Exhibit 99.1(iv)
HUBEI INDUSTRIAL UNIVERSITY BUSINESS COLLEGE(A WHOLLY OWNED SUBSIDIARY OF WUHAN JIYANG EDUCATION INVESTMENT CO., LTD.)
CONDENSED FINANCIAL STATEMENTS
AS OF JUNE 30, 2010
(UNAUDITED)
HUBEI INDUSTRIAL UNIVERSITY BUSINESS COLLEGE
(A WHOLLY OWNED SUBSIDIARY OF WUHAN JIYANG EDUCATION INVESTMENT CO., LTD.)
CONTENTS
| | Pages |
| | |
| Condensed Balance Sheets as of June 30, 2010 | 1 |
| | |
| Unaudited Condensed Statements of Operations for the three and six months ended June 30, 2010 and 2009 | 2 |
| | |
| Unaudited Statements of Cash Flows for the six months ended June 30, 2010 and 2009 | 3 |
| | |
| Notes to Condensed Financial Statements (Unaudited) | 4 –6 |
HUBEI INDUSTRIAL UNIVERSITY BUSINESS COLLEGE
(A WHOLLY OWNED SUBSIDIARY OF WUHAN JIYANG EDUCATION INVESTMENT CO., LTD.)
CONDENSED BALANCE SHEET (Unaudited)
(In thousands)
ASSETS
| | | As of June 30, 2010 | |
| | | RMB | |
| CURRENT ASSETS | | | |
| Cash and cash equivalents | | | 26,197 | |
| Accounts receivable, net | | | 1,883 | |
| Prepaid expenses and other current assets | | | 4,932 | |
| Inventory | | | 261 | |
| Total Current Assets | | | 33,273 | |
| | | | | |
| PROPERTY AND EQUIPMENT, NET | | | 161,061 | |
| | | | | |
| OTHER ASSETS | | | | |
| Land use rights, net | | | 32,260 | |
| TOTAL ASSETS | | | 226,594 | |
| LIABILITIES AND STOCKHOLDERS’ EQUITY | | | | |
| | | | | |
| CURRENT LIABILITIES | | | | |
| Accounts payable | | | 31,196 | |
| Accrued expenses and other current liabilities | | | 23,742 | |
| Income tax payable | | | 21,695 | |
| Deferred revenue | | | 17,660 | |
| Current portion of bank loan | | | 54,000 | |
| Total Current Liabilities | | | 148,293 | |
| | | | | |
| NON-CURRENT LIABILITIES | | | — | |
| | | | | |
| TOTAL LIABILITIES | | | 148,293 | |
| | | | | |
| COMMITMENTS AND CONTINGENCIES | | | — | |
| | | | | |
| SHAREHOLDERS’ EQUITY | | | | |
| Registered capital | | | 50,000 | |
| Additional paid-in capital | | | 20 | |
| Due from holding company | | | (36,803 | ) |
| Retained earnings (Unappropriated) | | | 65,084 | |
| Total Shareholders’ Equity | | | 78,301 | |
| TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | | | 226,594 | |
The accompanying notes are an integral part of these condensed financial statements
HUBEI INDUSTRIAL UNIVERSITY BUSINESS COLLEGE
(A WHOLLY OWNED SUBSIDIARY OF WUHAN JIYANG EDUCATION INVESTMENT CO., LTD.)
CONDENSED STATEMENTS OF OPERATIONS (Unaudited)
(In thousands)
| | | For the three months | | | For the three months | | | For the six months | | | For the six months | |
| | | Ended | | | ended | | | ended | | | Ended | |
| | | June 30, 2010 | | | June 30, 2009 | | | June 30, 2010 | | | June 30, 2009 | |
| | | RMB | | | RMB | | | RMB | | | RMB | |
| | | | | | | | | | | | | |
| REVENUES | | | 26,670 | | | | 23,983 | | | | 53,424 | | | | 48,323 | |
| | | | | | | | | | | | | | | | | |
| COST OF REVENUES | | | (20,996 | ) | | | (18,380 | ) | | | (42,565 | ) | | | (38,038 | ) |
| | | | | | | | | | | | | | | | | |
| GROSS PROFIT | | | 5,674 | | | | 5,603 | | | | 10,859 | | | | 10,285 | |
| | | | | | | | | | | | | | | | | |
| OPERATING EXPENSES | | | | | | | | | | | | | | | | |
| General and administrative expenses | | | (9 | ) | | | (2 | ) | | | (122 | ) | | | (14 | ) |
| | | | | | | | | | | | | | | | | |
| INCOME FROM OPERATIONS | | | 5,665 | | | | 5,601 | | | | 10,737 | | | | 10,271 | |
| | | | | | | | | | | | | | | | | |
| OTHER INCOME (EXPENSES) | | | | | | | | | | | | | | | | |
| Bank loan interest | | | (864 | ) | | | (988 | ) | | | (1,709 | ) | | | (1,954 | ) |
| Other income | | | - | | | | - | | | | - | | | | (138 | ) |
| | | | | | | | | | | | | | | | | |
| Total Other (Expenses) Income, net | | | (864 | ) | | | (988 | ) | | | (1,709 | ) | | | (2,092 | ) |
| | | | | | | | | | | | | | | | | |
| INCOME BEFORE TAXES | | | 4,801 | | | | 4,613 | | | | 9,028 | | | | 8,179 | |
| | | | | | | | | | | | | | | | | |
| INCOME TAX EXPENSE | | | (1,200 | ) | | | (1,143 | ) | | | (2,257 | ) | | | (2,034 | ) |
| | | | | | | | | | | | | | | | | |
| NET INCOME | | | 3,601 | | | | 3,470 | | | | 6,771 | | | | 6,145 | |
The accompanying notes are an integral part of these condensed financial statements
HUBEI INDUSTRIAL UNIVERSITY BUSINESS COLLEGE
(A WHOLLY OWNED SUBSIDIARY OF WUHAN JIYANG EDUCATION INVESTMENT CO., LTD.)
CONDENSED STATEMENTS OF CASH FLOWS (Unaudited)
(In thousands)
| | | For the six months ended June 30, | |
| | | 2010 | | | 2009 | |
| | | RMB | | | RMB | |
| CASH FLOWS FROM OPERATING ACTIVITIES | | | | | | |
| Net income attributable to HIUBC | | | 6,771 | | | | 6,145 | |
| Adjusted to reconcile net income to cash provided by operating activities: | | | | | | | | |
| Depreciation and amortization | | | 10,184 | | | | 9,506 | |
| Changes in operating assets and liabilities | | | | | | | | |
| (Increase) decrease in: | | | | | | | | |
| Accounts receivable | | | 2,337 | | | | 4,145 | |
| Prepaid expenses and other current assets | | | (2,577 | ) | | | 24,730 | |
| Inventory | | | 41 | | | | 73 | |
| Increase (decrease) in: | | | | | | | | |
| Deferred revenue | | | (52,981 | ) | | | (47,869 | ) |
| Accounts payable | | | (3,352 | ) | | | 18,031 | |
| Accrued expenses and other current liabilities | | | (4,949 | ) | | | (16,411 | ) |
| Income tax payable | | | 2,257 | | | | 2,034 | |
| Net cash (used in)/provided by operating activities | | | (42,269 | ) | | | 384 | |
| | | | | | | | | |
| CASH FLOWS FROM INVESTING ACTIVITIES | | | | | | | | |
| Purchase of property and equipment | | | (5,361 | ) | | | (1,602 | ) |
| Due from holding company | | | 8,000 | | | | (7,400 | ) |
| Net cash provided by/(used in) investing activities | | | 2,639 | | | | (9,002 | ) |
| | | | | | | | | |
| CASH FLOWS FROM FINANCING ACTIVITIES | | | | | | | | |
| | | | | | | | | |
| Net cash provided by financing activities | | | — | | | | — | |
| | | | | | | | | |
| NET INCREASE IN CASH AND CASH EQUIVALENTS | | | (39,630 | ) | | | (8,619 | ) |
| | | | | | | | | |
| CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD | | | 65,827 | | | | 11,845 | |
| CASH AND CASH EQUIVALENTS AT END OF PERIOD | | | 26,197 | | | | 3,226 | |
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION | | | | | | | | |
Cash paid for interest expenses | | | 1,709 | | | | 1,954 | |
The accompanying notes are an integral part of these condensed financial statements
HUBEI INDUSTRIAL UNIVERSITY BUSINESS COLLEGE
(A WHOLLY OWNED SUBSIDIARY OF WUHAN JIYANG EDUCATION INVESTMENT CO., LTD.)
NOTES TO THE CONDENSED
FINANCIAL STATEMENTS (UNAUDITED)
(In thousands)
| NOTE 1 | BASIS OF PRESENTATION |
Hubei Industrial University Business College (“HIUBC” or “the College”) was incorporated in the People’s Republic of China (“PRC”) on July 13, 2004. HIUBC, which was founded in 2003 by private investors, is an independent accredited college affiliated with Hubei Industrial University, that offers bachelor degree and diploma courses in industrial engineering design, computer engineering, management, economics, language studies and law. Revenue is generated primarily from student tuition fees and student boarding charges.
The accompanying unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements.
In the opinion of management, the unaudited condensed financial statements contain all adjustments consisting only of normal recurring accruals considered necessary to present fairly the College's financial position as of June 30, 2010, the results of operations for the three and six months ended September 30, 2010 and 2009 and cash flows for the six months ended June 30, 2010 and 2009. The results for the three months and six months ended June 30, 2010 are not necessarily indicative of the results to be expected for a full year. These financial statements should be read in conjunction with the audited financial statements and footnotes for the year ended December 31, 2009.
Bank loan consisted of the following:
| | | RMB | |
| | | | |
| Note payable to a bank at bank's floating rate per annum, guaranteed by a related party, due November 20, 2010. | | | 24,000 | |
| | | | | |
| Note payable to a bank at bank's floating rate per annum, guaranteed by a related party, due October 20, 2010. | | | 30,000 | |
| | | | 54,000 | |
| | | | | |
| Less: current maturities | | | 54,000 | |
| | | | - | |
| | | | | |
| Maturities are as follows: | | RMB | |
For the year ended December 31, 2010 | | | 54,000 | |
| | | | 54,000 | |
Interest expense paid for the three and six months ended June 30, 2010 and 2009 were RMB864, RMB1,709, RMB988 and RMB1,954 respectively.
HIUBC was incorporated in the PRC and is subject to PRC income tax. The income tax rate applicable was 25%.
The income tax expenses for three months ended June 30, 2010 and 2009 are summarized as follows:
| PRC Income Tax | | 2009 | | | 2008 | |
| | | RMB | | | RMB | |
| | | | | | | |
| Current | | | 1,200 | | | | 1,413 | |
| Total provision for income taxes | | | 1,200 | | | | 1,413 | |
The income tax expenses for six months ended June 30, 2010 and 2009 are summarized as follows:
| PRC Income Tax | | 2009 | | | 2008 | |
| | | RMB | | | RMB | |
| | | | | | | |
| Current | | | 2,257 | | | | 2,034 | |
| Total provision for income taxes | | | 2,257 | | | | 2,034 | |
No deferred tax liabilities incurred from temporary differences relating to revenue earned but not yet taxable.
| NOTE 4 | RELATED PARTY TRANSACTIONS |
As of June 30, 2010, the College had RMB36,803 due from its holding company, Wuhan Jiyang Education Investment Co., Ltd. (“Jiyang”) which is unsecured, interest free and is repayable on demand.
In 2003 Jiyang entered into a partnership agreement with Hubei Industrial University to cooperate and develop HIUBC in Wuhan. Jiyang’s responsibilities are incorporation, investment, construction and management for HIUBC. Hubei Industrial University’s responsibilities were to provide goodwill and manpower support for HIUBC. The terms of the partnership agreement was from April 16, 2003 to July 31, 2013 (10 years). Based the agreement, 5% tuition fee income is paid to Jiyang as management fee for services provided to HIUBC.
For the three and six months ended June 30, 2010 and 2009, management fees paid to Jiyang and included in cost of revenue were RMB1,101, RMB2,203, RMB994 and RMB1,987 respectively.
| NOTE 5 | OPERATING LEASE COMMITMENT |
HIUBC leases land from third parties under operating leases which expire at various dates from September 2016 through December 2029. At June 30, 2010, HIUBC has outstanding commitments with respect to operating leases are as follows:
| Fiscal year ending December 31, | | | |
| | | RMB | |
| 2010 | | | 206 | |
| 2011 | | | 411 | |
| 2012 | | | 411 | |
| 2013 | | | 411 | |
| 2014 | | | 411 | |
| Thereafter | | | 2,928 | |
| | | | 4,778 | |
| NOTE 6 | CONCENTRATIONS AND RISKS |
During 2010 and 2009, both 100% of HIUBC’s assets were located and 100% of HIUBC’s revenues were earned in China.
Wintown Limited (“Wintown”) was incorporated on August 18, 2004 in the British Virgin Islands as a limited liability company. Wintown is an investment holding company. Wintown established Shanghai Rubao Information and Technology Co., Ltd. (“Rubao”) in the PRC as a wholly owned subsidiary on January 20, 2005. The business activities of Rubao are information technology development, consulting and investment holding. On July 20, 2010, Rubao acquired the entire stake of Wuhan Jiyang Education Investment Co., Ltd. (“Jiyang”) which owned the entire stake of HIUBC. On August 19, 2010, the shareholder of Wintown entered into a Share Transfer Agreement with ChinaCast Education Corporation (“CEH”) to dispose of the entire stake in Wintown to CEH for RMB 450,000,000. This transaction was consummated on August 23, 2010.
