China Kangtai Cactus Biotech Q2 Revenue Up 9% To $9.5M; Q2 Operating Income Up 68% To $3.85M; EPS $0.13; YTD Revenue Up 12% To $15.96M; Operating Income Up 69% To $5.88M

China Kangtai Cactus Biotech Inc. (OTCBB: CKGT), a vertically integrated grower, developer, manufacturer and marketer of a variety of cactus-based products in China, announced today that revenue for the second quarter of 2011 increased 9% to $9.5 million, compared to $8.7 million in the same period of 2010. Income from operations rose 68% to $3.85 million, compared to $2.3 million in the same period of 2010. Net income for the second quarter of 2011 was $2.8 million or $0.13 per diluted share compared to $3.0 million for the same period of 2010, or $0.14 per diluted share. The second quarter results included the impact of the revaluation of Series A Preferred Stock and A, B, C and D warrants with characteristics of liabilities at fair value.

Second Quarter Highlights

• Revenue for the second quarter of 2011 increased 9% to $9.5 million, up from $8.7 million recorded in the same period of 2010.
• Income from operations increased 68% to $3.85 million, compared to $2.3 million in the second quarter of 2010.
• Net income decreased 6% to $2.8 million or $0.13 per diluted share versus $3.0 million in the second quarter of 2010.
• Gross profit margin decreased to 34% compared with 38% in Q2 of 2010 as a result of changes in product mix.
• Sheng Cao brand of new low-nicotine cigarettes was approved for sale to consumers by the Chinese Center for Disease Control and Prevention (China CDC).
• CKGT expanded the use of cactus dry powder to increase raw material revenue streams.

Q2 Product Categories Performance

• Sales of cactus cigarettes were up 155% to $2.1 million, from $0.84 million in Q2 2010.
• Nutraceuticals revenue increased 21% to $3.9 million, up from $3.2 million recorded in Q2 2010.
• Cactus feed increased 32% to $1.8 million, up from $1.3 million recorded in the second quarter of 2010.
• Beverage sales decreased 62% to $1.2 million from $3.2 million recorded in the second quarter of 2010 as the company discontinued certain product lines that were not profitable and no longer competitive.
• Raw & intermediate material increased 226% to $483,868 from $148,447 recorded in the second quarter of 2010.

Six Months Financial Highlights

• Revenue for the first six months of 2011 increased 12% to $15.9 million, up from $14.3 million recorded in the same period of 2010.
• Income from operations increased 69% to $5.88 million, compared to $3.48 million in the first six months of 2010.
• Net income decreased 12% to $4.69 million or $0.21 per diluted share versus $5.35 million or $0.25 per diluted share in the first six months of 2010.
• Net income from Shandong Qingdao cigarettes was $1.4 million for the six months of 2011.
• Gross profit margin increased to 35% compared with 34% in the first six months of 2010.

Six Months Product Categories Performance

• Sales of cactus cigarettes increased 209% to $3.25 million from $1.05 million recorded in the first six months of 2010.
• Nutraceutical sales revenue increased 28% to $6.4 million, up from $5.0 million in the same period of 2010.
• Raw & intermediate material sales decreased 61% to $0.7 million from $1.8 million recorded in the first six months of 2010.
• Cactus feed increased 49% to $2.7 million, up from $1.8 million recorded in the first six months of 2010.
• Beverage sales decreased 37% to $2.9 million from $4.6 million recorded in the same period of 2010 reflecting the company’s discontinuance of certain product lines that were not profitable and no longer competitive.

Liquidity and Capital Resources

As of June 30, 2011, cash and cash equivalents were $4.0 million. Accounts receivable net of allowance was $9.98 million. Net cash provided by operating activities was $979,913 in the six months ended June 30, 2011, a decrease from $6.1 million for the same period in 2010. Net cash provided by investing activities was $111,169 in the six months ended June 30, 2011. As of August 15, 2011, the number of shares of the company’s common stock issued and outstanding was 22,355,527.