China Education Alliance Announces First Quarter 2014 Financial Results - San Diego, California News Station - KFMB Channel 8 - cbs8.com

China Education Alliance Announces First Quarter 2014 Financial Results

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SOURCE China Education Alliance, Inc.

HARBIN, China, May 15, 2014 /PRNewswire/ -- China Education Alliance, Inc. ("China Education Alliance" or the "Company", OTCQX: CEAI), a China-based education resource and services company, today announced its first quarter 2014 financial results.  The Company will host a conference call on Friday, May 16, 2014, at 8 a.m. EDT (8 p.m. Beijing time the same day).

Financial Highlights for the First Quarter ended March 31, 2014

  • Total revenues decreased by 70% to $0.7 million.
  • Net loss of $6.0 million.
  • Loss per share was $0.56 per fully diluted share.

First Quarter 2014 Review:

Revenue decreased by $1.7 million, or 70% to $0.7 million for the quarter ended March 31, 2014 from $2.4 million during the same period in 2013.

Revenue from the on-line education division decreased by $0.5 million, or 80%, to $0.1 million for the quarter ended March 31, 2014 from $2.1 million for the quarter ended March 31, 2013.  Revenue from the training center division decreased by $1.2 million, or 67%, to $0.6 million for the quarter ended March 31, 2014 from $1.8 million for the quarter ended March 31, 2013.

The decline in revenue was primarily a result of a decline in revenue across all of our business. We believe revenue was affected by external factors including slowdown in economic growth within the PRC, untruthful allegations about our businesses, and increased competition. These factors contributed to the continuous decline in interest of existing and new students, which resulted in decrease in student enrollments and led to a decline in revenue as compared to the quarter ended March 31, 2013. We expect to improve the performance of our online education division in the future by providing students with more competitive, up-to-date study materials and easy access. We have contracted technology companies and hired our own professional IT technicians to design and build a new web-based platform, aiming to provide the long-distance teaching services encompassing online community system and online teaching management system. The platform is in the final testing stage and will be launched in the near future. Also, we will continue to implement the new strategic business development plan for 2014, which targets to optimize the operation of existing training centers while seeking good opportunities to expand our market share. As such, we predict that our revenue will gradually recover after we launch the new web-based platform and set up more training centers. 

Overall cost of revenue decreased by $0.6 million, or 31%, to $1.4 million for the quarter ended March 31, 2014 from $2.1 million for the same period in 2013.  

Cost of revenue for the online education division decreased by $0.3 million, or 24% to $1.0 million for the quarter ended March 31, 2014 from $1.4 million for the same period in 2013. The decrease was mainly attributable to the decrease in purchase of study materials and the decrease in depreciation costs resulting from less expenditure on fixed assets in this quarter. Gross profit margin for the online education division decreased to negative 713% for the quarter ended March 31, 2014 from negative 116% during the same period in 2013 due to the significant decrease in online education revenue and the relatively moderate decrease in cost of revenue.

Cost of revenue for the training center division decreased $0.3 million, or 45% to $0.4 million for the quarter ended March 31, 2014 from $0.7 million for the same period in 2013. The decrease was mainly attributable to the decrease in teacher's salary as our teachers are paid by the number of classes they teach and there was a decrease in classes we offered during the quarter ended March 31, 2014 as compared to the quarter ended March 31, 2013. Gross profit margin for the training center division decreased to 33% for the quarter ended March 31, 2014 from 61% during the same period in 2013 as cost of revenue did not decrease as much as revenue.

Gross profit for the first quarter of 2014 was negative $0.7 million compared to gross profit of $0.4 million for the first quarter of 2013.

Selling expenses increased by $0.1 million, or 10%, to $1.2 million in the first quarter of 2014 from $1.1 million in the first quarter of 2013. Selling expenses were 167% of total sales in the first quarter of 2014 compared with 45% in the first quarter of 2013. The increase in selling expenses was a result of the increase in labor costs as a result of increase in the average employee salary and increase in the number of sales and marketing personnel in our onsite education segment.

Administrative expenses increased by $2.0 million, or 124% to $3.7 million for the quarter ended March 31, 2014 from $1.7 million for the quarter ended March 31, 2013. The increase was mainly due to the increase in research and development expenses related to the development of the web based platform and newly-opened onsite training centers. Total administrative expenses were about 511% of total revenue for the three months ended March 31, 2014, compared to 68% for the same period in 2013.

Other income was $68,189 for the quarter ended March 31, 2014 as compared to other expense of $558,802 for the quarter ended March 31, 2013.

Net loss for the first quarter of 2014 was $6.0 million compared to net loss of $3.7 million for the first quarter of 2013. Basic and diluted loss per share was $0.56 for the first quarter of 2014 compared to loss per share of $0.35 for the first quarter of 2013.

Financial Position

As of March 31, 2014, the Company had cash and cash equivalents of $51 million and working capital of $50 million.  The Company had net cash used in operating activities of $5.0 million.

As of March 31, 2014, the Company had no long-term debt.

Conference Call

China Education Alliance will host a conference call and live webcast to discuss its first quarter 2014 financial results at 8 a.m. Eastern Daylight Time (EDT) on Friday, May 16, 2014 (8 p.m. in Harbin/Beijing on the same day).

The dial-in details for the live conference call are as follows:

- Participant Dial-In (Toll Free USA): +1 84 5675 0437
- International Dial-In: +65 67239381
- China Dial-In:  800-819-0121 
- China Dial-In: 400-620-8038
- Hong Kong Toll Free: 8009-30346
  Conference Password: CEU

A live webcast of the conference call will be available in the investor relations section of the Company's website at: http://www.chinaeducationalliance.com/index.jsp

A telephone replay of the call will be available 1 hour after the end of the conference for seven days.

The dial-in details for the replay are as follows:

- US Toll Free:  1-855-452-5696
- International Toll:  +61-2-8199-0299 
  Passcode Number: 47869096

About China Education Alliance, Inc.

China Education Alliance, Inc. (http://www.chinaeducationalliance.com) is a leading educational services company offering high-quality instructors and online education materials for students between the ages of 6 to 18 and adults (university students and professionals) aged 18 and over. Divided into two segments, students and graduate professionals, our business model delivers the skills and knowledge necessary to excel in a rapidly growing and highly competitive China. The Company provides students in the first segment with online education materials sourced from top tier schools and famous instructors for download, as well as online training and tutoring services. With teaching centers located across China, the Company also offers hands on training and tutoring to aid Chinese students pass the two most important tests they will face in their educational careers: the senior high school entrance and college entrance exams. In the second segment for graduates and professionals, China Education Alliance provides vocational training courses in subjects including IT, administration, multimedia, as well as several professional training programs.

Safe Harbor Statement

Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995: Certain statements in this press release, constitute forward-looking statements for purposes of the safe harbor provisions under The Private Securities Litigation Reform Act of 1995. These statements include, without limitation, statements regarding our ability to prepare the company for growth, the Company's planned expansion in 2009 and predictions and guidance relating to the Company's future financial performance. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs and are not a guarantee of future performance but they involve risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements, which may include, but are not limited to, such factors as unanticipated changes in product demand especially in the education industry, pricing and demand trends for the Company's products, changes to government regulations, risk associated with operation of the Company's new facilities, risk associated with large scale implementation of the company's business plan, the ability to attract new customers, ability to increase its product's applications, cost of raw materials, downturns in the Chinese economy, and other information detailed from time to time in the Company's filings and future filings with the United States Securities and Exchange Commission. Investors are urged to consider these factors carefully in evaluating the forward-looking statements herein and are cautioned not to place undue reliance on such forward-looking statements, which are qualified in their entirety by this cautionary statement. The forward-looking statements made herein speak only as of the date of this press release, readers are cautioned not to place undue reliance on any of them and the Company undertakes no duty to update any forward-looking statement to conform the statement to actual results or changes in the company's expectations.

For more information, please contact:

China Education Alliance, Inc.
Ms. Cloris Li
Chief Financial Officer
Email: cloris@edu-chn.com

China Education Alliance, Inc. and Subsidiaries

Consolidated Balance Sheets














March 31,


December 31,






2014


2013






(Unaudited)



ASSETS









Current Assets







Cash and cash equivalents

$

51,015,598

$

56,377,154


Accounts receivable


452,938


-


Other receivables



509,568


262,547


Prepaid expenses and other current assets


692,874


727,708



Total current assets


52,670,978


57,367,409









Non-current Assets







Property and equipment, net


7,492,741


8,251,612


Intangibles and capitalized software, net


4,844,055


5,099,934



Total non-current assets


12,336,796


13,351,546











Total Assets


$

65,007,774

$

70,718,955









LIABILITIES AND STOCKHOLDERS' EQUITY









Current Liabilities







Accounts payable and accrued expenses

$

1,659,741

$

1,076,625


Deferred revenue



1,068,968


854,027


Income tax and other taxes payable


164,540


111,500



Total current liabilities


2,893,249


2,042,152










Commitments and Contingent Liabilities


-


-









Stockholders' Equity







Common stock ($0.001 par value, 150,000,000 shares authorized, 10,582,530 and 10,582,530 issued as of March 31, 2014 and December 31, 2013, respectively; 137,512 and 137,512 shares held in treasury, as of March 31, 2014 and December 31, 2013, respectively)

10,583


10,583


Additional paid-in capital


40,942,009


40,942,009


Statutory reserve



3,792,161


3,792,161


Retained earnings



5,539,596


11,516,661


Accumulated other comprehensive income


12,193,196


12,705,287


Less: Treasury stock


(977,072)


(977,072)



Stockholders' equity - CEAI and Subsidiaries


61,500,473


67,989,629


Noncontrolling interests in subsidiaries


614,052


687,174



Total stockholders' equity


62,114,525


68,676,803











Total Liabilities and Stockholders' Equity

$

65,007,774

$

70,718,955









The accompanying notes are an integral part of these consolidated financial statements.

 

China Education Alliance, Inc. and Subsidiaries

 Consolidated Statements of Operations and Comprehensive Income 

(Unaudited)














Three months ended March 31,






2014


2013









Revenue






Online education revenue

$

127,264

$

626,711


Training center revenue


597,430


1,815,821



Total revenue


724,694


2,442,532









Cost of Revenue






Online education costs


1,034,869


1,354,321


Training center costs


397,525


716,845



Total cost of revenue


1,432,394


2,071,166









Gross Profit/(Loss)






Online education gross profit/(loss)


(907,605)


(727,610)


Training center gross profit


199,905


1,098,976



Total gross profit/(loss)


(707,700)


371,366









Operating Expenses






Selling expenses


1,210,448


1,099,502


Administrative expenses


3,702,847


1,649,961


Depreciation and amortization


492,196


808,372



Total operating expenses


5,405,491


3,557,835









Loss from operations


(6,113,191)


(3,186,469)









Other Income (Expense)






Other income(expenses), net


28,056


(1,717)


Loss on disposal of property and equipment


(5,453)


(2,769)


Impairment loss on intangible assets


-


(606,032)


Interest income


45,586


51,716



Total other income/(Expense), net


68,189


(558,802)









Net Loss Before Provision for Income Tax


(6,045,002)


(3,745,271)


Income taxes:







Current


-


-



Deferred


-


-









Net Loss


(6,045,002)


(3,745,271)


Net Loss attributable to the noncontrolling interests


(67,937)


(42,252)

Net Loss - attributable to CEAI and Subsidiaries

$

(5,977,065)

$

(3,703,019)









Net Loss per common stock-basic and diluted

$

(0.56)

$

(0.35)









Weighted Average Shares Outstanding-basic and diluted


10,582,530


10,582,530

Diluted Weighted  Average Shares Outstanding


10,582,530


10,582,530









The Components of Other Comprehensive Income






Net Loss

$

(5,977,065)

$

(3,703,019)


Foreign currency translation adjustment


(512,091)


517,565









Comprehensive Loss

$

(6,489,156)

$

(3,185,454)









 The accompanying notes are an integral part of these consolidated financial statements. 

 

China Education Alliance, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

(Unaudited)
















Three months ended March 31,







2014


2013










Cash flows from operating activities






Net loss 

$

(6,045,002)

$

(3,745,271)


Adjustments to reconcile net loss to net cash used in







operating activities








Depreciation and amortization - operating expenses


492,196


808,372




Depreciation and amortization - cost of revenue


439,684


724,895




Loss on disposal of fixed assets


5,453


2,769




Impairment loss on intangible assets


-


606,032




Stock based compensation


-


595


Net changes in operating assets and liabilities







Accounts receivable


(450,678)


(76,471)



Prepaid expenses and other receivables


(219,159)


636,015



Accounts payable and accrued liabilities


587,796


(27,153)



Income tax and other taxes payable


53,040


(54,690)



Deferred revenue


220,901


171,183

Net cash used in operating activities


(4,915,769)


(953,724)










Cash flows from investing activities






Purchases of property and equipment


(3,527)


(11,520)


Loan received back from NIT


-


7,965,715


Proceeds from disposal of property and equipment


752


255

Net cash (used in) provided by investing activities


(2,775)


7,954,450










Cash flows from financing activities






Advance to a stockholder


-


196,151


Dividend paid to noncontrolling shareholders


-


(305,883)

Net cash used in financing activities


-


(109,732)










Effect of exchange rate changes on cash


(443,012)


283,112










Net increase (decrease) in cash and cash equivalents


(5,361,556)


7,174,106










Cash and cash equivalents at beginning of period


56,377,154


64,172,917










Cash and cash equivalents at end of period

$

51,015,598

$

71,347,023



















 The accompanying notes are an integral part of these consolidated financial statements. 

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