SOURCE: China Aoxing Pharmaceutical Co., Inc.

November 18, 2008 16:00 ET

China Aoxing Pharmaceutical Company Announces First Quarter Fiscal Year 2009 Financial Results

NEW YORK, NY--(Marketwire - November 18, 2008) - China Aoxing Pharmaceutical Company, Inc. (OTCBB: CAXG) ("China Aoxing"), a China-based pharmaceutical company specializing in research, development, manufacturing and distribution of narcotic and pain-management products, today announced its unaudited financial results for the first quarter of fiscal year 2009, which ended on September 30, 2008.

Highlights for the Quarter Ended September 30, 2008

--  Revenues increased 161% year over year to $3.60 million, driven by the
    contribution from our newly acquired subsidiary, LRT.
--  Gross profit reached $1.94 million, an increase of $0.91 million, or
    120%, year over year, reflecting higher net sales as well as the
    contribution of our newly acquired subsidiary, LRT.
--  Net income was $0.63 million, or $0.008 per share, as compared to the
    $1.81 million reported for the first quarter of fiscal 2008.
    

Mr. Juan Yue Han, China Aoxing's Chief Executive Officer and Chairman, stated, "We are pleased with our financial performance. The quarter, which seasonally is our weakest, was also adversely affected by the proximity of our factory to the site of the Beijing Olympic Games, which caused significant logistical problems and sharply increased expenses for utilities and shipping. On the other hand, we are continuing our integration efforts for our newly acquired subsidiary, LRT. Going forward, we expect to continue improving our profitability, as well as accelerating our R&D efforts in narcotic drug pipeline."

Balance Sheet

As of September 30, 2008, the Company had cash of $1.30 million. This compares to $1.57 million as of September 30, 2007.

During this quarter, the Company paid 10 million RMB to its principal lender and the lender forgave an additional 10 million RMB, or $1.46 million, owed by the Company. In addition, the maturity date of the Company's bank debt was extended to December 31, 2009 with an outstanding balance in the amount of $6.09 million. The Company continues its negotiation with its loan issuer for further loan forgiveness and reduction.

Business Highlights

--  China Aoxing continues moving forward its clinical trial development
    programs, under SFDA filings, including Tilidine, Codeine Phosphate, and
    other narcotic drug products. The Company is planning to report the
    clinical results once available.
--  The Company is accelerating the development in its laboratory of
    additional 5 new products using novel and more effective drug delivery
    technologies, such as oral film. The Company expects to file application
    with the SFDA on these products in proprietary forms and initiate clinical
    trials in year 2009.
--  Most recently, the Company announced the newly elected members of its
    Board of Directors. The Company believes that the new Board of Directors
    provides the leadership and diverse experience needed to guide the Company
    smoothly in navigating through the evolving US capital market and China
    pharmaceutical industry.
    

About China Aoxing Pharmaceutical Company, Inc.

China Aoxing Pharmaceutical Company, Inc. (OTCBB: CAXG) is a pharmaceutical company located in China specializing in research, development, manufacturing and distribution of a variety of narcotics and pain-management products. Headquartered in Shijiazhuang City, the pharmaceutical capital of China, outside of Beijing, the Company has China's largest product pipeline and largest manufacturing facility (1.2 million sq. ft.) for highly regulated narcotic medicines, addressing a very under-served and fast-growing market in China. Its facility is one of the few GMP facilities licensed for narcotics medicines. The Company has two drugs on the market and has received China SFDA licenses for research and clinical development of seven more medications, including Oxycodone, Tilidine, Buprenorphine and Pholcodine. The Company is working closely with the Chinese government and SFDA to assure the strictly regulated availability to medical professionals of its narcotic drugs and pain medicines throughout China.

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-KSB for the year ended June 30, 2008, 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.


         CHINA AOXING PHARMACEUTICAL CO., INC. AND SUBSIDIARIES

                       CONSOLIDATED BALANCE SHEETS

                                               September 30,     June 30,
                                                    2008           2008
                                                (Unaudited)
                                 ASSETS
CURRENT ASSETS:
  Cash                                          $  1,299,275  $  1,565,513
  Accounts receivable                              2,802,649     2,536,047
  Inventories                                        678,765       848,959
  Prepaid expenses and sundry current assets         410,748       303,208
                                                ------------  ------------
    TOTAL CURRENT ASSETS                           5,191,437     5,253,727
                                                ------------  ------------

LONG-TERM ASSETS:
  Property and equipment, net of accumulated
   depreciation                                   30,056,983    30,331,143
  Goodwill                                        18,902,282    18,904,845
  Other intangible assets                          1,634,099     1,635,375
                                                ------------  ------------
    TOTAL LONG-TERM ASSETS                        50,593,364    50,871,363
                                                ------------  ------------
TOTAL ASSETS                                    $ 55,784,801  $ 56,125,090
                                                ============  ============



                  LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
  Short-term borrowings                         $  3,648,720  $  2,042,600
  Accounts payable                                 3,600,336     3,544,795
  Current portion of loan payable - other            160,840       380,070
  Loan from stockholders                             112,051       112,068
  Accrued expenses and taxes payable               3,449,153     4,851,314
  Current portion of notes payable - bank          5,836,000     7,545,239
                                                ------------  ------------
    TOTAL CURRENT LIABILITIES                     16,807,100    18,476,086
                                                ------------  ------------

LONG-TERM DEBT - BANK                                249,271             -
                                                ------------  ------------
               - STOCKHOLDER                       4,098,035     4,098,687
                                                ------------  ------------
               - OTHER                             3,499,131     3,127,643
                                                ------------  ------------
CONVERTIBLE DEBENTURES                               889,392     1,098,362
                                                ------------  ------------
MINORITY INTEREST                                     79,830        24,598
                                                ------------  ------------
WARRANT AND DERIVATIVE LIABILITIES                 3,848,357     4,161,678
                                                ------------  ------------

STOCKHOLDERS' EQUITY:
  Common stock, par value $0.001
   100,000,000 shares authorized
   81,564,555 and 81,089,911 shares issued and
   outstanding                                        81,565        81,090
  Preferred stock, par value $0.001
   300,000 shares authorized
   277,018 shares issued and outstanding                 277           277
  Additional paid-in capital                      37,272,662    36,749,956
  Accumulated deficit                            (11,688,059)  (12,314,178)
  Other comprehensive income                         647,240       620,891
                                                ------------  ------------
    TOTAL STOCKHOLDERS' EQUITY                    26,313,685    25,138,036
                                                ------------  ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY      $ 55,784,801  $ 56,125,090
                                                ============  ============




         CHINA AOXING PHARMACEUTICAL CO., INC. AND SUBSIDIARIES

     CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

                                                   Three Months Ended
                                                       September 30,
                                                    2008          2007
                                                 (Unaudited)   (Restated)

SALES                                           $  3,598,065  $  1,380,294

COST OF SALES                                      1,937,345       625,653
                                                ------------  ------------

GROSS PROFIT                                       1,660,720       754,641
                                                ------------  ------------

OPERATING EXPENSES:
  Research and development                           266,329        57,262
  General and administrative                       1,192,892       538,290
  Selling expense                                    631,018       276,813
  Depreciation and amortization                      144,458       118,812
                                                ------------  ------------
    TOTAL OPERATING EXPENSES                       2,234,697       991,177
                                                ------------  ------------

LOSS FROM OPERATIONS                                (573,977)     (236,536)

OTHER INCOME (EXPENSES):
  Interest expense                                  (475,494)     (695,561)
  Change in fair value of warrant and
   derivative liabilities                            147,727     2,675,652
  Gain on foreign currency transaction               203,037             -
  Forgiveness of debt                              1,459,751             -
                                                ------------  ------------

INCOME BEFORE MINORITY INTEREST AND INCOME
 TAXES                                               761,044     1,743,555

MINORITY INTEREST IN (INCOME) LOSSES OF
 SUBSIDIARY                                          (55,232)       18,606
                                                ------------  ------------

INCOME BEFORE INCOME TAXES                           705,812     1,762,161

INCOME TAXES                                          79,693             -
                                                ------------  ------------

NET INCOME                                           626,119     1,762,161

OTHER COMPREHENSIVE INCOME:
  Foreign currency translation adjustment             26,349        44,288
                                                ------------  ------------

COMPREHENSIVE INCOME                            $    652,468  $  1,806,449
                                                ============  ============


Basic and diluted earnings (loss) per common
 share                                          $      0.008  $       0.04
                                                ============  ============

Weighted average number of shares outstanding     81,205,779    40,098,373
                                                ============  ============




         CHINA AOXING PHARMACEUTICAL CO., INC. AND SUBSIDIARIES

                  CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                    Three Months Ended
                                                      September 30,
                                                    2008          2007
                                                 (Unaudited)   (Restated)

OPERATING ACTIVITIES:
  Net income (loss)                             $    626,119  $  1,762,161
  Adjustments to reconcile net loss to net
   cash used in operating activities:
    Depreciation and amortization                    311,599       177,072
    Forgiveness of debt                           (1,459,751)            -
    Non-cash interest expense related to
     convertible debentures and warrants              81,030       436,258
    Stock issued for services                              -       179,932
    Change in fair value of warrants and
     derivative liabilities                         (147,727)   (2,675,652)
    Minority interest                                 55,232       (18,606)
  Changes in operating assets and liabilities:
    Accounts receivable                             (267,123)      (41,757)
    Inventories                                      170,019       (98,856)
    Prepaid expenses and sundry current assets      (107,574)      (81,737)
    Accounts payable                                  56,269      (270,300)
    Accrued expenses, taxes and sundry current
     liabilities                                      61,415       331,933
                                                ------------  ------------
NET CASH USED IN OPERATING ACTIVITIES               (620,492)     (299,552)
                                                ------------  ------------

INVESTING ACTIVITIES:
  Acquisition of property and equipment, net         (55,975)       (9,915)
                                                ------------  ------------
NET CASH USED IN INVESTING ACTIVITIES                (55,975)       (9,915)
                                                ------------  ------------

FINANCING ACTIVITIES:
  Repayment of bank borrowings                    (1,458,417)            -
  Other borrowings                                 1,759,460        67,284
  Loans from stockholders                                  -      (463,378)
  Sale of convertible debentures                           -       160,000
                                                ------------  ------------
NET CASH PROVIDED BY FINANCING ACTIVITIES            301,043      (236,094)
                                                ------------  ------------

EFFECT OF EXCHANGE RATE ON CASH                      109,486        65,155
                                                ------------  ------------

DECREASE IN CASH                                    (265,938)     (480,406)
CASH - BEGINNING OF PERIOD                         1,565,213     1,511,127
                                                ------------  ------------
CASH - END OF PERIOD                            $  1,299,275  $  1,030,721
                                                ============  ============

Non-cash financing activities:
  Conversion of convertible debentures          $    290,000  $    360,000
                                                ============  ============
  Common stock issued as payment for accrued
   interest                                     $     25,570  $     25,829
                                                ============  ============

Contact Information

  • Contact:

    Investor Relations
    China Aoxing Pharmaceutical Company, Inc
    (Tel) 646 - 512 - 5662