omniture

China Unitech Group, Inc. Announces Third Quarter 2010 Results

2010-11-16 22:04 1098

- Third quarter 2010 revenue increased 61% year-over-year to $5.8 million

- Third quarter 2010 net income increased 66% to $1.9 million

SHENZHEN, China, Nov. 16, 2010 /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 third quarter of 2010.

Third Quarter 2010 Highlights

  • Revenue increased 61.4% to $5.8 million year-over-year
  • Gross profit increased 83.5% year-over-year to $2.7 million
  • Operating income increased 52.7% to $2.2 million year-over-year
  • Net income was $1.6 million in the third quarter of 2010, up 41.4% year-over-year
  • Cash flow provided by operating activities was $6.1 million for the nine months ended September 30, 2010, as compared to $3.6 million for the same period last year
  • Acquired one internet cafe in and opened 6 additional internet cafes in the third quarter of 2010

"We are pleased to report another quarter of momentous financial performance with significant surges in our top line and bottom line, representing an increase of 61.4% and 41.4%, respectively, year-over-year. During the third quarter, we successfully added 7 additional new stores, bringing the total number of internet cafes under the "Dragon Surf" brand name to 43. While we continued to expand our presence in Shenzhen, we executed innovative ways to attract and sustain customers, resulting in improved average occupation rate. This has demonstrated Junlong's seasoned capability and Junlong is well on the way to becoming a major national internet cafe operator in the future," commented Mr. Dishan Guo, Chief Executive Officer of China Unitech Group, Inc.

Third Quarter 2010 Results

For the quarter ended September 30, 2010, net revenue increased 61.4% to $5.8 million, compared to $3.6 million in the third quarter of 2009. Revenue growth was mainly due to the contribution of 15 internet cafes opened since September 30, 2009. The accelerated growth compared to previous quarters was due to one acquired internet cafe located in Baoan District and six newly opened internet cafes located in Shenzhen City during the third quarter of 2010. An increase in average occupation utilization also contributed favorably to the Company's revenue growth.  

Gross profit for the third quarter of 2010 increased 83.5% to $2.7 million, compared to $1.5 million in the third quarter of 2009. Gross margin expanded 5.6 percentage points to 46.4%, as compared to 40.8% in the comparable period of 2009. The increase was mainly attributable to the increase in computer usage time in the third quarter of 2010.

Operating expenses increased 1,304.0% to $0.5 million for the third quarter of 2010 from $0.04 million for the third quarter of 2009. The increase was primarily due to higher general and administrative expenses attributable to professional fees related to the Company's status as a public company and reorganizational expenses attributable to recent share exchange transaction with Classic Bond in July 2010.

Operating income for the third quarter of 2010 increased 52.7% to $2.2 million, compared to $1.4 million in the comparable period of 2009. Operating margin was 37.7% in the quarter compared to 39.8% in the third quarter of 2009.

Income tax expense for the third quarter of 2010 increased 96.6% to $0.6 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 third quarter of 2010, up from 20% for the comparable period in 2009.  

Net income increased 41.4% to $1.6 million, or $0.08 per diluted share compared to $1.1 million or $0.06 per share for the same period last year. Diluted earnings per share were calculated using weighted average shares of 20,186,957and 19,000,000 for the quarters ended September 30, 2010 and September 30, 2009, respectively.

Results for the Nine Months Ended September 30, 2010

Net revenue was $14.1 million for the nine months ended September 30, 2010, an increase of 35.8% from $10.4 million for the same period in 2009. Gross profit was $6.3 million, or 44.9% of revenue, an increase of 51.8% from $4.2 million, or 40.1% of revenue, for the nine months ended September 30, 2009. Operating income was $5.6 million, or 39.3% of revenue, an increase of 36.8% from $4.1 million, or 39.0% of revenue, for the nine months ended September 30, 2009. Net income increased 28.6% to $4.2 million for the nine months ended September 30, 2010, or $0.22 per diluted share, compared to $3.3 million, or $0.17 per share for the same period last year. Diluted earnings per share were calculated using weighted average shares of 19,400,000 and 19,000,000 for the nine months ended September 30, 2010 and September 30, 2009, respectively.

Financial Condition

As of September 30, 2010, the Company had $6.4 million in cash and cash equivalents, compared to $3.1 million at year-end 2009, working capital of $5.8 million and a current ratio of 3.1:1. As of September 30, 2010, shareholders' equity was $11.8 million, up from $7.0 million at the end of 2009.

For the nine months ended September 30, 2010, the Company generated $6.0 million in cash from operating activities, compared with$3.6 million for the same period last year. Net cash used in investing activities was $3.3 million for the nine months ended September 30, 2010, which was used for the acquisitions of internet cafes and improvements on leased assets.

Business Outlook

The Company plans to complete acquisitions in Guizhou, Yunnan and Sichuan provinces in the future in order to qualify as a national internet cafe operator.

"For the remainder of 2010, we continue to look for acquisition opportunities to expand our presence outside of Guangdong province as this move would enable us to qualify as one of few national internet cafe operators in China. While we are lagging behind our initial timeline for completing cross provincial acquisitions, we continue to carry out stringent due diligence on potential targets. Despite the delay, we anticipate healthy and stable top line growth in the last quarter of 2010 supported by our acquisitions completed thus far and the strong market demand for internet cafe services," 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 43 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 510 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; the ability to obtain adequate funding for acquisitions, 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.

Financial tables follow

CHINA UNITECH GROUP, INC.


CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

UNAUDITED

 


For The Three Months Ended



For The Nine Months Ended

 


September 30



September 30

 


2010


2009



2010


2009

 










 

Revenue

$

5,840,453

$

3,617,873


$

14,142,866

$

10,417,633

 










 

Cost of revenue










 

Depreciation


442,104


331,588



1,132,103


944,775

 

Salary


342,695


201,586



831,226


588,123

 

Rent


306,243


206,545



748,723


608,256

 

Utility


397,630


351,489



1,111,843


1,009,105

 

Business tax and surcharge


1,381,435


855,433



3,344,906


2,463,347

 

Others


260,197


194,275



629,068


625,476

 


3,130,304


2,140,916



7,797,869


6,239,082

 

Gross profit


2,710,149


1,476,957



6,344,997


4,178,551

 










 

Operating Expenses










 

General and administrative expenses


75,906


36,395



351,888


114,732

 

Reorganizational expenses


435,086


-



435,086


-

 


 


 



 


 

 

Total operating expenses


510,992


36,395



786,974


114,732

 










 

Income from operations


2,199,157


1,440,562



5,558,023


4,063,819

 










 

Non-operating income (expenses)










 

Interest income


1,827


452



4,287


811

 

Interest expenses


(2,402)


-



(7,115)


-

 

Other expenses


(10)


(93)



(43)


(252)

 


 


 



 


 

 

Total other income (expenses)


(585)


359



(2,871)


559

 










 

Net income before income taxes


2,198,572


1,440,921



5,555,152


4,064,378

 

Income taxes


572,302


291,158



1,340,823


788,198

 


 


 



 


 

 

Net income

$

1,626,270

$

1,149,763


$

4,214,329

$

3,276,180

 










 

Other comprehensive income










 

Foreign currency translation


209,872


13,261



229,549


8,793

 

Comprehensive income

$

1,836,142

$

1,163,024


$

4,443,878

$

3,284,973

 










 

Basic and diluted earnings per share


0.08


0.06



0.22


0.17

 










 

Basis and Diluted weighted average Common Stock outstanding


20,186,957


19,000,000



19,400,000


19,000,000

 










 

 
                   



CHINA UNITECH GROUP, INC.


CONDENSED CONSOLIDATED BALANCE SHEETS

 


September 30,


December 31,

 


2010


2009

 


(unaudited)



 

ASSETS





 

Current assets:





 

Cash

$

6,409,048

$

3,061,856

 

Restricted cash


1,679,581


1,645,411

 

Rental deposit


255,163


144,504

 

Equipment deposit


-


81,217

 

Inventory


208,050


204,971

 


 


 

 

Total current assets


8,551,842


5,137,959

 





 

Property and equipment, net


5,802,798


3,572,696

 

Intangible assets, net


197,589


-

 


 


 

 

Total assets

$

14,552,229

$

8,710,655

 

LIABILITIES AND STOCKHOLDERS' EQUITY





 





 

Current liabilities:





 

Short term loan

$

449,296

$

146,259

 

Accounts payable


80,859


33,979

 

Deferred revenue


659,600


775,985

 

Payroll and payroll related liabilities


154,888


124,390

 

Income and other tax payables


986,316


525,470

 

Accrued expenses


132,974


43,126

 

Amount due to director


240,625


5,162

 

Acquisition consideration payable


92,564


-

 




 

 

Total current liabilities


2,797,122


1,654,371

 

Commitments and contingencies


-


-

 





 

Stockholders' Equity





 

Preferred stock ($0.00001 par value, 100,000,000 shares authorized, 0 share issued and outstanding)


-


-

 

Common stock ($0.00001 par value, 100,000,000 shares authorized, 20,200,000 and 19,000,000 shares issued and outstanding as of September 30, 2010 and December 31, 2009, respectively)

(6,173,600 equivalent shares outstanding as of December 31, 2009)


202


190

 

Additional paid-in capital


1,628,417


1,373,484

 

Statutory reserves


718,744


718,744

 

Retained earnings  


8,967,200


4,752,871

 

Accumulated other comprehensive income


440,544


210,995

 


 


 

 

Total stockholders' equity  


11,755,107


7,056,284

 





 

Total liabilities and stockholders' equity

$

14,552,229

$

8,710,655

 







 

 
         



CHINA UNITECH GROUP, INC.


CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

UNAUDITED

 


For The Nine Months Ended

 


September 30

 


2010


2009

 

Cash flows from operating activities





 

Net income

$

4,214,329

$

3,276,180

 

Adjustments to reconcile net income to net cash used in operating activities:





 

Depreciation


1,161,497


964,444

 

Amortization


14,601


-

 

Changes in operating assets and liabilities:





 

Rental deposit


(81,776)


(6,723)

 

Inventory


1,156


(134,592)

 

Accounts payable


45,374


10,708

 

Amount due to director


231,668


(148,493)

 

Payroll and payroll related liabilities


27,431


(38,333)

 

Accrued expenses


82,094


9,782

 

Deferred revenue


(130,200)


124,994

 

Income and other tax payable


442,125


(415,925)

 

Net cash provided by operating activities


6,008,299


3,642,042

 





 

Cash flows from investing activities





 

Acquisition of property, plant and equipment


(2,696,834)


(1,215,347)

 

Acquisition of cafes


(635,233)


-

 

Net cash used in investing activities


(3,332,067)


(1,215,347)

 





 

Cash flows from financing activities





 

Cash acquired from reverse merger


1,442


-

 

Issuance of shares for cash


251,612


-

 

Proceeds from short term loan


300,000


-

 

Net cash provided by financing activities


553,054


-

 





 

Effect of foreign currency translation on cash and cash equivalents


117,906


4,442

 





 

Net increase in cash


3,347,192


2,431,137

 





 

Cash- beginning of period


3,061,856


1,112,646

 





 

Cash- end of period

$

6,409,048

$

3,543,783

 





 

Supplemental disclosure of cash flow information





 

Cash paid during the period





 

Interest paid

$

7,115

$

-

 

Income tax paid

$

1,051,472

$

671,288

 





 

SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVIES:

Summary of Assets Acquired from Acquisitions:





 

Net Property and Equipment

$

499,776

$

-

 

Other Current Assets


15,678


-

 

Intangible Assets


207,964


-

 

Net Assets Acquired

$

723,418

$

-

 





 

Transfer of equipment deposits paid in property and equipment

$

83,811

$

-

 

Acquisition payable

$

90,610

$

-

 

 
         



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: kerban@sina.com

 

Tel: +86-755-3366-8770

 

 

Investor Relations Contact:

 

Mr. Crocker Coulson, President

 

CCG Investor Relations

 

Email: crocker.coulson@ccgir.com

 

Tel: +1-646-213-1915

 
 


Source: China Unitech Group, Inc.
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