Chinacast Education (GREY:CAST)

BEIJING, January 5, 2012 /PRNewswire-Asia-FirstCall/ -- ChinaCast Education Corporation (the "Company" or "ChinaCast") (Nasdaq GS: CAST), a leading post-secondary education and e-learning services provider in China, announced that the Company will be amending its Annual Report for the year ended December 31, 2010 to restate the financial statements for the year ended December 31, 2010 to reverse a write-off of certain prepayments.

The elimination of the write-off of the prepayment will result in the increase of the Company's net income for such period to approximately RMB132 million from RMB72 million. Accordingly, net income for the year ended December 31, 2010 will have increased by 43.0%, as compared to the net income for the year ended December 31, 2009. The restated financial statements are expected to result in a non-cash charge of approximately RMB2.0 million per quarter for the 29.6 quarters subsequent to December 31, 2010. Basic and diluted net income attributable to ChinaCast per share for the year ended December 31, 2010 will be increased to approximately RMB2.73 per share and RMB2.70 per share from approximately RMB1.49 per share and RMB1.47 per share, respectively. Prepaid expenses and other current assets as at December 31, 2010 will be increased to RMB56.3 million from RMB48.2 million and non-current deposits and prepayments as at December 31, 2010 will be increased to RMB59.1 million from RMB7.4 million. The Company determined that the effect on the quarterly reports in 2011 would be insignificant, i.e., the effect on the earnings will be less than approximately 5% and approximately 2% on total assets.

The Company took the write-off in 2010 after it determined to use the RMB59.8 million balance of non-current advances as a prepayment for services which were being provided by ChinaCast Company Ltd to help the Company in its renewal of the inter-provincial value-added telecommunication service license ("VSAT license"). The license is critical to the Company's ability to provide its E-learning and training services. The prepayment was sufficient to cover approximately seven years of such services. Such a prepayment, in the absence of impairment or other changes that may apply, is usually amortized as a cost over the relevant service period. However, since the annual renewal of VSAT license needs to be approved by a government agency and the result is not under the control of neither CCL nor CCLX, and CCLX undertakes to CCL that it will not take back nor to recover any amount of the prepayment even though it subsequently does not require the service of CCL during the entire service term, the Company did not believe that it could reliably determine the future cash flows specifically to be obtained from the prepayment, the Company decided to write off the RMB59.8 million prepayment. The Company has now determined that such prepayment should be amortized over a period of 7.4 years. In the event that CCLX can renew the license without the assistance from CCL in the future, the remaining prepaid amount will be expensed then.

As a result of the significant change in the results of operations of the Company for the year ended December 31, 2010 due to the change in the accounting treatment of the non-current advance used as prepayment for services, the Company will be filing a Form 8-K under Item 4.02, Non-Reliance on Previously Issued Financial Statements or a Related Audit Report or Completed Interim Review.