China Aoxing Pharmaceutical Company, Inc. (OTCBB: CAXG) ("China
Aoxing"), a China-based pharmaceutical company specializing in
research, development, manufacturing and distribution of narcotic
and pain-management products, today announced financial results for
the fiscal year ended June 30, 2009.
Revenues for our fiscal year ended June 30, 2009 were
$8,941,907, representing a 27% increase from revenues of $7,065,015
for our fiscal year ended June 30, 2008. The increase was driven by
our increased marketing efforts, improved brand recognition and
effective pricing strategy.
Gross profit in the year ended June 30, 2009 increased by
$576,213 from gross profit during the year ended June 30, 2008.
Research and development expenses increased from $700,202 in
fiscal year 2008 to $722,567 in fiscal year 2009 as we continued
advancing our development programs including Oxycodone, Tilidine,
Codeine Phosphate, Buprenorphine and other products.
General and administrative expenses decreased from $4,001,282 in
fiscal year 2008 to $3,804,296 in fiscal year 2009, as a result of
our efforts to control expenditures on both cash and non-cash based
items. During the fiscal year 2009, we reduced our staff from 465
employees at June 30, 2008 to our current roster of 360 employees.
We also reduced professional fees by 45% on legal, accounting, and
other services.
Loss from our operations was $4,003,065 in fiscal year 2009 as
compared to the loss of $3,578,966 in fiscal year 2008, an increase
in $424,098 or 12%, primarily due to the increase in our bad debt
reserve in the amount of $1,461,789 in fiscal year 2009, which
offset the savings achieved from the operation improvement.
We incurred interest expenses of $1,919,143 in fiscal year 2009,
compared to $2,514,840 in fiscal year 2008, a 24% decrease
primarily due to the conversion of our 10% convertible debenture
into common stock as of September 30, 2008.
We continue improving our capital structure and financial
strength and anticipate that interest expense will continue to
decrease in the coming years. The completion of a $5 million
private placement of equity in early August 2009 was an important
first step in that program. Also in late August 2009, we paid off a
convertible term note to American Oriental Bioengineering Inc.
("AOB") in the total amount of $4,830,847, in the form of 3,578,405
shares of restricted common stock. As of October 14, 2009, AOB owns
33,578,405 shares, or approximately 37% of our common stock.
During the fiscal year 2009, we recorded impairment loss in the
amount of $2,345,420, primarily attributable to our revaluation of
LRT's property and equipment in connection with our consolidation
efforts of LRT subsidiary. The impairment loss was offset in part
by a one-time gain on forgiveness of debt in the amount of
$1,461,299 during the same year.
Net cash outflows from operations during fiscal year ended June
30, 2009 amounted to $642,598, representing 34% improvement
compared with net cash outflows from operation of $982,947 in the
fiscal year 2008. Our cash flows used in investing activities
amounted to $2,227,309 in acquisition of property and equipment in
fiscal year 2009 as compared to $17,135,612 in fiscal year 2008.
During fiscal year 2008, we paid $12,232,123 and $3.42m
respectively to acquire 100% equity ownership of LRT and 35% of
equity ownership of Hebei Aoxing Pharmaceutical Group Company, our
main operating subsidiary in China.
According to the accounting treatment of embedded derivative
instruments required by the US GAAP, the Company recognized other
income of approximately $627,183 and $8,547,000 during the years
ended June 30, 2009 and 2009 respectively, as a result of
marking-to-market the value of warrants and derivative liabilities
related to the convertible debentures issued by the Company in
earlier periods. In addition, we also recognized income tax credit
of $3,281,059 in fiscal year 2009. As a result, the net loss for
the fiscal year 2009 was $2,695,050, or $0.03 per fully diluted
share, compared to a net income of $3,646,859, or $0.08 per fully
diluted share in the prior year.
Mr. Zhenjiang Yue, Chairman and Chief Executive Officer of China
Aoxing, commented, "We are very pleased with our 2009 fiscal year
financial and business results. We revised our capital structure
and improved our financial condition significantly, forming an
important basis of our future business expansion. Our clinical
development team achieved significant progress toward finishing
several clinical trials of narcotic products by June 2009. In
addition, we are very optimistic about new product licenses and
product launches in the coming year, which would lead us to a new
commercialization era in the company history."
About China Aoxing Pharmaceutical Company, Inc.
China Aoxing Pharmaceutical Company, Inc. (OTCBB: CAXG) is a
pharmaceutical company located in China specializing in research,
development, manufacturing and distribution of a variety of
narcotics and pain-management products. It has a strategic alliance
with American Oriental Bioengineering, Inc. (NYSE: AOB) to develop
and market various narcotic drugs in China. Headquartered in
Shijiazhuang City, the pharmaceutical capital of China, outside of
Beijing, China Aoxing has China's largest and the most advanced
manufacturing facility for highly regulated narcotic medicines,
addressing a very under-served and fast-growing market in China.
Its facility is one of the few GMP facilities licensed for
narcotics medicines. The Company is working closely with the
Chinese government and SFDA to assure the strictly regulated
availability to medical professionals of its narcotic drugs and
pain medicines throughout China.
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-KSB for the year ended
June 30, 2008, 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.
CHINA AOXING PHARMACEUTICAL CO., INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
----June 30,----
2009 2008
ASSETS
CURRENT ASSETS:
Cash $ 1,271,922 $ 1,565,513
Accounts receivable, net of allowance for
doubtful accounts of $1,461,091 and $0 1,064,381 2,536,047
Inventory 712,521 848,959
Deposits with suppliers 261,780 78,052
Deferred tax assets 3,331,045 -
Prepaid expenses and sundry current assets 302,449 225,156
------------ ------------
TOTAL CURRENT ASSETS 6,944,098 5,253,727
------------ ------------
LONG-TERM ASSETS
Property and equipment, net of accumulated
depreciation 29,324,362 30,331,143
Other intangible assets 1,549,497 1,635,375
Goodwill 18,926,527 18,904,845
------------ ------------
TOTAL LONG-TERM ASSETS 49,800,386 50,871,363
------------ ------------
TOTAL ASSETS $ 56,744,484 $ 56,125,090
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-Term borrowings $ 292,193 $ 291,800
Accounts payable 2,816,711 3,544,795
Deposit payable 3,871,552 -
Current portion of long term debt - other 144,635 380,070
Current portion of long term debt -
stockholders 4,494,629 1,862,868
Accrued expenses and taxes payable and
other sundry current liabilities 2,403,185 4,851,314
Loan payable - Bank 6,094,428 7,545,239
------------ ------------
TOTAL CURRENT LIABILITIES 20,117,333 18,476,086
------------ ------------
LONG-TERM DEBT -- STOCKHOLDERS 4,104,201 4,098,687
------------ ------------
-- OTHER 3,491,113 3,127,643
------------ ------------
CONVERTIBLE DEBENTURES 1,023,733 1,098,362
------------ ------------
WARRANT AND DERIVATIVE LIABILITIES 3,368,901 4,161,678
------------ ------------
MINORITY INTEREST - 24,598
------------ ------------
Common stock, par value $0.001,
100,000,000 shares authorized, 82,827,999 and
81,089,919 shares issued and outstanding at
June 30, 2009 and 2008, respectively 82,828 81,090
Preferred stock, par value $0.001,
300,000 shares authorized, 277,018 shares
issued and outstanding at June 30,2009 and
2008, respectively 277 277
Additional paid in capital 39,104,309 36,749,956
Accumulated deficit (15,009,228) (12,314,178)
Other compensive income 461,017 620,891
------------ ------------
TOTAL STOCKHOLDERS' EQUITY 24,639,203 25,138,036
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 56,744,484 $ 56,125,090
============ ============
CHINA AOXING PHARMACEUTICAL CO., INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND OTHER COMPREHENSIVE INCOME (LOSS)
Year ended June 30,
2009 2008
SALES $ 8,941,907 $ 7,065,015
COST OF SALES 5,135,661 3,834,982
------------ ------------
GROSS PROFIT 3,806,246 3,230,033
------------ ------------
COSTS AND EXPENSES:
Research and development expense 722,567 700,202
General and administrative expenses 3,804,296 4,001,282
Bad Debt expenses 1,461,789 -
Selling expenses 1,480,118 1,449,909
Depreciation and amortization 340,541 657,606
------------ ------------
TOTAL COSTS AND EXPENSES 7,809,311 6,808,999
------------ ------------
LOSS FROM OPERATIONS (4,003,065) (3,578,966)
------------ ------------
OTHER INCOME (EXPENSE):
Interest expense (1,919,143) (2,514,840)
Change in fair value of warrant and
derivative liabilities 627,183 8,547,374
Gain on foreign currency transactions 203,037 677,365
Impairment loss (2,345,420) -
Forgiveness of debt 1,461,299 -
------------ ------------
TOTAL OTHER INCOME (EXPENSE) (1,973,044) 6,709,899
------------ ------------
INCOME (LOSS) BEFORE MINORITY INTEREST AND
INCOME TAXES (5,976,109) 3,130,933
Minority interest in (income) losses of
subsidiary - 515,926
------------ ------------
INCOME (LOSS) BEFORE INCOME TAXES (5,976,109) 3,646,859
Income taxes (credit) 3,281,059 -
------------ ------------
NET INCOME (LOSS) (2,695,050) 3,646,859
OTHER COMPREHENSIVE INCOME (LOSS):
Foreign currency translation adjustment (159,874) 239,483
------------ ------------
COMPREHENSIVE INCOME (LOSS) $ (2,854,924) $ 3,886,342
============ ============
BASIC AND DILUTED EARNINGS (LOSSES) PER
COMMON SHARE $ (0.03) $ 0.08
============ ============
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING 82,402,736 49,242,639
============ ============
CHINA AOXING PHARMACEUTICAL CO., INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year ended June 30,
2009 2008
OPERATING ACTIVITIES:
Net income (loss) $ (2,695,050) $ 3,646,859
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 1,017,559 730,570
Deferred tax assets (3,331,045) -
Impairment loss on land and building 2,345,420 -
Bad debt 1,461,453 -
Forgiveness of debt (1,460,963) -
Non-cash interest expense related to
debentures and warrants 215,371 1,432,462
Stocks issued for services and interest 1,000,506 1,695,898
Change in fair value of warrants and
derivative liability (627,183) (8,547,374)
Minority interest (24,598) (515,927)
Changes in operating assets and liabilities:
Accounts receivable 25,543 (525,085)
Inventories 137,581 (168,807)
Prepaid expenses and sundry current assets (272,729) 85,506
Accounts payable (1,240,164) 1,627,658
Accrued expenses, taxes and sundry current
liabilities 2,805,701 (442,707)
------------ ------------
NET CASH USED IN OPERATING ACTIVITIES (642,598) (980,947)
------------ ------------
INVESTING ACTIVITIES:
Acquisition of property and equipment (2,227,309) (1,483,489)
Cash paid for acquisition of subsidiary - (12,232,123)
Acquisition of minority interest - (3,420,000)
------------ ------------
NET CASH USED IN INVESTING ACTIVITIES (2,227,309) (17,135,612)
------------ ------------
FINANCING ACTIVITIES:
Repayment of bank borrowings - (4,895,950)
Other borrowings 123,316 2,837,959
Loans from stockholders 2,629,655 2,953,664
Sale of convertible debentures - 425,000
Sale of common stock - 17,100,000
------------ ------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 2,752,971 18,420,673
------------ ------------
EFFECT OF EXCHANGE RATE ON CASH (178,655) (247,728)
------------ ------------
INCREASE (DECREASE) IN CASH (295,591) 56,386
CASH - BEGINNING OF PERIOD 1,567,513 1,511,127
------------ ------------
CASH - END OF PERIOD $ 1,271,922 1,567,513
============ ============
Supplemental disclosures of cash flow
information:
Non-cash financing activities:
Conversion of convertible debentures into
common stock 290,000 -
============ ============
Contact: Wei Zhang China Aoxing Pharmaceutical Company, Inc
Email: chinaaoxing@gmail.com Telephone: 646 - 367-1747 Website:
www.chinapainmed.com
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