China Education Resources Inc. provided shareholders and investors an update on its business performance, current assessment of performance and changes to its business strategy.
BUSINESS STRATEGY
The goal of CER has always been to position CERSP.com as China’s central on-line location for the K-12 education sector (students, teachers, parents, schools, government and administrators). CER’s vision is to take the world’s largest education system into the twenty-first century and make CERSP.com the world’s largest on-line community.
CERSP is an advanced learning, working and sharing platform that offers China’s teachers, students, administrators, and parents a wide range of services and products. Through the CERSP family of portals, education users can access, discover, learn, socialize, create and share new curriculum materials.
In May 2008 the Company announced it had completed upgrades to its online education suite of digital products and services. The CERSP framework, with 36 sub portals, including Education Services Portal (ESP) was finally assembled. As with all technologies, its capabilities and features are never finished, but always improved and enlarged.
RECENT FINANCING
In January 2008, the company raised $2.3 million to enable CER to deploy several new services, including ESP and CER’s successful teacher-training program.
SUCCESS OF CERSP.COM
In 2007 and 2008, the company began to build up its CERSP capabilities through strategic agreements; primarily its agreements with California State University Monterey Bay (CSUMB) Extended Education and International Programs (EEIP); China Telecom Information Development Co. LTD (CTID); SCOLA® and with federal and provincial ministries of education for CER’s online teacher training program.
The success of CERSP began to have commercial results in the second half of 2007. Although overall revenues decreased, primarily through the deliberate decrease in the Company’s traditional book selling business, there were initial successes of commercializing the CERSP portal through online teacher training.
SUCCESS OF TEACHER TRAINING PROGRAMS
The teacher training program is a key element of the Chinese government’s new creative curriculum methodology, which is an essential element to modernizing China’s education system.
To gain rapid adoption of China’s new curriculum and the internet portal system, CER and China’s Curriculum Development Center (CDC) initially focused on the development and on-line training of the new curriculum for teachers. The portal now contains hundreds of thousands of pages of new curriculum covering all key subjects. In collaboration with the CDC, CER has completed 25 online government certificate courses aimed at the primary, middle school, and high school teachers.
STRATEGIC RELATIONSHIPS
California State University Monterey Bay (CSUMB) Extended Education and International Programs (EEIP)
In November 2007 China Education and CSUMB/EEIP announced a partnership program designed to offer U.S. based English language training for high school students in China and Mandarin language training for primary grades in the United States. The partnership is intended to use China Education’s web-based gateway portal (CERSP.com) to share best teaching practices in a variety of subject areas to China’s K-12 teaching and learning community.
Both China Education and CSUMB/EEIP plan to use the portal to create a new means of international education collaboration, resource sharing, and developing new teaching and learning strategies. The partnership is expected to benefit teachers and students in both countries. It will also to promote better understanding and the development of constructive, positive relationships between the people of China and the United States.
The agreement paves the way for a number of strategic initiatives including:
1. The creation of virtual classrooms in China and the U.S. that connect American and Chinese students, who will help each other learn Chinese and English, study respective cultures using personal interaction, and enable educators to share best teaching practices in a variety of subject areas;
2. Making CSUMB branded English language learning programs available to high school students in China through broadband connections in homes and schools; and
3. Making language materials designed in China available to support the teaching of Mandarin by and to non-native speakers of Mandarin in United States elementary schools;
As of today, the e-classroom portal system has been developed, but the virtual classroom content is incomplete.
CHINA TELECOM
In January 2008, CER’s subsidiary, Today’s Teachers Technology and Culture Ltd. (TTTC), signed an agreement with China Telecom Information Development Co. LTD (CTID) to develop and market education content for CTID online “Video on Demand” program. The intent was to access over 30 million broadband users with its proprietary and licensed products, including English as a Second Language (ESL) training, tutoring services, digital textbooks, digital supplemental education material and more. The program is temporary postponed due to recent re-structure of China Telecom. However, the company is continuing to develop the content material for this program.
Education Services Portal (ESP) Development and Beta-Testing
In April 2008, CER launched its beta version of ESP, which evolved from the Company’s development of the teacher training platform, ‘My Study Room’ and ‘Push E-mail’ as well other features. ESP is a subscription-based service that seamlessly integrates with CER’s flagship CERSP.COM learning portal.
ESP helps teachers prepare education materials, such as lesson plans and testing analysis, and for preparing study aids for students in the classroom or at home after school. ESP provides important, unique education tools, resources and networks to teachers and students that enrich their education experience and improve creative thinking.
PRESENT SITUATION
General Assessment
As a result of decreasing market valuations throughout the global community, CER decided to downsize its staff and minimize expenditures. This foresight enables the Company to run operations and ESP program implementation at a slower rate, but for a longer period of time.
The Company stated in its MD&A for the six months ended June 30, 2008, that it expected it could achieve a breakeven bottom line for the current financial year if the progress of the Company’s fundamentals progressed in accordance with its plan of management. Unfortunately, during the implementation phase of the Company’s commercialization plan, management discovered that it needed to adapt its business plan to meet some unforeseen market conditions.
CER believes that while the commercialization of its business has been slow in terms of revenue generation, the business strategy is still fundamentally sound. A number of the products and services developed by the company are acknowledged as industry leaders. The teacher training, for instance, is recognized by the MOE as an industry standard, the company currently has the world’s largest teacher blog.
ESP Implementation and Commercialization
Currently, over 1,200 schools have applied for enrollment in the ESP program, from which over 500 schools have been processed and enrolled; including approximately 500,000 users who now have active accounts. Due to its smaller staff, CER has experienced slower than expected ESP enrollment. In addition, during the ongoing ESP implementation phase, the Company discovered that most of the portals functions are under utilized.
As part of the Ministry of Educations’ efforts to bring the 21st century internet to rural areas, TTTC is helping teachers in those areas to use ESP. TTTC has experienced a slower than expected process for implementing ESP. Many schools, especially schools in rural areas and those urban areas with a large influx of rural population do not have much experience with the internet. To facilitate implementation of ESP and to help these inexperienced users, TTTC is building up its customer services team to help students and teachers. Thus far, the solution is based on training teachers and students by using the ESP portal’s services, including memory games, online tutoring, short message system, simple testing, etc.
In addition, the Company plans to launch a school-wide, education-centric, short message system and an online tutoring program very soon and additional developments are expected to deploy later this year.
Teacher Training
CERSP is considered by most teacher experts in China to have the best online teacher training content available in China. Since May of this year approximately 2,200 teachers have participated CER’s individual teacher training program, at an average price of approximately $26 (180 RMB) per course and generated approximately $64,000 (437,000 RMB). This individual program is different than the previous federal and provincial sponsored programs that China Education was part of the past.
However, CER is beginning to experience competition in the individual teacher training program, which is beginning to erode this pricing structure. The Company has recommended to MOE that it set up a minimum online teacher training price structure, which CER believes will encourage faster implementation across the country.
In addition, heading into the current school year, the Chinese central government has mandated that 5% of the education budget must be used for teacher training and continuing study. These funds are earmarked to school level. Consequently CER management believes some of this will be used for the ESP program and continues to work with the various authorities, particularly the municipal and district level authorities.
CER’S FUTURE – ADAPTING THE BUSINESS PLAN
In short, the company’s current strategy is to generate revenue as soon as possible by concentrating on several product lines that are expected to produce revenue quickly. Going forward, China Education plans to:
- Continue its good working relationships and agreements with:
– National and regional government education agencies;
– Over 1,200 schools, including administrators, teachers, parents, students and other education professionals;
– Strategic partners;
- Continued improvements of the CERSP.COM portal system; especially the ESP platform, which will:
– Initiate its ESP online tutoring program;
– Adding content to the Testing and Assessment Center (“TAC”) module;
– Adding more products to the Student Activity Center module;
- Add a new ESP School Set-up and Support Team;
- Add a new User Training Team to teach teachers, parents and students how to use ESP and other CERSP functions.
Upcoming ESP platform developments
China Education has a number of ongoing improvements to ESP, including adding content to the Testing and Assessment Center (“TAC”), which enables schools to create and administer tests and assessments that align with learning objectives and automatically reports raw data results and various analyses that can be used to identify areas in which the student may need extra help and recommend learning strategies. The TAC provides a repository for education E-portfolios, which are complete records of each student’s learning and achievements.
Another ongoing improvement is the Student Activity Center, which provides an informal environment where students can gather online to visit with each other, find relaxing, education-related activities and play learning games using points they buy or earn from their educational achievements. The Center also features a customized education resource search function.
Entering the Tutoring Market:
There are currently 150 tutors taking part in CER’s ESP online portal training program. Management believes it will have more than 400 tutors using this platform to assist K-12 students in 2009.
According to China media resources, 40% of China’s 200 million K-12 students are using tutoring. Assuming each family spends 100 RMB per month for tutoring, the current potential tutoring market in China is over USD$140 billion (960 billion RMB) annually. There are more than 100 online tutoring companies in China, of which only about 10 companies are of competitive size.
According to information from ChinaEdu, it is the largest online tutoring company in China with more than 400 teachers signed up as their online tutors and claims to have 50% of China’s online tutoring market share.
CER is organizing School Set-up and Support Teams to assist school administrators with the ESP registration process. Setting up schools’ ESP programs includes collecting user information; setting up e-mail accounts for teachers, students and parents who do not have them; and then setting up the individual ESP accounts. In addition, there will be ESP technicians to help with technical support.
User Training Teams will be used to instruct individual users (students, teachers, administrators) in each school on how to set up and use their own ESP home page.
Funding
Management has identified two key hurdles it needs to overcome to implement the strategy previously outlined. It must overcome the relative lack of internet knowledge of its targeted customers who find ESP too complicated, which the Company is already beginning to implement; and it must raise sufficient financial capital.
While immediate funding is not required, the Company does intend to raise capital in 2009. The infusion of capital will be used to hire senior management in China; ESP sales teams; school set-up teams; and training teams. The Company is developing a capital budget to quantify the amount necessary to fund these initiatives and other company operations.
China Education’s CEO and Board of Directors are mindful of shareholders’ desire to minimize dilution and will try to keep it at a minimum. After careful consideration, the Board believes that this is the best course for the company and its shareholders.
ABOUT CHINA EDUCATION RESOURCES INC.
In collaboration with China’s various education authorities and experts, China Education Resources Inc. (CER) is helping to transform the curriculum of the world’s largest educational system. Recognizing the need for centralization and increased accessibility to address the Chinese Central government’s 2000 education reform policy changes, China Education Resources Inc. has created educational tools and curricula for China’s entire kindergarten through twelfth grade system. By implementing the government’s goal of converting the existing educational system from memory-based learning to creative thinking and utilizing a more interactive approach to embrace a world-based economy, CER has played an integral part in positioning China’s educational system to reach new heights.
Contacts:
China Education Resources Inc.
Craig Bird
Shareholder/Investor Information
(215) 392-4981
Email: CHBird@segue.biz
Website: http://www.chinaeducationresources.com
Source: China Education Resources Inc.