SOURCE: Aoxing Pharmaceutical Co., Inc.

November 16, 2010 11:17 ET

Aoxing Pharmaceutical Company Announces First Quarter 2011 Financial and Operational Results

NEW YORK, NY--(Marketwire - November 16, 2010) - Aoxing Pharmaceutical (NYSE Amex: AXN) ("Aoxing Pharma"), a specialty pharmaceutical company focusing on research, development, manufacturing and distribution of narcotic and pain-management products, today announced financial and operational results for the three month period ended September 30, 2010, or the first quarter of fiscal year 2011.

Recent Highlights and Updates

--  Aoxing Pharma has recently completed construction on the dedicated
    newly renovated facility for the joint venture with Johnson Matthey
    Plc. Full GMP certification from the China SFDA and a pharmaceutical
    business license is expected by year-end 2010
--  The chemical synthesis laboratories and pilot-manufacturing plant
    recently passed the GMP inspection of the China State Food and Drug
    Administration (SFDA).
--  Guoan Zhang, formerly the Controller for Aoxing Pharma's subsidiary,
    Hebei Aoxing Pharmaceutical Co., Inc., has been appointed interim CFO.

Financial Results:

Revenues for the three months ended September 30, 2010 were $1,740,673 representing a 20% increase over the revenues of $1,446,663 realized during the three months ended September 30, 2009, reflecting the positive impact of the recent sales team expansion. Revenues continue to be negatively affected by the need to obtain GMP re-certification for each product. Aoxing Pharma is currently in the final stage of passing the GMP re-certification of pill formulation production, so expect additional sales from pill based formulations in 2011.

Cost of sales was $827,295 for three months ended September 30, 2010, which was 84% higher than the $450,143 in costs incurred during the three month ended September 30, 2009. The gross margin ratio decreased from 69% in the three months ended September 30, 2009 to 52% in the three months ended September 30, 2010. The primary reason for the decrease in gross margin was higher raw material cost along with increased labor and utility costs. For these reasons, the gross profit of $913,379 during the three months ended September 30, 2010 was 8% lower than the $996,520 gross profit realized during the three months ended September 30, 2009.

General and administrative expenses were $909,057 in the three months ended September 30, 2010, or 4% higher than the $877,484 expenses incurred in the three months ended September 30, 2009.

Selling expenses in the amount of $511,821 during the three months ended September 30, 2010 were a 96% increase from the $260,894 spent on selling during the three months ended September 30, 2009. The increase was primarily due to the recent expansion of our sales and marketing team and product promotion activities. We expect such expansion activities will continue to the end of calendar year 2010, with the result that selling expenses for fiscal year 2011 will be significantly higher than in fiscal 2010.

Loss from operations increased to $744,991 during the three months ended September 30, 2010 from $364,378 during the three months ended September 30, 2009. The 104% increase in the loss was primarily due to the reduced gross margin on sales and to the expenses resulting from the ongoing expansion of the sales and marketing team and product promotion.

Mr. Zhenjiang Yue, Chairman and Chief Executive Officer of China Aoxing, commented, "Following the recent completion of the dedicated facility for the joint venture with Johnson Matthey and with full GMP certification expected by year-end and with the expected GMP re-certification of pill formulation production, we are poised for a very successful 2011. We continue to be pleased with our quarterly results, as our financial condition remains strong. We look forward to re-launching our recertified products, launching new products and begin manufacturing API for the China markets in the calendar year 2011."

About Aoxing Pharmaceutical Company, Inc.

Aoxing Pharmaceutical Company, Inc is a US incorporated specialty pharmaceutical company with its operations in China, specializing in research, development, manufacturing and distribution of a variety of narcotics and pain-management products. Headquartered in Shijiazhuang City, outside Beijing, Aoxing has the largest and most advanced manufacturing facility in China for highly regulated narcotic medicines. Its facility is one of the few GMP facilities licensed for the manufacture of narcotic medicines by the China State Food and Drug Administration (SFDA). It has a joint venture collaboration with Johnson Matthey Plc to produce and market narcotics and neurological drugs in China. It also has strategic alliance partnerships with QRxPharma, Phoenix PharmaLabs, Inc and American Oriental Bioengineering, Inc. For more information, please visit: www.aoxingpharma.com.

Safe Harbor Statement from Aoxing Pharmaceutical Company, Inc

Statements made in this press release are forward-looking and are made pursuant to the safe harbor provisions of the Securities Litigation Reform Act of 1995. Such statements involve risks and uncertainties that may cause actual results to differ materially from those set forth in these statements. The economic, competitive, governmental, technological and other risk factors identified in the Company's filings with the Securities and Exchange Commission, including the Form 10-K for the year ended June 30, 2010, may cause actual results or events to differ materially from those described in the forward looking statements in this press release. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether because of new information, future events, or otherwise.

             AOXING PHARMACEUTICAL CO., INC. AND SUBSIDIARIES
                        CONSOLIDATED BALANCE SHEETS


                                                  September       June
                                                    2010          2010
                      ASSETS
CURRENT ASSETS:
  Cash                                          $  3,450,647  $  3,985,710
  Accounts receivable, net                         2,261,219     1,724,198
  Loan receivable                                    415,545       748,790
  Inventory                                        1,397,839     1,564,975
  Deposits with suppliers                            486,764       475,042
  Prepaid expenses and sundry current assets         485,254       421,391
                                                ------------  ------------
TOTAL CURRENT ASSETS                               8,497,270     8,920,106
                                                ------------  ------------

LONG-TERM ASSETS
Property and equipment, net of accummulated
 depreciation                                     26,460,534    25,569,782
Other intangible assets                            1,426,137     1,431,182
Goodwill                                          19,279,940    19,012,321
Deferred tax assets                                3,331,045     3,394,103
                                                ------------  ------------
TOTAL LONG-TERM ASSETS                            50,497,656    49,407,388
                                                ------------  ------------

TOTAL ASSETS                                    $ 58,994,927  $ 58,327,494
                                                ============  ============

             LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
  Short-Term borrowings                         $  1,045,072  $    293,746
  Accounts payable                                 3,122,749     2,965,514
  Current portion of long term debt - other           47,775        46,999
  Current portion of long term debt -
   related parties                                    96,228        94,760
  Accrued expenses and taxes payable and
   other sundry current liabilities                2,113,302     2,076,555
     Loan payable - Bank                           8,211,284     8,078,019
                                                ------------  ------------
TOTAL CURRENT LIABILITIES                         14,636,410    13,555,593
                                                ------------  ------------

LONG-TERM DEBT -- RELATED PARTIES                  6,433,532     6,329,118
                                                ------------  ------------
                         -- OTHER                  2,258,598     2,221,943
                                                ------------  ------------
WARRANT AND DERIVATIVE LIABILITIES                 1,690,817     1,913,534
                                                ------------  ------------

Common stock, par value $0.001,
 100,000,000 shares authorized,
 46,494,903 shares issued and outstanding
 at September 30, 2010 and June 30, 2010              46,495        46,495
Additional paid in capital                        49,736,600    49,594,553
Accumulated deficit                              (16,252,539)  (15,598,600)
Other comprehensive income                           735,721       525,555
                                                ------------  ------------
TOTAL STOCKHOLDERS' EQUITY OF THE COMPANY         34,266,277    34,568,003
                                                ------------  ------------

NONCONTROLLING INTEREST IN SUBSIDIARIES             (290,707)     (260,697)
                                                ------------  ------------
TOTAL EQUITY                                      33,975,570    34,307,306
                                                ------------  ------------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY      $ 58,994,927  $ 58,327,494
                                                ============  ============




             AOXING PHARMACEUTICAL CO., INC. AND SUBSIDIARIES
             CONSOLIDATED STATEMENTS OF OPERATIONS AND OTHER
                       COMPREHENSIVE INCOME (LOSS)

                                                For the three months ended
                                                       September 30,
                                                    2010          2009

SALES                                           $  1,740,673  $  1,446,663
COST OF SALES                                        827,295       450,143
                                                ------------  ------------
GROSS PROFIT                                         913,379       996,520
                                                ------------  ------------

COSTS AND EXPENSES:
  Research and development expense                    85,448       113,303
  General and administrative expenses                909,057       877,484
  Selling expenses                                   511,821       260,894
  Depreciation and amortization                      152,044       109,217
                                                ------------  ------------
      TOTAL COSTS AND EXPENSES                     1,658,370     1,360,898
                                                ------------  ------------

LOSS FROM OPERATIONS                                (744,991)     (364,378)
                                                ------------  ------------

OTHER INCOME (EXPENSE):
  Interest expense, net of interest income          (374,781)     (592,084)
  Change in fair value of warrant and
   derivative liabilities                            222,717    (2,142,159)
  Gain on foreign currency transactions                    0             0
  Loss on disposal of assets                               0       (21,416)
                                                ------------  ------------
     TOTAL OTHER INCOME (EXPENSE)                   (152,064)   (2,755,659)
                                                ------------  ------------

INCOME (LOSS) BEFORE INCOME TAXES                   (897,055)   (3,120,037)

Income taxes (credit)                               (202,596)     (809,253)
                                                ------------  ------------
NET INCOME (LOSS)                                   (694,459)   (2,310,784)

Net loss attributed to non-controlling interest      (40,519)      (16,175)
                                                ------------  ------------
INCOME (LOSS) ATTRIBUTABLE TO THE SHAREHOLDERS
 OF THE COMPANY                                     (653,939)   (2,294,609)

OTHER COMPREHENSIVE INCOME (LOSS) :
  Foreign currency translation adjustment            220,674        37,678
                                                ------------  ------------

COMPREHENSIVE INCOME (LOSS)                     $   (433,266)   (2,256,931)
                                                ============  ============

Other comprehensive income attributable to
 non-controlling interest                             10,508             0
                                                ------------  ------------

COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO THE
 COMPANY                                        $   (443,774)   (2,256,931)
                                                ============  ============


BASIC AND DILUTED EARNINGS (LOSSES) PER COMMON
 SHARE                                                 (0.01)        (0.05)
                                                ============  ============
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING     46,475,780    43,705,662
                                                ============  ============




             AOXING PHARMACEUTICAL CO., INC. AND SUBSIDIARIES
                  CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                For the three months ended
                                                        September 30,
                                                      2010         2009

OPERATING ACTIVITIES:
 Net income (loss)                              $   (653,939) $ (2,294,609)
  Adjustments to reconcile net loss to net cash
   used in operating activities:
      Depreciation and amortization                  283,679       284,634
      Deferred tax assets                           (202,596)     (809,253)
      Loss on desposal on assets                           -        21,416
      Non-cash interest expense related to
       debentures and warrants                             -        44,780
      Stock issued for services                      142,048       202,227
      Change in fair value of warrants and
       derivative liability                         (222,717)    2,142,159
      Minority interest                              (40,519)      (16,175)
  Changes in operating assets and liabilities:
       Accounts receivable                          (509,708)     (241,022)
       Inventories                                   192,954      (159,213)
       Prepaid expenses and sundry current
        assets                                       (59,890)      (18,417)
       Accounts payable                              108,312       115,423
       Accrued expenses, taxes and sundry
        current liabilities                          (15,265)      485,074
                                                ------------  ------------
NET CASH USED IN OPERATING ACTIVITIES               (977,643)     (242,976)
                                                ------------  ------------

INVESTING ACTIVITIES:
  Acquisition of property and equipment             (723,945)     (293,018)
  Loans to unrelated parties                         345,597             -
  Cash Proceeds from sale of assets                        -       950,626
                                                ------------  ------------
NET CASH USED IN INVESTING ACTIVITIES               (378,347)      657,608
                                                ------------  ------------

FINANCING ACTIVITIES:
Proceeds from bank loan                              746,480
  Other borrowings                                         -      (210,257)
  Loans from related party                                 -        (1,121)
  Sale of common stock                                     -     5,000,000
                                                ------------  ------------
NET CASH PROVIDED BY FINANCING ACTIVITIES            746,480     4,788,622
                                                ------------  ------------

EFFECT OF EXCHANGE RATE ON CASH                       74,446       (57,895)
                                                ------------  ------------

INCREASE (DECREASE) IN CASH                         (535,063)    5,145,359
CASH - BEGINNING OF YEAR                           3,985,710     1,271,922
                                                ------------  ------------
CASH - END OF YEAR                              $  3,450,647     6,417,281
                                                ============  ============

Supplemental disclosures of cash flow
 information:
  Non-cash financing activities:
     Conversion of 33MM RMB AOB loan and
      accrued interest into common stock                   -     4,830,847
                                                ============  ============

Contact Information

  • CONTACT:

    Investor Relations:
    The Trout Group
    Brian Korb
    646-378-2923