China Shenghuo 2011 total revenue increases 35% to $44.2 million

China Shenghuo Pharmaceutical Holdings, Inc. (NYSE Alternext US: KUN) ("China Shenghuo" or the "Company"), today reported financial results for the year ended December 31, 2011.

Full Year 2011 Highlights

• Total revenue was approximately $44.2 million, an increase of 35% from approximately $32.7 million for the year 2010.
• Gross profit as a percentage of revenues was approximately 61.5%, as compared to 65.8 % in 2010.
• Net income attributable to stockholders was approximately $0.1 million, as compared to approximately $1.2 million for the year ended December 31, 2010.
• The stockholder's equity was approximately $2.1 million as of December 31, 2011.

Full Year 2011 Results

Sales: Sales for the year ended December 31, 2011 were approximately $44.2 million, an increase of approximately $11.5 million, or 35%, from approximately $32.7 million for the year ended December 31, 2010. The increase in sales was primarily due to the Company's main product Xuesaitong's sales increasing in Tianjin City, Jiangsu, Guangdong and Yunnan Province as Xuesaitong was listed on the PIC list of Tianjin City since the second half year in 2010 and the Company strengthened sales promotion in the provinces and cities where Xuesaitong was listed on their PIC lists, especially Yunnan Province and Tianjin City. The OTC market also contributed part of increase of revenue as the Company also strengthened the OTC market development in 2011.

Cost of sales: Our cost of sales for the year ended December 31, 2011 was approximately $17.0 million, an increase of approximately $5.8 million, or 52%, from approximately $11.2 million for the year ended December 31, 2010. The increase in cost of sales was due to the increase of the sales volume and the purchase price of Sanqi which is the main raw material of our main product Xuesaitong. Although we have started to grow Sanqi within the Resort, we will not be able to harvest until 2014 because it has a three year growth cycle. In addition, the Zhonghuang Hotel began trial operation since January 2011 which has contributed $2.3 million to the increase of cost of sales.

Gross profit: Our gross profit for the year ended December 31, 2011 was approximately $27.2 million as compared with approximately $21.5 million for the year ended December 31, 2010. Gross profit as a percentage of revenues was approximately 61.5% for the year ended December 31, 2011, a decrease of 4.3% from 65.8 % for the year ended December 31, 2010. The decrease in gross profit percentage was primarily due to the increase of cost of sales set forth above.

Selling expenses: Selling expenses were approximately $19.8 million for the year ended December 31, 2011, an increase of approximately $4.1 million, or 26%, from approximately $15.7 million for the year ended December 31, 2010. The primary reason for the increase in selling expenses was due to increase of sales commission to sales representative in line with the sales increment.

We reimburse the sales representatives their selling and marketing expenses when they submit the appropriate documentation to be reimbursed. We reimburse the sales representatives their accrued selling expenses when related accounts receivable are collected.

General and administrative expenses: General and administrative expenses were approximately $5.0 million for the year ended December 31, 2011, an increase of approximately $1.4 million, or 38%, from approximately $3.6 million for the year ended December 31, 2010. The increase was primarily due to the increase of the management's traveling expenses and conference expenses for expanding our sales channel. In addition, Zhonghuang Hotel began trial operation since January 2011 which has contributed approximately $0.5 million to the increase of general and administrative expense.

Research and development expenses: Research and development expense for the year ended December 31, 2011 was approximately $0.71 million as compared to approximately $0.66 million for the year ended December 31, 2010. The increase was primarily due to the expenditures in 2011 for the Phase I clinical test of Sh1002 in America which amounted to $303,335.

Net other expense: Net other expense, which includes interest income, subsidy income, interest expense, other income and other expense, was approximately $1.5 million for the year ended December 31, 2011 as compared to approximately $0.1 million for the year ended December 31, 2010, an increase of approximately $1.4 million, or 1323%. The increase was mainly due to less subsidy income from provincial government as compared the same period in 2010 and more interest expenses in the 2011.

Income tax benefit (expense): Income tax benefit was $11,765 for the year ended December 31, 2011 as compared to income tax expense $105,764 for the year ended December 31, 2010. The tax benefit was mainly from medicine segment of the Company and the deferred tax assets benefit from accrued expenses and provisions for inventory.

Net income attributable to stockholders: We achieved a net income attributable to stockholders of approximately $0.1 million for the year ended December 31, 2011 as compared to approximately $1.2 million for the year ended December 31, 2010. The decrease in net income attributable to stockholders was primarily due to the decrease of subsidy income and increase of interest expense.