China Education Alliance, Inc. Announces Third Quarter 2008 Results

2008-11-14 19:53 800

Third Quarter Highlights:

-- Net revenue of $7.1 million, an increase of 39.2% from $5.1 million

in third quarter 2007

-- Gross profit of $5.8 million, an increase of 41.4% from $4.1

million in the third quarter 2007

-- Gross margin of 80.7%, as compared to 80.9% from the third quarter

of 2007

-- Net income of $2.8 million, an increase of 27.3% from $2.2

million in 2007

-- Fully diluted earnings per share was $0.11, flat from the third

quarter 2007

HARBIN, Heilongjiang, China, Nov. 14 /Xinhua-PRNewswire-FirstCall/ -- China Education Alliance, Inc. (OTC Bulletin Board: CEUA) ("China Education Alliance" or "the Company"), a leading distributor of exam oriented educational resources, offering high-quality materials and training and tutoring services through both online networks and on-site training center in China, today reported financial results for the third quarter ended September 30, 2008.

Xiqun Yu, Chairman and CEO of China Education Alliance, commented, "We experienced a significant increase in revenue this quarter led by our online education business as we continue to dominate the online education business in Heilongjiang Province and expand into surrounding provinces. In the third quarter 2008, we successfully executed on our expansion plan in the cities of Mu Dan Jiang and Qi Qi Ha Er. China Education Alliance continues to leverage its expertise in the education sector, maintain a strong balance sheet, and ability to access capital to further enhance its market position."

Financial Results for the Third Quarter ended September 30, 2008

For the third quarter 2008, China Education Alliance reported net revenue of $7.1 million, representing a 39.2% increase over $5.1 million revenue reported in the third quarter of 2007 and a 57.8% increase over the $4.5 million revenue reported in the second quarter of 2008. The increase in revenue was attributed to an increase of $1.5 million from on-line business and an increase of $0.5 million from on-site business. In addition, we have several new programs in vocational training including two new on-site training centers in Mu Dan Jiang and Qi Qi Ha Er.

Gross profit increased to $5.8 million in the third quarter, up 41.4% from $4.1 million in the same quarter of 2007 and up 56.8% from the $3.7 million in the second quarter of 2008. Gross margin was 80.7% in the third quarter of 2008, down 0.2 basis points year-over-year and down 2.8 basis points, sequentially.

Net income for the third quarter of 2008 was $2.8 million, up 27.3% from $2.2 million in the same period last year, and up 64.7% from $1.7 million in the previous quarter. This represents fully diluted earnings per share of $0.11, compared to $0.11 in the third quarter of 2007, and $0.07 in the second quarter of 2008.

Operating income for the third quarter of 2008 was $2.9 million, up 38% from $2.1 million in the same period last year, and up 61% from $1.8 million in the previous quarter.

As of September 30, 2008, China Education Alliance, Inc. had $20 million in cash and cash equivalents, $21.7 million in working capital, and no long-term debt. Shareholders' equity was approximately $30 million up from $18.6 million at December 31, 2007. The company generated $6.3 million in cash flow from operating activities in the third quarter of 2008.

Financial Results for the Nine Months ended September 30, 2008

For the first nine months of 2008, total revenue was $15.7 million, up 25.6% from $12.5 million in the previous year. Online education revenue was $12.1 million, up 21% from $10 million in the previous year and represented 77% of total revenue. The training center business contributed 23% of revenue or $3.6 million, as compared to 38.5% of revenue or $2.6 million for the first nine months of 2007. Gross profit for the first nine months of 2008 was $12.7 million, up 29.6% from gross profit of $9.8 million in the comparable period a year ago. Gross margin was 81.2% compared to 78.4% for the first nine months of 2007. Income from operations for the nine-months of 2008 was $6.2 million, up 19.2% from $5.2 million from the year ago period. Net income for the first nine months of 2008 was $6.3 million or $0.26 fully diluted earnings per share compared to $4.5 million or $0.22 for the comparable 2007 period.

Business Outlook

Mr. Yu commented, "In the third quarter, despite a challenging economic environment, we experienced significant growth in both online and on site exam orientated training. We continue to make progress in the expansion and establishment of additional English language and vocational training centers.

Despite the difficult financial economic environment, we continue to see opportunities for growth going into 2009. We remain fully confident that we can continue our growth trend in the final quarter of 2008 and into 2009. We will continue to provide exam-oriented education by targeting the 10 million students, ages 7-18, in the northeast region of China, and increasing our market share in these areas. We will continue to expand our language training business and expect to reach our stated goal of 10 branches by the end of 2008 and 20 total branches by the end of 2009. In addition, Scientific Discovery is expected to generate considerable revenues in Q4, and will continue to help us promote the China Education Alliance brand and facilitate our nationwide expansion."

Investor Conference Call / Webcast Details

The Company's management will review detailed third quarter 2008 results on Friday, November 14, 2008 at 8:30 AM EST (9:30 PM, Friday, November 14, Beijing time). The conference dial-in numbers are +1-617-213-8841 (international) and 1-866-202-0886 (U.S. domestic). The passcode to access the conference call is 37608714. The playback will be available beginning two hours after the conclusion of the conference call and will be accessible by dialing +1-617-801-6888 (international) and 1-888-286-8010 (U.S. domestic). The passcode number to access the replay is 30602427.

About China Education Alliance, Inc.

China Education Alliance, Inc. is a fast growing, leading China-based company offering high-quality education resources and services to students ages 7 to 18 and adults ages 18+. For students ages 7 to 18, China Education Alliance, Inc. offers supplemental online exam-oriented training materials and on-site exam-oriented training and tutoring services. All resources and tutoring services are provided by famous teachers within mainland China. The purpose of online exam orientated resources and on-site tutoring is to help Chinese students ages 11 to 18 to pass the two most important, and highly competitive exams in their educational career: senior high school entrance exam and college entrance exam. For graduates and professionals age 18+, China Education Alliance provides vocational training including IT and Accounting training programs. In addition, as of April 2008, the Company has acquired 70% of the 'World Exchange College of Language' English training business, headquartered in Toronto with sites expanding across China. Their comprehensive English programs are designed to assist graduates and professionals in learning the English language, both written and conversational in order to better able them to work for a foreign corporation or work-study abroad. For more information about CEUA, please visit .

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 2008 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, the adoption by consumers of its new game business, the unproven advertising model that is dependent on attracting a large game user base, 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.

-Financial Tables Attached-

China Education Alliance, Inc. and Subsidiaries

Consolidated Statements of Operations

Three months ended Nine months ended

September 30 September 30

2008 2007 2008 2007

(Unaudited) (Unaudited) (Unaudited) (Unaudited)


Online education

revenues $5,126,456 $3,613,550 $12,067,183 $9,958,203

Training center

revenues 2,019,933 1,474,969 3,608,317 2,566,298

Total revenue 7,146,389 5,088,519 15,675,500 12,524,501

Cost of Goods Sold

Online education

costs 714,995 568,334 1,622,862 1,855,951

Training center costs 667,066 402,225 1,321,523 848,314

Total cost of goods

Sold 1,382,061 970,559 2,944,385 2,704,265

Gross Profit

Online education

gross profit 4,411,461 3,045,216 10,444,321 8,102,252

Training center gross

profit 1,352,867 1,072,744 2,286,794 1,717,984

Total gross profit 5,764,328 4,117,960 12,731,115 9,820,236

Operating Expenses

Selling expenses 2,352,018 1,573,632 4,965,036 3,412,798

Administrative 288,083 317,407 935,830 913,073

Depreciation and

amortization 264,988 128,124 680,819 341,301

Total operating

Expenses 2,905,089 2,019,163 6,581,685 4,667,172

Other Income


Other Income 5,570 243,156 534,067 298,650

Interest income 37,991 18,253 94,427 34,339

Interest expense -- (49,094) -- (542,173)

Total other income

(expense) 43,561 212,315 628,494 (209,184)

Net Income Before

Provision for Income

Tax 2,902,800 2,311,112 6,777,924 4,943,880

Provision for Income


Current 145,889 158,469 451,097 395,214

Net Income $2,756,911 $2,152,643 $6,326,827 $4,548,666

Basic Earnings Per

Share $0.13 $0.11 $0.30 $0.24

Basic Weighted

Average Shares

Outstanding 21,434,129 19,321,667 21,434,129 19,319,249

Diluted Earnings Per

Share $0.11 $0.11 $0.26 $0.22

Diluted Weighted

Average Shares

Outstanding 24,176,509 20,284,937 24,796,069 20,282,519

The Components of

Other Comprehensive


Net Income $2,756,911 $2,152,643 $6,326,827 $4,548,666

Foreign currency


adjustment 80,723 (210,170) 1,412,564 48,596

Comprehensive Income $2,837,634 $1,942,473 $7,739,391 $4,597,262

China Education Alliance, Inc. and Subsidiaries

Consolidated Balance Sheet

September 30, December 31,

2008 2007

ASSETS (unaudited)

Current Assets

Cash and cash equivalents $20,048,307 $11,778,954

Advances to related parties 1,052,269 108,536

Other receivable 296,276 --

Prepaid expenses 2,585,740 1,612,779

Total current assets 23,982,591 13,500,269

Property and equipment, net 6,374,735 6,186,824

Intangible, net 1,901,123 623,560

Long term investment 431,831 --

$32,690,281 $20,310,653


Current Liabilities

Accounts payable and accrued

expenses $712,727 $423,109

Deferred revenues 1,996,566 1,245,507

Total current liabilities 2,709,293 1,668,616

Stockholders' Equity

Preferred stock ($0.001 par value,

20,000,000 shares authorized, of

7,597,645 and 9,397,645 issued

and outstanding, respectively,

aggregate liquidation preference

of $2,717,152 and $3,383,152,

respectively 3,010,144 3,677,944

Common stock ($0.001 par value,

150,000,000 shares authorized,

21,892,631 and 19,409,830,

issued and outstanding,

respectively 21,893 19,410

Additional paid-in capital 10,642,986 6,378,110

Statutory reserve

Accumulated other comprehensive

income 2,656,105 1,243,541

Retained earnings 13,649,860 7,323,032

Total stockholders' equity 29,980,988 18,642,037

$32,690,281 $20,310,653

China Education Alliance, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

Nine Months Ended September 30

2008 2007

(Unaudited) (Unaudited)

Cash flows from operating activities

Net Income $6,326,827 $4,548,666

Adjustments to reconcile net cash

provided by operating activities

Depreciation and amortization 1,193,275 601,441

Amortization of loan discount -

warrants attached to loans -- 420,639

Warrants issued for services -- 12,371

Stock issued for services -- 15,900

Other receivables (296,276) 40,535

Prepaid expenses and other (972,961) (90,338)

Accounts payable and accrued

Liabilities 289,618 239,609

Deferred revenue 751,059 1,468,542

Net cash provided by operating activities 7,291,542 7,257,365

Cash flows from investing activities

Purchases of fixed assets (994,181) (1,738,502)

Purchases of intangible assets (732,569) --

Long-term investment (431,831) --

Net Cash (used in) investing activities (2,158,581) (1,738,502)

Cash flows from financing activities

Warrants exercised 2,667,559 --

Proceeds from loans -- 3,400,000

Payments on loans -- (1,530,000)

Advances from (payments to) related parties (943,733) (237,443)

Net cash provided by financing activities 1,723,826 1,632,557

Effect of exchange rate 1,412,566 293,316

Net increase in cash 8,269,353 7,444,736

Cash and cash equivalents at

beginning of year 11,778,954 1,838,339

Cash and cash equivalents at end of year $20,048,307 $9,283,075

Supplemental disclosure of cash flow


Interest paid $-- $297,838

Taxes paid $94,737 $--

Stock issued for Services -- 15,900

Value of warrants issued for services $-- $12,371

Non-cash investing and financing activities:

Conversion of preferred stock to common $667,800 $339,076

For more information, please contact:

China Education Alliance, Inc.

Susan Liu

Chief Financial Officer

Tel: +1-778-388-8513


Investor Relations:

Lauren Milner

The Ruth Group

Tel: +1-646-536-7026


Source: China Education Alliance, Inc.
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