HARBIN, China, Sept. 2 /PRNewswire-Asia-FirstCall/ -- SOKO Fitness & Spa Group, Inc. (OTC Bulletin Board: SOKF), a leading operator of fitness centers and beauty salons and spas in Northeast China, today announced record financial results for the fiscal year ended May 31, 2009.
Fiscal 2009 highlights:
-- Revenue increased 40% year-over-year to $19.6 million
-- Net profit increased 36% year-over-year to $7.0 million
-- Gross margin was 66%, compared to 64% in the prior year period
-- Operating income increased 31% year-over-year to $7.1 million
-- Fitness membership increased 30% year-over-year to 13,000
-- Beauty salon & spa customers increased 95% year-over-year to 19,500
Results of Operations
Compared to fiscal year 2008, beauty and spa revenues increased by 29.35%. The increase was driven by the increasing number of clients and the opening of new facilities. Fitness and yoga revenues increased by 98.70%. These results were driven by marketing efforts to an increase in memberships, and the acquisition of Yoga Wave and increased revenues associated with add-on services provided to members. Other revenues, which consist of beauty school tuition and related student costs, increased by 79.25%, driven by the increasing number of students and new courses.
SOKO achieved gross profits of $12.98 million for the year ended May 31, 2009, compared to $8.95 million for the previous year, an increase of 45% or approximately $4.03 million. As a percentage of revenues, gross profit margin was 66% for fiscal 2009 compared to 64% in fiscal 2008. The margin improvement was mainly driven by the shift from lower margin services and product sales to higher margin services during the year.
Operating expenses increased 66.9% year over year. The increase in operating expenses was attributable to the increase in amortization of leasehold improvement, increased rental expenses for new and existing facilities and other expenses relating to our growth in sales.
Net income for the year ended May 31, 2009 increased by approximately $1.8 million to $7.0 million as compared to $5.2 million for the previous year. The 36% net income increase year over year was mainly attributable to an increase in revenues and the Company's ongoing efforts to cut costs.
Basic earnings per share were $0.41 for 2009 as compared to $0.45 in the previous year. Fully diluted earnings per share were $0.41 for 2009 as compared to $0.43 in the pervious year. The decline in earnings per share was attributable to the dilution from the public offering in fiscal 2008.
During fiscal 2009, SOKO generated cash flow from operations of $9.39 million, an increase of 93.5% from fiscal 2008. The Company used its cash flow from operations for capital expenditures to renovate existing facilities and open/acquire new ones.
"I'm very proud that we achieved another record year despite the downturn of macro economy," said Mr. Liu Tong, Chairman, President & CEO of SOKO. "In 2009, we continued to strengthen our leading position in fitness center and beauty salon and spa operations in Northeast China. Our rapid growth resulted from the expansion of our branches and increased consumption per client due to innovative programs we developed. We will keep working on new branch expansion and new value-added programs next year."
Earnings Call
SOKO's Chief Executive Officer Liu Tong, Chief Financial Officer Yu Xia, and Corporate Secretary Jiang Judy will host a conference call for shareholders to discuss FY2009 annual earnings results at 9 am EDT on September 2, 2009.
Dial-In Number(s):
* US/Canada Toll Free Dial-in #: (866)811-8933
* Int'l/Local Dial-In #: (706)645-9773
Conference ID #: 28156610
NOTE: In order to join this conference call, all speakers and participants will be required to provide the Conference ID Number listed above.
About SOKO Fitness & Spa Group, Inc.:
SOKO Fitness & Spa Group, Inc., an OTCBB listed company (SOKF.OB), is a leading operator of fitness centers and beauty salons and spas in Northeast China. The Company provides programs, services, and products uniquely 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 .
Safe Harbor Statement
This press release may contain forward-looking statements. These statements are made under the "safe harbor" provisions of the U.S. Private Securities Litigation Reform Act of 1995. These forward-looking statements can be identified by words or phrases such as "will," "expects," "anticipates," "future," "intends," "plans," "believes," "estimates" and similar statements. Among other things, the business outlook and quotations from management in this press release contain forward-looking statements. Statements that are not historical facts, including statements about SOKO's beliefs and expectations, are forward-looking statements. Forward-looking statements involve inherent risks and uncertainties. A number of important factors could cause actual results to differ materially from those contained in any forward-looking statement. SOKO does not undertake any obligation to update any forward-looking statement, except as required under applicable law.
SOKO FITNESS & SPA GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(IN US DOLLARS)
AS OF MAY 31,
2009 2008
(RESTATED)
ASSETS
Current assets:
Cash & cash equivalents $ 1,907,640 $ 1,563,709
Restricted cash 7,233 --
Accounts receivable, net 110,541 682,694
Inventories 1,391,302 1,048,788
Advances to suppliers 993,084 1,467,861
Employee advance 54,783 249,900
Prepaid expense 146,959 340,993
Total Current Assets 4,611,542 5,353,945
Property, plant and equipment, net of
accumulated depreciation 19,674,394 12,782,918
Other Assets
Security Deposit 47,853 --
Deferred Rent 589,188 --
Deposit to suppliers 1,464,530 720,461
Investment advance 399,750 1,152,738
Goodwill 2,525,778 1,505,710
Total Other Assets 5,027,099 3,378,909
Total Assets 29,313,035 21,515,772
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term loans 2,196,795 2,547,244
Accounts payable, accrued expenses
and other payable 471,457 1,020,232
Unearned revenue 1,909,755 514,965
Taxes payable 360,229 339,555
Contingent Liability 200,000 --
Total Current Liabilities 5,138,236 4,421,996
Stockholders' Equity
Preferred Stock, $.001 par value;
10,000,000 shares authorized;
- 0 - shares issued and outstanding
at May 31,2009 and 2008 -- --
Common stock, $0.001 Par value;
500,000,000 shares authorized;
17,000,000 shares issued and
outstanding at May 31, 2009 and
2008 17,000 17,000
Additional paid-in-capital 2,139,786 2,091,165
Additional paid-in-capital - Warrants 372,914 372,914
Accumulated other comprehensive income 1,910,752 1,625,829
Retained earnings 19,688,064 12,657,564
Total Stockholders' Equity 24,128,516 16,764,472
Noncontrolling interest 46,283 329,304
Total Equity 24,174,799 17,093,776
Total Liabilities and Stockholders'
Equity $ 29,313,035 $ 21,515,772
SOKO FITNESS & SPA GROUP, INC.
CONSOLIDATED STATEMENTS OF INCOME
(IN US DOLLAR)
FOR THE YEARS ENDED MAY 31,
2009 2008
(RESTATED)
Net Sales $ 19,569,108 $ 13,963,130
Cost of Sales (6,591,906) (5,010,643)
Gross Profit 12,977,202 8,952,487
Selling, General and
Administrative Expenses: 5,902,059 3,536,547
Operating income 7,075,143 5,415,940
Other Income and Expenses
Interest expenses (66,121) (49,177)
Other income 47,012 2,357
Penalty for investors'
liquidated damages (200,000) --
Other expenses (70,731) (10,328)
Total Other Income and (Expense) (289,840) (57,148)
Income Before Income Taxes 6,785,303 5,358,792
Provision for Income Taxes 42,667 74,381
Net Income 6,742,636 5,284,411
Less: net income (loss)
attributable to the
noncontrolling interest (287,865) 108,481
Net Income Attributable to SOKO
Fitness & Spa Group, Inc. $ 7,030,500 $ 5,175,930
Other Comprehensive Income
Foreign currency translation
adjustment 284,923 1,217,693
Comprehensive Income $ 7,315,423 $ 6,393,622
Basic and Diluted Income per
common share
Basic $ 0.41 $ 0.45
Diluted $ 0.41 $ 0.43
Weighted average common share
outstanding
Basic 17,000,000 11,601,781
Diluted 17,297,931 11,903,589
SOKO FITNESS & SPA GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN US DOLLARS)
FOR THE YEARS ENDED MAY 31,
2009 2008
(RESTATED)
Cash Flows From Operating Activities:
Net income $ 7,030,500 $ 5,175,930
Adjustments to reconcile net income
to net cash provided by operating
activities:
Stock based compensation 48,621 --
Depreciation 1,719,398 1,016,855
Minority interest (287,865) 108,481
Liquidated damage penalty 200,000 --
Loss from disposal of fixed
assets 54,809 --
Rent expense converted from
leasehold improvement 163,229 --
Changes in operating assets and
liabilities:
Restricted cash (7,219) --
Accounts receivable 605,326 (270,326)
Inventories (302,677) (584,845)
Advances to suppliers 503,705 (279,736)
Employee advance 198,831 (163,600)
Prepaid expense 265,225 (254,681)
Security deposit (47,761) --
Deferred Rent (588,061) --
Deposit to suppliers (730,864) 6,816
Accounts payable 7,283 (33,815)
Unearned revenue 1,367,451 6,948
Taxes payable 15,018 203,532
Accrued expenses and other payables (829,923) (82,086)
Cash provided by operating
activities 9,385,023 4,849,473
Cash Flows From Investing Activities:
Addition in construction in
progress (5,312,845) (2,665,759)
Purchase of property and
equipment (3,061,979) (3,293,245)
Proceeds received from disposal
of fixed assets 1,316
Investment in subsidiary -- (1,687,408)
Cash acquired from subsidiaries 97,594 124,447
Investment advance (399,750) (1,090,545)
Cash used in investing activities (8,675,665) (8,612,510)
Cash Flows From Financing Activities:
Proceeds from capital contribution -- 1,000,000
Net proceeds from issuance of
common stock -- 1,327,500
Proceeds from short-term loan 2,196,795 2,409,815
Repayment of short-term loan (2,588,227) --
Cash provided by (used in)
financing activities (391,432) 4,737,315
Effect of exchange rate changes on cash
and cash equivalents 26,005 133,316
Increase in cash and cash equivalents 343,931 1,107,594
Cash and Cash Equivalents - Beginning of
the year 1,563,709 456,115
Cash and Cash Equivalents - Ending of
the year $ 1,907,640 $ 1,563,709
Supplemental disclosures of cash flow
information:
Interest paid $ 66,121 $ 49,042
Income Taxes paid $ 74,135 $ 9,427
Non-cash investing and financing
activities:
Option issued for directors $ 109,898 $ --
