China Education Alliance Announces First Quarter 2014 Financial Results

HARBIN, China, May 15, 2014 /PRNewswire/ -- China Education Alliance, Inc. ("China Education Alliance" or the "Company", OTCQX: CEAI), a China-based education resource and services company, today announced its first quarter 2014 financial results.  The Company will host a conference call on Friday, May 16, 2014, at 8 a.m. EDT (8 p.m. Beijing time the same day).

Financial Highlights for the First Quarter ended March 31, 2014

• Total revenues decreased by 70% to $0.7 million.
• Net loss of $6.0 million.
• Loss per share was $0.56 per fully diluted share.

First Quarter 2014 Review:

Revenue decreased by $1.7 million, or 70% to $0.7 million for the quarter ended March 31, 2014 from $2.4 million during the same period in 2013.

Revenue from the on-line education division decreased by $0.5 million, or 80%, to $0.1 million for the quarter ended March 31, 2014 from $2.1 million for the quarter ended March 31, 2013.  Revenue from the training center division decreased by $1.2 million, or 67%, to $0.6 million for the quarter ended March 31, 2014 from $1.8 million for the quarter ended March 31, 2013.

The decline in revenue was primarily a result of a decline in revenue across all of our business. We believe revenue was affected by external factors including slowdown in economic growth within the PRC, untruthful allegations about our businesses, and increased competition. These factors contributed to the continuous decline in interest of existing and new students, which resulted in decrease in student enrollments and led to a decline in revenue as compared to the quarter ended March 31, 2013. We expect to improve the performance of our online education division in the future by providing students with more competitive, up-to-date study materials and easy access. We have contracted technology companies and hired our own professional IT technicians to design and build a new web-based platform, aiming to provide the long-distance teaching services encompassing online community system and online teaching management system. The platform is in the final testing stage and will be launched in the near future. Also, we will continue to implement the new strategic business development plan for 2014, which targets to optimize the operation of existing training centers while seeking good opportunities to expand our market share. As such, we predict that our revenue will gradually recover after we launch the new web-based platform and set up more training centers. 

Overall cost of revenue decreased by $0.6 million, or 31%, to $1.4 million for the quarter ended March 31, 2014 from $2.1 million for the same period in 2013.  

Cost of revenue for the online education division decreased by $0.3 million, or 24% to $1.0 million for the quarter ended March 31, 2014 from $1.4 million for the same period in 2013. The decrease was mainly attributable to the decrease in purchase of study materials and the decrease in depreciation costs resulting from less expenditure on fixed assets in this quarter. Gross profit margin for the online education division decreased to negative 713% for the quarter ended March 31, 2014 from negative 116% during the same period in 2013 due to the significant decrease in online education revenue and the relatively moderate decrease in cost of revenue.

Cost of revenue for the training center division decreased $0.3 million, or 45% to $0.4 million for the quarter ended March 31, 2014 from $0.7 million for the same period in 2013. The decrease was mainly attributable to the decrease in teacher's salary as our teachers are paid by the number of classes they teach and there was a decrease in classes we offered during the quarter ended March 31, 2014 as compared to the quarter ended March 31, 2013. Gross profit margin for the training center division decreased to 33% for the quarter ended March 31, 2014 from 61% during the same period in 2013 as cost of revenue did not decrease as much as revenue.

Gross profit for the first quarter of 2014 was negative $0.7 million compared to gross profit of $0.4 million for the first quarter of 2013.

Selling expenses increased by $0.1 million, or 10%, to $1.2 million in the first quarter of 2014 from $1.1 million in the first quarter of 2013. Selling expenses were 167% of total sales in the first quarter of 2014 compared with 45% in the first quarter of 2013. The increase in selling expenses was a result of the increase in labor costs as a result of increase in the average employee salary and increase in the number of sales and marketing personnel in our onsite education segment.

Administrative expenses increased by $2.0 million, or 124% to $3.7 million for the quarter ended March 31, 2014 from $1.7 million for the quarter ended March 31, 2013. The increase was mainly due to the increase in research and development expenses related to the development of the web based platform and newly-opened onsite training centers. Total administrative expenses were about 511% of total revenue for the three months ended March 31, 2014, compared to 68% for the same period in 2013.

Other income was $68,189 for the quarter ended March 31, 2014 as compared to other expense of $558,802 for the quarter ended March 31, 2013.

Net loss for the first quarter of 2014 was $6.0 million compared to net loss of $3.7 million for the first quarter of 2013. Basic and diluted loss per share was $0.56 for the first quarter of 2014 compared to loss per share of $0.35 for the first quarter of 2013.

Financial Position

As of March 31, 2014, the Company had cash and cash equivalents of $51 million and working capital of $50 million.  The Company had net cash used in operating activities of $5.0 million.

As of March 31, 2014, the Company had no long-term debt.

Conference Call

China Education Alliance will host a conference call and live webcast to discuss its first quarter 2014 financial results at 8 a.m. Eastern Daylight Time (EDT) on Friday, May 16, 2014 (8 p.m. in Harbin/Beijing on the same day).

The dial-in details for the live conference call are as follows:

- Participant Dial-In (Toll Free USA): +1 84 5675 0437
- International Dial-In: +65 67239381
- China Dial-In:  800-819-0121 
- China Dial-In: 400-620-8038
- Hong Kong Toll Free: 8009-30346
  Conference Password: CEU

A live webcast of the conference call will be available in the investor relations section of the Company's website at: http://www.chinaeducationalliance.com/index.jsp

A telephone replay of the call will be available 1 hour after the end of the conference for seven days.

The dial-in details for the replay are as follows:

- US Toll Free:  1-855-452-5696
- International Toll:  +61-2-8199-0299 
  Passcode Number: 47869096

About China Education Alliance, Inc.

China Education Alliance, Inc. (http://www.chinaeducationalliance.com) is a leading educational services company offering high-quality instructors and online education materials for students between the ages of 6 to 18 and adults (university students and professionals) aged 18 and over. Divided into two segments, students and graduate professionals, our business model delivers the skills and knowledge necessary to excel in a rapidly growing and highly competitive China. The Company provides students in the first segment with online education materials sourced from top tier schools and famous instructors for download, as well as online training and tutoring services. With teaching centers located across China, the Company also offers hands on training and tutoring to aid Chinese students pass the two most important tests they will face in their educational careers: the senior high school entrance and college entrance exams. In the second segment for graduates and professionals, China Education Alliance provides vocational training courses in subjects including IT, administration, multimedia, as well as several professional training programs.

Safe Harbor Statement

Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995: Certain statements in this press release, constitute forward-looking statements for purposes of the safe harbor provisions under The Private Securities Litigation Reform Act of 1995. These statements include, without limitation, statements regarding our ability to prepare the company for growth, the Company's planned expansion in 2009 and predictions and guidance relating to the Company's future financial performance. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs and are not a guarantee of future performance but they involve risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements, which may include, but are not limited to, such factors as unanticipated changes in product demand especially in the education industry, pricing and demand trends for the Company's products, changes to government regulations, risk associated with operation of the Company's new facilities, risk associated with large scale implementation of the company's business plan, the ability to attract new customers, ability to increase its product's applications, cost of raw materials, downturns in the Chinese economy, and other information detailed from time to time in the Company's filings and future filings with the United States Securities and Exchange Commission. Investors are urged to consider these factors carefully in evaluating the forward-looking statements herein and are cautioned not to place undue reliance on such forward-looking statements, which are qualified in their entirety by this cautionary statement. The forward-looking statements made herein speak only as of the date of this press release, readers are cautioned not to place undue reliance on any of them and the Company undertakes no duty to update any forward-looking statement to conform the statement to actual results or changes in the company's expectations.

For more information, please contact:

China Education Alliance, Inc.
Ms. Cloris Li
Chief Financial Officer
Email: [email protected]

SOURCE China Education Alliance, Inc.

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