China Yongxin Pharmaceuticals, Inc. Announces 2008 Fourth Quarter and Full Year Financial Results

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    CHANGCHUN, China and LOS ANGELES, April 23 /-Asia-/ --

    - Fourth Quarter 2008 Revenue Increased 28.6% to $14.1 Million, with Net

     Income was $0.9 Million and Diluted EPS of $.03

    - 2008 Revenues Increased 23.5% to $59.1 Million vs. 2007

    - 2008 Gross Profit Margin Improved 340 Basis Points to 20.1%

    - 2008 Net Income Increased 13.7% to $4.1 Million with Diluted EPS of


    - 2008 Cash Flow from Operations was $5.9 million

China Yongxin Pharmaceuticals, Inc. ("China Yongxin Pharmaceuticals" or "the Company") (OTC Bulletin Board: CYXN), a leading manufacturer, distributor and retailer of pharmaceuticals in Northeastern China, today announced Annual 2008 financial results ended December 31, 2008.

Fourth Quarter Ending December 31, 2008 Financial Results

Yongxin announced record revenue for its fourth quarter of $14.1 million, representing a 28.6% increase from $11 million recorded in the fourth quarter of fiscal 2007. Growth was driven by increased sales from both its wholesale distribution and retail business segment.

Gross profit in the fourth quarter 2008 was $3.5 million, a 122.8% increase from $1.6 million in the fourth quarter of 2007. Gross margins were 24.6% in the fourth quarter of 2008, compared to 14.2% in the fourth quarter of 2007.

Operating expenses were approximately $2 million, representing a 112.6% increase from approximately $1 million in the fourth quarter of 2007, and were directly related to increased marketing and selling expenses. Income from operations was $1.4 million, an increase of 138.8% from $0.6 million in the same period of 2007. Operating margins were 10.1% compared to 5.4%.

Net income for the quarter was $0.9 million, down from net income of $1.3 million in the same period a year ago. Income taxes were approximately $346,053 and 0 representing an effective tax rate of 25% and 0% for the fiscal fourth quarter of 2008 and 2007 respectively.

Diluted earnings per share were $0.03 for the fourth quarter of 2008, compared to diluted earnings per share of $0.06 in the fourth quarter of 2007, utilizing 31.2 million shares and 21 million shares respectively. The variance in net income and earnings per share was related to recapitalization on reverse merger.

Fiscal Year Ending December 31, 2008 Financial Results

For the fiscal year ended December 31, 2008, Yongxin announced record revenue of $59.1 million, a 23.5% increase versus $47.9 million reported for 2007. Revenues from the pharmaceutical wholesale business segment increased approximately 25.8% from $38.3 million in 2007 to $48.3 million in 2008, while revenues for retail chain drugstores increased approximately 15.1% to $10.9 million in 2008. Increased demand for its portfolio of pharmaceutical products by a broader customer base and higher sales volume overall, and the addition of 14 new drugstores were the principal drivers of growth year over year. Yongxin Drugstore, Jingyongxin Drugstore and Caoantang Drugstore, three new subsidiaries added in mid-2007, grew rapidly in 2008, which brought in additional revenues and contributed to overall revenue growth.

Cost of goods sold was approximately $47.2 million, yielding a gross profit of $11.9 million and gross margins of 20.1%, compared to $8.0 million in gross profit and a gross margin of 16.7% for fiscal year of 2007. Thus, gross profits grew by 48.8% and gross profit margin improved 340 basis points on a year-over-year basis. The improved margins were primarily attributable to the company's ability to receive larger volume discounts for purchases to service a greater revenue base, in addition to a product mix which included higher profit margin cosmetics and health and organic products. During 2008, the Company added 486 new products for distribution, 343 of these were granted exclusive distribution rights in Jilin province.

Operating expenses, which include selling, general and administration expenses for fiscal year 2008, were $6.1 million, up 57.7% compared to the same period in 2007. Selling expenses for the period increased to approximately $3.6 million from $2.6 million in 2007, which is a result of increased marketing efforts. General and administrative expenses increased to $2.6 million in 2008 from $1.3 million in 2007. The increase was mainly due to the increased expenses related to the public market.

Operating income totaled approximately $5.8 million, a 40.5% increase from the $4.1 million reported for fiscal year 2007. Operating margins were 9.8% and 8.6% for the fiscal year 2008 and 2007, respectively.

For fiscal 2008, net income was approximately $4.1 million, an increase of 13.7% from $3.6 million recorded for fiscal 2007. The provision for income taxes was $1.0 million and $17,888, yielding an effective tax rate of 16% and 0.4% for 2008 and 2007 respectively and thus impacted the year-over-year net income comparison.

Fully diluted earnings per share for 2008 and 2007 were $0.13 and $0.16 respectively, based on 31.2 million and 22.4 million shares for 2008 and 2007, respectively. This increase in outstanding shares was related to recapitalization on reverse merger. The share count does not include 5 million shares of preferred stock owned by the management, which is convertible to up to 30 million shares of common stock.

"We are very pleased with our strong financial performance in 2008 despite the global recession as growth emanated from increased sales through our pharmaceutical wholesale business to a larger base of customers complemented by higher margin products in addition to contributions from our retail chain drugstores where we launched 14 new locations during 2008," commented Mr. Yongxin Liu, Chairman and Chief Executive Officer of China Yongxin. "Our multi-pronged growth strategy is proving to be successful as evidenced by this growth in revenue and net income for 2008."

"Revenues generated from prescription drugs represented approximately 25% of total drugstore sales with gross margins of approximately 23.5%. We successfully launched our Electronic Diagnosis System in the 42 chain drugstores located in Changchun, Jilin Province and where we have experienced an approximate 25% increase in prescription drug sales in these stores. We plan to introduce this service to the balance of our retail drugstores, which we expect to drive market share gains and incremental revenue growth during 2009 and beyond. The Chinese government recently released its new plan to spend $124 billion on healthcare reform during the next three years, which will provide accessible and affordable healthcare to the country's 1.3 billion citizens. We believe this healthcare plan will significantly increase the overall market size and our strategic location and strong reputation in Northeastern China will enable us to capitalize on this opportunity, while creating further value for our shareholders," concluded Mr. Liu.

Balance Sheet and Cash Flow

The Company had a current ratio of 1.8 to 1 and $0.6 million in cash and cash equivalents on December 31, 2008. Stockholders' equity was $13.6 million, with working capital of $10.2 million and total assets of $31.5 million and total liabilities of $18 million. Days Sales Outstanding for fiscal 2008 were 37 days, a considerable decrease compared to the 50 days reported during 2007. For the fiscal year of 2008, the Company generated $5.9 million in cash from operations versus net cash used in operations of $1.8 million for the same period in 2007. The increase in cash flow was primarily attributable to an increase in net income and decrease in accounts receivable, advances to suppliers and inventory, while partially offset by a decrease in accounts payable.

About China Yongxin Pharmaceuticals, Inc.

China Yongxin Pharmaceuticals, Inc. was founded in 1993 as the Changchun Yongxin Dirui Medical Co., Ltd. (Yongxin), a wholesale drug distributor. Its products include Chinese traditional medicines, pharmaceutical preparations, natural health products, health food, cosmetics, and medical equipment. It began retail operations in 2004, and in 2005, it gained franchise rights from one of the world's largest drug chains for China's Jilin Province. By the end of 2007, the Company had become one of the fastest growing pharmaceutical companies in China through its retail chain of 93 drug outlets as well as wholesale distribution and manufacturing operations in Northeastern China. For more information about China Yongxin Pharmaceuticals, please visit .

Forward Looking Statements

This news release contains certain "forward-looking statements." Forward-looking statements are based on current expectations and assumptions and are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified, and many of which are beyond the Company's control. The forward-looking statements are also identified through the use of words "believe," enable," "may," "will," "could," "intends," "estimate," "anticipate," "plan," "predict" "probable," "potential," "possible," "should," "continue," and other words of similar meaning. Actual results could differ materially from these forward-looking statements as a result of a number of risk factors detailed in the Company's periodic reports filed with the SEC. Given these risks and uncertainties, investors are cautioned not to place undue reliance on such forward-looking statements and no assurances can be given that such statements will be achieved. China Yongxin Pharmaceutical Inc. does not assume any duty to publicly update or revise the material contained herein.

    For more information, please contact:

    For the Company:

     Mr. Sam Liu, COO

     China Yongxin Pharmaceuticals, Inc.

     Tel: +1-626-581-9098



     Mr. Matthew Hayden, HC International

     Tel: +1-561-245-5155






     AS OF DECEMBER 31, 2008 AND 2007

     2008 2007


    Current Assets:

     Cash and cash equivalents $609,422 $1,180,029

     Accounts receivable, net 6,030,874 6,586,105

     Notes receivable 1,334,078 --

     Other receivable, net 356,573 207,337

     Advances to suppliers 6,186,269 5,729,235

     Prepaid expenses 345,686 319,074

    Inventory, net 7,864,677 6,257,450

    Total Current Assets 22,727,579 20,279,230

    Property and Equipment, net 2,680,207 2,038,629

    Construction In Progress 6,066,249 --

    Intangible Assets, net 73,687 81,152

    Total Assets $31,547,722 $22,399,011


    Current Liabilities:

     Accounts payable $3,255,148 $5,030,340

     Accrued expenses &

     other payable 2,412,067 1,435,235

     Advances from customers 2,580,894 799,910

     Tax payable 1,240,411 282,899

     Loan to related parties 184,662 1,722,557

     Short-term loan payable 1,967,185 389,977

     Deferred income 273,753 239,937

     Shares to be issued 35,000 35,000

    Net liabilities of

     discontinued operations 628,837 628,777

    Total Current Liabilities 12,577,956 10,564,632

    Long term loan 1,320,390 959,616

    Minority Interests 4,098,940 2,640,128

    Commitments and Contingency -- --

    Stockholders' Equity:

     Preferred stock, $0.001 par

     value; 5,000,000 shares

     authorized; 5,000,000 shares

     issued and outstanding 5,000 5,000

     Common stock; $0.001 par value;

     75,000,000 shares authorized;

     31,400,540 and 31,041,845

     shares issued and outstanding

     as of December 31, 2008

     and December 31, 2007 31,401 31,042

     Additional paid in capital 615,906 --

     Deferred consulting expense -

     issuance of warrants (72,815) --

     Prepaid consulting -

     issuance of shares (68,750) --

     Receivable from a

     related party (50,000) --

     Statutory reserve 1,841,241 1,341,600

     Other comprehensive income 1,684,649 859,688

    Retained earnings 9,563,803 5,997,305

    Total Stockholders' Equity 13,550,435 8,234,635

    Total Liabilities and

     Stockholders' Equity $31,547,722 $22,399,011





     2008 2007

    Net Revenue $59,123,256 $47,892,833

    Cost of Revenue 47,227,334 39,898,004

    Gross Profit 11,895,922 7,994,829

    Operating Expenses

     Selling expenses 3,553,923 2,561,721

     General and administrative expenses 2,556,133 1,314,229

    Total operating expenses 6,110,056 3,875,950

    Income From Operations 5,785,866 4,118,879

    Other Income (Expense)

     Interest income 2,470 3,690

     Interest expense (9,148) (194,644)

     Other income 690,517 678,888

     Other expense (154,441) (101,114)

    Total other income 529,397 386,820

    Operating Income Before Income Tax And

    Minority Interest 6,315,263 4,505,699

    Provision For Income Tax (1,009,643) (17,888)

    Net Income Before Minority Interest 5,305,620 4,487,811

    Minority Interest (1,239,481) (910,433)

    Net Income 4,066,139 3,577,378

    Other Comprehensive Item:

     Foreign Currency Translation Gain 824,961 590,885

    Net Comprehensive Income 4,891,100 4,168,263

    Earning per share

     Basic $0.13 $0.16

     Diluted $0.13 $0.16

    Weighted average number of

     shares outstanding

     Basic 31,186,366 22,238,036

     Diluted 31,186,366 22,372,676





     2008 2007


    Net Income $4,066,139 $3,577,378

    Adjustments to reconcile net income to

     net cash used in / (provided by)

     operating activities:

    Depreciation and amortization 311,992 203,909

    Stock issued for consulting services 424,700 --

    Minority interest 1,239,481 910,433

    (Increase) / decrease in current assets:

    Accounts receivable 999,096 (3,577,120)

    Advances to suppliers (53,949) (3,403,984)

    Other receivable (132,334) 59,064

    Notes receivable (1,310,799) --

    Prepaid expenses (4,143) (94,404)

    Inventory (1,147,645) (2,510,863)

    Increase / (decrease) in current


    Accounts payable (2,164,346) 1,400,423

    Accrued expense and other payable 903,925 625,276

    Deferred income 16,679 230,968

    Advances from customers 1,821,591 748,000

    Tax payable 924,573 --

    Net cash provided by/ (used in)

     operating activities 5,894,960 (1,830,920)


    Cash acquired on reverse acquisition -- 5,334

    Contribution from minority shareholders 11,532 --

    Additions to construction in progress (5,960,396) --

    Purchase of property, equipment and

     intangible assets (789,036) (1,029,925)

    Net cash used in investing activities (6,737,900) (1,024,591)


    Receipts of loan from non-related

     parties 1,818,271 1,187,673

    Receipts of Loan from banks -- 1,516,067

    Payments of loan from non-related

     parties (1,617,118) --

    Net cash provided by financing

     activities 201,153 2,703,740


     EQUIVALENTS (641,786) (151,771)


     CASH AND CASH EQUIVALENTS 71,179 83,396


     BALANCE 1,180,029 1,248,404


     BALANCE $609,422 $1,180,029


    Interest paid $167,156 $161,888

    Income tax paid $15,927 $8,563


    Issuance of shares and receivable from

     a related party $50,000 $--
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