Lotus Pharmaceuticals (OTCBB: LTUS) (????????) announced that its Q3 net income climbed 45% to $3.2 million, even though revenues dropped slightly in the quarter to $16.6 million. The company earned 7 cents per share, fully diluted, bringing its nine-month eps total to 16 cents.

Lotus reported that its revenue mix, when compared to the year-ago quarter, was the reason earnings increased while revenue stayed flat. Revenue from wholesale distribution and manufacturing revenue was up 21% at $13.8 million. But retail revenue declined 27% to $1.2 million and other income, hit by a reduction in third-party manufacturing, R&D and lab testing, was cut in half, dropping from $3.5 million last year to $1.7 million in 2008’s Q3.

In Q2, the company began a sales and accounts receivable collections incentive program as a means of reducing its AR numbers. As the commissions and bonuses paid in the program slowed down in Q3, the company’s profitability improved. The program helped Lotus reduce its outstanding accounts receivables by $6.6 million to $13.9 million over the first nine months of 2008. However, the program had a negative effect on the bottom line. Nine-month numbers for Lotus show that the company has increased its revenues by 27% in 2008, but the huge increase in selling costs kept its net income at roughly the same levels as 2007—exactly the opposite of Q3, where earnings jumped on flat revenues.

Lotus said that strong revenues from its newest drug, Brimonidine Tartrate Eye Drops, a glaucoma treatment, were responsible for much of the rise in revenues thus far in 2008. Looking to the future, the company said it has applied for approval of Gliclazide sustained-release tablets, a treatment for diabetes. It was also happy to report that the SFDA is now considering its application for clinical trials of asthma drug Laevo-Bambutero. Lotus paid $7 million to obtain rights to the drug in May of 2008. It is at least two years away from submitting Laevo-Bambutero for SFDA marketing approval.

Lotus ended its Q3 with $2.7 million in cash and $18.7 million of working capital. It generated $16 million in net cash flow from operating activities in the first nine months of 2008, a big improvement from the $3.7 million in the first nine months of 2007. It has paid $21.1 million for investments so far this year: a $2.9 million deposit on Laevo-Bambutero, a $16.8 million payment for land use rights in the Cha You Qian Qi Economy zone in Inner Mongolia, and $1.4 million to pay for new property and equipment.