China Distance Education (NYSE:DL)

Second Quarter Fiscal 2012 Business and Financial Highlights:

• Total course enrollments from continuing operations was 293,000, an increase of 27.7% from the second quarter of fiscal 2011.
• Net revenues from continuing operations increased 36.7% over the second quarter of fiscal 2011 toUS$12.3 million.
• Gross profit from continuing operations increased 49.3% from the second quarter of fiscal 2011 to US$7.02 million.
• Non-GAAP(1) gross profit from continuing operations increased 39.9% over the second quarter of fiscal 2011 to US$7.03 million.
• Gross profit margin from continuing operations was 56.9%, compared to 52.1% in the second quarter of fiscal 2011. Non-GAAP gross profit margin from continuing operations was 57.0%, compared to 55.7% in the same period last year.
• Operating income from continuing operations was US$3.2 million, compared to US$0.3 million in the second quarter of fiscal 2011. Non-GAAP operating income from continuing operations was US$3.3 million, compared to US$1.2 million in the second quarter of fiscal 2011.
• Net income was US$2.8 million, compared to US$0.5 million in the second quarter of fiscal 2011.
• Non-GAAP(1) net income was US$2.9 million, compared to US$1.4 million in the second quarter of fiscal 2011.
• Basic net income per American Depositary Share ("ADS") was US$0.083, compared to basic net income per ADS of US$0.013 for the second quarter of fiscal 2011. Diluted net income per ADS was US$0.082, compared to diluted net income per ADS of US$0.013 for the second quarter of fiscal 2011. Each ADS represents four ordinary shares.
• Basic non-GAAP(1) net income per ADS was US$0.086, compared to basic non-GAAP(1) net income per ADS of US$0.040 for the second quarter of fiscal 2011. Diluted non-GAAP(1) net income per ADS wasUS$0.085, compared to diluted non-GAAP(1) net income per ADS of US$0.040 for the second quarter of fiscal 2011.
• Deferred revenue and refundable fees balance was US$15.8 million, a 3.6% increase from the balance ofUS$15.2 million for the first quarter of fiscal 2012 and a 19.5% increase from the second quarter of fiscal 2011.

Commenting on the results, Mr. Zhengdong Zhu, Chairman and Chief Executive Officer said, "We are very pleased to report another quarter of healthy top- and bottom-line growth, building on the momentum we have gained in recent quarters. Supported by steady enrollment growth across our core online education courses and increasing pricing power, revenue for the quarter again exceeded guidance. Our results demonstrate the robust underlying demand for high quality online training and educational services and the growing strength of our brand power in China's education market. We are also pleased to see that our recent initiatives, including our newly launched high definition courseware and mobile learning platform, are helping to drive incremental enrollment growth across our course offerings, while also supporting growth in average student payments. These new services highlight our innovative and student-focused approach which we believe will help to further strengthen our industry leading position for years to come.

"While overall market conditions and student demand remain healthy, some major Accounting Professional Qualification Examination, or 'APQE', originally scheduled for May have been delayed to October. At the same time we are still awaiting the release of the official policy on this year's CPA exams, including the exam dates, registration timeline and text books. The release of this information is already more than six weeks behind the usual schedule. Consequently, we anticipate a shift in the timing of enrollments and revenue recognition for APQE and CPA exams. Specifically, a significant portion of APQE revenue that we had expected to record in the third fiscal quarter will shift into next fiscal year, and post-exam APQE enrollment will also be delayed until next fiscal year. The delayed release of CPA exam policy for this year may also affect both the timing and the amount of revenue we may earn in the remainder of this fiscal year. While the delayed timing of these exams will impact our results, we believe that these regulatory changes are a one-time event and such changes will only affect the timing of the revenue contribution related to these exams.

"We believe that the continuing strength of our other accounting and non-accounting courses will help to partially offset the near-term impact from these delays. The continued diversification of our business in recent years and the growing momentum of our recent initiatives have helped us to develop a more robust platform with multiple sustainable revenue streams. As a result, we still expect to achieve our revenue guidance for the full year of 20-30% revenue increase year-over-year."

Ms. Ping Wei, Chief Financial Officer of CDEL, commented, "Our performance in the second quarter has again demonstrated the scalability of our business model as we registered another quarter of strong top- and bottom-line growth. Both our gross and net margin continue to expand at a healthy pace while cash flow has also continued to increase, registering a US$4.8 millionincrease in the second quarter.

"The delayed timing of the AQPE exams and the delayed release of CPA exam policy will result in about 15-20% of third-quarter revenue being delayed to later quarters. On a fiscal year basis, APQE alone will result in the delayed recognition of at least US$1.8 million in revenue into fiscal 2013. As most of our costs and expenses are fixed, the impact to our bottom line for the next quarter and for fiscal year 2012 will be even more significant.

"Nonetheless, as most of our other education verticals are growing at a particularly high rate, and as we continue to tightly control our costs and expenses, we remain confident that despite these unexpected delays, we will still maintain net profit growth in-line with our revenue growth in fiscal year 2012."

First Quarter 2012 Results

• Total course enrollments from continuing operations was 828,000, an increase of 62.1% from the first quarter of fiscal 2011.
• Net revenues from continuing operations increased 35.8% over the first quarter of fiscal 2011 to US$9.9 million.
• Gross profit from continuing operations increased 57.3% from the first quarter of fiscal 2011 to US$5.3 million.
• Non-GAAP(1) gross profit from continuing operations increased 41.0% over the first quarter of fiscal 2011 to US$5.3 million.
• Net income was US$0.4 million, compared to net loss of US$1.0 million in the first quarter of fiscal 2011.
• Non-GAAP(1) net income was US$0.5 million, compared to non-GAAP(1) net income of US$0.1 million in the first quarter of fiscal 2011.
• Basic and diluted net income per American Depositary Share ("ADS") were US$0.011 compared to basic and diluted net loss per ADS of US$0.030, for the first quarter of fiscal 2011. Each ADS represents four ordinary shares.
• Basic and diluted non-GAAP(1) net income per ADS were US$0.015, compared to basic and diluted non-GAAP(1) net income per ADS of US$0.004, for the first quarter of fiscal 2011.

Commenting on the results, Mr. Zhengdong Zhu, CDEL Chairman and Chief Executive Officer said, "We are pleased to report strong first quarter results with revenues exceeding our guidance and net profit on both a GAAP and non-GAAP basis. Despite the first quarter being our seasonally lowest quarter of the year, we delivered enrollment growth across our online education courses and average student payment growth for most of our online test preparation courses. As a result, total net revenues from continuing operations of our online education services increased 48.6% year-over-year. In addition, we have seen increasing contribution from our newer initiatives, demonstrating that our investment in new courses and services is beginning to pay dividends.

Ms. Ping Wei, Chief Financial Officer of CDEL, commented, "This quarter's results clearly demonstrated the scalability of our business model as our revenue growth outpaced the increase in cost and expenses despite the fact that we are still operating in an inflationary environment. We expect this margin expansion trend to continue. Simultaneously, we strongly believe in the future of online education in China and we will continue to invest prudently in new online learning models and revenue growth drivers. Going forward, we expect to maintain our non-GAAP margin from continuing operations at a level similar to or slightly better than the non-GAAP margin of fiscal year 2011."

Share Repurchase Program

Today, the board of directors of CDEL has approved the extension of the Company's share repurchase program (the "Prior Repurchase Plan") to April 28, 2013. Under the extended program, CDEL is authorized to repurchase up to US$5.84 million worth of its issued and outstanding ADSs from time to time in open-market transactions on NYSE, representing the unused portion of the Prior Repurchase Plan. The repurchases will be made at prevailing market prices, in negotiated transactions off the market, in block trades, pursuant to a 10b5-1 plan (which if adopted, will allow CDEL to repurchase its ADSs during periods in which it may be in possession of material non-public information) or otherwise. The purchases will be made subject to restrictions relating to volume, price and timing. The timing and extent of any purchases will depend upon market conditions, the trading price of its ADSs and other factors. CDEL expects to implement this share repurchase program in a manner consistent with market conditions and the interest of its shareholders. The board will review the share repurchase program periodically, and may authorize adjustment of its terms and size accordingly. The program may be suspended or discontinued at any time.

BEIJING, December 20, 2011 /PRNewswire-Asia-FirstCall/ -- China Distance Education Holdings Limited (NYSE: DL) ("CDEL" or the "Company"), a leading provider of online education in China focusing on professional education, today announced that it signed six new contracts throughout 2011 relating to its business start-up, or entrepreneurship training program offering. CDEL's business start-up training program aims to teach university students, job seekers and individuals how to start their own businesses using a practical, "learning-by-doing" approach. The program leverages the concept and training framework of an international organization called EUROPEN/Pen International, and allows students to set up their own practice companies and participate in virtual business dealings with other practice companies from both inside China and around the world.

Mr. Zhengdong Zhu, Chairman and Chief Executive Officer of CDEL commented, "We have made significant progress throughout the year on the expansion of our business start-up training programs provided through Yucai. The signing of these six contracts demonstrates the strong underlying demand among both students and local governments for effective business start-up training. We believe the growth opportunities for this business segment will remain healthy given the increasing competition among job seekers and the strong entrepreneurial spirit evident throughout China today. We will continue to work hard to establish new agreements with additional cities and provinces in the year ahead."

Fourth Quarter Fiscal 2011 Business and Financial Highlights:

• Total course enrollments from continuing operations were 536,000, an increase of 33.7% from the fourth quarter of fiscal 2010.
• Net revenues from continuing operations increased 18.2% over the fourth quarter of fiscal 2010 to US$13.1 million.
• Gross profit from continuing operations increased 6.3% over the fourth quarter of fiscal 2010 to US$6.8 million.
• Non-GAAP(1) gross profit from continuing operations increased 11.2% over the fourth quarter of fiscal 2010 to US$7.7 million.
• Gross profit margin from continuing operations was 51.7%, compared to 57.4% in the fourth quarter of fiscal 2010. Non-GAAP(1) gross margin from continuing operations was 58.6%, compared to 62.3% in the same period last year.
• Operational loss from continuing operations was US$0.6 million, compared to operating income of US$0.9 million in the fourth quarter of fiscal 2010. Non-GAAP operating income from continuing operations was US$2.5 million, a 3.7% increase from the fourth quarter of fiscal 2010.
• Net loss was US$4.1 million, compared to net loss of US$2.1 million in the fourth quarter of fiscal 2010.
• Non-GAAP(1) net income was US$0.9 million, compared to non-GAAP(1) net income of US1.3 million in the fourth quarter of fiscal 2010.
• Basic and diluted net loss per American Depositary Share ("ADS") were US$0.128 compared to basic and diluted net loss per ADS of US$0.060 for the fourth quarter of fiscal 2010. Each ADS represents four ordinary shares.
• Basic and diluted non-GAAP(1) net income per ADS were US$0.030, compared to basic and diluted non-GAAP(1) net income per ADS of US$0.038 for the fourth quarter of fiscal 2010.
• Deferred revenue and refundable fees balance was US$10.4 million, a 14.6% increase from the balance of the fourth quarter of fiscal 2010.

Fiscal Year 2011 Business and Financial Highlights:

Compared to the fiscal year 2010 results,

• Total course enrollments from continuing operations were 1,601,000, representing a 32.2% increase.
• Net revenues from continuing operations increased 27.6% to US$41.6 million.
• Gross profit from continuing operations increased 27.3% to US$21.9 million.
• Non-GAAP(1) gross profit from continuing operations increased 25.9% to US$23.9 million.
• Operational loss from continuing operations was US$0.6 million, compared to operating loss of US$0.6 million in fiscal 2010. Non-GAAP operating income from continuing operations was US$6.6 million, a 65.1% increase from fiscal 2010.
• Net loss increased 100.3% to US$3.8 million.
• Non-GAAP(1) net income increased 13.3% to US$5.2 million.
• Basic and diluted net loss per ADS were US$0.114, compared to basic and diluted net loss per ADS of US$0.055 for fiscal year 2010.
• Basic and diluted non-GAAP(1) net income per ADS were US$0.155 and US$0.154, respectively, compared to basic and diluted non-GAAP(1) net income per ADS of US$0.133, for fiscal year 2010.

Commenting on the results, Mr. Zhengdong Zhu, CDEL Chairman and Chief Executive Officer said, "We concluded fiscal year 2011 with healthy fourth quarter results that exceeded our revenue guidance before adjusting for the revenue from a business unit that is to be discontinued within a year, capping a year of consistent execution on a financial and operational basis. Our fourth quarter results were supported by steady revenue growth across our core online education courses. We believe that the underlying demand for our core education services will remain strong, and we expect to see continuous growth in the year ahead.

First Quarter Fiscal 2012 Guidance -- Due to the typical seasonality pattern of our business, the fiscal first quarter is normally a weak quarter.

As such, CDEL expects to generate total net revenues in the range of US$8.5 million to US$9.0 million for the first quarter of fiscal year 2012 as compared to net revenues of US$7.8 million in the first quarter of fiscal 2011.

We expect our fiscal year 2012 annual revenue from continuing operations to be between US$50 million and US$54 million, representing year-over-year growth of 20% to 30%. This represents our current and preliminary view, which is subject to change.

Third Quarter Fiscal 2011 Business and Financial Highlights:

• Total course enrollments were 324,400, an increase of 34.0% from the third quarter of fiscal 2010.
• Net revenues increased 22.7% over the third quarter of fiscal 2010 to US$12.7 million.
• Gross profit increased 21.8% over the third quarter of fiscal 2010 to US$7.3million.
• Gross profit margin was 57.6%, compared to 58.0% in the third quarter of fiscal 2010. Non-GAAP (1) gross margin excluding share-based compensation was 60.5%, compared to 62.1% in the same period of 2010.
• Net income was US$0.9 million, compared to net income of US$1.3 million in the third quarter of fiscal 2010.
• Non-GAAP (1) net income excluding share-based compensation expenses and a $0.8 million of write-off arising from the purchased call option for acquisition of additional equity interest in Beijing Zhengbao Yucai Education Technology Co., Ltd., or Zhengbao Yucai, was US$2.7 million, compared to non-GAAP (1) net income of US$2.4 million in the third quarter of fiscal 2010.
• Basic and diluted net income per American Depositary Share ("ADS") were US$0.028 compared to basic and diluted net income per ADS of US$0.037 for the third quarter of fiscal 2010. Each ADS represents four ordinary shares.
• Basic and diluted non-GAAP (1) net income per ADS excluding share-based compensation and a write-off arising from the purchased call option for acquisition of additional equity interest in Zhengbao Yucai, were US$0.083, compared to basic and diluted non-GAAP (1) net income per ADS of US$0.068 for the third quarter of fiscal 2010.
• Deferred revenue and refundable fees balance was US$12.6 million, a 21.9% increase from the third quarter of fiscal 2010 and a 7.6% decrease from the second quarter of fiscal 2011.

Commenting on the results, Mr. Zhengdong Zhu, CDEL Chairman and Chief Executive Officer said, "We are pleased to report another quarter of top-line growth exceeding our guidance, supported by a steady increase in our core online education services net revenues. We are also pleased to see our non-GAAP net income for the third quarter increased year-over-year. These prove again that we are delivering on our commitment to execute our top- and bottom-line growth strategy."

"We have maintained a consistent focus throughout 2011 on the execution of our strategy to provide high quality, comprehensive, life-long online learning programs. This has included continued investments in our online learning platform, consistent focus on the quality of our courses and services, and extensive marketing and advertising campaigns to further strengthen our brand name. This investment in our growth has helped to bolster our reputation as a high quality, results oriented education services provider, supporting enrollment growth and allowing us to raise prices in our core online test preparation courses. We will continue to execute our balanced growth strategy, focusing on delivering quality courses and services, promoting our brand awareness, and seeking to delivering healthy top- and bottom-line growth for years to come."

Ms. Ping Wei, Chief Financial Officer of CDEL, commented, "We continue to strive for a balanced growth approach despite a generally inflationary environment, investing prudently in growth initiatives while maintaining tight cost control. The selective investments we have made, coupled with payroll inflation, resulted in heightened marketing and payroll related cost and expenses this quarter. However, our tight control over other expenses helped partially offset the impact. We believe such investments are necessary for the long-term health of our business and will eventually pay off."

Fourth Quarter Fiscal 2011 Guidance - The Company expects to generate total net revenues for the fourth quarter of fiscal 2011 in the range of US$12.7 million toUS$13.3 million, as compared to net revenues of US$11.4 million in the fourth quarter of fiscal 2010. This represents our current and preliminary view, which is subject to change.

We believe that our current cash and cash equivalents, and anticipated cash flows from operations will be sufficient to meet our anticipated working capital requirements and capital expenditures for 12 months following the date of this annual report. Our online course platform can support significant growth in course enrollments and is easily adapted for the addition of new courses. We do, however, expect to spend money on the further development of our “Chinaacc” brand and other brands in the disciplines for which we offer courses. We do not expect our short-term and long-term cash requirements to be materially different.

Second Quarter Results:

• Net revenues increased 27.2% over the second quarter of fiscal 2010 to US$9.5 million.
• Gross profit increased 27.3% over the second quarter of fiscal 2010 to US$4.8 million.
• Gross profit margin was 50.8%, unchanged from 50.8% in the second quarter of fiscal 2010. Non-GAAP(1) gross margin excluding share-based compensation was 54.3%, compared to 55.4% in the same period of 2010.
• Net income was US$0.4 million, compared to net income of US$0.2 million in the second quarter of fiscal 2010.  
• Non-GAAP(1) net income excluding share-based compensation was US$1.4 million, compared to non-GAAP(1) net income of US$1.1 million in the second quarter of fiscal 2010.  
• Basic and diluted net income per American Depositary Share ("ADS") were US$0.013 compared to basic and diluted net income per ADS of US$0.006 for the second quarter of fiscal 2010.  Each ADS represents four ordinary shares.
• Basic and diluted non-GAAP(1) net income per ADS excluding share-based compensation were US$0.040, compared to basic and diluted non-GAAP(1) net income per ADS of US$0.031 for the second quarter of fiscal 2010.

First Quarter Fiscal 2011 Business and Financial Highlights:

• Total course enrollments were 510,000, an increase of 39.7% from the first quarter of fiscal 2010.
• Net revenues increased 40.0% over the first quarter of fiscal 2010 to US$7.8 million.
• Gross profit increased 88.9% from the first quarter of fiscal 2010 to US$3.5 million.
• Gross profit margin was 45.2%, compared to 33.5% in the first quarter of fiscal 2010. Non-GAAP(1) gross margin excluding share-based compensation was 50.2%, compared to 42.1% in the same period of 2010.
• Net loss was US$1.0 million, compared to net loss of US$1.3 million in the first quarter of fiscal 2010.  
• Non-GAAP(1) net income excluding share-based compensation and a write-off arising from the purchased call option for acquisition of additional equity interest in Zhejiang Champion Xinlixiang Education Management Co., Ltd., or Champion Xinlixiang, was US$0.1 million, compared to non-GAAP(1) net loss of US$0.2 million in the first quarter of fiscal 2010.  
• Basic and diluted net loss per American Depositary Share ("ADS") were US$0.030 compared to basic and diluted net loss per ADS of US$0.038, for the first quarter of fiscal 2010.  Each ADS represents four ordinary shares.
• Basic and diluted non-GAAP(1) net income per ADS excluding share-based compensation charge and the write-off of purchased call option for acquisition of additional equity interest in Champion Xinlixiang were US$0.004, compared to basic and diluted non-GAAP(1) net loss per ADS of US$0.005, for the first quarter of fiscal 2010.
• Deferred revenue and refundable fees balance was US$12.7 million, a 21.9% increase from the balance of US$10.4 million for the fourth quarter of fiscal 2010 and a 6.7% increase from the first quarter of fiscal 2010.  

Commenting on the results, Mr. Zhengdong Zhu, CDEL Chairman and Chief Executive Officer said, "We are pleased to report strong results for the quarter which exceeded our own guidance, driven by the continued growth in online education services and better than expected cash collections from the sale of books and reference materials."

"We experienced steady enrollment growth across all verticals. In particular, enrollments in our self-taught higher education segment increased 167% year-over-year as we continued to expand the geographic reach of the program into more provinces. Our accounting vertical also delivered steady growth despite a soft demand environment for CPA and APQE courses, thanks to robust enrollment growth in our accounting continuous education courses.    

"In addition, we experienced healthy revenue contribution from some of our newer initiatives such as our K-12 after-school tutoring courses and our business start-up training program, Yucai. Our investments in Yucai have started to pay off. In December 2010, we announced the signing of three new contracts. In addition, sizable payments have started to come in for training and services provided.  We recorded some revenue for Yucai this quarter but more meaningful revenue contributions are expected in the coming quarters as we continue to prudently expand the program.  

"In conclusion, we are delighted with our solid performance in the quarter and the continuing development of our newer verticals.  We believe that our performance demonstrates the benefits of our unique business model which combines a robust and highly scalable IT and courseware platform with centralized processes such as marketing, distribution and student services, allowing for the rapid integration and rollout of new verticals and business lines.   We strongly believe that we are well positioned to drive further growth in the years ahead and we will continue to focus on executing on our growth initiatives."  

Ms. Ping Wei, Chief Financial Officer of CDEL, commented, "The fiscal first quarter is traditionally our lowest revenue quarter, and we typically generate net loss in the quarter on a non-GAAP basis. However, we delivered strong financial results this quarter, thanks to a solid performance across our main business lines and growing momentum behind our newer initiatives. Effective cash collections also contributed to our healthy cash flow in the quarter.  In the coming quarters, we expect to experience some inflationary impact on wages driven by macroeconomic conditions in China. Nevertheless, while we will continue to invest in the growth of our key strategic initiatives, we will continue to maintain tight cost controls."  

Second Quarter Fiscal 2011 Guidance — The Company expects to generate total net revenues for the second quarter of fiscal 2011 in the range of US$8.6 million to US$9.4 million, as compared to net revenues of US$7.5 million in the second quarter of fiscal 2010. This represents our current and preliminary view, which is subject to change.  

Fiscal Third Quarter 2010 Unaudited Financial Results:

• Total net revenues for the third quarter of fiscal 2010 were US$10.3 million, representing a year-over-year increase of 25.0% from US$8.3 million in the third quarter of fiscal 2009.
  
  
  • Online education services net revenues for the third quarter of fiscal 2010 were US$6.3 million, an increase of 16.6% from the third quarter of fiscal 2009. The increase was a result of increased enrollment in accounting, healthcare and construction engineering courses.
    
  • Revenue from books and reference materials increased by 22.3% to US$1.3 million for the third quarter of fiscal 2010 due to the improvement in cash payment from customers.
    
  • Other revenues, primarily comprised of courseware production services, magazine content production services, offline information technology courses and related services, professional training for accounting firms, and revenue from Gaokao retake courses offered by the newly acquired Xinlixiang, increased 52.3% year-over-year to US$2.7 million for the fiscal third quarter of 2010 from US$1.8 million in the corresponding period of last year. 
    
• Net income was US$1.3 million for the third quarter of fiscal 2010, compared to net income of US$0.1 million in the same period of 2009.
  
• Excluding share-based compensation, non-GAAP(1) net income for the third quarter of fiscal 2010 was US$2.4 million, a 80.6% increase as compared to net income of US$1.3 million in the corresponding quarter in 2009.
• Basic and diluted net income per American Depositary Share ("ADS") were US$0.037 compared to basic and diluted net income per ADS of US$0.003, for the third quarter of fiscal 2009. Each ADS represents four
  ordinary shares.
• Basic and diluted non-GAAP(1) net income per ADS excluding share-based compensation charge were US$0.068, compared to basic and diluted non-GAAP(1) net income per ADS of US$0.037, for the third quarter of
  fiscal 2009.

Commenting on the results, Mr. Zhengdong Zhu, CDEL Chairman and Chief Executive Officer said, "We are pleased to report healthy top- and bottom-line growth in the quarter, supported by strong enrollment increases in our healthcare and construction engineering verticals. We also continue to experience steady performance from our core accounting verticals, with enrollment increasing 21.3% year-over-year. In addition, we again generated meaningful revenue from the sale of books and reference materials, aided by an improvement in our cash collection.

"We made further progress during the quarter on our self-taught higher education vertical, where we have continued to gain acceptance by both students and government bodies, resulting in a 37.3% year-over-year enrollment increase. Together with the newly signed Hunan province contract, we believe the self-taught higher education segment will continue to grow at an accelerated pace going forward.

"Looking ahead, we expect the fourth quarter to be a transitional quarter. While we will continue to focus on our core online businesses, which remain solid, we expect to cease some of our initiatives under ITAT cooperation contracts, which include our sponsorship of the ITAT contest and provision of related online and offline training courses, after conducting a cost benefit analysis. Although this will have some impact on our revenue in the fourth quarter, it will allow us to remain focused on our core businesses that provide higher margins and exhibit stronger long-term growth potential."

Fourth Quarter Fiscal 2010 Guidance

As CDEL will cease some of its initiatives under ITAT cooperation contracts, the Company expects to generate total net revenues for the fourth quarter of fiscal 2010 in the range of US$10.2 million to US$11.2 million, as compared to net revenues of US$10.2 million in the fourth quarter of fiscal 2009. This represents our current and preliminary view, which is subject to change.