Lotus Pharmaceuticals (PINK:LTUS)

Q: Can you give me some background information on the company? What are your segments?

A: Lotus has 2 subsidiaries. Liang Fang was established in 1999 and En ze jia shi was established in 2000

We have three segments. 1. manufacturing and distribution of pharmaceutical products, including the manufacture of pharmaceutical products for other distributors (OEM manufacturing). 2. Retailing of Western and traditional Chinese medications, and medical treatment equipment through retail locations. 3. Research and development

Q: Has the pricing environment improved? (Previously TBA).

A: After the drop in 2009, the pricing stablize in 2010. Therefore, there is no pricing impact in 2010 compared to last year.

Q: Who are your main competitors?

A: Every company has their own advantage of territory.Lotus mainly sells products in Inner Mongolia and Anhui products.Other companies have other areas they sell to.Each company won’t invade other people’s territory.Every company has their own customer base.

Q: How is the pharmaceutical industry in China changing?

A: I don't have government statistics, but there is a policy in the rural area where the government allows people to get insured. If they pay 10 yuan, they get reimbursed for 20,000 yuan. So medical expense quantity increased 10%. This should increase the size of our market.

Q: What are some small cap companies in China pharmaceuticals you think will be successful?

A: Any companies that can exist will be successful.

Q: Do you have plans to uplist?

A: Not this year; after the construction of the new factory.We will have a class 1 new drug after construction.At that time, we will try to uplist.

Q: Do you have any need to issue stock or raise capital?

A: At current time, we have decided to raise capital by getting loans because the stock price is not good.When the stock price raises, we might decide to raise capital.

Q: Do you have plans to use an investor relations firm?

A: We have decided to hire a CFO with an American background.He will be hired this quarter.After that, we will use an investor relations firm.

Q: Could I speak with Dr. Ashley about the company?

A: Yes you can talk with him, but he doesn’t know the Chinese situation.Nearly nothing

Q: Why did you change your auditor from Sherb to Friedman?

A: Sherb has low efficiency and Friedman is bigger (top 20).Often, Sherb would delay.

Q: Do you have plans to eventually hire a larger auditor?

A: Currently there is no plan, but if we uplist to a main exchange we might consider that.

Q: How will the new factory effect Revenues?

A: It will be the same like now.The main revenue is from the products manufactured by the factory.The other is acting as an agent of products for other companies.The company has its own sales channels, but we want to increase the product sales in the hospital.

Q: How will the company change in the next 3-5 years? Where will the company be?

A: 25% growth for the next 3 years.

Q: What are the long term goals of the company?

A: Increase the market share, increase the number of people using products, and if capital is sufficient, we want to do acquisitions.

Q: What type of acquisitions do you look for?

A: Two target companies, one is a production company in order to acquire their brands. The other is a marketing company.

Q: How will government changes to the pharmaceutical industry affect lotus? If at all?

A: Very little

Q: Why do you think the stock price is so low?

A: Because the market does not know the company. We have done very little to increase market awareness.

Q: Why not get more market awareness?

A: We are not experts in such area. We are experts in production. At one point, we had IR representation, but they were not very good. That is why we are hiring a new CFO.

Q: What if one of the products came off of the approved government list?

A: If the product quality has a problem it is possible, otherwise it is impossible.

Q: The factory will be done when?

A: End of 2010

Q: Your guidance you issued in your 2010 second quarter release indicates that you may experience a decrease in 2010 second half net margins. Please address. (Previously  TBA).

A: We expect no significant change to our margins in the second half of the year. On the other hand, when we gave our guidance, we were conservative.