China-Biotics Announces Financial Results for Second Quarter of Fiscal 2007.

Company Reports Revenues of $5.5 million, up 34.3% vs. 2Q06; Net Income of $1.6 million up 13.9 %; EPS of $0.09

SHANGHAI, China -- China-Biotics, Inc. (OTCBB: CHBT), one of China's largest producers of probiotic products and food supplements that benefit and improve microbial balance in the human body, announced record financial results for the second quarter of fiscal 2007 which ended on September 30, 2006.

Recent Developments:

* The Company is in the final stages of opening four new stores during November, in addition to the five retail locations opened year to date. These are all located in the greater Shanghai region and are being supported by several market promotion activities.

* Company received government approval to establish Growing Bioengineering (Shanghai) Co. Ltd., a wholly owned subsidiary specifically for the operation of its new plant which is expected to commence production by the end of calendar 2007.

* The Company invested approximately $1.3 million to improve existing production and research facilities during the six months ended September 30, 2006.

Financial Results (Note: 2005 results reflect the results of Sinosmart Group and 2006 results reflect the results of Sinosmart Group and China-Biotics as a combined company - reported results are unaudited)

For the second quarter ended September 30, 2006, the Company reported revenue of $5.5 million compared to $4.1 million in the second quarter of 2005, representing an increase of 34.3 percent. Growth primarily resulted from an increase in sales volume of the Company's product portfolio, including Shining Essence, which continued to be the best selling product, accounting for 60.9 percent of second quarter revenues, compared to 74.0% last year. The Company experienced an increase in sales volume in all of its other key products, including Shining Signal, Shining Gold Shield and Shining Energy for both the quarter and first six months of fiscal 2007. To compliment future growth, the Company launched several new products during the quarter ended March 31, 2006.

Mr. Song Jin An, China-Biotics' Chairman and Chief Executive Officer, elaborated, "This quarter was more normalized from a sales perspective and did not benefit from several large public Holidays which positively impacted the first fiscal quarter. We continued to see solid improvements in sales across our product portfolio and growth was complimented by our retail store expansion, and we expect to have a total of nine locations opened by calendar year end, with further locations planned for 2007. It is also important to note also that historically 60 percent of our sales were generated during the second half of each fiscal year."

Cost of sales increased for the quarter by 33.7 percent to $1.7 million, which was directly related to the increased sales volume. Gross profit increased by 34.6 percent to $3.8 million and increased as a percentage of revenue to 69.8 percent as compared to gross profit $2.8 million or 69.7 percent of revenue for second quarter 2005.

Operating expenses were $1.3 million for second quarter, up 109.0 percent as compared to $0.6 million for the quarter which ended September 30, 2005. The increase in selling expenses were primarily related to advertising, marketing and branding initiatives supporting the opening and supporting of new retail store locations. The Company also experienced a $0.3 million increase in general and administrative expense in the year over year period as a result of operational growth and increased expenses related to going public. Operating income totaled approximately $2.5 million for second quarter 2006, up approximately 12.9 percent from second quarter 2005, which was $2.2 million. As a result of higher overall expense levels, operating margins were 45.4 percent compared to 53.9 percent for the prior year period.

In addition to the Value Added Tax (VAT) which is paid directly before net revenues are reported, the provision for income taxes was $0.9 million for second quarter of fiscal 2006 as compared to $0.8 million for second quarter 2005, representing an effective tax rate of 37.1 percent for each respective period. Net income for the quarter totaled $1.6 million, a 13.9 percent increase from the $1.4 million for the previous second quarter, resulting in earnings per share of $0.09 based on 17.1 million diluted shares outstanding. Since the merger and subsequent private placement occurred during fiscal 2006, last year's second quarter did not include the associated shares and does not provide a reflective year over year comparable analysis.

For six months ended September 30, 2006, total sales were $13.5 million, an increase of 60.7% compared to the same period for 2005 which yielded total sales of $8.4 million. During this period, 61.58% of sales revenue emanated from its flagship product Shining Essence compared to 72.18% in the year ago period, while sales volume improved 34%. Gross Profit increased 61.3 percent to $9.5 million compared to $5.9 for the six months ended September 30, 2005. This resulted in Gross Margins of 70.2 percent for the first six months of this year compared to 70.0 percent for the same period last year. Income from operations totaled $6.4 million, which was up 33.9 percent from its total in the six months ended of 2005 of $4.8 million. Net Income for six months ended 2006 was $4.5 million, compared to $3.1 million for the previous year, an increase of 41.6 percent. This produced an EPS of $0.26 for the first half of 2006. The year ago period did not have the associated shares and does not provide a reflective year over year comparable analysis.

Cash flow from operations for the six months ended September 30, 2006 was approximately $5.2 million compared to $7.8 million in the same year ago period. The Company ended the quarter with a cash balance, including restricted cash, of $23.9 million, a 20.6 percent increase from 19.8 million as of March 31, 2006. Working capital was $14.25 million at quarter's end and the Company had a current ratio of 1.64 to 1. The Company does carry a current liability of $17.1 million related to a potential taxes payable, with further details available quarterly filed 10Q reports. Stockholder's equity increased 37.6 percent to $17.0 million as compared to $12.3 million at March 31, 2006.

"The company is in final planning stages for its new 150 ton bulk production facility and expects to commence construction in the near term. We have almost received the necessary approvals and signed an agreement for a land lease in the Shanghai Qingpu Industrial Park District, which will give us enough room to double capacity to 300 tons in the future. This will enable us to capitalize on growth opportunities for probiotic bulk food additives, a market with has been previously served by foreign imports," further commented Mr. Song Jin An. "The company expects the new plant will commence production by the end of 2007 and will begin to make revenue contributions in 2008. The costs of this business expansion, expected to be approximately $18 million for the first phase, will be funded through the Company's internal working capital."

Probiotics Overview

Probiotics are described as "live microorganisms administered in adequate amounts which confer a beneficial health effect on the host," by the Food and Agriculture Organization of the United Nations. The beneficial effects of probiotics consumption can include improvement of the general intestinal (GI) tract health, enhancement of the immune system, synthesized and enhanced bioavailability of nutrients, reduction of symptoms of lactose intolerance, decreased prevalence of allergy in susceptible individuals and reduction of risks of certain cancers.

About China-Biotics, Inc.

Based in Shanghai, China-Biotics is an emerging leader in the research, development, production, marketing and distribution of probiotics products in the People's Republic of China. Probiotics products contain live microbial food supplements which beneficially affect the host by improving its intestinal microbial balance. Currently, the Company produces and distributes proprietary probiotics, which are approved by the Ministry of Health in China and have been tested by the Shanghai Preventive Medicine Research Institute. For more information on China Biotics, visit their website at: http://www.shiningbt.com/

Safe Harbor Statement

Statements in this release that are not statements of historical fact may be deemed to be forward-looking statements. Forward-looking statements involve risks and uncertainties, including statements regarding our capital needs, business strategy and expectations. You should not rely on forward-looking statements as predictions of future events or results. Any or all of our forward-looking statements may turn out to be wrong. They can be affected by inaccurate assumptions, risks and uncertainties and other factors which could cause actual events or results to be materially different from those expressed or implied in the forward-looking statements. In evaluating these statements, you should consider various factors, including the risks described under "Risk Factors" in our Form 10-KSB filed with the SEC on September 30, 2006. These factors may cause our actual results to differ materially from any forward-looking statement. In addition, new factors emerge from time to time and it is not possible for us to predict all factors that may cause actual results to differ materially from those contained in any forward-looking statements. We do not intend to publicly update any forward-looking statements to reflect events or circumstances, except as required by applicable law.

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