Company Overview - The company has been operating for over 20 years, providing online exam preparation services and related technology solutions in China[233]. - The company controls 100% of Beijing Digital Information through contractual arrangements, which allows it to derive 100% of the economic interest from this entity[224]. - The company has established a wholly-owned subsidiary in Hong Kong, Wah Fu Education Holding Limited, to serve as a holding company[211]. - The company owns varying equity interests in multiple subsidiaries across different provinces in China, with ownership percentages ranging from 51% to 75%[215][218][219]. Financial Performance - In fiscal year 2020, the company reported revenue of $5,637,370, a 5.2% increase from $5,358,023 in 2019[354]. - The cost of revenue increased to $3,386,965, representing 60% of total revenue, compared to 53% in 2019[354]. - Gross profit decreased to $2,250,405, accounting for 40% of total revenue, down from 47% in the previous year[354]. - The company experienced a net loss of $1,641,087, which is -29% of total revenue, compared to a net loss of $1,018,527 (-19%) in 2019[354]. - Working capital increased by $2,293,312 or 45.39% from $5,052,918 in 2019 to $7,346,230 in 2020[372]. - Net cash provided by operating activities was $937,518 in fiscal year 2020, a significant recovery from a cash outflow of $513,310 in 2019[375]. Revenue Sources - For the fiscal year ended March 31, 2020, 5.5% of the company's consolidated revenue was derived from Beijing Digital Information, down from 29.6% in the previous year[225]. - Revenue from adult continuing education programs was $0.8 million for the fiscal year ended March 31, 2020, with expectations for growth in the next fiscal year[261]. - Net revenues for online education services increased to $5,370,700 in fiscal year 2020, up by $1,185,104 or 28.31% from $4,185,596 in 2019[355]. - Revenue from technological development and operation services decreased significantly to $266,670 in fiscal year 2020, down by $905,757 or 77.25% from $1,172,427 in 2019[360]. Course Offerings and Platforms - The company offers over 1,950 courses on its B2B2C platforms, which are used by approximately 95 universities and educational institutions[235]. - The self-study examination platform allows universities to monitor student learning processes and generate performance scores for evaluation[236]. - The continuing education platform provides additional administrative functions for managing student profiles, tuition payments, and course arrangements[237]. - The non-diploma training platform enables traditional training institutions to offer courses online without significant overhead costs[238]. - The company has developed online courses for the "National Teacher Certificate Examination," targeting a market with limited competition[259]. Employee and Technology Development - More than 25% of the company's employees are dedicated to technology and product development, with 30% holding master's or doctoral degrees[250]. - The technology team has maintained an average of over 30 employees in research and development over the past three years, with 30% holding master's or doctoral degrees[271]. - The company has registered 30 software and 21 trademarks, with 2 additional trademark applications pending[272]. - The company anticipates continued increases in research and development expenditure to maintain a technological advantage in the online education industry[271]. Market and Competition - The company faces competition from four primary competitors in the B2B2C service and two major competitors in the B2C service, but maintains advantages in geographic coverage and course offerings[281]. - The company plans to expand its client base for B2B2C services in response to demand from over 3,000 universities in China[252]. - The company aims to expand internationally by establishing branches or acquiring training institutions in North America[254]. Regulatory Environment - The company must obtain a Value-Added Telecommunications License for Internet Information Services (ICP license) to provide commercial internet content services in China[294]. - Foreign investors are prohibited from holding more than 50% equity interest in enterprises providing value-added telecommunications services in China[295]. - The Law for Promoting Private Education allows sponsors to establish either non-profit or for-profit private schools, but prohibits for-profit schools in compulsory education[297]. - Online publishing services in China require an online publishing services permit, and all online publications must be approved by relevant authorities[307]. Operational Challenges - The impact of COVID-19 led to a temporary decline in revenue due to changes in examination schedules and school closures, but the company expects to maintain its market position in the long run[341][345]. - The company operates in a seasonal business environment, with the highest student enrollment occurring in the two months prior to major examinations in April and October[280].
Wah Fu Education (WAFU) - 2020 Q4 - Annual Report