10-Q/A

United States

Securities and Exchange Commission

Washington, D. C. 20549

FORM 10-Q/A

(Amendment No. 1)

[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2011

[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _____ to _____

Commission File No. 1-32674

AOXING PHARMACEUTICAL COMPANY, INC.

(Exact Name of Registrant as Specified in its Charter)

Florida	65-0636168
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer ID Number)

15 Exchange Place, Suite 500, Jersey City, NJ 07302

(Address of Principal Executive Offices)

Issuer's Telephone Number: (646) 367-1747

Indicate  by check mark  whether the  Registrant  (1) has filed all reports required to be filed by Sections 13 or 15(d) of the  Securities Exchange Act of 1934  during  the  preceding  12 months  (or for such shorter  period  that the Registrant was required to file such reports),  and (2) has been subject to such filing requirements for the past 90 days.

Yes  X       No _____

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files.)  Yes  X    No _____

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check One)

Large accelerated filer Accelerated filer  _____  Non-accelerated filer Small reporting company X

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes _____    No   X

APPLICABLE ONLY TO CORPORATE ISSUERS:  Indicate the number of shares outstanding of each of the Registrant's classes of common stock, as of the latest practicable date:

As of November 14, 2011, the Company had 49,196,090 shares of its common stock issued and outstanding.

AOXING PHARMACEUTICALCOMPANY, INC.

QUARTERLY REPORT ON FORM 10Q/A

FOR THE FISCAL QUARTER ENDED SEPTEMBER 30, 2011

TABLE OF CONTENTS

		Page No
Part I	Financial Information
	Explanatory Note	1
Item 1.	Financial Statements:
	Restated Consolidated Balance Sheet – September 30, 2011 (unaudited) and  June 30, 2011	2
	Restated Consolidated Statements of Operations and Other Comprehensive Income (Loss) – for the Three Months Ended September 30, 2011 and 2010 (Unaudited)	3
	Restated Consolidated Statements of Cash Flows – for the Three Months Ended September 30, 2011 and 2010 (Unaudited)	4
	Notes to Restated Consolidated Financial Statements (Unaudited)	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	14
Item 3	Quantitative and Qualitative Disclosures about Market Risk	19
Item 4.	Controls and Procedures	19
Item 6	Exhibits	19
	Signatures	20

EXPLANATORY NOTE

The management of Aoxing Pharmaceutical Company, Inc. (the “Company”) has concluded that we should restate our financial statements as of and for the three months ended September 30, 2011. The conclusion was reached by management because they determined that a deferred tax asset in the amount of $2,776,111 was improperly valued as an asset as of September 30, 2011 and that a valuation allowance for 100% of the balance of the deferred tax asset should be recorded.  Upon review, management decided that the Company did not have sufficient competent evidence to support its conclusion that the Company would earn taxable income in the future against which it could realize the benefit of its net operating loss carryforwards.

The restatement has resulted in changes to the financial statements identified in Note 3 to the restated Consolidated Financial Statements.  The restatement has also resulted in the addition of Note 3 (Restatement) and a modification to Note 12 (Income Taxes) to the Consolidated Financial Statements, as well as appropriate changes to Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”  In addition, as a result of discovering the need to restate, we have modified the disclosure in Item 4, “Controls and Procedures.”

Except as discussed above, we have not modified or updated disclosures presented in the original quarterly report on Form 10-Q. Accordingly, this Form 10-Q/A does not reflect events occurring after the filing of our original Form 10-Q or modify or update those disclosures affected by subsequent events, except as specifically referenced herein. Accordingly, this Form 10-Q/A should be read in conjunction with our periodic filings made with the SEC subsequent to the date of the original filing, including any amendments to those filings, as well as any Current Reports filed on Form 8-K subsequent to the date of the original filing.

1

AOXING PHARMACEUTICAL CO., INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
	September 30,			June 30,
	2011			2011
	(Unaudited)			(Restated)
	(Restated)
ASSETS
CURRENT ASSETS:
Cash	$	2,479,180		$	2,770,744
Accounts receivable, net of allowance for doubtful accounts of $548,980 and $543,697, respectively		2,249,966			2,008,024
Inventory		1,401,998			1,469,417
Prepaid expenses and other current assets		1,133,095			1,130,010
TOTAL CURRENT ASSETS		7,264,239			7,378,195
LONG-TERM ASSETS:
Property and equipment, net of accummulated depreciation		26,664,028			26,669,156
Goodwill		20,082,523			19,916,128
Other intangible assets		1,372,214			1,388,704
Investment in joint venture		484,533			521,541
TOTAL LONG-TERM ASSETS		48,603,298			48,495,529
TOTAL ASSETS	$	55,867,537		$	55,873,724
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term borrowings	$	234,309		$	232,055
Accounts payable		2,588,649			2,659,727
Loan payable - bank		8,591,334			8,508,663
Current portion of loan payable - related parties		5,793			5,793
Current portion of loan payable - other		96,847			23,515
Accrued expenses and other current liabilities		3,584,746			3,206,009
TOTAL CURRENT LIABILITIES		15,101,678			14,635,762
LONG-TERM LIABILITIES:
Loan payable - related parties		3,730,451			3,696,210
- others		1,849,636			1,831,838
Warrant and derivative liabilities		-			1,161
TOTAL LONG-TERM LIABILITIES		5,580,087			5,529,209
Common stock, par value $0.001, 100,000,000 shares authorized,    49,196,090 and 49,158,955 shares issued and outstanding      on September 30 and June 30, 2011, respectively		49,196			49,159
Additional paid in capital		57,516,219			57,382,109
Accumulated deficit		(23,932,352	)		(23,009,448	)
Other comprehensive income		2,168,664			1,885,531
TOTAL SHAREHOLDERS' EQUITY OF THE COMPANY		35,801,727			36,307,351
NONCONTROLLING INTEREST IN SUBSIDIARIES		(615,955	)		(598,598	)
TOTAL EQUITY		35,185,772			35,708,753
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$	55,867,537		$	55,873,724

See notes to financial statements

2

AOXING PHARMACEUTICAL CO., INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND OTHER COMPREHENSIVE INCOME (LOSS)
(Unaudited)
	For the Three Months Ended
	September 30,
	2011			2010
	(Restated)
SALES	$	1,530,068		$	1,740,673
COST OF SALES		662,550			827,295
GROSS PROFIT		867,518			913,378
OPERATING EXPENSES:
Research and development expense		106,399			85,448
General and administrative expenses		746,243			909,057
Selling expenses		363,293			511,821
Depreciation and amortization		147,540			152,044
TOTAL OPERATING EXPENSES		1,363,475			1,658,370
LOSS FROM OPERATIONS		(495,957	)		(744,992	)
OTHER INCOME (EXPENSE):
Interest expense, net of interest income		(418,431	)		(374,781	)
Change in fair value of warrant and derivative liabilities		1,161			222,717
Equity in loss of joint venture, net of tax		(41,936	)		-
TOTAL OTHER INCOME (EXPENSE)		(459,206	)		(152,064	)
LOSS BEFORE INCOME TAX		(955,163	)		(897,056	)
Income tax (credit)		-			(202,596	)
NET LOSS		(955,163	)		(694,460	)
Net loss attributed to non-controlling interest in subsidiaries		(32,259	)		(40,519	)
LOSS ATTRIBUTABLE TO SHAREHOLDERS OF THE COMPANY		(922,904	)		(653,941	)
OTHER COMPREHENSIVE INCOME :
Foreign currency translation adjustment		298,035			220,674
COMPREHENSIVE LOSS		(624,869	)		(433,267	)
Other comprehensive income attributable to non-controlling interest		14,902			10,508
COMPREHENSIVE LOSS ATTRIBUTABLE TO THE COMPANY	$	(639,771	)	$	(443,775	)
BASIC AND DILUTED LOSS PER COMMON SHARE	$	(0.02	)	$	(0.01	)
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING		49,167,411			46,475,780

See notes to financial statements

3

AOXING PHARMACEUTICAL CO., INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
	For the Three Months Ended
	September 30,
	2011			2010
	(Restated)
OPERATING ACTIVITIES:
Net loss	$	(955,163	)	$	(694,460	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		293,883			283,679
Deferred income tax		-			(202,596	)
Common stock issued for services		134,147			142,048
Change in fair value of warrants and derivative liability		(1,161	)		(222,717	)
Equity in loss of joint venture, net of tax		41,936			-
Changes in operating assets and liabilities:
Accounts receivable		(221,694	)		(509,708	)
Inventories		81,425			192,954
Prepaid expenses and other current assets		7,586			(59,890	)
Accounts payable		(72,468	)		108,312
Accrued expenses and other current liabilities		338,583			(15,263	)
NET CASH USED IN OPERATING ACTIVITIES		(352,926	)		(977,641	)
INVESTING ACTIVITIES:
Acquisition of property and equipment		(24,762	)		(723,945	)
Repayment from unrelated parties		-			345,597
NET CASH USED IN INVESTING ACTIVITIES		(24,762	)		(378,348	)
FINANCING ACTIVITIES:
Proceeds from bank loans		-			746,480
Proceeds from other borrowings		72,862			-
Repayment of loans from related party		(1,666	)		-
NET CASH PROVIDED BY FINANCING ACTIVITIES		71,196			746,480
EFFECT OF EXCHANGE RATE ON CASH		14,928			74,446
DECREASE IN CASH		(291,564	)		(535,063	)
CASH – BEGINNING OF PERIOD		2,770,744			3,985,710
CASH – END OF PERIOD	$	2,479,180		$	3,450,647
Supplemental disclosures of cash flow information:
Cash paid for interest	$	515,574		$	340,123
Cash paid for income taxes	$	-		$	-

See notes to financial statements

4

AOXING PHARMACEUTICAL CO., INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2011

(Unaudited)

1             BASIS OF PRESENTATION

The accompanying unaudited consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles for interim financial information and pursuant to the requirements for reporting on Form 10-Q. Accordingly, they do not include all the information and footnotes required by accounting principles generally accepted in the United States of America for annual financial statements. However, the information included in these interim financial statements reflects all adjustments (consisting solely of normal recurring adjustments) which are, in the opinion of management, necessary for the fair presentation of the consolidated financial position and the consolidated results of operations. Results shown for interim periods are not necessarily indicative of the results to be obtained for a full year. The consolidated balance sheet as of June 30, 2011 was derived from the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K/A for the fiscal year 2011. These interim financial statements should be read in conjunction with that report.

For further information, refer to the consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K/A for the fiscal year ended June 30, 2011 filed on September 28, 2012.

2              BUSINESS DESCRIPTION AND SIGNIFICANT ACCOUNTING POLICIES

Aoxing Pharmaceutical Co., Inc. (“the Company” or “Aoxing Pharma”) is a specialty pharmaceutical company specializing in research, development, manufacturing and distribution of a variety of narcotic, pain-management, and addiction treatment pharmaceutical products.

As of September 30, 2011, the Company had one operating subsidiary: Hebei Aoxing Pharmaceutical Co., Inc. (“Hebei Aoxing”), which is organized under the laws of the People’s Republic of China (“PRC”).  As of September 30, 2011, the Company owned 95% of the issued and outstanding common stock of Hebei Aoxing.

Since 2002, Hebei Aoxing has been engaged in developing narcotic, pain management, and addiction treatment pharmaceutical products, building its facilities and obtaining the requisite licenses from the Chinese Government.  Headquartered in Shijiazhuang City, the pharmaceutical capital of China, outside of Beijing, Hebei now 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 manufacturing narcotics medicines. The Company is working closely with the Chinese government and SFDA to assure the strictly regulated availability to medical professionals throughout China of its narcotic drugs and pain medicines.

In April, 2008, Hebei Aoxing completed the acquisition of 100% of the registered capital of LRT.  LRT is engaged in the manufacture and distribution of Chinese traditional medicines focusing on pain management related therapeutics within China.  As of June 30, 2009, LRT had been completely integrated into Hebei Aoxing.

Investment in Joint Venture (“JV”)

On April 26, 2010, Aoxing Pharma and Johnson Matthey Plc (‘JM”) entered into an agreement to establish a joint venture focused on research, development, manufacturing and marketing of active pharmaceutical ingredients for narcotics and neurological drugs for the China market. The joint venture represents a significant new opportunity for both companies to expand their business in the rapidly growing pharmaceutical market in China.  Under the terms of the agreement, Macfarlan Smith Ltd, a wholly owned subsidiary of Johnson Matthey Plc, headquartered in the United Kingdom, will contribute technology expertise and capital to the joint venture. Hebei will contribute capital, fixed assets and related active pharmaceutical ingredients manufacturing licenses. The joint venture company is called Hebei Aoxing API Pharmaceutical Company, Ltd. (“API”).  Hebei Aoxing has a 51% stake in the Company, while Macfarlan Smith (Hong Kong) Ltd (a wholly owned subsidiary of JM) holds 49%. Each company has equal representation on the board of directors that will oversee a management team responsible for corporate strategies and operations.  The new joint venture will be located on the Hebei Aoxing campus in Xinle City, 200 kilometers southwest of Beijing. The total capital investment is projected to be approximately $15 million during the first five years, which will be shared between the equity shareholders of the joint venture. On December 10, 2010, the joint venture obtained business license from the City Industry & Commercial Administrative Bureau. The Company accounts for its investment in the Joint Venture under the equity method of accounting.

5

AOXING PHARMACEUTICAL CO., INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2011

(Unaudited)

Use of estimates in the preparation of financial statements

The preparation of the consolidated financial statements in conformity with generally accepted accounting principles in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenue and expenses during the reporting period. Significant estimates reflected in the consolidated financial statements include, but are not limited to, the recoverability of the carrying amount and estimated useful lives of long-lived assets, allowance for accounts receivable, realizable values for inventories, valuation allowance of deferred tax assets, purchase price allocation of its acquisitions and share-based compensation expenses. Management makes these estimates using the best information available at the time the estimates are made; however, actual results when ultimately realized could differ significantly from those estimates.

Impairment of long lived assets

Long-lived assets are reviewed for impairment when circumstances indicate the carrying value of an asset may not be recoverable.  For assets that are to be held and used, impairment is recognized when the estimated undiscounted cash flows associated with the asset or group of assets is less than their carrying value. If impairment exists, an adjustment is made to write the asset down to its fair value, and a loss is recorded as the difference between the carrying value and fair value.  Fair values are determined based on quoted market values, discounted cash flows or internal and external appraisals, as applicable.  Assets to be disposed of are carried at the lower of carrying value or estimated net realizable value.

Derivative financial instruments

The Company’s derivative financial instruments consist of embedded derivatives related to the convertible debentures and warrants.  The accounting treatment of derivative financial instruments requires that the Company record the derivatives and related warrants at their fair values as of the inception date of the debt agreements and at fair value as of each subsequent balance sheet date.  Any change in fair value is recorded as non-operating, non-cash income or expense at each balance sheet date.  If the fair value of the derivatives was higher at the subsequent balance sheet date, the Company recorded a non-operating, non-cash charge. If the fair value of the derivatives was lower at the subsequent balance sheet date, the Company recorded non-operating, non-cash income.

For the three months ended September 30, 2011 and 2010, the Company recognized other income of $1,161 and $222,717, respectively, relating to recording the warrant and derivative liabilities at fair value.  On September 30, 2011 and June 30, 2011 there were $0 and $1,161 of warrant and derivative liabilities, respectively. All outstanding warrants expired without exercise during the current period.

6

AOXING PHARMACEUTICAL CO., INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2011

(Unaudited)

 3             RESTATEMENT

We have determined that, in our Quarterly Report as originally filed, a deferred tax asset in the amount of $2,776,111 was improperly valued as an asset as of September 30, 2011 and that a valuation allowance for 100% of the balance of the deferred tax asset should be recorded.  Upon review, we decided that the Company did not have sufficient competent evidence to support its conclusion that the Company would earn taxable income in the future against which it could realize the benefit of its net operating loss carryforwards.

The September 30, 2011 balance sheet and the statements of operations and statements of cash flows for the three months ended September 30, 2011 have been restated as follows:

CONSOLIDATED BALANCE SHEETS

ASSETS	September 30, 2011
	As Previously
	Reported			Adjustments			As Restated
CURRENT ASSETS
Cash	$	2,479,180		$	–		$	2,479,180
Accounts receivable, net of allowance for doubtful accounts of $548,980 and $543,697, respectively		2,249,966			–			2,249,966
Inventory		1,401,998			–			1,401,998
Prepaid expenses and other current assets		1,133,095			–			1,133,095
TOTAL CURRENT ASSETS		7,264,239			–			7,264,239
LONG-TERM ASSETS:
Property and equipment, net of accumulated depreciation		26,664,028			–			26,664,028
Deferred income tax		2,776,111			(2,776,111	)		–
Goodwill		20,082,523			–			20,082,523
Other intangible assets		1,372,214			–			1,372,214
Investment in joint venture		484,533			–			484,533
TOTAL LONG-TERM ASSETS		51,379,409			(2,776,111	)		48,603,298
TOTAL ASSETS	$	58,643,648		$	(2,776,111	)	$	55,867,537
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Short-term borrowings	$	234,309		$	–		$	234,309
Accounts payable		2,588,649			–			2,588,649
Loan payable - bank		8,591,334			–			8,591,334
Current portion of loan payable - related parties		5,793			–			5,793
Current portion of loan payable - other		96,847			–			96,847
Accrued expenses and other current liabilities		3,584,746			–			3,584,746
TOTAL CURRENT LIABILITIES		15,101,678			–			15,101,678
LONG-TERM LIABILITIES:
Loan payable - related parties		3,730,451			–			3,730,451
-others		1,849,636			–			1,849,636
TOTAL LONG-TERM LIABILITIES		5,580,087			–			5,580,087
Common stock, par value $0.001, 100,000,000 shares authorized,       49,196,090 and 49,158, 955 shares issued and outstanding on       September 30 and June 30, 2011, respectively		49,196			–			49,196
Additional paid in capital		57,516,219			–			57,516,219
Accumulated deficit		(21,295,047	)		(2,637,305	)		(23,932,352	)
Other comprehensive income		2,168,664			–			2,168,664
TOTAL SHAREHOLDERS' EQUITY OF THE COMPANY		38,439,032			(2,637,305	)		35,801,727
NONCONTROLLING INTEREST IN SUBSIDIARIES		(477,149	)		(138,806	)		(615,955	)
TOTAL EQUITY		37,961,833			(2,776,111	)		35,185,772
TOTAL LIABILITIES AND SHAREHOLDERS EQUITY	$	58,643,648		$	(2,776,111	)	$	55,867,537

7

AOXING PHARMACEUTICAL CO., INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2011

(Unaudited)

CONSOLIDATED STATEMENTS OF OPERATIONS AND OTHER COMPREHENSIVE LOSS

	For the Three Months Ended September 30, 2011
	As Previously
	Reported			Adjustments			As Restated
SALES	$	1,530,068		$	–		$	1,530,068
COST OF SALES		662,550			–			662,550
GROSS PROFIT		867,518			–			867,518
OPERATING EXPENSES:
Research and development expense		106,399			–			106,399
General and administrative expenses		746,243			–			746,243
Selling expenses		363,293			–			363,293
Depreciation and amortization		147,540			–			147,540
TOTAL OPERATING EXPENSES		1,363,475			–			1,363,475
LOSS FROM OPERATIONS		(495,957	)		–			(495,957	)
OTHER INCOME (EXPENSE)
Interest expense, net of interest income		(418,431	)		–			(418,431	)
Change in fair value of warrant and derivative liabilities		1,161			–			1,161
Equity in loss of joint venture, net of tax		(41,396	)		–			(41,396	)
Total Other Income (Expense)		(459,206	)		–			(459,206	)
LOSS BEFORE INCOME TAXES		(955,163	)		–			(955,163	)
Income taxes (credit)		(161,294	)		161,294			–
NET LOSS		(793,869	)		(161,294	)		(955,163	)
Net loss attributed to non-controlling interest in subsidiaries		(24,194	)		(8,065	)		(32,259	)
LOSS ATTRIBUTABLE TO THE SHAREHOLDERS OF THE COMPANY		(769,675	)		(153,229	)	$	(922,904	)
OTHER COMPREHENSIVE INCOME:
Foreign currency translation adjustment		298,035			–			298,035
COMPREHENSIVE LOSS		(471,640	)		(153,229	)		(624,869	)
Other comprehensive income attributable to non-controlling interest		14,902			–			14,902
COMPREHENSIVE LOSS ATTRIBUTABLE TO THE COMPANY	$	(486,542	)	$	(153,229	)	$	(639,771	)
BASIC AND DILUTED LOSSES PER COMMON SHARE	$	(0.02	)	$	–		$	(0.02	)
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING		49,167,411			–			49,167,411

8

AOXING PHARMACEUTICAL CO., INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2011

(Unaudited)

CONSOLIDATED STATEMENTS OF CASH FLOWS

	For the Three Months Ended September 30, 2011
	As Previously
	Reported			Adjustments			As Restated
OPERATING ACTIVITIES:
Net income (loss)	$	(793,869	)	$	(161,294	)	$	(955,163	)
Adjustments to reconcile net income (loss) to net cash used by operating activities:
Depreciation and amortization		293,883			–			293,883
Deferred income tax		(161,294	)		161,294			–
Common stock issued for services		134,147			–			134,147
Change in fair value of warrants and derivative liability		(1,161	)		–			(1,161	)
Equity in loss of joint venture, net of tax		41,936			–			41,936
Changes in operating assets and liabilities:
Accounts receivable		(221,694	)		–			(221,694	)
Inventories		81,425			–			81,425
Prepaid expenses and other current assets		7,586			–			7,586
Accounts payable		(72,468	)		–			(72,468	)
Accrued expenses and other current liabilities		338,583			–			338,583
NET CASH USED IN OPERATING ACTIVITIES		(352,926	)		–			(352,926	)
INVESTING ACTIVITIES:
Acquisition of property and equipment		(24,762	)		–			(24,762	)
NET CASH USED IN INVESTING ACTIVITIES	$	(24,762	)	$	–		$	(24,762	)

FINANCING ACTIVITIES:
Proceeds from other borrowings	$	72,862		$	–	$	72,862
Repayment of loans from related party		(1,666	)		–		(1,666	)
NET CASH PROVIDED BY FINANCING ACTIVITIES		71,196			–		71,196
EFFECT OF EXCHANGE RATE ON CASH		14,928			–		14,928
INCREASE (DECREASE) IN CASH		(291,564	)		–		(291,564	)
CASH – BEGINNING OF PERIOD		2,770,744			–		2,770,744
CASH – END OF PERIOD	$	2,479,180		$	–	$	2,479,180
Supplemental disclosures of cash flow information:
Cash paid for interest	$	515,574		–		$	515,574
Cash paid for income taxes	$	–		–		$	–

9

AOXING PHARMACEUTICAL CO., INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2011

(Unaudited)

4              INVENTORIES

Inventories consist of the following:

	September 30,		June 30,
	2011		2011
Work in process	$	630,424	$	159,388
Raw materials		494,391		1,017,658
Finished goods		277,183		292,371
	$	1,401,998	$	1,469,417

5              EQUITY-METHOD INVESTMENT IN JOINT VENTURE

The Company account for its investment in API (see Note 2), under the equity method of accounting.

Summarized financial information for our investment in API assuming a 100% ownership interest is as follows:

	For the Quarter			For the Year
	Ended			Ended
	September 30, 2011			June 30, 2011
Current assets	$	34,254		$	126,458
Noncurrent assets		634,781			627,660
Current liabilities	$	141,931		$	150,379
Noncurrent liabilities		-			-
Equity	$	527,104		$	603,739
General and administrative expenses	$	82,227		$	-
Net income (loss)	$	(82,227	)	$	-

6              SHORT-TERM BORROWING

Short-term borrowing is anon-interest bearing unsecured note payable to a local government, due on demand.

10

AOXING PHARMACEUTICAL CO., INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2011

(Unaudited)

7              ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

Accrued expenses and taxes consist of the following:

	September 30,		June 30,
	2011			2011
Accrued salaries and benefits	$	641,869		$	555,617
Accrued interest		655,796			745,866
Accrued taxes		404,938			316,229
Deposit payable		609,784			505,977
Due to employee		44,964			44,532
Other accrued expenses and current liabilities		1,227,395			1,037,788
	$	3,584,746		$	3,206,009

  8            LOAN PAYABLE - BANK

Loan payable – bank consist of the following loans collateralized by assets of the company:

	September 30,		June 30,
	2011		2011
Bank Note in the amount of 30 million RMB with Bank of Communications of China bearing an annual floating rate of  7.572%, set to be 20% higher than the interest rate of the China People Bank rate, initially made on April 29, 2010 for one year and renewed on April 15, 2011 for one year maturing on April 15, 2012	$	4,686,182	$	4,641,089
Bank Note in the amount of 25 million RMB with China Citic Bank bearing an annual floating rate of  6.941%, set to be 10% higher than the interest rate of the China People Bank rate, initially made on May 5, 2010 for one year and renewed on April 20, 2011 for one year maturing on April 20, 2012		3,905,152		3,867,574
	$	8,591,334	$	8,508,663

11

AOXING PHARMACEUTICAL CO., INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2011

(Unaudited)

9             LOAN PAYABLE – OTHER

Loan payable – other consist of loans from unrelated third-parties, bearing interest at an average rate of 17.9% per annum.  Loans will mature as following:

Date	Amount
Within one year	$	96,847
2 - 3 years		1,849,636
Total		1,946,483
Less current portion		(96,847)
	$	1,849,636

10           LOAN PAYABLE – RELATED PARTIES

Loan payable – related parties consists of loans from shareholders, officers and other related parties, bearing interest at an average rate of 15.13% per annum. Loans will mature as follows:

Date	Amount
Within one year	$	5,793
1 - 2 years		1,298,716
2 - 3 years		2,431,735
Total		3,736,244
Less current portion		(5,793)
	$	3,730,451

11            ISSUANCE OF COMMON STOCK

During the three months ended September 30, 2011, the Company issued 37,135 shares of common stock to an independent director for services rendered. These shares were valued using the stock price at grant date. Total value of the compensation is $22,000.

 12           TAXES - Restated

The Company’s Chinese subsidiaries are governed by the Income Tax Law of the People’s Republic of China concerning private-run enterprises, which are generally subject to tax at a statutory rate of 25% on income reported in the statutory financial statements after appropriate tax adjustments.

The reconciliation of income tax at the U.S. statutory rate to the Company’s effective tax rate is as follows:

12

AOXING PHARMACEUTICAL CO., INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2011

(Unaudited)

	Three Months Ended September 30,
	2011			2010
	(Restated)
Tax at U.S. Statutory rate	$	(334,307	)	$	(313,969	)
Tax rate difference between China and U.S.		64,518			81,038
Change in Valuation Allowance		269,789			30,335
Effective tax rate	$	-		$	(202,596)

The income tax credits are summarized as follows:

	Three Months Ended September 30,
	2011		2010
	(Restated)
Current	$	-	$	-
Deferred - U.S.		(108,495)		(30,335	)
Deferred - China		(161,294)		(202,596	)
Valuation allowance		269,789		30,335
Total	$	-	$	(202,596)

The deferred tax assets are substantially related to loss carry forwards for the past 5 years under Chinese tax law.  Subsequently to the filing of the Form 10-Q, the Company determined the positive and negative evidence used to provide the full valuation allowance as of March 31, 2012 also existed as of June 30, 2011.  The Company concluded the full valuation allowance should have been recorded as of June 30, 2011 and restated its previously issued financial statements.  In this restated Form 10-Q, the Company adjusted income taxes and the net loss attributed to non-controlling interest in subsidiaries for the full valuation allowance originally recorded.

13           CONCENTRATIONS

Sales to two major customers accounted for 27% and 23% of total sales for the three months ended September 30, 2011.  Sales to two major customers were 26% and 12% of total sales for the three months ended September 30, 2010.  

Sales of two major products represented approximately 86% and 5% of total sales for the three months ended September 30, 2011. Sales of three major products represented approximately 77%, 5% and 5% of total sales for the three months ended September 30, 2010.

Accounts receivable balances of three customers represented for 35%, 13% and 11% of total accounts receivable balance as of September 30, 2011, respectively.

Accounts receivable balances of two customers represented for 23% and 18% of total accounts receivable balance as of June 30, 2011, respectively.

14           SUBSEQUENT EVENTS

In accordance with ASC 855, “Subsequent Events”, the Company has evaluated subsequent events that have occurred through the date of issuance of these financial statements and has determined that there was no other material event that occurred after the date of the balance sheets included in this report, except the special funding from Hebei Province of China, which was disclosed in an 8-K filing on November 4, 2011.

13

ITEM 2.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This Quarterly Report on Form 10-Q/A (including the section regarding Management’s Discussion and Analysis of Financial Condition and Results of Operations) contains certain “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, as well as information relating to Aoxing Pharmaceutical Company, Inc. that is based on management’s exercise of business judgment and assumptions made by and information currently available to management. Although forward-looking statements in this Quarterly Report reflect the good faith judgment of our management, such statements can only be based on facts and factors currently known by us. Consequently, forward-looking statements are inherently subject to risks and uncertainties and actual results and outcomes may differ materially from the results and outcomes discussed in or anticipated by the forward-looking statements. When used in this document and other documents, releases and reports released by us, the words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “the facts suggest” and words of similar import, are intended to identify any forward-looking statements. You should not place undue reliance on these forward-looking statements. These statements reflect our current view of future events and are subject to certain risks and uncertainties as noted below. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, our actual results could differ materially from those anticipated in these forward-looking statements. Actual events, transactions and results may materially differ from the anticipated events, transactions or results described in such statements. Although we believe that our expectations are based on reasonable assumptions, we can give no assurance that our expectations will materialize. Many factors could cause actual results to differ materially from our forward looking statements. Other unknown, unidentified or unpredictable factors could materially and adversely impact our future results.  You should read the following discussion and analysis in conjunction with our restated  unaudited financial statements contained in this report , as well as the audited financial statements, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and “Risk Factors” contained in our Annual Report on Form 10-K/A for the fiscal year ended June 30, 2011.  We undertake no obligation and do not intend to update, revise or otherwise publicly release any revisions to our forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of any unanticipated events.

Outline of Our Business

Aoxing Pharmaceutical Company, Inc. (the “Company” or “Aoxing Pharma”) is a Florida incorporated specialty pharmaceutical company with its main operations in China, specializing in research, development, manufacturing and distribution of a variety of narcotic, pain-management, and addiction treatment pharmaceutical products.  Its common stock is currently trading on the NYSE AMEX under the ticker symbol of “AXN”.  Our product line is comprised of prescription and over-the-counter pharmaceutical products.  Our pharmaceutical products have been approved by the Chinese State Food and Drug Administration, or SFDA, based on demonstrated safety and efficacy. We sell our products primarily to hospitals, clinics, pharmacies and retail in most of the provinces of China, including rural areas and major cities.

14

In April 2010 Aoxing Pharma and Johnson Matthey Plc entered into an agreement to establish a joint venture through affiliated companies focused on research, development, manufacturing and marketing of active pharmaceutical ingredients (“API”) for narcotics and neurological drugs for the China market. The joint venture represents a significant new opportunity for both companies to expand their business in the rapidly growing pharmaceutical market in China.

Under the terms of the agreement, Macfarlan Smith Ltd, a wholly owned subsidiary of Johnson Matthey Plc, headquartered in the United Kingdom, will contribute technology expertise and capital to the joint venture.  Hebei Aoxing Pharmaceutical Group Company, Ltd (“Hebei Aoxing”), the operating subsidiary of Aoxing Pharma, will contribute capital, fixed assets and related API manufacturing licenses.  The joint venture company will be called Hebei Aoxing API Pharmaceutical Company, Ltd.  Hebei Aoxing will have a 51% stake in the Company, while Macfarlan Smith (Hong Kong) Ltd, (a wholly owned subsidiary of Johnson Matthey Pacific Ltd), will hold 49%.  Each company will have equal representation on a board of directors that will oversee a management team responsible for corporate strategies and operations.

The new joint venture is located on the Hebei Aoxing campus in Xinle City, 200 kilometers south west of Beijing.  The joint venture received a manufacturing license in November 2010 and a business license in January 2011 for its first product, Naloxone Hydrochloride.

In February 2010, Aoxing Pharma and QRxPharma Ltd. announced a strategic alliance to collaborate in the development of two proprietary narcotic drugs in China and ex-China markets: MoxDuo®IV, an intravenous formulation, as well as MoxDuo®IR, an immediate release capsule presently in pivotal Phase 3 studies in the United States.  Both products are based on QRxPharma’s patented morphine and oxycodone Dual-Opioid™ technology for the acute treatment of moderate to severe pain.  Under the terms of the agreement, Aoxing Pharma will fund the development of MoxDuo®IV and MoxDuo®IR for the China market in exchange for exclusive marketing rights in China.  QRxPharma will retain ownership of both products and may use the clinical work completed by Aoxing Pharma for product registration purposes outside of China.  Extensive clinical studies have demonstrated that QRxPharma’s Dual-Opioids™ provide as good or better pain relief than either morphine or oxycodone alone, but with significantly fewer side effects, giving doctors and patients more options in the treatment of moderate to severe pain from the hospital to the home.

Pharmaceutical Market in China

According to IMS health, the global pharmaceutical market in 2011 is expected to be about $880 billion and expected to grow 5-7% in 2011 while the Chinese pharmaceutical market is expected to grow 25-27% in 2011 to more than $50 billion, making it the third largest pharmaceutical market behind the United States and Japan.  The growth in Chinese pharmaceutical market is driven by several factors including improving standards of living and an increase in disposable income fueled by the growing economy, the aging population, the increasing participation in the State Basic Medical Insurance System and the increase in government spending on public health care. In January 2009, the Chinese government approved a healthcare reform plan and has budgeted RMB 850 billion, or $124 billion, for a three year program to make medical services and products more affordable and accessible to the whole population.

15

 Narcotics Industry in China

The pharmaceutical market in China is highly fragmented today. We believe there are over 3,000 small enterprises currently engaged in the development, manufacture and sale of pharmaceutical products, and we expect significant consolidation of pharmaceutical business, products and technologies in China in near future.  However, based on recent statistics provided by the China SFDA, there are only 13 pharmaceutical companies designated by the China SFDA as narcotic drug producers in China.

Regulatory and Quality Control

Each of our pharmaceutical products has certain medicinal functions and has demonstrated safety and efficacy in accordance with the China SFDA requirements for the treatment of at least one or more therapeutic indications.  Our products are produced in various formulations, such as injection, tablets, capsules, oral solution and powders.  Our manufacturing facility in China is GMP certified, fully integrated with manufacturing support systems including quality assurance, quality control and regulatory compliance. We have developed our own independent quality control systems in accordance with SFDA regulations. Our quality assurance team devotes significant attention to quality control for designing, manufacturing and testing our products, and is also responsible for ensuring that we are in compliance with all applicable national and local regulations and standards, as well as our internal policies. Our senior management team is also actively involved in setting quality assurance policies and managing internal and external quality performance. These support systems enable us to maintain high standards of quality for our products and deliver reliable products to our customers on a timely basis.

Results of Operations - Restated

The Company has restated its financial statements to correct an error related to the accounting for the Company’s valuation of deferred tax assets. The Company has amended its Annual Report on Form 10-K/A as of and for the year ended June 30, 2011. The effect of the error is on the financial statements included in this amended Quarterly Report is set forth in Note 3 to the Consolidated Financial Statements.

Revenues for the three months ended September 30, 2011 were $1,530,068, representing 12.1% decrease over the revenues of $1,740,673 realized during the three months ended September 30, 2010.  The decrease is mostly contributed to reduced promotional effort on certain non-proprietary products that have become non-profitable.  Most of them are those included in the government’s Essential Drug List, as discussed in previous period.  The significant increase in the price of raw materials since January 2011 combined with the pricing pressure from the biding process made those products non-profitable.

The Company’s top-selling, proprietary product, Zhongtongan, also declined modestly, due to the decision to restrict sales in certain provinces in which its price was substantially lower than the average price.  This issue is not company specific but industry wise.  Prices of pharmaceutical products in these provinces were generally much lower than their national averages.

Cost of sales was $662,550 for the three months ended September 30, 2011, which was 20% less than the $827,295 in costs incurred during the three months ended September 30, 2010.  The main factor for the decrease in cost of sales was lower sales.  Improved gross margin also reduced cost of sales.

Gross profit was $867,518 during the three months ended September 30, 2011, 5% lower than the same period a year earlier, reflecting the combined effect of lower sales and higher gross margin.  Gross margin was 56.7% during the three months ended September 30, 2011, a 4.2% improvement from the gross margin of 52.5% for the same period a year earlier.  The improvement in gross margin was due to modest price increase for Zhongtongan and manufacturing efficiency enhancements. Price of raw materials during the quarter ended September 30, 2011 was higher than the same period a year ago but flat sequentially.

16

Research and development expenses were $106,399 during the three months ended September 30, 2011, representing a 24.5% increase from $85,448 occurred during the three months ended September 30, 2010.  R&D expenses could fluctuate significantly from one period to another, reflecting the progress and timing of our various development projects.

General and administrative expenses were $746,243 in the three months ended September 30, 2011, 17.9% lower than $909,057 in the three months ended September 30, 2010.  The main reason for the decrease was Company’s effort to reduce cost.

Selling expenses in the amount of $363,293 incurred during the three months ended September 30, 2011 were 29% lower from $511,821 spent on selling during the three months ended September 30, 2010.  The decrease was mainly due to reduced marketing efforts for non-profitable products.

Loss from operations for the quarter ended September 30, 2011 decreased 33.4% to $495,957, from $744,992 incurred during the quarter ended September 30, 2010.  The significant decrease in the loss was primarily due to lower general, administrative, and selling expenses.

Net interest expense was $418,431 for the three months ended September 30, 2011, increased 11.6% from net interest expense of $374,781 for the three months ended September 30, 2010.  Increase in interest expense was due to higher interest rates upon renewal of loans, as a result of nationwide credit tightening in China, and currency exchange rate change.

The volatility in the market price of common stock has a significant impact on the fair valuation of our outstanding warrant liabilities.  During the quarter ended September 30, 2010, this value decreased by $222,717, primarily due to a decline in the market price of our common stock.  The decrease was recorded as other income for the three months ended September 30, 2010.  All outstanding warrants expired without exercise by the end of September 30, 2011, which resulted in other income of $1,161 for the quarter ended September 30, 2011.

During the quarter ended September 30, 2011, there was a loss of $41,936 in the JV with Johnson Mathey Plc.  The JV has no operation during the same period in previous year.

The Company realized a net loss of $955,163 for the three months ended September 30, 2011.  However, because the Company owns only 95% of Hebei Aoxing, 5% of that company’s income was attributed to the non-controlling interest.  Therefore the net loss for the three months ended September 30, 2011 was $922,904 attributable to the shareholders of Aoxing Pharmaceutical.  In comparison, during the three months ended September 30, 2010, the net loss attributable to the Company’s shareholders was $653,941, after deducting income attributable to the 5% non-controlling interest in Hebei Aoxing.

17

Liquidity and Capital Resources

Operations during the three months ended September 30, 2011 used $352,926 in cash, as compared to $977,641 used for operations during the three months ended September 30, 2010.  The primary reason for the decreased use of cash during the period is relatively less increase in accounts receivable than the increase in accounts receivable.  Increase in accrued expenses and other current liabilities also resulted in less cash use during the three months ended September 30, 2011.

Investing activities used $24,762 in cash during the three months ended September 30, 2011.   During the three months ended September 30, 2010 investing activities used $378,348 in cash, as the Company invested $723,945 in additional property and equipment.  Repayment from loans to unrelated party reduced the cash use by $345,597.

There was no significant financing activity during the three months ended September 2011.  In the same period from previous year, the Company completed a short-term loan financing of 5 mil RMB ($746,480).

As a result of the several debt refinancing during fiscal 2011 and the first quarter of fiscal 2012, our debt service obligations on September 30, 2011 were:

			Less than										After 5
Contractual Obligations	Total		1 Year		1-2 Years		2-3 Years		3-4 Years		4-5 Years		Years
Short-term Borrowing	$	234,309	$	234,309	$	-	$	-	$	-	$	-	$	-
Bank		8,591,334		8,591,334
Related Party		3,736,244		5,793		1,298,716		2,431,735		-
Others		1,946,483		96,847				1,849,636		-
TOTAL	$	14,508,370	$	8,928,283	$	1,298,716	$	4,281,371	$	-	$	-	$	-

On September 30, 2011, we had $2.48 million in cash.  Presently, the Company does not anticipate large capital expenditure projects in the next 12 months.  As a result, the Company will be able to operate at much lower cash burn rates, if needed, without major impact on its operations. The Company does anticipate that its current cash position will be insufficient to support the Company's operations at current capacity for the next 12 month period and, therefore, will need to seek additional financing of its operations.  The Company may also want to seek financing to fund expansion of our operations, extend our reach to broader markets, or to acquire additional entities.  We may rely on additional bank borrowing as well as capital raises.  We are actively exploring various proposals and alternatives in order to secure sources of financing and improve our financial position. We may raise such additional capital through the issuance of our equity securities, which may result in significant dilution to our current investors.  Other options considered include issuance of convertible debt, a new bridge loan, and arrangement to out-license intellectual property.  We are also exploring potential strategic partnerships, which could provide a capital infusion to the Company.

18

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition or results of operations.

ITEM 3   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.

ITEM 4.  CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures.

Under the supervision and with the participation of the Company’s management, including our Chief Executive Officer and Chief Financial Officer (the “Certifying Officers”), we carried out an evaluation of the effectiveness of our disclosure controls and procedures as of September 30, 2011.  The term “Disclosure controls and procedures” means controls and other procedures that are designed to insure that information required to be disclosed by us in the reports that we file with the Securities and Exchange Commission is recorded, processed, summarized and reported within the time limits specified in the Commission’s rules. That evaluation revealed the following material weakness in our internal control over financial reporting: the Company is relatively inexperienced with certain complexities within US GAAP and SEC reporting causing a material weakness in internal controls, Based on the results of these self-assessments, our principal executive officer and principal financial officer concluded that Aoxing Pharma’s system of disclosure controls and procedures was not effective as of September 30, 2011 for the purposes described in this paragraph.

Changes in Internal Control over Financial Reporting.

There was no change in internal controls over financial reporting during our most recently completed fiscal quarter that has materially affected or is reasonably likely to materially affect Aoxing Pharmaceutical’s internal control over financial reporting.

Item 6. Exhibits

31.1	Certification of Chief Executive Officer pursuant to Section 302 of the SOX of 2002.
31.2	Certification of Chief Financial Officer pursuant to Section 302 of the SOX of 2002.
32.1	Certificate of Chief Executive Officer pursuant to 18 U.S.C.ss.1350.
32.2	Certificate of Chief Financial Officer pursuant to 18 U.S.C.ss.1350.
101 INS	XBRL Instance Document*
101 SCH	XBRL Schema Document*
101 CAL	XBRL Calculation Linkbase Document*
101 DEF	XBRL Definition Linkbase Document*
101 LAB	XBRL Labels Linkbase Document*
101 PRE	XBRL Presentation Linkbase Document*

*           The XBRL related information in Exhibit 101 shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to liability of that section and shall not be incorporated by reference into any filing or other document pursuant to the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing or document.

19

SIGNATURES

Pursuant to the  requirements  of the Securities  Exchange Act of 1934, the Registrant  has duly  caused  this  Report  to be  signed  on its  behalf by the undersigned thereunto duly authorized.

	AOXING PHARMACEUTICAL COMPANY, INC.
Date: September 28, 2012	By: /s/ Zhenjiang Yue
	Zhenjiang Yue, Chief Executive Officer
	(Principal Executive Officer)
Date: September 28, 2012	By: /s/ Guoan Zhang
	Guoan Zhang, Chief Financial Officer
	(Principal Accounting and Financial Officer)

20

EX-31.1

Exhibit 31.1

Certification

I, Zhenjiang Yue, certify that:

1. I have reviewed this quarterly report on Form 10-Q/A (Amendment No. 1) of Aoxing Pharmaceutical Company, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal controls over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal controls over financial reporting, or caused such internal controls over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal controls over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal controls over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting.

Date: September 28, 2012	/s/ Zhenjiang Yue
	Zhenjiang Yue, Chief Executive Officer
	(Principal Executive Officer)

EX-31.2

Exhibit 31.2

Certification

I, Guoan Zhang, certify that:

1. I have reviewed this quarterly report on Form 10-Q/A (Amendment No. 1) of Aoxing Pharmaceutical Company, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal controls over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f))for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal controls over financial reporting, or caused such internal controls over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal controls over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal controls over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting.

Date: September 28, 2012	/s/ Guoan Zhang
	Guoan Zhang, Chief Financial Officer
	(Principal Accounting and Financial Officer)

EX-32.1

Exhibit 32.1

CERTIFICATION

OF

CHIEF EXECUTIVE OFFICER

PURSUANT TO 18 U.S.C. §1350

In connection with the Quarterly Report on Form 10-Q/A of Aoxing Pharmaceutical Company, Inc. (the “Company”) for the fiscal period ended September 30, 2011 (the “Report”), as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Zhenjiang Yue, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company for said period.

September 28, 2012	/s/ Zhenjiang Yue
	Zhenjiang Yue, Chief Executive Officer

A signed original of this written statement has been provided to the Registrant and will be retained by the Registrant and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.2

Exhibit 32.2

CERTIFICATION

OF

CHIEF FINANCIAL OFFICER

PURSUANT TO 18 U.S.C. §1350

In connection with the Quarterly Report on Form 10-Q/A of Aoxing Pharmaceutical Company, Inc. (the “Company”) for the fiscal period ended September 30, 2011 (the “Report”), as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Guoan Zhang, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company for said period.

September 28, 2012	/s/ Guoan Zhang
	Guoan Zhang, Chief Financial Officer

A signed original of this written statement has been provided to the Registrant and will be retained by the Registrant and furnished to the Securities and Exchange Commission or its staff upon request.

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4 Inventories

3 Months Ended

Sep. 30, 2011

Notes

4 Inventories

4             INVENTORIES

Inventories consist of the following:

	September 30,		June 30,
	2011		2011
Work in process	$	630,424	$	159,388
Raw materials		494,391		1,017,658
Finished goods		277,183		292,371
	$	1,401,998	$	1,469,417

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3 Restatement

3 Months Ended

Sep. 30, 2011

Notes

3 Restatement

 3             RESTATEMENT

We have determined that, in our Quarterly Report as originally filed, a deferred tax asset in the amount of $2,776,111 was improperly valued as an asset as of September 30, 2011 and that a valuation allowance for 100% of the balance of the deferred tax asset should be recorded.  Upon review, we decided that the Company did not have sufficient competent evidence to support its conclusion that the Company would earn taxable income in the future against which it could realize the benefit of its net operating loss carryforwards.

The September 30, 2011 balance sheet and the statements of operations and statements of cash flows for the three months ended September 30, 2011 have been restated as follows:

CONSOLIDATED BALANCE SHEETS

ASSETS	September 30, 2011
	As Previously
	Reported			Adjustments			As Restated
CURRENT ASSETS
Cash	$	2,479,180		$	–		$	2,479,180
Accounts receivable, net of allowance for doubtful accounts of $548,980 and $543,697, respectively		2,249,966			–			2,249,966
Inventory		1,401,998			–			1,401,998
Prepaid expenses and other current assets		1,133,095			–			1,133,095
TOTAL CURRENT ASSETS		7,264,239			–			7,264,239
LONG-TERM ASSETS:
Property and equipment, net of accumulated depreciation		26,664,028			–			26,664,028
Deferred income tax		2,776,111			(2,776,111	)		–
Goodwill		20,082,523			–			20,082,523
Other intangible assets		1,372,214			–			1,372,214
Investment in joint venture		484,533			–			484,533
TOTAL LONG-TERM ASSETS		51,379,409			(2,776,111	)		48,603,298
TOTAL ASSETS	$	58,643,648		$	(2,776,111	)	$	55,867,537
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Short-term borrowings	$	234,309		$	–		$	234,309
Accounts payable		2,588,649			–			2,588,649
Loan payable - bank		8,591,334			–			8,591,334
Current portion of loan payable - related parties		5,793			–			5,793
Current portion of loan payable - other		96,847			–			96,847
Accrued expenses and other current liabilities		3,584,746			–			3,584,746
TOTAL CURRENT LIABILITIES		15,101,678			–			15,101,678
LONG-TERM LIABILITIES:
Loan payable - related parties		3,730,451			–			3,730,451
-others		1,849,636			–			1,849,636
Warrant and derivative liabilities		-			–			-
TOTAL LONG-TERM LIABILITIES		5,580,087			–			5,580,087
Common stock, par value $0.001, 100,000,000 shares authorized, 49,196,090 and 49,158, 955 shares issued and outstanding on September 30 and June 30, 2011, respectively		49,196			–			49,196
Additional paid in capital		57,516,219			–			57,516,219
Accumulated deficit		(21,295,047	)		(2,637,305	)		(23,932,352	)
Other comprehensive income		2,168,664			–			2,168,664
TOTAL SHAREHOLDERS' EQUITY OF THE COMPANY		38,439,032			(2,637,305	)		35,801,727
NONCONTROLLING INTEREST IN SUBSIDIARIES		(477,149	)		(138,806	)		(615,955	)
TOTAL EQUITY		37,961,833			(2,776,111	)		35,185,772
TOTAL LIABILITIES AND SHAREHOLDERS EQUITY	$	58,643,648		$	(2,776,111	)	$	55,867,537

CONSOLIDATED STATEMENTS OF OPERATIONS AND OTHER COMPREHENSIVE LOSS

	For the Three Months Ended September 30, 2011
	As Previously
	Reported			Adjustments			As Restated
SALES	$	1,530,068		$	–		$	1,530,068
COST OF SALES		662,550			–			662,550
GROSS PROFIT		867,518			–			867,518
OPERATING EXPENSES:
Research and development expense		106,399			–			106,399
General and administrative expenses		746,243			–			746,243
Selling expenses		363,293			–			363,293
Depreciation and amortization		147,540			–			147,540
TOTAL OPERATING EXPENSES		1,363,475			–			1,363,475
LOSS FROM OPERATIONS		(495,957	)		–			(495,957	)
OTHER INCOME (EXPENSE)
Interest expense, net of interest income		(418,431	)		–			(418,431	)
Change in fair value of warrant and derivative liabilities		1,161			–			1,161
Equity in loss of joint venture, net of tax		(41,396	)		–			(41,396	)
Total Other Income (Expense)		(459,206	)		–			(459,206	)
LOSS BEFORE INCOME TAXES		(955,163	)		–			(955,163	)
Income taxes (credit)		(161,294	)		161,294			–
NET LOSS		(793,869	)		(161,294	)		(955,163	)
Net loss attributed to non-controlling interest in subsidiaries		(24,194	)		(8,065	)		(32,259	)
LOSS ATTRIBUTABLE TO THE SHAREHOLDERS OF THE COMPANY		(769,675	)		(153,229	)	$	(922,904	)
OTHER COMPREHENSIVE INCOME:
Foreign currency translation adjustment		298,035			–			298,035
COMPREHENSIVE LOSS		(471,640	)		(153,229	)		(624,869	)
Other comprehensive income attributable to non-controlling interest		14,902			–			14,902
COMPREHENSIVE LOSS ATTRIBUTABLE TO THE COMPANY	$	(486,542	)	$	(153,229	)	$	(639,771	)
BASIC AND DILUTED LOSSES PER COMMON SHARE	$	(0.02	)	$	–		$	(0.02	)
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING		49,167,411			–			49,167,411

CONSOLIDATED STATEMENTS OF CASH FLOWS

	For the Three Months Ended September 30, 2011
	As Previously
	Reported			Adjustments			As Restated
OPERATING ACTIVITIES:
Net income (loss)	$	(793,869	)	$	(161,294	)	$	(955,163	)
Adjustments to reconcile net income (loss) to net cash used by operating activities:
Depreciation and amortization		293,883			–			293,883
Deferred income tax		(161,294	)		161,294			–
Common stock issued for services		134,147			–			134,147
Change in fair value of warrants and derivative liability		(1,161	)		–			(1,161	)
Equity in loss of joint venture, net of tax		41,936			–			41,936
Changes in operating assets and liabilities:
Accounts receivable		(221,694	)		–			(221,694	)
Inventories		81,425			–			81,425
Prepaid expenses and other current assets		7,586			–			7,586
Accounts payable		(72,468	)		–			(72,468	)
Accrued expenses and other current liabilities		338,583			–			338,583
NET CASH USED IN OPERATING ACTIVITIES		(352,926	)		–			(352,926	)
INVESTING ACTIVITIES:
Acquisition of property and equipment		(24,762	)		–			(24,762	)
NET CASH USED IN INVESTING ACTIVITIES	$	(24,762	)	$	–		$	(24,762	)

FINANCING ACTIVITIES:
Proceeds from other borrowings	$	72,862		$	–	$	72,862
Repayment of loans from related party		(1,666	)		–		(1,666	)
NET CASH PROVIDED BY FINANCING ACTIVITIES		71,196			–		71,196
EFFECT OF EXCHANGE RATE ON CASH		14,928			–		14,928
INCREASE (DECREASE) IN CASH		(291,564	)		–		(291,564	)
CASH – BEGINNING OF YEAR		2,770,744			–		2,770,744
CASH – END OF PERIOD	$	2,479,180		$	–	$	2,479,180
Supplemental disclosures of cash flow information:
Cash paid for interest	$	515,574		–		$	515,574
Cash paid for income taxes	$	–		–		$	–

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CONSOLIDATED BALANCE SHEETS (USD $)	Sep. 30, 2011	Jun. 30, 2011
Cash	$ 2,479,180	$ 2,770,744
Accounts receivable, net of allowance for doubtful accounts of $548,980 and $543,697, respectively	2,249,966	2,008,024
Inventory	1,401,998	1,469,417
Prepaid expenses and other current assets	1,133,095	1,130,010
TOTAL CURRENT ASSETS	7,264,239	7,378,195
Property and equipment, net of accummulated depreciation	26,664,028	26,669,156
Goodwill	20,082,523	19,916,128
Other intangible assets	1,372,214	1,388,704
Investment in joint venture	484,533	521,541
TOTAL LONG-TERM ASSETS	48,603,298	48,495,529
TOTAL ASSETS	55,867,537	55,873,724
Short-Term borrowings	234,309	232,055
Accounts payable	2,588,649	2,659,727
Loan payable - bank	8,591,334	8,508,663
Current portion of loan payable - related parties	5,793	5,793
Current portion of loan payable - other	96,847	23,515
Accrued expenses and other current liabilities	3,584,746	3,206,009
TOTAL CURRENT LIABILITIES	15,101,678	14,635,762
Loan payable - related parties	3,730,451	3,696,210
Loan payable - others	1,849,636	1,831,838
Warrant and derivative liabilities		1,161
TOTAL LONG-TERM LIABILITIES	5,580,087	5,529,209
Common stock, par value $0.001, 100,000,000 shares authorized, 49,196,090 and 49,158,955 shares issued and outstanding on September 30 and June 30, 2011, respectively	49,196	49,159
Additional paid in capital	57,516,219	57,382,109
Accumulated deficit	(23,932,352)	(23,009,448)
Other comprehensive income	2,168,664	1,885,531
TOTAL SHAREHOLDERS' EQUITY OF THE COMPANY	35,801,727	36,307,351
NONCONTROLLING INTEREST IN SUBSIDIARIES	(615,955)	(598,598)
TOTAL EQUITY	35,185,772	35,708,753
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$ 55,867,537	$ 55,873,724

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Basis of Accounting

3 Months Ended

Sep. 30, 2011

Notes

Basis of Accounting

 1             BASIS OF PRESENTATION

The accompanying unaudited consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles for interim financial information and pursuant to the requirements for reporting on Form 10-Q. Accordingly, they do not include all the information and footnotes required by accounting principles generally accepted in the United States of America for annual financial statements. However, the information included in these interim financial statements reflects all adjustments (consisting solely of normal recurring adjustments) which are, in the opinion of management, necessary for the fair presentation of the consolidated financial position and the consolidated results of operations. Results shown for interim periods are not necessarily indicative of the results to be obtained for a full year. The consolidated balance sheet as of June 30, 2011 was derived from the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K/A for the fiscal year 2011. These interim financial statements should be read in conjunction with that report.

For further information, refer to the consolidated financial statements and footnotes thereto included in the Company’s Annual Report on Form 10-K/A for the fiscal year ended June 30, 2011 filed on September 28, 2012.

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2 Business Description and Significant Accounting Policies

3 Months Ended

Sep. 30, 2011

Notes

2 Business Description and Significant Accounting Policies

2                   BUSINESS DESCRIPTION AND SIGNIFICANT ACCOUNTING POLICIES

Aoxing Pharmaceutical Co., Inc. (“the Company” or “Aoxing Pharma”) is a specialty pharmaceutical company specializing in research, development, manufacturing and distribution of a variety of narcotic, pain-management, and addiction treatment pharmaceutical products.

As of September 30, 2011, the Company had one operating subsidiary: Hebei Aoxing Pharmaceutical Co., Inc. (“Hebei Aoxing”), which is organized under the laws of the People’s Republic of China (“PRC”).  As of September 30, 2011, the Company owned 95% of the issued and outstanding common stock of Hebei Aoxing.

Since 2002, Hebei Aoxing has been engaged in developing narcotic, pain management, and addiction treatment pharmaceutical products, building its facilities and obtaining the requisite licenses from the Chinese Government.  Headquartered in Shijiazhuang City, the pharmaceutical capital of China, outside of Beijing, Hebei now 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 manufacturing narcotics medicines. The Company is working closely with the Chinese government and SFDA to assure the strictly regulated availability to medical professionals throughout China of its narcotic drugs and pain medicines.

In April, 2008, Hebei Aoxing completed the acquisition of 100% of the registered capital of LRT.  LRT is engaged in the manufacture and distribution of Chinese traditional medicines focusing on pain management related therapeutics within China.  As of June 30, 2009, LRT had been completely integrated into Hebei Aoxing.

Investment in Joint Venture (“JV”)

On April 26, 2010, Aoxing Pharma and Johnson Matthey Plc (‘JM”) entered into an agreement to establish a joint venture focused on research, development, manufacturing and marketing of active pharmaceutical ingredients for narcotics and neurological drugs for the China market. The joint venture represents a significant new opportunity for both companies to expand their business in the rapidly growing pharmaceutical market in China.  Under the terms of the agreement, Macfarlan Smith Ltd, a wholly owned subsidiary of Johnson Matthey Plc, headquartered in the United Kingdom, will contribute technology expertise and capital to the joint venture. Hebei will contribute capital, fixed assets and related active pharmaceutical ingredients manufacturing licenses. The joint venture company is called Hebei Aoxing API Pharmaceutical Company, Ltd. (“API”).  Hebei Aoxing has a 51% stake in the Company, while Macfarlan Smith (Hong Kong) Ltd (a wholly owned subsidiary of JM) holds 49%. Each company has equal representation on the board of directors that will oversee a management team responsible for corporate strategies and operations.  The new joint venture will be located on the Hebei Aoxing campus in Xinle City, 200 kilometers southwest of Beijing. The total capital investment is projected to be approximately $15 million during the first five years, which will be shared between the equity shareholders of the joint venture. On December 10, 2010, the joint venture obtained business license from the City Industry & Commercial Administrative Bureau. The Company accounts for its investment in the Joint Venture under the equity method of accounting.

Use of estimates in the preparation of financial statements

The preparation of the consolidated financial statements in conformity with generally accepted accounting principles in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenue and expenses during the reporting period. Significant estimates reflected in the consolidated financial statements include, but are not limited to, the recoverability of the carrying amount and estimated useful lives of long-lived assets, allowance for accounts receivable, realizable values for inventories, valuation allowance of deferred tax assets, purchase price allocation of its acquisitions and share-based compensation expenses. Management makes these estimates using the best information available at the time the estimates are made; however, actual results when ultimately realized could differ significantly from those estimates.

Impairment of long lived assets

Long-lived assets are reviewed for impairment when circumstances indicate the carrying value of an asset may not be recoverable.  For assets that are to be held and used, impairment is recognized when the estimated undiscounted cash flows associated with the asset or group of assets is less than their carrying value. If impairment exists, an adjustment is made to write the asset down to its fair value, and a loss is recorded as the difference between the carrying value and fair value.  Fair values are determined based on quoted market values, discounted cash flows or internal and external appraisals, as applicable.  Assets to be disposed of are carried at the lower of carrying value or estimated net realizable value.

Derivative financial instruments

The Company’s derivative financial instruments consist of embedded derivatives related to the convertible debentures and warrants.  The accounting treatment of derivative financial instruments requires that the Company record the derivatives and related warrants at their fair values as of the inception date of the debt agreements and at fair value as of each subsequent balance sheet date.  Any change in fair value is recorded as non-operating, non-cash income or expense at each balance sheet date.  If the fair value of the derivatives was higher at the subsequent balance sheet date, the Company recorded a non-operating, non-cash charge. If the fair value of the derivatives was lower at the subsequent balance sheet date, the Company recorded non-operating, non-cash income.

For the three months ended September 30, 2011 and 2010, the Company recognized other income of $1,161 and $222,717, respectively, relating to recording the warrant and derivative liabilities at fair value.  On September 30, 2011 and June 30, 2011 there were $0 and $1,161 of warrant and derivative liabilities, respectively. All outstanding warrants expired without exercise during the current period.

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BALANCE SHEET PARENTHETICAL (USD $)	Sep. 30, 2011	Jun. 30, 2011
Allowance for doubtful accounts	$ 548,980	$ 543,697
Common stock par value	$ 0.001	$ 0.001
Common stock shares authorized	100,000,000	100,000,000
Common stock shares issued	49,196,090	49,158,955
Common stock shares outstanding	49,196,090	49,158,955

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12 Taxes - Restated

3 Months Ended

Sep. 30, 2011

Notes

12 Taxes - Restated

 12          TAXES - Restated

The Company’s Chinese subsidiaries are governed by the Income Tax Law of the People’s Republic of China concerning private-run enterprises, which are generally                 subject to tax at a statutory rate of 25% on income reported in the statutory financial                statements after appropriate tax adjustments.

The reconciliation of income tax at the U.S. statutory rate to the Company’s effective tax               rate is as follows:

	Three Months Ended September 30,
	2011			2010
	(Restated)
Tax at U.S. Statutory rate	$	(334,307	)	$	(313,969	)
Tax rate difference between China and U.S.		64,518			81,038
Change in Valuation Allowance		269,789			30,335
Effective tax rate	$	-		$	(202,596)

The income tax credits are summarized as follows:

	Three Months Ended September 30,
	2011		2010
	(Restated)
Current	$	-	$	-
Deferred - U.S.		(108,495)		(30,335	)
Deferred - China		(161,294)		(202,596	)
Valuation allowance - U.S.		108,495		30,335
Valuation allowance - China.		161,294		-
Total	$	-	$	(202,596)

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Document and Entity Information	3 Months Ended
	Sep. 30, 2011	Nov. 14, 2011
Document and Entity Information
Entity Registrant Name	AOXING PHARMACEUTICAL COMPANY, INC.
Document Type	10-Q
Document Period End Date	Sep. 30, 2011
Amendment Flag	false
Entity Central Index Key	0001060426
Current Fiscal Year End Date	--06-30
Entity Filer Category	Smaller Reporting Company
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Well-known Seasoned Issuer	No
Document Fiscal Year Focus	2012
Document Fiscal Period Focus	Q1
Entity Common Stock, Shares Outstanding		49,196,090

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13 Concentrations

3 Months Ended

Sep. 30, 2011

Notes

13 Concentrations

13           CONCENTRATIONS

Sales to two major customers accounted for 27% and 23% of total sales for the three months ended September 30, 2011.  Sales to two major customers were 26% and 12% of total sales for the three months ended September 30, 2010.  

Sales of two major products represented approximately 86% and 5% of total sales for the three months ended September 30, 2011. Sales of three major products represented approximately 77%, 5% and 5% of total sales for the three months ended September 30, 2010.

Accounts receivable balances of three customers represented for 35%, 13% and 11% of total accounts receivable balance as of September 30, 2011, respectively.

Accounts receivable balances of two customers represented for 23% and 18% of total accounts receivable balance as of June 30, 2011, respectively.

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CONSOLIDATED STATEMENTS OF OPERATIONS AND OTHER COMPREHENSIVE INCOME (LOSS) (USD $)	3 Months Ended
	Sep. 30, 2011	Sep. 30, 2010
SALES	$ 1,530,068	$ 1,740,673
COST OF SALES	662,550	827,295
GROSS PROFIT	867,518	913,378
OPERATING EXPENSES:
Research and development expense	106,399	85,448
General and administrative expenses	746,243	909,057
Selling expenses	363,293	511,821
Depreciation and amortization	147,540	152,044
TOTAL OPERATING EXPENSES	1,363,475	1,658,370
LOSS FROM OPERATIONS	(495,957)	(744,992)
OTHER INCOME (EXPENSE):
Interest expense, net of interest income	(418,431)	(374,781)
Change in fair value of warrant and derivative liabilities	1,161	222,717
Equity in loss of joint venture, net of tax	(41,936)
TOTAL OTHER INCOME (EXPENSE)	(459,206)	(152,064)
LOSS BEFORE INCOME TAX	(955,163)	(897,056)
Income tax (credit)		(202,596)
NET LOSS	(955,163)	(694,460)
Net loss attributed to non-controlling interest in subsidiaries	(32,259)	(40,519)
LOSS ATTRIBUTABLE TO SHAREHOLDERS OF THE COMPANY	(922,904)	(653,941)
OTHER COMPREHENSIVE INCOME :
Foreign currency translation adjustment	298,035	220,674
COMPREHENSIVE LOSS	(624,869)	(433,267)
Other comprehensive income attributable to non-controlling interest	14,902	10,508
COMPREHENSIVE LOSS ATTRIBUTABLE TO THE COMPANY	$ (639,771)	$ (443,775)
BASIC AND DILUTED LOSS PER COMMON SHARE	$ (0.02)	$ (0.01)
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING - BASIC	49,167,411	46,475,780
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING - DILUTED	49,167,411	46,475,780

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7 Accrued Expenses and Other Current Liabilities

3 Months Ended

Sep. 30, 2011

Notes

7 Accrued Expenses and Other Current Liabilities

7              ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

Accrued expenses and taxes consist of the following:

	September 30,		June 30,
	2011			2011
Accrued salaries and benefits	$	641,869		$	555,617
Accrued interest		655,796			745,866
Accrued taxes		404,938			316,229
Deposit payable		609,784			505,977
Due to employee		44,964			44,532
Other accrued expenses and current liabilities		1,227,395			1,037,788
	$	3,584,746		$	3,206,009

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6 Short-term Borrowing

3 Months Ended

Sep. 30, 2011

Notes

6 Short-term Borrowing

6            SHORT-TERM BORROWING

Short-term borrowing is a non-interest bearing unsecured note payable to a local government, due on demand.

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14 Subsequent Events

3 Months Ended

Sep. 30, 2011

Notes

14 Subsequent Events

14           SUBSEQUENT EVENTS

In accordance with ASC 855, “Subsequent Events”, the Company has evaluated subsequent events that have occurred through the date of issuance of these financial statements and has determined that there was no other material event that occurred after the date of the balance sheets included in this report, except the special funding from Hebei Province of China, which was disclosed in an 8-K filing on November 4, 2011.

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10 Loan Payable - Related Parties

3 Months Ended

Sep. 30, 2011

Notes

10 Loan Payable - Related Parties

10             LOAN PAYABLE – RELATED PARTIES

Loan payable – related parties consists of loans from shareholders, officers and other related parties, bearing interest at an average rate of 15.13% per annum. Loans will mature as follows:

Date	Amount
Within one year	$	5,793
1 - 2 years		1,298,716
2 - 3 years		2,431,735
Total		3,736,244
Less current portion		(5,793)
	$	3,730,451

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8 Loan Payable - Bank

3 Months Ended

Sep. 30, 2011

Notes

8 Loan Payable - Bank

  8            LOAN PAYABLE - BANK

Loan payable – bank consist of the following loans collateralized by assets of the company:

	September 30,		June 30,
	2011			2011
Bank Note in the amount of 30 million RMB with Bank of Communications of China bearing an annual floating rate of  7.572%, set to be 20% higher than the interest rate of the China People Bank rate, initially made on April 29, 2010 for one year and renewed on April 15, 2011 for one year maturing on April 15, 2012	$	4,686,182		$	4,641,089
Bank Note in the amount of 25 million RMB with China Citic Bank bearing an annual floating rate of  6.941%, set to be 10% higher than the interest rate of the China People Bank rate, initially made on May 5, 2010 for one year and renewed on April 20, 2011 for one year maturing on April 20, 2012		3,905,152			3,867,574
	$	8,591,334		$	8,508,663

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9 Loan Payable - Other

3 Months Ended

Sep. 30, 2011

Notes

9 Loan Payable - Other

9               LOAN PAYABLE – OTHER

Loan payable – other consist of loans from unrelated third-parties, bearing interest at an average rate of 17.9% per annum.  Loans will mature as following:

Date	Amount
Within one year	$	96,847
2 - 3 years		1,849,636
Total		1,946,483
Less current portion		(96,847)
	$	1,849,636

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11 Issuance of Common Stock

3 Months Ended

Sep. 30, 2011

Notes

11 Issuance of Common Stock

11           Issuance of Common Stock

During the three months ended September 30, 2011, the Company issued 37,135 shares of common stock to an independent director for services rendered. These shares were valued using the stock price at grant date. Total value of the compensation is $22,000.

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CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $)	3 Months Ended
	Sep. 30, 2011	Sep. 30, 2010
Net loss	$ (955,163)	$ (694,460)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization (production and nonproduction)	293,883	283,679
Deferred income tax		(202,596)
Common stock issued for services	134,147	142,048
Change in fair value of warrants and derivative liability	(1,161)	(222,717)
Equity in loss of joint venture, net of tax	41,936
Change in accounts receivable	(221,694)	(509,708)
Change in inventories	81,425	192,954
Change in prepaid expenses and other current assets	7,586	(59,890)
Change in accounts payable	(72,468)	108,312
Change in accrued expenses and other current liabilities	338,583	(15,263)
NET CASH USED IN OPERATING ACTIVITIES	(352,926)	(977,641)
INVESTING ACTIVITIES:
Acquisition of property and equipment	(24,762)	(723,945)
Repayment from unrelated parties		345,597
NET CASH USED IN INVESTING ACTIVITIES	(24,762)	(378,348)
Proceeds from bank loans		746,480
Proceeds from other borrowings	72,862
Repayment of loans from related party	(1,666)
NET CASH PROVIDED BY FINANCING ACTIVITIES	71,196	746,480
EFFECT OF EXCHANGE RATE ON CASH	14,928	74,446
DECREASE IN CASH	(291,564)	(535,063)
CASH - BEGINNING OF PERIOD	2,770,744	3,985,710
CASH - END OF PERIOD	2,479,180	3,450,647
Cash paid for interest	515,574	340,123
Cash paid for income taxes

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5 Equity-method Investment in Joint Venture

3 Months Ended

Sep. 30, 2011

Notes

5 Equity-method Investment in Joint Venture

5              EQUITY-METHOD INVESTMENT IN JOINT VENTURE

The Company account for its investment in API (see Note 2), under the equity method of accounting.

Summarized financial information for our investment in API assuming a 100% ownership interest is as follows:

		For the Quarter		For the Year
		Ended		Ended
		September 30, 2011		June 30, 2011
Current assets	$	34,254	$	126,458
Noncurrent assets		634,781		627,660
Current liabilities	$	141,931	$	150,379
Noncurrent liabilities		-		-
Equity	$	527,104	$	603,739
General and administrative expenses	$	82,227	$	-
Net income (loss)	$	(82,227)	$	-