China Education Alliance (PINK:CEU)

At the end of 2010, there were allegations that we failed to disclose material adverse facts about our business, operations, and prospects (the “Allegations”) which were cited by major websites and other media. The reason for the decrease was the result of the Company's name brand and imagine still in the process of slowly recovering. Some parents and students have been reluctant to use our services. As a result, there was a decrease in the number of students seeking our services both online and on-site. In addition, the morale of our employees and teachers was adversely affected, which led to unfavorable conditions in our daily operation.

Financial Highlights for the First Quarter ended March 31, 2011

• Total revenue decreased 18.8% year-over-year to $7 million.
• Gross profit declined to $4.6 million or to 66.0% of sales, compared to $6.8 million, or to 79.3% of sales last year.
• Non-GAAP net income was $0.5 million compared with $3.7 million last year. On a GAAP-basis, net loss was $0.5 million compared with net income of $3.7 million last year.
• Non-GAAP fully diluted earnings per share were $0.02, compared with EPS of $0.12 per fully diluted share in the first quarter of 2010.

"As a result of the unfounded allegations made against the Company at the end of 2010, we faced a difficult quarter with numerous challenges to retain our high-quality teachers and attract new students. Our business relies on our reputation in the market and these allegations hindered our business performance considerably. We implemented strategic promotional and marketing campaigns to improve our corporate brand image and to restore our reputation, and we are beginning to see a stabilization in the business," said Mr. Xiqun Yu, Chairman and Chief Executive Officer of China Education Alliance. "We remain confident in growing our core business and seeking new opportunities to expand our platform as we continue to explore M&A opportunities."

Business Outlook

"We will continue to focus on designing and providing premium online education and vocational training services with our high-quality teachers and exclusive training materials. We plan to establish 50 additional training centers in 10 different cities in China this year. We also expect to grow organically as well as through mergers or acquisitions if we can find quality businesses at attractive valuation levels that fit our overall business strategy," said Chairman Yu.

2011 Guidance

The Company expects full year 2011 total revenues to be between $47 million and $52 million.

Fourth Quarter Highlights:

• Total revenue increased 19.3% year-over-year to $12.4 million.
• Gross profit rose 16.4% to $10.2 million or 82.3% of sales, compared to 84.3% of sales, or $8.78 million, in the fourth quarter of 2009.
• Operating income decreased 53.6%.
• Net income decreased 53.5% year-over-year to $2.1 million.
• EPS was $0.06 per fully diluted share, compared to EPS of $0.15 per fully diluted share in the fourth quarter of fiscal 2009

"We are pleased with our solid growth in online education and our training center businesses due to industry organic growth, which validates our focus on exam-oriented educational services and vocational training programs in China," said Mr. Xiqun Yu, Chairman and Chief Executive Officer of China Education Alliance. "Going forward, we will continue to develop and deliver high quality supplemental education resources and professional training programs. This will help us continue our business expansion and reaffirm our position as one of the leading education resource and service company in China."

HARBIN, China, March 16, 2011 /PRNewswire-Asia-FirstCall/ -- China Education Alliance, Inc. announced today that it purchased 60% of the equity interests of Harbin Tianlang Culture and Education School ("Tianlang") for RMB35,000,000. This acquisition is advantageous to China Education Alliance's comprehensive integration of its training programs. Tianlang currently has 5,000 students and generates an annual profit of RMB10 million.

Mr. Yu Xiqun, Chairman and Chief Executive Officer of China Education Alliance, commented, "The acquisition of Tianlang is the beginning of the implementation of the Company's National Expansion Plan. We plan to complete two to three similar acquisitions within one month after we acquired Tianlang. We have established offices in 27 provinces and cities nationwide. By thoroughly studying the market demand for training programs in different regions, as well as using our talented teachers, we hope to add 100 new teaching centers through establishment or acquisition within one year. We are confident that we will become one of the few large-scale educational institutions in China."

• Revenue for the three months ended September 30, 2010  increased by $4,145,532, or 40.5%, to $14,377,210 compared to $10,231,678 for the three months ended September 30, 2009 (the “September 30, 2009 quarter”)
  
• Net income of $5,258,415, or $.17 per share for both basic and diluted, for the September 30, 2010 quarter, as compared with net income of $4,178,718, or $.18 per share for basic and $.16 for diluted, for the September 30, 2009 quarter.

We believe the education market in China is large and significantly fragmented. Our current activities are primarily in the Northeast four provinces of China. China has about 150 million students aged 6 -18, which are the target of our education services. In the Northeast four provinces, there are about 10 million students in the 6-18 age group, while the number of student we are serving is only about 500,000 – 600,000, only about 5% of the students in our current market. Therefore, we believe that we have great potential to grow. Our growth will depend on how we penetrate and expand into the market. Our expansion may take the form of organic growth and acquisitions and the key to our growth will be the increase in students’ enrollment.

"We achieved strong growth in our online education and training center businesses. This acceleration in our organic revenue growth led to further margin expansion, signifying the high profitability of incremental revenues in our business model," stated Xiqun Yu, Chief Executive Officer of China Education Alliance, Inc. "Today our operations are centered within the four northeast provinces of China where there are an estimated 10 million students, aged 6 to 18. Of those students, we are currently providing our education services to approximately 500,000 to 600,000, or 5% of the addressable market. Going forward, we expect our growth initiative will enable us to penetrate this market and gain additional market share, and for this year, we remain confident in achieving our target of 30 percent revenue growth."

    Financial Highlights for the Three Months Ended June 30, 2010:

    -- Total revenue increased 33.7% year-over-year to $10.85 million, 
       compared to revenue of $8.12 million in the second quarter of fiscal
       2009.
    -- Net income increased 29.9% year-over-year to $4.26 million, compared to
       net income of $3.28 million in the second quarter of fiscal 2009.
    -- EPS was $0.14 per fully diluted share, compared to $0.13 in the second
       quarter of fiscal 2009.
    -- Operating income totalled $4.74 million, compared to $3.72 million same
       period in fiscal 2009.
    -- Gross profit rose 39.0% to $9.06 million or 83.4% of sales, compared to 
       80.2% of sales or $6.51 million in the second quarter of fiscal 2009.

"We are pleased to again report solid revenue and earnings growth driven largely by strong demand for our exam-oriented educational services and our vocational training programs in China," stated Xiqun Yu, Chief Executive Officer of China Education Alliance, Inc. "We remain optimistic about the opportunities for continued growth in both our supplemental education resources and in IT and professional training programs offered through our vocational centers. We remain focused on our expansion efforts into new geographic markets, which will be supported by enhanced marketing strategies to develop our core businesses. We are confident in achieving 30 percent revenue growth for the full year 2010, based on strong enrolment for our online educational services and our vocational training services."

"We believe the education market in China is quite large and significantly fragmented. Our current activities are primarily in the Northeast four provinces of China. China has about 150 million students aged 6 -18, which are the target of our education services. In the Northeast four provinces, there are about 10 million students in the 6-18 age group, while the number of student we are serving is only about 500,000 – 600,000, only about 5% of the students in our current market. Therefore, we believe that we have great potential to grow. Our growth will depend on how we penetrate and expand into the market. Our expansion may take the form of organic growth and acquisitions and the key to our growth will be the increase in students’ enrollment.