China-Biotics Announces Record Results for Fiscal 2006; Company Reports Full Year Revenues of $21.9 million, up 51.6% vs. FY05; Gross Margins of 70.7% and Net Income of $8.4 million.SHANGHAI, China -- China-Biotics, Inc. (OTCBB OTCBB See OTC Bulletin Board (OTCBB). : CHBT), one of China's largest producers of probiotic pro·bi·ot·ic n. A dietary supplement containing live bacteria or yeast that supplements normal gastrointestinal flora, given especially after depletion of flora caused by infection or ingestion of an antibiotic drug. products, which are food supplements that benefit and improve microbial microbial pertaining to or emanating from a microbe. microbial digestion the breakdown of organic material, especially feedstuffs, by microbial organisms. balance in the human body, announced record financial results for the full fiscal year which ended on March 31, 2006. These are the first financial results reported for the Company since the March 2006 completion of the acquisition of Sinosmart Group Inc. Recent Developments: --On March 22, 2006 Sinosmart Group completed a private placement raising aggregate proceeds of $5.1 million. In conjunction with this financing, the Company acquired 100% of the outstanding stock of Sinosmart Group and officially changed the name of the Company to China-Biotics, Inc. --China-Biotics, Inc. will utilize proceeds from the private placement and internally generated cash flow to fund its corporate growth initiatives, which include the construction of a 150-ton capacity bulk production plant in the PRC, further research and development efforts aimed at expanding the Company's product portfolio and broadening of the Company's geographic sales footprint in China through an increase in distribution points and the expansion of a direct to consumer retail strategy. --In March 2006, the Company opened its first pilot retail store in Shanghai and introduced several new products into this market. Financial Results (Note: 2005 results reflect the results of Sinosmart Group and 2006 results reflect the results of Sinosmart Group and China-Biotics as a combined company) For the year ended March 31, 2006, the Company reported revenue of $21.9 million as compared to $14.4 million for the 2005 fiscal year, representing an increase of 51.6 percent. The increase in revenues was primarily driven by sales of its flagship Shining Essence(R) brand, as well as other key products through both established and new distributors who service large Super and Drug stores in Shanghai, Jiangxu, and Zhejiang. Cost of sales increased for the year by 45.8 percent to $6.5 million, with the increase attributable to higher sales volume, 4.7 percent increase in raw material prices and a 2.3 percent increase in packaging material costs. Gross profit increased by 54.1 percent to $15.4 million and increased as a percentage of revenue to 70.5 percent as compared to $10.0 million in gross profit last year or 69.4 percent of revenue. Operating expenses Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. were $3.2 million for fiscal 2006, up 59.7 percent as compared to $2.0 million for the prior year period and increased primarily as a result of higher overall sales levels. Operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. totaled approximately $12.2 million for fiscal 2006, up approximately 52.7 percent from fiscal 2005. As a percent of revenue, operating income increased to 55.7 percent from 55.3 percent for the prior year period, resulting from both increases in gross margins and the Company's ability to generate incremental Additional or increased growth, bulk, quantity, number, or value; enlarged. Incremental cost is additional or increased cost of an item or service apart from its actual cost. operating efficiencies. The provision for income taxes was $3.9 million for fiscal 2006 and $2.6 million for fiscal 2005, representing an effective tax rate of 31.8 percent and 32.0 percent respectively for each period. Net income for fiscal 2006 totaled $8.4 million, a 53.0 percent increase from the $5.5 million for the last fiscal year. As a result of both the merger and private placement, the Company now has 17.08 million diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. shares outstanding as of March 31, 2006 The Company had a cash balance on March 31, 2006 of $19.8 million, an increase from $10.3 million at the end of last year, primarily as a result of $6.9 million in cash generated from operations and the previously mentioned private placement proceeds. Total current assets Current Assets Appearing on a company's balance sheet, it represents cash, accounts receivable, inventory, marketable securities, prepaid expenses, and other assets that can be converted to cash within one year. on March 31, 2006 were $31.8 million, up from $19.3 million at March 31, 2005. The Company maintains a relatively low amount of debt but currently carries a $15.3 million provision for taxes payable. Stockholders' equity Stockholders' Equity The portion of the balance sheet that includes capital received from investors in exchange for stock (paid-in capital), donated capital, and retained earnings. This is equal to total assets minus liabilities, preferred stock and intangible assets. increased 73.8 percent to $12.3 million as compared to $7.1 million last year. Mr. Song Jin An, China-Biotics' Chairman and Chief Executive Officer, commented "Fiscal 2006 was a monumental year in our evolution as an emerging leader in the probiotics Probiotics Bacteria that are beneficial to a person's health, either through protecting the body against pathogenic bacteria or assisting in recovery from an illness. Mentioned in: Colonic Irrigation, Dysentery, Gastroenteritis market, evidenced by greater than 50 percent growth in both revenues and net income. To support our growth efforts, we effectuated a share exchange to become a publicly traded company publicly traded company A company whose shares of common stock are held by the public and are available for purchase by investors. The shares of publicly traded firms are bought and sold on the organized exchanges or in the over-the-counter market. in the US while completing a private placement. We believe that each of these events will help facilitate the next stage of growth for China-Biotics. Our strategic plans include the construction of a new production facility with an initial annual capacity of 150-tons which would improve our available capacity by over 20 fold. We expect this to be operational during the second half of 2007, and that the infrastructure could eventually be expanded to accommodate 300 tons of production capacity. This facility will create the foundation for our new bulk business and will support further growth in our consumer products business as we expand to other geographic areas in China outside of the greater Shanghai region. As a leader in probiotic-based products, we hope to reap further benefits from both governmental and other macro drivers promoting the benefits of probiotics versus traditional antibiotics Antibiotics Definition Antibiotics may be informally defined as the subgroup of anti-infectives that are derived from bacterial sources and are used to treat bacterial infections. ." Probiotics Overview Probiotics are described as "live microorganisms administered in adequate amounts which confer a beneficial health effect on the host," by the Food and Agriculture Organization of the United Nations Noun 1. Food and Agriculture Organization of the United Nations - the United Nations agency concerned with the international organization of food and agriculture FAO, Food and Agriculture Organization . The beneficial effects of probiotics consumption can include improvement of the general intestinal (GI) tract health, enhancement of the immune system immune system Cells, cell products, organs, and structures of the body involved in the detection and destruction of foreign invaders, such as bacteria, viruses, and cancer cells. Immunity is based on the system's ability to launch a defense against such invaders. , synthesized syn·the·sized adj. 1. Relating to or being an instrument whose sound is modified or augmented by a synthesizer. 2. Relating to or being compositions or a composition performed on synthesizers or synthesized instruments. and enhanced bioavailability bioavailability /bio·avail·a·bil·i·ty/ (bi?o-ah-val?ah-bil´i-te) the degree to which a drug or other substance becomes available to the target tissue after administration. bi·o·a·vail·a·bil·i·ty n. of nutrients, reduction of symptoms of lactose intolerance Lactose Intolerance Definition Lactose intolerance refers to the inability of the body to digest lactose. Description Lactose is the form of sugar present in milk. , decreased prevalence of allergy in susceptible individuals In epidemiology a susceptible individual (sometimes known simply as a susceptible) is a member of a population who is at risk of becoming infected by a disease, if he or she is exposed to the infectious agent. and reduction of risks of certain cancers. China-Biotics is one of the largest producers of probiotics in China, and a recognized leader in probiotic research, development, production, marketing and distribution through its wholly owned subsidiary Wholly Owned Subsidiary A subsidiary whose parent company owns 100% of its common stock. Notes: In other words, the parent company owns the company outright and there are no minority owners. , Shanghai Shining Biotechnology Co. Ltd., and its top-selling brand, Shining Essence. The Company owns several patents which relate to its production processes, packaging equipment and product packaging. Currently, China-Biotics' annual production is approximately seven metric tons, which is made into a capsule capsule In botany, a dry fruit that opens when ripe. It splits from top to bottom into separate segments known as valves, as in the iris, or forms pores at the top (e.g., poppy), or splits around the circumference, with the top falling off (e.g., pigweed and plantain). format. The Company's products have a shelf life of around 2 years (at a 70% level), which management believes is the highest among all biogen manufacturers in China, and are based on human cultivated raw materials to minimize rejection by users. Management also believes that the quantity of active ingredients An active ingredient, also active pharmaceutical ingredient (or API), is the substance in a drug that is pharmaceutically active. Some medications may contain more than one active ingredient. in the Company's products is many times that of its competitors, and that the Company's Shining Essence brand, which was named by The Health Food Association of China named as the best selling liver health product in 2001, has become one of most recognized brands in the Shanghai nutritional products market. Currently, the Company produces and distributes proprietary probiotics to consumers and food manufacturers, which are approved by the Ministry of Health in China and State Food and Drug Administration The State Food and Drug Administration (SFDA Simplified Chinese: 国家食品药品监督管理局) is founded on the basis of the State Drug Administration. and have been tested by the Shanghai Preventive Medicine preventive medicine, branch of medicine dealing with the prevention of disease and the maintenance of good health practices. Until recently preventive medicine was largely the domain of the U.S. Research Institute. The portfolio of China-Biotics products includes: --Shining Essence: Contains L. acidophilus Acidophilus The bacteria called Lactobacillus acidophilus that is usually found in yogurt. Mentioned in: Balanitis, Blastomycosis, Coccidioidomycosis, Histoplasmosis, Sporotrichosis acidophilus, n and B. bifidium, aimed at balancing the microecology of the digestive Ulcers (Digestive) Definition In general, an ulcer is any eroded area of skin or a mucous membrane, marked by tissue disintegration. In common usage, however, ulcer usually is used to refer to disorders in the upper digestive tract. system, enhancing intestinal health and protecting/strengthening liver function --Shining Signal: Contains monascus rice and L. acidophilus, focused on reducing high blood pressure, high blood sugar level, and hyperlipidemia hyperlipidemia /hy·per·lip·id·emia/ (-lip?i-de´me-ah) elevated concentrations of any or all of the lipids in the plasma, including hypertriglyceridemia, hypercholesterolemia, etc. --Shining Golden Shield: Contains B. adolescentis and lentinusedodes, focused on enhancing the body's immune system --Shining Energy: Contains Vitamin C vitamin C or ascorbic acid Water-soluble organic compound important in animal metabolism. Most animals produce it in their bodies, but humans, other primates, and guinea pigs need it in the diet to prevent scurvy. , L. Arginine arginine (är`jənĭn), organic compound, one of the 20 amino acids commonly found in animal proteins. Only the l-stereoisomer participates in the biosynthesis of proteins. , and other amino acids amino acid (əmē`nō), any one of a class of simple organic compounds containing carbon, hydrogen, oxygen, nitrogen, and in certain cases sulfur. These compounds are the building blocks of proteins. , aimed at promoting the development of brain cells and enhancing alertness and energy Currently, China-Biotics owns a Level 10 clean room facility in Shanghai with maximum monthly production capacity of approximately 3.5 million capsules. The Company is in the planning stage of constructing a new manufacturing facility, which includes bulk production and will expand the Company's total manufacturing capacity to 150 metric tons annually. The new facility will have the capability and footprint to double the manufacturing capacity in the future to accommodate incremental growth. "Our increased manufacturing capacity, favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. pricing, and quality of our products should enable us to both capture incremental market share from our competitors while also experiencing incremental growth from our addressable Reachable. When something is addressable, it can be identified and manipulated independently of its surroundings. For example, screen pixels and RAM memory are addressable. Each of the screen's picture elements can be individually turned on and off, and each of the memory's bytes can be customer base, whose disposable income disposable income Portion of an individual's income over which the recipient has complete discretion. To assess disposable income, it is necessary to determine total income, including not only wages and salaries, interest and dividend payments, and business profits, but also we believe is increasing in conjunction with their awareness of the benefits related to probiotics," added Mr. Song Jin An. "China-Biotics possesses significant cost advantages, particularly compared to foreign competitors. We believe our manufacturing capability within the PRC will continue to drive pricing advantages, as well as ongoing and increased support from the Chinese government Ever since Republic of China founded in January 1st, 1912, China has had several regional and national governments. List
About China-Biotics, Inc. Based in Shanghai, China-Biotics is an emerging leader in the research, development, production, marketing and distribution of probiotics products in the People's Republic People's Republic n. A political organization founded and controlled by a national Communist party. of China. Probiotics products contain live microbial food supplements which beneficially affect the host by improving its intestinal microbial balance. Currently, the Company produces and distributes proprietary probiotics, which are approved by the Ministry of Health in China and have been tested by the Shanghai Preventive Medicine Research Institute. Safe Harbor Safe Harbor 1. A legal provision to reduce or eliminate liability as long as good faith is demonstrated. 2. A form of shark repellent implemented by a target company acquiring a business that is so poorly regulated that the target itself is less attractive. Statement Statements in this release that are not statements of historical fact may be deemed to be forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. . Forward-looking statements involve risks and uncertainties, including statements regarding our capital needs, business strategy and expectations. You should not rely on forward-looking statements as predictions of future events or results. Any or all of our forward-looking statements may turn out to be wrong. They can be affected by inaccurate assumptions, risks and uncertainties and other factors which could cause actual events or results to be materially different from those expressed or implied in the forward-looking statements. In evaluating these statements, you should consider various factors, including the risks described under "Risk Factors" in our Form 10-KSB filed with the SEC on June 30, 2006. These factors may cause our actual results to differ materially from any forward-looking statement. In addition, new factors emerge from time to time and it is not possible for us to predict all factors that may cause actual results to differ materially from those contained in any forward-looking statements. We do not intend to publicly update any forward-looking statements to reflect events or circumstances, except as required by applicable law.
CHINA-BIOTICS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Amount expressed in US Dollars)
March 31, March 31,
2005 2006
----------- -----------
ASSETS
Current assets
Cash and cash equivalents $10,271,503 $19,840,812
Restricted cash - 752,778
Accounts receivable 7,019,013 10,941,595
Advances to related parties 1,544,758 -
Inventories 442,109 257,584
Prepayment - 31,200
Travel advances - 8,972
Other receivables 8,213 -
----------- -----------
Total current assets $19,285,596 $31,832,941
Plant, equipment and leasehold improvements,
net 1,959,782 1,594,047
----------- -----------
Total assets $21,245,378 $33,426,988
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,592,016 $ 1,826,441
Tax payables 11,132,621 15,316,318
Loan from stockholders - 2,290,230
Other payables and accruals 1,421,337 1,656,987
----------- -----------
Total current liabilities $14,145,974 $21,089,976
----------- -----------
Commitments and contingencies
Stockholders' equity:
Preferred stock $ - $ -
Common stock 112 1,708
Additional paid-in capital 207,817 7,863,031
Retained earnings 1,594,289 1,379,914
Accumulated other comprehensive
income (loss) 1,251 66,565
Capital and statutory reserves 3,025,794 3,025,794
Liquidating dividends 2,270,141 -
----------- -----------
Total stockholders' equity $ 7,099,404 $12,337,012
----------- -----------
Total liabilities and stockholders' equity $21,245,378 $33,426,988
=========== ===========
CHINA-BIOTICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Amount expressed in US Dollars)
Years ended March 31,
-----------------------
2005 2006
----------- -----------
Net sales (net of sales tax of $76,375 and
$294,867 for years ended March 31, 2005 and
2006, respectively) $14,421,772 $21,862,385
Cost of sales (4,419,649) (6,445,148)
----------- -----------
Gross profit $10,002,123 $15,417,237
----------- -----------
Operating expenses:
Selling expenses $(1,528,798)$(2,434,448)
General and administrative expenses (495,157) (797,232)
----------- -----------
Total operating expenses $(2,023,955)$(3,231,680)
----------- -----------
Income from operations $ 7,978,168 $12,185,557
----------- -----------
Other income and expenses:
Other income $ 55,192 $ 69,041
Other expenses - (89)
----------- -----------
Total other income (expenses) $ 55,192 $ 68,952
----------- -----------
Income before taxes $ 8,033,360 $12,254,509
Provision for income taxes (2,573,950) (3,900,541)
----------- -----------
Net income $ 5,459,410 $ 8,353,968
=========== ===========
Earnings per share:
Basic and diluted $ 4.88 $ 4.90
=========== ===========
Weighted average shares outstanding
Basic and diluted 1,118,600 1,705,242
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