10-Q

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

þ Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended March 31, 2009

o Transition Report pursuant to 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period                      to                     

Commission File Number 000-50550

CHINACAST EDUCATION CORPORATION

(Exact Name of Issuer as Specified in Its Charter)

Delaware
(State or Other Jurisdiction of
Incorporation or Organization) 20-0178991
(I.R.S. Employer Identification Number)

10/F Xu Jie Mansion,
No. 29, Nanmofang Road,
Beijing, 100020, People’s Republic of China
(Address of Principal Executive Offices)

(8610) 6566-7788
(Issuer’s Telephone Number, Including Area Code)

Former Name If Applicable

     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 past 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 þ     No o

     Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, 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 o     No o

     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. (Check one):

Large accelerated filer o Accelerated filer þ Non-accelerated filer o
(Do not check if a smaller
reporting company) Smaller reporting company o

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

     There were 35,648,251 shares of the Company’s common stock, par value $0.0001 per share, outstanding as of May [10], 2009.

TABLE OF CONTENTS

	Page
PART I — FINANCIAL INFORMATION		3
Item 1 .. Financial Statements (unaudited)		3
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		15
Item 3. Quantitative and Qualitative Disclosures About Market Risk		21
Item 4. Controls and Procedures		21
PART II — OTHER INFORMATION		22
Item 1. Legal Proceedings		22
Item 1A. Risk Factors		22
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		22
Item 3. Defaults Upon Senior Securities		22
Item 4. Submission of Matters To a Vote of Security Holders		22
Item 5. Other Information		22
Item 6. Exhibits		22
EX-31.1 Certification of Chief Executive Officer pursuant to Rule 13a-14(a) or 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
EX-31.2 Certification of Chief Financial Officer pursuant to Rule 13a-14(a) or 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
EX-32.1 Certification of Chief Executive Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act
EX-32.2 Certification of Chief Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act

2

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements (unaudited)

CHINACAST EDUCATION CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
(In thousands, except share-related data)

							As of
	As of March 31,						December 31,
	2009			2009			2008
	US$			RMB			RMB
	(Note 1)
Assets
Current assets:
Cash and cash equivalents		12,944			88,021			220,131
Term deposits		73,927			502,700			369,000
Accounts receivable		6,902			46,934			32,581
Inventory		206			1,402			1,419
Prepaid expenses and other current assets		948			6,446			8,987
Amounts due from related parties		248			1,688			2,488
Total current assets		95,175			647,191			634,606
Non-current deposits		144			981			686
Property and equipment, net		41,149			279,813			283,982
Land use rights, net		17,814			121,133			121,783
Acquired intangible assets, net		4,006			27,239			31,330
Long-term investments		729			4,958			5,224
Non-current advances to a related party		15,338			104,295			110,217
Goodwill		45,784			311,333			311,331
Total assets		220,139			1,496,943			1,499,159
Liabilities and shareholders’ equity
Current liabilities:
Accounts payable		2,012			13,682			11,467
Accrued expenses and other current liabilities		18,950			128,862			132,807
Deferred revenues		7,537			51,254			84,372
Amount due to related party		124			838			1,127
Income taxes payable		7,960			54,128			50,594
Current portion of long-term bank borrowings		11,529			78,400			20,000
Current portion of capital lease obligation		200			1,358			1,191
Other borrowings		161			1,097			1,097
Total current liabilities		48,473			329,619			302,655
Non-current liabilities:
Long-term bank borrowings		—			—			58,400
Capital lease obligations, net of current portion		180			1,223			1,323
Deferred tax liabilities		2,999			20,392			21,030
Unrecognized tax benefits		6,846			46,555			44,612
Total non-current liabilities		10,025			68,170			125,365
Total liabilities		58,498			397,789			428,020
Commitments and contingencies (Note 12)
Shareholders’ equity:
Ordinary shares (US$0.0001 par value; 100,000,000 shares authorized; 35,648,251 and 35,648,251 shares issued and outstanding)		4			27			27
Additional paid-in capital		140,431			954,928			948,352
Statutory reserve		4,135			28,117			28,117
Accumulated other comprehensive loss		(920	)		(6,258	)		(5,462	)
Retained earnings		11,060			75,208			55,526
Total ChinaCast Education Corporation shareholders’ equity		154,710			1,052,022			1,026,560
Noncontrolling interest		6,931			47,132			44,579
Total shareholders’ equity		161,641			1,099,154			1,071,139
Total liabilities and shareholders’ equity		220,139			1,496,943			1,499,159

See notes to unaudited condensed consolidated financial statements.

3

CHINACAST EDUCATION CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(In thousands, except share-related data)

	For the three months ended March 31,
	2009			2009			2008
	US$			RMB			RMB
	(Note 1)
Revenues:
Service		10,891			74,062			40,205
Equipment		423			2,876			19,289
		11,314			76,938			59,494
Cost of revenues:
Service		(4,109	)		(27,941	)		(11,986	)
Equipment		(417	)		(2,838	)		(19,105	)
		(4,526	)		(30,779	)		(31,091	)
Gross profit		6,788			46,159			28,403
Operating (expenses) income:
Selling and marketing expenses (including share-based compensation of RMB840 and RMB1,281 for the three months ended March 31, 2009 and 2008, respectively)		(277	)		(1,883	)		(3,487	)
General and administrative expenses (including share-based compensation of RMB5,736 and RMB7,834 for the three months ended March 31, 2009 and 2008, respectively)		(2,639	)		(17,944	)		(18,216	)
Foreign exchange gain (loss)		25			169			(465	)
Management service fee		142			967			798
Other operating income		74			505			—
Total operating expenses, net		(2,675	)		(18,186	)		(21,370	)
Income from operations		4,113			27,973			7,033
Interest income		340			2,312			5,852
Interest expense		(214	)		(1,453	)		(4	)
Income before provision for income taxes and loss in equity investments		4,239			28,832			12,881
Provision for income taxes		(930	)		(6,325	)		(3,859	)
Income before loss in equity investments		3,309			22,507			9,022
Loss in equity investments		(39	)		(266	)		(408	)
Net income		3,270			22,241			8.614
Less: Net income attributable to noncontrolling interest		(375	)		(2,559	)		(384	)
Net income attributable to ChinaCast Education Corporation		2,895			19,682			8,230
Earnings per share
Net income attributable to ChinaCast Education Corporation per share
Basic		0.08			0.55			0.30
Diluted		0.08			0.55			0.29
Weighted average shares used in computation:
Basic		35,648,251			35,648,251			27,297,256
Diluted		35,648,251			35,648,251			28,292,257

See notes to unaudited condensed consolidated financial statements.

4

CHINACAST EDUCATION CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY AND COMPREHENSIVE INCOME (Unaudited)
(In thousands, except share-related data)

	ChinaCast Education Corporation Shareholders
											Accumulated other						Total
	Ordinary				Additional						comprehensive			Noncontrolling			stockholders'
	Shares		Amount		paid-in capital		Statutory Reserve		Retained earnings		loss			interest			equity
			RMB		RMB		RMB		RMB		RMB			RMB			RMB
Balance at January 1, 2009		35,648,251		27		948,352		28,117		55,526		(5,462	)		44,579			1,071,139
Share-based compensation		—		—		6,576		—		—		—			—			6,576
Net income		—		—		—		—		19,682		—			2,559			22,241
Foreign currency translation adjustment		—		—		—		—		—		(796	)		(6	)		(802	)
Balance at March 31, 2009		35,648,251		27		954,928		28,117		75,208		(6,258	)		47,132			1,099,154
			US$	4	US$	140,431	US$	4,135	US$	11,060	US$	(920	)	US$	6,931		US$	161,641

See notes to unaudited condensed consolidated financial statements.

5

CHINACAST EDUCATION CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(In thousands)

	For the three months ended March 31,
	2009			2009			2008
	US$			RMB			RMB
	(Note 1)
Cash flows from operating activities:
Net income		3,270			22,241			8,614
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		1,582			10,757			1,421
Share-based compensation		967			6,576			9,115
Loss in equity investments		39			266			408
Changes in assets and liabilities:
Accounts receivable		(2,107	)		(14,328	)		(18,869	)
Inventory		3			17			22
Prepaid expenses and other current assets		373			2,541			(2,078	)
Non-current deposits		(43	)		(295	)		837
Amounts due from related parties		118			800			(200	)
Accounts payable		326			2,215			6,300
Accrued expenses and other current liabilities		(320	)		(2,178	)		3,345
Deferred revenues		(4,870	)		(33,118	)		798
Amount due to related party		(43	)		(289	)		—
Income taxes payable		520			3,534			3,210
Deferred taxes liabilities		(94	)		(638	)		—
Unrecognized tax benefits		285			1,943			124
Net cash provided by operating activities		6			44			13,047
Cash flows from investing activities:
Advance to related party		(2,941)			(20,000)			—
Repayment from advance to related party		3,812			25,922			8,817
Purchase of property and equipment		(643	)		(4,377	)		(642	)
Term deposits		(19,662	)		(133,700	)		(24,308	)
Net cash used in investing activities		(19,434	)		(132,155	)		(16,133	)
Cash flows from financing activities:
Exercise of warrants		—			—			347
Repayment of capital lease obligations		—			—			(33	)
Net cash provided by financing activities		—			—			314
Effect of foreign exchange rate changes		—			1			(24	)
Net decrease in cash and cash equivalents		(19,428	)		(132,110	)		(2,796	)
Cash and cash equivalents at beginning of the period		32,372			220,131			138,610
Cash and cash equivalents at end of the period		12,944			88,021			135,814

See notes to unaudited condensed consolidated financial statements.

6

NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(In thousands, except share-related data)

1. BASIS OF PREPARATION

The accompanying unaudited condensed consolidated financial statements of ChinaCast Education Corporation (“CEC”, formerly Great Wall Acquisition Corporation (“Great Wall”)) have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Accordingly, they do not include all of the information and notes required by accounting principles generally accepted in the United States of America (“US GAAP”) for complete financial statements and should be read in conjunction with the audited financial statements included in CEC’s Annual Report on Form 10-K for the fiscal year ended December 31, 2008.

In the opinion of the management of CEC, the accompanying unaudited condensed consolidated financial statements are prepared on the same basis as the audited financial statements, and these unaudited condensed consolidated financial statements reflect all adjustments, consisting only of normal recurring adjustments necessary for a fair presentation of the results of the interim periods presented. The results of operations for the interim periods presented are not necessarily indicative of the operating results expected for any subsequent interim period or for CEC’s fiscal year ending December 31, 2009.

The accompanying unaudited condensed consolidated financial statements include the accounts of CEC, its subsidiaries, and variable interest entities (collectively, the “Company”). All significant intercompany balances and transactions have been eliminated in consolidation.

Significant Accounting Policies

The accompanying unaudited condensed consolidated financial statements have been using the same accounting policies used in the preparation of the audited financial statements included in CEC’s Annual Report on Form 10-K for the fiscal year ended December 31, 2008, except for the following additional accounting policies:

(1) Adoption of Statement of Financial Accounting Standards (“SFAS”) No. 160, “Noncontrolling Interests in Consolidated Financial Statements — an amendment of ARB No. 51”.

Effective January 1, 2009, the Company adopted SFAS 160. The adoption did not impact the condensed consolidated financial statements for the quarter ended March 31, 2009, except for the presentation and disclosure requirements affecting all periods presented including (a) the noncontrolling interest has been reclassified to equity, (b) consolidated net income or loss has been adjusted to include the net income or loss attributable to the noncontrolling interest, (c) consolidated comprehensive income or loss has been adjusted to include the comprehensive income or loss attributable to the noncontrolling interest and (d) for each reporting period the Company must present a reconciliation at the beginning and end of the period of the carrying amount of total equity and equity attributable to the Company and the noncontrolling interest.

(2) Adoption of SFAS No. 141(R), “Business Combinations”.

Effective January 1, 2009, the Company adopted SFAS 141(R). The adoption of SFAS No. 141(R) did not have a significant effect on its consolidated financial statements for the quarter ended March 31, 2009.

Convenience Translation

Amounts in United States dollars (“US$”) are presented solely for the convenience of readers and an exchange rate of RMB6.8 to US$1 was applied as of March 31, 2009. Such translation should not be construed to be the amounts that would have been reported under US GAAP.

The Share Exchange Transaction

On December 22, 2006, Great Wall consummated the voluntary conditional offer (the “Offer”) made in Singapore to acquire all of the outstanding ordinary shares of ChinaCast Communication Holdings Limited (“ChinaCast”). Pursuant to the terms of the Offer, ChinaCast shareholders had the option to receive either shares of CEC or a cash payment for each ChinaCast share tendered. On January 18, 2007, the closing date of the Offer, total shares acquired were 80.27%. Since Great Wall was not an operating company and the shareholders of ChinaCast control the combined company after the above transaction consummated on December 22, 2006 (the “Share Exchange Transaction”), the Share Exchange Transaction was accounted for as a recapitalization in which ChinaCast was the accounting acquirer. The cash consideration paid as part of the Offer was accounted for as a capital distribution. The remaining outstanding ordinary shares of ChinaCast not acquired by Great Wall were reported as minority interest.

During the year ended December 31, 2007, CEC acquired additional shares by issuing shares of CEC and cash amount to RMB5,793 to certain original ChinaCast shareholders and, as of July 11, 2007, CEC increased its holdings to 100% of the outstanding ordinary shares of ChinaCast. The 19.73% of the additional shares acquired were accounted for on the same basis as the Share Exchange Transaction.

2. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

On April 9, 2009, the Financial Accounting Standards Board (“FASB”) issued FASB Staff Position (“FSP”) No. FAS 107-1 and APB 28-1, “Interim Disclosures about Fair Value of Financial Instruments”. FAS 107-1 and APB 28-1 amend FASB Statement No. 107, “Disclosures about Fair Value of Financial Instruments,” to require disclosures about fair value of financial instruments for interim reporting periods of publicly traded companies as well as in annual financial statements. FAS 107-1 and APB 28-1 also amend APB Opinion No. 28, “Interim Financial Reporting,” to require those disclosures in summarized financial information at interim reporting periods. FAS 107-1 and APB 28-1 will be effective on April 1, 2009. FAS 107-1 and APB 28-1 do not require disclosures for earlier periods presented for comparative purposes at initial adoption. In periods after initial adoption, FAS 107-1 and APB 28-1 require comparative disclosures only for periods ending after initial adoption. The Company is currently evaluating whether the adoption of FAS 107-1 and APB 28-1 will have a significant effect on its consolidated financial statements.

On April 9, 2009, the FASB issued FSP No. FAS 115-2 and FAS 124-2, “Recognition and Presentation of Other-Than-Temporary Impairments”. FAS 115-2 and FAS 124-2 amend the other-than-temporary impairment guidance in US GAAP for debt securities to make the guidance more operational and to improve the presentation and disclosure of other-than-temporary impairments on debt and equity securities in the financial statements. FAS 115-2 and FAS 124-2 do not amend existing recognition and measurement guidance related to other-than-temporary impairments of equity securities. FAS 115-2 and FAS 124-2 will be effective on April 1, 2009. FAS 115-2 and FAS 124-2 do not require disclosures for earlier periods presented for comparative purposes at initial adoption. In periods after initial adoption, FAS 115-2 and FAS 124-2 require comparative disclosures only for periods ending after initial adoption. The Company is currently evaluating whether the adoption of FAS 115-2 and FAS 124-2 will have a significant effect on its consolidated financial position or results of operations.

On April 9, 2009, the FASB issued FSP No. FAS 157-4, “Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly”. FAS 157-4 provides additional guidance for estimating fair value in accordance with FASB Statement No. 157, “Fair Value Measurements”, when the volume and level of activity for the asset or liability have significantly decreased. FAS 157-4 also includes guidance on identifying circumstances that indicate a transaction is not orderly. FAS 157-4 emphasizes that even if there has been a significant decrease in the volume and level of activity for the asset or liability and regardless of the valuation technique(s) used, the objective of a fair value measurement remains the same. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction (that is, not a forced liquidation or distressed sale) between market participants at the measurement date under current market conditions. FAS 157-4 will be effective on April 1, 2009 and will be applied prospectively. FAS 157-4 does not require disclosures for earlier periods presented for comparative purposes at initial adoption. In periods after initial adoption, FAS 157-4 requires comparative disclosures only for periods ending after initial adoption. The Company is currently evaluating whether the adoption of FAS 157-4 will have a significant effect on its consolidated financial position or results of operations.

7

3. ACQUISITION

On April 11, 2008, Yupei Information Technology Co., Ltd, the Company’s subsidiary in the People’s Republic of China (the “PRC”), consummated the acquisition of an 80% interest in Hai Lai Education Technology Limited (“Hai Lai”) from Beijing Heng Tai Jufu Investment Limited. Hai Lai holds the entire interest in the Foreign Trade and Business College of Chongqing Normal University (“FTBC”) and Hai Yuan Company Limited (“Hai Yuan”). FTBC is a private college affiliated with Chongqing Normal University. The consideration for the acquisition was RMB480,000, of which RMB475,850 was paid during 2008. The acquisition was recorded using the purchase method of accounting and, accordingly, the acquired assets and liabilities were recorded at their fair market value at the date of acquisition. The purchase price allocation was as follows:

				Amortization
	RMB			period
Cash		10,343
Other current assets		323
Non-current deposits		523
Property and equipment and land use rights		334,227		4-50 years
Intangible assets:
Customer relationship		40,329		41 months
Goodwill		309,717
Bank and other borrowings		(65,000	)
Other current liabilities		(83,779	)
Deferred tax liabilities		(23,296	)
Long-term bank loans		(20,000	)
Unrecognized tax benefits		(6,837	)
Minority interest		(16,550	)
Total		480,000

The Company performed the purchase price allocation for the acquisition after considering a valuation analysis provided by a third party valuation firm. The valuation analysis utilized and considered generally accepted valuation methodologies such as income, market and cost approach.

The Company believes that the acquisition furthers its strategy of expanding into the post-secondary bricks and mortar education market. The combination of these factors is the rationale for the excess of purchase price over the value of the assets acquired and liabilities assumed.

4. NON-CURRENT DEPOSITS

Non-current deposits consisted of the following:

	As of March 31,		As of December 31,
	2009		2008
	RMB		RMB
Rental deposits		461		166
Utilities deposits		270		270
Other deposits		250		250
Total		981		686

Rental deposits represented office rental deposits for the Company’s daily operations. These deposits are classified into non-current deposits since they will not be refunded within one year.

8

5. COMPREHENSIVE INCOME

The components of comprehensive income for the periods presented were as follows:

	For the three months ended March 31,
	2009			2008
	RMB			RMB
Net income		22,241			8,614
Foreign currency translation adjustment		(802	)		(183	)
Comprehensive income		21,439			8,431
Comprehensive income attributable to noncontrolling interest		(2,553	)		(384	)
Comprehensive income attributable to ChinaCast Education Corporation		18,886			8,047

6. ACQUIRED INTANGIBLE ASSETS, NET

Acquired intangible assets, net consisted of the following:

	As of March 31,			As of December 31,
	2009			2008
	RMB			RMB
Brand name usage right
Cost		22,532			22,532
Less: Accumulated amortization		(3,149	)		(3,004	)
Less: Impairment loss		(14,500	)		(14,500	)
		4,883			5,028
Customer relationship
Cost		40,329			40,329
Less: Accumulated amortization		(17,973	)		(14,027	)
		22,356			26,302
Acquired intangible assets, net		27,239			31,330

On August 30, 2007, the Company acquired 100% of the outstanding registered capital of Modern English Trademark Limited (“MET”), in exchange for cash of RMB22,532 (US$3,000). MET has no assets or liabilities except for a 10-year exclusive brand name usage right. The acquisition was recorded as an intangible asset, which is being amortized on a straight-line basis over 10 years. In 2008, an impairment loss amounting to RMB14,500 was recorded in relation to this brand name usage right.

For the three months ended March 31, 2009, the Company recorded amortization expense in respect of the brand name usage right amounting to RMB145. The Company will record amortization expenses in respect of brand name usage right of RMB435, RMB580 RMB580, RMB580, RMB580 RMB2,128 in 2009, 2010, 2011, 2012, 2013 and 2014 and thereafter, respectively.

On April 11, 2008, the Company acquired a customer relationship through an acquisition (see Note 3). The customer relationship is being amortized using accelerated amortization method over 41 months based on the estimated progression of the students through the respective courses, giving consideration to the revenue and cash flow associated.

For the three months ended March 31, 2009, the Company recorded amortization expense in respect of the customer relationship amounting to RMB3,946. The Company will record amortization expenses in respect of the customer relationship of RMB10,081, RMB8,767 and RMB3,508 in 2009, 2010 and 2011, respectively.

9

7. STOCK COMPENSATION PLAN

Under the 2007 Omnibus Securities and Incentive Plan (“2007 Plan”) adopted in May 2007, the Company may grant any awards to eligible participants, including employees, directors or consultants, to purchase up to 2,500,000 ordinary shares.

On July 11, 2007, the Company granted, under the 2007 Plan, 12,500 ordinary shares to its employees at no consideration. The per share fair value of ordinary shares as of the grant date was US$5.65 (RMB42.75).

On January 11, 2008, the Company granted, under the 2007 Plan, restricted shares to its three directors at no consideration. Each of the three directors was granted 100,000 restricted shares of the Company’s common stock. All of the shares of restricted stock granted to the directors were issued at fair market value based on the closing price on January 11, 2008 of US$6.25 (RMB45.38). For each of the three directors of CEC, 10,000, 30,000 and 60,000 restricted shares were/will be vested on February 9, 2008, February 9, 2009 and February 9, 2010, respectively. On January 11, 2008, the Company granted, under the 2007 Plan, 1,200,000 share options on the Company’s common stock to selected employees at no consideration. The exercise price of the share options granted is US$6.30 and the expiry date is January 11, 2018. A total of 401,000, 401,000 and 398,000 share options were/will be vested on March 31, 2008, March 31, 2009 and March 31, 2010, respectively. Upon exercise of these share options, a total of 1,200,000 common stock will be issued. As of March 31, 2009, no restricted shares or share options have been forfeited.

A summary of the share option activity under 2007 Plan was as follows:

	Number		Weighted average
	of option		exercise price
			US$
Options outstanding at January 1, 2007 and December 31, 2007		—		—
Granted		1,200,000		6.30
Exercised		—		—
Cancelled		—		—
Options outstanding at December 31, 2008		1,200,000		6.30
Granted		—		—
Exercised		—		—
Cancelled		—		—
Options outstanding at March 31, 2009		1,200,000		6.30
Options exercisable at March 31, 2009		802,000		6.30

The per share fair value of options as of January 11, 2008, the grant date was as follows:

Ordinary shares US$2.67 (RMB19.33)

The aggregate intrinsic value of share options outstanding and exercisable as of March 31, 2009 was US$nil and US$nil, respectively.

The weighted average remaining contractual life is 8.75 years as of March 31, 2009.

Total share-based compensation expenses amounting to RMB6,576 and RMB9,115 were recognized for the three-month periods ended March 31, 2009 and 2008, respectively.

There was RMB12,577 of total unrecognized compensation expense related to nonvested restricted shares and share options as of March 31, 2009.

As of March 31, 2009, no other awards have been granted under the 2007 Plan.

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8. INCOME TAXES

On March 16, 2007, the National People’s Congress enacted a new enterprise income tax law, which took effect on January 1, 2008. The new law applies a uniform 25% enterprise income tax rate to both foreign invested enterprises and domestic enterprises. The new law provides a five-year transition period from its effective date for the entitled enterprises which were established before the promulgation date of the new tax law and which were entitled to a preferential tax treatment such as a reduced tax rate or a tax holiday. According to transitional rules published after the new income tax law, one of the Company’s major operating subsidiaries, CCT Shanghai, which was subject to the preferential tax rate of 15%, is now eligible to the phased-in rates: 18% in 2008, 20% in 2009, 22% in 2010, 24% in 2011, 25% in 2012 and thereafter.

On April 11, 2008, the Company consummated the acquisition of an 80% interest in Hai Lai. Hai Lai holds the entire interest in FTBC and Hai Yuen. Hai Lai was incorporated in the PRC and is subject to PRC income tax rate of 25% since 2008. FTBC and Hai Yuen were incorporated in Chongqing of the PRC and are subject to the preferential tax rate of 15% until 2010 in accordance with the western development preferential policy.

The Company considers itself to be permanently reinvested with respect to its investment in its foreign subsidiaries. Accordingly, no deferred income tax liability related to the unremitted earnings of its foreign subsidiaries has been included in the Company’s provision for income taxes. Upon distribution of subsidiaries earnings in the form of dividends or otherwise, the Company would be subject to a withholding tax calculated based on 10% of the gross amount of distribution.

The Company adopted the provisions of FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes — An Interpretation of FASB Statement No. 109” on January 1, 2007. During the three months ended March 31, 2009, the unrecognized tax benefits increased from RMB44,612 to RMB46,555.

9. NET INCOME ATTRIBUTABLE TO CHINACAST EDUCATION CORPORATION PER SHARE

Reconciliation of the basic and diluted net income attributable to ChinaCast Education Corporation per share is as follows:

	For the three months ended March 31,
	2009		2008
Numerator used in basic and diluted net income attributable to ChinaCast Education Corporation per share:
Income attributable to holders of ordinary shares	RMB	19,682		8,230
Shares (denominator):
Weighted average ordinary shares outstanding used in computing basic net income attributable to ChinaCast Education Corporation per share		35,648,251		27,297,256
Plus:
Incremental ordinary shares from assumed exercises of Warrants (Note 11)		—		995,001
Weighted average ordinary shares outstanding used in computing diluted net income attributable to ChinaCast Education Corporation per share		35,648,251		28,292,257
Net income attributable to ChinaCast Education Corporation per share—basic:	RMB	0.55		0.30
Net income attributable to ChinaCast Education Corporation per share—diluted:	RMB	0.55		0.29

The diluted net income attributable to ChinaCast Education Corporation per share calculations for three month ended March 31, 2009 have not included the outstanding unit purchase option (the “UPO”) or the related warrants (Note 11) since the effect is anti-dilutive.

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10. SEGMENT INFORMATION

Since the acquisition of Hai Lai in April 2008, the Company has been organized as two business segments, the E-learning and training service Group (“ELG”), encompassing all the Company’s business operations before the acquisition and the Traditional University Group (“TUG”), offering bachelor and diploma programs to students in the PRC. The Company follows the provisions of SFAS No. 131, “Disclosures about Segments of an Enterprise and Related Information”, which establishes standards for reporting information about operating segments. Operating segments are defined as components of an enterprise about which discrete financial information is available that is evaluated regularly by the chief operating decision maker, or decision making group, in deciding how to allocate resources and in assessing performance.

The Company’s chief operating decision maker is the Chief Executive Officer. The following were details of the Company’s reportable segments:

	For the three months ended March 31,
	2009		2008
	RMB		RMB
Revenues from external customers:
ELG		47,195		59,494
TUG		29,743		—
		76,938		59,494
Additional analysis of revenues from ELG by product or service:
Service		44,319		40,205
Equipment		2,876		19,289
		47,195		59,494
Additional analysis of revenue from ELG by business lines:
Post secondary education distance learning		25,829		22,758
K-12 and content delivery		16,219		15,862
Vocational training, enterprise/government training and networking services		5,147		20,874
		47,195		59,494
Income from operations:
ELG		17,055		7,033
TUG		10,918		—
		27,973		7,033

	As of March		As of December
	31, 2009		31, 2008
	RMB		RMB
Segment assets:
ELG		744,387		725,516
TUG		752,556		773,643
		1,496,943		1,499,159

The Company’s revenues and net income are substantially derived from the PRC. Most of the assets and capital expenditure of the Company are employed in the PRC.

There were no customers accounting for 10% or more of total net revenues for the three months ended March 31, 2009.

Four customers as of March 31, 2009 and four different customers as of December 31, 2008 each accounted for 10% or more of the Company’s accounts receivable balances, representing an aggregate of 53.9% and 55.4% of the Company’s accounts receivable balance at March 31, 2009 and December 31, 2008, respectively.

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11. WARRANTS AND UNIT PURCHASE OPTIONS

In March 2004, Great Wall sold 4,515,975 units in its initial public offering. Each unit consists of one share of the Company’s common stock and two redeemable common stock purchase warrants (“Warrants”). Each Warrant will entitle the holder to purchase from the Company one share of common stock at an exercise price of US$5 commencing on the consummation of the Share Exchange Transaction. In no event will the Company be required to net cash settle the warrant exercise.

In April 2008, 50,100 Warrants had been exercised at an exercise price of US$5.

In June and July 2008, the Company entered into agreements with Fir Tree Value Master Fund, L.P. and Fir Tree Capital Opportunity Master Fund, L.P. (collectively, “Fir Tree”), Sherleigh Associates Inc. Profit Sharing Plan and Sherleigh Associates Inc. Defined Benefit Pension Plan (collectively, “Sherleigh”) and Capela Overseas Ltd (“Capela”), (Fir Tree, Sherleigh and Capela, collectively, the “Warrantholders”), whereby the Company agreed to reduce the exercise price of the Warrants held by Fir Tree, Sherleigh and Capela from US$5.00 per share to US$4.25 per share. In connection with the reduction in the price of the Warrants, in June 2008, Fir Tree exercised in full an aggregate of 3,007,200 Warrants and Sherleigh exercised in full an aggregate of 411,882 Warrants. In July, Capela exercised in full an aggregate of 94,117 Warrants. As additional consideration for the Warrantholders exercising the Warrants in full as well as for the value of the Warrants, in June 2008 the Company issued 459,924 restricted shares of common stock of the Company to Fir Tree and 62,993 restricted shares of common stock of the Company to Sherleigh. In July, the Company issued 14,394 restricted shares of common stock of the Company to Capela.

All the outstanding Warrants expired in March 2009.

In connection with the initial public offering, Great Wall issued, for $100, an “UPO” to the representative of the underwriters to purchase 400,000 units at an exercise price of US$9.90 per unit. In addition, the warrants (“UPO Warrants”) underlying such units are exercisable at US$6.95 per share. In January 2008, the underwriters exercised the UPO to purchase 5,000 units.

There was no remeasurement required for these assumed Warrants and UPO because such assumption is part of the recapitalization in connection with the Share Exchange Transaction.

In connection with the share offering which was consummated in October 2008, the Company sold to the underwriter in December 2008, for nominal consideration, an aggregate of 255,000 Underwriter Warrants with a price of US$3.15 per share. The Underwriter Warrants will be exercisable for five years from the closing date of the share offering. There was no remeasurement required for these Underwriter Warrants since they do not provide for a net cash settlement.

As of March 31, 2009, there were 395,000 UPO units, 10,000 UPO Warrants and 255,000 Underwriter Warrants outstanding.

12. CONTINGENCIES

a) On March 21, 2006, after obtaining the approval of its shareholders, the Company amended its certificate of incorporation, the effect of which was, among other things, to eliminate the provision of the certificate of incorporation that purported to prohibit the amendment of the “business combination” provisions contained therein and to extend the date before which the Company must complete a business combination, to avoid being required to liquidate, from March 23, 2006 to December 31, 2006. Because extending the period during which the Company could consummate a business combination was not contemplated by the initial public offering (“IPO”) prospectus, shareholders may have securities law claims against the Company for rescission (under which a successful claimant would have the right to receive the total amount paid for his or her shares, plus interest and less any income earned on the shares, in exchange for surrender of the shares) or damages (compensation for loss on an investment caused by alleged material misrepresentations or omissions in the sale of the security). Such claims might entitle shareholders asserting them to up to US$6.00 per share of common stock, based on the initial offering price of the public units comprised of stock and warrants, less any amount received from sale of the original warrants purchased with them and plus interest from the date of the IPO. A successful claimant for damages under federal or state law could be awarded an amount to compensate for the decrease in value of his or her shares caused by the alleged violation (including, possibly, punitive damages), together with interest, while retaining the shares. The Company believes the shareholder claims for rescission or damages are remote. As such, the Company has not recorded a liability for such possible rescission. However, the Company cannot definitively predict whether shareholders will bring such claims, how many might bring them or the extent to which they might be successful.

b) The Company may be subject to claims for rescission or other securities law claims resulting from the failure to disclose that the charter provision purporting to prohibit certain amendments was possibly inconsistent with Delaware’s General Corporation Law. The Company may also be subject to such claims as a result of inaccuracies in other disclosures, as follows: It may be argued that the IPO prospectus misstated the vote required by its charter to approve a business combination by providing that “[w]e will proceed with a business combination only if the public shareholders who own at least a majority of the shares of common stock sold in [that] offering vote in favor [of it] ...,” and that the Exchange Act reports have been inaccurate in describing ChinaCast as a leading provider of e-learning content (as opposed to being primarily a content carrier). On November 13, 2006, the Company filed a Current Report on Form 8-K with the SEC regarding this last item. The Company is unable to predict the likelihood that claims might be made with regard to the foregoing or estimate any amounts for which it might be liable if any such claim was made. As such, the Company has not recorded a liability for such possible rescission.

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13. SUBSEQUENT EVENT

On April 13, 2009, the Company announced that it has signed a Memorandum of Understanding to acquire a 100% interest in the holding company of a private, accredited university located in Southwestern China. The acquisition will be subject to the completion of the required audited financials and other customary closing conditions.

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Item 2. Management’s Discussion and Analysis or Plan of Operation.

Forward Looking Statement

Portions of the discussion and analysis below contain certain statements that are not descriptions of historical facts, but are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities and Exchange Act of 1934. These forward-looking statements may include statements about our plans and objectives for future expansion, including into post-secondary brick and mortar education market; expectations for E-learning and training services the PRC; anticipated margins for our solutions; general and cyclical economic and business conditions, and, in particular, those in the PRC’s education market; our ability to enter into and renew key corporate and strategic relationships with our customers and suppliers; changes in the favorable tax incentives enjoyed by our PRC operating companies; and other statements containing forward looking terminology such as “may”, “expects”, “believes”, “anticipates”, “intends”, “projects”, “looking forward” or similar terms, variations of such terms or the negative of such terms. Such information is based upon various assumptions made by, and expectations of, our management that were reasonable when made but may prove to be incorrect. All of such assumptions are inherently subject to uncertainties and contingencies beyond our control and upon assumptions with respect to future business decisions which are subject to change. Accordingly, there can be no assurance that actual results will meet expectations and actual results may vary (perhaps materially) from certain of the results anticipated herein. For a further description of these and other risks and uncertainties, see our most recent Annual Report filed with the Securities and Exchange Commission (SEC) on Form 10-K, and our subsequent SEC filings. The following discussion of our financial condition and results of operations should also be read in conjunction with our unaudited condensed consolidated financial statements and the notes to those financial statements appearing elsewhere in this Form 10-Q.

Overview

We were formed on August 20, 2003 to serve as a vehicle to effect a merger, capital stock exchange, asset acquisition or other similar business combination with a company having its primary operations in the PRC.

On December 22, 2006, we consummated the acquisition of ChinaCast Communication Holdings Limited (“CCH”). As of December 22, 2006, shareholders of CCH that had previously executed Letters of Undertaking with us with respect to the sale of their shares of CCH and that collectively held 239,648,953 shares of CCH or 51.22% of CCH’s outstanding shares accepted the voluntary conditional offer (the “Offer”) made in Singapore by DBS Bank, for and on our behalf, to acquire all of the outstanding ordinary shares of CCH. On January 18, 2007, at the end of the Offer period, acceptance of the Offer totaled 80.27% which is the basis we accounted for the acquisition. As a result of this acceptance of the Offer by CCH shareholders, CCH has become our subsidiary and such acquisition qualified as a “business combination” under our amended and restated certificate of incorporation. During 2007, CEC acquired additional shares by issuing shares of CEC to certain original ChinaCast shareholders and increased its holdings to 100% of the outstanding ordinary shares of ChinaCast. The 19.73% of the additional shares acquired were accounted for on the same basis as the acquisition of the 80.27% shares.

We are subject to risks common to companies operating in China, including risks inherent in our distribution and commercialization efforts, uncertainty of foreign regulatory approvals and laws, the need for future capital and retention of key employees. We cannot provide assurance that we will generate revenues or achieve and sustain profitability in the future.

Critical Accounting Policies

For summary of the critical accounting policies and the significant judgments and estimates made on the part of the management, see item 7 of Form 10-K for the year ended December 31, 2008 filed by the Company on March 16, 2009. The following are accounting policies that were either new or were adopted during the three months ended March 31, 2009.

(1) Adoption of SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements — an amendment of ARB No. 51”.

Effective January 1, 2009, we adopted SFAS 160. The adoption did not impact the condensed consolidated financial statements for the quarter ended March 31, 2009, except for the presentation and disclosure requirements affecting all periods presented including (a) the noncontrolling interest has been reclassified to equity, (b) consolidated net income or loss has been adjusted to include the net income or loss attributable to the noncontrolling interest, (c) consolidated comprehensive income or loss has been adjusted to include the comprehensive income or loss attributable to the noncontrolling interest and (d) for each reporting period the Company must present a reconciliation at the beginning and end of the period of the carrying amount of total equity and equity attributable to the Company and the noncontrolling interest.

(2) Adoption of SFAS No. 141(R), “Business Combinations”.

Effective January 1, 2009, the Company adopted SFAS 141(R). The adoption of SFAS No. 141(R) did not have a significant effect on our consolidated financial statements for the quarter ended March 31, 2009.

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Results of Operations

For the purpose of the discussion and analysis of the results of ChinaCast Education Corporation (“CEC”), its subsidiaries, and variable interest entities in this section, the consolidated group is referred to as the “Company”. The satellite operating entity, ChinaCast Company Limited, is referred to as “CCL”. CCL was not accounted for as a consolidated variable interest entity, because the Company was not considered to be the primary beneficiary of CCL. CCL’s registered branch in Beijing is referred to as “CCLBJ.” The US dollar figures presented below were based on the historical exchange rate of 1USD = 6.8RMB at March 31, 2009 for the three months ended March 31, 2009.

Since our acquisition of Hai Lai, we have been organized as two business segments, the E-learning and training service Group (the “ELG”), encompassing all the Company’s businesses before the acquisition, and the Traditional University Group (the “TUG”), offering bachelor and diploma programs to students in China.

Three Months Ended March 31, 2009 compared to the Three Months Ended March 31, 2008. The revenue of the Company for the three months ended March 31, 2009 amounted to RMB76.9 million (US$11.3 million) representing an increase of 29.3%over the revenue of the corresponding period in 2008. The increase was mainly due to the acquisition of Hai Lai, which forms the TUG, in the second quarter of 2008.

Revenue of the ELG amounted to RMB47.2 million (US$6.9 million) for the three months ended March 31, 2009, as compared to revenue of RMB59.5 of the ELG for the three months ended March 31, 2008. Service income, mainly of a recurring nature amounted to RMB44.3 million (US$6.5 million) for the three months ended March 31, 2009, compared to RMB40.2 million in the same period in 2008. Equipment sales, mainly project based, amounted to RMB2.9 million (US$0.4 million) for the three months ended March 31, 2009, against RMB19.3 million during the same period last year. The following table provides a summary of the ELG’s revenue by business lines:

					Three Months
					Ended
	Three Months ended				March 31,
	March 31, 2009				2008
(millions)	US$		RMB		RMB
Post secondary education distance learning		3.8		25.9		22.8
K-12 and content delivery		2.4		16.2		15.9
Vocational training, enterprise / government training and networking and English training services		0.7		5.1		20.9
Total ELG revenue		6.9		47.2		59.5

Net revenue from post secondary education distance learning services increased from RMB22.8 million in the three months ended March 31, 2008 to RMB25.9 million (US$3.8 million) in three months ended March 31, 2009. The total number of post-secondary students enrolled in courses using the Company’s distance learning platforms including contracts with CCLBJ but excluding Tongfang Education’s students, increased to 135,000 at September 30, 2008 from 127,000 at the end of March 31, 2008. The increase was due to the continuous growth of students enrolled in distance learning degree courses with the universities.

16

The revenue from the K-12 and content delivery business increased slightly by approximately 1.9% from RMB15.9 million for the three months ended March 31, 2008 to RMB16.2 million (US$2.4 million) for the three months ended March 31, 2009. The number of subscribing schools for K-12 distance learning services has stabilized at 6,500.

Net revenue from vocational and career training services, enterprise government training and networking and English training services decreased from RMB20.9 million during the three months ended March 31, 2008 to RMB5.1 million (US$0.7 million) during the three months ended March 31, 2009. The changes were mainly due to fluctuations in equipment sales, the nature of which is not recurring and the change of the business model in English training service. Equipment sales included in the revenue of this business line amounted to RMB2.9 million (US$0.4 million) for the three months ended March 31, 2009, against RMB19.3 million during the same period last year.

TUG was newly established in the second quarter of 2008 after the acquisition of Hai Lai, and its revenue amounted to RMB 29.7 million (US$4.4 million) in the three months ended March 31, 2009. FTBC had approximately 11,000 students and generated RMB26.1 million (US$3.8 million) tuition revenue in the first quarter of 2009. Other revenue of TUG, which comprises mainly accommodation and catering revenue, amounted to RMB3.6 million (US$0.5 million).

Cost of sales of the Company decreased by 1.0% from RMB31.1 million during the first quarter of 2008 to RMB30.8 million (US$4.5 million) during the first quarter of 2009. The decrease was due to the reduction in equipment sales, which was offset by the addition of the cost of sales of the TUG.

ELG’s cost of materials decreased from RMB19.1 million during the first quarter of 2008 to RMB2.8 million (US$0.4 million) during the first quarter of 2009. The changes were mainly due to fluctuations in equipment sales. The cost of service for the ELG amounted to RMB9.4 million (US$1.4 million) for the three months ended March 31, 2009, as compared to RMB12.0 million in the same period in 2008. The decrease in the first quarter of 2009 as compared to the same period of 2008 was mainly due to the change of the business model in English training service.

TUG’s cost amounted to RMB18.6 million (US$2.7 million) for the three months ended March 31, 2009, which comprises payroll to teaching staff, depreciation and amortization expense in relation to the intangible asset.

ELG’s gross profit margin increased by 26.6 percentage points, from 47.7% in the first quarter of 2008 to 74.3% in the first quarter of 2009. The increase was due to the decrease in equipment sales, which has a low margin and the increase in post secondary distance learning education revenue. TUG’s gross profit margin was 37.3% for the first quarter of 2009.

For the three months ended March 31, 2009, the Company received a management service fee of RMB1.0 million (US$0.1 million), as compared to RMB0.8 million during the three months ended March 31, 2008. The management service fee arose from various agreements with CCL that entitled the Company to the economic benefits of its Beijing Branch — CCLBJ. CCLBJ is in the process of transferring all its outstanding businesses, mainly in post secondary education distance learning, to the Company. The increase in management fee was mainly due to the reduction in expenses in CCLBJ.

Selling and marketing expenses decreased from RMB3.5 million in the first quarter of 2008 to RMB1.9 million (US$0.3 million) in the first quarter of 2009. The decrease was due to the reduction in selling and marketing activities of the English training division after its change of the business model since 2008 as described in MD&A in the Form 10-K for the year ended December 31, 2008. Share-based compensation included in selling and marketing expenses also decreased from RMB1.3 million in the first quarter of 2008 to RMB0.8 million in the first quarter of 2009.

17

General and administrative expenses increased slightly by 1.5% to RMB17.9 million (US$2.6 million) in the three months ended March 31, 2009 from RMB18.2 million during the three months ended March 31, 2008. The TUG incurred a general and administrative expense of RMB1.3 million (US$0.2 million) in the first quarter of 2009. Share-based compensation included in general and administrative expenses decreased from RMB7.8 million in the first quarter of 2008 to RMB5.7 million (US$0.8 million) in the first quarter of 2009.

The Company has foreign exchange gain of RMB0.2 million (US$0.03 million) for the first quarter of 2009 compared to a loss of RMB0.5 million during the first quarter of 2008. The change was a result of stabilization of the change in the RMB/US exchange rate and the reduction of the Company’s holding in US dollars.

Interest income decreased from RMB5.9 million in the first quarter of 2008 to RMB 2.3 million (US$0.3 million) in the first quarter of 2009. The decrease in the first quarter of 2009 was due to the reduction in interest rate as well as a lower amount of the Company’s term deposits.

Overall, profit before income tax and loss in equity investments increased from RMB12.9 million in the three months ended March 31, 2008 to RMB28.8 million (US$4.2 million) in the three months ended March 31, 2008, an increase of 123.3%. The increase was mainly due the TUG, which contributed RMB9.0 million (US$1.3 million) to the profit before income tax and loss in equity investments.

The Company recorded a loss in equity investments amounted to RMB0.3 million (US$0.04 million) in the first quarter of 2009 compared to a loss of RMB0.4 million in the first quarter of 2008.

Income taxes increased by 61.5% from RMB3.9 million in the first quarter of 2008 to RMB6.3 million (US$0.9 million) in the first quarter of 2009. The increase was due to the increase in business and the newly acquired TUG.

Noncontrolling interest amounted to RMB2.6 million (US$0.4 million) for the three months ended March 31, 2009 as compared to RMB0.4 million for the three months ended March 31, 2008. The increase in minority interest in 2009 was mainly due to the acquisition of Hai Lai, in which there is a 20% minority stake.

Net income attributable to the Company increased by 139.1% to RMB19.7 million (US$2.9 million) in the three months ended March 31, 2009 from RMB8.2 million in the three months ended March 31, 2008. The increase was mainly due to the increase in business and the newly acquired TUG.

On March 16, 2007, the National People’s Congress of China enacted a new tax law, under which foreign-invested enterprises and domestic companies will be subject to enterprise income tax at a uniform rate of 25% . The new tax law became effective on January 1, 2008. There is a transition period, during which enterprises may continue to enjoy existing preferential tax treatment or in which their tax rates may be gradually adjusted to 25%. Following the effectiveness of the new tax law, one of the Company’s major operating subsidiaries, CCT Shanghai, which was subject to the preferential tax rate of 15%, is now eligible to the phased-in rates, which is 18% in 2008, 20% in 2009, 22% in 2210, 24% in 2011, 25% in 2012 and thereafter.

18

Liquidity and Capital Resources

The following is a summary of the key items from the consolidated balance sheets.

					As of
	As of				December 31,
	March 31, 2009				2008
(millions)	RMB		US$		RMB
Cash and cash equivalents		88.0		12.9		220.1
Term deposits		502.7		73.9		369.0
Subtotal		590.7		86.8		589.1
Accounts receivable		46.9		6.9		32.6
Inventory		1.4		0.2		1.4
Prepaid expenses and other current assets		6.4		0.9		9.0
Total current assets		647.2		95.2		634.6
Non-current advances to a related party		104.3		15.3		110.2
Total assets		1,496.9		220.1		1,499.2

Cash and cash equivalents balances decreased from RMB220.1 million as at December 31, 2008, to RMB88.0 million (US$12.9 million) as at March 31, 2009. The decrease of approximately 60.0% was mainly because of transfer to fixed deposits.

There was net cash generated from operating activities of RMB0.04 million (US$0.01 million) in the three months ended March 31, 2009 as compared to net cash from operating activities of RMB13.0 million in the three months ended March 31, 2008. In the first quarter of 2009, there was the increase in account receivable in the current period and a considerable part of the revenue recognized, in particular the revenue of the TUG, was received in previous periods. Revenue is recognized ratably throughout the periods services are provided, but payments may be received ahead of or behind the revenue being recognized. Payments received before recognition of revenue are recorded as deferred revenue while payments not received at the time goods and service have been provided are recorded as accounts receivable. For revenue related to project sales, the timing of payments depended upon the terms of the contracts.

Net cash used in investment activities in the first three months of 2009 was RMB132.2 million (US$19.4 million), mainly reflecting the transfer from term deposit of RMB133.7 million (US$19.7 million). For the three months ended March 31, 2008, transfer from term deposit amounted to RMB24.3 million.

Net cash provided by financing activities in the first three months of 2009 was RMBnil.

The Company believes that its cash and cash equivalents balances, together with its access to financing sources, will continue to be sufficient to meet the working capital needs associated with its current operations on an ongoing basis, although that cannot be assured. Also, it is possible that the Company’s cash flow requirements could increase as a result of a number of factors, including unfavorable timing of cash flow events, the decision to increase investment in marketing and development activities or the use of cash for acquisitions to accelerate its growth.

Total assets at March 31, 2009 amounted to RMB1,496.9 million (US$220.1 million), a reduction of 0.1%, when compared to the total assets amounting to RMB1,499.2 million at December 31, 2008. Total current assets increased by 2.0% to RMB647.2 million.

Accounts receivable increased from RMB32.6 million as at December 31, 2008 to RMB46.9 million (US$6.9 million) at March 31, 2009. The increase was due to the seasonal factor in the settlement of account receivable by the Company’s customers. Most of the business partners are long term customers and settle their accounts promptly. All account receivables are reviewed regularly and provisions have been made for any balances that are disputed or doubtful.

Inventory, mainly made up of satellite transmission and receiving equipment, decreased slightly to RMB1.4 million (US$0.2 million) at March 31, 2009.

19

Prepaid expenses and other current assets decreased from RMB9.0 million as at December 31, 2008 to RMB6.4 million (US$0.9 million). The increase was mainly due to the reduction in accrued interest for the term deposits.

The Company also funded the operation of a related party, CCL, which held the satellite license before transferring it to the Company. The related party is still in the process of transferring its satellite related businesses to the Company. Amounts advanced to the related party were RMB104.3 million (US$15.3 million) as at March 31, 2009. As at December 31, 2008, the amount advanced was RMB110.2 million, the decrease is mainly due to repayment made.

As at March 31, 2009, the Company had total long-term bank loans of RMB78.4 million (US$11.5 million) as a result of the acquisition of Hai Lai. RMB78.4 million of the bank loans are expiring within one year. All the bank borrowings were secured by pledge of certain land use rights and buildings in Hai Lai, the entitlement to accommodation income of the student apartments of FTBC and guarantees given by certain individuals.

Off-Balance Sheet Arrangements

The Company has not entered any financial guarantees or other commitments to guarantee the payment obligations of any third parties.

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Item 3. Quantitative And Qualitative Disclosures About Market Risk

Foreign Exchange Risk

     Our reporting currency is the Renminbi (“RMB”). Transactions in other currencies are recorded in RMB at the rates of exchange prevailing when the transactions occur. Monetary assets and liabilities denominated in other currencies are remeasured into RMB at rates of exchange in effect at the balance sheet dates. Exchange gains and losses are recorded in our statements of operations as a component of current period earnings.

     The PRC State Administration for Foreign Exchange, under the authority of the People’s Bank of China, controls the conversion of Renminbi into foreign currencies. The principal regulation governing foreign currency exchange in China is the Foreign Currency Administration Rules (1996), as amended, or the “Rules.” Under the Rules, once various procedural requirements are met, RMB is convertible for current account transactions, including trade and service-related foreign exchange transactions and dividend payments, but not for capital account transactions, including direct investment, loans or investments in securities outside China, without prior approval of the State Administration of Foreign Exchange of the People’s Republic of China, or its local counterparts.

     Since July 2005, the RMB has no longer been pegged to the U.S. dollar. Although currently the Renminbi exchange rate versus the U.S. dollar is restricted to a rise or fall of no more than 0.3% per day and the People’s Bank of China regularly intervenes in the foreign exchange market to prevent significant short-term fluctuations in the exchange rate, the Renminbi 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, the PRC authorities may lift restrictions on fluctuations in the Renminbi exchange rate and lessen intervention in the foreign exchange market. As of the close of business on March 31, 2009, the exchange rate between the RMB and the U.S. dollar was RMB6.8 to US$1.

     We conduct substantially all of our operations through our PRC operating companies, and their financial performance and position are measured in terms of RMB. The majority of our net sales and purchases are denominated in RMB.

     Any devaluation of the RMB against the U.S. dollar would consequently have an adverse effect on our financial performance and asset values when measured in terms of U.S. dollars. In addition, from time to time we may have U.S. dollar denominated fixed deposits, and therefore a decoupling of the RMB may affect our financial performance in the future.

     We recognized a foreign exchange gain of approximately RMB0.17 million (US$0.03 million) for the three ended March 31, 2009. We do not currently engage in hedging activities, as such, we may in the future experience economic loss as a result of any foreign currency exchange rate fluctuations.

Interest Rate Risk

     We have a long history of investing excess cash under a conservative corporate policy that only allows investments in bank fixed deposits, with preservation of capital and liquidity as the primary objectives. For the three months ended March31, 2009, we recorded an interest income of RMB2.3 million (US$0.3 million). Any significant changes in interest rate might have an adverse effect on this interest income.

     We have short-term and long-term debt amounting to RMB78.4 million (US$11.5 million) as at March 31, 2009. Interest paid in the three months ended March 31, 2009 was RMB1.4 million. Any significant changes in interest rate might have an adverse effect on interest expense. There have been no material changes associated with the impact of inflation and concentration of credit risk from that previously disclosed in our 2008 Annual Report on Form 10-K.

Inflation

     There have been no material changes associated with the impact of inflation from that previously disclosed in our 2008 Annual Report on Form 10-K.

Item 4. Controls and Procedures.

     We maintain “disclosure controls and procedures,” as such term is defined under Exchange Act Rule 13a-15(e), that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures. In designing and evaluating the disclosure controls and procedures, our management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives and in reaching a reasonable level of assurance our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. We have carried out an evaluation under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of March 31, 2009. Based upon their evaluation and subject to the foregoing, the Chief Executive Officer and Chief Financial Officer concluded that as of March 31, 2009 our disclosure controls and procedures were effective.

     There were no changes in our internal control over financial reporting during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

21

PART II — OTHER INFORMATION

Item 1. Legal Proceedings.

     We are not currently a party to any pending material legal proceeding.

Item 1A. Risk Factors.

     There are no material changes from risk factors previously disclosed in the Annual Report on Form 10-K for the year ended December 31, 2008, filed with the SEC on March 16, 2009.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

     None.

Item 3. Defaults Upon Senior Securities.

     None.

Item 4. Submission of Matters To a Vote of Security Holders.

     None.

Item 5. Other Information.

     None.

Item 6. Exhibits.

31.1	Certification of Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification of Chief Executive Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification of Chief Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

22

SIGNATURES

     In accordance with the requirements of the Securities Exchange Act of 1934, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	CHINACAST EDUCATION CORPORATION (Registrant)
Date: May 11, 2009	By:	/s/ Ron Chan Tze Ngon
	Name: Ron Chan Tze Ngon Title: Chairman of the Board, Chief Executive Officer (Principal Executive Officer)
	By:	/s/ Antonio Sena
	Name: Antonio Sena Title: Chief Financial Officer and Secretary (Principal Financial Officer)

23

EX-31.1

Exhibit 31.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
PURSUANT TO RULES 13a-14(a) AND 15d-14(a)
OF THE SECURITIES EXCHANGE ACT OF 1934

     I, Ron Chan Tze Ngon, Chairman of the Board and Chief Executive Officer (Principal Executive Officer) of ChinaCast Education Corporation, certify that:

     1. I have reviewed this quarterly report on Form 10-Q of ChinaCast Education Corporation;

     2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

     3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

     4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

     a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

     b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

     c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

     d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

     5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

     a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

     b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated May 11, 2009	/s/ Ron Chan Tze Ngon
	Ron Chan Tze Ngon
	Chairman of the Board and Chief Executive Officer (Principal Executive Officer)

EX-31.2

Exhibit 31.2

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
PURSUANT TO RULES 13a-14(a) AND 15d-14(a)
OF THE SECURITIES EXCHANGE ACT OF 1934

     I, Antonio Sena, Chief Financial Officer (Principal Financial Officer) of ChinaCast Education Corporation, certify that:

     1. I have reviewed this quarterly report on Form 10-Q of ChinaCast Education Corporation;

     2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

     3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

     4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

     a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

     b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

     c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

     d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

     5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

     a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

     b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated: May 11, 2009	/s/ Antonio Sena
	Antonio Sena
	Chief Financial Officer (Principal Executive Officer)

EX-32.1

Exhibit 32.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

     In connection with the Quarterly Report of ChinaCast Education Corporation on Form 10-Q for the quarter ended March 31, 2009 as filed with the Securities and Exchange Commission (the “Report”), I, Ron Chan Tze Ngon, Chairman of the Board and Chief Executive Officer of ChinaCast Education Corporation, certify, pursuant to 18 U.S.C. Section 1350, as adopted by Section 906 of the Sarbanes-Oxley Act of 2002, that:

     1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

     2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of ChinaCast Education Corporation.

Dated: May 11, 2009	/s/ Ron Chan Tze Ngon
	Ron Chan Tze Ngon
	Chairman of the Board and Chief Executive Officer (Principal Executive Officer)

EX-32.2

Exhibit 32.2

CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

     In connection with the Quarterly Report of ChinaCast Education Corporation on Form 10-Q for the quarter ended March 31, 2009 as filed with the Securities and Exchange Commission (the “Report”), I, Antonio Sena , Chief Financial Officer of ChinaCast Education Corporation, certify, pursuant to 18 U.S.C. Section 1350, as adopted by Section 906 of the Sarbanes-Oxley Act of 2002, that:

     1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

     2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of ChinaCast Education Corporation.

Dated May 11, 2009	/s/ Antonio Sena
	Antonio Sena
	Chief Financial Officer (Principal Financial Officer)