Aoxing Pharmaceutical Company Announces First Quarter Fiscal 2012 Financial and Operational Results

JERSEY CITY, N.J., Nov. 15, 2011 /PRNewswire/ -- Aoxing Pharmaceutical (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 the three month period ended September 30, 2011.  

Financial Results:

Revenues for the three months ended September 30, 2011 were $1,530,068, representing a 12.1% decrease over the revenues of $1,740,673 realized during the same period in 2010.  The decrease is mostly attributed to reduced promotional efforts on certain non-proprietary products that have become non-profitable.  Most of them are those included in the PRC government's Essential Drug List.  The significant increase in the price of raw materials since January 2011 combined with the pricing pressure from the bidding process made those products unprofitable.    

Cost of sales was $662,550 for the three months ended September 30, 2011, 20% less than the $827,295 in costs incurred during the same period in 2010.  The main factor for the decrease in cost of sales was a lower volume of product sales.  Improved gross margin also reduced cost of sales.

Gross profit was $867,518 during the three months ended September 30, 2011, 5% lower than the same period a year earlier, reflecting the combined effect of lower sales and higher gross margin.  Gross margin was 56.7% during the three months ended September 30, 2011, a 4.2% improvement from the gross margin of 52.5% for the same period a year earlier.  The improvement in gross margin was due to a modest price increase for Zhongtongan as well as manufacturing efficiency enhancements.  The price of raw materials during the three months ended September 30, 2011 was higher than the same period a year ago, but flat sequentially quarter to quarter.

Research and development expenses were $106,399 during the three months ended September 30, 2011, representing a 24.5% increase from $85,448 incurred during the same period in 2010.  R&D expenses could fluctuate significantly from one period to another, reflecting the progress and timing of various development projects.  

General and administrative expenses were $746,243 in the three months ended September 30, 2011, 17.9% lower than $909,057 in the same period a year earlier.  The main reason for the decrease was Company's effort to reduce cost.  

Selling expenses in the amount of $363,293 incurred during the three months ended September 30, 2011 were 29% lower than $511,821 spent on selling during the same period in 2010.  The decrease was mainly due to reduced marketing efforts for non-profitable products.  

Loss from operations for the quarter ended September 30, 2011 decreased 33.4% to $495,957, from $744,992 incurred during the same period in 2010.  The significant decrease in the loss was primarily due to lower general, administrative, and selling expenses.

Net interest expense was $418,431 for the three months ended September 30, 2011, increasing 11.6% from net interest expense of $374,781 for the same period in 2010. The increase in interest expense was due to higher interest rates upon renewal of loans, as a result of nationwide credit tightening in China, and currency exchange rate change.

During the quarter ended September 30, 2011, the Company recognized a loss of $41,936 from the joint venture with Johnson Matthey Plc.  The JV did not have any product sales yet and was not in operation during the same period in 2010.

Recent Highlights and Updates

  • On November 3, 2011, the Company announced that it had received a special funding of 2 million RMB (approximately $315,000) from the Industry and Information Technology Department and the Finance Department of Hebei Province in China.  The grant was for manufacturing facility improvements in the form of interest payment assistance on the Company's existing bank loans.

Zhenjiang Yue, Aoxing's Chairman and CEO, commented, "I am pleased with improvement in gross margin, as we have continued our strategy to decrease promotions on unprofitable products, despite continued challenges in the market place.  We are making progress with our exciting pipeline of narcotic, pain management, and addiction treatment pharmaceuticals.  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 Company may also make written or oral forward-looking statements in its periodic reports filed with the U.S. Securities and Exchange Commission and other written materials and in oral statements made by its officers, directors or employees to third parties. These statements are subject to risks and uncertainties that cannot be predicted or quantified and, consequently, actual results may differ materially from those expressed or implied by these forward-looking 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, 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.

CONTACT:

Aoxing Pharmaceutical Company:
Bob Ai
Chief Financial Officer
646-367-1767
investor.relations@aoxingpharma.com

Investor Relations:
The Trout Group
Brian Korb
646-378-2923
bkorb@troutgroup.com

AOXING PHARMACEUTICAL CO., INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS




September 30,



June 30,



2011



2011



(Unaudited)




ASSETS




CURRENT ASSETS:






    Cash

$

2,479,180


$

2,770,744

    Accounts receivable, net of allowance for doubtful accounts of






    $548,980 and $543,697, respectively


2,249,966



2,008,024

    Inventory


1,401,998



1,469,417

    Prepaid expenses and other current assets


1,133,095



1,130,010

TOTAL CURRENT ASSETS


7,264,239



7,378,195







LONG-TERM ASSETS:






    Property and equipment, net of accummulated depreciation


26,664,028



26,669,156

    Deferred income tax


2,776,111



2,614,817

    Goodwill


20,082,523



19,916,128

    Other intangible assets


1,372,214



1,388,704

    Investment in joint venture


484,533



521,541

TOTAL LONG-TERM ASSETS


51,379,409



51,110,346







TOTAL ASSETS

$

58,643,648


$

58,488,541













LIABILITIES AND SHAREHOLDERS' EQUITY







CURRENT LIABILITIES:






    Short-term borrowings

$

234,309


$

232,055

    Accounts payable


2,588,649



2,659,727

    Loan payable - bank


8,591,334



8,508,663

    Current portion of loan payable - related parties


5,793



5,793

    Current portion of loan payable - other


96,847



23,515

    Accrued expenses and other current liabilities


3,584,746



3,206,009

TOTAL CURRENT LIABILITIES


15,101,678



14,635,762







LONG-TERM LIABILITIES:






    Loan payable - related parties


3,730,451



3,696,210

                        - others


1,849,636



1,831,838

   Warrant and derivative liabilities


-



1,161

TOTAL LONG-TERM LIABILITIES


5,580,087



5,529,209







Common stock, par value $0.001, 100,000,000 shares authorized,






   49,196,090 and 49,158,955 shares issued and outstanding






   on September 30 and June 30, 2011, respectively


49,196



49,159

Additional paid in capital


57,516,219



57,382,109

Accumulated deficit


(21,295,047)



(20,525,372)

Other comprehensive income


2,168,664



1,885,531

TOTAL SHAREHOLDERS' EQUITY OF THE COMPANY


38,439,032



38,791,427







NONCONTROLLING INTEREST IN SUBSIDIARIES


(477,149)



(467,857)

TOTAL EQUITY


37,961,883



38,323,570







TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

$

58,643,648


$

58,488,541













See notes to financial statements



AOXING PHARMACEUTICAL CO., INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND OTHER COMPREHENSIVE INCOME (LOSS)

(Unaudited)









For the Three Months Ended



September 30,



2011



2010






SALES

$

1,530,068


$

1,740,673

COST OF SALES


662,550



827,295

GROSS PROFIT


867,518



913,378







OPERATING EXPENSES:






  Research and development expense


106,399



85,448

  General and administrative expenses


746,243



909,057

  Selling expenses


363,293



511,821

  Depreciation and amortization


147,540



152,044

      TOTAL OPERATING EXPENSES


1,363,475



1,658,370







LOSS FROM OPERATIONS


(495,957)



(744,992)







OTHER INCOME (EXPENSE):






  Interest expense, net of interest income


(418,431)



(374,781)

  Change in fair value of warrant and derivative liabilities


1,161



222,717

 Equity in loss of joint venture, net of tax


(41,936)



-







     TOTAL OTHER INCOME (EXPENSE)


(459,206)



(152,064)







LOSS BEFORE INCOME TAX


(955,163)



(897,056)







Income tax (credit)


(161,294)



(202,596)

NET LOSS


(793,869)



(694,460)







Net loss attributed to non-controlling interest in subsidiaries


(24,194)



(40,519)

LOSS ATTRIBUTABLE TO SHAREHOLDERS OF THE COMPANY


(769,675)



(653,941)







OTHER COMPREHENSIVE INCOME :






  Foreign currency translation adjustment


298,035



220,674







COMPREHENSIVE LOSS


(471,640)



(433,267)







Other comprehensive income attributable to non-controlling interest


14,902



10,508







COMPREHENSIVE LOSS ATTRIBUTABLE TO THE COMPANY

$

(486,542)


$

(443,775)













BASIC AND DILUTED LOSS PER COMMON SHARE

$

(0.02)


$

(0.01)

WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING


49,167,411



46,475,780







See notes to financial statements



AOXING PHARMACEUTICAL CO., INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)









For the Three Months Ended



September 30,



2011



2010





OPERATING ACTIVITIES:






Net loss

$

(793,869)


$

(694,460)

  Adjustments to reconcile net loss to net cash used in operating activities:






      Depreciation and amortization


293,883



283,679

     Deferred income tax


(161,294)



(202,596)

      Common stock issued for services


134,147



142,048

      Change in fair value of warrants and derivative liability


(1,161)



(222,717)

     Equity in loss of joint venture, net of tax


41,936



-

  Changes in operating assets and liabilities:






       Accounts receivable


(221,694)



(509,708)

       Inventories


81,425



192,954

       Prepaid expenses and other current assets


7,586



(59,890)

       Accounts payable


(72,468)



108,312

       Accrued expenses and other current liabilities


338,583



(15,263)

NET CASH USED IN OPERATING ACTIVITIES


(352,926)



(977,641)







INVESTING ACTIVITIES:






  Acquisition of property and equipment


(24,762)



(723,945)

 Repayment from unrelated parties


-



345,597

NET CASH USED IN INVESTING ACTIVITIES


(24,762)



(378,348)







FINANCING ACTIVITIES:






 Proceeds from bank loans


-



746,480

 Proceeds from other borrowings


72,862



-

 Repayment of loans from related party


(1,666)



-

NET CASH PROVIDED BY FINANCING ACTIVITIES


71,196



746,480







EFFECT OF EXCHANGE RATE ON CASH


14,928



74,446







DECREASE IN CASH


(291,564)



(535,063)

CASH – BEGINNING OF PERIOD


2,770,744



3,985,710

CASH – END OF PERIOD

$

2,479,180


$

3,450,647













Supplemental disclosures of cash flow information:






    Cash paid for interest

$

515,574


$

340,123

    Cash paid for income taxes


-



-













See notes to financial statements



SOURCE Aoxing Pharmaceutical Company, Inc.



RELATED LINKS
http://www.aoxingpharma.com

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