Dr. Liu continued, “The Zhejiang provincial government has ceased to accept applications for such wholesale drug licenses. The acquisition should greatly improve the long-term efficiency of the Company’s supply-chain operation and reduce its supply costs.”

“Looking forward, we will continue our expansion in Zhejiang and Shanghai. We will also continue to expand our online drug store, the only licensed one in Zhejiang, to drive new growth and build long-term shareholder value.”

Second Quarter Results

Revenue increased 42% to $22.2 million for the second quarter, primarily as a result of the same store sale growth, sale from new stores opened within a year and wholesale revenue from Jiuxin Medicine.

Same store sales increased 7.7% during the quarter, mainly due to sales of pharmaceutical products covered by government-sponsored medical insurance programs. Revenue also increased from operating additional stores. As of September 30, 2011, the company operated 58 stores, compared with 46 stores a year earlier.

Gross profit increased 42% to $6.3 million for the second quarter. Gross margin increased slightly from 28.1% to 28.2%, offset by the lower gross margin from Jiuxin Medicine’s wholesale activities.

Selling expenses increased to $2.7 million from $1.2 million, primarily a result of operating 58 store locations, compared with 46 a year earlier.

General and administrative expenses for the quarter increased to $1.3 million from $0.8 million, mainly due to addition of new subsidiaries and expenses of being a U.S. public company.

Net income attributable to controlling interest for the quarter rose to $1.634 million from $1.627 million. Basic and Diluted earnings per share attributable to controlling interest remained constant at $0.12 a share

Six-Month Results

Revenue for the six months ended September 30, 2011 increased 41.3% to $43.7 million compared with $30.9 million in the year ago period.

Same store sales increased 20.6% from a year earlier, mainly due to sales of pharmaceutical products covered by government-sponsored medical insurance programs. Revenue also increased from operating additional stores.

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