##### Table of Contents



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 September 30, 2008
 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
  Delaware
(State or Other Jurisdiction of 
Incorporation or Organization)
    
    20-0178991
(I.R.S. Employer Identification Number)
 15F Reignwood Center,
8 Yong An Dongli
Jianguo Menwai Avenue,
Beijing, 100022, Peoples Republic of China
 (8610) 6566-7788
  þ o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 o þ
  o þ




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##### 



TABLE OF CONTENTS
 PagePART I FINANCIAL INFORMATION
    
    
    3Item 1. Financial Statements
    
    
    3Item 2.Managements Discussion and Analysis or Plan of Operation
    
    
    15Item 3.Quantitative and Qualitative Disclosures About Market Risk
    
    
    21Item 4.Controls and Procedures
    
    
    21Item 4A.Controls and Procedures
    
    
    21PART II OTHER INFORMATION
    
    
    22Item 1.Legal Proceedings
    
    
    22Item 2.Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    22Item 3.Defaults Upon Senior Securities
    
    
    22Item 4.Submission of Matters To a Vote of Security Holders
    
    
    22Item 5.Other Information
    
    
    22Item 6.Exhibits
    
    
    22EX-31.1 Certification of Chief Executive Officer pursuant to Rule 13a-IH(a) or 15d-14(a).EX-31.2 Certification of Chief Financial Officer pursuant to Rule 13a-IH(a) or 15d-14(a).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 ActEX-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




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##### Table of Contents



PART I  FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 CHINACAST EDUCATION CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
(In thousands, except share-related data)
 As ofAs of September 30,
    
    
    December 31,2008
    
    
    2008
    
    
    2007US$
    
    
    RMB
    
    
    RMB(Note 1)AssetsCurrent assets:Cash and cash equivalents
    
    
    12,924
    
    
    
    87,884
    
    
    
    138,610Term deposits
    
    
    60,147
    
    
    
    409,000
    
    
    
    596,768Accounts receivable
    
    
    8,712
    
    
    
    59,242
    
    
    
    35,316Inventory
    
    
    303
    
    
    
    2,057
    
    
    
    2,015Prepaid expenses and other current assets
    
    
    1,428
    
    
    
    9,720
    
    
    
    7,127Amounts due from related parties
    
    
    336
    
    
    
    2,288
    
    
    
    3,248Total current assets
    
    
    83,850
    
    
    
    570,191
    
    
    
    783,084Non-current deposits
    
    
    116
    
    
    
    788
    
    
    
    1,948Deposit for
business acquisition
    
    
    2,794
    
    
    
    19,000
    
    
    
    Property and equipment, net
    
    
    33,458
    
    
    
    227,514
    
    
    
    11,107Land use rights, net
    
    
    18,007
    
    
    
    122,448
    
    
    
    Acquired intangible assets, net
    
    
    7,403
    
    
    
    50,338
    
    
    
    21,781Long-term investments
    
    
    1,549
    
    
    
    10,531
    
    
    
    11,165Non-current advances to a related party
    
    
    16,040
    
    
    
    109,072
    
    
    
    119,914Goodwill
    
    
    45,790
    
    
    
    311,369
    
    
    
    1,715Total assets
    
    
    209,007
    
    
    
    1,421,251
    
    
    
    950,714Liabilities, minority interest, and shareholders equityCurrent liabilities:Accounts payable
    
    
    2,882
    
    
    
    19,595
    
    
    
    13,027Accrued expenses and other current liabilities
    
    
    28,420
    
    
    
    193,261
    
    
    
    53,376Income taxes payable
    
    
    7,423
    
    
    
    50,477
    
    
    
    31,237Other borrowings
    
    
    632
    
    
    
    4,298
    
    
    
    Current portion of long-term bank loans
    
    
    11,529
    
    
    
    78,400
    
    
    
    Current portion of capital lease obligations
    
    
    177
    
    
    
    1,202
    
    
    
    34Total current liabilities
    
    
    51,063
    
    
    
    347,233
    
    
    
    97,674Non-current liabilities:Capital lease obligations, net of current portion
    
    
    357
    
    
    
    2,430
    
    
    
    Deferred tax liabilities
    
    
    3,189
    
    
    
    21,685
    
    
    
    Unrecognized tax benefits
    
    
    5,332
    
    
    
    36,258
    
    
    
    27,892Total non-current liabilities
    
    
    8,878
    
    
    
    60,373
    
    
    
    27,892Total liabilities
    
    
    59,941
    
    
    
    407,606
    
    
    
    125,566Minority interest
    
    
    6,283
    
    
    
    42,723
    
    
    
    20,512Commitments
and contingencies (Note 15)Shareholders equity:Ordinary shares (US$0.0001 par value; 100,000,000
shares authorized in 2008 and 2007; 31,389,251
and 27,292,641 shares issued and outstanding
in 2008 and 2007, respectively)
    
    
    3
    
    
    
    24
    
    
    
    21Additional paid-in capital
    
    
    129,674
    
    
    
    881,785
    
    
    
    768,844Statutory reserve
    
    
    3,775
    
    
    
    25,671
    
    
    
    16,087Accumulated other comprehensive loss
    
    
    (813
    )
    
    
    (5,526
    )
    
    
    (5,205
    )Retained earnings
    
    
    10,144
    
    
    
    68,968
    
    
    
    24,889Total shareholders equity
    
    
    142,783
    
    
    
    970,922
    
    
    
    804,636Total liabilities, minority interest,
and shareholders equity
    
    
    209,007
    
    
    
    1,421,251
    
    
    
    950,714
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CHINACAST EDUCATION CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(In thousands, except share-related data)
 For the three months ended September 30,
    
    
    For the nine months ended September 30,2008
    
    
    2008
    
    
    2007
    
    
    2008
    
    
    2008
    
    
    2007US$
    
    
    RMB
    
    
    RMB
    
    
    US$
    
    
    RMB
    
    
    RMB(Note 1)
    
    
    
    
    
    
    
    
    (Note 1)Revenues:Service
    
    
    10,420
    
    
    
    70,856
    
    
    
    37,992
    
    
    
    26,745
    
    
    
    181,869
    
    
    
    106,014Equipment
    
    
    283
    
    
    
    1,923
    
    
    
    8,038
    
    
    
    3,577
    
    
    
    24,327
    
    
    
    22,14410,703
    
    
    
    72,779
    
    
    
    46,030
    
    
    
    30,322
    
    
    
    206,196
    
    
    
    128,158Cost of revenues:Service
    
    
    (4,248
    )
    
    
    (28,887
    )
    
    
    (12,178
    )
    
    
    (10,497
    )
    
    
    (71,369
    )
    
    
    (33,267
    )Equipment
    
    
    (279
    )
    
    
    (1,898
    )
    
    
    (7,967
    )
    
    
    (3,543
    )
    
    
    (24,093
    )
    
    
    (22,378
    )(4,527
    )
    
    
    (30,785
    )
    
    
    (20,145
    )
    
    
    (14,040
    )
    
    
    (95,462
    )
    
    
    (55,645
    )Gross profit
    
    
    6,176
    
    
    
    41,994
    
    
    
    25,885
    
    
    
    16,282
    
    
    
    110,734
    
    
    
    72,513Operating (expenses) income:Selling and marketing expenses
(including share-based compensation
of RMB1,506 and RMB170 for the
nine months ended September 30 for 2008
and 2007, respectively, share-based
compensation of RMB114 and
RMB170 for the three months ended
September 30 for 2008 and 2007, respectively)
    
    
    (294
    )
    
    
    (2,001
    )
    
    
    (1,731
    )
    
    
    (937
    )
    
    
    (6,370
    )
    
    
    (4,496
    )General and administrative expenses
(including share-based compensation
of RMB12,079 and RMB360 for the
nine months ended September 30 for 2008
and 2007, respectively, share-based
compensation of RMB2,115
and RMB360 for the three months ended
September 30 for 2008 and 2007, respectively)
    
    
    (2,438
    )
    
    
    (16,577
    )
    
    
    (12,425
    )
    
    
    (6,908
    )
    
    
    (46,976
    )
    
    
    (33,423
    )Foreign exchange loss
    
    
    (58
    )
    
    
    (392
    )
    
    
    (1,114
    )
    
    
    (153
    )
    
    
    (1,043
    )
    
    
    (4,257
    )Management service fee
    
    
    274
    
    
    
    1,864
    
    
    
    5,138
    
    
    
    685
    
    
    
    4,655
    
    
    
    16,967Other operating income
    
    
    34
    
    
    
    232
    
    
    
    
    
    
    
    34
    
    
    
    232
    
    
    
    Total operating expenses, net
    
    
    (2,482
    )
    
    
    (16,874
    )
    
    
    (10,132
    )
    
    
    (7,279
    )
    
    
    (49,502
    )
    
    
    (25,209
    )Income from operations
    
    
    3,694
    
    
    
    25,120
    
    
    
    15,753
    
    
    
    9,003
    
    
    
    61,232
    
    
    
    47,304Interest income
    
    
    616
    
    
    
    4,191
    
    
    
    6,140
    
    
    
    2,319
    
    
    
    15,764
    
    
    
    12,962Interest expense
    
    
    (37
    )
    
    
    (251
    )
    
    
    (4
    )
    
    
    (64
    )
    
    
    (437
    )
    
    
    (34
    )Income before provision for income
taxes, earnings in equity investments,
and minority interest and
discontinued operations
    
    
    4,273
    
    
    
    29,060
    
    
    
    21,889
    
    
    
    11,258
    
    
    
    76,559
    
    
    
    60,232Provision for income taxes
    
    
    (990
    )
    
    
    (6,733
    )
    
    
    (4,527
    )
    
    
    (2,441
    )
    
    
    (16,601
    )
    
    
    (12,559
    )Income before earnings in equity
investments, minority interest,
and discontinued operations
    
    
    3,283
    
    
    
    22,327
    
    
    
    17,362
    
    
    
    8,817
    
    
    
    59,958
    
    
    
    47,673Earnings
in equity investments
    
    
    27
    
    
    
    182
    
    
    
    (232
    )
    
    
    (93
    )
    
    
    (634
    )
    
    
    (711
    )Minority interest
    
    
    (415
    )
    
    
    (2,820
    )
    
    
    (295
    )
    
    
    (832
    )
    
    
    (5,661
    )
    
    
    (2,719
    )Income from continuing operations
    
    
    2,895
    
    
    
    19,689
    
    
    
    16,835
    
    
    
    7,892
    
    
    
    53,663
    
    
    
    44,243Discontinued operations:Loss from discontinued operations, net
of tax RMBnil for both 2008 and 2007
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (139
    )Minority interest in discontinued
operations, net of tax RMBnil
for both 2008 and 2007
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (230
    )Loss on discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (369
    )Net income
    
    
    2,895
    
    
    
    19,689
    
    
    
    16,835
    
    
    
    7,892
    
    
    
    53,663
    
    
    
    43,874Net income per shareBasic
    
    
    0.09
    
    
    
    0.63
    
    
    
    0.62
    
    
    
    0.28
    
    
    
    1.87
    
    
    
    1.67Diluted
    
    
    0.09
    
    
    
    0.63
    
    
    
    0.61
    
    
    
    0.27
    
    
    
    1.85
    
    
    
    1.60Weighted average shares used
in computation:Basic
    
    
    31,373,482
    
    
    
    31,373,482
    
    
    
    27,266,564
    
    
    
    28,695,241
    
    
    
    28,695,241
    
    
    
    26,315,541Diluted
    
    
    31,373,482
    
    
    
    31,373,482
    
    
    
    27,783,672
    
    
    
    29,026,908
    
    
    
    29,026,908
    
    
    
    27,491,941
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CHINACAST EDUCATION CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(In thousands)
 For the nine months ended September 30,2008
    
    2008
    
    2007US$
    
    RMB
    
    RMB(Note 1)Cash flows from operating activities:Net income
    
    
    7,892
    
    
    
    53,663
    
    
    
    43,874Adjustments to reconcile net income to net cash
provided by operating activities:Minority interest in continuing operations
    
    
    832
    
    
    
    5,661
    
    
    
    2,719Minority interest in discontinued operations
    
    
    
    
    
    
    
    
    
    
    230Depreciation and amortization
    
    
    3,395
    
    
    
    23,083
    
    
    
    3,878Share-based compensation
    
    
    1,998
    
    
    
    13,585
    
    
    
    530Gain on disposal of property and equipment
    
    
    (34
    )
    
    
    (232
    )
    
    
    Loss in equity investments
    
    
    93
    
    
    
    634
    
    
    
    711Changes in assets and liabilities:Accounts receivable
    
    
    (3,650
    )
    
    
    (24,822
    )
    
    
    5,604Inventory
    
    
    (6
    )
    
    
    (42
    )
    
    
    (164
    )Prepaid expenses and other current assets
    
    
    (339
    )
    
    
    (2,302
    )
    
    
    (1,779
    )Non-current deposits
    
    
    241
    
    
    
    1,640
    
    
    
    Amounts due from related parties
    
    
    141
    
    
    
    960
    
    
    
    745Accounts payable
    
    
    (444
    )
    
    
    (3,022
    )
    
    
    (4,761
    )Accrued expenses and other current liabilities
    
    
    9,575
    
    
    
    65,113
    
    
    
    (42,039
    )Amounts due to related parties
    
    
    
    
    
    
    
    
    
    
    (115
    )Income taxes payable
    
    
    2,019
    
    
    
    13,728
    
    
    
    4,098Deferred taxes assets
    
    
    
    
    
    
    
    
    
    
    129Deferred taxes liabilities
    
    
    (237
    )
    
    
    (1,611
    )
    
    
    Unrecognized tax benefits
    
    
    224
    
    
    
    1,529
    
    
    
    3,443Net cash provided by operating activities
    
    
    21,700
    
    
    
    147,565
    
    
    
    17,103Cash flows from investing activities:Repayment from advance to related parties
    
    
    1,616
    
    
    
    10,991
    
    
    
    9,170Advance to related parties
    
    
    (22
    )
    
    
    (149
    )
    
    
    (1,443
    )Purchase of subsidiaries, net of cash acquired
    
    
    (68,457
    )
    
    
    (465,507
    )
    
    
    Purchase of property and equipment
    
    
    (2,093
    )
    
    
    (14,235
    )
    
    
    (1,548
    )Term deposits
    
    
    27,613
    
    
    
    187,768
    
    
    
    15,378Disposal of property and equipment
    
    
    38
    
    
    
    256
    
    
    
    Deposit for
business acquisition
    
    
    (2,794
    )
    
    
    (19,000
    )
    
    
    Advance received from disposal of cost method investment
    
    
    
    
    
    
    
    
    
    
    12,000Proceeds from disposal of discontinued operations,
net of cash disposed of
    
    
    
    
    
    
    
    
    
    
    (9,113
    )Net cash
(used in) provided by investing activities
    
    
    (44,099
    )
    
    
    (299,876
    )
    
    
    24,444Cash flows from financing activities:Other borrowings raised
    
    
    779
    
    
    
    5,298
    
    
    
    Repayment of other borrowings
    
    
    (1,118
    )
    
    
    (7,600
    )
    
    
    Exercise of
warrants
    
    
    2,467
    
    
    
    16,778
    
    
    
    Repayment of
capital lease obligations
    
    
    (27
    )
    
    
    (184
    )
    
    
    (111
    )Repayment of advances from related parities
    
    
    
    
    
    
    
    
    
    
    (4,251
    )Collection of subscription receivable
    
    
    12,893
    
    
    
    87,670
    
    
    
    Capital distribution
    
    
    
    
    
    
    
    
    
    
    (5,793
    )Net cash provided by (used in) financing activities
    
    
    14,994
    
    
    
    101,962
    
    
    
    (10,155
    )Effect of foreign exchange rate changes
    
    
    (55
    )
    
    
    (377
    )
    
    
    (1,707
    )Net (decrease) increase in cash and cash equivalents
    
    
    (7,460
    )
    
    
    (50,726
    )
    
    
    29,685Cash and cash equivalents at beginning of the period
    
    
    20,384
    
    
    
    138,610
    
    
    
    278,067Cash and cash equivalents at end of the period
    
    
    12,924
    
    
    
    87,884
    
    
    
    307,752
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NOTES TO CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(In thousands, except share-related data)
 1.
    
    BASIS OF PREPARATIONThe 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-KSB for the fiscal year ended December 31, 2007.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, 2008.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 PoliciesThe 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-KSB for the
fiscal year ended December 31, 2007, except for the following additional
accounting policies adopted in connection with the acquisition set out in Note
4:Revenues from bachelor degree and diploma program offerings, representing
tuition fees and accommodation and catering service income, are recognized on a
straight-line basis over the service period.Customer relationship acquired is being amortized using the 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.Convenience TranslationAmounts 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
September 30, 2008. Such translation should not be construed to be the amounts
that would have been reported under US GAAP.The Share Exchange TransactionOn 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. For purposes of the preparation of the
consolidated financial statements, the consummation date was designed as the
effective date when 80.27% of the outstanding ordinary shares of ChinaCast were
acquired by Great Wall and 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 PRONOUNCEMENTSIn December 2007, the Financial Accounting Standard Board (FASB) issued
Standard of Financial Accounting Standards (SFAS) No. 141R, Business
Combination, to improve reporting creating greater consistency in the
accounting and financial reporting of business combinations. The standard
requires the acquiring entity in a business combination to recognize all (and
only) the assets acquired and liabilities assumed in the transaction;
establishes the acquisition-date fair value as the measurement objective
 6




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for all assets acquired and liabilities assumed; and requires the acquirer to
disclose to investors and other users all of the information they need to
evaluate and understand the nature and financial effect of the business
combination. SFAS No. 141R applies prospectively to business combinations for
which the acquisition date is on or after the beginning of the first annual
reporting period beginning on or after December 15, 2008. An entity may not
apply it before that date. The Company is currently evaluating whether the
adoption of SFAS No. 141R will have a significant effect on its consolidated
financial position, results of operations or cash flows.In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in
Consolidated Financial Statements to improve the relevance, comparability,
and transparency of financial information provided to investors by requiring
all entities to report noncontrolling (minority) interests in subsidiaries in
the same way as required in the consolidated financial statements. Moreover,
SFAS No. 160 eliminates the diversity that currently exists in accounting for
transactions between an entity and noncontrolling interests by requiring they
be treated as equity transaction. SFAS No. 160 is effective for fiscal years,
and interim periods within those fiscal years, beginning on or after
December 15, 2008. Earlier adoption is prohibited. The Company is currently
evaluating whether the adoption of SFAS No. 160 will have a significant effect
on its consolidated financial position, results of operations or cash flows.3.
    
    DISCONTINUED OPERATIONSAs of January 1, 2007, the Company had a 50% stake in Beijing Tongfang Digital Education Technology Limited (Tongfang)
and Tongfang had a 51% stake in Beijing Tongfang Chuangxin Technology Limited (Tongfang Chuangxin). The Company considers
Tongfang and Tongfang Chuangxin as subsidiaries due to the fact that the Company controls the entities by having the
majority voting rights in the board of directors of Tongfang who in turn holds a majority ownership interest in Tongfang
Chuangxin. On February 9, 2007, the Company completed the transaction under a sale and purchase agreement with Tongfang Co.
Limited to dispose all of its shareholding in Tongfang in return for a 17.85% interest in Tongfang Chuangxin. As part of the
consideration for the sale, the Company offset the RMB6,300 payable to Tongfang Co. Limited against the sale proceeds. No
significant gain or loss was reported as a result of the sale. Tongfang ceased to be a subsidiary of the Company and the
Company has accounted for its investment in Tongfang Chuangxin amounting to RMB8,936 under the cost method of accounting
thereafter.The following was a summary of the assets and liabilities associated with the discontinued operations as of February 9, 2007:
 As ofFebruary 9, 2007RMBCurrent assets of discontinued operations:Cash and cash equivalents
    
    
    9,113Accounts receivable, net
    
    
    2,715Prepaid expenses and other current assets
    
    
    1,73213,560Non-current assets of discontinued operations:Property and equipment, net
    
    
    1,433Acquired intangible assets, net
    
    
    13,58115,014Current liabilities of discontinued operations:Accounts payable
    
    
    1,355Accrued expenses and other current liabilities
    
    
    6,8848,239Minority interest
    
    
    6,694Attributable goodwill
    
    
    1,595
  For the three months ended
    
    For the nine months endedSeptember 30,
    
    September 30,2008
    
    2007
    
    2008
    
    2007RMB
    
    RMB
    
    RMB
    
    RMBRevenues
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,096Loss before provision of income taxes from
discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (139
    )Provision for income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Minority interest in discontinued operations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (230
    )Loss from discontinued operations, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (369
    )Reduction in net income per share of the
Company  basic and diluted
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (0.01
    )
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4.
    
    ACQUISITIONOn April 11, 2008, Yu Pei Information Technology (Shanghai) Limited, 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 Yuen Company Limited (Heng Tai). FTBC is a
private college affiliated with Chongqing Normal University. The consideration
for the acquisition was RMB480,000, of which RMB475,850 was paid and the
remaining balance of RMB4,150 will be paid within 2008. The acquisition was
recorded using the purchase method of accounting and, accordingly, the acquired
assets and liabilities were recorded at their estimated fair market value at
the date of acquisition. The preliminary purchase price allocation, which was
based on managements estimates and assumptions, was as follows:
 AmortizationRMB
    
    periodCash
    
    
    10,343Other current assets
    
    
    323Non-current deposits
    
    
    523Property and equipment and land use rights
    
    
    334,227
    
    
    4-50 yearsIntangible assets:Customer relationship (allocated to the TUG as set out in Note 11)
    
    
    40,329
    
    
    41 monthsGoodwill (allocated to the TUG as set out in Note 11)
    
    
    309,717Bank 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 purchase price allocation for the acquisition will be
finalized within one year after the acquisition date and subject to
revision as more detailed analyses are completed and additional
information about fair value of assets and liabilities becomes
available. Any change in the fair value of the net assets of the
acquired company and its subsidiaries will change the amount of the
purchase price allocable to goodwill.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.Pro formaThe following supplemental unaudited pro forma results of operations for the nine months ended
September 30, 2008 and 2007 presented the acquisition as if it had occurred on
January 1, 2008 and 2007. The unaudited pro forma results include estimates and
assumptions regarding amortization of acquired intangible assets which the
Company believes are reasonable. However, pro forma results are not necessarily
indicative of the results that would have occurred if the acquisition had
occurred on the dates, indicated, or that may result in the future:
 For the nine months ended September 30,2008
    
    2007RMB
    
    RMBNet revenues
    
    
    
    236,492
    
    
    
    192,125Net income attributable to holders of ordinary shares
    
    
    
    54,914
    
    
    
    34,547Net income per share  basic
    
    
    
    1.91
    
    
    
    1.31Net income per share  diluted
    
    
    
    1.89
    
    
    
    1.26
 5.
    
    NON-CURRENT DEPOSITSNon-current deposits consisted of the following:
 As of September 30, 2008
    
    As of December 31, 20072008
    
    2007RMB
    
    RMBRental deposits
    
    
     788
    
    
    
    1,948
 Rental deposits represented satellite rental deposit for ChinaCast satellite
business operations and 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




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6.
    
    DEPOSIT FOR BUSINESS ACQUISITION
 As of September 30,
    
    As of December 31,2008
    
    2007RMB
    
    RMBDeposit for
business acquisition
    
    
    19,000
    
    
    
    
 In September 2008, the Company paid RMB19,000 to an independent third party as a deposit for a proposed business
acquisition. The acquisition was not concluded and the deposit was
subsequently returned to the Company in October 2008.
 7.
    
    COMPREHENSIVE INCOME
  For the three months ended September 30,
    
    For the nine months ended September 30,2008
    
    2007
    
    2008
    
    2007RMB
    
    RMB
    
    RMB
    
    RMBNet income
    
    
    19,689
    
    
    
    16,835
    
    
    
    53,663
    
    
    
    43,874Foreign currency translation adjustment
    
    
    (75
    )
    
    
    (222
    )
    
    
    (321
    )
    
    
    (3,137
    )Comprehensive income
    
    
    19,614
    
    
    
    16,613
    
    
    
    53,342
    
    
    
    40,737
 8.
    
    ACQUIRED INTANGIBLE ASSETS, NETAcquired intangible assets, net consisted of the following:
 As of September 30,
    
    As of December 31,2008
    
    2007RMB
    
    RMBBrand name usage right
    
    
    22,532
    
    
    
    22,532Customer relationship
    
    
    40,329
    
    
    
    62,861
    
    
    
    22,532Less: accumulated amortization
    
    
    (12,523
    )
    
    
    (751
    )50,338
    
    
    
    21,781
 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.For the three months and nine months ended September 30, 2008, the Company
recorded amortization expense in respect of the brand name usage right
amounting to RMB563 and RMB 1,690, respectively. The Company will record
amortization expenses in respect of brand name usage right of RMB563, RMB2,253,
RMB2,253, RMB2,253, RMB12,769 in 2008, 2009, 2010, 2011 and 2012 and
thereafter, respectively.On April 11, 2008, the Company acquired a customer relationship through an
acquisition (see Note 4). 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 and nine months ended September 30, 2008, the Company
recorded amortization expense in respect of the customer relationship amounting
to RMB4,925 and RMB10,082, respectively. The Company will record amortization
expenses in respect of the customer relationship of RMB3,945, RMB14,028,
RMB8,767
and RMB3,507 in 2008, 2009, 2010 and 2011, respectively.
 9




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9.
    
    STOCK COMPENSATION PLAN2007 Omnibus Securities and Incentive Plan (2007 Plan)Under the 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 September 30, 2008, no restricted
shares or share options have been forfeited.Management used the Black Scholes Model to estimate the fair value of the share
options on the grant date with the following assumptions:
 Expected price volatility
    
    
    37.6
    %Risk-free interest rate
    
    
    4.75
    %Expected life
    
    67 monthsExpected dividends
    
    
    Fair value of ordinary share at grant date
    
    US$
    6.25
 The fair value of the share option on the grant date was US$2.67 (RMB19.33). In
calculating the fair value of the options using the Black Scholes Model, the
following major assumptions were used:
 (1)
    
    VolatilityThe volatility of the underlying ordinary shares during the life of the options
was estimated based on the historical stock prices volatility of listed
comparable companies over a period comparable to the expected term of the
options.(2)
    
    Risk free interest rateRisk free interest rate was estimated based on the yield to maturity of China
international government bonds with a maturity period close to the expected
term of the options.(3)
    
    Expected termAs the Company did not have historical share option exercise experience, it
estimated the expected term as the weighted average between the vesting term of
the options and the original contractual term.(4)
    
    Dividend yieldThe dividend yield was estimated by the Company based on their expected
dividend policy over the expected term of the options.(5)
    
    Exercise priceThe exercise price of the options was determined by the Companys board of directors.(6)
    
    Fair value of underlying ordinary sharesThe estimated fair value of the ordinary shares underlying the options as of
the grant date was determined based on the closing price of the ordinary shares
traded in NASDAQ Global Market as of the grant date.
 As of September 30, 2008, 401,000 share options were exercisable. The following
table summarized information with respect to share options outstanding at
September 30, 2008:
 Weighted-averageExercise
    
    Number
    
    Remaining
    
    Intrinsicprice
    
    outstanding
    
    contractual life
    
    valueShare options
    
    US$
    6.30
    
    
    
    1,200,000
    
    
    9.25 years
    
    
    
 The aggregate intrinsic value of share options outstanding and exercisable as
of September 30, 2008 was US$nil and US$nil, respectively.Total share-based compensation expenses amounting to RMB2,229 and RMB530 were
recognized for the three months ended September 30, 2008 and 2007,
respectively. Total share-based compensation expenses amounting to RMB13,585
and RMB530 were recognized for the nine months ended September 30, 2008 and
2007, respectively.There was RMB21,301 of total unrecognized compensation expense related to
nonvested restricted shares and share options as of September 30, 2008.As of September 30, 2008, no other awards have been granted under the 2007 Plan.
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10.
    
    INCOME TAXESOn 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 2210, 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. Hai Yuen and FTBC were incorporated in Chongqing of the PRC and are
subject to the preferential tax rate of 15% 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. Management has considered the determination of the amount of
unrecognized deferred income tax liability to be not practicable because of the
complexities associated with the hypothetical calculation.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 nine months ended September 30, 2008, the
unrecognized tax benefits increased from RMB27,892 to RMB36,258.11.
    
    NET INCOME PER SHAREReconciliation of the basic and diluted net income per share is as follows:
 For the three months ended September 30,
    
    For the nine months ended September 30,2008
    
    2007
    
    2008
    
    2007Numerator used in basic and diluted net income per share:Income from continuing operations
    
    RMB
    
    
    19,689
    
    
    
    16,835
    
    
    
    53,663
    
    
    
    44,243Loss on discontinued operation
    
    RMB
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (369
    )Income attributable to holders of ordinary shares
    
    RMB
    
    
    19,689
    
    
    
    16,835
    
    
    
    53,663
    
    
    
    43,874Shares (denominator):Weighted average ordinary shares outstanding used in
computing basic net income per share
    
    
    
    
    
    
    31,373,482
    
    
    
    27,266,564
    
    
    
    28,695,241
    
    
    
    26,315,541Plus:Incremental ordinary shares from assumed conversions of
stock options and exercises of Warrants (Note 13)
    
    
    
    
    
    
    
    
    
    
    517,108
    
    
    
    331,667
    
    
    
    1,176,400Weighted average ordinary shares outstanding used in computing
diluted net income per share
    
    
    
    
    
    
    31,373,482
    
    
    
    27,783,672
    
    
    
    29,026,908
    
    
    
    27,491,941Net income per sharebasic:Income from continuing operations
    
    RMB
    
    
    0.63
    
    
    
    0.62
    
    
    
    1.87
    
    
    
    1.68Loss on discontinued operations
    
    RMB
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (0.01
    )Net income
    
    RMB
    
    
    0.63
    
    
    
    0.62
    
    
    
    1.87
    
    
    
    1.67Net income per sharediluted:Income from continuing operations
    
    RMB
    
    
    0.63
    
    
    
    0.61
    
    
    
    1.85
    
    
    
    1.61Loss on discontinued operations
    
    RMB
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (0.01
    )Net income
    
    RMB
    
    
    0.63
    
    
    
    0.61
    
    
    
    1.85
    
    
    
    1.60
  11




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12.
    
    SEGMENT INFORMATIONSince 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 September 30,
    
    
    For the nine months ended September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007RMB
    
    
    RMB
    
    
    RMB
    
    
    RMBRevenues from external customers:ELG (Note)
    
    
    46,317
    
    
    
    46,030
    
    
    
    154,122
    
    
    
    128,158TUG
    
    
    26,462
    
    
    
    
    
    
    
    52,074
    
    
    
    72,779
    
    
    
    46,030
    
    
    
    206,196
    
    
    
    128,158Income from operations:ELG
    
    
    16,768
    
    
    
    15,753
    
    
    
    46,207
    
    
    
    47,304TUG
    
    
    8,352
    
    
    
    
    
    
    
    15,025
    
    
    
    25,120
    
    
    
    15,753
    
    
    
    61,232
    
    
    
    47,304Note:Revenues from ELG:Service
    
    
    44,394
    
    
    
    37,992
    
    
    
    129,795
    
    
    
    106,014Equipment
    
    
    1,923
    
    
    
    8,038
    
    
    
    24,327
    
    
    
    22,14446,317
    
    
    
    46,030
    
    
    
    154,122
    
    
    
    128,158
 As of September
    
    
    As of December30, 2008
    
    
    31, 2007Segment assets:ELG
    
    
    654,110
    
    
    
    950,714TUG
    
    
    767,141
    
    
    
    1,421,251
    
    
    
    950,714
    12




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13.
    
    WARRANTS AND UNIT PURCHASE OPTIONSIn 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 Capella, collectively, the Warrantholders),
whereby the Company agreed to reduce the exercise price of the Warrants held by Fir Tree, Sherleigh and
Capella 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, Capella 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 459,925 restricted shares of
common stock of the Company to Fir Tree and 62,994 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
Capella.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.As of September 30, 2008, there were 395,000 UPO units, 10,000 UPO Warrants and 5,468,651 Warrants outstanding.14.
    
    NEW BORROWINGSBank borrowings amounting to RMB78,400 were assumed in connection with
the acquisition as set out in Note 4. Bank borrowings carried
interests at the benchmark interest rate announced by the Peoples
Bank of China plus 10% to 20% per annum. As of September 30, 2008, bank borrowings amounting to
RMB78,400 will be due for repayment within one year and were
classified as current liabilities. All the bank loans were secured by the fixed assets in FTBC.In connection with the acquisition as set out in Note 4, other
borrowings amounting to RMB6,600 were assumed. During the period to
September 30, 2008, a further amount of other borrowings of
RMB5,298
was raised while RMB7,600 was repaid. These borrowings carried interest at 10.125% per annum and
will be repayable within one year.In addition, the Company leases a computer information
integration system amounting to RMB3,784 under a capital lease
contractual arrangement from a supplier. The capital lease is 3 years
expiring in 2011.
 15.
    
    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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16.
    
    SUBSEQUENT EVENTSOn September 26, 2008, the
Company entered into an
underwriting agreement (the
Underwriting Agreement)
with Roth Capital Partners,
LLC (the Underwriter),
pursuant to which the
Company agreed to issue and
sell 4,250,000 shares of
the Companys common stock,
par value $0.0001 per share
, to the
Underwriter at an offering price per
share of $2.60. In
addition, the Company also
granted the Underwriter an
option to purchase up to an
additional 637,500 shares
to cover overallotments, if
any, at the same price
of $2.60 per share. The Company
also granted the
Underwriter warrants to
purchase 255,000 shares at
an exercise price of $2.86
per share.The sale of the 4,250,000 shares of common stock was consummated on October
1, 2008 and the Underwriters option to purchase up to an
additional 637,500 shares to cover overallotments expired. Net proceeds to
the Company from the
offering, after deducting
underwriting discounts and
commissions and estimated
offering expenses, were
approximately $9,587.
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Item 2. Managements Discussion and Analysis or Plan of Operation.
 Forward Looking Statement
  Overview
    Critical Accounting Policies
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Results of Operations
   Three
Months Ended September 30, 2008 compared to the Three Months Ended September 30, 2007.
  Three MonthsEndedThree Months ended
    
    September 30,September 30, 2008
    
    2007(millions)
    
    US$
    
    RMB
    
    RMBPost secondary education distance learning
    
    
    3.6
    
    
    
    24.3
    
    
    
    17.6K-12 and content delivery
    
    
    2.4
    
    
    
    16.2
    
    
    
    15.6Vocational training, enterprise /
government training and networking and
English training services
    
    
    0.8
    
    
    
    5.8
    
    
    
    12.8Total ELG revenue
    
    
    6.8
    
    
    
    46.3
    
    
    
    46.0
 Nine MonthsEndedNine Months ended
    
    September 30,September 30, 2008
    
    2007(millions)
    
    US$
    
    RMB
    
    RMBPost secondary education distance learning
    
    
    10.5
    
    
    
    71.1
    
    
    
    47.8K-12 and content delivery
    
    
    7.3
    
    
    
    49.5
    
    
    
    49.1Vocational training, enterprise /
government training and networking and
English training services
    
    
    4.9
    
    
    
    33.5
    
    
    
    31.3Total ELG revenue
    
    
    22.7
    
    
    
    154.1
    
    
    
    128.2
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Liquidity and Capital Resources
  As ofAs of
    
    December 31,September 30, 2008
    
    2007(millions)
    
    RMB
    
    US$
    
    RMBCash and cash equivalents
    
    
    87.9
    
    
    
    12.9
    
    
    
    138.6Term deposits
    
    
    409.0
    
    
    
    60.1
    
    
    
    596.8Subtotal
    
    
    496.9
    
    
    
    73.0
    
    
    
    735.4Accounts receivable
    
    
    59.2
    
    
    
    8.7
    
    
    
    35.3Inventory
    
    
    2.1
    
    
    
    0.3
    
    
    
    2.0Prepaid expenses and other current assets
    
    
    9.7
    
    
    
    1.4
    
    
    
    7.1Total current assets
    
    
    570.2
    
    
    
    83.9
    
    
    
    783.1Non-current advances to a related party
    
    
    109.1
    
    
    
    16.0
    
    
    
    119.9Total assets
    
    
    1,421.3
    
    
    
    209.0
    
    
    
    950.7
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Item 3. Quantitative And Qualitative Disclosures About Market Risk
 Foreign Exchange Risk
       Interest Rate Risk
   Inflation
  
 Item 4. Controls and Procedures.
   
 Item 4A. Controls and Procedures.
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PART II  OTHER INFORMATION
 
 Item 1. Legal Proceedings.
  Item 1A. Risk Factors.
  
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
  
 Item 3. Defaults Upon Senior Securities.
  
 Item 4. Submission of Matters To a Vote of Security Holders.
  
 Item 5. Other Information.
  
 Item 6. Exhibits.
 3(i)
    
    Certificate of Incorporation(1)3(ii)
    
    By laws(1)31.1
    
    Certification of Chief Executive Officer pursuant to Rule 13a-IH(a) or 15d-14(a).31.2
    
    Certification of Chief Financial Officer pursuant to Rule 13a-IH(a) or 15d-14(a).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.
 
 (1)
    
    Incorporated by reference to the Registration Statement on Form-S1 filed with the Securities and Exchange Commission on December 4, 2003, subsequently amended on January 13, 2004, February 25, 2004, and March 9, 2004.
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SIGNATURES
  CHINACAST EDUCATION CORPORATION(Registrant)Date: November 10, 2008
    
    By:
    
    /s/ Ron Chan Tze NgonName: Ron Chan Tze NgonTitle: Chairman of the Board,Chief Executive Officer (Principal Executive Officer)By:
    
    /s/ Antonio SenaName: Antonio SenaTitle: Chief Financial Officer andSecretary (Principal Financial Officer)
 23