NEW YORK, NY--(Marketwire - November 16, 2010) - Aoxing Pharmaceutical (NYSE Amex: AXN) ("Aoxing Pharma"), a specialty pharmaceutical company focusing on research, development, manufacturing and distribution of narcotic and pain-management products, today announced financial and operational results for the three month period ended September 30, 2010, or the first quarter of fiscal year 2011.
Recent Highlights and Updates
-- Aoxing Pharma has recently completed construction on the dedicated
newly renovated facility for the joint venture with Johnson Matthey
Plc. Full GMP certification from the China SFDA and a pharmaceutical
business license is expected by year-end 2010
-- The chemical synthesis laboratories and pilot-manufacturing plant
recently passed the GMP inspection of the China State Food and Drug
Administration (SFDA).
-- Guoan Zhang, formerly the Controller for Aoxing Pharma's subsidiary,
Hebei Aoxing Pharmaceutical Co., Inc., has been appointed interim CFO.
Financial Results:
Revenues for the three months ended September 30, 2010 were $1,740,673 representing a 20% increase over the revenues of $1,446,663 realized during the three months ended September 30, 2009, reflecting the positive impact of the recent sales team expansion. Revenues continue to be negatively affected by the need to obtain GMP re-certification for each product. Aoxing Pharma is currently in the final stage of passing the GMP re-certification of pill formulation production, so expect additional sales from pill based formulations in 2011.
Cost of sales was $827,295 for three months ended September 30, 2010, which was 84% higher than the $450,143 in costs incurred during the three month ended September 30, 2009. The gross margin ratio decreased from 69% in the three months ended September 30, 2009 to 52% in the three months ended September 30, 2010. The primary reason for the decrease in gross margin was higher raw material cost along with increased labor and utility costs. For these reasons, the gross profit of $913,379 during the three months ended September 30, 2010 was 8% lower than the $996,520 gross profit realized during the three months ended September 30, 2009.
General and administrative expenses were $909,057 in the three months ended September 30, 2010, or 4% higher than the $877,484 expenses incurred in the three months ended September 30, 2009.
Selling expenses in the amount of $511,821 during the three months ended September 30, 2010 were a 96% increase from the $260,894 spent on selling during the three months ended September 30, 2009. The increase was primarily due to the recent expansion of our sales and marketing team and product promotion activities. We expect such expansion activities will continue to the end of calendar year 2010, with the result that selling expenses for fiscal year 2011 will be significantly higher than in fiscal 2010.
Loss from operations increased to $744,991 during the three months ended September 30, 2010 from $364,378 during the three months ended September 30, 2009. The 104% increase in the loss was primarily due to the reduced gross margin on sales and to the expenses resulting from the ongoing expansion of the sales and marketing team and product promotion.
Mr. Zhenjiang Yue, Chairman and Chief Executive Officer of China Aoxing, commented, "Following the recent completion of the dedicated facility for the joint venture with Johnson Matthey and with full GMP certification expected by year-end and with the expected GMP re-certification of pill formulation production, we are poised for a very successful 2011. We continue to be pleased with our quarterly results, as our financial condition remains strong. We look forward to re-launching our recertified products, launching new products and begin manufacturing API for the China markets in the calendar year 2011."
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, Phoenix PharmaLabs, Inc and American Oriental Bioengineering, Inc. For more information, please visit: www.aoxingpharma.com.
Safe Harbor Statement from Aoxing Pharmaceutical Company, Inc
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-K for the year ended June 30, 2010, 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
September June
2010 2010
ASSETS
CURRENT ASSETS:
Cash $ 3,450,647 $ 3,985,710
Accounts receivable, net 2,261,219 1,724,198
Loan receivable 415,545 748,790
Inventory 1,397,839 1,564,975
Deposits with suppliers 486,764 475,042
Prepaid expenses and sundry current assets 485,254 421,391
------------ ------------
TOTAL CURRENT ASSETS 8,497,270 8,920,106
------------ ------------
LONG-TERM ASSETS
Property and equipment, net of accummulated
depreciation 26,460,534 25,569,782
Other intangible assets 1,426,137 1,431,182
Goodwill 19,279,940 19,012,321
Deferred tax assets 3,331,045 3,394,103
------------ ------------
TOTAL LONG-TERM ASSETS 50,497,656 49,407,388
------------ ------------
TOTAL ASSETS $ 58,994,927 $ 58,327,494
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-Term borrowings $ 1,045,072 $ 293,746
Accounts payable 3,122,749 2,965,514
Current portion of long term debt - other 47,775 46,999
Current portion of long term debt -
related parties 96,228 94,760
Accrued expenses and taxes payable and
other sundry current liabilities 2,113,302 2,076,555
Loan payable - Bank 8,211,284 8,078,019
------------ ------------
TOTAL CURRENT LIABILITIES 14,636,410 13,555,593
------------ ------------
LONG-TERM DEBT -- RELATED PARTIES 6,433,532 6,329,118
------------ ------------
-- OTHER 2,258,598 2,221,943
------------ ------------
WARRANT AND DERIVATIVE LIABILITIES 1,690,817 1,913,534
------------ ------------
Common stock, par value $0.001,
100,000,000 shares authorized,
46,494,903 shares issued and outstanding
at September 30, 2010 and June 30, 2010 46,495 46,495
Additional paid in capital 49,736,600 49,594,553
Accumulated deficit (16,252,539) (15,598,600)
Other comprehensive income 735,721 525,555
------------ ------------
TOTAL STOCKHOLDERS' EQUITY OF THE COMPANY 34,266,277 34,568,003
------------ ------------
NONCONTROLLING INTEREST IN SUBSIDIARIES (290,707) (260,697)
------------ ------------
TOTAL EQUITY 33,975,570 34,307,306
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 58,994,927 $ 58,327,494
============ ============
AOXING PHARMACEUTICAL CO., INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND OTHER
COMPREHENSIVE INCOME (LOSS)
For the three months ended
September 30,
2010 2009
SALES $ 1,740,673 $ 1,446,663
COST OF SALES 827,295 450,143
------------ ------------
GROSS PROFIT 913,379 996,520
------------ ------------
COSTS AND EXPENSES:
Research and development expense 85,448 113,303
General and administrative expenses 909,057 877,484
Selling expenses 511,821 260,894
Depreciation and amortization 152,044 109,217
------------ ------------
TOTAL COSTS AND EXPENSES 1,658,370 1,360,898
------------ ------------
LOSS FROM OPERATIONS (744,991) (364,378)
------------ ------------
OTHER INCOME (EXPENSE):
Interest expense, net of interest income (374,781) (592,084)
Change in fair value of warrant and
derivative liabilities 222,717 (2,142,159)
Gain on foreign currency transactions 0 0
Loss on disposal of assets 0 (21,416)
------------ ------------
TOTAL OTHER INCOME (EXPENSE) (152,064) (2,755,659)
------------ ------------
INCOME (LOSS) BEFORE INCOME TAXES (897,055) (3,120,037)
Income taxes (credit) (202,596) (809,253)
------------ ------------
NET INCOME (LOSS) (694,459) (2,310,784)
Net loss attributed to non-controlling interest (40,519) (16,175)
------------ ------------
INCOME (LOSS) ATTRIBUTABLE TO THE SHAREHOLDERS
OF THE COMPANY (653,939) (2,294,609)
OTHER COMPREHENSIVE INCOME (LOSS) :
Foreign currency translation adjustment 220,674 37,678
------------ ------------
COMPREHENSIVE INCOME (LOSS) $ (433,266) (2,256,931)
============ ============
Other comprehensive income attributable to
non-controlling interest 10,508 0
------------ ------------
COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO THE
COMPANY $ (443,774) (2,256,931)
============ ============
BASIC AND DILUTED EARNINGS (LOSSES) PER COMMON
SHARE (0.01) (0.05)
============ ============
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING 46,475,780 43,705,662
============ ============
AOXING PHARMACEUTICAL CO., INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the three months ended
September 30,
2010 2009
OPERATING ACTIVITIES:
Net income (loss) $ (653,939) $ (2,294,609)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 283,679 284,634
Deferred tax assets (202,596) (809,253)
Loss on desposal on assets - 21,416
Non-cash interest expense related to
debentures and warrants - 44,780
Stock issued for services 142,048 202,227
Change in fair value of warrants and
derivative liability (222,717) 2,142,159
Minority interest (40,519) (16,175)
Changes in operating assets and liabilities:
Accounts receivable (509,708) (241,022)
Inventories 192,954 (159,213)
Prepaid expenses and sundry current
assets (59,890) (18,417)
Accounts payable 108,312 115,423
Accrued expenses, taxes and sundry
current liabilities (15,265) 485,074
------------ ------------
NET CASH USED IN OPERATING ACTIVITIES (977,643) (242,976)
------------ ------------
INVESTING ACTIVITIES:
Acquisition of property and equipment (723,945) (293,018)
Loans to unrelated parties 345,597 -
Cash Proceeds from sale of assets - 950,626
------------ ------------
NET CASH USED IN INVESTING ACTIVITIES (378,347) 657,608
------------ ------------
FINANCING ACTIVITIES:
Proceeds from bank loan 746,480
Other borrowings - (210,257)
Loans from related party - (1,121)
Sale of common stock - 5,000,000
------------ ------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 746,480 4,788,622
------------ ------------
EFFECT OF EXCHANGE RATE ON CASH 74,446 (57,895)
------------ ------------
INCREASE (DECREASE) IN CASH (535,063) 5,145,359
CASH - BEGINNING OF YEAR 3,985,710 1,271,922
------------ ------------
CASH - END OF YEAR $ 3,450,647 6,417,281
============ ============
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
============ ============
CONTACT:
Investor Relations:
The Trout Group
Brian Korb
646-378-2923
