TEEN EDUCATION GROUP, INC. - FORM 10-Q

Attached files

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EX-32.1 - TEEN EDUCATION GROUP, INC.	v222639_ex32-1.htm
EX-10.1 - TEEN EDUCATION GROUP, INC.	v222639_ex10-1.htm
EX-31.2 - TEEN EDUCATION GROUP, INC.	v222639_ex31-2.htm
EX-31.1 - TEEN EDUCATION GROUP, INC.	v222639_ex31-1.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2011

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______________ to ______________

Commission file number 000-53169

TEEN EDUCATION GROUP, INC.

(Exact Name of Registrant as Specified in Its Charter)

Delaware		26-032648
(State or Other Jurisdiction of Incorporation or Organization)		(IR.S. Employer Identification No.)

NO. 288 Maodian Road
Liantang Industrial Park, Qingpu District
Shanghai, PRC		N/A
(Address of Principal Executive Offices)		(Zip Code)

+86 21-39252120

(Registrant’s Telephone Number, Including Area Code)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes x No 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 definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer o Accelerated filer o Non-accelerated filer o Smaller Reporting Company x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o No x

There were 2,500,000 shares outstanding of the issuer’s common stock, par value $0.001 per share, as of May 16, 2011.

TEEN EDUCATION GROUP, INC.

FORM 10-Q QUARTERLY REPORT

TABLE OF CONTENTS

PART I - FINANCIAL INFORMATION	2

UAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS	2

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED	2

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)	3

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)	4

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS	5

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	14

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	23

CONTROLS AND PROCEDURES	23

PART II — OTHER INFORMATION	25

LEGAL PROCEEDINGS	25

RISK FACTORS	25

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	25

DEFAULTS UPON SENIOR SECURITIES	25

SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS	25

OTHER INFORMATION	25

EXHIBITS	25

SIGNATURES	26

PART I - FINANCIAL INFORMATION

ITEM 1. UAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

TEEN EDUCATION GROUP, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(UNAUDITED)

	March 31, 2011			June 30, 2010
ASSETS

Current assets:
Cash and cash equivalents	$	736,338		$	2,786,069
Accounts receivable, net		2,854,512			1,148,177
Inventory		4,307,975			3,676,681
Other receivables, net		62,191			171,341
Value added tax recoverable		440,458			237,292
Advance to vendors		407,722			1,037,363
Prepaid expenses		142,042			52,037
Loan to outside parties		-			1,327,159

Total current assets		8,951,238			10,436,119

Property and equipment, net		353,924			310,280

Total assets	$	9,305,162		$	10,746,399

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
Short-term borrowings		3,817,610			3,686,554
Accounts payable		624,467			748,310
Advances from customers		160,058			103,978
Accrued expenses and other liabilities		56,035			10,462
Taxes payable		91,555			59,578
Due to related parties		4,532,872			5,936,768

Total current liabilities		9,282,597			10,545,650

Stockholders' equity
Preferred Stock, $.01 par value, 5,000,000 shares authorized, none issued or outstanding.
Common Stock, $0.001 par value, 100,000,000 shares authorized, 2,500,000 shares and 2,250,000 shares issued and outstanding at March 31, 2011 and June 30, 2010, respectively.		2,500			2,250
Additional paid in capital		142,197			142,447
Retained earnings		(151,940	)		56,876
Statutory reserves		27,123
Accumulated other comprehensive income (loss)		2,685			(824	)

Total stockholders' equity		22,565			200,749

Total Liabilities and Stockholders' Equity		9,305,162			10,746,399

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

TEEN EDUCATION GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

	For The Three Months Ended March 31,						For The Nine Months Ended March 31,
	2011			2010			2011			2010

Revenues
Automotive supplies revenue		3,068,255			874,669			11,875,872			2,263,629
Automotive maintenance service		-			205,008			185,124			641,059
Total revenues		3,068,255			1,079,677			12,060,996			2,904,688

Cost of revenues
Cost of automotive supplies revenue		2,687,938			757,690			10,158,887			1,870,236
Cost of maintenance service		-			12,471			11,107			53,455
Total cost of revenues		2,687,938			770,161			10,169,994			1,923,691

Gross profit		380,317			309,516			1,891,002			980,997

Selling, general and administrative expenses		684,480			246,390			1,688,763			822,386

Operating income (loss)		(304,163	)		63,126			202,239			158,611

Other expense (income)
Interest income		(275	)		(53	)		(1,259	)		(123	)
Interest expenses		55,208			-			161,401			-
Other expenses		(11,908	)		943			2,475			2,541
Total other expenses (income)		43,025			890			162,617			2,418

Income (loss) before income taxes		(347,188	)		62,237			39,622			156,193

Provision for income taxes		105,053			15,559			221,314			87,934

Net income (loss)	$	(452,241	)	$	46,678		$	(181,692	)	$	68,259

Other comprehensive income ( loss)
Foreign currency translation gain(loss)		(6,308	)		54			3,509			141

Comprehensive income (loss)	$	(458,549	)	$	46,732		$	(178,183	)	$	68,400

Basic and diluted income per common share
Basic and diluted	$	(0.18	)	$	0.02		$	(0.08	)	$	0.03

Weighted average common shares outstanding
Basic and diluted		2,500,000			2,250,000			2,377,289			2,250,000

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

TEEN EDUCATION GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

	For The Nine Month Ended March 31,
	2011			2010

Cash flows from operating activities
Net income (loss)	$	(181,692	)	$	68,259
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Depreciation		60,869			56,489
Allowance for doubtful accounts		(29,202	)		650
Inventory allowance		10,122			-

Changes in assets and liabilities:
(Increase) decrease in -
Account receivables		(1,610,813	)		(424,441	)
Inventory		(501,698	)		(1,066,117	)
Other receivables		117,654			(231,322	)
Value added tax recoverable		(191,224	)		(13,086	)
Prepaid expenses		(86,568	)		(32,758	)
Advance to vendors		654,518			(46,367	)

Increase (decrease) in -
Accounts payable		(147,736	)		71,467
Accrued expenses and other liabilities		44,387			46,114
Advance from customers		51,441			61,985
Tax payable		29,322			127,917

Net cash provided by (used in) operating activities		(1,780,622	)		(1,381,210	)

Cash flows from investing activities
Proceeds from loan to outside party		1,349,593			-
Purchase of fixed assets		(92,896	)		(288,924	)

Net cash provided by (used in) investing activities		1,256,697			(288,924	)

Cash flows from financing activities
Proceeds (payments) from (to) related parties		(1,585,866	)		1,812,094

Net cash provided by (used in) financing activities		(1,585,866	)		1,812,094

Effect of exchange rate changes on cash and cash equivalents		60,060			125

Net increase (decrease) in cash and cash equivalents		(2,049,731	)		142,084

Cash and cash equivalents, beginning of period		2,786,069			96,883

Cash and cash equivalents, end of period	$	736,338		$	238,968

Supplemental disclosures of cash flow information:
Interest paid	$	161,466		$	-
Income taxes paid	$	285,428		$	8,080

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

TEEN EDUCATION GROUP, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1. ORGANIZATION AND BASIS OF PRESENTATION

Teen Education Group, Inc. (“we,”, “us”, “our”, “Teen Education” or the “Company”), a Delaware corporation, incorporated on April 16, 2007, acquired an automotive parts distribution company, Hongkong Charter International Group Limited (“Hongkong Limited”) pursuant to a share exchange agreement (the “Exchange Agreement”), dated November 12, 2010.

The closing of the transaction (the “Closing”) took place on November 12, 2010 (the “Closing date”). On the closing date, pursuant to the terms of the Exchange Agreement, Hongkong Limited became a wholly owned subsidiary of the Company.

Hongkong Limited was incorporated in Hong Kong on August 21, 2009 and owns 100% of the issued and outstanding capital stock of Shanghai Vomart Auto Parts Co., Ltd. (“Shanghai Vomart”). Shanghai Vomart was incorporated in Shanghai, People’s Republic of China (“PRC”) in January 2008 with registered capital in an amount of RMB 1,000,000 (equivalent to $144,697). In 2008 and 2009, the Company established four wholly-owned subsidiaries: Shanghai Vomart Nanjing Branch, Ningbo Branch, Hangzhou Branch and Shijiazhuang Branch. In 2010, the Company established the fifth wholly-owned subsidiary, Huai An Branch in Huai An City, Jiangsu province. Currently, the Company owns thirty-seven (37) stores in nine (9) provinces and municipalities. Shanghai Vomart and its subsidiaries are engaged in automotive parts and accessories distribution and providing automotive maintenance services (which was temporarily suspended in August, 2010) in China. The Company distributes a broad selection of international brand name (such as Philips, Mahle, Denso, Bosch and Osram) as well as private label automotive replacement parts, such as accessories and maintenance items for cars, minivans, vans, sport utility vehicles, light trucks, and heavy-duty trucks. The typical products include batteries, brake pads, filters, oils and transmission fluid.

The Company’s financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”).

The accompanying unaudited condensed consolidated financial statements reflect all material adjustments consisting of only normal recurring adjustments which, in the opinion of management, are necessary for a fair presentation of results for the interim periods. Certain information and footnote disclosures required under accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission, although the Company believes that the disclosures are adequate to make the information presented not misleading. The condensed consolidated balance sheet information as of June 30, 2010 was derived from the audited consolidated financial statements included on the Form 8-K/A No. 2 filed on February 11, 2011. These interim financial statements should be read in conjunction with that report and Management’s Discussion and Analysis included in this Form 10Q. Unless otherwise indicated, all amounts herein are expressed in US Dollars (“USD”).

The results of operations for the nine months ended March 31, 2011 are not necessarily indicative of the results to be expected for the entire year or for any other period.

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principle of consolidation

The accompanying unaudited condensed consolidated financial statements include the financial statements of the Company and its wholly-owned subsidiary, Shanghai Vomart and Shanghai Vomart’s five wholly-owned subsidiaries (the “PRC subsidiaries”). All significant inter-company transactions and balances between the Company and its subsidiaries are eliminated upon consolidation.

Use of estimates

In preparing the financial statements in conformity with US GAAP, management makes estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the dates of the financial statements, as well as the reported amounts of revenues and expenses during the reporting year. Significant estimates, required by management, include the recoverability of long-lived assets, the valuation of inventories, allowances for doubtful accounts and useful lives for property and equipment. Actual results could differ from those estimates.

Cash and cash equivalents

Cash equivalents include all short-term, highly liquid investments with an initial maturity of three months or less when purchased. All credit and debit card transactions that settle in less than seven days are also classified as cash and cash equivalents.

The Company maintains bank accounts in the PRC, which are not covered by insurance. The Company has not experienced any losses in such accounts and management believes it is not exposed to any risks on its cash in bank accounts.

Accounts receivable

Accounts receivables are recorded at net realizable value consisting of the carrying amount less an allowance for uncollectible amounts, as needed.

The Company uses the aging method to estimate the valuation allowance for anticipated uncollectible receivable balances. Under the aging method, bad debt percentages determined by management based on historical experience as well as current economic climate are applied to customers’ balances categorized by the number of months the underlying invoices have remained outstanding. There were allowances of $12,438 and $36,316 for uncollectible amounts as of March 31, 2011 and June 30, 2010, respectively.

Inventories

Inventory is primarily mainly composed of automotive parts and supplies. Inventories are stated at the lower of cost or market, as determined on a weighted average basis. If inventory costs exceed expected market value due to obsolescence or quantities in excess of expected demand, the Company will record reserves for the difference. These reserves are recorded based on estimates and reflected in cost of sales. Inventory allowance as of March 31, 2011 and June 30, 2010, was $ 10,307 and $ 0 respectively.

Advances to vendors

Advances to vendors consist of balances paid to the Company’s suppliers but the service or goods have not been provided or received. Advances to vendors are reviewed periodically to determine whether the carrying value has become impaired. The Company considers the assets to be impaired if the realization of the services and goods become doubtful. There was no allowance as of March 31, 2011 and June 30, 2010.

Property and equipment

Property and equipment are recorded at cost less accumulated depreciation and any impairment losses. The cost of an asset comprises of its purchase price and any directly attributable costs of bringing the asset to its working condition and location for its intended use. Expenditures incurred after the fixed assets have been put into operation, such as repairs and maintenance and overhaul costs are expenses when incurred.

Any gain or loss on disposal or retirement of a fixed asset is recognized as the difference between the net sales proceeds and the carrying amount of the relevant asset. When property and equipment are retired or otherwise disposed of, the asset and accumulated depreciation are removed from the accounts and the resulting profit or loss is recognized.

Depreciation is computed using the straight-line method over the estimated useful lives of the assets. Estimated useful lives of the assets are as follows:

Office equipment	3 years

Furniture and fixture	5 years

Automobiles	7 years

Impairment of long-lived assets

Long-lived assets, which include equipment, furniture and fixtures and automobiles, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of long-lived assets to be held and used is measured by a comparison of the carrying amount of an asset to the estimated undiscounted future cash flows expected to be generated by the assets. If the carrying amount of an asset exceeds its estimated undiscounted future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the assets. Fair value is generally determined using the asset’s expected future discounted cash flows or market value, if readily determinable. No impairment loss was recorded as of March 31, 2011 and June 30, 2010.

Revenue recognition

The Company recognizes revenue when the following fundamental criteria are met: (i) persuasive evidence of an arrangement exists, (ii) delivery has occurred or services have been rendered, (iii) the price to the customer is fixed or determinable and (iv) collection of the resulting receivable is reasonably assured. Revenue is not recognized until title and risk of loss is transferred to the customer, which occurs upon delivery of goods, and objective evidence exists that customer acceptance provisions have been met. Deposits or advance payments from customers prior to delivery of goods and passage of title of goods are recorded as advance from customers.

Cost of sales

Costs of sales include costs of the automotive parts sold and used, as well as inbound freight costs.

Income taxes

The Company accounts for income tax under the provisions of Accounting Standards Codification (“ASC”) 740, “Accounting for Income Taxes”, which requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred income taxes are recognized for the tax consequences in future years of differences between the tax bases of assets and liabilities and their financial reporting amounts at each period end based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, whenever necessary, against net deferred tax assets when it is more likely than not that some portion or all of the deferred tax asset will not be realized.

Value added tax

The Company is subject to value added tax (“VAT”) at a 17% rate on the amount of goods sold or maintenance services provided. The amount of VAT liability is determined by applying the applicable tax rate to the invoiced amount of goods sold (output VAT) less VAT paid on purchases made with the relevant supporting invoices (input VAT). Under the commercial practice of the PRC, the Company paid VAT based on tax invoices issued. The tax invoices may be issued subsequent to the date on which revenue is recognized, and there may be a considerable delay between the date on which the revenue is recognized and the date on which the tax invoice is issued.

The VAT collected from sales is not revenue of the company, and is recorded as a liability on the balance sheet until such VAT is paid. The Company reports revenue net of PRC’s VAT for all periods presented in the consolidated statement of operations.

Foreign currency translation

The Company maintains books and records in its functional currency of the Renminbi (“RMB”), being the primary currency of the economic environment in which its operations are conducted.

For financial reporting purposes, RMB has been translated into United States dollars (“USD”, “$”) as the reporting currency. Assets and liabilities are translated at the exchange rate in effect at the balance sheet date. Revenues and expenses are translated at the average rate of exchange prevailing during the reporting period. Translation adjustments arising from the use of different exchange rates from period to period are included as a component of shareholders’ equity as “Accumulated other comprehensive income”. Gains and losses resulting from foreign currency translations are included in accumulated other comprehensive income.

	Nine Months Ended
	March 31,
	2011		2010
US$ / RMB exchange rate at periods ended		6.5486		6.8259
Average US$/RMB exchange rate		6.6687		6.8286

	Three Months Ended
	March 31,
	2011		2010
Average US$/RMB exchange rate		6.5788		6.8275

Comprehensive income

ASC 220, “Comprehensive Income”, requires disclosure of all components of comprehensive income and loss on an annual and interim basis. Comprehensive income and loss is defined as the change in equity of a business enterprise during a period from transactions and other events and circumstances from non-owner sources. Accumulated other comprehensive income arose from the changes in foreign currency exchange rates.

Fair value of financial instruments

The Company’s financial instruments include cash and cash equivalents, accounts receivable, advances to suppliers, other receivables, accounts payable, accrued expenses, and other short term loans payable. Management has estimated that the carrying amounts approximate their fair value due to the short-term nature.

Earnings per share

The Company computes earnings per share (“EPS”) in accordance with ASC 260 “Earning Per Share”. ASC 260 requires companies with complex capital structures to present basic and diluted EPS. Basic EPS is measured as net income divided by the weighted average common shares outstanding for the period. Diluted EPS is similar to basic EPS but presents the dilutive effect on a per share basis of potential common shares (e.g., convertible securities, options and warrants) as if they had been converted at the beginning of the periods presented, or issuance date, if later, using the treasury stock method. Potential common shares that have an anti-dilutive effect (i.e., those that increase income per share or decrease loss per share) are excluded from the calculation of diluted EPS.

Concentration of credit risk

Financial instruments that potentially subject the Company to concentration of credit risk consist primarily of accounts receivable and other receivables. The Company does not require collateral or other security to support these receivables. The Company conducts periodic reviews of its clients' financial condition and customer payment practices to minimize collection risk on accounts receivable.

Employment Contracts

Under the PRC labor law, all employees have signed employment contracts with the Company. The CEO has a 26 months employment contract and the rest of employees have a one year employment contract renewable on an annual basis.

NOTE 3. PROPERTY AND EQUIPMENTS

Property, and equipment is comprised of:

	March 31, 2011			June 30, 2010
Office equipment	$	115,285		$	129,981
Furniture and fixture		81,877			44,414
Automobiles		298,163			217,148
Subtotal		495,325			391,543
Less:accumulated depreciation		(141,401	)		(81,263	)
Property and equipment, net	$	353,924		$	310,280

Depreciation expense for the three months ended March 31, 2011 and 2010 were $17,491 and $16,167, and for the nine months ended March 31, 2011 and 2010 were $60,869 and $56,489, respectively.

NOTE 4. SHORT-TERM BORROWINGS

The Company has a loan payable in the amount of $1.53 million (in equivalent to RMB 10 million) to China Construction Bank (CCB), Qingpu Branch. The loan has one year term from May 31, 2010 to May 30, 2011 at a fixed interest rate of 5.31% per year. The loan is guaranteed by a non-related third party.

On June 23, 2010, the Company signed a loan contract with China CITIC Bank for the amount of around $2.29 million (in equivalent to RMB 15 million). The loan has one year term with a variable rate, which shall increase each quarter by a compound rate of 10% over the initial annual rate of 5.31%. The loan is guaranteed by Yi Ben Ma Group (“YBM”), an affiliated company. Mr. Anming Yu is the major shareholder of YBM. Currently, the Company is negotiating to renew the loan with the banks. Each bank has indicated a willingness to renew the loans upon the maturity. In addition, YBM has indicated that it will provide similar support for these loan facilities as it has in the past.

See note 7 for related party borrowing disclosure.

NOTE 5. TAXES

(a) Corporation income tax (“CIT”)

Hong Kong

The Company was incorporated in Hong Kong, and was subject to a current income tax rate of 16.5% to the estimated taxable income earned in or derived from Hong Kong during the period, if applicable.

People’s Republic of China (“PRC”)

The Company’s PRC subsidiaries are governed by the Income Tax Law of the PRC concerning the private-run enterprises, which are generally subject to tax at a new statutory rate of 25% on income reported in the statutory financial statements after appropriate tax adjustments.

Currently, Shanghai, Nanjing, Hangzhou, Shijiazhuang and Ningbo file a consolidated income tax returns at 25% of the income before tax amount after appropriate tax adjustments. However, Huai An subsidiary is a separate-accounted subsidiary making quarterly tax provision at 25% of its own income before tax. The Company is negotiating with local tax authorities to combine Huai An’ sales with other subsidiaries for income tax filing purposes. At the date of this report, the Huai An sub still accrues and pays income tax provision separately. For the three months ended March 31, 2011, Huai An paid the second quarter’s income tax amounted $148,193 and accrued the third quarter’s income tax for the amount of $56,393. The other five subsidiaries did not make income tax expense provision due to the net loss for the quarter ended March 31, 2011. For the three months and nine months ended March 31, 2011, the Company’s income tax provision was $105,053 and $221,314, respectively, due to Huai An’s special tax situation.

Reconciliation of the differences between statutory tax rate and the effective tax rate

Reconciliation between total income tax expense and that amount computed by applying the PRC statutory income tax rate of 25% to income before taxes is as follows:

	For The Three Months Ended March 31,					For The Nine Months Ended March 31, 2011
	2011			2010		2011			2010

Income (loss) before tax by the five subsidiaries	$	(589,656	)	$	62,236	$	(151,766	)	$	156,191

Income (loss) before tax by Huai An subsidiary		225,515			-		814,092			-

Income tax expense incurred by the five subsidiaries @ 25% statutory rate		-			15,559		-			39,048

Income tax expense incurred by Huai An @ 25% statutory rate		56,393			-		203,523			-

Effect of timing difference		48,660			-		17,791			48,886
Income tax provision	$	105,053		$	15,559	$	221,314		$	87,934

NOTE 6. STATUTORY SURPLUS RESERVES

According to relevant PRC laws, companies registered in PRC are required to allocate at least 10% of their after-tax net income determined under GAAP in the PRC to a statutory surplus reserve account until the reserve account balance reaches 50% of the company’s registered capital. The amount of Vomart’s net assets that may not be transferred to the parent in the form of dividends or loan etc. is $72,349 (50% of registered capital) due to this restriction. Distribution of dividends or loans to overseas shareholders may be subject to approval of some Chinese government agencies, such as Foreign Exchange Administrative Authorities or tax authorities, etc.

As of March 31, 2011 and June 30, 2010, the amount of statutory surplus is $27,123 and $0, respectively.

NOTE 7. RELATED PARTY TRANSACTIONS

Amounts payable to related parties are as follows:

	March 31, 2011		June 30, 2010
Yi Ben Ma Group (a)	$	4,532,872	$	5,812,215
Anming Yu (a)		-		72,525
Zhoufeng Shen (b)		-		52,028

Total	$	4,532,872	$	5,936,768

(a) Yi Ben Ma Group (“YBM”) is an affiliate of the Company. The majority shareholder (60.32%) of YBM, Mr. Anming Yu, is the father-in-law of Mr. Qun Hu, the majority shareholder (52%) and chairman of the board of directors of the Company. Mr. Yu’s spouse and daughter own 25.23% and 14.45%, respectively, of the issued and outstanding shares of YBM. Mr. Yu, Mr. Yu’s spouse and daughter, and Mr. Yu’s son-in-law collectively hold more than 50% of the voting ownership of YBM group and the Company. Accordingly, YBM and the Company are under common control.

(b) Mr. Zhoufeng Shen is the Chief Executive Officer of the Company.

The funds received from the above related parties were used by the Company as operating capital. The payables are unsecured, non-interest bearing and due upon demand.

On July 1, 2010, Shanghai Vomart entered into an Exclusive Distribution Agreement (the “Agreement”) with YBM for a twelve-month period ending in June 2011. Under the Agreement, the Company is the sole domestic distributor of certain items manufactured by YBM in China. The distribution of these items commenced during the quarter ended December 31, 2010.

Concurrently, YBM referred and transferred its domestic customer list, consisting of over a hundred domestic retail customers and second-tier distributors, to Shanghai Vomart. Management estimates the fair value of the retained customer list as of December 31, 2010 to be approximately $1.3 million based on the discounted future cash flows expected from sales to those customers over the next ten years, the estimated life of the intangible asset. Because the transfer of the customer list was between the related parties under common control, the customer list was recorded at historical cost, or zero, since YBM obtained those customers on its own and there was no carrying value of the customer list recorded on YBM’s books.

During the three months ended December 31, 2010, the Company began recording sales to certain customers transferred from YBM. The sales to these customers represented 54.84 % of the total sales of the Company during that period.

YBM periodically supports the Company by providing working capital. On May 10, 2008, Shanghai Vomart obtained a three-year line of credit from YBM amounting to approximately $7.6 million (RMB 50 million) on May 10, 2008. Such line of credit is unsecured, non-interest bearing and due upon demand. As of March 31, 2011, YBM’s borrowings under this line totaled approximately $4.5 million (RMB 29.7 million). The unused line of credit as of March 31, 2011 was $3.1 million (RMB 20.3 million). In May 2011, YBM extended the line of credits amounting RMB 50 million (equivalent to $7.6 million) for another three years.

For the three months and nine months ended March 31, 2011 and 2010, the Company also had purchase transactions with YBM and its subsidiaries as follows:

	For the three months ended March 31,				For the nine months ended March 31,
	2011		2010		2011		2010
Purchases from YBM and its subsidiaries	$	1,323,145	$	106,378	$	6,532,240	$	724,240

See Note 4 for other related party loan guarantee disclosure.

NOTE 8. CONCENTRATION

Only one customer accounted for approximately 17% and 11%, respectively, for the three and nine months ended March 31, 2011. There were no customers individually accounted over 10% for the three and nine months ended March 31, 2010.

The Company purchases approximately 89% of the total purchases from the top ten major vendors for the nine months ended March 31, 2011. The Company purchased approximately 46% of its total purchases from YBM and approximately 43% from other nine major vendors. For the nine months ended March 31, 2010, the Company purchased approximately 60% of the total purchases from the top ten major vendors. Among them, 12% of its total purchases from YBM and approximately 48% from other nine major vendors.

NOTE 9. LIQUIDITY

The Company has negative working capital and has negative cash flow for the nine months ended March 31, 2011. In addition, the Company’s bank loans and line of credit from related party will be due in the fourth quarter of the Company’s fiscal year. The Company’s related party, YBM, will continue to provide necessary funding in order to enable the Company to continue operations. The Company obtained an extension of the line of credit amounting to $7.6 million (RMB 50 million) provided by YBM for another three years commencing in May, 2011 and maturing in 2014. YBM also committed to repaying the two bank loans for the Company upon their maturities in May and June 2011 and helping the Company renew the bank loans by being the guarantor and providing additional collateral if needed. The Company believes that YBM has the intention and capability to continue providing necessary funding for the Company’s operations. Thus, the accompanying condensed consolidated financial statements do not include any adjustments that might result from the uncertainty of liquidity.

NOTE 10. COMMITMENTS

From time to time, the Company leases office spaces in Shanghai, Hangzhou, Nanjing, Ningbo and Shijiazhuang and other major cities in China to provide sales of automotive parts. These lease agreements are short-term in nature and will expire through February 2012.

The minimum obligations under such commitments (unless otherwise stated) for the twelve months ended March 31 until their expiration are summarized below, estimated at the foreign exchange rate of 6.7077:

Year	Amount
2011	$	118,534
2012		97,740
Total	$	216,274

Rent expense for the three months ended March 31, 2011 and 2010 was $58K and $21K, respectively. For the nine months ended March 31, 2011 and 2010 were $141K and $44K, respectively.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Management Discussion and Analysis of Financial Condition and Results of Operations for the three months and nine months ended March 31, 2011 and 2010:

The following discussion and analysis of our financial condition and results of operations relates to the period ended March 31, 2011 and should be read in conjunction with our consolidated financial statements and related notes appearing elsewhere in this report. Unless otherwise indicated, all amounts herein are expressed in US Dollars. This discussion contains certain forward-looking statements that involve significant risks and uncertainties. Our actual results and the timing of certain anticipated events could differ materially or perhaps substantially from those discussed in these forward-looking statements as a result of certain factors, including, but not limited to, those set forth herein and elsewhere in this report and in our other filings with the Securities and Exchange Commission.

Overview

The Company was incorporated under the laws of the State of Delaware on April 16, 2007, primarily engaged in the business of providing a financial literacy and money management educational program for teenagers on a fee for service offered basis.

On November 12, 2010, the Company entered into a share exchange agreement with Hongkong Charter International Group Limited, a company incorporated in the Hong Kong on August 21, 2009, which owns 100% of the issued and outstanding capital stock of Shanghai Vomart Auto Parts Co., Ltd.

Shanghai Vomart Auto Parts Co., Ltd. (“Vomart”) was incorporated in Shanghai, People’s Republic of China in January 2008, with registered capital in amount of RMB 1,000,000 (equivalent to US$144,697). Currently, the Company owns thirty-seven (37) stores in nine (9) provinces and municipalities. Vomart and its subsidiaries are engaged in distribution of automotive replacement parts and accessories in China.

Through Vomart and its subsidiaries, the Company is now engaged in the business of distribution of automotive replacement parts and accessories in China. The Company temporarily suspended providing automotive maintenance services in August 2010. The maintenance services we provided included home delivery sales, installation assistance, products training and technical guidance. The revenues generated from our suspended maintenance services are included in the financial statements for the nine months ended March 31, 2011 and 2010. We may resume providing maintenance services in the future. The Company distributes a broad selection of international brand name and private label automotive replacement parts, accessories and maintenance items for cars, minivans, vans, sport utility vehicles, light trucks, and heavy-duty trucks. The typical products include batteries, brake pads, filters, oils and transmission fluid.

We are one of the largest distributors of automotive replacement parts and accessories in the PRC based on the number of stores we own and the geographic areas where we have presence. We currently own thirty-seven stores in six provinces and three municipalities, namely Jiangsu, Zhejiang, Hebei, Anhui, Fujian, Shanxi, Shanghai, Beijing, and Tianjin. In comparison, other large auto parts distributors in China own fewer stores and/or their stores are located in fewer provinces or municipalities. For example, as of November 12, 2010, Shandong Youpei Auto Parts owns twenty-four stores of which eighteen are located in Shangdong Province. Jiangsu Youpei Auto Parts owns seventeen stores of which sixteen are located in Jiangsu Province. Putong Auto Service owns fifteen stores in thirteen different provinces and municipalities.

Results of Operations

For the Three Months Ended March 31, 2011 Compared to Three Months Ended March 31, 2010

The following table presents our summary statements of operations for the three months ended March 31, 2011 and 2010. Our historical results presented below are not necessarily indicative of the results for any future periods.

TEEN EDUCATION GROUP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)

	For The Three Months Ended March 31,
	2011			2010

Revenues
Automotive supplies revenue		3,068,255			874,669
Automotive maintenance service		-			205,008
Total revenues		3,068,255			1,079,677

Cost of revenues
Cost of automotive supplies revenue		2,687,938			757,690
Cost of maintenance service		-			12,471
Total cost of revenues		2,687,938			770,161

Gross profit		380,317			309,516

Selling, general and administrative expenses		684,480			246,390

Operating income (loss)		(304,163	)		63,126

Other expense (income)
Interest income		(275	)		(53	)
Interest expenses		55,208			-
Other expenses		(11,908	)		943
Total other expenses (income)		43,025			890

Income (loss) before income taxes		(347,188	)		62,237

Provision for income taxes		105,053			15,559

Net income (loss)	$	(452,241	)	$	46,678

Other comprehensive income ( loss)
Foreign currency translation gain(loss)		(6,308	)		54

Comprehensive income (loss)	$	(458,549	)	$	46,732

Basic and diluted income per common share
Basic and diluted	$	(0.18	)	$	0.02

Weighted average common shares outstanding
Basic and diluted		2,500,000			2,250,000

Revenues:

Revenues increased by approximately $2.0 million to $3.1million, as compared to $1.1 million for the three months ended March 31, 2010. Our sales growth was driven by expansion of stores and retail customers taken over from Yi Ben Ma Group (“YBM”) through exclusive distribution agreement on July 1, 2010. As part of the entering into of the exclusive distribution relationship with YBM, YBM referred and transferred its domestic customers list, consisting of over a hundred domestic retail customers and second-tier distributors to us. All of those accounts have been primarily serviced out of the Huai An branch. Under the Agreement, the Company is the sole domestic distributor of certain items manufactured by YBM in China. The distribution of these items commenced during the quarter ended December 31, 2010.

During the period from March 31, 2010 to March 31, 2011, we had 8 new stores and a big branch, Huai An, opened, leading to the increase in net sales from automotive supplies service. Among them, the new branch’s revenues achieved $1.7 million in the past three months, which represented 54.76% of the total revenues. Revenue from automotive supplies increased by $2.2 million to 3.1 million while revenue from maintenance service decreased from $0.21million (representing 26% of total revenue) to $0 for the three months ended March 31, 2011 from the same period of 2010 because the Company temporarily suspended the maintenance business in August 2010.

Cost of Sales and Gross Profit:

Cost of sales includes two parts as well: cost of sales from automotive supplies sales and cost of sales from automotive maintenance service. For the three months ended March 31, 2011, we had cost of sales of $2.7 million from automotive supplies sales, as compared to $0.8 million for the same period of 2010, an increase of $1.9 million reflecting the $2.2 million increase in automotive supplies sales. Likewise, cost of sales related to automotive maintenance service decreased from $12k for the three months ended March 31, 2010 to $0 for the three months ended March 31, 2011.

We achieved gross profits of $0.38 million for the three months ended March 31, 2011, compared to $0.31 million for the same period in 2010, representing a 23% period to period increase. Our overall gross profit margin as a percentage of revenue decreased from 29% for the three months ended March 31, 2010 to 12% for the same period of 2011, mainly due to temporary suspension of maintenance services which obtained a higher gross profit margin and temporary promotional prices for new stores which were lower than normal prices. During the three months ended March 31, 2010, the maintenance service revenue was $0.21 million with a gross profit of 94%.

Operating Expenses:

Our operating expenses, consisting of selling, general and administrative expenses, increased by approximately 178% ($0.44 million), to $0.68 million for the three months ended March 31, 2011 from $0.25 million for the same period of 2010. The Company incurred $0.175 million expense during three months ended March 31, 2011 for the Company going public in the USA. In addition, $0.16 million related to payroll increases and the remaining $0.11 million for traveling expenses, store and office leasing expenses, depreciation expenses, transportation expenses and other expenses relating to our growth in sales.

Income Tax Provision:

For the three months ended March 31, 2011, we had a tax provision of $105k as compared to a tax provision of $16k for the same period of 2010. The quarterly tax provision is computed at 25% of the pretax income. The Company makes tax provision for its Huai An subsidiary as this Huai An subsidiary was deemed to be a separate-accounted subsidiary and it achieved $226k gross income before tax for the three months ended March 31, 2011. The Company is negotiating with the local tax authorities to combine Huai An’s sales with other subsidiaries for income tax filling purposes. The increase of the income tax provision of the three months ended March 31, 2011 from the three months ended March 31, 2010 reflects the increase of gross income of Huai An subsidiary and timing differences for income tax provision.

Net Income

As a result of the factors described above, net income for the three months ended March 31, 2011 decreased by approximately $0.5 million to $(0.45 million) loss as compared to $47k income for the three months ended March 31, 2010.

For the Nine Months Ended March 31, 2011 Compared to the Nine Months Ended March 31, 2010

	For The Nine Months Ended March 31,
	2011			2010

Revenues
Automotive supplies revenue		11,875,872			2,263,629
Automotive maintenance service		185,124			641,059
Total revenues		12,060,996			2,904,688

Cost of revenues
Cost of automotive supplies revenue		10,158,887			1,870,236
Cost of maintenance service		11,107			53,455
Total cost of revenues		10,169,994			1,923,691

Gross profit		1,891,002			980,997

Selling, general and administrative expenses		1,688,763			822,386

Operating income (loss)		202,239			158,611

Other expense (income)
Interest income		(1,259	)		(123	)
Interest expenses		161,401			-
Other expenses		2,475			2,541
Total other expenses (income)		162,617			2,418

Income (loss) before income taxes		39,622			156,193

Provision for income taxes		221,314			87,934

Net income (loss)	$	(181,692	)	$	68,259

Other comprehensive income ( loss)
Foreign currency translation gain(loss)		3,509			141

Comprehensive income (loss)	$	(178,183	)	$	68,400

Basic and diluted income per common share
Basic and diluted	$	(0.08	)	$	0.03

Weighted average common shares outstanding
Basic and diluted		2,377,289			2,250,000

Revenues:

Revenues increased by approximately $9.2 million to $12.1 million, as compared to $2.9 million for the nine months ended March 31, 2010. Our sales growth was driven by expansion of stores and retail customers taken over from YBM through exclusive distribution agreement on July 1, 2010. As part of the entering into of the exclusive distribution relationship with YBM, YBM referred and transferred its domestic customers list, consisting of over a hundred domestic retail customers and second-tier distributors to us. All of those accounts have been primarily serviced out of the Huai An branch. Under the Agreement, the Company is the sole domestic distributor of certain items manufactured by YBM in China. The distribution of these items commenced during the quarter ended December 31, 2010.

During the period from March 31, 2010 to March 31, 2011, we had 8 new stores and a big branch opened, leading to the increase in net sales from automotive supplies service. Among them, the new branch’s revenues achieved $ 5.1 million in the past nine months, which represented 42.73% of the total revenues. Revenue from automotive supplies increased by $9.6 million to $11.9 million from $2.3 million for the same nine months period of 2010, while revenue from maintenance service decreased from $0.64 million (representing 22% of the total revenue) to $0.19 million for the nine months ended March 31, 2011 from the same period of 2010 because the Company temporarily suspended the maintenance business in August 2010.

Cost of Sales and Gross Profit

During the nine months ended March 31, 2011, we had cost of sales of $10 million, as compared to $1.9 million for the same period of 2010, an increase of $8.1 million reflecting the increase in net sales.

We achieved gross profits of $1.9 million for the nine months ended March 31, 2011, compared to $1.0 million for the same period of the previous year, representing a 93% period to period increase. Our overall gross profit margin as a percentage of revenue decreased by 18% from 34% for the nine months ended March 31, 2010 to 16% for the same period of 2011, mainly due to temporary suspension of maintenance services which obtained a high gross profit margin and temporary promotional prices for new stores which were lower than normal prices. During the nine months ended March 31, 2010, the maintenance service revenue was $0.64 million with a gross profit ratio of 92%; however during the nine months ended March 31, 2011, such revenue was decreased to $185k and significantly lowered the overall gross profit of revenue.

Operating Expenses:

Our operating expenses, consisting of selling, general and administrative expenses, increased by approximately 106%, to $1.7 million for the nine months ended March 31, 2011 from $0.8 million for the same period of the previous year. The Company incurred $0.2 million expense during the nine months ended March 31, 2011 for the Company going public in the USA. In addition, , the Company opened 8 new stores during the twelve months from March 31, 2010 to March 31, 2011, which resulted in significant increase in pre-opening expenses and a $457k payroll increase and the remaining $268k for traveling expenses, store and office leasing expenses, depreciation expenses, transportation expenses and other expenses relating to our growth in sales.

Income Tax Provision:

For the nine months ended March 31, 2011, we had a tax provision of $221k as compared to a tax provision of $88k for the same period of 2010. The Company makes a tax provision for its Huai An subsidiary as this Huai An subsidiary was deemed to be a separate-accounted subsidiary and it achieved $1.4 million gross income before tax for the nine months ended March 31, 2011. The Company is negotiating with the local tax authorities to combine Huai An’s sales with other subsidiaries for income tax filling purposes. The increase of the income tax provision of the nine months ended March 31, 2011 from the nine months ended March 31, 2010 reflects the increase of gross income of Huai An subsidiary and timing differences for income tax provision.

Net Income

As a result of the factors described above, net income for the nine months ended March 31, 2011 decreased by approximately $250k to a $(182k) loss as compared to $68k income for the nine months ended March 31, 2010.

Liquidity and Capital Resources

Capital Resources and Needs

Our cash requirements arise principally from the purchase of inventory, capital expenditures related to existing and new stores, offices and distribution centers, debt service and contractual obligations. Cash flows realized through the sales of automotive services, tires, parts and accessories are our primary source of liquidity.

The Company has negative working capital and has negative cash flow for the nine months ended March 31, 2011. In addition, the Company’s bank loans will be due in the fourth quarter of the Company’s fiscal year.

YBM, one of our major suppliers and an affiliated entity, provided a three-year line of credit amounting to $7.6 million (RMB 50 million) to us on May 10, 2008. This line of credit was set to expire on May 10, 2011. The Company obtained an extension of the line of credit amounting to $7.6 million (RMB 50 million) for another three years commencing in May, 2011 and maturing in 2014.

We re-negotiated with China Construction bank and China CITIC Bank for two short-term bank loans amounting $1.53 million and $2.29 million, respectively, which mature in May and June of 2011. The banks indicated a willingness to renew the loans upon the maturity. YBM also committed to repaying the two bank loans for the Company upon their maturities in May and June 2011 and helping the Company renew the bank loans by being the guarantor and providing additional collateral. The Company believes that YBM has the intention and capability to continue providing necessary funding for the Company’s operations.

	For the nine months ended March 31,
	2011			2010
Cash provided by (used in):
Operating Activities	$	(1,780,622	)		(1,381,210	)
Investing Activities	$	1,256,697			(288,924	)

Financing Activities	$	(1,585,866	)		1,812,094

Operating Activities

We opened two new stores during the first six months of the current fiscal year. As part of our growth and expansion strategy, we are examining whether it is more effective from a cost and market penetration standpoint to open new stores or to acquire existing stores from competitors. We are conducting a comprehensive market research with respect to the regions for new stores, their growth potential and our competitors. In addition, we are also in the process of preparing financial data analysis about the possibility to achieve profit by new stores. As such, it is not possible to predict the number of new stores which we will open during the balance of our current fiscal year or in 2012. To the extent that we open or acquire additional stores we intend to do so through loans from YBM or from banks based on guaranty and additional collateral which will be provided by YBM.

We expect to incur 1% of our annual sales income in the marketing and promoting of “Vomart” brand awareness. We have on a limited and pilot basis begun to sell automotive replacement parts and accessories online. We expect to refine and develop this strategy over time as an additional distribution channel for our goods and services.

Cash used in operating activities totaled $1.8 million for the nine months ended March 31, 2011 as compared to $1.4 million used in the same period of 2010. Cash used in operations was primarily due to the increases in inventory to match our store expansion. Additionally, we held more account receivable and value added tax recoverable which offset by advance to vendors.

Investing Activities

Cash generated in investing activities totaled $1.26 million for the nine months ended March 31, 2011 as compared to $289k used in the same period of 2010. This increase in our cash generated in investing activities was mainly due to the collection of the loan previously advanced to third parties and the purchase of fixed assets.

Financing Activities

Cash used in financing activities totaled $1.6 million for the nine months ended March 31, 2011 as compared to $1.8 million generated in the same period of 2010. The increase in our cash used in financing activities was primarily due to the increase payments to our related parties. However, in the previous period, our cash generated in financing activities was primarily due to the increase proceeds from our related parties.

On May 10, 2008, Vomart obtained a three-year line of credit from YBM amounting to $7.6 million (RMB 50 million). This line of credit is unsecured, non-interest bearing and due upon demand. As of March 31, 2011, the balance of borrowings from YBM was approximately $4.5 million. The unused line of credit as of March 31, 2011 was $3.1 million. In May 2011, YBM extended the line of credits amounting RMB 50 million (equivalent to $7.6 million) for another three years.

On May 1, 2009, Vomart entered into a loan agreement with Zhoufeng Shen, our current CEO, to borrow $51,653. On May 1, 2009, Vomart entered into a loan agreement with Anming Yu, our former CEO, to borrow $69,864. Both of these facilities are unsecured and non-interest bearing. As of March 31, 2011, the loans the Company borrowed from Mr. Shen and Mr. Yu have been repaid.

Off-Balance Sheet Arrangements

As of the date of this report, we do not have any off-balance sheet arrangements 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 are material to investors.

Critical Accounting Policies

While our significant accounting policies are more fully described in Note 2 to our financial statements, we believe that the following accounting policies are the most critical to aid you in fully understanding and evaluating this “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Use of estimates

In preparing the financial statements in conformity with accounting principles generally accepted in the United States of America, management makes estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the dates of the financial statements, as well as the reported amounts of revenues and expenses during the reporting year. Significant estimates, required by management, include the recoverability of long-lived assets, the valuation of inventories, allowances for doubtful accounts and useful lives for property and equipment. Actual results could differ from those estimates.

Accounts receivable

Accounts receivables are recorded at net realizable value consisting of the carrying amount less an allowance for uncollectible amounts, as needed.

Advances to vendors

Impairment of long-lived assets

Long-lived assets, which include property, plant and equipment and intangible assets, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of long-lived assets to be held and used is measured by a comparison of the carrying amount of an asset to the estimated undiscounted future cash flows expected to be generated by the assets. If the carrying amount of an asset exceeds its estimated undiscounted future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the assets. Fair value is generally determined using the asset’s expected future discounted cash flows or market value, if readily determinable.

Value added tax

Foreign currency translation

The Company maintains books and records in its functional currency of the Renminbi (“RMB”), being the primary currency of the economic environment in which its operations are conducted.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Smaller reporting companies are not required to provide the information required by this Item.

ITEM 4. CONTROLS AND PROCEDURES

Disclosure controls and procedures

Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, and effected by our Board of Directors, we conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, as of the end of the period covered by this report (the “Evaluation Date”). The evaluation of our disclosure controls and procedures included a review of our processes and the effect on the information generated for use in this report. In the course of this evaluation, we sought to identify any material weaknesses in our disclosure controls and procedures and to confirm that any necessary corrective action, including process improvements, was taken. The purpose of this evaluation is to determine if, as of the Evaluation Date, our disclosure controls and procedures were operating effectively such that the information, required to be disclosed in our SEC reports (i) was recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and (ii) was accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

As of March 31, 2011, our Chief Executive Officer and Chief Financial Officer have concluded that, as of that date, the Company’s controls and procedures were not effective due to some significant deficiencies (as defined in Public Company Accounting Oversight Board Standard No. 2) in the our internal controls over financial reporting. This is due to the fact that we do not have accounting personnel with sufficient knowledge, experience and training in maintaining our books and records and preparing financial statements in accordance with US generally accepted accounting principles (“US GAAP”) standards and SEC rules and regulations. This could cause us to be unable to fully identify and resolve certain accounting and disclosure issues that could lead to a failure to maintain effective controls over preparation, review and approval of certain significant account reconciliation from Chinese generally accepted accounting principles (“Chinese GAAP”) to US GAAP and necessary journal entries.

The Company has relatively small number of professionals employed by the Company in bookkeeping and accounting functions, which prevents the Company from appropriately segregating duties within its internal control systems. The inadequate segregation of duties is a weakness because it could lead to the untimely identification and resolution of accounting and disclosure matters or could lead to a failure to perform timely and effective reviews.

Based on the control deficiency identified above, we have designed and plan to implement, or in some cases have already implemented, the specific remediation initiatives described below:

We are evaluating the roles of our existing accounting personnel in an effort to realign the reporting structure of our internal auditing staff in China that will test and monitor the implementation of our accounting and internal control procedures.

We will begin implementation an initiative and training in China to ensure the importance of internal controls and compliance with established policies and procedures are fully understood throughout the organization and will provide additional U.S. GAAP training to all employees involved with the performance of or compliance with those procedures and policies.

Between September 30, 2010 and March 28, 2011, we engaged an outside consulting firm in Shanghai with expertise in US GAAP to assist us with our internal financial report process.

Since March 29, 2011, we engaged an individual consultant with expertise in US GAAP to assist us with conversion of Chinese financial statements into US GAAP financial reports and other matters in connection with the quarterly and annual audits.

The remedial measures being undertaken may not be fully effectuated or may be insufficient to address the significant deficiencies we identified, and there can be no assurance that significant deficiencies or material weaknesses in our internal control over financial reporting will not be identified or occur in the future. If additional significant deficiencies (or if material weaknesses) in our internal controls are discovered or occur in the future, among other similar or related effects: (i) the Company may fail to meet future reporting obligations on a timely basis, (ii) the Company’s consolidated financial statements may contain material misstatements, (iii) the Company’s business and operating results may be harmed.

Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of the Evaluation Date, our disclosure controls and procedures were not operating effectively.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting that occurred during the quarter ended March 31, 2011 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II — OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

We are currently not involved in any litigation that we believe could have a material adverse effect on our financial condition or results of operations.

ITEM 1A. RISK FACTORS

There have been no material changes from the risk factors previously disclosed in the Company’s Form 8-K/A filed with the SEC on February 11, 2011.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS

Exhibit Number	Description of Exhibit

10.1	English Translation of Working Capital Loan Agreement between Shanghai Vomart Auto Parts Co., Ltd. and YBM Group China Co., Ltd., dated May 16, 2011.

31.1	Certification of the Chief Executive Officer pursuant to Exchange Act Rule 13a-14(a) or 15d-14(a).

31.2	Certification of the Chief Financial Officer pursuant to Exchange Act Rule 13a-14(a) or 15d-14(a).

32.1	Certification pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes Oxley Act of 2002.*

* This exhibit shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, whether made before or after the date hereof and irrespective of any general incorporation language in any filings.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	TEEN EDUCATION GROUP, INC.
	(Registrant)

May 16, 2011	By:	/s/ Zhoufeng Shen
		Zhoufeng Shen
		Chief Executive Officer

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