As filed with the Securities and Exchange Commission on March 20, 2017 

 

Registration No. 333-            

 

 

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

 

 

 

FORM F-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

 

 

 

Wah Fu Education Group Limited
(Exact name of Registrant as specified in its charter)

 

Not Applicable
(Translation of Registrant’s name into English)

 

British Virgin Islands   8200   Not Applicable
(State or other jurisdiction of
incorporation or organization)
  (Primary Standard Industrial
Classification Code Number)
  (I.R.S. Employer
Identification Number)

 

Room 505 Building No.40, No.1 Disheng North Street

Economic and Technological Development Zone

Beijing, China 100176
Tel: +86 10 57925024
(Address, including zip code, and telephone number, including area code, of Registrant’s principal executive offices)

 

 

 

Puglisi & Associates

850 Library Ave

Suite 204

Newark, DE 19711
(Name, address, including zip code, and telephone number, including area code, of agent for service)

 

 

 

Copies to:
     

Richard I. Anslow, Esq.

Ellenoff Grossman & Schole LLP

1345 Avenue of the Americas

New York, New York 10105

Telephone: (212) 370-1300

 

Fang Liu, Esq.

Mei & Mark LLP

818 18th Street NW, Suite 410

Washington, DC 20006

(202) 567-6417

 

Approximate date of commencement of proposed sale to the public: as soon as practicable after the effective date of this registration statement.

 

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box.    ☒

 

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.     ☐

 

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.     ☐

 

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.     ☐

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933. Emerging growth company.     ☒

 

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 7(a)(2)(B) of the Securities Act.     ☒

 

 

   

 

 

CALCULATION OF REGISTRATION FEE

 

Title of each class of securities
to be registered
  Amount of
shares to be
registered
    Proposed maximum
offering price
per share
    Proposed maximum
aggregate offering
price (1)
    Amount of
registration fee
 
 

Ordinary shares, par value $0.01 per share (2)

    [___]       [___]     $ 10,000,000      $ 1,245.00  
Warrants to purchase ordinary shares issuable to underwriter (3)(4)     [___]       -       -       -  
Ordinary shares, par value $0.01 per share, issuable upon exercise of underwriter warrants (2)     [___]       [___]     $ 500,000     $ 62.25  
Total     [___]       [___]     $ 10,500,000     $ 1,307.25  

 

(1) Estimated solely for the purpose of determining the amount of registration fee in accordance with Rule 457(a) under the Securities Act of 1933, as amended.
   
(2) In accordance with Rule 416(a), the Registrant is also registering an indeterminate number of additional ordinary shares that shall be issuable pursuant to Rule 416 to prevent dilution resulting from share splits, share dividends or similar transactions.
   
(3) The Registrant will issue to the Underwriter warrants to purchase a number of ordinary shares equal to an aggregate of 10 percent (10%) of the ordinary shares sold in the offering. The exercise price of the underwriter warrants is equal to 125% of the offering price of the ordinary shares offered hereby. Assuming a maximum offering amount and an exercise price of $[__] per share, we would receive, in the aggregate, $[__] upon exercise of the underwriter warrants. The ordinary shares underlying the underwriter warrants are exercisable within five years after issuance, commencing 180 days from the effective date of the registration statement at any time, and from time to time, in whole or in part.
   
(4) No separate registration fee required pursuant to Rule 457(g) under the Securities Act.

 

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to such Section 8(a), may determine.

 

 

 

  

 

 

The information in this preliminary prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities and we are not soliciting offers to buy these securities in any jurisdiction where the offer or sale is not permitted.

 

PRELIMINARY PROSPECTUS

 

SUBJECT TO COMPLETION, DATED March 20, 2018

 

[____] Ordinary Shares (Minimum Offering Amount)

[____] Ordinary Shares (Maximum Offering Amount)

 

Wah Fu Education Group Limited

 

This is an initial public offering of ordinary shares of Wah Fu Education Group Limited, a British Virgin Islands company (“we”, “us”, “our”, or the “Company”). We are offering on a “best efforts” basis a minimum of [____] and a maximum of [_____] ordinary shares. Prior to this offering, there has been no public market for our ordinary shares. We anticipate the initial public offering price of our ordinary shares will be US$[__] per share. 

We are an “emerging growth company” under applicable U.S. federal securities laws and are eligible for reduced public company reporting requirements. 

We have applied for the listing of our ordinary shares NASDAQ Stock Market (“NASDAQ”) under the symbol “WAFU.”

Investing in our ordinary shares involves risks. See “Risk Factors” beginning on page 8.

    Minimum offering amount     Maximum offering amount  
    Per ordinary share     Total     Per ordinary share     Total  
Initial public offering price   US$         [__]     US$ 5,000,000     US$         [__]     US$ 10,000,000  
Commissions to the underwriter (8%) for sales to investors introduced by the underwriter (1)   US$ [__]     US$ [__]     US$ [__]     US$ [__]  
Commissions to the underwriter (4.5%) for sales to investors introduced by us (1)   US$ [__]     US$ [__]     US$ [__]     US$ [__]  
Proceeds to our company before expenses (1)(2)   US$ [__]     US$ [__]     US$ [__]     US$ [__]  
(1) We have agreed to pay Network 1 Financial Securities, Inc. (the “Underwriter”) a fee equal to 7.5% of the gross proceeds of the offering from investors introduced by the Underwriter and a fee equal to 4.5% of the gross proceeds of the offering from investors introduced by us. We have agreed to grant to the Underwriter warrants equal to 5% of the aggregate number of the ordinary shares sold in the offering and a corporate finance fee of 2% of the gross proceeds of the offering. We have also agreed to pay the Underwriter’s reasonable out-of-pocket expenses (including fees and expenses of the underwriter’s counsel) incurred by the Underwriter in connection with this offering up to US$75,000. See “Underwriting” in this prospectus for more information regarding our arrangements with the Underwriter.
(2) The total estimated expenses related to this offering are set forth in the section entitled “Expenses Relating to This Offering.” 

The offering is being made without a firm commitment by the Underwriter, which has no obligation or commitment to purchase any securities. The Underwriter is not required to sell any specific number or dollar amount of ordinary shares but will use its best efforts to sell the shares offered. One of the conditions to our obligation to sell any securities through the Underwriter is that, upon the closing of the offering, the ordinary shares would qualify for listing on NASDAQ. 

We do not intend to close this offering unless we sell at least a minimum number of ordinary shares, at the price per share set forth above, to result in sufficient proceeds to list our ordinary shares on NASDAQ. Because this is a best efforts offering, the Underwriter does not have an obligation to purchase any securities, and, as a result, there is a possibility that we may not be able to sell the minimum offering amount. The offering may close or terminate, as the case may be, on the earlier of (i) any time after the minimum offering amount of our ordinary shares is raised, or (ii) [__] days from the date of this prospectus, or the expiration date although we retain the right to terminate the offering prior to the expiration date. If we can successfully raise the minimum offering amount within the offering period, the proceeds from the offering will be released to us. The proceeds from the sale of the ordinary shares in this offering will be deposited in a separate (limited to funds received on behalf of us) non-interest bearing bank account at the branch of [____] established by our escrow agent, Continental Stock Transfer & Trust Company (the “Escrow Account”), until the minimum offering amount is raised. See “Underwriting—Deposit of Offering Proceeds.” If we do not raise the minimum offering amount of $5,000,000, we will not conduct a closing of this offering and our Escrow Agent will promptly return to investors all amounts previously deposited by them in escrow, without interest or deduction. We expect that delivery of the ordinary shares will be made to investors through the book-entry facilities of The Depository Trust Company. 

 

Neither the SEC nor any state securities commission has approved or disapproved of these securities or passed upon the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense. 

The Underwriter expects to deliver the ordinary shares to purchasers on ___________, 2018.

Network 1 Financial Securities, Inc.  

The date of this prospectus is _______, 2018.

  

 

 

TABLE OF CONTENTS

 

    Page
Prospectus Summary   1
Risk Factors   8
Special Note Regarding Forward-Looking Statements   39
Use of Proceeds   40
Dividend Policy   41
Capitalization   42
Dilution   43
Exchange Rate Information   46
Enforceability of Civil Liabilities   47
Corporate History and Structure   48
Selected Consolidated Financial Data   51
Management’s Discussion and Analysis of Financial Condition and Results of Operations   52
Industry Overview   72
Business   80
Regulations   88
Management   98
Principal Shareholders   102
Related Party Transactions   103
Description of Share Capital   104
Shares Eligible for Future Sale   113
Taxation   114
Underwriting   120
Expenses Relating to this Offering   127
Legal Matters   128
Experts   128
Where You Can Find Additional Information   128
Index to Consolidated Financial Statements   F-1

 

You should rely only on the information contained in this prospectus or in any related free-writing prospectus. We have not authorized anyone to provide you with information different from that contained in this prospectus. We are offering to sell, and seeking offers to buy, the ordinary shares only in jurisdictions where offers and sales are permitted. The information contained in this prospectus is current only as of the date of this prospectus, regardless of the time of delivery of this prospectus or of any sale of the ordinary shares.

 

We have not taken any action to permit a public offering of the ordinary shares outside the United States or to permit the possession or distribution of this prospectus outside the United States. Persons outside the United States who come into possession of this prospectus must inform themselves about and observe any restrictions relating to the offering of the ordinary shares and the distribution of the prospectus outside the United States.

 

Until            , 2018 (the 25 th day after the date of this prospectus), all dealers that buy, sell or trade ordinary shares, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the obligation of dealers to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.

 

  

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PROSPECTUS SUMMARY

 

The following summary is qualified in its entirety by, and should be read in conjunction with, the more detailed information and financial statements appearing elsewhere in this prospectus. In addition to this summary, we urge you to read the entire prospectus carefully, especially the risks of investing in our ordinary shares discussed under “Risk Factors,” before deciding whether to buy our ordinary shares.

 

Unless otherwise indicated, all share amounts and per share amounts in this prospectus have been presented on a pro-forma basis to reflect a forward stock split of the authorized and outstanding ordinary shares at a ratio of 100-for-1 effected on March 16, 2018 and subsequent surrender of an aggregate of 1,800,000 ordinary shares by existing shareholders on a pro rata basis. 

 

Our Business

 

We are a holding company incorporated under the laws of the British Virgin Islands. Through our subsidiaries and variable interest entity, we provide online exam preparation services and related technology solutions and also produce online training course materials in China and have been in operation for nearly 17 years. We develop our own online education materials that are offered through the cloud and that can be used for a wide range of purposes, such as standard examination preparation, professional training and interactive programs for educational purposes other than exam preparation. We also produce thousands of online classes. Our services not only include development of online education platforms and online course materials but also consist of comprehensive cloud service for online education and exam preparation training. The bulk of our operations is conducted via our wholly owned subsidiaries, primarily Beijing Huaxia Dadi Distance Learning Services Co., Ltd. while the rest of our business operations, including certain portions of our B2C services and technology services, are conducted through our variable interest entity Beijing Huaxia Dadi Digital Information Technology Co., Ltd. We do not directly own the businesses or assets in the PRC that are operated by our variable interest entity, including our PRC internet content license.

 

We currently offer online education services and technology research & development services. Our online education services currently comprises Online Education Cloud Services and Online Training Services.

 

Online Education Cloud Service (“B2B2C”)

 

We provide online education platforms to institutions, such as universities and training institutions, and online course development service companies. Our teachers are well regarded and recommended by our clients, which include universities and academic institutions. Through our product development team, we interview and enlist teachers who we use to record teaching sessions. In return, we provide fixed compensation to teachers. We have developed three separate types of B2B2C platforms: a self-study examination platform, a continuing education platform and a non-diploma training platform (which allows students to enroll in courses for college credit). These platforms are available both online and via mobile applications that we design for each of our clients. Currently, we are primarily focused on providing clients with B2B2C services relating to self-study examinations, which are a set of standard national examinations necessary to obtain college degrees in China. We have offered such services since September 2009. We entered into the adult education field and commenced offering continuing education platforms in late 2016. We offer over 700 courses to students that use this platform. We commenced offering our non-diploma training platforms in March 2017. We currently provide services in ten provinces in China and believe that we are the leading service provider in this market.

 

Online Training Service (“B2C”)

 

We provide online training and examination preparation services directly to students for a fee. We have provided this service since 2000, however, due to limited marketing efforts, the revenue generated from this service has been limited. Beginning in early 2017, we began to increase our marketing efforts for our B2C service and our revenue from this service increased 50% in the first half of 2017 compared to the first half of 2016. With the increased demand for continuing education, we plan to expand our B2C service. In connection with our B2C service, we provide an online cloud education platform targeting end users, which is available both online and via the mobile applications we design for each program. We plan to license this platform to other offline education and training institutions for them to offer online services and to manage their online courses and online users. Students that use this service are primarily college students and students preparing for the self-study examination. In the last two years, we have provided on average approximately 350,000 courses to students per year.

 

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Technology Research & Development Services

 

Another major aspect of our operations is dedicated to developing and maintaining online education platforms and online courses for our clients, comprising universities, government agencies and private clients such as publishers and education service companies. We also provide consulting, maintenance and updating services relating to online education programs we have developed for our clients. We have provided these services to our clients since our wholly-owned subsidiary, Beijing Huaxia Dadi Distance Learning Services Co., Ltd. (“Beijing Distance Learning”) commenced operations in 1999. Our largest clients for our technology services business are Shanghai World Publishing Co. and the State Intellectual Property Bureau Training Center. Pursuant to our agreements with Shanghai World Publishing Co., we develop and update platforms for its Electric Backpack program, an online interactive teaching program for elementary and middle school students in China. We have been providing online course development services to the State Intellectual Property Bureau Training Center since 2002. Our services to the center include training course recording, editing and posting as well as platform maintenance and updating for a fixed fee agreed upon by both parties.

 

Our Strengths, Strategies and Values

 

Our Strengths

 

We believe that the following competitive strengths contribute to, and will continue to reinforce, our success and leading market position in the online self-taught education industry in the PRC and differentiate us from our competitors:

 

Education Cloud Platform Advantage . We are dedicated to the development of our education platforms and actual operations and are one of the companies with the longest history in the industry. Our platforms are constantly improved and upgraded and have been well recognized by its users for being comprehensive and easy to use.

 

Leading Service Provider in Online Preparation of Self-taught Examination . According to China Research and Intelligence Co., Ltd. (“CRI”), a leading provider of industry and market research reports in China, we are the leading provider and standards setter of online education service of self-taught examination courses in the PRC and the first company in China that provides such services. We offer over 700 online courses and provide services to over 100 universities and colleges across more than ten provinces in China.

 

Leading Service Provider in Online Adult Education . We launched our adult continuing education platform in late 2016. There are approximately 20 schools that currently have service agreements with us and approximately 60 more that are testing our services. We believe our platform has become well-known in the industry.

 

Strong Brand Recognition with Nationwide Experience in Online Education . After many years in operation, our brand is well recognized. “Huaxiadadi华夏大地” is an online education course brand in the PRC. We kept improving our course designs over the years. With an experienced and cooperative team, we are able to provide quality services and exceed customer expectations. In 2015, we were awarded “2015 Chinese Brand Influence Educational Institution” by Sina Education. In 2016, we were recognized as “2016 Famous Online Education Brand” by Tencent Echo China. In 2017, we were awarded “2017 China Internet Education Brand Enterprise” by the Online Study magazine of China Long-Distance Education Magazine and China Online Education Leaders Association.

 

Technology Advantage . We have dedicated considerable resources to our technology and product development efforts. More than 50% of our employees are in our technology and product development department and are very experienced with research and development. 30% of these employees hold master or doctor degrees. In addition, we have 22 registered copyrights and have accumulated close to two decade’s experience.

 

Our Strategies

 

Our goal is to strengthen our position as a leading provider of online self-taught examination courses and adult education in PRC by pursuing the following business strategies:

 

In response to the increased demand from over 3,000 universities in China, we plan to expand our client base for our B2B2C service.

 

We continue to improve on the breadth and quality of our online courses, which are key components for our B2B2C and B2C services.

 

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In addition to cloud services, we intend to provide offline training and testing services to supplement the online services provided to universities and colleges based on their demand.

 

While implementing our national expansion strategy, we intend to acquire or set up local training companies to localize our B2B2C service.
     
  We intend to continue to increase our research and development department.

  

We intend to expand internationally by setting up branches or acquiring training institutions in North America and also leveraging international education resources to operations in China.

 

Our Mission, Vision and Values

 

Our mission is to improve education in China. Recognizing the unmet demand for higher education and the potential social and commercial value of private education, we started our business by providing education services focusing on long-distance learning. Our vision is to utilize our technology advantages accumulated over our nearly two-decade operations to become the best education technology company in China. We believe the core of distance-learning is service – customer satisfaction and innovation are critical to our success and we strive to promote and adhere to these values.

 

Our Corporate History and Structure

 

We commenced operations in China in 1999. We established a holding company on July 2012 as a company formed under the laws of the British Virgin Islands. Immediately prior to this offering, we will be 43.5% owned by River Business Limited, a British Virgin Islands company formed in July 2012 and wholly-owned by Xinghui Yang, one of our directors and officers. Our other shareholders include Silver Thousand International, a British Virgin Islands company jointly owned by Mr. Yang and Yang Yu, chairman of our Board of Directors, and HFGFR INC., a Marshall Islands company solely owned by Mr. Yu. We conduct our business in China primarily through our subsidiaries and contractual arrangements among our subsidiaries in China and Beijing HuaXiaDaDi Digital Information Technology Co., Ltd., a limited liability company formed under the laws of PRC (“Beijing Digital Information”) and its subsidiaries.

 

The following diagram illustrates our current corporate structure as of the date of this prospectus:

 

Pre- IPO Ownership and Organization Chart

 

  

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Beijing Digital Information is our consolidated affiliated entity established in China. Beijing Digital Information and its subsidiaries hold the licenses and permits necessary to conduct our business in China and directly operate our online education business. These contractual arrangements enable us to:

 

exercise effective control over Beijing Digital Information and its subsidiaries;

 

receive a substantial portion of the economic benefits from Beijing Digital Information and its subsidiaries in consideration for the services provided by our wholly owned subsidiary in China; and

 

have an exclusive option to purchase all or part of the equity interests in Beijing Digital Information, in each case when and to the extent permitted by applicable PRC law.

 

See “Corporate History and Structure—Contractual Arrangements” and “Related Party Transactions—Contractual Arrangements with our Affiliated Entities and their Shareholders” for further information on our contractual arrangements with these parties.

 

Upon the consummation of this offering, we anticipate that our ownership and corporate structure will be as follows:

 

Post-IPO Ownership and Organization Chart

 

  

Our Offices

 

Our principal executive offices in Beijing are located at Room 505, Building No.40, No.1 Disheng North Street, Economic and Technological Development Zone, Beijing, China 100176. Our telephone number at this address is +86 10 57925024. We also have offices in Hunan, Shanghai, Jiangsu, Hubei and Guizhou. We are currently in the process of changing our registered agent and will provide the name and address of the new registered agent once available. Investors should submit any inquiries to the address and telephone number of our principal executive offices. Our principal website is www.edu-edu.com . The information contained on this website is not a part of this prospectus. 

 

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Implications of Being an Emerging Growth Company

 

As a company with less than US$1.07 billion in revenue for the last fiscal year, we qualify as an “emerging growth company” pursuant to the Jumpstart Our Business Startups Act of 2012 (as amended by the Fixing America’s Surface Transportation Act of 2015) (the “JOBS Act”). An emerging growth company may take advantage of specified reduced reporting and other requirements that are otherwise applicable generally to public companies. These provisions include exemption from the auditor attestation requirement under Section 404 of the Sarbanes-Oxley Act of 2002, or Section 404, in the assessment of the emerging growth company’s internal control over financial reporting. The JOBS Act also provides that an emerging growth company does not need to comply with any new or revised financial accounting standards until such date that a private company is otherwise required to comply with such new or revised accounting standards. However, we have elected to “opt out” of this provision and, as a result, we will comply with new or revised accounting standards as required when they are adopted for public companies. This decision to opt out of the extended transition period under the JOBS Act is irrevocable.

 

We will remain an emerging growth company until the earliest of (i) the last day of our fiscal year during which we have total annual gross revenues of at least US$1.07 billion; (ii) the last day of our fiscal year following the fifth anniversary of the completion of this offering; (iii) the date on which we have, during the previous three year period, issued more than US$1.0 billion in non-convertible debt; or (iv) the date on which we are deemed to be a “large accelerated filer” under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which would occur if the market value of our ordinary shares that are held by non-affiliates exceeds US$700 million as of the last business day of our most recently completed second fiscal quarter. Once we cease to be an emerging growth company, we will not be entitled to the exemptions provided in the JOBS Act discussed above.

 

Conventions Which Apply to this Prospectus

 

Except where the context otherwise requires and for purposes of this prospectus only:

 
“China” or “PRC” refer to the People’s Republic of China, excluding, for the purpose of this prospectus only, Taiwan, Hong Kong and Macau;

 

“gross billings” for a specific period refer to the total amount of cash received for the sale of course packages in such period, net of the total amount of refunds in such period;

 

“ordinary shares” refers to our ordinary shares, par value US$0.01 per share;

 

“RMB” or “Renminbi” refers to the legal currency of China;

 

References to “share capital” or “shares in the capital of” or similar expressions shall include a reference to shares in a company that does not have a share capital under its governing law, but which is authorized to issue a maximum or unlimited number of shares;

 

References to “stock” include a reference to shares;

 

“US$,” “dollars” or “U.S. dollars” refers to the legal currency of the United States; and

 

“Wah Fu,” “we,” “us,” the “Company,” or “our” refer to Wah Fu Education Group Limited, a British Virgin Islands company, and its subsidiaries, and, in the context of describing our operations and consolidated financial information, also include its consolidated variable interest entity.

 

This prospectus contains information and statistics relating to China’s economy and the industries in which we operate derived from various publications issued by market research companies and PRC governmental entities, which have not been independently verified by us, the Underwriter or any of its affiliates or advisers. The information in such sources may not be consistent with other information compiled in or outside China.

 

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The Offering

 

Offering price  

We currently estimate that the initial public offering price will be US$[__] per ordinary share.

 

Securities offered by us  

[___] ordinary shares, if the minimum amount is raised, and [___] ordinary shares, if the maximum amount is raised.

 

Ordinary shares outstanding immediately after this offering  

Minimum: [____] ordinary shares

 

Maximum: [____] ordinary shares

 

Best efforts  

The Underwriter is selling our ordinary shares on a “best efforts” basis. Accordingly, the Underwriter has no obligation or commitment to purchase any of our securities. The Underwriter is not required to sell any specific number of dollar amount of ordinary shares, but will use its best efforts to sell such securities.

 

We do not intend to close this offering unless we sell at least a minimum number of ordinary shares, at the price per share set forth on the cover page of this prospectus, to result in sufficient proceeds to list our ordinary shares on NASDAQ.

 

Offering period  

The offering may close or terminate, as the case may be on the earlier of any time after the minimum offering amount of our ordinary shares is raised, or for a period of [___] days commencing on the date of this prospectus although we retain the right to terminate the offering prior to the expiration of the [__]-day period. If the minimum offering amount is not raised within [__] days from the date of this prospectus, all subscription funds from the escrow account will be returned to investors promptly without interest or deduction of fees. If we raise the minimum offering amount within the offering period, the proceeds from the offering will be released to us.

 

Escrow agent  

Continental Stock Transfer & Trust Company

 

Escrow account  

The gross proceeds from the sale of the ordinary shares in this offering will be deposited in a non-interest bearing escrow account maintained by the Escrow Agent, Continental Stock Transfer & Trust Company. All checks will be deposited directly into such escrow account and all wire transfers will be wired directly to such escrow account. The funds will be held in escrow until the Escrow Agreement, has advised us and the Underwriter that it has received a minimum of $5,000,000, the minimum offering amount, in cleared funds. If we do not receive the minimum of $5,000,000 by [         ], all funds will be returned to purchasers in this offering by noon the next business day after the termination of the offering, without charge, deduction or interest. Prior to [         ], in no event will funds be returned to you unless the offering is terminated. You will only be entitled to receive a refund of your subscription price if we do not raise a minimum of $5,000,000 by [         ]. No interest will be paid either to us or to you. See “Underwriting — Deposit of Offering Proceeds.”

 

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Use of proceeds  

We expect to receive net proceeds of approximately a minimum of US$[__] and a maximum of US$[__] from this offering, assuming an initial public offering price of US$[__] per share which is the mid-point of the estimated range of the initial public offering price, after deducting underwriting discounts and commissions and estimated offering expenses payable by us.

 

   

We plan to use the net proceeds of this offering primarily for general corporate purposes, which may include investing in sales and marketing activities, product development, technology research and development, establishing domestic and international branches and subsidiaries as well as strategic reserve and other general and administrative matters. See “Use of Proceeds” for additional information.

 

Dividend policy  

We have no present plans to declare dividends and plan to retain our earnings to continue to grow our business.

 

Closing of offering  

If we can successfully raise the minimum offering amount within the offering period, the proceeds from the offering will be released to us. In addition, we will not complete this offering unless our application to list on NASDAQ or any other national stock exchange is approved. We will not be able to use such proceeds in China, however, until we complete certain remittance procedures with agencies in China. See “Use of Proceeds” for detailed discussions of the remittance procedures.

 

Lock-up  

We, our directors and executive officers, and our existing shareholders have agreed with the Underwriter, subject to certain exceptions, not to sell, transfer or dispose of, directly or indirectly, any of our ordinary shares or securities convertible into or exercisable or exchangeable for our ordinary shares for a period of 180 days after the date of this prospectus. See “Shares Eligible for Future Sale” and “Underwriting” for more information.

 

Listing  

We have applied to have the ordinary shares listed on NASDAQ under the symbol “WAFU.”

 

Transfer agent  

VStock Transfer LLC

 

Payment and settlement  

The Underwriter expects to deliver the ordinary shares against payment therefor through the facilities of the Depository Trust Company on [____], 2018.

 

Risk factors   Investing in our securities involves a high degree of risk. As an investor, you should be able to bear a complete loss of your investment. You should carefully consider the information set forth in the “Risk Factors” section of this prospectus before deciding to invest in our ordinary shares.

 

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RISK FACTORS

 

An investment in our ordinary shares involves significant risks. You should carefully consider all of the information in this prospectus, including the risks and uncertainties described below, before making an investment in our ordinary shares. Any of the following risks could have a material adverse effect on our business, financial condition and results of operations. In any such case, the market price of our ordinary shares could decline, and you may lose all or part of your investment.

 

Risks Related to Our Business and Industry

 

If we are not able to continue to attract students to purchase our course packages and to increase the spending of our students on our platforms, our business and prospects will be materially and adversely affected.

 

Our ability to continue to attract students to purchase our course packages and to increase their spending on our platforms are critical to the continued success and growth of our business. This in turn will depend on several factors, including our ability to effectively market our platforms to a broader base of prospective students, continue to develop, adapt or enhance quality educational content and services to meet the evolving demands of our existing or prospective students and expand our geographic reach. We must also manage our growth while maintaining consistent and high quality of course materials, and respond effectively to competitive pressures. If we are unable to continue to attract students to purchase our course packages and to increase the spending of our students on our platform, our revenues may decline, which may have a material adverse effect on our business, financial condition and results of operations.

 

We may not be able to improve the content of our existing courses, develop new courses or services in a timely or cost-effective manner.

 

Historically, our core business centered on the exam preparation courses offered through our B2C platform. We have since expanded our course offerings to target students that not only need to take self-taught higher education exams but who desire to educate themselves in other fields of study, as well as a broader range of situation-based education and test preparation targeting a wide range of student demographics. We constantly update and improve the content of our existing courses and develop new courses or services to meet changing market demands. Revisions to our existing courses and our newly developed courses or services may not be well received by existing or prospective students. If we cannot respond effectively to changes in market demands, our business may be adversely affected. Even if we are able to develop new courses or services that are well received, we may not be able to introduce them in a timely or cost-effective manner. If we do not respond adequately to changes in market demands, our ability to attract and retain students may be impaired and our financial results could suffer.

 

The effectiveness of our program depends on the success of our personalized learning approach to self-taught and adult higher education, which in turn is determined by the efficiency of our data analytics know-how. We might not be able to continue to efficiently monitor and analyze relevant data important for us to provide a personalized learning experience for our students, or to continue to drive our teaching training, curriculum development and other operational aspects of our platforms.

 

The timing of the introduction of new courses is subject to risks and uncertainties, including our ability to find and retain teachers and attract students. Offering new courses or services or modifying existing courses may require us to invest in content development, increase marketing efforts and re-allocate resources away from other uses. Unexpected technical, operational, logistical or other problems could delay or prevent the introduction of one or more new courses. Moreover, we cannot assure you that any of these courses or programs will match the quality or popularity of those developed by our competitors, achieve widespread market acceptance or contribute the desired level of income. We may have limited experience with the content of new courses or services and may need to adjust our systems and strategies to incorporate new courses or services into our existing course catalogue. If we are unable to continuously improve the content of our existing courses, or offer new courses or services in a timely or cost-effective manner, our results of operations and financial condition could be adversely affected.

 

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Our business depends on the market recognition of our brand, and if we are unable to maintain and enhance brand recognition, our business, financial condition and results of operations may be materially and adversely affected.

 

We believe that the market recognition of our “Huaxiadadi” brand has significantly contributed to the success of our business and that maintaining and enhancing our brand recognition is critical to sustaining our competitive advantages. Our ability to maintain and enhance brand recognition and reputation depends primarily on the perceived effectiveness and quality of our curriculum and teachers, as well as the success of our branding efforts. Our branding efforts, however, may not be successful and we may incur significant branding costs. If we are unable to maintain and further enhance our brand recognition and reputation and promote awareness of our platforms, we may not be able to maintain our current level of students, fees and engage qualified teachers, and our results of operations may be materially and adversely affected. Furthermore, any negative publicity relating to our company, our courses, teachers, platforms and services, regardless of its veracity, could harm our brand image and in turn materially and adversely affect our business and results of operations.

 

If we are unable to conduct sales and marketing activities cost-effectively, our results of operations and financial condition may be materially and adversely affected.

 

We have incurred selling and marketing expenses of $480,523 and $322,480 for the six months ended September 31, 2017 and 2016 respectively. As we continue to increase our marketing efforts for our B2C service, we expect our selling and marketing expenses to increase for the next three years.

 

Our sales activities may not be well received by students and may not result in the levels of sales that we anticipate and our free trials may not be attractive to our prospective institution customers and students. Furthermore, we may not be able to achieve the operational efficiency necessary to increase the gross billings per sales and marketing staff. We also may not be able to retain or recruit experienced sales staff, or to efficiently train junior sales staff. Further, marketing and branding approaches and tools in the online education market in China are evolving, especially for mobile platforms. This further requires us to enhance our marketing and branding approaches and experiment with new methods to keep pace with industry developments and student preferences. Failure to refine our existing marketing and branding approaches or to introduce new marketing and branding approaches in a cost-effective manner may reduce our market share, cause our revenues to decline and negatively impact our profitability.

 

If we are not able to continue to engage and retain qualified teachers, we may not be able to maintain consistent teaching quality on our platforms, and our business, financial condition and operating results may be materially and adversely affected.

 

Our teachers are critical to the learning experience of our students and our reputation. We seek to engage highly qualified teachers with strong teaching skills. We must provide competitive pay and other benefits to attract and retain them. Furthermore, as we continue to develop new course contents and lesson formats, we may need to engage additional teachers with appropriate skill sets or backgrounds to deliver instructions effectively. We cannot guarantee that we will be able to effectively engage such teachers quickly, or at all. Further, given other potential more attractive opportunities for our quality teachers, over time, some of them may choose to end their relationship with us. We have not experienced major difficulties in engaging, or retaining qualified teachers in the past, however, we may not always be able to engage and retain enough qualified teachers to keep pace with our growth while maintaining consistent education quality. We may also face significant competition in engaging qualified teachers from our competitors or from other opportunities that are perceived as more desirable. A shortage of qualified teachers, a decrease in the quality of our teachers’ performances, whether actual or perceived, or a significant increase in the cost to engage or retain qualified teachers would have a material adverse effect on our business, financial condition and results of operations.

 

Our historical financial and operating results, growth rates and profitability may not be indicative of future performance.

 

We had net income of $713,641 and $658,092 for the six months ended September 30, 2017 and 2016, respectively. Any evaluation of our business and our prospects must be considered in light of the risks and uncertainties encountered by companies at our stage of development. The private education market in China is still at the development stage, which makes it difficult to evaluate our business and future prospects. In addition, our past results may not be indicative of future performance because of new businesses developed or acquired by us. Furthermore, our results of operations may vary from period to period in response to a variety of other factors beyond our control, including general economic conditions and regulations or government actions pertaining to the private education service sector in China, changes in spending on private education and non-recurring charges incurred under unexpected circumstances or in connection with acquisitions, equity investments or other extraordinary transactions. Due to these and other factors, our historical financial and operating results, growth rates and profitability as well as quarter-to-quarter comparisons of our operating results may not be indicative of our future performance and you should not rely on them to predict our future performance.

 

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If our students’ level of performance deteriorates or satisfaction with our services declines, the students may decide to withdraw from our courses and request refunds and our business, financial condition, results of operations and reputation would be adversely affected.

 

The success of our business depends in part on our ability to deliver a satisfactory learning experience and improved academic results. Our services may fail to improve a student’s academic performance and a student may perform below expectations even after completing our courses. Additionally, student satisfaction with our services may decline. A student’s learning experience may also suffer if his or her relationship with our teachers does not meet expectations. We generally offer refunds for the remaining classes in a course to students who withdraw from the course. If a significant number of students fail to improve their academic performance after attending our courses or if their learning experiences with us are unsatisfactory, they may decide to withdraw from our courses and request refunds, and our business, financial condition, results of operations and reputation would be adversely affected.

 

We face significant competition, and if we fail to compete effectively, we may lose our market share or fail to gain additional market share, which would adversely impact our business, financial condition and operating results.

 

The private education market in China is fragmented, rapidly evolving and highly competitive. We face competition in self-taught higher education and adult higher education, from existing online and offline education companies. In the future, we may also face competition from new entrants into the private education market.

 

Some of our competitors may be able to devote more resources than we can to the development and promotion of their education programs and respond more quickly than we can to changes in student demands, market trends or new technologies. In addition, some of our competitors may be able to respond more quickly to changes in student preferences or engage in price-cutting strategies. We cannot assure you that we will be able to compete successfully against current or future competitors. If we are unable to maintain our competitive position or otherwise respond to competitive pressure effectively, we may lose market share or be forced to reduce our fees for course packages, either of which would adversely impact our results of operations and financial condition.

 

The loss of any of our key customers could reduce our revenues and our profitability.

 

Our key customers are principally enrolled students or institutions that are located primarily in China, such as Jiangxi Normal University, Jiangxi University of Science and Technology, Fujian Education Institution and Nanchang University. For the six months ended September 30, 2017, no institutional customers accounted for more than 10% of our total revenue. For the six months ended September 30, 2016, two institutional customers accounted for approximately 12% and 10% of our total revenue, respectively. As of September 30, 2017, four institutional customers accounted for 16%, 13%, 13% and 10% of the total outstanding accounts receivable balance, respectively. As of March 31, 2017, three institutional customers accounted for 31%, 28% and 25% of the total outstanding accounts receivable balance, respectively. There can be no assurance that we will maintain or improve the relationships with these major customers, or that we will be able to continue to service these customers at current levels or at all. Any failure by these customers to pay us or any decrease in courses purchased by these customers could have a material negative effect on our business, financial condition and results of operations if we fail to increase sales to other customers. In addition, having a relatively small number of customers may cause our quarterly results to be inconsistent, depending upon when these customers pay for outstanding invoices.

 

The loss of our third party suppliers on which we rely could impair our operations and substantially reduce our financial results.

 

We have been relying upon a limited number of suppliers since the inception of our operations. For the six months ended September 30, 2017 and 2016, we made approximately 13% and 49% of total purchases from one major supplier, respectively. If we are not able to maintain or expand our relationships with our major suppliers, our ability to deliver our products and services in a timely manner may be impaired and we could be required to incur additional expenses, including research and development expenses. Also, disruption in our supply chain or the need to find alternative suppliers could impact the costs and/or timing associated with procuring necessary products and services. Similarly, our suppliers have operating risks that could impact our business. These risks could result in delays, invoicing problems and other operational difficulties which could have a material negative effect on our business.

 

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Our new courses and services may compete with our existing courses and services.

 

We are constantly developing new courses and services to meet changes in student demands, school curriculum, testing materials, admission standards, market trends and technologies. While some of the courses and services that we develop will expand our current course catalogue and services and increase student enrollment, others may compete with or render obsolete our existing courses and services without increasing our total student enrollment. If we are unable to increase our total student enrollment and profitability as we expand our course catalogue and services, our business and growth may be adversely affected.

 

If we fail to successfully execute our growth strategies, our business and prospects may be materially and adversely affected.

 

Our growth strategies include further enhancing our brand image to grow our student base and increase student enrollments, developing our online course catalogue and online education platforms, increasing our market penetration, expanding into additional markets, improving the learning experience of our students, and advancing our technology. We may not succeed in executing these growth strategies due to a number of factors, including the following:

 

we may fail to identify, and effectively market our services in, new markets with sufficient growth potential into which to expand our network or promote new courses in existing markets;

 

we may fail to further promote our platforms;

 

we may not be able to continue to enhance our online offerings or expand them to new markets, generate profits from online offerings, or adapt online offerings to changing student needs and technological advances such that we will continue to face significant student acquisition costs in the markets we enter;

 

we may not be able to engage and retain a sufficient number of qualified teachers and other personnel;

 

we may fail to maintain the technology necessary to deliver a smooth learning experience to our students; and

 

we may not be able to identify suitable targets for acquisitions and partnership.

 

If we fail to successfully execute our growth strategies, we may not be able to maintain our growth rate and our business and prospects may be materially and adversely affected as a result.

 

We may not be able to adopt new technologies important to our business.

 

Technology standards in internet and value-added telecommunications services and products in general, and in online education in particular, may change over time. If we fail to anticipate and adapt to technological changes, our market share and our business development could suffer, which in turn could have a material and adverse effect on our financial condition and results of operations. If we are unsuccessful in addressing any of the risks related to new courses, our reputation and business may be materially and adversely affected.

 

Unexpected network interruptions, security breaches or computer virus attacks and system failures could have a material adverse effect on our business, financial condition and results of operations.

 

Our business depends on the performance and reliability of the internet infrastructure in China. In China, almost all access to the internet is maintained through state-controlled telecommunications operators. In many parts of China, the internet infrastructure is relatively underdeveloped, and internet connections are generally slower and less stable than in more developed countries. We cannot assure you that the internet infrastructure in China will remain sufficiently reliable for our needs or that either country will ever develop and make available more reliable internet access to our students and teacher. Any failure to maintain the performance, reliability, security or availability of our network infrastructure may cause significant damage to our ability to attract and retain students and teachers. Major risks involving our network infrastructure include:

 

breakdowns or system failures resulting in a prolonged shutdown of our servers;

 

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disruption or failure in the national backbone networks in China, which would make it impossible for students and teachers to access our online and mobile platforms or to engage in live lessons;

 

damage from natural disaster or other catastrophic event such as an typhoon, volcanic eruption, earthquake, flood, telecommunications failure, or other similar events in China; and

 

any infection by or spread of computer viruses.

 

Any network interruption or inadequacy that causes interruptions in the availability of our online and mobile platforms or deterioration in the quality of access to our online and mobile platforms could reduce student satisfaction and result in a reduction in the activity level of our students and the number of students purchasing our course packages. Furthermore, increases in the volume of traffic on our online and mobile platforms could strain the capacity of our existing computer systems and bandwidth, which could lead to slower response times or system failures. The internet infrastructure in China may not support the demands associated with continued growth in internet usage. This would cause a disruption or suspension in our lesson delivery, which could hurt our brand and reputation. We may need to incur additional costs to upgrade our technology infrastructure and computer systems in order to accommodate increased demand if we anticipate that our systems cannot handle higher volumes of traffic in the future.

 

All of our servers and routers, including backup servers, are currently hosted by third-party service providers in Beijing, Jiujiang and Wuhan in China. We also rely on major telecommunication companies to provide us with data communications capacity primarily through local telecommunications lines and internet data centers to host our servers. We may not have access to alternative services and we have no control over the costs of services. If the prices that we pay for telecommunications and internet services in China rise significantly, our gross profit and net income could be adversely affected. In addition, if internet access fees or other charges to internet users increase, our visitor traffic may decrease, which in turn may harm our revenues.

 

Some students may decide not to continue taking our courses for a number of reasons, including a perceived lack of improvement in their performance in specific courses, a change in requirements or general dissatisfaction with our programs, which may adversely affect our business, financial condition, results of operations and reputation.

 

The success of our business depends in large part on our ability to retain our students by delivering a satisfactory learning experience and improving their performance in the courses they have taken. If students feel that we are not providing them the experience they are seeking, they may choose not to renew their existing packages. For example, our courses may fail to significantly improve a student’s performance in the relevant subject area. Student satisfaction with our programs may decline for a number of reasons, many of which may not reflect the effectiveness of our lessons and teaching methods. Students also need to be self-motivated in order to successfully complete the courses in which they enroll. If students’ performances decline as a result of their own study habits or inability to learn the course material, they may not purchase additional lessons from us or refer other students to us, which could materially adversely affect our business.

 

A student’s learning experience may also suffer if his or her relationship with our teaching assistants does not meet expectations. If a significant number of students fail to significantly improve their proficiency in the applicable course subject after taking our lessons or if their learning experiences with us are unsatisfactory, they may not purchase additional lessons from us or refer other students to us and our business, financial condition, results of operations and reputation would be adversely affected.

 

Our failure to protect our intellectual property rights may undermine our competitive position, and litigation to protect our intellectual property rights or defend against third party allegations of infringement may be costly and ineffective.

 

We believe that our copyrights, trademarks and other intellectual property are essential to our success. We depend to a large extent on our ability to develop and maintain the intellectual property rights relating to our technology and course materials. We have devoted considerable time and energy to the development and improvement of our websites, mobile apps, and our course materials.

 

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We rely primarily on copyrights, trademarks, trade secrets and other contractual restrictions for the protection of the intellectual property used in our business. Nevertheless, these provide only limited protection and the actions we take to protect our intellectual property rights may not be adequate. Our trade secrets may become known or be independently discovered by our competitors. Third parties may in the future pirate our course materials and may infringe upon or misappropriate our other intellectual property. Infringement upon or the misappropriation of, our proprietary technologies or other intellectual property could have a material adverse effect on our business, financial condition or operating results. Policing the unauthorized use of proprietary technology can be difficult and expensive.

 

Also, litigation may be necessary to enforce our intellectual property rights, protect our trade secrets or determine the validity and scope of the proprietary rights of others. Such litigation may be costly and divert management’s attention away from our business. An adverse determination in any such litigation would impair our intellectual property rights and may harm our business, prospects and reputation. Enforcement of judgments in China is uncertain, and even if we are successful in litigation, it may not provide us with an effective remedy. In addition, we have no insurance coverage against litigation costs and would have to bear all costs arising from such litigation to the extent we are unable to recover them from other parties. The occurrence of any of the foregoing could have a material adverse effect on our business, financial condition and results of operations.

 

We may encounter disputes from time to time relating to our use of intellectual property of third parties.

 

We cannot be certain that third parties will not claim that our business infringes upon or otherwise violates trademarks, patents, copyrights or other intellectual property rights that they hold. We cannot assure you that third parties will not claim that our courses and marketing materials, online courses, products, and platform or other intellectual property developed or used by us infringe upon valid copyrights or other intellectual property rights that they hold. We may be subject to claims by educational institutions and organizations, content providers and publishers, competitors and others on the grounds of intellectual property rights infringement, defamation, negligence or other legal theories based on the content of the materials that we or our teachers distribute or use in our business operation. These types of claims have been brought, sometimes successfully, against print publications and educational institutions in the past. We may encounter disputes from time to time over rights and obligations concerning intellectual property, and we may not prevail in those disputes.

 

Any claims against us, with or without merit, could be time consuming and costly to defend or litigate, divert our management’s attention and resources or result in the loss of goodwill associated with our brand. If a lawsuit against us is successful, we may be required to pay substantial damages and/or enter into royalty or license agreements that may not be based upon commercially reasonable terms, or we may be unable to enter into such agreements at all. We may also lose, or be limited in, the rights to offer some of our programs, parts of our platform and products or be required to make changes to our course materials or websites. As a result, the scope of our course materials could be reduced, which could adversely affect the effectiveness of our curriculum, limit our ability to attract new students, harm our reputation and have a material adverse effect on our results of operations and financial position.

 

Failure to protect confidential information of our teachers, students and other customers against security breaches could damage our reputation and brand and substantially harm our business and results of operations.

 

A significant challenge to the online education industry is the secure storage of confidential information and its secure transmission over public networks. Most purchases of our course packages are made through our website and our mobile apps. In addition, online payments for our course packages are settled through third-party online payment services. Maintaining complete security for the storage and transmission of confidential information on our technology platform, such as student names, personal information and billing addresses, is essential to maintaining student confidence.

 

We have adopted security policies and measures to protect our proprietary data and student information]. However, advances in technology, the expertise of hackers, new discoveries in the field of cryptography or other events or developments could result in a compromise or breach of the technology that we use to protect confidential information. We may not be able to prevent third parties, especially hackers or other individuals or entities engaging in similar activities, from illegally obtaining such confidential or private information we hold as a result of our users’ visits to our website and use of our mobile apps. Such individuals or entities obtaining our clients’ confidential or private information may further engage in various other illegal activities using such information. Any negative publicity regarding our website’s or mobile apps’ safety or privacy protection mechanisms and policies, and any claims asserted against us or fines imposed upon us as a result of actual or perceived failures, could have a material and adverse effect on our public image, reputation, financial condition and results of operations.

 

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Practices regarding the collection, use, storage, transmission and security of personal information by companies operating over the internet and mobile platforms have recently come under increased public scrutiny. Increased regulation by the PRC government of data privacy on the internet may occur and we may become subject to new laws and regulations applying to the solicitation, collection, processing or use of personal or consumer information that could affect how we store and process the data of our teachers, students and clients. We generally comply with industry standards and are subject to the terms of our own privacy policies. Compliance with any additional laws could be expensive, and may place restrictions on the conduct of our business and the manner in which we interact with our students and other clients. Any failure to comply with applicable regulations could also result in regulatory enforcement actions against us.

 

Significant capital and other resources may be required to protect against information security breaches or to alleviate problems caused by such breaches or to comply with our privacy policies or privacy-related legal obligations. The resources required may increase over time as the methods used by hackers and others engaged in online criminal activities are increasingly sophisticated and constantly evolving. Any failure or perceived failure by us to prevent information security breaches or to comply with privacy policies or privacy-related legal obligations, or any compromise of security that results in the unauthorized release or transfer of personally identifiable information or other student data, could cause our students to lose trust in us and could expose us to legal claims. Any perception by the public that online transactions or the privacy of user information are becoming increasingly unsafe or vulnerable to attacks could inhibit the growth of online education services generally, which may negatively impact our business prospects.

 

Our employees may engage in misconduct or other improper activities or misuse our platforms, which could harm our reputation.

 

We are exposed to the risk of employee fraud or other misconduct. Employee misconduct could include intentionally failing to comply with government regulations, engaging in unauthorized activities and misrepresentation to our potential students and clients during marketing activities, which could harm our reputation. Employee misconduct could also involve improper use of our clients’ and teachers’ sensitive or classified information, which could result in regulatory sanctions against us and serious harm to our reputation. Employee misconduct could also involve making payments to government officials or third parties that would expose us to being in violation of laws. It is not always possible to deter employee misconduct, and the precautions we take to prevent and detect this activity may not be effective in controlling unknown or unmanaged risks or losses, which could harm our business, financial condition and results of operations.

 

A former member of the management team of Beijing Distance Learning and a former shareholder of our company and Beijing Digital Information (“Former Employee”) was involved in a corruption case relating to gifts and payments in the aggregate of approximately RMB 70,000, or US$10,514 made to a PRC governmental official from 2010 to 2012. The Former Employee solely testified as a witness in the prosecution of the government official. In November 2015, such government official was tried by the Beijing Second Intermediate People’s Court and found guilty on the corruption charges. Since the conclusion of the corruption case, the prosecutors have not taken any action against the Former Employee or the Company. The Former Employee was terminated as manager and director of Beijing Distance Learning in May 2013 and May 2015, respectively and ceased to be a shareholder of our company and Beijing Digital Information in December 2016. In the event that the actions of the Former Employee result in negative publicity for our company, directors or members of our current management team, or potentially lead to civil or criminal penalties being imposed on our company, directors or current members of our management team, such events could have a material adverse effect on our business, financial condition and results of operations.

 

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Allegations, harassment or other detrimental conduct by third parties, as well as the public dissemination of negative, inaccurate or misleading information about us, could harm our reputation and adversely affect the price of our ordinary shares.

 

We may be subject to allegations by third parties or purported current or former employees, negative internet postings and other negative, inaccurate or misleading publicity related to our business and operations. We may also become the target of harassment or other detrimental conduct by third parties or disgruntled former or current employees. Such conduct may include complaints, anonymous or otherwise, to our board, advisors, regulatory agencies, media or other organizations. Depending on their nature and significance, we may need to conduct internal investigations to appropriately review any such allegations. We may also be subject to government or regulatory inquiries or, investigations or other proceedings as a result of such third-party conduct and may be required to spend significant time and incur substantial costs to address such conduct, and there is no assurance that we will be able to conclusively refute each of the allegations within a reasonable period of time, or at all. Allegations may be posted on the internet, including social media platforms, by anyone anonymously. Any negative, inaccurate or misleading publicity about us or our management can be quickly and widely disseminated. Social media platforms and devices immediately publish the content of their subscribers’ and participants’ posts, often without filters or checks on the accuracy of the content posted. Information posted on the internet or otherwise publicly released, including by us or our employees, may be inaccurate or misleading, and the information or the inaccurate or misleading nature of the information, may harm our reputation, business or prospects. The harm may be immediate without affording us an opportunity for redress or correction. Our reputation may be negatively affected as a result of the public dissemination of negative, inaccurate, or misleading information about our business and operations, which in turn may cause us to lose market share or students, and adversely affect the price of our ordinary shares.

 

We may not be able to achieve the benefits we expect from future acquisitions, and future acquisitions may have an adverse effect on our ability to manage our business.

 

We intend to make acquisitions or equity investments in additional businesses that complement our existing business. We may not be able to successfully integrate acquired businesses and we may not have control over the businesses or operations of our minority equity investments, the value of which may decline over time. As a result, our business and operating results could be harmed. In addition, if the businesses we acquire or invest in do not subsequently generate the anticipated financial performance or if any goodwill impairment test triggering event occurs, we may need to revalue or write down the value of goodwill and other intangible assets in connection with such acquisitions or investments, which would harm our results of operations. In addition, we may be unable to identify appropriate acquisition or strategic investment targets when it is necessary or desirable to make such acquisition or investment to remain competitive or to expand our business. Even if we identify an appropriate acquisition or investment target, we may not be able to negotiate the terms of the acquisition or investment successfully, finance the proposed transaction or integrate the relevant businesses into our existing business and operations. Furthermore, as we often do not have control over the companies in which we only have minority stake, we cannot ensure that these companies will always comply with applicable laws and regulations in their business operations. Material non-compliance by our investees may cause substantial harm to our reputation and the value of our investment.

 

The wide variety of payment methods that we accept subjects us to third-party payment processing-related risks.

 

 We accept payments using a variety of methods, including bank transfers, online payments with credit cards and debit cards issued by major banks in China, and payment through third-party online payment platforms such as Alipay and WeChat Pay. For certain payment methods, including credit and debit cards, we pay interchange and other fees, which may increase over time and raise our operating costs and lower our profit margins. We may also be susceptible to fraud and other illegal activities in connection with the various payment methods we offer. We are also subject to various rules, regulations and requirements, regulatory or otherwise, governing electronic funds transfers which could change or be reinterpreted to make it difficult or impossible for us to comply. If we fail to comply with these rules or requirements, we may be subject to fines and higher transaction fees and become unable to accept credit and debit card payments from our students, process electronic funds transfers or facilitate other types of online payments, and our business, financial condition and results of operations could be materially and adversely affected.

 

If our senior management is unable to work together effectively or efficiently or if we lose their services, our business may be severely disrupted.

 

Our success heavily depends upon the continued services of our management. In particular, we rely on the expertise and experience of Yang Yu, Xinghui Yang and Cuntao Hou. We also rely on the experience and services from other senior management. If such individuals cannot work together effectively or efficiently, our business may be severely disrupted. If one or more of our senior managers were unable or unwilling to continue in their present positions, we might not be able to replace them easily or at all, and our business, financial condition and results of operations may be materially and adversely affected. If any of our senior management joins a competitor or forms a competing business, we may lose students, teachers, and other key professionals and staff members. Our senior management has entered into employment agreements with us, including confidentiality and non-competition clauses. However, if any dispute arises between our officers and us, we may have to incur substantial costs and expenses in order to enforce such agreements in China or we may be unable to enforce them at all.

 

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Our results of operations are subject to seasonal fluctuations.

 

Our industry generally experiences seasonality, reflecting a combination of traditional education industry patterns and new patterns associated with the online platforms in particular. Seasonal fluctuations have affected, and are likely to continue to affect, our business. In general, our self-taught examination services experiences lower student enrollment during the month following the four examination periods but enjoys higher student enrollment during the two months before the four examination periods. As to our continuing education services, our sales generally slow down when our cooperating universities and colleges are summer and winter breaks. Our financial condition and results of operations for future periods may continue to fluctuate. As a result, the trading price of our ordinary shares may fluctuate from time to time due to seasonality.

 

We have limited insurance coverage for our operations in China, which could expose us to significant costs and business disruption.

 

We do not maintain any liability insurance or property insurance policies covering students, equipment and facilities for injuries, death or losses due to fire, earthquake, flood or any other disaster. Consistent with customary industry practice in China, we do not maintain business interruption insurance, nor do we maintain key-man life insurance. However, as the insurance industry in China is still in an early stage of development, insurance companies in China currently offer limited business-related insurance products. We do not maintain business interruption insurance, nor do we maintain key-man life insurance. We cannot assure you that our insurance coverage is sufficient to prevent us from any loss or that we will be able to successfully claim our losses under our current insurance policy on a timely basis, or at all. If we incur any loss that is not covered by our insurance policies, or the compensated amount is significantly less than our actual loss, our business, financial condition and results of operations could be materially and adversely affected.

 

We have identified material weaknesses in our internal control over financial reporting. If we fail to develop and maintain an effective system of internal control over financial reporting, we may be unable to accurately report our financial results or prevent fraud, and investor confidence and the market price of our ordinary shares may be materially and adversely affected.

 

Prior to this offering, we were a private company with limited accounting personnel and other resources with which to address our internal controls and procedures. We have identified “material weaknesses” and other control deficiencies including significant deficiencies in our internal control over financial reporting. As defined in the standards established by the Public Company Accounting Oversight Board of the United States, or PCAOB, a “material weakness” is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis.

 

One material weakness that has been identified related to our lack of sufficient financial reporting and accounting personnel (including a qualified CFO) with appropriate knowledge of U.S. GAAP and SEC reporting requirements to properly address complex U.S. GAAP accounting issues and to prepare and review our consolidated financial statements and related disclosures to fulfill U.S. GAAP and SEC financial reporting requirements. Upon completion of this offering, we plan to engage a qualified CFO with comprehensive knowledge of U.S. GAAP and SEC reporting requirements. We also plan to adopt an accounting policies and procedures manual in accordance with U.S. GAAP.  As our operations continue to expand, we plan to hire additional accounting and finance staff to increase segregation of duties and also invest in technology infrastructure to support our financial reporting function.  Despite all these remedial measures, we might efficiently address the weaknesses we have identified.

 

Neither we nor our independent registered public accounting firm undertook a comprehensive assessment of our internal control for purposes of identifying and reporting material weaknesses and other control deficiencies in our internal control over financial reporting as we and they will be required to do after we become a public company. Had we performed a formal assessment of our internal control over financial reporting or had our independent registered public accounting firm performed an audit of our internal control over financial reporting, additional deficiencies may have been identified.

 

Upon completion of this offering, we will become subject to the Sarbanes-Oxley Act of 2002. Section 404 of the Sarbanes-Oxley Act, or Section 404, will require that we include a report from management on the effectiveness of our internal control over financial reporting in our annual report on Form 20-F beginning with our annual report for the fiscal year ending March 31, 2018. In addition, once we cease to be an “emerging growth company” as such term is defined in the JOBS Act, our independent registered public accounting firm must attest to and report on the effectiveness of our internal control over financial reporting. Our management may conclude that our internal control over financial reporting is not effective. Moreover, even if our management concludes that our internal control over financial reporting is effective, our independent registered public accounting firm, after conducting its own independent testing, may issue a report that is qualified if it is not satisfied with our internal controls or the level at which our controls are documented, designed, operated or reviewed, or if it interprets the relevant requirements differently from us. In addition, after we become a public company, our reporting obligations may place a significant strain on our management, operational and financial resources and systems for the foreseeable future. We may be unable to timely complete our evaluation testing and any required remediation. 

 

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During the course of documenting and testing our internal control procedures, in order to satisfy the requirements of Section 404, we may identify other weaknesses and deficiencies in our internal control over financial reporting. In addition, if we fail to maintain the adequacy of our internal control over financial reporting, as these standards are modified, supplemented or amended from time to time, we may not be able to conclude on an ongoing basis that we have effective internal control over financial reporting in accordance with Section 404. If we fail to achieve and maintain an effective internal control environment, we could suffer material misstatements in our financial statements and fail to meet our reporting obligations, which would likely cause investors to lose confidence in our reported financial information. This could in turn limit our access to capital markets, harm our results of operations, and lead to a decline in the trading price of our Ordinary shares. Additionally, ineffective internal control over financial reporting could expose us to increased risk of fraud or misuse of corporate assets and subject us to potential delisting from the stock exchange on which we list, regulatory investigations and civil or criminal sanctions. We may also be required to restate our financial statements from prior periods.

 

Any significant interruption in the operations of our customer hotline could adversely affect our ability to respond to potential customers’ inquiries and other service requests in a timely manner.

 

We have a customer hotline which responds to inquiries from potential customers and provides customer service to our existing customers. We have not experienced any significant interruption in the operations of our customer hotline. We do not currently have a risk mitigation plan for our customer hotline to prevent an interruption of its operation due to natural disasters, accidents or other events. Any significant interruptions as a result of these events or our failure to successfully expand or upgrade our systems or manage the necessary expansions or upgrades in the customer hotline could reduce our ability to respond to customer inquiries or service requests, which could in turn result in the loss of potential customers and damage our reputation.

 

Risks Related to Our Corporate Structure

 

If the PRC government finds that the contractual arrangements that establish the structure for holding our Internet Content Provider (“ICP”) license do not comply with applicable PRC laws and regulations, we could be subject to severe penalties or be forced to relinquish our interests in those operations.

 

Foreign ownership in entities that provide value-added telecommunication services, is subject to restrictions under current PRC laws and regulations. For example, in accordance with the Guidance Catalog of Industries for Foreign Investment, as amended in June 2017, and other applicable laws and regulations, foreign investors are not allowed to own more than 50% of the equity interests in a value-added telecommunication service provider (except for e-commerce) and any such foreign investor must have experience in providing value-added telecommunications services overseas and maintain a good track record.

 

We are a British Virgin Islands company and our PRC subsidiary, Beijing Distance Learning is considered a foreign-invested enterprise. To comply with PRC laws and regulations, we operate our website, www.edu-edu.com , through our PRC consolidated VIE, Beijing Digital Information, which holds our ICP License for www.edu-edu.com . Beijing Digital Information is 51.5% owned by Yang Yu and 48.5% owned by Xinghui Yang. All shareholders of Beijing Digital Information are PRC citizens. We entered into a series of contractual arrangements with Beijing Digital Information and its shareholders, which enable us to:

 

exercise effective control over Beijing Digital Information;

 

receive substantially all of the economic benefits; and

 

have an exclusive option to purchase all or part of the equity interests in Beijing Digital Information when and to the extent permitted by PRC law.

 

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Because of these contractual arrangements, we are the primary beneficiary of Beijing Digital Information and treat it as our PRC consolidated VIE under U.S. GAAP. We consolidate the financial results of Beijing Digital Information in our consolidated financial statements in accordance with U.S. GAAP. For a detailed discussion of these contractual arrangements, see “Corporate History and Structure.”

 

Jingtian & Gongcheng, our PRC legal counsel, is of the opinion that (i) the ownership structure of Beijing Digital Information and Beijing Distance Learning will not result in any violation of PRC laws or regulations currently in effect; and (ii) the contractual arrangements among Beijing Digital Information and Beijing Distance Learning and its shareholders governed by PRC law are valid, binding and enforceable, and will not result in any violation of PRC laws or regulations currently in effect. Our PRC legal counsel is also of the opinion that there are, however, substantial uncertainties regarding the interpretation and application of current or future PRC laws and regulations concerning foreign investment in the PRC, and their application to and effect on the legality, binding effect and enforceability of the contractual arrangements. In particular, we cannot rule out the possibility that PRC regulatory authorities, courts or arbitral tribunals may in the future adopt a different or contrary interpretation or take a view that is inconsistent with the opinion of our PRC legal counsel.

 

It is uncertain whether any new PRC laws, rules or regulations relating to VIE structures will be adopted or if adopted, what affect they may have on our corporate structure. In particular, in January 2015, the Ministry of Commerce, or MOC, published a discussion draft of the proposed Foreign Investment Law for public review and comments. Among other things, the draft Foreign Investment Law expands the definition of foreign investment and introduces the principle of “actual control” in determining whether a company is considered a foreign-invested enterprise, or an FIE. Under the draft Foreign Investment Law, VIEs would be deemed as FIEs, if they are ultimately “controlled” by foreign investors, and would thus be subject to restrictions on foreign investments. However, the draft law has not taken a position on what actions will be taken with respect to existing companies with a “variable interest entity” structure, whether or not these companies are controlled by Chinese parties. It is uncertain when the draft would be signed into law and whether the final version would have any substantial changes from the draft. See “Regulation—The Draft PRC Foreign Investment Law” and “—Substantial uncertainties exist with respect to the enactment timetable, interpretation and implementation of draft PRC Foreign Investment Law and how it may impact the viability of our current corporate structure, corporate governance and business operations.”

 

If, as a result of such contractual arrangement, we or Beijing Digital Information is found to be in violation of any existing or future PRC laws or regulations, or such contractual arrangement is determined as illegal and invalid by the PRC court, arbitral tribunal or regulatory authorities, or we fail to obtain, maintain or renew any of the required permits or approvals, the relevant PRC regulatory authorities would have broad discretion to take action in dealing with such violations or failures, including:

 

revoking the business licenses and/or operating licenses of Beijing Distance Learning and/or Beijing Digital Information;

 

discontinuing or restricting the conduct of any transactions between Beijing Distance Learning and Beijing Digital Information;

 

limiting our business expansion in China by way of entering into contractual arrangements;

 

imposing fines, confiscating the income from Beijing Digital Information, or imposing other requirements with which we or Beijing Digital Information may not be able to comply with;

 

shutting down our servers or blocking our websites;

 

requiring us to restructure our ownership structure or operations, including terminating the contractual arrangements with Beijing Digital Information and deregistering the equity pledges of Beijing Digital Information;

 

restricting or prohibiting our use of the proceeds of this offering to finance our business and operations in China;

 

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imposing additional conditions or requirements with which we may not be able to comply with; or
     
  take other regulatory or enforcement actions against us that could be harmful to our business.

 

The imposition of any of these penalties could result in a material and adverse effect on our ability to conduct our business and on our results of operations. If any of these penalties results in our inability to direct the activities of Beijing Digital Information that most significantly impact its economic performance, and/or our failure to receive the economic benefits from Beijing Digital Information, we may not be able to consolidate Beijing Digital Information in our consolidated financial statements in accordance with U.S. GAAP.

 

We rely on contractual arrangements with Beijing Digital Information and its shareholders for a portion of our business operations, which may not be as effective as direct ownership in providing operational control.

 

We have relied and expect to continue to rely on contractual arrangements with Beijing Digital Information, as well as its respective shareholders, to operate our www.edu-edu.com website and mobile apps. For a description of these contractual arrangements, see “Corporate History and Structure.” These contractual arrangements may not be as effective as direct ownership in providing us with control over Beijing Digital Information. For example, Beijing Digital Information and its shareholders could breach their contractual arrangements with us by, among other things, failing to conduct their operations, including maintaining our website and using the domain names and trademarks, in an acceptable manner or taking other actions that are detrimental to our interests.

 

If we had direct ownership of Beijing Digital Information, we would be able to exercise our rights as a shareholder to change the executive director of Beijing Digital Information, which in turn could effect changes, subject to any applicable fiduciary obligations, at the management level. However, under the current contractual arrangements, we rely on the performance by Beijing Digital Information and its shareholders of their obligations under the contracts to exercise control over Beijing Digital Information. However, the shareholders of Beijing Digital Information may not act in the best interests of the Company or may not perform their obligations under these contracts. Such risks exist throughout the period in which we intend to operate our business through the contractual arrangements with Beijing Digital Information. We may replace the shareholders of Beijing Digital Information at any time pursuant to our contractual arrangements with it and its shareholders. However, if any dispute relating to these contracts remains unresolved, we will have to enforce our rights under these contracts through the operations of PRC law and therefore will be subject to uncertainties in the PRC legal system. See “—Any failure by Beijing Digital Information or its shareholders to perform their obligations under our contractual arrangements with them would have a material and adverse effect on our business.” Therefore, our contractual arrangements with Beijing Digital Information may not be as effective in ensuring our control over the relevant portion of our business operations as direct ownership would be.

 

Substantial uncertainties exist with respect to the enactment timetable, interpretation and implementation of draft PRC Foreign Investment Law and how it may impact the viability of our current corporate structure, corporate governance and business operations.

 

The Ministry of Commerce published a discussion draft of the proposed Foreign Investment Law in January 2015 aiming to, upon its enactment, replace the trio of existing laws regulating foreign investment in China, namely, the Sino-foreign Equity Joint Venture Enterprise Law, the Sino-foreign Cooperative Joint Venture Enterprise Law and the Wholly Foreign-invested Enterprise Law . The draft Foreign Investment Law embodies an expected PRC regulatory trend to rationalize its foreign investment regulatory regime in line with prevailing international practice and the legislative efforts to unify the corporate legal requirements for both foreign and domestic investments. While the Ministry of Commerce solicited comments on this draft in early 2015, substantial uncertainties exist with respect to its enactment timetable, interpretation and implementation. According to the Legislative Work Plan 2018 of the State Council published on March 2, 2018, the draft Foreign Investment Law will be submitted for deliberation by the Standing Committee of the National People’s Congress. The draft Foreign Investment Law, if enacted as proposed, may materially impact the viability of our current corporate structure, corporate governance and business operations in many aspects.

 

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Among other things, the draft Foreign Investment Law expands the definition of foreign investment and introduces the principle of “actual control” in determining whether a company is considered an FIE. The draft Foreign Investment Law specifically provides that entities established in China but “controlled” by foreign investors will be treated as FIEs, whereas an entity set up in a foreign jurisdiction would nonetheless be, upon market entry clearance by the Ministry of Commerce, treated as a PRC domestic investor provided that the entity is “controlled” by PRC entities and/or citizens. In this connection, “foreign investors” refers to the following subjects making investments within the PRC: (i) natural persons without PRC nationality; (ii) enterprises incorporated under the laws of countries or regions other than China; (iii) the governments of countries or regions other than the PRC and the departments or agencies thereunder; and (iv) international organizations. Domestic enterprises under the control of the subjects as mentioned in the preceding sentence are deemed foreign investors, and “control” is broadly defined in the draft law to cover the following summarized categories: (i) holding, directly or indirectly, not less than 50% of shares, equities, share of voting rights or other similar rights of the subject entity; (ii) holding, directly or indirectly, less than 50% of the voting rights of the subject entity but having the power to secure at least 50% of the seats on the board or other equivalent decision making bodies, or having the voting power to material influence on the board, the shareholders’ meeting or other equivalent decision making bodies; or (iii) having the power to exert decisive influence, via contractual or trust arrangements, over the subject entity’s operations, financial matters or other key aspects of business operations. Once an entity is determined to be an FIE, it will be subject to the foreign investment restrictions or prohibitions set forth in a “catalogue of special administrative measures,” which is classified into the “catalogue of prohibitions” and “the catalogue of restrictions,” to be separately issued by the State Council later. Foreign investors are not allowed to invest in any sector set forth in the catalogue of prohibitions. However, unless the underlying business of the FIE falls within the catalogue of restrictions, which calls for market entry clearance by the Ministry of Commerce, prior approval from governmental authorities as mandated by the existing foreign investment legal regime would no longer be required for establishment of the FIE.

 

The “variable interest entity” structure, or VIE structure, has been adopted by many PRC-based companies, including us, to obtain necessary licenses and permits in the industries that are currently subject to foreign investment restrictions in China. See “—If the PRC government finds that the contractual arrangements that establish the structure for holding our ICP license do not comply with applicable PRC laws and regulations, we could be subject to severe penalties or be forced to relinquish our interests in those operations” and “Corporate History and Structure.” Under the draft Foreign Investment Law, VIEs that are controlled via contractual arrangement would also be deemed as FIEs, if they are ultimately “controlled” by foreign investors. Therefore, for any companies with a VIE structure in an industry category that is on the “catalogue of restrictions,” the VIE structure may be deemed a domestic investment only if the ultimate controlling person(s) is/are of PRC nationality (either PRC companies or PRC citizens). Conversely, if the actual controlling person(s) is/are of foreign nationalities, then the VIEs will be treated as FIEs and any operation in the industry category on the “catalogue of restrictions” without market entry clearance may be considered as illegal.

 

In addition, the draft Foreign Investment Law does not indicate what actions shall be taken with respect to the existing companies with a VIE structure, whether or not these companies are controlled by Chinese parties. Moreover, it is uncertain whether the online education industry, in which our PRC consolidated VIE operate, will be subject to the foreign investment restrictions or prohibitions set forth in the “catalogue of special administrative measures” to be issued. If the enacted version of the Foreign Investment Law and the final “catalogue of special administrative measures” mandate further actions, such as the Ministry of Commerce market entry clearance, to be completed by companies with an existing VIE structure like us, we face uncertainties as to whether such clearance can be timely obtained, or at all.

 

The draft Foreign Investment Law, if enacted as proposed, may also materially impact our corporate governance practice and increase our compliance costs. For instance, the draft Foreign Investment Law imposes stringent ad hoc and periodic information reporting requirements on foreign investors and the applicable FIEs. Aside from an investment information report required at each investment, and investment amendment reports, which shall be submitted upon alteration of investment specifics, it is mandatory for entities established by foreign investors to submit an annual report, and large foreign investors meeting certain criteria are required to report on a quarterly basis. Any company found to be non-compliant with these reporting obligations may potentially be subject to fines and/or administrative or criminal liabilities, and the persons directly responsible may be subject to criminal liabilities.

 

Any failure by Beijing Digital Information or its shareholders to perform their obligations under our contractual arrangements with them would have a material and adverse effect on our business.

 

If Beijing Digital Information or its shareholders fail to perform their obligations under the contractual arrangements, we may have to incur substantial costs and expend additional resources to enforce such arrangements. We may also have to rely on legal remedies under PRC law, including seeking specific performance or injunctive relief, and claiming damages, which we cannot assure you will be effective. For example, if the shareholders of Beijing Digital Information, were to refuse to transfer their equity interest in Beijing Digital Information to us or our designee if we exercise the purchase option pursuant to these contractual arrangements, or if they were otherwise to act in bad faith toward us, then we may have to take legal actions to compel them to perform their contractual obligations.

 

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All the agreements under our contractual arrangements with Beijing Digital Information are governed by PRC law and provide for the resolution of disputes through arbitration in China. Accordingly, these contracts would be interpreted in accordance with PRC law and any disputes would be resolved in accordance with PRC legal procedures. The legal system in the PRC is not as developed as in some other jurisdictions, such as the United States. As a result, uncertainties in the PRC legal system could limit our ability to enforce these contractual arrangements. Under PRC law, if the losing parties fail to carry out the arbitration awards within a prescribed time limit, the prevailing parties may only enforce the arbitration awards in PRC courts through arbitration award recognition proceedings, which would require additional expenses and delay. In the event we are unable to enforce these contractual arrangements, we may not be able to exert effective control over Beijing Digital Information, and our ability to conduct our business may be negatively affected.

 

If the custodians or authorized users of our controlling non-tangible assets, including chops and seals, fail to fulfill their responsibilities, or misappropriate or misuse these assets, our business and operations could be materially and adversely affected.

 

Under PRC law, legal documents for corporate transactions, including agreements and contracts such as the leases and sales contracts that our business relies on, are executed using the chop or seal of the signing entity or with the signature of a legal representative whose designation is registered and filed with the relevant local branch of the SAIC. We generally execute legal documents by affixing chops or seals, rather than having the designated legal representatives sign the documents.

 

We have three major types of chops—corporate chops, contract chops and finance chops. We use corporate chops generally for documents to be submitted to government agencies, such as applications for changing business scope, directors or company name, and for legal letters. We use contract chops for executing leases and commercial, contracts. We use finance chops generally for making and collecting payments, including, but not limited to issuing invoices. Use of corporate chops and contract chops must be approved by our legal department and administrative department, and use of finance chops must be approved by our finance department. The chops of our PRC subsidiary and our PRC consolidated VIE are generally held by the relevant entities so that documents can be executed locally. Although we usually utilize chops to execute contracts, the registered legal representatives of our PRC subsidiary and our PRC consolidated VIE have the apparent authority to enter into contracts on behalf of such entities without chops, unless such contracts set forth otherwise. All designated legal representatives of our PRC subsidiary and our PRC consolidated VIE have signed employment agreements with us under which they agree to abide by duties they owe to us.

 

In order to maintain the physical security of our chops, we generally have them stored in secured locations accessible only to the department heads of the legal, administrative or finance departments. Our designated legal representatives generally do not have access to the chops. Although we monitor our employees, including the designated legal representatives of our PRC subsidiary and our consolidated VIE, the procedures may not be sufficient to prevent all instances of abuse or negligence. There is a risk that our employees or designated legal representatives could abuse their authority, for example, by binding the relevant subsidiary or consolidated VIE with contracts against our interests, as we would be obligated to honor these contracts if the other contracting party acts in good faith in reliance on the apparent authority of our chops or signatures of our legal representatives. If any designated legal representative obtains control of the chop in an effort to obtain control over the relevant entity, we would need to have a shareholder or board resolution to designate a new legal representative and to take legal action to seek the for a new chop with the relevant authorities, or otherwise seek legal remedies for the legal representative’s misconduct. If any of the designated legal representatives obtains and misuses or misappropriates our chops and seals or other controlling intangible assets for whatever reason, we could experience disruption to our normal business operations. We may have to take corporate or legal action, which could involve significant time and resources to resolve while distracting management from our operations.

 

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The shareholders of Beijing Digital Information may have potential conflicts of interest with us, which may materially and adversely affect our business and financial condition.

 

We have designated individuals who are PRC nationals to be the shareholders of Beijing Digital Information. Beijing Digital Information is owned by Yang Yu and Xinghui Yang. The interests of these individuals as the shareholders of Beijing Digital Information may differ from the interests of the Company as a whole. These shareholders may breach, or cause our PRC consolidated VIE to breach, or refuse to renew, the existing contractual arrangements we have with them and Beijing Digital Information, which would have a material and adverse effect on our ability to effectively control Beijing Digital Information. We cannot assure you that when conflicts of interest arise, any or all of these shareholders will act in the best interests of our company or such conflicts will be resolved in our favor.

 

Currently, we do not have any arrangements to address potential conflicts of interest between these shareholders and the Company, except that we could exercise our purchase option under the exclusive option agreement with these shareholders to request them to transfer all of their equity ownership in Beijing Digital Information to Beijing Distance Learning or one or more individuals designated by us. We rely on Messrs. Yu and Yang, who are also our directors and officers, to abide by PRC law, which provides that directors owe a fiduciary duty to the company. Such fiduciary duty requires directors to act in good faith and in the best interests of the company and not to use their positions for personal gains. If we cannot resolve any conflict of interest or dispute between us and the shareholders of Beijing Digital Information, we would have to rely on legal proceedings, which could result in disruption of our business and subject us to substantial uncertainty as to the outcome of any such legal proceedings.

 

We may rely on dividends and other distributions on equity paid by our PRC subsidiary to fund any cash and financing requirements we may have, and any limitation on the ability of our PRC subsidiary to make payments to us could have a material and adverse effect on our ability to conduct our business.

 

We are a holding company, and we may rely on dividends and other distributions on equity paid by our PRC subsidiary, Beijing Distance Learning, for our cash and financing requirements, including the funds necessary to pay dividends and other cash distributions to our shareholders and service any debt we may incur. If our PRC subsidiary incurs debt on its own behalf in the future, the instruments governing the debt may restrict its ability to pay dividends or make other distributions to us. In addition, the PRC tax authorities may require Beijing Distance Learning to adjust its taxable income under the contractual arrangements it currently has in place with our PRC consolidated VIE in a manner that would materially and adversely affect its ability to pay dividends and other distributions to us. See “—Our contractual arrangements may be subject to scrutiny by the PRC tax authorities, and a finding that we owe additional taxes could substantially reduce our consolidated net income and the value of your investment.”

 

Under PRC laws and regulations, our PRC subsidiary, which is a wholly foreign-owned enterprise may pay dividends only out of its respective accumulated profits as determined in accordance with PRC accounting standards and regulations. In addition, a wholly foreign-owned enterprise is required to set aside at least 10% of its accumulated after-tax profits each year, if any, to fund a certain statutory reserve fund, until the aggregate amount of such fund reaches 50% of its registered capital. At its discretion, a wholly foreign-owned enterprise may allocate a portion of its after-tax profits based on PRC accounting standards to an enterprise expansion fund, or a staff welfare and bonus fund. The statutory reserve funds, enterprise expansion funds and staff welfare and bonus funds are not distributable as cash dividends.

 

Any limitation on the ability of our PRC subsidiary to pay dividends or make other distributions to us could materially and adversely limit our ability to grow, make investments or acquisitions that could be beneficial to our business, pay dividends, or otherwise fund and conduct our business. See also “—Risks Related to Doing Business in China—Under the PRC Enterprise Income Tax Law, we may be classified as a PRC “resident enterprise” for PRC enterprise income tax purposes. Such classification would likely result in unfavorable tax consequences to us and our non-PRC shareholders and has a material adverse effect on our results of operations and the value of your investment.”

 

Our contractual arrangements may be subject to scrutiny by the PRC tax authorities, and a finding that we owe additional taxes could substantially reduce our consolidated net income and the value of your investment.

 

Under PRC laws and regulations, arrangements and transactions among related parties may be subject to audit or challenge by the PRC tax authorities. We could face material and adverse tax consequences if the PRC tax authorities determine that the contractual arrangements among our PRC subsidiary and our PRC consolidated VIE do not represent an arm’s-length price and adjust our PRC consolidated VIEs income in the form of a transfer pricing adjustment. A transfer pricing adjustment could, among other things, result in a reduction, for PRC tax purposes, of expense deductions recorded by our PRC consolidated VIE, which could in turn increase their tax liabilities. In addition, the PRC tax authorities may impose late payment fees and other penalties to our PRC consolidated VIE for under-paid taxes. Our consolidated net income may be materially and adversely affected if our tax liabilities increase or if we are found to be subject to late payment fees or other penalties.

 

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If Beijing Digital Information becomes the subject of a bankruptcy or liquidation proceeding, we may lose the ability to use and enjoy its assets, which could reduce the size of our operations and materially and adversely affect our business, ability to generate revenues and the market price of our ordinary shares.

 

To comply with PRC laws and regulations relating to foreign ownership restrictions in the online value-added telecommunications business, we hold our ICP license through contractual arrangements with Beijing Digital Information, our PRC consolidated VIE, as well as its shareholders. As part of these arrangements, Beijing Digital Information holds assets that are important to the operation of our business.

 

We do not have priority pledges and liens against Beijing Digital Information’s assets. As a contractual and property right matter, this lack of priority pledges and liens has remote risks. If Beijing Digital Information undergoes an involuntary liquidation proceeding, third-party creditors may claim rights to some or all of its assets and we may not have priority against such third-party creditors on Beijing Digital Information’s assets. If Beijing Digital Information liquidates, we may take part in the liquidation procedures as a general creditor under the PRC Enterprise Bankruptcy Law and recover any outstanding liabilities owed by Beijing Digital Information to Beijing Distance Learning under the applicable service agreements. To ameliorate the risks of an involuntary liquidation proceeding initiated by a third-party creditor, we closely monitor the operations and finances of Beijing Digital Information through carefully designed budgetary and internal controls to ensure that Beijing Digital Information is well capitalized and is highly unlikely to trigger any third-party monetary claims in excess of its assets and cash resources. Furthermore, Beijing Distance Learning has the ability, if necessary, to provide finance support to Beijing Digital Information to prevent such an involuntary liquidation.

 

If the shareholders of Beijing Digital Information were to attempt to voluntarily liquidate Beijing Digital Information without obtaining our prior consent, we could effectively prevent such unauthorized voluntary liquidation by exercising our right to request Beijing Digital Information’s shareholders to transfer all of their equity ownership interest to Beijing Distance Learning or one or more individuals designated by us in accordance with the option agreements with the shareholders of Beijing Digital Information. In the event that the shareholders of Beijing Digital Information initiates a voluntary liquidation proceeding without our authorization or attempts to distribute the retained earnings or assets of Beijing Digital Information without our prior consent, we may need to resort to legal of the contractual agreements. Any such litigation may be costly and may divert our management’s time and attention away from the operation of our business, and the outcome of such litigation would be uncertain.

 

Risks Related to Doing Business in China

 

Uncertainties in the interpretation and enforcement of PRC laws and regulations could limit the legal protections available to you and us.

 

The PRC legal system is based on written statutes. Unlike common law systems, it is a system in which legal cases have limited value as precedents. In the late 1970s, the PRC government began to promulgate a comprehensive system of laws and regulations governing economic matters in general. The overall effect of legislation over the past three decades has significantly increased the protections afforded to various forms of foreign or private-sector investment in China. Our PRC subsidiary is subject to various PRC laws and regulations generally applicable to companies in China. However, since these laws and regulations are relatively new and the PRC legal system continues to rapidly evolve, the interpretations of many laws, regulations and rules are not always uniform and enforcement of these laws, regulations and rules involve uncertainties.

 

From time to time, we may have to resort to administrative and court proceedings to enforce our legal rights. However, since PRC administrative and court authorities have significant discretion in interpreting and implementing statutory and contractual terms, it may be more difficult to evaluate the outcome of administrative and court proceedings and the level of legal protection we enjoy than in more developed legal systems. Furthermore, the PRC legal system is based in part on government policies and internal rules (some of which are not published in a timely manner or at all) that may have retroactive effect. As a result, we may not be aware of our violation of these policies and rules until sometime after the violation. Such uncertainties, including uncertainty over the scope and effect of our contractual, property (including intellectual property) and procedural rights, and any failure to respond to changes in the regulatory environment in China could materially and adversely affect our business and impede our ability to continue our operations.

 

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We may be adversely affected by the complexity, uncertainties and changes in PRC regulation of internet-related business.

 

The PRC government extensively regulates the internet industry, including foreign ownership of, and the licensing and permit requirements pertaining to, companies in the internet industry. These internet-related laws and regulations are relatively new and evolving, and their interpretation and enforcement involves significant uncertainties. As a result, in certain circumstances it may be difficult to determine what actions or omissions may be deemed to be in violation of applicable laws and regulations. Issues, risks and uncertainties relating to PRC governmental regulation of the internet industry include, but are not limited to, the following.

 

We only have control over our website through contractual arrangements. We do not own the website in China due to the restriction of foreign investment in businesses providing value-added telecommunication services in China, including internet information provision services. This may significantly disrupt our business, subject us to sanctions, compromise enforceability of related contractual arrangements, or have other harmful effects on us.

 

The evolving PRC regulatory system for the internet industry may lead to the establishment of new regulatory agencies. For example, in May 2011, the State Council announced the establishment of a new department, the State Internet Information Office (with the involvement of the State Council Information Office, the MIIT, and the Ministry of Public Security). The primary role of this new agency is to facilitate the policy-making and legislative development in this field, to direct and coordinate with the relevant departments in connection with online content administration and to deal with cross-ministry regulatory matters in relation to the internet industry.

 

We are required to obtain and maintain various licenses and permits and fulfill registration and filing requirements in order to conduct and operate our business. If these new laws and regulations are promulgated, additional licenses may be required for our operations. If our operations do not comply with these new regulations at the time they become effective, or if we fail to obtain any licenses required under these new laws and regulations, we could be subject to penalties.

 

The Circular on Strengthening the Administration of Foreign Investment in an Operation of Value-added Telecommunications Business, issued by the MIIT in July 2006, prohibits domestic telecommunication service providers from leasing, transferring or selling telecommunications business operating licenses to any foreign investor in any form, or providing any resources, sites or facilities to any foreign investor for their illegal operation of a telecommunications business in China. According to this circular, either the holder of a value-added telecommunication services operation permit or its shareholders must directly own the domain names and trademarks used by such license holders in their provision of value-added telecommunication services. The circular also requires each license holder to have the necessary facilities, including servers, for its approved business operations and to maintain such facilities in the regions covered by its license. If an ICP license holder fails to comply with the requirements and also fails to remediate such non-compliance within a specified period of time, the MIIT or its local counterparts have the discretion to take administrative measures against such license holder, including revoking its ICP license. Currently, Beijing Digital Information holds an ICP license and operates our website. Beijing Digital Information owns the relevant domain names and registered trademarks and has the necessary personnel to operate such website.

 

The interpretation and application of existing PRC law, regulations and policies and possible new laws, regulations or policies relating to the internet industry have created substantial uncertainties regarding the legality of existing and future foreign investments in, and the businesses and activities of, internet businesses in China, including our business. We cannot assure you that we have obtained all the permits or licenses required for conducting our business in China or will be able to maintain our existing licenses or obtain new ones.

 

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New legislation or changes in the PRC laws or policies regarding self-taught education may affect our business operations and prospects.

 

The self-taught education industry in China and our business are subject to regulations and policies in various respects. Relevant rules and regulations could be amended or updated from time to time to accommodate the development of education in China. We may need to change our business practices in order to comply with the new rules and regulations or adapt to policy changes, but we may not be able to do so timely and efficiently. Any such failure may subject us to administrative fines or penalties or other negative consequences which could materially and adversely affect our brand name, reputation, business, financial condition and results of operations.

 

The enforcement of the PRC Labor Contract Law and other labor-related regulations in the PRC may adversely affect our business and our results of operations.

 

The PRC Labor Contract Law became effective and was implemented on January 1, 2008, which was amended on December 28, 2012. It has reinforced the protection of employees who, under the PRC Labor Contract Law, have the right, among others, to have written labor contracts, to enter into labor contracts with no fixed terms under certain circumstances, to receive overtime wages and to terminate or alter terms in labor contracts. According to the PRC Social Insurance Law, which became effective on July 1, 2011, and the Administrative Regulations on the Housing Funds, Companies operating in China are required to participate in pension insurance, work-related injury insurance, medical insurance, unemployment insurance, maternity insurance and housing funds plans, and the employers must pay all or a portion of the social insurance premiums and housing funds for their employees.

 

As a result of these laws and regulations designed to enhance labor protection, we expect our labor costs will continue to increase. In addition, as the interpretation and implementation of these laws and regulations are still evolving, our employment practice may not at all times be deemed in compliance with the new laws and regulations. If we are subject to severe penalties or incur significant liabilities in connection with labor disputes or investigations, our business and results of operations may be adversely affected.

 

Regulation and censorship of information disseminated over the internet in China may adversely affect our business and reputation and subject us to liability for information displayed on our website.

 

The PRC government has adopted regulations governing internet access and the distribution of news and other information over the internet. Under these regulations, internet content providers and internet publishers are prohibited from posting or displaying over the internet content that, among other things, violates PRC laws and regulations, impairs the national dignity of China, or is reactionary, obscene, superstitious, fraudulent or defamatory. Failure to comply with these requirements may result in the revocation of licenses to provide internet content and other licenses, and the closure of the concerned websites. The website operator may also be held liable for such censored information displayed on or linked to the websites. If our website is found to be in violation of any such requirements, we may be penalized by relevant authorities, and our operations or reputation could be adversely affected.

 

The operation of Beijing Digital Information may be deemed by relevant PRC government authority to be beyond its authorized business scope. If the relevant PRC government authorities take actions against Beijing Digital Information, our business and operations could be materially and adversely affected.

 

The principal regulations governing private education in China consist of the Education Law of the PRC, the Law for Promoting Private Education, or Private Education Law, and the Implementation Rules for the Law for Promoting Private Education and the latest amendment of Private Education Law was in November 2016 which came into effect as of September 1, 2017. Under these PRC laws and regulations, sponsors of private schools may choose to establish non-profit or for-profit private schools at their own discretion, while prior to the effectiveness of the Amendment, all private schools shall not be established for for-profit purposes. Nonetheless, school sponsors are not allowed to establish for-profit private schools that are engaged in compulsory education. On December 30, 2016, the MOE, SAIC and the Ministry of Human Resources and Social Welfare jointly issued the Implementation Rules on the Supervision and Administration of For-profit Private Schools, pursuant to which the establishment, division, merger and other material changes of a for-profit private school shall first be approved by the education authorities or the authorities in charge of labor and social welfare, and then be registered with the competent branch of SAIC.

 

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We operate online platforms that provide online educational courses to students through the internet, and both of our PRC subsidiary and our PRC consolidated VIE are registered with Beijing AIC as commercial enterprises. As such, we believe the provisions of the Private Education Law and its implementing rules, including without limitation, the requirement for obtaining a private school operating permit, are not applicable to us. However, as the laws and regulations are new, it is unclear that how these laws and regulations will be explained and implemented and we cannot assure you that the competent PRC governmental authorities will not ultimately take a view contrary to our opinion. Moreover, because there is no further official or publicly-available interpretation of the definition of “private schools”, there are uncertainties with regard to whether our business currently conducted in PRC will be deemed by the relevant PRC governmental authorities to be “private schools” as defined under the relevant PRC laws and regulations. If our business conducted in PRC is deemed as operating private schools, we may be required to register our PRC entity as a private school with education or training-related items included into its approved business scope. Beijing Digital Information is registered with Beijing AIC as a limited liability company, and its current registered business scope only includes “education consulting” and “computer technology training,” without “training” or any other education or training-related items. We plan to make an application with Beijing AIC to expand our business scope but we cannot assure you that our application will be accepted by Beijing AIC in a timely fashion or at all. As of the date of this prospectus, we have not received any notice of warning or been subject to penalties or other disciplinary action from the relevant governmental authorities regarding the conducting of our business beyond authorized business scope or without any approvals and permits. However, we cannot assure you that we will not be subject to any penalties in the future. If the relevant PRC government authorities discover or determine that Beijing Digital Information operates beyond its authorized business scope, Beijing Digital Information may be ordered to complete the registration for change of business scope within a given period, failing which Beijing Digital Information is subject to a one-time fine of RMB10,000 to RMB100,000, or may be ordered to cease its operation if the relevant authorities determine that Beijing Digital Information is operating without any approval or permit required.

 

We face risks and uncertainties with respect to the licensing requirement for Internet audio-video programs.

 

On December 20, 2007, the State Administration of Press Publication Radio Film and Television (“SAPPRFT”), and the Ministry of Industry and Information Technology (“MIIT”), jointly promulgated the Administrative Measures Regarding Internet Audio-Video Program Services, or the Internet Audio-Video Program Measures, which became effective on January 31, 2008 and was amended and effective as of August 8, 2015. Among other things, the Internet Audio-Video Program Measures stipulate that no entities or individuals may provide Internet audio-video program services without a License for Online Transmission of Audio-Visual Programs issued by SAPPRFT or its local bureaus or completing the relevant registration with SAPPRFT or its local bureaus, and only state-owned or state-controlled entities are eligible to apply for a License for Online Transmission of Audio-Visual Programs. In a press conference jointly held by the SAPPRFT and MIIT in February 2008 to answer questions relating to the Internet Audio-Video Program Measures, the SAPPRFT and MIIT clarified that those providers of internet audio-visual program services who engaged in such services prior to the promulgation of the Internet Audio-Video Program Measure may re-register and continue their operation of internet audio-visual program services so long as those providers did not violate the relevant laws and regulations in the past, regardless whether they are state-owned or state-controlled entities or not, but any other entities intend to provide internet audio-visual program services shall comply with all requirements specified in the Internet Audio-Video Program Measures. On April 1, 2010, SAPPRFT promulgated the Provisional Implementation of the Tentative Categories of Internet Audio-Visual Program Services, or the Categories, which was modified on March 10, 2017. The Categories clarified the scope of Internet audio-video programs services. According to the Categories, there are four categories of Internet audio-visual program services which are further divided into seventeen sub-categories. The third sub-category to the second category covers the making and editing of certain specialized audio-video programs concerning, among other things, educational content, and broadcasting such content to the general public online. However, there are still significant uncertainties relating to the interpretation and implementation of the Internet Audio-Video Program Measures, in particular, the scope of “internet audio-video programs.”

 

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We offer recorded audio-video lectures to our enrolled students only. We believe the limited scope of our audience and the nature of the raw data we transmit distinguishes us from general providers of internet audio-visual program services, such as the operator of online video websites, and the provision of the Audio-Visual Program Provisions are not applicable with regard to our offering of the lessons. However, we cannot assure you that the competent PRC government authorities will not ultimately take a view contrary to our opinion. In addition, as supplementary course materials, we offer certain audio-video contents on our websites and mobile apps for the review of all registered members. If the governmental authorities determine that our relevant activities fall within the definition of “internet audio-video program service” under the Audio-Visual Program Provisions, we may be required to obtain the License for Disseminating Audio-Video Programs through Information Network. If this occurs, we may not be able to obtain such license and we may become subject to penalties, fines, legal sanctions or an order to suspend our use of audio-video content. We cannot assure you that the measures we have taken will be deemed adequate by the authorities and we will not be subject to any penalties or legal sanctions in the future for our use of audio or video contents on our websites.

 

We are required to obtain various operating licenses and permits and to make registrations and filings for our business operations in China; failure to comply with these requirements may materially adversely affect our business and results of operations.

 

The internet industry in China is highly regulated by the PRC government. See “Regulation—PRC Regulation.” We are required to obtain and maintain various licenses and permits and fulfill registration and filing requirements in order to conduct and operate our business currently carried out, and we may be required to obtained additional licenses or permits for our operations as the interpretation and implementation of current PRC laws and regulations are still evolving, and new laws and regulations may also be promulgated. We currently, through our PRC variable interest entity, Beijing Digital Information, hold an ICP license for our website, which is valid through January 11, 2016 to January 11, 2021 and is subject to annual review. Beijing Digital Information, however, may be required to obtain additional licenses or expand the authorized business scope covered under the licenses it currently holds. For example, the contents we use on our websites or mobile apps, including the course materials and video-audio contents we licensed from third parties, may be deemed “Internet cultural products”, and our use of those contents may be regarded as “Internet cultural activities”, thus we may be required to obtain an Internet Culture Business Operating License for provision of those contents through our online platforms as currently there is no further official or publicly-available interpretation of those definitions. Also, we may be required to obtain a Publication Business Operating License for distribution of course books or other course materials, including electronical version, to our enrolled students. In addition, our providing content through our online platform may be regarded as “online publishing” and may thus subject us to the requirement of obtaining an Online Publishing License. If Beijing Digital Information fails to obtain or maintain any of the required licenses or approvals, its continued business operations in the Internet industry may subject it to various penalties, such as confiscation of illegal revenues, fines and the discontinuation or restriction of its operations. Any such disruption in the business operations of our affiliated entities will materially and adversely affect our business, financial condition and results of operations.

 

Changes in China’s economic, political or social conditions or government policies could have a material adverse effect on our business and operations.

 

Currently all of our business operations is conducted in China and all of our sales are made in China. Accordingly, our business, financial condition, results of operations and prospects may be influenced to a significant degree by political, economic and social conditions in China generally and by continued economic growth in China as a whole.

 

China’s economy differs from the economies of most developed countries in many respects, including the level of government involvement, level of development, growth rate, control of foreign exchange and allocation of resources. Although the PRC government has implemented measures since the late 1970’s emphasizing the utilization of market forces for economic reform, the reduction of state ownership of productive assets, and the establishment of improved corporate governance in business enterprises, a substantial portion of productive assets in China is still owned by the PRC government. In addition, the PRC government continues to play a significant role in regulating industry development by imposing industrial policies. The PRC government also exercises significant control over the PRC economic growth through allocating resources, controlling payment of foreign currency-denominated obligations, setting monetary policy, and providing preferential treatment to particular industries or companies. For example, as a result of China’s current nationwide anti-corruption campaign, public school spending has become strictly regulated. To comply with the expenditure control policies of the Chinese government, many public universities, including our clients, temporarily reduced their self-taught education spending in 2017. This caused the demand for our courses in 2017 to decrease. If our clients continue to reduce their demand for our services due to the policies of the Chinese government, this could adversely impact our business, financial condition and operating results.

 

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While China’s economy has experienced significant growth over the past decades, growth has been uneven, both geographically and among various sectors of the economy, and the rate of growth has been slowing. Some of the governmental measures may benefit the overall Chinese economy, but may have a negative effect on us. For example, our financial condition and results of operations may be adversely affected by government control over capital investments or changes in tax regulations. Any stimulus measures designed to boost the Chinese economy may contribute to higher inflation, which could adversely affect our results of operations and financial condition. For example, certain operating costs and expenses, such as employee compensation and office operating expenses, may increase as a result of higher inflation.

 

PRC regulations relating to foreign exchange registration of overseas investment by PRC residents may subject our PRC resident beneficial owners or our PRC subsidiary to liability or penalties, limit our ability to inject capital into these subsidiaries, limit PRC subsidiary’s ability to increase their registered capital or distribute profits to us, or may otherwise adversely affect us.

 

On July 4, 2014, the State Administration of Foreign Exchange (“SAFE’) promulgated the Circular on Relevant Issues Relating to Domestic Resident’s Investment and Financing and Roundtrip Investment through Special Purpose Vehicles, or SAFE Circular 37, which replaced the former Notice on Relevant Issues Concerning Foreign Exchange Administration for PRC Residents to Engage in Financing and Inbound Investment via Overseas Special Purpose Vehicles (generally known as SAFE Circular 75) promulgated by SAFE on October 21, 2005. On February 13, 2015, SAFE further promulgated the Circular on Further Simplifying and Improving the Administration of the Foreign Exchange Concerning Direct Investment, or SAFE Circular 13, which took effect on June 1, 2015. This SAFE Circular 13 has amended SAFE Circular 37 by requiring PRC residents or entities to register with qualified banks rather than SAFE or its local branch in connection with their establishment or control of an offshore entity established for the purpose of overseas investment or financing.

 

These circulars require PRC residents to register with qualified banks in connection with their direct establishment or indirect control of an offshore entity, for the purpose of overseas investment and financing, with such PRC residents’ legally owned assets or equity interests in domestic enterprises or offshore assets or interests, which is referred to in SAFE Circular 37 as a “special purpose vehicle.” These circulars further require amendment to the registration in the event of any significant changes with respect to the special purpose vehicle, such as an increase or decrease of capital contributed by PRC residents, share transfer or exchange, merger, division or other material events. In the event that a PRC resident holding interests in a special purpose vehicle fails to complete the required SAFE registration, the PRC subsidiary of that special purpose vehicle may be prohibited from making profit distributions to the offshore parent and from carrying out subsequent cross-border foreign exchange activities, and the special purpose vehicle may be restricted in its ability to contribute additional capital into its PRC subsidiary. Furthermore, failure to comply with the various SAFE registration requirements described above could result in liability under PRC law for evasion of foreign exchange controls.

 

Yang Yu and Xinghui Yang, who directly or indirectly hold shares in our British Virgin Islands holding company and who are known to us as being PRC residents have initiated the application for foreign exchange registrations. However, we may not at all times be fully aware or informed of the identities of all our shareholders or beneficial owners that are required to make such registrations, and we may not always be able to compel them to comply with all relevant foreign exchange regulations. As a result, we cannot assure you that all of our shareholders or beneficial owners who are PRC residents will at all times comply with, or in the future make or obtain any applicable registrations or approvals required by all relevant foreign exchange regulations. The failure or inability of such individuals to comply with the registration procedures set forth in these regulations may subject us to fines or legal sanctions, restrictions on our cross-border investment activities or our PRC subsidiary’s ability to distribute dividends to, or obtain foreign-exchange-dominated loans from, our company, or prevent us from making distributions or paying dividends. As a result, our business operations and our ability to make distributions to you could be materially and adversely affected.

 

Furthermore, as these foreign exchange regulations are still relatively new and their interpretation and implementation has been constantly evolving, it is unclear how these regulations, and any future regulation concerning offshore or cross-border transactions, will be interpreted, amended and implemented by the relevant government authorities. We cannot predict how these regulations will affect our business operations or future strategy. In addition, if we decide to acquire a PRC domestic company, we cannot assure you that we or the owners of such company, as the case may be, will be able to obtain the necessary approvals or complete the necessary filings and registrations required by the foreign exchange regulations. This may restrict our ability to implement our acquisition strategy and could adversely affect our business and prospects.

 

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PRC regulation on loans to, and direct investment in, PRC entities by offshore holding companies and governmental control in currency conversion may delay or prevent us from using the proceeds of this offering to make loans to our PRC subsidiary and PRC consolidated VIE or make additional capital contributions to our PRC subsidiary, which could materially and adversely affect our liquidity and our ability to fund and expand our business.

 

We are an offshore holding company conducting our operations in China through our PRC subsidiary, Beijing Distance Learning. We may make loans to our PRC subsidiary and PRC consolidated VIE subject to the approval from governmental authorities and limitation of amount, or we may make additional capital contributions to our PRC subsidiary.

 

Any loans to our PRC subsidiary, which is treated as a foreign-invested enterprise under PRC law, are subject to PRC regulations and foreign exchange loan registrations. For example, loans by us to our PRC subsidiary, Beijing Distance Learning, to finance its activities cannot exceed statutory limits and must be registered with the local counterpart of the SAFE. The statutory limit for the total amount of foreign debts of a foreign-invested company is either the difference between the amount of total investment as approved by the Ministry of Commerce or its local counterpart and the amount of registered capital of such foreign-invested company or twice of net worth of the foreign-invested company. We may also decide to finance our PRC subsidiary by means of capital contributions.

 

On August 29, 2008, SAFE promulgated the Circular on the Relevant Operating Issues Concerning the Improvement of the Administration of the Payment and Settlement of Foreign Currency Capital of Foreign-Invested Enterprises, or SAFE Circular 142, regulating the conversion by a foreign-invested enterprise of foreign currency registered capital into RMB by restricting how the converted RMB may be used. SAFE Circular 142 provides that the RMB capital converted from foreign currency registered capital of a foreign-invested enterprise may only be used for purposes within the business scope approved by the applicable governmental authority and may not be used for equity investments within the PRC unless otherwise provided by law. In addition, SAFE strengthened its oversight of the flow and use of the RMB capital converted from foreign currency registered capital of a foreign-invested company. The use of such RMB capital may not be altered without SAFE approval, and such RMB capital may not in any case be used to repay RMB loans if the proceeds of such loans have not been used. Violations of SAFE Circular 142 could result in severe monetary or other penalties. On July 4, 2014, SAFE issued the Circular of the SAFE on Relevant Issues Concerning the Pilot Reform in Certain Areas of the Administrative Method of the Conversion of Foreign Exchange Funds by Foreign-invested Enterprises, or SAFE Circular 36, which launched the pilot reform of administration regarding conversion of foreign currency registered capitals of foreign-invested enterprises in 16 pilot areas. According to SAFE Circular 36, some of the restrictions under SAFE Circular 142 will not apply to the settlement of the foreign exchange capitals of an ordinary foreign-invested enterprise in the pilot areas, and such foreign-invested enterprise is permitted to use Renminbi converted from its foreign-currency registered capital to make equity investments in the PRC within and in accordance with the authorized business scope of such foreign-invested enterprises, subject to certain registration and settlement procedure as set forth in SAFE Circular 36. As this circular is relatively new, there remains uncertainty as to its interpretation and application and any other future foreign exchange related rules. On March 30, 2015, SAFE promulgated Circular on Reforming the Management Approach regarding the Settlement of Foreign Exchange Capital of Foreign-invested Enterprises, or SAFE Circular 19, to expand the reform nationwide. SAFE Circular 19 came into force and replaced both SAFE Circular 142 and SAFE Circular 36 on June 1, 2015. However, SAFE Circular 19 continues to prohibit a foreign-invested enterprise from, among other things, using RMB funds converted from its foreign exchange capitals for expenditure beyond its authorized business scope, providing entrusted loans or repaying loans between non-financial enterprises. Violations of these Circulars could result in severe monetary or other penalties. These circulars may significantly limit our ability to use RMB converted from the net proceeds of this offering to fund the establishment of new entities in China by our PRC subsidiary, to invest in or acquire any other PRC companies through our PRC subsidiary, or to establish new consolidated VIEs in the PRC.

 

In light of the various requirements imposed by PRC regulations on loans to, and direct investment in, PRC entities by offshore holding companies, we cannot assure you that we will be able to complete the necessary government registrations or obtain the necessary government approvals on a timely basis, if at all, with respect to future loans by us to our PRC subsidiary or PRC consolidated VIE or with respect to future capital contributions by us to our PRC subsidiary. If we fail to complete such registrations or obtain such approvals, our ability to use the proceeds from this offering and to capitalize or otherwise fund our PRC operations may be negatively affected, which could materially and adversely affect our liquidity and our ability to fund and expand our business.

 

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Under the PRC Enterprise Income Tax Law, we may be classified as a PRC “resident enterprise” for PRC enterprise income tax purposes. Such classification would likely result in unfavorable tax consequences to us and our non-PRC shareholders and has a material adverse effect on our results of operations and the value of your investment.

 

Under the PRC Enterprise Income Tax Law, or the EIT Law, that became effective in January, 2008 and was amended in February, 2017, an enterprise established outside the PRC with “de facto management bodies” within the PRC is considered a “resident enterprise” for PRC enterprise income tax purposes and is generally subject to a uniform 25% enterprise income tax rate on its worldwide income. Under the implementation rules to the EIT Law, a “de facto management body” is defined as a body that has material and overall management and control over the manufacturing and business operations, personnel and human resources, finances and properties of an enterprise. In addition, a circular, known as SAT Circular 82, issued in April 2009 by the State Administration of Taxation, or the SAT, specifies that certain offshore incorporated enterprises controlled by PRC enterprises or PRC enterprise groups will be classified as PRC resident enterprises if the following are located or resident in the PRC: senior management personnel and departments that are responsible for daily production, operation and management; financial and personnel decision making bodies; key properties, accounting books, company seal, and minutes of board meetings and shareholders’ meetings; and half or more of the senior management or directors having voting rights. Further to SAT Circular 82, the SAT issued a bulletin, known as SAT Bulletin 45, which took effect in September 2011, to provide more guidance on the implementation of SAT Circular 82 and clarify the reporting and filing obligations of such “Chinese-controlled offshore incorporated resident enterprises.” SAT Bulletin 45 provides procedures and administrative details for the determination of resident status and administration on post-determination matters. Although both SAT Circular 82 and SAT Bulletin 45 only apply to offshore enterprises controlled by PRC enterprises or PRC enterprise groups, not those controlled by PRC individuals or foreign individuals, the determining criteria set forth in SAT Circular 82 and SAT Bulletin 45 may reflect the SAT’s general position on how the “de facto management body” test should be applied in determining the tax resident status of offshore enterprises, regardless of whether they are controlled by PRC enterprises, PRC enterprise groups or by PRC or foreign individuals.

 

We do not believe that the Company meets all of the conditions above thus we do not believe that the Company is a PRC resident enterprise, though a substantial majority of the members of our management team as well as the management team of our offshore holding company are located in China. However, if the PRC tax authorities determine that the Company is a PRC resident enterprise for PRC enterprise income tax purposes, a number of unfavorable PRC tax consequences could follow. First, we will be subject to the uniform 25% enterprise income tax on our world-wide income, which could materially reduce our net income. In addition, we will also be subject to PRC enterprise income tax reporting obligations.

 

Finally, dividends payable by us to our investors and gains on the sale of our shares may become subject to PRC withholding tax, at a rate of 10% in the case of non-PRC enterprises or 20% in the case of non-PRC individuals (in each case, subject to the provisions of any applicable tax treaty), if such gains are deemed to be from PRC sources. It is unclear whether non-PRC shareholders of our company would be able to claim the benefits of any tax treaties between their country of tax residence and the PRC in the event that we are treated as a PRC resident enterprise. Any such tax may reduce the returns on your investment in the ordinary shares.

 

Enhanced scrutiny over acquisition transactions by the PRC tax authorities may have a negative impact on potential acquisitions we may pursue in the future.

 

Pursuant to the Notice on Strengthening Administration of Enterprise Income Tax for Share Transfers by Non-PRC Resident Enterprises, or SAT Circular 698, issued by the SAT on December 10, 2009, where a foreign investor transfers the equity interests of a resident enterprise indirectly via disposition of the equity interests of an overseas holding company, or an “indirect transfer,” and such overseas holding company is located in a tax jurisdiction that (i) has an effective tax rate less than 12.5% or (ii) does not tax foreign income of its residents, the foreign investor shall report the indirect transfer to the competent tax authority. The PRC tax authority will examine the true nature of the indirect transfer, and if the tax authority considers that the foreign investor has adopted an “abusive arrangement” in order to avoid PRC tax, it may disregard the existence of the overseas holding company and re-characterize the indirect transfer and as a result, gains derived from such indirect transfer may be subject to PRC withholding tax at a rate of up to 10%.

 

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On February 3, 2015, the SAT issued the Announcement of the State Administration of Taxation on Several Issues Concerning the Enterprise Income Tax on Indirect Property Transfer by Non-Resident Enterprises, or SAT Bulletin 7, to supersede existing provisions in relation to the “indirect transfer” as set forth in Circular 698, while the other provisions of Circular 698 remain in force. Pursuant to SAT Bulletin 7, where a non-resident enterprise indirectly transfers properties such as equity in PRC resident enterprises without any justifiable business purposes and aiming to avoid the payment of enterprise income tax, such indirect transfer must be reclassified as a direct transfer of equity in PRC resident enterprise. To assess whether an indirect transfer of PRC taxable properties has reasonable commercial purposes, all arrangements related to the indirect transfer must be considered comprehensively and factors set forth in SAT Bulletin 7 must be comprehensively analyzed in light of the actual circumstances. SAT Bulletin 7 also provides that, where a non-PRC resident enterprise transfers its equity interests in a resident enterprise to its related parties at a price lower than the fair market value, the competent tax authority has the power to make a reasonable adjustment to the taxable income of the transaction.

 

On October 17, 2017, the SAT issued the Announcement of the State Administration of Taxation on Matters Concerning Withholding of Income Tax of Non-resident Enterprises as Source, or SAT Bulletin 37, which repealed the entire Circular 698 and the provision in relation to the time limit for the withholding agent to declare to the competent tax authority for payment of such tax of SAT Bulletin 7. Pursuant to SAT Bulletin 37, the income from property transfer, as stipulated in the second item under Article 19 of the Law on Enterprise Income Tax, shall include the income derived from transferring such equity investment assets as stock equity. The balance of deducting the equity’s net value from the total income from equity transfer shall be taxable income from equity transfer. Where a withholding agent enters into a business contract, involving the income specified in the third paragraph of Article 3 in the Law on Enterprise Income Tax, with a non-resident enterprise, the tax-excluding income of the non-resident enterprise will be treated as the tax-including income, based on which the tax payment will be calculated and remitted, if it is agreed in the contract that the withholding agent shall assume the tax payable. 

 

There has been very limited application of SAT Bulletin 7 and SAT Bulletin 37 because these regulations were newly issued and came into force in February 2015 and in December 2017 respectively. During the effective period of SAT Circular 698, some intermediary holding companies were actually looked through by the PRC tax authorities, and consequently the non-PRC resident investors were deemed to have transferred the PRC subsidiary and PRC corporate taxes were assessed accordingly. It is possible that we or our non-PRC resident investors may become at risk of being taxed under SAT Bulletin 7 and SAT Bulletin 37 and may be required to expend valuable resources to comply with SAT Bulletin 7 and SAT Bulletin 37 or to establish that we or our non-PRC resident investors should not be taxed under SAT Bulletin 7 and SAT Bulletin 37, which may have an adverse effect on our financial condition and results of operations or such non-PRC resident investors’ investment in us.

 

Our PRC subsidiary is subject to restrictions on paying dividends or making other payments to us, which may restrict our ability to satisfy our liquidity requirements.

 

We are a holding company incorporated in the British Virgin Islands. We may need dividends and other distributions on equity from our PRC subsidiary to satisfy our liquidity requirements. Current PRC regulations permit our PRC subsidiary to pay dividends to us only out of their accumulated profits, if any, determined in accordance with PRC accounting standards and regulations. In addition, our PRC subsidiary is required to set aside at least 10% of their respective accumulated profits each year, if any, to fund certain reserve funds until the total amount set aside reaches 50% of their respective registered capital. Our PRC subsidiary may also allocate a portion of its after-tax profits based on PRC accounting standards to employee welfare and bonus funds at their discretion. These reserves are not distributable as cash dividends. Furthermore, if our PRC subsidiary incurs debt on their own behalf in the future, the instruments governing the debt may restrict their ability to pay dividends or make other payments to us. In addition, the PRC tax authorities may require us to adjust our taxable income under the contractual arrangements we currently have in place in a manner that would materially and adversely affect our PRC subsidiary’s ability to pay dividends and other distributions to us. Any limitation on the ability of our subsidiary to distribute dividends to us or on the ability of our PRC consolidated VIE to make payments to us may restrict our ability to satisfy our liquidity requirements.

 

In addition, the EIT Law, and its implementation rules provide that a withholding tax rate of up to 10% will be applicable to dividends payable by Chinese companies to non-PRC-resident enterprises unless otherwise exempted or reduced according to treaties or arrangements between the PRC central government and governments of other countries or regions where the non-PRC-resident enterprises are incorporated.

 

Governmental control of currency conversion may affect the value of your investment.

 

The PRC government imposes controls on the convertibility of the RMB into foreign currencies and, in certain cases, the remittance of currency out of China. We receive substantially all of our revenues in RMB. Under our current corporate structure, our company in the British Virgin Islands may rely on dividend payments from our PRC subsidiary to fund any cash and financing requirements we may have. Under existing PRC foreign exchange regulations, payments of current account items, such as profit distributions and trade and service-related foreign exchange transactions, can be made in foreign currencies without prior approval from SAFE by complying with certain procedural requirements. Therefore, our PRC subsidiary in China is able to pay dividends in foreign currencies to us without prior approval from SAFE, subject to the condition that the remittance of such dividends outside of the PRC complies with certain procedures under PRC foreign exchange regulation, such as the overseas investment registrations by our shareholders or the ultimate shareholders of our corporate shareholders who are PRC residents. But approval from or registration with appropriate government authorities is required where RMB is to be converted into foreign currency and remitted out of China to pay capital expenses such as the repayment of loans denominated in foreign currencies. The PRC government may also at its discretion restrict access in the future to foreign currencies for current account transactions. If the foreign exchange control system prevents us from obtaining sufficient foreign currencies to satisfy our foreign currency demands, we may not be able to pay dividends in foreign currencies to our shareholders, including holders of our ordinary shares.

 

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The approval of the China Securities Regulatory Commission may be required in connection with this offering under a regulation adopted in August 2006, and, if required, we cannot assure you that we will be able to obtain such approval.

 

The Regulations on Mergers and Acquisitions of Domestic Companies by Foreign Investors, or the M&A Rules, adopted by six PRC regulatory agencies in 2006 and amended in 2009, requires an overseas special purpose vehicle formed for listing purposes through acquisitions of PRC domestic companies and controlled by PRC companies or individuals to obtain the approval of the China Securities Regulatory Commission, or the CSRC, prior to the listing and trading of such special purpose vehicle’s securities on an overseas stock exchange. In September 2006, the CSRC published a notice on its official website specifying documents and materials required to be submitted to it by a special purpose vehicle seeking CSRC approval of its overseas listings. The application of the M&A Rules remains unclear. Currently, there is no consensus among leading PRC law firms regarding the scope and applicability of the CSRC approval requirement.

 

Our PRC counsel, Jingtian & Gongcheng, has advised us based on their understanding of the current PRC law, rules and regulations that the CSRC’s approval is not required for the listing and trading of our ordinary shares on NASDAQ in the context of this offering, given that:

 

the CSRC currently has not issued any definitive rule or interpretation concerning whether offerings like ours under this prospectus are subject to this regulation;

 

we did not establish our PRC subsidiary, Beijing Distance Learning, by means of mergering with or acquisition of PRC domestic companies; and

 

no provision in this regulation clearly classifies contractual arrangements as a type of transaction subject to its regulation.

 

However, our PRC legal counsel has further advised us that there remains some uncertainty as to how the M&A Rules will be interpreted or implemented in the context of an overseas offering and its opinions summarized above are subject to any new laws, rules and regulations or detailed implementations and interpretations in any form relating to the M&A Rules. We cannot assure you that relevant PRC governmental agencies, including the CSRC, would reach the same conclusion as we do. If it is determined that CSRC approval is required for this offering, we may face sanctions by the CSRC or other PRC regulatory agencies for failure to seek CSRC approval for this offering. These sanctions may include fines and penalties on our operations in the PRC, limitations on our operating privileges in the PRC, delays in or restrictions on the repatriation of the proceeds from this offering into the PRC, restrictions on or prohibition of the payments or remittance of dividends by our China subsidiary, or other actions that could have a material and adverse effect on our business, financial condition, results of operations, reputation and prospects, as well as the trading price of our ordinary shares. The CSRC or other PRC regulatory agencies may also take actions requiring us, or making it advisable for us, to halt this offering before the settlement and delivery of the ordinary shares that we are offering. Consequently, if you engage in market trading or other activities in anticipation of and prior to the settlement and delivery of the ordinary shares we are offering, you would be doing so at the risk that the settlement and delivery may not occur.

 

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The M&A Rules and certain other PRC regulations establish complex procedures for some acquisitions of Chinese companies by foreign investors, which could make it more difficult for us to pursue growth through acquisitions in China.

 

The M&A Rules discussed in the preceding risk factor and recently adopted regulations and rules concerning mergers and acquisitions established additional procedures and requirements that could make merger and acquisition activities by foreign investors more time consuming and complex. For example, the M&A Rules require that the Ministry of Commerce be notified in advance of any change-of-control transaction in which a foreign investor takes control of a PRC domestic enterprise, if (i) any important industry is concerned, (ii) such transaction involves factors that have or may have impact on the national economic security, or (iii) such transaction will lead to a change in control of a domestic enterprise which holds a famous trademark or PRC time-honored brand. Mergers, acquisitions or contractual arrangements that allow one market player to take control of or to exert decisive impact on another market player must also be notified in advance to the Ministry of Commerce when the threshold under the Provisions on Thresholds for Prior Notification of Concentrations of Undertakings, or the Prior Notification Rules, issued by the State Council in August 2008 is triggered. In addition, the security review rules issued by the Ministry of Commerce that became effective in September 2011 specify that mergers and acquisitions by foreign investors that raise “national defense and security” concerns and mergers and acquisitions through which foreign investors may acquire de facto control over domestic enterprises that raise “national security” concerns are subject to strict review by the Ministry of Commerce, and the rules prohibit any activities attempting to bypass a security review, including by structuring the transaction through a proxy or contractual control arrangement. In the future, we may grow our business by acquiring complementary businesses. Complying with the requirements of the above-mentioned regulations and other relevant rules to complete such transactions could be time consuming, and any required approval processes, including obtaining approval from the Ministry of Commerce or its local counterparts may delay or inhibit our ability to complete such transactions. It is unclear whether our business would be deemed to be in an industry that raises “national defense and security” or “national security” concerns. However, the Ministry of Commerce or other government agencies may publish explanations in the future determining that our business is in an industry subject to the security review, in which case our future acquisitions in the PRC, including those by way of entering into contractual control arrangements with target entities, may be closely scrutinized or prohibited. Our ability to expand our business or maintain or expand our market share through future acquisitions would as such be materially and adversely affected.

 

Risks Related to Our Ordinary Shares and This Offering

 

An active trading market for our ordinary shares may not develop and the trading price for our ordinary shares may fluctuate significantly.

 

We have applied to list our ordinary shares on NASDAQ. Prior to the completion of this offering, there has been no public market for our ordinary shares, and we cannot assure you that a liquid public market for our ordinary shares will develop or be sustained after this offering. If an active public market for our ordinary shares does not develop following the completion of this offering, the market price and liquidity of our ordinary shares may be materially and adversely affected. The initial public offering price for our ordinary shares will be determined by negotiation between us and the Underwriter based upon several factors, and we can provide no assurance that the trading price of our ordinary shares after this offering will not decline below the initial public offering price. As a result, investors in our securities may experience a significant decrease in the value of their ordinary shares.

 

The trading prices of our ordinary shares are likely to be volatile, which could result in substantial losses to investors.

 

The trading prices of our ordinary shares are likely to be volatile and could fluctuate widely due to factors beyond our control. This may happen because of broad market and industry factors, like the performance and fluctuation of the market prices of other companies with business operations located mainly in China that have listed their securities in the United States. In recent months, the widespread negative publicity of alleged fraudulent accounting practices and poor corporate governance of certain U.S. public companies with operations in China were believed to have negatively affected investors’ perception and sentiment towards companies with connection with China, which significantly and negatively affected the trading prices of some companies’ securities listed in the U.S. Once we become a public company, any similar negative publicity or sentiment may affect the performances of our ordinary shares. A number of PRC companies have listed or are in the process of listing their securities on U.S. stock markets. The securities of some of these companies have experienced significant volatility, including price declines in connection with their initial public offerings. The trading performances of these PRC companies’ securities after their offerings may affect the attitudes of investors toward PRC companies listed in the United States in general and consequently may impact the trading performance of our ordinary shares, regardless of our actual operating performance.

 

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In addition to market and industry factors, the price and trading volume for our ordinary shares may be highly volatile for factors specific to our own operations, including the following:

 

the financial projections that we may choose to provide to the public, any changes in those projections or our failure for any reason to meet those projections;

 

variations in our net revenues, net loss/income and cash flow;

 

changes in the economic performance or market valuation of other education companies;

 

announcements of new investments, acquisitions by us or our competitors, strategic partnerships, joint ventures or capital commitments;

 

announcements of new services and expansions by us or our competitors;

 

detrimental negative publicity about us, our competitors or our industry;

 

changes in financial estimates by securities analysts;

 

additions or departures of personnel;

 

release of lock-up or other transfer restrictions on our outstanding equity securities or sales of additional equity securities;

 

potential litigation or regulatory investigations;

 

substantial sales or perception of sales of our ordinary shares in the public market;

 

fluctuations in market prices for our products and securities; and

 

general economic, regulatory or political conditions in China and the U.S.

 

Any of these factors may result in large and sudden changes in the volume and price at which our ordinary shares will trade. In addition, the stock market in general, and the market prices for companies with operations in China in particular, have experienced volatility that often has been unrelated to the operating performance of such companies. The securities of some PRC companies that have listed their securities in the United States have experienced significant volatility since their initial public offerings, including, in some cases, substantial price declines in the trading prices of their securities. The trading performances of these PRC companies’ securities after their offerings may affect the attitudes of investors toward PRC companies listed in the United States, which consequently may impact the trading performance of our ordinary shares, regardless of our actual operating performance. In addition, any negative news or perceptions about inadequate corporate governance practices or fraudulent accounting, corporate structure or other matters of other PRC companies may also negatively affect the attitudes of investors towards PRC-based companies in general, including us, regardless of whether we have conducted any inappropriate activities. Further, the global financial crisis and the ensuing economic recessions in many countries have contributed and may continue to contribute to extreme volatility in the global stock markets. These broad market and industry fluctuations may adversely affect operating performance. Volatility or a lack of positive performance in our share price may also adversely affect our ability to retain key employees, some of whom have been granted restricted shares under our share incentive plan.

 

We may not be able to successfully list our ordinary shares on NASDAQ or if successful, we may not maintain our listing on NASDAQ which could limit investors’ ability to make transactions in our securities and subject us to additional trading restrictions.

 

We plan to list our ordinary shares on the NASDAQ, a national securities exchange. Even if we successfully list our ordinary shares on NASDAQ we cannot assure you that our securities will continue to be listed on NASDAQ in the future. In order to continue listing our securities on NASDAQ, we must maintain certain financial, distribution and share price levels. Generally, we must (i) maintain a minimum amount in shareholders’ equity (generally above $2,500,000), maintain a minimum market value of listed securities (generally above $35,000,000) or have a minimum net income from operations for the prior year of for two of the preceding years (generally above $500,000); and (ii) a minimum number of publicly held shares (generally greater than 500,000) and a minimum number of public shareholders (generally greater than 300 shareholders). Our ordinary shares also cannot have a bid price of less than $1.00. Moreover, we must comply with certain listing standards regarding the independence of our board of directors and members of our audit committee. We intend to fully comply with these requirements on or prior to the effectiveness of this registration statement, but we may not continue to be able to meet these requirements in the future.

 

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If NASDAQ delists our securities from trading on its exchange and we are not able to list our securities on another national securities exchange, we could face significant material adverse consequences including:

 

limited availability of market quotations for our securities;

 

reduced liquidity with respect to our securities;

 

a determination that our shares are “penny stocks,” which will require brokers trading in our shares to adhere to more stringent rules and possibly resulting in a reduced level of trading activity in the secondary trading market for our ordinary shares;

 

limited amount of news and analyst coverage for our company; and

 

a decreased ability to issue additional securities or obtain additional financing in the future.

 

If securities or industry analysts do not publish research or reports about our business, or if they adversely change their recommendations regarding our ordinary shares, the market price for our ordinary shares and trading volume could decline.

 

The trading market for our ordinary shares will be influenced by research reports and ratings that industry or securities analysts or ratings agencies publish about us, our business and the online education market in China in general. We do not have any control over these analysts or agencies. If one or more analysts or agencies who cover us downgrade our ordinary shares, or publish unfavorable research about us, the market price for our ordinary shares would likely decline. If one or more of these analysts cease to cover us or fail to regularly publish reports on us, we could lose visibility in the financial markets, which, in turn, could cause the market price or trading volume for our ordinary shares to decline.

 

The sale or availability for sale of substantial amounts of our ordinary shares could adversely affect their market price.

 

Sales of substantial amounts of our Ordinary shares in the public market after the completion of this offering, or the perception that these sales could occur, could adversely affect the market price of our ordinary shares and could materially impair our ability to raise capital through equity offerings in the future. The ordinary shares sold in this offering will be freely tradable without restriction or further registration under the Securities Act, and shares held by our existing shareholders may also be sold in the public market in the future subject to the restrictions in Rule 144 and Rule 701 under the Securities Act and the applicable lock-up agreements. There will be [_____] ordinary shares outstanding immediately after this offering, if the minimum amount is raised, and there will be [_____] ordinary shares outstanding immediately after this offering, if the maximum amount is raised. In connection with this offering, we, our directors and executive officers, and our existing shareholders have agreed not to sell any ordinary shares for 180 days after the date of this prospectus without the prior written consent of the Underwriter. However, the Underwriter may release these securities from these restrictions at any time, subject to applicable regulations of the Financial Industry Regulatory Authority, Inc. We cannot predict what effect, if any, market sales of securities held by our significant shareholders or any other shareholder or the availability of these securities for future sale will have on the market price of our ordinary shares. See “Underwriting” and “Shares Eligible for Future Sale” for a more detailed description of the restrictions on selling our securities after this offering.

 

Because the initial public offering price is substantially higher than the pro forma net tangible book value per share, you will experience immediate and substantial dilution.

 

If you purchase ordinary shares in this offering, you will pay more for each ordinary share than the corresponding amount paid by existing shareholders for their ordinary shares. As a result, you will experience immediate dilution in net tangible book value of US$[___] per share. See “Dilution” for a more complete description of how the value of your investment in our ordinary shares will be diluted upon the completion of this offering.

 

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There can be no assurance that we will not be a passive foreign investment company, or PFIC, for United States federal income tax purposes for any taxable year, which could subject United States investors in our ordinary shares to significant adverse United States income tax consequences.

 

A non-United States corporation, such as our company, will be classified as a PFIC, for U.S. federal income tax purposes for any taxable year, if either (i)   75% or more of its gross income for such year consists of certain types of “passive” income or (ii)   50% or more of the value of its assets (determined on the basis of a quarterly average) during such year is attributable to assets that produce or are held for the production of passive income (the “asset test”). Although the law in this regard is not clear, we treat our consolidated VIEs as being owned by us for U.S. federal income tax purposes because we exercise effective control over the consolidated VIEs and are entitled to substantially all of their economic benefits. As a result, we consolidate their results of operations in our consolidated U.S.   GAAP financial statements. Assuming that we are the owner of our consolidated VIEs for U.S. federal income tax purposes, and based upon our current and expected income and assets (taking into account goodwill, other unbooked intangibles, and expected proceeds from this offering) and projections as to the value of our ordinary shares immediately following the offering, we do not presently expect to be a PFIC for the current taxable year or the foreseeable future.

 

While we do not expect to be or become a PFIC in the current or foreseeable taxable years, the determination of whether we will be or become a PFIC will depend, in part, upon the value of our goodwill and other unbooked intangibles. Furthermore, the determination of whether we will be or become a PFIC will depend, in part, on the composition of our income and assets. Fluctuations in the market price of our ordinary shares may cause us to become a PFIC for the current or subsequent taxable years. The composition of our income and assets may also be affected by how, and how quickly, we use our liquid assets and the cash raised in this offering. In addition, because there are uncertainties in the application of the relevant rules, it is possible that the Internal Revenue Service may challenge our classification of certain income and assets as non-passive or our valuation of our tangible and intangible assets.

 

Because determination of PFIC status is a fact-intensive inquiry made on an annual basis that depends upon the composition of our assets and income, no assurance can be given that we are not or will not become classified as a PFIC. If we were to be or become classified as a PFIC in any taxable year, a U.S. Holder (as defined in “Taxation United States Federal Income Taxation”) may incur significantly increased U.S. federal income tax on gain recognized on the sale or other disposition of our ordinary shares and on the receipt of distributions on the ordinary shares to the extent such gain or distributions is treated as an “excess distribution” under the U.S. federal income tax rules. Further, if we are classified as a PFIC for any year during which a U.S. Holder holds our ordinary shares, we generally will continue to be treated as a PFIC for all succeeding years during which such U.S. Holder holds our ordinary shares. You are urged to consult your tax advisor concerning the United States federal income tax consequences of acquiring, holding, and disposing of ordinary shares if we are or become classified as a PFIC. For more information, see “Taxation—United States Federal Income Taxation.”

 

You may face difficulties in protecting your interests, and your ability to protect your rights through U.S. courts may be limited, because we are incorporated under British Virgin Islands law.

 

We are a company limited by shares incorporated under the laws of the British Virgin Islands. Our corporate affairs are governed by our memorandum and articles of association, the BVI Business Companies Act (the “Act”) and the common law of the British Virgin Islands. The rights of shareholders to take action against the directors, actions by minority shareholders and the fiduciary responsibilities of our directors to us under British Virgin Islands law are to a large extent governed by the Act and the common law of the British Virgin Islands. The common law of the British Virgin Islands is derived in part from comparatively limited judicial precedent in the British Virgin Islands as well as from the common law of England, the decisions of whose courts are of persuasive authority, but are not binding, on a court in the British Virgin Islands. The rights of our shareholders and the fiduciary responsibilities of our directors under British Virgin Islands law are codified in the Act but are not as clearly established as they would be under statutes or judicial precedent in some jurisdictions in the United States. In particular, the British Virgin Islands has a less developed body of securities laws than the United States. Some U.S. states, such as Delaware, have more fully developed and judicially interpreted bodies of corporate law than the British Virgin Islands. In addition, British Virgin Islands companies may not have standing to initiate a shareholder derivative action in a federal court of the United States.

 

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The British Virgin Islands courts are also unlikely:

 

to recognize or enforce against us judgments of courts of the United States based on certain civil liability provisions of U.S. securities laws; and

 

to impose liabilities against us, in original actions brought in the British Virgin Islands, based on certain civil liability provisions of U.S. securities laws that are penal in nature.

 

There is no statutory recognition in the British Virgin Islands of judgments obtained in the United States, although the courts of the British Virgin Islands will in certain circumstances recognize and enforce a non-penal judgment of a foreign court of competent jurisdiction without retrial on the merits.

 

As a result of all of the above, public shareholders may have more difficulty in protecting their interests in the face of actions taken by management, members of the board of directors or controlling shareholders than they would as public shareholders of a company incorporated in the United States. For a discussion of significant differences between the provisions of the Act and the laws applicable to companies incorporated in the United States and their shareholders, see “Description of Share Capital—Differences in Corporate Law.”

 

Judgments obtained against us by our shareholders may not be enforceable.

 

We are a British Virgin Islands company and all of our assets are located outside of the United States. The majority of our current operations are conducted in the China. In addition, a majority of our current directors and officers are nationals and residents of countries other than the United States. Substantially all of the assets of these persons are located outside the United States. As a result, it may be difficult or impossible for you to bring an action against us or against these individuals in the United States in the event that you believe that your rights have been infringed under the United States federal securities laws or otherwise. Even if you are successful in bringing an action of this kind, the laws of the British Virgin Islands and of China may render you unable to enforce a judgment against our assets or the assets of our directors and officers. For more information regarding the relevant laws of the British Virgin Islands and China, see “Enforceability of Civil Liabilities.”

 

We have not determined a specific use for a portion of the net proceeds from this offering, and we may use these proceeds in ways with which you may not agree.

 

We have not determined a specific use for a portion of the net proceeds of this offering. For more information, see “Use of Proceeds.” You will not have the opportunity to assess whether the proceeds are being used appropriately before you make your investment decision. You must rely on the judgment of our management regarding the application of the net proceeds of this offering. We cannot assure you that the net proceeds will be used in a manner that would improve our results of operations or increase our share price, nor that these net proceeds will be placed only in investments that generate income or appreciate in value.

 

We are an emerging growth company within the meaning of the Securities Act and may take advantage of certain reduced reporting requirements.

 

We are an “emerging growth company,” as defined in the JOBS Act, and we may take advantage of certain exemptions from various requirements applicable to other public companies that are not emerging growth companies including, most significantly, not being required to comply with the auditor attestation requirements of Section 404 for so long as we are an emerging growth company. As a result, if we elect not to comply with such auditor attestation requirements, our investors may not have access to certain information they may deem important.

 

The JOBS Act also provides that an emerging growth company does not need to comply with any new or revised financial accounting standards until such date that a private company is otherwise required to comply with such new or revised accounting standards. However, we have elected to “opt out” of this provision and, as a result, we will comply with new or revised accounting standards as required when they are adopted for public companies. This decision to opt out of the extended transition period under the JOBS Act is irrevocable.

 

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We are a foreign private issuer within the meaning of the rules under the Exchange Act, and as such we are exempt from certain provisions applicable to U.S. domestic public companies.

 

Because we qualify as a foreign private issuer under the Exchange Act, we are exempt from certain provisions of the securities rules and regulations in the United States that are applicable to U.S. domestic issuers, including:

 

the rules under the Exchange Act requiring the filing with the SEC of quarterly reports on Form 10-Q or current reports on Form 8-K;

 

the sections of the Exchange Act regulating the solicitation of proxies, consents, or authorizations in respect of a security registered under the Exchange Act;

 

the sections of the Exchange Act requiring insiders to file public reports of their share ownership and trading activities and liability for insiders who profit from trades made in a short period of time; and

 

the selective disclosure rules by issuers of material nonpublic information under Regulation FD.

 

We will be required to file an annual report on Form 20-F within four months of the end of each fiscal year. In addition, we intend to publish our results on a quarterly basis as press releases, distributed pursuant to the rules and regulations of NASDAQ. Press releases relating to financial results and material events will also be furnished to the SEC on Form 6-K. However, the information we are required to file with or furnish to the SEC will be less extensive and less timely as compared to that required to be filed with the SEC by U.S. domestic issuers. As a British Virgin Islands company listed on NASDAQ, we are subject to the NASDAQ corporate governance listing standards. However, NASDAQ rules permit a foreign private issuer like us to follow the corporate governance practices of its home country. Certain corporate governance practices in the British Virgin Islands, which is our home country, may differ significantly from the NASDAQ corporate governance listing standards. Although we do not currently plan to utilize the home country exemption for corporate governance matters, to the extent that we choose to do so in the future, our shareholders may be afforded less protection than they otherwise would under the NASDAQ corporate governance listing standards applicable to U.S. domestic issuers. As a result, you may not be afforded the same protections or information, which would be made available to you, were you investing in a U.S. domestic issuer.

 

We will incur increased costs as a result of being a public company, particularly after we cease to qualify as an “emerging growth company.”

 

Upon completion of this offering, we will become a public company and expect to incur significant legal, accounting and other expenses that we did not incur as a private company. The Sarbanes-Oxley Act of 2002, as well as rules subsequently implemented by the SEC and NASDAQ, impose various requirements on the corporate governance practices of public companies. As a company with less than US$1.07 billion in revenues for our last fiscal year, we qualify as an “emerging growth company” pursuant to the JOBS Act. An emerging growth company may take advantage of specified reduced reporting and other requirements that are otherwise applicable generally to public companies. These provisions include exemption from the auditor attestation requirement under Section 404 of the Sarbanes-Oxley Act of 2002 in the assessment of the emerging growth company’s internal control over financial reporting and permission to delay adopting new or revised accounting standards until such time as those standards apply to private companies. However, we have elected to “opt out” of this provision and, as a result, we will comply with new or revised accounting standards as required when they are adopted for public companies. This decision to opt out of the extended transition period under the JOBS Act is irrevocable.

 

We expect these rules and regulations to increase our legal and financial compliance costs and to make some corporate activities more time-consuming and costly. After we are no longer an “emerging growth company”, we expect to incur significant expenses and devote substantial management effort toward ensuring compliance with the requirements of Section 404 of the Sarbanes-Oxley Act of 2002 and the other rules and regulations of the SEC. For example, as a result of becoming a public company, we will need to increase the number of independent directors and adopt policies regarding internal controls and disclosure controls and procedures. We also expect that operating as a public company will make it more difficult and more expensive for us to obtain director and officer liability insurance, and we may be required to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. In addition, we will incur additional costs associated with our public company reporting requirements. It may also be more difficult for us to find qualified persons to serve on our board of directors or as executive officers. We are currently evaluating and monitoring developments with respect to these rules and regulations, and we cannot predict or estimate with any degree of certainty the amount of additional costs we may incur or the timing of such costs.

 

In the past, shareholders of a public company often brought securities class action suits against the company following periods of instability in the market price of that company’s securities. If we were involved in a class action suit, it could divert a significant amount of our management’s attention and other resources from our business and operations, which could harm our results of operations and require us to incur significant expenses to defend the suit. Any such class action suit, whether or not successful, could harm our reputation and restrict our ability to raise capital in the future. In addition, if a claim is successfully made against us, we may be required to pay significant damages, which could have a material adverse effect on our financial condition and results of operations.

 

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

This prospectus contains forward-looking statements that involve risks and uncertainties. All statements other than statements of historical facts are forward-looking statements. These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from those expressed or implied by the forward-looking statements.

 

You can identify these forward-looking statements by words or phrases such as “may,” “will,” “expect,” “anticipate,” “aim,” “estimate,” “intend,” “plan,” “believe,” “likely to” or other similar expressions. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy and financial needs. These forward-looking statements include, but are not limited to, statements about:

 

our goals and growth strategies;

 

our expectations regarding demand for and market acceptance of our brand and platforms;

 

our ability to enter into arrangements and agreements with more universities and other educational institutions;

 

our ability to retain and increase our student enrollment;

 

our ability to offer new courses;

 

our ability to engage and retain new teachers;

 

our future business development, results of operations and financial condition;

 

our ability to maintain and improve infrastructure necessary to operate our education platforms;

 

competition in the online education industry in China;

 

  the expected growth of, and trends in, the markets for our course offerings in China;

 

relevant government policies and regulations relating to our corporate structure, business and industry;

 

our expectation regarding the use of proceeds from this offering;

 

general economic and business condition in China and elsewhere; and

 

assumptions underlying or related to any of the foregoing.

 

You should read thoroughly this prospectus and the documents that we refer to in this prospectus with the understanding that our actual future results may be materially different from and worse than what we expect. Other sections of this prospectus include additional factors which could adversely impact our business and financial performance. Moreover, we operate in an evolving environment. New risk factors and uncertainties emerge from time to time and it is not possible for our management to predict all risk factors and uncertainties, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. We qualify all of our forward-looking statements by these cautionary statements.

 

You should not rely upon forward-looking statements as predictions of future events. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

 

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USE OF PROCEEDS

 

We estimate that we will receive net proceeds from this offering of approximately US$[__], if the minimum amount is raised, and approximately US$[___], if the maximum amount is raised, after deducting underwriting discounts and commissions and the estimated offering expenses payable by us. These estimates are based upon an assumed initial offering price of US$[__] per ordinary share, the mid-point of the range shown on the front cover page of this prospectus. A US$1.00 change in the assumed initial public offering price of US$[__] per share would, in the case of an increase, and, in the case of a decrease, decrease the net proceeds of this offering by US$[__], assuming the sale of [_____] ordinary shares at US$[__] per share, the mid-point of the range shown on the front cover page of this prospectus and after deducting underwriting discounts and commissions and the estimated offering expenses payable by us.

 

The primary purposes of this offering are to create a public market for our shares for the benefit of all shareholders, retain talented employees by providing them with equity incentives and obtain additional capital. We plan to use the net proceeds of this offering primarily for general corporate purposes, which may include investing in sales and marketing activities, product development, technology research and development, establishing domestic and international branches and subsidiaries as well as strategic reserve and other general and administrative matters. The table below provides more detailed information on our use of proceeds after we complete the remittance process. We expect that 70% of the net proceeds from this offering will be used by our PRC subsidiaries and VIE entity in the form of RMB and the rest of the net proceeds will be used by us for the purposes discussed in this section, primarily establishing U.S. operations. For the net proceeds of this offering to be used in the form of RMB, we will have to convert any capital contributions or loans to our PRC subsidiaries and VIE entity from U.S. dollars to RMB pursuant to certain procedural requirements under regulations of the PRC State Administration of Foreign Exchange. See “Regulations - Regulations Relating to Foreign Exchange.”

 

Description of Use (1)   Percentage of Net Proceeds     Estimated Amount of Net Proceeds
(Minimum Offering)
    Estimated Amount of Net Proceeds
(Maximum Offering)
 
Establishing U.S. operations     30 %   $ 1,106,293     $ 2,456,293  
Product development (1)     10 %   $ 368,764     $ 818,764  
Technology research & development (2)     10 %   $ 368,764     $ 818,764  
Establishing branches in China     10 %   $ 368,764     $ 818,764  
Advertisement and marketing (3)     10 %   $ 368,764     $ 818,764  
Strategic reserve     20 %   $ 737,528     $ 1,637,528  
Working capital (4)     10 %   $ 368,764     $ 818,764  
Total     100 %   $ 3,687,641     $ 8,187,641  

 

(1) This portion of net proceeds will be used by Beijing Huaxia Dadi Distance Learning Services Co., Ltd., Beijing HuaXiaDaDi Digital Information Technology Co., Ltd. and Hunan Huafu Haihui Learning Technology Co., Ltd. for development of online courses, training platforms and other products.
(2) This portion of net proceeds will be used by Beijing HuaXiaDaDi Digital Information Technology Co., Ltd. and Hunan Huafu Haihui Learning Technology Co., Ltd. for technology research & development.
(3) This portion of net proceeds will be used by Beijing Huaxia Dadi Distance Learning Services Co., Ltd. and other subsidiaries in Shanghai, Hunan, Hubei, Jiangsu and Guizhou for marketing and advertising efforts of these entities.
(4) This portion of net proceeds will be used by Beijing Huaxia Dadi Distance Learning Services Co., Ltd. and Beijing HuaXiaDaDi Digital Information Technology Co., Ltd. for working capital purposes.

 

In utilizing the proceeds from this offering, we are permitted under PRC laws and regulations to provide funding to our PRC subsidiaries through loans or capital contributions, and to our PRC consolidated VIE through loans, and only if we satisfy the applicable government registration and approval requirements. Current PRC laws and regulations set forth remittance requirements for transferring funds from us, a British Virgin Islands company, to our PRC subsidiaries. For example, if we transfer proceeds to our PRC subsidiaries via capital contribution, our PRC subsidiaries will be required to complete the filing procedures with the PRC Ministry of Commerce. If we make loans to our PRC subsidiaries, the principal amount of such loans cannot exceed the surplus between the total investment in projects approved by the verifying governmental departments and the registered capital or twice of net worth of the relevant PRC subsidiary. If the proceeds are used to set up a new enterprise in China, we will be required to complete the record-filing or approval and other requirements set forth in the Interim Administrative Measures for the Record-filing of the Incorporation and Change of Foreign-invested Enterprises (Revised in 2017).

 

We cannot assure you that we will be able to meet these requirements on a timely basis, if at all. See “Risk Factors—Risks Related to Doing Business in China—PRC regulation on loans to, and direct investment in, PRC entities by offshore holding companies and governmental control in currency conversion may delay or prevent us from using the proceeds of this offering to make loans to our PRC subsidiaries and PRC consolidated VIE or make additional capital contributions to our PRC subsidiaries, which could materially and adversely affect our liquidity and our ability to fund and expand our business.”

 

As advised by Jingtian & Gongcheng, our PRC legal counsel, the above discussed use of proceeds is within the currently applicable PRC statutory limitations, subject to the procedural requirements discussed in this section. Based on the advice of Jingtian & Gongcheng, upon the satisfaction of such procedural requirements, we will be able to use 70% of our net proceeds from this offering in the form of RMB through loans or capital contributions to our PRC subsidiaries and VIE entity without increasing the registered capital and approval investment amount of such entities.

 

The amounts and timing of any expenditures will vary depending on the amount of cash generated by our operations, and the rate of growth, if any, of our business. Accordingly, our management will have significant flexibility in applying the net proceeds of the offering. If an unforeseen event occurs or business conditions change, we may use the proceeds of this offering differently than as described in this prospectus.

 

Pending use of the net proceeds, we intend to hold our net proceeds in short-term, interest-bearing, financial instruments or demand deposits.

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DIVIDEND POLICY

 

We have not previously declared or paid cash dividends and we have no plan to declare or pay any dividends in the near future on our ordinary shares. We currently intend to retain most, if not all, of our available funds and any future earnings to operate and expand our business.

 

We are a holding company incorporated in the British Virgin Islands. We rely principally on dividends from our PRC subsidiaries for our cash requirements, including any payment of dividends to our shareholders. PRC regulations may restrict the ability of our PRC subsidiaries to pay dividends to us. See “PRC Regulation—Regulations on Foreign Exchange—Dividend Distribution.”

 

Our board of directors has discretion as to whether to distribute dividends, subject to applicable laws. Even if our board of directors decides to pay dividends, the form, frequency and amount will depend upon our future operations and earnings, capital requirements and surplus, general financial condition, contractual restrictions and other factors that the board of directors may deem relevant. Cash dividends on our ordinary shares, if any, will be paid in U.S. dollars.

 

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CAPITALIZATION

 

The following tables set forth our capitalization as of September 30, 2017:

 

on an actual basis; and

 

on a pro forma as adjusted basis to reflect the issuance and sale of 1,000,000 shares, if the minimum amount is sold, and 3,000,000 shares, if the maximum amount is sold in this offering at an assumed initial public offering price of US$5 per share, the mid-point of the estimated range of the initial public offering price shown on the front cover of this prospectus, after deducting the underwriting discounts and commissions and estimated offering expenses payable by us.

 

You should read the tables together with our consolidated financial statements and the related notes included elsewhere in this prospectus and the information under “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

 

Minimum Offering (1,000,000 Ordinary Shares)

$5,000,000

 

    As of
September 30, 2017
 
    Actual     Pro forma  
             
Short-term debt, including current portion   $ 1,046,080     $ 1,046,080  
                 
Equity:                
Common stock, $0.01 par value, 30,000,000 shares authorized; 3,200,000 shares issued and outstanding, actual; 4,200,000 shares issued and outstanding, pro forma     32,000       42,000  
Additional paid-in capital     217,395       4,020,037  
Statutory surplus reserve     150,905       150,905  
Retained earnings     6,901,854       6,901,854  
Accumulated other comprehensive loss     (316,386 )     (316,386 )
Non-controlling interest     225,044       225,044  
Total equity     7,210,812       11,023,454  
                 
Total capitalization   $ 8,256,892     $ 12,069,534  

  

Maximum Offering (3,000,000 Ordinary Shares)

$15,000,000

 

    As of
September 30, 2017
 
    Actual     Pro forma  
             
Short-term debt, including current portion   $ 1,046,080     $ 1,046,080  
                 
Shareholders’ equity:                
Common stock, $0.01 par value, 30,000,000 shares authorized; 3,200,000 shares issued and outstanding, actual; 6,200,000 shares issued and outstanding, pro forma     32,000       62,000  
Additional paid-in capital     217,395       13,250,037  
Statutory surplus reserve     150,905       150,905  
Retained earnings     6,901,854       6,901,854  
Accumulated other comprehensive loss     (316,386 )     (316,386 )
Non-controlling interest     225,044       225,044  
Total equity     7,210,812       20,273,454  
                 
Total capitalization   $ 8,256,892     $ 21,319,534  

   

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DILUTION

 

If you invest in our ordinary shares, your interest will be diluted to the extent of the difference between the initial public offering price per share and our net tangible book value per share after this offering. Dilution results from the fact that the initial public offering price per ordinary share is substantially in excess of the book value per ordinary share attributable to the existing shareholders for our presently outstanding ordinary shares.

 

Dilution to New Investors if the Minimum Offering Amount is Sold

 

Our net tangible book value as of September 30, 2017 was approximately US$2.25 per ordinary share. Net tangible book value per ordinary share represents the amount of total tangible assets, minus the amount of total liabilities, divided by the total number of ordinary shares outstanding. Dilution is determined by subtracting net tangible book value per ordinary share from the assumed public offering price per ordinary share.

 

Without taking into account any other changes in such net tangible book value after September 30, 2017, other than to give effect to our issuance and sale of 1,000,000 ordinary shares offered in this offering at the assumed initial public offering price of US$5 per share, the mid-point of the estimated range of the offering price, after deduction of the underwriting discounts and commissions and estimated offering expenses payable by us, our pro forma as adjusted net tangible book value as of September 30, 2017 would have been approximately US$11,023,453.5, or US$2.62 per ordinary share to existing shareholders, and an immediate dilution in net tangible book value of US$2.38 per ordinary share to purchasers of ordinary shares in this offering.

 

The following table illustrates the dilution on a per ordinary share basis assuming that the initial public offering price per ordinary share is US$5:

 

Assumed initial public offering price per ordinary share   US$ 5.00  
Net tangible book value per ordinary share as of September 30, 2017   US$ 2.25  
Pro forma net tangible book value per ordinary share   US$ 2.62  
Amount of dilution in net tangible book value per ordinary share to new investors in the offering   US$

2.38

 

 

A US$1.00 change in the assumed public offering price of US$5 per ordinary share would, in the case of an increase, increase and, in the case of a decrease, decrease our pro forma net tangible book value after giving effect to the offering by US$0.93 million, the pro forma net tangible book value per ordinary share after giving effect to this offering by US$0.22 and the dilution in pro forma net tangible book value per ordinary share to new investors in this offering by US$0.78, assuming no change to the number of ordinary shares offered by us as set forth on the cover page of this prospectus, and after deducting underwriting discounts and commissions and estimated offering expenses. The pro forma information discussed above is illustrative only. Our net tangible book value following the completion of this offering is subject to adjustment based on the actual initial public offering price of our ordinary shares and other terms of this offering determined at pricing.

 

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The following table summarizes, on a pro forma basis as of September 30, 2017, the differences between the existing shareholders and the new investors with respect to the number of ordinary shares purchased from us in this offering, the total consideration paid and the average price per ordinary share paid at an assumed initial public offering price of US$5 per share before deducting estimated underwriting discounts and commissions and estimated offering expenses.

 

         

Total

Consideration

    Average Price Per  
    Ordinary shares     Amount           Ordinary  
    Purchased     (in thousands           Share  
    Number     Percent     of US$)     Percent     US$  
Existing shareholders     3,200,000       76.19 %     249.40       4.75 %     0.08  
New investors     1,000,000       23.81 %     5,000.00       95.25 %     5.00  
Total     4,200,000       100.00 %     5,249.40       100.00 %     1.250  

 

A US$1.00 change in the assumed public offering price of US$5 per share would, in the case of an increase, increase and, in the case of a decrease, decrease total consideration paid by new investors, total consideration paid by all shareholders, average price per ordinary share paid by all shareholders by US$1,000,000, US$1,000,000, and US$0.24, respectively, assuming the sale of 1,000,000 ordinary shares at US$5, the mid-point of the range set forth on the cover page of this prospectus, and after deducting underwriting discounts and commissions and estimated offering expenses payable by us.

 

The discussion and tables above also assume no exercise of any stock options outstanding as of the date of this prospectus.

 

Dilution to New Investors if the Maximum Offering Amount is Sold

 

Our net tangible book value as of September 30, 2017 was approximately US$2.25 per ordinary share. Net tangible book value per ordinary share represents the amount of total tangible assets, minus the amount of total liabilities, divided by the total number of ordinary shares outstanding. Dilution is determined by subtracting net tangible book value per ordinary share from the assumed public offering price per ordinary share.

 

Without taking into account any other changes in such net tangible book value after September 30, 2017, other than to give effect to our issuance and sale of 3,000,000 ordinary shares offered in this offering at the assumed initial public offering price of US$5 per share, the mid-point of the estimated range of the offering price, after deduction of the underwriting discounts and commissions and estimated offering expenses payable by us, our pro forma as adjusted net tangible book value as of September 30, 2017 would have been approximately US$20,273,453.5, or US$3.27 per ordinary share, to existing shareholders and an immediate dilution in net tangible book value of US$1.73 per ordinary share, to purchasers of ordinary shares in this offering.

 

The following table illustrates the dilution on a per ordinary share basis assuming that the initial public offering price per ordinary share is US$5:

 

Assumed initial public offering price per ordinary share   US$ 5.00  
Net tangible book value per ordinary share as of September 30, 2017   US$ 2.25  
Pro forma net tangible book value per ordinary share   US$ 3.27  
Amount of dilution in net tangible book value per ordinary share to new investors in the offering   US$ 1.73  

 

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A US$1.00 change in the assumed public offering price of US$5 per ordinary share would, in the case of an increase, increase and, in the case of a decrease, decrease our pro forma net tangible book value after giving effect to the offering by US$2.78 million, the pro forma net tangible book value per ordinary share after giving effect to this offering by US$0.45 and the dilution in pro forma net tangible book value per ordinary share to new investors in this offering by US$0.55, assuming no change to the number of ordinary shares offered by us as set forth on the cover page of this prospectus, and after deducting underwriting discounts and commissions and estimated offering expenses. The pro forma information discussed above is illustrative only. Our net tangible book value following the completion of this offering is subject to adjustment based on the actual initial public offering price of our ordinary shares and other terms of this offering determined at pricing.

 

The following table summarizes, on a pro forma basis as of September 30, 2017, the differences between the existing shareholders and the new investors with respect to the number of ordinary shares purchased from us in this offering, the total consideration paid and the average price per ordinary share paid at an assumed initial public offering price of US$5 per share before deducting estimated underwriting discounts and commissions and estimated offering expenses.

 

         

Total

Consideration

    Average Price Per  
   

Ordinary shares

Purchased

   

Amount

(in thousands

         

Ordinary

Share

 
    Number     Percent     of US$)     Percent     US$  
Existing shareholders     3,200,000       51.61 %     249.40       1.64 %     0.08  
New investors     3,000,000       48.39 %     15,000.00       98.36 %     5.00  
Total     6,200,000       100.00 %     15,249.40       100.00 %     2.460  

 

A US$1.00 change in the assumed public offering price of US$5 per share would, in the case of an increase, increase and, in the case of a decrease, decrease total consideration paid by new investors, total consideration paid by all shareholders, average price per ordinary share paid by all shareholders by US$3,000,000, US$3,000,000 and US$0.48, respectively, assuming the sale of 3,000,000 ordinary shares at US$5, the mid-point of the range set forth on the cover page of this prospectus, and after deducting underwriting discounts and commissions and estimated offering expenses payable by us.

   

The discussion and tables above also assume no exercise of any stock options outstanding as of the date of this prospectus.

 

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EXCHANGE RATE INFORMATION

 

Our reporting currency is the Renminbi because our business is mainly conducted in China and all of our revenues are denominated in Renminbi. This prospectus contains translations of Renminbi amounts into U.S. dollars at specific rates solely for the convenience of the reader. The conversion of Renminbi into U.S. dollars in this prospectus is based on the rate indicated on www.oanda.com . Unless otherwise noted, all translations from Renminbi to U.S. dollars and from U.S. dollars to Renminbi in this prospectus are made at the rate as of the end of the applicable period, that is, RMB 6.6545 to US$1.00, the rate in effect as of September 30, 2017, RMB 6.8912 to US$1.00, the rate in effect as of March 31, 2017, RMB 6.6702 to US$1.00, the rate in effect as of September 30, 2016, RMB 6.4494 to US$1.00, the rate in effect as of March 31, 2016, or RMB 6.1197 to US$1.00, the rate in effect as of March 31, 2015, as applicable. We make no representation that any Renminbi or U.S. dollar amounts could have been, or could be, converted into U.S. dollars or Renminbi, as the case may be, at any particular rate, the rates stated below, or at all. The PRC government imposes control over its foreign currency reserves in part through direct regulation of the conversion of Renminbi into foreign exchange and through restrictions on foreign trade. On March 14, 2018, the rate was RMB 6.3168 to US$1.00.

 

The following table sets forth information concerning exchange rates between the Renminbi and the U.S. dollar for the periods indicated. These rates are provided solely for your convenience and are not necessarily the exchange rates that we used in this prospectus or will use in the preparation of our periodic reports or any other information to be provided to you.

 

    Midpoint of Buy and Sell Prices for U.S. Dollar per RMB  
    Period End     Average(1)     Low     High  
    (RMB per US$1.00)  
2012     6.3090       6.3115       6.2289       6.3862  
2013     6.1090       6.1938       6.1084       6.3087  
2014     6.1484       6.1458       6.0881       6.2080  
2015     6.4917       6.2288       6.0933       6.4917  
2016     6.9448       6.6441       6.4494       7.0672  
2017                                
January     6.8817       6.8987       6.8466       6.9535  
February     6.8689       6.8723       6.8541       6.8842  
March     6.8889       6.8971       6.8757       6.9161  
April     6.8969       6.8890       6.8457       6.9094  
May     6.8284       6.8852       6.8284       6.9063  
June     6.7774       6.8090       6.7774       6.8382  
July     6.7252       6.7721       6.7252       6.8054  
August     6.5939       6.6718       6.5912       6.7316  
September     6.6545       6.5657       6.4680       6.6623  
October     6.6332       6.6275       6.5792       6.6550  
November     6.6113       6.6222       6.5745       6.6414  
December     6.5844       6.6136       6.5844       6.6206  
2018                                
January     6.2976       6.4284       6.2976       6.5186  
February     6.3278       6.3207       6.2660       6.3524  
March (Through March 14, 2018)     6.3168       6.3345       6.3168       6.3497  

 

Source: www.oanda.com

 

Notes:

 

(1) Annual averages were calculated by using the average of the exchange rates on the last day of each month during the relevant year. Monthly averages are calculated by using the average of the daily rates during the relevant month.

 

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ENFORCEABILITY OF CIVIL LIABILITIES

 

We were incorporated in the British Virgin Islands in order to enjoy the following benefits:

 

political and economic stability;

 

an effective judicial system;

 

a favorable tax system; and

 

the absence of exchange control or currency restrictions; and the availability of professional and support services.

 

However, certain disadvantages accompany incorporation in the British Virgin Islands. These disadvantages include, but are not limited to, the following:

 

the British Virgin Islands has a less developed body of securities laws as compared to the United States and these securities laws provide significantly less protection to investors; and

 

British Virgin Islands companies may not have standing to sue before the federal courts of the United States.

 

Our constitutional documents do not contain provisions requiring that disputes, including those arising under the securities laws of the United States, between us, our officers, directors and shareholders, be arbitrated.

 

All of our current operations are conducted in the People’s Republic of China (the “PRC”), and all of our assets are located in the PRC. All of our current directors and officers are nationals and residents of the PRC and a substantial portion of their assets are located outside the United States. As a result, it may be difficult for a shareholder to effect service of process within the United States upon these persons, or to enforce against us or them judgments obtained in United States courts, including judgments predicated upon the civil liability provisions of the securities laws of the United States or any state in the United States. Maples and Calder, our counsel as to British Virgin Islands law, and Jingtian & Gongcheng, our counsel as to PRC law, have advised us, respectively, that there is uncertainty as to whether the courts of the British Virgin Islands and China, respectively, would:

 

recognize or enforce judgments of United States courts obtained against us or our directors or officers predicated upon the civil liability provisions of the securities laws of the United States or any state in the United States; or

 

entertain original actions brought in each respective jurisdiction against us or our directors or officers predicated upon the securities laws of the United States or any state in the United States.

 

Maples and Calder has informed us that it is uncertain whether the courts of the British Virgin Islands will allow shareholders of our company to originate actions in the British Virgin Islands based upon securities laws of the United States. In addition, there is uncertainty with regard to British Virgin Islands law related to whether a judgment obtained from the U.S. courts under civil liability provisions of U.S. securities laws will be determined by the courts of the British Virgin Islands as penal or punitive in nature. If such a determination is made, the courts of the British Virgin Islands will not recognize or enforce the judgment against a British Virgin Islands company, such as our company. As the courts of the British Virgin Islands have yet to rule on making such a determination in relation to judgments obtained from U.S. courts under civil liability provisions of U.S. securities laws, it is uncertain whether such judgments would be enforceable in the British Virgin Islands. Maples and Calder has further advised us that the courts of the British Virgin Islands would recognize as a valid judgment a final and conclusive judgment in personam obtained in the federal or state courts in the United States under which a sum of money is payable (other than a sum of money payable in respect of multiple damages, taxes or other charges of a like nature or in respect of a fine or other penalty) or, in certain circumstances, an in personam judgment for non-monetary relief, and would give a judgment based thereon provided that: (i) such courts had proper jurisdiction over the parties subject to such judgment; (ii) such courts did not contravene the rules of natural justice of the British Virgin Islands; (iii) such judgment was not obtained by fraud; (iv) the enforcement of the judgment would not be contrary to the public policy of the British Virgin Islands; (v) no new admissible evidence relevant to the action is submitted prior to the rendering of the judgment by the courts of the British Virgin Islands; and (vi) there is due compliance with the correct procedures under the laws of the British Virgin Islands.

 

We have been advised by Jingtian & Gongcheng that there is uncertainty as to whether the courts of the PRC would enforce judgments of United States courts or British Virgin Islands courts obtained against us or these persons predicated upon the civil liability provisions of the United States federal and state securities laws. Jingtian & Gongcheng has further advised us that the recognition and enforcement of foreign judgments are provided for under PRC Civil Procedures Law. PRC courts may recognize and enforce foreign judgments in accordance with the requirements of PRC Civil Procedures Law based either on treaties between China and the country where the judgment is made or on reciprocity between jurisdictions. China does not have any treaties or other form of reciprocity with the United States or the British Virgin Islands that provide for the reciprocal recognition and enforcement of foreign judgments. In addition, according to the PRC Civil Procedures Law, courts in the PRC will not enforce a foreign judgment against us or our directors and officers if they decide that the judgment violates the basic principles of PRC law or national sovereignty, security or public interest. As a result, it is uncertain whether and on what basis a PRC court would enforce a judgment rendered by a court in the United States or in the British Virgin Islands.

 

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CORPORATE HISTORY AND STRUCTURE

 

We began our operations in December 1999 through Beijing Distance Learning, a company formed under the laws of PRC. Beijing Distance Learning was formed to engage in the business of online training for self-taught higher education examination in Beijing. In July 2012, we formed Wah Fu Education Group Limited under the laws of the British Virgin Islands as an offshore holding company under the former name “Wah Fu Trade Limited”, which was changed to our current name in 2016. In May 2016, we established our wholly-owned Hong Kong subsidiary, Wah Fu Education Holding Limited, which currently exists as a holding company. We conduct our business through our subsidiaries and affiliated entities in China, which are described below. Through contractual arrangements described below, we control 100% of Beijing Digital Information. These contractual arrangements allow us to effectively control and derive 100% of the economic interest from Beijing Digital Information. In addition, we directly own equity interest of a number of PRC entities. Below is a list of our operating subsidiaries and variable interest entity:

 

Beijing Huaxia Dadi Distance Learning Services Co., Ltd. : our wholly owned subsidiary formed under the laws of PRC in 1999. The current business operations of Beijing Distance Learning include research and development of long-distance education software and development of long-distance education resources and information.

 

Beijing HuaXiaDadi Digital Information Technology Co., Ltd .: our variable interest entity formed under the laws of PRC in September 2000. The current business operations of Beijing Digital Information include platform development, upgrading, maintenance and other related services. This entity also holds an ICP license for our website, www.edu-edu.com .

 

Shanghai Xin Fu Network Technology Co., Ltd. : our wholly owned subsidiary formed under the laws of PRC in July 2015 to engage in the business of development of internet technology and computer technology, technological consulting, services and transfer. Shanghai Xin Fu currently doesn’t have any business operations.

 

Shanghai Xia Shu Network Technology Co., Ltd. : our wholly owned subsidiary formed under the laws of PRC in April 2016 to enter into agreements relating to the platform in Shanghai for tax reasons.

 

Hunan Huafu Haihui Learning Technology Co., Ltd. : our subsidiary formed under the laws of PRC in June 2015. We own 75% of the equity interests of this entity. Its primary business purpose is to provide technology services in Hunan relating to online platforms for preparation of various examinations.

 

Beijing HuaxiaDadi Digital Information Technology Co., Ltd. – Shandong Branch : a branch company of our variable interest entity, Beijing Digital Information, formed under the laws of PRC in August 2013 formed for the purpose of providing future services in Shandong. Shandong Branch currently does not have any business operations.

 

Huaxia MOOC(Hubei) Network Technology Co., Ltd. : a company formed under the laws of PRC in March 2017 to provide exam preparation services in Hubei. We currently own 65% of the equity interest of this entity. Cuntao Hou, our Vice President of Sales, currently owns 5% of the equity interest in this entity. The rest of its equity interest is owned by third party individuals and entities that are not affiliated with us or any of our officers and directors.

 

Nanjin Suyun Education Technology Co., Ltd. : a company formed under the laws of PRC in March 2017 to provide exam preparation services in Jiangsu. We currently own 70% of the equity interest of this entity. The rest of its equity interest is owned by third party individuals and entities that are not affiliated with us or any of our officers and directors.

 

Guizhou Huafu Qianyun Network Technology Co., Ltd. : a company formed under the laws of PRC in April 2017 to provide exam preparation services in Guizhou. We currently own 51% of the equity interest of this entity. The rest of its equity interest is owned by third party individuals and entities that are not affiliated with us or any of our officers and directors.

 

Due to PRC legal restrictions on foreign ownership and investment in the value-added telecommunications market, we operate our online platform through Beijing Digital Information, our PRC consolidated variable interest entity (“VIE”). Beijing Digital Information holds our ICP license necessary to operate our online platform in China, our domain names, including www.edu-edu.com , our registered trademarks in China and our registered software copyrights that are essential to the Company’s online operation in PRC. We rely on a series of contractual arrangements among Beijing Digital Information and its shareholders to operate our online and mobile platforms in China. These contractual arrangements enable us to:

 

exercise effective control over Beijing Digital Information;

 

receive substantially all of the economic benefits of Beijing Digital Information in consideration for the services provided by us; and

 

have an exclusive option to purchase all of the equity interests in Beijing Digital Information when and to the extent permitted under PRC law.

 

We do not own equity interests in Beijing Digital Information. However, as a result of these contractual arrangements, we are the primary beneficiary of Beijing Digital Information and treat it as our consolidated VIE under U.S. GAAP. We depend upon dividends and other distributions paid to us by our PRC subsidiaries, primarily Beijng Distance Learning. Beijing Distance Learning partially relies on service fees paid by our variable interest entity Beijing Digital Information. For the six months ended September 30, 2017 and 2016, 20.8% and 2.4% of our consolidated revenue was derived from Beijing Digital Information. Our affiliated variable interest entity, Beijing Digital Information, did not pay any fee to our PRC subsidiary, Beijing Distance Learning for fiscal years ending March 31, 2017 and 2016 since our VIE agreements were executed in August 2017. We did not receive any dividends from our PRC subsidiaries in the past two fiscal years and expect that these levels will continue in the future.

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As discussed in details in “Regulation – Regulations Relating to Foreign Investment” and “Regulation - Regulations Relating to Foreign Exchange”, current PRC laws and regulations set forth restrictions on payment of dividends by PRC companies, foreign exchange and foreign investment in PRC companies. As such, we do not have unfettered access to revenues of our PRC subsidiaries and variable interest entity. See “Risk Factors – Risks Related to Doing Business in China” and “Risk Factor – Risks Related to Our Corporate Structure.”

 

The following is a summary of the contracts by and among our subsidiary Beijing Distance Learning, our PRC consolidated VIE Beijing Digital Information, and the shareholders of Beijing Digital Information; each of which is currently in full force and effect.

 

The series of contractual agreements include the following:

 

Exclusive Business Cooperation Agreement

 

Under the business cooperation agreement, Beijing Digital Information engages Beijing Distance Learning as its exclusive technical and operational consultant and under which Beijing Distance Learning agrees to assist in business development and related services necessary to conduct Beijing Digital Information’ operational activities. Beijing Digital Information shall not seek or accept similar services from other providers without the prior written approval of Beijing Distance Learning. The agreements will be effective as long as Beijing Digital Information exists. Beijing Distance Learning may terminate this agreement at any time by giving a prior written notice to Beijing Digital Information.

 

Under the above agreements, the shareholders of Beijing Digital Information irrevocably granted Beijing Distance Learning the power to exercise all voting rights to which they were entitled. In addition, Beijing Distance Learning has the option to acquire all of the equity interests in Beijing Digital Information, to the extent permitted by the then-effective PRC laws and regulations, for nominal consideration. Finally, Beijing Distance Learning is entitled to receive service fees for certain services to be provided to Beijing Digital Information.

 

Exclusive Option Agreement

 

Under the exclusive option agreement, in consideration of an aggregate payment of RMB2,000,000, each of the shareholders of Beijing Digital Information has granted Beijing Distance Learning or its designated representative(s) an irrevocable and exclusive option to purchase their equity interests in Beijing Digital Information when and to the extent permitted by PRC law. Beijing Distance Learning or its designated representative(s) has sole discretion as to when to exercise such options, either in part or in full. Without Beijing Distance Learning’s written consent, the shareholders of Beijing Digital Information shall not transfer, donate, pledge, or otherwise dispose any equity interests of Beijing Digital Information in any way. The acquisition price for the equity interests will be RMB2,000,000 or the minimum amount of consideration permitted under the PRC law at the time when the option is exercised if such minimum price is higher. The agreement cannot be terminated by Beijing Digital Information or their shareholders. The agreement remains in effective until all the equity interests of each shareholder of Beijing Digital Information transfers to Beijing Distance Learning or its designee(s).

 

Equity Interest Pledge Agreement

 

Under the equity interest pledge agreement, each of the shareholders pledged all of their equity interests in Beijing Digital Information to Beijing Distance Learning as collateral to secure their obligations under the equity pledge agreement, the exclusive option agreement and the powers of attorney. If the shareholders of Beijing Digital Information breach their respective contractual obligations, Beijing Distance Learning, as pledgee, will be entitled to certain rights, including the right to dispose the pledged equity interests. Pursuant to the agreement, the shareholders of Beijing Digital Information shall not transfer, assign or otherwise create any new encumbrance on their respective equity interest in Beijing Digital Information without prior written consent of Beijing Distance Learning. The equity pledge right held by Beijing Distance Learning will terminate upon the satisfaction of all its obligations by all parties under the VIE contractual arrangements.

 

Power of Attorney

 

Each of the shareholders of Beijing Digital Information has executed a power of attorney to grant Beijing Distance Learning the power of attorney to act on his or her behalf on all matters pertaining to Beijing Digital Information and to exercise all of his or her rights as a shareholder of Beijing Digital Information, including but not limited to convene, attend and vote at shareholders’ meetings and designate and appoint directors and senior management members. The power of attorney will remain in effect unless each shareholder ceases to own any equity interests of Beijing Digital Information.

 

If our variable interest entity and its shareholders fail to perform their obligations under the above contractual arrangements, we could be limited in our ability to enforce these VIE agreements and maintain effective control over our variable interest entity Beijing Digital Information. See “Risk Factors – Risks Related to Our Corporate Structure - Any failure by Beijing Digital Information or its shareholders to perform their obligations under our contractual arrangements with them would have a material and adverse effect on our business.” If we are unable to maintain effective control, we would not be able to continue to consolidate Beijing Digital Information’s financial results. See “Risk Factors – Risks Related to Our Corporate Structure - If the PRC government finds that the contractual arrangements that establish the structure for holding our Internet Content Provider (“ICP”) license do not comply with applicable PRC laws and regulations, we could be subject to severe penalties or be forced to relinquish our interests in those operations” and “Risk Factors – Risks Related to Our Corporate Structure - We rely on contractual arrangements with Beijing Digital Information and its shareholders for a portion of our business operations, which may not be as effective as direct ownership in providing operational control.”

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The following diagram illustrates our ownership and corporate structure immediately prior to this offering:

 

Pre- IPO Ownership and Organization Chart

 

 

Our corporate and ownership structure immediately after this offering will be as follows:

 

Post-IPO Ownership and Organization Chart

 

 

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SELECTED CONSOLIDATED FINANCIAL DATA

 

The following selected consolidated income and comprehensive income data for the years ended March 31, 2017 and 2016, selected consolidated balance sheet data as of March 31, 2017 and 2016 and selected consolidated cash flow data for the years ended March 31, 2017 and 2016 have been derived from our audited consolidated financial statements included elsewhere in this prospectus. Our consolidated financial statements are prepared and presented in accordance with U.S. GAAP. Our historical results are not necessarily indicative of results expected for future periods. You should read this Selected Consolidated Financial Data section together with our consolidated financial statements and the related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere in this prospectus.

 

(All amounts in U.S. dollars)

 

Selected Consolidated Statements of Income:

 

    For the years ended March 31,  
    2017     2016  
Revenues   $ 5,172,688     $ 7,042,835  
Gross profit   $ 3,021,289     $ 4,491,843  
Operating expenses   $ 2,362,477     $ 1,869,660  
Income from operations   $ 658,812     $ 2,622,183  
Provision for Income taxes   $ 105,952     $ 434,309  
Net income   $ 617,231     $ 2,231,484  

 

Selected Consolidated Balance Sheet Data:

 

    As of March 31,  
    2017     2016  
Current assets   $ 6,610,821     $ 6,341,649  
Total assets   $ 7,290,282     $ 6,764,857  
Current liabilities   $ 1,038,238     $ 798,423  
Total liabilities   $ 1,038,238     $ 798,423  
Total shareholders’ equity (net assets)   $ 6,252,044     $ 5,966,434  

 

Selected Consolidated Cash Flow Data:

 

    For the years ended March 31,  
    2017     2016  
Net cash provided by operating activities   $ 1,292,819     $ 1,852,604  
Net cash provided by (used in) investing activities   $ (580,715 )   $ 144,645  
Net cash provided by financing activities   $ 66,861     $ -  
Effect of exchange rate changes on cash   $ (349,732 )   $ (210,869 )
Net increase in cash   $ 429,233     $ 1,786,380  
Cash, beginning of year   $ 5,171,535     $ 3,385,155  
Cash, end of year   $ 5,600,768     $ 5,171,535  

 

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and related notes that appear in this prospectus. In addition to historical consolidated financial information, the following discussion contains forward-looking statements that reflect our plans, estimates, and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to these differences include those discussed below and elsewhere in this prospectus, particularly in “Risk Factors.”

 

As described elsewhere in this prospectus, all share amounts and per share amounts in this prospectus have been presented on a pro-forma basis to reflect a forward stock split of the authorized and outstanding ordinary share at a ratio of 100-for-1 effected on March 16, 2018 and subsequent surrender of an aggregate of 1,800,000 ordinary shares by existing shareholders on a pro rata basis.

 

Business Overview

 

We are a holding company incorporated under the laws of the British Virgin Islands. Through our subsidiaries and variable interest entity, we provide online exam preparation services and related technology solutions and produce online training course materials in China and have been in operation for nearly 17 years. We develop our own online education materials that are offered through the cloud and that can be used for a wide range of purposes, such as standard examination preparation, professional training and interactive programs for educational purposes other than exam preparation. We also produce thousands of online classes. Our services not only include development of online education platforms and online course materials but also include comprehensive cloud service for online education and exam preparation training. The bulk of our operations is conducted via our wholly owned subsidiaries, primarily Beijing Huaxia Dadi Distance Learning Services Co., Ltd. while the rest of our business operations, including certain portions of our B2C services and technology services, are conducted through our variable interest entity Beijing Huaxia Dadi Digital Information Technology Co., Ltd. We do not directly own the businesses or assets in the PRC that are operated by our variable interest entity, including our PRC internet content license.

 

We currently have the following two business segments:

 

Online Education Segment

 

Our online education segment comprises two types of online services:

 

Online Education Cloud Service (“B2B2C”)

 

We provide online education platforms to institutions, such as universities and training institutions, and online course development service companies. Our teachers are well regarded and recommended by our clients, which include universities and academic institutions. Through our product development team, we interview and enlist teachers who we use to record teaching sessions. In return, we provide fixed compensation to teachers. We have developed three separate types of B2B2C platforms: a self-study examination platform, a continuing education platform and a non-diploma training platform (which allows students to enroll in courses for college credit). These platforms are available both online and via mobile applications that we design for each of our clients. Currently, we are primarily focused on providing clients with B2B2C services relating to self-study examinations, which are a set of standard national examinations necessary to obtain college degrees in China. We have offered such services since September 2009. We also entered into the adult education field and launched our continuing education platforms in late 2016. Currently, there are over 700 courses available on our adult continuing education platforms and approximately 60 universities and education institutions are testing these platforms. We commenced offering our non-diploma training platforms in March 2017. We currently provide services in ten provinces in China and believe that we are the leading service provider in this market.

 

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Online Training Service (“B2C”)

 

We provide online training and examination preparation services directly to students for a fee. We have provided this service since 2000, however, due to limited marketing efforts, the revenue generated from this service has been limited. We have been increasing our marketing efforts for our B2C service since early 2017 and our revenue from this service increased 87% in the first half of 2018 compared to the first half of 2017. With the increased demand for continuing education, we plan to expand our B2C service. In connection with our B2C service, we provide an online cloud education platform targeting end users, which is available both online and via the mobile applications we design for each program. We plan to license this platform to other offline education and training institutions for them to offer online services and to manage their online courses and online users. Students that use this service are primarily college students and students preparing for the self-study examination. In the last two years, we have provided on average approximately 350,000 courses to students per year.

 

Technology Research and Development Services

 

Another major aspect of our business is dedicated to developing and maintaining online education platforms and online courses for our clients, comprising universities, government agencies and private clients such as publishers and education service companies. We also provide consulting, maintenance and updating services relating to online education programs we have developed for our clients. We have provided these services to our clients since Beijing Distance Learning commenced operations in 1999. Our largest clients in our technology services are Shanghai World Publishing Co. and the State Intellectual Property Bureau Training Center. Pursuant to our agreements with Shanghai World Publishing Co., we develop and update platforms for its Electric Backpack program, an online interactive teaching program for elementary and middle school students in China. We have been providing online course development services to the State Intellectual Property Bureau Training Center since 2002. Our services to the center include training course recording, editing and posting as well as platform maintenance and updating for a fixed fee agreed upon by both parties.

 

Factors Affecting Our Results of Operations

 

We have benefited significantly from the following recent trends in the China educational and career enhancement services market and we anticipate that the demand for online education will continue to grow:

 

Increasing Internet and broadband penetration rates in China - We have benefited from the rapid improvement of internet and broadband connectivity in China, which have increased the accessibility of online education courses as an effective and convenient way for people to meet their educational and career development needs.

 

Increasing awareness of the importance of higher and professional education - We believe people in China are increasingly willing to invest in higher and professional education as it may lead to better career opportunities and enhanced earning power. We also believe that the market for post-secondary education and career enhancement services in China is expected to grow due to demand from various sources, including demand from employers for well-trained professionals, demand from an increasing number of high school and university graduates seeking employment that requires practical skills and professional certifications, and demand from working professionals who wish to further achieve their career and salary advancement potential.

 

Need to differentiate oneself from peers Each step of academic advancement requires an individual to differentiate oneself. Despite China’s rapid economic growth, university students in China are experiencing difficulties in finding an ideal job that meets their salary and personal growth expectations upon graduation. According to the  2017 Chinese College Graduates’ Employment Annual Report  by MyCOS Research, only about 65% of college graduates were satisfied with their jobs. We believe that in this highly competitive job market many students may choose to enhance their core skill sets by taking additional training courses or obtaining a second degree to differentiate themselves from their peers in order to get a better job. This may create demand for our services and products.

 

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While our business is influenced by factors affecting the education and career enhancement industries in China generally and by conditions in each of the geographic markets we serve within China, we believe our business is more directly affected by company-specific factors, including, among others:

 

Number of enrollments in our courses - Our ability to generate and grow our revenues is primarily affected by our ability to increase the number of course enrollments. This in turn is driven by several factors, including government and industry requirements for education in various professions, recognition of our brand and services, Internet and broadband connectivity rate, and the perceived effectiveness of our education courses.

 

Fees for our courses - Our revenues are also affected by the amount of fees we charge for our courses, which depends on the overall demand, the prices and availability of competing courses, and the perception of the quality and effectiveness of our courses. We may also experience pricing pressure as we expand our course offerings into new areas, or new service within existing areas that we cover, in an effort to attract new course participants.

 

Our ability to expand the range of courses and other services - Our ability to address market needs by expanding the range of our course offerings and other services has a direct impact on our ability to maintain growth in our course enrollments. Diversifying our sources of revenues also helps protect us from potential reduced course enrollment due to down-turns in certain industries or professions. To date, we have provided not only diversified online education courses, such as courses of laws, mathematics, accounting, nursing to participants, but also technological development and operation services to other educational organizations. In the future, we will continue to expand our course offerings in other areas to diversify and further grow our revenues.

 

Our ability to maintain and expand cooperation with universities and colleges - our ability to maintain and expand our customer base will have a material impact on our operations. A majority of our revenue is derived from our cooperation with universities and colleges. We have entered into agreements with more than 100 universities and colleges to provide online education services or technological services and expect to keep expanding our customer base in the near future. If we fail to maintain or further expand our customer base, our results of operations will be adversely affected.

 

Trend Information

 

We have noted the existence of the following trends, all of which are likely to affect our business to the extent they continue in the future:

 

China’s economy is growing rapidly

 

We have benefited significantly from overall economic growth and the expansion of the education market in China. Economic growth and increasing domestic consumption in China have contributed to a significant increase in spending on education. According to data from National Bureau of Statistics of China , gross domestic product (“GDP”) of China reached RMB 74,412 billion in year 2016, increased by 37.7% over year 2012; disposable income per capita of urban residents increased from RMB 24,565 in 2012 to RMB 33,616 in 2016, representing the increase of 8.16% during this period. (Source: China Research and Intelligence www.shcri.com ) We believe that the increase trend of the disposable income per capita creates favorable economic environment for online self-taught higher education. People who would like to obtain more education will invest more in education as their disposable income increases.

 

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Market size of China’s Online Self-taught Higher Education is increasing

 

As reflected in the table below, the scale of China’s online education industry was enlarged in recent years, mainly driven by the internet technology upgrading. The self-taught higher education sector was transformed from offline classroom schooling to online platforms because of the broader audience reached and the economic benefit provided by online platforms. Therefore, the market size of China’s online self-taught higher education grew rapidly year by year, exceeded RMB 20 billion (approximately of $3.5 billion as of September 30, 2017) in year 2016.

 

  2012     2013     2014     2015     2016  
Market Size (RMB, billion)     10.51       12.60       14.97       18.38       23.40  

 

(Source: China Research and Intelligence www.shcri.com

 

Market size of Online Self-taught Higher Education B2B2C Service in China is also increasing

 

As reflected in the table below, B2B2C service is our major service line. For the six months ended September 30, 2017, approximately 79% of our revenue was generated from B2B2C service. Market size of online self-taught higher education B2B2C service in China increased from RMB 52.5 million ($7.6 million as of September 30, 2017) to RMB 543.3 million ($81.6 million as of September 30, 2017) from year 2012 to year 2016, and is expected to be RMB 815 million ($122.5 million as of September 30, 2017) for year 2017.

 

    2012       2013       2014       2015       2016       2017E
Market Size (RMB, million)     52.50       130.50       272.70       393.90       543.30       815.00  

 

(Source: China Research and Intelligence www.shcri.com)

 

Steps to Improve Our Performance

 

Recruiting professional personnel is expected to help increase our sales.

 

We believe that our existing products and services with technological development of our online platform and quality improvement of our online courses will enable us to capture increased market demands for online education. With these opportunities we are able to provide, we plan to expand our team by recruiting professionals in various fields. In recent years, supply and demand of professionals tend to be stable, as long as we can provide development opportunities, we are able to hire more outstanding personnel, such as technology development professionals, online course producers, teaching professionals and senior management expertise. As our team keeps growing, we expect to be able to improve the quality of our courses, negotiate and cooperate with more schools, achieve more revenue and better financial results.

 

We expect our income will benefit from the implementation of “Provincial Partnership Model.”

 

There are 32 provinces in China and the population in each province varies from tens of millions to hundreds of millions. We are currently implementing a “Provincial Partnership Model” under which we establish subsidiaries in different provinces. Our local partners in each province, who are also the shareholders of each local subsidiary, can develop business not only with the reputation, platform and courses of the Company, but also with their own capability and deep understanding of local education market. We have founded subsidiaries in Hunan, Hubei, Jiangsu and Guizhou Province in the past two fiscal years and the incorporation of Jiangxi subsidiary is in process. We believe that this “Provincial Partnership Model” will create more revenue by motivating our partners of subsidiaries to explore potential market and provide better services to local customers. Meanwhile, “Provincial Partnership Model” will decrease the Company’s payroll and travel expenses by hiring local staff instead of recruiting staff in Beijing, where our headquarters is located.

 

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Other than self-taught higher education courses, we are exploring online non-diploma education courses and adult continuing higher education courses

 

(1) Online non-diploma education courses

 

As of now, most of our online courses are provided to self-taught learners and college students pursuing higher education degrees. We are also exploring non-diploma education courses and professional development courses for qualification certificates. For example, we have completed development of online courses for the “National Teacher Certificate Examination”. There are a very limited amount of institutions developing courses for the “National Teacher Certificate Examination” in China, especially promoting these courses through B2B2C model like us. Therefore, competition in this field is not strong. On the other hand, our online education platform was successfully built and there will be much less cost in the upcoming periods. As such, our gross profit is more likely to increase with the development of other professional development courses.

 

(2) Online adult continuing higher education courses

 

Adult higher education examination is an alternative way to obtain higher education for adults and an important part of China’s higher education system. According to the statistics from China Research and Intelligence www.shcri.com , there were 288 universities and colleges offering continuing education services, mainly adopting face-to-face teaching at present. There is barely B2B2C service provider for adult continuing higher education courses and market size of China’s online continuing higher education is relatively small. The market size of online continuing higher education increased from RMB 7.85 billion ($1.2 billion as of September 30, 2017) in 2012 to RMB 17.8 billion ($2.7 billion as of September 30, 2017) in 2016, representing an increase of 22.71% from 2012 to 2016.

 

  2012     2013     2014     2015     2016  
Market Size (RMB, billion)     7.85       9.91       13.68       15.24       17.80  

 

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We entered into the adult education field and launched our continuing education platforms in late 2016. Currently, there are over 60 universities and education institutions testing our platforms. We expect revenue from such programs to be generated starting the first half of fiscal year 2019. Given the unmet market demands for this type of services as well as the PRC government’s promotion of the “Internet Plus” model, China’s institutions of higher education, including our existing and potential clients, will likely increase their use of adult continuing higher education cloud platform to standardize teaching process and monitor learning process. As such, we expect our revenue from services for online adult continuing education will increase in the long term. 

 

Results of Operations for the Six Months Ended September 30, 2017 and 2016

 

The following table sets forth a summary, for the periods indicated, of our results of operations and each item expressed as a percentage of our total net revenues. Our historical results presented below are not necessarily indicative of the results that may be expected for any future period.

 

    For the six months ended September 30,     Variance  
    2017     2016     Amount     %  
Revenue   $ 3,061,334     $ 3,071,770     $ (10,436 )     (0.34 )%
Cost of revenue and related tax     964,845       1,065,492       (100,647 )     (9.45 )%
Gross profit     2,096,489       2,006,278       90,211       4.50 %
Selling expenses     480,523       322,480       158,043       49.01 %
General and administrative expenses     894,210       910,868       (16,658 )     (1.83 )%
Income from operations     721,756       772,930       (51,174 )     (6.62 )%
Interest income     98,458       50,596       47,862       94.60 %
Income (loss) from investments in unconsolidated entity     15,358       (29,197 )     44,555       (152.60 )%
Other expenses     (10,823 )     (7,220 )     (3,603 )     49.90 %
Income before income tax provision     824,749       787,109       37,640       4.78 %
Provision for income taxes     111,108       129,017       (17,909 )     (13.88 )%
Net income   $ 713,641     $ 658,092     $ 55,549       8.44 %
Other comprehensive income (loss): foreign currency translation gain (loss)     234,245       (204,493 )     438,738       (214.55 )%
Less: Comprehensive income attributable to non-controlling interest     112,365       115,810       (3,445 )     (2.97 )%
Comprehensive income attributable to Wah Fu Education Group Ltd.   $ 835,521     $ 337,789     $ 497,732       147.35 %

 

Revenues

 

We derive revenues from online education services and technological development and operation services. Our net revenues are presented net of PRC business tax and related surcharges, as well as value-added taxes. The following table sets forth a breakdown of our total revenues for the periods indicated:

 

    For the six months ended
September 30,
    Variance  
    2017     %     2016     %     Amount     %  
Online education services   $ 2,708,331       88.47 %   $ 2,962,762       96.45 %   $ (254,431 )     (8.59 )%
Technological development and operation services     353,003       11.53 %     109,008       3.55 %     243,995       223.83 %
Total Amount   $ 3,061,334       100.00 %   $ 3,071,770       100.00 %   $ (10,436 )     (0.34 )%

 

We derive most of our revenues from online education services. Our online education services mainly consist of courses designed for self-taught learners pursuing higher education degrees, including laws, mathematics, accounting, nursing, administration management and others. In addition, we provided continuing education and professional development courses to students, such as information technology, accounting and language courses.

 

To enroll in our courses, course participants may choose to purchase pre-paid study cards from our distributors or to pay us through bank transfers, online payments with credit cards and debit cards issued by major banks in China, and through third-party online payment platforms such as Alipay and WeChat Pay.

 

We also provide technological development and operation services, such as information technology system designing and monitoring, daily system supporting, cloud platform development and other related services.

 

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For the six months ended September 30, 2017 and 2016, revenue derived from online education services was $2,708,331 and $2,962,762, respectively, which represented a decrease of $254,431 or 8.59%. The decrease was due to the course structure adjustments of our clients in response to an important policy, Regulation of Continuing Higher Education Major Set-Up , announced by Ministry of Education of China. According to this policy, started from January 1, 2018, institutions of higher education, including universities and junior colleges, are no longer allowed to set up adult continuing education majors other than their existing full-time majors. Universities that have not established major in full-time junior-college level are prohibited setting up such majors for adult continuing education. The qualification for setting up continuing higher education courses will also be strictly regulated. As a result of such policy, our clients preferred setting up such courses for adult continuing education in 2017 before the new policy became effective to meet the demand for such type of education and reduced their orders for our self-taught courses in 2017. However, we believe that the impact of this policy is temporary. Since most of our clients have completed their course structure adjustments in response to the policy, our management does not anticipate that such event will have a material impact on our financial condition and operations going forward. Given the PRC government’s promotion of the “Internet Plus” model, China’s institutions of higher education will likely increase their use of adult continuing higher education cloud platform, to standardize teaching process and monitor learning process. Therefore, we expect our revenue for online education services, including services for adult continuing education, will increase in a long run.

 

Moreover, the decrease in revenue from online education services was due to the depreciation of RMB against USD. The average translation rates for the six months ended September 30, 2017 and 2016 were at 1 RMB to $0.1478 USD and at 1 RMB to $0.1515 USD, respectively, which represented a decrease of 2.44%.

 

For the six months ended September 30, 2017 and 2016, revenue from technological development and operation services was $353,003 and $109,008, respectively, representing an increase of $243,995 or 223.83%. The increase was attributable to our cooperation with a new client, Zhengqingheya Education Technology (Beijing) Co., Ltd. (“Zhengqingheya”). We entered into a training platform development contract with Zhengqingheya in April, 2017 and recognized revenue of approximately $0.25 million in the six months ended September 30, 2017.

 

Cost of Revenue

 

The following table sets forth the breakdown of the Company’s cost of revenue for the six months ended September 30, 2017 and 2016, respectively:

 

   

For the six months ended

September 30,

    Variance  
    2017     %     2016     %     Amount     %  
Online education services   $ 915,311       94.87 %   $ 1,000,991       93.95 %   $ (85,680 )     (8.56 )%
Technological development and operation services     38,254       3.96 %     48,877       4.59 %     (10,623 )     (21.73 )%
Business and sales related tax     11,280       1.17 %     15,624       1.47 %     (4,344 )     (27.80 )%
Total Amount   $ 964,845       100.00 %   $ 1,065,492       100.00 %   $ (100,647 )     (9.45 )%

 

Cost of revenue accounted for 31.5% and 36.6% of our net revenues in the six months ended September 30, 2017 and 2016, respectively. Cost of revenue is mainly composed of salaries and related expenses for our teaching support, course and content development, website maintenance and information technology technicians and other employees, fees paid to our course lecturers, depreciation and amortization expenses, server relocation and bandwidth leasing fees paid to third-party providers and other miscellaneous expenses.

 

For the six months ended September 30, 2017 and 2016, cost of revenue from online education services was $915,311 and $1,000,991, respectively, representing a decrease of $85,680 or 8.56%. The decrease in cost of revenue of online education services was primarily attributable to the decrease in collaboration fees paid to outsourced developers, which are $200,272 and $307,008 for the six months ended September 30, 2017 and 2016, respectively. As the most part of our online education platform development was completed in fiscal year 2017, we spent less on platform development in the current period. However, this decrease was partially offset by our increased labor cost due to the reason that we hired employees with relatively higher wages in order to attract more specialists.

 

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For the six months ended September 30, 2017 and 2016, cost of revenue from technological development and operation services was $38,254 and $48,877, respectively, representing a decrease of $10,623 or 21.73%. The decrease was mainly due to the decrease in traveling expenses in connection with client visit as fewer contracts were executed with Shanghai World Publications Co, Ltd. (“WPC”) in the six months ended September 30, 2017. Except for WPC, our major customers of technological development and operation services are located in Bejing, where our headquarters are located. As a result, travelling cost was reduced in the current period.

 

Gross Profit

 

The following table sets forth the breakdown of the Company’s gross profit for the six months ended September 30, 2017 and 2016, respectively:

 

    For the six months ended
September 30,
    Variance  
    2017     %     2016     %     Amount     %  
Online education services   $ 1,783,040       85.05 %   $ 1,946,702       97.03 %   $ (163,662 )     (8.41 )%
Technological development and operation services     313,449       14.95 %     59,576       2.97 %     253,873       426.13 %
Total Amount   $ 2,096,489       100.00 %   $ 2,006,278       100.00 %   $ 90,211       4.50 %

 

Gross profit from online education services decreased by $163,662 or 8.41% for the six months ended September 30, 2017 as compared to the same period of 2016. The decrease in gross profit of online education services was primarily due to the decrease in revenue, partially offset by the decrease in cost of revenue, as discussed above.

 

Gross profit from technological development and operation services increased by $253,873 or 426.13% for the six months ended September 30, 2017 as compared to the same period of 2016. The increase of technological development and operation services was mainly attributable to the increase in sales and the decrease in cost of revenue, as discussed above.

 

Expenses

 

The following table sets forth the breakdown of our operating expenses for the six months ended September 30, 2017 and 2016, respectively:

 

    For the six months ended
September 30,
    Variance  
    2017     %     2016     %     Amount     %  
Selling expenses   $ 480,523       34.95 %   $ 322,480       26.15 %   $ 158,043       49.01 %
General and administrative expenses     894,210       65.05 %     910,868       73.85 %     (16,658 )     (1.83 )%
Total Amount   $ 1,374,733       100.00 %   $ 1,233,348       100.00 %   $ 141,385       11.46 %

 

Selling Expenses

 

Selling expenses primarily consist of salaries and related expenses of our sales team, sales commissions, advertising and promotion expenses etc. Our selling expenses increased by 49.01% to $0.48 million in the fiscal six months ended September 30, 2017 from $0.32 million in the fiscal six months ended September 30, 2016. This increase was primarily due to the increased salaries for our sales department, as the number of employee in sales department has increased by 14 or 93% for the six months ended September 30, 2017 compared to the corresponding period in fiscal year 2016.

 

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General and Administrative Expenses

 

For the six months ended September 30, 2017, our general and administrative expenses were $894,210, representing a decrease of $16,658 or 1.83%, as compared to the same period of 2016. The decrease was primarily attributable to the decreased professional fees, such as consulting fees and attorney fees etc. This decrease was partially offset by the general and administrative expenses for our newly formed subsidiary Nanjing Suyun in the amount of $33,813, and also offset by the increased accruals of allowance for doubtful accounts in the amount of $65,181. As China's online education market is intensely competitive in recent years, in order to retain existing customers and attract new customers and capture additional market shares, the Company extends more credit sales to its customers. Therefore, our net accounts receivable balance increased by $155,581 from $1,374,852 as of September 30, 2016 to $1,530,433 as of September 30, 2017. The management periodically evaluates the collectability of its accounts receivable and determines the appropriate allowance for doubtful accounts based on a combination of factors. Based on the management’s best estimates of specific losses on individual exposures, as well as a provision on historical trends of collections, the Company provided a provision of doubtful accounts receivable with an amount of $101,097 for the six months ended September 30, 2017, compared to $35,916 for the corresponding period of 2016.

 

Interest Income, net

 

Interest income is primarily generated from our cash deposits in the banks and interest from short-term loans to third parties. For the six months ended September 30, 2017, our net interest income was $98,458 as compared to interest income of $50,596 in the same period of 2016. The increase in net interest income was primarily due to the increased average amount of cash deposits we maintained during the six months ended September 30, 2017, and the increase in interest income derived from loan to third parties.

 

Income (Loss) from Investments in Unconsolidated Entity  

 

We own 49% equity interest in Nanjing Wei You Xue Information Technology Co., Ltd. (“Wei You Xue”). We recorded an income of $15,358 and a loss of $29,197 from the equity method investment for the six months ended September 30, 2017 and 2016, respectively. The decrease in investment loss was due to a net income of $31,343 and a net loss of $59,587 recognized by Wei You Xue for the six months ended September 30, 2017 and 2016, respectively.

 

Provision for Income Taxes

 

The Company’s provision for income taxes decreased by $17,909 or 13.88% from $129,017 for the six months ended September 30, 2016 to $111,108 for the six months ended September 30, 2017, as a result of a decreased current income tax of $115,878 and a decreased deferred income tax benefit of $97,969 for the six months ended September 30, 2017 compared to the corresponding period in 2016. The decrease in current income tax is mainly due to the decreased taxable income of Distance Learning. The decrease in deferred income tax benefit is primarily attributable to the decreased deferred revenue of Distance Learning, which is a deductible temporary difference can be deducted from future taxable income.

 

Net Income

 

Our net income increased by $55,549 or 8.44% for the six months ended September 30, 2017 as compared to the same period of 2016. The increase in net income was primarily a result of the increase in gross profit and other income, partially offset by the increase in operating expenses as discussed above.

 

Comprehensive Income

 

The foreign currency translation gain or loss resulting from translation of the financial statements expressed in RMB to USD is reported in other comprehensive income (loss) in the unaudited condensed consolidated statements of income and comprehensive income. The comprehensive income attributable to Wah Fu increased by $497,732 to $835,521 for the six months ended September 30, 2017 from $337,789 for the six months ended September 30, 2016, which was mainly due to the increase in net income of $55,549 and the decrease in foreign currency translation loss of $438,738.

 

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Results of Operations for the Years Ended March 31, 2017 and 2016

 

The following table sets forth a summary, for the periods indicated, of our consolidated results of operations and each item expressed as a percentage of our total net revenues. Our historical results presented below are not necessarily indicative of the results that may be expected for any future period.

 

    For the years ended March 31,     Variance  
    2017     2016     Amount     %  
Revenue   $ 5,172,688     $ 7,042,835     $ (1,870,147 )     (26.55 )%
Cost of revenue     2,151,399       2,550,992       (399,593 )     (15.66 )%
Gross profit     3,021,289       4,491,843       (1,470,554 )     (32.74 )%
Selling expenses     702,337       844,478       (142,141 )     (16.83 )%
General and administrative expenses     1,660,140       1,025,182       634,958       61.94 %
Income from operations     658,812       2,622,183       (1,963,371 )     (74.88 )%
Interest income     107,777       114,049       (6,272 )     (5.50 )%
Loss from investments in unconsolidated entities     (36,171 )     (66,198 )     30,027       (45.36 )%
Other expenses     (7,235 )     (4,241 )     (2,994 )     70.60 %
Income before income tax provision     723,183       2,665,793       (1,942,610 )     (72.87 )%
Provision for income taxes     105,952       434,309       (328,357 )     (75.60 )%
Net income   $ 617,231     $ 2,231,484     $ (1,614,253 )     (72.34 )%
Other comprehensive loss: foreign currency translation loss     (396,923 )     (245,745 )     (151,178 )     62 %
Less: Comprehensive income (loss) attributable to non-controlling interest     43,969       (7,474 )     51,443       (688 )%
Comprehensive income attributable to Wah Fu Education Group Ltd.   $ 176,339     $ 1,993,213     $ (1,816,874 )     (91.15 )%

 

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Revenues

 

We derive revenues from online education services and technological development and operation services. Our net revenues are presented net of PRC business tax and related surcharges, as well as value-added taxes. The following table sets forth a breakdown of our total revenues for the periods indicated:

 

    For the years ended
March 31,
    Variance  
    2017     %     2016     %     Amount     %  
Online education services   $ 4,732,843       91.50 %   $ 6,083,698       86.38 %   $ (1,350,855 )     (22.20 )%
Technological development and operation services     439,845       8.50 %     959,137       13.62 %     (519,292 )     (54.14 )%
Total Amount   $ 5,172,688       100.00 %   $ 7,042,835       100.00 %   $ (1,870,147 )     (26.55 )%

 

We derive most of our revenues from online education services. Our online education services mainly consist of courses designed for self-taught learners pursuing higher education degrees, including laws, mathematics, accounting, nursing, administration management and others. In addition, we provided continuing education and professional development courses to students, such as information technology, accounting and language courses.

 

To enroll in our courses, course participants may choose to purchase pre-paid study cards from our distributors or to pay us through bank transfers, online payments with credit cards and debit cards issued by major banks in China, and through third-party online payment platforms such as Alipay and WeChat Pay.

 

We also provide technological development and operation services, such as information technology system designing and monitoring, daily system supporting, cloud platform development and other related services.

 

For the years ended March 31, 2017 and 2016, revenue derived from online education services was $4,732,843 and $6,083,698, respectively, which represented a decrease of $1,350,855 or 22.2%. Approximately 86% and 81% of our revenue was generated from B2B2C model for the years ended March 31, 2017 and 2016, respectively. For the year ended March 31, 2017, total number of courses sold through B2B2C model was 333,988, compared to 417,262 for the same period of 2016. Under the nationwide anti-corruption campaign, public school spending is strictly regulated. To comply with the Chinese government’s expenditure control policies, many public universities, including our clients, temporarily reduced their self-taught education scale in 2017. Therefore the demand for our courses decreased in 2017. However, the impact of the anti-corruption campaign is decreasing and management does not anticipate that such event will have a material impact on our financial condition and operations going forward. As we continue to expand our cooperation with more universities and colleges, we expect our revenue for online education services to increase in a long run.

 

For the years ended March 31, 2017 and 2016, revenue from technological development and operation services was $439,845 and $959,137, respectively, representing a decrease of $519,292 or 54.1%. The decrease was attributable to fewer contracts executed with Shanghai World Publications Co, Ltd. (“WPC”), a wholly owned subsidiary of China Publishing & Media Holdings Co., Ltd. (“China Publishing”), for the “Education Cloud Platform Software Development” project during fiscal year 2017 as compared to fiscal year 2016 because China Publishing was in the process of its IPO in China during fiscal 2017 and since part of China Publishing’s IPO proceeds was for the Education Cloud Platform Software Development program, we had to present details of our services in connection with the program and terms of our agreements with WPC to its parent company China Publishing. As such, the numbers of executed agreements with Shanghai World Publications were reduced. Since these details have been presented to China Publishing, we do not anticipate that such factor will continue to affect our business relationship with Shanghai Publishing Group. In addition, China Publishing’s IPO closed in August 2017 and, per China Publishing’s IPO prospectus, part of its IPO proceeds are expected to be used on the Education Cloud Platform Software Development program. As such, we expect that we will generate increased revenue from Shanghai World Publishing.

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Cost of Revenue

 

The following table sets forth the breakdown of the Company’s cost of revenue for the years ended March 31, 2017 and 2016, respectively:

 

    For the years ended
March 31,
    Variance  
    2017     %     2016     %     Amount     %  
Online education services   $ 1,922,916       89.38 %   $ 1,788,620       70.11 %   $ 134,296       7.51 %
Technological development and operation services     195,035       9.07 %     547,648       21.47 %     (352,613 )     (64.39 )%
Business and sales related tax     33,448       1.55 %     214,724       8.42 %     (181,276 )     (84.42 )%
Total Amount   $ 2,151,399       100.00 %   $ 2,550,992       100.00 %   $ (399,593 )     (15.66 )%

 

Cost of revenue accounted for 41.6% and 36.2% of our net revenues in the fiscal years ended March 31, 2017 and 2016, respectively. Cost of revenue are mainly composed of salaries and related expenses for our teaching support, course and content development, website maintenance and information technology technicians and other employees, fees paid to our course lecturers, depreciation and amortization expenses, server relocation and bandwidth leasing fees paid to third-party providers and other miscellaneous expenses.

 

For the years ended March 31, 2017 and 2016, cost of revenue from online education services was $1,922,916 and $1,788,620, respectively, representing an increase of $134,296 or 7.51%. The increase in cost of revenue was primarily attributable to the increased employee salaries as a result of the rise in salary with amount of $217,170 or 31% during the year ended March 31, 2017 compared to the same period of 2016. The reason for the increase in employee salaries is mainly due to that the numbers of employees increased by 10%, from 70 for fiscal year 2016 to 77 for fiscal year 2017. In order to expand our research and development team, we hired technical specialists with relatively higher wages. Our business relies upon research and development before we can offer services to customers. Increased expenses such as salaries of our research and development employees do not immediately result in an increase in revenue. Despite a 7.51% increase in cost of revenue for the years ended March 31, 2017 and 2016, our revenue declined.

 

For the years ended March 31, 2017 and 2016, cost of revenue from technological development and operation services was $195,035 and $547,648, respectively, representing a decrease of $352,613 or 64.39%. The decrease was mainly due to the decrease in the number of technological development projects during the year ended March 31, 2017, as compared to the year ended March 31, 2016, as mentioned in the revenue analysis section of technological development and operation services. Due to the decrease in number of technological development projects, the fees paid to outsourced developers, as the essential element of cost of sales of technological development and operation services, decreased by $391,502.

 

Gross Profit

 

The following table sets forth the breakdown of the Company’s gross profit for the years ended March 31, 2017 and 2016, respectively:

 

    For the years ended
March 31,
    Variance  
    2017     %     2016     %     Amount     %  
Online education services   $ 2,779,323       91.99 %   $ 4,109,596       91.49 %   $ (1,330,273 )     (32.37 )%
Technological development and operation services     241,966       8.01 %     382,247       8.51 %     (140,281 )     (36.70 )%
Total Amount   $ 3,021,289       100.00 %   $ 4,491,843       100.00 %   $ (1,470,554 )     (32.74 )%

 

Gross profit from online education services decreased by $1,330,273 or 32.37% for the year ended March 31, 2017 as compared to the same period of 2016. The decrease in gross profit of online education services was primarily due to the decrease in sales and the slight increase in cost of revenue, as discussed above.

 

Gross profit from technological development and operation services decreased by $140,281 or 36.70% for the year ended March 31, 2017 as compared to the same period of 2016. The decrease was mainly attributable to the decrease in sales of technological development and operation services, partially offset by the decrease in cost of revenue in this segment, as discussed above.

 

Expenses

 

The following table sets forth the breakdown of our operating expenses for the years ended March 31, 2017 and 2016, respectively:

 

    For the years ended
March 31,
    Variance  
    2017     %     2016     %     Amount     %  
Selling expenses   $ 702,337       29.73 %   $ 844,478       45.17 %   $ (142,141 )     (16.83 )%
General and administrative expenses     1,660,140       70.27 %     1,025,182       54.83 %     634,958       61.94 %
Total Amount   $ 2,362,477       100.00 %   $ 1,869,660       100.00 %   $ 492,817       26.36 %

 

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Selling Expenses

 

Selling expenses primarily consist of salaries and related expenses of our sales team, sales commissions, advertising and promotion expenses etc. Our selling expenses decreased by 16.83% to $0.70 million in the fiscal year ended March 31, 2017 from $0.84 million in the fiscal year ended March 31, 2016. This decrease was primarily due to the decreased commission fees paid to the colleges that introduced our courses to students, in amount of $148,437 or 74%, from $200,034 for the year ended March 31, 2016, to $51,597 for the same period in 2017 with respect to decreased sales as discussed above.

 

General and Administrative Expenses

 

For the year ended March 31, 2017, our general and administrative expenses were $1,660,140, representing an increase of $634,958 or 61.94%, as compared to the same period of 2016. The increase was primarily attributable to the increased professional expenses related to our ongoing initial public offering efforts, such as consulting fees, attorney fees and auditing fees. During the year ended March 31, 2017, professional expenses related to our initial public offerings were $865,260 in comparable to that of $278,958 in fiscal year 2016.

 

Interest Income, net

 

Interest income is primarily generated from our cash deposits in the banks and interest from short-term loans to third parties. For the year ended March 31, 2017, our net interest income was $107,777 as compared to interest income of $114,049 in the same period of 2016. The slight decrease in net interest income was primarily due to the decreased average amount of cash deposits we maintained during this year, partially offset by the increase in interest income derived from loan to third parties.

 

Loss from Investments in Unconsolidated Entity  

 

We own 49% equity interest in Nanjing Weiyouxue Information Technology Co., Ltd. (“Nanjing Weiyouxue”). We recorded net loss of $36,171 and $66,198 from the equity method investment for the years ended March 31, 2017 and 2016, respectively. The decrease in net loss was primarily due to the lower net loss in Nanjing Weiyouxue in the current period.

 

Provision for Income Taxes

 

The Company’s provision for income taxes decreased by $328,357 or 75.60% from $434,309 for the year ended March 31, 2016 to $105,952 for the year ended March 31, 2017, as a result of a decreased current income tax of $203,057 and an increased deferred income tax benefit of $125,300 for the year ended March 31, 2017 compared to the corresponding period in 2016. The decrease in current income tax is mainly due to the decreased taxable income of Distance Learning. The increase in deferred income tax benefit is primarily attributable to the increased deferred revenue of Distance Learning, which is a deductible temporary difference can be deducted from future taxable income.

 

Net Income

 

Our net income decreased by $1,614,253 or 72.34% for the year ended March 31, 2017 as compared to the same period of 2016. The decrease in net income was primarily a result of the decrease in gross profit and the increase in operating expenses, partially offset by the increase in other income as discussed above.

 

Comprehensive Income

 

The foreign currency translation gain or loss resulting from translation of the financial statements expressed in RMB to USD is reported in other comprehensive loss in the consolidated statements of income and comprehensive income. The comprehensive income attributable to Wah Fu decreased by $1,816,874 to $176,339 for the year ended March 31, 2017 from $1,993,213 for the year ended March 31, 2016, which was mainly due to the decrease in net income of $1,614,253 and the increase in foreign currency translation loss of $151,178 for the fiscal year ended March 31, 2017.

 

Liquidity and Capital Resources

 

We currently finance our business operations primarily through cash provided by operating activities. Our current cash primarily consists of cash on hand and cash in bank, which is unrestricted as to withdrawal and use and is deposited with banks in China. As of September 30, 2017 and March 31, 2017, we had approximately $4.8 million and $5.6 million cash in bank, respectively, and had no outstanding bank loans or third party loans due.

 

Management believes that our current cash and cash flows from current and future operations will be sufficient to meet our working capital needs for at least the next 12 months. We intend to continue carefully executing our growth plans and managing market risk.

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Working Capital

 

The following table provides the information about our working capital at September 30, 2017 and March 31, 2017:

 

    As of
September 30,
2017
    As of
March 31, 2017
 
             

Current Assets

  $ 7,086,280     $ 6,610,821  
Current Liabilities     1,046,080       1,038,238  
Working Capital   $ 6,040,200     $ 5,572,583  

 

The working capital increased by $467,617 or 8.39% from March 31, 2017 to September 30, 2017. Our working capital requirements are influenced by the level of our operations, the numerical and dollar volume of our sales contracts, the progress of execution on our customer contracts, and the timing of accounts receivable collections.

 

Capital Commitments and Contingencies

 

Capital commitments refer to the allocation of funds for a possible liability in the near future arising out of capital expenditures. Contingency refers to a condition that arises from past transactions or events, the outcome of which will be confirmed only by the occurrence or non-occurrence of uncertain futures events.

 

As of September 30, 2017 and March 31, 2017, we had no material capital commitments or contingent liabilities.

 

Cash Flows

 

The following table provides detailed information about our net cash flows for the six months ended September 30, 2017 and 2016.

 

   

For the six months ended

September 30,

 
    2017     2016  
             
Net cash (used in) provided by operating activities   $ (354,500 )   $ 170,563  
Net cash used in investing activities     (899,084 )     (438,580 )
Net cash provided by financing activities     306,685       -  
Effect of exchange rate changes on cash     183,035       (168,422 )
Net decrease in cash     (763,864 )     (436,439 )
Cash, beginning of period     5,600,768       5,171,535  
Cash, end of period   $ 4,836,904     $ 4,735,096  

 

Operating Activities

 

Net cash used in operating activities during the six months ended September 30, 2017 was $0.3 million, consisting of net income of $0.7 million, provision of doubtful accounts of $0.1 million as reconciled and net changes in our operating assets and liabilities, which mainly included an increase in accounts receivable of $0.9 million, a decrease in deferred revenue of $0.4 million and an increase in taxes payable of $0.07 million. Net cash provided by operating activities during the six months ended September 30, 2016 was approximately $0.2 million, consisting of net income of $0.7 million and net changes in our operating assets and liabilities, which mainly included an increase in accounts receivable of $0.4 million, an increase in other current assets of $0.2 million and an increase in taxes payable of $0.1 million.

 

Investing Activities

 

For the six months ended September 30, 2017, net cash used in investing activities amounted to $0.9 million as compared to net cash used in investing activities of $0.4 million for the same period of 2016. The increase in net cash used in investing activities was primarily due to purchase of property and equipment of $0.5 million and payments made for loan to third parties of approximately $0.4 million during the six months ended September 30, 2017.

 

We made a RMB 3.0 million (approximately $0.4 million) loan to an unrelated party, Beijing Dejinbao Mining Engineering Consulting Co., Ltd (“Dejinbao”), for its temporary working capital needs. According to the agreement, the loan has an interest rate of 6% per annum and Dejinbao will repay the principal and interest by September 2019.

 

Financing Activities   For the six months ended September 30, 2017, net cash provided by financing activities amounted to $306,685, as compare to net cash provided by financing activities of nil for the same period of 2016. The increase of $306,685 in net cash provided by financing activities was mainly due to an increase of $0.3 million in due to related parties during the six months ended September 30, 2017.

 

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The following table provides detailed information about our net cash flows for the years ended March 31, 2017 and 2016.

 

   

For the years ended

March 31,

 
    2017     2016  
             
Net cash provided by operating activities   $ 1,292,819     $ 1,852,604  
Net cash (used in) provided by investing activities     (580,715 )     144,645  
Net cash provided by financing activities     66,861       -  
Effect of exchange rate changes on cash     (349,732 )     (210,869 )
Net increase in cash     429,233       1,786,380  
Cash, beginning of year     5,171,535       3,385,155  
Cash, end of year   $ 5,600,768     $ 5,171,535  

 

Operating Activities

 

Net cash provided by operating activities during the year ended March 31, 2017 was approximately $1.3 million, consisting of net income of $0.6 million, depreciation expenses of $0.1 million as reconciled and net changes in our operating assets and liabilities, which mainly included an increase in deferred revenue of $0.3 million, and a decrease in accounts receivable of $0.3 million. Net cash provided by operating activities during the year ended March 31, 2016 was approximately $1.9 million, consisting of net income of $2.2 million and net changes in our operating assets and liabilities, which mainly included an increase in accounts receivable of $0.4 million.

 

Investing Activities

 

For the year ended March 31, 2017, net cash used in investing activities amounted to $0.6 million as compared to net cash provided by investing activities of $0.1 million for the same period of 2016. The decrease in net cash provided by investing activities was primarily due to payments of loan to third parties of approximately $0.4 million and payments of investment in unconsolidated entities of $0.3 million and the proceeds from loan to third parties of $0.1 million during the year ended March 31, 2017.

 

We made RMB 2.0 million (approximately $0.3 million) and RMB 0.5 million (approximately $0.1 million) loan to two unrelated parties, Beijing Chuangyouyi Education Technology Co., Ltd. (“Chuangyouyi”) and Beijing Yuanjitiancheng Investment Co., Ltd (“Yuanji”), respectively, for their temporary working capital needs. Chuangyouyi repaid RMB 1.0 million in fiscal year 2017 and fully repaid the principal and interest in total amount of RMB 1,150,000 on December 12, 2017. Yuanji repaid RMB 0.5 million in full by the end of August, 2017.

 

During the year ended March 31, 2017, we invested RMB 0.9 million (approximately $0.13 million) and RMB 1.0 million (approximately $0.14 million) in exchange for 10% and 15% equity interest of Tianyubowen and Zhongtai, respectively, through Haohua Haofu (See Note 5). Haohua Haofu signed the investment agreement on behalf of Digital Information and transferred above-mentioned ownership to us subsequently. RMB 1.9 million (approximately $0.3 million) was paid in full by us in fiscal year 2017.

 

Financing Activities

 

For the year ended March 31, 2017, net cash provided by financing activities amounted to $66,861, as compare to net cash provided by financing activities of nil for the same period of 2016. The increase of $66,861 in net cash provided by financing activities was due to the capital contribution made by non-controlling shareholders during the year ended March 31, 2017.

 

Impact of Inflation

 

We do not believe the impact of inflation on our company is material.

 

Quantitative and Qualitative Disclosure about Market Risk

 

Foreign Exchange Risk

 

Our functional currency is RMB, and our financial statements are presented in U.S. dollars. RMB has gradually depreciated against U.S. dollars over the past few years. The average exchange rate for U.S. dollars against RMB has changed from US$1.00 for RMB 6.6000 in the six months ended September 30, 2016 to US$1.00 for RMB 6.7659 in the six months ended September 30, 2017; The average exchange rate for U.S. dollars against RMB has changed from US$1.00 for RMB 6.3271 in fiscal 2016 to US$1.00 for RMB 6.7304 in fiscal 2017. The change in the value of RMB relative to the U.S. dollar may affect our financial results reported in the U.S. dollar terms without giving effect to any underlying change in our business or results of operation. If using the average exchange rate of the six months ended September 30, 2016, our revenue, cost of revenue and total expenses, including selling expenses and general and administrative expenses, for the six months ended September 30, 2017 would increase by approximately $77,000, $24,000 and $35,000, respectively. If using the average exchange rate of fiscal 2016, our revenue, cost of revenue and total expenses, including selling expenses and general and administrative expenses, for the year ended March 31, 2017 would increase by approximately $0.3 million, $0.1 million and $0.2 million, respectively.

 

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Currently, our assets, liabilities, revenues and costs are denominated in RMB, our exposure to foreign exchange risk will primarily relate to those financial assets denominated in U.S. dollars. Any significant revaluation of RMB against U.S. dollar may materially affect our earnings and financial position, and the value of, and any dividends payable on, our ordinary shares in U.S. dollars in the future.

 

Credit Risk

 

As of September 30, 2017 and March 31, 2017, we had cash of $4.8 million and $5.6 million, respectively. Our cash was on deposit at financial institutions in the PRC where there currently is no rule or regulation requiring such financial institutions to maintain insurance to cover bank deposits in the event of bank failure.

 

Inflation Risk

 

Inflationary factors such as increases in the cost of our product and overhead costs may adversely affect our operating results. Although we do not believe that inflation has had a material effect on our financial position or results of operations to date, a high rate of inflation in the future may have an adverse effect on our ability to maintain current levels of gross profit and selling, general and administrative expenses as a percentage of net sales if the selling prices of our services do not increase with these increased costs.

 

Off-balance Sheet Commitments and Arrangements

 

There were no off-balance sheet arrangements for the six months ended September 30, 2017 and 2016, and the years ended March 31, 2017 and 2016, that have or that in the opinion of management are likely to have, a current or future material effect on our financial condition or results of operations.

 

Contractual Obligations and Other Commitments

 

The following table represents our contractual commitments as of September 30, 2017:

 

    Payments Due by Period  
    Total     Within
1 Year
    2-3
Years
    4-5
Years
    After
5 Years
 
Operating lease obligations   $ 339,453     $ 102,220     $ 163,560     $ 73,673     $    -  

 

There have been no material changes to our contractual obligations since September 30, 2017.

 

Critical Accounting Policies

 

We believe it is helpful to investors to understand the critical accounting policies underlying our financial statements and the following discussion of our Company’s financial condition and results of operations.

 

Consolidation of Variable Interest Entities

 

In accordance with accounting standards regarding consolidation of variable interest entities, VIEs are generally entities that lack sufficient equity to finance their activities without additional financial support from other parties or whose equity holders lack adequate decision making ability. The VIE with which the Company is involved must be evaluated to determine the primary beneficiary of the risks and rewards of the VIE. The primary beneficiary is required to consolidate the VIE for financial reporting purposes. We have determined that Distance Learning is the primary beneficiary of Digital Information’s risks and rewards.

 

Uses of estimates

 

The preparation of unaudited condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the unaudited condensed consolidated financial statements and the reported amounts of revenue and expenses during each reporting period. Actual results could differ from those estimates. Significant accounting estimates reflected in the Company’s unaudited condensed consolidated financial statements include the allowances for doubtful accounts, estimated useful lives and fair value in connection with the impairment of property and equipment. Actual results could differ from these estimates.

 

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Accounts receivable, net

 

Accounts receivable are recognized and carried at original invoiced amount less an estimated allowance for uncollectible accounts. The Company usually grants credit to customers with good credit standing with a maximum of 90 days and determines the adequacy of reserves for doubtful accounts based on individual account analysis and historical collection trends. The Company establishes a provision for doubtful receivables when there is objective evidence that the Company may not be able to collect amounts due. The allowance is based on management’s best estimates of specific losses on individual exposures, as well as a provision on historical trends of collections. The provision is recorded against accounts receivables balances, with a corresponding charge recorded in the unaudited condensed consolidated statements of income and comprehensive income. Actual amounts received may differ from management’s estimate of credit worthiness and the economic environment. Delinquent account balances are written-off against the allowance for doubtful accounts after management has determined that the likelihood of collection is not probable. As of September 30, 2017 and March 31, 2017, the allowances for doubtful accounts were $219,908 and $113,109, respectively.

 

Long-term investments

 

The Company’s long-term investments consist of cost method investment and equity method investment.

 

Cost method investment

 

For an investee over which the Company does not have significant influence and a controlling interest, the Company carries the investment at cost and recognizes income for any dividend received from the distribution of the investee’s earnings.

 

The Company reviews its cost method investment for impairment whenever an event or circumstance indicates that an other-than-temporary impairment has occurred. The Company considers available quantitative and qualitative evidence in evaluating potential impairment of its cost method investment. An impairment charge is recorded if the carrying amount of an investment exceeds its fair value and such excess is determined to be other-than temporary. The Company did not record any impairment loss on its cost method investment during the six months ended September 30, 2017 and 2016, and the years ended March 31, 2017 and 2016.

 

Equity method investment

 

For an investee over which the Company has the ability to exercise significant influence, but does not have a controlling interest, the Company accounted for those using the equity method. Significant influence is generally considered to exist when the Company has an ownership interest in the voting stock of the investee between 20% and 50%. Other factors, such as representation on the investee’s board of directors, voting rights and the impact of commercial arrangements, are also considered in determining whether the equity method of accounting is appropriate.

 

An impairment charge is recorded if the carrying amount of the investment exceeds its fair value and this condition is determined to be other-than temporary. The Company did not record impairment losses on its equity method investment during the six months ended September 30, 2017 and 2016, and the years ended March 31, 2017 and 2016.

 

Revenue recognition

 

Revenues are recognized when the following four criteria are met: (i) persuasive evidence of an arrangement exists, (ii) the service has been rendered, (iii) the fees are fixed or determinable, and (iv) collectability is reasonably assured.

 

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Online education service

 

The online education service provided by the Company to its customers is an integrated service, including audio-video course content, mock examinations and online chat rooms during the subscription period. Audio-video course content, mock examinations and online chat rooms are not practical to be sold on standalone basis and have never been sold separately. The revenues for the online education service are recognized on a straight line basis over the subscription period from the month in which students enroll in the courses to the month in which the subscribed courses terminate. The online education service includes online education cloud service (“B2B2C”) and online training service (“B2C”). B2C service can be cancelled and is refundable no later than 24 hours after enrollment. B2B2C service can not be cancelled and is not refundable after enrollment.

  

Technological development and operation service

 

Revenues from technological development service, such as information technology system design and cloud platform development, are recognized when the system or platform are delivered and accepted by the customers. From time to time, the Company enters into arrangement to provide technological support and maintenance service of online platforms to its customers. The revenues for the technological support and maintenance service are recognized over the support and maintenance services period.

 

Deferred revenue represents revenues collected but not earned as of September 30, 2017 and March 31, 2017. This is primarily composed of revenue for online course tuition received in advance. If a course is provided over a period end, deferred revenue is recorded for the revenue related to the course conducted in the next period.

 

Income taxes

 

The Company accounts for income taxes under ASC 740. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the unaudited condensed consolidated financial statement carrying amounts of existing assets and liabilities and their respective tax bases.

 

Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period including the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.

 

The provisions of ASC 740-10-25, “Accounting for Uncertainty in Income Taxes,” prescribe a more-likely-than-not threshold for unaudited condensed consolidated financial statement recognition and measurement of a tax position taken (or expected to be taken) in a tax return. This interpretation also provides guidance on the recognition of income tax assets and liabilities, classification of current and deferred income tax assets and liabilities, accounting for interest and penalties associated with tax positions, and related disclosures. The Company does not believe that there was any uncertain tax position at September 30, 2017 and March 31, 2017.

 

Value added tax (“VAT”)

 

Sales revenue derived from the invoiced online education service, and technological development and operation service is subject to VAT since 2014. Prior to that, the Company was subject to a fixed rate of business tax of 3%. The applicable VAT rates are 6% and 3% for the entities that are general taxpayer and small-scale taxpayer, respectively. Distance Learning and Digital Information are both considered VAT general taxpayers since June 2015. Hunan Huafu, Shanghai Xia Shu, Shanghai Xin Fu, Nanjing Suyun and Guizhou Huafu are VAT small-scale taxpayers since the date of incorporation.

 

Entities that are VAT general taxpayers are allowed to offset qualified input VAT paid to suppliers against their output VAT liabilities. Net VAT balance between input VAT and output VAT is recorded in the line item of taxes payable on the unaudited condensed consolidated balance sheets. All of the VAT returns of the Company have been and remain subject to examination by the tax authorities for five years from the date of filing.

 

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Foreign currency translation

 

Since the Company operates in the PRC, the Company’s functional currency is the Chinese RMB. The Company’s unaudited condensed consolidated financial statements have been translated into the reporting currency, the United States Dollar (“USD”). Assets and liabilities of the Company are translated at the exchange rate at each reporting period end date. Equity is translated at historical rates. Income and expense accounts are translated at the average rate of exchange during the reporting period. The resulting translation adjustments are reported under other comprehensive income (loss). Gains and losses resulting from the translations of foreign currency transactions and balances are reflected in the result of operations. RMB is not freely convertible into foreign currency and all foreign exchange transactions must take place through authorized institutions. No representation is made that the RMB amounts could have been, or could be, converted into USD at the rates used in translation.

 

Recent accounting pronouncements

 

In January 2017, the FASB issued ASU No. 2017-01, “Business Combinations (Topic 805): Clarifying the Definition of a Business”. The amendments in this ASU clarify the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. Basically these amendments provide a screen to determine when a set is not a business. If the screen is not met, the amendments in this ASU first, require that to be considered a business, a set must include, at a minimum, an input and a substantive process that together significantly contribute to the ability to create output and second, remove the evaluation of whether a market participant could replace missing elements. These amendments take effect for public businesses for fiscal years beginning after December 15, 2017 and interim periods within those periods. The Company does not expect that adoption of this guidance will have a material impact on its unaudited condensed financial statements.

 

In February 2017, the FASB issued ASU No. 2017-05, “Other Income—Gains and Losses from the Derecognition of Nonfinancial Assets” to clarify the scope of Subtopic 610-20 and to add guidance for partial sales of nonfinancial assets. Subtopic 610-20, which was issued in May 2014 as a part of ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606), provides guidance for recognizing gains and losses from the transfer of nonfinancial assets in contracts with noncustomers. For public entities, the amendments are effective for annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. The Company does not expect that adoption of this guidance will have a material impact its unaudited condensed financial statements and related disclosures.

  

In May 2017, the FASB issued ASU 2017-09, “Scope of Modification Accounting”, which amends the scope of modification accounting for share-based payment arrangements, provides guidance on the types of changes to the terms or conditions of share-based payment awards to which an entity would be required to apply modification accounting under ASC 718. Early adoption is permitted, including adoption in any interim period. The Company does not expect that adoption of this guidance will have a material impact on its consolidated financial statements and related disclosures. In January 2017, the FASB issued ASU 2017-01, which clarifies the definition of a business to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The standard will be effective for us in the first quarter of our fiscal 2019. The Company expects that the adoption of this ASU would not have a material impact on its unaudited condensed financial statements.

 

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In July 2017, the FASB issued ASU 2017-11, “Earnings Per Share (Topic 260)”, Distinguishing Liabilities from Equity (Topic 480), Derivatives and Hedging (Topic 815). The amendments in Part I of this Update change the classification analysis of certain equity-linked financial instruments (or embedded features) with down round features. When determining whether certain financial instruments should be classified as liabilities or equity instruments, a down round feature no longer precludes equity classification when assessing whether the instrument is indexed to an entity’s own stock. The amendments also clarify existing disclosure requirements for equity-classified instruments. The amendments in Part II of this Update recharacterize the indefinite deferral of certain provisions of Topic 480 that now are presented as pending content in the Codification, to a scope exception. Those amendments do not have an accounting effect. For public business entities, the amendments in Part I of this Update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. Early adoption is permitted for all entities, including adoption in an interim period. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. The Company expects that the adoption of this ASU would not have a material impact on its unaudited condensed financial statements.

 

In September 2017, the FASB issued ASU 2017-13, Revenue from Contracts with Customers (Topic 606) and Leases (Topic 842). The main objective of this pronouncement is to clarify the effective date of the adoption of ASC Topic 606 and ASC Topic 842 and the definition of public business entity as stipulated in ASU 2014-09 and ASU 2016-02. ASU 2014-09 provides that a public business entity and certain other specified entities adopt ASC Topic 606 for annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. All other entities are required to adopt ASC Topic 606 for annual reporting periods beginning after December 15, 2018, and interim reporting periods within annual reporting periods beginning after December 15, 2019. ASU 2016-12 requires that “a public business entity and certain other specified entities adopt ASC Topic 842 for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. All other entities are required to adopt ASC Topic 842 for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020”. ASU 2017-13 clarifies that the SEC would not object to certain public business entities electing to use the non-public business entities effective dates for applying ASC 606 and ASC 842. ASU 2017-13, however, limits such election to certain public business entities that “otherwise would not meet the definition of a public business entity except for a requirement to include or inclusion of its financial statements or financial information in another entity’s filings with the SEC”. The Company expects that the adoption of this ASU would not have a material impact on its unaudited condensed financial statements.

 

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INDUSTRY OVERVIEW

 

Overview

 

China’s online education industry includes K-12 education, adult education, preschool education and art training. The online adult education industry can fall into two categories, non-academic education and academic education. Online academic education relates to education necessary to prepare for the self-taught examination and the adult college entrance examination for higher education. The online self-taught examination business is a major part of China’s online academic education. The cost of online self-taught education is far lower than that of the education in offline classrooms, which is also convenient for students using spare time.

 

China’s Online Education Industry and Sub-Sectors in 2016

 

In China, the online education industry (which generated an aggregate of RMB 156 billion in 2016) is divided into the online adult education sector (which generated an aggregate of RMB 89.7 billion in 2016) and others (which generated an aggregate of RMB 66.3 billion in 2016). The online adult education sector includes the non-academic education sector (which generated an aggregate of RMB 48.5 billion in 2016) and the online adult academic education sector (which generated an aggregate of RMB 41.2 billion in 2016). Online adult academic education can be further divided into the online self-taught higher education sector (which generated an aggregate of RMB 23.4 billion in 2016) and others (which generated an aggregate of RMB 17.8 billion in 2016). Online self-taught higher education is divided into the B2B2C sector (which generated an aggregate of RMB 543.3 million in 2016) and others (which generated an aggregate of RMB 22.86 billion in 2016). The chart below illustrates the various sectors and sub-sectors included in China’s online education industry:    

 

 

Source: Research Report on China’s Online Higher Education Industry, 2017-2021 (the “CRI report”)

  

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China’s online self-taught education sector has been growing quickly as Internet technology continues to develop in China. The cost of providing online self-taught educational services is much lower than that of offline classrooms, and this has fueled the transition of self-taught education in China from offline classrooms to online classrooms. The market size of China’s online self-taught education industry reached RMB 23.4 billion in 2016, with the compound annual growth rate (“CAGR”) up to 22.2% from 2012 to 2016. China Research and Intelligence Co., Ltd. (“CRI”), a leading independent company providing industry/market research reports for initial public offerings and mergers and acquisitions in China, forecasts the market size will achieve RMB 41.24 billion in 2021, representing a CAGR of about 12% between 2017-2021.

  

Market Size of China’s Online Self-Taught Education Industry, 2012-2016

  

Year     Market Size (RMB in billion)
2012     10.51
2013     12.60
2014     14.97
2015     18.38
2016     23.40
2017F     26.21
2018F     29.36
2019F     32.88
2020F     36.83
2021F     41.24
2012-2016 CAGR     22.2%
2017-2021 CAGR     12.0%

 

Source: the CRI report

    

Industry Chain of China’s Online Adult Academic Education 

 

 

Source: the CRI report

  

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Analysis of China’s B2B2C Service

 

Service models in China’s online adult education sector include “Business to Business” (“B2B”), “Business to Consumer” (“B2C”), “Business to Business to Consumer” (“B2BC2C”), “Online to Offline” (“O2O”) and “Consumer to Consumer” (“C2C”).

 

Most companies that operate in the online self-taught education sector have adopted the B2B2C service model. B2B2C emerged in China in 2010 and was developed to integrate online education, examination and evaluation into one platform. This service is only offered in several regions in China. Each college that uses this service must be approved by the provincial education examination authority that has jurisdictional authority over such college. The Chinese government is implementing policies to optimize educational resources, and according to CRI the B2B2C service model will remain widespread to in the online self-taught education sector in the future.

 

According to the CRI report, the market size of the B2B2C service model has been fast-growing, with a CAGR of 79.4% from 2012 to 2016. This growth rate is expected to decline, as the CAGR is expected to remain steady (around 50%) between 2017 to 2021.

    

China’s B2B2C Service Market Size, 2012-2021

 

Year   Market Size (RMB in million)
2012     52.5
2013     130.5
2014     272.7
2015     393.9
2016     543.3
2017F     815.0
2018F     1,222.4
2019F     1,833.6
2020F     2,750.5
2021F     4,125.7
2012-2016 CAGR     79.4%
2017-2021 CAGR     50.0%

 

Source: the CRI report

  

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Competition Landscape

 

According to the CRI report, there were less than 100 companies providing B2B2C services as of the end of September 2017. Annual revenues of most of these businesses are low because they are limited to certain provinces. The number of such businesses is also small because of the high barriers of entry in this industry, such as:

 

  Brand Awareness and Subscribers: a company that provides B2B2C services depends on brand awareness and a customer base to sustain its business. If it lacks either, it will be less likely to attract new customers.

 

Resources of Universities and Colleges: it is necessary for online education companies to cooperate with authorized universities and colleges in China in order to operate in the B2B2C sector. It is difficult for new entrants in China to establish cooperative relationships with universities and colleges.

 

TOP 5 COMPANIES OPERATING IN CHINA’S B2B2C SECTOR

 

Ranking   Name   Online Self-taught Education B2B2C
Business in China in 2016
        Revenue (RMB in million)   Market Share  
1   Beijing Huaxia Dadi Distance Learning Services Co., Ltd.   29.96     5.51%
2   China Distance Education Holdings Ltd.   12.10     2.23%
3   Beijing Open Distance Education Center Co., Ltd.   10.60     1.95%
4   ChinaEdu Technology Development Co., Ltd.   9.25     1.70%
5   Beijing Sunlands Online Education and Technology Co., Ltd.   8.93     1.64%

 

Sources: the CRI report

 

With respect to companies using the B2B2C service model, Beijing Distance Learning has a much higher market share than that of its competitors. Beijing Distance Learning is a pioneer and leader in this sector.

  

Development Environment

 

The Education Level of the Average Chinese Person is Low

 

According to the statistics provided by the National Bureau of Statistics of China, the number of college graduates in China (including junior college) was 170.93 million, accounting for only 16% of China’s population in 2015. Globally speaking, this rate is very low, so there is great potential for the self-taught education market to grow in China.

  

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Fast Growth of Internet and Mobile Internet Subscribers in China

 

According to the CNNIC report, as of June 30, 2017, the number of China’s internet subscribers and mobile internet subscribers reached 751 million and 724 million, respectively. The popularity of the Internet is conducive to the development of online education. As use of the Internet in China grows, this will facilitate development of the online education industry.

 

Number of Internet and Mobile Internet Subscribers in China, 2012-2017 (units in millions)

  

    Dec. 2012     Dec. 2013     Jun. 2014     Jun. 2015     Dec. 2016     Jun. 2017  
Internet Subscribers     564       618       632       668       731       751  
Mobile Internet Subscribers     420       500       527       594       695       724  

 

Source: the CRI report

 

Number of Regions and Colleges Approved to Operate B2B2C services in China

 

According to the CRI report, 16 out of 31 provinces were approved to operate B2B2C services in China by September 2017. The market has potential to expand. The number of universities and colleges entering the B2B2C sector increased from 7 in September 2010 to 106 in September 2017, representing a fast growth rate.

 

Number of Universities and Colleges That Currently Offer B2B2C Services in China, 2010-2017

 

   

Source: the CRI report

  

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Supporting Polices from Government

 

Since 1999, China’s Ministry of Education approved 68 universities and colleges to launch long distance education. These universities and colleges were approved to operate academic and non-academic education businesses through modern communication networks. Modern distance education has become a major part of China’s higher education industry. It may cause a paradigm shift in China’s education system and lead to China having a more well-educated society. In 2015, the number of college graduates with online degrees reached 1.8 million representing 24% of the total number of college graduates, which was 7.49 million in 2015.

 

Opportunities and Challenges

 

Driving Forces and Opportunities

 

Cost and Technology Advantages: Universities and colleges are not required to invest in online platforms through the B2B2C service. Recruiting and daily management of students and online courses are maintained by third party platform suppliers. This convenience attracts more universities and colleges to our market.

 

Demand for Education Degrees from Recruiting Market: Companies seek employees with higher education degree as the economy and society develops. The enrollment requirements of self-taught examinations are low but the social recognition is high so the market is full of potential.

 

Promotion of “Internet Plus”: The Chinese government’s development and promotion of its “Internet Plus” policy has improved cloud service technology in China, resulting in greater efficiencies in the online education industry, such as the improvement of the online grading systems used by companies in this industry.

  

Elimination of Tier III Universities and Colleges: Since June 2015, the Chinese provincial governments have gradually eliminated the tier III category of universities and colleges and integrate them into the tier II category, which require students to obtain a higher score on their college entrance examinations. This may cause college acceptance rates to decline, as students with lower scores that would have been able to attend college prior to the elimination of the tier III category may no longer have the opportunity to do so. Consequently, more students may turn to the self-taught examination market in order to continue their education.

 

· Internet Use: The number of Internet subscribers, especially mobile Internet subscribers, is increasing daily, which benefits companies that provide B2B2C services.

 

Working Professionals’ Large Demand for A Second Education Degree: Certain majors are more popular with students than others. According to the statistics provided by the Ministry of Education of the PRC, the total number of graduates from the most popular 10 majors offered by universities and colleges in China, including accounting and law, was approximately 1.195 million, accounting for 15.7% of the number of all such graduates in 2016. The number of graduates majoring in each of the following majors (which also rank in the top 10 most popular majors in China) exceeded 100,000 in 2016: accounting, English, art design, civil engineering, computer science and technology (. Many graduates take jobs in areas that are different from the majors they studied. Some graduates may find their true interest after they get some working experience. Therefore, many people are eager to get a second degree through self-taught examinations in order to gain job promotions and salary improvement in China. We believe that due to this, the potential for the self-taught education market is huge.

 

  Online Courses by Qualified Teachers: Online self-taught education provides more opportunities for students to communicate with qualified teachers. Offline tutorial agencies for self-taught examinations are limited in teacher resources. It is very difficult for students to communicate with qualified teachers. Even though they provide such opportunities; the price may be very high. Online self-taught education guarantees higher coaching qualities through recording and replaying videos of qualified teachers, as well as the low cost to students.

   

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Challenges for the Industry

 

Besides the college entrance examination and self-taught examination, there are other ways to enter college or obtain junior college courses, e.g., by taking adult college entrance examinations and correspondence education. Once a person chooses the self-taught examination as the way to gain the education degree, the other ways lose the customer. Apparently, there is certain competition among them.

   

The ability of Chinese families to pay for education has been growing as China’s disposable income per capita increases. More high-income families choose to study overseas over the college entrance examination, which may reduce the number of persons choosing self-taught examinations.

 

The cost of marketing and advertising is continuously increasing so businesses in this industry may encounter the risk of rising customer acquisition costs.

 

Key Factors for Success in China’s Online Self-taught Education B2B2C Service Market

 

Public Praise and Brand Awareness

 

Beijing Distance Learning had fewer than 100 competitors in the B2B2C service market in September 2017. Consumers will choose proper companies through comparison of public praise and brands. Through an online search conducted in September 2017, CRI found no complaints about Beijing Distance Learning and that customer satisfaction was very high. However, some of Beijing Distance Learning’s competitors have experienced a high number of complaints, which drive potential consumers to choose our company over others.

 

Cooperation with Several Universities and Colleges

 

The more universities and college with whom we cooperate, the more options we can provide to our customers and the more customers we may gain.

 

Excellent Course Development Capacity

 

Businesses can provide more online courses for consumers and attract more customers if they are capable of course development.

 

Forceful Marketing and Promotion

 

Businesses that market and promote their services (whether through online and traditional channels) have the ability to target more potential consumers.

 

Excellent Human Resources

 

Businesses can succeed in the market because of excellent talents in operation, management, IT technology, course design, marketing, etc.

  

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Prospect of Online Education Industry in China

 

B2B2C service market

 

Our business is still in an early stage. Presently, there is a limited number of universities and colleges that are authorized to provide online self-taught education B2B2C services. We believe that our services will be gradually accepted by more universities and colleges between 2017 to 2021 and that the market space is huge.

 

Adult college entrance examination - B2B2C service market

 

From the education policies of the Chinese government, the adult college entrance examination tutorial business will transfer from offline classrooms to online learning including the B2B2C service in the future. Obviously, the market is full of opportunities.

 

B2C service market

 

Our B2C service has been operating longer than our B2B2C business, and the B2C sector is more mature. However, we have not marketed this business as much as our B2B2C business. There remains a large number of self-taught students who prefer offline classrooms to online learning. Online education companies can enlarge the market size if they can promote those students to online education through the B2C service in the future.

 

Online adult non-academic education service market

 

Adult non-academic education includes vocational skill training, art training and living skill training ( i.e. , classes that teach students how to cook). Our target consumer group mainly includes students in vocational and technical schools and working staff. We believe that China’s human resource market is in need of individuals with a more sophisticated skill set as China’s economy continues to develop. Students that use this service are able to attend courses through online education platforms after school. Working staff that use this service can improve their interpersonal skills and salary range and attend courses though such platforms after work.

 

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BUSINESS

 

Overview

 

We are a provider of online exam preparation services and related technology solutions as well as a producer of online training course materials in China and have been in operation for nearly 17 years. We develop our own online education materials that are offered through the cloud and that can be used for a wide range of purposes, such as standard examination preparation, professional training and interactive programs for educational purposes other than exam preparation. We also produce thousands of online classes. Our services not only include development of online education platforms and online course materials but also includes comprehensive cloud service for online education and exam preparation training.

 

Our Business

 

We currently offer online education services and technology research & development services. Our online education services currently comprises Online Education Cloud Services and Online Training Services.

 

Online Education Cloud Service (“B2B2C”)

 

We provide online education platforms to institutions, such as universities and training institutions, and online course development service companies. Our teachers are well regarded and recommended by our clients, which include universities and academic institutions. Through our product development team, we interview and enlist teachers who we use to record teaching sessions. In return, we provide fixed compensation to teachers. We have developed three separate types of B2B2C platforms: a self-study examination platform, a continuing education platform and a non-diploma training platform (which allows students to enroll in courses for college credit). These platforms are available both online and via mobile app that we design for each of our clients. Currently, we are primarily focused on providing clients with B2B2C services relating to self-study examinations, which are a set of standard national examinations necessary to obtain college degrees in China. We have offered such services since September 2009. We also entered into the adult education field and commenced offering continuing education platforms in late 2016. Currently, over 700 courses are available on such platforms and approximately 60 universities and education institutions are testing our platforms. We commenced offering our non-diploma training platforms in March 2017. We currently provide services in ten provinces in China and believe that we are the leading service provider in this market.

 

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The flow chart below shows our B2B2C service:

 

 

  Self-Study Examination Platform

 

This platform is a cloud based education system for universities, government examination officials as well as students who would like obtain college degrees through self-taught higher education examination. We created customized homepage systems for each university that uses our platform. Our system allows the university management to import their student data into the data base of our platform and will generate accounts for each specific student. Students can login the platform, choose to participate in recorded or live courses that are available on the platform. The platform will grant government examination officials the authority to monitor the learning process of each student. The platform can record the student’s learning data, giving each student a score for evaluation of the performance of each course for use by the university and government officials.

 

  Continuing Education Platform

 

This platform is also cloud based and targets college students and students aiming to complete adult higher education. Similar to the self-study examination platform, this platform offers customized interface for each university using the platform where the school management can integrate their student data into the platform. Students can log in and take courses. The system will keep track of the students’ leaning data and generate scores based on students’ performance for school evaluation. What’s different from the self-study examination platform, this platform offers additional teaching administrative functions, including student profile management, tuition payment, management of different campus, course arrangement as well as statistical screening management, etc.

 

  Non-Diploma Training Platform

 

This platform is cloud based as well, but services training institutions and individual students. A large number of traditional face-to-face training institutions can use this platform to provide their training courses online without overspending on personnel, servers and online training platform. Similar to the other systems, the training institutions have their own interfaces and can create accounts for their students to take courses on the platform. In addition, the platform also provides a large number of online educational operations to the training institutions, including the management of their own courses, and pricing, promotion, enrollment and payment functions.

 

For all the three platforms, we will be paid by the schools or training institutions based on the number of courses taken by their students.

 

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Online Training Service (“B2C”)

 

We provide online training and examination preparation services directly to students for a fee. We have provided this service since 2000, however, due to limited marketing efforts, the revenue generated from this service has been limited. Beginning in early 2017, we began to increase our marketing efforts for our B2C service and our revenue from this service increased 50% in the first half of 2017 compared to the first half of 2016. With the increased demand for continuing education, we plan to expand our B2C service. In connection with our B2C service, we provide an online cloud education platform targeting end users, which is available both online and via the mobile app we design for each program. We can also license this platform to other offline education and training institutions for them to offer online services, and to manage their online courses and online users. Students that use this service are primarily college students and students preparing for the self-study examination. In the last two years, we have provided on average approximately 350,000 courses to students per year. The flow chart below illustrates our B2C services:

 

 

 

Technology Research & Development Services

 

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Another major aspect of our business is dedicated to developing and maintaining online education platforms and online courses for our clients, comprising universities, government agencies and private clients such as publishers. We also provide consulting, maintenance and updating services relating to online education programs we have developed for our clients. We have provided these services to our clients since Beijing Distance Learning commenced operations in 1999. Our largest clients in this segment are Shanghai World Publishing Co. and the State Intellectual Property Bureau Training Center. Pursuant to our agreements with Shanghai World Publishing Co., we develop and update platforms for its Electric Backpack program, an online interactive teaching program for elementary and middle school students in China. We have been providing online course development services to the State Intellectual Property Bureau Training Center since 2002. Our services to the center include training course recording, editing and posting as well as platform maintenance and updating for a fixed fee agreed upon by both parties.

 

Our Strengths

 

We believe that the following competitive strengths contribute to, and will continue to reinforce, our success and leading market position in the online self-taught education industry in the PRC and differentiate us from our competitors:

 

  Education Cloud Platform Advantage . We are dedicated to the development of our education platforms and actual operations and is one of the companies with the longest history in the industry. Our platforms are constantly improved and upgraded and have been well recognized by its users for being comprehensive and easy to use.
     
  Leading Service Provider in Online Preparation of Self-Taught Examination . According to CRI, we are the leading provider and standards setter of online education service of self-study examination courses in the PRC and the first company in China that provides such services. The Company has over 700 online courses and provides services to over 100 universities and colleges across more than ten provinces in China.
     
 

Leading Service Provider in Online Adult Education . We launched our adult continue education platform in late 2016. There are approximately 20 schools that currently have service agreements with us and approximately 60 more that are testing our services. The platform has become well-known in the industry.

     
  Strong Brand Recognition with Nationwide Experience in Online Education . After many years in operation, our brand is well recognized. “Huaxiadadi华夏大地” is an online education course brand in PRC. We kept improving our course designs over the years. With an experienced and cooperative team, we are able to provide quality services and exceed customer expectations. In 2015, we were awarded “2015 Chinese Brand Influence Educational Institution” by Sina Education. In 2016, we were recognized as “2016 Famous Online Education Brand” by Tencent Echo China. In 2017, we were awarded “2017 China Internet Education Brand Enterprise” by the Online Study magazine of China Long-Distance Education Magazine and China Online Education Leaders Association.
     
  Technology Advantage . We have dedicated considerable resources to our technology and product development efforts. More than 50% of our employees are in our technology and product development departments and are very experienced with research and development. 30% of these employees hold master or doctor degrees. In addition, we have 22 registered copyrights and have accumulated close to two decade’s experience.

 

Our Strategies

 

Our goal is to strengthen our position as a leading provider of online self-taught courses in PRC by pursuing the following business strategies:

 

  In response to the increased demand from over 3,000 universities in China, we plan to expand our client base for our B2B2C service.
     
  We continue to improve on the breadth and quality of our online courses, which are key components for our B2B2C and B2C services.

 

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  In addition to cloud services, we intend to provide offline training and testing services to supplement the online services provided to universities and colleges based on their demand.
     
  While implementing our national expansion strategy, we intend to acquire or set up local training companies to localize our B2B2C service. We intend to continue to increase our research and development department.
     
  We intend to expand internationally by setting up branches or acquiring training institutions in North America and also leveraging international education resources to operations in China.

 

Our Mission, Vision and Values

 

Our mission is to improve education in China. Recognizing the unmet demand for higher education and the potential social and commercial value of private education, we started our business by providing education services focusing on long-distance learning. Our vision is to utilize our technology advantages accumulated over our nearly two-decade operations to become the best education technology company in China. We believe the core of distance-learning is service – customer satisfaction and innovation are critical to our success and we strive to promote and adhere to these values.

 

Steps to Improve Our Performance

 

Recruitment of Professional Personnel

 

We believe that our existing products and services with technological development of our online platform and quality improvement of our online courses will enable us to capture increased market demands for online education. With these opportunities we are able to provide, we plan to expand our team by recruiting professionals in various fields. In recent years, supply and demand of professionals tend to be stable, as long as we can provide development opportunities, we are able to hire more outstanding personnel, such as technology development professionals, online course producers, teaching professionals and senior management expertise. As our team keeps growing, we expect to be able to improve the quality of our courses, negotiate and cooperate with more schools, achieve more revenue and better financial results.

 

Implementation of “Provincial Partnership Model”

 

There are 32 provinces in China and the population in each province varies from tens of millions to hundreds of millions. We are currently implementing a “Provincial Partnership Model” under which we establish subsidiaries in different provinces. Our local partners in each province, who are also the shareholders of each local subsidiary, can develop business not only with the reputation, platform and courses of the Company, but also with their own capability and deep understanding of local education market. We have founded subsidiaries in Hunan, Hubei, Jiangsu and Guizhou Province in the past two fiscal years and the incorporation of Jiangxi subsidiary is in process. We believe that this “Provincial Partnership Model” will create more revenue by motivating our partners of subsidiaries to explore potential market and provide better services to local customers. In addition, “Provincial Partnership Model” will decrease the Company’s payroll and travel expenses by hiring local staff instead of recruiting staff in Beijing, where our headquarters is located.

 

Expansion to Online Non-Diploma Courses

 

As of now, most of our online courses are provided to self-taught learners and college students pursuing higher education degrees. We are also exploring continuing education and professional development courses for qualification certificates. For example, we have completed development of online courses for the “National Teacher Certificate Examination”. There are a very limited amount of institutions developing courses for the “National Teacher Certificate Examination” in China, especially promoting these courses through B2B2C model like us. Therefore, competition in this field is not strong. On the other hand, our online education platform was successfully built and there will be much less cost in the upcoming periods. As such, our gross profit is more likely to increase with the development of other professional development courses.

 

Continuous Expansion to Online Non-Diploma Education Courses and Adult Continuing Higher Education Courses

 

  Online non-diploma education courses

 

As of now, most of our online courses are provided to self-taught learners and college students pursuing higher education degrees. We are also exploring non-diploma education courses and professional development courses for qualification certificates. For example, we have completed development of online courses for the “National Teacher Certificate Examination”. There are a very limited amount of institutions developing courses for the “National Teacher Certificate Examination” in China, especially promoting these courses through B2B2C model like us. Therefore, competition in this field is not strong. On the other hand, our online education platform was successfully built and there will be much less cost in the upcoming periods. As such, our gross profit is more likely to increase with the development of other professional development courses.

 

  Online adult continuing higher education courses

 

Adult higher education examination is an alternative way to obtain higher education for adults and an important part of China’s higher education system. According to the statistics from China Research and Intelligence www.shcri.com , there were 288 universities and colleges offering continuing education services, mainly adopting face-to-face teaching at present. There is barely B2B2C service provider for adult continuing higher education courses and market size of China’s online continuing higher education is relatively small. The market size of online continuing higher education increased from RMB 7.85 billion ($1.2 billion as of September 30, 2017) in 2012 to RMB 17.8 billion ($2.7 billion as of September 30, 2017) in 2016, representing an increase of 22.71% from 2012 to 2016.

 

    2012     2013     2014     2015     2016  
Market Size (RMB, billion)     7.85       9.91       13.68       15.24       17.80  

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We entered into the adult education field and launched our continuing education platforms in late 2016. Currently, there are over 60 universities and education institutions are in trial period of using our platforms. We expect revenue from such programs to be generated starting the first half of fiscal year 2019. Given the unmet market demands for this type of services as well as the PRC government’s promotion of the “Internet Plus” model, China’s institutions of higher education, including our existing and potential clients, will likely increase their use of adult continuing higher education cloud platform to standardize teaching process and monitor learning process. As such, we expect our revenue from services for online adult continuing education will increase in the long term.

 

Key Aspects of Our Operations

 

Sales and Marketing

 

We market our services through both offline and online channels. Since our inception, the bulk of our marketing is done through traditional offline channels. Our sales representative visit our targeted potential customers, such as universities and schools, and then schedule meetings and demos for these potential clients to learn about our services and for us to learn about the specific needs of each potential client. We also develop customers through referrals from existing clients and business partners. We also attend industry conferences to promote our brand and further expand our client base. We started online marketing in 2004, including search engine marketing and mobile app advertising.

 

Fees

 

Fees for B2B2C business : we provide platform to universities or schools for free but charge students a fee of RMB 35 to 100 per class, depending upon the course.

 

Fees for our B2C services : we charge fees based on the specific training program. Low end programs only include online courses and we charge RMB 50 to 180 per class for this type of programs. High end programs include both online courses and in person training. We charge RMB 200 to 600 per course for this type of programs.

 

Technical services fees : we charge service fees based on our development and maintenance costs plus a 30% profit. The fee for each client varies, depending upon the specific program design as well as our costs for providing the services, primarily including human resources and computer hardware and software related expenses. Such fees are set forth in our agreements with such clients.

 

Customers

 

Our customers for our online education services include universities, academic institutions, government agencies, private clients such as publishers as well as students preparing for various types of standard examination. For the B2B2C service, our customers are universities and academic institutions in ten provinces in the PRC such as Hunan, Hubei, Jiangsu, Fujian and Anhui. Our top customers for the B2B2C service include Jiangxi Normal University, Jiangxi University of Science and Technology, Fujian Education Institution and Nanchang University. Our customers for the B2C service are students located nationwide. For our technology services business, customers include government agencies and private companies such as publishers. Our largest clients of our technology services are Shanghai World Publishing Co. and the State Intellectual Property Bureau Training Center.

 

In terms of geographic areas, all of our customers are currently based in the PRC. We plan to expand our client base internationally as we continue to grow our business.

 

Material Contracts

 

Below is a summary of all material contracts to which we are a party dated within the preceding two years from the date hereof:

 

In addition to the series of variable interest entity agreements discussed under “Corporate History and Structure - Contractual Arrangements,” we have entered into the following material agreements.

 

Technology Services Agreements with Training Center of the State Intellectual Property Bureau

 

On December 15, 2016, we entered into a technology service for its remote training platform with Training Center of the State Intellectual Property Bureau (the “Training Center”). Pursuant to the agreement, we provide technology support, development and platform maintenance services, including software upgrading, new feature development and technological adjustments relating to new course posting. Our services fee is RMB 143,000 (approximately $21,696), 60% of which is payable within 30 days of agreement signing and 40% of which is payable upon full performance of the agreement. The term is the agreement is from December 15, 2016 to December 14, 2017. Pursuant to the agreement, the Training Center owns intellectual property related to system and data while both parties jointly own intellectual property related to software and source code. The agreement also contains customary confidentiality provision.

 

Technology Development and Platform Maintenance Service Agreements with World Publishing (Shanghai) Co., Ltd.

 

As part of our long term business relationship with World Publishing (Shanghai) Co., Ltd. (“Publishing Corp.”) in relation to its CloudBag program, we entered into a 5-year Technology Development Agreement with the Publishing Corp., effective July 21, 2015. Pursuant to the agreement, we develop cloud platform for the ClouBad program, including development of source data, interactive education program and related mobile application as well as updating programs developed in previous CloudBag projects. Our service fee is RMB 1.58 million (approximately $239,721), payable in three installments. We own intellectual property rights in connection with services provided under the agreement. The agreement also contains customary confidentiality provision.

 

We also entered into a Platform Maintenance Service Agreement with Publishing Corp. in June 2017. Pursuant to the agreement, we provide technical maintenance services to Publishing Corp. and its partner schools for the CloudBag project, including platform maintenance, technical training at partner schools for an one-year term starting from January 1, 2017 as well as hardware support for the platform for the period from June 15, 2017 to December 31, 2017. We are entitled to a service fee of RMB 550,000 (approximately $83,447).

 

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Partnership Agreements with Jiangxi Normal University and Hunan Agricultural University

 

We have entered into 5-year partnership agreements in relation to preparation of Self-Study Examination with Jiangxi Normal University and Hunan Agricultural University, each a major customer for our B2B2C services. Pursuant to each of these agreements, we have agreed to development, maintenance, security and technical consulting services in relation to self-study examination preparation platform and online courses. Each university will have the right to give students access to the platform and online courses. Under our partnership agreement with Jiangxi Normal University, we are entitled to a service fee of RMB 100 (approximately $15.2) per course for online courses we develop and a service fee of 20% to 30% of actual fee charged by the university, depending on how many times the course has been used by students. Under our partnership agreement with Hunan Agricultural University, we are entitled to a service fee of RMB 90/course. We own intellectual property rights in connection with the platform and online courses. Each partnership agreement contains customary confidentiality provisions.

 

Platform and Online Course Development Agreement with Zhengqing Heya Education Technology (Beijing) Co., Limited

 

In April 2017, we entered into a Platform and Online Course Development Agreement with Zhengqing Heya Education Technology (Beijing) Co., Limited, an education service company based in China (“Zhengqing Heya”). Pursuant to the agreement, we provide online training platform development services for a service fee of RMB 1.7 million (approximately $ 204,053), payable in two installments. The intellectual property rights in connection with the platform are jointly owned by the parties to the agreement. The agreement also contains customary confidentiality provision and terminates when both parties have performed their obligations thereunder.

 

Technology

 

Our Proprietary Platform

 

  1. Development Strategy: We have developed proprietary online education platforms which we have designed and updated based on the needs of our customers. In addition to traditional training features, we added additional features to facilitate intellectual studies. We own relatively mature technologies for platform development and can design specific platforms based on such technologies according to the commercial needs of our customers. We believe that this approach saves our customers’ costs, reduces development period and allows us to quickly respond to market demands.
     
  2. Purposes and Advantages: The primary purpose of our platforms is for our own business, namely training programs for students preparing for various examinations. Our platform is compatible with Windows, H5, Android and iOs systems. Our institution customers can develop their own mobile app based on their own data management capacity and sales system.
     
  3. Platform Security: We have adopted security policies and measures, including encryption technology, to protect our proprietary data and customer information, and we back up our database, including customer data, every day.

 

All of our servers and routers, including backup servers, are currently hosted by third-party service providers in Beijing, Jiujiang and Wuhan in China. We back up our databases daily. Our IT department regularly monitors the performance of our websites, mobile apps and technology infrastructure to enable us to respond quickly to potential problems. We have not experienced any major problems in our network infrastructure. In addition, we also engaged well known cloud service provider to have a cloud host to provide online services, and cloud storage and cloud-on-demand services.

 

Research and Development

 

Our technology team also dedicate part of their time to our research and development efforts. Our technology team has experience in the development, design, operation and maintenance of platform products, servers and mobile apps. Most of our team members have 5 years or more of experience, 30% of our team members have master’s or doctor’s degree and certain team members have work experience at Fortune 500 companies. Our research and development efforts are closely tied to the market. We adjust our product development and services based on market conditions and government policies. The focuses of our research and development efforts include improving our online training data collection, programs focused on intelligent study, education resource integration and technology service.

 

Intellectual Property

 

We currently have 26 software registrations for our online course delivery and examination preparation programs and related mobile applications. We have also registered 14 trademarks with the China Trademark Office and an additional 7 trademark applications are currently pending. We, however, cannot assure that all of our trademark applications will be successful.

  

Employees

 

We are headquartered in Beijing, where most of our senior management and technology teams are based. We also host part of our general and administrative personnel, content development professionals and sales and marketing staff in our Beijing offices. The rest of our sales and marketing staff are based in Hunan, Shandong, and Jiangsu. Our offices in Hunan and Jiangxi host our teacher assistance department, technology team and general and administrative personnel.

 

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As of March 31, 2017, 2016 and 2015, we had 80, 62 and 66 full-time employees, respectively, and two, three and two part-time employees, respectively. As of March 31, 2017, 65 of these employees are based in our headquarters in Beijing and five are based on other cities in the PRC. The table below breaks down the full-time personnel of the Company by function:

 

Function   Number of Employees     % of Total  
Management     9       11.5 %
Technology and Development     27       34.6 %
Teaching Assistance     13       16.7 %
Sales and Marketing     7       9.0 %
Product Development and Customer Service     13       16.7 %
General and Administrative     9       11.5 %
Total     78       100.00 %

 

We enter into employment contracts with our full-time employees. For our full-time employees in China, we also enter into stand-alone confidentiality and non-compete agreements with them. In addition to salaries and benefits, we provide performance-based bonuses for our full-time employees and commission-based compensation for our sales and marketing force.

 

Foreign teachers delivering paid lessons on our platform are generally not our full-time employees. We enter into service contracts with such teachers, and pay service fees to them based on the number of lessons they teach and their teaching performance.

 

As required by regulations in China, we participate in various employee social security plans that are organized by municipal and provincial governments for our PRC-based full-time employees, including pension, unemployment insurance, childbirth insurance, work-related injury insurance, medical insurance and housing insurance. We are required under PRC law to make contributions from time to time to employee benefit plans for our PRC-based full-time employees at specified percentages of the salaries, bonuses and certain allowances of such employees, up to a maximum amount specified by the local governments in China.

 

Our employees are not covered by any collective bargaining agreement. We believe that we maintain a good working relationship with our employees, and we have not experienced any significant labor disputes.

 

Seasonality

 

The current operations of the Company have demonstrated seasonality. There are major examinations scheduled in April and October of each year and other examinations scheduled in January and July of each year. As a result, the number of students enrolled in our programs is the highest within the two months period prior to each exam. In addition, Adult Continue Education business slows down during the summer and winter breaks of our partner schools. See “Risk Factor—Risks Related to Our Business and Industry—Our results of operations are subject to seasonal fluctuations.”

 

Competition

 

With respect to the B2B2C service, we believe that we are a leading service provider in the self-study online training area. Our primary competitors are four other companies providing similar types of programs, including Beijing Shangde Online Education Technology Co., Ltd., Suzhou Qingying Feifan Software Technology Co., Ltd., Beijing Aopeng Long Distance Education Center Co., Ltd. and Hongcheng Technology Development Co. but we have competitive advantages in terms of geographic coverage, the number of partner schools, the number of courses and our years of operating experience in the industry. With respect to the B2C service, we have two major competitors in the PRC, Beijing Shangde Online Education Technology Co. and Bejing Dongda Zhengbao Technology Co., Ltd. Our competitive advantages with respect to this service are our long operating history, our brand recognition and the number and types of courses that we offer. For the B2C service, we compete with traditional offline training institutions as well as well as other companies that provide online training services. In terms of our technology service, we primarily face competition from Shenzhen Youxuepai World Education Development Co., Ltd, Teewon Digital Media Technology Co., Ltd., Founder Tech and Hanwon Technology. Our current client base strongly relies on these services. We face competition from other online and mobile platforms or internet companies that plan to expand their business into the online education space but we believe our long established relationship with our clients, experienced technology team and many years’ experience will provide us an edge in competing with these market new entrants.

 

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Facilities

 

We lease executive office space in Beijing of an aggregate of 600 square meters. These facilities currently accommodate our management headquarters, as well as part of our sales and marketing, product development and general and administrative activities.

 

As of the date of this prospectus, we have also leased an aggregate of approximately 789 square meters office space in Beijing, Shanghai, Jiangsu, Hubei, and Guizhou. A summary of our leased properties as of the date of this prospectus is shown below:

 

Location   Space
(in square
meters)
    Address   Use
Beijing     600     Room 503A and 505, Jinkai Building, No. 1 Shengbei Road, Economic Development Zone, Daxing District, Beijing, China   Office
Shanghai     21.34     Room 602-23, Building 1, No.38 Debao Road, Free Trade Zone, Shanghai, China   Office
Nanjing, Jiangsu     20     Room 704, Building 2, No. 61 Jianning Road, Nanjin, Jiangsu.   Office
Wuhan, Hubei     80     Room 12-6, Building 2A, No. 8 Daxueyuan Road, Hongshan District, Wuhan, Hubei.   Office
Guiyang, Guizhou     67.45     No. 20, 13 th Floor, Unit 1, Building 1, Zone M, Pengjiawan Huaguoyuan, Nanming District, Guiyang, Guizhou, China   Office

 

We own an office space of 52.08 square meters located at Room 917, Building B1, No. 568 Queyuan Road, Tianxin District, Changsha, Hunan, which is where our Hunan office is based.

 

We also entered into a purchase agreement to acquire office space of 166.6 square meters located at Room 12-6, Building 2A, No. 8 Daxueyuan Road, Hongshan District, Wuhan, Hubei. The total purchase price is RMB 1.08 million (approximately $0.17 million). The property is still under construction. We expect to receive ownership certificate once the property is delivered to us and certain registration with the local government is completed.

 

Other than our office building in Hunan, we lease all of the facilities that we currently occupy from independent third parties. We believe that the facilities that we currently lease are adequate to meet our needs for the foreseeable future, and we believe that we will be able to obtain adequate facilities, principally through leasing of additional properties, to accommodate our future expansion plans.

 

Insurance

 

We currently do not have any insurance coverage other than participation in various government statutory social security plans, including a pension contribution plan, a medical insurance plan, an unemployment insurance plan, a work-related injury insurance plan, a maternity insurance plan and a housing provident fund.

 

Legal Proceedings

 

From time to time, we may in the future become a party to various legal or administrative proceedings arising in the ordinary course of our business, including actions with respect to intellectual property infringement, violation of third-party licenses or other rights, breach of contract and labor and employment claims. We are currently not a party to, and we are not aware of any threat of, any legal or administrative proceedings that, in the opinion of our management, are likely to have any material and adverse effect on our business, financial condition, cash-flow or results of operations.

 

Regulations

 

This section sets forth a summary of the most significant laws, rules and regulations that affect our business and operations.

 

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Regulations Relating to Foreign Investment

 

Laws of Wholly foreign-owned Enterprise

 

The establishment procedures, examination and approval procedures, registered capital requirement, foreign exchange restriction, accounting practices, taxation and labor matters of a wholly foreign-owned enterprise are governed by the Wholly Foreign-owned Enterprise Law of China, or the Whole Foreign-owned Enterprise Law, which was promulgated by the Standing Committee of the National People’s Congress, or NPCSC, and effective as of April 12, 1986, amended on October 31, 2000 and September 3, 2016 and the Implementation Rules for the Wholly Foreign-owned Enterprise Law, which was promulgated by the Ministry of Foreign Economic Relations and Trade on December 12,1990 and amended on April 12,2001 and February 19, 2014 by the State Council. According to the Wholly Foreign-owned Enterprise Law and its Implementation Rules, the establishment of wholly foreign-owned enterprises shall be subject to the examination and approval by the Ministry of Commerce, or MOFCOM, or the Chinese Government level of province, autonomous region, municipality directly under the central Chinese Government, municipality separately listed on the State plan or special economic zone, as authorized by the State Council, which will issue a certificate of approval in respect thereof. Where the establishment of wholly foreign-owned enterprises does not involve the implementation of special access administrative measures prescribed by the State, the establishment of wholly foreign-owned enterprises are subject to record-filing management. Profits and other legal rights and interests obtained by foreign investors in China shall be protected by Chinese laws, and legitimate profits, other lawful income and post-liquidation funds received by foreign investors from the wholly foreign-owned enterprises may be remitted abroad.

 

The Guidance Catalog of Industries for Foreign Investment

 

Investment activities in the PRC by foreign investors shall comply with the Guidance Catalog of Industries for Foreign Investment, or the Catalog, which was promulgated and is amended from time to time by MOFCOM, and the National Development and Reform Commission, or NDRC. The Catalog divides industries into three categories: encouraged foreign invested industries, restricted foreign invested industries and prohibited foreign invested industries. Any industry not listed in the Catalog or any encouraged foreign invested industry listed in the Catalog is a permitted industry. Some restricted industries are limited to equity or contractual joint ventures, while in some cases Chinese partners are required to hold the majority interests in such joint ventures. Foreign investors are not allowed to invest in industries in the prohibited category. According to the latest Catalog amended in June 2017, or the 2017 Catalog, the provision of value-added telecommunications services falls in the restricted category and the percentage of foreign ownership cannot exceed 50% (except for e-commence).

 

The M&A Rules

 

The Provisions Regarding Mergers and Acquisitions of Domestic Enterprises by Foreign Investors, or the M&A Rules, was jointly promulgated by MOFCOM, China Securities Regulatory Commission, or CSRC, the State-owned Assets Supervision and Administration Commission of the State Council, State Administration of Taxation, State Administration of Industry and Commerce and State Administration of Foreign Exchange, or SAFE, on August 8, 2006 and became effective as of September 8, 2006, and were later amended on June 22, 2009. This M&A Rules governs among other things, the purchase and subscription by foreign investors of equity interests in a domestic enterprise, and the purchase and operation by foreign investors of the assets and business of a domestic enterprise. An offshore special purpose vehicle, or SPV, is defined under the M&A Rules as an offshore entity directly or indirectly controlled by Chinese individuals or enterprises for the purpose of an overseas listing, and the main assets of which are the rights and interests in affiliated domestic enterprises. Under the M&A Rules, if a SPV intends to merge with or acquire any domestic enterprise affiliated with such Chinese individuals or enterprises that control the SPV, the proposed merger or acquisition shall be submitted to the MOFCOM for approval. The M&A Rules also require a SPV to obtain an approval from the CSRC prior to the listing and trading of its securities on an overseas stock exchange.

 

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The Draft PRC Foreign Investment Law

 

The draft Foreign Investment Law specifically provides that entities established in China but “controlled” by foreign investors, such as via contracts or trust, will be treated as Foreign-invested enterprises, or FIEs, whereas foreign investment in China in the foreign investment restricted industries by a foreign investor may nonetheless apply for being, when approving market entry clearance by the foreign investment administration authority, treated as a PRC domestic investment if the foreign investor is determined by the foreign investment administration authority as being “controlled” by PRC entities and/or citizens. In this connection, “actual control” is broadly defined in the draft Foreign Investment Law to cover the following summarized categories: (i) holding 50% of more of the voting rights of the subject entity; (ii) holding less than 50% of the voting rights of the subject entity but having the power to secure at least 50% of the seats on the board or other equivalent decision making bodies, or having the voting power to materially influence the board, the shareholders’ meeting or other equivalent decision making bodies; or (iii) having the power to exert decisive influence, via contractual or trust arrangements, over the subject entity’s operations, financial matters or other key aspects of business operations. According to the draft Foreign Investment Law, VIEs would also be deemed as FIEs, if they are ultimately “controlled” by foreign investors, and be subject to restrictions on foreign investments. However, the draft Foreign Investment Law has not taken a position on what actions will be taken with respect to the existing companies with the “variable interest entity” structure, whether or not these companies are controlled by Chinese parties.

 

According to the Legislative Work Plan 2018 of the State Council published on March 2, 2018, the draft Foreign Investment Law will be submitted for deliberation by the Standing Committee of the National People’s Congress. It is still uncertain when the draft would be signed into law and whether the final version would have any substantial changes from this draft.

 

Regulations Relating to Value-added Telecommunications Services

 

Licenses for Value-Added Telecommunications Services

 

The State Council issued the Regulations on Telecommunications of China, or the Telecommunications Regulations, on September 25, 2000 which was amended on February 6, 2016, to regulate telecommunications activities in China. The Telecommunications Regulations divide the telecommunications services into two categories, namely “infrastructure telecommunications services” and “value-added telecommunications services.” Pursuant to the Telecommunications Regulations, operators of value-added telecommunications services must first obtain a Value-added Telecommunications Business Operating License, or VAT License, from the Ministry of Industry and Information Technology, or MIIT, or its provincial level counterparts. On July 3, 2017, the MIIT promulgated the Administrative Measures for the Licensing of Telecommunications Business, effective as of September 1, 2017, which sets forth more specific provisions regarding the types of licenses required to operate value-added telecommunications services, the qualifications and procedures for obtaining such licenses and the administration and supervision of such licenses.

 

According to the Catalog of Classification of Telecommunications Businesses effective from April 1, 2003, internet information services, also called internet content services, or ICP services, are deemed as a type of value-added telecommunications services. On December 28, 2015, the MIIT published a revised Catalog of Classification of Telecommunication Business, or the 2016 MIIT Catalog, which took effect on March 1, 2016. According to the 2016 MIIT Catalog, internet information services, which include information release and delivery services, information search and query services, information community platform services, information real-times interactive services, and information protection and processing services, continues to be classified as a category of value-added telecommunication services. The Administrative Measures on Internet Information Services, or ICP Measures, also promulgated by the PRC State Council on September 25, 2000 and amended on January 8, 2011, sets forth more specific rules on the provision of ICP services. According to ICP Measures, any company that engages in the provision of commercial ICP services shall obtain a sub-category VAT License for Internet Information Services, or ICP license, from the relevant government authorities before providing any commercial internet content services within the PRC, and when the ICP services involve areas of news, publication, education, medical treatment, health, pharmaceuticals and medical equipment, and if required by law or relevant regulations, specific approval from the respective regulatory authorities must be obtained prior to applying for the ICP License from the MIIT or its provincial level counterpart. Pursuant to the above mentioned regulations, “commercial ICP services” generally refers to provision of specific information content, online advertising, web page construction and other online application services through internet for profit making purpose.

 

Foreign Investment in Value-Added Telecommunication Services

 

The Regulations on Administration of Foreign-Invested Telecommunications Enterprises, or the FITE Regulations, which took effect on January 1, 2002 and amended on September 10, 2008 and February 6, 2016, are the key regulations that regulate foreign direct investment in telecommunications companies in China. The FITE Regulations stipulate that the foreign investor of a telecommunications enterprise is prohibited from holding more than 50% of the equity interest in a foreign-invested enterprise that provides value-added telecommunications services. In addition, for a foreign investor to acquire any equity interest in a business providing value-added telecommunications services in China, it must demonstrate a positive track record and experience in providing such services.        

 

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Regulations Relating to Private Education in the PRC

 

Education Law of the PRC

 

On March 18, 1995, the National People’s Congress of the PRC, or the NPC, enacted the Education Law of the PRC, or the Education Law, which was amended on August 27, 2009 and December 27, 2015. The Education Law provides that in principle, enterprises, social organizations and individuals are encouraged to establish and operate schools and other types of education institutions in accordance with PRC laws and regulations. Meanwhile, schools and other education institutions sponsored wholly or partially by government financial funds or donated assets remain prohibited from being established as for-profit organizations.

 

The Law for Promoting Private Education and the Implementation Rules for the Law for Promoting Private Education

 

The Law for Promoting Private Education of the PRC became effective on September 1, 2003 and the latest amendment was on November 7, 2016 which shall come into effect as of September 1, 2017. Under the Amendment, sponsors of private schools may choose to establish non-profit or for-profit private schools at their own discretion, while prior to the effectiveness of the Amendment, all private schools shall not be established for for-profit purposes. Nonetheless, school sponsors are not allowed to establish for-profit private schools that are engaged in compulsory education. In other words, the schools engaged in compulsory education should retain their non-profit status after the Amendment comes into force. The Amendment further establishes a new classification system for private schools to be classified by whether they are established and operated for profit-making purposes.

 

According to the Amendment, the key features of the aforesaid new classification system for private schools include the following: (i) sponsors of for-profit private schools are entitled to retain the profits and proceeds from the schools and the operation surplus may be allocated to the sponsors pursuant to the PRC Company Law and other relevant laws and regulations; (ii) sponsors of non-profit private schools are not entitled to the distribution of profits or proceed from the non-profit schools and all operation surplus of non-profit schools shall be used for the operation of the schools; (iii) for-profit private schools are entitled to set their own tuition and other miscellaneous fees without the need to seek prior approvals from or report to the relevant government authorities. The collection of fees by non-profit private schools, on the other hand, shall be regulated by the provincial, autonomous regional or municipal governments; (iv) private schools (for-profit and non-profit) may enjoy preferential tax treatments. Non-profit private schools will be entitled to the same tax benefits as public schools. Taxation policies for for-profit private schools after the Amendment taking effect are still unclear as more specific provisions are yet to be introduced; (v) where there is construction or expansion of a non-profit private school, the school may acquire the required land use rights in the form of allocation by the government as a preferential treatment. Where there is construction or expansion of a for-profit private school, the school may acquire the required land use rights by purchasing them from the government; (vi) the remaining assets of non-profit private schools after liquidation shall continue to be used for the operation of non-profit schools. The remaining assets of for-profit private schools shall be distributed to the sponsors in accordance with the PRC Company Law; and people’s governments at or above the county level may support private schools by subscribing to their services, provision of student loans and scholarships, and leases or transfers of unused state assets. The governments may further take such measures as government subsidies, bonus funds and incentives for donation in support of non-profit private schools. The Amendment became effective on September 1, 2017 and its impact on our operations is yet to be observed. As advised by Jingtian & Gongcheng, our PRC counsel, we do not believe that the Amendment will have material adverse impact on our current operations or contractual arrangements.

 

On December 30, 2016, the MOE, MCA, SAIC, the Ministry of Human Resources and Social Welfare and the State Commission Office of Public Sectors Reform jointly issued the Implementation Rules on the Classification Registration of Private Schools to reflect the new classification system for private schools as set out in the Amendment. Generally, if a private school established before promulgation of the Amendment chooses to register as a non-profit school, it shall amend its articles of association, continue its operation and complete the new registration process. If such private school chooses to register as a for-profit school, it shall conduct financial liquidation process, have the property rights of its assets such as lands, school buildings and net balance being authenticated by relevant government authorities, pay up relevant taxes, apply for a new Permit for Operating a Private School, re-register as for-profit schools and continue its operation. Specific provisions regarding the above registrations are yet to be introduced by people’s governments at the provincial level.

 

On December 30, 2016, the MOE, SAIC and the Ministry of Human Resources and Social Welfare jointly issued the Implementation Rules on the Supervision and Administration of For-profit Private Schools, pursuant to which the establishment, division, merger and other material changes of a for-profit private school shall first be approved by the education authorities or the authorities in charge of labor and social welfare, and then be registered with the competent branch of SAIC.

 

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Besides the Amendment and the above regulations, the other details of the operation requirement of non-profit schools and for-profit schools will further be provided in implementation regulations that are yet to be introduced: (i) the amendment to the Implementation Rules for the Law for Promoting Private Education of the PRC; (ii) the local regulations relating to legal person registration of for-profit and non-profit private schools; and the specific measures to be formulated and promulgated by the competent authorities responsible for the administration of private schools in the province(s) in which the schools are located, including but not limited to the specific measures for registration of pre-existing private schools, the specific requirements for authenticating various parties’ property rights and payment of taxes and fees of for-profit private schools, taxation policies for for-profit private schools, measures for the collection of non-profit private schools’ fees.

 

Regulations Relating to Online and Distance Education

 

Pursuant to the Administrative Regulations on Educational Websites and Online and Distance Education Schools issued by the Ministry of Education on July 5, 2000, educational websites and online education schools may provide educational services in relation to higher education, elementary education, pre-school education, teaching education, occupational education, adult education, other education and public educational information services. “Educational websites” refer to organizations providing education or education-related information services to website visitors by means of a database or online education platform connected via the Internet or an educational television station through an Internet Service Provider, or ISP. “Online education schools” refer to educational websites providing academic education services or training services with the issuance of various certificates. Setting up education websites and online education schools is subject to approval from relevant education authorities, depending on the specific types of education. Any educational website and online education school shall, upon the receipt of approval, indicate on its website such approval information as well as the approval date and file number.

 

On February 3, 2016, the State Council promulgated the Decision on Cancelling the Second Batch of 152 Items Subject to Administrative Examination and Approval by Local Governments Designated by the Central Government, explicitly cancelled the approval requirements for operating educational websites and online education schools that provided by the Administrative Regulations on Educational Websites and Online Education Schools, and reiterated the principle that administrative approval requirements may only be imposed in accordance with the Administrative Licensing Law.

 

Regulations Relating to Internet Information Services

 

The Internet Information Service Administrative Measures, or the Internet Information Measures, was promulgated on September 25, 2000 and amended on January 8, 2011. The Internet Information Measures requires that commercial Internet content providers, or ICP providers, obtain a license for Internet information services, or ICP license, from the appropriate telecommunications authorities in order to offer any commercial Internet information services in the PRC. ICP providers shall display their ICP license number in a conspicuous location on their home page. In addition, the Internet Information Measures also provide that ICP providers that operate in sensitive and strategic sectors, including news, publishing, education, health care, medicine and medical devices, must obtain additional approvals from the relevant authorities regulating those sectors as well.

 

Regulations Relating to Internet Culture Activities

 

On February 17, 2011, the Ministry of Culture, or MOC, promulgated the Interim Administrative Provisions on Internet Culture, or the Internet Culture Provisions, which became effective on April 1, 2011. The Internet Culture Provisions require ICP services providers engaging in commercial “internet culture activities” to obtain a permit from the MOC. “Internet cultural activities” is defined in the Internet Culture Provisions as an act of provision of Internet cultural products and related services, which includes (i) the production, duplication, importation, and broadcasting of the Internet cultural products; (ii) the online dissemination whereby cultural products are posted on the Internet or transmitted via the Internet to end-users, such as computers, fixed-line telephones, mobile phones, television sets and games machines, for online users’ browsing, use or downloading; and (iii) the exhibition and comparison of the Internet cultural products. In addition, “Internet cultural products” is defined in the Internet Culture Provisions as cultural products produced, broadcast and disseminated via the Internet, which mainly include internet cultural products specially produced for the Internet, such as online music entertainment, online games, online shows and plays (programs), online performances, online works of art and online cartoons, and internet cultural products produced from cultural products such as music entertainment, games, shows and plays (programs), performances, works of art, and cartoons through certain techniques and duplicate those to internet for dissemination.

 

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Regulations Relating to Online Publishing

 

On February 4, 2016, the SAPPRFT and the MIIT jointly issued the Administrative Provisions on Online Publishing Services, or the Online Publishing Provisions which took effect as of March 10, 2016. The Online Publishing Provisions sets out detailed provisions for online publishing activities, which mainly cover issues such as defining online publishing services, licensing and approvals, the administrative and supervisory regime and legal liabilities. According to the Online Publishing Provisions, all online publishing services provided within the territory of China are subject to the Online Publishing Provisions, and an online publishing services permit shall be obtained to provide online publishing services. Pursuant to the Online Publishing Provisions, “online publishing services” refer to providing online publications to the public through information networks; and “online publications” refer to digital works with publishing features such as having been edited, produced or processed and are made available to the public through information networks, including: (i) written works, pictures, maps, games, cartoons, audio/video reading materials and other original digital works containing useful knowledge or ideas in the field of literature, art, science or other fields; (ii) digital works of which the content is identical to that of any published book, newspaper, periodical, audio/video product, electronic publication or the like; (iii) network literature databases or other digital works, derived from any of the aforesaid works by selection, arrangement, collection or other means; and (iv) other types of digital works as may be determined by the SAPPRFT.

 

Regulations Relating to Publication Distribution

 

Under the Administrative Measures for the Publications Market, or Publications Market Measures, which was jointly promulgated by SAPPRFT and MOFCOM and became effective on June 1, 2016, any enterprise or individual who engages in publication distribution activities shall obtain permission from SAPPRFT or its local counterpart. “Publication” is defined as “books, newspapers, periodicals, audio-video products, and electronic publications,” and “distributing” is defined as “wholesale, retail, rental, exhibition and other activities,” respectively, in the Publication Market Measures. Any enterprise or individual that engages in retail of publications shall obtain a Publication Business Operating License issued by the local counterpart of SAPPRFT at the county level. In addition, any enterprise or individual that holds a Publication Business Operating License shall file with the relevant local counterpart of SAPPRFT that granted such license to it within 15 days since it begins to carry out any online publication distribution business. Where an entity or individual is engaged in the distribution of publications via the internet or other information networks, it or he/she shall obtain the operation permit for publications.

 

Regulations Relating to Online Transmission of Audio-Visual Programs

 

The SAPPRFT and the MIIT jointly promulgated the Administrative Provisions on Internet Audio-Visual Program Service, or the Audio-Visual Program Provisions, on December 20, 2007, which came into effect on January 31, 2008 and was amended and effective on August 8, 2015. Under the Audio-Visual Program Provisions, “internet audio-visual program services” is defined as activities of producing, redacting and integrating audio-visual programs, providing them to the general public via internet, and providing service for other people to upload and transmits audio-visual programs, and providers of internet audio-visual program services are required to obtain a License for Online Transmission of Audio-Visual Programs issued by SAPPRFT, or complete certain registration procedures with SAPPRFT. In general, providers of internet audio-visual program services must be either state-owned or state-controlled entities, and the business to be carried out by such providers must satisfy the overall planning and guidance catalog for internet audio-visual program service determined by SAPPRFT. On March 30, 2009, SAPPRFT promulgated the Notice on Strengthening the Administration of the Content of Internet Audio-Visual Programs, which reiterates the pre-approval requirements for the audio-visual programs transmitted via the internet, including through mobile networks, where applicable, and prohibits certain types of internet audio-visual programs containing violence, pornography, gambling, terrorism, superstition or other similarly prohibited elements.

 

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On April 1, 2010, SAPPRFT promulgated the Provisional Implementation of the Tentative Categories of Internet Audio-Visual Program Services, or the Categories, which was modified on March 10, 2017. The Categories clarified the scope of Internet audio-video programs services. According to the Categories, there are four categories of Internet audio-visual program services which are further divided into seventeen sub-categories. The third sub-category to the second category covers the making and editing of certain specialized audio-video programs concerning, among other things, educational content, and broadcasting such content to the general public online. However, there are still significant uncertainties relating to the interpretation and implementation of the Audio-Visual Program Provisions, in particular, the scope of “internet audio-video programs.”

 

Regulations Relating to the Software Industry

 

On June 24, 2000, the State Council issued Certain Policies to Encourage the Development of Software and Integrated Circuit Industries, or the Policies, to encourage the development of software and integrated circuit industries in China and to enhance the ability of PRC information technology companies to compete in the international market. The Policies facilitate the development of software and integrated circuit industries in China through various methods, including: (i) encouraging venture capital investments in software industry and providing capital to software enterprises or assisting such software enterprises to raise capital overseas; (ii) providing tax incentives, including an immediate tax rebate for taxpayers who sell self-developed software products before 2010 in the amount of the statutory value-added tax that exceeds 3% and a number of exemptions and reduced corporate income tax rates; (iii) providing government support, such as government funding in the development of software technology; (iv) providing preferential treatments, such as credit facilities with low interest rates to enterprises that export software products; (v) taking various strategies to ensure that the software industry has sufficient expertise; and (vi) implementing measures to enhance intellectual property protection in China. According to Certain Policies to Further Encourage the Development of the Software Industry and the Integrated Circuit Industry which was promulgated on January 28, 2011 by the State Council, preferential value-added tax shall continue to be implemented and relevant preferential business tax policies shall be further implemented and improved. Eligible software enterprises and integrated circuit design enterprises, which engage in software development and testing, information system integration, consulting and operation maintenance, integrated circuit design and other businesses, shall be exempt from business tax and relevant procedures for them shall be simplified.

 

To qualify for preferential treatments, an enterprise must be recognized as a software enterprise by governmental authorities. A software enterprise is subject to annual inspection, failure to pass such inspection in a given year would cause the enterprise to lose the relevant benefits.

 

Regulations Relating to Privacy Protection

 

The PRC Constitution states that PRC law protects the freedom and privacy of communications of citizens and prohibits infringement of these rights. In recent years, PRC government authorities have enacted laws and regulations on internet use to protect personal information from any unauthorized disclosure. Pursuant to the Decision on Strengthening the Protection of Online Information issued by the NPCSC on December 28, 2012 and the Order for the Protection of Telecommunication and Internet User Personal Information issued by the MIIT in July 16, 2013, any collection and use of user personal information must be subject to the consent of the user, abide by the principles of legality, rationality and necessity and be within the specified purposes, methods and scopes. “Personal information” is defined in these regulations as information that identifies a citizen, the time or location for his use of telecommunication and internet services, or involves privacy of any citizen such as his birth date, ID card number, and address. An ICP services provider must also keep information collected strictly confidential, and is further prohibited from divulging, tampering or destroying of any such information, or selling or providing such information to other parties. Any violation of the above decision or order may subject the ICP service provider to warnings, fines, confiscation of illegal gains, revocation of licenses, cancellation of filings, closedown of websites or even criminal liabilities.

 

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Regulations Relating to Intellectual Property Rights

 

Copyright and Software Registration

 

The NPCSC adopted the Copyright Law in 1990 and amended it in 2001 and 2010, respectively. The amended Copyright Law extends copyright protection to Internet activities, products disseminated over the Internet and software products. In addition, there is a voluntary registration system administered by the China Copyright Protection Center. The amended Copyright Law also requires registration of a copyright pledge. To address the problem of copyright infringement related to the content posted or transmitted over the Internet, the National Copyright Administration and the MIIT jointly promulgated the Measures for Administrative Protection of Copyright Related to Internet on April 29, 2005. This measure became effective on May 30, 2005.

 

The Computer Software Protection Regulations was promulgated by the State Council on December 20, 2001 and amended on January 30, 2013 which stipulates that Chinese citizens, legal entities or other organizations enjoy, in accordance with these Regulations, copyright in the software which they have developed, whether published or not. In order to further implement the Computer Software Protection Regulations, the State Copyright Bureau issued the Computer Software Copyright Registration Procedures on February 20, 2002, which apply to software copyright registration, license contract registration and transfer contract registration.

 

Patents

 

The NPCSC adopted the Patent Law of the PRC in 1984 and amended it in 1992, 2000 and 2008, respectively. A patentable invention, utility model or design must meet three conditions: novelty, inventiveness and practical applicability. Patents cannot be granted for scientific discoveries, rules and methods for intellectual activities, methods used to diagnose or treat diseases, animal and plant breeds or substances obtained by means of nuclear transformation. The Patent Office under the State Intellectual Property Office is responsible for receiving, examining and approving patent applications. A patent is valid for a twenty-year term for an invention and a ten-year term for a utility model or design, starting from the application date. Except under certain specific circumstances provided by law, any third party user must obtain consent or a proper license from the patent owner to use the patent, or else the use will constitute an infringement of the rights of the patent holder.

 

Domain Name

 

On November 5, 2004, the MIIT promulgated the Measures for Administration of Domain Names for the Chinese Internet, or the Domain Name Measures. According to the Domain Name Measures, “domain name” shall refer to the character identifier for identifying and locating the hierarchical structure of a computer on the Internet, which corresponds to the Internet protocol (IP) address of the computer concerned. A domain name registration service shall observe the principle of “first apply, first register”. Where the domain name is completed, the applicant for the domain name registration shall be the holder of the domain name. The holder of the domain name shall pay operation fees for a registered domain name on a regular basis. If the domain name holder fails to pay the corresponding operation fees as required, the original domain name registry shall write it off and notify the holder of the domain name in written form.

 

Trademark

 

Trademarks are protected by the PRC Trademark Law which was adopted in 1982 and subsequently amended in 1993, 2001 and 2013 as well as the Implementation Regulation of the PRC Trademark Law adopted by the State Council in 2002 and amended in 2014. The Trademark Office under the SAIC handles trademark registrations and grants a term of ten years to registered trademarks which may be renewed for consecutive ten-year periods upon request by the trademark owner. Trademark license agreements must be filed with the Trademark Office for record. The PRC Trademark Law has adopted a “first-to-file” principle with respect to trademark registration. Where a trademark for which a registration has been made is identical or similar to another trademark which has already been registered or been subject to a preliminary examination and approval for use on the same kind of or similar commodities or services, the application for registration of such trademark may be rejected. Any person applying for the registration of a trademark may not prejudice the existing right first obtained by others, nor may any person register in advance a trademark that has already been used by another party and has already gained a “sufficient degree of reputation” through such party’s use.

 

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Regulations Relating to Foreign Exchange

 

Foreign Exchange Settlement

 

The Circular of the State Administration of Foreign Exchange on Reforming the Management Approach regarding the Settlement of Foreign Exchange Capital of Foreign-invested Enterprises, which was promulgated by the SAFE on March 30, 2015 and became effective as of June 1, 2015, adopts the approach of discretional foreign exchange settlement, under which the foreign exchange capital in the capital account of a foreign-invested enterprise for which the foreign-invested enterprise has obtained confirmation by the local SAFE branches regarding the rights and interests of monetary contribution (or the book-entry registration of monetary contribution by the banks) can be settled at the banks based on the actual operation needs of such foreign-invested enterprise. The capital in Renminbi obtained by the foreign-invested enterprise from the discretionary settlement of foreign exchange capital shall be managed under the account pending for foreign exchange settlement payment. The proportion of discretionary settlement of foreign exchange capital is temporarily determined as 100%, subject to the adjustment of the SAFE.

 

Regulations Relating to Foreign Exchange Registration of Overseas Investment by PRC Residents

 

SAFE Circular on Relevant Issues Relating to Domestic Resident’s Investment and Financing and Roundtrip Investment through Special Purpose Vehicles, or Circular 37, issued by SAFE and effective in July 4, 2014, regulates foreign exchange matters in relation to the use of special purpose vehicles, or SPVs, by PRC residents or entities to seek offshore investment and financing and conduct round trip investment in China. Under Circular 37, a SPV refers to an offshore entity established or controlled, directly or indirectly, by PRC residents or entities for the purpose of seeking offshore financing or making offshore investment, using legitimate domestic or offshore assets or interests, while “round trip investment” refers to the direct investment in China by PRC residents or entities through SPVs, namely, establishing foreign-invested enterprises to obtain the ownership, control rights and management rights. Circular 37 requires that, before making contribution into an SPV, PRC residents or entities are required to complete foreign exchange registration with the SAFE or its local branch. SAFE Circular 37 further provides that option or share-based incentive tool holders of a non-listed SPV can exercise the options or share incentive tools to become a shareholder of such non-listed SPV, subject to registration with SAFE or its local branch.

 

PRC residents or entities who have contributed legitimate domestic or offshore interests or assets to SPVs but have yet to obtain SAFE registration before the implementation of the Circular 37 shall register their ownership interests or control in such SPVs with SAFE or its local branch. An amendment to the registration is required if there is a material change in the SPV registered, such as any change of basic information (including change of such PRC residents, name and operation term), increases or decreases in investment amount, transfers or exchanges of shares, or mergers or divisions. Failure to comply with the registration procedures set forth in Circular 37, or making misrepresentation on or failure to disclose controllers of foreign-invested enterprise that is established through round-trip investment, may result in restrictions on the foreign exchange activities of the relevant foreign-invested enterprises, including payment of dividends and other distributions, such as proceeds from any reduction in capital, share transfer or liquidation, to its offshore parent or affiliate, and the capital inflow from the offshore parent, and may also subject relevant PRC residents or entities to penalties under PRC foreign exchange administration regulations.

 

Regulations Relating to Employment and Social Insurance

 

Pursuant to the PRC Labor Law effective as of January 1, 1995 (as amended on August 27, 2009), and the PRC Labor Contract Law effective as of January 1, 2008 (as amended on December 28, 2012), a written labor contract shall be executed by employer and an employee when the employment relationship is established, and an employer is under an obligation to sign an unlimited-term labor contract with any employee who has worked for the employer for ten consecutive years. Further, if an employee requests or agrees to renew a fixed-term labor contract that has already been entered into twice consecutively, the resulting contract must have an unlimited term, with certain exceptions. All employers are required to establish a system for labor safety and sanitation, strictly abide by state rules and standards and provide employees with appropriate workplace safety training. Moreover, all PRC enterprises are generally required to implement a standard working time system of eight hours a day and forty hours a week, and if the implementation of such standard working time system is not appropriate due to the nature of the job or the characteristics of business operation, the enterprise may implement a flexible working time system or comprehensive working time system after obtaining approvals from the relevant authorities.

 

Pursuant to the Social Insurance Law of China effective from July 1, 2011, and the Housing Fund Regulation which was amended and became effective on March 24, 2002, employers in China shall pay contributions to the social insurance plan and the housing fund plan for their employees, and such contribution amount payable shall be calculated based on the employee actual salary in accordance with the relevant regulations.

 

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Regulations Relating to Taxation

 

PRC Enterprise Income Tax Law

 

In January 2008, the PRC Enterprise Income Tax Law, or the EIT Law, took effect (revised and took effect on February 24, 2017). The EIT Law applies a uniform 25% enterprise income tax rate to both foreign-invested enterprises and domestic enterprises, except where tax incentives are granted to special industries and projects. An enterprise established outside China with “de facto management bodies” within China is considered a “resident enterprise” for PRC enterprise income tax purposes and is generally subject to a uniform 25% enterprise income tax rate on its worldwide income. According to the EIT Law and its implementation regulations, certain high and new technology enterprises which have proprietary intellectual property rights and simultaneously meet the prescribed requirements as stipulated in the implementation regulations of the EIT Law and other relevant regulations are permitted to enjoy a reduced EIT rate of 15%.

 

Under the EIT Law and its implementation regulations, dividends generated from the business of a PRC subsidiary after January 1, 2008 and payable to its foreign investor may be subject to a withholding tax rate of 10% if the PRC tax authorities determine that the foreign investor is a non-resident enterprise, unless there is a tax treaty with China that provides for a preferential withholding tax rate. Distributions of earnings generated before January 1, 2008 are exempt from PRC withholding tax.

 

Under the PRC Enterprise Income Tax Law, an enterprise established outside China with “de facto management bodies” within China is considered a “resident enterprise” for PRC enterprise income tax purposes and is generally subject to a uniform 25% enterprise income tax rate on its worldwide income. The implementing regulations of the EIT Law define the term “de facto management bodies” as a management body which substantially manages, or has control over the business, personnel, finance and assets of an enterprise. On April 22, 2009, the State Administration of Taxation, or SAT issued the Circular on Issues Concerning the Identification of Chinese-Controlled Overseas Registered Enterprises as Resident Enterprises in Accordance With the Actual Standards of Organizational Management, or Circular 82, which provides certain specific criteria for determining whether the “de facto management bodies” of a PRC-controlled enterprise that is incorporated offshore is located in China. However, there are no further detailed rules or precedents governing the procedures and specific criteria for determining “de facto management body.”

 

PRC Value-added Tax Law

 

Pursuant to the Interim Regulations on Value-added Tax of China, or VAT Regulations which was promulgated by the State Council on December 13, 1993 and became effective as of January 1, 1994 and further amended on November 10, 2008, February 6, 2016 and November 19, 2017, all units and individuals engaging in the sale of goods, provision of processing, repair and fitting services, and importation of goods within the territory of China are taxpayers of value-added tax (“VAT”), and shall pay VAT in accordance with the VAT Regulations. According to the VAT Regulations, a VAT tax rate at 17% applies to the Chinese enterprises unless otherwise exempted or reduced according to the VAT Regulations and other relevant regulations.

 

Pursuant to the Circular on Comprehensively Promoting the Pilot Program of the Collection of Value-added Tax in Lieu of Business Tax jointly promulgated by the State Administration of Taxation and the Ministry of Finance (“Circular 36”), the pilot program of the collection of VAT in lieu of business tax shall be promoted nationwide in a comprehensive manner as of May 1, 2016. Entities and individuals engaged in sales of services, intangible assets or real property within the territory of the PRC are value-added taxpayers, and shall pay VAT rather than business tax. Any taxable activities of taxpayers shall be subject to a tax rate of 6%, except those taxpayers who provide services related to transportation, postal services, basic telecommunications, construction, leasing of real property, sell any real property, transfer any land use rights, leasing services of tangible personal property or any cross-board taxable activity.

 

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Identity of Directors, Senior Management and Advisers

 

Directors and Senior Management

 

The following table sets forth information regarding our executive officers and directors as of the date immediately prior to this offering. We plan to appoint additional directors to meet the corporate governance requirements of NASDAQ prior to or in connection with the completion of this offering. We are currently in the process of identifying such additional directors and intend to name such directors in an amendment to the registration statement of which this prospectus is a part.

 

Directors and Executive Officers   Age   Position/Title
Yang Yu   45   Chairman of the Board and Executive Director
         
Xinghui Yang   46   Chief Executive Officer and Director
         
Gang Yao   44   Chief Financial Officer*
         
Cuntao Hou   38   Vice President
         
Defang Li   72   Director Nominee*
         
Yik C Chan   59   Director Nominee*
         
Rong Zhang   44   Director Nominee*

 

* This individual has indicated his assent to occupy such position upon the effective date of the registration statement of which this prospectus forms a part.

 

Yang Yu has served as Chairman of the Board of Directors and Executive Director of the Company since November 2016. Mr. Yu has been serving as the executive director of several of our subsidiaries and VIE, including the executive director of Beijing Distance Learning since July 2015, the executive director of Beijing Digital Information since October 2012, the executive director of Shanghai Xia Shu network Technology Co., Ltd. since April 2016 and the executive director of Shanghai Xin Fu Network Technology Co., Ltd. since July 2015. He has also been the acting executive director of Beijing Hao Hua Hao Tai Investment Co., Ltd, an investment company, since July 2009. Mr. Yu obtained his Ph.D. in law from China University of Political Science & Law, a Master of Laws degree from Xian Jiaotong University and a Bachelor’s Degree in Medicine from The Fourth Military Medical University in Xi’an, China.

 

Xinghui Yang has served as director of the Company since March 2013 and Chief Executive Officer of the Company since November 2016. Mr. Yang has served as chief executive officer of our wholly owned subsidiary Beijing Distance Learning since March 2013 and Deputy General Manager of this subsidiary from November 2006 to February 2013. He has also been serving as chief executive officer of Beijing Digital Information since March 2013. While with Beijing Distance Learning, Mr. Yang managed the daily operations of the company. From October 2003 to October 2006, Mr. Yang served as Deputy General Manager of Beijing Meiming Media Co., Limited, an integrated marketing company. Mr. Yang obtained his B.S. in Industrial & Electrical Automation from Beijing Information Science & Technology University and his M.B.A from University of International Business and Economics in Beijing, China.

 

Gang Yao will serve as our Chief Financial Officer as of the effective date of the registration statement of which this prospectus forms a part. Mr. Yao has been serving as Executive Chairman of Beijing Clean2Organic Technology Co., Ltd. since January 2017, responsible for overall decision making in connection with key aspects of the company’s operations. From May 2015 to December 2016, he served as Chief Executive Officer of Hanwang Technology Co., Ltd. (Shenzhen Stock Exchange 002362) where he managed the company’s operations (including finance and supply chain), implemented organizational reforms and developed its internal control program. From June 2013 to May 2015, Mr. Yao served as Chief Executive Officer of Qingdao Hengshun Zhongsheng Group Co., Ltd. (Shenzhen Stock Exchange 300208) where he was managed the company’s operations, led its internal reform and also managed the company’s international expansions in Southeast Asia and Africa. From September 2010 to June 2013, he served as RMB Fund Partner at Zero2IPO Venture, managing the firm’s private equity funds such as modern agriculture funds and clean technology funds. Previously, Mr. Yao was with Baker Tilly China from March 2003 and September 2010 where he held various finance and accounting positions. He started his career as an engineer at Huaihua Raiway Co., Ltd. In addition to his executive experience, Mr. Yao has served as a director of public companies in China. He is currently an independent director of HaiNan Pearl River Holdings Co., Ltd. (Shenzhen Stock Exchange 200505), Qingdao Hengshun Zhongsheng Group Co., Ltd. and Hanwang Technology Co., Ltd. Mr. Yao obtained his B.S. in Household Electrical Appliances Technology and Management from Hunan University of Commerce in Changsha, China, his Master’s degree in Accountancy from Central South University in Changsha, China and his Doctor degree in Accountancy from Chinese Academy of Fiscal Science in Beijing, China. He is a Certified Public Accountant in China and Australia.

 

Cuntao Hou has been Vice President of the Company since December 2016, which term will expire in November 2019. Mr. Hou has held various managerial positions at our subsidiaries. He has served as Deputy General Manager of Beijing Distance Learning since February 2015 where he has been in charge of marketing and sales. He has also been serving as the General Manager of Hunan Huafu Haihui Learning Technology Co., Ltd., our subsidiary based in Hunan, China, in charge of key aspects of daily operations. Mr. Hou was previously the Assistant Manager of the Marketing Department at Beijing Distance Learning from June 2006 to July 2013, responsible for sales and marketing in relation to the company’s self-study education preparation programs. He joined Beijing Distance Learning in June 2003 and worked as a software engineer at the company’s R&D Department until June 2006. He then served as Assistant Manager of the R&D Department at Beijing Distance Learning from July 2006 to May 2009. Mr. Hou obtained his B.S. degree in Computer Science from Beijing Applied Science and Technology University and his B.A. degree in Management from Beijing Normal University in Beijing, China.

 

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Defang Li will be an independent director as of the effective date of the registration statement of which this prospectus forms a part. Mr. Li has been a professor of Beijing Normal University since 1986. He has also held various leadership positions at the university, including Dean of the Continuing Education Department, Dean of Higher Vocational Education and Deputy Dean of Network Education School. In addition to his positions at Beijing Normal University, Mr. Li has been in leadership positions at various professional associations dedicated to education since 2005. He is currently Deputy Secretary of the National Colleges & Universities Modern Remote Education Collaboration, Vice President of Beijing Adult Education Association and Secretary of National Teachers’ Network Association. Mr. Li has published two books and over 20 articles on education related subjects. He received his M.A. in Social Anthropology, Cultural Anthropology & Folklore Studies and his B.A. in Chinese Literature from Beijing Normal University in Beijing, China.

 

Yik C Chan will be an independent director as of the effective date of the registration statement of which this prospectus forms a part. Since 2016, Mr. Chan has served as the Managing Director Asia of IAA-Advisory Associates, which provides specialized advisory services in leasing and asset finance in the areas of strategy and planning, corporate development, mergers and acquisitions, vendor and captive finance, turnaround and restructures, international expansion and funding strategies. Before joining IAA, from 2012 to 2016, Mr. Chan served as Operating Partner of CITIC Capital, one of the largest private equity firms in China, where he operated in the non-bank financial services industry, including leasing, commercial factoring and supply chains financing. From 2007 to 2012, Mr. Chan served as Chief Executive Officer of BNP Paribas Leasing Solutions China, a provider of leasing and finance solutions, a position he held from the company’s inception in 2007. Mr. Chan is an experienced general manager and finance and treasury executive with more than 30 years’ experience in private equity, global leasing, supply chains, and structured finance in the US, Pan Asia and China. Mr. Chan is a Certified Public Accountant in the U.S., and received a B.A. in Accounting from Baruch College and a M.B.A. in Business Administration from New York University. 

 

Rong Zhang will be an independent director as of the effective date of the registration statement of which this prospectus forms a part. Mr. Zhang has over 20 years of experience in accounting, internal controls assessment, and financial management. He has served as a member of the board of directors and the Chief Financial Officer of EMAR Online Technology Co., Ltd. (National Equities Exchange and Quotations in China, 836346) since September 2014. From January 2011 to May 2014, Mr. Zhang served as the Chief Financial Officer of China TransInfo Technology Co., Ltd. (Shenzhen Stock Exchange in China, 002373), overseeing the company’s public filings. From July 2009 to December 2010, he served as the Chief Financial Officer of China Vocational Training Holdings Co., Ltd., the largest automotive technician training school chain in China. He also served as the Chief Financial Officer of Hunan Taizinai Biological Technology Co., Ltd. from August 2007 to October 2008. From July 2005 to July 2007, Mr. Zhang was the Asia Pacific Controller of Draft FCB as well as the Asia Pacific Lead Area Controller of Interpublic Group of Companies, Inc. (Draft FCB's parent company), one of the world’s largest advertising and marketing services companies. From January 2004 to July 2005, he was a Senior Analyst and Project Leader at MCI, Inc., now a telecommunications subsidiary of Verizon Communications Inc., a global broadband and telecommunications company. From July 1997 to January 2004, Mr. Zhang held finance and accounting positions at U.S. companies in a wide range of industries, including ACSI Network Technologies, Union Camp Corporation and International Paper and Deloitte & Touche.

 

In addition, Mr. Zhang has served on the board of directors of other public companies. He has been serving as a director of SSLJ.Com Limited since April 16, 2017. He also served as the Chair of the Audit Committee of eFuture Information Technology Inc., a company listed on NASDAQ, from March 2015 to February 2017. Since August 2008, Mr. Zhang has been serving as a non-employee director of SVTeck, Inc., a Silicon Valley start-up in online reputation grading/search business using advanced dynamic programming as well as artificial intelligence, and OKIKI Education Management Co., Ltd., a preschool education chain.

 

Mr. Zhang received a Master’s degree in Accounting and Finance and a Master’s degree in Economics from Georgia State University and a Bachelor’s degree in Marine Meteorology from Ocean University of China.

 

Employment Agreements

 

We have entered into employment agreements with each of our executive officers. We may terminate an executive officer’s employment for cause at any time without advance notice or remuneration, if (i) the executive officer is convicted or pleads guilty to a felony or to an act of fraud, misappropriation or embezzlement, (ii) the executive officer has been negligent or acted dishonestly to our detriment, (iii) the executive officer has engaged in actions amounting to misconduct or failed to perform his/her duties thereunder and such failure continues after the executive officer is afforded a reasonable opportunity to cure such failure, (iv) the executive officer has died, or (v) the executive officer has a disability which shall mean a physical or mental impairment which, as reasonably determined by our board of directors, renders the executive officer unable to perform the essential functions of his/her employment with us, even with reasonable accommodation that does not impose an undue hardship on the Company, for more than 180 days in any 12-month period, unless a longer period is required by applicable law, in which case that longer period would apply. We may also terminate an executive officer’s employment under PRC Labor Law Articles 36, 39 40 and 41 and under other applicable laws and regulations. An executive officer may terminate his or her employment at any time by giving a thirty days’ prior written notice.

 

Each executive officer has agreed to hold, at all times during and after the termination or expiry of his or her employment agreement, in strict confidence and not to use, except as required in the performance of his or her duties in connection with the employment or pursuant to applicable law, any of our confidential information, or the confidential or proprietary information disclosed to the executive officer by or obtained by the executive officer from us either directly or indirectly in writing, orally or otherwise, if specifically indicated to be confidential or reasonably expected to be confidential.

 

In addition, each executive officer has agreed to be bound by non-competition and non-solicitation restrictions during the term of his or her employment and for two years following the last date of employment. Specifically, each executive officer has agreed not to (i) approach our suppliers, clients, customers or contacts of us or other persons or entities introduced to the executive officer in the executive officer’s capacity as our representative for the purposes of doing business with such persons or entities which will harm the business relationship between the Company and such persons and/or entities; (ii) unless expressly consented to by us, assume employment with or provide services to any of our competitors, engage, whether as principal, partner, licensor or otherwise, any of our competitors; or (iii) unless expressly consented to by us, seek directly or indirectly, by the offer of alternative employment or other inducement whatsoever, to solicit the services of any of our employees who is employed by us.

 

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We have also entered into indemnification agreements with each of our directors and executive officers. Under these agreements, we agree to indemnify our directors and executive officers against certain liabilities and expenses incurred by such persons in connection with claims made by reason of their being a director or officer of our company.

 

Board of Directors

 

Our board of directors will consist of five directors upon the SEC’s declaration of effectiveness of our registration statement on Form F-1, of which this prospectus is a part. A director is not required to hold any shares in our company to qualify to serve as a director. A director may vote with respect to any contract, proposed contract, or arrangement in which he or she is materially interested. A director may exercise all the powers of the company to borrow money, mortgage its business, property and uncalled capital, and issue debentures or other securities whenever money is borrowed or as security for any obligation of the company or of any third party.

 

Committees of the Board of Directors

 

Immediately upon the effectiveness of our registration statement on Form F-1, of which this prospectus is a part, we will establish an audit committee, a compensation committee and a nominating and corporate governance committee under the board of directors. We have adopted a charter for each of the three committees prior to the completion of this offering. Each committee’s members and functions are described below.

 

Audit Committee. Our audit committee will consist of Messrs. Chan, Zhang and Li and will be chaired by Chan. We have determined that each of these three director nominees satisfies the “independence” requirements of the NASDAQ Listing Rules and meet the independence standards under Rule 10A-3 under the Securities Exchange Act of 1934, as amended. We have determined that Mr. Chan qualifies as an “audit committee financial expert.” The audit committee will oversee our accounting and financial reporting processes and the audits of the financial statements of the Company. The audit committee will be responsible for, among other things:

 

  selecting the independent registered public accounting firm and pre-approving all auditing and non-auditing services permitted to be performed by the independent registered public accounting firm;
     
  reviewing with the independent registered public accounting firm any audit problems or difficulties and management’s response;
     
  reviewing and approving all proposed related party transactions, as defined in Item 404 of Regulation S-K under the Securities Act;
     
  discussing the annual audited financial statements with management and the independent registered public accounting firm;
     
  reviewing the adequacy and effectiveness of our accounting and internal control policies and procedures and any special steps taken to monitor and control major financial risk exposures;
     
  annually reviewing and reassessing the adequacy of our audit committee charter;
     
  meeting separately and periodically with management and the independent registered public accounting firm;
     
  monitoring compliance with our code of business conduct and ethics, including reviewing the adequacy and effectiveness of our procedures to ensure proper compliance; and
     
  reporting regularly to the board.

 

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Compensation Committee . Our compensation committee will consist of Messrs. Zhang and Chan, and will be chaired by Mr. Zhang. We have determined that each of these directors satisfies the “independence” requirements of the NASDAQ Listing Rules. The compensation committee will assist the board in reviewing and approving the compensation structure, including all forms of compensation, relating to our directors and executive officers. Our chief executive officer may not be present at any committee meeting during which their compensation is deliberated upon. The compensation committee will be responsible for, among other things:

 

  reviewing and approving, or recommending to the board for its approval, the compensation for our chief executive officer and other executive officers;
     
  reviewing and recommending to the board for determination with respect to the compensation of our non-employee directors;
     
  reviewing periodically and approving any incentive compensation or equity plans, programs or other similar arrangements; and
     
  selecting compensation consultant, legal counsel or other adviser only after taking into consideration all factors relevant to that person’s independence from management.

 

Nominating and Corporate Governance Committee . Our nominating and corporate governance committee will consist of Mr. Li and Mr. Chan, and will be chaired by Mr. Li. We have determined that each of these directors satisfies the “independence” requirements of the NASDAQ Listing Rules. The nominating and corporate governance committee will assist the board in selecting individuals qualified to become our directors and in determining the composition of the board and its committees. The nominating and corporate governance committee will be responsible for, among other things:

 

  recommending nominees to the board for election or re-election to the board, or for appointment to fill any vacancy on the board;
     
  reviewing annually with the board the current composition of the board with regards to characteristics such as independence, knowledge, skills, experience, expertise, diversity and availability of service to us;
     
  selecting and recommending to the board the names of directors to serve as members of the audit committee and the compensation committee, as well as of the nominating and corporate governance committee itself;
     
  developing and reviewing the corporate governance principles adopted by the board and advising the board with respect to significant developments in the law and practice of corporate governance and our compliance with such laws and practices; and
     
  evaluating the performance and effectiveness of the board as a whole.

 

Duties of Directors

 

Under British Virgin Islands law, our directors have a statutory and fiduciary duty to act honestly in good faith and in our best interests. Our directors also have a duty to exercise the skill they actually possess and such care and diligence that a reasonably prudent person would exercise in comparable circumstances. In fulfilling their duty of care to us, our directors must ensure compliance with our memorandum and articles of association. A shareholder may have the right to seek damages in our name if a duty owed by our directors is breached. You should refer to “Description of Share Capital—Differences in Corporate Law” for additional information on our standard of corporate governance under British Virgin Islands law.

 

Terms of Directors and Officers

 

Our officers are elected by and serve at the discretion of the board. Unless his term is fixed by the resolution of shareholder or directors appointing him, each director holds office until the earlier of his death, resignation or removal from office, with or without cause, by the a resolution of shareholders passed at a meeting of shareholders called for the purposes of removing the director, or by a written resolution passed by at least 75% of the shareholders entitled to vote, or if with cause, by a resolution of directors passed at a meeting of directors called for the purpose of removing the director.

 

Compensation of Directors and Executive Officers

 

For the fiscal year ended March 31, 2017, we paid an aggregate of RMB705,824 (approximately US$170,638) in cash and benefits in-kind granted to or accrued on behalf of all of our directors and members of senior management for their services, in all capacities, and we did not pay any additional compensation to our directors and members of senior management. We have not set aside or accrued any amount to provide pension, retirement or other similar benefits to our executive officers and directors. Our PRC subsidiaries and consolidated variable interest entity are required by law to make contributions equal to certain percentages of each employee’s salary for his or her pension insurance, medical insurance, unemployment insurance and other statutory benefits and a housing provident fund.

 

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PRINCIPAL SHAREHOLDERS

 

The following table sets forth information concerning the beneficial ownership of our ordinary shares as of the date of this prospectus by:

 

  each of our directors and executive officers;
     
  each person known to us to beneficially own more than 5% of our ordinary shares; and
     
  all directors and executive officers as a group.

 

The calculations in the table below are based on 3,200,000 ordinary shares outstanding immediately prior to this offering and (i) [____] ordinary shares outstanding immediately after the completion of this offering, assuming the minimum amount is raised and (ii) [____] ordinary shares outstanding immediately after the completion of this offering, assuming the maximum amount is raised, which number of shares has been calculated based on an initial offering price of US$[__] per share, the mid-point of the estimated initial public offering price range shown on the front cover page of this prospectus.

 

Beneficial ownership is determined in accordance with the rules and regulations of the SEC. In computing the number of shares beneficially owned by a person and the percentage ownership of that person, we have included shares that the person has the right to acquire within 60 days, including through the exercise of any option, warrant, or other right or the conversion of any other security. These shares, however, are not included in the computation of the percentage ownership of any other person. Unless otherwise indicated in the footnotes, the address for each principal shareholder is Room 505 Building No.40, No.1 Disheng North Street, Economic and Technological Development Zone, Beijing, China 100176.

 

    Ordinary shares
beneficially owned
prior to this offering
    Shares beneficially
owned after this offering
(Minimum offering amount)
    Shares beneficially
owned after this
offering
(Maximum offering amount)
 
Name   Number     %     Number     %     Number     %  
Directors and Executive Officers:                                    
Yang Yu (1)     1,648,000       51.5 %     1,648,000     [____] %     1,648,000     [____] %
Xinghui Yang (2)     1,552,000       48.5 %     1,552,000     [____] %      1,552,000     [____] %
Gang Yao      -        -        -        -        -        -  
Cuntao Hou     -       -       -       -       -       -  
Defang Li     -       -       -       -       -       -  
Yik C Chan     -       -       -       -       -       -  
Rong Zhang     -       -       -       -       -       -  
All directors and executive officers as a group (seven persons)    

3,200,000

      100 %    

3,200,000 

    [____] %    

3,200,000

    [____] %
Principal Shareholders:                                                
River Business Limited (3)     1,392,000       43.5 %     1,392,000       [____] %     1,392,000       [____] %
Silver Thousand International (4)     320,000       10 %     320,000       [____] %     320,000       [____] %
HFGFR INC. (5)     1,488,000       46.5 %     1,488,000       [____] %     1,488,000       [____] %

  

(1) Includes 1,488,000 ordinary shares held through HFGFR INC. and 160,000 ordinary shares held through Silver Thousand International.

 

(2) Includes 1,392,000 ordinary shares held through River Business Limited and 160,000 ordinary shares held through Silver Thousand International.

 

(3) The registered office address of River Business Limited is Sea Meadow House, PO Box 173, Road Town, Tortola, VG1110 British Virgin Islands. As the holder of all of the equity interest in River Business Limited, Yang Xinghui has voting and dispositive power with respect to all of the ordinary shares of the Company held by River Business Limited.

 

(4) The registered office address of Silver Thousand International is Sea Meadow House, PO Box 173, Road Town, Tortola, VG1110, British Virgin Islands. As of the date of this prospectus, Silver Thousand International is 50% owned by Mr. Yang and 50% owned by HFGFR INC.

 

(5) The business address of HFGFR INC. is Ajeltake Road, Ajeltake Island, Majuro, Marshall Islands MH96960. As the holder of all of the equity interest in HFGFR INC., Yu Yang has voting and dispositive power with respect to all of the ordinary shares of the Company held by HFGFR INC.

 

None of our major shareholders have differing voting rights, and as of the date of this prospectus, none of our outstanding ordinary shares are held by record holders in the United States. We are not aware of any arrangement that may, at a subsequent date, result in a change of control of our company.

 

 

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RELATED PARTY TRANSACTIONS

 

Contractual Arrangements with our Affiliated Entities and their Shareholders

 

See “Corporate History and Structure – Contractual Arrangements.”

 

Transactions with Certain Related Parties

 

For the year ended March 31, 2016, Horwath Capital China, where Mr. Yang Yu, our chairman of the board of directors, served as managing director and a major shareholder, provided consulting services to the Company in the amount of $47,415 (RMB 300,000). There were no related party transactions in fiscal year 2017 or the six months ended September 30, 2017.

 

Private Placements

 

We have not issued any securities in the past three fiscal years.

 

Employment Agreements

 

We have entered into employment agreements with our executive officers. See “Management—Employment Agreements.”

  

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DESCRIPTION OF SHARE CAPITAL

 

We are a British Virgin Islands company limited by shares and our affairs are governed by our memorandum and articles of association and the Act (as amended or modified from time to time).

 

In respect of all of our ordinary shares we have power insofar as is permitted by law, to redeem or purchase any of our shares and to increase or reduce the said capital subject to the provisions of the Act and the articles of association and to issue any part of our capital, whether original, redeemed or increased with or without any preference, priority or special privilege or subject to any postponement of rights or to any conditions or restrictions, subject to the provisions of our memorandum and articles of association from time to time in force.

 

As of the date immediately prior to this offering, our authorized share capital consists of 30,000,000 ordinary shares with a par value of US$0.01. As of the date immediately prior to this offering, there are 3,200,000 ordinary shares issued and outstanding.

 

Our authorized share capital upon completion of the offering will be US$300,000 divided into 30,000,000 ordinary shares of a par value of US$0.01 each. We will issue 1,000,000 ordinary shares represented by our ordinary shares in this offering. All options, regardless of grant dates, will entitle holders to an equivalent number of ordinary shares once the vesting and exercising conditions are met. The following are summaries of material provisions of our post-offering amended and restated memorandum and articles of association and the Act insofar as they relate to the material terms of our ordinary shares that we expect will become effective upon the closing of this offering.

 

Ordinary Shares

 

General. Upon the completion of this offering, our authorized share capital is US$300,000 divided into 30,000,000 ordinary shares, with a par value of US$0.01. Holders of ordinary shares will have the same rights. All of our outstanding ordinary shares are fully paid and non-assessable. Certificates representing the ordinary shares are issued in registered form. Our shareholders who are non-residents of the British Virgin Islands may freely hold and transfer their ordinary shares.

 

Dividends. The holders of our ordinary shares are entitled to such dividends as may be declared by our board of directors. Our post-offering amended and restated articles of association provide that dividends may be declared and paid at such time, and in such an amount, as the directors determine subject to their being satisfied that the Company will meet the statutory solvency test immediately after the dividend. Holders of ordinary shares will be entitled to the same amount of dividends, if declared.

 

Voting Rights. In respect of all matters subject to a shareholders’ vote, each ordinary share is entitled to one vote for each ordinary share registered in his or her name on our register of members. Holders of ordinary shares shall at all times vote together on all resolutions submitted to a vote of the members. Voting at any meeting of shareholders is by show of hands unless a poll is demanded. A poll may be demanded by the chairman of such meeting or any one shareholder.

 

A quorum required for a meeting of shareholders consists of two or more shareholders who hold at least one-half of all voting power of our share capital in issue at the date of the meeting present in person or by proxy or, if a corporation or other non-natural person, by its duly authorized representative. Shareholders’ meetings may be held annually. Each general meeting, other than an annual general meeting, shall be an extraordinary general meeting. Extraordinary general meetings may be called by a majority of our board of directors or our chairman or upon a requisition of shareholders holding at the date of deposit of the requisition not less than 30% of the aggregate voting power of our company. Advance notice of at least 10 days is required for the convening of our annual general meeting and other general meetings unless such notice is waived in accordance with our articles of association.

 

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Transfer of Ordinary Shares.  Under the Act the transfer of a registered share which is not listed on a recognized exchange is by a written instrument of transfer signed by the transferor and containing the name of the transferee. However, the instrument must also be signed by the transferee if registration would impose a liability on the transferee to the company. The instrument of transfer must be sent to the company for registration. Subject to the company’s memorandum or articles of association the company shall on receipt of an instrument of transfer enter the name of the transferee of the share in the register of members unless the directors resolve to refuse or delay registration of the transfer for reasons that should be specified in a resolution of directors. The transfer of a registered share is effective when the name of the transferee is entered in the register of members. The entry of the name of a person in the company’s register of members is prima facie evidence that legal title in the share vests in that person.

 

The procedure is different for the transfer of shares that are listed on a recognized exchange. Such shares may be transferred without the need for a written instrument of transfer if the transfer is carried out in accordance with the laws, rules, procedures and other requirements applicable to shares listed on the recognized exchange and subject to the company’s memorandum and articles of association.

 

The registration of transfers may, after compliance with any notice required of NASDAQ, be suspended and the register closed at such times and for such periods as our board of directors may from time to time determine, provided, however, that the registration of transfers shall not be suspended nor the register closed for more than 30 days in any year as our board may determine.

 

Liquidation. On a return of capital on winding up or otherwise (other than on conversion, redemption or purchase of ordinary shares), assets available for distribution among the holders of ordinary shares shall be distributed among the holders of the ordinary shares on a pro rata basis. Any distribution of assets or capital to holders of an ordinary share will be the same in any liquidation event.

 

Calls on Ordinary Shares and Forfeiture of Ordinary Shares.  Our board of directors may from time to time make calls upon shareholders for any amounts unpaid on their ordinary shares in a notice served to such shareholders at least 14 clear days prior to the specified time of payment. The ordinary shares that have been called upon and remain unpaid are subject to forfeiture.

 

Redemption of Ordinary Shares. The Act and our amended and restated articles of association permit us to purchase our own shares with the prior written consent of the relevant shareholders and resolution of directors and applicable law.

 

Variation of Rights of Shares.  All or any of the special rights attached to any class of shares may, subject to the provisions of the Act, only be varied with the written consent of the holders of a majority of the issued shares of that class or with the sanction of a resolution passed at a general meeting of the holders of the shares of that class. The rights conferred upon the holders of the shares of any class issued shall not, unless otherwise expressly provided by the terms of issue of the shares of that class, be deemed to be varied by the creation or issue of further shares ranking pari passu with such existing class of shares.

 

Inspection of Books and Records.     

 

A member of a company is entitled, on giving written notice to the company, to inspect (a) the memorandum and articles of association; (b) the register of members; (c) the register of directors; and (d) the minutes of meetings and resolutions of members and of those classes of members of which he is a member; and to make copies of or take extracts from the documents and records. Subject to the memorandum and articles of association, the directors may, if they are satisfied that it would be contrary to the company’s interests to allow a member to inspect any document, or part of a document, specified in (b), (c) and (d) above, refuse to permit the member to inspect the document or limit the inspection of the document, including limiting the making of copies or the taking of extracts from the records.

 

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Where a company fails or refuses to permit a member to inspect a document or permits a member to inspect a document subject to limitations, that member may apply to the BVI High Court for an order that he should be permitted to inspect the document or to inspect the document without limitation.

 

A company is required to keep at the office of its registered agent: the memorandum and articles of association of the company; the register of members or a copy of the register of members; the register of directors or a copy of the register of directors; and copies of all notices and other documents filed by the company in the previous ten years.

 

Issuance of Additional Shares. Our post-offering amended and restated memorandum of association authorizes our board of directors to issue additional ordinary shares from time to time as our board of directors shall determine, to the extent of available authorized but unissued shares.

 

Register of Members

 

Under the Act we must keep a register of members and there should be entered therein:

 

  the names and addresses of our members, a statement of the number and class of shares held by each member;
     
  the date on which the name of any person was entered on the register as a member; and
     
  the date on which any person ceased to be a member.

 

Under the Act, the register of members of our company is prima facie evidence of the matters set out therein (that is, the register of members will raise a presumption of fact on the matters referred to above unless rebutted) and a member registered in the register of members is deemed as a matter of the Act to have legal title to the shares as set against its name in the register of members. Upon completion of this offering, we will perform the procedure necessary to immediately update the register of members to record and give effect to the issuance of shares by us to the Depositary (or its nominee) as the depositary. Once our register of members has been updated, the shareholders recorded in the register of members will be deemed to have legal title to the shares set against their name.

 

If the name of any person is incorrectly entered in or omitted from our register of members, or if there is any default or unnecessary delay in entering on the register the fact of any person having ceased to be a member of our company, the person or member aggrieved (or any member of our company or our company itself) may apply to the High Court of the British Virgin Islands for an order that the register be rectified, and the Court may either refuse such application or it may, if satisfied of the justice of the case, make an order for the rectification of the register.

 

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Differences in Corporate Law

 

The Act differs from laws applicable to United States corporations and their shareholders. Set forth below is a summary of the significant differences between the provisions of the Act applicable to us and the laws applicable to companies incorporated in the State of Delaware.

 

Mergers and Similar Arrangements. Under the Act two or more companies, each a “constituent company”, may merge or consolidate. A merger involves the merging of two or more companies into one of the constituent companies (to the merger) with one constituent company continuing in existence to become the surviving company post-merger. A consolidation involves two or more companies consolidating into a new company.

 

A merger is effective on the date that the articles of merger (as described below) are registered by the Registrar of Corporate Affairs in the BVI, or on such later date, not exceeding 30 days from the date of registration as is stated in the articles of merger.

 

The Act provides that any member of the Company is entitled to payment of the fair value of his shares upon dissenting from a merger, unless the Company is the surviving company of the merger and the member continues to hold the same or similar shares. The following is a summary of the position under the Act.

 

A dissenter is in most circumstances required to give to the Company written objection to the merger, which must include a statement that the dissenter proposes to demand payment for his shares if the merger takes place. This written objection must be given before the meeting of members at which the merger is submitted to a vote, or at the meeting but before the vote. However, no objection is required from a member to whom the Company did not give notice of the meeting of members or where the proposed merger is authorized by written consent of the members without a meeting.

 

Within 20 days immediately following the written consent, or the meeting at which the merger was approved, the Company shall give written notice of the consent or resolution to each member who gave written objection or from whom written objection was not required, except those members who voted for, or consented in writing to, the proposed merger.

 

A member to whom the Company was required to give notice who elects to dissent shall, within 20 days immediately following the date on which the copy of the plan of merger or an outline of the merger is given to him, give to the Company a written notice of his decision to elect to dissent, stating:

 

(a) his name and address;
     
(b) the number and classes of shares in respect of which he dissents (which must be all shares that he holds in the Company); and
     
(c) a demand for payment of the fair value of his shares.

 

Upon the giving of a notice of election to dissent, the dissenter ceases to have any of the rights of a member except the right to be paid the fair value of his shares, and the right to institute proceedings to obtain relief on the ground that the action is illegal.

 

The Company shall make a written offer to each dissenter to purchase his shares at a specified price that the Company determines to be their fair value. Such offer must be given within 7 days immediately following the date of the expiration of the period within which members may give their notices of election to dissent, or within 7 days immediately following the date on which the merger is put into effect, whichever is later.

 

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If the Company and the dissenter fail, within 30 days immediately following the date on which the offer is made, to agree on the price to be paid for the shares owned by the dissenter, then within 20 days:

 

(a) the Company and the dissenter shall each designate an appraiser;
     
(b) the two designated appraisers together shall designate an appraiser;
     
(c) the three appraisers shall fix the fair value of the shares owned by the dissenter as of the close of business on the day prior to the date of the meeting or the date on which the resolution was passed, excluding any appreciation or depreciation directly or indirectly induced by the action or its proposal, and that value is binding on the Company and the dissenter for all purposes; and
     
(d) the Company shall pay to the dissenter the amount in money upon the surrender by him of the certificates representing his shares, and such shares shall be cancelled.

 

Shareholders’ Suits.     

 

Under the provisions of the Act, the memorandum and articles of association of a company are binding as between the company and its members and between the members. In general, members are bound by the decision of the majority or special majorities as set out in the articles of association or in the Act. As for voting, the usual rule is that with respect to normal commercial matters members may act from self-interest when exercising the right to vote attached to their shares.

 

If the majority members have infringed a minority member’s rights, the minority may seek to enforce its rights either by derivative action or by personal action. A derivative action concerns the infringement of the company’s rights where the wrongdoers are in control of the company and are preventing it from taking action, whereas a personal action concerns the infringement of a right that is personal to the particular member concerned.

 

The Act provides for a series of remedies available to members. Where a company incorporated under the Act conducts some activity which breaches the Act or the company’s memorandum and articles of association, the BVI High Court can issue a restraining or compliance order. Members can now also bring derivative, personal and Representative Actions under certain circumstances.

 

The traditional English basis for members’ remedies have also been incorporated into the Act: where a member of a company considers that the affairs of the company have been, are being or are likely to be conducted in a manner likely to be oppressive, unfairly discriminating or unfairly prejudicial to him, he may apply to the BVI High Court for an order on such conduct.

 

Any member of a company may apply to the BVI High Court for the appointment of a liquidator for the company and the Court may appoint a liquidator for the company if it is of the opinion that it is just and equitable to do so.

 

The Act provides that any member of a company is entitled to payment of the fair value of his shares upon dissenting from any of the following:

 

(a) a merger;
     
(b) a consolidation;
     
(c) any sale, transfer, lease, exchange or other disposition of more than 50 per cent in value of the assets or business of the company if not made in the usual or regular course of the business carried on by the company but not including (i) a disposition pursuant to an order of the court having jurisdiction in the matter; (ii) a disposition for money on terms requiring all or substantially all net proceeds to be distributed to the members in accordance with their respective interest within one year after the date of disposition; or (iii) a transfer pursuant to the power of the directors to transfer assets for the protection thereof;
     
(d) a redemption of 10 per cent, or fewer, of the issued shares of the company required by the holders of 90 percent, or more, of the shares of the company pursuant to the terms of the Act; and
     
(e) an arrangement, if permitted by the BVI High Court.

 

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Generally any other claims against a company by its members must be based on the general laws of contract or tort applicable in the BVI or their individual rights as members as established by the company’s memorandum and articles of association.

 

The Act provides that if a company or a director of a company engages in, proposes to engage in or has engaged in, conduct that contravenes the Act or the memorandum or articles of association of the company, the BVI High Court may, on the application of a member or a director of the company, make an order directing the company or director to comply with, or restraining the company or director from engaging in conduct that contravenes the Act or the memorandum or articles of association.

 

Indemnification of Directors and Executive Officers and Limitation of Liability. BVI law does not limit the extent to which a company’s articles of association may provide for indemnification of officers and directors, except to the extent any such provision may be held by the BVI High Court to be contrary to public policy (e.g. for purporting to provide indemnification against the consequences of committing a crime). An indemnity will be void and of no effect and will not apply to a person unless the person acted honestly and in good faith and in what he believed to be in the best interests of the company and, in the case of criminal proceedings, the person had no reasonable cause to believe that his conduct was unlawful. Our post-offering amended and restated memorandum and articles of association permit indemnification of officers and directors for losses, damages, costs and expenses incurred in their capacities as such unless such losses or damages arise from dishonesty or fraud of such directors or officers. This standard of conduct is generally the same as permitted under the Delaware General Corporation Law for a Delaware corporation. In addition, we have entered into indemnification agreements with our directors and executive officers that provide such persons with additional indemnification beyond that provided in our post-offering amended and restated memorandum and articles of association.

 

Insofar as indemnification for liabilities arising under the Securities Act may be permitted to our directors, officers or persons controlling us under the foregoing provisions, we have been informed that in the opinion of the SEC, such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.

 

Directors’ Fiduciary Duties. Under Delaware corporate law, a director of a Delaware corporation has a fiduciary duty to the corporation and its shareholders. This duty has two components: the duty of care and the duty of loyalty. The duty of care requires that a director act in good faith, with the care that an ordinarily prudent person would exercise under similar circumstances. Under this duty, a director must inform himself of, and disclose to shareholders, all material information reasonably available regarding a significant transaction. The duty of loyalty requires that a director acts in a manner he reasonably believes to be in the best interests of the corporation. He must not use his corporate position for personal gain or advantage. This duty prohibits self-dealing by a director and mandates that the best interest of the corporation and its shareholders take precedence over any interest possessed by a director, officer or controlling shareholder and not shared by the shareholders generally. In general, actions of a director are presumed to have been made on an informed basis, in good faith and in the honest belief that the action taken was in the best interests of the corporation. However, this presumption may be rebutted by evidence of a breach of one of the fiduciary duties. Should such evidence be presented concerning a transaction by a director, the director must prove the procedural fairness of the transaction, and that the transaction was of fair value to the corporation.

 

As a matter of British Virgin Islands law, a director of a British Virgin Islands company is in the position of a fiduciary with respect to the company and therefore it is considered that he or she owes the following duties to the company—a duty to act bona fide in the best interests of the company, a duty not to make a profit based on his or her position as director (unless the company permits him or her to do so) and a duty not to put himself or herself in a position where the interests of the company conflict with his or her personal interest or his or her duty to a third party. Under the Act, a director must act honestly in good faith and in the best interests of the Company. A director of a British Virgin Islands company owes to the company a duty to act with skill and care. It was previously considered that a director need not exhibit in the performance of his or her duties a greater degree of skill than may reasonably be expected from a person of his or her knowledge and experience. However, English and Commonwealth courts have moved towards an objective standard with regard to the required skill and care and these authorities are likely to be followed in the British Virgin Islands.

 

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Shareholder Action by Written Consent.  Under the Delaware General Corporation Law, a corporation may eliminate the right of shareholders to act by written consent by amendment to its certificate of incorporation. Although British Virgin Islands law may permit shareholder actions by written consent, our post-offering amended and restated articles of association provide that shareholders may not approve corporate matters by way of a unanimous written resolution signed by or on behalf of each shareholder who would have been entitled to vote on such matter at a general meeting without a meeting being held. 

 

Shareholder Proposals. Under the Delaware General Corporation Law, a shareholder has the right to put any proposal before the annual meeting of shareholders, provided it complies with the notice provisions in the governing documents. A special meeting may be called by the board of directors or any other person authorized to do so in the governing documents, but shareholders may be precluded from calling special meetings.

 

British Virgin Islands law and our amended and restated articles of association provide that shareholders holding 30% or more of the voting rights entitled to vote on any matter for which a meeting is to be converted may request that the directors shall requisition a shareholder’s meeting. As a British Virgin Islands company, we are not obliged by law to call shareholders’ annual general meetings. 

 

Cumulative Voting. Under the Delaware General Corporation Law, cumulative voting for elections of directors is not permitted unless the corporation’s certificate of incorporation specifically provides for it. Cumulative voting potentially facilitates the representation of minority shareholders on a board of directors since it permits the minority shareholder to cast all the votes to which the shareholder is entitled on a single director, which increases the shareholder’s voting power with respect to electing such director. There are no prohibitions in relation to cumulative voting under the laws of the British Virgin Islands but our post-offering amended and restated articles of association do not provide for cumulative voting. As a result, our shareholders are not afforded any less protections or rights on this issue than shareholders of a Delaware corporation.

 

Removal of Directors. Under the Delaware General Corporation Law, a director of a corporation with a classified board may be removed only for cause with the approval of a majority of the outstanding shares entitled to vote, unless the certificate of incorporation provides otherwise. Under our post-offering amended and restated articles of association, directors may be removed with or without cause, by a resolution of our shareholders, or with cause by a resolution of the directors. 

 

Transactions with Interested Shareholders. The Delaware General Corporation Law contains a business combination statute applicable to Delaware corporations whereby, unless the corporation has specifically elected not to be governed by such statute by amendment to its certificate of incorporation, it is prohibited from engaging in certain business combinations with an “interested shareholder” for three years following the date that such person becomes an interested shareholder. An interested shareholder generally is a person or a group who or which owns or owned 15% or more of the target’s outstanding voting share within the past three years. This has the effect of limiting the ability of a potential acquirer to make a two-tiered bid for the target in which all shareholders would not be treated equally. The statute does not apply if, among other things, prior to the date on which such shareholder becomes an interested shareholder, the board of directors approves either the business combination or the transaction which resulted in the person becoming an interested shareholder. This encourages any potential acquirer of a Delaware corporation to negotiate the terms of any acquisition transaction with the target’s board of directors.

 

British Virgin Islands law has no comparable statute. As a result, we are not afforded the same statutory protections in the British Virgin Islands as we would be offered by the Delaware business combination statute. However, although British Virgin Islands law does not regulate transactions between a company and its significant shareholders, it does provide that such transactions must be entered into bona fide in the best interests of the company and not with the effect of constituting a fraud on the minority shareholders. See also “Shareholders’ Suits” above. We have adopted a code of business conduct and ethics which requires employees to fully disclose any situations that could reasonably be expected to give rise to a conflict of interest, and sets forth relevant restrictions and procedures when a conflict of interest arises to ensure the best interest of the Company. 

 

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Dissolution; Winding up. Under the Delaware General Corporation Law, unless the board of directors approves the proposal to dissolve, dissolution must be approved by shareholders holding 100% of the total voting power of the corporation. Only if the dissolution is initiated by the board of directors may it be approved by a simple majority of the corporation’s outstanding shares. Delaware law allows a Delaware corporation to include in its certificate of incorporation a supermajority voting requirement in connection with dissolutions initiated by the board.

 

The liquidation of a company may be a voluntary solvent liquidation or a liquidation under the Insolvency Act. Where a company has been struck off the Register of Companies under the Act continuously for a period of 7 years it is dissolved with effect from the last day of that period.

 

Voluntary Liquidation

 

If the liquidation is a solvent liquidation, the provisions of the Act governs the liquidation. A company may only be liquidated under the Act as a solvent liquidation if it has no liabilities or it is able to pay its debts as they fall due and the value of its assets exceeds its liabilities. Subject to the memorandum and articles of association of a company, a liquidator may be appointed by a resolution of directors or resolution of members but if the directors have commenced liquidation by a resolution of directors the members must approve the liquidation plan by a resolution of members save in limited circumstances.

 

A liquidator is appointed for the purpose of collecting in and realizing the assets of a company and distributing proceeds to creditors.

 

Liquidation under the Insolvency Act

 

The Insolvency Act governs an insolvent liquidation. Pursuant to the Insolvency Act, a company is insolvent if (a) it fails to comply with the requirements of a statutory demand that has not be set aside pursuant to the Insolvency Act, execution or other process issued on a judgement, decree or order of court in favor of a creditor of the company is returned wholly or partly unsatisfied or either the value of the company’s liabilities exceeds its assets or the company is unable to pay its debts as they fall due. The liquidator must be either the Official Receiver in BVI or a BVI licensed insolvency practitioner. An individual resident outside the BVI may be appointed to act as liquidator jointly with a BVI licensed insolvency practitioner or the Official Receiver. The members of the company may appoint an insolvency practitioner as liquidator of the company or the court may appoint an Official Receiver or an eligible insolvency practitioner. The application to the court can be made by one or more of the following: (a) the company (b) a creditor (c) a member (d), the supervisor of a creditors’ arrangement in respect of the company, the Financial Services Commission and the Attorney General in the BVI.

 

The court may appoint a liquidator if:

 

(a)   the company is insolvent;
   
(b) the court is of the opinion that it is just and equitable that a liquidator should be appointed; or
   
(c) the court is of the opinion that it is in the public interest for a liquidator to be appointed.

 

An application under (a) above by a member may only be made with leave of the court, which shall not be granted unless the court is satisfied that there is prima facie case that the company is insolvent. An application under (c) above may only be made by the Financial Services Commission or the Attorney General and they may only make an application under (c) above if the company concerned is, or at any time has been, a regulated person (i.e. a person that holds a prescribed financial services license) or the company is carrying on, or at any time has carried on, unlicensed financial services business.

 

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Order of Preferential Payments upon Liquidation

 

Upon the insolvent liquidation of a company, the assets of a company shall be applied in accordance with the following priorities: (a) in paying, in priority to all other claims, the costs and expenses properly incurred in the liquidation in accordance with the prescribed priority; (b) after payment of the costs and expenses of the liquidation, in paying the preferential claims admitted by the liquidator (wages and salary, amounts to the BVI Social Security Board, pension contributions, government taxes) - preferential claims rank equally between themselves and, if the assets of the company are insufficient to meet the claims in full, they shall be paid ratably; (c) after the payment of preferential claims, in paying all other claims admitted by the liquidator, including those of non-secured creditors - the claims of non-secured creditors of the Company shall rank equally among themselves and if the assets of the company are insufficient to meet the claims in full, such non-secured creditors shall be paid ratably; (d) after paying all admitted claims, paying any interest payable under the BVI Insolvency Act; and finally (e) any surplus assets remaining after payment of the costs, expenses and claims above shall be distributed to the members in accordance with their rights and interests in the Company. Part VIII of the Insolvency Act provides for various applications which may be made by a liquidator to set aside transactions which have unfairly diminished the assets which are available to creditors.

 

The appointment of a liquidator over the assets of a company does not affect the right of a secured creditor to take possession of and realize or otherwise deal with assets of the company over which that creditor has a security interest. Accordingly, a secured creditor may enforce its security directly without recourse to the liquidator, in priority to the order of payments described in paragraph 25.7. However, so far as the assets of a company in liquidation available for payment of the claims of unsecured creditors are insufficient to pay the costs and expenses of the liquidation and the preferential creditors, those costs, expenses and claims have priority over the claims of chargees in respect of assets that are subject to a floating charge created by a company and shall be paid accordingly out of those assets.

 

The court has authority to order winding up in a number of specified circumstances including where it is, in the opinion of the court, just and equitable to do so. Under the Act and our post-offering amended and restated articles of association, our company may be dissolved, liquidated or wound up by a resolution of our shareholders.

 

Variation of Rights of Shares.  Under the Delaware General Corporation Law, a corporation may vary the rights of a class of shares with the approval of a majority of the outstanding shares of such class, unless the certificate of incorporation provides otherwise. Under British Virgin Islands law and our post-offering amended and restated articles of association, if our share capital is divided into more than one class of shares, we may vary the rights attached to any class with the written consent of the holders of a majority of the issued shares of that class or with the sanction of a resolution passed at a general meeting of the holders of the shares of that class.

 

Amendment of Governing Documents. Under the Delaware General Corporation Law, a corporation’s governing documents may be amended with the approval of a majority of the outstanding shares entitled to vote, unless the certificate of incorporation provides otherwise. As permitted by British Virgin Islands law, our post-offering amended and restated memorandum and articles of association may be amended with a resolution of our shareholders or, with certain exception by resolutions of directors.

 

Rights of Non-resident or Foreign Shareholders. There are no limitations imposed by our post-offering amended and restated memorandum and articles of association on the rights of non-resident or foreign shareholders to hold or exercise voting rights on our shares. In addition, there are no provisions in our post-offering amended and restated memorandum and articles of association governing the ownership threshold above which shareholder ownership must be disclosed.

 

History of Securities Issuances

 

We have not issued any shares in the past three years.

 

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SHARES ELIGIBLE FOR FUTURE SALE

 

Upon completion of this offering, if the minimum amount is sold, we will have [_______] ordinary shares outstanding, and if the maximum amount is sold, we will have [_______] ordinary shares outstanding. All of the Ordinary shares sold in this offering will be freely transferable by persons other than our “affiliates” without restriction or further registration under the Securities Act. Sales of substantial amounts of our ordinary shares in the public market could adversely affect prevailing market prices of our ordinary shares. Prior to this offering, there has been no public market for our ordinary shares, and while we intend to submit application for the ordinary shares to be listed on NASDAQ, we cannot assure you that a regular trading market will develop in the ordinary shares. We do not expect that a trading market will develop for our ordinary shares not represented by the ordinary shares.

 

Lock-Up Agreements

 

We, our directors and executive officers, and our existing shareholders have agreed, subject to some exceptions, not to transfer or dispose of, directly or indirectly, any of our ordinary shares, or any securities convertible into or exchangeable or exercisable for our ordinary shares, for a period of 180 days after the date of this prospectus. After the expiration of the 180-day period, the ordinary shares held by our directors, executive officers and our existing shareholders may be sold subject to the restrictions under Rule 144 under the Securities Act or by means of registered public offerings.

 

Rule 144

 

All of our ordinary shares outstanding prior to this offering are “restricted shares” as that term is defined in Rule 144 under the Securities Act and may be sold publicly in the United States only if they are subject to an effective registration statement under the Securities Act or pursuant to an exemption from the registration requirements. Under Rule 144 as currently in effect, a person who has beneficially owned our restricted shares for at least six months is generally entitled to sell the restricted securities without registration under the Securities Act beginning 90 days after the date of this prospectus, subject to certain additional restrictions.

 

Our affiliates may sell within any three-month period a number of restricted shares that does not exceed the greater of the following:

 

1% of the then outstanding ordinary shares of the same class, which will equal approximately [____] ordinary shares immediately after this offering; or
     
the average weekly trading volume of our ordinary shares on NASDAQ during the four calendar weeks preceding the date on which notice of the sale is filed with the SEC.

 

Affiliates who sell restricted securities under Rule 144 may not solicit orders or arrange for the solicitation of orders, and they are also subject to notice requirements and the availability of current public information about us.

 

Persons who are not our affiliates are only subject to one of these additional restrictions, the requirement of the availability of current public information about us, and this additional restriction does not apply if they have beneficially owned our restricted shares for more than one year.

 

Rule 701

 

In general, under Rule 701 of the Securities Act as currently in effect, each of our employees, consultants or advisors who purchases our ordinary shares from us in connection with a compensatory stock or option plan or other written agreement relating to compensation is eligible to resell such ordinary shares 90 days after we became a reporting company under the Exchange Act in reliance on Rule 144, but without compliance with some of the restrictions, including the holding period, contained in Rule 144.

  

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TAXATION

 

The following discussion of British Virgin Islands, PRC and United States federal income tax consequences of an investment in our ordinary shares is based upon laws and relevant interpretations thereof in effect as of the date of this prospectus, all of which are subject to change. This discussion does not deal with all possible tax consequences relating to an investment in our ordinary shares, such as the tax consequences under state, local and other tax laws. To the extent that the discussion relates to matters of British Virgin Islands tax law, it represents the opinion of Maples and Calder, our British Virgin Islands counsel. To the extent that the discussion relates to matters of PRC tax law, it represents the opinion of Jingtian & Gongcheng, our PRC counsel.

 

British Virgin Islands Taxation

 

The Company and all dividends, interest, rents, royalties, compensation and other amounts paid by the Company to persons who are not resident in the BVI and any capital gains realized with respect to any shares, debt obligations, or other securities of the Company by persons who are not resident in the BVI are exempt from all provisions of the Income Tax Ordinance in the BVI.

 

No estate, inheritance, succession or gift tax, rate, duty, levy or other charge is payable by persons who are not resident in the BVI with respect to any shares, debt obligation or other securities of the Company.

 

All instruments relating to transfers of property to or by the Company and all instruments relating to transactions in respect of the shares, debt obligations or other securities of the Company and all instruments relating to other transactions relating to the business of the Company are exempt from payment of stamp duty in the BVI. This assumes that the Company does not hold an interest in real estate in the BVI.

 

There are currently no withholding taxes or exchange control regulations in the BVI applicable to the Company or its members.

 

People’s Republic of China Taxation

 

Under the EIT Law, an enterprise established outside the PRC with “de facto management bodies” within the PRC is considered a “resident enterprise” for PRC enterprise income tax purposes and is generally subject to a uniform 25% enterprise income tax rate on its worldwide income. Under the implementation rules to the EIT Law, a “de facto management body” is defined as a body that has material and overall management and control over the manufacturing and business operations, personnel and human resources, finances and properties of an enterprise.

 

Our PRC subsidiary and PRC consolidated VIE are companies incorporated under PRC law and, as such, are subject to PRC enterprise income tax on their taxable income in accordance with the relevant PRC income tax laws. Pursuant to the EIT Law, which became effective on January 1, 2008 and was amended on February 24, 2017, a uniform 25% enterprise income tax rate is generally applicable to both foreign-invested enterprises and domestic enterprises, except where a special preferential rate applies. The enterprise income tax is calculated based on the entity’s global income as determined under PRC tax laws and accounting standards. We are subject to VAT at a rate of 6% on the services we provide, less any deductible VAT we have already paid or borne. We are also subject to surcharges on VAT payments in accordance with PRC law.

 

In addition, the SAT Circular 82 issued by the SAT in April 2009 specifies that certain offshore incorporated enterprises controlled by PRC enterprises or PRC enterprise groups will be classified as PRC resident enterprises if the following are located or resident in the PRC: senior management personnel and departments that are responsible for daily production, operation and management; financial and personnel decision making bodies; key properties, accounting books, company seal, minutes of board meetings and shareholders’ meetings; and half or more of the senior management or directors having voting rights. Further to SAT Circular 82, the SAT issued the SAT Bulletin 45, which took effect in September 2011, to provide more guidance on the implementation of SAT Circular 82. SAT Bulletin 45 provides for procedures and administration details of determination on resident status and administration on post-determination matters. Wah Fu is a company incorporated outside the PRC. As a holding company, its key assets are its ownership interests in its subsidiaries, and its key assets are located, and its records (including the resolutions of its board of directors and the resolutions of its shareholders) are maintained, outside the PRC. As such, we do not believe that Wah Fu meet all of the conditions above or are PRC resident enterprises for PRC tax purposes. For the same reasons, we believe our other entities outside of China are not PRC resident enterprises either. However, the tax resident status of an enterprise is subject to determination by the PRC tax authorities and uncertainties remain with respect to the interpretation of the term “de facto management body.” There can be no assurance that the PRC government will ultimately take a view that is consistent with us. If the PRC tax authorities determine that our British Virgin Islands holding company is a PRC resident enterprise for PRC enterprise income tax purposes, a number of unfavorable PRC tax consequences could follow. One example is that a 10% withholding tax would be imposed on dividends we pay to our non-PRC enterprise shareholders and with respect to gains derived by our non-PRC enterprise shareholders from transferring our shares and potentially a 20% of withholding tax would be imposed on dividends we pay to our non-PRC individual shareholders and with respect to gains derived by our non-PRC individual shareholders from transferring our shares s. See “Risk Factors—Risk Related to Doing Business in China—Under the PRC Enterprise Income Tax Law, we may be classified as a PRC “resident enterprise” for PRC enterprise income tax purposes. Such classification would likely result in unfavorable tax consequences to us and our non-PRC shareholders and has a material adverse effect on our results of operations and the value of your investment.”

 

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As a British Virgin Islands holding company, we may receive dividends from our PRC subsidiaries. The EIT Law and its implementing rules provide that dividends paid by a PRC entity to a non-resident enterprise for income tax purposes is subject to PRC withholding tax at a rate of 10%, subject to reduction by an applicable tax treaty with China. There is currently no such preferential tax treaty between China and British Virgin Islands.

 

In January 2009, the SAT promulgated the Provisional Measures for the Administration of Withholding of Enterprise Income Tax for Non-resident Enterprises, pursuant to which the entities that have the direct obligation to make certain payments to a non-resident enterprise should be the relevant tax withholders for the non-resident enterprise, and such payments include: income from equity investments (including dividends and other return on investment), interest, rents, royalties and income from assignment of property as well as other incomes subject to enterprise income tax received by non-resident enterprises in China. Further, the measures provide that in case of an equity transfer between two non-resident enterprises which occurs outside China, the non-resident enterprise which receives the equity transfer payment must, by itself or engage an agent to, file tax declaration with the PRC tax authority located at place of the PRC company whose equity has been transferred, and the PRC company whose equity has been transferred should assist the tax authorities to collect taxes from the relevant non-resident enterprise. The SAT issued a SAT Circular 59 together with the MOF in April 2009 and a SAT Circular 698 in December 2009. Both Circular 59 and Circular 698 became effective retroactively as of January 1, 2008. By promulgating and implementing these two circulars, the PRC tax authorities have enhanced their scrutiny over the direct or indirect transfer of equity interests in a PRC resident enterprise by a non-resident enterprise. Under SAT Circular 698, where a non-resident enterprise transfers the equity interests of a PRC “resident enterprise” indirectly by disposition of the equity interests of an overseas holding company, and such overseas holding company is located in certain low tax jurisdictions, the non-resident enterprise, being the transferor, must report to the relevant tax authority of the PRC “resident enterprise” this Indirect Transfer. The PRC tax authority may disregard the existence of the overseas holding company if it lacks a reasonable commercial purpose and was established for the purpose of reducing, avoiding or deferring PRC tax. As a result, gains derived from such Indirect Transfer may be subject to PRC tax at a rate of up to 10%. On February 3, 2015, the SAT issued the Announcement of the State Administration of Taxation on Several Issues Concerning the Enterprise Income Tax on Indirect Property Transfer by Non-Resident Enterprises, or SAT Bulletin 7, to supersede existing provisions in relation to the Indirect Transfer as set forth in Circular 698, while the other provisions of Circular 698 remain in force. SAT Bulletin 7 introduces a new tax regime that is significantly different from that under Circular 698. Public Notice extends its tax jurisdiction to capture not only Indirect Transfer as set forth under Circular 698 but also transactions involving transfer of immovable property in China and assets held under the establishment and place, in China of a foreign company through the offshore transfer of a foreign intermediate holding company. SAT Bulletin 7 also addresses transfer of the equity interest in a foreign intermediate holding company widely. In addition, SAT Bulletin 7 provides clearer criteria than Circular 698 on how to assess reasonable commercial purposes and introduces safe harbor scenarios applicable to internal group restructurings. However, it also brings challenges to both the foreign transferor and transferee of the Indirect Transfer as they have to make self-assessment on whether the transaction should be subject to PRC tax and to file or withhold the PRC tax accordingly. Although it appears that SAT Circular 698 and/or SAT Bulletin 7 was not intended to apply to share transfers of publicly traded companies, there is uncertainty as to the application of SAT Circular 698 and/or SAT Bulletin 7 and we and our non-resident investors may be at risk of being required to file a return and being taxed under SAT Circular 698 and/or SAT Bulletin 7 and we may be required to expend valuable resources to comply with SAT Circular 698 or to establish that we should not be taxed under SAT Circular 698 and/or SAT Bulletin 7.

 

On October 17, 2017, the SAT issued the Announcement of the State Administration of Taxation on Matters Concerning Withholding of Income Tax of Non-resident Enterprises as Source, or SAT Bulletin 37, which repealed the entire Circular 698 and the provision in relation to the time limit for the withholding agent to declare to the competent tax authority for payment of such tax of SAT Bulletin 7. Pursuant to SAT Bulletin 37, the income from property transfer, as stipulated in the second item under Article 19 of the Law on Enterprise Income Tax, shall include the income derived from transferring such equity investment assets as stock equity. The balance of deducting the equity’s net value from the total income from equity transfer shall be taxable income from equity transfer. Where a withholding agent enters into a business contract, involving the income specified in the third paragraph of Article 3 in the Law on Enterprise Income Tax, with a non-resident enterprise, the tax-excluding income of the non-resident enterprise will be treated as the tax-including income, based on which the tax payment will be calculated and remitted, if it is agreed in the contract that the withholding agent shall assume the tax payable.

 

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United States Federal Income Taxation

 

The following discussion is a summary of U.S. federal income tax considerations generally applicable to U.S. Holders (as defined below) of the ownership and disposition of our ordinary shares. This summary applies only to U.S. Holders that hold our ordinary shares as capital assets (generally, property held for investment) and that have the U.S. dollar as their functional currency. This summary is based on U.S. tax laws in effect as of the date of this prospectus, on U.S. Treasury regulations in effect or, in some cases, proposed as of the date of this prospectus, and judicial and administrative interpretations thereof available on or before such date. All of the foregoing authorities are subject to change, which could apply retroactively and could affect the tax consequences described below. Moreover, this summary does not address the U.S. federal estate, gift, Medicare, backup withholding, and alternative minimum tax considerations, or any state, local, and non-U.S. tax considerations, relating to the ownership and disposition of our ordinary shares. The following summary does not address all aspects of U.S. federal income taxation that may be important to particular investors in light of their individual circumstances or to persons in special tax situations such as:

 

  banks and other financial institutions;
     
  insurance companies;
     
  pension plans;
     
  cooperatives;
     
  regulated investment companies;
     
  real estate investment trusts;
     
  broker-dealers;
     
  traders that elect to use a mark-to-market method of accounting;
     
  certain former U.S. citizens or long-term residents;
     
  tax-exempt entities (including private foundations);
     
  persons liable for alternative minimum tax;
     
  persons holding stock as part of a straddle, hedging, conversion or integrated transaction;
     
  persons that actually or constructively own 10% or more of the total combined voting power of all classes of our voting stock; or
     
  partnerships or other entities taxable as partnerships for U.S. federal income tax purposes, or persons holding common stock through such entities.

 

Prospective investors are urged to consult their own tax advisors regarding the application of U.S. federal taxation to their particular circumstances, and the state, local, non-U.S., or other tax consequences of the ownership and disposition of our ordinary shares.

 

For purposes of this discussion, a “U.S. Holder” is a beneficial owner of our ordinary shares that is, for U.S. federal income tax purposes:

 

  an individual who is a citizen or resident of the United States;
     
  a corporation (or other entity taxable as a corporation for U.S. federal income tax purposes) created or organized in the United States or under the laws of the United States, any state thereof or the District of Columbia;
     
  an estate, the income of which is subject to U.S. federal income taxation regardless of its source; or
     
  a trust that (1) is subject to the primary supervision of a court within the United States and the control of one or more U.S. persons for all substantial decisions, or (2) has a valid election in effect under applicable U.S. Treasury regulations to be treated as a U.S. person.

 

If a partnership (or other entity treated as a partnership for U.S. federal income tax purposes) is a beneficial owner of our ordinary shares, the tax treatment of a partner in the partnership will generally depend upon the status of the partner and the activities of the partnership. Partnerships holding our ordinary shares and their partners are urged to consult their tax advisors regarding an investment in our ordinary shares.

 

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Passive Foreign Investment Company Considerations

 

A non-U.S. corporation, such as our company, will be classified as a PFIC, for U.S. federal income tax purposes for any taxable year, if either (i) 75% or more of its gross income for such year consists of certain types of “passive” income or (ii) 50% or more of the value of its assets (determined on the basis of a quarterly average) during such year is attributable to assets that produce or are held for the production of passive income (the “asset test”). For this purpose, cash and cash equivalents are categorized as passive assets and the company’s goodwill and other unbooked intangibles are taken into account as non-passive assets. Passive income generally includes, among other things, dividends, interest, rents, royalties, and gains from the disposition of passive assets. We will be treated as owning a proportionate share of the assets and earning a proportionate share of the income of any other corporation in which we own, directly or indirectly, more than 25% (by value) of the stock.

 

Although the law in this regard is not clear, we treat our consolidated VIEs as being owned by us for U.S. federal income tax purposes because we exercise effective control over the consolidated VIEs and are entitled to substantially all of their economic benefits. As a result, we consolidate their results of operations in our consolidated U.S. GAAP financial statements. If it were determined that we are not the owner of the consolidated VIEs for U.S. federal income tax purposes, we would likely be treated as a PFIC for the current taxable year and any subsequent taxable year. Assuming that we are the owner of the VIEs for U.S. federal income tax purposes, and based upon our current and expected income and assets (including goodwill, other unbooked intangibles, and the cash proceeds following this offering), we do not presently expect to be a PFIC for the current taxable year or the foreseeable future.

 

While we do not expect to be or become a PFIC in the current or foreseeable taxable years, no assurance can be given in this regard because the determination of whether we will be or become a PFIC is a factual determination made annually that will depend, in part, upon the composition of our income and assets. Furthermore, the composition of our income and assets may also be affected by how, and how quickly, we use our liquid assets and the cash raised in this offering. Under circumstances where our revenue from activities that produce passive income significantly increase relative to our revenue from activities that produce non-passive income, or where we determine not to deploy significant amounts of cash for active purposes, our risk of becoming classified as a PFIC may substantially increase. In addition, because there are uncertainties in the application of the relevant rules, it is possible that the Internal Revenue Service may challenge our classification of certain income and assets as non-passive or our valuation of our tangible and intangible assets, each of which may result in our becoming a PFIC for the current or subsequent taxable years. If we were classified as a PFIC for any year during which a U.S. Holder held our ordinary shares, we generally would continue to be treated as a PFIC for all succeeding years during which such U.S. Holder held our ordinary shares even if we cease to be a PFIC in subsequent years, unless certain elections are made.

 

The discussion below under “Dividends” and “Sale or Other Disposition” is written on the basis that we will not be or become classified as a PFIC for U.S. federal income tax purposes. If we are treated as a PFIC, the U.S. federal income tax considerations that apply generally are discussed under “Passive Foreign Investment Company Rules.”

 

Dividends

 

Subject to the discussion below under “Passive Foreign Investment Company Rules,” any cash distributions (including the amount of any PRC tax withheld) paid on our ordinary shares out of our current or accumulated earnings and profits, as determined under U.S. federal income tax principles, will generally be includible in the gross income of a U.S. Holder as dividend income on the day actually or constructively received by the U.S. Holder. Because we do not intend to determine our earnings and profits on the basis of U.S. federal income tax principles, any distribution we pay will generally be treated as a “dividend” for U.S. federal income tax purposes. A non-corporate U.S. Holder will be subject to tax on dividend income from a “qualified foreign corporation” at a lower applicable capital gains rate rather than the marginal tax rates generally applicable to ordinary income provided that certain holding period requirements are met. A non-U.S. corporation (other than a corporation that is classified as a PFIC for the taxable year in which the dividend is paid or the preceding taxable year) will generally be considered to be a qualified foreign corporation (i) if it is eligible for the benefits of a comprehensive tax treaty with the United States that the U.S. Secretary of Treasury determines is satisfactory for purposes of this provision and includes an exchange of information program, or (ii) with respect to any dividend it pays on stock that is readily tradable on an established securities market in the United States, including NASDAQ. It is unclear whether dividends that we pay on our ordinary shares will meet the conditions required for the reduced tax rate. However, in the event that we are deemed to be a PRC resident enterprise under the PRC Enterprise Income Tax Law (see “Taxation—People’s Republic of China Taxation”), we may be eligible for the benefits of the United States-PRC income tax treaty. If we are eligible for such benefits, dividends we pay on our ordinary shares, would be eligible for the reduced rates of taxation described in the this paragraph. You are urged to consult your tax advisor regarding the availability of the lower rate for dividends paid with respect to our ordinary shares. Dividends received on our ordinary shares will not be eligible for the dividends-received deduction allowed to corporations.

 

Dividends will generally be treated as income from foreign sources for U.S. foreign tax credit purposes and will generally constitute passive category income. Depending on the U.S. Holder’s individual facts and circumstances, a U.S. Holder may be eligible, subject to a number of complex limitations, to claim a foreign tax credit not in excess of any applicable treaty rate in respect of any foreign withholding taxes imposed on dividends received on our ordinary shares. A U.S. Holder who does not elect to claim a foreign tax credit for foreign tax withheld may instead claim a deduction, for U.S. federal income tax purposes, in respect of such withholding, but only for a year in which such U.S. Holder elects to do so for all creditable foreign income taxes. The rules governing the foreign tax credit are complex and their outcome depends in large part on the U.S. Holder’s individual facts and circumstances. Accordingly, U.S. Holders are urged to consult their tax advisors regarding the availability of the foreign tax credit under their particular circumstances.

 

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Sale or Other Disposition

 

Subject to the discussion below under “Passive Foreign Investment Company Rules,” a U.S. Holder will generally recognize capital gain or loss upon the sale or other disposition of ordinary shares in an amount equal to the difference between the amount realized upon the disposition and the U.S. Holder’s adjusted tax basis in such ordinary shares. Any capital gain or loss will be long term if the ordinary shares have been held for more than one year and will generally be U.S.-source gain or loss for U.S. foreign tax credit purposes. Long-term capital gains of non-corporate taxpayers are currently eligible for reduced rates taxation. In the event that gain from the disposition of the ordinary shares is subject to tax in the PRC, such gain may be treated as PRC-source gain under the United States-PRC income tax treaty. The deductibility of a capital loss may be subject to limitations. U.S. Holders are urged to consult their tax advisors regarding the tax consequences if a foreign tax is imposed on a disposition of our ordinary shares, including the availability of the foreign tax credit under their particular circumstances.

 

Passive Foreign Investment Company Rules

 

If we are classified as a PFIC for any taxable year during which a U.S. Holder holds our ordinary shares, and unless the U.S. Holder makes a mark-to-market election (as described below), the U.S. Holder will generally be subject to special tax rules that have a penalizing effect, regardless of whether we remain a PFIC, on (i) any excess distribution that we make to the U.S. Holder (which generally means any distribution paid during a taxable year to a U.S. Holder that is greater than 125 percent of the average annual distributions paid in the three preceding taxable years or, if shorter, the U.S. Holder’s holding period for the ordinary shares), and (ii) any gain realized on the sale or other disposition of ordinary shares. Under these rules,

 

 

  the U.S. Holder’s gain or excess distribution will be allocated ratably over the U.S. Holder’s holding period for the ordinary shares;
     
  the amount allocated to the current taxable year and any taxable years in the U.S. Holder’s holding period prior to the first taxable year in which we are classified as a PFIC (each, a “pre-PFIC year”), will be taxable as ordinary income;
     
  the amount allocated to each prior taxable year, other than a pre-PFIC year, will be subject to tax at the highest tax rate in effect for individuals or corporations, as appropriate, for that year; and
     
  an additional tax equal to the interest charge generally applicable to underpayments of tax will be imposed in respect of the tax attributable to each prior taxable year, other than a pre-PFIC year, of the U.S. Holder.

 

If we are treated as a PFIC for any taxable year during which a U.S. Holder holds our ordinary shares, or if any of our subsidiaries is also a PFIC, such U.S. Holder would be treated as owning a proportionate amount (by value) of the shares of any lower-tier PFICs for purposes of the application of these rules. U.S. Holders are urged to consult their tax advisors regarding the application of the PFIC rules to any of our subsidiaries.

 

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As an alternative to the foregoing rules, a U.S. Holder of “marketable stock” in a PFIC may make a mark-to-market election with respect to such stock, provided that such stock is “regularly traded” within the meaning of applicable U.S. Treasury regulations. If our ordinary shares qualify as being regularly traded, and an election is made, the U.S. Holder will generally (i) include as ordinary income for each taxable year that we are a PFIC the excess, if any, of the fair market value of ordinary shares held at the end of the taxable year over the adjusted tax basis of such ordinary shares and (ii) deduct as an ordinary loss the excess, if any, of the adjusted tax basis of the ordinary shares over the fair market value of such ordinary shares held at the end of the taxable year, but such deduction will only be allowed to the extent of the amount previously included in income as a result of the mark-to-market election. The U.S. Holder’s adjusted tax basis in the ordinary shares would be adjusted to reflect any income or loss resulting from the mark-to-market election. If a U.S. Holder makes a mark-to-market election in respect of a corporation classified as a PFIC and such corporation ceases to be classified as a PFIC, the U.S. Holder will not be required to take into account the gain or loss described above during any period that such corporation is not classified as a PFIC. If a U.S. Holder makes a mark-to-market election, any gain such U.S. Holder recognizes upon the sale or other disposition of our ordinary shares in a year when we are a PFIC will be treated as ordinary income and any loss will be treated as ordinary loss, but such loss will only be treated as ordinary loss to the extent of the net amount previously included in income as a result of the mark-to-market election.

 

Because a mark-to-market election cannot be made for any lower-tier PFICs that we may own, a U.S. Holder may continue to be subject to the PFIC rules with respect to such U.S. Holder’s indirect interest in any investments held by us that are treated as an equity interest in a PFIC for U.S. federal income tax purposes.

 

Furthermore, as an alternative to the foregoing rules, a U.S. Holder that owns stock of a PFIC generally may make a “qualified electing fund” election regarding such corporation to elect out of the PFIC rules described above regarding excess distributions and recognized gains. We do not intend to provide information necessary for U.S. Holders to make qualified electing fund elections which, if available, would result in tax treatment different from the general tax treatment for PFICs described above.

 

If a U.S. Holder owns our ordinary shares during any taxable year that we are a PFIC, the U.S. Holder must generally file an annual Internal Revenue Service Form 8621 and provide such other information as may be required by the U.S. Treasury Department, whether or not a mark-to-market election is or has been made. If we are or become a PFIC, you should consult your tax advisor regarding any reporting requirements that may apply to you.

 

You should consult your tax advisors regarding how the PFIC rules apply to your investment in our ordinary shares.

 

Information Reporting

 

Certain U.S. Holders are required to report information to the Internal Revenue Service relating to an interest in “specified foreign financial assets,” including shares issued by a non-United States corporation, for any year in which the aggregate value of all specified foreign financial assets exceeds $50,000 (or a higher dollar amount prescribed by the Internal Revenue Service), subject to certain exceptions (including an exception for shares held in custodial accounts maintained with a U.S. financial institution). These rules also impose penalties if a U.S. Holder is required to submit such information to the Internal Revenue Service and fails to do so.

 

In addition, U.S. Holders may be subject to information reporting to the Internal Revenue Service with respect to dividends on and proceeds from the sale or other disposition of our ordinary shares. Each U.S. Holder is advised to consult with its tax advisor regarding the application of the U.S. information reporting rules to their particular circumstances.

 

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UNDERWRITING

 

We have entered into an underwriting agreement with Network 1 Financial Securities, Inc., as the underwriter named therein (the “Underwriter”), with respect to the ordinary shares in this offering. Under the terms and subject to the conditions contained in the underwriting agreement, we have agreed to issue and sell a minimum offering amount of [___] ordinary shares and a maximum offering amount of [___] ordinary shares on a best efforts basis. The offering is being made without a firm commitment by the Underwriter, which has no obligation or commitment to purchase any securities. As a result, we may not be able to sell the minimum number of ordinary shares. The Underwriter is not required to sell any specific number of dollar amount of ordinary shares but will use its best efforts to sell the ordinary shares offered.

 

We do not intend to close this offering unless we sell at least a minimum number of ordinary shares, at the price per share set forth on the cover page of this prospectus, to result in sufficient proceeds to list our ordinary shares on NASDAQ. We expect our ordinary shares will trade on NASDAQ under the symbol “WAFU”. The offering may close or terminate, as the case may be, on the earlier of (i) any time after the minimum offering amount of our ordinary shares is raised, or (ii) [__] days from the date of this prospectus, or the expiration date. We retain the right to terminate the offering prior to the expiration of the [__]-day period. If we can successfully raise the minimum offering amount within the offering period, the proceeds from the offering will be released to us. If we do not raise the minimum offering amount of $5,000,000, we will not conduct a closing of this offering and will promptly return to investors all amounts previously deposited by them in escrow, without interest or deduction.

 

We expect that delivery of the ordinary shares will be made to investors through the book-entry facilities of The Depository Trust Company.

 

The underwriting agreement provides that the obligation of the Underwriter to sell the ordinary shares, on a best efforts basis, is subject to certain conditions precedent, including but not limited to (1) obtaining listing approval on NASDAQ, (2) delivery of legal opinions and (3) delivery of auditor comfort letters. The Underwriter is under no obligation to purchase any ordinary shares for its own account. As an offering on a best efforts basis, there can be no assurance that the offering contemplated hereby will ultimately be consummated. The Underwriter may, but is not obligated to, retain other selected dealers that are qualified to offer and sell the shares and that are members of the Financial Industry Regulatory Authority, Inc. (“FINRA”),

 

Discounts, Commissions and Expenses

 

We have agreed to pay the Underwriter a fee equal to 7.5% of the gross proceeds of the offering from investors introduced by the Underwriter and a fee equal to 4.5% of the gross proceeds of the offering from investors introduced by us. We have agreed to pay the Underwriter a corporate finance fee equal to 2% of the gross proceeds of the offering. We have also agreed to pay the Underwriter’s reasonable out-of-pocket expenses relating to this offering up to $75,000, including but not limited to (i) reasonable travel and out-of-pocket expenses, including clearing charges, (ii) reasonable fees of Underwriter’s counsel incurred by the Underwriter in connection with this offering, (iii) the cost of due diligence meetings not exceeding $10,000 in the aggregate; (iv) preparation of printed documents for closing and deal mementos with costs not exceeding US$3,000; and (v) all reasonable documented fees and expenses for conducting a net road show presentation not exceeding $10,000. As of January 2018, we have paid an advance of $75,000 to the Underwriter to be applied to the Underwriter’s anticipated out-of-pocket expenses. Such advance payments will be returned to us to the extent such out-of-pocket expenses are not actually incurred in accordance with FINRA Rule 5110(f)(2)(C).

  

    Minimum offering amount     Maximum offering amount  
    Per ordinary share     Total     Per ordinary share     Total  
Initial public offering price   US$ [__]     US$ 5,000,000     US$ [__]     US$ 10,000,000  
Commissions to the underwriter (7.5%) for sales to investors introduced by the underwriter (1)   US$ [__]     US$ [___]     US$ [__]     US$ [___]  
Commissions to the underwriter (4.5%) for sales to investors introduced by us (1)   US$ [__]     US$ [___]     US$ [__]     US$ [___]  
Proceeds to our company before expenses (1)(2)   US$ [__]     US$ [___]     US$ [__]     US$ [___]  

   

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In addition, we have agreed to grant the Underwriter non-redeemable warrants to purchase an amount equal to five percent (5%) of the ordinary shares sold in the offering, which warrants will be exercisable six months after the effective date of the registration statement, have three (3) year terms and cashless exercise options. Such warrants are exercisable at a price of 125% of the public offering price of the ordinary shares offered pursuant to this offering. We will register the shares underlying the underwriter warrants and will file all necessary undertakings in connection therewith. The underwriter warrants may not be sold, transferred, assigned, pledged or hypothecated, or be the subject of any hedging, short sale, derivative, put, or call transaction that would result in the effective economic disposition of the securities by any person for a period of 180 days immediately following the effective date of the registration statement, of which this prospectus forms a part (in accordance with FINRA Rule 5110), except that they may be assigned, in whole or in part, to any successor, officer, manager, member, or partner of the Underwriter, and to members of the syndicate or selling group and their respective officers, managers, members or partners, if all securities so transferred remain subject to the lock-up restriction for the remainder of the time period. The underwriter warrants may be exercised as to all or a lesser number of shares, will provide for cashless exercise. The total expenses of the offering payable by us, excluding underwriting discounts and commissions, will be approximately US$812,358.5. Expenses include the SEC and the FINRA filing fees, the NASDAQ listing fee, and printing, legal, accounting and miscellaneous expenses.

 

We have agreed that, subject to certain exceptions, we will not without the prior written consent of the Underwriter, during the period ending 180 days after the closing of the offering (the “restricted period”):

 

  offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, lend, or otherwise transfer or dispose of, directly or indirectly, any ordinary shares or any securities convertible into or exercisable or exchangeable for ordinary shares;
     
  enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of the ordinary shares; or
     
  file any registration statement with the SEC relating to the offering of any ordinary shares or any securities convertible into or exercisable for ordinary shares or ordinary shares (other than a registration statement on Form S-8);

 

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whether any such transaction described above is to be settled by delivery of ordinary shares, or such other securities, in cash or otherwise. In the event that we enter into a letter of intent or effectuate a public or private offering of our securities without the prior written consent of the Underwriter within six months after the execution of our engagement letter with the Underwriter, we shall be liable to the Underwriter $75,000.

 

Each of our directors, executive officers and existing beneficial owners of our outstanding ordinary shares has agreed that, subject to certain exceptions, such director, executive officer or beneficial owner of our outstanding ordinary shares will not, without the prior written consent of the Underwriter, during the restricted period:

 

  offer, pledge, sell, contract to sell, grant, lend or otherwise transfer or dispose of, directly or indirectly, any ordinary shares or any securities convertible into or exercisable or exchangeable for ordinary shares;
     
  enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of the ordinary shares; or
     
  make any demand for or exercise any right with respect to, the registration of any ordinary shares or any security convertible into or exercisable or exchangeable for ordinary shares;

 

whether any such transaction described above is to be settled by delivery of ordinary shares or such other securities, in cash or otherwise.

 

Prior to this offering, there has been no public market for the ordinary shares. The initial public offering price will be determined by negotiations between us and the Underwriter. In determining the initial public offering price, we and the Underwriter expects to consider a number of factors, including:

 

  the information set forth in this prospectus and otherwise available to the Underwriter;
     
  our prospects and the history and prospects for the industry in which we compete;
     
  an assessment of our management;
     
  our prospects for future earnings;
     
  the general condition of the securities markets at the time of this offering;
     
  the recent market prices of, and demand for, publicly traded securities of generally comparable companies; and
     
  other factors deemed relevant by the Underwriter and us.

 

Neither we nor the Underwriter can assure investors that an active trading market will develop for our ordinary shares, or that the shares will trade in the public market at or above the initial public offering price.

 

We have agreed to indemnify the Underwriter against certain liabilities, including liabilities under the Securities Act. If we are unable to provide this indemnification, we will contribute to payments that the Underwriter may be required to make for these liabilities.

 

The address of Network 1 Financial Securities, Inc. is 2 Bridge Avenue, Suite 241, Red Bank, NJ 0770.

 

Deposit of Offering Proceeds

 

The proceeds from the sale of the ordinary shares in this offering will be deposited in a separate (limited to funds received on behalf of us) non-interest bearing bank account at the branch of [_____] established by the Escrow Agent (the “Escrow Account”). We have appointed Continental Stock Transfer & Trust Company, an independent third party, as our Escrow Agent. The purpose of the Escrow Account is for (i) the deposit of all subscription monies (checks or wire transfers) which are received by the Underwriter from prospective purchasers of the our offered Ordinary shares and are delivered by the Underwriter to the Escrow Agent, (ii) the holding of amounts of subscription monies which are collected through the banking system, and (iii) the disbursement of collected funds.

 

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The Underwriter shall promptly deliver to the Escrow Agent all funds in the form of checks or wire transfers which it receives from prospective purchasers of our Ordinary shares by noon the next business day following receipt where internal supervisory review is conducted at the same location at which subscription documents and funds are received. Simultaneously with each deposit to the Escrow Account, the Underwriter shall inform the Escrow Agent about the subscription information for each prospective purchaser. Upon the Escrow Agent’s receipt of such monies, they shall be credited to the Escrow Account. All checks delivered to the Escrow Agent shall be made payable to “[_____]”. The Escrow Agent shall not be required to accept for credit to the Escrow Account or for deposit into the Escrow Account checks which are not accompanied by the appropriate subscription information. Wire transfers representing payments by prospective purchasers shall not be deemed deposited in the Escrow Account until the Escrow Agent has received in writing the subscription information required with respect to such payments.

 

No interest will be available for payment to either us or the investors (since the funds are being held in a non-interest bearing account). All subscription funds will be held in trust pending the raising of the minimum offering amount and no funds will be released to us until the completion of the offering. Release of the funds to us is based upon the Escrow Agent reviewing the records of the depository institution holding the escrow to verify that the funds received have cleared the banking system prior to releasing the funds to us. All subscription information and subscription funds through checks or wire transfers should be delivered to the Escrow Agent. Failure to do so will result in subscription funds being returned to the investor. In the event that the minimum offering amount is not raised by [_____] or the offering is otherwise terminated, all subscription funds from the escrow account will be returned to investors by noon the next business day after termination of the offering. Prior to [_____], in no event will funds be returned to you unless the offering is terminated. You will only be entitled to receive a refund of your subscription price if we do not raise a minimum of $5,000,000 by [_____].

 

Electronic Offer, Sale and Distribution of Ordinary shares

 

A prospectus in electronic format may be made available on websites maintained by the Underwriter, or selling group members, if any, participating in this offering. The representatives may agree to allocate a number of ordinary shares to underwriters for sale to their online brokerage account holders. Internet distributions will be allocated by the representatives to underwriters that may make Internet distributions on the same basis as other allocations. In addition, ordinary shares may be sold by the Underwriter to securities dealers who resell Ordinary shares to online brokerage account holders. Other than the prospectus in electronic format, the information on the Underwriter’s website and any information contained in any other website maintained by any underwriter or selling group member is not part of the prospectus or the registration statement of which this prospectus forms a part, has not been approved and/or endorsed by us or any underwriter or selling group member in its capacity as underwriter or selling group member and should not be relied upon by investors.

 

Pricing of the Offering

 

Prior to this offering, there has been no public market for the ordinary shares. The initial public offering price is determined by negotiations between us and the representatives. Among the factors considered in determining the initial public offering price are our future prospects and those of our industry in general, our sales, earnings, certain other financial and operating information in recent periods, the price-earnings ratios, price-sales ratios and market prices of securities and certain financial and operating information of companies engaged in activities similar to ours, the general condition of the securities markets at the time of this offering, the recent market prices of, and demand for, publicly traded common share of generally comparable companies, and other factors deemed relevant by the representatives and us. Neither we nor the Underwriter can assure investors that an active trading market will develop for the ordinary shares, or that the ordinary shares will trade in the public market at or above the initial public offering price.

 

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Selling Restrictions

 

No action may be taken in any jurisdiction other than the United States that would permit a public offering of the ordinary shares or the possession, circulation or distribution of this prospectus in any jurisdiction where action for that purpose is required. Accordingly, the ordinary shares may not be offered or sold, directly or indirectly, and neither the prospectus nor any other offering material or advertisements in connection with the ordinary shares may be distributed or published in or from any country or jurisdiction except under circumstances that will result in compliance with any applicable laws, rules and regulations of any such country or jurisdiction.

 

Australia. This document has not been lodged with the Australian Securities & Investments Commission and is only directed to certain categories of exempt persons. Accordingly, if you receive this document in Australia:

 

(a)

you confirm and warrant that you are either:

 

(b) “sophisticated investor” under section 708(8)(a) or (b) of the Corporations Act 2001 (Cth) of Australia, or the Corporations Act;

 

(ii) “sophisticated investor” under section 708(8)(c) or (d) of the Corporations Act and that you have provided an accountant’s certificate to the company which complies with the requirements of section 708(8)(c)(i) or (ii) of the Corporations Act and related regulations before the offer has been made;

 

(iii) person associated with the company under section 708(12) of the Corporations Act; or

 

(iv) “professional investor” within the meaning of section 708(11)(a) or (b) of the Corporations Act;

 

and to the extent that you are unable to confirm or warrant that you are an exempt sophisticated investor, associated person or professional investor under the Corporations Act, any offer made to you under this document is void and incapable of acceptance;

 

(b) you warrant and agree that you will not offer any of the ordinary shares issued to you pursuant to this document for resale in Australia within 12 months of those ordinary shares being issued unless any such resale offer is exempt from the requirement to issue a disclosure document under section 708 of the Corporations Act.

 

Canada.  The ordinary shares may be sold only to purchasers purchasing, or deemed to be purchasing, as principal that are accredited investors, as defined in National Instrument 45-106 Prospectus Exemptions or subsection 73.3(1) of the Securities Act (Ontario), and are permitted clients, as defined in National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations . Any resale of the ordinary shares must be made in accordance with an exemption from, or in a transaction not subject to, the prospectus requirements of applicable securities laws.

 

Securities legislation in certain provinces or territories of Canada may provide a purchaser with remedies for rescission or damages if this prospectus (including any amendment thereto) contains a misrepresentation, provided that the remedies for rescission or damages are exercised by the purchaser within the time limit prescribed by the securities legislation of the purchaser’s province or territory. The purchaser should refer to any applicable provisions of the securities legislation of the purchaser’s province or territory for particulars of these rights or consult with a legal advisor.

 

Pursuant to section 3A.3 (or, in the case of securities issued or guaranteed by the government of a non-Canadian jurisdiction, section 3A.4) of National Instrument 33-105 Underwriting Conflicts (“NI 33-105”), the Underwriter is not required to comply with the disclosure requirements of NI 33-105 regarding underwriter conflicts of interest in connection with this offering.

 

British Virgin Islands.  This prospectus does not constitute an invitation or offer to the public in the British Virgin Islands of the ordinary shares, whether by way of sale or subscription. The Underwriter has not offered or sold, and will not offer or sell, directly or indirectly, any ordinary shares in the British Virgin Islands.

 

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European Economic Area. In relation to each Member State of the European Economic Area which has implemented the Prospectus Directive (each, a “Relevant Member State”) an offer to the public of any shares which are the subject of the offering contemplated by this prospectus may not be made in that Relevant Member State unless the prospectus has been approved by the competent authority in such Relevant Member State or, where appropriate, approved in another Relevant Member State and notified to the competent authority in that Relevant Member State, all in accordance with the Prospectus Directive, except that an offer to the public in that Relevant Member State of any shares may be made at any time under the following exemptions under the Prospectus Directive, if they have been implemented in that Relevant Member State:

 

  to legal entities which are authorized or regulated to operate in the financial markets or, if not so authorized or regulated, whose corporate purpose is solely to invest in securities;
     
  to any legal entity which has two or more of (i) an average of at least 250 employees during the last financial year; (ii) a total balance sheet of more than €43,000,000 and (iii) an annual net turnover of more than €50,000,000, as shown in its last annual or consolidated accounts;
     
  by the Underwriter to fewer than 100 or, if the Relevant Member State has implemented the relevant provision of the 2010 PD Amending Directive, 150, natural or legal persons (other than “qualified investors” as defined in the Prospectus Directive) subject to obtaining the prior consent of the representatives for any such offer; or
     
  in any other circumstances falling within Article 3(2) of the Prospectus Directive; provided that no such offer of shares shall result in a requirement for the publication by us or any representative of a prospectus pursuant to Article 3 of the Prospectus Directive or supplement a prospectus pursuant to Article 16 of the Prospectus Directive.

 

Any person making or intending to make any offer of shares within the EEA should only do so in circumstances in which no obligation arises for us or the Underwriter to produce a prospectus for such offer. Neither we nor the Underwriter has authorized, nor do they authorize, the making of any offer of shares through any financial intermediary, other than offers made by the Underwriter which constitute the final offering of shares contemplated in this prospectus.

 

For the purposes of this provision, and your representation below, the expression an “offer to the public” in relation to any shares in any Relevant Member State means the communication in any form and by any means of sufficient information on the terms of the offer and any shares to be offered so as to enable an investor to decide to purchase any shares, as the same may be varied in that Relevant Member State by any measure implementing the Prospectus Directive in that Relevant Member State and the expression “Prospectus Directive” means Directive 2003/71/EC (including the 2010 PD Amending Directive, to the extent implemented in the Relevant Member State) and includes any relevant implementing measure in each Relevant Member State and the expression “2010 PD Amending Directive” means Directive 2010/73/EU.

 

Each person in a Relevant Member State who receives any communication in respect of, or who acquires any shares under, the offer of shares contemplated by this prospectus will be deemed to have represented, warranted and agreed to and with us and each underwriter that:

 

  it is a “qualified investor” within the meaning of the law in that Relevant Member State implementing Article 2(1)(e) of the Prospectus Directive; and
     
  in the case of any shares acquired by it as a financial intermediary, as that term is used in Article 3(2) of the Prospectus Directive, (i) the shares acquired by it in the offering have not been acquired on behalf of, nor have they been acquired with a view to their offer or resale to, persons in any Relevant Member State other than “qualified investors” (as defined in the Prospectus Directive), or in circumstances in which the prior consent of the representatives has been given to the offer or resale; or (ii) where shares have been acquired by it on behalf of persons in any Relevant Member State other than qualified investors, the offer of those shares to it is not treated under the Prospectus Directive as having been made to such persons.

 

In addition, in the United Kingdom, this document is being distributed only to, and is directed only at, and any offer subsequently made may only be directed at persons who are “qualified investors” (as defined in the Prospectus Directive) (i) who have professional experience in matters relating to investments falling within Article 19 (5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended, or the Order, and/or (ii) who are high net worth companies (or persons to whom it may otherwise be lawfully communicated) falling within Article 49(2)(a) to (d) of the Order (all such persons together being referred to as “relevant persons”). This document must not be acted on or relied on in the United Kingdom by persons who are not relevant persons. In the United Kingdom, any investment or investment activity to which this document relates is only available to, and will be engaged in with, relevant persons.

 

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Japan.  The ordinary shares have not been and will not be registered under the Financial Instruments and Exchange Law of Japan, and ordinary shares will not be offered or sold, directly or indirectly, in Japan or to, or for the benefit of, any resident of Japan (which term as used herein means any person resident in Japan, including any corporation or other entity organized under the laws of Japan), or to others for re-offering or resale, directly or indirectly, in Japan or to a resident of Japan, except pursuant to any exemption from the registration requirements of, and otherwise in compliance with, the Financial Instruments and Exchange Law and any other applicable laws, regulations and ministerial guidelines of Japan.

 

Hong Kong. The ordinary shares may not be offered or sold in Hong Kong by means of any document other than (i) in circumstances which do not constitute an offer to the public within the meaning of the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Cap.32, Laws of Hong Kong), or (ii) to “professional investors” within the meaning of the Securities and Futures Ordinance (Cap.571, Laws of Hong Kong) and any rules made thereunder, or (iii) in other circumstances which do not result in the document being a “prospectus” within the meaning of the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Cap.32, Laws of Hong Kong), and no advertisement, invitation or document relating to the ordinary shares may be issued or may be in the possession of any person for the purpose of issue (in each case whether in Hong Kong or elsewhere), which is directed at, or the contents of which are likely to be accessed or read by, the public in Hong Kong (except if permitted to do so under the laws of Hong Kong) other than with respect to ordinary shares which are or are intended to be disposed of only to persons outside Hong Kong or only to “professional investors” within the meaning of the Securities and Futures Ordinance (Cap.571, Laws of Hong Kong) and any rules made thereunder.

 

Singapore.  This prospectus has not been registered as a prospectus with the Monetary Authority of Singapore. Accordingly, this prospectus and any other document or material in connection with the offer or sale, or invitation for subscription or purchase, of our ordinary shares may not be circulated or distributed, nor may our ordinary shares be offered or sold, or be made the subject of an invitation for subscription or purchase, whether directly or indirectly, to persons in Singapore other than (i) to an institutional investor under Section 274 of the Securities and Futures Act, Chapter 289 of Singapore, or SFA, (ii) to a relevant person or any person pursuant to Section 275(1A), and in accordance with the conditions specified in Section 275 of the SFA, and in accordance with the conditions specified in Section 275 of the SFA or (iii) otherwise pursuant to, and in accordance with the conditions of, any other applicable provision of the SFA, in each case subject to compliance with conditions set forth in the SFA.

 

Where our ordinary shares are subscribed or purchased under Section 275 by a relevant person which is: (a) a corporation (which is not an accredited investor as defined in Section 4A of the SFA) the sole business of which is to hold investments and the entire share capital of which is owned by one or more individuals, each of whom is an accredited investor; or (b) a trust (where the trustee is not an accredited investor) whose sole purpose is to hold investments and each beneficiary of the trust is an individual who is an accredited investor; shares, debentures and units of shares and debentures of that corporation or the beneficiaries’ rights and interest (howsoever described) in that trust shall not be transferred within six months after that corporation or that trust has acquired the ordinary shares under Section 275 of the SFA, except: (1) to an institutional investor (for corporations under Section 274 of the SFA) or to a relevant person defined in Section 275(2) of the SFA, or to any person pursuant to an offer that is made on terms that such shares, debentures and units of shares and debentures of that corporation or such rights and interest in that trust are acquired at a consideration of not less than S$200,000 (or its equivalent in a foreign currency) for each transaction, whether such amount is to be paid for in cash or by exchange of securities or other assets, and further for corporations, in accordance with the conditions, specified in Section 275 of the SFA; (2) where no consideration is or will be given for the transfer; or (3) where the transfer is by operation of law.

 

People’s Republic of China. This prospectus has not been and will not be circulated or distributed in the PRC, and ordinary shares may not be offered or sold, and will not be offered or sold to any person for re-offering or resale, directly or indirectly, to any resident of the PRC except pursuant to applicable laws and regulations of the PRC.

 

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EXPENSES RELATING TO THIS OFFERING

 

Set forth below is an itemization of the total expenses, excluding underwriting discounts and commissions, that we expect to incur in connection with this offering. With the exception of the SEC registration fee and the NASDAQ listing fee, all amounts are estimates.

 

SEC Registration Fee   US$ 1,369.5  
NASDAQ Listing Fee   US$ 55,000  
Underwriting Fee   US$ 75,000  
Legal Fees and Expenses   US$ 354,943  
Accounting Fees and Expenses   US$ 270,000  
Printing and Engraving Expenses   US$ 16,475  
Industry Research Fee   US$ 8,571  
Investor Relations Fee   US$ 26,000  
Miscellaneous Expenses   US$ 5,000  
Total   US$ 812,358.5  

 

 

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LEGAL MATTERS

 

Ellenoff Grossman & Schole LLP is acting as counsel to our company regarding U.S. securities law matters. The validity of the ordinary shares offered hereby will be passed upon for us by Maples and Calder. Certain legal matters with respect to U.S. federal and New York State law in connection with this offering will be passed upon for the Underwriter by Mei & Mark LLP. Legal matters as to PRC law will be passed upon for us by Jingtian & Gongcheng and for the Underwriter by [______]. Ellenoff Grossman & Schole LLP may rely upon Maples and Calder with respect to matters governed by British Virgin Islands law and Jingtian & Gongcheng with respect to matters governed by PRC law. Mei & Mark LLP may rely upon [_____] with respect to matters governed by PRC law.

 

EXPERTS

 

The consolidated financial statements as of March 31, 2017 and 2016 and for each of the years then ended included in this prospectus have been so included in reliance on the report of Friedman LLP, an independent registered public accounting firm, given on the authority of such firm as experts in accounting and auditing. The section titled ” Industry Overview” have been prepared by China Research and Intelligence Co., Ltd., our industry expert, who has confirmed to us that such sections accurately describe the online education industry of PRC.

 

The office of Friedman LLP, is located at 1700 Broadway New York, NY 10019.

 

WHERE YOU CAN FIND ADDITIONAL INFORMATION

 

We have filed a registration statement, including relevant exhibits, with the SEC on Form F-1 under the Securities Act with respect to the ordinary shares to be sold in this offering. This prospectus, which constitutes a part of the registration statement on Form F-1, does not contain all of the information contained in the registration statement. You should read our registration statements and their exhibits and schedules for further information with respect to us and our ordinary shares.

 

Immediately upon the effectiveness of the registration statement on Form F-1 to which this prospectus is a part, we will become subject to periodic reporting and other informational requirements of the Exchange Act as applicable to foreign private issuers. Accordingly, we will be required to file reports, including annual reports on Form 20-F, and other information with the SEC. All information filed with the SEC can be inspected over the internet at the SEC’s website at www.sec.gov and copied at the public reference facilities maintained by the SEC at 100 F Street, N.E., Washington, D.C. 20549. You can request copies of these documents, upon payment of a duplicating fee, by writing to the SEC.

 

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WAH FU EDUCATION GROUP LIMITED AND SUBSIDIARIES

 

CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED MARCH 31, 2017 AND 2016

 

AND

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

   

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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Consolidated financial statements  
   
Report of Independent Registered Public Accounting Firm   F-3
     
Consolidated Balance Sheets   F-4
     
Consolidated Statements of Income and Comprehensive Income   F-5
     
Consolidated Statements of Changes in Equity   F-6
     
Consolidated Statements of Cash Flows   F-7
     
Notes to Consolidated Financial Statements   F-8 – F-26

   

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

  

To the Board of Directors and Shareholders of

Wah Fu Education Group Limited

  

We have audited the accompanying consolidated balance sheets of Wah Fu Education Group Limited and its subsidiaries (collectively, the “Company”) as of March 31, 2017 and 2016, and the related consolidated statements of income and comprehensive income, changes in equity, and cash flows for each of the two years in the periods ended March 31, 2017 and 2016. The Company’s management is responsible for these consolidated financial statements. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

 

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

 

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of March 31, 2017 and 2016, and the results of its operations and its cash flows for each of the two years in the periods ended March 31, 2017 and 2016, in conformity with accounting principles generally accepted in the United States of America.

 

/s/ Friedman LLP

 

New York, New York

September 15, 2017, except for Note 10, as to which the date is December 22, 2017 and Note 12, as to which the date is March 20, 2018.

 

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WAH FU EDUCATION GROUP LIMITED AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

 

    As of
March 31,
    As of
March 31,
 
    2017     2016  
ASSETS            
CURRENT ASSETS:            
Cash   $ 5,600,768     $ 5,171,535  
Accounts receivable, net     664,263       1,055,744  
Inventories     8,803       7,530  
Other receivables, net     76,506       24,201  
Loan to third parties     232,182       15,505  
Other current assets     28,299       67,134  
TOTAL CURRENT ASSETS     6,610,821       6,341,649  
                 
Property and equipment, net     193,376       256,715  
Investment in unconsolidated entities     346,682       113,575  
Deferred tax assets     139,403       52,918  
TOTAL  ASSETS   $ 7,290,282     $ 6,764,857  
                 
CURRENT LIABILITIES:                
Accounts payable   $ -     $ 14,220  
Deferred revenue     518,704       234,880  
Taxes payable     322,330       346,416  
Accrued and other liabilities     197,204       202,907  
TOTAL CURRENT LIABILITIES     1,038,238       798,423  
                 
TOTAL LIABILITIES     1,038,238       798,423  
                 
Commitments                
                 
EQUITY:                
Common stock, $0.01 par value, 30,000,000 shares authorized; 3,200,000 shares issued and outstanding as of March 31, 2017 and March 31, 2016*     32 ,000       32 ,000  
Additional paid-in capital     217 ,395       217 ,395  
Statutory reserve     64,190       -  
Retained earnings     6,381,514       5,873,003  
Accumulated other comprehensive loss     (544,852 )     (148,490 )
Total shareholders’ equity     6,150,247       5,973,908  
Non-controlling interest     101,797       (7,474 )
TOTAL EQUITY     6,252,044       5,966,434  
TOTAL LIABILITIES AND EQUITY   $ 7,290,282     $ 6,764,857  

  

* Retrospectively restated for effect of stock split and share reorganization

 

The accompanying notes are an integral part of these consolidated financial statements.

 

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WAH FU EDUCATION GROUP LIMITED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

 

    For the Years Ended
March 31,
 
    2017     2016  
             
REVENUE   $ 5,172,688     $ 7,042,835  
                 
COST OF REVENUE                
Cost of services     2,117,951       2,336,268  
Business and sales related tax     33,448       214,724  
                 
GROSS PROFIT     3,021,289       4,491,843  
                 
OPERATING EXPENSES                
Selling expenses     702,337       844,478  
General and administrative expenses     1,660,140       1,025,182  
Total operating expenses     2,362,477       1,869,660  
                 
INCOME FROM OPERATIONS     658,812       2,622,183  
                 
Other Income (Expense)                
Interest income     107,777       114,049  
Loss from investments in unconsolidated entity     (36,171 )     (66,198 )
Other expenses     (7,235 )     (4,241 )
Total other income, net     64,371       43,610  
                 
INCOME BEFORE INCOME TAX PROVISION     723,183       2,665,793  
                 
PROVISION FOR INCOME TAXES     105,952       434,309  
                 
NET INCOME     617,231       2,231,484  
                 
Less: net income (loss) attributable to non-controlling interest     44,530       (7,618 )
                 
NET INCOME ATTRIBUTABLE TO WAH FU EDUCATION GROUP LIMITED   $ 572,701     $ 2,239,102  
                 
COMPREHENSIVE INCOME                
Net income     617,231       2,231,484  
Other comprehensive loss: foreign currency translation loss     (396,923 )     (245,745 )
Total comprehensive income     220,308       1,985,739  
Less: Comprehensive income (loss) attributable to non-controlling interest     43,969       (7,474 )
                 
COMPREHENSIVE INCOME ATTRIBUTABLE TO WAH FU EDUCATION GROUP LIMITED   $ 176,339     $ 1,993,213  
                 
Earnings per common share - basic and diluted   $ 0.18     $ 0.70  
Weighted average shares - basic and diluted*     3,200,000       3,200,000  

 

* Retrospectively restated for effect of stock split and share reorganization

 

The accompanying notes are an integral part of these consolidated financial statements.

 

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WAH FU EDUCATION GROUP LIMITED AND SUBSIDIARIES

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, March 31, 2015     3,200,000     $ 32,000     $ 217,395     $ -     $ 3,633,901     $ 97,399     $ 3,980,695     $ -     $ 3,980,695  
                                                                         
Net income (loss) for the year             -       -       -       2,239,102               2,239,102       (7,618 )     2,231,484  
Foreign currency translation adjustment             -       -       -               (245,889 )     (245,889 )     144       (245,745 )
Balance, March 31, 2016     3,200,000     $ 32 ,000     $ 217 ,395     $ -     $ 5,873,003     $ (148,490 )   $ 5,973,908     $ (7,474 )   $ 5,966,434  
                                                                         
Capital contribution             -       -       -       -       -       -       65,302       65,302  
Net income for the year             -       -       -       572,701       -       572,701       44,530       617,231  
Appropriation of statutory reserves             -       -       64,190       (64,190 )     -       -       -       -  
Foreign currency translation adjustment             -       -       -       -       (396,362 )     (396,362 )     (561 )     (396,923 )
Balance, March 31, 2017     3,200,000     $ 32 ,000     $ 217 ,395     $ 64,190     $ 6,381,514     $ (544,852 )   $ 6,150,247     $ 101,797     $ 6,252,044  

 

* Retrospectively restated for effect of stock split and share reorganization

 

The accompanying notes are an integral part of these consolidated financial statements.

 

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CONSOLIDATED STATEMENTS OF CASH FLOWS

 

    For the Years Ended
March 31,
 
    2017     2016  
Cash flows from operating activities:            
Net Income   $ 617,231     $ 2,231,484  
Adjustments to reconcile net income to net cash provided by operating activities:                
Depreciation     118,857       125,906  
Loss from disposal of equipment     4,686       -  
Provision of doubtful accounts     26,794       20,165  
Loss from investments in unconsolidated entities     36,171       66,198  
Deferred tax provision (benefit)     (92,025 )     33,275  
Accounts receivable, net     304,737       (391,675 )
Inventories     (1,798 )     885  
Other receivable, net     (55,142 )     34,096  
Due from related parties     -       2,371  
Advances to supplier     -       1,264  
Other current assets     35,352       91,710  
Accounts payable     (13,627 )     4,946  
Due to related parties     -       (316,098 )
Deferred revenue     306,024       (109,585 )
Taxes payable     (1,921 )     24,343  
Accrued and other liabilities     7,480       33,319  
Net cash provided by operating activities     1,292,819       1,852,604  
                 
Cash flows from investing activities:                
Purchase of property and equipment     (75,676 )     (155,648 )
Proceeds from disposal of equipment     134       -  
Repayment proceeds from loan to third parties     148,581       316,098  
Payments made for loan to third parties     (371,451 )     (15,805 )
Payments made for investment in unconsolidated entities     (282,303 )     -  
Net cash provided by (used in) investing activities     (580,715 )     144,645  
                 
Cash flows from financing activities:                
Capital contribution by non-controlling interest     66,861       -  
Net cash provided by financing activities     66,861       -  
                 
Effect of exchange rate fluctuation on cash     (349,732 )     (210,869 )
                 
Net increase in cash     429,233       1,786,380  
Cash at beginning of year     5,171,535       3,385,155  
Cash at end of year   $ 5,600,768     $ 5,171,535  
                 
Supplemental cash flow information                
Cash paid for income taxes   $ 195,003     $ 377,400  

 

The accompanying notes are an integral part of these consolidated financial statements.

 

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WAH FU EDUCATION GROUP LIMITED AND SUBSIDIARIES

NOTES TO FINANCIAL STATEMENTS

 

NOTE 1 – ORGANIZATION AND BUSINESS DESCRIPTION

 

Wah Fu Education Group Limited (“Wah Fu”) was incorporated under the laws of the British Virgin Islands on July 23, 2012. Wah Fu is a holding company whose primary purpose is to develop business opportunities in the People’s Republic of China (“PRC” or “China”). Wah Fu Education Holding Limited (“Wah Fu Holding”) is a wholly-owned subsidiary of Wah Fu, which was established on May 19, 2016 in Hong Kong, China.

 

In December 2012, Wah Fu acquired 100% equity interest of Beijing Huaxia Dadi Distance Learning Services Co., Ltd. (“Distance Learning”) and its Variable Interest Entity (“VIE”), Beijing Huaxia Dadi Digital Information Technology Co., Ltd (“Digital Information”), with a consideration totaling Chinese Renminbi (“RMB”) 2,000,000 (approximately $0.3 million). Distance Learning is a Chinese national-wide online education services provider founded on December 23, 1999. Digital Information is a technological development and operation services provider founded on September 14, 2000. Due to PRC legal restrictions on foreign ownership and investment in, among other areas, value-added telecommunications services, which include internet content providers, or ICPs, Wah Fu cannot have a direct ownership in Digital Information. As an alternative, Distance Learning entered into a series of contractual agreements with the owners of Digital Information. These agreements include an Exclusive Business Cooperation Agreement, an Equity Interest Pledge Agreement, an Exclusive Option Agreement and Powers of Attorney.

 

Pursuant to the above agreements, Distance Learning has the exclusive right to provide Digital Information consulting services related to business operations including technology and management. All the above contractual agreements obligate Distance Learning to absorb a majority of the risk of loss from Digital Information’s activities and entitle Distance Learning to receive a majority of their residual returns. In essence, Distance Learning has gained effective control over Digital Information. Therefore, the Company believes that Digital Information should be considered as VIE under the Statement of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 810 “Consolidation”. Accordingly, the accounts of Digital Information are consolidated with those of Distance Learning and ultimately are consolidated into those of Wah Fu.

 

On July 20, 2015, Wah Fu established Shanghai Xin Fu Network Technology Co., Ltd. (“Shanghai Xin Fu”), a wholly foreign-owned enterprise (the “WFOE”) under the laws of the PRC. Shanghai Xin Fu owns 100% equity interest of Shanghai Xia Shu Network Technology Co., Ltd, (“Shanghai Xia Shu”), a company formed on April 29, 2016 under the laws of PRC. On June 15, 2015, Hunan Huafu Haihui Learning Technology Co., Ltd. (“Hunan Huafu”) was incorporated in Hunan Province, China. Shanghai Xia Shu owns 75% equity interest of Hunan Huafu, and the other 25% equity interest is owned by two unrelated individual shareholders.

   

On March 8, 2017, Nanjing Suyun Education Technology Co., Ltd. (“Nanjing Suyun”) was founded in Jiangsu Province, China. Distance Learning owns 70% equity interest of Nanjing Suyun, and the other 30% equity interest is owned by an individual shareholder. On March 15, 2017, Huaxia MOOC Internet Technology Co., Ltd. (“Huaxia MOOC”) was founded in Hubei Province, China. Distance Learning owns 65% equity interest of Huaxia MOOC, and two individual shareholders own 30% and 5% equity interest of Huaxia MOOC, respectively.

 

Wah Fu, its subsidiaries and its subsidiary’s consolidated VIE (collectively, the “Company”) are primarily engaged in providing online education services and technological development and operation service in China.

  

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NOTES TO FINANCIAL STATEMENTS

 

NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Basis of Presentation and Principles of Consolidation

 

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The consolidated financial statements include the financial statements of Wah Fu, its subsidiaries and its subsidiary’s VIE. All inter-company balances and transactions have been eliminated upon consolidation.

 

Company   Date of
establishment
  Place of
establishment
  Percentage
of legal
ownership
by Wah Fu
    Principal activities
Subsidiaries:                  
Wah Fu Holding   May 19, 2016   Hong Kong, PRC     100 %   Holding Company
Distance Learning   December 23, 1999   Mainland, PRC     100 %   Provider of online education services and technological development and operation services
Shanghai Xin Fu   July 20, 2015   Mainland, PRC     100 %   Inactive
Shanghai Xia Shu   April 29, 2016   Mainland, PRC     100 %   Inactive
Hunan Huafu   June 15, 2015   Mainland, PRC     75 %   Provider of online education services
Nanjing Suyun   March 8, 2017   Mainland, PRC     70 %   Inactive
Huxia MOOC   March 15, 2017   Mainland, PRC     65 %   Inactive
Variable interest entity                    
Digital Information   September 14, 2000   Mainland, PRC     Nil     Provider of online education services and technological development and operation service

 

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NOTES TO FINANCIAL STATEMENTS

 

NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

 

Consolidation of Variable Interest Entities

 

In accordance with accounting standards regarding consolidation of variable interest entities, VIEs are generally entities that lack sufficient equity to finance their activities without additional financial support from other parties or whose equity holders lack adequate decision making ability. The VIE with which the Company is involved must be evaluated to determine the primary beneficiary of the risks and rewards of the VIE. The primary beneficiary is required to consolidate the VIE for financial reporting purposes. We have determined that Distance Learning is the primary beneficiary of Digital Information’s risks and rewards.

 

The following tables set forth the assets, liabilities, results of operations and changes in cash of the VIE, Digital Information, which were included in the Company’s consolidated balance sheets, statements of comprehensive income and cash flows:

 

    As of
March 31, 2017
    As of
March 31, 2016
 
Current assets   $ 23,157     $ 51,399  
Non-current assets     422,412       226,643  
Total assets     445,569       278,042  
Current liabilities     178,750       173,612  
Intercompany payables*     1,684,238       1,311,194  
Total liabilities     1,862,988       1,484,806  
Net assets   $ (1,417,419 )   $ (1,206,764 )

 

* Payables to Distance Learning and Digital Information are eliminated upon consolidation.

 

    For the Years Ended  
    March 31, 2017     March 31, 2016  
Revenue*   $ 925,643     $ 1,580,576  
Net income (loss)   $ (294,905 )   $ 228,886  

 

* Intercompany sales are eliminated upon consolidation.

 

    For the Years Ended  
    March 31, 2017     March 31, 2016  
Net cash provided by operating activities *   $ 266,876     $ 7,898  
Net cash used in investing activities     (283,172 )     (6,206 )
Effect of exchange rate fluctuation on cash     (1,761 )     (1,739 )
Net decrease in cash   $ (18,057 )   $ (47 )

 

* Intercompany operating activities are eliminated upon consolidation.

  

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WAH FU EDUCATION GROUP LIMITED AND SUBSIDIARIES

NOTES TO FINANCIAL STATEMENTS

 

NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

 

Non-controlling Interests

 

U.S. GAAP requires that non-controlling interests in subsidiaries and affiliates be reported in the equity section of a company’s balance sheet. In addition, the amounts attributable to the net income (loss) of those subsidiaries are reported separately in the consolidated statements of income and comprehensive income.

 

Uses of estimates

 

The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during each reporting period. Actual results could differ from those estimates. Significant accounting estimates reflected in the Company’s consolidated financial statements include the allowances for doubtful accounts, estimated useful lives and fair value in connection with the impairment of property and equipment. Actual results could differ from these estimates.

 

Cash

 

The Company considers all highly liquid investment instruments with an original maturity of three months or less from the date of purchase to be cash equivalents. As of March 31, 2017 and 2016, the Company had no cash equivalents. The Company maintains cash and cash equivalents with various financial institutions mainly in the PRC. Balances in banks in the PRC are uninsured.

 

Accounts receivable, net

 

Accounts receivable are recognized and carried at original invoiced amount less an estimated allowance for uncollectible accounts. The Company usually grants credit to customers with good credit standing with a maximum of 90 days and determines the adequacy of reserves for doubtful accounts based on individual account analysis and historical collection trends. The Company establishes a provision for doubtful receivables when there is objective evidence that the Company may not be able to collect amounts due. The allowance is based on management’s best estimates of specific losses on individual exposures, as well as a provision on historical trends of collections. The provision is recorded against accounts receivables balances, with a corresponding charge recorded in the consolidated statements of income and comprehensive income. Actual amounts received may differ from management’s estimate of credit worthiness and the economic environment. Delinquent account balances are written-off against the allowance for doubtful accounts after management has determined that the likelihood of collection is not probable. As of March 31, 2017 and 2016, the allowances for doubtful accounts were $113,109 and $92,896, respectively.

  

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NOTES TO FINANCIAL STATEMENTS

 

NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

 

Loans to third parties

 

Loans to third parties are cash advances mainly used for short-term funding to unrelated companies and individuals with which the Company has business relationships. These loans are due on demand with an interest rate ranged from nil to 15% per annum. Loans to third parties are reviewed periodically as to whether their carrying values remain realizable.

 

Property and equipment, net

 

Property and equipment is stated at cost, less accumulated depreciation and amortization. Expenditures for additions, major renewal and betterments are capitalized, and expenditures for maintenance and repairs are charged to expense as incurred. Depreciation is provided on a straight-line basis, less estimated residual value, over an asset’s estimated useful life. Following are the estimated useful lives of the Company’s property and equipment:

 

    Estimated useful lives
Electronic equipment   4 - 5 years
Office equipment and furniture   4 - 5 years
Motor vehicles   4 - 5 years
Leasehold improvements   The shorter of the lease term and its useful life

 

Repair and maintenance costs are charged to expense as incurred, whereas the cost of renewals and betterment that extends the useful lives of property, plant and equipment are capitalized as additions to the related assets. Retirements, sales and disposals of assets are recorded by removing the cost and accumulated depreciation from the asset and accumulated depreciation accounts with any resulting gain or loss reflected in the consolidated statements of income and comprehensive income in other income or expenses.

 

Impairment of long-lived assets

 

The Company assesses its long-lived assets such as property and equipment for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. Factors which may indicate potential impairment include a significant underperformance related to the historical or projected future operating results or a significant negative industry or economic trend. Recoverability of these assets is measured by comparison of their carrying amounts to future undiscounted cash flows the assets are expected to generate. If property and equipment and certain identifiable intangibles are considered to be impaired, the impairment to be recognized equals the amount by which the carrying value of the assets exceeds their fair value. The Company did not record any impairment loss on its long-lived assets during the years ended March 31, 2017 and 2016.

  

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WAH FU EDUCATION GROUP LIMITED AND SUBSIDIARIES

NOTES TO FINANCIAL STATEMENTS

 

NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

 

Long-term investments

 

The Company’s long-term investments consist of cost method investment and equity method investment.

 

Cost method investment

 

For an investee over which the Company does not have significant influence and a controlling interest, the Company carries the investment at cost and recognizes income for any dividend received from the distribution of the investee’s earnings.

 

The Company reviews its cost method investment for impairment whenever an event or circumstance indicates that an other-than-temporary impairment has occurred. The Company considers available quantitative and qualitative evidence in evaluating potential impairment of its cost method investment. An impairment charge is recorded if the carrying amount of an investment exceeds its fair value and such excess is determined to be other-than temporary. The Company did not record any impairment loss on its cost method investment during the years ended March 31, 2017 and 2016.

 

Equity method investment

 

For an investee company over which the Company has the ability to exercise significant influence, but does not have a controlling interest, the Company accounted for those using the equity method. Significant influence is generally considered to exist when the Company has an ownership interest in the voting stock of the investee between 20% and 50%. Other factors, such as representation on the investee’s board of directors, voting rights and the impact of commercial arrangements, are also considered in determining whether the equity method of accounting is appropriate.

 

An impairment charge is recorded if the carrying amount of the investment exceeds its fair value and this condition is determined to be other-than temporary. The Company did not record impairment losses on its equity method investment during the years ended March 31, 2017 and 2016.

 

Revenue recognition

 

Revenues are recognized when the following four criteria are met: (i) persuasive evidence of an arrangement exists, (ii) the service has been rendered, (iii) the fees are fixed or determinable, and (iv) collectability is reasonably assured.

 

Online education service

 

The online education service provided by the Company to its customers is an integrated service, including audio-video course content, mock examinations and online chat rooms during the subscription period. Audio-video course content, mock examinations and online chat rooms are not practical to be sold on standalone basis and have never been sold separately. The revenues for the online education service are recognized on a straight line basis over the subscription period from the month in which students enroll in the courses to the month in which the subscribed courses terminate. The online education service includes online education cloud service (“B2B2C”) and online training service (“B2C”). B2C service can be cancelled and is refundable no later than 24 hours after enrollment. B2B2C service can not be cancelled and is not refundable after enrollment.

 

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WAH FU EDUCATION GROUP LIMITED AND SUBSIDIARIES

NOTES TO FINANCIAL STATEMENTS

 

NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

 

Revenue recognition (Continued)

 

Technological development and operation service

 

Revenues from technological development service, such as information technology system design and cloud platform development, are recognized when the system or platform are delivered and accepted by the customers. From time to time, the Company enters into arrangement to provide technological support and maintenance service of online platforms to its customers. The revenues for the technological support and maintenance service are recognized over the support and maintenance services period.

 

Deferred revenue represents revenues collected but not earned as of March 31. This is primarily composed of revenue for online course tuition received in advance. If a course is provided over a fiscal year end, deferred revenue is recorded for the revenue related to the course conducted in the next fiscal year.

 

Income taxes

 

The Company accounts for income taxes under ASC 740. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the consolidated financial statement carrying amounts of existing assets and liabilities and their respective tax bases.

 

Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period including the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.

 

The provisions of ASC 740-10-25, “Accounting for Uncertainty in Income Taxes,” prescribe a more-likely-than-not threshold for consolidated financial statement recognition and measurement of a tax position taken (or expected to be taken) in a tax return. This interpretation also provides guidance on the recognition of income tax assets and liabilities, classification of current and deferred income tax assets and liabilities, accounting for interest and penalties associated with tax positions, and related disclosures. The Company does not believe that there was any uncertain tax position at March 31, 2017 and 2016.

  

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WAH FU EDUCATION GROUP LIMITED AND SUBSIDIARIES

NOTES TO FINANCIAL STATEMENTS

 

NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

 

Value added tax (“VAT”)

 

Sales revenue derives from the invoiced online education service, and technological development and operation service is subject to VAT since 2014. Prior to that, the Company was subject to a fixed rate of business tax of 3%. The applicable VAT rates are 6% and 3% for the entities that are general taxpayer and small-scale taxpayer, respectively. Distance Learning and Digital Information are both considered VAT general taxpayers since June 2015. Hunan Huafu, Shanghai Xia Shu and Shanghai Xin Fu are VAT small-scale taxpayers since the date of incorporation.

 

Entities that are VAT general taxpayers are allowed to offset qualified input VAT paid to suppliers against their output VAT liabilities. Net VAT balance between input VAT and output VAT is recorded in the line item of taxes payable on the consolidated balance sheets. All of the VAT returns of the Company have been and remain subject to examination by the tax authorities for five years from the date of filing.

 

Foreign currency translation

 

Since the Company operates in the PRC, the Company’s functional currency is the Chinese RMB.  The Company’s consolidated financial statements have been translated into the reporting currency, the United States Dollar (“USD”). Assets and liabilities of the Company are translated at the exchange rate at each reporting period end date. Equity is translated at historical rates. Income and expense accounts are translated at the average rate of exchange during the reporting period. The resulting translation adjustments are reported under other comprehensive income. Gains and losses resulting from the translations of foreign currency transactions and balances are reflected in the result of operations. RMB is not freely convertible into foreign currency and all foreign exchange transactions must take place through authorized institutions. No representation is made that the RMB amounts could have been, or could be, converted into USD at the rates used in translation.

 

Earnings per Share

 

The Company computes earnings per share (“EPS”) in accordance with ASC 260, “Earnings per Share” (“ASC 260”). ASC 260 requires companies with complex capital structures to present basic and diluted EPS. Basic EPS is measured as net income divided by the weighted average common shares outstanding for the period. Diluted EPS is similar to basic EPS but presents the dilutive effect on a per share basis of potential common shares (e.g., convertible securities, options and warrants) as if they had been converted at the beginning of the periods presented, or issuance date, if later. Potential common shares that have an anti-dilutive effect (i.e., those that increase income per share or decrease loss per share) are excluded from the calculation of diluted EPS. There is no anti-dilutive effect for the years ended March 31, 2017 and 2016.

 

Comprehensive Income

 

Comprehensive income consists of two components, net income and other comprehensive income (loss). The foreign currency translation gain or loss resulting from translation of the financial statements expressed in RMB to US$ is reported in other comprehensive income (loss) in the consolidated statements of income and comprehensive income.

 

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WAH FU EDUCATION GROUP LIMITED AND SUBSIDIARIES

NOTES TO FINANCIAL STATEMENTS

 

NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

 

Fair value of financial instruments

 

The Company follows the provisions of FASB ASC 820, Fair Value Measurements and Disclosures. ASC 820 clarifies the definition of fair value, prescribes methods for measuring fair value, and establishes a fair value hierarchy to classify the inputs used in measuring fair value as follows:

 

Level 1 - Inputs are unadjusted quoted prices in active markets for identical assets or liabilities available at the measurement date.

 

Level 2 - Inputs are unadjusted quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, inputs other than quoted prices that are observable, and inputs derived from or corroborated by observable market data.

 

Level 3 - Inputs are unobservable inputs which reflect the reporting entity’s own assumptions on what assumptions the market participants would use in pricing the asset or liability based on the best available information.

 

The carrying amounts reported in the balance sheets for cash, accounts receivable, other receivables, loan to third parties, other current assets, accounts payable, deferred revenue, taxes payable, accrued and other liabilities, approximate their fair value based on the short-term maturity of these instruments.

 

Risks and Uncertainties

 

The operations of the Company are located in the PRC. Accordingly, the Company’s business, financial condition, and results of operations may be influenced by the political, economic, and legal environments in the PRC, as well as by the general state of the PRC economy. The Company’s operations in the PRC are subject to special considerations and significant risks not typically associated with companies in North America and Western Europe. These include risks associated with, among other factors, the political, economic and legal environment and foreign currency exchange. The Company’s results may be adversely affected by changes in the political, regulatory and social conditions in the PRC, and by changes in governmental policies or interpretations with respect to laws and regulations, anti-inflationary measures, currency conversion, remittances abroad, and rates and methods of taxation, among other things. Although the Company has not experienced losses from these situations and believes that it is in compliance with existing laws and regulations, this may not be indicative of future results.

 

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WAH FU EDUCATION GROUP LIMITED AND SUBSIDIARIES

NOTES TO FINANCIAL STATEMENTS

 

NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

 

Concentrations and credit risk

 

Credit risk

 

Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash. As of March 31, 2017 and 2016, $5,598,402 and $5,166,157 of the Company’s cash were on deposits at financial institutions in the RMB where there currently is no rule or regulation requiring such financial institutions to maintain insurance to cover bank deposits in the event of bank failure. While management believes that these financial institutions are of high credit quality, it also continually monitors their credit worthiness.

 

Accounts receivable are typically unsecured and derived from revenue earned from customers, thereby exposed to credit risk. The risk is mitigated by the Company’s assessment of its customers’ creditworthiness and its ongoing monitoring of outstanding balances.

 

Customer and supplier concentration risk

 

The Company’s revenues are derived from enrolled students or institutions that are located primarily in China. For the year ended March 31, 2017, one institutional customer accounted for approximately 13% of the Company’s total revenue. For the year ended March 31, 2016, three institutional customers accounted for approximately 14%, 12% and 11% of the Company’s total revenue, respectively. As of March 31, 2017, three institutional customers accounted for 31%, 28% and 25% of the total outstanding accounts receivable balance, respectively. As of March 31, 2016, three institutional customers accounted for 42%, 25% and 13% of the total outstanding accounts receivable balance, respectively.

 

For the years ended March 31, 2017 and 2016, the Company made approximately 41% and 10% of total purchases from one major supplier, respectively. As of March 31, 2017 and 2016, no suppliers accounted for more than 10% of total advance payments outstanding.

 

A loss of either of these customers or suppliers could adversely affect the operating results or cash flows of the Company.

 

Statements of cash flows

 

In accordance with FASB ASC Topic 230, “Statement of Cash Flows,” cash flows from the Company are calculated based upon the local currencies. As a result, amounts related to assets and liabilities reported on the Company’s statements of cash flows will not necessarily agree with changes in the corresponding balances on the balance sheet.

  

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WAH FU EDUCATION GROUP LIMITED AND SUBSIDIARIES

NOTES TO FINANCIAL STATEMENTS

 

NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

 

Recent accounting pronouncements

 

In May 2014, the FASB issued Accounting Standard Update (“ASU”) No. 2014-09, “Revenue from Contracts with Customers (Topic 606)” (“ASU 2014-09”). ASU 2014-09 requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. ASU 2014-09 will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective and permits the use of either the retrospective or cumulative effect transition method. The guidance also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts. In August 2015, the FASB issued ASU No. 2015-14, “Deferral of the Effective Date” (“ASU 2015-14”), which defers the effective date for ASU 2014-09 by one year. For public entities, the guidance in ASU 2014-09 will be effective for annual reporting periods beginning after December 15, 2017 (including interim reporting periods within those periods), and for all other entities, ASU 2014-09 will be effective for annual reporting periods beginning after December 15, 2018, and interim reporting periods within annual reporting periods beginning after December 15, 2019. In March 2016, the FASB issued ASU No. 2016-08, “Principal versus Agent Considerations (Reporting Revenue versus Net)” (“ASU 2016-08”), which clarifies the implementation guidance on principal versus agent considerations in the new revenue recognition standard. In April 2016, the FASB issued ASU No. 2016-10, “Identifying Performance Obligations and Licensing” (“ASU 2016-10”), which reduces the complexity when applying the guidance for identifying performance obligations and improves the operability and understandability of the license implementation guidance. In May 2016, the FASB issued ASU No. 2016-12 “Narrow-Scope Improvements and Practical Expedients” (“ASU 2016-12”), which amends the guidance on transition, collectability, noncash consideration and the presentation of sales and other similar taxes. Preliminarily, the Company plans to adopt Topic 606 using the retrospective transition method, and is continuing to evaluate the impact its pending adoption of Topic 606 will have on its consolidated financial statements. The Company believes that its current revenue recognition policies are generally consistent with the new revenue recognition standards set forth in ASU 2014-09. Potential adjustments to input measures are not expected to be pervasive to the majority of the Company’s contracts. While no significant impact is expected upon adoption of the new guidance, the Company will not be able to make that determination until the time of adoption based upon outstanding contracts at that time.

 

In February 2016, the FASB issued ASU No. 2016-02, “Leases” to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. ASU 2016-02 creates a new ASC 842 “Leases” to replace the previous ASC 840 “Leases.” ASU 2016-02 affects both lessees and lessors, although for the latter the provisions are similar to the previous model, but updated to align with certain changes to the lessee model and also the new revenue recognition provisions contained in ASU 2014-09. For public business entities, the amendments in this ASU are effective for fiscal years beginning after December 15, 2018, including interim reporting periods within those fiscal years. For all other entities, the amendments in this ASU are effective for fiscal years beginning after December 15, 2019, and interim reporting periods within fiscal years beginning after December 15, 2020. Early adoption is permitted. The Company is evaluating the impact of the adoption of this revised guidance on its consolidated financial statements.

  

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WAH FU EDUCATION GROUP LIMITED AND SUBSIDIARIES

NOTES TO FINANCIAL STATEMENTS

 

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

 

Recent accounting pronouncements (Continued)

 

In August 2016, the FASB issued ASU No. 2016-15, “Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments, to address diversity in how certain cash receipts and cash payments are presented and classified in the statement of cash flows”. The amendments provide guidance on the following eight specific cash flow issues: (1) Debt Prepayment or Debt Extinguishment Costs; (2) Settlement of Zero-Coupon Debt Instruments or Other Debt Instruments with Coupon Interest Rates That Are Insignificant in Relation to the Effective Interest Rate of the Borrowing; (3) Contingent Consideration Payments Made after a Business Combination; (4)Proceeds from the Settlement of Insurance Claims; (5) Proceeds from the Settlement of Corporate-Owned Life Insurance Policies, including Bank-Owned; (6) Life Insurance Policies; (7) Distributions Received from Equity Method Investees; (8) Beneficial Interests in Securitization Transactions; and Separately Identifiable Cash Flows and Application of the Predominance Principle. The amendments are effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2018, and interim reporting periods within fiscal years beginning after December 15, 2019. The amendments should be applied using a retrospective transition method to each period presented. If it is impracticable to apply the amendments retrospectively for some of the issues, the amendments for those issues would be applied prospectively as of the earliest date practicable. The Company does not expect that adoption of this guidance will have a material impact on its consolidated financial statements and related disclosures.

 

In October 2016, the FASB issued ASU No. 2016-16, “Income Taxes (Topic 740): Intra-Entity Transfer of Assets Other than Inventory”, which requires the recognition of the income tax consequences of an intra-entity transfer of an asset, other than inventory, when the transfer occurs. For public business entities, the amendments in this ASU are effective for annual reporting periods beginning after December 15, 2017, including interim reporting periods within those annual reporting periods. For all other entities, the amendments in this ASU are effective for annual reporting periods beginning after December 15, 2018, and interim reporting periods within annual periods beginning after December 15, 2019. Early adoption is permitted. The amendments in this ASU should be adopted on a modified retrospective basis. The Company does not expect that adoption of this guidance will have a material impact on its consolidated financial statements.

 

In October 2016, the FASB issued ASU No. 2016-17, “Consolidation (Topic 810): Interests Held through Related Parties That Are under Common Control”. The amendments affect reporting entities that are required to evaluate whether they should consolidate a variable interest entity in certain situations involving entities under common control. Specifically, the amendments change the evaluation of whether a reporting entity is the primary beneficiary of a variable interest entity by changing how a reporting entity that is a single decision maker of a variable interest entity treats indirect interests in the entity held through related parties that are under common control with the reporting entity. The amendments are effective for public business entities for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2016, and interim reporting periods within fiscal years beginning after December 15, 2017. Early adoption is permitted. The Company does not expect that adoption of this guidance will have a material impact on its consolidated financial statements and related disclosures.

  

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NOTES TO FINANCIAL STATEMENTS

 

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

 

Recent accounting pronouncements (Continued)

 

In November 2016, the FASB issued ASU No. 2016-18, “Statement of Cash Flows (Topic 230): Restricted Cash”, which requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The amendments in this ASU apply to all entities that have restricted cash or restricted cash equivalents and are required to present a statement of cash flows under Topic 230. The amendments are effective for public business entities for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2018, and interim periods within fiscal years beginning after December 15, 2019. Early adoption is permitted. The amendments should be applied using a retrospective transition method to each period presented. The adoption of this guidance will increase cash and cash equivalents by the amount of the restricted cash on the Company’s consolidated statement of cash flows.

 

In January 2017, the FASB issued ASU No. 2017-01, “Business Combinations (Topic 805): Clarifying the Definition of a Business”. The amendments in this ASU clarify the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. Basically these amendments provide a screen to determine when a set is not a business. If the screen is not met, the amendments in this ASU first, require that to be considered a business, a set must include, at a minimum, an input and a substantive process that together significantly contribute to the ability to create output and second, remove the evaluation of whether a market participant could replace missing elements. These amendments take effect for public businesses for fiscal years beginning after December 15, 2017 and interim periods within those periods, and all other entities should apply these amendments for fiscal years beginning after December 15, 2018, and interim periods within annual periods beginning after December 15, 2019. The Company does not expect that adoption of this guidance will have a material impact on its consolidated financial statements.

 

In February 2017, the FASB issued ASU No. 2017-05, “Other Income—Gains and Losses from the Derecognition of Nonfinancial Assets” to clarify the scope of Subtopic 610-20 and to add guidance for partial sales of nonfinancial assets. Subtopic 610-20, which was issued in May 2014 as a part of ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606), provides guidance for recognizing gains and losses from the transfer of nonfinancial assets in contracts with noncustomers. For public entities, the amendments are effective for annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. For all other entities, the amendments in this Update are effective for annual reporting periods beginning after December 15, 2018, and interim reporting periods within annual reporting periods beginning after December 15, 2019. The Company does not expect that adoption of this guidance will have a material impact on its consolidated financial statements and related disclosures.

   

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NOTES TO FINANCIAL STATEMENTS

 

NOTE 2 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

 

Recent accounting pronouncements (Continued)

 

In May 2017, the FASB issued ASU 2017-09, “Scope of Modification Accounting”, which amends the scope of modification accounting for share-based payment arrangements, provides guidance on the types of changes to the terms or conditions of share-based payment awards to which an entity would be required to apply modification accounting under ASC 718. For all entities, the ASU is effective for annual reporting periods, including interim periods within those annual reporting periods, beginning after December 15, 2017. Early adoption is permitted, including adoption in any interim period. The Company does not expect that adoption of this guidance will have a material impact on its consolidated financial statements and related disclosures. In January 2017, the FASB issued ASU 2017-01, which clarifies the definition of a business to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The standard will be effective for us in the first quarter of our fiscal 2019. The Company expects that the adoption of this ASU would not have a material impact on the Company’s consolidated financial statements.

 

NOTE 3 – ACCOUNTS RECEIVABLE, NET

 

Accounts receivable consisted of the following:

 

    As of
March 31, 2017
    As of
March 31, 2016
 
Accounts receivable   $ 777,372     $ 1,148,640  
Less: allowance for doubtful accounts     (113,109 )     (92,896 )
Accounts receivable, net   $ 664,263     $ 1,055,744  

 

NOTE 4 – PROPERTY AND EQUIPMENT, NET

 

Property and equipment, net consisted of the following:

 

    As of
March 31, 2017
    As of
March 31, 2016
 
Electronic equipment   $ 181,938     $ 226,465  
Office equipment and furniture     243,949       231,139  
Motor vehicles     139,993       149,583  
Leasehold improvements     50,122       22,336  
Subtotal     616,002       629,523  
Less: accumulated depreciation     (422,626 )     (372,808 )
Property and equipment, net   $ 193,376     $ 256,715  

 

Depreciation expense was $118,857 and $125,906 for the years ended March 31, 2017 and 2016, respectively.

    

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NOTES TO FINANCIAL STATEMENTS

 

NOTE 5 – INVESTMENT IN UNCONSOLIDATED ENTITIES

 

The Company’s investments in unconsolidated entities consisted of the following:

 

    As of
March 31, 2017
    As of
March 31, 2016
 
Cost method investment:                
Beijing Tianyuebowen Science and Technology Co., Ltd. (a)   $ 130,602     $ -  
Zhongtai International Education Technology (Beijing) Co., Ltd. (b)     145,114       -  
Equity method investment:                
Nanjing Weiyouxue Information Technology Co., Ltd. (c)     70,966       113,575  
Total   $ 346,682     $ 113,575  

 

(a) On June 2, 2016, the Company invested RMB 0.9 million (approximately $0.13 million) in exchange for 10% equity interest of Tianyuebowen through its related party, Beijing Haohua Haofu Investment Co., Ltd. (“Haohua Haofu”). Haohua Haofu signed the investment agreement on behalf of Digital Information and transferred 10% ownership of Tianyuebowen to the Company subsequently. RMB 0.9 million was paid in full by the Company in June 2016.

 

(b) On August 15, 2016, the Company invested RMB 1.0 million (approximately $0.14 million) in exchange for 15% equity interest of Zhongtai International Education Technology (Beijing) Co., Ltd. (“Zhongtai”) through Haohua Haofu. Haohua Haofu signed the investment agreement on behalf of Digital Information and transferred 15% ownership of Zhongtai to the Company subsequently. RMB 1.0 million was paid in full by the Company in August 2016.

 

(c) On July 3, 2014, Digital Information entered into an equity investment agreement to acquire 49% equity interest of Nanjing Wei You Xue Information Technology Co., Ltd. (“Wei You Xue”), with a consideration of RMB 1,862,000 (approximately $0.27 million). The Company uses the equity method to account for the investment, because the Company has the ability to exercise significant influence but does not have control over the investee. Wei You Xue qualified as a related party thereafter. For the years ended March 31, 2017 and 2016, the Company recorded loss of $36,171 and $66,198 on the investment, respectively, which was included in “Loss from investments in unconsolidated entity” in the consolidated statements of income and comprehensive income.

 

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WAH FU EDUCATION GROUP LIMITED AND SUBSIDIARIES

NOTES TO FINANCIAL STATEMENTS

 

NOTE 6 – TAXES

 

Corporate Income Taxes (“CIT”)

 

The Company is subject to income taxes on an entity basis on income arising in or derived from the tax jurisdiction in which each entity is domiciled.

 

Wah Fu is an offshore holding company and is not subject to tax on income or capital gains under the laws of the British Virgin Islands.

 

Wah Fu Holding was incorporated in Hong Kong and is subject to Hong Kong corporate income tax at a rate of 16.5% on the estimated assessable profits arising from Hong Kong.

 

Distance Learning was registered in the PRC and is subject to corporate income tax at a reduced rate of 15% starting from 2014, when it was approved by local government as a High-technology Company. The certificate of High-technology Company is going to expire in October 2017 and the Company is currently renewing this certificate.

 

Hunan Huafu, Shanghai Xia Shu and Shanghai Xin Fu, were registered in the PRC and are subject to corporate income tax at a reduced rate of 10% starting from the inception dates when they were approved by local government as small-scaled minimal profit enterprises.

 

Digital Information was registered in the PRC and is subject to corporate income tax at the rate of 25%.

 

The estimated tax savings as a result of the Company’s preferred tax rates for the years ended March 31, 2017 and 2016 amounted to $74,844 and $232,139, respectively. Per share effect of the tax savings were $1.50 and $4.64 for the years ended March 31, 2017 and 2016, respectively.

 

(i) The components of the income tax (benefit) expense are as follows:

 

    For the Years Ended  
    March 31, 2017     March 31, 2016  
Current income tax provision   $ 197,977     $ 401,034  
Deferred income tax provision (benefit)     (92,025 )     33,275  
Total   $ 105,952     $ 434,309  

 

(ii) The following table summarizes deferred tax assets resulting from differences between the financial reporting basis and tax basis of assets and liabilities:

 

    As of
March 31,
2017
    As of
March 31,
2016
 
             
Allowance for doubtful accounts   $ 18,940     $ 15,024  
Deferred revenue     76,758       37,347  
Net operating loss carry-forwards     43,705       547  
Net deferred tax asset   $ 139,403     $ 52,918  

  

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NOTES TO FINANCIAL STATEMENTS

 

NOTE 6 – TAXES (Continued)

 

Corporate Income Taxes (“CIT”) (Continued)

 

According to Chinese tax regulations, net operating loss (“NOL”) can be carried forward to offset operating income for five years. A valuation allowance is established for deferred tax assets if it is more likely than not that these items will either expire before the Company is able to realize their benefits, or that the realization of future deductions is uncertain. Management performs an assessment over future taxable income to analyze whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. As of March 31, 2017 and 2016, no valuation allowance was accrued for deferred tax assets.

 

(iii) The following table reconciles the PRC statutory rates to the Company’s effective tax rate for the years ended March 31, 2017 and 2016:

 

    For the Years Ended  
    March 31, 2017     March 31, 2016  
Statutory PRC income tax rate     25.0 %     25.0 %
Favorable tax rate impact (a)     (10.3 %)     (8.7 %)
Effective tax rate     14.7 %     16.3 %

 

(a) Distance Learning is subject to a favorable tax rate of 15%; Shanghai Xia Shu, Shanghai Xin Fu, Hunan Huafu are subject to a favorable tax rate of 10%.

 

Taxes payable

 

Taxes payable consisted of the following:

 

    As of
March 31, 2017
    As of
March 31, 2016
 
Income tax payable   $ 296,602     $ 313,817  
Value added tax recoverable     8,560       11,023  
Other taxes payable     17,168       21,576  
Total   $ 322,330     $ 346,416  

 

NOTE 7 – RELATED PARTY TRANSACTIONS

 

For the year ended March 31, 2016, one of the Company’s related parties, Horwath Capital China provided consulting services to the Company in the amount of $47,415 (RMB 300,000). There was no related party transaction in fiscal year 2017.

  

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WAH FU EDUCATION GROUP LIMITED AND SUBSIDIARIES

NOTES TO FINANCIAL STATEMENTS

 

NOTE 8 – EQUITY

 

Ordinary shares

 

When the Company was incorporated in British Virgin Islands on July 23, 2012, 50,000 ordinary shares were authorized and issued to the shareholders at a par value of $1.00 each. The 50,000 shares were allocated to previous capital contributions by the shareholders.

 

Statutory reserves

 

The Company is required to make appropriations to certain reserve funds, comprising the statutory surplus reserve and the discretionary surplus reserve, based on after-tax net income determined in accordance with generally accepted accounting principles of the PRC (“PRC GAAP”). Appropriations to the statutory surplus reserve are required to be at least 10% of the after-tax net income determined in accordance with PRC GAAP until the reserve is equal to 50% of the entity’s registered capital. Appropriations to the surplus reserve are made at the discretion of the Board of Directors. As of March 31, 2017 and 2016, the balance of statutory reserves was $64,190 and nil, respectively.

 

NOTE 9 – COMMITMENTS

 

Operating lease commitments

 

The Company’s leases mainly include office buildings. These leases had an average remaining lease term of approximately 5 years as of March 31, 2017. Rental expense charged to operations under operating leases in the years ended March 31, 2017 and 2016 amounted to $90,378 and $107,984, respectively.

 

Future minimum lease obligations for operating leases with initial terms in excess of one year at March 31, 2017 are as follows:

 

Twelve months ended March 31,      
2018   $ 78,361  
2019     78,361  
2020     80,190  
2021     81,496  
2022     33,957  
Total   $ 352,365  

 

NOTE 10 – SEGMENT REPORTING

 

ASC 280, “Segment Reporting,” establishes standards for reporting information about operating segments on a basis consistent with the Company’s internal organizational structure as well as information about geographical areas, business segments and major customers in financial statements for details on the Company’s business segments. The Company uses the “management approach” in determining reportable operating segments. The management approach considers the internal organization and reporting used by the Company’s chief operating decision maker for making operating decisions and assessing performance as the source for determining the Company’s reportable segments. Management, including the chief operating decision maker, reviews operation results by the revenue of different products. Based on management’s assessment, the Company has determined that it has two operating segments: online education services, and technological development and operation service. Our online education segment consists of two types of online services: Online Education Cloud Service (“B2B2C”) and Online Training Service (“B2C”).

 

The following tables present summary information by segment for the years ended March 31, 2017 and 2016, respectively:

 

    For the Years Ended  
    March 31, 2017     March 31, 2016  
             

Revenue from Online Education Service

           

Revenue from B2B2C Service

  $ 4,450,795     $ 5,724,197  

Revenue from B2C Service

    282,048       359,501  

Revenue from Technological Development and Operation Service

    439,845       959,137  
Total   $ 5,172,688     $ 7,042,835  

 

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WAH FU EDUCATION GROUP LIMITED AND SUBSIDIARIES

NOTES TO FINANCIAL STATEMENTS

 

All the Company’s revenue was generated from its business operation in China.

 

    For the Year Ended March 31, 2017  
    Online Education Service     Technological Development and Operation Service     Total  
Revenue   $ 4,732,843     $ 439,845     $ 5,172,688  
Cost of revenue     1,922,916       195,035       2,117,951  
Gross profit   $ 2,779,323     $ 241,966     $ 3,021,289  
Depreciation and amortization   $ 90,278     $ 28,579     $ 118,857  
Total capital expenditures   $ 74,807     $ 869     $ 75,676  

 

    For the Year Ended March 31, 2016  
    Online Education Service     Technological Development and Operation Service     Total  
Revenue   $ 6,083,698     $ 959,137     $ 7,042,835  
Cost of revenue     1,788,620       547,648       2,336,268  
Gross profit   $ 4,109,596     $ 382,247     $ 4,491,843  
Depreciation and amortization   $ 96,410     $ 29,496     $ 125,906  
Total capital expenditures   $ 149,442     $ 6,206     $ 155,648  

 

    As of
March 31, 2017
    As of
March 31, 2016
 
Total assets:            
Online Education Service   $ 6,844,713     $ 6,486,815  
Technological Development and Operation Service     445,569       278,042  
Total Assets   $ 7,290,282     $ 6,764,857  

 

NOTE 11 SUBSEQUENT EVENTS

 

On April 6, 2017, Distance Learning purchased four office suites located in Hunan Province, China, with a total payment of RMB 1,885,594 (approximately $0.3 million).

 

On April 25, 2017, Guizhou Huafu Qianyun Network Technology Co., Ltd. (“Guizhou Huafu”) was established in Guizhou Province, China. Distance Learning owns 75% equity interest of Guizhou Huafu, and the other 25% equity interest is owned by a third party company.

 

These audited consolidated financial statements were approved by management and available for issuance on September 15, 2017, and the Company has evaluated subsequent events through this date.

 

NOTE 12 OTHER SUBSEQUENT EVENTS

 

On March 15, 2018, the Board of Directors adopted a consent resolution to effectuate a stock split to sub-divide the original 50,000 issued ordinary shares of a nominal or par value of US$1 in the capital of the Company into 5,000,000 ordinary shares of a nominal or par value of US$0.01. Following such stock split, the Board of Directors on Mach 16, 2018, approved an increase of the authorized common shares to 30,000,000 common shares. On March 20, 2018, the Board of Directors adopted another consent resolution to decrease the issued and outstanding common shares to 3,200,000, by way of share surrender and cancelation. All the existing shareholders and directors of the Company consider the stock split of original 50,000 ordinary shares on March 15, 2018 and the subsequent reorganization of shares by way of share surrender on March 20, 2018 as part of the company’s recapitalization to result in 3,200,000 common shares issued and outstanding prior to completion of its initial public offering. The Company believes it is appropriate to reflect stock split on a retroactive basis pursuant to ASC 260. The Company has retroactively restated all shares and per share data for all the periods presented. As a result, the Company had 30,000,000 authorized common shares, $0.01 par value per share, of which 3,200,000 were issued and outstanding as of March 31, 2017 and 2016.

 

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WAH FU EDUCATION GROUP LIMITED AND SUBSIDIARIES

 

UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

FOR THE SIX MONTHS ENDED

 

SEPTEMBER 30, 2017 AND 2016

    

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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WAH FU EDUCATION GROUP LIMITED AND SUBSIDIARIES

 

TABLE OF CONTENTS

 

Unaudited Condensed Consolidated Financial Statements    
     
Unaudited Condensed Consolidated Balance Sheets as of September 30, 2017 and March 31, 2017   F-29
     
Unaudited Condensed Consolidated Statements of Income and Comprehensive Income for the Six Months Ended September 30, 2017 and 2016   F-30
     
Unaudited Condensed Consolidated Statements of Changes in Equity for the Six Months Ended September 30, 2017 and 2016   F-31
     
Unaudited Condensed Consolidated Statements of Cash Flows for the Six Months Ended September 30, 2017 and 2016   F-32
     
Notes to the unaudited Condensed Consolidated Financial Statements   F-33 – F-48

 

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WAH FU EDUCATION GROUP LIMITED AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

 

    As of September 30,     As of March 31,  
    2017     2017  
ASSETS            
CURRENT ASSETS:            
Cash   $ 4,836,904     $ 5,600,768  
Accounts receivable, net     1,530,433       664,263  
Inventories     7,366       8,803  
Other receivables, net     19,846       76,506  
Loan to third parties     634,617       232,182  
Other current assets     57,114       28,299  
TOTAL CURRENT ASSETS     7,086,280       6,610,821  
                 
Property and equipment, net     694,234       193,376  
Investment in unconsolidated entities     374,604       346,682  
Deferred tax assets, net     101,774       139,403  
TOTAL  ASSETS   $ 8,256,892     $ 7,290,282  
                 
CURRENT LIABILITIES:                
Due to related party   $ 300,530     $ -  
Deferred revenue     178,287       518,704  
Taxes payable     406,963       322,330  
Accrued and other liabilities     160,300       197,204  
TOTAL CURRENT LIABILITIES     1,046,080       1,038,238  
                 
TOTAL LIABILITIES     1,046,080       1,038,238  
                 
COMMITMENTS                
                 
EQUITY:                
Common stock, $0.01 par value, 30,000,000 shares authorized; 3,200,000 shares issued and outstanding as of September 30, 2017 and March 31, 2017*     32 ,000       32 ,000  
Additional paid-in capital     217 ,395       217 ,395  
Statutory reserve     150,905       64,190  
Retained earnings     6,901,854       6,381,514  
Accumulated other comprehensive loss     (316,386 )     (544,852 )
Total shareholders’ equity     6,985,768       6,150,247  
Non-controlling interest     225,044       101,797  
TOTAL EQUITY     7,210,812       6,252,044  
TOTAL LIABILITIES AND EQUITY   $ 8,256,892     $ 7,290,282  

 

* Retrospectively restated for effect of stock split and share reorganization

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

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WAH FU EDUCATION GROUP LIMITED AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

 

    For the Six Months Ended
September 30,
 
    2017     2016  
             
REVENUE   $ 3,061,334     $ 3,071,770  
                 
COST OF REVENUE AND RELATED TAX                
Cost of revenue     953,565       1,049,868  
Business and sales related tax     11,280       15,624  
                 
GROSS PROFIT     2,096,489       2,006,278  
                 
OPERATING EXPENSES                
Selling expenses     480,523       322,480  
General and administrative expenses     894,210       910,868  
Total operating expenses     1,374,733       1,233,348  
                 
INCOME FROM OPERATIONS     721,756       772,930  
                 
OTHER INCOME (EXPENSE)                
Interest income     98,458       50,596  
Income (loss) from investments in unconsolidated entity     15,358       (29,197 )
Other expenses     (10,823 )     (7,220 )
Total other income, net     102,993       14,179  
                 
INCOME BEFORE INCOME TAX PROVISION     824,749       787,109  
                 
PROVISION FOR INCOME TAXES     111,108       129,017  
                 
NET INCOME     713,641       658,092  
                 
Less: net income attributable to non-controlling interest     106,586       116,792  
                 
NET INCOME ATTRIBUTABLE TO WAH FU EDUCATION GROUP LIMITED   $ 607,055     $ 541,300  
                 
COMPREHENSIVE INCOME                
Net income     713,641       658,092  
Other comprehensive income (loss): foreign currency translation gain (loss)     234,245       (204,493 )
Total comprehensive income     947,886       453,599  
Less: Comprehensive income attributable to non-controlling interest     112,365       115,810  
                 
COMPREHENSIVE INCOME ATTRIBUTABLE TO WAH FU EDUCATION GROUP LIMITED   $ 835,521     $ 337,789  
                 
Earnings per common share - basic and diluted   $ 0.19     $ 0.17  
Weighted average shares - basic and diluted*     3,200,000       3,200,000  

  

* Retrospectively restated for effect of stock split and share reorganization

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

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WAH FU EDUCATION GROUP LIMITED AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED 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, March 31, 2017     3,200,000     $ 32,000     $ 217,395     $ 64,190     $ 6,381,514     $ (544,852 )   $ 6,150,247     $ 101,797     $ 6,252,044  
 Capital contribution             -       -       -       -       -       -       10,882       10,882  
Net income for the period             -       -       -       607,055       -       607,055       92,495       699,550  
Appropriation of statutory reserves             -       -       86,715       (86,715 )     -       -       14,091       14,091  
Foreign currency translation adjustment             -       -       -       -       228,466       228,466       5,779       234,245  
Balance, September 30, 2017     3,200,000     $ 32,000     $ 217,395     $ 150,905     $ 6,901,854     $ (316,386 )   $ 6,985,768     $ 225,044     $ 7,210,812  
                                                                         
Balance, March 31, 2016     3,200,000     $ 32,000     $ 217,395     $ -     $ 5,873,003     $ (148,490 )   $ 5,973,908     $ (7,474 )   $ 5,966,434  
Net income for the period             -       -       -       541,300       -       541,300       116,792       658,092  
Appropriation of statutory reserves             -       -       42,174       (42,174 )     -       -       -       -  
Foreign currency translation adjustment             -       -       -       -       (203,511 )     (203,511 )     (982 )     (204,493 )
Balance, September 30, 2016     3,200,000     $ 32,000     $ 217,395     $ 42,174     $ 6,372,129     $ (352,001 )   $ 6,311,697     $ 108,336     $ 6,420,033  

 

* Retrospectively restated for effect of stock split and share reorganization

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

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WAH FU EDUCATION GROUP LIMITED AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

 

    For the Six Months Ended September 30,  
    2017     2016  
Cash flows from operating activities:            
Net Income   $ 713,641     $ 658,092  
Adjustments to reconcile net income to net cash provided by (used in) operating activities:                
Depreciation     58,640       68,159  
Loss from disposal of  equipment     -       4,771  
Provision for doubtful accounts     101,097       35,916  
Loss (income) from investments in unconsolidated entities     (15,358 )     29,197  
Interest income from loan to third parties     (15,300 )     (1,121 )
Deferred tax expense (benefit)     41,880       (56,089 )
Changes in operating assets and liabilities:                
Accounts receivable, net     (929,860 )     (393,750 )
Inventories     1,721       -  
Other receivable, net     40,695       (29,427 )
Other current assets     (27,353 )     (218,299 )
Deferred revenue     (352,945 )     45,951  
Taxes payable     71,989       122,687  
Accrued and other liabilities     (43,347 )     (95,524 )
Net cash (used in) provided by operating activities     (354,500 )     170,563  
                 
Cash flows from investing activities:                
Purchase of property and equipment     (544,365 )     (75,087 )
Proceeds from disposal of equipment     -       144  
Repayment proceeds from loan to third parties     88,680       -  
Payments made for loan to third parties     (443,399 )     (75,758 )
Payments made for investment in unconsolidated entities     -       (287,879 )
Net cash used in investing activities     (899,084 )     (438,580 )
                 
Cash flows from financing activities:                
Due to shareholders     295,600       -  
Capital contribution by a shareholder of non-controlling interest     11,085       -  
Net cash provided by financing activities     306,685       -  
                 
Effect of exchange rate fluctuation on cash     183,035       (168,422 )
                 
Net decrease in cash     (763,864 )     (436,439 )
Cash at beginning of period     5,600,768       5,171,535  
Cash at end of period   $ 4,836,904     $ 4,735,096  
                 
Supplemental cash flow information                
Cash paid for income taxes   $ 10,882     $ 54,755  

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements

 

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WAH FU EDUCATION GROUP LIMITED AND SUBSIDIARIES

 

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

NOTE 1 – ORGANIZATION AND BUSINESS DESCRIPTION

 

Wah Fu Education Group Limited (“Wah Fu”) was incorporated under the laws of the British Virgin Islands on July 23, 2012. Wah Fu is a holding company whose primary purpose is to develop business opportunities in the People’s Republic of China (“PRC” or “China”). Wah Fu Education Holding Limited (“Wah Fu Holding”) is a wholly-owned subsidiary of Wah Fu, which was established on May 19, 2016 in Hong Kong, China.

 

In December 2012, Wah Fu acquired 100% equity interest of Beijing Huaxia Dadi Distance Learning Services Co., Ltd. (“Distance Learning”) and its Variable Interest Entity (“VIE”), Beijing Huaxia Dadi Digital Information Technology Co., Ltd (“Digital Information”), with a consideration totaling Chinese Renminbi (“RMB”) 2,000,000 (approximately $0.3 million). Distance Learning is a Chinese national-wide online education services provider founded on December 23, 1999. Digital Information is a technological development and operation services provider founded on September 14, 2000. Due to PRC legal restrictions on foreign ownership and investment in, among other areas, value-added telecommunications services, which include internet content providers, or ICPs, Wah Fu cannot have a direct ownership in Digital Information. As an alternative, Distance Learning entered into a series of contractual agreements with the owners of Digital Information. These agreements include an Exclusive Business Cooperation Agreement, an Equity Interest Pledge Agreement, an Exclusive Option Agreement and Powers of Attorney.

 

Pursuant to the above agreements, Distance Learning has the exclusive right to provide Digital Information consulting services related to business operations including technology and management. All the above contractual agreements obligate Distance Learning to absorb a majority of the risk of loss from Digital Information’s activities and entitle Distance Learning to receive a majority of their residual returns. In essence, Distance Learning has gained effective control over Digital Information. Therefore, the Company believes that Digital Information should be considered as VIE under the Statement of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 810 “Consolidation”. Accordingly, the accounts of Digital Information are consolidated with those of Distance Learning and ultimately are consolidated into those of Wah Fu.

 

On July 20, 2015, Wah Fu established Shanghai Xin Fu Network Technology Co., Ltd. (“Shanghai Xin Fu”), a wholly foreign-owned enterprise (the “WFOE”) under the laws of the PRC. Shanghai Xin Fu owns 100% equity interest of Shanghai Xia Shu Network Technology Co., Ltd, (“Shanghai Xia Shu”), a company formed on April 29, 2016 under the laws of PRC. On June 15, 2015, Hunan Huafu Haihui Learning Technology Co., Ltd. (“Hunan Huafu”) was incorporated in Hunan Province, China. Shanghai Xia Shu owns 75% equity interest of Hunan Huafu, and the other 25% equity interest is owned by two unrelated individual shareholders.

 

On March 8, 2017, Nanjing Suyun Education Technology Co., Ltd. (“Nanjing Suyun”) was founded in Jiangsu Province, China. Distance Learning owns 70% equity interest of Nanjing Suyun, and the other 30% equity interest is owned by an individual shareholder. On March 15, 2017, Huaxia MOOC Internet Technology Co., Ltd. (“Huaxia MOOC”) was founded in Hubei Province, China. Distance Learning owns 65% equity interest of Huaxia MOOC, and two individual shareholders own 30% and 5% equity interest of Huaxia MOOC, respectively

 

On April 25, 2017, Guizhou Huafu Qianyun Network Technology Co., Ltd. (“Guizhou Huafu”) was established in Guizhou Province, China. Distance Learning owns 75% equity interest of Guizhou Huafu, and the other 25% equity interest is owned by a third party company.

 

Wah Fu, its subsidiaries and its subsidiary’s consolidated VIE (collectively, the “Company”) are primarily engaged in providing online education services and technological development and operation service in China.

  

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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

Basis of Presentation and Principles of Consolidation

 

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. The unaudited interim condensed consolidated financial statements should be read in conjunction with the Company’s consolidated financial statements and the notes thereto for the years ended March 31, 2017 and 2016. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary to make the financial statements not misleading have been included. Operating results for the interim period ended September 30, 2017 are not necessarily indicative of the results that may be expected for the fiscal year ending March 31, 2018.

 

The accompanying unaudited condensed consolidated financial statements include the financial statements of Wah Fu, its subsidiaries and its subsidiary’s VIE. All inter-company balances and transactions have been eliminated upon consolidation. 

 

Company   Date of
establishment
  Place of
establishment
  Percentage
of legal
ownership
by Wah Fu
    Principal activities
Subsidiaries:                  
Wah Fu Holding   May 19, 2016   Hong Kong, PRC     100 %   Holding Company
Distance Learning   December 23, 1999   Mainland, PRC     100 %   Provider of online education services and technological development and operation services
Shanghai Xin Fu   July 20, 2015   Mainland, PRC     100 %   Inactive
Shanghai Xia Shu   April 29, 2016   Mainland, PRC     100 %   Inactive
Hunan Huafu   June 15, 2015   Mainland, PRC     75 %   Provider of online education services
Nanjing Suyun   March 8, 2017   Mainland, PRC     70 %   Inactive
Huaxia MOOC   March 15, 2017   Mainland, PRC     65 %   Inactive
Guizhou Huafu   April 25, 2017   Mainland, PRC     75 %   Inactive
Variable interest entity                  
Digital Information   September 14, 2000   Mainland, PRC     Nil     Provider of online education services and technological development and operation service

 

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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

 

Consolidation of Variable Interest Entities

 

In accordance with accounting standards regarding consolidation of variable interest entities, VIEs are generally entities that lack sufficient equity to finance their activities without additional financial support from other parties or whose equity holders lack adequate decision making ability. The VIE with which the Company is involved must be evaluated to determine the primary beneficiary of the risks and rewards of the VIE. The primary beneficiary is required to consolidate the VIE for financial reporting purposes. We have determined that Distance Learning is the primary beneficiary of Digital Information’s risks and rewards.

 

The following tables set forth the assets, liabilities, results of operations and changes in cash of the VIE, Digital Information, which were included in the Company’s unaudited condensed consolidated balance sheets, statements of comprehensive income and cash flows:

 

    As of
September 30, 2017
    As of
March 31, 2017
 
Current assets   $ 294,008     $ 23,157  
Non-current assets     437,407       422,412  
Total assets     731,415       445,569  
Current liabilities     165,310       178,750  
Intercompany payables*     2,016,010       1,684,238  
Total liabilities     2,181,320       1,862,988  
Net assets   $ (1,449,905 )   $ (1,417,419 )

 

* Payables to Distance Learning and Digital Information are eliminated upon consolidation.

 

    For the Six Months Ended  
    September 30, 2017     September 30, 2016  
Revenue*   $ 636,376     $ 73,888  
Net income (loss)   $ 17,541     $ (477,492 )

 

* Intercompany sales are eliminated upon consolidation.

 

    For the Six Months Ended  
    September 30, 2017     September 30, 2016  
Net cash provided by operating activities *   $ 33,770     $ 278,440  
Net cash used in investing activities     (3,878 )     (288,765 )
Effect of exchange rate fluctuation on cash     1,042       (996 )
Net increase (decrease) in cash   $ 30,934     $ (11,321 )

 

* Intercompany operating activities are eliminated upon consolidation.

 

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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

 

Non-controlling Interests

 

U.S. GAAP requires that non-controlling interests in subsidiaries and affiliates be reported in the equity section of a company’s balance sheet. In addition, the amounts attributable to the net income of those subsidiaries are reported separately in the unaudited condensed consolidated statements of income and comprehensive income.

 

Uses of estimates

 

The preparation of unaudited condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the unaudited condensed consolidated financial statements and the reported amounts of revenue and expenses during each reporting period. Actual results could differ from those estimates. Significant accounting estimates reflected in the Company’s unaudited condensed consolidated financial statements include the allowances for doubtful accounts, estimated useful lives and fair value in connection with the impairment of property and equipment. Actual results could differ from these estimates.

 

Cash

 

The Company considers all highly liquid investment instruments with an original maturity of three months or less from the date of purchase to be cash equivalents. As of September 30, 2017 and March 31, 2017, the Company had no cash equivalents. The Company maintains cash and cash equivalents with various financial institutions mainly in the PRC. Balances in banks in the PRC are uninsured.

 

Accounts receivable, net

 

Accounts receivable are recognized and carried at original invoiced amount less an estimated allowance for uncollectible accounts. The Company usually grants credit to customers with good credit standing with a maximum of 90 days and determines the adequacy of reserves for doubtful accounts based on individual account analysis and historical collection trends. The Company establishes a provision for doubtful receivables when there is objective evidence that the Company may not be able to collect amounts due. The allowance is based on management’s best estimates of specific losses on individual exposures, as well as a provision on historical trends of collections. The provision is recorded against accounts receivables balances, with a corresponding charge recorded in the unaudited condensed consolidated statements of income and comprehensive income. Actual amounts received may differ from management’s estimate of credit worthiness and the economic environment. Delinquent account balances are written-off against the allowance for doubtful accounts after management has determined that the likelihood of collection is not probable. As of September 30, 2017 and March 31, 2017, the allowances for doubtful accounts were $219,908 and $113,109, respectively.

  

Loans to third parties

 

Loans to third parties are cash advances mainly used for short-term funding to unrelated companies and individuals with which the Company has business relationships. These loans are due on demand with an interest rate ranged from 6% to 15% per annum. Loans to third parties are reviewed periodically as to whether their carrying values remain realizable.

 

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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

 

Property and equipment, net

 

Property and equipment is stated at cost, less accumulated depreciation and amortization. Expenditures for additions, major renewal and betterments are capitalized, and expenditures for maintenance and repairs are charged to expense as incurred. Depreciation is provided on a straight-line basis, less estimated residual value, over an asset’s estimated useful life. Following are the estimated useful lives of the Company’s property and equipment:

 

    Estimated useful lives
Buildings   20 years
Electronic equipment   4 - 5 years
Office equipment and furniture   4 - 5 years
Motor vehicles   4 - 5 years
Leasehold improvements   The shorter of the lease term and useful life

 

Repair and maintenance costs are charged to expense as incurred, whereas the cost of renewals and betterment that extends the useful lives of property, plant and equipment are capitalized as additions to the related assets. Retirements, sales and disposals of assets are recorded by removing the cost and accumulated depreciation from the asset and accumulated depreciation accounts with any resulting gain or loss reflected in the unaudited condensed consolidated statements of income and comprehensive income in other income or expenses.

 

Impairment of long-lived assets

 

The Company assesses its long-lived assets such as property and equipment for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. Factors which may indicate potential impairment include a significant underperformance related to the historical or projected future operating results or a significant negative industry or economic trend. Recoverability of these assets is measured by comparison of their carrying amounts to future undiscounted cash flows the assets are expected to generate. If property and equipment and certain identifiable intangibles are considered to be impaired, the impairment to be recognized equals the amount by which the carrying value of the assets exceeds their fair value. The Company did not record any impairment loss on its long-lived assets during the six months ended September 30, 2017 and 2016.

  

Long-term investments

 

The Company’s long-term investments consist of cost method investment and equity method investment.

 

Cost method investment

 

For an investee over which the Company does not have significant influence and a controlling interest, the Company carries the investment at cost and recognizes income for any dividend received from the distribution of the investee’s earnings.

 

The Company reviews its cost method investment for impairment whenever an event or circumstance indicates that an other-than-temporary impairment has occurred. The Company considers available quantitative and qualitative evidence in evaluating potential impairment of its cost method investment. An impairment charge is recorded if the carrying amount of an investment exceeds its fair value and such excess is determined to be other-than temporary. The Company did not record any impairment loss on its cost method investment during the six months ended September 30, 2017 and 2016.

 

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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

   

NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

 

Long-term investments (Continued)

 

Equity method investment

 

For an investee over which the Company has the ability to exercise significant influence, but does not have a controlling interest, the Company accounted for those using the equity method. Significant influence is generally considered to exist when the Company has an ownership interest in the voting stock of the investee between 20% and 50%. Other factors, such as representation on the investee’s board of directors, voting rights and the impact of commercial arrangements, are also considered in determining whether the equity method of accounting is appropriate.

 

An impairment charge is recorded if the carrying amount of the investment exceeds its fair value and this condition is determined to be other-than temporary. The Company did not record impairment losses on its equity method investment during the six months ended September 30, 2017 and 2016.

 

Revenue recognition

 

Revenues are recognized when the following four criteria are met: (i) persuasive evidence of an arrangement exists, (ii) the service has been rendered, (iii) the fees are fixed or determinable, and (iv) collectability is reasonably assured.

 

Online education service

 

The online education service provided by the Company to its customers is an integrated service, including audio-video course content, mock examinations and online chat rooms during the subscription period. Audio-video course content, mock examinations and online chat rooms are not practical to be sold on standalone basis and have never been sold separately. The revenues for the online education service are recognized on a straight line basis over the subscription period from the month in which students enroll in the courses to the month in which the subscribed courses terminate. The online education service includes online education cloud service (“B2B2C”) and online training service (“B2C”). B2C service can be cancelled and is refundable no later than 24 hours after enrollment. B2B2C service can not be cancelled and is not refundable after enrollment.

  

Technological development and operation service

 

Revenues from technological development service, such as information technology system design and cloud platform development, are recognized when the system or platform are delivered and accepted by the customers. From time to time, the Company enters into arrangement to provide technological support and maintenance service of online platforms to its customers. The revenues for the technological support and maintenance service are recognized over the support and maintenance services period.

 

Deferred revenue represents revenues collected but not earned as of September 30, 2017 and March 31, 2017. This is primarily composed of revenue for online course tuition received in advance. If a course is provided over a period end, deferred revenue is recorded for the revenue related to the course conducted in the next period.

 

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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

 

Income taxes

 

The Company accounts for income taxes under ASC 740. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the unaudited condensed consolidated financial statement carrying amounts of existing assets and liabilities and their respective tax bases.

 

Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period including the enactment date. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.

 

The provisions of ASC 740-10-25, “Accounting for Uncertainty in Income Taxes,” prescribe a more-likely-than-not threshold for unaudited condensed consolidated financial statement recognition and measurement of a tax position taken (or expected to be taken) in a tax return. This interpretation also provides guidance on the recognition of income tax assets and liabilities, classification of current and deferred income tax assets and liabilities, accounting for interest and penalties associated with tax positions, and related disclosures. The Company does not believe that there was any uncertain tax position at September 30, 2017 and March 31, 2017.

 

Value added tax (“VAT”)

 

Sales revenue derived from the invoiced online education service, and technological development and operation service is subject to VAT since 2014. Prior to that, the Company was subject to a fixed rate of business tax of 3%. The applicable VAT rates are 6% and 3% for the entities that are general taxpayer and small-scale taxpayer, respectively. Distance Learning and Digital Information are both considered VAT general taxpayers since June 2015. Hunan Huafu, Shanghai Xia Shu, Shanghai Xin Fu, Nanjing Suyun and Guizhou Huafu are VAT small-scale taxpayers since the date of incorporation.

 

Entities that are VAT general taxpayers are allowed to offset qualified input VAT paid to suppliers against their output VAT liabilities. Net VAT balance between input VAT and output VAT is recorded in the line item of taxes payable on the unaudited condensed consolidated balance sheets. All of the VAT returns of the Company have been and remain subject to examination by the tax authorities for five years from the date of filing.

 

Foreign currency translation

 

Since the Company operates in the PRC, the Company’s functional currency is the Chinese RMB.  The Company’s unaudited condensed consolidated financial statements have been translated into the reporting currency, the United States Dollar (“USD”). Assets and liabilities of the Company are translated at the exchange rate at each reporting period end date. Equity is translated at historical rates. Income and expense accounts are translated at the average rate of exchange during the reporting period. The resulting translation adjustments are reported under other comprehensive income (loss). Gains and losses resulting from the translations of foreign currency transactions and balances are reflected in the result of operations. RMB is not freely convertible into foreign currency and all foreign exchange transactions must take place through authorized institutions. No representation is made that the RMB amounts could have been, or could be, converted into USD at the rates used in translation.

 

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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

 

Earnings per Share

 

The Company computes earnings per share (“EPS”) in accordance with ASC 260, “Earnings per Share” (“ASC 260”). ASC 260 requires companies with complex capital structures to present basic and diluted EPS. Basic EPS is measured as net income divided by the weighted average common shares outstanding for the period. Diluted EPS is similar to basic EPS but presents the dilutive effect on a per share basis of potential common shares (e.g., convertible securities, options and warrants) as if they had been converted at the beginning of the periods presented, or issuance date, if later. Potential common shares that have an anti-dilutive effect (i.e., those that increase income per share or decrease loss per share) are excluded from the calculation of diluted EPS. There is no anti-dilutive effect for the six months ended September 30, 2017 and 2016.

 

Comprehensive Income

 

Comprehensive income consists of two components, net income and other comprehensive income (loss). The foreign currency translation gain or loss resulting from translation of the financial statements expressed in RMB to US$ is reported in other comprehensive income (loss) in the unaudited condensed consolidated statements of income and comprehensive income.

 

Fair value of financial instruments

 

The Company follows the provisions of FASB ASC 820, Fair Value Measurements and Disclosures. ASC 820 clarifies the definition of fair value, prescribes methods for measuring fair value, and establishes a fair value hierarchy to classify the inputs used in measuring fair value as follows:

 

Level 1 - Inputs are unadjusted quoted prices in active markets for identical assets or liabilities available at the measurement date.

 

Level 2 - Inputs are unadjusted quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, inputs other than quoted prices that are observable, and inputs derived from or corroborated by observable market data.

 

Level 3 - Inputs are unobservable inputs which reflect the reporting entity’s own assumptions on what assumptions the market participants would use in pricing the asset or liability based on the best available information.

 

The carrying amounts reported in the balance sheets for cash, accounts receivable, other receivables, loan to third parties, other current assets, deferred revenue, taxes payable, accrued and other liabilities approximate their fair value based on the short-term maturity of these instruments.

 

Risks and Uncertainties

 

The operations of the Company are located in the PRC. Accordingly, the Company’s business, financial condition, and results of operations may be influenced by the political, economic, and legal environments in the PRC, as well as by the general state of the PRC economy. The Company’s operations in the PRC are subject to special considerations and significant risks not typically associated with companies in North America and Western Europe. These include risks associated with, among other factors, the political, economic and legal environment and foreign currency exchange. The Company’s results may be adversely affected by changes in the political, regulatory and social conditions in the PRC, and by changes in governmental policies or interpretations with respect to laws and regulations, anti-inflationary measures, currency conversion, remittances abroad, and rates and methods of taxation, among other things. Although the Company has not experienced losses from these situations and believes that it is in compliance with existing laws and regulations, this may not be indicative of future results.

 

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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

 

Concentrations and credit risk

 

Credit risk

 

Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash. As of September 30, 2017 and March 31, 2017, $4,835,369 and $5,598,402 of the Company’s cash were on deposits at financial institutions in the RMB where there currently is no rule or regulation requiring such financial institutions to maintain insurance to cover bank deposits in the event of bank failure. While management believes that these financial institutions are of high credit quality, it also continually monitors their credit worthiness.

 

Accounts receivable are typically unsecured and derived from revenue earned from customers, thereby exposed to credit risk. The risk is mitigated by the Company’s assessment of its customers’ creditworthiness and its ongoing monitoring of outstanding balances.

 

Customer and supplier concentration risk

 

The Company’s revenues are derived from enrolled students or institutions that are located primarily in China. For the six months ended September 30, 2017, no institutional customers accounted for more than 10% of the Company’s total revenue. For the six months ended September 30, 2016, two institutional customers accounted for approximately 12% and 10% of the Company’s total revenue, respectively. As of September 30, 2017, four institutional customers accounted for 16%, 13%, 13% and 10% of the total outstanding accounts receivable balance, respectively. As of March 31, 2017, three institutional customers accounted for 31%, 28% and 25% of the total outstanding accounts receivable balance, respectively.

 

For the six months ended September 30, 2017 and 2016, the Company made approximately 13% and 49% of total purchases from one major supplier, respectively. As of September 30, 2017, no suppliers accounted for more than 10% of total advance payments outstanding. As of March 31, 2017, no suppliers accounted for more than 10% of total advance payments outstanding.

 

A loss of either of these customers or suppliers could adversely affect the operating results or cash flows of the Company.

 

Statements of cash flows

 

In accordance with FASB ASC Topic 230, “Statement of Cash Flows,” cash flows from the Company are calculated based upon the local currencies. As a result, amounts related to assets and liabilities reported on the Company’s statements of cash flows will not necessarily agree with changes in the corresponding balances on the balance sheet.

  

Reclassification

 

Certain prior year amounts have been reclassified to conform to the current period presentation. These reclassifications have no effect on the results of operations and cash flows.

 

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WAH FU EDUCATION GROUP LIMITED AND SUBSIDIARIES

 

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

 

Recent accounting pronouncements

 

In January 2017, the FASB issued ASU No. 2017-01, “Business Combinations (Topic 805): Clarifying the Definition of a Business”. The amendments in this ASU clarify the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. Basically these amendments provide a screen to determine when a set is not a business. If the screen is not met, the amendments in this ASU first, require that to be considered a business, a set must include, at a minimum, an input and a substantive process that together significantly contribute to the ability to create output and second, remove the evaluation of whether a market participant could replace missing elements. These amendments take effect for public businesses for fiscal years beginning after December 15, 2017 and interim periods within those periods. The Company does not expect that adoption of this guidance will have a material impact on its unaudited condensed financial statements. 

 

In February 2017, the FASB issued ASU No. 2017-05, “Other Income—Gains and Losses from the Derecognition of Nonfinancial Assets” to clarify the scope of Subtopic 610-20 and to add guidance for partial sales of nonfinancial assets. Subtopic 610-20, which was issued in May 2014 as a part of ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606), provides guidance for recognizing gains and losses from the transfer of nonfinancial assets in contracts with noncustomers. For public entities, the amendments are effective for annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. The Company does not expect that adoption of this guidance will have a material impact its unaudited condensed financial statements and related disclosures.

  

In May 2017, the FASB issued ASU 2017-09, “Scope of Modification Accounting”, which amends the scope of modification accounting for share-based payment arrangements, provides guidance on the types of changes to the terms or conditions of share-based payment awards to which an entity would be required to apply modification accounting under ASC 718. Early adoption is permitted, including adoption in any interim period. The Company does not expect that adoption of this guidance will have a material impact on its consolidated financial statements and related disclosures. In January 2017, the FASB issued ASU 2017-01, which clarifies the definition of a business to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The standard will be effective for us in the first quarter of our fiscal 2019. The Company expects that the adoption of this ASU would not have a material impact on its unaudited condensed financial statements.

 

In July 2017, the FASB issued ASU 2017-11, “Earnings Per Share (Topic 260)”, Distinguishing Liabilities from Equity (Topic 480), Derivatives and Hedging (Topic 815). The amendments in Part I of this Update change the classification analysis of certain equity-linked financial instruments (or embedded features) with down round features. When determining whether certain financial instruments should be classified as liabilities or equity instruments, a down round feature no longer precludes equity classification when assessing whether the instrument is indexed to an entity’s own stock. The amendments also clarify existing disclosure requirements for equity-classified instruments. The amendments in Part II of this Update recharacterize the indefinite deferral of certain provisions of Topic 480 that now are presented as pending content in the Codification, to a scope exception. Those amendments do not have an accounting effect. For public business entities, the amendments in Part I of this Update are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. Early adoption is permitted for all entities, including adoption in an interim period. If an entity early adopts the amendments in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. The Company expects that the adoption of this ASU would not have a material impact on its unaudited condensed financial statements.

 

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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

 

Recent accounting pronouncements (Continued)

 

In September 2017, the FASB issued ASU 2017-13, Revenue from Contracts with Customers (Topic 606) and Leases (Topic 842). The main objective of this pronouncement is to clarify the effective date of the adoption of ASC Topic 606 and ASC Topic 842 and the definition of public business entity as stipulated in ASU 2014-09 and ASU 2016-02. ASU 2014-09 provides that a public business entity and certain other specified entities adopt ASC Topic 606 for annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. All other entities are required to adopt ASC Topic 606 for annual reporting periods beginning after December 15, 2018, and interim reporting periods within annual reporting periods beginning after December 15, 2019. ASU 2016-12 requires that “a public business entity and certain other specified entities adopt ASC Topic 842 for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. All other entities are required to adopt ASC Topic 842 for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020”. ASU 2017-13 clarifies that the SEC would not object to certain public business entities electing to use the non-public business entities effective dates for applying ASC 606 and ASC 842. ASU 2017-13, however, limits such election to certain public business entities that “otherwise would not meet the definition of a public business entity except for a requirement to include or inclusion of its financial statements or financial information in another entity’s filings with the SEC”. The Company expects that the adoption of this ASU would not have a material impact on its unaudited condensed financial statements.

 

NOTE 3 – ACCOUNTS RECEIVABLE, NET

 

Accounts receivable consisted of the following:

 

    As of
September 30, 2017
    As of
March 31, 2017
 
Accounts receivable   $ 1,750,341     $ 777,372  
Less: allowance for doubtful accounts     (219,908 )     (113,109 )
Accounts receivable, net   $ 1,530,433     $ 664,263  

 

NOTE 4 – PROPERTY AND EQUIPMENT, NET

 

Property and equipment, net consisted of the following:

 

    As of
September 30, 2017
    As of
March 31, 2017
 
Buildings   $ 447,865     $ -  
Electronic equipment     253,182       181,938  
Office equipment and furniture     246,447       243,949  
Motor vehicles     144,963       139,993  
Leasehold improvements     99,025       50,122  
Subtotal     1,191,482       616,002  
Less: accumulated depreciation     (497,248 )     (422,626 )
Property and equipment, net   $ 694,234     $ 193,376  

 

Depreciation expense was $58,640 and $68,159 for the six months ended September 30, 2017 and 2016, respectively.

    

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WAH FU EDUCATION GROUP LIMITED AND SUBSIDIARIES

 

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENT S

 

NOTE 5 – INVESTMENT IN UNCONSOLIDATED ENTITIES

 

The Company’s investments in unconsolidated entities consisted of the following:

 

    As of
September 30, 2017
    As of
March 31, 2017
 
Cost method investment:            
Beijing Tianyuebowen Science and Technology Co., Ltd. (a)   $ 135,239     $ 130,602  
Zhongtai International Education Technology (Beijing) Co., Ltd. (b)     150,265       145,114  
Equity method investment:                
Nanjing Weiyouxue Information Technology Co., Ltd. (c)     89,100       70,966  
Total   $ 374,604     $ 346,682  

 

  (a) On June 2, 2016, the Company invested RMB 0.9 million (approximately $0.14 million as of September 30, 2017) in exchange for 10% equity interest of Tianyuebowen through its related party, Beijing Haohua Haofu Investment Co., Ltd. (“Haohua Haofu”). Haohua Haofu signed the investment agreement on behalf of Digital Information and transferred 10% ownership of Tianyuebowen to the Company subsequently. RMB 0.9 million was paid in full by the Company in June 2016.

 

  (b) On August 15, 2016, the Company invested RMB 1.0 million (approximately $0.15 million as of September 30, 2017) in exchange for 15% equity interest of Zhongtai International Education Technology (Beijing) Co., Ltd. (“Zhongtai”) through Haohua Haofu. Haohua Haofu signed the investment agreement on behalf of Digital Information and transferred 15% ownership of Zhongtai to the Company subsequently. RMB 1.0 million was paid in full by the Company in August 2016.

 

  (c) On July 3, 2014, Digital Information entered into an equity investment agreement to acquire 49% equity interest of Nanjing Wei You Xue Information Technology Co., Ltd. (“Wei You Xue”), with a consideration of RMB 1,862,000 (approximately $0.28 million as of September 30, 2017). The Company uses the equity method to account for the investment, because the Company has the ability to exercise significant influence but does not have control over the investee. Wei You Xue qualified as a related party thereafter. For the six months ended September 30, 2017 and 2016, the Company recorded income of $15,358 and loss of $29,197 on the investment, respectively, which was included in “Income (loss) from investments in unconsolidated entity” in the unaudited condensed consolidated statements of income and comprehensive income.

  

NOTE 6 – DUE TO RELATED PARTY

 

As of September 30, 2017 and March 31, 2017, the Company had related party payables of $300,530 and $nil, respectively, mainly due to the principal shareholders of the Company who lent funds for the Company’s operations. The payables are unsecured, non-interest bearing and due on demand.

 

    As of
September 30, 2017
    As of
March 31, 2017
 
Due to shareholders   $ 300,530     $    -  
    $ 300,530     $ -  

 

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WAH FU EDUCATION GROUP LIMITED AND SUBSIDIARIES

 

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

NOTE 7 – TAXES

 

Corporate Income Taxes (“CIT”)

 

The Company is subject to income taxes on an entity basis on income arising in or derived from the tax jurisdiction in which each entity is domiciled.

 

Wah Fu is an offshore holding company and is not subject to tax on income or capital gains under the laws of the British Virgin Islands.

 

Wah Fu Holding was incorporated in Hong Kong and is subject to Hong Kong corporate income tax at a rate of 16.5% on the estimated assessable profits arising from Hong Kong.

 

Distance Learning was registered in the PRC and is subject to corporate income tax at a reduced rate of 15% starting from 2014, when it was approved by local government as a High-technology Company. The certificate of High-technology Company expired in October 2017 and the Company renewed this certificate in November 2017.

 

Hunan Huafu, Shanghai Xia Shu, Shanghai Xin Fu and Nanjing Suyun, were registered in the PRC and are subject to corporate income tax at a reduced rate of 10% starting from the inception dates when they were approved by local government as small-scaled minimal profit enterprises.

 

Digital Information was registered in the PRC and is subject to corporate income tax at the rate of 25%.

 

The estimated tax savings as a result of the Company’s preferred tax rates for the six months ended September 30, 2017 and 2016 amounted to $100,463 and $67,760, respectively. Per share effect of the tax savings were $2.01 and $1.36 for the six months ended September 30, 2017 and 2016, respectively.

 

(i) The components of the income tax (benefit) expense are as follows:

 

    For the Six Months Ended  
    September 30, 2017     September 30, 2016  
Current income tax provision   $ 69,228     $ 185,106  
Deferred income tax provision (benefit)     41,880       (56,089 )
Total   $ 111,108     $ 129,017  

 

(ii) The following table summarizes deferred tax assets resulting from differences between the financial reporting basis and tax basis of assets and liabilities:

 

    As of
September 30, 2017
    As of
March 31,
2017
 
Allowance for doubtful accounts   $ 35,030     $ 18,940  
Deferred revenue     27,432       76,758  
Net operating loss carry-forwards     44,786       43,705  
Total deferred tax asset     107,248       139,403  
Valuation allowance     (5,474 )     -  
Deferred tax assets, net   $ 101,774     $ 139,403  

 

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WAH FU EDUCATION GROUP LIMITED AND SUBSIDIARIES

 

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

NOTE 7 – TAXES (Continued)

 

Corporate Income Taxes (“CIT”) (Continued)

 

According to Chinese tax regulations, net operating loss (“NOL”) can be carried forward to offset operating income for five years. A valuation allowance is established for deferred tax assets if it is more likely than not that these items will either expire before the Company is able to realize their benefits, or that the realization of future deductions is uncertain. Management performs an assessment over future taxable income to analyze whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. As of September 30, 2017 and March 31, 2017, valuation allowance accrued for deferred tax assets was $5,474 and $nil, respectively.

 

(iii) The following table reconciles the PRC statutory rates to the Company’s effective tax rate for the six months ended September 30, 2017 and 2016:

 

    For the Six Months Ended  
    September 30, 2017     September 30, 2016  
Statutory PRC income tax rate     25.0 %     25.0 %
Favorable tax rate impact (a)     (12.2 %)     (8.6 %)
Change in valuation allowance     0.7 %     -  
Effective tax rate     13.5 %     16.4 %

 

(a) Distance Learning is subject to a favorable tax rate of 15%; Shanghai Xia Shu, Shanghai Xin Fu, Hunan Huafu,  Nanjing Suyun and Guizhou Huafu are subject to a favorable tax rate of 10%.

 

Taxes payable

 

Taxes payable consisted of the following:

 

    As of
September 30, 2017
    As of
March 31, 2017
 
Income tax payable   $ 365,845     $ 296,602  
Value added tax recoverable     18,680       8,560  
Other taxes payable     22,438       17,168  
Total   $ 406,963     $ 322,330  

   

NOTE 8 – EQUITY

 

Ordinary shares

 

When the Company was incorporated in British Virgin Islands on July 23, 2012, 50,000 ordinary shares were authorized and issued to the shareholders at a par value of $1.00 each. The 50,000 shares were allocated to previous capital contributions by the shareholders.

 

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WAH FU EDUCATION GROUP LIMITED AND SUBSIDIARIES

 

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

NOTE 8 – EQUITY (Continued)

 

Statutory reserves

 

The Company is required to make appropriations to certain reserve funds, comprising the statutory surplus reserve and the discretionary surplus reserve, based on after-tax net income determined in accordance with generally accepted accounting principles of the PRC (“PRC GAAP”). Appropriations to the statutory surplus reserve are required to be at least 10% of the after-tax net income determined in accordance with PRC GAAP until the reserve is equal to 50% of the entity’s registered capital. Appropriations to the surplus reserve are made at the discretion of the Board of Directors. As of September 30, 2017 and March 31, 2017, the balance of statutory reserves were $152,900 and $64,190, respectively.

 

NOTE 9 – COMMITMENTS

 

Operating lease commitments

 

The Company’s leases mainly include office buildings. These leases had an average remaining lease term of approximately 4 years as of September 30, 2017. Rental expense charged to operations under operating leases in the six months ended September 30, 2017 and 2016 amounted to $50,022 and $49,747, respectively.

 

Future minimum lease obligations for operating leases with initial terms in excess of one year at September 30, 2017 are as follows:

 

Twelve months ended September 30,      
2018   $ 102,220  
2019     83,190  
2020     80,370  
2021     73,673  
Total   $ 339,453  

   

NOTE 10 – SEGMENT REPORTING

 

ASC 280, “Segment Reporting,” establishes standards for reporting information about operating segments on a basis consistent with the Company’s internal organizational structure as well as information about geographical areas, business segments and major customers in financial statements for details on the Company’s business segments. The Company uses the “management approach” in determining reportable operating segments. The management approach considers the internal organization and reporting used by the Company’s chief operating decision maker for making operating decisions and assessing performance as the source for determining the Company’s reportable segments. Management, including the chief operating decision maker, reviews operation results by the revenue of different products. Based on management’s assessment, the Company has determined that it has two operating segments: online education services, and technological development and operation service. Our online education segment consists of two types of online services: Online Education Cloud Service (“B2B2C”) and Online Training Service (“B2C”).

 

The following tables present summary information by segment for the six months ended September 30, 2017 and 2016, respectively: 

 

    For the Six Months Ended  
    September 30, 2017     September 30, 2016  
             
Revenue from Online Education Service            
Revenue from B2B2C Service   $ 2,422,983     $ 2,806,274  
Revenue from B2C Service     285,348       156,488  
Revenue from Technological Development and Operation Service     353,003       109,008  
Total   $ 3,061,334     $ 3,071,770  

 

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WAH FU EDUCATION GROUP LIMITED AND SUBSIDIARIES

 

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

 

NOTE 10 – SEGMENT REPORTING (Continued)

 

All the Company’s revenue was generated from its business operations in China.

 

    For the Six Months Ended
September 30, 2017
 
    Online Education Service     Technological Development and Operation Service     Total  
Revenue   $ 2,708,331     $ 353,003     $ 3,061,334  
Cost of revenue and related tax     925,290       39,555       964,845  
Gross profit   $ 1,783,041     $ 313,448     $ 2,096,489  
Depreciation and amortization   $ 45,249     $ 13,391     $ 58,640  
Total capital expenditures   $ 540,487     $ 3,878     $ 544,365  

 

    For the Six Months Ended
September 30, 2016
 
    Online Education Service     Technological Development and Operation Service     Total  
Revenue   $ 2,962,762     $ 109,008     $ 3,071,770  
Cost of revenue and related tax     1,016,061       49,431       1,065,492  
Gross profit   $ 1,946,701     $ 59,577     $ 2,006,278  
Depreciation and amortization   $ 53,614     $ 14,545     $ 68,159  
Total capital expenditures   $ 74,201     $ 886     $ 75,087  

  

    As of
September 30, 2017
    As of
March 31, 2017
 
Total assets:            
Online Education Service   $ 7,525,477     $ 6,844,713  
Technological Development and Operation Service     731,415       445,569  
Total Assets   $ 8,256,892     $ 7,290,282  

 

NOTE 11 SUBSEQUENT EVENTS

 

These unaudited condensed consolidated financial statements were approved by management and available for issuance on January 19, 2018, and the Company has evaluated subsequent events through this date.

 

NOTE 12 OTHER SUBSEQUENT EVENTS

 

On March 15, 2018, the Board of Directors adopted a consent resolution to effectuate a stock split to sub-divide the original 50,000 issued ordinary shares of a nominal or par value of US$1 in the capital of the Company into 5,000,000 ordinary shares of a nominal or par value of US$0.01. Following such stock split, the Board of Directors on Mach 16, 2018, approved an increase of the authorized common shares to 30,000,000 common shares. On March 20, 2018, the Board of Directors adopted another consent resolution to decrease the issued and outstanding common shares to 3,200,000, by way of share surrender and cancelation. All the existing shareholders and directors of the Company consider the stock split of original 50,000 ordinary shares on March 15, 2018 and the subsequent reorganization of shares by way of share surrender on March 20, 2018 as part of the company’s recapitalization to result in 3,200,000 common shares issued and outstanding prior to completion of its initial public offering. The Company believes it is appropriate to reflect stock split on a retroactive basis pursuant to ASC 260. The Company has retroactively restated all shares and per share data for all the periods presented. As a result, the Company had 30,000,000 authorized common shares, $0.01 par value per share, of which 3,200,000 were issued and outstanding as of March 31, 2017 and 2016.

 

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PART II

 

INFORMATION NOT REQUIRED IN PROSPECTUS

 

ITEM 6.    INDEMNIFICATION OF DIRECTORS AND OFFICERS.

 

BVI law does not limit the extent to which a company’s articles of association may provide for indemnification of officers and directors, except to the extent any such provision may be held by the BVI High Court to be contrary to public policy (e.g. for purporting to provide indemnification against the consequences of committing a crime). An indemnity will be void and of no effect and will not apply to a person unless the person acted honestly and in good faith and in what he believed to be in the best interests of the company and, in the case of criminal proceedings, the person had no reasonable cause to believe that his conduct was unlawful.

 

The Underwriting Agreement, the form of which is filed as Exhibit 1.1 to this Registration Statement, will also provide for indemnification of us and our officers and directors.

 

Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers or persons controlling us pursuant to the foregoing provisions, we have been informed that in the opinion of the SEC, such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.

 

ITEM 7.    RECENT SALES OF UNREGISTERED SECURITIES.

 

During the past three years, we have not issued any securities exempt from registration under the Securities Act.

 

ITEM 8.    EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

 

(a)       Exhibits

 

See Exhibit Index beginning on page II-5 of this registration statement.

 

The agreements included as exhibits to this registration statement contain representations and warranties by each of the parties to the applicable agreement. These representations and warranties were made solely for the benefit of the other parties to the applicable agreement and (i) were not intended to be treated as categorical statements of fact, but rather as a way of allocating the risk to one of the parties if those statements prove to be inaccurate; (ii) may have been qualified in such agreement by disclosures that were made to the other party in connection with the negotiation of the applicable agreement; (iii) may apply contract standards of “materiality” that are different from “materiality” under the applicable securities laws; and (iv) were made only as of the date of the applicable agreement or such other date or dates as may be specified in the agreement.

 

We acknowledge that, notwithstanding the inclusion of the foregoing cautionary statements, we are responsible for considering whether additional specific disclosures of material information regarding material contractual provisions are required to make the statements in this registration statement not misleading.

 

(b)       Financial Statement Schedules

 

Schedules have been omitted because the information required to be set forth therein is not applicable or is shown in the Consolidated Financial Statements or the Notes thereto.

 

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ITEM 9.    UNDERTAKINGS.

 

The undersigned registrant hereby undertakes to provide to the underwriter at the closing specified in the underwriting agreements, certificates in such denominations and registered in such names as required by the underwriter to permit prompt delivery to each purchaser.

 

Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the registrant pursuant to the provisions described in Item 6, or otherwise, the registrant has been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.

 

The undersigned registrant hereby undertakes that:

 

  1. For purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant under Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective.
     
  2. For the purpose of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
     
  3. For the purpose of determining liability under the Securities Act to any purchaser, each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use.
     
  4. For the purpose of determining any liability of the registrant under the Securities Act to any purchaser in the initial distribution of the securities, the undersigned registrant undertakes that in a primary offering of securities of the undersigned registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:

 

  i. Any preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule 424;
     
  ii. Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to by the undersigned registrant;
     
  iii. The portion of any other free writing prospectus relating to the offering containing material information about the undersigned registrant or its securities provided by or on behalf of the undersigned registrant; and
     
  iv. Any other communication that is an offer in the offering made by the undersigned registrant to the purchaser.

 

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The undersigned registrant hereby undertakes:

 

  1. To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:

 

  a. To include any prospectus required by section 10(a)(3) of the Securities Act;
     
  b. To reflect in the prospectus any facts or events arising after the effective date of this registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in this registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the SEC pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than 20% change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement; and
     
  c. To include any material information with respect to the plan of distribution not previously disclosed in this registration statement or any material change to such information in this registration statement;

 

  2. That, for the purpose of determining any liability under the Securities Act, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
     
  3. To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.
     
  4.

To file a post-effective amendment to the registration statement to include any financial statements required by Item 8.A. of Form 20-F at the start of any delayed offering or throughout a continuous offering, unless the registrant includes in the prospectus, by means of a post-effective amendment, financial statements required pursuant to this paragraph and other information necessary to ensure that all other information in the prospectus is at least as current as the date of those financial statements.

  

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SIGNATURES

 

Pursuant to the requirements of the Securities Act of 1933, as amended, the registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form F-1 and has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in Beijing, China, on March 20, 2018.

 

  Wah Fu Education Group Limited
   
  By:

/s/ Xinghui Yang  

    Name: Xinghui Yang
    Title: Chief Executive Officer

 

Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.

 

Signature

 

Title

 

Date

        March 20, 2018
/s/ Xinghui Yang   Director and Chief Executive Officer    
Xinghui Yang   (Principal Executive Officer)    
         
/s/ Gang Yao   Chief Financial Officer   March 20, 2018
Gang Yao   (Principal Financial and Accounting Officer)    
         
/s/ Yang Yu   Chairman of the Board of Directors   March 20, 2018
Yang Yu        
         
/s/ Defang Li   Director    March 20, 2018
Defang Li        
         
/s/ Yik C Chan     Director   March 20, 2018
Yik C Chan        
         
/s/ Rong Zhang   Director   March 20, 2018
Rong Zhang        

 

 

SIGNATURE OF AUTHORIZED REPRESENTATIVE IN THE UNITED STATES

 

Pursuant to the Securities Act of 1933, as amended, the undersigned, the duly authorized representative in the United States of Puglisi & Associates has signed this registration statement or amendment thereto in New York on March 20, 2018.

 

  Authorized U.S. Representative
   
  By: /s/ Donald Puglisi
    Name: Donald Puglisi
    Title: Managing Director

 

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TABLE OF CONTENTS  

 

EXHIBIT INDEX

 

Exhibit
number
  Description of document
     
1.1**   Form of Underwriting Agreement
3.1*   Memorandum of Association of the Registrant
3.2*   Articles of Association of the Registrant
3.3**   Amended and Restated Memorandum of Association of the Registrant
4.1**   Form of Underwriter’s Warrant
5.1**   Opinion of Maples and Calder regarding the validity of ordinary shares being registered.
5.2**   Opinion of Jintian & Gongcheng Law Officers regarding PRC legal matters.
8.1**   Opinion of Maples and Calder regarding certain British Virgin Islands tax matters
10.1*   Exclusive Business Cooperation Agreement, dated August 16, 2017, by and between Beijing Huaxia Dadi Distance Learning Services Co., Ltd. and Beijing Huaxia Dadi Digital Information Technology Co., Ltd.
10.2*   Exclusive Option Agreement, dated August 16, 2017, by and among Beijing Huaxia Dadi Distance Learning Services Co., Ltd., Yang Yu, Xinghui Yang and Beijing Huaxia Dadi Digital Information Technology Co., Ltd.
10.3*   Equity Interest Pledge Agreement, dated August 18, 2017, by and among Beijing Huaxia Dadi Distance Learning Services Co., Ltd., Yang Yu, Xinghui Yang and Beijing Huaxia Dadi Digital Information Technology Co., Ltd.
10.4*   Form of Power of Attorney
10.5*   English translation of Property Lease Agreement, dated June 1, 2016, by and between Beijing Huaxia Dadi Distance Learning Services Co., Ltd. and Beijing Jinkai Gongda Investment Management Co., Ltd.
10.6*   English Translation of Technology Development Agreement, dated July 12, 2016, by and between Beijing Huaxia Dadi Distance Learning Services Co., Ltd. and World Publishing (Shanghai) Co., Ltd.
10.7*   English Translation of Technical Operation and Platform Maintenance Service Agreement, dated June 19, 2017, by and between Beijing Huaxia Dadi Digital Information Technology Co., Ltd. and World Publishing (Shanghai) Co., Ltd.
10.8*   English Translations of  Cooperation Agreement, dated as of May 14, 2013, by and between Beijing Huaxia Dadi Distance Learning Services Co., Ltd. and Jiangxi Normal University.
10.9*   English Translation of  Cooperation Agreement, dated as of September 1, 2014, by and between Beijing Huaxia Dadi Distance Learning Services Co., Ltd. and Hunan Agricultural University.
10.10*   English Translation of   Operation and Maintenance Services Agreement, dated December 9, 2016, by and between Beijing Huaxia Dadi Distance Learning Services Co., Ltd. and Training Center of the State Intellectual Property Bureau.
10.11**   Form of Escrow Agreement.
10.12*   Platform and Online Course Development, dated April 24, 2017, by and between Beijing Huaxia Dadi Digital Information Co., Ltd. and Zhengqing Heya Education Technology (Beijing) Co., Ltd.
21.1*   List of Subsidiaries of the Registrant
23.1*   Consent of Friedman LLP
23.2**   Consent of Maples and Calder (included in Exhibits 5.1 and 8.1)
23.3**   Consent of Jintian & Gongcheng Law Offices (included in Exhibit 5.2)
23.4*   Consent of China Research and Intelligence Co., Ltd.
99.1*   Consent of Defang Li
99.2*   Consent of Don Yik C Chan
99.3*   Consent of Rong Zhang

 

*    Filed herewith

** To be filed by amendment.

 

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Exhibit 3.1

 

 

 

 

 

  

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Exhibit 3.2

 

 

 

- 2 -

 

 

 

- 3 -

 

 

 

- 4 -

 

 

 

- 5 -

 

 

 

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- 7 -

 

 

 

- 8 -

 

 

 

- 9 -

 

 

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Exhibit 10.1

 

独家业务合作协议

Exclusive Business Cooperation Agreement

 

本独家业务合作协议 ( 本协议 ) #65289;由以下双方于 2017 8 16 日在中华人民共和国( 中国 ) 北京市签署。

This Exclusive Business Cooperation Agreement (this “ Agreement ”) is made and entered into by and between the following parties on 16 August, 2017 in Beijing, the People’s Republic of China (“ China ” or the “ PRC ”).

 

甲方 : 北京华夏大地远程教育网络服务有限公司
住所 北京市北京经济技术开发区地盛北街 1 号院 40 号楼 505
Party A: Huaxia Dadi Distance Learning Services Co., Ltd.
Address: Room 505 Building No.40, No.1 Disheng North Street, Beijing Economic-Technological Development Area

 

乙方: 北京华夏大地数码信息技术有限公司
住所: 北京经济技术开发区地盛北街 1 号院 40 号楼 503A
Party B: Huaxia Dadi Digital Information Technology Co., Ltd.
Address: Room 503A, Building No.40, No.1 Disheng North Street, Beijing Economic-Technological Development Area

 

甲方和乙方以下各称为 一方 ,合称为 双方

Each of Party A and Party B shall be hereinafter referred to as a “Party” respectively, and as the “Parties” collectively.

 

鉴于:

Whereas,

 

1. 甲方是一家在中国成立的外商独资企业,拥有提供远程教育应用软件研制、开发,远程教育资源信息开发的必要资源;

Party A is a wholly foreign owned enterprise established in China, and has the necessary resources to support research and development of distance education application software and distance education resource information.

 

2. 乙方是一家在中国成立的内资公司,经中国有关政府部门依法批准可以从事因特网信息服务等业务。乙方现时及在本协议有效期内的任何时候所经营并发展的所有业务活动以下合称 主营业务

Party B is a company established in China with exclusively domestic capital and is permitted to engage in internet information services and other business by relevant PRC government authorities. The businesses conducted by Party B currently and any time during the term of this Agreement are collectively referred to as the “Principal Business”;

 

3. 甲方同意利用其人员、信息和技术优势,在本协议期间向乙方提供有关主营业务的独家营销服务、管理咨询服务、技术服务和其他服务,乙方同意接受甲方或其指定方按本协议条款的规定提供的各种服务。

Party A is willing to provide Party B with marketing services, management consultation services, technical services and other services on exclusive basis in relation to the Principal Business during the term of this Agreement, utilizing its advantages in human resources, information and technology, and Party B is willing to accept such services provided by Party A or Party A’s designee(s), each on the terms set forth herein.

 

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据此,甲方和乙方经协商一致,达成如下协议:

Now, therefore, through mutual discussion, the Parties have reached the following agreements:

 

1. 服务提供

 

Services Provided by Party A

 

1.1 按照本协议条款和条件,乙方在此委任甲方在本协议期间作为乙方的独家服务提供者向乙方提供全面的营销服务、管理咨询服务、技术服务和其他服务,包括但不限于以下内容:

According to the terms and conditions of this Agreement, Party B hereby appoints Party A as Party B’s exclusive services provider during the term of this Agreement to provide Party B with comprehensive marketing services, management consultation services, technical support and other services, including but not limited to the follows:

 

(1) 为乙方提供企业管理咨询服务;

Providing business management consultation services for Party B;

 

(2) 为乙方提供有关远程教育和互联网信息服务业务的咨询服务;

Providing consultation services regarding distance education and internet information services for Party B;

 

(3) 为乙方提供经营远程教育和互联网信息服务业务所需的课件开发、技术支持(中国法律禁止外商独资企业从事的技术支持及服务除外);

Providing courseware production, technical support regarding distance education and internet information services for Party B (excluding technical support and services that wholly foreign-owned enterprises are prohibited from conducting under PRC law);

 

(4) 协助乙方进行远程教育有关的技术和市场信息的咨询、收集与调研(中国法律禁止外商独资企业从事的市场调查除外);

Assisting Party B in consultancy, collection and research of technology and market information regarding to distance education (excluding market research business that wholly foreign-owned enterprises are prohibited from conducting under PRC law);

 

(5) 许可乙方使用甲方拥有合法权利的相关域名、商标;

Licensing Party B to use any domain name or trademark legally owned by Party A;

 

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(6) 许可乙方使用甲方拥有合法权利的相关软件;

Licensing Party B to use any software legally owned by Party A;

 

(7) 提供乙方业务所需的相关应用软件的开发、维护与更新服务;

Providing software development, maintenance and update services necessary for Party B’s business for Party B;

 

(8) 提供与乙方计算机网络系统、硬件设备及数据库的设计、安装和日常管理、维护、更新相关的服务;

Providing network system, hardware and database design, installation, daily management, maintenance and updating services and other relevant services for Party B;

 

(9) 为乙方相关人员提供技术支持和专业培训;

Providing technical support and training for employees of Party B;

 

(10) 向乙方提供设备、资产出租;和

Leasing of equipments or properties to Party B; and

 

(11) 在中国法律允许的情况下,其他应乙方要求而不时提供的其他相关服务。

Other services requested by Party B from time to time to the extent permitted under PRC law.

 

1.2 乙方接受甲方提供的服务。乙方进一步同意,除非经甲方事先书面同意,在本协议期间,就本协议约定的服务或其他事宜,乙方不得直接或间接地从任何第三方获得任何与本协议相同或类似的服务,并不得与任何第三方就本协议所述事项建立任何相同或类似的合作关系。甲乙双方同意,甲方提供的服务涉及的技术可以为甲方自有的技术,也可以是甲方从第三方采购的技术。甲方也可以指定其他方(该被指定方可以与乙方签署本协议第 1.3 条描述的某些协议)为乙方提供本协议约定的服务。

Party B agrees to accept all the services provided by Party A. Party B further agrees that unless with Party A’s prior written consent, during the term of this Agreement, Party B shall not directly or indirectly accept the same or any similar services provided by any third party and shall not establish identical or similar corporation relationship with any third party regarding the matters contemplated by this Agreement. Party A and Party B agree that, the technology involved in the services provided by Party A may be the technology owned by Party A or purchased by Party A from any third parties. Party A may appoint other parties, who may enter into certain agreements described in Section 1.3 with Party B, to provide Party B with the services under this Agreement.

 

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1.3 服务的提供方式

Service Providing Methodology

 

1.3.1 甲、乙双方同意在本协议有效期内,视情况而定,乙方可以与甲方或甲方指定的其他方进一步签订服务协议,对各项服务的具体内容、方式、人员、收费等进行约定。

Party A and Party B agree that during the term of this Agreement, where necessary, Party B may enter into further service agreements with Party A or any other party designated by Party A, which shall provide the specific contents, manner, personnel, and fees for the specific services.

 

1.3.2 为更好地履行本协议,甲乙双方同意,视情况而定,乙方在本协议有效期内将与甲方或甲方指定的其他方根据业务进展需要随时签署知识产权(包括但不限于软件、商标、专利、技术秘密及域名)许可使用协议由甲方将有关的知识产权许可给乙方使用,或签署设备、资产的租用协议,由甲方将有关设备、资产提供给乙方使用。

To fulfill this Agreement, Party A and Party B agree that during the term of this Agreement, where necessary, Party B may enter into intellectual property (including but not limited to software, trademark, patent, know-how and domain name) licensing agreement with Party A or any other party designated by Party A which shall license Party B to use Party A’s relevant intellectual property rights or may enter into equipment or property leases with Party A or any other party designated by Party A which shall permit Party B to use Party A’s relevant equipment or property based on the needs of the business of Party B.

 

1.3.3 乙方特此向甲方授予一项不可撤销的排他性的购买权,根据该购买权,甲方可在中国法律法规允许的范围内,由甲方自行选择,向乙方购买任何部分或全部资产和业务,作价为中国法律允许的最低价格。届时双方将另行签订资产或业务转让合同,对该资产转让的条款和条件进行约定。

Party B hereby grants to Party A an irrevocable and exclusive option to purchase from Party B, at Party A’s sole discretion, any or all of the assets and business of Party B, to the extent permitted under PRC law, at the lowest purchase price permitted by PRC law. The Parties shall then enter into a separate assets or business transfer agreement, specifying the terms and conditions of the transfer of the assets.

 

1.3.4 为更好地履行本协议,甲乙双方同意在本协议有效期内将直接或通过其关联方根据业务进展需要随时另行签署专项技术服务协议,即乙方向甲方提供服务项目(包括但不限于通过乙方平台向甲方学员提供教学服务等),甲方向乙方支付相关费用。

To fulfill this Agreement, Party A and Party B agree that during the term of this Agreement, both parties, directly or through their respective affiliates, may enter into separate agreement of special technology service based on the needs of the business of Party A, which shall permit Party B provide the services (including but not limited to providing educational services for students of Party A through its platform), Party A shall pay service fee to Party B.

 

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2. 服务的价格和支付方式

Calculation and Payment of the Service Fees

 

2.1 在本协议有效期内,乙方应向甲方支付的费用应按如下方式计算:

The fees payable by Party B to Party A during the term of this Agreement shall be calculated as follows:

 

2.1.1 甲乙双方同意,乙方应按季向甲方支付服务费,乙方支付的服务费的金额为乙方上季度的收入减去该季度发生并经甲方批准的乙方销售成本、经营费用及其他费用(包括销售费用、管理费用、财务费用)后的剩余金额。

Party A and Party B agree that, Party B shall pay service fee to Party A on a quarterly basis and the amount of service fee paid by Party B of a season shall equal to Party B’s revenue of such season minus the marketing costs and operating fees and other expenses (including marketing expenses, management expenses and financial expenses) of Party B of that season permitted by Party A.

 

2.1.2 甲乙双方同意,视情况而定,乙方可以按照甲方提供服务所花费的时间及预先确定的收费标准向甲方支付服务费。

Party A and Party B agree that, where necessary, Party B may pay service fee to Party A based on the time spent by Party A for providing such service and fees scale determined beforehand.

 

2.1.3 如果甲方向乙方转让技术或者受乙方委托进行软件或其他技术开发或者向乙方出租设备、资产,则技术转让费、委托开发费用或租金应由双方根据实际情况确定。

If Party A transfers technology to Party B or develops software or other technology as entrusted by Party B or leases equipments or properties to Party B, the technology transfer price, development fees or rent shall be determined by the Parties based on the actual situations.

 

2.2 在本协议有效期内,甲方应于每季度第 15 日之前根据上季度提供服务的内容和数量向乙方发出收取服务费的书面通知,该等服务费通知中所载的服务费的金额应是最终且确凿的;乙方应在每季度第 30 日前根据甲方通知中所载的金额向甲方足额、及时地支付上一季度的服务费。

During the term of this Agreement, Party A shall, within the first 15 days of each season, provide Party B with a written notice of payment of service fee in connection with the content and amount of services during the previous season. The amount of service fee contained in the notice of payment of service fee shall be final and certain. Party B shall, within the first 30 days of each season, fully and promptly pay the service fee of the previous season as requested by the notice of payment of service fee to Party A.

 

2.3 在甲方向乙方发出收取服务费的书面通知之前,乙方应及时、准确地向甲方提供乙方上一季度的收入、发生的销售成本、经营费用及其他有关费用的具体数额和财务报表供甲方审阅和验证。

Prior to Party’s A’s issuance of a written notice of payment of service fee to Party B in relation to the service fee, Party B shall promptly and accurately provide Party A with the precise amount of its revenue, marketing expenses, operating expenses and other relevant fees and its financial statements for Party A’s review and verification.

 

2.4 甲方有权根据乙方的运营情况,减免服务费或允许乙方延期支付服务费,以确保乙方的正常经营。

Party A is entitled to reduce the amount of service fee or permitting Party B to defer the payment of service fee based on the actual operating situations of Party B to ensure its proper operation.

 

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2.5 在符合中国法律规定的前提下,甲方同意,在本协议有效期间,甲方将享有和承担任何乙方业务产生的经济利益及风险;在任何乙方经营亏损或出现严重经营困难时,甲方将对其提供财务支持;在发生上述情形时,仅甲方有权决定乙方是否继续营运,乙方无条件认可并同意执行甲方上述决定。

On the premise of complying with the PRC law, Party A agrees that, during the term of this agreement, it is entitled to and responsible for all economic benefits and risks derived by Party B. If any operating loss or critical operation adversity occurs in Party B, Party A shall provide financial support to Party B, and only Party A can decide whether Party B should continue its operation and Party B shall unconditionally accept and execute the decision made by Party A as aforesaid.

 

3. 知识产权和保密条款

Intellectual Property Rights and Confidentiality Clauses

 

3.1 甲方对履行本协议而产生或创造的任何和所有知识产权(包括但不限于著作权、专利权、专利申请权、软件、技术秘密、商业机密及其他)均享有独占的和排他的所有权、权利和利益。乙方应签署所有适当的文件,采取所有适当的行动,递交所有的文件和 / 或申请,提供所有适当的协助,以及做出所有其他依据甲方的自行决定认为是必要的行为,以将任何对该等知识产权的所有权、权利和权益赋予甲方,和 / 或完善对甲方此等知识产权权利的保护。

Party A shall have exclusive and proprietary ownership, rights and interests in any and all intellectual properties arising out of or created during the performance of this Agreement, including but not limited to copyrights, patents, patent applications, software, technical secrets, trade secrets and others. Party B shall execute all appropriate documents, take all appropriate actions, submit all filings and/or applications, render all appropriate assistance and otherwise conduct whatever is necessary as deemed by Party A at its sole discretion for the purposes of vesting any ownership, right or interest of any such intellectual property rights in Party A, and/or perfecting the protections for any such intellectual property rights in Party A.

 

3.2 双方承认及确认有关本协议、本协议内容以及彼此就准备或履行本协议而交换的任何口头或书面资料均被视为保密信息。双方应对所有该等保密信息予以保密,而在未得到另一方书面同意前,不得向任何第三方披露任何保密信息,惟下列信息除外: (1) 公众人士知悉或将会知悉的任何信息(惟并非由接受保密信息之一方擅自向公众披露); (2) 根据适用法律法规、股票交易规则、或政府部门或法院的命令而所需披露之任何信息;或 (3) 由任何一方就本协议所述交易而需向其股东、董事、员工、法律或财务顾问披露之信息,而该股东、董事、员工、法律或财务顾问亦需遵守与本条款相类似之保密责任。如任何一方股东、董事、员工或聘请机构的泄密均视为该方的泄密,需依本协议承担违约责任。

The Parties acknowledge that the existence and the terms of this Agreement and any oral or written information exchanged between the Parties in connection with the preparation and performance of this Agreement are regarded as confidential information. Each Party shall maintain confidentiality of all such confidential information, and without obtaining the written consent of the other Party, it shall not disclose any relevant confidential information to any third party, except for the information that: (1) is or will be in the public domain (other than through the receiving Party’s unauthorized disclosure); (2) is under the obligation to be disclosed pursuant to the applicable laws or regulations, rules of any stock exchange, or orders of the court or other government authorities; or (3) is required to be disclosed by any Party to its shareholders, directors, employees, legal counsels or financial advisors regarding the transaction contemplated hereunder, provided that such shareholders, directors, employees, legal counsels or financial advisors shall be bound by the confidentiality obligations similar to those set forth in this Section. Disclosure of any confidential information by the shareholders, director, employees of or agencies engaged by any Party shall be deemed disclosure of such confidential information by such Party and such Party shall be held liable for breach of this Agreement.

 

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4. 陈述和保证

Representations and Warranties

 

4.1 甲方陈述、保证和承诺如下:

Party A hereby represents, warrants and covenants as follows:

 

4.1.1 甲方是按照中国法律合法成立并有效存续的外商独资企业;甲方或其指定的服务提供方将在根据本协议提供任何服务前获得提供该等服务所需的必要政府许可、证照。

Party A is a wholly foreign owned enterprise legally established and validly existing in accordance with the laws of China; Party A or the service providers designated by Party A will obtain necessary government permits and licenses for providing the service under this Agreement before providing such services.

 

4.1.2 甲方已采取必要的公司行为,获得必要的授权,并取得第三方和政府部门的同意及批准(若需)以签署,交付和履行本协议;甲方对本协议的签署,交付和履行并不违反法律法规的明确规定。

Party A has taken all necessary corporate actions, obtained all necessary authorizations as well as all consents and approvals from third parties and government agencies (if required) for the execution, delivery and performance of this Agreement. Party A’s execution, delivery and performance of this Agreement do not violate any explicit requirements under any law or regulation.

 

4.1.3 本协议构成对其合法、有效、有约束力并依本协议之条款对其强制执行的义务。

This Agreement constitutes Party A’s legal, valid and binding obligations, enforceable against it in accordance with its terms.

 

4.2 乙方陈述、保证和承诺如下:

Party B hereby represents, warrants and covenants as follows:

 

4.2.1 乙方是按照中国法律合法成立且有效存续的公司,乙方已获得并将维持从事主营业务所需的全部政府许可、证照。

Party B is a company legally established and validly existing in accordance with the laws of the PRC and has obtained and will maintain all permits and licenses for engaging in the Principal Business in a timely manner.

 

4.2.2 乙方已采取必要的公司行为,获得必要的授权,并取得第三方和政府部门的同意及批准(若需)以签署,交付和履行本协议;乙方对本协议的签署,交付和履行并不违反法律法规的明确规定。

Party B has taken all necessary corporate actions, obtained all necessary authorizations as well as all consents and approvals from third parties and government agencies (if required) for the execution, delivery and performance of this Agreement. Party B’s execution, delivery and performance of this Agreement do not violate any explicit requirements under any law or regulation.

 

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4.2.3 本协议构成对其合法、有效、有约束力并依本协议之条款对其强制执行的义务。

This Agreement constitutes Party B’s legal, valid and binding obligations, and shall be enforceable against it in accordance with its terms.

 

4.2.4 如在本协议有效期间内的任何时候,中国法律或政府部门对本协议以及相关协议的履行有任何新的规定或其他任何要求,乙方将全力配合甲方对本协议条款作出相应调整和完善,以使其合乎监管要求并且满足与甲方开展独家业务合作的目的。

During the term of this Agreement, if the PRC laws or PRC government authorities set out new regulations or other requirements regarding the performance of this Agreement or relevant agreements, to meet the regulatory requirements and to accomplish the purpose of carrying out exclusive business cooperation with Party A, Party B shall provide full cooperation for Party A to make corresponding adjustments and improvements on the terms of this Agreement.

 

5. 协议期限

Term of Agreement

 

5.1 本协议自双方正式签署之日起生效;除非本协议明确约定或甲方书面决定终止本协议,本协议应永久有效。

This Agreement shall become effective upon execution by the Parties. Unless terminated in accordance with the provisions of this Agreement or terminated in writing by Party A, this Agreement shall remain effective.

 

5.2 如果在本协议有效期内,任何一方的经营期限届满,则该方应及时续展其经营期限,以使本协议得以继续有效和执行。如一方续展经营期限之申请未获任何主管部门批准或同意,则本协议于该方经营期限届满之时终止。

During the term of this Agreement, each Party shall renew its operation term prior to the expiration thereof so as to enable this Agreement to remain effective. This Agreement shall be terminated upon the expiration of the operation term of a Party if the application for renewal of its operation term is not approved by relevant government authorities.

 

5.3 在本协议终止之后,双方在第 3 6 7 条和第 5.3 条下的权利和义务将继续有效。

The rights and obligations of the Parties under Sections 3, 6, 7 and Section 5.3 shall survive the termination of this Agreement.

 

6. 适用法律和争议解决

Governing Law and Resolution of Disputes

 

6.1 本协议的订立、效力、解释、履行、修改和终止以及争议的解决适用中国法律。

The execution, effectiveness, construction, performance, amendment and termination of this Agreement and the resolution of disputes hereunder shall be governed by the laws of China.

 

6.2 因解释和履行本协议而发生的任何争议,本协议双方应首先通过友好协商的方式加以解决。如果在一方向另一方发出要求协商解决的书面通知后 30 天之内争议仍然得不到解决,则任何一方均可将有关争议提交给中国国际经济贸易仲裁委员会,由该会按照其仲裁规则仲裁解决。仲裁应在北京进行。仲裁裁决是终局性的,对双方均有约束力。

In the event of any dispute with respect to the construction and performance of this Agreement, the Parties shall first resolve the dispute through friendly negotiations. In the event the Parties fail to reach an agreement on the dispute within 30 days after either Party’s request to the other Party for resolution of the dispute through negotiations, either Party may submit the relevant dispute to the China International Economic and Trade Arbitration Commission for arbitration, in accordance with its arbitration rules. The arbitration shall be conducted in Beijing. The arbitration award shall be final and binding on both Parties.

 

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6.3 因解释和履行本协议而发生任何争议或任何争议正在进行仲裁时,除争议的事项外,双方仍应继续行使各自在本协议项下的其他权利并履行各自在本协议项下的其他义务。

Upon the occurrence of any disputes arising from the construction and performance of this Agreement or during the pending arbitration of any dispute, except for the matters under dispute, the Parties shall continue to exercise their respective rights under this Agreement and perform their respective obligations under this Agreement.

 

7. 违约责任和补偿

Breach of Agreement and Indemnification

 

7.1 若乙方实质性违反本协议项下所作的任何一项约定,甲方有权终止本协议和 / 或要求乙方给予损害赔偿;本第 7.1 条不应妨碍甲方在本协议下的任何其他权利。

If Party B conducts any material breach of any term of this Agreement, Party A shall have right to terminate this Agreement and/or require Party B to indemnify all damages; this Section 7.1 shall not prejudice any other rights of Party A herein.

 

7.2 除非法律另有规定,乙方在任何情况均无权利终止或解除本协议。

Unless otherwise required by applicable laws, Party B shall not have any right to terminate this Agreement in any event.

 

7.3 就甲方根据本协议向乙方提供的服务所产生或引起的针对甲方的诉讼、请求或其他要求而招致的任何损失、损害、责任或费用都应由乙方补偿给甲方,以使甲方不受任何损害,除非该损失、损害、责任或费用是因甲方的重大过失或故意不当行为而产生的。

Party B shall indemnify and hold harmless Party A from any losses, injuries, obligations or expenses caused by any lawsuit, claims or other demands against Party A arising from or caused by the services provided by Party A to Party B pursuant this Agreement, except where such losses, injuries, obligations or expenses arise from the gross negligence or willful misconduct of Party A.

 

8. 不可抗力

Force Majeure

 

8.1 若由于地震、台风、洪水、火灾、流行病、战争、罢工以及其他任何无法预见并且是受影响方无法防止亦无法避免的不可抗力事件( 不可抗力 ),而直接致使本协议任何一方不能履行或不能完全履行本协议时,则受上述不可抗力影响的一方不对此不履行或部份履行承担责任。但该受影响方须立即毫不迟延地向另外一方发出书面通知,并须在发出该书面通知后 15 天内向另外一方提供不可抗力事件的详情,解释其此种不能履行、部份不能履行或需要迟延履行的原因。

In the case of any force majeure events (the “ Force Majeure ”) such as earthquake, typhoon, flood, fire, flu, war, strikes or any other events that cannot be predicted and are unpreventable and unavoidable by the affected Party, which directly or indirectly causes the failure of either Party to perform or completely perform this Agreement, then the Party affected by such Force Majeure shall give the other Party written notices without any delay, and shall provide details of such event within 15 days after sending out such notice, explaining the reasons for such failure of, partial or delay of performance.

 

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8.2 若主张不可抗力的一方未能根据以上规定通知另一方并提供适当证明,其不得免于未能履行其在本协议项下义务的责任。受不可抗力影响的一方应作出合理的努力,以减低该不可抗力造成的后果,并在该不可抗力终止后尽快恢复履行所有有关义务。如受不可抗力影响的一方在因不可抗力而暂免履行义务的理由消失后未有恢复履行有关义务,该方应就此向另一方承担责任。

If such Party claiming Force Majeure fails to notify the other Party and furnish it with proof pursuant to the above provision, such Party shall not be excused from the non-performance of its obligations hereunder. The Party so affected by the event of Force Majeure shall use reasonable efforts to minimize the consequences of such Force Majeure and to promptly resume performance hereunder whenever the causes of such excuse are cured. Should the Party so affected by the event of Force Majeure fail to resume performance hereunder when the causes of such excuse are cured, such Party shall be liable to the other Party.

 

8.3 不可抗力发生时,双方应立即互相协商,以求达致公平解决方案,并须作出一切合理努力,尽量减低该不可抗力造成的后果。

In the event of Force Majeure, the Parties shall immediately consult with each other to find an equitable solution and shall use all reasonable endeavours to minimize the consequences of such Force Majeure.

 

9. 通知

Notices

 

9.1 本协议项下要求或发出的所有通知和其他通信应通过专人递送、挂号邮寄、邮资预付或商业快递服务或传真的方式发到该方下列地址。每一通知还应再以电子邮件送达。该等通知视为有效送达的日期按如下方式确定:

All notices and other communications required or permitted to be given pursuant to this Agreement shall be delivered personally or sent by registered mail, postage prepaid, by a commercial courier service or by facsimile transmission to the address of such Party set forth below. A confirmation copy of each notice shall also be sent by email. The dates on which notices shall be deemed to have been effectively given shall be determined as follows:

 

9.1.1 通知如果是以专人递送、快递服务或挂号邮寄、邮资预付发出的,则以于设定为通知的地址在接收或拒收之日为有效送达日。

Notices given by personal delivery, by courier service or by registered mail, postage prepaid, shall be deemed effectively given on the date of receipt or refusal at the address specified for notices.

 

9.1.2 通知如果是以传真发出的,则以成功传送之日为有效送达日(应以自动生成的传送确认信息为证)。

Notices given by facsimile transmission shall be deemed effectively given on the date of successful transmission (as evidenced by an automatically generated confirmation of transmission).

 

9.2 为通知的目的,双方地址如下:

For the purpose of notices, the addresses of the Parties are as follows:

 

甲方 北京华夏大地远程教育网络服务有限公司
Party A: Huaxia Dadi Distance Learning Services Co., Ltd.
住所: 北京市经济技术开发区地盛北街 1 号院 40 号楼 505
Address:   Room 505, Building No.40, No.1 Disheng North Street, Beijing Economic-Technological Development Area
收件人: 于洋
Attn: Yang Yu
电话: + 86 138 0125 9058
Phone: + 86 138 0125 9058
传真: +86 10 85171378
Facsimile:   +86 10 85171378

 

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乙方: 北京华夏大地数码信息技术有限公司
Party B: Huaxia Dadi Digital Information Technology Co., Ltd.
住所: 北京经济技术开发区地盛北街 1 号院 40 号楼 503A
Address:   Room 503A, Building No.40, No.1 Disheng North Street, Beijing Economic-Technological Development Area
收件人: 杨兴晖
Attn: Xinghui Yang
电话: +86 139 1165 6638
Phone: +86 139 1165 6638
传真: +86 10 58022039
Facsimile:   +86 10 58022039

 

9.3 任何一方可按本条规定随时给另一方发出通知来改变其接收通知的地址。

Any Party may at any time change its address for notices by a notice delivered to the other Party in accordance with the terms hereof.

 

10. 协议的转让

Assignment

 

10.1 乙方不得将其在本协议项下的权利与义务转让给第三方,除非事先征得甲方的书面同意。

Without Party A’s prior written consent, Party B shall not assign its rights and obligations under this Agreement to any third party.

 

10.2 乙方在此同意,甲方可以向第三方转让其在本协议项下的权利和义务,并在该等转让发生时甲方仅需向乙方发出书面通知,并且无需再就该等转让征得乙方的同意。

Party B agrees that Party A may assign its obligations and rights under this Agreement to any third party and in case of such assignment; Party A is only required to give written notice to Party B and does not need any consent from Party B for such assignment.

 

11. 协议的分割性

Severability

 

如果本协议有任何一条或多条规定根据任何法律或法规在任何方面被裁定为无效、不合法或不可执行,本协议其余规定的有效性、合法性或可执行性不应因此在任何方面受到影响或损害。双方应通过诚意磋商,争取以法律许可以及双方期望的最大限度内有效的规定取代那些无效、不合法或不可执行的规定,而该等有效的规定所产生的经济效果应尽可能与那些无效、不合法或不能强制执行的规定所产生的经济效果相似。

In the event that one or several of the provisions of this Agreement are found to be invalid, illegal or unenforceable in any aspect in accordance with any laws or regulations, the validity, legality or enforceability of the remaining provisions of this Agreement shall not be affected or compromised in any aspect. The Parties shall negotiate in good faith to replace such invalid, illegal or unenforceable provisions with effective provisions that accomplish to the greatest extent permitted by law and the intentions of the Parties, and the economic effect of such effective provisions shall be as close as possible to the economic effect of those invalid, illegal or unenforceable provisions.

  

12. 协议的修改、补充

Amendments and Supplements

 

双方可以书面协议方式对本协议作出修改和补充。经过双方签署的有关本协议的修改协议和补充协议是本协议组成部分,具有与本协议同等的法律效力。

Any amendments and supplements to this Agreement shall be in writing. The amendment agreements and supplementary agreements that have been signed by the Parties and relate to this Agreement shall be an integral part of this Agreement and shall have the same legal validity as this Agreement.

 

13. 语言和副本

Language and Counterparts

 

本协议以中文和英文书就,一式四份,甲乙双方各持二份。中英文版本具有同等效力;中英文版本如有歧义,应以中文版本为准。

This Agreement is written in both Chinese and English language in four copies, each Party having two copy. The Chinese version and English version shall have equal legal validity. If there is any discrepancy between Chinese version and English version, Chinese version prevails.

 

本页其余部分刻意留为空白

The Remainder of this page is intentionally left blank

 

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有鉴于此,双方已使得经其授权的代表于文首所述日期签署了本《独家业务合作协议》,以昭信守。

IN WITNESS WHEREOF, the Parties have caused their authorized representative to execute this Exclusive Business Cooperative Agreement as of the date first above written.

 

甲方 北京华夏大地远程教育网络服务有限公司  
Party A: Huaxia Dadi Distance Learning Services Co., Ltd.
     
签署:    
By /s/ Yang Yu  
姓名: 于洋  
Name Yang Yu  
职位: 董事  
Title Director  

 

乙方 北京华夏大地数码信息技术有限公司  
Party B: Huaxia Dadi Digital Information Technology Co., Ltd.
     
签署:    
By /s/ Yang Yu    
姓名: 于洋  
Name Yang Yu  
职位: 董事  
Title Director  

 

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Exhibit 10.2

 

独家购买权协议

Exclusive Option Agreement

 

本独家购买权协议(下称“本协议”)由以下各方于2017年8月16 日在中华人民共和国(下称“中国”)北京市签订:

This Exclusive Option Agreement (this "Agreement") is executed by and among the following Parties as of the 16 day of August, 2017 in Beijing, the People’s Republic of China (“China” or the “PRC”):

 

甲方: 北京华夏大地远程教育网络服务有限公司 ,一家依照中国法律设立和存在的外商独资公司,地址为 北京市北京经济技术开发区地盛北街 1 号院 40 号楼 505;
Party A: Huaxia Dadi Distance Learning Services Co., Ltd., a wholly foreign owned enterprise, organized and existing under the laws of the PRC, with its address at Room 505 Building No.40, No.1 Disheng North Street, Beijing Economic and Technological Development Zone, Beijing, China;
   
乙方: 于洋,一位中国公民,身份证号码:140202197202174030;
Party B: Yang Yu, a citizen of China with Chinese Identification No.:  140202197202174030;
   
丙方: 杨兴晖,一位中国公民,身份证号码:11010519700924615x;
Party C: Xinghui Yang, a citizen of China with Chinese Identification No.:  11010519700924615x;
   
丁方: 北京华夏大地数码信息技术有限公司,一家依照中国法律设立和存在的有限责任公司,地址为 北京市北京经济技术开发区地盛北街 1 号院 40 号楼 503A。
Party D: Huaxia Dadi Digital Information Technology Co., Ltd., a limited liability company organized and existing under the laws of the PRC, with its address at Room 503A Building No.40, No.1 Disheng North Street, Beijing Economic and Technological Development Zone, Beijing, China

 

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在本协议中,甲方、乙方、丙方、丁方以下各称“一方”,合称“各方”。

In this Agreement, each of Party A, Party B and Party C shall be referred to as a "Party" respectively, and they shall be collectively referred to as the "Parties".

 

鉴于:

Whereas:

 

乙方、丙方是丁方的股东;在本协议签署日,乙方、丙方持有丁方100%的股权,代表丁方注册资本人民币200万元。

Party B, Party C are shareholders of Party D and as of the date hereof holds 100% of equity interests of Party D, representing RMB 200 million in the registered capital of Party D.

 

现各方协商一致,达成如下协议:

Now therefore, upon mutual discussion and negotiation, the Parties have reached the following agreement:

 

1. 股权买卖

Sale and Purchase of Equity Interest

 

1.1 授予权利

Option Granted

 

鉴于甲方向乙方、丙方支付了人民币200万元作为对价,且乙方、丙方确认收到并认为该对价足够,乙方、丙方在此不可撤销地授予甲方在中国法律允许的前提下,按照甲方自行决定的行使步骤,并按照本协议第1.3条所述的价格,随时一次或多次从乙方、丙方购买或指定一人或多人(“ 被指定人 ”)从乙方、丙方购买其届时所持有的丁方的全部或部分股权的一项不可撤销的专有权(“ 股权购买权 ”)。除甲方和被指定人外,任何第三人均不得享有股权购买权或其他与乙方、丙方股权有关的权利。丁方特此同意乙方、丙方向甲方授予股权购买权。本款及本协议所规定的“人”指个人、公司、合营企业、合伙、企业、信托或非公司组织。

In consideration of the payment of RMB two million by Party A, the receipt and adequacy of which is hereby acknowledged by Party B, Party C, Party B, Party C hereby irrevocably grants Party A an irrevocable and exclusive right to purchase, or designate one or more persons (each, a " Designee ") to purchase the equity interests in Party D then held by Party B, Party C once or at multiple times at any time in part or in whole at Party A's sole and absolute discretion to the extent permitted by Chinese laws and at the price described in Section 1.3 herein (such right being the " Equity Interest Purchase Option "). Except for Party A and the Designee(s), no other person shall be entitled to the Equity Interest Purchase Option or other rights with respect to the equity interests of Party B, Party C. Party D hereby agrees to the grant by Party B, Party C of the Equity Interest Purchase Option to Party A. The term "person" as used herein shall refer to individuals, corporations, partnerships, partners, enterprises, trusts or non-corporate organizations.

 

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1.2 行使步骤

Steps for Exercise of Equity Interest Purchase Option

 

甲方行使其股权购买权以符合中国法律和法规的规定为前提。甲方行使股权购买权时,应向乙方、丙方发出书面通知(“ 股权购买通知 ”),股权购买通知应载明以下事项:(a)甲方或被指定人关于行使股权购买权的决定;(b)甲方或被指定人拟从乙方、丙方购买的股权份额(“ 被购买股权 ”) ;和(c) 被购买股权的购买日/转让日。

Subject to the provisions of the laws and regulations of China, Party A may exercise the Equity Interest Purchase Option by issuing a written notice to Party B, Party C (the " Equity Interest Purchase Option Notice "), specifying: (a) Party A's or the Designee’s decision to exercise the Equity Interest Purchase Option; (b) the portion of equity interests to be purchased by Party A or the Designee from Party B, Party C (the " Optioned Interests "); and (c) the date for purchasing the Optioned Interests and/or the date for transfer of the Optioned Interests.

 

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1.3 股权对价

Equity Interest Purchase Price

 

甲方行使股权购买权购买乙方、丙方在丁方持有的全部股权的对价 基准对价 应为人民币200万元;甲方行使股权购买权购买乙方、丙方持有在丁方持有的部分股权时,股权买价按照比例计算。如果在甲方行权时中国法律所允许的最低价格高于前述价格,则股权买价应以中国法律所允许的最低价格为准(统称“ 股权对价 ”)。

The purchase price of all equity interests held by Party B, Party C in Party D purchased by Party A by exercising the Equity Interest Purchase Option (the “ Base Price ”) shall be RMB 2,000,000 ; if Party A exercises the Equity Interest Purchase Option to purchase part of the equity interests held by Party B, Party C Din Party D, the purchase price shall be calculated pro rata. If PRC law requires a minimum price higher than aforementioned price when Party A exercises Equity Interest Purchase Option, the minimum price regulated by PRC law shall be the purchase price (collectively, the " Equity Interest Purchase Price ").

 

1.4 转让被购买股权

Transfer of Optioned Interests

 

甲方每次行使股权购买权时:

For each exercise of the Equity Interest Purchase Option:

 

1.4.1 乙方、丙方应责成丁方及时召开股东会会议,在该会议上,应通过批准乙方、丙方向甲方和/或被指定人转让被购买股权的决议;

Party B, Party C shall cause Party D to promptly convene a shareholders’ meeting, at which a resolution shall be adopted approving Party B, Party C 's transfer of the Optioned Interests to Party A and/or the Designee(s);

 

1.4.2 乙方、丙方应就其向甲方和/或被指定人转让被购买股权取得丁方其他股东同意该转让并放弃优先购买权的书面声明 (如适用)

Party B, Party C shall obtain written statements from the other shareholders of Party D giving consent to the transfer of the equity interest to Party A and/or the Designee(s) and waiving any right of first refusal related thereto (if applicable).

 

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1.4.3 乙方、丙方应与甲方和/或(在适用的情况下)被指定人按照本协议及股权购买通知的规定,为每次转让签订股权转让合同;

Party B, Party C shall execute an equity interest transfer contract with respect to each transfer with Party A and/or each Designee (whichever is applicable), in accordance with the provisions of this Agreement and the Equity Interest Purchase Option Notice regarding the Optioned Interests;

 

1.4.4 有关方应签署所有其他所需合同、协议或文件,取得全部所需的政府批准和同意,并采取所有所需行动,在不附带任何担保权益的情况下,将被购买股权的有效所有权转移给甲方和/或被指定人并使甲方和/或被指定人成为被购买股权的登记在册所有人。为本款及本协议的目的,“担保权益”包括担保、抵押、第三方权利或权益,任何购股权、收购权、优先购买权、抵销权、所有权扣留或其他担保安排等;但为了明确起见,不包括在本协议、乙方、丙方股权质押协议和乙方、丙方授权委托书项下产生的任何担保权益。本协议所规定的“乙方、丙方股权质押协议”指甲方、乙方、丙方和丁方于本协议签署之日签订的股权质押协议及对其的任何修改、修订或重述;本协议所规定的“乙方、丙方授权委托书”指乙方、丙方于本协议签署之日签署的授权甲方的授权委托书及对其的任何修改、修订或重述。

The relevant Parties shall execute all other necessary contracts, agreements or documents, obtain all necessary government licenses and permits and take all necessary actions to transfer valid ownership of the Optioned Interests to Party A and/or the Designee(s), unencumbered by any security interests, and cause Party A and/or the Designee(s) to become the registered owner(s) of the Optioned Interests. For the purpose of this Section and this Agreement, "security interests" shall include securities, mortgages, third party's rights or interests, any stock options, acquisition right, right of first refusal, right to offset, ownership retention or other security arrangements, but shall be deemed to exclude any security interest created by this Agreement, Party B, Party C's Equity Interest Pledge Agreement and Party B, Party C’s Power of Attorney. "Party B, Party C's Equity Interest Pledge Agreement" as used in this Agreement shall refer to the Equity Interest Pledge Agreement executed by and among Party A, Party B, Party C, Party D on the date hereof and any modification, amendment and restatement thereto. “Party B, Party C’s Power of Attorney” as used in this Agreement shall refer to the Power of Attorney executed by Party B, Party C on the date hereof granting Party A with power of attorney and any modification, amendment and restatement thereto.

 

2. 承诺

Covenants

 

2.1 有关丁方的承诺

Covenants regarding Party D

 

乙方、丙方(作为丁方的股东)和丁方在此承诺:

Party B, Party C (as the shareholders of Party D) and Party D hereby covenant as follows:

 

2.1.1 未经甲方的事先书面同意,不以任何形式补充、更改或修改丁方公司章程文件,增加或减少其注册资本,或以其他方式改变其注册资本结构;

Without the prior written consent of Party A, they shall not in any manner supplement, change or amend the articles of association and bylaws of Party D, increase or decrease its registered capital, or change its structure of registered capital in other manners;

 

2.1.2 按照良好的财务和商业标准及惯例,保持其公司的存续,取得和维持丁方从事业务所需的全部政府许可、证照,审慎地及有效地经营其业务和处理事务;

They shall maintain Party D's corporate existence in accordance with good financial and business standards, obtain and maintain all necessary government licenses and permits and practice by prudently and effectively operating its business and handling its affairs;

 

2.1.3 未经甲方的事先书面同意,不在本协议签署之日起的任何时间出售、转让、抵押或以其他方式处置丁方的任何资产、业务或收入的合法或受益权益,或允许在其上设置任何其他担保权益;

Without the prior written consent of Party A, they shall not at any time following the date hereof, sell, transfer, mortgage or dispose of in any manner any assets of Party D or legal or beneficial interest in the business or revenues of Party D, or allow the encumbrance thereon of any security interest;

 

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2.1.4 未经甲方的事先书面同意,不发生、继承、保证或容许存在任何债务,但(i)正常或日常业务过程中产生而不是通过借款方式产生的债务;和(ii)已向甲方披露和得到甲方书面同意的债务除外;

Without the prior written consent of Party A, they shall not incur, inherit, guarantee or suffer the existence of any debt, except for (i) debts incurred in the ordinary course of business other than through loans; and (ii) debts disclosed to Party A for which Party A's written consent has been obtained;

 

2.1.5 一直在正常业务过程中经营所有业务,以保持丁方的资产价值,不进行任何足以影响其经营状况和资产价值的作为/不作为;

They shall always operate all of Party D's businesses during the ordinary course of business to maintain the asset value of Party E and refrain from any action/omission that may affect Party D's operating status and asset value;

 

2.1.6 未经甲方的事先书面同意,不得让丁方签订任何重大合同,但在正常业务过程中签订的合同除外(就本段而言,如果一份合同的总金额超过人民币10万元,即被视为重大合同);

Without the prior written consent of Party A, they shall not cause Party D to execute any major contract, except the contracts in the ordinary course of business (for purpose of this subsection, a contract with a price exceeding RMB100,000 shall be deemed a major contract);

 

2.1.7 未经甲方的事先书面同意,丁方不得向任何人提供贷款或信贷;

Without the prior written consent of Party A, they shall not cause Party D to provide any person with any loan or credit;

 

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2.1.8 应甲方要求,向其提供所有关于丁方的营运和财务状况的资料;

They shall provide Party A with information on Party D's business operations and financial condition at Party A's request;

 

2.1.9 如甲方提出要求,丁方应从甲方接受的保险公司处购买和持有有关其资产和业务的保险,该保险的金额和险种应与经营类似业务的公司一致;

If requested by Party A, they shall procure and maintain insurance in respect of Party D's assets and business from an insurance carrier acceptable to Party A, at an amount and type of coverage typical for companies that operate similar businesses;

 

2.1.10 未经甲方的事先书面同意,丁方不得与任何人合并或联合,或对任何人进行收购或投资;

Without the prior written consent of Party A, they shall not cause or permit Party D to merge, consolidate with, acquire or invest in any person;

 

2.1.11 将发生的或可能发生的与丁方资产、业务或收入有关的诉讼、仲裁或行政程序立即通知甲方;

They shall immediately notify Party A of the occurrence or possible occurrence of any litigation, arbitration or administrative proceedings relating to Party D's assets, business or revenue;

 

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2.1.12 为保持丁方对其全部资产的所有权,签署所有必要或适当的文件,采取所有必要或适当的行动和提出所有必要或适当的控告或对所有索偿进行必要和适当的抗辩;

To maintain the ownership by Party D of all of its assets, they shall execute all necessary or appropriate documents, take all necessary or appropriate actions and file all necessary or appropriate complaints or raise necessary and appropriate defenses against all claims;

 

2.1.13 未经甲方事先书面同意,不得以任何形式派发股息予各股东,但一经甲方要求,丁方应立即将其所有可分配利润全部立即分配给其各股东;及

Without the prior written consent of Party A, they shall ensure that Party D shall not in any manner distribute dividends to its shareholders, provided that upon Party A's written request, Party D shall immediately distribute all distributable profits to its shareholders; and

 

2.1.14 根据甲方的要求,委任由其指定的任何人士出任丁方的董事。

At the request of Party A, they shall appoint any persons designated by Party A as the director(s) of Party D.

 

2.1.15 未经甲方书面同意,不得从事任何与甲方或甲方的关联公司相竞争的业务。

Without Party A’s prior written consent, they shall not engage in any business in competition with Party A or its affiliates.

 

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2.1.16 除非中国法律强制要求,未经甲方书面同意,丁方不得解散或清算。

Unless otherwise required by PRC law, Party D shall not be dissolved or liquated without prior written consent by Party A.

 

2.2 乙方、丙方 的承诺

Covenant of Party B, Party C

 

乙方、丙方承诺:

Party B, Party C hereby covenant as follows:

 

2.2.1 未经甲方的事先书面同意,不出售、转让、抵押或以其他方式处置其拥有的丁方的股权的合法或受益权益,或允许在其上设置任何其他担保权益,但根据乙方、丙方股权质押协议和乙方、丙方授权委托书设置的权益除外;

Without the prior written consent of Party A, Party B, Party C shall not sell, transfer, mortgage or dispose of in any other manner any legal or beneficial interest in the equity interests in Party D held by Party B, Party C, or allow the encumbrance thereon, except for the interest placed in accordance with Party B, Party C's Equity Interest Pledge Agreement and Party B, Party C’s Power of Attorney;

 

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2.2.2 促使丁方股东会和/或董事不批准在未经甲方的事先书面同意的情况下,出售、转让、抵押或以其他方式处置任何乙方、丙方持有之丁方的股权的合法权益或受益权,或允许在其上设置任何其他担保权益,但批准根据乙方、丙方股权质押协议和乙方、丙方授权委托书设置的权益除外;

Party B, Party C shall cause the shareholders' meeting and/or the director(s) of Party D not to approve the sale, transfer, mortgage or disposition in any other manner of any legal or beneficial interest in the equity interests in Party D held by Party B, Party C, or allow the encumbrance thereon of any security interest, without the prior written consent of Party A, except for the interest placed in accordance with Party B, Party C's Equity Interest Pledge Agreement and Party B, Party C’s Power of Attorney;

 

2.2.3 未经甲方的事先书面同意的情况下,对于丁方与任何人合并或联合,或对任何人进行收购或投资,乙方、丙方将促成丁方股东会或董事不予批准;

Party B, Party C shall cause the shareholders' meeting or the director(s) of Party D not to approve the merger or consolidation with any person, or the acquisition of or investment in any person, without the prior written consent of Party A;

 

2.2.4 将发生的或可能发生的任何关于其所拥有的股权的诉讼、仲裁或行政程序立即通知甲方;

Party B, Party C shall immediately notify Party A of the occurrence or possible occurrence of any litigation, arbitration or administrative proceedings relating to the equity interests in Party D held by Party B and Party C;

 

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2.2.5 促使丁方股东会或董事表决赞成本协议规定的被购买股权的转让并应甲方之要求采取其他任何行动;

Party B, Party C shall cause the shareholders' meeting or the director(s) of Party D to vote their approval of the transfer of the Optioned Interests as set forth in this Agreement and to take any and all other actions that may be requested by Party A;

 

2.2.6 为保持其对股权的所有权,签署所有必要或适当的文件,采取所有必要或适当的行动和提出所有必要或适当的控告或对所有索偿进行必要和适当的抗辩;

To the extent necessary to maintain Party B, Party C's ownership in Party D, Party B, Party C shall execute all necessary or appropriate documents, take all necessary or appropriate actions and file all necessary or appropriate complaints or raise necessary and appropriate defenses against all claims;

 

2.2.7 应甲方的要求,委任由其指定的任何人士出任丁方的董事;

Party B, Party C shall appoint any designee of Party A as the director(s) of Party D, at the request of Party A;

 

2.2.8 放弃其对丁方其他股东向甲方转让股权所享有的优先购买权(如有的话);

Party B, Party C hereby waives its right of first of refusal to transfer of equity interest by the other existing shareholders of Party D to Party A (if any); and

 

2.2.9 如乙方、丙方从丁方获得任何利润、分红、股利、股息或清算所得,乙方、丙方应在遵从中国法律的前提下将其及时赠予甲方或甲方指定的任何人;和

Party B, Party C shall promptly donate any profit, interest, dividend or proceeds of liquidation to Party A or any other person designated by Party A to the extent permitted under applicable PRC laws.

 

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2.2.10 严格遵守本协议及乙方、丙方、丁方与甲方共同或分别签订的其他协议的各项规定,切实履行该等协议项下的各项义务,并不进行任何足以影响该等协议的有效性和可执行性的作为/不作为。如果乙方、丙方对于本协议项下或本协议各方签署的股权质押协议下或对甲方的授权委托书中的股权,还留存有任何权利,除非甲方书面指示,否则乙方、丙方仍不得行使该权利。

Party B, Party C shall strictly abide by the provisions of this Agreement and other contracts jointly or separately executed by and among Party B、C、D and Party A, perform the obligations hereunder and thereunder, and refrain from any action/omission that may affect the effectiveness and enforceability thereof. To the extent that Party B, Party C has any remaining rights with respect to the equity interests subject to this Agreement hereunder or under the Equity Interest Pledge Agreement among the same parties hereto or under the Power of Attorney granted in favor of Party A, Party B, Party C shall not exercise such rights except in accordance with the written instructions of Party A.

 

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3. 陈述和保证

Representations and Warranties

 

乙方、丙方和丁方特此在本协议签署之日和每一个转让日向甲方共同及分别陈述和保证如下:

Party B、C、D hereby represent and warrant to Party A, jointly and severally, as of the date of this Agreement and each date of transfer of the Optioned Interests, that:

 

3.1 其具有签订和交付本协议和其为一方的、根据本协议为每一次转让被购买股权而签订的任何股权转让合同(各称为“转让合同”),并履行其在本协议和任何转让合同项下的义务的权力和能力。乙方、丙方和丁方同意在甲方行使股权购买权时,他们将签署与本协议条款一致的转让合同。本协议和其是一方的各转让合同一旦签署后,构成或将对其构成合法、有效及具有约束力的义务并可按照其条款对其强制执行;

They have the authority to execute and deliver this Agreement and any equity interest transfer contracts to which they are parties concerning the Optioned Interests to be transferred thereunder (each, a "Transfer Contracts"), and to perform their obligations under this Agreement and any Transfer Contracts. Party B、C and D agree to enter into Transfer Contracts consistent with the terms of this Agreement upon Party A’s exercise of the Equity Interest Purchase Option. This Agreement and the Transfer Contracts to which they are parties constitute or will constitute their legal, valid and binding obligations and shall be enforceable against them in accordance with the provisions thereof;

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3.2 乙方、丙方和丁方已经取得第三方和政府部门的同意及批准(若需)以签署,交付和履行本协议;

Party B、C and D have obtained any and all approvals and consents from government authorities and third parties (if required) for execution, delivery and performance of this Agreement.

 

3.3 无论是本协议或任何转让合同的签署和交付还是其在本协议或任何转让合同项下的义务的履行均不会:(i)导致违反任何有关的中国法律;(ii)与丁方章程或其他组织文件相抵触;(iii)导致违反其是一方或对其有约束力的任何合同或文件,或构成其是一方或对其有约束力的任何合同或文件项下的违约;(iv)导致违反有关向任何一方颁发的任何许可或批准的授予和(或)继续有效的任何条件;或(v)导致向任何一方颁发的任何许可或批准中止或被撤销或附加条件;

The execution and delivery of this Agreement or any Transfer Contracts and the obligations under this Agreement or any Transfer Contracts shall not: (i) cause any violation of any applicable laws of China; (ii) be inconsistent with the articles of association, bylaws or other organizational documents of Party D; (iii) cause the violation of any contracts or instruments to which they are a party or which are binding on them, or constitute any breach under any contracts or instruments to which they are a party or which are binding on them; (iv) cause any violation of any condition for the grant and/or continued effectiveness of any licenses or permits issued to either of them; or (v) cause the suspension or revocation of or imposition of additional conditions to any licenses or permits issued to either of them;

 

3.4 乙方、丙方对其在丁方拥有的股权拥有良好和可出售的所有权,除乙方、丙方股权质押协议和乙方、丙方授权委托书外,乙方、丙方在上述股权上没有设置任何担保权益;

Party B, Party C has a good and merchantable title to the equity interests in Party D he holds. Except for Party B, Party C's Equity Interest Pledge Agreement and Party B, Party C’s Power of Attorney, Party B, Party C has not placed any security interest on such equity interests;

 

3.5 丁方对所有资产拥有良好和可出售的所有权,丁方在上述资产上没有设置任何担保权益;

Party D has a good and merchantable title to all of its assets, and has not placed any security interest on the aforementioned assets;

 

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3.6 丁方没有任何未偿还债务,除(i)在其正常的业务过程中发生的债务,及(ii)已向甲方披露及经甲方书面同意债务除外;

Party D does not have any outstanding debts, except for (i) debt incurred in the ordinary course of business; and (ii) debts disclosed to Party A for which Party A's written consent has been obtained.

 

3.7 丁方遵守适用于资产的收购的所有法律和法规;和

Party D has complied with all laws and regulations of China applicable to asset acquisitions; and

 

3.8 目前没有悬而未决的或构成威胁的与股权、丁方资产有关的或与丁方有关的诉讼、仲裁或行政程序。

There are no pending or threatened litigation, arbitration or administrative proceedings relating to the equity interests in Party D, assets of Party D or Party D.

 

4. 有效期

Effective Date

 

本协议自各方正式签署之日起生效,本协议在乙方、丙方持有的丁方全部股权均根据本协议的约定依法转让至甲方和/或其指定的其他人名下后终止。

This Agreement shall become effective upon execution by the Parties, and remain effective until all equity interests held by Party B, Party C in Party D have been transferred or assigned to Party A and/or any other person designated by Party A in accordance with this Agreement.

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5. 适用法律与争议解决

Governing Law and Resolution of Disputes

 

5.1 适用法律

Governing law

 

本协议的订立、效力、解释、履行、修改和终止以及争议解决均适用中国法律。

The execution, effectiveness, construction, performance, amendment and termination of this Agreement and the resolution of disputes hereunder shall be governed by the laws of PRC.

 

5.2 争议的解决方法

Methods of Resolution of Disputes

 

因解释和履行本协议而发生的任何争议,本协议各方应首先通过友好协商的方式加以解决。如果在一方向其他方发出要求协商解决的书面通知后30天之内争议仍然得不到解决,则任何一方均可将有关争议提交给中国国际经济贸易仲裁委员会,由该会按照其仲裁规则仲裁解决。仲裁应在北京进行,使用之语言为中文。仲裁裁决是终局性的,对各方均有约束力。

In the event of any dispute with respect to the construction and performance of this Agreement, the Parties shall first resolve the dispute through friendly negotiations. In the event the Parties fail to reach an agreement on the dispute within 30 days after either Party's request to the other Parties for resolution of the dispute through negotiations, either Party may submit the relevant dispute to the China International Economic and Trade Arbitration Commission for arbitration, in accordance with its Arbitration Rules. The arbitration shall be conducted in Beijing, and the language used in arbitration shall be Chinese. The arbitration award shall be final and binding on all Parties.

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6. 税款、费用

Taxes and Fees

 

每一方应承担根据中国法律因准备和签署本协议和各转让合同以及完成本协议和各转让合同拟定的交易而由该方发生的或对其征收的任何和全部的转让和注册的税、花费和费用。

Each Party shall pay any and all transfer and registration tax, expenses and fees incurred thereby or levied thereon in accordance with the laws of China in connection with the preparation and execution of this Agreement and the Transfer Contracts, as well as the consummation of the transactions contemplated under this Agreement and the Transfer Contracts.

 

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7. 通知

Notices

 

7.1 本协议项下要求或发出的所有通知和其他通信应通过专人递送、挂号邮寄、邮资预付或商业快递服务或传真的方式发到该方下列地址。每一通知还应再以电子邮件送达。该等通知视为有效送达的日期按如下方式确定:

All notices and other communications required or permitted to be given pursuant to this Agreement shall be delivered personally or sent by registered mail, postage prepaid, by a commercial courier service or by facsimile transmission to the address of such Party set forth below. A confirmation copy of each notice shall also be sent by email. The dates on which notices shall be deemed to have been effectively given shall be determined as follows:

 

7.1.1 通知如果是以专人递送、快递服务或挂号邮寄、邮资预付发出的,则以于设定为通知的地址在接收或拒收之日为有效送达日。

Notices given by personal delivery, by courier service or by registered mail, postage prepaid, shall be deemed effectively given on the date of receipt or refusal at the address specified for notices.

 

7.1.2 通知如果是以传真发出的,则以成功传送之日为有效送达日(应以自动生成的传送确认信息为证)。

Notices given by facsimile transmission shall be deemed effectively given on the date of successful transmission (as evidenced by an automatically generated confirmation of transmission).

 

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7.2 为通知的目的,各方地址如下:

For the purpose of notices, the addresses of the Parties are as follows:

 

  甲方:   北京华夏大地远程教育网络服务有限公司
  Party A: Huaxia Dadi Distance Learning Services Co., Ltd.
  地址: 北京市北京经济技术开发区地盛北街1号院40号楼505
  Address: Room 505 Building No.40, No.1 Disheng North Street, Beijing Economic and Technological Development Zone, Beijing, China
  收件人:于洋  
  Attn: Yang Yu
  电话: +86 138 0125 9058
  Phone: +86 138 0125 9058
  传真: +86-10-85171378
  Facsimile: +86-10-85171378
     
  乙方: 于洋
  Party B : Yang Yu
  地址: 中国北京市海淀区西直门北大街45号1号楼1203号
  Address: Room 1203, Building 1, No. 45, Xizhimen North Avenue, Haidian District, Beijing, China
  电话: +86 138 0125 9058
  Phone: +86 138 0125 9058
  传真: +86-10-85171378
  Facsimile:   +86-10-85171378
     
  丙方: 杨兴晖
  Party C: Xinghui Yang
  地址: 北京市海淀区清河十九院宿舍10楼2单元603号
  Address: Room 603, Unit 2, No. 19 Academy Dormitory, Qinghe, Haidian District, Beijing
  电话: +86 139 1165 6638
  Phone: +86 139 1165 6638
  传真: +86-10-58022039
  Facsimile: +86-10-58022039

    

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  丁方: 北京华夏大地数码信息技术有限公司
 

Party D:

Huaxia Dadi Digital Information Technology Co., Ltd.

  地址: 北京市北京经济技术开发区地盛北街 1 号院 40 号楼 503A
  Address: Room 503A Building No.40, No.1 Disheng North Street, Beijing Economic and Technological Development Zone, Beijing, China
  收件人: 杨兴晖
  Attn: Xinghui Yang
  电话: +86 139 1165 6638
  Phone: +86 139 1165 6638
  传真: +86 10 58022039
  Facsimile: +86 10 58022039

  

7.3 任何一方可按本条规定随时给其他方发出通知来改变其接收通知的地址。

Any Party may at any time change its address for notices by a notice delivered to the other Parties in accordance with the terms hereof.

 

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8. 保密责任

Confidentiality

 

各方承认及确定有关本协议、本协议内容,以及彼此就准备或履行本协议而交换的任何口头或书面资料均被视为保密信息。各方应当对所有该等保密信息予以保密,而在未得到另一方书面同意前,不得向任何第三者披露任何保密信息,惟下列信息除外:(a)公众人士知悉或将会知悉的任何信息(惟并非由接受保密信息之一方擅自向公众披露);(b)根据适用法律法规、股票交易规则、或政府部门或法院的命令而所需披露之任何信息;或(c)由任何一方就本协议所述交易而需向其股东、投资者、法律或财务顾问披露之信息,而该股东、法律或财务顾问亦需遵守与本条款相类似之保密责任。如任何一方工作人员或聘请机构的泄密均视为该方的泄密,需依本协议承担违约责任。无论本协议以任何理由终止,本条款仍然生效。

The Parties acknowledge that the existence and the terms of this Agreement and any oral or written information exchanged between the Parties in connection with the preparation and performance this Agreement are regarded as confidential information. Each Party shall maintain confidentiality of all such confidential information, and without obtaining the written consent of the other Party, it shall not disclose any relevant confidential information to any third parties, except for the information that: (a) is or will be in the public domain (other than through the receiving Party’s unauthorized disclosure); (b) is under the obligation to be disclosed pursuant to the applicable laws or regulations, rules of any stock exchange, or orders of the court or other government authorities; or (c) is required to be disclosed by any Party to its shareholders, investors, legal counsels or financial advisors regarding the transaction contemplated hereunder, provided that such shareholders, investors, legal counsels or financial advisors shall be bound by the confidentiality obligations similar to those set forth in this Section. Disclosure of any confidential information by the staff members or agencies hired by any Party shall be deemed disclosure of such confidential information by such Party, which Party shall be held liable for breach of this Agreement. This Section shall survive the termination of this Agreement for any reason.

 

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9. 进一步保证

Further Warranties

 

各方同意迅速签署为执行本协议的各项规定和目的而合理需要的或对其有利的文件,以及为执行本协议的各项规定和目的而采取合理需要的或对其有利的进一步行动。

The Parties agree to promptly execute documents that are reasonably required for or are conducive to the implementation of the provisions and purposes of this Agreement and take further actions that are reasonably required for or are conducive to the implementation of the provisions and purposes of this Agreement.

 

10. 违约责任

Breach of Agreement

 

10.1 若乙方、丙方或丁方实质性违反本协议项下所作的任何一项约定,甲方有权终止本协议并要求乙方、丙方及丁方或丁方给予损害赔偿;本第10条不应妨碍甲方在本协议下的任何其他权利;

If Party B, Party C or Party D conducts any material breach of any term of this Agreement, Party A shall have right to terminate this Agreement and require the Party B, Party C or Party D to compensate all damages; this Section 10 shall not prejudice any other rights of Party A herein;

 

10.2 若甲方违反本协议项下所作的任何一项约定,除非法律另有规定,乙方、丙方或丁方在任何情况均无任何权利终止或解除本协议。

If Party A conducts any breach of any term of this Agreement, Party B, Party C or Party D shall not terminate this Agreement in any event unless otherwise required by applicable laws.

 

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11. 其他

Miscellaneous

 

11.1 修订、修改与补充

Amendment, change and supplement

 

对本协议作出修订、修改与补充,必须经每一方签署书面协议。

Any amendment, change and supplement to this Agreement shall require the execution of a written agreement by all of the Parties.

 

11.2 完整合同

Entire agreement

 

除了在本协议签署后所作出的书面修订、补充或修改以外,本协议构成本协议各方就本协议标的物所达成的完整合同,取代在此之前就本协议标的物所达成的所有口头或书面的协商、陈述和协议。

Except for the amendments, supplements or changes in writing executed after the execution of this Agreement, this Agreement shall constitute the entire agreement reached by and among the Parties hereto with respect to the subject matter hereof, and shall supercede all prior oral and written consultations, representations and contracts reached with respect to the subject matter of this Agreement.

 

11.3 标题

Headings

 

本协议的标题仅为方便阅读而设,不应被用来解释、说明或在其他方面影响本协议各项规定的含义。

The headings of this Agreement are for convenience only, and shall not be used to interpret, explain or otherwise affect the meanings of the provisions of this Agreement.

 

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11.4 语言

Language

 

本协议以中文和英文书就,一式伍份,各方各持一份,具有同等效力;中英文版本如有冲突,应以中文版为准。

This Agreement is written in both Chinese and English language in five copies, each Party having one copy with equal legal validity; in case there is any conflict between the Chinese version and the English version, the Chinese version shall prevail.

 

11.5 可分割性

Severability

 

如果本协议有任何一条或多条规定根据任何法律或法规在任何方面被裁定为无效、不合法或不可执行,本协议其余规定的有效性、合法性或可执行性不应因此在任何方面受到影响或损害。各方应通过诚意磋商,争取以法律许可以及各方期望的最大限度内有效的规定取代那些无效、不合法或不可执行的规定,而该等有效的规定所产生的经济效果应尽可能与那些无效、不合法或不能强制执行的规定所产生的经济效果相似。

In the event that one or several of the provisions of this Agreement are found to be invalid, illegal or unenforceable in any aspect in accordance with any laws or regulations, the validity, legality or enforceability of the remaining provisions of this Agreement shall not be affected or compromised in any respect. The Parties shall strive in good faith to replace such invalid, illegal or unenforceable provisions with effective provisions that accomplish to the greatest extent permitted by law and the intentions of the Parties, and the economic effect of such effective provisions shall be as close as possible to the economic effect of those invalid, illegal or unenforceable provisions.

 

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11.6 继任者

Successors

 

本协议对各方各自的继任者和各方所允许的受让方应具有约束力并对其有利。

This Agreement shall be binding on and shall inure to the interest of the respective successors of the Parties and the permitted assigns of such Parties.

 

11.7 继续有效

Survival

 

11.7.1 本协议期满或提前终止前因本协议而发生的或到期的任何义务在本协议期满或提前终止后继续有效。

Any obligations that occur or that are due as a result of this Agreement upon the expiration or early termination of this Agreement shall survive the expiration or early termination thereof.

 

11.7.2 本协议第5、8、10条和本第11.7条的规定在本协议终止后继续有效。

The provisions of Sections 5, 8, 10 and this Section 11.7 shall survive the termination of this Agreement.

 

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11.8 弃权

Waivers

 

任何一方可以对本协议的条款和条件作出弃权,但必须经书面作出并经各方签字。一方在某种情况下就其他方的违约所作的弃权不应被视为该方在其他情况下就类似的违约已经对其他方作出弃权。

Any Party may waive the terms and conditions of this Agreement, provided that such a waiver must be provided in writing and shall require the signatures of the Parties. No waiver by any Party in certain circumstances with respect to a breach by other Parties shall operate as a waiver by such a Party with respect to any similar breach in other circumstances.

 

 

本页其余部分刻意留为空白

The Remainder of this page is intentionally left blank

 

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有鉴于此,各方已使得经其授权的代表于文首所述日期签署了本独家购买权协议并即生效,以昭信守。

IN WITNESS WHEREOF, the Parties have caused their authorized representatives to execute this Exclusive Option Agreement as of the date first above written.

 

甲方: 北京华夏大地远程教育网络服务有限公司
Party A:  Huaxia Dadi Distance Learning Services Co., Ltd.

 

签字:    
By: /s/ Yang Yu  
姓名:  于洋  
Name:  Yang Yu  
职位: 法定代表人  
Title: Legal Representative  

 

乙方: 于洋  
Party B: Yang Yu  
     
签字:    
By: /s/ Yang Yu  

 

丙方: 杨兴晖  
Party C: Xinghui Yang  
     
签字:    
By: /s/ Xinghui Yang  

 

丁方:

北京华夏大地数码信息技术有限公司

Party D:

Huaxia Dadi Digital Information Technology Co., Ltd.

  

签字:

   
By:  /s/ Yang Yu  
姓名: 于洋  
Name: Yang Yu  
职位: 法定代表人  
Title: Legal Representative  

 

 

27

 

Exhibit 10.3

 

股权质押协议

Equity Interest Pledge Agreement

 

本股权质押协议 (下称“本协议”)由下列各方于2017年8月18日在中华人民共和国(下称“中国”)北京市签订: 

This Equity Interest Pledge Agreement (this “Agreement”) has been executed by and among the following parties on August 18, 2017 in Beijing, the People’s Republic of China (“China” or the “PRC”):

 

甲方( 下称“质权方” ):

 

北京华夏大地远程教育网络服务有限公司,一家依照中国法律设立和存在的外商独资公司,地址为北京市北京经济技术开发区地盛北街1号院40号楼505;

 

Party A (hereinafter “Pledgee”) :

 

Huaxia Dadi Distance Learning Services Co., Ltd., a wholly foreign owned enterprise, organized and existing under the laws of the PRC, with its address at Room 505 Building No.40, No.1 Disheng North Street, Beijing Economic and Technological Development Zone, Beijing, China;

 

乙方: 于洋,一位中国公民,身份证号码:140202197202174030;

Party B: Yang Yu, a citizen of China with Chinese Identification No.: 140202197202174030;

 

丙方: 杨兴晖,一位中国公民,身份证号码:11010519700924615x;

Party C: Xinghui Yang, a citizen of China with Chinese Identification No.: 11010519700924615x;

 

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丁方: 北京华夏大地数码信息技术有限公司,一家依照中国法律设立和存在的有限责任公司,地址为 北京市北京经济技术开发区地盛北街 1 号院 40 号楼 503A。

Party D: Huaxia Dadi Digital Information Technology Co., Ltd., a limited liability company organized and existing under the laws of the PRC, with its address at Room 503A Building No.40, No.1 Disheng North Street, Beijing Economic and Technological Development Zone, Beijing, China.

 

在本协议中,乙方、丙方合称“出质方”,质权方、出质方和丁方以下各称“一方”,合称“各方”。 

In this Agreement, Party B, Party C together referred to as “Pledgor”, each of Pledgee, Pledgor and Party D shall be referred to as a "Party" respectively, and they shall be collectively referred to as the "Parties".

 

鉴于: 

Whereas:

 

1. 在本协议签署日,出质方持有丁方100%的股权,代表丁方注册资本人民币200万元。丁方是一家在中国北京注册成立的有限责任公司。丁方有意在此确认出质方和质权方在本协议下的权利和义务并提供必要的协助登记该质权;

Pledgor is a citizen of China who as of the date hereof holds 100% of equity interests of Party D, representing RMB 200 million in the registered capital of Party D. Party D is a limited liability company registered in Beijing, China. Party D acknowledges the respective rights and obligations of Pledgor and Pledgee under this Agreement, and intends to provide any necessary assistance in registering the Pledge;

 

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2. 质权方是一家在中国注册的外商独资企业。质权方与出质方所部分拥有的丁方于北京签订了业务合作协议(定义如下);质权方与出质方、丁方签订了独家购买权协议(定义如下);质权方与出质方签订了 独家业务合作协议 (定义如下);出质方签署了授权质权方的授权委托书;

Pledgee is a wholly foreign-owned enterprise registered in China. Pledgee and Party D partially owned by Pledgor have executed an Exclusive Business Cooperation Agreement (as defined below) in Beijing; Party D, Pledgee and Pledgor have executed an Exclusive Option Agreement (as defined below); Pledgee and Pledgor have executed Exclusive Business Cooperation Agreement (as defined below); and Pledgor has executed a Power of Attorney to Pledgee.

 

3. 为了保证丁方和出质方履行独家业务合作协议、独家购买权协议和授权委托书项下的义务,出质方以其在丁方中拥有的全部股权向质权方就丁方和出质方履行业务合作协议、独家购买权协议和授权委托书做出质押担保。

To ensure that Party D and Pledgor fully perform their obligations under the Exclusive Business Cooperation Agreement, the Exclusive Option Agreement, the Loan Agreement and the Power of Attorney, Pledgor hereby pledges to the Pledgee all of the equity interest he holds in Party D as security for Party D’s and Pledgor’s obligations under the Exclusive Business Cooperation Agreements, the Exclusive Option Agreement and the Power of Attorney.

 

为了履行交易文件的条款,各方商定按照以下条款签订本协议。 

To perform the provisions of the Transaction Documents, the Parties have mutually agreed to execute this Agreement upon the following terms.

 

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1. 定义

Definitions

 

除非本协议另有规定,下列词语含义为: 

Unless otherwise provided herein, the terms below shall have the following meanings:

 

1.1 质权:指出质方根据本协议第2条给予质权方的担保物权,即指质权方所享有的,以出质方质押给质权方的质押股权折价或拍卖、变卖该质押股权的价款优先受偿的权利。

Pledge: shall refer to the security interest granted by Pledgor to Pledgee pursuant to Article 2 of this Agreement, i.e., the right of Pledgee to be compensated on a preferential basis with the conversion, auction or sales price of the Equity Interest.

 

1.2 质押股权:指出质方现在和将来持有的其在丁方的全部股权权益。

Equity Interest: shall refer to all of the equity interest now held and hereafter acquired by Pledgor in Party D.

 

1.3 质押期限:指本协议第3条规定的期间。

Term of Pledge: shall refer to the term set forth in Section 3.2 of this Agreement.

 

1.4 交易文件:指丁方与质权方于2017年8月16日签订的独家业务合作协议;出质方、丁方与质权方于2017年8月16日签订的独家购买权协议;和出质方于2017年8月16日签署的授权委托书,以及对前述文件的任何修改、修订和/或重述。

Transaction Documents: shall refer to the Exclusive Business Cooperation Agreement executed by and between Party D and Pledgee on 16 August, 2017(the “Exclusive Business Cooperation Agreement”), the Exclusive Option Agreement executed by and among Party D, Pledgee and Pledgor on 16 August, 2017(the “Exclusive Option Agreement”), Power of Attorney executed on 16 August, 2017 by Pledgor (the “Power of Attorney”) and any modification, amendment and restatement to the aforementioned documents.

 

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1.5 合同义务:指出质方在独家购买权协议、授权委托书和本协议项下所负的所有义务;丁方在业务合作协议、独家购买权协议、和本协议项下所负的所有义务。

Contract Obligation: shall refer to all the obligations of Pledgor under the Exclusive Option Agreement, the Power of Attorney; all the obligations of Party D under the Exclusive Cooperation Agreement, the Exclusive Option Agreement and this Agreement.

 

1.6 担保债务:指质权方因出质方和/或丁方的任何违约事件而遭受的全部直接、间接、衍生损失和可预计利益的丧失,该等损失的金额的依据包括但不限于质权方合理的商业计划和盈利预测、丁方在业务合作协议项下应支付的服务费用,及质权方为强制出质方和/或丁方执行其合同义务而发生的所有费用。

Secured Indebtedness: shall refer to all the direct, indirect or derivative losses of Pledgee, including loss of expected profits, incurred as a result of any Event of Default (as defined below). The amount of such loss shall be based on, including but not limited to the reasonable business plan and profit forecast of Pledgee, the consulting and service fees payable to Pledgee under the Exclusive Business Cooperation Agreement and all expenses occurred in connection with enforcement by Pledgee of Pledgor’s and/or Party D’s Contract Obligation.

 

1.7 违约事件:指本协议第7条所列任何情况。

Event of Default: shall refer to any of the circumstances set forth in Article 7 of this Agreement.

 

1.8 违约通知:指质权方根据本协议发出的宣布违约事件的通知。

Notice of Default: shall refer to the notice issued by Pledgee in accordance with this Agreement declaring an Event of Default.


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2. 质权

The Pledge

 

2.1 出质方兹同意将质押股权按照本协议的约定出质给质权方作为履行合同义务和偿还担保债务的担保。丁方兹同意出质方按照本协议的约定将质押股权出质给质权方。

Pledgor agrees to pledge all the Equity Interest as security for performance of the Contract Obligation and payment of the Secured Indebtedness under this Agreement. Party D hereby assents that Pledgor pledges the Equity Interest to the Pledgee pursuant to this Agreement.

 

2.2 在质押期限内,质权方有权收取质押股权所产生的红利或股利。在质权方事先书面同意的情况下,出质方方可就质押股权而分得股利或分红。出质方因质押股权而分得的股利或分红应根据质权方的要求(1)存入质权方的指定帐户内,受质权方监管,并用于担保合同义务和首先清偿担保债务;或者(2)在不违反中国法律的前提下,将此等红利、股利无条件地赠送给质权方或质权方指定的人。

During the term of the Pledge, Pledgee is entitled to receive dividends distributed on the Equity Interest. Pledgor may receive dividends distributed on the Equity Interest only with prior written consent from Pledgee. Dividends received by Pledgor on Equity Interest shall be, subject to requirement of Pledgee, (1) deposited into an account designated and supervised by Pledgee and used to secure the Contract Obligations and pay the Secured Indebtedness prior and in preference to make any other payment; or (2) unconditionally give to Pledgee or any other person designated by Pledgee to the extent permitted under applicable PRC laws.

 

2.3 在质权方事先书面同意的情况下,出质方可对丁方增资。出质方因对公司增资而在公司注册资本中增加的出资额亦属于质押股权。

Pledgor may subscribe for capital increase in Party D only with prior written consent of Pledgee. Any equity interest obtained by the Pledgor in future capital increase shall be deemed as Equity Interest as well.

 

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2.4 如丁方根据中国法律的强制性规定需予以解散或清算,出质方在丁方依法完成解散或清算程序后,从丁方依法分配的任何利益,应根据质权方的要求(1)存入质权方的指定帐户内,受质权方监管,并用于担保合同义务和首先清偿担保债务;或者(2)在不违反中国法律的前提下,无条件地赠予质权方或质权方指定的人。

In the event that Party D is required by PRC law to be liquidated or dissolved, any interest distributed to Pledgor upon Party D’s dissolution or liquidation shall be (1) deposited into an account designate and supervised by Pledgee and used to secure the Contract Obligations and pay the Secured Indebtedness prior and in preference to make any other payment; or (2) unconditionally give to Pledgee or any other person designated by Pledgee to the extent permitted under applicable PRC laws.

 

3. 质押期限

Term of Pledge

 

3.1 本质权自本协议项下的质押股权出质在相应的工商行政管理机关登记之日起生效,质权有效期持续到所有合同义务和担保债务履行完毕为止。出质方和丁方应(一)自本协议签署之日起3个工作日内,将本协议的质权登记在丁方股东名册上,并(二)自本协议签署之日起30个工作日内向相应的工商行政管理机关申请登记本协议项下的质权。各方共同确认,为办理股权质押工商登记手续,各方及丁方其他股东应将本协议或者一份按照丁方所在地工商行政管理部门要求的形式签署的、真实反映本协议项下质权信息的股权质押合同(以下简称“工商登记质押合同”)提交给工商行政管理机关,工商登记质押合同中未约定事项,仍以本协议约定为准。出质方和丁方应当按照中国法律法规和有关工商行政管理机关的各项要求,提交所有必要的文件并办理所有必要手续,保证质权在递交申请后尽快获得登记。

The Pledge shall become effective on such date when the pledge of the Equity Interest contemplated herein has been registered with relevant administration for industry and commerce (the “AIC”). The Pledge shall be continuously valid until all Contract Obligations and Secured Indebtedness have been fully performed and paid. Pledgor and Party D shall (1) register the Pledge in the shareholders' register of Party D within 3 business days following the execution of this Agreement, and (2) submit an application to the AIC for the registration of the Pledge of the Equity Interest contemplated herein within 30 business days following the execution of this Agreement. The parties covenant that for the purpose of registration of the Pledge, the parties hereto and all other shareholders of Party D shall submit to the AIC this Agreement or an equity interest pledge contract in the form required by the AIC at the location of Party D which shall truly reflect the information of the Pledge hereunder (the “AIC Pledge Contract”).  For matters not specified in the AIC Pledge Contract, the parties shall be bound by the provisions of this Agreement. Pledgor and Party D shall submit all necessary documents and complete all necessary procedures, as required by the PRC laws and regulations and the relevant AIC, to ensure that the Pledge of the Equity Interest shall be registered with the AIC as soon as possible after filing.

 

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3.2 质押期限内,如出质方和/或丁方未履行合同义务或支付担保债务,质权方有权但无义务按本协议的规定行使质权。

During the Term of Pledge, in the event Pledgor and/or Party D fails to perform the Contract Obligation or pay Secured Indebtedness, Pledgee shall have the right, but not the obligation, to exercise the Pledge in accordance with the provisions of this Agreement.

 

4. 质权凭证的保管

Custody of Records for Equity Interest subject to Pledge

 

4.1 在本协议规定的质押期限内,出质方应将其在丁方的股权出资证明书及记载质权的股东名册交付质权方保管。出质方应在本协议签订之日起一周内将上述股权出资证明书及股东名册交付给质权方。质权方将在本协议规定的全部质押期间一直保管这些文件。

During the Term of Pledge set forth in this Agreement, Pledgor shall deliver to Pledgee's custody the capital contribution certificate for the Equity Interest and the shareholders' register containing the Pledge within one week from the execution of this Agreement. Pledgee shall have custody of such documents during the entire Term of Pledge set forth in this Agreement.

 

5. 出质方和丁方的陈述和保证

Representations and Warranties of Pledgor and Party D

 

出质方和丁方特此在本协议签署之日向质权方共同及分别陈述和保证如下: 

As of the execution date of this Agreement, Pledgor and Party D hereby jointly and severally represent and warrant to Pledgee that:

 

5.1 出质方是质押股权唯一的合法所有人。

Pledgor is the sole legal and beneficial owner of the Equity Interest.

 

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5.2 质权方有权以本协议规定的方式处分并转让质押股权。

Pledgee shall have the right to dispose of and transfer the Equity Interest in accordance with the provisions set forth in this Agreement.

 

5.3 除本质权之外,出质方未在质押股权上设置任何其他质押权利或其他担保权益。

Except for the Pledge, Pledgor has not placed any security interest or other encumbrance on the Equity Interest.

 

5.4 出质方和丁方已经取得第三方和政府部门的同意及批准(若需)以签署,交付和履行本协议。

Pledgor and Party D have obtained any and all approvals and consents from applicable government authorities and third parties (if required) for execution, delivery and performance of this Agreement.

 

5.5 本协议的签署、交付和履行均不会:(i)导致违反任何有关的中国法律;(ii)与丁方章程或其他组织文件相抵触;(iii)导致违反其是一方或对其有约束力的任何合同或文件,或构成其是一方或对其有约束力的任何合同或文件项下的违约;(iv)导致违反有关向任何一方颁发的任何许可或批准的授予和(或)继续有效的任何条件;或(v)导致向任何一方颁发的任何许可或批准中止或被撤销或附加条件。

The execution, delivery and performance of this Agreement will not: (i) violate any relevant PRC laws; (ii) conflict with Party D’s articles of association or other constitutional documents; (iii) result in any breach of or constitute any default under any contract or instrument to which it is a party or by which it is otherwise bound; (iv) result in any violation of any condition for the grant and/or maintenance of any permit or approval granted to any Party; or (v) cause any permit or approval granted to any Party to be suspended, cancelled or attached with additional conditions.

 

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6. 出质方和丁方的承诺

Covenants of Pledgor and Party D

 

6.1 在本协议存续期间,出质方和丁方共同和分别向质权方承诺:

Pledgor and Party D hereby jointly and severally covenant to the Pledgee:

 

6.1.1 除履行交易文件外,未经质权方事先书面同意,出质方不得转让质押股权或其任何部分,不得在质押股权上设立或允许存在任何担保或其他债务负担;

Pledgor shall not transfer the Equity Interest, place or permit the existence of any security interest or other encumbrance on the Equity Interest or any portion thereof, without the prior written consent of Pledgee, except for the performance of the Transaction Documents;

 

6.1.2 出质方和丁方遵守并执行所有有关权利质押的法律、法规的规定,在收到有关主管机关就质权发出或制定的通知、指令或建议时,于五日内向质权方出示上述通知、指令或建议,同时遵守上述通知、指令或建议,或按照质权方的合理要求或经质权方同意就上述事宜提出反对意见和陈述;

Pledgor and Party D shall comply with the provisions of all laws and regulations applicable to the pledge of rights, and within 5 days of receipt of any notice, order or recommendation issued or prepared by relevant competent authorities regarding the Pledge, shall present the aforementioned notice, order or recommendation to Pledgee, and shall comply with the aforementioned notice, order or recommendation or submit objections and representations with respect to the aforementioned matters upon Pledgee's reasonable request or upon consent of Pledgee;

 

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6.1.3 出质方和丁方将任何可能导致对质押股权或其任何部分的权利产生影响的事件或收到的通知,以及可能改变出质方在本协议中的任何保证、义务或对出质方履行其在本协议中义务可能产生影响的任何事件或收到的通知及时通知质权方。

Pledgor and Party D shall promptly notify Pledgee of any event or notice received by Pledgor that may have an impact on Pledgee's rights to the Equity Interest or any portion thereof, as well as any event or notice received by Pledgor that may have an impact on any guarantees and other obligations of Pledgor arising out of this Agreement.

 

6.1.4 丁方应在其经营期限届满前三(3)个月内办理完成延长经营期限的登记手续,以使本协议的效力得以持续。

Party D shall complete the registration procedures for extension of the term of operation within three (3) months prior to the expiration of such term to maintain the validity of this Agreement.

 

6.2 出质方同意,质权方按本协议条款取得的对质权享有的权利,不应受到出质方或出质方的继承人或出质方之委托人或任何其他人通过法律程序的中断或妨害。

Pledgor agrees that the rights acquired by Pledgee in accordance with this Agreement with respect to the Pledge shall not be interrupted or harmed by Pledgor or any heirs or representatives of Pledgor or any other persons through any legal proceedings.

 

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6.3 出质方向质权方保证,为保护或完善本协议对合同义务和担保债务的担保,出质方将诚实签署、并促使其他与质权有利害关系的当事人签署质权方所要求的所有的权利证书、契约和/或履行并促使其他有利害关系的当事人履行质权方所要求的行为,并为本协议赋予质权方之权利、授权的行使提供便利,与质权方或其指定的人(自然人/法人)签署所有的有关质押股权所有权的文件,并在合理期间内向质权方提供其认为需要的所有的有关质权的通知、命令及决定。

To protect or perfect the security interest granted by this Agreement for the Contract Obligation and Secured Indebtedness, Pledgor hereby undertakes to execute in good faith and to cause other parties who have an interest in the Pledge to execute all certificates, agreements, deeds and/or covenants required by Pledgee. Pledgor also undertakes to perform and to cause other parties who have an interest in the Pledge to perform actions required by Pledgee, to facilitate the exercise by Pledgee of its rights and authority granted thereto by this Agreement, and to enter into all relevant documents regarding ownership of Equity Interest with Pledgee or designee(s) of Pledgee (natural persons/legal persons). Pledgor undertakes to provide Pledgee within a reasonable time with all notices, orders and decisions regarding the Pledge that are required by Pledgee.

 

6.4 出质方向质权方保证,出质方将遵守、履行本协议项下所有的保证、承诺、协议、陈述及条件。如出质方不履行或不完全履行其保证、承诺、协议、陈述及条件,出质方应赔偿质权方由此遭受的一切损失。

Pledgor hereby undertakes to comply with and perform all guarantees, promises, agreements, representations and conditions under this Agreement. In the event of failure or partial performance of its guarantees, promises, agreements, representations and conditions, Pledgor shall indemnify Pledgee for all losses resulting therefrom.

 

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7. 违约事件

Event of Breach

 

7.1 下列事项均被视为违约事件:

The following circumstances shall be deemed Event of Default:

 

7.1.1 出质方对其在交易文件及/或本协议项下的任何义务的违反;

Pledgor’s any breach to any obligations under the Transaction Documents and/or this Agreement.

 

7.1.2 丁方对其在交易文件及/或本协议项下的任何义务的违反。

Party D’s any breach to any obligations under the Transaction Documents and/or this Agreement.

 

7.2 如知道或发现本第7.1条所述的任何事项或可能导致上述事项的事件已经发生,出质方和丁方应立即以书面形式通知质权方。

Upon notice or discovery of the occurrence of any circumstances or event that may lead to the aforementioned circumstances described in Section 7.1, Pledgor and Party D shall immediately notify Pledgee in writing accordingly.

 

7.3 除非第7.1条下的违约事件在质权方向出质方和/或丁方发出要求其修补此违约行为通知后的二十(20)天之内已经按质权方要求获得救济,质权方在其后的任何时间,可向出质方发出书面违约通知,要求依据第8条行使质权。

Unless an Event of Default set forth in this Section 7.1 has been successfully resolved to Pledgee's satisfaction within twenty (20) days after the Pledgee and /or Party D delivers a notice to the Pledgor requesting ratification of such Event of Default, Pledgee may issue a Notice of Default to Pledgor in writing at any time thereafter, demanding the Pledgor to immediately exercise the Pledge in accordance with the provisions of Article 8 of this Agreement.

 

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8. 质权的行使

Exercise of Pledge

 

8.1 在质权方行使其质押权利时,质权方可以向出质方发出书面违约通知。

Pledgee may issue a Notice of Default to Pledgor when exercising the Pledge.

 

8.2 受限于第7.3条的规定,质权方可在按第8.1条发出违约通知之后的任何时间里对质权行使处分的权利。质权方决定行使处分质权的权利时,出质方即不再拥有任何与质押股权有关的权利和利益。

Subject to the provisions of Section 7.3, Pledgee may exercise the right to enforce the Pledge at any time after the issuance of the Notice of Default in accordance with Section 8.1. Once Pledgee elects to enforce the Pledge, Pledgor shall cease to be entitled to any rights or interests associated with the Equity Interest.

 

8.3 质权方有权在根据第8.1条发出违约通知后,行使其根据中国法律、交易文件及本协议条款而享有的全部违约救济权利,包括(但不限于)以质押股权折价或以拍卖、变卖质押股权所得的价款以优先受偿。质权方对其合理行使该等权利和权力造成的任何损失不负责任。

After Pledgee issues a Notice of Default Pledgee in accordance with Section 8.1, Pledgee may exercise any remedy measure under applicable PRC laws, the Transaction Documents and this Agreement, including but not limited to be compensated in priority by the conversion of the Equity Pledge or from the proceeds from auction or sale of the Equity Interest. The Pledgee shall have no liability for any loss incurred by its duly exercise of such rights and powers.

 

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8.4 质权方行使质权获得的款项,应优先支付因处分质押股权而应缴的税费和向质权方履行合同义务及偿还担保债务。扣除上述款项后如有余款,质权方应将余款交还出质方或根据有关法律、法规对该款项享有权利的其他人或者向出质方所在地公证机关提存(由此所生之任何费用全部由出质方承担);在中国法律允许的情况下,出质方应将上述款项无条件地赠予质权方或质权方指定的人。

The proceeds from exercise of the Pledge by Pledgee shall be used to pay for tax and expenses incurred by disposing the Equity Interest and perform Contract Obligations and pay the Secured Indebtedness prior and in preference to any other payment. After the payment of the aforementioned amounts, the remaining balance shall be returned to Pledgor or any other person who have rights to such balance under applicable laws or be deposited to the local notary public office where Pledgor resides, with all expense incurred being borne by Pledgor. To the extent permitted under applicable PRC laws, Pledgor shall unconditionally give the aforementioned proceeds to Pledgee or any other person designated by Pledgee.

 

8.5 质权方有权选择同时或先后行使其享有的任何违约救济,质权方在行使本协议项下的以质押股权折价或拍卖、变卖质押股权所得款项优先受偿的权利前,无须先行使其他违约救济。

Pledgee has the right to exercise any remedy measure available simultaneously or in any order. Pledgee may exercise the right to be compensated from in priority by the conversion of the Equity Pledge or from the proceeds from auction or sale of the Equity Interest under this Agreement, without exercising any other remedy measure first.

 

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8.6 质权方有权以书面方式指定其律师或其他代理人行使其质权,出质方或丁方对此均不得提出异议。

Pledgee is entitled to designate an attorney or other representatives to exercise the Pledge on its behalf and Pledgor and Party D shall not raise any objection to such exercise.

 

8.7 质权方依照本协议处分质权时,出质方和丁方应予以必要的协助,以使质权方实现其质权。

When Pledgee disposes of the Pledge in accordance with this Agreement, Pledgor and Party D shall provide necessary assistance to enable Pledgee to enforce the Pledge in accordance with this Agreement.

 

9. 违约责任

Breach of Agreement

 

9.1 若出质方或丁方实质性违反本协议项下所作的任何一项约定,质权方有权终止本协议并要求违约方给予损害赔偿;本第9条不应妨碍质权方在本协议下的任何其他权利;

If Pledgor or Party D conducts any material breach of any term of this Agreement, Pledgee shall have right to terminate this Agreement and require Pledgor or Party D to compensate all damages; this Section 9 shall not prejudice any other rights of Pledgee herein;

 

9.2 若质权方违反本协议项下所作的任何一项约定,除非法律另有规定,出质方或丁方在任何情况均无任何权利终止或解除本协议。

If Pledgee conducts any breach of any term of this Agreement, Pledgor or Party D shall not terminate this Agreement in any event unless otherwise required by applicable laws.

 

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10. 转让

Assignment

 

10.1 除非经质权方事先同意,出质方无权赠予或转让其在本协议项下的权利义务。

Without Pledgee's prior written consent, Pledgor shall not have the right to assign or delegate its rights and obligations under this Agreement.

 

10.2 本协议对出质方及其继任人和经许可的受让人均有约束力,并且对质权方及每一继任人和受让人有效。

This Agreement shall be binding on Pledgor and its successors and permitted assigns, and shall be valid with respect to Pledgee and each of its successors and assigns.

 

10.3 质权方可以在任何时候将其在交易文件中的所有或任何权利和义务转让给其指定的人,在这种情况下,受让人应享有和承担本协议项下质权方享有和承担的权利和义务,如同其作为原协议方应享有和承担的一样。质权方转让业务合作协议项下的权利和义务时,应质权方要求,出质方和/或丁方应就此转让签署有关协议和/或文件。

At any time, Pledgee may assign any and all of its rights and obligations under the Transaction Documents to its designee(s), in which case the assigns shall have the rights and obligations of Pledgee under this Agreement, as if it were the original party to this Agreement. When the Pledgee assigns the rights and obligations under the Business Cooperation Agreement, upon Pledgee's request, Pledgor and/or Party D shall execute relevant agreements or other documents relating to such assignment.

 

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10.4 因转让所导致的质权方变更后,应质权方要求,出质方和/或丁方应与新的质权方签订一份内容与本协议一致的新质押协议,并在相应的工商行政管理机关进行登记。

In the event of a change in Pledgee due to an assignment, Pledgor and/or Party D shall, at the request of Pledgee, execute a new pledge agreement with the new pledgee on the same terms and conditions as this Agreement, and register the same with the relevant AIC.

 

10.5 出质方和丁方应严格遵守本协议和各方单独或共同签署的其他有关协议的规定,包括交易文件,履行交易文件项下的义务,并不进行任何足以影响协议的有效性和可强制执行性的作为/不作为。除非根据质权方的书面指示,出质方不得行使其对质押股权还留存的权利。

Pledgor and Party D shall strictly abide by the provisions of this Agreement and other contracts jointly or separately executed by the Parties hereto or any of them, including the Transaction Documents, perform the obligations hereunder and thereunder, and refrain from any action/omission that may affect the effectiveness and enforceability thereof. Any remaining rights of Pledgor with respect to the Equity Interest pledged hereunder shall not be exercised by Pledgor except in accordance with the written instructions of Pledgee.

 

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11. 终止

Termination

 

11.1 在出质方和丁方充分、完全地履行了所有的合同义务和清偿了所有的担保债务后,质权方应根据出质方的要求,在尽早合理可行的时间内,解除本协议下的质押股权的质押,并配合出质方办理注销在丁方的股东名册内所作的股权质押的登记以及办理在相关工商行政管理部门的质押注销登记。

Upon the fulfillment of all Contract Obligation and the full payment of all Secured Indebtedness by Pledgor and Party D, Pledgee shall release the Pledge under this Agreement upon Pledgor’s request as soon as reasonably practicable and shall assist Pledgor to de-register the Pledge from the shareholders’ register of Party D and with relevant PRC local administration for industry and commerce.

 

11.2 本协议第9、13、14条和本第11.2条的规定在本协议终止后继续有效。

The provisions under Sections 9, 13, 14 and 11.2 herein of this Agreement shall survive the expiration or termination of this Agreement.

 

12. 手续费及其他费用

Handling Fees and Other Expenses

 

一切与本协议有关的费用及实际开支,其中包括但不限于法律费用、工本费、印花税以及任何其他税收、费用等全部由丁方承担。 

All fees and out of pocket expenses relating to this Agreement, including but not limited to legal costs, costs of production, stamp tax and any other taxes and fees, shall be borne by Party D.

 

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13. 保密责任

Confidentiality

 

各方承认及确定有关本协议、本协议内容,以及彼此就准备或履行本协议而交换的任何口头或书面资料均被视为保密信息。各方应当对所有该等保密信息予以保密,而在未得到另一方书面同意前,不得向任何第三者披露任何保密信息,惟下列信息除外:(a)公众人士知悉或将会知悉的任何信息(惟并非由接受保密信息之一方擅自向公众披露);(b)根据适用法律法规、股票交易规则、或政府部门或法院的命令而所需披露之任何信息;或(c)由任何一方就本协议所述交易而需向其股东、投资者、法律或财务顾问披露之信息,而该股东、法律或财务顾问亦需遵守与本条款相类似之保密责任。如任何一方工作人员或聘请机构的泄密均视为该方的泄密,需依本协议承担违约责任。无论本协议以任何理由终止,本条款仍然生效。 

The Parties acknowledge that the existence and the terms of this Agreement and any oral or written information exchanged between the Parties in connection with the preparation and performance this Agreement are regarded as confidential information. Each Party shall maintain confidentiality of all such confidential information, and without obtaining the written consent of the other Party, it shall not disclose any relevant confidential information to any third parties, except for the information that: (a) is or will be in the public domain (other than through the receiving Party’s unauthorized disclosure); (b) is under the obligation to be disclosed pursuant to the applicable laws or regulations, rules of any stock exchange, or orders of the court or other government authorities; or (c) is required to be disclosed by any Party to its shareholders, investors, legal counsels or financial advisors regarding the transaction contemplated hereunder, provided that such shareholders, investors, legal counsels or financial advisors shall be bound by the confidentiality obligations similar to those set forth in this Section. Disclosure of any confidential information by the staff members or agencies hired by any Party shall be deemed disclosure of such confidential information by such Party, which Party shall be held liable for breach of this Agreement. This Section shall survive the termination of this Agreement for any reason.

 

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14. 适用法律和争议的解决

Governing Law and Resolution of Disputes

 

14.1 本协议的订立、效力、解释、履行、修改和终止以及争议的解决均适用中国法律。

The execution, effectiveness, construction, performance, amendment and termination of this Agreement and the resolution of disputes hereunder shall be governed by the laws of China.

 

14.2 因解释和履行本协议而发生的任何争议,本协议各方应首先通过友好协商的方式加以解决。如果在一方向其他方发出要求协商解决的书面通知后30天之内争议仍然得不到解决,则任何一方均可将有关争议提交给中国国际经济贸易仲裁委员会,由该会按照其仲裁规则仲裁解决。仲裁应在北京进行,使用之语言为中文。仲裁裁决是终局性的,对各方均有约束力。

In the event of any dispute with respect to the construction and performance of this Agreement, the Parties shall first resolve the dispute through friendly negotiations. In the event the Parties fail to reach an agreement on the dispute within 30 days after either Party's request to the other Parties for resolution of the dispute through negotiations, either Party may submit the relevant dispute to the China International Economic and Trade Arbitration Commission for arbitration, in accordance with its Arbitration Rules. The arbitration shall be conducted in Beijing, and the language used in arbitration shall be Chinese. The arbitration award shall be final and binding on all Parties.

 

14.3 因解释和履行本协议而发生任何争议或任何争议正在进行仲裁时,除争议的事项外,本协议各方仍应继续行使各自在本协议项下的其他权利并履行各自在本协议项下的其他义务。

Upon the occurrence of any disputes arising from the construction and performance of this Agreement or during the pending arbitration of any dispute, except for the matters under dispute, the Parties to this Agreement shall continue to exercise their respective rights under this Agreement and perform their respective obligations under this Agreement.

 

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15. 通知

Notices

 

15.1 本协议项下要求或发出的所有通知和其他通信应通过专人递送、挂号邮寄、邮资预付或商业快递服务或传真的方式发到该方下列地址。每一通知还应再以电子邮件送达。该等通知视为有效送达的日期按如下方式确定:

All notices and other communications required or permitted to be given pursuant to this Agreement shall be delivered personally or sent by registered mail, postage prepaid, by a commercial courier service or by facsimile transmission to the address of such party set forth below. A confirmation copy of each notice shall also be sent by E-mail. The dates on which notices shall be deemed to have been effectively given shall be determined as follows:

 

15.2 通知如果是以专人递送、快递服务或挂号邮寄、邮资预付发出的,则以于设定为通知的地址在发送或拒收之日为有效送达日。

Notices given by personal delivery, by courier service or by registered mail, postage prepaid, shall be deemed effectively given on the date of delivery or refusal at the address specified for notices.

 

15.3 通知如果是以传真发出的,则以成功传送之日为有效送达日(应以自动生成的传送确认信息为证)。

Notices given by facsimile transmission shall be deemed effectively given on the date of successful transmission (as evidenced by an automatically generated confirmation of transmission).

 

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15.4 为通知的目的,各方地址如下:

For the purpose of notices, the addresses of the Parties are as follows:

 

  甲方: 北京华夏大地远程教育网络服务有限公司
  Party A: Huaxia Dadi Distance Learning Services Co., Ltd.
     
  地址: 北京市经济技术开发区地盛北街 1 号院 40 号楼 505
  Address: Room 505, Building No.40, No.1 Disheng North Street, Beijing Economic-Technological Development Area
     
  收件人: 于洋
  Attn: Yang Yu
     
  电话: +86 138 0125 9058
  Phone: +86 138 0125 9058
     
  传真:

+86-10-85171378

  Facsimile: +86-10-85171378
     
  乙方: 于洋
  Party B: Yang Yu
     
  地址: 中国北京市海淀区西直门北大街 45 1 号楼 1203
  Address: Room 1203, Building 1, No. 45, Xizhimen North Avenue, Haidian District, Beijing, China
     
  电话: +86 138 0125 9058
  Phone: +86 138 0125 9058
     
  传真:

+86-10-85171378

  Facsimile: +86-10-85171378

 

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  丙方: 杨兴晖
  Party C: Xinghui Yang
     
  地址: 北京市海淀区清河十九院宿舍 10 2 单元 603
  Address: Room 603, Unit 2, No. 19 Academy Dormitory, Qinghe, Haidian District, Beijing
     
  电话: +86 139 1165 6638
  Phone: +86 139 1165 6638
     
  传真:

+86-10-58022039

  Facsimile:

+86-10-58022039

     
  丁方: 北京华夏大地数码信息技术有限公司
  Party D: Huaxia Dadi Digital Information Technology Co., Ltd.
     
  地址: 北京市北京经济技术开发区地盛北街 1 号院 40 号楼 503A
  Address: Room 503A, Building No.40, No.1 Disheng North Street, Beijing Economic and Technological Development Zone, Beijing, China
     
  收件人: 杨兴晖
  Attn: Xinghui Yang
     
  电话: +86 139 1165 6638
  Phone: +86 139 1165 6638
     
  传真:

+86-10-58022039

  Facsimile:

+86-10-58022039

 

15.5 任何一方可按本条规定随时给其他各方发出通知来改变其接收通知的地址。

Any Party may at any time change its address for notices by a notice delivered to the other Parties in accordance with the terms hereof.

 

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16. 分割性

Severability

 

如果本协议有任何一条或多条规定根据任何法律或法规在任何方面被裁定为无效、不合法或不可执行,本协议其余规定的有效性、合法性或可执行性不应因此在任何方面受到影响或损害。各方应通过诚意磋商,争取以法律许可以及各方期望的最大限度内有效的规定取代那些无效、不合法或不可执行的规定,而该等有效的规定所产生的经济效果应尽可能与那些无效、不合法或不能强制执行的规定所产生的经济效果相似。 

In the event that one or several of the provisions of this Contract are found to be invalid, illegal or unenforceable in any aspect in accordance with any laws or regulations, the validity, legality or enforceability of the remaining provisions of this Contract shall not be affected or compromised in any respect. The Parties shall strive in good faith to replace such invalid, illegal or unenforceable provisions with effective provisions that accomplish to the greatest extent permitted by law and the intentions of the Parties, and the economic effect of such effective provisions shall be as close as possible to the economic effect of those invalid, illegal or unenforceable provisions.

 

17. 附件

Attachments

 

本协议所列附件,为本协议不可分割的组成部分。 

The attachments set forth herein shall be an integral part of this Agreement.

 

18. 生效

Effectiveness

 

18.1 本协议自各方正式签署之日起生效。

This Agreement shall become effective upon execution by the Parties.

 

18.2 本协议的任何修改、补充或变更,均须采用书面形式,经各方签字或盖章并按规定办理政府登记(如需)后生效。

Any amendments, changes and supplements to this Agreement shall be in writing and shall become effective upon completion of the governmental filing procedures (if applicable) after the affixation of the signatures or seals of the Parties.

 

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19. 语言和副本

Language and Counterparts

 

本协议以中文和英文书就,一式陆份,质权方、出质方和丁方各持一份,剩余一份用于登记,各份具有同等效力;中英文版本如有冲突,应以中文版为准。 

This Agreement is written in Chinese and English in six copies. Pledgor, Pledgee and Party D shall hold one copy respectively and the other copy shall be used for registration. Each copy of this Agreement shall have equal validity. In case there is any conflict between the Chinese version and the English version, the Chinese version shall prevail.

 

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The Remainder of this page is intentionally left blank

 

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有鉴于此,各方已使得经其授权的代表于文首所述日期签署了本股权质押协议并即生效,以昭信守。

IN WITNESS WHEREOF, the Parties have caused their authorized representatives to execute this Equity Interest Pledge Agreement as of the date first above written.

 

甲方: 北京华夏大地远程教育网络服务有限公司
Party A: Huaxia Dadi Distance Learning Services Co., Ltd.
     
签字:    
By: /s/ Yang Yu  
姓名: 于洋  
Name: Yang Yu  
职位: 法定代表人  
Title: Legal Representative  
     
乙方: 于洋  
Party B: Yang Yu  
     
签字:    
By: /s/ Yang Yu  

 

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丙方: 杨兴晖  
Party C: Xinghui Yang  
     
签字:    
By: /s/ Xinghui Yang  
     
丁方: 北京华夏大地数码信息技术有限公司  
Party D: Huaxia Dadi Digital Information Technology Co., Ltd.
     
签字:    
By: /s/ Yang Yu  
姓名: 于洋  
Name: Yang Yu  
职位: 法定代表人  
Title: Legal Representative  

 

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附件: 

Attachments:

 

1. 独家业务合作协议;

Exclusive Business Cooperation Agreement;

 

2. 独家购买权协议;

Exclusive Option Agreement;

 

3. 授权委托书。

Power of Attorney.

 

 

 

 

 

Exhibit 10.4

 

授权委托书

Form of Power of Attorney

 

本人, _______,中国公民,身份证号码为__________,在本授权委托书签署之日拥有北京华夏大地数码信息技术有限公司(“ 内资公司” )___%的股权。就本人在内资公司现时和将来持有的股权(“ 本人股权 ”),本人特此不可撤销地授权北京华夏大地远程教育网络服务有限公司(“ 独资公司 ”)在本授权委托书的有效期内行使如下权利:

I, ________, a Chinese citizen with Chinese Identification Card No.: __________, and a holder of ___% of the entire registered capital in Huaxia Dadi Digital Information Technology Co., Ltd. ("Domestic Company") as of the date when the Power of Attorney is executed, hereby irrevocably authorize Huaxia Dadi Distance Learning Services Co., Ltd. ("WFOE") to exercise the following rights relating to all equity interests held by me now and in the future (“My Shareholding”) during the term of this Power of Attorney:

 

授权独资公司作为本人唯一的排他的代理人就有关本人股权的事宜全权代表本人行使包括但不限于如下的权利:1)参加内资公司的股东会;2)行使按照法律和内资公司章程规定本人所享有的全部股东权和股东表决权,包括但不限于出售或转让或质押或处置本人股权的全部或任何一部分;以及3)作为本人的授权代表指定和任命内资公司的法定代表人、董事、监事、总经理以及其他高级管理人员等。

WFOE is hereby authorized to act on behalf of myself as my exclusive agent and attorney with respect to all matters concerning My Shareholding, including without limitation to: 1) attend shareholders' meetings of Domestic Company; 2) exercise all the shareholder's rights and shareholder's voting rights I am entitled to under the laws of China and Domestic Company's Articles of Association, including but not limited to the sale or transfer or pledge or disposition of My Shareholding in part or in whole; and 3) designate and appoint on behalf of myself the legal representative, the directors, supervisors, the chief executive officer and other senior management members of Domestic Company.

 

独资公司将有权代表本人签署本人与独资公司、内资公司于2017年8月16日签署的独家购买权协议以及本人与独资公司、内资公司于2017年8月16日签署的股权质押协议(包括上述文件的修改、修订或重述,合称“交易文件”)中约定的需由本人签署的所有文件,如期履行交易文件,该权利的行使将不对本授权形成任何限制。

Without limiting the generality of the powers granted hereunder, WFOE shall have the power and authority to, on behalf of myself, execute all the documents I shall sign as stipulated in Exclusive Option Agreement entered into by and among I, WFOE and Domestic Company on August 16, 2017 and the Equity Pledge Agreement entered into by and among I, WFOE and Domestic Company on August 16, 2017 (including any modification, amendment and restatement thereto, collectively the “Transaction Documents”), and perform the terms of the Transaction Documents.

 

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独资公司就本人股权的一切行为均视为本人的行为,签署的一切文件均视为本人签署,本人会予以承认。

All the actions associated with My Shareholding conducted by WFOE shall be deemed as my own actions, and all the documents related to My Shareholding executed by WFOE shall be deemed to be executed by me. I hereby acknowledge and ratify those actions and/or documents by WFOE.

 

独资公司有转委托权,可以就上述事项的办理自行再委托其他人或单位而不必事先通知本人或获得本人的同意。如果中国法律有要求,WFOE应指派中国公民行使上述权利。

WFOE is entitled to re-authorize or assign its rights related to the aforesaid matters to any other person or entity at its own discretion and without giving prior notice to me or obtaining my consent. If required by PRC laws, WFOE shall designate a PRC citizen to exercise the aforementioned rights.

 

在本人为内资公司的股东期间,本授权委托书不可撤销并持续有效,自授权委托书签署之日起算。

This Power of Attorney is coupled with an interest and shall be irrevocable and continuously valid from the date of execution of this Power of Attorney, so long as I am a shareholder of Domestic Company.

 

本授权委托书期间,本人特此放弃已经通过本授权委托书授权给独资公司的与本人股权有关的所有权利,不再自行行使该等权利。

During the term of this Power of Attorney, I hereby waive all the rights associated with My Shareholding, which have been authorized to WFOE through this Power of Attorney, and shall not exercise such rights by myself.

 

本授权委托书以中文和英文书就,中英文版本如有冲突,应以中文版为准。

This Power of Attorney is written in Chinese and English; in case there is any conflict between the Chinese version and the English version, the Chinese version shall prevail.

 

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The Remainder of this page is intentionally left blank

 

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股东 Shareholder  
     
签署:    
By:                                         
2017 ___ __  
_______________, 2017  
   
接受:  
Accepted by:  

 

北京华夏大地远程教育网络服务有限公司(盖章)  
Huaxia Dadi Distance Learning Services Co., Ltd.
     
签字:    
By:                                                              
姓名: 于洋  
Name: Yang Yu  
职位: 法定代表人  
Title: Legal Representative  

 

承认:

Acknowledged by:

 

北京华夏大地数码信息技术有限公司(盖章)  
Huaxia Dadi Digital Information Technology Co., Ltd.
     
签字:    
By:                                                              
姓名: 于洋  
Name: Yang Yu  
职位: 法定代表人  
Title: Legal Representative  

 

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Exhibit 10.5

 

北京经开·经开大厦 租赁合同

 

Contract on Lease of Jingkai Building of Beijing Jingkai

 

租赁合同编号:( )租字( )初字第( )号

 

Lease Contract No.: ( ) Zu Zi ( ) Chu Zi No. ( )

 

甲方(出租人):北京经开工大投资管理有限公司

Party A (lessor): Beijing Jingkai Gongda Investment Management Co., Ltd.

 

住所:北京经济技术开发区地盛北街1号院2号楼

Domicile: Building 2, Couryard 1, North Disheng Street, Beijing Economic and Technological Development Area

 

邮编: 100176

Zip code: 100176

 

电话: 67873388

Tel: 67873388

 

传真: 67871204

Fax: 67871204

 

法定代表人:周世义

Legal Representative: Zhou Shiyi

 

乙方(承租人):北京华夏大地远程教育网络服务有限公司

Party B (lessee): Beijing Huaxia Dadi Distance Learning Services Co., Ltd.

 

住所:北京经济技术开发区地盛北街1号院21号楼

Domicile: Building 21, Couryard 1, North Disheng Street, Beijing Economic and Technological Development Area

 

邮编: 100176

Zip code: 100176

 

电话: 57925024

Tel: 57925024

 

传真: 57925056

Fax: 57925056

 

法定代表人:于洋

Legal Representative: Yu Yang

 

鉴于:

Whereas:

 

1、出租人甲方是按中华人民共和国的法律规定,拥有中国北京经济技术开发区地盛北街1号院40号楼502A、503A、505房屋的所有权,有权按照法律的规定和自己的意愿,将以上房屋出租给他人并取得相应的收益;

1. Party A, the lessor, has the ownership of Houses 502A, 503A and 505 at Building 40, Courtyard 1, North Disheng Street, Beijing Economic and Technological Development Area ("Leased Houses") under laws of the People's Republic of China, and has the right to lease such houses to others for gains according to laws and at its will.

 

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2、承租人乙方是按照中华人民共和国的法律规定,经工商行政管理部门注册登记,具有合法经营权的独立法人,具备民事权利能力和民事行为能力;在按本合同项下的约定向甲方支付了乙方应缴的租金和费用后,乙方有独立自主地在租赁房屋内从事合法经营活动的权利。

2. Party B, the lessee, registered with the administrative department for industry and commerce under laws of the People's Republic of China, is an independent legal person with legal management right, and has the capacity for civil rights and the capacity for civil conduct; After paying to Party A the rental and fees payable by Party B under agreement hereunder, Party B shall have the right to independently engage in legal operating activities in the Leased Houses.

 

3、乙方现为办公需要,需租用甲方所有的经开大厦园区的房屋;

3. Party B needs to rent houses owned by Party A in the Jingkai Building Park for office purpose.

 

现甲、乙双方在平等自愿、协商一致的基础上,就乙方租赁甲方所有的房屋的有关事宜达成如下条款,以资共同遵守。

Now, therefore, Party A and Party B have reached, based on equality and willingness and consensus consultation, the following terms in respect of matters relating to Party B's rent of houses owned by Party A, for mutual compliance.

 

第一条 租赁房屋的基本情况

Article 1 General Information of Leased Houses

 

1.1甲方同意按照本合同的约定向乙方出租,乙方同意按照本合同的约定向甲方承租位于北京经济技术开发区地盛北街1号40号楼的房屋。该房屋土地用途为综合,房屋性质为:办公具体租赁房屋的栋号见本会同附件一。

1.1 Party A agrees to rent to Party B and Party B agrees to rent from Party A, under this Contract, houses at Building 40, Courtyard 1, North Disheng Street, Beijing Economic and Technological Development Area. The houses are of comprehensive land use, and of the nature of: office purpose. See Appendix I to this Contract for the specific number of building where the Leased Houses are located.

 

签订本合同前,乙方已明确知悉租赁房屋的权属情况及抵押情况,并不持异议。

Before signing this Contract, Party B has been clearly aware of the ownership and mortgage situation of the Leased Houses, and has no objection thereto.

 

1.2租赁房屋的建筑面积为600平方米。为避免将来发生争议,若租赁房屋的建筑面积与任何人士、组织或机关测量的建筑面积、租用面积或其它算法的面积有出入,双方同意不对租赁房屋的各种面积的算法进行比较,仍以本合同列明的租用建筑面积为准。

1.2 The construction area of Leased Houses is 600 square meters. For avoidance of future disputes, in case of any difference between the construction area of the Leased Houses and the construction area, lettable area or the area under other arithmetic as measured by any person, organization or organ, the Parties agree not to compare all area arithmetic for the Leased Houses, and will apply the lettable area set forth in this Contract.

 

第二条 租赁房屋的用途

Article 2 Use of Leased Houses

 

2.1乙方向甲方承诺,本合同项下租赁房屋将用于:办公。乙方将租赁房屋作为上述用途经营需办理相关证照时,甲方应予以协助。

2.1 Party B undertakes to Party A that the Leased Houses hereunder will be used for: office purpose. When Party B needs to handle the relevant permits or licenses for using the Leased Houses for the said purpose, Party A shall give assistance.

 

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2.2乙方进行经营活动必须遵守国家法律、法规、政府相关政策和甲方对租赁房屋管理的有关规定。非经甲方书面同意,以及按规定须经政府有关部门审批而未核准前,乙方不得擅自从事和改变本合同约定的使用用途。合同期内乙方若有违反本条款的情况,甲方有权立即解除本合同,乙方须向甲方赔偿其蒙受的一切损失。 

2.2 Party B shall engage in operating activities subject to state laws and regulations, the relevant government policies and Party A's rules on the management of the Leased Houses. Party B may not engage in and change the use agreed herein without Party A's written consent and before approval from the relevant governmental departments to which the engagement or change is subject is obtained. Party A has the right to immediately discharge this Contract if Party B violates this article during the Contract Term, and Party B shall compensate Party A for all losses suffered by Party A.

 

2.3乙方在租赁房屋内、外的所有布置,包括广告宣传、灯箱、招牌标记、装饰、旗帜、海报、橱窗和货架的陈列等均须事先征得相关政府职能部门的认可及完全符合相关管理机构设定的规格和标准。

2.3 All layout arranged by Party B inside and outside the Leased Houses, including advertising, light boxes, signboard marks, decoration, flags, posters, showcase and shelves display, shall be subject to prior consent of the relevant governmental functional departments approved and fully comply with the specifications and standards set by the relevant management authorities.

 

2.4非经甲方书面特别允许,不得使用甲方的名称或其公开标识。

2.4 Party B shall not use the name or public identification of Party A unless specially permitted by Party A in writing.

 

第三条 租赁期限

Article 3 Lease Term

 

3.1租赁房屋的承租期为5年,租期自2016年9月1日起至2021年8月31日。

3.1 The lease term of Leased Houses is five years from September 1, 2016 to August 31, 2021.

 

3.2甲方给予乙方2个月的期限(即2016年7月1日至2016年8月31日)作为乙方进行租赁房屋装修改造期(下称“装修期”)。装修期内乙方无需支付租金,乙方应缴纳除租金外的本合同约定的与使用租赁房屋有关的其他费用。

3.2 Party A will give Party B a period of two months (from July 1, 2016 to August 31, 2016) for Party B's decoration and renovation of the Leased Houses (hereinafter referred to as "Decoration Period"). Party B needs not to pay rental during the Decoration Period. Party B shall pay fees relating to the use of Leased Houses as agreed herein other than rental.

 

3.3 租赁期满,乙方如需继续租赁的,享有优先续租权,但乙方应在租赁期限届满前3个月前向甲方提出书面续租的申请,甲、乙双方在此基础上签订《续租合同》或新的《租赁合同》。若乙方未能在前述期限内向甲方提出书面续租要求并且双方在本合同期满前1个月内未能签订《续租合同》或新的《租赁合同》,乙方的续租权将被视为放弃。在此情况下,甲方有权在本合同到期后将本合同项下约定的租赁房屋出租给任何第三方。

3.3 Where Party B needs to renew the lease upon the expiration of the Lease Term, it shall enjoy the priority to renew the lease, provided, however, that Party B shall file a written renewal application to Party A three months before the expiration of the Lease Term, and Party A and Party B shall conclude a Contract on Renewal of Lease or a new Lease Contract on this basis. If Party B fails to file a written renewal application with Party A within the said time limit and the Parties fail to conclude a Contract on Renewal of Lease or a new Lease Contract within one month before the expiration of this Contract, Party B's right of renewal shall be deemed as having been waived. In this case, Party A has the right to lease the Leased Houses agreed herein to any third Party After the expiration of this Contract.

 

3.4承租期满前3个月内,甲方有权向未来的租客展示租赁房屋,乙方应予以配合。

3.4 Within three months prior to the expiration of the Lease Term, Party A has the right to show the Leased Houses to future tenants, and Party B shall provide cooperation.

 

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第四条 租赁房屋的交付

Article 4 Delivery of Leased Houses

 

4.1甲方应于2016年7月1日之前向乙方办理租赁房屋的交付手续,视为甲方已履行将租赁房屋依约交付给乙方的义务。自交接日起,由于使用租赁房屋而产生的一切法律责任、费用由乙方承担;由于租赁房屋本身产生的法律责任及费用由甲方承担。

4.1 Party A shall handle formalities for the delivery of Leased Houses with Party B before July 1, 2016, after which Party A shall be deemed as having fulfilled the obligation to deliver the Leased Houses to Party B as agreed. As of the delivery date, any and all legal liability and costs arising from the use of Leased Houses shall be borne by Party B; while the legal liability and costs arising from Leased Houses themselves shall be borne by Party A.

 

4.2租赁房屋交付时,甲方应保证租赁房屋内处于腾空、清洁状态或乙方认可的状态。在甲、乙双方交接租赁房屋前,双方应对租赁房屋及现有装修、附属设施、设备的正常运行状态进行确认并签定确认书,确认书作为本合同附件。

4.2 When the Leased Houses are delivered, Party A shall ensure that the Leased Houses are vacated or clean or in a state approved by Party B. Before handing over the Leased Houses, the Parties shall confirm the normal operation status of the Leased Houses and their existing decoration, ancillary facilities and equipment and sign the confirmation letter as an appendix to this Contract.

 

4.3双方委派代表对租赁房屋进行交接。需约定的有关事宜,由甲、乙双方分别于交付日加以验收及说明,并记载于交接记录。甲、乙双方同意以本合同约定的交接确认书和交接记录(如有)为甲方向乙方交付租赁房屋和本合同解除或提前解除时乙方向甲方返还租赁房屋之验收依据。

4.3 The Parties delegate representatives to hand over the Leased Houses. The relevant matters to be agreed shall be accepted and explained by Party A and Party B respectively on the delivery date and recorded in the hand-over records. The Parties agree to treat the hand-over confirmation letter and hand-over records (if any) as agreed in this Contract as the basis for accepting Party A's delivery of Leased Houses to Party B and Party B's return of Leased Houses to Party A when this Contract is discharged or discharged in advance.

 

4.4若乙方在2016年7月1日过后仍未向甲方办理租赁房屋的交付手续,每逾期一日,乙方需按首季租金的万分之五向甲方支付违约金,装修期及起租日期不予顺延。逾期超过30日的,甲方有权以书面形式通知乙方解除本合同,乙方已交付的租赁定金不予退还。

4.4 If Party B still fails to handle the formalities for delivery of Leased Houses with Party A after July 1, 2016, Party B shall pay to Party A liquidated damages at 0.05% of the rental for the first quarter for each day overdue, and the Decoration Period and date of commencement of lease will not be postponed accordingly. In case of being overdue for over 30 days, Party A shall have the right to notify Party B in writing to discharge this Contract and the rental deposit paid by Party B will not be returned.

 

4.5若甲方未能在2016年7月1日前将符合本合同约定条件的租赁房屋交付给乙方,装修期及起租日期均相应顺延。每逾期一日,甲方需按首季租金的万分之五向乙方支付违约金。逾期超过30日的,乙方有权以书面形式通知甲方解除本合同,甲方需双倍返还乙方的租赁定金。

4.5 If Party A fails to deliver the Leased Houses meeting the conditions agreed herein to Party B before July 1, 2016, the Decoration Period and the date of commencement of lease shall be postponed accordingly. Party A shall party to Party B liquidated damages at 0.05% of the rental for the first quarter for each day overdue. In case of being overdue for over 30 days, Party B shall have the right to notify Party A in writing to discharge this Contract and Party A shall return to Party B two times of the rental deposit paid by Party B.

 

4.5逾期30日后,若甲、乙双方有意继续履行本合同的,则双方可协商再次选定一个日期为交付日,装修期及起租日期均顺延。违约方不承担逾期违约责任,有关交付的规定仍以本合同项下的规定执行。

4.5 If, after the delivery is overdue for 30 days, Party A and Party B intend to continue to perform this Contract, the Parties may select another day as the delivery date through negotiation and the Decoration Period and the date of commencement of lease will be postponed accordingly. The breaching party will not bear the liability for being overdue and the relevant delivery provisions will still be subject to the provisions hereof.

 

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第五条 租金、其他费用及支付方式

Article 5 Rental, Other Costs and Terms of Payment

 

5.1本合同中所涉租金、其他费用均以人民币为报价及支付。乙方应全额承担汇款所发生的银行费用,并支付至甲方指定账号。

5.1 Rental and other costs involved in this Contract shall be quoted and paid in Renminbi. Party B shall bear all bank charges incurred from remittance and pay to Party A's designated account.

 

开户人:北京经开工大投资管理有限公司

Opened by: Beijing Jingkai Gongda Investment Management Co., Ltd.

 

开户行:北京银行经济技术开发区支行

Opening bank: Economic and Technological Development Zone Sub-branch of the Bank of Beijing

 

银行账号: 01090978000120109000643

Bank Account: 01090978000120109000643

 

5.2租赁房屋的租金为:

5.2 The rental for the Leased Houses amounts is:

 

2016年9月1日至2019年8月31日期间为2.5元/平米/天。

RMB2.5/m 2 /day during the period from September 1, 2016 to August 31, 2019.

 

2019年9月1日至2021年8月31日期间为2.6元/平米/天。

RMB2.6/m 2 /day during the period from September 1, 2019 to August 31, 2021.

 

租金包括租赁租金、空调设备系统及附属设施设备的使用费。但不包括物业管理费、租赁房屋设施设备运行所产生的能源费用、租赁房屋除建筑物本身财产险外的其他保险费用,也不包括与使用租赁房屋有关的其它费用。

The rental includes the lease rental and cost of using air conditioning system and ancillary facilities and equipment, but excludes property management fee, energy costs incurred by the operation of facilities and equipment of the Leased Houses, cost of insurance (other than property insurance for the constructions themselves) for the Leased Houses, and other costs relating to the use of the Leased Houses.

 

5.3租金支付方式为按季度支付,先行支付。其中,首笔租金135,000元,乙方应于本合同起租之日前7个工作日内支付给甲方;

5.3 The rental is payable quarterly and shall be paid in advance. Specifically, the first installment of rental is RMB135,000 which shall be paid by Party B to Party A within seven working days before the date of commencement of lease hereunder;

 

2016年9月1日至2019年8月31日期间租金为135,000元/季度:

The rental shall be RMB135,000/quarter during the period from September 1, 2016 to August 31, 2019.

 

2019年9月1日至2021年8月31日期间租金为140,400元/季度:租金应在下一季度提前7天向甲方支付。所述日期恰逢法定休假日的,则应相应提前。逾期支付的,每逾期一日,则乙方需按未付当季度租金的万分之五支付违约金。乙方支付租金的日期以甲方银行实际收款单据之日为准。

The rental will be RMB140,400/quarter during the period from September 1, 2019 to August 31, 2021: The rental shall be paid by Party B to Party A seven days before the beginning of the next quarter. If the said date falls on a legal holiday, the payment shall be made in advance. In case of overdue payment, Party B shall party to Party A liquidated damages at 0.05% of the rental for the corresponding quarter. The date of payment of rental by Party B shall be subject to the date indicated on the actual receipt voucher of Party A's bank.

 

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5.4甲、乙双方约定,于本合同签订之日起15个工作日时,乙方应向甲方缴纳45,000元作为向甲方的租赁保证金,以确保乙方遵守在本合同项下其必须遵守的一切条文规定。在整个租赁期内保证金由甲方保管,甲方无须向乙方支付保证金的利息。乙方应于签订本合同前缴清该保证金,甲方收取保证金后向乙方开具收款凭证。

5.4 Party A and Party B agree that Party B shall pay RMB45,000 to Party A as a lease deposit within 15 working days after this Contract is concluded, to ensure that Party B complies with all provisions that it is subject to under this Contract. The deposit will be kept by Party A during the whole Lease Term and Party A needs not to pay interest on the deposit to Party B. Party B shall pay off such deposit before signing this Contract and Party A shall issue a receipt voucher to Party B after receiving the deposit.

 

5.5如乙方在征得甲方书面许可后将租赁房屋转租,乙方同意将转租承租人应交纳的租金按合同约定的时间和期限直接向甲方交纳,乙方应向甲方出具委托收款授权委托书,由甲方直接向转租承租人开具相关票据。如转租承租人向甲方交纳的租金不足以支付乙方依本合同约定所应承担的租金金额时,乙方需按本合同的约定予以补足。因本款约定而产生的税费及法律责任由乙方自行承担。

5.5 If Party B sub-lease the Leased Houses upon written permit by Party A, Party B agrees to directly pay the rental payable by the sub-lessee according to the date and time limit agreed herein, and Party B shall issue a power of attorney for entrusted collection of payment to Party A which shall directly issue the relevant invoices to the sub-lessee. If the rental paid by the sub-lessee to Party A is insufficient to cover the rental payable by Party B hereunder, Party B shall supplement the difference as agreed herein. Taxes and legal liability arising from the agreement in this article shall be borne by Party B.

 

5.4承租期内租赁房屋运行所需的费用,包括水费、燃气费、电费、电话费、光缆电视收视费、宽带费等等费用,由乙方自行承担。乙方应在收到甲方或甲方委托的物业服务企业的书面通知后五日内向甲方支付上述费用,甲方有权向乙方按所欠缴付费用总额的千分之一按日计算收取滞纳金,直至乙方全数付清其所应付费用之日为止。

5.4 Costs of the operation of the Leased Houses during the Lease Term, including water fee, gas fee, electricity fee, telephone fee, cable TV license fee, broadband fee and so on, which shall be borne by Party B. Party B shall pay the said fees to Party A within five days after receipt of the written notice from Party A or the property service enterprise entrusted by Party A, and Party A has the right to collect late fees from Party B at 0.1% of the total outstanding fee for each day overdue until Party B pays off all fees payable by it.

 

5.6在不影响本合同项下甲方其它权利的前提下,甲方须于本合同终止或提前终止后乙方按本合同规定将租赁房屋返还予甲方且结清本合同项下乙方应付的所有款项后十个工作日内,凭收款凭证把保证金无息退还乙方。

5.6 Without prejudice to other rights of Party A hereunder, Party A shall return the deposit to Party B free of interest on the strength of the receipt voucher, within ten working days after Party B returns the Leased Houses to Party A according to this Contract and pays off all fees payable by it hereunder when this Contract is terminated or terminated in advance.

 

5.7如果乙方违反本合同的任何约定或条款,拖欠支付本合同规定的任何款项包括但不限于租金、物业管理费及其它费用等,在不影响甲方其它权利或补救的前提下,甲方有权以该保证金或其任何部分抵付任何欠款或甲方因乙方违约而根据本合同规定可以要求其承担的任何其它款项。在甲方以此方式使用该保证金或其任何部分的情形下,乙方应在收到甲方通知的15日内向甲方支付一笔款项,以补足该保证金。若不补足,则构成乙方违约。如乙方未按本条规定缴付或补足保证金,则甲方有权终止本合同。如甲方因此终止本合同,乙方应承担违约责任。

5.7 If Party B default on any fees prescribed herein, including but not limited to rental, property management fee and other fees, in violation of any agreement or clause herein, without prejudice to other rights or remedies of Party A, Party A has the right to offset the deposit or any part thereof against any arrears or other payments that Party A may require Party B to make according to this Contract due to Party B's default. Where Party B uses the deposit or any part thereof in this way, Party B shall make a payment to Party A within 15 days after receipt of Party A's notice to complement the deposit. Party B's failure to complement the deposit will constitute its breach of contract. If Party B fails to pay or complement the deposit in accordance with this article, Party A has the right to terminate this Contract. If Party A hence terminates this Contract, Party B shall bear the liability for breach of contract.

 

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第六条 租赁房屋的维修保养

Article 6 Maintenance of Leased Houses

 

6.1甲方负责对租赁房屋建筑结构及附属设备、设施的日常维修保养,乙方应予以配合。乙方自行改造后的房屋及设备、设施需负自费维修的责任。

6.1 Party A is responsible for the daily maintenance of the building structure and ancillary equipment and facilities of the Leased Houses and Party B shall offer cooperation. Party B shall be responsible for repairing the houses, equipment and facilities renovated by itself at its own cost.

 

6.2上述维修保养过程中,若由于双方(包括其雇员、访客及授权人士)的过失或过错行为对租赁房屋造成的损坏,则由过失方承担有关的维修费用及赔偿费用。

6.2 In case of damage to the Leased Houses due to the negligence or fault of the Parties (including their employees, visitors and authorized persons) during the said maintenance process, the fault party shall bear the relevant costs for maintenance and compensation.

 

6.3租赁房屋区域内乙方自行进行的装修及改造的设施、设备需按国家及北京市、北京市经济技术开发区相关职能部门的要求按期检测及维修保养,上述工作由乙方自行进行并承担费用;检测合格底单需向甲方或租赁房屋的物业服务企业进行按期备案。乙方须保持租赁房屋装修及其设施、设备处于良好运行状况,并须承担租赁房屋及设施、设备因未检测、失修或损毁而对任何人造成的人身伤害或财产损失的赔偿责任。

6.3 Facilities and equipment within the area of Leased Houses which are decorated and renovated by Party B itself shall be regularly tested and maintained according to the requirements of the related functional departments of the state, the Beijing Municipality and Beijing Economic and Technological Development Area. Such work shall be carried out independently by Party B at its own costs. And the original of the certificate proving the test if passed shall be regularly filed with Party A or the enterprise providing property service for the Leased Houses for record. Party B shall keep the decoration of and the facilities and equipment in the Leased Houses in good condition, and shall be liable for compensation for personal damage or property loss to any person due to non-testing, disrepair or damage of the Leased Houses and equipment and facilities therein.

 

6.4本合同期内,乙方应保持租赁房屋及其内部的可租用及正常使用状态。即使乙方按本合同的规定取得甲方事先书面同意,乙方仍须保持该房屋及其内部(除自然损耗外)的可租用及正常使用状态。甲方如发现租赁房屋的任何部分存在损坏(除自然损耗外)时,应向乙方发出书面通知。在甲方书面通知发出后的七日内(在特殊情况下,双方可协商另一时限),乙方应完成上述修缮。如乙方在期限内没有进行该项工作,则甲方有权自行进行该项工作,所需费用由乙方承担。

6.4 During the period of this Contract, Party B shall keep the Leased Houses and interiors thereof rentable and in ordinary use conditions. Though Party B has obtained Party A's prior written consent according to this Contract, Party B shall still keep the houses and interiors thereof (excluding natural losses) rentable and in normal use conditions. If Party A finds any damage to any part of the Leased Houses (except for natural loss), Party A shall give written notice to Party B. Within seven days after Party A gives the written notice (or within another time limit agreed by the Parties in special circumstances), Party B shall complete the above repair. If Party B fails to carry out the work within the time limit, Party A shall have the right to undertake the work itself at the costs of Party B.

 

6.5租赁房屋区域内的中央空调设备及其它机电设备装置,乙方应小心及合理地使用及调节该等设备装置,甲方负责对该设备装置提供定期的及按乙方合理要求的维修服务。但因乙方不正当使用或疏忽使用造成的损害,其维修费用由乙方承担。

6.5 Party B shall carefully and reasonably use and regulate central air-conditioning equipment and other electrical equipment and devices within the area of Leased Houses, and Party A shall maintain such equipment and devices regularly or at Party B's reasonable request. But in case any damage to the said equipment and devices due to improper use or careless use by Party B, they shall be maintained at the costs of Party B.

 

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6.6因乙方过错造成对租赁房屋的门窗或玻璃损坏、毁坏,乙方必须向甲方支付或偿还因甲方更换该租赁房屋所有破损的窗户和玻璃而引起的一切费用或者经甲方事先同意由乙方自行负责修复至原状,经甲方验收通过。

6.6 Where doors, windows or glasses of the Leased Houses are damaged or destroyed due to Party B's fault, Party B shall pay to or compensate Party A for any and all costs arising from Party A's replacement of all such damaged or destroyed doors, windows or glasses or shall independently repair the same to their original state upon Party A's prior consent subject to Party A's acceptance.

 

6.7对由下列因过错方的责任导致的事故而造成甲、乙双方或第三人的财产损失、人身损害,由过错方对造成的损失、损害承担全部赔偿责任:

6.7 Any property loss or personal damage to Party A, Party B or any third party caused by an of the following incidents on account of the liability of the fault party shall be compensated by the fault party:

 

(1)租赁房屋的电机、电器装置、电机电器用品或电线的故障或失修;

(1) failure or disrepair of motors, electrical devices, or motor or electrical appliances or wires in the Leased Houses;

 

(2)租赁房屋的水管通道或厕所堵塞或损坏;

(2) clog or damage of water pipes or toilets in the Leased Houses;

 

(3)火或烟雾在租赁房屋扩散;

(3) the spread of fire or smoke in the Leased Houses;

 

(4)任何来源的水在租赁房屋的泄露或满溢; or

(4) the leaking or overflowing of water from any source in the Leased Houses;

 

(5)任何其他对租赁房屋任何区域造成的损坏。

(5) any other damage to any area of the Leased Houses.

 

6.8甲方有权在发出通知24小时后且乙方未立刻清理的情形下,以甲方认为妥当的方法,清理及处置乙方留下或未处理好的任何装箱、纸盒、垃圾或其它任何种类或性质的障碍物。甲方并不因此向乙方或第三人承担任何责任。乙方须向甲方支付因其执行本条规定而发生的所有开支和费用。

6.8 Party A has the right to clean up and dispose of any packing boxes, boxes, waste, or obstacles of any other kind or nature that are left by Party B or untreated, in the way Party A considers appropriate, if 24 hours have lapsed after Party A notifies Party B and Party B fails to immediately clean up such packing boxes, boxes, waste, or obstacles. Party A will assume no liability for Party B or any third Party Accordingly. Party B shall pay to Party A any and all expenses and costs incurred by Party A to implement the present article.

 

6.9若乙方未能遵守本条规定进行有关修缮和维护,甲方有权在提前24小时通知乙方后自行进行修缮和维护工作,由此发生的费用由乙方承担。

6.9 If Party B fails to make the relevant maintenance and repair according to the present article, Party A shall have the right to make such maintenance and repair at the costs of Party B after notifying Party B 24 hours in advance.

 

6.10在承租期内,乙方须自费更换租赁房屋内损毁的灯泡、灯管或其他设备,或由甲方或租赁房屋的物业服务企业代为更换乙方租赁房屋内损毁的灯泡、灯管或其他设备,但乙方须向甲方或租赁房屋的物业服务企业支付该费用。

6.10 During the Lease Term, any damaged light bulbs, lamps or other equipment in the Leased Houses shall be replaced by Party B at its own cost, or may be replaced by Party A or the enterprise providing property service for the Leased Houses on behalf of Party B, in which case, Party B shall make payment to Party A or such enterprise.

 

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6.11在承租期间,甲方保证租赁房屋及其设施设备处于正常的可使用和安 全的状态。 甲方对租赁房屋进行检查、养护,应提前24小时通知乙方(紧急情况除外)。检查养护时,乙方应予以配合。甲方应尽量减少对乙方使用租赁房屋的影响。

6.11 During the Lease Term, Party A shall guarantee that the Leased Houses and facilities and equipment therein are in normal usable and safe conditions. Party A shall notify Party B 24 hours before it makes any inspection or maintenance of the Leased Houses (except for emergency cases).Party B shall cooperate with Party A in such inspection or maintenance. Party A shall minimize the impact on Party B's use of Leased Houses.

 

6.12遇到紧急事态时,若在办公或营业时间内,甲方由乙方人员陪同进入租赁房屋,但在非办公或营业时间内且无法联络到乙方的情况下,甲方或其授权的代表可进入租赁房屋进行抢修,但甲方应保证乙方财产的安全,但因事故造成的乙方的财产损失,甲方无须承担任何赔偿责任。

6.12 In case of an emergency, if the emergency occurs in working or business hours, Party A may enter the Leased Houses accompanied by Party B's personnel, but if the emergency does not occur in working or business hours and it is unable to contact Party B, Party A or its authorized representative may enter the Leased Houses for first-aid repair, provided, however, that Party A shall ensure the safety of Party B's property; but Party A will bear no liability for compensating Party B's property loss caused by the incident.

 

6.13乙方须在租赁房屋遭受到损毁,或任何第三人在租赁房屋受伤、或租赁房屋发生火警或意外,租赁房屋的水管通道、煤气管道、电线、装置等设施、设备出现损坏、破裂、缺陷时,立即以口头或书面形式通知甲方或甲方的物业服务企业。甲、乙双方按本合同约定的维修责任及时进行修复。如因乙方未及时通知而致使损失过大时,该损失扩大部分由乙方承担责任。

6.13 Party B shall immediately notify Party A or Party A's property service enterprise, in oral or written form, if the Leased Houses are damaged, or if any third party is injured in the Leased Houses, or if the water pipes, gas pipes, wires, devices and other facilities and equipment in the Leased Houses are damaged, broken or defective due to fire or accident in the Leased Houses. Party A and Party B shall make timely repair according to the maintenance responsibilities as agreed herein. If the losses are increased due to Party B's failure to give timely notice, the increased part of the losses shall be borne by Party B.

 

6.14乙方在承租期内对租赁房屋进行的任何装修工程,其设计与图纸必须取得甲方的事先书面同意,甲方不得不合理地拒绝。在征得所有必要的政府部门的书面同意和批准后,方可进行。有关报批费用由乙方自行承担。

6.14 The design and drawing of any decoration work in the Leased Houses to be carried out by Party B during the Lease Term shall be subject to Party A's prior written consent which shall not be unreasonably withheld. Such decoration work may be carried out only after all necessary written consents and approvals are obtained from government departments. The related expenses for obtaining such approval shall be borne by Party B.

 

6.15若在承租期内,政府任何主管部门对租赁房屋的装修、改造(包括消防设备、安全系统等)提出任何书面整改要求,乙方均须按政府主管部门的要求进行修改。

6.15 If any competent governmental department require in writing for recertification of the decoration or renovation of the Leased Houses (including firefighting equipment, safety system, etc.) during the Lease Term, Party B shall rectify according to the requirements of the competent governmental department.

 

6.16附着于租赁房屋的所有附着物及其它任何时候的改造成果,均应是租赁房屋的组成部份(乙方自行安装的设施设备除外),亦应视为是甲方的财产。除非与甲方达成书面协议,乙方不得将其移除。经达成协议,甲方可移除某些自有的附着物,并可允许乙方安装其附着物,乙方同意就其作为或不作为所引起的甲方附着物的损失、费用、支出和损害,向甲方做出补偿。由乙方自费安装的任何附着物或其改造,只要不是甲方要求进行的,均可由乙方在本合同承租期满前从租赁房屋中移除,而且在甲方提出要求时,必须移除。乙方应支付移除的费用以及因移除而需进行的修缮租赁房屋的费用。

6.16 All attachments to Leased Houses and all renovation results thereof at any other time are integral part of the Leased Houses (except for equipment and facilities installed by Party B) and shall be deemed as Party A's property. They shall not be removed by Party B unless under a written agreement with Party A. Party A may remove some of its own attachments upon agreement, and may permit Party B to install Party B's attachments. Party B agrees that it will compensate for Party A for any losses, expenses, costs and damages concerning part a's attachments due to Party B's act or omission. Any attachments installed by Party B at its own cost or renovations thereof may be removed from the Leased Houses by Party B before the expiration of the Lease Term to the extent such installment or renovation is not required by Party A; and must be removed at the request of Party A. Party B shall pay the cost of removal and the cost of repairs to the Leased Houses due to such removal.

 

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第七条 租赁房屋的转租、转让

Article 7 Sublease or Assign of Leased Houses

 

7.1甲方将本合同项下租赁房屋转让给第三方,甲方承诺将以租赁房屋的新所有者接受本合同条款作为租赁房屋转让的先决条件。

7.1 If Party A assigns the Leased Houses hereunder to a third party, Party A undertakes that it is a precedent condition for the assignment of the Leased Houses that the new owner of the Leased Houses accept terms hereof.

 

7.2本合同期内,甲方不得就租赁房屋与任何第三方单独签订任何租赁合同或协议。

7.2 During the contract period, Party A may not separately conclude any lease contract or agreement with any third party in respect of the Leased Houses.

 

7.3本合同期内,乙方不得将本租赁合同转让给任何第三方,除非得到甲方的事先同意。

7.3 During the contract period, Party B may not assign this lease contract to any third party except with Party A's prior consent.

 

第八条 租赁房屋的交还

Article 8 Return of Leased Houses

 

8.1甲方在本合同约定的承租期届满前三个月内,除非甲、乙双方已签订《续租合同》或新的《租赁合同》,否则甲方有权在不影响乙方的情况下带领有意承租租赁房屋的人员在乙方人员的陪同下进入租赁房屋观看,但需提前24小时通知乙方。

8.1 Within three months before the expiration of the Lease Term agreed herein, Party A has the right to bring, without prejudice to Party B, persons intending to rent the Leased Houses to the Leased Houses for viewing accompanied by Party B's personnel, to the extent of notifying Party B 24 hours in advance.

 

8.2乙方应在本合同承租期届满前或提前终止后30日内,将租赁房屋及其设施设备恢复至交付使用时的原貌(经双方同意保留的内部装修、装饰或附属物除外)。同时将有关锁匙交还甲方或甲方的物业服务企业。若返还时不符合本合同要求的,甲方可代为修缮,但所需的费用由乙方承担。

8.2 Within 30 days before the expiration of the Lease Term hereof or after early termination of this Contract, Party B shall restore the Leased Houses and facilities and equipment therein to the original status at the time of delivery, except for interior decoration or appendants which the Parties agree to retain. At the same time, Party B shall return the keys to Party A or Party A's property service enterprise. If the Leased Houses and facilities and equipment therein do not meet the requirements hereof at the time of return, Party A may repair them on behalf at the cost of Party B.

 

8.3乙方返还租赁房屋时,应经甲方验收认可,乙方结清其应当承担的一切费用。经双方签订返还协议,清场结束。

8.3 The Leased Houses returned by Party B shall be subject to the check and acceptance of Party A, and Party B shall pay off all costs it bears. The clearing work will come to an end upon the Parties sign a return agreement.

 

8.4若乙方未按约定的时间将租赁房屋返还甲方,则乙方应赔偿甲方因此而遭受的一切损失。同时每逾期一日,乙方须向甲方缴纳滞留金,相当于2倍的当年日租金及其他费用。但该续占时间不得超过30日,逾期后甲方有权即时封闭租赁房屋,且甲方有权处理乙方遗留的物品,乙方或任何第三人不得提出异议或追讨。

8.4 If Party B fails to return the Leased Houses to Party A at the agreed time, Party B shall compensate Party A for all losses to Party A arising therefrom. Meanwhile, Party B shall pay to Party A late fees, equivalent to two times of the daily rental for the current year and other fees, for each day overdue. However, the return may not be overdue for more than 30 days after which Party A has the right to immediately close the Leased Houses and to dispose of articles left by Party B, and Party B or any third party may not raise an objection or claim a recovery.

 

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8.5在承租期结束或提前终止时,乙方已将租赁房屋交还给甲方后,如租赁房屋内乙方遗留下任何装饰、家具、装备、物件或其他任何物品,均视为乙方放弃前述物品,甲方有权以任何方式处理前述物品但需以书面形式通知乙方并给予乙方一个合理的期限处理该物品。乙方或任何第三人不得提出任何异议及追讨。因清除、清理、处理前述物品所产生的所有费用由乙方承担。

8.5 When the Lease Term expires or is early terminated, any decoration, furniture, equipment, things or any other articles left by Party B in the Leased Houses after it returns the Leased Houses to Party A, shall be deemed as having been waived by Party B; and Party A has the right to dispose of any of such articles in any manner to the extent of notifying Party B in writing and giving Party B a reasonable period to dispose of such articles. Party B or any third party shall not raise any objection and claim a recovery. Any and all costs incurred to remove, clear up or dispose of such articles shall be borne by Party B.

 

8.6在交还租赁房屋时,乙方不得以任何理由向甲方提出偿还因装修而支出的各种费用,不得要求甲方收购租赁房屋内的装修和乙方自己增附的各种设施、设备,亦不得要求甲方支付搬运费、撤离费或拆除费。

8.6 When returning Leased Houses, Party B may not claim compensation from Party A for all fees expensed for decoration for whatsoever reason, or require Party A to acquire the decoration in the Leased Houses and all facilities and equipment added by Party B, or require Party A to pay the transportation fee, removal fee or demolish fee.

 

第九条 保险

Article 9 Insurance

 

租赁房屋建筑物本身的财产保险由甲方负责投保,乙方在租赁房屋内属于乙方产权所有的机器、设施、设备、产品等财产的意外保险由乙方负责投保。保险的投保对双方是必须的。

The property insurance for the constructions of the Leased Houses shall be covered by Party A, while the accident insurance for Party B's property in the Leased Houses which are owned by Party B such as machines, facilities, equipment and products shall be covered by Party B. Insurance coverage is necessary for both Party A and Party B.

 

第十条 权利和义务

Article 10 Rights and Obligations

 

10.1甲方的权利和义务

10.1 Rights and Obligations of Party A

 

(1)甲方保证租赁房屋的质量、安全状况均符合中华人民共和国及北京市的有关规定;

(1) Party A shall ensure that the quality and safety conditions of the Leased Houses are in line with the relevant provisions of the People's Republic of China and of the Beijing Municipality;

 

(2)甲方应按本合同的约定按时提供租赁房屋给乙方使用,在本合同期内不得就租赁房屋与任何第三方签订任何租赁合同或协议;

(2) Party A shall provide the Leased Houses to Party B for its use on time as agreed herein and may not conclude any lease contract or agreement with any third party in respect of the Leased Houses during the contract period;

 

(3)合同期内,甲方应承担根据法律、法规应由甲方承担的各种税费;

(3) During the contract period, Party A shall bear all taxes and surcharges to be borne by it under laws and regulations;

 

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(4)甲方或甲方的物业服务企业可依据改善租赁房屋管理的实际需要,制定、修改、取消有关租赁房屋的管理规则及其它必要的规章制度,但甲方或其物业服务企业须在任何新规则执行前不少于30日书面通知乙方,且新规则不应对乙方使用租赁房屋产生负面影响或增加乙方的费用支出;

(4) Party A or its property service enterprise formulate, modify or cancel management rules on the Leased Houses and other necessary rules and systems depending on the actual need to improve the management of Leased Houses, provided, however, that Party A or its property service enterprise shall notify Party B in writing at least 30 days before any new rules are implemented and such new rules shall not adversely affect Party B's use of Leased Houses or increase Party B' expenses and costs;

 

(5)甲方有权在不影响乙方正常办公/经营的情况下派工作人员进入租赁房屋进行有关检查和维修,但需在乙方人员陪同下进行,且提前24小时书面通知乙方,但紧急情况除外;

(5) Party A has the right to dispatch staff to enter the Leased Houses for inspection and maintenance without prejudice to Party B's ordinary work/operation, provided that the staff shall be accompanied by Party B's personnel and a written notice shall be given to Party B 24 hours in advance, except for in emergent cases;

 

(6)甲方应在整个合同期内以甲方的费用保持租赁房屋在以下几方面处于良好的状态:A、屋顶、主要结构、窗户、外墙壁、水管通道及机电设施设备和电力、电缆电线处于良好的使用状态,乙方自行进行的装修改造,增设和改造的设施设备及有关附属材料除外。B、任何电梯、防火及安全装置、暖气及空调系统处于正常运转状态。

(6) During the whole contract period, Party A shall keep at the cost of Party A: A. roof, main structure, windows, exterior walls, water pipes, electrical facilities and equipment, cables and wires in good use conditions, except for added or renovated facilities and equipment and related auxiliary materials in case of decoration and renovation independently carried out by Party B. B. any elevators, fire prevention and safety devices, heating and air conditioning systems in normal operation conditions.

 

(7)在本合同期内,甲方有权向第三方转让租赁房屋(或其任何部分),但甲方应及时通知乙方,在同等条件下乙方有优先购买权。转让租赁房屋时,甲方须以书面形式,保证要求购买方不能撤销及更改的承继本合同的履行。

(7) During the contract period, Party A has the right to assign the Leased Houses (or any part thereof) to a third party provided that Party A shall timely notify Party B, and Party B shall have the right of pre-emption under equal conditions. When assigning the Leased Houses, Party A shall guarantee, in writing, that the proposed buyer may not cancel and change the fulfillment of this Contract as inherited.

 

(8)甲方接受乙方的租金、物业管理费和其它费用,不得被视为甲方放弃其向乙方追究因乙方违反本合同项下乙方须遵守及履行的任何责任的权利。

(8) Party A's acceptance of rental, property management fee and other fees from Party B shall not be deemed as Party A's waiver of the right to hold Party B accountable for violation of any responsibility to be complied with and fulfilled b Party B hereunder.

 

(9)甲方一次或多次原谅乙方在本合同项下的违约行为,不得构成甲方放弃追究对乙方任何持续、将来的违约行为的依据,或不得在任何方面减损或影响甲方追究乙方任何持续、将来的违约行为的权利和补救。甲方做出或没有做出任何事项均不得构成甲方对乙方的违约行为放弃追究,除非甲方以书面明确表示放弃对乙方违约行为的追究。

(9) Party A's forgiveness for Party B's default hereunder for one time or repeatedly shall not constitute the ground of Party A's waiver of pursuing Party B's liability for any continuous or future default, and shall in no way dilute or affect Party A's right and remedy to pursue Party B's liability for any continuous or future default. No act or failure to act by Party A may constitute Party A's waiver of pursuing Party B's liability for default, unless such pursuing is clearly waived by Party A in writing.

 

(10)在本合同期内,如甲方抵押、转让租赁房屋,该项抵押、转让应以不影响乙方使用为前提。如因该项抵押、转让影响乙方的正常经营,甲方应赔偿乙方的损失。

(10) The mortgage or assignment, if any, of the Leased Houses by Party A during the contract period shall be based on the premise of not affecting Party B's use of the same. If such mortgage or assignment affects Party B's normal operation, Party A shall compensate Party B for the losses.

 

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10.2乙方的权利义务

10.2 Rights and Obligations of Party B

 

(1)在乙方按照本合同规定交纳租金及履行所有本合同项下乙方须遵守及履行的规定的前提下,有权使用租赁房屋及其配套的设施、设备,且不受到甲方的干预、干扰;

(1) Party B has the right to use the Leased Houses and the supporting facilities and equipment without Party A's intervention and interference, to the extent that Party B pays rental according to this Contract and performs all provisions to be complied with and performed by Party B hereunder;

 

(2)乙方有权要求甲方按照本合同的约定提供和保证本合同期内租赁房屋的正常使用;

(2) Party B has the right to require Party A to provide the Leased Houses as agreed herein and to ensure the normal use of Leased Houses during the contract period;

 

(3)乙方应遵守租赁房屋的一切规章管理制度,并促使其雇员、顾客、访客遵守及履行本合同项下应由乙方遵守或履行的全部条款。因上述人士的违反本合同的行为给甲方或第三人造成的损失,由乙方负责赔偿;

(3) Party B shall comply with all rules and regulations on the Leased Houses, and procure that all its employees, customers and visitors abide by and fulfill all clauses hereof that Party B shall comply with and fulfill. Any losses to Party A or a third party due to the violation of this Contract by the said persons shall be compensated by Party B;

 

(4)乙方同意按照已安装的分表计量,向甲方委托的物业管理公司缴清一切与租赁房屋有关的设施、设备使用费用及能源费用,并分摊总表与分表的表差费用。具体内容由物业管理企业与乙方签订的《代收代缴协议》加以约定。

(4) Party B agrees that it will pay to the property management company entrusted by Party A all facilities and equipment use fee and energy cost relating to the Leased Houses according to the submeter installed, and shall apportion the difference between the amount calculated under the total meter and that calculated under the submeter. The specific contents shall be agreed in the Agreement on Collection and Payment on Behalf between the property management enterprise and Party B.

 

(5)乙方同意遵守甲方及其委托的物业服务企业关于园区管理的规章制度,但其中如与本合同的约定条款不一致的,以本合同的约定为准。

(5) Party B agrees to comply with the rules and systems of Party A and its entrusted property service enterprise concerning park management. In case of any inconsistence between such rules and systems and the clauses hereof, the latter shall prevail.

 

(6)乙方在租赁房屋进行的经营活动或一切其他行为,须遵守中国法律、法规及政府部门下达的指令。在租赁房屋区域开展的经营业务,乙方应向政府有关部门取得必要的执照、批准或许可证(如有规定),同时乙方应保证上述证照在本合同期内完全有效。若因乙方的违法行为,而给甲方或第三人造成任何经济损失,乙方应承担赔偿责任。若甲方在名誉等方面因乙方的违法行为受到影响,则甲方有权保留对其在名誉等方面所受损失向乙方追索的权利。

(6) The operating activities or any other acts of Party B in the Leased Houses shall be subject to laws and regulations of China and directions of governmental departments. Before carrying out operating business in the area of Leased Houses, Party B shall secure necessary licenses, approvals or permits from the relevant governmental departments (if provided for), and shall ensure such permits or licenses remain valid in full during the contract period. In case of any economic loss to Party A or a third party due to Party B's illegal act, Party B shall be liable for compensation. If Party A is affected by Party B's illegal act in respect of reputation or other aspects, Party A has the right to reserve the right to recourse to Party B for such reputation or other losses.

 

(7)乙方应按本合同的规定按时缴付租金、物业管理费及本合同规定的其他任何费用;须按时支付其应承担的一切税费。

(7) Party B shall pay the rental, property management fee and any other fees stipulated in this Contract on time in accordance with the provisions hereof, and shall pay all taxes and surcharges payable by him on time.

 

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(8)乙方有责任确保租赁房屋的装修、间隔等符合消防、环保、建筑规范或其他有关法律法规及条例的要求;

(8) Party B has the responsibility to ensure that the decoration and spacing of the Leased Houses comply with fire protection, environmental protection and building standards or the requirements of other relevant laws, regulations and rules;

 

(9)乙方不得在该房屋的地面上放置超过设计荷载的物品;不得在租赁房屋内存放易燃易爆危险品及发出强烈气味的物品,不得在租赁房屋内制造或渗漏任何具有强烈异味或对环境造成污染的气体或其它物品。若乙方确需存放上述物品,需事先征得甲方同意,并办理相关政府审批手续,并对由此产生的一切事项承担责任。

(9) Party B shall not put articles beyond the designed load on the ground of the Leased Houses, or store inflammable and explosive dangerous goods and articles with strong smell in the Leased Houses, or make or leak any gas or other articles in the Leased Houses which have strong unusual odor or cause pollution to the environment. If Party B indeed needs to store such articles, it shall first obtain Party A's consent and handle the relevant government approval formalities, and shall be held liable for all matters arising therefrom.

 

(10)乙方不得在租赁房屋进行任何非法或不道德的活动或宗教活动;

(10) Party B shall not engage in any illegal or immoral activities or religious activities in the Leased Houses;

 

(11)乙方应遵守国家有关消防安全规定,若因违反规定而发生的一切意外,乙方需承担所有责任和赔偿甲方因此而产生的一切损失;

(11) Party B shall comply with the relevant fire safety regulations of the state. If any accident occurs due to Party B's violation of such regulations, Party B shall bear all liability and compensate for all losses so caused to Party A;

 

(12)乙方的代理人、雇员、经乙方许可使用租赁房屋的任何人的任何行为及其它任何人经乙方许可做出的行为均被视为乙方本身的行为,由乙方对其行为负全责。

(12) Any acts of Party B's agents or employees, or any person permitted by Party B to use the Leased Houses and any acts of any other person as permitted by Party B, shall be deemed as Party B's acts; and Party B shall be held fully accountable for all such acts.

 

(13)乙方在租赁房屋的任何活动而产生的意外、诉讼等一切责任,全部由乙方自行负责。因有关事件令甲方产生的经济损失,乙方需向甲方赔偿。

(13) Party B shall be held liable for any accidents or litigations arising from any act of Party B in the Leased Houses. Any economic loss to Party A due to the related incidents shall be compensated by Party B.

 

(14)乙方如需在租赁房屋外墙或外侧展示、树立任何广告、招牌等凸出物的,需与甲方进行协商,经甲方书面同意后方可进行。

(14) Party B shall consult with Party A if it needs to display or establish any advertisement, signboard or other protrusions on the outer wall or outer side of the Leased Houses, and may display or establish the same only upon written consent of Party A.

 

(15)乙方自行负责租赁房屋区域内其财产的安全,甲方不为乙方租赁区域人身损害或财产损失承担任何责任,除非该损失、损害是由于甲方的过错造成的。

(15) Party B shall be responsible for the safety of the property within the area of the Leased Houses. Party A shall not be held liable for any personal damage or property loss of Party B in lease area, unless such loss or damage is caused by Party A's fault.

 

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第十一条 解除本合同的条件及违约责任

Article 11 Conditions for Discharge of Contract and Liabilities for Breach of Contract

 

11.1甲、乙双方同意在本合同期内,有下列情形之一的,本合同自动解除,双方互不承担责任:

11.1 The Parties agree that this Contract will be automatically discharged during the contract period under any of the following circumstances, and no Party will bear liability for the other Party:

 

(1)非甲、乙双方或其雇员、承建商的原因而导致租赁房屋损毁、灭失或者被鉴定为危房的, or

(1) where the Leased Houses are damaged, lost or identified as dangerous buildings for a reason not attributable to the Parties and their employees or the builder,

 

(2)因不可抗力因素致使租赁房屋及其附属设施遭到严重损坏,双方同意本合同无法继续履行的。双方在此确认前述的不可抗力是指包括地震、台风、水灾和其他自然灾害;疫情、突发公共卫生事件、战争、战争威胁、暴动和类似的军事行动、封锁、恐怖活动、民间骚动以及非本合同双方员工的罢工、怠工和其他工人运动、能源短缺或政府的禁运令、禁止令。

(2) where the Leased Houses and their ancillary facilities were seriously damaged due to force majeure, and the Parties agree that it is unable to perform this Contract any more. The Parties hereby acknowledge that the foregoing force majeure refers to earthquake, typhoon, flood and other natural disasters; epidemic situation, public health emergencies, war, war threat, riot and similar military act, blockade, terrorist activities, civil commotion, and strike, slowdown and other labor movement not on the part of employees of the Parties hereto, the shortage of energy, or governmental embargo or injunction.

 

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如因不可抗力原因及非因甲、乙双方原因导致租赁房屋全部或其主要部分受到破坏、损毁,致使其不适宜使用或占有,租赁房屋在破坏、损坏发生后六个月内尚未得到重修或重建,甲、乙任何一方可以书面通知对方,终止本合同。在前述情形下,甲方没有义务对租赁房屋进行重修或重建,乙方可在租赁房屋遭受上述破坏、损毁的次日起停止或按租赁房屋受破坏损毁的程度相应减少支付租金,直到租赁房屋完成重修或重建。

In case all of or main parts of the Leased Houses are damaged or destroyed due to force majeure or a reason not attributable to the Parties so that the Leased Houses are not suitable for use or occupation, if the Leased Houses are not reconstructed or rebuilt within six months after the damage or destruction, either Party may terminate this Contract by giving the other Party A written notice. In this case, Party A has no obligation to reconstruct or rebuild the Leased Houses, and Party B may stop paying rental from the day immediately after the Leased Houses are so damaged or destroyed or may pay reduced rental according to the extent of such damage or destruction, until the Leased Houses are reconstructed or rebuilt.

 

在不影响一方对另一方就任何在本合同解除前的索赔或违反本合同项下之条款的权利继续有效的前提下,甲、乙方任何一方在收到对方按照本条规定发给的书面通知后,本合同终止。

Without prejudice to the validity of a Party's right against the other Party in respect of a claim before the discharge of this Contract or of the violation of clauses hereof, this Contract will terminate after either Party receives a written notice from the other Party given according to this article.

 

11.2甲、乙双方应谨慎行使和履行本合同中约定的权利和义务,任何一方因未履行或未完全履行在本合同中的权利、义务,而给对方造成损失的,应承担相应的赔偿责任。

11.2 The Parties shall prudently exercise and fulfill rights and obligations agreed herein. Any party shall bear the liability to compensate the other Party for any losses to such other Party caused by the party's failure to fulfill or fully fulfill its rights and obligations hereunder.

 

11.3甲方有权在下列任何情形发生后提前解除本合同并提前收回租赁房屋或其任何部分;

11.3 Party A has the right to early discharge this Contract and recover the Leased Houses or any part thereof in advance if:

 

(1)乙方在按照本合同约定的租金、物业管理费、保证金及其它费用到期支付日后经甲方书面催收后30日内仍未能足额支付上述费用的;

(1) Party B fails to pay in full the rental, property management fee, deposit and other fees agreed herein within 30 days after Party A urges Party B to pay such fees in writing after they become due and payable;

 

(2)乙方违反本合同中所约定的义务性条款及政府的相关规定,并在甲方发出书面通过后30日内未予纠正;

(2) Party B violates the obligation-related clauses hereof and the related governmental provisions and fails to make a correction within 30 days after Party A gives Party B a written notice requiring such correction;

 

(3)乙方破产或进行清算程序,或第三方向法院申请对乙方进行清算且法院受理该申请的;

(3) Party B becomes bankrupt or enters liquidation procedures, or a third Party Applies to the court for liquidating Party B and the court accepts the application;

 

(4)乙方擅自中断、停止其业务经营或放弃承租租赁房屋的;

(4) Party B arbitrarily suspends or stops its business operation or waives the renting of the Leased Houses;

 

(5)乙方在租赁房屋内的产业被司法部门或职能部门查封或扣押,30日内未能解除查封或扣押的; or

(5) Party B's property in the Leased Houses is confiscated or detained by a judicial department or functional department and the confiscation or detention is not cancelled within 30 days;

 

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(6)乙方在未征得甲方同意下擅自改变租赁房屋用途,或未按本协议约定的范围擅自转租租赁房屋的。

(6) Party B changes the purpose of the Leased Houses without consent of Party A, or arbitrarily sub-leases the Leased Houses beyond the scope agreed herein.

 

当发生上述情况时,本合同自甲方将解除合同通知书送达乙方之日即行解除。本合同依本条解除时,乙方应按甲方规定的合理时间交还租赁房屋,如乙方不按甲方规定的时间交还租赁房屋,甲方有权依本合同的规定自行收回租赁房屋,并要求乙方承担违约责任。

Under any of the said circumstances, this Contract will be discharged on the date when Party A delivers the notice on discharge of contract to Party B. When this Contract is discharged under the present article, Party B shall return the Leased Houses at the reasonable time specified by Party A; if Party B fails to do so, Party A shall have the right to recover the Leased Houses on its own according to this Contract and require Party B to bear the liability for breach of contract.

 

11.4甲、乙双方同意,在发生下列情形之一时,一方可书面通知另一方解除本合同,违反合同的一方,应向另一方支付相当于当年应收月租金两倍的违约金;给对方造成损失的,支付的违约金不足以抵付一方损失的,还应赔偿与违约金的差额部分的损失;

11.4 The Parties agree that under any of the following circumstances, a Party may discharge this Contract by notifying the other Party in writing, and the breaching party shall pay to the other Party liquidated damages equivalent to two times of the monthly rental receivable for that year; in case losses are caused to the other Party, if the liquidated damages paid are insufficient to cover such losses, the breaching party shall also compensate for the difference between the liquidated damages and such losses;

 

(1)甲方交付的租赁房屋存在重大缺陷,以致危及乙方安全的; or

(1) where the Leased Houses delivered by Party A have material defects, endangering the safety of Party B;

 

(2)因甲方或乙方的原因造成租赁房屋结构损坏的;

(2) where the structure of the Leased Houses is damaged due to a reason attributable to Party A or Party B;

 

11.5除法律另有规定或本合同另有约定外,甲、乙任何一方均不得擅自终止本合同,否则应向另一方支付相当于当年应收月租金四倍的违约金,并赔偿另一方因本合同提前终止而导致的直接经济损失。

11.5 Unless otherwise prescribed by laws or agreed herein, no Party may arbitrarily terminate this Contract, otherwise it shall pay to the other Party liquidated damages equivalent to four times of the monthly rental receivable for that year, and compensate for the direct economic losses to the other Party due to early termination of this Contract.

 

11.6在发生违约事件后,甲方无论是否继续收取租金不影响甲方向乙方追究违约责任的权利。乙方未按本合同规定付足租金或其他费用,不影响甲方对这些租金、费用不足部分的追索权,亦不影响甲方按本合同及有关法律规定采取其他补偿措施的权利。

11.6 In the event of a breach of contract, whether Party A continues to collect rental will not affect Party A's right to pursue Party B's liability for breach of contract. If Party B fails to pay the rental or other fees in full according to this Contract, it shall not affect Party A's right of recourse in respect of the short rental or fees, nor shall it affect Party A's right to take other compensation measures under this Contract and the relevant laws.

 

第十二条 法律适用及争议解决

Article 12 Applicable Law and Dispute Resolution

 

12.1本合同的订立、效力、解释、履行、争议的解决均受中国法律的管辖。

12.1 The conclusion, effectiveness, interpretation and performance of this Contract and dispute settlement shall be governed by laws of China.

 

12.2甲、乙双方因履行本合同而发生的或与本合同有关的一切争议,双方应通过友好协商解决,如果协商不能解决的,由租赁房屋所在地的人民法院管辖。

12.2 Any and all disputes arising from the performance of this Contract or relating to this Contract shall be settled by the Parties through friendly negotiation; if such negotiation fails, the disputes shall be governed by the people's court of the locality of the Leased Houses.

 

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第十三条 附则

Article 13 Supplementary Provisions

 

13.1若本合同的部分条款根据法律规定成为无效或不能执行,则本合同其他条款的有效性、合法性和可执行性不受影响,任何一方不得以此为理由拒绝履行本合同其他的条款。

13.1 If some clauses hereof become invalid or unenforceable, the effectiveness, validity and enforceability of the other clauses hereof shall not be affected, and no Party may refuse to implement the other clauses hereof on this ground.

 

13.2凡有关本合同的通知、请求或其他通讯往来,需以书面形式为准,并采用挂号邮寄或专人送达或传真任一方式传递至本合同之首所列双方地址,致乙方的函件可传递至租赁房屋。双方在该书面信函寄出之日即视为对方已收到函件。如任何的名称、地址及法定代表人发生变更时,该方必须及时直接以书面通知另一方。

13.2 Any notices, requests or other communications relating to this Contract shall be made in writing and delivered to the Parties' addresses set forth in the beginning of this Contract by registered mail or personal service or fax; and any letters, if addressed to Party B, may be delivered to the Leased Houses. The party to which such written letter is addressed shall be deemed as having received the letter on the date when the same is sent. In case of any change in the name, address and legal representative of any Party, such Party shall timely notify the other Party directly in writing.

 

13.3本合同未尽事宜,由甲、乙双方另行签订补充协议,作为本合同的附件,与本合同具有同等法律效力。

13.3 For any matters not covered herein, the Parties may otherwise conclude a supplementary agreement as an appendix hereto which shall have the same legal force as this contact.

 

13.4双方在此确认本合同以上内容为双方经充分协商讨论后达成的一致的意思表示,双方已完全理解并接受本合同内容,不存在胁迫、欺诈、重大误解、显失公平的情形。

13.4 The Parties hereby acknowledge that the above contents hereof are unanimous manifestation of the intention of the Parties after full negotiation and discussion, the Parties have fully understood and accepted the contents hereof, free and clear of duress, fraud, gross misunderstanding and obvious unjust.

 

13.5本合同经甲、乙双方法定代表人或其授权代表签字盖章后生效,并于承租期满或被提前终止时,且双方债务结算完毕之日起失效。

13.5 This Contract shall come into force upon signatures and seals by the legal representatives or authorized representatives of the Parties and will become null and void when the Lease Term is expired or early terminated and the Parties' debt are settled in full.

 

13.6本合同正本一式四份,甲、乙双方各执两份,具有同等法律效力。

13.6 This Contract is made in quadruplicate of the same legal effect, with each party holding two.

 

(以下无正文)

(There is no text hereunder)

 

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(本页为签署页)

(This page is for signatures)

 

甲方:北京经开工大投资管理有限公司(公章)

Party A: Beijing Jingkai Gongda Investment Management Co., Ltd. (official seal)

 

法定代表人或授权代表签字:

Legal representative or authorized representative (signature):

 

乙方:北京华夏大地远程教育网络服务有限公司(公章)

Party B: Beijing Huaxia Dadi Distance Learning Services Co., Ltd. (official seal)

 

法定代表人或授权代表签字:

Legal representative or authorized representative (signature):

 

 

签约时间:2016年6月1日

Signed on: June 1, 2016.

 

 

19

 

Exhibit 10.6

 

合同编号:

Contract No.:

 

技术开发(委托)合同

Technical Development (Entrustment) Contract

 

项目名称:《中版教育云平台软件系统》开发

Project Name: Development of Education Cloud Platform Software System (Chinese Version)

 

委托方(甲方):世界图书出版上海有限公司

Entrusting Party (Party A): Shanghai World Publishing Corporation

 

受托方(乙方):北京华夏大地远程教育网络服务有限公司

Entrusted Party (Party B): Beijing Huaxia Dadi Distance Learning Services Co., Ltd.

 

生效时间: 2016年7月12日

Effective Date: July 12, 2016

 

有效期限: 2020年7月11日

Expiration Date: July 11, 2020

 

 

 

 

 

 

 

 

 

 

 

中华人民共和国科学技术部印制

Printed by the Ministry of Science and Technology of the People´s Republic of China

 

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填 写 说 明

Instructions

 

一、本合同为中华人民共和国科学技术部印制的技术开发(委托)合同示范文本,各技术合同认定登记机构可推介技术合同当事人参照使用。

1. The Contract is the model text of the Technical Development (Entrustment) Contract printed by the Ministry of Science and Technology of the People´s Republic of China, and the technical contract certification and registration agencies may recommend the parties to a technical contract to use this Contract mutatis mutandis.

 

二、本合同书适用于一方当事人委托另一方当事人进行新技术、新产品、新工艺或者新材料及其系统的研究开发所订立的技术开发合同。

2. The Contract is applicable to the technology development contract according to which one Party entrusts the other Party to carry out the research and development of new technology, new product, new process or new material and its system.

 

三、签约一方为多个当事人的,可按各自在合同关系中的作用等,在“委托方”、“受托方”项下(增页)分别排列为共同委托人或共同受托人。

3. Several signers for one Party may be arrayed as joint consigners or joint consignees under the column of “Entrusting Party” or “Entrusted Party” (attached sheet) in accordance with their respective functions in the contract.

 

四、本合同书未尽事项,可由当事人附页另行约定,并可作为本合同的组成部分。

4. Any matter not covered by the Contract may be agreed by parties concerned on an attached sheet, which constitutes an inseparable part of the Contract.

 

五、当事人使用本合同书时约定无需填写的条款,应在该条款处注明“无”等字样。

5. Any clause not applicable to the Contract shall be filled in with “None” by parties concerned.

 

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技术开发(委托)合同

Technical Development (Entrustment) Contract

 

委托方(甲方): 世界图书出版上海有限公司

Entrusting Party (Party A): Shanghai World Publishing Corporation

 

住 所 地: 上海市广中路88号9-10楼 

Domicile: 9-10/F, No. 88 Guangzhong Road, Shanghai

 

法定代表人: 陆琦

Legal Representative: Lu Qi

 

项目联系人: 熊佳

Contact Person: Xiong Jia

 

联系方式 :

Contact Information:

 

通讯地址: 上海市广中路88号9-10楼

Address: 9-10/F, No. 88 Guangzhong Road, Shanghai

 

电话: 021-36357951 传真: 021- 36357920

Tel: 021-36357951 Fax: 021- 36357920

 

电子信箱: yzhang@mail.wpcsh.com

Email: yzhang@mail.wpcsh.com

 

受托方(乙方): 北京华夏大地远程教育网络服务有限公司

Entrusted Party (Party B): Beijing Huaxia Dadi Distance Learning Services Co., Ltd.

 

住 所 地: 北京市经济技术开发区地盛北街1号经开大厦B座5层505室

Domicile: Room 505, 5/F, B Block, Jingkai Building, North Disheng Street, Beijing Economic and Technological Development Area

 

法定代表人: 于洋

Legal Representative: Yu Yang

 

项目联系人: 王雯

Contact Person: Wang Wen

 

联系方式 :

Contact Information:

 

通讯地址:北京市经济技术开发区地盛北街1号经开大厦B座5层505室华夏大地教育网

Address: Room 505, 5/F, B Block, Jingkai Building, North Disheng Street, Beijing Economic and Technological Development Area

 

电话: 010-57925018 传真: 010-57925018

Tel: 010-57925018 Fax: 010-57925018

 

电子信箱: wuft@edu-edu.com.cn

Email: wuft@edu-edu.com.cn

 

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本合同甲方委托乙方研究开发 《中版教育云平台软件系统》项目,并支付研究开发经费和报酬,乙方接受委托并进行此项研究开发工作。双方经过平等协商,在真实、充分地表达各自意愿的基础上,根据《中华人民共和国合同法》的规定,达成如下协议,并由双方共同恪守。

According to the Contract, Party A will entrust Party B to perform the research and development ("R&D") of the Education Cloud Platform Software System (Chinese Version) and shall pay the R&D funds and remuneration to Party B, and Party B will accept the said R&D work. Party A and Party B have reached the following agreement for mutual compliance in accordance with the Contract Law of the People's Republic of China through equal consultation and on the basis of faithfully and fully expressing their respective will.

 

  第一条 本合同是中版教育云平台前期开发的延续,截至合同签署时,中版教育云平台完成了系统底层架构包括账号管理系统、消息管理系统、业务字典系统、基础数据库系统和元数据系统,分布式管理系统包括课程体系管理系统、课程管理系统、应用模块管理系统、班级分类管理系统、班级管理系统、班级授权管理系统、开课卡管理系统,基础教学系统包括教学日历、课堂学生列表管理系统、教学与学习活动管理系统、备课系统、课堂互动系统、电子教材创作系统、课件点播系统、交互式微课制作系统、课堂评测系统、考试系统、教学资源管理系统、电子学档系统,终端应用软件包括我的班级、互动课堂、我的错题本。本合同约定的开发内容应延续前期技术路线和技术框架,在前续项目已经完成的 CloudBag 电子书包教育云平台基础技术架构和相应功能模块及后续应用开发基础上开发本合同约定的功能模块。

Article 1 This Contract is a continuation of the early development of the Education Cloud Platform (Chinese Version), upon the signing of the Contract, the Education Cloud Platform (Chinese Version) has completed the underlying system architecture (including the account management system, message management system, business dictionary system, dictionary database system and metadata system), the distributed management system (including the curriculum system management system, curriculum management system, application module management system, class classification management system, class management system, class authorization management system, course card management system), the basic teaching system (including the teaching calendar, classroom student list management system, teaching and learning activity management system, teaching preparation system, classroom interaction system, electronic textbook creation system, courseware on demand system, interactive microlecture production system, classroom teaching evaluation system, examination system, teaching resources management system, e-learning portfolio system), and the terminal application software (including My Class, Interactive Class and My Notebook of Error Correction). The development content hereunder shall follow the early technical route and technical framework, and the function modules specified in the Contract shall be developed on the basis of the e-Schoolbag ("CloudBag") education cloud platform based technical architecture and the corresponding function modules that have been completed in the previous project and the subsequent application development.

 

第二条 本合同研究后续开发项目的要求如下:

Article 2 The requirements for the subsequent development project are as follows:

 

1 技术目标:

1. Technical objectives:

 

(1)开发完成CloudBag电子书包教育云平台中的教师信息管理系统;

 (1) Complete the development of the teacher information management system in the e-Schoolbag ("CloudBag") education cloud platform;

 

(2)开发完成CloudBag电子书包教育云平台中的学生学籍信息管理系统;

(2) Complete the development of the student status information management system in the e-Schoolbag ("CloudBag") education cloud platform;

 

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(3)开发完成CloudBag电子书包教育云平台中的教案管理系统;

(3) Complete the development of the teaching plan management system in the e-Schoolbag ("CloudBag") education cloud platform;

 

(4)开发完成CloudBag电子书包教育云平台中的第三方资源接口;

(4) Complete the development of the third-party resource interface in the e-Schoolbag ("CloudBag") education cloud platform;

 

(5)对前续项目中实际应用中发现的问题进行修改和完善;

(5) Make revision and improvement according to the problems found in the practical application of the previous project;

 

(6)与前续项目合同中已经完成的功能模块进行整合,形成支持数字化教学与学习过程的教育云平台产品和Android终端应用产品;

(6) Integrate with the function modules which have been completed in the previous project contract to form the education cloud platform products and Android terminal application products supporting digital teaching and learning process;

 

2 技术内容:

2. Technical contents:

 

1) CloudBag中版教育云平台中的教师信息管理系统应具备以下功能:

(1) The teacher information management system in the CloudBag education cloud platform (Chinese Version) shall have the following functions:

 

a. 支持教师基础信息管理,如教师姓名,任教班级,任教科目,职称评定和个人简介等;

a. Support the teachers' basic information management, such as teacher's name, teaching class, teaching subjects, title assessment and personal profile, etc.;

 

b. 支持通过拍照录入形式上传及管理老师个人照片;

b. Support uploading and managing teachers' personal photos by way of photo input;

 

c. 支持教师信息的查询与维护,支持批量管理操作。

c. Support the query and maintenance of teacher information, and support batch management.

 

2) CloudBag中版教育云平台中的学生学籍信息管理系统应具备以下功能:

(2) The student status information management system in the CloudBag education cloud platform (Chinese Version) shall have the following functions:

 

d. 允许管理员权限设置学生学籍信息所包含的字段;

d. Allow administrators to set the fields contained in student status information;

 

e. 允许学生在登录后填写个人学籍信息;

e. Allow students to fill in their personal status information after logging in;

 

f. 允许管理员权限查询与维护学生学籍信息;

f. Allow administrators to query and maintain student status information;

 

g. 为对接其他平台预留接口。

g. Reserve interfaces for docking with other platforms.

 

3) CloudBag中版教育云平台中的教案管理系统应具备以下功能:

(3) The teaching plan management system in the CloudBag education cloud platform (Chinese Version) shall have the following functions:

 

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h. 支持教师使用教案管理系统创建、保存、打开、编辑、删除数字教案;

h. Support teachers to create, save, open, edit and delete digital teaching plans by using the teaching plan management system;

 

i. 支持教师基于时间线组建教学活动序列,通过拖拽的方式实现教学序列的组织。系统支持的教学活动类型包括学生活动、教师活动、师生互动等;

i. Support teachers to organize teaching activity sequence based on timeline to realize the organization of teaching sequence by dragging. The types of teaching activities supported by the system include student activities, teacher activities, teacher-student interaction, etc.;

 

j. 支持教学活动过程中各类数字资源的选择和调用;

j. Support the selection and invocation of all kinds of digital resources in the process of teaching activities;

 

k. 支持教案共享,能够在教案共享库查看所有共享教案,并允许将教案加入个人教案收藏夹。

k. Support teaching plan sharing, through which a teacher can view all shared teaching plans in the teaching plan sharing library and may be allowed to place the teaching plans into the personal teaching plan favorite.

 

4) CloudBag中版教育云平台中的第三方资源接口应具备以下功能:

(4) The third-party resource interface in the CloudBag education cloud platform (Chinese Version) shall have the following functions:

 

l. 支持包含课件、试卷、试题及图片、视频、音频、动画、文本等多种格式的教学资源;

l. Support a variety of teaching resources including courseware, test paper, test questions and pictures, video, audio, animation, text and other formats;

 

m. 支持根据教材章节,分类浏览资源;

m. Support browsing resources classified according to the chapter of teaching materials;

 

n. 支持资源的打开播放、收藏、下载等。

n Support the opening, play, collection and download etc. of resources.

 

5) 根据用户反馈,对前续项目中各个子系统功能进行完善,主要完善以下子系统:

(5) According to the user feedback, improve the functions of the subsystems in the previous project, including mainly the following subsystems:

 

o. 完善教学与学习管理系统;

o. Improve the teaching and learning management system;

 

p. 完善课程体系管理系统;

p. Improve the curriculum system management system;

 

q. 完善班级分类系统;

q. Improve class classification system;

 

r. 完善开课卡系统;

r. Improve the course card system;

 

s. 完善课堂学生列表管理系统;

s. Improve the classroom student list management system;

 

t. 完善课堂测评系统;

t. Improve the classroom teaching evaluation system;

 

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u. 完善交互式微课制作系统;

u. Improve the interactive microlecture production system;

 

v. 完善教学资源管理系统;

v. Improve the teaching resources management system;

 

w. 完善电子学档系统;

w. Improve the e-learning portfolio system;

 

x. 完善元数据系统。

x. Improve the metadata system.

 

3. 技术方法和路线: 服务器端采用Java EE技术体系,客户端基于B/S模式及Android系统开发。

3. Technical methods and routes: The server side uses the Java EE technology system, and the client side is based on the B/S mode and Android system development.

  

第三条 乙方应在本合同生效后 10 个工作日内向甲方提交研究开发计划。研究开发计划应包括以下主要内容:

Article 3 Party B shall submit the research and development plan to Party A within 10 working days after the Contract takes effect. The research and development plan shall include the following main contents:

 

1. 产品需求规格说明书 

1. Specification of the products required;

 

2. 项目组组成人员及分工

2. Project team members and division of work;

 

3. 例会安排及会议纪要 

3. Arrangement of regular meeting and minutes of meeting;

 

4. 项目计划进度

4. Project schedule.

 

第四条 乙方应按下列进度完成研究开发工作: 

Article 4 Party B shall complete the research and development work according to the following schedule:

 

1. 2016年9月10日前完成本合同第二条第2款第(1)、(2)项规定的技术内容 ;

1. Complete the technical contents specified in Item (1) and Item (2) of Paragraph 2 of Article 2 before September 10, 2016;

 

2. 2016年10月10日前完成本合同第二条第2款第(3)、(4)、(5)项规定的技术内容 ; 

2. Complete the technical contents specified in Item (3), Item (4) and Item (5) of Paragraph 2 of Article 2 before October 10, 2016;

 

3.2016年11月4日前完成系统性能测试及问题修改;

3. Complete the system performance test and the correction of problems before November 4, 2016;

 

4. 2016年11月10日前完成产品交付。 

4. Complete the delivery of finished products before November 10, 2016.

 

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第五条 甲方应向乙方提供的技术资料及协作事项如下:  

Article 5 The technical data to be provided by Party A to Party B and the cooperation matters are as follows:

 

1.技术资料清单: 《项目需求说明》

1. List of technical materials: Description of the Project Requirements.

 

2.提供时间和方式: 本合同签订后10个工作日内。

2. Time and mode of provision: Ten working days after the Contract is signed.

 

3.其他协作事项: 无

3. Other cooperation matters: None.

 

本合同履行完毕后,上述资料按以下方式处理:交回甲方封存。

After the performance of this Contract, the above materials shall be returned to Party A for sealing up.

 

第六条 甲方应按以下方式支付研究开发经费和报酬:

Article 6 Party A shall pay the research and development funds and remuneration in the following ways:

 

1.研究开发经费和报酬总额为 人民币壹佰伍拾捌万元整(小写人民币¥1580000.00元)。

1. The total amount of the research and development funds and remuneration shall be RMB One Million, Five Hundred and Eighty Thousand (in figures: ¥1,580,000.00).

 

2.研究开发经费由甲方分叁次支付乙方。具体支付方式和时间如下:

2. The research and development funds shall be paid by Party A to Party B in 3 installments in the ways and time specified as follows:

 

(1)在本合同签订后十个工作日内,甲方支付乙方项目经费伍拾陆万元整(小写人民币¥560000.00元);

(1) Within ten working days after the Contract is signed, Party A shall pay Party B the project funds of RMB Five Hundred and Sixty Thousand (in figures: ¥560,000.00);

 

(2)在本合同签订后,乙方完成本合同第二条第2款第(1)、(2)(3)、(4)、(5)项规定并按照本合同第一条的规格交付甲方后十个工作日内,甲方支付乙方项目经费伍拾贰万元整(小写人民币¥520000.00元);

(2) After the Contract is signed and within ten working days after Party B has completed the technical contents specified in Items (1)-(5) of Paragraph 2 of Article 2 and submitted the same to Party A according to the specification mentioned in Article 1, Party A shall pay Party B the project funds of RMB Five Hundred and Twenty Thousand (in figures: ¥520,000.00);

 

(3)在本合同签订后,乙方完成本合同规定的全部内容并完成产品及资料交付后十个工作日内,甲方支付乙方项目经费伍拾万元整(小写人民币¥500000.00元)。

(3) After the Contract is signed and within ten working days after Party B has completed all the contents hereunder and completed the delivery of products and materials, Party A shall pay Party B the project funds of RMB Five Hundred Thousand (in figures: ¥500,000.00);

 

3. 乙方开户银行名称和账号为:

3. Name, address and account number of Party B’s bank of deposit are as follows:

 

户名:北京华夏大地远程教育网络服务有限公司

Account Name: Beijing Huaxia Dadi Distance Learning Services Co., Ltd.

 

开户行:工商银行北京经济技术开发区宏达北路支行

Bank of Deposit: Industrial and Commercial Bank Beijing Economic and Technological Development Area North Hongda Road Sub-branch

 

帐号:0200059019200028622

Account No.: 0200059019200028622

 

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第七条 本合同的研究开发经费由乙方以 开发费 的方式使用。甲方有权以 书面信函或电子邮件 的方式检查乙方进行研究开发工作和使用研究开发经费的情况,但不得妨碍乙方的正常工作。

Article 7 The funds for research and development under the Contract shall be used by Party B as development fees. Party A shall have the right to examine Party B's research and development work and the use of research and development funds through written letters or email, but shall not impede the normal work of Party B.

 

第八条 本合同的变更必须由双方协商一致,并以书面形式确定。但有下列情形之一的,一方可以向另一方提出变更合同权利与义务的请求,另一方应当在 7 个工作日内予以答复;逾期未予答复的,视为同意:

Article 8 Any change to the Contract must be agreed by both Parties and determined in written form. However, in case of one of the following circumstances, one Party may request the other Party to change its rights and obligations hereunder, and the other Party shall reply within 7 working days; if it fails to do so, it shall be deemed to be agreed:

 

1. 无

None;

 

2. 无

None.

 

第九条 未经甲方同意,乙方不得将本合同项目部分或全部研究开发工作转让第三人承担。但有下列情况之一的,乙方可以不经甲方同意,将本合同项目部分或全部研究开发工作转让第三人承担:

Article 9 Without the consent of Party A, Party B shall not assign any part or all of the research and development work hereunder to any third party. However, Party B may assign any part or all of the research and development work hereunder to any third party without the consent of Party A.

 

1.无

None;

 

2. 无

None.

 

乙方可以转让研究开发工作的具体内容包括:无

The specific research and development work that may be assigned by Party B includes: None.

 

第十条 在本合同履行中,因出现在现有技术水平和条件下难以克服的技术困难,导致研究开发失败或部分失败,并造成一方或双方损失的,双方按如下约定承担风险损失:乙方退回相应的费用。

Article 10 During the performance of the Contract, if any Party or both Party incurred any loss due to the partial or entire failure of the research and development work caused by the insurmountable technical difficulties under existing technical level and conditions, both parties shall bear the risk of loss as agreed as follows: Party B shall return the corresponding fees.

 

双方确定,本合同项目的技术风险按 双方协商书面认定的方式认定。认定技术风险的基本内容应当包括技术风险的存在、范围、程度及损失大小等。认定技术风险的基本条件是:

Both Parties confirmed that the technical risks of the project hereunder are identified in writing by the Parties through consultation. The basic contents of the technical risk identification shall include the existence, scope, extent and degree of loss of the technical risk. The basic conditions for identifying technical risks include:

 

1. 本合同项目在现有技术水平条件下具有足够的难度;

1. There exist certain difficulties in the project under the existing technical level;

 

2. 乙方在主观上无过错且经认定研究开发失败为合理的失败。

2. Party B has no subjective fault and the failure of research and development is identified as reasonable failure.

 

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一方发现技术风险存在并有可能致使研究开发失败或部分失败的情形时,应当在7个工作 日内通知另一方并采取适当措施减少损失。逾期未通知并未采取适当措施而致使损失扩大的,应当就扩大的损失承担赔偿责任。

If any Party discovers that there exists any technical risk that may cause the partial or entire failure of the research and development, it shall notify the other Party within 7 working days and take appropriate measures to reduce the losses. If the losses are enlarged due to its failure to notify the other Party or to take appropriate measures, it shall be liable for the enlarged losses.

 

第十一条 在本合同履行中,因作为研究开发标的技术已经由他人公开(包括以专利权方式公开),一方应在 7 个工作 日内通知另一方解除合同。逾期未通知并致使另一方产生损失的,另一方有权要求予以赔偿。

Article 11 If, during the performance of the Contract, the technology under development has been disclosed by other persons (including the disclosure of the technology in the form of patent), one Party shall, within 7 working days, notify the other Party to terminate the Contract. If any Party fails to notify the other Party and thus causes losses to the other Party, the other Party shall have the right to claim compensation.

 

第十二条 双方确定因履行本合同应遵守的保密义务如下:

Article 12 The Parties acknowledge that they shall fulfill the following confidentiality obligations:

 

甲方:

Party A:

 

1. 保密内容(包括技术信息和经营信息): 在合作过程中得到的乙方技技术资料和技术秘密,以及其他泄露后损及乙方利益的信息。

1. Confidential content (including technical information and business information): The technical materials and technical secrets obtained from Party B in the process of cooperation, as well as other information disclosure of which may damage Party B's interests.

 

2.涉密人员范围: 参与本项目的甲方项目组成员

2. The scope of secrete-related personnel: Party A's project team members participating in this project

 

3.保密期限: 自本合同签订之日起5年内。

3. Confidentiality period: Five years after the Contract is signed.

 

4.泄密责任: 甲方承担因泄密而对乙方造成的经济损失。

4. Liability for disclosure of confidential information: Party A shall compensate Party B's economic losses caused by Party A's disclosure of the said confidential information.

 

乙方:

Party B:

 

1. 保密内容(包括技术信息和经营信息): 在合作过程中得到的甲方技术资料和技术秘密,以及其它泄露后损及甲方利益的信息 。

1. Confidential content (including technical information and business information): The technical materials and technical secrets obtained from Party A in the process of cooperation, as well as other information disclosure of which may damage Party A's interests.

 

2.涉密人员范围: 参与本项目的乙方项目组成员。

2. The scope of secrete-related personnel: Party B's project team members participating in this project.

 

3.保密期限: 自本合同签订之日起5年内。

3. Confidentiality period: Five years after the Contract is signed.

 

4.泄密责任:乙方承担因泄密而对甲方造成的经济损失。

4. Liability for disclosure of confidential information: Party B shall compensate Party A's economic losses caused by Party B's disclosure of the said confidential information.

 

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第十三条 乙方应当按以下方式向甲方交付研究开发成果:

Article 13 Party B shall deliver the research and development achievements to Party A in the following manner:

 

1.研究开发成果交付的形式及数量: 以刻录光盘形式交付《中版教育云平台软件系统》 源代码和源代码说明、软件使用说明。

1. Delivery method and quantity of the research and development achievements: Deliver the source code and source code description of the Education Cloud Platform Software System (Chinese Version) and the instructions for the use of the software in the form of CD.

 

2.研究开发成果交付的时间及地点: 成果交付时间以本合同第三条的约定为准,交付地点为世界图书出版上海有限公司。

2. Time and place for the delivery of the research and development achievements: The research and development achievements shall be delivered at the time stipulated in Article 3 at Shanghai World Publishing Corporation.

 

第十四条 双方确定,按以下标准及方法对乙方完成的研究开发成果进行验收: 根据本合同第一条及第二条的规定进行成果验收。

Article 14 The Parties agree that the acceptance of Party B's research and development achievements shall follow the following standards and methods: The acceptance of the achievements shall be carried out according to the provisions of Article 1 and Article 2.

 

第十五条 乙方应当保证其交付给甲方的研究开发成果不侵犯任何第三人的合法权益。如发生第三人指控甲方实施的技术侵权,乙方应当 承担全部责任。

Article 15 Party B shall ensure that the research and development achievements delivered by it to Party A shall not infringe upon the legitimate rights and interests of any third party. If any third Party claims that the technologies used by Party A infringe its patents, Party B shall bear all the responsibilities therefrom.

 

第十六条 双方确定,因履行本合同所产生的研究开发成果及其相关知识产权权利归属,按下列第 2 种方式处理:

Article 16 The Parties agree that the ownership of research and development achievements and relevant intellectual properties during performance of the Contract shall be treated through the 2 nd method:

 

1.(甲、乙、双)方享有申请专利的权利。

(Party A/B/both Parties) enjoys/enjoy the right to apply for patents.

 

专利权取得后的使用和有关利益分配方式如下:

The methods for use of the obtained patents and the allocation of the relevant interests are as follows:

 

2.按技术秘密方式处理。有关使用和转让的权利归属及由此产生的利益按以下约定处理:

They shall be treated as technical secrets. The rights ownership relating to the use and transfer and the interests therefrom shall be treated as follows:

 

(1)技术秘密的使用权: 归甲方所有

The right to use technical secrets: owned by Party A.

 

(2)技术秘密的转让权: 归甲方所有

The right to transfer technical secrets: owned by Party A.

 

(3)相关利益的分配办法:归甲方所有

The distribution of relevant interests: owned by Party A.

 

  11 / 14  

 

 

双方对本合同有关的知识产权权利归属特别约定如下:

The Parties have reached the following agreement on the ownership of intellectual property rights relating to the Contract:

 

第十七条 乙方不得在向甲方交付研究开发成果之前,自行将研究开发成果转让给第三人。

Article 17 Party B shall not transfer arbitrarily the research and development achievements to any third party before delivering the same to Party A.

 

第十八条 乙方完成本合同项目的研究开发人员享有在有关技术成果文件上写明技术成果完成者的权利和取得有关荣誉证书、奖励的权利。

Article 18 Party B's research and development personnel participating in the project hereunder shall enjoy the rights to have their names to be included in the relevant technical achievement documents and to acquire relevant honor certificates and awards.

 

第十九条 乙方利用研究开发经费所购置与研究开发工作有关的设备、器材、资料等财产,归乙方所有。

Article 19 The equipment, apparatuses, materials and other properties purchased by Party B using the research and development funds for the research and development work shall be owned by Party B.

 

第二十条 双方确定,乙方应在向甲方交付研究开发成果后,根据甲方的请求,为甲方指定的人员提供技术指导和培训,或提供与使用该研究开发成果相关的技术服务。

Article 20 The Parties agree that Party B shall, after delivering the research and development achievements to Party A, provide Party A's designated personnel with technical guidance and training or provide technical services relating to the use of the research and development achievements at the request of Party A.

 

1.技术服务和指导内容: 甲方在验收项目后,乙方免费为甲方提供本合同软件产品十二个月的无增量技术支持。

Contents of the technical services and guidance: Party B shall provide Party A with free technical support with no increment for the software products during 12 months after the acceptance of the project by Party A.

 

2:地点和方式: 电话远程方式或现场服务

Time and mode: telephone remote or field service.

 

3.费用及支付方式: 无

Charges and mode of payment: None.

 

第二十一条 双方确定:任何一方违反本合同约定,造成研究开发工作停滞、延误或失败的,按以下约定承担违约责任:

Article 21 The Parties agree that any Party which violates the Contract and thus causes the stagnation, delay or failure of the research and development shall bear the liability for breach of contract according to the following provisions:

 

1. 甲方违反本合同第六条约定,应当按照约定付款额千分之五的额度支付违约金。

1. Party A shall pay liquidated damages at 5‰ of the agreed amount of payment if it violates the provisions of Article 6.

 

2. 乙方违反本合同第四条约定,应当按照约定合同额千分之五的额度支付违约金。

2. Party B shall pay liquidated damages at 5‰ of the agreed amount of payment if it violates the provisions of Article 4.

 

第二十二条 双方确定,甲方有权利用乙方按照本合同约定提供的研究开发成果,进行后续改进。由此产生的具有实质性或创造性技术进步特征的新的技术成果及其权属,由甲方享有。具体相关利益的分配办如下: 无

Article 22 The Parties agree that Party A has the right to make further improvement with the research and development achievements provided by Party B in accordance with the Contract. The new technical achievements with characteristics of substantive or creative technological progress arising therefrom and the ownership thereof shall be owned by Party A. The distribution of relevant interests: None.

 

  12 / 14  

 

 

乙方有权在完成本合同约定的研究开发工作后,利用该项研究开发成果进行后续改进。由此产生的具有实质性或创造性技术进步特征的新的技术成果,归乙方所有。具体相关利益的分配办法如下: 无

Party B has the right to make further improvement with the research and development achievements after it has completed the research and development work in accordance with the Contract. The new technical achievements with characteristics of substantive or creative technological progress arising therefrom shall be owned by Party B. The distribution of relevant interests: None.

 

第二十三条 双方确定,在本合同有效期内,甲方指定熊佳为甲方项目联系人,乙方指定王雯为乙方项目联系人。项目联系人承担以下责任:

Article 23 The Parties agree that, within the term of the Contract, Party A shall designate Xiong Jia as the contact person of Party A, and Party B shall designate Wang Wen as the contact person of Party B. The contact persons shall be responsible for:

 

1.组织和召集项目双方研讨会;

1. organizing and convening project seminar with the participation of both Parties;

 

2.共同确定项目的需求和规格;

2. defining the requirements and specifications of the project together;

 

3.确定项目经费的及时支付和划拨;

3. confirming the timely payment and allocation of project funds; and

 

4.具体落实项目成果的验收。

4. carrying out the acceptance of the project achievements.

 

一方变更项目联系人的,应当及时以书面形式通知另一方。未及时通知并影响本合同履行或造成损失的,应承担相应的责任。

If one Party changes its contact person, it shall notify in writing the other Party in timely manner, and, if it fails to do so and thus impact the performance of the Contract or cause any loss, it shall bear the corresponding responsibilities.

 

第二十四条 双方确定,出现下列情形,致使本合同的履行成为不必要或不可能的,一方可以通知另一方解除本合同;

Article 24 The Parties agree that either Party may notify the other to terminate the Contract if any of the following conditions occurs, which may make the Contract unnecessary or unable to be fulfilled:

 

1.因发生不可抗力或技术风险;

1. Occurrence of any force majeure or technical risks;

 

2. 无

2. None.

 

第二十五条:双方因履行本合同而发生的争议,应协商、调解解决。协商、调解不成的,确定按以下第1种方式处理:

Article 25 Any dispute arising from the performance of the Contract shall be settled through consultation and mediation. If it cannot be settled through consultation and mediation, then it shall be handled through the 1 st method:

 

1.提交上海仲裁委员会仲裁;

1. submit the dispute to Shanghai Arbitration Commission for arbitration;

 

2.依法向人民法院起诉。

2. file a lawsuit with the people's court in accordance with the law.

 

第二十六条 本合同一式四份,具有同等法律效力。

Article 26 The Contract shall be made in quadruplicate of the same legal effect.

 

第二十七条 本合同经双方签字盖章后生效。

Article 27 The Contract shall come into force after signed and sealed by both Parties.

 

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甲方: 世界图书出版上海有限公司

Party A: Shanghai World Publishing Corporation (Company Seal)

 

法定代表人/委托代理人:

Legal Representative/Entrusted Agent:

 

2016年7月18日 

07/18/2016

 

 

 

乙方: 北京华夏大地远程教育网络服务有限公司 (盖章)

Party B: Beijing Huaxia Dadi Distance Learning Services Co., Ltd. (Company Seal)

 

法定代表人/委托代理人:

Legal Representative/Entrusted Agent:

 

2016年7月18日

07/18/2016

 

 

14 / 14

 

Exhibit 10.7

 

教育云平合技术运维服务合同

Technical Operation & Maintenance Service Contract for Education Cloud Platform

 

甲方:世界图书出版上海有限公司(以下简称甲方)

Party A: Shanghai World Publishing Corporation (hereinafter referred to as "Party A")

 

联系地址:上海市广中路88号9-10楼

Address: 9-10F, No.88 Guangzhong Road, Shanghai

联系人:熊佳

Contact Person: Xiong Jia

电话:021-62990305

Tel.: 021-62990305

 

乙方:北京华夏大地数码信息技术有限公司(以下简称乙方)

Party B: Beijing Huaxia Dadi Digital Information Technology Co., Ltd. (hereinafter referred to as "Party B")

 

联系地址:北京经济财开发区地盛北街1号北工大软件园40号楼505室

Address: Room 505, No.40 Building, Software Park, Beijing University of Technology, No. 1, North Disheng Street, Beijing Economic and Technological Development Area, Beijing

联系人:王雯

Contact Person: Wang Wen

电话:010-57925037

Tel.: 010-57925037

 

甲乙双方经友好协商,就甲方委托乙方提供教育云平台技术运维服务事宜达成如下协议:

With respect to entrusting Party B to provide technical operation and maintenance services for education cloud platform of Party A, Party A and Party B have, upon friendly negotiation, agreed as follows:

 

一、服务内容

I. Services

 

1、乙方向甲方提供甲方教育云平台运行所需要的专用服务器、网络存储、网络带宽、标准机架、标准电源、网络端口、IP地址等网络计算资源,保证甲方教育云平台的正常运营;

1. Party B shall provide Party A with network and computing resources such as special servers, network storage, network bandwidth, standard frames, standard power source, network port, and IP addresses required for the operation of Party A's education cloud platform, to ensure the normal operation thereof;

 

2、乙方提供的计算资源应能保证甲方15所(含)以内接入教育云平台的实验学校进行正常的教学和学习,如当年服务的学校超过15所学校,超过学校数量的服务费用在后续的服务合同中予以体现,当年不再另外结算;

2. The computing resources to be provided by Party B shall guarantee normal teaching and studies of no more than 15 experimental schools that have gained access to Party A's education cloud platform; if there are more than 15 schools that are entitled to the services, the service fees for those schools other than 15 schools shall be reflected in subsequent service contracts and shall not be otherwise settled in the same year;

 

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3、乙方为甲方项目学校使用教育云平台提供技术支持服务,技术支持服务包括:(1)向甲方项目学校远程或现场部署教育云平台;(2)对甲方项目学校的教师和学生进行总计不少于240人时的技术培训/服务,技术培训/服务的内容由双方协商确定;

3. Party B shall provide technical supports and services for the education cloud platform used by the schools participating in Party A's project, which shall include: (1) deploying the education cloud platform on site or remotely for such schools; (2) providing technical trainings/services for the teachers and students of such schools for a total of no less than 240 man-hours with the contents of technical trainings/services to be determined by the Parties through negotiation;

 

4、乙方向甲方提供甲方套卷与题库管理系统运行所需要的专用服务器、网络存储、网络带宽、标准机架、标准电源、网络端口、IP地址等网络计算资源,保证甲方套卷与题库管理系统的正常运营。

4. Party B shall provide Party A with network and computing resources such as special servers, network storage, network bandwidth, standard frames, standard power source, network port, and IP addresses required for the operation of Party A's exam paper and pool management system to ensure the normal operation thereof.

 

二、双方的权利和义务

II. Rights and Obligations

 

1、甲方应按照约定及时足额向乙方支付技术运维服务的费用;

1. Party A shall pay full amount of fees of the technical operation and maintenance service to Party B in time as agreed;

 

2、乙方应不间断对服务器的进行日常维护和监控,以保证甲方教育云平台和套卷与题库管理系统的正常运行;

2. Party B shall carry out routine maintenance and monitoring over the servers without interruption to ensure the normal operation of Party A's education cloud platform and the exam paper and pool management system;

 

3、乙方应保证甲方教育云平台和套卷与题库管理系统的联通性;

3. Party B shall guarantee the connectivity between Party A's education cloud platform and the exam paper and pool management system;

 

4、乙方应保证甲方的用户信息、数据安全和知识产权;

4. Party B shall guarantee the safety of Party A's user information and data and the intellectual property rights;

 

5、乙方应根据甲方要求及时完成教育云平台软件升级、远程部署等服务,现场部署不少于4次;

5. Party B shall timely complete services such as the upgrading of education cloud platform software and remote deployment according to Party A's requirements and carry out at least four times of on-site deployment;

 

6、乙方对甲方技术人员进行不低于10小时的系统运维培训,以协助甲方技术人员能够独立完成教育云平台的技术运维工作;

6. Party B shall provide no less than 10 hours of training on system operation and maintenance for Party A's technical personnel to assist Party A's technical personnel in completing the technical operation and maintenance of the education cloud platform independently;

 

7、如教育云平台软件在使用过程中因故障(不可抗力除外)对甲方造成严重影响或损失的,乙方应承担相应的责任,并应及时赶到现场配合甲方进行处理。甲方有权定期或不定期检查维护质量,对乙方未达要求的,相应核减维护费用。

7. If any fault during the use of the education cloud platform software (except for the fault due to force majeure) has caused any serious impact or loss to Party A, Party B shall undertake corresponding liabilities and timely reach the site to assist Party A in handling the situation. Party A shall have the right to inspect the quality of maintenance on a regular or irregular basis, and where Party B fails to meet the requirements, the maintenance fees shall be reduced correspondingly.

 

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三、服务费用及支付方式

III. Service Term, Service Fee and Payment Mode

 

1、本协议约定乙方为甲方提供教育云平台运维服务的时间自2017年1月1日起至2017年12月31日止;乙方为甲方提供套卷与题库管理系统运维服务的时间自2017年6月15日起至2017年12月31日止;

1. It is agreed herein that the period for Party B to provide the service of operation and maintenance of the education cloud platform for Party A shall commence on January 1, 2017 and end on December 31, 2017; the period for Party B to provide the service of operation and maintenance of the exam paper and pool management system for Party A shall commence on June 15, 2017 and end on December 31, 2017;

 

2、甲方支付乙方服务费人民币伍拾伍万元整(小写:¥550000.00元);

2. The service fee to be paid by Party A to Party B shall be RMB Five Hundred and Fifty Thousand Only (in figure: RMB 550,000.00);

 

3、本协议签订10个工作日内,甲方以转帐方式向乙方支付第一期服务费人民币叁拾万元整(小写:¥300000.00元),2017年12月31日前甲方以转帐方式向乙方支付第二期服务费人民币贰拾伍万元整(小写:¥250000.00元);

3. Party A shall pay the first installment of the service fee of RMB Three Hundred Thousand Only (in figure: RMB 300,000.00) to Party B by transfer within 10 working days after this Contract is signed; and Party A shall pay the second installment of the service fee of RMB Two Hundred and Fifty Thousand Only (in figure: RMB 250,000.00) to Party B by transfer before December 31, 2017;

 

4、服务期满后如甲方需要乙方继续提供服务,双方另签合同。

4. The Parties shall sign another contract if Party A requires Party B to continue to provide the service after the service term expires.

 

四、违约责任

IV. Liability for Breach of Contract

 

1、若一方违约应承担相应的赔偿责任,给对方造成损失的按国家有关法规承担相应的赔偿责任。

1. Either party that breaches the Contract shall undertake corresponding liabilities for compensation; where it has caused any loss to the other party, it shall undertake corresponding liabilities for compensation in accordance with relevant national laws and regulations.

 

2、由于水灾、火灾、地震、干旱、战争或合同一方无法预见、控制、避免和克服的其他事件导致不能或暂时不能全部或部分履行本合同,该方可以免责。但是,受不可抗力事件影响的一方须尽快将事件发生状况通知另一方,并在不可抗力事件影响消除日起15日内将有关机构出具的不可抗力事件的证明寄交对方。

2. Either party hereto may be exempted from liability for inability or temporary inability to partially or fully perform the Contract resulting from flood, fire, earthquake, drought, war or any other event that cannot be foreseen, controlled, prevented or overcome by such party, provided that the party affected by such force majeure event shall notify the other party of occurrence of such event as soon as possible and send evidences of such force majeure event issued by any competent authority to the other party within 15 days after the influence of such force majeure event is eliminated.

 

五、其它

V. Miscellaneous

 

1、因履行本合同所发生的一切争议应通过友好协商解决。如协商不能解决争议,则由甲方所在地法院管辖。

1. Any and all disputes arising from the performance of the Contract shall be solved through friendly negotiation. Where such negotiation fails, the dispute shall submit to the jurisdiction of the court at the place where Party A is located.

 

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2、本合同从签字盖章之日起生效。

2. The Contract shall take effect when it is signed and affixed with seals.

 

3、本合同一式两份,甲、乙双方各执壹份,具有同等法律效力。

3. The Contract is made in duplicate, one for each party with the same legal effect.

 

甲方 (Party A)

世界图书出版上海有限公司

Shanghai World Publishing Corporation (Company Seal)

 

乙方 (Party B)

北京华夏大地数码信息技术有限公司

Beijing Huaxia Dadi Digital Information Technology Co., Ltd. (Company Seal)

     

代表人(签字):

Representative (signature):

 

代表人(签字):

Representative (signature):

     

日期:2017年6月19日

Date: June 19, 2017

 

日期:2017年6月19日

Date: June 19, 2017

 

  4  

 

Exhibit 10.8

 

北京华夏大地远程教育网络服务有限公司

Beijing Huaxia Dadi Distance Learning Services Co., Ltd.

 

 

江西省自学考试“课程学业综合评价”

学习服务中心项目合作协议

Cooperation Agreement for Jiangxi “Comprehensive Academic

Evaluation” Learning Service Center Program for Self-taught Examinations

 

甲方:北京华夏大地远程教育网络服务有限公司

Party A: Beijing Huaxia Dadi Distance Learning Services Co., Ltd.

 

地址:北京经济技术开发区地盛北街北工大软件园21-1楼

Address: 21-1 Building, Software Park, Beijing University of Technology, North Disheng Street, Beijing Economic and Technological Development Area

 

邮编:100176

Zip code: 100176

 

手机:18610716856

Mobile: 18610716856

 

电话:010-57925046

Tel: 010-57925046

 

传真:010-57925053

Fax: 010-57925053

 

E-mail:houct@edu-edu.com.cn

 

联系人:侯存涛

Contact: Hou Cuntao

 

乙方:江西师范大学继续教育学院

Party B: College of Continuing Education, Jiangxi Normal University

 

地址:江西省南昌市北京西路437号

Address: No. 437, Beijing West Road, Nanchang City, Jiangxi Province

 

邮编:330027

Zip code: 330027

 

手机:13397091898

Mobile: 13397091898

 

电话:010-57925046

Tel:010-57925046

传真:010-57925056

Fax:010-57925056

http://www.edu-edu.com.cn

地址:北京经济技术开发区地盛北街1号北工大软件园21-1号

Address: 21-1 Building, Software Park, Beijing University of Technology, North Disheng Street, Beijing Economic and Technological Development Area

邮编:100176

Zip code:100176

 

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北京华夏大地远程教育网络服务有限公司

Beijing Huaxia Dadi Distance Learning Services Co., Ltd.

 

 

电话:0791-88506229

Tel: 0791-88506229

 

传真:0791-88513645

Fax: 0791-88513645

 

E-mail:quanwa99@yahoo.com.cn

 

联系人:饶文华

Contact: Rao Wenhua

 

甲方:北京华夏大地远程教育网络服务有限公司是专注于远程学习内容提供和学习支持服务的大型企业,是中国远程教育领域第一家被北京市科委认定的外商投资“高新技术企业”和“双软企业”。所推出的主导服务产品是基于互联网的网上教学、辅导及培训服务。其内容包括:网上学习跟踪平台、自学考试辅导课程、各类取证考试辅导课程、职业、技能培训课程和其他非学历课程。

Party A: Beijing Huaxia Dadi Distance Learning Services Co., Ltd. is a large enterprise focusing on the distance provision of learning contents and learning support services, and the first foreign-invested “high-tech enterprise” and “software enterprise providing software products” recognized by the Beijing Municipal Science & Technology Commission in the Chinese distance education field . The leading service products launched by it are online teaching, coaching and training services based on the Internet. The contents of such services include: online learning tracking platforms, couching courses for self-taught examinations and certification examinations, vocational and skills training courses and other non-award courses.

 

甲方是全国考办推荐的“课程学业综合评价”项目的学习平台技术及教学资源、运营服务提供方,乙方是江西省教育考试院《江西省自学考试综合改革实验方案》中“课程学业综合评价”项目(以下称本项目)的试点单位。

Party A is the provider of learning platform technology and teaching resources and operation services for the “comprehensive academic evaluation” program (hereinafter referred to as the “Program”) recommended by the Office of the China Council for Self-taught Higher Education Examinations. Party B is a pilot entity of the Program in the Experimental Proposal for the Comprehensive Reform of Self-taught Examinations in Jiangxi Province of the Jiangxi Provincial Education Examination Authority.

 

乙方:江西师范大学成人教育自1956年创办以来,是全国首批开展成人高等学历教育和具有成人高等学历教育学士学位授予权、全省首先举办成人教育学硕士研究生教育和具有成人教育学硕士学位授予权、全省高等教育自学考试首批主考单位的省属重点高校。1956年学校正式举办江西省高等师范专科函授教育,1992年成立成人教育学院,2001年成立继续教育学院。学院位于学校青山湖校区,现有教职工30人,其中教授3人、副教授9人;设有办公室、学历部、自考部、学科部、网络部、培训部、外语部等教学管理与科研机构,学校成人教育实行二级管理。

Party B: since the foundation of its adult education in 1956, Jiangxi Normal University is a provincial key university that is one of the first batch of universities carrying out adult higher academic education with the right to confer the bachelor’s degree for adult higher academic education, and the first provincial university that runs education for graduates of bachelor’s degree and master’s degree for adult education and with the right to confer bachelor’s degree and master’s degree for adult education, and the first batch of provincial universities holding self-taught examinations for higher education. The university formally provided correspondence education of normal college in Jiangxi Province in 1956, and established the college of adult education in 1992 and the college of continuing education in 2001. The college of continuing education is located in Qingshan Lake campus, and currently has 30 teaching and administrative staff, including 3 professors and 9 associate professors; it has a office, academic records department, self-taught department, disciplines department, network department, training department, foreign languages department and other teaching administration and scientific research institutions; adult education is subject to two-level management in the college.

 

电话:010-57925046

Tel:010-57925046

传真:010-57925056

Fax:010-57925056

http://www.edu-edu.com.cn

地址:北京经济技术开发区地盛北街1号北工大软件园21-1号

Address: 21-1 Building, Software Park, Beijing University of Technology, North Disheng Street, Beijing Economic and Technological Development Area

邮编:100176

Zip code:100176

 

  2  

 

 

北京华夏大地远程教育网络服务有限公司

Beijing Huaxia Dadi Distance Learning Services Co., Ltd.

 

 

长期以来,学院秉承“静思笃行、持中秉止”的校训和“严谨、勤奋、求是、创新”的优良校风,依托学校雄厚的教育资源和师资力量,致力于成人教育的发展,把成人教育作为学校人才培养结构的重要组成部分,作为学校服务社会、服务经济、服务广大群众的平台,树立“以人为本、服务学员、服务学校、服务社会”的办学理念,形成了以成人教育理论研究为动力、以成人高等学历教育为主体,高等教育自学考试、继续教育培训为两翼的社会教育服务体系。学校已成为成人教育学科建设和理论研究的主要阵地、成人高等教育的品牌大学、高等教育自学考试的示范高校、继续教育培训的重要基地。

For a long time, adhering to the college motto of “to be impartial by in-depth thinking and persistent practice” and the good college spirit of “prudence, diligence, faith of truth and innovative”, relying on the abundant educational resources and faculty of the college, the college is committed to the development of adult education, making adult education as an important part of the college’s talent cultivation structure and a platform for the college to serve the society, the economy and the masses. The college has established the schooling ideas of “people orientation, and serving students, the college and the society” and formed a social education service system with the two wings of self-taught examinations for higher education and continuing education training, driven by theoretic research, with adult higher academic education as the subject. The university has become the main position of discipline construction and theoretical research for adult education, a brand university of adult higher education, a demonstrative university for self-taught examinations for higher education, and an important base for continuing education training.

 

甲乙双方在平等互利、友好合作的基础上开展诚信合作,并就共同开展课程学业综合评价的合作事宜达成本合作协议(下称“本协议”):

On the basis of equality, mutual benefits and friendly cooperation, Party A and Party B cooperate with each other in good faith and enter into the cooperation agreement (hereinafter referred to as the “Agreement”) in relation to the cooperation on comprehensive academic evaluation:

 

第一条:合作内容描述

Article 1: Description of Cooperation

 

  1、 在《江西省自学考试综合改革方案》指导下,甲方负责“课程学业综合评价”项目所涉及的网络学习平台开发及省考办指定的“课程学业综合评价”学科网络课件资源开发,统称“课程学业综合评价”系统。“课程学业综合评价”系统建成后,乙方学员可持甲方提供的注册学习账号登陆进入“课程学业综合评价”系统注册学习课程。系统在乙方辅导员的配合下,对学生学习过程实施课程学业综合评价。
1. Under the guidance of the Proposal for the Comprehensive Reform of Self-taught Examinations in Jiangxi Province, Party A is responsible for the development of the online learning platform involved in the “comprehensive academic evaluation” program and the online discipline courseware resources for “comprehensive academic evaluation” designated by the provincial examination office, which are collectively referred to as the “comprehensive academic evaluation” system. After the completion of the establishment of the “comprehensive academic evaluation” system, Party B’s students can log into such system for the registration of learning courses on the strength of the registered learning accounts provided by Party A. Under the coordination of Party B’s instructors, the system carries out the comprehensive academic evaluation of students’ learning process.

 

电话:010-57925046

Tel:010-57925046

传真:010-57925056

Fax:010-57925056

http://www.edu-edu.com.cn

地址:北京经济技术开发区地盛北街1号北工大软件园21-1号

Address: 21-1 Building, Software Park, Beijing University of Technology, North Disheng Street, Beijing Economic and Technological Development Area

邮编:100176

Zip code:100176

 

  3  

 

 

北京华夏大地远程教育网络服务有限公司

Beijing Huaxia Dadi Distance Learning Services Co., Ltd.

 

 

2、 在《江西师范大学自学考试综改方案》的基础上,双方合作开发网络助学课程。由乙方组织老师完成脚本的编写,课程录制。由甲方负责课程的后期开发和上线运营。

2. On the basis of the Comprehensive Reform Proposal of Jiangxi Normal University for Self-taught Examinations, both parties cooperate to develop online educational aid courses. Party B shall organize teachers to complete the compilation of scripts and the recording of courses. Party A is responsible for the subsequent development and go-live operation of courses.

 

第二条:甲方的权利和义务

Article 2: Rights and Obligations of Party A

 

1、 甲方保证提供给乙方的课程资源“课程学业综合评价”平台拥有完全版权或其他合法授权,保证其内容的真实性并符合中华人民共和国相关法律、法规;

1. Party A guarantees that the “comprehensive academic evaluation” platform of course resources provided for Party B has full copyright or other lawful authority and guarantees the authenticity of the contents and the compliance with the relevant laws and regulations of the People’s Republic of China;

 

2、 甲方负责根据课程学业综合评价方案提供网络课件,并根据乙方需要逐步开发完善,同时甲方应提供技术成熟、性能稳定、操作简便的“课程学业综合评价”系统;

2. Party A is responsible for providing online courseware in accordance with the proposal for comprehensive academic evaluation and gradually developing and improving the same according to Party B’s needs; meanwhile, Party A shall provide a “comprehensive academic evaluation” system featuring mature technology, stable performance and simple operation;

 

3、甲方负责承担课程学业综合评价系统的网络运行和维护服务;

3. Party A is responsible for the online operation and maintenance of the comprehensive academic evaluation system;

 

4、 甲方负责对“课程学业综合评价”系统中的相关宣传界面进行更新维护;

4. Party A is responsible for updating and maintaining the relevant promotional interface in the “comprehensive academic evaluation” system;

 

5、 甲方负责提供“课程学业综合评价”系统的使用手册,并提供必要的人员培训;

5. Party A is responsible for providing the manual of the “comprehensive academic evaluation” system and necessary personnel training;

 

6、 甲方负责提供“课程学业综合评价”系统的安装调试工作,并保证系统的正常运行;

6. Party A is responsible for providing the installation and debugging of the “comprehensive academic evaluation” system and ensuring the normal operation of the system;

 

7、 甲方应向乙方学员提供正常的教学平台使用技术支持和网络学习相关技术咨询服务,除不可抗力因素外,甲方保证在问题出现后48小时内解决网络学习中的各种技术问题。具体保障措施为:

7. Party A shall provide Party B’s students with normal technical support for the use of the teaching platform and technology consulting services related to online learning. Except for force majeure factors, Party A guarantees to solve all the technical problems in online learning process within 48 hours upon the occurrence of such problems. Specific safeguard measures are set out as follows:

 

电话:010-57925046

Tel:010-57925046

传真:010-57925056

Fax:010-57925056

http://www.edu-edu.com.cn

地址:北京经济技术开发区地盛北街1号北工大软件园21-1号

Address: 21-1 Building, Software Park, Beijing University of Technology, North Disheng Street, Beijing Economic and Technological Development Area

邮编:100176

Zip code:100176

 

  4  

 

 

北京华夏大地远程教育网络服务有限公司

Beijing Huaxia Dadi Distance Learning Services Co., Ltd.

 

 

甲方为乙方指派专门技术人员负责;甲方向乙方和使用者提供技术保障联系方式,甲方的服务热线电话:400-610-0480和客户信箱:service@edu-edu.com.cn;

Party A shall assign special technical personnel to the job; Party A shall provide Party B and users with the contact information on technical safeguard. Party A’s service hotline is: 400-610-0480 and customer service email address is: service@edu-edu.com.cn;

 

8、 有关“课程学业综合评价”学习账号收费标准由甲乙双方根据当地的市场情况合理制定,未经双方书面确认任何一方不得改动;

8. The charging standards for learning accounts for “comprehensive academic evaluation” shall be reasonably determined by both parties according to the actual market situation and shall not be changed by either party without the written confirmation by both parties;

 

9、 甲方应按乙方要求向乙方提供注册学习账号,由乙方向学员出售。甲方应确保提供给乙方学员的注册学习账号可以正常使用,如果使用中出现问题应及时配合解决,如因甲方提供的账号问题导致学员学习权限失效,由甲方承担责任;

9. Party A shall provide Party B with registered learning accounts according to the requirements of Party B, which shall sell such accounts to students. Party A shall ensure that the registered learning accounts provided for Party B’s students can be used normally and shall cooperate to solve any problems arising in the use process in a timely manner; Party A shall be liable for the invalidation of learning authority of students due to the problems in the accounts provided by Party A;

 

10、甲方对乙方一切有关“课程学业综合评价”项目市场招生广告有建议权,以保护“课程学业综合评价核”项目健康稳定的发展;

10. Party A has the right to make suggestions on all the marketing and enrollment advertisements for the “comprehensive academic evaluation” program, so as to protect the healthy and stable development of the “comprehensive academic evaluation” program;

 

11、甲方有权监控乙方在“课程学业综合评价”运作的规范性,如发现乙方有运作不规范或侵害学员利益的现象,甲方应及时通知乙方改正,若乙方不予改进的,甲方有权书面报省考办查实整顿,如乙方出现重大违规行为可能影响到项目的健康运营,甲方有权暂停本协议的相关义务直至违规行为得到纠正;

11. Party A has the right to monitor Party B’s regularity in the operation of “comprehensive academic evaluation”. If finding any irregular operation or infringement of students’ interests by Party B, Party A shall notify Party B of corrections in a timely manner; if Party B fails to do so, Party A has the right to report in writing to the principal examination office for rectification; in case of Party B’s material breach, which may affect the sound operation of the program, Party A has the right to suspend the performance of the relevant obligations hereunder until the breach is corrected;

 

12、甲方不得泄露在履行本协议过程中了解到的乙方的商业秘密,甲方有义务对本协议的内容保密;

12. Party A shall not disclose the trade secrets of Party B coming to its knowledge in the course of fulfilling the Agreement, and Party A has the obligation to keep the contents hereof confidential;

 

13、甲方应派专员负责本协议内容事项的接洽工作;

13. Party A shall assign special personnel to the coordination of the matters hereunder;

 

电话:010-57925046

Tel:010-57925046

传真:010-57925056

Fax:010-57925056

http://www.edu-edu.com.cn

地址:北京经济技术开发区地盛北街1号北工大软件园21-1号

Address: 21-1 Building, Software Park, Beijing University of Technology, North Disheng Street, Beijing Economic and Technological Development Area

邮编:100176

Zip code:100176

 

  5  

 

 

北京华夏大地远程教育网络服务有限公司

Beijing Huaxia Dadi Distance Learning Services Co., Ltd.

 

 

14、甲方指定课程合作开发项目联系人和负责人,确保在项目过程中沟通顺畅;

14. Party A shall designate the contact and the person in charge of the cooperative course development project to ensure the smooth communication in the project process;

 

15、甲方在合作开发课程期间,为乙方提供课程脚本编写过程规范的指导和帮助;

15. Party A shall provide Party B with guidance and help for the norms for the preparation of course scripts during the cooperative course development;

 

1. 甲方负责检查老师提交的脚本,对脚本的编写规范和教学设计等进行完整性审查;
1. Party A is responsible for checking the scripts submitted by teachers, and examining the completeness of the preparation norms for scripts and teaching design;

 

16、甲方负责对乙方录制人员进行录制过程的沟通和培训。

16. Party A is responsible for the communication and training of the personnel participating in recording in the process of recording.

 

17、甲方负责完成课程的后期开发制作,并上线运营。

17. Party A is responsible for the subsequent development and production and go-live operation of courses.

 

18、甲方负责给乙方提供过考平台的管理入口,让乙方监控合作课程在全国的使用统计。

18. Party A is responsible for providing Party B with the management entrance for the examination-pass-guaranteed platform, for Party B to monitor the statistics of the use of cooperative courses in the country.

 

第三条:乙方的权利和义务

Article 3: Rights and Obligations of Party B

 

1、乙方有权使参加本校自学考试的采用付费学习的方式享有“课程学业综合评价”赋予的政策权利;

1. Party B has the right to confer the adoption of paid learning to participate in the self-taught examinations held in the university the right to the policies under the “comprehensive academic evaluation”;

 

2、乙方须明确告知社会考生参与“课程学业综合评价”项目时,要严格遵循江西省自考办的相关监督管理要求并说明违规的后果,并制定一系列的监控管理制度及操作规范,使试点改革项目有效进行;

2. Party B shall clearly inform the social candidates that they shall strictly observe the relevant regulatory requirements of the Jiangxi Provincial Self-taught Examination Office when participating in the “comprehensive academic evaluation” program and explain the consequences of violations, and shall formulate a series of monitoring and management systems and operation norms, to effectively carry out the pilot reform program;

 

3、乙方应根据甲方提供的网络学习环境建设要求,在学习服务中心内建设规范达标准的网络助学环境。确保学生能正常学习;

3. Party B shall construct a standard internet-based learning environment in the learning service center in accordance with the construction requirements for the online learning environment provided by Party A, to ensure the normal learning of students;

 

电话:010-57925046

Tel:010-57925046

传真:010-57925056

Fax:010-57925056

http://www.edu-edu.com.cn

地址:北京经济技术开发区地盛北街1号北工大软件园21-1号

Address: 21-1 Building, Software Park, Beijing University of Technology, North Disheng Street, Beijing Economic and Technological Development Area

邮编:100176

Zip code:100176

 

  6  

 

 

北京华夏大地远程教育网络服务有限公司

Beijing Huaxia Dadi Distance Learning Services Co., Ltd.

 

 

4、乙方需要每次考期前四个月向甲方提供参与考期的“课程学业综合评价”的新增课程目录以供甲方做好必要的准备,甲方根据乙方提供的课程需求酌情安排开发。

4. Party B shall, four months prior to each examination period, provide Party A with the catalog of additional courses participating in the “comprehensive academic evaluation” in the examination period, for Party A to make necessary preparations, and Party B shall arrange development at its discretion according to the course needs provided by Party B.

 

5、乙方应制定全年网络助学计划并提供给甲方,供甲方根据乙方计划定期导入、更换系统课件内容;

5. Party B shall formulate an annual network educational aid plan and provide the same for Party A, for Party A to input and replace the courseware content of the system according to Party B’s plan on a regular basis;

 

6、乙方应派专门技术人员负责跟踪“课程学业综合评价”系统日常的现场运维工作,发现问题及时向甲方反馈,由甲方负责排查解决,保障学生正常使用;

6. Party B shall dispatch special technical personnel responsible for tracking the daily on-site operation and maintenance of the “comprehensive academic evaluation” system, and feed back any identified problems in a timely manner to Party A, for Party A’s investigation and solution, to guarantee the normal use by students;

 

7、乙方应逐步建立“课程学业综合评价”助学辅导师资队伍,负责进行学生学习过程考核中需要人工记录的部分;

7. Party B shall gradually build the educational aid teaching faculty for the “comprehensive academic evaluation” responsible for the manual recording of the assessment of students’ learning process;

 

8、乙方应妥善管理甲方提供的注册学习账号,如因乙方原因导致学员学习权限失效,由乙方承担责任。乙方不得把学习账号出卖给乙方学员之外的任何机构、个人;

8. Party B shall properly manage the registered learning accounts provided by Party A and shall be liable for the invalidation of learning authority of students due to the reasons attributable to Party B. Party B shall not sell the learning accounts to any organization or individual other than Party B’s students;

 

9、为保护“课程学业综合评价”服务定价的统一,乙方不得随意调整收费标准,如遇特殊情况确需要调整时,应书面向甲方提报申请说明原因,甲方书面认可后,方可按新的价格标准执行收费;

9. In order to protect the unified prices of “comprehensive academic evaluation” services, Party B shall not arbitrarily adjust the charging standards and, if adjustment is necessary under special circumstances, apply in writing to Party A with reasons explained, and may execute the charges according to new price standards upon written recognition by Party A;

 

10、乙方须保证有关“课程学业综合评价”招生广告宣传的真实性,招生广告须经甲方及江西省教育考试院同意后方可投放;

10. Party B shall ensure the authenticity of the enrollment advertisements and publicity related to “comprehensive academic evaluation”. Such enrollment advertisements may not be released unless approved by Party A and the Jiangxi Provincial Education Examination Authority;

 

电话:010-57925046

Tel:010-57925046

传真:010-57925056

Fax:010-57925056

http://www.edu-edu.com.cn

地址:北京经济技术开发区地盛北街1号北工大软件园21-1号

Address: 21-1 Building, Software Park, Beijing University of Technology, North Disheng Street, Beijing Economic and Technological Development Area

邮编:100176

Zip code:100176

 

  7  

 

 

北京华夏大地远程教育网络服务有限公司

Beijing Huaxia Dadi Distance Learning Services Co., Ltd.

 

 

11、乙方学员通过交纳注册学习账号费的形式享受付费网络助学资源及课程学业综合评价服务,乙方应根据双方约定和学员报名课次数向甲方支付费用;

11. Party B’s students enjoy paid online educational aid resources and comprehensive academic evaluation services by paying fees for registered learning accounts; Party B shall pay Party A fees as agreed upon by both parties and based on the number of applications for courses by students;

 

12、乙方不得泄露在履行本协议过程中了解到的甲方的商业秘密。乙方有义务对本协议的内容保密。

12. Party B shall not disclose the trade secrets of Party A coming to its knowledge in the course of fulfilling the Agreement. Party B has the obligation to keep the contents hereof confidential.

 

13、乙方应派专员负责本协议内容事项的接洽工作。

13. Party B shall assign special personnel to the coordination of the matters hereunder.

 

14、乙方指定课程合作开发项目联系人和负责人,确保在项目过程中沟通顺畅;

14. Party B shall designate the contact and the person in charge of the cooperative course development project to ensure the smooth communication in the project process;

 

15、乙方负责对合作开发的课程组织老师进行脚本编写和录制工作。

15. Party B is responsible for organizing teachers to prepare scripts and conduct recording for the cooperatively developed courses.

 

16、乙方负责安排摄像棚和摄像人员完成老师视频课件录制工作。

16. Party B is responsible for arranging for the camera studio and camera personnel to complete the recording of teachers’ video courseware.

 

17、乙方免费为甲方提供2间办公室作为甲方技术人员办公场所,办公设施由甲方自行负责。

17. Party B provides Party A with 2 offices free of charge as the office places of Party A’s technical personnel, with the office facilities to be provided by Party A on its own.

 

18、乙方确保按照江西省教育考试院关于开展自学考试综合改革试点的要求,统一组织江西师大综合改革试点考生参加网络助学。

18. Party B shall ensure that students under the pilot comprehensive reform program for self-taught examinations of Jiangxi Normal University are organized on a unified basis to participate in online educational aid in accordance with the requirements of the Jiangxi Provincial Education Examination Authority for carrying out the pilot comprehensive reform program.

 

第四条:费用支付和招生收入分配

Article 4: Payment of Fees and Distribution of Enrollment Income

 

1、对于甲方独立版权的课程,如根据江西师大自学考试本科(专升本)综合改革试点方案属参加全国统一考试课程,则甲方按照100元/课次的标准收费;如根据江西师大自学考试本科(专升本)综合改革试点方案属参加理论与实践考核相结合考试课程,则甲方按照70元/课次的标准收费。

1. For courses whose independent copyright is owned by Party A, if they belong to the courses under national unified examinations according to the pilot comprehensive reform program for self-taught examinations for the undergraduate diplomat (top-up program) of Jiangxi Normal University, Party A shall charge fees at RMB 100 per class; if they belong to examination courses in combination of theory and practice according to such program, Party A shall charge fees at RMB 70 per class.

 

电话:010-57925046

Tel:010-57925046

传真:010-57925056

Fax:010-57925056

http://www.edu-edu.com.cn

地址:北京经济技术开发区地盛北街1号北工大软件园21-1号

Address: 21-1 Building, Software Park, Beijing University of Technology, North Disheng Street, Beijing Economic and Technological Development Area

邮编:100176

Zip code:100176

 

  8  

 

 

北京华夏大地远程教育网络服务有限公司

Beijing Huaxia Dadi Distance Learning Services Co., Ltd.

 

 

2、对于甲乙双方合作开发的课程,如果收费标准大于60元/课次,按照如下标准支付乙方课程使用费:

2. For the courses developed by both parties through cooperation, if the charging standard is more than RMB 60 per class, Party B shall be paid the fees for the use of courses based on the following standards:

 

a) 如每考期该课程全国使用课次在0-2000,甲方按照收费标准的30%支付给乙方课程使用费;

a) if the courses are used in 0-2000 classes nationwide during each examination period, Party A shall pay 30% of the charging standard to Party B for the use of courses;

 

b) 如每考期该课程全国使用课次在2001-4000,甲方按照收费标准的27%支付给乙方课程使用费;

b) if the courses are used in 2001-4000 classes nationwide during each examination period, Party A shall pay 27% of the charging standard to Party B for the use of courses;

 

c) 如每考期该课程全国使用课次在4001-6000,甲方按照收费标准的24%支付给乙方课程使用费;

c) if the courses are used in 4001-6000 classes nationwide during each examination period, Party A shall pay 24% of the charging standard to Party B for the use of courses;

 

d) 如每考期该课程全国使用课次在6001以上,甲方按照收费标准的20%支付给乙方课程使用费;

d) if the courses are used in 6001 or more classes nationwide during each examination period, Party A shall pay 20% of the charging standard to Party B for the use of courses;

 

3、对于甲乙双方合作开发的课程,如果收费标准小于60元/课次,甲方按照收费标准的20%支付给乙方课程使用费。

3. For the courses developed by both parties through cooperation, if the charging standard is less than RMB 60 per class, Party A shall pay 20% of the charging standard to Party B for the use of courses.

 

4、甲乙双方费用的核算在每个考期结束后五个工作日内进行,并及时将结算金額支付给双方。

4. The settlement of fees between both parties shall be conducted within five working days upon the end of each examination period, and the settled amount shall be paid to each other in a timely manner.

 

5、甲方应于收到乙方支付的预付学习账号费或追加学习账号费款项后的五个工作日内向乙方开具正式发票;乙方应于收到甲方支付的课程合作分成款后的五个工作日内向甲方开具正式发票;

5. Party A shall issue official invoices to Party B within five working days upon receipt of the prepaid fees for learning accounts or additional fees for learning accounts paid by Party B; Party B shall issue official invoices to Party A within five working days upon receipt of the share of amount from cooperative courses paid by Party A;

 

甲方汇款银行信息:

Information on Party A’s remitting bank:

 

银行汇款: 甲方全称 :北京华夏大地远程教育网络服务有限公司

Bank remittance: full name of Party A: Beijing Huaxia Dadi Distance Learning Services Co., Ltd.

 

电话:010-57925046

Tel:010-57925046

传真:010-57925056

Fax:010-57925056

http://www.edu-edu.com.cn

地址:北京经济技术开发区地盛北街1号北工大软件园21-1号

Address: 21-1 Building, Software Park, Beijing University of Technology, North Disheng Street, Beijing Economic and Technological Development Area

邮编:100176

Zip code:100176

 

  9  

 

 

北京华夏大地远程教育网络服务有限公司

Beijing Huaxia Dadi Distance Learning Services Co., Ltd.

 

 

开户银行:交通银行北京分行北京经济技术开发区支行

Deposit bank: Beijing Economic and Technological Development Area Sub-branch, Beijing Branch, Bank of Communications

 

帐       号:110060777018001824776

Account No.: 110060777018001824776

 

乙方汇款银行信息:

Information on Party B’s remitting bank:

 

银行汇款: 乙方全称:江西师范大学

Bank remittance: full name of Party B: Jiangxi Normal University

 

开户银行:建设银行南昌市洪都支行

Bank of deposit: China Construction Bank Nanchang Hongdu Sub-branch

 

帐         号:36001050400050004609

Account No.: 36001050400050004609

 

第五条:违约责任

Article 5: Liability for Breach of Contract

 

1、如果因甲方所提供教学内容的版权与第三方发生纠纷,由甲方负全责,乙方不承担任何资任;如果非因甲方过错乙方与第三方发生纠纷,甲方不承担任何责任;

1. Party A shall be solely liable for any dispute with any third party over the copyright for the teaching contents provided by Party A, while Party B does not undertake any liability; Party A does not undertake any liability for any dispute between Party B and any third party for reasons not attributable to Party A;

 

2、若一方(非违约方)声明另一方(违约方)违反本协议并提出此种违反的证明,则非违约方可要求违约方在30天内就违约侵害进行补偿协商;

2. If a party (non-defaulting party) declares that the other party (defaulting party) violates the Agreement and produces proof of such breach, the non-defaulting party may require the defaulting party to negotiate about compensation for breach of contract and infringement within 30 days;

 

3、当违约方违反其在本协议项下的义务时,非违约方有权免于履行其在本协议项下的义务;

3. When the defaulting party breaches its obligations hereunder, the non-defaulting party has the right to be exempted from performing its obligations hereunder;

 

4、若因违约方违反本协议而使非违约方或第三方发生任何费用、开支、额外责任或遭受损失,违约方应就该费用、开支、责任或损失、包括已付、应付或将付的利息等,向非违约方给予赔偿;

4. The defaulting party shall compensate the non-defaulting party for any expenses, expenditures, additional liability or losses incurred or suffered by the non-defaulting party or a third party as a result of the defaulting party’s breach of the Agreement, including the interest paid, payable or to be paid;

 

电话:010-57925046

Tel:010-57925046

传真:010-57925056

Fax:010-57925056

http://www.edu-edu.com.cn

地址:北京经济技术开发区地盛北街1号北工大软件园21-1号

Address: 21-1 Building, Software Park, Beijing University of Technology, North Disheng Street, Beijing Economic and Technological Development Area

邮编:100176

Zip code:100176

 

  10  

 

 

北京华夏大地远程教育网络服务有限公司

Beijing Huaxia Dadi Distance Learning Services Co., Ltd.

 

 

5、双方认可所有应由违约方承担之责任,除本条前四款约定外,均应以协商的原则处置。

5. Both parties recognize all the liability that shall be assumed by the defaulting party shall be disposed of on the principle of negotiation, except as agreed in the previous four paragraphs of the present article.

 

第六条:协议的生效、变更与解除

Article 6: Effectiveness, Alteration and Dissolution of the Agreement

 

1、本协议在江西省教育考试院下达正式批文后双方代表签署盖章之日起生效,五年内有效;

1. The Agreement shall take effect as of the date when both parties’ representatives affix signatures and seals after the official release of the official approval document by the Jiangxi Provincial Education Examination Authority and shall remain valid for five years;

 

2、本协议未尽事宜,双方可另行协商解决并签订补充协议;

2. The matters not covered herein may be separately settled by both parties upon negotiation, with any supplementary agreements signed;

 

3、补充协议和附件视作本协议组成部分,具有同等法律效力;

3. Supplementary agreements and appendices, if any, shall be deemed as part of the Agreement and shall have the same legal force;

 

4、如甲、乙双方协商一致,可以解除本协议,双方互不承担损害赔偿责任。

4. Both parties may dissolve the Agreement upon negotiation and shall not bear the liability for damages to each other.

 

第七条:不可抗力

Article 7: Force Majeure

 

由于包括但不限于下列情形如:地震、台风、洪水、火灾、战争、罢工、政府禁令、通信线路中断、黑客攻击、计算机病毒发作、电信部门技术调整、国家或省级考试中心及自考办相关政策调整等不可预见并对其发生和后果不能防止或避免的不可抗力事件,影响本协议一方履行本协议相关义务,该遭遇不可抗力事件的本协议一方,应于不可抗力事件发生之日起十五日内,以书面形式通知本协议另一方。该遭遇不可抗力事件的本协议一方将无须就上述不可抗力事件导致的其不履行本协议向本协议另一方负相关赔偿责任。但当事人迟延履行或不当履行后发生不可抗力的,不能免除责任。

If a party’s performance of the relevant obligations hereunder is affected by the following circumstances, including but not limited to: earthquakes, typhoon, floods, fire, war, strikes, government bans, interruption of communication lines, hacker attacks, computer virus outbreaks, technical adjustments made by telecommunication departments, relevant policy adjustments of the national or provincial examination centers and self-taught examination offices and other unforeseen force majeure events whose occurrence and consequences cannot be prevented or avoided, the affected party hereto shall, within fifteen days upon occurrence of a force majeure event, notify the other party hereto in writing. The affected party hereto need not bear the relevant liability for compensation to the other party hereto in respect of its non-performance hereof caused by the above force majeure event. The liability cannot be exempted, however, if the force majeure occurs after the delayed or inappropriate performance by the party.

 

电话:010-57925046

Tel:010-57925046

传真:010-57925056

Fax:010-57925056

http://www.edu-edu.com.cn

地址:北京经济技术开发区地盛北街1号北工大软件园21-1号

Address: 21-1 Building, Software Park, Beijing University of Technology, North Disheng Street, Beijing Economic and Technological Development Area

邮编:100176

Zip code:100176

 

  11  

 

 

北京华夏大地远程教育网络服务有限公司

Beijing Huaxia Dadi Distance Learning Services Co., Ltd.

 

 

第八条:争议解决

Article 8: Dispute Resolution

 

凡因协议所发生的一切争议,甲、乙双方应通过友好协商的方式加以解决;协商不成时,甲、乙双方之任何一方均有权将该争议向有管辖权的法院提起诉讼。

All disputes arising from the Agreement shall be settled by both parties through friendly negotiation; if the negotiation fails, either party has the right to bring such disputes before a court of competent jurisdiction for litigation.

 

第九条:附则

Article 9: Supplementary Provisions

 

1、未经对方书面同意,任何一方不得将其在本协议项下的权利或义务以任何方式转让与第三方;

1. Without the written consent of the other party, neither party shall transfer in any form its rights or obligations under the Agreement to any third party;

 

2、甲乙双方基于本协议产生的法律关系是一种合作关系,除本协议另有规定外,乙方不是甲方的代理人,乙方作为独立的民事主体对外开展经营活动,执行本协议应当遵守法律的要求对外独立承担民事责任;

2. The legal relationship between the parties arising out of the Agreement is a cooperative relationship. Unless otherwise specified herein, Party B is not an agent of Party A but carries out business activities with external parties as an independent civil subject; it shall abide by the requirements of the law and bear independent civil liability to external parties;

 

3、本协议由中华人民共和国有关法律、法规管辖和解释;

3. The Agreement shall be governed by and construed in accordance with the relevant laws and regulations of the People’s Republic of China;

 

4、本协议一式四份,甲、乙双方各执两份,具有同等法律效力。

4. The Agreement is made in quadruplicate of the same legal effect, with each party holding two.

 

5、本协议内的“考期”定义和期限为: 自学考试每年4、5、10、11月的考试期。

5. In the Agreement, the examination periods are defined in: each April, May, October and November for self-taught examinations.

 

电话:010-57925046

Tel:010-57925046

传真:010-57925056

Fax:010-57925056

http://www.edu-edu.com.cn

地址:北京经济技术开发区地盛北街1号北工大软件园21-1号

Address: 21-1 Building, Software Park, Beijing University of Technology, North Disheng Street, Beijing Economic and Technological Development Area

邮编:100176

Zip code:100176

 

  12  

 

 

北京华夏大地远程教育网络服务有限公司

Beijing Huaxia Dadi Distance Learning Services Co., Ltd.

 

 

甲方:北京华夏大地远程教育网络服务有限公司

Party A: Beijing Huaxia Dadi Distance Learning Services Co., Ltd. (Seal)

 

乙方:江西师范大学继续教育学院

Party B: College of Continuing Education, Jiangxi Normal University (Seal)

     

授权代表(签字):

Authorized representative (signature):

 

授权代表(签字):

Authorized representative (signature):

     

签署日期: 2013.5.14

Signed on: May 14, 2013

 

签署日期:2013.5.14

Signed on: May 14, 2013

 

电话:010-57925046

Tel:010-57925046

传真:010-57925056

Fax:010-57925056

http://www.edu-edu.com.cn

地址:北京经济技术开发区地盛北街1号北工大软件园21-1号

Address: 21-1 Building, Software Park, Beijing University of Technology, North Disheng Street, Beijing Economic and Technological Development Area

邮编:100176

Zip code:100176

 

  13  

 

Exhibit 10.9

 

北京华夏大地远程教育网络服务有限公司

Beijing Huaxia Dadi Distance Learning Services Co., Ltd.

 

 

湖南省高等教育自学考试点考系统合作协议

Cooperation Agreement for Suspended Self-taught Examinations System of Higher Education in Hunan Province

 

甲方:北京华夏大地远程教育网络服务有限公司

Party A: Beijing Huaxia Dadi Distance Learning Services Co., Ltd.

 

地址:北京经济技术开发区地盛北街北工大软件园21-1楼

Address: 21-1 Building, Software Park, Beijing University of Technology, North Disheng Street, Beijing Economic and Technological Development Area

 

邮编:100176

Zip code: 100176

 

手机:18610716856

Mobile: 18610716856

 

电话:010-57925046

Tel: 010-57925046

 

传真:010-57925025

Fax: 010-57925025

 

联系人:侯存涛

Contact: Hou Cuntao

 

乙方:湖南农业大学继续教育学院

Party B: College of Continuing Education, Hunan Agricultural University

 

地址:湖南省长沙市芙蓉区农大路1号

Address: No. 1 Nongda Road, Furong District, Changsha City, Hunan Province

 

邮编:410128

Zip code: 410128

 

手机:13975863116

Mobile: 13975863116

 

电话:0731-84618093

Tel: 0731-84618093

 

传真:0731-84618093

Fax: 0731-84618093

 

联系人:刘志

Contact: Liu Zhi

 

地址:北京经济技术开发区地盛北街北工大软件园21-1楼

Address: 21-1 Building, Software Park, Beijing University of Technology, North Disheng Street, Beijing Economic and Technological Development Area

邮编:100176

Zip code: 100176

 

  1  

 

 

北京华夏大地远程教育网络服务有限公司

Beijing Huaxia Dadi Distance Learning Services Co., Ltd.

 

 

甲方:北京华夏大地远程教育网络服务有限公司是专注于远程学习内容提供和学习支持服务的大型企业,是中国远程教育领域第一家被北京市科委认定的外商投资“高新技术企业”和“双软企业”。所推出的主导服务产品是基于互联网的网上教学、辅导及培训服务。其内容包括:网上学习跟踪平台、自学考试辅导课程、自学考试标准考试题库、各类取证考试辅导课程、职业、技能培训课程和其他非学历课程。

Party A: Beijing Huaxia Dadi Distance Learning Services Co., Ltd. is a large enterprise focusing on the distance provision of learning contents and learning support services, and the first foreign-invested “high-tech enterprise” and “software enterprise providing software products” recognized by the Beijing Municipal Science & Technology Commission in the Chinese distance education field . The leading service products launched by it are online teaching, coaching and training services based on the Internet. The contents of such services include: online learning tracking platforms, couching courses and standard test paper bank for self-taught examinations, couching courses for certification examinations, vocational and skills training courses and other non-award courses.

 

乙方:湖南农业大学继续教育学院开办学校成人高等教育、高等教育自觉考试。办学层次为高中起点专科、高中起点本科、专科起点本科。开办成人高等教育招生专业83个(本科专业50个,专科专业33个),高等教育自考专业63个(本科专业33个,专科专业30个)。

Party B: College of Continuing Education, Hunan Agricultural University runs adult higher education and holds self-taught examinations for higher education. The schooling levels are the high school starting college diploma, high school undergraduate diploma and college starting undergraduate diploma. The college provides 83 majors for adult higher education (including 50 undergraduate majors and 33 college majors) and 63 majors for self-taught examinations for higher education (including 33 undergraduate majors and 30 college majors).

 

继续教育的办学定位为:立足省内,面向全国,以“涉农专业”为特色,以“应用和实用”为基础,以“基本技能和素质教育”为重点,以培养“高素质的应用性人才”为目标,培养适用社会需求,服务“三农”,德、智、体、美、劳全面发展的应用性科学技术和经营管理人才。

The continuing education is positioned to: cultivate applied science and technology and business management talent who adapts to social demands, serves “agriculture, farmers and rural areas”, and develops all round in terms of moral, intelligence, corporeity, beauty and labor, by keeping a foothold in the province and facing the country, on the basis of “application and practice”, focusing on “basic skills and quality education”, and aiming at cultivating “applied talent of high quality”.

 

甲方是全国考办推荐的高等教育自觉考试综合改革技术及教学资源、运营服务提供方,乙方是全国高等教育自学考试的学习服务中心,湖南省高等教育自学考试点考项目的试点单位。

Party A is the provider of comprehensive reform technology and teaching resources and operation services for the self-taught examinations for higher education recommended by the Office of the China Council for Self-taught Higher Education Examinations. Party B is a learning service center for self-taught examinations for national higher education and a pilot entity of the suspended self-taught examinations program for higher education in Hunan Province.

 

甲乙双方在平等互利、友好合作的基础上开展诚信合作,并就共同开展高等教育自觉考试点考项目的合作事宜达成本合作协议(下称“本协议”):

On the basis of equality, mutual benefits and friendly cooperation, Party A and Party B cooperate with each other in good faith and enter into the cooperation agreement (hereinafter referred to as the “Agreement”) in relation to the cooperation on the suspended self-taught examinations program for higher education:

 

地址:北京经济技术开发区地盛北街北工大软件园21-1楼

Address: 21-1 Building, Software Park, Beijing University of Technology, North Disheng Street, Beijing Economic and Technological Development Area

邮编:100176

Zip code: 100176

 

  2  

 

 

北京华夏大地远程教育网络服务有限公司

Beijing Huaxia Dadi Distance Learning Services Co., Ltd.

 

 

第一条:合作内容描述

Article 1: Description of Cooperation

 

1、在省教育考试院的指导下,甲方负责点考项目所涉及的网络考试平台开发、题库资源开发、技术运营、安全保障等相关服务。乙方负责考生的在线报名工作,在线安排考场,组织上机考试实施等相关工作。

1. Under the guidance of the Hunan Provincial Education Examination Board, Party A is responsible for the development of the online examination platform, the development of test paper bank resources, technical operation, security and other related services involved in the suspended examinations program. Party B is responsible for the online applications for candidates, online arrangements for examination rooms, organization of the implementation of computer examinations and other related work.

 

第二条:甲方的权利和义务

Article 2: Rights and Obligations of Party A

 

1、甲方保证提供给乙方的点考平台拥有完全版权或其他合法授权,保证其内容的真实性并符合中华人民共和国相关法律、法规;

1. Party A guarantees that the suspended examinations platform provided for Party B has full copyright or other lawful authority and guarantees the authenticity of the contents and the compliance with the relevant laws and regulations of the People’s Republic of China;

 

2、甲方负责根据点考的考试方案提供在线考试平台系统,题库系统,保证提供的系统技术成熟、性能稳定、操作简便;

2. Party A is responsible for providing the online examination platform system and the test paper bank system according to the examination program for suspended examinations, to ensure the system provided features mature technology, stable performance and simple operation;

 

3、甲方负责承担该项目的所有的服务器机房建设与维护,保证项目的正常访问;

3. Party A is responsible for the development and maintenance of all the server rooms of the program, to ensure the normal access to the program;

 

4、甲方负责点考系统与考试院信息系统进行接口对接任务和更新维护;

4. Party A is responsible for the interface connection between the suspended examinations system and the information system of the Hunan Provincial Education Examination Board and the update and maintenance of the system;

 

5、甲方负责提供点考系统的使用手册,并提供必要的人员培训;

5. Party A is responsible for providing the manual of the suspended examinations system and necessary personnel training;

 

6、甲方负责向乙方提供正常的点考平台使用技术支持和网络考试相关技术咨询服务,除不可抗力因素外,甲方保证在问题出现后48小时内解决网络考试中的各种技术问题。具体保障措施为:甲方为乙方指派专门技术人员负责;甲方向乙方和使用者提供技术保障联系方式,甲方的服务热线电话:400-610-0480和客户信箱:service@edu-edu.com.cn;

6. Party A shall provide Party B with normal technical support for the use of the suspended examinations platform and technology consulting services related to online examinations. Except for force majeure factors, Party A guarantees to solve all the technical problems in online examination process within 48 hours upon the occurrence of such problems. The specific safeguard measures: Party A shall assign special technical personnel to the job; Party A shall provide Party B and users with the contact information on technical safeguard. Party A’s service hotline is: 400-610-0480 and customer service email address is: service@edu-edu.com.cn;

 

地址:北京经济技术开发区地盛北街北工大软件园21-1楼

Address: 21-1 Building, Software Park, Beijing University of Technology, North Disheng Street, Beijing Economic and Technological Development Area

邮编:100176

Zip code: 100176

 

  3  

 

 

北京华夏大地远程教育网络服务有限公司

Beijing Huaxia Dadi Distance Learning Services Co., Ltd.

 

 

7、甲方负责成立技术运营和安全保证小组,在服务器机房负责系统涉及的软件和硬件的运维和安全保障服务。

7. Party A is responsible for the establishment of a technical operation and security assurance team, which shall be responsible for the operation and maintenance as well as security assurance services for the software and hardware related to the system in the server room.

 

8、甲方不得泄露在履行本协议过程中了解到的乙方的商业秘密,甲方有义务对本协议的内容保密;

8. Party A shall not disclose the trade secrets of Party B coming to its knowledge in the course of fulfilling the Agreement, and Party A has the obligation to keep the contents hereof confidential;

 

9、甲方应派专员负责本协议内容事项的接洽工作。

9. Party A shall assign special personnel to the coordination of the matters hereunder.

 

第三条:乙方的权利和义务

Article 3: Rights and Obligations of Party B

 

1、乙方有权使参加本学习服务中心的考生采用付费学习的方式享有点考系统赋予的政策权利;

1. Party B has the right to confer the students who adopt paid learning to participate in the learning service center the right to the policies under the suspended examinations system;

 

2、乙方须明确告知考生参与自学考试点考项目时,要严格遵循湖南省考试院的相关监督管理要求并说明违规的后果,并制定一系列的监控管理制度及操作规范,使试点改革项目有效进行;

2. Party B shall clearly inform the candidates that they shall strictly observe the relevant regulatory requirements of the Hunan Provincial Education Examination Board when participating in the suspended self-taught examinations program and explain the consequences of violations, and shall formulate a series of monitoring and management systems and operation norms, to effectively carry out the pilot reform program;

 

3、乙方负责根据甲方提供的网络考试环境建设要求,在学习服务中心内建设规范达标准的网络考试机房环境,确保考生能正常考试;

3. Party B shall construct a standard internet-based examination computer room environment in the learning service center in accordance with the construction requirements for the online examination environment provided by Party A, to ensure that candidates can take examinations normally;

 

4、乙方负责根据考试院的要求组织考生报考、编排机房考场、组织考试等相关工作;

4. Party B is responsible for organizing candidates to apply for examinations, arranging examination rooms, organizing examinations and other related work according to the requirements of the Hunan Provincial Education Examination Board;

 

5、乙方须保证有关点考招生广告宣传的真实性,考生范围必须是湖南省考试院制定的考试范围;

5. Party B shall ensure the authenticity of the enrollment advertisements and publicity related to suspended examinations and the candidates shall fall within the examination scope formulated by the Hunan Provincial Education Examination Board;

 

6、乙方考生通过交纳报考费的形式享受付费网络点考的复习、考试服务,乙方应根据双方约定和学员报名课次数向甲方支付费用;

6. Party B’s students enjoy paid online review and examination services for suspended examinations by paying examination fees; Party B shall pay Party A fees as agreed upon by both parties and based on the number of applications for courses by students;

 

地址:北京经济技术开发区地盛北街北工大软件园21-1楼

Address: 21-1 Building, Software Park, Beijing University of Technology, North Disheng Street, Beijing Economic and Technological Development Area

邮编:100176

Zip code: 100176

 

  4  

 

 

北京华夏大地远程教育网络服务有限公司

Beijing Huaxia Dadi Distance Learning Services Co., Ltd.

 

 

7、乙方不得泄露在履行本协议中了解到的甲方的商业秘密。乙方有义务对本协议的内容保密。

7. Party B shall not disclose the trade secrets of Party A coming to its knowledge in the course of fulfilling the Agreement. Party B has the obligation to keep the contents hereof confidential.

 

8、乙方应派专员负责本协议内容事项的接洽工作。

8. Party B shall assign special personnel to the coordination of the matters hereunder.

 

第四条:费用支付和招生收入分配

Article 4: Payment of Fees and Distribution of Enrollment Income

 

1、甲方按照90元/课次的收费标准向乙方收费。具体费用包括(命题费20元/课次,系统运维费用50元/课次,服务器机房安全保证及保密费用20元/课次)

1. Party A will charge fees from Party B according to the charging standard of RMB 90 per class. The specific fees include the proposition fee of RMB 20 per class, system operation and maintenance fee of RMB 50 per class, and server room security assurance and confidentiality fee of RMB 20 per class.

 

2、乙方应于每考期结束后的五个工作日内将上述款项汇入甲方账户;

2. Party B shall transfer the above amount to Party A’s account within five working days upon the end of each examination period;

 

3、甲方应于收到乙方支付的相关款项后的五个工作日内向乙方开具正式发票;

3. Party A shall issue official invoices to Party B within five working days upon receipt of the relevant amount paid by Party B;

 

银行汇款:甲方全称:北京华夏大地远程教育网络服务有限公司

Bank remittance: full name of Party A: Beijing Huaxia Dadi Distance Learning Services Co., Ltd.

 

银行名称:兴业银行股份有限公司北京国贸支行

Bank’s name: Industrial Bank Co., Ltd. Beijing World Trade Center Sub-branch

 

帐号:321130100100164188

Account No.: 321130100100164188

 

第五条:具体保密义务:

Article 5: Obligation of Confidentiality:

 

甲方:

Party A:

 

1.保密内容(包括技术信息和经营信息):①涉及本合同运维相关的技术文件、资料、报考信息、考试数据和商业秘密,乙方管理制度及交付给甲方的不能公开的文档资料等。

1. Confidential contents (including technical information and business information): ① the relevant technical documents, materials, information on examination applications, examination data and trade secrets related to the operation and maintenance hereof and Party B’s management systems and documentary materials that are provided for Party A and cannot be made public.

 

地址:北京经济技术开发区地盛北街北工大软件园21-1楼

Address: 21-1 Building, Software Park, Beijing University of Technology, North Disheng Street, Beijing Economic and Technological Development Area

邮编:100176

Zip code: 100176

 

  5  

 

 

北京华夏大地远程教育网络服务有限公司

Beijing Huaxia Dadi Distance Learning Services Co., Ltd.

 

 

2.涉密人员范围:①直接或间接涉及本合同技术的有关人员;②甲方的研究开发人员;③涉及与该技术成果的相关人员。

2. Scope of secret-related persons: ① persons directly or indirectly related to technologies hereunder; ② Party A’s research and development personnel; and ③ persons relating to the technical achievements.

 

3.保密期限:10年

3. Confidentiality period: 10 years

 

4.泄密责任:按技术运维保密法规定承担责任;应承担因甲方原因泄漏保密内容而造成乙方经营所引发的一切不良后果。

4. Liability for the leakage of secrets: Party A shall bear liability as per the technical operation and maintenance confidentiality law; and bear all adverse consequences of Party B’s operation arising from the leakage of any confidential content for Party A’s reason.

 

乙方:

Party B:

 

1.保密内容(包括技术信息和经营信息):①涉及本合同运维成果软件的设计流程,使用手册,相关的经营信息、数据和商业秘密;②甲方经营流程等。

1. Confidential contents (including technical information and business information): ① the design process of software relating to the operation and maintenance achievements hereunder, the manual, and the relevant operation information, data and trade secrets; ② operation process of Party A.

 

2.涉密人员范围:直接或间接涉及本合同技术的有关人员。

2. Scope of secret-related persons: persons directly or indirectly related to technologies hereunder.

 

3.保密期限:10年

3. Confidentiality period: 10 years

 

4.泄密责任:按技术运维保密法规定承担责任。

4. Liability for the leakage of secrets: Party B shall bear liability as per the technical operation and maintenance confidentiality law.

 

第六条:违约责任

Article 6: Liability for Breach of Contract

 

1、如果因甲方所提供考试内容的版权与第三方发生纠纷,由甲方负全责,乙方不承担任何责任;如果非因甲方过错乙方与第三方发生纠纷,甲方不承担任何责任;

1. Party A shall be solely liable for any dispute with any third party over the copyright for the examination contents provided by Party A, while Party B does not undertake any liability; Party A does not undertake any liability for any dispute between Party B and any third party for reasons not attributable to Party A;

 

地址:北京经济技术开发区地盛北街北工大软件园21-1楼

Address: 21-1 Building, Software Park, Beijing University of Technology, North Disheng Street, Beijing Economic and Technological Development Area

邮编:100176

Zip code: 100176

 

  6  

 

 

北京华夏大地远程教育网络服务有限公司

Beijing Huaxia Dadi Distance Learning Services Co., Ltd.

 

 

2、若一方(非违约方)声明另一方(违约方)违反本协议并提出此种违反的证明,则非违约方可要求违约方在30天内就违约侵害进行补偿协商;

2. If a party (non-defaulting party) declares that the other party (defaulting party) violates the Agreement and produces proof of such breach, the non-defaulting party may require the defaulting party to negotiate about compensation for breach of contract and infringement within 30 days;

 

3、当违约方违反其在本协议项下的义务时,非违约方有权免于履行其在本协议项下的义务;

3. When the defaulting party breaches its obligations hereunder, the non-defaulting party has the right to be exempted from performing its obligations hereunder;

 

4、若因违约方违反本协议而使非违约方或第三方发生任何费用、开支、额外责任或遭受损失,违约方应就该费用、开支、责任或损失、包括已付、应付或将付的利息等,向非违约方给予赔偿;

4. The defaulting party shall compensate the non-defaulting party for any expenses, expenditures, additional liability or losses incurred or suffered by the non-defaulting party or a third party as a result of the defaulting party’s breach of the Agreement, including the interest paid, payable or to be paid;

 

5、双方认可所有应由违约方承担之责任,除本条細款约定外,均应以协商的原则处置。

5. Both parties recognize all the liability that shall be assumed by the defaulting party shall be disposed of on the principle of negotiation, except as agreed in the present paragraph.

 

第七条:协议的生效、变更与解除

Article 7: Effectiveness, Alteration and Dissolution of the Agreement

 

1、本协议在双方代表签署盖章之日起生效,五年内有效;

1. The Agreement shall take effect as of the date when both parties’ representatives affix signatures and seals and shall remain valid for five years;

 

2、本协议未尽事宜,双方可另行协商解决并签订补充协议;

2. The matters not covered herein may be separately settled by both parties upon negotiation, with any supplementary agreements signed;

 

3、补充协议和附件视作本协议组成部分,具有同等法律效力;

3. Supplementary agreements and appendices, if any, shall be deemed as part of the Agreement and shall have the same legal force;

 

4、如甲、乙双方协商一致,可以解除本协议,双方互不承担损害赔偿责任。

4. Both parties may dissolve the Agreement upon negotiation and shall not bear the liability for damages to each other.

 

地址:北京经济技术开发区地盛北街北工大软件园21-1楼

Address: 21-1 Building, Software Park, Beijing University of Technology, North Disheng Street, Beijing Economic and Technological Development Area

邮编:100176

Zip code: 100176

 

  7  

 

 

北京华夏大地远程教育网络服务有限公司

Beijing Huaxia Dadi Distance Learning Services Co., Ltd.

 

 

第八条:不可抗力

Article 8: Force Majeure

 

由于包括但不限于下列情形如:地震、台风、洪水、火灾、战争、罢工、政府禁令、通信线路中断、黑客攻击、计算机病毒发作、电信部门技术调整、国家或省级考试中心及自考办相关政策调整等不可预见并对其发生和后果不能防止或避免的不可抗力事件,影响本协议一方履行本协议相关义务,该遭遇不可抗力事件的本协议一方,应于不可抗力事件发生之日起十五日内,以书面形式通知本协议另一方。该遭遇不可抗力事件的本协议一方将无须就上述不可抗力事件导致的其不履行本协议向本协议另一方负相关赔偿责任。但当事人迟延履行或不当履行后发生不可抗力的,不能免除责任。

If a party’s performance of the relevant obligations hereunder is affected by the following circumstances, including but not limited to: earthquakes, typhoon, floods, fire, war, strikes, government bans, interruption of communication lines, hacker attacks, computer virus outbreaks, technical adjustments made by telecommunication departments, relevant policy adjustments of the national or provincial examination centers and self-taught examination offices and other unforeseen force majeure events whose occurrence and consequences cannot be prevented or avoided, the affected party hereto shall, within fifteen days upon occurrence of a force majeure event, notify the other party hereto in writing. The affected party hereto need not bear the relevant liability for compensation to the other party hereto in respect of its non-performance hereof caused by the above force majeure event. The liability cannot be exempted, however, if the force majeure occurs after the delayed or inappropriate performance by the party.

 

第九条:争议解决

Article 9: Dispute Resolution

 

凡因协议所发生的一切争议,甲、乙双方应通过友好协商的方式加以解决;协商不成时,甲、乙双方之任何一方均有权将该争议向有管辖权的法院提起诉讼。

All disputes arising from the Agreement shall be settled by both parties through friendly negotiation; if the negotiation fails, either party has the right to bring such disputes before a court of competent jurisdiction for litigation.

 

第十条:附则

Article 10: Supplementary Provisions

 

1、未经对方书面同意,任何一方不得将其在本协议项下的权利或义务以任何方式转让与第三方;

1. Without the written consent of the other party, neither party shall transfer in any form its rights or obligations under the Agreement to any third party;

 

2、甲乙双方基于本协议产生的法律关系是一种合作关系,除本协议另有规定外,乙方不是甲方的代理人乙方作为独立的民事主体对外开展经营活动,执行本协议应当遵守法律的要求对外独立承担民事责任;

2. The legal relationship between the parties arising out of the Agreement is a cooperative relationship. Unless otherwise specified herein, Party B is not an agent of Party A but carries out business activities with external parties as an independent civil subject; it shall abide by the requirements of the law and bear independent civil liability to external parties;

 

3、本协议由中华人民共和国有关法律、法规管辖和解释;

3. The Agreement shall be governed by and construed in accordance with the relevant laws and regulations of the People’s Republic of China;

 

4、本协议一式贰份,甲、乙双方各执壹份,具有同等法律效力。

4. The Agreement is made in duplicate of the same legal effect, with each party holding one.

 

5、本协议内的“考期”定义和期限为:自学考试毎年1月、7月的考试期。

5. In the Agreement, the examination periods are defined in: each January and July for self-taught examinations.

 

地址:北京经济技术开发区地盛北街北工大软件园21-1楼

Address: 21-1 Building, Software Park, Beijing University of Technology, North Disheng Street, Beijing Economic and Technological Development Area

邮编:100176

Zip code: 100176

 

  8  

 

 

北京华夏大地远程教育网络服务有限公司

Beijing Huaxia Dadi Distance Learning Services Co., Ltd.

 

 

甲方:北京华夏大地远程教育网络服务有限公司

Party A: Beijing Huaxia Dadi Distance Learning Services Co., Ltd. (Company Seal)

 

乙方:湖南农业大学继续教育学院

Party B: College of Continuing Education, Jiangxi Normal University (Company Seal)

     

授权代表(签字):

Authorized representative (signature):

 

授权代表(签字):

Authorized representative (signature):

     

签署日期: 2014.8.21

Signed on: August 21, 2014

 

签署日期:2014.9.1

Signed on: September 1, 2014

 

地址:北京经济技术开发区地盛北街北工大软件园21-1楼

Address: 21-1 Building, Software Park, Beijing University of Technology, North Disheng Street, Beijing Economic and Technological Development Area

邮编:100176

Zip code: 100176

 

  9  

Exhibit 10.10

 

合同编号:

Contract No.:

 

中国知识产权远程教育学习平台运维服务合同

Contract on Operation and Maintenance Services for the Distance Education and Learning Platform for the Intellectual Property Rights in China

 

项目名称:中国知识产权培训中心远程教育学习平台运维服务

Project name: Operation and Maintenance Services for the Distance Education and Learning Platform of the Intellectual Property Right Training Center of China

 

委托方(甲方):中国知识产权培训中心

Entrusting Party (Party A): Training Center of the State Intellectual Property Bureau of China

 

受委托方(乙方):北京华夏大地远程教育网络服务有限公司

Entrusted Party (Party B): Beijing Huaxia Dadi Distance Learning Services Co., Ltd.

 

签订时间:2016年12月

Signing Time: December 2016

 

签订地点:北京

Signing Place: Beijing

 

有效期限:2016年12月15日-2017年12月14日

Effective Period: December 15, 2016 to December 14, 2017

 

 

 

中华人民共和国科学技术部印制

Printed by the Ministry of Science and Technology of the People´s Republic of China

 

填写说明

Instructions

 

本合同为中华人民共和国科学技术部印制的技术开发(委托)合同示范文本,各技术合同登记机构可推介技术合同当事人参照使用。

This Contract is the model text of the Technical Development (Entrustment) Contract printed by the Ministry of Science and Technology of the People´s Republic of China, and the technical contract registration agencies may recommend the parties to a technical contract to use this Contract mutatis mutandis.

 

本合同书适用于一方当事人委托另一方当事人进行新技术、新产品、新工艺、新材料或者新品种及其系统的研究开发所订立的技术运维合同。

This Contract is applicable to the technology operation and maintenance contract according to which one party entrusts the other party to carry out the research and development of new technology, new product, new process, new material or new type and its system.

 

签约一方为多个当事人的,可按各自在合同关系中的作用等,在“委托方”、“受托方”项下(增页)分别排列为共同委托人或共同受托人。

Several signers for one party may be arrayed as joint consigners or joint consignees under the column of “Entrusting Party” or “Entrusted Party” (attached sheet) in accordance with their respective functions in the contract.

 

本合同书未尽事项,可由当事人附页另行约定,并可作为本合同的组成部分。

Any supplementary items or conditions may be agreed by parties concerned on an attached sheet, which constitutes an inseparable part of the Contract.

 

当事人使用本合同书时约定无需填写的条款,应在该条款处注明“无”等字样。

Any clause not applicable to the Contract shall be filled in with “None” by parties concerned.

 

委托方(甲方):中国知识产权培训中心

Entrusting Party (Party A): Intellectual Property Right Training Center of China

 

住所地:北京海淀区上地信息产业基地信息路6号

Domicile: No. 6 Xinxi Road, Shangdi Information Industry Base, Haidian District, Beijing

 

代表人:马放

Representative: Ma Fang

 

项目联系人:邓一凡

Contact Person: Deng Yifeng

 

联'系方式:13501333561

Contact Information: 13501333561

 

通讯地址:北京海淀区上地信息产业基地信息路6号

Correspondence Address: No. 6 Xinxi Road, Shangdi Information Industry Base, Haidian District, Beijing

 

电话:010-62983355 传真:010-62984787

Tel.: 010-62983355 Fax: 010-62984787

 

  2  

 

电子信箱:dengyifan@ciptc.org.cn

E-mail: dengyifan@ciptc.org.cn

 

受托方(乙方):北京华夏大地远程教育网络服务有限公司

Entrusted Party (Party B): Beijing Huaxia Dadi Distance Learning Services Co., Ltd.

 

住所地:北京经济技术开发区地盛北街1号北工大软件园21-1

Domicile: 21-1 Building, Software Park, Beijing University of Technology, North Disheng Street, Beijing Economic and Technological Development Area

 

代表人:杨诚

Representative: Yang Cheng

 

项目联系人:侯存涛

Contact Person: Hou Cuntao

 

联系方式:18610716856

Contact Information: 18610716856

 

通讯地址:北京经济技术开发区地盛北街1号北工大软件园21-1

Correspondence Address: 21-1 Building, Software Park, Beijing University of Technology, North Disheng Street, Beijing Economic and Technological Development Area

 

电话:010-57926046 传 真:010-57925023

Tel.: 010-57926046 Fax: 010-57925023

 

电子信箱:houct@edu-edu.com.cn

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本合同甲方委托乙方开展中国知识产权远程教育学习平台运维服务项目的技术运维,并支付技术运维经费和报酬,乙方接受委托并进行此项技术运维工作。双方经过平等协在真实、充分地表达各自意愿的基础上,根据《中华人民共和国合同法》的规定,达成如下协议,并由双方共同恪守。

Party A to the contract entrusts Party B to conduct the technical operation and maintenance of the operation and maintenance service project of the distance education and learning platform for the intellectual property rights in China, and pays technical operation and maintenance expenses and remunerations, and Party B accepts the entrustment and conduct this technical operation and maintenance. Party A and Party B have reached the Contract on Operation and Maintenance Services for the Distance Education and Learning Platform for the Intellectual Property Rights in China (this "Contract") as below for mutual compliance in accordance with the Contract Law of the People's Republic of China through equal consultation and on the basis of faithfully and fully expressing their respective will.

 

第一条 本合同研究开发项目的要求如下:

Article 1 The requirements for the research and development project hereunder are as follows:

 

1.技术目标:针对培训中心的实际远程运维业务提供日常的技术支持服务;针对中国知识产权远程教育培训业务的实际需要,及时优化平台已有功能;对于变化较大的业务需求,开发平台新的功能;完成应用软件升级(db2,Websphere)、运行环境变化(操作系统升级)等情况下对平台技术的升级和配置调整;对新开设的分站提供相应的技术支持和开发服务;对于培训中心自主制作或第三方制作的课程,完成课程的平台配置,使课程能够以标准方式运行;针对培训中心的教学需要或者新技术的发展,对平台运行的课件(包括第三方制作的课件)进行相应技术调整。

1. Technical objectives: In view of the actual distance operation and maintenance business of the Intellectual Property Right Training Center of China (the "Training Center"), provide routine technical support services; in terms of actual demands of the distance education training business of the intellectual property rights in China, responsively optimize existing functions of the platform; as for business demands changing largely, develop new functions of the platform; complete the upgrade of the platform technologies and configuration adjustment in the case of the upgrade of application software (db2 and Websphere), operation environment change (the upgrade of operating system), etc.; provide corresponding technical supports and development services for sub-stations newly established; complete the platform configuration for courses designed independently by the Training Center or by a third party to ensure the operation of the courses in a standard way; as for the teaching demands or the development of new technologies of the Training Center, conduct corresponding technical adjustments to the platform operation courseware (including the courseware designed by a third party).

 

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2.技术内容:中国知识产权培训中心远程教育平台运维

2. Technical contents: the operation and maintenance for the distance education platform of the Intellectual Property Right Training Center of China

 

3.技术方法和路线:JAVAEE技术路线。

3. Technical methods and routes: JAVAEE technical route.

 

第二条 乙方应在本合同生效后15日内向甲方提交技术运维计划。研究技术运维计划应包括以下主要内容:

Article 2 Party B shall submit the technical operation and maintenance plan to Party A within 15 days after this Contract takes effect. The research technical operation and maintenance plan shall include the following main contents:

 

1.对远程教育系统进行日常运维的具体设计方案;

1. the specific design scheme for the routine operation and maintenance of the distance education system;

 

2.对远程教育系统实施运行保障和代码维护工作的整体思路和具体方案;

2. the overall ideas and specific scheme on the operation guarantee and code maintenance for the distance education system;

 

3.根据上述设计方案和运维方案制定可行性的实施计划;

3. the feasible implementation plan formulated as per the aforesaid design scheme and operation and maintenance scheme;

 

4.根据上述设计方案和运维方案制定可行性的培训计划;

4. the feasible training plan formulated as per the aforesaid design scheme and operation and maintenance scheme; and

 

5.根据上述设计方案和运维方案制定完整的验收计划。

5. the complete inspection and acceptance plan formulated as per the aforesaid design scheme and operation and maintenance scheme.

 

第三条 在每个服务期内,双方依据技术目标约定,协商确定工作内容和进度计划。在本服务期内,双方约定,乙方应按下列进度完成研究开发工作:

Article 3 In each service period, both parties shall negotiate about and determine work contents and schedule as per agreements about the technical objectives. In this service period, Party B shall, as per agreements of both parties, complete the research and development work according to the following schedule:

 

1.合同签订后3个工作日成立项目技术运维组;

1. Establish the technical operation maintenance group for the project within 3 working days after the conclusion of this Contract;

 

2.合同签订后20个工作日完成对远程教育系统运维准备工作;

2. Complete preparations for the operation and maintenance of the distance education system within 20 working days after the conclusion of this Contract;

 

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3.提供每年不少于130个人/日的技术支持与日常开发运维服务;

3. Provide the technical supports and routine development operation and maintenance services for not less than 130 persons/day each year;

 

4.根据新业务发展需要,在新需求提出2个工作日内,完成新需求需求分析,并进入升级开发;

4. According to new business development demands, complete the analysis of new demands within 2 working days after the proposal of such demands, and enter into upgrading development;

 

5.优化和完善后系统的培训,客户验收;

5. Optimize and improve back-system trainings and inspection and acceptance by customers; and

 

6.系统的日常运行备份保障和程序代码维护。

6. Conduct the routine operation backup guarantee and procedure code maintenance of the system.

 

第四条 甲方应向乙方提供的技术资料及协作事项如下:

Article 4 The technical data to be provided by Party A to Party B and the cooperation matters are as follows:

 

1.技术资料清单: 日常运维的实施服务方案,运维服务考核标准核定方案, 实施运行保障和代码维护工作的整体思路和具体方案,运维实施计划方案。

1. The list of technical data: the implementation service scheme for routine operation and maintenance, the verification scheme for operation and maintenance service assessment standards, the overall ideas and specific scheme on the implementation of operation guarantee and code maintenance, and operation and maintenance implementation plan.

 

2.提供时间和方式根据项目各阶段进度实时提供。

2. The provision time and method shall be subject to the progresses of the project in all the phases.

 

3.其他协作事项:系统技术运维需要甲方业务负责人、协调人及技术人员与乙方的技术人员的相互协作,避免协作不当等原因影响到项目研发运维进度。

3. Other cooperation matters: the technical operation and maintenance of the system needs the mutual cooperation of Party A's business principal, coordinator and technicians and Party B's technicians, the research and development operation and maintenance schedule of the project shall not be influenced for the reason of improper coordination, etc.

 

本合同履行完毕后,上述技术资料按以下方式处理:乙方归还甲方提供的数据资源。

After the performance of this Contract, the above technical data shall be disposed of in the following way: Party B returns the data resources provided by Party A.

 

第五条 甲方应按以下方式支付技术运维经费和报酬:

Article 5 Party A shall pay the technical operation and maintenance funds and remuneration in the following ways:

 

1.技术运维经费和报酬总额为人民币¥143000元整。提供每年不少于130个人日的技术支持与日常运维服务。

1. The technical operation and maintenance funds and remuneration total RMB143,000 only. The technical supports and routine operation and maintenance services for not less than 130 persons/day shall be provided each year.

 

2.技术运维经费由甲方分期(一次、分期或提成)支付乙方。具体支付方式和时间如下:

2. The technical operation and maintenance funds shall be paid by Party A to Party B by installments (by lump sum/by installments/by means of commissions). Specific payment method and time are as below:

 

(1) 运维合同签订后30个工作日内,甲方应向乙方支付合同总款项的60%,即人民币¥85800元整(大写:捌万伍仟捌佰元整);

(1) Within 30 working days after the conclusion of this Contract, Party A shall pay Party B 60% of the total monies hereunder, i.e. RMB85,800 only (in words: RMB eighty-five thousand eight hundred only); and

 

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( 2) 合同期满,根据实际工作量的核算和考核指标的考核来支付剩余费用,详情见《运维服务考核标准核定方案》

(2) Upon expiration of this Contract, remaining expenses shall be paid as per the calculation of actual workload and the assessment results of assessment indicators. See the Verification Scheme for Operation and Maintenance Service Assessment Standards for details.

 

第六条 本合同的技术运维经费由乙方以自主支配的方式使用。甲方有权以无的方式检查乙方进行研究工作和使用运维经费的情况,但不得妨碍乙方的正常工作。

Article 6 The technical operation and maintenance funds hereunder shall be used at Party B's discretion. Party A shall have the right to examine Party B's research and development work and the use of the operation and maintenance funds in the way of none , but shall not impede the normal work of Party B.

 

第七条 在本合同履行中,因出现在现有技术水平和条件下难以克服的技术困难,导致技术运维失败或部分失败,并造成一方或双方损失的,双方按如下约定承担风险损失:乙方承担100%。双方确定,本合同项目的技术风险按甲乙双方认可的专家或权威机构确认的方式认定。认定技术风险的基本内容应当包括技术风险的存在、范围、程度及损失大小等。认定技术风险的基本条件是:

Article 7 During the performance of this Contract, if either Party or both Parties suffer(s) any loss due to the partial or entire failure of the technical operation and maintenance caused by the insurmountable technical difficulties under existing technical level and conditions, both Parties shall bear the risk of loss as agreed as follows: Party B shall bear liability fully. Both Parties confirm that the technical risks of the project hereunder are identified by the means confirmed by the expert or authoritative organization recognized by Party A and Party B. The basic contents of the technical risk identification shall include the existence, scope, extent and degree of loss of the technical risk. The basic conditions for identifying technical risks include:

 

1.本合同项目在现有技术水平条件下具有足够的难度;

1. There exists certain difficulty in the project under the existing technical level;

 

2.乙方在主观上无过错且经认定研究开发失败为合理的失败。

2. Party B has no subjective fault and the failure of research and development is identified as reasonable failure.

 

一方发现技术风险存在并有可能致使研究失败或部分失败的情形时,应当在15日内通知另一方并采取适当措施减少损失。逾期未通知并未采取适当措施而致使损失扩大的,应当就扩大的损失承担赔偿责任。

If either Party discovers that there exists any technical risk that may cause the partial or entire failure of the research, it shall notify the other Party within 15 days and take appropriate measures to reduce the losses. If the losses are enlarged due to its failure to notify the other Party or to take appropriate measures, it shall be liable for the compensation for the enlarged losses.

 

第八条 在本合同履行中,因作为研究方的技术已经由他人公开(包括以专利权方式公开),一方应在15日内通知另一方解除合同。逾期未通知并致使另一方产生损失的,另一方有权要求予以赔偿。

Article 8 If, during the performance of the Contract, the technology of the research party has been disclosed by other persons (including the disclosure of the technology in the form of patent), one Party shall, within 15 days, notify the other Party to terminate this Contract. If any Party fails to notify the other Party and thus causes losses to the other Party, the other Party shall have the right to claim compensation.

 

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第九条 双方确定因履行本合同应遵守的保密义务如下:

Article 9 The Parties acknowledge that they shall fulfill the following confidentiality obligations:

 

甲方:

Party A:

 

1.保密内容(包括技术信息和经营信息):①涉及本合同运维成果软件的源代码或工程源文件,相关的技术文件、资料、经营信息、数据和商业秘密;②乙方软件的设计思路。

1. Confidential contents (including technical information and business information): ① the source codes or project source file of the software relating to the operation and maintenance achievements hereunder, relevant technical documents, materials, business information, data and trade secrets; ② design ideas of Party B's software.

 

2.涉密人员范围:直接或间接涉及本合同技术的有关人员。

2. Scope of secret-related persons: persons directly or indirectly related to technologies hereunder.

 

3.保密期限:10年

3. Confidentiality period: 10 years

 

4.泄密责任:按技术保密法规定承担责任:但甲方因业务需要委托第三方对系统进行非商用用途的二次开发时,在系统开发文档及源代码的使用上不受保密及知识产权的限制约束。

4. Liability for the leakage of secrets: Party A shall bear liability as per the technical confidentiality law; where Party A needs to entrust a third party to conduct the secondary development for the system for any non-commercial purpose due to business demands, the use of system development documents and source code will not be restricted or constrained by the provisions on confidentiality and intellectual property rights.

 

乙方:

Party B:

 

1.保密内容(包括技术信息和经营信息):①涉及本合同运维成果软件的源代码或工程源文件,系统设计架构,相关的技术文件、资料、经营信息、数据和商业秘密,甲方管理制度及交付给乙方的不能公开的文档资料等:②甲方提供的业务需求(工作流程,报表,规章制度,法律条款等),未得到甲方授权.不可提供给任何第三方使用;③乙方针对业务需求产生的设计成果(数据库表结构,系统功能设计,系统源代码,测试文挡和用例),归属双方共有。在未得到甲方许可前提下,乙方不得提供给任何第三方使用。

1. Confidential contents (including technical information and business information): ① the source codes or project source file of the software relating to the operation and maintenance achievements hereunder, system design structure, relevant technical documents, materials, business information, data and trade secrets, Party A's management system and document materials delivered to Party B and unable to be made public; ② business demands provided by Party A (work processes, statements, rules and regulations, legal causes, etc.), which cannot be provided to any third party for use without Party A's authorization; and, ③ design results (including database form structure, system function design, system source codes, test files and cases) generated by Party B in terms of business demands which are jointly owned by both Parties. Without Party A's permission, Party B shall not provide the aforesaid confidential contents to any third party for use.

 

2.涉密人员范围:①直接或间接涉及本合同技术的有关人员;②乙方的研究开发人员;③涉及与该技术成果的相关人员。

2. Scope of secret-related persons: ① persons directly or indirectly related to technologies hereunder; ② Party B's research and development personnel; and, ③ persons relating to the technical achievements.

 

3.保密期限:10年

3. Confidentiality period: 10 years

 

4.泄密责任:按技术保密法规定承担责任:应承担因乙方原因泄漏保密内容而造成甲方系统所引发的一切不良后果。

4. Liability for the leakage of secrets: Party B shall bear liability as per the technical confidentiality law; and, bear all adverse consequences of Party A's system arising from the leakage of any confidential content for Party B's reason.

 

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第十条 乙方应当按以下方式向甲方交付技术运维成果:

Article 10 Party B shall deliver the technical operation and maintenance achievements to Party A in the following manner:

 

1.研究成果交付的形式及数量:软件代码以及相应的文档。

1. Delivery form and quantity of research achievements: software codes and corresponding files.

 

2.研究成果交付的时间及地点:根据项目发展实时提供,甲方指定地点。

2. Delivery time and place of research achievements: real-time provision as per the project development, and the place designated by Party A.

 

3.其他事项:系统技术运维需要乙方的项目团队与甲方的业务负责人、协调人及技术人员相互协作,如因乙方的协作不配合等相关原因影响到甲方项目研发运维进度,责任由乙方承担。

3. Other matters: the technical operation and maintenance of the system needs the mutual cooperation of Party B's project team and Party A's business principal, coordinator and technicians, and Party B shall be liable for the influence of Party B's refusal of cooperation or any other relevant reason on the research and development operation and maintenance schedule of Party A's project.

 

第十一条 双方确定按以下标准及方法对乙方完成的研究成果进行验收:乙方按照运维计划,将优化,升级后的软件系统给甲方予以安装,交付项目源代码,并对甲方技术人员进行系统使用及相关培训。甲方签订由乙方出具的《产品验收证明》。

Article 11 Both Parties determine to inspect and accept research achievements made by Party B as per the following standards and method: Party B provides the optimized and upgraded software system to Party A for installation as per the operation and maintenance plan, delivers the source codes of the project, and provide system use and relevant trainings for Party A's technicians. Party A signs the Product Inspection and Acceptance Certification issued by Party B.

 

第十二条 乙方应当保证其交付给甲方的技术运维成果不侵犯任何第三方的合法权益。如发生第三方指控甲方实施的技术侵权的,乙方应当承担由此而产生的全部责任。

Article 12 Party B shall ensure that the technical operation and maintenance achievements delivered by it to Party A do not infringe upon the legitimate rights and interests of any third party. If any third Party claims that the technologies used by Party A infringe upon its patents, Party B shall bear all the liability arising therefrom.

 

第十三条 双方确定,因履行本合同所产生的技术运维成果及其相关知识产权权利归属,按下列第2种方式处理:

Article 13 The Parties agree that the ownership of technical operation and maintenance achievements and relevant intellectual properties during performance of this Contract shall be treated by the second method below:

 

1.无(甲、乙、双)方享有申请专利的权利。

1. No (Party A/Party B/both Parties) Party enjoys/enjoy the right to apply for patents.

 

专利权取得后的使用和有关利益分配方式如下:无。

The methods for use of the obtained patents and the allocation of the relevant interests are as follows: None.

 

2.按技术秘密方式处理。有关使用和转让的权利归属及由此产生的利益按以下约定处理:

2. As per technical secrets. The ownership of rights of use and transfer and interests arising therefrom shall be treated as per the following agreements:

 

(1) 技术秘密的使用权:甲方对属于系统内容的技术秘密拥有使用权,甲乙双方对属于软件技术及源代码拥有使用权。

(1) The use right of technical secrets: Party A has the use right of technical secrets that are system contents, and Party A and Party B have the use right of software technologies and source codes.

 

( 2) 技术秘密的转让权:甲方拥有本合同成果产品的转让权和属于系统内容的技术秘密的转让权。

(2) The transfer right of technical secrets: Party A has the transfer right of achievements hereunder and technical secrets that are system contents.

 

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( 3) 相关利益的分配办法:无。

双方对本合同有关的知识产权权利归属特别约定如下:①甲方对系统内容及相关数据拥有所有权并对其知识产权负责;②甲乙方双方共同拥有软件源代码的所有权,并对软件程序的知识产权负责;③甲方不得将乙方提供的最终成果软件以外的技术文档提供给第三方;④乙方不得将甲方提供的数据内容及成果产品提供给第三方,并不得全部或部分用于其它产品中;⑤如果乙方要在本运维项目中使用任何自主知识产权,且无法被双万共享共有的技术成果,则须要向甲方书面说明,并征得甲方同意,如果没有特殊说明,则默认为双方共享共有的成果。

(3) Allocation method of relevant interests: None. Both Parties specially agree about the ownership of relevant intellectual property rights hereunder as below: ① Party A possesses the ownership of the system contents and relevant data and is responsible for intellectual property rights thereof; ② Party A and Party B jointly own the ownership of software source codes, and are responsible for intellectual property rights of software programs; ③ Party A shall not provide any technical document other than the ultimate achievement software provided by Party B to any third party; ④ Party B shall not provide any third party with the data contents or achievements provided by Party A, or use them in any other product in whole or in part; and, ⑤ if B intends to use in the operation and maintenance project any independent intellectual property right with technical achievements unable to be shared or jointly owned by both parties, it shall make written explanations to Party A, and obtain Party A's approval. If there is no special explanation, it will be defaulted that the achievements are shared and jointly owned by both Parties.

 

第十四条 乙方不得在向甲方交付研究成果之前,自行将研究成果转让给第三方。

Article 14 Party B shall not transfer arbitrarily the research achievements to any third party before delivering the same to Party A.

 

第十五条 乙方完成本合同项目的研究开发人员享有在有关技术成果文件上写明技术成果完成者的权利和取得有关荣誉证书、奖励的权利。

Article 15 Party B's research and development personnel participating in the project hereunder shall enjoy the rights to have their names included in the relevant technical achievement documents as completers and to acquire relevant honor certificates and awards.

 

第十六条 乙方利用研究经费所购置与研究工作有关的设备、器材、货料等财产,归乙(甲、乙、双)方所有。

Article 16 The equipment, apparatuses, goods and materials and other properties purchased by Party B using the research and development funds for the research work shall be owned by Party B (Party A/Party B/both Parties).

 

第十七条 双方确定,乙方应在向甲方交付研究成果后,根据甲方的需求,为甲万指定的人员提供技术指导和培训,并提供与使用该研究开发成果相关的技术服务。

Article 17 The Parties agree that Party B shall, after delivering the research achievements to Party A, provide Party A's designated personnel with technical guidance and training and provide technical services relating to the use of the research and development achievements at the request of Party A.

 

1.技术服务和指导内容:①系统的使用方法;②系统架构、运维安装部署等。

1. Contents of technical services and guidance: ① the usage of the system; ② system structure, operation and maintenance installation and deployment and so on.

 

2.地点和方式:①甲方指定地点;②现场安装。

2. Place and method: ① the place designated by Party A; ② field installation.

 

3.费用及支付方式:无

3. Charges and mode of payment: None.

 

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第十八条 双方确定:任何一方违反本合同约定,造成研究工作停滞、延误或失败的,按以下约定承担违约责任;

Article 18 The Parties agree that any Party which violates this Contract and thus causes the stagnation, delay or failure of the research work shall bear the liability for breach of contract according to the following provisions:

 

1.乙方违反本合同第二或三条约定,应当按照总合同款0.1%/天支付违约金。

1. Where Party B violates Article 2 or Article 3 hereof, it shall pay forfeits at a rate of 0.1% of the total contract monies/day.

 

2.甲方违反本合同第四条约定,应当研究成果提交时间相应推迟。

2. Where Party A violates Article 4 hereof, the submission time of the research achievements shall be delayed accordingly.

 

3.甲方违反本合同第五条约定,应当项目成果相应推迟。

3. Where Party A violates Article 5 hereof, the project achievements shall be postponed accordingly.

 

第十九条 双方确定,甲方有权利用乙方按照本合同约定提供的研究成果,进行后续改进。由此产生的具有实质性或创造性技术进步特征的新的技术成果及其权利归属,由甲(甲、乙、双)方享有。具体相关利益的分配办法如下:全部归甲方所有。

Article 19 The Parties agree that Party A has the right to make further improvement with the research achievements provided by Party B in accordance with this Contract. The new technical achievements with characteristics of substantive or creative technological progress arising therefrom and the ownership thereof shall be owned by Party A (Party A/Party B/both Parties). The distribution of relevant interests: all the interests belong to Party A.

 

乙方有权在完成本合同约定的研究开发工作后,利用该项研究成果进行后续改进。由此产生的具有实质性或创造性技术进步特征的新的技术成果,归双(甲、乙、双)方所有。具体相关利益的分配办法如下:经甲方书面同意后,乙方可进行改造,收益由双方协商。

Party B has the right to make further improvement with the research achievements after it has completed the research and development work in accordance with this Contract. The new technical achievements with characteristics of substantive or creative technological progress arising therefrom shall be owned by Party B (Party A/Party B/both Parties). The distribution of relevant interests: upon the written approval by Party A, Party B may conduct transformation, with the distribution of earnings to be negotiated about by both parties.

 

第二十条 双方确定,在满足以下条件时,甲乙双方进行续约:

Article 20 Both parties determine that they will renew this Contract, where the following conditions are met:

 

(1)甲方应于本协议有效期届满前三十日将是否续约的意向通知乙方。甲乙双方均同意续约的,经双方协商后签订新的协议。

(1) Party A shall inform Party B whether it is willing to renew this Contract 30 days before the expiry of the effective period of this Contract. Where Party A and Party B agree about the renewal, a new agreement may be entered into upon negotiation by both parties.

 

( 2) 在乙方同意续约的情况下,甲方未在本协议期限届满十五日前将是否续约的意向书面通知乙方,本协议于有效期届满后自动续延一年。

(2) If Party B agrees about the renewal, but Party A fails to inform Party B in writing whether it intends to renew this Contract 15 days before the expiration of this Contract, this Contract will be automatically renewed for one year upon the expiry of the effective period thereof.

 

( 3) 本协议期限届满十五日前,若任一方未以书面向另一方提出不再续约的,则本协议自动延长一年,延长年限届满时亦同。

(3) If either Party fails to put forward renewal to the other Party in writing fifteen days before the expiration of this Contract, this Contract will be automatically extended for one year, which is the same upon expiration of the extended period.

 

  10  

 

第二十一条 双方确定,在满足以下条件时,甲乙双方终止合同:

Article 21 Both parties determine that they will terminate this Contract, where the following conditions are met:

 

( 1) 本协议履行过程中,如果遇到不可抗力或国家政策、法规调整,导致本协议难以继续履行的,甲乙双方可协商变更或终止本协议,双方互不承担违约赔偿责任。

(1) Where any force majeure or the adjustment to any state policy of regulations makes this Contract unable to be continuously performed in the process of performance, Party A and Party B may alter or terminate this Contract through negotiation, and do not bear the liability for liquidated damages mutually.

 

( 2) 协议期限届满十五日前,甲乙双方有任何一方不同意续约的,经书面确认后,本协议即于有效期满后自行终止。

(2) Where either Party disagrees about the renewal fifteen days before the expiry of this Contract, this Contract will, upon written confirmation, be automatically terminated upon expiration of the effective period.

 

( 3) 乙方应在本协议终止前的10个工作日内向甲方交清软件代码以及相应的文档。

(3) Party B shall submit all the software codes and corresponding documents to Party A within 10 working days before the termination of this Contract.

 

第二十二条 双方确定,在本合同有效期内,甲方指定胡振刚为甲方项目联系人,乙方指定侯存涛为乙方项目联系人。项目联系人承担以下责任:

Article 22 The Parties agree that, within the effective period of this Contract, Party A designates Hu Zhengang as the contact person of Party A, and Party B designates Hou Cuntao as the contact person of Party B. The contact persons shall be responsible for:

 

1.按照约定联系时间、联系方式和联系地点完成交办的相关工作;

1. complete relevant work arranged as per the contact time, method and place agreed upon;

 

2.防止因人事变动而使合同难以履行或无法履行;

2. prevent the difficulty in unavailability of the performance of this Contract due to personnel change; and

 

3.保证以适当的时间、方式、标准履行本合同。

3. guarantee the performance of this Contract as per the proper time, method and standards.

 

一方变更项目联系人的,应当及时以书面形式通知另一方。未及时通知并影响本合同履行或造成损失的,应承担相应的责任。

If either Party changes its contact person, it shall inform the other Party in writing in time. If it fails to do so in time and thereby influences the performance of this Contract or results in losses, it shall bear corresponding liability.

 

第二十三条 双方约定本合同其他相关事项为:①本合同未尽事宜,甲、乙双方另行协商解决,并签订补充协议。补充协议视作本协议组成部分.具有同等法律效力;②本合同将由中华人民共和国有关法律和法规管辖和解释;基于本协议的来往信函及传真件均具有同等法律效力。

Article 23 Both Parties agree upon other relevant matters hereunder: ① Matters not covered hereunder shall be solved by Party A and Party B through negotiation, and a supplementary agreement shall be arrived at. The supplementary agreement shall be deemed as an integral part hereof and have the equal legal force; and, ② this Contract shall be subject to and be construed by relevant laws and regulations of the People's Republic of China; correspondences and faxes based on this Contract shall have the same legal force.

 

第二十四条 本合同一式肆份,甲方执两份,乙方执两份,具有同等法律效力。

Article 24 This Contract shall be executed in four counterparts with equal legal force, with two held by each Party.

 

第二十五条 本合同经双方签字盖章后生效。

Article 25 This Contract shall come into force after being signed and sealed by both Parties.

 

  11  

 

甲方:中国知识产权培训中心(盖章)

Party A: Intellectual Property Right Training Center of China (seal)

法定代表人/委托代理人: (签名)

Legal Representative/Entrusted Agent: (signature)

 

2016年12月9日

December 9, 2016

 

乙方:北京华夏大地远程教育网络服务有限公司(盖章)

Party B: Beijing Huaxia Dadi Distance Learning Services Co., Ltd. (seal)

法定代表人/委托代理人: (签名)

Legal Representative/Entrusted Agent: (signature)

 

2016年12月9日

December 9, 2016

 

印花税票粘贴处

For stamp duty receipt

 

登记机关审查登记栏:  
Examination and registration column for registration authority:  
   
   
   
   
经办人: 技术合同登记处机关(专用章)
Handler: Technical contract registry (special seal)
  年   月   日
  MM/DD/YY

 

  12  

 

中国知识产权远程教育学习平台运维服务考核标准核定方案

Verification Scheme for Operation and Maintenance Service Assessment Standards of the Distance Education and Learning Platform for the Intellectual Property Rights in China

 

一、服务对象

I. Service Objects

 

中国知识产权远程教育学习平台。

The distance education and learning platform for the intellectual property rights in China.

 

二、服务目标

II. Service Objectives

 

完成各项技术运维任务,做好管理员及辅导老师支持服务,保障中国知识产权远程教育学习平台的平稳运行。

Complete all technical operation and maintenance tasks, provide support services as administrator and counselor, and guarantee the steady operation of the distance education and learning platform for the intellectual property rights in China.

 

三、服务内容

III. Service Contents

 

1、技术运维服务

1. Technical operation and maintenance services

 

主要包括:远程教育平台新功能研发、既有功能调整、系统BUG修改、美工设计、系统日常监控以及应急处理等。

Primarily include: the research and development of new functions of the distance education platform, adjustments to existing functions, system BUG correction, artistic design, routine monitoring of the system and emergency treatment.

 

2、技术支持服务

2. Technical support services

 

主要包括:通过QQ技术支持群、热线电话回复管理员和辅导老师遇到的技术问题。

Mainly include: reply to the technical problems of administrator and counselor through QQ technical support group and hotline.

 

四、人员要求

IV. Personnel Requirements

 

1、项目负责人1名

1. 1 project principal

 

项目的固定联系人,全面负责本项目的协调、管理工作,为远程教育学习平台的设计和远程教育的发展提供合理化建议。要求:总监级别,具有8年以上的在线教育从业经验。

The fixed contact person of the project is fully responsible for the coordination and management of the project, and gives reasonable suggestions on the design of the distance education and learning platform and the development of distance education. Requirements: the project principal shall be at the director level, and have the online education working experience of more than 8 years.

 

2、技术人员2名

2. 2 technicians

 

1名主要技术开发人员,1名候补技术开发人员,负责远程教育学习平台日常的技术运维服务。要求:5年以上软件开发经验。

The 1 major technical developer and 1 alternate technical developer are responsible for the routine technical operation and maintenance services for the distance education and learning platform. Requirements: the two technicians shall have the software development experience of more than 5 years.

 

  13  

 

五、工作量和评分

V. Workload and Scoring

 

服务费用的最终结算依据为实际完成工作量和最终评分,其中QQ技术支持、电话技术支持、日常系统BUG处理、系统监控、紧急情况处理核算工作量为80人·日,记为固定工作量;系统功能开发服务为动态工作量,需要进行日常记录,精确到小时,估算为50人·日(8个小时记为1人·日)。评分方式有系统自动评分、中心工作人员评分和管理员评分四种方式,具体评分标准如下:

The final settlement bases of service charges are the workload actually completed and final scoring. In particular, the accounting workload of QQ technical supports, phone technical supports, routine system BUG processing, system monitoring and emergency treatment is 80 persons/day and is fixed workload; development services of system functions are dynamic workload, routine records accurate to hour are needed, and they are evaluated as 50 persons/day (1 person/day for 8 hours). Scoring methods are classified into the automatic scoring of the system, scoring by workers of the Training Center and scoring by administrator. Specific scoring standards are as below:

 

一级指标

Level-1 indicator

二级指标

Level-2 indicator

具体内容

Specific content

评分标准

Scoring standard

技术运维 服务

平台开发

Platform development

平台新功能研发、功能调整、BUG修改。

Research and development of new functions of the platform, function adjustments and BUG correction.

两个方面进行考核:完成质量和效率。完成质量:完全符合要求,不扣分;有微小不足,扣0.1分;部分符合要求,扣0.3分;完全不符合要求,扣0.5分。完成效率:没有按时完成任务,每晚1天扣0.3分。

Assessments are made in two aspects: completion quality and efficiency. Completion quality: do not deduct points for the full satisfaction of requirements; deduct 0.1 point for minor deficiency; deduct 0.3 point for the partial satisfaction of requirements; and, deduct 0.5 point for the full dissatisfaction of requirements. Completion efficiency: in the event of failure of completion of tasks, deduct 0.3 point for each day of delay.

Technical operation and maintenance services

平台日常监控

Routine monitoring of the platform

每天监控平台的运行情况,及时解决访问异常问题。

Monitor operation conditions of the platform every day, and solve visit abnormalities in time.

由于程序原因,平台出现访问异常、数据丢失以及其他 安全问题,解决时间<0.5小时,不扣分;0.5小时<解决时间<1小时,扣1分;1小时<解决时间<3小时,扣2分;3小时<解决时间<8小时,扣3分;8小时<解决时间<12小时,扣4分;12小时<解决时间<24小时,扣5分。参照此标准,以每24小时为周期进行计算。

If the abnormal visit, data loss or any other safety problem of the platform occurs for the reason of programs, do not deduct points for the solution time < 0.5 hour; deduct 1 point for 0.5 hour < solution time < 1 hour; deduct 1 points for 1 hour < solution time < 3 hours; deduct 3 points for 3 hours < solution time < 8 hours; deduct 4 points for 8 hours < solution time < 12 hours; and, deduct 5 points for 12 hours < solution time < 24 hours. Conduct calculation with 24 hours as a period by reference to the aforesaid standards.

技术支持服务

管理员支 持服务

Support services of administrator

在qq群对管理员问题的进行回复。

Reply to administrator questions in qq group

工作日工作时间,回复管理员问题超过1个小时,每1次扣0.1分;超过3小时,每1次扣0.3分:超过24小时,每1次扣0.5分。参照此标准,以每24小时为周期进行计算,5分封顶。

During working time on working days, deduct 0.1 point for the delay in reply to administrator questions for more than 1 hour each time; deduct 0.3 point for more than 3 hours; and, deduct 0.5 point for more than 24 hours. Conduct calculation with 24 hours as a period by reference to the aforesaid standards, with the upper limit of 5 points.

Technical support services

教学支持 满意度调 查

Teaching support satisfaction survey

向管理员发放调查问卷收集反馈。

Distribute questionnaires to administrator and collect feedback.

计算所有调查问卷的平均分。调查问卷的评分标准为:

Work out the average point of all questionnaires. Scoring standards of the questionnaires are:

非常满意:加5分

Very satisfactor y: add 5 points

满意:加3分

Satisfactory: add 3 points

一般:扣3分

Ordinary: deduct 3 points

不满意:扣5分

Dissatisfactory: deduct 5 points

每月例会

Monthly meeting

 

每月召开一次工作人员的例会,形式为面对面会议或在线会议。每季度至少有一次面对面例会,项目负责人必须参加,地点在培训中心。

Hold a regular meeting of workers in the face-to-face or online way every month. Hold a face-to-face regular meeting at the Training Center every quarter at least, which the project principal must attend.

项目负责人每缺席一次,扣3分;技术人员每缺席一人次,扣1分。

Deduct 3 points for the absence of the project principal each time; and, deduct 1 point for the absence of each technician each time.

工作主动性

Work initiative

 

积极主动地为远程教育 提供建议。培训中心管 理人员根据采纳的数量 评分。

Actively give suggestions for the distance education. The administrator of the Training Center scores as per the number of those adopted.

非常积极:加5分(采纳数量>=10条);

Very active: add 5 points (the number of adopted ones >= 10);

比较积极:加3分(5条<=采纳数量<=9条);

Quite active: add 3 points (5 <= the number of adopted ones <= 9);

一般:加1分(1条<=采纳数量<=4条);

Ordinary: add 1 point (1 <= the number of adopted ones <= 4); and

不积极:减3分(采纳数量=0条)。

Not active: deduct 3 points (the number of adopted ones = 0).

  14  

 

六、实际费用的支付

VI. Actual Payment for Expenses

 

如果130人·日<=实际完成工作量<=143人·日,合同价格为报价;如果实际完成工作量<130人·日或者实际完成工作量>143人·日,合同价格为:报价X实际工作量/130人·日。实际支付费用的计算方法如下:

If 130 persons/day <= workload actually completed <= 143 persons/day, the contract price is quotation; if the workload actually completed < 130 persons/day or > 143 persons/day, the contract price is: quotation X actual workload / 130 persons/day. The calculation method of the expenses to be actually paid is as follows:

 

 

实际支付费用

Expenses to be actually paid

>100

> 100 points

合同价格 * 得分对应百分比

Contract price * the percentage corresponding to the score

96 -100

96-100 points

合同价格 *100%

Contract price * 100%

91 -95

91-95 points

合同价格 *90%

Contract price * 90%

86 -90

86-90 points

合同价格 *80%

Contract price * 80%

81 -85

81-85 points

合同价格 *70%

Contract price * 70%

<=80

<= 80 points

合同价格 *60%

Contract price * 60%

 

七、费用核算标准

VII. Expense Calculation Standards

 

开发费用/人·日 1100元/人·日

Development expenses/person/day RMB1,100/person/day

 

基础运维工作量 130人日,其中(技术开发服务50人日,技术支持服务80人日)

Basic operation and maintenance workload 130 persons/day (in particular, 50 persons/day for technical development services and 80 persons/day for technical support services)

 

 

15

 

 

Exhibit 10.12

 

Zhengqing Heya Education Technology (Beijing) Co., LTD

Training Platform

 

 

 

 

 

 

Development Contract

 

 

 

 

 

April 2017

 

 

 

 

Development Contract for Training Platform and Courseware of

Zhengqing Heya Education Technology (Beijing) Co., LTD

 

Party A: Zhengqing Heya Education Technology (Beijing) Co., Ltd. (hereinafter referred to as “Party A”)

 

Address: Floor 3, Expert Building, National Academy of Education Administration, Qingyuan Road North, Daxing District, Beijing, China

 

Phone: 010-65181168

 

Fax: 010-65181168

 

Party B: Beijing Huaxia Dadi Digital Information Technology Co., Ltd. (hereinafter referred to as “Party B”)

 

Address: Room 505, Jingkai Mansion, Disheng Road North #1, Beijing Economic-Technological Development Area, Beijing, China

 

Phone: 010-57925051

 

Fax: 010-57925056

 

In order to promote the common development of both parties, Party A and Party B reached the following cooperation contract for developing the training platform of Zhengqing Heya Education Technology (Beijing) Co., LTD through friendly consultation in accordance with the principles of voluntariness, equality and mutual benefit:

 

I. Development contents

 

Party A entrusts Party B and Party B accepts Party A’s entrustment to develop the training platform of Zhengqing Heya Education Technology (Beijing) Co., LTD. (Party A) according to Party A’s actual needs.

 

II. Schedule and delivery time

 

1. Confirmation of the preliminary project requirements:

 

In May 2017, both parties confirmed the system development plan and formed Appendix I: Zhengqing Heya Training Platform System Solution , which has detailed the data, process, statements and other requirements of Party A and ultimately shall require Party A’s approval and be taken as the standard for Party A’s acceptance within the period of 20 working days.

 

2. Project development commencement:

 

After Appendix I: Zhengqing Heya Training Platform System Solution has been approved by Party A, Party B shall complete the relevant development in accordance with the final solution approved by Party A within the period of 50 working days.

 

3. Delivery, commissioning and preliminary acceptance:

 

After the completion of the project development, Party B shall carry out internal release testing of the system version, and, after such internal release testing has passed, get down to delivery installation at Party A’s site; after the installation has been completed, it will enter the stage for the group of experts appointed by Party A to carry out the code and documents review and system testing and Party B shall simultaneously provide the documents and source codes as listed in Appendix 4: List of System Documents for expert group’s review; the system testing shall be subject to the period of 15 working days, with the testing and acceptance standards referring to Appendix 5: System Acceptance Testing Standards , and if all functions have been completed and have satisfied the acceptance testing standards, the preliminary acceptance documents can be signed; otherwise, Party B shall modify and improve the relevant functions for retesting and the testing period shall be delayed accordingly, subject to the ultimate satisfaction with the acceptance testing standards. After the system testing has passed, the preliminary acceptance documents shall be signed and the system can start its commissioning.

 

 

 

 

4. System commissioning and final acceptance:

 

The system commissioning shall cover a period of 15 days, and if the system keeps stable without any error, the relevant data is correct and subject to verification, all functions described in the solution have been achieved and the performance test has passed, Party A and Party B will organize manpower for final acceptance in accordance with the solution confirmed by both parties after Party B has submitted the final documents and all system source codes in agreement with the system as listed in Appendix 4: List of System Documents and then after the acceptance has passed, both parties will sign the acceptance document, which indicates the termination of the system commissioning and thereon the start of the system maintenance period.

 

5. Both parties shall work together in coordination and cooperation strictly in accordance with the schedule. If the development work can not be completed due to Party B’s reasons, Party B shall bear the corresponding responsibilities, but if due to Party A’s reasons, the development period shall be postponed accordingly.

 

III. Price and payment

 

Party A shall pay Party B all the project expenses totaling RMB: 1,700,000 yuan (Namely: One million and seven hundred thousand yuan) (See Appendix 2: List of product prices for details) in two installments according to the project schedule:

 

1. Payment in the first installment:

 

Pay 5% after the signing of the contract, namely: RMB 85,000 yuan (Eighty-five thousand yuan) .

 

3. Payment in the second installment:

 

Pay 95% after all development has been completed and delivered for operation, namely: RMB 1,615,000 yuan (One million, six hundred and fifteen thousand yuan) .

 

VI. Party A’s obligations

 

1. Designate the project contact and persons in charge to ensure smooth communication during the project development;

 

2. Provide the functional requirements of the new system in a timely and complete manner and help Party B’s investigation in the detailed requirements, so that Party B could fully understand Party A’s specific demands;

 

3. Provide the necessary environment and conditions for system operation within the stipulated period and give the necessary convenience and assistance to Party B’s survey work;

 

4. Party A shall guarantee that no source code of the product be provided to any third party;

 

5. Complete system acceptance and corresponding payment according to the contract agreement.

 

V. Party B’s obligations

 

1. Designate the project contact and persons in charge to ensure smooth communication during the project development;

 

2. Ensure that the functions of the developed system are in line with the requirements of Appendix I: Zhengqing Heya Training Platform System Solution ; complete the development work on time and undertake relevant installation and commissioning;

 

3. Undertake to provide the relevant system use instructions and complete the training of the relevant personnel, as detailed in Appendix 3: Project Implementation Development Plan ;

 

4. During the development period, Party B’s relevant developers shall enter the site and discuss with Party A for common requirements and development.

 

VI. Requirement changes and modification

 

1. In order to ensure the project quality and progress, after the start of the project, no significant modification, in principle, can be made against those functions listed in Appendix I: Zhengqing Heya Training Platform System Solution subject to both parties’ approval and agreement, but Party A can propose its solutions for modification.

 

2. If any modification is really necessary, Party A shall fill in the Application Form for Modifications and submit it to Party B’s relevant personnel in time;

 

 

 

 

3. After receiving the Application Form for Modifications , Party B shall submit its Suggestions on Modification Implementation to Party A according to the modification control process;

 

4. Party B will carry out the technical development of the related requirements according to the Suggestions on Modification Implementation confirmed by both parties.

 

VII. Intellectual property protection

 

1. Party A shall fully understand the importance of protecting Party B’s intellectual property;

 

2. Party A and Party B shall jointly hold the ownership of the system and it shall not be used for any commercial purpose without both parties’ permission. Party B shall provide all the documents and source codes of the system to Party A, but such documents and source codes can only be used by Zhengqing Heya Education Technology (Beijing) Co., LTD, and without mutual consent, any party shall not disclose, copy, transfer or sell all or part of the above data to any third party;

 

3. Party A shall have the right for lifelong use of the system and can carry out secondary development and Party A’s application of any technology in this Contract to Zhengqing Heya Education Technology (Beijing) Co., LTD shall never constitute any tort;

 

4. Party B shall guarantee that the system will not infringe on the copyright of any third party or other relevant civil rights. Otherwise, Party B shall bear all legal and economic responsibilities and undertake to negotiate with the accuser. In this case, Party B shall make compensation on Party A for its loss incurred therefrom.

 

VIII. Confidentiality obligations

 

1. Both parties shall make a commitment to strictly keep confidentiality of any party’s all technology, property rights and trade secrets accessible during cooperation and never disclose to any third party until the above data information has become available to the public;

 

2. Unless this Contract has opposite provisions, the obligations under this Clause shall not be subject to the limit of the contract term.

 

IX. Liability for breach of contract

 

Any party who fails to fulfill the obligations under the provisions of this Contract shall be deemed to be a breach of contract. If the negotiation fails within a reasonable period of time, the observant party shall have the right to terminate this Contract and require the party in default to compensate for the corresponding economic losses.

 

X. Applicable laws and dispute settlement

 

1. Both parties of this Contract shall abide by China’s laws, decrees and relevant regulations.

 

2. Any dispute arising from or relating to this Contract, including any problem relating to the existence, validity or termination of this Contract shall first be settled through friendly consultation by both parties; if the dispute can not be settled within a reasonable period of time, any party shall have the right to present application for arbitration to the jurisdictional arbitration commission, which will make judgment on the basis of the existing arbitration rules. The arbitral award shall be final and binding on both parties.

 

XI. Term of contract validity

 

This Contract shall come into force on the date of signature and/or seal of both parties’ authorized representatives and terminate on the date of the full implementation of the rights and obligations by both parties under this Contract.

 

XII. Others

 

1. This Contract shall replace all the previous agreements, understandings and negotiations reached by both parties for the subject matters of this Contract and constitute the overall contract of cooperation between both parties.

 

2. Any unaccomplished matter relating to this Contract shall be solidified as a supplementary contract or appendix through friendly negotiations between both parties. Any supplementary contract or appendix of this Contract shall be an inseparable part of this Contract.

 

 

 

 

3. Any amendment or supplement to this Contract, once signed, shall require written consent from both parties.

 

4. This Contract shall be made in four duplicates with Party A and Party B holding two copies respectively.

 

Party A: Zhengqing Heya Education Technology (Beijing) Co., Ltd. (Seal)

 

Authorized representative:

 

April 21, 2017

 

Party B: Beijing Huaxia Dadi Digital Information Technology Co., Ltd. (Seal)

 

Authorized representative :

 

April 21, 2017

 

 

 

 

Zhengqing Heya Training Platform Learning Tracking System Solution

 

 

Zhengqing Heya Training Platform Learning Tracking System Solution

 

Aforementioned   1
Document purpose   1
Several concepts   1
SCORM   1
Learning management system (LMS)   1
Learning content management system (LCMS)   1
Metadata   1
Definition of learning tracking (scorm) platform   1
References available to us   2
Scorm version   2
Descriptions of the system higher requirements   2
System User Roles   3
Learner   3
Teaching manager   4
Content manager   4
System Function Module   4
Content library   5
Data tracking service   6
Learning filing service   6
Content delivery   6
SCORM operating environment   6
Module in-between relationship and functional hierarchy division   6
One Sequence Diagram   6
Diagram For System Configurations And Hierarchical Structure   7
Scorm runtime flow diagram   8
Integration strategy   8

 

 

 

 

Zhengqing Heya Training Platform Learning Tracking System Solution

 

 

Aforementioned

 

Document purpose

 

This document mainly starts from such two aspects as the system function descriptions and boundary divisions to locate the functions of the training platform learning tracking (SCORM) system, carry out reasonable division of the components and describe the deployment models, so as to provide reference and guidance for the platform development the from the system level.

 

Several concepts

 

SCORM

 

SCORM means a shareable content object reference model . As the name suggests, it is a set of standards put forward to target contents. Its main purpose is to allow contents to be shared. The two words (reference and model) can tell us that this is a train of thought (models) as a guidebook to help us build advanced learning contents and reuse the learning contents.

 

Learning management system (LMS)

 

It is mainly to support and manage the teaching and learning process. Teachers and students are direct user roles of this system.

 

Learning content management system (LCMS)

 

It mainly supports the creation, management, retrieval and delivery of learning contents. At present, the concepts easy to be discussed and implemented by everyone include: the learning content repository, learning object library, knowledge base, curriculum management system and digital resource library, etc.

 

Later, it is much easier to use the content repository for representing this subsystem in my course.

 

Metadata

 

It refers to the descriptive data about the data. Its main purpose is to describe the digital resources by means of standard and public-accepted attributes and thus increase the retrieval accuracy of the digital resources, so as to be more quickly obtained and reused by real users.

 

The system related to the metadata can be divided into two subsystems from the macro level: metadata registration and management systems.

 

  Page 1 /8  

 

 

Zhengqing Heya Training Platform Learning Tracking System Solution

 

 

Definition of learning tracking (SCORM) platform

 

It is not very accurate to call it the training platform learning tracking (SCORM) system, which tends to be doubtful for those people who are more aware of SCORM. Here follows the definition of our learning tracking (SCORM) platform as follows:

 

It can provide standard operating environment support for those courses in accordance with the SCORM standard and simultaneously support the skills for tracking data statistics and analysis. Essentially, it is an organic combination of a micro learning management system (LMS) and a learning content management system (LCMS).

 

References available to us

 

The independent design and implementation of training platform tracking (SCORM) system is inherently complex, but of course there are references available for implementation of standard. So our architecture and code have referenced the current ADL official runtime environment examples to the maximum extent.

 

SCORM version

 

Our curriculum is to be newly developed, so we have decided to realize SCORM2004 (Version 3) at the very beginning.

 

Descriptions of the system higher requirements

 

At present, the main demand sources of this system can be divided into two parts:

 

Learning process tracking (real learning time/learning effects)

 

Statistics and analysis of learning process tracking data

 

Establishment of sharable content library

 

The learning strategies can be adjusted in a more intelligent manner with personalized learning services provided according to the user differences.

 

Please refer to some contents introduced in the following diagram and the first part of the document to understand the overall requirements of our current platform.

 

  Page 2 /8  

 

 

Zhengqing Heya Training Platform Learning Tracking System Solution

 

 

SCORM2004 platform service layer (component level) use cases

 

 

Roles “Enable” descriptions
Learner For how to learn contents in the SCORM operating environment provided by the platform, please refer to the diagram for learning process use cases .
Teaching manager Complete statistics and analysis of learners’ school situation
Content manager Import and adjust courses
External system Interact with this system at the data level/Click to log in to solve the reuse problem of the platform itself, for example, typically, share contents between the content authoring tools and the platform.
   
Service (components division) Descriptions
Content/courseware management Import, remove, release, update/explore and tag the content packages in conformity with SCORM and so on
Content delivery Mainly responsible for content access control and URL conversion as an interface for contents to be used by frontline users
Sorting and navigation A high-level plug-in logic needed during content delivery, able to dynamically adjust the contents to the frontline users
Tracking service Provide an independent, categorized and semantic data access/storage entry
Archive learning service Provide the standard and more semantic high-level learning statistical results and directly provide complete data support for the analysis of the learning process.

 

Figure 1

 

System user roles

 

Note: The following roles are mainly defined to target the contents within the scope of our current system.

 

Learner

 

The learner, as the center of the system, is mainly to acquire learning contents and process in the system.

 

  Page 3 /8  

 

 

Zhengqing Heya Training Platform Learning Tracking System Solution

 

 

Teaching manager

 

The teaching manager can examine and analyze learners’ learning.

 

Content manager

 

Manage the learning contents.

 

System function module

 

Subdivision of SCORM2004 platform service layer module

 

 

Premise constraints for previous components division and hierarchy:

 

1. We do not provide complete support for the school management system, but focus more on the release of the school contents.

 

2. We do not provide complete school filing services, but provide complete data required by the school filing system.

 

3. We do not provide any online content authoring tool, but provide an interface for content authoring tools to get access to this system.

 

4. We do not provide any ability to protect the content copyright, but only provide the ability for contents authorization.

 

5. We do not provide specific SSO solutions and implementation measures, but provide an SSO access interface.

 

Basis for components division and hierarchy: (we also need to create practical use cases for textual research)

 

1. Relatively independent in business

 

2. Relatively independent in deployment

 

3. Relatively independent in technology implementation system

 

4. Coupling considerations

 

Figure 2

 

  Page 4 /8  

 

 

Zhengqing Heya Training Platform Learning Tracking System Solution

 

 

Core functions of each service module

 

 

Figure 3

 

Figure 2 and Figure 3 divide and organize the functional modules from two abstract levels. Here follows no further explanation any more. Figure 2 is more system, so relatively more contents are involved, while Figure 3 has divided some system requirements more clearly.

 

Next, we’ll detail the services in individual modules respectively to ensure a better understanding.

 

Content library

 

The content library refers to the learning content management system, but the content library is favored, mainly because it can express its own exact meaning.

 

The content library is mainly responsible for the retrieval and management of the courseware materials and courseware packages.

 

At present, the most popular method for retrieval has come into being under the influence of the library technology, mainly focusing on metadata identification and retrieval. And the management itself is more concerned with the organization and import-export performance of the contents. Currently, more popular technology for resources management and exchange is the standard XML description, so the main functions of the content library can be divided into:

 

  Page 5 /8  

 

 

Zhengqing Heya Training Platform Learning Tracking System Solution

 

 

Data tracking service

 

Provide single storage, import and export of the classified learning logs.

 

Learning filing service

 

Provide data supported for statistics and analysis on the basis of data tracking.

 

Content delivery

 

The content delivery essentially is to provide special runtime support for the operation of different content packages, for example, provide runtime support for the SCORM content package.

 

But we must understand a good delivery system can provide different runtime support for different content packages, so that we can intuitively position the runtime structure: Similar to a content player, different contents should need different players consistent with the corresponding formats. On this basis, the following design will be easily understood and developed.

 

It is not intended to design other delivery environments here, because we just need to implement the SCORM platform.

 

SCORM operating environment

 

On the basis of 1.2, SCORM2004 has completely introduced the IMS simple sorting and navigation specification, so that the curriculum packers could provide relatively intelligent capabilities for learning and adjustment of the dynamic contents. Of course, such introduction directly makes the SCORM operating environment become more complicated.

 

The SCORM operating environment mainly includes such three modules as follows:

 

Data maintenance and management

 

Sorting and navigation engine

 

Client server session and communication management

 

Module in-between relationship and functional hierarchy division

 

In this part, I mainly present system expression intuitively in a graphical manner.

 

One sequence diagram

 

Use a core operating sequence diagram to illustrate the system core process and the duties of each module.

 

  Page 6 /8  

 

 

Zhengqing Heya Training Platform Learning Tracking System Solution

 

 

Sequence diagram for learner’s content learning (at the component level)

 

 

Figure 4

 

Diagram for system configurations and hierarchical structure

 

 

Figure 5

 

  Page 7 /8  

 

 

Zhengqing Heya Training Platform Learning Tracking System Solution

 

 

SCORM runtime flow diagram

 

 

Figure 6

 

Integration strategy

 

The requirements currently integrated are as follows:

 

Users (from the logins from CIPTC E-learning Platform or other system logins)

 

External courses (maybe stored in a separate courseware server)

 

Use the portal system SSO solution.

 

The integration of external courses needs to consider some security architectures of the current courseware services.

 

  Page 8 /8  

 

 

Appendix 2: List of product quotations

 

Part of custom development
Items Descriptions Working days Unit price Subtotal
Training platform learning tracking system   ●  It can provide standard runtime support for courses in line with the SCORM standard and simultaneously support the capacity for tracking data statistics and analysis. Essentially, it is an organic combination of a micro learning management system (LMS) and a learning content management system (LCMS). 510 persons/day 2800 yuan/person/day ¥1,428,000
Subtotal (yuan) ¥1,428,000 (RMB: one million, four hundred and twenty-eight thousand)
Part of implementation, training and maintenance
Descriptions Price Remarks
Hardware integration (configuration optimization of the equipment procured by Party A) ¥272, 000  
Platform implementation (installation, system initial configurations)
Training of administrators (training of the administrators for network and server maintenance)
Training of tutors (training of the tutors for online platform operation)
Annual maintenance cost (telephone, mail, on-site support)
Subtotal (yuan) ¥272,000 (RMB: two hundred and seventy-two thousand yuan)
Total ¥1,700,000 (RMB: one million and seven hundred thousand yuan)

 

 

 

 

Development Plan for Platform Learning Tracking (SCORM) System

 

 

 

 

 

 

 

 

Zhengqing Heya Training Platform Learning Tracking (SCORM) System

 

Project Development Plan

 

 

 

 

 

 

 

 

 

 

 

Development Plan for Platform Learning Tracking (SCORM) System

 

 

Table of Contents

 

1. Introduction 1
1.1 Purpose 1
1.2 Scope 1
1.3 Special instructions 1
1.4 References 1
1.5 Overview 1
1.5.1 Project purpose, size and objectives 1
1.5.2 Assumptions and constraints 1
1.6 Deliverable project artifacts 1
2. Project organization 2
2.1 Organization structure 2
3. Management process 2
3.1 Project estimation 2
3.2 Project plan 2
3.2.1 Phase plan 2
3.3 Project monitoring and control 3
3.3.1 Requirements management plan 3
3.3.2 Schedule control plan 3
3.3.3 Budget control plan 3
3.3.4 Quality control plan 3
3.3.5 Report plan 3
4. Technical process plan 3
4.1 Development case 3
4.2 Methods, tools and techniques 3
5. Risk management plan 4

 

 

 

 

Development Plan for Platform Learning Tracking (SCORM) System

 

 

Project Development Plan

 

1. Introduction

 

1.1 Purpose

 

This document is mainly to develop the software development plan for Zhengqing Heya Training Platform Learning Tracking (SCORM) System as an important guidance document during the development of this project.

 

1.2 Scope

 

This document has clarified the software development plan for Zhengqing Heya Training Platform Learning Tracking (SCORM) System, including staffing organization, time plan, iteration plan and other contents during the project development. Moreover, it has determined the organization, personnel/resource configurations and project plans taken to ensure the smooth completion of the project.

 

1.3 Special instructions

 

The plans annotated in this document are not unchangeable. However, with the progress of the project and especially with the gradual refinement of the demands, the development plan will also be gradually adjusted and further refined accordingly.

 

1.4 References

 

Appendix 1: Training Platform Learning Tracking (SCORM) System Solution.doc

 

1.5 Overview

 

1.5.1 Project purpose, size and objectives

 

Project objective: Training Platform Learning Tracking (SCORM) System

 

Project scope: SCORM system:

 

It can provide standard runtime support for courses in line with the SCORM standard and simultaneously support the capacity for tracking data statistics and analysis. Essentially, it is an organic combination of a micro learning management system (LMS) and a learning content management system (LCMS).

 

Project results: Set up a comprehensive SCORM system solution and realize the tracking and analysis of the process learning for remote training hosted by Zhengqing Heya.

 

1.5.2 Assumptions and constraints

 

The project of Zhengqing Heya Training Platform Learning Tracking (SCORM) System shall be delivered before September 30, 2019, with the corresponding training work completed accordingly at the same time.

 

1.6 Deliverable project artifacts

 

ID Name Expected date
PLAN Zhengqing Heya Learning Tracking (SCORM) Platform Project Plan (1.0) 2017-04-28
REQDOC Learning Tracking (SCORM) Platform Solution (1.0) 2017-05-20
SOFTWARE Zhengqing Heya Learning Tracking (SCORM) Platform (including platform software and database scripts) 2017-09-10
MANNUAL Platform technical document 2017-9-30
  Platform user manual 2017-9-30
  Platform maintenance manual 2017-9-30
TRAINDOC Training lecture 2017-9-10
  Platform commissioning 2017-9-10
  Platform formal software 2017-9-25

 

  Page 1 of 4  

 

 

Development Plan for Platform Learning Tracking (SCORM) System

 

 

2. Project organization

 

2.1 Organization structure

 

Role category Staff Project role
Consultants Group Hou Cuntao Company’s deputy manager, project general leader
Huang Biao Chief Director of company’s Technology Department, technology general leader
System Installing Group Sun Ronghui System engineer
  Chen Long Project manager, specific project leader
  Chen Xinjie Development manager, product manager, project development general leader
R&D Group Wang Wen Design and development engineer
Zhang Gaofeng Development engineer
  Sun Xiang Development engineer
  Huang Biao Development engineer
UI Group Guo Hongliang UI engineer
QA Group An Tiantian, Lv Xueling Test engineer
Support Group Huang Biao, Chen Long Support engineer

 

3. Management process

 

3.1 Project estimation

 

The project development will continue for about five and a half months as planned, with the total staffing expected to be 8 persons, but if any project change event occurs, the project needs to be estimated once again.

 

3.2 Project plan

 

3.2.1 Phase plan

 

Implementation steps Specific contents Time Result documents
Set up a project group Huaxia Dadi Digital set up a special project implementation group. 2017-04-28 Project group setup
System survey and design The system survey requires that the users fully communicate with the system designers and finally reach a consensus on the problems that need to be solved. The system designers shall prepare a system overall scheme and users shall verify and approve the system scheme. 2017-05-01 to 2017-05-20

Requirements Instructions

 

Detailed Design Instructions

 

Program coding The system designer shall carry out the program coding, data acquisition/conversion and relevant other work according to the customized Detailed Design Instructions . 2017-06-01 to 2017-09-10

Software Maintenance Manual

 

User Operation Manual

 

System software testing Carry out functional testing, load testing and debugging. 2017-08-20 to 2017-9-10 Test report
Party A’s testing and commissioning Install and debug the system so that it could be integrated as a whole. After collecting data and converting the original data according to the plan, starting system commissioning in a certain range. 2017—9-10 to 2017-9-20 Product installation and delivery
Training Carry out product demonstration, operation training, system administrator training and so on; users assign relevant personnel to participate in training. 2017-9-10 to 2017-9-20 Trainees master the system functions and processes

 

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Development Plan for Platform Learning Tracking (SCORM) System

 

 

System acceptance Both parties organize the system acceptance. 2017-9-25 Sign the document System Acceptance
System maintenance Provide the user with tracking services and undertake to train the relevant working staff for software maintenance. Start at the end of the acceptance System Maintenance Files
Technical support A second project implementation plan can be provided for new demands and those objectively in need of secondary project approval. Since 2017-9-25 Technical Support Files

 

3.3 Project monitoring and control

 

3.3.1 Requirements management plan

 

In order to clarify the requirements changes and corresponding treatment, any requirement change must be mailed to the whole team with detailed requirement document instructions attached.

 

3.3.2 Schedule control plan

 

In order to ensure that the project can be completed according to the plan, make sure of all check points in each phase and check such points carefully.

 

3.3.3 Budget control plan

 

3.3.4 Quality control plan

 

The phase and unit tests shall run through the whole development process. The delivery tasks must also be subject to the “Unit Test”.

 

Start a new day’s task on the basis of ensuring that yesterday’s “Nightly Build” has passed.

 

Guarantee the code quality while ensuring the quality of the whole project.

 

3.3.5 Report plan

 

Each person shall write a weekly report every week. The project team leader, since this day, shall undertake to submit a project weekly report in each week.

 

4. Technical process plan

 

4.1 Development case

 

4.2 Methods, tools and techniques

 

● “Rational Rose” is used to create the business “Model”.

 

● “Ellipse” is used to make a code generator framework.

 

● “Junit & Ant Integration” will serve as “Unit test” and “build” tools.

 

● IDEA is used as a “Team” unified development tool (“Ultra Edit” can be used to help develop).

 

● VSS is used for version control.

 

● BUGZILLA is used as a test and BUG tracking management tool.

 

  Page 3 of 4  

 

 

Development Plan for Platform Learning Tracking (SCORM) System

 

 

5. Risk management plan

 

ID Risk name Existing possibility Importance Destructive power Mitigation measures
1 Insufficient staff High High Lead to 2-5 weeks’ project delay Ensure fixed developers for this project
2 Misunderstand customer’s needs somewhat Extremely high Medium

Result in reworking of some project modules;

 

Result in project demand modules increasing in number;

 

Result in project extension with the destructive power lasting 1-6 months.

 

Stick to agile methods;

 

Communicate with customers at least once every week;

 

Insist on releasing to the customer after iteration every time;

 

Implement refined models only.

 

3 The customer unilaterally retracts the core demands Medium High

The project needs to reselect its architecture;

 

Lead to rigid customer relationship;

 

Lead to project interruption.

 

Stick to agile methods;

 

Insist on confirming the development artifacts with the customer.

 

 

  Page 4 of 4  

 

 

Appendix 4: List of system documents

 

Contents Documents
Project planning and software requirements Training Platform Learning Tracking (SCORM) System Solution
Software design descriptions Database Design Instructions , General Design Instructions
Test Test Report
Deployment and implementation System Installation and Configuration Manual
User Operation Manual
System Maintenance Manual
Training Manual

  

 

 

 

Appendix 5: System acceptance test standards

 

This system acceptance test includes such contents as follows: Examine and check whether the relevant documents and codes are in line with the determined specifications and whether the system functions have satisfied the requirements; make sure that the bequeathal problems do not affect the system normal operation and that the performance indexes can satisfy the requirements of the system for existing and future user visits and the system can work continuously. In accordance with the above requirements, the standards involved are composed of such three parts as follows:

 

Document acceptance standards, code acceptance standards and test acceptance standards

 

(I) Document acceptance standards

 

The following documents should be submitted:

 

Contents Documents
Project planning and software solutions Training Platform Learning Tracking (SCORM) System Solution
Software design descriptions Database Design Instructions , General Design Instructions
Test Test Report
Deployment and implementation System Installation and Configuration Manual
User Operation Manual
System Maintenance Manual
Training Manual

 

The document acceptance standards are as follows:

 

S/N Contents
Basic standards Consistent and specified format and typesetting
Content integrity
Readability
Requirement-related documents Requirement integrity
Consistency with user manuals
Design-related documents Clear and complete overall design
Design and system implementation consistency
Clear and complete interface definition
Interface definition and system code consistency
  Complete database structure design diagram and descriptions
Safety system integrity
Error handling framework integrity
User manual Readability (Graphic and texts)
User operating function coverage
Content and actual system operation consistency
Operation manual Complete system environment configurations and installation instructions
Complete operation monitoring, error recovery and safe operation instructions

 

 

 

   

(II) Code acceptance standards

 

The system codes developed shall be in line with the Java development specifications, which include, but are not limited to file organization, format and naming normalization, exceptions and garbage disposal, etc.

 

(III) Test acceptance standards

 

When the acceptance test has passed, the system can pass the performance test and the number of the system functional classification bugs shall meet the following requirements:

 

Class A - Fatal bugs: No such bugs are allowed in the software released.

 

Class B - Serious bugs: Only 1-2 bugs are allowed in every ten thousand lines of codes.

 

Class C - General bugs: Only 2-5 bugs are allowed in every ten thousand lines of codes.

 

(IV) Quality warranty

 

S/N Item Contents
1 Commencement time Within three days after the signing of the contract
2 Construction duration (The project development has completed and passed the acceptance) 100 days (working days)
3 Compensation amount within 10 days’ delay 1% of the contract price
4 Compensation amount within 10-30 days’ delay 8% of the contract price
5 Compensation amount beyond 30 days’ delay 20% of the contract price
4 Quality warranty: The system functions have 20% not up to the expected objectives. 10% of the contract price
5 Quality warranty: The system functions have more than 20% not up to the expected objectives. Pay no money for Phase 2 and Phase 3 of the project.

 

 

 

 

Beijing Huaxia Dadi Digital Information Technology Co., Ltd.

Zhengqing Heya Training Platform Project

Acceptance Report

 

Project Name Zhengqing Heya Training Platform Development
Party A’ Name Zhengqing Heya Education Technology (Beijing) Co., Ltd.
Party B’ Name Beijing Huaxia Dadi Digital Information Technology Co., Ltd.
Acceptance Site Beijing
Acceptance Date September 2017
Acceptance Results þ Acceptance Passed
Remarks  
(Others to be explained)  
   

 

Party A’s responsible person: Party B’s responsible person:

 

Party A’s unit: (official seal)

 

Party B’s unit: (official seal):

Date: September 22, 2017 Date: September 22, 2017

 

 

 

 

Exhibit 21.1

 

Entity   Jurisdiction
Beijing Huaxia Dadi Distance Learning Services Co., Ltd.   People’s Republic of China
Beijing HuaXiaDaDi Digital Information Technology Co., Ltd.   People’s Republic of China
Shanghai Xin Fu Network Technology Co., Ltd.   People’s Republic of China
Shanghai Xia Shu Network Technology Co., Ltd   People’s Republic of China
Hunan Huafu Haihui Learing Technology Co., Ltd.   People’s Republic of China
Huaxia MOOC (Hubei) Network Technology Co., Ltd.   People’s Republic of China
Nanjin Suyun Education Technology Co., Ltd.   People’s Republic of China
Guizhou Huafu Qianyun Network Technology Co., Ltd.   People’s Republic of China

  Exhibit 23.1

 

 

 

 

 

 

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

 

 

 

We consent to the use in this Amendment to the Registration Statement on Form F-1 of Wah Fu Education Group Limited and subsidiaries of our report dated September 15, 2017, except for Note 10, as to which the date is December 22, 2017, and Note 12, as to which the date is March 20, 2018, with respect to the consolidated balance sheets of Wah Fu Education Group Limited and subsidiaries as of March 31, 2017 and 2016, and the related consolidated statements of income and comprehensive income, changes in equity and cash flows for each of the years in the two-year period ended March 31, 2017, included in this Registration Statement. We also consent to the reference to our firm under the heading “Experts” in the Prospectus.

 

/s/ Friedman LLP

 

 

New York, New York

March 20, 2018

 

 

 

Exhibit 23.4

 

China Research and Intelligence Co., Ltd.

Room A606, No. 1500, Longwu Road, Xuhui District

Shanghai, China 200231

+86 2168522019

www.shcri.com

 

Wah Fu Education Group Limited

Room 505 Building No.40, No.1 Disheng North Street

Economic and Technological Development Zone

Beijing, China 100176

 

December 13, 2017

 

Dear Sir/Madam:

 

Reference is made to the Form F-1 registration statement (the “Registration Statement”), relating to the registration of ordinary shares, par value $1.00 per share, of Wah Fu Education Group Limited (the “Company”). We hereby consent to all references to our name in the Registration Statement, including in the sections entitled “Industry Overview”. We hereby consent to the filing of this letter as an exhibit to the Registration Statement of the Company on Form F-1 to be filed with the U.S. Securities and Exchange Commission pursuant to the Securities Act of 1933, as amended, and the reference to our firm in the section of the Registration Statement entitled “Experts.”

  

Yours sincerely,

 

/s/ China Research and Intelligence Co., Ltd.                   

China Research and Intelligence Co., Ltd.

Exhibit 99.1

 

CONSENT OF DEFANG LI

 

Wah Fu Education Group Limited intends to file a Registration Statement on Form F-1 (together with any amendments or supplements thereto the "Registration Statement"), registering securities for issuance in its initial public offering. As required by Rule 438 under the Securities Act of 1933, as amended, the undersigned hereby consents to being named in the Registration Statement as a Director Nominee.

  

January 29, 2018 /s/ Defang Li
  Defang Li

 

Exhibit 99.2

 

CONSENT OF YIK C CHAN

 

Wah Fu Education Group Limited intends to file a Registration Statement on Form F-1 (together with any amendments or supplements thereto the "Registration Statement"), registering securities for issuance in its initial public offering. As required by Rule 438 under the Securities Act of 1933, as amended, the undersigned hereby consents to being named in the Registration Statement as a Director Nominee.

  

March 19, 2018 /s/ Yik C Chan
  Yik C Chan

 

Exhibit 99.3

 

CONSENT OF RONG ZHANG

 

Wah Fu Education Group Limited intends to file a Registration Statement on Form F-1 (together with any amendments or supplements thereto the "Registration Statement"), registering securities for issuance in its initial public offering. As required by Rule 438 under the Securities Act of 1933, as amended, the undersigned hereby consents to being named in the Registration Statement as a Director Nominee.

  

March 16, 2018 /s/ Rong Zhang
  Rong Zhang