China-Biotics Announces Record Financial Results for the Third Quarter of Fiscal 2007.

Company Reports Revenues of $8.8 million, up 31.2% vs. 3QFY06; Net Income Increases 23.1% to $3.6 million; EPS of $0.21

SHANGHAI, China -- China-Biotics, Inc. (OTCBB: CHBT), one of China's largest domestic producers of probiotic products and food supplements, which benefit and improve microbial balance in the human body, announced today record financial results for the third quarter of fiscal 2007 ending December 31, 2006.

Financial Results

Key Financial Indicators

(All numbers in USD and in thousands, except per-share amounts)

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The Company reported record revenue of $8.8 million during the third quarter compared to $6.7 million in the third quarter of 2006, representing an increase of 31.2 percent. Revenue growth was a result of an increase in sales volume for all products, including the Company's best selling product, Shining Essence, which accounted for 64.0 percent of total third quarter revenues with sales increasing 25.3 percent versus last year.

Mr. Song Jin An, China-Biotics' Chairman and Chief Executive Officer, stated, "We are pleased to report record revenues, which resulted from increased sales to our distributors as our product continues to gain additional shelf space with supermarkets and drugstores in our target geographic regions. To compliment future growth, the Company launched several new products during calendar 2006 and anticipates making additional introductions during calendar 2007 while accelerating the pace of new Company owned retail stores in core and new markets. The increase of Company owned retail stores is expected to build further brand awareness for China-Biotics' products while facilitating the move into new high growth regions."

Cost of sales increased for the quarter by 33.1 percent to $2.5 million, which was directly related to the increase in sales volume. Gross profit increased by 30.5 percent to $6.3 million compared to $4.8 million during the third quarter of fiscal 2006. Gross margins for the third quarter were relatively unchanged at 71.4 percent compared to the same period last year.

Operating expenses were $1.6 million for third quarter, up 101.1 percent as compared to $0.8 million for the comparable quarter last year. The year over year increase was partially related to higher advertising expenses to support the opening of four new retail locations. At the end of the third quarter China-Biotics had a total of nine company owned stores. These initial stores will also be utilized as training and logistics centers to support future store openings. General and administrative expenses increased $0.4 million to $0.6 million which were primarily related to public company expenses, which were not present last year. Operating income totaled approximately $4.6 million for the third quarter of 2007, up approximately 16.2 percent from $4.0 million in the third quarter 2006. As a result of higher overall expense levels, operating margins decreased to 52.8 percent compared to 59.6 percent for the prior year period.

In addition to the Value Added Tax (VAT) which is paid directly before net revenues are reported, the Company had a $1.0 million provision for income taxes during the third quarter of fiscal 2007 as compared to $1.1 million for third quarter 2006, representing an effective tax rate of 21.9 percent and 26.8 percent respectively. Net income for the quarter was a record at $3.6 million, a 23.1 percent increase from the $2.9 million for the previous third quarter, resulting in earnings per share of $0.21 based on 17.1 million diluted shares outstanding. Since the Company's share exchange and related private placement occurred during the 2006 fiscal year, last year's third quarter results did not include the associated shares and does not provide a reflective year over year comparison.

For nine months ended December 31, 2006, total sales were $22.2 million, an increase of 47.6 percent compared to $15.1 million last year. During the first nine months of fiscal 2007, 62 percent of revenue was related to the Company's flagship product Shining Essence compared to 70 percent in the year ago period with sales increasing 30.1 percent versus last year. Gross profit increased 47.4 percent to $15.7 million compared to $10.7 million for the nine months ended December 31, 2005. Gross margins of 70.7 percent for the period were relatively unchanged from last year. Income from operations totaled $11.1 million as compared to $8.8 million last year resulting in operating margins of 49.8 percent and 58.4 respectively with the decrease in margins related to the aforementioned increase in expenses. Net income for the nine months ended 2007 was $8.1 million, compared to $6.1 million for the previous year, an increase of 32.7 percent. Earnings per share for the first nine months of fiscal 2007 were $0.47 per weighted average fully diluted share which were not comparable to the year ago period.

Cash flow from operations was $5.9 million for the nine months ended December 31, 2006. The Company ended the quarter with a cash balance, including restricted cash, of $25.6 million, compared to $20.6 million as of March 31, 2006. Working capital was $18.2 million at the end of the third quarter and the Company maintained a current ratio of 1.80 to 1. Stockholders' equity increased 68.5 percent to $20.8 million as compared to $12.3 million last year.

"Our growth strategy during the next several years has three complementary components. First, we anticipate expanding our core product revenues through the addition of new distributors which will facilitate sales to new end customers and increase our geographical footprint in China. Second, we plan on building upon our momentum on the retail front by opening an additional 100 stores during calendar 2007, which will be utilized not only for branding and retail distribution but also as training and logistics centers to support our Community Network Program. Lastly, we are preparing to break ground on our new manufacturing facility in Shanghai which will accommodate additional production capabilities specifically for our bulk additive initiatives. We believe that as the Chinese consumer becomes more affluent there will be continued demand for products which are fortified with probiotics such as yogurt drinks, instant milk formula and other diary goods. Based on our low cost manufacturing and superior product offering we believe we are well positioned to capture these new high volume and high margin opportunities."

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.chn-biotics.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 for our fiscal year ended March 31, 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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