Kid Castle Educational (PINK:KDCE)

We have assertively expanded our business in the PRC. Our Shanghai operations turned profitable in 2006, and the Group turned profitable in the first quarter of 2007. We anticipate continued expansion of the demand for learning materials and an increase in the number of franchise schools. Furthermore, we foresee better utilization of capital and funds as we identify and implement alternatives for restructuring and refinancing. In order to increase its profit margin, the Group has operated direct-owned schools since 2007. Due to the rapid expansion in our Shanghai operations, the Group foresees additional need for funds in the near future to facilitate its expansion plans during 2009. As discussed in Note 11 to our Condensed Consolidated Financial Statements, the majority of the Group’s existing loans are guaranteed by two directors of the Group who have expressed their willingness to continue to support the Group until other sources of funds have been obtained. Moreover, management believes that, with the support of the directors and continuous PRC sales, the Company would have sufficient funds for its operations, but may need new a bank facility to fulfill its business plan to expand its operations in the future.

Source: SEC Form 10Q (For the quarterly period ended: March 31, 2009, page 22)