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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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