omniture

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 tosoko@tpg-ir.com. 

    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: soko@tpg-ir.com

     SOKO Fitness & Spa Group, Inc.
     Shawn Qu
     Tel:   +1-908-208-8681
     Email: shawnqu@sokofitness.com

     SOKO Fitness & Spa Group, Inc.
     Judy Jiang
     Tel:   +86-451-8770-2280  
     Email: judyjiang@sokofitness.com



                 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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