Attached files
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
(Mark One)
þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 for the period ended September 30, 2012
o TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE Act of 1934 for the transition period from ___ to ___.
Commission file number: 333-163635
Wonder International Education & Investment Group Corporation
(Name of Small Business Issuer in its charter)
Arizona | 26-2773442 | |
(State of Incorporation) | (I.R.S. Employer I.D. Number) |
8040 E. Morgan Trail, #18, Scottsdale, AZ 85258
(Address of principal executive offices) (Zip Code)
Issuer's telephone number: 480-966-2020
Securities registered under Section 12 (b) of the Act:
Title of each class to be registered | Name of exchange on which each class is to be registered | |
None | None |
Securities registered under Section 12(g) of the Act:
None
Check whether issuer (1) filed all reports to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. (1). þ Yes o No (2). þ Yes o No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). o Yes þ No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. þ Smaller Reporting Company
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). o Yes þ No
The number of shares issued and outstanding of issuer's common stock, $0.001 par value, as of November 13, 2012 was 20,000,000.
PART I - FINANCIAL INFORMATION
|
||||
Item 1. Financial Statements.
|
Page No.
|
|||
-Consolidated Balance Sheets as of September 30, 2012 (unaudited) and December 31, 2011 (audited).
|
3 | |||
-Consolidated Statements of Income for the Nine Month Periods Ended September 30, 2012 and September 30, 2011 (unaudited).
|
4 | |||
-Consolidated Statements of Income for the Three Month Periods Ended September 30, 2012 and September 30, 2011 (unaudited).
|
5 | |||
-Consolidated Statements of Cash Flows for the Nine Months Periods Ended September 30, 2012 and September 30, 2011 (unaudited).
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6 | |||
-Notes to the Consolidated Financial Statements.
|
7 | |||
Item 2. Management's Discussion and Analysis.
|
9 | |||
Item 4. Controls and Procedures
|
15 | |||
Item 4(A)T Controls and Procedures.
|
15 | |||
PART II - OTHER INFORMATION
|
||||
Item 6. Exhibits.
|
15 | |||
Signatures
|
16 |
2
PART I –FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
WONDER INTERNATIONAL EDUCATION & INVESTMENT GROUP CORPORATION
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 2012 AND DECEMBER 31, 2011
September 30, 2012
(Unaudited)
|
December 31, 2011
(Audited)
|
|||||||
ASSETS
|
||||||||
Current Assets:
|
||||||||
Cash
|
$
|
2,006,487
|
$
|
1,646,542
|
||||
Miscellaneous receivables
|
239,318
|
273,190
|
||||||
Accrued interest receivable
|
11,545
|
11,515
|
||||||
Related party receivable
|
4,573,279
|
1,040,750
|
||||||
Prepaid expenses
|
688,561
|
82,231
|
||||||
Total current assets
|
7,519,190
|
3,054,228
|
||||||
Fixed Assets:
|
||||||||
Building and related land rights
|
4,579,096
|
4,566,810
|
||||||
Computers and related furniture and equipment
|
11,959,861
|
7,393,943
|
||||||
Vehicles
|
963,514
|
963,077
|
||||||
Total fixed assets
|
17,502,471
|
12,923,830
|
||||||
Less accumulated depreciation
|
5,620,784
|
4,873,248
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||||||
Net fixed assets
|
11,881,687
|
8,050,582
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||||||
Other Assets:
|
||||||||
Long term investment
|
37,980,693
|
37,878,788
|
||||||
Total other assets
|
37,980,693
|
37,878,788
|
||||||
Total Assets
|
$
|
57,381,570
|
$
|
48,983,598
|
||||
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
||||||||
Current Liabilities:
|
||||||||
Bank loans payable
|
$
|
3,639,816
|
$
|
3,630,051
|
||||
Accounts payable
|
118,619
|
424,949
|
||||||
Other accounts payable
|
1,054,238
|
825,008
|
||||||
Advanced tuition payments
|
11,339,862
|
8,387,527
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||||||
Accrued liabilities
|
37,551
|
617,490
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||||||
Taxes payable
|
2,175,360
|
1,517,293
|
||||||
Total current liabilities
|
18,365,446
|
15,402,318
|
||||||
Stockholders’ Equity:
|
||||||||
Common stock: authorized, 100,000,000 shares without par value; issued and outstanding, 20,000,000 shares
|
5,858,782
|
5,858,782
|
||||||
Retained earnings
|
24,944,959
|
19,591,560
|
||||||
Earnings appropriated for statutory reserves
|
2,929,391
|
2,929,391
|
||||||
Accumulated other comprehensive income
|
5,282,992
|
5,201,547
|
||||||
Total stockholders’ equity
|
39,016,124
|
33,581,280
|
||||||
Total Liabilities and Stockholders’ Equity
|
$
|
57,381,570
|
$
|
48,983,598
|
The accompanying notes are an integral part of these financial statements.
3
WONDER INTERNATIONAL EDUCATION & INVESTMENT GROUP CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
For The Nine Month Periods Ended September 30,
(Unaudited)
2012
|
2011
|
|||||||
(RESTATED)
|
||||||||
Revenue
|
$
|
14,137,203
|
$
|
10,386,967
|
||||
Cost of Sales
|
3,771,517
|
3,627,948
|
||||||
Gross Profit
|
10,365,686
|
6,759,019
|
||||||
|
||||||||
Expenses:
|
||||||||
Selling and Administrative Expenses
|
4,619,524
|
3,944,848
|
||||||
Operating Income
|
5,746,162
|
2,814,171
|
||||||
|
||||||||
Other Income and Expense:
|
||||||||
Other Income
|
33,516
|
62,383
|
||||||
Interest Income
|
-
|
761,740
|
||||||
Interest Expense
|
(204,805
|
)
|
(162,166
|
)
|
||||
Other Expense
|
(221,474
|
)
|
(3,811
|
)
|
||||
Net Income
|
5,353,399
|
3,472,317
|
||||||
Other Comprehensive Income (Loss) – foreign currency translation adjustments
|
81,445
|
973,724
|
||||||
Total Comprehensive Income
|
$
|
5,434,844
|
$
|
4,446,041
|
||||
|
||||||||
Income Per Share -
|
||||||||
Basic and Diluted
|
$
|
.27
|
$
|
.17
|
||||
Weighted Average Number of Shares Outstanding
|
20,000,000
|
20,000,000
|
The accompanying notes are an integral part of these financial statements.
4
WONDER INTERNATIONAL EDUCATION & INVESTMENT GROUP CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
For The Three Month Periods Ended September 30,
(Unaudited)
2012
|
2011
|
|||||||
(RESTATED)
|
||||||||
Revenue
|
$
|
4,871,336
|
$
|
3,599,640
|
||||
Cost of Sales
|
1,468,736
|
1,275,103
|
||||||
Gross Profit
|
3,402,600
|
2,324,537
|
||||||
Expenses:
|
||||||||
Selling and Administrative Expenses
|
2,143,997
|
2,056,141
|
||||||
Operating Income
|
1,258,603
|
268,396
|
||||||
|
||||||||
Other Income and Expense:
|
||||||||
Other Income
|
5,901
|
11,298
|
||||||
Interest Income
|
-
|
279,790
|
||||||
Interest Expense
|
(61,212
|
)
|
(82,556
|
)
|
||||
Other Expense
|
(74,913
|
)
|
(495
|
)
|
||||
Net Income
|
1,128,379
|
476,433
|
||||||
|
||||||||
Accumulated Other Comprehensive Income (loss) – foreign currency translation adjustments
|
(58,649
|
)
|
330,327
|
|||||
Total Comprehensive Income
|
$
|
1,069,730
|
$
|
806,760
|
||||
Income Per Share -
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||||||||
Basic and Diluted
|
$
|
.06
|
$
|
.02
|
||||
Weighted average number of shares outstanding
|
20,000,000
|
20,000,000
|
The accompanying notes are an integral part of these financial statements.
5
WONDER INTERNATIONAL EDUCATION & INVESTMENT GROUP CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Nine Month Periods Ended September 30,
(Unaudited)
2012
|
2011
|
|||||||
(RESTATED) | ||||||||
CASH FLOWS FROM OPERATIONS:
|
||||||||
Net income
|
$
|
5,353,399
|
$
|
3,472,317
|
||||
Adjustments to reconcile net income with net cash
|
||||||||
provided (consumed) by operating activities:
|
||||||||
Charges not requiring the outlay of cash:
|
||||||||
Depreciation
|
735,647
|
722,765
|
||||||
Increases in advanced tuition payments
|
2,934,647
|
5,543,536
|
|
|||||
Changes in assets and liabilities:
|
||||||||
Decrease (increase) in other miscellaneous receivables
|
34,665
|
(195,797
|
)
|
|||||
Increase in prepaid expenses
|
(607,118
|
)
|
(84,444
|
)
|
||||
Decrease in accrued interest receivable
|
-
|
11,244
|
||||||
Increases in advances to related parties
|
(3,535,604
|
)
|
(9,346,615
|
)
|
||||
Increases (decrease) in other accounts payable
|
227,389
|
341,059
|
||||||
Increases in taxes payable
|
655,070
|
515,824
|
||||||
Increase (decrease) in accrued liabilities
|
(890,553
|
)
|
(323,002
|
)
|
||||
Net Cash Provided (Consumed) By Operating Activities
|
4,907,542
|
|
656,887
|
|||||
|
||||||||
CASH FLOWS FROM INVESTING ACTIVITIES:
|
||||||||
Purchases of fixed assets
|
(4,551,435
|
)
|
(85,392
|
)
|
||||
Decreases in restricted cash
|
-
|
1,541,212
|
||||||
Net Cash Provided By Investing Activities
|
(4,551,435
|
)
|
1,455,820
|
|||||
|
||||||||
CASH FLOWS FROM FINANCING ACTIVITIES:
|
||||||||
Increase in bank loans
|
1,585,163
|
-
|
||||||
Repayments of bank loans
|
(1,585,163
|
)
|
(3,082,424
|
)
|
||||
Repayments of drafts payable
|
-
|
1,541,212
|
||||||
Net Cash Consumed By Financing Activities
|
-
|
(1,541,212
|
)
|
|||||
|
||||||||
Effect on cash of exchange rate changes
|
3,838
|
55,716
|
||||||
Net change in cash
|
359,945
|
627,211
|
||||||
Cash balance, beginning of period
|
1,646,542
|
1,338,316
|
||||||
|
||||||||
Cash balance, end of period
|
2,006,487
|
$
|
1,965,527
|
The accompanying notes are an integral part of these financial statemets.
6
WONDER INTERNATIONAL EDUCATION & INVESTMENT GROUP CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2012
(Unaudited)
1. BASIS OF PRESENTATION
The unaudited interim consolidated financial statements of Wonder International Education & Investment Group Corporation (“the Company”) as of September 30, 2012 and for the three and nine month periods ended September 30, 2012 and 2011 have been prepared in accordance with U.S. generally accepted accounting principles. In the opinion of management, such information contains all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the results of such periods. The results of operations for the three and nine month periods ended September 30, 2012 are not necessarily indicative of the results to be expected for the full fiscal year ending December 31, 2012.
Certain information and disclosures normally included in the notes to financial statements have been condensed or omitted as permitted by the rules and regulations of the Securities and Exchange Commission, although the Company believes the disclosure is adequate to make the information presented not misleading. The accompanying unaudited financial statements should be read in conjunction with the financial statements of the Company for the year ended December 31, 2011.
2. RESTATEMENTS
The Company has restated its financial statements for fiscal year 2011. An error was discovered during the year 2011 in the way the Company had recorded its tax liabilities. Management realized that it had overlooked a Notice of the Ministry of Finance and State Administration of Taxes which exempted the Company from income taxes and certain other taxes. The exemption applies to companies which meet certain criteria and applies to all tax periods subsequent to the year 2003. The Company meets the required criteria and is exempt from income taxes for each of the years of its existence. In prior periods, the Company recorded income tax expense each period for each of its seven schools. These expenses have been eliminated in the restated statements of income and cash flows of the three and nine month periods ended September 30, 2011. Also eliminated in the restated statements are income tax benefits which had been accrued in previous years relative to deferred revenue. These corrections resulted in an increase in net income for the nine month period ended September 30, 2011 of $1,801,802 ($.09 per share).
3. SUPPLEMENTAL CASH FLOWS INFORMATION:
Cash paid for interest during the nine month periods ended September 30, 2012 and September 30, 2011 was $204,805 and $162,166, respectively. Cash paid for income taxes during the nine month periods ended September 30, 2012 and September 30, 2011 was $62,023 and $4,307, respectively.
There were no noncash investing or financing activities during either of the periods presented.
7
WONDER INTERNATIONAL EDUCATION & INVESTMENT GROUP CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2012
(Unaudited)
4. DETAILS OF EXPENSES
Details of expenses incurred during the nine month periods ended September 30, 2012 and 2011 are presented below:
2012
|
2011
|
|||||||
Advertising and publicity
|
$
|
2,516,687
|
$
|
1,798,863
|
||||
Sales tax
|
596,514
|
560,772
|
||||||
Management salary and benefits
|
205,738
|
216,712
|
||||||
Staff salary and benefits
|
288,454
|
295,241
|
||||||
Office expense
|
196,380
|
151,991
|
||||||
Recruitment
|
640,167
|
473,502
|
||||||
Maintenance
|
44,209
|
147,365
|
||||||
Other
|
131,375
|
300,402
|
||||||
Total expenses
|
$
|
4,619,524
|
$
|
3,944,848
|
5. RELATED PARTY TRANSACTIONS
During the nine month period ended September 30, 2012, the Company advanced $7,731,295 to related parties and received payments against these advances of $4,198,766. The balance at September 30, 2012 is $4,573,279. Our President and controlling shareholder is the majority equity owner of these related parties. During the year ended December 31, 2011 the Company advanced funds, primarily to Anhui Wenda Information Technology Professional College. At September 30, 2011 these advances totaled $38,978,975. Interest charged during the nine months ended September 30, 2011 was $761,740. On December 31, 2011, the entire balance of these advances to the University ($38,878,788) was converted into a 7% equity interest in the college.
6. GRADUATE STUDENT TRAINING PROGRAM
A new project group has been initiated by Wonder targeting the graduate student market in China with an advanced certification program. The initial program will be at the Anhui, Zhejiang, Jiangsu, and Henan schools and once begun will be managed by the individual schools. Expenditures to date have been as follows:
Capitalized
|
Expensed
|
|||||||
Technical equipment
|
$
|
1,355,314
|
$
|
-
|
||||
Lease deposits and prepayments
|
602,362
|
-
|
||||||
Publicity
|
-
|
220,464
|
||||||
Advertising
|
-
|
454,942
|
||||||
Office expense
|
-
|
87,871
|
||||||
Other expense
|
-
|
168,172
|
||||||
$
|
1,957,676
|
$
|
931,449
|
Capitalized program costs will be amortized beginning when the program starts and the assets are put into service. The development of the program is estimated to take approximately one year. The expenses noted above are included in the expenses detailed in Note 4. The total program investment for all schools is estimated at $7,925,000.
8
Item 2. Management's Discussion and Analysis and Plan of Operations
Unless the context indicates otherwise, as used in this Form 10-Q, references to the “Company,” “we,” “our” or “us” refer to Wonder International Education & Investment Group Corporation and our subsidiaries and variable interest entities.
Forward-Looking Statements
The following discussion should be read in conjunction with our financial statements, which are included elsewhere in this Form 10-Q (the “Report”). This Report contains forward-looking statements which relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as “may,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential” or “continue” or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties, and other factors that may cause our or our industry’s actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements.
For a description of such risks and uncertainties refer to our Form 10-K for the Annual Report for the period ending December 31, 2011 filed with the Securities and Exchange Commission on April 16, 2012. While these forward-looking statements, and any assumptions upon which they are based, are made in good faith and reflect our current judgment regarding the direction of our business, actual results will almost always vary, sometimes materially, from any estimates, predictions, projections, assumptions or other future performance suggested herein. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results.
General.
Organizational History
Wonder International Education & Investment Group Corporation (“US Wonder”) is a US holding company, incorporated in Arizona on April 21, 2008. On November 1, 2010, US Wonder acquired all of the outstanding capital stock of Anhui Lang Wen Tian Cheng Consulting & Management Co., Ltd. (“WFOE”), a Chinese company pursuant to the terms of a share exchange agreement. WOFE is a wholly owned subsidiary of US Wonder. On November 3, 2010, WFOE entered into a series of agreements with Anhui Wonder Education and Management Company, Ltd, a PRC company (“China Wonder”) including a Voting Right Proxy Agreement, Option Agreement, Equity Pledge Agreement, Consulting Services Agreement and Operating Agreement. China Wonder wholly owns seven separate vocational training schools in seven provinces in China. These schools are non-governmental vocational education institutions in China. Wonder’s core business is to provide IT education. China Wonder's seven (7) vocational schools are in the following provinces of China: Anhui, Jiangsu, Zhejiang, Fujian, Henan, Hubei and Liaoning. Through our ownership of WFOE, we control China Wonder and the schools and have the ability to control any income produced by China Wonder.
Our United States offices are located at 8040 E. Morgan Trail, #18, Scottsdale, AZ 85258 and our phone number is 480-966-2020. Our PRC headquarters are located at 4-5/F, Xingke Building, 441 Huangshanlu, Hefei, Anhui, China and our phone number is 86-0551-3687892.
Business Introduction
China Wonder owns and operates seven separate vocational training schools located in seven provinces in China, namely Anhui, Jiangsu, Zhejiang, Fujian, Henan, Hubei and Liaoning. These schools are non-governmental vocational education institutions in China. Wonder’s core business is to provide IT education. It also provides job placement services to its students at no charge through its 12 employment centers located nationwide.
9
Results of Operations for Nine Months ended September 30, 2012 compared with September 30, 2011 (restated).
The following tables and related discussions set forth key components of Wonder’s results of operations for the periods above indicated in dollars.
2012
|
2011
|
|||||||
Revenue
|
$
|
14,137,203
|
$
|
10,386,967
|
||||
Cost of Sales
|
3,771,517
|
3,627,948
|
||||||
Gross Profit
|
$
|
10,365,686
|
6,759,019
|
For the nine months ended September 30, 2012, our revenues grew to $14,137,203 from $10,386,967 for the comparable 2011 period. The increase of $3,750,236 or 36.1% is the result of an aggressive marketing and promotional campaign that began in 2009 and continues to date. The growth of Company sales, although somewhat inhibited by the worldwide economic recession, occurred at six of seven Company schools. We expect further growth in our revenues for the remainder of fiscal 2012.
Expenses:
|
2012
|
2011
|
||||||
Selling and Administrative Expenses
|
$
|
4,619,524
|
3,944,848
|
|||||
Operating Income
|
$
|
5,746,162
|
2,814,171
|
Selling and Administrative Expenses (which includes advertising, office expense, salaries and benefits, travel and promotion, technical support and related overhead) for the 2012 nine month period were $4,619,524, which represents an increase of $674,676 or 17.1% from the expenses of $3,944,848 from the prior period.
Major items of included in Selling and Administrative Expenses were the following:
2012
|
2011
|
|||||||
Advertising
|
|
$
|
2,516,687
|
|
|
$
|
1,798,863
|
|
Sales tax
|
|
|
596,514
|
|
|
|
560,772
|
|
Management salary and benefits
|
|
|
205,738
|
|
|
|
216,712
|
|
Marketing staff salary and benefits
|
|
|
288,454
|
|
|
|
295,241
|
|
Office expense
|
|
|
196,380
|
|
|
|
151,991
|
|
Recruitment
|
|
|
640,167
|
|
|
|
473,502
|
|
Maintenance
|
|
|
44,209
|
|
|
|
147,365
|
During the third quarter of fiscal 2012, we increased our advertising and promotional expenditures when compared to those of the prior year’s quarter. As mentioned above, we began to increase our advertising and promotional efforts commencing in fiscal 2009 generally on a quarter to quarter basis. We continued to do so during the current quarter compared to the same quarter last year. During the 2012 period, we incurred $2,516,687 in advertising costs, an increase of $717,824 or 39.9% from $1,798,863 for the prior period. Sales tax for the current quarter increased by 6.4% from the prior quarter, an increase comparable to the change in new sales contracts recorded in the quarter. Management salary and benefits for the current quarter decreased by 5.1% from the prior quarter due primarily to benefit reductions. Marketing staff salary and benefits for the current period were relatively flat compared to the prior quarter. We were able to increase revenues during the current period without a concomitant increase our marketing headcount. Office expenses for the current period increased 29.2% from the prior period due to expenses to support the graduate school program. Recruitment which represents principally travel and entertainment expenses incurred in promoting our schools to high school students increased by 35.2% from the prior period due to intensive promotional efforts at four of our school locations. Our management decided to increase our recruiting efforts in the first fiscal quarter of 2011 and this effort continues through this current period. Previously, we did not focus on this method of attracting students. Maintenance decreased by 70.0% from the comparable prior period due to significant prior year renovations of the Anhui school.
10
Operating Income (Loss)
We generated operating income for the 2012 period of $5,746,162 compared with $2,814,171 for the 2011 period. The reasons for this reduction are discussed above.
Other Income and Expenses
Other income was $33,516 for the 2012 quarter, a decrease of 46.3% from $62,383 for the prior year’s quarter. Other income represents income from the sales of books and school related services.
Interest income for the current period was nil compared with $761,740 for the comparable period in 2011. In the fourth quarter of 2010, we changed our arrangement with Anhui Wenda Information Technology Professional College (“College”), an accredited university located in Anhui Province, PRC, whereby the Company received interest at 5.85% per year on the university’s borrowings. Our President and controlling shareholder is the majority equity owner of the College. As of September 30, 2012, the amount due from the college was $0 as the previous advances were converted into a 7% equity investment in the College which occurred on December 28, 2011 and no other advances were made to the College during the nine month period ended September 30, 2012 .
Interest expense was $204,505 for the 2012 nine month period, compared with $162,166 for the 2011 comparable prior year period due to changes in the base rate of the People's Bank of China.
Other expense was $221,474 for the current nine month period compared with $3,811 for the 2011 comparable period.
Net Income
Net Income for the current quarter was $5,353,399 compared with $3,472,317 for the 2011 period. The increase of $1,881,082 or 54.2% is due to the reasons discussed above.
Foreign currency translation adjustment
The foreign currency translation adjustment, which is the impact of different foreign exchange rates applied to balance sheet accounts, versus those applied to income statement accounts, was $81,445 for the 2012 period compared with $978,140 for the 2011 period.
Total Comprehensive Income
For the current 2012 period, we had a total comprehensive income of $5,434,844 compared with a total comprehensive income for the 2011 comparable quarter of $4,450,457. Total comprehensive income is the combined sum of net income and comprehensive income.
Income Per Share.
Income applicable to common stock holders was $0.27 per share for the 2012 period compared with $0.17 per share for the 2011 comparable quarter. The change in income per share is reflective of the earnings increase as the number of common shares subscribed has not changed.
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Results of Operations for Three Months ended September 30, 2012 compared with September 30, 2011 (restated).
The following tables and related discussions set forth key components of Wonder’s results of operations for the periods above indicated in dollars.
2012
|
2011
|
|||||||
Revenue
|
$
|
4,871,336
|
$
|
3,599,640
|
||||
Cost of Sales
|
1,468,736
|
1,275,103
|
||||||
Gross Profit
|
$
|
3,402,600
|
2,324,537
|
For the three months ended September 30, 2012, our revenues grew to $4,871,336 from $3,599,640 for the comparable 2011 period. The increase of $1,271,696 or 35.3% is the result of an aggressive marketing and promotional campaign that began in 2009 and continues to date. The growth of Company sales, although somewhat inhibited by the worldwide economic recession, occurred at five of the seven Company schools. We expect further growth in our revenues for the remainder of fiscal 2012.
Expenses:
|
2012
|
2011
|
||||||
Selling and Administrative Expenses
|
$
|
2,143,997
|
2,056,141
|
|||||
Operating Income
|
$
|
1,258,603
|
268,396
|
Selling and Administrative Expenses (which includes advertising, office expense, salaries and benefits, travel and promotion, technical support and related overhead) for the 2012 three month period were $2,143,997, which represents an increase of $87,856 or 4.3% from the expenses of $2,056,141 from the prior period.
The larger items included in Selling and Administrative Expense were the following
2012
|
2011
|
|||||||
Advertising
|
$ | 1,464,236 | $ | 1,048,275 | ||||
Sales tax
|
349,016 | 323,221 | ||||||
Management salary and benefits
|
68,464 | 104,012 | ||||||
Staff salary and benefits
|
118,234 | 116,595 | ||||||
Office expense
|
145,624 | 50,569 | ||||||
Recruitment
|
143,650 | 130,451 | ||||||
Maintenance
|
4,720 | 2,321 |
Expenses of the third quarter are usually higher than in the other quarters because of seasonal factors. Many of the expenses are also higher in the third quarter of 2012 because we began intensive preparations for the new graduate program during the second quarter of 2012.
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Operating Income (Loss)
We generated operating income for the 2012 period of $1,258,603 compared with $268,396 for the 2011 period. The reasons for this reduction are discussed above.
Other Income and Expenses
Other income was $5,901 for the 2012 quarter, a decrease of 47.8% from the prior year’s quarter. Other income represents income from the sales of books and school related services.
Interest income for the current period was nil compared with $279,790 for the comparable period in 2011. In the fourth quarter of 2010, we changed our arrangement with Anhui Wenda Information Technology Professional College (“College”), an accredited university located in Anhui Province, PRC, whereby the Company received interest at 5.85% per year on the university’s borrowings. Our President and controlling shareholder is the majority equity owner of the College. As of September 30, 2012, the amount due from the college was $0 as the previous advances were converted into a 7% equity investment in the College which occurred on December 28, 2011 and no other advances were made to the College during the quarter ended September 30, 2012 .
Interest expense was $61,212 for the 2012 quarter, compared with $82,556 for the 2011 comparable quarter due to quarter to quarter changes in the base rate of the People's Bank of China.
Other expense was $74,913 for the current quarter compared with $495 for the 2011 quarter.
Net Income
Net Income for the current quarter was $1,128,379 compared with $476,433 for the 2011 period. The increase of $651,946 or 137% is due to the reasons discussed above.
Foreign currency translation adjustment
The foreign currency translation adjustment, which is the impact of different foreign exchange rates applied to balance sheet accounts, versus those applied to income statement accounts, was an unfavorable $58,649 for the 2012 period compared with a favorable $334,743 for the 2011 period.
Total Comprehensive Income
For the current 2012 quarter, we had a total comprehensive income of $1,069,730 compared with a total comprehensive income for the 2011 comparable quarter of $811,176. Total comprehensive income is the combined sum of net income and comprehensive income.
Income Per Share.
Income applicable to common stock holders was $0.06 per share for the 2012 period compared with $0.02 per share for the 2011 comparable quarter. The change in income per share is reflective of the earnings increase as the number of common shares subscribed has not changed.
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Liquidity and Capital Resources
As of September 30, 2012, we had a working capital deficit of $10,846,256, compared to a working capital deficit of $12,348,090 as of December 31, 2011. The decrease in the deficit by $1,501,834 for the current quarter from the 2011 year end is primarily due to an increase in related party receivables, partially offset by an increase in advance tuition payments.
Over the next 12 months, we will require additional working capital of approximately $1,000,000 to sustain our working capital needs based on projected sales of $15,500,000. See plans for expansion below for additional capital needs to grow the business.
Sources of Capital
We expect our revenues generated from operations to cover our projected working capital needs; however, if additional capital is needed, we will explore financing through options such as shareholder loans. Shareholder loans are without stated terms of repayment. We have no formal agreement that ensures that we will receive such loans. In the event shareholder loans are not available, we may seek long or short term financing from local banks.
We had two short term loans outstanding at September 30, 2012 and we had three at December 31, 2011. The balances were $3,639,816 and $3,630,051, respectively.
As of September 30, 2012, we had business taxes payable of $2,175,360, compared with $1,517,293 at December 31, 2011.
Plans for Expansion
Given sufficient funding, we expect to expand our operations throughout China by establishing additional schools. Each new school will have a full complement of staff. The capital needed for each new school is about $1,500,000 and is not included in the working capital needs. We are currently seeking up to $10 million in investment capital which will be used for our expansion plans. As of the date of this filing, we do not have any formal arrangement with any third party to provide such capital to us. Accordingly, we can not predict whether we will be successful with our efforts to obtain investment capital.
We do not know of any trends, events or uncertainties that are likely to have a material impact on our short-term or long-term liquidity other than those factors discussed above.
Material Commitments
We do not have any material commitments for capital expenditures other than what was discussed relating to establishment of new facilities.
Seasonal Aspects
Our business is seasonal in that sales are particularly low in the summer months, due to school vacations. Sales are usually higher at the start of new semesters.
Off Balance Sheet Arrangements
We have no off balance sheet financing arrangements.
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Item 4. Controls and Procedures.
Our disclosure controls and procedures are designed to ensure that information required to be disclosed in reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the United States Securities and Exchange Commission. Our principal executive officer and principal financial and accounting officers have reviewed the effectiveness of our “disclosure controls and procedures” (as defined in the Securities Exchange Act of 1934 Rules 13(a)-15(e) and 15(d)-15(e)) within the end of the period covered by this Quarterly Report on Form 10-Q and have concluded that the disclosure controls and procedures are effective to ensure that material information relating to the Company is recorded, processed, summarized, and reported in a timely manner.
Changes in Internal Controls over Financial Reporting
There have been no changes in the Company's internal control over financial reporting during the last quarterly period covered by this report that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.
Part II OTHER INFORMATION
Item 6. Exhibits.
Exhibit 31 –
|
Certification Pursuant To Section 302 of The Sarbanes-Oxley Act Of 2002.
|
Exhibit 32 –
|
Certification Pursuant To Section 906 of The Sarbanes-Oxley Act Of 2002.
|
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
Wonder International Education & Investment Group Corporation | |||
Date: November __, 2012
|
By:
|
/s/ Xie Chungui | |
Xie Chungui | |||
Chairman
|
|||
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