Wah Fu Education Group Limited (“Wah Fu” or the “Company”) (NASDAQ:WAFU), a provider of online education and exam preparation services, as well as related training materials and technology solutions for both institutions and individuals, today announced its unaudited financial results for the six months ended September 30, 2020.

Financial Highlights for the Six Months Ended September 30, 2020

    For the Six Months Ended  September 30,  
($’000, except per share data)   2020     2019     % Change  
Revenue   $ 4,302     $ 2,500       72.1 %
Gross profit   $ 2,430     $ 986       146.5 %
Gross margin     56.5 %     39.4 %     17.1 pp
Income (loss) from operations   $ 687     $ (1,038 )     -166.2 %
Operating profit (loss) margin     16.0 %     -41.5 %     57.5 pp
Net income (loss)   $ 511     $ (1,183 )     -143.2 %
Basic and diluted earnings (loss) per share   $ 0.09     $ (0.29 )     -131.0 %

* pp: percentage points            

  Revenue increased by 72.1% year-over-year to $4.30 million for the six months ended September 30, 2020 from $2.50 million for the same period of the prior fiscal year. The increase in revenue is primarily attributable to the increased revenue from online education services due to the impact of the COVID-19.
     
  Gross profit increased by 146.5% to $2.43 million for the six months ended September 30, 2020 from $0.99 million for the same period of the prior fiscal year. Gross margins were 56.5% and 39.4% for the six months ended September 30, 2020 and 2019, respectively. The increased gross profit was mainly due to (i) the sharply increased revenue from online education service due to the impact of the COVID-19, which had a higher gross margin; (ii) the decreased salary expense for IT service personnel since the Company shifted focus to online education service.
     
  Income from operations was $0.69 million for the six months ended September 30, 2020, compared to loss from operations of $1.04 million for the same period of the prior fiscal year. Operating profit margin was 16.0% for the six months ended September 30, 2020, compared to operating loss margin of 41.5% for the same period of the prior fiscal year.
     
  Net income was $0.51 million or, income per share of $0.09 for the six months ended September 30, 2020, compared to net loss of $1.18 million, or loss per share of $0.29, for the same period of the prior fiscal year.

Unaudited Financial Results for the Six months Ended September 30, 2020

Revenue

For the six months ended September 30, 2020, revenue increased by $1.80 million, or 72.1%, to $4.30 million from $2.50 million for the same period of the prior fiscal year. The increase in revenue is primarily attributable to the increase of revenue from online education services.

For the six months ended September 30, 2020, revenue from online education services increased by $1.74 million, or 71.0%, to $4.19 million from $2.45 million for the same period of the prior fiscal year. The increase was primarily due to increase in B2B2C revenues. The increase in B2B2C revenues was due to the increased revenue from online continuing education and examination service. Due to the impact of the COVID-19, the daily offline education and teaching activities of colleges and universities across the country were suspended due to government’s regulations. The online courses we provided during the six months ended September 30, 2020 thus increased sharply. As a consequence, revenue from online education services increased, compared to the same period of the prior fiscal year. The number of courses provided increased by 41,231 from 244,422 courses for the six months ended September 30, 2019 to 285,653 courses for the six months ended September 30, 2020.

Cost of revenue

Cost of revenue increased by $0.36 million, or 24.2%, to $1.85 million for the six months ended September 30, 2020 from $1.49 million for the same period of the prior fiscal year. The increase in overall cost of revenue was mainly due to increased cost of revenue for online education services. Because revenue from the online education services increased, the cooperation fee paid to collaborators increased. The increase was partially offset by payroll expense due to the decrease of the total number of employees during the six months ended September 30, 2020.

Cost of revenue for online education services increased by $0.34 million, or 22.8%, to $1.83 million for the six months ended September 30, 2020 from $1.49 million for the same period of the prior fiscal year. The increase in cost of revenue for online education services was primarily due to increased collaboration fees resulting from business expansion in Hunan Province. As the total numbers of adult education course increased, the collaboration fees paid to collaborator increased accordingly.

Gross profit

Gross profit increased by $1.44 million, or 146.5%, to $2.43 million for the six months ended September 30, 2020 from $0.99 million for the same period of the prior fiscal year. As a result, gross margin increased by 17.1 points to 56.5% for the six months ended September 30, 2020 from 39.4% for the same period of the prior fiscal year.  Gross profit for online education services increased by $1.40 million or 148.9% to $2.34 million for the six months ended September 30, 2020 from $0.94 million for the same period of the prior fiscal year. As the online courses we provided during the six months ended September 30, 2020 increased sharply, the revenue from online education services increased compared to the same period of the prior fiscal year. As the operation of our platform remained stable, the cost of online education services, such as collaboration fees paid to universities, depreciation and amortization expenses, didn’t increase exactly in line with increase in revenue. As a result, gross margin for online education services increased to 56.0% for the six months ended September 30, 2020 from 38.4% for the same period of the prior fiscal year.

Operating expenses

Selling expenses increased by $0.05 million, or 6.6%, to $0.81 million for the six months ended September 30, 2020 from $0.76 million for the same period of the prior fiscal year. The increase was mainly due to the increased effort the company put in marketing in current period.

General and administrative expenses decreased by $0.33 million, or 26.2%, to $0.93 million for the six months ended September 30, 2020 from $1.26 million for the same period of the prior fiscal year. The decrease was primarily because the government claimed the company exempt from social insurance during the six months ended September 30, 2020 due to the impact of COVID-19.

Total operating expenses decreased by $0.28 million, or 13.9%, to $1.74 million for the six months ended September 30, 2020 from $2.02 million for the same period of the prior fiscal year.

Income (loss) from operations

Income from operations was $0.69 million for the six months ended September 30, 2020, compared to loss from operations of $1.04 million for the same period of the prior fiscal year. We realized profit mainly due to the increase of revenue during the six months ended September 30, 2020. For details reasons, please see above.

Other income (expenses)

Total other income, including interest income, loss from investments in unconsolidated entity, net of other expenses, were $0.04 million and $0.04 million for the six months ended September 30, 2020 and the same period of the prior fiscal year, respectively.

Income (loss) before income taxes

Income before income taxes was $0.72 million for the six months ended September 30, 2020, compared to loss before income taxes of $1.00 million for the same period of the prior fiscal year.

Net income (loss) and earnings (loss) per share

Net income was $0.51 million for the six months ended September 30, 2020, compared to net loss of $1.18 million for the same period of the prior fiscal year. Net profit margin was 11.9% for the six months ended September 30, 2020, compared to net loss margin of 47.3% for the same period of the prior fiscal year.

After deducting non-controlling interests, net profit attributable to the Company was $0.37 million, or profit of $0.09 basic and diluted share, for the six months ended September 30, 2020. This compared to net loss of $1.23 million, or loss of $0.29 per basic and diluted share, for the same period of the prior fiscal year.

Weighted average number of shares outstanding was 4,381,033 for the six months ended September 30, 2020, compared to 4,199,336 for the same period of last fiscal year.

Financial Condition

As of September 30, 2020, the Company had cash of $9.27 million, compared to $6.83 million as of March 31, 2020. Total working capital was $8.64 million as of September 30, 2020, compared to $7.34 million as of September 30, 2019.

Net cash provided by operating activities was $1.59 million for the six months ended September 30, 2020, compared to net cash provided by operating activities of $1.13 million for the same period last year. Net cash provided by investing activities was $0.68 million for the six months ended September 30, 2020, compared to net cash used in investing activities $0.06 million for the same period last year. Net cash used in financing activities was $0.09 million for the six months ended September 30, 2020, compared to net cash provided by financing activities $4.89 million for the same period of last year.

About Wah Fu Education Group Limited

Headquartered in Beijing, China, Wah Fu Education Group Limited provides online training and exam preparation services, as well as related training materials and technology solutions for both institutions, such as universities and training institutions, and students. For more information about Wah Fu, please visit www.edu-edu.cn.

Safe Harbor Statement

This press release contains forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. Forward-looking statements include statements concerning plans, objectives, goals, strategies, future events or performance, and underlying assumptions and other statements that are not statements of historical facts. When the Company uses words such as “may, “will, “intend,” “should,” “believe,” “expect,” “anticipate,” “project,” “estimate” or similar expressions that do not relate solely to historical matters, it is making forward-looking statements. Forward-looking statements are not guarantees of future performance and involve risks and uncertainties that may cause the actual results to differ materially from the Company’s expectations discussed in the forward-looking statements. These statements are subject to uncertainties and risks including, but not limited to, the following:  the Company’s goals and strategies; the Company’s future business development; product and service demand and acceptance; changes in technology; economic conditions; the growth of the online training industry in China and the other markets the Company serves or plans to serve; reputation and brand; the impact of competition and pricing; government regulations; fluctuations in general economic and business conditions in China and the other markets the Company serves or plans to serve and assumptions underlying or related to any of the foregoing and other risks contained in reports filed by the Company with the Securities and Exchange Commission (the “SEC”).  For these reasons, among others, investors are cautioned not to place undue reliance upon any forward-looking statements in this press release. Additional factors are discussed in the Company’s filings with the SEC, which are available for review at www.sec.gov. The Company undertakes no obligation to publicly update these forward-looking statements to reflect events or circumstances that arise after the date hereof.

For more information, please contact:

Raincy Du ir@edu-edu.com.cn

WAH FU EDUCATION GROUP LIMITED AND SUBSIDIARIESUNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

    As of September 30,     As of  March 31,  
    2020     2020  
ASSETS            
CURRENT ASSETS:            
Cash   $ 9,266,310     $ 6,833,891  
Accounts receivable, net     1,149,926       542,913  
Other receivables, net     74,601       143,920  
Loan to third parties, current     666,669       42,316  
Loan to related parties     1,832,051       2,537,532  
Other current assets     199,543       150,213  
TOTAL CURRENT ASSETS     13,189,100       10,250,785  
                 
Loan to third parties, noncurrent     -       579,335  
Right-of-use assets     494,963       603,553  
Rent deposit     76,123       73,049  
Property and equipment, net     743,552       775,465  
Investments in unconsolidated entities     11,439       10,977  
Deferred tax assets, net     338,191       272,115  
TOTAL  ASSETS   $ 14,853,368     $ 12,565,279  
                 
CURRENT LIABILITIES:                
Due to related parties   $ 297,855     $ 286,353  
Deferred revenue     2,399,981       1,524,918  
Operating lease liabilities, current     265,610       254,332  
Taxes payable     580,341       314,052  
Other payables     200,716       189,201  
Accrued expenses and other liabilities     808,483       335,699  
TOTAL CURRENT LIABILITIES     4,552,986       2,904,555  
                 
Operating lease liabilities, noncurrent     242,695       361,595  
TOTAL LIABILITIES     4,795,681       3,266,150  
                 
COMMITMENTS AND CONTINGENCIES                
                 
EQUITY                
Common stock, $0.01 par value, 30,000,000 shares authorized; 4,381,033 and 4,381,033 shares issued and outstanding as of September 30, 2020 and March 31, 2020 respectively     43,810       43,810  
Additional paid-in capital     4,799,384       4,799,384  
Statutory reserve     231,424       231,424  
Retained earnings     5,098,639       4,723,999  
Accumulated other comprehensive loss     (505,639 )     (734,028 )
Total shareholders’ equity     9,667,618       9,064,589  
Non-controlling interest     390,069       234,540  
TOTAL EQUITY     10,057,687       9,299,129  
TOTAL LIABILITIES AND EQUITY   $ 14,853,368     $ 12,565,279  

WAH FU EDUCATION GROUP LIMITED AND SUBSIDIARIESUNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

    For the Six Months Ended September 30,  
    2020     2019  
             
REVENUE   $ 4,302,082     $ 2,500,195  
                 
COST OF REVENUE AND RELATED TAX                
Cost of revenue     1,853,601       1,491,384  
Business and sales related tax     18,634       22,509  
                 
GROSS PROFIT     2,429,847       986,302  
                 
OPERATING EXPENSES                
Selling expenses     812,877       764,179  
General and administrative expenses     929,998       1,259,784  
Total operating expenses     1,742,875       2,023,963  
                 
INCOME (LOSS) FROM OPERATIONS     686,972       (1,037,661 )
                 
OTHER INCOME (EXPENSE)                
Interest income     82,864       46,447  
Other expenses     (46,389 )     (5,726 )
Total other income, net     36,475       40,721  
                 
INCOME (LOSS) BEFORE INCOME TAX PROVISION     723,447       (996,940 )
                 
PROVISION FOR INCOME TAXES     212,024       186,434  
                 
NET INCOME (LOSS)     511,423       (1,183,374 )
                 
Less: net income attributable to non-controlling interest     136,783       41,653  
                 
NET INCOME (LOSS) ATTRIBUTABLE TO WAH FU EDUCATION GROUP LIMITED   $ 374,640     $ (1,225,027 )
                 
COMPREHENSIVE INCOME (LOSS)                
Net income (loss)     511,423       (1,183,374 )
Other comprehensive loss: foreign currency translation loss     247,135       (388,073 )
Total comprehensive loss     758,558       (1,571,447 )
Less: Comprehensive income (loss) attributable to non-controlling interest     18,746       (26,088 )
                 
COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO WAH FU EDUCATION GROUP LIMITED   $ 739,812     $ (1,545,359 )
                 
Earnings (loss) per common share - basic and diluted   $ 0.09     $ (0.29 )
Weighted average shares - basic and diluted     4,381,033       4,199,336  

  

WAH FU EDUCATION GROUP LIMITED AND SUBSIDIARIESUNAUDITED CONDENSED CONSOLIDATION STATEMENTS OF CHANGES IN EQUITY

    Ordinary Shares     Additional  Paid-in     Statutory     Retained     Accumulated Other Comprehensive     Shareholders’     Non-controlling     Total  
    Shares     Amount     Capital     Reserves     Earnings     Income (Loss)     Equity     Interest     Equity  
                                                       
Balance at March 31, 2020     4,381,033     $ 43,810     $ 4,799,384     $ 231,424     $ 4,723,999     $ (734,028 )   $ 9,064,589     $ 234,540     $ 9,299,129  
                                                                         
Net income (loss)     -       -       -       -       374,640       -       374,640       136,783       511,423  
Foreign currency translation adjustment     -       -       -       -       -       228,389       228,389       18,746       247,135  
                                                                         
Balance at September 30, 2020     4,381,033     $ 43,810     $ 4,799,384     $ 231,424     $ 5,098,639     $ (505,639 )   $ 9,667,618     $ 390,069     $ 10,057,687  
                                                                         
Balance at March 31, 2019     3,200,000     $ 32,000     $ 217,395     $ 222,180     $ 6,421,944     $ (407,169 )   $ 6,486,350     $ 211,353     $ 6,697,703  
                                                                         
Common stock issued net of stock issuance costs of $1,266,326     1,181,033       11,810       4,627,029       -       -       -       4,638,839       -       4,638,839  
Net income (loss)     -       -       -       -       (1,225,027 )     -       (1,225,027 )     41,653       (1,183,374 )
Foreign currency translation adjustment     -       -       -               -       (361,985 )     (361,985 )     (26,088 )     (388,073 )
Balance at September 30, 2019     4,381,033     $ 43,810     $ 4,844,424     $ 222,180     $ 5,196,917     $ (769,154 )   $ 9,538,177     $ 226,918     $ 9,765,095  

  

WAH FU EDUCATION GROUP LIMITED AND SUBSIDIARIESUNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

    For the six months ended, September 30  
    2020     2019  
Cash flows from operating activities:            
Net Income (loss)   $ 511,423     $ (1,183,374 )
Adjustments to reconcile net income (loss) to net cash provided by operating activities:                
Depreciation and amortization     70,124       113,767  
Non-cash lease expense     130,173       78,861  
Loss from disposal of property and equipment     -       88  
Provision for doubtful accounts     241,551       59,242  
Provision for investments in unconsolidated entities     23,329       -  
Interest income from loan to third parties     (72,600 )     (15,610 )
Deferred tax benefit     (53,069 )     91,148  
Changes in operating assets and liabilities:                
Accounts receivable, net     (645,705 )     929,249  
Other receivable, net     150,959       (155,658 )
Other current assets     (44,446 )     67,131  
Rent deposit     (77,731 )     (74,856 )
Deferred revenue     787,789       1,157,842  
Taxes payable     245,863       108,238  
Other payable     4,074       -  
Operating lease liabilities     (129,738 )     (56,131 )
Accrued expenses and other liabilities     445,590       13,928  
Net cash provided by operating activities     1,587,586       1,133,865  
                 
Cash flows from investing activities:                
Purchase of property and equipment     (7,417 )     (63,111 )
Proceeds made for loans to related party     (1,650,000 )     -  
Proceeds from loans to related party     2,355,481       -  
Payments made for loans to third parties     (18,321 )     -  
Net cash provided by (used in) investing activities     679,743       (63,111 )
                 
Cash flows from financing activities:                
Changes in due to related parties     (88,510 )     26,040  
Net proceeds from initial public offering (“IPO”)     -       4,866,512  
Net cash provided by (used in) financing activities     (88,510 )     4,892,552  
                 
Effect of exchange rate fluctuation on cash     253,600       (293,494 )
                 
Net increase in cash     2,432,419       5,669,812  
Cash at beginning of the period     6,833,891       3,927,718  
Cash at end of the period   $ 9,266,310     $ 9,597,530  
                 
Supplemental cash flow information                
Cash paid for income taxes   $ 29,066     $ 11,228  
                 
Non-cash financing activities                
Right of use assets obtained in exchange for operating lease obligations   $ 816,057     $ 823,554  
Deferred offering cost netted with proceeds from IPO   $ -     $ 227,673