UNITED
STATES
 SECURITIES
AND EXCHANGE COMMISSION
 Washington,
D.C. 20549
 
 FORM
10-K
 
 (Mark
One)
 
 x
              ANNUAL
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934
 
 For the
fiscal year ended December 31, 2009
 
 or
 
 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
 000-50240
 
 China
Ivy School, Inc.
 (Exact
name of registrant as specified in its charter)
 
 Nevada
              98-0534456(State
      or other jurisdiction of
              (I.R.S.
      Employer Identification No.)incorporation
      or organization)
 
 1 Suhua
Road, Shiji Jinrong Building Suite 801,
 Suzhou Industrial Park,
Jiangsu Province, 215020, P.R. China
 (Address
of Principal Executive Offices) (Zip Code)
 
 86-512-6762-5632
 (Registrant's
Telephone Number, Including Area Code)
 
 Securities
registered pursuant to Section 12(b) of the Act:
 
 Title of each class
              Name of each exchange on which
      registeredNone
              Not
      applicable
 
 Securities
registered pursuant to section 12(g) of the Act:
 
 Common
Stock
 
 Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act. Yes oNo x
 
 Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Act. Yes oNo x
 
 Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes xNo o
 
 Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 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 oNo o
 
 Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K (ss. 229.405 of this chapter) is not contained herein, and will
not be contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K o
 
 Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
definitions of "large accelerated filer," "accelerated filer," and "smaller
reporting company" in Rule 12b-2 of the Exchange Act. (Check one):
 
 Large
      accelerated filer o
              Accelerated
      filer oNon-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 Act). Yes oNo x
 
 State the
aggregate market value of the voting and non-voting common equity held by
non-affiliates computed by reference to the price at which the common equity was
last sold, or the average bid and asked price of such common equity, as of the
last business day of the registrant's most recently completed second fiscal
quarter. The aggregate market value of the common stock of the registrant held
by non-affiliates (excluding shares held by directors, officers and others
holding more than 5% of the outstanding shares of the class) was $28,069.46
based upon a closing sale price of $0.021 on May 26, 2009, the last reported
trade prior to June 30, 2009, as reported by Bloomberg Finance.
 
 Indicate
the number of shares outstanding of each of the registrant's classes of common
stock, as of the latest practicable date. As of March 31, 2010, the registrant
had outstanding 22,582,541 shares of common stock.
 
 DOCUMENTS
INCORPORATED BY REFERENCE: None
  
  TABLE OF
CONTENTS
 
 PART
      IPageItem
      1.
              Business
              
              1Item
      1A.
              Risk
      Factors
              
              2Item
      2.
              Properties
              
              8Item
      3.
              Legal
      Proceedings
              
              8PART
      IIItem
      5.
              Market
      for Registrant's Common Equity, Related Stockholder Matters and Issuer
      Purchases of Equity Securities
              
              8Item
      6.
              Selected
      Financial and Other Data
              
              9Item
      7.
              Management's
      Discussion and Analysis of Financial Condition and Results of
      Operations.
              
              10Item
      8.
              Financial
      Statements and Supplementary Data
              
              14Item
      9.
              Changes
      in and Disagreements with Accountants on Accounting and Financial
      Disclosure.
              
              14Item
      9A (T).
              Controls
      and Procedures
              
              14Item
      9B.
              Other
      Information
              
              16PART
      IIIItem
      10.
              Directors,
      Executive Officers and Corporate Governance
              
              16Item
      11.
              Executive
      Compensation
              
              18Item
      12
              Security
      Ownership of Certain Beneficial Owners and Management and Related
      Stockholder Matters
              
              18Item
      13.
              Certain
      Relationships and Related Transactions, and Director
      Independence
              
              19Item
      14.
              Principal
      Accounting Fees and Services
              
              20PART
      IVItem
      15.
              Exhibits
      and Financial Statement Schedules
              
              20Signatures
              
              
              21
 
 Special
Note Regarding Forward Looking Information
 
 This
report contains forward-looking statements that reflect management's current
views and expectations with respect to our business, strategies, future results
and events, and financial performance. All statements made in this report other
than statements of historical fact, including statements that address operating
performance, events or developments that management expects or anticipates will
or may occur in the future, including statements related to future reserves,
cash flows, revenues, profitability, adequacy of funds from operations,
statements expressing general optimism about future operating results and
non-historical information, are forward-looking statements. In particular, the
words "believe," "expect," "intend," "anticipate," "estimate," "plan," "may,"
"will," variations of such words and similar expressions identify
forward-looking statements, but are not the exclusive means of identifying such
statements and their absence does not mean that the statement is not
forward-looking. Readers should not place undue reliance on forward-looking
statements which are based on management's current expectations and projections
about future events, are not guarantees of future performance, are subject to
risks, uncertainties and assumptions. Our actual results, performance or
achievements could differ materially from the results expressed in, or implied
by, these forward-looking statements. Factors that could cause or contribute to
such differences include those discussed in this report, particularly under the
caption "Risk Factors." Except as required under the federal securities laws, we
do not undertake any obligation to update the forward-looking statements in this
report.
  
  PART I
 
 Item 1. Business.
 
 Introduction
 
 We operate an educational facility
under the name "Blue Tassel School" which provides a comprehensive curriculum
required by the government of the People’s Republic of China, supplemented by a
broad range of elective courses which may be chosen from by our students. To the
present date, we have only operated within the People's Republic of China. As
used in this report, the terms "we," "our," "Company" and "China Ivy Schools"
refers to China Ivy Schools, Inc. and its wholly-owned subsidiaries. All
information in this report gives effect to a 1 for 20 reverse stock split
effected in December 2008.
 
 The Company's functional currency is
the Renminbi, which had an average exchange rate of $0.14396 and $0.14475during
fiscal year 2008 and 2009, respectively.
 
 BLUE
TASSEL SCHOOL
 
 Blue Tassel School ("BTS") is an
education center located in Suzhou and organized under the laws of China. BTS is
accredited by the Jiangsu Educational Committee as a boarding school comprising
grades from kindergarten through senior school, including an international
school. The five schools that comprise BTS are kindergarten, primary school,
junior high school, senior high school, and international school.
 
 The BTS International School has 15
foreign teachers with international teacher certification. They are primarily
responsible for the teaching of English. BTS has built a cooperative
relationship with other schools located in the United Kingdom, Australia, New
Zealand and Hong Kong. The BTS International School has established preparatory
classes with the BATH ACADEMY located in the United Kingdom, as the BLUE
TASSEL-BATH ACADEMY. BTS has also established a program for exchange students,
providing long- and short-term study abroad programs, exchange of teachers,
sharing of resources, and collaboration of courses. The BTS Kindergarten has 3
classes for children aged 2-6 years, and has developed appropriate learning
programs for such students which include art, music and musical instruments
performance, dance, skating, and computer programming. In order to develop the
potential abilities of its students, BTS provides diverse options for its
students.
 
 The BTS Primary School provides
elementary education for children aged 6 -12 years and has 14 classes and 47
teachers in the six-year school.
 
 The BTS Junior High School is a
three-year middle school for children aged 12 - 15 years with 16 classes and 40
teachers.
 
 The BTS Senior High School is a
three-year high school for children aged 15 - 18 years with 24 classes and over
1,200 students. The curriculum and program are designed for preparing students
to enter top tier universities.
 
 BTS's education program includes
compulsory level education, ample elective courses, activity courses, students'
societies, clubs, and seminars presented by famous scholars and successful
individuals. Large-scale social practices and educational activities compose a
highly selective and personal curriculum, where children can fully develop their
personalities and discover their potentials. The comprehensive education system
of BTS includes science, art, multi-language, information technology,
international understanding, ethics and behavior, adolescence, and ideal
seminars. Interaction between students and instructors, an efficient learning
environment, and small class teaching are the core ideas for attentive learning
and effective study.
 
 BTS possesses facilities for teaching,
learning, living, extracurricular activities and health care purposes. Such
facilities are at the vanguard of our educational platform, including a
Chinese-English library, e-reading room, computer lab, multi-functional network
system, varieties of labs for group study and experimental use, halls for music
rehearsal and scholarly presentations. In addition to academic facilities, BTS
also has tennis courts, gyms, and other athletic facilities, as well as student
apartments.
 
 As of December 31, 2009, there were
1,810students enrolled at BTS. Our educational facilities are located in the
city of Suzhou, in Jiangsu Province on the eastern coast of China. We are within
two hours driving distance of Shanghai.
 
 Our
Corporate History
 
 The Company was incorporated on
September 14, 1999, in and under the laws of the state of Nevada. At the time of
our incorporation we were engaged in the business of developing an internet
computer software program known as Clear Switch, a program that processes
submission of internet web page information to major internet search engines. We
suspended these efforts due to our insufficient cash flow and inability to
obtain financing to conduct further development of this software
program.
  1
  On October 12, 2006 (the "Effective
Date"), the Company entered into and consummated a Share Exchange Agreement with
Brighter International Limited ("BIL"), Blue Tassel School ("BTS"), and the
shareholders of BIL (the "BIL Shareholders"), pursuant to which the Company
acquired BIL in exchange for the issuance of 2,762,500 shares of the Company’s
common stock to the BIL Shareholders (the "Share Exchange Transaction"), which
was divided proportionally among the BIL Shareholders in accordance with their
respective ownership interests in BIL immediately before the completion of the
Share Exchange Transaction.
 
 As a result of the Share Exchange
Transaction, a change of control of the Company occurred as of the Effective
Date. Prior to the Effective Date, the controlling shareholder of Company was Xu
Zuqiang, who held approximately 80% of the then issued and outstanding shares of
Common Stock of the Company. As of the Effective Date, the BIL Shareholders
became the controlling shareholders of the Company, owning in the aggregate 98%
of the issued and outstanding shares of Common Stock of the Company as of the
Effective Date. Yongqi Zhu ("Zhu"), the Company's present Chairman and Chief
Executive Officer acquired 1,745,900 shares of the Common Stock of the Company.
After giving effect to the Share Exchange Transaction, Zhu held 56.7% of the
then-issued and outstanding shares of the Common Stock of the
Company.
 
 Prior to
the closing of the Share Exchange Transaction, Zuqiang had been Chief Executive
Officer, Chief Financial Officer, and sole director of the Company. Effective
upon the filing and distribution of such documents as required under the
Securities Exchange Act of 1934, as amended, and the expiration of all
applicable grace periods, which occurred on November 12, 2006, Zhu (who prior to
the Share Exchange Transaction was a shareholder of BIL), Qian Gao, Yipeng Lu,
Fugeng Xia and Haiming Zhang were appointed, and Zuqiang resigned from, the
Board of Directors of the Company and from his positions as Chief Executive
Officer and Chief Financial Officer of the Company.
 
 Competition
 
 Our
principal competitors in the education sector in our region are
 
 ·
              Suzhou
      Foreign Language School(Kindergarten to Senior
  high)
 
 ·
              Suzhou
      Zhenhua School(Junior High)
 
 ·
              Suzhou
      Pingjiang School(Junior High)
 
 Also
competing with us are the public schools in our region, examples of which
are:
 
 ·
              Suzhou
      Middle School
 
 ·
              Wuxi
      Guanghua School.
 
 Government
Regulation
 
 We are responsible for compliance with
all laws relevant to education within the country, as administered by the
Ministry of Education of the People’s Republic of China. These include, in
pertinent part, the Education Law of the People's Republic of China, Higher
Education Laws of the People's Republic of China, and the Vocational Education
Laws of the People’s Republic of China. Standards of teacher qualification,
facilities management and suitability, student assessment and program content
are among the most important of the areas which are specified in these
regulations.
 
 Because
of our arrangements with the Bath Academy, as well as with educational
institutions in Hong Kong, Australia, and New Zealand, we are also regulated by
the Ministry's Department of International Cooperation and
Exchanges.
  Item 1A.
Risk Factors.
 
 You
should consider carefully each of the following business and investment risk
factors and all of the other information in this report. If any of the following
risks and uncertainties develop into actual events, the business, financial
condition or results of our operations could be materially adversely affected.
If that happens, the trading price of our shares of common stock could decline
significantly. The risk factors below contain forward-looking statements
regarding our business. Actual results could differ materially from those set
forth in the forward-looking statements. See "Special Note Regarding
Forward-Looking Information."
 
 Risks
Relating to Our Business
 
 We depend
on our students for our revenues, and any loss, cancellation, reduction, or
interruption in our ability to provide educational services could harm our
business.
 
 In
general, we have derived a material portion of our revenue from tuition payments
from our students. If our student base were to be significantly reduced, our
revenues and net income could significantly decline. Our success will depend on
our continued ability to enroll significant numbers of new students. Any adverse
change in our relationship with our students or employees may have a material
adverse effect on our business. Although we are attempting to expand awareness
of our services, we expect that our student enrollment will not change
significantly in the near future. We cannot be sure that we will be able to
retain our students or that we will be able to attract additional students, or
that students will continue to enroll in our school in the same amounts as in
prior years. Any reduction or interruption in the provision of educational
services to our students, our inability to successfully enroll additional
students, or future concessions in tuition rates or fees that we may have to
make could significantly harm our business.
  2
  Attracting
and retaining key personnel is an essential element of our future
success.
 
 Our
future success depends to a significant extent upon the continued service of our
executive officers, other key management, and our faculty, and on our ability to
continue to attract, retain and motivate executive and other key employees,
including those in managerial, technical, marketing and information technology
support positions. Experienced teaching and technical, marketing and support
personnel are in demand and competition for their talents is intense. The loss
of the services of one or more of our key employees or our failure to attract,
retain and motivate qualified personnel could have a material adverse effect on
our business, financial condition and results of operations.
 
 If we
lose the services of our chairman and chief executive officer, our business may
suffer.
 
 We are
dependent on Mr. Yongqi Zhu, our chairman and chief executive officer. The loss
of his services could materially harm our business because of the cost and time
necessary to retain and train a replacement. Such a loss would also divert
management attention away from operational issues. We do not have key-man term
life insurance on Mr. Zhu.
 
 Our
inability to successfully manage the growth of our business may have a material
adverse effect on our business, results of operations and financial
condition.
 
 We expect
to experience growth in the number of employees and the scope of our operations
as a result of internal growth and acquisitions. Such activities could result in
increased responsibilities for management. Our future success will be highly
dependent upon our ability to manage successfully the expansion of operations.
Our ability to manage and support our growth effectively will be substantially
dependent on our ability to implement adequate improvements to financial,
inventory, management controls, reporting, order entry systems and other
procedures, and hire sufficient numbers of financial, accounting,
administrative, and management personnel.
 
 Our
future success depends on our ability to address potential market opportunities
and to manage expenses to match our ability to finance operations. The need to
control our expenses will place a significant strain on our management and
operational resources. If we are unable to control our expenses effectively, our
business, results of operations and financial condition may be adversely
affected.
 
 The
unsuccessful integration of a business or business segment we acquire could have
a material adverse effect on our results.
 
 As part
of our business strategy, we expect to acquire assets and facilities, some of
which may not be related to or complementary to our operations. These
acquisitions will involve risks commonly encountered in acquisitions. These
risks include exposure to unknown liabilities of the acquired facilities,
additional acquisition costs and unanticipated expenses. Our quarterly and
annual operating results could fluctuate due to the costs and expenses of
acquiring and integrating new facilities. We may also experience difficulties in
assimilating the operations and personnel of acquired facilities. Our ongoing
operations may be disrupted and our management's time and attention diverted
from existing operations. Our acquisition strategy will likely require
additional equity or debt financing, resulting in additional leverage or
dilution of ownership. We cannot assure you that any future acquisition will be
consummated, or that if consummated, that we will be able to integrate such
acquisition successfully.
 
 Our
management is comprised almost entirely of individuals residing in the PRC with
very limited English skills.
 
 Our
management is comprised almost entirely of individuals born and raised in the
PRC. As a result of differences in culture, educational background and business
experiences, our management may analyze, evaluate and present business
opportunities and results of operations differently from the way they are
analyzed, evaluated and presented by management teams of public companies in
Europe and the United States. In addition, our management has very limited
skills in English. Consequently, it is possible that our management team will
emphasize or fail to emphasize aspects of our business that might customarily be
emphasized in a different manner by comparable public companies from different
geographical and political areas.
 
 We will
face many of the difficulties that companies in the early stage may
face.
 
 We have a
limited operating history as an education provider, which may make it difficult
for you to assess our ability to identify merger or acquisition candidates and
our growth and earnings potential. Therefore, we may face many of the
difficulties that companies in the early stages of their development in new and
evolving markets often face. We may continue to face these difficulties in the
future, some of which may be beyond our control. If we are unable to
successfully address these problems, our future growth and earnings will be
negatively affected.
  3
  We cannot
accurately forecast our future revenues and operating results, which may
fluctuate.
 
 Our short
operating history and the rapidly changing nature of the markets in which we
compete make it difficult to accurately forecast our revenues and operating
results. Furthermore, our revenues and operating results may fluctuate in the
future due to a number of factors, including the following:
 
 ·
                the
      success of identifying and completing mergers and
      acquisitions;
 ·
                reduced
      demand for our educational
services;
 ·
                difficulty
      in keeping current with changing
technologies;
 ·
                increased
      or uneven expenses, whether related to sales and marketing or
      administration;
 ·
                deferral
      of recognition of our revenue in accordance with applicable accounting
      principles due to the time required to complete the academic year;
      and
 ·
                costs
      related to possible acquisitions of technology or other educational
      facilities.
 
 Due to
these factors, forecasts may not be achieved, either because expected revenues
do not occur or because they occur at lower prices or on terms that are less
favorable to us. In addition, these factors increase the chances that our
results could be lower than the expectations of investors and analysts. If so,
the market price of our stock would likely decline.
 
 Risks
Related to Doing Business in the People's Republic of China
 
 Our
business operations take place primarily in the People's Republic of China.
Because Chinese laws, regulations and policies are changing, our Chinese
operations will face several risks summarized below.
 
 -
Limitations on Chinese economic market reforms may discourage foreign investment
in Chinese businesses.
 
 The value
of investments in Chinese businesses could be adversely affected by political,
economic and social uncertainties in China. The economic reforms in China in
recent years are regarded by China's central government as a way to introduce
economic market forces into China. Given the overriding desire of the central
government leadership to maintain stability in China amid rapid social and
economic changes in the country, the economic market reforms of recent years
could be slowed, or even reversed.
 
 - Any
change in policy by the Chinese government could adversely affect investments in
Chinese businesses.
 
 Changes
in policy could result in imposition of restrictions on currency conversion,
imports or the source of supplies, as well as new laws affecting joint ventures
and foreign-owned enterprises doing business in China. Although China has been
pursuing economic reforms, events such as a change in leadership or social
disruptions that may occur upon the proposed privatization of certain
state-owned industries, could significantly affect the government's ability to
continue with its reform.
 
 - We face
economic risks in doing business in China.
  As a
developing nation, China's economy is more volatile than that of developed
Western industrial economies. It differs significantly from that of the U.S. or
a Western European country in such respects as structure, level of development,
capital reinvestment, legal recourse, resource allocation and self-sufficiency.
Only in recent years has the Chinese economy moved from what had been a command
economy through the 1970s to one that during the 1990s encouraged substantial
private economic activity. In 1993, the Constitution of China was amended to
reinforce such economic reforms. The trends of the 1990s indicate that future
policies of the Chinese government will emphasize greater utilization of market
forces. For example, in 1999 the Government announced plans to amend the Chinese
Constitution to recognize private property, although private business will
officially remain subordinate to state-owned companies, which are the mainstay
of the Chinese economy. However, we cannot assure you that, under some
circumstances, the government's pursuit of economic reforms will not be
restrained or curtailed. Actions by the central government of China could have a
significant adverse effect on economic conditions in the country as a whole and
on the economic prospects for our Chinese operations.
 
 - The
Chinese legal and judicial system may negatively impact foreign
investors.
 
 In 1982,
the National People's Congress amended the Constitution of China to authorize
foreign investment and guarantee the "lawful rights and interests" of foreign
investors in China. However, China's system of laws is not yet comprehensive.
The legal and judicial systems in China are still under development, and
enforcement of existing laws is inconsistent. Many judges in China lack the
depth of legal training and experience that would be expected of a judge in a
more developed country. Because the Chinese judiciary is relatively
inexperienced in enforcing the laws that exist, anticipation of judicial
decision-making is more uncertain than would be expected in a more developed
country. It may be impossible to obtain swift and equitable enforcement of laws
that do exist, or to obtain enforcement of the judgment of one court by a court
of another jurisdiction. China's legal system is based on written statutes; a
decision by one judge does not set a legal precedent that is required to be
followed by judges in other cases. In addition, the interpretation of Chinese
laws may shift to reflect domestic political changes.
  4
  The
promulgation of new laws, changes to existing laws and the pre-emption of local
regulations by national laws may adversely affect foreign investors. However,
the trend of legislation over the last 20 years has significantly enhanced the
protection of foreign investment and allowed for more control by foreign parties
of their investments in Chinese enterprises. We cannot assure you that a change
in leadership, social or political disruption, or unforeseen circumstances
affecting China's political, economic or social life, will not affect the
Chinese government's ability to continue to support and pursue these reforms.
Such a shift could have a material adverse effect on our business and
prospects.
 
 The
practical effect of the People's Republic of China's legal system on our
business operations in China can be viewed from two separate but intertwined
considerations. First, as a matter of substantive law, the Foreign Invested
Enterprise laws provide significant protection from government interference. In
addition, these laws guarantee the full enjoyment of the benefits of corporate
articles and contracts to Foreign Invested Enterprise participants. These laws,
however, do impose standards concerning corporate formation and governance,
which are not qualitatively different from the general corporation laws of the
several states. Similarly, the accounting laws and regulations of the People's
Republic of China mandate accounting practices which are not consistent with
U.S. Generally Accepted Accounting Principles. China's accounting laws require
that an annual "statutory audit" be performed in accordance with People's
Republic of China's accounting standards and that the books of account of
Foreign Invested Enterprises are maintained in accordance with Chinese
accounting laws. Article 14 of the Peoples Republic of China Wholly
Foreign-Owned Enterprise Law requires a Wholly Foreign-Owned Enterprise to
submit certain periodic fiscal reports and statements to designated financial
and tax authorities, at the risk of business license revocation. Second, while
the enforcement of substantive rights may appear less clear than United States
procedures, Foreign Invested Enterprises and Wholly Foreign-Owned Enterprises
are Chinese registered companies, which enjoy the same status as other Chinese
registered companies in business-to-business dispute resolution. Generally, the
Articles of Association provide that all business disputes pertaining to Foreign
Invested Enterprises are to be resolved by the Arbitration Institute of the
Stockholm Chamber of Commerce in Stockholm, Sweden, applying Chinese substantive
law. Any award rendered by this arbitration tribunal is, by the express terms of
the respective Articles of Association, enforceable in accordance with the
"United Nations Convention on the Recognition and Enforcement of Foreign
Arbitral Awards (1958)." Therefore, as a practical matter, although no
assurances can be given, the Chinese legal infrastructure, while different in
operation from its United States counterpart, should not present any significant
impediment to the operation of Foreign Invested Enterprises.
 
 Because
our principal assets are located outside of the United States and all of our
directors and executive officers reside outside of the United States, it may be
difficult for you to enforce your rights based on the United States Federal
securities laws against us and our officers and directors in the United States
or to enforce judgments of United States courts against us or them in the
People's Republic of China.
 
 In
addition, our operating subsidiaries and substantially all of our assets are
located outside of the United States. You will find it difficult to enforce your
legal rights based on the civil liability provisions of the United States
Federal securities laws against us in the courts of either the United States or
the People's Republic of China and, even if civil judgments are obtained in
courts of the United States, to enforce such judgments in the courts of the
People's Republic of China. In addition, it is unclear if extradition treaties
in effect between the United States and the People's Republic of China would
permit effective enforcement against us or our officers and directors of
criminal penalties, under the United States Federal securities laws or
otherwise.
 
 -
Economic Reform Issues
 
 Although
the Chinese government owns the majority of productive assets in China, during
the past several years the government has implemented economic reform measures
that emphasize decentralization and encourage private economic activity. Because
these economic reform measures may be inconsistent or ineffectual, we are unable
to assure you that:
  ·
                  We
      will be able to capitalize on economic
reforms;
 ·
                  The
      Chinese government will continue its pursuit of economic reform
      policies;
 ·
                  The
      economic policies, even if pursued, will be
  successful;
 ·
                  Economic
      policies will not be significantly altered from time to time;
      and
 ·
                  Business
      operations in China will not become subject to the risk of
      nationalization.
 Since
1979, the Chinese government has reformed its economic systems. Because many
reforms are unprecedented or experimental, they are expected to be refined and
improved. Other political, economic and social factors, such as political
changes, changes in the rates of economic growth, unemployment or inflation, or
in the disparities in per capita wealth between regions within China, could lead
to further readjustment of the reform measures. This refining and readjustment
process may negatively affect our operations.
 
 Over the
last few years, China's economy has registered a high growth rate. Recently,
there have been indications that rates of inflation have increased. In response,
the Chinese government recently has taken measures to curb this excessively
expansive economy. These measures have included revaluations of the Chinese
currency, the Renminbi (RMB), restrictions on the availability of domestic
credit, and limited re-centralization of the approval process for purchases of
some foreign products. These austerity measures alone may not succeed in slowing
down the economy's excessive expansion or control inflation, and may result in
severe dislocations in the Chinese economy. The Chinese government may adopt
additional measures to further combat inflation, including the establishment of
freezes or restraints on certain projects or markets.
  5
  To date,
reforms to China's economic system have not adversely impacted our operations
and are not expected to adversely impact operations in the foreseeable future;
however, there can be no assurance that the reforms to China's economic system
will continue or that we will not be adversely affected by changes in China's
political, economic, and social conditions and by changes in policies of the
Chinese government, such as changes in laws and regulations, measures which may
be introduced to control inflation, changes in the rate or method of taxation,
imposition of additional restrictions on currency conversion and remittance
abroad, and reduction in tariff protection and other import
restrictions.
 
 We are
subject to risks associated with our operations which may affect our
results.
 
 The field
of education in the PRC has drawbacks that the same industry does not have
within the United States. For instance:
  ·      In
China, insurance coverage is a relatively new concept compared to that of the
United States and for certain aspects of a business operation, insurance
coverage is restricted or expensive. Workers compensation for employees in the
PRC may be unavailable or, if available, insufficient to adequately cover such
employees.
 
 ·      The
laws and regulations in the PRC set various standards regulating certain aspects
of health and environmental quality, including, in some cases, the environment
in which educational activities and teaching facilities may be located, or what
methods, procedures or substances may be used in the conduct of certain classes.
Violation of those standards could result in a temporary or permanent
restriction by the PRC of our operations.
 We cannot
assure you that we will be able to adequately address any of these or other
limitations.
 
 Our
earnings and, therefore our profitability, may be affected by price
volatility.
 
 We
anticipate that the majority of our future revenues will be derived from
providing educational services, and, as a result, our earnings are directly
related to the prices of these services. There are many factors influencing the
price of these services including expectations for inflation; regional demand
and our ability to meet it; political and economic conditions; and labor costs.
These factors are beyond our control and are impossible for us to predict. As a
result, price changes may adversely affect our operating results.
 
 Our
educational business operations and related activities are subject to PRC
government regulations concerning education.
 
 We may
have to make a significant financial commitment to ensure that we remain
compliant with the regulations affecting education providers. Compliance with
existing and future regulations may increase our operating costs and may
adversely affect our operating results.
 
 Risks
Relating to our Common Stock and our Status as a Public Company
 
 Since our
chairman and chief executive officer owns a majority of our outstanding of
common stock, and together with our other directors and officers and another
stockholder in the aggregate own over 94% of our outstanding shares, you will
not have the ability to determine the outcome of matters requiring stockholder
approval.
 
 Yongqi
Zhu, our chairman and chief executive officer, beneficially owns approximately
56% of the outstanding shares of our common stock. In addition, another
beneficial owner owns more than 26% of our outstanding shares of common stock
and other officers and directors in the aggregate own approximately 12% of our
common stock. As a result of this concentration of ownership, you and our other
stockholders, acting alone, do not have the ability to determine the outcome of
matters requiring stockholder approval, including the election of our directors
or significant corporate transactions. In addition, this concentration of
ownership, which is not subject to any voting restrictions, may discourage or
thwart efforts by third parties to take-over or effect a change in control of
our company that may be desirable for you and are other stockholders, and may
limit the price that investors are willing to pay for our common
stock.
 
 The price
of our common stock may be affected by a limited trading volume and may
fluctuate significantly.
 
 There has
been a limited public market for our common stock and we cannot assure you that
an active trading market for our stock will develop or if developed, will be
maintained. The absence of an active trading market may adversely affect our
stockholders' ability to sell our common stock in short time periods, or
possibly at all. In addition, we cannot assure you that you will be able to sell
shares of common stock that you have purchased without incurring a loss. The
market price of our common stock may not necessarily bear any relationship to
our book value, assets, past operating results, financial condition or any other
established criteria of value, and may not be indicative of the market price for
the common stock in the future. In addition, the market price for our common
stock may be volatile depending on a number of factors, including business
performance, industry dynamics, and news announcements or changes in general
economic conditions.
  6
  We have
not and do not anticipate paying any dividends on our common stock; because of
this our securities could face devaluation in the market.
 
 We have
paid no dividends on our common stock to date and it is not anticipated that any
dividends will be paid to holders of our common stock in the foreseeable future.
While our dividend policy will be based on the operating results and capital
needs of the business, it is anticipated that any earnings will be retained to
finance our future expansion and for the implementation of our business plan. As
an investor, you should take note of the fact that a lack of a dividend can
further affect the market value of our stock, and could significantly affect the
value of any investment in our Company.
 
 We will
continue to incur significant increased costs as a result of operating as a
public company, and our management will be required to devote substantial time
to new compliance requirements.
 
 As a
public company we incur significant legal, accounting and other expenses under
the Sarbanes-Oxley Act of 2002, together with rules implemented by the
Securities and Exchange Commission and applicable market regulators. These rules
impose various requirements on public companies, including requiring certain
corporate governance practices. Our management and other personnel will need to
devote a substantial amount of time to these new compliance requirements.
Moreover, these rules and regulations will increase our legal and financial
compliance costs and will make some activities more time-consuming and
costly.
 
 In
addition, the Sarbanes-Oxley Act requires, among other things, that we maintain
effective internal controls for financial reporting and disclosure controls and
procedures. In particular, we must perform system and process evaluations and
testing of our internal controls over financial reporting to allow management,
and commencing in 2011 our independent registered public accounting firm, to
report on the effectiveness of our internal controls over financial reporting,
as required by Section 404 of the Sarbanes-Oxley Act. Our testing, or the
subsequent testing by our independent registered public accounting firm, may
reveal deficiencies in our internal controls over financial reporting that are
deemed to be material weaknesses. Compliance with Section 404 may require that
we incur substantial accounting expenses and expend significant management
efforts. If we are not able to comply with the requirements of Section 404 in a
timely manner, or if our accountants later identify deficiencies in our internal
controls over financial reporting that are deemed to be material weaknesses, the
market price of our stock could decline and we could be subject to sanctions or
investigations by the SEC or other applicable regulatory
authorities.
 
 Our Board
of Directors has the authority, without stockholder approval, to issue preferred
stock with terms that may not be beneficial to common stock holders and with the
ability to adversely affect stockholder voting power and perpetuate the board's
control over the Company.
 
 Our
certificate of incorporation authorizes the issuance of up to 50,000,000 shares
of preferred stock. Our Board of Directors by resolution may authorize the
issuance of preferred stock in one or more series with such limitations and
restrictions as it may determine, in its sole discretion, with no further
authorization by security holders required for the issuance thereof. The Board
may determine the specific terms of the preferred stock, including:
designations; preferences; conversions rights; cumulative; relative;
participating; and optional or other rights, including: voting rights;
qualifications; limitations; or restrictions of the preferred stock. The
issuance of preferred stock may adversely affect the voting power and other
rights of the holders of common stock. Preferred stock may be issued quickly
with terms calculated to discourage, make more difficult, delay or prevent a
change in control of our company or make removal of management more difficult.
As a result, the Board of Directors' ability to issue preferred stock may
discourage the potential hostile acquirer, possibly resulting in beneficial
negotiations. Negotiating with an unfriendly acquirer may result in terms more
favorable to us and our stockholders. Conversely, the issuance of preferred
stock may adversely affect any market price of, and the voting and other rights
of the holders of the common stock. We presently have no plans to issue any
preferred stock.
 
 We may
issue shares of our capital stock or debt securities to complete an acquisition,
which would reduce the equity interest of our stockholders or subject our
company to risks upon default.
 
 We may
issue our securities to acquire companies or assets. Most likely, we will issue
additional shares of our common stock or preferred stock, or both, to complete
acquisitions. If we issue additional shares of our common stock or shares of our
preferred stock, the equity interest of our existing stockholders may be reduced
significantly, and the market price of our common stock may decrease. The shares
of preferred stock we issue are likely to provide holders with dividend,
liquidation and voting rights, and may include participation rights, senior to,
and more favorable than, the rights and powers of holders of our common
stock.
 
 If we
issue debt securities as part of an acquisition, and we are unable to generate
sufficient operating revenues to pay the principal amount and accrued interest
on that debt, we may be forced to sell all or a significant portion of our
assets to satisfy our debt service obligations, unless we are able to refinance
or negotiate an extension of our payment obligation. Even if we are able to meet
our debt service obligations as they become due, the holders of that debt may
accelerate payment if we fail to comply with, and/or are unable to obtain
waivers of, covenants that require us to maintain certain financial ratios or
reserves or satisfy certain other financial restrictions. In addition, financial
and other covenants in the agreements we may enter into to secure debt financing
may restrict our ability to obtain additional financing and our flexibility in
operating our business.
  7
  We have
significant indebtedness. We are significantly leveraged and our indebtedness is
substantial in relation to our stockholders' equity. Our ability to make
principal and interest payments will depend on future performance, which is
subject to many factors, some of which are outside our control. In the case of a
continuing default with respect to this indebtedness, the lender will have the
right to foreclose on our assets, which would have a material adverse effect on
our business. Payment of principal and interest on this indebtedness may limit
our ability to pay cash dividends to stockholders and the documents governing
this indebtedness prohibit the payment of cash dividends in certain situations.
Our leverage may also adversely affect our ability to finance future operations
and capital needs, may limit our ability to pursue business opportunities and
may make our results of operations more susceptible to adverse economic
conditions.
 
 Future
sales of our common stock, or the perception that such sales could occur, could
have an adverse effect on the market price of our common stock.
 
 As of
March 31, 2010, we had outstanding 22,582,541 shares of common stock. There are
a limited number of holders of our common stock. Future sales of our common
stock, pursuant to a registration statement or Rule 144 under the Securities
Act, or the perception that such sales could occur, could have an adverse effect
on the market price of our common stock. The number of our shares available for
sale pursuant to registration statements or Rule 144 is very large relative to
the trading volume of our shares. Any attempt to sell a substantial number of
our shares could severely depress the market price of our common stock. In
addition, we may use our capital stock in the future to finance acquisitions and
to compensate employees and management, which will further dilute the interests
of our existing shareholders and could also depress the trading price of our
common stock.
 
 Our
business may be adversely affected by conditions in the financial markets and
economic conditions generally.
 
 Changes
in economic conditions worldwide and particularly in China make it difficult for
us to accurately forecast and plan future business requirements, and could cause
us to slow or reduce our business activities. Furthermore, during challenging
economic times, we may face issues gaining timely access to financing or capital
infusion, which could result in an impairment of our ability to continue our
business activities. We cannot predict the timing, strength or duration of any
economic slowdown or subsequent economic recovery, worldwide, in China, or in
our industry.
 
 These and
other economic factors could have a material adverse effect on our financial
condition and operating results. In addition, further negative market
developments may affect consumer confidence levels and may cause adverse changes
in payment patterns, lessened demand for our products and services, and
increased default rates among our clients. A worsening of these conditions would
likely exacerbate the adverse effects of these difficult market conditions on us
and others in our industry.
 
 Item 2. Properties.
 
 Our
educational and principal operating facilities are located at 1 Suhua Road,
Shiji Jinrong Building Suite 801, Suzhou Industrial Park, Jiangsu Province,
215020, P.R. China. Our facilities consist of twenty buildings with 50,113
square feet of space housed on approximately 92,000 square meters of land. The
term of the lease expires March 2018 and the minimum rent for the next five
years is $1,645,735 per annum.
 
 Item 3. Legal Proceedings.
 
 There are
no pending legal proceedings to which we are a party or in which any of our
directors, officers or affiliates, any owner of record or beneficially of more
than 5% of any class of our voting securities, or security holder is a party
adverse to us or has a material interest adverse to us. Our property is not the
subject of any pending legal proceedings.
 
 PART II
 
 Item 5. Market for Registrant's Common
Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities.
 
 Market
for Our Common Stock
 
 Our
common stock is traded in the over-the-counter market and is quoted on the OTC
Bulletin Board under the symbol CIVS.OB. Prior to December 29, 2008, the date we
effected a 1-for-20 reverse stock split of our common stock, our common stock
had been quoted under the symbol "CIVY.OB".
 
 The
prices set forth below reflect the quarterly high and low closing price
information for shares of our common stock for the periods indicated. These
quotations reflect inter-dealer prices, without retail markup, markdown or
commission, and may not represent actual transactions. The prices set forth
below have been adjusted to reflect the 1-for-20 reverse stock split effected on
December 29, 2008.
  8
  High
                
                
                Low2008First
      Quarter
                
                $
                4.10
                
                
                $
                1.60Second
      Quarter
                
                $
                2.20
                
                
                $
                0.60Third
      Quarter
                
                $
                1.06
                
                
                $
                0.60Fourth
      Quarter
                
                $
                0.18
                
                
                $
                0.0242009First
      Quarter
                
                $
                0.35
                
                
                $
                0.04Second
      Quarter
                
                $
                0.09881
                
                
                $
                0.021Third
      Quarter
                
                $
                0.479
                
                
                $
                0.04Fourth
      Quarter
                
                $
                0.99887
                
                
                $
                0.07287
 
 As of
March 31, 2010, our common stock was held of record by approximately 27
stockholders, some of whom may hold shares for beneficial owners and have not
been polled to determine the extent of beneficial ownership.
 
 We have
never paid cash dividends on our common stock. Holders of our common stock are
entitled to receive dividends, if any, declared and paid from time to time by
the Board of Directors out of funds legally available. We intend to retain any
earnings for the operation and expansion of our business and do not anticipate
paying cash dividends in the foreseeable future. Any future determination as to
the payment of cash dividends will depend upon future earnings, results of
operations, capital requirements, our financial condition and other factors that
our Board of Directors may consider.
 
 Our
Equity Compensation Plans
 
 The
following table provides information as of December 31, 2009 about our equity
compensation plans and arrangements.
 
 Equity
Compensation Plan Information - December 31, 2009
  Plan
      category
                  
                  Number
      of securities to be issued upon exercise of outstanding options, warrants
      and rights
                    (a)
                  
                  Weighted-average
      exercise price of outstanding options, warrants and rights
                    (b)
                  
                  Number
      of securities remaining available for future issuance under equity
      compensation plans (excluding securities reflected in column
      (a))
                    (c)Equity
      compensation plans approved by security holders
                  
                  none
                  
                  none
                  
                  noneEquity
      compensation plans not approved by security holders
                  
                  none
                  
                  n/a
                  
                  0
  Purchases
of Equity Securities by the Company and Affiliated Purchasers
 
 During
the fourth quarter of our fiscal year ended December 31, 2009, neither we nor
any "affiliated purchaser" (as defined in Rule 10b-18(a)(3) under the Exchange
Act) purchased any shares of our common stock, the only class of our equity
securities registered pursuant to section 12 of the Exchange Act.
  Recent
Sales of Unregistered Securities
 
 Information
concerning sales of unregistered securities during 2009 has been reported in our
reports filed pursuant to Section 13(a) of the Exchange Act.
 
 Item 6. Selected Financial
Data.
 
 Not
applicable.
  9
  Item 7. Management's Discussion and
Analysis of Financial Condition and Results of Operation
 
 The
following discussion should be read in conjunction with our financial statements
and notes thereto included in this report. All information presented herein is
based on our fiscal years ended December 31, 2009 and 2008.
  Results
of Operations
  Comparison
of Revenue for the Years Ended December 31, 2009 and 2008
 
 2009
                
                
                2008RevenueTuition
      fees
                
                $
                5,350,069
                
                
                $
                5,253,656Accommodation
      fees
                
                
                599,243
                
                
                
                570,454Other
                
                
                385,469
                
                
                
                256,667Total
      Revenue
                
                $
                6,334,781
                
                
                $
                6,080,777
 
 Net revenue for the year ended December
31, 2009 totaled $6,334,781, an increase of $254,004, or approximately 4%
compared to $6,080,777 for the year ended December 31, 2008.The revenue
from tuition fees was $5,350,069 for the year ended December 31, 2009, an
increase of $96,413, or 2% compared to $5,253,656 for the year ended December
31, 2008. The increase in tuition fees was primarily attributable to the slight
increase of fees for certain students. Our current enrollment (as of December
31, 2009) was 1,810 students, a decrease of 115 students, or 6%, compared to an
enrollment of 1,925 students as of December 31, 2008.
 
 Comparison
of Operating Expenses for the Years Ended December 31, 2009 and
2008
 
 2009
                
                
                2008Operating
      ExpensesTeachers
      salaries and related expenses
                
                $
                2,164,486
                
                
                $
                1,789,290Professional
      and consulting fees
                
                
                1,054,483
                
                
                
                1,897,765Rental
      and related expenses
                
                
                1,811,139
                
                
                
                1,481,290Depreciation
      and amortization expenses
                
                
                901,348
                
                
                
                1,146,903Other
      general and administrative expenses
                
                
                1,015,240
                
                
                
                1,141,823Total
      Operating Expenses
                
                $
                6,946,696
                
                
                $
                7,457,071
 
 Operating expenses for the year ended
December 31, 2009 totaled $6,946,696, representing a decrease of $510,375, or
7%, compared to $7,457,071 for the year ended December 31, 2008. The decrease in
operating expenses was mainly attributable to a decrease in consulting expenses. The
consulting expense was $899,531 in 2009, a decrease of $823,340 as compared to
$1,722,871 in 2008. The increase in teachers’ salaries and related expense was
due to $439,200 in bonuses paid to teachers in 2009. During 2009, $329,849
increase in rental and related expenses and $245,555 decrease in depreciation
and amortization resulted from the sale and leaseback of our buildings and land
use right in March 2008.
 
 Comparison
of Other Income and Expenses for the Years Ended December 31, 2009 and
2008
 
 Other
income and expense for the year ended December 31, 2009 totaled a net expense of
$203,013, a decrease of $3,623,862, compared to net expense of $3,826,875 for
the year ended December 31, 2008. The decreased net other expense mainly
resulted from the loss on sale and leaseback of real property to a related party
in 2008. (See Note 4 to Financial Statements). The loss represents the
difference between the carrying value of the property sold and the fair value of
the consideration received – i.e., the present value of future cash inflows
(lease payments). The Company recorded a loss of $5,169,294 at the date of the
transaction. The discount will be accreted in proportion to the payments
received and will be recorded under the caption “accretion of discount” in the
other income section. During 2008, the accretion of discount totaled $2,280,191.
The net effect was that $2,889,103 of net other expenses were incurred for the
year ended December 31, 2008 related to the sale and leaseback of real property.
During 2009, the accretion of discount of $482,478 was contained in other
income. Interest expense totaling $686,870 in 2009, decreased $264,126, as
compared to $950,996 in 2008. The decrease in interest expense resulted from
lower average balances outstanding in 2009 compared to 2008.
  10
  Liquidity
and Capital Resources
 
 Cash has
historically been generated from operations. Operations and liquidity needs are
funded primarily through cash flows from operations and short-term borrowings.
Cash and cash equivalents were $46,187 and $58,984 at December 31, 2009 and
2008, respectively.
 
 Net cash
provided by operating activities was $1,774,684 and $2,455,012 for the year
ended December 31, 2009 and 2008, respectively. The decrease in net cash
provided by operating activities in 2009 was due to $3,731,418 expenses paid by
a related party, Minglong, in 2008 as compared to $0 in 2009. See Note 4 of
Notes to Consolidated Financial Statements.
 
 Net cash
used by investing activities was $2,984,629 in 2009, compared to $44,581 in
2008. During 2009, the Company made advances of $2,790,207 to an entity owned by
the Company’s Chief Executive Officer who is also a significant shareholder in
the Company. These advances, $2,790,207, were repaid to the Company by the
entity on March 30, 2010. There were no advances made to the aforementioned
entity in 2008. During 2009, the Company acquired $194,422 of property and
equipment, compared to $44,581 in 2008.
 
 Net cash
provided by financing activities was $1,175,173 in 2009, compared to $2,272,272
used in financing activates in 2008. During 2009, net repayment of bank
borrowings was $293,000, compared to $4,606,720 in 2008. During 2009, the
Company repaid $91,827 of loans from related parties, compared to net proceeds
of $1,641,232 from advances from the entity owned by the Chief Executive
Officer/significant Company Shareholder described in the preceding paragraph in
2008. The Company received $1,560,000 from convertible notes in
2009.
 
 Bank
Borrowings
 
 The
Company has borrowed $10,401,500 and $10,699,610 from two banks located in China
under credit agreements as of December 31, 2009 and 2008, respectively.
Borrowings under credit lines consist of the following:
 
 2009
                
                
                2008Bank
      BorrowingsBorrowings from Huaxia Bank Suzhou
      BranchInterest
      at 5.103% per annum, due by September 18, 2009
                
                $
                -
                
                
                $
                6,009,370Interest
      at 5.841% per annum, due by September 12, 2009
                
                
                -
                
                
                
                2,784,830Interest
      at 5.346% per annum, due by October 30, 2010
                
                
                2,637,000
                
                
                
                -Interest
      at 5.346% per annum, due by November 5, 2010
                
                
                2,197,500
                
                
                
                -Interest
      at 5.346% per annum, due by November 9, 2010
                
                
                2,710,250
                
                
                
                -Interest
      at 5.346% per annum, due by November 18, 2010
                
                
                1,098,750
                
                
                
                -Borrowings
      from Huaxia Bank Subtotal
                
                
                8,643,500
                
                
                
                8,794,200Borrowings from Jiangsu Dongwu Rural Commercial
      BankInterest
      at 9.711% per annum, due by June 26, 2009
                
                
                -
                
                
                
                293,140Interest
      at 9.711% per annum, due by June 25, 2009
                
                
                -
                
                
                
                1,612,270Interest
      at 6.903% per annum, due by June 5, 2010
                
                
                293,000
                
                
                
                -Interest
      at 6.903% per annum, due by June 5, 2010
                
                
                1,465,000
                
                
                
                -Borrowings
      from Dongwu Rural Commercial Bank Subtotal
                
                
                1,758,000
                
                
                
                1,905,410Total
      borrowings
                
                
                10,401,500
                
                
                
                10,699,610Current
      portion
                
                
                10,401,500
                
                
                
                10,699,610Long
      term portion
                
                $
                -
                
                
                $
                -
 
 June 17,
2008, the Company entered into a credit agreement with Jiangsu Dongwu Rural
Commercial Bank. The Company acquired a 2,000,000 RMB (approximately $293,000)
credit line from June 17, 2008 to June 17, 2011. This credit line is secured by
a 234 square meter residential unit and 62 square meter land use right owned by
Ti Yin and Yan Hong, the third party assigned by the bank.
 
 On June
17, 2008, the Company entered into a credit agreement with Jiangsu Dongwu Rural
Commercial Bank. The Company acquired a 11,000,000 RMB (approximately
$1,611,500) credit line from June 17, 2008 to June 17, 2011. This credit line is
secured by a 477 square meter residential unit and 837 square meter land use
right owned by the Chief Executive Officer of the Company. As of December 31,
2009, the balance outstanding under this credit line was 10,000,000 RMB
($1,465,000).
 
 The loans
from Huaxia Bank are secured by the land use right of Blue Tassel School and
four buildings totaling 20,926.86 square meters of the School.
  11
  Convertible
Notes Payable
 
 On June
30, 2009, the Company completed the sale of $1,560,000 principal amount of the
Company's 6% Convertible Notes, due June 30, 2010 (the "Notes"). The Notes were
sold to four related parties ($920,000 to the Company’s chief executive officer,
$448,000 to Minglong, and $192,000 to two other Company directors) outside the
United States in a private transaction exempted from the registration
requirements of the Securities Act of 1933 pursuant to Regulation S. The Notes
accrue interest at the rate of 6% per annum and were to mature on June 30, 2010.
The four related parties paid an aggregate of $1,560,000 for their
Notes.
 
 Holders
of the Notes could at any time convert all or any portion of the principal
amount of the Notes into shares of the Company's Common Stock at a conversion
price, subject to adjustment, initially equal to eight cents ($0.08) per share.
No interest was payable on any portion of a Note converted into Common Stock.
Should the conversion price decrease or increase, the number of shares of Common
Stock issuable upon conversion of the Notes would have proportionately increased
or decreased, as the case may be. In the event of default by the Company in its
obligations under the Notes, Holders can, at their option, declare the principal
of the Note and the interest accrued thereon to be immediately due and
payable.
 
 On March
2, 2010, China Ivy issued a total of 19,500,000 shares of its common stock in
full satisfaction of the $1,560,000 convertible notes payable due to the four
related parties discussed above.
 
 Going
Concern
 
 The
financial statements have been prepared on a “going concern” basis, which
contemplates the realization of assets and liquidation of liabilities in the
normal course of business. However, as of December 31, 2009 and 2008, the
Company had cash of $46,187 and $58,984, respectively, and working capital
deficit of $11,038,871 and $13,257,768, respectively. The Company had
accumulated deficit of $5,115,622 and $4,300,694 as of December 31, 2009 and
2008, respectively. These factors create substantial doubt as to the Company’s
ability to continue as a going concern. The Company plans to improve its
financial condition through a debt or equity offering of its securities and /or
a business combination with another business entity. However, there is no
assurance that the Company will accomplish these objectives. The financial
statements do not include any adjustments that might be necessary should the
Company be unable to continue as a going concern.
 
 Historically,
operations, short term financing and the sale of our company stock have been
sufficient to meet our cash needs. Our school is a reputable school in the City
of Suzhou. The tuition income will be relatively stable in the foreseeable
future. We believe that we will be able to generate enough cash to cover our
daily operating needs in the next twelve months. We will focus our efforts on
reducing operating costs, especially administrative expenses, in the next twelve
months. However, our actual working capital needs for the long and short term
will depend upon numerous factors, including operating results, competition, and
the availability of credit facilities, none of which can be predicted with
certainty. Future expansion will be limited by the availability of
capital.
 
 Critical
Accounting Policies and Estimates
 
 Financial
Reporting Release No. 60, published by the SEC, recommends that all companies
include a discussion of critical accounting policies used in the preparation of
their financial statements. While all our significant accounting policies impact
our financial condition and results of operations, we view certain of these
policies as critical. Policies determined to be critical are those policies that
have the most significant impact on our consolidated financial statements and
require management to use a greater degree of judgment and estimates. Actual
results may differ from those estimates.
 
 We
believe that given current facts and circumstances, it is unlikely that applying
any other reasonable judgments or estimate methodologies would cause a material
effect on our consolidated results of operations, financial position or
liquidity for the periods presented in this report.
 
 General
 
 The
Company’s Consolidated Financial Statements are prepared in accordance with U.S.
generally accepted accounting principles, which require management to make
estimates, judgments and assumptions that affect the reported amounts of assets,
liabilities, net revenue and expenses, and the disclosure of contingent assets
and liabilities. Management bases its estimates on historical experience and on
various other assumptions that it believes 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. Senior management has discussed the development, selection and
disclosure of these estimates with the Board of Directors. Management believes
that the accounting estimates employed and the resulting balances are
reasonable; however, actual results may differ from these estimates under
different assumptions or conditions.
  12
  Revenue
Recognition
 
 The
Company’s revenue consists of tuition fees, donated tuition fees, accommodation
fees and others. Those fees will usually be collected in advance at the
beginning of a semester. Spring semester runs from February to July. Autumn
semester runs from August to January. The Company prorates the fees collected to
applicable months during the semester, recognizes revenue in the corresponding
periods and records unrecognized fees collected as deferred income. As of
December 31, 2009 and 2008, the deferred revenue balance was $715,535 and
$930,100, respectively which represents fees applied for the month of January
2010 and 2009, respectively, and advance collections for the spring
semester.
 
 Fair
Value of Financial Instruments
 
 In
connection with the determination of accounts receivable from related party
(Note 4), the Company used the following assumptions to calculate the present
value at the date of the transactions: (1) annual rent payments of $1,603,405;
(2) term of ten years; (3) interest rate of 7% per annum.
 
 Foreign
Currency Translation
 
 The
consolidated financial statements of the Company are translated pursuant to
Accounting Standard Codification (“ASC”) 830, “Foreign Currency Matters.” The
Company’s subsidiary, Blue Tassel School, is located and operates in China. The
Chinese Yuan is the functional currency. The financial statements of Blue Tassel
School are translated to U.S. dollars using period-end exchange rates (published
by the Federal Reserve Bank) for assets and liabilities, and average exchange
rates (published by the Federal Reserve Bank) for revenues, costs and expenses.
Translation adjustments are recorded in accumulated other comprehensive income
as a component of stockholders’ equity. Transaction gains or losses arising from
exchange rate fluctuations on transactions denominated in a currency other than
the functional currency are included in the consolidated results of
operations.
 Recent
Accounting Pronouncements
 
 Effective
for interim and annual periods ending after September 15, 2009, the FASB
Accounting Standards Codification (the “Codification”) is the single source of
authoritative literature of U.S. generally accepted accounting principles
(“GAAP”). The Codification consolidates all authoritative accounting literature
into one internet-based research tool, which supersedes all pre-existing
accounting and reporting standards, excluding separate rules and other
interpretive guidance released by the SEC. New accounting guidance is now issued
in the form of Accounting Standards Updates, which update the Codification. The
adoption of Codification did not result in any change in the Company’s
significant accounting policies.
 
 In
May 2009, the FASB issued standards that establish general standards of
accounting for and disclosures of events that occur after the balance sheet date
but before financial statements are issued or are available to be issued. These
standards require the disclosure of the date through which an entity has
evaluated subsequent events and the basis for that date, that is, whether the
date represents the date the financial statements were issued or were available
to be issued. This standard is effective in the first interim period ending
after June 15, 2009. This standard did not have any significant impact
on disclosures in the Company’s consolidated financial statements.
 
 In
June 2009, the FASB issued authoritative guidance which eliminates the
exemption for qualifying special-purpose entities from consolidation
requirements, contains new criteria for determining the primary beneficiary of a
variable interest entity, and increases the frequency of required reassessments
to determine whether a company is the primary beneficiary of a variable interest
entity. The guidance is applicable for annual periods beginning after
November 15, 2009 and interim periods therein and thereafter. The Company
does not expect the adoption of this standard to have a material effect on its
consolidated financial position or results of operations.
 
 In
June 2009, the FASB issued authoritative guidance which eliminates the
concept of a qualifying special-purpose entity, creates more stringent
conditions for reporting a transfer of a portion of a financial asset as a sale,
clarifies other sale-accounting criteria, and changes the initial measurement of
a transferor’s interest in transferred financial assets. The guidance is
applicable for annual periods beginning after November 15, 2009 and interim
periods therein and thereafter. The Company does not expect the adoption of this
standard to have a material effect on its consolidated financial position or
results of operations.
 
 In August
2009, the FASB issued guidance on measuring liabilities at fair value. This
guidance amends the fair value measurements and disclosures by providing
additional guidance clarifying the measurement of liabilities at fair value.
This new accounting guidance is effective for reporting periods ending after
December 15, 2009. The Company is evaluating this new guidance and the possible
impact that the adoption of this new accounting guidance will have on its
consolidated financial statements.
 
 Certain
other accounting pronouncements have been issued by the FASB and other standard
setting organizations which are not yet effective and have not yet been adopted
by the Company. The impact on the Company’s consolidated financial position and
results of operations from adoption of these standards is not expected to be
material.
  13
  Off-Balance
Sheet Arrangements
 
 We have
never entered into any off-balance sheet financing arrangements and have never
established any special purpose entities. We have not guaranteed any debt or
commitments of other entities or entered into any options on non-financial
assets.
  Item 8.
Financial Information and Supplementary Data.
  The
financial information required by this item is attached hereto beginning on page
F-1.
 
 Item 9. Changes In and Disagreements
With Accountants on Accounting and Financial Disclosure.
 
 On June
23, 2008 the Company elected to terminate the services of Kabani & Company,
Inc. as the Company's independent auditors.
 
 Kabani
& Company, Inc. performed the audits for the two year period ended December
31, 2007 and 2006, which did not contain any adverse opinion or a disclaimer of
opinion, nor was the opinion as to either audit qualified or modified as to
uncertainty, audit scope or accounting principles.
 
 The
decision to change accountants was approved by the Company's Board of
Directors.
 
 During
the Company's fiscal years ended December 31, 2006 and December 31, 2007 and
during any subsequent interim period prior to the June 23, 2008 termination as
the Company's independent auditors, there were no disagreements with Kabani
& Company, Inc, with respect to accounting or auditing issues of the type
discussed in Item 304(a)(iv) of Regulation S-K.
 
 On June
23, 2008, the Company's board of directors approved the engagement of the firm
of Michael T. Studer CPA, P.C., (the "Studer Group") Suite 311, 18 East Sunrise
Highway, Freeport, New York 11520 as the Company's independent auditors. Such
appointment was accepted by Michael T. Struder, principal partner of the
firm.
 
 During
the Company's fiscal years ended December 31, 2006 and December 31, 2007 and the
subsequent interim period prior to engaging the Studer Group, neither the
Company, nor any other person on the Company's behalf, had consulted with the
Studer Group regarding the application of accounting principles to a specified
transaction or the type of audit opinion that might be rendered on the Company's
financial statements.
 
 On June
24, 2008, Kabani & Company, Inc. was supplied a copy of this disclosure and
requested that it furnish a letter to the Company, addressed to the SEC, stating
that it agreed with the statements made herein or the reasons why it
disagreed.
 
 Item 9A(T). Controls and
Procedures.
 
 Evaluation
of Disclosure Controls and Procedures
 
 We
maintain disclosure controls and procedures (as defined in Rules 13a-15(e) under
the Exchange Act) that are designed to ensure that information that would be
required to be disclosed in Exchange Act reports is recorded, processed,
summarized and reported within the time period specified in the SEC's rules and
forms, and that such information is accumulated and communicated to our
management, including to the Chief Executive Officer and Chief Financial
Officer, as appropriate, to allow timely decisions regarding required
disclosure.
 
 As
required by Rule 13a-15 under the Exchange Act, under the supervision and with
the participation of our management, including Mr. Yongqi Zhu, our Chairman and
Chief Executive Officer, and Ms. Jian Xue, our Chief Financial Officer, we
evaluated the effectiveness of the design and operation of our disclosure
controls and procedures as of December 31, 2009. Based on that evaluation, Mr.
Zhu and Ms. Xue concluded that because of the material weakness in internal
control over financial reporting described below, our disclosure controls and
procedures were not effective as of December 31, 2009.
 
 Management's
Report on Internal Control over Financial Reporting
 
 Management
is responsible for establishing and maintaining adequate internal control over
financial reporting as such term is defined in the rules of the Securities and
Exchange Act of 1934.
 
 Internal
control over financial reporting refers to the process designed by, or under the
supervision of Mr. Yongqi Zhu, our Chief Executive Officer, and Mr. Jian Xue,
our Chief Financial Officer, and effected by our Board of Directors, management
and other personnel, to provide reasonable assurance regarding the reliability
of our financial reporting and the preparation of financial statements for
external purposes in accordance with U.S. GAAP, and includes those policies and
procedures that:
  14
  (1)
pertain to the maintenance of records that in reasonable detail accurately and
fairly reflect the transactions and dispositions of our assets;
 (2)
provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with U.S. GAAP, and
that our receipts and expenditures are being made only in accordance with the
authorization of our management and directors; and
 (3)
provide reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use or disposition of our assets that could have a
material effect on the financial statements.
 
 Because
of inherent limitations, internal control over financial reporting may not
prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.
 
 Management,
under the supervision of Mr. Yongqi Zhu, our Chief Executive Officer, and Mr.
Jian Xue, our Chief Financial Officer, conducted an evaluation of the
effectiveness of the Company's internal control over financial reporting based
on the framework in Internal Control - Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based
on its evaluation under the framework in Internal Control - Integrated
Framework, management concluded that the Company's internal control over
financial reporting was not effective as of December 31, 2009.
 
 Our
management concluded that there were several significant deficiencies that when
combined, resulted in a material weakness in our internal controls over our
ability to produce financial statements free from material misstatements. The
material weakness resulted from a combination of the following significant
deficiencies:
 
 • Lack of
documentation and review of financial information by our accounting personnel
with direct oversight responsibility, and lack of analysis and reconciliation of
certain accounts on a periodic basis, and the failure of the accounting system
to provide information related to expenditures on a project-by-project
basis;
 
 • Lack of
timely identification, research and resolution of accounting issues and lack of
documentation of consideration of recent accounting pronouncements;
 
 • Absence
of documented controls over our related party transactions; and
 
 • Lack of
technical accounting expertise among senior financial staff regarding US GAAP
and the requirements of the PCAOB, and regarding the preparation of draft
financial statements.
 
 The
above-noted material weaknesses were first noted in management's review for the
year ended December 31, 2007. Although the Company has attempted to rectify
these deficiencies, certain of them remain, and the Company will continue to
seek to rectify them.
 
 These
weaknesses, which caused our management to conclude that our internal control
over financial reporting was not effective as of December 31, 2007, have been
significantly improved, and we expect additional steps to be implemented in the
near term, will correct the material weaknesses described above.
 
 Changes
in Internal Control over Financial Reporting
 
 In order
to further enhance our internal controls, our management, with the participation
of Mr. Zhu and Ms. Xue, has recommended the implementation of the following
changes by the end of the second quarter of 2009:
 
 • the
restructuring of our relationships with related parties to address our controls
over related party transactions;
 
 • the
hiring of additional accounting personnel to assist us in the timely
identification, research and resolution of accounting issues and with our
documentation processes;
 
 • the
hiring of additional high-level accounting personnel with experience in US GAAP
to monitor all financial and accounting affairs throughout the Company;
and
 
 • the
engagement of a third-party financial consulting firm to assist management in
evaluating complex accounting issues on an as-needed basis, and the
implementation of systems to improve control and review procedures over all
financial statement and account balances.
 
 This
annual report does not include an attestation report of our registered public
accounting firm regarding internal control over financial reporting.
Management's report was not subject to attestation by our registered public
accounting firm pursuant to temporary rules of the Securities and Exchange
Commission that permit us to provide only management's report in this annual
report.
  15
  During
the fiscal quarter ended December 31, 2009, there were no changes in our
internal control over financial reporting identified in connection with the
evaluation performed during the fiscal year covered by this report that has
materially affected, or is reasonably likely to materially affect, our internal
control over financial reporting, except as otherwise noted above.
 
 Item 9B. Other
Information.
 
 Not
applicable.
 
 PART III
 
 Item 10. Directors, Executive Officers,
and Corporate Governance.
 
 The
following table sets forth information with respect to our directors and
executive officers:
 
 Name
                Age
                Position
      with the CompanyYongqi
      Zhu
                52
                Director,
      Chief Executive OfficerQian
      Gao
                28
                Director,
      SecretaryJian
      Xue
                40
                Chief
      Financial OfficerYipeng
      Lu
                47
                DirectorFugeng
      Xia
                69
                DirectorHaiming
      Zhang
                47
                Director
 
 The
business experience of each director and executive officer of the Company is set
forth below.
 
 Yongqi
Zhu -
 
 Mr. Zhu
graduated from Zuzhou University and Beijing University and received an MBA
degree at Singapore Nanyang Technological University. He previously worked at
several governmental departments of Wuxian, Jiangsu Province as office manager,
deputy general manager and general manager. His outstanding performance at each
of these positions led to a great deal of appreciation from his colleagues and
community. With support from the government and with great enthusiasm for
contributing to the education industry, Zhu started Blue Tassel School in 2001.
Zhu also served as the manager of Brighter International Limited
("BIL").
 
 Qian Gao
-
 
 Ms. Gao
graduated from Foreign Yangzhou University in 2004, majoring in English. In
2003, while a student at Foreign Yangzhou University, Ms. Gao was chosen to
continue her studies at Valdosta State University, located at Valdosta, Georgia,
U.S.A. She worked at the Project Promotion Bureau of Suzhou Wuzhong Economic
Development Zone, as a project manager and served as a vice director of the
department from 2004 to 2006. In October 2006, she joined Brighter International
Limited ("BIL").
 
 Jian Xue
-
 
 Ms. Xue
graduated from Nanjing Institute of Finance, majoring in accounting. Ms. Xue is
an experienced accountant and worked at several of China's renowned accounting
companies both as an accountant and as an auditor. Ms. Xue has also worked at
Suzhou Governmental Chemical Union as an accounting specialist. From 1998 to
2002, she worked at Suzhou Jiatai Union, an accounting company, and served as
office manager and deputy director. Ms. Xue has experience in the fields of
administration management and financial management. In 2002, Ms. Xue joined
BIL.
 
 Yipeng Lu
-
 
 Mr. Lu
began his teaching career at High School Affiliated to Nanjing Normal University
after graduating from Nanjing Normal University in 1983. In 1989, as a
representative of China's young teachers, Mr. Lu was chosen by China's Education
Commission to continue his studies in Japan. During 1995 Mr. Lu served as the
principal of the High School Affiliated to Nanjing Normal University. In July
2001 Mr. Lu, as one of the sponsors, joined BTS. Currently he is the principal
of BTS; serves as vice-president of the provincial educational association; is a
supervisor of post-graduate master students in the Chemistry Department of
Nanjing Normal University; and is a visiting professor at Nanjing Xiaozhuang
College. Since 1992 Mr. Lu has been recognized as one of Nanjing's top chemistry
teachers and one of the top ten teachers in Nanjing. In 1997 he was recognized
as the outstanding education specialist of Jiangsu Province and awarded the gold
prize for excellence in education by Hong Kong's Bonington Education
Foundation.
  16
  Fugeng
Xia -
 
 Mr. Xia
was chosen as one of China's top educators in 1989. In 1992 he served as
vice-principal of Suzhou No. 10 High School. At the same time, he was the
director for the Olympic Mathematics Contests. Mr. Xia educated and coached a
large number of students who won the first prize in the national and provincial
Olympic Mathematics Contests. Mr. Xia has written more than ten theses which
were published by important national level journals. Mr. Xia joined BTS in July
of 2001. Currently he is not only the vice-principal of BTS, but also serves as
a director of Jiangsu Provincial High School Mathematics Association, as well as
being the vice-president of Suzhou High School Mathematics Association. In
addition to his educational activities, Mr. Xia has been a standing member of
the National People's Congress, and served as a representative in the tenth
session of the Suzhou Municipal People's Congress.
 
 Haiming
Zhang -
 
 Mr. Zhang
graduated from Nanjing Normal University in 1983, and began his teaching career
at High School Affiliated to Nanjing Normal University in 1992. He was the coach
of the International Olympic Physics Contest in Nanjing for 10 years and trained
and mentored a large number of students who won the first prize in national and
provincial Olympic Physics Contests. Mr. Zhang was the director of the Dean's
Office at High School Affiliated to Nanjing Normal University. Mr. Zhang, as one
of the sponsors, joined Blue Tassel School in July 2001. Mr. Zhang has written
more than ten theses which were published in distinguished national and
provincial teaching journals in the fields of management, science and technology
education, and physics.
 
 All
directors hold office until the next annual meeting of stockholders or until
their successors have been elected and qualified, or their earlier death,
resignation or removal. All officers are appointed annually by the board of
directors and, subject to any existing employment agreement, serve at the
discretion of the board.
 
 Compensation
of Directors
 
 During
the fiscal year ended December 31, 2009, we did not pay or accrue for any
individual serving as a member of our Board of Directors (other than Mr. Zhu who
receives compensation for serving as our chief executive officer), and none of
our directors earned, any fees for serving as a member of our Board of
Directors. The following table sets forth certain information regarding the
compensation paid to our directors during the fiscal year ended December 31,
2009.
 
 DIRECTOR
      COMPENSATIONName
                  (a)
                Fees
                  Earned
                  or
      Paid
                  in
      Cash
                  ($)
                  (b)
                Stock
                  Awards
                  ($)
                  (c)
                Option
                  Awards
                  ($)
                  (d)
                Non-Equity
                  Incentive
                  Plan
      Compensation
                  ($)
                  (e)
                Non-Qualified
                  Deferred
                  Compensation
                  Earnings
                  ($)
                  (f)
                All
                  Other
                  Compensation
                  ($)
                  (g)
                Total
                  ($)
                  (j)Qian
      Gao
                None
                None
                None
                None
                None
                None
                NoneYipeng
      Lu
                None
                None
                None
                None
                None
                None
                NoneFugeng
      Xia
                None
                None
                None
                None
                None
                None
                NoneHaiming
      Zhang
                None
                None
                None
                None
                None
                None
                None
 
 Board
Committees
 
 Our Board
of Directors has not established any committees. Since our common stock is
quoted on the OTC Bulletin Board, the Board has no plans or need to establish an
audit committee with a financial expert or a compensation committee to determine
guidelines for determining the compensation of its executive officers or
directors, who currently serve without compensation. For similar reasons, we
have not adopted a written policy for considering recommendations from
shareholders for candidates to serve as directors or with respect to
communications from shareholders.
 
 We intend
to establish an Audit Committee and such other committees as may be required
when sufficient members and resources are available. The Audit Committee will
have a designated Audit Committee Financial Expert who will be responsible for
reviewing the results and scope of the audit, and other services provided by the
independent auditors. No final determination has yet been made as to the
memberships of these committees or when we will have sufficient members to
establish these committees.
 
 Code of
Ethics
 
 The
Company has not yet adopted a code of ethics to apply to its principal executive
officer, principal financial officer, principal accounting officer and
controller, or persons performing similar functions. The Company expects to
prepare a Code of Ethics in the near future.
  17
  Section
16(a) Beneficial Ownership Reporting Compliance
 
 Section
16(a) of the Exchange Act, as amended, requires the Company's executive
officers, directors and persons who beneficially own more than 10% of China
Ivy's common stock to file reports of their beneficial ownership and changes in
ownership (Forms 3, 4 and 5, and any amendment thereto) with the SEC. Executive
officers, directors, and greater-than-ten percent holders are required to
furnish the Company with copies of all Section 16(a) forms they file. Based
solely on its review of such forms received by it, the Company believes that all
reports require to be filed pursuant to Section 16(a) of the Exchange Act by its
directors, executive officers and beneficial owners of 10% or more of the common
stock were timely made during the fiscal year ended December 31, 2009, except
that the Form 4s reporting the acquisition of the Company’s 6% Convertible Notes
due June 30, 2010 by Messrs. Zhu, Zhang and Lu, as well as by Ming Long Industry
Asia Co., Ltd., were filed 23 days late.
 
 Item 11. Executive
Compensation.
 
 The
following table sets forth information with respect to the amounts awarded to,
earned by, or paid to, our chief executive officer for services provided in all
capacities to us and our subsidiaries for the fiscal years ended December 31,
2009 and 2008. No other individual who served as an executive officer of our
company was awarded, earned, or paid total compensation in excess of $100,000
for services provided in all capacities to us and our subsidiaries in those
years.
  Summary
      Compensation TableName
      and Principal Position (a)
                    Year(b)
                    Salary
      ($) (c)
                    Bonus($)
      (d)
                    Stock
      Awards($) (e)
                    Option
      Awards ($) (f)
                    Non-Equity
      Incentive PlanCompensation($)(g)
                    Change
      inPension Value and Nonqualified Deferred Compensation
      Earnings($) (h)
                    All
      OtherCompensation($) (i)
                    Total($)
      (j)Yongqi
      Zhu,
                    2009
                    None
                    $144,750
                    None
                    None
                    None
                    None
                    None
                    $144,750CEO
                    2008
                    None
                    $
      17,653
                    None
                    None
                    None
                    None
                    None
                    $17,653
 Outstanding
Equity Awards at Fiscal Year-End Table
 
 The
Company does not have a pension plan, stock option plan, non-equity incentive
plan or deferred compensation arrangement. We plan to implement a more
comprehensive compensation program, which takes into account other elements of
compensation, including but not limited to non-cash and other equity-based
compensation such as stock options, but did not do so during the year ended
December 31, 2009. We did not grant any stock options or make any other equity
awards to Yongui Zhu, our Chief Executive Officer, during the fiscal year ended
December 31, 2009, and Mr. Zhu did not own any outstanding stock options on
December 31, 2009.
  Item 12. Security Ownership of Certain
Beneficial Owners and Management Related Stockholder Matters.
 
 The
following table sets forth certain information regarding the beneficial
ownership of our common stock as of March 31, 2010 by: (i) each person who, to
our knowledge, beneficially owns more than 5% of our common stock; (ii) each of
our directors and officers; and (iii) all of our directors and executive
officers as a group. As of March 31, 2010, we had outstanding 22,582,541 shares
of common stock. Unless otherwise noted below, we believe that all persons named
in the table have sole voting and investment power with respect to all shares of
Common Stock beneficially owned by them. For purposes hereof, a person is deemed
to be the beneficial owner of securities that can be acquired by such person
within 60 days from the date hereof upon the exercise of warrants or options or
the conversion of convertible securities. Each beneficial owner's percentage
ownership is determined by assuming that any warrants, options or convertible
securities that are held by such person (but not those held by any other person)
and which are exercisable within 60 days from the date hereof, have been
exercised. The address of each of our directors and officers is 1 Suhua Road,
Shiji Jinrong Building Suite 801, Suzhou Industrial Park, Jiangsu Province,
215020, P.R. China.
  18
  Name of Beneficial Owner
                
                Amount
      and Nature ofBeneficial Ownership
                
                
                Percent of Common StockOwners
      of More than 5%:Ming
      Long Industry Asia Company Limited
                
                
                5,935,000
                
                
                
                26.28
                %Room
      1102-03 11/F,Kowloon Bldg.555
      Nathan Road,Mongkok,KL,HongKongOur
      Directors and Officers:Yongqi
      Zhu
                
                
                12,683,650
                
                
                
                56.17
                %Yipeng
      Lu
                
                
                1,751,500
                
                
                
                7.76
                %Haiming
      Zhang
                
                
                875,750
                
                
                
                3.88
                %Qian
      Gao
                
                
                0
                
                
                
                --Jian
      Xue
                
                
                0
                
                
                
                --Fugeng
      Xia
                
                
                0
                
                
                
                --All
      Officers and Directors as a Group (6 persons):
                
                
                15,310,900
                
                
                
                67.81
                %
 
 Item 13.
Certain Relationships and Related Transactions, and Director
Independence.
 
 Until
September 16, 2009, Ming Long Industry Asia Company Limited was controlled by
Yongqi Zhu, the chief executive officer and a shareholder of the Company. On May
24, 2007 the Company obtained the Property Titles on twenty buildings and
accompanying infrastructures located in Suzhou City Wuzhou Economy Development
District from its shareholder Ming Long Industry Asia Company Limited, totaling
50,113.81 square meters, which were and are pledged under bank borrowings. The
net historical value of the buildings transferred amounted to approximately
$10,441,053 as of December 31, 2007.
 
 On May
24, 2007, the Company obtained the National Land Use Right and house property
title for the land, buildings and accompanying infrastructures where Blue Tassel
School is operating from its shareholder Ming Long Industry Asia Company
Limited. The piece of land totals 91,993.32 square meters, and was and is
pledged under bank borrowings. The land use right will expire on January 17,
2051. The land use right was recorded at $5,516,431 net of accumulated
amortization expense of $69,929 as of December 31, 2007.
 
 On March
12, 2008, Blue Tassel School sold the Land Use Right of 91,993.32 square meters
and twenty Buildings of 50,113.81 square meters to its shareholder Ming Long
Industry Asia Company Limited with the sales price of $5,563,692 and $10,405,554
respectively, totaling $15,969,246 (RMB111,829,458). Blue Tassel School leased
back the buildings from Ming Long Industry Asia Company Limited from the date of
sale.
 
 Director
Independence
 
 Since all
of our directors are employed by Blue Tassel School or us, none of our directors
is “independent,” as that term is defined in Rule 10A-3 of the Exchange
Act.
  19
  Item 14.
Principal Accountant Fees and Services.
 
 The
following table sets forth the fees accrued or paid to Michael T. Studer, CPA,
P.C., the Company's independent registered public accounting firm during fiscal
years 2009 and 2008.
 
 Fiscal Year EndedDecember 31, 2009
                December 31, 2008Audit
      Fees
                $
      60,000
                $50,000Audit-Related
      Fees
                None
                NoneTax
      Fees
                None
                NoneAll
      Other Fees
                None
                None
 
 Item
      15. Exhibits.Exhibit
      No.
                Description2.2
                Share
      Exchange Agreement between Safe Cell Tab Inc. and Registrant (incorporated
      herein by reference to Exhibit 2 to the Registrant's Current Report on
      Form 8-K filed on September 4, 2003).2.3
                Amended
      Share Exchange Agreement between Safe Cell Tab Inc. and Registrant
      (incorporated herein by reference to Exhibit 2 to the Registrant's Current
      Report on Form 8-K/A filed on March 26, 2004).3.1
                Articles
      of Incorporation (incorporated herein by reference to Exhibit 3.1 to the
      Registrant's Registration Statement on Form SB-2 filed on January 26,
      2001).3.2
                Bylaws
      (incorporated herein by reference to Exhibit 3.2 (I) to the Registrant's
      Registration Statement on Form SB-2 filed on January 26,
      2001).3.3
                Amended
      Bylaws (incorporated herein by reference to Exhibit 3.2 II) to the
      Registrant's Registration Statement on Form SB-2 filed on January 26,
      2001).3.4
                Amended
      Bylaws (incorporated herein by reference to Exhibit 3 to the Registrant's
      Quarterly Report on Form 10-QSB filed on February 2,
  2004).3.5
                Certificate
      of Correction to the Certificate of Correction to the Articles of
      Incorporation (incorporated herein by reference to Exhibit 3.1 to the
      Registrant's Current Report on Form 8-K filed on August 29,
      2006).3.6
                Certificate
      of Designations to the Articles of Incorporation, designating Series A
      Convertible Preferred Stock (incorporated herein by reference to Exhibit
      3.2 to the Registrant's Current Report on Form 8-K filed
      on  August 29, 2006).3.7
                Certificate
      of Amendment to Articles of Incorporation changing the name from Claremont
      Technologies Corp. to China Ivy School, Inc.(incorporated herein by
      reference to Exhibit 3.1 to the Registrant's Current Report on Form 8-K
      filed on January 8, 2007).4.1
                2007
      Equity Incentive Plan (incorporated herein by reference to Exhibit 4.1(I)
      to the Registrant's Registration Statement on Form S-8 filed on January
      22, 2007).4.2
                Form
      of the Registrant’s 6% Convertible Note due June 30, 2010 (incorporated
      herein by reference to Exhibit 4.1 to the Registrant’s Current Report on
      Form 8-K filed on July 7, 2009).10.3
                Stock
      Purchase Agreement between Xu Zuqiang and Registrant (incorporated herein
      by reference to Exhibit 10.1 to the Registrant's Current Report on Form
      8-K filed on June 12, 2006).10.4
                Amendment
      to Stock Purchase Agreement between Xu Zuqiang and Registrant
      (incorporated herein by reference to Exhibit 10.1 to the Registrant's
      Current Report on Form 8-K filed on August 29,2006).10.6
                Share
      Exchange Agreement among Brighter International Limited, Blue Tassel
      School and the shareholders of Brighter International Limited and
      Registrant (incorporated herein by reference to Exhibit 10.1 to the
      Registrant's Current Report on Form 8-K filed on October 13,
      2006).10.7
                Standby
      Fixed Price Equity Distribution Agreement between certain investors and
      the Registrant (incorporated herein by reference to Exhibit 99.1 to the
      Registrant's Current Report on Form 8-K filed on May 31,
      2007).10.8
                Purchase
      and Sale Agreement dated as of March 6, 2009 by and among Su Zhou Blue
      Tassel School and Jianwei Wu, Wei Li, Surong Gong, Changgen Ma, Yongxia
      Tan, Junhua Tang, and Xuehui Jiang (incorporated herein by reference to
      Exhibit 10.1 to the Registrant's Current Report on Form 8-K filed on March
      9, 2009).10.9
                Rescission
      Agreement rescinding Purchase and Sale Agreement dated as of March 6, 2009
      by and among the Registrant and Jianwei Wu, Wei Li, Surong Gong, Changgen
      Ma, Yongxia Tan, Junhua Tang, and Xuehui Jiang (incorporated herein by
      reference to Exhibit 10.2 to the Registrant's Current Report on Form 8-K
      filed on May 1, 2009).16.1
                Kabani
      & Company, Inc. letter regarding change of accountant (incorporated
      herein by reference to Exhibit 10.1 to the Registrant's Current Report on
      Form 8-K filed on June 26, 2008).21.1
                List
      of Subsidiaries (incorporated herein by reference to Exhibit 21.1 to the
      Registrant's Annual Report on Form 10-K for the fiscal year ended December
      31, 2008).31.1
                Chief
      Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange
      Act of 1934.31.2
                Certification
      of Chief Financial Officer pursuant to Rule 13a-14(a) under the Securities
      Exchange Act of 1934.32.1
                Certification
      of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley
      Act of 2002.32.2
                Certification
      of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley
      Act of 2002.
  20
  SIGNATURES
 
 Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
 
 Dated:
March 31, 2010
  CHINA
      IVY SCHOOL, INC.By:
                  /s/ Yongqi
      ZhuYongqi
      ZhuChairman
      and Chief Executive Officer
                    (principal
      executive officer)By:
                  /s/ Jian
      XueJian
      XueChief
      Financial Officer
                    (principal
      financial and accounting officer)
  Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the registrant on March 31,
2010 in the capacities indicated.
 
 Signature
                
                Title/s/Yongqi Zhu
                
                Chairman,
      Chief Executive Officer (principal executive officer) and a
      DirectorYongqi
      Zhu/s/Jian Xue
                
                Chief
      Financial Officer (principal financial and accounting
    officer)Jian
      Xue/s/ Qian Gao
                
                DirectorQian
      Gao/s/ Xipeng Liu
                
                DirectorXipeng
      Liu/s/ Fuqeng Xia
                
                DirectorFuqeng
      Xia/s/ Haiming Zhang
                
                DirectorHaiming
      Zhang
  21
  CHINA IVY
SCHOOL, INC. AND SUBSIDIARIES
 
 CHINA
IVY SCHOOL, INC. AND SUBSIDIARIES
 
 INDEX
TO CONSOLIDATED FINANCIAL STATEMENTS
 
 PageReport
      of Independent Registered Public Accounting Firm
                F-1Consolidated
      Balance Sheetsas
      of December 31, 2009 and December 31, 2008
                F-2Consolidated
      Statements of Operations and Comprehensive Lossfor
      the Years ended December 31, 2009 and 2008
                F-3Consolidated
      Statements of Stockholders’ Equityfor
      the Years ended December 31, 2009 and 2008
                F-4Consolidated
      Statements of Cash Flowsfor
      the Years ended December 31, 2009 and 2008
                F-5Notes
      to Consolidated Financial Statements
                F-6
      - F-17
  
  To the
Board of Directors and Stockholders of
 China Ivy
School, Inc.
 
 I have
audited the accompanying consolidated balance sheets of China Ivy School, Inc.
and subsidiaries (the "Company") as of December 31, 2009 and December 31, 2008
and the related consolidated statements of operations, stockholders' equity, and
cash flows for the years then ended. These financial statements are the
responsibility of the Company's management. My responsibility is to express an
opinion on these financial statements based on my audit.
 
 I
conducted my audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that I plan
and perform the audit to obtain reasonable assurance about whether the
financial
 statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. I believe that my audit provides a reasonable basis for
my opinion.
 
 In my
opinion, the consolidated financial statements referred to above present fairly,
in all material respects, the financial position of China Ivy School, Inc. and
subsidiaries as of December 31, 2009 and December 31, 2008 and the results of
their operations and cash flows for the years then ended in conformity with
accounting principles generally accepted in the United States.
   /s/ Michael T. Studer CPA
P.C.
 Michael
T. Studer CPA P.C.
 
 Freeport,
New York
 March 31,
2010
  F -
1
  CHINA
      IVY SCHOOL, INC. AND SUBSIDIARIES(FORMERLY
      CLAREMONT TECHNOLOGIES CORP.)CONSOLIDATED
      BALANCE SHEETSAS
      OF DECEMBER 31, 2009 AND 20082009
                
                
                2008ASSETSCurrent
      AssetsCash
      and cash equivalents
                
                $
                46,187
                
                
                $
                58,984Advances
      made to vendors
                
                
                95,974
                
                
                
                -Prepaid
      expenses
                
                
                -
                
                
                
                3,971Receivable
      from related party
                
                
                2,790,207
                
                
                
                -Receivable
      from sale and leaseback of real property - related party
                
                
                1,156,639
                
                
                
                -Total
      Current Assets
                
                
                4,089,007
                
                
                
                62,955Property
      and equipment, net
                
                
                7,749,770
                
                
                
                8,471,639Receivable
      from sale and leaseback of real property - related party
                
                
                3,710,090
                
                
                
                6,026,246Total
      Assets
                
                $
                15,548,867
                
                
                $
                14,560,840LIABILITIES AND STOCKHOLDERS'
      EQUITYCurrent
      LiabilitiesBank
      borrowings
                
                $
                10,401,500
                
                
                $
                10,699,610Convertible
      notes payable
                
                
                1,560,000
                
                
                
                -Accounts
      payable and accrued expenses
                
                
                1,731,502
                
                
                
                938,120Payables
      to related parties
                
                
                719,341
                
                
                
                752,893Deferred
      revenue
                
                
                715,535
                
                
                
                930,100Total
      Current Liabilities
                
                
                15,127,878
                
                
                
                13,320,723Total
      Liabilities
                
                
                15,127,878
                
                
                
                13,320,723Stockholders'
      EquityPreferred
      stock, $0.001 par value; 50,000,000 shares authorized,none
      issued and outstanding as of December 31, 2009 and 2008
                
                
                -
                
                
                
                -Common
      stock, $0.001 par value; 100,000,000 shares authorized,3,082,500
      shares issued and outstanding as of December 31, 2009 and
    2008
                
                
                3,083
                
                
                
                3,083Additional
      paid in capital
                
                
                4,302,907
                
                
                
                4,302,907Statutory
      reserves
                
                
                480,813
                
                
                
                480,813Accumulated
      deficit
                
                
                (5,115,622
                )
                
                
                (4,300,694
                )Accumulated
      other comprehensive income
                
                
                749,808
                
                
                
                754,008Total
      Stockholders' Equity
                
                
                420,989
                
                
                
                1,240,117Total
      Liabilities and Stockholders' Equity
                
                $
                15,548,867
                
                
                $
                14,560,840
 
 The
accompanying notes are an integral part of these consolidated financial
statements.
  F -
2
  CHINA
      IVY SCHOOL, INC. AND SUBSIDIARIES(FORMERLY
      CLAREMONT TECHNOLOGIES CORP.)CONSOLIDATED
      STATEMENTS OF OPERATIONS AND COMPREHENSIVE (LOSS)FOR
      THE YEARS ENDED DECEMBER 31, 2009 AND 20082009
                
                
                2008Net
      revenue
                
                $
                6,334,781
                
                
                $
                6,080,777Operating
      expensesTeachers
      salaries and related expenses
                
                
                2,164,486
                
                
                
                1,789,290Professinal
      and consulting fees
                
                
                1,054,483
                
                
                
                1,897,765Rent
      and related expenses
                
                
                1,811,139
                
                
                
                1,481,290Depreciation
      and amortization
                
                
                901,348
                
                
                
                1,146,903Other
      general and administrative expenses
                
                
                1,015,240
                
                
                
                1,141,823Total
      operating expenses
                
                
                6,946,696
                
                
                
                7,457,071Loss
      from operations
                
                
                (611,915
                )
                
                
                (1,376,294
                )Other
      (income) expenseInterest
      income
                
                
                (1,379
                )
                
                
                (13,224
                )Interest
      expense
                
                
                686,870
                
                
                
                950,996Loss
      on sale of real property
                
                
                -
                
                
                
                5,169,294Accretion
      of discount on receivable from related party relating to sale of real
      property
                
                
                (482,478
                )
                
                
                (2,280,191
                )Total
      Other (Income) Expense
                
                
                203,013
                
                
                
                3,826,875Loss
      from continuing operations
                
                
                (814,928
                )
                
                
                (5,203,169
                )Loss
      from operations of discontinued entity
                
                
                -
                
                
                
                (7,226
                )Net
      loss
                
                
                (814,928
                )
                
                
                (5,210,395
                )Other
      comprehensive itemForeign
      currency translation adjustment
                
                
                (4,200
                )
                
                
                253,656Comprehensive
      loss
                
                $
                (819,128
                )
                
                $
                (4,956,739
                )Basic
      and diluted net loss per share:Continuing
      operations
                
                $
                (0.26
                )
                
                $
                (1.69
                )Operations
      of the discontinued entity
                
                
                -
                
                
                
                (0.00
                )Total
                
                $
                (0.26
                )
                
                $
                (1.69
                )Weighted
      average number of basic and diluted shares outstanding
                
                
                3,082,500
                
                
                
                3,082,500
 
 The
accompanying notes are an integral part of these consolidated financial
statements.
  F -
3
  CHINA
      IVY SCHOOL, INC. AND SUBSIDIARIES(FORMERLY
      CLAREMONT TECHNOLOGIES CORP.)CONSOLIDATED
      STATEMENTS OF STOCKHOLDERS' EQUITYFOR
      THE YEARS ENDED DECEMBER 31, 2009 and 2008Common
      StockNumber
      of Shares
                
                
                Amount
                
                
                AdditionalPaid in Capital
                
                
                Accumulated
      otherComprehensive Income (Loss)
                
                
                StatutoryReserves
                
                
                RetainedEarning (Deficit)
                
                
                TotalStockholders' EquityBalance
      December 31, 2007
                
                
                3,082,500
                
                
                $
                3,083
                
                
                $
                4,113,446
                
                
                $
                500,352
                
                
                $
                480,813
                
                
                $
                909,701
                
                
                $
                6,007,395Spinoff
      of Safe Cell Tab Inc. on July 31, 2008
                
                
                -
                
                
                
                -
                
                
                
                189,461
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                189,461Foreign
      currency translation adjustment
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                253,656
                
                
                
                -
                
                
                
                -
                
                
                
                253,656Net
      loss for the year ended December 31, 2008
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                (5,210,395
                )
                
                
                (5,210,395
                )Balance
      December 31, 2008
                
                
                3,082,500
                
                
                
                3,083
                
                
                
                4,302,907
                
                
                
                754,008
                
                
                
                480,813
                
                
                
                (4,300,694
                )
                
                
                1,240,117Foreign
      currency translation adjustment
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                (4,200
                )
                
                
                -
                
                
                
                -
                
                
                
                (4,200
                )Net
      loss for the year ended December 31, 2009
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                (814,928
                )
                
                
                (814,928
                )Balance
      - December 31, 2009
                
                
                3,082,500
                
                
                $
                3,083
                
                
                $
                4,302,907
                
                
                $
                749,808
                
                
                $
                480,813
                
                
                $
                (5,115,622
                )
                
                $
                420,989
 
 The
accompanying notes are an integral part of these consolidated financial
statements.
  F -
4
  CHINA IVY SCHOOL, INC. AND
      SUBSIDIARIES(FORMERLY
      CLAREMONT TECHNOLOGIES CORP.)CONSOLIDATED
      STATEMENTS OF CASH FLOWSFOR
      THE YEARS ENDED DECEMBER 31, 2009 AND 20082009
                
                
                2008CASH
      FLOWS FROM OPERATING ACTIVITIESNet
      loss
                
                $
                (814,928
                )
                
                $
                (5,210,395
                )Adjustments
      to reconcile net loss to net cash provided
      by (used in) operating activities:Depreciation
      and amortization
                
                
                901,348
                
                
                
                1,146,903Imputed
      rent and related expense
                
                
                1,625,300
                
                
                
                1,481,290Expenses
      paid by related party
                
                
                -
                
                
                
                3,731,418Accretion
      of discount on receivable from related party
                
                
                (482,478
                )
                
                
                (2,280,191
                )Loss
      on sale of real property
                
                
                -
                
                
                
                5,169,294Loss
      from operations of discontinued entity
                
                
                -
                
                
                
                7,226Changes
      in operating assets and liabilitiesAdvances
      made to vendors
                
                
                (95,974
                )
                
                
                -Decrease
      in other receivables
                
                
                -
                
                
                
                2,174Decrease
      in prepaid expenses
                
                
                3,971
                
                
                
                8,970Increase
      (decrease) in accounts payable and accrued expenses
                
                
                852,010
                
                
                
                (2,042,288
                )(Decrease)
      increase in deferred revenue
                
                
                (214,565
                )
                
                
                448,871Net
      cash provided by operating activities from continuing
      operations
                
                
                1,774,684
                
                
                
                2,463,272Net
      cash used in operating activities of the discontinued
    entity
                
                
                -
                
                
                
                (8,260
                )Net
      cash provided by operating activities
                
                
                1,774,684
                
                
                
                2,455,012CASH
      FLOWS FROM INVESTING ACTIVITIESAdvances
      made to related party
                
                
                (2,790,207
                )
                
                
                -Acquisition
      of property and equipment
                
                
                (194,422
                )
                
                
                (44,581
                )Net
      cash used in investing activities from continuing
    operations
                
                
                (2,984,629
                )
                
                
                (44,581
                )Net
      cash provided by (used in) investing activities of the discontinued
      entity
                
                
                -
                
                
                
                -Net
      cash used in investing activities
                
                
                (2,984,629
                )
                
                
                (44,581
                )CASH
      FLOWS FROM FINANCING ACTIVITIESRepayment
      of bank borrowings
                
                
                (19,484,500
                )
                
                
                (4,606,720
                )Proceeds
      from bank borrowings
                
                
                19,191,500
                
                
                
                -Proceeds
      from convertible notes
                
                
                1,560,000
                
                
                
                -Repayment
      of loans payable to related party
                
                
                (91,827
                )
                
                
                -Advances
      from related party
                
                
                -
                
                
                
                1,641,232Decrease
      in restricted cash secured for bank loans
                
                
                -
                
                
                
                685,500Net
      cash provided by (used in) financing activities from continuing
      operations
                
                
                1,175,173
                
                
                
                (2,279,988
                )Net
      cash provided by financing activities of the discontinued
      entity
                
                
                -
                
                
                
                7,716Net
      cash provided (used in) financing activities
                
                
                1,175,173
                
                
                
                (2,272,272
                )EFFECT
      OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS
                
                
                21,975
                
                
                
                (307,062
                )NET
      DECREASE IN CASH AND CASH EQUIVALENTS
                
                
                (12,797
                )
                
                
                (168,903
                )CASH
      AND CASH EQUIVALENTS, BEGINNING BALANCE
                
                
                58,984
                
                
                
                227,887CASH
      AND CASH EQUIVALENTS, ENDING BALANCE
                
                $
                46,187
                
                
                $
                58,984SUPPLEMENTAL
      DISCLOSURES:Income
      tax payments
                
                $
                -
                
                
                $
                -Interest
      payments
                
                $
                622,456
                
                
                $
                950,996NON
      CASH TRANSACTIONS:Sale
      of real property in exchange for receivable from related
    party
                
                $
                -
                
                
                $
                11,228,703Spinoff
      of Safe Cell Tab, Inc.
                
                $
                -
                
                
                $
                189,461
 
 The
accompanying notes are an integral part of these consolidated financial
statements.
  F -
5
  CHINA IVY
SCHOOL, INC. AND SUBSIDIARIES
 (FORMERLY
CLAREMONT TECHNOLOGIES CORP.)
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
 
 NOTE 1 -
DESCRIPTION OF
BUSINESS AND BASIS OF PRESENTATION
 
 Organization
 
 China Ivy
School, Inc. (formerly Claremont Technologies Corp.) (“China Ivy") was
incorporated on September 14, 1999 under the laws of the State of Nevada. China
Ivy acquired a wholly owned subsidiary Safe Cell Tab Inc. ("Safe Cell") on
August 22, 2003. Safe Cell was incorporated on May 9, 1996 under the laws of the
Province of British Columbia, Canada and engaged in distributing Wi-Fi License
and Mobius disposable cell phones.
 
 On
October 12, 2006, China Ivy and the shareholders of Brighter International
Limited (“Brighter International”) entered into a Share Exchange Agreement in
which China Ivy acquired 100% of Brighter International's outstanding common
stock. Under the Share Exchange Agreement, the shareholders of Brighter
International received 2,762,500 newly issued common shares of the company. This
acquisition was accounted for as a reverse acquisition since after the
acquisition, the former shareholders of Brighter International held a majority
of the outstanding shares of China Ivy. The financial statements of the legal
acquirer were not significant.
 
 Brighter
International Limited is an education investment enterprise and was incorporated
in accordance with the General Corporation Act of the State of Nevada on June 1,
2006. On June 15, 2006, Brighter International entered into an agreement with
Blue Tassel School, and pursuant to the agreement, all the shareholders of Blue
Tassel School transferred all their ownership interests in Blue Tassel School to
Brighter International. Prior to the acquisition, Brighter International and
Blue Tassel School had common shareholders owning the same percentage of
ownership in both companies. Therefore, the entities were under common control
before the acquisition. This acquisition was accounted for at historical cost in
a manner similar to the pooling of interests method. After the acquisition,
Brighter International owned 100% of the outstanding shares of Blue Tassel
School.
 
 Blue
Tassel School was established on July 10, 2001 under the laws of the People’s
Republic of China (“PRC”). Blue Tassel School is an education center located in
Suzhou city, accredited by the Jiangsu Province Educational Committee as a
boarding school comprising grades from kindergarten through senior school,
including an international school. The five schools that comprise Blue Tassel
School are kindergarten, primary school, junior high school, senior high school,
and international school.
 
 On July
31, 2008, the Company spun off its wholly owned subsidiary Safe Cell (now named
Cellteck Inc.) to its stockholders. The distribution was completed on August 21,
2008. Accordingly, the operations of Safe Cell have been presented as
"discontinued operations” in the accompanying condensed consolidated financial
statements.
 
 Effective
January 14, 2009, the Company effectuated a 1 for 20 reverse stock split
(thereby reducing the issued and outstanding shares from 61,650,001 shares to
3,082,500 shares). The financial statements have been retroactively adjusted to
reflect this stock split.
  F -
6
  NOTE 2 -
SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
 
 Principles of
Consolidation
 
 The
accompanying consolidated financial statements include the accounts of China Ivy
and its subsidiaries Safe Cell, Brighter International, and Blue Tassel School
(collectively, the “Company”). All significant intercompany balances and
transactions have been eliminated in consolidation.
 
 Basis of
Presentation
 
 The
accompanying consolidated financial statements have been prepared in conformity
with accounting principles generally accepted in the United States of America.
The Company's reporting currency is the United States dollar.
 
 Going
Concern
 
 The
financial statements have been prepared on a “going concern” basis, which
contemplates the realization of assets and liquidation of liabilities in the
normal course of business. However, as of December 31, 2009 and 2008, the
Company had cash of $46,187 and $58,984, respectively, and working capital
deficit of $11,038,871 and $13,257,768, respectively. The Company had
accumulated deficit of $5,115,622 and $4,300,694 as of December 31, 2009 and
2008, respectively. These factors create substantial doubt as to the Company’s
ability to continue as a going concern. The Company plans to improve its
financial condition through a debt or equity offering of its securities and /or
a business combination with another business entity. However, there is no
assurance that the Company will accomplish these objectives. The financial
statements do not include any adjustments that might be necessary should the
Company be unable to continue as a going concern.
 
 Foreign Currency
Transactions and Comprehensive Income (Loss)
 
 The
functional currency of China Ivy is the United States dollar. The functional
currency of Blue Tassel School is the Chinese Renminbi (“RMB”). The reporting
currency of the Company is the United States dollar.
 
 The
assets and liabilities of Blue Tassel School are translated into United States
dollars at period-end exchange rates. The revenues and expenses are translated
into United States dollars at average exchange rates for the periods. Resulting
translation adjustments are recorded as a component of accumulated other
comprehensive income within stockholders’ equity.
 
 Transaction
gains or losses arising from exchange rate fluctuations on balances and
transactions denominated in a currency other than the functional currency are
included in the consolidated results of operations. There is no material foreign
currency transaction gains or losses for the years ended December 31, 2009 and
2008.
 
 Use of
Estimates
 
 The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States ("GAAP") requires management to make
certain estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting periods. Actual results could differ from those estimates,
and such differences may be material to the financial statements.
 
 Reclassifications
 
 Certain
prior year amounts have been reclassified to conform to the current year
presentation.
  F -
7
  Revenue
Recognition
 
 The
revenues of the Company are tuition fees, accommodation fees and others. Tuition
fees and accommodation fees are collected in advance on or before the new
semester. Tuition fees are recognized as revenue proportionately as the
instructions are delivered, and are reported net of scholarships and tuition
refunds. Accommodation fees are recognized as revenue in proportion to semester
progressed through the end of the reporting period. Tuition and accommodation
fees paid in advance are recorded as deferred revenue.
 
 Stock-Based
Compensation
 
 Stock-based
compensation is accounted for at fair value in accordance with Accounting
Standards Codification (“ASC”) topic 718-10, Stock Compensation (formerly, SFAS
123(R), “Accounting for Stock-Based Compensation”). As of December 31, 2009 and
2008, no stock options or warrants have been granted and none are
outstanding.
 
 Advertising
 
 Advertising
costs are expensed as incurred. Advertising expense for the years ended December
31, 2009 and 2008 were $46,923 and $83,272, respectively.
 
 Research and
Development
 
 In
accordance with the Accounting Standards Codification subtopic 730-10, Research
and Development (“ASC 730-10”) (formerly, SFAS No. 2, “Accounting For Research
and Development Costs”), the Company expenses all research and development costs
as incurred.
 
 Segment
Information
 
 ASC
280-10 (formerly, SFAS No. 131, “Disclosure About Segments of and Enterprise and
Related Information”), requires entity-wide disclosures about the products and
services an entity provides, the material countries in which it holds assets and
reports revenues, and its major customers. The Company operates as a single
segment and will evaluate additional segment disclosure requirements as it
expands its operations.
 
 Income
Taxes
 
 The
Company accounts for income taxes using the asset and liability method described
in ASC 740-10 (formerly, SFAS No. 109, “Accounting For Income Taxes”), the
objective of which is to establish deferred tax assets and liabilities for the
temporary differences between the financial reporting and the tax bases of the
Company’s assets and liabilities at enacted tax rates expected to be in effect
when such amounts are realized or settled. A valuation allowance related to
deferred tax assets is recorded when it is more likely than not that some
portion or all of the deferred tax assets will not be realized.
 
 Blue
Tassel School is governed by the Income Tax Laws of the PRC. Pursuant to the PRC
relevant laws and regulations and tax law, Blue Tassel School is exempt from
income tax.
 
 Cash and Cash
Equivalents
 
 Cash and
cash equivalents include cash on hand and cash in time deposits, certificates of
deposit and all highly liquid debt instruments with original maturities of three
months or less.
  F -
8
  Property and
Equipment
 
 Property
and equipment are stated at cost. Expenditures for maintenance and repairs are
charged to earnings as incurred; additions, renewals and betterments are
capitalized. When property and equipment are retired or otherwise disposed of,
the related cost and accumulated depreciation are removed from the respective
accounts, and any gain or loss is included in operations. Depreciation of
property and equipment is provided using the straight-line method for
substantially all assets with estimated lives of:
 
 Buildings
                
                20
      yearsInfrastructure
      and leasehold improvements
                
                10
      yearsEquipment
                
                10
      yearsAutomobiles
                
                10
      yearsFurniture
      and fixtures
                
                5
      yearsComputer
      hardware and software
                
                5
      years
  Fair Value of Financial
Instruments
 
 The
Company’s financial instruments consist of cash and cash equivalents, receivable
from related party, receivable from sale and leaseback of real property -
related party, bank borrowings, convertible notes payable, accounts payable and
accrued expenses, and payables to related parties. The fair value of these
financial instruments approximate their carrying amounts reported in the
consolidated balance sheets due to the short term maturity of these instruments
or based upon market quotations of instruments with similar interest rates and
maturities.
  Long-Lived
Assets
 
 The
Company reviews its long-lived assets for impairment whenever events or changes
in circumstances indicate that the carrying amount of an asset may no longer be
recoverable. When these events occur, the Company measures impairment by
comparing the carrying value of the long-lived assets to the estimated
undiscounted future cash flows expected to result from the use of the assets and
their eventual disposition. If the sum of the expected undiscounted cash flow is
less than the carrying amount of the assets, the Company would recognize an
impairment loss based on the fair value of the assets. Based on its review, the
Company believes that, as of December 31, 2009, there were no significant
impairments of its long-lived assets.
 
 Net Loss Per Common
Share
 
 The
Company has adopted ASC 260-10 (formerly, SFAS No. 128, “Earnings per Share”
(“EPS”)), which requires presentation of basic and diluted EPS on the face of
the income statement for all entities with complex capital structures and
requires a reconciliation of the numerator and denominator of the basic EPS
computation to the numerator and denominator of the diluted EPS
computation.
 
 Basic
loss per share is computed by dividing net loss by the weighted average number
of common shares outstanding during the period.
 
 Diluted
loss per share is computed similarly to basic loss per share except that it
includes the potential dilution that could occur if dilutive securities were
converted. Diluted loss per share is the same as basic loss per share, as the
effect of potentially dilutive securities (convertible notes payable) are
anti-dilutive.
  F -
9
  Recent Accounting
Pronouncements
 
 Effective
for interim and annual periods ending after September 15, 2009, the FASB
Accounting Standards Codification (the “Codification”) is the single source of
authoritative literature of U.S. generally accepted accounting principles
(“GAAP”). The Codification consolidates all authoritative accounting literature
into one internet-based research tool, which supersedes all pre-existing
accounting and reporting standards, excluding separate rules and other
interpretive guidance released by the SEC. New accounting guidance is now issued
in the form of Accounting Standards Updates, which update the Codification. The
adoption of Codification did not result in any change in the Company’s
significant accounting policies.
 
 In
May 2009, the FASB issued standards that establish general standards of
accounting for and disclosures of events that occur after the balance sheet date
but before financial statements are issued or are available to be issued. These
standards require the disclosure of the date through which an entity has
evaluated subsequent events and the basis for that date, that is, whether the
date represents the date the financial statements were issued or were available
to be issued. This standard is effective in the first interim period ending
after June 15, 2009. This standard did not have any significant impact
on disclosures in the Company’s consolidated financial statements.
 
 In
June 2009, the FASB issued authoritative guidance which eliminates the
exemption for qualifying special-purpose entities from consolidation
requirements, contains new criteria for determining the primary beneficiary of a
variable interest entity, and increases the frequency of required reassessments
to determine whether a company is the primary beneficiary of a variable interest
entity. The guidance is applicable for annual periods beginning after
November 15, 2009 and interim periods therein and thereafter. The Company
does not expect the adoption of this standard to have a material effect on its
consolidated financial position or results of operations.
 
 In
June 2009, the FASB issued authoritative guidance which eliminates the
concept of a qualifying special-purpose entity, creates more stringent
conditions for reporting a transfer of a portion of a financial asset as a sale,
clarifies other sale-accounting criteria, and changes the initial measurement of
a transferor’s interest in transferred financial assets. The guidance is
applicable for annual periods beginning after November 15, 2009 and interim
periods therein and thereafter. The Company does not expect the adoption of this
standard to have a material effect on its consolidated financial position or
results of operations.
 
 In August
2009, the FASB issued guidance on measuring liabilities at fair value. This
guidance amends the fair value measurements and disclosures by providing
additional guidance clarifying the measurement of liabilities at fair value.
This new accounting guidance is effective for reporting periods ending after
December 15, 2009. The Company is evaluating this new guidance and the possible
impact that the adoption of this new accounting guidance will have on its
consolidated financial statements.
 
 Certain
other accounting pronouncements have been issued by the FASB and other standard
setting organizations which are not yet effective and have not yet been adopted
by the Company. The impact on the Company’s consolidated financial position and
results of operations from adoption of these standards is not expected to be
material.
 
 NOTE 3 -
RECEIVABLE FROM
RELATED PARTY
 
 Minglong
Industry Co. Ltd. (“Minglong”) is one of the Company’s significant shareholders
and is controlled by the chief executive officer of the Company. Receivable from
related party in the amount of $2,790,207 as of December 31, 2009 represented
the net amount advanced to Minglong (see Notes 13 and 16). The receivable due
from Minglong is interest free and due on demand.
  F -
10
  NOTE 4 -
RECEIVABLE FROM SALE
AND LEASEBACK OF REAL PROPERTY - RELATED PARTY
 
 On March
12, 2008, Blue Tassel School sold the land use right of 91,993.32 square meters
and twenty buildings of 50,113.81 square meters to its former shareholder
Minglong with the sales price of $5,563,692 and $10,405,554 respectively,
totaling $15,969,247 (RMB 111,829,458). Blue Tassel School leased back the land
use right and the buildings from Minglong from the date of sale.
 
 The lease
payments equaled the total sales price of $15,969,247 (RMB 111,829,458). The
leases approximated $3.40 (RMB 24) per square meter annually, totaling
approximately $315,280 (RMB 2,207,840) per year for using the land and $35.60
(RMB 180) per square meter annually, totaling approximately $1,288,125 (RMB
9,020,486) per year for leasing the buildings. The total annual lease was to
approximate $1,603,405 (RMB 11,228,326) until a total of approximately
$15,969,247 (RMB 111,829,458) has been offset against the amount receivable from
related party over the 10 year term of the lease.
 
 The total
receivable from related party on the date of sale and lease back was
$11,228,703. This amount represented the present value of the future cash
inflows (our lease payments) at the date of the transactions. Assumptions used
for the present value calculation were: (1) annual rent payments of $1,603,405;
(2) term of ten years; (3) interest rate of 7% per annum.
 
 The
purpose of the sale and leaseback of the land use right and buildings was to
comply with a new regulation from the government of Suzhou City, Jiangsu
Province, China. According to the new regulation, "Public institutions like
schools, kindergartens, hospitals etc., educational facilities and health
facilities of social organizations and other lands for the use of other social
welfare cannot be used as collateral for bank loans". As in 2007 the land use
right and buildings were pledged for bank loans, the management of the Company
decided to sell the land use right and buildings to Minglong and then lease back
for the school use.
 
 The loss
on the March 12, 2008 sale of real property was $5,169,294, as
follows:
 
 Fair
      value of consideration received - $15,969,247 noninterest bearing
      receivable from Minglong due in annual installments of
      $1,603,405 until repaid (discounted at 7% interest
      rate)
                
                $
                11,228,703Effect
      of change in exchange rate
                
                
                45,893Net
      carrying value of land use right and buildings (less
      $113,057 foreign exchange translation
    adjustment)
                
                
                (16,443,890
                )Loss
      on sale of real property
                
                $
                (5,169,294
                )
  For the
years ended December 31, 2009 and 2008, the receivable from sale and leaseback
of real property – related party changed as follows:
 
 Balance
      due from Minglong at March 12, 2008 in connection with thesale and
      leaseback of real property, noninterest bearing
(discounted)
                
                $
                11,228,703Amounts
      collected (See Note 13)
                
                
                (7,681,172
                )Accretion
      of discount on receivable
                
                
                2,280,191Foreign
      exchange translation adjustment
                
                
                198,524Balance
      at December 31, 2008
                
                
                6,026,246Amounts
      collected - during the year ended December 31, 2009
                
                
                (1,625,300
                )Accretion
      of discount on receivable
                
                
                482,478Foreign
      exchange translation adjustment
                
                
                (16,695
                )Balance
      at December 31, 2009
                
                
                4,866,729Less:
      current portion
                
                
                1,156,639Receivable
      from sale and leaseback of real property - related party
                
                $
                3,710,090
  F -
11
  NOTE 5 –
PROPERTY AND
EQUIPMENT
 
 As of
December 31, 2009 and 2008, property, plant and equipment consist of the
following:
 
 December
      31,
                
                
                December
      31,2009
                
                
                2008Infrastructure
      and leasehold improvements
                
                $
                11,237,638
                
                
                $
                11,065,511Educational
      equipment
                
                
                561,144
                
                
                
                544,394Automobiles
                
                
                28,834
                
                
                
                28,848Total
      property and equipment
                
                
                11,827,616
                
                
                
                11,638,753Accumulated
      depreciation
                
                
                (4,077,846
                )
                
                
                (3,167,114
                )Property
      and equipment, net
                
                $
                7,749,770
                
                
                $
                8,471,639
 
 The
Company had depreciation expense of $901,348 and $1,146,903 for the years ended
December 31, 2009 and 2008, respectively.
 
 NOTE 6 -
BANK
BORROWINGS
 
 The
Company has borrowed $10,401,500 and $10,699,610 from two banks located in China
under credit agreements as of December 31, 2009 and 2008, respectively.
Borrowings under credit lines consist of the following:
 
 2009
                
                
                2008Bank
      BorrowingsBorrowings from Huaxia Bank Suzhou
      BranchInterest
      at 5.103% per annum, due by September 18, 2009
                
                $
                -
                
                
                $
                6,009,370Interest
      at 5.841% per annum, due by September 12, 2009
                
                
                -
                
                
                
                2,784,830Interest
      at 5.346% per annum, due by October 30, 2010
                
                
                2,637,000
                
                
                
                -Interest
      at 5.346% per annum, due by November 5, 2010
                
                
                2,197,500
                
                
                
                -Interest
      at 5.346% per annum, due by November 9, 2010
                
                
                2,710,250
                
                
                
                -Interest
      at 5.346% per annum, due by November 18, 2010
                
                
                1,098,750
                
                
                
                -Borrowings
      from Huaxia Bank Subtotal
                
                
                8,643,500
                
                
                
                8,794,200Borrowings from Jiangsu Dongwu Rural Commercial
      BankInterest
      at 9.711% per annum, due by June 26, 2009
                
                
                -
                
                
                
                293,140Interest
      at 9.711% per annum, due by June 25, 2009
                
                
                -
                
                
                
                1,612,270Interest
      at 6.903% per annum, due by June 5, 2010
                
                
                293,000
                
                
                
                -Interest
      at 6.903% per annum, due by June 5, 2010
                
                
                1,465,000
                
                
                
                -Borrowings
      from Dongwu Rural Commercial Bank Subtotal
                
                
                1,758,000
                
                
                
                1,905,410Total
      borrowings
                
                
                10,401,500
                
                
                
                10,699,610Current
      portion
                
                
                10,401,500
                
                
                
                10,699,610Long
      term portion
                
                $
                -
                
                
                $
                -
 
 On June
17, 2008, the Company entered into a credit agreement with Jiangsu Dongwu Rural
Commercial Bank. The Company acquired a 2,000,000 RMB (approximately $293,000)
credit line from June 17, 2008 to June 17, 2011. This credit line is secured by
a 234 square meter residential unit and 62 square meter land use right owned by
Ti Yin and Yan Hong, the third party assigned by the bank.
  F -
12
  On June
17, 2008, the Company entered into a credit agreement with Jiangsu Dongwu Rural
Commercial Bank. The Company acquired a 11,000,000 RMB (approximately
$1,611,500) credit line from June 17, 2008 to June 17, 2011. This credit line is
secured by a 477 square meter residential unit and 837 square meter land use
right owned by the Chief Executive Officer of the Company. As of December 31,
2009, the Company borrowed 10,000,000 RMB ($1,465,000).
 
 The loans
from Huaxia Bank are secured by the land use right of Blue Tassel School and
four buildings totaling 20,926.86 square meters of the School.
 
 NOTE 7 -
CONVERTIBLE NOTES
PAYABLE
 
 On June
30, 2009, the Company completed the sale of $1,560,000 principal amount of the
Company's 6% Convertible Notes, due June 30, 2010 (the "Notes"). The Notes were
sold to four related parties ($920,000 to the Company’s chief executive officer,
$448,000 to Minglong, and $192,000 to two other Company directors) outside the
United States in a private transaction exempted from the registration
requirements of the Securities Act of 1933 pursuant to Regulation D. The Notes
accrue interest at the rate of 6% per annum and were to mature on June 30, 2010.
The four related parties paid an aggregate of $1,560,000 for their
Notes.
 
 Holders
of the Notes could at any time convert all or any portion of the principal
amount of the Notes into shares of the Company's Common Stock at a conversion
price, subject to adjustment, initially equal to eight cents ($0.08) per share.
No interest is payable on any portion of a Note converted into Common Stock.
Should the conversion price decrease or increase, the number of shares of Common
Stock issuable upon conversion of the Notes would have proportionately increased
or decreased, as the case may be. In the event of default by the Company in its
obligations under the Notes, Holders can, at their option, declare the principal
of the Note and the interest accrued thereon to be immediately due and
payable.
 
 On March
2, 2010, China Ivy issued a total of 19,500,000 shares of its common stock in
full satisfaction of the $1,560,000 convertible notes payable due to the four
related parties discussed above.
 
 NOTE 8 -
ACCOUNTS PAYABLE AND
ACCRUED EXPENSES
 
 The
Company's accounts payable and accrued expenses as of December 31, 2009 and 2008
are summarized as follows:
 
 2009
                
                
                2008Accounts
      payable
                
                $
                490,001
                
                
                $
                563,312Accrued
      wages
                
                
                120,776
                
                
                
                109,903Accrued
      consulting fees
                
                
                883,384
                
                
                
                -Accrued
      interest on convertible notes payable
                
                
                46,800
                
                
                
                -Other
      accrued expenses
                
                
                190,541
                
                
                
                264,905Total
      accounts payable and accrued expenses
                
                $
                1,731,502
                
                
                $
                938,120
 
 On
December 31, 2009, the Company authorized consulting fee payments totaling
$846,788 to 56 consultants who provided various education consulting services to
the Company during 2009. The consulting fees were accrued in December 2009 and
were paid in full on February 5, 2010.
  F -
13
  NOTE 9 -
PAYABLES TO RELATED
PARTIES
 
 Payables
to related parties consist of the following:
 
 2009
                
                
                2008Payable
      to Minglong (See Note 13)
                
                $
                -
                
                
                $
                73,372Payable
      to Chief Financial Officer (See Note 13)
                
                
                58,600
                
                
                
                -Payable
      to Mr. Yongqi Zhu
                
                
                660,741
                
                
                
                679,521Total
      Payable to Related Parties
                
                $
                719,341
                
                
                $
                752,893
 
 Payable
to Minglong in the amount of $73,372 as of December 31, 2008 represented the net
balance of payments made by Minglong on behalf of the Company (see Note 3). The
payable was interest free and due on demand.
 
 Payable
to Chief Financial Officer in the amount of $58,600 as of December 31, 2009
represented the net balance of loans from the Chief Financial Officer of the
Company. The payable is interest free and due on demand. $58,628 of this payable
was included in accounts payable and accrued expenses as of December 31,
2008.
 
 Payable
to Mr. Yongqi Zhu, the Chief Executive Officer of the Company, was $660,741 and
$679,521 as of December 31, 2009 and 2008, respectively. The balance due to Mr.
Zhu is interest free and due on demand.
 
 NOTE 10 -
DEFERRED
REVENUE
 
 The
Company’s revenue consists of tuition fees, accommodation fees and others. Those
fees will usually be collected in advance at the beginning of a semester. Spring
semester runs from February to July. Autumn semester runs from August to
January. The Company prorates the fees collected to applicable months during the
semester, recognizes revenue in the corresponding periods and records
unrecognized fees collected as deferred income. As of December 31, 2009 and
2008, the deferred revenue balance totaled $715,535 and $930,100,
respectively.
 
 NOTE 11 -
STATUTORY
RESERVES
 
 Statutory
reserves consist of the following:
 
 2009
                
                
                2008Statutory
      surplus reserve
                
                $
                307,853
                
                
                $
                307,853Statutory
      common welfare fund
                
                
                172,960
                
                
                
                172,960Total
                
                $
                480,813
                
                
                $
                480,813
 
 As
stipulated by the Company Law of the People's Republic of China (PRC), net
income after taxation can only be distributed as dividends after appropriation
has been made for the following: i. Making up cumulative prior years' losses, if
any; ii. Allocations to the "Statutory surplus reserve" of at least 10% of
income after tax, as determined under PRC accounting rules and regulations,
until the fund amounts to 50% of Blue Tassel School's registered capital; iii.
Allocations of 5-10% of income after tax, as determined under PRC accounting
rules and regulations, to Blue Tassel School's "Statutory common welfare fund",
which is established for the purpose of providing employee facilities and other
collective benefits to the School's employees; and iv. Allocations to the
discretionary surplus reserve, if approved in the stockholders' general
meeting.
  F -
14
  As an
educational institution, the Blue Tassel School has an option not to make these
appropriations. For the year ended December 31, 2009 and 2008, the Company did
not make any appropriations to the statutory reserves.
 
 NOTE 12 -
ACCUMULATED OTHER
COMPREHENSIVE INCOME
 
 Balances
of related after-tax components comprising accumulated other comprehensive
income (loss), included in stockholders' equity at December 31, 2009 and 2008,
are as follows:
 
 Foreign
      CurrencyTranslation AdjustmentsBalance
      at December 31, 2007
                
                $
                500,352Change
      during the year ended December 31, 2008
                
                
                253,656Balance
      at December 31, 2008
                
                
                754,008Change
      during the year ended December 31, 2009
                
                
                (4,200
                )Balance
      at December 31, 2009
                
                $
                749,808
  NOTE 13 -
RELATED PARTY
TRANSACTIONS
 
 During
2008, the Company received funds from and advanced funds to Mr. Yongqi Zhu, one
of its significant shareholders and the Chief Executive Officer of the Company.
As of December 31, 2009 and 2008, the balance due to Mr. Zhu was $660,741 and
$679,521, respectively, which was included in payables to related parties. The
balance due to Mr. Zhu is interest free and due on demand.
 
 During
2009, the Company received $146,500 from Ms. Xue, Chief Financial Officer of the
Company and returned $146,500 to Mr. Xue in the fourth quarter of 2009. As of
December 31, 2009, the balance due to Ms. Xue was $58,600, which is interest
free and due on demand. (See Note 9).
 
 Minglong
is a former shareholder of Blue Tassel School. It is controlled by Mr. Zhu, the
chief executive officer of the Company. On March 12, 2008, the Company sold a
91,993 square meters land use right and twenty buildings of 50,114 square meters
to Minglong. The Company leased back the land use right and buildings pursuant
to a 10 year lease from Minglong at the date of sale (See Note 4).
 
 During
2008, the Company recorded rent expense of $1,296,466 to offset the scheduled
amount due from related party in connection with the sale and leaseback of real
property. Also, the Company received net cash inflow of $2,518,999 from
Minglong. In addition, Company expenses of $2,181,385 and consulting fees of
$1,684,322 were paid by Minglong. The Company agreed to apply and treat the
above items totaling $7,681,172 as collections of the receivable from related
party in connection with the sale and lease back of real property (See Note
4).
 
 For the
year ended December 31, 2009, the Company advanced net cash of $3,020,313 to
Minglong. Minglong paid expenses of $156,734 and $73,372 on behalf of China Ivy
during the year ended December 31, 2009 and 2008, respectively. A netted amount
of $2,790,207 was recorded under the caption “Receivable from Related Party” as
of December 31, 2009 (See Note 16).
  F -
15
  NOTE 14 -
COMMITMENTS
 
 Operating Lease
Obligations
 
 Blue
Tassel School leases a land use right and 20 buildings located in Suzhou City
Wuzhong Economy Development District from Minglong, the former shareholder of
Blue Tassel School (Note 4). The term of the lease agreement is 10 years
starting March 12, 2008. The lease is considered an operating lease. Rent
expense and related maintenance expenses for the year ended December 31, 2009
and the period March 12, 2008 to December 31, 2008 was $1,811,139 and
$1,481,290, respectively.
 
 Aggregate
minimum future lease payments under operating leases as of December 31, 2009 for
each of the next five years and thereafter are as follows:
 
 Period
      ending
                  December
      31,
                
                Minimum
      lease
                  payments2010
                
                $
                1,644,9492011
                
                
                1,644,9492012
                
                
                1,644,9492013
                
                
                1,644,9492014
                
                
                1,644,949Thereafter
                
                
                5,688,782Total
                
                $
                13,913,527
  Consulting
Agreements
 
 In 2008,
the Company engaged over 50 individuals (the “Consultants”) to provide various
education consulting services for the Company. The agreements for 2008 provided
for the payment of minimum consulting fees to the Consultants totaling
$1,684,332 (RMB 11,700,000) for the service period January 1, 2008 to December
31, 2008.
 
 In 2009,
the Company renewed one year service contracts with 56 consultants to provide
various education consulting services for the Company. On December 31, 2009, the
Company authorized consulting fee payments totaling $846,788 to the 56
consultants who provided various education consulting services to the Company
during 2009. The consulting fees were accrued in December 2009 and were paid in
full on February 5, 2010.
 
 On June
13, 2008, the Company executed an 18 month consulting agreement with Beijing JP
Investment Advisors Limited (the “Advisors”). For consideration of 30,000 RMB
($4,392) per month, the Advisors provided services related to business
development, marketing research, and prospective acquisitions.
 
 For the
years ended December 31, 2009 and 2008, consulting fees expense was $899,531 and
$1,722,877, respectively.
 
 NOTE 15 -
DISCONTINUED
OPERATIONS
 
 On July
31, 2008, the Company spun off its wholly owned subsidiary Safe Cell (now named
Cellteck Inc.) to its stockholders. Accordingly, the operating results of Safe
Cell before the spinoff on July 31, 2008 is reported as discontinued operations
in the accompanying consolidated financial statements. The $189,461 negative
stockholders’ equity of Safe Cell at July 31, 2008 has been added to additional
paid-in capital.
  F -
16
  For the
year ended December 31, 2008, loss from operations of discontinued entity
consisted of:
 
 2008Sales,
      net
                
                $
                6,771Cost
      of sales
                
                
                -Gross
      profit
                
                
                6,771Selling,
      general and administrative expenses
                
                
                (13,997
                )Net
      loss from operations of discontinued entity
                
                $
                (7,226
                )
  NOTE 16 –
SUBSEQUENT
EVENT
 
 On March
2, 2010, China Ivy issued a total of 19,500,000 shares of its common stock in
full satisfaction of the $1,560,000 convertible notes payable due to the four
related parties disclosed in Note 7, increasing the issued and outstanding
shares of China Ivy common stock from 3,082,500 shares to 22,582,500
shares.
 
 On March
30, 2010, the Company received payment of RMB 20,000,000 ($2,930,000) from
Minglong Industry Co. substantially satisfying an interest free advance
receivable of $2,790,207 at December 31, 2009 due the Company discussed in Notes
3 and 13 above.
 
 The
Company has evaluated subsequent events through the date of filing of this Form
10-K and has determined that there were no additional subsequent events to
recognize or disclose in these financial statements.
   F -
17