China Internet Cafe Holdings Group Inc. (fka CICC)

[$hellKing]

China Unitech Group, Inc. Announces Third Quarter 2010 Results

TUESDAY , NOVEMBER 16, 2010 08:00 AM


SHENZHEN, China, Nov. 16, 2010 /PRNewswire-Asia-FirstCall/ -- China Unitech Group, Inc. (the "Company") (OTC Bulletin Board: CUIG), operating through Junlong Culture Communication Co. Ltd ("Junlong"), a leading internet cafe chain operator in China, today announced its financial results for its third quarter of 2010.


Third Quarter 2010 Highlights




-- Revenue increased 61.4% to $5.8 million year-over-year

-- Gross profit increased 83.5% year-over-year to $2.7 million

-- Operating income increased 52.7% to $2.2 million year-over-year

-- Net income was $1.6 million in the third quarter of 2010, up 41.4%

year-over-year

-- Cash flow provided by operating activities was $6.1 million for the nine

months ended September 30, 2010, as compared to $3.6 million for the

same period last year

-- Acquired one internet cafe in and opened 6 additional internet cafes in

the third quarter of 2010



"We are pleased to report another quarter of momentous financial performance with significant surges in our top line and bottom line, representing an increase of 61.4% and 41.4%, respectively, year-over-year. During the third quarter, we successfully added 7 additional new stores, bringing the total number of internet cafes under the "Dragon Surf" brand name to 43. While we continued to expand our presence in Shenzhen, we executed innovative ways to attract and sustain customers, resulting in improved average occupation rate. This has demonstrated Junlong's seasoned capability and Junlong is well on the way to becoming a major national internet cafe operator in the future," commented Mr. Dishan Guo, Chief Executive Officer of China Unitech Group, Inc.


Third Quarter 2010 Results


For the quarter ended September 30, 2010, net revenue increased 61.4% to $5.8 million, compared to $3.6 million in the third quarter of 2009. Revenue growth was mainly due to the contribution of 15 internet cafes opened since September 30, 2009. The accelerated growth compared to previous quarters was due to one acquired internet cafe located in Baoan District and six newly opened internet cafes located in Shenzhen City during the third quarter of 2010. An increase in average occupation utilization also contributed favorably to the Company's revenue growth.


Gross profit for the third quarter of 2010 increased 83.5% to $2.7 million, compared to $1.5 million in the third quarter of 2009. Gross margin expanded 5.6 percentage points to 46.4%, as compared to 40.8% in the comparable period of 2009. The increase was mainly attributable to the increase in computer usage time in the third quarter of 2010.


Operating expenses increased 1,304.0% to $0.5 million for the third quarter of 2010 from $0.04 million for the third quarter of 2009. The increase was primarily due to higher general and administrative expenses attributable to professional fees related to the Company's status as a public company and reorganizational expenses attributable to recent share exchange transaction with Classic Bond in July 2010.


Operating income for the third quarter of 2010 increased 52.7% to $2.2 million, compared to $1.4 million in the comparable period of 2009. Operating margin was 37.7% in the quarter compared to 39.8% in the third quarter of 2009.


Income tax expense for the third quarter of 2010 increased 96.6% to $0.6 million, compared to $0.3 million in the same period last year, primarily due to the increase in net revenue and higher income tax rate of 22% for the third quarter of 2010, up from 20% for the comparable period in 2009.


Net income increased 41.4% to $1.6 million, or $0.08 per diluted share compared to $1.1 million or $0.06 per share for the same period last year. Diluted earnings per share were calculated using weighted average shares of 20,186,957and 19,000,000 for the quarters ended September 30, 2010 and September 30, 2009, respectively.


Results for the Nine Months Ended September 30, 2010


Net revenue was $14.1 million for the nine months ended September 30, 2010, an increase of 35.8% from $10.4 million for the same period in 2009. Gross profit was $6.3 million, or 44.9% of revenue, an increase of 51.8% from $4.2 million, or 40.1% of revenue, for the nine months ended September 30, 2009. Operating income was $5.6 million, or 39.3% of revenue, an increase of 36.8% from $4.1 million, or 39.0% of revenue, for the nine months ended September 30, 2009. Net income increased 28.6% to $4.2 million for the nine months ended September 30, 2010, or $0.22 per diluted share, compared to $3.3 million, or $0.17 per share for the same period last year. Diluted earnings per share were calculated using weighted average shares of 19,400,000 and 19,000,000 for the nine months ended September 30, 2010 and September 30, 2009, respectively.



Financial Condition


As of September 30, 2010, the Company had $6.4 million in cash and cash equivalents, compared to $3.1 million at year-end 2009, working capital of $5.8 million and a current ratio of 3.1:1. As of September 30, 2010, shareholders' equity was $11.8 million, up from $7.0 million at the end of 2009.


For the nine months ended September 30, 2010, the Company generated $6.0 million in cash from operating activities, compared with$3.6 million for the same period last year. Net cash used in investing activities was $3.3 million for the nine months ended September 30, 2010, which was used for the acquisitions of internet cafes and improvements on leased assets.



Business Outlook

The Company plans to complete acquisitions in Guizhou, Yunnan and Sichuan provinces in the future in order to qualify as a national internet cafe operator.


"For the remainder of 2010, we continue to look for acquisition opportunities to expand our presence outside of Guangdong province as this move would enable us to qualify as one of few national internet cafe operators in China. While we are lagging behind our initial timeline for completing cross provincial acquisitions, we continue to carry out stringent due diligence on potential targets. Despite the delay, we anticipate healthy and stable top line growth in the last quarter of 2010 supported by our acquisitions completed thus far and the strong market demand for internet cafe services," commented Mr. Guo.


About China Unitech Group, Inc.

China Unitech Group, Inc. is the holding company of Classic Bond Development Limited. The Company operates through its variable interest entity Junlong Culture Communication Co. Ltd. ("Junlong"), a leading internet cafe chain operator headquartered in Shenzhen, China. Established in 2003, Junlong is one of the five largest internet cafe chain operators in Shenzhen with 43 company-owned stores. Junlong's internet cafes are operated and managed under the Dragon Surf brand. Its robust system offers a one-stop entertainment and media venue for customers, including VoIP, instant messaging, online games, snacks and drinks. Its internet cafes are typically located in high traffic areas that target mature students and migrant workers. The Company currently employs about 510 full time employees.


Safe Harbor Statement

This press release may contain certain "forward-looking statements" relating to the business of China Unitech Group, Inc., its subsidiary companies and variable interest entity. All statements, other than statements of historical fact included herein are "forward-looking statements" including statements regarding the ability of the Company to grow; the general ability of the Company to achieve its commercial objectives; the business strategy, plans and objectives of the Company and its subsidiaries; the ability to obtain adequate funding for acquisitions, and any other statements of non-historical information. These forward-looking statements are often identified by the use of forward-looking terminology such as "believes," "expects" or similar expressions, and involve known and unknown risks and uncertainties. Although the Company believes that the expectations reflected in these forward-looking statements are reasonable, they do involve assumptions, risks and uncertainties, and these expectations may prove to be incorrect. Investors should not place undue reliance on these forward-looking statements, which speak only as of the date of this press release. The Company's actual results could differ materially from those anticipated in these forward-looking statements as a result of a variety of factors, including those discussed in the Company's periodic reports that are filed with the Securities and Exchange Commission and available on its website (http://www.sec.gov). All forward-looking statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by these factors. Other than as required under the securities laws, the Company does not assume a duty to update these forward-looking statements.


Financial tables follow









CHINA UNITECH GROUP, INC.



CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

UNAUDITED






For The Three

Months Ended

September 30

2010 2009

---- ----



Revenue $5,840,453 $3,617,873



Cost of revenue

Depreciation 442,104 331,588

Salary 342,695 201,586

Rent 306,243 206,545

Utility 397,630 351,489

Business tax and

surcharge 1,381,435 855,433

Others 260,197 194,275

------- -------

3,130,304 2,140,916

Gross profit 2,710,149 1,476,957



Operating Expenses

General and

administrative

expenses 75,906 36,395

Reorganizational

expenses 435,086 -





Total operating

expenses 510,992 36,395

------- ------



Income from operations 2,199,157 1,440,562



Non-operating income

(expenses)

Interest income 1,827 452

Interest expenses (2,402) -

Other expenses (10) (93)





Total other income

(expenses) (585) 359

---- ---



Net income before

income taxes 2,198,572 1,440,921

Income taxes 572,302 291,158





Net income $1,626,270 $1,149,763



Other comprehensive

income

Foreign currency

translation 209,872 13,261

------- ------

Comprehensive income $1,836,142 $1,163,024

---------- ----------



Basic and diluted

earnings per share 0.08 0.06

==== ====



Basis and Diluted

weighted average

Common Stock

outstanding 20,186,957 19,000,000

========== ==========











For The Nine

Months Ended

September 30

2010 2009

---- ----



Revenue $14,142,866 $10,417,633



Cost of revenue

Depreciation 1,132,103 944,775

Salary 831,226 588,123

Rent 748,723 608,256

Utility 1,111,843 1,009,105

Business tax and

surcharge 3,344,906 2,463,347

Others 629,068 625,476

------- -------

7,797,869 6,239,082

Gross profit 6,344,997 4,178,551



Operating Expenses

General and

administrative

expenses 351,888 114,732

Reorganizational

expenses 435,086 -





Total operating

expenses 786,974 114,732

------- -------



Income from operations 5,558,023 4,063,819



Non-operating income

(expenses)

Interest income 4,287 811

Interest expenses (7,115) -

Other expenses (43) (252)





Total other income

(expenses) (2,871) 559

------ ---



Net income before

income taxes 5,555,152 4,064,378

Income taxes 1,340,823 788,198





Net income $4,214,329 $3,276,180



Other comprehensive

income

Foreign currency

translation 229,549 8,793

------- -----

Comprehensive income $4,443,878 $3,284,973

---------- ----------



Basic and diluted

earnings per share 0.22 0.17

==== ====



Basis and Diluted

weighted average

Common Stock

outstanding 19,400,000 19,000,000

========== ==========








CHINA UNITECH GROUP, INC.



CONDENSED CONSOLIDATED BALANCE SHEETS






September 30, December 31,

2010 2009

---- ----

(unaudited)

ASSETS

Current assets:

Cash $6,409,048 $3,061,856

Restricted cash 1,679,581 1,645,411

Rental deposit 255,163 144,504

Equipment deposit - 81,217

Inventory 208,050 204,971





Total current assets 8,551,842 5,137,959



Property and equipment, net 5,802,798 3,572,696

Intangible assets, net 197,589 -





Total assets $14,552,229 $8,710,655

=========== ==========

LIABILITIES AND STOCKHOLDERS' EQUITY



Current liabilities:

Short term loan $449,296 $146,259

Accounts payable 80,859 33,979

Deferred revenue 659,600 775,985

Payroll and payroll related liabilities 154,888 124,390

Income and other tax payables 986,316 525,470

Accrued expenses 132,974 43,126

Amount due to director 240,625 5,162

Acquisition consideration payable 92,564 -





Total current liabilities 2,797,122 1,654,371

Commitments and contingencies - -



Stockholders' Equity

Preferred stock ($0.00001 par value,

100,000,000 shares authorized, 0 share

issued and outstanding) - -

Common stock ($0.00001 par value,

100,000,000 shares authorized, 20,200,000

and 19,000,000 shares issued and

outstanding as of September 30, 2010 and

December 31, 2009, respectively) 202 190

(6,173,600 equivalent shares outstanding as

of December 31, 2009)

Additional paid-in capital 1,628,417 1,373,484

Statutory reserves 718,744 718,744

Retained earnings 8,967,200 4,752,871

Accumulated other comprehensive income 440,544 210,995





Total stockholders' equity 11,755,107 7,056,284

---------- ---------



Total liabilities and stockholders' equity $14,552,229 $8,710,655

=========== ==========










CHINA UNITECH GROUP, INC.



CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

UNAUDITED






For The Nine Months Ended

September 30

------------

2010 2009

---- ----

Cash flows from operating activities

Net income $4,214,329 $3,276,180

Adjustments to reconcile net income to

net cash used in operating activities:

Depreciation 1,161,497 964,444

Amortization 14,601 -

Changes in operating assets and

liabilities:

Rental deposit (81,776) (6,723)

Inventory 1,156 (134,592)

Accounts payable 45,374 10,708

Amount due to director 231,668 (148,493)

Payroll and payroll related liabilities 27,431 (38,333)

Accrued expenses 82,094 9,782

Deferred revenue (130,200) 124,994

Income and other tax payable 442,125 (415,925)

Net cash provided by operating activities 6,008,299 3,642,042

--------- ---------



Cash flows from investing activities

Acquisition of property, plant and

equipment (2,696,834) (1,215,347)

Acquisition of cafes (635,233) -

---

Net cash used in investing activities (3,332,067) (1,215,347)

---------- ----------



Cash flows from financing activities

Cash acquired from reverse merger 1,442 -

Issuance of shares for cash 251,612 -

Proceeds from short term loan 300,000 -

Net cash provided by financing activities 553,054 -



Effect of foreign currency translation on

cash and cash equivalents 117,906 4,442

------- -----



Net increase in cash 3,347,192 2,431,137



Cash- beginning of period 3,061,856 1,112,646

--------- ---------



Cash- end of period $6,409,048 $3,543,783

========== ==========



Supplemental disclosure of cash flow

information

Cash paid during the period

Interest paid $7,115 $ -

====== ===

Income tax paid $1,051,472 $671,288

========== ========



SUPPLEMENTAL DISCLOSURE OF NON-CASH

INVESTING AND FINANCING ACTIVIES:

Summary of Assets Acquired from

Acquisitions:

Net Property and Equipment $499,776 $ -

Other Current Assets 15,678 -

Intangible Assets 207,964 -

------- ---

Net Assets Acquired $723,418 $ -

======== ===



Transfer of equipment deposits paid in

property and equipment $83,811 $ -

======= ===

Acquisition payable $90,610 $ -

======= ===











Company Contact:

Mr. Dishan Guo

Chief Executive Officer

China Unitech Group, Inc.

Tel: [phone]



Mr. Jingwei Li

Vice President of Corporate Finance,

China Unitech Group, Inc.

Email: [e-mail]

Tel: [phone]



Investor Relations Contact:

Mr. Crocker Coulson, President

CCG Investor Relations

Email: [e-mail]

Tel: [phone]








SOURCE China Unitech Group, Inc.

Contacts:



Mr. Dishan Guo

Chief Executive Officer

[phone]

Mr. Jingwei Li

Vice President of Corporate Finance

[phone]

[e-mail]



both of China Unitech Group, Inc.; or Investors



Mr. Crocker Coulson

President of CCG Investor Relations

646-213-1915

[e-mail]