Lotus Pharma raises $5 million

Lotus Pharmaceuticals, the parent holding company in the USA that operates Beijing Liang Fang Pharmaceutical and Beijing En Zhe Jia Shi Pharmaceutical, both of which are in China, says that it has raised $5.0 million in a private placement of 5,747,118 shares of the company's series A convertible redeemable preferred stock, par value $0.001 per share, and warrants to purchase 2,873,553 shares, for an aggregate purchase price of $5.0 million. The warrants have an initial exercise price of $1.20 each and a term of five years.

As part of the terms of the transaction, Lotus' founders delivered in the aggregate 7,500,000 shares of the company's common stock owned by them to an escrow account. Subject to Lotus achieving certain earning targets in fiscal years 2007, 2008 and 2009, these "make good shares" shall be returned to the founders. The target for 2007 is $8.5 million in net income, for 2008 it is 95% of $13.8 million in net income after eliminating the effect of non-cash charges associated with the private placement and adjusting for differences in the exchange rate between Chinese renminbi and US dollar used in the company's 2008 financial statements and an exchange rate. For 2009, the target is 95% of $17.5 million in net income, after adjustments.