China Kangtai Cactus Biotech Q1 Revenue Up 21% to $6.7M; Operating Income Up 72% to $2.0M

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 first quarter of 2011 increased 21% to $6.7 million, compared to $5.5 million in the same period of 2010. Income from operations rose 72% to $2.0 million, compared to $1.2 million in the same period of 2010. Net income for the first quarter of 2011 was $1.9 million or $0.08 per diluted share compared to $2.4 million for the same period of 2010, or $0.11 per diluted share. The first 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.

First Quarter Financial Highlights

• Revenue for the first quarter of 2011 increased 21% to $6.7 million, up from $5.5 million recorded in the same period of 2010
• Income from operations increased 72% to $2.0 million from $1.2 million in the first quarter of 2010.
• Adjusted net income (absent revaluation of Series A Preferred Stock and A, B, C and D warrants) rose 78% to $1.5 million or $0.07 per diluted share versus $0.8 million or $0.04 per diluted share in Q1 2010
• Net income decreased 21% to $1.9 million or $0.08 per diluted share versus $2.4 million in the first quarter of 2010
• Gross profit margin increased to 38% compared with 27% in Q1 of 2010

Q1 Product Categories Performance

• Sales of cactus cigarettes, launched in Q4 2009, increased 524% to $1.3 million, from $212,638 recorded in the first quarter of 2010
• Nutraceuticals revenue increased 40% to $2.5 million, up from $1.8 million recorded in the first quarter of 2010
• Cactus feed increased 96% to $0.9 million, up from $0.5 million recorded in the first quarter of 2010
• Beverage sales increased 20% to $1.7 million, up from $1.4 million recorded in the first quarter of 2010
• Raw & intermediated material decreased 87% to $218,042 million from $1.6 million recorded in the first quarter of 2010

Liquidity and Capital Resources

As of March 31, 2010, cash and cash equivalents were $2.6 million. Accounts receivables net of allowance were $8.7 million. Net cash used by operating activities was $117,372, a decrease from $4.5 million for the same period in 2010. Net cash provided by financing activities was $36,150. As of May 10, 2011, the company’s common stock issued and outstanding was 22,355,527.

Management Comment

China Kangtai CEO Jinjiang Wang said, “Sales of our new cigarette products helped propel us to strong gains in revenue and net income in the quarter. Our low nicotine cactus cigarettes are proved to be very popular with consumers and this is playing a major role in driving our business forward. With the launch of our new low nicotine cigarette in April, we expect that cigarettes will play a major positive role in our financial results for the rest of 2011.

“We also recorded excellent results in cactus feed sales, which were up 96%, and nutraceuticals, our largest product segment, which rose 40%. The decrease in sales of raw and intermediate materials reflected our increased use of raw materials for the production of our own products.

“Income from operations increased 72% to $2 million, compared to $1.2 million in the same period of 2010 reflecting an improved gross profit rate. Operating expenses increased 61% to $481,100, compared to $298,515 in the comparable period of 2010. This was due to an increase in amortization of intangible assets resulting from our acquisition of patents and trademarks in 2010.

“With robust growth in almost all of our major categories, we expect we will continue to report good results, and will have a good year ahead,” 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, nutritious food, health and energy drinks, beer, wine and liquor, extracts and powders, 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.