Hq Global Education Inc Common (PINK:HQGE)

On July 13, 2011, Hunan Oya Education Technology Co., Ltd. (“Oya”), HQ Global Education’s wholly controlled entity through contractual agreements, entered into a joint school-running agreement with the People’s Government of Zhangwu County Liaoning Province (“Zhangwu Government”) concerning school-running cooperation between Zhangwu Secondary Vocational Technical School (“Zhangwu Vocational School”) and Oya.

According to the joint school-running agreement, Oya agreed to jointly run Zhangwu Vocational School with Zhangwu Government and be responsible for providing the necessary capital for the development of the school. During the term of the agreement, Oya shall have the ownership and right of exploitation to the newly requisitioned land, newly built houses and newly invested equipment and facilities funded by Oya other than those in the campus of the existing vocational school and shall be responsible for the creditor's rights and debts that occur during Oya’s operation, settling the labor disputes for staff members employed by Oya and the safety of the school during the term of the agreement. In connection with the agreement, Oya warranted that the employment rate shall be above 96% and the stability rate above 92% with two-year track management for the satisfaction of students and their parents. Oya also warranted that the welfare of Zhangwu Government’s staff members who continue to be employed will not be lower than its former welfare level. The joint school-running agreement is effective upon its execution and the term is thirty (30) years.

Nine Months and Third Quarter of Fiscal 2011 Financial and Operating Highlights

• Revenue generated in this quarter was $16.9 million, which was a decrease of 2% as compared to $17.2 million for the three months ended May 31, 2010.
• Net income for the quarter decreased 10% to $4.9 million, compared with $5.6 million for the same period of last year. $.15 per share basic and diluted earnings based on 33 million shares outstanding for the quarter.
• Total revenue for the first nine months of fiscal year 2011 achieved $46 million, representing an increase of $8.9 million, or 24% as compared to $37.1 million for the same period of 2010.
• For the nine months ended May 31, 2011, our net income increased $3.4 million or 29% to $15.1 million, as compared to $11.7 million for the same period of last year.
• Cash and total assets were $10.6 million and $69.0 million, respectively, as of May 31, 2011.

Our net income for the three months ended May 31, 2011 was $4.9 million, representing a decrease of $0.6 million or 10% as compared to $5.5 million. For the nine months ended May 31, 2011, our net income increased $3.4 million or 29% to $15.1 million, as compared to $11.7 million for the same period of last year. Our net income for the past nine months has already exceeded the $13.6 million that we earned in the twelve months of fiscal year 2010. Basic and diluted earnings per share were $0.15 per share based on 33 million shares outstanding for the quarter, compared with basic and diluted earnings per share of $0.17 achieved in the same period a year ago.

Mr. Guangwen He, Chairman and CEO of HQ Global Education stated, "Most of our businesses did quite well in the third quarter and past nine months, meeting or exceeding expectations. Despite the unclear international financial market, we believe that our business is solid and our operating strategy is sound in China, we intend to focus on operating our "Order-oriented Education" at our ten schools utilizing our existing and accessible resources and will continue to put great efforts into business development, service quality and brand recognition."

Results of operations are a general reflection of our experience in providing customized educational programs, the operation time of our schools, the reputation of our schools, the scalability of our schools and the total number of students, all of which demonstrated a growth trend in the past years and are expected to expand in the future. Our expansion can be reflected specifically in the increase of our student enrollment, the development of new customized educational programs, the cooperation with more target employers, the education appropriations from local government for running new schools. It will be also reflected in our return from the investment on new business in the future. The number of students increased from 32,238 in the first semester of fiscal year 2010 to 37,408 in the first semester of fiscal year 2011.

First Quarter Fiscal Year 2011 Financial and Operating Highlights

• Revenues generated in the first quarter of fiscal year 2011 increased by 27.9% to $16.6 million, up from $13.0 million in the first quarter of fiscal year 2009
  -- Tuition and other fees generated $12.2 million or 73.3% of revenues
  -- Services generated $4.4 million or 26.7% of revenues
• Gross margin for the first quarter of fiscal year 2011 was 39.0% based on gross profit of $6.5 million, compared with a 39.6% margin in the first quarter of fiscal year 2010
• Net income for the first quarter of fiscal year 2011 increased 53.5% to $5.5 million, compared with $3.6 million in the first quarter of fiscal year 2010
• Earnings per diluted share were $0.17 for the quarter, compared with diluted EPS of $0.17 achieved in the same period a year ago

Mr. Guangwen He, Chairman and CEO of the Company, stated, "Our first quarter fiscal 2011 performance was highlighted by solid revenue and net income growth, as well as improved margins. These strong results demonstrate our ability to successfully manage costs as we expand our operations. We grew our student enrollment at HQ-operated schools to a record 37,408 students in the first semester of fiscal year 2011. There is an urgent need for skilled workers in China's rapidly developing economy, and we anticipate that enrollment in vocational training programs such as ours will continue to increase."

Mr. He continued, "During the remainder of fiscal 2011, we plan to seek strategic partnerships with other schools, expand our existing facilities and program offerings, and promote the HQ brand name to increase our market presence and attract new students to our schools. By leveraging our strong reputation and successful operating history, we expect the positive growth pattern of recent years to continue into 2011."

Fiscal Year 2010 Financial and Operating Highlights

• Revenues generated in fiscal year 2010 increased by 30.3% to $47.1 million, up from $36.1 million in fiscal 2009
  -- Tuition and other fees generated $34.8 million or 73.9% of revenues
  -- Services generated $12.3 million or 26.1% of revenues

• Gross margin for the year was 38.1% based on gross profit of $17.9 million, compared with a 36.8% margin in fiscal 2009

• Net income for fiscal 2010 increased 27.2% to $13.6 million, compared with $10.7 million in fiscal 2009

• Earnings per diluted share were $0.49 for the year, compared with diluted EPS of $0.52 achieved in the previous year

• Fourth quarter EPS was $0.03 vs. $0.05

Mr. Guangwen He, Chairman and CEO of the Company, stated, "Our fiscal 2010 performance was highlighted by solid revenue and net income growth, as well as improved margins. These strong results demonstrate our ability to successfully manage costs as we expand our operations. We grew our operating network to 10 schools during fiscal 2010, and accumulated enrollment at HQ-operated schools exceeded 100,000 students. There is an urgent need for skilled workers in China's rapidly developing economy, and we anticipate that enrollment in vocational training programs such as ours will continue to increase."

Mr. He continued, "In fiscal 2011, we plan to seek strategic partnerships with other schools, expand our existing facilities and program offerings, and promote the HQ brand name to increase our market presence and attract new students to our schools. By leveraging our strong reputation and successful operating history, we expect the positive growth pattern of recent years to continue into 2011."

Hq Global Education Reported fiscal third quarter earnings this morning:

• Revenues reached $17,235,916, an 80.73% gain over revenues of $9,536,983 in the prior year third quarter.
  
•  Net income climbed to $5,548,960, from $2,435,720 in last year's third quarter.
  
• EPS, based on 33,000,000 shares outstanding in the third quarter of fiscal year 2010 was $0.17, compared with $0.12 per share on 20,500,000 shares outstanding in the same period last year.

Note: The actual table in the release shows EPS of $0.12 as compared to $0.15 reported in the body of the release.  We believe $0.12 is likely the correct number.

Comments were bullish:

"We anticipate contributions to our bottom line from both new school additions in the current fiscal year, which we see shaping up to be another year of strong top and bottom line growth, in a period of continuing strong demand for our well-trained graduates."

 "Under economic  globalization,  enterprises  in China are expanding  faster
than ever and this has  resulted  in a serious  shortage  of skilled  personnel.
According  to the  National  Guideline  on  Medium  and  Long-Term  Program  for
Education Reform and Development 2010-2020 issued by the Central Government, the
number of secondary vocational students is expected to reach 22.5 million by the
end of 2015  and  23.5  million  by the end of 2020.  Management  believes  this
provides favorable opportunities for the development of our business."

Business Strategy:

For the  following  twelve  months,  HQ Global  will  continue  to grow its
business to provide vocational training and desirable job opportunities for more
students. Our business development plan is as follows

• Under the Order-oriented Education mode, we expect to build new teaching facilities in our existing schools so as to expand the capacity of student enrollment. Meanwhile, we are expecting to cooperate with 2-4 vocational or technical schools in the financial year 2011, and with 10-12 vocational or technical schools in the coming five years in the inland provinces, such as Yunnan Province, Liaoning Province, Guangxi Province, Guizhou Province, Anhui Province, Hunan Province and so on, in addition to the ten schools (including Dongying Shengli Maritime School in Shandong Province which we started in this June) we operate currently.
• We plan to cooperate with more maritime schools in Fujian Province and Qingdao City in Shandong Province to reinforce the training of maritime talents.
•  We plan to establish cooperative relationships with more enterprises and actively promote the Order-oriented Education mode.
• We will further develop our program and curriculum to be offered to different types of students including high school graduates, unemployed young people, enterprise employees and rural labor force.
• We will launch the "Online Education" where we provide remote education program via dedicated Internet platform and "Continuing Education" where we provide continuing education to employed people.

We are attempting to verify last year's fourth quarter share count. It will likely be around 20 million.   

• The 2010 third quarter's revenue is about 70% above the average of the first two 2010 quarters.  

We could not find a reference to liquidity needs for the next 12 months, but ratios look solid

• Current Ratio (Current Assets/Current Liabilities= 3.23
• Cash Ratio (Cash/Current Liabilities)= 1.48
• Cash Flow from Operations Ratio (Cash Flow/Current Liabilities): 2.13
• Debt to Equity: 5.2%

Ultimately investors :

• need to inquire about capital raise plans
• would require financial guidance.
• need understand that the fourth quarter has been the seasonal low quarter.

On February 11,  2010 Green Star Mining d/b/a HQ Global Education Inc. completed a reverse merger.

Company Snapshot:  Operates two private secondary vocational schools and a public secondary vocational school in China.

Financial Snapshot: (August Year)

2009 Revenues increased 25.3% to $36.1 million
2009 Net income increased 37.2% to $10.7 million
2010 First quarter revenues increased 11.1% to $13.0 million

Post Merger Share Calculation:

• 12,500,000: Pre reverse merger outstanding shares
• 20,500,000: Newly issued shares of Common Stock

GeoTeam® best effort calculation of total post reverse merger outstanding shares assuming full conversions:  33,000,643

Source: 8K (February 8, 2010)