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Aoxing Pharmaceutical Company, Inc. Announces Financial Results for Third Quarter of 2014 Fiscal Year

JERSEY CITY, NJ -- (Marketwired) -- 05/14/14 -- Aoxing Pharmaceutical Company, Inc. (NYSE MKT: AXN) ("Aoxing Pharma"), a specialty pharmaceutical company focusing on research, development, manufacturing, and distribution of narcotic, pain-management, and addiction treatment pharmaceuticals, today announced its financial and operational results for the three and nine month periods ended March 31, 2014. Complete financial results can be found in the Quarterly Report on Form 10-Q filed by Aoxing Pharma on May 14, 2014.

Financial Results:

Revenues for the three and nine months ended March 31, 2014 were $2,445,793 and $9,489,708, respectively, representing a 30% and a 22% increase over the revenues realized in the comparable periods of fiscal year 2013. The increase in revenue was mainly attributable to the increase in sales of our main product, Zhongtongan, which is now being marketed for gynecological and orthopaedic applications in addition to its core pediatric and stomotological market. Sales of Zhongtongan accounted for 91% of sales during the quarter ended March 31, 2014.

Cost of sales for the three and nine months ended March 31, 2014 were $1,425,630 and $5,464,000, respectively, representing a 101% and a 78% increase over the cost of sales recorded in the comparable periods of fiscal year 2013. The increase in cost of sales resulted from a poor harvest at the end of 2013, which dramatically increased raw material prices. As a result of the increase in raw material prices, Aoxing Pharma's gross profits for the three and nine months ended March 31, 2014 fell by 20.7% and 18.3% from the comparable periods of fiscal 2013.

Despite the reduction in gross profit, Aoxing Pharma reduced its loss from operations during the three and nine month periods ended March 31, 2014. Loss from operations of $717,874 during the three months ended March 31, 2014 was only 31% of the loss from operations realized in the prior year's third quarter, and loss from operations of $2,625,798 during the nine months ended March 31, 2014 was only 58% of the loss from operations realized in the comparable period of fiscal 2013. The primary reason for the reduction in loss from operations was the elimination of a television advertising program carried out during fiscal 2013, with resulting reductions in selling expense of $2,103,722 and $1,541,806 during the three and nine month periods ending March 31, 2014.

Net interest expense increased by 71% to $3,524,563 for the nine months ended March 31, 2014, as the Company's short and long term debt increased by $9,142,080 from March 31, 2013 to March 31, 2014. After that deduction, the Company realized a net loss attributable to the shareholders of Aoxing Pharma of $1,822,137 and $5,882,840 for the three and nine months ended March 31, 2014, respectively, representing improvements of 30% and 2% compared to the same periods of fiscal 2013.

On March 31, 2014, Aoxing Pharma had $2.4 million in cash on hand and a working capital deficit of $23,911,146, which represented a deterioration of $14,099,835 from Aoxing Pharma's working capital position at June 30, 2013. The primary reasons for the increase in our working capital deficit were the net loss, which was funded by an increase in short-term bank loans, and the reclassification of $10.1 million in bank debt from long-term to current liabilities.

Zhenjiang Yue, our Chairman and CEO, commented, "The Chinese pharmaceutical market continues to be challenging. I am pleased with Aoxing Pharma's operating results, highlighted by continued growth in product sales, as well as by the faith that our lenders have shown in our business model, as they continue to fund the growth and development of our Company."

About Aoxing Pharmaceutical Company, Inc.
Aoxing Pharmaceutical Company, Inc. is a US incorporated specialty pharmaceutical company with its 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 Pharma has the largest and most advanced manufacturing facility in China 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). Aoxing Pharma has a joint venture collaboration with Johnson Matthey Plc to produce and market narcotics and neurological drugs in China. For more information, please visit: www.aoxingpharma.com.

Safe Harbor Statement from Aoxing Pharmaceutical Company, Inc.
Certain 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. All forward-looking statements included herein are based upon information available to the Company as of the date hereof and, except as is expressly required by the federal securities laws, the Company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, changed circumstances or future events or for any other reason. To the extent that any statements made here are not historical, these statements are essentially forward-looking. The Company uses words and phrases such as "guidance," "forecasted," "projects," "is expected," "remain confident," "will" and/or similar expressions to identify forward-looking statements in this press release. Undue reliance should not be placed on forward-looking information. The economic, competitive, governmental, technological and other risk factors identified in the Company's filings with the Securities and Exchange Commission, specifically, Item 1A, "Risk Factors," in the Form 10-K for the year ended June 30, 2013, 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.

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