Company Structure and Operations - The company operates through various subsidiaries and holds 100% economic interest in Beijing Digital Information, which is crucial for its online platform operations in China[227]. - The company has established a series of contractual agreements with its variable interest entity, Beijing Digital Information, to maintain effective control and derive economic benefits[230][231]. - The exclusive option agreement allows the company to purchase equity interests in Beijing Digital Information for RMB 2,000,000, subject to PRC law[232]. - The company has a diversified portfolio of subsidiaries providing exam preparation services across multiple provinces in China, including Hunan, Jiangsu, and Fujian[220][222][224]. - The company has implemented a "Provincial Partnership Model," establishing subsidiaries in various provinces to enhance local market engagement[258]. Revenue and Financial Performance - Total revenue for the year ended March 31, 2019, was $5,358,023, a decrease of 10.22% from $5,967,896 in 2018[348]. - Revenue from online education services was $4,185,596, representing 78.21% of total revenue, down 16.66% from $5,022,085 in 2018[348]. - Revenue from technological development and operation services increased by 23.96% to $1,172,427 from $945,811 in 2018[354]. - Net loss for the year ended March 31, 2019, was $1,018,527, compared to a net income of $1,203,477 for the same period in 2018, primarily due to decreased revenue and increased operating expenses[366]. - Comprehensive loss attributable to the company was $1,540,777 for the year ended March 31, 2019, compared to a comprehensive income of $1,805,470 in 2018, mainly due to net loss and foreign currency translation loss[367]. Online Education Services - The company provides online education services and technology solutions, including Online Education Cloud Services and Online Training Services, targeting institutions and individual students[237][238]. - The B2B2C service includes three platforms: self-study examination, continuing education, and non-diploma training, with over 1,600 courses available and approximately 95 institutions utilizing these platforms[239][240]. - The company has been increasing marketing efforts for its B2C service since early 2017, stabilizing revenue from this segment, which provided approximately 340,000 courses to students in the year ended March 31, 2019[246]. - The company is focused on expanding its B2C service in response to increased demand for continuing education[246]. - The company has developed online courses for the "National Teacher Certificate Examination," with limited competition in this field[259]. Cost and Expenses - Cost of revenue for the year ended March 31, 2019, was $2,854,379, accounting for 53.3% of net revenues, up from 37.4% in 2018[356]. - Cost of revenue from online education services increased by 33.58% to $2,388,799, primarily due to increased payroll expenses for course development[357]. - Total operating expenses increased by $1,076,329 or 40.37% to $3,742,235 for the year ended March 31, 2019, compared to $2,665,906 in 2018[361]. - Selling expenses rose by 32.88% to $1,441,165 in fiscal year 2019, driven by increased salaries and expansion of the sales team by 138.5%[362]. - General and administrative expenses increased by $719,763 or 45.52% to $2,301,070 in fiscal year 2019, mainly due to payroll expenses for new subsidiaries[363]. Market and Competitive Landscape - The company faces competition from both established players and new entrants in the online education space, but believes its long-standing client relationships and experienced technology team provide a competitive edge[281]. - The company is a leading service provider in the self-study online training area, with competitive advantages in geographic coverage, partner schools, course offerings, and years of operating experience[280]. - Increased internet and broadband penetration in China is expected to drive demand for online education services[339]. Employee and Operational Insights - As of March 31, 2019, the company had 153 employees, with 43 (28%) in technology and development and 44 (29%) in product development and customer service[275]. - More than 45% of the company's employees are dedicated to technology and product development, with 30% holding master's or doctoral degrees[251]. - The company has leased a total of approximately 1,444.45 square meters of office space across multiple cities including Beijing, Shanghai, and Wuhan, to support its operations[283][284]. - The company owns office space of 218.68 square meters in Changsha and Wuhan, which serves as its operational bases[285]. Regulatory Environment - The company is subject to regulations regarding foreign investment, which restrict foreign ownership in certain sectors, including value-added telecommunications services, to a maximum of 50%[295]. - The company operates under the Education Law of the PRC, which encourages the establishment of educational institutions while prohibiting for-profit organizations in certain government-funded schools[296]. - The company is compliant with the Law for Promoting Private Education, allowing for the establishment of both non-profit and for-profit private schools, but prohibits for-profit schools in compulsory education[297]. Tax and Financial Regulations - The PRC Enterprise Income Tax Law applies a uniform 25% enterprise income tax rate to both foreign-invested and domestic enterprises, with certain high-tech enterprises eligible for a reduced rate of 15%[329]. - The VAT tax rate for Chinese enterprises is set at 17%, with adjustments reducing it to 16% for certain taxable activities effective May 1, 2018[334]. - The PRC Labor Law mandates that employers must sign an unlimited-term labor contract with employees who have worked for ten consecutive years[326]. Future Outlook - The company expects revenue from adult continuing education services to increase in the long term due to unmet market demands and government support for the "Internet Plus" model[262]. - The company plans to continue expanding its course offerings to diversify and grow revenues in the future[344].
Wah Fu Education (WAFU) - 2019 Q4 - Annual Report