Income from operations decreased 22.1% to $2.15 million. Operating margin decreased to 8.4% from 15.3% a year ago.

Net income attributable to controlling interest decreased 29.7% to $1.57 million.

Dr. Lei Liu, Chairman and CEO, stated, “We are pleased to report another record quarter in revenue with our excellent operational and financial performance in the fiscal third quarter, achieving double-digit sales growth. Because of our integrated business model, we were able to adjust our distribution channel and strike a good balance between product volume and selling prices.”

“Facing an economic slowdown and inflationary pressures in China, we have been closely monitoring market development and new growth opportunities. We are also controlling rental increases and other expenses,” stated Dr. Lei Liu, Chairman and CEO. “Our recent strategic initiatives include VIP clubs that cater to high-income customers with increasing healthcare needs. We are also developing more customized services in our stores.”

Dr. Liu continued, “I believe our online drugstore will bring new revenue sources and our expertise in traditional Chinese medicine will distinguish ourselves from our competitors. Going forward, we will continue to grow our business based on an integrated model. We also look to open more stores in both Zhejiang and Shanghai.”

New Store Openings

The Company operated a total of 60 stores as of December 31, 2011, including two new stores added during the quarter, as compared to 49 stores as of December 31, 2010. We anticipate that our overall revenue will continue to increase as we open additional stores and our maturing stores are able to accept government insurance.

Nine Month Results

Revenue increased 41.6% to $69.30 million for the nine months ended December 31, 2011, from $48.93 million for the nine months ended December 31, 2010, primarily as a result of same-store sales growth, sales from new stores opened since December 31, 2010, and wholesale revenue from Jiuxin Medicine.

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