China Education Alliance Announces Second Quarter 2009 Financial Results

HARBIN, China, Aug. 11 /PRNewswire-Asia-FirstCall/ -- China Education Alliance, Inc. (NYSE Amex: CEU) today announced strong financial results for the three and six months ended June 30, 2009. The Company will host a conference call Wednesday, August 12, 2009, at 10:00 a.m. EDT to discuss these results. Details on accessing the call and live webcast follow, below.

"China Education had a very strong quarter as demand for our high-quality educational services and our English language and vocational training programs in China remains strong," said Xiqun Yu, Chief Executive Officer of China Education Alliance. "Our results validate the effectiveness of our business model and support our plans for expansion. We remain focused on marketing our online test-preparation materials, developing our language-training programs, and expanding our vocational and IT training efforts to drive growth for our businesses."

  Financial Highlights for the Three Months Ended June 30, 2009

  -- Total revenue increased $3.66 million or 82.1% year-over-year to
     $8.12 million.
  -- Net income increased $1.58 million or 95.4% year-over-year to $3.24
     million, compared to net income of $1.66 million in the second
     quarter of fiscal 2008.
  -- EPS was $0.13 per fully diluted share, compared to EPS of $0.07 per
     fully diluted share in the second quarter of fiscal 2008.
  -- Operating income totalled $3.72 million, compared to an operating
     income of $1.77 million in the second quarter of 2008.
  -- Gross profit rose 75.0% to $6.51 million or 80.2% of sales, compared
     to 83.5% of sales or $3.72 million in the second quarter of 2008.


  Financial results for the three months ended June 30, 2009


China Education Alliance reported revenue of $8.12 million for the second quarter ended June 30, 2009, an increase of 82.1% compared to the second quarter of 2008. The Company's online education business generated 67.4% of its total revenue in the second quarter of 2009 compared to 73.4% for the same prior-year period. Its training center business generated 24.7% of total revenue in the second quarter of 2009 compared to 13.6% for the same prior-year period; its advertising business segment generated the remaining 7.9% of total revenue in the second quarter of 2009, compared to 13.0% for the same prior-year period.

Online Education revenue was $5.47 million for the second quarter of 2009, an increase of 67.2% compared to $3.27 million for the second quarter of 2008. During 2008 and 2009, the Company added several new programs for vocational studies and certification programs, which provided new revenue sources for its online education business.

Training Center revenue in the second quarter of 2009 was $2.01 million, up 232.0% from $0.60 million in the second quarter last year.

Advertising revenue was approximately $0.64 million for the second quarter of 2009, an increase of 10.0% from $0.58 million for the second quarter in the prior year.

Net income for the second quarter of fiscal 2009 was $3.24 million, representing an increase of 95.4% over second quarter 2008 net income of $1.66 million.  The increase was largely the result of strong development in the Company's three business segments. Diluted earnings per share was $0.13, compared with $0.07 in the same period last year.

Operating income in the second quarter of fiscal 2009 increased to $3.72 million, from $1.77 million in the same period a year ago. Operating margin was 45.8% in the second quarter of fiscal 2009.

Overall cost of sales increased 117.7% to $1.61 million in the second quarter of fiscal 2009, compared to $0.74 million for the same period in fiscal 2008. Gross profit increased to $6.51 million in the second quarter of fiscal 2009, an increase of 75.0% from approximately $3.72 million for the same quarter in fiscal 2008. Gross margin for the second quarter of fiscal 2009 was 80.2%, as compared to a record 83.5% for the same quarter a year ago. The online education gross margin decreased to 81.1% in the second quarter of fiscal 2009 from 86.7% for the same period in fiscal 2008. The training center gross margin increased to 75.0% for the second quarter of fiscal 2009 from 57.9% for the same period last year.  Advertising gross margin decreased to 89.1% in the second quarter of fiscal 2009 from 91.8% for the same period in 2008.

Selling expenses increased 34.7% to approximately $1.91 million for the second quarter of fiscal 2009, compared to approximately $1.42 million in the second quarter of 2008, due to increased expenses in building our marketing team and higher debit card agency expenses. General and administrative ("G&A") expenses were approximately $0.64 million for the second quarter of fiscal 2009, an increase from approximately $0.32 million in the second quarter of fiscal 2008, primarily due to an increase in salaries and decrease in travel and telephone expenses in the second quarter of fiscal 2009 compared to the prior year. As a percentage of revenue, G&A expenses increased to 7.9% in the second quarter of fiscal 2009, down from 7.1% in the same period of last year.

Financial results for the six months ended June 30, 2009

Revenue for the six months ended June 30, 2009 was $16.32 million, representing an increase of 91.4% compared to the same six-month period in 2008. Online education revenue was $10.30 million for the six months ended June 30, 2009, representing an increase of 74.0% from $5.92 million for the same six-month period in 2008. Training center revenue in the six months ended June 30, 2009, was $4.56 million, representing an increase of 186.8% from $1.59 million in the same six-month period last year. The increase was largely the result of strong development in the Company's three business segments.

Advertising revenue was approximately $1.47 million for the six months ended June 30, 2009, representing an increase of 43.8% from $1.02 million for the same prior-year, six-month period.

Net income for the six-months ended June 30, 2009 was $6.47 million, representing an increase of 81.1% over the same six-month period in 2008 net income of $3.57 million.  Diluted earnings per share for the six months ended June 30, 2009 was $0.26, compared with $0.14 in the same period of 2008.

Financial Condition

As of June 30, 2009, China Education Alliance had approximately $31.51 million in cash and cash equivalents, $32.62 million in working capital, and no long-term debt. Shareholders' equity was approximately $40.32 million, an increase from approximately $36.91 million on March 31, 2009. The Company generated $8.40 million in cash flow from operating activities in the second quarter of 2009.

Business Outlook

China Education believes the education industry in China will remain a fast-growth sector.  The Company has experienced rapid growth by providing online and onsite, supplemental educational training services to students aged 6 to 18 and vocational and language training services to adults aged 18 and over.

For student's ages 6 to 18, CEU provides downloadable course material and test papers online and classroom instructions onsite.  All the online course material and test papers and onsite classroom instructions are provided by the famed instructors in P. R. China, with the purpose of helping the students pass the two most important exams during their academic life:  the high school and college entrance exams.

For those age 18 and over CEU provides various vocational training including IT and other professional training programs. In addition, the English training program aims to help college graduates and other professionals improve their written and spoken English as needed to pursue an overseas education or an international business environment.

China Education Alliance has three primary businesses:

1. Exam-Oriented Primary and Secondary School Supplemental Education: China Education Alliance provides famed instructors educational resources online for primary and secondary students to download through the Internet, and also offers onsite training by the same famed instructors as well. Currently, the Company has expanded its business network from Heilongjiang province to Jilin, Liaoning and Inner Mongolia.  While the Company plans to penetrate into news areas it will continue to explore and increase online market shares in these four provinces.  The Company's online educational resources are provided through its website, http://www.edu-chn.com/ . This website is a comprehensive education network platform that utilizes video-on-demand technology and houses a large database that includes more than 350,000 exams and test papers and courseware for college, secondary and elementary schools.

2. Vocational Training:  China Education operates various vocational training programs both through online services and onsite training at its main center in Beijing, as well as through its strategic partnerships with professional organizations, including the National Association of Vocation Education Society of China (NAVEC), whose focus is on vocation and certification training. The Company will focus on its Heilongjiang-based, self-run vocational education market, which includes IT training and other profession training programs, such as secretarial training and other professions with standard exam trainings. The vocational training area is expected to have further improvement in 2009.

3. English Training:  The Company actively carries out high-end foreign language services, primarily focused on teaching English. At present, the Company has entered foreign language training contracts with a number of large enterprises and enterprise groups, including a recently announced strategic alliance with Peking University to develop their "Practical Oral English Training Project."  Since the embarking in the field of teaching foreign languages, China Education Alliance, as a leading provider of educational resources, has insisted on practical English education by hiring North American teachers, using original English materials, providing an English-only teaching environment and setting "practicalness" as its goal.

In addition to these primary businesses, the Company's is also invested in the publishing and circulation of an educational newspaper, Scientific Discovery, which is enjoying a growing distribution, currently estimated at 60,000.

"We continue to enjoy comprehensive growth in each of our business segments, primarily due to our strategic decision-making and partnerships that enhance our outreach efforts. We will continue to adhere to our goals for development. We are confident in the future growth and development of the Company," said Mr. Xiqun Yu.

Conference Call and Webcast Details

The Company will host a conference call to discuss its second quarter 2009 results at 10:00 a.m. Eastern Time on Wednesday, August 12, 2009. To participate in the call please dial [phone], or [phone] for international calls, approximately 10 minutes prior to the scheduled start time. Interested parties may also listen via a live Internet webcast, which can be found at the Company's website at http://www.chinaeducationalliance.com/ or alternately at http://viavid.net/ .

A replay of the call will be available for two weeks from 1:00 p.m. August 12, 2009, EDT until 11:59 p.m. EDT on August 26, 2009. The number for the replay is [phone], or [phone] for international calls. The passcode for the replay is 330198, and the account number is 3055. You will need both the passcode and the account number to listen to the replay. In addition, a recording of the call will be available via the company's website at http://www.chinaeducationalliance.com/ for one year.

About China Education Alliance, Inc.

China Education Alliance, Inc. is a fast growing, leading China-based company offering high-quality education resources and services to students ages 6 to 18 and adults ages 18+ (University students and professionals). For students ages 6 to 18, China Education Alliance, Inc. offers supplemental online exam-oriented training materials and on-site exam-oriented training and tutoring services. The company is providing on-line downloadable famous teachers resources and on-site face-to-face instructions.  All resources and tutoring services are provided by famous teachers within mainland China. The purpose of online exam orientated resources and on-site tutoring is to help Chinese students ages 6 to 18 to pass the two most important, and highly competitive exams in their educational career: senior high school entrance exam and college entrance exam. For graduates and professionals age 18+, China Education Alliance provides vocational training including IT and several professional training programs. In addition, the Company is providing comprehensive English programs that are taught by the North American instructors and to assist graduates and professionals in learning the English language, both written and conversational in order to better able them to work for a foreign corporation or work-study abroad.  For more information about China Education Alliance, please visit http://www.chinaeducationalliance.com/ .

Safe Harbor Statement

Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995: Certain statements in this press release, constitute forward-looking statements for purposes of the safe harbor provisions under The Private Securities Litigation Reform Act of 1995. These statements include, without limitation, statements regarding our ability to prepare the company for growth, the Company's planned expansion in 2008 and predictions and guidance relating to the Company's future financial performance. 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 and are not a guarantee of future performance but they involve risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements, which may include, but are not limited to, such factors as unanticipated changes in product demand especially in the education industry, pricing and demand trends for the Company's products, changes to government regulations, risk associated with operation of the Company's new facilities, risk associated with large scale implementation of the company's business plan, the ability to attract new customers, ability to increase its product's applications, cost of raw materials, downturns in the Chinese economy, the adoption by consumers of its new game business, the unproven advertising model that is dependent on attracting a large game user base, and other information detailed from time to time in the Company's filings and future filings with the United States Securities and Exchange Commission. Investors are urged to consider these factors carefully in evaluating the forward-looking statements herein and are cautioned not to place undue reliance on such forward-looking statements, which are qualified in their entirety by this cautionary statement. The forward-looking statements made herein speak only as of the date of this press release, readers are cautioned not to place undue reliance on any of them and the Company undertakes no duty to update any forward-looking statement to conform the statement to actual results or changes in the company's expectations.

                       -- Financial tables follow --



  Item 1. Financial Statements (Unaudited)

               China Education Alliance, Inc. and Subsidiaries
                         Consolidated Balance Sheets

                                          June 30,      December 31,
                                            2009            2008
                 ASSETS                 (Unaudited)
  Current Assets
    Cash and cash equivalents           $31,508,995     $23,418,098
    Advances to related parties                  --         142,006
    Accounts receivables                  1,099,072         469,607
    Prepaid expenses                      2,157,767       3,437,506
        Total current assets             34,765,834      27,467,217

  Property and equipment, net             6,104,710       6,136,252
  Intangibles and capitalized
   software, net                            592,412         864,089
  Goodwill                                  431,825              --
  Advance on acquisition                    233,000         932,000
  Long term investment                      338,268         342,357
                                        $42,466,049     $35,741,915

            LIABILITIES AND STOCKHOLDERS' EQUITY

  Current Liabilities
    Accounts payable and accrued
     expenses                            $1,048,033        $800,692
    Deferred revenues                     1,041,297       1,227,806
    Advances from related parties            52,414              --
        Total current liabilities         2,141,744       2,028,498

  Stockholders' Equity
  Preferred stock ($0.001 par value,
   20,000,000 shares authorized,
   7,252,143 and 7,597,645 issued
   and outstanding, respectively,
   aggregate liquidation preference
   of $2,683,293 and $2,811,129,
   respectively)                          2,885,144       3,010,144
  Common stock ($0.001 par value,
   150,000,000 shares authorized,
   22,059,626 and 21,892,631,
   issued and outstanding,
   respectively)                             22,060          21,893
  Additional paid-in capital             11,208,821      10,751,732
  Statutory reserve                       1,990,238       1,990,238
  Accumulated other comprehensive
    income                                2,501,359       2,688,080
  Retained earnings                      21,716,683      15,251,330
  Total stockholders' equity             40,324,305      33,713,417
                                        $42,466,049     $35,741,915

  The accompanying notes in the Company's filings with the Securities and
  Exchange Commission are an integral part of these unaudited consolidated
  financial statements.



               China Education Alliance, Inc. and Subsidiaries
                    Consolidated Statements of Operations
                                 (Unaudited)

                       Three months ended June 30, Six months ended June 30,
                              2009        2008         2009       2008

  Revenues
  Online education
   revenues               $5,470,628  $3,272,441  $10,300,116 $5,920,555
  Training center
   revenues                2,007,947     604,752    4,555,046  1,588,384
  Advertising revenues       639,798     581,501    1,467,290  1,020,172
  Total revenue            8,118,373   4,458,694   16,322,452  8,529,111

  Cost of Goods Sold
  Online education
   costs                   1,034,312     435,408    2,233,419    822,280
  Training center costs      501,789     254,867    1,366,439    654,457
  Advertising costs           69,775      47,417      124,914     85,587
  Total cost of goods
   sold                    1,605,876     737,692    3,724,772  1,562,324

  Gross Profit
  Online education
   gross profit            4,436,316   2,837,033    8,066,697  5,098,275
  Training center
   gross profit            1,506,158     349,885    3,188,607    933,927
  Advertising
   gross profit              570,023     534,084    1,342,376    934,585
  Total gross profit       6,512,497   3,721,002   12,597,680  6,966,787

  Operating Expenses
  Selling expenses         1,906,494   1,415,683    4,117,182  2,613,018
  Administrative             639,361     318,543      894,112    625,905
  Depreciation and
   amortization              244,898     218,173      490,351    415,831
  Total operating
   expenses                2,790,753   1,952,399    5,501,645  3,654,754

  Other Income
  Other Income                    --       6,668           --    528,497
  Interest income             25,783      31,528       48,539     56,436
  Investment loss             (3,678)    (21,842)      (4,089)   (21,842)
  Total other income          22,105      16,354       44,450    563,091

  Net Income Before
   Provision for
   Income Tax              3,743,849   1,784,957    7,140,485  3,875,124

  Provision For
   Income Taxes              507,977     128,964      675,132    305,208

  Net Income              $3,235,872  $1,655,993   $6,465,353 $3,569,916
  Basic Earnings
   Per Share                   $0.15       $0.08        $0.29      $0.17

  Basic Weighted Average
   Shares Outstanding     21,930,272  21,202,359   21,930,272 21,202,359

  Diluted Earnings
   Per Share                   $0.13       $0.07        $0.26      $0.14

  Diluted Weighted
   Average Shares
   Outstanding            25,085,474  24,818,668   24,459,405 24,818,668

  The Components of Other
   Comprehensive Income
  Net Income              $3,235,872  $1,655,993   $6,465,353 $3,569,916
  Foreign currency
   translation
   adjustment               (148,642)     55,303     (186,726) 1,331,841

  Comprehensive
   Income                 $3,087,230  $1,711,296   $6,278,627 $4,901,757



               China Education Alliance, Inc. and Subsidiaries
                    Consolidated Statements of Cash Flows
                                 (Unaudited)

                                                 Six Months Ended June 30,
                                                    2009            2008
  Cash flows from operating activities
  Net Income                                     $6,465,353     $3,569,916
  Adjustments to reconcile net income to net
   cash provided by operating activities
    Depreciation and amortization                   663,830        673,059
    Stock based compensation                        332,256             --
    Loss on equity investment                         4,089             --

  Net change in assets and liabilities
    Account receivables                            (626,926)      (477,094)
    Prepaid expenses and other                    1,285,913        484,128
    Advances to related parties                     162,894        108,536
    Accounts payable and accrued liabilities        247,341         33,786
    Deferred revenue                               (186,509)        52,772
    Advances from related parties                    52,414             --
  Net cash provided by operating activities       8,400,655      4,445,103

  Cash flows from investing activities
    Purchases of fixed assets                      (348,837)      (409,378)
    Cash of WEI on date of acquisition              227,964             --
    Long-term investment                                 --       (436,567)
  Net Cash used in investing activities            (120,873)      (845,945)
  Cash flows from financing activities
    Warrants exercised                                   --      2,667,559
  Net Cash Provided by Financing Activity                --      2,667,559
  Effect of exchange rate on cash                  (188,885)     1,331,841
  Net increase in cash                            8,090,897      7,598,558
  Cash and cash equivalents at beginning
   of period                                     23,418,098     11,778,954
  Cash and cash equivalents at end of period     31,508,995     19,377,514
  Supplemental disclosure of cash flow
   information:
    Value of equity granted and issued              332,257         94,737
  Non-cash investing and financing activities
    Conversion of preferred stock to common         125,000        667,800

  This information is intended to be reviewed in conjunction with the
  Company's filings with the Securities and Exchange Commission.



  For more information, please contact:

  At the Company:

   Ms. Susan Liu, CFO
   China Education Alliance, Inc.
   Tel:   [phone]
   Email: 

  Investor Relations:

   RedChip Companies, Inc.
   Jon Cunningham, Investor Relations
   Tel:   [phone], Ext. 107
   Email: 

DATASOURCE: China Education Alliance, Inc.



CONTACT: At the Company: Ms. Susan Liu, CFO of China Education Alliance,

Inc., [phone], or ; Or Investor Relations: RedChip

Companies, Inc., Jon Cunningham, Investor Relations, [phone] x107, or

http://www.redchip.com/ 



Web site: http://www.chinaeducationalliance.com/

http://www.edu-chn.com/

http://viavid.net/

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