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China Aoxing Pharmaceutical Corp. (CAXG) Reports First Quarter 2010 Financial and Operational Results



11/24/2009 9:57:57 AM

NEW YORK, NY--(Marketwire - November 24, 2009) -

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 financial and operational results for the three month ended September 30, 2009, or the first quarter of fiscal year 2010.

First Quarter 2010 Highlights:

-- Completed the relocation of LRT manufacturing operation into our main campus -- Continuous improvement of profitability and reduction of cash consumption while relocating product manufacturing operation from LRT into our main campus -- Obtained GMP re-certification in capsule, tablet, oral solution dosage forms of pharmaceuticals -- Submitted a new drug application (NDA) to the China SFDA for Codeine Phosphate to treat acute moderate to severe cough -- Obtained the clinical trial license from the China SFDA of Tilidine/Naloxone capsules, an abuse resistant opioid drug to treat moderate to severe pain -- Completed a private placement of common stock for gross proceeds of $5 million -- Completed the conversion of a $4.8million convertible note to common stock

Revenues for the first quarter ended September 30, 2009 were $1,446,663, a 60% decrease from the revenues of $3,598,065 realized for the same period of last year. The decrease in revenue was caused by the impact of our relocation of the LRT manufacturing facility in the summer of 2009. The consolidation of the LRT facility with our own necessitated that we obtain GMP re-certification of six formulations at the new facility. This has delayed our fulfillment of certain purchase orders. Our new facility has successfully passed the GMP re-certification on capsule, tablet, granule and oral solution formulations by September 30, 2009. We expect that sales of our products to regain the growth trend after the completion of GMP re-certification of pill and tincture formulations in near future.

General and administrative expenses decreased to $877,484 during first quarter 2010 from $1,192,892 during the same period of last year, or a 26% decrease, reflecting our continuous efforts in cost control.

Our loss from operations decreased to $364,378 during the first quarter 2010 from $573,977 during the same period of last year. The 37% decrease in the loss was primarily due to the improvement of operation efficiency as well as greater control of operational expenditures.

Our net loss for the first quarter 2010 was $2,310,784. This included, however, an expense of $2,142,159 attributable to the increase in the fair value of our outstanding financial derivatives.

Mr. Zhenjiang Yue, Chairman and Chief Executive Officer of China Aoxing, commented, "We are entering an exciting and busy year in 2010. We are pleased with our financial and business results of this quarter. During this quarter we revised our capital structure and improved our financial condition significantly, forming important basis of our future business expansion. We are confident about the prospects for our business in 2010 and will continue advancing the new generation of narcotics and pain medicine into the market place in China."

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, China Aoxing has China's largest and the most advanced manufacturing facility 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 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, 2009 2009 (Unaudited) ASSETS CURRENT ASSETS: Cash $ 6,417,281 $ 1,271,922 Accounts receivable 1,296,787 1,064,381 Inventory 872,483 712,521 Deposits with suppliers 289,339 261,780 Deferred tax assets 4,140,298 3,331,045 Prepaid expenses and sundry current assets 408,121 302,449 ------------- ------------- TOTAL CURRENT ASSETS 13,424,310 6,944,098 ------------- ------------- LONG - TERM ASSETS Property and equipment, net of accumulated depreciation 24,578,597 29,324,362 Other intangible assets 1,521,608 1,549,497 Goodwill 18,943,519 18,926,527 ------------- ------------- TOTAL LONG-TERM ASSETS 45,043,724 49,800,386 ------------- ------------- TOTAL ASSETS $ 58,468,033 $ 56,744,484 ============= ============= LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Short-Term borrowings $ 292,500 $ 292,193 Accounts payable 2,814,029 2,816,711 Deposit payable - 3,871,552 Current portion of long term debt - other 46,800 144,635 Current portion of long term debt - stockholders 111,202 4,494,629 Loan payable - Bank 6,100,846 6,094,428 Accrued expenses and taxes payable and other sundry current liabilities 2,632,869 2,403,185 ------------- ------------- TOTAL CURRENT LIABILITIES 11,998,245 20,117,333 ------------- ------------- LONG-TERM DEBT-- STOCKHOLDERS 4,108,523 4,104,201 ------------- ------------- -- OTHER 3,382,520 3,491,113 ------------- ------------- CONVERTIBLE DEBENTURES 1,068,513 1,023,733 ------------- ------------- WARRANT AND DERIVATIVE LIABILITIES 5,511,061 3,368,901 ------------- ------------- Common stock, par value $0.001, 100,000,000 shares authorized, 91,669,562 and 82,827,999 shares issued and outstanding at September 30, 2009 and June 30, 2009, respectively 91,670 82,828 Preferred stock, par value $0.001 300,000 shares authorized 277,018 shares issued and outstanding at September 30, 2009 and June 30, 2009, respectively 277 277 Additional paid in capital 49,128,541 39,104,309 Accumulated deficit (17,320,012) (15,009,228) Other comprehensive income 498,695 461,017 ------------- ------------- TOTAL STOCKHOLDERS' EQUITY 32,399,171 24,639,203 ------------- ------------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 58,468,033 $ 56,744,484 ============= ============= CHINA AOXING PHARMACEUTICAL CO., INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS AND OTHER COMPREHENSIVE INCOME (LOSS) (Unaudited) For the three months ended September 30, 2009 2008 SALES $ 1,446,663 $ 3,598,065 COST OF SALES 450,143 1,937,345 ------------ ------------ GROSS PROFIT 996,520 1,660,720 ------------ ------------ COSTS AND EXPENSES: Research and development expenses 113,303 266,329 General and administrative expenses 877,484 1,192,892 Selling expenses 260,893 631,018 Depreciation and amortization 109,217 144,458 ------------ ------------ TOTAL COSTS AND EXPENSES 1,360,897 2,234,697 ------------ ------------ LOSS FROM OPERATIONS -364,378 -573,977 ------------ ------------ OTHER INCOME (EXPENSE): Interest expense (592,085) (475,494) Change in fair value of warrant and derivative liabilities (2,142,159) 147,727 Gain on foreign currency transactions - 203,037 Loss on sale of assets (21,416) - Forgiveness of debt - 1,459,751 ------------ ------------ TOTAL OTHER INCOME (EXPENSE) (2,755,659) 1,335,021 ------------ ------------ INCOME (LOSS) BEFORE MINORITY INTEREST AND INCOME TAXES (3,120,037) 761,044 Minority interest in (income) losses of subsidiary - (55,232) ------------ ------------ INCOME (LOSS) BEFORE INCOME TAXES (3,120,037) 705,812 Income taxes (credit) (809,253) 79,693 ------------ ------------ NET INCOME ( LOSS) (2,310,784) 626,119 OTHER COMPREHENSIVE INCOME ( LOSS) : Foreign currency translation adjustment 37,678 26,349 ------------ ------------ COMPREHENSIVE INCOME (LOSS) $ (2,273,106) 652,468 ============ ============ BASIC AND DILUTED EARNINGS (LOSSES) PER COMMON SHARE (0.03) 0.008 ============ ============ WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING 87,411,323 81,205,779 ============ ============ CHINA AOXING PHARMACEUTICAL CO., INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS For the three months ended September 30, 2009 2008 ------------ ------------ OPERATING ACTIVITIES: Net income (loss) $ (2,310,784) $ 626,119 Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 284,634 311,599 Deferred tax assets (809,253) - Impairment loss on land and buildings 21,416 0 Forgiveness of debt - (1,459,751) Non-cash interest expense related to debentures and warrants 44,780 81,030 Stocks issued for services 202,227 0 Change in fair value of warrants and derivative liability 2,142,159 (147,727) Minority interest - 55,232 Changes in operating assets and liabilities: Accounts receivable (241,022) (267,123) Inventories (159,213) 170,019 Prepaid expenses and sundry current assets (18,417) (107,574) Accounts payable 115,423 56,269 Accrued expenses, taxes and sundry current liabilities 485,074 61,415 ------------ ------------ NET CASH USED IN OPERATING ACTIVITIES (242,975) (620,492) ------------ ------------ INVESTING ACTIVITIES: Acquisition of property and equipment (293,018) (55,975) Cash received from sale of assets 950,626 0 ------------ ------------ NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES 657,608 (55,975) ------------ ------------ FINANCING ACTIVITIES: Other borrowings (210,257) (1,458,417) Loans from stockholders (1,121) 1,759,460 Sale of common stock 5,000,000 - ------------ ------------ NET CASH PROVIDED BY FINANCING ACTIVITIES 4,788,622 301,043 ------------ ------------ EFFECT OF EXCHANGE RATE ON CASH (57,895) 109,486 ------------ ------------ INCREASE (DECREASE) IN CASH 5,145,360 265,938 CASH - BEGINNING OF PERIOD 1,271,922 1,565,213 ------------ ------------ CASH - END OF PERIOD $ 6,417,281 1,299,275 ============ ============ Supplemental disclosures of cash flow information: Non-cash financing activities: Conversion of 33MM RMB AOB loan and accrued interest into common stock 4,830,847 - ============ ============ Conversion of convertible debentures into common stock - 290,000 ============ ============ Common stock issued as payment for accrued interest - 25,570 ============ ============


Contact:

Wei Zhang
China Aoxing Pharmaceutical Company, Inc
Email: chinaaoxing@gmail.com
Telephone: 646 - 367-1747
Website: www.chinapainmed.com


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