SOKO Fitness Announces Fourth Quarter and Fiscal Year End 2010 Financial Results
Full-Year Net Income Increases 55%, Revenue Increases 53% Over 2009; Company to Host Conference Call on Monday, August 30 at 8:00 AM Eastern Time
HARBIN, China, Aug. 30 /PRNewswire-Asia-FirstCall/ -- SOKO Fitness & Spa Group, Inc. (OTC Bulletin Board: SOKF) ("SOKO"), an operator of fitness centers and beauty salons and spas in Northeast China as well as suburban Beijing, today announced financial results for the fourth quarter and fiscal year ended May 31, 2010.
Full Year Financial Highlights
-- Full-year revenue totaled $29.9 million, an increase of 53% over $19.6
million in fiscal 2009.
-- Gross profit improved to $20.4 million, or 68% of revenue, compared
with $13 million, or 66% of revenue for fiscal year end 2009.
-- Operating income improved by 44% year-over-year to $10.2 million,
compared with operating income of $7.1 million in fiscal 2009.
-- Net income improved by 55% year-over-year to $10.4 million, or $0.56
per diluted share, compared with $7.0 million, or $0.41 per diluted
share for fiscal 2009.
Fourth Quarter Financial Highlights
-- Fourth quarter 2010 revenue totaled $8.0 million, an increase of 40%
over $5.6 million in the fourth quarter of 2009.
-- Gross profit increased to $5.2 million, or 65% of revenue for the
quarter, compared with $3.8 million, or 68% of revenue in the fourth
quarter of 2009.
-- Operating income was $2.0 million, a 5% increase over $1.9 million in
the fourth quarter of 2009.
-- Net income was $2.0 million, or $0.10 per diluted share, compared with
$2.0 million, or $0.12 per diluted share in the same period a year ago.
Fourth Quarter and Full Year Business Highlights
-- Completed non-brokered private placement for gross proceeds of $10
million.
-- Opened 7 new facilities in fiscal 2010.
-- Entered Beijing market through December 2009 acquisition of majority
interest in 2 suburban Beijing fitness centers.
-- Opened Lea Spa Xishan Club, SOKO's first spa facility in Beijing.
-- Signed lease agreement with Westin Chaoyang Hotel in Beijing to open
SOKO's fourth yoga facility.
-- Opened Daoli Fitness, Legend Spa Central Club, and Yoga Wave Harbin,
collectively occupying 63,000 square feet in the Long Dian Building in
centrally located downtown Harbin.
"During fiscal 2010, we achieved solid top and bottom line growth, high margins and strong operating cash flow. This performance speaks to the significant demand that exists for our premium fitness and aesthetic services in the markets in which we operate, as well as the ongoing success of our growth strategy," said Tong Liu, Chief Executive Officer of SOKO. "Fiscal 2010 was notable for several important milestones, including our entry into the Beijing market, where we currently operate two fitness centers and one spa. We expect that our fourth Beijing facility, Yoga Wave Beijing, will open in September in Westin's Chaoyang hotel, marking our second facility located in a luxury hotel. We believe a tremendous opportunity exists for SOKO spas, fitness centers and yoga studios in the luxury hotel market, and expect that this facility could lead to further cooperation with hotel chains throughout China.
"In addition to our expansion into new markets, we took steps to further establish SOKO's leadership position in our core second tier city markets of Harbin and Shenyang. During fiscal 2010, we opened 4 new facilities in these cities, which we believe will allow us to better address the significant, untapped growth potential that exists among northeastern China's emerging upper and middle-classes. Early sales activity at these facilities has been strong, and we believe that they can make a meaningful contribution to our business as they mature," Mr. Liu added.
SOKO currently operates 20 facilities in Northeastern China and Beijing, including 11 beauty salons and spas, one non-surgical medical beauty center, seven fitness centers and yoga studios, including two fitness centers in suburban Beijing, and one beauty school. As of May 31, 2010, SOKO had approximately 18,000 fitness club members, and approximately 21,000 beauty salon and spa clients. SOKO currently has 4 facilities under construction or engaged in pre-opening activities.
Full Year Financial Summary
Total revenue for the fiscal year ended May 31, 2010 was $29.9 million, an increase of 53%, compared with revenue of $19.6 million for fiscal 2009. The increase in revenue was attributed to an increase in the number of SOKO-operated facilities and increased per-customer spending.
Among SOKO's three business segments, spa and beauty services and products accounted for 77.3% of revenue, fitness centers accounted for 18.2% of revenue and the beauty school accounted for 4.5% of revenue for the fiscal year ended May 31, 2010.
-- Total professional services were $19.1 million, up 69% year-over-year.
The year-over-year increase was primarily related to promotional
activities conducted in the second half of fiscal 2010, which drove an
increase in revenue during the period.
-- Total product sales were $4.1 million, up 13.9% year-over-year.
-- Membership fees grew to $5.4 million, up 80% year-over-year.
-- Revenue from beauty school tuition was $1.3 million, compared with $1.7
million in the same period a year ago. The decrease was due to SOKO's
strategic cut back in some of its short-term administration courses and
transition toward longer-term training programs to support its core
beauty and spa business operations.
Gross profit for the twelve months ended May 31, 2010 was $20.4 million, or 68% of revenue, compared with $13.0 million, or 66% of revenue for fiscal 2009.
Selling, general and administrative expenses for fiscal 2010 were $10.3 million, compared with $5.9 million for the fiscal year end 2009. The increase in SG&A expense was related to an increase in one-time expenses related to the Beijing fitness center acquisition and other activities related to both new and existing facilities, as well as increased costs directly related to the growth in revenue.
Net income for fiscal 2010 increased 55% year-over-year to $10.4 million, or $0.56 per diluted share, based on 18.6 million weighted average diluted shares outstanding, compared with $7.0 million, or $0.41 per diluted share, based on 17.3 million weighted diluted average shares outstanding, for the same period a year ago.
As of May 31, 2010, SOKO had cash and cash equivalents of $18.1 million compared with $1.9 million on May 31, 2009. The increase in cash and cash equivalents is attributable to SOKO's non-brokered private placement completed April 21, 2010, as well as continued positive cash flow from operations.
Company and Market Outlook
Commenting on SOKO's plans for the upcoming year, Mr. Liu stated, "Our growth plans for fiscal 2011 remain aggressive. We believe that the cash we generate from operations, coupled with the proceeds from our April financing, will give SOKO the resources to maintain our robust expansion plans to open new facilities and acquire centers that we believe complement our existing portfolio. We achieved a great deal in fiscal 2010 and believe that the stage is set for continued advancement in fiscal 2011. With an established, well-respected brand in the beauty and fitness markets, a growing base of potential customers driven by increasing affluence in China, and a strong financial position that will enable us to achieve our growth objectives, we are excited about what the future holds for SOKO."
Conference Call
SOKO will host a conference call for interested investors and analysts to discuss its financial results for the period on Monday, August 30, 2010, at 8:00 a.m. Eastern time. To participate in the conference call, please dial 1-877-941-2321 from the U.S. and Canada, or 1-480-629-9714 for international callers.
An audio replay will also be available approximately one hour after the conclusion of the call and will be made available through September 13, 2010. The audio replay can be accessed by dialing 1-800-406-7325 from the U.S or Canada, or 1-303-590-3030 internationally, and entering access ID Number 4352938.
About SOKO Fitness & Spa Group, Inc.
SOKO Fitness & Spa Group, Inc., an OTCBB listed company (SOKF), is an operator of fitness centers and beauty salons and spas in key cities in Northeastern China as well as in suburban Beijing. SOKO provides programs, services, and products combined with exercise, education and nutrition to help their members lead a healthy life and achieve their fitness goals. For further information, please go to http://www.sokofitness.com .
To be added to SOKO's email distribution for future news releases, please send your request [email protected].
Cautionary Note Regarding Forward Looking Statements
This press release and the statements of representatives of SOKO Fitness & Spa Group, Inc. (the "Company") related thereto contain, or may contain, statements that are not historical facts and are therefore "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve significant risks and uncertainties. Such statements may include, without limitation, statements with respect to the Company's plans, objectives, projections, beliefs, expectations and intentions and other statements identified by words such as "projects," "may," "could," "would," "should," "believe," "expect," "anticipate," "estimate," "intend," "plan," or similar expressions. These statements are based upon the current beliefs and expectations of the Company's management and are subject to significant risks and uncertainties, including those detailed in the Company's filings with the Securities and Exchange Commission. Actual results, including, without limitation, results regarding the Company's expansion strategies, service offerings, client, membership and customer figures, proposed new center openings and prospects and strategies for growth, may differ significantly from those set forth in the forward-looking statements. These forward-looking statements involve certain risks and uncertainties that are subject to change based on various factors (many of which are beyond the Company's control). The Company does not undertake any obligation to update any forward- looking statement, except as required under applicable law.
For more information, please contact:
The Piacente Group, Inc.
Investor Relations
Brandi Floberg or Lee Roth
Tel: +1-212-481-2050
Email: [email protected]
SOKO Fitness & Spa Group, Inc.
Shawn Qu
Tel: +1-908-208-8681
Email: [email protected]
SOKO Fitness & Spa Group, Inc.
Judy Jiang
Tel: +86-451-8770-2280
Email: [email protected]
SOKO FITNESS & SPA GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN US DOLLARS)
May 31,
2010 2009
ASSETS (RESTATED)
Current Assets:
Cash & cash equivalents $18,104,218 $1,907,640
Restricted cash -- 7,233
Accounts receivable, net 911,523 110,541
Inventories 1,099,208 1,391,302
Advances to suppliers 6,302,976 993,084
Employee advance 437,196 54,783
Loan receivable 146,270 --
Prepaid expense 127,365 146,959
Total Current Assets 27,128,755 4,611,542
Property, plant and equipment, net of
accumulated depreciation 24,116,400 19,674,394
Other Assets
Security deposit 75,412 47,853
Deferred rent 897,032 589,188
Deposit to suppliers -- 1,464,530
Investment advance -- 399,750
Goodwill 4,178,365 2,525,778
Intangible assets, net 1,739,107 --
Total Other Assets 6,889,917 5,027,099
Total Assets 58,135,072 29,313,035
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Short-term loans 2,196,869 2,196,795
Accounts payable, accrued expenses and
other payable 1,707,381 471,457
Unearned revenue 9,344,088 1,909,755
Taxes payable 144,598 360,229
Contingent liability -- 200,000
Total Current Liabilities 13,392,936 5,138,236
Stockholders' Equity
Preferred Stock, $.001 par value;
10,000,000 shares authorized; - 0 -
shares issued and outstanding at May
31,2010 and 2009 -- --
Common stock, $0.001 Par value; 500,000,000
shares authorized; 20,213,889 and
17,000,000 shares issued and outstanding
at May 31, 2010 and 2009, respectively 20,214 17,000
Additional paid-in-capital 12,604,619 2,346,397
Additional paid-in-capital - Warrants 639,253 639,253
Accumulated other comprehensive income 1,913,924 1,910,751
Retained earnings 29,655,804 19,215,114
Total Stockholders' Equity 44,833,814 24,128,515
Noncontrolling interest (91,678) 46,283
Total Equity 44,742,136 24,174,799
Total Liabilities and Stockholders'
Equity 58,135,072 $29,313,034
SOKO FITNESS & SPA GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(IN US DOLLARS)
FOR THE FISCAL YEARS ENDED
MAY 31,
2010 2009
(RESTATED)
Net Sales $29,931,674 $19,569,108
Cost of Sales (9,512,745) (6,591,906)
Gross Profit 20,418,929 12,977,202
Selling, General and Administrative
Expenses: 10,258,668 5,902,059
Operating Income 10,160,261 7,075,143
Other Income and Expenses
Interest expense (62,736) (66,121)
Other income 230,387 47,012
Penalty for investor's liquidated damages (200,000)
Other expenses (17,648) (70,731)
Total Other Income and (Expense) 150,004 (289,840)
Income Before Income Taxes 10,310,265 6,785,303
Provision for Income Taxes 114,301 42,667
Net Income 10,195,964 6,742,636
Less: net income (loss) attributable to
the noncontrolling interest (244,726) (287,865)
Net Income Attributable to SOKO Fitness
& Spa Group, Inc. $10,440,690 $7,030,500
Other Comprehensive Income - Foreign
currency translation adjustment
Attributable to SOKO Fitness & Spa Group,
Inc. 544 284,923
Attributable to non-controlling interest (35) 4,844
Comprehensive Income (Loss)
Attributable to SOKO Fitness & Spa Group,
Inc. $10,441,233 $7,315,423
Attributable to non-controlling interest $ (244,761) $(283,021)
Basic and Diluted Income per common share
Basic $0.60 $0.41
Diluted $0.56 $0.41
Weighted average common share outstanding
Basic 17,284,932 17,000,000
Diluted 18,597,186 17,297,931
SOURCE SOKO Fitness & Spa Group, Inc.
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