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Massive Growth for China’s SOKO Fitness & Spa Group

Massive Growth for China’s SOKO Fitness & Spa Group
September 6, 2010

On the heels of opening two new facilities in the north eastern Chinese city of Harbin, the SOKO Fitness & Spa Group, Inc. (SOKF), an operator of fitness centres, beauty salons and spas in the region as well as in suburban Beijing, has revealed further plans for expansion.

The two new facilities, Daoli Fitness and the Legend Spa Central Club, are located in the Long Dian Building in downtown Harbin, China, a centrally located building for SOKF's target upper-middle class clients.

SOKO now holds majority ownership in 13 fitness and spa facilities in Harbin, including Yoga Wave Harbin, which opened in February 2010 and is also strategically located in the Long Dian Building.

As SOKO Chief Executive Tong Liu, explains “our newest facility openings further expand our presence in what we believe is an ideal location in Harbin, where there remains significant opportunity to attract new customers and clients from the city's rapidly growing upper-middle class.

"Having three facilities under a single roof allows us to fully leverage our cross-selling model while offering our customers and members a complete range of fitness, wellness and aesthetic services. Strong pre-sale activity at both Legend Spa and Daoli Fitness, as well as the continued growth we have achieved at Yoga Wave Harbin in the last four months, provides further validation of our prominent reputation in Harbin and the significant brand equity we have built since opening our first Harbin spa 18 years ago."

Harbin is one of the three largest cities in north eastern China, with a population of more than six million and a fast-growing upper-middle class demographic. SOKF's three facilities in the Long Dian Building occupy a total of more than 5,000 metres2, covering five floors of the 34-story commercial and residential building.

Consistent with SOKO's business model at other facilities, the Company expects annual spa visits and fitness club memberships to ramp significantly during these facilities' first two years of operation.

Legend Spa Central Club is a 1,800 metres2 featuring 23 treatment rooms, and will offer a range of high-end beauty and aesthetic treatments in luxurious settings similar to those offered at SOKO's other facilities in Harbin, Shenyang and suburban Beijing. In conjunction with pre-opening sales and marketing activities, SOKO signed over 250 customers ahead of the spa's grand opening.

At Daoli Fitness, the Company has sold over 100 memberships during pre-opening sales activities. The 5,000 metres2 facility features high-end classrooms and an area for private training sessions, state of the art equipment and amenities. Members of Daoli Fitness will have access to a variety of classes, including spin, Pilates and aerobics taught by expert trainers and instructors.

SOKO recently announced financial results for the year ended 31st May 2010 revealed full-year revenue totaling US$29.9 million, an increase of 53% over US$19.6 million in fiscal 2009 while gross profit improved to US$20.4 million, or 68% of revenue.

In 2009/2001, the Company opened seven new facilities and entered the Beijing market in December 2009 through the acquisition of a majority interest in two suburban Beijing fitness centres.

Explaining the growth, Tong Liu adds, “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.

"Fiscal 2010 was notable for several important milestones, including our entry into the Beijing market, where we currently operate two fitness centres 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 centres 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 four 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.”

SOKO currently operates 20 facilities in north eastern China and Beijing, including 11 beauty salons and spas, one non-surgical medical beauty centre, seven fitness centres and yoga studios and a beauty school. It has approximately 18,000 fitness club members, and 21,000 beauty salon and spa clients.

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