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American Oriental Bioengineering Reports First Quarter 2010 Financial Results

NEW YORK, May 10 /PRNewswire-Asia/ -- American Oriental Bioengineering, Inc. (NYSE: AOB), ("the Company" or "AOBO"), a pharmaceutical company dedicated to improving health through the development, manufacture and commercialization of a broad range of prescription and over the counter ("OTC") products, today announced financial results for the first quarter ended March 31, 2010.

First Quarter 2010 Financial Performance

Revenue in the first quarter of 2010 increased 16.7% year over year to $53.7 million from $46.1 million, reflecting continued demand for the Company's core prescription and OTC pharmaceutical products.

-- Revenue from pharmaceutical products increased 17.8% to $40.9 million

from $34.7 million in the first quarter of 2009, driven by increased

demand for the Shuanghuanglian ("SHL") Injection Powder, BOKE and CCXA

pharmaceutical products, as well as the newly-launched products such as

YuYeQingHuo Capsules. Revenue from prescription pharmaceutical products

increased 29.3% to $20.9 million from $16.2 million in the prior year

period, reflecting a year over year increase in sales from the

prescription Jinji capsule, SHL powder, Boke and CCXA prescription

products. The overall increase in sales was also supported by

continuous marketing efforts, an increase in new product offerings, and

expansion of coverage to previously unaddressed rural markets. OTC

pharmaceutical products generated $19.9 million in revenue during the

first quarter of 2010, in comparison to $18.5 million in the prior year

period, reflecting increased sales of our Boke and CCXA products as a

result of improved recognition of those products.

-- Nutraceutical products generated revenue of approximately $9.7 million

in the first quarter of 2010, up 8.5% from $8.9 million in the prior

year period, reflecting increased sales of new beverage products

launched in the second quarter of 2009.

-- The Company generated $3.2 million from its distribution business, Nuo

Hua, in the first quarter of 2010. An increase of 29.5% was mainly

attributed to the Nuo Hua's expanding market coverage.

Gross profit in the first quarter of 2010 was $28.2 million, compared to $28.4 million in the first quarter of 2009. Gross margin was 52.5%, compared to 61.7% in the prior year period, reflecting continued revenue mix shift to CCXA's generic product sales as well as increasing raw material prices.

Operating income in the first quarter of 2010 was $6.4 million, compared to $10.9 million in the prior year period. Selling and marketing expenses increased 14.7% to $6.0 million from $5.2 million in the prior year period, and advertising expense increased 21.2% to $6.7 million in the first quarter of 2010 from $5.6 million in the prior year period. General and administrative expenses increased 8.6% to $4.8 million from $4.4 million in the prior year period. Research and development expenses increased to $2.8 million from $0.7 million in the prior year period. This reflects the Company's continuing efforts to invest in the centralized R&D centre in Beijing.

Net income attributable to controlling interest for the first quarter of 2010 was $3.1 million, compared to $7.2 million in the prior year period. The Company's net income attributable to controlling interest was $0.04 per diluted share, compared to $0.10 per diluted share in the same period of 2009.

Balance Sheet

As of March 31, 2010, the Company had $99.0 million in cash and cash equivalents, including restricted portions, and generated approximately $5.8 million of operating cash flow during the first quarter of 2010. Working capital was $136.9 million as of March 31, 2010, reflecting an increase of 4.6% from $130.9 million as of December 31, 2009.

Mr. Tony Liu, Chairman and Chief Executive Officer of American Oriental Bioengineering, commented, "We are very satisfied with our performance in the first quarter, despite the challenging global economic environment and the changing Chinese regulatory environment. During the past quarter, we continued to invest heavily in R&D, which consumed 5% of total revenue, in order to upgrade our existing products and develop new proprietary products to lay a solid foundation for AOBO's near term and long term growth. Meanwhile, we continued to fortify our market position, strengthen our presence in rural areas, and diversify our business operations through cost control, advertising campaigns, and sales network expansion. We are confident that we will achieve initial success from the above combined efforts in the latter part of this year."

Conference Call

The Company will hold a conference call at 8:00 am ET on Monday, May 10, to discuss its results. Listeners may access the call by dialing 1-866-804-6927 or 1-857-350-1673 for international callers, access code: 92995812. A webcast will also be available through AOB's website at http://www.bioaobo.com . A replay of the call will be available through May 17, 2010. Listeners may access the replay by dialing 1-888-286-8010 or 1-617-801-6888 for international callers, access code: 50942560.

About American Oriental Bioengineering, Inc.

American Oriental Bioengineering, Inc. is a pharmaceutical company dedicated to improving health through the development, manufacture and commercialization of a broad range of prescription and over the counter products.

Statements made in this press release are forward-looking and are made pursuant to the safe harbor provisions of the Securities Litigation Reform Act of 1995. Such statements involve risks and uncertainties that may cause actual results to differ materially from those set forth in these statements. The economic, competitive, governmental, technological and other factors identified in the Company's filings with the Securities and Exchange Commission, including the Form 10-K for the year ended December 31, 2010, may cause actual results or events to differ materially from those described in the forward looking statements in this press release. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether because of new information, future events, or otherwise.

For more information, please contact:

Integrated Corporate Relations, Inc.

Ashley M. Ammon

Tel: +1-646-277-1200

AMERICAN ORIENTAL BIOENGINEERING, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

MARCH 31, DECEMBER 31,

2010 2009

CURRENT ASSETS

Cash and cash equivalents $95,787,301 $91,126,486

Restricted Cash 3,209,381 3,298,379

Accounts and notes receivable, net 53,503,601 57,504,454

Inventories, net 19,838,535 10,015,711

Advances to suppliers and prepaid

expenses 5,525,812 13,901,180

Deferred tax assets 590,330 824,451

Other current assets 1,494,931 1,246,647

Total Current Assets 179,949,891 177,917,308

LONG-TERM ASSETS

Property, plant and equipment, net 94,614,699 95,468,265

Land use rights, net 152,805,027 153,604,196

Other long term assets 7,930,112 7,909,086

Construction in progress 30,111,567 28,975,386

Other intangible assets, net 17,480,990 18,695,554

Goodwill 33,164,121 33,164,121

Investments in and advances to

equity investments 57,461,382 57,325,887

Deferred tax assets 138,746 134,268

Unamortized financing costs 3,055,621 3,287,694

Total Long-Term Assets 396,762,265 398,564,457

TOTAL ASSETS $576,712,156 $576,481,765

LIABILITIES AND SHAREHOLDERS' EQUITY

MARCH 31, DECEMBER 31,

2010 2009

CURRENT LIABILITIES

Accounts payable $10,660,316 $7,497,143

Notes payable 3,297,568 3,392,575

Other payables and accrued expenses 14,935,485 22,320,757

Taxes payable 352,439 947,338

Short-term bank loans 10,386,039 10,384,368

Current portion of long-term bank

loans 60,404 60,108

Other liabilities 3,140,176 2,199,280

Deferred tax liabilities 172,017 172,473

Total Current Liabilities 43,004,444 46,974,042

LONG-TERM LIABILITIES

Long-term bank loans 727,731 743,957

Deferred tax liabilities 15,737,755 15,961,465

Unrecognized tax benefits 3,300,625 2,746,561

Convertible Notes 115,000,000 115,000,000

Total Long-Term Liabilities 134,766,111 134,451,983

TOTAL LIABILITIES 177,770,555 181,426,025

EQUITY

SHAREHOLDERS' EQUITY

Preferred stock, $0.001 par value;

2,000,000 shares authorized;

1,000,000 shares issued and

outstanding at March 31, 2010

and December 31, 2009, respectively 1,000 1,000

Common stock, $0.001 par value;

150,000,000 shares authorized;

78,321,439 shares issued and

outstanding at March 31, 2010

and December 31, 2009 78,321 78,321

Common stock to be issued 485,000 388,000

Prepaid forward repurchase contract (29,998,616) (29,998,616)

Additional paid-in capital 200,408,156 199,829,921

Retained earnings (the restricted

portion of retained earnings is

$23,757,901 at both March 31 and

December 31, 2009) 194,296,931 191,173,754

Accumulated other comprehensive

income 33,143,073 33,050,224

Total Shareholders' Equity 398,413,865 394,522,604

Non-controlling Interest 527,736 533,136

TOTAL EQUITY 398,941,601 395,055,740

TOTAL LIABILITIES AND EQUITY $576,712,156 $576,481,765

AMERICAN ORIENTAL BIOENGINEERING, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

(UNAUDITED)

THREE MONTHS ENDED

MARCH 31,

2010 2009

Revenues $53,749,768 $46,077,190

Cost of sales 25,513,047 17,660,338

GROSS PROFIT 28,236,721 28,416,852

Selling and marketing expenses 5,976,226 5,211,502

Advertising costs 6,748,470 5,567,357

Research and development costs 2,778,809 749,798

General and administrative expenses 4,766,486 4,390,701

Depreciation and amortization

expenses 1,596,958 1,632,586

Total operating expenses 21,866,949 17,551,944

INCOME FROM OPERATIONS 6,369,772 10,864,908

Equity in earnings from

unconsolidated entities 117,473 437,794

Interest expense, net (1,565,785) (1,579,269)

Other income (expenses) 12,247 (98,609)

INCOME BEFORE INCOME TAXES 4,933,707 9,624,824

Income tax 1,815,930 2,469,764

NET INCOME 3,117,777 7,155,060

Net loss (income) attributable to

non-controlling interest 5,400 (3,551)

NET INCOME ATTRIBUTABLE TO

CONTROLLING INTEREST 3,123,177 7,151,509

OTHER COMPREHENSIVE INCOME 92,849 491,337

COMPREHENSIVE INCOME $3,216,026 $7,642,846

EARNINGS PER COMMON SHARE

Basic $0.04 $0.10

Diluted $0.04 $0.10

WEIGHTED AVERAGE SHARES OUTSTANDING

Basic 74,697,044 74,538,593

Diluted 89,460,953 86,917,603

Source: American Oriental Bioengineering, Inc.
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