China Biopharmaceuticals Holdings, Inc. Announces Second Quarter 2007 Financial Results

BEIJING, Aug. 15 /Xinhua-PRNewswire-FirstCall/ -- China Biopharmaceuticals Holdings, Inc. , a leading Chinese pharmaceutical company focused on the development, manufacturing and marketing of innovative drugs in China, today announced its results for the second quarter ended June 30, 2007.

Revenue for the three months ended June 30, 2007 increased 28% to $8.9 million compared to $7 million for the period ended June 30, 2006. The increase in revenues was mainly attributable to the 31% revenue growth of the Company's subsidiary Erye Pharmaceutical Limited Company ("Erye"). Additionally, the Company realized a full quarter of revenue this year from Enshi as opposed to last year when the acquisition of Enshi was made.

Recent industry developments in China have provided Erye a great opportunity to continue to grow its core business going forward. The Chinese government has invested billions of dollars in a new insurance policy called "Cooperative Medicare." This policy is aimed at providing insurance for farmers in China. Erye will provide their products, which are currently focused on middle-end to low-end markets, to these farmers under the new policy.

Cost of goods sold increased 31% to $6.7 million for the second quarter of 2007 compared to $5.1 million for the second quarter of 2006. Cost of goods sold as a percentage of sales revenues was approximately 75% for the three months ended June 30, 2007 compared to 74% for the three months ended June 30, 2006. The increase in cost of goods sold has remained consistent with the growth of sales for the quarter.

Gross profit increased 18% for the three months ended June 30, 2007 to $2.2 million compared to $1.9 million for the same period in 2006. The gross profit margin for the three months ended June 30, 2007 was 25% compared to 27% for the same period in 2006.

Income from operations for the three months ended June 30, 2007 decreased 25% to $649 thousand compared to $860 thousand for the same period in 2006. The decrease is mainly attributable to high operational expenses and poor operational performance of Enshi of which financials were only partially reflected for the three months ended June 30, 2006.

The Company reported a net loss for the second quarter of 2007 of $29 thousand compared to a net income of $391 thousand for the second quarter of 2006. The net loss for the quarter was mainly attributable to the higher payment and accrued interest expenses as a result of the acquisition financing loan due to RimAsia Capital Partners for Enshi. EBITDA for the second quarter of 2007 decreased 25% to $945 thousand compared to $1.2 million for the same period in 2006.

As of June 30, 2007, total assets were $50 million and total liabilities were $36.7 million. Shareholder equity was $13.4 million or $.37 per share.

Ms. ZHANG Jian, Chairwoman of the Board, commented, "This quarter the management team and I have been focused on restructuring our balance sheet and building our core business, especially our most successful subsidiary, Erye. Recently, we signed a letter of intent with RimAsia to convert their $11.5 million of debt to equity. I can assure our shareholders that we are working diligently to ensure these negotiations become finalized in a timely fashion."

Ms. ZHANG Jian, continued, "I am also pleased to announce our intent to acquire the remaining 49% of Erye. With the continued success of Erye this quarter and the strong growth potential of this subsidiary, the team and I are eager to finalize the acquisition of the remaining equity. Once completed, I look forward to updating everyone on the signing of both of these definitive agreements and provide more guidance on our plans for the future."

Subsequent Events

Subsequent to the end of our second quarter on August 2, 2007, the Company and RimAsia Capital Partners ("RACP") entered into a letter of intent to restructure their $11.5 million loan. If executed as drafted, the Company must first acquire the 49% minority interest in Erye, so that Erye becomes wholly owned by the Company. The Company will also authorize a new class of preferred stock. At that time, Rim Asia will convert the $11.5 million loan into a senior redeemable convertible preferred stock with a conversion price of $1.02. Additionally, the Company will reduce the exercise price on the warrants issued with the original $11.5 million loan, from $1.375 to $1.26 and the term of the warrants will be extended from 3 years to 4.5 years from the date of the conversion of the principal of the loan into preferred stock.

Erye has demonstrated an impressive growth of more than 38% in net income in the first half of 2007. The Enshi acquisition has slowed down our original expansion plans due to management resources being devoted to its operations and integration. However, we still believe in the overall strategy of growth through organic opportunities and acquisitions. We expect that the recent changes in our management, with the addition of Erye's top management, Ms. ZHANG Jian and Mr. SHI Mingsheng will improve our overall operations. They recently joined our board of directors and are now playing an active role in our management, giving play to their industrial and manufacturing and marketing expertise.

About China Biopharmaceuticals Holdings, Inc.

China Biopharmaceuticals Holdings, Inc. is a vertically integrated pharmaceutical company dedicated to the discovery, development, manufacturing and marketing of small and large molecule pharmaceutical products, including medicines, vaccines, and active pharmaceutical ingredients for various categories of diseases. CHBP's product portfolio includes 260 drugs already approved for manufacturing and marketing by the Chinese State Food and Drug Administration (SFDA). CHBP also has submitted 15 drug applications to the SFDA for its review during the calendar year of 2006. CHBP is a U.S.-listed public company with operating subsidiaries and senior management based in China. For further information, please visit our website at http://www.cbioinc.com .

Safe Harbor Statement

The statements contained herein that are not historical facts are "forward-looking statements" within the meaning of Section 21E of the Securities and Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995. Such forward-looking statements may be identified by, among other things, the use of forward-looking terminology such as "believes," "expects," "may," "will," "should," or "anticipates" or the negative thereof or other variations thereon or comparable terminology, or by discussions of strategy that involve risks and uncertainties. In particular, our statements regarding the potential growth of the markets are examples of such forward-looking statements. The forward-looking statements include risks and uncertainties, including but not limited to, general economic conditions and regulatory developments, not within our control. The factors discussed herein and expressed from time to time in our filings with the Securities and Exchange Commission could cause actual results and developments to be materially different from those expressed or implied by such statements. The forward-looking statements are made only as of the date of this filing, and we undertake no obligation to publicly update such forward-looking statements to reflect subsequent events or circumstances.

CONSOLIDATED BALANCE SHEET AS OF JUNE 30, 2007 June 30, 2007 ------------ CURRENT ASSETS: Unaudited ------------ Cash $ 1,230,258 Accounts receivable, trade, net of allowance for doubtful accounts of $934,516 6,860,309 Accounts receivable, related parties 259,347 Other receivables 2,614,674 Other receivables - related parties 3,123,894 Advances to suppliers 244,161 Prepaid expenses 48,257 Inventories 7,605,936 Loan to shareholders 42,794 ------------ Total current assets 22,029,630 ------------ PLANT AND EQUIPMENT, net 12,278,966 ------------ OTHER ASSETS: Intangible asset, net 12,702,943 Long term notes receivable 657,797 Long term other receivables - related parties 554,344 Restricted cash 840,285 Other assets 989,624 ------------ Total other assets 15,744,993 ------------ Total assets $ 50,053,589 ============ CURRENT LIABILITIES: Accounts payable $ 5,427,225 Short-term loans 5,588,750 Long term debt - current maturities 11,500,000 Other payables 104,896 Other payables - related parties 1,514,292 Customer deposits 1,845,349 Notes payable 2,406,450 Taxes payable 1,308,375 Other accrued liabilities 1,403,995 ------------ Total current liabilities 31,099,332 ------------ LONG TERM LIABILITIES: Other long term liabilities 164,848 ------------ Total liabilities 31,264,180 ------------ COMMITMENTS AND CONTINGENCIES -- ------------ MINORITY INTEREST 5,420,442 ------------ SHAREHOLDERS' EQUITY: Preferred stock, $0.01 par value, 10,000,000 shares authorized; 417,500 shares Issued and outstanding 4,175 Common stock, $0.01 par value, 200,000,000 shares authorized; 36,465,312 shares issued and outstanding 364,654 Paid-in capital 13,093,750 Capital receivable (252,471) Deferred compensation (46,125) Statutory reserves 2,754,547 Retained earnings (deficit) (3,771,410) Accumulated other comprehensive income 1,221,847 ------------ Total shareholders' equity 13,368,967 ------------ Total liabilities and shareholders' equity $ 50,053,589 ============ CONSOLIDATED STATEMENTS OF OPERATIONS AND OTHER COMPREHENSIVE INCOME FOR THE THREE MONTHS ENDED JUNE 30, 2007 AND 2006 Three months ended June 30, 2007 2006 ------------ ------------ (Unaudited) (Unaudited) ------------ ------------ Restated ------------ REVENUES $ 8,891,559 $ 6,965,818 COST OF GOODS SOLD 6,656,183 5,077,169 ------------ ------------ GROSS PROFIT 2,235,376 1,888,649 ------------ ------------ OPERATING EXPENSES Research and development 66,748 240,747 Selling, general and administrative 1,519,246 788,133 ------------ ------------ Total Operating Expenses 1,585,994 1,028,880 ------------ ------------ INCOME FROM OPERATIONS 649,382 859,769 ------------ ------------ OTHER INCOME (EXPENSE) Interest income (expense), net (314,481) (138,091) Other income (expense), net 217,597 195,139 ------------ ------------ Total Other Income (expense), net (96,884) 57,048 ------------ ------------ INCOME BEFORE INCOME TAXES AND MINORITY INTEREST 552,498 916,817 PROVISION FOR INCOME TAXES 16,015 59,530 ------------ ------------ INCOME BEFORE MINORITY INTEREST 536,483 857,287 MINORITY INTEREST 565,772 412,970 ------------ ------------ INCOME (LOSS) FROM CONTINUING OPERATIONS (29,289) 444,317 LOSS FROM DISCONTINUED OPERATIONS, net of tax -- (53,717) ------------ ------------ NET (LOSS) INCOME (29,289) 390,600 OTHER COMPREHENSIVE INCOME: Foreign currency translation adjustment 319,364 394,168 ------------ ------------ COMPREHENSIVE (LOSS) INCOME $ 290,075 $ 784,768 ============ ============ INCOME (LOSS) PER SHARE OF COMMON STOCK BASIC CONTINUING OPERATIONS $ (0.001) $ 0.013 DISCONTINUED OPERATIONS -- (0.002) ------------ ------------ Total-Basic $ (0.001) $ 0.011 ============ ============ DILUTED CONTINUING OPERATIONS $ (0.001) $ 0.013 DISCONTINUED OPERATIONS -- (0.002) ------------ ------------ Total-diluted $ (0.001) $ 0.011 ============ ============ WEIGHTED AVERAGED NUMBER OF SHARES OUTSTANDING - BASIC 36,402,125 33,662,770 ============ ============ WEIGHTED AVERAGED NUMBER OF SHARES OUTSTANDING - DILUTED 36,819,625 34,592,770 ============ ============ For more information, please contact: HCI Emerging Growth Alan Sheinwald, Partner Tel: +1-914-669-0222 Email: alan.sheinwald@HCInternational.com

China Biopharmaceuticals Holdings, Inc.

CONTACT: Alan Sheinwald, Partner of HCI Emerging Growth, +1-914-669-0222,or alan.sheinwald@HCInternational.com, for China BiopharmaceuticalsHoldings, Inc.

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