ITEM 1. FINANCIAL STATEMENTS
CHINA BIOLOGIC PRODUCTS, INC. AND SUBSIDIARIES
INDEX TO UNAUDITED
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Contents
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Page
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Unaudited Condensed Consolidated Balance Sheets
|
1
|
Unaudited Condensed Consolidated Statements of Comprehensive Income
|
2
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Unaudited Condensed Consolidated Statements of Cash Flows
|
3
|
Notes to the Unaudited Condensed Consolidated Financial Statements
|
5
|
CHINA BIOLOGIC PRODUCTS, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED
CONSOLIDATED BALANCE SHEETS
|
|
Note
|
|
June 30, 2013
|
|
|
December 31, 2012
|
|
|
|
|
|
USD
|
|
|
USD
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
Current Assets
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
|
|
147,264,448
|
|
|
|
129,609,317
|
|
Accounts receivable, net of allowance for doubtful accounts
|
|
2
|
|
|
17,821,673
|
|
|
|
11,206,244
|
|
Inventories
|
|
3
|
|
|
80,907,813
|
|
|
|
75,679,173
|
|
Prepayments and other current assets
|
|
|
|
|
5,503,155
|
|
|
|
5,664,919
|
|
Total Current Assets
|
|
|
|
|
251,497,089
|
|
|
|
222,159,653
|
|
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment, net
|
|
4
|
|
|
62,337,422
|
|
|
|
51,325,177
|
|
Intangible assets, net
|
|
5
|
|
|
3,104,210
|
|
|
|
3,541,582
|
|
Land use rights, net
|
|
|
|
|
6,373,176
|
|
|
|
5,818,709
|
|
Deposits related to land use rights
|
|
6
|
|
|
16,669,167
|
|
|
|
14,752,574
|
|
Restricted cash
|
|
7
|
|
|
2,786,502
|
|
|
|
2,912,145
|
|
Equity method investment
|
|
|
|
|
10,937,307
|
|
|
|
10,537,310
|
|
Total Assets
|
|
|
|
|
353,704,873
|
|
|
|
311,047,150
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
|
|
|
|
Short-term bank loans
|
|
8
|
|
|
4,860,000
|
|
|
|
7,935,000
|
|
Accounts payable
|
|
|
|
|
3,018,095
|
|
|
|
2,908,624
|
|
Due to related parties
|
|
14
|
|
|
4,055,925
|
|
|
|
4,081,624
|
|
Other payables and accrued expenses
|
|
|
|
|
25,895,823
|
|
|
|
25,423,349
|
|
Advance from customers
|
|
|
|
|
2,381,166
|
|
|
|
2,857,420
|
|
Income tax payable
|
|
|
|
|
3,333,141
|
|
|
|
4,513,075
|
|
Total Current Liabilities
|
|
|
|
|
43,544,150
|
|
|
|
47,719,092
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred income
|
|
7
|
|
|
2,972,700
|
|
|
|
2,912,145
|
|
Other liabilities
|
|
|
|
|
3,410,801
|
|
|
|
2,996,749
|
|
Total Liabilities
|
|
|
|
|
49,927,651
|
|
|
|
53,627,986
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders’ Equity
|
|
|
|
|
|
|
|
|
|
|
Common stock: par value $0.0001; 100,000,000 shares authorized; 26,952,945 and 26,629,615 shares issued and outstanding at June 30, 2013 and December 31, 2012, respectively
|
|
|
|
|
2,695
|
|
|
|
2,663
|
|
Additional paid-in capital
|
|
|
|
|
67,303,915
|
|
|
|
62,251,731
|
|
Retained earnings
|
|
|
|
|
150,220,786
|
|
|
|
119,143,000
|
|
Accumulated other comprehensive income
|
|
|
|
|
18,826,850
|
|
|
|
14,072,322
|
|
Total equity attributable to China Biologic Products, Inc.
|
|
|
|
|
236,354,246
|
|
|
|
195,469,716
|
|
|
|
|
|
|
|
|
|
|
|
|
Noncontrolling interest
|
|
|
|
|
67,422,976
|
|
|
|
61,949,448
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Stockholders’ Equity
|
|
|
|
|
303,777,222
|
|
|
|
257,419,164
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies
|
|
13
|
|
|
-
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities and Stockholders’ Equity
|
|
|
|
|
353,704,873
|
|
|
|
311,047,150
|
|
See accompanying notes to Unaudited Condensed
Consolidated Financial Statements.
CHINA BIOLOGIC PRODUCTS, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
|
|
|
|
For the three months ended
|
|
|
For the six months ended
|
|
|
|
Note
|
|
June 30, 2013
|
|
|
June 30, 2012
|
|
|
June 30, 2013
|
|
|
June 30, 2012
|
|
|
|
|
|
USD
|
|
|
USD
|
|
|
USD
|
|
|
USD
|
|
Sales
|
|
12
|
|
|
53,580,523
|
|
|
|
50,466,339
|
|
|
|
107,612,255
|
|
|
|
97,693,800
|
|
Cost of sales
|
|
|
|
|
16,122,262
|
|
|
|
16,130,889
|
|
|
|
32,739,020
|
|
|
|
31,846,616
|
|
Gross profit
|
|
|
|
|
37,458,261
|
|
|
|
34,335,450
|
|
|
|
74,873,235
|
|
|
|
65,847,184
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling expenses
|
|
|
|
|
2,441,727
|
|
|
|
4,165,242
|
|
|
|
4,278,120
|
|
|
|
8,991,349
|
|
General and administrative expenses
|
|
|
|
|
8,866,071
|
|
|
|
7,932,372
|
|
|
|
17,553,168
|
|
|
|
15,078,166
|
|
Research and development expenses
|
|
|
|
|
835,150
|
|
|
|
929,489
|
|
|
|
1,748,242
|
|
|
|
1,640,077
|
|
Income from operations
|
|
|
|
|
25,315,313
|
|
|
|
21,308,347
|
|
|
|
51,293,705
|
|
|
|
40,137,592
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income/ (expenses)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity in income of an equity method investee
|
|
|
|
|
610,997
|
|
|
|
451,891
|
|
|
|
739,945
|
|
|
|
1,474,303
|
|
Change in fair value of derivative liabilities
|
|
|
|
|
-
|
|
|
|
559,758
|
|
|
|
-
|
|
|
|
1,769,140
|
|
Interest expense
|
|
|
|
|
(198,739
|
)
|
|
|
(157,635
|
)
|
|
|
(434,913
|
)
|
|
|
(766,198
|
)
|
Interest income
|
|
|
|
|
995,757
|
|
|
|
765,717
|
|
|
|
1,643,819
|
|
|
|
1,309,112
|
|
Other expenses, net
|
|
|
|
|
-
|
|
|
|
(1,797
|
)
|
|
|
-
|
|
|
|
(102,786
|
)
|
Total other income, net
|
|
|
|
|
1,408,015
|
|
|
|
1,617,934
|
|
|
|
1,948,851
|
|
|
|
3,683,571
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings before income tax expense
|
|
|
|
|
26,723,328
|
|
|
|
22,926,281
|
|
|
|
53,242,556
|
|
|
|
43,821,163
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense
|
|
9
|
|
|
3,745,649
|
|
|
|
3,333,616
|
|
|
|
8,352,551
|
|
|
|
6,510,331
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
22,977,679
|
|
|
|
19,592,665
|
|
|
|
44,890,005
|
|
|
|
37,310,832
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: Net income attributable to noncontrolling interest
|
|
|
|
|
6,815,753
|
|
|
|
6,753,894
|
|
|
|
13,812,219
|
|
|
|
11,514,755
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to China Biologic Products, Inc.
|
|
|
|
|
16,161,926
|
|
|
|
12,838,771
|
|
|
|
31,077,786
|
|
|
|
25,796,077
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per share of common stock:
|
|
15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
|
|
0.60
|
|
|
|
0.50
|
|
|
|
1.15
|
|
|
|
1.00
|
|
Diluted
|
|
|
|
|
0.57
|
|
|
|
0.46
|
|
|
|
1.11
|
|
|
|
0.90
|
|
Weighted average shares used in computation:
|
|
15
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
|
|
26,880,459
|
|
|
|
25,875,164
|
|
|
|
26,833,262
|
|
|
|
25,738,145
|
|
Diluted
|
|
|
|
|
28,067,303
|
|
|
|
26,627,160
|
|
|
|
27,967,080
|
|
|
|
26,581,824
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
|
|
22,977,679
|
|
|
|
19,592,665
|
|
|
|
44,890,005
|
|
|
|
37,310,832
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustment, net of nil income taxes
|
|
|
|
|
4,428,715
|
|
|
|
136,178
|
|
|
|
5,825,256
|
|
|
|
1,313,135
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income
|
|
|
|
|
27,406,394
|
|
|
|
19,728,843
|
|
|
|
50,715,261
|
|
|
|
38,623,967
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: Comprehensive income attributable to noncontrolling interest
|
|
|
|
|
7,723,790
|
|
|
|
6,750,933
|
|
|
|
14,882,947
|
|
|
|
11,766,768
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income attributable to China Biologic Products, Inc.
|
|
|
|
|
19,682,604
|
|
|
|
12,977,910
|
|
|
|
35,832,314
|
|
|
|
26,857,199
|
|
See accompanying notes to Unaudited Condensed
Consolidated Financial Statements.
CHINA BIOLOGIC PRODUCTS, INC. AND SUBSIDIARIES
UNAUDITED CONDESENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
For the six months ended
|
|
|
|
June 30, 2013
|
|
|
June 30, 2012
|
|
|
|
USD
|
|
|
USD
|
|
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Net income
|
|
|
44,890,005
|
|
|
|
37,310,832
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
3,105,739
|
|
|
|
2,281,223
|
|
Amortization
|
|
|
702,556
|
|
|
|
1,525,267
|
|
(Gain)/ loss on sale of property, plant and equipment
|
|
|
(70,363
|
)
|
|
|
60,518
|
|
Allowance for doubtful accounts, net
|
|
|
-
|
|
|
|
21,895
|
|
Provision for doubtful accounts - other receivables and prepayments
|
|
|
6,202
|
|
|
|
35,637
|
|
Write-down of obsolete inventories
|
|
|
-
|
|
|
|
49,703
|
|
Deferred tax expense
|
|
|
720,679
|
|
|
|
26,341
|
|
Share-based compensation
|
|
|
3,047,962
|
|
|
|
1,992,958
|
|
Change in fair value of derivative liabilities
|
|
|
-
|
|
|
|
(1,769,140
|
)
|
Equity in income of an equity method investee
|
|
|
(739,945
|
)
|
|
|
(1,474,303
|
)
|
Change in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
(6,314,643
|
)
|
|
|
(4,692,006
|
)
|
Prepayment and other current assets
|
|
|
(101,135
|
)
|
|
|
(292,473
|
)
|
Inventories
|
|
|
(3,616,165
|
)
|
|
|
2,045,191
|
|
Accounts payable
|
|
|
242,365
|
|
|
|
(1,546,373
|
)
|
Other payables and accrued expenses
|
|
|
(2,033,594
|
)
|
|
|
(2,977,473
|
)
|
Advance from customers
|
|
|
(529,984
|
)
|
|
|
401,393
|
|
Due to related parties
|
|
|
(140,697
|
)
|
|
|
1,255,867
|
|
Income tax payable
|
|
|
(1,260,254
|
)
|
|
|
(2,185,825
|
)
|
Net cash provided by operating activities
|
|
|
37,908,728
|
|
|
|
32,069,232
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Payment for property, plant and equipment
|
|
|
(11,912,603
|
)
|
|
|
(5,098,533
|
)
|
Payment for intangible assets and land use right
|
|
|
(1,137,556
|
)
|
|
|
(796,707
|
)
|
Dividend received
|
|
|
560,980
|
|
|
|
555,310
|
|
Purchase of short-term investment
|
|
|
-
|
|
|
|
(1,348,610
|
)
|
Proceeds from sale of property, plant and equipment
|
|
|
83,731
|
|
|
|
-
|
|
Net cash used in investing activities
|
|
|
(12,405,448
|
)
|
|
|
(6,688,540
|
)
|
See accompanying
notes to Unaudited Condensed Consolidated Financial Statements.
CHINA BIOLOGIC PRODUCTS, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
|
|
For the six months ended
|
|
|
|
June 30, 2013
|
|
|
June 30, 2012
|
|
|
|
USD
|
|
|
USD
|
|
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
Proceeds from stock option exercised
|
|
|
2,668,916
|
|
|
|
-
|
|
Proceeds from warrants exercised
|
|
|
-
|
|
|
|
4,500,000
|
|
Proceeds from short term bank loans
|
|
|
4,808,400
|
|
|
|
-
|
|
Repayment of short term bank loans
|
|
|
(8,014,000
|
)
|
|
|
(11,106,200
|
)
|
Acquisition of noncontrolling interest
|
|
|
(1,963,913
|
)
|
|
|
-
|
|
Dividend paid by subsidiaries to noncontrolling interest shareholders
|
|
|
(8,110,168
|
)
|
|
|
(4,379,016
|
)
|
Net cash used in financing activities
|
|
|
(10,610,765
|
)
|
|
|
(10,985,216
|
)
|
|
|
|
|
|
|
|
|
|
EFFECTS OF FOREIGN EXCHANGE RATE CHANGE ON CASH
|
|
|
2,762,616
|
|
|
|
679,914
|
|
|
|
|
|
|
|
|
|
|
NET INCREASE IN CASH
|
|
|
17,655,131
|
|
|
|
15,075,390
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
at beginning of period
|
|
|
129,609,317
|
|
|
|
89,411,835
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
at end of period
|
|
|
147,264,448
|
|
|
|
104,487,225
|
|
|
|
|
|
|
|
|
|
|
Supplemental cash flow information
|
|
|
|
|
|
|
|
|
Cash paid for income taxes
|
|
|
8,892,126
|
|
|
|
8,669,815
|
|
Cash paid for interest expense
|
|
|
198,900
|
|
|
|
204,982
|
|
Noncash investing and financing activities:
|
|
|
|
|
|
|
|
|
Acquisition of property, plant and equipment included in payables
|
|
|
1,554,828
|
|
|
|
347,439
|
|
Exercise of warrants that were liability classified
|
|
|
-
|
|
|
|
3,641,279
|
|
See accompanying
notes to Unaudited Condensed Consolidated Financial Statements.
CHINA BIOLOGIC PRODUCTS INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
JUNE 30, 2013 AND 2012
NOTE 1 – BASIS OF PRESENTATION, SIGNIFICANT CONCENTRATION
AND RISKS
|
(a)
|
Basis of Presentation
|
The accompanying unaudited condensed consolidated
financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America
(“U.S. GAAP”). Certain information and footnote disclosures normally included in financial statements prepared in accordance
with U.S. GAAP have been condensed or omitted as permitted by rules and regulations of the U.S. Securities and Exchange Commission
(“SEC”). The December 31, 2012 consolidated balance sheet was derived from the audited consolidated financial statements
of China Biologic Products, Inc. (the “Company”). The accompanying unaudited condensed consolidated financial statements
should be read in conjunction with the December 31, 2012 audited consolidated financial statements of the Company included in the
Company’s annual report on Form 10-K for the year ended December 31, 2012.
In the opinion of management, all adjustments
(which include normal recurring adjustments) necessary to present a fair statement of the financial position as of June 30, 2013,
the results of operations for the three and six months ended June 30, 2013 and 2012, and cash flows for the six months ended June
30, 2013 and 2012, have been made. All significant intercompany transactions and balances are eliminated on consolidation.
The preparation of the unaudited condensed
consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the unaudited
condensed consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Actual
results could differ from those estimates. Significant items subject to such estimates and assumptions include the useful lives
of property, plant and equipment and intangibles with definite lives, the allowance for doubtful accounts, the fair value determinations
of equity instruments and stock compensation awards, the realizability of deferred tax assets and inventories, intangible asset,
land use right and property, plant and equipment, and accruals for income tax uncertainties and other contingencies. The current
economic environment has increased the degree of uncertainty inherent in those estimates and assumptions.
|
(b)
|
Significant Concentration and Risks
|
The Company’s operations are carried
out in the People’s Republic of China (the “PRC”) and are subject to specific considerations and significant
risks not typically associated with companies in North America and Western Europe. Accordingly, the Company’s business, financial
condition and results of operations may be influenced by the political, economic and legal environment in the PRC, and by the general
state of the PRC economy. The Company’s results may be adversely affected by changes in governmental policies with respect
to laws and regulations, anti-inflationary measures, currency conversion and remittance abroad, and rates and methods of taxation,
among other matters.
The Company
maintains cash balances at financial institutions which, from time to time, may exceed Federal Deposit Insurance Corporation insured
limits for its bank accounts located in the United States or may exceed Hong Kong Deposit Protection Board insured limits for its
bank accounts located in Hong Kong. Cash balances maintained at financial institutions or state-owned banks in the PRC are not
covered by insurance. Total cash at banks as of
June 30
, 2013 and December 31, 2012 amounted
to $146,777,083 and $129,289,461, respectively, of which $73,923 and $76,101 are insured, respectively. The Company has not experienced
any losses in uninsured bank deposits and does not believe that it is exposed to any significant risks on cash held in bank accounts.
The Company’s two major products
are human albumin and human immunoglobulin for intravenous injection (“IVIG”).
Human albumin
accounted for 42.5% and 38.7% of the total sales for the three months ended
June 30
, 2013 and
2012, respectively, and 40.2% and 46.4% of the total sales for the six months ended June 30, 2013 and 2012, respectively. IVIG
accounted for 39.4% and 42.1% of the total sales for the three months ended
June 30
, 2013 and
2012, respectively, and 43.5% and 37.4% of the total sales for the six months ended June 30, 2013 and 2012, respectively. If the
market demands for human albumin and IVIG cannot be sustained in the future or the price of human albumin and IVIG decreases, the
Company’s operating results could be adversely affected.
Substantially
all of the Company’s customers are located in the PRC. As of
June 30
, 2013 and 2012, the
Company had no significant concentration of credit risk. There were no customers that individually comprised 10% or more of the
total sales during the three months and six months ended June 30, 2013 and 2012, respectively. No individual customer represented
10% or more of trade receivables at June 30, 2013 and December 31, 2012, respectively. The Company performs ongoing credit evaluations
of its customers’ financial condition and, generally, requires no collateral from its customers.
There were no suppliers that comprised
10% or more of the total purchases for the three months and six months ended June 30, 2013 and 2012, respectively. No individual
vendor represented more than 10% of accounts payables as at June 30, 2013. Two vendors individually represented more than 10% of
accounts payables as at December 31, 2012.
NOTE 2 – ACCOUNTS RECEIVABLE
Accounts receivable at June 30, 2013 and
December 31, 2012 consisted of the following:
|
|
June 30, 2013
|
|
|
December 31, 2012
|
|
|
|
USD
|
|
|
USD
|
|
Accounts receivable
|
|
|
18,245,922
|
|
|
|
11,621,851
|
|
Less: Allowance for doubtful accounts
|
|
|
(424,249
|
)
|
|
|
(415,607
|
)
|
Total
|
|
|
17,821,673
|
|
|
|
11,206,244
|
|
A provision for doubtful accounts of nil
and a reversal of the allowance for doubtful accounts of $12,953 was recorded during the three months ended June 30, 2013 and 2012,
respectively. A provision for doubtful accounts of nil and $21,895 was recorded for the six months ended June 30, 2013 and 2012,
respectively. There was no write-off of accounts receivable for the three and six months ended June 30, 2013 and 2012, respectively.
NOTE 3 – INVENTORIES
Inventories at June 30, 2013 and December
31, 2012 consisted of the following:
|
|
June 30, 2013
|
|
|
December 31, 2012
|
|
|
|
USD
|
|
|
USD
|
|
Raw materials
|
|
|
34,286,954
|
|
|
|
29,596,746
|
|
Work-in-process
|
|
|
24,544,953
|
|
|
|
24,524,142
|
|
Finished goods
|
|
|
22,075,906
|
|
|
|
21,558,285
|
|
Total
|
|
|
80,907,813
|
|
|
|
75,679,173
|
|
No inventory write-down was recorded during
the three months ended June 30, 2013 and 2012, respectively. An inventory write-down of nil and $49,703 was recorded for the six
months ended June 30, 2013 and 2012, respectively.
NOTE 4 – PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment at June 30,
2013 and December 31, 2012 consisted of the following:
|
|
June 30, 2013
|
|
|
December 31, 2012
|
|
|
|
USD
|
|
|
USD
|
|
Buildings
|
|
|
31,296,990
|
|
|
|
25,183,496
|
|
Machinery and equipment
|
|
|
27,169,226
|
|
|
|
29,625,166
|
|
Furniture, fixtures, office equipment and vehicles
|
|
|
7,121,204
|
|
|
|
6,513,482
|
|
Total property, plant and equipment, gross
|
|
|
65,587,420
|
|
|
|
61,322,144
|
|
Accumulated depreciation
|
|
|
(23,479,901
|
)
|
|
|
(24,356,752
|
)
|
Total property, plant and equipment, net
|
|
|
42,107,519
|
|
|
|
36,965,392
|
|
Construction in progress
|
|
|
14,813,753
|
|
|
|
3,501,404
|
|
Prepayment for property, plant and equipment
|
|
|
5,416,150
|
|
|
|
10,858,381
|
|
Property, plant and equipment, net
|
|
|
62,337,422
|
|
|
|
51,325,177
|
|
Depreciation expense for the three months
ended June 30, 2013 and 2012 was $1,571,232 and $1,184,498, respectively. Depreciation expense for the six months ended June 30,
2013 and 2012 was $3,105,739 and $2,281,223, respectively.
NOTE 5 – INTANGIBLE ASSETS, NET
Intangible assets at June 30, 2013 and December 31, 2012 consisted
of the following:
|
|
June 30, 2013
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
|
|
average
|
|
Gross
|
|
|
|
|
|
Net
|
|
|
|
amortization
|
|
carrying
|
|
|
Accumulated
|
|
|
carrying
|
|
|
|
period
|
|
amount
|
|
|
amortization
|
|
|
amount
|
|
|
|
|
|
USD
|
|
|
USD
|
|
|
USD
|
|
Amortizing intangible assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Permits and licenses
|
|
10 years
|
|
|
5,091,360
|
|
|
|
(2,477,006
|
)
|
|
|
2,614,354
|
|
GMP certificate
|
|
5 years
|
|
|
2,578,198
|
|
|
|
(2,282,267
|
)
|
|
|
295,931
|
|
Long-term customer relationship
|
|
4 years
|
|
|
7,675,560
|
|
|
|
(7,675,560
|
)
|
|
|
-
|
|
Others
|
|
|
|
|
342,231
|
|
|
|
(148,306
|
)
|
|
|
193,925
|
|
Total
|
|
|
|
|
15,687,349
|
|
|
|
(12,583,139
|
)
|
|
|
3,104,210
|
|
|
|
December 31, 2012
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
|
|
average
|
|
Gross
|
|
|
|
|
|
Net
|
|
|
|
amortization
|
|
carrying
|
|
|
Accumulated
|
|
|
carrying
|
|
|
|
period
|
|
amount
|
|
|
amortization
|
|
|
amount
|
|
|
|
|
|
USD
|
|
|
USD
|
|
|
USD
|
|
Amortizing intangible assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Permits and licenses
|
|
10 years
|
|
|
4,987,647
|
|
|
|
(2,119,622
|
)
|
|
|
2,868,025
|
|
GMP certificate
|
|
5 years
|
|
|
2,525,679
|
|
|
|
(1,955,360
|
)
|
|
|
570,319
|
|
Long-term customer relationship
|
|
4 years
|
|
|
7,519,206
|
|
|
|
(7,519,206
|
)
|
|
|
-
|
|
Others
|
|
|
|
|
214,520
|
|
|
|
(111,282
|
)
|
|
|
103,238
|
|
Total
|
|
|
|
|
15,247,052
|
|
|
|
(11,705,470
|
)
|
|
|
3,541,582
|
|
Amortization
expense for intangible assets was $391,452 and $733,794
for the three months ended June 30, 2013
and 2012, respectively. Amortization expense for intangible assets was $655,152 and $1,456,810
for
the six months ended June 30, 2013 and 2012, respectively. Estimated amortization expenses for the next five fiscal years are $511,058
in 2014, $509,278 in 2015, $503,715 in 2016, $469,606 in 2017 and $426,774 in 2018.
NOTE 6 – DEPOSITS RELATED TO LAND
USE RIGHT
As of June 30, 2013, the deposits mainly
represented a $13,510,800 (equivalent RMB83,400,000) refundable payment made by Guizhou Taibang to the local government in connection
with the public bidding for a land use right in Guizhou Province. The payment will be refunded within one year following the completion
of the bidding process. If the Company is successful in the bid, the land use right will be used for the construction of a new
manufacturing facility to comply with the new GMP standard effective by the end of 2013. However, due to potential delays in government
approval procedures with respect to the land use right for such site, the Company may not be able to complete the construction
of the new production facility as planned. In order to mitigate the operation disruption at Guizhou Taibang, the Company started
to upgrade its existing production facility to meet the new GMP standard in June 2013. The production of the related facilities
was suspended and the total production capacity of the Company is expected to decrease in part of 2013 and 2014.
NOTE 7 – RESTRICTED CASH
On November 1, 2012, Guizhou Taibang entered
into an agreement with the Financial Bureau of Huaxi District, Guiyang City. Pursuant to the agreement, the Financial Bureau of
Huaxi District provided $2,972,700 (equivalent RMB18,350,000) to Guizhou Taibang to subsidize the technical upgrade in respect
of the new GMP standard (see Note 6). The agreement is valid for a three-year period. The usage of this fund must be under the
supervision of the Financial Bureau of Huaxi District and cannot be used for other purposes. During the six months ended June 30,
2013, $186,198 was used in the technical upgrade in respect of the new GMP standard.
NOTE 8 – SHORT-TERM BANK LOANS
The Company’s bank loans as of June
30, 2013 and December 31, 2012 consisted of the following:
|
|
Maturity
|
|
Annual
|
|
|
|
|
|
|
|
Loans
|
|
date
|
|
interest rate
|
|
|
June 30, 2013
|
|
|
December 31, 2012
|
|
|
|
|
|
|
|
|
USD
|
|
|
USD
|
|
Short-term bank loan, unsecured
|
|
August 1, 2013
|
|
|
6.00
|
%
|
|
|
-
|
|
|
|
3,174,000
|
|
Short-term bank loan, unsecured
|
|
September 3, 2013
|
|
|
6.00
|
%
|
|
|
-
|
|
|
|
3,174,000
|
|
Short-term bank loan, unsecured
|
|
September 3, 2013
|
|
|
6.00
|
%
|
|
|
-
|
|
|
|
1,587,000
|
|
Short-term bank loan, unsecured
|
|
May 12, 2014
|
|
|
6.00
|
%
|
|
|
4,860,000
|
|
|
|
-
|
|
Total
|
|
|
|
|
|
|
|
|
4,860,000
|
|
|
|
7,935,000
|
|
Interest expense
on short-term bank loans was $79,410 and $45,765
for the three months ended June 30, 2013 and
2012, respectively. Interest expense on short-term bank loans was $198,900 and $204,982
for the
six months ended June 30, 2013 and 2012, respectively.
The Company did not have any revolving
line of credit as of June 30, 2013.
NOTE 9 – INCOME TAX
On October 31, 2011, Shandong Taibang received
a notice from the Shandong provincial government that the High and New Technology Enterprise qualification has been renewed for
an additional three years which entitled it to a 15% preferential income tax rate from 2011 to 2013.
According to Cai Shui [2011] No. 58 dated
July 27, 2011, Guizhou Taibang, being a qualified enterprise located in the western region of PRC, enjoys a preferential income
tax rate of 15% effective retroactively from January 1, 2011 to December 31, 2020.
The Company’s effective income tax
rates were 14% and 15% for the three months ended June 30, 2013 and 2012, respectively. The Company’s effective income tax
rates were 16% and 15% for the six months ended June 30, 2013 and 2012, respectively.
As of and for the six months ended June
30, 2013, the Company did not have any unrecognized tax benefits and thus no interest and penalties related to unrecognized tax
benefits were recorded. In addition, the Company does not expect that the amount of unrecognized tax benefits to change significantly
within the next 12 months.
NOTE 10 – OPTIONS AND NONVESTED
SHARES
Options
A summary of stock options activity for
six months ended June 30, 2013 is as follow:
|
|
Number of Options
|
|
|
Weighted Average Exercise Price
|
|
|
Weighted Average Remaining Contractual Term in Years
|
|
|
Aggregate Intrinsic
Value
|
|
|
|
|
|
|
USD
|
|
|
|
|
|
USD
|
|
Outstanding as of December 31, 2012
|
|
|
2,648,609
|
|
|
|
9.39
|
|
|
|
7.65
|
|
|
|
18,374,422
|
|
Granted
|
|
|
33,000
|
|
|
|
10.48
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(323,330
|
)
|
|
|
8.25
|
|
|
|
|
|
|
|
4,267,299
|
|
Forfeited and expired
|
|
|
(150,680
|
)
|
|
|
6.78
|
|
|
|
|
|
|
|
|
|
Outstanding as of June 30, 2013
|
|
|
2,207,599
|
|
|
|
9.75
|
|
|
|
7.45
|
|
|
|
29,679,283
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vested and expected to vest
|
|
|
2,207,599
|
|
|
|
9.75
|
|
|
|
7.45
|
|
|
|
29,679,283
|
|
Exercisable as of June 30, 2013
|
|
|
1,387,587
|
|
|
|
9.65
|
|
|
|
6.60
|
|
|
|
18,788,752
|
|
The 33,000 stock options granted during
the
six
months ended June 30, 2013 had a weighted average fair value of $8.37 per share or an
aggregate of $276,250 on the date of grant, determined based on the Black-Scholes option pricing model using the following weighted
average assumptions:
|
|
For
six
months ended
|
|
|
|
June 30, 2013
|
|
Expected volatility
|
|
|
104
|
%
|
Expected dividends yield
|
|
|
0
|
%
|
Expected term
|
|
|
5 years
|
|
Risk-free interest rate (per annum)
|
|
|
0.72
|
%
|
Fair value of underlying ordinary shares (per share)
|
|
$
|
10.57
|
|
For the three months ended June 30, 2013
and 2012, the Company recorded stock compensation expense of $1,230,066 and $1,030,539, respectively, in general and administrative
expenses. For the six months ended June 30, 2013 and 2012, the Company recorded stock compensation expense of $2,694,999 and $1,992,958,
respectively, in general and administrative expenses.
As of
June
30
, 2013, approximately $4,733,962 of stock compensation expense with respect to the non-vested stock
options is to be recognized over approximately 2.71 years.
Nonvested shares
A summary of nonvested shares activity for the
six
months ended June 30, 2013 is as follows:
|
|
Number of
nonvested shares
|
|
|
Grant date weighted
average fair value
|
|
|
|
|
|
|
USD
|
|
Outstanding as of December 31, 2012
|
|
|
120,000
|
|
|
|
9.85
|
|
Granted
|
|
|
22,500
|
|
|
|
18.58
|
|
Vested
|
|
|
-
|
|
|
|
-
|
|
Forfeited
|
|
|
-
|
|
|
|
-
|
|
Outstanding as of June 30, 2013
|
|
|
142,500
|
|
|
|
11.23
|
|
For the
three months ended June 30, 2013 and 2012, the Company recorded stock compensation expense of $183,161 and nil respectively
in general and administrative expenses. For the six months ended June 30, 2013 and 2012, the Company recorded stock
compensation expense of $352,963 and nil respectively in general and administrative expenses.
As of
June
30
, 2013, approximately $1,037,755 of stock compensation expense with respect to
nonvested
shares is to be recognized over approximately 2.52 years.
NOTE 11 – FAIR VALUE MEASUREMENTS
Management used the following methods and
assumptions to estimate the fair value of financial instruments at the relevant balance sheet dates:
·
|
Short-term financial instruments (including accounts receivable, other receivables, short-term
bank loans, accounts payable, other payables and accrued expenses, and amount due to related parties) – The carrying amounts
of the short-term financial instruments approximate their fair values because of the short maturity of these instruments.
|
NOTE 12 – SALES
The Company’s sales are primarily
derived from the manufacture and sale of Human Albumin and Immunoglobulin products. The Company’s sales by significant types
of product for the three months ended June 30, 2013 and 2012 are as follows:
|
|
For the three months ended
|
|
|
|
June 30, 2013
|
|
|
June 30, 2012
|
|
|
|
USD
|
|
|
USD
|
|
Human Albumin
|
|
|
22,764,711
|
|
|
|
19,539,419
|
|
Immunoglobulin products:
|
|
|
|
|
|
|
|
|
Human Immunoglobulin for Intravenous Injection
|
|
|
21,097,154
|
|
|
|
21,239,174
|
|
Other Immunoglobulin products
|
|
|
5,494,261
|
|
|
|
6,987,822
|
|
Placenta Polypeptide
|
|
|
3,037,991
|
|
|
|
2,509,202
|
|
Others
|
|
|
1,186,406
|
|
|
|
190,722
|
|
Total
|
|
|
53,580,523
|
|
|
|
50,466,339
|
|
The Company’s sales by significant
types of product for the six months ended June 30, 2013 and 2012 are as follows:
|
|
For the six months ended
|
|
|
|
June 30, 2013
|
|
|
June 30, 2012
|
|
|
|
USD
|
|
|
USD
|
|
Human Albumin
|
|
|
43,266,022
|
|
|
|
45,329,702
|
|
Immunoglobulin products:
|
|
|
|
|
|
|
|
|
Human Immunoglobulin for Intravenous Injection
|
|
|
46,759,025
|
|
|
|
36,500,900
|
|
Other Immunoglobulin products
|
|
|
10,593,986
|
|
|
|
10,773,101
|
|
Placenta Polypeptide
|
|
|
5,222,154
|
|
|
|
4,620,011
|
|
Others
|
|
|
1,771,068
|
|
|
|
470,086
|
|
Total
|
|
|
107,612,255
|
|
|
|
97,693,800
|
|
NOTE 13 – COMMITMENTS AND CONTINGENCIES
Capital commitments
As of June 30, 2013, commitments outstanding
for the purchase of property, plant and equipment approximated $5,200,000.
Legal proceedings
Dispute among Guizhou Taibang Shareholders
over Raising Additional Capital
In May 2007, a 91% majority of Guizhou
Taibang’s shareholders approved a plan to raise additional capital from private strategic investors through the issuance
of an additional 20,000,000 shares of Guizhou Taibang at RMB2.80 per share. The plan required all existing Guizhou Taibang shareholders
to waive their rights of first refusal to subscribe for the additional shares. The remaining 9% minority shareholder of Guizhou
Taibang’s shares, Guizhou Jie’an Company (“Jie’an”), did not support the plan and did not waive its
right of first refusal. In May 2007, the majority shareholders caused Guizhou Taibang to sign an Equity Purchase Agreement with
certain investors, pursuant to which the investors agreed to invest an aggregate of $7,475,832 (or RMB50,960,000) in exchange for
18,200,000 shares, or 21.4%, of Guizhou Taibang’s equity interests. At the same time, Jie’an also subscribed for 1,800,000
shares, representing its pro rata share of the 20,000,000 shares being offered. The proceeds from all parties were received by
Guizhou Taibang in accordance with the agreement.
In June 2007, Jie’an brought suit
in the High Court of Guizhou province, China, against Guizhou Taibang and the three other original shareholders of Guizhou Taibang,
alleging the illegality of the Equity Purchase Agreement. In its complaint, Jie’an claimed that it had a right to acquire
the 18,200,000 shares offered to the strategic investors under the Equity Purchase Agreement. In September 2008, the Guizhou High
Court ruled against Jie’an and sustained the Equity Purchase Agreement. In November 2008, Jie’an appealed the Guizhou
High Court judgment to the People’s Supreme Court in Beijing. In May 2009, the People’s Supreme Court sustained the
original ruling and denied the rights of first refusal of Jie’an over the 18,200,000 shares.
During the second
quarter of 2010, Jie’an requested that Guizhou Taibang register its 1.8 million shares of additional capital injection with
the local Administration for Industry and Commerce, or
AIC, pursuant to the Equity Purchase Agreement,
and such request was approved by the majority shareholders of Guizhou Taibang in a shareholders meeting held in the second quarter
of 2010. However, the Board of Directors of the Company is withholding its required ratification of the shareholders’ approval
of Jie’an’s request, pending the outcome of the ongoing litigation. In March 2012, the Company received a subpoena
that Jie’an brought suit in the People’s Court of Huaxi District, Guizhou Province, against Guizhou Taibang, alleging
Guizhou Taibang’s withholding of its request. Jie’an requested that Guizhou Taibang register its 1.8 million shares
of capital injection, pay dividends associated with these shares, as well as the related interest and penalty from May 2007 to
December 2011 amounting to $3,967,500 (or RMB25,000,000) in aggregate, and return the over-paid subscription of $228,528 (or RMB1,440,000),
as well as the interest and penalty, amounting to $1,587,000 (or RMB10,000,000) in aggregate. The People’s Court of Huaxi
District, Guizhou Province, has accepted Jie’an’s suit. In May 2012, Guizhou Taibang was informed by the court that
the case was postponed upon the request from Jie’an and no exact hearing date has been provided as of the date of this report.
If the Company decides to ratify the approval or the case is ruled in Jie’an’s favor, Dalin’s ownership in Guizhou
Taibang will be diluted from 54% to 52.54% and Jie’an may be entitled to receive its pro rata share of Guizhou Taibang’s
profits since the date of Jie’an’s capital contribution became effective. As this case is closely tied to the outcome
of the strategic investors’ dispute stated below, the Company does not expect Jie’an to prevail. As of
June
30
, 2013, the Company had recorded, in its balance sheet, payables to Jie’an in the amounts of
RMB5,040,000 (approximately $816,480) for the additional funds received in relation to the 1.8 million shares of capital infusion,
RMB1,440,000 (approximately $233,280) for the over-paid subscription and RMB2,736,575 (approximately $443,325) for the accrued
interest.
As a result of this dispute, the strategic
investors’ equity ownership in Guizhou Taibang and the related increase in registered capital of Guizhou Taibang have not
been registered with the local AIC. In January 2010, the strategic investors brought suit in the High Court of Guizhou Province
against Guizhou Taibang alleging Guizhou Taibang’s failure to register their equity interest in Guizhou Taibang with the
local AIC and requesting the distribution of their share of Guizhou Taibang’s dividends declared since 2007. Dalin was also
joined as a co-defendant as it is the majority shareholder and exercises control over Guizhou Taibang’s day-to-day operations.
In October, 2010, the High Court of Guizhou
ruled in favor of the Company and denied the strategic investors’ right as shareholders of Guizhou Taibang, as well as their
entitlement to the dividends. In light of the Guizhou ruling, the Company returned the proceeds of $1,699,040 (or RMB11,200,000)
to one of the strategic investors in November 2010. In October 2010, the other strategic investors appealed to the PRC Supreme
Court in Beijing on the ruling of the High Court of Guizhou. The PRC Supreme Court overruled the decision of the High Court of
Guizhou and remanded the case to the High Court of Guizhou for retrial. In January 2012, the strategic investors re-filed their
case to the High Court of Guizhou requesting, in addition to the share distribution, the distribution of dividends and interest
in the amount of RMB18,349,345 (approximately $2,972,594) and RMB2,847,000 (approximately $461,214), respectively. In December
2012, the High Court of Guizhou affirmed the judgment against the strategic investors. In January 2013, the strategic investors
appealed to the PRC Supreme Court in Beijing on the ruling again. The PRC Supreme Court accepted the case for retrial. The Company
does not expect the strategic investors to prevail because, upon evaluation of the Equity Purchase Agreement, the Company believe
that the Equity Purchase Agreement is void due to certain invalid pre-conditions and the absence of shareholder authorization of
the initial investment.
In April 2013,
the Company countersued the strategic investors in the Intermediate Court of Guiyang City alleging their breach of the Security
Law in the PRC and requested a consideration of $6,064,800 (or RMB38,000,000) for the related expenses and losses, and Guizhou
Intermediate Court accepted the case.
The Company is awaiting the hearing of the above cases as of the date of this report.
As of June 30, 2013,
Guizhou Taibang has set aside the strategic investors’ initial fund
along with RMB15,942,138 (approximately $2,582,626) in accrued interest, and RMB509,600 (approximately $82,555) for the 1% penalty
imposed by the agreement
for any breach in the event that Guizhou Taibang is required to return their original investment
amount to the strategic investors. If strategic investors prevail in their suit, Dalin’s interests in Guizhou Taibang may
be reduced to approximately 41.3%.
NOTE 14 – RELATED PARTY TRANSACTIONS
The material related party transactions
undertaken by the Company with related parties for the three months ended June 30, 2013 and 2012 are presented as follows:
|
|
For the three months ended
|
|
|
|
June 30, 2013
|
|
|
June 30, 2012
|
|
|
|
USD
|
|
|
USD
|
|
Commission expenses with related parties
(1)
|
|
|
909,057
|
|
|
|
852,948
|
|
The material related party transactions
undertaken by the Company with related parties for the six months ended June 30, 2013 and 2012 are presented as follows:
|
|
For the six months ended
|
|
|
|
June 30, 2013
|
|
|
June 30, 2012
|
|
|
|
USD
|
|
|
USD
|
|
Commission expenses with related parties
(1)
|
|
|
1,552,312
|
|
|
|
1,581,483
|
|
The related party balances as at June 30,
2013 and December 31, 2012 are presented as follows:
Liabilities
|
|
Purpose
|
|
June 30
, 2013
|
|
|
December 31, 2012
|
|
|
|
|
|
USD
|
|
|
USD
|
|
Other payable – a related party
(1)
|
|
Commission
|
|
|
204,120
|
|
|
|
339,272
|
|
Other payable – a related party
(2)
|
|
Loan
|
|
|
2,358,720
|
|
|
|
2,311,044
|
|
Other payable – a related party
(3)
|
|
Contribution
|
|
|
1,493,085
|
|
|
|
1,431,308
|
|
Total other payable – related parties
|
|
|
|
|
4,055,925
|
|
|
|
4,081,624
|
|
(1)
During
the year ended December 31, 2011, Guizhou Taibang signed an agency contract with Guizhou Eakan Co., Ltd. (“Guizhou Eakan”),
an affiliate of one of the Guizhou Taibang’s noncontrolling interest shareholders, pursuant to which Guizhou Taibang would
pay commission to Guizhou Eakan for the promotion of the product of Placenta Polypeptide. As of June 30, 2013, Guizhou Taibang
accrued commission payable of $204,120 for service rendered by Guizhou Eakan. For the three months ended June 30, 2013, commission
expense for service rendered by Guizhou Eakan was $909,057. For the six months ended June 30, 2013, commission expense for service
rendered by Guizhou Eakan was $1,552,312.
(2)
Guizhou
Taibang has payables to Guizhou Eakan Investing Corp., amounting to approximately $2,358,720 and $2,311,044 as of June 30, 2013
and December 31, 2012, respectively. Guizhou Eakan Investing Corp. is one of the noncontrolling interest shareholders of Guizhou
Taibang. The Company borrowed this interest free advance for working capital purpose for Guizhou Taibang. The balance is due on
demand.
(3)
Guizhou
Taibang has payables to Jie’an, a noncontrolling interest shareholder of Guizhou Taibang, amounting to approximately $1,493,085
and $1,431,308 as of June 30, 2013 and December 31, 2012, respectively. In 2007, Guizhou Taibang received additional contributions
from Jie’an of $962,853 (or RMB6,480,000) to maintain Jie’an’s equity interest in Guizhou Taibang at 9%. However,
due to a legal dispute among shareholders over raising additional capital as discussed in the legal proceeding section (see Note
13), the contribution is subject to be returned to Jie’an. During the second quarter of 2010, Jie’an requested that
Guizhou Taibang register its 1.8 million shares of additional capital contribution with the local AIC, pursuant to the Equity Purchase
Agreement, and such registration was approved by the majority shareholders of Guizhou Taibang in a shareholders’ meeting
held in the second quarter of 2010. However, the Board of Directors of the Company is withholding its required ratification of
the shareholders’ approval of Jie’an’s request until the completion of the ongoing litigations. If the Company
decided to ratify the approval, Dalin’s ownership in Guizhou Taibang will be diluted from 54% to 52.54% and Jie’an
will be entitled to receive its pro rata share of Guizhou Taibang’s profits since the date of Jie’an contribution became
effective. As this case is closely tied to the outcome of the strategic investors’ dispute stated above, the Company has
set aside Jie’an’s additional fund of RMB5,040,000 (approximately $816,480), the over-paid subscription of RMB1,440,000
(approximately $233,280) along with RMB2,736,575 (approximately $443,325) in accrued interest and penalty as of June 30, 2013.
NOTE 15 - NET INCOME PER SHARE
The following table sets forth the computation
of basic and diluted net income per share for the periods indicated:
|
|
For the three months ended
|
|
|
|
June 30, 2013
|
|
|
June 30, 2012
|
|
|
|
USD
|
|
|
USD
|
|
|
|
|
|
|
|
|
Net income attributable to China Biologic Products, Inc.
|
|
|
16,161,926
|
|
|
|
12,838,771
|
|
Earnings allocated to participating nonvested shares
|
|
|
(85,227
|
)
|
|
|
-
|
|
Net income allocated to common stockholders used in computing basic net income per common stock
|
|
|
16,076,699
|
|
|
|
12,838,771
|
|
Change in fair value of warrants
|
|
|
-
|
|
|
|
(559,758
|
)
|
Net income used in diluted net income per common stock
|
|
|
16,076,699
|
|
|
|
12,279,013
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares used in computing basic net income per common stock
|
|
|
26,880,459
|
|
|
|
25,875,164
|
|
Diluted effect of warrants
|
|
|
-
|
|
|
|
311,200
|
|
Diluted effect of stock option
|
|
|
1,186,844
|
|
|
|
440,796
|
|
Weighted average shares used in computing diluted net income per common stock
|
|
|
28,067,303
|
|
|
|
26,627,160
|
|
|
|
|
|
|
|
|
|
|
Net income per common stock – basic
|
|
|
0.60
|
|
|
|
0.50
|
|
Net income per common stock – diluted
|
|
|
0.57
|
|
|
|
0.46
|
|
During the three months ended June 30,
2013, no option was antidilutive and excluded from the calculation of diluted net income per common stock.
During the three months ended June 30,
2012, 1,544,000 options with an average exercise price of $11.98 were excluded from the calculation of diluted net income per common
stock since they were antidilutive.
The following table sets forth the computation
of basic and diluted net income per share for the periods indicated:
|
|
For the six months ended
|
|
|
|
June 30, 2013
|
|
|
June 30, 2012
|
|
|
|
USD
|
|
|
USD
|
|
|
|
|
|
|
|
|
Net income attributable to China Biologic Products, Inc.
|
|
|
31,077,786
|
|
|
|
25,796,077
|
|
Earnings allocated to participating nonvested shares
|
|
|
(157,615
|
)
|
|
|
-
|
|
Net income allocated to common stockholders used in computing basic net income per common stock
|
|
|
30,920,171
|
|
|
|
25,796,077
|
|
Change in fair value of warrants
|
|
|
-
|
|
|
|
(1,769,140
|
)
|
Net income used in diluted net income per common stock
|
|
|
30,920,171
|
|
|
|
24,026,937
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares used in computing basic net income per common stock
|
|
|
26,833,262
|
|
|
|
25,738,145
|
|
Diluted effect of warrants
|
|
|
-
|
|
|
|
390,507
|
|
Diluted effect of stock option
|
|
|
1,133,818
|
|
|
|
453,172
|
|
Weighted average shares used in computing diluted net income per common stock
|
|
|
27,967,080
|
|
|
|
26,581,824
|
|
|
|
|
|
|
|
|
|
|
Net income per common stock – basic
|
|
|
1.15
|
|
|
|
1.00
|
|
Net income per common stock – diluted
|
|
|
1.11
|
|
|
|
0.90
|
|
During the six months ended June 30, 2013,
no option was antidilutive and excluded from the calculation of diluted net income per common stock.
During the six months ended June 30, 2012,
1,544,000 options with an average exercise price of $11.98 were excluded from the calculation of diluted net income per common
stock since they were antidilutive.
NOTE 16 – SUBSEQUENT EVENT
On August 2, 2013, the Company entered
into a redemption agreement with one of its individual shareholders, pursuant to which the Company would repurchase 1,479,704 shares
of common stock for a consideration of US$29,594,080.
ITEM 2.
|
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
|
Special
Note Regarding Forward Looking Statements
In addition
to historical information, this report contains forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. We use words such as “believe,”
“expect,” “anticipate,” “project,” “target,” “plan,” “optimistic,”
“intend,” “aim,” “will” or similar expressions which are intended to identify forward-looking
statements. Such statements include, among others, those concerning market and industry segment growth and demand and acceptance
of new and existing products; expectations regarding governmental approvals of our new products; any projections of sales, earnings,
revenue, margins or other financial items; any statements of the plans, strategies and objectives of management for future operations;
any statements regarding future economic conditions or performance; as well as all assumptions, expectations, predictions, intentions
or beliefs about future events. You are cautioned that any such forward-looking statements are not guarantees of future performance
and involve risks and uncertainties, including those identified in Item 1A “Risk Factors” described in our Annual
Report on Form 10-K for the fiscal year ended December 31, 2012, as well as assumptions, which, if they were to ever materialize
or prove incorrect, could cause the results of the Company to differ materially from those expressed or implied by such forward-looking
statements.
Readers are
urged to carefully review and consider the various disclosures made by us in this report and our other filings with the SEC. These
reports attempt to advise interested parties of the risks and factors that may affect our business, financial condition and results
of operations and prospects. The forward-looking statements made in this report speak only as of the date hereof and we disclaim
any obligation, except as required by law, to provide updates, revisions or amendments to any forward-looking statements to reflect
changes in our expectations or future events.
Use of Terms
Except as otherwise
indicated by the context and for the purposes of this report only, references in this report to:
|
·
|
“China
Biologic”,
the “Company”,
“we”,
“us”,
or “our”,
are to the combined
business of China
Biologic Products,
Inc., a Delaware
corporation, and
its direct and
indirect subsidiaries;
|
|
·
|
“Taibang
Biological”
are to our wholly
owned subsidiary
Taibang Biological
Limited, a BVI
company, formerly
Logic Express Limited;
|
|
·
|
“Taibang
Holdings”
are to our wholly-owned
subsidiary Taibang
Holdings (Hong
Kong) Limited,
a Hong Kong company,
formerly Logic
Holdings (Hong
Kong) Limited;
|
|
·
|
“Taibang
Biotech”
are to our wholly
owned subsidiary
Taibang Biotech
(Shandong) Co.,
Ltd., a PRC company,
formerly Logic
Management and
Consulting (China)
Co., Ltd.;
|
|
·
|
“Taibang
Beijing”
are to our wholly
owned subsidiary
Taibang (Beijing)
Pharmaceutical
Research Institute
Co., Ltd., a PRC
company, formerly
Logic Taibang Biotech
Institute (Beijing);
|
|
·
|
“Dalin”
are to our wholly
owned subsidiary
Guiyang Dalin Biologic
Technologies Co.,
Ltd., a PRC company;
|
|
·
|
“Shandong
Taibang”
are to our majority
owned subsidiary
Shandong Taibang
Biological Products
Co. Ltd., a sino-foreign
joint venture incorporated
in China;
|
|
·
|
“Taibang
Medical”
are to our wholly
owned subsidiary
Shandong Taibang
Medical Company,
a PRC company;
|
|
·
|
“Guizhou
Taibang”
are to our majority
owned subsidiary
Guizhou Taibang
Biological Products
Co., Ltd., a PRC
company, formerly
Guiyang Qianfeng
Biological Products
Co., Ltd.;
|
|
·
|
“Huitian”
are to our minority
owned investee
Xi’an Huitian
Blood Products
Co., Ltd., a PRC
company;
|
|
·
|
“Board”
are to our board
of directors;
|
|
·
|
“BVI”
are to the British
Virgin Islands;
|
|
·
|
“Hong
Kong” are
to the Hong Kong
Special Administrative
Region of the People’s
Republic of China;
|
|
·
|
“PRC”
and “China”
are to the People’s
Republic of China;
|
|
·
|
“SEC”
are to the Securities
and Exchange Commission;
|
|
·
|
“Securities
Act” are
to the Securities
Act of 1933, as
amended;
|
|
·
|
“Exchange
Act” are
to the Securities
Exchange Act of
1934, as amended;
|
|
·
|
“Renminbi”
and “RMB”
are to the legal
currency of China;
|
|
·
|
“U.S.
dollars”,
“dollars”
,
“
USD
”
and
“$”
are to the legal
currency of the
United States;
and
|
|
·
|
“New
GMP Standard”
are to the Drug
Good Manufacturing
Practice Regulations
enacted by China’s
Ministry of Health
on February 12,
2001 and the Good
Manufacturing Practice
Implementation
Guidelines published
by China’s
State Food and
Drug Administration
on February 24,
2011.
|
Overview
of Our Business
We are a biopharmaceutical
company principally engaged in the research, development, manufacturing and sales of human plasma-based pharmaceutical products
in China. We have two majority owned subsidiaries, Shandong Taibang, a company based in Tai’an, Shandong Province and Guizhou
Taibang, a company based in Guiyang, Guizhou Province. We also hold a minority equity interest in Huitian, a company based in
Xi’an, Shaanxi Province. The human plasma-based biopharmaceutical manufacturing industry in China is highly regulated by
both provincial and central governments. Accordingly, the manufacturing process of our products is strictly monitored from the
initial collection of plasma from human donors to finished products.
Our principal
products are human albumin and immunoglobulin products. Albumin has been used for almost 50 years to treat critically ill patients
by replacing lost fluid and maintaining adequate blood volume and pressure. Immunoglobulin is used for certain disease prevention
and treatment by enhancing specific immunity. These products use human plasma as the principal raw material. Human albumin and
human immunoglobulin for intravenous injection, or IVIG products, are our top-selling products. Sales of human albumin products
represented approximately 42.5% and 38.7% of our total sales for each of the three months ended June 30, 2013 and 2012, respectively,
and 40.2% and 46.4% of our total sales for the six months ended June 30, 2013 and 2012, respectively. Sales of IVIG products represented
approximately 39.4% and 42.1% of our total sales for each of the three months ended June 30, 2013 and 2012, respectively, and
43.5% and 37.4% of our total sales for the six months ended June 30, 2013 and 2012, respectively. All of our products are prescription
medicines administered in the form of injections.
We sell our
products primarily to hospitals and inoculation centers in the PRC directly or through approved distributors. We usually sign
short-term contracts with customers and therefore our largest customers have changed over the years. For the three months ended
June 30, 2013 and 2012, our top 5 customers accounted for approximately 13.9% and 13.4%, respectively, of our total sales. For
the six months ended June 30, 2013 and 2012, our top 5 customers accounted for approximately 10.5% and 13.8%, respectively, of
our total sales. As we continue to expand our geographic presence and diversify our customer base and product mix, we expect that
our largest customers will continue to change from year to year.
We operate
and manage our business as a single segment. We do not account for the results of our operations on a geographic or other basis.
Our principal
executive offices are located at 18
th
Floor, Jialong International Building, 19 Chaoyang Park Road, Chaoyang District,
Beijing 100125, the People’s Republic of China. Our corporate telephone number is + (86) 10-6598-3111 and our fax number
is + (86) 10-6598-3222. We maintain a website at
http://www.chinabiologic.com
that contains information about our company,
but that information is not part of this report.
Recent Development
Shandong Taibang
On June 28,
2013, Shandong Taibang obtained the renewed GMP certification from the China Food and Drug Administration in respect of its plasma
production facility.
As the current
manufacturing facility of Shandong Taibang is located in the scenic area of Mount Tai, it has no room for future production expansion.
Shandong Taibang therefore plans to build a new production facility at a new site in the Taian city, Shandong province, before
the current GMP expires in mid 2018. In order to ensure that the new facility will meet the new GMP standards and have sufficient
time for a smooth operational transition, Shandong Taibang has initiated the process of applying for land use right for a parcel
of land in Taian city with local government.
Guizhou Taibang
In June 2013, Guizhou Taibang suspended
its plasma production and started the upgrade of plasma production facility. Guizhou Taibang is expected to complete the upgrade
in six to nine months.
Equity Compensation
On August 2,
2013, the independent directors of the Company, acting upon the recommendation of the Compensation Committee, approved and authorized
the issuance of an aggregate of 230,000 shares of restricted stock under the 2008 Plan to employees of the Company, including:
|
·
|
80,000
shares of the Company’s restricted stock to Mr. David (Xiaoying) Gao, Chief Executive Officer and Chairman of the Board;
|
|
·
|
30,000
shares of the Company’s
restricted stock
to Mr. Ming Yang,
our CFO;
|
|
·
|
20,000
shares of the Company’s
restricted stock
to Mr. Ming Yin,
our senior corporate
vice president;
|
|
·
|
5,000
shares of the Company’s
restricted stock
to Ms. Zhijing
Liu, our corporate
vice president;
|
|
·
|
20,000
shares of the Company’s
restricted stock
to Mr. Gang Yang,
our corporate vice
president and the
general manager
of Guizhou Taibang,
and
|
|
·
|
an
aggregate of 75,000
shares of the Company’s
restricted stock
to other employees.
|
The restricted
stock granted to each of the employees will vest annually over a 4-year period in four equal portions, with the first portion
vesting on the one year anniversary of the grant date.
On August 2,
2013, the Board, acting upon the recommendation of the Compensation Committee, approved and authorized the issuance of an aggregate
of 47,000 shares of the Company’s restricted stock to non-executive directors, of which 5,000 shares of the Company’s
restricted stock to Mr. Bing Li, 6,000 shares of the Company’s restricted stock to Mr. Wenfang Liu, 9,000 shares of the
Company’s restricted stock to Mr. Yungang Lu, 10,000 shares of the Company’s restricted stock to Mr. Sean Shao, 6,000
shares of the Company’s restricted stock to Mr. Zhijun Tong, 6,000 shares of the Company’s restricted stock to Mr.
Albert (Wai Keung) Yeung and 5,000 shares of the Company’s restricted stock to Mr. Charles Zhang. The restricted stock granted
to each of the non-executive directors will vest annually over a 2-year period in two equal portions, with the first portion vesting
on the one year anniversary of the grant date.
The Company is expected to enter
into a restricted stock grant agreement with each of the aforementioned grantees in mid August, 2013. A copy of the form of such
agreement is filed as Exhibit 3.3 to this quarterly report on Form 10Q and incorporated herein by reference.
Second Quarter Financial Performance
Highlights
The following
are some financial highlights for the three months ended June 30, 2013:
|
·
|
Sales
:
Sales increased
by $3,114,184,
or 6.2%, to $53,580,523
for the three months
ended June 30,
2013, from $50,466,339
for the same period
in 2012.
|
|
·
|
Gross
profit
:
Gross profit increased
by $3,122,811,
or 9.1%, to $37,458,261
for the three months
ended June 30,
2013, from $34,335,450
for the same period
in 2012.
|
|
·
|
Income
from operations
:
Income from operations
increased by $4,006,966,
or 18.8%, to $25,315,313
for the three months
ended June 30,
2013, from $21,308,347
for the same period
in 2012.
|
|
·
|
Net
income attributable
to the Company
:
Net income increased
by $3,323,155,
or 25.9%, to $16,161,926
for the three months
ended June 30,
2013, from $12,838,771
for the same period
in 2012.
|
|
|
|
|
·
|
Diluted
net income per
share
:
Diluted net income
per share was $0.57
for the three months
ended June 30,
2013, as compared
to $0.46 for the
same period in
2012.
|
Results of Operations
Comparison of Three Months Ended
June 30, 2013 and June 30, 2012
The following
table sets forth key components of our results of operations for the periods indicated.
(All amounts,
other than percentages, in U.S. dollars)
|
|
For the three Months Ended June 30
|
|
|
|
2013
|
|
|
2012
|
|
|
|
$
|
|
|
% of
Total
Sales
|
|
|
$
|
|
|
% of
Total
Sales
|
|
SALES
|
|
|
53,580,523
|
|
|
|
100.0
|
|
|
|
50,466,339
|
|
|
|
100.0
|
|
COST OF SALES
|
|
|
16,122,262
|
|
|
|
30.1
|
|
|
|
16,130,889
|
|
|
|
32.0
|
|
GROSS MARGIN
|
|
|
37,458,261
|
|
|
|
69.9
|
|
|
|
34,335,450
|
|
|
|
68.0
|
|
OPERATING EXPENSES
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling expenses
|
|
|
2,441,727
|
|
|
|
4.6
|
|
|
|
4,165,242
|
|
|
|
8.3
|
|
General and administrative expenses
|
|
|
8,866,071
|
|
|
|
16.5
|
|
|
|
7,932,372
|
|
|
|
15.7
|
|
Research and development expenses
|
|
|
835,150
|
|
|
|
1.6
|
|
|
|
929,489
|
|
|
|
1.8
|
|
Total operating expenses
|
|
|
12,142,948
|
|
|
|
22.7
|
|
|
|
13,027,103
|
|
|
|
25.8
|
|
INCOME FROM OPERATIONS
|
|
|
25,315,313
|
|
|
|
47.2
|
|
|
|
21,308,347
|
|
|
|
42.2
|
|
OTHER INCOME (EXPENSES)
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity in income of equity method investee
|
|
|
610,997
|
|
|
|
1.1
|
|
|
|
451,891
|
|
|
|
0.9
|
|
Change in fair value of derivative liabilities
|
|
|
-
|
|
|
|
-
|
|
|
|
559,758
|
|
|
|
1.1
|
|
Interest expense
|
|
|
(198,739
|
)
|
|
|
(0.4
|
)
|
|
|
(157,635
|
)
|
|
|
(0.3
|
)
|
Interest income
|
|
|
995,757
|
|
|
|
1.9
|
|
|
|
765,717
|
|
|
|
1.5
|
|
Other expenses, net
|
|
|
-
|
|
|
|
-
|
|
|
|
(1,797
|
)
|
|
|
(0.0
|
)
|
Total other income, net
|
|
|
1,408,015
|
|
|
|
2.6
|
|
|
|
1,617,934
|
|
|
|
3.2
|
|
EARNINGS BEFORE INCOME TAX EXPENSE
|
|
|
26,723,328
|
|
|
|
49.9
|
|
|
|
22,926,281
|
|
|
|
45.4
|
|
INCOME TAX EXPENSES
|
|
|
3,745,649
|
|
|
|
7.0
|
|
|
|
3,333,616
|
|
|
|
6.6
|
|
NET INCOME
|
|
|
22,977,679
|
|
|
|
42.9
|
|
|
|
19,592,665
|
|
|
|
38.8
|
|
Less: Net income attributable to non-controlling interest
|
|
|
6,815,753
|
|
|
|
12.7
|
|
|
|
6,753,894
|
|
|
|
13.4
|
|
NET INCOME ATTRIBUTABLE TO COMPANY
|
|
|
16,161,926
|
|
|
|
30.2
|
|
|
|
12,838,771
|
|
|
|
25.4
|
|
NET INCOME PER SHARE OF COMMON STOCK
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BASIC
|
|
|
0.60
|
|
|
|
|
|
|
|
0.50
|
|
|
|
|
|
DILUTED
|
|
|
0.57
|
|
|
|
|
|
|
|
0.46
|
|
|
|
|
|
Sales
Our sales increased
by 6.2%, or $3,114,184, to $53,580,523 for the three months ended June 30, 2013, compared to $50,466,339 for the three months
ended June 30, 2012. The increase in sales during 2013 was primarily attributable to a mix of price and volume increases in certain
of our plasma based products. In addition, foreign currency translation accounted for 1.8% of the sales increase.
The following
table summarizes the breakdown of sales by significant types of product
:
|
|
For the three Months Ended June 30,
|
|
|
Change
|
|
|
|
2013
|
|
|
2012
|
|
|
|
|
|
|
|
|
|
$
|
|
|
%
|
|
|
$
|
|
|
%
|
|
|
Amount
|
|
|
%
|
|
Human Albumin
|
|
|
22,764,711
|
|
|
|
42.5
|
|
|
|
19,539,419
|
|
|
|
38.7
|
|
|
|
3,225,292
|
|
|
|
16.5
|
|
Immunoglobulin products:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
IVIG
|
|
|
21,097,154
|
|
|
|
39.4
|
|
|
|
21,239,174
|
|
|
|
42.1
|
|
|
|
(142,020
|
)
|
|
|
(0.7
|
)
|
Other Immunoglobulin products
|
|
|
5,494,261
|
|
|
|
10.3
|
|
|
|
6,987,822
|
|
|
|
13.8
|
|
|
|
(1,493,561
|
)
|
|
|
(21.4
|
)
|
Placenta Polypeptide
|
|
|
3,037,991
|
|
|
|
5.7
|
|
|
|
2,509,202
|
|
|
|
5.0
|
|
|
|
528,789
|
|
|
|
21.1
|
|
Others
|
|
|
1,186,406
|
|
|
|
2.1
|
|
|
|
190,722
|
|
|
|
0.4
|
|
|
|
995,684
|
|
|
|
522.1
|
|
Totals
|
|
|
53,580,523
|
|
|
|
100.0
|
|
|
|
50,466,339
|
|
|
|
100.0
|
|
|
|
3,114,184
|
|
|
|
6.2
|
|
During the
three months ended June 30, 2013 as compared to the three months ended June 30, 2012, the prices of all of our approved plasma
products either recorded an price increase or remained relative stable. For the three months ended June 30, 2013 as compared to
the three months ended June 30, 2012:
|
·
|
the
average price for
our approved human
albumin products,
which accounted
for 42.5% of our
total sales for
the three months
ended June 30,
2013, increased
by approximately
12.1% and, excluding
the impact of foreign
currency, their
average price in
RMB term increased
by approximately
10.3%; and
|
|
·
|
the
average price for
our approved IVIG
products, which
accounted for 39.4%
of our total sales
for the three months
ended June 30,
2013, increased
by approximately
0.9%, and excluding
the impact of foreign
currency, their
average price in
RMB term decreased
by approximately
0.9%.
|
The price increase
of human albumin products was mainly due to the increase of retail price ceiling announced by Chinese National Development and
Reform Commission (“NDRC”) in January 2013, which came into effect on February 1, 2013. This increased retail price
ceiling provides us with more flexibility in pricing our human albumin products and allows us to increase our ex-factory prices
in certain regional markets. NDRC also adjusted retail price ceilings for IVIG in September 2012, which came into effect on October 8,
2012. The new retail price ceilings for IVIG products are lower than the current prevailing market prices in some of our regional
markets. As a result, some of local governments revised tender price ceilings for IVIG products. We have appealed to local governments
for favorable pricing policy in selective regional markets and have successfully gained support from certain provincial governments
in lifting the tender price ceilings for IVIG products. Therefore, the average price of our IVIG products remained stable in the
second quarter of 2013 as compared to the same period of 2012 in spite of the retail price ceiling adjustment.
The sales volumes
of our products in general depend on market demands and our production volumes. The production volumes of our IVIG and human albumin
products depend primarily on general plasma supply. The production volumes of our hyper-immune products, which include human rabies
immunoglobulin, human hepatitis B immunoglobulin and human tetanus immunoglobulin products, are subject to the availabilities
of specific vaccinated plasma and our production capacity. The supply of specific vaccinated plasma in general requires several
months of lead time. Our production facility currently can only accommodate the production of one type of hyper-immune products
at any given time and we rotate the production of different types of hyper-immune products from time to time in response to market
demand. As such, the sales volume of any given type of hyper-immune products may vary significantly from quarter to quarter. Given
the planned production suspension of Guizhou Taibang starting from June 2013, we decreased the sales volume of some of our products
in the three months ended June 30, 2013 in order to smooth out the impact of the reduced production volume and maintain our sales
channels and customer relationship during the period of Guizhou Taibang production suspension.
Sales volume
for our human albumin products increased slightly by 3.9% in the second quarter of 2013 as compared to the same period of 2012.
The increase in sales volumes of human albumin products was primarily due to the strong market demand for human albumin products.
Sales volume for our IVIG products decreased by 1.6% in the second quarter of 2013 as compared to the same period of 2012.
Cost
of sales
& gross profit
|
|
For the three Months Ended June 30,
|
|
|
Change
|
|
|
|
2013
|
|
|
2012
|
|
|
Amount
|
|
|
%
|
|
Cost of sales
|
|
$
|
16,122,262
|
|
|
$
|
16,130,889
|
|
|
$
|
(8,627
|
)
|
|
|
(0.1
|
)%
|
as a percentage of total sales
|
|
|
30.1
|
%
|
|
|
32.0
|
%
|
|
|
|
|
|
|
(1.9
|
)%
|
Gross Profit
|
|
$
|
37,458,261
|
|
|
$
|
34,335,450
|
|
|
$
|
3,122,811
|
|
|
|
9.1
|
%
|
Gross Margin
|
|
|
69.9
|
%
|
|
|
68.0
|
%
|
|
|
|
|
|
|
1.9
|
%
|
Our cost of
sales was $16,122,262, or 30.1% of our sales, for the three months ended June 30, 2013, as compared to $16,130,889, or 32.0% of
our sales for the same period in 2012. Our gross profit was $37,458,261 and $34,335,450 for the three months ended June 30, 2013
and 2012, respectively, representing gross margins of 69.9% and 68.0%, respectively. In general, our cost of sales and gross
margin are impacted by the volume and pricing of our finished products, our raw material costs, production mix and respective
yields, inventory provisions, production cycles and routine maintenance costs.
The decrease
in cost of sales in the three months ended June 30, 2013 as compared to the same period in 2012 was in line with the decrease
in sales volumes, mainly immunoglobulin products. We decreased the sales volume during the three months ended June 30, 2013 in
response to the production suspension starting from June 2013. The improvement of gross margin in the three months ended June
30, 2013 as compared to the same period in 2012, was mainly due to the improved gross margin of human albumin products as a result
of price increases and the improved utilization efficiency of plasma following the newly-launched Factor VIII products.
Operating
expenses
|
|
For the three Months Ended June 30,
|
|
|
Change
|
|
|
|
2013
|
|
|
2012
|
|
|
Amount
|
|
|
%
|
|
Operating expenses
|
|
$
|
12,142,948
|
|
|
$
|
13,027,103
|
|
|
$
|
(884,155
|
)
|
|
|
(6.8
|
)%
|
as a percentage of total sales
|
|
|
22.7
|
%
|
|
|
25.8
|
%
|
|
|
|
|
|
|
(3.1
|
)%
|
Our total operating
expenses decreased by $884,155, or 6.8%, to $12,142,948, for the three months ended June 30, 2013, from $13,027,103 for the same
period in 2012. As a percentage of sales, total expenses decreased by 3.1% to 22.7% for the three months ended June 30, 2013,
from 25.8% for the same period in 2012. The decrease of the total operating expenses was mainly due to the decrease of the selling
expenses as discussed below.
Selling
expenses
|
|
For the three Months Ended June 30,
|
|
|
Change
|
|
|
|
2013
|
|
|
2012
|
|
|
Amount
|
|
|
%
|
|
Selling expenses
|
|
$
|
2,441,727
|
|
|
$
|
4,165,242
|
|
|
$
|
(1,723,515
|
)
|
|
|
(41.4
|
)%
|
as a percentage of total sales
|
|
|
4.6
|
%
|
|
|
8.3
|
%
|
|
|
|
|
|
|
(3.7
|
)%
|
For the three
months ended June 30, 2013, our selling expenses decreased by $1,723,515, or 41.4%, to $2,441,727, from $4,165,242 for the three
months ended June 30, 2012. As a percentage of sales, our selling expenses for the three months ended June 30, 2013 decreased
by 3.7% to 4.6%, from 8.3% for the three months ended June 30, 2012. The decrease was mainly due to the fact that we lowered the
commission rate for certain products during the second half of 2012. Further, we have taken steps to impose stricter control on
the selling expenses since the second half of 2012. However, we carried out the promotional and conference activities for our
new product Factor VIII starting from the second quarter of 2013. As a result, we expect our selling expenses as a percentage
of sales will increase in the following quarters.
General
and administrative expenses
|
|
For the three Months Ended June 30,
|
|
|
Change
|
|
|
|
2013
|
|
|
2012
|
|
|
Amount
|
|
|
%
|
|
General and administrative expenses
|
|
$
|
8,866,071
|
|
|
$
|
7,932,372
|
|
|
$
|
933,699
|
|
|
|
11.8
|
%
|
as a percentage of total sales
|
|
|
16.5
|
%
|
|
|
15.7
|
%
|
|
|
|
|
|
|
0.8
|
%
|
For the three
months ended June 30, 2013, our general and administrative expenses increased by $933,699, or 11.8%, to $8,866,071, from $7,932,372
for the three months ended June 30, 2012. General and administrative expenses as a percentage of sales increased by 0.8% to 16.5%
for the three months ended June 30, 2013, from 15.7% for the three months ended June 30, 2012. The increase in general and administrative
expenses was mainly due to an increase in expenses related to payroll and employee benefits as a result of general salary increases,
an increase of share-based compensation and an increase in legal expenses relating to the corporate defense against the proposed
share acquisition by Shanghai RAAS Blood Products Co., Ltd. (“Shanghai RAAS”), a public company listed on the Shenzhen
Stock Exchange and a direct competitor of the Company in China.
Research
and development expenses
|
|
For the three Months Ended June 30,
|
|
|
Change
|
|
|
|
2013
|
|
|
2012
|
|
|
Amount
|
|
|
%
|
|
Research and development expenses
|
|
$
|
835,150
|
|
|
$
|
929,489
|
|
|
$
|
(94,339
|
)
|
|
|
(10.1
|
)%
|
as a percentage of total sales
|
|
|
1.6
|
%
|
|
|
1.8
|
%
|
|
|
|
|
|
|
(0.2
|
)%
|
For the three months ended June
30, 2013 and 2012, our research and development expenses were $835,150 and $929,489, respectively, representing an decrease of
$94,339, or 10.1%. As a percentage of sales, our research and development expenses for the three months ended June 30, 2013 and
2012 were 1.6% and 1.8%, respectively. The research and development expenses remained consistent for the three months ended June
30, 2013, as compared to the same period in 2012.
Change
in fair value of derivative liabilities
|
|
For the three Months Ended June 30,
|
|
|
Change
|
|
|
|
2013
|
|
|
2012
|
|
|
Amount
|
|
|
%
|
|
Change in fair value of derivative liabilities
|
|
$
|
-
|
|
|
$
|
559,758
|
|
|
$
|
(559,758
|
)
|
|
|
(100.0
|
)%
|
as a percentage of total sales
|
|
|
-
|
|
|
|
1.1
|
%
|
|
|
|
|
|
|
(1.1
|
)%
|
Our warrants
issued in June 2009 are classified as derivative liabilities carried at fair value. For the three months ended June 30, 2013 and
2012, we recognized a gain from the change in fair value of derivative liabilities in the amounts of nil and $559,758, respectively.
The recognized gain from the change in the fair value of derivative liabilities in the three months ended June 30, 2012 was mainly
due to a decrease in the price of our common stock from $9.28 per share as of March 31, 2012 to $8.55 and $9.22, respectively,
as of the two warrants exercise dates. All warrants have been exercised by the end of June 2012.
Income
tax
|
|
For the three Months Ended June 30,
|
|
|
Change
|
|
|
|
2013
|
|
|
2012
|
|
|
Amount
|
|
|
%
|
|
Income tax
|
|
$
|
3,745,649
|
|
|
$
|
3,333,616
|
|
|
$
|
412,033
|
|
|
|
12.4
|
%
|
as a percentage of total sales
|
|
|
7.0
|
%
|
|
|
6.6
|
%
|
|
|
|
|
|
|
0.4
|
%
|
Our provision
for income taxes increased by $412,033, or 12.4%, to $3,745,649 for the three months ended June 30, 2013, from $3,333,616 for
the same period in 2012. Our effective income tax rates were 14.0% and 14.5% for the three months ended June 30, 2013 and 2012,
respectively. The effective income tax rate remained consistent for the three months ended June 30, 2013, as compared to the same
period in 2012. Tax rate applicable to our major operating subsidiaries in the PRC for 2012 and 2013 is 15%.
Net income
attributable to the Company
|
|
For the three Months Ended June 30,
|
|
|
Change
|
|
|
|
2013
|
|
|
2012
|
|
|
Amount
|
|
|
%
|
|
Net income attributable to the Company
|
|
$
|
16,161,926
|
|
|
$
|
12,838,771
|
|
|
$
|
3,323,155
|
|
|
|
25.9
|
%
|
as a percentage of total sales
|
|
|
30.2
|
%
|
|
|
25.4
|
%
|
|
|
|
|
|
|
4.8
|
%
|
Our net income
attributable to the Company increased by $3,323,155, or 25.9%, to $16,161,926 for the three months ended June 30, 2013, from $12,838,771
for the same period in 2012. Net income attributable to the Company as a percentage of total sales was 30.2% and 25.4% for the
three months ended June 30, 2013 and 2012, respectively, as a result of the cumulative effect of the foregoing factors.
Comparison of Six Months Ended
June 30, 2013 and June 30, 2012
The following
table sets forth key components of our results of operations for the periods indicated.
(All amounts,
other than percentages, in U.S. dollars)
|
|
For the six Months Ended June 30
|
|
|
|
2013
|
|
|
2012
|
|
|
|
$
|
|
|
% of
Total
Sales
|
|
|
$
|
|
|
% of
Total
Sales
|
|
SALES
|
|
|
107,612,255
|
|
|
|
100.0
|
|
|
|
97,693,800
|
|
|
|
100.0
|
|
COST OF SALES
|
|
|
32,739,020
|
|
|
|
30.4
|
|
|
|
31,846,616
|
|
|
|
32.6
|
|
GROSS MARGIN
|
|
|
74,873,235
|
|
|
|
69.6
|
|
|
|
65,847,184
|
|
|
|
67.4
|
|
OPERATING EXPENSES
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selling expenses
|
|
|
4,278,120
|
|
|
|
4.0
|
|
|
|
8,991,349
|
|
|
|
9.2
|
|
General and administrative expenses
|
|
|
17,553,168
|
|
|
|
16.3
|
|
|
|
15,078,166
|
|
|
|
15.4
|
|
Research and development expenses
|
|
|
1,748,242
|
|
|
|
1.6
|
|
|
|
1,640,077
|
|
|
|
1.7
|
|
Total operating expenses
|
|
|
23,579,530
|
|
|
|
21.9
|
|
|
|
25,709,592
|
|
|
|
26.3
|
|
INCOME FROM OPERATIONS
|
|
|
51,293,705
|
|
|
|
47.7
|
|
|
|
40,137,592
|
|
|
|
41.1
|
|
OTHER INCOME (EXPENSES)
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity in income of equity method investee
|
|
|
739,945
|
|
|
|
0.7
|
|
|
|
1,474,303
|
|
|
|
1.5
|
|
Change in fair value of derivative liabilities
|
|
|
-
|
|
|
|
-
|
|
|
|
1,769,140
|
|
|
|
1.8
|
|
Interest expense
|
|
|
(434,913
|
)
|
|
|
(0.4
|
)
|
|
|
(766,198
|
)
|
|
|
(0.8
|
)
|
Interest income
|
|
|
1,643,819
|
|
|
|
1.5
|
|
|
|
1,309,112
|
|
|
|
1.3
|
|
Other expenses, net
|
|
|
-
|
|
|
|
-
|
|
|
|
(102,786
|
)
|
|
|
(0.1
|
)
|
Total other income, net
|
|
|
1,948,851
|
|
|
|
1.8
|
|
|
|
3,683,571
|
|
|
|
3.8
|
|
EARNINGS BEFORE INCOME TAX EXPENSE
|
|
|
53,242,556
|
|
|
|
49.5
|
|
|
|
43,821,163
|
|
|
|
44.9
|
|
INCOME TAX EXPENSES
|
|
|
8,352,551
|
|
|
|
7.8
|
|
|
|
6,510,331
|
|
|
|
6.7
|
|
NET INCOME
|
|
|
44,890,005
|
|
|
|
41.7
|
|
|
|
37,310,832
|
|
|
|
38.2
|
|
Less: Net income attributable to non-controlling interest
|
|
|
13,812,219
|
|
|
|
12.8
|
|
|
|
11,514,755
|
|
|
|
11.8
|
|
NET INCOME ATTRIBUTABLE TO COMPANY
|
|
|
31,077,786
|
|
|
|
28.9
|
|
|
|
25,796,077
|
|
|
|
26.4
|
|
NET INCOME PER SHARE OF COMMON STOCK
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
BASIC
|
|
|
1.15
|
|
|
|
|
|
|
|
1.00
|
|
|
|
|
|
DILUTED
|
|
|
1.11
|
|
|
|
|
|
|
|
0.90
|
|
|
|
|
|
Sales
Our sales increased
by 10.2%, or $9,918,455, to $107,612,255 for the six months ended June 30, 2013, compared to $97,693,800 for the six months ended
June 30, 2012. The increase in sales for the six months ended June 30, 2013 was primarily attributable to a mix of price and volume
increases in certain of our plasma based products. In addition, foreign currency translation accounted for 1.1% of the sales increase.
The following
table summarizes the breakdown of sales by significant types of product:
|
|
For the six Months Ended June 30,
|
|
|
Change
|
|
|
|
2013
|
|
|
2012
|
|
|
|
|
|
|
|
|
|
$
|
|
|
%
|
|
|
$
|
|
|
%
|
|
|
Amount
|
|
|
%
|
|
Human Albumin
|
|
|
43,266,022
|
|
|
|
40.2
|
|
|
|
45,329,702
|
|
|
|
46.4
|
|
|
|
(2,063,680
|
)
|
|
|
(4.6
|
)
|
Immunoglobulin products:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
IVIG
|
|
|
46,759,025
|
|
|
|
43.5
|
|
|
|
36,500,900
|
|
|
|
37.4
|
|
|
|
10,258,125
|
|
|
|
28.1
|
|
Other Immunoglobulin products
|
|
|
10,593,986
|
|
|
|
9.8
|
|
|
|
10,773,101
|
|
|
|
11.0
|
|
|
|
(179,115
|
)
|
|
|
(1.7
|
)
|
Placenta Polypeptide
|
|
|
5,222,154
|
|
|
|
4.9
|
|
|
|
4,620,011
|
|
|
|
4.7
|
|
|
|
602,143
|
|
|
|
13.0
|
|
Others
|
|
|
1,771,068
|
|
|
|
1.6
|
|
|
|
470,086
|
|
|
|
0.5
|
|
|
|
1,300,982
|
|
|
|
276.8
|
|
Totals
|
|
|
107,612,255
|
|
|
|
100.0
|
|
|
|
97,693,800
|
|
|
|
100.0
|
|
|
|
9,918,455
|
|
|
|
10.2
|
|
During the
six months ended June 30, 2013 as compared to the six months ended June 30, 2012, all of our approved plasma products recorded
price increases. For the six months ended June 30, 2013 as compared to the six months ended June 30, 2012:
|
·
|
the
average price for
our approved human
albumin products,
which accounted
for 40.2% of our
total sales for
the six months
ended June 30,
2013, increased
by approximately
10.1% and, excluding
the impact of foreign
currency, their
average price in
RMB term increased
by approximately
9.0%; and
|
|
·
|
the
average price for
our approved IVIG
products, which
accounted for 43.5%
of our total sales
for the six months
ended June 30,
2013, increased
by approximately
1.5%, and excluding
the impact of foreign
currency, their
average price in
RMB term increased
by approximately
0.4%.
|
The price increase
of human albumin products was mainly due to the increase of retail price ceiling announced by NDRC in January 2013, which came
into effect on February 1, 2013. This increased retail price ceiling provide us with more flexibility in pricing our human albumin
products and allows us to increase our ex-factory prices in certain regional markets. NDRC also adjusted retail price ceilings
for IVIG in September 2012, which came into effect on October 8, 2012. The new retail price ceilings for IVIG products are
lower than the current prevailing market prices in some of our regional markets. As a result, some of local governments revised
tender price ceilings for IVIG products. We have appealed to local governments for favorable pricing policy in selective regional
markets and have successfully gained support from certain provincial governments in lifting the tender price ceilings for IVIG
products. Therefore, the average price of our IVIG products remained relative stable in the first half of 2013 as compared to
the same period of 2012 in spite of the retail price ceiling adjustment.
The sales volumes
of our products in general depend on market demands and our production volumes. The production volumes of our IVIG and human albumin
products depend primarily on general plasma supply. The production volumes of our hyper-immune products, which include human rabies
immunoglobulin, human hepatitis B immunoglobulin and human tetanus immunoglobulin products, are subject to the availabilities
of specific vaccinated plasma and our production capacity. The supply of specific vaccinated plasma in general requires several
months of lead time. Our production facility currently can only accommodate the production of one type of hyper-immune products
at any given time and we rotate the production of different types of hyper-immune products from time to time in response to market
demand. As such, the sales volume of any given type of hyper-immune products may vary significantly from quarter to quarter. Given
the planned production suspension of Guizhou Taibang starting from June 2013, we decreased the sales volume of some of our products
in the six months ended June 30, 2013 in order to smooth out the impact of the reduced production volume and maintain our sales
channels and customer relationship during the period of Guizhou Taibang production suspension.
Sales volume
for our human albumin products decreased by 13.3% during the six months ended June 30, 2013 as compared to the same period of
2012. The decrease in sales volumes of human albumin products was primarily due to our increase of inventory level of these products
in preparation for the production suspension in Guizhou Taibang during the same period. Sales volume for our IVIG products increased
by 26.2% during the six months ended June 30, 2013 as compared to the same period of 2012. The increase in sales volumes of IVIG
products was primarily due to our marketing efforts focused on IVIG promotion and the engagement of new distributors to sell IVIG
in new territories in the first half of 2013.
Cost
of sales
& gross profit
|
|
For the six Months Ended June 30,
|
|
|
Change
|
|
|
|
2013
|
|
|
2012
|
|
|
Amount
|
|
|
%
|
|
Cost of sales
|
|
$
|
32,739,020
|
|
|
$
|
31,846,616
|
|
|
$
|
892,404
|
|
|
|
2.8
|
%
|
as a percentage of total sales
|
|
|
30.4
|
%
|
|
|
32.6
|
%
|
|
|
|
|
|
|
(2.2
|
)%
|
Gross Profit
|
|
$
|
74,873,235
|
|
|
$
|
65,847,184
|
|
|
$
|
9,026,051
|
|
|
|
13.7
|
%
|
Gross Margin
|
|
|
69.6
|
%
|
|
|
67.4
|
%
|
|
|
|
|
|
|
2.2
|
%
|
Our cost of
sales was $32,739,020, or 30.4% of our sales, for the six months ended June 30, 2013, as compared to $31,846,616, or 32.6% of
our sales for the same period in 2012. Our gross profit was $74,873,235 and $65,847,184 for the six months ended June 30, 2013
and 2012, respectively, representing gross margins of 69.6% and 67.4%, respectively. In general, our cost of sales and gross
margin are impacted by the volume and pricing of our finished products, our raw material costs, production mix and respective
yields, inventory provisions, production cycles and routine maintenance costs.
The increase
in cost of sales in the six months ended June 30, 2013 as compared to the same period in 2012 was largely due to the change of
product mix to include products with higher per-unit cost. The increase of our overall gross margin in the six months ended June
30, 2013 as compared to the same period in 2012, was mainly due to the improved gross margin of human albumin products as a result
of price increases and the improved utilization efficiency of plasma following the newly-launched Factor VIII products.
Operating
expenses
|
|
For the six Months Ended June 30,
|
|
|
Change
|
|
|
|
2013
|
|
|
2012
|
|
|
Amount
|
|
|
%
|
|
Operating expenses
|
|
$
|
23,579,530
|
|
|
$
|
25,709,592
|
|
|
$
|
(2,130,062
|
)
|
|
|
(8.3
|
)%
|
as a percentage of total sales
|
|
|
21.9
|
%
|
|
|
26.3
|
%
|
|
|
|
|
|
|
(4.4
|
)%
|
Our total operating
expenses decreased by $2,130,062, or 8.3%, to $23,579,530, for the six months ended June 30, 2013, from $25,709,592 for the same
period in 2012. As a percentage of sales, total expenses decreased by 4.4% to 21.9% for the six months ended June 30, 2013, from
26.3% for the same period in 2012. The decrease of the total operating expenses was mainly due to the decrease of the selling
expenses as discussed below.
Selling
expenses
|
|
For the six Months Ended June 30,
|
|
|
Change
|
|
|
|
2013
|
|
|
2012
|
|
|
Amount
|
|
|
%
|
|
Selling expenses
|
|
$
|
4,278,120
|
|
|
$
|
8,991,349
|
|
|
$
|
(4,713,229
|
)
|
|
|
(52.4
|
)%
|
as a percentage of total sales
|
|
|
4.0
|
%
|
|
|
9.2
|
%
|
|
|
|
|
|
|
(5.2
|
)%
|
For the six
months ended June 30, 2013, our selling expenses decreased by $4,713,229, or 52.4%, to $4,278,120, from $8,991,349 for the six
months ended June 30, 2012. As a percentage of sales, our selling expenses for the six months ended June 30, 2013 decreased by
5.2% to 4.0%, from 9.2% for the six months ended June 30, 2012. The decrease was mainly due to the fact that we lowered the commission
rate for certain products during the second half of 2012. Further, we have taken steps to impose stricter control on the selling
expenses since the second half of 2012. However, we carried out the promotional and conference activities for our new product
Factor VIII starting from the second quarter of 2013. As a result, we expect our selling expenses as a percentage of sales will
increase in the following quarters.
General
and administrative expenses
|
|
For the six Months Ended June 30,
|
|
|
Change
|
|
|
|
2013
|
|
|
2012
|
|
|
Amount
|
|
|
%
|
|
General and administrative expenses
|
|
$
|
17,553,168
|
|
|
$
|
15,078,166
|
|
|
$
|
2,475,002
|
|
|
|
16.4
|
%
|
as a percentage of total sales
|
|
|
16.3
|
%
|
|
|
15.4
|
%
|
|
|
|
|
|
|
0.9
|
%
|
For the six
months ended June 30, 2013, our general and administrative expenses increased by $2,475,002, or 16.4%, to $17,553,168, from $15,078,166
for the six months ended June 30, 2012. General and administrative expenses as a percentage of sales increased by 0.9% to 16.3%
for the six months ended June 30, 2013, from 15.4% for the six months ended June 30, 2012. The increase in general and administrative
expenses was mainly due to an increase in expenses related to payroll and employee benefits as a result of general salary increases,
an increase of share-based compensation and an increase in legal expenses relating to the disputes among Guizhou Taibang shareholders
and the corporate defense against the proposed share acquisition by Shanghai RAAS.
Research
and development expenses
|
|
For the six Months Ended June 30,
|
|
|
Change
|
|
|
|
2013
|
|
|
2012
|
|
|
Amount
|
|
|
%
|
|
Research and development expenses
|
|
$
|
1,748,242
|
|
|
$
|
1,640,077
|
|
|
$
|
108,165
|
|
|
|
6.6
|
%
|
as a percentage of total sales
|
|
|
1.6
|
%
|
|
|
1.7
|
%
|
|
|
|
|
|
|
(0.1
|
)%
|
For the six
months ended June 30, 2013 and 2012, our research and development expenses were $1,748,242 and $1,640,077, respectively, representing
an increase of $108,165, or 6.6%. As a percentage of sales, our research and development expenses for the six months ended June
30, 2013 and 2012 were 1.6% and 1.7%, respectively. The research and development expenses remained consistent for the six months
ended June 30, 2013, as compared to the same period in 2012.
Change
in fair value of derivative liabilities
|
|
For the six Months Ended June 30,
|
|
|
Change
|
|
|
|
2013
|
|
|
2012
|
|
|
Amount
|
|
|
%
|
|
Change in fair value of derivative liabilities
|
|
$
|
-
|
|
|
$
|
1,769,140
|
|
|
$
|
(1,769,140
|
)
|
|
|
(100.0
|
)%
|
as a percentage of total sales
|
|
|
-
|
|
|
|
1.8
|
%
|
|
|
|
|
|
|
(1.8
|
)%
|
Our warrants
issued in June 2009 are classified as derivative liabilities carried at fair value. For the six months ended June 30, 2013 and
2012, we recognized a gain from the change in fair value of derivative liabilities in the amounts of nil and $1,769,140, respectively.
The recognized gain from the change in the fair value of derivative liabilities in the six months ended June 30, 2012 was mainly
due to a decrease in the price of our common stock from $10.46 per share as of December 31, 2011 to $8.55 and $9.22, respectively,
as of the two warrants exercise dates. All warrants have been exercised by the end of June 2012.
Income
tax
|
|
For the six Months Ended June 30,
|
|
|
Change
|
|
|
|
2013
|
|
|
2012
|
|
|
Amount
|
|
|
%
|
|
Income tax
|
|
$
|
8,352,551
|
|
|
$
|
6,510,331
|
|
|
$
|
1,842,220
|
|
|
|
28.3
|
%
|
as a percentage of total sales
|
|
|
7.8
|
%
|
|
|
6.7
|
%
|
|
|
|
|
|
|
1.1
|
%
|
Our provision
for income taxes increased by $1,842,220, or 28.3%, to $8,352,551 for the six months ended June 30, 2013, from $6,510,331 for
the same period in 2012. Our effective income tax rates were 15.7% and 14.9% for the six months ended June 30, 2013 and 2012,
respectively. The effective income tax rate remained consistent for the six months ended June 30, 2013, as compared to the same
period in 2012. Tax rate applicable to our major operating subsidiaries in the PRC for 2012 and 2013 is 15%.
Net income
attributable to the Company
|
|
For the six Months Ended June 30,
|
|
|
Change
|
|
|
|
2013
|
|
|
2012
|
|
|
Amount
|
|
|
%
|
|
Net income attributable to the Company
|
|
$
|
31,077,786
|
|
|
$
|
25,796,077
|
|
|
$
|
5,281,709
|
|
|
|
20.5
|
%
|
as a percentage of total sales
|
|
|
28.9
|
%
|
|
|
26.4
|
%
|
|
|
|
|
|
|
2.5
|
%
|
Our net income
attributable to the Company increased by $5,281,709, or 20.5%, to $31,077,786 for the six months ended June 30, 2013, from $25,796,077
for the same period in 2012. Net income attributable to the Company as a percentage of total sales was 28.9% and 26.4% for the
six months ended June 30, 2013 and 2012, respectively, as a result of the cumulative effect of the foregoing factors.
Liquidity
and Capital Resources
To date, we
have financed our operations primarily through cash flows from operations, augmented by short-term bank borrowings and equity
contributions by our stockholders. As of June 30, 2013, we had $147,264,448 in cash, primarily consisting of cash on hand and
demand deposits.
The following
table provides the summary of our cash flows for the periods indicated:
Cash Flow
|
|
Six Months Ended June 30,
|
|
|
|
2013
|
|
|
2012
|
|
Net cash provided by operating activities
|
|
$
|
37,908,728
|
|
|
$
|
32,069,232
|
|
Net cash used in investing activities
|
|
|
(12,405,448
|
)
|
|
|
(6,688,540
|
)
|
Net cash used in financing activities
|
|
|
(10,610,765
|
)
|
|
|
(10,985,216
|
)
|
Effects of exchange rate change on cash
|
|
|
2,762,616
|
|
|
|
679,914
|
|
Net increase in cash
|
|
|
17,655,131
|
|
|
|
15,075,390
|
|
Cash at beginning of the period
|
|
|
129,609,317
|
|
|
|
89,411,835
|
|
Cash at end of the period
|
|
$
|
147,264,448
|
|
|
$
|
104,487,225
|
|
Operating Activities
Net cash provided
by operating activities for the six months ended June 30, 2013 was $37,908,728, as compared to $32,069,232 for the same period
in 2012. The increase in net cash provided by operating activities was mainly in line with the increase of the net income excluding
non-cash items for the six months ended June 30, 2013 as compared to the same period in 2012.
Investing Activities
Our use of
cash for investing activities is primarily for the acquisition of property, plant and equipment and land use rights. Net cash
used in investing activities for the six months ended June 30, 2013 was $12,405,448, as compared to $6,688,540, for the six months
ended June 30, 2012. During the six months ended June 30, 2013 and 2012, we paid $11,912,603 and $5,098,533, respectively, for
acquisition of property, plant and equipment at Shandong Taibang and Guizhou Taibang. The investing activities for the six months
ended June 30, 2013 mainly consisted of construction of premises for Cao Xian Plasma Company, production facility for new product
Factor VIII , office building for Shandong Taibang and production facility for placenta polypeptide.
Financing Activities
Net cash used
in financing activities for the six months ended June 30, 2013 totaled $10,610,765, as compared to net cash used in financing
activities of $10,985,216 for the same period in 2012. The net cash used in financing activities for the six months ended June
30, 2013 was mainly due to a repayment of $8,014,000 of short-term bank loans and a dividend of $8,110,168 paid by our subsidiaries
to the noncontrolling interest shareholders, partially offset by the proceeds of $4,808,400 from short-term bank loans and the
proceeds of $2,668,916 from options exercised. The net cash used in financing activities for the six months ended June 30, 2012
was mainly due to a repayment of $11,106,200 of short-term bank loans and a dividend of $4,379,016 paid by our subsidiaries to
the noncontrolling interest shareholders, partially offset by the net proceeds of $4,500,000 from warrants exercised.
Management
believes that the Company has sufficient cash on hand and continuing positive cash inflow, from the sale of its plasma-based products
in the PRC market, for its operations.
Obligations under Material Contracts
The following table sets forth our
material contractual obligations as of June 30, 2013:
|
|
Payments Due by Period
|
|
Contractual Obligations
|
|
Total
|
|
|
Less than
1 year
|
|
|
1-3 years
|
|
|
3-5 years
|
|
|
More than
5 years
|
|
Short-term bank loans
|
|
$
|
4,860,000
|
|
|
|
4,860,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Operating lease commitment
|
|
|
1,427,506
|
|
|
|
469,889
|
|
|
|
771,751
|
|
|
|
12,378
|
|
|
|
173,488
|
|
Capital commitment
|
|
|
5,200,000
|
|
|
|
4,940,000
|
|
|
|
260,000
|
|
|
|
-
|
|
|
|
-
|
|
Total
|
|
$
|
11,487,506
|
|
|
|
10,269,889
|
|
|
|
1,031,751
|
|
|
|
12,378
|
|
|
|
173,488
|
|
Seasonality of Our Sales
Our operating
results and operating cash flows historically have not been subject to seasonal variations. This pattern may change, however,
as a result of new market opportunities or new product introductions.
Inflation
Inflation does
not materially affect our business or the results of our operations.
Off-Balance
Sheet Arrangements
We do not have
any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition,
changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources
that are material to our investors.
Critical
Accounting Policies
Critical accounting
policies are those we believe are most important to portraying our financial conditions and results of operations and also require
the greatest amount of subjective or complex judgments by management. Judgments and uncertainties regarding the application of
these policies may result in materially different amounts being reported under various conditions or using different assumptions.
There have been no material changes to the critical accounting policies previously disclosed in our Annual Report on Form 10-K
for the fiscal year ended December 31, 2012.