UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)
x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

	For the quarterly period ended June 30, 2012

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

	For the transition period from to

Commission file number 000-52347

TSINGDA EEDU CORPORATION

(Exact name of registrant as specified in its charter)


Cayman Islands		N/A
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)

No. 0620, Yongleyingshiwenhuanan Rd.,
Yongledian Town, Tongzhou District,
Beijing, PR China
		101105
(Address of principal executive offices)		(Zip Code)
Registrant’s telephone number (including area code): +45-8842 9181

(Former name, former address and former fiscal year, if changed since last report)

Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the issuer was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days

x Yes o No

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 (§ 229.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x 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.


Large accelerated filer o		Accelerated filer	o

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

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

State the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 35,754,862 ordinary shares, par value $0.000384 per share, as of August 16, 2012.

TABLE OF CONTENTS

		Page

PART I - FINANCIAL INFORMATION

Item 1:	Financial Statements	3
Item 2:	Management’s Discussion and Analysis of Financial Condition and Results of Operations	11
Item 3:	Quantitative and Qualitative Disclosures About Market Risk	18
Item 4:	Controls and Procedures	18

PART II - OTHER INFORMATION

Item 1:	Legal Proceedings	19
Item 1A:	Risk Factors	19
Item 2:	Unregistered Sales of Equity Securities and Use of Proceeds	19
Item 3:	Defaults Upon Senior Securities	19
Item 4:	Mine Safety Disclosures.	19
Item 5:	Other Information	19
Item 6:	Exhibits	19

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

Tsingda eEDU Corporation

Consolidated Balance Sheets

(Stated in US dollars)

	June 30, 2012		December 31, 2011

	(Unaudited)		(Audited)
ASSETS
Current assets
Cash and cash equivalents	$	3,972,553	$	3,162,560
Accounts receivable, net		21,475,827		16,971,480
Advances to suppliers		9,148,732		12,166,014
Other receivables		1,249,729		1,409,259
Receivable from escrow account		100,000		100,000
Due from related parties		100,000		3,000,000
Inventory		2,795,839		321,628
Deferred tax assets		377,601		370,786

Total Current Assets		39,220,281		37,501,727

Advances for leasehold improvements		2,260,905		2,456,522
Prepayment for investment and acquisition		4,210,000		3,760,000
Prepayment for setting up company owned stores		2,123,354		-
Property, plant and equipment, net		14,061,901		16,634,974
Intangible assets, Net		18,886,791		12,800,645

TOTAL ASSETS	$	80,763,232	$	73,153,868

LIABILITIES & SHAREHOLDERS’ EQUITY
Current Liabilities
Accounts payable		1,996,768		1,252,404
Customer Deposit		4,653,231		3,032,264
Taxes payable		11,351,871		9,688,065
Accrued and other liabilities		454,289		454,785
Deferred revenue		2,517,342		2,471,916

Total Current Liabilities		20,973,501		16,899,434
SHAREHOLDERS’ EQUITY
Preferred stock: 781,250 shares of $0.000128 par value authorized; None shares issued and outstanding	$	—	$	—
Common Stock (par value $0.000384 per share; 100,000,000 shares authorized; 35,754,862 shares issued and outstanding as of June 30, 2012 and December 31, 2011)		13,730		13,730
Additional paid in capital		21,075,316		21,068,967
Statutory reserves		2,398,464		2,398,464
Retained earnings		33,660,360		29,935,343
Accumulated other comprehensive income		2,641,861		2,837,930

TOTAL SHAREHOLDERS’ EQUITY		59,789,731		56,254,434

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	80,763,232	$	73,153,868

The accompanying notes are an integrated part of these consolidated financial statements

Tsingda eEDU Corporation

Consolidated Statements of Operations and Comprehensive Income

(Stated in US dollars)

	Three Months Ended June 30,						Six Months Ended June 30,

	2012			2011			2012			2011

	(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)

Sales revenue	$	14,390,575		$	8,861,189		$	26,711,428		$	17,090,536
Cost of revenue		4,899,051			2,931,294			9,232,339			5,133,295

Gross Profit		9,491,524			5,929,895			17,479,089			11,957,241

Operating expenses
Selling expenses		5,544,594			2,617,754			8,577,301			4,362,302
General and administrative expenses		3,003,679			2,567,683			4,612,134			4,166,404

Total operating expenses		8,548,273			5,185,437			13,189,435			8,528,706

Income from operations		943,251			744,458			4,289,654			3,428,535
Interest income		1,295			4,177			2,504			4,816
Other expenses		(6,267	)		(19,785	)		88,087			(20,154	)

Income before income tax		938,279			728,850			4,380,245			3,413,197
Income tax expenses		160,385			326,303			655,228			729,509

Net Income	$	777,894		$	402,547		$	3,725,017		$	2,683,688

Other comprehensive income/(loss)
Foreign currency translation adjustments		(248,480	)		547,096			(196,069	)		637,066

Total Comprehensive Income	$	529,414		$	949,643		$	3,528,948		$	3,320,754

Earnings per share, Basic	$	0.02		$	0.01		$	0.10		$	0.08
Earnings per share, Diluted	$	0.02		$	0.01		$	0.10		$	0.08
Average number of weighted average shares, Basic		35,754,862			34,352,939			35,754,862			34,043,122
Average number of weighted average shares, Diluted		36,596,199			34,352,939			36,596,199			34,043,122

The accompanying notes are an integrated part of these consolidated financial statements

Tsingda eEDU Corporation

Consolidated Statements of Cash Flows

(Stated in US dollars)

	Six Months Ended June 30,

	2012			2011

CASH FLOWS FROM OPERATING ACTIVITIES

Net income	$	3,725,017		$	2,683,688

Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization		5,040,930			1,720,770
Bad debt expenses		914,798			-
Share-based compensation costs		6,349			1,442,116
Deferred tax assets		(8,222	)		164,968
Changes in operating assets and liabilities:
Accounts receivable		(5,483,544	)		(2,141,666	)
Advances to suppliers		2,971,118			(310,415	)
Other receivables		564,877			128,716
Inventories		(2,475,431	)		-
Accounts payable		749,116			845,922
Customer deposit		1,632,473			(120,473	)
Accrued and other liabilities		1,230			91,960
Taxes payable		1,700,568			1,122,952
Deferred revenue		54,958			(1,087,195	)

CASH PROVIDED BY OPERATING ACTIVITIES		9,394,237			4,541,343

CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property, plant and equipment		(2,196,590	)		(720,404	)
Sales of property, plant and equipment		834			-
Collection of cancelled constructions		1,960,505			-
Addition of intangible assets		(9,307,355	)		(4,581,785	)
Payments for leasehold improvements not completed		186,296			(1,882,641	)
Payments for setting up company owned stores		(2,123,354	)
Cash payment for acquisition deposit		(200,000	)		-
Cash payment for equity investment deposit		(250,000	)		-
Advances/loans to related parties		-			(94,961	)
Collection of advances/loan to related parties		2,900,000			164,783

CASH USED IN INVESTING ACTIVITIES		(9,029,664	)		(7,115,008	)

CASH FLOWS FROM FINANCING ACTIVITIES
Cash released from escrow accounts		-			420,000

CASH PROVIDED BY FINANCING ACTIVITIES		-			420,000

Effect of exchange rate changes on cash and cash equivalents		445,420			13,415

NET INCREASE (DECREASE) IN CASH		809,993			(2,140,250	)

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD	$	3,162,560		$	4,086,214

CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	3,972,553		$	1,945,964

Supplementary Disclosures for Cash Flow Information:
Income taxes paid	$	156,882		$	414,059

The accompanying notes are an integrated part of these consolidated financial statements

TSINGDA EEDU CORPORATION

Notes to the Consolidated Financial Statements

March 31, 2012

(Unaudited)

NOTE 1- ORGANIZATION AND BUSINESS OPERATIONS

Tsingda Century Investment Consultant of Education Co., Ltd. (“Tsingda Century”) was incorporated on October 23, 2003, in Beijing, the People’s Republic of China (the “PRC”). Beijing Tsingda Century Network Technology Co., Ltd. (“Tsingda Network”), the wholly owned subsidiary of Tsingda Century was incorporated in the PRC on February 14, 2004. Tsingda Century and its subsidiary provide high quality offline and online educational services for students ranging from six to eighteen years of age in the PRC. Tsingda eEDU Corporation (“Tsingda eEDU” or “the Company”, formerly “Compass Acquisition Corporation”) was incorporated in the Cayman Islands on September 27, 2006. The Company was originally organized as a “blank check” company to investigate and acquire a target company or business seeking the advantages of being a publicly held corporation.

Tsing Da Century Education Technology Co., Ltd. (“Tsingda Technology”) was incorporated on December 11, 2009, in the British Virgin Islands, to serve as the intermediate holding company.

Tsingda Century Beijing Management Consulting Co., Ltd. (“Tsingda Management”) was incorporated on November 26, 2007 and was serving as the wholly owned foreign enterprise (“WOFE”) of Tsingda Technology.

On April 22, 2010, Tsingda Century Training School (“Tsingda School”) was incorporated in Beijing, the PRC, and it is a wholly owned subsidiary of Tsingda Century.

On September 23, 2011, Family Baby Kindergarten (“Family Baby”) was incorporated in Beijing, the PRC, and it is a wholly owned subsidiary of Tsingda century.

As part of the restructuring, on April 26, 2010, Tsingda Management entered into a series of agreements with Tsingda Century and its shareholders, including an Operating Agreement, Proxy Agreement, Consulting Services Agreement, Equity Pledge Agreement and Option Agreement, which entitled Tsingda Management to receive substantially all of the economic benefits of Tsingda Century in consideration for consulting services provided by Tsingda Management to Tsingda Century. An Option Agreement allows Tsingda Management to acquire the shares of Tsingda Century when permitted by the PRC laws. The Proxy Agreement provides Tsingda Management with the voting rights of Tsingda Century’s shareholder and Equity Pledge Agreement pledges the shares in Tsingda Century to Tsingda Management without transferring legal ownership in Tsingda Century to Tsingda Management. Under the Consulting Services Agreement, Tsingda Management is the exclusive service provider, to Tsingda Century, for services, including general business operation, human resources, business development and Tsingda Century is obligated to make regular payments for such services provided. Under the Operating Agreement, Tsingda Century shall not conduct any transactions which may materially affect the assets, obligations, rights or the operations, without the written consent of Tsingda Management and Tsingda Century accepted Tsingda Management’s corporate policy provide by Tsingda Management in connection with Tsingda Century’s daily operations, financial management and the employment and dismissal of Tsingda Century’s employees. Through those agreements, Tsingda Management has the power to direct the activities that most significantly impact the economic performance of Tsingda Century and Tsingda Century became a variable interest entity (“VIE”) and is included in the consolidated group.

As all of the companies are under common control, this structure has been accounted for as a reorganization of entities under common control and the financial statements have been prepared as if the reorganization had occurred retroactively.

On May 24, 2010, the Company and its controlling shareholders entered into a share exchange agreement (the Agreement) with Tsingda Technology and all of the shareholders of Tsingda Technology. Under the Agreement, the Company acquired 100% of the outstanding equity interests of Tsingda Technology in exchange for 244,022.78 preferred shares of the Company. Each such share of preferred stock was convertible into 100 ordinary shares of the Company at such time as the number of authorized ordinary shares is increased. The transaction was closed in May 2010 and was accounted for as a reverse merger with a shell company and a recapitalization of Tsingda Technology. Tsingda eEDU Corporation is the accounting acquiree. Tsingda Technology is the accounting acquirer and the surviving entity.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION

The unaudited interim financial statements of Tsingda eEdu Corporation as of June 30, 2012 and for the three month periods ended June 30, 2012 and 2011 have been prepared in accordance with U.S. generally accepted accounting principles. In the opinion of management, such information contains all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the results of such periods. The results of operations for the three month period ended June 30, 2012 are not necessarily indicative of the results to be expected for the full fiscal year ending December 31, 2012.

Certain information and disclosures normally included in the notes to financial statements have been condensed or omitted as permitted by the rules and regulations of the Securities and Exchange Commission, although the Company believes the disclosure is adequate to make the information presented not misleading. The accompanying unaudited financial statements should be read in conjunction with the financial statements of the Company for the year ended December 31, 2011.

BASIS OF CONSOLIDATION

The accompanying consolidated financial statements include the accounts of the Company, and its wholly owned subsidiaries, (Tsingda Technology, and Tsingda Management), and Tsingda Century and its subsidiaries, Tsingda Network, Tsingda Century Training School and Family Baby. All intercompany balances and transactions have been eliminated in consolidation.

USE OF ESTIMATES

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. Significant items subject to such estimates and assumptions include the useful lives of fixed assets; the allowance for doubtful accounts; the fair value determination of financial and equity instruments, the reliability of deferred tax assets; the recoverability of intangible asset and property, plant and equipment; and accruals for income tax uncertainties and other contingencies.

REVENUE RECOGNITION

Online Courses

The Company provides online education programs to its franchisees, agents and individual customers. Revenue is realized through sales to franchisees and other agents of rights to conduct education services. The Company authorized the franchised locations to use its logo, all education programs and products and the Company receives a onetime licensing fee, annual management fee, and 20% of student generated revenue from the franchised location by providing them prepaid e-cards of 5 times the cash amount. All the mentioned fees are revenues or unearned revenues from the sale of e-cards. Revenue is recognized when the services are consummated when the e-cards are opened and used by the students to purchase online education courses and is reported net of business tax. The opening of cards is tracked by our IT system automatically and the revenue is proportionally recognized based on the progress of the e-cards usage.

Virtual Internet Classroom

The Company sold prepaid e-cards to the customers. Revenue is recognized until the services are consummated upon the e-cards are opened and used by the students to purchase online education courses and is reported net of business tax. The opening of cards is tracked by our IT system automatically and the revenue is proportionally recognized based on the progress of the e-cards usage.

Sales of Materials and Publications

The revenue is recognized upon the products are delivered to the customers.

Offline courses

Offline tutorial courses are provided by Tsingda Century Training School (“Tsingda School” or “Huanggang Experimental School”) and by the company owned learning centers. The revenue is recognized based on the progress of courses the students completed during the period.

FOREIGN CURRENCY TRANSLATION AND TRANSACTIONS

The financial position and results of operations of the Company’s subsidiaries in the PRC are measured using the Chinese currency Renminbi as the functional currency, while the Company’s reporting currency is the US dollar. Balance sheet accounts with exception of equity of the subsidiaries are translated at the prevailing exchange rate in effect at each period end, income statement accounts are translated at the average rate of exchange during the period, and equity accounts were stated at their historical exchange rate. Exchange gains or losses arising from foreign currency transactions are included in the determination of net income (loss) for the respective periods. Translation adjustments are included in the accumulated other comprehensive income in the consolidated statements of shareholders’ equity and comprehensive income.

The exchange rates used for foreign currency translation were as follows (USD$1 = RMB):

Period Covered	Balance Sheet Date Rates		Average Rates

Six months ended June 30, 2012		6.3249		6.3074
Six months ended June 30, 2011		6.4716		6.5465

SEGMENT REPORTING

The Company uses the “management approach” in determining reportable operating segments. The management approach considers the internal organization and reporting used by the Company’s chief operating decision maker for making operating decisions and assessing performance as the source for determining the Company’s reportable segments. The Company’s chief operating decision maker has been identified as the chief executive officer of the Company who reviews financial information of separate operating segments based on US GAAP. The chief operating decision maker now reviews results analyzed by service line. This analysis is only presented at the revenue level with no allocation of direct or indirect costs. Consequently, the Company has determined that it has only one operating segment.

EARNINGS PER SHARE

Basic earnings per share are computed by dividing net income by weighted average number of shares of common stock outstanding during each period. Diluted earnings per share is computed by dividing net income by the weighted average number of shares of common stock, common stock equivalents and potentially dilutive securities outstanding during each period.

NOTE 3 - ADVANCES TO SUPPLIERS

Advances to suppliers represent amounts prepaid for advertising, network, rent, store construction and decoration:

	June 30, 2012		December 31, 2011
Advance for advertising and printing	$	3,563,096	$	7,233,400
Advance for network service		878,051		1,794,569
Others		4,707,585		3,138,045

Total	$	9,148,732	$	12,166,014

NOTE 4 – PREPAYMENTS FOR INVESTMENT AND ACQUISITION

On August 10, 2011, the Company entered into a Shares Investment Agreement (the “Acquisition Agreement”) with Beijing YIYING Angel Education Consulting Co., Ltd. (“YIYING Angel”) and Ms. Yitong Chen (“Chen”, the owner of YIYING Angel, to acquire 70% of the equity interest of YIYING Angel from Ms. Chen for consideration of $2,800,000 and 200,000 options to purchase the Company’s ordinary shares at an exercise price of $5 per share. As of June 30, 2012, the Company paid $2,800,000 to Ms. Chen and contributed $160,000 to Yiyang Angel as registered capital. The options have not been granted. The acquisition has not closed yet.

On November 1, 2011, the Company entered into an investment agreement with Beijing ShangXue Educational Technology Co. (“Shangxue”) to purchase 80% of the equity interest of Shangxue for $1,800,000. As of June 30, 2012, the Company has paid $1,250,000 as a deposit.

	June 30, 2012		December 31, 2011

Prepayment for acquisition of YIYING Angel	$	2,960,000	$	2,760,000
Prepayment for investment in ShangXue Education		1,250,000		1,000,000

Total	$	4,210,000	$	3,760,000

NOTE 5 – RELATED PARTY TRANSACTIONS

On August 5, 2011, the Company entered into an Investment Agreement (the “Investment Agreement”) with Mr. Guozhen Zhou, an executive of the Company and also the founder of Asia Outstanding Students Admissions Union Ltd. (“AOSA”), a Company registered in British Columbia, Canada. Under the Investment Agreement, Tsingda agreed to invest $3,000,000 to acquire 55% of the total equity interest of AOSA. As of December 31, 2011, the Company paid $3,000,000 to Mr. Guozhen Zhou. However, AOSA was unable to obtain the regulatory approvals necessary to consummate the transaction. As of June 30, 2012, $2,900,000 has been returned by Mr. Guozhen Zhou to the Company. In the event AOSA is able to obtain the necessary regulatory approvals, the parties may still determine to proceed with the investment.

NOTE 6 - INCOME TAXES

The Company is incorporated in the Cayman Islands, and is not subject to tax on income or capital gain under the current laws of the Cayman Islands. In addition, upon payment of dividends by the Company to its shareholders, no Cayman Islands withholding tax is imposed. The Company’s other subsidiaries are subject to income tax as described below.

British Virgin Islands (“BVI”)

Under the current laws of BVI, our BVI subsidiaries are not subject to tax on income or capital gain. In addition, payments of dividends by our BVI subsidiaries to their shareholders are not subject to withholding tax in the BVI.

PRC

Prior to January 1, 2008, the Company was governed by the previous Income Tax Law (the “Previous Tax Law”) of China. Under the Previous Tax Law, the Company’s PRC subsidiaries, Tsingda Management, Tsingda Century and Tsingda network, were entitled various preferential tax treatments.

On March 16, 2007, the National People’s Congress passed the new Enterprise Income Tax law (the “new EIT law”) which imposes a single income tax rate of 25% for most domestic enterprises and foreign investment enterprises. The new EIT law was effective as of January 1, 2008. The new EIT law provides a five-year transition period from its effective date for those enterprises which were established before March 16, 2007 and which were entitled to a preferential lower tax rate under the then effective tax laws or regulations, as well as grandfathering tax holidays. Further, according to the new EIT law, entities that qualify as “High and New Technology Enterprises” are entitled to the preferential EIT rate of 15%. Tsingda Century has received approval for the status as a “High and New Technology Enterprises”. The status is valid for three years starting from June 2009 and will be renewed after evaluation by relevant government authorities every three years. Further, on December 26, 2007, the PRC government passed the detailed implementing rules which allow enterprises to continue to enjoy their unexpired tax holiday under the previous income tax laws and rules. As a result, under the new EIT law, Tsingda Century’s tax rate are 15% for the calendar years from 2010 to 2012 and subject to renewal of the status of “High and New Technology Enterprises” after calendar year 2012; and Tsingda Network and Tsingda School’s tax rates are 25%. Tsingda Management’s tax rates are 22% and 24% for 2010 and 2011 and 25% thereafter.

The provision for taxes on earnings consisted of:

	Three Months Ended				Six Months Ended
	June 30,		June 30,		June 30,		June 30,
	2012		2011		2012		2011
	(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)

PRC Enterprise Income Tax	$	160,385	$	326,303	$	655,228	$	729,509

United States Federal Income Tax		-		-		-		-

Income tax, net	$	160,385	$	326,303	$	655,228	$	729,509

A reconciliation between the income tax computed at the U.S. statutory rate and the Company’s provision for income tax is as follows:

	Three Months Ended						Six Months Ended
	June 30,			June 30,			June 30,			June 30,
	2012			2011			2012			2011
	(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)
U.S. Federal income tax statutory rate		35	%		35	%		35	%		35	%
PRC Statutory rate (25%) difference		-10	%		-10	%		-10	%		-10	%
Preferential tax rate		-10	%		-10	%		-10	%		-10	%
Share-based compensation cost		0	%		30	%		0	%		6	%
Effective tax rate		15	%		45	%		15	%		21	%

The tax effect of temporary differences that gives rise to significant portions of the deferred income tax assets are presented below:

	June 30, 2012		December 31, 2011

Deferred tax assets:
Deferred revenue	$	377,601	$	370,786

Deferred tax assets, total	$	377,601	$	370,786

NOTE 7 – EARNINGS PER SHARE

Basic earnings per share (“EPS”) excludes the dilutive effect of common stock equivalents and is computed by dividing net income by the weighted-average number of shares of common stock outstanding during the period. Diluted EPS includes the dilutive effect of common stock equivalents, which consists primarily of stock options and warrants, and is computed using the weighted-average number of common stock and common stock equivalents outstanding during the period.

The following table is a reconciliation of basic and diluted EPS for the three and six months ended June 30, 2012 and 2011:

	Three months ended				Six months ended

	2012		2011		2012		2011
Numerator:

Net income attributable to Tsingda eEDU	$	777,894	$	402,547	$	3,725,017	$	2,683,688

Denominator:

Weighted average number of common shares outstanding		35,754,862		34,352,939		35,754,862		34,043,122

Dilutive effect of common stock equivalents		841,337		—		841,337		—

Adjusted weighted average number of common shares outstanding, assuming conversion of common stock equivalents		36,596,199		34,352,939		36,596,199		34,043,122

Basic net income attributable to Tsingda eEDU per common share	$	0.02	$	0.01	$	0.10	$	0.08

Diluted net income attributable to Tsingda eEDU per common share	$	0.02	$	0.01	$	0.10	$	0.08

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Forward-Looking Statements

Certain statements, other than purely historical information, including estimates, projections, statements relating to our business plans, objectives, and expected operating results, and the assumptions upon which those statements are based, are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements generally are identified by the words “believes,” “project,” “expects,” “anticipates,” “estimates,” “intends,” “strategy,” “plan,” “may,” “will,” “would,” “will be,” “will continue,” “will likely result,” and similar expressions. We intend such forward-looking statements to be covered by the safe-harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995, and are including this statement for purposes of complying with those safe-harbor provisions. Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties which may cause actual results to differ materially from the forward-looking statements. Our ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Factors which could have a material adverse affect on our operations and future prospects on a consolidated basis include, but are not limited to: changes in economic conditions, legislative/regulatory changes, availability of capital, interest rates, competition, and generally accepted accounting principles. These risks and uncertainties should also be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise. Further information concerning our business, including additional factors that could materially affect our financial results, is included herein and in our other filings with the SEC. Readers of this Quarterly Report are strongly encouraged to review the risk factors relating to the Company which are set forth in the Company’s Annual Report on Form 10-K for the year ending December 31, 2011 filed with the Securities and Exchange Commission.

COMPANY OVERVIEW

On May 24, 2010, Compass Acquisition Corporation and its controlling shareholders entered into a share exchange agreement (“Share Exchange Agreement”) with Tsing Da Century Education Technology Co. Ltd., a British Virgin Islands business company (“Tsingda Technology”), and its shareholders. On November 15, 2010, the Company’s shareholders approved the change of the Company’s name from “Compass Acquisition Corporation” to “Tsingda eEDU Corporation” and the name change is effective immediately following the shareholder’s approval.

Tsingda Technology owns 100% of the issued and outstanding capital stock of Beijing Tsingda Century Management Consulting Ltd. (“Tsingda Management”), a wholly foreign owned enterprise incorporated under the laws of the People’s Republic of China (“PRC”). On April 26, 2010, Tsingda Management entered into a series of contractual agreements with Beijing Tsingda Century Investment Consultant of Education Co. Ltd (“Tsingda Education”), a company incorporated under the laws of the PRC, and its shareholders, in which Tsingda Management effectively assumed management of the business activities of Tsingda Education. Beijing Tsingda Century Network Technology Co. Ltd., a PRC company, is a wholly owned subsidiary of Tsingda Education. The contractual arrangements are comprised of a series of agreements, including a Consulting Services Agreement, Operating Agreement, Proxy Agreement, and Option Agreement, through which Tsingda Management has the right to advise, consult, manage and operate Tsingda Education for a quarterly fee in the amount of 100% of Tsingda Education’s quarterly, after tax net profits. Additionally, Tsingda Education’s shareholders have pledged their rights, titles and equity interest in Tsingda Education as security for Tsingda Management to collect consulting and service fees through an Equity Pledge Agreement. In order to further reinforce Tsingda Management’s rights to control and operate Tsingda Education, Tsingda Education’s shareholders have granted Tsingda Management the exclusive right and option to acquire all of their equity interests in Tsingda Education through the Option Agreement. As all of the companies are under common control, this structure has been accounted for as a reorganization of entities and the financial statements have been prepared as if the reorganization had occurred retroactively.

Tsingda Education, with its subsidiary Tsingda Network, is a leading offline and online provider of educational services in the PRC. It has established the largest chain of education centers in the PRC, known as “Tsingda Learning Centers.” These offline educational centers principally target elementary school students and consist mainly of franchised locations. As of June 30, 2012, it has approximately 3,196 learning centers nationwide. It also has developed a robust, interactive educational platform which allows students to search and subscribe to virtual classrooms offered by a wide range of teachers in the PRC.

Results of Operations (Unaudited) for the Three and Six Months Ended June 30, 2012 Compared to Three and Six Months Ended June 30, 2011

The following table sets forth key components of Tsingda eEDU’s results of operations for the periods indicated in dollars. The discussion following the table addresses these results.

Tsingda eEDU Corporation

(Formerly “Compass Acquisition Corporation”)

Consolidated Statements of Operations and Comprehensive Income

(Stated in US dollars)

	Three Months Ended June 30,						Six Months Ended June 30,

	2012			2011			2012			2011

	(Unaudited)			(Unaudited)			(Unaudited)			(Unaudited)
Sales revenue	$	14,390,575		$	8,861,189		$	26,711,428		$	17,090,536
Cost of revenue		4,899,051			2,931,294			9,232,339			5,133,295

Gross Profit		9,491,524			5,929,895			17,479,089			11,957,241

Operating expenses
Selling expenses		5,544,594			2,617,754			8,577,301			4,362,302
General and administrative expenses		3,003,679			2,567,683			4,612,134			4,166,404

Total operating expenses		8,548,273			5,185,437			13,189,435			8,528,706

Income from operations		943,251			744,458			4,289,654			3,428,535
Interest income		1,295			4,177			2,504			4,816
Other expenses		(6,267	)		(19,785	)		88,087			(20,154	)

Income before income tax		938,279			728,850			4,380,245			3,413,197
Income tax expenses		160,385			326,303			655,228			729,509

Net Income	$	777,894		$	402,547		$	3,725,017		$	2,683,688

Other comprehensive income/(loss)

Foreign currency translation adjustments		(248,480	)		547,096			(196,069	)		637,066

Total Comprehensive Income	$	529,414		$	949,643		$	3,528,948		$	3,320,754

Earnings per share, basic and diluted	$	0.02		$	0.01		$	0.10		$	0.08
Average number of weighted average shares, basic		35,754,862			34,352,939			35,754,862			34,043,122
Average number of weighted average shares, diluted		36,596,199			34,352,939			36,596,199			34,043,122

Revenues. For the three months ended June 30, 2012, we had revenues of $14,390,575 as compared to revenues of $8,861,189 for the three months ended June 30, 2011, an increase of approximately 62%. For the six months ended June 30, 2012, we had revenues of $26,711,428 as compared to revenues of $17,090,536 for the six months ended June 30, 2012, an increase of approximately 56%. We experienced strong growth in our revenues during the second quarter ended June 30, 2012. This growth is due to an increase in prepaid card sales and the number of franchise locations for the Company’s offline businesses, along with the continued growth of its online learning platform. As of June 30, 2012, we had 3,153 franchise locations and 43 company owned locations, compared with 2,464 franchise locations and 32 company owned locations respectively as of June 30, 2011. In addition, online revenues for six months ended June 30, 2012 decreased to $2,701,978 from $2,929,007 due to the adjustment of the new online broadcasting system leading to the decrease of online lesson hours for the comparable period in 2011. We launched our online virtual classroom platform in September 2008. Beginning with the second quarter of 2012, the Company has slowed down the pace of expansion, strengthened the franchise management system by shutting down the less competitive stores. Specifically, the franchise stores which do not follow the Company’s franchise rules and/or whose operating space is less than 100 square meters will be gradually forced to shut down. In addition, some less competitive Company-owned stores were also shut down. But we continued to add new Company-owned stores in new cities. The Company introduced many competitive education products and learning materials to the franchise system during the second quarter of 2012. Such a new strategy is expected to increase the average consumption of each franchise store and attract more new qualified and competitive franchisees.

Expenses. For the six months ended June 30, 2012, we incurred expenses, composed of selling and general and administrative expenses, of $13,189,435 compared with expenses of $8,528,706 for the six months ended June 30, 2011, an increase of approximately 55%. Moreover, for the three months ended June 30, 2012, we incurred expenses, composed of selling and general and administrative expenses, of $8,548,273 compared with expenses of $5,185,437 for the three months ended June 30, 2011, an increase of approximately 65%.

Selling expenses include salaries of our sales staff and rent of company owned learning centers, advertising, printing, logo manufacturing, transportation and others. For the three months ended June 30, 2012, we had selling expenses of $5,544,594 as compared to $2,617,754 for the comparable period of last year, an increase of 112% or $2,926,840. In addition, for the six months ended June 30, 2012, we had selling expenses of $8,577,301 as compared to $4,362,302 for the comparable period of last year, an increase of 97% or $4,214,999. The increase in selling expenses for the three and six months period ended June 30, 2012 were $2,926,840 and $4,214,999 respectively. The increase was primarily due to increased printing expenses and rent. The increase in printing and rent for the three and six month period ended June 30, 2012 accounted for 21% and 46% of the increase in selling expenses, respectively.

Key components of selling expenses for the three month periods ended June 30, 2012 and 2011 were:

	Three months ended June 30, 2012		Three months ended June 30, 2011

Salaries and wages	$	683,176	$	411,664
Advertising		3,484,664		1,598,517
Printing		797,691		324,206
Shipping		32,560		63,646

Key components of selling expenses for the six month periods ended June 30, 2012 and 2011 were:

	Six months ended June 30, 2012		Six months ended June 30, 2011

Salaries and wages	$	1,339,856	$	725,547
Advertising		5,268,127		2,462,080
Printing		1,178,837		662,274
Shipping		56,762		145,862

-Salaries and wages increased by approximately 66% and 85% respectively for the three and six months ended June 30, 2012 from the comparable 2011 periods. The increase represents an increase in our sales personnel at our headquarters, consistent with our increased franchise sales and the establishment of two new business projects mentioned above.

-Advertising expenses increased by approximately 118% and 114% respectively for the three and six months ended June 30, 2012 from the comparable 2011 periods. The expenses are mainly attributable to the increase in printing costs for new Company-owned centers, Family Baby Clubs and virtual classrooms, as well as our ongoing promotional efforts to attract new franchisees.

-Printing expenses increased by approximately 146% and 78% respectively for the three and six months ended June 30, 2012 from the comparable 2011 periods. These expenses represent the costs for printing of Company newsletters and promotional materials related to the enhancement of our brand name and learning center channels.

-Shipping expenses decreased by approximately 49% and 61% respectively for the three and six months ended June 30, 2012 from the comparable 2011 periods as the outstanding balance of $130,852 remain unpaid as of June 30, 2012 because the vendor did not issue invoice to us.

General and administrative expenses include rent, salaries and wages, insurance, training and related expenses. For the three and six months ended June 30, 2012, we had general and administrative expenses of $3,003,679 and $4,612,134 respectively as compared to $2,567,683 and $4,166,404 respectively for the comparable period from last year.

Key components of general and administrative expenses for the three month periods ended June 30, 2012 and 2011 were:

	Three months ended June 30, 2012		Three months ended June 30, 2011

Salaries and wages		272,831		189,681
Rent		349,741		78,157
Share-based compensation cost		-		1,442,116
Depreciation		293,213		187,107
Consulting expenses		158,224		390,356

Key components of general and administrative expenses for the six month periods ended June 30, 2012 and 2011 were:

	Six months ended June 30, 2012		Six months ended June 30, 2011

Salaries and wages		621,133		378,366
Rent		707,910		302,778
Share-based compensation cost		-		1,442,116
Depreciation		579,866		367,766
Consulting expenses		325,159		701,512

-Salaries and wages increased by 64% for the six months ended June 30, 2012. Salaries and wages increased by 44% for the three months ended June 30, 2012 from the comparable 2011 period as the Company increased personnel to handle the increase in sales revenue.

-Rent increased by 347% and 134% respectively for the three and six months ended June 30, 2012 from the comparable 2011 periods. These expenses mainly come from the lease of the new Shijingshan Headquarter-Tsingda Century Plaza.

-The Company granted three executives 900,000 ordinary shares for no cost and 100,000 non-qualified stock options on April 29, 2011 pursuant to the 2011 Equity Incentive Plan. The stock options are exercisable at $2 per share and vest over a term of 5 years. The Company calculates the fair value of the shares and stock options granted at the grant date using the Black-Sholes option-pricing model and the total cost of $1,442,116 was recorded in the three and six month period ended June 30, 2011.

-Depreciation increased by 57% and 58% respectively for the three and six months ended June 30, 2012 from the comparable 2011 periods as the Company purchased more fixed assets to improve its hardware system, including servers and computers, equipment for new Company-owned locations and interior improvements of Family Baby Club.

-Consulting expenses decreased by 59% and 54% respectively for the three and six months ended June 30, 2012 from the comparable 2011 periods as the Company engaged in more third-party consulting services related to finance, IT and HR in line with the expansion of its business.

Income Before Taxes. Income before taxes for the three and six months ended June 30, 2012 was $938,279 and $4,380,245 respectively compared with $728,850 and $3,413,197 respectively for the comparable periods of 2011.

Net Income. For the reasons discussed above, we had net income for three and six months ended June 30, 2012 of $777,894 and $3,725,017, respectively, compared with $402,547 and $2,683,688 respectively for the corresponding periods in 2011, an increase of 93% and 39%, respectively.

Other Comprehensive Loss. We had other comprehensive loss of $248,480 and $196,069 respectively for the three and six months ended June 30, 2012 compared with other comprehensive income of $547,096 and $637,066 respectively during corresponding 2011 periods as a result of foreign currency translation loss.

Total Comprehensive Income. We had total comprehensive income of $529,414 and $3,528,948 respectively for the three and six months ended June 30, 2012, representing a decrease of $949,643 and $3,320,754. The reason for the decrease is due to the various reasons stated above.

LIQUIDITY AND CAPITAL RESOURCES

As of June 30, 2012, we had working capital of $18,246,780 compared with working capital of $20,602,293 as of December 31, 2011. Changes in our working capital are summarized as follows:

	June 30, 2012 (unaudited)		December 31, 2011 (audited)		Increase in Working Capital

Total current assets	$	39,220,281		37,501,727		1,718,554
Total current liabilities		20,973,501		16,899,434		4,074,067
Working Capital	$	18,246,780		20,602,293		(2,355,513	)

Our decrease of $2,355,513 in working capital is primarily attributable to the expansion of Company-owned locations and prepayment for online contents purchases of $2,123,354 and $1,250,000, respectively.

Our primary uses of cash have been for selling and marketing expenses, employee compensation, and working capital. The main sources of cash have been revenues from franchisees and from our Company owned locations.

We believe the following trends are reasonably likely to result in a material decrease in our liquidity over the near to long term:


	•	An increase in working capital requirements to finance the growth of our company owned locations,

	•	Addition of administrative and marketing personnel as the business grows,

	•	Increases in advertising, public relations and sales promotions for our franchising efforts in new and existing markets,

	•	Software development and the purchase of servers commensurate with student population growth, and

	•	The cost of being a public company and the continued increase in costs due to governmental compliance activities.

The Company currently generates cash flow through operations which we believe will be sufficient to sustain current operations for at least the next twelve months.

Cash flows from operations are calculated based upon the local currencies using the average translation rate. As a result, amounts related to assets and liabilities reported on the statement of cash flows will not necessarily agree with changes in the corresponding balances on the balance sheets.

The following summarizes the key components of our cash flows for the three months ended June 30, 2012 and 2011:

	Three Months Ended June 30

	2012			2011

Net cash provided by operating activities	$	7,620,590		$	3,911,568
Net cash consumed by investing activities	$	(7,059,730	)	$	(4,886,992	)
Net cash provided by financing activities	$	-		$	-
Effect on cash of foreign exchange rates	$	427,210		$	168,915
Net change in cash	$	988,070		$	(806,509	)
Cash Balance (Beginning of Period)	$	2,984,483		$	2,752,473
Cash Balance (End of Period)	$	3,972,553		$	1,945,964

The following summarizes the key components of our cash flows for the six months ended June 30, 2012 and 2011:

	Six Months Ended June 30

	2012			2011

Net cash provided by operating activities	$	9,394,237		$	4,541,343
Net cash consumed by investing activities	$	(9,029,664	)	$	(7,115,008	)
Net cash provided by financing activities	$	-		$	420,000
Effect on cash of foreign exchange rates	$	445,420		$	13,415
Net change in cash	$	809,993		$	(2,140,250	)
Cash Balance (Beginning of Period)	$	3,162,560		$	4,086,214
Cash Balance (End of Period)	$	3,972,553		$	1,945,964

The net cash provided by operating activities for the three and six months ended June 30, 2012 were $7,620,590 and $9,394,237 respectively, compared with 3,911,568 and $4,541,343 respectively, for the comparable periods in 2011. The increase in the operating cash inflows primarily reflects the revenue increase and expenses related to marketing and promotion activities.

The net cash consumed by investing activities for the three and six months ended June 30, 2012 were $7,059,730 and $9,029,664 respectively, compared with $4,886,992 and $7,115,008 respectively for the comparable periods in 2011. The increase was primarily due to additions to the intangible assets which were primarily composed of purchase of online teaching software and materials and the establishment of new Company-owned locations.

The net cash provided by financing activities for both the three and six months ended June 30, 2012 was zero compared with zero and $420,000 respectively for the comparable periods ended June 30, 2011. The decrease was primarily due to the retrieval of $420,000 from the escrow account in the first half of 2011.

The effect of foreign exchange rate changes on cash and cash equivalents was a gain of $427,210 and $445,420 respectively for the three and six months ended June 30, 2012, compared with $168,915 and $13,415 respectively for the comparable periods in 2011.

The difference between the closing balance of cash and cash equivalents for the three and six months ended June 30, 2012 and 2011 is due to the reasons mentioned above.

OFF-BALANCE SHEET ARRANGEMENTS

There are no off-balance sheet arrangements between us and any other entity that have, or are reasonably likely to have, a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to stockholders.

CRITICAL ACCOUNTING POLICIES

The discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. We continually evaluate our estimates, including those related to bad debts, inventories, recovery of long-lived assets, income taxes, and the valuation of equity transactions. We base our estimates on historical experience and on various other assumptions that we believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Any future changes to these estimates and assumptions could cause a material change to our reported amounts of revenues, expenses, assets and liabilities. Actual results may differ from these estimates under different assumptions or conditions. We believe the following critical accounting policies affect our more significant judgments and estimates used in the preparation of the financial statements

A summary of significant accounting policies is included in Note 2 to the audited consolidated financial statements for the year ended December 31, 2011. Management believes that the application of these policies on a consistent basis enables us to provide useful and reliable financial information about our operating results and financial condition. Other than those indicated in this quarterly report, there have been no material revisions to the critical accounting policies as filed in our Annual Report on Form 10-K as of and for the year ended December 31, 2011 with the SEC on March 30, 2012.

Variable Interest Entities

Pursuant to Financial Accounting Standards Board Interpretation No. 46 (Revised), “Consolidation of Variable Interest Entities - an Interpretation of ARB No. 51” (“FIN 46R”) we are required to include in our consolidated financial statements the financial statements of variable interest entities. FIN 46R requires a variable interest entity to be consolidated by a company if that company is subject to a majority of the risk of loss for the variable interest entity or is entitled to receive a majority of the variable interest entity’s residual returns. Variable interest entities are those entities in which we, through contractual arrangements, bear the risk of, and enjoy the rewards normally associated with ownership of the entity, and therefore we are the primary beneficiary of the entity.

Tsingda Education is considered a variable interest entity (“VIE”), and we are the primary beneficiary. On April 26, 2010, we entered into agreements with Tsingda Education pursuant to which we shall receive a quarterly fee in an amount equal to Tsingda Education’s quarterly, after tax net profits. In accordance with these agreements, Tsingda Education shall pay consulting fees equal to 100% of its quarterly, after tax net profits to our wholly-owned subsidiary, Tsingda Management, and Tsingda Management shall supply the technology and administrative services needed to service Tsingda Education.

The accounts of Tsingda Education are consolidated in the accompanying financial statements pursuant to FIN 46R. As a VIE, Tsingda Education’s sales are included in our total sales, its income from operations is consolidated with ours, and our net income includes all of Tsingda Education’s net income. We do not have any non-controlling interest and accordingly, did not subtract any net income in calculating the net income attributable to us. Because of the contractual arrangements, we have pecuniary interest in Tsingda Education that requires consolidation of Tsingda Education’s financial statements with our financial statements.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

A smaller reporting company is not required to provide the information required by this Item.

Item 4. Controls and Procedures.

Evaluation of disclosure controls and procedures

Management, with the participation of our Principal Executive Officer and Principal Financial Officer, carried out an evaluation of the effectiveness of our “disclosure controls and procedures” (as defined in the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) pursuant to Rules 13a-15(e) and 15d-15(e)) as of the end of the period covered by this quarterly report on Form 10-Q (the “Evaluation Date”). Based upon that evaluation, our Principal Executive Officer and Principal Financial Officer concluded that, as of the Evaluation Date, our disclosure controls and procedures are not effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act (i) is recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms and (ii) is accumulated and communicated to our management, including our Principal Executive Officer and Principal Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Notwithstanding the conclusion that our disclosure controls and procedures were not effective as of the end of the period covered by this Quarterly Report, the Principal Executive Officer and Principal Financial Officer believe that the condensed consolidated financial statements and other information contained in this Quarterly Report present fairly, in all material respects, our business, financial condition and results of operations.

Our Principal Executive Officer and Principal Financial Officer determined that our disclosure controls and procedures are not effective due to our lack of formalized policies with respect to such disclosure controls and procedures.

Changes in Internal Control Over Financial Reporting

There were no material changes in the Company’s internal control over financial reporting as of the end of the period covered by this report as such term is defined in Rule 13a-15(f) of the Exchange Act.

PART II - OTHER INFORMATION

Item 1.	Legal Proceedings

We are not a party to any pending legal proceeding. We are not aware of any pending legal proceeding to which any of our officers, directors, or any beneficial holders of 5% or more of our voting securities are adverse to us or have a material interest adverse to us.

Item 1A:	Risk Factors

A smaller reporting company is not required to provide the information required by this Item.

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

None

Item 3.	Defaults upon Senior Securities

None

Item 4.	Mine Safety Disclosure
Not Applicable
Item 5.	Other Information

Item 6.	Exhibits

The following exhibits are filed herewith:

Exhibit No.	Description
31.1*	Certification by the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*	Certification by the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1*	Certification by the Chief Executive Officer pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2*	Certification by the Chief Financial Officer pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

* Filed herewith.

SIGNATURES

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

	Tsingda eEdu Corporation


Date: August 17, 2012	By:	/s/ Zhang Hui
		President, Chief Executive Officer and Chairman of the Board (Principal Executive Officer)

Date: August 17, 2012	By:	/s/ Kang Chungmai
		Chief Financial Officer (Principal Financial and Accounting Officer)

Tsingda eEDU Corp 10-Q