China Kangtai Cactus Biotech 2009 Revenue Up 31% to $26.5M; Reports Strong Cash Generation From Operations

HARBIN, China--(BUSINESS WIRE)--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 fiscal year ended December 31, 2009 increased 31% to $26.5 million from $20.3 million in 2008.

FY 2009 Highlights

Revenue for 2009 increased 31% to $26.5 million from $20.3 million in 2008.
Gross profit increased 32% to $10.5 million for 2009 from $8.0 million in 2008.
2009 gross margin 40% vs. 39% for 2008.
Income from operations increased 40% to $9.5 million from $6.8 million in 2008.
Net income was $480,000, compared to $5.7 million in 2008. The decrease in net income was caused mainly by the non-cash expense from revaluation of Series A Preferred Stock and A, B, C, and D warrants with characteristics of liabilities at fair values. Absent this expense, the company would have reported net income of $8.4 million; basic earnings per share $0.46 and diluted earnings per share $0.43 in 2009. The company reported $0.30 basic EPS and $.29 diluted EPS in 2008.
Weighted average number of diluted shares outstanding was 19.5 million as of December 31, 2009, compared to 18.6 million as of December 31, 2008.

2009 Product Categories Performance

Nutraceuticals revenue increased 6% from $10.1 million in 2008 to $10.7 million, or 40% of the total 2009 sales.
Beverages revenue increased 73% from $5.4 million in 2008 to $ 9.3 million, or 35% of the total 2009 sales
Raw and intermediate materials segment revenue decreased 8% from $3.8 in 2008 to $3.5 million, or about 13% of the total sales, due to increased usage of China Kangtai’s own finished products.
Cactus feed revenue increased 168% from $860K in 2008 to $2.3 million, or about 10% of the total sales, due to cactus hog feed launched in Q4 2009 after the successful launch of cactus cattle feed and fish feed in July 2008
Packaged foods revenue increased 222% from $119,000 in 2008 to $384,000, or 1% of the total 2009 sales
Cactus cigarettes, launched in Q4 2009, reported revenue of $317,000, or 1% of total sales

Liquidity and Capital Resources

As of December 31, 2009, cash and cash equivalents were $2.9 million. Net cash provided by operating activities was $7.7 million. Net cash used by investing activities was $9.5 million. Net cash provided by financing activities was $255,000.

Company Guidance

The company reiterates its previous guidance in which it stated that based on continued strong demand for its existing products, the company is targeting revenue for the full year 2010 to be nearly $35 million, up over 30% from $26.5 million in 2009.

The above guidance for 2010 is forward-looking and actual results may differ materially. These are the company’s targets and not predictions of actual performance.

Management Comment

China Kangtai CEO Jinjiang Wang said, "Our business performed very well in 2009 as we continued to gain positive sales momentum that helped us generate $7.7 million in cash from operations. Our final results for the year were slightly better than we had anticipated. The increase in sales was attributable to the fact that our products are efficiently marketed and enthusiastically accepted by consumers.

“We were pleased with the solid growth of our nutraceuticals segment, which accounted for 40% of total sales, and the 73% growth of our beverage unit, which now represents 35% of total sales. Our results were also boosted by the rapid growth of other products including packaged foods and cactus feed for livestock and fish, both of which experienced triple-digit growth. We are thrilled at the initial acceptance of our new cigarette products. We expect these health-preserving cigarettes products will make a useful contribution to our operating performance in year 2010.

“We had excellent gains in gross profit. Gross margin was a healthy 40% for year 2009. Our balance sheet continued to strengthen with total assets of $35.7 million, total liabilities of $7 million and total stockholders equity of $28.6 million. This underscores the financial strength of our company, which enables us to continue to grow and build value for our shareholders,” Mr. Wang concluded.

China Kangtai Cactus Bio-Tech Inc. and Subsidiaries
Consolidated Balance Sheets
As of December 31,
				2009		2008

ASSETS
Current Assets
	Cash and cash equivalents			$	2,918,068	$	4,398,897
	Accounts receivable, net of allowance for doubtful accounts of $1,006,597 and $979,700, respectively		2,283,257				3,869,985
	Inventories				2,440,904		3,376,635
	Prepaid expenses				1,265		1,005
	Other receivables				3,992,562		-
Total Current Assets					11,636,056		11,646,522

Property, plant and equipment, net of accumulated depreciation of $2,112,093 and $1,649,662, respectively			5,750,876				6,236,914

Other Assets
	Intangible assets, net of accumulated amortization of $1,054,531 and $920,040, respectively				316,300		454,445
	Land use rights, net of accumulated amortization of $473,151 and $289,941, respectively				17,981,834		8,609,491

Total Assets				$	35,685,066	$	26,947,372
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
	Accounts payable and accrued liabilities			$	311,417	$	315,639
	Note payable				885,115		887,475
	Taxes payable				789,141		570,855
	Other payable				5,042		-
Total Current Liabilities					1,990,715		1,773,969

Estimated liability for equity-based financial instruments with characteristics of liabilities:
	Designated as Series A convertible Preferred Stock (50,000 shares issued and outstanding at December 31, 2009)				135,500		-
	Warrants				4,922,860		-
	Total				5,058,360		-

Total Liabilities					7,049,075		1,773,969

Commitments and Contingencies					-		-

Stockholders' Equity
	Preferred stock, par value $.001 per share; authorized 200,000,000 shares; issued and outstand: 50,000 and 1,150,000 shares, respectively				-		1,150
	Common stock, par value $.001 per share; authorized 200,000,000 shares,
	issued or issuable and outstanding: 20,024,024 and 17,885,625 shares, respectively				20,024		17,886
	Additional paid-in capital				11,003,276		7,819,865
	Retained earnings
		Appropriated			3,881,804		2,682,345
		Unappropriated			10,903,711		11,604,285
	Accumulated other comprehensive income				2,827,176		3,047,872
Total stockholders' equity					28,635,991		25,173,403
Total Liabilities and Stockholders' Equity				$	35,685,066	$	26,947,372

	China Kangtai Cactus Bio-Tech Inc. and Subsidiaries
	Consolidated Statements of Operations and Comprehensive Income
For The Years Ended December 31,


			2009			2008


Net Sales		$	26,537,356		$	20,300,583
Cost of Sales			(16,016,434	)		(12,307,303	)
Gross Profit			10,520,922			7,993,280

Operating Expenses
	Selling expenses		249,083			214,285
	Provision for reserve for allowances, returns and doubtful accounts		26,897			136,125
	General and administrative expenses		464,697			543,929
	Depreciation		77,323			77,015
	Amortization of land use rights		38,165			73,761
	Amortization of intangible assets		137,227			134,924
Total operating expenses			993,392			1,180,039
Income from Operations			9,527,530			6,813,241

Other Income (Expense)
	Interest income		69			838
	Imputed interest expense		(53,219	)		(52,326	)
	Expense from revaluation of Series A Preferred Stock and A, B, C, and D warrants with characteristics of liabilities at fair values		(7,926,182	)		-
	Net gain (loss) on disposal of property, plant and equipment		495,348			(14,323	)
	Total Other Income (Expenses)		(7,483,984	)		(65,811	)
Income before Income Tax			2,043,546			6,747,430
Income tax expense			(1,563,421	)		(1,065,930	)
Net Income			480,125			5,681,500
	Deemed dividends relating to the beneficial conversion feature included in the
	sale of the Series A preferred stock and warrants		-			(322,750	)
Net Income Attributable to Common Stockholders		$	480,125		$	5,358,750

Net Income Per Common Share
	Basic	$	0.03		$	0.30
	Diluted	$	0.02		$	0.29

Weighted Average Number of Common Shares Used to Compute Earnings per Common Share:
	Basic		18,304,775			17,767,461
	Diluted		19,469,714			18,597,561

Comprehensive Income:
	Net income	$	480,125		$	5,681,500
	Foreign currency translation adjustment		(220,696	)		1,309,246
	Comprehensive Income	$	259,429		$	6,990,746

China Kangtai Cactus Bio-Tech Inc. and Subsidiaries
Consolidated Statements of Cash Flows
For the Years Ended December 31,

			2009			2008

Cash Flows from Operating Activities
	Net income		$	480,125		$	5,681,500
	Adjustments to reconcile net income
		to net cash provided by operating activities:
		Expense from revaluation of Series A Preferred Stock and A, B, C, and D warrants with characteristics of liabilities at fair values		7,926,182			-
		Provision for reserve for allowances, returns and doubtful accounts		26,897			136,125
		Net (gain) loss on disposal of property, plant and equipment		(495,348	)		14,323
		Depreciation - cost of sales		392,999			408,351
		Depreciation - operating expenses		77,322			77,015
		Amortization of land use rights -cost of sales		146,200			-
		Amortization of land use rights- operating expenses		38,165			73,761
		Amortization of intangible assets		137,227			134,924
		Issuance of shares in consideration for the waiver of liquidated damages		-			26,680
		Stock option expense		32,118			90,635
		Imputed interest		53,219			52,326
	Changes in operating assets and liabilities:
		Accounts receivable, net		1,532,934			30,059
		Prepaid expenses		(260	)		19,232
		Other receivables		(3,747,926	)		-
		Inventories		935,731			2,717,320
		Accounts payable and accrued liabilities		(4,222	)		(37,452	)
		Taxes payable		218,286			251,706
Net cash provided by operating activities				7,749,649			9,676,505
Cash Flows from Investing Activities
	Purchases of land use rights			(9,710,926	)		(7,186,778	)
	Net proceeds from disposals of property, plant and equipment			495,348			2,546
	Advances to related party			(244,636	)		-
Net cash (used for) investing activities				(9,460,214	)		(7,184,232	)
Cash Flows from Financing Activities
	Proceeds from related party			5,042			-
	Cash exercise of A warrants			250,000			-
	Sale of Series A preferred stock-net			-			720,922
Net cash provided by financing activities				255,042			720,922
Effect of exchange rate changes on cash and cash equivalents				(25,306	)		675,801
Increase (decrease) in cash and cash equivalents				(1,480,829	)		3,888,996
Cash and cash equivalents, beginning of period				4,398,897			509,901
Cash and cash equivalents, end of period				2,918,068			4,398,897

Supplemental disclosures of cash flow information:
	Interest paid		$	-		$	-
	Income taxes paid		$	1,419,189		$	814,224

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.