Tsingda eEDU Corp - FORM 10-Q

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)
x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

	For the quarterly period ended March 31, 2012

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 000-52347

TSINGDA EEDU CORPORATION

(Exact name of registrant as specified in its charter)


Cayman Islands		N/A
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)

No. 0620, Yongleyingshiwenhuanan Rd.,
Yongledian Town, Tongzhou District,
Beijing, PR China
		101105
(Address of principal executive offices)		(Zip Code)
Registrant’s telephone number (including area code): +45-8842 9181

(Former name, former address and former fiscal year, if changed since last report)

Check whether the issuer (1) 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 issuer was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days

x Yes o No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 229.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). 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.


Large accelerated filer o		Accelerated filer	o

Non-accelerated filer o	(Do not check if a smaller reporting company)	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). o Yes x No

State the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 35,754,862 ordinary shares, par value $0.000384 per share, as of May 17, 2012.

TABLE OF CONTENTS


		Page

PART I – FINANCIAL INFORMATION

Item 1:	Financial Statements
Item 2:	Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 3:	Quantitative and Qualitative Disclosures About Market Risk
Item 4:	Controls and Procedures

PART II – OTHER INFORMATION

Item 1:	Legal Proceedings
Item 1A:	Risk Factors
Item 2:	Unregistered Sales of Equity Securities and Use of Proceeds
Item 3:	Defaults Upon Senior Securities
Item 4:	Mine Safety Disclosures.
Item 5:	Other Information
Item 6:	Exhibits

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

Tsingda eEDU Corporation

Consolidated Balance Sheets

(Stated in US dollars)


	March 31, 2012		December 31, 2011

	(Unaudited)		(Audited)
ASSETS
Current assets
Cash and cash equivalents	$	2,984,483	$	3,162,560
Accounts receivable, net		20,378,056		16,971,480
Advances to suppliers		14,785,095		12,166,014
Other receivables		441,544		1,409,259
Receivable from escrow account		100,000		100,000
Due from related parties		100,000		3,000,000
Inventory		65,130		321,628
Deferred tax assets		257,906		370,786

Total Current Assets		39,112,214		37,501,727

Advances for leasehold improvements		2,271,897		2,456,522
Prepayment for investment and acquisition		4,210,000		3,760,000
Property, plant and equipment, net		16,089,876		16,634,974
Intangible assets, Net		15,788,789		12,800,645

TOTAL ASSETS	$	77,472,776	$	73,153,868

LIABILITIES & SHAREHOLDERS’ EQUITY
Current Liabilities
Accounts payable		2,008,119		1,252,404
Customer Deposit		3,454,468		3,032,264
Taxes payable		10,584,661		9,688,065
Accrued and other liabilities		449,015		454,785
Deferred revenue		1,719,371		2,471,916

Total Current Liabilities		18,215,634		16,899,434
SHAREHOLDERS’ EQUITY
Preferred stock: 781,250 shares of $0.000128 par value authorized; None shares issued and outstanding	$	—	$	—
Common Stock (par value $0.000384 per share; 100,000,000 shares authorized; 35,754,862 shares issued and outstanding as of March 31, 2012 and December 31, 2011)		13,730		13,730
Additional paid in capital		21,072,141		21,068,967
Statutory reserves		2,398,464		2,398,464
Retained earnings		32,882,466		29,935,343
Accumulated other comprehensive income		2,890,341		2,837,930

TOTAL SHAREHOLDERS’ EQUITY		59,257,142		56,254,434


TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	77,472,776	$	73,153,868

The accompanying notes are an integrated part of these consolidated financial statements

Tsingda eEDU Corporation

Consolidated Statements of Operations and Comprehensive Income

(Stated in US dollars)


	Three Months Ended March 31,

	2012		2011

	(Unaudited)		(Unaudited)

Sales revenue	$	12,320,853	$	8,229,347
Cost of revenue		4,333,288		2,202,001

Gross Profit		7,987,565		6,027,346


Operating expenses
Selling expenses		3,032,707		1,744,548
General and administrative expenses		1,608,455		1,598,721

Total operating expenses		4,641,162		3,343,269


Income from operations		3,346,403		2,684,077
Interest income		1,209		639
Other expenses		94,354		(369	)


Income before income tax		3,441,966		2,684,347
Income tax expenses		494,843		403,206

Net Income	$	2,947,123	$	2,281,141


Other comprehensive income/(loss)
Foreign currency translation adjustments		52,411		89,970

Total Comprehensive Income	$	2,999,534	$	2,371,111


Earnings per share, Basic	$	0.08	$	0.07
Earnings per share, Diluted	$	0.08	$	0.07
Average number of weighted average shares, Basic		35,754,862		33,729,862
Average number of weighted average shares, Diluted		36,596,199		33,729,862

The accompanying notes are an integrated part of these consolidated financial statements

Tsingda eEDU Corporation

Consolidated Statements of Cash Flows

(Stated in US dollars)


	Three Months Ended March 31,

	2012			2011


CASH FLOWS FROM OPERATING ACTIVITIES

Net income	$	2,947,123		$	2,281,141

Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization		2,180,225			673,273
Share-based compensation costs		3,174			—
Deferred tax assets		113,269			160,141
Changes in operating assets and liabilities:
Accounts receivable		(3,388,780	)		(1,048,594	)
Advances to suppliers		(2,606,324	)		(1,188,746	)
Other receivables		969,298			114,890
Inventories		256,835			—
Accounts payable		754,402			205,205
Customer deposit		419,024			(42,402	)
Accrued and other liabilities		(6,247	)		84,686
Taxes payable		886,437			452,505
Deferred revenue		(754,789	)		(1,062,324	)

CASH PROVIDED BY OPERATING ACTIVITIES		1,773,647			629,775


CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property, plant and equipment		(523,939	)		(3,710,642	)
Sales of property, plant and equipment		16,761			—
Addition of intangible assets		(4,099,957	)		(1,057,908	)
Payments for leasehold improvements not completed		187,201			2,606,915
Cash payment for acquisition deposit		(200,000	)		—
Cash payment for equity investment deposit		(250,000	)		—
Advances/loans to related parties		—			(96,083	)
Collection of advances/loan to related parties		2,900,000			29,702

CASH USED IN INVESTING ACTIVITIES		(1,969,934	)		(2,228,016	)


CASH FLOWS FROM FINANCING ACTIVITIES
Cash released from escrow accounts		—			420,000

CASH PROVIDED BY FINANCING ACTIVITIES		—			420,000

Effect of exchange rate changes on cash and cash equivalents		18,210			(155,500	)

NET INCREASE (DECREASE) IN CASH		(178,077	)		(1,333,741	)

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD	$	3,162,560		$	4,086,214

CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	2,984,483		$	2,752,473


Supplementary Disclosures for Cash Flow Information:
Income taxes paid	$	—		$	142,509

The accompanying notes are an integrated part of these consolidated financial statements

TSINGDA EEDU CORPORATION
Notes to the Consolidated Financial Statements
March 31, 2012
(Unaudited)

NOTE 1- ORGANIZATION AND BUSINESS OPERATIONS

Tsingda Century Investment Consultant of Education Co., Ltd. (“Tsingda Century”) was incorporated on October 23, 2003, in Beijing, the People’s 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 Tsingda Technology.

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.

On September 23, 2011, Family Baby Kindergarten (“Family Baby”) 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 an Operating Agreement, Proxy Agreement, Consulting Services Agreement, Equity Pledge Agreement and Option Agreement, which entitled Tsingda Management to receive 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 Century’s shareholder and Equity Pledge Agreement pledges the shares in Tsingda Century to Tsingda Management without transferring legal ownership in Tsingda Century to Tsingda Management. Under the Consulting Services Agreement, Tsingda Management is the exclusive service provider, to Tsingda Century, for services, including general business operation, human resources, business development and Tsingda Century is obligated to make regular payments for such services provided. Under the Operating Agreement, Tsingda Century shall not conduct any transactions which may materially affect the assets, obligations, rights or the operations, without the written consent of Tsingda Management and Tsingda Century accepted Tsingda Management’s corporate policy provide by Tsingda Management in connection with Tsingda Century’s daily operations, financial management and the employment and dismissal of Tsingda Century’s employees. Through those agreements, Tsingda Management has the power to direct the activities that most significantly impact the economic performance of Tsingda Century and 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 Tsingda Technology. Tsingda eEDU Corporation is the accounting acquiree. Tsingda Technology is the accounting acquirer and the surviving entity.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION

The unaudited interim financial statements of Tsingda eEdu Corporation as of March 31, 2012 and for the three month periods ended March 31, 2012 and 2011 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 three month period ended March 31, 2012 are not necessarily indicative of the results to be expected for the full fiscal year ending December 31, 2012.

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, 2011.

BASIS OF CONSOLIDATION

The accompanying consolidated financial statements include the accounts of the Company, and its wholly owned subsidiaries, (Tsingda Technology, and Tsingda Management), and Tsingda Century and its subsidiaries, Tsingda Network, Tsingda Century Training School and Family Baby. All intercompany balances and transactions have been eliminated in consolidation.

USE OF ESTIMATES

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. Significant items subject to such estimates and assumptions include the useful lives of fixed assets; the allowance for doubtful accounts; the fair value determination of financial and equity instruments, the reliability of deferred tax assets; the recoverability of intangible asset and property, plant and equipment; and accruals for income tax uncertainties and other contingencies.

REVENUE RECOGNITION

Online Courses

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 onetime licensing fee, annual management fee, and 20% of student generated revenue from the franchised location by providing them prepaid e-cards of 5 times the cash amount. All the mentioned fees are revenues or unearned revenues from the sale of e-cards. Revenue is recognized when the services are consummated when the e-cards are opened and used by the students to purchase online education courses and is reported net of business tax. The opening of cards is tracked by our IT system automatically and the revenue is proportionally recognized based on the progress of the e-cards usage.

Virtual Internet Classroom

The Company sold prepaid e-cards to the customers. Revenue is recognized until the services are consummated upon the e-cards are opened and used by the students to purchase online education courses and is reported net of business tax. The opening of cards is tracked by our IT system automatically and the revenue is proportionally recognized based on the progress of the e-cards usage.

Sales of Materials and Publications

The revenue is recognized upon the products are delivered to the customers.

Offline courses

Offline tutorial courses are provided by Tsingda Century Training School (“Tsingda School” or “Huanggang Experimental School”) and by the company owned learning centers. The revenue is recognized based on the progress of courses the students completed during the period.

FOREIGN CURRENCY TRANSLATION AND TRANSACTIONS

The financial position and results of operations of the Company’s subsidiaries in the PRC are measured using the Chinese currency Renminbi as the functional currency, while the Company’s reporting currency is the US dollar. Balance sheet accounts with exception of equity of the subsidiaries are translated at the prevailing exchange rate in effect at each period end, income statement accounts are translated at the average rate of exchange during the period, and equity accounts were stated at their historical exchange rate. Exchange gains or losses arising from foreign currency transactions are included in the determination of net income (loss) for the

respective periods. Translation adjustments are included in the accumulated other comprehensive income in the consolidated statements of shareholders’ equity and comprehensive income.

The exchange rates used for foreign currency translation were as follows (USD$1 = RMB):

SEGMENT REPORTING

The Company uses the “management approach” in determining reportable operating segments. The management approach considers the internal organization and reporting used by the Company’s chief operating decision maker for making operating decisions and assessing performance as the source for determining the Company’s reportable segments. The Company’s chief operating decision maker has been identified as the chief executive officer of the Company who reviews financial information of separate operating segments based on US GAAP. The chief operating decision maker now reviews results analyzed by service line. This analysis is only presented at the revenue level with no allocation of direct or indirect costs. Consequently, the Company has determined that it has only one operating segment.

EARNINGS PER SHARE

Basic earnings per share are computed by dividing net income by weighted average number of shares of common stock outstanding during each period. Diluted earnings per share is computed by dividing net income by the weighted average number of shares of common stock, common stock equivalents and potentially dilutive securities outstanding during each period. At March 31, 2012 and 2011, the Company had no common stock equivalents that could potentially dilute future earnings per share.

NOTE 3 - ADVANCES TO SUPPLIERS

Advances to suppliers represent amounts prepaid for advertising, network, rent, store construction and decoration:


	March 31, 2012		December 31, 2011

Advance for advertising and printing	$	7,341,924	$	7,233,400
Advance for network service		1,003,644		1,794,569
Others		6,439,527		3,138,045

Total	$	14,785,095	$	12,166,014

NOTE 4 – PREPAYMENTS FOR INVESTMENT AND ACQUISITION

On August 10, 2011, the Company entered into a Shares Investment Agreement (the “Acquisition Agreement”) with Beijing YIYING Angel Education Consulting Co., Ltd. (“YIYING Angel”) and Ms. Yitong Chen (“Chen”, the owner of YIYING Angel, to acquire 70% of the equity interest of YIYING Angel from Ms. Chen for consideration of $2,800,000 and 200,000 options to purchase the Company’s ordinary shares at an exercise price of $5 per share. As of March 31, 2012, the Company paid $2,800,000 to Ms. Chen and contributed $160,000 to Yiyang Angel as registered capital. The options have not been granted. The acquisition has not closed yet.

On November 1, 2011, the Company entered into an investment agreement with Beijing ShangXue Educational Technology Co. (“Shangxue”) to purchase 80% of the equity interest of Shangxue for $1,800,000. As of March 31, 2012, the Company has paid $1,250,000 as a deposit.


	March 31, 2012		December 31, 2011


Prepayment for acquisition of YIYING Angel	$	2,960,000	$	2,760,000
Prepayment for investment in ShangXue Education		1,250,000		1,000,000

Total	$	4,210,000	$	3,760,000

NOTE 5 – RELATED PARTY TRANSACTIONS

On August 5, 2011, the Company entered into an Investment Agreement (the “Investment Agreement”) with Mr. Guozhen Zhou, an executive of the Company and also the founder of Asia Outstanding Students Admissions Union Ltd. (“AOSA”), a Company registered in British Columbia, Canada. Under the Investment Agreement, Tsingda agreed to invest $3,000,000 to acquire 55% of the total equity interest of AOSA. As of December 31, 2011, the Company paid $3,000,000 to Mr. Guozhen Zhou. However, AOSA was unable to obtain the regulatory approvals necessary to consummate the transaction. As of March 31, 2012, $2,900,000 has been returned by Mr. Guozhen Zhou to the Company. In the event AOSA is able to obtain the necessary regulatory approvals, the parties may still determine to proceed with the investment.

NOTE 6 - INCOME TAXES

The Company is incorporated in the Cayman Islands, and is not subject to tax on income or capital gain under the current laws of the Cayman Islands. In addition, upon payment of dividends by the Company to its shareholders, no Cayman Islands withholding tax is imposed. The Company’s other subsidiaries are subject to income tax as described below.

British Virgin Islands (“BVI”)

Under the current laws of BVI, our BVI subsidiaries are not subject to tax on income or capital gain. In addition, payments of dividends by our BVI subsidiaries to their shareholders are not subject to withholding tax in the BVI.

PRC

Prior to January 1, 2008, the Company was governed by the previous Income Tax Law (the “Previous Tax Law”) of China. Under the Previous Tax Law, the Company’s PRC subsidiaries, Tsingda Management, Tsingda Century and Tsingda network, were entitled various preferential tax treatments.

On March 16, 2007, the National People’s Congress passed the new Enterprise Income Tax law (the “new EIT law”) which imposes a single income tax rate of 25% for most domestic enterprises and foreign investment enterprises. The new EIT law was effective as of January 1, 2008. The new EIT law provides a five-year transition period from its effective date for those enterprises which were established before March 16, 2007 and which were entitled to a preferential lower tax rate under the then effective tax laws or regulations, as well as grandfathering tax holidays. Further, according to the new EIT law, entities that qualify as “High and New Technology Enterprises” are entitled to the preferential EIT rate of 15%. Tsingda Century has received approval for the status as a “High and New Technology Enterprises”. The status is valid for three years starting from June 2009 and will be renewed after evaluation by relevant government authorities every three years. Further, on December 26, 2007, the PRC government passed the detailed implementing rules which allow enterprises to continue to enjoy their unexpired tax holiday under the previous income tax laws and rules. As a result, under the new EIT law, Tsingda Century’s tax rate are 15% for the calendar years from 2010 to 2012 and subject to renewal of the status of “High and New Technology Enterprises” after calendar year 2012; and Tsingda Network and Tsingda School’s tax rates are 25%. Tsingda Management’s tax rates are 22% and 24% for 2010 and 2011 and 25% thereafter.

The provision for taxes on earnings consisted of:


	March 31 2012		March 31, 2011

PRC Enterprise Income Tax	$	494,843	$	403,206
United States Federal Income Tax		—		—

Income tax, net	$	494,843	$	403,206

A reconciliation between the income tax computed at the U.S. statutory rate and the Company’s provision for income tax is as follows:


	March 31, 2012			March 31, 2011

U.S. Federal income tax statutory rate		35	%		35	%
PRC Statutory rate (25%) difference		-10	%		-10	%
Preferential tax rate		-10	%		-10	%

Effective tax rate		15	%		15	%

The tax effect of temporary differences that gives rise to significant portions of the deferred income tax assets are presented below:


	March 31, 2012		December 31, 2011

Deferred tax assets:
Deferred revenue	$	257,906	$	370,786

Deferred tax assets, total	$	257,906	$	370,786

NOTE 7 – EARNINGS PER SHARE

Basic earnings per share (“EPS”) excludes the dilutive effect of common stock equivalents and is computed by dividing net income by the weighted-average number of common shares outstanding during the period. Diluted EPS includes the dilutive effect of common stock equivalents, which consists primarily of stock options and warrants, and is computed using the weighted-average number of common stock and common stock equivalents outstanding during the period.

The following table is a reconciliation of basic and diluted EPS for the three months ended March 31, 2012 and 2011:


	Three months ended March 31,

	2012		2011

Numerator:

Net income attributable to Tsingda eEDU	$	2,947,123	$	2,281,141

Denominator:

Weighted average number of common shares outstanding		35,754,862		33,729,862

Dilutive effect of common stock equivalents		841,337		—


Adjusted weighted average number of common shares outstanding, assuming conversion of common stock equivalents		36,596,199		33,729,862


Basic net income attributable to Tsingda eEDU per common share	$	0.08	$	0.07


Diluted net income attributable to Tsingda eEDU per common share	$	0.08	$	0.07

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Forward-Looking Statements

Certain statements, other than purely historical information, including estimates, projections, statements relating to our business plans, objectives, and expected operating results, and the assumptions upon which those statements are based, are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements generally are identified by the words “believes,” “project,” “expects,” “anticipates,” “estimates,” “intends,” “strategy,” “plan,” “may,” “will,” “would,” “will be,” “will continue,” “will likely result,” and similar expressions. We intend such forward-looking statements to be covered by the safe-harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995, and are including this statement for purposes of complying with those safe-harbor provisions. Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties which may cause actual results to differ materially from the forward-looking statements. Our ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Factors which could have a material adverse affect on our operations and future prospects on a consolidated basis include, but are not limited to: changes in economic conditions, legislative/regulatory changes, availability of capital, interest rates, competition, and generally accepted accounting principles. These risks and uncertainties should also be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise. Further information concerning our business, including additional factors that could materially affect our financial results, is included herein and in our other filings with the SEC. Readers of this Quarterly Report are strongly encouraged to review the risk factors relating to the Company which are set forth in the Company’s Registration Statement on Form S-1 filed on October 12, 2010 and the Annual Report on Form 10-K for the year ending December 31, 2011 filed with the Securities and Exchange Commission.

COMPANY OVERVIEW

On May 24, 2010, 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. On November 15, 2010, the Company’s shareholders approved the change of the Company’s name from “Compass Acquisition Corporation” to “Tsingda eEDU Corporation” and the name change is effective immediately following the shareholder’s approval.

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 People’s 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 Education’s quarterly, after tax net profits. Additionally, Tsingda Education’s 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 Management’s rights to control and operate Tsingda Education, Tsingda Education’s 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. It has established the largest chain of education centers in the PRC, known as “Tsingda Learning Centers.” These offline educational centers principally target elementary school students and consist mainly of franchised locations. As of March 31, 2012, it has approximately 3,101 learning centers nationwide. 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.

Results of Operations (Unaudited) for the Three Months Ended March 31, 2012 Compared to Three Months Ended March 31, 2011

The following table sets forth key components of Tsingda eEDU’s results of operations for the periods indicated in dollars. The discussion following the table addresses these results.

Tsingda eEDU Corporation

Consolidated Statements of Operations and Comprehensive Income

(Stated in US dollars)

	Three Months Ended March 31,
	2012		2011
	(Unaudited)		(Unaudited)
Sales revenue	$	12,320,853	$	8,229,347
Cost of revenue		4,333,288		2,202,001
Gross Profit		7,987,565		6,027,346

Operating expenses
Selling expenses		3,032,707		1,744,548
General and administrative expenses		1,608,455		1,598,721
Total operating expenses		4,641,162		3,343,269

Income from operations		3,346,403		2,684,077
Interest income		1,209		639
Other expenses		94,354		(369	)

Income before income tax		3,441,966		2,684,347
Income tax expenses		494,843		403,206
Net Income	$	2,947,123	$	2,281,141

Other comprehensive income/(loss)
Foreign currency translation adjustments		52,411		89,970
Total Comprehensive Income	$	2,999,534	$	2,371,111

Earnings per share, Basic		0.08		0.07
Earnings per share, Diluted		0.08		0.07
Average number of weighted average shares, Basic		35,754,862		33,729,862
Average number of weighted average shares, Diluted		36,596,199		33,729,862

Revenues. For the three months ended March 31, 2012, we had revenues of $12,320,853 compared to revenues of $8,229,347 for the three months ended March 31, 2011, an increase of approximately 49.7%. We experienced strong growth in our revenues during the first quarter ended March 31, 2012. This growth is due to an increase in the number of franchise locations for the Company’s offline businesses, along with the continued growth of its online learning platform. As of March 31, 2012, we had 3,069 franchise locations and 32 company owned locations, compared with 2,347 franchise locations and 31 company owned locations as of March 31, 2011.

Expenses. For the three months ended March 31, 2012, we incurred expenses, composed of selling and general and administrative expenses, of $4,641,162 compared with expenses of $3,343,269 for the three months ended March 31, 2011, an increase of approximately 38.8%.

Selling expenses include salaries of our sales department and company owned learning centers, advertising, printing, shipping, logo manufacturing, transportation and others. For the three months ended March 31, 2012, we had selling expenses of $3,032,707 as compared to $1,744,548 for the comparable period of the prior year, an increase of 73.84% or $1,288,159. The increase reflected the marketing efforts spent on two new business projects: the Family Baby Club and the Huang Gang Supplementary Education Center, and the continued promotion for our online education platform. The Family Baby Club targets at pre-school children from zero to six years old and the Huang Gang Supplementary Education Center provides well-regarded supplementary education to high school students. Huang Gang is an area in Hubei, China and is famous for its nationally top-ranked high school and the excellent academic performance of its students. The Education Department of Huang Gang City has reached an agreement with the Company to establish supplemental tutoring programs throughout China started in May 2011.

Key components of selling expenses for the three months period ended March 31, 2012 and 2011 were:


	Three months ended March 31, 2012		Three months ended March 31, 2011

Salaries and wages	$	656,680	$	313,883
Advertising		1,783,463		863,563
Printing		381,146		338,068
Shipping		24,202		82,216

-Salaries and wages increased by approximately 109.21% for the three months ended March 31, 2012 from the comparable 2011 period. The increase represents an increase in our sales personnel at our headquarters, which is consistent with our increased franchise sales and the establishment of two new business projects mentioned above.

-Advertising expenses increased by approximately 106.52% for the three months ended March 31, 2012 from the comparable 2011 period. The expenses represent third party print media costs related to new company-owned centers and the two new business projects, online platform, as well as our ongoing promotional efforts to attract new franchisees.

-Printing expenses increased by approximately 12.74% for the three months ended March 31, 2012 from the comparable 2011 period. These expenses represent internal costs for printing our company newsletters and other promotional costs related to enhancement of our brand name and increase in the numbers of newly owned locations, as well as the promotional materials of the two new business projects.

-Shipping cost decreased by approximately 70.56% for the three months ended March 31, 2012 from the comparable 2011 period, which is due to the increased use of online distribution of company newsletters and materials.

General and administrative expenses include rent, salaries and wages, insurance, training and related expenses. For the three months ended March 31, 2012, we had general and administrative expenses of $1,608,455 compared to $1,598,721 for the comparable period from the prior year.

Key components of general and administrative expenses for the three months period ended March 31, 2012 and 2011 were:


	Three months ended March 31, 2012		Three months ended March 31, 2011

Salaries and wages		351,655		188,685
Entertainment expenses		166,649		354,448
Rent		358,169		224,621
Depreciation		286,653		180,967

-Salaries and wages increased by 86.37% for the three months ended March 31, 2012 from the comparable 2011 period as the company hired more management personnel for newly owned locations and two new business projects.

-Entertainment expenses decreased by 52.98% for the three months ended March 31, 2012 from the comparable 2011 period as the company spent a substantial amount to establish relationships with local authorities when the company headquarters moved into the new location in March 2011.

-Rent increased by 59.45% for the three months ended March 31, 2012 from the comparable 2011 period. The increase was due to the lease of the new Shijingshan Headquarters - Tsingda Century Plaza.

-Depreciation increased by 58.4% for the three months ended March 31, 2012 from the comparable 2011 period as the company purchased more fixed assets including new teaching and recording equipments and servers.

Income Before Taxes. Income before taxes for the three months ended March 31, 2012 was $3,441,966 compared with $2,684,347 for the comparable period of 2011. The increase is due to the increased revenue and decreased expenses as discussed above.

Provision for Income Tax. For the three months ended March 31, 2012 we had a provision for income tax of $494,843 compared with $403,206 for the corresponding period in 2011, which is commensurate with the increase in operating income for current period.

Net Income. We had net income for the three months ended March 31, 2012 of $2,947,123 compared with $2,281,141 for the corresponding quarterly period in 2011.

Other Comprehensive Income. We had other comprehensive income of $52,411 for the three months ended March 31, 2012 compared with $89,970 during the corresponding 2011 period as a result of foreign currency translation gain/loss.

Total Comprehensive Income. We had total comprehensive income of $2,999,534 for the three months ended March 31, 2012 compared with $2,371,111 for the comparable period of 2011. The increase is due to the various reasons stated above.

LIQUIDITY AND CAPITAL RESOURCES

As of March 31, 2012, we had working capital of $20,896,580 compared with working capital of $20,602,293 as of December 31, 2011. Changes in our working capital are summarized as follows:


	March 31, 2012 (unaudited)		December 31, 2011 (audited)		Increase in Working Capital

Total current assets	$	39,112,214		37,501,727		1,610,487
Total current liabilities		18,215,634		16,899,434		(1,316,200	)
Working Capital	$	20,896,580		20,602,293		294,287

Our increase in working capital is primarily attributable to the increase in account receivable. The increase reflects the continued and proportional growth in sales revenue. In addition, deferred revenue decreased by $752,545, reflecting that learning cards sold to students were consumed at a faster speed for the period ended March 31, 2012 compared to the same period of 2011.

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 our company owned locations.

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 three months ended March 31, 2012 and 2011:


	Three Months Ended March 31,

		2012			2011
Net cash provided by operating activities	$	1,773,647		$	629,775
Net cash consumed by investing activities	$	(1,969,934	)	$	(2,228,016	)
Net cash provided by financing activities	$	—		$	420,000
Effect of foreign exchange rate changes on cash and cash equivalents	$	18,210		$	(155,500	)
Net change in cash	$	(178,077	)	$	(1,333,741	)
Cash Balance (Beginning of Period)	$	3,162,560		$	4,086,214
Cash Balance (End of Period)	$	2,984,483		$	2,752,473

The net cash provided by operating activities for the three months ended March 31, 2012 was $1,773,647 compared with $629,775 for the comparable period in 2011. The increase in the operating cash inflows was due to the increase in the sales of e-learning cards for the period ended March 31, 2012.

The net cash consumed by investing activities for the three months ended March 31, 2012 was ($1,969,934) compared with ($2,228,016) for the comparable period in 2011. The increase was primarily due to combined causes including decrease of cash flows as a result of additions to intangible assets and increase of cash flows due to less purchase of fixed assets as well as the return of $2.9 million prepayment from Mr. Guozhen Zhou we previously paid pursuant to certain Investment Agreement. .

The net cash provided by financing activities for the three months ended March 31, 2012 was zero compared with $420,000 of the three months ended March 31, 2011. The decrease was primarily due to the retrieval of $420,000 from the escrow account in the first quarter of 2011.

The effect of foreign exchange rate changes on cash and cash equivalents was a gain of $18,210 for the three months ended March 31, 2012 compared with a loss of $155,500 for the comparable period in 2011.

The difference between the closing balance of cash and cash equivalents for the three months ended March 31, 2012 and 2011 is due to the reasons mentioned above.

OFF-BALANCE SHEET ARRANGEMENTS

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.

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 amounts 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 believed 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 2 to the audited consolidated financial statements for the year ended December 31, 2011. 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. Other than those indicated in this quarterly report, there have been no material revisions to the critical accounting policies as filed in our Annual Report on Form 10-K as of and for the year ended December 31, 2011 with the SEC on March 30, 2012.

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 entity’s 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.

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 shall receive a quarterly fee in an amount equal to Tsingda Education’s quarterly after-tax net profits. In accordance with these agreements, Tsingda Education shall pay consulting fees equal to 100% of its quarterly after-tax net profits to our wholly-owned subsidiary, Tsingda Management, and 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 Education’s sales are included in our total sales, its income from operations is consolidated with ours, and our net income includes all of Tsingda Education’s 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 Education’s financial statements with our financial statements.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

A smaller reporting company is not required to provide the information required by this Item.

Item 4. Controls and Procedures.

Evaluation of disclosure controls and procedures

Management, with the participation of our Principal Executive Officer and Principal Financial Officer, carried out an evaluation of the effectiveness of our “disclosure controls and procedures” (as defined in the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) pursuant to Rules 13a-15(e) and 15d-15(e)) as of the end of the period covered by this quarterly report on Form 10-Q (the “Evaluation Date”). Based upon that evaluation, our Principal Executive Officer and Principal Financial Officer concluded that, as of the Evaluation Date, our disclosure controls and procedures are not effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act (i) is recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms and (ii) is accumulated and communicated to our management, including our Principal Executive Officer and Principal Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Notwithstanding the conclusion that our disclosure controls and procedures were not effective as of the end of the period covered by this Quarterly Report, the Principal Executive Officer and Principal Financial Officer believe that the condensed consolidated financial statements and other information contained in this Quarterly Report present fairly, in all material respects, our business, financial condition and results of operations.

Our Principal Executive Officer and Principal Financial Officer determined that our disclosure controls and procedures are not effective due to our lack of formalized policies with respect to such disclosure controls and procedures.

Changes in Internal Control Over Financial Reporting

There were no material changes in the Company’s internal control over financial reporting as of the end of the period covered by this report as such term is defined in Rule 13a-15(f) of the Exchange Act.

PART II – OTHER INFORMATION


Item 1.	Legal Proceedings

We are not a party to any pending legal proceeding. We are not aware of any pending legal proceeding to which any of our officers, directors, or any beneficial holders of 5% or more of our voting securities are adverse to us or have a material interest adverse to us

Item 1A:	Risk Factors

A smaller reporting company is not required to provide the information required by this Item.

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds

None

Item 3.	Defaults upon Senior Securities

None

Item 4.	Mine Safety Disclosure
Not Applicable
Item 5.	Other Information

Item 6.	Exhibits

The following exhibits are filed herewith:

Exhibit No.	Description
31.1*	Certification by the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*	Certification by the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1*	Certification by the Chief Executive Officer pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2*	Certification by the Chief Financial Officer pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS	XBRL Instance Document**
101.SCH	XBRL Taxonomy Extension Schema Document**
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document**
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document**
101.LAB	XBRL Taxonomy Extension Labels Linkbase Document**
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document**

* Filed herewith.

** XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.

SIGNATURES

In accordance with the requirements of the Securities Exchange Act of 1934, the Company caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


	Tsingda eEdu Corporation


Date: May 21, 2012	By:	/s/ Zhang Hui
		President, Chief Executive Officer and Chairman of the Board

Date: May 21, 2012	By:	/s/ Kang Chungmai
		Chief Financial Officer (Principal Financial and Accounting Officer)

Period Covered

Balance Sheet Date Rates

Average Rates

Three months ended March 31, 2012

Three months ended March 31, 2011