For Immediate Release
| Contact: | |
| Jiangbo Pharmaceuticals, Inc. | CCG Investor Relations |
| Ms. Elsa Sung, CFO | Ms. Lei Huang, Account Manager |
| Phone: (954) 903-9378 ex 2 | Phone: (646) 833-3417 |
| E-mail:elsasung@jiangbo.com | E-mail: lei.huang@ccgir.com |
http:// www.jiangbopharma.com | http://www.ccgirasia.com |
| | |
| | Mr. Crocker Coulson, President |
| | Phone: (646) 213-1915 |
| | E-mail: crocker.coulson@ccgir.com |
Jiangbo Pharmaceuticals Reports Results for
the Second Quarter of its Fiscal Year 2010
Laiyang, China, February 22, 2010 – Jiangbo Pharmaceuticals, Inc. (OTC Bulletin Board: JGBO) (“Jiangbo” or the “Company”), a pharmaceutical company with its principal operations in the People's Republic of China, today announced its financial results for the second quarter of its fiscal year 2010 ended December 31, 2009.
Second Quarter Highlights and Recent Events
| · | Revenue was $18.2 million, a decrease of 44.8% from the corresponding quarter ended December 31, 2008 |
| · | Gross profit was $13.5 million, compared to $25.8 million for the corresponding quarter ended December 31, 2008, and gross margin was 74.3%, compared to 78.3% in the a year ago quarter ended December 31, 2008 |
| · | Operating income was $7.1 million, down 37.4% from the corresponding quarter ended December 31, 2008 |
| · | Net income was $5.3 million, or $0.49 per basic share, compared $5.4 million or $0.55 per basic share a year ago |
| · | Excluding non-cash gains related to the change in fair value from derivative liabilities of $6.7 million and the amortization of debt discount and debt issuance costs related to convertible debentures of $5.8 million, non-GAAP adjusted net income was $4.4 million, or $0.29 per fully diluted share for the three months ended December 31, 2009, compared to non-GAAP adjusted net income of $6.6 million, or $0.46 per fully diluted share, for the quarter ended December 31, 2008(*) |
| · | Received renewal of Good Manufacture Practice (“GMP”) certificate from the State Food and Drug Administration (“SFDA”) for its tablets and granules |
| · | In January 2010, Osteomyelitis treatment tablets were included in the 2009 Edition of the National Basic Medical Insurance Directory |
“Our second quarter sales volume was adversely impacted by the temporary production stoppage at our main facility related to the re-certification of our GMP certificate. In addition, we faced heightened competition associated with China’s newly announced National Basic Medical Insurance plan,” said Jiangbo’s Chairman and CEO, Mr. Wubo Cao. “Our main facility has now returned to normal operations and we have reinforced our sales efforts. We expect sales volumes to improve in the second half of 2010. We continue our cost control efforts, which we expect to improve operational efficiency and drive organic growth, and we plan to leverage our strong cash position to bring in new drug opportunities.”
Second Quarter of Fiscal Year 2010 Results
Total revenue for the three months ended December 31, 2009 was $18.2 million, a decrease of $14.8 million from $32.9 million for the three months ended December 31, 2008. The 44.8% decline was due to decreases in unit sales prices and sales volume. Unit sales prices for Clarithromycin Sustained-released tablets, Itopride Hydrochloride granules and Baobaole chewable tables decreased by an average of 26% following the restructuring of the Company’s distribution and sales system in January 2009. Sales volumes declined due to renewal of the Company’s GMP certificate, which resulted in a six-week production stoppage at the Company’s main facility. Jiangbo received its GMP renewal certificate in December 2009, which is valid for a period of five years. Additionally, the Company’s major products faced increasing competition from similar products included in China’s newly announced National Basic Medical Insurance.
For the three months ended December 31, 2009, Clarithromycin Sustained-released tablets and Itopride Hydrochloride granules accounted for approximately 40.2% and 30.9% of total revenue, respectively. Baobaole chewable tables accounted for 16.9% of total revenue and were down 51.5% compared to the first quarter of fiscal 2010. Baobaole faced increased competition from Jianweixiaoshi tablet and zinc additives. Radix Isatidis dispersible tablets accounted for 11.9% of total revenue.
Gross profit in the second quarter of the fiscal year 2010 was $13.5 million, a decrease of 47.6% from $25.8 million for the prior year’s corresponding period. Gross margin decreased to 74.3% from 78.3% for the prior year quarter, primarily due to the previously mentioned decrease in the unit prices.
Selling, general and administrative expenses were $5.3 million for the three months ended December 31, 2009, down 60.4% from $13.3 million in the three months ended December 31, 2008. Salaries, wages and related benefits decreased to $1.5 million from $9.2 million for the corresponding quarter of fiscal 2009, primarily due to a significant decrease in commissions paid to the Company’s sales representatives in connection with the sales restructuring in January 2009. Advertising, marketing and promotion spending for the second quarter of fiscal 2010 was $2.2 million, a decrease of $0.4 million compared to one year ago.
Research and development expenses totaled $1.1 million for the three months ended December 31, 2009, consistent with the three months ended December 31, 2008. The Company is obligated to make monthly payment to the designated university/institute research and development projects pursuant to two cooperative research and development agreements which were signed in fiscal 2008.
Income from operations was $7.1 million, a 37.4% decrease from $11.4 million for the three months ended December 31, 2008.
Other income was $0.2 million compared to other expense of $3.2 million for the three months ended December 31, 2008. Other income was primarily due to non-cash gains related to the change in fair value from derivative liabilities of $6.7 million, which the Company did not record in the prior corresponding period, and the amortization of debt discount and debt issuance costs related to convertible debentures of $5.8 million versus $1.2 million in the prior year period.
Net income for the three months ended December 31, 2009 was $5.3 million, compared to $5.4 million in the year ago quarter. Basic earnings per share were $0.49, compared with $0.55 per basic share a year ago. Diluted earnings per share assumes the conversion of the Company’s convertible notes and is calculated by adding interest expense to and deducting the loan issuance costs and unamortized debt discount from net income. As a result, the Company recorded a loss of $1.06 per diluted share, compared to a loss of $1.87 per diluted share in the same quarter last year.
Excluding non-cash gains related to the change in fair value from derivative liabilities of $6.7 million and the amortization of debt discount and debt issuance costs related to convertible debentures of $5.8 million, non-GAAP adjusted net income was $4.4 million, or $0.29 per fully diluted share for the three months ended December 31, 2009, compared to non-GAAP adjusted net income of $6.6 million, or $0.46 per fully diluted share, for the quarter ended December 31, 2008.
(*) See the reconciliation table at the end of this press release for a reconciliation of net income and EPS to non-GAAP adjusted net income and EPS.
Six Month Results
Total revenue for the six month period ended December 31, 2009 was $42.6 million, down 29.7% from $60.5 million for the six month period ended December 31, 2008.
Gross profit totaled $31.6 million, down 33.5% from $47.6 million in the year ago period. Gross profit margin was 74.3% for the six month compared to 78.7% for the corresponding period in 2008. Operating income was $19.8 million, a 5.6% increase year-over-year from $18.8 million last year. Net income was $7.5 million, or $0.70 basic earnings per share, compared to $8.5 million, or $0.87 basic earnings per share, for the corresponding period in 2008. Diluted loss per share was $0.89 per share, compared to $1.61 diluted loss per share in the year ago period. Excluding non-cash gains related to the change in fair value from derivative liabilities of $1.9 million and the amortization of debt discount and debt issuance costs related to convertible debentures of $8.0 million, non-GAAP adjusted net income was $13.6 million, or $0.92 per fully diluted share for the three months ended December 31, 2009, compared to non-GAAP adjusted net income of $10.5 million, or $0.74 per fully diluted share, for the quarter ended December 31, 2008.
Financial Condition
As of December 31, 2009, the Company had $89.0 million in cash and an additional $14.5 million in restricted cash, as compared to $104.4 million and $7.3 million, respectively, at the end of fiscal 2009. The decline in cash was mainly attributable to the November 2009 purchase of land use rights for future factory expansion for $17.0 million and repayments for bank loans of $2.2 million. Working capital was $99.8 million, consistent with the level as of June 30, 2009. Shareholder’s equity was $104.3 million, as compared to $126.1 million at the end of fiscal 2009. The decrease in shareholder’s equity was the result of the reclassification of the Company’s derivative instruments from the equity section to liability section of the balance sheet. The Company generated $3.2 million in cash flow from operating activities in the first half of fiscal 2010.
Business Outlook and Guidance
“Improving our operational efficiency, building our pipeline and strengthening our management team are expected to be our top priorities right now,” said Mr. Cao. “We are already taking steps to address these challenges and look forward to providing updates on our progress.”
Jiangbo’s management has begun reviewing the existing marketing and sales system, including sales force compensation and incentive and effectiveness of our advertising activities. The Company is planning to take steps to reduce and eliminate operational inefficiencies and drive sales growth.
The Company recognizes the need to improve its product pipeline in order to ensure long term growth. In the past several months, the Company has been actively searching for new branded drug opportunities to license or acquire. Management expects revenues to improve in the second half of fiscal 2010. As such, the Company is maintaining its fiscal 2010 revenue guidance of $96 million to $98 million and operating income guidance of $42 million to $44 million.
Subsequent Events
On February 15, 2010, the Company entered into an agreement with one of the holders of its convertible notes, Pope Investments LLC (“Pope”), whereby Pope agreed to waive certain provisions set forth in the November 2007 and May 2008 securities purchase agreements for the Company’s debentures and convertible notes, provided that the Company has made the November 2009 interest payments to the holders of the Company’s November 2007 debentures and May 2008 notes on or prior to February 25, 2010. If the interest payments are not made by February 25, 2010 all rights and remedies of Pope defined in the 2007 and 2008 Securities Purchase Agreements shall remain in full force and effect as if this waiver had not been granted.
The Company also agreed that in the event that its common stock has not been listed on the NASDAQ Stock Market on or prior to April 15, 2010, it will pay to the holders of the 2007 Notes and the 2008 Notes an amount equal to the difference between the interest on such Notes previously paid for the period from June 1, 2009 to November 30, 2009.
Conference Call
Jiangbo Pharmaceuticals, Inc. management will host a conference call at 8:30 a.m. Eastern on Friday, February 26, 2010 to discuss financial results for the second quarter ended December 31, 2009 of its fiscal year 2010. The conference call will include Mr. Wubo Cao, Chairman and CEO, and Ms. Elsa Sung, CFO, of Jiangbo. To participate in the live conference call, please dial the following number five to ten minutes prior to the scheduled conference call time: (877) 700-5838. International callers should dial +1 (706) 758 - 5465. The Conference ID for this call is 58049438.
If you are unable to participate in the call at this time, a replay will be available for 14 days starting on Friday, February 26, 2010 at 9:30 a.m. Eastern Time. To access the replay, dial (800) 642-1687, international callers dial (706) 645-9291. Conference ID is 58049438.
Use of Non-GAAP Adjusted Financial Information
This press release includes certain financial information, non-GAAP adjusted net income and non-GAAP adjusted fully diluted earnings per share, which are not presented in accordance with GAAP. Non-GAAP adjusted net income was derived by taking net income and adjusting it with non-cash gains or losses related to the change in fair value from derivative liabilities and the amortization of debt discount and debt issuance costs related to convertible debentures. The Company's management believes that these non-GAAP adjusted measures provide investors with a better understanding of the Company's historical results from its core business operations. To supplement the Company's condensed consolidated financial statements presented on a non-GAAP adjusted basis, the Company has provided non-GAAP adjusted financial information, which is non-GAAP adjusted net income and non-GAAP adjusted earnings per share, excluding the impact of these items in this press release. The non-GAAP adjusted information is not meant to be considered in isolation or as a substitute for GAAP financials. The non-GAAP adjusted financial information provided by the Company may also differ from non-GAAP adjusted information provided by other companies. A table at the end of this press release provides a reconciliation of the non-GAAP adjusted financial information to the nearest GAAP measure.
About Jiangbo Pharmaceuticals, Inc.
Jiangbo Pharmaceuticals, Inc. is a U.S. public company engaged in the research, development, production, marketing and sales of pharmaceutical products in the People's Republic of China. Its operations are located in Eastern China in an Economic Development Zone in Laiyang City, Shandong province. Jiangbo is a major pharmaceutical company in China producing both western and Chinese herbal-based medical drugs in tablet, capsule, granule, syrup and electuary (sticky syrup) form. http://www.jiangbopharma.com
Safe Harbor Statement
Certain statements in this press release that are not historical facts are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements are not guarantees of future performance and are subject to risks and uncertainties that could cause the Company's actual results and financial position to differ materially from those included within the forward-looking statements. Forward-looking statements involve risks and uncertainties, including those relating to the Company's ability to introduce, manufacture and distribute new drugs, improve operational efficiency, in-license or acquire new drugs, make required interest payment and NASDAQ listing. Actual results may differ materially from predicted results, and reported results should not be considered as an indication of future performance. The potential risks and uncertainties include, among others, the Company’s ability to obtain raw materials needed in manufacturing, the continuing employment of key employees, the failure risks inherent in testing any new drug, the possibility that regulatory approvals may be delayed or become unavailable, patent or licensing concerns that may include litigation, direct competition from other manufacturers and product obsolescence. More information about the potential factors that could affect the Company's business and financial results is included in the Company's filings, available via the United States Securities and Exchange Commission.
- Financial Statements Follow –
(FORMERLY KNOWN AS GENESIS PHARMACEUTICAL ENTERPRISES, INC.)
CONSOLIDATED STATEMENTS OF INCOME AND OTHER COMPREHENSIVE INCOME
(UNAUDITED)
| | | For the Three Months Ended | | | For the Six Months Ended | |
| | | December 31, | | | December 31, | |
| | | 2009 | | | 2008 | | | 2009 | | | 2008 | |
| REVENUES: | | | | | | | | | | | | |
| Sales | | $ | 18,179,942 | | | $ | 32,944,809 | | | $ | 42,563,996 | | | $ | 60,265,493 | |
| Sales – related parties | | | - | | | | - | | | | - | | | | 243,909 | |
| Total revenues | | | 18,179,942 | | | | 32,944,809 | | | | 42,563,996 | | | | 60,509,402 | |
| | | | | | | | | | | | | | | | | |
| COST OF SALES | | | | | | | | | | | | | | | | |
| Cost of sales | | | 4,667,049 | | | | 7,138,166 | | | | 10,927,448 | | | | 12,851,210 | |
| Cost of sales - related parties | | | - | | | | - | | | | - | | | | 54,493 | |
| Total cost of sales | | | 4,667,049 | | | | 7,138,166 | | | | 10,927,448 | | | | 12,905,703 | |
| | | | | | | | | | | | | | | | | |
| GROSS PROFIT | | | 13,512,893 | | | | 25,806,643 | | | | 31,636,548 | | | | 47,603,699 | |
| | | | | | | | | | | | | | | | | |
| RESEARCH AND DEVELOPMENT EXPENSE | | | 1,106,385 | | | | 1,098,525 | | | | 2,205,960 | | | | 2,196,450 | |
| | | | | | | | | | | | | | | | | |
| SELLING, GENERAL AND ADMINISTRATIVE EXPENSES | | | 5,259,213 | | | | 13,282,421 | | | | 9,601,019 | | | | 26,634,396 | |
| | | | | | | | | | | | | | | | | |
| INCOME FROM OPERATIONS | | | 7,147,295 | | | | 11,425,697 | | | | 19,829,569 | | | | 18,772,853 | |
| | | | | | | | | | | | | | | | | |
| OTHER (INCOME) EXPENSE: | | | | | | | | | | | | | | | | |
| Change in fair value of derivative liabilities | | | (6,687,085 | ) | | | - | | | | (1,865,992 | ) | | | - | |
| Other income - related parties | | | (80,668 | ) | | | (92,774 | ) | | | (161,304 | ) | | | (236,724 | ) |
| Non-operating (income) expense, net | | | 366,685 | | | | 204,001 | | | | 214,271 | | | | 1,193,592 | |
| Interest expense, net | | | 6,162,640 | | | | 1,549,331 | | | | 8,919,818 | | | | 2,902,125 | |
| Loss from discontinued operations | | | 87,561 | | | | 1,545,607 | | | | 164,769 | | | | 1,590,823 | |
| Total other (income) expense, net | | | (150,867 | ) | | | 3,206,165 | | | | 7,271,562 | | | | 5,449,816 | |
| | | | | | | | | | | | | | | | | |
| INCOME BEFORE PROVISION FOR INCOME TAXES | | | 7,298,162 | | | | 8,219,532 | | | | 12,558,007 | | | | 13,323,037 | |
| | | | | | | | | | | | | | | | | |
| PROVISION FOR INCOME TAXES | | | 1,970,021 | | | | 2,820,346 | | | | 5,078,191 | | | | 4,790,367 | |
| | | | | | | | | | | | | | | | | |
| NET INCOME | | $ | 5,328,141 | | | | 5,399,186 | | | | 7,479,816 | | | | 8,532,670 | |
| | | | | | | | | | | | | | | | | |
| OTHER COMPREHENSIVE INCOME: | | | | | | | | | | | | | | | | |
| Unrealized holding gain (loss) | | | 32,827 | | | | (384,650 | ) | | | 56,371 | | | | (1,947,617 | ) |
| Foreign currency translation adjustment | | | 44,704 | | | | 248,823 | | | | 196,884 | | | | 579,464 | |
| | | | | | | | | | | | | | | | | |
| COMPREHENSIVE INCOME | | $ | 5,405,672 | | | $ | 5,263,359 | | | $ | 7,733,071 | | | $ | 7,164,517 | |
| | | | | | | | | | | | | | | | | |
| BASIC WEIGHTED AVERAGE NUMBER OF SHARES | | | 10,983,405 | | | | 9,771,883 | | | | 10,744,648 | | | | 9,770,615 | |
| | | | | | | | | | | | | | | | | |
| BASIC EARNINGS PER SHARE | | $ | 0.49 | | | $ | 0.55 | | | $ | 0.70 | | | $ | 0.87 | |
| | | | | | | | | | | | | | | | | |
| DILUTED WEIGHTED AVERAGE NUMBER OF SHARES | | | 15,065,301 | | | | 14,148,317 | | | | 14,829,605 | | | | 14,173,463 | |
| | | | | | | | | | | | | | | | | |
| DILUTED EARNINGS (LOSS) PER SHARE | | $ | (1.06 | ) | | $ | (1.87 | ) | | $ | (0.89 | ) | | $ | (1.61 | ) |
JIANGBO PHARMACEUTICALS, INC. AND SUBSIDIARIES
(FORMERLY KNOWN AS GENESIS PHARMACEUTICAL ENTERPRISES, INC.)
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 2009 AND JUNE 30, 2009
| | | December 31, | | | June 30, | |
| | | 2009 | | | 2009 | |
| | | (Unaudited) | | | | |
| | | | | | | |
| ASSETS | | | | | | |
| CURRENT ASSETS: | | | | | | |
| Cash and cash equivalents | | $ | 88,971,243 | | | $ | 104,366,117 | |
| Restricted cash | | | 14,545,305 | | | | 7,325,000 | |
| Investments | | | 42,599 | | | | 879,228 | |
| Accounts receivable, net of allowance for doubtful accounts of $1,276,843 and $694,370 as of December 31, 2009 and June 30, 2009, respectively | | | 19,729,985 | | | | 19,222,707 | |
| Inventories | | | 3,935,239 | | | | 3,277,194 | |
| Other receivables | | | 4,447 | | | | 167,012 | |
| Other receivable - related parties | | | 161,370 | | | | - | |
| Advances to suppliers | | | 472,939 | | | | 236,496 | |
| Financing costs – current | | | 632,637 | | | | 680,303 | |
| Total current assets | | | 128,495,764 | | | | 136,154,057 | |
| | | | | | | | | |
| PLANT AND EQUIPMENT, net | | | 13,661,593 | | | | 13,957,397 | |
| | | | | | | | | |
| OTHER ASSETS: | | | | | | | | |
| Restricted investments | | | 129,306 | | | | 1,033,463 | |
| Financing costs, net | | | 131,278 | | | | 556,365 | |
| Intangible assets, net | | | 33,243,462 | | | | 17,041,181 | |
| Total other assets | | | 33,504,046 | | | | 18,631,009 | |
| | | | | | | | | |
| Total assets | | $ | 175,661,403 | | | $ | 168,742,463 | |
| | | | | | | | | |
| LIABILITIES AND SHAREHOLDERS' EQUITY | | | | | | | | |
| | | | | | | | | |
| CURRENT LIABILITIES: | | | | | | | | |
| Accounts payable | | $ | 2,875,667 | | | $ | 6,146,497 | |
| Short term bank loans | | | - | | | | 2,197,500 | |
| Notes payable | | | 14,545,305 | | | | 7,325,000 | |
| Other payables | | | 2,342,231 | | | | 2,152,063 | |
| Refundable security deposits due to distributors | | | 4,107,600 | | | | 4,102,000 | |
| Other payables - related parties | | | 332,689 | | | | 238,956 | |
| Accrued liabilities | | | 368,578 | | | | 1,356,898 | |
| Liabilities assumed from reorganization | | | 525,739 | | | | 1,565,036 | |
| Taxes payable | | | 3,608,665 | | | | 11,248,226 | |
| Total current liabilities | | | 28,706,474 | | | | 36,332,176 | |
| | | | | | | | | |
| OTHER LIABILITIES: | | | | | | | | |
| Derivative liabilities | | | 33,996,855 | | | | - | |
| Convertible debt, net of discount $20,945,255 and $28,493,089 as of December 31, 2009 and June 30, 2009, respectively | | | 8,694,745 | | | | 6,346,911 | |
| Total other liabilities | | | 42,691,600 | | | | 6,346,911 | |
| | | | | | | | | |
| Total liabilities | | | 71,398,074 | | | | 42,679,087 | |
| | | | | | | | | |
| COMMITMENTS AND CONTINGENCIES | | | | | | | | |
| | | | | | | | | |
| SHAREHOLDERS' EQUITY: | | | | | | | | |
| Convertible preferred stock Series A ($0.001 par value; 0 shares issued and outstanding as of December 31, 2009 and June 30, 2009, respectively | | | - | | | | - | |
| Common stock ($0.001 par value, 22,500,000 and 15,000,000 shares authorized, 11,169,546 and 10,435,099 shares issued and outstanding as of December 31, 2009 and June 30, 2009, respectively) | | | 11,170 | | | | 10,435 | |
| Additional paid-in capital | | | 23,805,104 | | | | 48,397,794 | |
| Capital contribution receivable | | | (11,000 | ) | | | (11,000 | ) |
| Retained earnings - unrestricted | | | 70,427,320 | | | | 67,888,667 | |
| Statutory reserves | | | 3,253,878 | | | | 3,253,878 | |
| Accumulated other comprehensive income | | | 6,776,857 | | | | 6,523,602 | |
| Total shareholders' equity | | | 104,263,329 | | | | 126,063,376 | |
| Total liabilities and shareholders' equity | | $ | 175,661,403 | | | $ | 168,742,463 | |
JIANGBO PHARMACEUTICALS, INC. AND SUBSIDIARIES
(FORMERLY KNOWN AS GENESIS PHARMACEUTICAL ENTERPRISES, INC.)
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED DECEMBER 31, 2009 AND 2008
(Unaudited)
| | | For the Six Months Ended | |
| | | December 31, | |
| | | 2009 | | | 2008 | |
| CASH FLOWS FROM OPERATING ACTIVITIES: | | | | | | |
| Net income | | $ | 7,479,816 | | | $ | 8,532,670 | |
| Loss from discontinued operations | | | 164,769 | | | | 1,590,823 | |
| Income from continuing operations | | | 7,644,585 | | | | 10,123,493 | |
| Adjustments to reconcile net income to net cash, net of acquisition, provided by operating activities: | | | | | | | | |
| Depreciation | | | 391,435 | | | | 289,749 | |
| Amortization of intangible assets | | | 803,234 | | | | 147,120 | |
| Amortization of deferred debt issuance costs | | | 472,753 | | | | 340,151 | |
| Amortization of debt discount | | | 7,547,834 | | | | 1,646,235 | |
| Loss from issuance of shares in lieu of interest | | | 317,124 | | | | - | |
| Bad debt expense | | | 581,287 | | | | 111,237 | |
| Realized loss (gain) on marketable securities | | | 406,551 | | | | (115,128 | ) |
| Unrealized (gain) loss on marketable securities | | | (265,747 | ) | | | 1,459,656 | |
| Other non-cash settlement | | | - | | | | (20,000 | ) |
| Change in fair value of derivative liabilities | | | (1,865,992 | ) | | | - | |
| Stock-based compensation | | | 135,104 | | | | 38,028 | |
| Changes in operating assets and liabilities | | | | | | | | |
| Accounts receivable | | | (1,062,126 | ) | | | (1,764,421 | ) |
| Accounts receivable - related parties | | | - | | | | 488,580 | |
| Inventories | | | (653,303 | ) | | | (1,049,318 | ) |
| Other receivables | | | 161,727 | | | | (2,175,378 | ) |
| Other receivables - related parties | | | (161,304 | ) | | | (236,724 | ) |
| Advances to suppliers and other assets | | | (235,033 | ) | | | 1,608,131 | |
| Accounts payable | | | (3,277,854 | ) | | | 569,601 | |
| Other payables | | | 187,153 | | | | 1,815,563 | |
| Other payables - related parties | | | 93,588 | | | | 66,028 | |
| Accrued liabilities | | | (299,688 | ) | | | 153,587 | |
| Liabilities assumed from reorganization | | | (79,150 | ) | | | (903,600 | ) |
| Taxes payable | | | (7,651,766 | ) | | | 13,821,621 | |
| Net cash provided by operating activities | | | 3,190,415 | | | | 26,414,211 | |
| | | | | | | | | |
| CASH FLOWS FROM INVESTING ACTIVITIES: | | | | | | | | |
| Proceeds from sale of marketable securities | | | 531,333 | | | | 117,614 | |
| Purchase of equipment and building improvements | | | (76,707 | ) | | | (128,179 | ) |
| Purchase of land use right | | | (16,975,633 | ) | | | - | |
| Net cash used in investing activities | | | (16,521,007 | ) | | | (10,565 | ) |
| | | | | | | | | |
| CASH FLOWS FROM FINANCING ACTIVITIES: | | | | | | | | |
| Change in restricted cash | | | (7,207,356 | ) | | | 1,292,162 | |
| Proceeds from bank loans | | | | | | | 2,196,450 | |
| Payments for bank loans | | | (2,199,600 | ) | | | (2,782,170 | ) |
| Proceeds from notes payable | | | 14,539,356 | | | | 704,328 | |
| Principal payments on notes payable | | | (7,332,000 | ) | | | - | |
| Net cash (used in) provided by financing activities | | | (2,199,600 | ) | | | 1,410,770 | |
| | | | | | | | | |
| EFFECTS OF EXCHANGE RATE CHANGE IN CASH | | | 135,318 | | | | 369,646 | |
| | | | | | | | | |
| (DECREASE) INCREASE IN CASH | | | (15,394,874 | ) | | | 28,184,062 | |
| | | | | | | | | |
| CASH and CASH EQUIVALENTS, beginning | | | 104,366,117 | | | | 48,195,798 | |
| | | | | | | | | |
| CASH and CASH EQUIVALENTS, ending | | $ | 88,971,243 | | | $ | 76,379,860 | |
| | | | | | | | | |
| SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: | | | | | | | | |
| Cash paid for Interest | | $ | 390,861 | | | $ | 1,110,572 | |
| Cash paid for Income taxes | | $ | 1,289,849 | | | $ | 128,329 | |
| | | | | | | | | |
| Non-cash investing and financing activities: | | | | | | | | |
| Common stock issued for interest payment | | $ | 667,500 | | | $ | - | |
| Common stock issued for convertible notes conversion, net of discount | | $ | 5,200,000 | | | $ | 160,000 | |
| Derivative liability reclassified to equity upon conversion | | $ | 4,049,887 | | | $ | - | |
| Transfer of investments to settle liabilities assumed from reorganization | | $ | 1,124,916 | | | $ | - | |
JIANGBO PHARMACEUTICALS, INC. AND SUBSIDIARIES
(FORMERLY KNOWN AS GENESIS PHARMACEUTICAL ENTERPRISES, INC.)
RECONCILIATION OF NON-GAAP NET INCOME AND DILUTED EPS
| | | For Three Months Ended December 31 | | | For Six Months Ended December 31 | |
| | | 2009 | | | 2008 | | | 2009 | | | 2008 | |
| | | | | | | | | | | | | |
| Net Income | | $ | 5,328,141 | | | $ | 5,399,186 | | | $ | 7,479,816 | | | $ | 8,532,670 | |
| | | | | | | | | | | | | | | | | |
| Loss (gain) in fair value of derivative liabilities | | $ | (6,687,085 | ) | | $ | - | | | $ | (1,865,992 | ) | | $ | - | |
| | | | | | | | | | | | | | | | | |
| Amortization of debt discount and debt issuance costs related to convertible debentures | | $ | 5,751,934 | | | $ | 1,153,759 | | | $ | 8,020,587 | | | $ | 1,986,386 | |
| | | | | | | | | | | | | | | | | |
| Adjusted Net Income | | $ | 4,392,990 | | | $ | 6,552,945 | | | $ | 13,634,411 | | | $ | 10,519,056 | |
| | | | | | | | | | | | | | | | | |
| Basic Weighted Average Number of Shares | | | 10,983,405 | | | | 9,771,883 | | | | 10,744,648 | | | | 9,770,615 | |
| | | | | | | | | | | | | | | | | |
| Diluted Weighted Average Number of Shares** | | | 15,065,301 | | | | 14,148,318 | | | | 14,829,605 | | | | 14,173,463 | |
| | | | | | | | | | | | | | | | | |
| Adjusted Diluted Earnings per Share | | $ | 0.29 | | | $ | 0.46 | | | $ | 0.92 | | | $ | 0.74 | |
** Including outstanding options and warrants using treasury method of calculation plus the number of shares if converted from the convertible debt
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