China Yingxia International, Inc. Reports Third Quarter 2008 Results

Our sales in the third quarter of 2008 more than doubled from the third quarter last year, supported by strong performance of our nutritional food segment.

18/11/08 China Yingxia International, Inc., a provider in the health and nutritional food industry engaged in the development, manufacture and distribution of nutritional food products, dietary supplements, and raw cactus plants in the People's Republic of China ("PRC"), reported its financial results for the third quarter ended September 30, 2008 on Friday November 14, 2008.

"Our sales in the third quarter of 2008 more than doubled from the third quarter last year, supported by strong performance of our nutritional food segment. We have continued to shift our product mix towards nutritional food products, and were pleased to see growth more than triple in this product segment from last year," said Ms. Yingxia Jiao, CEO of China Yingxia. "During the quarter, sales from our Jin Ao subsidiary contributed 10.3% of revenues, demonstrating the potential of this acquisition to our revenue growth."

Third Quarter Fiscal Year 2008 Results

Revenue for the three months ended September 30, 2008, was $7.5 million, increasing 112.3% from $3.5 million in the same period in 2007. Sales in the cactus product segment contributed 49.3% of total revenue in the third quarter of 2008, compared to 32.1% in the corresponding quarter last year. The nutritional product segment contributed 17.7% of total revenue, compared to 11.9% in the corresponding quarter last year, increasing by 216.2% year-over- year. Revenue from the Jin Ao subsidiary represented 10.3% of total revenue in the quarter. Dietary supplements, personal care products, cosmetics and the Chichi Network Companies accounted for the remaining 22.8% of revenue.

China Yingxia also expanded its sales channels during the third quarter of 2008, adding 146 new franchise stores across China.

Gross profit was $3.9 million, up 50.9% from the same period previous year. Gross profit margin was 52.8% in the third quarter of 2008 compared to 74.3% during the same period a year ago. The high gross profit margin in the third quarter of 2007 was due to the Company growing all cactus plants in its own greenhouses, while the Company outsourced the farming of cactus plants to local farmers in the third quarter of 2008. In addition, the lower gross profit margins of Jin Ao and Chi Chi Network subsidiaries impacted total gross profit margin in the third quarter of 2008.

Operating expenses totaled $0.5 million, or 7.0% of total revenue, in the third quarter of 2008, a decrease of 41.5% from $0.9 million, or 25.5% of revenue, in the same period last year. The decrease was due to significantly lower selling, general and administrative expenses, as the Company streamlined management expenses and professional services fees, and did not pay any sales commission during 2008. The Company's research and development expenditures decreased 87.9% from the third quarter of 2007 as the Company has entered a slow research and development phase.

Operating income for the third quarter of 2008 was $3.4 million, up 99.4% from $1.7 million in the equivalent period a year ago. Operating margin was 45.8% compared to 48.7% in the third quarter of 2007.

The Company paid income taxes of $153,481 as opposed to nil in the same period last year.

Net income was $3.2 million or $0.06 per fully diluted share, an increase of 88.0% from $1.7 million or $0.04 during the corresponding period prior year. Net profit margin was 43.2% compared to 48.8% in the previous year. Fully diluted weighted average shares used to calculate earnings per share was 49.7 million in the third quarter of 2008, compared to 43.7 million in the third quarter of 2007.

Nine Months Results

For the nine months ended September 30, 2008, total sales were $16.0 million, an increase of 54.0% from the nine month period ended 2007. Gross profit for the nine months ended September 30, 2008 was $8.8 million, up 37.9% from gross profit of $6.4 million in the comparable period a year ago. Gross profit margin was 55.0% compared to 61.4% for the first nine months of 2008 and 2007, respectively. Income from operations for the period was $7.4 million, up 55.9% from $4.7 million in the first nine months of 2007. Net income for the nine months ended September 30, 2008 was $7.0 million, an increase of 48.8% from $4.7 million for the nine months ended September 30, 2007. Fully diluted earnings per share were $0.14 for the nine months ended September 30, 2008 compared to $0.13 for the nine months ended September 30, 2007. Fully diluted weighted average shares used to calculate earnings per share was 49.7 million in nine months ended September 30, 2008, up from 37.0 million in the nine months ended September 30, 2007.

Financial Condition

As of September 30, 2008, the Company had $5.4 million in cash and cash equivalents and no long-term debt outstanding. Working capital was $21.2 million as of September 30, 2008, compared to $14.8 million as of December 2007. As of September 30, 2008 the current ratio was 17:1. Total shareholder's equity amounted to $46.8 million as of September, 30 2008, compared to $36.8 million as of December 31, 2007. For the nine months ended September 30, China Yingxia's net cash flow from operating activities totaled $1.5 million. Net cash flow provided by investing activities totaled $1.8 million for the nine months ended September 30, 2008, due to the collection of short-term loans and loans to related parties.

Recent Events

In September 2008, the Company announced that its Board of Directors has approved and authorized a share repurchase program for up to $2 million of its common stock. China Yingxia will repurchase shares on the open market or through privately negotiated transactions through September 30, 2009. The repurchase program may be discontinued or expanded by the Board of Directors in the future.