China Kangtai Cactus Bio (PINK:CKGT)

HARBIN, China--(BUSINESS WIRE)--China Kangtai Cactus Biotech Inc. (“China Kangtai”) (OTCBB: CKGT), a vertically integrated grower, developer, manufacturer and marketer of a variety of cactus-based products in China, announced today that the company has launched a new nutraceutical product, “Cactus Zhi Kang.”

Prior to the full launch of Cactus Zhi Kang, the company began marketing trials at the end of 2011 that showed excellent acceptance from consumers. The new nutraceutical product is expected to generate approximately US $2.5 to $3.0 million in sales in 2012.

The new product, which blends cactus with other Chinese herbal ingredients in tablet form, contains several vitamins and minerals such as vitamin C and vitamin E, which are associated with reduced cholesterol and lipoprotein levels. Research has indicated that reduced cholesterol and lipoprotein levels can help reduce problems associated with thrombus, arteriosclerosis, fatty liver and cardiovascular disease.

China Kangtai CEO Jinjiang Wang said, “The new cactus based Nutraceutical product demonstrates our research capability and our ability to develop new products popular with consumers that will help further penetrate the enormous Chinese herbal medicine market. In some areas of Asia, 80% of the population depends on traditional medicine for primary health care. The demand of herbal medicine continues to grow rapidly in China. We believe that our new product 'Cactus Zhi Kang' will be accretive to earnings and will further contribute to an increase in shareholder value.”

In the first nine months of 2011, nutraceuticals represented nearly 39% of total company sales. During that period, sales of nutraceuticals rose 30% from $8.7 million to $11.4 million.

Third Quarter 2011 Results

• 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.

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.

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 it has signed sales agreements with Apollo Duty Free Shop GMBH and Tobosst Duty Free Shop GMBH, two of the biggest duty-free stores in Frankfurt, to sell Kangtai’s cactus-based “Sheng Cao” cigarettes in Germany.

The company has completed market surveys in Frankfurt and received positive consumer feedback. China Kangtai also invited several German tobacco dealers to help the company improve the taste and smell of “Sheng Cao” to enhance its quality. The company signed the agreements with the two duty-free companies in August and expects new revenue from the German market will be approximately 2.7 million EUR annually (approximately $3.7 million USD). Kangtai has initiated discussions with these two companies about possible sales of cactus powder and neutraceuticals.

Apollo is one of the largest professional duty-free companies in Germany and represents well-known European brands. Apollo’s retail store located at Romerberg serves 100,000 customers annually and has monthly sales of around one million EUR (approximately $1.4 million USD). Tobosst’s retail stores, along the Main River, sell luxury products such as watches, furniture, and tobacco products and have annual revenue over 10 million EUR (approximately $14 million USD).

China Kangtai CEO Jinjiang Wang said, “Expanding our market to Europe is an important step for our company. Besides the expected increase in cigarette revenue, this milestone for our company attests to the high quality of our products and demonstrates that Kangtai’s strong sales and promotion team has great potential to further penetrate the European markets and add new revenue streams that will increase the value of our company.

Second Quarter 2011 Results

• 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.

“Earlier this month we announced our new 'Tai Shan Sheng Chao' cigarette that we have co-developed with China Tobacco Shandong. Initial product samples are already being produced by Shandong Jinan Tobacco Company, a subsidiary of China Tobacco Shandong. This new cigarette has been developed primarily for the Russian market, with cactus ingredients specially blended to appeal to this audience. We have a high degree of confidence in the success of this new product.”

“Our Nutraceuticals posted excellent gains in the quarter, with revenues up 21%. Cactus feed sales grew even faster, and were up 32%. We also saw an increase in the sale of raw and intermediate materials by 226% as a result of increased production stemming from crop rotation. But we do not expect this growth rate to be consistent going forward.”

“The decline in revenue from our beverage segment reflects our decision to terminate weak profit beverage products that were no longer competitive in the market. We also sold old beverage machines that were purchased in 2001-2003. Our beverage emphasis now is on dry red wine and cactus juice. Looking forward, we expect revenue from our beverage segment to be about 20% to 25% of total revenue,” Mr. Wang said.

CENTER VALLEY, Pa., Aug. 2, 2011 /PRNewswire/ -- TechPrecision Corporation (OTC Bulletin Board: TPCS) ("TechPrecision", or "the Company"), an industry leading manufacturer of precision, large-scale fabricated and machined metal components and systems with customers in the alternative energy, cleantech, medical, nuclear, defense, aerospace and other commercial industries, today announced that it has received orders for more than $4 million in new contracts from existing defense industry customers. These orders will ship during the next 12 months.

"We continue to benefit from a more strategic approach, partnering with new and existing customers to support their roadmaps and requirements, and these orders reflect our continuing success," commented James Molinaro, CEO of TechPrecision Corporation. "In addition, we recently qualified our manufacturing facility in Massachusetts to perform a broader spectrum of work for key defense customers. These qualifications serve to expand and diversify our opportunities for new and follow-on business in the defense sector. Our focus, corporate-wide, is on diversifying and growing our revenues, and these orders further prove that we are achieving those goals."

Mr. Molinaro continued, "We also look forward to bringing our new gantry mill on-line later this year, which will enable us to provide solutions for the defense sector on an even larger scale than our current tool set."

First Quarter Results:

• 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

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.

"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.

China Kangtai Cactus Biotech Inc. said today that it stands by its 10-k financial reports with the SEC. The statement was given in response to a bulletin board posting alleging differences between the company’s Chinese SAIC filings and filings with the U.S. Securities and Exchange Commission.

China Kangtai CEO Jinjiang Wang said, "It is a well-known fact that there is rarely consistency between Chinese SAIC filings and U.S. SEC filings. Non-matching PRC and U.S. financial statements do not automatically indicate fraud or understatements of our real financial results. The SAIC reports are not consolidated nor do they use the same accounting standard as our SEC reports. We have three operating subsidiaries in China. It would be misleading to use only one SAIC report to match our SEC financial reports. Our SAIC reports were prepared in accordance with pertinent SAIC rules and policies. We stand by our numbers."

Fourth Quarter Results:

• Revenue for the fourth quarter of 2010 increased 44% to $12.3 million, up from $8.5 million in the same period of 2009
• Net income rose 959% to $3.6 million or $0.18 per diluted share versus a loss of $0.42 million in the fourth quarter of 2009
• Adjusted net income (excluding the reclassification of Series A preferred Stock and A, B, C and D warrants) rose 7% to $3.6 million or $0.17 per diluted share versus $3.3 million or $0.17 per diluted share in Q4 2009
• Gross profit margin increased to 42% compared to 39% in Q4 of 2009
• Income from operations increased 42% to $4.7 million from $3.3 million in Q4 2009

China Kangtai CEO, Jinjiang Wang, said, "2010 was a highly successful year for our company with significant improvement in our financial results. Our cactus cigarette, cactus feed and beverage and nutraceutical products all showed strong improvement. Revenue from the sale of cactus feed increased 99% reflecting the value of the cactus patent that we acquired in early 2010. The significant increase in total revenue was attributable to our efficient product marketing and increased customer acceptance."

In an open letter to shareholders, China Kangtai Cactus CEO Mr. Jinjiang Wang said, “We are nearing the end of our most successful year ever. Our profitable growth is accelerating as Chinese consumers and farmers increase their use of our cactus products.

• Fourth quarter revenue will reach a record $12.2 million. This will represent a revenue gain of 43% over revenue of $8.5 million in 2009.

• For the year, we are anticipating revenue of $36.0 million, a gain of 35% over 2009 revenue of $26.5 million.

• Although we are not yet prepared to provide specific EPS guidance for the quarter, we can point out that earnings per share in the first nine months of 2010 were $0.38 per diluted share and we currently expect good profitability in the fourth quarter.

“This shows that our valuation is extremely low and represents exceptional value for investors. The average P/E for fast growing profitable Chinese companies trading on the U.S. capital markets is approximately 8.85. Our current trailing twelve-month price to earnings ratio is 3.78.

“Our company generated cash flow from operations for the nine months of $6.9 million. We fully expect this to increase because we completed the $8 million patent payment at the end of August and our operating margins should remain in the 33% range.

“Our growth is driven by several important factors. Our cigarette business is growing even faster than we originally expected. For the first nine months cigarette revenue was $1.7 million up from $42,000 in the first nine months of 2009. In the third quarter of 2010, cigarette revenue was nearly $660,000. We believe we are going to continue to see robust growth in this segment of our business.

“Our other two strong growth segments are cactus feed, which was up 67% in the third quarter and beverages, still our largest segment, which was up 37% in the third quarter to $3.9 million. Our ability to continue to scale up our various business segments is positive,” Mr. Wang said.

• Sales for the three months ended September 30, 2010 totaled $9,522,875, an increase of $1,335,478, or 16% compared to the sales of $8,187,397 for the three months ended September 30, 2009.

• Net income totaled $2,807,217 for the three months ended September 30, 2010, an increase of $2,523,514, as compared to $283,703 in the same period of 2009. The increase in net income was caused partially by the income and loss from revaluation of Series A Preferred Stock and A, B, C, and D warrants with characteristics of liabilities at fair values.

Absent this income, the Company would have had a net income of $2,301,912 and basic and diluted earnings per common share would have been $0.11 and $0.11 for the three months ended September 30, 2010.

Absent the revaluation loss of $2,738,135 and the reduction in reserve for allowance, returns and doubtful account, the Company would have had a net income of $2,529,632 and basic and diluted earnings per common share would have been $0.14 and $0.13 for the three months ended September 30, 2009.

Second Quarter Financial Highlights 

• Revenue for the second quarter increased 34% to $8.7 million, up from $6.5 million recorded in the second quarter of 2009
• Net income rose 989% to $3 million of $0.14 per diluted share versus loss of $337,486 in Q2 2009.
• Adjusted net income (absent revaluation of Series A preferred Stock and A, B, C and D warrants) rose 10% to $1.6 million of $0.07 per diluted share versus $1.4 million or $0.07 per diluted share in Q2 2009
• Gross profit margin was 38% compared with 42% in the second quarter of 2009.
• Income from operations increased 25% to $2.3 million from $1.8 million in the second quarter of 2009.
• Weighted average number of diluted shares outstanding was 22.1 million as of June 30, 2010 compared with 19 million as of June 30, 2009

China Kangtai CEO Jinjiang Wang said, "The second quarter of 2010 was an exciting period for us. We achieved excellent sales levels in our cactus feed, beverage, cactus cigarette and nutraceutical segments. Revenue attributed to cactus feed increased 322% compared to the same period of 2009. Cigarette sales increased 294% from the first quarter of 2010. Significant growth resulted from the fact that our company’s products are efficiently marketed and well accepted by consumers. Another major factor is the feed patent bought last year, which provided us opportunities to further penetrate feed market.

“The decease in sales of raw and intermediated materials and packaged foods resulted from the changing of our product mix. The increase in cost of sales and decrease in gross profit rates was primarily attributable to the increased sales of our cactus feed products, which has gross profit rate of 17%.”

“Our newly acquired tobacco plant, which has the capacity to produce 260 million cigarettes a year, is an excellent opportunity for us our further expand this segment. Strong cactus cigarette revenue increases in the first half of year underscored the growing demand for our product. We anticipate cactus cigarettes revenue will continue to rise for the second half of the year,” Mr. Wang said.

The quarter's results highlights one of the concerns we had in our May 24 ,2010 research note:

 Operating income grew at a lesser rate than sales

Product mix played led to decreased margins:

"Sales of raw and intermediate materials were up 170% to $1.6 Million. This had a negative impact on our gross margin because the gross profit rate for raw and intermediate materials is about 11%, compared with substantially higher margins in the other two categories."

Management did not indicate if this situation would change. We can make the assumption that it will, but we need to hear it from the company. Maybe this is a clue to management's own margin uncertainties and lack of net income guidance?

This issue remains open.