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SOKO Fitness & Spa Group Announces Third Quarter FY2009 Financial Results

HARBIN, China, April 15 /PRNewswire-Asia-FirstCall/ -- SOKO Fitness & Spa Group, Inc. (OTC Bulletin Board: SOKF), a leading operator of fitness clubs and spas in Northern China, announced its operating results for the fiscal third quarter ended February 28, 2009.

Total revenue for the quarter was $5.1 million, an increase of 42% over the same quarter in the previous year. For the nine months ended February 28, 2009, revenues were $14 million, an increase of 55% from the prior year. SOKO also reaffirmed its previous FY2009 revenue guidance in a range of $16.3 to $18.3 million and its pro forma net income guidance of $6.5 to $7.1 million.

Net income during the quarter grew 29% to $1.85 million from $1.43 million for the same quarter of 2008. For the nine months ended February 28, 2009, net income increased to $5.2 million, an increase of 49%. Third quarter Earnings per share were $0.11 vs. $0.13 in the prior period. The decline was caused by the dilution from the stock offering. EPS for the 9 months were $0.30 vs. $0.32 in the previous year. Higher earnings were offset by a higher share count.

Revenue growth was driven primarily by the opening of two spas during the period. We increased product sales in our spas. Fitness and yoga membership fee revenues increased by 135% year to year, mainly as a result of the acquisition of a majority interest in Letian in March 2008. Letian contributed about 52% to our fitness revenue for Q3 FY2009.

Operating margin increased to 64.6%, compared to 62.5%. The increase in our gross profit margin was mainly driven by our ability to obtain high volume discounts because of our larger size as well as by the increases in our fitness segment.

Operating expenses increased by approximately $0.6 million to $1.4 million for the three months ended February 28, 2009 year to year. As a percentage of revenues, expenses increased to 28.2% from 22.6%. This increase was mainly driven by the high cost of being a public company as well as the start-up costs for building management teams for our new facilities.

We have reclassified some direct labor costs from operating expenses to cost of sales. The impact of this change is to lower gross margins and lower operating expenses/sales. The reclassification has no impact on either sales or net income. The numbers below for both 2008 and 2009 reflect the impact of the reclassification and are comparable with each other.

"We are very pleased with the results of our business," Mr. Liu Tong, Chairman of SOkO commented. "We focus our business on Northeast, which is the most famous traditional industry base of China, and expect to open more spas and fitness centers in the future. We believe we have significant opportunities for expansion, and look forward to becoming the dominant company in the fitness and beauty business in the northeast."

                            SOKO INCOME STATEMENT

                         FEBRUARY 28, FEBRUARY 29,  FEBRUARY 28,  FEBRUARY 29,
                               2009          2008          2009          2008

    Net Sales           $13,996,019    $9,048,287    $5,110,861    $3,593,350

    Cost of Sales        (4,822,521)   (3,330,316)   (1,807,084)   (1,347,769)

    Gross Profit          9,173,498     5,717,971     3,303,777     2,245,581

    Gross Margin              65.54%        63.19%        64.64%        62.49%

    Operating Expenses    3,839,238     2,251,863     1,438,622       810,904

    Operating Income      5,334,260     3,466,108     1,865,155     1,434,677

    Net Income           $5,175,220    $3,464,687    $1,855,474    $1,433,961

    Diluted Income per
     common share             $0.30         $0.32         $0.11         $0.13

    Weighted average
     common share
      Diluted            17,000,000    10,725,000    17,000,000    10,725,000

About SOKO Fitness & Spa Group, Inc.:

SOKO Fitness & Spa Group, Inc., is a leading operator of fitness clubs 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 announcement contains 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.

    For more information, please contact:

     The U.S. Office:
     Mu Yan:
     Tel:   +1-484-716-1081

     China Office:
     Yu Xia
     Tel:   +86-451-8770-2255

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

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