China Yongxin Pharmaceuticals, Inc. Reports Record Second Quarter 2008 Financial Results

Aug 26, 2008

China Yongxin Pharmaceuticals, Inc. (OTC Bulletin Board: CYXN; 'China Yongxin Pharmaceuticals' or 'the Company'), a leading manufacturer, distributor and retailer of pharmaceuticals in Northeastern China, recently reported its financial results for the second quarter ended June 30, 2008.

Second Quarter 2008 Highlights:

-- Net revenues increased approximately 15% to $14.58 million
-- Gross profit increased approximately 16% to $2.85 million
-- Net income before minority interest increased approximately 36% to
$1.21 million
-- Cost of sales decreased

Mr. Yongxin Liu, Chairman and CEO of China Yongxin Pharmaceuticals, Inc. commenting on the quarter stated, "We are pleased with our overall results, which were driven, once again, by our diversification strategy's success in expanding beyond our core wholesale business and into higher margin initiatives, such as our growing chain of retail drug stores. We believe this business model will enable us to rapidly increase our market penetration and, as a result, increase our revenue and earnings during the second half of 2008.

"In China, retail pharmaceutical sales are projected to grow at 20% per year to over $30 billion by 2011. Combined with a strong network of over 3500 medical institutions, secondary medicine distribution companies and retail buyers of our company's products, our business should continue to flourish as China's up and coming middle class continue to demand higher quality products and natural and organic alternatives," added Mr. Liu.

Comparison of Three Months Ended June 30, 2008 and 2007.

For the three months ended June 30, 2008, our net revenues increased approximately 15% from $12,699,461 to $14,580,500 relative to the same period ended June 30, 2007. The increase in revenues resulted mainly from the remodeling of our stores, our development of new chain stores and a stronger market.

Cost of sales decreased from $10,243,427, which was 81% of net revenues, for the three month period ended June 30, 2007, to $11,723,541, which was 80% of net revenues for the three month period ended June 30, 2008. The decrease was due to the economies of scale with the increase in revenue.

Gross profit increased approximately 16% from $2,456,034 for the three month period ended June 30, 2007 to $2,856,959 for the three month period ended June 30, 2008. This increase in gross profit was primarily due to the increase in revenues during the period.

For the three month period ended June 30, 2008, overall operating expenses increased approximately 52% from $1,022,919 to $1,551,267 relative to the three month period ended June 30, 2007. This increase was mainly due to the following:

Selling Expenses. Selling expenses increased approximately 52% from
$632,058 for the three month period ended June 30, 2007 to $963,352 for
the same period in 2008. This increase was related to an increase in
revenues for the period.

General and Administrative Expenses. General and administrative expenses
were $390,861 for the three month period ended June 30, 2007, as
compared to $587,915 for the three month period ended June 30, 2008, an
increase of 50%. This increase is due to an increase in operations of
the Company.

Net income before minority interest increased approximately 36% from a net income of 893,944 for the three month period ended June 30, 2007 to a net income before minority interest of $1,219,299 for the three month period ended June 30, 2008.

Comparison of Six Months Ended June 30, 2008 and 2007.

For the six month period ended June 30, 2008, our net revenues increased approximately 29% from $22,862,977 to $29,574,097 relative to the same period ended June 30, 2007. The increase in revenues resulted mainly from the remodeling of our stores, our development of new chain stores and a stronger market.

Cost of sales increased from $18,696,733 for the six month period ended June 30, 2007, to $24,190,231 for the six month period ended June 30, 2008. The increase was in the same proportion as the increase in revenue.

Gross profit increased approximately 29% from $4,166,244 for the six month period ended June 30, 2007 to $5,383,866 for the six month period ended June 30, 2008. This increase in gross profit was primarily due to the increase in the revenues during the period.

For the six month period ended June 30, 2008, overall operating expenses increased approximately 63% from $1,742,880 to $2,837,688 relative to the six month period ended June 30, 2007. This increase was mainly due to the following:

Selling Expenses. Selling expenses increased approximately 69% from
$1,021,146 for the six month period ended June 30, 2007 to $1,724,373
for the same period in 2008. This increase was related to an increase in
revenues for the period.

General and Administrative Expenses. General and administrative expenses
were $721,734 for the six month period ended June 30, 2007, as compared
to $1,113,315 for the six month period ended June 30, 2008, an increase
of 54%. This increase is due to increase in operations of the Company.

Net income before minority interest increased approximately 43% from a net income of 1,522,761 for the six month period ended June 30, 2007 to a net income before minority interest of $2,178,158 for the six month period ended June 30, 2008.

Liquidity and Capital Resources

At June 30, 2008, we had cash on hand of $ 1,090,389. At June 30, 2008, we had loans payable to various unrelated parties amounting to $3,415,595.

The Company believes that its existing cash and cash equivalents, and cash generated from operating activities will be sufficient to meet the needs of its current operations, including anticipated capital expenditures and scheduled debt repayments, for the next twelve months and on a long term basis. The Company may also seek additional financing to meet the needs of its long-term strategic plan.

Cash Flows

Six month period Ended June 30, 2008 and 2007

Net cash flow provided by operating activities was $1,956,220 for the six month period ended June 30, 2008 and net cash used in operations was $830,407 for the six month period ended June 30, 2007. For the six month period ended June 30, 2008, increase in cash flows provided by operating activities was attributable to a net income after minority interest of $1,486,277, an increase in accounts payable of $1,342,605, an increase in advances from customers of $1,047,628, an increase in tax payable of $857,194 and a decrease in advances to suppliers of $2,077,575, offset by an increase in accounts receivable of $3,183,428, an increase in inventory of $1,556,377, an increase in other receivables of $799,159 and a decrease in deferred income of $249,545. For the six month period ended June 30, 2007, cash flows used in operating activities was attributable to an increase in accounts receivable of 2,148,881 and an increase in inventory of $2,678,670, offset by net income of $1,521,263, an increase in accounts payable of $915,183 and an increase in tax payable of $806,041.

The Company incurred cash outflows of $2,614,813 in investing activities during the six month period ended June 30, 2008, as compared to $599,648 used in investing activities for the same period in 2007 for the purchase of property and equipment.

We raised a loan of $1,964,749 from unrelated parties and paid off $1,620,887 to related parties during the six month period ended June 30, 2008. For the same period in 2007, we raised $1,298,530 from unrelated parties and $718,585 from related parties and repaid $400,557 of related party advances.

Recent Events

As of June 30, 2008, the Company has developed 42 retail chains in the name of Yongxin Drugstore covering a large community inside Changchun City in China. These drugstores sell over-the counter western and traditional Chinese medicines, medical treatment appliances and other items.

As of June 30, 2008, Jinyongxin Drugstore had developed 14 retail chain drug stores covering a business area of 2,462 square meters throughout Tianjin City in China.

About China Yongxin Pharmaceuticals

China Yongxin Pharmaceuticals Inc. (OTCBB: CYXN - News) was founded in 1993 as the Changchun Yongxin Dirui Medical Co., Ltd. (Yongxin), a wholesale drug distributor. Its products include Chinese traditional medicines, chemical pharmaceutical preparations, natural health products, healthy food, cosmetics, and medical equipment. It began retail operations in 2004 and, in 2005, 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.

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.

　