WAFU Wah Fu Education Group Ltd

Wah Fu Education Group Limited (“Wah Fu” or the “Company”) (NASDAQ:WAFU), a provider of online education and exam preparation services, as well as related training materials and technology solutions for both institutions and individuals, today announced its unaudited financial results for the six months ended September 30, 2020.

Financial Highlights for the Six Months Ended September 30, 2020

		For the Six Months Ended  September 30,
($’000, except per share data)		2020				2019				% Change
Revenue		$	4,302			$	2,500				72.1	%
Gross profit		$	2,430			$	986				146.5	%
Gross margin			56.5	%			39.4	%			17.1	pp
Income (loss) from operations		$	687			$	(1,038	)			-166.2	%
Operating profit (loss) margin			16.0	%			-41.5	%			57.5	pp
Net income (loss)		$	511			$	(1,183	)			-143.2	%
Basic and diluted earnings (loss) per share		$	0.09			$	(0.29	)			-131.0	%

* pp: percentage points            

	●	Revenue increased by 72.1% year-over-year to $4.30 million for the six months ended September 30, 2020 from $2.50 million for the same period of the prior fiscal year. The increase in revenue is primarily attributable to the increased revenue from online education services due to the impact of the COVID-19.
	●	Gross profit increased by 146.5% to $2.43 million for the six months ended September 30, 2020 from $0.99 million for the same period of the prior fiscal year. Gross margins were 56.5% and 39.4% for the six months ended September 30, 2020 and 2019, respectively. The increased gross profit was mainly due to (i) the sharply increased revenue from online education service due to the impact of the COVID-19, which had a higher gross margin; (ii) the decreased salary expense for IT service personnel since the Company shifted focus to online education service.
	●	Income from operations was $0.69 million for the six months ended September 30, 2020, compared to loss from operations of $1.04 million for the same period of the prior fiscal year. Operating profit margin was 16.0% for the six months ended September 30, 2020, compared to operating loss margin of 41.5% for the same period of the prior fiscal year.
	●	Net income was $0.51 million or, income per share of $0.09 for the six months ended September 30, 2020, compared to net loss of $1.18 million, or loss per share of $0.29, for the same period of the prior fiscal year.

Unaudited Financial Results for the Six months Ended September 30, 2020

Revenue

For the six months ended September 30, 2020, revenue increased by $1.80 million, or 72.1%, to $4.30 million from $2.50 million for the same period of the prior fiscal year. The increase in revenue is primarily attributable to the increase of revenue from online education services.

For the six months ended September 30, 2020, revenue from online education services increased by $1.74 million, or 71.0%, to $4.19 million from $2.45 million for the same period of the prior fiscal year. The increase was primarily due to increase in B2B2C revenues. The increase in B2B2C revenues was due to the increased revenue from online continuing education and examination service. Due to the impact of the COVID-19, the daily offline education and teaching activities of colleges and universities across the country were suspended due to government’s regulations. The online courses we provided during the six months ended September 30, 2020 thus increased sharply. As a consequence, revenue from online education services increased, compared to the same period of the prior fiscal year. The number of courses provided increased by 41,231 from 244,422 courses for the six months ended September 30, 2019 to 285,653 courses for the six months ended September 30, 2020.

Cost of revenue

Cost of revenue increased by $0.36 million, or 24.2%, to $1.85 million for the six months ended September 30, 2020 from $1.49 million for the same period of the prior fiscal year. The increase in overall cost of revenue was mainly due to increased cost of revenue for online education services. Because revenue from the online education services increased, the cooperation fee paid to collaborators increased. The increase was partially offset by payroll expense due to the decrease of the total number of employees during the six months ended September 30, 2020.

Cost of revenue for online education services increased by $0.34 million, or 22.8%, to $1.83 million for the six months ended September 30, 2020 from $1.49 million for the same period of the prior fiscal year. The increase in cost of revenue for online education services was primarily due to increased collaboration fees resulting from business expansion in Hunan Province. As the total numbers of adult education course increased, the collaboration fees paid to collaborator increased accordingly.

Gross profit

Gross profit increased by $1.44 million, or 146.5%, to $2.43 million for the six months ended September 30, 2020 from $0.99 million for the same period of the prior fiscal year. As a result, gross margin increased by 17.1 points to 56.5% for the six months ended September 30, 2020 from 39.4% for the same period of the prior fiscal year.  Gross profit for online education services increased by $1.40 million or 148.9% to $2.34 million for the six months ended September 30, 2020 from $0.94 million for the same period of the prior fiscal year. As the online courses we provided during the six months ended September 30, 2020 increased sharply, the revenue from online education services increased compared to the same period of the prior fiscal year. As the operation of our platform remained stable, the cost of online education services, such as collaboration fees paid to universities, depreciation and amortization expenses, didn’t increase exactly in line with increase in revenue. As a result, gross margin for online education services increased to 56.0% for the six months ended September 30, 2020 from 38.4% for the same period of the prior fiscal year.

Operating expenses

Selling expenses increased by $0.05 million, or 6.6%, to $0.81 million for the six months ended September 30, 2020 from $0.76 million for the same period of the prior fiscal year. The increase was mainly due to the increased effort the company put in marketing in current period.

General and administrative expenses decreased by $0.33 million, or 26.2%, to $0.93 million for the six months ended September 30, 2020 from $1.26 million for the same period of the prior fiscal year. The decrease was primarily because the government claimed the company exempt from social insurance during the six months ended September 30, 2020 due to the impact of COVID-19.

Total operating expenses decreased by $0.28 million, or 13.9%, to $1.74 million for the six months ended September 30, 2020 from $2.02 million for the same period of the prior fiscal year.

Income (loss) from operations

Income from operations was $0.69 million for the six months ended September 30, 2020, compared to loss from operations of $1.04 million for the same period of the prior fiscal year. We realized profit mainly due to the increase of revenue during the six months ended September 30, 2020. For details reasons, please see above.

Other income (expenses)

Total other income, including interest income, loss from investments in unconsolidated entity, net of other expenses, were $0.04 million and $0.04 million for the six months ended September 30, 2020 and the same period of the prior fiscal year, respectively.

Income (loss) before income taxes

Income before income taxes was $0.72 million for the six months ended September 30, 2020, compared to loss before income taxes of $1.00 million for the same period of the prior fiscal year.

Net income (loss) and earnings (loss) per share

Net income was $0.51 million for the six months ended September 30, 2020, compared to net loss of $1.18 million for the same period of the prior fiscal year. Net profit margin was 11.9% for the six months ended September 30, 2020, compared to net loss margin of 47.3% for the same period of the prior fiscal year.

After deducting non-controlling interests, net profit attributable to the Company was $0.37 million, or profit of $0.09 basic and diluted share, for the six months ended September 30, 2020. This compared to net loss of $1.23 million, or loss of $0.29 per basic and diluted share, for the same period of the prior fiscal year.

Weighted average number of shares outstanding was 4,381,033 for the six months ended September 30, 2020, compared to 4,199,336 for the same period of last fiscal year.

Financial Condition

As of September 30, 2020, the Company had cash of $9.27 million, compared to $6.83 million as of March 31, 2020. Total working capital was $8.64 million as of September 30, 2020, compared to $7.34 million as of September 30, 2019.

Net cash provided by operating activities was $1.59 million for the six months ended September 30, 2020, compared to net cash provided by operating activities of $1.13 million for the same period last year. Net cash provided by investing activities was $0.68 million for the six months ended September 30, 2020, compared to net cash used in investing activities $0.06 million for the same period last year. Net cash used in financing activities was $0.09 million for the six months ended September 30, 2020, compared to net cash provided by financing activities $4.89 million for the same period of last year.

About Wah Fu Education Group Limited

Headquartered in Beijing, China, Wah Fu Education Group Limited provides online training and exam preparation services, as well as related training materials and technology solutions for both institutions, such as universities and training institutions, and students. For more information about Wah Fu, please visit www.edu-edu.cn.

Safe Harbor Statement

This press release contains forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. Forward-looking statements include statements concerning plans, objectives, goals, strategies, future events or performance, and underlying assumptions and other statements that are not statements of historical facts. When the Company uses words such as “may, “will, “intend,” “should,” “believe,” “expect,” “anticipate,” “project,” “estimate” or similar expressions that do not relate solely to historical matters, it is making forward-looking statements. Forward-looking statements are not guarantees of future performance and involve risks and uncertainties that may cause the actual results to differ materially from the Company’s expectations discussed in the forward-looking statements. These statements are subject to uncertainties and risks including, but not limited to, the following:  the Company’s goals and strategies; the Company’s future business development; product and service demand and acceptance; changes in technology; economic conditions; the growth of the online training industry in China and the other markets the Company serves or plans to serve; reputation and brand; the impact of competition and pricing; government regulations; fluctuations in general economic and business conditions in China and the other markets the Company serves or plans to serve and assumptions underlying or related to any of the foregoing and other risks contained in reports filed by the Company with the Securities and Exchange Commission (the “SEC”).  For these reasons, among others, investors are cautioned not to place undue reliance upon any forward-looking statements in this press release. Additional factors are discussed in the Company’s filings with the SEC, which are available for review at www.sec.gov. The Company undertakes no obligation to publicly update these forward-looking statements to reflect events or circumstances that arise after the date hereof.

For more information, please contact:

Raincy Du ir@edu-edu.com.cn

WAH FU EDUCATION GROUP LIMITED AND SUBSIDIARIESUNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

		As of September 30,				As of  March 31,
		2020				2020
ASSETS
CURRENT ASSETS:
Cash		$	9,266,310			$	6,833,891
Accounts receivable, net			1,149,926				542,913
Other receivables, net			74,601				143,920
Loan to third parties, current			666,669				42,316
Loan to related parties			1,832,051				2,537,532
Other current assets			199,543				150,213
TOTAL CURRENT ASSETS			13,189,100				10,250,785
Loan to third parties, noncurrent			-				579,335
Right-of-use assets			494,963				603,553
Rent deposit			76,123				73,049
Property and equipment, net			743,552				775,465
Investments in unconsolidated entities			11,439				10,977
Deferred tax assets, net			338,191				272,115
TOTAL  ASSETS		$	14,853,368			$	12,565,279
CURRENT LIABILITIES:
Due to related parties		$	297,855			$	286,353
Deferred revenue			2,399,981				1,524,918
Operating lease liabilities, current			265,610				254,332
Taxes payable			580,341				314,052
Other payables			200,716				189,201
Accrued expenses and other liabilities			808,483				335,699
TOTAL CURRENT LIABILITIES			4,552,986				2,904,555
Operating lease liabilities, noncurrent			242,695				361,595
TOTAL LIABILITIES			4,795,681				3,266,150
COMMITMENTS AND CONTINGENCIES
EQUITY
Common stock, $0.01 par value, 30,000,000 shares authorized; 4,381,033 and 4,381,033 shares issued and outstanding as of September 30, 2020 and March 31, 2020 respectively			43,810				43,810
Additional paid-in capital			4,799,384				4,799,384
Statutory reserve			231,424				231,424
Retained earnings			5,098,639				4,723,999
Accumulated other comprehensive loss			(505,639	)			(734,028	)
Total shareholders’ equity			9,667,618				9,064,589
Non-controlling interest			390,069				234,540
TOTAL EQUITY			10,057,687				9,299,129
TOTAL LIABILITIES AND EQUITY		$	14,853,368			$	12,565,279

WAH FU EDUCATION GROUP LIMITED AND SUBSIDIARIESUNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

		For the Six Months Ended September 30,
		2020				2019
REVENUE		$	4,302,082			$	2,500,195
COST OF REVENUE AND RELATED TAX
Cost of revenue			1,853,601				1,491,384
Business and sales related tax			18,634				22,509
GROSS PROFIT			2,429,847				986,302
OPERATING EXPENSES
Selling expenses			812,877				764,179
General and administrative expenses			929,998				1,259,784
Total operating expenses			1,742,875				2,023,963
INCOME (LOSS) FROM OPERATIONS			686,972				(1,037,661	)
OTHER INCOME (EXPENSE)
Interest income			82,864				46,447
Other expenses			(46,389	)			(5,726	)
Total other income, net			36,475				40,721
INCOME (LOSS) BEFORE INCOME TAX PROVISION			723,447				(996,940	)
PROVISION FOR INCOME TAXES			212,024				186,434
NET INCOME (LOSS)			511,423				(1,183,374	)
Less: net income attributable to non-controlling interest			136,783				41,653
NET INCOME (LOSS) ATTRIBUTABLE TO WAH FU EDUCATION GROUP LIMITED		$	374,640			$	(1,225,027	)
COMPREHENSIVE INCOME (LOSS)
Net income (loss)			511,423				(1,183,374	)
Other comprehensive loss: foreign currency translation loss			247,135				(388,073	)
Total comprehensive loss			758,558				(1,571,447	)
Less: Comprehensive income (loss) attributable to non-controlling interest			18,746				(26,088	)
COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO WAH FU EDUCATION GROUP LIMITED		$	739,812			$	(1,545,359	)
Earnings (loss) per common share - basic and diluted		$	0.09			$	(0.29	)
Weighted average shares - basic and diluted			4,381,033				4,199,336

  

WAH FU EDUCATION GROUP LIMITED AND SUBSIDIARIESUNAUDITED CONDENSED CONSOLIDATION STATEMENTS OF CHANGES IN EQUITY

		Ordinary Shares								Additional  Paid-in				Statutory				Retained				Accumulated Other Comprehensive				Shareholders’				Non-controlling				Total
		Shares				Amount				Capital				Reserves				Earnings				Income (Loss)				Equity				Interest				Equity
Balance at March 31, 2020			4,381,033			$	43,810			$	4,799,384			$	231,424			$	4,723,999			$	(734,028	)		$	9,064,589			$	234,540			$	9,299,129
Net income (loss)			-				-				-				-				374,640				-				374,640				136,783				511,423
Foreign currency translation adjustment			-				-				-				-				-				228,389				228,389				18,746				247,135
Balance at September 30, 2020			4,381,033			$	43,810			$	4,799,384			$	231,424			$	5,098,639			$	(505,639	)		$	9,667,618			$	390,069			$	10,057,687
Balance at March 31, 2019			3,200,000			$	32,000			$	217,395			$	222,180			$	6,421,944			$	(407,169	)		$	6,486,350			$	211,353			$	6,697,703
Common stock issued net of stock issuance costs of $1,266,326			1,181,033				11,810				4,627,029				-				-				-				4,638,839				-				4,638,839
Net income (loss)			-				-				-				-				(1,225,027	)			-				(1,225,027	)			41,653				(1,183,374	)
Foreign currency translation adjustment			-				-				-								-				(361,985	)			(361,985	)			(26,088	)			(388,073	)
Balance at September 30, 2019			4,381,033			$	43,810			$	4,844,424			$	222,180			$	5,196,917			$	(769,154	)		$	9,538,177			$	226,918			$	9,765,095

  

WAH FU EDUCATION GROUP LIMITED AND SUBSIDIARIESUNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

		For the six months ended, September 30
		2020				2019
Cash flows from operating activities:
Net Income (loss)		$	511,423			$	(1,183,374	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization			70,124				113,767
Non-cash lease expense			130,173				78,861
Loss from disposal of property and equipment			-				88
Provision for doubtful accounts			241,551				59,242
Provision for investments in unconsolidated entities			23,329				-
Interest income from loan to third parties			(72,600	)			(15,610	)
Deferred tax benefit			(53,069	)			91,148
Changes in operating assets and liabilities:
Accounts receivable, net			(645,705	)			929,249
Other receivable, net			150,959				(155,658	)
Other current assets			(44,446	)			67,131
Rent deposit			(77,731	)			(74,856	)
Deferred revenue			787,789				1,157,842
Taxes payable			245,863				108,238
Other payable			4,074				-
Operating lease liabilities			(129,738	)			(56,131	)
Accrued expenses and other liabilities			445,590				13,928
Net cash provided by operating activities			1,587,586				1,133,865
Cash flows from investing activities:
Purchase of property and equipment			(7,417	)			(63,111	)
Proceeds made for loans to related party			(1,650,000	)			-
Proceeds from loans to related party			2,355,481				-
Payments made for loans to third parties			(18,321	)			-
Net cash provided by (used in) investing activities			679,743				(63,111	)
Cash flows from financing activities:
Changes in due to related parties			(88,510	)			26,040
Net proceeds from initial public offering (“IPO”)			-				4,866,512
Net cash provided by (used in) financing activities			(88,510	)			4,892,552
Effect of exchange rate fluctuation on cash			253,600				(293,494	)
Net increase in cash			2,432,419				5,669,812
Cash at beginning of the period			6,833,891				3,927,718
Cash at end of the period		$	9,266,310			$	9,597,530
Supplemental cash flow information
Cash paid for income taxes		$	29,066			$	11,228
Non-cash financing activities
Right of use assets obtained in exchange for operating lease obligations		$	816,057			$	823,554
Deferred offering cost netted with proceeds from IPO		$	-			$	227,673