China Kangtai Cactus Biotech Q3 Revenue Up 39% to $13.3M; Q3 Operating Income Up 72% to $5.38M; EPS $0.18; Net Income Up 42% to $4M. YTD Revenue Up 23% to $29.2M; Operating Income Up 71% to $11.26M

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 third quarter of 2011 increased 39% to $13.3 million, compared to $9.5 million in the same period of 2010. Income from operations rose 72% to $5.4 million, compared to $3.1 million in the same period of 2010. Net income for the third quarter of 2011 increased 42% to $3.99 million or $0.18 per diluted share compared to $2.8 million for the same period of 2010, or $0.13 per diluted share.

Third Quarter Highlights

• Revenue for the third quarter of 2011 increased 39% to $13.3 million, up from $9.5 million recorded in the same period of 2010.
• Income from operations increased 72% to $5.38 million, compared to $3.12 million in the third quarter of 2010.
• Net income increased 42% to $3.99 million or $0.18 per diluted share versus $2.8 million in the third quarter of 2010, or $0.13 per diluted share.
• Gross profit margin decreased to 37% compared with 38% in Q3 of 2010 as a result of changes in product mix.

Q3 Product Categories Performance

• Sales of cactus cigarettes were up 266% to $2.4 million, from $0.66 million in Q3 2010.
• Nutraceuticals revenue increased 37% to $4.9 million, up from $3.6 million recorded in Q3 2010.
• Cactus feed increased 56% to $2.1 million, up from $1.4 million recorded in the third quarter of 2010.
• Beverage sales decreased 19% to $3.2 million from $3.9 million recorded in the third quarter of 2010 as the company discontinued certain product lines that were not profitable and no longer competitive.
• Raw & intermediate material increased 2729% to $655,996 from $23,186 recorded in the third quarter of 2010.

Nine Months Financial Highlights

• Revenue for the first nine months of 2011 increased 23% to $29.2 million, up from $23.8 million recorded in the same period of 2010.
• Income from operations increased 71% to $11.3 million, compared to $6.6 million in the first nine months of 2010.
• Net income increased 6% to $8.7 million or $0.39 per diluted share versus $8.2 million or $0.38 per diluted share in the first nine months of 2010.
• Gross profit margin increased to 36% compared with 35% in the first nine months of 2010.

Nine Months Product Categories Performance

• Sales of cactus cigarettes increased 231% to $5.67 million from $1.7 million recorded in the first nine months of 2010.
• Nutraceutical sales revenue increased 30% to $11.36 million, up from $8.7 million in the same period of 2010.
• Raw & intermediate material sales decreased 20% to $1.4 million from $1.7 million recorded in the first nine months of 2010.
• Cactus feed increased 52% to $4.8 million, up from $3.2 million recorded in the first nine months of 2010.
• Beverage sales decreased 29% to $6.0 million from $8.5 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 September 30, 2011, cash and cash equivalents were $5.2 million. Accounts receivable net of allowance was $12.16 million. Net cash provided by operating activities was $1.9 million in the nine months ended September 30, 2011, a decrease from $6.9 million for the same period in 2010. Net cash provided by investing activities was $112,657 in the nine months ended September 30, 2011. As of November 10, 2011, the number of shares of the company’s common stock issued and outstanding was 22,355,527.

Management Comment

China Kangtai CEO Jinjiang Wang said, "We are pleased to report another strong quarter of growth as our cactus product line continues to attract customers. The increase in sales in the third quarter was attributable to the introduction of new products and increased selling prices. Operating expenses for the third quarter was $499,562, an increase of $1,814, compared to $497,748 in the comparable period of 2010. The increase in operating expenses was mainly due to lower professional and consulting fees and research and development expenses, offset by a $99,846 increase in amortization of intangible assets, which resulted from our acquisition of patents and trademarks in 2010.

"Our agreement with Shandong Qingdao Tobacco Company in February is an important milestone for our company, which further increased our profitability this year. The increase in income from operations resulted mainly from increased net revenue from the Shandong Qingdao Cooperative Processing Agreement of $0.93 million this quarter and $2.3 million for the first nine month of 2011.

"Our Cactus feed posted excellent gains in the quarter, with revenues up 56%. Nutraceuticals were up 37% as that category continued to strengthen. We also saw an increase in the sale of raw and intermediate materials by 2,729% as a result of bulk sales of cactus raw materials to pharmaceutical customers. We do not expect to experience this growth rate going forward.

"The continuing decline in revenue from our beverage segment reflects our decision to terminate weak profit beverage products that were no longer competitive in the market. As previously reported, we also sold old beverage machines that were purchased in 2001-2003. Our beverage emphasis now is on dry red wine and cactus juice,” Mr. Wang said.

About China Kangtai Cactus Biotech, Inc.

China Kangtai Cactus Biotech, Inc. is a leading grower, developer, producer, and marketer of cactus-derived products, including nutraceuticals, wine and juice, extracts and powders, cactus cigarette and animal feed. China Kangtai controls over 387 acres of plants and maintains an active R&D group that holds 18 product patents and is seeking another 12. China Kangtai's high-quality "green” products are sold throughout China via a distribution network that covers 12 of China's 23 provinces and two of China's four municipalities. More information may be found at http://www.biocactus.com or via e-mail: chinakangtai@gmail.com.

China Kangtai’s online investor kit, including an investment profile, press releases, current price quotes, stock charts and more is available at http://www.hawkassociates.com/profile/ckgt.cfm. To subscribe to future releases via e-mail alert, visit http://www.hawkassociates.com/about/alert/.

This news release contains forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. Forward-looking statements include statements concerning plans, objectives, goals, strategies, future events or performance, and underlying assumptions and other statements that are other than statements of historical facts. These statements are subject to uncertainties and risks including, but not limited to, product and service demand and acceptance, changes in technology, economic conditions, the impact of competition and pricing, government regulation, and other risks contained in reports filed by the company with the Securities and Exchange Commission. All such forward-looking statements, whether written or oral, and whether made by or on behalf of the company, are expressly qualified by the cautionary statements and any other cautionary statements which may accompany the forward-looking statements. In addition, the company disclaims any obligation to update any forward-looking statements to reflect events or circumstances after the date hereof.