China Aoxing Pharmaceutical Company Reports Third Quarter Fiscal Year 2009 Financial Results

NEW YORK, NY, May 18 (MARKET WIRE) --
China Aoxing Pharmaceutical Company, Inc. (OTCBB: CAXG) ("China Aoxing"),
a pharmaceutical company specializing in research, development,
manufacturing and marketing of narcotic and pain-management products,
today announced its unaudited financial results for the third quarter of
fiscal year 2009, which ended on March 31, 2009.

Financial Results

Revenue in the third quarter of 2009 increased 85% year over year to
$1,587,989 from $857,065, reflecting the contribution of our newly
acquired subsidiary, LRT, as well as continued demand for the Company's
prescription and over-the-counter (OTC) pharmaceutical products.

Gross profit in the third quarter of fiscal year 2009 increased 28% to
$517,903 from $403,609. The increase reflected higher net sales as a
result of the contribution of our newly acquired subsidiary, LRT.

Operating loss in the third quarter was $707,244 compared to a loss of
$1,411,428 in the prior year period, reflecting positive impact of cost
control measures taken by the company recently. General and administration
expenses were reduced by 39% to $797,954 from $1,316,804 in the prior year
period as a result of tight control on expenditures and improvement of
efficiencies.

Net loss in the third quarter was $239,208, compared to a net income of
$7,449,659 in the prior year. However, the net income for both periods was
significantly attributed to the changes in fair value of warrant and
derivative liabilities in the amount of $1,502,314 and $8,981,552,
respectively.

Mr. Juan Yue Han, Chairman and the CEO of China Aoxing, commented, "We are
pleased with our third quarter performance and have met our near-term
corporate objectives. On operation side, we made good progress on
business integration, cost cutting and efficiency improvement. On pipeline
development side, we continued receiving new drug approval from the China
State Food and Drug Administration ("SFDA"). Our pipeline products
progress well and we are planning to announce the clinical results in due
course. We remain focused on becoming a premium specialty pharmaceutical
company in narcotics and pain management."

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 STATEMENTS OF OPERATIONS
(Unaudited)

THREE MONTHS ENDED NINE MONTHS ENDED
March 31, March 31,
2009 2008 2009 2008
(Restated) (Restated)
SALES $ 1,587,989 $ 857,065 $ 7,501,763 $ 3,101,236
COST OF SALES 1,070,086 453,456 4,339,126 1,550,872
GROSS PROFIT 517,903 403,609 3,162,637 1,550,364

COSTS AND EXPENSES:
Research and
development expense 143,197 174,237 483,434 277,891
General and
administrative
expenses 797,954 1,316,804 2,787,746 2,515,251
Selling expenses 169,809 198,928 1,293,344 764,722
Depreciation and
amortization 114,187 125,068 346,069 363,463
TOTAL COSTS AND
EXPENSES 1,225,147 1,815,037 4,910,593 3,921,327

LOSS FROM OPERATIONS (707,244) (1,411,428) (1,747,956) (2,370,963)

OTHER INCOME (EXPENSE):
Interest expense (495,489) (329,497) (1,400,868) (1,915,473)
Change in fair value
of warrant and
derivative liabilities 1,502,314 8,981,552 506,028 9,121,393
Gain on foreign
currency translation (42,481) - 220,579 -
Impairment loss (561,913) (561,913)
Forgiveness of debt - - 1,459,654 -
TOTAL OTHER INCOME
(EXPENSE) 402,431 8,652,055 223,480 7,205,920

LOSS BEFORE MINORITY
INTEREST AND INCOME
TAXES (304,813) 7,240,627 (1,524,476) 4,834,957

Minority interest in
(income) losses of
subsidiary 65,605 209,032 37,084 476,856

LOSS BEFORE INCOME
TAXES (239,208) 7,449,659 (1,487,392) 5,311,813

Income taxes 0 - (98,686) -

NET INCOME (LOSS) (239,208) 7,449,659 (1,586,078) 5,311,813

OTHER COMPREHENSIVE
LOSS:
Foreign currency
translation
adjustment 159,152 192,409 (222,626) 414,968

COMPREHENSIVE INCOME
(LOSS) $ (80,056) $ 7,642,068 $(1,808,704) $ 5,726,781

BASIC AND DILUTED
EARNINGS PER COMMON
SHARE (0.00) 0.18 (0.02) (0.13)

WEIGHTED AVERAGE NUMBER
OF SHARES OUTSTANDING 82,819,555 41,312,664 82,261,499 40,822,684

China Aoxing Pharmaceutical Co., Inc. and Subsidiaries

CONSOLIDATED BALANCE SHEETS
(Unaudited)

March 31, June 30,
2009 2008
(Unaudited)
ASSETS
CURRENT ASSETS:
Cash $ 987,894 $ 1,565,513
Accounts receivable 2,294,235 2,536,047
Inventories 701,462 848,959
Prepaid expenses and sundry current assets 754,996 303,208
TOTAL CURRENT ASSETS 4,738,587 5,253,727

LONG-TERM ASSETS:
Property and equipment, net of accumulated
depreciation 30,333,047 30,331,143
Other intangible assets 1,578,321 1,635,375
Goodwill 18,924,641 18,904,845
TOTAL LONG-TERM ASSETS 50,836,009 50,871,363
TOTAL ASSETS $ 55,574,596 $ 56,125,090

LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term borrowings $ 5,112,353 $ 2,042,600
Accounts payable 3,565,614 3,544,795
Loan payable - other - 380,070
Due to stockholders 112,198 112,068
Accrued expenses and taxes payable 3,826,171 4,851,314
Notes payable - bank 6,093,716 7,545,239
TOTAL CURRENT LIABILITIES 18,710,052 18,476,086

LONG-TERM DEBT - STOCKHOLDER 4,103,722 4,098,687
- OTHER 3,716,616 3,127,643
CONVERTIBLE DEBENTURES 978,953 1,098,362
WARRANT AND DERIVATIVE LIABILITIES 3,490,056 4,161,678
MINORITY INTEREST - 24,598

STOCKHOLDERS' EQUITY:
Common stock, $0.001 par value,
100,000,000 shares authorized
82,819,555 and 82,819,555 shares issued
and outstanding at March 31, 2009 and
June 30, 2008, respectively 82,820 81,090
Preferred stock, $0.001 par value
300,000 shares authorized
277,018 shares issued and outstanding 277 277
Additional paid-in capital 37,994,090 36,749,956
Accumulated deficit (13,900,224) (12,314,178)
Other comprehensive income 398,234 620,891
TOTAL STOCKHOLDERS' EQUITY 24,575,197 25,138,036
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 55,574,596 $ 56,125,090

Contact:

Wei Zhang
Investor Relations
China Aoxing Pharmaceutical Company, Inc
Email: chinaaoxing@gmail.com
Telephone: 646 - 512 - 5662

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