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

  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: [e-mail] Telephone: 646 - 512 - 5662