North
Carolina
(State
or other jurisdiction of
incorporation
or organization)
|
56-2012361
(I.R.S.
Employer Identification No.)
|
Item
1. Consolidated Financial Statements:
|
|
Condensed
Consolidated Balance Sheet as of March 31, 2006
|
1
|
Condensed
Consolidated Statements of Operations for the three
|
|
months
ended March 31, 2006, and 2005
|
2
|
Condensed
Consolidated Statements of Cash Flows for the three
|
|
months
ended March 31, 2006, and 2005
|
3
|
Notes
to the Condensed Consolidated Financial Statements
|
5
|
Item
2. Management’s Discussion and Analysis or Plan of
Operations
|
19
|
Item
3. Controls and Procedures
|
21
|
PART
II. OTHER INFORMATION
|
|
Item
1. Legal Proceedings
|
21
|
Item
2. Unregistered Sales of Equity Securities and Use of
Proceeds
|
21
|
Item
3. Defaults upon Senior Securities
|
21
|
Item
4. Submission of Matters to a Vote of Security Holders
|
21
|
Item
5. Other Information
|
21
|
Item
6. Exhibits and Reports on Form 8-K
|
21
|
Signatures
|
22
|
|
3/31/06
|
|||
ASSETS
|
||||
Current
Assets
|
|
|||
Cash
and Cash Equivalents (Note 5)
|
$
|
1,546,659
|
||
Inventories
(Note 6)
|
2,790
|
|||
Prepaid
expense (Note 3)
|
113,684
|
|||
Other
receivable (Note 3)
|
8,315
|
|||
Total
Current Assets
|
1,671,448
|
|||
Property
and Equipment
|
||||
Fixed
Assets, Net of Accumulated Depreciation (Note 7)
|
3,909,037
|
|||
Total
Property and Equipment
|
3,909,037
|
|||
Total
Assets
|
$
|
5,580,485
|
||
|
||||
LIABILITIES
AND SHAREHOLDERS' EQUITY
|
||||
|
||||
Current
Liabilities
|
||||
Accounts
Payable and Accrued Expenses (Note 8)
|
$
|
22,060
|
||
Advances
on Accounts (Note 9)
|
533,278
|
|||
Loan
from Shareholder (Note 15)
|
177,358
|
|||
Wages
Payable
|
5,662
|
|||
Welfare
Payable
|
7,796
|
|||
Taxes
Payable (Note 10)
|
25,797
|
|||
Total
Current Liabilities
|
771,951
|
|||
Total
Liabilities
|
771,951
|
|||
|
||||
Shareholders'
Equity
|
||||
Registered
Capital
|
57,915
|
|||
Capital
Reserve
|
2,407,969
|
|||
Currency
Conversion Adjustment (Note 3)
|
69,233
|
|||
Retained
Earnings
|
2,273,417
|
|||
Total
Shareholders' Equity
|
4,808,534
|
|||
Total
Liabilities and Shareholders' Equity
|
$
|
5,580,485
|
CHINA
EDUCATION ALLIANCE, INC. AND SUBSIDIARIES
|
|||||||
Condensed
Consolidated Statement of Operations
|
|||||||
For
the Three Months Ended March 31, 2006
|
|||||||
(Expressed
in US dollars)
|
|||||||
(Unaudited)
|
|||||||
|
|||||||
For
the Three Months Ended
|
|||||||
March
31,
|
|||||||
2006
|
2005
|
||||||
REVENUES
|
|||||||
Sales and
Tuition (Note 3)
|
$
|
1,347,403
|
$
|
78,617
|
|||
Less:
Cost
of Good Sold
|
493,751
|
25,638
|
|||||
Gross
Profit
|
853,652
|
52,979
|
|||||
OPERATING
EXPENSES
|
|||||||
Operating
Expenses
|
114,023
|
45,654
|
|||||
Administrative
Expenses
|
60,573
|
-
|
|||||
Total
Operating Expenses
|
174,596
|
45,654
|
|||||
OTHER
EXPENSES (INCOME)
|
|||||||
Finance
Costs (Income)
|
(896
|
)
|
2,732
|
||||
Total
Other Expenses (Income)
|
(896
|
)
|
2,732
|
||||
Net
Income before Income Taxes
|
679,952
|
4,593
|
|||||
Less:
Provision
for Income Taxes (Note 11)
|
-
|
3,613
|
|||||
Net
Income
|
$
|
679,952
|
$
|
980
|
|||
Earnings
per share attributed to China Education Alliance common
stock:
|
|||||||
Basic
income per share
|
0.0123
|
||||||
Diluted
income per share
|
0.0123
|
||||||
Basic
weighted average shares outstanding
|
55,364,375
|
57,915,000
|
CHINA
EDUCATION ALLIANCE, INC. AND SUBSIDIARIES
|
||||
Condensed
Consolidated Statement of Cash Flow
|
||||
For
the Three Months Ended March 31, 2006
|
||||
(Expressed
in US dollars)
|
||||
(Unaudited)
|
||||
Cash
flows from operating activities:
|
||||
Net
income
|
$
|
679,952
|
||
Adjustments
to reconcile net income to net cash provided by operating
activities
|
||||
Depreciation
|
81,128
|
|||
Changes
in assets and liabilities -
|
||||
Inventories
|
(2,269
|
)
|
||
Prepaid
Expense
|
(45,506
|
)
|
||
Other
receivable
|
(52
|
)
|
||
Accounts
payable and accrued expenses
|
(54,795
|
)
|
||
Advance
on account
|
236,153
|
|||
Wages
payable
|
(191
|
)
|
||
Welfare
payable
|
7,420
|
|||
Taxes
payable
|
1,348
|
|||
Net
cash provided by operating activities
|
903,188
|
|||
Cash
flows from investing activities:
|
||||
Purchases/(transfer)
of fixed assets
|
(63,552
|
)
|
||
Net
cash used by investing activities
|
(63,552
|
)
|
||
Cash
flows from financing activities:
|
||||
Loan
from shareholders
|
40,346
|
|||
Net
cash provided by financing activities
|
40,346
|
|||
Currency
Conversion adjustments
|
69,233
|
|||
Net
increase in cash
|
949,215
|
|||
Cash
at beginning of year
|
597,444
|
|||
Cash
at end of year
|
$
|
1,546,659
|
CHINA
EDUCATION ALLIANCE, INC. AND SUBSIDIARIES
|
|||||||||||||||||||
Condensed
Consolidated Statement of Stockholders’ Equity
|
|||||||||||||||||||
For
the Three Months Ended March 31, 2006
|
|||||||||||||||||||
(Expressed
in US dollars)
|
|||||||||||||||||||
(Unaudited)
|
|||||||||||||||||||
Registered
Capital
|
|
Additional
Paid-in Capital
|
|
Currency
Conversion Adjustment
|
|
Capital
Reserve
|
|
Retained
Earnings
|
|
Total
shareholders’ equity
|
|||||||||
Balance
at December 31, 2005
|
$
|
57,915
|
$
|
2,407,969
|
$
|
19,067
|
$
|
88,757
|
$
|
1,504,708
|
$
|
4,078,416
|
|||||||
Net
income for the three months ended March 31, 2006
|
679,952
|
679,952
|
|||||||||||||||||
Currency
Conversion Adjustment
|
50,166
|
50,166
|
|||||||||||||||||
Transfer
to Capital Reserve
|
68,457
|
(68,457
|
)
|
||||||||||||||||
Balance
at March 31, 2006
|
$
|
57,915
|
$
|
2,407,969
|
$
|
69,233
|
$
|
157,214
|
$
|
2,116,203
|
$
|
4,808,534
|
1.
|
Description
of Business
|
1. |
Description
of Business (Continued)
|
2.
|
Basis
of Preparation of Financial
Statements
|
2. |
Basis
of Preparation of Financial Statements
(Continued)
|
3.
|
Summary
of Significant Accounting
Policies
|
3. |
Summary
of Significant Accounting Policies
(Continued)
|
Buildings
|
20
years
|
|||
Communication
Equipments
|
10
years
|
|||
Motor
vehicles
|
5
years
|
|||
Furniture,
Fixtures, and Equipments 5 years
|
3. |
Summary
of Significant Accounting Policies
(Continued)
|
3. |
Summary
of Significant Accounting Policies
(Continued)
|
3. |
Summary
of Significant Accounting Policies
(Continued)
|
3. |
Summary
of Significant Accounting Policies
(Continued)
|
3. |
Summary
of Significant Accounting Policies
(Continued)
|
3. |
Summary
of Significant Accounting Policies
(Continued)
|
4.
|
Concentrations
of Business and Credit
Risk
|
5.
|
Cash and Cash Equivalents |
Cash
and Cash Equivalents
|
03/31/06
|
|||
Cash
on Hand
|
$
|
1,760
|
||
Bank
Deposits
|
1,544,899
|
|||
Total
Cash and Cash Equivalents
|
$
|
1,546,659
|
6.
|
Inventories
|
Inventory
|
03/31/06
|
|||
Debit
Cards & materials
|
$
|
2,790
|
||
Total
Inventory
|
$
|
2,790
|
7.
|
Property
and Equipment
|
Property
and Equipment
|
03/31/06
|
|||
Buildings
|
$
|
2,766,787
|
||
Transportation
Vehicles
|
113,390
|
|||
Office
Equipments
|
326,318
|
|||
Machinery
|
1,030,638
|
|||
Total
Property and Equipment
|
4,237,133
|
|||
Less:
Accumulated Depreciation
|
(328,096
|
)
|
||
Property
and Equipment, Net
|
$
|
3,909,037
|
8.
|
Accounts Payable and Accrued Expense |
Accounts
Payable and Accrued Expense
|
03/31/06
|
|||
Accounts
Payable and Accrued Expense
|
$
|
22,060
|
||
Wages
& Welfare Benefit Payable
|
13,458
|
|||
Other
Current Liabilities
|
412
|
|||
Total
Accounts Payable and Accrued Exp
|
$
|
35,930
|
9.
|
Advances
on accounts
|
10.
|
Taxes
Payable
|
Taxes
Payable
|
03/31/06
|
|||
Value
Added Tax
|
$
|
20,668
|
||
City
Tax
|
4,819
|
|||
Payroll
Tax
|
310
|
|||
Total
Taxes Payable
|
$
|
25,797
|
11.
|
Income Taxes |
12.
|
Non-Distributable
Reserves
|
13.
|
Employee Retirement Benefits and Post Retirement Benefits |
14.
|
Commitments
and Contingencies
|
15.
|
Loans
from Shareholder
|
March
31,2006
|
March
31, 2005
|
||||||||||||
Sales
and Tuition
|
$
|
1,347,403
|
$
|
78,617
|
|||||||||
Cost
of Good Sold
|
$
|
493,751
|
$
|
25,638
|
|||||||||
Total
Operating Expenses
|
$
|
174,596
|
$
|
45,654
|
|||||||||
Net
Income before Income Taxes
|
$
|
679,952
|
50%
|
|
$
|
4,593
|
6%
|
|
§ |
A
strong increase in the sales of general study cards, including e-business
income;
|
§ |
New
tuition income generated from our education center which did not
occur
until later periods in 2005;
|
§ |
Increase
in staffing to support the operation; and
the
|
§
|
Increase
in scale of operation;
|
(a) |
Exhibits.
|
3.1
|
Articles
of Incorporation are hereby incorporated herein by reference to
Exhibit
3.1 to the Form SB-2 registration statement (File No. 333-101167)
of the
Company
|
3.2
|
Articles
of Amendment Business Corporation are hereby incorporated by reference
to
Exhibit 3.2 to the Form SB-2 registration statement (File No. 333-101167)
of the Company
|
3.3
|
Articles
of Amendment Business Corporation filed November 17, 2004, changing
the
name of the Company from ABC Realty Co. to China Education Alliance,
Inc.
|
3.4
|
Bylaws
of the Company are hereby incorporated herein by reference to Exhibit
3.3
to the Form SB-2 registration statement (File No. 333-101167) of
the
Company
|
10.1
|
Product
Commission Process Contract dated March 2, 2006, with Tianjin Huishi
Printing Products Co., Ltd. is incorporated by reference herein
to Exhibit
10.6 to the Form 10-KSB annual report of the Company for its fiscal
year
ended December 31, 2005
|
10.2
|
Employment
contract with Liansheng Zhang effective February 21, 2006 is incorporated
by reference herein to Exhibit 10.7 to the Form 10-KSB annual report
of
the Company for its fiscal year ended December 31,
2005
|
10.3
|
Consulting
Agreement with Conceptual Management Limited dated March 20, 2006
is
incorporated by reference herein to Exhibit 10.8 to the Form 10-KSB
annual
report of the Company for its fiscal year ended December 31,
2005
|
16.2
|
Letter
dated March 16, 2006, of former independent certified public accountants,
Jimmy C.H. Cheung & Co. is hereby incorporated herein by reference to
Exhibit 16.1 to the Form 8-K/A current report of the Company filed
on
March 20, 2006
|
23
|
List
of subsidiaries is incorporated herein by reference to Exhibit
23 to the
Form 10-KSB annual report of the Company for its fiscal year ended
December 31, 2006
|
31.1
|
Certification
of Xi, Qun Yu
|
31.2
|
Certification
of Wang, Chunqing
|
32
|
Certification
of Xi Qun Yu and Wang Chunqing
|
(b)
|
Reports
on Form 8-K
|
China Education Alliance, Inc. | ||
|
|
|
Date: May 15, 2006 | By: | /s/ Qun Yu Xi |
Xi, Qun Yu |
||
Chief Executive Officer and President |
By: | /s/ Chunqing Wang | |
Wang, Chunqing |
||
Chief Financial Officer |