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Aoxing Pharmaceutical Company Inc. (AXN) Announces Second Quarter Fiscal 2012 Financial and Operational Results


2/15/2012 8:19:42 AM

JERSEY CITY, NJ--(Marketwire - February 14, 2012) - Aoxing Pharmaceutical Company, Inc. (NYSE Amex: AXN) ("Aoxing Pharma"), a specialty pharmaceutical company focusing on research, development, manufacturing, and distribution of narcotic, pain-management, and addiction treatment pharmaceuticals, today announced its financial and operational results for its second fiscal quarter, which ended on December 31, 2011.

Financial Results:

Revenues for the quarter ended December 31, 2011 were $2,124,333, representing a 9.5% increase over the revenues of $1,940,539 realized during second quarter of the last fiscal year. In the recent quarter, foreign currency translation added 3.1% to sales growth. Sales of the Company's main product, Zhongtongan, increased significantly from the same period in 2010, mainly due to an increase in the number of hospital customers.

For the six months ended December 31, 2011, revenues were $3,654,401, a 0.7% decrease from revenues of $3,681,212 realized during the same period in 2010. Sales of Zhongtongan still increased modestly from the same period in 2010, but the increase was more than offset by the decline in sales of other products. Since the beginning of 2011, the Company has reduced promotional efforts on certain lower margin, non-proprietary products.

For the quarter ended December 31, 2011, gross margin was 60.3%, essentially unchanged from the gross margin of 60.0% realized during the same period a year earlier. For the six months ended December 31, 2011, gross margin was 58.8%, 2.3% higher than the gross margin of 56.5% for the same period a year earlier. Recent positive factors for gross margin include decreased sales of low margin products and an overall enhancement of manufacturing efficiency. Negative pressures mainly came from higher raw material costs.

General and administrative expenses were $764,568 during the quarter ended December 31, 2011, 49.4% lower than $1,510,140 incurred in the same period a year earlier. For the six months ended December 31, 2011, general and administrative expenses were $1,510,811, 37.5% lower than $2,419,196 incurred during the six months a year earlier. The main reason for the decrease was bad debt expense. Company's effort to reduce costs was another importance factor. Bad debt expenses of $457,352 were recorded for the three months ended December 31, 2010, but none for the same period a year later.

Recent Highlights and Updates

  • On December 5, 2011, the Company received a term loan of $3,124,902 from Shijiazhuang Construction Investment Group, disbursed through China Construction Bank. The note matures in one year and carries an annual interest rate of 15%.

  • The Company has almost completed the analysis of the Phase III clinical trial of Tongjingshule (TJSL) and has been preparing the materials to file an NDA for the indication of Primary Dysmenorrha ("PD"), or menstrual pain, in adult women. The company intends to submit the application in the next few weeks. The Phase III trial was conducted under the protocol approved by the China SFDA. TJSL is a capsule form of selected herbal medicine. The market for healthcare products to address menstrual pain is estimated at $3 billion per year in China.

Zhenjiang Yue, our Chairman and CEO, commented, "The year 2011 was a challenging one for many pharmaceutical companies in China. I am pleased with our operating results in the latest quarter. Our overall sales increased despite reduced promotion on certain unprofitable products. We look forward to continued success in the years ahead."

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, and Phoenix PharmaLabs, Inc. For more information, please visit: www.aoxingpharma.com.

Safe Harbor Statement from Aoxing Pharmaceutical Company, Inc.
Certain 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. All forward-looking statements included herein are based upon information available to the Company as of the date hereof and, except as is expressly required by the federal securities laws, the Company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, changed circumstances or future events or for any other reason. To the extent that any statements made here are not historical, these statements are essentially forward-looking. The Company uses words and phrases such as "guidance," "forecasted," "projects," "is expected," "remain confident," "will" and/or similar expressions to identify forward-looking statements in this press release. Undue reliance should not be placed on forward-looking information. The economic, competitive, governmental, technological and other risk factors identified in the Company's filings with the Securities and Exchange Commission, specifically, Item 1A, "Risk Factors," in the Form 10-K for the year ended June 30, 2011, 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                         
                                                                            
                                                December 31,     June 30,   
                                                    2011           2011     
                                               -------------  ------------- 
                                                (Unaudited)                 
                    ASSETS                                                  
CURRENT ASSETS:                                                             
  Cash                                         $   5,816,973  $   2,770,744 
  Accounts receivable, net of allowance for                                 
   doubtful accounts of $551,591 and $543,697,                              
   respectively                                    2,325,142      2,008,024 
  Inventories                                      1,469,070      1,469,417 
  Prepaid expenses and other current assets        1,413,468      1,130,010 
                                               -------------  ------------- 
TOTAL CURRENT ASSETS                              11,024,653      7,378,195 
                                               -------------  ------------- 
                                                                            
LONG-TERM ASSETS:                                                           
  Property and equipment, net of accummulated                               
   depreciation                                   26,566,065     26,669,156 
  Deferred income tax                              2,735,675      2,614,817 
  Goodwill                                        20,164,757     19,916,128 
  Other intangible assets                          1,348,615      1,388,704 
  Investment in joint venture                        449,827        521,541 
                                               -------------  ------------- 
TOTAL LONG-TERM ASSETS                            51,264,939     51,110,346 
                                               -------------  ------------- 
                                                                            
TOTAL ASSETS                                   $  62,289,592  $  58,488,541 
                                               =============  ============= 
                                                                            
                                                                            
     LIABILITIES AND SHAREHOLDERS' EQUITY                                   
                                                                            
CURRENT LIABILITIES:                                                        
  Short-term borrowings                        $   3,374,402  $     232,055 
  Accounts payable                                 2,733,430      2,659,727 
  Loan payable - bank                              8,632,190      8,508,663 
  Current portion of loan payable - related                                 
   parties                                         1,104,435          5,793 
  Current portion of loan payable - other            107,353         23,515 
  Accrued expenses and other current                                        
   liabilities                                     3,732,909      3,206,009 
                                               -------------  ------------- 
TOTAL CURRENT LIABILITIES                         19,684,719     14,635,762 
                                               -------------  ------------- 
                                                                            
LONG-TERM LIABILITIES:                                                      
  Loan payable - related parties                   2,649,549      3,696,210 
        - others                                   1,846,661      1,831,838 
  Warrant and derivative liabilities                       -          1,161 
                                               -------------  ------------- 
TOTAL LONG-TERM LIABILITIES                        4,496,210      5,529,209 
                                               -------------  ------------- 
                                                                            
Common stock, par value $0.001, 100,000,000                                 
 shares authorized, 49,415,562 and 49,158,955                               
 shares issued and outstanding on December 31                               
 and June 30, 2011, respectively                      49,416         49,159 
Additional paid in capital                        57,741,361     57,382,109 
Accumulated deficit                              (21,630,375)   (20,525,372)
Other comprehensive income                         2,412,179      1,885,531 
                                               -------------  ------------- 
TOTAL SHAREHOLDERS' EQUITY OF THE COMPANY         38,572,581     38,791,427 
                                               -------------  ------------- 
                                                                            
NONCONTROLLING INTEREST IN SUBSIDIARIES             (463,918)      (467,857)
                                               -------------  ------------- 
TOTAL EQUITY                                      38,108,663     38,323,570 
                                               -------------  ------------- 
                                                                            
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY     $  62,289,592  $  58,488,541 
                                               =============  ============= 
                                                                            
                                                                            
                                                                            
              AOXING PHARMACEUTICAL CO., INC. AND SUBSIDIARIES              
CONSOLIDATED STATEMENTS OF OPERATIONS AND OTHER COMPREHENSIVE INCOME (LOSS) 
                                (Unaudited)                                 
                                                                            
                           For the three months                             
                                   ended           For the six months ended 
                               December 31,              December 31,       
                             2011         2010         2011         2010    
                                                                            
SALES                    $ 2,124,333  $ 1,940,539  $ 3,654,401  $ 3,681,212 
COST OF SALES                843,345      775,846    1,505,895    1,603,141 
                         -----------  -----------  -----------  ----------- 
GROSS PROFIT               1,280,988    1,164,693    2,148,506    2,078,071 
                         -----------  -----------  -----------  ----------- 
                                                                            
OPERATING EXPENSES:                                                         
  Research and                                                              
   development expense       154,541      191,950      260,940      277,398 
  General and                                                               
   administrative                                                           
   expenses                  764,568    1,510,140    1,510,811    2,419,196 
  Selling expenses           366,531      362,071      729,824      873,892 
  Depreciation and                                                          
   amortization              146,208      150,262      293,748      302,306 
                         -----------  -----------  -----------  ----------- 
    TOTAL OPERATING                                                         
     EXPENSES              1,431,848    2,214,423    2,795,323    3,872,792 
                         -----------  -----------  -----------  ----------- 
                                                                            
LOSS FROM OPERATIONS        (150,860)  (1,049,730)    (646,817)  (1,794,721)
                         -----------  -----------  -----------  ----------- 
                                                                            
OTHER INCOME (EXPENSE):                                                     
  Interest expense, net                                                     
   of interest income       (419,113)    (385,327)    (837,544)    (760,108)
  Change in fair value                                                      
   of warrant and                                                           
   derivative                                                               
   liabilities                     -      894,306        1,161    1,117,023 
  Equity in income                                                          
   (loss) of joint                                                          
   venture, net              (36,994)           -      (78,930)           - 
  Subsidy income             312,490      262,960      312,490      262,960 
                         -----------  -----------  -----------  ----------- 
    TOTAL OTHER INCOME                                                      
     (EXPENSE)              (143,617)     771,939     (602,823)     619,875 
                         -----------  -----------  -----------  ----------- 
                                                                            
LOSS BEFORE INCOME TAXES    (294,477)    (277,791)  (1,249,640)  (1,174,846)
                                                                            
Income tax expense                                                          
 (credit)                     40,436     (189,613)    (120,858)    (392,210)
                         -----------  -----------  -----------  ----------- 
                                                                            
NET LOSS                    (334,913)     (88,178)  (1,128,782)    (782,636)
                                                                            
Net income (loss)                                                           
 attributed to non-                                                         
 controlling interest in                                                    
 subsidiaries                    415      (37,923)     (23,779)     (78,442)
                         -----------  -----------  -----------  ----------- 
LOSS ATTRIBUTABLE TO                                                        
 SHAREHOLDERS OF THE                                                        
 COMPANY                    (335,328)     (50,255)  (1,105,003)    (704,194)
                                                                            
OTHER COMPREHENSIVE                                                         
 INCOME :                                                                   
  Foreign currency                                                          
   translation                                                              
   adjustment                256,331      649,958      554,366      870,632 
                         -----------  -----------  -----------  ----------- 
                                                                            
COMPREHENSIVE INCOME         (78,997)     599,703     (550,637)     166,438 
                         ===========  ===========  ===========  =========== 
                                                                            
Other comprehensive                                                         
 income attributable to                                                     
 non-controlling                                                            
 interest                     12,816       30,950       27,718       41,459 
                         -----------  -----------  -----------  ----------- 
                                                                            
COMPREHENSIVE LOSS                                                          
 ATTRIBUTABLE TO THE                                                        
 COMPANY                 $   (91,813) $   568,753  $  (578,355) $   124,979 
                         ===========  ===========  ===========  =========== 
                                                                            
                                                                            
BASIC AND DILUTED LOSS                                                      
 PER COMMON SHARE        $     (0.01) $     (0.00) $     (0.02) $     (0.02)
                         ===========  ===========  ===========  =========== 
WEIGHTED AVERAGE NUMBER                                                     
 OF SHARES OUTSTANDING    49,272,820   46,494,981   49,220,116   46,494,942 
                         ===========  ===========  ===========  =========== 

                                                                            
                                                                            
                                                                            
              AOXING PHARMACEUTICAL CO., INC. AND SUBSIDIARIES              
                   CONSOLIDATED STATEMENTS OF CASH FLOWS                    
                                (Unaudited)                                 
                                                                            
                                                 For the six months ended   
                                                       December 31,         
                                                    2011           2010     
                                               -------------  ------------- 
                                                                            
OPERATING ACTIVITIES:                                                       
Net loss                                       $  (1,105,003) $    (704,194)
  Adjustments to reconcile net loss to net                                  
   cash used in operating activities:                                       
    Depreciation and amortization                    588,120        576,962 
    Deferred income tax                             (120,858)      (392,210)
    Common stock issued for services                 359,509        252,559 
    Change in fair value of warrants and                                    
     derivative liability                             (1,161)    (1,117,023)
    Equity in (income) loss of joint venture,                               
     net                                              78,930              - 
    Net loss attributable to non-controlling                                
     interests                                       (23,779)       (78,442)
  Changes in operating assets and liabilities:                              
    Accounts receivable                             (286,675)      (469,755)
    Inventories                                       21,583        (10,874)
    Prepaid expenses and other current assets       (266,202)      (134,167)
    Accounts payable                                  34,932        449,032 
    Accrued expenses and other current                                      
     liabilities                                     570,135        298,371 
                                               -------------  ------------- 
NET CASH USED IN OPERATING ACTIVITIES               (150,469)    (1,329,741)
                                               -------------  ------------- 
                                                                            
INVESTING ACTIVITIES:                                                       
  Acquisition of property and equipment              (40,071)    (1,044,528)
  Loan repayment from unrelated parties                    -        291,049 
                                               -------------  ------------- 
NET CASH USED IN INVESTING ACTIVITIES                (40,071)      (753,479)
                                               -------------  ------------- 
                                                                            
FINANCING ACTIVITIES:                                                       
  Short-term borrowings, net of repayment          3,124,902        680,601 
  Proceeds from other borrowings                      71,404         39,324 
  Proceeds from (Repayment of) loans from                                   
   related party                                      (1,672)        49,457 
                                               -------------  ------------- 
NET CASH PROVIDED BY FINANCING ACTIVITIES          3,194,634        769,382 
                                               -------------  ------------- 
                                                                            
EFFECT OF EXCHANGE RATE ON CASH                       42,135        136,874 
                                               -------------  ------------- 
                                                                            
INCREASE (DECREASE) IN CASH                        3,046,229     (1,176,964)
CASH - BEGINNING OF PERIOD                         2,770,744      3,985,710 
                                               -------------  ------------- 
CASH - END OF PERIOD                           $   5,816,973  $   2,808,746 
                                               =============  ============= 
                                                                            
                                                                            
Supplemental disclosures of cash flow                                       
 information:                                                               
    Cash paid for interest                     $     916,376  $     588,227 
                                               =============  ============= 
    Cash paid for income taxes                 $           -  $           - 
                                               =============  ============= 

CONTACT:

Aoxing Pharmaceutical Company:
Bob Ai
Chief Financial Officer
646-367-1767
investor.relations@aoxingpharma.com


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