Nutrastar International Inc. Announces Second Quarter 2014 Results

Revenue of $13.0 Million; Gross Margin at 77.3%; Company Maintains Forecasts for 2014 Revenue of Between $47 Million and $50 Million

HARBIN, China, August 13, 2014 /PRNewswire/ — Nutrastar International Inc. (OTCQB: NUIN; “Nutrastar” or the “Company”), a leading producer and supplier of premium branded consumer products, including commercially cultivated Cordyceps Militaris (“Cordyceps”), functional health beverages and organic and specialty foods, today announced its results for the three months and six months ended June 30, 2014.

Financial Highlights for the Three Months Ended June 30, 2014

  • Net revenue was $13.0 million, representing an increase of $1.13 million or 9.5% from $11.87 million in the comparable 2013 three month period.
  • Gross profit was $10.05 million, representing a gross margin of 77.3%.
  • Net income was $6.80 million, representing a net margin of 52.2%.
  • Basic and diluted EPS were $0.40 and $0.38, respectively, with 16.86 million basic shares and 17.69 million diluted shares outstanding.

Financial Highlights for the Six Months Ended June 30, 2014

  • Net revenue was $19.87 million, representing an increase of $0.59 million or 3% from $19.29 million in the comparable 2013 six month period.
  • Gross profit was $15.29 million, representing a gross margin of 76.9%.
  • Net income was $10.03 million, representing a net margin of 50.4%.
  • Basic and diluted EPS were $0.59 and $0.57, respectively, with 16.76 million basic shares and 17.66 million diluted shares outstanding.

Management Commentary

Ms. Lianyun Han, CEO of Nutrastar, commented, “Our entire consumer product portfolio performed in line with expectations in the three month period ended June 30, 2014. Sales of our core premium consumer product Cordyceps came in at an impressive $10.69 million, up 21.5% year-over-year. This included approximately $1.0 million in sales of our new Cordyceps powder solution product, which was initially distributed within our current specialty nutraceuticals stores channels located in Harbin as a part of its testing phase. Sales of our 210ml and 310ml beverage offerings closed at $1.75 million, down 31.0% year-over-year due to the product line realignment to meet the market demand. Organic and specialty foods segment, our third consumer product category, experienced sales growth of 4.1%, contributing $0.56 million to revenues.”

Ms. Han continued, “Overall, we’re delighted with the outcome of the second quarter and first six months of the year – both periods marked by continued strong margins and an overall increase in revenue thanks to continued Cordyceps demand and the introduction of our new soluble, powder solution product. This synergistic soluble on-the-go Cordyceps product we believe has the potential to take Nutrastar to the next level – the international market – which we are extremely excited about. In terms of strategy, we were fortunate to bring on Beijing Meilitianhe Fortune Investment Management Co., Ltd. (“MLTH”) as a strategic investor through a private share transaction in late June. This development not only further diversified management’s holdings, but also aided us in expanding our reach and opportunity in China. MLTH has been instrumental in introducing and helping us secure our first distributor in Hubei for the new Cordyceps powder solution product, and are confident there will be more opportunities like this coming our way.”

“As it stands now, we remain the single largest producer of commercially cultivated Cordyceps Militaris. Continued Cordyceps demand coupled with the introduction of exciting products and a broadening in our geographical reach will facilitate future expansion and allow us to achieve key milestones set forth in our long-term growth plan including extending our market presence well-beyond China. We will keep the public and shareholders apprised of our development progress with these initiatives and in all other areas of our business as we are able to, and encourage any interested party to reach out directly for more information on the Company and our innovative, premium consumer product portfolio,” added Ms. Han.

Outlook for the Year Ending December 31, 2014

Based on management’s current expectations, full year 2014 revenue should fall in the range of $47 million to $50 million, representing an approximate 8% to 15% year-over-year top line growth.

Request for Call with Management

Investors are invited to request a call with Nutrastar’s management team. For those investors who are interested in speaking with management, please contact American Capital Ventures at +1-305-918-7000 to schedule.

For more information regarding Nutrastar’s financial performance during the three and six months ended June 30, 2014, please refer to the Quarterly Report on Form 10-Q to be filed with the Securities and Exchange Commission on or about August 13, 2014.

About Nutrastar International Inc.

Nutrastar is a China based leading producer and supplier of premium branded consumer products including commercially cultivated Cordyceps Militaris, functional health beverages as well as specialty and organic foods. Cordyceps Militaris is one of the most highly regarded herbal nutrients in Traditional Chinese Medicine. The Company is headquartered in Harbin, capital of Heilongjiang Province, with 330 employees, including 21 in R&D, and 149 in sales and marketing. The products of Nutrastar are sold throughout China via a sales and distribution network that covers more than 10 provinces. More information may be found at http://www.nutrastarintl.com/ or e-mail: ir@nutrastarintl.com

Make sure you are first to receive timely up-to-date information on Nutrastar. Sign up for Nutrastar’s email news alert system today at: http://www.nutrastarintl.com/alerts

Safe Harbor Statement

This news release contains “forward-looking statements” relating to the business of Nutrastar International Inc., its subsidiaries and other affiliate companies. All statements, other than statements of historical fact included herein are “forward-looking statements” including statements concerning plans, objectives, goals, strategies, future events or performance, and underlying assumptions and other statements that are other than statements of historical facts. These forward-looking statements are often identified by the use of forward-looking terminology such as “believes,” “expects” or similar expressions. These statements are subject to uncertainties and risks including, but not limited to, product and service demand and acceptance, changes in technology, economic conditions, the impact of competition and pricing, government regulation, and other risks contained in reports filed by the Company with the Securities and Exchange Commission. All forward-looking statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by these factors. You should not place undue reliance on these forward-looking statements, which speak only as of the date of this press release. Other than as required under the securities laws, the Company does not assume a duty to update any forward-looking statements to reflect events or circumstances after the date hereof.

For more information, please contact:

Richard Hull
American Capital Ventures
Tel: +1-305-918-7000
Email: rh@amcapventures.com

NUTRASTAR INTERNATIONAL INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

(Unaudited)

(AMOUNTS EXPRESSED IN US DOLLARS)

For the Three Months

For the Six Months

Ended June 30,

Ended June 30,

2014

2013

2014

2013

NET REVENUE

$

13,004,562

$

11,874,334

$

19,871,243

$

19,285,470

Cost of goods sold

(2,953,060)

(2,731,416)

(4,581,314)

(4,503,704)

GROSS PROFIT

10,051,502

9,142,918

15,289,929

14,781,766

Selling expenses

(478,832)

(473,793)

(725,895)

(904,256)

General and administrative expenses

(533,618)

(696,752)

(1,206,633)

(1,289,267)

Income from operations

9,039,052

7,972,373

13,357,401

12,588,243

Other income (expenses):

Interest income

97,226

78,748

189,084

162,489

Foreign exchange differences

(1,639)

31,644

(19,728)

26,457

Change in fair value of warrants

173

173

Total other income

95,587

110,565

169,356

189,119

Income before income taxes

9,134,639

8,082,938

13,526,757

12,777,362

Provision for income taxes

(2,338,917)

(2,120,129)

(3,497,461)

(3,399,869)

NET INCOME

6,795,722

5,962,809

10,029,296

9,377,493

OTHER COMPREHENSIVE INCOME:

Foreign currency translation adjustments

(17,913)

1,389,545

(1,070,742)

1,629,292

COMPREHENSIVE INCOME

$

6,777,809

$

7,352,354

$

8,958,554

$

11,006,785

Earnings per share:

Basic

$

0.40

$

0.37

$

0.59

$

0.58

Diluted

$

0.38

$

0.35

$

0.57

$

0.55

Weighted average number of shares outstanding:

Basic

16,858,667

15,863,826

16,758,599

15,863,826

Diluted

17,694,270

16,993,926

17,657,471

16,993,926

NUTRASTAR INTERNATIONAL INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(AMOUNTS EXPRESSED IN US DOLLARS)

June 30, 2014

December 31, 2013

(Unaudited)

ASSETS

CURRENT ASSETS

Cash and cash equivalents

$

112,323,274

$

102,599,186

Accounts receivable

93,688

56,922

Inventories

821,897

691,847

Prepayments and other receivables

1,356,424

1,300,012

Total current assets

114,595,283

104,647,967

OTHER ASSETS

Intangible assets, net

853,809

1,107,737

Property, plant and equipment, net

14,843,123

15,481,249

Total assets

$

130,292,215

$

121,236,953

LIABILITIES AND STOCKHOLDERS’ EQUITY

CURRENT LIABILITIES

Other payables and accruals

$

1,030,344

$

1,167,957

Taxes payable

2,806,214

2,879,172

Due to a related party

452,668

265,223

Preferred stock dividend payable

604,666

738,903

Total current liabilities

4,893,892

5,051,255

Total liabilities

4,893,892

5,051,255

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS’ EQUITY

Preferred Stock, $0.001 par value,1,000,000 shares authorized, 77,776
shares and 110,066 shares issued and outstanding at June 30, 2014 and
December 31, 2013, respectively; aggregate liquidation preference
amount:$2,177,728 and $3,081,848, plus accrued but unpaid dividend of
$604,666and $738,903, at June 30, 2014 and December 31, 2013,
respectively

1,773,772

2,510,183

Common stock, $0.001 par value, 190,000,000 shares authorized, 16,908,541
shares issued and 16,864,986 shares outstanding at
June 30, 2014; 16,421,161 shares issued and 16,377,606 shares
outstanding at December 31, 2013

16,909

16,422

Additional paid-in capital

21,012,795

19,934,551

Statutory reserves

4,989,036

4,983,935

Treasury stock, at cost, 43,555 shares
as of June 30, 2014 and December 31,2013

(78,767)

(78,767)

Retained earnings

90,178,823

80,242,877

Accumulated other comprehensive income

7,505,755

8,576,497

Total stockholders’ equity

125,398,323

116,185,698

Total liabilities and stockholders’ equity

$

130,292,215

$

121,236,953

NUTRASTAR INTERNATIONAL INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(AMOUNTS EXPRESSED IN US DOLLARS)

For the Six Months Ended
June 30,

2014

2013

CASH FLOWS FROM OPERATING ACTIVITIES:

Net income

$

10,029,296

$

9,377,493

Adjustments to reconcile net income to cash provided by operating activities:

Change in fair value of warrants

(173)

Consultant restricted stock expense

53,371

Depreciation and amortization

743,052

731,128

Share-based compensation expense

66,463

108,613

(Increase) decrease in assets:

Accounts receivable

(37,370)

(8,537)

Inventories

(136,651)

(265,896)

Prepayments and other receivables

(68,381)

885,634

Increase (decrease) in liabilities:

Other payables and accruals

(127,833)

305,355

Advance from related party

179,980

Taxes payable

(46,908)

(197,651)

Net cash provided by operating activities

10,655,019

10,935,966

CASH FLOWS FROM FINANCING ACTIVITIES:

Advance from/(Repayment to) related party

29,704

(27,009)

Net cash provided by/(used in) financing activities

29,704

(27,009)

Foreign currency translation adjustment

(960,635)

1,412,437

INCREASE IN CASH AND CASH EQUIVALENTS

9,724,088

12,321,394

CASH AND CASH EQUIVALENTS, at the beginning of the period

102,599,186

75,526,533

CASH AND CASH EQUIVALENTS, at the end of the period

$

112,323,274

$

87,847,927

NON-CASH TRANSACTIONS

Preferred stock and dividend converted into common stock

$

958,897

$

Preferred stock dividend payable

88,249

112,246

Share-based payment to officers and directors under equity incentive plan

66,463

108,613

Share-based payment – IR warrants

53,371

SUPPLEMENTAL DISCLOSURE INFORMATION

Income taxes paid

$

3,502,450

$

3,468,821