UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

xANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended: December 31, 2011

oTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____________ to _____________

Commission File No. 000-54086

CHINA EXECUTIVE EDUCATION CORP.

 (Exact name of registrant as specified in its charter)

Nevada	75-3268300
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

c/o Hangzhou MYL Business Administration Consulting Co. Ltd.

Room 307, Hualong Business Building

110 Moganshan Road, Hangzhou 310005

People’s Republic of China

(Address of principal executive offices)

(+86) 0571-8880-8109

 (Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Exchange Act: Common Stock, $0.001 par value

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.Yes ¨ No x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.Yes ¨ No x

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes x No ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer  o	Accelerated Filer   o
Non-Accelerated Filer  o (Do not check if a smaller reporting company)	Smaller reporting company  x

Indicate by check mark whether registrant is a shell company (as defined in Rule 12b-2 of the Act).Yes o No x

As of June 30, 2011 (the last business day of the registrant’s most recently completed second fiscal quarter), the aggregate market value of the shares of the registrant’s common stock held by non-affiliates (based upon the closing bid price of such shares as quoted on the OTCQB Marketplace) was approximately $4.6 million. Shares of the registrant’s common stock held by each executive officer and director and by each person who owns 10% or more of the outstanding common stock have been excluded from the calculation in that such persons may be deemed to be affiliates of the registrant. This determination of affiliate status is not necessarily a conclusive determination for other purposes.

There were a total of 22,834,100 shares of the registrant’s common stock outstanding as of March 28, 2012.

DOCUMENTS INCORPORATED BY REFERENCE

None.

China Executive Education Corp.

Annual Report on Form 10-K

Year Ended December 31, 2011

TABLE OF CONTENTS

	PART I
Item 1.	Business.	2
Item 1A.	Risk Factors.	9
Item 1B	Unresolved Staff Comments.	23
Item 2	Properties.	23
Item 3	Legal Proceedings.	23
Item 4	Mine Safety Disclosueres.	23
	PART II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.	24
Item 6.	Selected Financial Data.	25
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.	25
Item 7A	Quantitative and Qualitative Disclosures About Market Risk.	35
Item 8	Financial Statements and Supplementary Data.	35
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.	35
Item 9A.	Controls and Procedures.	35
Item 9B.	Other Information.	37
	PART III
Item 10.	Directors, Executive Officers and Corporate Governance.	37
Item 11.	Executive Compensation.	42
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.	43
Item 13.	Certain Relationships and Related Transactions, and Director Independence.	43
Item 14.	Principal Accounting Fees and Services.	43
	PART IV
Item 15.	Exhibits, Financial Statement Schedules.	44

Special Note Regarding Forward Looking Statements

In addition to historical information, this report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. We use words such as “believe,” “expect,” “anticipate,” “project,” “target,” “plan,” “optimistic,” “intend,” “aim,” “will” or similar expressions which are intended to identify forward-looking statements. Such statements include, among others, those concerning market and industry segment growth and demand and acceptance of new and existing products; any projections of sales, earnings, revenue, margins or other financial items; any statements of the plans, strategies and objectives of management for future operations; any statements regarding future economic conditions or performance; as well as all assumptions, expectations, predictions, intentions or beliefs about future events. You are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, including those identified in Item 1A “Risk Factors” included herein, as well as assumptions, which, if they were to ever materialize or prove incorrect, could cause the results of the Company to differ materially from those expressed or implied by such forward-looking statements.

Readers are urged to carefully review and consider the various disclosures made by us in this report and our other filings with the SEC. These reports attempt to advise interested parties of the risks and factors that may affect our business, financial condition and results of operations and prospects. The forward-looking statements made in this report speak only as of the date hereof and we disclaim any obligation, except as required by law, to provide updates, revisions or amendments to any forward-looking statements to reflect changes in our expectations or future events.

Use of Terms

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

·   the “Company,” “we,” “us,” and “our” refer to the combined business of China Executive Education Corp., a Nevada corporation, and its consolidated subsidiaries and variable interest entity;

·   “SLM” refers to our subsidiary Surmounting Limit Marketing Adviser Limited, a Hong Kong limited company;

·   “MYL Business” refers to our indirect subsidiary Hangzhou MYL Business Administration Consulting Co., Ltd., a PRC limited company;

·   “Shanghai MYL” refers to our indirect subsidiary Shanghai MYL Business Administration Consulting Co. Ltd., a PRC limited company;

·   “MYL Commercial” refers to our variable interest entity Hangzhou MYL Commercial Services Co., Ltd., a PRC limited company;

·   “MYL Training School” refers to MYL Commercial’s subsidiary Hangzhou Gongshu MYL Training School;

·   “Hong Kong” refers to the Hong Kong Special Administrative Region of the People’s Republic of China;

·   “PRC” and “China” refer to the People's Republic of China;

·   “SEC” refers to the Securities and Exchange Commission;

·   “Exchange Act” refers to the Securities Exchange Act of 1934, as amended;

·   “Securities Act” refers to the Securities Act of 1933, as amended;

·   “Renminbi” and “RMB” refer to the legal currency of China; and

·   “U.S. dollars,” “dollars” and “$” refer to the legal currency of the United States.

1

PART I

ITEM 1. BUSINESS.

Business Overview

We are a fast-growing executive education company with operations in Hangzhou and Shanghai, China. We operate comprehensive business training programs that are designed to fit the needs of Chinese entrepreneurs and to improve their leadership, management and marketing skills, as well as bottom-line results. Our comprehensive business training initiatives integrate research-based, proprietary content with processes that are specifically connected to the critical business issues that most private Chinese companies are facing. Our programs enable the trainees to better achieve their potential and better align their individual goals and competencies with the organizational objectives of their employers or business.

Our open-enrollment training programs include our proprietary training courses and comprehensive training courses. Our comprehensive training courses include one package of 16 courses for CEO and C-Level managers, as well as 23 leadership and personal development courses, focusing on management skills, negotiation skills, leadership skills and public speaking skills, among others. Featured lectures, delivered to large audiences, are presented by experts or well-known speakers in each relevant field. In 2011, we organized 4,613 such lectures in Shanghai. We believe that our network of speaking professionals is a leading platform for inspiring audiences to new levels of motivation and commitment.

We market our training programs directly to business executives through promotional seminars. Our websites are www.magicyourlife101.com and www.myl101.com. 

Our principal executive offices are located at c/o Hangzhou MYL Business Administration Consulting Co. Ltd., Room 307, Hualong Business Building, 110 Moganshan Road, Hangzhou 310005, People’s Republic of China, and our telephone number is (86) 0571-8880-8109.

Our Corporate History and Background

We were incorporated in the state of Nevada on May 9, 2008 under the name “On Demand Heavy Duty Corp.” We originally intended to commence business operations by purchasing and distributing eco-friendly building supplies for sale throughout Europe and North America. However, from our inception until completion of the acquisition of SLM and merger described below, we did not engage in any active business operations.

On February 12, 2010, we acquired all of the outstanding capital stock of SLM through our wholly-owned Nevada subsidiary, China Executive Education Corp., or the Merger Sub. In connection with the acquisition, the Merger Sub issued 20 shares of its common stock, which constituted no more than 10% ownership interest in the Merger Sub, to the shareholders of SLM, in exchange for all of the capital stock of SLM. Immediately following such exchange, the Merger Sub was merged into our Company and the 20 shares of common stock of the Merger Sub were converted into 21,560,000 shares of our common stock, so that upon completion of the merger, the shareholders of SLM owned approximately 98% of our common stock.

As part of the merger, pursuant to a stock purchase agreement, we transferred all of the outstanding capital stock of our subsidiary, On Demand Heavy Duty Holdings, Inc. to certain of our shareholders in exchange for the cancellation of 6,070,000 shares of our common stock owned by them.

Following these transactions, we discontinued our former business and now engage in the executive education business. In connection with the merger, we changed our name to “China Executive Education Corp.” in order to more accurately reflect our new business operations.

SLM is a holding company and holds 100% of the equity interests of MYL Business. MYL business was incorporated in the PRC on April 23, 2009. Substantially all of our operations are conducted through MYL Business, and through contractual arrangements with MYL Commercial, a PRC company incorporated on March 25, 2009, and its subsidiary.

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Our Corporate Structure

All of our business operations are conducted through our PRC operating subsidiaries and variable interest entity. The chart below presents our current corporate structure.

We do not own any of the equity interests of MYL Commercial. Instead, MYL Business has entered into a series of exclusive contractual arrangements with MYL Commercial, pursuant to which we exercise effective control over the operations of MYL Commercial and receive the economic benefits of MYL Commercial. As a result of these contractual arrangements, under United States generally accepted accounting principles, or U.S. GAAP, we are considered the primary beneficiary of MYL Commercial and thus consolidate its results in our consolidated financial statements. These agreements are summarized in the following paragraphs.

Exclusive Services Agreement. Pursuant to an exclusive services agreement by and among MYL Business, MYL Commercial and its subsidiary, dated May 1, 2009, MYL Commercial and its subsidiary irrevocably entrusted to MYL Business the right of the management and operation of MYL Commercial and its subsidiary and the responsibilities and authorities of their shareholders and directors. The service fee to be paid by MYL Commercial and its subsidiary is equal to 95% of their total income which can be waived by MYL Business from time to time in its sole discretion.

            Call Option Agreement. Pursuant to a call option agreement by and among MYL Business, MYL Commercial and MYL Commercial’s shareholders and subsidiary, dated as of May 1, 2009, each of MYL Commercial and MYL Commercial’s shareholders have granted MYL Business or its designee an exclusive option to purchase all or part of their equity interests in MYL Commercial and its subsidiary, or all or part of the assets of MYL Commercial, in each case, at any time determined by MYL Business and to the extent permitted by PRC law.

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Voting Rights Proxy Agreement. Pursuant to a voting rights proxy agreement by and among MYL Business, MYL Commercial and MYL Commercial’s shareholders and subsidiary, dated as of May 1, 2009, the shareholders of MYL Commercial and its subsidiary have granted the personnel designated by MYL Business the right to appoint directors and senior management of MYL Commercial and its subsidiary and to exercise all of their other voting rights as shareholders of MYL Commercial and its subsidiary, as the case may be, as provided under the articles of association of each such entity. Under the voting rights proxy agreement, there are no restrictions on the number, to the extent allowed under the respective articles of association of MYL Commercial and its subsidiary, or identity of those persons we can appoint as directors and officers.

Equity Pledge Agreement. Pursuant to an equity pledge agreement by and among MYL Business, MYL Commercial and MYL Commercial’s shareholders and subsidiary, dated as of May 1, 2009, each of the shareholders has pledged his or its equity interest in MYL Commercial and its subsidiary as the case may be, to MYL Business to secure their obligations under the relevant contractual control agreements to which each is a party, including but not limited to, the obligations of MYL Commercial and its subsidiary under the exclusive services agreement, call option agreement and voting rights proxy agreement. Under this equity pledge agreement, the shareholders have agreed not to transfer, assign, pledge or otherwise dispose of their interest in MYL Commercial or its subsidiary, as the case may be, without the prior written consent of MYL Business.

Our Industry

We operate in China’s professional training industry, which is one of the fastest growing sectors in China’s education industry. According to the China Education & Training Industrial Report, China’s total educational expenditures were approximately RMB 680 billion in 2009 (approximately $103.6 billion) and are expected to reach RMB 960 billion in 2012 (approximately $146.2 billion), representing a compound annual growth rate, or CAGR, of approximately 12%.

According to the Report of Investment Analysis and Prospect of China Training Industry published in March 2009, China’s training industry has been expanding at 30% annually. The Deloitte report on China Education and Training Industry indicated that the education and training market will reach up to RMB 960 billion (approximately $152 billion) in 2012.

There are currently over 10,000 training companies in China. China’s professional training industry has also been further divided in more sub-segments, such as, career development training, foreign language training, technique and skills training, and executive training. As Chinese companies and China’s workforce confront competition in the global market, we believe that the need for steady improvement of the skills and efficiency of China’s workforce will stimulate continuing growth in the demand for specialized professional education services in different fields. Accordingly to an expert at China Europe International Business School, the current market for China’s executive training is approximately $4 billion.

Executive training is a special business segment. The target clients for executive training businesses are corporate executives, C-level managers and private business owners. The training programs mainly include leadership development, corporate strategy, decision making and other personal skills development. China’s executive education sector is characterized by the following:

(1) Young and in an early development stage. Compared to other professional training segments, China’s executive training industry is young and has only about 10 years of history. It was first introduced by the foreign education institute to top Chinese business schools in the late 1990s, then expanded to the private sector with many active participants.

(2) Strong market demand. Driven by the booming Chinese economy and spirit of entrepreneurship in the private business sector, demand for open-enrollment and easy access high-level education programs from more than six million of Chinese’s private business owners and over ten million business executives in China is strong.

(3) Fragmented market. Because of a low entry barrier, now there are thousands of executive training providers in China. There is no dominant player in the national market. According to a study conducted by China Investment & Industry Research Center, there were more than 70,000 training companies nationwide in 2010, of which more than 10,000 were located in Beijing and Shanghai, but quite a few of them have generated ten million RMB or more of sales revenue annually.

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Our Growth Strategies

We believe that China’s highly fragmented professional training industry and rapidly growing market provide us with significant growth opportunities. We intend to pursue the following strategies to achieve our goal:

·   We plan to increase our market coverage. We plan to increase our market coverage through extensive telemarketing campaigns and mass mailings. We also intend to establish and expand our sales agent network in inland provinces. We believe that there are many untouched opportunities in those areas.

·   We plan to expand our course offerings. We plan to expand our executive training programs by adding more courses, such as effective corporation finance management, strategic investment and capital market operation, among others. We also intend to add our course offerings to the second generation of affluent families.

·   We plan to pursue strategic acquisitions. We plan to make strategic acquisitions to expand into the C-level management training segment, which has a large potential client base. We will also seek acquisition opportunities in other major commercial centers to expand our business presence.

·   We plan to strengthen our international network. We plan to establish strategic alliances with major international executive training and leadership development institutions. We believe that leveraging their capacities and bringing them to our classes will generate more value to our clients. We will also seek opportunities for business cooperation with major international education institutions to develop jointly operated programs.

·   We plan to promote of our brand name to attract more clients. We plan to promote our brand name, Magic Your LifeTM in China. We believe that the enhancement of public awareness of our brand name will help to broaden our client base all over China.

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Our Training Programs

We operate comprehensive business training programs that are designed to fit the needs of Chinese entrepreneurs and to improve their leadership, management and marketing skills, as well as bottom-line results. Our comprehensive business training initiatives integrate research-based, proprietary content with processes that are specifically connected to the critical business issues that most private Chinese companies are facing.

Generally, we provide two kinds of training programs, including: (1) proprietary training courses which normally take several days to complete and primarily consist of featured lectures; and (2) a comprehensive training course package that includes courses to be conveyed to the students by both Chinese lecturers and invited foreign lecturers. For the years ended December 31, 2011, we generated 51% and 49% of our revenues from our proprietary training courses and comprehensive training course package, respectively, as compared to 75% and 25%, respectively, in 2010.

Our comprehensive training courses include one package of 16 courses for CEO and C-Level managers, as well as 23 leadership and personal development courses, including the following courses:

ForBoss Comprehensive Courses taught by Chinese lecturers:

·   Magic Your Life—Goals Setting

·   Magic Your Life—Improvement

·   Public Speaking

·   Marketing

·   (Sales) Super Persuasion for CEOs

·   Super Leadership for CEOs

·   Investing

·   Motivation

·   Negotiation

·   Fortune and Ocean View—How to go public

Courses taught by world renowned lecturers:

·   John Maxwell

·   John Gray

·   Tom Peters

·   Mark Viator Harsen

·   Robert Kiyosaki

·   Stephen R. Covey

·   General Colin Powell

·   Tony Robbins

Other courses taught by Chinese lecturers:

·   Speakers Club

·   Customer Service System

·   I would like to beg you to sell

·   Hybrid Concert and Speech Event of 50,000 people

·   7 Essential Classes for CEOs

·   How to enhance children’s’ leadership

·   Mr. Der’s Customer Service Proposal

·   TPS Management System

·   Super Quick Memory

·   Professor Lee’s Proposal

The training course package normally takes several months to complete.

Featured lectures, delivered to large audiences, are presented by experts or well-known speakers in each relevant field. In 2011, we organized 4,613 such lectures in Shanghai. Noted speakers included John Gray, John Maxell and Brain Tracy. We believe that our network of speaking professionals is a leading platform for inspiring audiences to new levels of motivation and commitment.

Our Customers and Marketing Efforts

During the years ended December 31, 2011 and 2010, we provided our training programs to 7,243 and 6,148 customers, respectively. These clients come from various provinces and from diverse industries. During fiscal year 2011and 2010, no single customer accounted for more than 10% of our revenues.

We market our executive training programs directly to business executives primarily through promotional seminars. As of December 31, 2011, we had 220 sales and marketing personnel. Our sales team generates sales and sales leads through mass-mailing campaigns and business referrals. We also market our training program by organizing or sponsoring business seminars or other social and business events. Beginning in July 2010, we began to develop a cooperative relationship with many local student recruiting agencies to help us promote our training programs, recruit more students, coordinate and organize localized training and broaden our geographic market coverage.

We will further increase the size of our sales and marketing team as we continuously grow our business and add more training programs.

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Our Competition

We face competition on two different fronts. First is from major Chinese universities and business schools. They provide EMBA programs targeting corporate executives and entrepreneurs. The most popular Executive Master of Business Administration programs, or EMBA programs, available in China are from Euro-China International Business College in Shanghai, Cheung Kong Graduate School of Business, Tsinghua University and Shanghai Jiaotong University. These universities’ EMBA programs provide their students with approximately 300 hours of formal in-class training programs in the curriculum and issue degree certificates to students at graduation. The tuition ranges from RMB 60,000 (approximately $9,000) to RMB 568,000 (approximately $85,000) for the entire program. The top business schools enroll 400–600 students annually. Due to the strict admission requirements, many young and less qualified candidates are turned away. We believe that this increases market opportunities for our programs.

Open-enrollment programs provided by private education institutions, like ours, have emerged and constitute serious competition to the top business schools that provide formal executive training programs. These peer companies also constitute direct competition with us. Jucheng Group (founded in 2003 in Shenzhen), Action Success International Education Group (founded in 2001 in Shanghai) and Sparta Group (founded in 2002 in Beijing) are the most prominent companies in our business sector. We compete with them primarily on the basis of training courses, lecturers, prices, effectiveness of training execution and our brand name. Since those three companies have been in business longer than us and they have a cross-region presence, they have strengths in market coverage and pricing. We believe that we have a competitive advantage in our international network and broad course offerings.

Our Intellectual Property

We maintain two websites www.magicyourlife101.com and www.myl101.com. The domain name of www.magicyourlife101.com was registered by Mr. Kaien Liang in the name of SLM. The registered operator of this website is Shanghai Kaiye Investment Consulting Co., Ltd.  The domain name of www.myl101.com is registered by Dreamer Marketing Adviser (Shanghai) Co., Ltd. The registered operator of this website is MYL Commercial.

MYL Business has officially filed with the respective trademark offices in the PRC, Hong Kong, and the U.S. the application for registration of  (FORBOSS Business Mentor Group) as a registered trademark. Such application is subject to review and authorization by the respective trademark offices. In Hong Kong, the said application is pending as it has been challenged by third parties. The trademark was registered with the US Patent and Trademark Office on March 8, 2011.

Ms. Chiayeh Lin, one of the officers of MYL Business, has officially filed with the trademark office of the PRC the application for registration of    (Magic You Life) as a registered trademark. Such application is subject to review and authorization by the trademark office of the PRC. We are in the process of having the registrant’s name changed from Ms. Lin to MYL Business.

Mr. Kaien Liang, our Chairman and controlling shareholder of MYL, is of the author of the books Who Is The Next Magic? and Never Say Impossible, which sell in the thousands. Meanwhile, Mr. Pokai Hsu is the author of How to be No.1 in China.

Employees

As of December 31, 2011, we employed a total of 294 full-time employees. The following table sets forth the number of our employees by function.

Function	Number of Employees
Sales and Marketing	220
Customer Service	9
Research and Development	17
Network	13
Financial and Accounting	9
Administration and Human Resources	26
Total	294

We consider our relations with our employees to be good. None of our employees is represented by a labor union.

Our employees in China participate in a state pension plan organized by Chinese municipal and provincial governments. We are required to contribute monthly to the plan. In addition, we are required by Chinese law to cover employees in China with various types of social insurance. We believe that we are in material compliance with the relevant PRC laws.

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Regulation

Because our primary operating subsidiaries are located in China, we are regulated by China’s national and local laws, including those outlined below.

Licenses and Permits

In order to conduct business in the PRC, we need licenses from the appropriate government authorities, including general business licenses and an education service provider license.  We believe that we are in material compliance with all registrations and requirements for the issuance and maintenance of all licenses required by the governing bodies, and that all license fees and filings are current.

Foreign Currency Exchange

All of our sales revenue and expenses are denominated in RMB. Under the PRC foreign currency exchange regulations applicable to us, RMB is convertible for current account items, including the distribution of dividends, interest payments, trade and service-related foreign exchange transactions. Currently, our PRC operating subsidiaries and variable interest entities may purchase foreign currencies for settlement of current account transactions, including payments of dividends to us, employee salaries (even if employees are based outside of China), and payment for equipment purchases outside of China, without the approval of the State Administration of Foreign Exchange of the People’s Republic of China, or SAFE, by complying with certain procedural requirements. Conversion of RMB for capital account items, such as direct investment, loan, security investment and repatriation of investment, however, is still subject to the approval of SAFE. In particular, if our PRC operating subsidiaries or variable interest entities borrow foreign currency through loans from us or other foreign lenders, these loans must be registered with SAFE, and if we finance the subsidiaries by means of additional capital contributions, these capital contributions must be approved by certain government authorities, including the Ministry of Commerce, or MOFCOM, or their respective local branches. These limitations could affect our PRC operating subsidiaries and variable interest entities’ ability to obtain foreign exchange through debt or equity financing. In the event of a liquidation of our PRC subsidiaries or variable interest entities, SAFE approval is required before the remaining proceeds can be expatriated from China.

Taxation

On March 16, 2007, the National People’s Congress of China passed a new Enterprise Income Tax Law, or EIT Law, and on November 28, 2007, the State Council of China passed its implementing rules, which took effect on January 1, 2008. Before the implementation of the EIT Law, foreign invested enterprises, or FIEs, established in the PRC, unless granted preferential tax treatment by the PRC government, were generally subject to an earned income tax, or EIT, rate of 33.0%, which included a 30.0% state income tax and a 3.0% local income tax. The EIT Law and its implementing rules impose a unified EIT of 25.0% on all domestic-invested enterprises and FIEs, unless they qualify under certain limited exceptions. Despite these changes, the EIT Law gives FIEs established before March 16, 2007, or Old FIEs, a five-year grandfather period during which they can continue to enjoy their existing preferential tax treatments. During this five-year grandfather period, the Old FIEs which enjoyed tax rates lower than 25% under the original EIT law will be subject to gradually increased EIT rates over a 5-year period until their tax rate reaches 25%. In addition, the Old FIEs that are eligible for other preferential tax treatments by the PRC government under the original EIT law are allowed to continue enjoying their preference until these preferential treatment periods expire.

In addition to the changes to the current tax structure, under the EIT Law, an enterprise established outside of China with “de facto management bodies” within China is considered a resident enterprise and will normally be subject to an EIT of 25% on its global income. The implementing rules define the term “de facto management bodies” as “an establishment that exercises, in substance, overall management and control over the production, business, personnel, accounting, etc., of a Chinese enterprise.” If the PRC tax authorities subsequently determine that we should be classified as a resident enterprise, then our organization’s global income will be subject to PRC income tax of 25%. For detailed discussion of PRC tax issues related to resident enterprise status, see Item 1A “Risk Factors—Risks Related to Doing Business in China—Under the Enterprise Income Tax Law, we may be classified as a ‘resident enterprise’ of China. Such classification will likely result in unfavorable tax consequences to us and our non-PRC stockholders.”

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In addition, the EIT Law and its implementing rules generally provide that an income tax rate of 10% will normally be applicable to dividends payable to investors that are “non-resident enterprises,” or non-resident investors, which (i) do not have an establishment or place of business in the PRC or (ii) have an establishment or place of business in the PRC, but the relevant income is not effectively connected with the establishment or place of business to the extent such dividends are derived from sources within the PRC. The State Council of the PRC or a tax treaty between China and the jurisdictions in which the non-PRC investors reside may reduce such income tax. Under the Arrangement between the Mainland and the Hong Kong Special Administrative Region for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with respect to Taxes on Income, effective as of January 1, 2007, such dividend withholding tax rate is reduced to 5% if a Hong Kong resident enterprise owns over 25% of the PRC company distributing the dividends. As SLM is a Hong Kong company and owns 100% of MYL Business, under the aforesaid arrangement, any dividends that such MYL Business pays SLM may be subject to a withholding tax at the rate of 5%. However, if SLM is not considered to be the “beneficial owner” of such dividends under the Notice Regarding Interpretation and Recognition of Beneficial Owners under Tax Treaties, or Notice 601, promulgated by the State Administration of Taxation on October 27, 2009, such dividends would be subject to the withholding tax rate of 10%. The withholding tax rate of 5% or 10% applicable to SLM will have a significant impact on the amount of dividends to be received by the Company and ultimately by stockholders.

Dividend Distributions

All of our sales are earned by our PRC subsidiaries. However, PRC regulations restrict the ability of our PRC subsidiaries to make dividends and other payments to its offshore parent company. PRC legal restrictions permit payments of dividends by our PRC subsidiaries only out of their accumulated after-tax profits, if any, determined in accordance with PRC accounting standards and regulations. Our PRC subsidiaries are also required under PRC laws and regulations to allocate at least 10% of their annual after-tax profits determined in accordance with PRC GAAP to a statutory general reserve fund until the amounts in said fund reaches 50% of our registered capital. Allocations to these statutory reserve funds can only be used for specific purposes and are not transferable to us in the form of loans, advances, or cash dividends.

ITEM 1A. RISK FACTORS.

An investment in our common stock involves a high degree of risk. You should carefully consider the risks described below, together with all of the other information included in this report, before making an investment decision.  If any of the following risks actually occurs, our business, financial condition or results of operations could suffer. In that case, the trading price of our common stock could decline, and you may lose all or part of your investment. You should read the section entitled “Special Note Regarding Forward Looking Statements” above for a discussion of what types of statements are forward-looking statements, as well as the significance of such statements in the context of this report.

RISKS RELATED TO OUR BUSINESS

We have a short operating history.

We did not begin our business operations until April 2009. Accordingly, we have a limited operating history for our current operations upon which you can evaluate the viability and sustainability of our business and its acceptance by private business owners and executives. It is also difficult to evaluate the viability of our business model because we do not have sufficient experience to address the risks frequently encountered by early stage companies using new means to deliver education programs and entering new and rapidly evolving markets. These circumstances may make it difficult for you to evaluate our business and prospects.

Our senior management and employees have worked together for a short period of time.

Due to our limited operating history and recent additions to our management team, certain of our senior management and employees have worked together at our company for only a relatively short period of time. As a result, it may be difficult for you to evaluate the effectiveness of our senior management and other key employees and their ability to address future challenges to our business.

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Failure to manage our growth could strain our management, operational and other resources, which could materially and adversely affect our business and growth potential.

We have been rapidly expanding, and plan to continue expansion of our operations in China. We will continue to expand our operations to meet the demands of customers for executive training programs for larger and more diverse market coverage. This expansion has resulted in substantial demands on our management resources. To manage our growth, we must develop and improve our existing administrative and operational systems and, our financial and management controls and further expand, train and manage our work force. We have already begun selling our executive education training program through our sales agents who operate in the inland provinces and may in the future expand our presence to some major cities in China. As we continue this effort, we may incur substantial costs and expend substantial resources in connection with any such expansion. We may encounter difficulties when we expand into other cities or if we begin operations in other inland provinces in China due to different business practice, local government regulations and cultural factors. We may not be able to manage our current or future cross-region operations effectively and efficiently or compete effectively in such markets. We cannot assure you that we will be able to efficiently or effectively manage the growth of our operations, recruit top talent and train our personnel. Any failure to efficiently manage our expansion may materially and adversely affect our business and future growth.

We may need additional capital and we may not be able to obtain it, which could adversely affect our liquidity and financial position.

To further expand our executive education business, we may require additional cash resources. If our operations are insufficient to satisfy our cash requirements, we may seek to sell additional equity or debt securities or obtain a credit facility. The sale of additional equity securities or convertible debt securities could result in additional dilution to our shareholders. The incurrence of indebtedness would result in increased debt service obligations and could result in operating and financing covenants that would restrict our operations and liquidity.

Our ability to obtain additional capital on acceptable terms is subject to a variety of uncertainties, including:

·   investors’ perception of, and demand for, securities of executive education companies;

·   conditions of the U.S. and other capital markets in which we may seek to raise funds;

·   our future results of operations, financial condition and cash flows;

·   PRC governmental regulation of foreign investment in executive education companies in China;

·   economic, political and other conditions in China; and

·   PRC governmental policies relating to foreign currency borrowings.

We cannot assure you that financing will be available in amounts or on terms acceptable to us, if at all. Any failure by us to raise additional funds on terms favorable to us could have a material adverse effect on our liquidity and financial condition.

The terms on which we may raise additional capital may result in significant dilution and may impair our stock price.

We cannot assure you that we will be able to obtain additional financing on any terms, and, if we are able to raise funds, it may be necessary for us to sell our securities at a price which is at a significant discount from the market price and on other terms which may be disadvantageous to us. In connection with any such financing, we may be required to provide registration rights to the investors and pay damages to the investors in the event that the registration statement is not filed or declared effective by specified dates. The price and terms of any financing which would be available to us could result in both the issuance of a significant number of shares and significant downward pressure on our stock price.

Our business is dependent upon the PRC government’s educational policies and programs.

As a provider of educational services, we are dependent upon governmental educational policies. Almost all of our revenue to date has been generated from the sale of lectures and materials relating to executive training. To the extent that the government adopts policy changes that significantly alter what is allowed in China, our products could become obsolete, which would affect our ability to generate revenue and operate profitably. We cannot assure you that PRC government agencies would not adopt such changes.

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Our business is subject to the health of the PRC economy and our growth may be inhibited by the inability of potential customers to fund purchases of our products and services.

The purchase of educational materials is largely discretionary and dependent upon the ability and willingness of executives and businesses to spend available funds on extra educational products. A general economic downturn either in our market or a general economic downturn in the PRC could have a material adverse effect on our revenue, earnings, cash flow and working capital.

In addition, many businesses in the PRC do not have sufficient funds to purchase textbooks, educational materials or lectures and course materials.  In addition, provincial and local governments may not have the funds to support the implementation of a curriculum using our educational products or may allocate funds to programs which are different from our products. Our failure to be able to sell our products and services to students in certain areas of the PRC may inhibit our growth and our ability to operate profitably.

Price controls may affect both our revenues and net income.

The laws of the PRC provide the government broad power to fix and adjust prices. We need to obtain government approval in setting our prices for classroom coursework and tutorials. Although the sale of educational materials over the Internet is not presently subject to price controls, we cannot give you any assurance that they will not be subject to controls in the future. To the extent that we are subject to price control, our revenue, gross profit, gross margin and net income will be affected since the revenue we derive from our services will be limited and we may face no limitation on our costs. As a result, we may not be able to pass on to our students any increases in costs we incur, or any increases in the costs of our faculty. Further, if price controls affect both our revenue and our costs, our ability to be profitable and the extent of our profitability will be effectively subject to determination by the applicable PRC regulatory authorities.

If we are unable to attract and retain senior management and qualified personnel, our operations, financial condition and prospects will be materially adversely affected.

Our success depends on the management skills of Mr. Kaien Liang, Chairman and Chief Executive Officer, and his relationships with educators, administrators and other business contacts.  We also depend on successfully recruiting and retaining highly skilled and experienced authors, teachers, managers, sales persons and other personnel who can function effectively in the PRC.  In some cases, the market for these skilled employees is highly competitive.  We may not be able to retain or recruit such personnel, which could materially and adversely affect our business, prospects and financial condition.  We do not maintain key person insurance on these individuals.  The loss of Mr. Hsu would delay our ability to implement our business plan and would adversely affect our business.

We may not be successful in protecting our intellectual property and proprietary rights.

Our intellectual property consists of lectures and formats, which are contained in our library, and courseware which we developed by engaging authors and educators to develop these materials.  Our proprietary products are primarily protected by trade secret laws.  Although we require our authors and employees to sign confidentiality and non-disclosure agreements, we cannot assure you that we will be able to enforce those agreements or that our authors and software development employees will not be able to develop competitive products that do not infringe upon our proprietary rights. We do not know the extent that PRC courts will enforce our proprietary rights.

Others may bring defamation and infringement actions against us, which could be time-consuming, difficult and expensive to defend.

As a distributor of educational materials, we face potential liability for negligence, copyright, patent or trademark infringement and other claims based on the nature and content of the materials that we publish or distribute.  We cannot be certain that our lectures or other aspects of our business do not or will not infringe upon patents, copyrights or other intellectual property rights held by third parties. Although we are not aware of any such claims, we may become subject to legal proceedings and claims from time to time relating to the intellectual property of others in the ordinary course of our business. If we are found to have violated the intellectual property rights of others, we may be enjoined from using such intellectual property, and we may incur licensing fees or be forced to develop alternatives.  Moreover, any claims could require us to incur significant costs to investigate and defend, regardless of the final outcome.  We do not carry general liability insurance that would cover any potential or actual claims. The commencement of any legal action against us or any of our affiliates, whether or not we are successful in defending the action, could both require us to suspend or discontinue the distribution of some or a significant portion of our educational materials and require us to allocate resources to investigating or defending claims. 

If we make acquisitions, they may disrupt or have a negative impact on our business.

If we make acquisitions, we could have difficulty integrating personnel and operations of the acquired companies with our own. In addition, the key personnel of the acquired business may not be willing to work for us. We cannot predict the affect expansion which may have on our core business. Regardless of whether we are successful in making an acquisition, the negotiations could disrupt our ongoing business, distract our management and employees and increase our expenses. In addition to the risks described above, acquisitions are accompanied by a number of inherent risks, including, without limitation, the following:

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·   difficulty of integrating acquired products, services or operations;

·   potential disruption of the ongoing businesses and distraction of our management and the management of acquired companies;

·   difficulty of incorporating acquired rights or products into our existing business;

·   difficulties in disposing of the excess or idle facilities of an acquired company or business and expenses in maintaining such facilities;

·   difficulties in maintaining uniform standards, controls, procedures and policies;

·   potential impairment of relationships with employees and customers as a result of any integration of new management personnel;

·   potential inability or failure to achieve additional sales and enhance our customer base through cross-marketing of the products to new and existing customers;

·   effect of any government regulations which relate to the business acquired; and

·   potential unknown liabilities associated with acquired businesses, or the need to spend significant amounts to retool, reposition or modify the marketing and sales of acquired products or the defense of any litigation, whether or not successful, resulting from actions of the acquired company prior to our acquisition.

Our business could be severely impaired to the extent that we are unable to succeed in addressing any of these risks or other problems encountered in connection with these acquisitions, many of which cannot be presently identified, these risks and problems could disrupt our ongoing business, distract our management and employees, increase our expenses and adversely affect our results of operations.

We have limited insurance coverage in China.

We do not have any business liability, interruption or litigation insurance coverage for our operations in China. While business interruption insurance and other types of insurance are available to a limited extent in China, we have determined that the risks of interruption, cost of such insurance and the difficulties associated with acquiring such insurance on commercially reasonable terms make it impractical for us to have such insurance. Therefore, our existing insurance coverage may not be sufficient to cover all risks associated with our business. As a result, we may be required to pay for financial and other losses, damages and liabilities, including those caused by natural disasters and other events beyond our control, out of our own funds, which could have a material adverse effect on our business, financial condition and results of operations.

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We have identified material weaknesses in our internal control over financial reporting. If we fail to develop or maintain an effective system of internal controls, we may not be able to accurately report our financial results and prevent fraud. As a result, current and potential stockholders could lose confidence in our financial statements, which would harm the trading price of our common stock.

Companies that file reports with the SEC, including us, are subject to the requirements of Section 404 of the Sarbanes-Oxley Act of 2002, or SOX 404. SOX 404 requires management to establish and maintain a system of internal control over financial reporting and annual reports on Form 10-K filed under the Exchange Act to contain a report from management assessing the effectiveness of a company’s internal control over financial reporting. Separately, under SOX 404, as amended by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, public companies that are large accelerated or accelerated filers must include in their annual reports on Form 10-K an attestation report of their regular auditors attesting to and reporting on management’s assessment of internal control over financial reporting. Non-accelerated filers and smaller reporting companies are not required to include an attestation report of their auditors in annual reports.

A report of our management is included under Item 9A “Controls and Procedures” of this report. We are a smaller reporting company and, consequently, are not required to include an attestation report of our auditor in this annual report. However, if and when we become subject to the auditor attestation requirements under SOX 404, we can provide no assurance that we will receive a positive attestation from our independent auditors.

During its evaluation of the effectiveness of internal control over financial reporting as of December 31, 2011, management identified material weaknesses relating to our lack of sufficient accounting personnel with an appropriate understanding of U.S. GAAP and SEC reporting requirements. We are undertaking remedial measures, which measures will take time to implement and test, to address these material weaknesses. There can be no assurance that such measures will be sufficient to remedy the material weaknesses identified or that additional material weaknesses or other control or significant deficiencies will not be identified in the future. If we continue to experience material weaknesses in our internal controls or fail to maintain or implement required new or improved controls, such circumstances could cause us to fail to meet our periodic reporting obligations or result in material misstatements in our financial statements, or adversely affect the results of periodic management evaluations and, if required, annual auditor attestation reports. Each of the foregoing results could cause investors to lose confidence in our reported financial information and lead to a decline in our stock price. See Item 9A “Controls and Procedures” for more information.

RISKS RELATED TO OUR CORPORATE STRUCTURE

We operate our businesses through companies with which we have contractual relationships, but in which we do not have controlling ownership. If the PRC government determines that our agreements with these companies are not in compliance with applicable regulations, our business in the PRC could be materially adversely affected.

We operate our business through a series of contractual arrangements with MYL Commercial, its shareholders and MYL Training School. While our indirect PRC operating subsidiaries are eligible for the required licenses for providing executive education services in China and some of our indirect PRC operating subsidiaries have obtained such licenses, we have been using and are expected to continue to use MYL Commercial and MYL Training School to operate a significant portion of our executive education business for the foreseeable future. We are able to control these entities and operate their businesses through these contractual arrangements, but we have no equity control over these companies. See Item 1 “Business—Our Corporate Structure” for a description of these contractual arrangements.

While we believe that our ownership structure complies with all existing PRC laws and regulations, there are substantial uncertainties regarding the interpretation and application of current and future PRC laws and regulations.  Accordingly, there can be no assurance that the PRC regulatory authorities will not in the future take a view that is contrary to ours. If the PRC government finds that the agreements that establish the structure for operating our business in the PRC do not comply with PRC government restrictions, the relevant PRC regulatory authorities would have broad discretion in dealing with such violations, including:

·   levy fines on us;

·   revoke our business and operating licenses;

·   require us to discontinue or restrict our operations;

·   restrict our right to collect revenues;

·   require us to restructure our business, corporate structure or operations; and

·   impose additional conditions or requirements with which we may not be able to comply

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The imposition of any of these penalties could result in a material and adverse effect on our ability to conduct our business and our financial condition and results of operations.

We rely on contractual arrangements with MYL Commercial and MYL Training School for our operations, which may not be as effective in providing control over these entities as direct ownership.

Our operations are dependent on MYL Commercial and MYL Training School, in which we have no equity ownership interest and must rely on contractual arrangements to control and operate the businesses of these entities. These contractual arrangements may not be as effective in providing control over these entities as direct ownership. For example, MYL Commercial and MYL Training School may be unwilling or unable to perform their obligations under our commercial agreements with them, in which case we will not be able to conduct our operations in the manner currently planned. In addition, they may seek to renew their agreements on terms that are disadvantageous to us. Although we have entered into a series of agreements that provide us with substantial ability to control MYL Commercial and MYL Training School, we may not succeed in enforcing our rights under them by relying on legal remedies under Chinese law, which may not be adequate. In addition, if we are unable to renew these agreements on favorable terms when these agreements expire, or to enter into similar agreements with other parties, our business may not be able to operate or expand, and our operating expenses may significantly increase.

Uncertainties in the PRC legal system may impede our ability to enforce the commercial agreements that we have entered into with MYL Commercial and MYL Training School or any arbitral award thereunder and any inability to enforce these agreements could materially and adversely affect our business and operation.

While disputes under the contractual arrangements with MYL Commercial and MYL Training School are subject to binding arbitration before the Shanghai Branch of the China International Economic and Trade Arbitration Commission, or CIETAC, in accordance with CIETAC’s arbitration rules, the agreements are governed by PRC law and an arbitration award may be challenged in accordance with PRC law. For example, a claim that the enforcement of an award in our favor will be detrimental to the public interest, or that an issue does not fall within the scope of the arbitration would require us to engage in administrative and judicial proceedings to defend an award. China’s legal system is a civil law system based on written statutes and unlike common law systems, it is a system in which decided legal cases have little value as precedent. As a result, China’s administrative and judicial authorities have significant discretion in interpreting and implementing statutory and contractual terms, and it may be more difficult to evaluate the outcome of administrative and judicial proceedings and the level of legal protection available than in more developed legal systems. These uncertainties may impede our ability to enforce the terms of the contracts that we enter into with MYL Commercial and MYL Training School. Any inability to enforce the contractual arrangements with MYL Commercial and MYL Training School or an award thereunder could materially and adversely affect our business and operation.

Our arrangements with MYL Commercial, its shareholders and MYL Training School and may be subject to a transfer pricing adjustment by the PRC tax authorities which could have an adverse effect on our income and expenses.

We could face material and adverse tax consequences if the PRC tax authorities determine that our contracts with MYL Commercial, its shareholders and MYL Training School were not entered into based on arm’s length negotiations. Although our contractual arrangements are similar to other companies conducting similar operations in China, if the PRC tax authorities determine that these contracts were not entered into on an arm’s length basis, they may adjust our income and expenses for PRC tax purposes in the form of a transfer pricing adjustment. Such an adjustment may require that we pay additional PRC taxes plus applicable penalties and interest, if any.

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The exercise of right to purchase part or all of the equity interests in MYL Commercial under the call option agreement might be subject to approval by the PRC government. Our failure to obtain this approval may impair our ability to substantially control MYL Commercial and MYL Training School and could result in actions by MYL Commercial and MYL Training School that conflict with our interests.

Our call option agreement with MYL Commercial and MYL Training School gives our Chinese operating subsidiary, MYL Business, the right to purchase all or part of the equity interests in MYL Commercial and MYL Training School, however, the option may not be exercised by MYL Business if the exercise would violate any applicable laws and regulations in China. Under Chinese laws, if a foreign entity, through a foreign investment company that it invests in, acquires a domestic related company, China’s regulations regarding mergers and acquisitions would technically apply to the transaction. Application of these regulations requires an examination and approval of the transaction by MOFCOM, or its local counterparts. Although an appraisal of the equity to be acquired is mandatory, the local counterparts of MOFCOM hold the view that such a transaction would not require their approval. Therefore, we do not believe at this time that an approval and an appraisal are required for MYL Business to exercise its option to acquire MYL Commercial and MYL Training School. In light of the different views on this issue, however, it is possible that the central MOFCOM office in Beijing will issue a standardized opinion imposing the approval and appraisal requirement. If we are not able to purchase the equity of MYL Commercial and MYL Training School, then we will lose a substantial portion of our ability to control MYL Commercial and MYL Training School and our ability to ensure that MYL Commercial and MYL Training School will act in our interests.

RISKS RELATED TO DOING BUSINESS IN CHINA

If we become directly subject to the recent scrutiny, criticism and negative publicity involving U.S.-listed Chinese companies, we may have to expend significant resources to investigate and resolve the matter which could harm our business operations, stock price and reputation and could result in a loss of your investment in our stock, especially if such matter cannot be addressed and resolved favorably.

Recently, U.S. public companies that have substantially all of their operations in China, particularly companies like us which have completed so-called reverse merger transactions, have been the subject of intense scrutiny, criticism and negative publicity by investors, financial commentators and regulatory agencies, such as the SEC. Much of the scrutiny, criticism and negative publicity has centered around financial and accounting irregularities and mistakes, a lack of effective internal controls over financial accounting, inadequate corporate governance policies or a lack of adherence thereto and, in many cases, allegations of fraud. As a result of the scrutiny, criticism and negative publicity, the publicly traded stock of many U.S. listed Chinese companies has sharply decreased in value and, in some cases, has become virtually worthless. Many of these companies are now subject to shareholder lawsuits, SEC enforcement actions and are conducting internal and external investigations into the allegations. It is not clear what effect this sector-wide scrutiny, criticism and negative publicity will have on our Company, our business and our stock price. If we become the subject of any unfavorable allegations, whether such allegations are proven to be true or untrue, we will have to expend significant resources to investigate such allegations and/or defend our company. This situation will be costly and time consuming and distract our management from growing our company. If such allegations are not proven to be groundless, our company and business operations will be severely and your investment in our stock could be rendered worthless.

Adverse changes in political, economic and other policies of the Chinese government could have a material adverse effect on the overall economic growth of China, which could materially and adversely affect the growth of our business and our competitive position.

Most of our business operations are conducted in China. Accordingly, our business, financial condition, results of operations and prospects are affected significantly by economic, political and legal developments in China. The Chinese economy differs from the economies of most developed countries in many respects, including:

·   the degree of government involvement;

·   the level of development;

·   the growth rate;

·   the control of foreign exchange;

·   the allocation of resources;

·   an evolving regulatory system; and

·   a lack of sufficient transparency in the regulatory process.

While the Chinese economy has experienced significant growth in the past 30 years, growth has been uneven, both geographically and among various sectors of the economy. The Chinese economy has also experienced certain adverse effects due to the recent global financial crisis. The Chinese government has implemented various measures to encourage economic growth and guide the allocation of resources. Some of these measures benefit the overall Chinese economy, but may also 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 that are applicable to us.

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The Chinese economy has been transitioning from a planned economy to a more market-oriented economy. Although in recent years the Chinese government has implemented measures emphasizing the utilization of market forces for economic reform, the reduction of state ownership of productive assets and the establishment of sound corporate governance in business enterprises, a substantial portion of the productive assets in China is still owned by the Chinese government. The continued control of these assets and other aspects of the national economy by the Chinese government could materially and adversely affect our business. The Chinese government also exercises significant control over Chinese economic growth through the allocation of resources, controlling payment of foreign currency-denominated obligations, setting monetary policy and providing preferential treatment to particular industries or companies.

Any adverse change in the economic conditions or government policies in China could have a material adverse effect on overall economic growth, which in turn could lead to a reduction in demand for our products and consequently have a material adverse effect on our businesses.

We depend upon the acquisition and maintenance of licenses to conduct our business in the PRC.

In order to conduct business in the PRC, we need licenses from the appropriate government authorities, including general business licenses and an education service provider license.  The loss or failure to obtain or maintain these licenses in full force and effect will have a material adverse impact on our ability to conduct our business and on our financial condition.

Future government regulations or other standards could have an adverse effect on our operations.

Our operations are subject to a variety of laws, regulations and licensing requirements of national and local authorities in the PRC. We are required to obtain licenses or permits from the PRC central government and from Hangzhou province, where we operate, and to meet certain standards in the conduct of our business. The loss of such licenses, or the imposition of conditions to the granting or retention of such licenses, could have an adverse effect on us. In the event that these laws, regulations and/or licensing requirements change, we may be required to modify our operations or to utilize resources to maintain compliance with such rules and regulations. In addition, new regulations may be enacted that could have an adverse effect on us.

Uncertainties with respect to the PRC legal system could limit the legal protections available to you and us.

We conduct substantially all of our business through our subsidiaries in the PRC. Our subsidiaries are generally subject to laws and regulations applicable to foreign investments in China and, in particular, laws applicable to FIEs. The PRC legal system is based on written statutes, and prior court decisions may be cited for reference but have limited precedential value. Since 1979, a series of new PRC laws and regulations have significantly enhanced the protections afforded to various forms of foreign investments in China. However, since the PRC legal system continues to evolve rapidly, the interpretations of many laws, regulations, and rules are not always uniform, and enforcement of these laws, regulations, and rules involve uncertainties, which may limit legal protections available to you and us. In addition, any litigation in China may be protracted and result in substantial costs and diversion of resources and management attention. In addition, all of our executive officers and directors are residents of China and not of the United States, and substantially all the assets of these persons are located outside the United States. As a result, it could be difficult for investors to affect service of process in the United States or to enforce a judgment obtained in the United States against our Chinese operations and subsidiaries.

You may have difficulty enforcing judgments against us.

Most of our assets are located outside of the United States and all of our current operations are conducted in the PRC. In addition, all of our directors and officers are nationals and residents of countries other than the United States. A substantial portion of the assets of these persons is located outside the United States. As a result, it may be difficult for you to effect service of process within the United States upon these persons. It may also be difficult for you to enforce in U.S. courts judgments on the civil liability provisions of the U.S. federal securities laws against us and our officers and directors, all of whom are not residents in the United States and the substantial majority of whose assets are located outside of the United States. In addition, there is uncertainty as to whether the courts of the PRC would recognize or enforce judgments of U.S. courts. Our counsel as to PRC law has advised us that the recognition and enforcement of foreign judgments are provided for under the PRC Civil Procedures Law. Courts in China may recognize and enforce foreign judgments in accordance with the requirements of the PRC Civil Procedures Law based 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 arrangements that provide for the reciprocal recognition and enforcement of foreign judgments with the United States. 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 basic principles of PRC law or national sovereignty, security, or the public interest. So it is uncertain whether a PRC court would enforce a judgment rendered by a court in the United States.

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The PRC government exerts substantial influence over the manner in which we must conduct our business activities.

The PRC government has exercised and continues to exercise substantial control over virtually every sector of the Chinese economy through regulation and state ownership. Our ability to operate in China may be harmed by changes in its laws and regulations, including those relating to taxation, import and export tariffs, environmental regulations, land use rights, property, and other matters. We believe that our operations in China are in material compliance with all applicable legal and regulatory requirements. However, the central or local governments of the jurisdictions in which we operate may impose new, stricter regulations or interpretations of existing regulations that would require additional expenditures and efforts on our part to ensure our compliance with such regulations or interpretations.

Accordingly, government actions in the future, including any decision not to continue to support recent economic reforms and to return to a more centrally planned economy or regional or local variations in the implementation of economic policies, could have a significant effect on economic conditions in China or particular regions thereof and could require us to divest ourselves of any interest we then hold in Chinese properties or joint ventures.

Future inflation in China may inhibit our ability to conduct business in China.

In recent years, the Chinese economy has experienced periods of rapid expansion and highly fluctuating rates of inflation. During the past ten years, the rate of inflation in China has been as high as 5.9% and as low as -0.8%. These factors have led to the adoption by the Chinese government, from time to time, of various corrective measures designed to restrict the availability of credit or regulate growth and contain inflation. High inflation may in the future cause the Chinese government to impose controls on credit and/or prices, or to take other action, which could inhibit economic activity in China, and thereby harm the market for our products and our company.

Restrictions on currency exchange may limit our ability to receive and use our sales effectively.

The majority of our sales will be settled in RMB, and any future restrictions on currency exchanges may limit our ability to use revenue generated in RMB to fund any future business activities outside China or to make dividend or other payments in U.S. dollars. Although the Chinese government introduced regulations in 1996 to allow greater convertibility of the RMB for current account transactions, significant restrictions still remain, including primarily the restriction that FIEs may only buy, sell or remit foreign currencies after providing valid commercial documents, at those banks in China authorized to conduct foreign exchange business. In addition, conversion of RMB for capital account items, including direct investment and loans, is subject to governmental approval in China, and companies are required to open and maintain separate foreign exchange accounts for capital account items. The Chinese regulatory authorities may impose more stringent restrictions on the convertibility of the RMB.

In addition, the Notice of the General Affairs Department of the State Administration of Foreign Exchange on the Relevant Operating Issues concerning the Improvement of the Administration of Payment and Settlement of Foreign Currency Capital of Foreign-Invested Enterprises, issued by SAFE and effective as of August 29, 2008, or Circular 142, regulates the conversion by FIEs of foreign currency into RMB by restricting how the converted RMB may be used. Circular 142 requires that RMB converted from the foreign currency-dominated capital of a FIE may only be used for purposes within the business scope approved by the relevant government authority and may not be used to make equity investments in PRC, unless specifically provided otherwise. SAFE further strengthened its oversight over the flow and use of RMB funds converted from the foreign currency-dominated capital of a FIE. The use of such RMB may not be changed without approval from SAFE, and may not be used to repay RMB loans if the proceeds of such loans have not yet been used. Any violation of Circular 142 may result in severe penalties, including substantial fines.

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Fluctuations in exchange rates could adversely affect our business and the value of our securities.

The value of our common stock will be indirectly affected by the foreign exchange rate between the U.S. dollar and RMB and between those currencies and other currencies in which our sales may be denominated. Appreciation or depreciation in the value of the RMB relative to the U.S. dollar would affect our financial results reported in U.S. dollar terms without giving effect to any underlying change in our business or results of operations. Fluctuations in the exchange rate will also affect the relative value of any dividend we issue that will be exchanged into U.S. dollars, as well as earnings from, and the value of, any U.S. dollar-denominated investments we make in the future.

Since July 2005, the RMB has no longer been pegged to the U.S. dollar. Although the People’s Bank of China regularly intervenes in the foreign exchange market to prevent significant short-term fluctuations in the exchange rate, the RMB may appreciate or depreciate significantly in value against the U.S. dollar in the medium to long term. Moreover, it is possible that in the future PRC authorities may lift restrictions on fluctuations in the RMB exchange rate and lessen intervention in the foreign exchange market.

Very limited hedging transactions are available in China to reduce our exposure to exchange rate fluctuations. To date, we have not entered into any hedging transactions. While we may enter into hedging transactions in the future, the availability and effectiveness of these transactions may be limited, and we may not be able to successfully hedge our exposure at all. In addition, our foreign currency exchange losses may be magnified by PRC exchange control regulations that restrict our ability to convert RMB into foreign currencies.

Restrictions under PRC law on our PRC subsidiaries’ ability to make dividends and other distributions could materially and adversely affect our ability to grow, make investments or acquisitions that could benefit our business, pay dividends to you, and otherwise fund and conduct our business.

Substantially all of our sales are earned by our PRC subsidiaries. However, as discussed more fully under Item 1, “Business —Regulation—Dividend Distributions,” PRC regulations restrict the ability of our PRC subsidiaries to make dividends and other payments to their offshore parent company. Any limitations on the ability of our PRC subsidiaries to transfer funds to us could materially and adversely limit our ability to grow, make investments or acquisitions that could be beneficial to our business, pay dividends and otherwise fund and conduct our business.

Failure to comply with PRC regulations relating to the establishment of offshore special purpose companies by PRC residents may subject our PRC resident stockholders to personal liability, limit our ability to acquire PRC companies or to inject capital into our PRC subsidiaries, limit our PRC subsidiaries' ability to distribute profits to us or otherwise materially adversely affect us.

On November 1, 2005, SAFE issued the Notice on Relevant Issues Concerning Foreign Exchange Administration for Domestic Residents to Engage in Overseas Financing and Round Trip Investment via Overseas Special Purpose Vehicles, or Circular 75, which regulates the foreign exchange matters in relation to the use of a special purpose vehicle, or SPV, by PRC residents to seek offshore equity financing and conduct “round trip investment” in China. Under Circular 75, a SPV refers to an offshore entity established or controlled, directly or indirectly, by PRC residents or PRC entities for the purpose of seeking offshore equity financing using assets or interests owned by such PRC residents or PRC entities in onshore companies, while “round trip investment” refers to the direct investment in China by the PRC residents through the SPVs, including, without limitation, establishing FIEs and using such foreign-invested enterprises to purchase or control onshore assets through contractual arrangements. Circular 75 requires that, before establishing or controlling a SPV, PRC residents and PRC entities are required to complete foreign exchange registration with the local offices of SAFE for their overseas investments.

Circular 75 applies retroactively. PRC residents who have established or acquired control of the SPVs which have completed “round-trip investment” before the implementation of Circular 75 shall register their ownership interests or control in such SPVs with the local offices of SAFE before March 31, 2006. An amendment to the registration is required if there is a material change in the SPV, such as increase or reduction of share capital and transfer of shares. Failure to comply with the registration procedures set forth in Circular 75 may result in restrictions on the foreign exchange activities of the relevant FIEs, including the 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 to penalties under PRC foreign exchange administration regulations.

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We have asked our stockholders, who are PRC residents as defined in Circular 75, to register with the relevant branch of SAFE as currently required in connection with their equity interests in us and our acquisitions of equity interests in our PRC subsidiaries. However, we cannot provide any assurances that they can obtain the above SAFE registrations required by Circular 75. Moreover, because of uncertainty over how Circular 75 will be interpreted and implemented, and how or whether SAFE will apply it to us, we cannot predict how it will affect our business operations or future strategies. For example, our present and prospective PRC subsidiaries’ ability to conduct foreign exchange activities, such as the remittance of dividends and foreign currency-denominated borrowings, may be subject to compliance with Circular 75 by our PRC resident beneficial holders.

In addition, such PRC residents may not always be able to complete the necessary registration procedures required by Circular 75. We also have little control over either our present or prospective direct or indirect stockholders or the outcome of such registration procedures. A failure by our PRC resident beneficial holders or future PRC resident stockholders to comply with Circular 75, if SAFE requires it, could subject these PRC resident beneficial holders to fines or legal sanctions, restrict our overseas or cross-border investment activities, limit our subsidiaries’ ability to make distributions or pay dividends or affect our ownership structure, which could adversely affect our business and prospects.

We may be unable to complete a business combination transaction efficiently or on favorable terms due to complicated merger and acquisition regulations which became effective on September 8, 2006.

On August 8, 2006, six PRC regulatory agencies, including the China Securities Regulatory Commission, promulgated the Regulation on Mergers and Acquisitions of Domestic Companies by Foreign Investors, or the M&A Regulation, which became effective on September 8, 2006. The M&A Regulation, among other things, governs the approval process by which a PRC company may participate in an acquisition of assets or equity interests. Depending on the structure of the transaction, the M&A Regulation requires the PRC parties to make a series of applications and supplemental applications to the government agencies. In some instances, the application process may require the presentation of economic data concerning a transaction, including appraisals of the target business and evaluations of the acquirer, which are designed to allow the government to assess the transaction. Government approvals will have expiration dates by which a transaction must be completed and reported to the government agencies. Compliance with the M&A Regulation is likely to be more time consuming and expensive than in the past and the government can now exert more control over the combination of two businesses. Accordingly, due to the M&A Regulation, our ability to engage in business combination transactions has become significantly more complicated, time consuming and expensive, and we may not be able to negotiate a transaction that is acceptable to our stockholders or sufficiently protect their interests in a transaction.

The M&A Regulation allows PRC government agencies to assess the economic terms of a business combination transaction. Parties to a business combination transaction may have to submit to MOFCOM and other relevant government agencies an appraisal report, an evaluation report and the acquisition agreement, all of which form part of the application for approval, depending on the structure of the transaction. The M&A Regulation also prohibits a transaction at an acquisition price obviously lower than the appraised value of the PRC business or assets and in certain transaction structures, require that consideration must be paid within defined periods, generally not in excess of a year. The M&A Regulation also limits our ability to negotiate various terms of the acquisition, including aspects of the initial consideration, contingent consideration, holdback provisions, indemnification provisions and provisions relating to the assumption and allocation of assets and liabilities. Transaction structures involving trusts, nominees and similar entities are prohibited. Therefore, the M&A Regulation may impede our ability to negotiate and complete a business combination transaction on financial terms that satisfy our investors and protect our stockholders’ economic interests.

In addition to the above risks, in many instances, we will seek to structure transactions in a manner that avoids the need to make applications or a series of applications with Chinese regulatory authorities under the M&A Regulation. If we fail to effectively structure an acquisition in a manner that avoids the need for such applications or if the Chinese government interprets the requirements of the M&A Regulation in a manner different from our understanding of M&A Regulation, then acquisitions that we have effected may be unwound or subject to rescission. Also, if the Chinese government determines that our structure of any of our acquisitions does not comply with the M&A Regulation, then we may also be subject to fines and penalties.

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Failure to comply with Chinese regulations regarding the registration requirements for employee incentive plans may subject the PRC plan participants or us to fines and other legal or administrative sanctions.

In December 2006, The People’s Bank of China promulgated the Administrative Measures for Individual Foreign Exchange, which set forth the respective requirements for foreign exchange transactions by Chinese individuals under either the current account or the capital account. In January 2007, the SAFE issued the Implementation Rules of the Administrative Measures for Individual Foreign Exchange, which, among other things, specified approval requirements for certain capital account transactions such as a Chinese citizen’s participation in the employee stock ownership plans or stock option plans of an overseas publicly-listed company. On March 28, 2007, the SAFE promulgated the Processing Guidance on Foreign Exchange Administration for Domestic Individuals Participating in Employee Stock Holding Plans or Stock Option Plans of Overseas-Listed Companies. Under this rule, PRC citizens who are granted stock options by an overseas publicly-listed company are required, through a qualified PRC domestic agent or PRC subsidiary of such overseas publicly-listed company, to register with the SAFE and complete certain other procedures. We and our Chinese employees who receive stock option grants will be subject to this rule. Failure or inability by our company or the Chinese grantees to comply with these regulations may subject these individuals to fines and other legal or administrative sanctions.

Under the Enterprise Income Tax Law, we may be classified as a “resident enterprise” of China. Such classification will likely result in unfavorable tax consequences to us and our non-PRC stockholders.

On March 16, 2007, the National People’s Congress of China passed the EIT Law, and on November 28, 2007, the State Council of China passed its implementing rules, which took effect on January 1, 2008. Under the EIT Law, an enterprise established outside of China with “de facto management bodies” within China is considered a “resident enterprise,” meaning that it can be treated in a manner similar to a Chinese enterprise for enterprise income tax purposes. See Item 1 “Business—Regulation—Taxation” for a detailed discussion of the EIT Law.

It remains unclear whether the PRC tax authorities would require or permit our overseas registered entities to be treated as PRC resident enterprises. We do not currently consider our company to be a PRC resident enterprise. However, if the PRC tax authorities determine that we are a “resident enterprise” for PRC enterprise income tax purposes, a number of unfavorable PRC tax consequences could follow. First, we may be subject to the enterprise income tax at a rate of 25% on our worldwide taxable income as well as PRC enterprise income tax reporting obligations. In our case, this would mean that income such as interest on offering proceeds and non-China source income would be subject to PRC enterprise income tax at a rate of 25%. Second, although under the EIT Law and its implementing rules dividends paid to us from our PRC subsidiaries may qualify as “tax-exempt income,” we cannot guarantee that such dividends will not be subject to a 5% or 10% withholding tax, as the PRC foreign exchange control authorities, which enforce the withholding tax, have not yet issued guidance with respect to the processing of outbound remittances to entities that are treated as resident enterprises for PRC enterprise income tax purposes. Finally, it is possible that future guidance issued with respect to the new “resident enterprise” classification could result in a situation in which a 5% or 10% withholding tax is imposed on dividends we pay to our non-PRC stockholders and with respect to gains derived by our non-PRC stockholders from transferring our stock.

We face uncertainty from China’s Circular on Strengthening the Administration of Enterprise Income Tax on Non-Resident Enterprises' Share Transfer that was released in December 2009 with retroactive effect from January 1, 2008.

The Chinese State Administration of Taxation, or SAT, released a circular on December 15, 2009 that addresses the transfer of shares by nonresident companies, generally referred to as Circular 698. Circular 698, which is effective retroactively to January 1, 2008, may have a significant impact on many companies that use offshore holding companies to invest in China. Circular 698, which provides parties with a short period of time to comply with its requirements, indirectly taxes foreign companies on gains derived from the indirect sale of a Chinese company. Where a foreign investor indirectly transfers equity interests in a Chinese resident enterprise by selling the shares in an offshore holding company, and the latter is located in a country or jurisdiction where the effective tax burden is less than 12.5% or where the offshore income of his, her, or its residents is not taxable, the foreign investor is required to provide the tax authority in charge of that Chinese resident enterprise with the relevant information within 30 days of the transfers. Moreover, where a foreign investor indirectly transfers equity interests in a Chinese resident enterprise through an abuse of form of organization and there are no reasonable commercial purposes such that the corporate income tax liability is avoided, the PRC tax authority will have the power to re-assess the nature of the equity transfer in accordance with PRC’s “substance-over-form” principle and deny the existence of the offshore holding company that is used for tax planning purposes. There is uncertainty as to the application of Circular 698. For example, while the term "indirectly transfer" is not defined, it is understood that the relevant PRC tax authorities have jurisdiction regarding requests for information over a wide range of foreign entities having no direct contact with China. Moreover, the relevant authority has not yet promulgated any formal provisions or formally declared or stated how to calculate the effective tax in the country or jurisdiction and to what extent and the process of the disclosure to the tax authority in charge of that Chinese resident enterprise. In addition, there are not any formal declarations with regard to how to decide “abuse of form of organization” and “reasonable commercial purpose,” which can be utilized by us to balance if our Company complies with the Circular 698. As a result, we may become at risk of being taxed under Circular 698 and we may be required to expend valuable resources to comply with Circular 698 or to establish that we should not be taxed under Circular 698, which could have a material adverse effect on our financial condition and results of operations.

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We may be exposed to liabilities under the Foreign Corrupt Practices Act and Chinese anti-corruption laws, and any determination that we violated these laws could have a material adverse effect on our business.

We are subject to the Foreign Corrupt Practice Act, or FCPA, and other laws that prohibit improper payments or offers of payments to foreign governments and their officials and political parties by U.S. persons and issuers as defined by the statute, for the purpose of obtaining or retaining business. We have operations, agreements with third parties, and make most of our sales in China. The PRC also strictly prohibits bribery of government officials. Our activities in China create the risk of unauthorized payments or offers of payments by the employees, consultants, sales agents, or distributors of our Company, even though they may not always be subject to our control. It is our policy to implement safeguards to discourage these practices by our employees. However, our existing safeguards and any future improvements may prove to be less than effective, and the employees, consultants, sales agents, or distributors of our Company may engage in conduct for which we might be held responsible. Violations of the FCPA or Chinese anti-corruption laws may result in severe criminal or civil sanctions, and we may be subject to other liabilities, which could negatively affect our business, operating results and financial condition. In addition, the U.S. government may seek to hold our Company liable for successor liability FCPA violations committed by companies in which we invest or that we acquire.

The disclosures in our reports and other filings with the SEC and our other public pronouncements are not subject to the scrutiny of any regulatory bodies in the PRC.  Accordingly, our public disclosure should be reviewed in light of the fact that no governmental agency that is located in China where substantially all of our operations and business are located have conducted any due diligence on our operations or reviewed or cleared any of our disclosure.

We are regulated by the SEC and our reports and other filings with the SEC are subject to SEC review in accordance with the rules and regulations promulgated by the SEC under the Securities Act and the Exchange Act. Unlike public reporting companies whose operations are located primarily in the United States, however, substantially all of our operations are located in China. Since substantially all of our operations and business takes place in China, it may be more difficult for the Staff of the SEC to overcome the geographic and cultural obstacles that are present when reviewing our disclosure. These same obstacles are not present for similar companies whose operations or business take place entirely or primarily in the United States. Furthermore, our SEC reports and other disclosure and public pronouncements are not subject to the review or scrutiny of any PRC regulatory authority. For example, the disclosure in our SEC reports and other filings are not subject to the review of the China Securities Regulatory Commission, a PRC regulator that is tasked with oversight of the capital markets in China. Accordingly, you should review our SEC reports, filings and our other public pronouncements with the understanding that no local regulator has done any due diligence on our company and with the understanding that none of our SEC reports, other filings or any of our other public pronouncements has been reviewed or otherwise been scrutinized by any local regulator.

RISKS RELATED TO THE MARKET FOR OUR STOCK GENERALLY

Our common stock is quoted on the OTCQB Marketplace which may have an unfavorable impact on our stock price and liquidity.

Our common stock is quoted on the OTCQB Marketplace maintained by Pink OTC Markets Inc. The OTCQB Marketplace is a significantly more limited market than the New York Stock Exchange or NASDAQ. The quotation of our shares on the OTCQB Marketplace may result in a less liquid market available for existing and potential stockholders to trade shares of our common stock, could depress the trading price of our common stock and could have a long-term adverse impact on our ability to raise capital in the future. We plan to list our common stock as soon as practicable. However, we cannot assure you that we will be able to meet the initial listing standards of any stock exchange, or that we will be able to maintain any such listing.

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The market price of our common stock is volatile, leading to the possibility of its value being depressed at a time when you may want to sell your holdings.

The market price of our common stock is volatile, and this volatility may continue. Numerous factors, many of which are beyond our control, may cause the market price of our common stock to fluctuate significantly. In addition to market and industry factors, the price and trading volume for our common stock may be highly volatile for specific business reasons. Factors such as variations in our revenues, earnings and cash flow, announcements of new investments, cooperation arrangements or acquisitions, and fluctuations in market prices for our products could cause the market price for our shares to change substantially. Moreover, the trading market for our common stock will be influenced by research or reports that industry or securities analysts publish about us or our business. If one or more analysts who cover us downgrade our common stock, the market price for our common stock would likely decline. If one or more of these analysts cease coverage of 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 for our common stock or trading volume to decline.

Furthermore, securities markets may from time to time experience significant price and volume fluctuations for reasons unrelated to operating performance of particular companies. These market fluctuations may adversely affect the price of our common stock and other interests in our company at a time when you want to sell your interest in us.

Securities class action litigation is often instituted against companies following periods of volatility in their stock price. This type of litigation could result in substantial costs to us and divert our management’s attention and resources.

We may be subject to penny stock regulations and restrictions and you may have difficulty selling shares of our common stock.

The SEC has adopted regulations which generally define so-called “penny stocks” to be an equity security that has a market price less than $5.00 per share or an exercise price of less than $5.00 per share, subject to certain exemptions. Our common stock is a “penny stock” and is subject to Rule 15g-9 under the Exchange Act, or the Penny Stock Rule. This rule imposes additional sales practice requirements on broker-dealers that sell such securities to persons other than established customers and “accredited investors” (generally, individuals with a net worth in excess of $1,000,000 or annual incomes exceeding $200,000, or $300,000 together with their spouses). For transactions covered by Rule 15g-9, a broker-dealer must make a special suitability determination for the purchaser and have received the purchaser's written consent to the transaction prior to sale. As a result, this rule may affect the ability of broker-dealers to sell our securities and may affect the ability of purchasers to sell any of our securities in the secondary market, thus possibly making it more difficult for us to raise additional capital.

For any transaction involving a penny stock, unless exempt, the rules require delivery, prior to any transaction in penny stock, of a disclosure schedule prepared by the SEC relating to the penny stock market. Disclosure is also required to be made about sales commissions payable to both the broker-dealer and the registered representative and current quotations for the securities. Finally, monthly statements are required to be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stock.

There can be no assurance that our common stock will qualify for exemption from the Penny Stock Rule. In any event, even if our common stock were exempt from the Penny Stock Rule, we would remain subject to Section 15(b)(6) of the Exchange Act, which gives the SEC the authority to restrict any person from participating in a distribution of penny stock, if the SEC finds that such a restriction would be in the public interest.

We do not intend to pay dividends for the foreseeable future.

For the foreseeable future, we intend to retain any earnings to finance the development and expansion of our business, and we do not anticipate paying any cash dividends on our common stock. Accordingly, investors must be prepared to rely on sales of their common stock after price appreciation to earn an investment return, which may never occur. Investors seeking cash dividends should not purchase our common stock. Any determination to pay dividends in the future will be made at the discretion of our board of directors and will depend on our results of operations, financial condition, contractual restrictions, restrictions imposed by applicable law and other factors our board deems relevant.

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Our controlling stockholder holds a significant percentage of our outstanding voting securities, which could hinder our ability to engage in significant corporate transactions without his approval.

Mr. Kaien Liang is the beneficial owner of approximately 70% of our outstanding voting securities. As a result, he possesses significant influence, giving him the ability, among other things, to elect a majority of our board of directors and to authorize or prevent proposed significant corporate transactions. His ownership and control may also have the effect of delaying or preventing a future change in control, impeding a merger, consolidation, takeover or other business combination or discourage a potential acquirer from making a tender offer.

ITEM 1B. UNRESOLVED STAFF COMMENTS.

Not Applicable.

ITEM 2. PROPERTIES.

There is no private ownership of land in China and all urban land ownership is held by the government of the PRC, its agencies and collectives. Land use rights can be obtained from the government for a period of up to 50 years for industrial usage, 40 years for commercial usage and 70 years for residential usage, and are typically renewable. Land use rights can be transferred upon approval by the land administrative authorities of the PRC (State Land Administration Bureau) upon payment of the required land transfer fee.

We have the following PRC land use rights:

Certificate No.	Location	Purpose	Area	Registration Date
F.Q.Z.K.Z.No. A94134	1-12-2 Building No.56, Haiyi Residential Quarters, Dalian Economic & Technology Development Zone	Residential	72.03 square meters	October 13, 2009

We also lease two offices. The first is located at Room 303, Hualong Business Building, 110 Moganshan Road, Gongshu District, Hangzhou, China. This office consists of approximately 91.7 square meters, which we leased from Ms. Haiping Chu and Mr. Weihao Chen for RMB 66,940 per year. The term of the lease is from August 25, 2010 to August 24, 2012.

The second office is located in Fenghua Garden, 3601 Dongfang Road, Pudong Mew District, Shanghai, China. This office consists of approximately 37,063 square feet which we leased from Shanghai Shengkang Sanlin Investment and Development Co., Ltd. for approximately $634,390 per year. The term of the lease is from May 31, 2011 to April 30, 2014.

ITEM 3. LEGAL PROCEEDINGS.

From time to time, we may become involved in various lawsuits and legal proceedings, which arise, in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these, or other matters, may arise from time to time that may harm our business. We are currently not aware of any such legal proceedings or claims that we believe will have a material adverse affect on our business, financial condition or operating results.

ITEM 4. MINE SAFETY DISCLOSURES.

None.

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PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.

Market Information

Our common stock is quoted under the symbol “CECX” on the OTCQB Marketplace maintained by OTC Markets Group Inc.

The prices below reflect inter-dealer prices, without retail mark-up, mark-down or commission, and may not represent actual transactions.

	Closing Bid Prices(1)
	High		Low
Year Ended December 31, 2011
1st Quarter	$	7.50	$	4.00
2nd Quarter		9.00		1.01
3rd Quarter		1.01		1.01
4th Quarter		3.20		1.01
Year Ended December 31, 2010
1st Quarter		2.50		2.10
2nd Quarter		5.00		2.14
3rd Quarter		3.07		1.85
4th Quarter		4.02		2.50

(1) The above table sets forth the range of high and low closing bid prices per share of our common stock as reported by www.quotemedia.com for the periods indicated.

Holders

As of March 28, 2012, there were approximately 640 stockholders of record of our common stock. This number does not include shares held by brokerage clearing houses, depositories or others in unregistered form.

Dividends

On January 30, 2010, MYI Business declared a dividend in the amount of RMB 9,250,000 (equivalent to $1,285,305) out of the retained earnings balance of MYL Business to its sole shareholder, SLM.

Other than this dividend, we have never declared or paid a cash dividend. Any decisions regarding dividends will be made by our board of directors. We currently intend to retain and use any future earnings for the development and expansion of our business and do not anticipate paying any cash dividends in the foreseeable future. Our board of directors has complete discretion on whether to pay dividends, subject to the approval of our stockholders. 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.

Securities Authorized for Issuance under Equity Compensation Plans

We do not have any compensation plans in effect under which our equity securities are authorized for issuance.

Recent Sales of Unregistered Securities

We have not sold any equity securities during the fiscal year ended December 31, 2011 that were not previously disclosed in a quarterly report on Form 10-Q or a current report on Form 8-K that was filed during the 2011 fiscal year.

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Purchases of Equity Securities

No repurchases of our common stock were made during the fourth quarter of 2011.

ITEM 6. SELECTED FINANCIAL DATA.

Not Applicable.

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

The following management’s discussion and analysis should be read in conjunction with our financial statements and the notes thereto and the other financial information appearing elsewhere in this report. In addition to historical information, the following discussion contains certain forward-looking information. See “Special Note Regarding Forward Looking Statements” above for certain information concerning those forward looking statements. Our financial statements are prepared in U.S. dollars and in accordance with U.S. GAAP.

Overview

We are a fast-growing executive education company in China and mainly operate through MYL Business. We operate comprehensive training programs through our controlled companies and subsidiaries in Hangzhou and Shanghai, two prosperous and commercial cities of China. We provide Chinese business executives with systematic training in leadership development. We also provide highly effective personal skill development programs, such as decision making skills, negotiation skills, presentation skills and people skills. Such practical skills development programs have been well accepted by an increasing number of Chinese entrepreneurs, business executives and senior corporate management.

Our open-enrollment training programs include our proprietary training courses and featured lectures. Our proprietary training courses include one package of 16 courses for CEO and C-Level managers, as well as 23 leadership and personal development courses, which are on the topic of management skills, negotiation skills, leadership skills, public speaking skills, etc. Featured Lectures are delivered by world masters invited by us. Those world masters are experts or well-known speakers in each relevant field. Lectures are delivered to a large audience. MYL Business’s network of speaking professionals is a leading platform in China at inspiring audiences to new levels of motivation and commitment.

Since the formal launching of our operations in April 2009, our client base and sales revenue have been continuing to climb. For the years ended December 31, 2011 and 2010, respectively, we provided our training programs to 7,243 and 6,148 Chinese business owners and executives. They came from different provinces and from diverse industries.

As of December 31, 2011 and December 31, 2010, we generated sales revenue of $10.1 million and $7.2 million, respectively.  Our net loss for the above periods was $5.47 million and $8.54 million, respectively.

Management plans to continue the execution of our business expansion strategy that will result in increased market penetration of our educational services and expanded revenue growth in our 2012 fiscal year and beyond.  Part of this strategy involves increasing and improving our marketing activities, strengthening our sales force, and solidifying our client network. 

Management believes that our emphasis on further commercializing and broadening our professional training courses and service scope, enhanced sales and marketing efforts will continue to yield significant increases in our revenue in 2012 and beyond.

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Restatement of Previously Issued Financial Statements

The Company has restated its consolidated financial statements for the years ended December 31, 2010 and 2009, as previously disclosed in Form 10-K/A for 2010, filed on March 27, 2012.

2011 Financial Performance Highlights

The following summarizes certain key financial information for the year ended December 31, 2010:

·   Revenues: Revenues were $10,132,874 for the year ended December 31, 2011, an increase of $2,896,544, or 40.0%, from $7,236,330 for the year ended December 31, 2010.

·   Gross profit and margin: Gross profit was $2,456,196 for the year ended December 31, 2011, an increase of $1,473,979, or 150.1%, from $982,217 for the year ended December 31, 2010. Gross margin was 24.2% for the year ended December 31, 2011, as compared to 13.6% for the year ended December 31, 2010, a 10.6% increase.

·   Net loss attributable to the Company: Net loss attributable to the Company was $5,478,202 for the year ended December 31, 2011, a decrease of $3,064,868 from a net loss of $8,543,070 for the same period of last year.

·   Fully diluted net loss per share: Fully diluted net loss per share for the year ended December 31, 2011 was $0.24, as compared to a net loss per share of $0.38 for the same period last year.

DISCUSSION OF OPERATING RESULTS

For the years ended December 31, 2011 and December 31, 2010

The results of our operations, in U.S dollars for the year ended December 31, 2010, as compared to the prior comparative period, are as follows:

	December 31,		December 31,
	2011 $		2010 $		Increase (decrease)		Percentage
			(Restated)
Revenue		10,132,874		7,236,330		2,896,544	40.0%
Cost of revenue		7,676,678		6,254,113		1,422,565	22.7%
Gross profit		2,456,196		982,217		1,473,979	150.1%
Operating expenses
Selling and distribution costs		3,960,850		3,873,484		87,366	2.3%
Administrative and other operating expenses		3,791,419		3,839,303		(47,884)	(1.2%)
Total operating expenses		7,752,269		7,712,787		39,482	0.5%
Loss from operations		(5,296,073)		(6,730,570)		1,434,497	(21.3%)
Total other income (expenses)		166,235		(187,229)		353,464	(188.8%)
Loss before income taxes		(5,129,838)		(6,917,799)		1,787,961	(25.8%)
Income tax provisions		(348,364)		(1,625,271)		1,276,907	(78.6%)
Net loss		(5,478,202)		(8,543,070)		3,064,868	(35.9%)

Revenues, cost of revenues and gross profit

Revenues

For the year ended December 31, 2011, net revenue increased by $2,896,544, or 40%, as compared to the prior comparative period. The increase in our revenue was attributable to a number of factors. Our well-designed course content and flexible course offering schedule have met the strong market demand for quality executive training programs in China, and our business model and quick establishment in the target market have given us a considerable advantage over our competitors. To be specific, the increase in revenue was due to the following reasons:

 (1)   During the year ended December 31, 2011, our Company expanded its business operations to certain new geographic areas other than the previously focused areas of Hangzhou and Shanghai. The business expansion was through developing a cooperative relationship with many local student recruiting agencies, which greatly helped us recruit more students.  For the year ended December 31, 2011, 7,243 students attended our training courses or featured lectures (including 6,405 students for proprietary training courses and 838 students for comprehensive training programs) and we initiated more than 70 promotional seminars to sell our training programs. For the same period of 2010, we provided training services to 6,148 students (including 5,786 students for proprietary training courses and 362 students for comprehensive training programs) and only 58 promotional seminars were initiated.  More marketing and sales efforts as well as advertising have been performed during the year ended December 31, 2011 as compared to 2010.

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(2)   We provide two kinds of training programs to students: (a) proprietary training courses, which normally take several days to complete, primarily consist of featured lectures. These courses are provided on a roll-over basis over the year;  and (b) comprehensive training courses, which are composed of sixteen individual courses with systematic training in leadership development, i.e. decision making skills, negotiation skills, presentation skills and people skills.  These courses are provided by both Chinese lecturers and invited foreign lecturers. It normally takes several months to complete.  We normally collect student tuition before the courses can be arranged and provided, and record all the collection as deferred revenue. Our deferred revenue is subsequently recognized as revenue only to the extent that the courses or trainings have been fully arranged and delivered to the students, evidenced by the student course attendance record. Tuition collection for any un-arranged or un-delivered trainings remain the deferred revenue pool. This results in a large amount of deferred revenue reported on our balance sheet. The following table provides a breakdown of our revenues for the year ended December 31, 2011 and 2010, respectively:

									Increase
	2011				2010				(Decrease)
	$		%		$		%		$		%
Proprietary Training Courses	$	5,181,122	51	%	$	5,440,652	75	%	($	259,530)	(4.8	%)
Comprehensive Training Courses - Forbes		4,951,752	49	%		1,795,678	25	%		3,156,074	175.8	%
Total Revenues	$	10,132,874	100	%	$	7,236,330	100	%	$	2,896,544	40.0	%

First, revenue from preliminary training courses decreased $259,530, or 4.8%, for the year ended December 31, 2011 as compared to the year ended December 31, 2010.  The number of students that participated in the proprietary training courses increased from 6,012 students in 2010 to 6,405 students in 2011 as a result of using outsourced local agents to promote our training programs, which broadened our market coverage.  However, in order to stimulate student registration in 2011, we initiated more than 70 promotional seminars to sell our training programs and our tuition price for promotional seminars was set a little bit lower than in 2010 in order to attract student’s participation. As a result of the low price strategy, average tuition price decreased from $940 per student per course in 2010 to only $809 per student per course in 2011.  Consequently, the increase in student recruiting was offset by decreased average tuition price in 2011.    Our overall decrease in sales revenue from proprietary training courses for the year ended December 31, 2011 reflected the above combined factors.

Second, the Company’s comprehensive training programs included 16 courses, among which 10 courses were taught by Chinese lecturers, and the remaining 6 courses were taught by foreign lecturers. Revenue from comprehensive training programs increased from $1,795,678 for the year ended December 31, 2010 to $4,951,753 for the year ended December 31, 2011, an increase of $3,156,075, or 175.8%. The increase was mainly because more students attended the comprehensive training programs. For the year ended December 31, 2010, 1,028 courses have been offered to 362 students to participate in comprehensive training programs at an average tuition price of $1,747 per course. For the year ended December 31, 2011, 4,613 courses have been offered to 838 students to participate in comprehensive training programs at an average tuition price of $1,073 per course. The average tuition price per course decreased 39% for the year ended December 31, 2011 as compared to the prior comparative period.  The increase in revenue from comprehensive training courses reflected the above combined factors.

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Cost of revenue

Our costs of revenues primarily include expenditures incurred in connection with providing educational services to the students, such as renting conference rooms, booking hotels, compensation for lecturers, renting training equipment and materials as well as other direct labor costs incurred. The increase in our costs of revenues was primarily a result of our increased activities.

Our cost of revenue increased by approximately $1.42 million, or 22.7%, for the year ended December 31, 2011, as compared to the same period in 2010. The following table summarizes the cost of revenue for the years ended December 31, 2011 and 2010:

	For the years ended December 31,
	2011				2010				Increase (Decrease)
	$		%		$		%		$		%
Cost of lecturer's compensation	$	1,835,191	24	%	$	1,613,359	26	%	$	221,832	14	%
Hotel and conference-room		4,291,148	56	%		2,777,220	44	%		1,513,928	55	%
Educational facility costs		141,728	2	%		98,879	2	%		42,849	43	%
Administrative support		391,043	5	%		365,507	6	%		25,536	7	%
Other cost		83,307	1	%		51,634	1	%		31,673	61	%
Business tax		934,261	12	%		1,347,514	22	%		(413,253)	(31	%)
Total cost of revenue	$	7,676,678	100	%	$	6,254,113	100	%	$	1,422,565	23	%

The increase in our cost of sales was primarily due to the following reasons: 

First, cost of lecturer’s compensation amounted to $1.84 million, or 24% of the total cost of revenue for the year ended December 31, 2011, representing a $221,832, or 14%, increase as compared to the corresponding period of 2010. The increase in lecturers’ compensation cost was twofold: (1) the increased student attendance led to increased lecturer’s compensation. As discussed above, a total of 7,243 students participated in the trainings (including 6,405 students participating the preliminary course trainings and 838 students participating the comprehensive course trainings) during the year ended December 31, 2011, as compared to 6,148 students in the same period of 2010 (including 5,786 students for preliminary course trainings and 362 students for comprehensive course training). As more students attended the trainings, a higher amount of lecturer’s compensation was paid; and. (2) Our comprehensive training courses were taught by both Chinese lecturers and invited foreign lecturers, was the compensation paid to invited foreign lecturers were much higher than the compensation paid to Chinese lecturers. During the year 2011, we arranged for several well-known foreign lecturers to come to China to train our students. As a result, lecturer’s compensation expenses significantly increased.

Second, the cost of hotel and conference rooms for the year ended December 31, 2011 increased $1.51 million, or 55%, as compared to the prior year.  The increase in hotel and conference room costs was mainly because more students attended the trainings as discussed above. As a result, the Company was required to book more hotel rooms and larger space of conference rooms in order to host the students who attended the trainings, which were conducted on a rollover basis. In addition, in 2011, in order to create a more comfortable educational environment for student trainings, we raised the hotel and conference room selection standards which led to an increase in our hotel and conference room costs as well. Furthermore, the increase in our hotel and conference room costs was also affected by general inflation which led to higher hotel room rates. As a result, we paid more hotel room and conference room costs to organize our training in 2011.

Third, the cost of administrative support increased $25,536, or 7%, when comparing 2011 to 2010, primarily due to our increased educational training activities in 2011, which required more administrative supports to be provided by our management in order to effectively organize the promotional seminars, better serve and arrange students’ course attendance, and host the invited foreign lecturers.

Fourth, business sales taxes decreased $413,253, or 31%, when comparing 2011 to 2010.  Our Company is subject to 5% business sales tax calculated based on the invoiced amount upon student registration, not based on actual revenue recognized for the period indicated. The decrease in sales tax for the year ended December 31, 2011 was because the actual invoiced amount in 2011 was less than in 2010.  In 2010, more students have registered for the courses, but a significant amount of cash collection was not recognized as revenue but recorded as deferred revenue.  As a result, sales tax in 2010 was higher than in 2011.

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Gross profit and gross margin

Our gross profit is equal to the difference between our revenues and our cost of revenues. Our gross profit increased by $1,473,979, or 150.1%, to approximately $2,456,196 in 2011, from $982,217 in 2010. Our gross profit as a percentage of revenue (gross margin) increased to 24.2% in 2011 from 13.6% in 2010. The increase in gross margin was due to our increased sales revenue in 2011. As more students attended the trainings, we recognized more revenue in 2011 than in 2010. The increase in our revenue was offset by increased cost of revenue as well.  In 2011, we paid more compensation to our lecturers, incurred more hotel and conference – room expense and administrative support expenses when our business activities increased. As a result, revenue increased 40% but cost of revenue increased 22.7% as discussed above.  Our gross margin increased accordingly.

Operating expenses

Our selling expenses primarily include advertising expense, sales commission paid to outside agents for student recruiting and salaries paid to our own sales force.

Our general and administrative expenses principally include:

(1) Staff salaries and benefits;

(2) Traveling and entertainment expenses;

(3) Professional fees, such as consulting, audit and legal fees;

(4) Office space rent expense; and

(5) Other associated fees.

The following table sets forth our operating expenses for the periods indicated:

	2011		2010 (Restated)
Selling Expenses	$	3,960,850	$	3,873,484
General and administrative Expense		3,791,419		3,839,303
Total operating expenses	$	7,752,269	$	7,712,787

Total operating expenses were $7,752,269 for the year ended December 31, 2011, representing 0.5%, or a $39,482 increase as compared to $7,712,787 for the year ended December 31, 2010. 

The increase in sales and marketing expenses of $87,366, or 2.3%, was in line with the increased student recruiting for the period indicated. For the year ended December 31, 2011, 7,243 students have been recruited, as compared to 6,148 students in 2010. Consequently, we incurred more promotion and advertising expense in 2011 in order to generate wider public awareness of our brand name and course content. In 2011, we used both local agents and our own sales force for student recruiting. As a result, we paid a higher amount of salary to our own sales force as well as a higher amount of sales commission to several local sales agents.  We expect our selling and marketing expense to remain at a relatively stable level in the near future as we continue to use outsourced sales agents to help promote our training courses and conduct part of the student recruiting tasks.

The decrease in our general administrative expense by $47,884, or 1.2%, was primarily due to decreased consulting fees incurred in 2011.  During 2010, in connection with our going public in the United States, we incurred significant consulting and professional fees, such as shell company purchase, audit, legal and other consulting fees paid to various service providers. Total fees related to going public amounted to approximately RMB 7 million (equivalent to $1.03 million). In 2011, our only consulting fee incurred was to maintain our public status in the United States.

We expect that our general and administrative expenses will increase as we expand our business and operations. The Company will need to enhance our management’s skill level to adapt to the complex business environment because we are subject to the rules and regulations of the United States securities laws as well as a certain level of corporate governance and internal controls. We believe that we will need to hire more personnel as our business continues to grow, and we believe that we will need to incur additional general and administrative costs in the near future to support our business.

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Other income (expenses)

Other income (expense) primarily consists of interest income (expense), as well as government subsidy income or a tax refund from the relevant tax authority in China. For the year ended December 31, 2011, we reported net other income of $166,235, which included interest income of $37,801 generated from our large bank deposit, government subsidy income and tax refund of $293,662, as well as other expense of $165,228 which primarily represented a donation made to Shanghai Charitable Foundation.

For the year ended December 31, 2010, we reported net other expense of $187,229, which included interest income of $32,658 generated from our large bank deposit, advertising income of $25,982 as well as other expenses of $245,869 which represented our donation made to a China earthquake zone in 2010.

Net other income increased by $353,464, or 188.8%, for the year ended December 31, 2011 as compared to the prior comparative period.

Income tax provision and Deferred income tax benefit

Income tax provision for the year ended December 31, 2011 was $348,364, a decrease of $1,276,907, or 78.6%, as compared to $1,625,271 for the year ended December 31, 2010. Due to the operating loss and carry-forward, we reported deferred income tax benefits for prior periods. This was affected by the restatement of certain line items included in our previously issued financial statements. The application of deferred tax benefit led to the decrease in our income tax expense for the year ended December 31, 2011.

Net loss

As a result of the cumulative effect of the foregoing factors, we reported a net loss of $5.48 million for the year ended December 31, 2011, as compared to a net loss of $8.54 million for the year ended December 31, 2010, a decrease of $3,064,868, or 35.9%. The decrease in our net loss was primarily attributable to our increased sales revenue as discussed above. The decrease in our net loss was also affected by the restatement of several line items in our previously issued  financial statement which led to certain deferred tax benefits being applied to the current period which reduced our tax liabilities.

Other comprehensive loss

We operate primarily in the PRC and the functional currency of our operating subsidiary is the Chinese Renminbi (“RMB”).  The 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 US Dollars at the rates used in translation.

The financial information is first prepared in RMB and then is translated into U.S. dollars at period-end exchange rates as to assets and liabilities and average exchange rates as to revenue and expenses. Capital accounts are translated at their historical exchange rates when the capital transactions occurred. The effects of foreign currency translation adjustments are included as a component of accumulated other comprehensive income in shareholders’ equity.

For the year ended December 31, 2011 and 2010, other comprehensive loss resulting from the currency translation loss amounted to $720,796 and $275,929, respectively.  

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LIQUIDITY AND CAPITAL RESOURCES

Total current assets decreased by $5.16 million from $14.5 million as of December 31, 2010 to $9.34 million as of December 31, 2011.  The primary changes in our current assets during 2011 were from changes in cash and cash equivalents.  The decrease in our cash from $10,272,391 at December 31, 2010 to $3,570,740 at December 31, 2011 was because our expanded business required cash funds to be injected into the daily operations, such as advances to suppliers, pay tax liabilities, and the purchase of property and equipment, etc.  

Total current liabilities as of December 31, 2011 amounted to $10.7 million, as compared to $7.2 million at December 31, 2010. The increase in current liabilities was primarily due to an increase in our customer deposits and deferred revenue. Deferred revenue represents amounts received in advance from students for tuition paid to attend our professional training courses and featured lectures. Deferred revenue is refundable if the training does not occur within the specified time. We recognize these funds as a current liability until the revenue can be recognized.

Based on our current operating plan, we believe that existing cash and cash equivalents balances, as well as the cash forecast by management to be generated by operations, will be sufficient to meet our working capital and capital requirements for our current operations.

DISCUSSION OF CASH FLOWS

Comparison of cash flows for the years ended December 31, 2011 and 2010, respectively, is summarized as follows:

	2011			2010 (Restated)
Cash flows from operating activities	$	(6,328,807)		$	6,712,659
Cash flows from investing activities		(592,228	)		(619,507	)
Cash flows from financing activities		-			(1,624,779	)
Net (decrease) increase in cash and cash equivalents		(6,701,651)			4,182,472
Effect of exchange rate changes on cash		219,384			(285,901	)
Cash and cash equivalents, beginning of period		10,272,391			6,089,919
Cash and cash equivalents, end of period		3,570,740			10,272,391

Operating Activities

Net cash used in operating activities was $6,328,807 for the year ended December 31, 2011, which consisted of our net loss of $5,478,202, and noncash adjustments of $242,921, offset by net changes in operating assets and liabilities due to our expanded operating activities, including an increase of other receivables of $1,183,188, because more advance has been made to employees for marketing and student recruiting purposes, as well as an increase of customer deposits of $1,105,520, as well as an increase of deferred revenue in the amount of $388,594, representing amounts received in advance from students for tuition paid to attend our professional training courses and featured lectures where the criteria of revenue recognition have not been met.

Net cash provided by operating activities during the year ended December 31, 2010 was $6,712,659, which consisted of our net loss of $8,543,070, and noncash adjustments of $167,537, offset by net changes in operating assets and liabilities due to our expanded operating activities, primarily including an increase in tax payable of $953,253 resulting from increased taxable income, as well as an increase in deferred revenue in the amount of $15,177,871, representing amounts received in advance from students for tuition paid to attend our professional training courses and featured lectures where the criteria of revenue recognition have not been met.

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Investing Activities

Net cash used in investing activities for the year ended December 31, 2011 was $592,228, representing the acquisition of property and equipment in the same amount, primarily including computer and electronic equipment, vehicles to be used in our business operations as well as leasehold improvements.

Net cash used in investing activities for the year ended December 31, 2010 was $619,507, representing the acquisition of property and equipment in the same amount, primarily including computer and electronic equipment, educational management systems and vehicles to be used in our business operations.

Financing Activities

No cash was used in financing activities for the year ended December 31, 2011.

Net cash used in financing activities for the year ended December 31, 2010 was $1,624,779, including a dividend payment of $1,401,024 to a shareholder. On January 30, 2010, our Company’s Board of Directors adopted a resolution to declare dividends in the total amount of RMB 9,250,000 (equivalent to $1,401,024) out of the retained earnings balance of Hangzhou MYL for the fiscal year ended December 31, 2009 to its sole shareholder, Surmounting Limited Marketing Adviser Limited (“SLM”).  On the same date, SLM also made a resolution to distribute the net tax amount of such dividend that SLM receives to Magic Dream Enterprises Ltd., a company incorporated under the laws of the British Virgin Islands. Pursuant to the above mentioned Board Resolutions, on June 17, 2010, we paid dividends of RMB 9,250,000 (approximately $1,401,024) in cash to Magic Dream Enterprises Ltd. after dividend tax being paid to the relevant Chinese tax authority.

Our cash used in financing activities for the year ended December 31, 2010 also included cash proceeds from the issuance of common stock in a private placement. On June 8, 2010, our Board of Directors decided to issue a total of 610,200 shares of our common stock, par value of $0.001, at $2.00 per share to 60 individuals. We raised $1,220,400 in gross proceeds. On August 2, 2010, we issued an additional 100,000 shares of our common stock at a selling price of $2.00 per share to one individual for the same consideration as the offering consummated on June 8, 2010. We raised an additional $200,000 in gross proceeds as a result of this issuance.  On December 2, 2010, we entered into a Securities Purchase Agreement with certain investors relating to the issuance and sale of 73,900 shares of our common stock, par value $0.001 per share, at $2.50 per share, in a private placement transaction. The aggregate purchase price for the shares was $184,750. The purpose of the financings was to 1) to partially pay for the increased general and administrative expenses to avoid using cash which had been earmarked for business expansion; 2) to diversify our shareholder base; and 3) to build investor awareness in the Company.

Included in our cash used in financing activities for the year ended December 31, 2010 was a receivable from shareholders of $1,828,905 which represents the dividend previously declared invalid, which should be repaid to the Company by the shareholder.

Off-Balance Sheet Arrangements

As of the date of this report, we do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors. The term “off-balance sheet arrangement” generally means any transaction, agreement or other contractual arrangement to which an entity unconsolidated with us is a party, under which we have: (i) any obligation arising under a guarantee contract, derivative instrument or variable interest; or (ii) a retained or contingent interest in assets transferred to such entity or similar arrangement that serves as credit, liquidity or market risk support for such assets.

Critical Accounting Policies

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires our management to make assumptions, estimates and judgments that affect the amounts reported, including the notes thereto, and related disclosures of commitments and contingencies, if any. We have identified certain accounting policies that are significant to the preparation of our financial statements. These accounting policies are important for an understanding of our financial condition and results of operation. Critical accounting policies are those that are most important to the portrayal of our financial conditions and results of operations and require management’s difficult, subjective, or complex judgment, often as a result of the need to make estimates about the effect of matters that are inherently uncertain and may change in subsequent periods. Certain accounting estimates are particularly sensitive because of their significance to financial statements and because of the possibility that future events affecting the estimate may differ significantly from management’s current judgments. We believe the following critical accounting policies involve the most significant estimates and judgments used in the preparation of our financial statements:

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Use of estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes, and disclosure of contingent liabilities at the date of the consolidated financial statements. Estimates are used for, but not limited to, the selection of the useful lives of property and equipment, provision necessary for contingent liabilities, taxes and other similar charges. Management believes that the estimates utilized in preparing its consolidated financial statements are reasonable and prudent. Actual results could differ from these estimates.

Fair value of financial instruments

ASC 820, Fair Value Measurements and Disclosures 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 then 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 current assets and current liabilities approximate their fair value based on the short-term maturity of these instruments. The Company’s restricted cash and long-term deposit approximate fair value as these assets represent cash. The Company does not have any assets or liabilities that are required to be presented on the consolidated balance sheets at fair value in accordance with ASC 820.

Impairment of long-lived assets

In accordance with ASC 360, “Accounting for the Impairment or Disposal of Long-Lived Assets”, the Company is required to review its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable through the estimated undiscounted cash flows expected to result from the use and eventual disposition of the assets.  Whenever any such impairment exists, an impairment loss will be recognized for the amount by which the carrying value exceeds the fair value. The Company estimates fair value based on the information available in making whatever estimates, judgments and projections are considered necessary.  There was no impairment of long-lived assets during 2010 and 2009.

Accounts receivable

Accounts receivable is recognized and carried at the original invoice amount less allowance for any uncollectible amounts. An allowance for doubtful accounts is maintained for all customers based on a variety of factors, including the length of time the receivables are past due, significant one-time events and historical experience. Bad debts are written off as incurred.  During the reporting years, there were no bad debts.

Outstanding accounts balances are reviewed individually for collectability. The Company does not charge any interest income on trade receivables. Accounts balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. To date, the Company has not charged off any balances as it has yet to exhaust all means of collection.

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Revenue recognition

The Company records all tuition as deferred revenue when students enroll in a course. At the beginning of each course, revenue is recognized on a pro rata basis over the quantity of classes attended by the students. This results in the Company’s balance sheet including future revenues that have not yet been earned as deferred revenue for courses that are not yet attended.

Our refund policy permits students to apply for a refund for the portion of a course they did not attend. The Company may refund a portion of the fees. In past practice, there are seldom cases where students apply for a refund, and it has no significant impact on revenue recognition of the Company based on the best estimation of the management.  Refunds result in a reduction in deferred revenue during the period that a student drops or withdraws from a class because associated tuition revenue is recognized pro rata over the quantity of classes are delivered.

Generally, net revenue varies from period to period based on several factors, including the aggregate number of students attending classes, the number of classes held during the period, and the tuition price.

The Company’s revenue is principally derived from tuition and fees associated with two kinds of educational programs to the students: proprietary training courses, and comprehensive training courses.

Proprietary training courses, which normally take several days to complete, primarily consisted of featured lectures. These courses are provided on a roll-over basis over the year. Based on the course attendance record, the revenue is recognized as the course is delivered to the students.

Comprehensive training courses, which are composed of sixteen individual courses with systematic training in leadership development, i.e. decision making skills, negotiation skills, presentation skills and people skills. Based on the contracts, the students are eligible to enroll in the courses within a three year period. The revenue is recognized on a pro rata basis over the quantity of classes attended.

Income taxes

The Company accounts for income taxes using an asset and liability approach and allows for recognition of deferred tax benefits in future years. Under the asset and liability approach, deferred taxes are provided for the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. A valuation allowance is provided for deferred tax assets if it is more likely than not these items will either expire before the Company is able to realize their benefits, or that future realization is uncertain.

The Company is operating in the PRC, and in accordance with the relevant tax laws and regulations of PRC, the enterprise income tax rate for the years ended December 31, 2011 and 2010 were 25%.

Earnings per share

The Company computes earnings per share (“EPS’) in accordance with ASC 260 “Earnings per Share” (“ASC 260”), and SEC Staff Accounting Bulletin No. 98 (“SAB 98”).  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. No potential common shares were considered anti-dilutive for the periods presented.

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Risks and uncertainties

The operations of the Company are located in the PRC. Accordingly, the Company’s operations 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 others, the political, economic and legal environment and foreign currency exchange. The Company’s results may be adversely affected by changes in the political and social conditions in the PRC, and by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency conversion, remittances abroad, and rates and methods of taxation, among other things.

Obligations under Material Contracts

We did not have any payment obligations in fiscal year 2011.

Inflation

Inflation and changing prices have not had a material effect on our business, and we do not expect that inflation or changing prices will materially affect our business in the foreseeable future. However, our management will closely monitor price changes in the Chinese economy and our industry and continually maintain effective cost controls in operations.

Off Balance Sheet Arrangements

We do not have any off balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, sales or expenses, results of operations, liquidity or capital expenditures, or capital resources that are material to an investment in our securities.

Seasonality

Our operating results and operating cash flows historically have not been subject to seasonal variations. This pattern may change, however, as a result of new market opportunities or new product introduction.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Not applicable.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

The full text of our audited consolidated financial statements as of December 31, 2011 and 2010 begins on page F-1 of this report.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

None.

ITEM 9A. CONTROLS AND PROCEDURES.

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) that are designed to ensure that information that would be required to be disclosed in Exchange Act reports is recorded, processed, summarized and reported within the time period specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including to our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

As required by Rule 13a-15 under the Exchange Act, our management, including our Chief Executive Officer, Mr. Kaien Liang, and Chief Financial Officer, Mr. Zhiwei Huang, evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of December 31, 2011. Based on that evaluation, Messrs. Liang and Huang concluded that, because of the material weaknesses in internal control over financial reporting described below, our disclosure controls and procedures were not effective as of December 31, 2011.

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Management’s Annual Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting for the Company. Internal control over financial reporting refers to the process designed by, or under the supervision of, our Chief Executive Officer and Chief Financial Officer, and effected by our Board of Directors, management and other personnel, to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of financial statements for external purposes in accordance with U.S. GAAP, and includes those policies and procedures that:

(1)   pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets;

(2)   provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. GAAP, and that our receipts and expenditures are being made only in accordance with the authorization of our management and directors; and

(3)   provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.

Management evaluated the effectiveness of our internal control over financial reporting as of December 31, 2011. In making this evaluation, management used the framework established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission, or COSO. The COSO framework summarizes each of the components of a company’s internal control system, including (i) the control environment, (ii) risk assessment, (iii) control activities, (iv) information and communication, and (v) monitoring. Based on our evaluation, we determined that, as of December 31, 2011, our internal control over financial reporting was not effective because of the material weaknesses in our internal control over financial reporting described below.

During its evaluation of the effectiveness of internal control over financial reporting as of December 31, 2011, management identified a material weakness relating to our lack of sufficient accounting personnel with an appropriate understanding of U.S. GAAP and SEC reporting requirements.

Prior to our acquisition of SLM on February 12, 2010, SLM and its subsidiaries and VIEs were private companies and had limited accounting personnel and other resources to establish a high standard of internal control over financial reporting. In connection with such acquisition and our anticipated growth, we are seeking additional financial and accounting personnel with knowledge of U.S. GAAP and SEC reporting requirements, however we still have a relatively small number of professionals employed by the Company in bookkeeping and accounting functions, which prevents us from maintaining effective controls and appropriately segregating duties within our internal control systems.

We are implementing several measures to address the material weakness that has been identified, including the following:

·   We have established an audit committee of our board of directors, which will provide oversight of our accounting and financial reporting;

·   We are evaluating the roles of our existing accounting personnel in an effort to realign the reporting structure of our internal auditing staff in China that will test and monitor the implementation of our accounting and internal control procedures;

·   We are also seeking additional qualified in-house accounting personnel to ensure that management will have adequate resources in order to attain complete reporting of financial information disclosures in a timely matter;

·   We are in the process of completing a review and revision of the documentation of our internal control procedures and policies;

·   We intend to implement training to our employees in China to ensure that the importance of internal controls and compliance with established policies and procedures are fully understood throughout the organization and will provide additional U.S. GAAP training to all employees involved with the performance of or compliance with those procedures and policies.

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Because the Company is a smaller reporting company, this annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm.

Changes in Internal Controls over Financial Reporting

We regularly review our system of internal control over financial reporting and make changes to our processes and systems to improve controls and increase efficiency, while ensuring that we maintain an effective internal control environment. Changes may include such activities as implementing new, more efficient systems, consolidating activities, and migrating processes.

Other than in connection with the implementation of the remedial measures described above, there have been no changes in our internal control over financial reporting during the fourth quarter of fiscal year 2011 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

ITEM 9B. OTHER INFORMATION.

We have no information to disclose that was required to be disclosed in a report on Form 8-K during fourth quarter of fiscal year 2011, but was not reported.

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.

Directors and Executive Officers

The following sets forth information about our directors and executive officers as of the date of this report:

Name	Age	Position
Kaien Liang	39	Chairman and Chief Executive Officer
Zhiwei Huang	44	Chief Financial Officer
Pokai Hsu	40	Chief Operating Officer and Director
Tingyuan Chen	46	Chief Strategy Officer
Hongmiao Chen	51	Director
Hongbo Shen	31	Director

Mr. Kaien Liang. Mr. Liang has served as our Chairman and Chief Executive Officer since February 12, 2010. From 2006 to 2010, Mr. Liang was the Chairman of SLM. From 2004 to 2006, he served as president of Singapore Magic of Success Training Co., Ltd.. Prior to that, Mr. Liang worked as Marketing Director at Asia Magic Your Life Group between 2000 and 2003, and Marketing Director of Success Magazine in Taiwan from 1997 to 2000. During that period, he participated in and made a major investment in learning from several professional training programs, learning directly from 38 world-class masters in different management fields. Mr. Liang holds 14 internationally accredited certificates in respect of negotiation, marketing, sale, public speaking and customer service, among others. His total audience exceeds 500,000. His books, Never Say Impossible and Who is the Next Magic, have been published and sold well. Mr. Liang was trained in the night school of Taiwan Yuda Advanced Business School.

Mr. Zhiwei Huang. Mr. Huang became our Chief Financial Officer on February 12, 2010 and served as the Chief Financial Officer of SLM from 2006 to 2010. Prior to joining us, he has served as Financial Manager in Hangzhou Tai-Yang-Shen Marketing Co., Ltd. for 16 years.  Before that, he served as Accountant in Zhejiang Hangzhou Shipping Corp. between 1989 and 1993. Mr. Huang graduated from Wuhan River Transport College in 1989 and graduated from Zhejiang University of Finance & Economics in 2004.

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Mr. Pokai Hsu. Mr. Hsu has served as our Chief Operating Officer since February 12, 2010 and became a member of our Board of Directors on October 8, 2010. From 2006 to 2010, Mr. Hsu served as the Chief Operating Officer of SLM. Prior to joining us, he served as Chief Operating Officer of Asia Magic Your Life Group from 2004 to 2006. He served as the General Manager at Beijing Hongyuan Yingtong Cultural Press Co., Ltd. between 2002 and 2003. Prior to that, he worked in Du Yunsheng Consulting Co., Ltd., as the Chief Consultant for two years. By integrating his learning and achievements in motivational training in UK, USA, and Japan, Mr. Hsu has created an efficient training system in unleashing employee potential. He has given lectures over 2,300 times in the last 8 years, with audiences of over 200,000. In 2006, his bestseller, How to Be No.1 in China, broke the Guinness record for sales of a book at a book-signing event.

Mr. Tingyuan Chen. Mr. Chen became our Chief Strategy Officer on February 12, 2010 and served as the Chief Strategy Officer of SLM from 2006 to 2010.  Prior to joining us, he served as Chief Strategy Officer of Asia Magic Your Life Group from 2004 to 2006. Prior to that, he worked for Steve Chen Training Entity as a lecturer for four years.  As a student of Mr. Abraham, the world “marketing wizard,” Mr. Chen specialized in teaching and coaching people in time management and strategic decision-making. Mr. Chen graduated from National United University in Taiwan in 1986.

Ms. Hongmiao Chen. Ms. Chen became a member of our Board of Directors on October 8, 2010. She currently serves as the general manager of Shanghai Da Ketang Tea Corporation, a company engaged in manufacturing and sales of team products.  She has held this position since May 2003. From 2001 to 2003, Ms. Chen was the deputy general manager of Shanghai Lingyun Industrial Development Co., Ltd. Ms. Chen received her Bachelor’s degree from Suzhou University and her Master’s degree from East China Normal University.

Mr. Hongbo Shen. Mr. Shen became a member of our Board of Directors on October 8, 2010. Since March 2009, he has served as an Associate Professor at Fudan University, Financial Research Institution.  Prior to this position, Mr. Shen was a research fellow at Tsinghua University from January 2007 to March 2009.  Mr. Shen holds a Ph.D. in Accounting and is certified by the Association of Chartered Certified Accountants.  

Directors are elected until their successors are duly elected and qualified.

Except as set forth in our discussion below in Item 13, “Certain Relationships and Related Transactions, and Director Independence –Transactions with Related Persons,” none of our directors, director nominees or executive officers has been involved in any transactions with us or any of our directors, executive officers, affiliates or associates which are required to be disclosed pursuant to the rules and regulations of the SEC.

There are no agreements or understandings for any of our executive officers or directors to resign at the request of another person and no officer or director is acting on behalf of nor will any of them act at the direction of any other person.

Director Qualifications

Directors are responsible for overseeing our business consistent with their fiduciary duty to stockholders. This significant responsibility requires highly-skilled individuals with various qualities, attributes and professional experience. The Board believes that there are general requirements for service on our Board of Directors that are applicable to all directors and that there are other skills and experience that should be represented on the Board as a whole, but not necessarily by each director. The Board considers the qualifications of directors and director candidates individually and in the broader context of the Board’s overall composition and our current and future needs.

Qualifications for All Directors

In its assessment of each potential candidate, including those recommended by stockholders, the Board considers the nominee’s judgment, integrity, experience, independence, understanding of our business or other related industries and such other factors the Board determines are pertinent in light of the current needs of the Board. The Board also takes into account the ability of a director to devote the time and effort necessary to fulfill his or her responsibilities to the Company.

The Board requires that each director be a recognized person of high integrity with a proven record of success in his or her field. Each director must demonstrate innovative thinking, familiarity with and respect for corporate governance requirements and practices, an appreciation of multiple cultures and a commitment to sustainability and to dealing responsibly with social issues. In addition to the qualifications required of all directors, the Board assesses intangible qualities including the individual’s ability to ask difficult questions and, simultaneously, to work collegially.

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The Board does not have a specific diversity policy, but considers diversity of race, ethnicity, gender, age, cultural background and professional experiences in evaluating candidates for Board membership. Diversity is important because a variety of points of view contribute to a more effective decision-making process.

Qualifications, Attributes, Skills and Experience to be Represented on the Board as a Whole

The Board has identified particular qualifications, attributes, skills and experience that are important to be represented on the Board as a whole, in light of our current needs and business priorities. We are a U.S. public company that provides executive training programs to business executives and entrepreneurs in China. Therefore, the Board believes that a diversity of professional experiences in China’s professional training industry, specific knowledge of key geographic growth areas, and knowledge of U.S. capital markets and of U.S. accounting and financial reporting standards should be represented on the Doard.

Summary of Qualifications of Directors

Set forth below is a narrative disclosure that summarizes some of the specific qualifications, attributes, skills and experiences of our directors. For more detailed information, please refer to the biographical information for each director set forth above.

Mr. Kaien Liang. Mr. Liang is the co-founder of our business and our Chairman and Chief Executive Officer of since our inception. He has more than 10 years of experience in the professional training industry, including lectures and published works. Mr. Liang contributes invaluable long-term knowledge of our business and operations and extensive experience in the professional training industry to our Board.

Mr. Pokai Hsu. Mr. Hsu has served as the Chief Operating Officer of our business since our inception. He has more than 10 years of experience in the professional training industry, including lectures and published works. Mr. Hsu contributes invaluable long-term knowledge of our business and operations and extensive experience in the professional training industry to our Board.

Ms. Hongmiao Chen. Ms. Chen has rich experience in corporate management and investment strategies. She has extensive networks with banks, brokers and fund managers. She contributes invaluable management and investment experience to our Board.

Mr. Hongbo Shen. Mr. Shen holds a Ph.D. in Accounting and is certified by the Association of Chartered Certified Accountants. His extensive knowledge of financial markets and the banking industry makes him a valuable member of our Board.

Family Relationships

There are no family relationships among any of our officers or directors.

Involvement in Certain Legal Proceedings

To the best of our knowledge, none of our directors or executive officers has, during the past ten years:

·   been convicted in a criminal proceeding or been subject to a pending criminal proceeding (excluding traffic violations and other minor offences);

·   had any bankruptcy petition filed by or against the business or property of the person, or of any partnership, corporation or business association of which he was a general partner or executive officer, either at the time of the bankruptcy filing or within two years prior to that time;

·   been subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction or federal or state authority, permanently or temporarily enjoining, barring, suspending or otherwise limiting, his involvement in any type of business, securities, futures, commodities, investment, banking, savings and loan, or insurance activities, or to be associated with persons engaged in any such activity;

·   been found by a court of competent jurisdiction in a civil action or by the SEC or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated;

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·   been the subject of, or a party to, any federal or state judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or vacated (not including any settlement of a civil proceeding among private litigants), relating to an alleged violation of any federal or state securities or commodities law or regulation, any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order, or any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or

·   been the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the Exchange Act (15 U.S.C. 78c(a)(26))), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act (7 U.S.C. 1(a)(29))), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member.

Section 16(A) Beneficial Ownership Reporting Compliance

Section 16(a) of the Exchange Act requires our executive officers, directors and beneficial owner of more than 10% of a registered class of our equity securities to file with the SEC statements of ownership and changes in ownership. The same persons are required to furnish us with copies of all Section 16(a) forms they file. In fiscal year 2011, all of such forms were timely filed.

In making these statements, we have relied upon examination of the copies of all Section 16(a) forms provided to us and the written representations of our executive officers, directors and beneficial owner of more than 10% of a registered class of our equity securities.

Code of Ethics

On October 7, 2010, our Board of Directors adopted a code of ethics that applies to all of our directors, officers and employees, including our principal executive officer, principal financial officer, and principal accounting officer. The code of ethics addresses, among other things, honesty and ethical conduct, conflicts of interest, compliance with laws, regulations and policies, including disclosure requirements under the federal securities laws, confidentiality, trading on inside information, and reporting of violations of the code. A copy of the code of ethics has been filed as Exhibit 14 to our current report on Form 8-K filed on October 12, 2010.

Material Changes to Director Nomination Procedures

There have been no material changes to the procedures by which stockholders may recommend nominees to our board of directors since such procedures were last disclosed.

Audit Committee and Audit Committee Financial Expert

We have established an audit committee but have not adopted an audit committee charter. The audit committee will be primarily responsible for reviewing the services performed by our independent auditors, evaluating our accounting policies and our system of internal controls. We have not yet determined if any of our directors qualifies as an audit committee financial expert.

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ITEM 11. EXECUTIVE COMPENSATION.

Summary Compensation Table — Fiscal Years Ended December 31, 2011 and 2010

The following table sets forth information concerning all cash and non-cash compensation awarded to, earned by or paid to the named persons for services rendered in all capacities during the noted periods. No other executive officer received total annual salary and bonus compensation in excess of $100,000.

Name and Principal Position	Fiscal Year	Salary ($)	Bonus ($)	Stock Awards ($)	Option Awards ($)	All Other Compensation(2) ($)	Total ($)
Kaien Liang, Chief Executive Officer (1)	2011	38,000	124,000	-	-	-	162,000
	2010	36,630	1,999,220	-	-	116,418	2,152,286
Pokai Hsu, Chief Operating Officer (1)	2011	38,000	22,000	-	-	-	60,000
	2010	36,630	158,224	-	-	19,701	214,555
Tingyuan Chen, Chief Strategy Officer (1)	2011	38,000	88,000	-	-	-	126,000
	2010	36,630	158,224	-	-	82,089	276,943

(1) On February 12, 2010, we acquired SLM in a reverse acquisition transaction that was structured as a share exchange and in connection with that transaction, Mr. Liang became our Chief Executive Officer, Mr. Hsu became our Chief Operating Officer and Mr. Chen became our Chief Strategy Officer, effective immediately. Prior to the effective date of the reverse acquisition, they served in the same capacities with SLM. The annual, long term and other compensation shown in this table include the amount Messrs. Liang, Hsu and Chen received from SLM prior to the consummation of the reverse acquisition.

(2) Includes housing allowance each officer received in 2011 and 2010.

Employment Agreements

All of our employees, including Mr. Kaien Liang, our Chairman and Chief Executive Officer, Mr. Zhiwei Huang, our Chief Financial Officer, Mr. Pokai Hsu, our Chief Operating Officer, and Mr. Tingyuan Chen, Chief Strategy Officer, have executed our standard employment agreement. Our employment agreements with our executives provide the amount of each executive officer’s salary and establish their eligibility to receive a bonus. Mr. Liang’s employment agreement provides for an annual salary of RMB240,000 (approximately $39,630), Mr. Huang’s employment agreement provides for an annual salary of RMB144,000 (approximately $22,153), Mr. Hsu’s employment agreement provides for an annual salary of RMB240,000 (approximately $36,630), and Mr. Chen’s employment agreement provides for an annual salary of RMB 240,000 (approximately $36,630).

Other than the salary and necessary social benefits required by the government, which are defined in the employment agreement, we currently do not provide other benefits to the officers at this time. Our executive officers are not entitled to severance payments upon the termination of their employment agreements or following a change in control.

We have not provided retirement benefits (other than a state pension scheme in which all of our employees in China participate) or severance or change of control benefits to our named executive officers.

Outstanding Equity Awards at Fiscal Year End

For the year ended December 31, 2011, no director or executive officer has received compensation from us pursuant to any compensatory or benefit plan. There is no plan or understanding, express or implied, to pay any compensation to any director or executive officer pursuant to any compensatory or benefit plan.

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Compensation of Directors

The following table sets forth the total compensation earned by our independent directors during the year ended December 31, 2011:

Name	Fees earned or paid in cash ($)	All Other Compensation ($)	Total ($)
Hongmiao Chen	-	-	-
Tony Ho	-	-	-
Hongbo Shen	8,000	-	8,000

On October 8, 2010, we entered into a separate independent director’s agreement with each of our independent directors, Ms. Hongmiao Chen, Mr. Tony Ho and Mr. Hongbo Shen. Under the terms of the independent director’s agreements, we agreed to pay Ms. Chen an annual fee of RMB 36,000 (approximately $5,390), Mr. Ho an annual fee of RMB 36,000 (approximately $5,390) and Mr. Shen an annual fee of RMB 60,000 (approximately $8,990), as compensation for the services to be provided by them as directors. Mr. Ho resigned from our Board of Directors on December 31, 2011.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.

Security Ownership of Certain Beneficial Owners and Management

The following table sets forth information regarding beneficial ownership of our common stock as of March 28, 2012 (i) by each person who is known by us to beneficially own more than 5% of our common stock; (ii) by each of our officers and directors; and (iii) by all of our officers and directors as a group. Unless otherwise specified, the address of each of the persons set forth below is c/o Hangzhou MYL Business Administration Consulting Co. Ltd., Room 307, Hualong Business Building, 110 Moganshan Road, Hangzhou 310005, People’s Republic of China.

Name and Address of Beneficial Owner	Office, If Any	Title of Class	Amount and Nature of Beneficial Ownership(1)	Percent of Class(2)
Officers and Directors
Kaien Liang	Chairman and Chief Executive Officer	Common Stock	16,120,500	70.60%
Zhiwei Huang	Chief Financial Officer	Common Stock	0	*
Pokai Hsu	Chief Operating Officer and Director	Common Stock	1,760,000	7.71%
Tingyuan Chen	Chief Strategy Officer	Common Stock	1,100,000	4.82%
Hongmiao Chen	Director	Common Stock	0	*
Hongbo Shen	Director		0	*
All officers and directors as a group (6 persons named above)		Common Stock	18,980,500	83.12%
5% Security Holders
Kaien Liang		Common Stock	16,120,500	70.60%
Pokai Hsu		Common Stock	1,760,000	7.71%

* Less than 1%

(1) Beneficial Ownership is determined in accordance with the rules of the SEC and generally includes voting or investment power with respect to securities. Each of the beneficial owners listed above has direct ownership of and sole voting power and investment power with respect to the shares of our common stock.

(2) A total of 22,834,100 shares of our common stock are considered to be outstanding pursuant to SEC Rule 13d-3(d)(1) as of March 28, 2012. For each beneficial owner above, any options exercisable within 60 days have been included in the denominator.

Changes in Control

We are not aware of any arrangements which if consummated may result in a change of control of our Company.

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Securities Authorized for Issuance Under Equity Compensation Plans

We do not have any compensation plans in effect under which our equity securities are authorized for issuance.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.

Transactions with Related Persons

The following includes a summary of transactions since the beginning of the 2010 fiscal year, or any currently proposed transaction, in which we were or are to be a participant and the amount involved exceeded or exceeds the lesser of $120,000 or one percent of the average of our total assets at year end for the last two completed fiscal years, and in which any related person had or will have a direct or indirect material interest (other than compensation described under Item 11 “Executive Compensation”). We believe the terms obtained or consideration that we paid or received, as applicable, in connection with the transactions described below were comparable to terms available or the amounts that would be paid or received, as applicable, in arm's-length transactions.

·   During the normal course of the business, we from time to time temporarily borrow money from our principal shareholders or officers to finance our working capital as needed. The amounts are usually unsecured, non-interest bearing and due on demand. We had officer loans in the amount of $0 and $19,690 as of December 31, 2011 and 2010, respectively.

Director Independence

Ms. Hongmiao Chen and Mr. Hongbo Shen currently serve on our board as independent directors, as the term “independent” is defined by the rules of the NASDAQ Stock Market LLC.

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES.

Independent Auditors’ Fees

The following is a summary of the fees billed to the Company for professional services rendered for the fiscal years ended December 31, 2011 and 2010:

	Year Ended December 31,
	2011		2010
Audit Fees	$	120,000	$	111,500
Audit-Related Fees		5,000		3,000
Tax Fees		-		-
All Other Fees		-		-
TOTAL	$	125,000	$	114,500

“Audit Fees” consisted of fees billed for professional services rendered by the principal accountant for the audit of our annual financial statements and review of the financial statements included in our Form 10-K and 10-Q or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements.

“Audit-Related Fees” consisted of fees billed for assurance and related services by the principal accountant that were reasonably related to the performance of the audit or review of our financial statements and are not reported under the paragraph captioned “Audit Fees” above.

“Tax Fees” consisted of fees billed for professional services rendered by the principal accountant for tax returns preparation.

“All Other Fees” consisted of fees billed for products and services provided by the principal accountant, other than the services reported above under other captions of this Item 14.

Pre-Approval Policies and Procedures

Under the Sarbanes-Oxley Act of 2002, all audit and non-audit services performed by our auditors must be approved in advance by our board of directors to assure that such services do not impair the auditors’ independence from us. In accordance with its policies and procedures, our board of directors pre-approved the audit service performed by Albert Wong & Co. for our financial statements as of and for the year ended December 31, 2011.

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PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES.

Financial Statements and Schedules

The financial statements are set forth under Item 8 of this annual report on Form 10-K. Financial statement schedules have been omitted since they are either not required, not applicable, or the information is otherwise included.

Exhibit List

The list of exhibits included in the attached Exhibit Index is hereby incorporated herein by reference.

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SIGNATURES

Pursuant to the requirements of section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date: March 30, 2012

CHINA EXECUTIVE EDUCATION CORP.
By:	/s/ Kaien Liang
	Kaien Liang
	Chief Executive Officer
By:	/s/ Zhiwei Huang
	Zhiwei Huang
	Chief Financial Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature	Title	Date
/s/ Kaien Liang	Chairman and Chief Executive Officer	March 30, 2012
Kaien Liang	(Principal Executive Officer)
/s/ Zhiwei Huang	Chief Financial Officer	March 30, 2012
Zhiwei Huang	(Principal Financial and Accounting Officer)
/s/ Pokai Hsu	Director	March 30, 2012
Pokai Hsu
/s/ Hongmiao Chen	Director	March 30, 2012
Hongmiao Chen
/s/ Hongbo Shen	Director	March 30, 2012
Hongbo Shen

45

CHINA EXECUTIVE EDUCATION CORP. AND SUBSIDIARIES

CONSOLIDATED FINANCIAL STATEMENTS

(Stated in US dollars)

TABLE OF CONTENTS

Report of Independent Registered Public Accounting Firm F-2

CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 2011 AND 2010	F-3
CONSOLIDATED STATEMENTS OF OPERATION AND COMPREHENSIVE LOSS FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010	F-4
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDER’S DEFICIENCY FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010	F-5
CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010	F-6
NOTES TO  CONSOLIDATED FINANCIAL STATEMENTS	F-7 - F-21

F-1

ALBERT WONG & CO.

CERTIFIED PUBLIC ACCOUNTANTS

7th Floor, Nan Dao Commercial Building

359-361 Queen’s Road Central

Hong Kong

Tel : 2851 7954

Fax: 2545 4086

ALBERT WONG

B.Soc., Sc., ACA., LL.B., CPA(Practising)

To: The board of directors and shareholders of China Executive Education Corp. and Subsidiaries

Report of Independent Registered Public Accounting Firm

We have audited the accompanying consolidated balance sheets of China Executive Education Corp. and Subsidiaries (the “Company”) as of December 31, 2011 and 2010, and the related consolidated statements of operation and comprehensive loss, stockholders' deficiency and cash flows for the years then ended. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit.

We conducted our audit in accordance with standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

We were not engaged to examine management’s assertion about the effectiveness of the Company’s internal control over financial reporting as of December 31, 2011 included in the Company’s Item 9A “Controls and Procedures” in the Annual Report on Form 10-K and, accordingly, we do not express an opinion thereon.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2011 and 2010, the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.

The Company's consolidated financial statements are prepared using the generally accepted accounting principles applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has accumulated deficits as at December 31, 2011 of $17,466,892 including net losses of $5,478,202 for the year ended December 31, 2011. These factors as discussed in Note 2 to the financial statements, raises substantial doubt about the Company's ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 2. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Hong Kong, China  March  30, 2012 /s/ Albert Wong & Co Albert Wong & Co. Certified Public Accountants

F-2

CHINA EXECUTIVE EDUCATION CORP. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET

AS AT DECEMBER 31, 2011 AND 2010

(Stated in US Dollars)

			As of December 31
			2011				2010
ASSETS							(Restated )
Current assets:
Cash and cash equivalents-Unrestricted (including cash and cash equivalents-Unrestricted of the consolidated VIE without recourse to China Executive Education Corp of US$294,841 and US$2,759,809 as of December 31,2011 and 2010, respectively)			$	3,570,740			$	10,272,391
Cash and cash equivalents-Restricted cash (including cash and cash equivalents-Restricted cash of the consolidated VIE without recourse to China Executive Education Corp of US$317,178 and US$302,924as of December 31,2011 and 2010, respectively)				317,178				302,924
Advance to vendors (including advance to vendors of the consolidated VIE without recourse to China Executive Education Corp of nil and nil as of December 31,2011 and 2010, respectively)				602,685				415,619
Receivables from shareholder (including receivables from shareholder of the consolidated VIE without recourse to China Executive Education Corp of nil and nil as of December 31,2011 and 2010, respectively)				1,914,964				1,828,905
Other receivables (including other receivables of the consolidated VIE without recourse to China Executive Education Corp of US$3,749,545 and US$735,530as of December 31,2011and 2010, respectively)				2,934,815				1,644,965
Total current assets				9,340,382				14,464,804
Property, plant and equipment, net (including property, plant and equipment, netof the consolidated VIE without recourse to China Executive Education Corp of US$458 and US$1,200 as of December 31,2011 and 2010, respectively)				1,128,447				735,876
Total Assets			$	10,468,829			$	15,200,680
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Customer deposits (including customer depositsof the consolidated VIE without recourse to China Executive Education Corp of US$2,605,864 and US$1,406,808 as of December 31,2011 and 2010, respectively)			$	2,605,864			$	1,406,808
Accrued expenses (including accrued expensesof the consolidated VIE without recourse to China Executive Education Corp of US$205,666 and nil as of December 31,2011and 2010, respectively)				352,655				383,999
Deferred revenue (including deferred revenueof the consolidated VIE without recourse to China Executive Education Corp of US$7,188,008 and US$3,788,518 as of December 31,2011 and 2010, respectively)				7,188,008				3,788,518
Other payables (including other payablesof the consolidated VIE without recourse to China Executive Education Corp of US$842,546 and US$162,861 as of December 31,2011 and 2010, respectively)				523,411				309,911
Taxes payable (including taxes payableof the consolidated VIE without recourse to China Executive Education Corp of nil and nil as of December 31,2011 and 2010, respectively)				-				1,357,312
Total current liabilities				10,669,938				7,246,548
Deferred revenue- noncurrent			$	16,464,222			$	18,420,465
Total  liabilities				27,134,160				25,667,013
Commitments
Stockholders’ Deficiency
Common stock, $0.001 par value, 70,000,000 shares authorized, 22,834,100 shares  issued and outstanding at  December 31, 2011 and 2010, respectively			$	22,834			$	22,834
Additional paid-in capital			1,775,842			1,775,842
Statutory surplus			-			-
Accumulated deficits			(17,466,892		)	(11,988,690)
Accumulated other comprehensive income (loss)			(997,115		)		(276,319)
Total stockholders’ deficiency			$	(16,665,331	)		$	(10,466,333)
Total Liabilities and Stockholder's Equity			$	10,468,829			$	15,200,680

The accompanying notes are an integral part of these consolidated financial statements.

F-3

CHINA EXECUTIVE EDUCATION CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATION AND COMPREHENSIVE LOSS

FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010

	For the years ended December 31,
	2011			2010
				(Restated)
Revenues	$	10,132,874		$	7,236,330
Cost of revenue		7,676,678			6,254,113
Gross profit		2,456,196			982,217
Operating expenses
Selling expenses		3,960,850			3,873,484
General and administrative expenses		3,791,419			3,839,303
Total operating expenses		7,752,269			7,712,787
Income (loss) from operations		(5,296,073	)		(6,730,570	)
Other income (expenses)
Interest income		37,801			32,658
Other income		293,662			25,982
Other expenses		(165,228	)		(245,869	)
Total other income (expenses)		166,235			(187,229	)
Income (loss) before income taxes		(5,129,838	)		(6,917,799	)
Provision for income taxes		(348,364	)		(1,625,271	)
Net loss		(5,478,202	)		(8,543,070	)
Comprehensive loss
Net loss		(5,478,202	)		(8,543,070	)
Foreign currency translation loss		(720,796	)		(275,929	)
Total comprehensive loss	$	(6,198,998	)	$	(8,818,999	)
Basic and diluted loss per common share	$	(0.24)		$	(0.38)
Basic and diluted weighted average common shares outstanding		22,834,100			22,379,847
Cash dividends per common share	$	-		$	0.06

The accompanying notes are an integral part of these consolidated financial statements.

F-4

CHINA EXECUTIVE EDUCATION CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIENCY

FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010

					Additional			Accumulated Other
	Common Stock				Paid-in			Comprehensive			Statutory		Accumulated
	Shares		Amount		Capital			Income			Reserve		Deficits			Total
Balance at December  31, 2009 (Restated)		21,560,000	$	21,560	$	66,966		$	(39	0)	$	-	$	(2,044,596)			(1,956,460)
Acquisition of On Demand Heavy Duty Corp on February 12, 2010		440,000		440		(440	)		-			-		-			-
Stock issued for services on March 29, 2010		50,000		50		104,950			-			-		-			105,000
Issuance of common stock under private placement on June 8, 2010		610,200		610		1,219,790			-			-		-			1,220,400
Issuance of common stock under private placement on August 2, 2010		100,000		100		199,900			-			-		-			200,000
Issuance of common stock under private placement on December 2, 2010		73,900		74		184,676			-			-		-			184,750
Dividend paid		-		-		-			-			-		(1,401,024	)		(1,401,024	)
Net loss for the period		-		-		-			-			-		(8,543,070	)		(8,543,070	)
Foreign currency translation loss		-		-		-			(275,929	)		-		-			(275,929	)
Balance at December 31, 2010		22,834,100	$	22,834	$	1,775,842		$	(276,319)		$	-	$	(11,988,690)		$	(10,466,333)
Net loss		-		-		-			-			-		(5,478,202	)		(5,478,202)
Foreign currency translation loss		-		-		-			(720,796	)		-		-			(720,796)
Balance at December 31, 2011		22,834,100	$	22,834	$	1,775,842		$	(997,115	)	$	-	$	(17,466,892	)	$	(16,665,331	)

The accompanying notes are an integral part of these consolidated financial statements.

F-5

CHINA EXECUTIVE EDUCATION CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 2011 AND 2010

		For the years ended December 31,
		2011				2010
						(Restated)
Cash flows from operating activities
Net loss			$	(5,478,202	)		$	(8,543,070	)
Adjustments to reconcile net income to net cash   provided by (used in) operating activities:
Depreciation and amortization				242,921				62,537
Stock issued for services				-				105,000
Changes in assets and liabilities:
(Increase) decrease in -
Other receivables				(1,183,188	)			(420,680	)
Advance to vendors				(163,465	)			200,675
Increase (decrease) in -
Other payable				194,118				(502,967	)
Customer deposits				1,105,520				(614,575	)
Accrued expenses				(48,221	)			294,615
Tax payable				(1,386,884	)			953,253
Deferred revenue				388,594				15,177,871
Net cash (used in) provided by operating activities				(6,328,807	)			6,712,659
Cash flows used in investing activities
Acquisition of property and equipment				(592,228	)			(619,507	)
Net cash used in investing activities				(592,228	)			(619,507	)
Cash flows from financing activities
Dividend payment				-				(1,401,024	)
Proceeds from issuance of common stock under private placements				-				1,605,150
Advance to shareholder				-				(1,828,905	)
Net cash used in financing activities				-				(1,624,779	)
Effect of exchange rate changes on cash and cash equivalents				219,384				(285,901	)
Net (decrease) increase in cash and cash equivalents				(6,701,651	)			4,182,472
Cash and cash equivalents, beginning of years				10,272,391				6,089,919
Cash and cash equivalents, end of years			$	3,570,740			$	10,272,391
Supplemental disclosures of cash flow information:
Interest paid			$	-			$	-
Income taxes paid			$	1,766,778			$	708,792
Non-cash financing activities:
Common stock issued for services			$	-			$	105,000
Dividend declared			$	-			$	1,285,305

The accompanying notes are an integral part of these consolidated financial statements.

 F-6

1.ORGANIZATION AND PRINCIPAL ACTIVITIES

China Executive Education Corp (the “Company”), formerly known as On Demand Heavy Duty Corp, is a corporation organized under the laws of the State of Nevada.

On February 12, 2010, the Company acquired all of the outstanding capital stock of Surmounting Limit Marketing Adviser Limited (“SLM”), a Hong Kong Corporation,  through China Executive Education Corp., a Nevada corporation (the “Merger Sub”) wholly owned by the Company. SLM is a holding company whose only asset, held through a subsidiary, is 100% of the registered capital of Hangzhou MYL Business Administration Consulting Co., Ltd. (“MYL Business”), a limited liability company organized under the laws of the People’s Republic of China (“PRC”). Substantially all of SLM's operations are conducted in China through MYL Business, and through contractual arrangements with several of MYL Business’s affiliated entities in China, including Hangzhou MYL Commercial Services Co., Ltd. (“MYL Commercial”) and its subsidiaries. MYL Commercial is a fast-growing executive education company with dominant operation in Shanghai, the commercial center of China, providing comprehensive consulting services such as business administration, marketing strategy, designing of enterprise image, corporate investment and commerce, business conference as well as professional training programs designed to fit the needs of Chinese entrepreneurs to improve their leadership, management and marketing skills.

In connection with the acquisition, the Merger Sub issued 20 shares of the common stock of the Merger Sub which constituted no more than 10% ownership interest in the Merger Sub to the shareholders of SLM, in exchange for all the shares of the capital stock of SLM (the “Share Exchange” or “Merger”). The 20 shares of the common stock of the Merger Sub were converted into approximately 21,560,000 shares of the common stock of the Company so that upon completion of the Merger, the shareholders of SLM own approximately 98% of the common stock of the Company.

As part of the Merger, pursuant to a stock purchase agreement (the “Stock Purchase Agreement”), the Company transferred all of the outstanding capital of its subsidiary, On Demand Heavy Duty Holdings, Inc. (“Holdings”) to certain of its shareholders in exchange for the cancellation of  3,000,000 shares of the Company’s common stock (the “Split Off Transaction”). In addition, an aggregate of 3,070,000 shares were returned to the transfer agent for cancelation by other shareholders of Holdings. Following the Merger and the Split-Off Transaction, the Company discontinued its former business and is now engaged in the executive education business.

Upon completion of the Merger, there were 22,000,000 shares of the Company’s common stock issued and outstanding.

As a result of these transactions, persons affiliated with the SLM and MYL Business owned securities that in the aggregate represented approximately 98% of the equity in the Company. In addition, in connection with the change of control contemplated by the Share Exchange, the directors and officers of the Company resigned from their positions and new directors and officers affiliated with MYL Business controlled the Board of Directors.

Consequently, the Company’s name was changed from “On Demand Heavy Duty Corp.” to the Merger Sub’s name “China Executive Education Corp.” in order to more effectively reflect the Company’s business and communicate the Company’s brand identity to customers.

F-7

1.ORGANIZATION AND PRINCIPAL ACTIVITIES (continued)

The above mentioned merger transaction has been accounted for as a reverse merger under the purchase method of accounting since there was a change of control. Accordingly, SLM is treated as the continuing entity for accounting purposes. SLM did not commence business operations until April 2009.

SLM does not conduct any substantive operations of its own. Instead, through its subsidiary, MYL Business, it had entered into certain exclusive contractual agreements with Hangzhou MYL Commercial Services Co., Ltd.  (“MYL Commercial”), a company incorporated in Hangzhou City, Zhejiang Province, People’s Republic of China (“PRC”) on March 25, 2009.  Pursuant to these agreements, SLM is obligated to absorb a majority of the risk of loss from MYL Commercial’s activities and entitled it to receive a majority of its expected residual returns. In addition, MYL Commercial’s shareholders have pledged their equity interest in MYL Commercial to SLM, irrevocably granted SLM an exclusive option to purchase, to the extent permitted under PRC Law, all or part of the equity interests in MYL Commercial and agreed to entrust all the rights to exercise their voting power to the persons appointed by MYL Commercial. Through these contractual arrangements, the Company and SLM hold all the variable interests of MYL Commercial. Therefore, the Company is the primary beneficiary of MYL Commercial.

Based on these contractual arrangements, management believes that MYL Commercial should be considered as a Variable Interest Entity (“VIE”) under ASC 510 “Consolidation of Variable Interest Entities, and Interpretation of ARB No. 51”, because the Company is the primary beneficiary. Accordingly, the Company consolidates MYL Commercial and its subsidiary’s results, assets and liabilities

2. UNCERTAINTY OF ABILITY TO CONTINUE AS A GOING CONCERN

The Company's consolidated financial statements are prepared using the generally accepted accounting principles applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The continuation of the Company as a going concern is dependent upon the ability of the Company to obtain necessary equity financing to continue operations and the attainment of profitable operations.

As of December 31, 2011 and 2010, the Company has incurred accumulated deficits totaling $17,466,892 and $11,988,690, with stockholder’s deficiency totaling $16,665,331 and $10,466,333, and its current liabilities exceed its current assets by $1,329,556 and less than its current assets by $7,218,256, respectively. For the year ended December 31, 2011 and 2010, the Company has suffered from net loss of $5,478,203 and $8,543,070, respectively. These consolidated financial statements do not include any adjustments relating to the classification of liabilities that might be necessary should the Company be unable to continue as a going concern. These factors noted above raise substantial doubts regarding the Company's ability to continue as a going concern.

3.   RESTATEMENT OF PREVIOUSLY ISSUED CONSOLIDATED FINANCIAL STATEMENTS

The Company has restated its consolidated financial statements for the years ended December 31, 2010 and 2009, as previously disclosed in Form 10-K/A for 2010 filed on March 27, 2012.

F-8

4.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a)   Method of accounting

The Company maintains its general ledger and journals with the accrual method of accounting for financial reporting purposes.  The consolidated financial statements and notes are representations of management.  Accounting policies adopted by the Company conform to generally accepted accounting principles in the United States of America (“US GAAP”) and have been consistently applied in the presentation of consolidated financial statements.

(b)   Principles of consolidation

The consolidated financial statements are presented in US Dollars and include the accounts of the Company and its subsidiary.  All significant inter-company balances and transactions are eliminated in consolidation.

The Company owned its subsidiaries and variable interest entity (“VIE”) soon after its inception and continued to own the equity’s interests through December 31, 2011.  The following table depicts the identity of the subsidiaries and VIE:

Name of the entity	Place of Incorporation	Ownership Percentage
Surmounting Limit Marketing Advisor Limited ("SLM")	Hong Kong, China	100%
Hangzhou MYL Business Administration Co., Ltd. ("MYL Business")	Hangzhou, China	100%
Shanghai MYL Consulting Co., Ltd. ("MYL Consulting")	Shanghai, China	100%
Hangzhou MYL Commercial Service., Ltd. ("MYL Commercial")	Hangzhou, China	VIE
Hangzhou Gongshu MYL Training school ("MYL Training School ")	Hangzhou, China	VIE

(c)   Use of estimates

The preparation of the consolidated financial statements in conformity with generally accepted accounting principles in the United States of America 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 revenues and expenses during the reporting periods. Management makes these estimates using the best information available at the time the estimates are made; however actual results could differ materially from those estimates.

F-9

4.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

(d)   Economic and political risks

The Company’s operations are conducted in the PRC. Accordingly, the Company’s business, financial condition and results of operations may be influenced by the political, economic and legal environment in the PRC, and 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 others, the political, economic and legal environment and foreign currency exchange. The Company’s results may be adversely affected by changes in the political and social conditions in the PRC, and by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency conversion, remittances abroad, and rates and methods of taxation, among other things.

(e)   Cash and concentration of risk

Cash includes cash on hand, cash in banks and demand deposits in accounts maintained within the PRC and Hong Kong.  The Company has not experienced any losses in such accounts and believes it is not exposed to any risk on its cash in bank accounts.

(f)   Accounting for the impairment of long-lived assets

The Company periodically evaluates the carrying value of long-lived assets to be held and used, including intangible assets subject to amortization, when events and circumstances warrant such a review, pursuant to the guidelines established in ASC No. 360, “Property, Plant and Equipment”. The carrying value of a long-lived asset is considered impaired when the anticipated undiscounted cash flow from such asset is separately identifiable and is less than its carrying value. In that event, a loss is recognized based on the amount by which the carrying value exceeds the fair market value of the long-lived asset. Fair market value is determined primarily using the anticipated cash flows discounted at a rate commensurate with the risk involved. Losses on long-lived assets to be disposed of are determined in a similar manner, except that fair market values are reduced for the cost to dispose.

During the reporting periods, there was no impairment loss.

(g)   Cash and cash equivalents

The Company considers all highly liquid investments purchased with original maturities of three months or less to be cash equivalents. The Company maintains bank accounts in the Hong Kong. The subsidiaries of the Company maintain bank accounts in Hong Kong and the PRC.

F-10

4.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

(h)   Retirement benefits

The employees of the Company are members of a state-managed retirement benefit plan operated by the government of the PRC. The Company is required to contribute a specified percentage of payroll costs to the retirement benefit scheme to fund the benefits. The only obligation of the Company with respect to the retirement benefit plan is to make the specified contributions.

(i)   Property, plant and equipment

Plant and equipment are carried at cost less accumulated depreciation.  Depreciation is provided over their estimated useful lives, using the straight-line method. Estimated useful lives of the property, plant and equipment are as follows:

Buildings	20 years
Computer and electronic equipments	3-5 years
Leasehold improvement	3 years
Motor vehicles	5 years

The cost and related accumulated depreciation of assets sold or otherwise retired are eliminated from the accounts and any gain or loss is included in the statement of income.

(j)   Foreign currency translation

The accompanying consolidated financial statements are presented in United States dollars. The functional currency of the Company is the Renminbi (RMB).  The consolidated financial statements are translated into United States dollars from RMB at year-end exchange rates as to assets and liabilities and average exchange rates as to revenues and expenses. Capital accounts are translated at their historical exchange rates when the capital transactions occurred.

The exchange rates used to translate amounts in RMB into USD for the purposes of preparing the consolidated financial statements were as follows:

	December 31, 2011
balance sheet	RMB 6.3056  to US$1.00
Statements of income and comprehensive income	RMB 6.4615  to US$1.00
	December 31, 2010
balance sheet	RMB 6.6023  to US$1.00
Statements of income and comprehensive income	RMB 6.7682  to US$1.00

The 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.  In addition, the current foreign exchange control policies applicable in PRC also restrict the transfer of assets or dividends outside the PRC.

F-11

4.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

(k)   Accounts receivable

Accounts receivable is recognized and carried at the original invoice amount less allowance for any uncollectible amounts. An allowance for doubtful accounts is maintained for all customers based on a variety of factors, including the length of time the receivables are past due, significant one-time events and historical experience. Bad debts are written off as incurred.  During the reporting years, there were no bad debts.

Outstanding accounts balances are reviewed individually for collectability. The Company does not charge any interest income on trade receivables. Accounts balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote. To date, the Company has not charged off any balances as it has yet to exhaust all means of collection.

(l)   Statutory reserves

As stipulated by the PRC’s Company Law and as provided in the company Articles of Association, company’s net income after taxation can only be distributed as dividends after appropriation has been made for the following:

i.   Making up cumulative prior years’ losses, if any;

ii.   Allocations to the “Statutory surplus reserve” of at least 10% of income after tax, as determined under PRC accounting rules and regulations, until the fund amounts to 50% of the Company's registered capital, which is restricted for set off against losses, expansion of production and operation or increase in registered capital;

iii.   Allocations of 5-10% of income after tax, as determined under PRC accounting rules and regulations, to the Company's “Statutory common welfare fund”, which is restricted for capital expenditure for the collective benefits of the Company's employees; and

iv.   Allocations to the discretionary surplus reserve, if approved in the shareholders’ general meeting.

(m)   Revenue recognition

The Company records all tuition as deferred revenue when students enroll a course. At the beginning of each course, revenue is recognized on a pro rata basis over the quantity of classes attended by the students. This results in the Company’s balance sheet including future revenues that have not yet been earned as deferred revenue for courses that are not yet attended.

Refund policy permits students who apply for a refund for the portion of the course they did not attend. The Company may refund a portion of fees after negotiated. In the past practice, there are seldom cases that the students apply for refund, and it has no significant impact on revenue recognition of the Company based on the best estimation of the management Refunds result in a reduction in deferred revenue during the period that a student drops or withdraws from a class because associated tuition revenue is recognized pro rata over the quantity of classes are delivered.

F-12

4.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

(m)   Revenue recognition(Continued)

Generally, net revenue varies from period to period based on several factors, including the aggregate number of students attending classes, the number of classes held during the period, and the tuition price.

The Company’s revenue is principally derived from tuition and fees associated with two kinds of educational programs to the students: proprietary training courses, and comprehensive training courses.

Proprietary training courses, which normally take several days to complete, primarily consisted of featured lectures. These courses are provided on a roll-over basis over the year. Based on the courses attendance record, the revenue is recognized at the delivered courses to the students.

Comprehensive training courses, which are composed with sixteen individual courses with systematic training in leadership development, i.e. decision making skills, negotiation skills, presentation skills and people skills. Based on the contracts, the students are eligible to enroll the courses within three years period. The revenue is recognized on pro rata basis over the quantity of classes attended.

(n)   Operating lease rental

The Company did not have a lease that met the criteria of a capital lease. Leases that do not qualify as a capital lease are classified as an operating lease. Operating lease rental payments included in general and administrative expenses for the years ended December 31, 2011 and 2010 were $899,335 and $746,032, respectively.

(o)   Income taxes

The Company accounts for income taxes using an asset and liability approach and allows for recognition of deferred tax benefits in future years. Under the asset and liability approach, deferred taxes are provided for the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. A valuation allowance is provided for deferred tax assets if it is more likely than not these items will either expire before the Company is able to realize their benefits, or that future realization is uncertain.

The Company is operating in the PRC, and in accordance with the relevant tax laws and regulations of PRC, the enterprise income tax rate for the years ended December 31, 2011 and 2010 were 25%.

(p)   Comprehensive income

Comprehensive income is defined to include all changes in equity except those resulting from investments by owners and distributions to owners.  Among other disclosures, all items that are required to be recognized under current accounting standards as components of comprehensive income are required to be reported in a financial statement that is presented with the same prominence as other consolidated financial statements.  The Company’s current component of other comprehensive income is the foreign currency translation adjustment.

F-13

4.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

(q)   Recently implemented standard

In May 2011, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2011-04, “Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in GAAP and IFRSs.”  This ASU represents the converged guidance of the FASB and the International Accounting Standards Board (the “Boards”) on fair value measurement. The collective efforts of the Boards have resulted in common requirements for measuring fair value and for disclosing information about fair value measurements. The amendments are effective for public entities for interim and annual periods beginning after December 15, 2011, and should be applied prospectively. Early adoption is not permitted for public entities; therefore, the Company currently expects to adopt this standard in the first quarter of 2012. The Company is currently reviewing the effect this new pronouncement will have on the consolidated financial statements.

In June 2011, the FASB issued ASU No. 2011-05, “Comprehensive Income (Topic 220): Presentation of Comprehensive Income”. This ASU amends the FASB Accounting Standards Codification (Codification) to allow an entity the option to present the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. The amendments are effective for public entities for annual periods beginning after December 15, 2011, and should be applied prospectively. Early adoption is permitted; the Company currently expects to adopt this standard in the first quarter of 2012. The Company is currently reviewing the effect this new pronouncement will have on the consolidated financial statements.

In September 2011, the FASB issued Accounting Standards Update No. 2011-08, Intangibles — Goodwill and Other (Topic 350). This Accounting Standards Update amends FASB ASC 350. This amendment specifies the change in method for determining the potential impairment of goodwill. It includes examples of circumstances and events that the entity should consider in evaluating whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. The amendments are effective for annual and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011. The Company does not expect the adoption of the provisions in ASU 2011-08 will have a significant impact on the Company’s consolidated financial statements.

In December 2011, the FASB issued Accounting Standards Update No. 2011-11, Balance Sheet (Topic 210)—Disclosures about Offsetting Assets and Liabilities (ASU 2011-11). The update requires entities to disclose information about offsetting and related arrangements of financial instruments and derivative instruments.  The ASU is effective for annual periods beginning on or after January 1, 2013 and interim periods therein. The Company is currently evaluating the impact this update will have on our consolidated financial statements.

In December 2011, FASB issued Accounting Standards Update No. 2011−12, Comprehensive Income (“ASU 2011−12”). Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05.  Among the new provisions in ASU 2011-05 was a requirement for entities to present reclassification adjustments out of accumulated other comprehensive income by component in both the statement in which net income is presented and the statement in which other comprehensive income is presented (for both interim and annual financial statements); however this reclassification requirement is indefinitely deferred by ASU 2011-12 and will be further deliberated by the FASB at a future date.

F-14

5.CONCENTRATIONS OF CREDIT RISK AND MAJOR CUSTOMERS

Financial instruments that potentially expose the company to concentrations of credit risk, consists of cash and accounts receivable as of December 31, 2011 and 2010. The Company performs ongoing evaluations of its cash position and credit evaluations to ensure sound collections and minimize credit losses exposure.

As of December 31, 2011 and 2010, all the Company’s bank deposits were conducted with banks in the PRC where there is currently no rule or regulation mandated on obligatory insurance of bank accounts.

For the years ended December 31, 2011 and 2010, all of the Company’s sales were generated from the PRC. In addition, all accounts receivable as of December 31, 2011 and 2010 also arose in the PRC.

The maximum amount of loss exposure due to credit risk that the Company would bear if the counter parties of the financial instruments failed to perform represents the carrying amount of each financial asset on the balance sheet.

Normally, the Company does not require collateral from customers or debtors.

6.VARIABLE INTEREST ENTITY

PRC regulations currently limit direct foreign ownership of business entities to engage in education business in the PRC. To comply with these PRC regulations, the Company currently conducts the education business through MYL Commercial, and MYL Training School, VIES.

On May 1, 2009 MYL Business has entered into a series of exclusive contractual arrangements with (the “Contractual Arrangements”) MYL Commercial, pursuant to which MYL Business exercise effective control over the operations of MYL Commercial and receive the economic benefits of MYL Commercial. These agreements are summarized in the following paragraphs.

Exclusive Services Agreement. Pursuant to an exclusive services agreement by and among MYL Business, MYL Commercial and its subsidiary, dated May 1, 2009, MYL Commercial and its subsidiary irrevocably entrusted to MYL Business the management and operation of MYL Commercial and its subsidiary and the responsibilities and authorities of their shareholders and directors. The service fee to be paid by MYL Commercial and its subsidiary is equal to 95% of their total income which can be waived by MYL Business from time to time in its sole discretion.

Call Option Agreement. Pursuant to a call option agreement by and among MYL Business, MYL Commercial and MYL Commercial’s shareholders and subsidiary, dated as of May 1, 2009, each of MYL Commercial and MYL Commercial’s shareholders have granted MYL Business or its designee an exclusive option to purchase all or part of their equity interests in MYL Commercial and its subsidiary, or all or part of the assets of MYL Commercial, in each case, at any time determined by MYL Business and to the extent permitted by PRC law.

F-15

6.VARIABLE INTEREST ENTITY (Continued)

Voting Rights Proxy Agreement. Pursuant to a voting rights proxy agreement by and among MYL Business, MYL Commercial and MYL Commercial’s shareholders and subsidiary, dated as of May 1, 2009, the shareholders of MYL Commercial and its subsidiary have granted the personnel designated by MYL Business the right to appoint directors and senior management of MYL Commercial and its subsidiary and to exercise all of their other voting rights as shareholders of MYL Commercial and its subsidiary, as the case may be, as provided under the articles of association of each such entity. Under the voting rights proxy agreement, there are no restrictions on the number, to the extent allowed under the respective articles of association of MYL Commercial and its subsidiary, or identity of those persons we can appoint as directors and officers.

Equity Pledge Agreement. Pursuant to an equity pledge agreement by and among MYL Business, MYL Commercial and MYL Commercial’s shareholders and subsidiary, dated as of May 1, 2009, each of the shareholders has pledged his or its equity interest in MYL Commercial and its subsidiary as the case may be, to MYL Business to secure their obligations under the relevant contractual control agreements to which each is a party, including but not limited to, the obligations of MYL Commercial and its subsidiary under the exclusive services agreement, call option agreement and voting rights proxy agreement. Under this equity pledge agreement, the shareholders have agreed not to transfer, assign, pledge or otherwise dispose of their interest in MYL Commercial or its subsidiary, as the case may be, without the prior written consent of MYL Business.

As a result of these Contractual Arrangements, under U.S.GAAP, MYL Business is considered the primary beneficiary of MYL Commercial and thus consolidates its results in our consolidated financial statements.

As a result of the Contractual Arrangement, MYL Business was granted with unconstrained decision making rights and power over key operational functions within the MYL Commercial. As a result, MYL Business will bear all of the VIEs operating costs in exchange for 100% of the net income the VIEs. There is not any income or loss of the VIEs attributed to other parties. MYL Business does not have any equity interest in the VIEs, but instead has the right to enjoy economic benefits similar to equity ownership through its Contractual Arrangements with MYL Commercial.

These contractual arrangements may not be as effective in providing MYL Business with control over the MYL Commercial as direct ownership. Due to its VIE structure, MYL Business has to rely on contractual rights to effect control and management of the MYL Commercial, which exposes it to the risk of potential breach of contract by the shareholders of MYL Commercial.

In addition, as all of these Contractual Arrangements are governed by PRC law and provide for the resolution of disputes through either arbitration or litigation in the PRC, they would be interpreted in accordance with PRC law and any disputes would be resolved in accordance with PRC legal procedures. The legal environment in the PRC is not as developed as in other jurisdictions, such as the United States. As a result, uncertainties in the PRC legal system could further limit the Company’s ability to enforce these contractual arrangements. Furthermore, these contracts may not be enforceable in China if PRC government authorities or courts take a view that such contracts contravene PRC laws and regulations or are otherwise not enforceable for public policy reasons. In the event the Company is unable to enforce these contractual arrangements, it may not be able to exert effective control over the VIEs, and its ability to conduct its business may be materially and adversely affected. At present, the equity interest pledge agreement has not been registered with the PRC regulator.

F-16

6.VARIABLE INTEREST ENTITY (Continued)

None of the assets of the VIEs can be used only to settle obligations of the consolidated VIEs. Conversely, liabilities recognized as a result of consolidating these VIEs do not represent additional claims on the Company’s general assets.

The following financial statement amounts and balances of the VIEs were included in the accompanying consolidated financial statements as of and for the years ended:

	December 31,
	2011		2010
			(Restated)
Total assets	$	4,362,026	$	4,780,461
Total liabilities	$	27,306,306	$	23,778,652

7.PROPERTY, PLANT AND EQUIPMENT, NET

Details of property, plant and equipment are as follows:

	December 31,
	2011			2010
At cost				(Restated)
Buildings	$	99,089		$	94,636
Computer and electronic equipments		223,659			175,718
Leasehold improvement		492,271			49,358
Motor vehicles		635,760			486,269
Less: accumulated depreciation		(322,332	)		(70,105	)
	$	1,128,447		$	735,876

Depreciation expense included in the general and administrative expenses for the years ended December 31, 2011 and 2010 was $242,921 and $62,537, respectively.

8.OTHER RECEIVABLES

Other receivables were comprised of the following:

	December 31,
	2011		2010
			(Restated)
Disbursement and advances to employees	$	1,586,178	$	536,224
Business tax prepaid		844,757		641,975
Deposits paid and VAT set off		503,880		466,766
	$	2,934,815	$	1,644,965

F-17

9.OTHER PAYABLES

Other payables were comprised of the following:

	December 31,
	2011			2010
				(Restated)
Payables to outside service providers		$	335,575		$	-
Sundry PRC taxes payables			29,240			38,241
Deposits received and credit guarantees			11,100			48,472
Business taxes payable			147,496			222,289
Sundries			-			909
		$	523,411		$	309,911

Loan advances from unrelated parties were unsecured, interest-free and repayable on demand.

10.DEFERRED REVENUE

Deferred revenue represents the tuition fees from enrolled students for courses not delivered. As of December 31, 2011 and 2010, deferred revenue included in current liabilities amounted to $7,188,008 and $3,788,518, respectively. Included in non-current liabilities amounted to $16,464,222 and $18,420,465, respectively.

11.RELATED PARTY TRANSACTION

On July 2, 2010, the Company declared dividends in the total amount of RMB 12,075,000 (equivalent to $1,784,088) out of the retained earnings balance of Hangzhou MYL for the fiscal year ended December 31, 2009 to its sole shareholder, Surmounting Limit Marketing Adviser Limited(“SLM”). On the same date, SLM also made a resolution to distribute the net tax amount of such dividend that SLM receives to Magic Dream Enterprises Ltd., a company incorporated under the laws of British Virgin Island. And the shareholder Mr. Liang Kaien, the shareholder of the Company and Magic Dream Enterprises Ltd received the dividend payment. However, as at December 31, 2010, the Company’s Board of Directors adopted a resolution, the dividend previously declared invalid, the Company should collect back the payment from the shareholder, Mr. Liang Kaien. As of December 31, 2011, receivable from shareholder amounted to $1,914,964.

The Company has several rental arrangements providing residential units to house key employees, including the Chief Executive Officer Mr. Liang Kaien, Chief Operating Officer Mr. Xu Pokai, and Chief Strategy Officer Mr. Chen Tingyuan.  For the years ended December 31, 2011 and 2010, housing benefit provided to these officers totaled $227,339 and $218,208, respectively.

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12.BASIC AND DILUTED LOSSES PER SHARE

In accordance with ASC 260 Earnings per Share, basic losses per common share is computed by using net losses divided by the weighted average number of shares of common stock outstanding for the periods presented. Diluted losses per share reflect the potential dilution of securities that could share in the losses of the Company. Potential common stock shares consist of shares that may arise from outstanding dilutive common stock options and warrants (the number of which is computed using the “treasury stock method”). The calculation of diluted losses per common share assumes that outstanding common shares were increased by shares issuable upon exercise of those stock warrants for which the market price exceeds the exercise price, less shares that could have been purchased by the Company with related proceeds.

		Year ended December 31,
		2011			2010
					(Restated)
Net losses	$	(5,478,202	)	$	(8,543,070	)
Weighted average number of common shares outstanding – basic and diluted		22,834,100			22,379,847
Losses per share – basic and diluted	$	(0.24	)	$	(0.38	)

13.PROVISION FOR INCOME TAXES

United States

China Executive Education Corp. is subject to United States tax at a tax rate of 35%. No provision for income tax in the United States has been made as China Executive Education Corp. had no U.S. taxable income for the years ended December 31, 2011 and 2010.

Hong Kong

Incorporated in Hong Kong, the company is governed by the income tax law of Hong Kong. According to current Hong Kong income tax law, the applicable income tax rate for the company is 16.5%. No provision for income tax in the Hong Kong has been made as the Company had no Hong Kong taxable income for the years ended December 31, 2011 and 2010.

PRC

In accordance with the relevant tax laws and regulations of the PRC, a company registered in the PRC is subject to state and local income taxes within the PRC at the applicable tax rate on the taxable income. On March 16, 2007, the National People’s Congress of the PRC enacted a new Enterprise Income Tax Law (“Enterprise Income Tax Law”) under which foreign invested enterprises and domestic companies would be subject to Enterprise Income Tax Law at a uniform rate of 25%.  The Enterprise Income Tax Law became effective on January 1, 2008.

F-19

13.PROVISION FOR INCOME TAXES (Continued)

The Company’s PRC subsidiaries are subject to income tax at a rate of 25% for calendar years ended December 31, 2011 and 2010.

The following table reconciles the Company’s effective tax for the years presented:

	Year ended December 31,
	2011			2010
				(Restated)
Loss before income taxes benefits	$	(5,129,838	)	$	(6,917,799	)
PRC statutory income tax rate		25	%		25	%
Income tax at statutory tax rate		(1,282,460	)		(1,729,450	)
Permanent differences		1,630,824			3,354,721
Expected enterprise income tax benefits at statutory tax rate	$	348,364		$	1,625,271

The significant components of income tax benefits are as follows:

	Year ended December 31,
	2011		2010
			(Restated)
Current:
Provision for PRC Enterprise Income Tax	$	348,364	$	1,625,271
Deferred:
Provision for PRC Enterprise Income Tax		-		-
Income tax expenses (benefits)	$	348,364	$	1,625,271

Deferred tax assets reflect the tax effects of temporary differences due to deferred revenue and between the carrying amounts of assets and liabilities for financial reporting purpose and the tax bases used for income tax purpose.

The tax effects of temporary differences that give rise to the Company’s net deferred tax assets and liabilities as of December 31, 2011 and 2010 are summarized as follows:

	Year ended December 31,
	2011			2010
				(Restated)
Deferred tax assets:
Loss carried forward	$	5,913,058		$	5,552,246
Valuation allowance		(5,913,058	)		(5,552,246	)
Net deferred tax assets	$	-		$	-

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14.COMMITMENTS AND CONTINGENCIES

The Company did not have any significant capital commitment as of December 31, 2011 and 2010.

From time to time, the Company leases office spaces in Shanghai and Hangzhou in China to conduct its normal business activities, such as business administration, recruiting students, holding the business conferences and providing professional training courses or featured lectures to students. The Company also has several rental arrangements which provide residential units to house key employees. These lease agreements will expire before April 30, 2014.

Rent expenses for the above rental arrangements total $899,335 and $746,032 for 2011 and 2010, respectively.

The minimum obligations under such commitments (unless otherwise stated) for the years ending December 31 until their expiration are summarized below:

Year	Amount
2012	$	882,943
2013		658,448
2014		211,276
Total	$	1,752,667

The Company did not record any contingencies as of December 31, 2011 and 2010.

15.SUBSEQUENT EVENTS

The Company has evaluated all other subsequent events and determined that there were no other subsequent events or transactions that require recognition or disclosures in the financial statements

F-21

EXHIBIT INDEX

Exhibit No.	Description
2.1	Agreement and Plan of Merger, dated February 12, 2010, by and among the Company, China Executive Education Corp. (merger sub), Surmounting Limit Marketing Adviser Limited, Magic Dream Enterprises Ltd., Hangzhou MYL Business Administration Consulting Co., Ltd. and Hangzhou MYL Commercial Service Co., Ltd. (incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed on February 12, 2010)
3.1	Articles of Incorporation of the Company, as amended to date (incorporated by reference to Exhibit 3.1 to the Company’s Form 10-K filed on April 15, 2011)
3.2	Amended and Restated Bylaws of the Company (incorporated by reference to Exhibit 3.2 to the Company’s Form 8-K filed on October 12, 2010)
10.1	Form of Securities Purchase Agreement between the Company and certain individuals (incorporated by reference to Exhibit 3.1 to the Company’s Form 10-K filed on April 15, 2011)
10.2	Form of Securities Purchase Agreement, dated December 2, 2010 (incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed on December 2, 2010)
10.3	Exclusive Service Agreement, dated May 1, 2009, between Hangzhou MYL Business Administration Consulting Co., Ltd. and Hangzhou MYL Commercial Services Co., Ltd. (incorporated by reference to Exhibit 10.2 to the Company’s Form 8-K filed on February 12, 2010)
10.4	Equity Pledge Agreement, dated May 1, 2009, by and among Hangzhou MYL Business Administration Consulting Co., Ltd., Hangzhou MYL Commercial Services Co., Ltd., Xianbin Meng and Xiaobo Shen (incorporated by reference to Exhibit 10.3 to the Company’s Form 8-K filed on February 12, 2010)
10.5	Call Option Agreement, dated May 1, 2009, by and among Hangzhou MYL Business Administration Consulting Co., Ltd., Hangzhou MYL Commercial Services Co., Ltd., Xianbin Meng and Xiaobo Shen (incorporated by reference to Exhibit 10.4 to the Company’s Form 8-K filed on February 12, 2010)
10.6	Shareholders’ Voting Rights Proxy Agreement, dated May 1, 2009, by and among Hangzhou MYL Business Administration Consulting Co., Ltd., Hangzhou MYL Commercial Services Co., Ltd., Xianbin Meng and Xiaobo Shen (incorporated by reference to Exhibit 10.4 to the Company’s Form 8-K filed on February 12, 2010)
10.7	Contract for Lease of Employees, dated August 1, 2009, between Hangzhou MYL Business Administration Consulting Co., Ltd. and Zhejiang Foreign Service Corporation Ningbo Branch (English Translation) (incorporated by reference to Exhibit 10.6 to the Company’s Form 8-K filed on February 12, 2010)
10.8	Contract for Lease of Property, dated August 25, 2010 , among Hangzhou MYL Business Administration Consulting Co., Ltd., Haiping Chu and Weihao Wei (English Translation) (incorporated by reference to Exhibit 10.14 to the Company’s Form 8-K filed on February 12, 2010)
10.9	Contract for Lease of Property, dated July 29, 2009, between Hangzhou MYL Business Administration Consulting Co., Ltd. and Shanghai Shengkang Cimic Realty Investment Co., Ltd. (English Translation) (incorporated by reference to Exhibit 10.15 to the Company’s Form 8-K filed on February 12, 2010)
10.10	Employment Contract, dated April 2009, between Hangzhou MYL Business Administration Consulting Co., Ltd. and Kaien Lieng (English Translation) (incorporated by reference to Exhibit 10.7 to the Company’s Form 8-K filed on February 12, 2010)
10.11	Employment Contract, dated April 2009, between Hangzhou MYL Business Administration Consulting Co., Ltd. and Zhiwei Huang (English Translation) (incorporated by reference to Exhibit 10.12 to the Company’s Form 8-K filed on February 12, 2010)
10.12	Employment Contract, dated April 2009, between Hangzhou MYL Business Administration Consulting Co., Ltd. and Pokai Hsu (English Translation) (incorporated by reference to Exhibit 10.8 to the Company’s Form 8-K filed on February 12, 2010)
10.13	Employment Contract, dated April 2009, between Hangzhou MYL Business Administration Consulting Co., Ltd. and Tingyuan Chen (English Translation) (incorporated by reference to Exhibit 10.9 to the Company’s Form 8-K filed on February 12, 2010)
10.14	Form of Independent Director’s Agreement (incorporated by reference to Exhibit 10.1 to the Company’s Form 8-K filed on October 13, 2010)
14	Code of Business Conducts and Ethics of the Company adopted on October 7, 2010 (incorporated by reference to Exhibit 14.1 to the Company’s Form 8-K filed on October 12, 2010)
21*	Subsidiaries of the Company
31.1*	Certifications of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2*	Certifications of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1*	Certification of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2*	Certification of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101*	Interactive data files pursuant to Rule 405 of Regulation S-T (furnished herewith).

*Filed herewith