China Unitech Group, Inc. Announces Strong Second Quarter 2010 Results
-- Second quarter 2010 revenue increased 27.4% year-over-year to $4.6 million
-- Second quarter 2010 net income increased 25.3% to $1.4 million
SHENZHEN, China, Aug. 19 /PRNewswire-Asia-FirstCall/ -- China Unitech Group, Inc. (the "Company") (OTC Bulletin Board: CUIG), operating through Junlong Culture Communication Co. Ltd ("Junlong"), a leading internet cafe chain operator in China, today announced its financial results for its second quarter of 2010.
Second Quarter 2010 Highlights -- Revenue increased 27.4% to $4.6 million year-over-year -- Gross profit increased 42.4% year-over-year to $2.1 million -- Operating income increased 31.4% to $1.9 million year-over-year -- Net income was $1.4 million in the second quarter of 2010 as compared to $1.1 million in the second quarter of 2009 -- Cash flow provided by operating activities was $3.7 million for the first six months of 2010, as compared to $2.6 million for the same period last year -- Acquired Lanman and Chaosu internet cafes in April 2010 -- Opened six additional internet cafes in May and June 2010
"We are pleased to report strong second quarter financial results, characterized by double-digit growth in both our top and bottom line. Recently, we acquired two internet cafes and opened six independently managed locations under our "Dragon Surf" brand name. Located in the Longgang and Yantian districts of Shenzhen, these internet cafes contributed favorably to our year-over-year revenue growth of 27.4%. As a leading internet cafe operator, we are committed to providing a safe, entertaining and interactive place for internet users in China," commented Mr. Dishan Guo, Chief Executive Officer of China Unitech Group, Inc.
Second Quarter 2010 Results
For the quarter ended June 30, 2010, net revenue increased 27.4% to $4.6 million, compared to $3.6 million in the second quarter of 2009. Revenue growth was mainly due to the contribution of six new independently managed internet cafes located in Longgang and Yantian. In April, the Company successfully acquired Lanman and Chaosu internet cafes in Shenzhen, which also contributed favorably to the Company's revenue growth.
Gross profit for the second quarter of 2010 increased by 42.4% to $2.1 million, compared to $1.5 million in the second quarter of 2009. Gross margin was 45.3%, as compared to 40.5% in the comparable period of 2009. The increase was mainly attributable to the increase in computer usage time in the second quarter of 2010.
Operating expenses increased 424.3% to $0.2 million for the second quarter of 2010 from $0.04 million for the second quarter of 2009. The increase was primarily due to higher general and administrative expenses attributable to business expansion, increased staff compensation, increase in professional fees related to the Company's status as a public company and the establishment of the Company's new office, which will be ready for occupation in late August 2010.
Operating income for the second quarter of 2010 increased 31.4% to $1.9 million, compared to $1.4 million in the comparable period of 2009. Operating margin was 40.6% in the quarter compared to 39.4% in the second quarter of 2009.
Income tax expense for the second quarter of 2010 increased 55.0% to $0.4 million, compared to $0.3 million in the same period last year, primarily due to the increase in net revenue and higher income tax rate of 22% for the second quarter of 2010, up from 20% for the comparable period in 2009.
Net income increased 25.3% to $1.4 million, compared to $1.1 million for the same period last year.
Results for the Six Months Ended June 30, 2010
Net revenue was $8.3 million for the first six months of 2010, an increase of 22.1% from $6.8 million for the first six months of 2009. Gross profit was $3.6 million, or 43.9% of revenue, an increase of 34.5% from $2.7 million, or 39.7% of revenue, for the first six months of 2009. Operating income was $3.4 million, or 40.5% of revenue, an increase of 28.0% from $2.6 million, or 38.6% of revenue, for the first six months of 2009. Net income increased 21.7% to $2.6 million for the first six months of 2010, compared to $2.1 million for the same period last year.
Financial Condition
As of June 30, 2010, the Company had $5.4 million in cash and cash equivalents, compared to $3.1 million at year-end 2009, working capital of $5.2 million and a current ratio of 3.3:1. As of June 30, 2010, shareholders' equity was $9.9 million, up from $7.0 million at the end of 2009.
In the first half of 2010, the Company generated $3.7 million in cash from operating activities, compared to cash provided by operating activities of $2.6 million in the same period last year. Net cash used in investing activities was $1.6 million for the six months ended June 30, 2010, which was used for the acquisitions of the Lanman and Chaosu internet cafes in April 2010.
Subsequent Events
In July 2010, the Company completed a share exchange transaction with the shareholders of Classic Bond Development Limited, a British Virgin Islands corporation ("Classic Bond"). Pursuant to a Share Exchange Agreement, China Unitech acquired 100% of the issued and outstanding capital stock of Classic Bond in exchange for 19,000,000 newly issued shares of the Company's common stock. The Company will operate through its variable interest entity in China to execute the current business plan of those affiliates, which involves the operation of a chain of China-based internet cafes. The new public company is quoted on the OTC Bulletin Board Market under the ticker symbol "CUIG."
Business Outlook
For the remainder of the year, the Company plans to focus on geographic expansion and expects continued growth in the demand for internet cafes due to the increased population of migrant workers.
"In the second half of this year, we plan to expand our presence to Guizhou, Yunnan and Sichuan provinces, which will enable us to qualify as one of the few national internet cafe operators by the end of 2010. This will mark a significant milestone for us in our quest to expand our footprint outside of Guangdong province. We also plan to open additional, independently managed internet cafes in strategic locations in Shenzhen in order to accelerate penetration of our existing geographic markets. We anticipate market demand for internet cafes to remain strong, which in turn will support our top line performance during the remaining months of this year," commented Mr. Guo.
About China Unitech Group, Inc.
China Unitech Group, Inc. is the holding company of Classic Bond Development Limited. The Company operates through its variable interest entity Junlong Culture Communication Co. Ltd. ("Junlong"), a leading internet cafe chain operator headquartered in Shenzhen, China. Established in 2003, Junlong is one of the five largest internet cafe chain operators in Shenzhen with 28 company-owned stores. Junlong's internet cafes are operated and managed under the Dragon Surf brand. Its robust system offers a one-stop entertainment and media venue for customers, including VoIP, instant messaging, online games, snacks and drinks. Its internet cafes are typically located in high traffic areas that target mature students and migrant workers. The Company currently employs about 300 full time employees.
Safe Harbor Statement
This press release may contain certain "forward-looking statements" relating to the business of China Unitech Group, Inc., its subsidiary companies and variable interest entity. All statements, other than statements of historical fact included herein are "forward-looking statements" including statements regarding the ability of the Company to grow; the general ability of the Company to achieve its commercial objectives; the business strategy, plans and objectives of the Company and its subsidiaries; and any other statements of non-historical information. These forward-looking statements are often identified by the use of forward-looking terminology such as "believes," "expects" or similar expressions, and involve known and unknown risks and uncertainties. Although the Company believes that the expectations reflected in these forward-looking statements are reasonable, they do involve assumptions, risks and uncertainties, and these expectations may prove to be incorrect. Investors should not place undue reliance on these forward-looking statements, which speak only as of the date of this press release. The Company's actual results could differ materially from those anticipated in these forward-looking statements as a result of a variety of factors, including those discussed in the Company's periodic reports that are filed with the Securities and Exchange Commission and available on its website (http://www.sec.gov). All forward-looking statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by these factors. Other than as required under the securities laws, the Company does not assume a duty to update these forward-looking statements.
For more information, please contact: Company Contact: Mr. Dishan Guo Chief Executive Officer China Unitech Group, Inc. Tel: +86-755-2894-3820 Mr. Jingwei Li Vice President of Corporate Finance China Unitech Group, Inc. Email: [email protected] Tel: +86-755-3366-8770 Investor Relations Contact: Mr. Crocker Coulson, President CCG Investor Relations Email: [email protected] Tel: +1-646-213-1915 Financial tables follow CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME UNAUDITED For The Three Months Ended For The Six Months Ended June 30 June 30 2010 2009 2010 2009 Revenue $ 4,581,308 $3,595,057 $ 8,302,413 $ 6,799,760 Cost of revenue Depreciation 358,369 219,787 689,999 504,787 Salary 260,008 201,156 488,531 386,537 Rent 235,781 206,577 442,480 401,711 Utility 370,164 345,515 714,213 657,616 Business tax and surcharge 1,083,303 850,078 1,963,471 1,607,914 Others 199,801 315,761 368,871 539,601 2,507,426 2,138,874 4,667,565 4,098,166 Gross profit 2,073,882 1,456,183 3,634,848 2,701,594 Operating Expenses Selling expenses -- -- -- -- General and administrative expenses 213,309 40,684 275,982 78,337 Total operating expenses 213,309 40,684 275,982 78,337 Income from operations 1,860,573 1,415,499 3,358,866 2,623,257 Non-operating income (expenses) Interest income 2,460 458 2,460 359 Other income -- -- -- (159) Interest expenses (5,854) -- (4,713) -- Other expenses (62) (254) (33) -- Total other income (expenses) (3,456) 204 (2,286) 200 Net income before income taxes 1,857,117 1,415,703 3,356,580 2,623,457 Income taxes 434,657 280,462 768,521 497,040 Net income $ 1,422,460 $1,135,241 $ 2,588,059 $ 2,126,417 Other comprehensive income Foreign currency translation 38,927 (7,945) 40,049 (4,468) Comprehensive income $ 1,461,387 $1,127,296 $ 2,628,108 $ 2,121,949 Income per share 1.01 0.84 1.88 1.58 Weighted average Common Stock outstanding 1,405,573 1,348,279 1,377,084 1,348,279 CLASSIC BOND DEVELOPMENT LIMITED CONDENSED CONSOLIDATED BALANCE SHEETS June 30, December 31, 2010 2009 (unaudited) ASSETS Current assets: Cash and cash equivalents $ 5,384,556 $ 3,061,856 Restricted cash 1,652,322 1,645,411 Rental deposit 177,541 144,504 Equipment deposit 15,088 81,217 Inventory 216,983 204,971 Total current assets 7,446,490 5,137,959 Property and equipment, net 4,591,473 3,572,696 Intangible assets, net 135,222 -- Total assets $ 12,173,185 $ 8,710,655 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Short term loan $ 146,873 $ 146,259 Accounts payable 56,678 33,979 Deferred revenue 727,543 775,985 Payroll and payroll related liabilities 117,591 124,390 Income and Other Tax Payables 778,335 525,470 Accrued expenses 60,573 43,126 Amount due to director 200,970 5,162 Acquisition consideration payable 148,618 -- Total current liabilities 2,237,181 1,654,371 Commitments and contingencies Stockholders' Equity Common stock (No Par Value; 2,000,000 shares authorized; 2,000,000 and 1,358,954 shares issued and outstanding at June 30, 2010 and December 31, 2009, respectively) 1,625,286 1,373,674 Statutory reserves 718,744 718,744 Retained earnings 7,340,930 4,752,871 Accumulated other comprehensive income 251,044 210,995 Total stockholders' equity 9,936,004 7,056,284 Total liabilities and stockholders' equity $ 12,173,185 $ 8,710,655 CLASSIC BOND DEVELOPMENT LIMITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS UNAUDITED For The Six Months Ended June 30 2010 2009 Cash flows from operating activities Net income $ 2,588,059 $ 2,126,417 Adjustments to reconcile net income to net cash used in operating activities: Depreciation 704,376 625,766 Amortization 5,799 -- Changes in operating assets and liabilities: Rental deposit (21,334) (6,722) Inventory (11,109) (138,257) Accounts payable 22,448 171,111 Amount due to director 195,037 (46,187) Payroll and payroll related liabilities (7,293) (38,172) Accrued expenses 17,200 9,294 Deferred revenue (51,503) 283,627 Other tax payable 249,699 (429,326) Net cash provided by operating activities 3,691,379 2,557,551 Cash flows from investing activities Acquisition of property, plant and equipment (1,292,087) (1,296,251) Acquisition of cafes (348,839) -- Net cash used in investing activities (1,640,926) (1,296,251) Cash flows from financing activities Issuance of shares for cash 251,612 -- Net cash used in financing activities 251,612 -- Effect of foreign currency translation on cash and cash equivalents 20,635 (6,103) Net increase in cash 2,322,700 1,255,197 Cash- beginning of period 3,061,856 1,112,646 Cash- end of period $ 5,384,556 $ 2,367,843 Supplemental disclosure of cash flow information Cash paid during the period Interest paid $ 2,383 $ -- Income tax paid $ 333,927 $ 216,684 SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVIES: Summary of Assets Acquired from Acquisitions: Net Property and Equipment $ 346,003 $ -- Other Current Assets 10,973 -- Intangible Assets 140,481 -- Net Assets Acquired $ 497,457 $ --
SOURCE China Unitech Group, Inc.
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