Aoxing Pharmaceuticals Q2 Revenue Up 27%; Net Income $2.1 Million, Up 265%

Direct-To-Customer Sales Program Helps Raise Gross Margins To 79%

FOSTER CITY, Calif., Feb. 8, 2016 /PRNewswire/ -- Aoxing Pharmaceutical Company, Inc. (NYSE MKT: AXN) today announced that for the second quarter of fiscal year 2016, ended December 31, 2015, the Company achieved revenue of $8,195,839, a 27% improvement on revenue of $6,430,701 recorded in the same quarter in fiscal 2015.

The Company's net income in Q2 of fiscal year 2016 was $2,068,635, or $.03 per share, up 265% from the net income of $567,169, or $.01 per share, in the Q2 of fiscal year 2015. Gross margin for the three months ended December 31, 2015 was 79% compared to gross margin of 75% in the like year-ago quarter.

Aoxing's cash balance as of December 31, 2015 was $6,435,362, compared to $5,371,545 as of June 30, 2015, the end of its last fiscal year.

The Company's increase in second quarter revenue was primarily attributable to an increase in the number of customers for its lead pain management product, Zhongtong'an. Aoxing's 265% increase in net income was primarily the result of the Company's increased revenue, improved gross profit, and a 40% decrease in net interest expense due to a reduction in loan balances. Such earnings growth was realized despite higher R&D expenses during the recent quarter, which was mainly due to a large payment for a key raw material used in our R&D program.

Mr. Zhenjiang Yue, Chairman and CEO of Aoxing Pharma, said, "We are pleased by the continued growth of our Company, as our revenue for the first half of fiscal year 2016 increased by 54% to $16,940,661. Our Zhongtong'an product, which was recently included in the government essential drug procurement lists in four new provinces, has continued to accelerate our sales growth. We believe the growing market for Zhongtong'an, coupled with the introduction to market of our Tilidine HCL pain fighting tablets and capsules during the current quarter, should help our Company achieve its revenue target of $45 million in fiscal year 2016, along with continued earnings growth in fiscal year 2016 and beyond."

About the Company
Aoxing Pharmaceutical Company, Inc. is a U.S. incorporated 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 Pharma 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 Food and Drug Administration ("CFDA"). For more information, please visit: www.aoxingpharma.com.

Safe Harbor Statement. This press release contains certain statements that may include "forward-looking statements." All statements other than statements of historical fact included herein are "forward-looking statements." These forward-looking statements are often identified by the use of forward-looking terminology such as "believes," "expects" or similar expressions, involving known and unknown risks and uncertainties. Although the Company believes that the expectations reflected in these forward-looking statements are reasonable, they do involve assumptions, risks and uncertainties, and so these expectations may prove to be incorrect. You should not place undue reliance on these forward-looking statements, which speak only as of the date of this press release. The Company's actual results could differ materially from those anticipated in these forward-looking statements as a result of a variety of factors, including the risk factors discussed in the Company's periodic reports that are filed with the Securities and Exchange Commission and available on the SEC's website (http://www.sec.gov). All forward-looking statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by these risk factors. Other than as required under the securities laws, the Company does not assume any duty to update these forward-looking statements.

AOXING PHARMACEUTICAL CO., INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

		December 31,		June 30,
		2015		2015
ASSETS		(Unaudited)
CURRENT ASSETS:
Cash and cash equivalents	$	6,435,362	$	5,371,545
Accounts receivable, net		6,578,492		5,764,738
Notes receivable, net		23,103		89,317
Inventories, net		3,900,849		3,240,026
Prepaid expenses and other current assets		8,193,479		6,630,407
TOTAL CURRENT ASSETS		25,131,285		21,096,033

LONG-TERM ASSETS:
Property and equipment, net of accumulated depreciation		26,647,887		28,651,717
Deferred income tax		1,319,524		2,711,610
Other intangible assets, net		427,554		484,857
Investment in joint venture		53,210		96,475
TOTAL LONG-TERM ASSETS		28,448,175		31,944,659
TOTAL ASSETS	$	53,579,460	$	53,040,692

LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:
Short-term borrowings	$	11,038,551	$	12,484,356
Accounts payable		2,348,225		3,625,139
Notes payable		-		1,631,641
Loan payable – bank		14,939,856		16,316,408
Current portion of loan payable - related parties		13,494		5,793
Current portion of loan payable – others		15,402		-
Accrued expenses and other current liabilities		7,154,105		7,176,325
TOTAL CURRENT LIABILITIES		35,509,633		41,239,662

LONG-TERM LIABILITIES:
Loan payable - related parties		-		8,158
Loan payable – others		-		1,361,199
Deferred income		348,083		368,751
TOTAL LONG-TERM LIABILITIES		348,083		1,738,108

Common stock, par value $0.001, 100,000,000 shares authorized, 72,252,200 and 69,839,259 shares issued and outstanding on September 30, 2015 and June 30, 2015		74,299		69,839
Additional paid in capital		71,998,484		66,457,250
Accumulated deficit		(55,018,398)		(58,354,968)
Accumulated other comprehensive income		1,713,633		3,066,026
TOTAL SHAREHOLDERS' EQUITY OF THE COMPANY		18,768,018		11,238,147

NONCONTROLLING INTEREST IN SUBSIDIARIES		(1,046,274)		(1,175,225)
TOTAL EQUITY		17,721,744		10,062,922

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$	53,579,460	$	53,040,692

See accompanying notes to the consolidated financial statements

AOXING PHARMACEUTICAL CO., INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND OTHER COMPREHENSIVE INCOME (LOSS)
(Unaudited)

	For the three months ended				For the six months ended
	December 31,				December 31,
	2015		2014		2015		2014

SALES	$	8,195,839	$	6,430,701	$	16,940,661	$	10,955,783
COST OF SALES		1,726,592		1,624,853		3,484,671		3,012,386
GROSS PROFIT		6,469,246		4,805,849		13,455,990		7,983,397

OPERATING EXPENSES:
Research and development expense		830,105		95,597		1,207,411		203,147
General and administrative expenses		511,127		821,008		1,455,485		1,332,495
Selling expenses		1,589,866		1,775,924		3,984,212		2,978,433
Depreciation and amortization		128,126		140,801		259,656		280,076
TOTAL OPERATING EXPENSES		3,059,224		2,833,331		6,906,764		4,794,151

INCOME FROM OPERATIONS		3,410,023		1,972,518		6,549,225		3,189,246

OTHER INCOME (EXPENSE):
Interest expense, net of interest income		(979,906)		(1,628,120)		(1,908,936)		(2,821,280)
Gain on foreign currency transactions		24,753		0		83,345
Equity in loss of joint venture, net		(14,474)		(22,018)		(38,765)		(47,989)
Subsidy income		157,266		279,573		205,027		279,573
TOTAL OTHER EXPENSE		(812,362)		(1,370,565)		(1,659,329)		(2,589,696)

INCOME BEFORE INCOME TAXES		2,597,661		601,952		4,889,897		599,550

Income tax expense		409,393		-		1,353,196		-

NET INCOME		2,188,268		601,952		3,536,700		599,550

Net income attributed to non-controlling interest in subsidiaries		119,633		34,784		200,129		40,251
INCOME ATTRIBUTABLE TO SHAREHOLDERS OF THE COMPANY		2,068,635		567,169		3,336,571		559,299

OTHER COMPREHENSIVE INCOME (LOSS):
Foreign currency translation adjustment		(753,581)		7,900		(1,423,572)		21,708

COMPREHENSIVE PROFIT		1,315,054		575,068		1,912,999		581,007

Other comprehensive income (loss) attributable to non-controlling interest		(37,679)		395		(71,179)		1,085

COMPREHENSIVE INCOME ATTRIBUTABLE TO THE COMPANY	$	1,352,733	$	574,673	$	1,984,178	$	579,922

EARNINGS PER SHARE
Basic	$	0.03	$	0.01	$	0.05	$	0.01
Diluted	$	0.03	$	0.01	$	0.05	$	0.01
WEIGHTED AVERAGE SHARES OUTSTANDING
Basic		73,097,698		57,614,546		71,475,000		57,614,546
Diluted		73,177,698		57,674,546		71,555,000		57,674,546
See accompanying notes to the consolidated financial statements

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SOURCE Aoxing Pharmaceutical Company, Inc.

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