8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act 1934

Date of Report (date of earliest event reported): August 11, 2008

American Oriental Bioengineering, Inc.

(Exact name of registrant as specified in charter)

Nevada

(State or other jurisdiction of incorporation)

0-29785	84-0605867
(Commission File Number)	(IRS Employer Identification No.)

No. 4018, Jintian Road, Anlian Plaza

12 F Suite B02, Futian District

Shenzhen, PRC 518026

(Address of principal executive offices and zip code)

011-86-451-8666-6601

(Registrant’s telephone number including area code)

(Registrant’s former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of registrant under any of the following provisions:

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12(b) under the Exchange Act (17 CFR 240.14a-12(b))

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 2.02 Results of Operations and Financial Condition.

On August 11, 2008, American Oriental Bioengineering Inc. (the “Company”) issued a press release and hosted a conference call during which the Company’s operating results for the second quarter of 2008 was discussed. A copy of the press release is attached hereto as Exhibit 99.1.

Item 9.01 Financial Statements and Exhibits.

Exhibit No.	Description
99.1	American Oriental Bioengineering Reports Second Quarter 2008 Financial Results — Revenue Increased 74.0% to $59.0 Million in 2Q08 — — 2Q08 Net Income Increased 43.4% to $13.9 Million — — 2Q08 Diluted EPS $0.18 versus 2Q07 Diluted EPS $0.15 —

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

AMERICAN ORIENTAL BIOENGINEERING INC.
By:	/s/ Tony Liu
Name:	Tony Liu
Title:	Chairman and Chief Executive Officer

Dated: August 14, 2008

Exhibit Index

Exhibit No.	Description
99.1	American Oriental Bioengineering Reports Second Quarter 2008 Financial Results — Revenue Increased 74.0% to $59.0 Million in 2Q08 — — 2Q08 Net Income Increased 43.4% to $13.9 Million — — 2Q08 Diluted EPS $0.18 versus 2Q07 Diluted EPS $0.15 —

EX-99.1

Exhibit 99.1

American Oriental Bioengineering Reports

Second Quarter 2008 Financial Results

— Revenue Increased 74.0% to $59.0 Million in 2Q08 —

— 2Q08 Net Income Increased 43.4% to $13.9 Million —

— 2Q08 Diluted EPS $0.18 versus 2Q07 Diluted EPS $0.15 —

New York, August 11, 2008 — American Oriental Bioengineering, Inc. (NYSE: AOB) , a pharmaceutical company dedicated to improving health through the development, manufacture and commercialization of a broad range of prescription and over the counter (“OTC”) products in China, today announced financial results for the quarter ended June 30, 2008.

Revenue in the second quarter of 2008 increased 74.0% year over year to $59.0 million from $33.9 million, reflecting a continued increase in demand for the Company’s OTC and prescription pharmaceutical products. Revenue from pharmaceutical products increased 91.5% to $49.8 million from $26.0 million in the second quarter of 2007. Revenue from OTC pharmaceutical products increased 102.9% to $29.4 million from $14.5 million in the prior year’s second quarter, reflecting continued recognition of the Company’s new products supported by effective marketing campaigns. Sales generated by CCXA and Boke, which were not subsidiaries in the second quarter of 2007, were major contributors to the increase in OTC sales and generated a combined $13.4 million of revenue during the second quarter of 2008. Strong sales of the Jinji series and Jinji Yimucao products also contributed to the increase in OTC revenue during the second quarter of 2008. Prescription pharmaceutical products generated $20.4 million in revenue during the second quarter of 2008, a 77.2% year over year increase, driven by sales of Shuanghuanglian Injection Powder and Cease Enuresis Soft Gel. We believe that our continous marketing efforts, increased brand recognition and effective pricing strategy, as well as expanding rural market coverage drove prescription pharmaceutical revenue performance during the second quarter of 2008. Nutraceutical product revenue increased approximately 17% to $9.2 million in the second quarter of 2008 from $7.9 million in the prior year’s period, and decreased as a percentage of total revenue to approximately 15.6% versus 23.3% in the comparable period. The increase in Nutraceutical revenue was mainly attributed to the increase in sales of peptide tablets and peptide powder. The Company continues to focus on selling and marketing higher growth pharmaceutical products.

Gross profit in the second quarter of 2008 increased 69.1% to $40.1 million from $23.7 million in the second quarter of 2007. Gross margin was approximately 67.9%, compared to 69.9% in the prior year’s period, reflecting a shift in product mix.

For the second quarter of 2008, operating expenses increased 75.5% to $21.4 million from $12.2 million in the comparable period of 2007. The increase in operating expenses was primarily due to increases of $3.8 million in sales and marketing expenses, $2.7 million in general and administrative expenses as well as additional depreciation and amortization costs due to the Boke and CCXA acquisitions. Income from operating in the second quarter of 2008 increased 62.4% to $18.7 million from $11.5 million in the second quarter of 2007, while operating margin was 31.7%, compared to 33.9% in the second quarter of the prior year.

Net income for the second quarter of 2008 increased 43.4% to $13.9 million, or $0.18 per diluted share, compared to $9.7 million, or $0.15 per diluted share, in the prior year’s period. Net income for the second quarter of 2008 includes the impact of $0.6 million in loss from unconsolidated entities, related to the Company’s minority ownership in China Aoxing. Diluted share count in the second quarter of 2008 was 78.2 million, compared to 66.6 million in the second quarter of 2007.

Mr. Tony Liu, Chairman and Chief Executive Officer of American Oriental Bioengineering, commented “We are very pleased with our financial performance in the second quarter of 2008. All of our product categories exhibited strong sales and we believe that our performance is the result of promoting effective marketing and branding of our products and the expansion into rural markets. We believe that our six month performance speaks to the effectiveness of our acquisition strategy. For the six month period in 2008, OTC revenue was up 117% versus the year before, with $23.4 million of incremental revenue from CCXA and Boke integrations. We also generated $28.4 million of operating cash flow, an increase of 77.3% from the same period of last year.”

Mr. Liu concluded, “We continue to anticipate revenue growth in 2008 of at least 50 percent, and expect to reach total revenue of at least $245.0 million in the full year 2008. This anticipated year over year top line growth reflects continued demand for our leading products, and particularly our success with CCXA and Boke integrations. We also anticipate net income performance of at least $62.0 million, which reflects anticipated year over year net income growth of more than 44%. This full year financial guidance excludes interest expense related to the July 2008 convertible financing and excludes the financial impact of any pending acquisitions or LOIs. On that note, we remain dedicated to our goal of building a leading pharmaceutical business in China. Today we have signed an LOI and we are in the process of negotiating a large acquisition of a pharmaceutical distribution company located in China, which we believe will bolster the reach of our distribution network. We intend to move quickly and efficiently on the acquisition front and we’ll strive to work responsibly and aggressively on behalf of our shareholders.”

The Company will hold a conference call at 5:00 pm ET on August 11, 2008 to discuss its fiscal second quarter 2008 results. Listeners may access the call by dialing 1-800-599-9816 or 1-617-847-8705 for international callers, access code: 41757592. A webcast will also be available through AOB’s website at www.bioaobo.com. A replay of the call will be available through August 18, 2008. Listeners may access the replay by dialing 1-888-286-8010 or 1-617-801-6888 for international callers, access code: 95123746.

About American Oriental Bioengineering Inc.

American Oriental Bioengineering Inc. is a pharmaceutical company dedicated to improving health through the development, manufacture and commercialization of a broad range of prescription and over the counter products in China.

Statements made in this press release are forward-looking and are made pursuant to the safe harbor provisions of the Securities Litigation Reform Act of 1995. Such statements involve risks and uncertainties that may cause actual results to differ materially from those set forth in these statements. The economic, competitive, governmental, technological and other factors identified in the Company’s filings with the Securities and Exchange Commission, including the Form 10-Q for the quarter ended June 30, 2008, may cause actual results or events to differ materially from those described in the forward looking statements in this press release. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether because of new information, future events, or otherwise.

Contact Information:

Anindya Chatterjee

Chief Strategy Officer

(212) 786-7566

Ashley M. Ammon

Integrated Corporate Relations

(203) 682-8200

AMERICAN ORIENTAL BIOENGINEERING, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

ASSETS

	JUNE 30, 2008 (UNAUDITED)		DECEMBER 31, 2007
CURRENT ASSETS
Cash and cash equivalents	$	144,473,275	$	166,410,075
Accounts receivable, net of reserve of $176,962 and $302,270 at June 30, 2008 and December 31, 2007, respectively		17,332,076		16,494,619
Inventories, net		18,968,955		12,264,536
Advances to suppliers		2,984,896		4,309,352
Notes receivable		691,872		2,259,616
Refundable deposit		6,368,222		—
Other current assets		534,169		5,134,118
Total Current Assets		191,353,465		206,872,316
LONG-TERM ASSETS
Plant and equipment, net		50,561,819		48,496,760
Land use rights, net		48,732,647		46,310,240
Deposit for long-term assets		34,852,986		—
Construction-in-progress		776,947		755,614
Deferred tax assets		1,866,111		1,498,481
Other intangible assets, net		26,232,600		26,972,166
Goodwill		22,566,768		22,566,768
Investment and advances in unconsolidated entities		19,318,730		242,551
Other long-term assets		290,000		—
Total Long-Term Assets		205,198,608		146,842,580
TOTAL ASSETS	$	396,552,073	$	353,714,896

LIABILITIES AND SHAREHOLDERS’ EQUITY

	JUNE 30, 2008 (UNAUDITED)		DECEMBER 31, 2007
CURRENT LIABILITIES
Accounts payable	$	4,671,462	$	3,436,352
Other payables and accrued expenses		8,281,952		7,786,157
Taxes payable		3,766,436		2,843,719
Short-term bank loans		6,694,025		6,289,222
Current portion of long-term bank loans		2,958,324		2,374,565
Other liabilities		2,711,988		3,621,030
Deferred tax liabilities		358,529		109,733
Total Current Liabilities		29,442,716		26,460,778
LONG-TERM LIABILITIES
Long-term bank loans, net of current portion		828,879		1,263,483
Long-term notes payable		296,668		286,365
Deferred tax liabilities		16,713,352		12,621,180
Total Long-Term Liabilities		17,838,899		14,171,028
TOTAL LIABILITIES		47,281,615		40,631,806
COMMITMENTS
SHAREHOLDERS’ EQUITY
Preferred stock, $0.001 par value; 2,000,000 shares authorized; 1,000,000 shares issued and outstanding at June 30, 2008 and December 31, 2007, respectively		1,000		1,000
Common stock, $0.001 par value; 150,000,000 shares authorized; 78,249,264 and 77,991,935 shares issued and outstanding at June 30, 2008 and December 31, 2007, respectively.		78,249		77,992
Common stock to be issued		182,332		1,611,333
Additional paid-in capital		195,253,082		193,007,987
Retained earnings (the restricted portion of retained earnings is $15,910,685 at June 30, 2008 and December 31, 2007, respectively)		125,399,613		102,117,792
Accumulated other comprehensive income		28,356,182		16,266,986
Total Shareholders’ Equity		349,270,458		313,083,090
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	396,552,073	$	353,714,896

AMERICAN ORIENTAL BIOENGINEERING, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND

COMPREHENSIVE INCOME (UNAUDITED)

	THREE MONTHS ENDED JUNE 30,					SIX MONTHS ENDED JUNE 30,
	2008			2007		2008			2007
REVENUES	$	59,010,005		$	33,913,234	$	97,778,603		$	59,662,608
COST OF GOODS SOLD		18,928,447			10,210,485		31,406,083			18,240,539
GROSS PROFIT		40,081,558			23,702,749		66,372,520			41,422,069
Selling and marketing		7,687,892			3,886,564		12,717,600			6,590,035
Advertising		7,452,231			5,412,510		11,846,572			9,237,855
General and administrative		5,253,274			2,557,805		9,165,957			5,495,949
Depreciation and amortization		1,010,461			341,562		1,987,671			675,836
Total operating expenses		21,403,858			12,198,441		35,717,800			21,999,675
INCOME FROM OPERATIONS		18,677,700			11,504,308		30,654,720			19,422,394
EQUITY IN EARNINGS (LOSS) FROM UNCONSOLIDATED ENTITIES		(640,008	)		3,888		(641,067	)		11,000
INTEREST INCOME (EXPENSE), NET		(30,616	)		43,048		(13,769	)		17,238
OTHER INCOME (EXPENSE), NET		(255,770	)		56,952		(356,502	)		131,958
INCOME BEFORE INCOME TAXES		17,751,306			11,608,196		29,643,382			19,582,590
INCOME TAXES		3,891,614			1,939,825		6,361,562			3,464,773
NET INCOME		13,859,692			9,668,371		23,281,820			16,117,817
OTHER COMPREHENSIVE INCOME
Foreign currency translation gain, net of tax		5,154,761			1,468,243		12,089,196			2,279,042
TOTAL OTHER COMPREHENSIVE INCOME, NET OF TAX		5,154,761			1,468,243		12,089,196			2,279,042
COMPREHENSIVE INCOME	$	19,014,453		$	11,136,614	$	35,371,016		$	18,396,859
NET INCOME PER SHARE
BASIC	$	0.18		$	0.15	$	0.30		$	0.25
DILUTED	$	0.18		$	0.15	$	0.30		$	0.24
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING
BASIC		78,223,659			65,144,311		78,207,405			64,877,916
DILUTED		78,223,659			66,600,080		78,208,181			66,483,294