U.S. SECURITIES AND EXCHANGE COMMISSION


Washington, D. C. 20549




Amendment No. 1 to




FORM 10-K


(Mark One)





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





for the period ended December 31, 2012





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





for the transition period from ____ to ____.





Commission file number: 333-163635




Wonder International Education & Investment Group Corporation(Exact name of registrant as specified in its charter)





Arizona

26-2773442(State of Incorporation)

(I.R.S. Employer  I.D. Number)





8040 E. Morgan Trail, #18, Scottsdale, AZ 85258(Address of principal executive offices)  (Zip Code)
 
 Issuer’s telephone number: 480-966-2020





Securities registered under Section 12 (b) of the Act:





Title of each class to be registered

Name of exchange on which each class is to be registeredNone

None





Securities registered under Section 12(g) of the Act:


Common Stock(Title of Class)


Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. o Yes þ No





Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. o Yes  þ No





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. o Yes  þ No





Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 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).  o Yes  þ No





Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 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. þ




1




Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.





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





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





The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant was approximately as of June 30, 2012 cannot be calculated because there was no market for the issuer’s securities on such date.





The number of shares issued and outstanding of issuer’s common stock, $.001 par value, as of April 9, 2012 was 20,000,000.





DOCUMENTS INCORPORATED BY REFERENCE





None.







2





TABLE OF CONTENTS




Page

No.PART IITEM 1

DESCRIPTION OF BUSINESS

4ITEM 1 A

RISK FACTORS

26ITEM 1 B

UNRESOLVED STAFF COMMENTS

35ITEM 2

PROPERTIES

35ITEM 3

LEGAL PROCEEDINGS

35ITEM 4

MINE SAFETY DISCLOSURE

35PART IIITEM 5

MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

36ITEM 6

SELECTED FINANCIAL DATA

36ITEM 7

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

36ITEM 7A

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

42ITEM 8

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

42ITEM 9

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

42ITEM 9A

CONTROLS AND PROCEDURES

43ITEM 9B

OTHER INFORMATION

43PART IIIITEM 10

DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

44ITEM 11

EXECUTIVE COMPENSATION

47ITEM 12

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

49ITEM 13

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

50ITEM 14

PRINCIPAL ACCOUNTING FEES AND SERVICES

51Signatures

53
 
 3


EXPLANATORY NOTE
 
 On  April 16, 2013, we filed our Form 10-K for the period ended December 31, 2012 (“Original Filing”).  This Amendment No. 1 to Form 10-K is filed in response to a Comment Letter received from the Staff of the Securities and Exchange Commission (“Staff”). The Staff requested that we amend the Original Filing to include the audited financial statements of Anhui Wonder University of Information Engineering ("Wonder University") and a reconciliation of the statements to US GAAP, if necessary. We own approximately 7% of Wonder University.
 
 This Amendment amends the Original Filing by containing Exhibit 99.1 which includes the Audit Report of Wonder University, the Audited Financial Statements of Wonder University, and the Reconciliations to US GAAP.
 
 Except to the extent expressly set forth herein, this Amendment speaks as of the filing date of the Original Filing and has not been updated to reflect events occurring subsequent to the original filing date other than those required to reflect the effects of the comments received by the Staff. Accordingly, this Amendment should be read in conjunction with the Original Filing and our other filings made with the Securities and Exchange Commission subsequent to the filing of the Original Filing.
 PART I. 
 Certain statements contained in this report are forward-looking in nature.  These statements can be identified by the use of forward-looking terminology such as "believes", "expects", "may", "will", "should", or "anticipates", or the negatives thereof, or comparable terminology, or by discussions of strategy.  You are cautioned that our business and operations are subject to a variety of risks and uncertainties and, consequently, our actual results may materially differ from those projected by any forward-looking statements.  Certain of such risks and uncertainties are discussed below under the heading "Item 1A. Risk Factors."





ITEM 1.          DESCRIPTION OF BUSINESS.


As stated herein, unless otherwise specified, all monetary amounts are in U.S. dollars. All renminbi, or RMB, amounts have been translated into U.S. dollars as follows:  for balance sheet amounts at the December 31, 2012 noon buying rate in the City of New York for cable transfers of RMB as certified for customs purposes by the Federal Reserve Bank of New York, being US$1.00 = RMB 6.3161; for amounts related to the income statement and cash flows statement, at the average rate of exchange during the year 2012, being US $1=RMB6.31984
 Except where the context otherwise requires:


●
“We,” “us,” “our company,” “our,” and “Wonder” refer to the combined business of US Wonder and its consolidated subsidiaries and affiliates;
  ●
“US Wonder” refers to Wonder International Education & Investment Group Corporation, an Arizona corporation;




●
“China Wonder” refers to Anhui Wonder Education and Management Company, Ltd, a PRC company;


●
“China,” “Chinese” and “PRC,” refer to the People’s Republic of China;





●
“Renminbi” and “RMB” refer to the legal currency of China; and





●
“U.S. dollars,” “dollars” and “$” refer to the legal currency of the United States.





Organizational History.





Wonder International Education & Investment Group Corporation (“US Wonder”) is a US holding company, incorporated in Arizona on April 21, 2008. On November 1, 2010, US Wonder acquired all of the outstanding capital stock of Anhui Lang Wen Tian Cheng Consulting & Management Co., Ltd., a PRC company (“WFOE”), pursuant to the terms of a share exchange agreement.  As a result, WFOE became a wholly owned subsidiary of US Wonder.  On November 3, 2010, WFOE entered into a series of agreements with Anhui Wonder Education and Management Company, Ltd, a PRC company (“China Wonder”), including a Voting Right Proxy Agreement, Option Agreement, Equity Pledge Agreement, Consulting Services Agreement and Operating Agreement. The above WOFE arrangement was implemented by the Company to comply with the Merger and Acquisitions regulations in the PRC, which among other items, limits ownership of PRC companies by foreigners.


China Wonder owns and operates seven separate vocational training schools in seven provinces in China.  These schools are now famous non-governmental vocational education institutions in China. Wonder’s core business is to provide IT education to students ranging in age from 18 to 30. China Wonder’s seven vocational schools are in the following provinces of China: Anhui, Jiangsu, Zhejiang, Fujian, Henan, Hubei and Liaoning.  Through our ownership of WFOE and the contractual arrangements between the WOFE and China Wonder, we control China Wonder and the schools and have the ability to control any income produced by China Wonder.




4




The Wholly-Foreign Owned Enterprise Law (1986), as amended, and The Wholly-Foreign Owned Enterprise Law Implementing Rules (1990), as amended and the Company Law of the PRC (2006), contain the principal regulations governing dividend distributions by wholly foreign owned enterprises. Under these regulations, wholly foreign owned enterprises may pay dividends only out of their accumulated profits, if any, determined in accordance with PRC accounting standards and regulations. Additionally, such companies are required to set aside a certain amount of their accumulated profits each year, if any, to fund certain reserves. These reserves are not distributable as cash dividends except in the event of liquidation and cannot be used for working capital purposes. The PRC central government also imposes controls on the conversion of RMB into foreign currencies and the remittance of currencies out of the PRC. We may experience difficulties in completing the administrative procedures necessary to obtain and remit foreign currency for the payment of dividends from the Company’s profits. Furthermore, if our subsidiaries or affiliates in China incur debt on their own in the future, the instruments governing the debt may restrict its ability to pay dividends or make other payments. If we or our subsidiaries are unable to receive all of the revenues from our operations through these contractual or dividend arrangements, we may be unable to pay dividends on our common stock.





Our United States offices are located at 8040 E. Morgan Trail, #18, Scottsdale, AZ 85258 and our phone number is 480-966-2020. Our PRC headquarters are located at 4-5/F, Xingke Building, 441 Huangshanlu, Hefei, Anhui, China and our phone number is 86-0551-3687892.





On January 6, 2011, our Form S-1 Registration Statement was declared effective by the Securities and Exchange Commission. The Registration Statement related to the distribution of  899,875 shares of our common stock held by one of our shareholders. This shareholder distributed, as a dividend, these registered shares to its own shareholders, however, the shares are restricted against resale for a period of one year.





Business Introduction.





China Wonder owns and operates seven separate vocational training schools located in seven provinces in China, namely Anhui, Jiangsu, Zhejiang, Fujian, Henan, Hubei and Liaoning. Its largest school is located in Anhui and consists of approximately 41,000 square meters. These schools are non-governmental vocational education institutions in China. Wonder’s core business is to provide IT education to students ranging in age from 18 to 30. It also provides job placement services to its students at no charge through its 12 employment centers located nationwide.





Summarized balance sheet information of the operating companies follows.  The financial performance and cash flows of the Company are aligned with those of the WFOE and the operating companies.  The Company controls the operations of the operating companies and their cash flows through the WFOE, which effects control over those operations through the various agreements which are described in Note 1 to the financial statements.  The financial position, financial performance, and cash flows of the Company are totally dependent on the results produced by the operating companies.




5




China Wonder































Exchange Rate:Balance sheet summary by school
































6.3161For the year ended December 31, 2012In RMBCHINA








RMB


USDSCHOOL

LN


HB


JS


ZJ


FJ


HN


AH


WONDER


TOTAL


ADJUSTMENTS


TOTAL


TOTALCURRENT ASSETS


1,098,774



452,617


730,300


2,058,044


241,656


620,435


12,053,411


56,424,585


73,679,822


(38,555,850
)

35,123,972


5,561,022FIXED ASSETS


3,200,147



2,202,726


4,912,246


6,769,632


1,080,196


5,692,297


48,606,138


377,029


72,840,411





72,840,411


11,532,498OTHER ASSETS
























240,000,000


240,000,000


-


240,000,000


37,998,132TOTAL ASSETS


4,298,921



2,655,343


5,642,546


8,827,676


1,321,852


6,312,732


60,659,549


296,801,614


386,520,233


(38,555,850
)

347,964,383


55,091,652CURRENT LIABILITIES


3,744,895



1,026,770


3,499,242


6,452,169


769,769


3,462,354


13,353,641


23,373,897


55,682,737


38,262,463


93,945,200


14,873,925TOTAL LIABILITIES


3,744,895



1,026,770


3,499,242


6,452,169


769,769


3,462,354


13,353,641


23,373,897


55,682,737


38,262,463


93,945,200


14,873,925EQUITY


554,026



1,628,573


2,143,304


2,375,506


552,083


2,850,379


47,305,909


273,427,716


330,837,496


(76,818,313
)

254,019,183


40,217,727TOTAL LIABILITIES ANDEQUITY


4,298,921



2,655,343


5,6542,546


8,827,675


1,321,852


6,312,733


60,659,550


296,801,613


386,520,233


(38,555,850
)

347,964,383


55,091,652


For fiscal year ended December 31, 2012, we had revenues of $18,913,562, gross profit of $12,811,008 and a net income of  $6,526,779. For fiscal year ended December 31, 2011, we had revenues of $14,839,050, gross profit of $9,432,463 and net income of $5,117,847.




6




Government Regulation


The Chinese government regulates the education services industry and the substance of Internet content. This section summarizes the principal Chinese regulations relating to our businesses. We operate our business in China under a legal framework that consists of the State Council, which is the highest executive authority of the Chinese central government, and several ministries and agencies under its authority, including the Ministry of Education, or MOE, the State Administration of Foreign Exchange, or SAFE, the Ministry of Information Industry, or MII, the State Administration for Industry and Commerce, or SAIC, the Ministry of Civil Affairs, or MCA, and their respective authorized local counterparts.





We have been advised by our PRC counsel that, no consent, approval or license other than those already obtained by our Chinese subsidiaries and affiliates is required under any of the existing laws and regulations of China for our business and operations.





Regulations on Operating Private Schools


The principal regulations governing private education in China consist of the Education Law of the People’s Republic of China, The People’s Republic of China (PRC) Law for Promoting Private Education (2003), and the Implementation Rules for the PRC Law for Promoting Private Education (2004).  These regulations are summarized below.





Education Law of the People’s Republic of China


The Education Law of the People’s Republic of China, or the Education Law, was enacted on March 18, 1995. The Education Law sets forth provisions relating to the fundamental education systems of China, including a system of pre-school education, primary education, secondary education and higher education, a system of nine-year compulsory education and a system of education certificates. The Education Law requires the government to formulate plans for the development of education and the establishment and operation of schools and other education institutions. In principle, enterprises, social organizations and individuals are encouraged to operate schools and other types of educational organizations in accordance with Chinese laws and regulations. Nevertheless, no school or any other accredited educational institution may be established for profit-making purposes. However, private schools may be operated for “reasonable returns,” as described in more detail below.





The PRC Law for Promoting Private Education (2003) and The Implementation Rules for the PRC Law for Promoting Private Education (2004)


The Law for Promoting Private Education (2003) became effective on September 1, 2003, and its implementing regulations, The Implementation Rules for the Law for Promoting Private Education (2004), became effective on April 1, 2004. Under these regulations, “private schools” are defined as schools established by individuals or private social organizations using private funds. Private schools providing degree education, pre-school education, education for self-study aid and other academic education are subject to approval by the education authorities, while private schools engaging in occupational qualification training and occupational skill training are subject to approvals from the authorities in charge of labor and social welfare. An approved private school will be granted an operating permit, and it must be registered with the MCA or its local counterpart as a privately run non-enterprise legal person.





The operation of private schools is highly regulated. For example, the types and amounts of fees charged by private schools offering certifications must be approved by the relevant governmental authority and be publicly disclosed, and the types and amounts of fees charged by private schools that do not offer certifications need only be filed with the relevant governmental authority and be publicly disclosed.





Private education is treated as a public welfare undertaking under the regulations. Nonetheless, investors in a private school may elect to require “reasonable returns” from the schools. Under the regulations, an election to establish a private school as one requiring reasonable returns must be made in the articles of association of the school. For schools that have made this election, the amount of reasonable return that can be distributed to investors each year is determined based on a percentage of the school’s “operating surplus,” which is equal to the school’s annual net income less the aggregate amount of donations received, government subsidies, if any, the amount required to be reserved for the school’s development fund and other expenses as required by the regulations. This percentage is determined by the school’s board of directors, taking into consideration the following factors: (i) the school’s tuition and other fees, (ii) the ratio of the school’s expenses used for educational activities and improving the educational conditions to the total fees collected; and (iii) the school’s admission standards and educational quality. Information relating to these factors must be publicly disclosed before the school’s board determines the percentage of the school’s annual net balance that can be distributed as reasonable returns.




7




This disclosed information and the decision to distribute reasonable returns must also be filed with the approval authorities within 15 days from the decision made by the board. However, none of the current Chinese laws and regulations provides a formula or other guidelines for determining “reasonable returns.” In addition, none of the current Chinese laws and regulations sets forth different requirements or restrictions on a private school’s ability to operate its education business based on such school’s status as a school that requires reasonable returns or a school that has not made this election. At the end of each fiscal year, private schools are required to allocate a certain amount to their development fund for the construction and maintenance of the school and the procurement and upgrade of educational equipment. For private schools that require reasonable returns, this amount must be no less than 25% of the annual net income or the annual increase in the net assets of the school, while for other private schools, this amount must be no less than 25% of the annual increase in the net assets of the school, if any. Private schools that have not elected to require reasonable returns are entitled to the same preferential tax treatment as public schools. The regulations require that preferential tax treatment policies applicable to private schools requiring reasonable returns to be formulated by the finance authority, taxation authority and other authorities under the State Council, but to date no such regulations have been promulgated by the relevant authorities.





Through fiscal year 2012, the Company has not elected to receive “reasonable returns” from its schools, and all income that may otherwise be available for distribution shareholders has been retained for operational purposes.





Organization Structure of Wonder:





Our organization is structured to abide by the laws of the PRC. Our corporate structure is depicted below:




8









9





Our Business.





●
China Wonder’s core business goal is to provide educated IT students to the business community of China.  To meet this goal, Wonder has established an excellent vocational education system which includes two new education models, called the “1+3” educational and the “Double Certificate” models.  Both education models have gained significant acceptance and reputation throughout China. The “1+3” educational model means through Wonder’s programs,  “1” means students obtain their IT diploma, and “3” means they also obtain the skills to succeed, namely professionalism, industry skills, and foreign language. “Double Certificate” model means that students receive an industry recognized Wonder diploma, but also may receive, after additional testing, a more specific diploma which such as Microsoft MLC certification or Adobe’s graphics design certification, among others.





●
Our classes consist principally of IT subjects, including courses ranging from basic computer skills to higher level design courses. However, class durations can vary from a couple of weeks to two years.  We have a substantially higher student population, approximately 40% in our short duration classes that range between two weeks to four weeks.  The balance of our student population is comprised of classes ranging from three months to two years.





●
China Wonder’s market focus is in the vast rural areas of China and the students who are unable to pass the national high school exam or the entrance test for university acceptance.  There are more than five million students each year that are candidates for China Wonder’s IT education. Wonder has established a strong marketing strategy to reach these students and to promote its IT education programs to its market. Wonder’s student population is classified as “long term” and “short term.” Long term students subscribe to a two year curriculum and receive a certification following completion. Short term students subscribe to a one or two month accelerated course(s). During the past three years, Wonder graduated the following number of long term students; 9,097 in fiscal 2010, 9,486 in fiscal 2011, and 9,132 in fiscal 2012.





●
China Wonder has assembled a solid management team and a professional staff to execute their excellent business model and their plans to expand the business significantly. Wonder’s market strategies have been developed to take advantage of the large market potential in China.




10




AWARDS & QUALIFICATION
 
 Wonder has achieved recognition for its IT education from various sources, including various ministries in the PRC. A list of these achievements is presented below:
 
 On December 10, 2012, Wonder was named one of the Most Influential IT Education Brand and one of the most Valuable Vocational Education Brand in the year of 2012 by the Tencent Corporation;
  On December 15, 2011, Wonder was awarded for the fourth time in a row the Ten Most Influential IT Education Brand award by the Tencent Corporation;
 
 On December 10, 2011, Wonder was named the Best Brand Name and Most Influential Education Institution award by the Sina Corporation; Wonder’s chairman, Mr. Xie, won the 2011 Best and Most Influential Educator award, also from Sina;
 
 On November 15, 2011, Wonder was named the Ten Best Schools award by the US AutoDesk Company in Beijing.
 
 Wonder was awarded the “Precursor of National Non-government Vocational Education institution” by the ministry of labor of the People’s Republic of China.
 
 Wonder was recognized as one of the “Top Ten IT Education Institutions” in China.
 
 Wonder was assessed the “Excellent Training Center” by Macromedia in America.
 
 Wonder was awarded the “Trustful Corporation”, “Reassurance Service Corporation”, “Full-satisfied Corporation”, “Perfect Service Corporation”, “Zonta Club” by Consumer Association of Anhui Province.
 
 Wonder was assessed the “Excellent Authorized Training Center” and “Excellent Regional Support Center for ATC” by Microsoft.
 
 Wonder was awarded the “Best Partner in Grand China” by Core in Canada.
 
 Wonder was awarded the “Outstanding Achievement Award”, “Outstanding Corporation” and “Top Ten Corporation of Vocational Education Institution.”
 
 Wonder was assessed the “Top Ten Training Center” and “Best Partner in Five Years” by Adobe of America.
 
 Wonder was awarded with “Outstanding Achievement Award” and as “Excellent Training Center in Grand China” by Autodesk of America.
 
 Wonder was awarded the “Excellent Training Center of NIT” by ministry of education of the People’s Republic of China.
 
 11
 
 EDUCATION MODEL AND CHARACTERISTICS
 
 CURRICULUM SYSTEM
 
 Wonder provides vocational training and employment service to its students. Wonder provides numerous IT classes in several different areas as noted below.  Many of Wonder’s students come from the rural areas of China.  Therefore, Wonder provides a comprehensive employment orientation and helps its students to find employment after their IT program is complete. Wonder’s primary target markets are students who have graduated from the high schools in China but are unable to advance to higher learning within the PRC school structure.
 
 Classification of Curriculum System
 
 Classification of Curriculum System of  Wonder
 
 Classification
Education Course1. Basic
General Training of Computer Technology2. Professional
Professional vocational education of computer application and design.3. High-level
High-level training of Internet Technology, Cartoon and Games, Professional Programmer.4. Expanded
IT education related vocational education such as Numerical Control Technology.
 
 Training Curriculum Program
 Training Curriculum Program
 
 Department
Curriculum
RecruitmentIT-Application
Department
Basics of Computer
Higher level than junior high schoolDesigner and Researcher3-D advertisement DesignerDesigner of Print AdvertisementBusiness Administration AssistantProfessional SecretaryE-Business & MarketingMechanics Department
Numerical Control Machine Tool
Students of high school or higher level than high schoolSoftware Department
Professional programmerInternet Department
Internet EngineerEngineer of Information SecurityDigital Art Department
E-Game Research DesignerComputer-art DesignerEnvironment-art DesignerComputer-based Costume DesignerComputer-based Movie & Cartoon Designer
 
 12
 
 Recruitment Target & Students Distribution
 
 Students who are recruited with junior high school certificates and higher will be taught mainly basic knowledge of computer applications.  Students with high school certificates and higher will learn about the professional use of a computer.
 
 (PIE CHART)
  The percentage of students is shown by the type of IT program study in the above graph.  Most students are in the Computer-based Art Design curriculum since this area has a large market demand and provides a significant employment opportunity for qualified students.
 
 CHARACTERISTICS OF THE EDUCATION MODEL
 
 1+3 Education Model
 
 Wonder has created the “1+3” education model (“Training” plus “Knowledge + Professionalism + Entrepreneurship”) which focuses its efforts on the students’ ability to put theory into practice and utilizing their entrepreneurship abilities, which are also taught by Wonder. By utilizing this very unique education model, Wonder has produced a significant number of talented students who are skilled in computer technology.
 
 Market Oriented Course Program
 
 Wonder also has focused its course development on what the market needs and what employers require.  Wonder has established their course work to meet these needs in a timely and effective manner.
 
 13
 
 Wonder’s Curriculum Review Process
 
 
 
 Curriculum design
 
 Based on the needs of corporations and especially their need for talent and Wonder’s ability to look forward in IT technology, Wonder has created an excellent market oriented curriculum.  Wonder revises its curriculum every six (6) months after receiving advice and feedback from employment agencies and their corporate partners.  Wonder will revise the curriculum taking into account the feedback and also utilizing their 16 years of teaching experience, by applying key design factors, and considering the projected revenue and cost for the new curriculum.  Wonder also will test the new curriculum by having its professors conduct the necessary tests with a view towards risk assessment. By utilizing this model, Wonder curriculum is the most up-to-date and market-driven system which management believes results in higher program and student success.
 
 Education Support/Description of Property
 
 Faculty
 
 Currently, Wonder has a total of 553 employees, approximately 209 full time and 55 part time teachers who are sufficient to educate 35,000 students each year, and the remainder of employees are administrative staff  Wonder graduates between 12,000 to 19,000 students per year (which includes both long term students and short term students). Accordingly, the Company maintains sufficient teacher capacity to grow the business during the next couple of years without an increase in the faculty capacity.
  14
 
 Hardware Facilities
 
 There are over 9,800 sets of computers in Wonder schools, and various types of laboratory classrooms are available, including: Auto-lectured labs, graphic design labs, in-house adorning and design labs, digital movie labs, television design labs, computer set-up and repair labs, internet labs, Cisco Network labs, program design labs and professional studios.
 
 
 
 Excellent Education Certifications
 
 As indicated below, the Company’s programs have been certified by industry leaders in the computer software and hardware industry and has been recommend by the PRC government.
  Ø▪▪
Recommended institution by the PRC Ministries of Education, Labor, and Information.Ø▪▪
Authorized  training center for Microsoft, Adobe, Cisco, Autodesk, Discreet and Macromedia.Ø▪▪
Authorized training center for Corel, Solid works, CIW, Sun, Linux in Canada.Ø▪▪
The only authorized training institution, internet technology school, ATA software school in Anhui Province for Microsoft.Ø▪▪
Authorized training institution for the Chinese Anti-Hacker & Computer Virus Research Center.Ø▪▪
Authorized test center for Prometric, which is the largest computer test service corporation, providing over 60 famous IT tests worldwide.
 
 15
 
 As stated above, Wonder was chosen by the PRC Government as a “recommended institution” since we target rural village students for our vocational programs. As result, our business plan had coincided with the efforts of the government to extend education to the rural villages. The designation of “recommend institution” is significant because we use the “recommended institution” in our student marketing materials and, based on past results, we believes it assists us in recruiting new students. In addition, to a lesser extent, we believe the “recommended institution” designation helps with the placement of Wonder’s students into full time employment.
 
 PROPRIETARY BUSINESS MODELS
 
 Double Certificates Education Model
 
 China Wonder has launched the Double Certificates Education Model identified as “Ability + School Certificates.”  This model provides assistance to students of China Wonder who are taking classes through the self-study program, the adult education program or through the off-campus program. China Wonder also provides to qualifying students certifications authorized by foreign companies, such as Adobe and Autodesk, and a certification for the National Junior College Degree. This model has been recognized and accepted throughout China since it provides opportunities for many students who cannot take the traditional classes.
 
 Employment Referral System
 
 China Wonder’s Employment Referral System
 
 
 
 With student employment as a key strategy, China Wonder has established 12 employment centers through the PRC (see map below). These centers provide job placement services for its students with local companies since 2000. As a result, China Wonder has established and maintained excellent relationships with many local companies and is able to secure employment for almost all of its graduating students through this process. This aspect of Wonder’s business is highly attractive to its students and is a key competitive advantage.
 
 16
 
 China Wonder’s employment center distribution is depicted on the map below, with each red flag identifying the location of a China Wonder employment center.
 
 
 
 17
 
 MARKET ANALYSIS
 
 GENERAL SUMMARY OF CHINESE VOCATIONAL EDUCATION
 
 There are three levels in the vocational education system in China.  Education starts with the Junior Vocational Education school followed by the Secondary Vocational Education school and finally Senior Vocational Education school.  The most popular is the Secondary Vocational Education school since it is directly linked to the development of China’s economy.
 
 Statistically, the number of Secondary Vocational schools has increased 2.1 times versus the number of schools in 1978.  The number of students also has increased.  The number of students recruited for Secondary Vocational schools has increased 10.5 times while the number of in-school students increased 14.3 times.
 
 The Development of Secondary Vocational Education
 During the Past 30 Years in China
  
  The Development of China’s Private Vocational Education
 (Source: 2007-2009 China Vocational Education Industry Report)
 
 More than 80 million students from the Secondary Vocational Education schools and more than 20 million students from the Senior Vocational schools have graduated in the past 30 years.  At the same time, over 150 million people are taking part in various kinds of vocational education in China. In 2008, the Secondary Vocational Education program represented approximately 50% of the entire High School Education system in China and it continues to grow annually.
 
 18
 
 FORWARD-LOOKING REVIEW OF CHINESE VOCATIONAL EDUCATION
 
 Chinese Government Encouraging Private Vocational Education
 
 There are four kinds of Vocational Education schools currently in China divided by the different management systems.  They are: Nationally financed Vocational Education schools, Vocational schools managed by social organizations, Vocational schools managed by corporations for their employees, and finally, the privately owned Vocational schools.  The Private Vocational Schools are the most popular in China.  To date, the Chinese government has encouraged the development of privately owned institutions for Vocational Education.
 
 Market-oriented establishment of professions in vocational education school
 
 The professions in a Vocational School are established by a combination of market demand and what is taught in that specific school. Currently, almost all of the professions offered by Vocational Education schools are established by utilizing the principles of market orientation of local economies.  The market is based on demand and only those professions that meet this demand survive.
 
 Focusing on practical training methods
 
 Chinese education has changed from an elite education system with limited participation to a more popular broader education system which includes vocational training. With the optimization of the industry structure and with more specialization required, a vocational education has become more important in the PRC.  Practical skills are needed in the work place.  The vocational education system requires students to practice what they learn by putting into practice what they studied in the classroom.  Many of the students will seek more than one educational degree to meet the needs of the industry in their areas.
 
 Setting up the training courses based on a company’s need to secure a talented workforce
 
 Vocational education schools usually set up the training courses based on a talent need in the workplace. As many employers request new staff with related working experience, the local vocational schools build a strong relationship with the employers; if necessary, the students will be taught specific skills to meet the needs of the employer.
 
 There is a surplus of students from the rural parts of China.
 
 During the past few years, there have been millions  of laborers from rural areas transferred to cities to obtain jobs. However, most of them have very little education or practical training. Since the cost to study in a vocational education school is much lower than any other education school, it is very economical for students from rural areas to choose a vocational education. To obtain a vocational education, students from the rural areas of China can have access to professional classes and have the possibility of working in large cities after graduation. Accordingly, the vocational-specific technologies education school plays an important role in the Chinese urbanization process.
 
 THE POTENTIAL OF “INFORMATION TECHNOLOGY (“IT”) EDUCATION” IN THE CHINESE MARKET
 
 According to the Ministry of Education in China, there were approximately 2.1 million (in 2009), about 2.2 million (in 2010) and about 2.3 million (in 2011) graduates of IT departments; there were approximately 1.97 million (in 2009), 2.06 million (in 2010), and 2.17 million (in 2011) students studying IT at vocational education schools   The Company believes that as the IT industry develops, this will produce a concomitant increase in the demand for IT.
 
 The IT industry has grown in size to 51.9 billion dollars and is now 0.8% of China’s GDP.  Many IT companies and Research Centers have been created in China during the past few years.  Therefore the demand for IT talent also has grown significantly and individuals with IT skills are in great demand.  Please note the Demand versus Capacity table and the IT Supply and Demand graphs below.
 
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 IT Demand vs. Capacity in China
 
 Market size
Annual growth rate
IT Demand/year
Current CapacityInterchange


250,000/year
4,000Information preservation
5.6 billion RMB
10%~20%
30,000/year
500e-business

100%
200,000/yearInformation security



4,000Network game
5 billion RMB

20,000/year
3,000Software industry

35%
 
 IT Supply and Demand in China
  
 
 (Source: 2007-2009 China Vocational Education Industry Report)
 
 Market Size and Demand
 
 TARGET MARKET ANALYSIS
 
 China Wonder has significant advantages compared with its competition due to the fact that their  primary recruitment area is from Junior High Schools and High Schools from the rural areas of China.   In addition, China Wonder has the resources to provide employment and career placement services once the student graduates from their vocational school which is a key competitive advantage.
 
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Great market demand of vocational education after high school in China
  During the past 20-30 years, the quality of the high school curriculum in the PRC has improved dramatically, and at the same time, demand has increased due in part to the heavy population migration to urban areas. Unfortunately,  post graduate educational opportunities (ie universities) have not grown symmetrically. As a result, there’s great market demand for vocational education. According to statistics from the Ministry of Education in China, 8.8 million students had been recruited by universities with the average enrollment ratio of 60.23 per cent of total possible students in 2006, in 2007 the quantity increased to 10.1 million while the ratio decreased to 54 per cent; in 2008 the quantity reached a culminating point of 10.5 million students and the ratio was 57.04 per cent.  Therefore, there is only a small improvement of Chinese Universities’ total capacity. Accordingly, this has led to a great market demand for vocational education.
 However, more recently, the number of junior high school graduates and high school graduates showed a slight downward trend, due in large part to the decline of the birth population in China and an increasing number of junior high school and high school graduates studying abroad.
 In 2010, there were 9.6 million high school graduates and 18.5 million junior high school graduates,
 In 2011, there were 9.4 million high school graduates and 18.2 million junior high school graduates, and
 In 2012, there were 9.2 million high school graduates, and 18 million junior high school graduates
 (Source:Ministry of Education of China)
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  The Chinese government is faced with the task of moving a significant amount of rural labor to China’s larger cities as the country moves toward urbanization.  It is predicted that 15 to 20 million people from the rural areas of China will need to be transferred to the cities to meet the demands of the economy during the next 5 to 10 years.  Low educational standards throughout the country have hindered the realization of this process.  However, many believe that the expanding vocational education system will provide the necessary skills needed to meet the economic demands and will accelerate the urbanization of China.
  The comparison between developed countries and China
  Developed countries
ChinaAgriculture occupation
3%—10%
49%Tertiary occupation
50%—70%
14.5%Urbanization
More than 80%
44.9%Surplus labor in rural area

46.1%
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  The two charts below depict the current status of rural education in China.
  The education condition of rural labor in China
  (PIE CHART)
 
 (Source: 2007-2009 China Vocational Education Industry Report)
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  The industry condition of rural labor
  
  (Source: 2007-2009 China Vocational Education Industry Report)
  There is great opportunity for the vocational education industry as the Chinese develop and build new towns and cities and complete the urbanization process.
  Currently, China is actively developing and implementing the New Village Construction program. This program is intended to accelerate the training of rural laborers who are transferring from their rural homes to the larger cities where many of the new jobs are located.
  During this urbanization process, more highly educated rural laborers are needed.  However, amongst the rural laborers younger than 35 years old, less than 9.1 per cent have been professionally trained and less than 5 percent have taken part in the rural vocational education system. The lack of education is hindering the progress of the urbanization process and the New Village Construction program.
  The Chinese government has published several policies to promote the development of vocational education.   The Chinese government believes vocational education is a key program for accelerating the New Village Construction program and the urbanization process.  Vocational education is one of the most effective programs to improve the skills of the rural laborers as they transfer to critical jobs in the larger cities of China.
  Training institutions that focus their attention on providing rural vocational education will see significant opportunities during the New Village Construction projects.  The size of this market is very significant for those who take advantage of the urbanization process in China.  The State Department’s decision “to energetically develop vocational education” affirms the great opportunity that exists for those who devote themselves to the rural vocational education market.
  COMPETITION
  The vocational school market in China is very fragmented and there are many smaller players. The market is furthered fragmented into specialized sectors. There are vocational schools for the junior high school, high school and university graduates; there are vocational schools for learning foreign languages, industrial skills, service providers and computer technology technicians. China Wonder is in the computer IT technology sector. We mainly target our recruitment efforts at the junior and high school graduates who want to gain a set of pragmatic computer IT technology knowledge and skills for their immediate employment needs. In our sector, there are many competitors locally and nationally. Many of them are smaller in scale compared to ours. There are many factors a typical student would consider before choosing a vocation school; besides the curricula offered, the history, size and brand name of the institution are also among the considerations. China Wonder is one of the better known vocational schools in the cities it now operates.
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  COMPETITIVE ADVANTAGES
  China Wonder’s core marketing competence lies in their existing channels to recruit new students. They rely heavily on their various recruitment centers and employment agencies to contact new students.
  Wonder’s Competitive Edge
  (FLOW CHART)
  Management Team Advantage
 China Wonder is the leader and main driver of improving China’s IT vocational education system. China Wonder has been developing its programs for 15 years and has developed a strong management team and staff structure.
  Marketing Advantage
 China Wonder’s target market is the rural population of China.  As noted above, the rural areas of China has large number of people who are looking for jobs in the larger cities but lack the skills needed for such job positions.  The market focus is the senior high school graduates located in the enormously populated rural areas of China.  China Wonder has a strong regional influence in these areas of China and places a larger emphasis on reaching the individuals who are looking to transfer to the Chinese cities and looking for jobs to improve their lives.  China Wonder’s Employment Referral System guarantees the rural laborers an education and jobs after graduation. This is a major factor in increasing China Wonder’s market position.
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  Product research Advantage
 China Wonder can control and guarantee the education quality of their programs. After 15 years of development, China Wonder has accumulated large numbers of competent teachers, which helps them create market demand and provides research capabilities. The qualifications and experiences of the staff ensure that the training courses will be improved constantly to meet the changing student learning needs and social manpower demands.
  Enrollment Network Advantage
 The substantial enrollment advertisements result in multi-level and high-impact media coverage toward the target market. China Wonder also has a strong sales team, including enrollment teams in all provinces of China and enrollment offices in all China Wonder schools.
  Student’s Employment Security Advantage
 With 15 years of vocational educational training experience, China Wonder has gained many experiences in brand consciousness, management and market orientation. The Company’s 15 employment placement offices are located in the major cities and IT-developed regions. The Company closely monitors its student placement, and students are encouraged to notify the Company if they have not obtained job placement post graduation.  Based on these factors, the Company believes that it has control over its job placement results. Accordingly, the Company further believes that almost all of the students are placed within 30 days after graduation.
  ITEM 1A.       RISK FACTORS.
  Disclosure Regarding Forward Looking and Cautionary Statements.
  Forward Looking Statements:   All statements other than statements of historical facts included in this Form 10-K regarding the Company’s financial position, business strategy, and plans and objectives of management for future operations and capital expenditures, and other matters, are forward looking statements. These forward-looking statements are based upon management’s expectations of future events. Although the Company believes the expectations reflected in such forward looking statements are reasonable, there can be no assurances that such expectations will prove to be correct. Additional statements concerning important factors that could cause actual results to differ materially from the Company’s expectations (“Cautionary Statements”) are disclosed below in the Cautionary Statements section and elsewhere in this Form 10-K. All written and oral forward looking statements attributable to the Company or persons acting on behalf of the Company subsequent to the date of this Form 10-K are expressly qualified in their entirety by the Cautionary Statements.
  Cautionary Statements:  Certain risks and uncertainties are inherent in the Company’s business. In addition to other information contained in this Form 10-K, the following Cautionary Statements should be considered when evaluating the forward looking statements contained in this Form 10-K:
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  Risks Related to Our Business
  Although our Chinese subsidiary has been in operation for several years, US Wonder was incorporated on April 17, 2008 and has a limited operating history.
 There is no way to evaluate the likelihood of whether we will be able to operate our proposed business successfully. If our business fails to develop in the manner we have anticipated, you will lose your investment in the shares. If our business develops, management may be unable to effectively or efficiently operate our business unless we are able to employ sufficient and trained professional personnel to assist us in the operation of our business, in which event you will lose your investment in the shares.
  The Chinese market for educational services is still emerging and evolving rapidly. If market acceptance of our products and services declines or fails to grow, our revenue growth may slow or we may experience a decrease in revenues.
 As the Chinese market for educational services is still emerging, our success will depend to a large extent on our ability to convince our clients that our technologies and services are valuable. If demand for educational services does not grow to the extent we anticipate, our revenue growth may slow or we may experience a decrease in revenues.
  If we need to raise additional funds, the funds may not be available when we need them.  We may be required to provide rights senior to the rights of our shareholders in order to attract additional funds and if we use equity securities to raise additional funds dilution to our shareholders will occur.
 To the extent that we require additional funds, we cannot assure you that additional financing will be available when needed on favorable terms or at all, and if the funds are not available when we need them, we may be forced to terminate our business. If additional funds are raised through the issuance of equity securities, the percentage ownership of our existing stockholders will be reduced; and those equity securities issued to raise additional funds may have rights, preferences or privileges senior to those of the rights of the holders of our common stock.
  Compliance with rules and requirements applicable to public companies will be difficult due to our PRC operations and cause us to incur increased costs,
 As a public company, we will incur significant legal, accounting and other expenses that we did not incur as a private company. In addition, the Sarbanes-Oxley Act, as well as rules subsequently implemented by the SEC and Nasdaq, have required changes in corporate governance practices of public companies. We expect these rules and regulations to increase our legal, accounting and financial compliance costs and to make certain corporate activities more time-consuming and costly. Complying with these rules and requirements may be especially difficult and costly for us because we may have difficulty locating sufficient personnel in China with experience and expertise relating to U.S. GAAP and U.S. public-company reporting requirements, and such personnel may command high salaries relative to what similarly experienced personnel would command in the United States. If we cannot employ sufficient personnel to ensure compliance with these rules and regulations, we may need to rely more on outside legal, accounting and financial experts, which may be very costly. In addition, we will incur additional costs associated with our public company reporting requirements. We cannot predict or estimate the amount of additional costs we may incur or the timing of such costs.
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  Some of our competition will be from larger, more established and better financed companies, and if we are unable to successfully compete with other companies our business will fail.
  If we are unable to implement our business expansions, some of our competitors will have greater financial resources, technical expertise and managerial capabilities than we do. If we are unable to overcome some of the competitive disadvantages, we will be forced to cease our business operations.
  Market factors are out of our control.  As a result, we may not be able to market any of our educational products which may be developed.
 The education industry, in general, is intensively competitive, and we are unable to provide any assurance that a ready market will exist of the sale of our products. Numerous factors beyond our control may affect the marketability of any products developed.  The factors include market fluctuations, government regulations, including regulations relating to prices and taxes. The exact effect of these factors cannot be accurately predicted, but the impact or any one or a combination thereof may result in our inability to generate any revenue, in which event you will lose your entire investment in the shares.
  Risks Related to Our Common Stock
  We are not listed or quoted on any exchange and we may never obtain such a listing or quotation.
 There may never be a market for stock and stock held by our shareholders may have little or no value.  There is presently no public market in our shares. While we intend to contact a market maker for sponsorship of our securities, we cannot guarantee that such sponsorship will be approved and our stock listed and quoted for sale. Even if our shares are quoted for sale, buyers may be insufficient in numbers to allow for a robust market, it may prove impossible to sell your shares.
  Even if we obtain a listing on an exchange and a market for our shares develops, sales of a substantial number of shares of our common stock into the public market by certain stockholders may result in significant downward pressure on the price of our common stock and could affect your ability to realize the current trading price of our common stock.
  Our shareholders positions may be diluted through the issuance of additional shares.
 Currently, we have issued a total of 20,000,000 shares of common stock. Additional issuances of equity securities may result in dilution to our existing stockholders. Our Articles of Incorporation authorize the issuance of up to 100,000,000 shares of common stock.
  Our common stock is subject to the “penny stock” rules of the SEC.
 Our common stock is subject to the “penny stock” rules of the SEC and the trading market in our securities is limited, which makes transactions in our stock cumbersome and may reduce the value of an investment in our stock. Because our stock may not be traded on a stock exchange or on the NASDAQ National Market or the NASDAQ Small Cap Market and because the market price of the common stock may be less than $5.00 per share, the common stock is classified as a “penny stock. The Securities and Exchange Commission has adopted Rule 15g-9 which establishes the definition of a “penny stock,” for the purposes relevant to us, as any equity security that has a market price of less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to certain exceptions. For any transaction involving a penny stock, unless exempt, the rules require that a broker or dealer approve a person’s account for transactions in penny stocks, and the broker or dealer receives from the investor a written agreement to the transaction, setting forth the identity and quantity of the penny stock to be purchased.
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  In order to approve a person’s account for transactions in penny stocks, the broker or dealer must obtain financial information and investment experience objectives of the person and make a reasonable determination that the transactions in penny stocks are suitable for that person and the person has sufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks.
  The broker or dealer must also deliver, prior to any transaction in a penny stock, a disclosure schedule prepared by the Commission relating to the penny stock market, which sets forth the basis on which the broker or dealer made the suitability determination; and the broker or dealer has received a signed, written agreement from the investor prior to the transaction.
  Generally, brokers may be less willing to execute transactions in securities subject to the “penny stock” rules. This may make it more difficult for investors to dispose of our common stock and cause a decline in the market value of our stock.
  Disclosure also has to be made about the risks of investing in penny stocks in both public offerings and in secondary trading and about the commissions payable to both the broker-dealer and the registered representative, current quotations for the securities and the rights and remedies available to an investor in cases of fraud in penny stock transactions. Finally, monthly statements have to be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks.
  A decline in the future price of our common stock could affect our ability to raise further working capital and adversely impact our operations.
 We have recently commenced trading of our common stock on the OTC-BB and OTC-QB, however, we will have no control over the market price of our common stock. The market price of our common stock likely will be highly volatile. In addition, factors, including regulatory matters, concerns about our financial condition, operating results, litigation, government regulation, developments or disputes relating to current or future agreements may have a significant impact on the market price of our stock, causing the market price to decline. In addition, potential dilutive effects of future sales of shares of common stock by shareholders and by us could also have an adverse effect on the price of our securities.  Such a decline would seriously hinder our ability to raise additional capital and prevent us from fully implementing our business plan and operations.
  Control by our Founder and Chairman.
 Mr. Chungui Xie, our Founder and Chairman, owns and controls approximately 83% of our total issued and outstanding shares of our common stock. Such ownership by the Company’s principal shareholder, executive officer and director may have the effect of delaying, deferring, preventing or facilitating a sale of the Company or a business combination with a third party.
  Even taking into account the limitations of Rule 144, the future sales of restricted shares could have a depressive effect on the market price of the Company’s securities in any market, which may develop.
 The 20,000,256 shares of Common Stock presently issued are “restricted securities” as that term is defined under the Securities Act of 1933, as amended, (the “Securities Act”) or have other re-sale restrictions as set forth in our recent Form S-1 Registration Statement. In the future, these shares may be sold in compliance with Rule 144 of the Securities Act, pursuant to the terms of our recent Form S-1 Registration Statement, or pursuant to another Registration Statement filed under the Securities Act. Rule 144 provides, in essence, that a person, who has not been an affiliate of the issuer for the past 90 days and has held restricted securities for six months of an issuer that has been reporting for a period of at least 90 days, may sell those securities so long as the Company is current in its reporting obligations.  After one year, non-affiliates are permitted to sell their restricted securities freely without being subject to any other Rule 144 condition.  Sales of restricted shares by our affiliates who have held the shares for six months are limited to an amount equal to one percent (1%) of the Company’s outstanding Common stock that may be sold in any three-month period. Additionally, Rule 144 requires that an issuer of securities make available adequate current public information with respect to the issuer. Such information is deemed available if the issuer satisfies the reporting requirements of sections 13 or 15(d) of the Securities and Exchange Act of 1934 (the “Securities Exchange Act”) or of Rule 15c2-11 there under.  There is no limitation on such sales and there is no requirement regarding adequate current public information. Sales under Rule 144 or pursuant to a Registration Statement filed under the Act, may have a depressive effect on the market price of our securities in any market, which may develop for such shares. However, these rules apply only to shares in a company that is not considered a “shell” entity.  In the event that the issuer is a “shell” entity, as we are, all shares must be held for one year from the date of distribution in order to be sold in compliance with Rule 144.
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  If shareholders sell a large number of shares all at once or in blocks, the value of our shares would most likely decline.
 The Company has 20,000,000 shares of Common Stock outstanding as of the date of this filing. Substantially all of these shares may be resold into the public market under Rule 144. Consequently, the potential sale of a large amount of these shares into the market may depress the market price for our Common Stock and impair our ability to raise additional capital through the public sale of Common Stock. The Company has no arrangement with any of the holders of our shares to address the possible effect on the price of the Company’s Common Stock of the sale by them of their shares.
  Risks Relating to Regulation of Our Business
  Changes to preferential policies adopted by the Chinese government related to vocational education may negatively affect our business and results of operations.
 The Chinese government has adopted preferential policies for the development of vocational schools in China, including “The Decision to Enhance the Promotion of the Reform and Development of Vocational Education” and “The Decision to Enhance the Development of Vocational Education” published by the State Council in September 2002 and October 2005, respectively. These decisions require all levels of government in China to intensify their support for vocational education and to gradually increase the financial resources that local and provincial governments allocate to vocational education. While the impact of these regulations have had a negligible impact on our business and operations, if the government were to develop new policies which would create competitive schools or further regulate our existing schools, such policies would have negative impact on our business and results of operations.
  We have limited recourse against our subsidiaries if anyone of them violates our contractual arrangements.
 We have limited direct recourse against our China subsidiaries if anyone of them violates these contractual arrangements. For example, they could refuse to operate the educational institutions in our group in an acceptable manner or pay the service fees due under our contractual arrangements. Because our contractual arrangements are governed by PRC law and provide for the resolution of disputes through either arbitration or litigation in China, if a subsidiary fails to perform its obligations under our contractual arrangements, we will have to rely on remedies under PRC law, including seeking specific performance and claiming damages. In addition, generally the PRC has substantially less experience related to the enforcement of contractual rights through its judiciary or the arbitration process as compared to the United States. This inexperience presents the risk that the judiciary or arbitrators in the PRC may be reluctant to enforce contractual rights, interpret these rights and remedies differently than what was intended by the parties to the agreements, or find that such contractual agreements do not comply with restrictions in current PRC laws. A PRC court may also set aside an arbitration award by reason of any defect the court considers to be present in the arbitration proceeding, remedies at law may not be adequate and a PRC court may not order specific performance. Additionally, contract interpretation and enforcement is not as developed as that in the United States and a contract dispute could be subject to uncertainties. In addition, any legal proceeding may result in substantial costs, disruptions to our business, damage to our reputation and diversion of our resources.
  Risks Related to Doing Business in China
  PRC economic, political and social conditions, as well as changes in any government policies, laws and regulations, could adversely affect the overall economy in China or the prospects of the education market, which in turn could adversely affect our business.
 Substantially all of our operations are conducted in China, and substantially all of our revenues are derived from China. Accordingly, our business, financial condition, results of operations, prospects and certain transactions we may undertake are subject, to a significant extent, to economic, political and legal developments in China.
  The PRC economy differs from the economies of most developed countries in many respects, including the amount of government involvement, level of development, growth rate, control of foreign exchange and allocation of resources. While the PRC economy has experienced significant growth in the past two to three decades, growth has been uneven, both geographically and among various sectors of the economy. Demand for our products and services depend, in large part, on economic conditions in China. Any slowdown in China’s economic growth may cause our potential customers to delay or cancel their plans to participate in our educational services, which in turn could reduce our net revenues.
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  Although the PRC economy has been transitioning from a planned economy to a more market-oriented economy since the late 1970s, the PRC government continues to play a significant role in regulating industry development by imposing industrial policies. The PRC government also exercises significant control over China’s economic growth through the allocation of resources, controlling the incurrence and payment of foreign currency-denominated obligations, setting monetary policy and providing preferential treatment to particular industries or companies. Changes in any of these policies, laws and regulations could adversely affect the overall economy in China or the prospects of the education market, which could harm our business.
  The PRC government has implemented various measures to encourage foreign investment and sustainable economic growth and to guide the allocation of financial and other resources, which have for the most part had a positive effect on our business and growth. However, we cannot assure you that the PRC government will not repeal or alter these measures or introduce new measures that will have a negative effect on us.
  China’s social and political conditions are also not as stable as those of the United States and other developed countries. Any sudden changes to China’s political system or the occurrence of widespread social unrest could have negative effects on our business and results of operations. In addition, China has tumultuous relations with some of its neighbors and a significant further deterioration in such relations could have negative effects on the PRC economy and lead to changes in governmental policies that would be adverse to our business interests.
  The PRC legal system embodies uncertainties that could limit the legal protections available to you and us.
 Unlike common law systems, the PRC legal system is based on written statutes and decided legal cases have little precedential value. In 1979, the PRC government began to promulgate a comprehensive system of laws and regulations governing economic matters in general. The overall effect of legislation since then has been to significantly enhance the protections afforded to various forms of foreign investment in China. Our PRC operating subsidiaries are subject to laws and regulations applicable to foreign investment in China in general and laws and regulations applicable to foreign invested enterprises in particular. Our PRC subsidiaries are subject to laws and regulations governing the formation and conduct of domestic PRC companies. Relevant PRC laws, regulations and legal requirements may change frequently, and their interpretation and enforcement involve uncertainties. For example, we may have to resort to administrative and court proceedings to enforce the legal protection that we enjoy either by law or contract.
  However, since PRC administrative and court authorities have significant discretion in interpreting and implementing statutory and contractual terms, it may be more difficult to evaluate the outcome of administrative and court proceedings and the level of legal protection we enjoy than under more developed legal systems. Such uncertainties, including the inability to enforce our contracts and intellectual property rights, could materially and adversely affect our business and operations. In addition, confidentiality protections in China may not be as effective as in the United States or other countries. Accordingly, we cannot predict the effect of future developments in the PRC legal system, particularly with respect to the privatization of the education industry, including the promulgation of new laws, changes to existing laws or the interpretation or enforcement thereof, or the preemption of local regulations by national laws. These uncertainties could limit the legal protections available to us and other foreign investors, including you.
  The accredited education sector is subject to extensive regulation in China, and the educational institutions’ ability to conduct operation is highly dependent on their compliance with these regulatory frameworks.
 We are a private vocational school and are not subject to the same regulations and restrictions as imposed on the regular accredited schools in China.
  We are required to hold a variety of permits, licenses and certificates to conduct our business in China. There permits are issued by each local government (Ministry  of Labor)in which we operate and by the Social Resource Bureau. We believe that we possess all the permits, licenses and certificates required for our business to operate in its current manner. However, there may be circumstances under which the approvals, permits, licenses or certificates granted by the governmental agencies are subject to change without substantial advance notice, and it is possible that we could fail to obtain the approvals, permits, licenses or certificates that are required to expand our business as we intend. If we fail to obtain or to maintain such permits, licenses or certificates or renewals are granted with onerous conditions, we could be subject to fines and other penalties and be limited in the number or the quality of the products or services that we would be able to offer. As a result, our business, result of operations and financial condition could be materially and adversely affected.
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  You may experience difficulties in effecting service of legal process, enforcing foreign judgments or bringing original actions in China based on United States or other foreign laws against us, our management or the experts named in the prospectus.
 We conduct substantially all of our operations in China and substantially all of our assets are located in China. In addition, all of our senior executive officers reside within China. As a result, it may not be possible to affect service of process within the United States or elsewhere outside China upon our senior executive officers, including with respect to matters arising under U.S. federal securities laws or applicable state securities laws.
  We have been advised by our PRC counsel that because the PRC does not have treaties with the United States providing for the reciprocal recognition and enforcement of court judgments, it is uncertain with regard to whether courts of China would recognize or enforce judgments of U.S. courts against us or our directors or officers pursuant to civil liability provisions of the securities laws of the United States or any state in the United States; or exercise jurisdiction over actions brought against us or our directors or officers pursuant to the securities laws of the United States or any state in the United States.
  Governmental control of currency conversion may affect the value of your investment.
 The PRC government imposes controls on the convertibility of the RMB into foreign currencies and, in certain cases, the remittance of currency out of China. We receive substantially all of our revenues in RMB. Under our current corporate structure, our income at the parent level will be primarily derived from dividend payments from our PRC subsidiary which in turn, derives its revenues from management fees from the Management Company. Shortages in the availability of foreign currency may restrict the ability of our PRC subsidiary and affiliate to remit sufficient foreign currency to pay dividends or other payments to us, or otherwise satisfy their foreign currency denominated obligations. Under existing PRC foreign exchange regulations, payments of current account items, including profit distributions, interest payments and expenditures from trade-related transactions, can be made in foreign currencies without prior approval from the PRC State Administration of Foreign Exchange, or SAFE, by complying with certain procedural requirements. However, approval from appropriate government authorities, such as SAFE, is required where RMB is to be converted into foreign currency and remitted out of China to pay capital expenses such as the repayment of loans denominated in foreign currencies. The PRC government may also at its discretion restrict access in the future to foreign currencies for current account transactions. If the foreign exchange control system prevents us from obtaining sufficient foreign currency to satisfy our currency demands, we may not be able to pay dividends in foreign currencies to our shareholders, including holders of our ordinary shares.
  PRC regulations relating to the establishment of offshore special purpose companies by PRC residents may subject our PRC resident shareholders to personal liability and limit our ability to inject capital into our PRC subsidiary, limit our PRC subsidiary’s ability to distribute profits to us, or otherwise adversely affect us.
 SAFE issued a public notice in October 2005 requiring PRC residents to register with the local SAFE branch before establishing or controlling any company outside of China for the purpose of capital financing with assets or equities of PRC companies, referred to in the notice as an “offshore special purpose company.” PRC residents that are shareholders and/or beneficial owners of offshore special purpose companies established before November 1, 2005 are required to register with the local SAFE branch before March 31, 2006. In addition, any PRC resident that is the shareholder of an offshore special purpose company is required to file, update and modify his or her SAFE registration with the SAFE or its competent local branch, with respect to that offshore special purpose company in connection with any of its increase or decrease of capital, transfer of shares, merger, split, equity investment or creation of any security interest over any assets located in China. The SAFE regulations require retroactive approval and registration of direct or indirect investments previously made by PRC residents in offshore special purpose companies. To further clarify the implementation of Circular 75, SAFE issued Circular 106 in May 2007. Under Circular 106, PRC subsidiaries of an offshore special purpose company are required to coordinate and supervise the filing of SAFE registrations by the offshore holding company’s shareholders who are PRC residents in a timely manner. We have requested our current shareholders and/or beneficial owners to disclose whether they or their shareholders or beneficial owners fall within the ambit of the SAFE notice and urge those who are PRC residents to register with the local SAFE branch as required under the SAFE notice. The failure of these shareholders and/or beneficial owners to timely amend their SAFE registrations pursuant to the SAFE notice or the failure of future shareholders and/or beneficial owners of our company who are PRC residents to comply with the registration procedures set forth in the SAFE notice may subject such shareholders and/or beneficial owners to fines and legal sanctions and may also limit our ability to contribute additional capital into our PRC subsidiary, limit our PRC subsidiary’s ability to distribute dividends to our company or otherwise adversely affect our business.
  32
  As of the date of this filing, Anhui Wonder has filed its SAFE registration and is waiting on  a response from SAFE.
  If the China Securities Regulatory Commission, or CSRC, or another PRC regulatory agency determines that our corporate structure is unlawful,  we may become subject to penalties.
 On August 8, 2006, PRC regulatory agencies, including the CSRC, promulgated the Regulation on Mergers and Acquisitions of Domestic Companies by Foreign Investors, or the M&A Rule, which became effective on September 8, 2006. On June 22, 2009, the MOFCOM promulgated the amended Regulations on Mergers and Acquisitions of Domestic Enterprises by Foreign Investors (the “Order 6”, together with M&A rule, the “New M&A Rules”), which became effective immediately. The M&A Rule, among other things, has certain provisions that require offshore special purpose vehicles, or SPVs, newly formed for the purpose of acquiring PRC domestic companies and controlled by PRC companies or individuals, to obtain the approval of the CSRC prior to listing their securities on an overseas stock exchange. On September 21, 2006, pursuant to the New M&A Rules and other PRC Laws and regulations, the CSRC, in its official website, promulgated relevant guidance with respect to the issues of listing and trading of domestic enterprises’ securities on overseas stock exchanges, including a list of application materials with respect to the listing on overseas stock exchanges by SPVs. We believe that the M&A Regulations only apply to transactions involving “mergers and acquisitions of domestic enterprises by foreign investors,” we believe that (i) the M&A Regulations are not applicable to our corporate structure based on control by contractual methods and (ii) CSRC approval is not required in the context of this offering, for the following reasons: (a) we established our PRC subsidiary, China WFOE, by means of direct investment, not through merger or acquisition of any PRC domestic companies and (b) we control our VIE and its subsidiaries through contractual arrangements, not through “mergers and acquisitions of domestic enterprises by foreign investors” as defined under the M&A Regulations. If the CSRC or another PRC regulatory agency subsequently determines that its approval is required for this offering, we may face sanctions by the CSRC or another PRC regulatory agency. If this happens, these regulatory agencies may impose fines and penalties on our operations in the PRC, limit our operating privileges in the PRC, restrict or prohibit payment or remittance of dividends by our PRC subsidiary to us or take other actions that could have a material adverse effect on our business, financial condition, results of operations, reputation and prospects, as well as the trading price of our ordinary shares. However, our PRC counsel has advised us that the Company has all necessary licenses and approval to conduct it business and there is no reason to believe that any regulatory authority is considering modifying, suspending, or revoking and such licenses, consents, authorizations, approvals, orders, certificates or permits
  The M&A Rule establishes more complex procedures for some acquisitions of PRC companies by foreign entities, which could make it more difficult for us to pursue growth through acquisitions in China.
 The M&A Rule establishes additional procedures and requirements that could make some acquisitions of PRC companies by foreign entities, such as ours, more time-consuming and complex, including requirements in some instances that the Ministry of Commerce be notified in advance of any change-of-control transaction in which a foreign entity takes control of a PRC domestic enterprise. In the future, we may grow our business in part by acquiring complementary businesses. Complying with the requirements of the M&A Rule to complete such transactions could be time-consuming, and any required approval processes, including obtaining approval from the Ministry of Commerce, may delay or inhibit our ability to complete such transactions, which could affect our ability to expand our business or maintain our market share.
  PRC regulation of loans and direct investment by offshore holding companies to PRC entities may delay or prevent us from making loans to our PRC subsidiary and PRC affiliated entity or to make additional capital contributions to our PRC subsidiary, which could materially and adversely affect our liquidity and our ability to fund and expand our business.
 We are an offshore holding company conducting our operations in China through our PRC subsidiaries. We plan to make loans to our PRC subsidiary, whether currently in existence or to be formed in the future, and our WOFE or other PRC affiliated entities formed in the future, or make additional capital contributions to our PRC subsidiary.
  33
 
 Any loans we make to our PRC subsidiary cannot exceed statutory limits and must be registered with the State Administration of Foreign Exchange, or SAFE, or its local counterparts. Under applicable PRC law, the government authorities must approve a foreign-invested enterprise’s registered capital amount, which represents the total amount of capital contributions made by the shareholders that have registered with the registration authorities. In addition, the authorities must also approve the foreign-invested enterprise’s total investment, which represents the total statutory capitalization of the company, equal to the company’s registered capital plus the amount of loans it is permitted to borrow under the law. The ratio of registered capital to total investment cannot be lower than the minimum statutory requirement and the excess of the total investment over the registered capital represents the maximum amount of borrowings that a foreign invested enterprise is permitted to have under PRC law. The various applications could be time-consuming and their outcomes may be uncertain. Concurrently with the loans, we might have to make capital contributions to these subsidiaries to maintain the statutory minimum registered capital and total investment ratio, and such capital contributions involve uncertainties of their own, as discussed below. Furthermore, even if we make loans to our PRC subsidiary that do not exceed their current maximum amount of borrowings, we will have to register each loan with SAFE or its local counterpart for the issuance of a registration certificate of foreign debts. In practice, it could be time-consuming to complete such SAFE registration process.
  Any loans we make to our PRC affiliated entity, which is treated as a PRC domestic company rather than a foreign-invested enterprise under PRC law, are also subject to various PRC regulations and approvals. Under applicable PRC regulations, international commercial loans to PRC domestic companies are subject to various government approvals.
  We cannot assure you that we will be able to complete the necessary government registrations or obtain the necessary government approvals on a timely basis, if at all, with respect to future loans by us to our PRC subsidiary or PRC affiliated entity or with respect to future capital contributions by us to our PRC subsidiary. If we fail to complete such registrations or obtain such approvals, our ability to capitalize or otherwise fund our PRC operations may be negatively affected, which could adversely and materially affect our liquidity and our ability to fund and expand our business.
  Restrictions on currency exchange may limit our ability to utilize our revenues effectively and the ability of our PRC subsidiary to obtain financing.
 Substantially all of our revenues and operating expenses are denominated in Renminbi (RMB). Restrictions on currency exchange imposed by the PRC government may limit our ability to utilize revenues generated in Renminbi to fund our business activities outside China, if any, or expenditures denominated in foreign currencies. We have been informed by our PRC counsel that under current PRC regulations Renminbi may be freely converted into foreign currency for payments relating to “current account transactions,” which include among other things dividend payments and payments for the import of goods and services, by complying with certain procedural requirements. Our PRC subsidiary may also retain foreign exchange in their respective current account bank accounts, subject to a cap set by SAFE or its local counterpart, for use in payment of international current account transactions.
  34
  ITEM 1B. UNRESOLVED STAFF COMMENTS.
 
  ITEM 2.          PROPERTIES
  Our headquarters in the PRC are located at 4-5/F, Xingke Building, 441 Huangshanlu, Hefei, Anhui, China. These offices are owned by our President and are leased to us rent free. The lease arrangement is month to month. If rent were charged for this space, it would be $3,591 per month.
  All of the Company’s schools rent classroom, office, and dormitory space under operating leases.  There are leases for ten facilities at these schools.  Eight of these leases expire more than one year after December 31, 2012. Future rent for these leases is presented below:
  2013

$
1,307,5112014


1,004,8892015


958,5222016


858,5132017


797,030
  ITEM 3.          LEGAL PROCEEDINGS
  Neither the Company nor any of its officers are involved in or contemplating any legal proceedings.
  ITEM 4.  MINE SAFETY DISCLOSURE.
  Not applicable.
  35




PART II
  ITEM 5.          MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
  Market Information
  Our common stock currently trades on the Pink Sheets’ OTC-QB Market under the symbol “WIEI”. Prior to October 2, 2012, our common stock was not publicly traded. The table below sets forth, for the fiscal quarters indicated, the high and low bid prices per share of our common stock as reflected on the OTCBB. The quotations represent inter-dealer prices without adjustment for retail markups, markdowns or commissions, and may not necessarily represent actual transactions.
  Quarterly Period

High

LowFiscal year ended December 31 2012:Fourth Quarter

2.01

0.76
  Quarterly Period

High

LowFiscal year ended December 31 2013:First Quarter

0.60

0.20
  Shareholder Matters
  As of March 31, 2013, there are 1,849 holders of record of our common stock.
  Dividends.
  While there are no restrictions in our articles of incorporation or bylaws that prevent us from declaring dividends, we have not paid or declared any dividends on our common stock and we do not anticipate paying dividends on our common stock for the foreseeable future.
  Equity Compensation Plan Information
  During fiscal year 2011 and 2012, no options have been granted under an Equity Compensation Plan or any other similar plan.
  Recent Sales of Unregistered Equity Securities and Purchases of Equity Securities by the Issuer or its Affiliates
  During the fiscal year ended December 31, 2012, there we no sales of unregistered equity securitiesnor were there purchases of outstanding equity securities by the Company or its affiliates.
  ITEM 6.          SELECTED FINANCIAL DATA.
  Not applicable
  ITEM 7.          MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
  The following discussion and analysis of the results of operations and financial condition of the Company for the fiscal years ended December 31, 2012 and 2011, should be read in conjunction with the notes to the financial statements that are included elsewhere herein. The consolidated financial statements presented herein (and to which this discussion relates) reflect the results of operations of the company, its subsidiaries, and its variable interest entities, for the fiscal years ended December 31, 2012 and 2011. Our discussion includes forward-looking statements based upon current expectations that involve risks and uncertainties, such as our plans, objectives, expectations and intentions. Actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of a number of factors. We use words such as “anticipate,” “estimate,” “plan,” “project,” “continuing,” “ongoing,” “expect,” “believe,” “intend,” “may,” “will,” “should,” “could,” and similar expressions to identify forward-looking statements. We undertake no obligation to revise or update any forward-looking statements in order to reflect any event or circumstance that may arise after the date of this report, except as required by law. Readers are urged to carefully review and consider the various disclosures made throughout the entirety of this
 
 36
 
 quarterly report, which are designed to advise interested parties of the risks and factors that may affect our business, financial condition, results of operations and prospects.
  COMPANY OVERVIEW
  Organizational History
  Wonder International Education & Investment Group Corporation (“US Wonder”) is a US holding company, incorporated in Arizona on April 21, 2008. On November 1, 2010, US Wonder acquired all of the outstanding capital stock of Anhui Lang Wen Tian Cheng Consulting & Management Co., Ltd. (“WFOE”), a Chinese company pursuant to the terms of a share exchange agreement.  WOFE is a wholly owned subsidiary of US Wonder.  On November 3, 2010, WFOE entered into a series of agreements with Anhui Wonder Education and Management Company, Ltd, a PRC company (“China Wonder”) including a Voting Right Proxy Agreement, Option Agreement, Equity Pledge Agreement, Consulting Services Agreement and Operating Agreement. The above WOFE arrangement was implemented by the Company to comply with the Merger and Acquisitions regulations in the PRC, which among other items, limits ownership of PRC companies by foreigners. China Wonder wholly owns seven separate vocational training schools in seven provinces in China.  These schools are now famous non-governmental vocational education institutions in China. Wonder’s core business is to provide IT education. China Wonder’s seven (7) vocational schools are in the following provinces of China: Anhui, Jiangsu, Zhejiang, Fujian, Henan, Hubei and Liaoning.  Through our ownership of WFOE, we control China Wonder and the schools and have the ability to control any income produced by China Wonder.
  Our United States offices are located at 8040 E. Morgan Trail, #18, Scottsdale, AZ 85258 and our phone number is 480-966-2020. Our PRC headquarters are located at 4-5/F, Xingke Building, 441 Huangshanlu, Hefei, Anhui, China and our phone number is 86-0551-3687892.
  37
 
 Business Introduction
  China Wonder owns and operates seven separate vocational training schools located in seven provinces in China, namely Anhui, Jiangsu, Zhejiang, Fujian, Henan, Hubei and Liaoning. These schools are non-governmental vocational education institutions in China. Wonder’s core business is to provide IT education. It also provides job placement services to its students at no charge through its 12 employment centers located nationwide.
  Summarized balance sheet information of the operating companies follows.  The financial performance and cash flows of the Company are aligned with those of the WFOE and the operating companies.  The Company controls the operations of the operating companies and their cash flows through the WFOE, which effects control over those operations through the various agreements which are described in Note 1 to the financial statements.  The financial position, financial performance, and cash flows of the Company are totally dependent on the results produced by the operating companies.
 China Wonder






















Exchange Rate:Balance sheet summary by school
























6.3161For the year ended December 31, 2012In RMBCHINA






RMB


USDSCHOOL

LN

HB

JS

ZJ

FJ

HN

AH

WONDER

TOTAL

ADJUSTMENTS


TOTAL


TOTALCURRENT ASSETS


1,098,774


452,617


730,300


2,058,044


241,656


620,435


12,053,411


56,424,585


73,679,822


(38,555,850
)


35,123,972



5,561,022FIXED ASSETS


3,200,147


2,202,726


4,912,246


6,769,632


1,080,196


5,692,297


48,606,138


377,029


72,840,411






72,840,411



11,532,498OTHER ASSETS























240,000,000


240,000,000

-



240,000,000



37,998,132TOTAL ASSETS


4,298,921


2,655,343


5,642,546


8,827,676


1,321,852


6,312,732


60,659,549


296,801,614


386,520,233


(30,555,850
)


347,964,383



55,091,652CURRENT LIABILITIES


3,744,895


1,026,770


3,499,242


6,452,169


769,769


3,462,354


13,353,641


23,373,897


55,682,737


38,262,463



93,945,200



14,873,925TOTAL LIABILITIES


3,744,895


1,026,770


3,499,242


6,452,169


769,769


3,462,354


13,353,641


23,373,897


55,682,737


38,262,463



93,945,200



14,873,925EQUITY


554,026


1,628,573


2,143,304


2,375,506


552,083


2,850,379


47,305,909


273,427,716


330,837,496


(76,818,313
)


254,019,183



40,217,727TOTAL LIABILITIES ANDEQUITY


4,298,921


2,655,343


5,642,546


8,827,675


1,321,852


6,312,733


60,659,550


296,801,613


386,520,233


(38,555,850
)


347,964,383



55,091,652
 Results of Operations for the Year Ended December 31, 2012 Compared to Year Ended December 31, 2011.
  The following tables and related discussions set forth key components of Wonder’s results of operations for the periods above indicated in dollars.
  2012


2011Revenue

$
18,913,562


$
14,839,050Cost of Sales


6,102,554



5,406,587Gross Profit


12,811,008



9,432,463
  Our revenues for the year 2012 grew to $18,913,562 from $14,839,050 for the comparable 2011 period. The  increase of $4,074,512 or 27.5% is due to an aggressive marketing and promotional campaign. The growth of Company sales, although somewhat inhibited by the worldwide economic recession, occurred at all seven Company schools.
  Selling and Administrative Expenses

$
6,097,866



5,357,099Operating Income

$
6,713,142



4,075,364
  38
  Selling and Administrative Expenses (which includes advertising, office expense, salaries and benefits, travel and promotion, technical support and related overhead) for 2012 were $6,097,866, which represents an increase of $740,767 or 13.8% from the expenses of $5,357,099 from the prior year.  Major items included in Selling and Administrative Expenses were the following:
  2012

2010Advertising

$
3,165,236

$
2,534,213Salaries and benefits


758,613


759,324Sales tax


675,065


649,732Recruitment Expense


732,313


819,261
  During the 2012 period, we continued with our plan to substantially increase our advertising and promotional efforts which began in 2009. As a result, during the 2012 period, we incurred $3,165,236 in advertising costs, an increase of $631,023 or 24.9% from $2,534,213 for the prior period. In spite of our aggressive marketing program, we held our other 2012 costs to approximately the same levels of the previous year.
  39
 
 Operating Income (Loss)
  We generated operating income during 2012 of $6,713,142 compared with $4,075,364 for the 2011 period.  The reasons for this increase are discussed above.
  Other Income and Expenses
  The Company President controls a number of Chinese enterprises which are involved in the field of education and in other fields.  Advances were made to several of these companies during the years 2012 and 2011.  In addition, advances were received from these companies during the year 2012.  Except as stated below, all advances made or received were re-paid as of December 31, 2012. The enterprises involved are as follows:
  Wonder University
Wonder Advertisement Co.Wonder Electronics Corp.
Zhengzho IT Co.Ri Hai
Wonder Vehicle Repair SchoolYa Wei
Wonder Agricultural Co.Sen Hai
Kemao Co.
  We did not earn interest on any advances during the 2012 period, however we earned $1,021,656 in interest income during 2011. Interest income in 2011 relates to advances that we made to Wonder University, an entity owned by our Chairman.  Since our formation, we have had a cooperative relationship with Wonder University.  Both entities are in the business of providing educational services to young people, but they serve entirely different markets.  The university provides those services to students who are eligible to attend a university, while we provide such services to students who have not and will not achieve eligibility for university attendance.  Wonder University is a fully accredited private university.  We are a private enterprise providing service to a specialized market.  Although different in the student bodies served, they are similar in that they provide educational services focusing principally on informational technology. In addition, there is an occasional sharing of physical facilities and interaction among the teaching staff.  The outstanding balance of advances to Wonder University was $37,878,788 at December 31, 2011, and the parties agreed to  convert the outstanding balance to a 7% equity investment in the Wonder University at December 31, 2011.  As of December 31, 2012, there were no outstanding loans or advances to Wonder University.
  During 2010, we began charging interest on these advances to Wonder University. During 2011, the interest rate that we charged was 5.85%.  The interest charge for 2011 was paid in January 2012 and is shown as receivable from related party on the balance sheet.  Interest income was nil in 2012, compared with $1,021,656 in 2011.  Dividend income was $590,095 for the 2012 period which results from our equity ownership in Wonder University. Since we acquired our equity interest in Wonder University on December 31, 2011, we were not entitled to receive dividends (nor were any paid) in 2011. Other income for the 2012 year was $15,524 compared with $452,500 in 2011. Interest expense was $296,849 in 2012, compared with $211,619 in 2011, reflecting an increase in the rates of interest charged by local banks. Other expense,which relates primarily to penalties on unpaid business taxes was $495,133 in 2012, compared with $220,054 in the 2011 period.
  Foreign currency translation adjustment
  The foreign currency translation adjustment, which is the impact of different foreign exchange rates applied to balance sheet accounts, versus those applied to income statement accounts, was a gain of $109,668 for the 2012 period compared with a gain of $2,030,842 for the 2011 period. The reduction reflects a reduced rate of change during 2012 in the exchange rate, of the US Dollar against the Yuan (RMB).
  Total Comprehensive Income
  For the 2012 period, we had a total comprehensive income of $6,636,447 compared with a total comprehensive income for 2011 of $7,148,689.  Total comprehensive income is the combined sum of net income and comprehensive income.  The reduction during the 2012 occurred in spite of significant improvement in net income and is due to sharply reduced other comprehensive income from the prior period, principally foreign currency adjustment.
  Income Per Share.
  Income applicable to common stock holders was $0.33 per share in 2012 compared with $0.26 per share during 2011.  The change in income per share is reflective of the earnings increase as the number of common shares subscribed has not changed.
  40
  Current trends in the industry
  We have experienced a consistent trend of sales increases due to expansion at our marketing effort and increased government support for technical training.  We expect this trend to continue and, in order for us to retain our market share and increase and surpass revenue levels previously achieved, we will continue our aggressive marketing effort.  We will also focus on maintaining good government relations by providing what we believe to be a higher level and quality of service. We wish to attract new students by providing this level of service consistently.
  We have been able to retain our market share and expect to increase our student base and level of sales with our existing methods of marketing, sales staff and the service we provide. We believe that service is the most important factor in our marketing mix. As mentioned above “Trends in the Market”, with new developments in rural areas, the PRC will be supporting the training we provide.  We anticipate such developments will increase our sales significantly.
  Liquidity and Capital Resources
  As of December 31, 2012, we had a working capital deficit of $9,312,903, compared to a working capital deficit of $12,348,090 as of December 31, 2011. The decrease is due principally to an increase in related party receivables, which represent advances made for anticipated purchases of computer equipment and furniture, and a reduction in the outstanding balance of our short term bank loans.
  41
  Sources of Capital
  We expect our revenues generated from operations to cover our projected working capital needs; however, if additional capital is needed, we will explore financing through options such as shareholder loans. Shareholder loans are without stated terms of repayment. We have no formal agreement that ensures that we will receive such loans. In the event shareholder loans are not available, we may seek long or short term financing from local banks.
  We have credit facilities with two local banks.   The balances at December 31, 2012 and 2011 were $2,058,232 and $3,630,051, respectively.  One of the loans ($474,977) bears interest at 7.8%; a second loan ($1,583,255) bears interest at 130% of the base rate of the People’s Bank of China.
  Plans for Expansion
  We do not know of any trends, events or uncertainties that are likely to have a material impact on our short-term or long-term liquidity other than those factors discussed above.
  Material Commitments
  We do not have any material commitments for capital expenditures.
  Seasonal Aspects
  Our business is seasonal in that sales are particularly low in the summer months, due to school vacations.  Sales are usually higher at the start of new semesters.
  Off Balance Sheet Arrangements
  We have no off balance sheet financing arrangements.
  ITEM 7A.       QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
  Not Applicable.
  ITEM 8.          FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
  The audited financial statements of the Company as required under this Item 8 follow the signature pages hereof.
  ITEM 9.          CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
  None.
  42
  ITEM 9A.       CONTROLS AND PROCEDURES
  Evaluation of Disclosure Controls and Procedures
  An evaluation of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) or 15d-15(e) under the Securities Exchange Act of 1934) was carried out by us under the supervision and with the participation of our chief executive officer and chief financial officer. Based upon that evaluation, our chief executive officer and chief financial officer concluded that as of December 31, 2012, our disclosure controls and procedures were effective to ensure (i) that information we are required to disclose in reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (ii) that such information is accumulated and communicated to management, including our chief executive officer, in order to allow timely decisions regarding required disclosure.
  Management’s Annual Report on Internal Control Over Financial Reporting
  Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act). Under the supervision and with the participation of our management, including our chief executive officer who serves as our principal executive officer and principal financial officer, we conducted an assessment of the effectiveness of our internal control over financial reporting. In making this assessment, we used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) in Internal Control — Integrated Framework. Based on management’s assessment based on the criteria of the COSO, we concluded that, as of December 31, 2012, the Company’s internal control over financial reporting is effective.
  Our internal control system was designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles in the U.S. Our internal control over financial reporting includes those policies and procedures that:
  (i)  pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company;
  (ii)  provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the U.S., and that receipts and expenditures of the Company are being made only in accordance with authorization of management and directors of the Company; and
  (iii)  provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on our consolidated financial statements. 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 the Dodd-Frank Wall Street Reform and Consumer Protection Act, which permits us to provide only management’s report in this annual report.
  Changes in Internal Control over Financial Reporting
  There were no changes in our internal control over financial reporting during the fourth fiscal quarter ended December 31, 2012 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
  ITEM 9B.       OTHER INFORMATION
  None.
  43
 
 PART III
  ITEM 10.        DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
  The following table sets forth the names and ages of our current directors and executive officers, their principal offices and positions and the date each such person became a director or executive officer.  The Board of Directors elects our executive officers annually.  Our directors serve one-year terms or until their successors are elected and accept their positions.  The executive officers serve terms of one year or until their death, resignation or removal by the Board of Directors.  There are no family relationships or understandings between any of the directors and executive officers.  In addition, there was no arrangement or understanding between any executive officer and any other person pursuant to which any person was selected as an executive officer.
  Name of Director or Executive Officer
Age
Current Position and Office
Date Position StartedChungui Xie
47
Chairman of the Board
April 17, 2008Xiang Wei
45
Chief Executive Officer and Director
May 1, 2008Wenming Xie
45
Chief Financial Officer and Director
May 1, 2008
  Chungcui Xie
  Mr. Xie Chungui, is the founder and chairman of US Wonder and founder of China Wonder.  Mr. Xie is the president of Li Hongzhang Research Society, honorary president of Liu Mingchuan Research Society, general director of Xu Beihong Education Foundation, branch director of China Association for Promoting Democracy in Hefei, National Peoples Congress member in Hefei, vice-president of Anhui Computer Industry trade association and executive member of Anhui Association of Industry and Commerce.
  Mr. Xie is constantly blazing new trails, exploring and perfecting the Wonder-style teaching method. He motivates Wonder’s management to emphasize high quality teaching to their students. Mr. Xie founded the first computer school in Anhui and invented the now famous nationally “Wonder 1+3” teaching method. He is recognized as the leader in IT education in China. A few short years later since its founding, the network of China Wonder computer education had expanded to East China, Central China, North China, Northeast China and many other places. Mr. Xie currently co-operates with U.S. Microsoft, the United States sector Networks, Canada Quebec Board of Education, Indian Asian Institute of Information Technology, Charles-Tudor University in Australia, South Korea South Hanba University, Shuntianxiang University and many other famous universities.
  Mr. Xie is a man of strong social responsibility and has the pioneering and innovative spirits. He supports China’s plan for science and education; he has successfully demonstrated a successful civilian-run vocational institution. In the years 2004 and 2005, he was awarded the honorary title of “VIP of the Time in China Computer Education” in Beijing. In December 2004, he was honored as “The Most Influential Figure of China Private Education” by Education Association of China. From 2005 to 2007, he had been received the titles of “20 Years’ Special Contribution Award of Anhui Consumer Rights Protection” and “Chinese Leader of Huizhou merchants”.
  Mr. Xie’s role as the founder of the Company led to the conclusion he should serve as a director of the Company.
  44
  Xiang Wei
  Mr. Wei Xiang (Frank Wei) has been the CEO of US Wonder since inception and China Wonder since April 2005.
  Mr. Wei graduated from Anhui University’s Department of Chemistry in July 1991 and then worked for the university until April 2005. From July 1991 to August 1996, he taught in the chemistry department of AU; in August 1996, he moved to Office of Educational Administration in A.U., responsible for the management of teaching and laboratory work. From August 1998 to April 2005, Mr. Wei had participated in the construction work of experimental materials and equipment management department in Anhui University. He took charge of the planning, design and construction work for the new campus center. Mr. Wei has a post graduate degree in engineering and master of Economic Laws.
  While working full time at his various jobs, Mr. Wei had hosted computer related education programs at Hefei radio station, Hefei television station and Anhui People Radio Station. In July 1995, he originated the first computer topic program Computer Time, which lasted five consecutive sessions and had a great influence in the field of IT broadcasting. Mr. Wei had earlier participated in the curriculum design as well as teaching planning, market planning and publicity drives of many local vocational schools. He has a good understanding and rich management experience in China’s current IT training market.
  Mr. Wei’s extensive background and broad experience with the Company led to the conclusion he should serve as a director of the Company.
  WenMing Xie
  Mr. Xie received his Bachelor of Science degree in 1989 from Fudan University.  From 1989 to 1999, he worked for the state government in Anhui as accountant. Since 1999, Mr. Xie has worked for Anhui Wonder Vocational School as vice principal and chief accountant and certified public accountant. He became chief financial officer of Wonder in February 3, 2006.
  We believe that Chungui Xie, as chairman, Xiang Wei as chief executive officer, and WenMing Xie, as chief financial officer, are each qualified to and should be a director of Wonder. All three parties, in particular Mr. Chungui Xie, have both been instrumental in establishing, developing and operating the business of Wonder.
  Mr. Xie’s extensive background and broad experience with the Company led to the conclusion he should serve as a director of the Company.
  Our directors are appointed for a one-year term to hold office until the next annual general meeting of our shareholders or until removed from office in accordance with our bylaws. Our officers are appointed by our board of directors and hold office until removed by the board. We have no significant employees other than the officers and directors described herein.
  There are no family relationships between any of our officers and directors.
  Involvement in Certain Legal Proceedings
  To the knowledge of the Company, none of its executive officers or directors has been personally involved in any of the following:
 (1) A petition under the Federal bankruptcy laws or any state insolvency law was filed by or against, or a receiver, fiscal agent or similar officer was appointed by a court for the business or property of such person, or any partnership in which he was a general partner at or within two years before the time of such filing, or any corporation or business association of which he was an executive officer at or within two years before the time of such filing;
 (2) Such person was convicted in a criminal proceeding or is a named subject of a pending criminal proceeding (excluding traffic violations and other minor offenses);
 (3) Such person was the subject of any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining him from, or otherwise limiting, the following activities:
 (i) Acting as a futures commission merchant, introducing broker, commodity trading advisor, commodity pool operator, floor broker, leverage transaction merchant, any other person regulated by the Commodity Futures Trading Commission, or an associated person of any of the foregoing, or as an investment adviser, underwriter, broker or dealer in securities, or as an affiliated person, director or employee of any investment company, bank, savings and loan association or insurance company, or engaging in or continuing any conduct or practice in connection with such activity;
 (ii) Engaging in any type of business practice; or
 (iii) Engaging in any activity in connection with the purchase or sale of any security or commodity or in connection with any violation of Federal or State securities laws or Federal commodities laws;
 (4) Such person was the subject of any order, judgment or decree, not subsequently reversed, suspended or vacated, of any Federal or State authority barring, suspending or otherwise limiting for more than 60 days the right of such person to engage in any activity described in paragraph (f)(3)(i) of this section, or to be associated with persons engaged in any such activity;
  45
  (5) Such person was found by a court of competent jurisdiction in a civil action or by the Commission to have violated any Federal or State securities law, and the judgment in such civil action or finding by the Commission has not been subsequently reversed, suspended, or vacated;
 (6) Such person was found by a court of competent jurisdiction in a civil action or by the Commodity Futures Trading Commission to have violated any Federal commodities law, and the judgment in such civil action or finding by the Commodity Futures Trading Commission has not been subsequently reversed, suspended or vacated;
 (7) Such person was the subject of, or a party to, any Federal or State judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or vacated, relating to an alleged violation of:
 (i) Any Federal or State securities or commodities law or regulation; or
 (ii) Any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order; or
 (iii) Any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or
 (8) Such person was the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the Exchange Act (15 U.S.C. 78c(a)(26))), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act (7 U.S.C. 1(a)(29))), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member.
  Code of Ethics
  The Company has not adopted a Code of Ethics but intends to do so in the near term.
  Audit Committee and Financial Expert
  Our Board of Directors currently serves as our audit committee.  Our board members are not “independent” in accordance with rule 4200(a)(14) of the Nasdaq Marketplace Rules. Our board of directors does not have an “audit committee financial expert,” within the meaning of that phrase under applicable regulations of the Securities and Exchange Commission because it has no audit committee and is not required to have an audit committee because its securities are not listed on any exchange. The board of directors believes that each member is financially literate and experienced in business matters and is capable of (1) understanding generally accepted accounting principles (“GAAP”) and financial statements, (2) assessing the general application of GAAP principles in connection with our accounting for estimates, accruals and reserves, (3) analyzing and evaluating our financial statements, (4) understanding our internal controls and procedures for financial reporting, and (5) understanding audit committee functions, all of which are attributes of an audit committee financial expert. However, the board of directors believes that no audit committee member has obtained these attributes through the experience specified in the SEC’s definition of “audit committee financial expert.” Further, as is the case with many small companies, it would be difficult for us to attract and retain board members who qualify as “audit committee financial experts,” and competition for such individuals is significant. The board of directors believes that its current members are able to fulfill its role under SEC regulations despite not having a designated “audit committee financial expert.”
  Compensation of Directors
  No member of our Board of Directors received any compensation for his services as a director during the fiscal year ended December 31, 2012.
  Compensation Committee Interlocks and Insider Participation
  During the fiscal year 2012, we did not have a standing compensation committee. Our Board of Directors was responsible for the functions that would otherwise be handled by the compensation committee. All directors participated in deliberations concerning executive officer compensation, including directors who were also executive officers. None of our executive officers has served on the Board of Directors or compensation committee (or other committee serving an equivalent function) of any other entity, any of whose executive officers served on our Board or Compensation Committee.
  46
  ITEM 11.    EXECUTIVE COMPENSATION
  The following table sets forth the total compensation paid to or accrued, during the fiscal years ended December 31, 2009 to 2012 to the Company’s highest paid executive officers.
  Summary Compensation Table
 Name and

Position
YEAR
Salary

($) (1)
Bonus

($)
Stock

Awards ($)
Option

Awards
Incentive

Plan

Compensation ($)
Nonqualified

Deferred

Compensation

Earnings ($)
All Other

Compensation

($)Chung Gui Xie,
2009
118,000
0
0
0
0
0
0Chairman
2010
118,000
0
0
0
0
0
02011
161,500
0
0
0
0
0
02012
198,600
0
0
0
0
0
0Xiang Wei,
2009
59,000
0
0
0
0
0
0Chief Executive
2010
59,000
0
0
0
0
0
0Officer
2011
112,900
0
0
0
0
0
02012
146,500
0
0
0
0
0
0Wen Ming Xie,
2009
51,500
0
0
0
0
0
0Chief Financial
2010
51,500
0
0
0
0
0
0Officer
2011
80,600
0
0
0
0
0
02012
115,600_
0
0
0
0
0
0
  (1)
All amounts are expressed in US Dollars based upon the average rate of rate of exchange during each year of the RMB to the US Dollar.
  Employment Agreements
  We have separate employment agreement with each of our Chairman, Chief Executive Officer and Chief Financial Officer. On February 1, 2008, we entered into a month-to-month employment agreement with our Chairman, which provides for a salary according to the table above. On October 15, 2009, we entered into an employment agreement with our Chief Executive Officer, which provides for a salary according to the table above. The agreement expires on October 15, 2014. On February 3, 2006, we entered into an employment agreement with our Chief Financial Officer, which provides for a salary according to the table above.  The agreement expired on February 3, 2011 and was renewed on February 4, 2011 with an expiration date of February 3, 2014.
  Other than as stated herein, there are no agreements or understandings for any of our executive officers or directors to resign at the request of another person and no officer or director is acting on behalf of nor will any of them act at the direction of any other person. We have no employment or other compensation agreements with our officers or directors.
  47
  Grants of Plan-Based Awards
  No plan-based awards were granted to any of our named executive officers during the fiscal year ended December 31, 2012.
  Outstanding Equity Awards at Fiscal Year End
  No unexercised options or warrants were held by any of our named executive officers at December 31, 2012. No equity awards were made during the fiscal year ended December 31, 2012.
  Option Exercises and Stock Vested
  No options to purchase our capital stock were exercised by any of our named executive officers, nor was any restricted stock held by such executive officers vested during the fiscal year ended December 31, 2012.
  Pension Benefits
  No named executive officers received or held pension benefits during the fiscal year ended December 31, 2012.
  Nonqualified Deferred Compensation
  No nonqualified deferred compensation was offered or issued to any named executive officer during the fiscal year ended December 31, 2012.
  Potential Payments Upon Termination or Change in Control
  Our executive officers are not entitled to severance payments upon the termination of their employment agreements or following a change in control.
  48
 
 ITEM 12.     SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
  The following table sets forth certain information, as of April 9, 2013, based on 20,000,000 shares issued and outstanding, withrespect to the beneficial ownership of the outstanding common shares by (i) each of our executive officers and directors; (ii) our directors and executive officers as a group; and (iii) any holder of more than five (5%) percent. Except as otherwise indicated, each of the stockholders listed below has sole voting and investment power over the shares beneficially owned.  Except as indicated, the address for each party is 4-5/F, Xingke Building, 441 Huangshanlu, Hefei, Anhui, China,  the address of our PRC headquarters.
  Name of Beneficial Owner
Number of shares

Of Common Stock

Beneficially Owned(1)


Percent of

Class %Officers and DirectorsXie Chungui – Chairman


16,600,000



83%Xiang Wei - Chief Executive Officer and Director


0



0WenMing Xie - Chief Financial Officer and Director


0



0All officers and directors as a group (3 persons)


16,600,000



05% or greater shareholdersEastbridge Investment Group Corp.(2)


2,499,769



12.5%
  (1)
Beneficial Ownership is determined in accordance with the rules of the SEC and generally includes voting or investment power with respect to securities. Each of the beneficial owners listed above has ownership of and voting power and investment power with respect to our Ordinary Shares or Preferred Shares. For each beneficial owner above, any options exercisable within 60 days have been included in the denominator.(2)
The address of this party is 8040 E. Morgan Trail, #18, Scottsdale, AZ 85258. Norm Klein is the Chief Financial Officer of Eastbridge Investment Group Corp.
 Equity Compensation Plan Information
  During fiscal year 2012 and 2011, no options have been granted under an Equity Compensation Plan or any other similar plan.
  49
 
 ITEM 13.        CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
  On April 28, 2008, we entered into an agreement with Eastbridge Investment Group Corp. (“Eastbridge”) pursuant to which Eastbridge agreed to provide advisory assistance and to defray certain legal and auditing costs for the Company in becoming a publicly traded company in the United States, among other services. In exchange, Eastbridge received 3,400,000 share of our common stock.
  The Company President controls a number of Chinese enterprises which are involved in the field of education and in other fields.  Advances were made to several of these companies during the years 2011 and 2010.. The enterprises involved are these:
  Wonder University
Wonder Advertisement Co.Wonder Electronics Corp.
Zhengzho IT Co.Ri Hai
Wonder Vehicle Repair SchoolYa Wei
Wonder Agricultural Co.Sen Hai
Kemao Co.
  In addition, advances were received from these companies during the year 2012.  Activity in these accounts during the years 2012 and 2011 is summarized below.
  Advances To


Advances FromBalances, December 31, 2010

$
28,282,424


$
-Advances during 2011


43,824,741



-Repayments during 2011


(35,632,030
)


-Exchange of balance of advances for equity position in Wonder University


(37,878,788
)


-Effect of changes in foreign currency exchange rate (A)


1,403,653



-Balances, December 31, 2011


-



-Advances during 2012


15,465,771



12,100,030Repayments during 2012


(12,235,622
)


12,100,030Exchange of balance of advances for equity position in Wonder University (A)


1,913



-Balance, December 31, 2012

$
3,232,062


$
-
  (A)  The accounting records are kept in the Chinese currency (RMB) and the currency exchange rate has changed during these periods.
  A substantial amount of the 2012 advances to affiliates were made to secure purchases of computer equipment and furniture from two affiliates (see below).  Those purchases continued through the end of 2012 and the balances that remained at year end were advances to secure future purchases from those two affiliates.
  In December 2011, the balances due from each of the debtor entities were consolidated and Wonder University assumed responsibility for all of the amounts due to the Company from these related parties. At that point, the amount due to the Company totaled $37,878,788. Shortly thereafter, the Company exchanged this receivable for an equity interest of approximately 7% in Wonder University. Wonder University is a for profit, accredited university with 2012 revenue of $16,559,922 and net income of $8,552,000. These amounts were obtained from unaudited financial statements of the University that were furnished to the Company.
  The Company’s proportional share of the 2012 earnings of Wonder University was $590,445.  That amount was paid to the Company as a dividend.  The dividend was declared in December 2012 and paid to the Company in January 2013.  It was recognized as income during 2012 and is included in miscellaneous receivables on the balance sheet.
  50




Other than as stated herein, none of the following persons has any direct or indirect material interest in any transaction to which we are a party since our last fiscal year or in any proposed transaction to which we are proposed to be a party:
 
 (i).   Any of our directors or officers;
 (ii).  Any proposed nominee for election as our director
 (iii). Any person who beneficially owns, directly or indirectly, shares carrying more than 10% of the voting rights attached to our common stock
 (iv). Any relative or spouse of any of the foregoing persons, or any relative of such spouse, who has the same house as such person or who is a director or officer of any parent or subsidiary of our company.
 ITEM 14.       PRINCIPAL ACCOUNTING FEES AND SERVICES
 
 The following table sets forth fees billed to us byJeffrey & Company, Certified Public Accountants,  our independent registered public accounting firm, during the fiscal years ended December 31, 2012 and December 31, 2011 for: (i) services rendered for the audit of our annual financial statements and the review of our quarterly financial statements; (ii) services by our independent registered public accounting firms that are reasonably related to the performance of the audit or review of our financial statements and that are not reported as Audit Fees; (iii) services rendered in connection with tax compliance, tax advice and tax planning; and (iv) all other fees for services rendered.
 
 Fiscal year
ending


Fiscal year
endingDecember 31,
2011


December 31,
2012Audit Fees

$
60,000



60,000Audit Related Fees


NIL



NILTax Fees


NIL



NILAll Other Fees

$
NIL



NIL
 
 Audit Committee Policies
 
 The Board of Directors is solely responsible for the approval in advance of all audit and permitted non-audit services to be provided by the independent auditors (including the fees and other terms thereof), subject to the de minimus exceptions for non-audit services provided by Section 10A(i)(1)(B) of the Exchange Act, which services are subsequently approved by the Board of Directors prior to the completion of the audit. None of the fees listed above are for services rendered pursuant to such de minimus exceptions.
 
 51
 
 PART IV
 
 Item 15.  Exhibits, Financial Statement Schedules.
 
 EXHIBITS
 
 3.1  Certificate of Incorporation filed with State of Arizona, April 17, 2008*
 3.2  Bylaws*
 10.2  Intentionally Omitted
 10.3  Intentionally Omitted
 10.4  Intentionally Omitted
 10.5  Loan Agreement with Shanghai Pudong Development Bank, dated July 6, 2009 (2)
 10.6  Loan Agreement with Huishang Bank (2)
 10.7  Loan Agreement with Hangzhou Bank (2)
 10.8  Common Stock Exchange Agreement between Wonder China and Seven Schools, dated July 13, 2010 (2)
 10.9  Consulting Agreement between the Company and Wonder China, dated April 26, 2010 (2)
 10.10  Capital Raise Agreement, dated March 9, 2010 (3)
 10.12 Equity Pledge Agreement by and among WOFE, Wonder China, Anhui Computer Training School, Hubei Computer Training School, Jiangson Computer Training School, Zhejiang Computer Training School, Henan Computer Training School, Fujian Computer Training School, Liaoning Computer Training School, and Chun Gui Xie, dated November 3, 2010 (4)
 10.14 Consulting Services Agreement by and among WOFE, Wonder China, Anhui Computer Training School, Hubei Computer Training School, Jiangson Computer Training School, Zhejiang Computer Training School, Henan Computer Training School, Fujian Computer Training School, Liaoning Computer Training School, and Chun Gui Xie, dated November 3, 2010 (4)
 23.1 Consent of Independent Certified Public Accountant
 99.1  Audit Report of Anhui Wonder University of Information Engineering ("Wonder University"), Audited Financial Statements of Wonder University and Reconciliation Statement to US GAAP.
 *Filed with S-1 Registration Statement on December 9, 2009.
 (2) Filed as Exhibits to Amendment Number 4 to the Company’s S-1 Registration Statement on July 26, 2010.
 (3) Filed as an Exhibit to Amendment Number 6 to the Company’s S-1 Registration Statement on August 13, 2010.
 (4) Filed as an Exhibit to Amendment Number 7 to the Company S-1 Registration Statement on November 26, 2010
 
 52
  SIGNATURES
  In accordance with Section 12 of the Securities Exchange Act of 1934, the Registrant caused this report to be signed on the behalf by the undersigned, thereunto duly authorized.
  Wonder International Education &
Investment Group CorporationDate: July 22, 2013
By:
/s/ Xie ChunguiXie ChunguiChairman
  In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
 
 Date: July 22, 2013
By:
/s/ Xie ChunguiXie ChunguiChairman/Director
 
 
 Date: July 22, 2013
By:
/s/ Xiang WeiXiang WeiDirector and Chief Executive Officer
 
 
 Date: July 22, 2013
By:
/s/ Wen Ming XieWen Ming XieDirector and Chief Financial Officer
  53
  REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
  Board of Directors
 Wonder International Education & Investment Group Corporation
 
 We have audited the accompanying consolidated balance sheets of Wonder International Education & Investment Group Corporation as of December 31, 2012 and 2011, and the related consolidated statements of income and comprehensive income, changes in stockholders’ equity, and cash flows for the years ended December 31, 2012 and 2011. These financial statements are the responsibility of the Company management. Our responsibility is to express an opinion on these financial statements based on our audits.
 
 We conducted the audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate under the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. 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. We believe that our audits provide a reasonable basis for our opinion.
 
 In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Wonder International Education & Investment Group Corporation as of December 31, 2012 and 2011, and the results of its operations and cash flows for the years ended December 31, 2012 and 2011 in conformity with U.S. generally accepted accounting principles.
 
 /s/ Jeffrey & Company
 Jeffrey & Company, Certified Public Accountants
 April 15, 2013
 Wayne, New Jersey
 
 
 
 WONDER INTERNATIONAL EDUCATION & INVESTMENT GROUP CORPORATION
 CONSOLIDATED BALANCE SHEETS
 DECEMBER 31, 2012 AND 2011
  2012


2011ASSETSCurrent Assets:Cash

$
1,490,802


$
1,646,542Miscellaneous receivables


782,583



273,190Accrued interest receivable


-



11,515Related party receivable


3,232,062



1,040,750Other current assets


55,575



82,231Total current assets


5,561,022



3,054,228Fixed Assets:Building and related land rights


4,566,810



4,566,810Computers and related furniture and equipment


11,986,681



7,393,943Vehicles


1,005,257



963,077Total fixed assets


17,558,748



12,923,830Less accumulated depreciation


6,026,250



4,873,248Net fixed assets


11,532,498



8,050,582Other Assets:Investment in related party, at cost


37,998,132



37,878,788Total other assets


37,998,132



37,878,788Total Assets

$
55,091,652


$
48,983,598LIABILITIES AND STOCKHOLDERS’ EQUITYCurrent Liabilities:Bank loans payable

$
2,058,232


$
3,630,051Accounts payable


1,460,984



1,249,957Advanced tuition payments


8,841,163



8,387,527Accrued liabilities


395,671



617,490Taxes payable


2,117,875



1,517,293Total current liabilities


14,873,925



15,402,318Stockholders’ Equity:Common stock: authorized, 100,000,000 shares without par value; issued and outstanding, 20,000,000 shares


5,858,782



5,858,782Retained earnings


26,118,339



19,591,560Earnings appropriated for statutory reserves


2,929,391



2,929,391Accumulated other comprehensive income


5,311,215



5,201,547Total stockholders’ equity


40,217,727



33,581,280Total Liabilities and Stockholders’ Equity

$
55,091,652


$
48,983,598
  The accompanying notes are an integral part of these financial statements.
 
 F-2
 
 WONDER INTERNATIONAL EDUCATION & INVESTMENT GROUP CORPORATION
 CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
 FOR THE YEARS ENDED DECEMBER 31, 2012 AND 2011
  2012


2011Revenue

$
18,913,562


$
14,839,050Cost of Sales


6,102,554



5,406,587Gross Profit


12,811,008



9,432,463Selling and Administrative Expenses


6,097,866



5,357,099Operating Income


6,713,142



4,075,364Other Income and Expense:Interest income


-



1,021,656Dividend income


590,095



-Other income


15,524



452,500Interest expense


(296,849
)


(211,619
)Other expense


(495,133
)


(220,054
)Net income


6,526,779



5,117,847Other comprehensive income – foreign currency translation adjustments


109,668



2,030,842Total comprehensive income

$
6,636,447


$
7,148,689Income Per Share -Basic and Diluted

$
.33


$
.26Weighted average number of shares outstanding


20,000,000



20,000,000
  The accompanying notes are an integral part of these financial statements.
 
 F-3
 
 WONDER INTERNATIONAL EDUCATION & INVESTMENT GROUP CORPORATION
 CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
 For the Years Ended December 31, 2012, and 2011
  AccumulatedOtherCommon Stock


Statutory


Retained


ComprehensiveShares


Amount


Reserves


Earnings


Income


TotalBalance, December 31, 2010


20,000,000


$
5,858,782


$
2,929,391


$
14,473,713


$
3,170,705


$
26,432,591Net income for year














5,117,847







5,117,847Other comprehensive income


















2,030,842



2,030,842Balance, December 31, 2011


20,000,000



5,858,782



2,929,391



19,591,560



5,201,547



33,581,280Net income for year














6,526,779







6,526,779Other comprehensive income


















109,668



109,668Balance, December 31, 2012


20,000,000


$
5,858,782


$
2,929,391


$
26,118,339


$
5,311,215


$
40,217,727
  The accompanying notes are an integral part of these financial statements.
 
 F-4
 
 WONDER INTERNATIONAL EDUCATION & INVESTMENT GROUP CORPORATION
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 For the Years Ended December 31, 2012 and 2011
 
 2012


2011CASH FLOWS FROM OPERATIONS:Net income

$
6,526,779


$
5,117,847Adjustments to reconcile net income to net cash provided by operating activities:Charges not requiring the outlay of cash:Depreciation


1,136,975



946,202Changes in assets and liabilities:Decrease (increase) in interest receivable from related party


1,043,411



(1,021,659)Decrease (increase) in other receivables


81,864



(57,472)Increase in other current assets


(551,653
)


(61,649)Increases in other accounts payable


633,000



783,321Increase in advanced tuition payments


426,957



3,184,856Increases in taxes payable


506,894



493,872Increase (decrease) in accrued liabilities


(561,112
)


48,711Net Cash Provided By Operating Activities


9,243,115



9,434,029CASH FLOWS FROM INVESTING ACTIVITIES:Purchases of fixed assets


(4,591,480
)


(976,827
)Decrease in restricted cash


-



1,549,331Advances to related parties


(15,465,771
)


(43,843,834
)Repayments of advances to related parties


12,235,622



35,632,030Advances from related parties


12,100,030



-Repayments of advances from related parties


(12,100,030
)


-Net Cash Consumed By Investing Activities


(7,821,629
)


(7,639,300
)CASH FLOWS FROM FINANCING ACTIVITIES:Borrowings under short term loans


(1,582,319



3,563,461Repayment of loans and bank drafts


-



(5,112,791
)Net Cash Consumed By Financing Activities


(1,582,319
)


(1,549,330
)Effect on cash of exchange rate changes


5,093



62,827Net change in cash


(155,740
)


308,226Cash balance, beginning of period


1,646,542



1,338,316Cash balance, end of period

$
1,490,802


$
1,646,542
  The accompanying notes are an integral part of these financial statements.
 
 F-5




WONDER INTERNATIONAL EDUCATION & INVESTMENT GROUP CORPORATION
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER 31, 2012
  1. ORGANIZATION and BUSINESS
  Organization and Business of the Company
  The Company was organized in the state of Arizona on April 17, 2008, for the purpose of providing computer related IT education in The People’s Republic of China (PRC). On April 26, 2008, the Company entered into an agreement (the Agreement) under which 20,000,000 shares of its common stock were exchanged for all the equity interests of Anhui Wonder Education & Investment Management Corporation (China Wonder), a company incorporated in the PRC. This transaction was accounted for as a reverse merger, with China Wonder treated as the acquiring company. The Company had no assets or liabilities on the date of the merger, so no allocation of the purchase price was made.
  Business
  China Wonder was incorporated in the PRC, on April 1, 2008. Its operations are headquartered in the city of Hefei, which is the capital of Anhui province. It operates information technology schools through seven subsidiaries (see Note 2) in Hefei and in six other cities of the PRC. Each of the seven subsidiaries of China Wonder is licensed by local authorities to operate a school. Prior to the acquisition of China Wonder by the Company, the Company had no operating history and had no assets, liabilities, or equity. As a result of entering into the Agreement, the shareholders of China Wonder became shareholders of the Company.
  On November 1, 2010, the Company purchased a non-operating wholly owned foreign company, named Anhui Lang Wen Tian Cheng Consulting and Management Co., Ltd (Wonder WFOE). Wonder WFOE is a wholly foreign owned entity (as defined under PRC law) organized under PRC law and located in Anhui province of the PRC. On November 3, 2010, the Company, China Wonder, the seven operating companies, and the majority shareholder of Company common stock entered into an Operating Agreement, a Proxy Agreement, and a Consulting Service Agreement with Wonder WFOE. The Operating Agreement provides, among other things, that the Chinese companies will conduct operations under the guidance of Wonder WFOE, and that they will not conduct any transactions that might have a material affect on their assets, liabilities or company operations without written permission from Wonder WFOE. The Proxy Agreement assigned to Wonder WFOE the voting rights of the equity interests of the Chinese companies. The Consulting Service Agreement provides that Wonder WFOE will provide advice and assistance to the Chinese companies in all major aspects of their businesses. The combination of the authority granted by these three agreements provides Wonder WFOE with operational control of each of the Chinese companies. Wonder WFOE is compensated under the Consulting Service Agreement with fees equal to the profits of the Chinese companies. The fees are calculated and paid at the end of each quarter in amounts equal to the net income as reported in the quarterly consolidated financial statements of China Wonder and its consolidated subsidiaries. The contracts give Wonder WFOE operational control of China Wonder and the seven operating companies.
 
 Generally Accepted Accounting Principles (GAAP) require the consolidation of Variable Interest Entities (VIE).  The seven schools and China Wonder are obligated to Wonder WFOE under operating agreements, asset pledge arrangements, and a consulting agreement, as noted above, under which Wonder WFOE controls the operations and cash flows of these Chinese companies, and realizes the benefits and assumes the risks of ownership of them. For these reasons the Company believes these entities are VIE's and that the standard for consolidating these entities has been met.
 F-6
 
 WONDER INTERNATIONAL EDUCATION & INVESTMENT GROUP CORPORATION
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER 31, 2012
  1. ORGANIZATION and BUSINESS (CONT’D)
  Risks and Uncertainties
 China Wonder operates under the authority of a business license which was granted April 10, 2008 and expires April 10, 2028. Renewal of the license will depend on the result of government inspections which are made to ensure environmental laws are not breached.
  The officers of the Company control through direct ownership most of the outstanding stock of the Company. As a result, insiders will be able to control the outcome of all matters requiring stockholder approval and will be able to elect all of the Company directors.
  2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
  Consolidated Statements
  The consolidated financial statements include the accounts of the Company and its wholly owned subsidiary, China Wonder, and the seven wholly owned subsidiaries of Wonder WFOE, and China Wonder, listed below. All intercompany balances and transactions have been eliminated in consolidation.
  Dates of FormationAnhui Wonder Computer Institute
01/06/06Fujian Wonder Computer School
04/30/05Henan Wonder Computer Institute
12/24/06Hubei Wonder Computer School
07/25/02Jiangsu Wonder Computer School
04/25/05Liaoning Wonder Computer School
05/10/07Zhejiang Wonder Computer School
08/29/03
  Cash
  For purposes of the statements of cash flows, the Company considers all short term debt securities purchased with an original maturity of three months or less to be cash equivalents.
  Concentrations Of Credit Risk
  Financial instruments which potentially subject the Company to concentrations of credit risk consist of cash, short term loans receivable and related accrued interest, and miscellaneous receivables. However, all Company assets are located in the PRC and Company cash balances are on deposit at financial institutions in the PRC, the currency of which is not free trading. Foreign exchange transactions are required to be conducted through institutions authorized by the Chinese government and there is no guaranty that Chinese currency can be converted to U.S. or other currencies.
  Pronouncements of the FASB require regular analysis of the relationship between the Company and its operating subsidiaries to determine that it continues to have a controlling financial interest in those operating companies. The Company performed this analysis, focusing on determining that the Company has each of the following relationships with its operating subsidiaries:
 
 A. The power to direct the activity that most significantly impacts the entity’s economic performance; and
 
 B. That it has the obligation to absorb losses of the operating companies that could potentially be significant and the right to receive benefits from the operating companies that could potentially be significant.
 
 The Company does not expect that this analysis will change its obligation to consolidate the subsidiaries at anytime in the foreseeable future.
 Recognition Of Revenue
  Revenue is recognized when product is delivered to customers. All students pre-pay for the courses they take, generally on an annual or school year basis. The revenue is then recognized ratably over those periods as classes occur. No provision is made for any right of return that may exist as the payments are non-refundable.
  F-7
 
 WONDER INTERNATIONAL EDUCATION & INVESTMENT GROUP CORPORATION
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER 31, 2012
  2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
  Fair Value of Financial Instruments
  The carrying amounts of the Company’s financial instruments, which include cash, short term loans and related interest, other receivables, the investment in Wonder University, bank loans payable, accounts payable, accrued liabilities, other liabilities, and advances to and from affiliated companies, approximate their fair values at December 31, 2012.
  Fixed Assets
  Fixed assets are recorded at cost. Depreciation is computed using the straight line method, with lives of fifty years for buildings (which includes rights to the underlying land), five years for computers and related equipment and furniture, and eight to ten years for automobiles.
  Taxes
  China Wonder generates its income in China where Value Added Tax, Income Tax, City Construction and Development Tax, and Education Surcharge taxes are applicable. Neither the Company nor China Wonder conducts any operations in the U.S.; therefore, U.S. taxes are not applicable unless earnings are repatriated to the U.S. The Company intends to invest its earnings overseas, indefinitely.
  Use Of Estimates
  The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts and disclosures 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 estimated.
  Common Stock
  Common stock of the Company may occasionally be issued in return for services. Values will be assigned to these issuances equal to the market values of the common stock at measurement dates, in the case of issuances to employees, and in the case of non employees at market values or at the value of the goods or services provided, whichever is more clearly evident. Measurement date is defined under pronouncements of the FASB which state the criteria to be used for the valuation of stock issued for goods and services.
  Stock Options
  Stock options, if issued, will be valued at fair value on the dates of issuance using a Black Scholes valuation model, in accordance with pronouncements of the FASB.
  Recently Adopted Accounting Pronouncements
  Management believes that none of the recently adopted accounting pronouncements will have a material affect on the Company financial position, results of operations, or cash flows.
  Other Comprehensive Income
  The Company reports as other comprehensive income revenues, expenses, and gains and losses that are not included in the determination of net income. Resultant gains during the years 2012 and 2011 are all the result of gains from translations of Chinese currency amounts to U.S. dollars.
  F-8
 
 WONDER INTERNATIONAL EDUCATION & INVESTMENT GROUP CORPORATION
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER 31, 2012
  2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT’D)
  Foreign Currency Translation
  All Company assets are located in China. These assets and related liabilities are recorded on the books of the Company in the currency of China (Renminbi), which is the functional currency. They are translated into US dollars as follows:
 (a) Assets and liabilities, at the rates of exchange in effect at balance sheet dates, which at December 31, 2012 was RMB6.3161 equal to one US dollar.
 (b) Equity accounts, at the exchange rates prevailing at the times of the transactions that established the equity accounts; and
 (c) Revenues and expenses, at the average rate of exchange for each reporting period, which for 2012 was RMB6.31984 equal to one US dollar.
 
 Gains and losses arising from this translation of foreign currency are included in other comprehensive income.
  Investments in Companies Accounted for Using the Equity or Cost Method
 
 Investments in other non-consolidated entities are accounted for using the equity method or cost basis depending upon the level of ownership and/or the Company's ability to exercise significant influence over the operating and financial policies of the investee.  When the equity method is used, investments are recorded at original cost and adjusted periodically to recognize the Company's proportionate share of the investees' net income or losses after the date of investment.  When net losses from an investment accounted for under the equity method exceed its carrying amount, the investment balance is reduced to zero and additional losses are not provided for as the Company is not obligated to provide additional capital.  The Company resumes accounting for the investment under the equity method if the entity subsequently reports net income and the Company's share of that net income exceeds the share of net losses not recognized during the period the equity method was suspended.
 
 When an investment accounted for using the equity method issues its own shares, the subsequent reduction in the Company's proportionate interest in the investee is reflected in equity as an adjustment to paid-in-capital.  The Company evaluates its investments in companies accounted for by the equity or cost method for impairment when there is evidence or indicator that a decrease in value may be other than temporary.
  Product Warranties
  Refunds to students who withdraw from courses are rarely made and are made only at the discretion of the Company. For this reason and, since revenue is recognized only as services are provided, no provision is needed for possible withdrawals.
  Net Income Per Share
  The Company computes net income per common share in accordance with generally accepted accounting priniciples. Basic and diluted net income per common share are computed by dividing the net income available to common shareholders for each period by the weighted average number of shares of common stock outstanding during the period. The number of weighted average shares outstanding as well as the amount of net income per share are the same for basic and diluted per share calculations for all periods reflected in the accompanying financial statements. At December 31, 2012 and 2011 there were no instruments with common shares underlying them.
  Advertising Cost
  The Company expenses advertising costs when an advertisement occurs. Amounts expensed were $3,165,236 during 2012 and $2,534,213 during 2011.
 The carrying amounts of assets, other than investment properties, inventories, deferred tax assets and non-current assets (or disposal groups) held for sale, are reviewed at each balance sheet date to determine whether there is any indication of impairment.  If any such indication exists, the asset's recoverable amount is estimated to determine the amount of impairment loss.
 Segment Reporting
  Management treats the operations of the Company as one segment.
 
 F-9
 
 WONDER INTERNATIONAL EDUCATION & INVESTMENT GROUP CORPORATION
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER 31, 2012
  3.  INVESTMENT IN WONDER UNIVERSITY
 
 In December 2011, the Company converted the $37,998,132 balance of advances to Wonder University to an equity interest in the University of approximately 7% (Note 4).  Wonder University is a for profit accredited university with 2012 revenue of $16,559,922 and net income of $8,552,000.  These amounts were taken from unaudited financial statements.  The fair value of the university was measured using level 3 inputs, as defined in pronouncements of the FASB.  The proportional interest in the university was derived by reference to an appraisal of the assets and business of the university that was made toward the end of 2011.  There has been no indication of impairment of that value.
 
 The Company's proportional share of the 2012 earnings of Wonder University was $590,445.  That amount was paid to the Company as a dividend.  The dividend was declared in December 2012 and paid to the Company in January 2013.  It was recognized as income during 2012 and is included in miscellaneous receivables on the balance sheet.
 
 4. RELATED PARTY TRANSACTIONS
  The Company president controls a number of Chinese enterprises which are involved in the field of education and in other fields. Advances were made to several of these companies during the year 2012 and during 2011. In addition, advances were received from some of these companies during 2012.  With two exceptions, described below, all of these advances had been repaid before the end of the year 2012.  Activity in these accounts during 2012 and 2011 is summarized below.
  Advances To


Advances FromBalances, December 31, 2010

$
28,282,424



-Advances during 2011


43,824,741



-Repayments during 2011


35,632,030



-Exchange of balance of advances for equity position in Wonder University


37,878,788



-Effect of changes in foreign currency exchange rate (A)


1,403,653



-Balances, December 31, 2011


-



-Advances during 2012


15,465,771



12,100,030Repayments during 2012


12,235,622



12,100,030Effect of changes in foreign currency exchange rate (A)


1,913



-Balance, December 31, 2012

$
3,232,062


$
-
  (A) The accounting records are kept in the Chinese currency (RMB) and the currency exchange rate has changed during these periods.
  In addition to these advances, the Company earned interest during 2011 on the portions of the advances made to Wonder University.  The interest earned in 2011 ($1,040,750) was paid in January 2012 and is included as a receivable on the 2011 balance sheet.
 A substantial amount of the 2012 advances to affiliates were made to secure purchases of computer equipment and furniture from two affiliates (see below).  Those purchases continued through the end of 2012 and the balances that remained at year end were advances to secure future purchases from those two affiliates.
 
 F-10
 
 WONDER INTERNATIONAL EDUCATION & INVESTMENT GROUP CORPORATION
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER 31, 2012
  4. RELATED PARTY TRANSACTIONS (continued)
  In December 2011, the balances due from each of the debtor entities were consolidated and Wonder University assumed responsibility for all of the amounts due to the Company from these related parties. At that point, the amount due to the Company totaled $37,878,788. Shortly thereafter, the Company exchanged this receivable for an equity interest of approximately 7% in Wonder University. (see Note 3).
  During the year 2012, the Company purchased computers and computer equipment from two companies controlled by the Company president. These purchases totaled $3,157,595. No such purchases were made during 2011. The Company has a policy of pricing these products on the internet from independent suppliers before executing a purchase contract with an affiliated company.
  See Note 5 for leases from and to related parties.
 
 5. STATUTORY RESERVE
 
 As required by the Chinese law that governs accounting, the Company allocates 10% of its after tax profits, if any, to a Statutory Reserve Fund and 5% to a Statutory Public Welfare Fund, as determined from year to year. Chinese law requires an allocation of 25% of the after tax profits of a private school to a Development Fund. These funds are allocated appropriately until reserves reach 50% of Paid in Capital. In addition, the Company has made these allocations of after tax profits.
  6. RENTALS UNDER OPERATING LEASES
  The Company conducts its operations from its principal business office in Hefei, China. These offices are owned by the Company president and are occupied without charge. If rent were charged for this space, it would be $3,916 per month. The Company also rents classroom space from Wonder University, an entity controlled by the Company president and in which the Company has a 7% equity interest (see Note 4); rent for this space is $52,744 per month. In addition, all of the schools rent classroom, office, and dormitory space under operating leases. There are leases for nine facilities used by the seven schools. All of these leases expire more than one year after December 31, 2012. Future rent for these leases is presented below:
 2013

$
1,307,5112014


1,004,8892015


958,5222016


858,5132017


797,030
  The Company owns a building in the city of Hefei which is used for classrooms and office space.
  7. BANK LOANS
  The Company had two short term bank loans at the end of 2012 and three at the end of 2011. The balances at December 31, 2012 and 2011 were $1,583,255 and $474,977, respectively. One of the loans $(1,583,255) bears interest at130% of the base rate of the People’s Bank of China. The second loan ($474,977) bears interest at 7.8%. Each of these loans is due during 2013 and is expected to be renewed on the due date.
 
 F-11
 
 WONDER INTERNATIONAL EDUCATION & INVESTMENT GROUP CORPORATION
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER 31, 2012
  8. INCOME AND OTHER TAXES
  The Company is required to file income tax returns in the United States but is exempt from filing returns in China under provisions of a Notice of the Anhui Ministry of Finance and State Administration of Taxation. Its operations in the United States have been insignificant and income taxes have not been accrued. The China exemption applies to the Company and each of its eight subsidiaries. The Notice providing the exemption specifies among other things that income taxes will not be collected for the income earned by schools and funds gained by schools for their enterprise development.  This exemption was granted to encourage further development of schools.
  The Company has not filed all of the returns for other taxes that are required of it in China. It has, however, recognized its obligations for these taxes and related penalties by accruing appropriate expenses and liabilities on the financial statements. The Company is in the process of negotiating with taxing authorities to which it is responsible to bring its filing status current. It does not expect resultant settlements to exceed the amounts accrued. (see also Note 10).
  A reconciliation of the taxes calculated by applying the Chinese statutory rate to pre tax income with the provisions for income taxes is presented below.
  2012


2011Taxes calculated using statutory rates

$
1,531,695


$
1,279,462Effect of exemption described above


(1,531,695
)


(1,279,462
)Provisions for income taxes

$
-


$
-
  9. EXPENSES
  Major items included in Selling and Administrative expenses were the following:
  2012


2011Advertising

$
3,165,236


$
2,534,213Office expense


395,544



225,377Salaries and benefits


758,613



759,324Sales tax


675,065



649,732Other


371,095



369,252Recruitment expense


732,313



819,261Total

$
6,097,866


$
5,357,159
  F-12
  WONDER INTERNATIONAL EDUCATION & INVESTMENT GROUP CORPORATION
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 DECEMBER 31, 2012
  10. SUPPLEMENTAL DISCLOSURES OF CASH FLOWS INFORMATION
  Cash was paid for interest during 2012 and 2011 in the amounts of $265,279 and $181,456, respectively.
  Cash was paid for income taxes in the amount of $2,438 in 2012 and $3,969 in 2011.
  During 2011, advances to related parties were consolidated, with all of obligations being assumed by Wonder University. The resultant receivable, which totaled $37,878,788, was then exchanged for an equity interest in Wonder University.  There were no other non cash investing activities in 2011 and none in 2012.  There were no non cash financing activities in either 2012 or 2011.
  11. CONTINGENCIES
  Consistent with business practices in China, the Company carries no insurance except for auto insurance.
 As noted in Note 7, the Company is in negotiations with taxing authorities in the PRC to bring current its filing status for business taxes. The Company does not expect its total obligation to exceed the tax liabilities recorded on the balance sheet, which include penalties. These penalties have been accrued and are included in other accounts payable on the balance sheet; charges of $331,831 and $218,096, respectively, are included in non operating expense on the 2012 and 2011 statements of income. In addition to these potential penalties, other consequences are possible. Although the Company does not expect any adversity beyond having to pay the taxes, the potential exists for the PRC government to obtain a priority lien against all Company assets and to pursue criminal charges against its officers and directors.