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Wah Fu Education Group Ltd. Announces Financial Results for the First Half of Fiscal Year 2021

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BEIJING, China, March 31, 2021 (GLOBE NEWSWIRE) -- Wah Fu Education Group Limited (“Wah Fu” or the “Company”) (NASDAQ:WAFU), a provider of online education and exam preparation services, as well as related training materials and technology solutions for both institutions and individuals, today announced its unaudited financial results for the six months ended September 30, 2020.

Financial Highlights for the Six Months Ended September 30, 2020

For the Six Months Ended
September 30,

($’000, except per share data)

2020

2019

% Change

Revenue

$

4,302

$

2,500

72.1

%

Gross profit

$

2,430

$

986

146.5

%

Gross margin

56.5

%

39.4

%

17.1

pp

Income (loss) from operations

$

687

$

(1,038

)

-166.2

%

Operating profit (loss) margin

16.0

%

-41.5

%

57.5

pp

Net income (loss)

$

511

$

(1,183

)

-143.2

%

Basic and diluted earnings (loss) per share

$

0.09

$

(0.29

)

-131.0

%

* pp: percentage points

Revenue increased by 72.1% year-over-year to $4.30 million for the six months ended September 30, 2020 from $2.50 million for the same period of the prior fiscal year. The increase in revenue is primarily attributable to the increased revenue from online education services due to the impact of the COVID-19.

Gross profit increased by 146.5% to $2.43 million for the six months ended September 30, 2020 from $0.99 million for the same period of the prior fiscal year. Gross margins were 56.5% and 39.4% for the six months ended September 30, 2020 and 2019, respectively. The increased gross profit was mainly due to (i) the sharply increased revenue from online education service due to the impact of the COVID-19, which had a higher gross margin; (ii) the decreased salary expense for IT service personnel since the Company shifted focus to online education service.

Income from operations was $0.69 million for the six months ended September 30, 2020, compared to loss from operations of $1.04 million for the same period of the prior fiscal year. Operating profit margin was 16.0% for the six months ended September 30, 2020, compared to operating loss margin of 41.5% for the same period of the prior fiscal year.

Net income was $0.51 million or, income per share of $0.09 for the six months ended September 30, 2020, compared to net loss of $1.18 million, or loss per share of $0.29, for the same period of the prior fiscal year.

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

Revenue

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

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

Cost of revenue

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

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

Gross profit

Gross profit increased by $1.44 million, or 146.5%, to $2.43 million for the six months ended September 30, 2020 from $0.99 million for the same period of the prior fiscal year. As a result, gross margin increased by 17.1 points to 56.5% for the six months ended September 30, 2020 from 39.4% for the same period of the prior fiscal year.

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

Operating expenses

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

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

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

Income (loss) from operations

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

Other income (expenses)

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

Income (loss) before income taxes

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

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

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

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

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

Financial Condition

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

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

About Wah Fu Education Group Limited

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

Safe Harbor Statement

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

For more information, please contact:

Raincy Du
ir@edu-edu.com.cn

WAH FU EDUCATION GROUP LIMITED AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

As of September 30,

As of
March 31,

2020

2020

ASSETS

CURRENT ASSETS:

Cash

$

9,266,310

$

6,833,891

Accounts receivable, net

1,149,926

542,913

Other receivables, net

74,601

143,920

Loan to third parties, current

666,669

42,316

Loan to related parties

1,832,051

2,537,532

Other current assets

199,543

150,213

TOTAL CURRENT ASSETS

13,189,100

10,250,785

Loan to third parties, noncurrent

-

579,335

Right-of-use assets

494,963

603,553

Rent deposit

76,123

73,049

Property and equipment, net

743,552

775,465

Investments in unconsolidated entities

11,439

10,977

Deferred tax assets, net

338,191

272,115

TOTAL ASSETS

$

14,853,368

$

12,565,279

CURRENT LIABILITIES:

Due to related parties

$

297,855

$

286,353

Deferred revenue

2,399,981

1,524,918

Operating lease liabilities, current

265,610

254,332

Taxes payable

580,341

314,052

Other payables

200,716

189,201

Accrued expenses and other liabilities

808,483

335,699

TOTAL CURRENT LIABILITIES

4,552,986

2,904,555

Operating lease liabilities, noncurrent

242,695

361,595

TOTAL LIABILITIES

4,795,681

3,266,150

COMMITMENTS AND CONTINGENCIES

EQUITY

Common stock, $0.01 par value, 30,000,000 shares authorized; 4,381,033 and 4,381,033 shares issued and outstanding as of September 30, 2020 and March 31, 2020 respectively

43,810

43,810

Additional paid-in capital

4,799,384

4,799,384

Statutory reserve

231,424

231,424

Retained earnings

5,098,639

4,723,999

Accumulated other comprehensive loss

(505,639

)

(734,028

)

Total shareholders’ equity

9,667,618

9,064,589

Non-controlling interest

390,069

234,540

TOTAL EQUITY

10,057,687

9,299,129

TOTAL LIABILITIES AND EQUITY

$

14,853,368

$

12,565,279

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

For the Six Months Ended
September 30,

2020

2019

REVENUE

$

4,302,082

$

2,500,195

COST OF REVENUE AND RELATED TAX

Cost of revenue

1,853,601

1,491,384

Business and sales related tax

18,634

22,509

GROSS PROFIT

2,429,847

986,302

OPERATING EXPENSES

Selling expenses

812,877

764,179

General and administrative expenses

929,998

1,259,784

Total operating expenses

1,742,875

2,023,963

INCOME (LOSS) FROM OPERATIONS

686,972

(1,037,661

)

OTHER INCOME (EXPENSE)

Interest income

82,864

46,447

Other expenses

(46,389

)

(5,726

)

Total other income, net

36,475

40,721

INCOME (LOSS) BEFORE INCOME TAX PROVISION

723,447

(996,940

)

PROVISION FOR INCOME TAXES

212,024

186,434

NET INCOME (LOSS)

511,423

(1,183,374

)

Less: net income attributable to non-controlling interest

136,783

41,653

NET INCOME (LOSS) ATTRIBUTABLE TO WAH FU EDUCATION GROUP LIMITED

$

374,640

$

(1,225,027

)

COMPREHENSIVE INCOME (LOSS)

Net income (loss)

511,423

(1,183,374

)

Other comprehensive loss: foreign currency translation loss

247,135

(388,073

)

Total comprehensive loss

758,558

(1,571,447

)

Less: Comprehensive income (loss) attributable to non-controlling interest

18,746

(26,088

)

COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO WAH FU EDUCATION GROUP LIMITED

$

739,812

$

(1,545,359

)

Earnings (loss) per common share - basic and diluted

$

0.09

$

(0.29

)

Weighted average shares - basic and diluted

4,381,033

4,199,336

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

Ordinary Shares

Additional
Paid-in

Statutory

Retained

Accumulated Other Comprehensive

Shareholders’

Non-controlling

Total

Shares

Amount

Capital

Reserves

Earnings

Income (Loss)

Equity

Interest

Equity

Balance at March 31, 2020

4,381,033

$

43,810

$

4,799,384

$

231,424

$

4,723,999

$

(734,028

)

$

9,064,589

$

234,540

$

9,299,129

Net income (loss)

-

-

-

-

374,640

-

374,640

136,783

511,423

Foreign currency translation adjustment

-

-

-

-

-

228,389

228,389

18,746

247,135

Balance at September 30, 2020

4,381,033

$

43,810

$

4,799,384

$

231,424

$

5,098,639

$

(505,639

)

$

9,667,618

$

390,069

$

10,057,687

Balance at March 31, 2019

3,200,000

$

32,000

$

217,395

$

222,180

$

6,421,944

$

(407,169

)

$

6,486,350

$

211,353

$

6,697,703

Common stock issued net of stock issuance costs of $1,266,326

1,181,033

11,810

4,627,029

-

-

-

4,638,839

-

4,638,839

Net income (loss)

-

-

-

-

(1,225,027

)

-

(1,225,027

)

41,653

(1,183,374

)

Foreign currency translation adjustment

-

-

-

-

(361,985

)

(361,985

)

(26,088

)

(388,073

)

Balance at September 30, 2019

4,381,033

$

43,810

$

4,844,424

$

222,180

$

5,196,917

$

(769,154

)

$

9,538,177

$

226,918

$

9,765,095

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

For the six months ended,
September 30

2020

2019

Cash flows from operating activities:

Net Income (loss)

$

511,423

$

(1,183,374

)

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

Depreciation and amortization

70,124

113,767

Non-cash lease expense

130,173

78,861

Loss from disposal of property and equipment

-

88

Provision for doubtful accounts

241,551

59,242

Provision for investments in unconsolidated entities

23,329

-

Interest income from loan to third parties

(72,600

)

(15,610

)

Deferred tax benefit

(53,069

)

91,148

Changes in operating assets and liabilities:

Accounts receivable, net

(645,705

)

929,249

Other receivable, net

150,959

(155,658

)

Other current assets

(44,446

)

67,131

Rent deposit

(77,731

)

(74,856

)

Deferred revenue

787,789

1,157,842

Taxes payable

245,863

108,238

Other payable

4,074

-

Operating lease liabilities

(129,738

)

(56,131

)

Accrued expenses and other liabilities

445,590

13,928

Net cash provided by operating activities

1,587,586

1,133,865

Cash flows from investing activities:

Purchase of property and equipment

(7,417

)

(63,111

)

Proceeds made for loans to related party

(1,650,000

)

-

Proceeds from loans to related party

2,355,481

-

Payments made for loans to third parties

(18,321

)

-

Net cash provided by (used in) investing activities

679,743

(63,111

)

Cash flows from financing activities:

Changes in due to related parties

(88,510

)

26,040

Net proceeds from initial public offering (“IPO”)

-

4,866,512

Net cash provided by (used in) financing activities

(88,510

)

4,892,552

Effect of exchange rate fluctuation on cash

253,600

(293,494

)

Net increase in cash

2,432,419

5,669,812

Cash at beginning of the period

6,833,891

3,927,718

Cash at end of the period

$

9,266,310

$

9,597,530

Supplemental cash flow information

Cash paid for income taxes

$

29,066

$

11,228

Non-cash financing activities

Right of use assets obtained in exchange for operating lease obligations

$

816,057

$

823,554

Deferred offering cost netted with proceeds from IPO

$

-

$

227,673