EXHIBIT 99.1
Linkwell Corporation Reports 2007 Fiscal Year-End Financial Results
Revenues Grow 85% in 2007; Anticipates 62% Growth in 2008
SHANGHAI, China, April 15 /Xinhua-PRNewswire-FirstCall/ -- Linkwell Corporation (Linkwell or the Company) (OTC Bulletin Board: LWLL - News), a leading developer, manufacturer and distributor of healthcare related disinfectants in China, announced today financial results for the fiscal year ended December 31, 2007 and provided guidance for 1st quarter 2008 and the entire year 2008.
Net revenues for the fiscal year ended December 31, 2007 increased $6,590,343, or approximately 85%, to $14,335,721, compared with $7,745,378 for the fiscal year ended December 31, 2006. Net revenues for the Company’s subsidiary LiKang Disinfectant were $8,127,717 and $6,208,004 for its subsidiary Shanghai LiKang International Trade Company Trade Co., Ltd (LiKang International).
The majority of the increase in net revenues was attributable to its subsidiary LiKang International, whose net revenues for the fiscal year ended 2007 increased approximately 761%, or $6,208,004 as compared to $720,996 for the fiscal year ended 2006, an increase of $5,487,008.
Net revenues for Linkwell’s subsidiary LiKang Disinfectant increased approximately 16%, or $1,103,335 to $8,127,717 or for year end 2007. The Company believes this increase in demand was due to an increase in its sales staff and customer recognition of the Company’s high-quality, competitively priced disinfectant products.
Total operating expenses for 2007 were $3,852,398, which was an increase of $1,548,905, or approximately 67%, from year end 2006 of $2,303,493. This increase is primarily attributable to an increase in general and administrative expenses, most of which was the result of a one-time write off of $564,000 due to terminating a contract with China Direct Investments, Inc., which were expensed for the year ended December 31, 2007. A second cause of increasing operating expenses was due to building out its sales and service division to improve future growth.
Linkwell reported net income of $360,135 for the fiscal year ended December 31, 2007, as compared to net income of $568,120 for the fiscal year ended December 31, 2006. However, the net income for Linkwell’s subsidiary, LiKang Disinfectant, increased approximately 3%, with net income of $1,196,318 for 2007 compared to $1,161,828 for 2006.
The primary causes for the decrease in net income for the year ended 2007 were attributable to four key factors: (1) the increase in cost of sales; (2) the low net income of our subsidiary LiKang International; (3) the increase in doubtful accounts of $448,958; and (4) a one-time write off of $564,000 as a result of terminating our contract with China Direct Investments, Inc.
Financial Tables
LINKWELL CORPORATION AND SUBSIDIARIES | |||||||
CONSOLIDATED BALANCE SHEETS | |||||||
December 31, | |||||||
ASSETS | |||||||
2007 | 2006 | ||||||
CURRENT ASSETS: | |||||||
Cash | $ | 1,222,128 | $ | 1,713,723 | |||
Accounts receivable (net of allowance for doubtful accounts of $460,175 and $144,639 in 2007 and 2006 respectively) | 2,999,191 | 1,682,878 | |||||
Accounts receivable-related parties (net of allowance for doubtful accounts of $221,359 and $87,937 in 2007 and 2006 respectively) | 1,992,233 | 1,406,425 | |||||
Other receivable | 261,231 | 414,000 | |||||
Inventories (net of reserve for obsolete inventory of $136,287 and $127,160 in 2007 and 2006 respectively) | 829,476 | 536,483 | |||||
Prepaid expenses and other current assets | 1,015,558 | 367,641 | |||||
Due from related parties | 946,591 | - | |||||
Short term loan receivable | - | 48,609 | |||||
Total Current Assets | 9,266,408 | 6,169,759 | |||||
PROPERTY AND EQUIPMENT - net | 749,073 | 774,733 | |||||
Total Assets | $ | 10,015,481 | $ | 6,944,492 | |||
LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||
CURRENT LIABILITIES: | |||||||
Loans payable | $ | 699,210 | $ | 652,382 | |||
Loan payable - related party | - | 165,471 | |||||
Accounts payable and accrued expenses | 1,246,943 | 1,301,131 | |||||
Tax payable | 92,815 | - | |||||
Other payable | 189,421 | 27,589 | |||||
Due to related party | 760,457 | 204,267 | |||||
Advances from customers | 713,578 | 254,434 | |||||
Total Current Liabilities | 3,702,424 | 2,605,274 | |||||
MINORITY INTEREST | 527,244 | 394,320 | |||||
STOCKHOLDERS' EQUITY: | |||||||
Preferred stock (No Par Value; 10,000,000 Shares Authorized; | |||||||
No shares issued and outstanding) | |||||||
Common Stock ($0.0005 Par Value; 150,000,000 Shares Authorized; | |||||||
73,731,675 and 69,868,355 shares issued and outstanding in 2007 and 2006 respectively) | 36,866 | 34,934 | |||||
Common stock issuable | 11 | - | |||||
Additional paid-in capital | 5,724,363 | 5,290,536 | |||||
Accumulated deficit | (510,921 | ) | (871,056 | ) | |||
Deferred compensation | (51,389 | ) | (646,222 | ) | |||
Other comprehensive gain - foreign currency | 586,883 | 136,706 | |||||
Total Stockholders' Equity | 5,785,813 | 3,944,898 | |||||
Total Liabilities and Stockholders' Equity | $ | 10,015,481 | $ | 6,944,492 |
See notes to consolidated financial statements
CONSOLIDATED STATEMENTS OF OPERATIONS |
For the Year | |||||||
Ended December 31, | |||||||
2007 | 2006 | ||||||
NET REVENUES | |||||||
Non-affiliated companies | $ | 11,694,030 | $ | 4,508,179 | |||
Affiliated companies | 2,641,691 | 3,237,199 | |||||
Total Net Revenues | 14,335,721 | 7,745,378 | |||||
COST OF SALES | 10,071,991 | 4,609,557 | |||||
GROSS PROFIT | 4,263,730 | 3,135,821 | |||||
OPERATING EXPENSES: | |||||||
Selling expenses | 1,099,266 | 573,315 | |||||
General and administrative | 2,753,132 | 1,730,178 | |||||
Total Operating Expenses | 3,852,398 | 2,303,493 | |||||
INCOME FROM OPERATIONS | 411,332 | 832,328 | |||||
OTHER INCOME (EXPENSE): | |||||||
Other income | 146,945 | (4,367 | ) | ||||
Registration rights penalty | - | (76,000 | ) | ||||
Interest income | 3,649 | 5,441 | |||||
Interest expense - related party | - | (26,132 | ) | ||||
Interest expense | (68,867 | ) | (41,589 | ) | |||
Total Other Income (Expense) | 81,727 | (142,647 | ) | ||||
INCOME BEFORE DISCONTINUED OPERATIONS, INCOME TAXES | |||||||
AND MINORITY INTEREST | 493,059 | 689,681 | |||||
DISCONTINUED OPERATIONS: | |||||||
Gain from discontinued operations | - | 12,794 | |||||
INCOME BEFORE INCOME TAXES AND MINORITY INTEREST | 493,059 | 702,475 | |||||
INCOME TAXES | - | (1,318 | ) | ||||
INCOME BEFORE MINORITY INTEREST | 493,059 | 701,157 | |||||
MINORITY INTEREST | (132,924 | ) | (133,037 | ) | |||
NET INCOME | $ | 360,135 | $ | 568,120 | |||
CUMULATIVE PREFERRED DIVIDENDS | - | (96,240 | ) | ||||
NET INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS | $ | 360,135 | $ | 471,880 | |||
BASIC AND DILUTED INCOME PER COMMON SHARE: | |||||||
Basic earnings per share from continued operation | $ | 0.00 | $ | 0.01 | |||
Basic earnings per share including discontinued operation | $ | 0.00 | $ | 0.01 | |||
Diluted earnings per share from continued operation | $ | 0.00 | $ | 0.01 | |||
Diluted earnings per share including discontinued operation | $ | 0.00 | $ | 0.01 | |||
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING: | |||||||
Basic | 73,195,593 | 53,098,047 | |||||
Diluted | 73,455,345 | 57,539,614 |
LINKWELL CORPORATION AND SUBSIDIARIES | ||||||||
CONSOLIDATED STATEMENTS OF CASH FLOWS |
For the Years | |||||||
Ended December 31, | |||||||
2007 | 2006 | ||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | |||||||
Net income | $ | 360,135 | $ | 568,120 | |||
(Gain)Loss from discontinued operations | - | (12,794 | ) | ||||
Income from continuing operations | 360,135 | 555,326 | |||||
Adjustments to reconcile net income from operations to net cash | |||||||
provided by (used in) operating activities: | |||||||
Depreciation and amortization | 126,295 | 91,657 | |||||
Minority interest | 132,924 | 145,150 | |||||
Allowance for doubtful accounts | 315,536 | 131,296 | |||||
Allowance for doubtful accounts-related party | 133,422 | 87,937 | |||||
Stock-based compensation | 709,271 | 398,945 | |||||
Changes in assets and liabilities: | |||||||
Accounts receivable | (1,631,849 | ) | (361,386 | ) | |||
Accounts receivable - related party | (719,230 | ) | (621,992 | ) | |||
Other receivable | 152,769 | (414,000 | ) | ||||
Inventories | (292,993 | ) | 431,741 | ||||
Prepaid and other current assets | (647,917 | ) | (285,891 | ) | |||
Other assets | - | 734 | |||||
Accounts payable and accrued expenses | 107,644 | (71,984 | ) | ||||
Tax payable | 92,815 | (75,489 | ) | ||||
Advances from customers | 459,144 | 123,516 | |||||
NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES | (702,034 | ) | 135,560 | ||||
CASH FLOWS FROM INVESTING ACTIVITIES: | |||||||
Decrease in loan receivable | 48,609 | (48,609 | ) | ||||
Increase in loan receivable - related party | (946,591 | ) | - | ||||
Increase in deposit on investment | - | 100,000 | |||||
Purchase of property, plant and equipment | (99,349 | ) | (149,339 | ) | |||
NET CASH USED IN INVESTING ACTIVITIES | (997,331 | ) | (97,948 | ) | |||
CASH FLOWS FROM FINANCING ACTIVITIES: | |||||||
Proceeds from loans payable | 699,210 | 63,157 | |||||
Proceeds from loans payable-related party | 556,190 | 204,267 | |||||
Repayment of loan payable | (699,210 | ) | |||||
Repayment of loan payable - related party | (165,471 | ) | (63,157 | ) | |||
Proceeds from Warrants Exercised | 321,332 | - | |||||
NET CASH PROVIDED BY FINANCING ACTIVITIES | 712,051 | 204,267 | |||||
EFFECT OF EXCHANGE RATE ON CASH | 495,719 | 11,766 | |||||
NET (DECREASE) INCREASE IN CASH | (491,595 | ) | 253,645 | ||||
CASH - beginning of year | 1,713,723 | 1,460,078 | |||||
CASH - end of year | $ | 1,222,128 | $ | 1,713,723 | |||
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: | |||||||
Cash paid for: | |||||||
Interest | $ | 68,867 | $ | 67,721 | |||
Income taxes | $ | - | $ | 1,318 |
See notes to consolidated financial statements |
Financial Projections for the first quarter 2008 (in 000s)
1st Qtr 2008 Estimate | 1st Qtr 2007 | Change | ||||||||
Total Revenues | $ | 3,814 | $ | 2,846 | + 34 | % | ||||
Gross Profit | $ | 1,489 | $ | 993 | + 50 | % | ||||
Net Income | $ | 400 | $ | 497 | - 19.5 | % |
Guidance for the first quarter 2008
“We believe our anticipated increase in revenues and gross profit for 1st quarter 2008 compared to 2007 validates our recently implemented growth strategy,” commented Linkwell Chairman and CEO, Mr. Xuelian Bian, “Our projected total revenue growth of 34% in 1st quarter continues at a strong pace in our what is historically our weakest quarter, plus this year we had to deal with a horrible winter storm.” Management estimates that while LiKang Disinfectant’s revenues and net income increased slightly, LiKang International’s revenues rose substantially, but its profits decreased.
Financial Projections for the full year 2008 (in 000s)
12/31/2008 Estimate | 12/31/ 2007 | Change | ||||||||
Total Revenues | $ | 23,180 | $ | 14,335 | +62 | % | ||||
Gross Profit | $ | 7,000 | $ | 4,767 | + 47 | % | ||||
Net Income | $ | 2,000 | $ | 360 + 455 | % |
Projected Net Revenues for the full year 2008
Linkwell’s management believes that financial projections for 2008 are conservative, based on reasonable direct growth and cost estimates. However, the Company has set higher goals for itself than projected, which are based on anticipated indirect benefits from potential developments based on support to the Beijing Olympics; introduction of new products to the market; management’s increasing prestige and influence in the disinfectant industry; and strategic ventures or agreements.
For the full year 2008, Linkwell projects total revenue to grow approximately 62% to $23.2 million from $14.3 million in 2007. Specifically, estimated revenue from LiKang Disinfectant is expected to rise approximately $3.95 million or 49%, to $12.05 million in 2008, compared to $8.1 million in 2007. Also, management estimates that revenue from LiKang International will increase approximately 15%, to $7.13 million in 2008, compared to $6.2 million in 2007.
Of the estimated $3.95 million increase in total revenue from LiKang Disinfectant in 2008, the Company estimates $10.25 million will come from sales of current and new products; $0.5 million from training disinfection and pest control professionals and sales of An’erdian at the 2008 Beijing Olympic Games; $0.3 million from implementing China's new disinfection vocational training and licensing program; and $1.0 million from Ecolab related agreements.
In addition, Linkwell anticipates revenues of $4.0 million in 2008 from strategic acquisitions as part of the disinfectant industry’s consolidation in China.
Chairman and CEO’s Comments on Guidance for the full year 2008
“In general for 2008, we expect stronger demand for our products due to increased marketing and branding and from our associations with the Beijing Olympic Games and Ecolab. We are making good progress on our 10 new products in various stages of development and are on track to launch 3 new products this year. We also believe that government administered health facilities and the general public will increase consumption of our products due to increased health education of the importance of disinfection and continued awareness of health dangers, such as highly pathogenic bird flu, hepatitis, sexually transmitted diseases and other potentially epidemic and pandemic outbreaks.”
Our vision for Linkwell is to be the consolidation leader of the estimated $6.25 billion disinfectant industry in China. We believe China is on the leading edge of a massive consolidation from over 1000 small disinfectant manufacturing companies now, to less than 200 in the next five years. Regarding our continued market penetration and the condition of our competition, we believe the factors previously described, increases barriers to entry and puts us in a very good position to lead consolidation of the disinfectant industry.”
“Last, but certainly not least, we believe good corporate governance measures and practices are very important to Linkwell and our investors. I am dedicated to implementing and maintaining these measures as described in appropriate SEC and stock exchange rules and regulations, including the establishment of an independent board of directors, hiring a qualified CFO, and reliable disclosure and internal control procedures.”
About Linkwell Corporation
Linkwell develops, manufactures and distributes disinfectant healthcare products in China through its subsidiary LiKang Disinfectant. Linkwell's disinfectant healthcare products are a nationally recognized domestic Chinese brand in this market segment. Linkwell products include disinfectants in liquid, tablet, powder and aerosol form. Through LiKang, Linkwell has a national marketing and sales presence throughout all 22 provinces, 5 autonomous regions, and 4 special municipalities of China. For more information, please visit http://www.linkwell.us.
Safe Harbor Statement
This news release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on current expectations or beliefs, including, but not limited to, statements concerning the Company's operations, financial performance and condition. For this purpose, statements that are not statements of historical fact may be deemed to be forward-looking statements. The Company cautions that these statements by their nature involve risks and uncertainties, and actual results may differ materially depending on a variety of important factors, including, but not limited to, the impact of competitive products; pricing and new technology; changes in consumer preferences and tastes; effectiveness of marketing; changes in laws and regulations; fluctuations in costs of production; and other factors as those discussed in the Company's reports filed with the Securities and Exchange Commission from time to time. In addition, the Company disclaims any obligation to update any forward-looking statements to reflect events or circumstances after the date hereof.
For more information, please contact:
Investor Relations
Craig Bird
Segue Ventures LLC
Tel: +1-215-885-4981
Email: chbird@segue.biz
Source: Linkwell Corporation