WEB NEWS Comments & Business Outlook
Three months ended June 30,
Six months ended June 30,
2011
2010
2011
2010
REVENUE
Customer service revenue
Cosmetic surgery services
$
1,530,619
$
1,428,536
$
3,224,377
$
3,051,966
Professional medical beauty services
2,441,374
1,125,457
4,065,290
2,488,894
Cosmetic dentistry services
28,879
91,105
56,388
231,958
Sales of goods
211,402
119,652
441,348
239,857
Total Revenue
4,212,274
2,764,750
7,787,403
6,012,675
COST OF REVENUE
Cost of service revenue
Cosmetic surgery services
(215,550
)
(479,840
)
(590,255
)
(907,140
)
Professional medical beauty services
(409,718
)
(216,160
)
(740,318
)
(355,927
)
Cosmetic dentistry services
(20,116
)
(34,051
)
(40,101
)
(78,310
)
Cost of goods sold
(76,343
)
(2,277
)
(156,628
)
(51,962
)
Depreciation
(125,651
)
(74,820
)
(249,549
)
(146,267
)
Total Cost of Revenue
(847,378
)
(807,148
)
(1,776,851
)
(1,539,606
)
GROSS PROFIT
3,364,896
1,957,602
6,010,552
4,473,069
OPERATING EXPENSES
Selling, general and administrative expenses
1,485,863
804,233
2,292,655
1,261,909
Advertising costs
961,155
288,435
1,649,189
684,719
Professional and consultant fees
88,642
350,850
195,763
378,906
Depreciation
95,148
40,981
186,440
78,073
Total Operating Expenses
2,630,808
1,484,499
4,324,047
2,403,607
INCOME FROM OPERATIONS
734,088
473,103
1,686,505
2,069,462
OTHER INCOME (EXPENSES)
Other income
21
316
28
617
Interest income
375
1,027
546
2,590
Interest expenses
(18,127
)
(15,042
)
(25,872
)
(21,606
)
Imputed interest
-
-
-
(247
)
Other expenses
(1,692
)
(22,341
)
(25,169
)
(74,969
)
Total Other Expenses, net
(19,423
)
(36,040
)
(50,467
)
(93,615
)
INCOME FROM OPERATIONS BEFORE TAXES
714,665
437,063
1,636,038
1,975,847
Less:
Income tax expenses
(62,192
)
(106,953
)
(359,734
)
(512,073
)
NET INCOME
652,473
330,110
1,276,304
1,463,774
Net loss attributable to noncontrolling interest
18,367
-
27,706
-
NET INCOME ATTRIBUTABLE TO CHINA SHESAYS COMMON STOCKHOLDERS
670,840
330,110
1,304,010
1,463,774
OTHER COMPREHENSIVE INCOME
Total foreign currency translation gain
75,101
15,577
90,821
15,976
Less: foreign currency translation gain attributable to noncontrolling interest
(347 )
-
(319 )
-
Foreign currency translation gain attributable to China Shesays common stockholders
74,754
15,577
90,502
15,976
COMPREHENSIVE INCOME ATTRIBUTABLE TO CHINA SHESAYS COMMON STOCKHOLDERS $
745,594
$
345,687
$
1,394,512
$
1,479,750
Net income per share-basic and diluted
$
0.04
$
0.02
$
0.07
$
0.10
Weighted average number of shares outstanding during the period - basic and diluted
18,600,012
14,736,279
18,600,012
14,121,561
Investor Alert
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.
Comments & Business Outlook
CHINA SHESAYS MEDICAL COSMETOLOGY INC.
("CHINA SHESAYS") AND SUBSIDIARIES
CONDENSED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE INCOME (UNAUDITED)
Three months ended
March, 31
2011
2010
Consolidated
Combined
REVENUE
Customer service revenue
Cosmetic surgery services
$
1,693,758
$
1,623,430
Professional medical beauty services
1,623,916
1,363,437
Cosmetic dentistry services
27,509
140,853
Sales of goods
229,946
120,205
Total Revenue
3,575,129
3,247,925
COST OF REVENUE
Cost of service revenue
Cosmetic surgery services
(374,705
)
(427,300
)
Professional medical beauty services
(330,600
)
(139,767
)
Cosmetic dentistry services
(19,985
)
(44,259
)
Cost of goods sold
(80,285
)
(49,685
)
Depreciation
(123,898
)
(71,447
)
Total Cost of Revenue
(929,473
)
(732,458
)
GROSS PROFIT
2,645,656
2,515,467
OPERATING EXPENSES
Selling, general and administrative expenses
632,428
457,676
Advertising costs
688,034
396,284
Professional and consultant fees
107,121
28,056
Depreciation
91,292
37,092
Total Operating Expenses
1,518,875
919,108
INCOME FROM OPERATIONS
1,126,781
1,596,359
OTHER INCOME (EXPENSES)
Other income
7
301
Interest income
171
1,563
Interest expenses
(7,745
)
(6,564
)
Imputed interest
-
(247
)
Other expenses
(23,477
)
(52,628
)
Total Other Expenses, net
(31,044
)
(57,575
)
INCOME FROM OPERATIONS BEFORE TAXES
1,095,737
1,538,784
Add (less):
Income tax expenses
(358,799
)
(405,120
)
Net loss attributable to noncontrolling interests
9,339
-
NET INCOME ATTRIBUTABLE TO CHINA SHESAYS
COMMON STOCKHOLDERS
746,277
1,133,664
OTHER COMPREHENSIVE INCOME
Total foreign currency translation gains
19,927
399
Add: foreign currency translation loss attributable to
noncontrolling interests
28
-
Foreign currency translation gains
attributable to China Shesays common stockholders
19,955
399
COMPREHENSIVE INCOME ATTRIBUTABLE
TO CHINA SHESAYS COMMON STOCKHOLDERS
$
766,232
$
1,134,063
Net income per share-basic and diluted
$
0.04
$
0.08
Weighted average number of shares outstanding during the period
- basic and diluted
18,600,012
13,500,012
Comments & Business Outlook
CHINA SHESAYS MEDICAL COSMETOLOGY INC . COMPREHENSIVE INCOME
Year ended December 31,
2010
2009
Consolidated
Combined
REVENUE
Customer service revenue
Cosmetic surgery service
$
6,195,516
$
4,835,389
Professional medical beauty service
4,940,433
2,998,806
Cosmetic dentistry services
427,427
579,822
Sales of goods
609,855
420,656
Total Revenue
12,173,231
8,834,673
COST OF REVENUE
Cost of service revenue
Cosmetic surgery service
(1,762,733
)
(1,536,779
)
Professional medical beauty service
(847,827
)
(517,428
)
Cosmetic dentistry services
(164,928
)
(168,547
)
Cost of goods sold
(228,078
)
(162,705
)
Depreciation
(349,328
)
(206,831
)
Total Cost of Revenue
(3,352,894
)
(2,592,290
)
GROSS PROFIT
8,820,337
6,242,383
OPERATING EXPENSES
Selling, general and administrative expenses
2,862,664
2,680,577
Advertising costs
3,014,871
1,290,545
Professional and consultant fees
716,910
138,292
Depreciation
197,071
125,768
Total Operating Expenses
6,791,516
4,235,182
INCOME FROM OPERATIONS
2,028,821
2,007,201
OTHER INCOME (EXPENSES)
Other income
4,574
52,714
Interest income
5,128
3,383
Interest expenses
(48,852
)
(3,224
)
Imputed interest
(250
)
(1,027
)
Other expenses
(41,530
)
(66,489
)
Total Other Expenses, net
(80,930
)
(14,643
)
INCOME FROM OPERATIONS BEFORE TAXES
1,947,891
1,992,558
Add (less):
Income tax expenses
(624,605
)
(226,116
)
Net loss attributable to noncontrolling interests
19,607
-
NET INCOME ATTRIBUTABLE TO CHINA SHESAYS COMMON STOCKHOLDERS
1,342,893
1,766,442
OTHER COMPREHENSIVE INCOME (LOSS)
Total foreign currency translation gain
129,429
1,073
Add: foreign currency translation loss attributable to noncontrolling interests
502
-
Foreign currency translation gains attributable to China Shesays common stockholders
129,931
1,073
COMPREHENSIVE INCOME ATTRIBUTABLE TO CHINA SHESAYS COMMON STOCKHOLDERS
$
1,472,824
$
1,767,515
Net income per share-basic and diluted
$
0.08
$
0.13
Weighted average number of shares outstanding during the year
- basic and diluted
16,170,417
13,500,012
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.
Liquidity Requirements
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.
Comments & Business Outlook
CHENGDU, China, Feb. 17, 2011 /PRNewswire-Asia-FirstCall / -- China SHESAYS Medical Cosmetology Inc. today provides an update regarding the progress of commencing operations at its new flagship hospital in Chengdu, Sichuan province.
The second flagship hospital comprises of approximately 195,269 square feet, which China SHESAYS leases for $1.3 millionper year until 2016 . In February, the Company started decorating the interior of the hospital. The Company expects to complete the decoration process in early April, after which it will start to install and test medical and cosmetic equipment. The management anticipates that the new flagship hospital will commence operations before the end of June 2011 .
As of December 31, 2010, the Company has expended approximately $1.4 million on the new hospital and expects to invest an additional $3.1 million on decoration and equipment in 2011. When operating at full capacity, the Company expects the new hospital to accommodate up to 100,000 patients per year, compared to 20,000 at the Company's existing flagship hospital .
"We are excited about specifying a timeline for completing our second flagship hospital, which is 5 times size of current flagship hospital, in addition to the three new clinics we opened in other cities in Sichuan province in the second half of 2010. Supported by this significant increase in scale, we expect to further increase our market share and strengthen our leadership in Sichuanprovince. This new facility will meet the growing consumer demand for premium, reliable cosmetology services that adhere to high safety standards. We remain optimistic about the prospects of our medical cosmetology business and are committed to expanding our presence in the region. We expect the new flagship hospital to contribute to the growth of our sales and profit starting from the third quarter of 2011 ," commented Yixiang Zhang, Chairman and Chief Executive Officer of China SHESAYS.
Comments & Business Outlook
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.
Comments & Business Outlook
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 .
Comments & Business Outlook
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."
Liquidity Requirements
Based on our current operating plan, we believe that our existing resources, including cash generated from operations as well as the bank loans, will be sufficient to meet our working capital requirement for our current operations. However, in order to fully implement our business plan and continue our growth,
we will require additional capital either from our stockholders or from outside sources.
Reverse Merger Activity
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 com pany 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.
