FOSTER CITY, NJ / ACCESSWIRE / October 5, 2016 / Aoxing Pharmaceutical Company, Inc. (NYSE MKT:AXN) today announced that for the
fiscal year 2016, ended June 30, 2016, the Company reported revenues of $32,329,525, representing a 26.9% increase from the revenue
of $25,481,199 for the year ended June 30, 2015.
The increase in revenue was primarily attributable to the increase in the sales of other herbal therapeutics products, which
supplemented the continuing strong sales of the Company's leading seller Zhongtong'an. Recently, the Company has evaluated the
strength of its product portfolio, and increased its effort to market products with large growth potential. Zhongtong'an, which
represents ~80% of total revenue in fiscal year 2016, had sales growth of ~7% year over year. Zhongtong'an's sales growth was below
our expectations, partly due to inventory drawdown in the sales channels during the fourth quarter. The total revenues for products
other than Zhongtong'an in fiscal 2016 increased more than five times compared to fiscal 2015. When compared in our local currency
(Chinese Yuan), total revenue increased 33% year over year while the revenue from Zhongtong'an increased 12% year over year. The
difference in the growth rate expressed in local currency and in U.S. dollars is the result of the devaluation of the Chinese yuan
against the U.S. dollar during fiscal 2016.
The following table shows the dollar volume of sales of our primary product lines in each of the past two fiscal
years:
Fiscal 2016 Fiscal 2015 Herbal Therapeutics: Zhongtong'an $ 25,981,611 $ 24,325,980 Yiqi Qiangshen Granule 2,665,714
87,806 Others 3,682,200 1,067,413 Total $ 32,329,525 $ 25,481,199
Cost of sales was $7,775,524 for the fiscal year 2016, representing an increase of 36.7% from $5,688,863 for the fiscal year
2015. Gross Margin was 75.9% for the fiscal year 2016 and relatively flat compared to 77.7% for the fiscal 2015. Lower gross margin
was mainly the result of product mix shift as we try to increase sales of products in addition to Zhongtong'an.
Research and development ("R&D") expenses were $3,143,233 for the year ended on June 30, 2016, representing a significant
increase from the $337,067 expended in fiscal 2015. Our R&D expenses fluctuate significantly from period to period, reflecting
the progress and timing of our various drug development projects. The larger expense this year was mainly due to large payments for
clinical trials and a large payment for a key raw material used in our R&D program.
Our general and administrative expenses consist primarily of employee compensation and benefits payable to management and to our
finance and administrative staff, professional and legal fees, and bad debt expenses. In the year ended June 30, 2016, our general
and administrative expenses were $3,066,634, an increase of 11.4% compared to the $2,753,534 incurred during the previous year. The
increase in general and administrative expense was mainly due to professional fees as a result of the registered direct offering of
securities during September 2015.
Selling expense for the year ended June 30, 2016 was $11,613,220, which was 55.7% higher than the selling expense of $7,457,758
for the year ended June 30, 2015. Sales and marketing efforts to introduce new products, including our new Tilidine tablets, are
the main reasons for higher selling expenses.
Income from Operations was $6,228,051 for the year ended June 30, 2016, a decline of 28.4% from $8,695,658 for the fiscal year
2015. The decline was mainly due to higher selling expenses and R&D expenses.
Net interest expense was $3,456,638 for fiscal 2016, a decrease of 40.1% compared to interest expense of $5,768,094 incurred in
fiscal 2015. The decrease of net interest expense was mainly due to lower debt during the period as a result of our equity
financing in September, 2015 and the conversion of $2.66 million in debt to equity in November, 2015.
The Company realized net income of $2,243,580 for the fiscal year ended June 30, 2016. However, because the Company owns only
95% of Hebei Aoxing, 5% of that company's net income was attributed to the non-controlling interest. Therefore the net income for
the fiscal year attributable to the shareholders of Aoxing Pharmaceutical was $2,061,224. In comparison, during the fiscal year
ended June 30, 2015, the Company's net income was $5,818,473 and, after deducting loss attributable to the 5% minority interest in
Hebei Aoxing, net loss attributable to shareholders of Aoxing Pharmaceutical was $5,494,713.
Our cash balance as of June 30, 2016 was $6,912,100, compared to $5,371,545 as of June 30, 2015. Cash used in operations during
the year ended June 30, 2016 was $534,989, while net cash of $3,025,739 was provided by operations during the year ended June 30,
2015. Cash flow from operations in fiscal 2016 was negatively impacted by higher accounts receivable balances at year-end, which
was mainly due to the development of new customers and changes in the government's procurement policy for the pharmaceutical
industry. We expect that during fiscal 2017 cash flow from operations should be positively impacted by the collection of account
receivables.
Mr. Zhenjiang Yue, Chairman and CEO of Aoxing Pharma, said, "While the growth of our Zhongtong'an product didn't meet our
expectations for the past year, we believe the fundamental demand is still very strong and we expect the growth rate to improve
this year. We're very happy to see the progress made byproducts other than Zhongtong'an. For our Tilidine tablets, we started
production in June, 2016 and expect sales to ramp up during fiscal 2017."
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 June 30, June 30, 2016 2015 ASSETS
CURRENT ASSETS: Cash and cash equivalents $ 6,912,100 $ 5,371,545 Accounts receivable, net of allowance for doubtful accounts of
$1,940,354 and $1,364,330, respectively 11,200,418 5,854,055 Inventories, net 2,841,690 3,240,026 Prepaid expenses and other
current assets 5,912,555 6,630,407 TOTAL CURRENT ASSETS 26,866,763 21,096,033 LONG-TERM ASSETS: Property and equipment, net of
accumulated depreciation 25,603,734 28,651,717 Deferred income tax 1,878,595 2,711,610 Other intangible assets, net 1,878,299
484,857 Investment in joint venture 4,200 96,475 TOTAL LONG-TERM ASSETS 29,364,828 31,944,659 TOTAL ASSETS $ 56,231,591 $
53,040,692 LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Short-term borrowings $ 11,070,966 $ 12,484,356 Accounts
payable 2,709,819 3,625,139 Notes payable - 1,631,641 Loan payable – bank 14,372,630 16,316,408 Current portion of loan payable -
related parties 13,317 5,793 Current portion of loan payable - others 15,048 - Accrued expenses and other current liabilities
9,633,750 7,176,325 TOTAL CURRENT LIABILITIES 37,815,530 41,239,662 LONG-TERM LIABILITIES: Loan payable - related parties - 8,158 -
others - 1,361,199 Deferred income 340,089 368,751 TOTAL LONG-TERM LIABILITIES 340,089 1,738,108 Common stock, par value $0.001,
100,000,000 shares authorized, 76,209,195and 69,839,259 shares issued and outstanding on June 30, 2016 and June 30, 2015,
respectively 76,209 69,839 Additional paid in capital 73,629,751 66,457,250 Accumulated deficit (56,293,745 ) (58,354,968 )
Accumulated other comprehensive income 1,723,740 3,066,026 TOTAL SHAREHOLDERS' EQUITY OF THE COMPANY 19,135,955 11,238,147
NON-CONTROLLING INTEREST IN SUBSIDIARIES (1,059,983 ) (1,175,225 ) TOTAL EQUITY 18,075,972 10,062,922 TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 56,231,591 $ 53,040,692 AOXING PHARMACEUTICAL CO., INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF
OPERATIONS AND OTHER COMPREHENSIVE LOSS For the year ended June 30 2016 2015 SALES $ 32,329,525 $ 25,481,199 COST OF SALES
7,775,524 5,688,863 GROSS PROFIT 24,554,001 19,792,336 OPERATING EXPENSES: Research and development 3,143,233 337,067 General and
administrative 3,066,634 2,753,535 Selling expenses 11,613,220 7,457,758 Depreciation and amortization 502,862 548,319 TOTAL
OPERATING EXPENSES 18,325,949 11,096,679 INCOME FROM OPERATIONS 6,228,051 8,695,657 OTHER INCOME (EXPENSE): Interest expense, net
of interest income (3,456,638 ) (5,768,094 ) Equity in loss of joint venture, net (87,500 ) (93,352 ) Subsidy income 201,912
279,893 TOTAL OTHER EXPENSE (3,342,226) (5,581,553 ) INCOME BEFORE INCOME TAXES 2,885,825 3,114,104 Income taxes/(benefits) 642,245
(2,704,369) NET INCOME 2,243,580 5,818,473 Net income attributable to non-controlling interest in subsidiaries 182,356 323,760 NET
INCOME ATTRIBUTABLE TO SHAREHOLDERS OF THE COMPANY 2,061,224 5,494,713 OTHER COMPREHENSIVE INCOME (LOSS) : Foreign currency
translation adjustment (1,342,286) 91,359 COMPREHENSIVE INCOME 718,938 5,586,072 Other comprehensive income (loss) attributable to
non-controlling interest (67,114) 4,568 COMPREHENSIVE INCOME ATTRIBUTABLE TO THE COMPANY $ 786,052 $ 5,581,504 EARNINGS PER SHARE
Basic $ 0.03 $ 0.09 Diluted 0.03 0.09 WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING Basic 73,695,338 63,107,104 Diluted 75,467,672
63,167,104
Contact: Aoxing Pharmaceutical Company: 646-367-1747 investor.relations@aoxingpharma.com
SOURCE: Aoxing Pharmaceutical Company, Inc.
