Skystar Bio-Pharmaceutical Announces Second Quarter 2009 Results

XI'AN, CHINA--(Marketwire - August 14, 2009) - Skystar Bio-Pharmaceutical Company (NASDAQ: SKBI) ("Skystar" or the "Company"), a China-based producer and distributor
of veterinary medicines, vaccines, micro-organisms and feed additives,
today announced its financial results for the second quarter ended June 30,
2009.

SECOND QUARTER 2009 & RECENT HIGHLIGHTS

-- Revenues increased 39.4% year-over-year to $6.2 million
-- Gross margin improved to 52.6% from 51.6% in the second quarter of
2008
-- Income from operations increased by 37.6% year-over-year to $1.7
million
-- Began trading on the NASDAQ Capital Market on June 26, 2009
-- Completed public offering for 1.61M shares of common stock for gross
proceeds of approximately $21.0M on July 8, 2009

"With our recent listing on the NASDAQ Capital Market, we are pleased to be
the only China-based company in our growing industry that trades on a US
exchange," commented Mr. Weibing Lu, Chairman and Chief Executive Officer.
"As the animal farming industry in China continues to grow, we are
expecting to scale our business to meet this increasing demand. We are
continuing to execute on our plans to expand our manufacturing capacity and
increase our market penetration through an increase in our sales efforts."

"Our revenue increase in the second quarter was largely attributable to the
utilization of the veterinary medicine facility expansion completed in 2007
and increased sales efforts," Mr. Lu continued. "We have an established and
growing distribution network that services our diverse customer base of
more than 1,500 throughout all of the farm producing provinces in China.
With more than 350 franchise stores with nationally recognized branding and
few direct competitors, we are well positioned as an industry leader."

For the Three Months Ended June 30, 2009 and 2008

Second Quarter Revenue Summary

Three months ending June 30,
Product Line 2009 2008 % Change
----------- ----------- ----------
Veterinary Medications $ 3,913,444 $ 2,934,247 33.4%
Micro-Organism 1,735,534 1,151,600 50.7%
Feed Additives 281,461 176,627 59.4%
Vaccines 312,999 215,720 45.1%
----------- -----------
Total $ 6,243,438 $ 4,478,194 39.4%

Gross profit for the second quarter was $3.3 million, up 42% from the
second quarter of 2008. Gross margin for the quarter was 52.6%, compared
with 51.6% in the comparable 2008 period. The margin expansion in the
quarter can be attributed to the faster growth of the higher margin product
lines.

Total operating expenses for the second quarter of 2009 were $1.6 million,
compared with $1.1 million in the prior period. Research and development
costs increased to $367,000, or 5.9% of revenues in the second quarter from
119,000, or 2.7% of revenues during the same period a year ago. The
increase is primarily attributable to increased research and development
activities involved in developing veterinary vaccines. We anticipate these
costs will continue to increase as we continue improving our existing
products and develop new products.

Selling expenses totaled $585,000, or 9.4% of revenues, for the second
quarter as compared to $302,843, or 6.8% of revenues, in the comparable
period a year ago. The increase is a result of increased marketing efforts
and increased sales.

General and administrative expenses declined to $625,000, or 10% of
revenues, in the second quarter of 2009, compared with $649,000, or 14.5%
of revenues, in the same period of 2008. While the Company's general and
administrative expenses remained relatively unchanged, we anticipate
general and administrative expenses to increase in future periods due to
the increased costs associated with being a US public company.

Income from operations increased to $1.7 million, or 27.3% of revenues,
from $1.2 million, or 27.7% of revenues in the quarters ended June 30, 2009
and 2008 respectively.

Net loss for the period was $117,000, or $0.06 per share, compared to a net
loss of $126,000, or $0.07 per share, in the second quarter of 2008. As a
result of adopting EITF 07-5 on January 1, 2009, the Company recognized a
loss of $1.5 million for the change in fair value of warrant liability for
the three months ended June 30, 2009. The Company was required to record
its warrants as a liability primarily because the Company's functional
currency is the Chinese Renminbi while the Company's reporting currency is
the US Dollar.

Excluding the costs of non-cash charges related to the revaluation of
Skystar's aforementioned warrants and costs associated with the completion
of its secondary offering, Skystar's net income for the second quarter of
2009 was $1.4 million, or $0.73 per share. (See "About Non-GAAP Financial
Measures" toward the end of this release.)

As of June 30, 2009, Skystar had approximately $411,000 in cash and
restricted cash, current assets of $17.6 million and total liabilities of
$9.8 million. On July 8, 2009, the company completed an equity offering
resulting in gross proceeds of approximately $21.0 million.

Business Outlook

"We are in the process of completing our vaccine manufacturing facility and
expanding our existing micro-organism facilities, which are expected to be
completed later this year," stated Mr. Lu. "Once completed, the vaccine
facility is expected to increase our vaccine production capacity by 2,300%,
from 250 million units to 6 billion units, with a will have a projected
increase in revenue of $14 million and related gross margins of 60-70% in
2010. Our micro-organism facility expansion is anticipated to increase our
micro-organism and feed additives production capacity by 48.7% and add $2.7
million in revenue with a gross margin of 70% in 2010."

About Non-GAAP Financial Measures

This press release contains non-GAAP financial measures for the change in
the fair value of the Company's warrants under EITF 07-5. The Company
believes that these non-GAAP financial measures are useful to investors
because they exclude non-cash charges that our management excludes when it
internally evaluates the performance of the Company's business and makes
operating decisions, including internal budgeting, and performance
measurement, because these measures provide a consistent method of
comparison to historical periods. Moreover, management believes these
non-GAAP measures reflect the essential operating activities of Skystar.
Accordingly, management excludes the change in the fair value of the
Company's warrants under EITF 07-5 when making operational decisions. The
Company believes that providing the non-GAAP measures that management uses
to its investors is useful to investors for a number of reasons. The
non-GAAP measures provide a consistent basis for investors to understand
the Company's financial performance in comparison to historical periods. In
addition, it allows investors to evaluate the Company's performance using
the same methodology and information as that used by our management.
Non-GAAP measures are subject to inherent limitations because they do not
include all of the expenses included under GAAP and because they involve
the exercise of judgment of which charges are excluded from the
non-GAAP financial measure. However, our management compensates for these
limitations by providing the relevant disclosure of the items excluded.

The following table provides the non-GAAP financial measure and the related
GAAP measure and provides a reconciliation of the non-GAAP measure to the
equivalent GAAP measure.

Adjusted Net Income

Three months Six months
ended ended
June 30, 2009 June 30, 2009
GAAP Net Income (Loss) $ (116,797) $ 947,847
GAAP Basic Earnings (Loss) Per Share $ (0.06) $ 0.51

Addition:
Change in fair value of warrants $ 1,480,484 1,442,156

Non GAAP Net Income $ 1,363,687 2,390,003
Non GAAP Basic Earnings Per Share $ 0.73 1.28

Shares used in computing net income per
basic share 1,869,512 1,868,854

Conference Call

Skystar will host a conference call to discuss these results today, August
14, 2009, at 8:00 a.m. Eastern time. To participate in the conference call,
please dial 877-941-2321 or 480-629-9714 from the US. Participants dialing
in from China can access the call toll free by dialing 10800-152-1142.
Investors may also access a live audio webcast of this conference call
under "Events/Presentation" on the Investors Relations section of the
Company's website at http://www.ir-site.com/skystar/events.asp.

A replay of the webcast will be available approximately two hours after the
conclusion of the call. The webcast replay will remain available for 90
days. An audio replay will also be available approximately two hours after
the conclusion of the call and will be made available until Friday, August
28, 2009. The audio replay can be accessed by dialing 800-406-7325 or
303-590-3030 and entering passcode 4138197# from the US. For toll free
access to the replay from China please dial
852-2287-4304 and enter reservation number 109110#.

About Skystar Bio-Pharmaceutical Company

Skystar is a China-based developer and distributor of veterinary healthcare
and medical care products. Skystar has four product lines (veterinary
medicines, micro-organisms, vaccines and feed additives) and over 170
products, with over 40 additional products in the developmental stage.
Skystar has formed strategic sales distribution networks covering 29
provinces throughout China. For additional information, please visit
http://www.skystarbio-pharmaceutical.com.

To be added to the Company's email distribution for future news releases,
please send your request to skystar@tpg-ir.com.

Forward Looking Statements

Safe Harbor Statement under the Private Securities Litigation Reform Act of
1995: Certain of the statements made in the press release constitute
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995. These statements can be identified by the
use of forward-looking terminology such as "believe," "expect," "may,"
"will," "should," "project," "plan," "seek," "intend," or "anticipate" or
the negative thereof or comparable terminology. Such statements typically
involve risks and uncertainties and may include financial projections or
information regarding the progress of new product development. Actual
results could differ materially from the expectations reflected in such
forward-looking statements as a result of a variety of factors, including
the risks associated with the effect of changing economic conditions in The
People's Republic of China, variations in cash flow, reliance on
collaborative retail partners and on new product development, variations in
new product development, risks associated with rapid technological change,
and the potential of introduced or undetected flaws and defects in
products, and other risk factors detailed in reports filed with the
Securities and Exchange Commission from time to time.

(Tables Follow)

SKYSTAR BIO-PHARMACEUTICAL COMPANY AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
AS OF JUNE 30, 2009 AND DECEMBER 31, 2008

ASSETS

June 30, December 31,
2009 2008
------------ ------------
(Unaudited)
------------
CURRENT ASSETS:
Cash $ 410,554 $ 576,409
Restricted cash 151 80,885
Short-term investments 307,650 352,080
Accounts receivable, net of allowance for
doubtful accounts of $327,410
and $327,857 as of June 30, 2009 and
December 31, 2008, respectively 3,832,627 2,424,102
Inventories 8,244,383 3,086,060
Deposits and prepaid expenses 2,714,259 4,878,851
Loans receivable 1,979,435 295,087
Other receivables 127,102 85,099
------------ ------------
Total current assets 17,616,161 11,778,573
------------ ------------

PLANT AND EQUIPMENT, NET 7,177,736 7,413,689
CONSTRUCTION-IN-PROGRESS 9,324,597 6,516,630

OTHER ASSETS:
Long-term prepayments 1,465,000 5,207,117
Intangible assets, net 821,270 899,529
------------ ------------
Total other assets 2,286,270 6,106,646
------------ ------------
Total assets $ 36,404,764 $ 31,815,538
============ ============

LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:
Accounts payable $ 349,706 $ 547,430
Accrued expenses 1,280,547 1,488,575
Short-term loans 952,250 748,170
Short-term loans from shareholders 109,875 308,070
Deposits from customers 258,970 424,266
Taxes payable 2,597,886 212,661
Other payables 86,525 68,398
Shares to be issued to related parties 173,228 95,204
Due to related parties 550,895 242,225
------------ ------------
Total current liabilities 6,359,882 4,134,999
------------ ------------

OTHER LIABILITIES:
Deferred government grant 1,098,750 1,100,250
Warrant liability 2,319,787 -
------------ ------------
Total other liabilities 3,418,537 1,100,250
------------ ------------
Total liabilities 9,778,419 5,235,249
------------ ------------

COMMITMENTS AND CONTINGENCIES

SHAREHOLDERS' EQUITY:
Preferred stock, $0.001 par value, 50,000,000
Series "A" shares authorized and
2,000,000 shares issued and outstanding as
of June 30, 2009 and December 31, 2008
48,000,000 Series "B" shares authorized,
Nil Series "B" shares issued and
outstanding as of June 30, 2009 and
December 31, 2008 2,000 2,000
Common stock, $0.001 par value, 20,000,000
shares authorized, 3,480,014 and 1,866,519
shares issued and outstanding as of June 30,
2009 and December 31, 2008, respectively 3,480 1,867
Paid-in capital 34,435,364 16,347,641
Contribution receivable (19,167,323) -
Statutory reserves 3,311,013 2,952,710
Retained earnings 5,238,885 4,418,464
Accumulated other comprehensive income 2,802,926 2,857,607
------------ ------------
Total shareholders' equity 26,626,345 26,580,289
------------ ------------
Total liabilities and shareholders'
equity $ 36,404,764 $ 31,815,538
============ ============

SKYSTAR BIO-PHARMACEUTICAL COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND OTHER COMPREHENSIVE INCOME
FOR THE THREE MONTHS AND SIX MONTHS ENDED JUNE 30, 2009 and 2008
(Unaudited)

Three months ended Six months ended
June 30, June 30,
2009 2008 2009 2008
------------ ------------ ------------ ------------

REVENUE, NET $ 6,243,438 $ 4,478,194 $ 10,067,004 $ 7,164,548

COST OF REVENUE 2,958,837 2,166,484 4,905,195 3,463,903
------------ ------------ ------------ ------------

GROSS PROFIT 3,284,601 2,311,710 5,161,809 3,700,645
------------ ------------ ------------ ------------

OPERATING EXPENSES:
Research and
development 366,695 119,399 484,047 166,698
Selling expenses 585,207 302,843 792,602 492,687
General and
administrative 625,359 648,591 940,054 902,326
------------ ------------ ------------ ------------
Total
operating
expenses 1,577,261 1,070,833 2,216,703 1,561,711
------------ ------------ ------------ ------------

INCOME FROM
OPERATIONS 1,707,340 1,240,877 2,945,106 2,138,934
------------ ------------ ------------ ------------

OTHER EXPENSE:
Other expense,
net (310) (492,895) (542) (493,258)
Interest expense,
net (788) (355,039) (486) (483,175)
Inducement cost
for debentures
converted - (257,775) - (257,775)
Change in fair
value of
warrants (1,480,484) - (1,442,156) -
------------ ------------ ------------ ------------
Total other
expense, net (1,481,582) (1,105,709) (1,443,184) (1,234,208)
------------ ------------ ------------ ------------

INCOME BEFORE
PROVISION FOR
INCOME TAXES 225,758 135,168 1,501,922 904,726

PROVISION FOR
INCOME TAXES 342,555 261,233 554,075 414,440
------------ ------------ ------------ ------------

NET INCOME (LOSS) (116,797) (126,065) 947,847 490,286

OTHER COMPREHENSIVE
(LOSS) INCOME:
Foreign currency
translation
adjustment (16,233) 456,967 (54,681) 1,226,980
------------ ------------ ------------ ------------

COMPREHENSIVE
INCOME $ (133,030) $ 330,902 $ 893,166 $ 1,717,266
============ ============ ============ ============

EARNINGS (LOSS) PER
SHARE:
Basic $ (0.06) $ (0.07) $ 0.51 $ 0.28
============ ============ ============ ============
Diluted $ (0.06) $ (0.07) $ 0.50 $ 0.27
============ ============ ============ ============

WEIGHTED AVERAGE
NUMBER OF COMMON
SHARES:
Basic 1,869,512 1,836,932 1,868,854 1,780,149
============ ============ ============ ============
Diluted 1,869,512 1,836,932 1,912,216 1,787,032
============ ============ ============ ============