UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): March
31, 2015
CHINA EDUCATION ALLIANCE, INC.
(Exact name of
registrant as specified in its charter)
North Carolina
(State or other jurisdiction of
incorporation) |
001-34386
(Commission
File Number) |
56-2012361
(IRS Employer
Identification No.) |
58 Heng Shan Road, Kun Lun Shopping
Mall
Harbin, People’s Republic of
China
(Address of principal executive offices) |
150090
(Zip Code) |
Registrant’s telephone number, including
area code: 86-451-8233-5794
Check the appropriate box below if the Form 8-K filing is intended
to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction
A.2. below):
¨ |
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
¨ |
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
¨ |
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
¨ |
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 2.02. |
Results of Operations and Financial Condition. |
On March 31, 2015,
China Education Alliance, Inc., a North Carolina corporation (the “Company”), announced its results of operations for
the fourth quarter and the year ended December 31, 2014. A copy of the press release is annexed as Exhibit 99.1 hereto.
In accordance with
General Instruction B.2 of Form 8-K, the information in Item 2.02 of this Current Report on Form 8-K, including Exhibit 99.1, shall
not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or
otherwise subject to the liabilities of that section, and shall not be deemed to be incorporated by reference into any of the Company’s
filings under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or
after the date hereof and regardless of any general incorporation language in such filings, except to the extent expressly set
forth by specific reference in such a filing.
Item 9.01 |
Financial Statements and Exhibits |
(d) Exhibits.
99.1 |
Press release, dated March 31, 2015, issued by China Education Alliance, Inc. |
SIGNATURES
Pursuant to the requirements of the Securities
and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly
authorized.
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CHINA EDUCATION ALLIANCE, INC. |
|
|
|
|
|
Dated: April 6, 2015 |
|
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By: |
/s/ Xiqun Yu |
|
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Name: |
Xiqun Yu |
|
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Title: |
Chief Executive Officer |
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Exhibit 99.1
China Education
Alliance Announces Fourth Quarter and Fiscal 2014 Financial Results
HARBIN,
China, March 31, 2015 /PRNewswire/ -- China Education Alliance, Inc. ("China Education Alliance" or the "Company")
(OTCQX: CEAI), a China-based education resource and services company, today announced its financial results for the fourth quarter
and the fiscal year of 2014.
Financial
Highlights for the Fourth Quarter of Fiscal 2014
| · | Total
revenues decreased by 53% to $0.4 million. |
| · | Net
loss of $9.6 million. |
| · | Loss
per share was $0.9 per fully diluted share. |
Financial
Highlights for the Fiscal Year Ended December 31, 2014 ("Fiscal 2014")
| · | Total
revenues decreased by 59% to $2.7 million. |
| · | Net
loss of $37.4 million. |
| · | Loss
per share was $3.53 per fully diluted share. |
Fiscal
2014 Review:
Revenue
for Fiscal 2014 decreased by $4.0 million, or 59%, to $2.7 million from $6.7 million for the year ended December 31, 2013 ("Fiscal
2013"). Revenue generated by the online education division decreased by $1.7 million, or 77%, to $0.5 million for Fiscal
2014 from $2.2 million for Fiscal 2013. Revenue generated by the training center division decreased by $2.3 million, or 51% to
$2.2 million for Fiscal 2014 from $4.5 million for the prior year.
The
decline in revenue in Fiscal 2014 was a result of decline in revenue across all of our business. We believe the main reason was
our continuously weakening brand recognition in the main targeted market and increased competition from new competitors who entered
into this market during the year 2014. In addition, in the middle of 2014, the local government in Harbin announced policies
prohibiting teachers of public schools from engaging in any tutoring/training classes outside of public schools. Tianlang, with
all of its teachers being public school teachers, had to cut its class offerings dramatically, which directly affected our revenue
for the training center division.
However,
we believe the rise of the online education industry in China presents a good opportunity for us to improve and develop our online
education business. We have been focusing on the development and promotion of our online education business and successfully launched
the China Education Cloud Platform (the "Platform") in 2014.
During
the initial operation period of the Platform, we offer free access to the platform to teachers and students with an aim to quickly
develop the user base, establish an interactive teaching and learning platform with an aim to achieve a leading position within
the industry. After this initial promotion period, we will share with teachers and educational institutions the platform usage,
maintenance and service fees paid by students. Our plan is to contract up to one thousand educational institutions and reputable
teachers in China by the end of 2015. As of the date of this report, we have entered into agreements with over 100 schools and
educational institutions that will use our Platform and services to offer live or on demand online courses. We hope that the Platform
will start to generate revenue upon expiration of the one year free trial period. However, there can be no assurance that we will
be able to sign up educational institutions and teachers as planned and if we fail, our revenue will be adversely affected.
Our
overall cost of revenue decreased by $1.8 million or 24% to $5.7 million for Fiscal 2014, from $7.6 million for the prior year.
Cost of revenue for the online education division decreased by $1.1 million or 21% to $4.2 million for Fiscal 2014,
from $5.3 million for Fiscal 2013. The decrease was primarily due to the decrease in purchase of study materials and decrease
in depreciation costs resulting from decreased expenditure on fixed assets. While we strive to provide high-quality and update-to-date
online materials, we continue to control cost of revenue for the online education division by closely monitoring the variable
costs while maintaining fixed costs at a stable level. Cost of revenue for the training center division decreased by $0.7 million
or 32% to $1.5 million for Fiscal 2014 from $2.3 million for the prior year. The decrease in cost of revenue was mainly due to
a decrease in teacher’s salary as our teachers are paid by the number of classes they teach and there was a decrease
in classes we offered during Fiscal 2014 particularly the dramatic decrease in the course offerings of Tianlang as compared to
Fiscal 2013.
Gross
loss was $3.0 million for Fiscal 2014, an increase of $2.2 million, or 253% from 0.8 million for Fiscal 2013. Selling expenses
decreased by $3.4 million or 34% to $6.8 million for Fiscal 2014, from $10.2 million for the prior year. Selling expenses were
248% of total revenue in 2014 compared with 152% in 2013. The decrease in selling expenses was mainly due to the decrease in expenditures
in connection with outsourced marketing activities to rebuild our brand name and reputation as we carried out most of promoting
activities through our own personnel in Fiscal 2014. We expect our selling expenses to increase because we will incur marketing
and advertising expenses to promote our Platform in order to develop a large user base as quick as possible.
Administrative
expenses increased by $15.0 million or 173%, to $23.7 million for Fiscal 2014, from $8.7 million for Fiscal 2013. This was mainly
due to the increase in research and development expenses for the development and launch of the Platform. In the future we expect
the administrative expenses to remain at this level because we will incur ongoing research and development expenses for the maintenance
and further development of the Platform. Total administrative expenses were 871% of revenues for Fiscal 2014 as compared to 130%
for Fiscal 2013.
Net
loss was $37.4 million, or negative return of $3.53 per share basic and diluted, for Fiscal 2014, as compared to net loss of $24.7
million or negative return of $2.33 per share basic and diluted, for Fiscal 2013.
Financial
Position
At
December 31, 2014, we had cash and cash equivalents of $22.7 million, a decrease of $33.7 million or 60%, from $56.4 million for
the prior year mainly due to significant losses from operations.
As
of December 31, 2014, the Company had no long-term debt.
About
China Education Alliance, Inc.
China
Education Alliance, Inc. (http://www.chinaeducationalliance.com) is a leading educational services company offering high-quality
instructors and online education materials for students between the ages of 6 to 18 and adults (university students and professionals)
aged 18 and over. Divided into two segments, students and graduate professionals, our business model delivers the skills and knowledge
necessary to excel in a rapidly growing and highly competitive China. The Company provides students in the first segment with
online education materials sourced from top tier schools and famous instructors for download, as well as online training and tutoring
services. With teaching centers located across China, the Company also offers hands on training and tutoring to aid Chinese students
pass the two most important tests they will face in their educational careers: the senior high school entrance and college entrance
exams. In the second segment for graduates and professionals, China Education Alliance provides vocational training courses in
subjects including IT, administration, multimedia, as well as several professional training programs.
Safe
Harbor Statement
Safe
Harbor Statement under the Private Securities Litigation Reform Act of 1995: Certain statements in this press release, constitute
forward-looking statements for purposes of the safe harbor provisions under The Private Securities Litigation Reform Act of 1995.
These statements include, without limitation, statements regarding our ability to prepare the company for growth, the Company's
planned expansion and predictions and guidance relating to the Company's future financial performance. We have based these forward-looking
statements largely on our current expectations and projections about future events and financial trends that we believe may affect
our financial condition, results of operations, business strategy and financial needs and are not a guarantee of future performance
but they involve risks and uncertainties that could cause actual results to differ materially from those in the forward-looking
statements, which may include, but are not limited to, such factors as unanticipated changes in product demand especially in the
education industry, pricing and demand trends for the Company's products, changes to government regulations, risk associated with
operation of the Company's new facilities, risk associated with large scale implementation of the company's business plan, the
ability to attract new customers, ability to increase its product's applications, cost of raw materials, downturns in the Chinese
economy, and other information detailed from time to time in the Company's filings and future filings with the United States Securities
and Exchange Commission. Investors are urged to consider these factors carefully in evaluating the forward-looking statements
herein and are cautioned not to place undue reliance on such forward-looking statements, which are qualified in their entirety
by this cautionary statement. The forward-looking statements made herein speak only as of the date of this press release, readers
are cautioned not to place undue reliance on any of them and the Company undertakes no duty to update any forward-looking statement
to conform the statement to actual results or changes in the company's expectations.
For more
information, please contact:
China Education
Alliance, Inc.
Ms. Cloris Li
Chief Financial Officer
Email: cloris@edu-chn.com
Phone: +86-151-6841-0854
China Education Alliance, Inc. and Subsidiaries
Consolidated Balance Sheets
| |
December 31, | | |
December 31, | |
| |
2014 | | |
2013 | |
| |
| | |
| |
ASSETS | |
| | | |
| | |
| |
| | | |
| | |
Current Assets | |
| | | |
| | |
Cash and cash equivalents | |
$ | 22,696,126 | | |
$ | 56,377,154 | |
Accounts receivable | |
| 22,763 | | |
| - | |
Other receivables | |
| 464,550 | | |
| 262,547 | |
Prepaid expenses and other current assets | |
| 594,390 | | |
| 727,708 | |
Total current assets | |
| 23,777,829 | | |
| 57,367,409 | |
| |
| | | |
| | |
Non-current Assets | |
| | | |
| | |
Property and equipment, net | |
| 6,555,511 | | |
| 8,251,612 | |
Intangibles and capitalized software, net | |
| 961,839 | | |
| 5,099,934 | |
Total non-current assets | |
| 7,517,350 | | |
| 13,351,546 | |
| |
| | | |
| | |
Total Assets | |
$ | 31,295,179 | | |
$ | 70,718,955 | |
| |
| | | |
| | |
LIABILITIES AND STOCKHOLDERS' EQUITY | |
| | | |
| | |
| |
| | | |
| | |
Current Liabilities | |
| | | |
| | |
Accounts payable and accrued expenses | |
$ | 468,098 | | |
$ | 1,076,625 | |
Deferred revenue | |
| 1,319,962 | | |
| 854,027 | |
Income tax and other taxes payable | |
| 210,582 | | |
| 111,500 | |
Total current liabilities | |
| 1,998,642 | | |
| 2,042,152 | |
| |
| | | |
| | |
Commitments and Contingent Liabilities | |
| - | | |
| - | |
| |
| | | |
| | |
Stockholders' Equity | |
| | | |
| | |
| |
| | | |
| | |
Common stock ($0.001 par value, 150,000,000 shares authorized, 10,582,530 and 10,582,530 issued as of December 31, 2014 and 2013, respectively; 137,512 and 137,512 shares held in treasury, as of December 31, 2014 and 2013, respectively) | |
| 10,583 | | |
| 10,583 | |
Additional paid-in capital | |
| 40,942,009 | | |
| 40,942,009 | |
Statutory reserve | |
| 3,792,161 | | |
| 3,792,161 | |
Retained earnings | |
| (25,859,244 | ) | |
| 11,516,661 | |
Accumulated other comprehensive income | |
| 12,338,272 | | |
| 12,705,287 | |
Less: Treasury stock | |
| (977,072 | ) | |
| (977,072 | ) |
Stockholders' equity - CEAI and Subsidiaries | |
| 30,246,709 | | |
| 67,989,629 | |
Noncontrolling interests in subsidiaries | |
| (950,172 | ) | |
| 687,174 | |
Total stockholders' equity | |
| 29,296,537 | | |
| 68,676,803 | |
| |
| | | |
| | |
Total Liabilities and Stockholders' Equity | |
$ | 31,295,179 | | |
$ | 70,718,955 | |
China Education Alliance, Inc. and Subsidiaries
Consolidated Statements of Operations
and Comprehensive Income
| |
Year ended December 31 | |
| |
2014 | | |
2013 | |
| |
| | |
| |
Revenue | |
| | | |
| | |
Online education revenue | |
$ | 508,623 | | |
$ | 2,168,803 | |
Training center revenue | |
| 2,218,948 | | |
| 4,541,027 | |
Total revenue | |
| 2,727,571 | | |
| 6,709,830 | |
| |
| | | |
| | |
Cost of Revenue | |
| | | |
| | |
Online education costs | |
| 4,182,498 | | |
| 5,300,181 | |
Training center costs | |
| 1,547,042 | | |
| 2,259,012 | |
Total cost of revenue | |
| 5,729,540 | | |
| 7,559,193 | |
| |
| | | |
| | |
Gross Profit/(Loss) | |
| | | |
| | |
Online education gross loss | |
| (3,673,875 | ) | |
| (3,131,378 | ) |
Training center gross profit | |
| 671,906 | | |
| 2,282,015 | |
Total gross loss | |
| (3,001,969 | ) | |
| (849,363 | ) |
| |
| | | |
| | |
Operating Expenses | |
| | | |
| | |
Selling expenses | |
| 6,776,783 | | |
| 10,217,712 | |
Administrative expenses | |
| 23,747,084 | | |
| 8,701,767 | |
Depreciation and amortization | |
| 2,368,586 | | |
| 3,286,947 | |
Total operating expenses | |
| 32,892,453 | | |
| 22,206,426 | |
| |
| | | |
| | |
Loss from operations | |
| (35,894,422 | ) | |
| (23,055,789 | ) |
| |
| | | |
| | |
Other Income (Expense) | |
| | | |
| | |
Other income(expenses), net | |
| 29,985 | | |
| (24,355 | ) |
Loss on disposal of property and equipment | |
| (38,210 | ) | |
| (22,859 | ) |
Impairment loss on intangible assets | |
| (3,254,308 | ) | |
| (2,746,622 | ) |
Interest income | |
| 147,403 | | |
| 215,976 | |
Total other expense, net | |
| (3,115,130 | ) | |
| (2,577,860 | ) |
| |
| | | |
| | |
Net Loss Before Provision for Income Tax | |
| (39,009,552 | ) | |
| (25,633,649 | ) |
Income taxes: | |
| | | |
| | |
Current | |
| - | | |
| - | |
Deferred | |
| - | | |
| - | |
| |
| | | |
| | |
Net Loss | |
| (39,009,552 | ) | |
| (25,633,649 | ) |
Net Loss attributable to the noncontrolling interests | |
| (1,633,647 | ) | |
| (963,874 | ) |
Net Loss - attributable to CEAI and Subsidiaries | |
$ | (37,375,905 | ) | |
$ | (24,669,775 | ) |
| |
| | | |
| | |
Net Loss per common stock-basic and diluted | |
$ | (3.53 | ) | |
$ | (2.33 | ) |
| |
| | | |
| | |
Weighted Average Shares Outstanding-basic and diluted | |
| 10,582,530 | | |
| 10,582,530 | |
| |
| | | |
| | |
The Components of Other Comprehensive Income | |
| | | |
| | |
Net Loss | |
$ | (37,375,905 | ) | |
$ | (24,669,775 | ) |
Foreign currency translation adjustment | |
| (367,015 | ) | |
| 2,382,797 | |
| |
| | | |
| | |
Comprehensive Loss | |
$ | (37,742,920 | ) | |
$ | (22,286,978 | ) |
China Education Alliance, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
| |
Year ended December 31, | |
| |
2014 | | |
2013 | |
| |
| | |
| |
Cash flows from operating activities | |
| | | |
| | |
Net loss | |
$ | (39,009,552 | ) | |
$ | (25,633,649 | ) |
Adjustments to reconcile net loss to net cash used in operating activities | |
| | | |
| | |
Depreciation and amortization - operating expenses | |
| 2,368,586 | | |
| 3,286,948 | |
Depreciation and amortization - cost of revenue | |
| 1,730,107 | | |
| 2,709,788 | |
Loss on disposal of fixed assets | |
| 38,210 | | |
| 22,859 | |
Bad debt written off on other receivables | |
| - | | |
| - | |
Impairment loss on intangible assets | |
| 3,254,308 | | |
| 2,746,622 | |
Stock based compensation | |
| - | | |
| 794 | |
Net changes in operating assets and liabilities | |
| | | |
| | |
Accounts receivable | |
| (22,764 | ) | |
| - | |
Prepaid expenses and other receivables | |
| (74,083 | ) | |
| 549,542 | |
Deferred tax assets | |
| - | | |
| - | |
Accounts payable and accrued liabilities | |
| (603,505 | ) | |
| (37,798 | ) |
Income tax and other taxes payable | |
| 99,082 | | |
| (68,044 | ) |
Deferred revenue | |
| 470,655 | | |
| 164,476 | |
Net cash used in operating activities | |
| (31,748,956 | ) | |
| (16,258,462 | ) |
| |
| | | |
| | |
Cash flows from investing activities | |
| | | |
| | |
Purchases of property and equipment | |
| (1,625,599 | ) | |
| (996,551 | ) |
Loan received back from NIT | |
| - | | |
| 8,072,197 | |
Proceeds from disposal of property and equipment | |
| 18,867 | | |
| 22,859 | |
Net cash (used in) provided by investing activities | |
| (1,606,732 | ) | |
| 7,098,505 | |
| |
| | | |
| | |
Cash flows from financing activities | |
| | | |
| | |
Dividend paid to noncontrolling shareholders | |
| - | | |
| (355,177 | ) |
Net cash used in financing activities | |
| - | | |
| (355,177 | ) |
| |
| | | |
| | |
Effect of exchange rate changes on cash | |
| (325,340 | ) | |
| 1,719,371 | |
| |
| | | |
| | |
Net decrease in cash and cash equivalents | |
| (33,681,028 | ) | |
| (7,795,763 | ) |
| |
| | | |
| | |
Cash and cash equivalents at beginning of period | |
| 56,377,154 | | |
| 64,172,917 | |
| |
| | | |
| | |
Cash and cash equivalents at end of period | |
$ | 22,696,126 | | |
$ | 56,377,154 | |
| |
| | | |
| | |
Supplemental disclosure of cash flow information | |
| | | |
| | |
Income tax paid | |
$ | - | | |
$ | - | |
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