Attached files
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
(Mark One)
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
for the period ended March 31, 2013
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
Investment Group Corporation
(Name of Small Business Issuer in its charter)
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Arizona
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26-2773442
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(State of
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(I.R.S. Employer
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Incorporation)
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I.D. Number)
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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:
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Title of each class
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Name of exchange on which
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to be registered
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each class is to be registered
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| 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). x Yes o No (2). x 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 x No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. x 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 x No
The number of shares issued and outstanding of issuer's common stock, $0.001 par value, as of May 9, 2013 was 20,000,000.
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| PART I - FINANCIAL INFORMATION | ||||
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2
WONDER INTERNATIONAL EDUCATION & INVESTMENT GROUP CORPORATION
MARCH 31, 2013 AND DECEMBER 31, 2012
(Unaudited)
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March 31,
2013
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December 31,
2012
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|||||||
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ASSETS
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||||||||
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Current Assets:
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||||||||
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Cash
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$
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1,138,329
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$
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1,490,802
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||||
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Miscellaneous receivables
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159,145
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782,583
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||||||
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Related party receivable
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7,679,403
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3,232,062
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||||||
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Other current assets
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151,759
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55,575
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||||||
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Total current assets
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9,128,636
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5,561,022
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||||||
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Fixed Assets:
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||||||||
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Building and related land rights
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4,617,507
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4,566,810
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||||||
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Computers and related furniture and equipment
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12,061,514
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11,986,681
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Vehicles
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1,018,507
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1,005,257
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||||||
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Total fixed assets
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17,697,528
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17,558,748
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Less accumulated depreciation
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6,477,332
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6,026,250
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Net fixed assets
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11,220,196
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11,532,498
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||||||
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Other Assets:
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||||||||
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Investment in related party, at cost
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38,298,280
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37,998,132
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Total other assets
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38,298,280
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37,998,132
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Total Assets
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$
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58,647,112
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$
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55,091,652
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LIABILITIES AND STOCKHOLDERS’ EQUITY
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Current Liabilities:
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Bank loans payable
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$
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2,074,490
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$
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2,058,232
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Accounts payable
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1,538,770
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1,460,984
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Advanced tuition payments
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9,130,381
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8,841,163
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Accrued liabilities
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894,405
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395,671
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Taxes payable
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2,433,305
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2,117,875
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Total current liabilities
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16,071,351
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14,873,925
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Stockholders’ Equity:
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Common stock: authorized, 100,000,000 shares without par value; issued and outstanding, 20,000,000 shares
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5,858,782
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5,858,782
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Retained earnings
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28,165,345
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26,118,339
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Earnings appropriated for statutory reserves
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2,929,391
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2,929,391
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Accumulated other comprehensive income
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5,622,243
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5,311,215
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Total stockholders’ equity
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42,575,761
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40,217,727
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Total Liabilities and Stockholders’ Equity
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$
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58,647,112
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$
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55,091,652
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The accompanying notes are an integral part of these financial statements.
3
WONDER INTERNATIONAL EDUCATION & INVESTMENT GROUP CORPORATION
For The Three Month Periods Ended March 31,
(Unaudited)
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2013
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2012
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Revenue
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$
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4,842,032
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$
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4,638,296
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Cost of Sales
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1,382,040
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1,203,102
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Gross Profit
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3,459,992
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3,435,194
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Expenses:
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Selling and Administrative Expenses
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1,312,532
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1,308,757
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Operating Income
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2,147,460
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2,126,437
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Other Income and Expense:
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Other Income
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31,702
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27,015
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Interest Expense
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(40,388
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)
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(74,934
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)
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Other Expense
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(101,768
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)
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(31,498
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)
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Net Income
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2,037,006
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2,047,020
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Other comprehensive income – foreign currency translation adjustments
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311,028
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121,879
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Total comprehensive income
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$
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2,348,034
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$
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2,168,899
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Income Per Share -
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||||||||
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Basic and Diluted
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$
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.10
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$
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.10
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Weighted average number of shares outstanding
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20,000,000
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20,000,000
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The accompanying notes are an integral part of these financial statements.
4
WONDER INTERNATIONAL EDUCATION & INVESTMENT GROUP CORPORATION
For the Three Month Periods Ended March 31,
(Unaudited)
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2013
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2012
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CASH FLOWS FROM OPERATIONS:
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Net income
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$
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2,037,006
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$
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2,047,020
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Adjustments to reconcile net income with net cash consumed by operating activities:
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Charges not requiring the outlay of cash:
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Depreciation
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402,819
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247,673
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Changes in assets and liabilities:
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Increases in advanced tuition payments
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219,021 | 335,717 | ||||||
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Decrease (increases) in other miscellaneous receivables
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34,455
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(45,979
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)
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Increases in other current assets
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(95,588
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)
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(95,275
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)
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Decrease in dividend receivable
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594,132
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—
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Increases in advances to related parties
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(4,414,555
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)
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(3,408,570
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)
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Increases in other accounts payable
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66,138
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637,675
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Increases in taxes payable
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298,210
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167,960
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Increase (decrease) in accrued liabilities
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494,794
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(539,807
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Net Cash Consumed By Operating Activities
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(363,568
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)
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(653,586
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)
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CASH FLOWS FROM INVESTING ACTIVITIES:
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Purchases of fixed assets
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(83
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)
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(4,320
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)
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Net Cash Consumed By Investing Activities
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(83
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)
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(4,320
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CASH FLOWS FROM FINANCING ACTIVITIES:
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—
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—
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Effect on cash of exchange rate changes
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11,178
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7,730
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Net change in cash
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(352,473
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)
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(650,176
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)
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Cash balance, beginning of period
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1,490,802
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1,646,542
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Cash balance, end of period
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$
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1,138,329
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$
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996,366
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The accompanying notes are an integral part of these financial statements.
5
WONDER INTERNATIONAL EDUCATION & INVESTMENT GROUP CORPORATION
MARCH 31, 2013
(Unaudited)
1. BASIS OF PRESENTATION
The unaudited interim condensed financial statements of Wonder International Education & Investment Group Corporation (“the Company”) as of March 31, 2013 and for the three month periods ended March 31, 2013 and 2012 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 month period ended March 31, 2013 are not necessarily indicative of the results to be expected for the full fiscal year ending December 31, 2013.
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, 2012.
2. SUPPLEMENTAL CASH FLOWS INFORMATION:
Cash paid for interest during the three month periods ended March 31, 2013 and March 31, 2012 was $40,388 and $74,893, respectively. Cash paid for income taxes during the three month periods ended March 31, 2013 and March 31, 2012 was $3,150 and $3,838, respectively.
There were no noncash investing or financing activities during either of the periods presented.
3. DETAILS OF EXPENSES
Details of expenses incurred during the three month periods ended March 31, 2013 and 2012 are presented below:
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2013
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2012
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|||||||
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Advertising
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$
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436,113
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$
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468,939
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||||
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Sales tax
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176,208
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174,910
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Management salary and benefits
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22,782
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59,264
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||||||
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Staff salary and benefits
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98,222
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88,471
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Office expense
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62,822
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18,926
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Recruitment
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493,016
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454,459
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Other
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23,369
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43,788
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Total expenses
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$
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1,312,532
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$
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1,308,757
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6
WONDER INTERNATIONAL EDUCATION & INVESTMENT GROUP CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2013
(Unaudited)
4. RELATED PARTY TRANSACTIONS
During the three month period ended March 31, 2013 the Company advanced funds to two related parties in the amount of $4,447,341 for the purpose of purchasing teaching equipment for Company schools. The transaction is expected to be completed within six months.
The Company has an investment in Anhui Wenda Information Technology Professional College in the amount of $38,298,280, representing a 7% equity interest in the college. At the end of 2012 a dividend in the amount of $594,132 from the college was declared and included as a related party receivable by the Company. The dividend was recognized as income in 2012 and received in the first quarter of 2013.
5. FOREIGN CURRENCY TRANSLATION
All Company assets are located in China. These assets and related liabilities are recorded on the books of the Company in the currency of China (Renminbi), which is the functional currency. They are translated into US dollars as follows:
(a) Assets and liabilities, at the rates of exchange in effect at balance sheet dates, which at March 31, 2013 was RMB6.2666 equal to one US dollar.
(b) Equity accounts, at the exchange rates prevailing at the times of the transactions that established the equity accounts; and
(c) Revenues and expenses, at the average rate of exchange for each reporting period, which for the three months ended March 31, 2013 was RMB6.2769 equal to one US dollar.
Gains and losses arising from this translation of foreign currency are included in other comprehensive income.
7
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, 2012 filed with the Securities and Exchange Commission on April 16, 2013. 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.
Results of Operations for Three Months ended March 31, 2013 compared with March 31, 2012
The following tables and related discussions set forth key components of Wonder’s results of operations for the periods above indicated in dollars.
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2013
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2012
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|||||||
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Revenue
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$
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4,842,032
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$
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4,638,296
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||||
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Cost of Sales
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1,382,040
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1,203,102
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||||||
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Gross Profit
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$
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3,459,992
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3,435,194
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|||||
8
For the three months ended March 31, 2013, our revenues grew to $4,842,032 from $4,638,296 for the comparable 2012 period. The increase of $203,736 or 4% is the result of an aggressive marketing and promotional campaign that began in 2009 and continues to date. The growth of Company sales, although somewhat inhibited by the worldwide economic recession, occurred at five of the seven Company schools. We expect further growth in our revenues for the remainder of fiscal 2013.
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Expenses:
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2013
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2012
|
||||||
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Selling and Administrative Expenses
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$
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1,312,532
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1,308,757
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|||||
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Operating Income
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$
|
2,147,460
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2,126,437
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Selling and Administrative Expenses (which includes advertising, office expense, salaries and benefits, travel and promotion, technical support and related overhead) for the 2013 three month period were $1,312,532, which represents a slight increase from the expenses of $1,308,757 from the prior period.
Major items of included in Selling and Administrative Expenses were the following:
|
2013
|
2012
|
|||||||
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Advertising
|
|
$
|
436,113
|
|
|
$
|
468,939
|
|
|
Sales tax
|
|
|
176,208
|
|
|
|
174,910
|
|
|
Management salary and benefits
|
|
|
22,782
|
|
|
|
59,264
|
|
|
Staff salary and benefits
|
|
|
98,222
|
|
|
|
88,471
|
|
|
Office expense
|
|
|
62,822
|
|
|
|
18,926
|
|
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Recruitment
|
|
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493,016
|
|
|
|
454,459
|
|
During the first quarter of fiscal 2013, our advertising and promotional expenditures decreased by $32,826 from the prior year’s quarter. As mentioned in our prior filings, we began to increase our advertising and promotional efforts commencing in fiscal 2009 generally on a quarter to quarter basis. During the current quarter however, we decreased our advertising expenditures and deployed additional funds towards student recruitment as discussed below. Management salary and benefits for the current quarter decreased by $36,482 or 61.6% from the prior quarter due to reduced headcount at our corporate offices. Marketing staff salary and benefits for the current period increased $9,751 or 11% from the prior period. The increase was due to increased direct marketing. Office expenses for the current period increased $43,896 or 232% from the prior period due to higher support costs. Recruitment which represents principally travel and entertainment expenses incurred in promoting our schools to high school students increased $38,557 or 8.5% due to the continuation of our promotional efforts at four of our school locations which began in early 2011.
Operating Income (Loss)
We generated operating income for the 2013 period of $2,147,460 compared with $2,126,437 for the 2012 period. The reasons for this reduction are discussed above.
Other Income and Expenses
Other income, which represents income from finance charges and school related services, was $31,702 for the 2013 period compared with $27,015 for the prior year’s period.
Interest Expense, which represents interest paid on bank loans, was $40,388 compared with $74,934 for the prior year’s period. The decrease is due to lower loan balances.
Other Expense, which primarily represents business tax penalty charges, was $101,768 for the 2013 period compared with $31,498 for the prior year’s period. The increase is primarily due to an increase in accumulated business tax penalty charges.
Net Income
Net Income for the current quarter was $2,037,006 compared with $2,047,020 for the 2012 period. The slight decrease of $10,014 or 0.4% is due to the reasons discussed above.
9
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 $311,028 for the 2013 period compared with $121,879 for the 2012 period.
Total Comprehensive Income
For the current 2013 period, we had a total comprehensive income of $2,348.034 compared with a total comprehensive income for 2012 comparable period of $2,168,899. Total comprehensive income is the combined sum of net income and comprehensive income.
Income Per Share.
Income applicable to common stock holders was $0.10 per share for the 2013 period compared with $0.10 per share for the 2012 comparable quarter.
Liquidity and Capital Resources
As of March 31, 2013, we had a working capital deficit of $6,942,715 compared to a working capital deficit of $9,312,903 as of December 31, 2012. The working capital deficit is primarily a result of the deferral of income as advanced tuition payments and taxes payable, reduced by receivables. The decrease in the working capital deficit by $2,370,188 is primarily due to earnings for the first quarter of 2013.
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 have two short term loans at March 31, 2013 and December 31, 2012. The balances at March 31, 2013 and December 31, 2012: $2,074,490 and $2,058,232, respectively. One of the loans ($478,728) bears interest at 7.8%; the second loan ($1,595,762) bears interest at 130% of the base rate of People's Bank of China.
As of March 31, 2013, we have business taxes payable of $2,433,305. While we have accounted for the business tax expense in our Condensed Consolidated Balance Sheet, we have not established a reserve account pursuant to which we have deposited an amount equal to our accrued tax liability.
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.
10
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.
11
(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.
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101.INS
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XBRL Instance Document
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101.SCH
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XBRL Taxonomy Extension Schema Document
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101.CAL
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XBRL Taxonomy Extension Calculation Linkbase Document
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101.DEF
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XBRL Taxonomy Extension Definition Linkbase Document
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101.LAB
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XBRL Taxonomy Extension Label Linkbase Document
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101.PRE
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XBRL Taxonomy Extension Presentation Linkbase Document
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12
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: May 15, 2013
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By: |
/s/ Xie Chungui
|
|
Xie Chungui
|
||
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Chairman
|
13