Attached files
file | filename |
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EX-23.1 - EXHIBIT 23.1 - CHINACAST EDUCATION CORP | v302252_ex23-1.htm |
EX-32.1 - EXHIBIT 32.1 - CHINACAST EDUCATION CORP | v302252_ex32-1.htm |
EX-31.2 - EXHIBIT 31.2 - CHINACAST EDUCATION CORP | v302252_ex31-2.htm |
EX-31.1 - EXHIBIT 31.1 - CHINACAST EDUCATION CORP | v302252_ex31-1.htm |
þ
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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¨
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Delaware
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20-178991
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(State or other Jurisdiction of
Incorporation or Organization)
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(I.R.S. Employer Identification No.)
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$0.0001 Common Stock
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NASDAQ Global Select Market
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Title of each class
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Name of each exchange on which registered
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Large accelerated filer ¨
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Accelerated filer x
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Non-accelerated filer ¨
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Smaller reporting company ¨
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(Do not check if a smaller reporting company)
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This amendment on Form 10-K/A (the “Amendment”) is being filed as Amendment No. 3 to our Annual Report on Form 10-K for ChinaCast Education Corporation (“CEC”), as initially filed with the Securities and Exchange Commission (“SEC”) on March 16, 2011 (the “Original Report”), as amended on September 2, 2011 and February 8, 2012. CEC is filing the Amendment for the purpose of (a) providing dated and executed certifications by our Principal Executive Officer and our Principal Financial Officer; (b) providing executed Signature pages; and (c) correcting certain inadvertent typographical errors. This Amendment sets forth, in its entirety, the Form 10-K/A for the Company, as initially filed with the SEC on February 8, 2012 (“Amendment No. 2”), with the following change: the signature pages were amended to add the electronic signatures of Ron Chan Tze Ngon, signing on behalf of CEC, and of the following executive officers and directors: Ron Chan Tze Ngon, Antonio Sena, Michael Santos, Daniel Tseung, Derek Feng, Ned Sherwood, Stephene Markscheid, and Douglas Woodrum. In addition, as required by Rule 12b-15 of the Securities Exchange Act of 1934, this Amendment contains new certifications by our Principal Executive Officer and our Principal Financial Officer, filed as exhibits hereto; all other exhibits (other than the accountant’s consent set forth in Exhibit 23.1) initially filed or furnished with Amendment No. 2 are incorporated in this Amendment by reference and are not re-filed or re-furnished herein. Further, certain inadvertent typographical errors were corrected. In all other respects, the disclosure is unchanged from Amendment No. 2 and, as such, this Amendment supersedes Amendment No. 2.
This Amendment does not reflect events occurring after the date of the Original Report or modify or update any of the other disclosures contained therein in any way other than the amendments referred to above. Accordingly, this Amendment should be read in conjunction with the Original Report, as amended on September 2, 2011, and CEC’s other filings with the SEC.
i |
PART
I
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ITEM
1. BUSINESS
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2
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ITEM
1A. RISK FACTORS
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12
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PART
II
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25
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ITEM
6. SELECTED FINANCIAL DATA
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25 | |
ITEM
7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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25
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ITEM
8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
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36
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ITEM
9A. CONTROLS AND PROCEDURES
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37
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PART
III
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41
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ITEM
11. EXECUTIVE COMPENSATION
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41
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PART
IV
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51
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ITEM
15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
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51
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EX-23.1
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EX-31.1
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EX-31.2
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EX-32.1
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ii |
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•
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the availability and cost of products from our suppliers ;
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•
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general and cyclical economic and business conditions, domestic or foreign;
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•
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the rate of introduction of new products by our customers;
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•
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the rate of introduction of enabling technologies by our suppliers;
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•
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changes in our pricing policies or the pricing policies of our competitors or suppliers;
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•
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our ability to compete effectively with our current and future competitors;
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our ability to manage our growth effectively, including possible growth through acquisitions;
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•
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our ability to enter into and renew key corporate and strategic relationships with our customers and suppliers;
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•
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our implementation of share-based compensation plans;
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•
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changes in the favorable tax incentives enjoyed by our PRC operating companies;
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•
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foreign currency exchange rates fluctuations;
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adverse changes in the securities markets; and
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legislative or regulatory changes in China.
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1 |
2 |
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Post Secondary Education Distance Learning Services — We enable universities and other higher learning institutions to provide nationwide real-time distance learning services. Our “turn-key” packages include all the hardware, software and broadband satellite network services necessary to allow university students located at remote classrooms around the country to interactively participate in live lectures broadcast from a main campus. The Company currently services 15 universities with over 143,000 students in over 300 remote classrooms. For example, Beijing Aeronautical and Aeronautics University (Beihang), consistently ranked among the top ten Universities in China by the Ministry of Education, launched its distance learning network in cooperation with CCH in 2002. By 2010, the number of distance learning students of Beihang reached 25,000, at over 120 remote learning centers in China. In return for the turn-key distance learning services, we receive from the University a percentage of each remote student’s tuition.
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K-12 Educational Services — We currently broadcast multimedia educational content to 6,500 primary, middle and high schools throughout the PRC in partnership with leading educational content companies, and renowned educational institutions. The educational content packages assist teachers in preparing and teaching course content. Each school pays us a monthly subscription fee for this service and a one-time charge for equipment used to provide the service.
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Vocational/Career Training Services — In partnership with various government departments and corporate enterprises, we have deployed several hundred training centers throughout China providing job-skills training to recent graduates, employees of state-owned enterprises, and corporate employees.
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Universities — FTBC, LJC and HIUBC are independent private
residential universities affiliated with Chongqing Normal University,Guangxi Normal University and Hubei Industrial University
respectively. With a total of over 32,000 on campus students, our three universities offer four-year bachelor’s degree and
three-year diploma programs in finance, economics, trade, tourism, advertising, IT, music, foreign languages, tourism, hospitality,
computer engineering, law and art, all of which are fully accredited by the Ministry of Education.
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3 |
The Company believes that the combination of its traditional bricks and mortar universities, its proprietary e-learning products and services, ownership of a nationwide broadband content delivery network and its ability to develop new educational content are essential to its long-term growth. In our TUG business, we develop our own teaching content for the instruction of the students. For our ELG business, the faculty members of the partnering universities develop the teaching content and the partnering universities own such content. We also purchase standard educational materials for our K-12 business from suppliers from which we develop the content in multimedia format, and then broadcast the content through our network for the use by K-12 schools. We do not publish/distribute any content on our websites and accordingly we do not need an internet content provider license. For the TUG business, all of our universities are granted an education license by the Ministry of Education, which allows the universities to teach and provide educational content to their students. For the ELG business, we distribute the content over our VSAT network. CCLX was granted by the Ministry of Industry and Information Technology to operate a VSAT network and currently, no other entity in the CEC corporate structure holds a VSAT license other than CCLX.
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*
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Glander Assets Limited holds the remaining 1.5% of CCT BVI.
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5 |
• CEC
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ChinaCast Education Corporation
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• CCH
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ChinaCast Communication Holdings Limited
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• CEH
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ChinaCast Education Holdings Limited
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• CEI HK
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ChinaCast Education International Limited
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• CEI
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ChinaCast Education Investment Limited
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• CBET
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ChinaCast (Beijing) Education Technology Limited
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• CCN
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ChinaCast Communication Network Company Ltd.
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• CCT BVI
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ChinaCast Technology (BVI) Limited
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• CCT HK
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ChinaCast Technology (HK) Limited
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• CCT Shanghai
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ChinaCast Technology (Shanghai) Limited
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• YPSH
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Yupei Training Information Technology Co., Ltd.
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• MET
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Modern English Trademark Limited
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• Chaosheng
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Chongqing Chaosheng Education and Investment Co., Ltd.
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• Hai Lai
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Hai Lai Education Technology Limited
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• FTBC
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Foreign Trade and Business College of Chongqing Normal University
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• Hai Yuan
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Hai Yuan Company Limited
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• CCLX
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ChinaCast Li Xiang Co., Ltd.
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• East Achieve
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East Achieve Limited
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• Xijiu
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Shanghai Xijiu Information Technology Co. Limited
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• Lian He
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China Lianhe Biotechnology Co., Ltd.
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• LJC
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Lijiang College of Guangxi Normal University
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• Wintown
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Wintown Enterprises Limited
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• Rubao
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Shanghai Rubao Information Technology Co. Limited
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• Jiyang
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Wuhan Jiyang Education Investment Limited
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• HIUBC
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Hubei Industrial University Business College
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• QPU
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Qingdao Zhongshida Education Development Limited
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• Aohua
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Dongying Aohua Education Consulting Limited
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Establishment of any major or department;
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Daily education and administrative activities;
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Examination and verification of qualified staffs responsible for administrative work and political work;
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College development direction and various conditions and facilities required for running the college;
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Administration of living service (Hou Qin), i.e., living related services, including dormitory, canteen, water supply, heating system; and
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Student’s education administration, i.e, the administration on the student’s ideological and political education, the student’s psychological education and the student’s scholarship and subsidy.
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Administration of Education Permit, i.e., the issuance, updating and cancellation of the permit;
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Examination of Recordation of Recruiting Prospectus and Recruiting Advertisement to determine if the recruiting prospectus and advertisements are in compliance with applicable rules;
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Publication of relevant information of college (i.e., basic information including the name of the college, campus, departments and enrolled students;
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Annual inspection of college;
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Reward to college, i.e., reward certificates or bonuses to recognize a college’s research and development contribution to a specific area;
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Investigation and Penalty of college’s illegal activities, i.e., if a college commits any inappropriate actions, MOE can investigate such activities and penalize the college if such activities are indeed in violation of laws and regulations; and
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Other duties provided in other laws and regulations, i.e., the MOE can also exercise such powers and rights or perform such duties to supervise and administer other laws and regulations affecting the supervision and administration of independent colleges.
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levying fines and confiscating illegal income;
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restricting or prohibiting our use of the proceeds to finance our business and operations in China;
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requiring us to restructure the ownership structure or operations of our Chinese subsidiaries or Chinese affiliated entities;
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requiring us to discontinue all or a portion of our business; and/or
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revoking our business licenses.
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13 |
If the PRC government finds that the contractual agreements that establish the structure for operating our VSAT business in China do not comply with PRC governmental restrictions on foreign investment, or if these regulations or the interpretation of existing regulations change in the future, we could be subject to severe penalties or be forced to relinquish our interests in such operations.
Current PRC laws and regulations place certain restrictions on foreign investments in VSAT business. Specifically, foreign ownership in an value-added telecommunication service provider, which include VSAT business, may not exceed 50%. Therefore, we conduct our VAST business through contractual control arrangement with our VIE entity in the PRC, CCLX, and its shareholders. Our contractual arrangement with CCLX and its shareholders enables us to exercise effective control over this entity and hence treat it as our consolidated affiliated entity and consolidate its results. For a detailed discussion of these contractual arrangements, see “Corporate Structure.”
We cannot assure you, however, that we will be able to enforce these contracts. Although we believe we are in compliance with current PRC regulations, we cannot assure you that the PRC government would agree that these contractual arrangements comply with PRC licensing, registration or other regulatory requirements, with existing policies or with requirements or policies that may be adopted in the future. PRC laws and regulations governing the validity of these contractual arrangements are uncertain and the relevant government authorities have broad discretion in interpreting these laws and regulations. If the PRC government determines that we do not comply with applicable laws and regulations, it could adopt the following measures to deal with such non-compliance:
· impose fines or other monetary penalties on CCLX or CCT Shanghai;
· revoke the business and operating licenses of CCLX and CCT Shanghai;
· require CCLX and CCT Shanghai to discontinue or restrict their operations;
· impose conditions or requirements with which we, CCLX or CCT Shanghai may not be able to comply;
· require us, CCLX and CCT Shanghai to restructure our operating structure and operations; or
The imposition of any of these penalties would result in a material and adverse effect on our ability to conduct our business.
We rely on contractual arrangements with our affiliated consolidated entity in China and its shareholders, for our VSAT business operation, which may not be as effective in providing operational control or enabling us to derive economic benefits as through ownership of controlling equity interest.
We rely on and expect to continue to rely on contractual control arrangement with CCLX and its respective shareholders to operate our VSAT business. These contractual arrangements may not be as effective in providing us with control over CCLX as ownership of controlling equity interests would be in providing us with control over, or enabling us to derive economic benefits from the operations of, CCLX. If we had direct ownership of CCLX, we would be able to exercise our rights as a shareholder to (i) effect changes in its board of directors, which in turn could effect changes, subject to any applicable fiduciary obligations, at the management level, and (ii) derive economic benefits from the operations of CCLX by causing it to declare and pay dividends. However, under the current contractual arrangements, as a legal matter, if CCLX or any of its shareholders fails to perform its or his respective obligations under these contractual arrangements, we may have to incur substantial costs and resources to enforce such arrangements, and rely on legal remedies available under PRC laws, including seeking specific performance or injunctive relief, and claiming damages, which we cannot assure you will be effective. For example, if shareholders of CCLX were to refuse to transfer their equity interests in CCLX to us or our designated persons when we exercise the purchase option pursuant to these contractual arrangements, we may have to take a legal action to compel them to fulfill their contractual obligations.
If (i) the applicable PRC authorities invalidate these contractual arrangements for violation of PRC laws, rules and regulations, (ii) CCLX or its shareholders terminate the contractual arrangements or (iii) CCLX or its shareholders fail to perform their obligations under these contractual arrangements, our VSAT business operation in China would be materially and adversely affected.
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uncertain growth in the market for, and uncertain market acceptance of, products, services and technologies;
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the evolving nature of education and e-Learning services and content; and
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competition, technological change or evolving customer preferences that could harm sales of services, content or solutions.
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14 |
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our ability to identify and acquire businesses on a cost-effective basis;
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our ability to integrate acquired personnel, operations, products and technologies into our organization effectively;
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our ability to retain and motivate key personnel and to retain the students of the acquired businesses;
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unanticipated problems or legal liabilities of the acquired businesses; and
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tax or accounting issues relating to the acquired businesses.
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16 |
17 |
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system failures and outages caused by fire, floods, earthquakes or power loss;
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telecommunications failures and similar events;
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software errors;
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•
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computer viruses, break-ins and similar disruptions from unauthorized tampering with our computer systems; and
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•
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security breaches related to the storage and transmission of proprietary information, such as credit card numbers or other personal information.
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18 |
1. | Lack of sufficient skilled resources in the finance team to meet the demands of rapidly expanded businesses which resulted in a delayed closing process. |
2. | Lack of contemporaneous documentation of certain decisions made by the Board of Directors. |
3. | Accounting for the prepaid service fee - During 2011, the Company reinterpreted its position related to the evaluation of the contractual requirements for a non-current advance referred to as the prepaid service fee. As a result of that process, the company concluded it lacked adequate and effective controls to ensure all contractual requirements as well as relevant accounting guidance were considered in determining the appropriate accounting for the prepaid service fee. This material weakness contributed to the restatement to the previously reported consolidated financial statements for the year ended December 31, 2010, as discussed in Note 27 to the consolidated financial statements under the caption "Second Restatement." |
A “material weakness” is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis. We have taken measures and plan to continue to take measures to remedy these deficiencies. However, the implementation of these measures may not fully address the control deficiencies in our internal control over financial reporting. Our failure to address any control deficiency could result in inaccuracies in our financial statements and could also impair our ability to comply with applicable financial reporting requirements and related regulatory filings on a timely basis. Moreover, effective internal control over financial reporting is important to prevent fraud. As a result, our business, financial condition, results of operations and prospects, as well as the trading price of our shares, may be materially and adversely affected.
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20 |
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Chinese authorities deem CEC’s corporate activities as violating applicable Chinese laws and regulations (including restrictions on foreign investments);
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Chinese regulatory authorities change applicable laws and regulations or impose additional requirements and conditions with which CEC is unable to comply;
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•
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CEC is found to violate any existing or future Chinese laws or regulations; or
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•
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CEC is found to have undergone a change of control (which may be deemed to include a change in the management of CEC/the departure of certain officers of CEC).
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21 |
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the number and importance of state-owned enterprises in the PRC is greater than in most OECD countries;
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the level of capital reinvestment is lower in the PRC than in most OECD countries; and
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Chinese policies make it more difficult for foreign firms to obtain local currency in China than in OECD jurisdictions.
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22 |
23 |
If FTBC, LJC or HIUBC is unable to pass verification examination with the Ministry of Education before March 31, 2013, we may not be able to consolidate the financial results of these brick-and-mortar colleges.
FTBC, LJC and HIUBC are all independent colleges under the PRC regulations, and the government authority in charge of administration of independent college is the Ministry of Education. The Ministry of Education issued the Rules on Establishment and Administration of Independent Colleges on February 22, 2008, which became effective on April 1, 2008, pursuant to which the independent colleges established before April 1, 2008 shall do restructuring works in order to comply with conditions and standards prescribed in the rules for independent colleges, subject to verification and examination by the Ministry of Education, and only independent college passing such verification examination before March 31, 2013 can obtain updated license to continue operation. All of FTBC, LJC and HIUBC were established before April 1, 2008, so have to go through such restructuring works. Following acquisitions of FTBC, LJC and HIUBC, we have been actively coordinating with the affiliated universities of FTBC, LJC and HIUBC to cause FTBC, LJC and HIUBC do such restructuring works in order to comply with conditions and standards set forth in the rules, and we believe that each of FTBC, LJC and HIUBC will comply with such conditions and standards. Currently, each of FTBC, LJC and HIUBC plans to initiate the verification process immediately, and expect to complete examination by the end of 2012.
However, we cannot assure you that each of FTBC, LJC and HIUBC can complete such examination in due course. In the event that any of FTBC, LJC and HIUBC is unable to pass such examination before March 31, 2013, any of them will not obtain update license to operate, and we may have to close the respective college that does not pass the examination, which will cause significant disruption to our business operations or render us unable to conduct all or a substantial portion of our business operations, and may materially and adversely affect our business, financial condition and results of operations. For the year ended December 31, 2010, revenue attributable to FTBC accounted for 27.2% of the Group’s revenue. For the year ended December 31, 2010, revenue attributable to LJC accounted for 23.7% of the Group’s revenue. For the year ended December 31, 2010, revenue attributable to HIUBC accounted for 8.3% of the Group’s revenue.
24 |
Year
Ended December 31,
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||||||||||||||||||||
2010
(As Restated)
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2009
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2008
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2007
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2006
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(Amounts
in thousands of RMB except share and per share data)
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||||||||||||||||||||
Selected
Consolidated Statements of Operations Data:
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Revenue
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514,011
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346,547
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282,614
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183,496
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174,119
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|||||||||||||||
Cost
of revenues
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(267,392
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) | (147,501
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) | (126,852
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) | (79,802
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) | (89,390
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) | ||||||||||
Gross
profit
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246,619
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199,046
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155,762
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103,694
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84,729
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Total
operating expenses, net
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(78,665
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) | (69,039
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) | (68,117
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) | (42,511
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) | (36,433
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) | ||||||||||
Income
from continuing operations
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131,827
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98,264
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71,209
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69,151
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30,097
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(Loss)
income from discontinued operations
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1,280
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1,154
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(21,025
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)
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(7,020
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)
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(2,250
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)
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Net
income
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133,107
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97,418
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50,184
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62,131
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27,847
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Noncontrolling
interest
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(1,454
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) | (7,339
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) | (7,517
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) | (3,472
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) | (8,143
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) | ||||||||||
Net
income attributable to the Company
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131,653
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92,079
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42,667
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58,659
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19,704
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Net
income from continuing operations attributable to the Company per share:
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Basic
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2.70
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2.46
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2.08
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2.37
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1.44
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Diluted
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2.67
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2.45
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2.06
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2.35
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1.23
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Income
(loss) from discontinued operations attributable to the Company per share:
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Basic
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0.03
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0.03
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(0.68
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)
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(0.26
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)
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(0.27
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) | ||||||||||||
Diluted
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0.03
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0.03
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(0.68
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)
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(0.25
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)
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(0.23
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) | ||||||||||||
Net
income attributable to the Company per share:
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||||||||||||||||||||
Basic
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2.73
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2.49
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1.40
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2.21
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1.17
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Diluted
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2.70
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2.48
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1.38
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2.10
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1.00
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Selected
Consolidated Balance Sheet Data:
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Cash
and cash equivalents
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244,403
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327,645
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220,131
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138,610
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278,067
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|||||||||||||||
Term
deposits
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704,000
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507,000
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369,000
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596,768
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442,921
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|||||||||||||||
Total
assets
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2,954,032
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2,273,149
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1,499,159
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950,714
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940,579
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Three
Months Ended
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||||||||||||||||||||||||||||||||
December 31, 2010
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September
30,
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June
30,
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March
31,
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December
31,
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September
30,
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June
30,
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March
31,
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|||||||||||||||||||||||||
(As Restated) | 2010
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2010
|
2010
|
2009
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2009
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2009
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2009
|
|||||||||||||||||||||||||
(Amounts
in thousands of RMB except share and per share data)
|
||||||||||||||||||||||||||||||||
Selected
quarterly operating results
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||||||||||||||||||||||||||||||||
Revenues
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169,886
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125,119
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110,645
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108,361
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112,091
|
82,185
|
75,754
|
76,517
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||||||||||||||||||||||||
Cost
of revenues
|
(102,847
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) | (64,190
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) | (52,136
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) | (48,219
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) | (58,021
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) | (30,343
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) | (28,932
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) | (30,205
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) | ||||||||||||||||
Gross
profit
|
67,039
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60,929
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58,509
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60,142
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54,070
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51,842
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46,822
|
46,312
|
||||||||||||||||||||||||
Total
operating expenses, net
|
(33,684
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) | (10,782
|
) | (15,471
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) | (18,728
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) | (26,414
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) | (13,363
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) | (11,528
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) | (17,735
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) | ||||||||||||||||
Income
from continuing operations
|
25,161
|
42,100
|
33,010
|
31,556
|
17,043
|
29,780
|
28,596
|
22,845
|
||||||||||||||||||||||||
Income
(loss) from discontinued operations
|
1,280
|
-
|
-
|
-
|
2,595
|
(388
|
)
|
(449
|
)
|
(604
|
)
|
|||||||||||||||||||||
Net
income
|
26,441
|
42,100
|
33,010
|
31,556
|
19,638
|
29,392
|
28,147
|
22,241
|
||||||||||||||||||||||||
Noncontrolling
interest
|
(27
|
) | (559
|
) | (434
|
) | (434
|
) | (394
|
) | (2,036
|
) | (2,350
|
) | (2,559
|
) | ||||||||||||||||
Net
income (loss) attributable to the Company
|
26,414
|
41,541
|
32,576
|
31,122
|
19,244
|
27,356
|
25,797
|
19,682
|
||||||||||||||||||||||||
Net
income from continuing operations attributable to the Company per share:
|
||||||||||||||||||||||||||||||||
Basic
|
0.50
|
0.83
|
0.69
|
0.68
|
0.42
|
0.77
|
0.73
|
0.57
|
||||||||||||||||||||||||
Diluted
|
0.49
|
0.82
|
0.69
|
0.67
|
0.43
|
0.77
|
0.73
|
0.57
|
||||||||||||||||||||||||
Income
(loss) income from discontinued operations attributable to the Company per share:
|
||||||||||||||||||||||||||||||||
Basic
|
0.03
|
-
|
-
|
-
|
0.06
|
(0.01
|
)
|
(0.01
|
)
|
(0.02
|
)
|
|||||||||||||||||||||
Diluted
|
0.03
|
-
|
-
|
-
|
0.06
|
(0.01
|
)
|
(0.01
|
)
|
(0.02
|
)
|
|||||||||||||||||||||
Net
income attributable to the Company per share:
|
||||||||||||||||||||||||||||||||
Basic
|
0.53
|
0.83
|
0.69
|
0.68
|
0.48
|
0.76
|
0.72
|
0.55
|
||||||||||||||||||||||||
Diluted
|
0.52
|
0.82
|
0.69
|
0.67
|
0.48
|
0.75
|
0.72
|
0.55
|
25 |
The following discussion and analysis of our financial condition and results of operations incorporates the amounts reflected in our restated consolidated financial statements and disclosures for the fiscal year ended December 31, 2010 as discussed in the Explanatory Note immediately preceding Part 1, Item 1 and Note 27, Restatements of Financial Statements of the Notes to Consolidated Financial Statements in Part II, Item 8.
26 |
27 |
2010
|
2009
|
|||||||
(RMB'000)
|
(RMB'000)
|
|||||||
E-learning and training serve Group (“ELG”)
|
1,618 | 1,614 | ||||||
Traditional University Group (“TUG”).
|
772,465 | 502,157 | ||||||
774,083 | 503,771 |
28 |
Key Assumptions
|
Description
|
|
Revenue growth rate
|
The forecasted average annual growth rate of revenue is 3 – 19% from 2011 to 2015. This reflects the following assumptions:
|
|
Student capacity of the campus is expected to grow upon completion of the planned construction projects;
|
||
Demand for accredited degree program is expected to grow significantly in the PRC; and
|
||
A long term growth rate into perpetuity has been determined to be 3% with reference to the birth rate, market penetration and other related factors.
|
||
COGS growth rate
|
Cost of goods sold ("COGS") are forecasted to grow by 0 to 10% from 2011 to 2015.
|
|
Discount rate
|
The discount rate applied to the cash flows is based on the weighted average cost of capital (“WACC”) of the Company. WACC is the weighted average of the estimated rate of return required by equity and debt holders for an investment of this type. We used 16.0 to 19%.
|
2010
|
2009
|
2008
|
||||||||||||||||||||||
(millions)
|
RMB
|
US$
|
RMB
|
US$
|
RMB
|
US$
|
||||||||||||||||||
Post secondary education distance learning
|
113.9 | 17.3 | 109.2 | 16.1 | 96.9 | 14.3 | ||||||||||||||||||
K-12 and content delivery
|
63.0 | 9.5 | 64.1 | 9.4 | 65.6 | 9.6 | ||||||||||||||||||
Vocational training, enterprise/government training and networking services
|
31.2 | 4.7 | 23.0 | 3.4 | 36.9 | 5.4 | ||||||||||||||||||
Total ELG revenue
|
208.1 | 31.5 | 196.3 | 28.9 | 199.4 | 29.3 |
29 |
Net revenue from post secondary education distance learning services increased from RMB109.2 million (US$16.1 million) in 2009 to RMB113.9 million (US$17.3 million) in 2010. The increase of 4.3% was mainly due to the increase in student enrollment and the increase in tuition fee. The total number of post-secondary students enrolled in courses using the Company’s distance learning platforms increased to 143,000 from 138,000 at the end of 2009.
2010
|
2009
|
2008
|
||||||||||||||||||||||
(millions)
|
RMB
|
US$
|
RMB
|
US$
|
RMB
|
US$
|
||||||||||||||||||
FTBC Group
|
||||||||||||||||||||||||
Tuition
|
123.4 | 18.7 | 110.3 | 16.2 | 70.9 | 10.4 | ||||||||||||||||||
Other
|
17.2 | 2.6 | 12.0 | 1.8 | 12.3 | 1.8 | ||||||||||||||||||
Sub-total
|
140.6 | 21.3 | 122.3 | 18.0 | 83.2 | 12.2 | ||||||||||||||||||
LJC Group
|
||||||||||||||||||||||||
Tuition
|
110.6 | 16.8 | 25.1 | 3.7 | - | - | ||||||||||||||||||
Other
|
12.3 | 1.9 | 2.9 | 0.4 | - | - | ||||||||||||||||||
Sub-total
|
122.9 | 18.7 | 28.0 | 4.1 | - | - | ||||||||||||||||||
HIUBC Group
|
||||||||||||||||||||||||
Tuition
|
38.2 | 5.8 | - | - | - | - | ||||||||||||||||||
Other
|
4.2 | 0.6 | - | - | - | - | ||||||||||||||||||
Sub-total
|
42.4 | 6.4 | - | - | - | - | ||||||||||||||||||
Total TUG revenue
|
305.9 | 46.4 | 150.3 | 22.1 | 83.2 | 12.2 |
30 |
31 |
32 |
33 |
Payment Due by Period
|
||||||||||||||||||||||||
|
Within
|
|
|
2014 and
|
|
|||||||||||||||||||
Total |
1 Year
|
2012 | 2013 |
beyond
|
Other
|
|||||||||||||||||||
(RMB
|
(RMB
|
(RMB
|
(RMB
|
(RMB
|
(RMB
|
|||||||||||||||||||
‘000) | ‘000) | ‘000) | ‘000) | ‘000) | ‘000) | |||||||||||||||||||
Long-term debt obligation
|
||||||||||||||||||||||||
Principal
|
260,000 | 170,000 | 55,000 | 30,000 | 5,000 | - | ||||||||||||||||||
Interest
|
22,672 | 14,628 | 5,603 | 2,345 | 96 | - | ||||||||||||||||||
Operating lease commitments
|
3,680 | 1,617 | 2,063 | |||||||||||||||||||||
FIN48 obligation
|
109,933 | 109,933 | ||||||||||||||||||||||
Lease obligation for information usage and satellite platform usage
|
12,136 | 12,136 | ||||||||||||||||||||||
Total contractual obligations
|
408,421 | 198,381 | 62,666 | 32,345 | 5,096 | 109,933 | ||||||||||||||||||
Equivalent US$ ‘000.
|
61,882 | 30,058 | 9,495 | 4,901 | 772 | 16,657 |
Total
|
Within 1
year
|
2012
|
2013
|
2014 and
beyond
|
Other
|
|||||||||||||||||||
(USD'000)
|
(USD'000)
|
(USD'000)
|
(USD'000)
|
(USD'000)
|
(USD'000)
|
|||||||||||||||||||
Long-term debt obligation
|
||||||||||||||||||||||||
Principal
|
39,394 | 25,758 | 8,333 | 4,545 | 758 | |||||||||||||||||||
Interest
|
3,435 | 2,216 | 849 | 355 | 15 | |||||||||||||||||||
Operating lease commitments
|
558 | 245 | 313 | |||||||||||||||||||||
FIN48 obligation
|
16,657 | 16,657 | ||||||||||||||||||||||
Lease obligation for information usage and satellite platform usage
|
1,839 | 1,839 | ||||||||||||||||||||||
Total contractual obligations
|
61,882 | 30,058 | 9,495 | 4,901 | 772 | 16,657 |
34 |
35 |
1.
|
Report
of Independent Registered Public Accounting Firm.
|
2.
|
Consolidated
Balance Sheets as of December 31, 2009 and 2010 (As Restated).
|
3.
|
Consolidated
Statements of Operations and Comprehensive Income for the years ended December 31, 2008, 2009 and 2010 (As Restated).
|
4.
|
Consolidated
Statements of Changes in Equity for the years ended December 31, 2008, 2009 and 2010 (As Restated).
|
5.
|
Consolidated
Statements of Cash Flows for the years ended December 31, 2008, 2009 and 2010 (As Restated).
|
36 |
|
6.
|
Notes to Consolidated Financial Statements (As Restated).
|
|
7.
|
Schedule I (As Restated).
|
(a)
|
Disclosure Controls and Procedures
|
1. | Lack of sufficient skilled resources in the finance team to meet the demands of rapidly expanded businesses which resulted in a delayed closing process. |
2. | Lack of contemporaneous documentation of certain decisions made by the Board of Directors. |
3. | Accounting for the prepaid service fee - During 2011, the Company reinterpreted its position related to the evaluation of the contractual requirements for a non-current advance referred to as the prepaid service fee. As a result of that process, the company concluded it lacked adequate and effective controls to ensure all contractual requirements as well as relevant accounting guidance were considered in determining the appropriate accounting for the prepaid service fee. This material weakness contributed to the restatement to the previously reported consolidated financial statements for the year ended December 31, 2010, as discussed in Note 27 to the consolidated financial statements under the caption "Second Restatement." |
37 |
1. | Lack of sufficient skilled resources in the finance team to meet the demands of rapidly expanded businesses which resulted in a delayed closing process. |
2. | Lack of contemporaneous documentation of certain decisions made by the Board of Directors. |
3. | Accounting for the prepaid service fee - During 2011, the Company reinterpreted its position related to the evaluation of the contractual requirements for a non-current advance referred to as the prepaid service fee. As a result of that process, the company concluded it lacked adequate and effective controls to ensure all contractual requirements as well as relevant accounting guidance were considered in determining the appropriate accounting for the prepaid service fee. This material weakness contributed to the restatement to the previously reported consolidated financial statements for the year ended December 31, 2010, as discussed in Note 27 to the consolidated financial statements under the caption "Second Restatement." |
Million
RMB
|
%
|
|||||||
Net
assets (including goodwill and intangible assets acquired)
|
434.7 | 24 | % | |||||
Total
assets (including goodwill and intangible assets acquired)
|
696.7 | 24 | % | |||||
Revenues
|
42.4 | 8 | % |
38 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
TO THE BOARD OF
DIRECTORS AND SHAREHOLDERS OF CHINACAST EDUCATION CORPORATION
We have audited the internal control over financial reporting of ChinaCast Education Corporation, its subsidiaries and its variable interest entities (collectively, the "Company") as of December 31, 2010, based on the criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. As described in Management's Annual Report on Internal Control Over Financial Reporting, management excluded from its assessment the internal control over financial reporting at Wintown Enterprises Limited and its subsidiaries (collectively, "Wintown"), which were acquired on August 23, 2010.
Subtotals pertaining to Wintown and its subsidiaries, whose internal controls have not been assessed and their significance (in percentage) to the Consolidated Financial Statements of CEC (as restated), are set out below.
Million RMB | % | |||||||
Net assets (including goodwill and intangible assets acquired) | 434.7 | 24 | % | |||||
Total assets (including goodwill and intangible assets acquired) | 696.7 | 24 | % | |||||
Revenues | 42.4 | 8 | % |
In addition, net loss of Wintown and its subsidiaries was approximately RMB4.0 million for the period from the date of acquisition to the end of 2010 and it represented 3% of net income of the Company (as restated).
Accordingly, our audit did not include the internal control over financial reporting at Wintown. The Company's management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on the Company's internal control over financial reporting, included in the accompanying Management's Annual Report on Internal Control Over Financial Reporting (as revised), based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
A company's internal control over financial reporting is a process designed by, or under the supervision of, the company's principal executive and principal financial officers, or persons performing similar functions, and effected by the company's board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.
Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
39 |
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company's annual or interim financial statements will not be prevented or detected on a timely basis. The following material weaknesses have been identified and included in management's assessment:
1. | Lack of sufficient skilled resources in the finance team to meet the demands of rapidly expanded businesses which resulted in a delayed closing process. |
2. | Lack of contemporaneous documentation of certain decisions made by the Board of Directors. |
3. | Accounting for the prepaid service fee - During 2011, the Company reinterpreted its position related to the evaluation of the contractual requirements for a non-current advance referred to as the prepaid service fee. As a result of that process, the company concluded it lacked adequate and effective controls to ensure all contractual requirements as well as relevant accounting guidance were considered in determining the appropriate accounting for the prepaid service fee. This material weakness contributed to the restatement to the previously reported consolidated financial statements for the year ended December 31, 2010, as discussed in Note 27 to the consolidated financial statements under the caption "Second Restatement." |
The material weaknesses were considered in determining the nature, and extent of audit tests applied in our audit of the consolidated financial statements and financial statement schedule as of and for the year ended December 31, 2010, of the Company and this report does not affect our report on such financial statements and financial statement schedule.
In our opinion, because of the effect of the material weaknesses identified above on the achievement of the objectives of the control criteria, the Company has not maintained, in all material respects, effective internal control over financial reporting as of December 31, 2010, based on the criteria established in Internal Control —Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements and financial statement schedule as of and for the year ended December 31, 2010 of the Company and our report dated March 16, 2011 (September 2, 2011 as to the effects of the restatement discussed in Note 27 under the caption "First Restatement" and February 7, 2012 as to the effects of the restatement discussed in Note 27 under the caption "Second Restatement") expressed an unqualified opinion on those financial statements and financial statement schedule and included explanatory paragraphs relating to i) the restatements discussed in Note 27 and ii) the convenience translation of Renminbi amounts into United States dollar amounts in the financial statements.
/s/ Deloitte Touche Tohmatsu CPA Ltd.
Beijing, People's Republic of China
March 16, 2011 (February 7, 2012 as to the effects of the material weakness related to the accounting for the prepaid service fee as discussed in Management’s Report on Internal Control over Financial Reporting (as revised))
40 |
41 |
42 |
43 |
Non-Equity
|
||||||||||||||||||||||||||||||
Stock
|
Option
|
Incentive Plan
|
All Other
|
|||||||||||||||||||||||||||
Name and Principal
|
Salary
|
Bonus
|
Awards
|
Awards
|
Compensation
|
Compensation
|
Total
|
|||||||||||||||||||||||
Position
|
Year
|
($)
|
($)
|
($)
|
($)(1)
|
($)
|
($)
|
($)
|
||||||||||||||||||||||
Ron Chan Tze Ngon,
|
2010
|
230,769 | 121,500 | 120,411 | — | — | — | 472,680 | (8) | |||||||||||||||||||||
Executive Chairman and
|
2009
|
204,345 | — | — | — | — | — | 204,345 | ||||||||||||||||||||||
Chief Executive Officer (2)
|
2008
|
139,221 | — | — | — | — | — | 139,221 | ||||||||||||||||||||||
Li Wei,
|
2010
|
88,798 | 46,752 | 86,012 | 267,000 | — | — | 488,562 | (9) | |||||||||||||||||||||
Chief Operating Office (3)
|
2009
|
80,030 | — | — | 267,000 | — | — | 349,030 | ||||||||||||||||||||||
2008
|
82,899 | — | — | 267,000 | — | — | 349,899 | |||||||||||||||||||||||
Antonio Sena,
|
2010
|
184,615 | 97,200 | 103,184 | 176,220 | — | — | 561,219 | (10) | |||||||||||||||||||||
Chief Financial Officer (4)
|
2009
|
131,586 | — | — | 178,890 | — | — | 310,476 | ||||||||||||||||||||||
2008
|
134,475 | — | — | 178,890 | — | — | 313,365 | |||||||||||||||||||||||
Michael Santos,
|
2010
|
185,000 | 97,403 | 103,184 | 176,220 | — | — | 561,807 | (11) | |||||||||||||||||||||
Director and Chief
|
2009
|
185,768 | — | — | 178,890 | — | — | 364,658 | ||||||||||||||||||||||
Marketing Officer (5)
|
2008
|
189,847 | — | — | 178,890 | — | — | 368,737 | ||||||||||||||||||||||
Jim Ma,
|
2010
|
138,462 | 72,900 | 86,012 | 176,220 | — | — | 473,594 | (12) | |||||||||||||||||||||
VP of Finance (6)
|
2009
|
102,173 | — | — | 178,890 | — | — | 281,063 | ||||||||||||||||||||||
2008
|
104,416 | — | — | 178,890 | — | — | 283,306 | |||||||||||||||||||||||
Jiang Xiang Yuan,
|
2010
|
88,798 | 46,752 | 103,184 | 267,000 | — | — | 505,734 | (13) | |||||||||||||||||||||
VP (7)
|
2009
|
27,778 | — | — | 267,000 | — | — | 294,778 | ||||||||||||||||||||||
2008
|
28,174 | — | — | 267,000 | — | — | 295,174 |
(1)
|
Valuation based on the dollar amount of option grants was based on the grant date fair value of awards computed in accordance with FASB ASC Topic 718. All Option Awards were received in 2008.
|
(2)
|
During 2010, Mr. Ron Chan received a total of 19,837 shares of restricted stock and a bonus of $121,411 under EIP2009. The closing price of the shares at the grant date on June 22, 2010 was $6.07.
|
(3)
|
On January 11, 2008, Mr Li Wei received a grant of options to purchase 300,000 shares of the Company’s common stock at an exercise price of $6.30 per share. 100,000 of the options vested on March 31, 2008, 100,000 of such options vested on March 31, 2009 and 100,000 of such options vested on March 31, 2010. During 2010, Mr. Li received a total of 14,170 shares of restricted stock and a bonus of $46,752 under EIP2009. The closing price of the shares at the grant date on June 22, 2010 was $6.07.
|
(4)
|
On January 11, 2008, Mr. Antonio Sena received a grant of options to purchase 200,000 shares of the Company’s common stock at an exercise price of $6.30 per share. 67,000 of the options vested on March 31, 2008, 67,000 of such options vested on March 31, 2009 and 66,000 of such options vested on March 31, 2010. During the year, Mr. Sena received a grant of 16,999 shares of restricted stock under EIP2009. The closing price of the shares at the grant date on June 22, 2010 was $6.07.
|
44 |
(5)
|
On January 11, 2008, Mr. Michael Santos received a grant of options to purchase 200,000 shares of the Company’s common stock at an exercise price of $6.30 per share. 67,000 of the options vested on March 31, 2008, 67,000 of such options vested on March 31, 2009 and 66,000 of such options vested on March 31, 2010. During the year, Mr. Santos received a grant of 16,999 shares of restricted stock under EIP2009. The closing price of the shares at the grant date on June 22, 2010 was $6.07.
|
(6)
|
On January 11, 2008, Mr. Jim Ma received a grant of options to purchase 200,000 shares of the Company’s common stock at an exercise price of $6.30 per share. 67,000 of the options vested on March 31, 2008, 67,000 of such options vested on March 31, 2009 and 66,000 of such options vested on March 31, 2010. During the year, Mr. Ma received a grant of 14,170 shares of restricted stock under EIP2009. The closing price of the shares at the grant date on June 22, 2010 was $6.07.
|
(7)
|
On January 11, 2008, Mr. Jiang received a grant of options to purchase 300,000 shares of the Company’s common stock at an exercise price of $6.30 per share. 100,000 of the options vested on March 31, 2008, 100,000 of such options vested on March 31, 2009 and 100,000 of such options vested on March 31, 2010. During the year, Mr. Jiang received a grant of 16,999 shares of restricted stock under EIP2009. The closing price of the shares at the grant date on June 22, 2010 was $6.07.
|
Option Awards
|
Stock Awards
|
|||||||||||||||||||||||||||||||||||
Number of
Securities
Underlying
Unexercised
Options (#)
|
Number of
Securities
Underlying
Unexercised
Options (#)
|
Equity
Incentive Plan
Awards:
Number of
Securities
Underlying
Unexercised
Unearned
Options (#)
|
Option
Exercise
Price ($)
|
Option
Expiration
Date
|
Number
of
Shares
or
Units of
Stock
That
Have
Not
Vested
(#) |
Market
Value
of
Shares
or
Units of
Stock
That
Have
Not
Vested
($)(4)
|
Equity
Incentive
Plan
Awards:
Number of
Unearned
Shares,
Units
or Other
Rights That
Have Not
Vested (#)
|
Equity
Incentive
Plan
Awards:
Market or
Payout
Value of
Unearned
Shares,
Units or
Other
Rights That
Have Not
Vested ($)
|
||||||||||||||||||||||||||||
Name
|
Exercisable
|
Unexercisable
|
||||||||||||||||||||||||||||||||||
Ron Chan (1)
|
— | — | — | — | — | 59,499 | 349,259 | — | — | |||||||||||||||||||||||||||
Li Wei (2)
|
300,000 | — | — | 6.30 |
1/11/2018
|
42,498 | 249,463 | — | — | |||||||||||||||||||||||||||
Antonio Sena (3)
|
200,000 | — | — | 6.30 |
1/11/2018
|
51,003 | 299,388 | — | — | |||||||||||||||||||||||||||
Michael Santos (4)
|
200,000 | — | — | 6.30 |
1/11/2018
|
51,003 | 299,388 | — | — | |||||||||||||||||||||||||||
Jim Ma (5)
|
200,000 | — | — | 6.30 |
1/11/2018
|
42,498 | 249,463 | — | — | |||||||||||||||||||||||||||
Jiang Xiang (6) Yuan
|
300,000 | — | — | 6.30 |
1/11/2018
|
51,003 | 299,388 | — | — |
(1)
|
On June 22, 2010, Mr. Ron Chan was granted 79,336 shares under EIP2009. The shares vest over 12 quarters. 19,837 shares vested in 2010 and 26,444 shares, 26,444 shares and 6,611 shares vest in 2011, 2012, 2013, respectively.
|
(2)
|
On January 11, 2008, Mr. Li Wei received a grant of options to purchase 300,000 shares of the Company’s common stock at an exercise price of $6.30 per share. 100,000 of the options vested on March 31, 2008, 100,000 of such options vested on March 31, 2009 and 100,000 of such options vested on March 31, 2010. On June 22, 2010, Mr. Li was granted 56,668 shares under EIP2009. The shares vest over 12 quarters. 14,170 shares vested in 2010 and 18,888 shares, 18,888 shares and 4,722 shares vest in 2011, 2012, 2013, respectively.
|
(3)
|
On January 11, 2008, Mr. Antonio Sena received a grant of options to purchase 200,000 shares of the Company’s common stock at an exercise price of $6.30 per share. 67,000 of the options vested on March 31, 2008, 67,000 of such options vested on March 31, 2009 and 66,000 of such options vested on March 31, 2010. On June 22, 2010, Mr. Sena was granted 68,002 shares under EIP2009. The shares vest over 12 quarters. 16,999 shares vested in 2010 and 22,668 shares, 22,668 shares and 5,667 shares vest in 2011, 2012, 2013, respectively.
|
(4)
|
On January 11, 2008, Mr. Michael Santos received a grant of options to purchase 200,000 shares of the Company’s common stock at an exercise price of $6.30 per share. 67,000 of the options vested on March 31, 2008, 67,000 of such options vested on March 31, 2009 and 66,000 of such options vested on March 31, 2010. On June 22, 2010, Mr. Santos was granted 68,002 shares under EIP2009. The shares vest over 12 quarters. 16,999 shares vested in 2010 and 22,668 shares, 22,668 shares and 5,667 shares vest in 2011, 2012, 2013, respectively.
|
45 |
(5)
|
On January 11, 2008, Mr. Jim Ma received a grant of options to purchase 200,000 shares of the Company’s common stock at an exercise price of $6.30 per share. 67,000 of the options vested on March 31, 2008, 67,000 of such options vested on March 31, 2009 and 66,000 of such options vested on March 31, 2010. On June 22, 2010, Mr. Jim Ma was granted 56,668 shares under EIP2009. 14,170 shares vest in 2010 and 18,888 shares, 18,888 shares and 4,722 shares vest in 2011, 2012, 2013, respectively.
|
(6)
|
On January 11, 2008, Mr. Jiang received a grant of options to purchase 300,000 shares of the Company’s common stock at an exercise price of $6.30 per share. 100,000 of the options vested on March 31, 2008, 100,000 of such options vested on March 31, 2009 and 100,000 of such options vested on March 31, 2010. On June 22, 2010, Mr. Jiang 68,002 shares under EIP2009. The shares vest over 12 quarters. 16,999 shares vested in 2010 and 22,668 shares, 22,668 shares and 5,667 shares vest in 2011, 2012, 2013, respectively.
|
All
|
||||||||||||||||||||||||||||||||
Other
|
||||||||||||||||||||||||||||||||
Stock
|
||||||||||||||||||||||||||||||||
Awards:
|
All Other
|
|||||||||||||||||||||||||||||||
Number
|
Option
|
Exercise
|
||||||||||||||||||||||||||||||
of
|
Awards:
|
or
|
Closing
|
|||||||||||||||||||||||||||||
Estimated Future Payouts Under
|
Shares
|
Number of
|
Base Price
|
Price on
|
||||||||||||||||||||||||||||
Equity Incentive Plan Awards
|
of
|
Securities
|
of Option
|
Grant
|
||||||||||||||||||||||||||||
Grant |
Approval
|
Threshold
|
Target
|
Maximum
|
Stock or
|
Underlying
|
Awards
|
Date
|
||||||||||||||||||||||||
Name
|
Date
|
Date
|
(#) | (#) | (#) |
Units (#)
|
Options (#)
|
($/Sh)
|
($/Sh)
|
|||||||||||||||||||||||
Ron Chan
|
6/22/2010
|
5/7/2010
|
n/a | n/a | n/a | 79,336 | (1) | — | — | 6.07 | ||||||||||||||||||||||
Li Wei
|
6/22/2010
|
5/7/2010
|
n/a | n/a | n/a | 56,668 | (2) | — | — | 6.07 | ||||||||||||||||||||||
Antonio Sena
|
6/22/2010
|
5/7/2010
|
n/a | n/a | n/a | 68,002 | (3) | — | — | 6.07 | ||||||||||||||||||||||
Michael Santos
|
6/22/2010
|
5/7/2010
|
n/a | n/a | n/a | 68,002 | (4) | — | — | 6.07 | ||||||||||||||||||||||
Jim Ma
|
6/22/2010
|
5/7/2010
|
n/a | n/a | n/a | 56,668 | (5) | — | — | 6.07 | ||||||||||||||||||||||
Jiang Xiang Yuan
|
6/22/2010
|
5/7/2010
|
n/a | n/a | n/a | 68,002 | (6) | — | — | 6.07 |
(1)
|
On June 22, 2010, Mr. Ron Chan was granted 79,336 shares under EIP2009. The shares vest over 12 quarters. 19,837 shares vested in 2010 and 26,444 shares, 26,444 shares and 6,611 shares vest in 2011, 2012, 2013, respectively.
|
(2)
|
On June 22, 2010, Mr. Li was granted 56,668 shares under EIP2009. The shares vest over 12 quarters. 14,170 shares vested in 2010 and 18,888 shares, 18,888 shares and 4,722 shares vest in 2011, 2012, 2013, respectively.
|
(3)
|
On June 22, 2010, Mr. Sena was granted 68,002 shares under EIP2009. The shares vest over 12 quarters. 16,999 shares vested in 2010 and 22,668 shares, 22,668 shares and 5,667 shares vest in 2011, 2012, 2013, respectively.
|
46 |
(4)
|
On June 22, 2010, Mr. Santos was granted 68,002 shares under EIP2009. The shares vest over 12 quarters. 16,999 shares vested in 2010 and 22,668 shares, 22,668 shares and 5,667 shares vest in 2011, 2012, 2013, respectively.
|
(5)
|
On June 22, 2010, Mr. Jim Ma was granted 56,668 shares under EIP2009. 14,170 shares vested in 2010 and 18,888 shares, 18,888 shares and 4,722 shares vest in 2011, 2012, 2013, respectively.
|
(6)
|
On June 22, 2010, Mr. Jiang 68,002 shares under EIP2009. The shares vest over 12 quarters. 16,999 shares vested in 2010 and 22,668 shares, 22,668 shares and 5,667 shares vest in 2011, 2012, 2013, respectively.
|
47 |
48 |
49 |
Fees | ||||||||||||||||||||
Earned or | All | |||||||||||||||||||
Paid in | Stock | Options | Other | |||||||||||||||||
Cash | Awards | Awards | Compensation | Total | ||||||||||||||||
Name | (US$) | (US$)(1) | (US$) | (US$) | (US$) | |||||||||||||||
Daniel Tseung | 70,000 | 528,750 | — | — | 598,750 |
|||||||||||||||
Justin Tang | 70,000 | 528,750 | — | — | 598,750 |
|||||||||||||||
Ned Sherwood | 73,804 | 705,000 | — | — | 778,804 |
(1) | Valuation based on the dollar amount of restricted stock grants was based on the grant date fair value of awards computed in accordance with FASB ASC Topic 718. |
(2) | Mr. Daniel Tseung received a grant of 75,000 shares of restricted common stock on August 8, 2010, all of which are scheduled to vest on February 9, 2013. |
(3)
|
Mr. Justin Tang received a grant of 75,000 shares of restricted common stock on August 8, 2010, 25,000 of which vested on February 9, 2011, 25,000 of which will vest on February 9, 2012 and 25,000 of which are scheduled to vest on February 9, 2013. |
(4) | Mr. Ned Sherwood received a grant of 100,000 shares of restricted common stock on August 6 , 2010, 10,000 of which vested on November 19, 2011, 30,000 of which will vest on November 19, 2012 and 60,000 of which are scheduled to vest on November 19, 2013. |
50 |
|
(1)
|
The financial statements listed on the Financial Statements Table of Contents.
|
|
(2)
|
Not applicable.
|
|
(3)
|
The exhibits referred to below, which include the following
managerial contracts or compensatory plans or arrangements:
|
· | 2007 Omnibus Securities and Incentive Plan |
· | 2009 Executive Incentive Plan |
· | 2010 Executive Incentive Plan |
· | Service Agreement, dated January 4, 2010, between the Company and Ron Chan Tze Ngon |
· | Service Agreement, dated January 4, 2010, between the Company and Michael Santos |
· | Service Agreement, dated January 4, 2010, between the Company and Antonio Sena |
· | Service Agreement, dated January 4, 2010, between the Company and Jim Ma |
· | Service Agreement, dated January 4, 2010, between the Company and Li Wei |
· | Service Agreement, dated January 4, 2010, between the Company and Jiang Xiangyuan |
(b)
|
The exhibits listed on the Exhibit Index are filed as part of this Annual Report.
|
(c)
|
Not applicable.
|
|
(a)
|
(1) Index to Consolidated Financial Statements
|
|
(b)
|
Please see the accompanying Index to Consolidated Financial Statements which appears on page F-1 of this report. The Management’s Report on Internal Control over Financial Reporting, Reports of Independent Registered Public Accounting Firms, Consolidated Financial Statements and Notes to Consolidated Financial Statements which are listed in the Index to Consolidated Financial Statements and which appear beginning on page F-2 of this report are included in Item 8 above.
|
|
All financial statements schedules have been omitted because the information required to be set forth therein is not applicable or is included in the Consolidated Financial Statements or notes thereto.
|
Exhibit
|
Description
|
|
1.1
|
Underwriting Agreement, between ChinaCast Education Corporation and Roth Capital Partners, LLC, dated September 26, 2008 (1)
|
51 |
1.2
|
Underwriting Agreement, between ChinaCast Education Corporation and Roth Capital Partners, LLC, dated December 1, 2009 (18)
|
|
2.1
|
Share Transfer Agreement dated August 11, 2009 by and between Yupei Training Information Technology Co., Ltd. and Chongqing Chaosheng Education and Investment Co., Ltd. (13)*
|
|
2.2
|
Summary of Cancellation Agreement dated September 18, 2009 by and between Yupei Training Information Technology Co., Ltd. and Chongqing Chaosheng Education and Investment Co., Ltd. (14)*
|
|
2.3
|
Summary of Share Transfer Agreement dated September 18, 2009 by and between Yupei Training Information Technology Co., Ltd. and the shareholders of Chongqing Chaosheng Education and Investment Co., Ltd. (14)*
|
|
2.4
|
Share Transfer Agreement dated September 28, 2009 by and among ChinaCast Communication Holdings Limited, Xie Jiqing, East Achieve Limited, Shanghai Xijiu Information Technology Co., Ltd., China Lianhe Biotechnology Co., Ltd. and Lijiang College of Guangxi Normal University (15)
|
|
3(i).1
|
Amended and Restated Certificate of Incorporation, as amended, as currently in effect (2)
|
|
3(i).2
|
Certificate of Amendment to Registrant’s Amended and Restated Certificate of Incorporation (2)
|
|
3(ii)
|
By-laws (2)
|
|
10.1
|
Pledge Agreement, dated as of November 15, 2000 (3)
|
|
10.2
|
Pledge Agreement, dated as of August 11, 2003 (3)
|
|
10.3
|
Technical Services Agreement by and among ChinaCast Technology (Shanghai) Ltd., CCLX Shareholders and ChinaCast Li Xiang Co., Ltd. dated August 11, 2003 (4)
|
|
10.4
|
Supplemental Deed to Technical Services Agreement by and among ChinaCast Technology (Shanghai) Ltd., CCLX Shareholders and ChinaCast Li Xiang Co., Ltd. dated March 29, 2004 (4)
|
|
10.5
|
Revenue and Cost Allocation Agreement by and among ChinaCast Technology (Shanghai) Ltd., CCLX Shareholders and ChinaCast Li Xiang Co., Ltd. dated March 29, 2004 (4)
|
|
10.6
|
Exclusive Operating Right Agreement between Tsinghua Tongfeng Co., Ltd. and Beijing Tongfong Digital Education Technology Limited, dated June 15, 2005 (5)
|
|
10.7
|
Technical Service Agreement by and among ChinaCast Technology (Shanghai) Limited, the CCL Shareholders and ChinaCast Co., Ltd., dated November 15, 2000 (5)
|
|
10.8
|
Agreement to Acquire 80% of the holding company of the Foreign Trade Business College of Chongqing Normal University dated February 11, 2008 (6)
|
|
10.9
|
Acquisition Agreement, dated February 11, 2008, by and among ChinaCast Education Corporation, Yu Pei Information Technology (Shanghai) Limited and Beijing Heng Tai Jufu Investment Limited (7)
|
10.10
|
Letter Agreement, dated June 27, 2008, by and among ChinaCast Education Corporation, and Fir Tree Value Master Fund, L.P. and Fir Tree capital Opportunity Master Fund, L.P. (8)
|
|
10.11
|
Letter Agreement, dated June 27, 2008, by and among ChinaCast Education Corporation, and Sherleigh Associates Inc. Profit Sharing Plan and Sherleigh Associates Inc. Defined Benefit Pension Plan (8)
|
|
10.12
|
Letter Agreement, dated July 16, 2008, between ChinaCast Education Corporation and Capela Overseas Ltd. (9)
|
|
10.13
|
2007 Omnibus Securities and Incentive Plan (10)
|
|
10.14
|
Share Purchase Agreement dated as of September 18, 2009 by and among Chinacast Education Corporation and the investors named therein (16)
|
52 |
10.15
|
Registration Rights Agreement dated November 23, 2009 by and among Chinacast Education Corporation, Fir Tree Value Master Fund L.P. and Fir Tree Capital Opportunity Master Fund, L.P. (17)
|
|
10.16
|
Subscription Agreement dated December 21, 2009 between the Company and Thriving Blue Limited (19)
|
|
10.17
|
Service Agreement, dated January 4, 2010, between the Company and Ron Chan Tze Ngon (20)
|
|
10.18
|
Service Agreement, dated January 4, 2010, between the Company and Michael Santos (20)
|
|
10.19
|
Service Agreement, dated January 4, 2010, between the Company and Antonio Sena (20)
|
|
10.20
|
Service Agreement, dated January 4, 2010, between the Company and Jim Ma (20)
|
|
10.21
|
Service Agreement, dated January 4, 2010, between the Company and Li Wei (20)
|
|
10.22
|
Service Agreement, dated January 4, 2010, between the Company and Jiang Xiangyuan (20)
|
|
10.23
|
2009 Executive Incentive Plan (20)
|
|
10.24
|
2010
Executive Incentive Plan (23)
|
|
10.25
|
Stock Purchase Agreement dated April 29, 2010 between ChinaCast Education Corporation and Wu Shi Xin (21)
|
|
10.26
|
English Translation of Share Transfer Agreement dated August 19, 2010 by and among ChinaCast Education Holdings Limited, Wu Shi Xing, Wintown Enterprises Limited, Shanghai Rubao Information Technology Co., Ltd., Wuhan Jiyang Education Investment Co., Ltd. and Hubei Industrial University Business College (22)
|
|
10.27 | Agreement with China Construction Bank* (24) |
53 |
10.28
|
English
Translation of Exclusive Technical Service Agreement, dated December 31, 2010 between ChinaCast Technology (Shanghai) Limited,
and ChinaCast Li Xiang Co., Ltd. (25)
|
|
10.29
|
English
Translation of Share Pledge Agreement, dated December 31, 2010 between ChinaCast Technology (Shanghai) Limited, Jiang
Xiangyuan, and ChinaCast Li Xiang Co., Ltd. (25)
|
|
10.30
|
English
Translation of Exclusive Option Agreement, dated December 31, 2010 between ChinaCast Technology (Shanghai) Limited, Jiang Xiangyuan,
and ChinaCast Li Xiang Co., Ltd. (25)
|
|
10.31
|
English
Translation of the Power Attorney, dated December 31, 2010 from Jiang Xiangyuan to ChinaCast Technology (Shanghai) Limited
(25)
|
|
10.32
|
English
Translation of Share Pledge Agreement, dated December 31, 2010 between ChinaCast Technology (Shanghai) Limited, Li Wei, and ChinaCast
Li Xiang Co., Ltd. (25)
|
|
10.33
|
English
Translation of Exclusive Option Agreement, dated December 31, 2010 between ChinaCast Technology (Shanghai) Limited, Li Wei, and
ChinaCast Li Xiang Co., Ltd. (25)
|
|
10.34
|
English
Translation of the Power Attorney, dated December 31, 2010 from Li Wei to ChinaCast Technology (Shanghai) Limited
(25)
|
|
10.35
|
English
Translation of Share Pledge Agreement, dated December 31, 2010 between ChinaCast Technology (Shanghai) Limited, Zhang Liwen, and
ChinaCast Li Xiang Co., Ltd. (25)
|
|
10.36
|
English
Translation of Exclusive Option Agreement, dated December 31, 2010 between ChinaCast Technology (Shanghai) Limited, Zhang Liwen,
and ChinaCast Li Xiang Co., Ltd. (25)
|
|
10.37
|
English
Translation of the Power Attorney, dated December 31, 2010 from Zhang Liwen to ChinaCast Technology (Shanghai) Limited
(25)
|
|
14.1
|
ChinaCast Education Corporation Code of Business Conduct and Ethics For Employees, Officers and Directors (11)
|
|
21.1
|
List
of Subsidiaries (23)
|
|
23.1
|
Consent of Independent Registered Public Accounting Firm
|
|
31.1
|
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
31.2
|
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
32.1
|
Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
99.1
|
Insider Trading Policy (12)
|
*
|
Summary translation filed as an exhibit. The agreement is in Chinese and the version executed by the Company is in Chinese
|
(1)
|
Incorporated by reference to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on October 1, 2008
|
(2)
|
Incorporated by reference to the Registration Statement on Form S-4 filed with the Securities and Exchange Commission on May 12, 2006.
|
(3)
|
Incorporated by reference to the Registration Statement on Form S-4 filed with the Securities and Exchange Commission on May 12, 2006.
|
(4)
|
Incorporated by reference to the Registration Statement on Form S-4/A filed with the Securities and Exchange Commission on August 14, 2006.
|
54 |
(5)
|
Incorporated by reference to the Registration Statement on Form S-4/A filed with the Securities and Exchange Commission on October 20, 2006.
|
(6)
|
Incorporated by reference to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on February 15, 2008
|
(7)
|
Incorporated by reference to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on February 15, 2008
|
(8)
|
Incorporated by reference to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on July 3, 2008
|
(9)
|
Incorporated by reference to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on July 22, 2008
|
(10)
|
Incorporated by reference to the Registrant’s Proxy Statement on Schedule 14A for its Annual Meeting of Shareholders held on December 18, 2007 filed with the Securities and Exchange Commission on November 28, 2007
|
(11)
|
Incorporated by reference to the Registrant’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 16, 2009
|
(12)
|
Incorporated by reference to the Registrant’s Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on August 10, 2009
|
(13)
|
Incorporated by reference to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on August 17, 2009
|
(14)
|
Incorporated by reference to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on September 24, 2009
|
(15)
|
Incorporated by reference to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on September 30, 2009
|
(16)
|
Incorporated by reference to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on October 22, 2009
|
(17)
|
Incorporated by reference to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on November 25, 2009
|
(18)
|
Incorporated by reference to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on December 2, 2009
|
(19)
|
Incorporated by reference to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on December 28, 2009
|
(20)
|
Incorporated by reference to the Registrant’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 29, 2010
|
(21)
|
Incorporated by reference to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on May 5, 2010
|
(22)
|
Incorporated by reference to the Registrant’s Current Report on Form 8-K filed with the Securities and Exchange Commission on August 27, 2010
|
(23)
|
Incorporated by reference to the Registrant’s Annual Report on Form 10-K filed with the Securities
and Exchange Commission on March 16, 2011
|
(24)
|
Incorporated by reference to the Registrant’s Annual Report
on Form 10-K/A filed with the Securities and Exchange Commission on September 2, 2011
|
(25)
|
Incorporated by reference to the Registrant’s Annual Report on Form 10-K/A filed with the Securities
and Exchange Commission on February 8, 2012
|
55 |
CHINACAST EDUCATION CORPORATION
|
||||
By:
|
/s/ Ron Chan Tze Ngon
|
|||
Dated: February
24, 2012
|
Name:
|
Ron Chan Tze Ngon
|
||
Title:
|
Chairman and Chief Executive Officer
|
56 |
Dated: February
24, 2012
|
By:
|
/s/
Ron Chan Tze Ngon
|
||
Name:
|
Ron Chan Tze Ngon
|
|||
Title:
|
Chairman and Chief Executive Officer
(Principal Executive Officer)
|
|||
Dated: February
24, 2012
|
By:
|
/s/ Antonio Sena
|
||
Name:
|
Antonio Sena
|
|||
Title:
|
Chief Financial Officer and Secretary
(Principal Accounting and Financial Officer)
|
|||
Dated: February
24, 2012
|
By:
|
/s/ Michael Santos
|
||
Name:
|
Michael Santos
|
|||
Title:
|
Director
|
|||
Dated: February
24, 2012
|
By:
|
/s/ Daniel Tseung
|
||
Name:
|
Daniel Tseung
|
|||
Title:
|
Director
|
|||
Dated: February
24, 2012
|
By:
|
/s/ Derek Feng
|
||
Name:
|
Derek Feng
|
|||
Title:
|
Director
|
|||
Dated: February
24, 2012
|
By:
|
/s/ Ned Sherwood
|
||
Name:
|
Ned Sherwood
|
|||
Title:
|
Director
|
Dated: February
24, 2012
|
By:
|
/s/ Stephene Markscheid | ||
Name:
|
Stephene
Markscheid
|
|||
Title:
|
Director
|
|||
Dated: February
24, 2012
|
By:
|
/s/ Douglas Woodrum | ||
Name:
|
Douglas
Woodrum
|
|||
Title:
|
Director
|
57 |
CHINACAST EDUCATION CORPORATION
|
||
Report of Independent Registered Public Accounting Firm
|
||
and Consolidated Financial Statements
|
||
For the years ended December 31, 2008, 2009 and 2010
|
58 |
CONTENTS
|
PAGE
|
|
REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
|
F
- 2
|
|
CONSOLIDATED
BALANCE SHEETS AS OF DECEMBER 31, 2009 AND 2010 (AS RESTATED)
|
F
- 3
|
|
CONSOLIDATED
STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME FOR THE YEARS ENDED DECEMBER 31, 2008, 2009 AND 2010 (AS
RESTATED)
|
F
- 5
|
|
CONSOLIDATED
STATEMENTS OF CHANGES IN EQUITY FOR THE YEARS ENDED DECEMBER 31, 2008, 2009 AND 2010 (AS
RESTATED)
|
F
- 7
|
|
CONSOLIDATED
STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2008, 2009 AND 2010 (AS RESTATED)
|
F
- 8
|
|
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS (AS RESTATED)
|
F
- 10
|
|
SCHEDULE
I (AS RESTATED)
|
F
- 64
|
F-1 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
TO THE BOARD OF
DIRECTORS AND SHAREHOLDERS OF CHINACAST EDUCATION CORPORATION
We have audited the accompanying consolidated balance sheets of ChinaCast Education Corporation, its subsidiaries, and its variable interest entity (collectively, the "Company") as of December 31, 2009 and 2010, and the related consolidated statements of operations and comprehensive income, changes in equity, and cash flows for each of the three years in the period ended December 31, 2010, all expressed in Renminbi. Our audits also included the financial statement schedule included in Schedule 1. These financial statements and financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on the financial statements and financial statement schedule based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2009 and 2010, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2010, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, such financial statement schedule, when considered in relation to the consolidated financial statements taken as a whole, present fairly, in all material respects, the information set forth therein.
Our audits also comprehended the translation of Renminbi amounts into United States dollar amounts and, in our opinion, such translation has been made in conformity with the basis stated in Note 2. Such United States dollar amounts are presented solely for the convenience of the readers.
As discussed in Note 27 to the consolidated financial statements, the accompanying 2010 financial statements have been restated for the correction of errors.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company's internal control over financial reporting as of December 31, 2010, based on the criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 16, 2011 (February 7, 2012 as to the effects of the material weakness related to the accounting for the prepaid service fee, as discussed in Management’s Report on Internal Control over Financial Reporting (as revised)) which report expressed an adverse opinion on the Company's internal control over financial reporting because of the material weaknesses.
/s/ Deloitte Touche Tohmatsu CPA Ltd.
Beijing, People's Republic of China
March 16, 2011 (September 2, 2011 as to the effects of the restatement discussed in Note 27 under the caption “First Restatement” and February 7, 2012 as to the effects of the restatement discussed in Note 27 under the caption “Second Restatement”)
F-2 |
As of December 31,
|
||||||||||||
2009
|
2010
|
2010
|
||||||||||
RMB
|
RMB
|
US$
|
||||||||||
(As Restated) | (As Restated) | |||||||||||
Assets
|
||||||||||||
Current assets:
|
||||||||||||
Cash and cash equivalents
|
327,628 | 244,403 | 37,031 | |||||||||
Term deposits
|
507,000 | 704,000 | 106,667 | |||||||||
Accounts receivable, net of allowance for doubtful accounts of nil as of December 31, 2009 and 2010
|
53,828 | 59,420 | 9,003 | |||||||||
Inventory
|
1,386 | 993 | 150 | |||||||||
Prepaid expenses and other current assets
|
19,178 | 56,321 | 8,533 | |||||||||
Amounts due from related parties
|
6,388 | 3,438 | 521 | |||||||||
Deferred tax assets - current
|
1,010 | 2,972 | 450 | |||||||||
Assets held for sale
|
34 | - | - | |||||||||
Current portion of prepaid lease payments for land use right
|
3,246 | 3,986 | 604 | |||||||||
Total current assets
|
919,698 | 1,075,533 | 162,959 | |||||||||
Non-current deposits and prepayments
|
14,550 | 59,130 | 8,959 | |||||||||
Property and equipment, net
|
516,938 | 763,926 | 115,746 | |||||||||
Prepaid lease payments for land use rights - non-current
|
144,818 | 177,544 | 26,901 | |||||||||
Acquired intangible assets, net
|
71,286 | 100,816 | 15,275 | |||||||||
Long-term investments
|
3,101 | 3,000 | 455 | |||||||||
Non-current advances to related party
|
99,727 | - | - | |||||||||
Goodwill
|
503,771 | 774,083 | 117,285 | |||||||||
Total assets
|
2,273,889 | 2,954,032 | 447,580 | |||||||||
Liabilities and equity
|
||||||||||||
Current liabilities:
|
||||||||||||
Accounts payable (including accounts payable of the consolidated VIE without recourse to ChinaCast
|
||||||||||||
Education Corporation of RMB719 and RMB1,635 as of December 31, 2009 and December 31, 2010, respectively)
|
16,061 | 48,602 | 7,364 | |||||||||
Accrued expenses and other current liabilities (including accrued expenses and other liabilities of the consolidated VIE without recourse to ChinaCast Education Corporation of RMB16,740 and RMB17,502 as of December 31, 2009 and December 31, 2010, respectively)
|
214,316 | 279,973 | 42,420 | |||||||||
Deferred revenues
|
156,645 | 262,824 | 39,822 | |||||||||
Income taxes payable (including income taxes payable of the consolidated VIE without recourse to ChinaCast Education
|
||||||||||||
Corporation of RMB2,293 and RMB4,844 as of December 31, 2009 and December 31, 2010, respectively)
|
68,731 | 99,461 | 15,070 | |||||||||
Current portion of long-term bank borrowings(including current portion of long-term bank borrowings of the consolidated VIE without recourse to ChinaCast Education Corporation of nil as of December 31, 2009 and December 31, 2010)
|
104,400 | 170,000 | 25,758 | |||||||||
Current portion of capital lease obligation (including current portion of capital lease obligation of the consolidated VIE without recourse to ChinaCast Education Corporation of nil as of December 31, 2009 and December 31, 2010)
|
1,323 | - | - | |||||||||
Other borrowings(including other borrowings of the consolidated VIE without recourse to ChinaCast Education Corporation of nil as of December 31, 2009 and December 31, 2010)
|
200 | 1,500 | 227 | |||||||||
Liabilities held for sale
|
1,315 | - | - | |||||||||
Total current liabilities
|
562,991 | 862,360 | 130,661 |
F-3 |
As of December 31,
|
||||||||||||
2009
|
2010
|
2010
|
||||||||||
RMB
|
RMB
|
US$
|
||||||||||
(As Restated) | (As Restated) | |||||||||||
Long-term bank borrowings(including long-term bank Borrowings of the consolidated VIE without recourse to ChinaCast Education Corporation of nil as of December 31, 2009 and December 31, 2010)
|
134,000 | 90,000 | 13,636 | |||||||||
Deferred tax liabilities - non-current(including deferred tax liabilities – non-current of the consolidated VIE without recourse to ChinaCast Education Corporation of nil as of December 31, 2009 and December 31, 2010)
|
30,923 | 51,503 | 7,803 | |||||||||
Unrecognized tax benefits - non-current (including unrecognized tax benefits of the consolidated VIE without recourse to ChinaCast Education Corporation of RMB5,257 and RMB5,799 as of December 31, 2009 and December 31, 2010, respectively)
|
62,457 | 109,933 | 16,657 | |||||||||
Total non-current liabilities
|
227,380 | 251,436 | 38,096 | |||||||||
Total liabilities
|
790,371 | 1,113,796 | 168,757 | |||||||||
Commitments and contingencies (Note 22)
|
||||||||||||
Equity:
|
||||||||||||
Ordinary shares (US$0.0001 par value; 100,000,000 shares authorized; 45,170,698 and 49,778,952 shares issued and outstanding in 2009 and 2010, respectively)
|
33 | 36 | 5 | |||||||||
Additional paid-in capital
|
1,290,651 | 1,510,527 | 228,868 | |||||||||
Statutory reserve
|
39,139 | 47,671 | 7,223 | |||||||||
Accumulated other comprehensive loss
|
(6,055 | ) | (3,194 | ) | (484 | ) | ||||||
Retained earnings
|
136,583 | 259,704 | 39,349 | |||||||||
Total ChinaCast Education Corporation shareholders' equity
|
1,460,351 | 1,814,744 | 274,961 | |||||||||
Noncontrolling interest
|
23,167 | 25,492 | 3,862 | |||||||||
Total equity
|
1,483,518 | 1,840,236 | 278,823 | |||||||||
Total liabilities and equity
|
2,273,889 | 2,954,032 | 447,580 |
F-4 |
For the years ended December 31,
|
||||||||||||||||
2008
|
2009
|
2010
|
2010
|
|||||||||||||
RMB
|
RMB
|
RMB
|
US$
|
|||||||||||||
(As Restated) | (As Restated) | |||||||||||||||
Revenues:
|
||||||||||||||||
Service
|
253,702 | 337,940 | 495,808 | 75,122 | ||||||||||||
Equipment
|
28,912 | 8,607 | 18,203 | 2,758 | ||||||||||||
282,614 | 346,547 | 514,011 | 77,880 | |||||||||||||
Cost of revenues:
|
||||||||||||||||
Service
|
(97,730 | ) | (139,046 | ) | (249,440 | ) | (37,794 | ) | ||||||||
Equipment
|
(29,122 | ) | (8,455 | ) | (17,952 | ) | (2,720 | ) | ||||||||
(126,852 | ) | (147,501 | ) | (267,392 | ) | (40,514 | ) | |||||||||
Gross profit
|
155,762 | 199,046 | 246,619 | 37,366 | ||||||||||||
Operating (expenses) income:
|
||||||||||||||||
Selling and marketing expenses (including share-based compensation of RMB1,626, RMB1,640 and RMB406 for 2008, 2009 and 2010, respectively)
|
(5,770 | ) | (4,649 | ) | (2,995 | ) | (454 | ) | ||||||||
General and administrative expenses (including share-based compensation of RMB14,225, RMB14,566 and RMB7,439 for 2008, 2009 and 2010, respectively)
|
(67,704 | ) | (69,641 | ) | (84,437 | ) | (12,793 | ) | ||||||||
Foreign exchange loss
|
(1,162 | ) | (87 | ) | (974 | ) | (148 | ) | ||||||||
Management service fee
|
6,463 | 5,128 | - | - | ||||||||||||
Change in fair value of contingent consideration
|
- | - | 9,417 | 1,427 | ||||||||||||
Other operating income
|
56 | 210 | 324 | 49 | ||||||||||||
Total operating expenses, net
|
(68,117 | ) | (69,039 | ) | (78,665 | ) | (11,919 | ) | ||||||||
Income from operations
|
87,645 | 130,007 | 167,954 | 25,447 | ||||||||||||
Impairment loss on cost method investment
|
(8,500 | ) | (436 | ) | ||||||||||||
Gain on disposal of cost method investment
|
- | - | 2,123 | 322 | ||||||||||||
Interest income
|
19,461 | 8,317 | 14,103 | 2,137 | ||||||||||||
Interest expense
|
(2,575 | ) | (7,988 | ) | (13,679 | ) | (2,073 | ) | ||||||||
Income before provision for income taxes, earnings in equity investments
|
96,031 | 129,900 | 170,501 | 25,833 | ||||||||||||
Provision for income taxes
|
(24,381 | ) | (29,949 | ) | (38,573 | ) | (5,844 | ) | ||||||||
Net income before earnings in equity investments
|
71,650 | 99,951 | 131,928 | 19,989 | ||||||||||||
Earnings in equity investments
|
(441 | ) | (1,687 | ) | (101 | ) | (15 | ) | ||||||||
Income from continuing operations, net of tax
|
71,209 | 98,264 | 131,827 | 19,974 | ||||||||||||
Discontinued operations
|
||||||||||||||||
Loss from discontinued operations, net of taxes of RMBnil for 2008, 2009 and 2010
|
(21,025 | ) | (74 | ) | - | - | ||||||||||
Gain on termination of discontinued operation, net of taxes of RMBnil for 2008, 2009 and 2010
|
- | 1,228 | 1,280 | 194 | ||||||||||||
Net (loss) income on discontinued operation | (21,025 | ) | 1,154 | 1,280 | 194 | |||||||||||
Net income
|
50,184 | 99,418 | 133,107 | 20,168 | ||||||||||||
Less: Net income attributable to noncontrolling interest
|
(7,517 | ) | (7,339 | ) | (1,454 | ) | (220 | ) | ||||||||
Net income attributable to ChinaCast Education Corporation
|
42,667 | 92,079 | 131,653 | 19,948 | ||||||||||||
Net income
|
50,184 | 99,418 | 133,107 | 20,168 | ||||||||||||
Foreign currency translation adjustments
|
(257 | ) | (596 | ) | 2,795 | 423 | ||||||||||
Comprehensive income
|
49,927 | 98,822 | 135,902 | 20,591 | ||||||||||||
Comprehensive income attributable to noncontrolling interest
|
(7,517 | ) | (7,336 | ) | (1,388 | ) | (210 | ) | ||||||||
Comprehensive income attributable to ChinaCast Education Corporation
|
42,410 | 91,486 | 134,514 | 20,381 |
F-5 |
For the years ended December 31,
|
||||||||||||||||
2008
|
2009
|
2010
|
2010
|
|||||||||||||
RMB
|
RMB
|
RMB
|
US$
|
|||||||||||||
(As Restated) | (As Restated) | |||||||||||||||
Net income per share
|
||||||||||||||||
Income from continuing operations attributable to ChinaCast Education Corporation per share:
|
||||||||||||||||
Basic
|
2.08
|
2.46
|
2.70
|
0.41
|
||||||||||||
Diluted
|
2.06
|
2.45
|
2.67
|
0.41
|
||||||||||||
(Loss) income on discontinued operations attributable to ChinaCast Education Corporation per share:
|
||||||||||||||||
Basic
|
(0.68
|
)
|
0.03
|
0.03
|
-
|
|||||||||||
Diluted
|
(0.68
|
)
|
0.03
|
0.03
|
-
|
|||||||||||
Net income attributable to ChinaCast Education Corporation per share:
|
||||||||||||||||
Basic
|
1.40
|
2.49
|
2.73
|
0.41
|
||||||||||||
Diluted
|
1.38
|
2.48
|
2.70
|
0.41
|
||||||||||||
Weighted average shares used in computation:
|
||||||||||||||||
Basic
|
30,442,992
|
36,946,830
|
48,241,779
|
48,241,779
|
||||||||||||
Diluted
|
30,691,742
|
37,167,694
|
48,767,142
|
48,767,142
|
F-6 |
ChinaCast Education Corporation shareholders
|
||||||||||||||||||||||||||||||||
(Accumulated
|
Accumulated other
|
|||||||||||||||||||||||||||||||
Ordinary
|
Additional
|
Statutory
|
deficit) retained
|
comprehensive
|
Noncontrolling
|
Total
|
||||||||||||||||||||||||||
Shares
|
Amount
|
paid-in capital
|
reserve
|
earnings
|
loss
|
interest
|
equity
|
|||||||||||||||||||||||||
RMB
|
RMB
|
RMB
|
RMB
|
RMB
|
RMB
|
RMB
|
||||||||||||||||||||||||||
(As Restated) | (As Restated) | |||||||||||||||||||||||||||||||
Balance at January 1, 2008
|
27,292,641 | 21 | 768,844 | 16,087 | 24,889 | (5,205 | ) | 20,512 | 825,148 | |||||||||||||||||||||||
Share-based compensation
|
- | - | 15,851 | - | - | - | - | 15,851 | ||||||||||||||||||||||||
Net income
|
- | - | - | - | 42,667 | - | 7,517 | 50,184 | ||||||||||||||||||||||||
Exercise of warrants and issuance of restricted shares of common stock, net of issuance costs of RMB5,938
|
4,105,610 | 3 | 98,507 | - | - | - | - | 98,510 | ||||||||||||||||||||||||
Share offering, net of issuance costs of RMB11,440
|
4,250,000 | 3 | 64,233 | - | - | - | - | 64,236 | ||||||||||||||||||||||||
Purchase of subsidiaries
|
- | - | - | - | - | - | 16,550 | 16,550 | ||||||||||||||||||||||||
Refund of payment of tax liability assumed pursuant to the Share Exchange Transaction
|
- | - | 917 | - | - | - | - | 917 | ||||||||||||||||||||||||
Foreign currency translation adjustments
|
- | - | - | - | - | (257 | ) | - | (257 | ) | ||||||||||||||||||||||
Statutory reserve
|
- | - | - | 12,030 | (12,030 | ) | - | - | - | |||||||||||||||||||||||
Balance at December 31, 2008
|
35,648,251 | 27 | 948,352 | 28,117 | 55,526 | (5,462 | ) | 44,579 | 1,071,139 | |||||||||||||||||||||||
Share-based compensation
|
120,000 | - | 16,206 | - | - | - | - | 16,206 | ||||||||||||||||||||||||
Net income
|
- | - | - | - | 92,079 | - | 7,339 | 99,418 | ||||||||||||||||||||||||
Issuance of restricted shares of common stock for acquisition of additional interests in subsidiary
|
2,582,947 | 2 | 28,746 | - | - | - | (28,748 | ) | - | |||||||||||||||||||||||
Share offering, net of issuance costs of RMB21,508
|
6,819,500 | 4 | 297,347 | - | - | - | - | 297,351 | ||||||||||||||||||||||||
Foreign currency translation adjustments
|
- | - | - | - | - | (593 | ) | (3 | ) | (596 | ) | |||||||||||||||||||||
Statutory reserve
|
- | - | - | 11,022 | (11,022 | ) | - | - | - | |||||||||||||||||||||||
Balance at December 31, 2009
|
45,170,698 | 33 | 1,290,651 | 39,139 | 136,583 | (6,055 | ) | 23,167 | 1,483,518 | |||||||||||||||||||||||
Share-based compensation
|
180,000 | - | 7,845 | - | - | - | - | 7,845 | ||||||||||||||||||||||||
Net income
|
- | - | - | - | 131,653 | - | 1,454 | 133,107 | ||||||||||||||||||||||||
Issuance of shares of common stock
|
4,428,254 | 3 | 232,968 | - | - | - | - | 232,971 | ||||||||||||||||||||||||
Capital contribution by a noncontrolling shareholder
|
- | - | - | - | - | - | 20,000 | 20,000 | ||||||||||||||||||||||||
Foreign currency translation adjustments
|
- | - | - | - | - | 2,861 | (66 | ) | 2,795 | |||||||||||||||||||||||
Acquisition of NCI
|
- | - | (20,937 | ) | - | - | - | (19,063 | ) | (40,000 | ) | |||||||||||||||||||||
Statutory reserve
|
- | - | - | 8,532 | (8,532 | ) | - | - | - | |||||||||||||||||||||||
Balance at December 31, 2010
|
49,778,952 | 36 | 1,510,527 | 47,671 | 259,704 | (3,194 | ) | 25,492 | 1,840,236 | |||||||||||||||||||||||
US$ |
5
|
US$ |
228,868
|
US$ |
7,223
|
US$ |
39,349
|
US$ |
(484
|
) | US$ |
3,862
|
US$ |
278,823
|
F-7 |
For the years ended December 31,
|
||||||||||||||||
2008
|
2009
|
2010
|
2010
|
|||||||||||||
RMB
|
RMB
|
RMB
|
US$
|
|||||||||||||
(As Restated)
|
(As Restated)
|
|||||||||||||||
Cash flows from operating activities:
|
||||||||||||||||
Net income
|
50,184 | 99,418 | 133,107 | 20,168 | ||||||||||||
Adjustments to reconcile net income to net cash provided by operating activities:
|
||||||||||||||||
Depreciation
|
16,565 | 29,489 | 53,126 | 8,049 | ||||||||||||
Amortization of acquired intangible assets
|
16,280 | 20,596 | 39,470 | 5,980 | ||||||||||||
Amortization of land use rights
|
1,908 | 2,639 | 3,534 | 535 | ||||||||||||
Share-based compensation
|
15,851 | 16,206 | 7,845 | 1,189 | ||||||||||||
(Gain) loss on disposal of property and equipment
|
(37 | ) | 1,364 | 684 | 104 | |||||||||||
Earnings in equity investments
|
441 | 1,687 | 101 | 15 | ||||||||||||
Write-down of inventory
|
262 | 276 | - | - | ||||||||||||
Gain on disposal of discontinued operation | - | - | (1,280 | ) | (194 | ) | ||||||||||
Gain on disposal of acquired intangible assets
|
- | (1,552 | ) | - | - | |||||||||||
Impairment loss on cost method investment
|
8,500 | 436 | - | - | ||||||||||||
Impairment loss on acquired intangible assets
|
14,500 | - | - | - | ||||||||||||
Gain on disposal of subsidiary
|
- | (1,228 | ) | - | - | |||||||||||
Gain on disposal of cost method investment
|
(2,123 | ) | (322 | ) | ||||||||||||
Change in fair value of contingent consideration-prior year
|
- | - | (9,417 | ) | (1,427 | ) | ||||||||||
Changes in assets and liabilities:
|
- | - | ||||||||||||||
Accounts receivable
|
1,927 | (20,298 | ) | (4,790 | ) | (726 | ) | |||||||||
Inventory
|
334 | (243 | ) | 393 | 60 | |||||||||||
Prepaid expenses and other current assets
|
(1,566 | ) | (8,910 | ) | (29,186 | ) | (4,422 | ) | ||||||||
Non-current deposits and prepayments
|
1,746 | (1,491 | ) | 16,262 | 2,464 | |||||||||||
Amounts due from related parties
|
760 | (3,900 | ) | 2,950 | 447 | |||||||||||
Accounts payable
|
(11,163 | ) | 4,594 | 6,136 | 930 | |||||||||||
Accrued expenses and other current liabilities
|
22,813 | (11,669 | ) | (2,839 | ) | (430 | ) | |||||||||
Deferred revenues
|
51,172 | (16,287 | ) | 103,426 | 15,671 | |||||||||||
Amounts due to related parties
|
1,127 | (1,127 | ) | |||||||||||||
Income taxes payable
|
13,844 | 18,137 | 25,175 | 3,814 | ||||||||||||
Deferred tax assets
|
- | (270 | ) | (1,413 | ) | (214 | ) | |||||||||
Deferred tax liabilities
|
(2,266 | ) | (3,463 | ) | (8,423 | ) | (1,276 | ) | ||||||||
Unrecognized tax benefits
|
9,883 | 10,683 | 19,833 | 3,005 | ||||||||||||
Net cash provided by operating activities
|
213,065 | 135,087 | 352,571 | 53,420 | ||||||||||||
Cash flows from investing activities:
|
||||||||||||||||
Purchase of cost method investment
|
(3,000 | ) | - | |||||||||||||
Advances to related party
|
(26,294 | ) | (20,309 | ) | - | - | ||||||||||
Repayment from advances to related party
|
35,991 | 32,611 | ||||||||||||||
Deposits for business acquisition
|
(19,000 | ) | - | |||||||||||||
Return of deposit for business acquisition
|
19,000 | - | ||||||||||||||
Purchase of property and equipment
|
(56,351 | ) | (41,280 | ) | (100,377 | ) | (15,209 | ) | ||||||||
Purchase of subsidiaries, net of cash acquired
|
(465,507 | ) | (221,887 | ) | (340,260 | ) | (51,555 | ) | ||||||||
Term deposits
|
227,768 | (138,000 | ) | (197,000 | ) | (29,848 | ) | |||||||||
Advance from disposal of intangible assets
|
- | 1,000 | ||||||||||||||
Disposal of intangible assets
|
- | 6,000 | ||||||||||||||
Disposal of property and equipment
|
244 | 51 | ||||||||||||||
Deposit for investment
|
- | (3,000 | ) | |||||||||||||
Acquisition of brand name usage right
|
- | - | ||||||||||||||
Cash on disposal of subsidiary
|
- | (683 | ) | |||||||||||||
Net cash used in investing activities
|
(287,149 | ) | (385,497 | ) | (637,637 | ) | (96,612 | ) |
F-8 |
For the years ended December 31,
|
||||||||||||||||
2008
|
2009
|
2010
|
2010
|
|||||||||||||
RMB
|
RMB
|
RMB
|
US$
|
|||||||||||||
(As Restated)
|
(As Restated)
|
|||||||||||||||
Cash flows from financing activities:
|
||||||||||||||||
Deferred consideration paid for acquisition of subsidiary
|
- | (4,150 | ) | (20,540 | ) | (3,112 | ) | |||||||||
Proceeds from share offering, net of issuance costs
|
64,236 | 297,351 | 232,971 | 35,299 | ||||||||||||
Other borrowings raised
|
5,998 | 10,850 | 93,500 | 14,167 | ||||||||||||
Bank borrowings raised
|
- | 70,000 | 136,000 | 20,606 | ||||||||||||
Bank borrowings repaid
|
- | - | (168,400 | ) | (25,515 | ) | ||||||||||
Capital contribution from noncontrolling interests
|
- | - | 20,000 |
3,030
|
||||||||||||
Guarantee deposit paid
|
- | (3,000 | ) | (1,000 | ) | (151 | ) | |||||||||
Repayment of other borrowings
|
(11,501 | ) | (11,747 | ) | (92,200 | ) | (13,970 | ) | ||||||||
Repayment of capital lease obligation
|
- | - | (1,323 | ) | (200 | ) | ||||||||||
Exercise of warrants and issuance of restricted shares of common stock, net of issuance costs (Note 18)
|
98,510 | - | ||||||||||||||
Net cash provided by financing activities
|
155,941 | 358,113 | 199,008 | 30,154 | ||||||||||||
Effect of foreign exchange rate changes
|
(336 | ) | (189 | ) | 2,833 | 428 | ||||||||||
Net (decrease) increase in cash and cash equivalents
|
81,521 | 107,514 | (83,225 | ) | (12,610 | ) | ||||||||||
Less: cash and cash equivalents in assets held for sale
|
- | (17 | ) | - | - | |||||||||||
Cash and cash equivalents at beginning of the year
|
138,610 | 220,131 | 327,628 | 49,641 | ||||||||||||
Cash and cash equivalents at end of the year
|
220,131 | 327,628 | 244,403 | 37,031 | ||||||||||||
Non-cash investing and financing activities:
|
||||||||||||||||
Payable assumed in purchase of property and equipment
|
23,189 | 49,335 | 30,609 | 4,638 | ||||||||||||
Inception of capital leases
|
3,784 | - | - | |||||||||||||
Non-current advance used to acquire NCI
|
40,000 | 6,061 | ||||||||||||||
Consideration payable for acquisition of subsidiaries
|
4,150 | 30,482 | 78,721 | 11,927 | ||||||||||||
Receivable from disposal of subsidiaries
|
- | 100 | - | - | ||||||||||||
Issuance of restricted shares of common stock for acquisition of additional interests in subsidiary
|
- | 135,000 | - | - | ||||||||||||
Supplemental cash flow information:
|
||||||||||||||||
Interest paid (net of amount capitalized of RMBRMB1,421 and RMB8,832 in 2009 and 2010, respectively)
|
2,575 | 7,988 | 13,679 | 2,073 | ||||||||||||
Income taxes paid
|
3,846 | 5,014 | 3,281 | 497 |
F-9 |
1.
|
ORGANIZATION AND PRINCIPAL ACTIVITIES (Restated)
|
Date of
|
Place of
|
Proportion of issued
|
||||||||||
incorporation
|
incorporation
|
share/registered capital
|
||||||||||
Name
|
or establishment
|
or establishment
|
held by the Company
|
Principal activity
|
||||||||
Direct
|
Indirect
|
|||||||||||
Subsidiary:
|
||||||||||||
ChinaCast Education Holdings Limited ("CEH")
|
February 12, 2010
|
British Virgin Islands
|
100 | % |
Investment holdings
|
|||||||
Subsidiaries of CEH
|
||||||||||||
Wintown Enterprises Limited ("Wintown")
|
August 18, 2004
|
British Virgin Islands
|
100 | % |
Investment holdings
|
|||||||
Subsidiaries of Wintown
|
||||||||||||
Shanghai Rubao Information Technology Co., Ltd ("Rubao")
|
January 20, 2005
|
PRC
|
100 | % |
Investment holdings
|
|||||||
Subsidiaries of Rubao
|
||||||||||||
Wuhan Jiyang Education Investment Co., Ltd. ("Jiyang")
|
March 21, 2003
|
PRC
|
100 | % |
Investment holdings
|
|||||||
Subsidiaries of Jiyang
|
||||||||||||
Hubei Industrial University Business College ("HIUBC")
|
Mar 31, 2004
|
PRC
|
100 | % |
Provision of accredited degree courses
|
|||||||
Subsidiaries of CEH
|
||||||||||||
ChinaCast Education International Limited ("CEIHK")
|
October 21, 2010
|
HK
|
100 | % |
Investment holdings
|
|||||||
Subsidiaries of CEH
|
||||||||||||
ChinaCast Education Investmentl Limited ("CEI")
|
February 12, 2010
|
BVI
|
100 | % |
Investment holdings
|
|||||||
Subsidiaries of CEI
|
||||||||||||
ChinaCast (BJ) Education Technology Limited ("CET")
|
September 28, 2010
|
BVI
|
100 | % |
Investment holdings
|
|||||||
ChinaCast Communication Holdings Limited ("CCH")
|
November 20, 2003
|
Bermuda
|
100.00 | % |
Investment holdings
|
|||||||
Subsidiaries of CCH
|
||||||||||||
ChinaCast Communication Network Company Ltd. ("CCN")
|
April 8, 2003
|
British Virgin Islands
|
- | 100.00 | % |
Investment holdings
|
||||||
East Achieve Limited ("East Achieve)
|
September 15, 2004
|
British Virgin Islands
|
- | 100.00 | % |
Investment holdings
|
||||||
Subsidiary of East Achieve
|
||||||||||||
Shanghai Xijiu Information Technology Co., Ltd. ("Xijiu")
|
January 20, 2005
|
People's Republic of China ("PRC")
|
- | 100.00 | % |
Investment holdings
|
||||||
Subsidiary of Xijiu
|
||||||||||||
China Lianhe Biotechnology Co., Ltd. ("Lianhe")
|
June 8, 1988
|
PRC
|
- | 100.00 | % |
Investment holdings
|
F-10 |
1.
|
ORGANIZATION AND PRINCIPAL ACTIVITIES - continued
|
Date of
|
Place of
|
Proportion of issued
|
||||||||||
incorporation
|
incorporation
|
share/registered capital
|
||||||||||
Name
|
or establishment
|
or establishment
|
held by the Company
|
Principal activity
|
||||||||
Direct
|
Indirect
|
|||||||||||
Subsidiary of Lianhe
|
||||||||||||
Lijiang College of Guangxi Normal University ("Lijiang College")
|
February 2, 2004
|
PRC
|
- | 100.00 | % |
Provision of accredited degree courses
|
||||||
Subsidiary of CCN
|
||||||||||||
ChinaCast Technology (BVI) Limited ("CCT BVI")
|
June 18, 1999
|
British Virgin Islands
|
- | 98.50 | % |
Acts as a technology enabler in the satellite communication
|
||||||
Subsidiaries of CCT BVI
|
||||||||||||
ChinaCast Technology (HK) Limited
|
October 4, 1999
|
Hong Kong
|
- | 98.50 | % |
Acts as a liaison office for the Company's operation
|
||||||
ChinaCast Technology (Shanghai) Limited ("CCT Shanghai")
|
December 20, 2000
|
PRC
|
- | 98.50 | % |
Provision of technical services to related parties
|
||||||
Yupei Training Information Technology Co., Ltd. ("YPSH")
|
April 30, 2007
|
PRC
|
- | 98.50 | % |
Investment holdings
|
||||||
Subsidiaries of CCTSH
|
||||||||||||
Qingdao Zhongshida Education Development Limited ("QPU")
|
March 23, 2010
|
PRC
|
59.1 | % |
Provision of education service
|
|||||||
Subsidiaries of QPU
|
||||||||||||
Dongying Aohua Education Consulting Co. Ltd. ("DAEC")
|
December 20, 2010
|
PRC
|
- | 59.1 | % |
Provision of education consulting services
|
||||||
Subsidiaries of YPSH
|
||||||||||||
Hai Lai Education Technology Limited ("Hai Lai")
|
June 21, 2001
|
PRC
|
- | 98.50 | % |
Investment Holdings
|
||||||
Chongqing Chaosheng Education and Investment Co., Ltd. ("Chaosheng")
|
March 28, 2008
|
PRC
|
- | 98.50 | % |
Investment Holdings
|
||||||
Subsidiaries of Hai Lai
|
||||||||||||
Foreign Trade and Business College of Chongqing Normal University ("FTBC")
|
September 1, 2004
|
PRC
|
- | 98.50 | % |
Provision of accredited degree courses
|
||||||
Hai Yuen Company Limited ("Hai Yuen")
|
July 30, 2007
|
PRC
|
- | 98.50 | % |
Provision of logistic services to FTBC
|
||||||
Variable interest entity:
|
||||||||||||
ChinaCast Li Xiang Co., Ltd. ("CCLX")
|
May 7, 2003
|
PRC
|
- | - |
Provision of satellite broad band services holding company
|
F-11 |
1.
|
ORGANIZATION AND PRINCIPAL ACTIVITIES - continued
|
F-12 |
1.
|
ORGANIZATION AND PRINCIPAL ACTIVITIES - continued
|
·
|
Agreements that transfer economic benefits to CCT Shanghai
|
·
|
Agreement that provide CCT Shanghai effective control over CCLX
|
F-13 |
1.
|
ORGANIZATION AND PRINCIPAL ACTIVITIES - continued
|
|
•
|
Levying fines and confiscating illegal income of the VIE or the Group's subsidiaries in China;
|
|
•
|
Restricting or prohibiting use of the proceeds to finance the Group's business and operations in China;
|
|
•
|
Requiring the Group to restructure the ownership structure or operations of the VIE or the Group's subsidiaries in China;
|
|
•
|
Requiring the Group to discontinue all or a portion of its business in China; and/or
|
|
•
|
Revoking the business licenses of the VIE or the Group's subsidiaries in China.
|
As of December 31,
|
||||||||
2009
|
2010
|
|||||||
RMB
|
RMB
|
|||||||
Total current assets
|
45,388 | 87,023 | ||||||
Total noncurrent assets
|
5,373 | 3,101 | ||||||
Total assets
|
50,761 | 90,124 |
As of December 31,
|
||||||||
2009
|
2010
|
|||||||
RMB
|
RMB
|
|||||||
Total current liabilities
|
19,752 | 23,981 | ||||||
Total noncurrent liabilities
|
23,529 | 58,708 | ||||||
Total liabilities
|
43,281 | 82,689 |
F-14 |
1.
|
ORGANIZATION AND PRINCIPAL ACTIVITIES - continued
|
For the years ended December 31,
|
||||||||||||
2008
|
2009
|
2010
|
||||||||||
RMB
|
RMB
|
RMB
|
||||||||||
Revenues
|
130,020 | 123,296 | 125,266 | |||||||||
Net (loss) income
|
(5,372 | ) | 324 | (45 | ) |
For the years ended December 31,
|
||||||||||||
2008
|
2009
|
2010
|
||||||||||
RMB
|
RMB
|
RMB
|
||||||||||
Net cash provided by (used in) operating activities
|
(14,991 | ) | (27,446 | ) | 15,803 | |||||||
Net cash provided by (used in) investing activities
|
(8,330 | ) | 18,591 | (50,288 | ) | |||||||
Net cash provided by (used in) financing activities
|
1,445 | 7,934 | 34,636 |
F-15 |
2.
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
|
|
(a)
|
Basis of presentation
|
|
(b)
|
Basis of consolidation
|
|
(c)
|
Cash and cash equivalents
|
|
(d)
|
Term deposits
|
F-16 |
2.
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued
|
|
(e)
|
Use of estimates
|
|
(f)
|
Inventories
|
|
(g)
|
Property and equipment
|
Buildings and structures
|
10~20 years
|
|
Teaching facilities and equipment
|
8~10 years
|
|
Satellite hub equipment
|
7 years
|
|
Computer equipment
|
5 years
|
|
Furniture and fixtures
|
5 years
|
|
Motor vehicles
|
5 years
|
F-17 |
2.
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued
|
|
(h)
|
Prepaid lease payments for land use rights
|
|
(i)
|
Acquired intangible assets
|
Brand name usage right
|
10 years
|
|
Customer relationship
|
up to 48 months
|
|
Affiliation agreement
|
36 - 59 months
|
|
(j)
|
Impairment of long-lived assets
|
F-18 |
2.
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued
|
|
(k)
|
Goodwill
|
|
(l)
|
Long-term investments
|
F-19 |
2.
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued
|
|
(m)
|
Revenue recognition
|
|
a)
|
pays the tuition fee in cash at the beginning of each academic year when registering in September, or
|
|
b)
|
registers in September but uses student loans to pay the tuition fee later. The tuition fee would be collected once the student loan is processed by the bank.
|
F-20 |
2.
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued
|
|
(n)
|
Operating leases
|
|
(o)
|
Foreign currency translation
|
|
(p)
|
Foreign currency risk
|
F-21 |
2.
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued
|
|
(q)
|
Concentration of credit risk
|
(r)
|
Fair value measurement
|
|
(s)
|
Fair value of financial instruments
|
F-22 |
2.
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued
|
(s)
|
Fair value of financial instruments - continued
|
|
(t)
|
Income taxes
|
(u)
|
Comprehensive
income
|
F-23 |
2.
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued
|
(v)
|
Net
income per share
|
|
(w)
|
Share-based compensation
|
(x)
|
Business
combinations
|
F-24 |
2.
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued
|
(y)
|
Recently
issued accounting pronouncements not yet adopted
|
F-25 |
2.
|
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - continued
|
(y)
|
Recently issued accounting pronouncements not yet adopted - continued
|
F-26 |
3.
|
DISCONTINUED OPERATIONS
|
For the year ended December 31,
|
||||||||||||
2008
|
2009
|
2010
|
||||||||||
RMB
|
RMB
|
RMB
|
||||||||||
Revenues
|
3,424 | 1,495 | - | |||||||||
Loss before provision of income taxes from discontinued operations
|
(21,025 | ) | 1,154 | 1,280 | ||||||||
Provision for income taxes
|
- | - | - | |||||||||
Noncontrolling interest in discontinued operations
|
315 | - | - | |||||||||
(Loss) income from discontinued operations attributable to ChinaCast Education Corporation, net of tax
|
(20,710 | ) | 1,154 | 1,280 | ||||||||
(Loss) income on discontinued operations attributable to ChinaCast Education Corporation per share - basic
|
(0.68 | ) | 0.03 | 0.03 | ||||||||
(Loss) income on discontinued operations attributable to ChinaCast Education Corporation per share - diluted..
|
(0.68 | ) | 0.03 | 0.03 |
F-27 |
4.
|
ACQUISITION
|
Amortization
|
|||||
RMB
|
period
|
||||
Cash
|
10,343 | ||||
Other current assets
|
323 | ||||
Non-current deposits
|
523 | ||||
Property and equipment
|
210,536 |
4-20 years
|
|||
Prepaid lease payments for land use rights
|
123,691 |
Over the remaining
|
|||
lease term of 40
|
|||||
to 50 years
|
|||||
Intangible assets:
|
|||||
Customer relationship
|
40,329 |
41 months
|
|||
Goodwill (allocated to the TUG as set out in Note 20)
|
309,717 | ||||
Bank and other borrowings
|
(65,000 | ) | |||
Other current liabilities
|
(83,779 | ) | |||
Deferred tax liabilities
|
(23,296 | ) | |||
Long-term bank borrowings
|
(20,000 | ) | |||
Unrecognized tax benefits
|
(6,837 | ) | |||
Noncontrolling interest
|
(16,550 | ) | |||
Total
|
480,000 |
F-28 |
4.
|
ACQUISITION - continued
|
For the year ended
|
||||
December 31, 2008
|
||||
RMB
|
||||
(unaudited)
|
||||
Revenues
|
316,335 | |||
Net income attributable to ChinaCast Education Corporation
|
40,319 | |||
Net income attributable to ChinaCast Education Corporation per share – basic
|
1.32 | |||
Net income attributable to ChinaCast Education Corporation per share - diluted
|
1.31 |
F-29 |
4.
|
ACQUISITION - continued
|
Consideration paid in cash
|
295,000 | |||
Fair value of deferred contingent consideration
|
30,482 | |||
Total
|
325,482 |
Amortization
|
|||||
RMB
|
period
|
||||
Cash
|
73,113 | ||||
Other current assets
|
2,408 | ||||
Non-current deposits
|
6,374 | ||||
Property and equipment
|
261,543 |
3-20 years
|
|||
Prepaid lease payments for land use rights
|
28,920 |
Over the remaining
|
|||
lease term
|
|||||
of 48 years
|
|||||
Intangible assets:
|
|||||
Customer relationship
|
51,000 |
up to 47 months
|
|||
Affiliation Agreement
|
14,000 |
59 months
|
|||
Goodwill
|
192,440 | ||||
Other current liabilities
|
(105,424 | ) | |||
Deferred revenues
|
(89,114 | ) | |||
Deferred tax liabilities
|
(12,616 | ) | |||
Long-term bank borrowing
|
(90,000 | ) | |||
Unrecognized tax benefits
|
(7,162 | ) | |||
Total
|
325,482 |
F-30 |
4.
|
ACQUISITION - continued
|
For the years
ended December 31,
|
||||||||
2008
|
2009
|
|||||||
RMB
|
RMB
|
|||||||
(unaudited)
|
(unaudited)
|
|||||||
Revenues
|
373,334 | 427,484 | ||||||
Net income attributable to ChinaCast Education Corporation
|
29,730 | 91,401 | ||||||
Net income attributable to ChinaCast Education Corporation per share - basic
|
0.98 | 2.47 | ||||||
Net income attributable to ChinaCast Education Corporation per share - diluted
|
0.97 | 2.46 |
F-31 |
4.
|
ACQUISITION - continued
|
Consideration paid in cash
|
360,000 | |||
Fair value of deferred contingent consideration
|
78,721 | |||
Total
|
438,721 |
Amortization
|
|||||
RMB
|
period
|
||||
Cash
|
19,942 | ||||
Other current assets
|
7,771 | ||||
Property and equipment
|
218,720 |
3 years-remaining
|
|||
lease term
|
|||||
Prepaid lease payments for land use rights
|
37,000 |
Over the remaining
|
|||
lease term
|
|||||
Intangible assets:
|
|||||
Customer relationship
|
38,000 |
up to 48 months
|
|||
Affiliation Agreement
|
31,000 |
3 years
|
|||
Goodwill
|
270,308 | ||||
Bank borrowing
|
(54,000 | ) | |||
Other current liabilities
|
(70,621 | ) | |||
Deferred revenues
|
(2,753 | ) | |||
Deferred tax liabilities
|
(29,003 | ) | |||
Unrecognized tax benefits
|
(27,643 | ) | |||
Total
|
438,721 |
F-32 |
4.
|
ACQUISITION - continued
|
For the years
ended December 31,
|
||||||||
2009
|
2010
|
|||||||
RMB
|
RMB
|
|||||||
(unaudited)
|
(unaudited)
|
|||||||
Revenues
|
471,982 | 583,374 | ||||||
Net income attributable to ChinaCast Education Corporation
|
69,732 | 58,359 | ||||||
Net income attributable to ChinaCast Education Corporation per share – basic
|
1.89 | 1.21 | ||||||
Net income attributable to ChinaCast Education Corporation per share - diluted
|
1.88 | 1.20 |
F-33 |
5.
|
INVENTORY
|
As of December 31,
|
||||||||
2009
|
2010
|
|||||||
RMB
|
RMB
|
|||||||
Satellite communication related equipment and equipment accessories
|
1,386 | 1,393 | ||||||
Less: provision of inventory value
|
- | (400 | ) | |||||
Satellite communication related equipment and equipment accessories
|
1,386 | 993 |
6.
|
PREPAID EXPENSES AND OTHER CURRENT ASSETS (As
Restated)
|
As of December 31,
|
||||||||
2009
|
2010
|
|||||||
RMB
|
RMB
|
|||||||
Staff advances
|
1,107 | 1,010 | ||||||
Prepaid expenses
|
16,874 | 20,533 | ||||||
Deposit for acquisition of land use rights
|
- | 21,994 | ||||||
Accrued interest income
|
107 | 1,825 | ||||||
Value added tax recoverable
|
463 | 423 | ||||||
Receivable from disposal of investment
|
- | 2,122 | ||||||
Prepayment for license renewal service fee | - | 8,100 | ||||||
Others
|
627 | 314 | ||||||
Total
|
19,178 | 56,321 |
F-34 |
7.
|
NON-CURRENT DEPOSITS AND PREPAYMENTS (As
Restated)
|
As of December 31,
|
||||||||
2009
|
2010
|
|||||||
RMB
|
RMB
|
|||||||
Rental deposits
|
358 | 415 | ||||||
Utilities deposits
|
208 | 208 | ||||||
Guarantee deposit for borrowings
|
3,000 | 4,000 | ||||||
Guarantee deposits for construction projects
|
2,492 | 2,765 | ||||||
Deposit for investment project
|
3,000 | |||||||
Deposit for acquiring of land use rights
|
5,492 | |||||||
Prepayment for license renewal service fee - Noncurrent | - | 51,742 | ||||||
Total
|
14,550 | 59,130 |
F-35 |
8.
|
PROPERTY AND EQUIPMENT, NET
|
As of December 31,
|
||||||||
2009
|
2010
|
|||||||
RMB
|
RMB
|
|||||||
Buildings and structures
|
486,310 | 709,253 | ||||||
Teaching facilities and equipment
|
22,662 | 62,002 | ||||||
Satellite hub equipment
|
34,599 | 34,766 | ||||||
Computer equipment
|
13,548 | 13,672 | ||||||
Furniture and fixtures
|
28,494 | 43,022 | ||||||
Motor vehicles
|
6,471 | 11,682 | ||||||
Construction in progress
|
9,212 | 25,531 | ||||||
601,296 | 899,928 | |||||||
Less: accumulated depreciation
|
(84,358 | ) | (136,002 | ) | ||||
Property and equipment, net
|
516,938 | 763,926 |
9.
|
PREPAID LEASE PAYMENTS FOR LAND USE RIGHTS
|
As of December 31,
|
||||||||
2009
|
2010
|
|||||||
RMB
|
RMB
|
|||||||
Prepaid lease payments for land use rights
|
148,064 | 181,530 | ||||||
Current portion of prepaid lease payments for land use rights
|
(3,246 | ) | (3,986 | ) | ||||
Non-current portion of prepaid lease payments for land use rights
|
144,818 | 177,544 |
F-36 |
9.
|
PREPAID LEASE PAYMENTS FOR LAND USE RIGHTS - continued
|
10.
|
ACQUIRED INTANGIBLE ASSETS, NET
|
Years ended December 31,
|
||||||||||||||||||||||||||||||||||||
2010
|
2009
|
|||||||||||||||||||||||||||||||||||
Gross
|
Impairment
|
Net
|
Gross
|
Net
|
||||||||||||||||||||||||||||||||
carrying
|
Accumulated
|
loss
|
carrying
|
carrying
|
Accumulated
|
Impairment
|
Disposal
|
carrying
|
||||||||||||||||||||||||||||
amount
|
amortization
|
amount |
amount
|
amount
|
amortization
|
loss
|
amount
|
|||||||||||||||||||||||||||||
Brand name usage right
|
- | - | - | - | 22,532 | (3,584 | ) | (14,500 | ) | (4,448 | ) | - | ||||||||||||||||||||||||
Customer relationship
|
129,329 | (66,509 | ) | - | 62,820 | 91,329 | (33,331 | ) | 57,998 | |||||||||||||||||||||||||||
Affiliated agreement
|
45,000 | (7,004 | ) | 37,996 | 14,000 | (712 | ) | 13,288 | ||||||||||||||||||||||||||||
Total
|
174,329 | (73,513 | ) | - | 100,816 | 127,861 | 37,627 | (14,500 | ) | (4,448 | ) | 71,286 |
F-37 |
10.
|
ACQUIRED INTANGIBLE ASSETS, NET - continued
|
The affiliation agreement intangible assets represent the economic benefits derived from the affiliation agreements through the use of the school name of the affiliated universities. In estimating the fair value of the affiliation agreement, the Company applied the income approach utilizing an excess cash flow method. The excess cash flow method provides an estimate of the fair value of an intangible asset by deducting operating expenses and economic charges from the revenue expected to be generated by the underlying asset. The projected cash flows are then discounted to their present value equivalent and summed.
F-38 |
11.
|
LONG-TERM INVESTMENTS
|
Percentage
|
As of December 31,
|
|||||||||||||
Name of investment
|
Notes
|
of ownership
|
2009
|
2010
|
||||||||||
%
|
RMB
|
RMB
|
||||||||||||
Equity investments:
|
||||||||||||||
ChongQing ChinaCast Distance Learning Service Limited
|
(a)
|
20 | 101 | - | ||||||||||
Guo You Communication Network Limited
|
(b)
|
43 | - | - | ||||||||||
101 | - | |||||||||||||
Cost investments:
|
||||||||||||||
Chongqing Education Guarantee Co., Ltd.
|
(c)
|
1.50 | 3,000 | 3,000 | ||||||||||
Tongfang Chuangxin
|
(d)
|
17.85 | - | - | ||||||||||
3,000 | - | |||||||||||||
Total
|
3,101 | 3,000 |
|
(a)
|
In February 2004, the Company established ChongQing ChinaCast Distance Learning Service Limited ("ChongQing ChinaCast") and invested a 20% ownership interest in ChongQing ChinaCast for RMB400. The Company has accounted for its investment in ChongQing ChinaCast under the equity method of accounting because the Company has the ability to exercise significant influence but does not have a controlling interest.
|
|
(b)
|
In March 2005, the Company established Guo You Communication Network Limited ("Guo You") and invested a 43% ownership interest in Guo You for RMB4,300. The Company has accounted for its investment in Guo You under the equity method of accounting because the Company has the ability to exercise significant influence but does not have a controlling interest. Guo You was in an accumulated deficit position as of December 31, 2009 and 2010.
|
|
(c)
|
In November 2008, the Company established Chongqing Education Guarantee Co., Ltd. ("CQEG") and invested a 1.50% ownership interest in CQEG for RMB3,000. The Company has accounted for its investment in CQEG under the cost method of accounting because the Company has no ability to exercise significant influence.
|
F-39 |
11.
|
LONG-TERM INVESTMENTS - continued
|
|
(d)
|
In 2008 and 2009, during the course of the Company's review of its investment in Tongfang Chuangxin, because of its loss making history, the Company assessed the recoverability of the carrying value of this investment, which resulted in impairment losses of RMB8,500 and RMB436, respectively. These losses reflect the amounts by which the carrying value of this investment exceeded its estimated fair value determined by its estimated future discounted cash flows. The impairment losses are recorded as components of other income and losses in the consolidated statements of operations and comprehensive income. On December 23, 2010, the Company entered into an agreement to dispose of its 17.85% stake in Tongfang Chuangxin for a consideration of RMB2,123. The transaction was completed on December 23, 2010. As such, a gain of RMB2,123 on disposal of this cost method investment was recorded as a component of other income and losses in the consolidated statements of operations in 2010.
|
12.
|
GOODWILL
|
RMB
|
||||
Balance at January 1, 2009
|
311,331 | |||
Acquisition of East Achieve
|
192,440 | |||
Balance at December 31, 2009
|
503,771 | |||
Exchange rate impact
|
(59 | ) | ||
Acquisition of Wintown
|
270,308 | |||
Acquisition of AH
|
63 | |||
Balance at December 31, 2010
|
774,083 |
F-40 |
13.
|
ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
|
As of December 31,
|
||||||||
2009
|
2010
|
|||||||
RMB
|
RMB
|
|||||||
Advance from disposal of brand name usage right
|
1,000 | |||||||
Accrued employee payroll and other compensation
|
9,313 | 15,934 | ||||||
Accrued professional fees
|
12,716 | 4,554 | ||||||
Business taxes payable
|
53,118 | 65,886 | ||||||
Other taxes payable
|
2,643 | 8,871 | ||||||
Payable for acquired property and equipment
|
49,335 | 30,609 | ||||||
Consideration payable for acquisitions (Note 4)
|
30,482 | 78,721 | ||||||
Temporary receipts
|
30,000 | |||||||
Accommodation and utilities deposits received for student apartments
|
10,938 | 19,708 | ||||||
Government loans granted to students
|
6,782 | 10,470 | ||||||
Stipends payable to students
|
- | 22,048 | ||||||
Other accrued expenses
|
7,989 | 23,172 | ||||||
Total
|
214,316 | 279,973 |
14.
|
BORROWINGS
|
As of December 31,
|
||||||||
2009
|
2010
|
|||||||
RMB
|
RMB
|
|||||||
Current portion
|
(104,400 | ) | (170,000 | ) | ||||
Non-Current portion
|
(134,000 | ) | (90,000 | ) | ||||
|
(238,400 | ) | (260,000 | ) |
F-41 |
15.
|
CAPITAL LEASE OBLIGATIONS
|
As of December 31,
|
||||||||
2009
|
2010
|
|||||||
RMB
|
RMB
|
|||||||
Capital lease obligation bearing an average interest rate of 4.0% per annum
|
1,323 | - | ||||||
Current portion of capital lease obligation
|
(1,323 | ) | - | |||||
Non-current portion of capital lease obligation
|
- | - |
16.
|
SHARE OFFERINGS
|
F-42 |
17.
|
STOCK COMPENSATION PLANS
|
F-43 |
17.
|
STOCK COMPENSATION PLANS - continued
|
F-44 |
17.
|
STOCK COMPENSATION PLANS - continued
|
Number of
|
Fair values
|
Intrinsic
|
||||||||||
shares
|
of shares
|
value
|
||||||||||
US$
|
US$
|
|||||||||||
Nonvested share unvested at January 1, 2010
|
120,000 | 6.25 | 750 | |||||||||
Granted
|
396,678 | 6.07 | 2,408 | |||||||||
Vested
|
(219,174 | ) | 6.19 | (1,357 | ) | |||||||
Fortified
|
- | - | - | |||||||||
Nonvested share unvested at December 31, 2010
|
297,504 | 6.05 | 1,801 |
Weighted
|
||||||||
Number
|
average
|
|||||||
of option
|
exercise price
|
|||||||
US$
|
||||||||
Options outstanding at January 1, 2009
|
1,200,000 | 6.30 | ||||||
Granted
|
- | - | ||||||
Exercised
|
- | - | ||||||
Cancelled
|
- | - | ||||||
Options outstanding at December 31, 2009
|
1,200,000 | 6.30 | ||||||
Granted
|
||||||||
Exercised
|
- | - | ||||||
Cancelled
|
- | - | ||||||
Options outstanding at December 31, 2010
|
1,200,000 | 6.30 | ||||||
Options exercisable at December 31, 2010
|
1,200,000 | 6.30 |
F-45 |
17.
|
STOCK COMPENSATION PLANS - continued
|
Weighted average
|
||||||||||||
grant date
|
Weighted average
|
|||||||||||
Nonvested options
|
Shares
|
fair value
|
exercise price
|
|||||||||
US$
|
US$
|
|||||||||||
Nonvested at January 1, 2009
|
799,000 | 2.67 | 6.30 | |||||||||
Granted
|
- | - | - | |||||||||
Vested
|
(401,000 | ) | 2.67 | 6.30 | ||||||||
Forfeited
|
- | - | - | |||||||||
Nonvested at December 31, 2009
|
398,000 | 2.67 | 6.30 | |||||||||
Granted
|
||||||||||||
Vested
|
(398,000 | ) | 2.67 | 6.30 | ||||||||
Forfeited
|
||||||||||||
Nonvested at December 31, 2010
|
- | - | - |
Expected price volatility
|
37.6 | % | ||
Risk-free interest rate
|
4.75 | % | ||
Expected life
|
67 months
|
|||
Expected dividends
|
- | |||
Fair value of ordinary share at grant date
|
US$ | 6.25 |
F-46 |
17.
|
STOCK COMPENSATION PLANS - continued
|
|
(1)
|
Volatility
|
|
(2)
|
Risk free interest rate
|
|
(3)
|
Expected life
|
|
(4)
|
Dividend yield
|
|
(5)
|
Exercise price
|
|
(6)
|
Fair value of underlying ordinary shares
|
F-47 |
18.
|
WARRANTS AND UNIT PURCHASE OPTIONS
|
19.
|
SEGMENT INFORMATION (As
Restated)
|
F-48 |
19.
|
SEGMENT INFORMATION (As Restated) - continued
|
For the year ended December 31,
|
||||||||||||||||||||||||||||||||||||
2008
|
2009
|
2010
|
||||||||||||||||||||||||||||||||||
ELG
|
TUG
|
Total
|
ELG
|
TUG
|
Total
|
ELG
|
TUG
|
Total
|
||||||||||||||||||||||||||||
Revenue from external customers
|
199,416 | 83,198 | 282,614 | 196,277 | 150,270 | 346,547 | 208,099 | 305,912 | 514,011 | |||||||||||||||||||||||||||
Impairment loss on acquired intangible assets:
|
14,500 | - | 14,500 | - | - | - | - | - | - | |||||||||||||||||||||||||||
Depreciation and amortization:
|
5,595 | 29,158 | 34,753 | 4,295 | 48,429 | 52,724 | 3,330 | 88,197 | 91,527 | |||||||||||||||||||||||||||
Share-based compensation:
|
15,851 | - | 15,851 | 16,206 | - | 16,206 | 7,845 | - | 7,845 | |||||||||||||||||||||||||||
Impairment loss(gain) on cost method investment:
|
8,500 | - | 8,500 | 436 | - | 436 | 3,403 | - | 3,403 | |||||||||||||||||||||||||||
Interest Income:
|
19,304 | 157 | 19,461 | 7,623 | 694 | 8,317 | 13,314 | 789 | 14,103 | |||||||||||||||||||||||||||
Interest expense
|
227 | 2,348 | 2,575 | - | 7,988 | 7,988 | - | 13,679 | 13,679 | |||||||||||||||||||||||||||
Provision for income taxes:
|
20,442 | 3,939 | 24,381 | 22,238 | 7,711 | 29,949 | 25,864 | 12,709 | 38,573 | |||||||||||||||||||||||||||
Earnings in equity investments:
|
441 | - | 441 | 1,687 | - | 1,687 | 101 | - | 101 | |||||||||||||||||||||||||||
Income from operations:
|
63,501 | 24,144 | 87,645 | 93,145 | 36,862 | 130,007 | 99,993 | 67,961 | 167,954 | |||||||||||||||||||||||||||
Addition to property and equipment:
|
1,937 | 77,191 | 79,128 | 2,658 | 9,691 | 12,349 | 24,390 | 83,820 | 108,210 | |||||||||||||||||||||||||||
Segment assets:
|
725,516 | 773,643 | 1,499,159 | 805,116 | 1,468,773 | 2,273,889 | 716,637 | 2,237,395 | 2,954,032 | |||||||||||||||||||||||||||
Equity investments:
|
1,788 | - | 1,788 | 101 | - | 101 | - | - | - | |||||||||||||||||||||||||||
Goodwill:
|
1,614 | 185,063 | 186,677 | 1,614 | 502,157 | 503,771 | 1,618 | 772,465 | 774,083 |
F-49 |
20.
|
INCOME TAXES
|
2011 and
|
||||||||||||||||||||
Subsidiary
|
2008
|
2009
|
2010
|
2011
|
thereafter
|
|||||||||||||||
CCT Shanghai (i)
|
18 | % | 20 | % | 22 | % | 24 | % | 25 | % | ||||||||||
FTBC (ii)
|
15 | % | 15 | % | 15 | % | 25 | % | 25 | % | ||||||||||
Hai Yuen (ii)
|
15 | % | 15 | % | 15 | % | 25 | % | 25 | % | ||||||||||
Lijiang College (iii)
|
15 | % | 15 | % | 15 | % | 25 | % | 25 | % |
(i)
|
CCT Shanghai was incorporated in the PRC and was governed by the Income Tax Law of the PRC concerning foreign-invested enterprises ("FIEs") before 2008. Due to a tax preferential policy, as a FIE of a production nature established in Pudong New Area of Shanghai, CCT Shanghai was subject to an income tax rate of 15% before 2008.
|
F-50 |
20.
|
INCOME TAXES - continued
|
(ii)
|
FTBC and Hai Yuen were incorporated in Chongqing of the PRC and are subject to the preferential tax rate of 15% until 2010 in accordance with the western development preferential policy.
|
(iii)
|
Lijiang College was incorporated in Guilin of the PRC and is subject to the preferential tax rate of 15% until 2010 in accordance with the western development preferential policy.
|
F-51 |
20.
|
INCOME TAXES - continued
|
RMB
|
||||
As of January 1, 2009
|
44,612 | |||
Additional provision made in this year
|
24,146 | |||
Reduction for tax position of the year
|
(6,301 | ) | ||
As of December 31, 2009
|
62,457 | |||
Additional provision made in this year
|
53,990 | |||
Reduction for tax position of the year
|
(6,514 | ) | ||
As of December 31, 2010
|
109,933 |
For the years ended December 31,
|
||||||||||||
2008
|
2009
|
2010
|
||||||||||
RMB
|
RMB
|
RMB
|
||||||||||
Current taxes
|
21,490 | 22,999 | 28,593 | |||||||||
Increase in unrecognized tax benefit balance
|
5,157 | 10,683 | 19,489 | |||||||||
Deferred taxes:
|
||||||||||||
Subsidiaries operating in PRC
|
(2,266 | ) | (3,733 | ) | (9,509 | ) | ||||||
Total provision for income taxes
|
24,381 | 29,949 | 38,573 |
F-52 |
20.
|
INCOME TAXES - continued
|
As of December 31,
|
||||||||
2009
|
2010
|
|||||||
RMB
|
RMB
|
|||||||
Current deferred tax assets:
|
||||||||
Deferred operating expenses
|
3,392 | 2,911 | ||||||
Accrued payroll
|
1,010 | 2,972 | ||||||
Total current deferred tax assets
|
4,402 | 5,883 | ||||||
Valuation allowance
|
(3,392 | ) | (2,911 | ) | ||||
Current deferred tax assets, net
|
1,010 | 2,972 | ||||||
Long-term deferred tax assets:
|
||||||||
Net operating loss carry forwards
|
21,408 | 30,137 | ||||||
Capitalized expenses
|
1,105 | 1,069 | ||||||
Foreign tax credit
|
567 | 745 | ||||||
Impairment loss on cost method investment
|
109 | - | ||||||
Property and equipment
|
3,464 | 3,702 | ||||||
Total long-term deferred tax assets
|
26,653 | 35,653 | ||||||
Valuation allowance
|
(23,189 | ) | (31,951 | ) | ||||
Long-term deferred tax assets, net
|
3,464 | (3,702 | ) | |||||
Long-term deferred tax liabilities:
|
||||||||
Property and equipment
|
2,767 | 12,228 | ||||||
Intangible assets
|
14,692 | 25,208 | ||||||
Land use rights
|
16,928 | 17,769 | ||||||
Long-term deferred tax liabilities
|
34,387 | 55,205 |
F-53 |
20.
|
INCOME TAXES - continued
|
As of December 31,
|
||||||||
2009
|
2010
|
|||||||
RMB
|
RMB
|
|||||||
Current deferred tax assets, net
|
1,010 | 2,972 | ||||||
Long-term deferred tax liabilities, net
|
(30,923 | ) | (51,503 | ) |
F-54 |
20.
|
INCOME TAXES - continued
|
For the years ended December 31,
|
||||||||||||
2008
|
2009
|
2010
|
||||||||||
%
|
%
|
%
|
||||||||||
Statutory tax rate (Note)
|
25.0 | 25.0 | 25.0 | |||||||||
Effect of non-deductible expenses
|
6.3 | 1.7 | 15.2 | |||||||||
Effect oftax holidays and tax reliefs
|
(17.3 | ) | (11.4 | ) | (14.9 | ) | ||||||
Increase in unrecognized
|
||||||||||||
tax benefit balance
|
5.4 | 2.1 | 4.2 | |||||||||
Changes in valuation allowance
|
6.0 | 5.4 | 5.4 | |||||||||
Effective tax rates
|
25.4 | 22.8 | 34.9 |
|
Note:
|
The domestic tax rate in the jurisdiction where the operation of the Company is substantially based is used. On January 1, 2008, the new Chinese Enterprise Income Tax Law took effect and has applied a uniform tax rate of 25% to all "resident enterprises" in China, including foreign-invested enterprises.
|
For the years ended December 31,
|
||||||||||||
2008
|
2009
|
2010
|
||||||||||
RMB
|
RMB
|
RMB
|
||||||||||
Provision for income taxes
|
8,866 | 12,846 | 9,596 | |||||||||
Net income attributable to ChinaCast Education Corporation per share - basic
|
0.29 | 0.35 | 0.20 | |||||||||
Net income attributable to ChinaCast Education Corporation per share - diluted
|
0.29 | 0.35 | 0.20 |
F-55 |
21.
|
NET INCOME PER SHARE (As
Restated)
|
For the years ended December 31,
|
||||||||||||||
2008 | 2009 | 2010 | ||||||||||||
Numerator used in basic and diluted net income per share:
|
||||||||||||||
Income from continuing operations attributable to ChinaCast Education Corporation
|
RMB |
63,377
|
RMB |
90,925
|
RMB |
130,373
|
||||||||
Loss on discontinued operations attributable to ChinaCast Education Corporation
|
(20,710
|
) | RMB |
1,154
|
RMB | 1,280 | ||||||||
Net income attributable to ChinaCast Education Corporation
|
RMB |
42,667
|
RMB |
92,079
|
RMB |
131,653
|
||||||||
Shares (denominator):
|
||||||||||||||
Weighted average ordinary shares outstanding used in computing basic net income per share
|
30,442,992 | 36,946,830 | 48,241,779 | |||||||||||
Plus:
|
||||||||||||||
Incremental ordinary shares from assumed conversions of stock options, vesting of restrict stock and exercises of Warrants and Underwriter Warrants
|
248,750 | 220,864 | 525,363 | |||||||||||
Weighted average ordinary shares outstanding used in computing diluted net income per share
|
30,691,742 | 37,167,694 | 48,767,142 | |||||||||||
Net income per share - basic:
|
||||||||||||||
Income from continuing operations attributable to ChinaCast Education Corporation
|
RMB |
2.08
|
RMB |
2.46
|
RMB |
2.70
|
||||||||
(Loss) income on discontinued operations attributable to ChinaCast Education Corporation
|
(0.68)
|
0.03 | 0.03 | |||||||||||
Net income attributable to ChinaCast Education Corporation
|
RMB |
1.40
|
RMB |
2.49
|
RMB |
2.73
|
||||||||
Net income per share - diluted:
|
||||||||||||||
Income from continuing operations attributable to ChinaCast Education Corporation
|
RMB |
2.06
|
RMB |
2.45
|
RMB |
2.67
|
||||||||
(Loss) income on discontinued operations attributable to ChinaCast Education Corporation
|
(0.68
|
) | 0.03 | 0.03 | ||||||||||
Net income attributable to ChinaCast Education Corporation
|
RMB |
1.38
|
RMB |
2.48
|
RMB |
2.70
|
F-56 |
22.
|
COMMITMENTS AND CONTINGENCIES
|
|
(a)
|
Information usage and satellite platform usage operating lease commitment
|
|
(b)
|
Office premises operating lease commitment
|
|
(c)
|
Capital commitments
|
F-57 |
22.
|
COMMITMENTS AND CONTINGENCIES - continued
|
|
(a)
|
On March 21, 2006, after obtaining the approval of its shareholders, Great Wall amended certificate of incorporation, the effect of which was, among other things, to eliminate the provision of the certificate of incorporation that purported to prohibit amendment of the "business combination" provisions contained therein and to extend the date before which Great Wall must complete a business combination, to avoid being required to liquidate, from March 23, 2006 to December 31, 2006. Because extending the period during which Great Wall could consummate a business combination was not contemplated by the IPO prospectus, shareholders may have securities law claims against the Company for rescission (under which a successful claimant would have the right to receive the total amount paid for his or her shares, plus interest and less any income earned on the shares, in exchange for surrender of the shares) or damages (compensation for loss on an investment caused by alleged material misrepresentations or omissions in the sale of the security). Such claims might entitle shareholders asserting them to up to US$6.00 per share of common stock, based on the initial offering price of the public units comprised of stock and warrants, less any amount received from sale of the original warrants purchased with them and plus interest from the date of the IPO. A successful claimant for damages under federal or state law could be awarded an amount to compensate for the decrease in value of his or her shares caused by the alleged violation (including, possibly, punitive damages), together with interest, while retaining the shares. The Company believes the shareholder claims for rescission or damages are remote. As such, the Company has not recorded a liability for such possible rescission. However, the Company cannot definitively predict whether shareholders will bring such claims, how many might bring them or the extent to which they might be successful.
|
|
(b)
|
The Company may be subject to claims for rescission or other securities law claims resulting from the failure to disclose that the charter provision purporting to prohibit certain amendments was possibly inconsistent with Delaware's General Corporation Law. The Company may also be subject to such claims as a result of inaccuracies in other disclosures, as follows: It may be argued that the IPO prospectus misstated the vote required by its charter to approve a business combination by providing that "[w]e will proceed with a business combination only if the public shareholders who own at least a majority of the shares of common stock sold in [that] offering vote in favor [of it] ...," and that the Exchange Act reports have been inaccurate in describing ChinaCast as a leading provider of e-learning content (as opposed to being primarily a content carrier). On November 13, 2006, the Company filed a Current Report on Form 8-K with the SEC regarding this last item. The Company is unable to predict the likelihood that claims might be made with regard to the foregoing or estimate any amounts for which it might be liable if any such claim was made. As such, the Company has not recorded a liability for such possible rescission.
|
F-58 |
22.
|
COMMITMENTS AND CONTINGENCIES - continued
|
|
(c)
|
On August 23, 2010, CEH, the Company's subsidiary in British Virgin Islands, consummated the acquisition of the entire interest in Wintown from the former sole owner of Wintown. Wintown holds the entire interest in Rubao. Rubao holds the entire interest in Jiyang which in turns holds the entire interest in HIUBC. HIUBC is a private college affiliated with Hubei Industrial University. The total consideration for the acquisition is up to RMB450,000, of which RMB360,000 was paid during 2010. The remaining amount of the consideration is to be calculated as following statement. For the academic year of 2010 (i.e. from September 1, 2010 to August 31, 2011), if the net profit as determined under the relevant sale and purchase agreement of the HIUBC is less than RMB50,000, CEH is entitled to deduct an amount equal to 9 times of the difference between the net profit and RMB50,000 from the remaining amount of consideration. The contingent consideration was recorded as a liability at fair value of RMB78,721 and the change of its fair value was recorded in earnings at each reporting date. As a result, the expected total consideration was RMB438,721 as of the date of acquisition. There was no change in the fair value of the remaining consideration up to December 31, 2010.
|
|
(d)
|
A number of the real properties that are being utilized by HIUBC have title defects or similar potential issues. As of December 31, 2010, we have not obtained fireproof, construction completion certificates, and building ownership certificates for certain buildings in HIUBC. We are in the process of applying for the abovementioned building ownership certificates as well as resolving other potential issues in relation to these school properties. If we are not able to obtain these approvals in a timely manner, we may be required to find alternative locations for the relevant schools or may be subject to fines or penalties, either of which could cause us to incur significant additional expenses or could disrupt certain aspects of our business. To the extent the relevant governmental entities were to find that we are not in compliance with the applicable regulations due to these defects, we may be ordered to suspend the use of such buildings and be subject to fines or incur additional expenses, and such liability, although not considered probable, might range from RMB30 to RMB300.
|
F-59 |
23.
|
MAINLAND CHINA CONTRIBUTION PLAN, STATUTORY RESERVE AND RESTRICTED NET ASSETS
|
24.
|
RELATED PARTY TRANSACTIONS (As
Restated)
|
|
(a)
|
Transactions
|
|
For the years ended December 31, | |||||||||||||
Transactions
|
Notes
|
2008
|
2009
|
2010
|
||||||||||
RMB
|
RMB
|
RMB
|
||||||||||||
Service fee earned from CCL
|
(i)
|
6,463 | 5,128 | - | ||||||||||
Satellite platform usage fee to CCL
|
(ii)
|
6,033 | 6,382 | - | ||||||||||
Disposal of consolidated entity to CCL
|
(iii)
|
- | 100 | - | ||||||||||
Sales to Guo You
|
(iv)
|
800 | 800 | - |
F-60 |
24.
|
RELATED PARTY TRANSACTIONS (As Restated) - continued
|
(a)
|
Transactions - continued
|
|
(i)
|
The service fee was made at the agreed term of the CCL Technical Service Agreement (see Note 21). CCL is a company in which a principal shareholder and director of the Company, Mr. Yin Jian Ping, has over 10% interest.
|
|
(ii)
|
The satellite platform usage fee was charged to CCT BVI.
|
|
(iii)
|
On October 12, 2009, the Company disposed of a subsidiary of a consolidated variable interest entity for RMB100.
|
|
(iv)
|
CCLX provided satellite related service or sold equipment and accessories to Guo You, which is the equity method investment of the Company (see Note 11)..
|
|
(v)
|
During 2009, YPSH provided temporary advances of RMB20,000 to CCL. The amounts were fully settled in the respective years of the advances.
|
|
(vi)
|
Following the acquisitions of Hai Lai in 2008, East Achieve in 2009 and Wintown in 2010, the Company assumed certain obligations of the agreement with Chongqing Normal University, the affiliated university of FTCB, and Hubei Industrial University in relation to the operations of FTBC, and of the agreement with Guangxi Normal University, the affiliated university of Lijiang College in relation to the operations of Lijiang College, respectively. Under these affiliation agreements, each of the respective affiliated universities authorizes FTBC, Lijiang College or HIUBC, as the case may be, to use its school name and offers certain management and operational supports, and in return is entitled to exercise significant influence over FTBC, Lijiang College or HIUBC, related to establishment of any major or department, college development directions and daily education and administrative activities, as the case may be, and an agreed amount of fees. The fees charged to the Company are determined by reference to certain percentages of the revenues earned by each of FTBC, Lijiang College and HIUBC under the relevant affiliation agreements. Affiliation fees for the years ended December 31, 2008, 2009 and 2010 were approximately RMB6,900, RMB17,000 and RMB47,700.
|
|
(b)
|
Balances
|
Amounts due
|
Amount due
|
|||||||||||||||||
from related parties
|
to related party
|
|||||||||||||||||
As of December 31,
|
As of December 31,
|
|||||||||||||||||
Notes
|
2009
|
2010
|
2009
|
2010
|
||||||||||||||
RMB
|
RMB
|
RMB
|
RMB
|
|||||||||||||||
Current amounts
|
||||||||||||||||||
Guo You
|
(1)
|
6,288 | 3,438 | - | - | |||||||||||||
CCL
|
(2)
|
100 | - | - | - | |||||||||||||
Mr. Wu Shi Xin
|
(3)
|
- | - | - | (78,721 | ) | ||||||||||||
6,388 | 3,438 | - | (78,721 | ) | ||||||||||||||
Non-current advances
|
||||||||||||||||||
CCL
|
(4)
|
99,727 | 59,842 | - | - |
|
(1)
|
The balances arose from the provision of satellite related services, which are non-interest bearing, unsecured and payable on demand.
|
|
(2)
|
On October 12, 2009, the Company disposed of a subsidiary of a consolidated variable interest entity and the balance related to the proceeds from the disposal.
|
|
(3)
|
The amount represents consideration payable to Mr. Wu for the acquisition of HIUBC (see Note 4).
|
|
(4)
|
The advances by the Company to CCL were for money spent on asset and expenses to build up the satellite business of CCL over the years. The balance was used to prepay CCL for the VSAT license renewal service fee and to acquire the NCI in CCLX. The balance as of December 31, 2010 is the prepayment for the VSAT license renewal service fee. As of December 31, 2010, CCL is no longer a related party of the Company. The amount is presented for comparison purpose only (See Note 1).
|
F-61 |
25.
|
OTHER BORROWINGS
|
Counterparties
|
Amounts borrowed
|
Borrowing date
|
Maturity date
|
Interest rate
|
|||||||
XIE, Chunyu
|
30,000 |
1/28/2010
|
4/28/2010
|
7 | % | ||||||
10,000 |
7/15/2010
|
9/25/2010
|
7 | % | |||||||
LI, Zhengbing
|
30,000 |
1/21/2010
|
4/21/2010
|
7 | % | ||||||
15,000 |
6/24/2010
|
9/24/2010
|
7 | % | |||||||
HU, Jiping
|
7,000 |
1/21/2010
|
3/20/2010
|
7 | % | ||||||
LI, Shaobi
|
1,500 |
7/16/2010
|
9/20/2011
|
7 | % | ||||||
93,500 |
Counterparties
|
Amounts repaid
|
Borrowing date
|
Repayment
date |
Interest rate
|
|||||||
XIE, Chunyu
|
30,000 |
1/28/2010
|
4/28/2010
|
7 | % | ||||||
10,000 |
7/15/2010
|
9/25/2010
|
7 | % | |||||||
LI, Zhengbing
|
30,000 |
1/21/2010
|
4/21/2010
|
7 | % | ||||||
15,000 |
6/24/2010
|
9/24/2010
|
7 | % | |||||||
HU, Jiping
|
7,000 |
1/21/2010
|
3/20/2010
|
7 | % | ||||||
XU, Hong
|
200 |
4/30/2009
|
4/29/2010
|
6.31 | % | ||||||
92,200 |
26.
|
SUBSEQUENT EVENT
|
27.
|
RESTATEMENTS
OF FINANCIAL STATEMENTS
|
The noncontrolling shareholder of QPU, Qingdao China University of Petroleum Holding Limited, injected RMB 20,000 to QPU for its 40% equity ownership in QPU in the fiscal year ended December 31, 2010. The Company reported this "Capital contribution by a noncontrolling shareholder" as an investing activity instead of financing activity. The restatement reflects the reclassification of the cash inflow as a financing activity on the statement of cash flows for the fiscal year ended December 31, 2010.
Consolidated
Cash Flows for the Year Ended December 31, 2010
|
As
Previously
Reported
|
Restated
|
Net
Adjustment
|
|||||||||
Cash
flows from investing activities:
|
||||||||||||
Capital
contribution from noncontrolling interest
|
20,000 | - | (20,000 | ) | ||||||||
Net
cash used in investing activities
|
(617,637 | ) | (637,637 | ) | (20,000 | ) | ||||||
Cash
flows from financing activities:
|
||||||||||||
Capital
contribution from noncontrolling interest
|
- | 20,000 | 20,000 | |||||||||
Net
cash provided by financing activities
|
179,008 | 199,008 | 20,000 |
F-62 |
27.
|
RESTATEMENTS
OF FINANCIAL STATEMENTS - continued
|
Consolidated
Balance Sheet as of December 31, 2010
|
As
Previously Reported
|
Restated
|
Net
Adjustment
|
|||||||||
Prepaid
expenses and other current assets
|
48,221 | 56,321 | 8,100 | |||||||||
Total
current assets
|
1,067,433 | 1,075,533 | 8,100 | |||||||||
Non-current
deposits and prepayments
|
7,388 | 59,130 | 51,742 | |||||||||
Total
assets
|
2,894,190 | 2,954,032 | 59,842 | |||||||||
Retained
earnings
|
199,862 | 259,704 | 59,842 | |||||||||
Total
ChinaCast Education Corporation shareholders' equity
|
1,754,902 | 1,814,744 | 59,842 | |||||||||
Total
equity
|
1,780,394 | 1,840,236 | 59,842 | |||||||||
Total
liabilities and equity
|
2,894,190 | 2,954,032 | 59,842 |
Consolidated
Statements of Operations and
Comprehensive
Income for the Year Ended December 31, 2010
|
As
Previously Reported
|
Restated
|
Net
Adjustment
|
|||||||||
Impairment
loss of non-current advance
|
(59,842 | ) | - | 59,842 | ||||||||
Total
operating expenses, net
|
(138,507 | ) | (78,665 | ) | 59,842 | |||||||
Income
from operations
|
108,112 | 167,954 | 59,842 | |||||||||
Income
before provision for income taxes, earnings in equity in investments
|
110,659 | 170,501 | 59,842 | |||||||||
Net
income before earnings in equity investments
|
72,086 | 131,928 | 59,842 | |||||||||
Income
from continuing operations, net of tax
|
71,985 | 131,827 | 59,842 | |||||||||
Net
income
|
73,265 | 133,107 | 59,842 | |||||||||
Net
income attributable to ChinaCast Education Corporation
|
71,811 | 131,653 | 59,842 | |||||||||
Comprehensive
income
|
76,060 | 135,902 | 59,842 | |||||||||
Comprehensive
income attributable to ChinaCast Education Corporation
|
74,672 | 134,514 | 59,842 | |||||||||
Net
income per share
|
||||||||||||
Income
from continuing operations attributable to ChinaCast Education
|
||||||||||||
Corporation
per share:
|
||||||||||||
Basic
|
1.46 | 2.70 | 1.24 | |||||||||
Diluted
|
1.44 | 2.67 | 1.23 | |||||||||
Net
income attributable to ChinaCast Education Corporation per share:
|
||||||||||||
Basic
|
1.49 | 2.73 | 1.24 | |||||||||
Diluted
|
1.47 | 2.70 | 1.23 | |||||||||
Consolidated
Statements of Changes in Equity for the Year Ended December 31, 2010
|
As
Previously Reported
|
Restated
|
Net
Adjustment
|
|||||||||
(Accumulated
deficit) retained earnings:
|
||||||||||||
Net
income
|
71,811 | 131,653 | 59,842 | |||||||||
Balance
at December 31, 2010
|
199,862 | 259,704 | 59,842 | |||||||||
Total
equity:
|
||||||||||||
Net
income
|
73,265 | 133,107 | 59,842 | |||||||||
Balance
at December 31, 2010
|
1,780,394 | 1,840,236 | 59,842 | |||||||||
Consolidated
Cash Flows for the Year Ended December 31, 2010
|
As
Previously Reported
|
Restated
|
Net
Adjustment
|
|||||||||
Cash
flows from operating activities:
|
||||||||||||
Net
income
|
73,265 | 133,107 | 59,842 | |||||||||
Impairment
loss of non-current advance
|
59,842 | - | (59,842 | ) | ||||||||
Prepaid
expenses and other current assets
|
(21,086 | ) | (29,186 | ) | (8,100 | ) | ||||||
Non-current
deposits and prepayments
|
8,162 | 16,262 | 8,100 |
F-63 |
As of December 31,
|
||||||||
2009
|
2010
|
|||||||
RMB
|
RMB
|
|||||||
(As Restated) | ||||||||
Assets
|
||||||||
Cash and cash equivalents
|
19,516 | 2,853 | ||||||
Amounts due from subsidiaries
|
663,847 | 862,932 | ||||||
Prepaid expenses and other current assets
|
698 | 795 | ||||||
Investment in subsidiary
|
788,952 | 952,828 | ||||||
Total assets
|
1,473,013 | 1,819,408 | ||||||
Liabilities and equity
|
||||||||
Accrued expenses
|
12,662 | 4,664 | ||||||
Income tax payable
|
- | - | ||||||
Total liabilities
|
12,662 | 4,664 | ||||||
Ordinary shares
|
33 | 36 | ||||||
Additional paid-in capital
|
1,290,651 | 1,510,527 | ||||||
Retained earnings
|
136,583 | 259,704 | ||||||
Statutory reserve
|
39,139 | 47,671 | ||||||
Accumulated other comprehensive income
|
(6,055 | ) | (3,194 | ) | ||||
Total equity
|
1,460,351 | 1,814,744 | ||||||
Total liabilities and equity
|
1,473,013 | 1,819,408 |
F-64 |
Year ended December 31,
|
||||||||||||
2008
|
2009
|
2010
|
||||||||||
RMB
|
RMB
|
RMB
|
||||||||||
(As Restated) | ||||||||||||
Operating expenses:
|
||||||||||||
Selling and marketing expenses
|
(1,626 | ) | (1,639 | ) | (406 | ) | ||||||
General and administrative expenses
|
(33,733 | ) | (30,589 | ) | (22,195 | ) | ||||||
Total operating expenses
|
(35,359 | ) | (32,228 | ) | (22,601 | ) | ||||||
Loss from operations
|
(35,359 | ) | (32,228 | ) | (22,601 | ) | ||||||
Interest income
|
- | - | ||||||||||
Other expense
|
- | - | - | |||||||||
Exchange differences
|
- | - | - | |||||||||
Equity in earnings of subsidiaries
|
77,642 | 124,036 | 158,340 | |||||||||
Net income before provision for income taxes
|
42,284 | 91,808 | 135,739 | |||||||||
Less: Provision for income taxes
|
383 | 271 | (4,086 | ) | ||||||||
Net income
|
42,667 | 92,079 | 131,653 | |||||||||
Foreign currency translation adjustment
|
(257 | ) | (593 | ) | 2,861 | |||||||
Comprehensive income
|
42,410 | 91,486 | 134,514 |
F-65 |
(Accumulated
|
Accumulated
|
|||||||||||||||||||||||||||
deficit)
|
other
|
|||||||||||||||||||||||||||
Ordinary
|
Additional
|
Statutory
|
retained
|
comprehensive
|
Total
|
|||||||||||||||||||||||
Shares
|
Amount
|
paid-in capital
|
reserve
|
earnings
|
loss
|
equity
|
||||||||||||||||||||||
RMB
|
RMB
|
RMB
|
RMB
|
RMB
|
RMB
|
|||||||||||||||||||||||
(As Restated) | (As Restated) | |||||||||||||||||||||||||||
Balance at January 1, 2008
|
27,292,641 | 21 | 768,844 | 16,087 | 24,889 | (5,205 | ) | 804,636 | ||||||||||||||||||||
Share-based compensation
|
- | - | 15,851 | - | - | - | 15,851 | |||||||||||||||||||||
Net income
|
- | - | - | - | 42,667 | - | 42,667 | |||||||||||||||||||||
Exercise of warrants and issuance of restricted shares of common stock, net of issuance costs of RMB5,938
|
4,105,610 | 3 | 98,507 | - | - | - | 98,510 | |||||||||||||||||||||
Share offering, net of issuance costs of RMB11,440
|
4,250,000 | 3 | 64,233 | - | - | - | 64,236 | |||||||||||||||||||||
Refund of payment of tax liability assumed pursuant to the Share Exchange Transaction
|
- | - | 917 | - | - | - | 917 | |||||||||||||||||||||
Foreign currency translation adjustments
|
- | - | - | - | - | (257 | ) | (257 | ) | |||||||||||||||||||
Statutory reserve
|
- | - | - | 12,030 | (12,030 | ) | - | - | ||||||||||||||||||||
Balance at December 31, 2008
|
35,648,251 | 27 | 948,352 | 28,117 | 55,526 | (5,462 | ) | 1,026,560 | ||||||||||||||||||||
Share-based compensation
|
120,000 | - | 16,206 | - | - | - | 16,206 | |||||||||||||||||||||
Net income
|
- | - | - | - | 92,079 | - | 92,079 | |||||||||||||||||||||
Issuance of restricted shares of common stock for acquisition of additional interests in subsidiary
|
2,582,947 | 2 | 28,746 | - | - | - | 28,748 | |||||||||||||||||||||
Share offering, net of issuance costs of RMB21,508
|
6,819,500 | 4 | 297,347 | - | - | 297,351 | ||||||||||||||||||||||
Foreign currency translation adjustments
|
- | - | - | - | - | (593 | ) | (593 | ) | |||||||||||||||||||
Statutory reserve
|
- | - | - | 11,022 | (11,022 | ) | - | - | ||||||||||||||||||||
Balance at December 31, 2009
|
45,170,698 | 33 | 1,290,651 | 39,139 | 136,583 | (6,055 | ) | 1,460,351 | ||||||||||||||||||||
Share-based compensation
|
180,000 | - | 7,845 | - | - | - | 7,845 | |||||||||||||||||||||
Net income
|
- | - | - | - | 131,653 | - | 131,653 | |||||||||||||||||||||
Issuance of shares of common stock
|
4,428,254 | 3 | 232,968 | - | - | - | 232,971 | |||||||||||||||||||||
Acquisition of NCI | - | - | (20,937 | ) | - | - | - | (20,937 | ) | |||||||||||||||||||
Foreign currency translation adjustments
|
- | - | - | - | - | 2,861 | 2,861 | |||||||||||||||||||||
Statutory reserve
|
- | - | - | 8,532 | (8,532 | ) | - | - | ||||||||||||||||||||
Balance at December 31, 2010
|
49,778,952 | 36 | 1,510,527 | 47,671 | 259,704 | (3,194 | ) | 1,814,744 |
F-66 |
Year ended December 31,
|
||||||||||||
2008
|
2009
|
2010
|
||||||||||
RMB
|
RMB
|
RMB
|
||||||||||
(As Restated) | ||||||||||||
Cash flow from operating activities:
|
||||||||||||
Net income
|
42,667 | 92,079 | 131,653 | |||||||||
Adjustments to reconcile net income to net cash used in operating activities:
|
||||||||||||
Share-based compensation
|
15,851 | 16,206 | 16,206 | |||||||||
Earnings in equity investment
|
(77,642 | ) | (124,036 | ) | (158,340 | ) | ||||||
Changes in assets and liabilities
|
||||||||||||
Prepaid expenses and other current assets
|
1 | (692 | ) | (97 | ) | |||||||
Amount due from related party
|
17,557 | 20,596 | (259,463 | ) | ||||||||
Accrued expenses and other current liabilities
|
6,045 | (2,105 | ) | (2,105 | ) | |||||||
Income tax payable
|
(30 | ) | (117 | ) | - | |||||||
Net cash (used in) provided by operating activities
|
4,449 | 1,931 | (272,146 | ) | ||||||||
Cash flow from investing activities:
|
||||||||||||
Advances to subsidiaries
|
(167,346 | ) | (280,059 | ) | - | |||||||
Net cash used in investing activities
|
(167,346 | ) | (280,059 | ) | - | |||||||
Cash flow from financing activities:
|
||||||||||||
Proceeds from issuance of ordinary shares, net of issuance expenses
|
64,236 | 297,351 | 297,347 | |||||||||
Payment of expenses in connection with Share Exchange Transaction from related party
|
- | - | ||||||||||
Payment of expenses in connection with Share Exchange Transaction
|
- | - | ||||||||||
Exercise of warrants
|
98,510 | - | ||||||||||
Capital distribution
|
- | - | ||||||||||
Net cash (used in) provided by financing activities
|
162,746 | 297,351 | 297,347 | |||||||||
Effect of foreign exchange rate changes
|
(31 | ) | (6 | ) | (41,864 | ) | ||||||
Net (decrease) increase in cash and cash equivalents
|
(182 | ) | 19,217 | 25,201 | ||||||||
Cash and cash equivalents at beginning of the year
|
481 | 299 | 19,516 | |||||||||
Cash and cash equivalents at end of the year
|
299 | 19,516 | 2,853 |
1.
|
Basis for Preparation
|
F-67 |
2.
|
Restatement
|
The Company has restated the consolidated financial statements as of and for the year ended December 31, 2010 to reverse an impairment of non-current advance at the amount of RMB59,842. The restatement is described in detail in Note 27 "Restatements of Financial Statements" to the consolidated financial statements. The accompanying condensed financial information of parent company as of and for the year ended December 31, 2010 has been restated to reflect the resulting increase in CEC's equity in earnings of subsidiaries.
The following table presents the effects of the restatement adjustment on the accompanying condensed financial information for the year ended December 31, 2010:
Condensed financial information of parent company | ||||||||||||
Balance Sheet as of December 31, 2010 | As Previously Reported | As Restated | Net Adjustment | |||||||||
Investment in subsidiary | 892,986 | 952,828 | 59,842 | |||||||||
Total assets | 1,759,566 | 1,819,408 | 59,842 | |||||||||
Retained earnings | 199,862 | 259,704 | 59,842 | |||||||||
Total equity | 1,754,902 | 1,814,744 | 59,842 | |||||||||
Total liabilities and equity | 1,759,566 | 1,819,408 | 59,842 | |||||||||
Statement of operations and comprehensive income | As Previously Reported | As Restated | Net Adjustment | |||||||||
for the Year Ended December 31, 2010 | ||||||||||||
Equity in earnings of subsidiaries | 98,498 | 158,340 | 59,842 | |||||||||
Net income before provision for income taxes | 75,897 | 135,739 | 59,842 | |||||||||
Net income | 71,811 | 131,653 | 59,842 | |||||||||
Comprehensive income | 74,672 | 134,514 | 59,842 | |||||||||
Statement of changes in equity | ||||||||||||
for the Year Ended December 31, 2010 | As Previously Reported | As Restated | Net Adjustment | |||||||||
Net income | 71,811 | 131,653 | 59,842 | |||||||||
Total equity | 1,754,902 | 1,814,744 | 59,842 | |||||||||
Statement of cash flows | ||||||||||||
for the Year Ended December 31, 2010 | As Previously Reported | As Restated | Net Adjustment | |||||||||
Cash flows from operating activities: | ||||||||||||
Net income | 71,811 | 131,653 | 59,842 | |||||||||
Changes in assets and liabilities | 98,498 | 158,340 | 59,842 |
F-68 |