The following management's discussion and analysis ("MD&A") should be read in
conjunction with financial statements of Quality Online Education Group Inc.
(ticker symbol: QOEG) for the years ended August 31, 2022 and 2021.
Safe Harbor for Forward-Looking Statements
Certain statements included in this MD&A constitute forward-looking statements,
including those identified by the expressions anticipate, believe, plan,
estimate, expect, intend, and similar expressions to the extent they relate to
Quality Online Education Group Inc. (ticker symbol: QOEG) or its management.
These forward-looking statements are not facts, promises, or guarantees; rather,
they reflect current expectations regarding future results or events. These
forward-looking statements are subject to risks and uncertainties that could
cause actual results, activities, performance, or events to differ materially
from current expectations. These include risks related to revenue growth,
operating results, industry, products, and litigation, as well as the matters
discussed in QOEG's MD&A under Risk Factors. Readers should not place undue
reliance on any such forward-looking statements. QOEG disclaims any obligation
to publicly update or to revise any such statements to reflect any change in the
Company's expectations or in events, conditions, or circumstances on which any
such statements may be based, or that may affect the likelihood that actual
results will differ from those set forth in the forward-looking statements.
The following discussion of our financial condition and results of operations
should be read in conjunction with our financial statements and the related
notes included in this report.
21
Liquidity, Capital Resources and Plan of Operations
Going Concern
Our financial statements appearing elsewhere in this offering circular have been
prepared on a going concern basis, which contemplates the realization of assets
and the satisfaction of liabilities in the normal course of business. The
Company's ability to continue as a going concern is contingent upon its ability
to raise additional capital as required. For the year ended August 31, 2022, the
Company incurred net losses of ($3,790,411). Initially, we intend to finance our
operations through equity financings.
Our auditors have indicated that these conditions raise substantial doubt about
the Company's ability to continue as a going concern. These financial statements
do not include any adjustments relating to the recoverability and classification
of recorded asset amounts or amounts and classification of liabilities that
might result from this uncertainty.
There are no external sources of liquidity.
Financings and Securities Offerings
Investing Activities.
Since inception, our principal sources of operating funds have been proceeds
from equity financing including the sale of our Common Stock to initial
investors known to management and principal shareholders of the Company. We do
not expect that our current cash on hand will fund our existing operations. We
will need to raise additional capital in order execute our business plan and
growth goals for at least the next twelve-month period thereafter. If the
Company is unable to raise sufficient additional funds, it will have to execute
a slower than planned growth path, reduce overhead and scale back its business
plan until sufficient additional capital is raised to support further
operational expansion and growth. There can be no assurance that such a plan
will be successful.
Business Strategy
Quality Online Education Group has founded in Aug 2018 in Ontario Canada with a
global reach. We provide comprehensive online English lessons to students around
the world. English education resource is unbalanced between areas. To address
this unmet need, we have developed online and mobile education platforms,
customized the content and optimized the marketing method to provide high
quality yet affordable products that enable students around the world to take
live online English lessons with native English-speaking teachers. We connect
our students with highly qualified teachers who have gone through our rigorous
selection and training process before they deliver lessons. We hire, train, and
manage our tutors from North America and the Philippines.
Our market consists of students from K12 to adults. The lessons we provide are
focused on the interaction and application of English.
We have successfully launched a direct selling model through Mommy Influencer in
different part of Southeast Asia countries. This business model is
cost-effective, saving us significant sales and marketing dollars and build a
better cash flow outlook compared to the competitors who only use online
advertisement. With the proper expansion of operations, coupled with the
replication of our direct selling model to targeted areas around the world more
than 200 cities around the globe, we expect to achieve magnitudes of exponential
growth.
Company's Plan of Operation.
We are launching small group lessons, where one teacher simultaneously teaches
2-4 students online. The one-to-many model has a lower unit price than other
competitors, and may be affordable for more students yet yield a higher margin.
We intend to further develop our sales platform by entering additional cities in
Southeast Asia and other countries in need of English teaching resources. Also,
we plan to develop and launch new product lines such as the test preparation
training for IELTS and non-English types. Our current student base covers Japan,
Thailand, France and Germany. We anticipate a more significant profit margin
through increasing the student retention rate and launching new product lines,
like group lessons.
22
Revenue
During the year ended 31st Aug, 2022, the Company billed our customers over
$2.70 million and realized a revenue of $1.67 million compared to $481,561 for
the year ended 2021. The gross margin for the year ended 31st Aug, 2022 was
$961,424 or 57.3%, compared to $45,365 or 9.4% for the year ended 31st Aug,
2021. The increased average selling prices and reduced free demo and trial
classes for customers primarily drove the increase in gross margin.
The low gross margin for both periods ended 2020 and 2021 was primarily due to:
1) Provided free demo classes and trial classes to students for better market
adoption;
2) Intentionally lowered our pricing in the competitive market for customer
attraction.
We terminated the only VIE contract in September 2021, and stopped acquiring
students from mainland China in December 2021, and ceased offering tutoring
services to students in mainland China by the end of April 2022. Our focus is on
North America, Southeast Asia and Europe markets. We are ambitiously looking for
more overseas business partners, and researched and developed our education
platform better for customers. As a result, we do not anticipate that the
cessation of services to students in China will negatively impact our revenues
in the future.
Operating expenses
The following is the breakdown of operating expenses for year ended of 8/31/22
and 8/31/21:
For year ended For year ended
8/31/2022 8/31/2021
Operating expenses:
Advertising & Marketing 67,414 59,739
Depreciation 3,599 68,842
Commission 412,664 82,729
Business consulting 3,962,795 30,828
General & Administrative expenses 119,447 355,178
Legal & Professional fees 93,408 134,633
Payroll & Benefits 92,508 1,408,434
Total operating expenses 4,751,835 2,140,383
Operating expenses were $4,751,835 for the year ended Aug 31, 2022 compared to
$2,140,383 for the year ended Aug 31, 2021. The 122% increase in operating
expenses during the year ended Aug 31, 2022 was primarily driven by business
consulting expenses.
Advertising and Marketing
Advertising and marketing expenses are related to promoting the Company and
service to our potential customers. For year ended Aug 31, 2022, the Company
incurred an advertising and marketing expense of $67,414 compared to $59,739 for
the same period of the prior year. The increase was mainly due to the more usage
of services from social media channels and marketing companies.
Depreciation
Depreciation is related to computers, office furniture and equipment. For year
ended Aug 31, 2022, the Company incurred a depreciation expense of $3,599,
compared to $68,842 for the same period of the prior year. The decrease in
depreciation expenses was due to the termination of a VIE with Tianjin Zhipin
Education Technology Co., Ltd.
23
Commission
Commission expenses are related to sales made by our Mommy Influencers and sales
teams. For year ended Aug 31, 2022, the Company incurred a commission expense of
$412,664, compared to $82,729 for the same period of the prior year. The
increase in commission expenses was mainly driven by recruiting more
commission-based salespeople.
Business Consulting
Business consulting expenses are related to the professional services provided
by contractors. For year ended Aug 31, 2022, the Company incurred a business
consulting fee of $3,962,795 compared to $30,828 for the same period of the
prior year. The significant increase was primarily due to the expenses related
to the service contract with Tianjin Zhipin Education Technology Co., Ltd.,
which provided online education market research, business and information
technology consulting services.
General and Administrative expenses
General and administrative expenses are related to rent, office expenses,
utilities, and meals, and entertainment. For year ended Aug 31, 2022, the
Company incurred General and Administrative expenses of $119,447, compared to
$355,178 for the same period of the prior year. The decrease was primarily due
to the termination of the VIE with Tianjin Zhipin Education Technology Co., Ltd.
Legal and Professional fees
Legal and professional fees are related to professional services provided by
lawyers and accountants. For year ended Aug 31, 2022, the Company incurred a
legal and professional expense of $93,408 as compared to $134,633 for the same
period of the prior year. There increase in the prior year was due to the audit
fees the Company paid to the previous years.
Payroll& Benefits
For year ended Aug 31, 2022, payroll and benefits were $92,508, compared to
$1,408,434 for the prior year. The significant decrease was primarily due to the
termination of VIE contract with Tianjin Zhipin Education Technology Co., Ltd.
Contractual Obligations, Commitments and Contingencies
As of the date there are none.
Off-Balance Sheet Arrangements
We did not have during the periods presented, and we do not currently have, any
off-balance sheet arrangements.
© Edgar Online, source Glimpses