China Shesays Medical (PINK:CSAY)

On management’s recommendation and in consultation with Baker Tilly Hong Kong Limited (“BTHK”), our independent registered public accounting firm, we concluded on July 15, 2011 that the financial statements of China SHESAYS Cosmetology Inc. (the “Company”) for the fiscal year ended December 31, 2010 and three months period ended March 31, 2011, as presented in our Annual Report on Form 10-K filed on March 31, 2011 and Quarterly Report on Form 10-Q filed on May 16, 2011, (the “2010 Annual and 2011 First Quarter Financial Statements”), should no longer be relied upon due to the accounting issues set forth below.

 On July 15, 2011, as a result of the preparation of the responses to comments the Company received from the Securities and Exchange Commission (the “SEC”) in connection with the SEC’s review of the Company’s Amendment No. 2 to the Registration Statement on Form S-1 filed on May 13, 2011, based on its communications with the Company’s auditor, the Company determined that the Company’s financial statements for the year ended December 31, 2010, and the three months period ended March 31, 2011 should no longer be relied upon as a result of certain errors regarding:

(i) pre-operating expenses wrongly recorded as other current assets;

(ii) under-provisions of rental expenses for clinics that had not yet commenced business;

(iii) income tax expense for the above items;

(iv) foreign currency translation gain or loss for the above items; and

(v) an over statement of payments to acquire property and equipment in cash flows from investing activities and increases in other payables and accrued liabilities included in cash flows from operating activities in the statement of cash flows for the year ended December 31, 2010.

As of December 31, 2010, we had cash and cash equivalents of $1.0 million. We had a working capital deficit of $0.8 million, that is, our current assets were $3.1 million and our current liabilities were $3.9 million as of December 31, 2010. Our net working capital deficit may initially raise substantial doubt as to our ability to continue as a going concern. However, we believe that our strong net cash flow from operating activities, cost reduction and delay on capital expenditure will provide sufficient liquidity to finance our anticipated working capital and capital expenditure requirements for the next 12 months.

We expect to need approximately $30.5 million to realize our plans for expansion in the next 3 years.

CHINA SHESAYS MEDICAL COSMETOLOGY INC.
("CHINA SHESAYS") AND SUBSIDIARIES
STATEMENTS OF OPERATIONS AND
COMPREHENSIVE INCOME

GeoTeam Note: Fourth Quarter 2010 vs. 2009 EPS was $0.04 vs. $0.04.

These results are lower than previously anticipated by the Company's management, largely due to the adverse market sentiment resulting from a high-profile incident in which a famous singer featured in the Super Girl contest in China died from complications related to plastic surgery in a clinic unaffiliated with China SHESAYS.

The 24-year-old singer, Ms. Bei Wang, suffered respiratory and circulatory failure following plastic surgery at a medical cosmetology clinic in Wuhan city of Hunan province in November 2010. As rumors state that the doctors performing the surgery lacked plastic surgery qualifications, the Ministry of Health has initiated an overhaul of the entire medical cosmetology industry in China to weed out unqualified players. Such regulatory reforms may lead to increased market concentration, ultimately benefiting licensed operators.

"We are truly sorry for what happened to Ms. Wang and our thoughts go out to her family. The effects of this unfortunate incident on the general attitudes towards cosmetic procedures may continue to negatively impact our top and bottom lines for the next few quarters," said Yixiang Zhang, Chairman and Chief Executive Officer of China SHESAYS. "However, we anticipate a pick-up in demand in the second half of 2011 after the general public gradually reassesses the risks associated with cosmetic surgery. In addition, as we expect the regulatory overhaul to force a significant number of substandard players out of business, we believe our solid industry position, strong brand image and leading market share may allow us to ultimately benefit from the increased general and regulatory scrutiny that followed this incident. "

"In addition to the negative impact of Ms. Wang's incident, we increased marketing expenses in the fourth quarter to enhance our marketing efforts, which we expect to further improve the brand name and our leading position in Sichuan market. In addition, our three newly opened clinics in the second half of 2010 had negative impact on our bottom line because it usually takes 6-12 months to fully develop a new market. We expect these three new clinics to be profitable in the second quarter of 2011, which will generate incremental revenues and net income. We remain focused on the initiatives which will contribute to our long-term growth and increased profitability, thus enhancing shareholder value," concluded Mr. Zhang.

CHENGDU, China, Feb. 1, 2011 /PRNewswire-Asia-FirstCall/ -- China SHESAYS Medical Cosmetology Inc.  today announces preliminary unaudited results for fiscal year 2010 and provides an update of its business outlook for investors.

For the fiscal year ended December 31, 2010, the Company expects

• $12.3 million in revenue and $1.5 million in net income.

These preliminary results are lower than previously anticipated by the Company's management, largely due to the adverse market sentiment resulting from a high-profile incident in which a famous singer featured in the Super Girl contest in China died from complications related to plastic surgery in a clinic unaffiliated with China SHESAYS.

CHENGDU, China, Jan. 21, 2011 /PRNewswire-Asia-FirstCall/ -- China SHESAYS Medical Cosmetology Inc., today announced the launch of its new Investor Relations and corporate website at http://www.chinashesays.com.

Third Quarter 2010 Highlights

• Revenue increased 34.5% year-over-year to $3.2 million
• Gross profit increased 25.3% year-over-year to $2.2 million
• Net income was $0.4 million, or $0.02 per diluted share vs. $0.06
• Completed a share-exchange transaction to list on the OTC Bulletin Board
• Opened two new outpatient clinics in Leshan and Yibin cities in Sichuan province in August 2010

"We continued to experience strong demand for our medical cosmetology services thanks to our strong brand equity, high standard of quality, experience medical team and safety in our medical procedures, which resulted in continued growth in our revenues during the third quarter," commented by Mr. Yixiang Zhang, Chairman and Chief Executive Officer. "During the quarter, we achieved several milestones that strategically positioned us for strong future growth. First, we became the first Chinese company in the medical cosmetology industry to list on a US stock exchange. Second, we opened new clinics in additional Tier II cities in Sichuan province, which represents a first step to roll out our unique chain of clinics and hospitals, thereby expanding our presence in these underdeveloped markets."  

Business Outlook

"We are excited about the future of medial cosmetology in China and the vast opportunities present in many Tier II and Tier III Chinese cities with rapid economic growth. Our recent debut in Zigong city, Sichuan province is another reflection of our long-time strategy to expand our network in regional markets in Southwest China," commented Mr. Zhang. "As we continue to scale up revenues, we remain confident that our gross margin will remain at attractive levels as we leverage our unique chain operations involving hospitals, clinics and skincare centers to improve economies of scale and operating efficiency and maintain our competitive advantage."

On June 7, 2010 China SHESAYS Medical Cosmetology became a public company via a reverse merger transaction.

Company Snapshot:

Over the past five years, SHESAYS has become one of the fastest growing cosmetology hospitals in China and one of the most well-known cosmetology hospital chains in Sichuan province, P.R. China.

Industry Snapshot:

• The medical cosmetology market in China is one of the largest and fastest growing markets in the world. China’s GDP per capita has been over U.S. $3000, which marks a new starting point in terms of consumption. With economic growth in the country with 1.3 billion people, China’s consumption has upgraded many traditional consumption industries and accelerated the development of certain new industries, such as medical cosmetic industry.
  
• Presently, China has about over 1.8 million cosmetic institutions, with about 12 million cosmetic workers. China invests about 3 billion U.S. Dollars in cosmetic industry. In recent two years, cosmetic consumers have reached over 300 million people. In 2009, the cosmetic industry witnessed a turnover of over approximately 7.3 billion U.S. Dollars. The national medical cosmetic market reached approximately 439.4 million U.S. Dollars last year but compared with 60 billion U.S. Dollars in the United States, there is still a huge gap. It grows at a rate of 15% per year. The growth speed of cosmetic service is far beyond the general economic growth speed.

Post Merger Share Calculation:

•   4,500,000: Pre reverse merger outstanding shares
• 13,500,012: Newly issued shares of Common Stock
•   4,230,000: Shares associated with private placement

GeoTeam® best effort calculation of total post reverse merger shares assuming full conversions:  22,230,012

Note: The company has not included the private placement shares in its calculation.

Financial Snapshot:

• During the three months ended March 31, 2010 we had revenues of $3,247,925 as compared to revenues of $2,162,768 during the three months ended March 31, 2009, an increase of $1,085,157, or 50%
• During the three months ended March 31, 2010 net income attributable to the Company in the amount of $1,142,715 for the three months ended March 31, 2010, as compared with $925,865 during the three months ended March 31, 2009.
  
• During the year ended December 31, 2009, we had revenues of $8,834,673, as compared with $4,461,901 during the year ended December 31, 2008, an increase of approximately $4,372,772, or 98%
• During the year ended December 31, 2009. net income attributable to the Company in the amount of $1,766,442 during the year ended December 31, 2009, compared with $6,396 during the year ended December 31, 2008.