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Press release from CNW Group

CHINA HEALTH LABS & DIAGNOSTICS LTD. ANNOUNCES SECOND QUARTER 2010 FINANCIAL RESULTS FOR WHOLE VISION LIMITED

Friday, November 05, 2010

CHINA HEALTH LABS & DIAGNOSTICS LTD. ANNOUNCES SECOND QUARTER 2010 FINANCIAL RESULTS FOR WHOLE VISION LIMITED09:00 EDT Friday, November 05, 2010Net income for the six month period ended June 30, 2010 increased by 50% compared with the same period in 2009Increased sales of new proprietary products drive increase in gross margin to 52% for Q2 2010 compared with 41% for Q2 2009VANCOUVER, Nov. 5 /CNW/ - China Health Labs & Diagnostics Ltd. ("China Health") (TSXV:CHO) is pleased to announce the financial results for the three- and six-month periods for Whole Vision Limited ("Whole Vision" or the "Company") which China Health recently acquired pursuant to its Qualifying Transaction (see China Health's press release dated October 22, 2010).  As the Qualifying Transaction was completed after the 2010 third quarter of both China Health and Whole Vision, the first consolidated financial report will be for the year ended December 31, 2010.  In the interim, China Health has filed Whole Vision's 2010 second quarter financial statements on SEDAR and will file Whole Vision's 2010 third quarter financial statements on SEDAR on or before November 30, 2010.  As previously disclosed, as part of the Qualifying Transaction, China Health changed its year-end to be the same as that of Whole Vision, which is December 31.For the three-month period ended June 30, 2010 revenue decreased 12% to $4.8 million compared to the same period in 2009.  For the six month period ended June 30, 2010 revenue increased by 4.0% to $9.3 million compared to the same period in 2009.  The reduced revenue for the second quarter and flat revenue for the six month period is due to the seasonality of the Whole Vision's business in China, whereby the first quarter is typically the slowest quarter of the year and because in 2009 there were a number of large orders delivered and recognized as revenue in the second quarter.  In addition, while the Company has more than doubled sales of its Point of Care Technology ("POCT") products to the Chinese military in 2010, the delivery and revenue recognition of most of those products was delayed to the third quarter of 2010, with the balance to be delivered and recognized as revenue in the fourth quarter of 2010.  In 2009, Whole Vision generated more than 60% of its gross revenue in the third and fourth quarters.  Whole Vision expects revenue 2010 will follow a similar pattern as 2009, and expects an increase in sales for Q3 and Q4 of 2010 due to its deliveries to rural clinics, military and food testing customers that are scheduled for the second half of 2010.  Gross margin increased to 52% and 42% for the three-month and six-month periods ended June 30, 2010, respectively, compared to 41% and 31% for the same periods in 2009.  The increase in gross margin was due to the increase in the percentage of revenues generated from new proprietary products where Whole Vision has no direct competitors.  China Health intends to expand the business by focusing its efforts on increasing its sales network in three areas where it has proprietary products, limited competition and strong government support in China: rural hospital labs, military and emergency POCT products, and food safety testing applications.Operating expenses for the three- and six-month periods ended June 30, 2010 were slightly lower compared to the same periods in 2009.  Increased research and development expenses for the development of the Company's POCT products for the Chinese military and a small increase in administrative expenses were offset by lower selling costs.  The reduced selling costs were due to a larger percentage of revenues from the military sector where a small sales team has generated larger sales orders.  Operating expenses are expected to increase for the full year of 2010 due to increased resources directed at the rural clinic and food safety customers and expenses related to being a public company.For the three-month period ended June 30, 2010, net income decreased by 4% to $1.1 million compared to the same period in 2009, mostly due to the delay of POCT product deliveries to the Chinese military from the second quarter to the third quarter of 2010.  For the six-month period ended June 30, 2010, net income increased by 50% to $1.5 million compared to the same period in 2009.  In 2009, the Company earned close to 75% of its total annual $3.9 million of net income in the second half of the year.  In 2010, China Health expects a similar pattern with a large percentage of its annual net income expected to be earned in the second half of the year.  "We are very pleased to report a significant increase in gross margin and net income for the first half of 2010 for Whole Vision.  As recently reported, sales to the Chinese military have doubled in the past year, and we expect strong second half sales from rural clinics and food safety customers.  We are still servicing our existing customers in the large urban hospitals, but are also focusing our resources on growing the businesses where we have developed products, services and systems that provide us a sustainable competitive advantages," said Wilson Yao, CEO of China Health.  "We are earning improved margins by delivering real value to our customers."The 2010 second quarter financial statements of Whole Vision are available on the SEDAR website at www.sedar.com.China Health will be hosting a conference call on Monday, November 8, 2010. The purpose of this conference call will be to provide an update of the second quarter results of Whole Vision Limited.  Representing China Health on the conference call will be:Mr. Shiping (Wilson) Yao, President and Chief Executive OfficerMr. Adam Kniec, Chief Financial OfficerMr. Kim Oishi, Member of the Board of DirectorsMr. Chao Zhang, Vice President, FinanceFollowing the update, a question and answer session will be held.  For those wishing to participate, the time and call-in instructions are as follows:DATE:            Monday, November 8, 2010TIME:             10:00am, Eastern TimeParticipant Dial-In Number(s):  North America Toll-Free Dial-In Number:   (888) 231 - 8191  For Toronto and international callers:        (647) 427 - 7450A Taped Replay will be available from 4:00pm Eastern Time on November 8, 2010 to 11:59pm Eastern Time on November 16, 2010.Taped Replay Toll Free Dial-in Number:  1-800-642-1687Taped Replay Local Dial-in Numbers: 416-849-0833Taped Replay Password: 21551485Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.FORWARD LOOKING INFORMATIONThis press release contains forward-looking statements and information that are based on the beliefs of management and reflect China Health's current expectations.  When used in this press release, the words "estimate", "project", "belief", "anticipate", "intend", "expect", "plan", "predict", "may" or "should" and the negative of these words or such variations thereon or comparable terminology are intended to identify forward-looking statements and information.  The forward-looking statements and information in this press release includes information relating to the filing of Whole Vision's third quarter financial statements, the Company's revenues, operating expenses, and annual net income for 2010, the expansion of China Health's sales network and businesses, and the delivery of POCT products in the fourth quarter of 2010.  Such statements and information reflect the current view of China Health with respect to risks and uncertainties that may cause actual results to differ materially from those contemplated in those forward-looking statements and information. By their nature, forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements, or other future events, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements.  Such factors include, among others, the risks that Whole Vision's third quarter financial statements may not be filed by a certain date or filed at all, that the Company's revenues, operating expenses, and annual net income for 2010 may not increase, decrease, change or follow the pattern expected, that the expansion of China Health's sales network and businesses may not proceed as expected or at all, and the delivery of POCT products may be delayed beyond the fourth quarter of 2010 or not be made at all.  China Health cautions that the foregoing list of material factors is not exhaustive.  When relying on China Health's forward-looking statements and information to make decisions, investors and others should carefully consider the foregoing factors and other uncertainties and potential events.  China Health has assumed a certain progression, which may not be realized.  It has also assumed that the material factors referred to above will not cause such forward-looking statements and information to differ materially from actual results or events.  However, the list of these factors is not exhaustive and is subject to change and there can be no assurance that such assumptions will reflect the actual outcome of such items or factors.THE FORWARD-LOOKING INFORMATION CONTAINED IN THIS PRESS RELEASE REPRESENTS THE EXPECTATIONS OF CHINA HEALTH AS OF THE DATE OF THIS PRESS RELEASE AND, ACCORDINGLY, IS SUBJECT TO CHANGE AFTER SUCH DATE.  READERS SHOULD NOT PLACE UNDUE IMPORTANCE ON FORWARD-LOOKING INFORMATION AND SHOULD NOT RELY UPON THIS INFORMATION AS OF ANY OTHER DATE.  WHILE CHINA HEALTH MAY ELECT TO, IT DOES NOT UNDERTAKE TO UPDATE THIS INFORMATION AT ANY PARTICULAR TIME EXCEPT AS REQUIRED IN ACCORDANCE WITH APPLICABLE LAWS.For further information: Kim Oishi Director Telephone: (778) 997-6228 Email: koishi@grandrockcapital.com