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SOKO Fitness & Spa Group Announces Record Financial Results for Fiscal Year; Sets Conference Call to Discuss Results

HARBIN, China, Sept. 1 /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 .

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
        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


    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.
                                  (IN US DOLLAR)

                                             FOR THE YEARS ENDED MAY 31,
                                               2009               2008

    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
        Basic                                17,000,000         11,601,781
        Diluted                              17,297,931         11,903,589

                          SOKO FITNESS & SPA GROUP, INC.
                                  (IN US DOLLARS)

                                                 FOR THE YEARS ENDED MAY 31,
                                                      2009          2008
    Cash Flows From Operating Activities:
        Net income                               $   7,030,500 $   5,175,930
        Adjustments to reconcile net income
         to net cash provided by operating
           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
           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
           Interest paid                         $      66,121 $      49,042
           Income Taxes paid                     $      74,135 $       9,427
    Non-cash investing and financing

           Option issued for directors           $     109,898 $          --

SOURCE SOKO Fitness & Spa Group, Inc.
Copyright©2009 PR Newswire.
All rights reserved

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