American Oriental Bioengineering, Inc. Reports Second Quarter 2007 Financial Results

NEW YORK, Aug. 8 /PRNewswire-FirstCall/ -- American Oriental Bioengineering, Inc. , a leading manufacturer and distributor of plant-based pharmaceutical and nutraceutical products, today announced financial results for the second quarter of 2007.

Revenues for the second quarter of 2007 increased 48.7% to $33.9 million from $22.8 million in the second quarter of 2006. Revenue from PBP products increased 64.6% to $26.0 million from $15.8 million in the prior year's second quarter, driven primarily by $11.5 million in revenues from the Jinji products series, including the Company's newly launched Yi Mu Cao product, and by slightly better than expected revenues from prescription products, including the Cease Enuresis Gel. Within the PBP product category, prescription product revenue increased 15% to $11.5 million compared to $10.0 million in the prior year period. OTC product revenue increased 150% to $14.5 million from $5.8 million in the prior year period. Revenue from PBN products increased 14.5% to $7.9 million from $6.9 million in the second quarter of 2006, due to increased demand for the Company's soy peptide products.

Gross profit in the second quarter of 2007 increased 61.2% to $23.7 million from $14.7 million in the second quarter of 2006. Gross profit margin increased 550 basis points to a record 69.9% from 64.4% in the prior year's period. The increase in gross profit was a result of increased sales of OTC products, which carry higher margins, and improved operating efficiencies across all business segments.

Operating expenses in the second quarter increased 58.4% to $12.2 million compared to $7.7 million in the prior year period. This increase was a result of additional expenses related to GLP and the Jinji product promotional effort that were not associated with the company in the prior year period, as well as increased marketing and advertising expenses related to the Company's efforts to increase market awareness of its brands and products and higher selling expenses to support the Company's growth. Operating income for the second quarter increased 64.3% to $11.5 million from $7.0 million in the second quarter of 2006. Operating income as a percent of sales in the second quarter increased 310 basis points to 33.9% compared to 30.8% in the prior year period.

Net Income for the second quarter of 2007 increased 67.2% to $9.7 million, or $0.15 per diluted share, compared to $5.8 million, or $0.09 per diluted share, in the prior year period.

Mr. Tony Liu, Chairman and Chief Executive Officer of American Oriental Bioengineering commented, "We are pleased to report another quarter of continued growth in our business. Each of our three core product categories - prescription, OTC and nutraceuticals -- all experienced growth in the second quarter with the largest contribution coming from our OTC business. We continue to successfully integrate acquisitions and launch new products such as our Jinji Yi Mu Cao product that contribute to our revenue performance and increase our brand strength. As our revenue grows, our ability to manage costs allow us to realize economies of scale that contribute to overall profitability."

Mr. Liu continued, "We successfully raised $74.0 million through a secondary offering recently. Our enhanced cash position allows us to fulfill our goal of acquiring companies that can quickly add value to our business model. In mid-June, we announced our intention to acquire Changchun Xinan Pharmaceutical Group ("CCXA") and today we announced our intention to acquire Guangxi Boke Pharmaceutical Company ("Boke"). Each of these companies will allow us the opportunity to increase our profitability and expand our market presence in China."

Financial Expectations

For the third quarter of 2007, the Company anticipates revenue of approximately $42.0 million, a 55% increase compared to third quarter 2006 revenues of $27.1 million, with the majority of this revenue growth coming from products that serve the OTC market, primarily the Jinji product portfolio. Third quarter revenue assumes approximately $1.0 million in revenue from the previously announced CCXA acquisition, assuming an August 2007 close. The Company anticipates diluted earnings per share of approximately $0.15, based on an estimated weighted average diluted share count of 76.0 million for the third quarter.

For the full 2007 fiscal year, the Company anticipates revenue of approximately $158 million, a 43% increase compared to prior year revenues of $110.2 million. This guidance includes approximately $8.0 million in revenues from CCXA and the newly announced Boke acquisition. This assumes an August acquisition close for CCXA and an acquisition close for Boke at the end of the Company's third quarter 2007. For the full year, the Company anticipates diluted earnings per share of approximately $0.60, based on an estimated weighted average diluted share count of 72.0 million for the full year. This guidance does not account for any other potential acquisitions for the remainder of 2007.

Mr. Liu stated, "We believe the remainder of 2007 is going to be an exciting time for the company and we are very pleased with our revenue guidance for the full year, which represents a strong year-over-year increase in organic growth. We are focused on growing our Company through not only our existing, highly-regarded product line of plant-based pharmaceutical and nutraceutical products, but also through acquisitions and new product launches, both of which help to increase brand awareness of our products and further improve our revenue opportunities."

"We remain committed to building the strongest possible portfolio of products and believe that our flexible business model combined with our strong financial position enables us to capitalize on a broad array of opportunities by quickly adapting to changes in the marketplace and growing our business through opportunistic and well-timed acquisitions. We look forward to continuing our efforts to establish AOBO as a leading integrator and cultivator of plant-based medicine products," concluded Liu.

The Company will conduct a conference call to discuss the second quarter 2007 results today, Wednesday, August 8, 2007 after the market close at 4:30 pm ET. Listeners may access the call by dialing 1-913-312-1296. A webcast will also be available on Company's website at www.bioaobo.com. A replay of the call will be available through August 15, 2007. Listeners may access the replay by dialing 1-719-457-0820, password 4951067.

About American Oriental Bioengineering Inc.

American Oriental Bioengineering Inc. is a leading, fully integrated, plant based pharmaceutical and plant based nutraceutical company dedicated to improving health through the development, manufacture and commercialization of modernized plant based products in China. For more information, visit http://www.bioaobo.com.

This news release contains forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. Forward-looking statements include statements concerning plans, objectives, goals, strategies, future events or performance, and underlying assumptions and other statements that are other than statements of historical facts. These statements are subject to uncertainties and risks including, but not limited to, product and service demand and acceptance, changes in technology, economic conditions, the impact of competition and pricing, government regulation, and other risks contained in reports filed by the Company with the Securities and Exchange Commission. All such forward-looking statements, whether written or oral, and whether made by or on behalf of the company, are expressly qualified by the cautionary statements and any other cautionary statements which may accompany the forward-looking statements. In addition, the company disclaims any obligation to update any forward-looking statements to reflect events or circumstances after the date hereof.

AMERICAN ORIENTAL BIOENGINEERING, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (UNAUDITED) THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30, JUNE 30, 2007 2006 2007 2006 REVENUES $33,913,234 $22,761,882 $59,662,608 $41,808,826 COST OF GOODS SOLD 10,210,485 8,092,663 18,240,539 14,875,987 GROSS PROFIT 23,702,749 14,669,219 41,422,069 26,932,839 Selling and marketing 3,886,564 1,956,629 6,590,035 3,655,169 Advertising 5,412,510 3,001,974 9,237,855 5,222,067 General and administrative 2,557,805 2,437,645 5,495,949 4,316,287 Depreciation and amortization 341,562 267,129 675,836 365,559 Total operating expenses 12,198,441 7,663,377 21,999,675 13,559,082 INCOME FROM OPERATIONS 11,504,308 7,005,842 19,422,394 13,373,757 INTEREST INCOME, NET 43,048 361,951 17,238 443,514 OTHER INCOME, NET 60,840 10,136 142,958 9,144 INCOME BEFORE INCOME TAXES 11,608,196 7,377,929 19,582,590 13,826,415 INCOME TAXES 1,939,825 1,550,708 3,464,773 3,094,888 NET INCOME 9,668,371 5,827,221 16,117,817 10,731,527 OTHER COMPREHENSIVE INCOME Foreign currency translation gain 2,191,408 378,670 3,401,555 638,295 Unrealized gain of marketable security - 1,089 - 1,089 Income tax expense related to other comprehensive income (723,165) (125,320) (1,122,513) (210,997) TOTAL OTHER COMPREHENSIVE INCOME, NET OF TAX 1,468,243 254,439 2,279,042 428,387 COMPREHENSIVE INCOME $11,136,614 $6,081,660 $18,396,859 $11,159,914 NET INCOME PER SHARE BASIC $ 0.15 $0.09 $0.25 $0.17 DILUTED $ 0.15 $0.09 $0.24 $0.17 WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING BASIC 65,144,311 62,657,876 64,877,916 61,944,618 DILUTED 66,600,080 62,795,439 66,483,294 62,060,700 AMERICAN ORIENTAL BIOENGINEERING, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS ASSETS JUNE 30, DECEMBER 31, 2007 2006 UNAUDITED CURRENT ASSETS Cash and cash equivalents $108,449,801 $87,784,419 Accounts receivable, net of reserve of $77,652 and $39,776 at June 30, 2007 and December 31, 2006, respectively 11,867,708 11,141,057 Inventories, net of $598,169 and $615,552 provision for slow moving inventories at June 30, 2007 and December 31, 2006, respectively 12,131,254 10,684,316 Advances to suppliers 3,322,663 1,950,101 Notes receivable 695,156 3,238,161 Other receivables 53,162 37,545 Due from employees 215,349 585,050 Deferred consulting expenses 162,500 166,600 Total Current Assets 136,897,593 115,587,249 LONG-TERM ASSETS Plant and equipment, net 32,955,702 32,194,957 Land use rights, net 33,394,666 32,937,743 Construction in progress 182,373 326,121 Deferred tax assets 1,679,788 1,797,153 License, net 344,273 383,755 Goodwill 1,933,100 1,933,100 Long-term investment and advance 196,979 113,868 Total Long-Term Assets 70,686,881 69,686,697 TOTAL ASSETS $207,584,474 $185,273,946 AMERICAN ORIENTAL BIOENGINEERING, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS LIABILITIES AND SHAREHOLDERS' EQUITY JUNE 30, DECEMBER 31, 2007 2006 UNAUDITED CURRENT LIABILITIES Accounts payable $3,754,082 $2,871,981 Other payables and accrued expenses 3,883,326 4,549,867 Taxes payable 1,749,568 2,211,542 Short-term bank loans 8,524,858 8,314,679 Current portion of long-term bank loans 1,488,198 1,450,905 Customer deposits 2,155,563 2,263,654 Notes payable 68,625 66,216 Other liabilities 933,211 1,606,334 Total Current Liabilities 22,557,431 23,335,178 LONG-TERM LIABILITIES Long-term bank loans, net of current portion 887,551 915,909 Long-term notes payable 266,435 255,836 Deferred tax liabilities 4,656,198 4,580,698 Other liabilities 3,148 9,083 Total Long-Term Liabilities 5,813,332 5,761,526 TOTAL LIABILITIES 28,370,763 29,096,704 SHAREHOLDERS' EQUITY Preferred stock, $0.001 par value; 2,000,000 shares authorized; 1,000,000 shares issued and outstanding at June 30, 2007 and December 31, 2006, respectively 1,000 1,000 Common stock, $0.001 par value; 150,000,000 shares authorized; 65,117,910 and 64,230,369 shares issued and outstanding, respectively 65,118 64,230 Stock to be issued 73,447,943 599,069 Additional paid-in capital 97,082,545 92,307,960 Receivable from sale of stock (74,107,250) - Retained earnings (the restricted portion of retained earnings is $8,498,766 at June 30, 2007 and December 31, 2006, respectively) 74,944,728 58,826,911 Accumulated other comprehensive income 7,779,627 4,378,072 Total Shareholders' Equity 179,213,711 156,177,242 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $207,584,474 $185,273,946

American Oriental Bioengineering, Inc.

CONTACT: Wilfred Chow, SVP Finance, +1-212-786-7568, American OrientalBioengineering, Inc.; Bill Zima and Ashley Ammon MacFarlane, both ofIntegrated Corporate Relations, Inc., +1-203-682-8200

Web site: http://www.bioaobo.com/