Hubei Minkang (OTC BB:HBMK)

Hubei Minkang Pharmaceutical Ltd.

Consolidated Statements of Operations and Comprehensive Income

On May 7, 2012, our indirect wholly-owned subsidiary, Hubei Minkang Pharmaceutical Co., Ltd. ("Hubei Minkang PRC"), and Bank of Communications Co., Ltd., Yichang Branch, ("Bank of Communications") executed a loan contract (the "Loan Contract"), where Hubei Minkang PRC loaned RMB 10,000,000 to be used as liquidity, with a loan period from May 7, 2012 to May 7, 2013 and having an interest rate of 7.872% per annum, which is calculated and paid on the 20th of each month, with principal due May 7, 2013.

 

Hubei Minkang Pharmaceutical Ltd.

 

Consolidated Statements of Income and Comprehensive Income

 

		For the Three Months				For the Three Months
		Ended				Ended
		March 31, 2012				March 31, 2011
		(Unaudited)				(Unaudited)
Net Revenues		$	2,687,939			$	2,818,413
Cost of Goods Sold			1,464,304				1,537,929
Gross Margin			1,223,635				1,280,484
Operating Expenses
Advertising expenses			8,940				6,099
Selling expenses			346,890				416,833
Professional fees			65,849				-
Research and development			9,331				6,422
General and administrative expenses			654,901				482,075
Total operating expenses			1,085,911				911,429
Income from Operations			137,724				369,055
OTHER (INCOME) EXPENSE:
Government grants - energy conservation			(5,265	)			-
Interest income			(4,236	)			(2,429	)
Interest expense			55,808				21,756
Other (income) expense			5,248				(9,569	)
Other (income) expense, net			51,555				9,758
Income before Income Tax Provision			86,169				359,297
Income Tax Provision			52,745				89,825
Net Income			33,424				269,472
Other Comprehensive Income
Foreign currency translation gain			51,095				60,555
Total other comprehensive income			51,095				60,555
Comprehensive Income		$	84,519			$	330,027
Net Income Per Common Share - Basic and Diluted		$	0.00			$	0.01
Weighted average common shares outstanding:
- basic and diluted			43,047,169				33,500,000

 

During the next 12 months, management anticipates proceeding with expansion plans to acquire at least a 51% interest of a sales distribution company for approximately $1.5 million and to increase commercialization of Hubei Minkang PRC’s products including the marketing distribution of existing and potential future products which is anticipated to cost approximately $700,000. However, if we are not able to raise the required funds for such expansion plans, then we may have to delay some or all of our expansion plans.

Item 3.02 Unregistered Sales of Equity Securities

On April 27, 2012, we completed a private placement financing involving the sale of 1,130,270 restricted shares of our common stock (each a "Share") to one individual at a subscription price of $0.70 per Share for gross proceeds of $791,189.

In connection with the issuance of the Shares, we relied on the exemption from registration under the United States Securities Act of 1933, as amended, provided by Regulation S, based on representations and warranties provided by the purchaser of the Shares in the subscription agreement entered into between the purchaser and us.

On January 11, 2012, our indirect wholly-owned subsidiary, Hubei Minkang Pharmaceutical Co., Ltd. ("Hubei Minkang PRC"), and Hubei Bank Co., Ltd. (Yichang Branch) ("Hubei Bank") executed a loan contract ("Loan Contract #1"), where Hubei Minkang PRC loaned RMB 5,000,000 to be used as liquidity, with a loan period from January 11, 2012 to January 11, 2013 and having an interest rate of 7.315% per annum, which is calculated and paid monthly.

YICHANG, HUBEI, CHINA--(Marketwire - Feb. 29, 2012) - Hubei Minkang Pharmaceutical Ltd. (OTCBB:HBMK) ("Hubei Minkang" or the "Company") is pleased to announce that its Chinese subsidiary, Hubei Minkang Pharmaceutical Co., Ltd. ("Hubei PRC") has recently signed a Memorandum of Understanding with Henan Wanlong Pharmaceutical Co., Ltd. ("Henan Wanlong") of Zhengzhou, Henan, China with respect to a proposal for Hubei PRC to acquire 51% of Henan Wanlong to expand distribution and increase sales growth.

The proposed transaction with Henan Wanlong would result in the Company indirectly acquiring 51% of Henan Wanlong through a share exchange, a modest capital injection by the Company into Henan Wanlong to support business expansion and provide the Company with access to Henan Wanlong's extensive sales network allowing for wider distribution of Hubei Minkang's products to generate substantial sales growth.

Henan Wanlong is a sales distribution company focused on supplying injection drugs to hospitals throughout China. Current turnover is estimated at RMB 700 million to 800 million (US $111 million to $127 million). For the past five years, Henan Wanlong has been the sole distributor for Hubei Minkang's flagship drug, Yinxing Damo Zhusheye. The contract was recently renewed for another three years.

According to Hubei Minkang's President, CEO and Director, Lee Tong Tai, the MOU with Henan Wanlong is another key step in Hubei Minkang's ongoing strategic plan to expand its distribution network throughout China.

"We know the market for injectable drugs is continuing to expand," said Mr. Lee. "Collaborating with Henan Wanlong creates an opportunity to access hospitals throughout China and take advantage of that growth."

		Three months ended September 30,
		2011	2010	2011	2010
Net Revenues		$    3,181,496	$     4,461,102	$  8,305,281	$  11,067,250
Costs of Goods Sold		1,610,148	1,992,985	4,253,671	5,017,902
Gross Margin		1,571,348	2,468,117	4,051,610	6,049,348
Operating Expenses
Advertising expenses		2,266	1,644	9,071	13,661
Selling expenses		628,409	571,091	1,449,980	1,629,168
Professional fees		260,436	-	260,436	-
Research & development		20,386	21,293	31,416	36,180
Stamp tax on Minkang change of ownership	504,298		-	504,298	-
General and administrative expenses		484,678	423,283	1,552,153	1,335,903
Total operating expenses		1,900,473	1,017,311	3,807,354	3,014,912
Income (Loss) from Operations before Other (Income) Expense		(329,125)	1,450,806	244,256	3,034,436
Other (Income) Expense
Government grants - energy conservation		(2,254)	-	(2,254)	-
Interest income		13,814	(9,042)	(6,064)	(11,724)
Interest expense		50,135	39,198	118,873	119,909
Other (income) expense	19,086		(70,016)	14,422	11,004
Other (income) expense, net		80,781	(39,860)	124,977	119,189
Income (Loss) from Operations before Income Tax Provisions	(409,906)		1,490,666	119,279	2,915,247
Income Tax Provision (Benefit)	(68,204)		427,933	53,466	804,118
Net Income (Loss)		(341,702)	1,062,733	65,813	2,111,129

We intend to focus on the business operations of our subsidiary Hubei Minkang PRC. Hubei Minkang PRC is a modern pharmaceutical company that is engaged in the research, development, manufacture and marketing of TCM and some chemical pharmaceuticals in the PRC as well as markets its products to the US, Japan, Canada, Singapore, Malaysia, Thailand and Hong Kong among other countries.

During the next 12 months, management anticipates proceeding with expansion plans to acquire at least a 51% interest of a sales distribution company for approximately $1.5 million and to increase commercialization of Hubei Minkang PRC's products including the marketing distribution of existing and potential future products which is anticipated to cost approximately $700,000. However, if we are not able to raise the required funds for such expansion plans, then we may have to delay some or all of our expansion plans.

Our primary source of funds for the interim period ended September 30, 2011, included cash flow from operations, loans from the Bank of Communications, Yichang Branch and the Yichang City Commercial Bank, and a working capital advance from an unrelated third party. During the next 12 months, management anticipates proceeding with expansion plans to acquire at least a 51% interest of a sales distribution company for approximately $1.5 million and to increase commercialization of Hubei Minkang PRC's products including the marketing distribution of existing and potential future products which is anticipated to cost approximately $700,000. However, if we are not able to raise the required funds for such expansion plans, then we may have to delay some or all of our expansion plans.

On September 21, 2011 became a public entity via a reverse merger transaction.

Company Snapshot:

A large-scale pharmaceutical company that mainly produces and markets Traditional Chinese Medicines

Industry Snapshot:

Traditional Chinese Medicine (“TCM”) is a comprehensive medical system that originated in China more than 3,000 years ago.

Core concepts are based on the theories of Yin-Yang and the five elements, which are based on the ancient Chinese observing nature's cycles and changes. They held that wood, fire, earth, metal, and water were the basic substances constituting the material world. These five basic substances were considered an indispensable part of daily life. They also noted that the material world is in a constant state of flux due to the dynamic movement and mutual antagonism of yin and yang factors. TCM holds that a person’s health depends on a constant struggle between the opposing forces of yin and yang, or heat and cold, as expressed through the five elements. TCM sees excesses or imbalances in the body as the cause of illness or disease.

TCM uses Chinese herbal medicines to help to restore balance and enable the body to regain health. These medicines comprise a combination of herbs, minerals and animal products, and complement other related therapies such as acupuncture, acupressure, massage and restorative physical exercises, such as T’ai Chi or Qi Qong.

Post Merger Share Calculation:

•   8,594,117: Pre reverse merger outstanding shares
• 33,500,000: Newly issued shares of Common Stock

GeoTeam® best effort calculation of total post reverse merger shares assuming full conversions:  42,094,117

Financial Snapshot: December Year End

2010 vs. 2009

• Net Income: $2.2 million vs. $800 Thousand   

Three Months 2011 vs 2010

• Net Income: $269 Thousand vs. $264 Thousand 

Pro Forma Valuation: using  price and new share count

• Trailing EPS: $0.05
• Trailing P/E: 5.4

Effective August 1, 2011, Hubei Minkang Pharmaceutical Ltd. (the “Company”), HBMK Pharmaceutical Limited (“HBMK”) and all the shareholders of HBMK (the “Vendors”), entered into an Extension Agreement (the “Extension Agreement”) with respect to the Share Exchange Agreement that was entered into between the same parties, dated July 8, 2011 (the “Share Exchange Agreement”) whereby the Company agreed to acquire all of the issued and outstanding shares of capital stock of HBMK from the Vendors in exchange for the issuance of 33,500,000 shares of common stock of the Company to the Vendors on a pro rata basis in accordance with each Vendor’s percentage ownership in HBMK, subject to the satisfaction or waiver of certain conditions precedent as set out in the Share Exchange Agreement. Since the closing date of the Share Exchange Agreement was to occur no later than August 1, 2011, the parties decided to enter into the Extension Agreement so that the latest closing date of the Share Exchange Agreement shall take place on or before August 16, 2011.

Reverse Merger has still not closed:

On July 8, 2011, we entered into a share exchange agreement with HBMK Pharmaceutical Limited (“HBMK”), a BVI corporation, and all of the shareholders of HBMK (the “Vendors”). Pursuant to the terms of the share exchange agreement, we have agreed to acquire all of the issued and outstanding shares of capital stock of HBMK from the Vendors in exchange for the issuance of 33,500,000 shares of our common stock to the Vendors on a pro rata basis in accordance with each Vendor’s percentage ownership in HBMK, subject to the satisfaction or waiver of certain conditions precedent as set out in the share exchange agreement.

Effective October 20, 2010, we completed a merger with our subsidiary, Hubei Minkang Pharmaceutical Ltd., a Nevada corporation. As a result, we have changed our name from “Nexgen Petroleum Corp.” to “Hubei Minkang Pharmaceutical Ltd.” We change the name of our company to better reflect the intended direction and business of our company.

In addition, effective October 20, 2010, we effected a one (1) for eight (8) reverse stock split of our authorized, issued and outstanding common stock. As a result, our authorized capital has decreased from 1,350,000,000 shares of common stock with par value of $0.001 per share and 10,000,000 shares of preferred stock with par value of $0.001 per share to 168,750,000 shares of common stock with par value of $0.001 per share and 10,000,000 shares of preferred stock with par value of $0.001 per share, and correspondingly our issued and outstanding capital has decreased from 64,765,941 shares of common stock to 8,095,742 shares of common stock.

We are still awaiting for the release of further details.