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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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