EpicQuest Education Announces Fiscal Year End 2022 Financial Results

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EpicQuest Education Group International Limited

Jan 23, 2023, 16:30 ET

MIDDLETOWN, Ohio, Jan. 23, 2023 /PRNewswire/ -- EpicQuest Education Group International Limited (NASDAQ: EEIQ), (the "Company" or "EpicQuest Education Group International"), a provider of comprehensive education solutions for domestic and international students interested in college and university programs in the US, Canada and the UK, today announced its financial results for the twelve months ended September 30, 2022.

"We are pleased to report a 19% increase in revenue for fiscal year 2022 as compared to fiscal year 2021. We saw in-person attendance continue to normalize at the English Language Program at the regional campuses of Miami University relative to our strategic pivot to remote learning in previous periods attributable to the disruptive effects of the Covid-19 pandemic. While our operating performance was stronger than that in the previous fiscal year, the Company is still in the process of recovering from the significant impact of Covid-19 over the past two and a half years. As our acquired colleges contribute to our financial results in future periods, and as we realize cost synergies, we are optimistic that our financial performance will improve over time," commented Jianbo Zhang, Chairman and Chief Executive Officer of EpicQuest Education.

"We are committed to our growth strategy of international expansion. Davis College entered into seven educational relationships with international universities in 2022, and we expanded our recruiting efforts to further internationalize our student body. We believe that our strategic plan will optimally grow the company and lead to superior educational outcomes for our students. Davis College and EduGlobal College both offer a cost-effective and practical education for our students, and combined with our pathway programs, enable advanced degrees and expanded career options," continued CEO Jianbo Zhang.

"We continue to engage in vigorous marketing and recruitment activities for all of our educational programs. Since January 2023, we have held more than 70 online promotional and training sessions, including business training with partners and live broadcast activities for potential students. We have also increased the number and variety of online activities that include online guidance classes and online service training sessions to spur student enrollment rates," concluded CEO Jianbo Zhang.

First Half 2022 Financial Results Ended September 30, 2022

Revenues were $6.3 million for the fiscal year ended September 30, 2022 compared to $5.3 million for the twelve months ended September 30, 2021, representing an increase of $1.0 million, or 18.9%. The increase was due to a rise in student registration at the regional campuses of Miami University ("the MU Regional Campuses").

Gross profit was $4.3 million for the fiscal year ended September 30, 2022 compared to $3.4 million for the twelve months ended September 30, 2021, representing an increase of $0.9 million, or 26.5%. Our gross margin increased to 68.1% in fiscal 2022 from 63.8% for the twelve months of 2021 due to higher revenue and a lower direct costs attributable to operational efficiencies.

Operating Expenses were $11.5 million for the fiscal year ended September 30, 2022 compared to $4.9 million for the twelve months ended September 30, 2021, representing an increase of $6.6 million, or 134.7%. The increase was partly due to higher general and administrative expenses which included a non-cash expense attributable to share-based compensation granted to directors, officers and employees for retention purposes following the Company's IPO in March of 2021, as well as an increase in the professional fees that are mainly related to the Company's two major acquisitions and expansion efforts.

Operating loss was $7.2 million for the fiscal year ended September 30, 2022 compared to an operating loss of $1.5 million for the twelve months ended September 30, 2021. This was due to higher general and administrative expenses that offset the increases in revenue and gross margin for the twelve months ended September 30, 2022.

Other income was $0.85 million for the fiscal year ended September 30, 2022 compared to $0.08 million for the twelve months ended September 30, 2021, attributable to the sale of residential properties adjacent to the MU Regional Campuses at a sales price of approximately 150% of its initial purchase price.

Net loss was $6.2 million for the fiscal year ended September 30, 2022 compared to a net loss of $1.1 million for the twelve months ended September 30, 2021, due to the factors discussed above.

Net Loss Per Basic and Diluted Share for the fiscal year ended September 30, 2022 was $0.55 compared to a net loss of $0.12 per basic and diluted share for the twelve months ended September 30, 2021.

Financial Condition

As of September 30, 2022, the Company had $11.4 million in cash and cash equivalents, a decrease of $5.1 million as compared to $16.5 million as of September 30, 2021. As of September 30, 2022, working capital was $8.0 million (current assets minus current liabilities) and the current ratio (current assets divided by current liabilities) was 2.3, as compared to working capital of $11.0 million and a current ratio of 2.3 as of September 30, 2021. Stockholders' equity as of September 30, 2022 was $15.1 million, an increase of $0.2 million as compared to $14.9 million as of September 30, 2021.

Liquidity and Capital Resources

Net cash used in operating activities for the twelve months ended September 30, 2022 was $4.6 million as compared to cash provided from operations of $0.3 million for the twelve months ended September 30, 2021. The increase was primarily due to the changes in net loss and other working capital balances; the changes in these balances are included in the changes in assets and liabilities presented in the consolidated statement of cash flows.

Net cash used in investing activities was $0.7 million and $0.5 million for the twelve months ended September 30, 2022 and 2021, respectively. The net cash used in investing activities for fiscal 2022 was attributable to $1.9 million for business acquisitions which was offset by $1.9 million in proceeds from the sale of property and equipment.

Net cash provided from financing activities was $0.2 million and $9.3 million for the twelve months ended September 30, 2022 and 2021, respectively.

About EpicQuest Education Group International Limited

EpicQuest Education Group International Limited ("EpicQuest Education" or the "Company"), through its subsidiaries Quest Holding International LLC and Highrim Holding International Limited, provides comprehensive education solutions for domestic and international students interested in university and college degree programs in the US, Canada and the UK. Through its wholly-owned subsidiary in Canada Highrim Holding International Limited, the Company owns 80% of the equity of EduGlobal College, based in British Columbia, Canada, which focuses on English proficiency educational programming for students pursuing academic degrees. The Company owns 70% of the equity of Ameri-Can Education Group Corporation, the holding company of Davis College, a career training college located in Toledo, Ohio. In addition, the Company has a recruiting relationship with the Miami University Regional Campuses, where it maintains residential facilities, a full-service cafeteria, recreational facilities, shuttle buses and an office for the regional campuses that provides study abroad and post-study services for its students; these facilities are not owned, maintained, operated or are a part of Miami University. The Company also acts as a recruiting agent for the University of the West of Scotland (through The Education Group (London) Ltd) and Coventry University, both of which are located in the UK. For more information, please visit https://www.epicquesteducation.com/.

Safe Harbor Statement

Certain of the statements made in this press release are "forward-looking statements" within the meaning and protections of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements in this press release include, without limitation, the Company's ability to implement its international strategy as described. Forward-looking statements include statements with respect to our beliefs, plans, objectives, goals, expectations, anticipations, assumptions, estimates, intentions, and future performance, and involve known and unknown risks, uncertainties and other factors, which may be beyond our control, and which may cause the actual results, performance, capital, ownership or achievements of the Company to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements. All statements other than statements of historical fact are statements that could be forward-looking statements. You can identify these forward-looking statements through our use of words such as "may," "will," "anticipate," "assume," "should," "indicate," "would," "believe," "contemplate," "expect," "estimate," "continue," "plan," "point to," "project," "could," "intend," "target" and other similar words and expressions of the future.

All written or oral forward-looking statements attributable to us are expressly qualified in their entirety by this cautionary notice, including, without limitation, those risks and uncertainties described in our most recent Form 20-F and otherwise in our SEC reports and filings. Such reports are available upon request from the Company, or from the Securities and Exchange Commission, including through the SEC's Internet website at http://www.sec.gov. We have no obligation and do not undertake to update, revise or correct any of the forward-looking statements after the date hereof, or after the respective dates on which any such statements otherwise are made.

Contacts:

EpicQuest Education Group International Limited
+1 513-649-8350
[email protected]

Investor Relations:

Precept Investor Relations LLC

David Rudnick
+1 646-694-8538
[email protected]

FINANCIAL TABLES FOLLOW

EPICQUEST EDUCATION INTERNATIONAL CO., LTD CONSOLIDATED BALANCE SHEETS AS OF SEPTEMBER 30, 2022 and SEPTEMBER 30, 2021 (US$, except share data and per share data, or otherwise noted)

	September 30, 2022		September 30, 2021
	US$		US$
Assets
Current Assets
Cash and cash equivalents		11,443,059		16,537,174
Accounts receivables		47,639		154,537
Prepaid expenses		946,299		1,560,847
Notes receivable		485,000		180,000
Income tax receivable		1,147,213		1,149,506
Total current assets		14,069,210		19,582,064
Non-current assets
Property and equipment, net		2,205,084		3,479,922
Long term investment		5,086,413		-
Deferred income tax assets		411,934		321,057
Intangible assets		398,794		-
Right-of-use assets		976,404		626,596
Goodwill		854,887		-
Total assets		24,002,726		24,009,639

LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Current liabilities
Accounts payable and other liabilities		2,120,660		2,960,915
Student deposits		46,040		681,818
Due to related party		140,000		140,000
Lease liabilities – current		461,161		259,297
Deferred revenue		3,286,350		4,569,664
Total current liabilities		6,054,211		8,611,694
Non-current liabilities
Lease liabilities – non current		561,897		461,997
Deferred income tax liabilities		107,674		-
Total liabilities		6,723,782		9,073,691

Commitments and contingencies
Shareholders' equity
Common shares, US$0.0015873 par value, 31,500,000 shares authorized, 11,350,704 and 10,412,843 shares issued and outstanding as of September 30, 2022 and 2021, respectively		18,017		16,528
Additional paid-in capital		17,526,546		11,464,979
Subscription receivable		-		(200,000)
Retained earnings (deficit)		(2,416,788)		3,654,441
Accumulated other comprehensive loss		(28,939)		-
Total shareholders' equity		15,098,836		14,935,948

Non-controlling interests		2,180,108		-
Total liabilities and shareholders' equity		24,002,726		24,009,639

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AVAILABLE VIA FORM 20-F FILED WITH THE SEC

EPICQUEST EDUCATION INTERNATIONAL CO., LTD CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME FOR THE TWELVE MONTHS ENDED SEPTEMBER 30, 2022, 2021 AND 2020 (US$, except share data and per share data, or otherwise noted)

	September 30, 2022		September 30, 2021		September 30, 2020
	US$		US$		US$
Revenues		6,330,428		5,341,850		9,063,137
Costs of services		2,021,058		1,934,237		2,342,276

Gross profit		4,309,370		3,407,613		6,720,861

Operating costs and expenses:
Selling expenses		952,888		1,732,758		2,310,188
General and administrative		10,521,551		3,148,256		3,115,120
Total operating costs and expenses		11,474,439		4,881,014		5,425,308

Income (loss) from operations		(7,165,069)		(1,473,401)		1,295,553

Other (income) expenses:
Other income		(819,135)		(71,640)		(55,000)
Interest income		(26,463)		(9,537)		(35,293)
Foreign exchange gain		-		(743)		(23,262)
Total other (income) expenses		(845,598)		(81,920)		(113,555)

Income (loss) before provision for income taxes		(6,319,471)		(1,391,481)		1,409,108

Current income tax expense (recovery)		16,459		13,889		397,553
Deferred income tax expense (recovery)		(99,814)		(321,057)		-
Income taxes expense (recovery)		(83,355)		(307,168)		397,553

Net income (loss)		(6,236,116)		(1,084,313)		1,011,555
Net income (loss) attributable to non-controlling interest		(164,887)		-		-
Net income (loss) attributable to common stockholders		(6,071,229)		(1,084,313)		1,011,555
Unrealized foreign currency translation adjustment		(28,939)		-		-
Comprehensive income		(6,265,055)		(1,084,313)		1,011,555

Basic & diluted net income per share	$	(0.55)	$	(0.12)		0.13

Weighted average number of ordinary shares-basic and diluted		11,010,240		9,160,447		7,938,000

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS AVAILABLE VIA FORM 20-F FILED WITH THE SEC

EPICQUEST EDUCATION INTERNATIONAL CO., LTD CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE TWELVE MONTHS ENDED SEPTEMBER 30, 2022, 2021 AND 2020 (US$, except share data and per share data, or otherwise noted)

	September 30,		September 30,		September 30,
	2022		2021		2020
	US$		US$		US$
Cash Flows from Operating Activities:
Net income (loss)		(6,236,116)		(1,084,313)		1,011,555
Adjustments for items not affecting cash:
Depreciation and amortization		252,097		126,234		87,593
Share-based compensation		4,813,049		-		-
Non-cash adjustment to lease expenses		(25,643)		94,698		-
Deferred income tax expense		(99,814)		(321,057)		-
Gain from disposal of fixed assets		(813,064)		(4,000)		-
Changes in operating assets and liabilities
Accounts receivable		118,608		(5,176)		89,521
Prepaid expenses		614,548		71,800		428,592
Long-term prepaid expenses		-		159,382		584,356
Accounts payable & accrued liabilities		(1,320,563)		1,117,184		545,606
Deferred revenue		(1,283,314)		961,426		(3,221,807)
Income tax receivable		2,293		(480,866)		(664,399)
Student deposits		(635,778)		(313,122)		994,940
Net cash provided from (used in) operating activities		(4,613,697)		322,190		(144,043)

Cash Flows from Investing Activities:
Purchase of property and equipment		(51,410)		(618,529)		(288,555)
Notes receivable		(305,000)		100,000		-
Long-term investment		(270,000)		-		-
Net cash used for business acquisitions		(1,945,931)		-		-
Proceeds from sale of fixed assets		1,920,861		4,000		-
Net cash used in investing activities		(651,480)		(514,529)		(288,555)

Cash Flows from Financing Activities:
Deferred costs related to initial public offering		-		-		(432,035)
Share issuances, net of issuance costs		200,000		9,321,523		-
Net cash provided from (used in) financing activities		200,000		9,321,523		(432,035)

Effect of exchange rate changes on cash and cash equivalents		(28,938)		-		-
Net increase/(decrease) in cash, cash equivalents		(5,094,115)		9,129,184		(864,633)
Cash and cash equivalents, beginning of period		16,537,174		7,407,990		8,272,623
Cash and cash equivalents, end of period		11,443,059		16,537,174		7,407,990

SUPPLEMENTAL DISCLOSURE OF CASH FLOWS INFORMATION:
Interest paid	-		-		-
Income taxes paid		14,166		490,250		1,053,360
Non-cash investing activities – acquisition of operating lease right-of-used assets		574,483		-		-
Non-cash investing activities – assumption of operating lease obligation		574,483		-		-