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Weikang Bio-Technology Reports Record Third Quarter 2010 Financial Results; Revenue of $17 Million and Non-GAAP Net Income of $6.5 Million or $0.23 Earnings per Share
Weikang Bio-Technology Reports Record Third Quarter 2010 Financial Results; Revenue of $17 Million and Non-GAAP Net Income of $6.5 Million or $0.23 Earnings per Share
-- $30 Million in Cash and Equivalents
-- Revenue of $41.9 million for the First Nine Months
-- Non-GAAP Net Income of $14.8 million or $.53 EPS for the First Nine Months
Nov. 15, 2010 (PR Newswire) --

HARBIN, China, Nov. 15, 2010 /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 and OTC pharmaceuticals and other health and nutritional products in the People's Republic of China, today announced record fiscal 2010 third quarter results for period ended September 30, 2010.

Third Quarter Highlights

Revenue increased 55.2% year-over-year to a record $17.4 million
Gross profit increased 74.7% year-over-year to a record $10.4 million
Gross margin was 60.0%
Net income increased 52.5% to a record $6.1 million with fully diluted earnings per share of $0.22
Adjusting for non-cash, stock-based compensation of $0.4 million, non-GAAP net income was $6.5 million and non-GAAP fully diluted earnings per share was $0.23


"We are highly pleased with our record revenue and net income for the quarter," commented Mr. Yin Wang, Chairman and CEO of Weikang. "Our increase in sales was due to an strong positive response from consumers for our new therapeutics launch this year, which represented 12.6% of our total sales for the quarter, combined with the delivery of products that were postponed during the first and second quarter due to weather problems. We anticipate our revenue and net income will continue to increase as we regularly launch new and exciting therapeutics that have a broad market potential."

Revenue for the third quarter of 2010 was $17.4 million, up 55.2% from revenue of $11.2 million in the third quarter of 2009. Revenue from the Company's operating entity Tianfang Pharmaceutical Co., Ltd was $10.3 million, or 59% of total sales, and revenue from the Company's other operating entity Heilongjiang WeiKang was $7.1 million, or 41% of total sales. Revenue for the quarter benefitted from delivery of products that were postponed during the first and second quarter of 2010 as well the introduction of new products. The new products launched during the year accounted for $2.2 million or 12.6% of total revenue.

Gross profit for the quarter increased 74.7% to $10.5 million from $6.0 million in the same period of 2009. Gross margin for the third quarter of 2010 was 60.0% compared to 53.3% in the third quarter of 2009. The increase in gross margin over the previous year period is the result of an increase of the percent of total sales of the Company's higher margin products as well as management's continuous efforts to control costs related to purchasing, manufacturing, storage and transportation.

Operating expenses were $2.3 million or 13.4% of sales, compared to $0.8 million or 7.5% of sales in the third quarter of 2009. The increase in operating expenses was attributable to an increase in marketing and promotion expense. The Company also recognized $401,273 in non-cash, stock-based compensation expenses that it did not incur in the comparable period a year ago. Adjusting for the non-cash, stock-based compensation, operating expenses were $1.9 million or 11.1% of total sales. The non-cash, stock-based compensation relates to the private placement closed on January 20, 2010 and associated investor relation expense as well as compensation to four directors and a key employee.

Operating income for the third quarter was $8.1 million, up 57.9% from $5.1 million in the third quarter of 2009. Operating margin was 46.6% compared to 45.8% in the same period a year ago. Adjusting for the previously mentioned non-cash, stock-based compensation, non-GAAP operating income was $8.5 million in the third quarter of 2010 and operating margin was 48.9%.

Net income was $6.1 million in the third quarter of 2010, up 52.5% from $4.0 million in net income from the same period a year ago. Fully diluted earnings per share were $0.22 compared to fully diluted earnings per share of $0.16 in the third quarter of 2009. Excluding the non-cash, stock-based compensation, non-GAAP net income and fully diluted earnings per share for the third quarter of 2010 was $6.5 million and $0.23, respectively.

Financial Condition

As of September 30, 2010, Weikang Bio-Technology Group Co., Inc. had $30.0 million in cash and cash equivalents, $27.2 million in working capital and $7.7 million in total liabilities. Net cash provided by operating activities for the first nine months of 2010 was $16.3 million. Shareholders' equity stood at $49.6 million, up from $23.4 million at year end 2009.

Nine Months Financial Results

Revenue for the first nine months of fiscal 2010 was $41.9 million, up 21.3% from $34.5 million in the same period a year ago. Gross profit was $24.9 million, up 32.9% from gross profit of $18.7 million for the first nine months of fiscal 2009. Gross margin was 59.5% compared to 54.2% for the comparable period a year ago. Operating income was $17.4 million, up 21.5% from $14.3 million in the first nine months of fiscal 2009. Adjusting for $2.3 million in non-cash, stock-based compensation, non-GAAP operating income was $19.6 million. Net income was $12.5 million, up 12.2% from $11.2 million in the same period a year ago. Fully diluted earnings per share were $0.45 compared to $0.44 in the first nine months of fiscal 2009. Excluding the non-cash, stock-based compensation, non-GAAP net income and fully diluted earnings per share for the first nine months of 2010 was $14.8 million and $0.53.

Business Outlook

Weikang Bio-Technology expects to complete the construction of its manufacturing line for producing licorice flavonoids by the end of 2010. The total estimated cost for the production line is $0.75 million of which the Company has already spent $0.47 million and is committed to pay an additional $0.28 million by the end of 2010. The Company expects to start production of licorice flavonoid extraction in 2011. Once full production is achieved in 2012, the project is expected to add over $13 million to annual revenue and approximately $5.7 million in annual net income. In addition, Weikang Bio-Technology plans to launch two new therapeutics by the end of 2010 and three new therapeutics during the first quarter of 2011. Combined, the new therapeutics are expected to add approximately $8.8 million in revenue and up to approximately $3.3 million in net income in 2011.

Weikang maintains its fiscal 2010 revenue guidance of $55 million, net profit of $21 million and earnings per share of $0.75. The Company also expects stockholders' equity to be $48 million or $1.71 per share. For fiscal year 2011, Weikang Bio-Technology is targeting revenue growth to be in the range of 30% to 50% over 2010 revenue.

"We believe that our growth opportunities remain robust as we are actively expanding our product portfolio and distribution network," Mr. Wang continued. "During the quarter we added a new distributor in Changsha, Hunan Province and Nanning, Guangxi Provinces. In addition, this December, we are presenting at the 64th National Medicine Trade Conference where we will have the opportunity to introduce our new therapeutics to a large number of distributors and retailers."

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 and OTC pharmaceuticals through its acquisition of Tianfang. For more information, please visit http://www.weikangbio.com.

Use of Non-GAAP Financial Measures

To supplement Weikang's 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 and nine month periods ended September 30, 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 and nine month periods ended September 30, 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 as well as compensation to four Directors and a key employee.

Safe Harbor Statement

Certain statements in this press release constitute forward-looking statements for purposes of the safe harbor provisions under The Private Securities Litigation Reform Act of 1995. 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 (http://www.sec.gov). 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-

WEIKANG BIO-TECHNOLOGY GROUP CO, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS


SEPTEMBER 30, 2010
DECEMBER 31, 2009


(Unaudited)


ASSETS



CURRENT ASSETS



Cash & cash equivalents
$ 29,949,501
$ 11,380,019

Accounts receivable
925,028
-

Advances to suppliers and other receivables
133,262
26,079

Inventory
364,441
285,395

Deferred tax asset
84,553
-

Total current assets
31,456,785
11,691,493

NONCURRENT ASSETS



Property and equipment, net
9,675,213
10,162,946

Construction in progress
475,863
-

Intangible assets
15,639,935
15,558,731

Total noncurrent assets
25,791,011
25,721,677

TOTAL ASSETS
$ 57,247,796
$ 37,413,170





LIABILITIES AND STOCKHOLDERS' EQUITY



CURRENT LIABILITIES



Accounts payable
$ 14,038
$ 12,668

Unearned revenue
783,453
11,716

Taxes payable
3,186,403
2,247,410

Other payables
230,462
-

Due to related party
25,369
-

Total current liabilities
4,239,725
2,271,794





ADVANCE FORM OFFICER
-
650,000

OTHER PAYABLES - LONG TERM
-
7,620,321

CONTINGENCIES



DEFERRED TAX LIABILITY
3,447,049
3,450,005

STOCKHOLDERS' EQUITY



Common stock, $.00001 par value; authorized shares



100,000,000; issued and outstanding shares 28,064,388



and 25,486,800 at September 30, 2010 and December 31, 2009, respectively
280
255

Additional paid in capital
13,365,240
139,245

Deferred compensation
(479,232)
-

Statutory reserve
1,702,111
1,069,507

Accumulated other comprehensive income
1,713,415
844,526

Retained earnings
33,259,208
21,367,517

Total stockholders' equity
49,561,022
23,421,050

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY
$ 57,247,796
$ 37,413,170





WEIKANG BIO-TECHNOLOGY GROUP CO, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (UNAUDITED)











NINE MONTHS ENDED SEPTEMBER 30,

THREE MONTHS ENDED SEPTEMBER 30,



2010
2009

2010
2009









Net sales

$41,878,410
$34,534,249

$17,426,211
$11,227,275

Cost of goods sold

16,976,845
15,803,400

6,962,482
5,238,634

Gross profit

24,901,565
18,730,849

10,463,729
5,988,642









Operating expenses







Selling

2,416,638
1,569,270

622,337
651,056

General and administrative

3,373,023
939,378

755,640
191,622

Research and development

1,760,631
1,937,928

957,724
-









Total operating expenses

7,550,292
4,446,576

2,335,701
842,678









Income from operations

17,351,273
14,284,273

8,128,028
5,145,964

Non-operating income (expenses)







Interest income

53,054
5,584

16,864
3,968

Other income

246,776
778,095

246,582
256,181

Other (expenses)

(1,947)
(48,479)

(40)
(13,045)

Total non-operating income, net

297,883
735,200

263,406
247,104









Income before income tax

17,649,156
15,019,473

8,391,434
5,393,068

Income tax

5,124,858
3,853,312

2,325,991
1,414,837









Net income

12,524,298
11,166,161

6,065,443
3,978,231

Basic and diluted weighted average shares outstanding

27,814,024
25,339,690

28,052,649
25,339,690

Basic and diluted net earnings per share

$ 0.45
$ 0.44

$ 0.22
$ 0.16







WEIKANG BIO-TECHNOLOGY GROUP CO., INC

RECONCILIATION OF NON- GAAP FINANCIAL MEASURES

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2010


Adjusted Net income
Three months ended

Nine months ended

30-Sep-10

30-Sep-10

Net Income (Loss) and Diluted EPS
Net Income
Diluted EPS

Net Income
Diluted EPS

Adjusted Amount Non-GAAP
$6,466,716
$0.23

$14,803,266
$0.53

Adjustments






Non-cash compensation adjustment (1)
354,391
0.01

2,123,571
0.08

Stock based compensation adjustment (2)
46,882
0.00

155,397
0.01

Amount per consolidated statement of operations
6,065,443
0.22

12,524,298
0.45

(1) Non cash compensation expense in connection with the private placement done on January 20, 2010 and associated investor relation expense.

(2) Stock-based compensation expense issued to a key employee and four directors







WEIKANG BIO-TECHNOLOGY GROUP CO, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF NON-GAAP INCOME

(Unaudited)




NINE MONTHS ENDED SEPTEMBER 30,

THREE MONTHS ENDED SEPTEMBER 30,



2010
2009

2010
2009









Net sales

$41,878,410
$34,534,249

$17,426,211
$11,227,275

Cost of goods sold

16,976,845
15,803,400

6,962,482
5,238,634









Gross profit

24,901,565
18,730,849

10,463,729
5,988,642









Operating expenses







Selling

2,416,638
1,569,270

622,337
651,056

General and administrative

1,094,055
939,378

354,367
191,622

Research and development

1,760,631
1,937,928

957,724
-









Total operating expenses

5,271,324
4,446,576

1,934,428
842,678









Income from operations

19,630,241
14,284,273

8,529,301
5,145,964









Non-operating income (expenses)






Interest income

53,054
5,584

16,864
3,968

Other income

246,776
778,095

246,582
256,181

Other (expenses)

(1,947)
(48,479)

(40)
(13,045)

Total non-operating income, net
297,883
735,200

263,406
247,104









Income before income tax

19,928,124
15,019,473

8,792,707
5,393,068

Income tax

5,124,858
3,853,312

2,325,991
1,414,837









Net income

14,803,266
11,166,161

6,466,716
3,978,231









Basic and diluted weighted average shares outstanding
27,814,024
25,339,690

28,052,649
25,339,690

Basic and diluted net earnings per share

$ 0.53
$ 0.44

$ 0.23
$ 0.16









WEIKANG BIO-TECHNOLOGY GROUP CO, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)







NINE MONTHS ENDED SEPTEMBER 30,


2010

2009

CASH FLOWS FROM OPERATING ACTIVITIES:




Net income
$ 12,524,298

$11,166,161

Adjustments to reconcile net income to net cash




provided by operating activities:




Depreciation and amortization
894,867

881,636

Stock issued for consulting expenses
192,400

127,500

Deferred compensation
2,086,567

-

Changes in deferred tax
(150,571)

(78,033)

(Increase) decrease in current assets:




Accounts receivable
(910,677)

(329,328)

Advances to suppliers and other receivables
(106,552)

(103,775)

Inventory
(72,491)

(346,268)

Increase (decrease) in current liabilities:




Accounts payable
1,112

942

Unearned revenue
759,546

(219,552)

Other payables
226,886

6,024

Taxes payable
882,460

219,946

Net cash provided by operating activities
16,327,845

11,325,254

CASH FLOWS FROM INVESTING ACTIVITIES:




Construction in progress
(468,480)

-

Acquisition of property & equipment
(14,351)

(27,751)

Net cash used in investing activities
(482,831)

(27,751)

CASH FLOWS FROM FINANCING ACTIVITIES:




Changes in due from management
-

1,198,035

Net proceeds from shares issued
2,197,500

-

Payment for purchase of Tianfang
-

(3,812,466)

Changes in due from related party
24,975

-






Net cash provided by (used in) financing activities
2,222,475

(2,614,430)






EFFECT OF EXCHANGE RATE CHANGE ON CASH & CASH EQUIVALENTS
501,993

8,443

INCREASE IN CASH & CASH EQUIVALENTS
18,569,482

8,691,516

CASH & CASH EQUIVALENTS, BEGINNING OF PERIOD
11,380,019

16,927

CASH & CASH EQUIVALENTS, END OF PERIOD
$29,949,501

$8,708,443







Investors Relation contacts:
John Marco, Partner, Elite IR
Tel: [phone]
Email: [e-mail]

Leslie J. Richardson, Partner, Elite IR
Tel: [phone]
Email: [e-mail]





SOURCE Weikang Bio-Technology Group Co., Inc.

Investors Relation, John Marco, Partner, Elite IR, [phone], [e-mail], or Leslie J. Richardson, Partner, Elite IR, [phone], [e-mail]




Source: PR Newswire (November 15, 2010 - 7:00 AM EST)

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