China Shenghuo Pharmaceutical Holdings (AMEX:
KUN)
(??????(??)????) released its Q3 financial report and also announced that it has
completed restatement of financial results for 2007 and the first two quarters
of 2008.
Shenghuo ran into reporting trouble when it came to light that
two members of its financial department had faked the collection of trade
receivables and employee advances. Most notable was the restatement in 2007’s
net income, which dropped by a very significant $2.3 million, taking it down to
$1.7 million. Earnings per share dropped from 21 cents to 9 nine cents. Although
management was not implicated, Shenghuo replaced its CFO and instituted stricter
controls over its financial department.
In the company’s third quarter,
ended September 30, revenues climbed by a year-best 73% to $7.3 million,
primarily because of better sales of the company main product, Xuesaitong Soft
Capsules, a TCM that increases blood circulation. However, sales and marketing
costs rose faster than revenues, moving higher by 93% to $3 million. General and
administrative costs soared from $341,000 to $1.8 million. Shenghuo blamed the
higher G&A costs on the complexity of complying with public company
regulations, as well as the investigation into its accounting scandal. Because
of the higher costs, net income was only $154,000 this year, as opposed to
$868,000 in Q3 of 2007. Earnings per share were 1 cent.
Nine month
figures tell a similar story. Revenues so far in 2008 are up 43% at $21.4
million, but the company still produced a net loss of $2.2 million. That is a
big swing from last year’s results. At the same point in 2007, the company
reported positive earnings of $3.7 million or 19 cents per share.
At the
end of the third quarter, Shenghuo had just $1.1 million in cash and
shareholder’s equity of $10 million.
Now that the restatement of its
financial history is complete, the company will seek relisting on the NYSE
Alternext US LLC (formerly the American Stock Exchange), once again under its
former symbol KUN.
