Skystar Bio-Pharmaceutical Comp (OTC:SKBI)

This Amendment No. 1 to the Current Report on Form 8-K/A (this “Current Report on Form 8-K/A”) is being filed to include a copy of the letter from the former auditor of Skystar Bio-pharmaceutical Company relating to the disclosures contained in this Current Report on Form 8-K/A, as required by the rules promulgated by the SEC, and corresponding changes in the body of the document indicating that the letter have now been filed.

On March 31, 2016, a member of the Audit Committee of the Board of Directors of Skystar Bio-pharmaceutical Company (the “Company”) received a letter from Crowe Horwath (HK) CPA Limited (“Crowe”) terminating its relationship with the Company (the “March 31 Letter”).

The audit report of Crowe on the financial statements of the Company for the years ended December 31, 2012 and 2013 did not contain any adverse opinion or disclaimer of opinion, and was not qualified or modified as to uncertainty, audit scope or accounting principles.

Except as disclosed in Item 4.02 if this Current Report on Form 8-K/A and the letter attached hereto as Exhibit 7.1, for the two years ended December 31, 2013 and the subsequent period through March 31, 2016, there were no disagreements between the Company and Crowe on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedures, which disagreements, if not resolved to the satisfaction of Crowe would have caused Crowe to make reference to the subject matter of the disagreements in connection with its reports.

Except as disclosed in Item 4.02 if this Current Report on Form 8-K/A and the letter attached hereto as Exhibit 7.1, for the two years ended December 31, 2013 and the subsequent period through March 31, 2016, there were no “reportable events” (defined below) requiring disclosure pursuant to Item 304(a)(1)(v) of Regulation S-K. As used herein, the term “reportable event” means any of the items listed in paragraphs (a)(1)(v)(A)-(D) of Item 304 of Regulation S-K.

The Company has provided Crowe with a copy of the foregoing disclosures and has requested that Crowe review such disclosures and provide a letter addressed to the Securities and Exchange Commission (“SEC”) as specified by Item 304(a)(3) of Regulation S-K. Filed as Exhibit 16.1 is a copy of Crowe’s letter addressed to the SEC relating to the statements made by the Company in this Current Report on Form 8-K/A.

On April 6, 2016, the Company engaged Wei Wei & Co., LLP (“Wei”) as its principal accountant. During the two years ended December 31, 2013 and the subsequent period through March 31, 2016, neither the Company nor anyone on its behalf consulted Wei regarding either (i) the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on the Company’s consolidated financial statements, and neither a written report nor oral advice was provided to the Company that Wei concluded was an important factor considered by the Company in reaching a decision as to any accounting, auditing or financial reporting issue; or (ii) any matter that was either the subject of a disagreement (as defined in Item 304(a)(1)(iv) of Regulation S-K and the related instructions to Item 304 of Regulation S-K) or a reportable event.

In the March 31 Letter, Crowe notified the Company that it was recalling its Auditor Reports dated April 1, 2013 and March 31, 2014 and that such reports should no longer be associated with the financial statements for the fiscal years ended December 31, 2012 and 2013.

In its letter Crowe indicated that:

Crowe indicated that the foregoing caused Crowe to be unwilling to rely on management’s representations in connection with its audits of the consolidated financial statements and of the Company for December 31, 2014 and prior periods.

Neither the Audit Committee of the Board of Directors nor the officers of the Company discussed the matters disclosed in response to this Item 4.02 with Crowe.

The Company has provided Crowe with a copy of the foregoing disclosures and has requested that Crowe review such disclosures and provide a letter addressed to the SEC as specified by Item 4.02(c) of Form 8-K. Filed as Exhibit 7.2 is a copy of Crowe’s letter addressed to the SEC relating to the statements made by the Company in this Current Report on Form 8-K/A.

Item 4.01 Changes in Registrant’s Certifying Accountant.

On March 31, 2016, a member of the Audit Committee of the Board of Directors of Skystar Bio-pharmaceutical Company (the “Company”) received a letter from Crowe Horwath (HK) CPA Limited (“Crowe”) terminating its relationship with the Company (the “March 31 Letter”).

The audit report of Crowe on the financial statements of the Company for the years ended December 31, 2012 and 2013 did not contain any adverse opinion or disclaimer of opinion, and was not qualified or modified as to uncertainty, audit scope or accounting principles.

Except as disclosed in Item 4.02 if this Current Report on Form 8-K and the letter attached hereto as Exhibit 7.1, for the two years ended December 31, 2013 and the subsequent period through March 31, 2016, there were no disagreements between the Company and Crowe on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedures, which disagreements, if not resolved to the satisfaction of Crowe would have caused Crowe to make reference to the subject matter of the disagreements in connection with its reports.

Except as disclosed in Item 4.02 if this Current Report on Form 8-K and the letter attached hereto as Exhibit 7.1, for the two years ended December 31, 2013 and the subsequent period through March 31, 2016, there were no “reportable events” (defined below) requiring disclosure pursuant to Item 304(a)(1)(v) of Regulation S-K. As used herein, the term “reportable event” means any of the items listed in paragraphs (a)(1)(v)(A)-(D) of Item 304 of Regulation S-K.

The Company has provided Crowe with a copy of the foregoing disclosures and has requested that Crowe review such disclosures and provide a letter addressed to the Securities and Exchange Commission (“SEC”) as specified by Item 304(a)(3) of Regulation S-K. When available, the Company will file as Exhibit 16.1 a copy of Crowe’s letter addressed to the SEC relating to the statements made by the Company in this Current Report on Form 8-K.

On April 6, 2016, the Company engaged Wei Wei & Co., LLP (“Wei”) as its principal accountant. During the two years ended December 31, 2013 and the subsequent period through March 31, 2016, neither the Company nor anyone on its behalf consulted Wei regarding either (i) the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on the Company’s consolidated financial statements, and neither a written report nor oral advice was provided to the Company that Wei concluded was an important factor considered by the Company in reaching a decision as to any accounting, auditing or financial reporting issue; or (ii) any matter that was either the subject of a disagreement (as defined in Item 304(a)(1)(iv) of Regulation S-K and the related instructions to Item 304 of Regulation S-K) or a reportable event.

XI'AN, CHINA--(Marketwired - Dec 22, 2015) - Skystar Bio-Pharmaceutical Company (OTCQB: SKBI), a China-based manufacturer and distributor of veterinary medicine, vaccines, micro-organisms and feed additives, announced that while the Company trades on the over-the-counter market, it has made progress with its audits.

Following the filing and acceptance of its delinquent quarterly and fiscal year end reports with the Securities Exchange Commission pursuant to the Exchange Act of 1934, as amended, Skystar intend to continue to follow applicable Nasdaq listing standards, notwithstanding its delisting.

Skystar will continue to provide both operational and financial updates to the market periodically and intends to apply for a Nasdaq listing at a future date and time.

XI'AN, CHINA--(Marketwired - Nov 19, 2015) - Skystar Bio-Pharmaceutical Company (NASDAQ: SKBI), a China-based manufacturer and distributor of veterinary medicine, vaccines, micro-organisms and feed additives, announced that on November 17, 2015, it received a letter from NASDAQ Stock Market indicating that that Skystar failed to comply with Nasdaq's filing requirement set forth in Listing Rule 5250(c)(1) (the "Rule") because it failed to file its Form 10-Q for the fiscal quarter ended September 30, 2015 (the "Quarterly Report").

The Company previously disclosed a notification from Nasdaq informing the Company that is was subject to delisting because it failed to comply with Nasdaq's filing requirements set forth in Listing Rule 5250(c)(1) because it failed to file its Form 10-K for the fiscal year ended December 31, 2014, and Forms 10-Q for the periods ended March 31, and June 30, 2015. The failure to file the Quarterly Report constitutes an additional basis for delisting. The Company also previously disclosed that Nasdaq had notified the Company of two additional, and separate, bases for delisting under Listing Rule 5250(b)(1) (failure to disclose material non-public information) and Listing Rule 5101 (public interest concerns). 

The Company has a hearing scheduled for December 3, 2015 for the hearing panel to review the delisting determination.

XI'AN, CHINA--(Marketwired - Oct 27, 2015) - Skystar Bio-Pharmaceutical Company (NASDAQ: SKBI) (the "Company"), a China-based manufacturer and distributor of veterinary medicine, vaccines, micro-organisms and feed additives, announced receiving new patent, number ZL201310259528.6, from the State Intellectual Property Office of the PRC (SIPO), on August 12, 2015. The Company originally filed the patent, which is named "Multi-joint-specific transfer factor and preparation methods," in 2013. The patent relates to a process for intended use in the animal pharmaceutical space to improve the way specific transfer factor (T-factors) are cultivated for large scale production purposes.

T-factors are widely accepted and used around the world as animal health supplements, administered orally, to support immune systems and to prevent diseases in poultry and livestock, including: porcine circovirus, porcine reproductive and respiratory syndrome, pseudorabies, swine mycoplasma pneumonia, swine fever, avian flu, Newcastle disease, avian infectious bronchitis, duck plague, and mycoplasma gallisepticum disease. The patent is valid for 20 years.

T-factors support the overall balance and health of an animal's immune system by positively stimulating an animal's immune system and response to pathogens. Skystar's patented process for the preparation and cultivation of T-factor was developed at Skystar's Huxian research and development facility. The traditional process for cultivating T-factor occurs by freezing and thawing materials, followed by membrane dialysis. The main disadvantage of the traditional method of harvesting T-factor is low yield relative to extraction time. Skystar's newly patented process for harvesting T-factors uses a harvesting method that replaces traditional membrane dialysis and filtration with centrifugation, microfiltration and ultrafiltration to extract the T-factor, thus greatly shortening the production cycle, saving manpower, and increasing T-factor yield to industrial production levels.

Mr. Weibing Lu commented, "Skystar is pleased to have final approval for this patent, which was developed at our labs in Huxian. The Company believes that the work performed at Skystar's research and development laboratories and sets a new bar for product development in the animal health space and we look forward to developing and launching these efforts into our product portfolio."

The Company is currently working on the commercial application and development of its patented T-factor production process.

XI'AN, CHINA--(Marketwired - Oct 23, 2015) -  Skystar Bio-Pharmaceutical Company (NASDAQ: SKBI), a China-based manufacturer and distributor of veterinary medicine, vaccines, micro-organisms and feed additives, announced today that on October 20, 2015 it received a letter from NASDAQ Stock Market indicating that that Skystar failed to comply with Nasdaq's filing requirement set forth in Listing Rule 5250(c)(1) (the "Rule") because it failed to file its Form 10-K for the fiscal year ended December 31, 2014, and Forms 10-Q for the periods ended March 31, and June 30, 2015, respectively (together, the "Delinquent Reports").

Based on its review of the materials submitted by Skystar (together, the "Submissions"), Nasdaq's staff granted Skystar an exception until October 12, 2015, to file the Delinquent Reports and thereby regain compliance with the Rule (the "Exception"). The notification letter indicated that because the Company has not filed the Delinquent Reports and does not meet the terms of the Exception.

Nasdaq also notified Skystar of two additional, and separate, bases for delisting under Listing Rule 5250(b)(1) (failure to disclose material non-public information) and Listing Rule 5101 (public interest concerns). The information to which Nasdaq referred was the conduct by Skystar's audit committee of an internal investigation into certain allegations, raised by Skystar's auditors, that the auditors had been presented by Skystar personnel with false bank documents relating to one bank account. The public interest concerns arise from the audit committee's determination that a low level employee had falsified bank documents relating to one bank account, which were then provided to the auditors by other Skystar personnel who were unaware of the falsehood. The employee who falsified the document is no longer with Skystar. After the audit committee concluded its investigation, the Company's external auditors have resumed their audit of Skystar's financial statements for the year ended December 31, 2014. Nasdaq's notice indicated that all of the foregoing constituted a basis for delisting by Nasdaq.

Item 3.01 Notice of Delisting or Failure to Satisfy a Continued Listing Rule or Standard; Transfer of Listing

On October 20, 2015, Skystar Bio-Pharmaceutical Company (the “Company”) received a notification from the Nasdaq Stock Market (“Nasdaq”) informing the Company that is was subject to delisting because it failed to comply with Nasdaq’s filing requirements set forth in Listing Rule 5250(c)(1) because it failed to file its Form 10-K for the fiscal year ended December 31, 2014, and Forms 10-Q for the periods ended March 31, and June 30, 2015.

Nasdaq also notified the Company of two additional, and separate, bases for delisting under Listing Rule 5250(b)(1) (failure to disclose material non-public information) and Listing Rule 5101 (public interest concerns). The information to which Nasdaq referred was the conduct by the Company’s audit committee of an internal investigation into certain allegations, raised by the Company’s auditors, that the auditors had been presented by Company personnel with false bank documents relating to one bank account. The public interest concerns arise from the audit committee’s determination that a low level employee had falsified bank documents relating to one bank account, which were then provided to the auditors by other Company personnel who were unaware of the falsehood. The employee who falsified the document is no longer with the Company. After the audit committee concluded its investigation, the Company’s external auditors have resumed their audit of the Company’s financial statements for the year ended December 31, 2014.

XI'AN, CHINA--(Marketwired - Jun 15, 2015) - Skystar Bio-Pharmaceutical Company (NASDAQ:SKBI) (the "Company"), a China-based manufacturer and distributor of veterinary medicine, vaccines, micro-organisms and feed additives, announced today that the Company timely submitted a "Plan of Compliance" to Nasdaq in accordance with applicable Nasdaq rules. The Plan of Compliance sets out the Company's plan to regain compliance with Nasdaq's continued listing rules.

On April 15, 2015, and May 22, 2015, the Company received notifications from the Nasdaq Stock Market ("Nasdaq") informing the Company that since it had not filed its Annual Report on Form 10-K for the fiscal year ended December 31, 2014 and its Quarterly Report on Form 10-Qfor the quarter ended March 31, 2015, respectively, the Company was not in compliance with Nasdaq Listing Rule 5250(c)(1).

The Nasdaq notification letters do not result in the immediate delisting of the Company's common stock, and the stock has continued to trade under its current trading symbol. If the Plan of Compliance is approved by the Nasdaq staff, the Company may be eligible for a listing exception of up to 180 calendar days from the original notice of non-compliance, or until October 12, 2015, to regain compliance. If the Nasdaq staff concludes that the Company will not be able to cure the deficiency, the Company's common stock will be subject to delisting by Nasdaq.

Skystar intends to regain compliance and report full year fiscal 2014 results and first quarter fiscal 2015 results as soon as practicable.

XI'AN, CHINA--(Marketwired - May 22, 2015) -  Skystar Bio-Pharmaceutical Company (NASDAQ: SKBI), a China-based manufacturer and distributor of veterinary medicine, vaccines, micro-organisms and feed additives, announced today that the Company received a notification from the Nasdaq Stock Market ("Nasdaq") informing the Company that since it had not filed its Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2015, the Company was not in compliance with Nasdaq Listing Rule 5250(c)(1). 

The Company must submit a plan of compliance with the foregoing listing deficiency by no later than June 15, 2015 (the "Plan of Compliance Deadline"). If its plan is approved by the Nasdaq staff, the Company may be eligible for a listing exception of up to 180 calendar days or until October 12, 2015 to regain compliance. If the Nasdaq staff concludes that the Company will not be able to cure the deficiency, or if the Company determines not to submit the required materials or make the required representations, the Company's common stock will be subject to delisting by Nasdaq.

XI'AN, CHINA--(Marketwired - Apr 15, 2015) - Skystar Bio-Pharmaceutical Company (NASDAQ: SKBI), a China-based manufacturer and distributor of veterinary medicine, vaccines, micro-organisms and feed additives, announced today that the Company received a notification from the Nasdaq Stock Market ("Nasdaq") informing the Company that since it had not filed its Annual Report on Form 10-K for the fiscal year ended December 31, 2014, the Company was not in compliance with Nasdaq Listing Rule 5250(c)(1). The Nasdaq notification letter does not result in the immediate delisting of the Company's common stock, and the stock will continue to trade uninterrupted under its current trading symbol.

The Company must submit a plan of compliance with the foregoing listing deficiency by no later than June 15, 2015 (the "Plan of Compliance Deadline"). If its plan is approved by the Nasdaq staff, the Company may be eligible for a listing exception of up to 180 calendar days or until October 12, 2015 to regain compliance. If the Nasdaq staff concludes that the Company will not be able to cure the deficiency, or if the Company determines not to submit the required materials or make the required representations, the Company's common stock will be subject to delisting by Nasdaq.

The Company expects the completion of the 2014 audit and filing of the 2014 Annual Report by the end of May 2015, but in no event later than the Plan of Compliance Deadline.

• Revenues of $18.4 million as compared to revenues of $16.0 million for the three months ended September 30, 2013, an increase of $2.4 million or 14.8%.
• Net income of $4.9 million or $0.57 per fully diluted share, compared with net income of $3.7 million or $0.49 per fully diluted share in the year ago period

Mr. Weibing Lu, Skystar Bio-Pharmaceutical's Chairman and Chief Executive Officer, commented, "Skystar continues to deliver strong quarterly performance while proceeding with operational changes that strengthen the Company's position in the long term. Currently, Skystar is in mid-transition to large scale manufacturing of the Company's animal vaccine and medicine products at one of Skystar's modern GMP production facilities. The transition to modern manufacturing is happening in lock step with production permit application and licensing with China's Ministry of Agriculture as a procedural requirement for GMP certified manufacturers. Skystar's long term goals are to improve key performance metrics including top line growth, blended gross margins and historical bottom line profitability. Skystar believes it is uniquely positioned to participate in the industrialization, standardization and modernization of China's evolving animal husbandry space.

"Skystar's successful efforts to GMP certify its animal vaccine and medicine facilities based in Huxian and Jingzhou under the Ministry of Agriculture's (MOA) stricter regulatory oversight of food and drug manufacturers paves way for a new wave of the Company's growth. This step change was part of China's movement to better regulate food and drug manufacturers by enforcing higher safety and manufacturing standards as outlined in China's 2011-2015 'Twelfth Five Year Plan.' As one of the leading operators in China's animal biopharmaceutical manufacturing space, we believe the stricter regulations have improved Skystar's positioning over the coming quarters as more products are added to the manufacturing line. Skystar also moves forward with its business strategy continuing to onboard more distribution agents and direct customers, increasing revenues generated throughout Skystar's extensive sales network across the 29 farming provinces in China.

"Operationally, we continue making adjustments in order to maximize sales, taking advantage of current production capabilities with each subsequent product launch. We also continue to shift resources, redirecting sales and marketing efforts and creating awareness and demand for both existing products and new products while adjusting marketing strategy such as the bundling of products to customers.

"In terms of Skystar's production facilities, as of this reporting period we have stopped producing our vaccine line by hand and have moved vaccine production to our new and modern GMP vaccine facility in Huxian. We consider the upgraded Huxian vaccine facility to be officially launched now that we are in receipt of three vaccine production permits from the MOA. As of current there are also 5 vaccine production permits in application with the MOA. Additionally, we have already been granted 100 permits to manufacture individual veterinary medications whose production has transitioned to our large scale process automated manufacturing facility. Additionally, Skystar has an additional 56 veterinary medication production permits under review with the MOA. 

"Skystar's Kunshan probiotics production facility continues to make good progress in its build out and we are pleased to announce the purchase and installation of equipment there. Equipping the Kunshan probiotics facility is expected to be completed in 2015. Meanwhile, Skystar's probiotics and animal feed production lines at the Company's Sanqiao plant continue to deliver solid output and sales, helping to boost revenues at the group level.

"As we move into the last reporting quarter of fiscal 2014, it is imperative that we continue our operational strategy, such as the shifting of resources towards the sale, marketing and distribution of our high growth, high margin veterinary medications line which is now being manufactured in large scale process automated batches. In line with our operating protocols, as production from Skystar's vaccine line scales up we will review and adjust our sales and marketing strategies to ensure the successful re-launch of one of our most promising product lines. 

"The operational changes that are happening now will continue to transform Skystar, allowing us to maintain a leading position in China's animal bio-pharmaceutical space. Skystar to date, continues to be historically profitable, raising the bar with solid quarterly revenue growth and expect to continue this growth trajectory in the upcoming quarters," concluded Mr. Lu.

Fiscal 2014 Guidance: We currently reiterate our fiscal 2014 guidance to be in the range of $46 million to $50 million for the full year.

XI'AN, CHINA--(Marketwired - Aug 26, 2014) - Skystar Bio-Pharmaceutical Company (NASDAQ:SKBI), a China-based manufacturer and distributor of veterinary medicine, vaccines, micro-organisms and feed additives, announced preparations to launch a new probiotic product for dairy cows by the end of fiscal 2014. The dairy cow probiotic is developed for the milk production industry in China and is designed to introduce Bacillus Subtilis (B. subtilis), also known as "Hay Bacillus," into the digestive tract of milk producing cows. Hay Bacillus has been proven to aid in the digestion and breakdown of hay in the animals' rumen canal. 

Mr. Weibing Lu, Chairman and CEO of Skystar, commented, "Skystar's dairy cow probiotic is expected to launch at the end of the fiscal year and is a welcome addition to Skystar's Western medicine-based line of animal husbandry products. Currently, the demand for milk outpaces domestic supply in China and as a result consumers are buying imported dairy products such as powdered milk to meet the shortfall. We believe that Skystar's new probiotic will help improve both production and quality. This new probiotic will help increase production for China's dairy producers. We expect to see revenue contribution by the first half of fiscal 2015 and full production goals by 2017."

According to internal research, market demand in China for B. subtilis is 150,000 tons per year with a total market value of USD$1.5 billion. It's Skystar's belief that full production is expected to be realized by the end of fiscal 2017. Total potential revenue from this line is expected to be in the range of USD$4.5 million to $6.5 million."

B. subtilis natto is produced from soybeans fermented with B. subtilis. There have been a number of major dairy experiments with good results. The conclusions have included improved milk production and milk components yield, decreased somatic cell count (a metric for milk quality) increase of total ruminal bacteria and increase of proteolytic and mylolytic bacteria.

• Revenue increase 25.6% YoY to $14.2 million as follows:
• Net Income of $2.8 million or $0.37 per fully diluted share, as compared with $3.8 million or $0.49 fully diluted share YoY

Management's Comments
Mr. Weibing Lu, Chairman and Chief Executive Officer of Skystar, commented, "Skystar is pleased to report strong financial results and our operational highlights for the second quarter. Revenues were driven by our veterinary medications line, up 37% year over year, whose average selling price increased 60% due to increased sales in premium priced products. Additionally, Skystar added 48 production permits to its medications line since the year ago period. Demand for Skystar's veterinary medications product line remains promising and continues to grow as we ramp our production line to full capacity now that Skystar has received GMP approval for the Huxian plant and production permits in application are being received on an ongoing basis. As of current, we have production permits for 97 products, including our strongest seller, praziquantel in our veterinary medication category and 50 in the application process. We also have production permits for 5 vaccines in application. Production permits in application for our vaccine line are expected to be received on an ongoing basis as well." 

Mr. Lu continued, "Additionally, Skystar ceased manufacturing its veterinary vaccine line manually within a small lab environment and transitioned production to the modern GMP certified plant in Huxian capable of large scale batch production. For this reason our revenues from our vaccine line decreased; however, Skystar was able to offset this drop in revenues through sales across its other product lines. The transition of our vaccine line to a modernized facility is a crucial step in executing our core mission to grow Skystar's organic business profitably. The need to modernize and standardize our manufacturing processes in accordance with the Ministry of Agriculture's strict GMP standards, ensures that Skystar remains competitively positioned to assist in China's campaign for improving the safety, health and quality standards of its food supply.

"The ability to adapt to the Ministry of Agriculture's regulatory changes and thrive positions Skystar well as a leader in the animal husbandry space in China allowing for predictable rates of future growth. In moving forward with the Company's growth initiatives, we continue to build infrastructure and make improvements to our other production lines including probiotic and feed additive which ultimately provide a complete suite of animal healthcare products that can be sold and marketed across our proprietary franchised based sales channel, and distribution network that spans all 29 farming provinces in China."

Business Outlook
Skystar currently maintains business outlook and anticipates delivering an 8% to 18% year over year increase in top line revenue for fiscal 2014 as compared to the prior year. The expected revenue range is $46 million to $50 million with gross margin of roughly 50% for fiscal 2014.

XI'AN, CHINA--(Marketwired - Jul 16, 2014) - Skystar Bio-Pharmaceutical Company (NASDAQ: SKBI), a China-based manufacturer and distributor of veterinary medicine, vaccines, micro-organisms and feed additives, today announces that it has entered into a definitive agreement with a dedicated healthcare institutional investor to purchase an aggregate of $5,000,000 of registered securities of the Company in a registered direct offering. Pursuant to the terms of the agreement, the investor shall purchase from the Company 790,514 shares of common stock and warrants to purchase up to 197,629 shares of common stock for an aggregate purchase price of $4,000,000 and 1,000 shares of convertible preferred stock and warrants to purchase up to 49,407 shares of common stock for an aggregate purchase price of $1,000,000.

The shares of common stock have a purchase price of $5.06 per share. The convertible preferred stock has an aggregate stated value of $1,000,000 and a conversion price of $5.06 and carries no dividend rights. The investor shall receive warrants to purchase up to an aggregate of 247,036 shares of common stock with an exercise price of $6.25 per share, which warrants will be exercisable six months following issuance and will expire twelve months from the initial exercise date.

The Company shall use a portion of the proceeds of the offering for acquisitions, licenses of new vaccine and aquaculture products, research & development and other general corporate purposes.

The closing of the offering is expected to take place on or about July 21, 2014, subject to the satisfaction of customary closing conditions.

XI'AN, CHINA--(Marketwired - Jul 8, 2014) - Skystar Bio-Pharmaceutical Company (NASDAQ: SKBI), a China-based manufacturer and distributor of veterinary medicine, vaccines, micro-organisms and feed additives, today announced the launch of a new product in China -- bovine immunoglobulin G (IgG) kits targeting China's domestic pig farming communities. This product helps to prevent and treat blue ear disease, respiratory pneumonia, pseudorabies, swine fever and foot and mouth disease which are common diseases affecting pig in the farming industry.

Skystar's Chairman and CEO, Mr. Weibing Lu, commented, "Skystar is pleased to launch its new bovine IgG kits in China. Having performed market research with our customers, we anticipate that, the bovine IgG kits, represent an approximate $1.5 million annual revenue opportunity for Skystar, upon full production. The bovine IgG kits will target and will be marketed to both small and medium scale pig farms in China. Following our assessment of the needs of our customers in the farming industry in China, we designed kits that were intended to address the need for a product that treats the most common diseases encountered in pig farming. Skystar will continue to meet the challenge of developing its product lines for the changing needs of China's animal husbandry industry which continually move forward with modern industrialization and standardization of animal husbandry practices. The Company believes that China's regulatory environment encouraging new standards of food safety, will support and create opportunities for its overall growth in the near to medium term."

Skystar's bovine immunoglobulin G (IgG) kits are comprised of a proprietary formula of vitamin supplements including B1, B2, B6, and niacin in combination with ATP, immune boosting antigen specific transfer factor molecules and five different immunoglobulin (IgG) G antibodies for the prevention and treatment of commonly occurring diseases found in pig farming, including blue ear disease, respiratory pneumonia, pseudorabies, swine fever and foot and mouth disease.

First Quarter 2014 Financial Results:

• Revenue increase 23.5% YoY to $6.8 million, as compared with $5.5 million in the same quarter last year.
• Adjusted Net Income per share is $0.12, as compared with $0.10 year over year.

Mr. Weibing Lu, Chairman and Chief Executive Officer of Skystar, commented, "Skystar is pleased with unaudited first quarter results seeing increases in both year over year top and bottom line profitability. Skystar's revenue growth was driven by Veterinary medicine which grew 40% year over year with solid contributions coming from Skystar's other segments. The increased utilization rates for Skystar's veterinary medication production facility were realized following the receipt of more product permits from the Ministry of Agriculture. Skystar's YoY gross margin compression from 47% to 41% for the current reporting quarter was anticipated due to increased production coming from the lower margin veterinary medications line for which the Company recently received some product permits, and increased manufacturing overhead as we successfully completed our Huxian vaccine plant construction. We expect for manufacturing to continue to scale up throughout the year in preparation for the majority of Skystar's sales coming after the first quarter coinciding with China's celebration of the Lunar New Year holiday. Skystar expects a steady growth trajectory once all of its manufacturing plants can be completed and brought to full utilization rates," concluded Mr. Lu.

Mr. Lu concluded, "Skystar has reported a strong start to the fiscal 2014 reporting cycle. The Company believes that it has built a strong framework as the only U.S. listed animal pharmaceutical play in China. The completed and newly GMP certified manufacturing facility in Huxian gives Skystar the ability to produce veterinary medicines and vaccines utilizing modern batch processes, increasing production efficiencies and volume of product produced. More importantly, the Company has been able to launch and expand infrastructure within the tougher regulatory framework of China's new requirements for GMP production facilities. These modern manufacturing standards and rules help to ensure the safety of China's food supply as agriculture and animal husbandry standards in China move towards modern standards and industrialization," concluded Mr. Lu.

Business Outlook

Skystar currently maintains business outlook and anticipates delivering an 8% to 18% year over year increase in top line revenue for fiscal 2014 as compared to the prior year. The expected revenue range is $46 million to $50 million with gross margin of roughly 50% for fiscal 2014.

XI'AN, CHINA--(Marketwired - Apr 17, 2014) - Skystar Bio-Pharmaceutical Company (NASDAQ: SKBI) ("Skystar" or the "Company"), a China-based manufacturer and distributor of veterinary medicines, vaccines, micro-organisms and feed additives, announced the following updates to its patent portfolio:

• China's State Intellectual Property Office (SIPO) granted the Company patents in application status for two new products
• Additional two patents have application pending and review status with SIPO
• Patent for one product in development expired, but the Company retains know-how and exclusive rights to sell and market the product through 2020

Skystar previously submitted patent applications for Live Trivalent Attenuated Coccidiosis for poultry, and Multi-Immune Transfer Factor (an immunity boosting supplement) have been accepted by China's State Intellectual Property Office (SIPO). SIPO has issued to Skystar patent numbers 2013103474397 and 2013102595286, respectively, in connection with these applications. These two patents in application can be found on SIPO's website (http://publicquery.sipo.gov.cn/index.jsp). The first patent is a live Trivalent Attenuated Coccidiosis Vaccine which is to be used as a one-time inoculation of baby chickens using an active vaccine (a weakened form of live coccidia). Coccidia, a very common parasitic protozoan, can kill chickens and, left unchecked, can threaten an entire poultry farm. The active vaccine is delivered via three different strains of Eimeria (Tenella, Maxima and Acerviluna) and allows an animal to develop immunity within 10-14 days of being inoculated. The vaccine can be delivered via various means, including mixing with chicken feed or drinking water, or spraying the poultry farm. The product is expected to be a one-time dosage that provides lifelong immunity against coccidiosis. Also, the patented vaccine does not produce resistant strains of coccidiosis and is shown to be able to eradicate coccidiosis throughout poultry farms. The second patent is a Multi-Immune Transfer Factor supplement. This supplement acts as an immunity booster. It is a small molecule that enables the transfer of information from one cell to another providing immunity boosting agents such as increased white blood cell count in animals. The goal of the transfer factor supplement is to provide farmers with a natural means of improving an animal's health without any negative side effects. 

Skystar is currently waiting for the SIPO office to issue the Company physical patent certificates for the two products. In addition, Skystar has applied to China's SIPO and was issued two additional patent application numbers 2014100550285 and 2014100559364, pending completion of the SIPO patent application review.

Finally, the Company's previously purchased exclusive patented aquaculture vaccine technology from China's Fourth Military Medical University ("FMMU") expired in December 2011. Under the FMMU collaborative research and development agreement the Company was granted Company exclusive rights to sell and market the aquaculture vaccine through 2020, the Company retains know-how for the production line for the vaccine. In collaboration with FMMU, Skystar is in a position to produce the first vaccine in China designed to prevent and treat certain bacterial infection and diseases in marine life without causing harmful side effects. Based on its first-to-market status, China's Ministry of Agriculture has issued a Grade I Veterinary Certificate for this vaccine.

Commenting on these developments, Mr. Weibing Lu, Chairman and CEO of the Company, said, "We are pleased to have received patent protection from China's SIPO for these two products. It is Skystar's goal to continue to introduce commonly applied Western methodologies, medicines and supplements to the animal husbandry ecosystem within China. In turn, the Company hopes to be part of the change in China directed at protecting the nation's food source by standardizing and modernizing the ways in which the animal husbandry industry operates."

SKYSTAR BIO-PHARMACEUTICAL COMPANY

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Amounts in U.S. Dollars, except share and amounts)

Management Discussion and Analysis

Results of Operations – Comparison of Two Years Ended December 31, 2013 and 2012

Revenues  

All of our revenues are derived from the sale of veterinary healthcare and medical care products in the PRC.  For the year ended December 31, 2013, we had revenues of $42,483,716 as compared to revenues of $33,586,791 for the year ended December 31, 2012, an increase of $8,896,925 or 26.5% primarily due to our resumed production at the Huxian veterinary medication plant after we successfully completed the mandated GMP re-certification in October 2012.  We generate revenue from sales of four product lines: veterinary medications, micro-organism, feed additives, and vaccines.  The selling prices of our products decreased about 1.9% on average in the year ended December 31, 2013 compared to 2012. The increase in revenue was primarily due to the increase of sales volume.

Employment Agreement with Bing Mei, CFO

On March 10, 2014, the Board also ratified and approved the renewal of the Company’s employment agreement with its Chief Financial Officer, Bing Mei, for another twelve month period, commencing as of July 29, 2013 on the same terms and provisions as previously disclosed in the Company’s public filings (the “Mei Employment Agreement”). For his services, the Company will compensate Mr. Mei with a base salary of $200,000 for a term of twelve months of his employment and with a total 8,000 shares of common stock of the Company under the Company’s under its equity compensation plan, in four equal quarterly installments. Similarly to the Weibing Lu Employment Agreement, during its term, the Mei Employment Agreement terminates upon Mr. Mei’s death, disability or for cause and contains similar restrictive covenants of confidentiality, non-competition and others. While employed as the registrant’s CFO, Mr. Mei may continue to devote his business time to operating Bing Mei, CPA. The Mei Employment Agreement also contains other covenants and provisions customary for agreements of this nature.

Form S-3

This prospectus is part of a registration statement that we filed with the Securities and Exchange Commission (SEC) using a “shelf” registration process. Under this shelf registration process, we may offer from time to time, in one or more offerings, securities having an aggregate initial offering price of up to $35,000,000. Each time we offer securities, we will provide you with a prospectus supplement that describes the specific amounts, prices and terms of the securities we offer. The prospectus supplement also may add, update or change information contained in this prospectus.

Third Quarter 2013 Financial Results

• Revenues increase 79% YoY to $16.0 million
• Net income of $3.7 million or $0.49 per fully diluted share, compared with net income of $2.7 million or $0.36 per fully diluted share in the year ago period

Management Comments
Mr. Weibing Lu, Skystar Bio-Pharmaceutical's Chairman and Chief Executive Officer, commented, "Skystar delivered strong top line and bottom line performance for the period as a result of Skystar's operational strategy. Adjustments to operations include redirecting sales and marketing efforts to create awareness and demand for newly available products as manufacturing capabilities come online. Additionally, since completing the approval process and obtaining production permits for Skystar's veterinary medication lines earlier in 2013, the MOA has granted roughly 45% of Skystar's submitted permits to manufacture individual veterinary medications. Skystar is also making significant progress in completing the complex two stage GMP inspection process that the Ministry of Agriculture (MOA) requires for to operate the Company's newly completed and modern Vaccine manufacturing facility."

"With this in mind, Skystar's current results reflect a significant ramp up of production and sales of its veterinary medications line since earning GMP approval for its production facilities in Huxian and Jingzhou, China. In order to ensure a successful re-launch of Skystar's high growth veterinary medication business, sales resources have been shifted away from probiotics, feed additives and vaccines and onto medications. This operational strategy has played an important role in Skystar's strong veterinary medication sales as revenues from this product line increased a dramatic 452% year over year through Skystar's seasonally strongest quarter. Currently, both veterinary medication manufacturing facilities are operating at near or above 50% capacity."

"With regard to Skystar's veterinary vaccine line, as explained in the Company's Quarterly Report on Form 10-Q, China's Ministry of Agriculture is currently in the process of completing Stage 2 of the GMP inspection of the newly built veterinary vaccine manufacturing facility in Huxian, China. The Company expects Stage 2 of the GMP inspection to be completed by the fourth quarter of 2013. The GMP certification process will be completed shortly thereafter. The newly built and largely automated vaccine manufacturing facility will allow the Company to mass produce vaccines without sacrificing quality control."

"Moving forward into fiscal 2014, the operational changes occurring over the next several quarters are expected to increase Skystar's ability to generate revenues and profits. As more manufacturing capabilities come online, the Company will initiate the appropriate sales and marketing efforts to support its growing number of products and production base."

"It has always been management's mission to grow revenues without sacrificing profitability. Since Skystar's listing on NASDAQ, the Company has been historically profitable to date and plans to continue that mission in the quarters ahead," concluded Mr. Lu.

Fiscal 2013 Guidance
We currently reiterate our fiscal 2013 guidance to be in the range of $40 million to $45 million for the full year.

Second Quarter 2013 Results

• Skystar reported second quarter fiscal year 2013 revenues of $11.3 million as compared to revenues of $8.9 million for the comparable year ago period, an increase of $2.4 million or 27.8%.
• Net income increased 120.8% year over year to $3.8 million or $0.49 per fully diluted share, as compared to $1.7 million or $0.23 per fully diluted share in the year ago period.

Management Comments
Mr. Weibing Lu, Skystar Bio-Pharmaceutical's Chairman and Chief Executive Officer, commented, "Skystar is pleased to report its strongest quarterly results in the last six reporting periods. The results for this quarter were driven by a combination of increased market demand and additional sales and marketing efforts. This allowed us to take advantage of the increased manufacturing capacity as a result of the Huxian and Jingzhou veterinary medication facilities resuming operations."

"Operationally, Skystar continues to receive more product manufacturing permits from the government which has allowed sales of veterinary medications in the current reporting period to grow 156% year over year. Further, we still have additional manufacturing capacity available at the Company's Huxian and Jingzhou veterinary medication facilities. Lastly, Skystar has applied for and is awaiting governmental approval of more product manufacturing permits and plans to utilize each permit as approval is received."

"Stage two of the Company's veterinary vaccine GMP certification is under way and currently on track as planned. Stage two GMP inspection is expected to be completed by the end of third quarter fiscal 2013 and limited production runs will commence shortly thereafter. The vaccine product line is expected to contribute roughly $3-$5 million to Skystar's top line next year. Sales of the Company's feed additives and pro-biotics line are also expected to increase as we move forward with the Company's high selling season. Additionally, Skystar's Kunshan facility is near completion and it is possible that small scale production will launch by the end of the fiscal year."

"Management is very excited to move into its strongest half of the fiscal year and to share its results with investors. Skystar continues to successfully implement its operational strategy, improve its financial performance and expand its footprint with profitability in mind. With 40% of Skystar's forecasted revenues earned in its first half, the Company believes that it is well positioned to make forecasted fiscal guidance for 2013, positioning itself for solid revenue growth and expansion in fiscal 2014," concluded Mr. Lu.

Fiscal 2013 Guidance

We currently reiterate our fiscal 2013 guidance to be in the range of $40 million to $45 million for the full year.

First Quarter 2013 Financial Results;

• Revenue decrease 30% YoY to $5.5 million as follows:
• Gross Profit of $2.6 million decreased 39% for the first three months of fiscal 2013 YoY
• Gross Margin of 47% for the first three months of fiscal 2013, compared to 54% in the prior 2012 period
• Net Income $0.7 million or $0.09 per fully diluted share, as compared with $1.9 million or $0.26 per fully diluted share YoY
• Company reiterates Fiscal 2013 revenue guidance range of $40 million to $45 million

Management's Comments
Mr. Weibing Lu, Chairman and Chief Executive Officer of Skystar, commented, "The Company has achieved significant milestones in preparing two of its manufacturing facilities to become fully operational. The first facility based in Huxian is expected to launch animal vaccine production once the Ministry of Agriculture concludes its stage two GMP certification process in the third quarter of fiscal year 2013. The second manufacturing facility in Kunshan, which will manufacture probiotics is currently being renovated. Probiotics production at this facility is expected to begin in the fourth quarter of the fiscal year.

"The first calendar quarter is normally the slowest for Skystar's product sales mainly due to the celebrating of China's Lunar calendar holidays in that period. Sales of Skystar's range of products in the current first quarter have slowed beyond seasonal levels however; this has been due to a variety of factors including the widely publicized Swine Flu and Avian Flu outbreak in China. In addition, while Skystar currently possesses over half of the required production permits following GMP certification, the Company is still awaiting approval for the remainder of such permits in order to make full use of the newly GMP certified Huxian facility. As of current, Skystar's remaining production permit applications are in various stages of the approval process.

"While the Government has effectively contained the Swine and Avian Flu outbreaks, subsidies are already being distributed to farmers in order to boost China's animal husbandry industry. These subsidies will assist farmers in the replacement and rearing of animals lost during the containment of the respective Swine and Avian Flu outbreaks. In timing the needs of its customers, Skystar anticipates that normal demand for its products is expected to come back later in the year as public fear over protein consumption in China diminishes and dissipates. By that time, Skystar expects to have the regulatory approvals and manufacturing capability for increasing production capacity of its products. The Company has already received several product production permits associated with the Huxian animal medication facility and expects more to be approved by the Ministry of Agriculture in the near future. The Kunshan probiotics plant is also scheduled to come online later in the year and will provide additional incremental revenue. Skystar expects fiscal 2014 to be the first normalized fiscal year for Skystar since 2011 when the Company generated record revenues and had full production capacity of its existing facilities," concluded Mr. Lu.

XI'AN, CHINA--(Marketwire - Nov 5, 2012) -  Skystar Bio-Pharmaceutical Company (NASDAQ: SKBI) ("Skystar" or the "Company"), a China-based manufacturer and distributor of veterinary medicines, vaccines, micro-organisms and feed additives, today announced that its primary production facility for veterinary medicines in Huxian, China has resumed production and distribution in October 2012. Production was allowed to resume at the 45,000 square foot veterinary medicine facility following Good Manufacturing Process "GMP" recertification by the Ministry of Agriculture and physical receipt of a GMP certificate. The veterinary medication line contributes significant annual revenue, accounting for roughly two-thirds of Skystar's fiscal 2011 sales. Skystar's two veterinary medicine facilities in Jingzhou and Huxian province have now resumed production and possess GMP certificates valid for 5 years.

Mr. Lu, Chairman and CEO, commented, "We are pleased to resume production of the Company's veterinary medication lines at both our Huxian and Jingzhou plant which was recently GMP recertified. As a leading provider of veterinary medicines in China, the Company looks forward to resuming support and providing products for the animal husbandry needs of its customer base. China's market for veterinary medicines continues to grow as the industry moves towards national production standards for livestock, poultry and aquaculture. In line with this trend, the Company's production facilities will be core to its mission of expanding the Company's footprint distribution, customer base and sales of its products. We look forward to providing an operational update and outlook to shareholders for all of our production lines when the Company reports its full fiscal year."

Effective as of June 29, 2012, Crowe Horwath LLP resigned as independent auditors of Skystar Bio-Pharmaceutical Company (the “Company”).

The reports of Crowe Horwath LLP on the registrant’s financial statements as of December 31, 2011 and 2010 and for the years ended December 31, 2011 and 2010 did not contain an adverse opinion or a disclaimer of opinion, and were not qualified or modified as to uncertainty, audit scope, or accounting principles. In connection with the audits of the registrant’s financial statements for the fiscal periods ended December 31, 2011 and 2010, and through June 29, 2012, there were: (i) no disagreements between the registrant and Crowe Horwath LLP on any matters of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreements, if not resolved to the satisfaction of Crowe Horwath LLP, would have caused Crowe Horwath LLP to make reference to the subject matter of the disagreement in its reports on the registrant’s financial statements for such periods, and (ii) no reportable events within the meaning set forth in Item 304(a)(1)(v) of Regulation S-K.

Item 4.01    Change in Registrant’s Certifying Accountant

Effective as of June 29, 2012, Crowe Horwath LLP resigned as independent auditors of Skystar Bio-Pharmaceutical Company (the “Company”).

The reports of Crowe Horwath LLP on the registrant’s financial statements as of December 31, 2011 and 2010 and for the years ended December 31, 2011 and 2010 did not contain an adverse opinion or a disclaimer of opinion, and were not qualified or modified as to uncertainty, audit scope, or accounting principles. In connection with the audits of the registrant’s financial statements for the fiscal periods ended December 31, 2011 and 2010, and through June 29, 2012, there were: (i) no disagreements between the registrant and Crowe Horwath LLP on any matters of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreements, if not resolved to the satisfaction of Crowe Horwath LLP, would have caused Crowe Horwath LLP to make reference to the subject matter of the disagreement in its reports on the registrant’s financial statements for such periods, and (ii) no reportable events within the meaning set forth in Item 304(a)(1)(v) of Regulation S-K.

The registrant provided Crowe Horwath LLP a copy of the disclosures contained herein and requested that Crowe Horwath LLP furnish it with a letter addressed to the Securities and Exchange Commission stating whether or not Crowe Horwath LLP agrees with its statements in this Item 4.01. A copy of the letter dated July 6, 2012, furnished by Crowe Horwath LLP in response to such request, is filed as Exhibit 16 to this Form 8-K.

On June 29, 2012, the Audit Committee of the Board of Directors of the Company engaged Crowe Horwath (HK) CPA Limited (“Crowe HK”) as the Company’s independent registered accounting firm.

During its two most recent fiscal years ended December 31, 2011 and 2010, and the subsequent interim period through the engagement of Crowe HK on June 29, 2012, the registrant did not consult with Crowe HK on (i) the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on the registrant’s financial statements, and Crowe HK did not provide either a written report or oral advice to the registrant that was an important factor considered by the registrant in reaching a decision as to any accounting, auditing, or financial reporting issue; or (ii) the subject of any disagreement, as defined in Item 304 (a)(1)(iv) of Regulation S-K and the related instructions, or a reportable event within the meaning set forth in Item 304(a)(1)(v) of Regulation S-K.

Full Year 2011 Results

• Revenues totaled $52.8 million, up 11% YoY
  • Veterinary vaccines totaled $2.3 million, up 17% YoY
  • Veterinary medicines totaled $33.8 million, up 5% YoY
  • Feed additives totaled $2.6 million, up 31% YoY
  • Micro-organism products totaled $14.1 million, up 23% YoY
• Gross profit margin was 50% a decrease of 4% YoY
• Net income decreased 3% year over year to $13.7 million or $1.90 per fully diluted share, as compared to $14.0 million or $1.97 per fully diluted share during the year ended December 31, 2010
• Improved cash balance to $7.0 million at the end of fiscal 2011

Mr. Weibing Lu, Skystar Bio-Pharmaceutical's chairman and chief executive officer, commented, "We are pleased to present Skystar's full year financial results. The Company was able to grow top line revenue while maintaining bottom line profitability in the midst of China's changing economic climate and shifting economic policies.

"From 2008 through 2010, China's economic policy had been geared towards insulating itself from the worst of the global recession. By March of 2011, China's 12^th Five Year Plan was enacted by the National People's Congress and economic policies were shifted in an effort to systematically reign in growth, stem inflation and drive China's economy via consumer consumption.

"All of these events have impacted Skystar's business, in particular, rising inflation, however Skystar firmly believes that throughout the fiscal year it has made all the necessary adjustments to move forward and execute its operating strategy with continued profitability in mind. China's 12^th Five Year Plan includes language that emphasizes the further development and support of the agriculture industry; ramping up of dairy consumption; increased livestock production and the standardization of animal husbandry practices in order to bring consumers a safer product, all of which directly relates to Skystar's business and operations. Skystar has anticipated much of these policies in developing its own road map for growth. The Company has invested heavily, roughly $2.8 million in 2011, on R&D projects in addition to our facilities expansion initiatives. In addition to developing an aquaculture product line, Skystar's R&D projects address our market research as we are developing solutions for the bovine, swine and dairy industries that we believe are immediately appealing to our customers. Above all else, Skystar has been able to drive this expansion and development via cash flow measures that are non-dilutive to shareholders.

"In implementing our 2011 operational strategy, Skystar increased its customer base 42% year over year across all 29 farming regions in China. The Company ended the year with 3,846 customers consisting of independent distributors, franchise distributors and direct customers. Skystar launched 13 new veterinary medications and 6 new feed additives. The Company now has 287 products in its lineup. Skystar remains committed to delivering premium products at reasonable prices supported by in depth customer service to our customers," the Chairman concluded.

Business Outlook
Presently, Skystar anticipates delivering top line revenue in the range of $53 million to $57 million with gross margins of roughly 50% for 2012. This is a conservative view that does not take into consideration the introduction of revenues from our new facilities to come online, although we do expect that there should be some partial revenue recognition to come from the new vaccine facility. Additionally once our facility's GMP certificate is renewed we expect to be able to have full production capacity once again.

XI'AN, CHINA--(Marketwire - Mar 27, 2012) - Skystar Bio-Pharmaceutical Company (NASDAQ: SKBI) ("Skystar" or the "Company"), a China-based manufacturer and distributor of veterinary medicines, vaccines, micro-organisms and feed additives, today announced that on March 26, 2012 it received a letter from the NASDAQ Listing Qualifications Panel ("the Panel") informing the Company that the Panel has determined to grant the request of Skystar to remain listed on The NASDAQ Stock Market ("NASDAQ"), subject to the condition that by April 28, 2012, Skystar provides evidence that it has held its 2011 annual shareholder meeting. In the event the Company is unable to hold such meeting or hold the meeting within the said timeframe, its securities may be delisted from NASDAQ, in which event the Company would seek to cause them be quoted in over the counter markets, which may result in a substantially less liquid market for the securities.

As previously disclosed, the Panel's decision follows a hearing held on March 1, 2012 at which time the Panel was presented with the Company's plan to regain compliance with NASDAQ's Listing Rule 5620(a) and (b) relating to the time frame of and proxy solicitation in connection with annual shareholder meetings.

XI'AN, CHINA--(Marketwire - Jan 20, 2012) - Skystar Bio-Pharmaceutical Company (NASDAQ: SKBI) ("Skystar" or the "Company"), a China-based manufacturer and distributor of veterinary medicines, vaccines, micro-organisms and feed additives, today announced that it has been notified by the Nasdaq Listing Qualifications staff that its request for an oral hearing to appeal the staff's delisting determination has been granted and the staff set a hearing date for such oral hearing before the Panel, at which hearing Skystar will present to the Panel its plan and timeline to regain compliance with Nasdaq listing standards. Accordingly, the staff's delisting action has been stayed, pending a final written decision by the Nasdaq Hearings Panel. The hearing will be held on Thursday, March 1, 2012.

There can be no assurance that the Panel will grant the Company's request for continued listing. If the Panel does not grant the relief sought by the Company, its securities will be delisted from the Exchange in which event the Company would seek to cause them be quoted in over the counter markets, which may result in a substantially less liquid market for the securities.

Second Quarter 2011 Highlights

• Revenue increases 10% YoY to $9.1 million
  • Veterinary vaccines totaled $0.4 million, up 1.2% YoY
  • Veterinary medicines totaled $6.3 million, up 15% YoY
  • Feed additives totaled $0.4 million, up 6% YoY
  • Micro-organism products totaled $2.0 million, flat YoY
• Gross margin of 49% for the second quarter of fiscal 2011 as compared to 53% in the year ago period
• Net income of $1.5 million or $0.21 per fully diluted share, compared with net income of $2.4 million or $0.33 per fully diluted share in the year ago period
• 6% increase in the number of distribution agents and direct customers from 1,026 in Q1 to 2,253 in Q2

GeoTeam® Note: Second Quarter 2011 vs. 2010 Adjusted EPS wsa $0.15 vs. $0.31

First Half 2011 Financial Highlights

• First half fiscal 2011 revenue increases 23% YoY to $16.2 million
• Gross margin of 50% for the first half of fiscal 2011 as compared to 53% in the year ago period
• Net income of $3.4 million or $0.48 per fully diluted share, compared with net income of $3.5 million or $0.49 per fully diluted share in the year ago period

Management Comments
Mr. Weibing Lu, Skystar Bio-Pharmaceutical's chairman and chief executive officer, commented, "Skystar is pleased with its second quarter performance in light of adverse market conditions. The Company has successfully funded product development internally and expanded its distribution footprint while still achieving revenue growth for the quarter as compared to the same period a year ago.

"The increase in research and development costs is necessary to remain competitive as the Company believes that it can no longer rely on making significant pre-payments for raw materials to protect its gross margins in the long term. We maintain a long term strategy for achieving sustained growth and profitability by periodically developing new high gross margin products according to demand and expanding manufacturing capability and distribution. In order to preserve market share and expand into new territories, we have not raised our sales prices as we believe our customers would not be able to absorb pricing increases in this environment and such an increase would erode our market share.

"During the second quarter, we made significant investments in R&D, staging initiatives to develop four new specialty high margin veterinary medication projects. We also successfully launched nine new veterinary medicines and six new feed additives and increased direct distribution channels by six percent as compared to the previous quarter. While this action has increased operating expenses for the quarter and reduced net income, we deemed the move necessary for expanding Skystar's diverse high margin product lines. Given current market conditions, we acknowledge that advanced purchases of raw materials has helped offset significantly higher raw material costs. However, in order to preserve our historical gross margins in the long term, we must continue to expand our distribution footprint and remain focused on developing and marketing our higher margin products.

"China has imposed policies to combat the effects of inflation and upwardly spiraling prices of the nation's food supply. As a result, wholesale market prices of meat became flat, negatively affecting the profits of some animal farmers. The diminished profitability has resulted in a reduction of animal farming and subsequently reduced some demand for our products. Wholesale meat prices have recently begun to increase to previous levels, and we expect farming to resume and demand for our products to return.

"Additionally, an ongoing drought in some regions of China has affected animal farming and aquaculture cultivation. The decreased supply of fresh water available for farming has adversely affected net sales of some of Skystar's products lines including pro-biotics and aquaculture.

"China's government has also started to put pressure on the animal husbandry industry to reduce its reliance on veterinary pharmaceuticals used in bringing animals to term for sale. These efforts are a commitment by China's government to increase the relative food safety for its citizens in addition to standardizing protocols of the animal husbandry industry itself.

"Due to several epidemics and concerns over food safety for China's food supply, the Ministry of Agriculture is delaying further inspections of veterinary pharmaceutical facilities. With this in mind, we believe that GMP certification of Skystar's new vaccine facility should be completed by the end of 2011.

"The fundamental challenge for Skystar is to utilize our industry expertise in staying on top of customer needs while maintaining profitability for our shareholders. China's overall market demand for animal based protein and the evolving commercial animal husbandry industry has not diminished and will drive the long term demand for our products, our growth, and our profitability for years to come.

"With this in mind, we believe that Skystar has taken the necessary measures to maintain our position as a market leader while weathering negative near term events. We value our shareholders and believe that we have positioned Skystar for long term growth in spite of a challenging operating environment and look forward to presenting our results and answering any investor questions concerning our operating environment during tomorrow's conference call," concluded Mr. Lu.

Fiscal 2011 Guidance
In light of the current economic environment, we are taking a conservative approach to financial guidance for fiscal year 2011. The Company confidently expects to generate full fiscal revenue in the range of $52.0 million to $55.0 million.

XI'AN, CHINA--(Marketwire - Aug 1, 2011) - Skystar Bio-Pharmaceutical Company (NASDAQ: SKBI) ("Skystar" or the "Company"), a China-based manufacturer and distributor of veterinary medicines, vaccines, micro-organisms and feed additives, today announced the appointment of Mr. Bing Mei to become the Company's permanent chief financial officer, effective as of July 29, 2011.

Mr. Mei is a seasoned chief financial officer fluent in both English and Mandarin with over 20 years of diverse industry experience including technology services and industrial manufacturing businesses and a successful track record of CFO/Controller roles with a variety of publicly traded Fortune 500 companies, fast-growing middle-market multinationals and international joint ventures. Prior to his engagement with Skystar Mr. Mei was chief financial officer of Avineon, a multinational technology company specializing in providing IT solutions to Federal and commercial industry with subsidiaries and joint ventures in Asia, Europe and North America and over 1,500 technical professionals located across the globe.

Mr. Mei is well acquainted with US and China GAAP, IFRS, SEC reporting standards and tax regulations, as well as SOX 404 compliance and in-depth knowledge of industry best practices, U.S. capital market and multinational financial operations. Mr. Mei is a certified public accountant (CPA), certified management accountant (CMA), and certified valuation analyst (CVA). He is a graduate of Zhejiang University with highest honors, Bowie State University and has a MBA from Duke University's Fuqua School of Business, where he was named a Fuqua Scholar graduating at the top ten percent of his class.

Mr. Weibing Lu, Skystar's chairman and CEO, commented, "We are pleased to have Bing Mei join Skystar as chief financial officer. Mr. Mei's experience in accounting and the international markets will assist the Company's growth initiatives as well as reporting and accountability to shareholders. Regrettably, Skystar accepted Michael Lan's resignation, concurrent to Bing Mei's appointment. Michael's resignation was due to personal reasons and there are no disputes between himself and the Company. Subsequently, we would like to thank Michael for his diligence and expertise in assisting Skystar grow record revenues and net income during his time with Skystar. We wish Michael all the best in his future endeavors."

Termination of Coverage 

Effective immediately, we are terminating coverage on Skystar Bio-Pharmaceuticals Co. (SKBI) to better allocate resources within our coverage universe. Our last rating on Skystar was Market Outperform/Speculative Risk with a Target Price of $15.00. Investors should not rely on our previously published financial projections.

INVESTMENT THESIS 

Skystar Bio-Pharmaceutical Company (SKBI) is a leading private Chinese company developing and selling veterinary medicine products. The company currently offers a complete suite of products to meet the needs of farmers from the birth of the animal through slaughter. SKBI’s products include vaccines, food-additives, and micro-organisms. The company currently markets approximately 200 products throughout China. 

In our view, SKBI’s distribution network is one of its primary competitive advantages. In China’s highly segmented animal farming industry, where an estimated 70% of pork products come from small farms with less than 15 pigs, SKBI has developed a network of company-owned or company promoted stores which educate farmers on the latest farming innovations and animal health. The company hires local farming experts at these facilities, and includes instructions on how to best use the company’s products to achieve desired results. The primary competitors for SKBI are government-owned enterprises that produce just several products, which are often under-promoted and are not competitively priced to SKBI’s product portfolio. SKBI has positioned itself as a leading and innovative manufacturer of animal husbandry health products, and we believe that the company’s regional stores and local expert endorsement may further strengthen the corporate brand.

We believe that the demand for animal husbandry products will continue to be strong in China in the foreseeable future. The economic growth over the last decade has significantly increased the consumption of protein by the Chinese. The gross production of farm animals is estimated at $200-250B in 2007, and growing at a CAGR of 9%. The current demand for animal husbandry products exceeds the current production capacity.

Notice Regarding Privacy and Confidentiality:

This material has been prepared for informational purposes only. While it is based on information generally available to the public from sources we believe to be reliable, no representation is made that the subject information is accurate or complete. Past performance is not a guarantee nor does it necessarily serve as an indicator of future results. Price and availability are subject to change without notice. Additional information is available upon request.

Since Rodman & Renshaw, LLC is not a tax advisor, transactions requiring tax consideration should be reviewed carefully with your tax advisor. Similarly, Rodman & Renshaw, LLC is not a law firm and provides no legal opinions or legal advice.

Rodman & Renshaw, LLC may make a market in the securities being discussed.

Rodman & Renshaw, LLC and/or its officers or employees may have positions in any of the securities of this (these) issuer(s).

Member FINRA.
Member SIPC.

Rodman and Renshaw on SKBI                                  5/24/2011

SKBI: Strong Quarter, Anticipating Regulatory Milestone

Key Points

• For 1Q11, Skystar Bio-Pharmaceutical reported $7.1MM in revenues and $1.9MM in net income, slightly higher than our estimates of $6.7MM and $1.6MM, respectively.
• The company reported a cash balance of $7.4MM at the end of 1Q11, an increase of $1.5MM from 4Q10.
• Future growth could be largely driven by the expansion of the vaccine production line as well as the improved capacity of the micro-organism facility in 2011.
• The company reassured 2011 guidance of $60-63MM in revenues.
• We reiterate our Market Outperform rating with a $15/share target price in 12 months.

Investing to Prepare for Inflation

Given the increased costs of raw materials, gross margins decreased to 51% in 1Q11 from 54% in 2010. In addressing ongoing inflation, the company has taken a proactive approach to control raw material costs by securing favorable pricing through prepayments. In 1Q11, the company stocked $12MM in raw materials in comparison to $5.5MM in 4Q10. As a result, the company incurred an operating loss of ($6MM). The prepayment schedule could reduce the impact of price increases. However, continued inflation may cause further erosion in the gross margins. Given these competing trends, we slightly decrease our gross profit projection from 53% to 50% for 2011.

Anticipating GMP Approval in 3Q11

Skystar is estimated to obtain GMP approval from the Ministry of Agriculture in 3Q11 for the vaccine production line, representing a 2600% increase in capacity. We project a conservative material contribution of $3MM in 2011 from vaccine products. Going forward, the vaccine production line is estimated to generate $8-15MM in revenues in 3-5 years.

New Acquisition Expected to Have Material Contribution in 2H11

Skystar recently invested $8MM in the Kunshan acquisition to expand the micro-organism production line. The company has obtained the title for the land usage and is expected to complete the acquisition in 2Q11. With an estimated $5MM in capital expenditure, the facility is expected to have a small material contribution in 2011 and reach $30MM in annual sales in five years.

Maintaining Our Market Outperform Rating and $15 Target Price

Utilizing a 2011 P/E multiple of 7.5, we derive a 12-month price target of $15/share. By way of comparison, other profitable and growing Chinese companies yield average P/E ratio of 16 for 2011. In our opinion a target price of $15 is easily justified by Skystar’s full product suite offering, significant growth opportunities in the domestic veterinary medications/vaccines market and the incremental growth potential stemming from entering the underserved aquaculture vaccines market.


Notice Regarding Privacy and Confidentiality:


This material has been prepared for informational purposes only. While it is based on information generally available to the public from sources we believe to be reliable, no representation is made that the subject information is accurate or complete. Past performance is not a guarantee nor does it necessarily serve as an indicator of future results. Price and availability are subject to change without notice. Additional information is available upon request.

Since Rodman & Renshaw, LLC is not a tax advisor, transactions requiring tax consideration should be reviewed carefully with your tax advisor. Similarly, Rodman & Renshaw, LLC is not a law firm and provides no legal opinions or legal advice.

Rodman & Renshaw, LLC may make a market in the securities being discussed.

Rodman & Renshaw, LLC and/or its officers or employees may have positions in any of the securities of this (these) issuer(s).

Member FINRA.
Member SIPC.

Further disclosures in 2011 first quarter fling could increase the risk of a need for capital.

We have a future registered capital commitment related to our newly created subsidiary Skystar Kunshan, located in Kunshan, Jiangsu province, China. The Skystar Kunshan subsidiary has a registered capital of $15,000,000, of which we invested $2,250,000 in cash. The remaining $12,750,000 of capital must be invested prior to May 7, 2012. We have also been making prepayments in an effort to acquire assets in a micro-organism manufacturing facility in Kunshan. Upon completion of such an acquisition, the assets purchased will be transferred to Skystar Kunshan to satisfy some of our registered capital commitment. If such an acquisition does not close, we may request a reduction or cancellation of the registered capital requirement. As of the date of this report, we have not completed the acquisition.

GeoTeam® Note:

• 2011 vs. 2010 First Quarter Adjusted EPS was $0.17 vs. $0.20.
• Cash flow from operations turned negative

"In 2010, Skystar continued to utilize working capital to prepay for raw materials. This buy-forward strategy helped Skystar manage fluctuations in raw material costs. Skystar as of current has adequate working capital to fund its operations and prepayment of raw materials but will continue to seek ways to improve its working capital position.

Fourth Quarter 2010 Highlights

• Revenue increases 45% YoY to $15.8 million
• Gross margin increased from 50% for the three months ending December 31, 2009 to 54% for the three months ended December 31, 2010
• Net income increased 26% to $3.9 million or $0.55 per fully diluted share, compared with $3.1 million or $0.44 per basic share in the fourth quarter of 2009

Mr. Weibing Lu, Skystar Bio-Pharmaceutical's chairman and chief executive officer, commented, "We are pleased to announce strong financial results for the fourth quarter and full fiscal 2010 year. The Company was able to grow top line revenue by over 40% year-over-year to $47.5 million and net income by over 20% year-over-year to $14.0 million. Additionally, Skystar improved net cash from operating activities significantly to $7.7 million as compared $1.3 million in the year ago period.

Presently, Skystar anticipates delivering top line revenue in the range of $60.0 to $63.0 million with a gross margin of 50% to 55% for 2011.

Skystar in 2010 saw significant inflation pressures building in China. However, the Company had been able to secure favorable pricing by prepaying for raw materials to major suppliers. The Company anticipates that inflationary pressures will continue in 2011. As a result, the Company is continuing with its buy-forward strategy to suppliers in order to have better control of costs for raw materials.

Mr. Lu concluded, "We are excited with the momentum that Skystar has built as a leader in China's animal healthcare space and as the only U.S. listed pureplay animal healthcare stock. We fully anticipate our current acquisitions and expanded manufacturing facilities to ramp up, bear fruit and further improve Skystar's profitability.

Rodman and Renshaw on SKBI             4/12/2011

SKBI: Solid 2010, Expansion in 2011 and Beyond

Key Points

• Skystar Bio-Pharmaceutical reported 2010 revenue of $47.6MM, slightly higher than our estimate of $46.6MM, and fell into the higher end of the 2010 guidance ($45.5-47.5MM). The company earned $14MM in net income, or $1.98 per diluted share, in line with our estimate of $1.97/share.
• Future growth could be largely driven by the expansion of the vaccine production line as well as the improved capacity of the micro-organism facility in 2011.
• The company reported a cash balance of $6MM at the end of 4Q10, an increase of $4MM from 3Q10.
• Management provided 2011 guidance of $60-63MM in revenue with an estimated gross margin of 50-55%.
• We maintain our top line assumption of $62.6MM in revenues and the bottom line estimates of $2.25 in diluted EPS in 2011.
• We reiterate our Market Outperform rating with a $15/share target price.

Solid Growth in 2010, Prepared for Inflation in the Near Term

In 2010, the company achieved $47.6MM in revenues, a 41% growth over 2009. Gross margins were improved to 54% in 2010 in comparison with 49% in 2009. On the bottom line the company reported $14MM in net income, representing a 30% growth over 2009. The company has taken a proactive approach to control costs of the raw materials by securing favorable pricing through prepayments. We project a 53% in the gross profit in 2011. However, we expect an erosion in the gross margin in 2012 if the inflation remains high in China.

GMP Approval to Enhance Vaccine Contribution

Skystar is estimated to obtain the GMP approval in 3Q11 on the vaccine production line, representing a 2600% increase in capacity. We projected a conservative material contribution of $2.6MM in 2011 from the new facility, resulting in total revenue of $4.6MM in 2011 from the vaccine products. Going forward, the vaccine production line is estimated to generate $8-15MM in revenues in 3-5 years.

New Acquisition to Contribute to the Future

Skystar recently invested $8MM in the Kunshan acquisition to expand micro-organism production line. The company has obtained the title for the land usage and is expected to complete the acquisition in 1H11. With an estimated $2-3MM in additional capital expenditure, the facility is expected to have small material contribution in 2011 and reach $30MM in annual sales in five years.

Maintaining Our Market Outperform Rating and $15 Target Price

Utilizing a 2011 P/E multiple of 8.5, we derive a 12-month price target of $15/share. By way of comparison, other profitable and growing Chinese companies yield average P/E ratios of 15.8 for 2010 and 15.6 for 2011. In our opinion a target price of $15 is easily justified by Skystar’s impressive margins, full product suite offering, significant growth opportunities in the domestic veterinary medications/vaccines market and the incremental growth potential stemming from entering the underserved aquaculture vaccines market.

Notice Regarding Privacy and Confidentiality:

This material has been prepared for informational purposes only. While it is based on information generally available to the public from sources we believe to be reliable, no representation is made that the subject information is accurate or complete. Past performance is not a guarantee nor does it necessarily serve as an indicator of future results. Price and availability are subject to change without notice. Additional information is available upon request.

Since Rodman & Renshaw, LLC is not a tax advisor, transactions requiring tax consideration should be reviewed carefully with your tax advisor. Similarly, Rodman & Renshaw, LLC is not a law firm and provides no legal opinions or legal advice.

Rodman & Renshaw, LLC may make a market in the securities being discussed.

Rodman & Renshaw, LLC and/or its officers or employees may have positions in any of the securities of this (these) issuer(s).

Member FINRA.
Member SIPC.

GeoTeam Note:  Adjusted 2010 vs 2009 EPS for the

• Full Year: $2.11 vs. $1.83
• Fourth Quarter:  $0.67 vs. $0.43

Rodman & Renshaw on SKBI

Key Points 

• Skystar Bio-Pharmaceutical reported 3Q10 revenue of $18.6MM, higher than our estimate of $17MM. The company earned $6.6MM net income, or $0.93 per diluted share, beating our estimate of $0.50/share. 

• The stellar quarter is due to 1) increased production capacity, 2) improved gross margins, 3) reduced SG&A expenses and 4) lower tax expenses. 

• Management reiterated 2010 guidance of $45.5 – $47.5MM in revenue, representing a 35–41% growth over 2009. 

• Future growth could be largely driven by the expansion of vaccine production, as well as potential acquisitions. 

• The company reported a cash balance of $2MM at the end of 3Q10, a decrease of $1.5MM from 2Q10. 

• We maintain our growth assumptions and increase revenue and EPS estimates for 2010 and 2011 to reflect better than expected 3Q10 results. 

• We reiterate our Market Outperform rating with a $15/share target price.   

Solid Top and Bottom Line Growth 

During 3Q10, the company achieved a 45% revenue growth YoY. Gross margins were slightly improved (54%) in 3Q10 in comparison with 53% in 2Q10. SG&A expenses decreased from 17% of total revenue in 2Q10 down to 11% of total revenue in 3Q10. On the bottom line the company reported a 36% net income growth in 3Q10 YoY. We maintain our top line growth assumption for both 2010 and 2011. But to reflect the strong 3Q10 results, we increase our revenue projections to $47MM from $45MM in 2010, and to $61MM from $59MM in 2011. We also adjust our gross margin and SG&A assumption to reflect improved performance. As a result, EPS projections are increased from $1.43 to $1.98 in 2010, $1.75 to $2.25 in 2011.

Invest in The Future 

Skystar reported negative net operating cash flow of ($3.1MM) in 3Q10. The decrease is mainly due to an increase in deposits and prepaid expenses ($11.4MM), which is composed of mostly prepayment for raw materials purchasing. Management stated that inventory would be drawn down during the next quarter or two. Accounts receivables were improved by $2MM, a great achievement in light of growing revenues. The company secured low interest $3.0MM line of credit and short term loan facility for $0.7MM in China.

All Four Product Lines Maintain Robust Growth 

The company’s 3Q10 revenues were attributable to 248 products from four product lines: veterinary medications, micro-organism, feed additives, and vaccines. Veterinary medications generated $12.4MM in revenues in 3Q10, or 67% of total revenues and a 46% growth YoY. Micro-organism products generated revenues of $4.7MM in 3Q10, or 25% of total revenues and a 48% growth YoY. Feed additives contributed 4% of total revenues, representing a 37% growth in comparison to sales in 3Q09. Vaccine products accounted for 4% of 3Q10 revenues, a 35% growth YoY. 

Increasing Capacity and Novel Products to Contribute to the Future 

Skystar recently completed the expansion of the vaccines and microorganisms production facility and is expected to receive GMP production approval by YE10 or early 2011. The company expects to significantly increase its production capacity of these product lines, which could contribute to revenue in 2011. The new vaccine plant is estimated to contribute $8-15MM in annual revenue within 3 – 5 years of market introduction.

Maintaining Our Market Outperform Rating and $15 Target Price 

Utilizing a 2010 P/E multiple of 11 and 2011 P/E multiple of 8.5, we derive a 12-month price target of $15/share. By way of comparison, other profitable and growing Chinese companies yield average P/E ratios of 15.8 for 2010 and 15.6 for 2011. In our opinion a target price of $15 is easily justified by Skystar’s impressive margins, full product suite offering, significant growth opportunities in the domestic veterinary medications/vaccines market and the incremental growth potential stemming from entering the underserved aquaculture vaccines market.

Notice Regarding Privacy and Confidentiality:   

This material has been prepared for informational purposes only. While it is based on information generally available to the public from sources we believe to be reliable, no representation is made that the subject information is accurate or complete. Past performance is not a guarantee nor does it necessarily serve as an indicator of future results. Price and availability are subject to change without notice. Additional information is available upon request.

Since Rodman & Renshaw, LLC is not a tax advisor, transactions requiring tax consideration should be reviewed carefully with your tax advisor. Similarly, Rodman & Renshaw, LLC is not a law firm and provides no legal opinions or legal advice.

Rodman & Renshaw, LLC may make a market in the securities being discussed.

Rodman & Renshaw, LLC and/or its officers or employees may have positions in any of the securities of this (these) issuer(s).

Member FINRA.
Member SIPC.

Third Quarter 2010 Highlights

• Revenue increases 45% YoY to record $18.5 million. 

• Net income for the third quarter of 2010 was a record $6.6 million, or $0.93 per fully diluted share. This compares to net income of $5.3 million or $0.76 per fully diluted share in the same quarter of 2009.

• Skystar's adjusted net income for the third quarter of 2010 was $6.5 million or $0.91 per fully diluted share, compared with $4.2 million, or $0.61 per fully diluted share, in the third quarter of 2009.

Mr. Weibing Lu, Skystar Bio-Pharmaceutical's chairman and chief executive officer, commented, "Skystar is pleased to report third quarter fiscal 2010 results in our seasonally stronger half of the fiscal year highlighted by record organic revenues. Skystar continues in refining its strategy to remain as one of the leading players in its niche as a manufacturer and distributor of over 250 animal healthcare products.

"Through consistent market research and close contact with our customers both large and small, we have been able to maximize our sales by smartly timing production and distribution of our products in conjunction with the animal farming cycle. We continue to believe that Skystar is servicing market demand for vaccines, medicines, micro-organisms and feed additives in China.

"Skystar experienced double digit organic revenue growth across Skystar's four product lines in the third quarter of fiscal 1010. Driving these positive results was the improved utilization of the Company's primary manufacturing facility in Huxian. Huxian's upgraded vaccine facility in the same location was completed in the second quarter of the fiscal year. Additional tooling, testing and installation of equipment were finalized in the third quarter of fiscal 2010. As of today, we are waiting for the response from the Ministry of Agriculture regarding our application of GMP certification.

We have sufficient capital to support our ongoing operations. However, if we are to acquire another business or further expand our operations, we may need additional capital.

Second Quarter 2010 Highlights

• Revenue increases 33% YoY to $8.3 million
  
  
  • Veterinary vaccines totaled $0.4 million, up 21% YoY
  • Veterinary medicines totaled $5.5 million, up 41% YoY
  • Feed additives totaled $0.4 million, up 31% YoY
  • Micro-organism products totaled $2.0 million, up 14% YoY
    
• Gross margin of 53% for the second quarter of fiscal 2010 as compared to 53% in the year ago period.
  
• GAAP net income of $2.4 million or $0.33 per fully diluted share, compared with a loss of $0.1 million or ($0.03) per fully diluted share in the year ago period.
  
• Adjusted net income of $2.2 million or $0.31 per fully diluted share, compared with a loss of $1.4 million or $0.36 per fully diluted share in the year ago period.

• Fiscal 2010 top line revenue guidance range remains at $45.5 million to $47.5 million.

Mr. Weibing Lu, Skystar Bio-Pharmaceutical's chairman and chief executive officer, commented, "Skystar's performance in the second quarter of fiscal 2010 positions the Company well for the second half of the fiscal year which is seasonally our strongest half. The second quarter's performance can be attributed to improved sales effort and increased utilization of production capacity at our Huxian plant, including the expanded micro-organism facility completed in 2009 and came online in June of this year, as well as increased product variety. We currently produce over 248 products as compared to over 195 products in the first quarter of 2010.

"Overall outlook for the industry remains promising despite severe flood damage in many of the agricultural regions of China. The Company anticipates meeting its financial goals and metrics for the year. During the quarter, the Company filed an S-1 registration which was subsequently withdrawn. The intention was not to raise capital at any price or level of dilution to shareholders but in preparation of strengthening our balance sheet should an opportunistic moment arise. The Company does not intend to raise capital at current price levels and is looking into alternative sources of funding such as low interest debt at the local level. Our current income from operations and cash on hand are at adequate levels to maintain daily operations. 

"We expect our sales and growth trajectory to continue through the remainder of the year as we reiterate fiscal guidance for the full year. The Company is positioning itself to be able to meet anticipated market demand for its products, and have sufficient cash resources on hand to maintain on-going operations. We hope to continue to maximize the Company's performance for our shareholders," concluded Mr. Lu. 

China Floods

On July 21, 2010, Xinhua news agency, reported China's worst flood in over a decade, displacing over 110 million people and affecting over 17 million acres of farmland. Additionally, as reported by Xinhua news agency on August 6, 2010, China's Ministry of Agriculture urged local authorities to resume agricultural production as soon as possible and create favorable conditions for the fall harvest.

To date Skystar's business lines have not been affected by the acts of nature; however, the Company will closely monitor the situation and react accordingly.

Mr. Weibing Lu, Skystar Bio-Pharmaceutical's chairman and chief executive officer, commented, "We are pleased to have delivered such a strong start to the fiscal 2010 year with a 27% increase in revenue as compared to the year ago period. Additionally, the Company continues to improve top line growth while generating 53% gross margins in line with the Company's historical gross margins. We hope to continue with management's growth strategy in expanding our footprint in China's animal husbandry space. "Across Skystar's product lines we are seeing material revenue growth as a result of increased sales efforts, demand for our products and increased utilization of the Company's veterinary medicine facility. Additionally, we are pleased to have Michael H. Lan join Skystar as our full time chief financial officer. We expect that Michael's internal financial control and operational experience will further aid in strengthening Skystar's financial accountability to the public.

Fiscal year 2010 revenue ranges have been revised to $45.5 million to $47.5 million for the full year reflecting partial revenue contribution from two new product dosage forms coming to market. We anticipate the estimated $5 million in total additional revenue to be fully recognized in fiscal 2011.

We have received inquires from GeoReaders regarding yesterday’s decision to remove SKBI from the GeoSpecial list. Due to market sentiment, the GeoTeam is taking a more stringent look at stocks on the whole.

We still believe SKBI offers great long-term value, however the most important factor fueling our decision lies with short-term EPS growth forecasts

Notes
-All EPS numbers in above table are Non-GAAP. Non-GAAP EPS Figures exclude certain non-operating gains and losses as well as certain non-cash items contained in the company's filings. Non-GAAP information should not be viewed in isolation or as a substitute for reported, or GAAP information. The GeoTeam® non-GAAP figures may, from time to time, differ from company supplied figures.
-2009 Annual estimates do not match the cumulative quarters due to varying share counts throughout the year. Rodman used a weighted average share count of 5.4 million for its 2009 annual estimate.

While sales will be up in each of these quarters going forward, dilution from its recent capital raise and a delay in its expansion plans are forecast to lead to unimpressive EPS growth for the next three quarters. Now, the company has been handily exceeding analyst estimates, but ultimately the GeoTeam requires EPS growth to justify inclusion in our GeoSpecial/Bargain List.   Part of our decision is also based on the fact that the stock had increased over 100% from our initial mention. 

It’s likely at some point that if the stock continues its retreat and/or begins showing progress on the EPS growth front, we will recode the stock as a GeoSpecial or GeoBargain. Also, value investors may still find SKBI’s low absolute P/E attractive. Rodman & Renshaw still has a price target of $16.00.

Skystar Bio-Pharmaceuticals shares opened sharply lower today in reaction to news that it has purchased an exclusive aquaculture vaccine technology.

The Good News:  New Vaccine Technology will address a Company-estimated $150 Million market opportunity.

The Bad News: The Company's highly anticipated Veterinary Vaccine Facility Launch will now occur in its 2010 first quarter rather than the 2009 fourth quarter. Thus, the company reduced its revenue guidance to $44.0 to $46.0 million vs. analyst estimates of $52 million.

The GeoTeam® believes, that overtime, some investors may view the drop in shares as a buying opportunity:

• The company has been beating estimates, which gives some hope that guidance may be conservative. 
• The company's guidance is based on organic growth.  Skystar Bio-Pharmaceuticals has previously stressed that acquisitions are part of its growth strategy, providing another reason that its guidance may be conservative.
• The acquired technology significantly improves long-term growth profile.

Source: Marketwire (December 9, 2009)

Skystar Bio-Pharma third quarter results easily surpassed analyst expectations as well was ours.

Although EPS growth was down for the quarter SKBI still crushed analyst split adjusted estimates of $0.42.  The company is working through dilution of a recent offering being used to accelerate growth gong into 2010.  Analysts estimates of $2.18 for 2009 and $4.22 for 2010 may be conservative.

^aNon-GAAP EPS Figures exclude certain non-operating gains and losses as well as certain non-cash items contained in the company's filings. Non-GAAP information should not be viewed in isolation or as a substitute for reported, or GAAP information . The GeoTeam® non-GAAP figures may, from time to time, differ from company supplied figures.

Valuation Scenarios

Added to Geo Bargain on the radar list on May 20, 2009.  ($9.00).

Added to Geo Bargain list on June 1, 2009.  ($10.00)

Stock has now been re-coded to a Geo Special due to its low PEG ratio and remains on the Geo Bargain On The Radar list. ($15.97)

Data Inputs:

Fiscal Year Ends in December

^a Skystar Bio-Pharma  is not paying a full U.S. tax rate.  The GeoTeam ® prefers to use U.S. fully-taxed EPS figures when calculating potential valuation scenarios. Therefore, all EPS numbers have been adjusted by the GeoTeam ® to reflect a standard U.S. tax rate of 36%.

^b Non-GAAP EPS Figures exclude certain non-operating gains and losses as well as certain non-cash items. Non-GAAP information should not be viewed in isolation or as a substitute for reported, or GAAP information . The GeoTeam ® non-GAAP figures may, from time to time, differ from company supplied figures.

^c The GeoTeam ® Generally applies P/E's of 20 and 25 on trailing EPS when portraying potential short-term valuation scenarios.  However, since the Company's 2008 non-GAAP EPS growth rate is below the GeoTeam ® preferred 30% minimum P/E's of 10 and 15 were utilized.

These scenarios are not investment advice, but are scenarios based on some commonly used investment guidelines.  They are provided to aid investors in making their own investment decisions.

^a Non-GAAP EPS Figures exclude certain non-operating gains and losses as well as certain non-cash items contained in the company's filings. Non-GAAP information should not be viewed in isolation or as a substitute for reported, or GAAP information . The GeoTeam® non-GAAP figures may, from time to time, differ from company supplied figures. 

^b The GeoTeam ® tax rate calculations may deviate from the company's reported tax rate, arising from the different treatment, in China vs. the U.S.A, with regards to the deductibility of certain expenses as well as the tax liabilities associated with certain gains.  These differences  typically arise from non-cash items.  For an example on how Skystar Bio-Pharma calculates its tax rate please refer to its SEC 10Q filing (page 24, note 18).  Skystar Bio-Pharma  is not paying a full U.S. tax rate.  The GeoTeam ® prefers to use U.S. fully-taxed EPS figures when calculating potential valuation scenarios. Therefore, EPS numbers have been adjusted by the GeoTeam ® to reflect a standard U.S. tax rate of 36%. 

^c For an explanation on how Skystar Bio-Pharma calculated diluted EPS for its 2008 first quarter please refer to its SEC 10Q filing (page 25, note 19).  The GeoTeam ® followed the same logic when calculating 2008 first quarter tax-adjusted and non-GAAP EPS figures.