SOURCE: AXM Pharma, Inc.

August 15, 2005 16:00 ET

AXM Pharma Announces Record Revenue and Profit

LAS VEGAS, NV -- (MARKET WIRE) -- August 15, 2005 -- AXM Pharma, Inc. (AMEX: AXJ) announced today financial results for the quarter ended June 30, 2005.

During the three-month period ended June 30, 2005 AXM entered into the Company's first three international markets for its line of Sunkist labeled products. The new markets where products were launched were Hong Kong, Taiwan and Shanghai. This -- combined with the ramp up of AXM's new factory in Shenyang, China -- enabled the Company to record the best sales quarter in its history. Sales for the three months ended June 30, 2005 were $3,220,978, representing a sales increase of $2,242,315 or 229%, from the three-month period ended June 30, 2004. Sales for the six-month period ended June 30, 2005 were $3,249,238 compared to $2,097,628 for the six months ended June 30, 2004. This represents an increase of $1,151,610 or 54%.

Gross profit for the three months ended June 30, 2005 was $1,707,838 compared to $513,228 for the three-month period ended June 30, 2004, an increase of $1,194,610 and 232%. This tripling of the gross profit is attributable to the record sales reported for the quarter. For the six months ended June 30, 2005, the gross profit was $1,712,623 or an increase of $660,767, 62% greater than the comparable six-month period last year. Operating income for the three months ended June 30, 2005 was $678,348 compared to an operating loss of $4,353,251.

During the quarter ended June 30, 2005, AXM had total general and administrative expense of $1,029,490 compared to $4,866,479 for the comparable period in 2004, a decrease of $3,836,989. This general and administrative expense included $301,266 in non-cash general and administrative expense. For the sixth month period ended June 30, 2005, we had total general and administrative expenses of $4,136,568 compared to $7,900,493, a decrease of $3,763,925. This general and administrative expense included approximately $1,600,000 in non-cash general administrative expense.

The reason for the significant improvement in both cash and non-cash general and administrative expenses was the lack of significant consulting expense as compared to the prior year while AXM's new factory was undergoing construction and the Company was establishing infrastructure to enter various markets.

During the quarter the Company incurred $498,939 in interest expense with $126,755 in interest on bank loans in AXM's subsidiary in Shenyang China and $372,184 in interest charges relating to the debt discount on notes payable financing in April 2005.

AXM generated its first quarterly net profit two quarters ahead of management expectations. For the three months ended June 30, 2005 AXM had net income of $179,409 compared to a loss of $4,353,251 for the three months ended June 30, 2004. This represents an improvement of $4,532,660.

This significant improvement in operating results was the result of large increases in sales and corresponding gross profit improvements coupled with reductions in general and administrative expense as well as the reduction of costs associated with completion of our factory and resultant reductions in outside consulting expense.

"We are extremely pleased with the progress we have made as a company in 2005," said Chet Howard, CEO, AXM Pharma Inc. "We have spent a considerable amount of time, capital, and effort to build a new factory and establish ourselves as a strong, independent player in both China and the broader Asian marketplace and we're proud of how far we have come."

AXM Pharma Inc., http://www.axmpharma.com, through its wholly owned subsidiary, Werke Pharmaceuticals, Inc., is the 100% owner of AXM Pharma Shenyang, Inc. ("AXM Shenyang"), a Wholly Foreign Owned Enterprise ("WFOE") under the laws of the People's Republic of China. AXM Shenyang is located in the City of Shenyang, in the Province of Liaoning, China. AXM Shenyang and its predecessor company Shenyang Tianwei Pharmaceutical Factory, Ltd. ("STPF"), has an operating history of approximately 10 years. AXM Shenyang historically has been a manufacturer of proprietary and generic pharmaceutical products, which include injectables, capsules, tablets, liquids and medicated skin products for export and domestic Chinese sales. For additional information on AXM Pharma Inc, please visit http://www.iccinfo.com or call Investor Communications Company, LLC at 866 562 0134.

Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995: The statements contained in this news release include certain predictions and projections that may be considered forward-looking statements under securities law. These statements involve a number of important risks and uncertainties that could cause actual results to differ materially including, but not limited to, the performance of joint venture partners, as well as other economic, competitive and technological factors involving the Company's operations, markets, services, products and prices. With respect to AXM, except for the historical information contained herein, the matters discussed in this news release are forward-looking statements involving risks and uncertainties that could cause actual results to differ materially from those in such forward-looking statements. Potential risks and uncertainties include, but are not limited to, AXM's extremely limited operating history, uncertainties related to the Company's access to additional capital, competition and dependence on key management.


               AXM PHARMA, INC. AND SUBSIDIARIES
                 CONSOLIDATED BALANCE SHEETS
                        (Unaudited)
                                           June 30,       December 31,
                                             2005             2004
                                         ------------     ------------

ASSETS
Current Assets
  Cash                                   $    559,382     $  1,255,681
  Accounts Receivable, net of
   allowance                                3,253,055           30,750
  Inventory                                 2,186,815        2,002,130
  Advances, Suppliers                       1,000,770          442,121
  Other Current Assets                          2,980                0
                                         ------------     ------------

    Total Current Assets                    7,003,452        3,730,682

Property & Equipment, Net                   7,661,524        7,160,376
Licenses                                    1,499,888        1,449,888
                                         ------------     ------------

TOTAL ASSETS                             $ 16,164,864     $ 12,340,946
                                         ============     ============

LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Short Term Loan                          $  3,273,161     $  1,001,668
Value Added Tax Payable                        18,998            3,015
Accounts Payable and accrued expense        3,815,031        4,342,013
                                         ------------     ------------

Total Current Liabilities                   7,107,190        5,346,696

Long Term Notes                               372,184                0

STOCKHOLDERS' EQUITY
Series A, Preferred stock, $.001 par
 value, 10,000,000 shares authorized,
 938,200 shares issued and outstanding            938            1,675
Series B Preferred stock, $.001 par
 value, 2,000,000 shares authorized,
 no shares issued and outstanding                   -                -
Series C Preferred stock, $.001 par
 value, 100 shares authorized, 17.425
 shares issued and outstanding                      -                -
Common Stock, $.001 par value,
 50,000,000 shares authorized,
 19,564,085 shares issued and
 outstanding                                   19,564           18,036
Additional paid-in capital                 30,855,810       26,242,477
Accumulated deficit                       (22,190,822)     (19,267,938)
                                         ------------     ------------

Total Equity                                8,685,490        6,994,250

Liabilities and Equity                   $ 16,164,864     $ 12,340,943
                                         ============     ============


                        AXM PHARMA, INC.
             CONSOLIDATED STATEMENTS OF OPERATIONS
                         (Unaudited)

                           Three Months Ended         Six Months Ended
                                June 30,                   June 30,
                           2005         2004          2005         2004
                       -----------  -----------   -----------  -----------
Revenues               $ 3,220,978  $   978,663   $ 3,249,238  $ 2,097,628

Cost of Revenues         1,513,140      465,435     1,536,615    1,045,772
                       -----------  -----------   -----------  -----------

Gross Profit             1,707,838      513,228     1,712,623    1,051,856

General, Administrative
 and Selling:
  Cash                     728,224    3,199,679     2,575,354    4,568,693
  Non-cash                 301,266    1,666,800     1,561,214    3,331,800
                       -----------  -----------   -----------  -----------

Total general,
 administrative
 and selling             1,029,490    4,866,479     4,136,568    7,900,493
                       -----------  -----------   -----------  -----------

Operating Income (Loss)    678,348   (4,353,251)   (2,423,945)  (6,848,637)

Interest Expense           498,939            -       498,939            -
                       -----------  -----------   -----------  -----------

Net Income (Loss)      $   179,409  $(4,353,251)  $(2,922,884) $(6,848,637)

Net Income (Loss)
 applicable to
 common shareholders:
  Net Income (Loss)    $   179,409  $(4,353,251)  $(2,922,884) $(6,848,637)
  Beneficial conversion
   features of
   preferred stock              -      (827,838)            -   (1,775,466)
  Deemed dividend
   from beneficial
   Conversion of
   warrants              (107,015)      (84,051)     (214,030)    (221,440)
                       -----------  -----------   -----------  -----------

Net Income (Loss)
 applicable to
 common shareholders   $    72,394  $(5,265,140)  $(3,136,914) $(8,845,543)
                       ===========  ===========   ===========  ===========
Net Income (Loss)
 per share:            $      0.00  $     (0.35)  $     (0.17) $     (0.60)
  Basic and diluted
  Weighted averaged
   shares outstanding:
    Basic and diluted   19,439,379   15,221,836    18,971,432   14,708,684


                               AXM PHARMA, INC.
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                         Six  Months Ended June 30,
                                (Unaudited)

                                                    2005            2004
                                               -----------     -----------

CASH FLOWS FROM OPERATING ACTIVITIES
  Net loss                                     $(2,922,884)    $(6,848,637)
  Adjustments to reconcile net loss to
   cash used in operating activities:
    Common stock  issued for services
     and interest                                1,580,124       3,331,800
    Depreciation and amortization                   47,916          20,100
    Non-cash interest expense                      372,184               -
      Changes in assets and liabilities:
      Accounts receivable                       (3,222,305)      1,786,077
      Advances, suppliers                         (558,649)        917,520
      Inventories                                 (184,685)       (732,259)
      Accounts payable and accrued expenses       (526,982)       (192,044)
      Value added tax payable                       15,983      (2,239,162)
                                               -----------     -----------

CASH FLOWS USED IN OPERATING ACTIVITIES         (5,399,298)     (3,956,605)
                                               -----------     -----------

CASH FLOWS FROM INVESTING ACTIVITIES
  Capital expenditures                            (602,044)     (1,326,954)
                                               -----------     -----------

CASH FROM FINANCING ACTIVITIES
  Proceeds from notes payable                    3,034,000       6,492,963
  Proceeds from bank loans                       2,271,493               -
                                               -----------     -----------

CASH FROM FINANCING ACTIVITIES                   5,305,493       6,492,963
                                               -----------     -----------

NET INCREASE IN CASH                              (695,849)      1,209,404

Cash, beginning of period                        1,255,681       2,950,782
                                               -----------     -----------

Cash, end of period                            $   559,832     $ 4,160,186
                                               ===========     ===========

Contact Information

  • Contact:
    Contact Information:
    Tom Bostic
    Investor Communications Company, LLC
    (866) 562-0134