China Executive Education Corp - FORM 10-Q/A

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EXCEL - IDEA: XBRL DOCUMENT - China Executive Education Corp	Financial_Report.xls

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10−Q/A

Amendment No. 2

(Mark One)

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

For the quarterly period ended: September 30, 2011

o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____________ to _____________

Commission File Number: 000-54086

CHINA EXECUTIVE EDUCATION CORP.

(Exact Name of Registrant as Specified in Its Charter)

Nevada		75-3268300
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

c/o Hangzhou MYL Business Administration Consulting Co. Ltd.

Room 307, Hualong Business Building

110 Moganshan Road, Hangzhou 310005

People’s Republic of China

(Address of principal executive offices, Zip Code)

(+86) 0571-8880-8109

(Registrant’s telephone number, including area code)

_____________________________________________________

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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

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 (§ 232.405 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 ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

	Large accelerated filer ¨		Accelerated filer ¨

	Non-accelerated filer ¨ (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). Yes ¨ No x

The number of shares outstanding of each of the issuer’s classes of common stock, as of November 18, 2011 is as follows:

Class of Securities		Shares Outstanding
Common Stock, $0.001 par value		22,834,100

CHINA EXECUTIVE EDUCATION CORP.

Quarterly Report on Form 10-Q

Three and Nine Months Ended September 30, 2011

TABLE OF CONTENTS


	Page
Explanatory Note	1

PART I FINANCIAL INFORMATION

Item 1. Financial Statements.	2

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.	23

Item 3. Quantitative and Qualitative Disclosures About Market Risk.	32

Item 4. Controls and Procedures.	32

PART II OTHER INFORMATION

Item 1. Legal Proceedings.	33

Item 1A. Risks Factors.	33

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.	33

Item 3. Defaults Upon Senior Securities.	33

Item 4. [Removed and Reserved.]	33

Item 5. Other Information.	33

Item 6. Exhibits.	33

SIGNATURES	33

EXPLANATORY NOTE

This Amendment No. 2 to China Executive Education Corp.’s (the “Company”) Quarterly Report on Form 10-Q/A for the quarterly period ended September 30, 2011 is being made for the sole purpose to furnish Exhibit 101 to the Form 10-Q in accordance with Rule 405 of Regulation S-T. Exhibit 101 to this report provides the consolidated financial statements and related notes from the Form 10-Q formatted in XBRL (eXtensible Business Reporting Language).

No other changes have been made to the Form 10-Q Amendment No. 1. This Form 10-Q Amendment No. 2 speaks as of the original filing date of the Form 10-Q/A, does not reflect events that may have occurred subsequent to the original filing date and does not modify or update in any way disclosures made in the Form 10-Q Amendment No. 1.

PART I.

FINANCIAL INFORMATION.

ITEM 1.

FINANCIAL STATEMENTS.

CHINA EXECUTIVE EDUCATION CORP. AND SUBSIDIARIES

	PAGES

Consolidated balance sheets	3

Consolidated statements of operations and comprehensive loss	4

Consolidated statements of cash flows	5

Notes to consolidated financial statements	6 – 22

CHINA EXCUTIVE EDUCATION CORP. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

AS AT SEPTEMBER 30, 2011 AND DECEMBER 31, 2010

(Stated in US Dollars)

		September 30, 2011			December 31, 2010
ASSETS		(Unaudited)			(Restated - note 2)
Current assets:
	Cash and cash equivalents - restricted cash	$	313,269		$	302,924
	Cash and cash equivalents - unrestricted cash		5,749,557			10,272,391
	Advance to vendors		1,193,776			415,620
	Receivables from shareholder		1,891,364			1,828,905
	Other receivables		1,589,582			1,644,964
	Total current assets	$	10,737,548		$	14,464,804

Property, plant and equipment, net			1,193,416			735,876
Deferred tax asset			6,561,694			5,552,246
	Total Assets	$	18,492,658		$	20,752,926
LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
	Customer deposits	$	1,191,164		$	1,406,808
	Accrued expense		-			383,999
	Deferred revenue		16,547,649			11,563,046
	Other payables		230,930			309,911
	Income taxes payable		-			1,357,312
	Total current liabilities	$	17,969,743		$	15,021,076

	Deferred revenue	9,699,128			10,645,937
	Total liabilities	$	27,668,871		$	25,667,013

Commitments		-				-

Stockholders’ Deficiency
	Common stock, $0.001 par value, 75,000,000 shares authorized 22,834,100 shares and 22,834,100 shares issued and outstanding at September 30, 2011 and December 31, 2010, respectively	$	22,834		$	22,834
	Additional paid-in capital		1,775,842			1,775,842
	Statutory surplus		-			-
	Accumulated deficits		(10,576,204	)		(6,588,838	)
	Accumulated other comprehensive loss		(398,685	)		(123,925	)
	Total stockholders’ deficiency	$	(9,176,213	)	$	(4,914,087	)

	Total Liabilities and Stockholders’ Deficiency	$	18,492,658		$	20,752,926

See accompanying notes to consolidated financial statements

CHINA EXCUTIVE EDUCATION CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2011 AND 2011

(Stated in US Dollars)

	For the three months ended September 30						For the nine months ended September 30,
	2011			2010			2011			2010
	(Unaudited)			(Restated - note 2)			(Unaudited)				(Restated - note 2)

Revenues	$	2,787,621		$	1,997,786		$	5,663,276			$	5,747,939
Cost of revenue		2,046,316			1,541,677			5,445,817				4,902,226
Gross profit		741,305			456,109			217,459				845,713

Operating expenses
Selling expenses		493,647			1,034,042			2,530,630				2,292,686
General and administrative expense		859,193			948,223			2,392,160				2,898,269
Total operating expenses		1,352,840			1,982,265			4,922,790				5,190,955

Income from operations		(611,535	)		(1,526,156	)		(4,705,331	)			(4,345,242	)

Other income (expenses)
Interest income		26,497			15,507			86,197				23,019
Other income (expenses)		(21,394	)		(319,850	)		155,391				(246,544	)
Total other income(expenses)		5,103			(304,343	)		241,588				(223,525	)

Loss before income taxes		(606,432	)		(1,830,499	)		(4,463,743	)			(4,568,767	)

Provision for income taxes/(income tax benefits)		(506,491	)		373,415			476,377				1,107,897

Net loss		(1,112,923	)		(1,457,084	)		(3,987,366	)			(3,460,870	)
Foreign currency translation loss		(103,268	)		(28,308	)		(274,760	)			(41,544	)
Comprehensive loss		(1,216,191	)		(1,485,392	)		(4,262,126	)			(3,502,414	)
Total comprehensive loss	$	(1,216,191	)	$	(1,485,392	)	$	(4,262,126	)		$	(3,502,414	)
Basic and diluted loss per common share	$	(0.05	)	$	(0.06	)	$	(0.17	)		$	(0.16	)
Basic and diluted weighted average common shares outstanding	$	22,834,100		$	22,736,024		$	22,834,100			$	22,246,996
Cash dividends per common share	$	-		$	-		$	-			$	0.06

See accompanying notes to consolidated financial statements

CHINA EXECUTIVE EDUCATION CORP. AND SUBSIDIARIES

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2011 AND 2011

CONSOLIDATED STATEMENT OF CASH FLOWS

(Stated in US Dollars)

	For the nine months ended September 30,
	2011				2010
Cash flows from operating activities	(Unaudited)				(Restated)
Net loss		$	(3,987,366	)		$	(3,460,870	)
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization			153,347				40,953
Stock issued for services			-				105,000
Changes in assets and liabilities:
(Increase) decrease in -
Other receivables			55,382				(1,193,616	)
Advance to vendors			(778,156	)			246,029
Deferred tax asset			(1,009,448	)			(2,595,961	)
Increase (decrease) in -
Other payables			(78,981	)			(506,575	)
Advance from customers			(215,644	)			(794,683	)
Accrued expenses			(383,999	)			(48,846	)
Tax payable			(1,357,312	)			724,512
Deferred revenue			4,037,794				10,383,844
Net cash (used in) provided by operating activities		$	(3,564,383	)		$	2,899,787

Cash flows used in investing activities
Acquisition of property and equipment		$	(610,887	)		$	(117,424	)
Net cash used in investing activities		$	(610,887	)		$	(117,424	)

Cash flows from financing activities
Advance to shareholder		$	-			$	(1,804,620	)
Dividends paid			-				(1,401,024	)
Proceeds from issuance of common stock under a private placement			-				1,420,400
Net cash (used in) financing activities		$	-			$	(1,785,244	)

Effect of exchange rate changes on cash and cash equivalents		$	(347,564	)		$	(59,531	)

Net (decrease) increase in cash and cash equivalents			(4,175,270	)			997,119

Cash and cash equivalents, beginning of period			10,272,391				6,089,919

Cash and cash equivalents, end of period		$	5,749,557			$	7,027,507
Supplemental disclosures of cash flow information:
Interest paid		$	-			$	-
Income taxes paid		$	1,636,867			$	1,757,203

See accompanying notes to consolidated financial statements

CHINA EXECUTIVE EDUCATION CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2011 AND 2010

(Stated in US Dollars)

(Unaudited)

1. ORGANIZATION AND PRINCIPAL ACTIVITIES

China Executive Education Corp (the “Company”), formerly known as On Demand Heavy Duty Corp, is a corporation organized under the laws of the State of Nevada.

On February 12, 2010, the Company acquired all of the outstanding capital stock of Surmounting Limit Marketing Adviser Limited (“SLM”), a Hong Kong Corporation, through China Executive Education Corp., a Nevada corporation (the “Merger Sub”) wholly owned by the Company. SLM is a holding company whose only asset, held through a subsidiary, is 100% of the registered capital of Hangzhou MYL Business Administration Consulting Co., Ltd. (“MYL Business”), a limited liability company organized under the laws of the People’s Republic of China (“PRC”). Substantially all of SLM's operations are conducted in China through MYL Business, and through contractual arrangements with several of MYL Business’s affiliated entities in China, including Hangzhou MYL Commercial Services Co., Ltd. (“MYL Commercial”) and its subsidiaries. MYL Commercial is a fast-growing executive education company with dominant operation in Shanghai, the commercial center of China, providing comprehensive consulting services such as business administration, marketing strategy, designing of enterprise image, corporate investment and commerce, business conference as well as professional training programs designed to fit the needs of Chinese entrepreneurs to improve their leadership, management and marketing skills.

In connection with the acquisition, the Merger Sub issued 20 shares of the common stock of the Merger Sub which constituted no more than 10% ownership interest in the Merger Sub to the shareholders of SLM, in exchange for all the shares of the capital stock of SLM (the “Share Exchange” or “Merger”). The 20 shares of the common stock of the Merger Sub were converted into approximately 21,560,000 shares of the common stock of the Company so that upon completion of the Merger, the shareholders of SLM own approximately 98% of the common stock of the Company.

As part of the Merger, pursuant to a stock purchase agreement (the “Stock Purchase Agreement”), the Company transferred all of the outstanding capital of its subsidiary, On Demand Heavy Duty Holdings, Inc. (“Holdings”) to certain of its shareholders in exchange for the cancellation of 3,000,000 shares of the Company’s common stock (the “Split Off Transaction”). In addition, an aggregate of 3,070,000 shares were returned to the transfer agent for cancelation by other shareholders of Holdings. Following the Merger and the Split-Off Transaction, the Company discontinued its former business and is now engaged in the executive education business.

Upon completion of the Merger, there were 22,000,000 shares of the Company’s common stock issued and outstanding.

CHINA EXECUTIVE EDUCATION CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2011 AND 2010

(Stated in US Dollars)

1. ORGANIZATION AND PRINCIPAL ACTIVITIES (Continued)

As a result of these transactions, persons affiliated with the SLM and MYL Business owned securities that in the aggregate represented approximately 98% of the equity in the Company. In addition, in connection with the change of control contemplated by the Share Exchange, the directors and officers of the Company resigned from their positions and new directors and officers affiliated with MYL Business controlled the Board of Directors.

Consequently, the Company’s name was changed from “On Demand Heavy Duty Corp.” to the Merger Sub’s name “China Executive Education Corp.” in order to more effectively reflect the Company’s business and communicate the Company’s brand identity to customers.

The above mentioned merger transaction has been accounted for as a reverse merger under the purchase method of accounting since there was a change of control. Accordingly, SLM is treated as the continuing entity for accounting purposes. SLM did not commence business operations until April 2009.

SLM does not conduct any substantive operations of its own. Instead, through its subsidiary, MYL Business, it had entered into certain exclusive contractual agreements with Hangzhou MYL Commercial Services Co., Ltd. (“MYL Commercial”), a company incorporated in Hangzhou City, Zhejiang Province, People’s Republic of China (“PRC”) on March 25, 2009. Pursuant to these agreements, SLM is obligated to absorb a majority of the risk of loss from MYL Commercial’s activities and entitled it to receive a majority of its expected residual returns. In addition, MYL Commercial’s shareholders have pledged their equity interest in MYL Commercial to SLM, irrevocably granted SLM an exclusive option to purchase, to the extent permitted under PRC Law, all or part of the equity interests in MYL Commercial and agreed to entrust all the rights to exercise their voting power to the persons appointed by MYL Commercial. Through these contractual arrangements, the Company and SLM hold all the variable interests of MYL Commercial. Therefore, the Company is the primary beneficiary of MYL Commercial.

Based on these contractual arrangements, management believes that MYL Commercial should be considered as a Variable Interest Entity (“VIE”) under ASC 510 “Consolidation of Variable Interest Entities, and Interpretation of ARB No. 51”, because the Company is the primary beneficiary. Accordingly, the Company consolidates MYL Commercial and its subsidiary’s results, assets and liabilities

CHINA EXECUTIVE EDUCATION CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2011 AND 2010

(Stated in US Dollars)

2. RESTATEMENT OF PREVIOUSLY ISSUED CONSOLIDATED FINANCIAL STATEMENTS

On November 15, 2011, the Audit Committee of the Board of Directors of China Executive Education Corp. (the “Company”) concluded, based on recommendation from Albert Wong & Co., our current independent auditor that the Company’s consolidated financial statements for the years ended December 31, 2010 and 2009 contained in the Company’s Annual Report on Form 10-K for the fiscal years ended December 31, 2010 and 2009, each as filed with the Securities and Exchange Commission, should be restated. These restatements are non-cash related, and relate to following reasons:

The Company recognized its revenue based on invoices issued other than courses delivered in years ended December 31, 2010 and 2009, which resulted in the net revenues for these two years were overstated. In the restatement, the Company reversed the improperly recognized revenue and recorded as deferred revenue;

The Company only consolidated 90% controlling interest of the variable interests entity (the “VIE”) and recognized 10% as noncontrolling interest in years ended December 31, 2010 and 2009. Pursuant to the VIE agreements, the Company should be the primary beneficiary of the VIEs and consolidate the VIEs entirely. This error was corrected in the restatement;

3)	The Company failed to disclosed its VIEs in accordance to Accounting Standard Codification (the “ASC”) 810-10-45 and 50 in the years ended December 31, 2010 and 2009. The disclosure is amended in the restatement;

4)	The Company failed to recognized the deferred tax assets in related to the temporary difference due to deferred revenue in years ended December 31, 2010 and 2009. The deferred tax assets are properly recognized and disclosed in the restatement;

5)	Under and over accrual for certain liabilities as well as expenses; and

6)	Certain accounts were improperly classified.

The net effects of net income attributable to the Company’s shareholders for the years ended December 31, 2010 and 2009 were decrease of approximately $7.49 million and $2.97 million, respectively. And for nine and three months ended September 30, 2010 was decrease of approximately $7.34 million and $2.69 million, respectively.

The following tables set forth the financial impacts of the restatement on the Company.

Consolidated balance sheet	As of December 31, 2010
	As previously reported		Adjustment			As restated

ASSETS
Current Assets
Cash and cash equivalents- Unrestricted	$	10,272,391	$	-		$	10,272,391
Cash and cash equivalents- Restricted cash		302,924		-			302,924
Advance to vendors		415,619		-			415,619
Receivables from shareholder		-		1,828,905			1,828,905
Advance to management		328,791		(328,791	)		-
Other receivables		285,854		1,359,111			1,644,965
Total current assets		11,605,579		2,859,225			14,464,804

Property, plant and equipment, net		735,876		-			735,876
Long-term deposit		302,924		(302,924	)		-
Deferred tax asset		-		5,552,246			5,552,246

Total Assets	$	12,644,379	$	8,108,547		$	20,752,926

Current Liabilities
Accrued expense	$	653,261		(269,262	)	$	383,999
Customer deposits		4,883,410		(3,476,602	)		1,406,808
Income taxes payable		1,180,080		177,232			1,357,312
Deferred revenue		-		11,563,046			11,563,046
Due to shareholder		19,690		(19,690	)		-
Other payables		49,381		260,530			309,911
Total current liabilities		6,785,822		8,235,254			15,021,076

Deferred revenue		-		10,645,937			10,645,937
Total liabilities	$	6,785,822	$	18,881,191		$	25,667,013

Commitments

Shareholders' Deficiency
Common Stock, $0.001 par value 75,000,000 shares authorized,
22,834,100 shares issued and outstanding at December 31, 2010		22,834		-			22,834
Additional paid-in capital		1,771,516		4,326			1,775,842
Statutory surplus		43,917		(43,917	)		-
Accumulated deficits		3,946,927		(10,535,765	)		(6,588,838	)
Accumulated other comprehensive income		71,894		(195,819	)		(123,925	)
Total equity		5,857,088		(10,771,175	)		(4,914,087	)
Non-controlling interest		1,469		(1,469	)		-
Total stockholders’ deficiency		5,858,557		(10,772,644	)		(4,914,087	)
Total Liabilities and Stockholders’ Deficiency	$	12,644,379	$	8,108,547		$	20,752,926

CHINA EXECUTIVE EDUCATION CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2011 AND 2010

(Stated in US Dollars)

Consolidated statements of operations and comprehensive loss

	Three months ended September 30, 2010						Nine months ended September 30, 2010
	As previously reported		Adjustments		As restated		As previously reported		Adjustments		As restated


Revenues	$	6,486,065	$	(4,488,279)	$	1,997,786	$	15,528,473	$	(9,780,534)	$	5,747,939
Cost of revenue		2,239,353		(697,676)		1,541,677		4,521,454		380,772		4,902,226
Gross profit		4,246,712		(3,790,603)		456,109		11,007,019		(10,161,306)		845,713

Operating expenses
Selling expenses		1,034,295		(253)		1,034,042		2,408,154		(115,468)		2,292,686
General and administrative expenses		1,091,981		(143,758)		948,223		2,999,923		(101,654)		2,898,269
Total operating expenses		2,126,276		(144,011)		1,982,265		5,408,077		(217,122)		5,190,955

Income from operations		2,120,436		(3,646,592)		(1,526,156)		5,598,942		(9,944,184)		(4,345,242)

Other income
Interest income(expenses)		(1,550)		17,057		15,507		3,402		19,617		23,019
Other income(expenses)		(287,537)		(32,313)		(319,850)		(192,309)		(54,235)		(246,544)
Total other income(expenses)		(289,087)		(15,256)		(304,343)		(188,907)		(34,618)		(223,525)

Loss before income taxes benefits		1,831,349		(3,661,848)		(1,830,499)		5,410,035		(9,978,802)		(4,568,767)

Income taxes benefits (expenses)		(516,465)		889,880		373,415		(1,408,903)		2,516,800		1,107,897

Net income (loss)		1,314,884		(2,771,968)		(1,457,084)		4,001,132		(7,462,002)		(3,460,870)
Less: net income attributable to non-controlling interest		77,613		(77,613)		-		121,619		(121,619)		-
Net income attributable to the Company	$	1,237,271		(2,694,355)		(1,457,084)		3,879,513		(7,340,383)		(3,460,870)

Comprehensive income (loss)
Net income		1,314,884		(2,771,968)		(1,457,084)		4,001,132		(7,462,002)		(3,460,870)
Foreign currency translation gain (loss)		(92,654)		64,346		(28,308)		(154,803)		113,259		(41,544)
Total comprehensive income (loss)		1,222,230		(2,707,622)		(1,485,392)		3,846,329		(7,348,743)		(3,502,414)
Less: net income attributable to non-controlling interest		77,613		(77,613)		-		121,619		(121,619)		-

Comprehensive income attributable to the company		1,144,617		(2,630,009)		(1,485,392)		3,724,710		(7,227,124)		(3,502,414)
Basic and diluted income (loss) per common share	$	0.06		(0.13)		(0.07)		0.18		(0.34)		(0.16)

Basic and diluted weighted average common shares outstanding		22,736,024		-		22,736,024		22,246,996		-		22,246,996

Cash dividends per common share		0.07		(0.07)		-		0.13		(0.07)		0.06

CHINA EXECUTIVE EDUCATION CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2011 AND 2010

(Stated in US Dollars)

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a)	Method of accounting

The Company’s interim consolidated financial statements have been prepared in accordance with US GAAP.

The interim results of operations are not necessarily indicative of the results to be expected for the fiscal year ending December 31, 2011. The Company’s consolidated balance sheet as of December 31, 2010 has been taken from the Company’s audited consolidated balance sheet (restated) as of the date. All other consolidated financial statements contained herein are unaudited and, in the opinion of management, contain all adjustments (consisting only of normal recurring accruals) necessary for a fair presentation of financial position, results of operations and cash flows for the period presented. These consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements (restated) and notes thereto.

The preparation of consolidated financial statements in conformity with US GAAP 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 revenues and expenses during the reporting period. Actual results could differ from those estimates. This basis of accounting differs in certain material respects from that used for the preparation of the books of account of the Company’s principal subsidiaries, which are prepared in accordance with the accounting principles and the relevant financial regulations applicable to enterprises with limited liabilities established in the PRC, the accounting standards used in the places of their domicile. The accompanying interim consolidated financial statements reflect necessary adjustments not recorded in the books of account of the Company's subsidiaries to present them in conformity with US GAAP.

(b)	Principles of consolidation

The consolidated financial statements are presented in US Dollars and include the accounts of the Company and its subsidiary. All significant inter-company balances and transactions are eliminated in consolidation.

The Company owned its subsidiaries and variable interest entity (“VIE”) soon after its inception and continued to own the equity’s interests through September 30, 2011. The following table depicts the identity of the subsidiaries and VIE:

Name of the entity	Place of Incorporation	Ownership Percentage
Surmounting Limit Marketing Advisor Limited ("SLM")	Hong Kong, China	100%

Hangzhou MYL Business Administration Co., Ltd. ("MYL Business")	Hangzhou, China	100%

Shanghai MYL Consulting Co., Ltd. ("MYL Consulting")	Shanghai, China	100%

Hangzhou MYL Commercial Service., Ltd. ("MYL Commercial")	Hangzhou, China	VIE

(c)	Use of estimates

The preparation of the consolidated financial statements in conformity with generally accepted accounting principles in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Management makes these estimates using the best information available at the time the estimates are made; however actual results could differ materially from those estimates.

CHINA EXECUTIVE EDUCATION CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2011 AND 2010

(Stated in US Dollars)

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

(d)	Economic and political risks

The Company’s operations are conducted in the PRC. Accordingly, the Company’s business, financial condition and results of operations may be influenced by the political, economic and legal environment in the PRC, and by the general state of the PRC economy.

The Company’s operations in the PRC are subject to special considerations and significant risks not typically associated with companies in North America and Western Europe. These include risks associated with, among others, the political, economic and legal environment and foreign currency exchange. The Company’s results may be adversely affected by changes in the political and social conditions in the PRC, and by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency conversion, remittances abroad, and rates and methods of taxation, among other things.

(e)	Cash and concentration of risk

Cash includes cash on hand, cash in bank and demand deposits in accounts maintained within the PRC and Kong Kong. The Company has not experienced any losses in such accounts and believes it is not exposed to any risk on its cash in bank accounts.

(f)	Accounting for the impairment of long-lived assets

The Company periodically evaluates the carrying value of long-lived assets to be held and used, including intangible assets subject to amortization, when events and circumstances warrant such a review, pursuant to the guidelines established in ASC No. 360, “Property, Plant and Equipment”. The carrying value of a long-lived asset is considered impaired when the anticipated undiscounted cash flow from such asset is separately identifiable and is less than its carrying value. In that event, a loss is recognized based on the amount by which the carrying value exceeds the fair market value of the long-lived asset. Fair market value is determined primarily using the anticipated cash flows discounted at a rate commensurate with the risk involved. Losses on long-lived assets to be disposed of are determined in a similar manner, except that fair market values are reduced for the cost to dispose.

During the reporting periods, there was no impairment loss.

(g)	Cash and cash equivalents

The Company considers all highly liquid investments purchased with original maturities of three months or less to be cash equivalents. The Company maintains bank accounts in the Hong Kong. The subsidiaries of the Company maintain bank accounts in Hong Kong and the PRC.

CHINA EXECUTIVE EDUCATION CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2011 AND 2010

(Stated in US Dollars)

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

(h)	Retirement benefits

The employees of the Company are members of a state-managed retirement benefit plan operated by the government of the PRC. The Company is required to contribute a specified percentage of payroll costs to the retirement benefit scheme to fund the benefits. The only obligation of the Company with respect to the retirement benefit plan is to make the specified contributions.

(i)	Property, plant and equipment

Plant and equipment are carried at cost less accumulated depreciation. Depreciation is provided over their estimated useful lives, using the straight-line method. Estimated useful lives of the property, plant and equipment are as follows:

Buildings	20 years
Computer and electronic equipments	3-5 years
Leasehold improvement	3 years
Motor vehicles	5 years

The cost and related accumulated depreciation of assets sold or otherwise retired are eliminated from the accounts and any gain or loss is included in the statement of income.

(j)	Foreign currency translation

The accompanying consolidated financial statements are presented in United States dollars. The functional currency of the Company is the Renminbi (RMB). The consolidated financial statements are translated into United States dollars from RMB at year-end exchange rates as to assets and liabilities and average exchange rates as to revenues and expenses. Capital accounts are translated at their historical exchange rates when the capital transactions occurred.

The exchange rates used to translate amounts in RMB into USD for the purposes of preparing the consolidated financial statements were as follows:

	September 30, 2011		December 31, 2010		September, 30, 2010
Twelve months ended		-		6.6023		-
RMB : USD exchange rate
Nine months ended		6.3843		-		6.6912
RMB : USD exchange rate
Average nine months ended		6.4967		-		6.8066
RMB : USD exchange rate

CHINA EXECUTIVE EDUCATION CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2011 AND 2010

(Stated in US Dollars)

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

(j)	Foreign currency translation(Continued)

The RMB is not freely convertible into foreign currency and all foreign exchange transactions must take place through authorized institutions. No representation is made that the RMB amounts could have been, or could be, converted into USD at the rates used in translation. In addition, the current foreign exchange control policies applicable in PRC also restrict the transfer of assets or dividends outside the PRC.

(k)	Accounts receivable

Accounts receivable is recognized and carried at the original invoice amount less allowance for any uncollectible amounts. An allowance for doubtful accounts is maintained for all customers based on a variety of factors, including the length of time the receivables are past due, significant one-time events and historical experience. Bad debts are written off as incurred. During the reporting years, there were no bad debts.

Outstanding accounts balances are reviewed individually for collectability. The Company does not charge any interest income on trade receivables. Accounts balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. To date, the Company has not charged off any balances as it has yet to exhaust all means of collection.

(l)	Statutory reserves

As stipulated by the PRC’s Company Law and as provided in the company’s Articles of Association, company’s net income after taxation can only be distributed as dividends after appropriation has been made for the following:

i.	Making up cumulative prior years’ losses, if any;

ii.

Allocations to the “Statutory surplus reserve” of at least 10% of income after tax, as determined under PRC accounting rules and regulations, until the fund amounts to 50% of the Company's registered capital, which is restricted for set off against losses, expansion of production and operation or increase in registered capital;

iii.	Allocations of 5-10% of income after tax, as determined under PRC accounting rules and regulations, to the Company's “Statutory common welfare fund”, which is restricted for capital expenditure for the collective benefits of the Company's employees; and

iv.	Allocations to the discretionary surplus reserve, if approved in the shareholders’ general meeting.

CHINA EXECUTIVE EDUCATION CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2011 AND 2010

(Stated in US Dollars)

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

(m)	Revenue recognition

The Company records all tuition as deferred revenue when students begin a class. Revenue is recognized based on a pro rata basis over the quantity of classes attended by the students. This results in the Company’s balance sheet including future revenues that have not yet been earned as deferred revenue for classes that are not yet attended.

Tuition revenue is generally recognized over the length of the course and/or program as applicable.

Refund policy permits students who apply for a refund for the portion of the course they did not attend. The Company may refund a portion of fees after negotiated. In the past practice, there are seldom cases that the students apply for refund, and it is no significant impact on revenue recognition of the Company based on the best estimation of the management. Refunds result in a reduction in deferred revenue during the period that a student drops or withdraws from a class because associated tuition revenue is recognized pro rata over the quantity of classes are delivered.

Generally, net revenue varies from period to period based on several factors, including the aggregate number of students attending classes, the number of classes held during the period, and the tuition price.

The Company’s revenue is principally derived from tuition and fees associated with two kinds of educational programs to the students: proprietary training courses, and comprehensive training courses.

Proprietary training courses, which normally take several days to complete, primarily consisted of featured lectures. These courses are provided on a roll-over basis over the year. Based on the courses attendance record, the revenue is recognized at the delivered courses to the students.

Comprehensive training courses, which are composed with sixteen individual courses with systematic training in leadership development, i.e. decision making skills, negotiation skills, presentation skills and people skills. Based on the contracts, the students are eligible to enroll the courses within three years period. The revenue is recognized on pro rata basis over the quantity of classes attended.

(n)	Income taxes

The Company accounts for income taxes using an asset and liability approach and allows for recognition of deferred tax benefits in future years. Under the asset and liability approach, deferred taxes are provided for the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. A valuation allowance is provided for deferred tax assets if it is more likely than not these items will either expire before the Company is able to realize their benefits, or that future realization is uncertain.

The Company is operating in the PRC, and in accordance with the relevant tax laws and regulations of PRC, the enterprise income tax rate for the nine months ended September 30, 2011 and 2010 were 25%.

CHINA EXECUTIVE EDUCATION CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2011 AND 2010

(Stated in US Dollars)

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

(o)	Comprehensive income

Comprehensive income is defined to include all changes in equity except those resulting from investments by owners and distributions to owners. Among other disclosures, all items that are required to be recognized under current accounting standards as components of comprehensive income are required to be reported in a consolidated financial statement that is presented with the same prominence as other consolidated financial statements. The Company’s current component of other comprehensive income is the foreign currency translation adjustment.

(p)	Recently implemented standard

In May 2011, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2011-04, “Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in GAAP and IFRSs.” This ASU represents the converged guidance of the FASB and the International Accounting Standards Board (the “Boards”) on fair value measurement. The collective efforts of the Boards have resulted in common requirements for measuring fair value and for disclosing information about fair value measurements. The amendments are effective for public entities for interim and annual periods beginning after December 15, 2011, and should be applied prospectively. Early adoption is not permitted for public entities; therefore, the Company currently expects to adopt this standard in the first quarter of 2012. The Company is currently reviewing the effect this new pronouncement will have on the consolidated financial statements.

In June 2011, the FASB issued ASU No. 2011-05, “Comprehensive Income (Topic 220): Presentation of Comprehensive Income”. This ASU amends the FASB Accounting Standards Codification (Codification) to allow an entity the option to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. The amendments are effective for public entities for annual periods beginning after December 15, 2011, and should be applied prospectively. Early adoption is permitted; the Company currently expects to adopt this standard in the first quarter of 2012. The Company is currently reviewing the effect this new pronouncement will have on the consolidated financial statements.

Except for the ASUs above, in the first nine months ended September 30, 2011, The FASB has issued ASU No. 2011-01 through ASU 2011-09, which is not expected to have a material impact on the consolidated financial statements upon adoption.

CHINA EXECUTIVE EDUCATION CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2011 AND 2010

(Stated in US Dollars)

4. CONCENTRATIONS OF CREDIT RISK AND MAJOR CUSTOMERS

Financial instruments that potentially expose the company to concentrations of credit risk, consists of cash and accounts receivable as of September 30, 2011 and 2010. The Company performs ongoing evaluations of its cash position and credit evaluations to ensure sound collections and minimize credit losses exposure.

As of September 30, 2011 and 2010, all the Company’s bank deposits were conducted with banks in the PRC where there is currently no rule or regulation mandated on obligatory insurance of bank accounts.

For the nine months ended September 30, 2011 and 2010, all of the Company’s sales were generated from the PRC. In addition, all accounts receivable as of September 30, 2011 and 2010 also arose in the PRC.

The maximum amount of loss exposure due to credit risk that the Company would bear if the counter parties of the financial instruments failed to perform represents the carrying amount of each financial asset on the balance sheet.

Normally, the Company does not require collateral from customers or debtors.

5. VARIABLE INTEREST ENTITY

On May 1, 2009 MYL Business has entered into a series of exclusive contractual arrangements with (the “Contractual Arrangements”) MYL Commercial, pursuant to which MYL Business exercise effective control over the operations of MYL Commercial and receive the economic benefits of MYL Commercial. These agreements are summarized in the following paragraphs.

Exclusive Services Agreement. Pursuant to an exclusive services agreement by and among MYL Business, MYL Commercial and its subsidiary, dated May 1, 2009, MYL Commercial and its subsidiary irrevocably entrusted to MYL Business the management and operation of MYL Commercial and its subsidiary and the responsibilities and authorities of their shareholders and directors. The service fee to be paid by MYL Commercial and its subsidiary is equal to 95% of their total income which can be waived by MYL Business from time to time in its sole discretion.

Call Option Agreement. Pursuant to a call option agreement by and among MYL Business, MYL Commercial and MYL Commercial’s shareholders and subsidiary, dated as of May 1, 2009, each of MYL Commercial and MYL Commercial’s shareholders have granted MYL Business or its designee an exclusive option to purchase all or part of their equity interests in MYL Commercial and its subsidiary, or all or part of the assets of MYL Commercial, in each case, at any time determined by MYL Business and to the extent permitted by PRC law.

CHINA EXECUTIVE EDUCATION CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2011 AND 2010

(Stated in US Dollars)

5. VARIABLE INTEREST ENTITY (Continued)

Voting Rights Proxy Agreement. Pursuant to a voting rights proxy agreement by and among MYL Business, MYL Commercial and MYL Commercial’s shareholders and subsidiary, dated as of May 1, 2009, the shareholders of MYL Commercial and its subsidiary have granted the personnel designated by MYL Business the right to appoint directors and senior management of MYL Commercial and its subsidiary and to exercise all of their other voting rights as shareholders of MYL Commercial and its subsidiary, as the case may be, as provided under the articles of association of each such entity. Under the voting rights proxy agreement, there are no restrictions on the number, to the extent allowed under the respective articles of association of MYL Commercial and its subsidiary, or identity of those persons we can appoint as directors and officers.

Equity Pledge Agreement. Pursuant to an equity pledge agreement by and among MYL Business, MYL Commercial and MYL Commercial’s shareholders and subsidiary, dated as of May 1, 2009, each of the shareholders has pledged his or its equity interest in MYL Commercial and its subsidiary as the case may be, to MYL Business to secure their obligations under the relevant contractual control agreements to which each is a party, including but not limited to, the obligations of MYL Commercial and its subsidiary under the exclusive services agreement, call option agreement and voting rights proxy agreement. Under this equity pledge agreement, the shareholders have agreed not to transfer, assign, pledge or otherwise dispose of their interest in MYL Commercial or its subsidiary, as the case may be, without the prior written consent of MYL Business.

As a result of these Contractual Arrangements, under U.S.GAAP, MYL Business is considered the primary beneficiary of MYL Commercial and thus consolidate its results in our consolidates financial statements.

As a result of the Contractual Arrangement, MYL Business was granted with unconstrained decision making rights and power over key operational functions within the MYL Commercial. As a result, MYL Business will bear all of the Variable Interest Entities (“VIEs”) operating costs in exchange for 100% of the net income the VIEs. There is not any income or loss of the VIEs attributed to other parties. MYL Business does not have any equity interest in the VIEs, but instead has the right to enjoy economic benefits similar to equity ownership through its Contractual Arrangements with MYL Commercial.

These contractual arrangements may not be as effective in providing MYL Business with control over the MYL Commercial as direct ownership. Due to its VIE structure, MYL Business has to rely on contractual rights to effect control and management of the MYL Commercial, which exposes it to the risk of potential breach of contract by the shareholders of MYL Commercial.

CHINA EXECUTIVE EDUCATION CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2011 AND 2010

(Stated in US Dollars)

5. VARIABLE INTEREST ENTITY (Continued)

In addition, as all of these Contractual Arrangements are governed by PRC law and provide for the resolution of disputes through either arbitration or litigation in the PRC, they would be interpreted in accordance with PRC law and any disputes would be resolved in accordance with PRC legal procedures. The legal environment in the PRC is not as developed as in other jurisdictions, such as the United States. As a result, uncertainties in the PRC legal system could further limit the Company’s ability to enforce these contractual arrangements. Furthermore, these contracts may not be enforceable in China if PRC government authorities or courts take a view that such contracts contravene PRC laws and regulations or are otherwise not enforceable for public policy reasons. In the event the Company is unable to enforce these contractual arrangements, it may not be able to exert effective control over the VIEs, and its ability to conduct its business may be materially and adversely affected. At present, the equity interest pledge agreement has not been registered with the PRC regulator.

None of the assets of the VIEs can be used only to settle obligations of the consolidated VIEs. Conversely, liabilities recognized as a result of consolidating these VIEs do not represent additional claims on the Company’s general assets.

The following financial statement amounts and balances of the VIEs were included in the accompanying consolidated financial statements as of and for the years ended:

	September 30, 2011		December 31, 2010
		(Unaudited)		(Restated)
Total assets	$	11,229,852	$	10,408,438
Total liabilities		27,655,626		23,778,652

6. PROPERTY, PLANT AND EQUIPMENT, NET

Details of property, plant and equipment are as follows:

	September 30, 2011			December 31, 2010
At cost	(Unaudited)			(Restated)
Buildings	$	97,868		$	94,636
Computer and electronic equipments		218,968			175,718
Leasehold improvement		472,107			49,358
Motor vehicles		627,925			486,269
Less: accumulated depreciation		(223,452	)		(70,105	)
	$	1,193,416		$	735,876

Depreciation expense included in the general and administrative expenses for the nine months ended September 30, 2011 was $153,347 (for the year ended December 31, 2010: $62,537).

CHINA EXECUTIVE EDUCATION CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2011 AND 2010

(Stated in US Dollars)

7. OTHER RECEIVABLES

Other receivables were comprised of the following:

	September 30, 2011		December 31, 2010
	(Unaudited)		(Restated)
Disbursement and advances to employees	$	108,460	$	536,223
Sale tax prepaid		806,962		641,975
Deposits paid and VAT set off		624,733		466,766
Others		49,427		-
	$	1,589,582	$	1,644,964

Loan advances to unrelated parties were unsecured, interest-free and repayable on demand.

CHINA EXECUTIVE EDUCATION CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2011 AND 2010

(Stated in US Dollars)

8. OTHER PAYABLES

Other payables were comprised of the following:

	September 30, 2011		December 31, 2010
	(Unaudited)		(Restated)
Sundry PRC taxes payables	$	11,445	$	38,241
Loan advances from unrelated parties		205,505		-
Deposits received and credit guarantees		11,140		48,472
Sales taxes payable		2,069		222,289
Sundries		771		909
	$	230,930	$	309,911

Loan advances from unrelated parties were unsecured, interest-free and repayable on demand.

9. DEFERRED REVENUE

Deferred revenue represents the tuition fees from enrolled students for courses not yet delivered. As of September 30, 2011 and December 31 2010, deferred revenue amounted to $26,246,777 and $22,208,983, respectively.

10. RELATED PARTY TRANSACTION

On July 2, 2010, the Company declares dividends in the total amount of RMB 12,075,000 (equivalent to $1,784,088) out of the retained earnings balance of Hangzhou MYL for the fiscal year ended December 31, 2009 to its sole shareholder, Surmounting Limit Marketing Adviser Limited(“SLM”). On the same date, SLM also made a resolution to distribute the net tax amount of such dividend that SLM receives to Magic Dream Enterprises Ltd., a company incorporated under the laws of British Virgin Island. And the shareholder Mr. Liang Kaien, the shareholder of the Company and Magic Dream Enterprises Ltd received the dividend payment. however, As at December 31,2010, the Company’s Board of Directors adopted a resolution, the dividend previously declared invalid, the Company should collect back the payment from the shareholder, Mr. Liang Kaien , As of September 30, 2011 and December 31 2010, receivable from shareholder amounted to $1,891,364 and $1,828,905 respectively.

The Company has several rental arrangements providing residential units to house key employees, including the Chief Executive Officer, Mr. Liang Kaien, Chief Operating Officer, Mr. Xu Pokai, and Chief Strategy Officer, Mr. Chen Tingyuan. For the nine months ended September 30, 2011 and 2010, housing benefits provided to these officers totaled $169,580 and $143,318, respectively.

In accordance with ASC 260 Earnings per Share, basic losses per common share is computed by using net income divided by the weighted average number of shares of common stock outstanding for the periods presented. Diluted losses per share reflect the potential dilution of securities that could share in the losses of the Company. Potential common stock shares consist of shares that may arise from outstanding dilutive common stock options and warrants (the number of which is computed using the “treasury stock method”). The calculation of diluted losses per common share assumes that outstanding common shares were increased by shares issuable upon exercise of those stock warrants for which the market price exceeds the exercise price, less shares that could have been purchased by the Company with related proceeds.

CHINA EXECUTIVE EDUCATION CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2011 AND 2010

(Stated in US Dollars)

11. BASIC AND DILUTED LOSSES PER SHARE

	Nine months ended September 30,
	2011			2010
				(Restated)
Net losses	$	(3,987,366	)	$	(3,460,870	)
Weighted average number of common shares outstanding – basic and diluted		22,834,100			22,246,996
Losses per share – basic and diluted	$	(0.17	)	$	(0.16	)

12. INCOME TAXES BENEFITS

United States

China Executive Education Corp. is subject to United States tax at a tax rate of 35%. No provision for income tax in the United States has been made as China Executive Education Corp. had no U.S. taxable income for the nine months ended September 30, 2011 and 2010.

Hong Kong

Incorporated in Hong Kong, the company is governed by the income tax law of Hong Kong. According to current Hong Kong income tax law, the applicable income tax rate for the company is 17.5%. No provision for income tax in the Hong Kong has been made as the Company had no Hong Kong taxable income for the nine months ended September 30, 2011 and 2010.

PRC

In accordance with the relevant tax laws and regulations of the PRC, a company registered in the PRC is subject to state and local income taxes within the PRC at the applicable tax rate on the taxable income. On March 16, 2007, the National People’s Congress of the PRC enacted a new Enterprise Income Tax Law (“Enterprise Income Tax Law”) under which foreign invested enterprises and domestic companies would be subject to Enterprise Income Tax Law at a uniform rate of 25%. The Enterprise Income Tax Law became effective on January 1, 2008.

CHINA EXECUTIVE EDUCATION CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2011 AND 2010

(Stated in US Dollars)

12. INCOME TAXES BENEFITS (Continued)

The Company’s PRC subsidiaries are subject to income tax at a rate of 25% for nine months ended September 30, 2011 and 2010.

The following table reconciles the Company’s effective tax for the periods presented:

	Nine months ended September 30,
	2011		2010
	(Restated)		(Restated)
Expected enterprise income tax benefits at statutory tax rate	$	476,377	$	1,107,897

The significant components of income tax benefits are as follows:

	Year ended December 31,
	2010		2009
	(Restated)		(Restated)
Current tax expenses	$	-	$	-
Deferred tax benefits		476,377		1,107,897
Income tax expenses	$	476,377	$	1,107,897

Deferred tax assets reflect the tax effects of temporary differences due to deferred revenue and between the carrying amounts of assets and liabilities for financial reporting purpose and the tax bases used for income tax purpose.

13. COMMITMENTS AND CONTINGENCIES

The Company did not have any significant capital commitment as of September 30, 2011 and December 31, 2010.

From time to time, the Company leases office spaces in Shanghai and Hangzhou in China to conduct its normal business activities, such as business administration, recruiting students, holding the business conferences and providing professional training courses or featured lectures to students. The Company also has several rental arrangements which provide residential units to house key employees. These lease agreements will expire before October 2012.

Rent expenses for the above rental arrangements total $667,465 and $565,678 for nine months ended September 30, 2011 and 2010, respectively.

The minimum obligations under such commitments (unless otherwise stated) for the years ending December 31 until their expiration are summarized below:

Year	Amount
2011	$	188,958
2012		654,778
2013		365,176
2014		208,672
Total	$	1,417,584

The Company did not record any contingencies as of September 30, 2011 and December 31, 2010.

14. SUBSEQUENT EVENTS

The Company has evaluated all other subsequent events and determined that there was no other a subsequent event or transactions that require recognition or disclosures in the consolidated financial statements.

ITEM 2.

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

Special Note Regarding Forward Looking Statements

In addition to historical information, this report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. We use words such as “believe,” “expect,” “anticipate,” “project,” “target,” “plan,” “optimistic,” “intend,” “aim,” “will” or similar expressions which are intended to identify forward-looking statements. Such statements include, among others, those concerning market and industry segment growth and demand and acceptance of new and existing products; any projections of sales, earnings, revenue, margins or other financial items; any statements of the plans, strategies and objectives of management for future operations; any statements regarding future economic conditions or performance; as well as all assumptions, expectations, predictions, intentions or beliefs about future events. You are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, including those identified in Item 1A “Risk Factors” included in our Annual Report on Form 10-K for the year ended December 31, 2010, as well as assumptions, which, if they were to ever materialize or prove incorrect, could cause the results of the Company to differ materially from those expressed or implied by such forward-looking statements.

Readers are urged to carefully review and consider the various disclosures made by us in this report and our other filings with the SEC. These reports attempt to advise interested parties of the risks and factors that may affect our business, financial condition and results of operations and prospects. The forward-looking statements made in this report speak only as of the date hereof and we disclaim any obligation, except as required by law, to provide updates, revisions or amendments to any forward-looking statements to reflect changes in our expectations or future events.

Use of Terms

Except where the context otherwise requires and for the purposes of this report only:

·	“Company,” “we,” “us,” and “our” refer to the combined business of China Executive Education Corp., a Nevada corporation, and its consolidated subsidiaries and variable interest entity;

·	“SLM” refers to our subsidiary Surmounting Limit Marketing Adviser Limited, a Hong Kong limited company;

·	“MYL Business” refers to our indirect subsidiary Hangzhou MYL Business Administration Consulting Co., Ltd., a PRC limited company;

·	“Shanghai MYL” refers to our indirect subsidiary Shanghai MYL Business Administration Consulting Co., Ltd., a PRC limited company;

·	“MYL Commercial” refers to our variable interest entity Hangzhou MYL Commercial Services Co., Ltd., a PRC limited company;

·	“MYL Training School” refers to MYL Commercial’s subsidiary Hangzhou Gongshu MYL Training School;

·	“Hong Kong” refers to the Hong Kong Special Administrative Region of the People’s Republic of China;

·	“PRC” and “China” are to the People’s Republic of China, excluding Hong Kong, Macau and Taiwan;

·	“SEC” are to the Securities and Exchange Commission;

·	“Securities Act” are to the Securities Act of 1933, as amended;

·	“Exchange Act” are to the Securities Exchange Act of 1934, as amended;

·	“Renminbi” and “RMB” are to the legal currency of China; and

·	“U.S. dollars,” “dollars” and “$” are to the legal currency of the United States.

Overview of our Business

We are a fast-growing executive education company with operations in Hangzhou and Shanghai, China. We operate comprehensive business training programs that are designed to fit the needs of Chinese entrepreneurs and to improve their leadership, management and marketing skills, as well as bottom-line results. Our comprehensive business training initiatives integrate research-based, proprietary content with processes that are specifically connected to the critical business issues that most private Chinese companies are facing. Our programs enable the trainees to better achieve their potential and better align their individual goals and competencies with the organizational objectives of their employers or business.

Our open-enrollment training programs include our proprietary training courses and comprehensive training courses. Our comprehensive training courses include one package of 16 courses for CEO and C-Level managers, as well as 23 leadership and personal development courses, focusing on management skills, negotiation skills, leadership skills and public speaking skills, among others. Featured lectures, delivered to large audiences, are presented by experts or well-known speakers in each relevant field. In 2010, we organized four such lectures in Shanghai. We believe that our network of speaking professionals is a leading platform for inspiring audiences to new levels of motivation and commitment.

We sell our training programs through our own sales team consisting of 235 employees. We also promote our services through the internet. Our websites are www.magicyourlife101.com and www.myl101.com.

Our principal executive offices are located at c/o Hangzhou MYL Business Administration Consulting Co. Ltd., Room 307, Hualong Business Building, 110 Moganshan Road, Hangzhou 310005, People’s Republic of China and our telephone number is (86) 0571-8880-8109.

Restatement of Previously Issued Financial Statements

On November 15, 2011, the Company was advised by Albert Wong that the financial statements as of the years ended December 31, 2009 and 2010 in the Form 10-K filed on April 15, 2011 have following accounting issues:

3)	The Company failed to disclosed its VIEs in accordance to Accounting Standard Codification (the “ASC”) 810-10-45 and 50 in the years ended December 31, 2010 and 2009. The disclosure is amended in the restatement;

4)	The Company failed to recognized the deferred tax assets in related to the temporary difference due to deferred revenue in years ended December 31, 2010 and 2009. The deferred tax assets are properly recognized and disclosed in the restatement;

5)	Under and over accrual for certain liabilities as well as expenses; and

6)	Certain accounts were improperly classified.

The net effects of net income attributable to the Company’s shareholders for the years ended December 31, 2009 and 2010 were decrease of approximately $2.97 million and $7.49 million, respectively. And for nine and three months ended September 30, 2010 was decrease of approximately $7.34 million and $2.69 million, respectively.

Third Quarter Financial Performance Highlights

The following summarizes certain key financial information for the third quarter of 2011:

·	Revenues: Revenues were $2,787,621 for the three months ended September 30, 2011, an increase of $789,835, or 40%, from $1,997,786 for the same period last year.

Gross profit and margin: Gross profit was $741,305 for the three months ended September 30, 2011, an increase of $285,196, or 63%, from $456,109 for the same period last year. Gross margin was 27% for the three months ended September 30, 2011, as compared to 23% for the same period last year, a 4% increase.

·	Net loss attributable to the Company: Net loss attributable to the Company was $1,112,923 for the three months ended September 30, 2011, a decrease of $344,161, or 24%, from a net loss of $1,457,084 for the same period of last year.

·	Fully diluted net loss per share: Fully diluted net loss per share for the three months ended September 30, 2011 was $0.05, as compared to a net loss per share of $0.06 for the same period last year.

Results of Operations

Comparison of Three Months Ended September 30, 2011 and September 30, 2010

	For the three months ended September 30
	2011				2010				Increase (Decrease)
					(Restated)				$				%

Revenues		$	2,787,621			$	1,997,786			$	789,835		40	%
Cost of revenue			2,046,316				1,541,677				504,639		33	%
Gross profit			741,305				456,109				285,196		63	%

Operating expenses
Selling expenses			493,647				1,034,042				(540,395	)	(52	%)
General and administrative expenses			859,193				948,223				(89,030	)	(9	%)
Total operating expenses			1,352,840				1,982,265				(629,425	)	(32	%)

Income from operations			(611,535	)			(1,526,156	)			914,621		(60	%)

Other income (expenses)
Interest income			26,497				15,507				10,990		71	%
Other income (expenses)			(21,394	)			(319,850	)			298,456		(93	%)
Total Other income(expenses)			5,103				(304,343	)			309,446		(102	%)

Loss before income taxes			(606,432	)			(1,830,499	)			1,224,067		(67	%)

Provision for income taxes/benefits			(506,491	)			373,415				(879,906	)	(236	%)

Net loss			(1,112,923	)			(1,457,084	)			344,161		(24	%)
Foreign currency translation gain(loss)			(103,268	)			(28,308	)			(74,960	)	265	%
Comprehensive loss			(1,216,191	)			(1,485,392	)			269,201		(18	%)
Comprehensive income attributable to China Executive Education Corp		$	(1,216,191	)		$	(1,485,392	)		$	269,201		(18	%)

The following table sets forth key components of our results of operations for the periods indicated.

Revenues. We provide two kinds of training programs to students: (1) proprietary training courses and (2) comprehensive training courses. Proprietary training courses, which normally take several days to complete, primarily consist of featured lectures. These courses are provided on a roll-over basis over the year. Started in the second half of 2010, we outsourced part of our student recruiting and marketing tasks to several local recruiting agents to help promote our training courses and programs. As a result, more students were recruited and attended our course trainings, which led to the increase in our sales revenue from proprietary training courses for the period indicated. Our comprehensive training course package includes sixteen courses (covers over forty-one main topics) to students by both Chinese lecturers and foreign lecturers. It normally takes several months to complete. The following table provides a breakdown of our revenues for the three months ended September 30, 2011 and 2010, respectively:

	Three Months Ended September 30,								Increase
	2011				2010				(Decrease)
		$	%			$	%			$	%
Proprietary Training Courses	$	2,385,030	86	%	$	1,630,568	82	%	$	754,462	46	%
Comprehensive Training Courses - Forbes		402,591	14	%		367,218	18	%		35,373	10	%
Total Revenues	$	2,787,621	100	%	$	1,997,786	100	%	$	789,835	40	%

Our revenues increased $789,835, or 40%, to $2,787,621 for the three months ended September 30, 2011, from $1,997,786 for the same period of 2010. The increase in our revenue was attributable to a number of factors, including:

First, revenue from preliminary training courses increased $754,462 or 46% for the quarter ended September 30,2011 as compared to the prior period, because of increased student recruiting and attendance during the quarter. The number of students participating the proprietary training courses increased from 1,377 students in 2010 to 2,242 students in 2011 as a result of using outsourced local agents to promote our training programs, which broadened our market coverage. As more students attended the preliminary training courses, sales revenue increased accordingly. The increase in student recruiting was offset by decreased average tuition price from $1,250 per course in 2010 to $1,064 per course in 2011. The Company focused on promotional sales seminars during the quarter aiming to recruit more students to participate the training courses in the near future, as a result, the tuition collected from such promotional seminars was lower than ordinary course offerings. Our overall increase in sales revenue from preliminary training courses for the three months ended September 30, 2011 reflected the above combined factors.

Second, revenue from comprehensive training programs increased from $367,218 for the quarter ended September 30, 2010 to $402,591 for the quarter ended September 30, 2011, an increase of $35,373, or 10%. The increase was mainly because the average tuition price for the comprehensive course program increased from $5,030 per student in 2010 to $6,941 per student in 2011, representing a 37% increase. The Company’s comprehensive training programs included 16 courses, among which 10 courses are taught by Chinese lecturers, and the remaining 6 courses taught by foreign lecturers are taught by invited foreign lecturers. The 10 courses in Chinese normally completed within 3 months; and the 6 courses can normally be completed within a 6-9 month periods, because the invitations and schedule arrangements need to be made in advance. For those students who have completed their 10 courses taught by Chinese lecturers, they must wait for the foreign lecturers’ arrival in order to move forward. This may affect the student course attendance from period to period. For the three months ended September 30, 2010, one invited foreign lecturer, Mr. John Maxwell, provided the lecturers to students, as a result, 73 students attended the comprehensive course training programs. For the same period of 2011, no invited foreign lecturers appeared in China to perform the lectures; as a result, only 58 students attended the courses.

Cost of revenue. Our costs of revenue primarily include expenditures incurred in connection with providing educational services to the students, such as renting conference rooms, booking hotels, compensation for lecturers, renting training equipment and materials as well as other direct labor costs incurred. For the three months ended September 30, 2011, cost of revenue increased by approximately $504,639, or 33%, as compared to the three months ended September 30, 2010. The following table summarizes the cost of revenue for the three months ended September 30, 2011 and 2010:

	Three Months Ended September 30,								Increase
	2011				2010				(Decrease)
		$	%			$	%			$		%
Cost of lecturer's compensation	$	61,981	3	%	$	416,852	27	%	$	(354,871	)	(85	%)
Hotel and conference-room		1,678,411	82	%		456,846	30	%		1,221,565		267	%
Educational facility costs		28,903	1	%		3,607	-			25,296		701	%
Administrative support		139,617	7	%		281,961	18	%		(142,344	)	(50	%)
Consulting fee		-	-			99	-			(99	)	-
Other cost		1,920				40,141	3	%		(38,221	)	(95	%)
Business tax		135,484	7	%		342,171	22	%		(206,687	)	(60	%)
Total cost of revenue	$	2,046,316	100	%	$	1,541,677	100	%	$	504,639		33	%

The change in cost of revenue was attributable to the cumulative effect of the following factors:

First, cost of lecturer’s compensation amounted to $61,981, or 3% of the total cost of revenue for the three months ended September 30, 2011, representing a $354,871 decrease as compared to the corresponding period of 2010. Normally, compensation paid to invited foreign lecturers is higher than compensation paid to Chinese lecturers. The decrease in lecturer’s compensation cost for the three months ended September 30, 2011 was due to decreased compensation paid to invited foreign lecturers. For the three months ended September 30, 2010, we paid about $400,000 to invited foreign lecturer Mr. John Maxwell for providing lecture to student in China. For the three months ended September 30, 2011, no invited foreign lecturers provided lectures to our students.

Second, the cost of hotel and conference rooms for the three months ended September 30, 2011 increased $1,221,565, or 267%, as compared to the prior comparative period. The increase in hotel and conference room costs was mainly because more students have attended the trainings as discussed above. In addition, in August 2011 we organized and held a training conference in Australia named “Anthony Robin dating the life”. Hotel and conference expense incurred to send students to participate in the training held overseas was higher than in the domestic market.

Gross profit and gross margin. Our gross profit is equal to the difference between our revenues and our cost of revenues. Our gross profit increased by $285,196, or 63%, to $741,305 for the three months ended September 30, 2011, as compared to $456,109 for the same period in 2010. Our gross profit as a percentage of revenue (gross margin) also increased to 27% for the three months ended September 30, 2011, from 23% in the prior comparative period. The increase in our gross profit and gross margin was primarily due to the increased revenues as discussed above.

Selling expenses. Our selling expenses mainly include advertising expense, sales commission paid to outside agents for student recruiting and salaries paid to our own sales forces. Selling expenses decreased $540,395, or 52%, when comparing the three months ended September 30, 2011 with the three months ended September 30, 2010. The decrease in our selling expenses was primarily because salary paid to our own sales forces reduced when we outsourced part of our student recruiting to several local agents. This strategy enabled us to focus more on course design and training organization and arrangements rather than sales promotion. For the same period of 2010, we used both local agents and our own sales force to conduct student recruiting. As a result, more salary was paid to our own sales force. As a result, selling expense was higher in 2010 than in 2011. We expect our selling and marketing expense to remain at a relatively stable level in the near future as we continue to use outsourced sales agents to help promote our training courses and conduct part of the student recruiting tasks.

General and administrative expenses. Our general and administrative expenses principally include staff salaries and benefits, traveling and entertainment expenses, professional fees, such as consulting, audit and legal fees, rent expense and other associated fees. Our general administrative expenses decreased $89,030, or 9%, for the three months ended September 30, 2011, as compared with the three months ended September 30, 2010. The decrease in our general and administrative expense for the quarter ended September 30, 2011 was due to decreased professional and consulting fee paid to maintain our Company’s public status in the United States. For the same period of 2010, since we had just become a publicly-listed Company, we paid more professional and consulting fees to various service providers in order to organize a road show and familiarize us with the U.S. capital market. As a result, such professional fees were higher in the same period of 2010.

Provision for income taxes and deferred tax benefit. Our variable interest entity are governed by the income tax laws of the PRC and are subject to a statutory rate of 25% on income reported in the statutory financial statements after appropriate tax adjustments. For the three months ended September 30, 2011, we incurred income taxes of $506,491. For the same period in 2010, we reported a deferred income tax benefit of $373,415 resulting in a net operating loss carry-forward.

Net income (loss). As a result of the cumulative effect of the foregoing factors, we reported a net loss of $1.11 million for the three months ended September 30, 2011, as compared to a net loss of $1.46 million for the same period of 2010, a decrease of $344,161, or 24%. The decrease in our net loss was due to the restatements of several line items in our income statement and was also affected by decreased operating expenses for the period indicated as discussed above.

Comparison of Nine Months Ended September 30, 2011 and September 30, 2010

The following table sets forth key components of our results of operations for the periods indicated.

	For the nine months ended September 30,
		2011			2010			Increase (Decrease)
					(Restated)			$		%
Revenues	$	5,663,276		$	5,747,939		$	(84,663	)	(1	%)
Cost of revenue		5,445,817			4,902,226			543,591		11	%
Gross profit		217,459			845,713			(628,254	)	(74	%)

Operating expenses
Selling expenses		2,530,630			2,292,686			237,944		10	%
General and administrative expenses		2,392,160			2,898,269			(506,109	)	(17	%)
Total operating expenses		4,922,790			5,190,955			(268,165	)	(5	%)

Income from operations		(4,705,331	)		(4,345,242	)		(360,089	)	8	%

Other income (expenses)
Interest income		86,197			23,019			63,178		274	%
Other income (expenses)		155,391			(246,544	)		401,935		(163	%)
Total Other income(expenses)		241,588			(223,525	)		465,113		(208	%)

Loss before income taxes		(4,463,743	)		(4,568,767	)		105,024		(2	%)

Provision for income taxes/benefits		476,377			1,107,897			(631,520	)	(57	%)

Net loss		(3,987,366	)		(3,460,870	)		(526,496	)	15	%
Foreign currency translation gain(loss)		(274,760	)		(41,544	)		(233,216	)	561	%
Comprehensive loss		(4,262,126	)		(3,502,414	)		(759,712	)	22	%
Comprehensive income attributable to China Executive Education Corp	$	(4,262,126	)	$	(3,502,414	)	$	(759,712	)	22	%

Revenues. Our revenues decreased $84,663, or 1%, to $5,663,276 for the nine months ended September 30, 2011, from $5,747,939 during the same period of 2010. The following table provides a breakdown of our revenues for the nine months ended September 30, 2011 and 2010, respectively:

	Nine Months Ended September 30,
	2011				2010				Increase (Decrease)
	$		%		$		%		$			%
Proprietary Training Courses	$	4,931,906	87	%	$	4,764,207	83	%	$	167,699		4	%
Comprehensive Training Courses-Forbes		731,370	13	%		983,732	17	%		(252,362	)	(26	%)
Total Revenues	$	5,663,276	100	%	$	5,747,939	100	%	$	(84,663	)	(1	%)

The decrease in our revenue for the nine months ended September 30, 2011, as compared to the prior period, was attributed to a number of factors, including:

First, revenue from preliminary training courses increased $167,699, or 4%, for the nine ended September 30,2011, as compared to the prior period, because of increased student recruiting and attendance during the period. The number of students participating the proprietary training courses increased from 3,158 students in 2010 to 4,715 students in 2011 as a result of using outsourced local agents to promote our training programs, which broadened our market coverage. As more students attended the preliminary training courses, sales revenue increased accordingly. The increase in student recruiting was offset by decreased average tuition price from $1,509 per course in 2010 to $1,046 per course in 2011 because the Company focused on promotional sales seminars during 2011 aiming to recruit more students to participate the training courses in the near future. As a result, the tuition collected from such promotional seminars was lower than ordinary course offerings. Our overall increase in sales revenue from preliminary training courses for the nine months ended September 30, 2011 reflected the above combined factors.

Second, revenue from comprehensive training programs decreased from $983,732, for the nine months ended September 30, 2010 to $731,370 for the nine months ended September 30, 2011, a decrease of $252,362, or 26%. The Company’s comprehensive training programs included 16 courses, among which 10 courses are taught by Chinese lecturers, and the remaining 6 courses are to be taught by invited foreign lecturers. The 10 courses normally are completed within 3 months; and the 6 courses can normally be completed within a 6-9 month periods, because the invitation and arrangement schedule need to be made in advance. For those students who have completed their 10 course taught by Chinese lecturers, they must wait for the foreign lecturers’ arrival in order to move forward. This may affect the student course attendance from period to period. The decrease in revenue from comprehensive training programs was primarily affected by decreased student participation in comprehensive trainings. For the nine months ended September 30, 2010, three invited foreign lecturers, Mr. John Grey , Mr. John Maxwell and Mr. Colin Powell provided lecturers to students. As a result, 120 students attended the comprehensive course training programs. For the same period of 2011, two invited foreign lecturers went to China to perform the lectures; as a result, only 98 students attended the courses. In addition, average tuition price also dropped from $8,198 per students in 2010 to $7,463 in 2011. This was because students paid higher price in order to attend the lecture given by Mr. Colin Powell in 2010.

Cost of revenue. Our cost of revenue increased by approximately $0.54 million, or 11%, for the nine months ended September 30, 2011, as compared to the same period in 2010. The following table summarizes the cost of revenue for the nine months ended September 30, 2011 and 2010:

	Nine Months Ended September 30,
	2011				2010				Increase (Decrease)
	$		%		$		%		$			%
Cost of lecturer's compensation	$	1,493,620	28	%	$	1,286,192	26	%	$	207,428		16	%
Hotel and conference-room		2,904,157	53	%		2,029,171	42	%		874,986		43	%
Educational facility costs		65,434	1	%		11,893	-			53,541		450	%
Administrative support		317,499	6	%		389,533	8	%		(72,034	)	-18	%
Consulting fee		-	-			35,259	1	%		(35,259	)	-
Other cost		11,079	-			167,901	3	%		(156,822	)	(93	%)
Business tax		654,028	12	%		982,277	20	%		(328,249	)	(33	%)
Total cost of revenue	$	5,445,817	100	%	$	4,902,226	100	%	$	543,591		11	%

The increase in our cost of sales was primarily due to the following reasons:

First, cost of lecturer’s compensation amounted to $1.49 million, or 28% of the total cost of revenue for the nine months ended September 30, 2011, representing a $207,428 increase as compared to the corresponding period of 2010. The increase in lecturers’ compensation cost was in line with the increased students attendance. As discussed above, a total of 4,813 students participated in the trainings during the nine months ended September 30, 2011 as compared to 3,278 students in the same period of 2010. As more students attended the trainings, more lecturers' compensation was paid.

Second, the cost of hotel and conference rooms for the nine months ended September 30, 2011 increased $874,986, or 43%, as compared to the prior period. The increase in hotel and conference room costs was mainly because more students attended the trainings as discussed above. In addition, in August 2011 we organized and held a training conference in Australia named “Anthony Robin dating the life”. Hotel and conference expense incurred to send students to participate in the training held overseas was higher than in the domestic market. Furthermore, in 2011, in order to create a more comfortable educational environment for student trainings, we raised the hotel and conference room selection standards which led to an increase in our hotel and conference room costs as well.

Gross profit and gross margin. Our gross profit decreased by $0.63 million, or 74%, to $0.22 million for the nine months ended September 30, 2011, as compared with $0.85 million for the same period in 2010, due to decreased revenue and increased cost of revenue as discussed above. Our gross profit as a percentage of revenue decreased to 4% for the nine months ended September 30, 2011, as compared to 15% in the prior comparative period for the same reasons indicated.

Selling expenses. Our selling expenses mainly include advertising expense, sales commission paid to outside agents for student recruiting and salaries paid to our own sales forces. Selling expenses increased $0.24 million, or 10%, when comparing the nine months ended September 30, 2011 with nine months ended September 30, 2010. The increase in our selling expenses was in line with the increased students recruiting for the period indicated. For the nine months ended September 30, 2011, a total of 4,813 students have been recruited and participated the trainings as compared to 3,278 students in the same period of 2010. We expect our selling and marketing expense to remain at a relatively stable level in the near future as we continue to use outsourced sales agent to help promote our training courses and conduct part of the student recruiting tasks.

General and administrative expenses. Our general administrative expense decreased by $506,109, or 17%, for the nine months ended September 30, 2011 as compared to the prior period. The decrease was mainly due to decreased professional fees paid in connection with maintaining our public status in the United States. We went public in February 2010 and incurred a significant amount of professional fees, such as shell company purchase, audit, legal and other consulting fees paid to various service providers. For the same period of 2011, we only paid routine professional and consulting fees to service providers to maintain our Company’s public status.

We expect that our general and administrative expenses will increase as we expand our business and operations. In addition, as a result of the Company’s shares of common stock being quoted on the Over-the-Counter Bulletin Board, we need to enhance our management’s skills to adapt to a more complex business environment, because we are subject to the rules and regulations of United States securities laws, including those pertaining to corporate governance and internal controls. We believe that we will need to hire more personnel as our business continues to grow, and that we will incur additional general and administrative costs in the near future to support our business.

Deferred income tax benefit. Due to the operating loss and carry-forward, we reported deferred income tax benefits of $476,377 and $1,107,897 for the nine months ended September 30, 2011 and 2010, respectively. This was affected by the restatement of certain line items included in our previously issued financial statements.

Net income(loss). As a result of the cumulative effect of the foregoing factors, we reported a net loss of $3.99 million for the nine months ended September 30, 2011, as compared to a net loss of $3.46 million for the same period of 2010, an increase of $526,496, or 15%. The decrease in our net loss was due to the restatement of several line items in our income statement and was also affected by decreased operating expenses for the period indicated as discussed above.

Liquidity and Capital Resources

As of September 30, 2011, we had cash and cash equivalents of $5.75 million. To date, we have financed our operations primarily through cash flows from operations. Based on our current operating plan, we believe that existing cash and cash equivalents, will be sufficient to meet our working capital and capital requirements for our current operations.

The following table sets forth a summary of our cash flows for the periods indicated:

Cash Flow

(all amounts in U.S. dollars)

	Nine Months Ended September 30,
	2011			2010 (Restated)
Net cash (used in) provided by operating activities	$	(3,564,383	)	$	2,899,787
Net cash used in investing activities		(610,887	)		(117,424	)
Net cash used in financing activities		-			(1,785,244	)
Effect of exchange rate changes on cash and cash equivalents		(347,564	)		(59,531	)
Net increase (decrease) in cash and cash equivalents		(4,175,270	)		997,119
Cash and cash equivalents at beginning of the period		10,272,391			6,089,919
Cash and cash equivalent at end of the period	$	5,749,557		$	7,027,507

Operating Activities

Net cash used in operating activities during the nine months ended September 30, 2011 was $3,564,383 which mainly consisted of our net loss of $3,987,366, offset by net changes in operating assets and liabilities due to our operating activities, including a deferred tax benefit of $1,009,448 resulting from a net operating loss carry-forward. In addition, our advance to vendors increased by $778,156, which mainly represents our payments made to invited foreign lecturers in order to provide educational training service to Chinese students, and our deferred revenue increased $4,037,794 representing amounts received in advance from students for tuition paid to attend our professional training courses and featured lectures.

Net cash provided by operating activities was $2,899,787 for the nine months ended September 30, 2010, which mainly consisted of our net loss of $3,460,870, offset by net changes in operating assets and liabilities due to our operating activities, including deferred tax benefit of $2,595,961 resulting from a net operating loss carry-forward, decrease in advance to vendors of $246,029, which represents cash paid to several well-known foreign lecturers for educational services provided to students in 2010. In addition, an increase of deferred revenue of $10,383,844, which were cash advances made to us by our students to attend our training courses or featured lectures.

Investing Activities

Net cash used in investing activities for the nine months ended September 30, 2011and 2010 amounted to $610,887 and $117,424, respectively, representing acquisition of property and equipment in the same amount.

Financing Activities

There were no financing activities for the nine months ended September 30, 2011.

Net cash used in financing activities for the nine months ended September 30, 2010 was $1,785,244, including a receivable from a shareholder of $1,804,620, a dividend payment of $1,401,024 and proceeds from issuance of common shares under a private placement of $1,420,400.

As a result of the above factors, as of September 30, 2011, we have $5.75 million available cash on hand. We expect to use such funds to continue to emphasize expanding and enhancing marketing and sales in fiscal year 2011 and beyond. Part of this strategy involves increasing and improving marketing and sales activities to enhance the market position of our key course offerings, solidifying our market coverage, and increasing promotional activities. Management also plans to selectively pursue strategic acquisition opportunities to further consolidate our resources and expand our market coverage.

Obligations Under Material Contracts

We have no material obligations to pay cash or deliver cash to any other party.

Seasonality

Our operating results and operating cash flows historically have not been subject to seasonal variations.

Inflation

Inflation and changing prices have not had a material effect on our business, and we do not expect that inflation or changing prices will materially affect our business in the foreseeable future. However, our management will closely monitor price changes in the Chinese economy and our industry and continually maintain effective cost controls in operations.

Off Balance Sheet Arrangements

We do not have any off balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, sales or expenses, results of operations, liquidity or capital expenditures, or capital resources that are material to an investment in our securities.

Critical Accounting Policies

Critical accounting policies are those we believe are most important to portraying our financial conditions and results of operations and also require the greatest amount of subjective or complex judgments by management. Judgments and uncertainties regarding the application of these policies may result in materially different amounts being reported under various conditions or using different assumptions. There have been no material changes to the critical accounting policies previously disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2010.

Recent Accounting Pronouncements

See Note 3 to our unaudited consolidated financial statements included elsewhere in this report.

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Not Applicable.

ITEM 4.

CONTROLS AND PROCEDURES.

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act). Disclosure controls and procedures refer to controls and other procedures designed to ensure that information required to be disclosed in the reports we file or submit under the Exchange Act are recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

As required by Rule 13a-15(e), our management has carried out an evaluation, with the participation and under the supervision of our Chief Executive Officer, Mr. Kaien Liang, and Chief Financial Officer, Mr. Zhiwei Huang, of the effectiveness of the design and operation of our disclosure controls and procedures, as of September 30, 2011. Based upon, and as of the date of this evaluation, Messieurs. Liang and Huang determined that, because of the material weaknesses described in Item 9A “Controls and Procedures” of our Annual Report on Form 10-K for the year ended December 31, 2010, which we are still in the process of remediating as of September 30, 2011, our disclosure controls and procedures were not effective. Investors are directed to Item 9A of our Annual Report on Form 10-K for the year ended December 31, 2010 for the description of these weaknesses.

Changes in Internal Control over Financial Reporting

We regularly review our system of internal control over financial reporting and make changes to our processes and systems to improve controls and increase efficiency, while ensuring that we maintain an effective internal control environment. Changes may include such activities as implementing new, more efficient systems, consolidating activities, and migrating processes.

During its evaluation of the effectiveness of internal control over financial reporting as of December 31, 2010, our management concluded that we still need to hire qualified accounting personnel and enhance the supervision, monitoring and review of the financial statement preparation process. Although our accounting staff is professional and experienced in accounting requirements and procedures generally accepted in the PRC, management has determined that they require additional training and assistance in U.S. GAAP. We are actively searching for additional personnel with relevant accounting experience, skills and knowledge in the preparation of financial statements in accordance with U.S. GAAP and financial reporting disclosure requirements under SEC rules.

Other than the foregoing changes, there were no changes in our internal controls over financial reporting during the third quarter of fiscal 2011 that have materially affected, or are reasonably likely to materially affect our internal control over financial reporting.

PART II

OTHER INFORMATION

ITEM 1.

LEGAL PROCEEDINGS.

From time to time, we may become involved in various lawsuits and legal proceedings, which arise, in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these, or other matters, may arise from time to time that may harm our business. We are currently not aware of any such legal proceedings or claims that we believe will have a material adverse affect on our business, financial condition or operating results.

ITEM 1A.

RISK FACTORS.

Not Applicable.

ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

None.

ITEM 3.

DEFAULTS UPON SENIOR SECURITIES.

None.

ITEM 4.

(REMOVED AND RESERVED).

ITEM 5.

OTHER INFORMATION.

We have no information to disclose that was required to be in a report on Form 8-K during the period covered by this report, but was not reported. There have been no material changes to the procedures by which security holders may recommend nominees to our board of directors.

ITEM 6.

EXHIBITS.

The following exhibits are filed as part of this report or incorporated by reference:

Exhibit No.		Description
31.1 *		Certifications of Principal Executive Officer filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2 *		Certifications of Principal Financial Officer filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1 *		Certifications of Principal Executive Officer furnished pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2 *		Certifications of Principal Financial Officer furnished pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101		Interactive data files pursuant to Rule 405 of Regulation S-T (filed herewith).

*Previously filed with 10-Q Amendment No 1

SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date: February 10, 2012	CHINA EXECUTIVE EDUCATION CORP.


	By:	/s/ Kaien Liang
		Kaien Liang, Chief Executive Officer
		(Principal Executive Officer)

	By:	/s/ Zhiwei Huang
		Zhiwei Huang, Chief Financial Officer
		(Principal Financial Officer and Principal Accounting Officer)

EXHIBIT INDEX

Exhibit No.		Description
31.1 *		Certifications of Principal Executive Officer filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2 *		Certifications of Principal Financial Officer filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1 *		Certifications of Principal Executive Officer furnished pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2 *		Certifications of Principal Financial Officer furnished pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101		Interactive data files pursuant to Rule 405 of Regulation S-T (filed herewith).

*Previously filed with 10-Q Amendment No 1

China Executive Education Corp - FORM 10-Q/A - February 10, 2012

Attached files

China Executive Education Corp Reports