Aoxing Pharmaceutical Company Inc. Reports Third Quarter 2010 Financial and Operational Results

NEW YORK, NY--(Marketwire - May 18, 2010) - Aoxing Pharmaceutical Company (NYSE Amex: AXN) (“Aoxing Pharma”), a specialty pharmaceutical company focusing on research, development, manufacturing and distribution of narcotic and pain-management products, today announced its financial and operational results for the three months ended March 31, 2010, or the third quarter of fiscal year 2010.

Third Quarter 2010 Highlights:

• Successfully listed on the NYSE, AMEX under ticker “ANX”
• Entered into a Joint-venture agreement with Johnson Matthey Plc to focus on research, development, manufacturing & marketing API for narcotics & neurological drugs in China
• Strategic alliance with QRx Pharma Ltd. to collaborate in the development of two proprietary narcotic drugs for China & ex-China markets
• Our leading product for dental pain, Zhongtongan, continued to expand gross margins
• Continuous improvement of profitability and operating efficiency

Revenues for the three months ended March 31, 2010 were $1,561,915, comparable to the revenues of $1,587,989 realized during the three months ended March 31, 2009. Our product sales level remains low, due to the negative impact of our relocation and GMP re-certification of the LRT manufacturing facility started in the summer of 2009. This process has delayed our fulfillment of the purchase orders for those formulations manufactured in that facility. As of March 31, 2010, our new facility has successfully passed the GMP re-certification on capsule, tablet, granule and oral solution formulations, while we are preparing for re-certification on pill and tincture formulations.

General and administrative expenses were $916,912 in the three months ended March 31, 2010, or 15% higher than $797,954 in the three months ended March 31, 2009. The increase of general and administrative expenses reflects our ramp-up of operations in anticipation of growth in sales.

Our loss from operations decreased to $490,427 during the three months ended March 31, 2010 from $707,244 during the three months ended March 31, 2009. For the nine months ended March 31, 2010, loss from operations decreased to $1,140,030 from $1,747,956 during the nine months ended March 31, 2009. The 31% and 35% decreases in the loss were primarily due to the dominant role played by Zhongtongan in our sales as well as ongoing improvement of operational efficiency.

During the nine months ended March 31, 2010, net income attributable to the Company’s shareholders was $3,181,148, as compared to a loss of $1,586,078 attributable to the Company’s shareholders for the nine months ended March 31, 2009.

Mr. Zhenjiang Yue, Chairman and Chief Executive Officer of Aoxing Pharma, commented, “We are very pleased to report another successful quarter as we achieved a number of significant milestones and are well-positioned to take advantage of growth opportunities. We will continue to seek international business collaborations to expand our pipeline and product opportunities similar to the deals we announced with QRxPharma and Johnson Matthey.”

About Aoxing Pharmaceutical Company, Inc.

Aoxing Pharmaceutical Company, Inc. is a US incorporated specialty pharmaceutical company with its main 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 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 strategic alliance partnership with QRxPharma and American Oriental Bioengineering, Inc. For more information: www.aoxingpharma.com.

Safe Harbor Statement from Aoxing Pharmaceutical Company, Inc.

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-K for the year ended June 30, 2009, 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.

 AOXING PHARMACEUTICAL CO., INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS March 31, June 30, 2010 2009 (Unaudited) ASSETS CURRENT ASSETS: Cash $ 3,212,657 $ 1,271,922 Accounts receivable 1,586,310 1,064,381 Inventory 1,730,433 712,521 Deposits with suppliers 950,851 252,128 Deferred tax assets 2,715,600 3,331,045 Prepaid expenses and sundry current assets 573,164 312,101 ------------ ------------ TOTAL CURRENT ASSETS 10,769,014 6,944,098 ------------ ------------ LONG - TERM ASSETS Property and equipment, net of accumulated depreciation 24,934,322 29,324,362 Other intangible assets 1,473,747 1,549,497 Goodwill 18,947,063 18,926,527 ------------ ------------ TOTAL LONG-TERM ASSETS 45,355,132 49,800,386 ------------ ------------ TOTAL ASSETS $ 56,124,146 $ 56,744,484 ============ ============ LIABILITIES AND STOCKHOLDERS’ EQUITY CURRENT LIABILITIES: Short-Term borrowings $ 292,564 $ 292,193 Accounts payable 3,055,294 2,816,711 Deposit payable - 3,871,552 Current portion of long term debt - other 419,830 144,635 Current portion of long term debt - related party 668,580 4,494,629 Accrued expenses and taxes payable and other sundry current liabilities 806,337 2,403,185 Loan payable - Bank - 6,094,428 Convertible debentures 1,158,074 1,023,733 ------------ ------------ TOTAL CURRENT LIABILITIES 6,400,679 21,141,066 ------------ ------------ LONG-TERM DEBT-- RELATED PARTY 4,252,030 4,104,201 ------------ ------------ -- OTHER 6,974,491 3,491,113 ------------ ------------ WARRANT AND DERIVATIVE LIABILITIES 312,930 3,368,901 ------------ ------------ Common stock, par value $0.001, 100,000,000 shares authorized, 46,434,781 and 41,414,000 shares issued and outstanding at March 31, 2010 and June 30, 2009, respectively 46,435 41,414 Additional paid in capital 49,440,384 39,104,586 Accumulated deficit (11,705,036) (14,791,039) Other comprehensive income 497,377 461,017 ------------ ------------ TOTAL STOCKHOLDERS’ EQUITY 38,279,161 24,815,978 ------------ ------------ NONCONTROLLING INTEREST IN SUBSIDIARIES (95,144) (218,189) ------------ ------------ TOTAL EQUITY 38,184,016 24,597,789 ------------ ------------ TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY $ 56,124,146 $ 56,703,070 ============ ============ 

 AOXING PHARMACEUTICAL CO., INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS AND OTHER COMPREHENSIVE INCOME (LOSS) (UNAUDITED) For the three months ended For the nine months ended March 31, March 31, 2010 2009 2010 2009 SALES $ 4,565,009 $ 1,587,989 $ 4,565,009 $ 7,501,763 COST OF SALES 1,365,069 1,070,086 1,365,069 4,339,126 ------------ ------------ ------------ ------------ GROSS PROFIT 3,199,941 517,903 3,199,941 3,162,637 ------------ ------------ ------------ ------------ COSTS AND EXPENSES: Research and development expense 506,133 143,197 506,133 483,434 General and administrative expenses 2,619,899 797,954 2,619,899 2,787,746 Selling expenses 885,236 169,809 885,236 1,293,344 Depreciation and amortization 328,703 114,187 328,703 346,069 ------------ ------------ ------------ ------------ TOTAL COSTS AND EXPENSES 4,339,970 1,225,147 4,339,970 4,910,593 ------------ ------------ ------------ ------------ LOSS FROM OPERATIONS (1,140,030) (707,244) (1,140,030) (1,747,956) ------------ ------------ ------------ ------------ OTHER INCOME (EXPENSE): Interest expense (1,545,940) (495,489) (1,545,940) (1,400,868) Change in fair value of warrant and derivative liabilities 3,055,971 1,502,314 3,055,971 506,028 Gain on foreign currency transactions (8,033) (42,481) (8,033) 220,579 Loss on sale of assets (21,415) (561,913) (21,415) (561,913) Forgiveness of debt 3,579,085 0 3,579,085 1,459,654 ------------ ------------ ------------ ------------ TOTAL OTHER INCOME (EXPENSE) 5,059,667 402,431 5,059,667 223,480 ------------ ------------ ------------ ------------ INCOME (LOSS) BEFORE INCOME TAXES 3,919,637 (304,813) 3,919,637 (1,524,476) Income taxes (credit) 615,445 0 615,445 (98,686) ------------ ------------ ------------ ------------ NET INCOME (LOSS) 3,304,192 (304,813) 3,304,192 (1,623,162) Minority interest in income of subsidiary (24,764) 65,605 123,044 37,084 ------------ ------------ ------------ ------------ INCOME (LOSS) ATTRIBUTABLE TO THE SHAREHOLDERS OF AOXING PHARMACEUTICAL CO. 3,328,956 -239,208 3,181,148 -1,586,078 OTHER COMPREHENSIVE INCOME (LOSS) : Foreign currency translation adjustment 26,426 159,152 36,360 (222,626) ------------ ------------ ------------ ------------ COMPREHENSIVE INCOME (LOSS) $ 3,355,382 (80,056) $ 3,217,508 (1,808,704) ============ ============ ============ ============ BASIC AND DILUTED EARNINGS (LOSSES) PER COMMON SHARE 0.07 (0.00) 0.07 -0.02 ============ ============ ============ ============ WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING 46,348,115 41,409,778 45,288,507 41,130,750 ============ ============ ============ ============