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8-K on Nov 1, 2006 and Amended 8-K on Nov 2, 2006:
Bridge financing.

Q2 10-Q was late.

The registrant was unable without unreasonable effort and expense to prepare its accounting records and schedules in sufficient time to allow its accountants to complete its review of the registrant for the period ending June 30, 2006, before the required filing date for its Form 10-QSB.

Registration of securities on June 30, 2006

Amended 8-K for the auditor switch on June 27, 2006, response to the SEC letter below.

SEC nasty-gram telling CEDA to list any disagreements with prior auditors. June 23, 2006.

CEDA writes a letter to the SEC, April 27, 2006. This talks about the revenue recognition issue I mentioned a long time ago. Since the prior auditor agreed with the fix, there were no issues with the prior auditor when they left.

Letter from the SEC telling CEDA to amend their March 24, 2006 8-K regarding the resignation of the prior auditor.

The 10-K was late.

The registrant was unable without unreasonable effort and expense to prepare its accounting records and schedules in sufficient time to allow its accountants to complete its review of the registrant for the period ending December 31, 2005, before the required filing date for its Form 10-KSB.

E-Fang's letter to CEDA about how they plan to conduct an audit.

e-Fang Accountancy Corp. is a PCAOB registered public accounting firm located in City of Industry, California. We conduct audit following all the requirements set forth by regulatory agencies. The audit of the international operations of China Educational Alliance Inc. will be conducted by auditors from our firm only. There will not be any foreign audit firm’s participation in any part of the audit procedures. All the auditors involved in the audit of China Educational Alliance Inc. are fluent in both English and Chinese languages, and have good understanding of the accounting operations in China. We are in full control at all stages, engagement, planning, field work, etc. of the audit procedures.

We appreciate your concerns and hope we have provided you a clear picture of out plan.

Don't worry, it works both ways: English speakers have all sorts of silly idioms when speaking East Asian languages.

March 6, 2006: The SEC doesn't have any issues.

Feb 28, 2006: The SEC wants to know how e-Fang will do the audit, in particular will any unqualified international groups be doing any of the work.

Amended 10-K for 2004. Contains only certifications and SOX stuff.

Prior auditor ok with everything. e-Fang appointed on Jan 18, 2006.

Q3-2005 amended 10-Q. Only added certifications.

The SEC wants certifications and some more details about accountants.

CEDA realizes their revenue recognition was wrong.

SEC says CEDA's revenue recognition was wrong.

CEDA says 15 employees were only paid a grand total of $11,346 compensation because 1) it only covered two months, 2) hey, this is China and people don't make the big bucks here. They also addressed the SEC's request to get a real auditor. They also explained how the debit cards work (getting the revenue recognition wrong).

In Q1 and Q2 of 2005, CEDA had mentioned that they have other sources of revenue: software and educational books media. The SEC wanted to know the revenue recognition for these. CEDA said they hadn't sold any of that stuff at that point in time.

Our revenue presentation in the Forms 10-KSB/A and 10-QSB/A as included a description of self developed educational software and education books media as well as the provision of other services such as text book downloading and electronic storage management. At this point in time, we have not booked any revenue for the sale of these items, although they are part of our business plan. Further, we did not recognize any revenues for these items in our Statement of Operations for the fiscal period ending December 31, 2004 or the interim quarterly periods that followed. Nonetheless, in order to be conservative in our disclosure, we have amended the annual and interim reports to delete any reference to revenue or sales being derived from self developed educational software and educational books media as well as the provision of other services such as text book downloading and electronic storage management.

We do offer downloadable materials which are paid for by our debit cards in the following manner. The Company's revenue from downloadable materials is recognized at the time of sale of the debit card, as mentioned above. However, if a debit card user has insufficient points left on his card, downloadable services will not be available until the client makes a payment to our sales center in cash or by wire transfer in order to purchase additional points. Revenue would be recognized for such additional purchases at the time that the funds were provided.

And then they present a price list.
100

Description	Price (RMB)	Points
Comprehensive Database	Concurrent Exercise	0.3	30
	Unit Exercise	0.3	30
	Mid-term Exam	0.5	50
	Final Exam	0.5	50
	Simulative Exam for College Entry	1.0	100
	Simulative Exam for High School Entry	1.0	100
	Enhanced Exam	1.0	100
	Monthly Test	0.5	50
	Enhanced Exam for High School Entry	3.0	300
	Enhance Exam for College Entry	3.0	300
Exam Database from Named School	Concurrent Exercise	0.5	50
	Unit Exercise	1.0	100
	Mid-term Exam	1.0	100
	Final Exam	1.0	100
	Simulative Exam for College Entry	5.0	500
	Simulative Exam for High School Entry	5.0	500
	Enhanced Exam	0.5	50
	Monthly Test	1.0	100
	Enhanced Exam for High School Entry	10.0	1,000
	Enhance Exam for College Entry	10.0	1,000
Exam Database from Named Teachers	Concurrent Exercise	0.5	50
	Unit Exercise	0.5	50
	Mid-term Exam	2.0	200
	Final Exam	2.0	200
	Simulative Exam for College Entry	3.0	300
	Simulative Exam for High School Entry	3.0	300
	Study / Notes from Named Teachers	1.0	100
	Enhanced Exam	0.5	50
	Daily Test	0.2	20
	Weekly Test	0.5	50
	Monthly Test	1.0	100

Hardly anything on that list is more than a dollar.

And they also go into detail about the communication equipment: 10 sets of DVD home theaters used for presentations, two sets of servers to run the website, one set of satellite receivers. Installed Oct 2004. The board of directors says that this stuff should last 10 years with proper care and maintenance. So they used a 10 year depreciation schedule.

The SEC asks:

We note your disclosure that your officers and directors do not presently receive compensation. Please tell us what accounting literature you considered in determining whether the value of the services provided by these persons should be recorded as an expense with a corresponding contribution to equity.

I've read about this issue in a GAAP book. Basically if an insider gives something to the company (including their time), it is essentially a donation of equity or something like that.

CEDA basically tap dances around it fairly effectively, in my opinion (and it's not an expert opinion).

Here's the SEC's letter which generated the above response.



I've said it before: Chinese reverse merger companies are so often terrible at accounting. But they typically figure things out and get with the program. It's very good to see the details of CEDA's business.

10 years for that equipment seems too long, especially the website servers.

It's somewhat troubling to see that they had listed business models for which no revenue had been generated.