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.