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EX-99.1 - Tsingda eEDU Corp | c63475_ex99-1.htm |
EX-23.1 - Tsingda eEDU Corp | c63475_ex23-1.htm |
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As filed with the Securities and Exchange Commission on December 3, 2010 |
Registration No. 333-169877 |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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TSINGDA EEDU CORPORATION |
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(Exact name of registrant as specified in its charter) |
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Cayman Islands |
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8299 |
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N/A |
(State or other jurisdiction of |
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(Primary Standard Industrial |
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(I.R.S. Employer |
No. 0620, Yongleyingshiwenhuanan Rd.,
Yongledian Town,
Tongzhou District, Beijing, PR China
86 10-62690222/0288
(Address including zip code, and telephone
number of
registrants principal executive
offices)
Mr. Kang Chungmai
No. 0620, Yongleyingshiwenhuanan Rd., Yongledian Town,
Tongzhou District, Beijing, PR China
86 10-62690222/0288
(Name, address, including zip code,
and
telephone number of Agent for Service)
with copies to
Ellenoff Grossman & Schole LLP
150 East 42nd Street
New York, NY 10017
Tel: (212) 370-1300
Fax: (212) 370-7889
and
Daniel H. Luciano
242A West Valley Brook Rd.
Califon, NJ 07830
Tel: (908) 832-5546
Fax: (847) 556-1456
Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this registration statement.
If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933 check the following box. x
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definition of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act. (Check one):
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Large accelerated filer |
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Accelerated filer |
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Non-accelerated filer |
o (Do not check if a smaller reporting company) |
Smaller reporting company |
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Title of each class of securities to be registered |
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Amount |
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Proposed |
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Proposed |
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Amount of |
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1,304,493 Ordinary Shares, par value $0.000384 |
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1,304,493 |
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$1.60 |
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$ |
2,087,188.80 |
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$148.82 |
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Total |
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1,304,493 |
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$1.60 |
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2,087,188.80 |
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$148.82 |
(2) |
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(1) |
Estimated solely for purposes of calculating the registration fee in accordance with Rule 457 under the Securities Act of 1933 based on the price of our Ordinary Shares purchased in a private placement of Units which closed on September 16, 2010. Currently, there is no trading market for our Ordinary Shares. |
(2) |
$55.99 previously paid. |
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED.
THE SELLING STOCKHOLDERS MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION
STATEMENT IS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION AND BECOMES
EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IS NOT
SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE SALE IS NOT
PERMITTED.
SUBJECT TO COMPLETION, DATED DECEMBER 2, 2010
PROSPECTUS
TSINGDA EEDU CORPORATION
1,304,493 ORDINARY SHARES
This prospectus relates to 1,304,493 of our ordinary shares, par value $.000384 per share (Ordinary Shares), which may be sold from time to time by the selling shareholders named in this prospectus.
The selling shareholders named in this prospectus are offering all of the Ordinary Shares offered through this prospectus. All of the shares, when sold, will be sold by these selling stockholders. The selling stockholders may sell these shares from time to time in the open market at prevailing prices or in individually negotiated transactions, through agents designated from time to time or through underwriters or dealers. We will not control or determine the price at which the selling stockholders decide to sell their shares.
We will not receive any of the proceeds from the sale of our Ordinary Shares by the selling shareholders.
Our Ordinary Shares are presently not traded on any market or securities exchange.
The purchase of the securities offered through this prospectus involves a high degree of risk. See Section Entitled Risk Factors beginning on page 8.
The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.
No underwriter or person has been engaged to facilitate the sale of Ordinary Shares in this offering. None of the proceeds from the sale of stock by the selling stockholders will be placed in escrow, trust or any similar account.
We may amend or supplement this prospectus from time to time by filing amendments or supplements as required. You should read the entire prospectus and any amendments or supplements carefully before you make your investment decision.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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PAGE NO. |
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8 |
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33 |
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MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
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50 |
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CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES |
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT |
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F-1 |
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The following summary highlights selected information contained in this prospectus. This summary does not contain all the information you should consider before investing in the securities. Before making an investment decision, you should read the entire prospectus carefully, including the risk factors section, the financial statements and the notes to the financial statements.
In this prospectus, unless otherwise specified, all monetary amounts
are in U.S. dollars. All renminbi, or RMB, amounts have been translated into
U.S. dollars at the December 31, 2009 noon buying rate in the City of New York
for cable transfers of RMB as certified for customs purposes by the Federal
Reserve Bank of New York, being $1.00 = RMB6.8372.
Except where the context otherwise requires and for the purposes of this prospectus only:
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We, us, our company, our, and Compass refer to the combined business of Tsingda eEDU Corporation and its consolidated subsidiaries and affiliates, but do not include the shareholders of Tsingda eEDU Corporation; |
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Tsingda Technology refers to Tsing Da Century Education Technology Co. Ltd., a British Virgin Islands business company, which is our direct, wholly-owned subsidiary; |
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Tsingda Management refers to Beijing Tsingda Century Management Consulting Ltd., a wholly foreign owned enterprise incorporated under the laws of the PRC, which is our indirect, wholly-owned subsidiary; |
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Tsingda Education refers to Beijing Tsingda Century Investment Consultant of Education Co. Ltd., our contractually controlled affiliate and the PRC operating company; |
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Tsingda Network refers to Beijing Tsingda Century Network Technology Co. Ltd., a wholly owned subsidiary of Tsingda Education; |
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China, Chinese and PRC, refer to the Peoples Republic of China; |
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Renminbi and RMB refer to the legal currency of China; and |
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U.S. dollars, dollars and $ refer to the legal currency of the United States. |
Our Company
Business Overview
We are an online provider of supplementary educational services in
China. All of our courses are broadcast online, and are consumed by either in private or at one of our 2,271
Company-owned or franchised learning centers. Most of our learning centers are
franchised locations, and we generate most of our revenues through franchise
fees and sale of e-cards, which are pre-paid credit cards used by our
students to purchase our
individual courses. Our online educational services consist of a web based platform
called the Tsingda Internet Classroom. We rolled out our offline
Tsingda Learning Center concept in 2006, and as of September 30, 2010, we
have approximately 2,271 learning centers throughout the PRC. In late 2008, we
introduced our online learning platform, and as of September 30, 2010, we had a total of 1,561,797 active students, which is
defined as a student registered with us (of which we have 6,500,751 as of September
30, 2010) who has also purchased and activated an e-card.
We have received the following awards reflecting our strength and position in China education industry:
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Twice awarded China Top-10 Brand of Education Chain (2008 and 2009), by China Education TV. |
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China Top-10 Institute for Online Education in 2009, by China Education TV. |
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The Most Valuable Education Chain for Investment in 2009, by Sina.com (Nasdaq: SINA). |
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Most Trustworthy Institute for Supplementary Education in 2009, by Sina.com (Nasdaq: SINA). |
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We generate revenues from franchised and Company-owned Tsingda Learning
Centers and from our online, virtual classroom platform. From franchised
locations, we receive one time franchise fees, annual management fees,
20% of student generated revenues at franchised locations, and 10% of the
revenues from the sale of reference books and teaching products at franchised
locations. From Company-owned locations, we receive 100% of its revenues. From
our online, virtual classroom platform, we receive 40% of revenues from live sessions and 90% of revenues
from pre-recorded sessions. For
more detailed information regarding our franchise arrangements, please see the
section entitled Franchise Arrangements on page 59.
For fiscal 2009, we generated $14,650,863 in gross revenues, which represents a 101% increase from gross revenues of $7,301,733 for fiscal 2008. Our fiscal year 2009 pre tax, net income was $7.1 million, which represents a 77.9% increase from pre tax, net income of $4.0 million for fiscal year 2008. Our revenue for the nine months ended September 30, 2010 was $18.7 million, which represents an approximately 64% increase from revenues of $11.4 million for the nine months ended September 30, 2009. Our pre tax, net income for the nine months ended September 30, 2010 was $10.9 million, which represents an increase of approximately 95% from pre tax, net income of $5.6 million for nine months ended September 30, 2009.
On September 16, 2010, we completed a unit financing with certain accredited investors pursuant to which we received total gross proceeds of $9.6 million. Each unit consisted of one ordinary share and a stock purchase warrant to purchase 35% of the number of Ordinary Shares purchased in the financing. The warrant exercise price is $2.08 per share, subject to adjustment, and the warrant term is five (5) years.
On November 15, 2010, the Company held a special meeting of its shareholders (Special Meeting) at its principal offices in Beijing, China, pursuant to the Notice of Special Meeting of Shareholders. At the Special Meeting, 33,386,754 shares of the Companys authorized share capital were represented in person or by proxy, which constituted a quorum. At the Special Meeting, shareholders approved two proposals (i) to change the corporate name from Compass Acquisition Corporation to Tsingda eEDU Corporation and (ii) to affect a three-for-one (3 to 1) consolidation of the Companys issued and outstanding Ordinary Shares and to increase the amount of the Companys authorized Ordinary Shares from thirty-nine million sixty-two thousand five hundred shares (39,062,500) to one hundred million (100,000,000) shares. The name change of the Company to Tsingda eEDU Corporation and the three-for-one consolidation and increase in the Companys authorized share capital was effective immediately following shareholder approval.
Our
headquarters are located at No. 0620, Yongleyingshiwenhuanan Rd., Yongledian
Town, Tongzhou District, Beijing, PR China, our phone number is 86 10-62690222/0288, and our English language
web-site is http://ir.eee114.com.cn.
The Industry
The Peoples Republic of China (PRC) represents approximately one quarter of the global population. According to information published by the PRC government, our target population market as of December 31, 2010 is approximately 360 million individuals. The group is comprised of: infants and children below school age (6) - 160 million; primary school students - 110 million; junior high school students - 60 million; and senior high school students 30 million. (Source: Ministry of Education http://www.moe.edu.cn/).
Organizational
History
We were organized under the laws of the Cayman Islands on September 27, 2006. Tsingda Technology was organized under the laws of British Virgin Islands on December 11, 2009. Tsingda Management was organized under the laws of the PRC on November 26, 2007. Tsingda Education was organized under the laws of the PRC on October 23, 2003. Tsingda Network was organized under the laws of the PRC on February 14, 2004.
On May 24, 2010, we acquired Tsingda Technology. The transaction was treated for accounting purposes as a capital transaction and recapitalization by Tsingda Technology, the accounting acquirer, and as a re-organization by Compass, the accounting acquiree.
Tsingda Technology owns 100% of the issued and outstanding capital
stock of Tsingda Management. On April 26, 2010, Tsingda Management entered into
a series of contractual agreements with Tsingda Education, and its
shareholders, in which Tsingda Management assumed management of the business activities
of Tsingda Education. Namely, these contractual agreements consist of: (i) a
consulting services agreement, (ii) an operating agreement, (iii) an equity
pledge agreement, (iv) a voting rights proxy agreement, and (v) an option
agreement. We rely on these agreements to, among other things, generate all our
revenues, control the business activities of Tsingda Education, appoint all of
its executives, senior management and the members of its board of directors,
and at our option, purchase all the outstanding equity of Tsingda Education. If
one or more of these contractual agreements are terminated or ruled
unenforcable, we could lose control of Tsingda Education, which will
materially and adversely affect our revenues and future growth prospects. See Risk Factors beginning on Page
8.
The Wholly-Foreign Owned Enterprise Law (1986), as amended, and The
Wholly-Foreign Owned Enterprise Law Implementing Rules (1990), as amended and
the Company Law of the PRC (2006), contain the principal regulations governing
dividend distributions by wholly foreign owned enterprises. Under these
regulations, wholly foreign owned enterprises may pay dividends only
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out of their accumulated profits, if any, determined in accordance with
PRC accounting standards and regulations. Additionally, such companies are
required to set aside a certain amount of their accumulated profits each year,
if any, to fund certain reserve funds. These reserves are not distributable as
cash dividends except in the event of liquidation and cannot be used for
working capital purposes. The PRC central government also imposes controls on
the conversion of RMB into foreign currencies and the remittance of currencies
out of the PRC. We may experience difficulties in completing the administrative
procedures necessary to obtain and remit foreign currency for the payment of
dividends from the Companys profits.
Furthermore, if our subsidiaries or affiliates in China incur debt on their own in the future, the instruments governing the debt may restrict its ability to pay dividends or make other payments. If we or our subsidiaries are unable to receive all of the revenues from our operations through these contractual or dividend arrangements, we may be unable to pay dividends on our Ordinary Shares.
The risks
described above and other risks in connection with an investment in our
securities are found in the Risk Factors section beginning on page 8. You should
carefully read and consider the information in the Risk Factors section
before making an investment in our securities.
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Corporate Structure
Our organization structure is depicted below:
This prospectus relates to the resale by the selling stockholders
identified in this prospectus of up to 1,304,493 Ordinary Shares. All of the
shares, when sold, will be sold by these selling stockholders. The selling
stockholders may sell their shares from time to time at prevailing market
prices. We will not receive any proceeds from the sale of the shares of Ordinary Shares by the selling stockholders.
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Ordinary Shares Offered: |
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1,304,493 Ordinary Shares. |
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Ordinary Shares Outstanding prior to Offering: |
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33,729,862 |
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Ordinary Shares Outstanding after Offering |
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32,425,369 |
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Use of Proceeds: |
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We will not receive any proceeds from the sale of the 1,304,493 Ordinary Shares subject to sale by the selling stockholders under this prospectus. |
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Summary Consolidated Financial Information
The following table summarizes selected historical financial data regarding our business and should be read in conjunction with our consolidated financial statements and related notes contained elsewhere in this prospectus and the information under Managements Discussion and Analysis of Financial Condition and Results of Operations.
The summary consolidated statement of income for the fiscal years ended
December 31, 2009 and 2008 respectively and the summary balance sheet data as
of December 31, 2009 and 2008 are derived from the audited consolidated
financial statements of Tsingda Technology included elsewhere in this
prospectus. Tsingda Technology conducts all our business operations and became
our wholly-owned subsidiary on May 24, 2010. We derived our summary
consolidated financial data for the nine months ended September 30, 2010 and
2009 respectively from our unaudited consolidated financial statements included
elsewhere in this prospectus, which include all adjustments, consisting of
normal recurring adjustments, that our management considers necessary for a
fair presentation of our financial position and results of operations as of the
dates and for the periods presented. The results of operations for past
accounting periods are not necessarily indicative of the results to be expected
for any future accounting period.
Balance Sheet
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December |
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December |
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Cash |
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$ |
458,645 |
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$ |
2,314,262 |
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Total Assets |
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17,243,696 |
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10,013,952 |
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Liabilities |
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3,732,244 |
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2,514,497 |
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Total Stockholders Equity |
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13,511,452 |
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7,499,455 |
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Statement of Operations
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Year Ended |
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Year Ended |
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Revenues |
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$ |
14,650,863 |
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$ |
7,301,733 |
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Pre-Tax Net Income |
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7,120,130 |
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4,001,207 |
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Balance Sheet
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September |
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Cash |
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$ |
7,245,703 |
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Total Assets |
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38,040,200 |
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Liabilities |
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7,161,423 |
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Total Stockholders Equity |
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38,040,200 |
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Statement of Operations
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Nine Month |
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Revenue |
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$ |
18,732,271 |
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11,396,636 |
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Pre-Tax Net Income |
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10,897,164 |
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5,633,108 |
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An investment in our Ordinary Shares is speculative and involves a high
degree of risk and uncertainty. You should carefully consider the risks
described below, together with the other information contained in this
prospectus, including the consolidated financial statements and notes thereto
of our Company, before deciding to invest in our Ordinary Shares. The risks
described below are not the only ones facing our Company. Additional risks not
presently known to us or that we presently consider immaterial may also
adversely affect our Company. If any of the following risks occur, our
business, financial condition and results of operations and the value of our
Ordinary Shares could be materially and adversely affected.
Risks Relating to Our Business
We have a limited operating history and we may not be able to sustain the growth in our business.
Our limited operating history and the early stage of development of the
online education industry in which we operate makes it difficult to evaluate
our business and future prospects. Although our annual growth rate of sales
revenue from 2008 to 2009 was approximately 101%, and our annual growth rate of
pre-tax income was approximately 77.9% during this same period, there is no
assurance that we will be able to sustain such growth in the future. We may
have negative growth, which in turn may impair our business operations and
profitability. Furthermore, our largest shareholder, Tsing Da Century Education
Technology Co., Ltd., a Belize corporation controlled by Zhang Hui, our
chairman and CEO, has entered into a securities escrow agreement with respect
to the 6,000,000 Ordinary Shares (the Escrowed Shares) owned by it. If the
Companys net income for its fiscal year ending 2010 is less than $9,000,000,
the escrow agent shall transfer to the investors in our September 2010 private
placement, on a pro-rata basis, a number of Escrow Shares equal to the
percentage of variation from the 2010 performance threshold times the total
number of Escrow Shares. Additionally, if the Companys net income for the
fiscal year 2011 is less than $13,500,000, the escrow agent shall transfer to
such investors, on a pro-rata basis, an amount of Escrow Shares equal to the
percentage of variation from the 2011 performance threshold times the total
number of Escrow Shares. Any Escrow Shares not distributed to such investors
following the release of fiscal year 2011 information will be returned to Tsing
Da Century Education Technology Co., Ltd. Therefore, if we cannot meet these
performance targets, there may be a significant change in the ownership of our
outstanding shares.
The market for the
services that we provide is still emerging and evolving rapidly.
The market for educational services is still evolving in the PRC. Our success will depend to a large extent on the perceived benefit that our services provide to our customers, who are mainly students. Therefore we will need to increase awareness of our products, protect our reputation and develop customer loyalty among our customers, anticipate and adapt to changing conditions in the markets in which we operate.
We may have
difficulty expanding our business operations.
In order to expand our business operations we will need to (i) increase
the number of our learning centers, (ii) scale
and adapt our existing network infrastructure to accommodate increased systems
traffic and (iii) increase our marketing efforts. Through 2011, we expect to open approximately 550
additional franchised locations. We plan on a broad scale brand promotion campaign, and we will need significantly more computing power as traffic
within our system increases and our learning center locations expand. We will
be required to spend significant capital and resources to manage our additional
franchises, execute our promotional campaign and to purchase equipment, and
upgrade our technology and network infrastructure to handle increased Internet
traffic. In this regard, we have budgeted approximately $1.2 million for our
marketing campaign,
approximately $1.4 million for IT expenditures, and approximately $1.8 million to add and improve our course content. We expect to generate this revenue through our existing cash flow. If
we fail to expend sufficient capital to execute our growth strategy, our
operating results will be harmed.
Problems with content delivery services, bandwidth providers, data centers or other third parties could harm our business, financial condition or results of operations.
Our business relies significantly on third-party vendors, such as data
centers, content delivery services and bandwidth providers, while no single vendor is material to our
operations. If any third-party vendor fails to provide their services or
if their services are no longer available to us for any reason and we are not
immediately able to find replacement providers, our business, financial
conditions or results of operations could be materially adversely affected.
Additionally, any disruption in network access or related services provided by these third-party providers or any failure of these third-party providers to handle current or higher volumes of use could significantly harm our business operations. If our service is disrupted, we may lose revenues due to our inability to provide services to our franchised learning centers and we may be obligated to compensate these franchisees for their loss. Our reputation also may suffer in the event of a disruption. Any financial or other difficulties our providers face may negatively impact our business and we are unable to predict the nature and extent of any such impact. We exercise very little control over these third-party vendors, which increases our vulnerability to problems with the services
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they provide. Any errors, failures, interruptions or delays experienced in connection with these third-party technologies and information services could negatively impact our relationships with our franchisees and materially adversely affect our brand reputation and our business, financial condition or results of operations and expose us to liabilities to third parties.
Our data centers are vulnerable to natural disasters, terrorism and system failures that could significantly harm our business operations and lead to client dissatisfaction.
In delivering our solutions, we are dependent on the operation of our data centers and bandwidth providers, which are vulnerable to damage or interruption from earthquakes, terrorist attacks, war, floods, fires, power loss, telecommunications failures, computer viruses, computer denial of service attacks or other attempts to harm our system, and similar events. We do not have insurance to cover any losses. Some of our systems are not fully redundant, and our disaster recovery planning cannot account for all eventualities. The occurrence of a natural disaster, a terrorist attack, a providers decision to close a facility we are using without adequate notice or other unanticipated problems at our data centers could result in lengthy interruptions in our service. Interruptions in our service could reduce our revenues and profits, and our brand reputation could be damaged if customers believe our system is unreliable, which could have a material adverse affect on our business, financial condition and results of operations.
Our business may be adversely affected by malicious third-party software applications that interfere with the function of our technology.
Our business may be adversely affected by malicious software applications that make changes to operating computers and interfere with our technology. These applications may attempt to change users experience in using our virtual classrooms or teaching modules at our learning centers, including changing configurations of our user interface, or otherwise interfering with our ability to connect with users. The interference may occur without disclosure to or consent from users, resulting in a negative experience that users may associate with our solutions. These software applications may be difficult or impossible to uninstall or disable, may reinstall themselves and may circumvent other applications efforts to block or remove them. If our efforts to combat these malicious software applications are unsuccessful, our reputation may be harmed, and users may be reluctant to use our services. This could result in a decline in usage of our educational services and corresponding revenues, which would have a material adverse effect on our business, financial condition and results of operations.
If we fail to manage our growth effectively, our business, financial condition and results of operations could be materially adversely affected.
We have experienced, and continue to experience, rapid growth in our operations and headcount, which has placed, and will continue to place, significant demands on our management, operational and financial infrastructure. If we do not effectively manage our growth, the quality of our solutions and services could suffer, which could negatively affect our brand and operating results. To effectively manage this growth, we will need to continue to improve, among other things:
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our information and communication systems to ensure that our operations are well coordinated and that we can effectively communicate with our growing base of franchisees and users; |
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our systems of internal controls to ensure timely and accurate reporting of all of our operations; and |
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our information technology infrastructure to maintain the effectiveness of our systems. |
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In order to enhance and improve these systems we will be required to make significant capital expenditures and allocation of valuable management resources. If the improvements are not implemented successfully, our ability to manage our growth will be impaired and we may have to make additional expenditures to address these issues, which could materially adversely affect our business, financial condition and results of operations.
Furthermore, our largest shareholder, Tsing Da Century Education
Technology Co., Ltd., a Belize corporation controlled by Zhang Hui, our
chairman and CEO, has entered into a securities escrow agreement with respect
to the Escrowed Shares. If the Companys net income for its fiscal year ending
2010 is less than $9,000,000, the escrow agent shall transfer to the investors
in our September 2010 private placement, on a pro-rata basis, a number of
Escrow Shares equal to the percentage of variation from the 2010 performance
threshold times the total number of Escrow Shares. Additionally, if the
Companys net income for the fiscal year 2011 is less than $13,500,000, the
escrow agent shall transfer to such investors, on a pro-rata basis, an amount
of Escrow Shares equal to the percentage of variation from the 2011 performance
threshold times the total number of Escrow Shares. Any Escrow Shares not
distributed to such investors following the release of fiscal year 2011
information will be returned to Tsing Da Century Education Technology Co., Ltd.
Therefore, if we cannot meet these performance targets, there may be a
significant change in the ownership of our outstanding shares.
We may incur significant costs to ensure compliance with United States corporate governance and accounting requirements.
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We may incur significant costs associated with our public company
reporting requirements, costs associated with newly applicable corporate
governance requirements, including requirements under the Sarbanes-Oxley Act of
2002 and other rules implemented by the Securities and Exchange Commission. We
expect all of the applicable rules and regulations to significantly increase
our legal and financial compliance costs and to make some activities more time
consuming and costly. We also expect that these rules and regulations will make
it more expensive for us to obtain director and officer liability insurance,
and we may be required to accept reduced policy limits and coverage or incur
substantially higher costs to obtain the same or similar coverage. We currently
estimate our annual costs for such compliance to be approximately $280,000,
however we cannot predict the amount of future compliance costs or other
additional costs we may incur or the timing of such costs.
We are currently evaluating and monitoring developments with respect to these newly applicable rules, and we cannot predict or estimate the amount of additional costs we may incur or the timing of such costs.
We are dependent upon key personnel and the loss of key personnel, or the inability to hire or retain qualified personnel, could have an adverse effect on our business and operations.
Our success is heavily dependent on the continued active participation of our current executive officers listed under Management. Loss of the services of one or more of our officers could have a material adverse effect upon our business, financial condition or results of operations. Further, our success and achievement of our growth plans depend on our ability to recruit, hire, train and retain other highly qualified technical and managerial personnel. Competition for qualified employees among companies in the PRC is intense, and the loss of any of such persons, or an inability to attract, retain and motivate any additional highly skilled employees required for the expansion of our activities, could have a materially adverse effect on us. The inability on our part to attract and retain the necessary personnel and consultants and advisors could have a material adverse effect on our business, financial condition or results of operations.
As of September 30, 2010, we had a total of approximately 150 employees
in our offices in the PRC. However, there can be no assurance that we will be
able to maintain a prolonged good relationship with our existing or
ex-employees and that no labor disruptions will occur in the future. Should any
industrial action or labor unrest occur, our business operations could be
adversely affected.
Potential claims alleging infringement of third partys intellectual property by us could harm our ability to compete and result in significant expense to us and loss of significant rights.
Our operations are technology driven, and we have sought patent and
copyright protection for our key software packages. However, we may confront,
from time to time, third parties that may assert patent, copyright, and other
intellectual property rights to these and other software packages which are
important to our business. Any claims that our products or processes infringe
the intellectual property rights of others, regardless of the merit or
resolution of such claims, could cause us to incur significant costs in
responding to, defending, and resolving such claims, and may divert the efforts
and attention of our management and technical personnel away from the business.
As a result of such intellectual property infringement claims, we could be
required or otherwise decide it is appropriate to pay third-party infringement
claims; discontinue using the technology or processes subject to infringement
claims which would include the software relating to our learning centers and
virtual classrooms; develop other technology not subject to infringement
claims, which could be time-consuming and costly or may not be possible; and/or
license technology from the third-party claiming infringement, which license
may not be available on commercially reasonable terms. The occurrence of any of
the foregoing could result in unexpected expenses or require us to recognize an
impairment of our assets, which would reduce the value of the assets and
increase expenses. In addition, if we are required to discontinue the use of
existing software, our revenue could be negatively impacted.
Risks Related to our Corporate Structure
Our principal shareholder is able to control
substantially all matters requiring a vote of our shareholders and its
interests may differ from the interests of our other shareholders.
Tsing Da Century Education Technology Co., Ltd., a Belize corporation
(not to be confused with Tsingda Technology, a BVI corporation, which is our
direct-wholly-owned subsidiary), is our majority shareholder and beneficially
owns approximately 33.8%
of our issued and outstanding Ordinary Shares. Mr. Zhang Hui, our
Chairman and President, is an officer and majority owner of this company.
Therefore, Mr. Zhang is able to exert substantial control on all matters
requiring approval by our shareholders, including the election of our directors
and officers. This concentration of ownership may also have the effect of
discouraging, delaying or preventing a future change of control, which could
deprive our stockholders of an opportunity to receive a premium for their shares
as part of a sale of our company and might reduce the price of our shares.
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The contractual agreements with Tsingda Education are not as effective as direct ownership. Because we rely on Tsingda Education for our revenue, any termination of, or disruption to, these contractual arrangements could detrimentally affect our business.
Presently all of our business operations are carried out by Tsingda Education, and its wholly owned subsidiary, Tsingda Network. We do not own any equity interests in Tsingda Education, but control and receive the economic benefits of its business operations through various contractual arrangements. Through these contractual arrangements, we have the ability to substantially influence the daily operations and financial affairs of Tsingda Education, as we are able to appoint its senior executives and approve all matters requiring shareholder approval. Accordingly, we consolidate Tsingda Education results, assets and liabilities in our financial statements.
However, these
contractual agreements may be terminated under certain circumstances. Generally
the PRC has substantially less experience related to the enforcement of
contractual rights through its judiciary or the arbitration process as compared
to the United States or the Cayman Islands. This inexperience presents the risk
that the judiciary or arbitrators in the PRC may be reluctant to enforce
contractual rights, interpret these rights and remedies differently than what
was intended by the parties to the agreements, or find that such contractual
agreements do not comply with restrictions in current PRC laws. A PRC court may
also set aside an arbitration award by reason of any defect the court considers
to be present in the arbitration proceeding, remedies at law may not be adequate
and a PRC court may not order specific performance. In addition, any legal
proceeding may result in substantial costs, disruptions to our business, damage
to our reputation and diversion of our resources.
If Tsingda Education or its stockholders fail to perform their obligations under the contractual arrangements, we may have to rely on legal remedies under PRC laws, including seeking specific performance or injunctive relief, and claiming damages, and there is a risk that we may be unable to obtain these remedies. Therefore our contractual arrangements may not be as effective in providing control over Tsingda Education as direct ownership. Because we rely on Tsingda Education for our revenue, any termination of or disruption to these contractual arrangements could detrimentally affect our business.
If the PRC
government determines that our agreements with these companies are not in
compliance with applicable regulations, our business in the PRC could be
adversely affected.
The Chinese government restricts foreign investment in education and Internet-related businesses, including distribution of content over the Internet. We cannot be sure that the PRC government would view our operating arrangements to be in compliance with PRC licensing, registration, restrictions on foreign investment or other regulatory requirements, including without limitation the requirements described in the Government Regulations section. If we are determined not to be in compliance, the PRC government could levy fines, revoke our business and operating licenses, require us to discontinue or restrict our operations, restrict our right to collect revenues, block our website, require us to restructure our business, corporate structure or operations, impose additional conditions or requirements with which we may not be able to comply, impose restrictions on our business operations or on our customers, or take other regulatory or enforcement actions against us that could be harmful to our business. We may also encounter difficulties in obtaining performance under or enforcement of related contracts.
In addition,
our agreements are governed by the PRC laws and regulations. PRC laws and
regulations concerning the validity of the contractual arrangements are
uncertain, as many of these laws and regulations are relatively new and may be
subject to change, and their official interpretation and enforcement by the PRC
government may involve substantial uncertainty.
We may not be able to consolidate the financial results of some of our affiliated companies or such consolidation could materially adversely affect our operating results and financial condition.
All of our
business is conducted through Tsingda Education which currently is considered
for accounting purposes a variable interest entity (VIE), and we are
considered the primary beneficiary, enabling us to consolidate our
financial results in our consolidated financial statements. We have also
received a legal opinion from our PRC legal counsel that the VIE Agreements are
valid and enforceable under PRC Laws. In the event that in the future a company
we hold as a VIE would no longer meet the definition of a VIE, or we are deemed
not to be the primary beneficiary, we would not be able to consolidate line by
line that entitys financial results in our consolidated financial statements
for PRC purposes. Also, if in the future an affiliate company becomes a VIE and
we become the primary beneficiary, we would be required to consolidate that
entitys financial results in our consolidated financial statements for PRC
purposes. If such entitys financial results were negative, this could have a
corresponding negative impact on our operating results for PRC purposes.
However, any material variations in the accounting principles, practices and
methods used in preparing financial statements for PRC purposes from the
principles, practices and methods generally accepted in the United States and
in the SEC accounting regulations must be discussed, quantified and reconciled
in financial statements for United States and SEC purposes.
We rely on certain
contractual agreements between Tsingda Management and Tsingda Education, and if
any of these agreements are terminated or unenforceable, our business and
operations will be materially and adversely affected. In the event of
termination or unenforceability of any of these agreements, our financial
condition, results of operations and future growth prospects may be materially
harmed.
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We rely on the
VIE Agreements between our wholly-owned subsidiary, Tsingda Management, and our variable interest entity, Tsingda
Education to control Tsingda Education.
Under the terms of the exclusive consulting services agreement Tsingda Management has the exclusive right to provide business consulting and related services to Tsingda Education in connection with its business operations. Under this agreement, Tsingda Management owns the intellectual property rights arising from the performance of these services, including, but not limited to, any trade secrets, copyrights, patents, know-how, unpatented methods and processes and otherwise, whether developed by Tsingda Management or Tsingda Education based on Tsingda Managements provision of such services under the agreement. Tsingda Education pays quarterly consulting service fees to Tsingda Management that are equal 100% of Tsingda Educations total net profit for such quarter. The consulting services agreement is in effect from April 26, 2010 and continues indefinitely unless terminated by (a) Tsingda Management upon a material breach by Tsingda Education; (b) bankruptcy by either Tsingda Management or Tsingda Education; (c) by either Tsingda Management or Tsingda Education in the event Tsingda Management ceases operations or (d) by either Tsingda Management or Tsingda Education in the event circumstances arise which materially adversely affects the performance of either party under the consulting agreement. Because 100% of our revenues are generated from Tsingda Education pursuant to this agreement, if this agreement is terminated or not enforceable, we will not be able to generate any revenues.
Under the terms of the operating agreement by and among Tsingda Management, Tsingda Education and the shareholders of Tsingda Education, Tsingda Management has the right to direct the corporate policies regarding Tsingda Educations daily operations and financial management, including the power to appoint the members of Tsingda Educations board of directors as well as its executive officers. The operating agreement is effective for an indefinite term under the laws of the PRC, and may only be terminated by Tsingda Management. Because we rely on the operating agreement to control the business operations of Tsingda Education, if this agreement is terminated or not enforceable, we may lose the ability to control the management and operations of Tsingda Education.
Under the terms of the equity pledge agreement, Tsingda Education pledged all of its assets to Tsingda Management for a term of two years following Tsingda Education meeting all of its obligations under the consulting services agreement. If this agreement is terminated or not enforceable, we may not have any adequate security or remedy against Tsingda Education should Tsingda Education breach its obligations under the consulting services agreement.
Under the terms of the voting rights agreement by and among Tsingda Management, Tsingda Education and the shareholders of Tsingda Education, the shareholders of Tsingda Education irrevocably grant and entrust Tsingda Management, for the maximum period of time permitted by PRC law, all voting rights in Tsingda Education. Because we rely on the voting rights agreement to vote on all matters submitted to Tsingda Educations shareholders for their approval, if this agreement is terminated or not enforceable, shareholders of Tsingda Education may take shareholder initiatives that may not be in our best interests.
Under the
terms of the option agreement by and among Tsingda Management, Tsingda
Education and the shareholders of Tsingda Education, Tsingda Management has the
option to purchase from the shareholders of Tsingda Education, all the
outstanding shares of Tsingda Education. The option agreement is effective for
the maximum period allowable under the laws of the PRC, and may only be
terminated by Tsingda Management. In the event we are not able to control
Tsingda Education through our other contractual arrangement, we would need to
rely on the option agreement to purchase all the outstanding shares of Tsingda
Education. In such an event, if the option agreement is terminated or not
enforceable, then we may lose control of Tsingda Education.
Risks Related to Doing Business in China
PRC economic, political and social conditions, as well as changes in any government policies, laws and regulations, could adversely affect the overall economy in China or the prospects of the education market, which in turn could adversely affect our business.
Substantially all of our operations are conducted in China, and substantially all of our revenues are derived from China. Accordingly, our business, financial condition, results of operations, prospects and certain transactions we may undertake are subject, to a significant extent, to economic, political and legal developments in China.
The PRC economy differs from the economies of most developed countries in many respects, including the amount of government involvement, level of development, growth rate, control of foreign exchange and allocation of resources. While the PRC economy has experienced significant growth in the past two to three decades, growth has been uneven, both geographically and among various sectors of the economy. Demand for our services may depend, in large part, on economic conditions in China. Any slowdown in Chinas economic growth may cause families to reduce the use of our services for their children, which in turn could reduce our net revenues.
Although the PRC economy has been transitioning from a planned economy to a more market-oriented economy since the late 1970s, the PRC government continues to play a significant role in regulating industry development by imposing ongoing policies. The PRC
12
government also exercises significant control over Chinas economic growth through the allocation of resources, controlling the incurrence and payment of foreign currency-denominated obligations, setting monetary policy and providing preferential treatment to particular industries or companies. Changes in any of these policies, laws and regulations could adversely affect the overall economy in China or the prospects of the education market, which could harm our business.
The PRC government has implemented various measures to encourage foreign investment and sustainable economic growth and to guide the allocation of financial and other resources, which have for the most part had a positive effect on our business and growth. However, we cannot assure you that the PRC government will not repeal or alter these measures or introduce new measures that will have a negative effect on us.
Chinas social and political conditions are also not as stable as those of the United States and other developed countries. Any sudden changes to Chinas political system or the occurrence of widespread social unrest could have negative effects on our business and results of operations. In addition, China has tumultuous relations with some of its neighbors and a significant further deterioration in such relations could have negative effects on the PRC economy and lead to changes in governmental policies that would be adverse to our business interests
Failure to comply with the United States Foreign Corrupt Practices Act could subject us to penalties and other adverse consequences.
We are subject to the United States Foreign Corrupt Practices Act, which generally prohibits United States companies from engaging in bribery or other prohibited payments to foreign officials for the purpose of obtaining or retaining business. Foreign companies, including some that may compete with us, are not subject to these prohibitions. Corruption, extortion, bribery, pay-offs, theft and other fraudulent practices occur from time-to-time in the PRC. We can make no assurance, however, that our employees or other agents will not engage in such conduct for which we might be held responsible. To date, we have taken no steps to prevent violations of the FCPA other than the adoption of a code of ethics. Although we intend to adopt a code of ethics to ensure compliance with the FCPA and Chinese anti-corruption laws by all individuals involved with our company, our employees or other agents may engage in such conduct for which we might be held responsible. If our employees or other agents are found to have engaged in such practices, we could suffer severe penalties and other consequences that may have a material adverse effect on our business, financial condition and results of operations.
PRC regulations regarding offshore financing activities by PRC residents have undertaken continuous changes which may increase the administrative burden we face and create regulatory uncertainties that could adversely affect our business.
On August 8,
2006, the PRC Ministry of Commerce (MOFCOM), joined by the China Securities
Regulatory Commission (CSRC), the State Administration of Foreign Exchange
(SAFE) as well as other government agencies, released a Provisions for
Foreign Investors to Merge with or Acquire Domestic Enterprises (M&A
Regulation), which took effect September 8, 2006 and was amended in 2009.
These new rules significantly revised Chinas regulatory framework governing
onshore-to-offshore restructurings and foreign acquisitions of domestic
enterprises. These new rules reflect greater PRC government attention to
cross-border merger, acquisition and other investment activities, by confirming
MOFCOM as a key regulator for issues related to mergers and acquisitions in
China and requiring MOFCOM approval of a broad range of merger, acquisition and
investment transactions. According to the new M&A Regulation, a related-party
acquisition in which an offshore Company-owned or controlled by a PRC resident
acquires a domestic company controlled by the same PRC resident shall be
subject to the approval of MOFCOM.
Among other things, the M&A Regulation also included new provisions to require that the overseas listing of an offshore company which is directly or indirectly controlled by a PRC resident for the purpose of overseas listing of such PRC residents interests in a domestic company, known as a special purpose company, must obtain the approval of CSRC prior to the listing.
We believe that our current VIE structure avoids the acquisition transaction which is directly the target under scrutiny of the M&A Regulation, including the requirement of CSRC approval. Thus, in its current practice, it appears the M&A Regulation does not apply to our corporate structure.
However, the application of this M&A Regulation remains uncertain since neither MOFCOM nor CSRC has approved any Chinese companys foreign listing. There is no consensus currently existing among the leading PRC law firms regarding the scope and applicability of the MOFCOM or CSRC approval requirements. If the MOFCOM, CSRC or other PRC regulatory body subsequently determines that the new M&A Regulation applies to our situation and CSRCs approval was required for this offering, we may face sanctions by the MOFCOM, CSRC or other PRC regulatory agencies. In such event, these regulatory agencies may impose fines and penalties on our operations in the PRC, limit our operating privileges in the PRC, delay or restrict the repatriation of funds to our offshore companies, or take other actions that could have a material adverse effect on our business, financial condition, results of operations, reputation and prospects, as well as the trading price of our securities.
13
We
maybe subject to PRC penalties and may be required to forfeit $100,000 if our PRC
resident shareholders including Zhang Hui, our chairman and CEO, and Liu
Juntao, our Executive Vice President do not obtain SAFE Circular 75 approval of
their ownership of our shares.
Under PRC law, a PRC resident is required to obtain approval from SAFE when such PRC resident acquires securities of a foreign company. In that respect, all of our PRC resident shareholders including Zhang Hui, our chairman and CEO, and Liu Juntao, our Executive Vice President, are required to obtain SAFE approval of the shares indirectly held by them. If they fail to obtain SAFE approval, we may be subject to penalties under PRC law. Failure to obtain the approval may result in restrictions on the Company, including prohibitions on the payment of dividends and other distributions to its offshore affiliates and capital inflow from the offshore entities.
To date, the required filings are underway for all of our PRC resident shareholders. We have requested our shareholders and beneficial owners who may be subject to SAFE rules to make the necessary applications, filings and amendments as required under SAFE rules. We have advised these shareholders and beneficial owners to comply with the relevant requirements. It is our understanding that these shareholders are in the process of making the required filings. However, we cannot provide any assurance that all of our shareholders and beneficial owners who may be PRC residents will comply with our request to make or obtain any applicable registrations or comply with other requirements required by SAFE rules. The failure or inability of our PRC resident shareholders or beneficial owners to make any required registrations or comply with other requirements may result in the forfeiture of $100,000 currently held in escrow for our benefit, may subject such shareholders or beneficial owners to fines and legal sanctions and may also limit our ability to contribute additional capital into or provide loans to our PRC subsidiaries, limit the ability of our PRC subsidiaries to pay dividends or otherwise distribute profits to us, or otherwise adversely affect us.
Under the EIT Law, we may be classified as a resident enterprise of the PRC. Such classification could result in unfavorable tax consequences to us and our non-PRC shareholders.
Under the EIT Law, an enterprise established outside of China with de facto management bodies within China is considered a resident enterprise, meaning that it can be treated in a manner similar to a Chinese enterprise for enterprise income tax purposes, although the dividends paid to one resident enterprise from another may qualify as tax-exempt income. The implementing rules of the EIT Law define de facto management as substantial and overall management and control over the production and operations, personnel, accounting, and properties of the enterprise. The EIT Law and its implementing rules are relatively new and ambiguous in terms of some definitions, requirements and detailed procedures, and currently no official interpretation or application of this new resident enterprise classification is available; therefore, it is unclear how tax authorities will determine tax residency based on the facts of each case.
If the PRC tax authorities determine that we are a resident enterprise for PRC enterprise income tax purposes, a number of unfavorable PRC tax consequences could follow. First, we may be subject to enterprise income tax at a rate of 25% on our worldwide taxable income, as well as PRC enterprise income tax reporting obligations. Second, although under the EIT Law and its implementing rules, dividends paid to us from our PRC subsidiaries through our sub-holding companies may qualify as tax-exempt income, we cannot guarantee that such dividends will not be subject to withholding tax. Finally, the new resident enterprise classification could result in a situation in which a 10% PRC tax is imposed on dividends we pay to our non-PRC shareholders and gains derived by our non-PRC shareholders from transferring our shares, if such income is considered PRC-sourced income by the relevant PRC authorities.
If any such PRC taxes apply to our non-PRC shareholders, a non-PRC shareholder may be entitled to a reduced rate of PRC taxes under an applicable income tax treaty and/or a foreign tax credit against such shareholders domestic income tax liability (subject to applicable conditions and limitations). You should consult with your own tax advisors regarding the applicability of any such taxes, the effects of any applicable income tax treaties, and any available foreign tax credits. In the event we become subject to the EIT Laws, our tax obligations can be expected to increase, which would adversely affect our net income, results of operations and future growth prospects.
Due to various restrictions under PRC laws on the distribution of dividends by our PRC operating companies, we may not be able to pay dividends to our shareholders.
The Wholly-Foreign Owned Enterprise Law (1986), as amended and The
Wholly-Foreign Owned Enterprise Law Implementing Rules (1990), as amended and
the Company Law of the PRC (2006) contain the principal regulations governing
dividend distributions by wholly foreign owned enterprises. Under these
regulations, wholly foreign owned enterprises may pay dividends only out of
their accumulated profits, if any, determined in accordance with PRC accounting
standards and regulations. Additionally, such companies are required to set
aside a certain amount of their accumulated profits each year, if any, to fund
certain reserve funds. These reserves are not distributable as cash dividends
except in the event of liquidation and cannot be used for working capital
purposes. Tsingda Education and Tsingda Network are regulated by the laws
governing foreign-invested enterprises in the PRC. Accordingly, they are
14
required to allocate 10% of their after-tax profits based on PRC accounting
standards each year to their general reserves until the accumulated amount of such reserves has exceeded 50% of their registered
capital, after which no further allocation is required to be made. As of
December 31, 2009, both companies have made
the required allocations to the general reserves. These reserve funds, however,
may not be distributed to equity owners except in accordance with PRC laws and
regulations. We cannot assure you that the PRC government authorities will
not request our subsidiaries to use their after-tax profits for their own
development and restrict our subsidiaries ability to distribute their
after-tax profits to us as dividends.
The PRC government also imposes controls on the conversion of RMB into foreign currencies and the remittance of currencies out of the PRC. We may experience difficulties in completing the administrative procedures necessary to obtain and remit foreign currency for the payment of dividends from the Companys profits.
Furthermore,
if our subsidiaries or affiliates in China incur debt on their own in the
future, the instruments governing the debt may restrict its ability to pay
dividends or make other payments. If we or our subsidiaries are unable to
receive all of the revenues from our operations through these contractual or
dividend arrangements, we may be unable to pay dividends on our Ordinary
Shares.
Changes in PRC regulations relating to tuitions may adversely affect our business.
Currently, we
are not regulated by the Ministry of Education of the PRC due to the fact that
we are a non-accredited learning center and do not offer certification
programs. The types and amounts of fees charged by private schools offering
certification programs must be approved by the relevant governmental authority
and be publicly disclosed, and the types and amounts of fees charged by private
schools that do not offer certification programs need only be filed with the
relevant governmental authority and be publicly disclosed. If the PRC
government decides to regulate private schools which do not offer certification programs similar to their regulations of certification programs, set
limits on fees chargeable by us, or impose a special tax on our business, such
events could significantly affect our operations.
You may experience difficulties in effecting service of legal process, enforcing foreign judgments or bringing original actions in China based on United States or other foreign laws against us, our management or the experts named in this current report.
We conduct substantially all of our operations in China and substantially all of our assets are located in China. In addition, all of our senior executive officers reside within China. As a result, it may not be possible to effect service of process within the United States or elsewhere outside of China upon our senior executive officers, including with respect to matters arising under U.S. federal securities laws or applicable state securities laws. Moreover, our PRC counsel has advised us that the PRC does not have treaties with the United States or many other countries providing for the reciprocal recognition and enforcement of judgment of courts.
Governmental control of currency conversion may affect the value of your investment.
The PRC government imposes controls on the convertibility of RMB into foreign currencies and, in certain cases, the remittance of currency out of China. We receive substantially all of our revenues in RMB. Under our current structure, our income is primarily derived from Tsingda Education. Shortages in the availability of foreign currency may restrict the ability of our PRC subsidiaries and our affiliated entity to remit sufficient foreign currency to pay dividends or other payments to us, or otherwise satisfy their foreign currency denominated obligations. Under existing PRC foreign exchange regulations, payments of current account items, including profit distributions, interest payments and expenditures from trade-related transactions, can be made in foreign currencies without prior approval from the PRC State Administration of Foreign Exchange by complying with certain procedural requirements. However, approval from appropriate government authorities is required where RMB is to be converted into foreign currency and remitted out of China to pay capital expenses such as the repayment of bank loans denominated in foreign currencies. The PRC government may also, at its discretion, restrict access in the future to foreign currencies for current account transactions. If the foreign exchange control system prevents us from obtaining sufficient foreign currency to satisfy our currency demands, we may not be able to pay dividends in foreign currencies to our shareholders.
Fluctuation in the value of RMB may have a material adverse effect on your investment.
The value of RMB against the U.S. dollar and other currencies may fluctuate and is affected by, among other things, changes in political and economic conditions. Our revenues and costs are mostly denominated in RMB, while a significant portion of our financial assets are denominated in U.S. dollars. Our revenue is based entirely on that generated by our affiliated entity in China. Any significant fluctuation in value of RMB may materially and adversely affect our cash flows, revenues, earnings and financial position, and the value of, and any dividends payable on, our stock in U.S. dollars. For example, an appreciation of RMB against the U.S. dollar would make any new RMB denominated investments or expenditures more costly to us, to the extent that we need to convert U.S. dollars into RMB for such purposes. An appreciation of RMB against the U.S. dollar would also result in foreign currency translation losses for financial reporting purposes when we translate our U.S. dollar denominated financial assets into RMB, as RMB is our reporting currency.
15
We face risks related to health epidemics and other outbreaks.
Our business could be adversely affected by the effects of an epidemic or outbreak that will cause social and economic disruptions in China, such as SARS or H1N1 flu. Any prolonged recurrence of SARS, H1N1 or other adverse public health developments in China may have a material adverse effect on our business operations as schools may be closed for an extended period of time. For instance, health or other government regulations adopted in response may require temporary closure of our production facilities or of our offices. Such closures would severely disrupt our business operations and adversely affect our results of operations. We have not adopted any written preventive measures or contingency plans to combat any future outbreak of SARS, H1N1 or any other epidemic.
Risks Related to an Investment in Our Securities
We are not listed or quoted on any exchange and we may never obtain such a listing or quotation.
There is presently no public market in our shares and there may never be a market for our stock. Stock held by our shareholders may have little or no value. We cannot guarantee that our stock will be listed on a securities exchange or if a market for our stock listed will ever develop. Even if our shares are quoted for sale, buyers may be insufficient in numbers to allow for a robust market, and therefore, it may prove impossible to sell your shares.
To date, we have not paid any cash dividends and no cash dividends will be paid in the foreseeable future.
We do not
anticipate paying cash dividends on our Ordinary Shares in the foreseeable
future and we may not have sufficient funds legally available to pay dividends.
Even if the funds are legally available for distribution, we may nevertheless
decide not to pay any dividends. We intend to retain all earnings from our
operations.
The market price for our Ordinary Shares may be highly volatile.
The market price of our Ordinary Shares may be volatile due to certain factors, including, but not limited to, market trends in PRC stock generally, quarterly fluctuations in our financial and operating results; general conditions in the PRC market; or changes in earnings estimates. Such volatility may make it more difficult, if not impossible, to sell your shares in such quantity or at such price as or when you determine. This volatility can be expected to harm our stock price, our ability to raise money in capital markets and our future growth prospects.
The application of the penny stock rules could adversely affect the market price of our Ordinary Shares and increase your transaction costs to sell those shares.
If the future trading price of our Ordinary Shares is below $5 per share, the open-market trading of our Ordinary Shares will be subject to the penny stock rules. The penny stock rules impose additional sales practice requirements on broker-dealers who sell securities to persons other than established customers and accredited investors (generally those with assets in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 together with their spouse). For transactions covered by these rules, the broker-dealer must make a special suitability determination for the purchase of securities and have received the purchasers written consent to the transaction before the purchase. Additionally, for any transaction involving a penny stock, unless exempt, the broker-dealer must deliver, before the transaction, a disclosure schedule prescribed by the Securities and Exchange Commission relating to the penny stock market. The broker-dealer also must disclose the commissions payable to both the broker-dealer and the registered representative and current quotations for the securities. Finally, monthly statements must be sent disclosing recent price information on the limited market in penny stocks. These additional burdens imposed on broker-dealers may restrict the ability or decrease the willingness of broker-dealers to sell our Ordinary Shares, and may result in decreased liquidity for our Ordinary Shares and increased transaction costs for sales and purchases of our Ordinary Shares as compared to other securities.
The market price for our Ordinary Shares may be volatile.
The market price for our Ordinary Shares may be volatile and subject to wide fluctuations in response to factors including the following:
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actual or anticipated fluctuations in our quarterly operating results; |
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changes in financial estimates by securities research analysts; |
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announcements by us or our competitors of new products, acquisitions, strategic partnerships, joint ventures or capital commitments; |
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addition or departure of key personnel; |
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fluctuations of exchange rates between RMB and the U.S. dollar; |
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intellectual property litigation; |
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16
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general economic or political conditions in China. |
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In addition, the securities market has from time to time experienced significant price and volume fluctuations that are not related to the operating performance of particular companies. These market fluctuations may also materially and adversely affect the market price of our stock.
We may need additional capital, and the sale of additional shares or other equity securities could result in additional dilution to our shareholders.
We believe
that our current cash and cash equivalents, anticipated cash flow from
operations and the net proceeds from the private placement of Ordinary Shares
on September 16, 2010 will be sufficient to meet our anticipated cash needs for
the near future. We may, however, require additional cash resources due to
changed business conditions or other future developments, including any
investments or acquisitions we may decide to pursue. If our resources are
insufficient to satisfy our cash requirements, we may seek to sell additional
equity or debt securities or obtain a credit facility. The sale of additional
equity securities could result in additional dilution to our shareholders. The
incurrence of indebtedness would result in increased debt service obligations
and could result in operating and financing covenants that would restrict our
operations. We cannot assure you that financing will be available in amounts or
on terms acceptable to us, if at all.
If we fail to maintain an effective system of internal controls, we may not be able to accurately report our financial results or prevent fraud.
We are subject to reporting obligations under the U.S. securities laws. The SEC, as required by Section 404 of the Sarbanes-Oxley Act of 2002, adopted rules requiring every public company to include a management report on such companys internal controls over financial reporting in its annual report, which contains managements assessment of the effectiveness of our internal controls over financial reporting.
Our reporting obligations as a public company will place a significant strain on our management, operational and financial resources and systems for the foreseeable future. Effective internal controls, particularly those related to revenue recognition, are necessary for us to produce reliable financial reports and are important to help prevent fraud. As a result, our failure to achieve and maintain effective internal controls over financial reporting could result in the loss of investor confidence in the reliability of our financial statements, which in turn could harm our business and negatively impact the trading price of our stock. Furthermore, we anticipate that we will incur considerable costs and use significant management time and other resources in an effort to comply with Section 404 and other requirements of the Sarbanes-Oxley Act.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Some of the statements under Prospectus Summary, Risk Factors, Managements Discussion and Analysis of Financial Condition and Results of Operations, Business, and elsewhere in this prospectus constitute forward-looking statements. These statements involve risks known to us, significant uncertainties, and other factors which may cause our actual results, levels of activity, performance, or achievements to be materially different from any future results, levels of activity, performance, or achievements expressed or implied by those forward-looking statements.
You can identify forward-looking statements by the use of the words may, will, should, could, expects, plans, anticipates, believes, estimates, predicts, intends, potential, proposed, or continue or the negative of those terms. These statements are only predictions. In evaluating these statements, you should specifically consider various factors, including the risks outlined above. These factors may cause our actual results to differ materially from any forward-looking statement.
Although we believe that the exceptions reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements.
17
We will not
receive any proceeds from the sale of our Ordinary Shares by the Selling Stockholders.
MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Our Ordinary Shares have not been quoted or listed for trading on the OTCBB or on any stock exchange.
Holders
As the date hereof, we have the following securities issued and outstanding;
- 33,729,862
Ordinary Shares, and
- stock purchase warrants to acquire 2,464,500 Ordinary Shares.
The total
number of outstanding Ordinary Shares assuming the exercise of all outstanding
stock purchase warrants 36,194,361 Ordinary Shares. Of that total amount, 1,304,493
Ordinary Shares are covered by this registration statement.
Rule 144 Shares
None of our issued and outstanding Ordinary Shares are currently available for resale to the public in accordance with the volume and trading limitations of Rule 144 of the Securities Act of 1933, as amended. In general, under Rule 144 as currently in effect, an affiliate who has beneficially owned shares of a companys common stock for at least six months, provided that the company has been subject to the reporting requirements of the Securities Exchange Act of 1934 for a minimum of 90 days, is entitled to sell within any three month period a number of shares that does not exceed the greater of:
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1. |
1% of the Ordinary Shares then outstanding which, in our case, will equal approximately 337,298 Ordinary Shares (or 361,943 Ordinary Shares assuming all our outstanding warrants are then exercised); or |
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2. |
the average weekly trading volume of the Ordinary Shares during the four calendar weeks preceding the filing of a notice on Form 144 with respect to the sale. |
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Non-affiliates who have beneficially owned shares, for a period of at least six months, of a company that has been subject to the reporting requirements of the Securities Exchange Act of 1934 for a minimum ninety (90) days are not subject to the volume limitations set under rule 144(e).
Sales by affiliates under Rule 144 are also subject to manner of sale provisions and notice requirements and to the availability of current public information about the company. Non-affiliates who have beneficially owned shares for a period of a year or longer are not subject to the currency of information requirements.
Immediately
prior to the business combination transaction with Tsingda Technology, we were
a shell company (as such term is defined in Rule 12b-2 under the Securities
Exchange Act of 1934). Accordingly, our Ordinary Shares may not be eligible for
resale under Rule 144 until August 17, 2011, which is 12 months after the
filing of our Second Amendment to our Current Report on Form 8-K disclosing our
business combination
Transfer Agent and Registrant
Our transfer agent is Action Stock Transfer Corp., at the address of 7069 S. Highland Drive, Suite 300, Salt Lake City, Utah 84121. Its telephone number is (801) 272-1088.
18
Dividend Policy
Since
inception, we have not paid any dividends on our Ordinary Shares. We currently
do not anticipate paying any cash dividends in the foreseeable future on our
Ordinary Shares. Although we intend to retain our earnings, if any, to finance
the exploration and growth of our business, our Board of Directors will have
the discretion to declare and pay dividends in the future. Payment of dividends
in the future will depend upon our earnings, capital requirements, and other
factors, which our Board of Directors may deem relevant.
In addition,
due to various restrictions under PRC laws on the distribution of dividends by
our PRC operating companies, we may not be able to pay dividends to our
shareholders. The Wholly-Foreign Owned Enterprise Law (1986), as amended and
The Wholly-Foreign Owned Enterprise Law Implementing Rules (1990), as amended
and the Company Law of the PRC (2006) contain the principal regulations
governing dividend distributions by wholly foreign owned enterprises. Under
these regulations, wholly foreign owned enterprises may pay dividends only out
of their accumulated profits, if any, determined in accordance with PRC
accounting standards and regulations. Additionally, such companies are required
to set aside a certain amount of their accumulated profits each year, if any,
to fund certain reserve funds. These reserves are not distributable as cash
dividends except in the event of liquidation and cannot be used for working
capital purposes. The PRC government also imposes controls on the conversion of
RMB into foreign currencies and the remittance of currencies out of the PRC.
Therefore, we may experience difficulties in completing the administrative
procedures necessary to obtain and remit foreign currency for the payment of
dividends from the Companys profits. Furthermore, if our subsidiaries and
affiliates in China incur debt on their own in the future, the instruments
governing the debt may restrict its ability to pay dividends or make other
payments. If we or our subsidiaries and affiliates are unable to receive all of
the revenues from our operations through the current contractual arrangements,
we may be unable to pay dividends on our Ordinary Shares.
Securities Authorized for Issuance Under Equity Compensation Plans
We presently do not have any equity based or other long-term incentive programs. In the future, we may adopt and establish an equity-based or other long-term incentive plan if it is in the best interest of the Company and our stockholders to do so.
We are
registering a total of 1,304,493 Ordinary Shares.
The table below lists the selling shareholders and other information regarding the beneficial ownership of the securities by each of the selling shareholders. Except as indicated in the footnotes to the table, no selling security holder has had any material relationship with us or our predecessors or affiliates during the last three years.
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NAME OF SHAREHOLDER |
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SHAREHOLDER ADDRESS |
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NUMBER |
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MAXIMUM |
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NUMBER |
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PERCENT |
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Joseph Rozelle (3) |
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700 Gemini, Suite 100, Houston, Texas 77058 |
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26,042 |
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1,302 |
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24,740 |
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* |
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Susan Vick (3) |
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700 Gemini, Suite 100, Houston, Texas 77058 |
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26,042 |
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1,302 |
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24,740 |
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* |
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Christopher Efird (3) |
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700 Gemini, Suite 100, Houston, Texas 77058 |
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104,167 |
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5,208 |
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98,959 |
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* |
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Stephen Taylor, Jr. (3) |
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700 Gemini, Suite 100, Houston, Texas 77058 |
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62,500 |
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3,125 |
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59,375 |
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* |
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Alexander C DeLape Beehive Trust (3) |
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700 Gemini, Suite 100, Houston, Texas 77058 |
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5,208 |
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260 |
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4,948 |
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* |
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Benchmark Equity Group (3) |
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700 Gemini, Suite 100, Houston, Texas 77058 |
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20,833 |
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1,042 |
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19,791 |
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* |
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Brianna N. DeLape Beehive Trust (3) |
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700 Gemini, Suite 100, Houston, Texas 77058 |
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5,208 |
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260 |
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4,948 |
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* |
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Magnolia Growth Trust (3) |
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700 Gemini, Suite 100, Houston, Texas 77058 |
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10,417 |
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521 |
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9,896 |
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* |
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Mid- Ocean Consulting Ltd. (4) |
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32 Govenors Cay, Nassau, Bahamas |
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26,042 |
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26,042 |
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0 |
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0 |
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Grant John Maughan |
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25 Bombala St., Dudley, Newcastle, NSW, Australia 2290 |
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100 |
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100 |
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0 |
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0 |
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19
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Benjamin Kenneth Barker |
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494 Latrielle St., Brinsmead Cairns 4870, Queensland, Australia |
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100 |
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100 |
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0 |
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0 |
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Polyanna Wan |
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Nerine Chambers, P. O. Box 905, Road Town, Tortola, British Virgin |
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100 |
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100 |
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0 |
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0 |
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Susan E. Lawrence |
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22 Harmony Hill Rd., Nassau Bahamas |
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100 |
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100 |
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0 |
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0 |
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Thomas D. Knowles |
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Corbie Lynn, Camperdown, New Providence, Bahamas |
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100 |
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100 |
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0 |
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0 |
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Paul D. Knowles |
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Corbie Lynn, Camperdown, New Providence, Bahamas |
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100 |
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100 |
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0 |
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0 |
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Donna E. Knowles |
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Corbie Lynn, Camperdown, New Providence, Bahamas |
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100 |
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100 |
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0 |
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0 |
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Alstair Mark Knowles |
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Corbie Lynn, Camperdown, New Providence, Bahamas |
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100 |
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100 |
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0 |
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0 |
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Robert Myers |
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P. O. Box N 1968, Nassau Bahamas |
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100 |
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100 |
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0 |
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0 |
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Richard Fox |
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P. O. Box SS-19481, #@ Teach St., Nassau, Bahamas |
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100 |
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100 |
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0 |
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0 |
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Marlene Patranella Fox |
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P. O. Box SS-19481, #@ Teach St., Nassau, Bahamas |
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100 |
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100 |
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0 |
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0 |
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Raymond Todd Forsythe |
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23 Richmond Ave, P. O. Box FH-14553, Nassau, Bahamas |
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100 |
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100 |
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0 |
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0 |
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Cameron Carey |
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3 Harrow Ave., P. O. Box CB 12512, Nassau, Bahamas |
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100 |
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100 |
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0 |
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0 |
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Magdaline Berdanis |
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3 Harrow Ave., P. O. Box CB 12512, Nassau, Bahamas |
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100 |
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100 |
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0 |
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0 |
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Heather Carey |
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Box CB-11141, Nassau, Bahamas |
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100 |
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100 |
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0 |
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0 |
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David William Slatter |
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1 Clarence St., P. O. Box CR 56766, Suite 360, Nassau Bahamas |
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100 |
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100 |
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0 |
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0 |
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Steven E. Carey |
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3 Harrow Ave., P. O. Box CB 12512, Nassau, Bahamas |
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100 |
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100 |
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0 |
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0 |
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Debra P. Carey |
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3 Harrow Ave., P. O. Box CB 12512, Nassau, Bahamas |
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100 |
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100 |
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0 |
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0 |
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Joseph G. Carey |
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Cable Beach, P. O. Box CB 12512, Nassau, Bahamas |
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100 |
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100 |
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0 |
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0 |
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20
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Phyllis D. Thompson |
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Sandford Dr., Highland Park, P. O. Box N3559, New Providence, |
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100 |
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100 |
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0 |
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0 |
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Reginald T. Carey |
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#33E Murphyville, P. O. Box 19928-SS, Nassau, Bahamas |
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100 |
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100 |
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0 |
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0 |
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Lorna Denise Kemp |
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#113 Westridge Estates, P. O. Box CB12511, Nassau, Bahamas |
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100 |
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100 |
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0 |
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0 |
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Todd Earle Kemp |
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#113 Westridge Estates, P. O. Box CB12511, Nassau, Bahamas |
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100 |
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100 |
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0 |
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0 |
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Debra-Lou Carey |
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4A Grove Lane, Kingston-Upon-Thames, KT1 2SU, U.K. |
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100 |
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100 |
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0 |
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0 |
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Paula Rigby |
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Mermaid Blvd. East, P. O. Box CR 54755, Nassau Bahamas |
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100 |
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100 |
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0 |
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0 |
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Patrice McKinney |
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Robinson Road, P. O. Box SS 5667, Nassau Bahamas |
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100 |
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100 |
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0 |
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0 |
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Tiffany K. Deal |
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Nassau Village, Butler Street, Bahamas |
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100 |
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100 |
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0 |
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0 |
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Conwill K. Saunders |
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#8 Berry Avenue, Yamacrow, Bahamas |
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100 |
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100 |
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0 |
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0 |
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Mary Turner |
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92 Flamingo Dr., P. O. Box EE-17340, Nassau, Bahamas |
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100 |
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100 |
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0 |
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0 |
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Melita A. Carey |
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Pine Yard Road, Off Sea Breeze Lane, P. O. Box EE-17340, Nassau, |
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100 |
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100 |
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0 |
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0 |
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Helen A. Rolle |
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811 Meluerne Road, Yellow Elder Gardens, Nassau Bahamas |
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100 |
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100 |
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0 |
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0 |
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Michael Brindle-Selle |
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P O. Box N1261, Nassau, Bahamas |
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100 |
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100 |
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0 |
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0 |
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Julie Brindle-Selle |
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20 Yorkshire St., Chapman Estates, Bahamas |
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100 |
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100 |
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0 |
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0 |
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Angela D. Culmer-Saunders |
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#8 Berry Avenue, Yamacrow, Bahamas |
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100 |
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100 |
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0 |
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0 |
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Maureen Mahon |
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Eastern Rd, Nassau, Bahamas |
|
100 |
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100 |
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0 |
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0 |
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Marguerite E. Bain |
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P. O. Box EE16072, Nassau, Bahamas |
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100 |
|
100 |
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0 |
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0 |
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Marcus W. Moss |
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18 Kent Ave, Nassau East, Nassau, Bahamas |
|
100 |
|
100 |
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0 |
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0 |
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Marcella Bond |
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P. O. Box N-7776-171, Chelsea Place, Lyford Cay, Nassau, NP |
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100 |
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100 |
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0 |
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0 |
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Lakeisha D. Brown |
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Yellow Elder Gardens, Major Road #706, CB-11501 |
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100 |
|
100 |
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0 |
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0 |
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Jane Seekings |
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Nerine Chambers, P. O. Box 905, Road Town, Tortola, British Virgin |
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100 |
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100 |
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0 |
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0 |
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Katie Vanessa Roach |
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P. O. Box N-9046, Nassau, NP, Bahamas |
|
100 |
|
100 |
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0 |
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0 |
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Karen Strachen |
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Golden Isles Road, CR 55859, Nassau Bahamas |
|
100 |
|
100 |
|
0 |
|
0 |
|
Gerda J.J. Vandervelde |
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Warotveld 108, 3020 Herent, Belgium |
|
100 |
|
100 |
|
0 |
|
0 |
|
Marie Elise J. Vandervelde |
|
Kammestraat 43, 3071 Kortenberg, Belgium |
|
100 |
|
100 |
|
0 |
|
0 |
|
Maria O.F. Marse |
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Potestraat 29C, 3020 Herent, Belgium |
|
100 |
|
100 |
|
0 |
|
0 |
|
Paul Henri Vandervelde |
|
Potestraat 29C, 3020 Herent, Belgium |
|
100 |
|
100 |
|
0 |
|
0 |
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Phillipe Dewez |
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81 Rue De Binche, 6540 Mont-Saint-Genevieve, Belgium |
|
100 |
|
100 |
|
0 |
|
0 |
|
Daniel Lienard |
|
56, Rue Les Tris, 5651 Berzee, Belgium |
|
100 |
|
100 |
|
0 |
|
0 |
|
Marguerite Ranwet |
|
56, Rue Les Tris, 5651 Berzee, Belgium |
|
100 |
|
100 |
|
0 |
|
0 |
|
Catherine Bocque |
|
18 Rue des Sacrifies, L-8356 Garnich, Luxembourg |
|
100 |
|
100 |
|
0 |
|
0 |
|
Koen Lozie |
|
18 Rue des Sacrifies, L-8356 Garnich, Luxembourg |
|
100 |
|
100 |
|
0 |
|
0 |
|
Jennifer Silva |
|
20 Vale House, Fairvale Lane, Warwick, Bermuda WK09 |
|
100 |
|
100 |
|
0 |
|
0 |
|
Valerie I. Weeks |
|
#3 New Park Condomimiums, Unit 8, Rambling Lane, Pembroke |
|
100 |
|
100 |
|
0 |
|
0 |
|
Fiona Jane Richardson |
|
32 Governors Cay, Sandyport, Nassau, Bahamas |
|
200 |
|
200 |
|
0 |
|
0 |
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21
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Renate Murdoch-Muirhed |
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21 Jones Lane, Warick, PG01 Hamilton, HMSX, Bermuda |
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100 |
|
100 |
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0 |
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0 |
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Colin Murdoch-Muirhead |
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21 Jones Lane, Warick, PG01 Hamilton, HMSX, Bermuda |
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1,000 |
|
1,000 |
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0 |
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0 |
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Katherine Steele |
|
14 Woodside Dr., Paget, Bermuda DU03 |
|
100 |
|
100 |
|
0 |
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0 |
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Caroline Rosser |
|
Southwest Breaker, 7 Oceanside Rd., Southhampton SB04, Bermuda |
|
100 |
|
100 |
|
0 |
|
0 |
|
Robert Rosser |
|
Beaumont, 18 Westwood Lane, Paget, Bermuda |
|
100 |
|
100 |
|
0 |
|
0 |
|
Severin Nicole Gibbons |
|
Columbia House, 32 Reid Street, Hamilton, Bermuda |
|
100 |
|
100 |
|
0 |
|
0 |
|
Edward Allen Lancer Barnes |
|
3 Phillpotts Hill Drive, Sandys, Bermuda |
|
100 |
|
100 |
|
0 |
|
0 |
|
Tina C. Gibbons |
|
8 Grace Lane, Pembroke HM 14, Bermuda |
|
100 |
|
100 |
|
0 |
|
0 |
|
Reid Gibbons |
|
8 Grace Lane, Pembroke HM 14, Bermuda |
|
100 |
|
100 |
|
0 |
|
0 |
|
Patricia M. Hill |
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Devon Springs, Apt. #6, 5 Devon Spring Lane, Devonshire FL01 |
|
100 |
|
100 |
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0 |
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0 |
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Floyd E. Smart |
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No.2 Cloverdale Close, Devonshire FL01, Bermuda |
|
100 |
|
100 |
|
0 |
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0 |
|
Richard S.L. Pearman |
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4 Bellevue Lane, Paget, Bermuda PG06 |
|
100 |
|
100 |
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0 |
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0 |
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Dannise Thompson |
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#5 Upper Apt., White Gate Lane, Sandys MA06, Bermuda |
|
100 |
|
100 |
|
0 |
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0 |
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Richard S. Thompson |
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17 Shelly Hall, 8 Shelly Hall Drive, Hamilton Parish, Bermuda |
|
100 |
|
100 |
|
0 |
|
0 |
|
Roderick Craig Christensen |
|
81 South Road, Warwick WK08, Bermuda |
|
100 |
|
100 |
|
0 |
|
0 |
|
Pennie Jean Whitehead |
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1 Wellman Lane, Warwick WK01, Bermuda |
|
100 |
|
100 |
|
0 |
|
0 |
|
Christina Maybury |
|
31 Devonsprings Road, Devonshire, Bermuda DV08 |
|
100 |
|
100 |
|
0 |
|
0 |
|
Dazarrie Steede |
|
27 Bostock Hill, East PG02, Paget, Bermuda |
|
100 |
|
100 |
|
0 |
|
0 |
|
Roy Angelo Furbert |
|
G1 A Cobbs Hill Rd., Paget PG04 Bermuda |
|
100 |
|
100 |
|
0 |
|
0 |
|
Dueane Stephen Dill |
|
CalaLee, #1 Waterloo Lane, St. George, GE03, Bermuda |
|
100 |
|
100 |
|
0 |
|
0 |
|
Gwen Haller |
|
6 Coxs Lane, Apt. North, Pembroke HM02, Bermuda |
|
100 |
|
100 |
|
0 |
|
0 |
|
Gail E. Murray |
|
La Folie, Rue Du Hamel, Castel, Guernsey, Channel Islands GY5 7QJ |
|
100 |
|
100 |
|
0 |
|
0 |
|
Barry Griffiths |
|
13 Peters Rd., Hamilton Parish CR01, Bermuda |
|
100 |
|
100 |
|
0 |
|
0 |
|
|
22
|
|
|
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|
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|
|
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|||||||||||
Kerry Griffiths |
|
13 Peters Rd., Hamilton Parish CR01, Bermuda |
|
100 |
|
100 |
|
0 |
|
0 |
|
Michael Abbott |
|
Lower Apt. 4 Aerial View Close, Devonshire Parish FL03, Bermuda |
|
100 |
|
100 |
|
0 |
|
0 |
|
Neal Turchiaro |
|
Columbia House, 32 Reid Street, Hamilton, Bermuda |
|
100 |
|
100 |
|
0 |
|
0 |
|
Shelly Abbott |
|
Lower Apt. 4 Aerial View Close, Devonshire Parish FL03, Bermuda |
|
100 |
|
100 |
|
0 |
|
0 |
|
David J.K. Macphee |
|
8 Rockaway Point, Condo #7, Southampton, SB02, Bermuda |
|
100 |
|
100 |
|
0 |
|
0 |
|
Christopher Cyr |
|
8 Rockaway Point, Condo #7, Southampton, SB02, Bermuda |
|
100 |
|
100 |
|
0 |
|
0 |
|
Mark W. Young |
|
1 Mill Point Road, Unit 4, Pembroke, Bermuda HM05 |
|
100 |
|
100 |
|
0 |
|
0 |
|
Sharlene A. Young |
|
1 Mill Point Road, Unit 4, Pembroke, Bermuda HM05 |
|
100 |
|
100 |
|
0 |
|
0 |
|
Heather Allison Hames |
|
3 Mill Point Rd., Pembroke, Bermuda HM05 |
|
100 |
|
100 |
|
0 |
|
0 |
|
Colin G. Hames |
|
3 Mill Point Rd., Pembroke, Bermuda HM05 |
|
100 |
|
100 |
|
0 |
|
0 |
|
Radi Plamenov Tsanev |
|
Nerine Chambers, P. O. Box 905, Road Town, Tortola, British Virgin |
|
100 |
|
100 |
|
0 |
|
0 |
|
Chris Brown |
|
Nerine Chambers, P. O. Box 905, Road Town, Tortola, British Virgin |
|
100 |
|
100 |
|
0 |
|
0 |
|
Justin Ferguson |
|
Nerine Chambers, P. O. Box 905, Road Town, Tortola, British Virgin |
|
100 |
|
100 |
|
0 |
|
0 |
|
David Rawson Mackenzie |
|
Nerine Chambers, P. O. Box 905, Road Town, Tortola, British Virgin |
|
100 |
|
100 |
|
0 |
|
0 |
|
Ian Rawson Mackenzie |
|
Nerine Chambers, P. O. Box 905, Road Town, Tortola, British Virgin |
|
100 |
|
100 |
|
0 |
|
0 |
|
Heather Rawson Mackenzie |
|
Nerine Chambers, P. O. Box 905, Road Town, Tortola, British Virgin |
|
100 |
|
100 |
|
0 |
|
0 |
|
Stephen McClure |
|
Nerine Chambers, P. O. Box 905, Road Town, Tortola, British Virgin |
|
100 |
|
100 |
|
0 |
|
0 |
|
Javier Martinez |
|
Nerine Chambers, P. O. Box 905, Road Town, Tortola, British Virgin |
|
100 |
|
100 |
|
0 |
|
0 |
|
Martin Paul Bennett |
|
Nerine Chambers, P. O. Box 905, Road Town, Tortola, British Virgin |
|
100 |
|
100 |
|
0 |
|
0 |
|
Paul Hunt |
|
Nerine Chambers, P. O. Box 905, Road Town, Tortola, British Virgin |
|
100 |
|
100 |
|
0 |
|
0 |
|
Gaston Cerf |
|
Nerine Chambers, P. O. Box 905, Road Town, Tortola, British Virgin |
|
100 |
|
100 |
|
0 |
|
0 |
|
Eduardo Omar Caspani |
|
Nerine Chambers, P. O. Box 905, Road Town, Tortola, British Virgin |
|
100 |
|
100 |
|
0 |
|
0 |
|
Charles Eugene Antione |
|
Nerine Chambers, P. O. Box 905, Road Town, Tortola, British Virgin |
|
100 |
|
100 |
|
0 |
|
0 |
|
Charles Eddwin Mabey |
|
Nerine Chambers, P. O. Box 905, Road Town, Tortola, British Virgin |
|
100 |
|
100 |
|
0 |
|
0 |
|
Andrew Jonathan Broster |
|
Nerine Chambers, P. O. Box 905, Road Town, Tortola, British Virgin |
|
100 |
|
100 |
|
0 |
|
0 |
|
Brenda Jean Phillips |
|
Columbia House, 32 Reid Street, Hamilton, Bermuda |
|
100 |
|
100 |
|
0 |
|
0 |
|
Jai-Michael Eskerine Phillips |
|
Columbia House, 32 Reid Street, Hamilton, Bermuda |
|
100 |
|
100 |
|
0 |
|
0 |
|
Erskine Douglas Phillips |
|
Columbia House, 32 Reid Street, Hamilton, Bermuda |
|
100 |
|
100 |
|
0 |
|
0 |
|
Tivin Tunchiano |
|
Columbia House, 32 Reid Street, Hamilton, Bermuda |
|
100 |
|
100 |
|
0 |
|
0 |
|
David Houston |
|
Columbia House, 32 Reid Street, Hamilton, Bermuda |
|
100 |
|
100 |
|
0 |
|
0 |
|
|
23
|
|
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|
|
|
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|
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|||||||||||
Susan E. Gibbons |
|
Columbia House, 32 Reid Street, Hamilton, Bermuda |
|
100 |
|
100 |
|
0 |
|
0 |
|
Ronald Joseph Burke |
|
2A Granaway Heights Rd., Apt #1, Southampton, Bermuda SB04 |
|
100 |
|
100 |
|
0 |
|
0 |
|
Marsha Gail Burke |
|
2A Granaway Heights Rd., Apt #1, Southampton, Bermuda SB04 |
|
100 |
|
100 |
|
0 |
|
0 |
|
Kelly Ross |
|
Lower Apt. South, 11 Ord Valley Lane, Warwick WK10, Bermuda |
|
100 |
|
100 |
|
0 |
|
0 |
|
Shirley Yap |
|
#2 Tablerock Ave., Pembroke HM04, Bermuda |
|
100 |
|
100 |
|
0 |
|
0 |
|
Nancy Morrison |
|
34 Riviera Cres., Apt #10, Southampton, Bermuda SN03 |
|
100 |
|
100 |
|
0 |
|
0 |
|
Wade A. Morrison |
|
34 Riviera Cres., Apt #10, Southampton, Bermuda SN03 |
|
100 |
|
100 |
|
0 |
|
0 |
|
Joanna Marie Masters |
|
Stoney View, 17 Cloverdale Road, Devonshire, Bermuda FL01 |
|
100 |
|
100 |
|
0 |
|
0 |
|
Glen Nicholas Masters |
|
Stoney View, 17 Cloverdale Road, Devonshire, Bermuda FL01 |
|
100 |
|
100 |
|
0 |
|
0 |
|
Lana Chi Nguyen |
|
22 Cobbs Hill Road, Warwick PG01, Bermuda |
|
100 |
|
100 |
|
0 |
|
0 |
|
Jean E. Parker |
|
38 Jenings Bay Road, Southampton, SB04 Bermuda |
|
100 |
|
100 |
|
0 |
|
0 |
|
Michelle Sara Christensen |
|
81 South Road, Warwick WK08, Bermuda |
|
100 |
|
100 |
|
0 |
|
0 |
|
Kandis Robertson |
|
1 Leacraft Hill Road, Southampton SB03, Bermuda |
|
100 |
|
100 |
|
0 |
|
0 |
|
Joel Matthews |
|
1 Leacraft Hill Road, Southampton SB03, Bermuda |
|
100 |
|
100 |
|
0 |
|
0 |
|
Julie Herauf |
|
22 Coral Acres Drive, Southampton, Bermuda SB04 |
|
100 |
|
100 |
|
0 |
|
0 |
|
Mark R. Herauf |
|
22 Coral Acres Drive, Southampton, Bermuda SB04 |
|
100 |
|
100 |
|
0 |
|
0 |
|
Stephen James McLaughlin |
|
5 Dunscombe Road, Warwick Parish WK10 Bermuda |
|
100 |
|
100 |
|
0 |
|
0 |
|
Robert Greg Abernethy |
|
27 Sunrise Blvd., Prospect, Grand Cayman, Caymas Islands |
|
100 |
|
100 |
|
0 |
|
0 |
|
|
24
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Matthew J. R. Grace |
|
#30 Denham Thompson Way, South Sound, Grand Cayman |
|
100 |
|
100 |
|
0 |
|
0 |
|
Marc E.O. Morabito |
|
16 GrosvenorCourt, Cavenolish Road, Pembroke HM19, Bermuda |
|
100 |
|
100 |
|
0 |
|
0 |
|
Serge Paritzky |
|
309 Route dArlon, L-8011 Strassen, Luxembourg |
|
100 |
|
100 |
|
0 |
|
0 |
|
Roland Schaefer |
|
Nerine Chambers, P. O. Box 905, Road Town, Tortola, British Virgin |
|
100 |
|
100 |
|
0 |
|
0 |
|
Fernando Casij Pena |
|
Nerine Chambers, P. O. Box 905, Road Town, Tortola, British Virgin |
|
100 |
|
100 |
|
0 |
|
0 |
|
Richard Allen Lettington |
|
6 Oleander Square, Devonshire DV 07, Bermuda |
|
100 |
|
100 |
|
0 |
|
0 |
|
Julia Ann Kempe |
|
45 Spice Hill Road, Warwick, Bermuda WK 03 |
|
100 |
|
100 |
|
0 |
|
0 |
|
Senga Tait |
|
3 Appleby Lane, Paget PG05, Bermuda |
|
100 |
|
100 |
|
0 |
|
0 |
|
Lisa J. Broomfield |
|
2, Ravensholst, Ivy Farm Lane, Coventry, CV4 7EN, England |
|
100 |
|
100 |
|
0 |
|
0 |
|
Rowena Jane Broomfield |
|
6 Pirie Close, Harbury, Leamington SPA, Warks CV33 9JT, England |
|
100 |
|
100 |
|
0 |
|
0 |
|
Joan Broomfield |
|
6 Pirie Close, Harbury, Leamington SPA, Warks CV33 9JT, England |
|
100 |
|
100 |
|
0 |
|
0 |
|
John William Broomfield |
|
6 Pirie Close, Harbury, Leamington SPA, Warks CV33 9JT, England |
|
100 |
|
100 |
|
0 |
|
0 |
|
Charles Henry Bolton |
|
21 Tuckey Grove, Send Marsh, Woking, Surrey, GU23 6JG |
|
100 |
|
100 |
|
0 |
|
0 |
|
Barbara Kathlen Bolton |
|
21 Tuckey Grove, Send Marsh, Woking, Surrey, GU23 6JG |
|
100 |
|
100 |
|
0 |
|
0 |
|
Sutherland A. Morris |
|
7 Hastings Road, Pembroke HM05 Bermuda |
|
100 |
|
100 |
|
0 |
|
0 |
|
Julian Trinder |
|
El Nido, Mainroad, Union Mills, Isle of Man IM4 4AG, British Isles |
|
100 |
|
100 |
|
0 |
|
0 |
|
June I. Morris |
|
7 Hastings Road, Pembroke HM05 Bermuda |
|
100 |
|
100 |
|
0 |
|
0 |
|
Hamish Charles Quinlan |
|
Unit 10, Reef House, South, Church Street, South Sound, Grand |
|
100 |
|
100 |
|
0 |
|
0 |
|
Jenny Kirsten Hutchison |
|
#30 Denham Thompson Way, South Sound, Grand Cayman |
|
100 |
|
100 |
|
0 |
|
0 |
|
Philippa Alison Trinder |
|
El Nido, Mainroad, Union Mills, Isle of Man IM4 4AG, British Isles |
|
100 |
|
100 |
|
0 |
|
0 |
|
Hilary Elaine Redfern Mullins |
|
1 Rookery Cottage, Chilcomb, Winchester SO21 1HR |
|
100 |
|
100 |
|
0 |
|
0 |
|
Douglas John Mullins |
|
1 Rookery Cottage, Chilcomb, Winchester SO21 1HR |
|
100 |
|
100 |
|
0 |
|
0 |
|
Peter Wilson |
|
17 Silver Cay Apartments, West Bay St., Nassau, Bahamas |
|
100 |
|
100 |
|
0 |
|
0 |
|
Julie Mary Wilson |
|
17 Silver Cay Apartments, West Bay St., Nassau, Bahamas |
|
100 |
|
100 |
|
0 |
|
0 |
|
Elizabeth Louise Phillips |
|
19 Anderson Drive, Whitnash, Leamington Spa Works |
|
100 |
|
100 |
|
0 |
|
0 |
|
Clifford Unsworth |
|
Eastern Rd, Nassau, Bahamas |
|
100 |
|
100 |
|
0 |
|
0 |
|
Paul B. Davis |
|
4 Dosham Close, Camperdown Heights, Nassau, Bahamas |
|
100 |
|
100 |
|
0 |
|
0 |
|
Lara Jane Davis |
|
4 Dosham Close, Camperdown Heights, Nassau, Bahamas |
|
100 |
|
100 |
|
0 |
|
0 |
|
Jane M. Poveromo |
|
5 Dosham Close, Camperdown Heights, Nassau, Bahamas |
|
100 |
|
100 |
|
0 |
|
0 |
|
John Bond |
|
P. O. Box N-7776-171, Chelsea Place, Lyford Cay, Nassau, NP |
|
100 |
|
100 |
|
0 |
|
0 |
|
Esther Dodd |
|
Iccle Cottagae, St. John Street, St. Peter Port, Guernsey |
|
100 |
|
100 |
|
0 |
|
0 |
|
|
25
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Alastair G. Long |
|
Merlins Mock, 7 Stardust Drive, Hamilton Parish, Bermuda CR01 |
|
100 |
|
100 |
|
0 |
|
0 |
|
Rosemary Long |
|
Merlins Mock, 7 Stardust Drive, Hamilton Parish, Bermuda CR01 |
|
100 |
|
100 |
|
0 |
|
0 |
|
Denize Cook |
|
#7 Neco Apartments, P. O. Box N7805, Nassau Bahamas |
|
100 |
|
100 |
|
0 |
|
0 |
|
Mark Fondas |
|
Rainbow Road, Nassau Bahamas |
|
100 |
|
100 |
|
0 |
|
0 |
|
Michele Louise Cottingham |
|
Cloverdale Apt. 3, 60 South Road, Smiths, Bermuda |
|
100 |
|
100 |
|
0 |
|
0 |
|
Christopher Charles Morris |
|
20 Cobbs Hill Road, Warwick PG01 Bermuda |
|
100 |
|
100 |
|
0 |
|
0 |
|
Michelle Annette Lawrence |
|
Chelmsford, 55 Pitts Bay Road, Hamilton HM06 Bermuda |
|
100 |
|
100 |
|
0 |
|
0 |
|
Alison Margaret Harvey |
|
63 South Road, Smiths FL06, Bermuda |
|
100 |
|
100 |
|
0 |
|
0 |
|
Michael James Harvey |
|
63 South Road, Smiths FL06, Bermuda |
|
100 |
|
100 |
|
0 |
|
0 |
|
Patricia A. Alderson |
|
4 Hutton Way, Belle Vue South, Charlisle CA2 7TA, Cumbria, |
|
100 |
|
100 |
|
0 |
|
0 |
|
Antoinette M. Backhouse |
|
Moulin Huet House, St. Martin, Guernsey |
|
100 |
|
100 |
|
0 |
|
0 |
|
Christian H. H. Backhouse |
|
59 Cairnwood, Heads Nook, Brampton, CA8 9A4 |
|
100 |
|
100 |
|
0 |
|
0 |
|
Edwin H. Backhouse |
|
5 Cairn Wood, Heads Nook, Brampton, CA8 9A4 |
|
100 |
|
100 |
|
0 |
|
0 |
|
Judith Backhouse |
|
59 Cairnwood, Heads Nook, Brampton, CA8 9A4 |
|
100 |
|
100 |
|
0 |
|
0 |
|
Karen L. Backhouse |
|
Wesley Manse, 10 Wordsworth Street, Penrith Cumbria CA11 7Q4 |
|
100 |
|
100 |
|
0 |
|
0 |
|
Margaret Backhouse |
|
119 Dalston Road, Carlisle, Cumbria CA2 5PL |
|
100 |
|
100 |
|
0 |
|
0 |
|
Mark A. Backhouse |
|
Wesley Manse, 10 Wordsworth Street, Penrith Cumbria CA11 7Q4 |
|
100 |
|
100 |
|
0 |
|
0 |
|
Patricia M. Backhouse |
|
5 Cairn Wood, Heads Nook, Brampton, CA8 9A4 |
|
100 |
|
100 |
|
0 |
|
0 |
|
Paul G. Backhouse |
|
Moulin Huet House, St. Martin, Guernsey |
|
100 |
|
100 |
|
0 |
|
0 |
|
Timothy S Backhouse |
|
Kiama, Miltonduff, Elgin, Moray, IV30 8TL, UK |
|
100 |
|
100 |
|
0 |
|
0 |
|
David P. Bartlett |
|
Cienfuegos, Rue Cevecq, St. Saviour, Guernsey, GY7 9TF |
|
100 |
|
100 |
|
0 |
|
0 |
|
Rachael C. Bartlett |
|
Cienfuegos, Rue Cevecq, St. Saviour, Guernsey, GY7 9TF |
|
100 |
|
100 |
|
0 |
|
0 |
|
Antoinette Baxter |
|
3 Ledcamerouch Park, Dearsden, Glasgow, G61 4AT |
|
100 |
|
100 |
|
0 |
|
0 |
|
|
26
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Charles Baxter |
|
39 Finlay Rise, Milngavie, Glasgow, G62 6QL |
|
100 |
|
100 |
|
0 |
|
0 |
|
Geraldine Baxter |
|
53D Montrose Drive, Bearsden, Glasgow, G61 3JY |
|
100 |
|
100 |
|
0 |
|
0 |
|
Paul Baxter |
|
10 Telford Court, Old College Rd., Newbury, RG14 1TF |
|
100 |
|
100 |
|
0 |
|
0 |
|
Catherine J. Belcher |
|
Le Hurel House, Le Vallon, St. Martins, Guernsey 9Y4 6DG |
|
100 |
|
100 |
|
0 |
|
0 |
|
Martin C. Belcher |
|
Le Hurel House, Le Vallon, St. Martins, Guernsey 9Y4 6DG |
|
100 |
|
100 |
|
0 |
|
0 |
|
Sarah L. Bertrand |
|
La Rocquette, Rue Du Manor Forest, Hernsey GY8 OHZ |
|
100 |
|
100 |
|
0 |
|
0 |
|
Wayne G Bertrand |
|
La Rocquette, Rue Du Manor Forest, Hernsey GY8 OHZ |
|
100 |
|
100 |
|
0 |
|
0 |
|
John N. Bishop |
|
Clovelly, Rue Robin, Bordeaux, Guernsey, GY3 5ND |
|
100 |
|
100 |
|
0 |
|
0 |
|
Nicola L. Bishop |
|
Clovelly, Rue Robin, Bordeaux, Guernsey, GY3 5ND |
|
100 |
|
100 |
|
0 |
|
0 |
|
Linda C. Budge |
|
3 clos Des Chgnes, La Couturg, St. Pates Port Guernsey, Channel |
|
100 |
|
100 |
|
0 |
|
0 |
|
Robert Childs |
|
52 Warwick Ave, Port Soif, Guernsey |
|
100 |
|
100 |
|
0 |
|
0 |
|
A. Henry G. Dick-Cleland |
|
Sand Dollar, 16 Les Grans\ds Loriers, Vale, Guernsey |
|
100 |
|
100 |
|
0 |
|
0 |
|
Karen L. Dick-Cleland |
|
Sand Dollar, 16 Les Grans\ds Loriers, Vale, Guernsey |
|
100 |
|
100 |
|
0 |
|
0 |
|
Kerry A. Fell |
|
Les Rondiaux, La Rue Des Rondiaux, St. Pierre-Du-Bois, Guernsey |
|
100 |
|
100 |
|
0 |
|
0 |
|
Stephen A. Fell |
|
Les Rondiaux, La Rue Des Rondiaux, St. Pierre-Du-Bois, Guernsey |
|
100 |
|
100 |
|
0 |
|
0 |
|
Cleone E. Ferris |
|
Curlew Cottage, Le Chateau Clos, Route de la Lague, St. Pierre du |
|
100 |
|
100 |
|
0 |
|
0 |
|
Nicholas P. Ferris |
|
Les Pins, Route De Cobo, Castel, Guernsey |
|
100 |
|
100 |
|
0 |
|
0 |
|
Nicola O. Ferris |
|
Les Pins, Route De Cobo, Castel, Guernsey |
|
100 |
|
100 |
|
0 |
|
0 |
|
Peter E. L. Ferris |
|
Curlew Cottage, Le Chateau Clos, Route de la Lague, St. Pierre du |
|
100 |
|
100 |
|
0 |
|
0 |
|
Claire Y. Gaffney |
|
71A Tanfield Grove, Old Bilton Orange, Hull HU9 4PP |
|
100 |
|
100 |
|
0 |
|
0 |
|
Emma L. Gavet |
|
Winduane Cottage, Vale Mill, Vale, Guernsey UK |
|
100 |
|
100 |
|
0 |
|
0 |
|
Alison C. Gavey |
|
Kerminy, Le Chene DMont, Forest, Guernsey GY8 0AL |
|
100 |
|
100 |
|
0 |
|
0 |
|
David J. Gavey |
|
Kerminy, Le Chene DMont, Forest, Guernsey GY8 0AL |
|
100 |
|
100 |
|
0 |
|
0 |
|
Alva I. Gee |
|
Les Cambrettes, Delisle Castel, Guernsey GY5 7JW |
|
100 |
|
100 |
|
0 |
|
0 |
|
Ian B. Gee |
|
Eventai, Oakmore Drive, St. Martins, Guernsey GY4 6DZ |
|
100 |
|
100 |
|
0 |
|
0 |
|
Sandra Gee |
|
Eventai, Oakmore Drive, St. Martins, Guernsey GY4 6DZ |
|
100 |
|
100 |
|
0 |
|
0 |
|
Graham E. Hindle |
|
Les Martins Farm, Les Martins, St. Martins, Guernsey GY4 6QJ |
|
100 |
|
100 |
|
0 |
|
0 |
|
Susan P. Hindle |
|
Les Martins Farm, Les Martins, St. Martins, Guernsey GY4 6QJ |
|
100 |
|
100 |
|
0 |
|
0 |
|
Dianne Huddlestone |
|
La Breiquette, Le Chemin De La Breiquette, St. Ouen, Jersey JE3 2FF |
|
100 |
|
100 |
|
0 |
|
0 |
|
Paul Huddlestone |
|
La Breiquette, Le Chemin De La Breiquette, St. Ouen, Jersey JE3 2FF |
|
100 |
|
100 |
|
0 |
|
0 |
|
Benn M. Hunter |
|
Flat 1, 22 Third Ave., Hove, East Sussex BN3 2PD |
|
100 |
|
100 |
|
0 |
|
0 |
|
|
27
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Lynda T. Hunter |
|
Flat 1, 22 Third Ave., Hove, East Sussex BN3 2PD |
|
100 |
|
100 |
|
0 |
|
0 |
|
Albert Howard Jackson |
|
Courtil Heweril, Chgmin Du Roi, Forest Guernsey, Channel Islands |
|
100 |
|
100 |
|
0 |
|
0 |
|
Caroline A. Jackson |
|
Otterbourne, Ru Planel, Turteval, Guernsey |
|
100 |
|
100 |
|
0 |
|
0 |
|
Elizabeth M. Jackson |
|
Courtil Heweril, Chgmin Du Roi, Forest Guernsey, Channel Islands |
|
100 |
|
100 |
|
0 |
|
0 |
|
Nicholas H. Jackson |
|
Otterbourne, Ru Planel, Turteval, Guernsey |
|
100 |
|
100 |
|
0 |
|
0 |
|
Jeannine F. Jenkins |
|
Cherry Cottage, Rue De La Cache, St. Andrews, Guernsey GY6 8TM |
|
100 |
|
100 |
|
0 |
|
0 |
|
Nicholas V. Jenkins |
|
Cherry Cottage, Rue De La Cache, St. Andrews, Guernsey GY6 8TM |
|
100 |
|
100 |
|
0 |
|
0 |
|
John P. Jordan |
|
Kiama, Miltonduff, Elgin, Moray, IV30 8TL, UK |
|
100 |
|
100 |
|
0 |
|
0 |
|
Owen M. Keenan |
|
La Forge, Rue Covins, Catel, Guernsey |
|
100 |
|
100 |
|
0 |
|
0 |
|
Susan A. Keenan |
|
La Forge, Rue Covins, Catel, Guernsey |
|
100 |
|
100 |
|
0 |
|
0 |
|
Roderick G. Keiller |
|
Lancroft, Reuge Mills Avenue, St. Peter Port, Guernsey |
|
100 |
|
100 |
|
0 |
|
0 |
|
Anthony L. Krinks |
|
45 The Broadway, Thorpe Bay, Essex SS1 3H9 |
|
100 |
|
100 |
|
0 |
|
0 |
|
Geraldine V. Krinks |
|
45 The Broadway, Thorpe Bay, Essex SS1 3H9 |
|
100 |
|
100 |
|
0 |
|
0 |
|
Alfred C. W. Laine |
|
Les Corbinets, Palloterie Rd., St. Peters, Guernsey GY7 9BD |
|
100 |
|
100 |
|
0 |
|
0 |
|
Christine E. Laine |
|
Les Corbinets, Palloterie Rd., St. Peters, Guernsey GY7 9BD |
|
100 |
|
100 |
|
0 |
|
0 |
|
Marc S. Laine |
|
Les Corbinets, Palloterie Rd., St. Peters, Guernsey GY7 9BD |
|
100 |
|
100 |
|
0 |
|
0 |
|
Nicola J. Laine |
|
Les Corbinets, Palloterie Rd., St. Peters, Guernsey GY7 9BD |
|
100 |
|
100 |
|
0 |
|
0 |
|
David A. Larkin |
|
Alaska Clos DG Gibandbrig, St. Peter Port, Guernsey GY1 1XQ |
|
100 |
|
100 |
|
0 |
|
0 |
|
Christopher J. Le Tissier |
|
Winduane Cottage, Vale Mill, Vale, Guernsey UK |
|
100 |
|
100 |
|
0 |
|
0 |
|
Peter Lynch |
|
53D Montrose Drive, Bearsden, Glasgow, G61 3JY |
|
100 |
|
100 |
|
0 |
|
0 |
|
|
28
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
E. Tony Manning |
|
Apt 42, Charlotte MG Mills, St. Peter Port, Guernsey GY1 1DR |
|
100 |
|
100 |
|
0 |
|
0 |
|
Kim J. Martin |
|
Le Catillon, Rue Du Catillon, St. Peters, Guernsey GY7 9HG |
|
100 |
|
100 |
|
0 |
|
0 |
|
Paul D. Martin |
|
Le Catillon, Rue Du Catillon, St. Peters, Guernsey GY7 9HG |
|
100 |
|
100 |
|
0 |
|
0 |
|
Therese P. Martin |
|
Kimberly, Pleinmont Road, Torteval, Guernsey GY8 0LX |
|
100 |
|
100 |
|
0 |
|
0 |
|
Rebecca Louise Massey |
|
2 Golf Course, Nassau, Bahamas |
|
100 |
|
100 |
|
0 |
|
0 |
|
Fiona Jackson |
|
Beaufort, La Rocque Poisson, St. Peters, Guernsey GY7 9LF |
|
100 |
|
100 |
|
0 |
|
0 |
|
Emma Blackhouse |
|
Beaufort, La Rocque Poisson, St. Peters, Guernsey GY7 9LF |
|
100 |
|
100 |
|
0 |
|
0 |
|
Anthony R. Nutbrown |
|
4 Hutton Way, Belle Vue South, Charlisle CA2 7TA, Cumbria, |
|
100 |
|
100 |
|
0 |
|
0 |
|
Christopher A. Oliver |
|
Holly Lodge, Forest Road, St. Martin, Guernsey GY4 6UB |
|
100 |
|
100 |
|
0 |
|
0 |
|
Lawrence Pape |
|
10 Brookside Place, Carlisle, CA2 7JW |
|
100 |
|
100 |
|
0 |
|
0 |
|
Patricia Pape |
|
10 Brookside Place, Carlisle, CA2 7JW |
|
100 |
|
100 |
|
0 |
|
0 |
|
Caroline Patterson |
|
2 Le Frene, Ville Au Roi St., Peter Port, Guernsey |
|
100 |
|
100 |
|
0 |
|
0 |
|
Matthew Patterson |
|
2 Le Frene, Ville Au Roi St., Peter Port, Guernsey |
|
100 |
|
100 |
|
0 |
|
0 |
|
John H. Petit |
|
Peremi, Houmet Du Nord, Vale, Guernsey GY6 8JL |
|
100 |
|
100 |
|
0 |
|
0 |
|
Lynette Le Q. Petit |
|
Maple House, LA, Marette Court, Rue De Farras, Forest, Guernsey |
|
100 |
|
100 |
|
0 |
|
0 |
|
Martin Petite |
|
Maple House, LA, Marette Court, Rue De Farras, Forest, Guernsey |
|
100 |
|
100 |
|
0 |
|
0 |
|
David Paul Redhead |
|
LEcurie, Rue Des Caches, St. Saviours, Guernsey GY7 9TJ |
|
100 |
|
100 |
|
0 |
|
0 |
|
Lucette Redhead |
|
LEcurie, Rue Des Caches, St. Saviours, Guernsey GY7 9TJ |
|
100 |
|
100 |
|
0 |
|
0 |
|
Helen Robinson |
|
Flat C, 1 De Beauvior Terrace, Les Gravees, St. Peter Port, Guernsey |
|
100 |
|
100 |
|
0 |
|
0 |
|
Paul Robinson |
|
Flat C, 1 De Beauvior Terrace, Les Gravees, St. Peter Port, Guernsey |
|
100 |
|
100 |
|
0 |
|
0 |
|
Dawn Scholes |
|
Rugenpark, Rue Des Fracais, Vale, Guernsey GY3 5N |
|
100 |
|
100 |
|
0 |
|
0 |
|
Raymond Scholes |
|
Rugenpark, Rue Des Fracais, Vale, Guernsey GY3 5N |
|
100 |
|
100 |
|
0 |
|
0 |
|
Christopher N. Shaw |
|
176 Godley Road, London, SW18 3HE, UK |
|
100 |
|
100 |
|
0 |
|
0 |
|
Jason de B Sherwill |
|
La Maison De Bas, Rue Des Truchots, St. Andrew, Guernsey GY6 |
|
100 |
|
100 |
|
0 |
|
0 |
|
Maxine L. Sherwill |
|
La Maison De Bas, Rue Des Truchots, St. Andrew, Guernsey GY6 |
|
100 |
|
100 |
|
0 |
|
0 |
|
Graham Thoume |
|
Les Mezieres, Rue Du Friquet, Castel, Guernsey GY5 7SU |
|
100 |
|
100 |
|
0 |
|
0 |
|
Karen Thoume |
|
Les Mezieres, Rue Du Friquet, Castel, Guernsey GY5 7SU |
|
100 |
|
100 |
|
0 |
|
0 |
|
Barry Tough |
|
28 Bas Courtil, St. Saviours, Guernsey |
|
100 |
|
100 |
|
0 |
|
0 |
|
Eileen R. Tough |
|
28 Bas Courtil, St. Saviours, Guernsey |
|
100 |
|
100 |
|
0 |
|
0 |
|
Jonathon E. Turner |
|
9 Windsor Drive, Penrith, Cumbria, CA11 9BS |
|
100 |
|
100 |
|
0 |
|
0 |
|
Suzanne D. M. Turner |
|
9 Windsor Drive, Penrith, Cumbria, CA11 9BS |
|
100 |
|
100 |
|
0 |
|
0 |
|
David Walker |
|
Le Juge Vent, Clos Guilmine, Delancey Lane, St. Sampson, Guernsey |
|
100 |
|
100 |
|
0 |
|
0 |
|
Richard J. Walker |
|
Casuarina, 6 La Maison De Arbres, St., Martins, Guernsey |
|
100 |
|
100 |
|
0 |
|
0 |
|
|
29
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Christine Wilson |
|
19 Grinsdale Avenue, Carlisle, CA2 7LK |
|
100 |
|
100 |
|
0 |
|
0 |
|
Christopher John Murray |
|
Le Folie, Rue Du Hamel, Castel, Guernsey, Channel Islands GY5 7QJ |
|
100 |
|
100 |
|
0 |
|
0 |
|
David R. Arch |
|
51 Melody Lane, George Town, Grand Cayman,Cayman Islands |
|
100 |
|
100 |
|
0 |
|
0 |
|
Katherine Arch |
|
51 Melody Lane, George Town, Grand Cayman,Cayman Islands |
|
100 |
|
100 |
|
0 |
|
0 |
|
Florence Parsons |
|
50 Henning Lane, West Bay, Grand Cayman, Cayman Islands |
|
100 |
|
100 |
|
0 |
|
0 |
|
Janet V. Hebbes |
|
34 Bayview Ave., Toronto, Ontario, Canada M5J 1Z4 |
|
100 |
|
100 |
|
0 |
|
0 |
|
Colleen S. Bleasdell |
|
22 Knightsbridge Rd., Scarborough, Ontario, Canada M1L 2B2 |
|
100 |
|
100 |
|
0 |
|
0 |
|
Victor George Kobina Dei |
|
50 Lord Roberts Dr., Scarborough, Toronto, Ontario, Canada M1K |
|
100 |
|
100 |
|
0 |
|
0 |
|
Elizabeth Roeder |
|
605 Burning Bush Rd., Waterloo, Ontario, Canada N2V 2A4 |
|
100 |
|
100 |
|
0 |
|
0 |
|
Charles Ryan Corrigan |
|
26 Aberdeen Rd., Kitchener, Ontario, Canada N2M 2Y5 |
|
100 |
|
100 |
|
0 |
|
0 |
|
Teresa Misue Corrigan |
|
26 Aberdeen Rd., Kitchener, Ontario, Canada N2M 2Y5 |
|
100 |
|
100 |
|
0 |
|
0 |
|
Charles J. Corrigan |
|
26 Aberdeen Rd., Kitchener, Ontario, Canada N2M 2Y5 |
|
100 |
|
100 |
|
0 |
|
0 |
|
Diane L. Strype |
|
114 Hearth Cres., Kitchener, Ontario, Canada N2M 1G9 |
|
100 |
|
100 |
|
0 |
|
0 |
|
Richard B. Strype |
|
114 Hearth Cres., Kitchener, Ontario, Canada N2M 1G9 |
|
100 |
|
100 |
|
0 |
|
0 |
|
Brian D. Malott |
|
53 Trailview Dr., Kitchener, Ontario, N2N 1P7, Canada |
|
100 |
|
100 |
|
0 |
|
0 |
|
Michael M. Malott |
|
53 Trailview Dr., Kitchener, Ontario, N2N 1P7, Canada |
|
100 |
|
100 |
|
0 |
|
0 |
|
|
30
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Erin Sloan |
|
625 Glasgow St., Kitchener, Ontario, Canada N2M 2N6 |
|
100 |
|
100 |
|
0 |
|
0 |
|
Tara Sloan |
|
625 Glasgow St., Kitchener, Ontario, Canada N2M 2N6 |
|
100 |
|
100 |
|
0 |
|
0 |
|
Nadica A. Sloan |
|
625 Glasgow St., Kitchener, Ontario, Canada N2M 2N6 |
|
100 |
|
100 |
|
0 |
|
0 |
|
Ron Millman |
|
1577 Bayview Ave., Toronto, Ontario, Canada M4G 3B5 |
|
100 |
|
100 |
|
0 |
|
0 |
|
James W. Sloan |
|
625 Glasgow St., Kitchener, Ontario, Canada N2M 2N6 |
|
100 |
|
100 |
|
0 |
|
0 |
|
Toshiyuki Sakamoto |
|
18 Glen Davis Crescent, Toronto, Canada M4E 1X5 |
|
100 |
|
100 |
|
0 |
|
0 |
|
Steven John Clow |
|
127 Valhalla Crescent NW, Calgary, Alberta, Canada T3A 1Z7 |
|
100 |
|
100 |
|
0 |
|
0 |
|
Jennifer Elizabeth Jean Pyatt |
|
127 Valhalla Crescent NW, Calgary, Alberta, Canada T3A 1Z7 |
|
100 |
|
100 |
|
0 |
|
0 |
|
John B. R. Stoddart |
|
90 Glenview Ave., Ottawa, Ontario, Canada K1S 1M3 |
|
100 |
|
100 |
|
0 |
|
0 |
|
Trudi Johnston |
|
32 Lakeridge Dr., Toronto, Ontario, Canada M1C 5C2 |
|
100 |
|
100 |
|
0 |
|
0 |
|
David Schultz |
|
4185 Shipp Dr., #1215, Mississauga, Ontario, Canada L4Z 2Y8 |
|
100 |
|
100 |
|
0 |
|
0 |
|
William Matthew Pyatt |
|
127 Valhalla Crescent NW, Calgary, Alberta, Canada T3A 1Z7 |
|
100 |
|
100 |
|
0 |
|
0 |
|
Jackie Gardner |
|
3-66B Wellesley St., East, Toronto, Ontario, Canada M4Y 1G2 |
|
100 |
|
100 |
|
0 |
|
0 |
|
Yolanda Pandolfo |
|
14070 Yonge St., Aurora, Ontario, Canada L4G 3G8 |
|
100 |
|
100 |
|
0 |
|
0 |
|
John Baker |
|
137 Royal Orchard Blvd., Thornhill, Ontario, Canada L3T 3E1 |
|
100 |
|
100 |
|
0 |
|
0 |
|
John A. Macfadyen |
|
110 Beatrice St., Toronto, Ontario, Canada M6J 2T3 |
|
100 |
|
100 |
|
0 |
|
0 |
|
Gloria June Taylor |
|
185 McMurchy Ave. South, Brampton, Ontario, Canada L6Y 1Z2 |
|
100 |
|
100 |
|
0 |
|
0 |
|
Mohamad H. Khorshid |
|
54 Av. Puvis de Chavanes, 92400 Courbevoie - France |
|
100 |
|
100 |
|
0 |
|
0 |
|
Sheila Brennan |
|
48 rue de Vaugirard, 75006 Paris France |
|
100 |
|
100 |
|
0 |
|
0 |
|
Patricia Lurie |
|
72, rue Maurice Rinpoche, 75014 Paris, France |
|
100 |
|
100 |
|
0 |
|
0 |
|
Peter Hartmuth |
|
Reef House, 10/South Church Street, South Sound, Grand Cayman, Cayman Islads |
|
100 |
|
100 |
|
0 |
|
0 |
|
Joanne Hopper Houston |
|
Columbia House, 32 Reid Street, Hamilton, Bermuda |
|
100 |
|
100 |
|
0 |
|
0 |
|
Garry M. Markham |
|
#7 Neco Apartments, P. O. Box N7805, Nassau Bahamas |
|
100 |
|
100 |
|
0 |
|
0 |
|
Craig Steven Massey |
|
2 Golf Course, Nassau, Bahamas |
|
100 |
|
100 |
|
0 |
|
0 |
|
Margaret Sandrin |
|
36, Rue de Picpus, 75012, Paris, France |
|
100 |
|
100 |
|
0 |
|
0 |
|
Norman G. Long |
|
Merlins Mock, 7 Stardust Drive, Hamilton Parish, Bermuda CR01 |
|
100 |
|
100 |
|
0 |
|
0 |
|
Vanessa J. Cooper |
|
7 Stardust Drive, Hamilton Parish, Bermuda CR01 |
|
100 |
|
100 |
|
0 |
|
0 |
|
Simon Michael Burroughs |
|
26 Crome Park, Wanstead, London E11 2DL, U.K. |
|
100 |
|
100 |
|
0 |
|
0 |
|
Joyce Gawne |
|
Keristan House, Port Soderick, Isle of Man 1M4 1BJ |
|
100 |
|
100 |
|
0 |
|
0 |
|
Allen Gawne |
|
Keristan House, Port Soderick, Isle of Man 1M4 1BJ |
|
100 |
|
100 |
|
0 |
|
0 |
|
Scott A. Christian |
|
8 Horseshce Ave., Ashbourne Park, Douglas, Isle of Man 1M2 1Q5 |
|
100 |
|
100 |
|
0 |
|
0 |
|
|
31
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Joanne C. Christian |
|
8 Horseshce Ave., Ashbourne Park, Douglas, Isle of Man 1M2 1Q5 |
|
100 |
|
100 |
|
0 |
|
0 |
|
William Darren Redford |
|
5 The Falls, Tromode Rd., Douglas, Isle of Man 1M4 4PZ |
|
100 |
|
100 |
|
0 |
|
0 |
|
Sarah Rachel Horrox |
|
5 The Falls, Tromode Rd., Douglas, Isle of Man 1M4 4PZ |
|
100 |
|
100 |
|
0 |
|
0 |
|
David Thomas Alderdice |
|
19 Redkiln Road, Crawl, Hamilton Parish, Bermuda CR02 |
|
100 |
|
100 |
|
0 |
|
0 |
|
Donna Cousins |
|
Columbia House, 32 Reid Street, Hamilton, Bermuda |
|
100 |
|
100 |
|
0 |
|
0 |
|
Molloy Stuart |
|
93, Rrue de Seine, 75006 Paris, France |
|
100 |
|
100 |
|
0 |
|
0 |
|
Una McBride |
|
170 Roehampton Ave., Apt. 606, Toronto, Ontario, Canada M4P 1R2 |
|
100 |
|
100 |
|
0 |
|
0 |
|
Neil Dignam |
|
1 Thorncliffe St., Kitchener, Ontario, Canada N2N 1Z3 |
|
100 |
|
100 |
|
0 |
|
0 |
|
Shea T. Richardson |
|
304-49 Glen Elm Ave., Toronto, Ontario, Canada M4T 1V2 |
|
100 |
|
100 |
|
0 |
|
0 |
|
William R Pyatt |
|
138 Abbott Blvd., Cobourg, Ontario, Canada K9A 4E7 |
|
100 |
|
100 |
|
0 |
|
0 |
|
Li Xiaojian(5) |
|
No.201 Unit5, Building 19, QiTsingda EducationTsingda Education, Shijingshan District, Beijing,100040 |
|
366,034 |
|
18,302 |
|
347,732 |
|
1.0 |
% |
Zhan Hongchun(5) |
|
No.29, Building 8, No.16, Yuantian Road, Jinshui District, Zhengzhou, Henan, 450000 |
|
244,023 |
|
12,210 |
|
231,813 |
|
* |
% |
Xie Lingbin(5) |
|
Room1205,No.153,Dongping Erli, Siming District, Xiamen, Fujian, 361004 |
|
244,023 |
|
12,210 |
|
231,813 |
|
* |
|
Feng Chengxiang(5) |
|
No.7,Qiaosizhen South Street, Yuhang district, Hangzhou, Zhejiang, 361000 |
|
73,207 |
|
3,660 |
|
69,547 |
|
* |
|
Wealth Index Capital Group LLC(5)(6) |
|
Room1603,Unit15,Building3, Xinshijie Center Apartment, Chongwen Menwai,Beijing,100062 |
|
1,255,741 |
|
62,787 |
|
1,192,954 |
|
3.5 |
% |
Zhang Wei(5) |
|
7C,Building1, Jinrong Jidi,No.8 Kefa Road, Nanshan District, Shenzhen, Guangdong, 518048 |
|
1,837,492 |
|
91,875 |
|
1,745,617 |
|
5.2 |
% |
Dong Hanbin(5) |
|
Room501, Unit2, Building17, Jindu Xincheng, Xihu District, Hangzhou, Zhejiang,310000 |
|
1,169,357 |
|
58,468 |
|
1,110,889 |
|
3.3 |
% |
Jiang Zhongchen(5) |
|
Room801, No.16, Lane158, Damuqiao Road, Xuhui District, Shanghai, 200032 |
|
1,169,357 |
|
58,468 |
|
1,110,889 |
|
3.3 |
% |
|
32
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Lin Huayu(5) |
|
Room401, No.16, Yangtaishan Road, Siming District, Xiamen, Fujian, 361000 |
|
1,895,569 |
|
94,778 |
|
1,800,791 |
|
5.3 |
% |
Shen Jing(5) |
|
Room1603,Unit15,Building3, Xinshijie Center Apartment, Chongwen Menwai,Beijing,100062 |
|
417,767 |
|
20,888 |
|
396,879 |
|
1.2 |
% |
Li Li(5) |
|
No.12,Unit5,Building 7, Yuetan North Street, Xicheng District, Beijing, 100045 |
|
55,149 |
|
2,757 |
|
52,402 |
|
* |
|
Yu Sheng(5) |
|
No.620, Zhongshan West Road, Changning District, Shanghai,200051 |
|
1,811,625 |
|
90,581 |
|
1,721,044 |
|
5.1 |
% |
Yang Fanbin(5) |
|
No.16, Xinde Road, Siming District, Xiamen,Fujian, 361001 |
|
1,342,125 |
|
67,106 |
|
1,275,023 |
|
3.8 |
% |
Ye Jiabo(5) |
|
Room401,No.63,Huguang Road, Siming District, Xiamen, Fujia, 361001 |
|
1,098,103 |
|
54,905 |
|
1,043,197 |
|
3.1 |
% |
Tsing Da Century Education Technology Co.,Ltd(5)(7) |
|
Room1803, Building13, Court58, Qingta West Road, Fengtai District, Beijing,100071 |
|
11,422,706 |
|
571,135 |
|
10,851,570 |
|
32.2 |
% |
|
|
* less than 1% |
|
|
|
|
|
(1) |
Beneficial Ownership is determined in accordance with the rules of the SEC and generally includes voting or investment power with respect to securities. Each of the beneficial owners listed above has ownership of and voting power and investment power with respect to our Ordinary Shares or Preferred Shares. For each beneficial owner above, any options exercisable within 60 days have been included in the denominator. |
|
|
|
|
(2) |
Based on 33,729,862 Ordinary Shares outstanding as of the date hereof. |
|
|
(3) |
Nautilus Global Partners was a promoter of the Company at the time prior to the merger with Tsingda. Certain affiliates of Nautilus Global Partners, namely Joseph Rozelle and David Richardson were affiliates of the Company. Joseph Rozelle was President, Chief Financial Officer, and a director and David Richardson was a director of the Company from September 2006 to June 2010. The persons identified by this footnote have received their shares in connection with their services provided to, or employment, with Nautilus Global Partners. |
|
|
(4) |
Mid-Ocean Consulting Ltd. was a promoter of the Company at the time prior to the merger with Tsingda Technology. |
|
|
(5) |
Each such person acquired their Ordinary Shares in connection with the reverse acquisition with Tsingda Technology. |
|
|
(6) |
Mr. Huang Shan Chun has voting and dispositive control over the securities of Wealth Index Capital Group LLC. |
|
|
(7) |
Mr. Zhang, our Chairman and President, and Mr. Liu, our Executive Vice President and Director, own 81.7% and 18.3%, respectively, of the outstanding securities of this entity. |
|
The selling shareholders may, from time to time, sell, transfer or otherwise dispose of any or all of their securities or interests in securities on any stock exchange, market or trading facility on which the shares are traded or in private transactions. These dispositions may be at fixed prices, at prevailing market prices at the time of sale, at prices related to the prevailing market price, at varying prices determined at the time of sale, or at negotiated prices.
The selling shareholders may use any one or more of the following methods when disposing of shares or interests therein:
|
|
|
|
||
|
|
ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers; |
|
|
block trades in which the broker-dealer will attempt to sell the shares as agent, but may position and resell a portion of the block as principal to facilitate the transaction; |
|
|
purchases by a broker-dealer as principal and resale by the broker-dealer for its account; |
|
|
an exchange distribution in accordance with the rules of the applicable exchange; |
|
|
privately negotiated transactions; |
|
|
short sales effected after the date the registration statement of which this Prospectus is a part is declared effective by the SEC; |
|
|
through the writing or settlement of options or other hedging transactions, whether through an options exchange or otherwise; |
|
|
broker-dealers may agree with the selling shareholders to sell a specified number of such shares at a stipulated price per share; and |
|
33
|
|
|
|
||
|
|
a combination of any such methods of sale. |
The selling shareholders may, from time to time, pledge or grant a security interest in some or all of the Ordinary Shares owned by them and, if they default in the performance of their secured obligations, the pledgees or secured parties may offer and sell the Ordinary Shares, from time to time, under this prospectus, or under an amendment to this prospectus under Rule 424(b)(3) or other applicable provision of the Securities Act amending the list of selling shareholders to include the pledgee, transferee or other successors in interest as selling shareholders under this prospectus. The selling shareholders also may transfer the securities in other circumstances, in which case the transferees, pledgees or other successors in interest will be the selling beneficial owners for purposes of this prospectus.
In connection with the sale of our Ordinary Shares or interests therein, the selling shareholders may enter into hedging transactions with broker-dealers or other financial institutions, which may in turn engage in short sales of the Ordinary Shares in the course of hedging the positions they assume. The selling shareholders may also sell shares of our Ordinary Shares short and deliver these securities to close out their short positions, or loan or pledge the Ordinary Shares to broker-dealers that in turn may sell these securities. The selling shareholders may also enter into option or other transactions with broker-dealers or other financial institutions or the creation of one or more derivative securities which require the delivery to such broker-dealer or other financial institution of shares offered by this prospectus, which shares such broker-dealer or other financial institution may resell pursuant to this prospectus (as supplemented or amended to reflect such transaction).
The aggregate proceeds to the selling shareholders from the sale of the
Ordinary Shares offered by them will be the purchase price of the Ordinary
Shares less discounts or commissions, if any. Each of the selling shareholders
reserves the right to accept and, together with their agents from time to time,
to reject, in whole or in part, any proposed purchase of Ordinary Shares to be
made directly or through agents. We will not receive any of the proceeds from
this offering.
Broker-dealers engaged by the selling shareholders may arrange for other broker-dealers to participate in sales. Broker-dealers may receive commissions or discounts from the selling shareholders (or, if any broker-dealer acts as agent for the purchase of shares, from the purchaser) in amounts to be negotiated.
The selling shareholders also may resell all or a portion of the shares in open market transactions in reliance upon Rule 144 under the Securities Act, provided that they meet the criteria and conform to the requirements of that rule.
Any underwriters, agents, or broker-dealers, and any selling
shareholders who are affiliates of broker-dealers, that participate in the sale
of the Ordinary Shares or interests therein may be underwriters within the
meaning of Section 2(11) of the Securities Act. Any discounts, commissions,
concessions or profit they earn on any resale of the shares may be underwriting
discounts and commissions under the Securities Act. Selling shareholders who
are underwriters within the meaning of Section 2(11) of the Securities Act
will be subject to the prospectus delivery requirements of the Securities Act.
We know of no existing arrangements between any of the selling shareholders and
any other stockholder, broker, dealer, underwriter, or agent relating to the
sale or distribution of the shares, nor can we presently estimate the amount,
if any, of such compensation. See Selling Shareholders for description of any
material relationship that a stockholder has with us and the description of
such relationship.
To the extent required, the Ordinary Shares to be sold, the names of the selling shareholders, the respective purchase prices and public offering prices, the names of any agents, dealer or underwriter, any applicable commissions or discounts with respect to a particular offer will be set forth in an accompanying prospectus supplement or, if appropriate, a post-effective amendment to the registration statement that includes this prospectus.
In order to comply with the securities laws of some states, if
applicable, the Ordinary Shares may be sold in these jurisdictions only through
registered or licensed brokers or dealers. In addition, in some states the
Ordinary Shares may not be sold unless it has been registered or qualified for
sale or an exemption from registration or qualification requirements is
available and is complied with.
We agreed with certain of the selling shareholders to pay the fees and expenses incurred by us incident to the registration of the shares and to indemnify them against liabilities, including liabilities under the Securities Act and state securities laws, relating to the registration of the shares offered by this prospectus. We also have agreed with certain of the selling shareholders to keep the registration statement of which this prospectus constitutes a part effective until the earlier of (1) such time as all of their shares covered by this prospectus have been sold of pursuant to and in accordance with the registration statement or (2) the date on which the shares may be sold pursuant to Rule 144 of the Securities Act without volume or manner of sale restrictions.
34
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of the
results of operations and financial condition of the Company for the three
month and six month periods ended September 30, 2010 and 2009, respectively,
and for the fiscal years ended December 31, 2009 and 2008, respectively, should
be read in conjunction with the notes to the financial statements that are
included elsewhere herein. The consolidated financial statements
presented herein (and to which this discussion relates) reflect the results of
operations of Tsingda Technology (as defined below) and its variable interest
entities, for the three and nine month periods ended September 30, 2010 and
2009 and reflect the acquisition of the Company pursuant to the Share Exchange
Agreement (as defined below) under the purchase method of accounting.
Subsequent to May 24, 2010, the operations of the Company reflected the
combined operations of the Company (including Tsingda Education and Tsingda
Network). Our discussion includes
forward-looking statements based upon current expectations that involve risks
and uncertainties, such as our plans, objectives, expectations and intentions.
Actual results and the timing of events could differ materially from those
anticipated in these forward-looking statements as a result of a number of
factors. We use words such as anticipate, estimate, plan, project,
continuing, ongoing, expect, believe, intend, may, will,
should, could, and similar expressions to identify forward-looking
statements. We undertake no
obligation to revise or update any forward-looking statements in order to reflect
any event or circumstance that may arise after the date of this report, except
as required by law. Readers are urged to carefully review and consider the
various disclosures made throughout the entirety of this quarterly report,
which are designed to advise interested parties of the risks and factors that
may affect our business, financial condition, results of operations and
prospects.
COMPANY OVERVIEW
On May 24,
2010, Tsingda eEDU,
f/k/a Compass Acquisition Corporation and its controlling shareholders entered
into a share exchange agreement (Share Exchange Agreement) with Tsing Da
Century Education Technology Co. Ltd., a British Virgin Islands business
company (Tsingda Technology), and its shareholders.
Tsingda Technology owns 100% of the issued and outstanding capital stock of Beijing Tsingda Century Management Consulting Ltd. (Tsingda Management), a wholly foreign owned enterprise incorporated under the laws of the Peoples Republic of China (PRC). On April 26, 2010, Tsingda Management entered into a series of contractual agreements with Beijing Tsingda Century Investment Consultant of Education Co. Ltd (Tsingda Education), a company incorporated under the laws of the PRC, and its shareholders, in which Tsingda Management effectively assumed management of the business activities of Tsingda Education. Beijing Tsingda Century Network Technology Co. Ltd., a PRC company, is a wholly owned subsidiary of Tsingda Education. The contractual arrangements are comprised of a series of agreements, including a Consulting Services Agreement, Operating Agreement, Proxy Agreement, and Option Agreement, through which Tsingda Management has the right to advise, consult, manage and operate Tsingda Education for a quarterly fee in the amount of 100% of Tsingda Educations quarterly, after tax net profits. Additionally, Tsingda Educations shareholders have pledged their rights, titles and equity interest in Tsingda Education as security for Tsingda Management to collect consulting and service fees through an Equity Pledge Agreement. In order to further reinforce Tsingda Managements rights to control and operate Tsingda Education, Tsingda Educations shareholders have granted Tsingda Management the exclusive right and option to acquire all of their equity interests in Tsingda Education through the Option Agreement.
As all of the companies are under common control, this structure has been accounted for as a reorganization of entities and the financial statements have been prepared as if the reorganization had occurred retroactively.
Tsingda Education, with its subsidiary Tsingda Network, is a leading offline and online provider of educational services in the PRC. To the best of its knowledge, the Company believes it runs the largest chain of learning centers in China in terms of the number of learning centers, known as Tsingda Learning Centers. These educational centers principally target elementary school students and consist mainly of franchised locations. As of September 30, 2010, it has approximately 2,271 learning centers nationwide, of which are franchised and the remainder of which are Company-owned It also has developed a robust, interactive educational platform which allows students to search and subscribe to virtual classrooms offered by a wide range of teachers in the PRC.
We have franchise agreements with each of our franchised locations. These franchise agreements are typically effective for a one year term. The franchised locations must conform to certain operating requirements of the Company, such as the quality of products and services offered and participation of promotional activities. Each franchised location pays an initial franchise fee to the Company as well as an annual branding licensing fee and annual management fee at the end of each subsequent year. The Company, in-turn, offers discounted e-cards to the franchised locations.
On November
15, 2010, the Company held the Special Meeting at its principal offices in Beijing, China,
pursuant to the Notice of Special Meeting of Shareholders. At the Special
Meeting, 33,386,754 shares of the Companys authorized share capital were
represented in person or by proxy, which constituted a quorum. At the Special
Meeting, shareholders approved two proposals: (i) to
35
change the
corporate name from Compass Acquisition Corporation to Tsingda eEDU Corporation
and (ii) to affect a three-for-one consolidation of the Companys issued and
outstanding Ordinary Shares and to increase the amount of the Companys
authorized Ordinary Shares from thirty-nine million sixty-two thousand five
hundred shares (39,062,500) to one hundred million (100,000,000) shares. The
name change of the Company to Tsingda eEDU Corporation and the three-for-one
consolidation and increase in the Companys authorized share capital was effective
immediately following shareholder approval.
Our financial statements are prepared in US Dollars and in accordance with accounting principles generally accepted in the United States. See Critical Accounting Policies - Foreign Currency Translation below for information concerning the exchange rates at the Renminbi (RMB) were translated into US Dollars (USD) at various pertinent dates and for pertinent periods.
Recruitment of Students
The following table shows the change in the number of active students from 2008 to the third quarter of 2010.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
No. of active students increased for the specified quarter |
|||||||||||||
|
|
||||||||||||
Year |
|
Q1 |
|
Q2 |
|
Q3 |
|
Q4 |
|
||||
|
|
|
|
|
|
|
|
|
|
||||
2008 |
|
|
104,550 |
|
|
121,394 |
|
|
132,485 |
|
|
115,126 |
|
2009 |
|
|
182,239 |
|
|
204,482 |
|
|
250,553 |
|
|
237,357 |
|
2010 |
|
|
301,203 |
|
|
328,813 |
|
|
337,440 |
|
|
|
|
Note: The numbers are calculated based on the number of newly active students minus (-) the number of active students lost in the specified quarter.
Online Content
The Company has continued to add new online broadcasting contents, consisting of new courses.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
No. of items of online contents increased for the specified quarter |
|||||||||||||
|
|
||||||||||||
Year |
|
Q1 |
|
Q2 |
|
Q3 |
|
Q4 |
|
||||
|
|
|
|
|
|
|
|
|
|
||||
2008 |
|
|
79,521 |
|
|
150,210 |
|
|
100,154 |
|
|
76,471 |
|
2009 |
|
|
60,000 |
|
|
78,652 |
|
|
68,015 |
|
|
15,332 |
|
2010 |
|
|
91,200 |
|
|
90,524 |
|
|
74,200 |
|
|
|
|
Sale of e-Cards
The Company has continued to see increased sales of e-cards, which are used by students to purchase our course offerings.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Face value of e-cards sold for the specified quarter |
|||||||||||||
|
|
||||||||||||
Year |
|
Q1 |
|
Q2 |
|
Q3 |
|
Q4 |
|
||||
|
|
|
|
|
|
|
|
|
|
||||
2008 |
|
$ |
989,504 |
|
$ |
937,157 |
|
$ |
1,278,251 |
|
$ |
1,238,242 |
|
2009 |
|
$ |
2,268,859 |
|
$ |
2,396,939 |
|
$ |
2,674,600 |
|
$ |
2,486,370 |
|
2010 |
|
$ |
2,475,842 |
|
$ |
3,891,129 |
|
$ |
5,456,776 |
|
|
|
|
Note: The Company sells e-cards at a discount to franchised learning centers which then re-sell e-cards to students. Face value of e-cards refers to the amount that students consumed.
Revenue Breakdown.
For the fiscal years 2008, 2009 and 2010, the tables below break down the source of our revenues. We generate most
of our revenues through licensing fees, management fees, sales of e-cards, and beginning August
2010, the sale of reference books and materials. We also feature an online
educational platform where students and teachers are linked through our
proprietary software interface for the sole purpose of transacting educational
related services.
36
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008 Revenue Breakdown (in Dollars) |
||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
|
|
|
|
Annual |
|
Sale of e-Cards |
|
|
|
|
|
|
|
|
|
|
|||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||
Year |
|
Licensing |
|
|
Pre-Recorded |
|
Online eBay |
|
Materials and |
|
Others |
|
Total |
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Q1/2008 |
|
$ |
886,424 |
|
$ |
997 |
|
$ |
595,603 |
|
|
|
|
|
|
|
$ |
51,324 |
|
$ |
1,534,348 |
|
Q2/2008 |
|
$ |
883,146 |
|
$ |
6,612 |
|
$ |
673,168 |
|
|
|
|
|
|
|
$ |
2,069 |
|
$ |
1,564,995 |
|
Q3/2008 |
|
$ |
1,251,769 |
|
$ |
19,772 |
|
$ |
843,0764 |
|
$ |
15,294 |
|
|
|
|
$ |
4,691 |
|
$ |
2,134,602 |
|
Q4/2008 |
|
$ |
990,222 |
|
$ |
67,753 |
|
$ |
791,058 |
|
$ |
139,264 |
|
|
|
|
$ |
79,491 |
|
$ |
2,067,788 |
|
Total |
|
$ |
4,011,561 |
|
$ |
95,134 |
|
$ |
2,952,905 |
|
$ |
154,558 |
|
|
|
|
$ |
137,575 |
|
$ |
7,301,733 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009 Revenue Breakdown (in Dollars) |
||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||
|
|
|
|
Annual |
|
Sale of e-Cards |
|
|
|
|
|
|
|
|||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Year |
|
Licensing |
|
|
Pre-Recorded |
|
Online eBay |
|
Materials and |
|
Others |
|
Total |
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Q1/2009 |
|
$ |
1,568,720 |
|
$ |
28,634 |
|
$ |
1,484,116 |
|
$ |
220,205 |
|
|
|
|
$ |
50,247 |
|
$ |
3,351,922 |
|
Q2/2009 |
|
$ |
1,705,551 |
|
$ |
26,494 |
|
$ |
1,514,852 |
|
$ |
258,088 |
|
|
|
|
$ |
83,335 |
|
$ |
3,588,320 |
|
Q3/2009 |
|
$ |
1,732,691 |
|
$ |
37,553 |
|
$ |
1,638,605 |
|
$ |
254,374 |
|
|
|
|
$ |
279,184 |
|
$ |
3,942,407 |
|
Q4/2009 |
|
$ |
1,806,543 |
|
$ |
29,706 |
|
$ |
1,645,104 |
|
$ |
275,970 |
|
|
|
|
$ |
10,891 |
|
$ |
3,768,214 |
|
Total |
|
$ |
6,813,505 |
|
$ |
122,387 |
|
$ |
6,282,677 |
|
$ |
1,008,637 |
|
|
|
|
$ |
423,657 |
|
$ |
14,650,863 |
|
2010 Revenue Breakdown (in Dollars)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sale of e-Cards |
|
|
|
|
|
|
|
|||||||||
|
|
|
|
Annual |
|
|
|
Materials and |
|
|
|
|
|
|||||||||
Year |
|
Licensing |
|
|
Pre- |
|
Online eBay |
|
|
Others |
|
Total |
|
|||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Q1/2010 |
|
$ |
1,308,823 |
|
$ |
37,968 |
|
$ |
2,136,709 |
|
$ |
161,697 |
|
|
|
|
$ |
4,961 |
|
$ |
3,650,158 |
|
Q2/2010 |
|
$ |
1,854,665 |
|
$ |
41,388 |
|
$ |
3,040,743 |
|
$ |
820,653 |
|
|
|
|
$ |
7,862 |
|
$ |
5,765,311 |
|
Q3/2010 |
|
$ |
2,947,794 |
|
$ |
42,067 |
|
$ |
3,865,578 |
|
$ |
1,095,375 |
|
$ |
1,361,622 |
|
$ |
4,366 |
|
$ |
9,316,802 |
|
Q4/2010 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
$ |
6,111,282 |
|
$ |
121,423 |
|
$ |
9,043,030 |
|
$ |
2,077,725 |
|
$ |
1,361,622 |
|
$ |
17,189 |
|
$ |
18,732,271 |
|
(1): Materials
and publications include reference books and materials, either self-branded or
cooperative. The sales of reference books and materials were started from
August, 2010.
37
For real time courses, the teachers and the Company split the revenues
generated on a 60% - 40% basis, respectively. For pre-recorded courses, the
teachers and the Company split the revenues generated on a 10% - 90% basis,
respectively.
Students must use e-cards to purchase all online content, while the purchase of reference books and materials are transacted in cash. The sales of reference books and materials began in August, 2010, and it is expected to account for approximately 10% of total revenue in 2010. While the sale of e-cards continues to be the single biggest source of revenue, licensing fees and sales of reference materials make up a substantial portion of our revenue.
Our Growth Strategy
Our growth and expansion strategy for the next 6 to 12 months includes the following measures, the cost of which is expected to come from our existing revenue stream:
|
|
|
Increase the number of Company-owned learning centers. As of September 30, 2010, we have 18 Company-owned locations. Due to the size of our Company-owned locations, we are able to absorb higher student traffic and generate higher overall revenues compared to franchised locations. We also recognize 100% of the revenue stream from these locations. During the remainder of calendar year 2010, we expect to open approximately 40 additional Company-owned locations. The aggregate estimated cost to open these locations is $4,000,000. |
|
|
|
Increase the number of franchised learning centers. As of September 30, 2010, we had over 2,271 locations with 1,400 of them located in 2nd and 3rd tier cities. We estimate there are approximately 50,000 2nd and 3rd tier cities in the PRC. Our plan is to increase the number of franchised learning centers by increasing our advertising and marketing initiatives in an effort to attract more franchisees. We plan on spending approximately $1.2 million on a broad scale brand promotional campaign. This campaign will target a number of media outlets, including advertisements on regional television and in local newspapers in select markets, as well as holding periodic regional events in these markets, all of which will be designed to attract franchisees. As of November 15, 2010, the Company has agreements to open 544 new franchised learning centers. |
|
|
|
Increase traffic to our virtual classrooms. We plan to allocate more capital resources to the marketing and promotion of our virtual classrooms. The above mentioned brand promotion campaign will include sponsoring events at prominent high schools designed to promote our virtual classrooms, advertising in school newspapers, and to a lesser extent, subscribing to more per click ad space on selected Internet sites, such as Sina.com and Yahoo.com.cn. We also expect to experience increased traffic to our virtual classrooms coincident with our franchise expansion efforts. Since introduction of this platform, historical results have indicated that a majority of our virtual classroom subscribers have originated from our learning centers. |
|
|
We plan to establish additional learning centers in 2010 and 2011 as follows:
|
|
|
|
|
|
|
|
|
|
2010 |
|
2011 |
|
||
|
|
|
|
|
|
||
New company-owned learning centers |
|
|
30 |
|
|
30 |
|
Total company-owned learning centers |
|
|
30 |
|
|
60 |
|
New franchised learning centers |
|
|
550 |
|
|
600 |
|
Total franchised learning centers |
|
|
2,300 |
|
|
2,900 |
|
Total Learning Centers |
|
|
2,330 |
|
|
2,960 |
|
On average, the total cost of opening a Company-owned learning center is approximately $100,000, as described in further detail in the following table:
|
|
|
|
|
Interior decoration |
|
$ |
22,059 |
|
Equipments and facilities |
|
$ |
5,882 |
|
6-month Rent (paid up front) |
|
$ |
44,118/6 month |
|
Deposit |
|
$ |
7,353/month |
|
Miscellaneous |
|
$ |
22,059 |
|
Total |
|
$ |
101,471 |
|
In order to execute our plan of expanding our
business operations, we
will need to (i) increase the number of our learning centers, (ii) scale and adapt our existing network
infrastructure to accommodate increased systems traffic and (iii) increase our
marketing efforts. During the
2010, we expect to open approximately 550 additional franchised locations; in
the next six months, we plan on spending
38
approximately $1.2 million on a broad
scale brand promotional campaign; and we will need significantly more computing power as traffic within our system
increases and our learning center locations expand. We will be required to
spend significant capital and resources to manage our additional franchises,
execute our promotional campaign and to purchase equipment, and upgrade our
technology and network infrastructure to handle increased Internet traffic. In
this regard, we have budgeted approximately $1.2 million for our market
campaign, approximately $1.4 million for IT expenditures, and approximately 1.8 million to add and improve our course
content in 2011.
Marketing and Promotion
Our marketing efforts target three principal areas; franchisees, students for our Company-owned learning centers, and students for our virtual classrooms.
We attract franchisees by conducting regional seminars on a periodic basis in areas that we have targeted for expansion, as well as advertising on regional television and in local newspapers in these areas. These efforts have produced in excess of 2,000 operating franchisees.
Our Company-owned learning centers are in close proximity to schools and large residential areas. We have been able to attract students to our learning centers principally through the distribution of leaflets in the nearby areas.
Traffic to our virtual classrooms has been driven principally by students from our learning centers. We expect to increase traffic to our virtual classrooms commensurate with the numerical increase in our learning centers.
We will continue these marketing measures for the foreseeable future.
Through December 31, 2011, we plan to spend approximately $4.7 million on marketing, as described in further detail in the following table:
|
|
|
|
|
|
|
|
|
|
Recruitment of students |
|
$ |
1,764,706 |
|
Recruitment of franchise |
|
$ |
735,294 |
|
Brand promotion |
|
$ |
441,176 |
|
Online Platform |
|
$ |
1,764,706 |
|
Total |
|
$ |
4,705,882 |
|
Results of Operations (Unaudited) for the Three Months Ended September 30, 2010 Compared to Three Months Ended September 30, 2009
The following table sets forth key components of Tsingda Educations results of operations for the periods indicated in dollars. The discussion following the table addresses these results.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September |
|
September |
|
||
|
|
|
|
|
|
||
Revenue |
|
$ |
9,265,163 |
|
$ |
3,510,903 |
|
Expenses |
|
|
|
|
|
|
|
Selling |
|
|
2,691,677 |
|
|
662,095 |
|
General and administrative |
|
|
891,748 |
|
|
884,432 |
|
|
|
|
3,583,425 |
|
|
1,546,527 |
|
|
|
|
|
|
|
|
|
Operating Income |
|
|
5,681,738 |
|
|
1,964,376 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Income (Expenses) |
|
|
|
|
|
|
|
Other income |
|
|
744 |
|
|
(19,340 |
) |
Total other income (expense) |
|
|
744 |
|
|
(19,340 |
) |
|
|
|
|
|
|
|
|
Income Before Income Taxes |
|
|
5,682,482 |
|
|
1,945,036 |
|
|
|
|
|
|
|
|
|
Provision for Income Taxes |
|
|
655,595 |
|
|
257,543 |
|
|
|
|
|
|
|
|
|
Net Income |
|
$ |
5,026,887 |
|
$ |
1,687,493 |
|
|
|
|
|
|
|
|
|
39
Revenues. For the
three months ended September 30, 2010, we had revenues of $9,265,163 as
compared to revenues of $3,510,903 for the three months ended September 30,
2009, an increase of approximately 164%. This growth is due to an increase in
the number of franchised locations, along with the continued growth of its
learning platform. As of September 30, 2010, we had 2,253 franchised locations
and 18 Company-owned locations, compared with 1,499 franchised locations and no
Company-owned locations as of September 30, 2009. In addition, our online
revenues increased to $8.1 million in the current quarter from $3.5 million for
the comparable quarter in 2009. We launched our online virtual classroom
platform in September 2008.
Expenses. For the three months ended September 30, 2010, we incurred expenses, comprised of selling and general and administrative expenses, of $3,583,425 compared with expenses of $1,546,527 for the three months ended September 30, 2009, an increase of approximately 132%.
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
Three months ended |
|
||
|
|
|
|
|
|
||
Salaries and wages |
|
$ |
158,840 |
|
$ |
48,001 |
|
Advertising |
|
|
1,194,711 |
|
|
276,399 |
|
Printing |
|
|
540,049 |
|
|
81,505 |
|
Logo Manufacturing Cost |
|
|
311,289 |
|
|
59,203 |
|
|
|
|
-Salaries and wages increase by approximately 231% for the three months ended September 30, 2010 from the comparable 2009 period. The increase represents an increase in our sales personnel at our headquarters consistent with our increased franchise sales and marketing efforts. |
|
|
|
-Advertising expenses increased by approximately 332% for the three months ended September 30, 2010 from the comparable 2009 period. These expenses represent third party print media costs related to new Company-owned centers, as well our ongoing promotional efforts to attract new franchisees. |
|
|
|
-Printing expenses increased by approximately 563% for the three months ended September 30, 2010 from the comparable 2009 period. These expenses represent internal costs for printing of our company newsletter and other promotional costs related to the enhancement of our brand name and Company-owned locations. |
|
|
|
- Logo manufacturing costs increased by 426% for the three months ended September 30, 2010 from the comparable 2009 period. The increase is due to the increase in the number of franchised locations and learning bars, thus incurring more logo manufacturing costs. |
General and administrative expenses include rent, salaries, insurance, training and related expenses. For the three months ended September 30, 2010, we had general and administrative expenses of $891,748 as compared to $884,432 for the comparable period from the prior year. Key components of general and administrative expenses for the three month periods ended September 30, 2010 and 2009 were:
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
Three months ended |
|
||
|
|
|
|
|
|
||
Sale tax and surcharges |
|
$ |
518,268 |
|
$ |
297,171 |
|
Salaries and wages |
|
|
146,119 |
|
|
117,205 |
|
Depreciation and amortization |
|
|
584,449 |
|
|
261,010 |
|
Rent |
|
|
152,981 |
|
|
76,499 |
|
|
|
|
|
- |
Sales tax increased by 74.4% for the three months ended September 30, 2010 from the comparable 2009 period. The increase in sales tax partially reflects the growth in sales. The obligation for sales taxes occurs at the time sales are billed, |
40
|
|
|
|
|
whereas the recognition of sales for financial statement purposes occurs as services are provided. This difference in timing has resulted in changes in sales tax expense occurring at a different rate than the rate of changes in sales. |
|
|
|
|
- |
Salaries and wages increased approximately 25% for the three months ended September 30, 2010 from the comparable 2009 period as the company hired more contracted teachers during the third quarter of 2010 to satisfy the increase of Company-owned locations in 2010. |
|
|
|
|
- |
Rent increased by 100% for the three months ended September 30, 2010 from the comparable 2009 period, as the company opened more of its owned locations in 2010 and as such incurred higher rent expenses during the year. |
|
|
|
|
- |
Depreciation and amortization increased by 124% for the three months ended September 30, 2010 from the comparable 2009 period. The increase for the current period reflects the amortization of increased intangible assets consisting of newly developed online software. |
Other Income(Expense). Other income for three months ended September 30, 2010 was $744 compared with $(19,340) for the comparable period of 2009. This increase reflects a decrease in other expense as no other expenses were incurred in the current period.
Income Before Taxes. Income before taxes for the three months ended September 30, 2010 was $5,682,482 compared with $1,945,036 for the comparable period of 2009, which represents an increase of 192%.
Provision for Income Tax. For the three months ended September 30, 2010, we had a provision for income tax of $655,594 compared with $257,543 for the comparable period for the prior year. The increase in tax provision is commensurate with the increase in operating income for the current period.
Net Income. For the reasons discussed above, we had net income for three months ended September 30, 2010 of $5,026,887 compared with $1,687,493 for the corresponding quarterly period in 2009, an increase of 197%.
Other Comprehensive Income. We had other comprehensive loss of $811,208 for the three months ended September 30, 2010 compared with a loss of $49,895 during corresponding 2009 as a result of foreign currency translation gain/loss.
Total Comprehensive Income.
We had total comprehensive income of $4,215,679 and $1,637,598, respectively,
for the three months ended September 30, 2010 and September 30, 2009,
representing an increase of 157%. The reason for the increase is due to the
various reasons stated above.
41
Results of Operations (Unaudited) for the
Nine Months Ended September 30, 2010 Compared to Nine Months Ended September
30, 2009
The following table sets forth key components of the Tsingda Educations results of operations for the periods above indicated in dollars. The discussion following the table addresses these results.
|
|
|
|
|
|
|
|
|
|
September |
|
September |
|
||
|
|
|
|
|
|
||
|
|
|
|
|
|
|
|
Revenue |
|
$ |
18,732,271 |
|
$ |
11,396,636 |
|
|
|
|
|
|
|
|
|
Expenses |
|
|
|
|
|
|
|
Selling |
|
|
5,044,571 |
|
|
3,041,250 |
|
General and administrative |
|
|
2,891,756 |
|
|
2,721,340 |
|
|
|
|
7,936,327 |
|
|
5,762,590 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Income |
|
|
10,795,944 |
|
|
5,634,046 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Income (Expenses) |
|
|
|
|
|
|
|
Other income |
|
|
101,220 |
|
|
9,571 |
|
Other Expense |
|
|
|
|
|
19,634 |
|
Interest income |
|
|
|
|
|
9,125 |
|
|
|
|
|
|
|
|
|
Total other income (expense) |
|
|
101,220 |
|
|
(938 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income Before Income Taxes |
|
|
10,897,164 |
|
|
5,633,108 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for Income Taxes |
|
|
1,440,370 |
|
|
822,573 |
|
Net Income |
|
$ |
9,456,794 |
|
$ |
4,810,535 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Comprehensive Income |
|
|
(681,494 |
) |
|
(40,352 |
) |
|
|
|
|
|
|
|
|
Total Comprehensive Income |
|
$ |
8,775,300 |
|
$ |
4,770,183 |
|
|
|
|
|
|
|
|
|
Revenues. For the nine months ended September 30, 2010, we had revenues of $18,732,271 as compared to revenues of $11,396,636 for the nine months ended September 30, 2009, an increase of approximately 64%. We experienced strong growth in our revenues during the nine month period ended September 30, 2010. This growth is due to an increase of the number of franchised locations for the companys offline businesses, along with the continued growth of its online learning platform.
Expenses. For the nine months ended September 30, 2010, we had expenses, which are comprised of selling and general and administrative expenses, of $7,936,327, as compared to expenses of $5,762,590 for the nine months ended September 30, 2009, an increase of approximately 38%. The increase in expenses was driven by the increase in selling and G&A expense.
Selling
expenses include salaries, advertising, and printing and meetings. For the nine
months ended September 30, 2010, we had selling expenses of $5,044,571 as
compared to $3,041,250 for the comparable period from the prior year, an
increase of 66%. The increase in selling expenses is mainly a result of the
Companys efforts to increase its business through increased advertising during
the current year.
42
General and
administrative expenses include rent, corporate salaries, and related expenses.
For the nine months ended September 30, 2010, we had general and administrative
expenses of $2,891,756 as compared to $2,721,340 for the comparable period from
the prior year. The increase is mainly driven by the increases in depreciation,
amortization and consulting expenses.
Other Income (expense). Other income for nine months ended September 30, 2010 was $101,220 compared with $(938) for the comparable period from the prior year. The increase in other income was due to the interest income generated from the short term investments.
Income Before Taxes. Income before taxes for the nine months ended September 30, 2010 was $10,897,164 compared with $5,633,108 for the comparable period from the prior year, which represents an increase of 93%. The increase was due to the various reasons stated above.
Provision for Income Tax. For the nine months ended September 30, 2010, we had a provision for income tax of $1,440,369 compared with $822,573 for the comparable period for the prior year. The increase in tax provision is commensurate with the increase in operating income for the current period.
Net Income. For the reasons discussed above, we had net income for the nine months ended September 30, 2010 of $9,456,794 compared with $4,810,535 for the prior nine month period, an increase of 97%. The increase in net income was due to the various reasons stated above.
Other Comprehensive Income. We had other comprehensive loss of $681,494 and other comprehensive loss of $40,352 for the nine months ended September 30, 2010 and September 30, 2009, respectively. The increase in other comprehensive income was the result of foreign currency translation gain.
Total Comprehensive Income.
We had total comprehensive income of $8,775,300 and $4,770,183 for the nine
months ended September 30, 2010 and September 30, 2009, respectively,
representing an increase of 84%. The increase in total comprehensive income was
due to the various reasons stated above.
LIQUIDITY AND CAPITAL RESOURCES
As of
September 30, 2010, we had working capital of $15,044,804 compared with working
capital of $4,868,319 as of December 31, 2009.
Changes in our working capital are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30, |
|
December 31, 2009 |
|
Increase in |
|
|||
|
|
|
|
|
|
|
|
|||
|
|
|
|
|
|
|
|
|
|
|
Total current assets |
|
$ |
22,206,227 |
|
$ |
8,600,563 |
|
$ |
13,605,664 |
|
Total current liabilities |
|
|
7,161,423 |
|
|
3,732,244 |
|
|
3,429,179 |
|
Working Capital |
|
$ |
15,044,804 |
|
$ |
4,868,319 |
|
$ |
10,176,485 |
|
|
|
|
|
|
|
|
|
|
|
|
Our increase in working capital is primarily attributable to a net increase in cash of approximately $6,787,058, the result of retaining operating cash flows, an increase in advances to suppliers of $5,481,470, and an increase in accounts receivable of $2,671,207, partially offset by an increase in taxes payable of $2,311,425. Further the increase in our working capital is primarily as a result of increased net profits for the nine month period ending September 30, 2010. The increase in advances to suppliers was mainly for prepayment of construction and renovation costs at the Company-owned locations. The increase in net profits is partially due to seasonality considerations and partially due to increased efforts by the Company to collect its accounts receivable. We experienced increased consumption of our courses throughout the summer months. Revenue generated during the summer months accounted for approximately 31% and 30% for 2009 and 2008, respectively.
Our primary
uses of cash have been for selling and marketing expenses, employee compensation,
and working capital. The main sources of cash have been revenues from
franchisees and from our Company-owned locations.
43
We believe the
following trends are reasonably likely to result in a material decrease in our
liquidity over the near to long term:
|
|
|
|
|
An increase in working capital requirements to finance the growth of our Company-owned locations, |
|
|
|
|
|
Addition of administrative and marketing personnel as the business grows, |
|
|
|
|
|
Increases in advertising, public relations and sales promotions for our franchising efforts in new and existing markets, |
|
|
|
|
|
Software development and the purchase of servers commensurate with student population growth, and |
|
|
|
|
|
The cost of being a public company and the continued increase in costs due to governmental compliance activities. |
The Company currently generates cash flow through operations which we believe will be sufficient to sustain current operations for at least the next twelve months.
Cash flows from operations are calculated based upon the local currencies using the average translation rate. As a result, amounts related to assets and liabilities reported on the statement of cash flows will not necessarily agree with changes in the corresponding balances on the balance sheets.
The following summarizes the key components of our cash flows for the nine months ended September 30, 2010 and 2009:
|
|
|
|
|
|
|
|
|
|
Nine Months Ended |
|
||||
|
|
2010 |
|
2009 |
|
||
|
|
|
|
|
|
||
Net cash provided by operating activities |
|
$ |
6,489,300 |
|
$ |
1,583,964 |
|
Net cash consumed by investing activities |
|
$ |
(6,621,828 |
) |
$ |
(4,057,901 |
) |
Net cash provided by financing activities |
|
$ |
7,756,440 |
|
$ |
876,617 |
|
Effect on cash of foreign exchange rates |
|
$ |
(836,854 |
) |
$ |
(49,337 |
) |
Net change in cash |
|
$ |
6,787,058 |
|
$ |
(1,646,657 |
) |
Cash Balance (Beginning of Period) |
|
$ |
458,645 |
|
$ |
2,314,262 |
|
Cash Balance (End of Period) |
|
$ |
7,245,703 |
|
$ |
667,605 |
|
The net cash provided by operating activities for the nine months ended September 30, 2010 was $6,489,300, compared with $1,583,964 for the nine months ended September 30, 2009. The increase in cash inflow was the primary cause of the increase in net income for the nine months ended September 30, 2010 compared with the nine months ended September 30, 2009.
The net cash consumed by investing activities for nine months ended September 30, 2010 was $(6,621,828), compared with $(4,057,901) for the nine months ended September 30, 2009. The increase was primarily due to the additions to intangible assets, which were primarily composed of on-line teaching software and materials.
The net cash provided by financing activities for the nine months ended September 30, 2010 was $7,756,440 compared with $876,617 for the nine months ended September 30, 2009. The increase was primarily due to the closing of a private placement of gross proceeds of about US $7.6 million in August 2010.
The effect on cash of exchange rates was a loss of $836,854 for the nine months ended September 30, 2010, compared with a loss of $49,337 for the nine months ended September 30, 2009.
The difference between the closing balance of cash and cash equivalents for the nine months ended September 30, 2010 and 2009 is due to the reasons mentioned above.
OFF-BALANCE SHEET ARRANGEMENTS
44
There are no
off-balance sheet arrangements between us and any other entity that have, or
are reasonably likely to have, a current or future effect on our financial
condition, changes in financial condition, revenues or expenses, results of
operations, liquidity, capital expenditures or capital resources that is
material to stockholders.
Results of Operations (Audited) for the Year ended December 31, 2009 Compared to the Year ended December 31, 2008
The following
table sets forth key components of the Companys results of operations for the
periods indicated. The discussion following the table addresses these results.
|
|
|
|
|
|
|
|
|
|
December 31, |
|
December 31, |
|
||
|
|
|
|
|
|
||
Revenue |
|
$ |
14,650,863 |
|
$ |
7,301,733 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses |
|
|
|
|
|
|
|
Selling |
|
|
3,875,405 |
|
|
1,511,838 |
|
General and administrative |
|
|
3,716,663 |
|
|
1,753,357 |
|
|
|
|
|
|
|
|
|
|
|
|
7,592,068 |
|
|
3,265,195 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Income |
|
|
7,058,795 |
|
|
4,036,538 |
|
|
|
|
|
|
|
|
|
Income Before Income Taxes |
|
|
7,120,130 |
|
|
4,001,207 |
|
|
|
|
|
|
|
|
|
Provision for Income Taxes: |
|
|
|
|
|
|
|
Current |
|
|
989,925 |
|
|
1,090,448 |
|
Deferred |
|
|
78,095 |
|
|
62,938 |
|
|
|
|
|
|
|
|
|
Total income taxes |
|
|
1,068,020 |
|
|
1,153,386 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income |
|
|
6,052,110 |
|
|
2,847,821 |
|
|
|
|
|
|
|
|
|
Other Comprehensive Income (Loss) |
|
|
(40,113 |
) |
|
265,587 |
|
|
|
|
|
|
|
|
|
Total Comprehensive Income |
|
$ |
6,011,997 |
|
$ |
3,113,408 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
the high survival rate of existing learning centers; |
|
|
the increasing brand name recognition of the Company. The survival rate is calculated as the percentage of learning centers that survive within a year since it starts operation. |
|
|
continuous franchise recruitment conferences throughout the country; |
|
|
training seminars for management of franchised learning centers; |
|
|
the expanding market for online education in China; and |
|
|
increased efficiency of sales personnel, which has led to an increase in the number of company-owned learning centers. |
In addition to
the expanding market for online education in China, the largest factors that
contributed to the increases in our revenues and related costs were the
purchase of e-cards and receipt of licensing fees from our franchisees. Our
online platform was also a substantial factor, though far less of a driver of
our business than e-cards and licensing fees. Through this platform, students
and teachers are linked through our proprietary software interface for the sole
purpose of transacting educational related services. While we believe these
three sources of revenue will continue to be the main factors contributing to
our growth, no assurances can be given that we can continue to increase revenue
in these or any other areas of our business.
Expenses. For the year ended December 31, 2009, we had expenses which are comprised of selling and general and administrative expenses of $7,592,068, as compared to expenses of $3,265,195 for the year ended December 31, 2008, an increase of approximately 133%.
General and administrative expenses include rent, corporate salaries, and related expenses. For the year ended December 31, 2009, we had general and administrative expenses of $3,716,663 as compared to $1,753,357 for the prior year. The increase of approximately
45
112% in general and administrative expenses is due
principally to the hiring of additional personnel to meet the companys
business growth.
The following table shows the changes in our personnel from 2008 through 2009.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Period/Type of Personnel |
|
Q1/2008 |
|
Q2/2008 |
|
Q3/2008 |
|
Q4/2008 |
|
Q1/2009 |
|
Q2/2009 |
|
Q3/2009 |
|
Q4/2009 |
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
G&A |
|
Other management |
|
20 |
|
22 |
|
22 |
|
24 |
|
26 |
|
17 |
|
12 |
|
14 |
|
|
IT Department |
|
17 |
|
19 |
|
19 |
|
18 |
|
23 |
|
19 |
|
13 |
|
13 |
|
|
|
Contracted Teachers |
|
40 |
|
78 |
|
123 |
|
138 |
|
202 |
|
202 |
|
87 |
|
23 |
|
|
|
Full time Teachers |
|
29 |
|
30 |
|
35 |
|
41 |
|
42 |
|
43 |
|
20 |
|
16 |
|
|
Sales |
|
63 |
|
66 |
|
84 |
|
120 |
|
136 |
|
60 |
|
34 |
|
51 |
|
|
|
The increase in general and administrative expenses was due primarily to the hiring of contracted and full time teachers. Salary and wages accounted for nearly 23% of the increase between 2008 and 2009. The main reason to increase the number of contracted teachers was to develop synchronized online education content for both our company-owned and franchised locations. As the chart above shows, a substantial number of contracted teachers did not have their contacts renewed. Full time teachers were simultaneously hired to ensure the quality of the newly developed content. An increase in our adverting expenditures accounted for nearly 11% of the change from 2008 to 2009. |
|
|
|
Operating Income. Operating income for the year ended December 31, 2009 was $7,058,795 compared with $4,036,538 for the prior annual period, which represents an increase of 74.9%.
Income Tax. For the 2009 annual period, we had total income tax of $1,068,020 compared with $1,153,386 for the prior annual period. Despite the significant increase in revenues for the 2009 period, income tax was relatively flat for the 2009 period due to the fact that the Companys tax rate for 2009 was reduced from 25% to 15%.
Net Income. For the reasons discussed
above, we had net income for the period ended December 31, 2009 of $6,052,110
compared with $2,847,821 for the prior annual period.
We believe the significant increases were due to the following:
Performance-based reviewing policy. From the second quarter of 2009, we began a performance-based review policy of our franchise sales department, pursuant to which we terminated approximately half of our then, existing sales force. We experienced greater efficiency of the sales team as a result.
Increased Survival Rate of Franchisees. Our existing franchised locations experienced higher survival rates which resulted in greater brand name recognition of the Company. This greater brand recognition, combined with our more efficient sales force, made it easier for our sales force to sell franchise opportunities. The survival rate, calculated as the percentage of learning centers that survive its first year of operation, has improved every year. The following table shows the survival rates of franchised learning centers from 2007 to 2009.
|
|
|
|
|
|
|
|
Year |
|
Survival rate |
|
No. of franchised learning |
|
||
|
|
|
|
|
|
||
2007 |
|
|
89 |
% |
|
392 |
|
2008 |
|
|
96 |
% |
|
583 |
|
2009 |
|
|
97 |
% |
|
774 |
|
30/06/2010 |
|
|
99 |
% |
|
276 |
|
46
LIQUIDITY AND CAPITAL RESOURCES
As of December 31, 2009, we had working capital of $7,939,752 compared with working capital of $5,849,612 as of December 31, 2008.
Our primary uses of cash have been for selling and marketing expenses
and employee compensation. The main sources of cash have been revenues from
franchisees and from our Company-owned locations. The following trends are
reasonably likely to result in a material decrease in our liquidity over the
near to long term:
|
|
|
|
|
An increase in working capital requirements to finance the growth of our Company-owned locations, |
|
|
Addition of administrative and marketing personnel as the business grows, |
|
|
Increases in advertising, public relations and sales promotions for franchising efforts into new or existing markets, |
|
|
Software development and the purchase of servers commensurate with student population growth, and |
|
|
The cost of being a public company and the continued increase in costs due to governmental compliance activities. |
The Company currently generates its cash flow through operations which it believes will be sufficient to sustain current level operations for at least the next twelve months.
The Company
anticipates that expenditures through December, 2011 will consist primarily of
establishment of new Company-owned learning centers, advertising and
promotions, general corporate purposes, including salaries, and further
development of our content and product offerings.
The Company anticipates total revenues from operations through December, 2011 to be in excess of expenditures and will consist primarily of licensing, management and other fees from new and existing franchisees and continued use of e-cards (with estimates of use based on past usage as well as the increasing number of both registered and active students).
Factors that may contribute to uncertainty in our cash flow assumptions include the success of new franchisees, the continued success of existing franchisees and the usage of e-cards.
CRITICAL ACCOUNTING POLICIES
The discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amount of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. We continually evaluate our estimates, including those related to bad debts, inventories, recovery of long-lived assets, income taxes, and the valuation of equity transactions. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Any future changes to these estimates and assumptions could cause a material change to our reported amounts of revenues, expenses, assets and liabilities. Actual results may differ from these estimates under different assumptions or conditions. We believe the following critical accounting policies affect our more significant judgments and estimates used in the preparation of the financial statements.
A summary of significant accounting policies is included in Note 1 to the audited consolidated financial statements for the year ended December 31, 2009. Management believes that the application of these policies on a consistent basis enables us to provide useful and reliable financial information about our operating results and financial condition.
Variable Interest Entities
Pursuant to
Financial Accounting Standards Board Interpretation No. 46 (Revised),
Consolidation of Variable Interest Entities - an Interpretation of ARB No. 51
(FIN 46R) we are required to include in our consolidated financial statements
the financial statements of variable interest entities. FIN 46R requires a
variable interest entity to be consolidated by a company if that company is
subject to a majority of the risk of loss for the variable interest entity or
is entitled to receive a majority of the variable interest entitys residual
returns. Variable interest entities are those entities in which we, through
contractual arrangements, bear the risk of, and enjoy the rewards normally
associated with, ownership of the entity, and therefore we are the primary
beneficiary of the entity.
47
Tsingda
Education is considered a variable interest entity (VIE), and we are the
primary beneficiary. On April 26, 2010, we entered into agreements with Tsingda
Education pursuant to which we receive a quarterly fee in an amount equal to
all of Tsingda Educations quarterly,
after tax net profits. Tsingda Management shall supply the technology and
administrative services needed to service Tsingda Education.
The accounts of Tsingda Education are consolidated in the accompanying financial statements pursuant to FIN 46R. As a VIE, Tsingda Educations sales are included in our total sales, its income from operations is consolidated with ours, and our net income includes all of Tsingda Educations net income. We do not have any non-controlling interest and accordingly, did not subtract any net income in calculating the net income attributable to us. Because of the contractual arrangements, we have pecuniary interest in Tsingda Education that requires consolidation of Tsingda Educations financial statements with our financial statements.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Consolidated Statements
The consolidated financial statements include the accounts of the Company, its
wholly owned subsidiaries, and Tsingda Education. All intercompany transactions
and balances have been eliminated in consolidation.
Cash
For purposes of the statements of cash flows, the Company considers all short
term debt securities purchased with a maturity of three months or less to be
cash equivalents.
Concentrations Of Credit Risk
Financial instruments which potentially subject the Company to concentrations
of credit risk consist of cash, short term investments, accounts receivable and
advances to suppliers. However, all Company assets are located in the PRC and
Company cash balances are on deposit at financial institutions in the PRC, the
currency of which is not free trading. Foreign exchange transactions are
required to be conducted through institutions authorized by the Chinese
government and there is no guarantee that Chinese currency can be converted to
U.S. or other currencies.
Recognition Of Revenue
The Company provides online and offline education program to its franchisees, agents and individual customers. Revenue is realized
through sales to franchisees and other agents of rights to conduct online and offline education services. The Company authorized the
franchise locations to use its logo, all education program and products and the Company receive the one time licensing fee, annual
management fee, and 20% of student generated revenue from the franchised location by providing them prepaid e-cards of 4 times of the
cash amount. All the mentioned fees are just revenues or unearned revenues from the sale of e-cards. Revenue is recognized until the
services are consummated upon the e-cards are used and is reported net of business tax.
Fair Value of Financial Instruments
The carrying amounts of the Companys financial instruments, which include
cash, short term investments, accounts receivable and other receivables,
advances to suppliers, accounts payable, accrued liabilities, and other
liabilities, approximate their fair values at December 31, 2009.
Fixed Assets
Fixed assets are recorded at cost. Depreciation and amortization is computed
using the straight line method, with lives of five years for computers and
related equipment and furniture, and eight to ten years for automobiles.
Intangibles are the cost of computerized video lessons delivered both online
and offline; this cost is amortized by the straight line method using lives of
three years.
Taxes
The Company generates its income in China where Business Tax, Income Tax, City
Construction and Development Tax, and Education Surcharge taxes are applicable.
The Company does not conduct any operations in the U.S.; therefore, U.S. taxes
are not applicable.
Use Of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect certain reported amounts and disclosures of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting periods. Actual results could differ
from those estimated.
Ordinary Shares
Ordinary Shares will occasionally be issued in return for services. Values will
be assigned to these issuances equal to the market value
48
of the Ordinary Shares
at the applicable measurement dates. A Measurement Date is defined under
pronouncements of the FASB which state the criteria to be used for the
valuation of stock issued for goods and services.
Stock Options
Stock options, if issued, will be valued at fair value on the dates of issuance
using a Black Scholes valuation model, in accordance with pronouncements of the
FASB.
Other Comprehensive Income
The Company reports as other comprehensive income revenues, expenses, and gains
and losses that are not included in the determination of net income. Resultant
gains and losses during the years 2009 and 2008 are all the result of
translations of Chinese currency amounts to U.S. dollars.
Foreign Currency Translation
All Company assets are located in China. These assets and related liabilities
are recorded on the books of the Company in the currency of China (Renminbi),
which is the functional currency. They are translated into US dollars as
follows:
(a) Assets and liabilities, at the rates of exchange in effect at balance sheet dates;
(b) Equity
accounts, at the exchange rates prevailing at the time of the transactions that
established the equity accounts; and
(c) Revenues and expenses, at the average rate of exchange for the year.
Gains and losses arising from this translation of foreign currency are included in other comprehensive income.
Product Warranties
Refunds to students who withdraw from courses are rarely made and are made only
at the discretion of the Company. For this reason, and since revenue is
recognized only as services are provided, no provision is needed for possible
withdrawals.
Advertising Cost
The Company expenses advertising costs when an advertisement occurs.
Segment Reporting
Management treats the operations of the Company as one segment.
Recently Adopted Accounting Pronouncements
Management believes that none of the recently adopted accounting pronouncements
will have a material affect on the Companys financial position, results of
operations, or cash flows.
In December 2009, the FASB codified Consolidations Improvements to
Financial Reporting by Enterprises Involved with VIEs (ASU 2009-17), guidance
which was issued by the FASB in June 2009. The amendments in this Accounting
Standards Update replace the quantitative-based risks and rewards calculation
for determining which reporting entity, if any, has a controlling financial
interest in a variable interest entity with an approach focused on identifying
which reporting entity has the power to direct the activities of a variable
interest entity that most significantly impact the entitys economic
performance and has (1) the obligation to absorb losses of the entity or
(2) the right to receive benefits from the entity. An approach that is
expected to be primarily qualitative will be more effective for identifying
which reporting entity has a controlling financial interest in a variable
interest entity. The adoption of this standard will have no material impact on
the Companys consolidated financial statements.
Recent Financing
On September 16, 2010, we entered into a Securities Purchase Agreement
(Securities Purchase Agreement) with certain accredited investors
(Investors) pursuant to which we completed an offering (Offering) of units
(Units) for total gross proceeds of $9,600,000. Each Unit is priced at $1.60
and consists of one (1) Ordinary Share, and a
Series A Stock Purchase Warrant (Warrants) to purchase 35% of the number of
Ordinary Shares purchased in the Offering. The initial Warrant exercise price
is $2.08 per share and the Warrant term is five (5) years. The Warrant may be
exercised on a cashless basis three (3) months after the Ordinary Shares are listed
on a major stock exchange or other exchange or market described therein.
We entered into a Hold Back Escrow Agreement with Zhong Hui Rong
(Fujian) Fund Ltd, (the Lead Investor) and an escrow agent under which we
deposited $520,000 of the Offering proceeds with the escrow agent. Increments
of the escrowed amount will be
49
released to the Company upon the Company
attaining the following respective milestones: (i) $120,000 upon engaging an
investor relations firm reasonably acceptable to the lead Investor; (ii)
$100,000 upon providing the lead Investor with evidence that is reasonably
satisfactory to the Lead Investor indicating that Circular 75 filings have been
approved by the PRC Government, (iii) $100,000 upon providing the Lead Investor with documentation
demonstrating that the business license of Beijing Tsingda Century Investment
Consultant of Education Co., Ltd. has been amended to clarify to the lead
investors reasonable satisfaction that the VIE Subsidiaries are properly
authorized to engage in its current business; and (vii) $200,000 upon providing
the Lead Investor with written confirmation that (a) an independent accounting
firm reasonable satisfactory to the Lead Investor has been engaged, and (b) a
law firm reasonably satisfactory to the Lead Investor has been retained in
connection with our initial public offering. If on June 30, 2011, any portion
of the escrowed amount remains in escrow as a result of our failure to satisfy
any of the milestones, then the Lead Investor can cause the release of the
balance of the escrowed amount to the Investors, on a pro rata basis.
We also entered into a Registration Rights Agreement with the Investors pursuant to we agreed to file a registration statement on Form S-1 (Registration Statement) to register all of the Ordinary Shares and shares underlying the Warrants. We are required to file the Registration Statement by November 29, 2010. The Registration Statement must be declared effective not later than February 28, 2011, or March 29, 2011 if the Registration Statement is subject to a full review by the Securities and Exchange Commission. If the Registration Statement is not declared effective by such date, we are required to pay the Investors as liquidated damages 1.5% of the aggregate amount invested for each 30 day period after such date until such registration statement is declared effective, not to exceed 10% of the aggregate amount invested.
In connection with the Offering, our largest shareholder, Tsing Da Century Education Technology Co., Ltd., a Belize corporation, placed preferred shares equal to 18,000,000 Ordinary Shares in escrow (the Escrow Shares) and agreed to transfer the Escrow Shares, in whole or in part as described below, to the Investors on a pro rata basis in the event that we do not meet certain performance targets for our fiscal years ending December 31, 2010 and December 31, 2011.
We also entered into a Founding Shareholder Lock-Up Agreement with our
largest shareholder pursuant to which the shareholder agreed to restrict the
transfer of its Ordinary Shares for 12 months from the listing date on any of:
the NYSE, any tier of the NASDAQ Stock Market, or the NYSE Amex (Listing
Date), except that during the lock up period, such shareholder may transfer an
amount up to 5% of the Ordinary Shares held by such shareholder. We also
entered into a Six Month Lock Up Agreement with various other shareholders
pursuant to which these shareholders agreed to restrict the transfer of their
respective shares in the Company for 6 months from the Listing Date, except
that during the lock up period, each of these shareholders may transfer an
amount up to 5% of the Ordinary Shares held by such shareholder. Finally, we
entered into Initial Shareholder Lock-Up Agreements with certain other shareholders
pursuant to which these shareholders agreed to restrict the transfer of their
shares in the Company for nine (9) months from the Listing Date, except that
during the (i) initial 6 months of the lock up period, each of these
shareholders may transfer an amount up to 5% of the Ordinary Shares held by
such shareholder, and (ii) final three months of the lock up period, each of
these shareholders may transfer an amount up to 20% of the Ordinary Shares held
by such shareholder.
Placement Agent
Maxim Group, LLC (Maxim), a FINRA broker/dealer, acted as our
placement agent in connection with the Offering. On March 12, 2010, Beijing
Tsingda Century Investment Consultant of Education Co., Ltd., our variable
interest entity, entered into an exclusive placement agent agreement, as
amended, with Maxim which will remain in effect until October 31, 2010, after
which either party may terminate the agreement with 30 days advance notice.
Maxim received an effective cash commission of $411,000 (or approximately 4.3% of
the proceeds of the Offering) and warrants equal to 4.5% of the number of
Ordinary Shares sold in the Offering (or 364,500 Ordinary Shares). The warrant
term is five years and is exercisable at any time beginning on March 16, 2011.
The exercise price is $110% of the offering price of the Units (or $1.76). We
are required to register the Maxim warrants. We also agreed to indemnify Maxim
against certain liabilities, including liabilities under the Securities Act. In
addition, we reimbursed Maxim for $25,000 as reasonable out of pocket expenses.
Our organization was structured to abide by the laws of the PRC. Its structure is depicted below:
50
We were organized under the laws of the Cayman Islands on September 27, 2006. Tsingda Technology was organized under the laws of British Virgin Islands on December 11, 2009. Tsingda Management was organized under the laws of the PRC on November 26, 2007. Tsingda Education was organized under the laws of the PRC on October 23, 2003. Tsingda Network was organized under the laws of the PRC on February 14, 2004.
On May 24, 2010, we acquired Tsingda Technology. The transaction was treated for accounting purposes as a capital transaction and recapitalization by the accounting acquirer and as a re-organization by the accounting acquiree.
Tsingda Technology owns 100% of the issued and outstanding capital stock of Tsingda Management. On April 26, 2010, Tsingda Management entered into a series of contractual agreements with Tsingda Education, and its shareholders, in which Tsingda Management effectively assumed management of the business activities of Tsingda Education and has the right to appoint all executives and senior management and the members of the board of directors of Tsingda Education. The contractual arrangements are comprised of a series of agreements, including a Consulting Services Agreement, Operating Agreement, Voting Rights Proxy Agreement, Equity Pledge and Option Agreement, through which Tsingda Management has the right to advise, consult, manage and operate Tsingda Education for an quarterly fee equal to its quarterly, after tax net profits. Additionally, Tsingda Educations Shareholders have pledged their rights, titles and equity interest in Tsingda Education as security for Tsingda Management to collect consulting and services fees provided to Tsingda Management through an Equity Pledge Agreement. In order to further reinforce Tsingda Managements rights to control and operate Tsingda Education, Tsingda Educations shareholders have granted Tsingda Management the exclusive right and option to acquire all of their equity interests in Tsingda Education through an Option Agreement.
On November
15, 2010, the Company held a Special Meeting of Shareholders (Special
Meeting) at its principal offices in Beijing, China, pursuant to the Notice of
Special Meeting of Shareholders. At the Special Meeting, 33,386,754 shares of
the Companys authorized share capital were represented in person or by proxy,
which constituted a quorum. At the Special Meeting, shareholders approved two
proposals (i) to change of the corporate name from Compass Acquisition
Corporation to Tsingda eEDU Corporation and (ii) to affect a three-for-one (3
to 1) consolidation of the Companys issued and outstanding Ordinary Shares and
to increase the amount of the Companys authorized Ordinary Shares from
thirty-nine million sixty-two thousand five hundred shares (39,062,500) to one
hundred million (100,000,000) shares. The name change of the Company to Tsingda
eEDU Corporation and the three-for-one consolidation and increase in the
Companys authorized share capital was effective immediately following
shareholder approval.
51
Market Information
General
Chinas education market is substantial based on the sheer size of its population. According to information published by the PRC government, it appears that our target population market as of December 31, 2010 is approximately 360 million individuals. The group is comprised of: infants and children below school age (6) - 160 million; primary school students - 110 million; junior high school students - 60 million; and senior high school students 30 million. (Source Ministry of Education http://www.moe.edu.cn/).
The importance of education in China is grounded upon a number of factors. Confucian doctrines placed high importance on education. Another factor which placed significant import on education arose from Chinas one child policy implemented in 1979 in an effort to control its staggering population. As a result of the one child policy, many Chinese families believe that their future rests with the success of their only child. Consequently, there is a strong parental push towards education. Another factor contributing to the demand for education in China is the need to support the enormous economic growth currently underway in the country.
In the PRC, school attendance is mandatory through junior high school. Beyond junior high school, schooling is voluntary and students must pay for senior high school and any post-secondary school. Senior high school students typically range in age from 15 to 19. Students in post-secondary schools (or any educational institution beyond senior high school) typically range in age from 20 to 24. Moreover, unlike public schooling in the United States, admission to prestigious public high schools is premised on student qualification, including results from entrance exams. Consequently, competition for prestigious high schools is intense. In fact, the country has developed a keen awareness of the most prestigious high school by region and countrywide. Many of the most prestigious high schools are located in tier one cities, principally Beijing. These prestigious high schools are the recipients of disproportionate governmental funding which in turn attracts more competent teachers.
The use of online education is trending favorably in China. Based on industry data, the market scale of online education in 2008 in the PRC amounted to approximately $5.1 billion with 2012 projections reaching $10.6 billion. Moreover, the number of online education learners in China will climb to 23.1 million in 2010, twice as many as that in 2007. (Source: iResearch Consulting).
52
In addition, Chinese online education market will experience an average growth of 150% in the next five years (Source: Beijing CCID Consulting).
Shortage of funding
Chinas educational system historically has been under-funded compared to the rest of the world. In 2008, Chinas fiscal education expenditure was 3.48% of GDP compared with the world average of 4.5% (Source: China Daily-July 29, 2010). Recently, the PRC government has taken initiatives to improve its educational system countrywide due principally to the recognition that the countrys technological development ultimately rests on the level of competency, or level of education, of its workforce. Yet despite these initiatives, there remains a severe disparity in educational funding between rural and urban areas in China as discussed below.
Funding disparity
Chinas vast territory and large population have led to a significant disparity in public educational offerings between urban and rural areas. According to official statistics, there is a significant gap in the average education investment of students between rich and poor provinces. The public funding disparity for primary schools, junior high schools and senior high schools can range between 6-8 times more in the rich, urban areas compared with the poorer, rural areas. (Source: Ministry of Education of PRC http://www.moe.edu.cn/). Compared with first-tier cities in PRC, many rural areas lack qualified teacher and training resources due principally to lack of funding from local governments. In recent years, a series of positive measures have been taken by related authorities to support the development of distance education. However, the problem is still quite pronounced, and massive input from the private sector is in demand. (Source: The Central Peoples Government of PRC http://www.gov.cn/; Ministry of Education of PRC http://www.moe.edu.cn/).
The Tsindga Learning Concept
General
We are an
on-line and off-line provider of supplementary educational services in China.
Our Chinese website
is http://www.eeduol.com and our English language web-site is
http://ir.eee114.com.cn. The information contained on our websites does not
form a part of this prospectus. We rolled out our offline Tsingda Learning
Center concept in 2006, and more recently in late 2008, we introduced an
online, virtual learning platform called Tsingda Internet Classroom.
Our educational model is depicted below:
Our on-line and off-line educational services are not accredited by the
PRC Ministry of Education or any other governmental agency. As such, our
learning concept does not function as a substitute or alternative to
traditional government run schools, which are accredited by the PRC Ministry of
Education to grant diplomas and/or degrees, rather it has been shaped to
supplement learning provided by government run schools in the PRC. No
accrediting learning centers compete with us in our industry. Accredited
learning centers are traditional degree-granting schools and we are not at a competitive
disadvantage because we are not an accredited learning center.
53
For the year ended December 31, 2009, we had revenues of $14,650,863,
as compared to revenues of $7,301,733 for the year ended December 31, 2008, an
increase of approximately 101%. For the nine months ended September 30, 2010,
we had revenues of approximately $18.7 million as compared to revenues of
approximately $11.4 million for the nine months ended September 30, 2009, an
increase of approximately 64.0%.
54
Learning Centers
As of December 31, 2009 and after three years of operations, we had approximately 1,750 operating Tsingda Learning Centers located in 1,300 cities and 23 provinces throughout the PRC. Of the total amount, three were Company-owned with the remainder as franchised operations. As of September 30, 2010, we had over 2,271 operating Tsingda Learning Centers in 1,400 cities and 23 provinces. Of the total amount, 18 were Company-owned with the remainder as franchised operations.
Our Tsingda Learning Centers principally target elementary school (grades K-8) students and in most instances are located in close proximity of a local elementary school. We designed the rollout of our franchised learning centers to generally avoid the tier one cities of Shanghai, Beijing, Chengdu, and Guangzhou. Instead, we are geographically concentrated on the second and third tier cities. We believe there are 50,000 2nd and 3rd tier cities in the PRC. We employed this strategy because we believe that competition in these lower tier cities would be less intense than first tier cities, but more importantly, we anticipated stronger product demand in the rural areas due to disparity in educational funding between the two areas.
While we concentrate our franchise development efforts in the rural areas for reasons discussed above, we located our initial Company-owned centers in close proximity to our headquarters in Beijing. This allows us to exert greater operating control over our own centers, as well as provide a nearby training center for new franchisees. We plan on opening future Company-owned centers in other tier one cities which will serve as regional training centers.
Our target customers are students ranging from 6 to 18 years of age studying at elementary, junior and senior high schools. Of our customers, 70% are elementary school students, 20% are middle school students and 10% are high school students. Our marketing methods consist of:
|
Referrals from teachers. Approximately 50% of our franchisees are school teachers and they encourage their students to attend learning centers after school. |
Concentrated Advertising. Learning centers generally distribute leaflets in front of school and advertise on bulletin boards in high density residential areas. |
Activities. Learning centers periodically hold recruitment conferences and free tours of online content, etc. in public areas where parents and teachers are invited. |
Mass Advertising. We advertise on local and national television, local newspapers and magazines, and on the Internet. |
Although we do not recruit students based on prior academic performance, regulations prohibiting a PRC educational institution from recruiting students based on prior academic performance do not apply to us.
Teaching at our learning centers is solely delivered electronically via desktop computers housed at our locations, either taught in live real time by a teacher at a remote location, or from a pre-recorded course. Our proprietary courseware provides two core curriculums: synchronous (or sync) courses and featured courses. Sync courses match textbooks from local schools and are delivered synchronously with the curriculum for these schools. Featured courses consist of learning programs designed to bolster skills in core subjects such as math and English, among others. Featured courses also prepare students for the highly competitive high school and college entrance exams. Our courseware provides a broad learning experience to the student. Learning modules includes classes directed by a wide range of teachers, including renowned teachers from tier one cites, Q&A sessions, and one on one teaching. Our courseware also features regular mock tests and exams, and gap detection which determines student weakness and automatically generates subsequent teaching aids. We also have digitized textbooks for 97% of targeted schools in the PRC. We believe our courseware is the most advanced in the industry and is a compelling learning regime particularly for students from less populated areas where teaching resources are limited.
In China, high school exams and college entrance exams are conducted on a local and provincial level, and are not standardized on a national level, such as its United States counterpart, the SAT. In that regard, there are many different exams and our students prepare for high school entrance exams by taking our courses that are synchronized with the textbooks they are studying. The most popular of our synchronous courses are keyed to the following textbooks:
|
|
|
Subject |
|
Textbook Editions/Publisher |
|
|
|
Chinese Language |
|
Remin University, Jiangsu Edition, Beijing Normal University |
|
Shanghai Edition, Hebei Edition, Hunan Edition |
|
Mathematics |
|
Remin University, Jiangsu Edition, Beijing Normal University |
|
Zhejiang Edition, Shanghai Edition, Hebei Edition, |
|
English |
|
Remin University, Jiangsu Edition |
|
Beijing Normal University, Zhejiang
Edition, Foreign Language |
|
Physics |
|
Remin University, Jiangsu Edition, Beijing Normal University |
|
Zhejiang Edition, Shanghai Edition, Hebei Edition, Hunan Edition |
|
Chemistry |
|
Remin University, Jiangsu Edition, Beijing Normal University |
|
Zhejiang Edition, Shanghai Edition, Hebei Edition, Hunan Edition |
|
|
|
|
55
Our
students prepare for their college entrance exam by consuming our featured
courses on subjects that are typically covered in a provincial college entrance
exam:
|
|
|
Subject |
|
Contents |
|
|
|
Chinese Language |
|
Composition, Reading |
Mathematics |
|
Focused Algebra, Mystery of Geometry |
English |
|
Listening training, Speaking training, Efficient Reading, Writing |
Physics |
|
Focused Mechanics, Focused Electricity, Focused Optics, Focused Heat, Focused Atom |
Chemistry |
|
Chemistry Experiments |
Special
Subject |
|
Nan Kai University Chair, Mock test, Simulation Questions Analysis |
|
Huang Gang Chair, Mock test, Simulation Question Analysis |
|
|
Chair of Middle School attached to China Normal University, Mock test, Simulation Question Analysis |
|
Psychological |
|
Psychological Counseling before University Entrance Exam, Case Study |
|
|
|
Online Virtual Classrooms
In the fourth quarter of 2008, we
successfully developed a highly interactive, real-time, and personalized learning platform called
the Tsingda Internet Classroom. Tsingda Internet Classroom has been designed to be eBay®-style
online educational platform whereby buyers (students) and sellers (teachers)
are linked through our proprietary software interface for the sole purpose of
transacting educational related services. The target audience is mainly high
school students; however some classrooms are oriented towards junior high and
other students. Course subjects along with pricing and presentations
dates are posted to a presentation page on our web-site by company qualified
teachers. Our teacher roster includes approximately 2,350 renowned teachers
from tier one cities. These teachers have achieved recognition based on awards
from the Ministry of Education. Interested students can browse presentation
web-pages by teacher or subject matter. Teacher credentials, course outline,
pricing, presentation times, and presentation mode (live or pre-recorded) also
are displayed. Course purchases are made electronically, and are delivered
through a video feed which can be viewed electronically by the student. More
popular courses are recorded for later presentation. Our online learning
platform offers students from less developed regions the opportunity to be able
experience the teaching disciplines of more experienced, including these
renowned teachers from tier one cities. Unlike the courseware provided at a
learning center, virtual classroom courses have not been designed to be
synchronous. In most courses, students can communicate electronically with
teachers.
The Tsingda virtual classroom
was first launched for high
school students, and later included junior high and elementary students. As of the September, 2010, total registered students and active
students reach 350,000 and 68,975, respectively, and the number of
certified teachers was 16,000. A significant portion of our existing student
base and current revenues of our virtual classroom is attributable to students
who have attended or are attending our learning centers.
Our Revenue Model
We generate revenues both from our Company-owned and franchised
learning centers and from the sale of e-cards which are used to purchase our
courses.
56
From franchised locations, we receive
(a) a one time, brand licensing fee, (b) annual management fees equal to 10% of the initial licensing fee, (c) 20% of
the student generated revenues, and (d) 10% from the sale of reference books
and stationery products sold in the centers. We retain 100% of the revenue
generated at Company-owned locations.
Online Virtual Classrooms
We share revenues generated
from virtual
classrooms with our
teachers. Generally, we receive 40% of revenues from live sessions and 90% of
revenues from pre-recorded sessions.
Tsingda Learning Centers
As of September 30, 2010, approximately 2,271 Tsingda Learning Centers are in
operation in 1,400 cities and 23 provinces in China. The map
below depicts the concentration of Tsingda Learning Centers by region as of
September 30, 2010.
57
The following table reflects the concentration of our learning center locations by city and province:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 |
|
2 |
|
3 |
|
4 |
|
5 |
|
6 |
|
7 |
|
8 |
|
9 |
|
10 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
City |
|
Zibo |
|
Fuzhou |
|
Qingdao |
|
Taiyuan |
|
Binzhou |
|
Nanchong |
|
Zhenzhou |
|
Chendu |
|
Nantong |
|
Wenzhou |
Number |
|
32 |
|
27 |
|
26 |
|
22 |
|
21 |
|
20 |
|
19 |
|
18 |
|
18 |
|
17 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 |
|
2 |
|
3 |
|
4 |
|
5 |
|
6 |
|
7 |
|
8 |
|
9 |
|
10 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Province |
|
Shandon |
|
Jiangsu |
|
Sichuan |
|
Henan |
|
Zhejiang |
|
Fujian |
|
Guangdong |
|
Shanxi |
|
Hubei |
|
Anhui |
|
Number |
|
229 |
|
157 |
|
137 |
|
121 |
|
108 |
|
105 |
|
103 |
|
83 |
|
82 |
|
81 |
|
Key Features of Our Courseware
Key features of our proprietary courseware are categorized as follows:
|
|
|
|
o |
Comprehensive Reference Library: We have digitized 97% of the teaching materials of all elementary, junior high and high schools in the PRC. The library allows for easy student reference to the familiar teaching materials. |
|
|
|
|
o |
Curriculum Matching Courseware: Early in its product development, we recognized that in the PRC, like most other developed or developing countries, teaching curriculum for the identical subject matter varies by region or province. Apart from digitizing substantially all of the relevant teaching materials, we have customized our teaching courseware to match local teaching materials. This means that a student in a Sichuan city learning center and a student in Nanjing city learning center will receive different courseware material on the same subject matter. We developed these customized learning materials in collaboration with regional teachers. |
|
|
|
|
o |
Synchronous Courseware Delivery: The courseware delivers teaching materials to the student synchronously with curriculums from local schools. Students can drill down to lessons which coincide with current school classes. |
|
|
|
|
o |
Diverse Teaching Disciplines. For any subject in our curriculum, students can select presentations from numerous teachers, including renowned teachers. |
|
|
|
|
o |
Gap Detection: Our proprietary courseware detects weaknesses in a students aptitude. During testing and Q&A sessions, incorrect answers generate subsequent questions specifically aimed at bolstering student weaknesses. |
|
|
|
|
o |
Results Evaluation. The courseware is result oriented and thus provides scores on mock tests and practice sessions so that students or their parents can gauge performance. It also delivers progress reports on demand which indicate a students progress in a given subject over a period of time. |
We have disclosed the titles of our courses and textbooks in Exhibit
99.1 to this Amendment No. 1.
Our Curriculum
Learning centers provide two core curriculums: synchronous (or sync) courses and featured courses, and both are depicted below;
|
|
|
Basic Curriculums |
|
Module |
|
|
|
Sync courses |
|
Match local textbooks in subjects like English and math. |
Featured courses |
|
Primary school English |
|
|
Primary school math |
|
|
|
|
|
Primary school Olympic math |
|
|
|
|
|
Primary school literature |
|
|
|
|
|
Kid English series |
|
|
|
|
|
Intensive teaching and drill series |
|
|
|
|
|
Composition series |
|
|
Video from famous school |
|
|
High school admission exam preparatory channel |
|
|
College admission exam preparatory channel |
|
|
Traditional Chinese cultures workshop |
|
|
Science and discovery |
58
We also have entered into licensing arrangements with third parties to provide extracurricular materials that are delivered through video, audio and animation. These presentations relate to such matters as Chinese and worldwide culture, geography and history. While these extracurricular products do not provide meaningful revenues to a learning center, they provide students with an educational diversion from core subjects.
Franchise and Company-owned Center Details
A typical franchised learning center is approximately 100 to 300 square meters while Company-owned locations are almost double in size at 300 to 800 square meters. Each franchise center is staffed with 4-5 employees, while Company-owned centers are staffed with 8-10 employees. The staff generally includes one supervisor, with the remainder of staff consisting of counselors. Our experience to date has been that most centers are owned and operated by former teachers in the respective regions. Thus, these operators often times are familiar with many of the families in the area and are able to promote the centers attributes the local market.
Generally, learning centers are located within close proximity of an elementary school, and most students are able to walk from their school to the learning center. Hours of operation are between 9:00 am to 8:30 pm each school day, however, high student traffic generally occurs between 3:00 pm to 6:00 pm during the school day. During winter recess (4 weeks) and summer recess (8 weeks), many children of single or dual income parents arrive at the learning center in the morning and leave in the evening. While at the learning centers, students can access the learning center curriculum or our virtual classrooms. A typical franchise center receives approximately 40-80 students per day, while a Company-owned center receives approximately 80-100 students per day.
Each learning center consists of three segregated areas, online
learning, counselor guidance, and educational
products depicted as follows:
|
|
|
|
o |
Online Learning Area. Each franchised and Company-owned center generally supports 15 and 50 computers, respectively, in the online learning area. During periods of high student traffic, computers are accessible to students for a maximum of one hour. Students pay for courses in advance with cash, an electronic bank transfer, or through the Tsingda e-card, a re-chargeable debit card. Once a student enters his name, ID and password, our proprietary software immediately recognizes the students school, grade level, and proficiency, and instantaneously delivers a menu of teaching materials designed to match the students current curriculum. The menu includes sync and featured courses, practice sessions, online question and answer database, mock tests, and interactive question and answer sessions. |
|
|
|
|
o |
Counselor Guidance Area. Students utilize the counselor guidance area to complete homework, take exams, or to perform workshop materials. The guidance area is supervised by counselor to ensure that students are not distracted by other students. In addition, parent meeting are held in this area. |
|
|
|
|
o |
Education Product Area. Each center provides an array of products available for sale to students, which include teaching materials complimentary to courseware, DVDs, books, learning toys, and general office supplies. Students also are able to purchase Tsingda e learning cards in this area. |
Courses can be purchased under a variety of packages and pricing,
including by day, by month, and by semester. Typically, our learning centers
hold four hour sessions for elementary school students and three hour sessions
for our middle and high school students for our Monday through Friday programs.
For our weekend program, all sessions for all students are bifurcated into two separate
two hour segments.
Franchise Arrangements
Each franchise agreement grants a specific territory to a franchisee which in turn requires the franchisee to open a corresponding number of centers commensurate with such territory as follows:
|
|
|
Typical Number of Centers |
|
Territory |
|
|
|
3 |
|
County |
5 |
|
Perfecture City |
8* |
|
Provincial Capital City |
50* |
|
Province |
* The actual number of centers for a Provincial Capital City and Province may vary depending on certain factors determined by the Company and the franchisee.
For reference purposes, the PRC consist of 23 provinces, 4 municipalities, 5 autonomous regions and 2 special administrative regions. These administrative divisions are further divided into prefectures with each prefecture consisting of numerous counties and townships.
59
The term of each franchise
agreement is one year, and renewable annually by the parties. Under the
agreement, franchisees are required to pay initial licensing fee of between
$7,000 and $10,000 per location depending on franchise territory, with an
annual payments of 10% of the initial fee. Franchisees are must maintain a
standardized signage, storefront and interior design, adhere to company pricing
policies for courseware, unified promotion activities and exclusively use company generated
materials, among other terms. Franchisees are required to bear all the costs of
owing and operating each center, including rent, staffing, and marketing. The
estimated cost to open a learning center for a franchisee ranges from $40,000
to $60,000 inclusive of franchise payments to the company, lease deposits,
leasehold improvements, furniture, fixtures and equipment (10-40 desktop computers). Franchisees also
are required to obtain necessary operating permits, and comply with applicable
laws and regulations. Our franchise attrition rate for 2008 and 2009 was
5.2% and 4.1%, respectively.
Tsingda Virtual Classroom
The Tsingda Internet
Classroom is a robust, multi-faceted on line educational platform delivering educational
services in the PRC. The virtual classroom has been designed to be an
eBay®-style educational platform whereby buyers (students) and sellers
(teachers) are linked through its proprietary software for the sole purpose of
transacting educational related services. The platform currently targets mainly
high school students and to a lesser extent junior high school students. We
expect to apply this platform to other educational areas, such as a Chinese
language learning program that can be accessed worldwide, and adult vocational
training classes for use in the PRC. We do not have a timetable as when we plan
to introduce these other educational programs.
The Tsingda virtual classroom
was first launched for high
school students, and later included junior high and elementary students. As of September, 2010, total registered students and active
students was 350,000 and 68,975, respectively, and the number of
certified teachers was 16,000 (approximately 2,350 of which are renowned). A
significant portion of our existing student base and current revenues of our
virtual classroom is attributable to students who have attended or are
attending our learning centers.
Students enroll in the system by providing relevant personal and educational information, along with electronic bank information. Students log on to the platform by entering an assigned user name and password. The software interface allows students to browse the system by subject matter and teacher name. An interested subscriber can enter the virtual classroom for a free trial of the first 5 minutes, after which the student can either log out or remain online and his/her account will be charged for the class.
Our various classrooms are depicted in the graphic below:
|
|
|
|
o |
Renowned Teacher Classroom: The Company has attracted approximately 2,350 teachers who are classified as renowned, out of our 16,000 total teachers (approximately 15%) to prepare and develop courses. A renowned teacher is generally one who has received a distinguished teacher award from the Ministry of Education and in our opinion has developed an outstanding reputation in the teaching community. These courses are well attended with attendance ranging from 1,000-10,000 students. The renowned teacher classroom enables student from the rural regions to experience the teaching disciplines of these teachers. Renowned teacher classrooms are often recorded for subsequent viewing by students. |
|
|
|
|
o |
General Classroom: These classes are presented by qualified, albeit not renowned teachers. These classrooms are designed for 30 to 50 students. These classrooms are used for general courses, including mathematics, English, and physics. |
|
|
|
|
o |
One-on-One Classroom:These are real time classrooms specially designed for students desiring personalized and private tutoring space. |
All of the classrooms are
designed to be interactive whereby teacher and student can communicate
electronically through text messaging, audio feeds, and email, however, due to
the size of the Renowned Teacher Classroom, interactive communications are
limited. Our system also maintains records of the teacher/student
communications.
60
As mentioned elsewhere herein,
we recognized the disparity in the level of educational services delivered by the
government to the various regions in China. We believe that our platform
attempts to bridge the education gap by allowing students from the poorer, less
funded regions, to experience the disciplines of other qualified teachers,
including renowned teachers.
Teacher Arrangements
Qualifications of Teachers
We believe the strength and future success of our virtual classroom is dependent upon the qualifications of our faculty. As a result, we have implemented the following practices designed at attain and maintain high teacher and subject matter integrity;
|
|
|
|
o |
Background. We perform a series of background checks to verify academic credentials and employment history of each teacher. These checks include obtaining transcripts from schools and universities as well as phone interviews with colleagues. |
|
|
|
|
o |
Experience. Each teacher must have at least a degree from a university or college recognized by the Ministry of Education. |
|
|
|
|
o |
Course Subjects. Course subjects and course outlines are approved in advance to ensure that courses presented avoid sensitive political and social issues. |
|
|
|
|
o |
Quality Control. We frequently monitors live sessions to ensure that teachers adhere to pre-approved course outlines and to assess overall teacher performance. We also monitor email exchanges between students and teachers. |
As of September 30, 2010, we had over 16,000
qualified teachers.
Financial Arrangements with Teachers
We enter into formal agreements with our qualified teachers. Under the agreement, qualified teachers receive a percentage of subscription revenue from live courses and any courses that are pre-recorded for later use. The percentage inuring to the teacher is 60% for live courses and 10% for all pre-recorded classes. All course materials prepared by teachers are property of the Company.
Qualified teachers are
afforded the flexibility to develop course content which they perceive as
receptive to students, subject to our approval. Teachers are then able to post
to the platform, specific information concerning one or more classes offered to
students. Relevant information includes the subject matter of the class, date
and time of the class, price of the class, and the qualifications of the
teacher. On any given day, a student can browse over hundreds of classes on a
variety of subject matters. More popular classes are English, math and physics,
however specialized subjects are also offered by some teachers. Courses are
presented live or pre-recorded from a prior live session. Classes range between
0.5 to 1 hours longs. Pricing ranges between $1.5 and $50 per hour, again
dependent upon class subject matter, level of difficulty, and teacher
qualification. The following table shows the average price for three different
types of courses we offer.
|
|
|
|
|
|
|
|
|
|
|
Type |
|
Elementary |
|
Middle School |
|
High School |
|
|||
|
|
|
|
|
|
|
|
|||
One-to-one classroom |
|
$ |
11.76 |
|
$ |
14.71 |
|
$ |
17.65 |
|
Renowned Teacher Classroom |
|
$ |
5.88 |
|
$ |
7.35 |
|
$ |
8.82 |
|
General Classroom |
|
$ |
8.82 |
|
$ |
11.76 |
|
$ |
14.71 |
|
Our Growth Strategy
Our growth and expansion strategy for the next 6 to 12 months includes the following measures:
|
|
|
Increase the number of Company-owned learning centers. As of September 30, 2010, we have eighteen Company-owned locations. Due to the size of Company-owned locations, we are able to absorb higher student traffic and generate higher overall revenues compared to franchised locations. We also recognize 100% of the revenue stream from these locations. We expect to open approximately 40 additional Company-owned locations this December 2011. The aggregate estimated cost to open these locations is $4,000,000. |
61
|
|
|
Increase the number of franchised learning centers. As of September 30, 2010, we had over 2,271 locations within 1,400 2nd and 3rd tier cities throughout China. We estimate that there are approximately 50,000 2nd and 3rd tier cities in the PRC. Our plan is to increase the number of franchised learning centers by increasing our advertising and marketing initiatives in an effort to attract more franchisees. As of November 15, 2010, the Company has agreements to open 544 new franchised learning centers. In the next six months, we plan on spending approximately $1.2 million on a broad scale brand promotional campaign. This campaign will target a number of media outlets, including advertisements on regional television and in local newspapers in select markets, as well as holding periodic regional events in these markets, all of which will be designed to attract franchisees. |
On average, the total cost of opening a Company-owned learning center is approximately $100,000 as described in further detail in the following table:
|
|
|
|
|
Interior decoration |
|
$ |
22,059 |
|
Equipments and facilities |
|
$ |
5,882 |
|
6-month Rent (paid up front) |
|
$ |
44,118/6 month |
|
Deposit |
|
$ |
7,353/month |
|
Miscellaneous |
|
$ |
22,059 |
|
Total |
|
$ |
101,471 |
|
Increase traffic to our virtual classrooms. We plan to allocate more capital resources to the marketing and promotion of our virtual classrooms. The above mentioned brand promotion campaign will include sponsoring events at prominent high-schools designed to promote our virtual classrooms, advertising in school newspapers, and to a lesser extent, subscribing to more per click ad space on selected Internet sites, such as Sina.com and Yahoo.com.cn. We also expect to experience increased traffic to our virtual classrooms coincident with our franchise expansion efforts. Since introduction of this platform, historical results have indicated that a majority of our virtual classroom subscribers have originated from our learning centers.
We plan to
establish additional learning centers in 2010 and 2011 as follows:
|
|
|
|
|
|
|
|
|
|
2010 |
|
2011 |
|
||
|
|
|
|
|
|
||
New company-owned learning centers |
|
|
30 |
|
|
30 |
|
Total company-owned learning centers |
|
|
30 |
|
|
60 |
|
New franchised learning centers |
|
|
550 |
|
|
600 |
|
Total franchised learning centers |
|
|
2,300 |
|
|
2,900 |
|
Total Learning Centers |
|
|
2,330 |
|
|
2,960 |
|
In order to execute our plan of expanding our business operations we
will need to (i) increase the number of our learning centers, (ii) scale and adapt our existing network
infrastructure to accommodate increased systems traffic and (iii) increase our
marketing efforts. During the 2010, we expect to open approximately 550
additional franchised locations; in the next six months, we plan on spending
approximately $1.2 million on a broad scale brand promotional campaign; and we will
need significantly more computing power as traffic within our system increases
and our learning center locations expand. We will be required to spend
significant capital and resources to manage our additional franchises, execute
our promotional campaign and to purchase equipment, and upgrade our technology
and network infrastructure to handle increased Internet traffic. In this
regard, we have budgeted approximately $1.2 million for our market campaign,
approximately $1.4 million for IT expenditures, and approximately 1.8 million to add and improve our course
content in 2011. If we fail to expend sufficient capital to execute our growth
strategy, our operating results will be harmed.
Marketing and Promotion
Our marketing efforts target
three principal areas; franchisees, students for our Company-owned learning
centers, and students for our virtual classrooms.
We attract franchisees by conducting regional seminars on a periodic basis in areas that we have targeted for expansion, as well as advertising on regional television and in local newspapers in these areas. These efforts have produced in excess of 2,000 operating franchisees.
Our Company-owned learning
centers are in close proximity to schools and large residential areas. We have
been able to attract students to our learning centers principally through the
distribution of leaflets in the nearby areas.
62
Traffic to our virtual classrooms has been driven principally by students from our learning centers. We expect to increase traffic to our virtual classrooms commensurate with the numerical increase of our learning centers.
We will continue the above stated marketing measures for the foreseeable future. In addition, however, as mentioned herein, we plan on spending approximately $1.2 million on a broad scale brand promotional campaign during the next six months. This campaign will create an overall brand awareness for our company and our products, and we expect the program to reach potential franchisees and students alike. Specifically, we intend to advertise on regional television and in local newspapers in select markets, hold periodic regional events in these specific markets, subscribe to more per click ad space on selected Internet sites, such as Sina.com and Yahoo.com.cn, and advertise in school newspapers.
Through December 31, 2011, we plan to spend approximately $4.7 million
on marketing, as described in further detail in the following table:
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|
|
|
|
Recruitment of students |
|
$ |
1,764,706 |
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Recruitment of franchise |
|
$ |
735,294 |
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Brand promotion |
|
$ |
441,176 |
|
Online Platform |
|
$ |
1,764,706 |
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Total |
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$ |
4,705,882 |
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Competition
We do not have direct competition from our business model of offering
online educational services at home and at learning centers. We face competition from online web schools with respect to our virtual
classroom model, such as China Edu, although these schools are generally
limited by the scope of classes offered and the number of teachers available
for presentation. China Edu offers only pre-recorded courses broadcast online,
targeting students aged three to eighteen in tier 1 and tier 2 cities in China.
The price point of China Edu is between $176 to $426 per year. We differentiate
our business from China Edu by targeting students aged six through eighteen in
tier 2 and tier 3 cities at a substantially lower price point, by offering
pre-recorded as well as live, real-time online courses, consumable both at home
and at franchised or Company-owned learning centers.
Our business also face
competition from traditional offline cram schools, however, these schools are
fragmented throughout the country with concentration mainly in tier one cities.
The largest of such cram schools are Xueda, Juren and China TAL Education,
which are focused on serving the tier 1 cities. Because these schools are
fragmented, they have no more than 200 locations, all of which locations are
Company-owned. Further, they do not offer online courses, and their teaching
materials are not synchronized with official textbooks. We compete with these
cram schools by offering online courses at home and at learning centers,
courses synchronized with textbooks, a lower price point, and because of our
franchise model, are able to expand more quickly and to more markets than the
cram school business model.Accredited
learning centers are traditional degree-granting schools. As we are not an
accredited learning center, we do not compete with these institutions.
We believe our current competitive advantages which will lead to potential future success are as follows:
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Business Footprint and Reputation. We are the largest provider of supplementary educational teaching in the PRC and we have achieved industry acclaim for products and services. |
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Management Experience. We have developed a strong management team which has demonstrated the ability to operate a highly successful business model. |
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Scalability of Franchise Model. We believe that we have standardized an innovative, high quality teaching platform at our learning centers which allows for substantial geographical expansion. |
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Attributes of our Virtual Classrooms. Our virtual classrooms have numerous attributes, including |
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No geographical limits. We allow students from anywhere in the PRC or elsewhere to subscribe to a wide menu of courses, many of which are presented by renowned teachers. |
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Real-time Interaction. Many of our classrooms allow real-time interaction between the student and teacher. |
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Learning on demand. We provide a wide menu of live and pre-recorded courses with a broad scheduling format, including weekends and holidays. |
Employees
As of September
30, 2010, we had approximately 150 full time employees and seven officers,
including our chairman and chief executive officer. Our employees are not
represented by any collective bargaining agreement, and we have never
experienced a work stoppage. We believe we have good relations with our
employees. We also have contracts with third party software providers from time
to time to develop software applications in accordance with our specifications.
Properties
Our corporate offices are located at No. 0620, Yongleyingshiwenhuanan Rd., Yongledian Town, Tongzhou District Beijing under three year lease agreement terminating in 2012. The office space consists of approximately 1,868 square meters. Annual rent for fiscal year 2010 is expected to be approximately $360,963.
Equipment and Equipment Suppliers
Presently, the Company owns
over 281 servers which are located in Beijing, Sichun, Shandong, Zhejiang and Tiejing.
These servers are maintained under service agreements with third parties. For each Company-owned learning
center, the Company owns between 40 to 50 desktop computers.
The Company purchases its servers and computers from various large suppliers like Dell and Lenovo, among others. The Company purchase products from its suppliers on an as needed basis and presently does not believe the loss of any one supplier will have an adverse effect on its business.
Software Development
Our learning center and virtual classroom software has been developed internally by our engineers and developers and through collaboration with third party developers. We retain ownership to all work product developed internally and by third parties. We will maintain this development strategy for future software products. Our development team has expertise in software and database programming, web application, browser, and desktop technologies.
Intellectual Property
We were granted trademark protection from PRC authorities for the names and logo of Tsingda Century and Tsingda Xiaoboshi.
A total of eight patents have been filed with the PRC authorities with respect to various aspects of our business, of which four of the applications have been granted and four applications are pending.
64
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Description Appearance Design |
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Patent No |
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Term of the Patent |
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Date Issued/Filed |
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Card (all-in-card for entrepreneurship training) |
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200730161941.4 |
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July 27, 2007 to July 26, 2017 |
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Issued: June 25, 2008 |
Card (Tsingda Learning Center) |
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200730161942.9 |
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July 27, 2007 to July 26, 2017 |
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Issued: July 16, 2008 |
Card (all-in-card for early education) |
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200730161943.3 |
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July 27, 2007 to July 26, 2017 |
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Issued: June 25, 2008 |
Card (all-in-card for China education) |
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200730161944.8 |
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July 27, 2007 to July 26, 2017 |
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Issued: May 21, 2008 |
Computer-aided Children Evaluation and Guiding System |
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2007101298785 |
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Pending |
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Filed: February 20 2009 |
Computer-aided Children Care Pattern System |
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2007101298770 |
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Pending |
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Filed: February 20 2009 |
Distant Network Education Interactive Platform |
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2007101298766 |
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Pending |
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Filed: February 20 2009 |
Evaluation and Monitoring Method of Distant Online Education Platform |
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2007101298751 |
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Pending |
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Filed: February 20 2009 |
We have registered four
software applications with the PRC authorities with respect to various aspects
of our business. Under PRC Copyright Law, a copyright protects
both the design of a software product and the name of the product. Copyrights
are granted for a term of 50 years from the date of first publication.
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Name of the Software |
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Date of Filing |
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Registration No. |
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Network Baomu Software V1.0 |
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May 20, 2007 |
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2007SR14359 |
Tsingda Shouhushen Software V2.0 |
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December 1, 2008 |
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2009SR014243 |
Tsingda Learning Center Software V1.0 |
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April 20, 2007 |
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2009SR014242 |
Tsingda Internet Classroom Software V1.0 |
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July 15, 2008 |
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2009SR014244 |
Litigation
From time to time, we may become involved in various lawsuits and legal proceedings, which arise, in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business. We are currently not aware of any such legal proceedings or claims that we believe will have a material adverse effect on our business, financial condition or operating results.
Government Regulation
The Chinese government regulates the education services industry and
the substance of Internet content. This section summarizes the principal
Chinese regulations relating to our businesses. We operate our business in
China under a legal framework that consists of the State Council, which is the
highest executive authority of the Chinese central government, and several
ministries and agencies under its authority, including the Ministry of
Education, or MOE, the State Administration of Foreign Exchange, or SAFE, the
General Administration of Press and Publication, or GAPP, the Ministry of
Information Industry, or MII, the State Administration for Industry and
Commerce, or SAIC, the Ministry of Civil Affairs, or MCA, and their respective
authorized local counterparts.
We believe that, except for the online publication license, the Internet culture business operations license and the license for broadcasting audio-video programs through the Internet discussed above, no consent, approval or license other than those already obtained by our Chinese subsidiaries and affiliates is required under any of the existing laws and regulations of China for our business and operations.
Regulations on Online Education
Pursuant to the Administrative
Regulations on Educational Websites and Online and Distance Education Schools,
issued by the MOE in 2000, educational websites and online education schools
may provide educational services in relation to higher education, elementary
education, pre-school education, teacher education, occupational education,
adult education, other education and public
65
educational information services. Educational websites refers
to websites of organizations providing education or education-related
information services to website visitors by means of a database or online
education platform connected via the Internet or an educational television
station. Online education schools refers to education websites that issue
educational certificates in connection with their providing academic education
services or training services.
On June 29, 2004, the State Council issued the Decision on Setting Down Administrative Licenses for the Administrative Examination and Approval Items Really Necessary to be Retained, which provides that an administrative license is required for online education schools that provide degree education to students, but not for educational websites that do not provide degree education to students, such as Tsingda Education.
Regulations on Operating Private Schools
The principal regulations governing private education in China consist of the Education Law of China, The Law for Promoting Private Education (2003), The Implementation Rules for the Law for Promoting Private Education (2004) and the Regulations on Chinese-Foreign Cooperation in Operating Schools. These regulations are summarized below.
Education Law of China
The Education Law of China, or the Education Law, was enacted on March 18, 1995. The Education Law sets forth provisions relating to the fundamental education systems of China, including a system of pre-school education, primary education, secondary education and higher education, a system of nine-year compulsory education and a system of education certificates. The Education Law requires the government to formulate plans for the development of education and the establishment and operation of schools and other education institutions. In principle, enterprises, social organizations and individuals are encouraged to operate schools and other types of educational organizations in accordance with Chinese laws and regulations. Nevertheless, no school or any other accredited educational institution may be established for profit-making purposes. However, private schools may be operated for reasonable returns, as described in more detail below.
The Law for Promoting Private Education (2003) and The Implementation Rules for the Law for Promoting Private Education (2004)
The Law for Promoting Private Education (2003) became effective on September 1, 2003, and its implementing regulations, The Implementation Rules for the Law for Promoting Private Education (2004), became effective on April 1, 2004. Under these regulations, private schools are defined as schools established by individuals or private social organizations using private funds. Private schools providing degree education, pre-school education, education for self-study aid and other academic education are subject to approval by the education authorities, while private schools engaging in occupational qualification training and occupational skill training are subject to approvals from the authorities in charge of labor and social welfare. An approved private school will be granted an operating permit, and it must be registered with the MCA or its local counterpart as a privately run non-enterprise legal person.
The operation of private schools is highly regulated. For example, the types and amounts of fees charged by private schools offering certifications must be approved by the relevant governmental authority and be publicly disclosed, and the types and amounts of fees charged by private schools that do not offer certifications need only be filed with the relevant governmental authority and be publicly disclosed.
Private
education is treated as a public welfare undertaking under the regulations.
Nonetheless, investors in a private school may elect to require reasonable
returns from the schools. Under the regulations, an election to establish a
private school as one requiring reasonable returns must be made in the articles
of association of the school. For schools that have made this election, the
amount of reasonable return that can be distributed to investors each year is
determined based on a percentage of the schools operating surplus, which is
equal to the schools annual net income less the aggregate amount of donations
received, government subsidies, if any, the amount required to be reserved for
the schools development fund and other expenses as required by the
regulations. This percentage is determined by the schools board of directors,
taking into consideration the following factors: (i) the schools tuition
and other fees, (ii) the ratio of the schools expenses used for
educational activities and improving the educational conditions to the total
fees collected; and (iii) the schools admission standards and educational
quality. Information relating to these factors must be publicly disclosed
before the schools board determines the percentage of the schools annual net
balance that can be distributed as reasonable returns. This disclosed
information and the decision to distribute reasonable returns must also be
filed with the approval authorities within 15 days from the decision made by
the board. However, none of the current Chinese laws and regulations provides a
formula or other guidelines for determining reasonable returns. In addition,
none of the current Chinese laws and regulations sets forth different
requirements or restrictions on a private schools ability to operate its
education business based on such schools status as a school that requires
reasonable returns or a school that has not made this election. At the end of
each fiscal year, private schools are required to allocate a certain amount to
their development fund for the construction and maintenance of the school and
the procurement and upgrade of educational equipment. For private schools that
require reasonable returns, this amount must be no less than 25% of the
66
annual net income or the annual increase in the net assets of the
school, while for other private schools, this amount must be no less than 25%
of the annual increase in the net assets of the school, if any. Private schools
that have not elected to require reasonable returns are entitled to the same
preferential tax treatment as public schools. The regulations require that
preferential tax treatment policies applicable to private schools requiring
reasonable returns to be formulated by the finance authority, taxation
authority and other authorities under the State Council, but to date no such
regulations have been promulgated by the relevant authorities.
Regulations on Chinese-Foreign Cooperation in Operating Schools
Chinese-foreign cooperation in the operation of schools and training programs is governed by the Regulations on Operating Chinese-Foreign Schools, issued by the State Council in 2003 in accordance with the Education Law, the Occupational Education Law and the Law for Promoting Private Education.
The Regulations on Operating Chinese-foreign Schools and its implementing regulations, the Implementing Rules for the Regulations on Operating Chinese-foreign Schools, or the Implementing Rules, which were issued by the MOE in 2004, encourage substantive cooperation between overseas educational organizations, which are required to have relevant qualifications and experience in providing high-quality education, and Chinese educational organizations to jointly operate various types of schools in China.
Permits for Chinese-foreign cooperation in operating schools must be obtained from the relevant education authorities or the authorities that regulate labor and social welfare in China. Since all of our learning centers are operated by our Chinese affiliated entity and not by us, we believe, based on the advice of our Chinese counsel, that we are not required to apply for these permits.
Additionally, the Regulations on Operating Chinese-Foreign Schools and its Implementing Rules require that the foreign party to Chinese-foreign cooperative educational institutions or programs be a foreign educational institution, and under those regulations, a for-profit company, such as us, cannot qualify as a foreign educational institution. As a result, we cannot direct our affiliates in China, and instead we are a service provider to these affiliates.
In August 2004, the MOE promulgated the Announcement Regarding Re-Approval of Chinese-foreign Cooperative Educational Institutions and Programs, which requires Chinese-foreign cooperative educational institutions and programs that were established before July 1, 2004 (the effective date for the Implementing Rules) to obtain re-approval from the MOE.
In April 2007, the MOE issued the Circular on Further Regulating Chinese-foreign Cooperative Education Programs. The circular directs the local education authorities generally to suspend the approval of any new Chinese-foreign cooperative polytechnic education programs until the end of 2008. To ensure the quality of the Chinese-foreign education programs, the circular emphasizes the regulatory supervision of these programs and advises local education authorities to closely supervise and monitor the existing programs, especially in recruiting materials, advertisement, and issuance of degrees and diplomas, and directs them to report and remedy any non-compliance by existing programs of the applicable regulations.
Regulations on Internet Information Services
Following the State Councils issuance of the Telecom Regulations and the Internet Information Services Administrative Measures, or the Internet Information Measures, on September 25, 2000, the MII and other regulatory authorities have issued a number of Internet-related regulations, including the Internet Electronic Bulletin Board Service Administrative Measures, or the BBS Measures.
The Internet Information Measures require that commercial Internet content providers, or ICPs, must either obtain a license for Internet information services, or an ICP license, from, or make an ICP filing with, the appropriate telecommunications authorities to carry on any commercial Internet information services in China. Generally, an ICP license is required to provide Internet information services for profit-making purposes, whereas only an ICP filing is required to provide Internet information services on a non-profit basis.
The BBS Measures provide that ICPs engaged in providing online bulletin board services, or BBS, must comply with a special approval process and make a specific filing with the relevant telecommunications industry authorities. ICPs that provide electronic messaging services must not disclose user personal information to any third party without the consent of the user, unless the law otherwise requires that the data be disclosed. The regulations authorize the relevant telecommunications authorities to require ICPs to rectify any unauthorized disclosure. ICPs could be liable if unauthorized disclosure causes damages or losses to users. The Chinese government can require ICPs to provide the government with Internet users personal information if the users post any prohibited content or engage in illegal activities on the Internet.
In July 2006,
the MII issued the Notice on Strengthening
Management of Foreign Investment in Operating Value-Added Telecom Services.
The notice prohibits Chinese ICPs engaged in providing value-added telecom
services from leasing, transferring or selling their ICP licenses or providing
facilities or other resources to illegal foreign investors. The notice requires
Chinese ICPs to directly own the trademarks and domain names for the websites
they operate, as well as servers and other infrastructure used to support these
67
websites. The notice also requires Chinese ICPs to evaluate their
compliance with the notice by November 1, 2006 and correct any
non-compliance. A Chinese ICPs failure to complete the procedures by
November 1, 2006 could be the basis for revocation of its ICP license.
Regulations on Online Publications
The General Administration of Press and Publication of The PRC, or GAPP, and the MII jointly promulgated the Tentative Internet Publishing Administrative Measures, or the Internet Publishing Measures, which took effect on August 1, 2002. The Internet Publishing Measures require Internet publishers to obtain approval from the GAPP. The term Internet publishing is defined in these regulations as online dissemination through which Internet information service providers select, edit and process works created by themselves or others (including content from books, newspapers, periodicals, audio and video products, electronic publications, and other sources that have already been formally published or works that have been made public in other media) and subsequently post this content on the Internet or transmit it to users over the Internet for browsing, use or downloading by the public.
Regulations Relating to Information Security
On December 28, 2000, the National Peoples Congress enacted the Decisions Regarding Maintaining Internet Security, which prohibits any use of the Internet that results in a breach of public security, dissemination of socially destabilizing content or divulgence of state secrets. The conduct prohibited is broadly defined under the decisions.
According to other relevant regulations, ICPs must complete mandatory security filing procedures with local public security authorities and must also report any public dissemination of prohibited content.
Regulations on Broadcasting Audio-Video Programs through the Internet or Other Information Network
The State Administration of Radio, Film and Television, or SARFT, and MII promulgated the Rules for Administration of Internet Video-Audio Programs Service, or the Video-Audio Programs Rules, which became effective on January 31, 2008. The Video-Audio Programs Rules apply to the activities of broadcasting, integration, transmission, downloading of audio-video programs with computers, televisions or mobile phones as the main terminals and through various types of information networks. Pursuant to the Video-Audio Programs Rules, a permit for broadcasting audio-video programs through an information network is required to engage in these Internet broadcasting activities. On April 13, 2005, the State Council announced a policy on private investments in businesses in China that relate to cultural matters, which prohibits private investments in businesses relating to the dissemination of audio-video programs through information networks. Although we may be subject to there rules, these regulations are relatively new, and there are significant uncertainties relating to their interpretation and implementation, including the definition of audio-video programs as specified in these regulations.
Regulations on Protection of the Right of Dissemination through Information Networks
On May 18, 2006, the State Council issued the Regulations on Protection of the Right of Dissemination through Information Networks, and they became effective on July 1, 2006. These regulations require that every organization or individual who disseminates a third partys work, performance, audio or visual recording products to the public through an information network must obtain permission from, and pay compensation to, the copyright owner of these products, unless otherwise provided under relevant laws and regulations. The copyright owner may take technical measures to protect his or her right of dissemination through information networks and any organization or individual may not intentionally evade, destroy or otherwise assist others in evading these protective measures unless permissible under law. These regulations also provide that permission from and compensation for the copyright owner are not required in the event of limited dissemination to teaching or research staff for the purpose of school teaching or scientific research.
Regulations on Copyright and Trademark Protection
China has adopted legislation governing intellectual property rights, including copyrights and trademarks. China is a signatory to the main international conventions on intellectual property rights and became a member of the Agreement on Trade Related Aspects of Intellectual Property Rights, or TRIPS, upon its accession to the World Trade Organization in December 2001.
Copyright. The National Peoples Congress amended its Copyright Law in 2001 to widen the scope of works and rights that are eligible for copyright protection. The amended Copyright Law extends copyright protection to Internet activities, products disseminated over the Internet and software products. In addition, there is a voluntary registration system administered by the China Copyright Protection Center.
Trademark. The Chinese Trademark Law, adopted in 1982 and
revised in 2001, protects the proprietary rights to registered trademarks. The
Trademark Office, which is under the SAIC, handles trademark registrations and
grants a ten-year term to registered
68
trademarks, subject to renewal for another ten years. Trademark
license agreements must be filed with the Trademark Office for recording. We
have registered nine trademarks with the Trademark Office and are in the
process of registering additional marks. In addition, if a registered trademark
is recognized as a well-known trademark, the proprietary right of the trademark
holder may be extended beyond the registered sphere of products and services of
the trademark.
On November 5, 2004, the MII amended the Measures for Administration of Domain Names for the Chinese Internet, or the Domain Name Measures. The Domain Name Measures regulate the registration of domain names, such as the first tier domain name .cn. In February 2006, China Internet Network Information Center, or CINIC, issued the Implementing Rules for Domain Name Registration and the Measures on Domain Name Disputes Resolution, pursuant to which CINIC can authorize a domain name dispute resolution institution to decide disputes.
Regulation of the Software Industry
Policies to Encourage the Development of Software
On June 24, 2000, the State Council issued Certain Policies to Encourage the Development of Software and Integrated Circuit Industries, or the Policies, to encourage the development of software and integrated circuit industries in China and to enhance the ability of PRC information technology companies to compete in the international market. The Policies facilitate the development of software and integrated circuit industries in China through various methods, including:
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encouraging venture capital investments in the software industry and providing capital to software enterprises or assisting such software enterprises to raise capital overseas; |
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providing tax incentives, including an immediate tax rebate for taxpayers who sell self-developed software products before 2010 in the amount of the statutory value-added tax that exceeds 3%, and a number of exemptions and reduced corporate income tax rates; |
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providing government support, such as government funding in the development of software technology; |
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providing preferential treatments, such as credit facilities with low interest rates to enterprises that export software products; |
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adopting various strategies to ensure that the software industry has sufficient expertise; and |
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implementing measures to enhance intellectual property protection in China. |
To qualify for preferential treatments, an enterprise must be recognized as a software enterprise by governmental authorities. A software enterprise is subject to annual inspection, failure to pass such inspection in a given year would cause the enterprise to lose the relevant benefits
Software Products Administration
On October 27, 2000, the MIIT issued the Measures Concerning Software Products Administration to regulate and administer software products and facilitate the development of the software industry in China. Pursuant to the Measures Concerning Software Products Administration, all software products operated or sold in China must be duly registered with and recorded by the relevant authorities, and no entity or individual is allowed to sell unregistered and unrecorded software products. In order to produce software products in China, a software producer is required to have:
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the status of an enterprise legal person, which scope of operations must include computer software business (including technology development of software or production of software products); |
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a fixed production site; |
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necessary conditions and technologies for producing software products; and |
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quality control measures and capabilities for the production of software products. |
Software developers or producers are allowed to sell their registered and recorded software products independently or through agents, or by way of licensing. Software products developed in China must be registered with local provincial governmental authorities in charge of the information industry and subsequently filed with the taxation authority at the same level and the MIIT. Imported software products, i.e., software developed overseas and sold or distributed into China, must be registered with the MIIT. Upon registration, the software products will be granted registration certificates. Each registration certificate is valid for five years from the issuance date and may be renewed upon expiry. The MIIT and other relevant authorities may carry out supervision and inspection over the development, production, operation and import/export of software products in and out of China.
On
March 5, 2009, the MIIT promulgated the new Measures Concerning Software Products Administration, or the
New Measures, which became effective on April 10, 2009. Under the New
Measures, software products operated or sold in China are not required to be
registered or recorded by relevant authorities, and software products developed
in China (including those developed in China on the
69
basis of imported software) can enjoy certain favorable policies
when they have been registered and recorded. The New Measures also eliminated
the previous requirements set forth above.
Software Copyright
The State Council promulgated the Regulations on the Protection of Computer Software, or the Software Protection Regulations, on December 20, 2001, which became effective on January 1, 2002. The Software Protection Regulations were promulgated, among other things, to protect the copyright of computer software in China. According to the Software Protection Regulations, computer software that is independently developed and attached to physical goods will be protected. However, such protection does not apply to any ideas, mathematical concepts, processing and operation methods used in the development of software solutions. Under the Software Protection Regulations, PRC citizens, legal persons and organizations will enjoy copyright protection for computer software that they have developed, regardless of whether the software has been published. Foreigners or any person without a nationality will enjoy copyright protection over computer software that they have developed, as long as such computer software was first distributed in China. Software of foreigners or any person without a nationality will enjoy copyright protection in China under these regulations in accordance with a bilateral agreement, if any, executed by and between China and the country to which the developer is a citizen of or in which the developer resides, or in accordance with an international treaty to which China is a party. Under the Software Protection Regulations, owners of software copyright will enjoy the rights of publication, authorship, modification, duplication, issuance, lease, transmission on the information network, translation, licensing and transfer. Software copyright protection takes effect on the day of completion of the softwares development. The protection period for software developed by legal persons and other organizations is fifty years and ends on December 31 of the fiftieth year from the date the software solution was first published. However, the Software Protection Regulations will not protect the software if it is not published within fifty years from the date of the completion of its development. Civil remedies available under the Software Protection Regulations against copyright infringements include cessation of the infringement, elimination of the effects, apology and monetary compensation. The copyright administrative authorities may order the infringer to stop all infringing acts, confiscate illegal gains, confiscate and destroy infringing copies, and may impose a fine on the offender under certain circumstances.
Software Copyright Registration
On February 20, 2002, the State Copyright Administration of the PRC promulgated and enforced the Measures Concerning Registration of Computer Software Copyright Procedures, or the Registration Procedures, to implement the Software Protection Regulations and to facilitate the development of Chinas software industry. The Registration Procedures apply to the registration of software copyrights and software copyright exclusive licensing contracts and assignment contracts. The registrant of a software copyright will either be the copyright owner or another person (a natural person, legal person or an organization) in whom the software copyright becomes vested through succession, assignment or inheritance. Upon registration, the registrant should be granted a registration certificate by the China Copyright Protection Center.
Limitations on Foreign Ownership of Our Businesses
The Foreign Investment Industry Guidance Catalogue (amended in 2007), the Regulations on Chinese-Foreign Cooperation in Operating School, the Implementation Measures for the Regulations on Sino-Foreign Cooperation in Operating Schools and other applicable laws and regulations limit foreign ownership in entities, or foreign participation in entities, engaging in specified education activities by:
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requiring that the foreign party in any Chinese-foreign cooperation in operating schools be a qualified foreign educational institution; |
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requiring regulatory approval for any Chinese-foreign cooperation in operating schools; |
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prohibiting foreign investment in schools providing compulsory education (that is, the first grade through the ninth grade, or primary school and junior high school education); and |
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restricting foreign investment in educational websites. |
Moreover, from a practical perspective, the MOE will not approve any foreign investment or participation in online degree education.
Our corporate structure is designed to comply with current regulatory limitations on foreign ownership and participation while engaging in our core business activities.
Regulations on Internet Culture Activities
70
The Ministry of Culture of the PRC promulgated the Internet
Culture Administration Tentative Measures, or the Internet Culture Measures, on
May 10, 2003, which became effective on July 1, 2003, and which were
amended on July 1, 2004. The Internet Culture Measures require ICP
operators engaging in Internet culture activities to obtain an Internet culture
business operations license from the Ministry of Culture in accordance with the
Internet Culture Measures. The term Internet culture activities includes, among
other things, acts of online dissemination of Internet cultural products, such
as audio-visual products, games, performances of plays or programs, works of
art and cartoons, and the production, reproduction, importation, sale
(wholesale or retail), leasing and broadcasting of Internet cultural products.
Operating License
Our business is subject to regulation by governmental agencies in the PRC. Business and company registrations are certified on a regular basis and must be in compliance with the laws and regulations of the PRC and provincial and local governments and industry agencies, which are controlled and monitored through the issuance of licenses and certificates.
Tsingda Education has received a license from the Beijing
Administration for Industry and Commerce. This business license enables us to
conduct our business of providing non-certified educational services. The
registration No. is 10112006225438, and it is valid from October 24, 2003
through October 23, 2013. Tsingda Management has received a license from the
Beijing Administration for Industry and Commerce which enables us to engage in
business consulting, education information services and organizing cultural
exchanges activities (excluding shows). This license is valid from November 26,
2007 to November 25, 2027. Once the terms expire, all the business licenses are
renewable.
SAFE regulations on overseas investment of Chinese residents and employee stock options
The SAFE issued The Notice on Issues Relating to the Administration of Foreign Exchange in Fund-Raising and Reverse Investment Activities of Domestic Residents Conducted via Offshore Special Purpose Companies in October 2005, which became effective in November 2005, and an implementing rule in May 2007, collectively SAFE Rules. According to SAFE Rules, Chinese residents, including both legal persons and natural persons and Chinese citizens and foreign citizens who reside in China, are required to register with SAFE or its local branch before establishing or controlling any company outside China, referred to in SAFE rules as an offshore special purpose company, for the purpose of financing that offshore company with their ownership interests in the assets of or their interests in any Chinese enterprise. In addition, a Chinese resident that is a shareholder of an offshore special purpose company is required to amend its SAFE registration with the local SAFE branch with respect to that offshore special purpose company in connection with the injection of equity interests or assets of a Chinese enterprise in the offshore company or overseas fund raising by the offshore company, or any other material change in the capital of the offshore company, including any increase or decrease of capital, transfer or swap of share, merger, division, long-term equity or debt investment or creation of any security interest. The SAFE Rules apply retroactively. As a result, Chinese residents who have established or acquired control of offshore companies that have made onshore investments in China in the past were required to complete the relevant registration procedures with the competent local SAFE branch. If any resident of China failed to file its SAFE registration for an existing offshore entity, any dividends remitted by the onshore entity to its overseas parent since April 21, 2005 will be considered to be an evasion of foreign exchange purchase rules, and the payment of the dividend will be illegal. As a result of any illegal action of this type, both the onshore entity and its actual controlling person(s) can be fined. In addition, failure to comply with the registration procedures may result in restrictions on the relevant onshore entity, including prohibitions on the payment of dividends and other distributions to its offshore parent or affiliate and capital inflow from the offshore entity. Chinese resident shareholders of the offshore entity may also be subject to penalties under Chinese foreign exchange administration regulations.
We have asked
our shareholders and beneficial owners who are Chinese residents to make the
necessary applications and filings as required under Circular 75 and other
related rules, as well as pursuant to the Escrow Agreement we entered into in
connection with our September 2010 private placement. However, due to uncertainty
concerning the reconciliation of Circular 75 with other approval or
registration requirements, it remains unclear how Circular 75, and any future
legislation concerning offshore or cross-border transactions, will be
interpreted, amended and implemented by the relevant government authorities. We
will attempt to comply, and attempt to ensure that our shareholders and
beneficial owners who are subject to these rules comply, with the relevant
requirements. However, we cannot provide any assurances that all of our
shareholders and beneficial owners who are Chinese residents will comply with
our request to make or obtain any applicable registrations or comply with other
requirements required by Circular 75 or other related rules. In addition,
certain of the holders of options to purchase our Ordinary Shares are Chinese
residents. We have been advised that it is unclear under SAFE Rules whether
these option holders would be deemed to be beneficial owners of our company for
the purposes of these rules as a result of holding these options. The failure
or inability of our Chinese resident shareholders or beneficial owners to
register with SAFE in a timely manner pursuant to SAFE Rules, or the failure or
inability of any future Chinese resident shareholders or beneficial owners to
make any required SAFE registration or comply with other requirements under
SAFE Rules may subject these shareholders or beneficial owners to fines or
other sanctions and may also limit our ability to contribute additional capital
into or provide loans to our Chinese subsidiaries, limit our Chinese
subsidiaries ability to pay dividends to us, repay shareholder loans or
otherwise distribute profits or proceeds from any reduction in capital, share
transfer or liquidation to us, or otherwise adversely affect us.
71
On March 28, 2007, SAFE promulgated the Application Procedure of Foreign Exchange
Administration for Domestic Individuals Participating in Employee Stock Option
Holding Plan or Stock Option Plan of Overseas Listed Company, or the
Stock Option Rule. The purpose of
the Stock Option Rule is to
regulate foreign exchange administration of Chinese citizens who participate in
employee stock holding plans and stock option plans of offshore listed
companies. According to the Stock Option
Rule, if a Chinese citizen participates in any employee stock
holding plan or stock option plan of an offshore listed company, a Chinese
domestic agent or the Chinese subsidiary of the offshore listed company is
required to file, on behalf of the individual, an application with SAFE to
obtain approval for an annual allowance with respect to the purchase of foreign
exchange in connection with stock holding or stock option exercises. This
restriction exists because a Chinese citizen may not directly use offshore
funds to purchase stock or exercise stock options. Concurrent with the filing
of the required application with SAFE, the Chinese domestic agent or the
Chinese subsidiary must obtain approval from SAFE to open a special foreign
exchange account at a Chinese domestic bank to hold the funds required in
connection with the stock purchase or option exercise, any returned principal
profits upon sales of stock, any dividends issued on the stock and any other
income or expenditures approved by SAFE. The Chinese domestic agent or the
Chinese subsidiary also is required to obtain approval from SAFE to open an
offshore special foreign exchange account at an offshore trust bank to hold
offshore funds used in connection with any employee stock holding plans.
All proceeds
obtained by a Chinese citizen from dividends acquired from the offshore listed
company through employee stock holding plans or stock option plans, or sales of
the offshore listed companys stock acquired through other methods, must be
remitted back to China after relevant offshore expenses are deducted. The
foreign exchange proceeds from these sales can be converted into Renminbi or
transferred to the individuals foreign exchange savings account after the
proceeds have been remitted back to the special foreign exchange account opened
at a Chinese bank. If stock options are exercised in a cashless exercise, the
Chinese individuals exercising them are required to remit the proceeds to the
special foreign exchange account.. If we or our Chinese employees fail to
comply with the Stock Option Rule,
we and/or our Chinese employees may face sanctions imposed by foreign exchange
authority or any other Chinese government authorities.
Foreign Exchange Control and Administration
Foreign exchange in China is primarily regulated by:
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The Foreign Currency Administration Rules (1996), as amended; and |
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The Administration Rules of the Settlement, Sale and Payment of Foreign Exchange (1996), or the Administration Rules. |
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Under the Administration Rules, the Renminbi is convertible for current account items, including the distribution of dividends, interest payments, and trade and service-related foreign exchange transactions. Conversion of Renminbi into foreign currency for capital account items, such as direct investment, loans, investment in securities and repatriation of funds, however, is still subject to the approval of SAFE. Under such rules, foreign-invested enterprises may only buy, sell and remit foreign currencies at banks authorized to conduct foreign exchange transactions after providing valid commercial documents and, in the case of capital account item transactions, only after obtaining approval from SAFE.
Under the Foreign Currency Administration Rules, foreign invested enterprises are required to complete the foreign exchange registration and obtain the registration certificate. Tsingda Management has not complied with these requirements. Tsingda Education and Tsingda Network are domestic enterprises and do not have to comply with these requirements.
The value of the Renminbi against the US dollar and other currencies may fluctuate and is affected by, among other things, changes in Chinas political and economic conditions. Historically, the conversion of Renminbi into foreign currencies, including US dollars, has been based on rates set by the Peoples Bank of China. On July 21, 2005, the PRC government changed its policy of pegging the value of the Renminbi to the US dollar. Under the new policy, the Renminbi will be permitted to fluctuate within a band against a basket of certain foreign currencies. There remains significant international pressure on the PRC government to adopt a substantial liberalization of its currency policy, which could result in a further and more significant appreciation in the value of the Renminbi against the US dollar.
Regulation on Mergers and Acquisitions
On August 8, 2006, six PRC regulatory agencies, including the China Securities Regulatory Commission, or CSRC, promulgated the Regulation on Mergers and Acquisitions of Domestic Companies by Foreign Investors, which became effective on September 8, 2006. This new regulation, among other things, has certain provisions that purport to require offshore special purpose vehicles, or SPVs, formed for the purpose of listing and controlled by PRC individuals or companies, to obtain the approval of the CSRC prior to listing their securities on an overseas stock exchange. On September 21, 2006, the CSRC published on its official website a notice specifying the documents and materials that are required to be submitted for obtaining CSRC approval.
72
In addition, under this new regulation, mergers and acquisitions of equity or assets involving PRC enterprises by foreign investors are subject to approval by the Ministry of Commerce or local branches or other competent government authorities. If we continue our expansion through acquiring PRC domestic companies by our offshore affiliates, we will be subject to such approval requirement.
Failure to comply with this new regulation may lead to sanctions by the Ministry of Commerce or other PRC regulatory authorities that are provided for in other relevant regulations governing foreign investment, foreign exchange, taxation, business registration, securities, and administration of state-owned assets.
Dividend Distributions
Pursuant to the Foreign Currency Administration Rules promulgated in 1996 and amended in 1997 and 2008, respectively, and various regulations issued by SAFE, and other relevant PRC government authorities, the PRC government imposes controls on the convertibility of the Renminbi into foreign currencies and, in certain cases, the remittance of currency out of China.
Tsingda Education and Tsingda Network are regulated by the
laws governing foreign-invested enterprises in the PRC. Accordingly, they are
required to allocate 10% of their after-tax profits based on PRC accounting
standards each year to their general reserves until the accumulated amount of
such reserves has exceeded 50% of their registered capital, after which no
further allocation is required to be made. As of December 31, 2009, the
registered capitals of Tsingda Education and Tsingda Network are $4,421,156 and
$588,235, respectively, and both companies have made the required allocations to
the general reserves. These reserve funds, however, may not be distributed to
equity owners except in accordance with PRC laws and regulations. We
cannot assure you that the PRC government authorities will not request our
subsidiaries to use their after-tax profits for their own development and
restrict our subsidiaries ability to distribute their after-tax profits to us
as dividends.
Pursuant to the new EIT law and its implementing regulations, dividends payable by a foreign-invested enterprise to its foreign investors will be subject to a 10% withholding tax if the foreign investors are considered as non-resident enterprises without any establishment or place within China or if the dividends payable have no connection with the establishment or place of the foreign investors within China, to the extent that the dividends are deemed China sourced income, unless any such foreign investors jurisdiction of incorporation has a tax treaty with China that provides for a different withholding arrangement. The Marshall Islands, where our immediate holding company is incorporated, does not have such a tax treaty with China. In addition, pursuant to a notice jointly promulgated by the Ministry of Finance and the State Administration of Taxation of the PRC on February 22, 2008, distribution of accumulated profits of foreign-invested enterprises arising before January 1, 2008 will be exempt from withholding tax even if the distribution is made after January 1, 2008 but the distribution of profits arising after January 1, 2008 will be subject to withholding tax.
Regulation
of Employment
On June 29, 2007, the National Peoples Congress promulgated the Employment Contract Law of the Peoples Republic of China, or ECL, which became effective on January 1, 2008. On September 18, 2008, the State Council issued the Peoples Republic of China Employment Contract Law Implementation Rules, or ECL Implementation Rules, which became effective on September 18, 2008, the date of issuance. The ECL and ECL Implementation Rules require employers to enter into written contracts with their employees, restrict the use of temporary workers and aim to give employees long-term job security.
Pursuant to the ECL, employment contracts lawfully entered into prior to the implementation of the ECL and continuing as of the date of its implementation will continue to be valid. Where an employment relationship was established prior to the implementation of the ECL but no written employment contract was entered into, a contract must be entered into within one month after the ECLs implementation.
Regulations on Franchise Businesses
On
February 6, 2007, the State Council promulgated the Regulation on the
Administration of Commercial Franchisees, which became effective on May 1,
2007. This regulation requires that any enterprise engaging in trans-provincial
franchise business shall register with the Ministry of Commerce, or MOC, and
any enterprise engaging in franchise business within one province shall
register with the provincial counterparts of MOC. On April 30, 2007, the
MOC promulgated the Administrative Measures for the Filing of Commercial
Franchises, which set forth in detail the procedures and documents required for
the filing, including among other things the franchise agreement, market plan
trademarks, and patents relating to the franchise.
73
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES
Prior to our reverse acquisition transaction with Tsingda Technology, our independent registered public accounting firm was PMB Helin Donovan, LLP (PMB), while Tsingda Managements independent registered public accounting firm was Jeffrey & Company.
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i |
On August 23, 2010, we dismissed PMB Helin Donavan, LLP (PMB) as our independent registered public accounting firm. The Board of Directors of the Company approved such dismissal on August 19, 2010. |
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ii |
The Companys Board of Directors participated in and approved the decision to change our independent registered public accounting firm. |
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iii |
PMBs reports on the financial statements of the Company for the years ended June 30, 2009 and 2008 did not contain an adverse opinion or a disclaimer of opinion, nor were they qualified or modified as to uncertainty, audit scope, or accounting principles. |
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iv |
In connection with the audit and review of the financial statements of the Company through August 23, 2010, there were no disagreements on any matter of accounting principles or practices, financial statement disclosures, or auditing scope or procedures, which disagreements if not resolved to their satisfaction would have caused them to make reference in connection with PMBs opinion to the subject matter of the disagreement. |
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v |
In connection with the audited financial statements of the Company for the years ended June 30, 2009 and 2008 and interim unaudited financial statement through August 23, 2010, there have been no reportable events with the Company as set forth in Item 304(a)(1)(v) of Regulation S-K. |
(b) Engagement of New Independent Registered Public Accounting Firm.
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i |
On August 19, 2010, the Board appointed Jeffrey & Company as the Companys new independent registered public accounting firm. The decision to engage Jeffrey & Company was approved by the Companys Board of Directors on August 19, 2010. |
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ii |
Prior to August 19, 2010, we did not consult with Jeffrey & Company regarding (1) the application of accounting principles to a specified transactions, (2) the type of audit opinion that might be rendered on our financial statements, (3) written or oral advice was provided that would be an important factor considered by us in reaching a decision as to an accounting, auditing or financial reporting issues, or (4) any matter that was the subject of a disagreement between us and its predecessor auditor as described in Item 304(a)(1)(iv) or a reportable event as described in Item 304(a)(1)(v) of Regulation S-K. |
We provided PMB with a copy of this disclosure on August 23, 2010, and provided PMB with the opportunity to furnish us with a letter addressed to the SEC stating whether it agrees with the statement made by us herein in response to Item 304(a) of Regulation S-K and, if not, stating the respect in which it does not agree. A letter from PMB dated August 23, 2010 was filed by us as Exhibit 16.1 to our current report on Form 8-K on August 23, 2010.
Directors and Executive Officers
The following table sets forth the name, age, and position of our
executive officers and directors. Executive officers are elected annually by
our Board of Directors. Each executive officer holds his office until he
resigns, is removed by the Board, or his successor is elected and qualified.
Directors are elected annually by our stockholders at the annual meeting. Each
director holds his office until his successor is elected and qualified or his
earlier resignation or removal.
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NAME |
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AGE |
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POSITION |
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Zhang Hui |
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44 |
|
Chairman of the Board of Directors, Chief Executive Officer and President |
Liu Juntao |
|
48 |
|
Executive Vice President and Director |
Kang Chungmai |
|
40 |
|
Secretary and Chief Financial Officer |
Zhang Hui established Tsingda Education in 2003, and has been its chairman, chief executive officer since its inception. From 1999 to 2003, he was vice president of Singapore Holding Group, during when he has integrated management methods and cultural diversity under different background efficiently, and then setting up a new branch for Singapore Holding Group-Holding Technology (Shenzhen) Co., Ltd. From 1995 to 1999, Mr. Zhang worked as the newsroom director and vice chief editor of China technology information magazine, successfully hatching the publication of the best choice of Chinese excellently expertise, Chinese diathesis education, Chinese innovation education and China education research. He graduated from Wuhan University of Technology in 1989.
74
Liu Juntao has been the executive vice-president of Tsingda Education since its inception. Prior to his employ with Tsingda, he had over 10 years of administrative work for government. He also spent 5 years in private industry in the PRC where worked in product development, market exploiting and customer service. Mr. Liu graduated from Huazhong Agriculture University in 1983.
Kang Chungmai has been the chief financial officer and secretary of Tsingda Education since January 2010. From 2004 to 2007, he worked as managing director in Zero2IPO Group in Beijing a financial consulting firm. From 1999 to 2002, he served as CFO in Optoma Electronics (the largest TFT-LCD backlight and DLP projector producer in the world). From 1996 to 1999, he served as financial manager in Far Eastern Department Stores (the largest chain of department stores in the Greater China Region) based in Taipei. He had broad experiences in general financial management, debt and equity financing, foreign exchange hedging, offshore holding structure design, and investment evaluation. Mr. Kang holds his master degree in International Finance from the University of Westminster, London, UK in 1996. He also expects to receive the PhD degree in Management from the University of Edinburgh, Edinburgh, Scotland in 2010.
We believe that Zhang Hui, as chairman and chief executive officer, and
Liu Juntao as executive vice president of our business since its inception in
2003, are each qualified to and should be a director of Tsingda eEDU
Corporation. Mr. Zhang and Mr. Liu have both been instrumental in establishing
Tsingda Education and overseeing its operations.
Directors are elected until their successors are duly elected and qualified.
There are no family relationships among our directors or officers.
To the best of our knowledge, none of our directors or executive officers has been convicted in a criminal proceeding, excluding traffic violations or similar misdemeanors, or has been a party to any judicial or administrative proceeding during the past five years that resulted in a judgment, decree or final order enjoining the person from future violations of, or prohibiting activities subject to, federal or state securities laws, or a finding of any violation of federal or state securities laws, except for matters that were dismissed without sanction or settlement. Except as set forth in our discussion below in Certain Relationships and Related Transactions, none of our directors, director nominees or executive officers has been involved in any transactions with us or any of our directors, executive officers, affiliates or associates which are required to be disclosed pursuant to the rules and regulations of the SEC.
Code of Ethics
We currently do not have a code of ethics that applies to our officers, employees and directors, including our Chief Executive Officer and Chief Financial Officer, however, we intend to adopt one in the near future.
The following table sets forth information concerning all cash and non-cash compensation awarded to, earned by or paid to the named persons for services rendered in all capacities during the noted periods. No other executive officer received total annual salary and bonus compensation in excess of $100,000.
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Name and Principal Position |
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Year |
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Salary |
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Bonus |
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Stock |
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Option |
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All Other |
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Total |
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Zhang Hui(1) |
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2009 |
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$ |
55,385 |
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0 |
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0 |
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0 |
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0 |
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$ |
55,385 |
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Chairman, President, and |
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2008 |
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$ |
55,385 |
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0 |
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0 |
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0 |
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0 |
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$ |
55,385 |
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|
Chief Executive Officer |
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|
Kang Chungmai(1) |
|
2009 |
|
|
0 |
|
|
0 |
|
|
0 |
|
|
0 |
|
|
0 |
|
|
0 |
|
|
Chief Financial Officer |
|
2008 |
|
|
0 |
|
|
0 |
|
|
0 |
|
|
0 |
|
|
0 |
|
|
0 |
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|
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Joseph Rozelle(2) |
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2009 |
|
|
0 |
|
|
0 |
|
|
0 |
|
|
0 |
|
|
0 |
|
|
0 |
|
|
Former President and Chief |
|
2008 |
|
|
0 |
|
|
0 |
|
|
0 |
|
|
0 |
|
|
0 |
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|
0 |
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|
Financial Officer and Secretary |
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Karl Brenza(3) |
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2009 |
|
|
0 |
|
|
0 |
|
|
0 |
|
|
0 |
|
|
0 |
|
|
0 |
|
|
Former Chief Executive Officer |
|
|
|
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(1) |
On May 24, 2010, we acquired Tsingda Technology in a reverse acquisition transaction that was structured as a share exchange and in connection with that transaction, Mr. Zhang Hui became our Chief Executive Officer and President and Kang Chungmai became our Chief Financial Officer. Prior to the effective date of the reverse acquisition, Mr. Zhang and Mr. |
75
|
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|
Kang held the same positions with Tsingda Education, respectively. The annual compensation shown in this table includes the amounts Mr. Zhang received from Tsingda Education prior to the consummation of the reverse acquisition. Mr. Kang was hired by Tsingda Education in January 2010 and his annual salary is approximately $46,225. |
76
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|
(2) |
Mr. Joseph Rozelle resigned from the offices of President and Chief Financial Officer on May 20, 2010, and resigned as Secretary on May 24, 2010. |
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(3) |
Mr. Karl Brenza was appointed as Chief Executive Officer on May 20, 2010, and resigned from such office on May 24, 2010. |
Employment Agreements.
Except as noted below, there are no agreements or understandings for any of our executive officers or directors to resign at the request of another person and no officer or director is acting on behalf of nor will any of them act at the direction of any other person.
On January 1, 2010, we entered into an employment agreement with Mr. Zhang, our President and Chairman. Pursuant to the agreement, Mr. Zhang has agreed to work exclusively for the Company during the term and will receive a monthly salary of approximately $4,400. The agreement expires on December 31, 2019.
Grants of Plan-Based Awards
No plan-based awards were granted to any of our named executive officers during the fiscal year ended December 31, 2009.
Outstanding Equity Awards at Fiscal Year End
No unexercised options or warrants were held by any of our named executive officers at December 31, 2009. No equity awards were made during the fiscal year ended December 31, 2009.
Option Exercises and Stock Vested
No options to purchase our capital stock were exercised by any of our named executive officers, nor was any restricted stock held by such executive officers vested during the fiscal year ended December 31, 2009.
Pension Benefits
No named executive officers received or held pension benefits during the fiscal year ended December 31, 2009.
Nonqualified Deferred Compensation
No nonqualified deferred compensation was offered or issued to any named executive officer during the fiscal year ended December 31, 2009.
Potential Payments Upon Termination or Change in Control
Our executive officers are not entitled to severance payments upon the termination of their employment agreements or following a change in control.
Compensation of Directors
No member of our Board of Directors received any compensation for his services as a director during the fiscal year ended December 31, 2009.
Compensation Committee Interlocks and Insider Participation
During the fiscal year 2009 we did not have a standing compensation committee. Our Board of Directors was responsible for the functions that would otherwise be handled by the compensation committee. All directors participated in deliberations concerning executive officer compensation, including directors who were also executive officers, however, none of our executive officers received any compensation during the last fiscal year. None of our executive officers has served on the Board of Directors or compensation committee (or other committee serving an equivalent function) of any other entity, any of whose executive officers served on our Board or Compensation Committee.
77
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information, as of the date
hereof, with respect to the beneficial ownership of the outstanding Ordinary
Shares by (i) any holder of more than five (5%) percent; (ii) each of our
executive officers and directors; and (iii) our directors and executive
officers as a group. Except as otherwise indicated, each of the stockholders
listed below has sole voting and investment power over the shares beneficially
owned.
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Name and Address of |
|
Number of Ordinary Shares |
|
Percent |
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||
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|
|
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|
Officers and Directors |
|
|
|
|
|
Zhang Hui
(3) |
|
11,422,706 |
|
|
|
33.8 |
% |
Liu
Juntao(3) |
|
11,422,706 |
|
|
|
33.8 |
% |
Kang
Changmai |
|
0 |
|
|
|
0 |
|
All officers and directors as a group (3 persons) |
|
11,422,706 |
|
|
|
33.8 |
% |
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|
|
|
|
|
|
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5% or greater shareholders |
|||||||
Zhong Hui Rong Fund Ltd. (4) |
|
2,531,250 |
|
|
|
7.5 |
% |
Yangyi Yu(5) |
|
2,193,750 |
|
|
|
6.4 |
% |
Eastbridge Investment Group Corp.(6) |
|
2,079,740 |
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|
|
6.2 |
% |
Tsing Da Century Education Technology Co., Ltd. (3) |
|
11,422,706 |
|
|
|
33.8 |
% |
|
|
(1) |
Beneficial ownership is determined in accordance with the rules of the SEC and generally includes voting or investment power with respect to securities. Each of the beneficial owners listed above has ownership of, and voting power and investment power with respect to, our Ordinary Shares. For each beneficial owner above, any options exercisable within 60 days have been included in the denominator. |
(2) |
Based on 33,729,862 Ordinary Shares issued and outstanding as of the date hereof. |
(3) |
Tsing Da Century Education Technology Co., Ltd., a Belize corporation, is the record owner of such shares. Mr. Zhang, our Chairman and President, and Mr. Liu, our Executive Vice President and Director, own 81.7% and 18.3%, respectively, of this entity. Accordingly, both Mr. Zhang and Mr. Liu may be deemed to be the beneficial owner of shares owned by such reporting person. |
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Address of the person is: |
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Room1803, Building13, Court 58, |
|
Qingta West Road, Fengtai District, Beijing,100071 |
(4) |
Address of the person is: |
|
c/o Tsingda Century Invest Tech Co Ltd |
|
7th Fl Capital |
|
Devel Twr, Zhongguangchun |
|
Haidian Dist, Beijing PRC 100080 |
|
|
|
Mr. Su Jie is the President of Zhong Hui Rong Fund Ltd. The amount includes stock purchase warrants to acquire 1,968,750 Ordinary Shares. |
(5) |
Address of the person is: |
|
c/o Tsingda Century Invest Tech. Co. Ltd. |
|
7th Fl Capital |
|
Devel Twr, Zhongguangchun |
|
Haidian Dist, Beijing PRC 100080 |
|
|
|
The amount includes stock purchase warrants to acquire 1,706,250 Ordinary Shares. |
(6) |
Address of the person is: |
|
8040 E. Morgan Trail Unit 18 |
|
Scottsdale, Arizona 85258 |
|
|
|
Norm Klein is President of the reporting person. |
78
We are
authorized to issue 100,000,000 Ordinary
Shares, $.000384 par value, and 537,227.22 preferred shares, $.000384 par
value. As of the date hereof, 33,729,862 Ordinary Shares are outstanding.
No preferred shares are outstanding.
79
(a) Ordinary Shares. Subject to preferences that may apply to shares of preferred stock outstanding at the time, the holders of outstanding Ordinary Shares are entitled to receive dividends out of assets legally available therefore at times and in amounts as our board of directors may determine. Each stockholder is entitled to one vote for each Ordinary Share held on all matters submitted to a vote of the stockholders. Cumulative voting is not provided for in our amended articles of incorporation, which means that the majority of the shares voted can elect all of the directors then standing for election. The Ordinary Shares are not entitled to preemptive rights and is not subject to conversion or redemption. Upon the occurrence of a liquidation, dissolution or winding-up, the holders of Ordinary Shares are entitled to share ratably in all assets remaining after payment of liabilities and satisfaction of preferential rights of any outstanding preferred stock. There are no sinking fund provisions applicable to the Ordinary Shares. The outstanding Ordinary Shares are, and the Ordinary Shares to be issued upon exercise of the Warrants will be, fully paid and non-assessable.
(b) Preferred Stock. As of the date of hereof, no preferred
shares are issued and outstanding. We were authorized to issue 781,249
preferred shares, and in connection with our acquisition of Tsingda Technology,
we issued 244,022.78 preferred shares, which converted into 24,402,278 Ordinary
Shares. Once issued, preferred shares
may not be re-issued. With respect to
the 537,227.22 authorized preferred shares that are still issuable, the Board
of Directors is empowered to designate and issue from time to time one or more
classes or series of Preferred Stock and to fix and determine the relative
rights, preferences, designations, qualifications, privileges, options,
conversion rights, limitations and other special or relative rights of each
such class or series so authorized. Such action could adversely affect the
voting power and other rights of the holders of the Companys capital shares or
could have the effect of discouraging or making difficult any attempt by a
person or group to obtain control of the Company.
(c) Warrants. In connection with the September 16, 2010 financing, we issued warrants to the Investors to purchase 2,100,000 of our Ordinary Shares. Each Warrant entitles the holder to purchase one Ordinary Share. The Warrants are exercisable in whole or in part, at an initial exercise price equal to $2.08 per share or on a cashless basis. The warrant term is five years from issuance and may be exercised at any time after we effect the 3 for 1 consolidation of our Ordinary Shares.
We also issued to the Maxim Group, LLC as placement agent for the financing, warrants to purchase 364,500 of our Ordinary Shares. Each Warrant entitles the holder to purchase one Ordinary Share. The Warrants are exercisable in whole or in part, at an exercise price equal to $1.76 per share or on a cashless basis. The warrant term is five years from issuance and may be exercised at any time after February 16, 2011.
The exercise price and number of Ordinary Shares to be received upon
the exercise of Warrants are subject to adjustment upon the occurrence of
certain events, such as stock splits, stock dividends or our recapitalization.
In the event of our liquidation, dissolution or winding up, the holders of
Warrants will not be entitled to participate in the distribution of our assets.
Holders of Warrants have no voting, pre-emptive, subscription or other rights
of shareholders in respect of the Warrants, nor shall the Holders be entitled
to receive dividends.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Compass
On September 27, 2006, the Company issued 1,000,000 and 100,000
Ordinary Shares, respectively, to Nautilus Global Partners and Mid-Ocean
Consulting Limited (subsequently adjusted to 781,250 and 78,125) at a price of
$0.0001 per share. Mr. Rozelle, a former director, is the President of Nautilus
Global Partners, LLC.
On March 1, 2008, the Company consolidated the authorized ordinary
share capital of the Company from 50,000,000 Ordinary Shares of $0.0001 par
value each to 39,062,500 Ordinary Shares of $0.000128 par value each. This resulted
in every shareholder as of March 1, 2008 receiving 0.78125 Ordinary Shares for
every ordinary share previously held. This was treated as a stock split for
U.S. GAAP purposes, and all share and per share data is presented as if the
consolidation took place as of the date of inception, September 27, 2006. On
March 1, 2008, we also consolidated our authorized preference share capital
from 1,000,000 preference shares of $0.0001 par value each to 781,250
preference shares of $0.000128 par value.
80
On March 12, 2010, Tsingda Education entered into an agreement with
Maxim Group, LLC (Maxim), a FINRA registered broker dealer, to act as a
placement agent on a best efforts basis in connection with a proposed private
placement offering of Tsingda Education and its affiliates and subsidiaries.
Under the Agreement, Maxim is entitled to receive 8% of the gross proceeds of
the offering and stock purchase warrants equal to eight percent of the number
of securities sold in the offering. The term of the warrants is five years,
although not exercisable for the initial six months, and are exercisable at
110% of the per share offering price. We are required to register the Maxim
warrants. Tsingda Education also is obligated to pay reasonable fees and
expenses of Maxim not to exceed $50,000. We also agreed to indemnify Maxim
against certain liabilities, including liabilities under the Securities Act. As
a result of the September 16, 2010 financing, we paid Maxim as full
compensation under the agreement, cash commissions of $411,000 (or 4.3% of the
proceeds from the offering) and issued a stock purchase warrant to acquire
364,500 Ordinary Shares. The warrant term is five years and is exercisable at
any time after six months from closing at an exercise price is $1.76. In addition,
we reimbursed Maxim for $25,000 as its reasonable out of pocket expenses.
On May 17, 2010, we issued an aggregate of 915,086 Ordinary Shares (adjusted to reflect the 3 for 1 reverse split) to
MJR Holdings, Inc., Christopher Fiore, Clifford Teller and Karl Brenza, our
former Chief Executive Officer, for an aggregate purchase price of $30,000. The
forgoing parties are affiliates of Maxim.
Tsingda Transactions
Tsingda Technology owns 100% of the issued and outstanding capital stock of Beijing Tsingda Century Management Consulting Ltd. (Tsingda Management), a wholly foreign owned enterprise incorporated under the laws of the Peoples Republic of China (PRC). On April 26, 2010, Tsingda Management entered into a series of contractual agreements with Beijing Tsingda Century Investment Consultant of Education Co. Ltd (Tsingda Education), a company incorporated under the laws of the PRC, and its shareholders, in which Tsingda Management assumed management of the business activities of Tsingda Education and has the right to appoint all executives and senior management and the members of the board of directors. The contractual arrangements are comprised of a Consulting Services Agreement, Operating Agreement, Equity Pledge Agreement, and Option Agreement, through which Tsingda Management has the right to advise, consult, manage and operate Tsingda Education for a quarterly fee in the amount of 100% of Tsingda Educations quarterly, after tax net profits. Additionally, Tsingda Educations Shareholders have pledged their rights, titles and equity interest in Tsingda Education as security for Tsingda Management to collect consulting and services fees provided to Tsingda Education through an Equity Pledge Agreement. In order to further reinforce Tsingda Managements rights to control and operate Tsingda Education, Tsingda Educations shareholders have granted Tsingda Management the exclusive right and option to acquire all of their equity interests in Tsingda Education through an Option Agreement.
Pursuant to the Tsingda transaction,
and as described elsewhere herein, on May 24, 2010, the Company issued 244,022.78
preferred shares of Compass to the Tsingda shareholders in exchange for 100%
of the outstanding shares of Tsingda Technology. The Company also issued
2,079,740 Ordinary Shares to Eastbridge Investment Group Corporation in exchange
for certain considerations provided by Eastbridge.
Advances were made during 2008 and 2009 to Mr. Zhang Hui, our chief
executive officer and to Mr. Liu Juntao, our executive vice president, both of
whom are equity shareholders of Tsing Da Century Education Technology Co.,
Ltd., a Belize corporation, which is the Companys largest shareholder. The
outstanding balance of such advances was $1,996,821 and $186,747 respectively
at December 31, 2008. Additional advances of $299,734 and $6,584 were made
during 2009 and repayments of $1,836,257 and $177,864 were received, leaving
balances of $460,716 and $15,468 at December 31, 2009. As of March 31, 2010,
all advances were paid back to Tsingda Education.
Other than employment, none of the following persons has any direct or indirect material interest in any transaction to which we are a party since our last fiscal year or in any proposed transaction to which we are proposed to be a party:
|
|
(A) |
Any of our directors or officers; |
(B) |
Any proposed nominee for election as our director; |
(C) |
Any person who beneficially owns, directly or indirectly, shares carrying more than 10% of the voting rights attached to our Ordinary Shares; or |
(D) |
Any relative or spouse of any of the foregoing persons, or any relative of such spouse, who has the same house as such person or who is a director or officer of any parent or subsidiary of our company. |
The validity of the Ordinary Shares offered by this prospectus will be
passed upon for us by Stuarts Walker Hersant, Attorneys at Law, Grand Cayman,
Cayman Islands.
81
The consolidated financial statements of our company included in this prospectus and in the registration statement have been audited by Jeffrey & Company, independent registered public accounting firm, to the extent and for the periods set forth in their report appearing elsewhere herein and in the registration statement, and are included in reliance on such report, given the authority of said firm as an expert in auditing and accounting.
82
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the Securities and Exchange Commission, or SEC, a
registration statement on Form S-1 under the Securities Act with respect
to the Ordinary Shares to be sold by the selling shareholders. This prospectus
does not contain all of the information set forth in the registration
statement. For further information with respect to us and the Ordinary Shares
offered in this offering, we refer you to the registration statement and to the
attached exhibits. With respect to each such document filed as an exhibit to
the registration statement, we refer you to the exhibit for a more complete
description of the matters involved.
You may inspect our registration statement and the attached exhibits and schedules without charge at the public reference facilities maintained by the SEC at 100 F Street, N.E., Washington, D.C. 20549. You may obtain copies of all or any part of our registration statement from the SEC upon payment of prescribed fees. You may obtain information on the operation of the public reference room by calling the SEC at 1-800-SEC-0330.
Our SEC filings, including the registration statement and the exhibits filed with the registration statement, are also available from the SECs website at www.sec.gov, which contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC.
83
F-1
JEFFREY & COMPANY
CERTIFIED PUBLIC ACCOUNTANTS
61 BERDAN AVENUE
WAYNE, NEW JERSEY 07470
Report of Independent Registered Public Accounting Firm
Board of
Directors
Tsingda eEDU Corporation (formerly Compass Acquisition Corporation)
We have
audited the accompanying consolidated balance sheets of Tsingda eEDU
Corporation (formerly Compass Acquisition Corporation) as of December 31,
2009 and 2008, and the related consolidated statements of income, changes in
stockholders equity, and cash flows, for the years ended December 31, 2009 and
2008. These financial statements are the responsibility of the Company
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted the audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate under the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Companys internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our
opinion, the financial statements referred to above present fairly, in all
material respects, the consolidated financial positions of Tsingda eEDU Corporation
as of December 31, 2009 and 2008, and the consolidated results of its operations
and its cash flows for the years ended December 31, 2009 and 2008 in conformity
with U. S. generally accepted accounting principles.
/s/ Jeffrey & Company
November 30, 2010
JEFFREY & COMPANY
Wayne, New Jersey
F-2
(FORMERLY COMPASS ACQUISITION CORPORATION)
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 2009 AND 2008
|
|
|
|
|
|
|
|
|
|
2009 |
|
2008 |
|
||
|
|
|
|
|
|
||
ASSETS |
|
|
|
|
|
|
|
Current Assets |
|
|
|
|
|
|
|
Cash |
|
$ |
458,645 |
|
$ |
2,314,262 |
|
Short term investments |
|
|
2,018,370 |
|
|
303,463 |
|
Accounts receivable, net of provision for doubtful accounts of $301,001and $256,486 as of December 31, 2009 and 2008 respectively |
|
|
4,228,510 |
|
|
2,242,170 |
|
Advances to suppliers |
|
|
3,880,307 |
|
|
530,876 |
|
Other accounts receivable |
|
|
374,243 |
|
|
296,965 |
|
Stockholder advances |
|
|
476,220 |
|
|
2,294,041 |
|
Prepaid expense |
|
|
39,453 |
|
|
108,643 |
|
Inventory |
|
|
40,558 |
|
|
40,443 |
|
Deferred tax assets |
|
|
155,690 |
|
|
233,246 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets |
|
|
11,671,996 |
|
|
8,364,109 |
|
FIXED ASSETS |
|
|
|
|
|
|
|
Furniture and equipment |
|
|
3,084,147 |
|
|
487,031 |
|
Accumulated depreciation |
|
|
366,213 |
|
|
77,370 |
|
|
|
|
|
|
|
|
|
Net furniture and equipment |
|
|
2,717,934 |
|
|
409,661 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intangible assets |
|
|
4,059,639 |
|
|
1,524,777 |
|
Accumulated amortization |
|
|
1,205,873 |
|
|
450,660 |
|
|
|
|
|
|
|
|
|
Net intangible assets |
|
|
2,853,766 |
|
|
1,074,117 |
|
|
|
|
|
|
|
|
|
Total fixed assets |
|
|
5,571,700 |
|
|
1,483,778 |
|
|
|
|
|
|
|
|
|
OTHER ASSETS |
|
|
|
|
|
|
|
Long term prepaid expense |
|
|
|
|
|
166,065 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets |
|
$ |
17,243,696 |
|
$ |
10,013,952 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current Liabilities |
|
|
|
|
|
|
|
Short term loan |
|
$ |
|
|
$ |
131,306 |
|
Accounts payable |
|
|
36,910 |
|
|
20,645 |
|
Advances from customers |
|
|
270,229 |
|
|
74,230 |
|
Accrued expenses |
|
|
175,528 |
|
|
115,187 |
|
Other accounts payable |
|
|
265,103 |
|
|
13,064 |
|
Taxes payable |
|
|
1,946,542 |
|
|
605,090 |
|
Deferred revenue |
|
|
1,037,932 |
|
|
1,554,975 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
3,732,244 |
|
|
2,514,497 |
|
|
|
|
|
|
|
|
|
Stockholders Equity |
|
|
|
|
|
|
|
Preferred stock: 781,250 shares of $.000128 par value authorized; None shares issued and outstanding |
|
|
|
|
|
|
|
Ordinary shares100,000,000 shares of $.000384 par value authorized; 24,402,278 issued and outstanding, |
|
|
9,370 |
|
|
9,370 |
|
Capital in excess of par value |
|
|
4,400,435 |
|
|
4,400,435 |
|
Retained earnings |
|
|
7,531,177 |
|
|
2,386,884 |
|
Earnings appropriated for statutory reserves |
|
|
1,329,032 |
|
|
421,215 |
|
Accumulated other comprehensive income (loss) |
|
|
241,438 |
|
|
281,551 |
|
|
|
|
|
|
|
|
|
Total stockholders equity |
|
|
13,511,452 |
|
|
7,499,455 |
|
|
|
|
|
|
|
|
|
Total Liabilities and Stockholders Equity |
|
$ |
17,243,696 |
|
$ |
10,013,952 |
|
|
|
|
|
|
|
|
|
F-3
(FORMERLY COMPASS ACQUISITION CORPORATION)
CONSOLIDATED STATEMENTS OF INCOME
For the Years Ended December 31, 2009 and 2008
|
|
|
|
|
|
|
|
|
|
2009 |
|
2008 |
|
||
|
|
|
|
|
|
||
Revenue |
|
$ |
14,650,863 |
|
$ |
7,301,733 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses |
|
|
|
|
|
|
|
Selling |
|
|
3,875,405 |
|
|
1,511,838 |
|
General and administrative |
|
|
3,716,663 |
|
|
1,753,357 |
|
|
|
|
|
|
|
|
|
|
|
|
7,592,068 |
|
|
3,265,195 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Income |
|
|
7,058,795 |
|
|
4,036,538 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Income (Expenses) |
|
|
|
|
|
|
|
Other income |
|
|
80,973 |
|
|
1,064 |
|
Other expenses |
|
|
(19,638 |
) |
|
(1,956 |
) |
Financial expense |
|
|
|
|
|
(34,439 |
) |
|
|
|
|
|
|
|
|
Total other income (expense) |
|
|
61,335 |
|
|
(35,331 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income Before Income Taxes |
|
|
7,120,130 |
|
|
4,001,207 |
|
|
|
|
|
|
|
|
|
Provision for Income Taxes: |
|
|
|
|
|
|
|
Current |
|
|
989,925 |
|
|
1,090,448 |
|
Deferred |
|
|
78,095 |
|
|
62,938 |
|
|
|
|
|
|
|
|
|
Total income taxes |
|
|
1,068,020 |
|
|
1,153,386 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income |
|
|
6,052,110 |
|
|
2,847,821 |
|
|
|
|
|
|
|
|
|
Other Comprehensive Income (Loss)-exchange rate gain (loss) |
|
|
(40,113 |
) |
|
265,587 |
|
|
|
|
|
|
|
|
|
Total Comprehensive Income |
|
$ |
6,011,997 |
|
$ |
3,113,408 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share-Basic and fully diluted |
|
$ |
.25 |
|
$ |
1.21 |
|
|
|
|
|
|
|
|
|
Average Number of Shares Outstanding: |
|
|
|
|
|
|
|
Basic and fully diluted |
|
|
24,402,278 |
|
|
2,362,900 |
|
F-4
(FORMERLY COMPASS ACQUISITION CORPORATION)
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY
For the Years Ended December 31, 2009 and 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital
in |
|
Retained |
|
Earnings |
|
Accumulated |
|
Total |
|
|||||||
|
|
Ordinary Shares |
|
|
|
|
|
|
||||||||||||||
|
|
|
|
|
|
|
|
|
||||||||||||||
|
|
Shares |
|
Amount |
|
|
|
|
|
|
||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Balance, December 31, 2007 |
|
|
1,352,891 |
|
$ |
519 |
|
$ |
243,966 |
|
$ |
(39,722 |
) |
$ |
|
|
$ |
15,964 |
|
$ |
220,727 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional Capital Contributions |
|
|
23,049,387 |
|
$ |
8,851 |
|
|
4,156,469 |
|
|
|
|
|
|
|
|
|
|
|
4,165,320 |
|
Net income for the year |
|
|
|
|
|
|
|
|
|
|
|
2,847,821 |
|
|
|
|
|
265,587 |
|
|
3,113,408 |
|
Earnings appropriated for statutory reserves |
|
|
|
|
|
|
|
|
|
|
|
(421,215 |
) |
|
421,215 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2008 |
|
|
24,402,278 |
|
|
9,370 |
|
|
4,400,435 |
|
|
2,386,884 |
|
|
421,215 |
|
|
281,551 |
|
|
7,499,455 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income for the year |
|
|
|
|
|
|
|
|
|
|
|
6,052,110 |
|
|
|
|
|
(40,113 |
) |
|
6,011,997 |
|
Earnings appropriated for statutory reserves |
|
|
|
|
|
|
|
|
|
|
|
(907,817 |
) |
|
907,817 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2009 |
|
|
24,402,278 |
|
$ |
9,370 |
|
$ |
4,400,435 |
|
$ |
7,531,177 |
|
$ |
1,329,032 |
|
$ |
241,438 |
|
$ |
13,511,452 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-5
(FORMERLY COMPASS ACQUISITION CORPORATION)
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2009 AND 2008
|
|
|
|
|
|
|
|
|
|
2009 |
|
2008 |
|
||
|
|
|
|
|
|
||
CASH FLOWS FROM OPERATING ACTIVITIES |
|
|
|
|
|
|
|
Net income |
|
$ |
6,052,110 |
|
$ |
2,847,821 |
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
|
|
Charges not requiring the outlay of cash: |
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
1,042,182 |
|
|
453,655 |
|
Decrease (increase) in deferred revenue |
|
|
(520,630 |
) |
|
360,636 |
|
Increases in deferred income taxes |
|
|
78,094 |
|
|
62,938 |
|
Changes in assets and liabilities: |
|
|
|
|
|
|
|
Increases in accounts receivable |
|
|
(1,979,699 |
) |
|
(1,704,753 |
) |
Increases in other receivables |
|
|
(76,540 |
) |
|
(1,218,795 |
) |
Decrease in stockholder advances |
|
|
1,822,543 |
|
|
|
|
Decrease (increase) in advances to suppliers |
|
|
(3,407,580 |
) |
|
115,610 |
|
Increases in inventory |
|
|
(14 |
) |
|
(38,041 |
) |
Decrease (increase) in prepaid expense |
|
|
69,423 |
|
|
(106,957 |
) |
Increase (decrease) in accounts payable |
|
|
16,234 |
|
|
(237,178 |
) |
Increases in wages payable |
|
|
60,022 |
|
|
37,764 |
|
Increase (decrease) in taxes payable |
|
|
1,339,219 |
|
|
(280,418 |
) |
Increase (decrease) in other payables |
|
|
251,870 |
|
|
(1,280,521 |
) |
Increase (decrease) in customer advances |
|
|
195,708 |
|
|
(2,542,168 |
) |
Decrease (increase) in long term prepaid expense |
|
|
166,389 |
|
|
(163,488 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash Provided (Consumed) By Operating Activities |
|
|
5,109,331 |
|
|
(3,693,895 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES |
|
|
|
|
|
|
|
Cash used in the short term investment: |
|
|
(2,845,939 |
) |
|
(298,754 |
) |
Purchases of fixed assets |
|
|
(1,461,759 |
) |
|
(329,705 |
) |
Additions of intangible assets |
|
|
(2,529,710 |
) |
|
(1,049,094 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash Consumed By Investing Activities |
|
|
(6,837,408 |
) |
|
(1,677,553 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES |
|
|
|
|
|
|
|
Capital contributions |
|
|
|
|
|
4,308,951 |
|
Repayments of short term loans |
|
|
(131,562 |
) |
|
(1,307,049 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Cash Provided (Consumed) By Financing Activities |
|
|
(131,562 |
) |
|
3,001,902 |
|
|
|
|
|
|
|
|
|
Affect on cash of foreign exchange rate changes |
|
|
4,022 |
|
|
259,509 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net change in cash |
|
|
(1,855,617 |
) |
|
(2,110,037 |
) |
|
|
|
|
|
|
|
|
Cash Balance, Beginning of Period |
|
|
2,314,262 |
|
|
4,424,299 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash Balance, End of Period |
|
$ |
458,645 |
|
$ |
2,314,262 |
|
|
|
|
|
|
|
|
|
F-6
(FORMERLY COMPASS ACQUISITION CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2009
1. ORGANIZATION and BUSINESS
Organization of Company
Tsingda
Century Investment Consultant of Education Co., Ltd. (Tsingda Century) was
established on October 23, 2003, in Beijing, the Peoples Republic of China
(the PRC). Beijing Tsingda Century Network Technology Co., Ltd. (Tsingda
Network), the wholly owned subsidiary of Tsingda Century was incorporated in the
PRC on February 14, 2004. Tsingda Century and its subsidiary provide high
quality offline and online educational services for students ranging from six
to eighteen years of age in the PRC. Tsingda eEDU
Corporation (Tsingda eEDU or the Company, formerly Compass Acquisition
Corporation) was incorporated in the Cayman Islands on September 27, 2006. The
Company was originally organized as a blank check company to investigate and
acquire a target company or business seeking the advantages of being a publicly
held corporation.
Tsing Da Century Education Technology Co., Ltd. (Tsingda Technology), was incorporated on December 11, 2009, in the British Virgin Islands, to serve as the intermediate holding company.
Tsingda Century Beijing Management Consulting Co., Ltd. (Tsingda Management), was incorporated on November 26, 2007 and was serving as the wholly owned foreign enterprise (WOFE) of Tsing Da.
On April 22, 2010, Tsingda Century Training School (Tsingda School) was incorporated in Beijing, the PRC, and it is a wholly owned subsidiary of Tsingda Century.
As part of the restructuring, on April 26, 2010, Tsingda Management entered into a series of agreements with Tsingda Century and its shareholders, including Operating Agreement, Proxy Agreement, Consulting Services Agreement, Equity Pledge Agreement and Option Agreement, which entitled Tsingda Management to have substantially all of the economic benefits of Tsingda Century in consideration for consulting services provided by Tsingda Management to Tsingda Century. An Option Agreement allows Tsingda Management to acquire the shares of Tsingda Century when permitted by the PRC laws. The Proxy Agreement provides Tsingda Management with the voting rights of Tsingda Centurys shareholder and Equity Pledge Agreement pledges the shares in Tsingda Century to Tsingda Management without transferring legal ownership in Tsingda Century to Tsingda Management. As the result of restructuring, Tsingda Century became a variable interest entity (VIE) and is included in the consolidated Group.
As all of the companies are under common control, this structure has been accounted for as a reorganization of entities under common control and the financial statements have been prepared as if the reorganization had occurred retroactively.
On May 24, 2010, the Company and its controlling shareholders entered into a share exchange agreement (the Agreement) with Tsingda Technology and all of the shareholders of Tsingda Technology. Under the Agreement, the Company acquired 100% of the outstanding equity interests of Tsingda Technology in exchange for 244,022.78 preferred shares of the Company. Each such share of preferred stock was convertible into 100 ordinary shares of the Company at such time as the number of authorized ordinary shares is increased. The transaction was closed in May 2010 and was accounted for as a reverse merger with a shell company and a recapitalization of Tsing Da. Tsing Da is the account acquirer and the surviving entity.
On November 15, 2010, the Companys shareholders approved the change of the Companys name from Compass Acquisition Corporation to Tsingda eEDU Corporation and the name change is effective immediately following the shareholders approval.
On October 19, 2010, the Board of the Company approved a three-for-one reverse split of the Companys issued and outstanding Ordinary Shares (and to increase the amount of the Companys authorized Ordinary Shares from thirty-nine million sixty-two thousand five hundred shares (39,062,500); to one hundred million (100,000,000) shares.
As result of the reverse spit and increase in share capital, the par value of the Companys Ordinary Shares change from US$0.000128 per share to US$0.000384 per share and the Companys total number of authorized Ordinary Shares increased to 100,000,000 Ordinary Shares. At the same time, all the preferred stock automatically converted to ordinary shares at the ratio of one share of preferred stock to 100 ordinary shares.
All ordinary
share data has been retroactively restated for the periods presented to reflect
the reverse stock split.
Risks and Uncertainties
Tsingda Century and Network operate under the authority of business licenses which were granted in 2003, and expire in 2023. Renewal of these licenses will depend on the result of government inspections which are made to ensure environmental laws are not breached.
The officers
of the Company control through direct ownership of most of the equity interests of
the Company. As a result, insiders will be able to control the outcome of all
matters requiring approval of equity owners and will be able to elect all of
the Company directors.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Consolidated Statements
The
consolidated financial statements include the accounts of the Company, and its
wholly owned subsidiaries, (Tsingda Technology, and Tsingda Management), and Tsingda
Century and its subsidiary, Network. All intercompany balances and transactions
have been eliminated in consolidation.
Cash
For purposes of the statements of cash flows, the Company considers all short term debt securities purchased with a maturity of three months or less to be cash equivalents.
F-7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2009
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTD)
Concentrations of Credit Risk
Financial instruments which potentially subject the Company to concentrations of credit risk consist of cash, short term investments, accounts receivable and advances to suppliers. However, all of the assets of Tsingda Century and Network are located in the PRC and cash balances are on deposit at financial institutions in the PRC, the currency of which is not free trading. Foreign exchange transactions are required to be conducted through institutions authorized by the Chinese government and there is no guarantee that Chinese currency can be converted to U.S. or other currencies.
Recognition of Revenue
The Company
provides online education programs to its franchisees, agents and individual
customers. Revenue is realized through sales to franchisees and other agents of
rights to conduct education services. The Company authorized the franchised
locations to use its logo, all education programs and products and the Company
receives a one time licensing fee, annual management fee, and 20% of student
generated revenue from the franchised location by providing them prepaid
e-cards of 4 times the cash amount. All the mentioned fees are revenues or
unearned revenues from the sale of e-cards. Revenue is recognized while the
services are consummated upon the e-cards use and is reported net of business
tax.
Fair Value of Financial Instruments
The carrying amounts of the Companys financial instruments, which include cash, short term investments, accounts receivable and other receivables, advances to suppliers, accounts payable, accrued liabilities, and other liabilities, approximate their fair values at December 31, 2009.
Fixed Assets
Fixed assets are recorded at cost. Depreciation and amortization is computed using the straight line method, with lives of five years for computers and related equipment and furniture, and eight to ten years for automobiles. Intangibles are the cost of computerized video lessons delivered both online and offline; this cost is amortized by the straight line method using lives of three years.
Intangible Assets
All costs
incurred to establish the technological feasibility of a computer software
product to be sold, leased, or otherwise marketed are charged to expenses as
incurred. Development costs incurred after technological feasibility of a
product has been established and before product sales begin are capitalized and
amortized over the estimated life of the product, which thus far has been
three years, starting when product sales begin. Technological feasibility is
deemed to have been achieved when all the planning, designing, coding, and
testing activities necessary to establish that the product can be produced to
meet its design specifications have been completed, including functions,
features, and technical performance requirements.
Taxes
The Company generates its income in China where Value Added Tax, Business Tax, Income Tax, City Construction and Development Tax, and Education Surcharge taxes are applicable. The Company does not conduct any operations in the U.S.; therefore, U.S. taxes are not applicable.
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimated.
Ordinary Shares
Ordinary shares of the Company will occasionally be issued in return for services. Values will be assigned to these issuances equal to the market value of the common stock at the applicable measurement dates. A Measurement Date is defined under pronouncements of the Financial Accounting Standards Board (FASB) which state the criteria to be used for the valuation of stock issued for goods and services.
Stock Options
Stock options, if issued, will be valued at fair value on the dates of issuance using a Black Scholes valuation model, in accordance with pronouncements of the FASB.
F-8
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2009
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTD)
Recently Adopted Accounting Pronouncements
Management believes that none of the recently adopted accounting pronouncements will have a material affect on the Company financial position, results of operations, or cash flows.
In December 2009, the FASB codified Consolidations Improvements to
Financial Reporting by Enterprises Involved with VIEs (ASU 2009-17), guidance
which was issued by the FASB in June 2009. The amendments in this Accounting
Standards Update replace the quantitative-based risks and rewards calculation
for determining which reporting entity, if any, has a controlling financial
interest in a variable interest entity with an approach focused on identifying
which reporting entity has the power to direct the activities of a variable
interest entity that most significantly impact the entitys economic
performance and has (1) the obligation to absorb losses of the entity or
(2) the right to receive benefits from the entity. An approach that is
expected to be primarily qualitative will be more effective for identifying
which reporting entity has a controlling financial interest in a variable
interest entity. The adoption of this standard will have no material impact on
the Companys consolidated financial statements.
Other Comprehensive Income
The Company reports as other comprehensive income revenues, expenses, and gains and losses that are not included in the determination of net income. Resultant gains and losses during the years 2009 and 2008 are all the result of translations of Chinese currency amounts to U.S. dollars.
Foreign Currency Translation
All of the assets of Tsingda Century and Network are located in China. These assets and related liabilities are recorded on the books of the Company in the currency of China (Renminbi), which is the functional currency. They are translated into US dollars as follows:
|
(a) Assets and liabilities, at the rates of exchange in effect at balance sheet dates; |
(b) Equity accounts, at the exchange rates prevailing at the times of the transactions that established the equity accounts; and |
(c) Revenues and expenses, at the average rate of exchange for the year. |
Gains and losses arising from this translation of foreign currency are included in other comprehensive income.
Product Warranties
Refunds to students who withdraw from courses are rarely made and are made only at the discretion of the Company. For this reason and, since revenue is recognized only as services are provided, no provision is needed for possible withdrawals.
Net Income Per Share
The Company computes net income per ordinary share in accordance with pronouncements of the FASB and SEC Staff Accounting Bulletin No. 981 (SAB 981). Under these provisions, basic and diluted net income per ordinary share are computed by dividing the net income available to ordinary shareholders for each period by the weighted average number of shares of ordinary stock outstanding during the period.
Advertising Cost
The Company expenses advertising costs when an advertisement occurs. Amounts expensed were $2,068,405 during 2009 and $400,009 during 2008.
Segment Reporting
Management treats the operations of the Company as one segment.
3. ADVANCES TO SUPPLIERS
Advances to suppliers represent amounts prepaid for advertising, network, rent,, store construction and decoration:
|
|
|
|
|
|
|
|
|
|
As of December 31, |
|
||||
|
|
2009 |
|
2008 |
|
||
|
|
|
|
|
|
||
Advance for advertising and printing |
|
$ |
11,993 |
|
$ |
68,279 |
|
Advance for Construction and Decoration |
|
|
3,071,433 |
|
|
|
|
Advance for network service |
|
|
292,517 |
|
|
377,141 |
|
Others |
|
|
504,364 |
|
|
85,456 |
|
|
|
|
|
|
|
|
|
Total |
|
$ |
3,880,307 |
|
$ |
530,876 |
|
|
|
|
|
|
|
|
|
4. OTHER ACCOUNTS RECEIVABLE
Other accounts receivable represent the advances to employees and deposits paid to property management companies.
5. STOCKHOLDER ADVANCES
Stockholder advances represent the loans provided to two shareholders with no interest and the repayment is due upon request.
6. PAID IN CAPITAL
F-9
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2009
6. PAID IN CAPITAL (CONTD)
There were 244,022.78 shares of preferred stock issued in connection with the acquisition of Tsing Da (see Note 1). Each of these preferred shares has rights identical to 100 ordinary shares except that each preferred share is convertible to 100 ordinary shares concurrent with approval by the Company Shareholders of an increase of its authorized ordinary shares to 100,000,000. Management has stated an intention to seek shareholder approval to increase the authorized ordinary shares to 100,000,000 and to effect a reorganization of the ordinary shares with a 3 for 1 exchange. Neither of these actions has yet been implemented. The preferred shares referred to above would not participate in this proposed 3 for 1 exchange.
As indicated
in Footnote 1, the reverse stock split and the conversion of preferred stock to
Ordinary Shares at part of the reorganization occurred in November 2010. As
a result, the share data was retroactively restated to reflect such
transactions.
7. STATUTORY RESERVE
In accordance with the relevant laws and regulations of the PRC, the Companys PRC subsidiaries are required to transfer 10% of their respective after tax profit, as determined in accordance with PRC accounting standards and regulations, to a general reserve fund until the balance of the fund reaches 50% of the registered capital of the respective subsidiary. The transfer to this general reserve fund must be made before distribution of dividends can be made. As of December 31, 2009, the registered capitals of Tsingda Education and Tsingda Network are $4,421,156 and $588,235, respectively, and both companies have made the required allocations to the general reserves. As of December 31, 2008 and 2009, the PRC subsidiaries had appropriated $280,810 and $886,021, respectively to the general reserve funds, which are restricted from being distributed to the Company. General reserve funds are restricted for set off against losses, expansion of production and operation or increase in registered capital of the respective company. These reserves are therefore not available for distribution except in liquidation.
Further, the PRC subsidiaries may, at the discretion of the enterprise, make appropriations to a staff welfare and bonus reserve in accordance with the relevant laws and regulations in the PRC. The appropriation to staff welfare and bonus reserve is recognized as an expense as it is a current liability to the employees. For the years ended December 31, 2008 and 2009, the PRC subsidiaries made appropriations to the staff welfare and bonus reserve of $140,405 and $443,010, respectively.
8. RELATED PARTY TRANSACTIONS
Advances were made during 2008 and 2009 to the chief executive officer of the Company and to its executive vice president, both of whom are significant Company shareholders. The outstanding balance of such advances was $1,996,821 and $186,747 respectively at December 31, 2008. Additional advances of $299,734 and $6,584 were made during 2009 and repayments of $1,836,257 and $177,864 were received, leaving balances of $460,716 and $15,468 at December 31, 2009.
9. RENTALS UNDER OPERATING LEASES
The Company conducts its operations from its principal business office in Beijing, and from a rental facility that is operated as a learning center. Leases for these two facilities expire more than one year after December 31, 2009. Future rent for these leases is presented below:
|
|
|
|
|
2010 |
|
$ |
480,491 |
|
2011 |
|
|
80,082 |
|
10. BANK LOAN
The Company had a short term bank loan during 2008 which was fully paid in 2009. Interest on this loan was at the rate of 6.5%.
11. INCOME TAXES
The Company is required to file income tax returns in the PRC, for Tsingda Century and Network.
The Company has been granted status as a New High-Tech Enterprise by the Beijing Science and Technology Commission. One of the benefits of this status is a three year reduction in the rate of income tax paid by the Company. This reduced rate will be 15% for the years 2009-2011.
The Company has one class of transactions that causes the recognition of a significant deferred tax benefit: The Company recognizes revenue only as it is earned; for income tax purposes, however, revenue is recognized as it is collected, resulting in the accrual of taxes before the income is recognized on the financial statements. Under pronouncements of the FASB, deferred tax assets may be recognized unless it is more likely than not that the tax benefit will not be realized. The Company recorded deferred tax assets in 2009 and 2008 of $155,690 and $233,246, respectively.
F-10
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2009
11. INCOME TAXES (CONTD)
A reconciliation of the taxes calculated by applying the Chinese statutory rate to pre tax income with the provisions for income taxes is presented below.
|
|
|
|
|
|
|
|
|
|
2009 |
|
2008 |
|
||
|
|
|
|
|
|
||
Taxes calculated using statutory rates |
|
$ |
1,068,020 |
|
$ |
1,000,302 |
|
Impact of change in tax rate on revenue deferred to 2009 |
|
|
|
|
|
153,084 |
|
|
|
|
|
|
|
|
|
Provisions for income tax |
|
$ |
1,068,020 |
|
$ |
1,153,386 |
|
|
|
|
|
|
|
|
|
Major items included in Selling & Administrative expenses were the following:
|
|
|
|
|
|
|
|
|
|
2009 |
|
2008 |
|
||
|
|
|
|
|
|
||
Rent |
|
$ |
382,988 |
|
$ |
331,318 |
|
Advertising |
|
|
2,068,405 |
|
|
400,009 |
|
Office expense |
|
|
169,603 |
|
|
258,094 |
|
Salaries and benefits |
|
|
1,145,801 |
|
|
742,756 |
|
Meetings and conferences |
|
|
566,594 |
|
|
22,753 |
|
Depreciation and amortization |
|
|
1,043,602 |
|
|
399,795 |
|
Cash of $2,956 and $42,916 was paid for interest during 2009 and 2008, respectively.
Cash was paid for income taxes during these years in the amounts of $806,391 and $803,186, respectively.
There was no non cash financing or investing activity during either 2009 or 2008.
14. CONTINGENCIES
Consistent with business practices in China, Tsingda Century and Network carry no insurance except for auto insurance.
15. SUBSEQUENT EVENTS
On May 17, 2010, the Company issued 915,085 ordinary shares (adjusted to reflect the 3 for 1 reverse split) for $30,000 in cash to a group associated with the firm that is the placement agent of a private placement offering of Company equity securities, which offering is described in the following paragraphs. Also on May 17, 2010, the Company issued 2,079,740 ordinary shares (adjusted to reflect the 3 for 1 reverse split) to Eastbridge Investment Group Corp., in return for services. The value of these shares, $1,477,000, was charged to expense prior to the reverse merger.
On September
16, 2010 the Company entered into a Securities Purchase Agreement (Agreement)
with certain accredited investors pursuant to which units were sold in a
private placement which generated capital of $9,600,000. Each unit consisted of
one share of Company ordinary stock and a warrant to purchase 35% of one
ordinary share of Company stock. The exercise price of the warrants is $6.24
per share and the warrant term is five years. The warrants may be exercised on
a cashless basis within three months after the ordinary shares are listed on a
stock exchange, as defined in the Agreement. Expenses of $731,400 were incurred
in obtaining this financing; in addition, the placement agent was awarded
121,500 warrants to purchase ordinary shares at $5.28 per share. These warrants
have a term of five years and may be exercised anytime after six months of the
date of the transaction.
Coincident with the execution of the Agreement, the Company entered into a Registration Rights Agreement pursuant to which the Company agreed to file by November 29, 2010 a registration statement to register the ordinary shares and the shares underlying the warrants. The Company further agreed that if the registration statement is not declared effective by February 28, 2011 (March 29, 2011 if the registration statement is subject to a full review by the Securities and Exchange Commission), the Company will pay the investors as liquidated damages 1.5% of the aggregate amount invested for each thirty day period after such date, not to exceed a total of 10% of the aggregate amount invested.
See Footnote 1
for the reverse spit of the Companys ordinary shares and the conversion of
preferred stock to ordinary shares.
See Footnote
No. 1 for the reverse merger transaction occurred in May 2010.
F-11
(FORMERLY COMPASS ACQUISITION CORPORATION)
CONSOLIDATED BALANCE SHEETS
(Unaudited)
|
|
|
|
|
|
|
|
|
|
September 30, |
|
December 31, |
|
||
|
|
|
|
|
|
||
ASSETS |
|
|
|
|
|
|
|
Current assets |
|
|
|
|
|
|
|
Cash |
|
$ |
7,245,703 |
|
$ |
458,645 |
|
Short term investments |
|
|
|
|
|
2,018,370 |
|
Accounts receivable, net of provision for doubtful accounts of $307,252 and $301,001 as of 09/30/2010 and 12/31/2009 |
|
|
6,899,717 |
|
|
4,228,510 |
|
Advances to suppliers |
|
|
6,290,344 |
|
|
808,874 |
|
Other accounts receivable |
|
|
276,482 |
|
|
374,243 |
|
Stockholder advances |
|
|
1,320,896 |
|
|
476,220 |
|
Prepaid expense |
|
|
50,312 |
|
|
39,453 |
|
Inventory |
|
|
41,400 |
|
|
40,558 |
|
Deferred tax assets |
|
|
81,373 |
|
|
155,690 |
|
|
|
|
|
|
|
|
|
Total current assets |
|
|
22,206,227 |
|
|
8,600,563 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Advance for Construction and Decoration of Company-owned locations |
|
|
7,897,762 |
|
|
3,071,433 |
|
|
|
|
|
|
|
|
|
Fixed Assets |
|
|
|
|
|
|
|
Furniture and equipment |
|
|
3,730,788 |
|
|
3,084,147 |
|
Accumulated depreciation |
|
|
(846,543 |
) |
|
(366,213 |
) |
Net furniture and equipment |
|
|
2,884,245 |
|
|
2,717,934 |
|
|
|
|
|
|
|
|
|
Intangible assets |
|
|
7,332,567 |
|
|
4,059,639 |
|
Accumulated amortization |
|
|
(2,280,601 |
) |
|
(1,205,873 |
) |
Net intangible assets |
|
|
5,051,966 |
|
|
2,853,766 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Assets |
|
$ |
38,040,200 |
|
$ |
17,243,696 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
|
Accounts payable |
|
$ |
43,071 |
|
$ |
36,910 |
|
Advances from customers |
|
|
939,005 |
|
|
270,229 |
|
Accrued expenses |
|
|
122,332 |
|
|
175,528 |
|
Other accounts payable |
|
|
1,256,563 |
|
|
265,103 |
|
Taxes payable |
|
|
4,257,967 |
|
|
1,946,542 |
|
Deferred revenue |
|
|
542,485 |
|
|
1,037,932 |
|
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
7,161,423 |
|
|
3,732,244 |
|
Total Liabilities |
|
$ |
7,161,423 |
|
$ |
3,732,244 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders Equity |
|
|
|
|
|
|
|
Preferred stock: 781,250 shares of $.000128 par value authorized; none issued and outstanding |
|
|
|
|
|
|
|
Ordinary Shares: 100,000,000 shares of $.000384 par value authorized; 33,729,862 and 24,402,278 shares issued and outstanding, respectively |
|
|
12,952 |
|
|
9,370 |
|
Additional paid in capital |
|
|
12,988,878 |
|
|
4,400,435 |
|
Retained earnings |
|
|
16,987,971 |
|
|
7,531,177 |
|
Earnings appropriated for statutory reserves |
|
|
1,329,032 |
|
|
1,329,032 |
|
Accumulated other comprehensive incomes |
|
|
(440,056 |
) |
|
241,438 |
|
Total shareholders equity |
|
|
30,878,777 |
|
|
13,511,452 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Liabilities and Shareholders Equity |
|
$ |
38,040,200 |
|
|
17,243,696 |
|
|
|
|
|
|
|
|
|
F-12
TSINGDA EEDU CORPORATION
(FORMERLY COMPASS ACQUISITION CORPORATION)
CONSOLIDATED STATEMENTS OF INCOME
FOR THE NINE MONTH PERIODS ENDED SEPTEMBER 30, 2010 AND 2009
(Unaudited)
|
|
|
|
|
|
|
|
|
|
September 30, |
|
September 30, |
|
||
|
|
|
|
|
|
||
|
|
|
|
|
|
|
|
Revenue |
|
$ |
18,732,271 |
|
$ |
11,396,636 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses |
|
|
|
|
|
|
|
Selling |
|
|
5,044,571 |
|
|
3,041,250 |
|
General and administrative |
|
|
2,891,756 |
|
|
2,721,340 |
|
|
|
|
7,936,327 |
|
|
5,762,590 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Income |
|
|
10,795,944 |
|
|
5,634,046 |
|
|
|
|
|
|
|
|
|
Other Income (Expenses) |
|
|
|
|
|
|
|
Other Income |
|
|
101,220 |
|
|
9,571 |
|
Other expenses |
|
|
|
|
|
(19,634 |
) |
Interest Income |
|
|
|
|
|
9,125 |
|
Total other income (expense) |
|
|
101,220 |
|
|
(938 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income Before Income Taxes |
|
|
10,897,164 |
|
|
5,633,108 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Provision for Income Taxes |
|
|
1,440,370 |
|
|
822,753 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income |
|
|
9,456,794 |
|
|
4,810,535 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Comprehensive Income Foreign currency translation adjustment |
|
|
(681,494 |
) |
|
(40,352 |
) |
Total Comprehensive Income |
|
$ |
8,775,300 |
|
$ |
4,770,183 |
|
Earnings Per Share |
|
|
|
|
|
|
|
Basic and Fully Diluted |
|
$ |
0.33 |
|
$ |
0.20 |
|
|
|
|
|
|
|
|
|
Average Number of Shares Outstanding: |
|
|
|
|
|
|
|
Basic and fully diluted |
|
|
28,843,985 |
|
|
24,402,278 |
|
|
|
|
|
|
|
|
|
F-13
TSINGDA EEDU CORPORATION
(FORMERLY COMPASS ACQUISITION CORPORATION)
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTH PERIODS ENDED SEPTEMBER 30, 2010 AND 2009
(Unaudited)
|
|
|
|
|
|
|
|
|
|
September 30, |
|
September 30, |
|
||
|
|
|
|
|
|
||
|
|
|
|
|
|
|
|
Revenue |
|
$ |
9,265,163 |
|
$ |
3,510,903 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses |
|
|
|
|
|
|
|
Selling |
|
|
2,691,677 |
|
|
662,095 |
|
General and administrative |
|
|
891,748 |
|
|
884,432 |
|
|
|
|
|
|
|
|
|
|
|
|
3,583,425 |
|
|
1,546,527 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Income |
|
|
5,681,738 |
|
|
1,964,376 |
|
|
|
|
|
|
|
|
|
Other Income (Expenses) |
|
|
|
|
|
|
|
Other income |
|
|
885 |
|
|
9,125 |
|
Other expense |
|
|
(141 |
) |
|
(28,465 |
) |
|
|
|
|
|
|
|
|
Total other income (expense) |
|
|
744 |
|
|
(19,340 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income Before Income Taxes |
|
|
5,682,482 |
|
|
1,945,036 |
|
|
|
|
|
|
|
|
|
Provision for Income Taxes: |
|
|
|
|
|
|
|
Current |
|
|
325,508 |
|
|
168,134 |
|
Deferred |
|
|
330,087 |
|
|
89,409 |
|
|
|
|
|
|
|
|
|
Total income taxes |
|
|
655,595 |
|
|
257,543 |
|
|
|
|
|
|
|
|
|
Net Income |
|
|
5,026,887 |
|
|
1,687,493 |
|
|
|
|
|
|
|
|
|
Other Comprehensive Income |
|
|
(811,208 |
) |
|
(49,895 |
) |
Total Comprehensive Income |
|
$ |
4,215,679 |
|
$ |
1,637,598 |
|
|
|
|
|
|
|
|
|
Earnings Per Share |
|
|
|
|
|
|
|
Basic and Fully Diluted |
|
$ |
0.18 |
|
$ |
0.07 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average Number of Shares Outstanding: |
|
|
|
|
|
|
|
Basic and Fully Diluted |
|
|
33,729,862 |
|
|
24,402,278 |
|
F-14
(FORMERLY COMPASS ACQUISITION CORPORATION)
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTH PERIODS ENDED SEPTEMBER 30, 2010 AND 2009
(Unaudited)
|
|
|
|
|
|
|
|
|
|
2010 |
|
2009 |
|
||
|
|
|
|
|
|
||
CASH FLOWS FROM OPERATING ACTIVITIES |
|
|
|
|
|
|
|
Net income |
|
$ |
9,456,794 |
|
$ |
4,810,535 |
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
|
|
Charges and credits not requiring the use of cash: |
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
1,555,058 |
|
|
651,505 |
|
Stock issuance in exchange for the consulting service |
|
|
799 |
|
|
|
|
Changes in assets and liabilities: |
|
|
|
|
|
|
|
Accounts receivable |
|
|
(2,583,393 |
) |
|
(2,130,746 |
) |
Other receivables |
|
|
105,533 |
|
|
(1,619,428 |
) |
Advances to suppliers |
|
|
(5,464,671 |
) |
|
(809,051 |
) |
Prepaid expenses |
|
|
(10,040 |
) |
|
61,003 |
|
Inventory |
|
|
|
|
|
(14 |
) |
Accounts Payable |
|
|
5,394 |
|
|
(6,552 |
) |
Accrued expenses |
|
|
(56,841 |
) |
|
(8,972 |
) |
Other payable |
|
|
985,955 |
|
|
101,711 |
|
Advances from customer |
|
|
663,164 |
|
|
147,230 |
|
Deferred Revenue |
|
|
(517,002 |
) |
|
(780,553 |
) |
Deferred tax asset |
|
|
77,550 |
|
|
78,131 |
|
Corporate tax payable |
|
|
2,271,001 |
|
|
922,697 |
|
Long term prepaid expenses |
|
|
|
|
|
166,468 |
|
|
|
|
|
|
|
|
|
Net Cash Provided By Operating Activities |
|
|
6,489,300 |
|
|
1,583,964 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES |
|
|
|
|
|
|
|
Purchases of fixed assets |
|
|
(646,641 |
) |
|
(2,085,060 |
) |
Prepayment of construction and decoration |
|
|
(4,762,545 |
) |
|
(1,535,627 |
) |
Short term investment |
|
|
2,060,286 |
|
|
304,200 |
|
Additions to intangible assets |
|
|
(3,272,928 |
) |
|
(741,414 |
) |
|
|
|
|
|
|
|
|
Net Cash Consumed By Investing Activities |
|
|
(6,621,828 |
) |
|
(4,057,901 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES |
|
|
|
|
|
|
|
Payment on short-term loan |
|
|
|
|
|
(131,625 |
) |
Cash proceeds from stock issuance |
|
|
8,591,226 |
|
|
|
|
Stockholder Advances |
|
|
(834,786 |
) |
|
1,008,242 |
|
|
|
|
|
|
|
|
|
Net Cash provided by financing activities |
|
|
7,756,440 |
|
|
876,617 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Affect on cash of foreign exchange rate changes |
|
|
(836,854 |
) |
|
(49,337 |
) |
Net change in cash |
|
|
6,787,058 |
|
|
(1,646,657 |
) |
Cash Balance, Beginning of Period |
|
|
458,645 |
|
|
2,314,262 |
|
|
|
|
|
|
|
|
|
Cash Balance, End of Period |
|
$ |
7,245,703 |
|
$ |
667,605 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL DISCLOSURES: |
|
|
|
|
|
|
|
Interest paid |
|
$ |
|
|
$ |
2,955 |
|
|
|
|
|
|
|
|
|
Income tax paid |
|
$ |
137,755 |
|
$ |
208,068 |
|
|
|
|
|
|
|
|
|
F-15
(FORMERLY COMPASS ACQUISITION CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2010
(Unaudited)
NOTE 1- DESCRIPTION OF BUSINESS AND ORGANIZATION
Tsingda Century Investment Consultant of Education Co., Ltd. (Tsingda Century) was established on October 23, 2003, in Beijing, the Peoples Republic of China (the PRC). Beijing Tsingda Century Network Technology Co., Ltd. (Tsingda Network), the wholly owned subsidiary of Tsingda Century was incorporated in the PRC on February 14, 2004. Tsingda Century and its subsidiary provide high quality offline and online educational services for students ranging from six to eighteen years of age in the PRC.
Tsingda eEDU Corporation (Tsingda eEDU or the Company, formerly Compass Acquisition Corporation) was incorporated in the Cayman Islands on September 27, 2006. The Company was originally organized as a blank check company to investigate and acquire a target company or business seeking the advantages of being a publicly held corporation.
Tsing Da Century Education Technology Co., Ltd. (Tsingda ), was incorporated on December 11, 2009, in the British Virgin Islands, to serve as the intermediate holding company.
Tsingda Century Beijing Management Consulting Co., Ltd. (Tsingda Management), was incorporated on November 26, 2007 and was serving as the wholly owned foreign enterprise (WOFE) of Tsing Da.
On April 22, 2010, Tsingda Century Training School (Tsingda School) was incorporated in Beijing, the PRC, and it is a wholly owned subsidiary of Tsingda Century.
As part of the restructuring, on April 26, 2010, Tsingda Management entered into a series of agreements with Tsingda Century and its shareholders, including Operating Agreement, Proxy Agreement, Consulting Services Agreement, Equity Pledge Agreement and Option Agreement, which entitled Tsingda Management to have a substantially all of the economic benefits of Tsingda Century in consideration for consulting services provided by Tsingda Management to Tsingda Century. An Option Agreement allows Tsingda Management to acquire the shares of Tsingda Century when permitted by the PRC laws. The Proxy Agreement provides Tsingda Management with the voting rights of Tsingda Centurys shareholder and Equity Pledge Agreement pledges the shares in Tsingda Century to Tsingda Management without transferring legal ownership in Tsingda Century to Tsingda Management. As the result of restructuring, Tsingda Century became a variable interest entity (VIE) and is included in the consolidated Group.
As all of the companies are under common control, this structure has been accounted for as a reorganization of entities and the financial statements have been prepared as if the reorganization had occurred retroactively.
On May 24, 2010, the Company and its controlling shareholders entered into a share exchange agreement (the Agreement) with Tsingda Technology and all of the shareholders of Tsingda Technology. Under the Agreement, the Company acquired 100% of the outstanding equity interests of Tsingda Technology in exchange for 244,022.78 preferred shares of the Company. Each such share of the Companys preferred stock is convertible into 100 ordinary shares of the Company at such time as the number of authorized ordinary shares is increased. The transaction was closed in May 2010 and was accounted for as a reverse merger with a shell company and a recapitalization of Tsing Da. Tsing Da is the account acquirer and the surviving entity.
On November 15. 2010, the Companys shareholders approved the change of the Companys name from Compass Acquisition Corporation to Tsingda eEDU Corporation and the name change is effective immediately following the shareholders approval.
On October 19, 2010, the Board of the Company approved a three-for-one (3 to 1) consolidation (reverse split) of the Companys issued and outstanding Ordinary Shares as the Record Date and to increase the amount of the Companys authorized Ordinary Shares from thirty-nine million sixty-two thousand five hundred shares (39,062,500); to one hundred million (100,000,000) shares. It became effective upon shareholder approval of such matter which occurred on November 15, 2010.
F-16
NOTE 2- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation
The unaudited interim financial statements of
Tsingda eEDU Corporation as of September 30, 2010 and for the three and nine
month periods ended September 30, 2010 and 2009 have been prepared in
accordance with U.S. generally accepted accounting principles. In the opinion
of management, such information contains all adjustments, consisting only of
normal recurring adjustments, necessary for a fair presentation of the results
of such periods. The results of operations for the nine month period ended
September 30, 2010 are not necessarily indicative of the results to be expected
for the full fiscal year ending December 31, 2010.
Certain information and disclosures normally included in the notes to financial statements have been condensed or omitted as permitted by the rules and regulations of the Securities and Exchange Commission, although the Company believes the disclosure is adequate to make the information presented not misleading. The accompanying unaudited financial statements should be read in conjunction with the financial statements of the Company for the year ended December 31, 2009.
On May 24, 2010, the Company entered into an Agreement with Tsingda Technology
and the Tsingda Technology Shareholders. Under the Agreement, the Company acquired 100%
of the outstanding equity interests of Tsingda Technology; in return, 244,022.78
preferred shares of the Company were issued to the Tsingda Technology Shareholders.
Tsingda Technology owns all of the equity interests of Tsingda Century Management Consulting Ltd. (Tsingda Management), a company incorporated in the Peoples Republic of China (PRC).
On April 26, 2010, Tsingda Management entered into a series of
contractual agreements with Beijing Tsingda Century Investment Consultant of
Education Co., Ltd. (Tsingda Century), a company incorporated in the PRC which
operates schools in seven PRC provinces providing education services for
students ranging from six to eighteen years of age.
The Agreement has been accounted for as a reverse merger, with Tsingda Technology being treated as the accounting acquirer. As a result of the reverse merger, the consolidated financial statements present the results of operations of Tsingda Technology for the three and nine month periods ended September 30, 2010 and 2009.
The consolidated financial statements include the accounts of the Company and its subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.
Certain prior year amounts in the consolidated financial statements have been reclassified to conform to current year presentations.
Use of estimates
The preparation of financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities, disclosure of contingent assets and liabilities at the date of the
financial statements, and the reported amounts of revenues and expenses during the
reporting year. Because of the use of estimates inherent in the financial
reporting process, actual results could differ from those estimates.
Significant accounting estimates reflected in the Companys consolidated
financial statements include valuation allowance for accounts receivable, the
useful lives of property and equipment and intangible assets, impairment of
intangible assets and long-lived assets.
Revenue Recognition
The Company provides online education programs to
its franchisees, agents and individual customers. Revenue is realized through
sales to franchisees and other agents of rights to conduct education services.
The Company authorized the franchised locations to use its logo, all education
programs and products and the Company receives a one time licensing fee, annual
management fee, and 20% of student generated revenue from the franchised
location by providing them prepaid e-cards of 4 times of the cash amount. All
the mentioned fees are just revenues or unearned revenues from the sale of
e-cards. Revenue is recognized while the services are consummated upon the
e-cards use and is reported net of business tax.
Foreign Currency
Translation
The functional and reporting currency of the
Company is the United States dollar. The functional currency of the Companys
PRC subsidiaries, VIEs in the PRC is Renminbi (RMB).
F-17
The exchange
rates used for foreign currency translation were as follows (USD$1 = RMB):
|
|
|
|
|
|
|
|
Period Covered |
|
Balance Sheet Date Rates |
|
Average Rates |
|
||
|
|
|
|
|
|
||
Year ended December 31, 2009 |
|
|
6.8372 |
|
|
6.8409 |
|
Nine months ended September 30, 2009 |
|
|
6.8376 |
|
|
6.8425 |
|
Nine months ended September 30, 2010 |
|
|
6.6981 |
|
|
6.8164 |
|
NOTE 3- ADVANCES TO SUPPLIERS
Advances to suppliers represent amounts prepaid for advertising, network and rent:
|
|
|
|
|
|
|
|
|
|
September 30, 2010 |
|
December 31, |
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Advance for advertising and printing |
|
$ |
1,268,143 |
|
$ |
55,871 |
|
Advance for network service |
|
|
419,423 |
|
|
304,020 |
|
Advance for rental |
|
|
3,186,388 |
|
|
25,184 |
|
Others |
|
|
1,416,390 |
|
|
423,799 |
|
|
|
|
|
|
|
|
|
Total |
|
$ |
6,290,344 |
|
$ |
808,874 |
|
|
|
|
|
|
|
|
|
NOTE 4 ADVANCE FOR CONSTRUCTION AND DECORATIONS FOR COMPANY-OWNED LOCATIONS
The Company entered into certain agreements for construction and decoration of numerous Company-owned locations all over the country. Under those agreements, the Company prepaid nearly $7,900,000 to the contractors as of September 30, 2010.
|
|
|
|
|
|
|
|
|
|
September 30, 2010 |
|
December 31, |
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Advance for construction |
|
$ |
7,897,762 |
|
$ |
3,071,433 |
|
NOTE 5 - CAPITAL STOCK
There were 244,022.78 shares of preferred stock issued in connection with the acquisition of Tsing Da. Each of these preferred shares has rights identical to 100 ordinary shares and each preferred share is automatically convertible into 100 ordinary shares concurrent with approval by the Companys shareholders of an increase of its authorized ordinary shares to 100,000,000. The preferred stock was converted to Ordinary Shares in November 2010, as indicated in Footnote 1.
NOTE 6- PRIVATE PLACEMENT
On September 16, 2010, the Company entered into a Securities Purchase Agreement
(Agreement) with certain accredited investors pursuant to which units were sold
in a private placement which generated capital of $9,600,000. Each unit consisted
of three ordinary shares and a warrant to purchase 35% of one ordinary share. The
exercise price of the warrants is $6.24 per share and the warrant term is five
years. The warrants may be exercised on a cashless basis within three months
after the ordinary shares are listed on a stock exchange, as defined in the
Agreement. As a result, 6,000,000 ordinary shares were issued and 700,000
warrants were granted. Expenses of $731,400 were incurred in obtaining this
financing; in addition, the placement agent was awarded 121,500 warrants to
purchase ordinary shares at $5.28 per share. These warrants have a term of five
years and may be exercised any time beginning on March 16, 2011.
Coincident with the execution of the Agreement, the Company entered
into a Registration Rights Agreement pursuant to which the Company agreed to
file by November 29, 2010 a registration statement to register the ordinary
shares and the shares underlying the warrants. The Company further agreed that
if the registration statement is not declared effective by February 28, 2011
(March 29,)
F-18
2011 if the registration statement is subject to a full review by the Securities and Exchange Commission), the Company will pay the investors as liquidated damages 1.5% of the aggregate amount invested for each thirty day period after such date, not to exceed a total of 10% of the aggregate amount invested.
NOTE 7 - EARNINGS PER
SHARE
Basic net income per share is computed by dividing net income by the weighted-average number of shares outstanding during the period.
Diluted net income per share is computed by using the weighted-average number of ordinary shares outstanding and, when dilutive, potential shares from warrants to purchase ordinary shares, using the treasury stock method. Diluted earnings per share for the three and nine months ended September 30, 2009 and 2010 excludes the impact of warrants issued as they were anti-dilutive.
NOTE 8 - INCOME TAX
Tsingda Century was entitled to a preferential Enterprise Income Tax (EIT) rate of 15%. The effective tax rate for the Company for the nine months ended September 30, 2010 and 2009 are as follows:
|
|
|
|
|
|
|
|
|
|
Year Ended September 30, |
|
||||
|
|
|
2010 |
|
|
2009 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
U.S Federal income tax statutory rate |
|
|
35 |
% |
|
35 |
% |
PRC statutory income tax rate (25%) difference |
|
|
(10 |
%) |
|
(10 |
%) |
Preferential tax rate |
|
|
(10 |
%) |
|
(10 |
%) |
Other |
|
|
(2 |
%) |
|
|
|
|
|
|
|
|
|
|
|
Effective tax rate |
|
|
13 |
% |
|
15 |
% |
|
|
|
|
|
|
|
|
NOTE 9 SUBSEQUENT EVENT
See Footnote 1
for the reverse spit of the Companys ordinary shares and the conversion of
preferred stock to ordinary shares.
F-19
|
|
|
|
|
|
|
|
|
|
PROSPECTUS |
|
|
|
|
|
|
|
|
, 2010 |
|
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
Item 13. Other Expenses and Issuance and Distribution
The following table sets forth the costs and expenses, other than underwriting discounts and commissions, payable by us in connection with the sale of ordinary shares being registered. All amounts, other than the SEC registration fee, are estimates. We will pay all these expenses.
|
|
|
|
|
|
|
Amount to |
|
|
|
|
|
|
|
SEC Registration Fee |
|
$ |
148.82 |
|
Printing Fees and Expenses |
|
|
2,000.00 |
|
Transfer Agent and Registrar Fees |
|
|
1,000.00 |
|
Miscellaneous |
|
|
500.00 |
|
|
|
|
|
|
Total |
|
$ |
3,648.82 |
|
|
|
|
|
|
Item 14. Indemnification of Directors and Officers
Cayman Islands law does not limit the extent to which a companys
articles of association may provide for indemnification of officers and
directors, except to the extent any such provision may be held by the Cayman
Islands courts to be contrary to public policy, such as to provide
indemnification against civil fraud or the consequences of committing a crime.
Our articles of association provide for indemnification of our officers and
directors for any liability incurred in their capacities as such, except
through their own willful negligence or default.
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers or persons controlling us pursuant to the foregoing provisions, we have been informed that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is theretofore unenforceable.
Item 15. Recent Sales of Unregistered Securities
On September 16, 2010, we completed and offering (Offering) whereby we
issued units (Units) to certain investors for total gross proceeds of
$9,600,000. Each Unit is priced at $1.60 and consists of one (1) Ordinary Share,
and a Series A Stock Purchase Warrant (Warrants) to purchase 35% of the
number of Ordinary Shares purchased in the Offering. The initial Warrant
exercise price is $2.08 per share (on a post 3 for 1 consolidation basis).
Maxim Group, LLC (Maxim), a FINRA broker/dealer, acted as our placement agent
in connection with the Offering. We issued to Maxim warrants equal to 4.5% of
the number of Ordinary Shares sold in the Offering (or 364,500 Ordinary
Shares). The warrants term is five years and are exercisable at any time after
six months from closing. The exercise price is $1.76 per share.
The issuance of the securities described above was exempt from registration under the Securities Act of 1933, as amended (the Securities Act), pursuant to Regulation D and Section 4(2) and/or Regulation S thereof and such other available exemptions. We made this determination based on the representations of Investors, which included, in pertinent part, that such Investors and/or Maxim were either (a) accredited investors within the meaning of Rule 501 of Regulation D promulgated under the Securities Act, or (b) not a U.S. person as that term is defined in Rule 902(k) of Regulation S under the Securities Act, and that such Investors were acquiring the Ordinary Shares for investment purposes for their own respective accounts and not as nominees or agents, and not with a view to the resale or distribution thereof, and that the Investors and Maxim understood that the Ordinary Shares may not be sold or otherwise disposed of without registration under the Securities Act or an applicable exemption therefrom.
II-1
On May 24, 2010, we issued 244,022.78 of our preferred
shares to the shareholders of Tsingda Technology in exchange for all of the
outstanding shares of Tsingda Technology. In addition, on May 17, 2010, we
also issued 2,079,740 ordinary shares (adjusted to reflect the 3 for 1 reverse split) to Eastbridge Investment
Group Corporation in exchange for certain considerations received from Eastbridge.
These securities qualified for exemption under Section 4(2) of the Securities
Act and the rules and regulations promulgated thereunder, including Regulation
S. The offering was not a public offering as defined in Section 4(2)
due to the insubstantial number of persons involved in the offering, manner of
the offering and number of securities offered. These shareholders made certain
representations and warranties, including their investment intent and that they
were not US Persons as defined in Rule 902(k) of Regulation S as required by
Section 4(2) and the rules and regulations promulgated thereunder, including
Regulation S. They also agreed to and received share certificates bearing a
legend stating that such securities are restricted pursuant to Rule 144 and
Regulation S of the Securities Act. These restrictions ensure that these
securities would not be immediately redistributed into the market and therefore
not be part of a public offering. It is the Companys position
that the transaction met the requirements to qualify for exemption under Section
4(2) and the rules and regulations promulgated thereunder, including Regulation
S of the Securities Act.
On May 17, 2010, we issued an aggregate of 915,086 Ordinary Shares (adjusted to reflect the 3 for 1 reverse split) to
MJR Holdings, Inc., Christopher Fiore, Clifford Teller and Karl Brenza for an
aggregate purchase price of $30,000. The offering was conducted pursuant
to an exemption from the registration requirements of the Securities Act of
1933, as amended, pursuant to Regulation D, Section 4(2) and Rule 506
thereunder. No placement agent or underwriter was used in connection with the offering
and there is no commission, finders fee or other compensation due or owing to
any party as a result of the transactions described herein.
II-2
SIGNATURES
Pursuant to the requirements of the
Securities Act of 1933, the registrant has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly authorized,
in the City of Beijing, China, on the 2nd
day of December 2010.
|
|
|
TSINGDA EEDU CORPORATION |
||
|
|
|
|
By: |
/s/ Zhang Hui |
|
|
|
|
|
Zhang Hui
President, Chief Executive Officer, |
|
|
and Chairman of the Board of Directors |
Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated.
|
|
|
|
|
Name |
|
Title |
|
Date |
|
|
|
|
|
|
|
|
|
|
/s/ Zhang Hui |
|
President,
Chief Executive Officer |
|
December 2, 2010 |
|
|
Chairman of the Board of Directors |
|
|
Zhang Hui |
|
|
|
|
|
|
|
|
|
* |
|
Executive Vice President and Director |
|
December 2, 2010 |
|
|
|
|
|
Liu Juntao |
|
|
|
|
|
|
|
|
|
* |
|
|
|
|
|
|
Secretary and Chief Financial Officer |
|
|
Kang Chungmai |
|
(principal accounting officer) |
|
December 2, 2010 |
* /s/ Zhang Hui
Zhang Hui
Attorney-in-Fact
II-3
EXHIBIT INDEX
|
|
|
|
|
Exhibit |
|
|
Description |
|
|
|
|
|
|
3.1 |
|
Memorandum and Articles of Association of the Company.(1) |
||
3.2 |
|
Amended Memorandum of Association of the Company.(2) |
||
|
||||
|
||||
3.3 |
|
Memorandum of and Articles of Association of Tsing Da Century Education Technology Co. Ltd.(3) |
||
4.1 |
|
Form of Warrant.(5) |
||
4.2 |
|
Form of Placement Agent Warrant.(5) |
||
5.1 |
|
Opinion of Stuarts Walker Hersant, Attorneys at Law, regarding legality of shares (6). |
||
10.1 |
|
Consulting Services Agreement dated April 26, 2010(3) |
||
10.2 |
|
Operating Agreement dated April 26, 2010(3) |
||
10.3 |
|
Option Agreement dated April 26, 2010(3) |
||
10.4 |
|
Voting Rights Proxy Agreement dated April 26, 2010(3) |
||
10.5 |
|
Equity Pledge Agreement dated April 26, 2010(3) |
||
10.6 |
|
Share Exchange Agreement dated May 24, 2010 by and among Compass Acquisition Corporation and its controlling shareholders, and Tsing Da Century Education Technology Co. Ltd. and its shareholders (4) |
||
10.7 |
|
Securities Purchase Agreement dated September 16, 2010 by and among the Company and certain investors.(5) |
||
10.8 |
|
Registration Rights Agreement dated September 16, 2010 by and among the Company and certain investors.(5) |
||
10.10 |
|
Holdback Escrow Agreement dated September 16, 2010, by and among the Company, Zhong Hui Rong (Fujian) Fund, Ltd. and Collateral Agents, LLC.(5) |
||
10.11 |
|
Six Month Lock-Up Agreement dated September 16, 2010 by and among the Company and certain shareholders.(5) |
||
10.12 |
|
Initial Shareholder Lock-Up Agreement dated September 16, 2010 by and among the Company and certain shareholders.(5) |
||
10.13 |
|
Initial Shareholder Lock-Up Agreement dated September 16, 2010 by and among the Company and Eastbridge Investment Group Corp.(5) |
||
10.14 |
|
Founding Shareholder Lock-Up Agreement dated September 16, 2010 by and between the Company and Tsingda Century Education Technology Co. Ltd.(5) |
||
10.15 |
|
Securities Escrow Agreement dated September 16,, 2010 by and among the Company, Maxim Group, LLC, Tsing Da Century Technology Co. Ltd., and Collateral Agents, LLC.(5) |
||
10.16 |
|
Agreement dated March 12, 2010 by and between Maxim Group, LLC and Beijing Tsingda Century Investment Consultant of Education Co., Ltd.(5) |
||
10.17 |
|
Translation of Form of Franchise Agreement.(6) |
||
10.18 |
|
Translation of Employment Agreement with Mr. Zhang.(6) |
||
21.1 |
|
List of Subsidiaries.(6) |
||
|
||||
|
||||
23.1 |
|
Consent of Jeffrey & Company.(7) |
||
|
||||
|
||||
23.2 |
|
Consent of Stuarts Walker Hersant, Attorneys at Law, included in Exhibit 5.1.(6) |
||
24.1 |
|
Power of Attorney (included in the signature page of the Registration Statement on Form S-1 (Registration No. 333-169877) filed on October 12, 2010.) |
||
|
||||
|
||||
99.1 |
|
Index of Tsingda Courses (7) |
||
|
|
(1) Incorporated herein by reference to the Form 10 Registration Statement filed on December 4, 2006. |
(2) Incorporated herein by reference to the Form 10-Q Quarterly Report filed on May 15, 2008. |
(3) Incorporated herein by reference to the Form 8-K Current Report filed on May 28, 2010. |
(4) Incorporated by reference to the Form 8-K/A Current Report filed on June 3, 2010. |
(5) Incorporated by reference to the Form 8-K Current Report filed on September 23 2010. |
|
(7) Filed Herewith |
II-4