- Amended Annual Report (10-K/A)

Share Name	Share Symbol	Market	Type
China Solar and Clean Energy Solutions Inc (PK)	USOTC:CSOL	OTCMarkets	Common Stock

	Price Change	% Change	Share Price	Bid Price	Offer Price	High Price	Low Price	Open Price	Shares Traded	Last Trade
	0.00	0.00%	0.0111	0.0001	0.036				0.00	21:15:17

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K/A

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

FOR THE FISCAL YEAR ENDED DECEMBER 31, 2008

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

FOR THE TRANSITION PERIOD FROM ______________ TO ______________

Commission file number: 000-12561

CHINA SOLAR & CLEAN ENERGY SOLUTIONS, INC.

(Exact name of Registrant as Specified in Its Charter)

Nevada		95-3819300
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)

3/F West Wing Dingheng Plaza, 45A North Fengtai Road, Beijing, China		100071
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (86) 10-63860500

Securities registered pursuant to Section 12(b) of the Exchange Act: None

Securities registered pursuant to Section 12(g) of the Exchange Act:

Common Stock, $0.001 par value

(Title of Class)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES ¨ NO x

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

Check whether the issuer: (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES x 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 (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ¨ 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 Part III of this Form 10-K or any amendment to this Form 10-K. x

Indicate by check mark whether the registrant is a large accelerated filer, an 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	¨	Accelerated filer	¨

Non-accelerated filer (Do not check if a smaller reporting company)	¨	Smaller reporting company	x

The aggregate market value of the 11,342,439 shares of common stock, par value $0.001 per share, of the registrant held by non-affiliates on June 30, 2008 was $15,879,415, which was computed upon the basis of the closing price $1.40 on that date.

There were 16,173,016 shares of common stock of the registrant outstanding as of April 12, 2009.

Documents Incorporated by Reference: None.

EXPLANATORY NOTE

The undersigned Registrant hereby amends Item 7 and 8 of Part II of the Registrant’s annual report on Form 10-K for the year ended December 31, 2008, for the purpose of amending its revenue recognition as described in the current report Form 8-K and its amendment filed on March 30, 2010 and April 9, 2010.

Except as described above, no other changes have been made to the original report and have not been included in this amendment. In addition, as required by Rule 12b-15 under the Securities Exchange Act of 1934, new certifications by our Principal Executive Officer and Principal Financial Officer are filed as exhibits to this amendment.

ITEM 7.

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

FORWARD-LOOKING INFORMATION - Management's Discussion and Analysis or Plan of Operation ("MD&A") includes "forward-looking statements". All statements, other than statements of historical facts, included in this report regarding the Company's financial position, business strategy and plans and objectives of management of the Company for future operations are forward-looking statements. These forward-looking statements rely on a number of assumptions concerning future events and are subject to a number of uncertainties and other factors, many of which are outside of the Company's control that could cause actual results to materially differ from such statements. While the Company believes that the assumptions concerning future events are reasonable, it cautions that there are inherent difficulties in predicting certain important factors, especially, the prospects for future acquisitions; the competition in the solar hot water product market, the competition in the solar water heaters and boilers industry and the impact of such competition on pricing, revenues and margins; and the cost of attracting and retaining highly skilled personnel.

Overview

We are engaged in the solar and renewable energy business in the People's Republic of China (“PRC”). Our business is conducted through our wholly owned PRC based operating subsidiaries, Bazhou Deli Solar, BeijingDeli Solar, and our indirect subsidiaries Tianjin Huaneng (majority owned) and SZPSP.

The Company has four reportable segment: solar heater/biomass stove/boiler related products, heat pipe related products, energy-saving projects and other products, which includes heat exchangers and other products that fall outside of the first three segments.

Bazhou Deli Solar designs, manufactures and sells renewable energy systems to produce hot water and for space heating in the PRC. Bazhou Deli Solar’s principal products are solar hot water heaters and multifunctional space heaters, including coal-fired boilers for residential use. Bazhou Deli Solar also sells component parts for its products and provides after-sales maintenance and repair services.

Beijing Deli Solar is principally engaged in the installation of large solar water heaters in construction projects in major cities in the PRC, including Beijing. However, so far there is no revenue derived from Beijing Deli Solar.

Tianjin Huaneng manufactures heating products such as heating pipes, heat exchangers, specialty heating pipes and tubes, high temperature hot blast stoves, heating filters, normal pressure water boilers, solar energy water heaters and radiators.

SZPSP is principally engaged in the manufacture of solar hot water systems for commercial use. Its customers include factories, hospitals, schools and hotels. SZPSP’s solar energy products include flat plate solar collectors, solar water heater systems, central solar water heater system and solar energy photovoltaic technology. Our customers include factories, hospitals, schools and hotels. SZPSP’s solar energy products include flat plate solar collectors, solar water heater systems, central solar water heater system and solar energy photovoltaic technology, etc.

Approximately 46.8% of our sales revenues for the fiscal year ended December 31, 2008 were derived from sales of our solar water heaters/biomass stove/boiler related products, 30.8% derived from sales of heat pipe related product 16.9% derived from sales of our energy saving projects, and 5.5% derived from sales of others. Approximately 76% of our sales revenues for the fiscal year ended December 31, 2008 were derived from sales made to PRC based customers, with the remaining 24% from the international market.

Recent Developments

In 2008, the Company’s wholly owned subsidiary Deli Solar Holding Ltd. entered into an agreement with Shenzhen Fuwaysun Technology Co., Ltd. (“Fuwaysun”) pursuant to which Deli Solar Holding acquired the outstanding shares of Fuwaysun. Deli Solar Holding loaned $3,000,000 to Fuwaysun, which amount will automatically become part of the purchase price in the event both parties complete the share transfer and investment plan agreed on between the parties within six months from the date of execution of the agreement. In the event the parties do not complete the share transfer and investment plan within six months from the date of execution of the agreement Fuwaysun will return the principal amount of the loan plus interest to Deli Solar Holding. In the event the parties do not complete the share transfer and investment plan within six months from the date of execution of the agreement Fuwaysun shall return the principal amount of the loan plus interest to Deli Solar Holding. On April 9, 2009, the Board approved an amendment to the Fuwaysun agreement to extend the period of time for the consummation of the Fuwaysun Acquisition until June 30, 2009.

On September 6, 2006, the Company entered into an Agreement of Intent on Share Transfer (“Xiongri Agreement”) to acquire 60% of the outstanding equity interest of Shenzhen Xiongri Solar Energy Heating Co., Ltd. (“Xiongri”) from its sole shareholder (“Xiongri Acquisition”). Among other things, pursuant to the Xiongri Agreement, the Company agreed to loan to the shareholder of Xiongri two loans in the aggregate amount of RMB 10,000,000, which loans would serve as a purchase price payment in the Xiongri Acquisition if Xiongri reached certain net profits in 2006, as specified in the Xiongri Agreement. On April 9, 2009, the Board approved an amendment to the Xiongri Agreement to extend the time period for the consummation of the Xiongri Acquisition, including all closing conditions to be performed as set forth in the Xiongri Agreement, to June 30, 2009.

Critical Accounting Policies and Estimates

The preparation of financial statements and related disclosures in conformity with U.S. generally accepted accounting principles requires us to make judgments, estimates and assumptions that affect the reported amounts in the consolidated financial statements and accompanying notes. Note 2 to the consolidated financial statements describe the significant accounting policies and methods used in the preparation of the consolidated financial statements. The areas described below are affected by critical accounting estimates and are impacted significantly by judgments and assumptions in the preparation of the consolidated financial statements. Actual results could differ materially from the amounts reported based on these critical accounting estimates.

Revenue Recognition

Product sales are recognized when the products are delivered to and inspected by customers and title has passed. Bazhou Deli Solar provides a three-year standard warranty on all of the products it manufactures. Under this standard warranty program, repair and replacement of defective component parts are free of any charge during the first year following the purchase. In the second and third year, replacement parts must be paid for by the customer but not the labor. Most of our warranty services are performed by our independent sales agents and distributors in return for a 1-2% discount of the purchase price they pay for our products. Accordingly, we have recorded no liability for warranty reserve. We also allow our sales agents and distributors to return any defective product for exchange.

Sales-type leases

The Company engages in installing energy-saving facilities and leases the equipment to customers. The Company will transfer all benefits, risks and ownership of the leased property to the customers at the end of the lease term. The Company's investment cost in these projects is recorded as Sales-type leases in accordance with Statement of Financial Accounting Standards ("SFAS") No. 13, “Accounting for Leases " and its various amendments and interpretations. The sales and cost of goods sold is recognized at the point of sales. The investment in sales-type lease consists of the sum of the total minimum lease payments receivable less unearned interest income. Unearned interest income is amortized to income over the lease term as to produce a constant periodic rate of return on the net investment in the lease. The gross investment on sales-type lease is recorded as net of unearned interest Income.

Sales-type leases are generally placed in a non-accrual status (i.e., no revenue is recognized) when payments are more than 90 days past due. Additionally, management periodically reviews the credit worthiness of all sales-type lessees with payments outstanding less than 90 days. Based upon management's judgment, sales-type lessees with balances less than 90 days delinquent may be placed in a non-accrual status. Leases placed on non-accrual status are only returned to an accrual status when the account has been brought current and management believes recovery of the remaining unpaid lease payments is probable.

Allowance for Doubtful Accounts

Our business operations are conducted in the PRC. We extend unsecured trade credit to our relatively large customers according to their sales volume and historical payment records. The allowance for doubtful accounts is established through charges to the provision for bad debts. We regularly evaluate the adequacy of the allowance for doubtful accounts based on historical trends in collections and write-offs, our judgment as to the probability of collecting accounts and our evaluation of business risk. This evaluation is inherently subjective, as it requires estimates that are susceptible to revision as more information becomes available. Accounts are determined to be uncollectible when the debt is deemed to be worthless or only recoverable in part and are written off at that time through a charge against the allowance.

Property, Plant and Equipment

Building, plant and equipment are recorded at cost less accumulated depreciation and amortization. Depreciation and amortization are recorded utilizing the straight-line method over the estimated original useful lives of the assets. Amortization of leasehold improvements is calculated on a straight-line basis over the life of the asset or the term of the lease, whichever is shorter. Major renewals and betterments are capitalized and depreciated; maintenance and repairs that do not extend the life of the respective assets are charged to expense as incurred. Upon disposal of assets, the cost and related accumulated depreciation are removed from the accounts and any gain or loss is included in income. Depreciation related to property and equipment used in production is reported in cost of sales.

Long-term assets of the Company are reviewed annually as to whether their carrying value has become impaired. We consider assets to be impaired if the carrying value exceeds the future projected cash flows from related operations. We also re-evaluate the periods of amortization to determine whether subsequent events and circumstances warrant revised estimates of useful lives. As of December 31, 2008, we expect these assets to be fully recoverable.

Business Combinations, Goodwill and intangible assets.

We account for business combinations in accordance with SFAS No. 141, Business Combinations , which requires that the purchase method of accounting be used for all business combinations. SFAS 141 requires intangible assets acquired in a business combination to be recognized and reported separately from goodwill.

Goodwill represents the cost of the acquired businesses in excess of the fair value of identifiable tangible and intangible net assets purchased. We generally seek the assistance of independent valuation experts in determining the fair value of the identifiable tangible and intangible net assets of the acquired business. We assign all the assets and liabilities of the acquired business, including goodwill, to reporting units in accordance with SFAS No. 142, Goodwill and Other Intangible Assets .

We test goodwill for impairment on an annual basis. In this process, we rely on a number of factors including operating results, business plans and future cash flows. Recoverability of goodwill is evaluated using a two-step process. The first step involves a comparison of the fair value of a reporting unit with its carrying value. If the carrying amount of the reporting unit exceeds its fair value, the second step of the process involves a comparison of the fair value and carrying value of the goodwill of that reporting unit. If the carrying value of the goodwill of a reporting unit exceeds the fair value of that goodwill, an impairment loss is recognized in an amount equal to the excess. Goodwill of a reporting unit will be tested for impairment between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of the reporting unit below its carrying amount.

We evaluate intangible assets for recoverability whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the future undiscounted net cash flows expected to be generated by the asset. If these assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying value of the assets exceeds the fair value of the assets.

Impairment of long-lived assets

In accordance with SFAS No. 144, “ Accounting for the Impairment or Disposal of Long-Lived Assets” , a long-lived assets and certain identifiable intangible assets held and used by the Company are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is evaluated by a comparison of the carrying amount of assets to estimated undiscounted net cash flows expected to be generated by the assets. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amounts of the assets exceed the fair value of the assets.

Key Items in 2008

Significant financial items during 2008 include:

Increase by us of ownership in Tianjin Huaneng from 51% to 91.82% through purchase of additional equity interests from minority shareholders and additional contribution to Tianjin Huaneng’s registered capital; and

Acquisition of SZPSP.

RESULTS OF OPERATIONS

Years ended December 31, 2008 and December 31, 2007

Sales Revenues

The following table sets forth a breakdown of our net revenues for the periods indicated:

Revenue:	2008		2007

Solar Heater/Biomass Stove/Boiler related products	$	25,098,563	$	26,693,850
Heat Pipe related products		14,369,716		7,002,015
Energy-saving projects		9,078,203		3,376,481
Solar Heat collector and others		2,952,514		—
Total		51,498,996	$	37,072,346

Overall: Sales increased to $51,498,996 for 2008 as compared to $37,072,346 for 2007, an increase of approximately $14,426,650 or 38.9%. This increase was primarily due to increased sales by Tianjin Huaneng and SZPSP. We acquired Tianjin Huaneng and commenced selling heat pipe related products on July 1, 2007. We acquired the entire equity interest in SZPSP in March 2008.

Solar Water Heater/Biomass Stove/Boiler Related Pr oducts : Sales revenues of this product segment decreased to $25,098,563 for 2008 from $26,693,850 for 2007, a decrease of $1,595,287 or 6.0%. The decrease in sales of these products was primarily because we added a fourth segment—solar heat collectors and others—and accounted for the sales revenue of certain products under this fourth segment instead of the solar water heater/biomass stove/boiler related products segment as we did in 2007. To a lesser extent, this decline was also due to a decrease in the selling prices of our solar water heaters and boiler related products, which constituted the vast majority of our total sales of this segment. The prices of our solar water heaters and boiler related products have been declining due to increased competition.

Heat Pipe Related Products: Sales revenues increased to $14,369,716 in 2008 from $7,002,015 in 2007, an increase of $7,367,701 or 105.2%. This increase was mainly due to the fact that we did not begin to sell heat pipe related products until we acquired Tianjin Huaneng on July 1, 2007.

Energy-saving projects: Sales revenues increased to $9,078,203 for 2008 from $3,376,481 for 2007, an increase of $5,701,722 or168.9%. This increase was mainly due to our acquisition of SZPSP in March 2008.

Solar Heat col lectors and others: Sales revenues were $2,952,514 for 2008 as compared to none for 2007. We did not account for these products as a separate segment prior to 2008. We added this segment in 2008 after we acquired SZPSP and had more sales of these products.

Cost of Revenue

The following table sets forth a breakdown of our cost of revenue for the periods indicated:

Cost of revenue:	2008		2007

Solar Heater/Biomass Stove/Boiler related products	$	20,741,274	$	21,021,407
Heat Pipe related products		12,618,787		5,181,491
Energy-saving projects		7,502,163		2,569,180
Solar Heat collectors and others		2,439,936		—
Total	$	43,302,160	$	28,772,078

Overall : Cost of revenue was $43,302,160 for 2008, an increase of $14,530,082 or 50.5% from $28,772,078 for 2007. This increase was primarily attributable to an increase in our material costs, generally in line with our increased sales revenues.

Solar Water Heaters/Biomass Stove/Boiler Related Products : Cost of revenue decreased $280,133, or 1.3%, to $20,741,274 for 2008 from $21,021,407 for 2007, mainly because we accounted for certain products under the solar heat collector and others segment in 2008 instead of this segment as we did in 2007.

Heat Pipe Related Products: Cost of revenue increased to $12, 618,787 for 2008, an increase of $7,437,296 or 143.5% from $5,181,491 for the prior year. This increase was primarily attributable to the increased cost of steel during the first nine months of 2008.

Energy-saving projects: Cost of revenue increased to $7,502,163 for 2008, an increase of $4,932,983 or 192.1% from $2,569,180 for the prior year. This increase was in line with the increase in our sales of such products in 2008.

Solar Heat collec tors and others: Cost of revenues was $2,439,936 for 2008 as compared to none for 2007 as we commenced sales of these products in 2008. We did not account for these products as a separate segment prior to 2008.

Gross Profit

The following table sets forth a breakdown of our gross profit for the periods indicated:

Gross profit:	2008		2007
Solar Heater/Boiler related products	$	4,357,289	$	5,672,443
Heat Pipe related products		1,750,929		1,820,524
Energy-saving projects		1,576,040		807,301
Solar Heat collector and others		512,578		—
Total		8,196,836	$	8,300,268

Overall : As a result of the foregoing, gross profit for 2008 was $8,196,836, compared to $8,300,268 for 2007, a decrease of $103,432 or 1.2%.

Gross margin (gross profit as a percentage of sales) in 2008 was approximately 15.9% compared to approximately 22.4% in 2007. Our profit margin decreased in 2008 primarily because a decrease in the selling prices of our products as we faced increased competition in the industry.

Solar Heater/Biomass Stove/Boiler Related Products : Gross profit from this segment decreased to $4,357,289 in 2008 from approximately $5,672,443 for 2007, or a decrease of $1,315,154 or 23.2%. The decrease in gross profit is due primarily to two factors. First, we accounted for certain products under the solar heat collector and others segment in 2008 instead of this segment as we did in 2007. Second, the selling prices were lower in 2008 as we faced increased competition from our competitors. Accordingly, our gross margin for this segment also decreased in 2008 to 18.4% as compared to 21.2% in 2007.

Heat Pipe Related Products: Gross profit on the sale of heat pipe related products decreased by $ 69,595, or 3.8%, to $1,750,929 for 2008 from $1,820,524 for 2007. Gross margin (gross profit as a percentage of sales of these products) decreased to 12.2% in 2008 from approximately 26.0% for 2007.

Energy-saving projects: Gross profit increased to $1,576,040 for 2008 from $807,300 for 2007, reflecting an increase of $768,740 or 95.2%. This increase was mainly due to the fact that we acquired SZPSP in March 2008. Gross margin (gross profit as a percentage of sales of these products), however, decreased to 17.4% in 2008 from approximately 23.9% for 2007.

Solar Heat collector and others: Gross profit was $ 512,578 for 2008 since we did not account for these products as a separate segment prior to 2008.

Operating Expenses

Operating expenses increased to $9,294,723 for 2008 as compared to $5,114,634 for 2007. This represented an increase of $4,180,089 or about 81.7%.

Depreciation and amortization increased by $889,432, or 314.5%, to $1,172,254 for 2008 from $282,822 for 2007, mainly due to our depreciation and amortization by Tianjin Huaneng and SZPSP.

Selling and distribution expenses increased to $3,995,401 for 2008 from $827,839 for 2007, representing an increase of $3,167,562, or 382.6%, due to increases in marketing and promotional expenses by our sales force, and in salary and benefits associated with the expansion of our sales force, including through our acquisition of Tianjin Huaneng and SZPSP.

General and administrative expenses increased by $123,096, or 3.1%, to $4,127,069 for 2008 from $4,003,973 for 2007. This increase included liquidated damages of approximately $523,026 paid to certain investors due to our delay in effecting a registration pursuant to our registration rights agreement with such investors in our February 2008 private placement. The increase was also attributable to the consolidation of SZPSP and expenses such as legal fees related to our February 2008 private placement.

Income (loss) from Operations:

As a result of the foregoing, income from operations for 2008 was -$1,097,887, as compared to $3,185,634, representing a decrease of $4,283,521 or 134.5%.

Total Other Income (Expenses)

Total other expenses were $3,392,972 in 2008, as compared to total other income of $154,576 for 2007. Total other expenses comprised mostly losses on non-recurring items of $3,012,488.12, including goodwill impairment of $2,314,389 related to our acquisition of SZPSP and inventory write-downs by Tianjin Huaneng of $101,799 (RMB695753) and Deli Solar (Bazhou) of $71,544 (RMB488,975) for obsolete inventories.

Income Taxes

Our income taxes decreased to $193,418 in 2008 from $615,325 in 2007, primarily due to reduced income by certain of our PRC subsidiaries.

Minority Interest

Minority Interests were $818,893 for 2008 as compared to $199,744 for 2007 due to share of profits by minority interests from consolidation with Tianjin Huaneng.

Net Income (Loss)

As a result of the foregoing, we incurred a net loss of $5,503,170 in 2008, as compared to net income of $2,525,141 for 2007.

LIQUIDITY AND CAPITAL RESOURCES

Net cash used in our operating activities was $4,637,112 for 2008, as compared to net cash provided by operations of $4,673,831 for 2007. This was mainly due to an increase in inventories, an increase in payments made in advance to suppliers, and our increased production costs for energy saving projects.

Net cash used in investing activities was $9,007,996 for 2008, as compared to $5,419,926 for 2007. The increase was due to acquisition of SZPSP, purchase of additional equity interests from Tianjin Huaneng minority shareholders and contribution to additional registered capital of Tianjin Huaneng, and the purchase of new facilities and assembly lines in connection with the SZPSP acquisition.

Net cash provided by financing activities was $10,102,656 for 2008, as compared to $2,400,306 for 2007. The increase was primarily due to the purchase of 4,691,499 shares of common stock by the investors in our February 2008 private placement and the exercise of 75,000 warrants.

We believe that current cash will be sufficient to meet anticipated working capital and capital expenditures. However, we need to require additional cash resources for future developments of business, including any investments we may decide to pursue.

Cash

Cash and cash equivalents decreased to $2,404,996 at December 31, 2008 from $5,466,637 at December 31, 2007. This was primarily due to two loans we made to Shenzhen Fuwaysun Technology Co., Ltd. in the amount of $3,000,000 and RMB3,000,000 ($424,352) and our increased spending on working capital and capital expenditures, partially offset by the net proceeds of $9,995,156 we received from the sale of stock to investors in February 2008. While we anticipate that our cash flow will be sufficient to support our operations for the next 12 months, we will need to raise additional equity capital to make further acquisitions. There can be no assurance that financing will be available to us, or that if available, that it will be available on satisfactory terms.

Accounts Receivable

During 2008, accounts receivable, net decreased by 18.9% to $ 6,040,065 from $7,453,009 at the end of 2007, primarily due to our acquisition of Tianjin Huaneng and SZPSP. Tianjin Huaneng and SZPSP both have a large balance of accounts receivable. SZPSP engages in installing energy-saving facilities and leasing the equipment facilities to customers.

We evaluate the need for an allowance for doubtful accounts based on specifically identified amounts that we believe to be uncollectible. If actual collections experience changes, revisions to the allowance may be required. Based upon the aforementioned criteria, the allowances for doubtful accounts for 2008 were $845,034, as compared to $766,795 for 2007.

Inventory

Inventories as of December 31, 2008 increased by 113.8% to $ 8,285,521 from $3,875,658 as of December 31, 2007, primarily due to the acquisition of Tianjin Huaneng and SZPSP. The inventory mainly consists of finished goods waiting for transportation or installation and unfinished energy saving projects.

Other receivables and prepayments

Other receivables and prepayments as of December 31, 2008 increased to $7,870,575 from $1,637,948 as of December 31, 2007, primarily due to our loan agreements to Fuwaysun and loan agreements to Xiongri. Other receivables and prepayments mainly consist of advances to suppliers, prepaid expenses and customers’ deposits.

Property, plant and equipment

Property, plant and equipment as of December 31, 2008 increased to $15,149,198 from $8,819,216 as of December 31, 2007 primarily due to our acquisition of Tianjin Huaneng and SZPSP. The increase is mainly contributable to an increase in buildings, plant and machinery and office equipment.

Goodwill

We recorded goodwill of $2,340,512 as of December 31, 2008, compared with $1,789,324 as of December 31, 2007. The increase was primarily due to our increased shareholding of Tianjin Huaneng and acquisition of SZPSP.

Intangible assets

Intangible assets refer to land use rights of the Company. The amount increased from $1,597,921 as of December 31, 2007 to $1,709,184 as of December 31, 2008 primarily due to our acquisition of Tianjin Huaneng and SZPSP. All of the Company’s land purchases in the PRC are considered to be leasehold land and are stated at cost less accumulated amortization and any recognized impairment loss. Amortization is provided over the term of the land use right agreement which is 50 years, on a straight-line basis.

Accounts payable

Account payable as of December 31, 2008 increased to $5,301,349 as of December 31, 2008 from $$2,111,028 as of December 31, 2007.

Income tax payables

Income tax payable of $ 1,818,488 decreased as of December 31, 2008 primarily due to our reduced income.

Other payables and accrued liabilities

Other payables and accrued liabilities as of December 31, 2008 increased to $11,190,000 from $8,552,452 as of December 31, 2007 primarily due to consolidation with SZPSP and acquisition minority interests of Tianjin. The increase mainly comprised of increases in accrued expenses, customer deposits, other payable, and deferred revenue.

Off-Balance Sheet Arrangements

We do not have any off balance sheet arrangements that are reasonably likely to have a current or future effect on our financial condition, revenues, result of operations, liquidity or capital expenditures.

ITEM 8.

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The Company’s consolidated audited financial statements for the fiscal years ended December 31, 2008 and 2007, together with the report of the independent certified public accounting firms thereon and the notes thereto, are presented beginning at page F-1.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and stockholders of

CHINA SOLAR & CLEAN ENERGY SOLUTIONS, INC.

We have audited the accompanying consolidated balance sheet of China Solar & Clean Energy Solutions, Inc. (the “Company”) as of December 31, 2008 and 2007 and the related consolidated statements of income, cash flows and changes in stockholders’ equity and comprehensive income for the years ended December 31, 2008 and 2007. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit 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 include consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in 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 also includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation. We believe that our audit provides 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 the Company as of December 31, 2008 and 2007 and the results of their operations and their cash flows for the years ended December 31, 2008 and 2007 in conformity with accounting principles generally accepted in the United States of America.

As discussed in Note 19 to the consolidated financial statements, the Company has restated its 2008 consolidated financial statements.

/s/ Cordovano and Honeck LLP

Englewood, Colorado USA

April 15, 2009, except for Note 4 and Note 19
which are dated April 12, 2010

F-1

CHINA SOLAR & CLEAN ENERGY SOLUTIONS, INC.

CONSOLIDATED BALANCE SHEETS

(Currency expressed in United States Dollars (“US$”), except for number of shares)

	As of December 31,
	2008 Restated		2007

ASSETS
Current assets:
Cash and cash equivalents	$	2,404,996	$	5,466,637
Accounts receivable, net		6,040,065		7,453,009
Inventories		8,285,521		3,875,658
Other receivables and prepayments		7,870,575		1,637,948

Lease receivables, current		156,579		-

Total current assets		24,757,736		18,433,252

Property, plant and equipment, net		15,149,198		8,819,216
Goodwill		2,340,512		1,789,324
Intangible assets, net		1,709,184		1,597,921

Customer relationships, net		1,017,500		-
Intellectual property – unpatented technology, net		869,500		-
Lease receivables, non current		654,578		-

TOTAL ASSETS	$	46,498,208	$	30,639,713

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable, trade	$	5,301,349	$	2,111,028
Income tax payables		1,818,488		1,108,433
Other payables and accrued liabilities		11,190,000		8,552,452

Total current liabilities		18,309,837		11,771,913
Deferred tax liability		15,779		-
Long-term liability		286,483		-
Total liabilities		18,612,099		11,771,913
Minority interests		194,542		935,825

Stockholders’ equity:
Convertible preferred stock: par value $0.001; 25,000,000 shares authorized, 373,000 and 1,774,194 shares issued and outstanding, respectively		373		1,774
Common stock, $0.001 par value; 66,666,667 shares authorized ; 13,799,450 and 6,205,690 shares issued and outstanding, respectively		13,799		6,205
Additional paid-in capital		23,073,258		9,260,607
Accumulated other comprehensive income		1,615,081		1,134,270
Retained earnings		2,025,950		7,529,119
Profit earning reserves		963,106		-
Total stockholders’ equity		27,691,567		17,931,975

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	46,498,20823	$	30,639,713

See accompanying notes to consolidated financial statements.

F-2

CHINA SOLAR & CLEAN ENERGY SOLUTIONS, INC.

CONSOLIDATED STATEMENTS OF INCOME

(Currency expressed in United States Dollars (“US$”))

	Years ended December 31,
	2008			2007
	Restated			As adjusted and restated
Revenue, net	$	51,498,996		$	37,072,346

Cost of revenue		43,302,160			28,772,078

Gross profit		8,196,836			8,300,268

Operating expenses:
Depreciation and amortization		1,172,253			282,822
Selling and distribution		3,995,401			827,839
General and administrative		4,127,069			4,003,973

Total operating expenses		9,294,723			5,114,634

Income from operations		(1,097,887	)		3,185,634

Other income (expenses):
Other income		197,155			220,057
Interest income		262,233			-
Other expense		(547,705	)		-
Interest expense		(292,167	)		(65,481	)
Loss on nonrecurring items		(3,012,488	)		-
Total other income (expenses)		(3,392,972	)		154,576

Income before income taxes		(4,490,859	)		3,340,210

Income tax expense		(193,418	)		(615,325	)
Minority interests		(818,893	)		(199,744	)

NET INCOME		(5,503,170	)		2,525,141

NET INCOME AVAILABLE TO COMMON STOCKHOLDERS	$	(5,503,170	)	$	1,549,334

Net income per share – basic	$	(0.45	)	$	0.25

Net income per share – diluted	$	(0.45	)	$	0.24

Weighted average shares outstanding - basic		12,158,482			6,205,290

Weighted average shares outstanding - diluted		12,158,482			6,396,697

See accompanying notes to consolidated financial statements.

F-3

CHINA SOLAR & CLEAN ENERGY SOLUTIONS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Currency expressed in United States Dollars)

	Years ended December 31,
	2008 Restated			2007
Cash flows from operating activities:
Net income	$	(5,503,170	)	$	2,525,141
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		1,497,240			324,157
Impairment for goodwill,inventory		2,702,487			-
Provision for allowance on accounts receivable		978,006			650,432
Changes in operating assets and liabilities:
Accounts receivable, trade		278,359			(7,232,995	)
Inventories		(4,648,079	)		(3,559,893	)
Other receivables and prepayments		(6,232,627	)		(250,037	)
Accounts payable, trade		3,190,321			1,963,127
Income tax payable		710,055			1,108,433
Other payables and accrued liabilities		1,571,403			8,209,641
Minority interest		818,893			935,825

Net cash provided by operating activities		(4,637,112	)		4,673,831

Cash flows from investing activities:
Acquisition of a subsidiary		(662,491	)		(489,459	)
Purchase of intangible assets		(981,283	)		(635,726	)
Purchase of property, plant and equipment		(7,364,222	)		(4,294,741	)

Net cash used in investing activities		(9,007,996	)		(5,419,926	)

Cash flows from financing activities:
proceeds from warrants exercised		107,500			(180,694	)
Capital contribution received from shareholders		9,995,156			-
Proceeds from issuance of preferred stock (net of offering costs of $169,000 paid in cash)		-			2,581,000

Net cash (used in) provided by financing activities		10,102,656			2,400,306

Foreign currency translation adjustment		480,812			600,361

NET CHANGE IN CASH AND CASH EQUIVALENTS		(3,061,641	)		2,254,572

CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR		5,466,637			3,212,065

CASH AND CASH EQUIVALENTS, END OF YEAR	$	2,404,996		$	5,466,637

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for income taxes	$	538,332		$	939,798
Cash paid for interest expenses	$	302,961		$	95,446

SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING TRANSACTIONS
Warrant shares granted for offering costs	$	541,695		$	138,338
Issuance of common stock for acquisitions of SZPSP	$	2,839,458		$	-
Issuance of warrants for the acquisitions of SZPSP	$	92,193		$	-
Preferred share converted	$	1,401		$	-

See accompanying notes to consolidated financial statements.

F-4

CHINA SOLAR & CLEAN ENERGY SOLUTIONS, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY AND COMPREHENSIVE INCOME

(Currency expressed in United States Dollars (“US$”), except for number of shares)

	Preferred stock				Common stock				Additional		Accumulated Other						Total stockholders’
	No. of		Par		No. of		Par		paid-in		comprehensive		Retained		Earning		Earning
	shares		value		Shares		Value		capital		income		earnings		reserve		reserve equity
Balance as of December 31, 2007		1,774,194	$	1,774		6,205,290	$	6,205	$	9,260,607	$	1,134,270	$	7,529,119			$	17,931,975

Shares issued for private placement, net of offering costs of $1,264,451 in cash and $541,695 in warrants.						4,691,499		4,691		9,990,465		-		-				9,995,156
Shares and warrants issued for the acquisition of subsidiary at fair value		-		-		1,419,729		1,420		2,930,231		-		-				2,931,651
Shares issued for services						7,304		7		15,185								15,192
Warrant exercised		-		-		75,000		75		107,425		-		-				107,500
Preferred share converted		-1,400,628		-1,401		1,400,628		1,401		-		-		-				-
Minority share purchased										769,345								769,345
Comprehensive income:
Net income		-		-		-		-		-		-		-5,503,170				-5,503,170
Foreign currency translation adjustment		-		-		-		-		-		480,811		-				480,812
Profit earning reserves																963,106		963,106
Balance as of December 31, 2008		373,566	$	373		13,799,450	$	13,799	$	23,073,258	$	1,615,081	$	2,025,950	$	963,106		27,691,567

See accompanying notes to consolidated financial statements.

F-5

CHINA SOLAR & CLEAN ENERGY SOLUTIONS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Currency expressed in United States Dollars (“US$”))

1.	ORGANIZATION AND BUSINESS BACKGROUND

China Solar & Clean Energy Solutions, Inc. (“China Solar”), formerly known as Deli Solar (USA) Inc. was incorporated in the State of Nevada on March 21, 1983 as Meditech Pharmaceuticals, Inc. (“Meditech”). In late 2004, the Board of Directors of Meditech contemplated a strategic reorganization with Deli Solar Holding Ltd., a corporation organized in the British Virgin Islands (“Deli Solar (BVI)”). In contemplation of the reorganization, the Board of Directors resolved to spin off Meditech's drug development business to the shareholders of Meditech of record on February 17, 2005, through a pro rata distribution in the form of a stock dividend. The spin-off was completed on August 29, 2005. The acquisition of Deli Solar (BVI) was accounted for as a recapitalization of Deli Solar (BVI).

Deli Solar (BVI) was formed in June 2004. On August 1, 2004, Deli Solar (BVI) purchased Bazhou Deli Solar Energy Heating Co., Ltd. (“Deli Solar (Bazhou)”), a corporation duly organized under the laws of the People’s Republic of China (“PRC”) from Messrs. Deli Du, Xiao'er Du, and Xiaosan Du for RMB 6,800,000. As a result of this transaction, Deli Solar (Bazhou) became a wholly-foreign owned enterprise ("WFOE") under PRC law on March 30, 2005. This acquisition was accounted for as a transfer of entities under common control.

Deli Solar (Bazhou) was incorporated on August 19, 1997 under the laws of the PRC. In the PRC, Ltd, or Limited, is equivalent to Inc, or Incorporated, in the United States (“US”).

The result of the above transactions is that Deli Solar (BVI) is now our direct, wholly-owned subsidiary and Deli Solar (Bazhou) remains a wholly-owned subsidiary of Deli Solar (BVI).

On November 21, 2005 Deli Solar (Bazhou) acquired Ailiyang Solar Energy Technology Co., Ltd. (“Ailiyang”), an entity formerly controlled by the owners of Deli Solar (Bazhou). The transaction was accounted for as a transfer of entities under common control.

Beijing Deli Solar Technology Development Co., Ltd. (“Deli Solar (Beijing)”) was founded in 2006 and is principally engaged in solar power heater integrated construction projects in major cities in the PRC.

During 2007, the Company set up a branch sales office in the cities of Lian Yun Gang and the City of Bazhou to provide sales support in those cities as sole-proprietorship of its chief executive officer and president, Mr. Deli Du. The sole proprietorships are considered variable interest entities because they (1) lack equity sufficient to finance their activities without additional subordinated financial support and (2) the Company, and not Mr. Deli Du, absorbs the losses or receives the gains.

Based upon a review of the provisions of FIN 46R, the structure of the agreements and activities of the entities described above, the Company determined that it is the primary beneficiary of the sole proprietorships at December 31, 2007. If the facts and circumstances change in the future, the Company could determine that it is no longer the primary beneficiary, which would require China Solar to de-consolidate the sole-proprietorships. The Company's investment in the sole-proprietorships was immaterial as of December 31, 2007.

On July 1, 2007, Deli Solar (Beijing) acquired 51% of Tianjin Hua Neng Energy Equipment Company (“Tianjin Huaneng”), which manufactures energy saving boilers and environmental protection equipment for industrial customers. The transaction was accounted for under the purchase method. See Note 2.

On April 1, 2008, Beijing Deli Solar Technology Development Co., Ltd (“Deli Solar (Beijing)”) acquired 100% of Shenzhen Pengsangpu Solar Industrial Products Corporation (“SZPSP”), which is engaged in the re-sale of energy-saving related heating products such as heat pipes, heat exchangers, pressure water boilers, solar energy heaters and raditors. The transaction was accounted for under the purchase method. See Note 2.

On October 27, 2008, Deli Solar (Beijing), entered into an agreement to acquire approximately 29.97% of the outstanding equity interest of Tianjin Huaneng, from the minority shareholders of Tianjin Huaneng.

As a result of the consummation of the agreement and the additional capital contribution, the Company owns approximately 91.82% of the equity interest in Tianjin Huaneng.

China Solar, Deli Solar (BVI), Deli Solar (Bazhou), Ailiyang, Deli Solar (Beijing), Tianjin Huaneng, SZPSP are hereinafter referred to as (“the Company”).

F-6

CHINA SOLAR & CLEAN ENERGY SOLUTIONS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Currency expressed in United States Dollars (“US$”))

2.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of presentation

These accompanying financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“US GAAP”).

Basis of consolidation

The consolidated financial statements include the financial statements of China Solar, Deli Solar (BVI), Deli Solar (Bazhou), Ailiyang, Deli Solar (Beijing), Tianjin Huaneng, Shenzhen Pengsangpu and the VIE.

The Company adopted the provisions of Financial Accounting Standards Board Interpretation No. 46R, “Consolidation of Variable Interest Entities” (“FIN 46R”). The sole-proprietorship business in the name of Mr. Deli Du is regarded a VIE of the Company and is consolidated in the Company’s financial statements. The Company evaluates its relationship with other entities to identify whether they are variable interest entities, as defined by Financial Accounting Standards Board (FASB) Interpretation No. 46 (revised), "Consolidation of Variable Interest Entities" (FIN 46R), and assesses whether it is the primary beneficiary of such entities. If the determination is made that the Company is the primary beneficiary, then that entity is included in the Company's Consolidated Financial Statements in accordance with FIN 46R.

All significant intercompany balances and transactions within the Company have been eliminated upon consolidation.

Use of estimates

In preparing these financial statements, management makes estimates and assumptions that affect the reported amounts of assets and liabilities in the balance sheets and revenues and expenses during the years reported. Actual results may differ from these estimates.

Cash and cash equivalents

The Company considers all highly liquid securities with original maturities of three months or less when acquired to be cash equivalents. At December 31, 2008 and 2007, the Company had $2,404,996 and $5,466,637, respectively, in cash equivalents.

Accounts receivable and allowance for doubtful accounts

Accounts receivable consists of amounts due from customers. The Company extends unsecured credit to its customers in the ordinary course of business but mitigates the associated risks by performing credit checks and actively pursuing past due accounts. An allowance for doubtful accounts is established and determined based on management’s assessment of known requirements, aging of receivables, payment history, the customer’s current credit worthiness and the economic environment.

Inventories

Inventories include direct materials, labor and factory overhead and are stated at lower of cost or market value, cost being determined on a first-in, first-out basis. The Company periodically reviews historical sales activity to determine excess, slow moving items and potentially obsolete items and also evaluates the impact of any anticipated changes in future demand. The Company provides inventory allowances based on excess and obsolete inventories determined principally by customer demand. As of December 31, 2008, and 2007, the Company recorded $246,408 and $0 in write-offs.

F-7

CHINA SOLAR & CLEAN ENERGY SOLUTIONS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Currency expressed in United States Dollars (“US$”))

Property, plant and equipment

Property, plant and equipment are stated at cost less accumulated depreciation and accumulated impairment losses, if any. Depreciation is calculated on the straight-line basis over the following expected useful lives from the date on which they become fully operational and after taking into account their estimated residual values. Property, plant and equipment are depreciated over their estimated useful lives as follows:

	Depreciable life	Residual value
Buildings	6-50 years		3~5	%
Plant and machinery	10 years		3~5	%
Office equipments	7 years		3~5	%
Motor vehicles	7 years		3~5	%
Computer equipment	3 years		3~5	%

Construction-in-progress

All facilities purchased for installation, self-made or subcontracted are accounted for under construction-in-progress. Construction-in-progress is recorded at acquisition cost, including cost of facilities, installation expenses and the interest capitalized during the course of construction for the purpose of financing the project. Upon completion and readiness for use of the project, the cost of construction-in-progress is to be transferred to fixed assets.

Goodwill and intangible assets

Furthermore, SFAS No. 142 requires purchased intangible assets other than goodwill to be amortized over their useful lives unless these lives are determined to be indefinite. Purchased intangible assets are carried at cost less accumulated amortization. No impairment of intangibles has been identified since the date of acquisition. All lands in the PRC are owned by the PRC government. The government in the PRC, according to the relevant PRC law, may sell the right to use the land for a specified period of time. Thus, all of the Company’s land purchases in the PRC are considered to be leasehold land and are stated at amortized cost. Amortization is provided over the term of the land use right agreements on a straight-line basis, which is 50 years and they will expire in 2048, 2051 and 2054.

Impairment of long-lived assets

In accordance with SFAS No. 144, “ Accounting for the Impairment or Di sposal of Long-Lived Assets” , a long-lived assets and certain identifiable intangible assets held and used by the Company are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is evaluated by a comparison of the carrying amount of assets to estimated undiscounted net cash flows expected to be generated by the assets. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amounts of the assets exceed the fair value of the assets. There has been no impairment as of December 31, 2008 and 2007.

F-8

CHINA SOLAR & CLEAN ENERGY SOLUTIONS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Currency expressed in United States Dollars (“US$”))

Revenue recognition

The Company’s sales include furnishing solar equipment to end users, installing and testing the equipment and providing maintenance. Revenue is recognized after testing and acceptance by the customer if a formal relationship exists, the price is fixed or determinable, no other significant obligations of the Company exists and collectability is reasonably assured.

The Company provides equipment purchasers with a maintenance warranty ranging from one year to eighteen months. The Company accrues expected warranty costs at the time the related sales revenue is recognized. Warranty reserves have been established by charging cost of sales and recording a warranty provision. The reserves are estimated by management to be adequate to cover expected warranty related costs under unexpired warranty periods.

Revenue from the provision of energy-saving projects are recognized when persuasive evidence of an arrangement exists, transfer of title has occurred or services have been rendered, the selling price is fixed or determinable and collectability is reasonably assured.

Project revenue under sales-type leases

In accordance with SFAS No. 13, "Accounting for Leases", the Company recognizes interest income over the lease term so as to produce a constant rate of return on the net investment in the lease using effective interest method.

Under sales-type leases, the Company also recognizes a profit (or loss) at the beginning of the lease term.

Sales revenue should be recorded for the fair value of the leased asset, or, if lower, the present value of the minimum lease payments, computed using the interest rate implicit in the lease. Cost of sales should be recorded for the carrying amount of the leased asset, less the present value of the unguaranteed residual value.

The Company recognizes its revenues net of value-added taxes (“VAT”). The Company is subject to VAT which is levied on the majority of the products at the rate of 17% on the invoiced value of sales. Output VAT is borne by customers in addition to the invoiced value of sales and input VAT is borne by the Company in addition to the invoiced value of purchases to the extent not refunded for export sales.

Cost of revenue

Cost of revenue consists primarily of material costs, direct labor, inbound freight charges, depreciation and manufacturing overheads, which are directly attributable to the manufactured products and the provision of the energy-saving projects. Additionally, costs of revenue includes purchasing, and receiving costs, inspection costs, warehousing costs and costs associated with distribution networks.

Operating expenses

Selling and distribution expenses consist primarily of non-cash sales promotions, outbound distribution, traveling and transportation expenses, and agency administration expenses. The nature of outbound distribution, traveling, and transportation expenses includes outbound shipping and handling costs related to the sale of our products. It is our Company’s accounting policy to differentiate outbound shipping costs from inbound shipping costs. Inbound shipping costs are capitalized in inventory and charged to costs of sales at the time revenue is recognized. Outbound shipping and handling costs recorded in selling and distribution expense totaled $515,363 and $177,413, for the years ended December 31, 2008 and 2007, respectively. General and administrative expenses include advertising expenses and salaries and benefits.

Advertising expenses

Advertising costs are expensed as incurred in accordance with the American Institute of Certified Public Accountants (“AICPA”) Statement of Position 93-7, “ Reporting for Advertising Costs” . Advertising expenses for the years ended December 31, 2008 and 2007 were $1,423,914 and $1,415,493, respectively.

Retirement plan costs

Contributions to retirement schemes (which are defined contribution plans) are charged to general and administrative expenses in the accompanying consolidated statements of operations as the related employee service is provided.

Comprehensive income

SFAS No. 130, “ Reporting Comprehensive Income” , establishes standards for reporting and display of comprehensive income, its components and accumulated balances. Comprehensive income as defined includes all changes in equity during a period from non-owner sources. Accumulated other comprehensive income, as presented in the accompanying statement of changes in owners’ equity consists of changes in unrealized gains and losses on foreign currency translation. This comprehensive income is not included in the computation of income tax expense or benefit.

F-9

CHINA SOLAR & CLEAN ENERGY SOLUTIONS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Currency expressed in United States Dollars (“US$”))

Income taxes

The Company accounts for income tax using SFAS No. 109 “ Accounting for Income Taxes” , which requires the asset and liability approach for financial accounting and reporting for income taxes. Under this approach, deferred income taxes are provided for the estimated future tax effects attributable to temporary differences between financial statement carrying amounts of assets and liabilities and their respective tax bases, and for the expected future tax benefits from loss carry-forwards and provisions, if any. Deferred tax assets and liabilities are measured using the enacted tax rates expected in the years of recovery or reversal and the effect from a change in tax rates is recognized in the statement of operations and comprehensive (loss) income in the period of enactment. A valuation allowance is provided to reduce the amount of deferred tax assets if it is considered more likely than not that some portion of, or all of the deferred tax assets will not be realized.

Net income per share

The Company calculates net income per share in accordance with SFAS No. 128, “ Earnings per Share.” Basic income per share is computed by dividing the net income by the weighted-average number of common shares outstanding during the period. Diluted income per share is computed similar to basic income per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common stock equivalents had been issued and if the additional common shares were dilutive.

Foreign currency translation

The reporting currency of the Company is United States dollar (“US$”). Transactions denominated in currency other than US$ are translated into US$ at the average rate for the period. Monetary assets and liabilities denominated in currency other than US$ are translated into US$ at the rates of exchange ruling at the balance sheet date. The resulting exchange differences are recorded in other expenses in the accompanying statements of operations.

The financial records of the Company’s operating subsidiaries are maintained in their local currency, the Renminbi (“RMB”), which is the functional currency. Assets and liabilities are translated at the exchange rates at the balance sheet date, equity accounts are translated at historical exchange rates, and income and expenses items are translated using the average rate for the period. The translation adjustments are recorded in accumulated other comprehensive income in the statements of changes in stockholders’ equity and comprehensive income.

Stock based compensation

Prior to January 1, 2006, we accounted for stock-based compensation using the intrinsic value method prescribed in Accounting Principles Bulletin No. 25, Account ing for Stock Issued to Employees , or APB No. 25 and related interpretations. Compensation expense for stock options was recognized ratably over the vesting period.

F-10

CHINA SOLAR & CLEAN ENERGY SOLUTIONS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Currency expressed in United States Dollars (“US$”))

Effective January 1, 2006, we adopted the fair value recognition provisions of Financial Accounting Standards Board, or FASB, Statement of Financial Accounting Standards, Share-Based Paymen t , or SFAS No. 123(R) using the modified prospective application method. Under SFAS No. 123R, stock-based compensation expense is measured at the grant date based on the value of the option or restricted stock and is recognized as expense, less expected forfeitures, over the requisite service period.

Product Warranty

The Company provides a three-year standard warranty to all Deli Solar (Bazhou) manufactured products. Repair and replacement of defective component parts during the first year following purchase are covered under the standard warranty program. In the second and third year, repair services are covered under the warranty program but customers pay for the purchase of the replacement parts. Warranty services are performed by our independent sales agents and distributors in return for a 1%-2% discount of the purchase price they pay for our products. No discount is provided to independent sales agents and distributors unless and until warranty services are provided to the Company. The Company has not experienced any material returns and therefore has not provided any discount to independent sales agents and distributors for warranty services.

Under the terms of the contracts for energy-saving projects, the Company provides a product warranty on the equipment sold to its customers for a period of twelve months upon the completion of installation at the Company’s expense.

The Company has not experienced any material returns where it was under obligation to honor this standard warranty provision. As such, no reserve for product warranty has been provided in the statements of operations for the years ended December 31, 2008 and 2007, respectively.

Segment reporting

SFAS No. 131 “ Disclosures about Segments of an Enterprise and Related Information” establishes standards for reporting information about operating segments on a basis consistent with the Company’s internal organization structure as well as information about geographical areas, business segments and major customers in financial statements. The Company operates in four principal reportable segments: Sales of solar heater or boiler related products, heat pipe related products, Energy-saving projects, and Solar heater collector and others.

Fair value of financial instruments

The Company values its financial instruments as required by SFAS No. 107, “ Disclosures about Fair Value of Financial Instruments” . The estimated fair value amounts have been determined by the Company, using available market information and appropriate valuation methodologies. The estimates presented herein are not necessarily indicative of amounts that the Company could realize in a current market exchange.

The Company’s financial instruments primarily include cash and cash equivalents, accounts receivable, other receivables and prepayments, accounts payable, other payables and accrued liabilities. As of the balance sheet date, the estimated fair values of financial instruments were not materially different from their carrying values as presented due to short maturities of these instruments.

F-11

CHINA SOLAR & CLEAN ENERGY SOLUTIONS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Currency expressed in United States Dollars (“US$”))

Registration payment arrangements

The Company accounts for registration payment arrangement in accordance with FASB Staff Position EITF 00-19-2, Accounting for Registration Payment Arrangements ("FSP EITF 00-19-2") which provides guidance on the accounting for registration payment arrangements. FSP EITF 00-19-2 specifies that the contingent obligation to make future payments or otherwise transfer consideration under a registration payment arrangement, whether issued as a separate agreement or included as a provision of a financial instrument or other agreement, should be separately recognized and measured in accordance with FASB Statement No. 5, Accounting for Contingencies. A registration payment arrangement is defined in FSP EITF 00-19-2 as an arrangement with both of the following characteristics: (1) the arrangement specifies that the issuer will endeavor (a) to file a registration statement for the resale of specified financial instruments and/or for the resale of equity shares that are issuable upon exercise or conversion of specified financial instruments and for that registration statement to be declared effective by the Securities and Exchange Commission within a specified grace period, and/or (b) to maintain the effectiveness of the registration statement for a specified period of time (or in perpetuity); and(2) the arrangement requires the issuer to transfer consideration to the counterparty if the registration statement for the resale of the financial instrument or instruments subject to the arrangement is not declared effective or if effectiveness of the registration statement is not maintained.

Uncertain tax positions

The Company adopted Financial Accounting Standards Board Interpretation No. 48, “ Accounting for Uncertainty in Income Taxes” (“FIN 48”), on January 1, 2007. FIN 48 prescribes a more likely than not threshold for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. This Interpretation also provides guidance on derecognition of income tax assets and liabilities, classification of current and deferred income tax assets and liabilities, accounting for interest and penalties associated with tax positions, accounting for income taxes in interim periods, and income tax disclosures.

The Company or one of its subsidiaries files income tax returns in the U.S. federal jurisdiction and foreign jurisdictions, principally the PRC. With few exceptions, the Company is no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations by tax authorities for years prior to the reverse merger on March 31, 2005. The Internal Revenue Service (IRS) has not commenced any examinations of the Company's U.S. income tax returns for the year 2005, of which reverse merger taking place, through 2008.

The Company did not have any adjustment to the opening balance of retained earnings as of January 1, 2007 as a result of the implementation of FIN 48. As of December 31, 2008, the Company did not have any significant liability for unrecognized tax benefits. For the year ended December 31, 2008, the Company did not have any interest accrued related to unrecognized tax benefits in interest expense and penalties in operating expenses.

3. RECENTLY ISSUED ACCOUNTING STANDARDS

In 2008, the Securities and Exchange Commission (the “SEC”) adopted rule amendments that replace the category of “Small Business Issuers” with a broader category of “Smaller Reporting Companies.” Under these rules, a "Smaller Reporting Company" is a company with a public floats less than $75,000,000 (measured at end of Q2). Companies that meet this definition are able to elect "scaled disclosure standards" on an item-by-item or "a-la-carte" basis. With this change, the SEC has streamlined and simplified reporting for many companies, and has not added any significant disclosure requirements.

In February 2007, the FASB issued Statement of Financial Accounting Standard No. 159, “ The Fair Value Option for Financial Assets and Financial Liabilities” , or SFAS 159. SFAS 159 permits companies to choose to measure many financial instruments and certain other items at fair value. It is expected to expand the use of fair value measurements which is consistent with the Financial Accounting Standards Board’s long-term measurement objectives for accounting for financial instruments. SFAS 159 is effective for our first fiscal year that begins after November 15, 2007, which is our fiscal year 2008 that begins in January 2008. The Company is currently evaluating the impact of this statement to its financial position and results of operations.

F-12

CHINA SOLAR & CLEAN ENERGY SOLUTIONS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Currency expressed in United States Dollars (“US$”))

In December 2007, the FASB issued SFAS No. 141 (Revised 2007), ‘’ Business Combinations ’’ , or SFAS No. 141R. SFAS No. 141R will change the accounting for business combinations. Under SFAS No. 141R, an acquiring entity will be required to recognize all the assets acquired and liabilities assumed in a transaction at the acquisition-date fair value with limited exceptions. SFAS No. 141R will change the accounting treatment and disclosure for certain specific items in a business combination. SFAS No. 141R applies prospectively to business combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. Accordingly, any business combinations we engage in will be recorded and disclosed following existing GAAP until January 1, 2009. We expect SFAS No. 141R will have an impact on accounting for business combinations once adopted but the effect is dependent upon acquisitions at that time. We are still assessing the impact of this pronouncement.

In December 2007, the FASB issued SFAS No. 160, "Noncontrolling Interests in Consolidated Financial S tatements — An Amendment of ARB No. 51 ’’ , or SFAS No. 160. SFAS No. 160 establishes new accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. SFAS No. 160 is effective for fiscal years beginning on or after December 15, 2008. We believe that SFAS 160 should not have a material impact on our financial position or results of operations.

4. ACQUISITION

On May 18, 2007, the Company’s wholly owned subsidiary, Beijing Deli Solar Technology Development Co., Ltd. entered into a purchase agreement to acquire 51% equity interest in Tianjin Huaneng, to expand market share, held by Tianjin Municipal Ji County State-owned Assets Administration Commission for a total purchase price of $3,149,147. By supplemental agreement dated August 8, 2007, the purchase price was reduced to approximately $1,689,741. The Company also incurred additional cost of $769,418 related to finder’s fee, which has been included in the total cost of the acquisition of $2,459,159. The finder’s fee was paid to Tianjin Wangshitong Corporate Consulting Co, Ltd., an unrelated third party. As of December 31, 2007, the Company paid approximately $2,345,018 of the purchase price and the finder’s fee. The remaining balance as of the date of this report was $114,141. In addition, the Company agreed to provide working capital of approximately $2.6 million to Tianjin Huaneng. The accounting date of the acquisition was July 1, 2007 and was accounted for under the purchase method. Tianjin Huaneng results of operations have been included in our consolidated financial statements since the date of acquisition. Tianjin Huaneng is principally engaged in the design, development and manufacturing and marketing of energy-saving related heating products such as heat pipes, heat exchangers, specialty heating pipes and tubes, high temperature hot blast stoves, heating filters, normal pressure water boilers, solar energy water heaters and radiators. These products are distributed in the PRC and Southeast Asia. Goodwill recorded as part of the purchase price allocation was $1,708,665. Identifiable intangible assets acquired as part of the acquisition included definite-lived intangibles such as land use rights which totaled $256,157, with a weighted average amortization period of approximately 50 years.

The aggregate purchase price was $2,459,159, including $1,689,741 of cash and costs related to the acquisition of $769,418. Below is a summary of the total purchase price:

Cash	$	1,689,741
Direct acquisition costs		769,418

Total purchase price	$	2,459,159

In June 2008, the purchase price allocation was finalized which resulted to no adjustment to the fair value of assets acquired and liabilities assumed. The following table represents the final purchase price allocation to the estimated fair value of the assets acquired and liabilities assumed:

	As of July 1, 2007
Cash and cash equivalents	$	196,150
Accounts receivable		2,362,792
Inventories		1,665,617
Prepayments and other receivables		441,882
Property, plant and equipment		589,985
Land use rights		256,157
Goodwill		1,789,324
Total assets acquired	$	7,301,907
Short-term bank loan	$	588,899
Accounts payable		573,479
Deferred revenue		340,856
Advances from customers		1,326,665
Value-added tax payable		440,207
Income taxes payable		458,705
Deferred tax liabilities		16,059
Accrued liabilities and other payables		716,188
Long-term payables		381,690
Total liabilities assumed		4,842,748
Net assets acquired	$	2,459,159

Cash Purchase Price : Under the agreement, Deli Solar (Beijing) agreed to pay to the Tianjin Huaneng shareholders RMB 10.68 million ($1,557,578 US Dollars) payable in cash within seven days of the execution of the agreement. But, of this aggregate amount, RMB 3.56 million ($515,026) was actually paid at the completion of the acquisition, the remaining RMB 7.12 million ($1,047,611) was not be paid as of December 31, 2008, and included other payable in the balance sheet for December 31, 2008. In addition, the Company agreed to pay to the Tianjin Huaneng shareholders RMB 2.848 million ($416,703) payable in cash in three installments, which will be respectively RMB890, 000, RMB890, 000 and RMB1, 068, 000 in the first year, in the second year and the third year at the completion of the acquisition.

Warrants Purchase Price : In addition to the cash purchase price, the Company also agreed to issue to the Tianjin Huaneng shareholders a total of 1,000,000 five year warrants to purchase the Company’s common stock at an exercise price of $1.10 per share, please refer note 11, as this is where the valuation information is reported.

In addition, the Company decided to increase its equity interest in Tianjin Huaneng by contributing an additional RMB 15,740,000 ($2,295,531 US Dollars) to the registered capital of Tianjin Huaneng.

As a result of the consummation of the agreement and the additional capital contribution, the Company owns approximately 91.82% of the equity interest in Tianjin Huaneng.

F-13

CHINA SOLAR & CLEAN ENERGY SOLUTIONS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Currency expressed in United States Dollars (“US$”))

The $1,789,324 of goodwill was assigned to the heat solar and related products segment. The company does not expect goodwill to be tax deductible in the PRC.

The following unaudited pro forma financial information for the Company gives effect to the 2007 acquisition as if they had occurred on January 1, 2007. These pro forma results do not purport to be indicative of the results of operations which actually would have resulted had the acquisitions occurred on such date or to project the Company’s results of operations for any future period.

	Years ended December 31,
	2008			2007

Pro forma net sales	$	53,683,651		$	46,937,497

Pro forma net income		(4,163,332	)		2,480,272

Pro forma earnings per common share — net income
Basic	$	(0.34	)	$	0.20
Diluted	$	(0.34	)	$	0.20

Weighted average common shares outstanding
Basic		12,158,482			12,316,518
Diluted		12,158,482			12,699,332

On January 9, 2008 and March 25, 2008 Beijing Deli Solar Technology Development Co., Ltd., the Company’s wholly-owned subsidiary (“Deli Solar (Beijing)”), entered into an Equity Purchase Agreement, a Complementary Agreement and a Supplementary, with Shenzhen PengSangPu Solar Industrial Products Corporation (“SZPSP”) and its shareholders to acquire 100% of the outstanding equity interests of SZPSP from its three current shareholders. The closing will be effective March 31, 2008.

Under the agreements, Deli Solar (Beijing) agreed to purchase the 100% equity interest of SZPSP from its current three shareholders. Part of the consideration of the transaction is RMB 28.8 million ($4,087,832) payable in cash. This purchase price is based on an appraisal of SZPSP. The three shareholders of SZPSP agreed to loan the cash proceeds back to SZPSP interest free to be used for working capital. Fifty (50%) of the principal amount of the loan is required to be paid prior to March 31, 2009 and the remaining 50% balance is required to be paid prior to March 31, 2010.

In addition to the payment of the cash purchase price under the Complementary Agreement the parties agreed to an appraisal value of RMB 20 million of SZPSP’s intangible assets which was paid in 1,419,729 shares of common stock. Provided that if on the first anniversary of the closing the common stock price is lower than $2, the Company will pay the difference. Fifty percent (50%) of these shares shall be transferable and unrestricted within one year after the Closing and the remaining Fifty percent (50%) transferable within two years. The shares shall be transferred to SZPSP within 180 days of the closing. In addition, as part of the purchase price, the shareholders of SZPSP will receive five years warrants to purchase a total of 141,973 shares of common stock at an exercise price of $2.5 per share subject to future adjustments such as stock splits and transactions similar in nature.

SZPSP warranted in the Complementary Agreement that if (i) its sales revenue is less than RMB 99 million (approximately $13,670,068) with an after-tax net profit of less than RMB 9.43 million (approximately $1,302,108) for the year ended December 31, 2008; or (ii) if in the year ended December 31, 2009, it does not reach the targeted sales revenue of RMB 143.9 million (approximately $19,868,336) or the after-tax net profit of RMB 12.13 million (approximately $1,674,789), the differential part that has not achieved the profit for the year specified will be paid by reducing the amount payable on the shareholders’ loan. If the shareholders’ loan is not sufficient to pay the difference, the common shares held by SZPSP will be returned to us to the extent necessary for the remaining balance. For the year ended December 31, 2008, RMB 7 million (approximately $1,029,336) has been accrued to reduce the amount payable on the shareholders’ loan.

F-14

The current shareholders of SZPSP, being the management of SZPSP, will enter into employment contracts with the Company for a term of three years to remain in their current managing positions of SZPSP, subject to further amendments of such employment arrangement.

After the Closing, Deli Solar (Beijing) has the right to a majority of the board seats of SZPSP.

The accounting date of the acquisition was April 1, 2008 and was accounted for under the purchase method. SZPSP results of operations for the nine months ended December 31, 2008 have been included in consolidated financial statements. The acquisition of SZPSP will enable the Company to immediately begin leveraging its technology and engineering capabilities and expertise, and will significantly expand China Solar’s customer base and present a commercial and industrial market opportunity for solar water heaters in southern China.

The estimated aggregate purchase price was $7,019,483. Below is a summary of the total purchase price:

Cash			4,087,832
Fair value of 1,419,729 common stock			2,839,458
Fair value of 141,973 warrants			92,193
Total purchase price			7,019,483

Our purchase price allocation for the SZPSP acquisition was finalized on June 30, 2008. The following table represents the final purchase price allocation to the estimated fair value of the assets acquired and liabilities assumed:

	As of April 1, 2008
	(Unaudited)
Cash and cash equivalents		87,316
Restricted cash		84,304
Accounts receivable, net	$	510,269
Inventories		325,429
Net investment in sales-type leases		966,806
Prepayments and other receivables		217,606
Property, plant and equipment		1,275,287
Customer relationships		1,100,000
Intellectual property		1,250,000
Goodwill		3,055,769
Total assets acquired	$	8,872,786

Short-team bank loan		710,668
Accounts payable		908,124
Deferred revenue		23,217
Accrued liabilities and other payables		211,294
Total liabilities assumed		1,853,303
Net assets acquired	$	7,019,483

The $3,055,769 of goodwill was expected to be assigned to the solar heater/boiler related products segment and a new segment of energy-saving projects. The Company does not expect goodwill to be tax deductible in the PRC. Of the $2,350,000 of acquired intangible assets, $310,000 was assigned to in-process research and development which was written off during the nine months ended December 31, 2008, $940,000 was assigned to existing intellectual property, and $1,100,000 was assigned to customer relationships. The acquired identifiable intangibles assets have a weighted-average amortization period totaling approximately 10 years and residual value totaling approximately $0.

The fair value of the IPRD was derived using a discounted cash flow method. Management analyzed expected future revenues from product sales and thereafter based on the research and development being underway at the date of acquisition. Technology feasibility was determined based on management review of the product life spans and also the rate of change in the industry. Based on the analysis management made assumptions as to the portion of product revenue going forward which would be derived from products based on current research and development. The significant assumptions with respect to the percentage of revenues going forward from products based on IPRD are as outlined in the following table:

F-15

	2008			2009			2010			2011			2012
Break down of Revenue - IPRD versus products		90	%		80	%		75	%		70	%		65	%
Existing products		10	%		20	%		25	%		30	%		35	%
IPRD		100	%		100	%		100	%		100	%		100	%

Upon further review, certain R&D underway was later determined to not warrant completion and that future products based on the R&D were discontinued given the demand in the market.

Our internal technology specialists did a scientific and technological evaluation of the research expenditures of Shenzen Pengsangpu Solar Industrial Products Corporation. Our evaluation was based on a number of factors, including,

1) Commercial viability of products being researched and developed

2) Anticipated level of patent protection

3) Competitive environment for products being researched and developed

At the date of acquisition, the technology feasibility has not been established and there is no alternative future use. Through this evaluation we determined that $310,000 of expenditures had no future value and accordingly should be written off immediately.

The property, plant and equipment acquired consists of plant machinery and equipment, motor vehicles and leasehold improvements with estimated depreciable lives of 5 years and residual value is 10% of the cost of assets.

The following unaudited pro forma financial information gives effect to the acquisition of Shenzhen PengSangPu Solar Industrial Products Corporation as if the acquisition occurred on January 1, 2008. These pro forma results do not purport to be indicative of the results of operations which actually would have resulted had the acquisitions occurred on such date or to project the Company’s results of operations for any future period.

	For the Year Ended
	December 31, 2008
	(Unaudited)
Pro forma revenues	$	54,077,571
Pro forma net loss	$	(4,163,333	)

Pro forma loss per common share
Basic and diluted	$	(0.34	)

Weighted average common shares outstanding		12,158,482

5. ACCOUNTS RECEIVABLE, NET

The majority of the Company’s sales are on open credit terms and in accordance with terms specified in the contracts governing the relevant transactions. The Company evaluates the need of an allowance for doubtful accounts based on specifically identified amounts that management believes to be uncollectible. If actual collections experience changes, revisions to the allowance may be required.

	As of December 31,
	2008			2007

Accounts receivable, cost	$	6,885,099		$	8,219,804
Less: allowance for doubtful accounts		(845,034	)		(766,795	)

Accounts receivable, net	$	6,040,065		$	7,453,009

For the year ended December 31, 2008, there is no recorded reversal of the allowance for doubtful accounts. For the year ended December 31, 2008, the Company recorded allowance for doubtful accounts of $ 845,034.

F-16

CHINA SOLAR & CLEAN ENERGY SOLUTIONS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Currency expressed in United States Dollars (“US$”))

6. INVENTORIES

Inventories consisted of the following:

	As of December 31,
	2008		2007

Raw materials	$	1,443,266	$	656,605
Consumables		4,320		5,359
Work-in-process		21,269		2,464,441
Finished goods		6,816,666		749,253

Inventories	$	8,285,521	$	3,875,658

During the year 2008, we make impairment test for inventory, and recognized impairment loss for Bazhou and Tianjin Huaneng respectively for: $71,544 and $174,864.

7. OTHER RECEIVABLES AND PREPAYMENTS

Other receivables and prepayments consisted of the following:

	As of December 31,
	2008		2007

Advance to suppliers	$	1,389,998	$	493,421
Notes receivable		727,175		-
Prepaid expenses		159,089		249,598
Income tax receivable		195,549		894,268
Other receivables		5,398,764		661

Other receivables and prepayments	$	7,870,575	$	1,637,948

During the year ended December 31, 2006, the Company received the amount of $82,639 being the settlement of related party receivables for an advance to one of the Company’s directors. Related party receivable as of December 31, 2008 and 2007 were in the amounts of $-0- and $-0- respectively.

Following please find the detail information for other receivables:

F-17

Shenzhen Fuwaysun Technology Co., Ltd.

On January 21, 2008, we entered into a letter of intent (“LOI”) with Mr. Caowei Liang, Ms. Xuemei Mo and Mr. Huafeng Mo (the “Fuwaysun Shareholders”), the three shareholders holding the entire equity interests of Shengzhen Fuwaysun Technology Co., Ltd. (“Fuwaysun”), a PRC company primarily engaged in the development and production of solar pest killing lamps and transportable solar generators. Pursuant to the LOI, we will acquire 60% of Fuwaysun’s entire equity interests (the “Acquisition”) from the Fuwaysun Shareholders at a purchase price equal to 60% of Fuwaysun’s audited net assets as of January 30, 2008 (the “Purchase Price”). We will pay the purchase price with cash and our shares as to be agreed by the parties.

In April, 2008, we entered into two loan agreements with Fuwaysun (the “Loan Agreements”), pursuant to which we made two loans to Fuwaysun as working capital for six months, one for $3,000,000 and the other for RMB3,000,000 ($424,352) (the “Loans”), respectively. The Loan Agreements are substantially identical, except for the amounts of the loans. Pursuant to the Loan Agreements, if we complete the Acquisition within six months, we will cancel the Loans to offset the Purchase Price; if we cannot complete the Acquisition within six months, Fuwaysun must repay the Loans with 30 days after the expiration of the six months plus interest on the Loans at a rate of 12% per annum. However, if Fuwaysun refuses to our Acquisition, Fuwaysun shall repay the Loans plus accrued interest at a rate of 20% per annum within 30 days thereafter and pay us liquidated damages equal to 5% of the Purchase Price. If Fuwaysun fails to repay either Loan pursuant to the applicable Loan Agreement, it shall pay us additional interest on such Loan at a rate of 0.5% per day. We has increased loan to Fuwaysun to RMB 6.45 million at December 31, 2008 (approximately $943,728).

On April 9, 2009, we entered into a supplement agreement with the Fuwaysun Shareholders and Fuwaysun (the “Supplement Agreement”) and extended both the date for the parties to complete the Acquisition and the maturity date of the Loans to June 30, 2009 and otherwise retained the terms of the LOI and the Loan Agreements.

Shenzhen Xiongri Solar Co., Ltd.

In 2006, we entered into a series of agreements with the three shareholders of Shenzhen Xiongri Solar Co., Ltd. (“Xiongri”) to purchase 60% of the entire equity interests of Xiongri for RMB2,000,000 ($282,901). The three shareholders agreed to loan RMB2, 000,000 to Xiongri as working capital. We have not complete the transfer of the 60% equity interests. On April 9, 2009, the parties entered into a supplement agreement and agreed to complete the transfer of the 60% equity interests by June 30, 2009 。

Investment in Sales-type Leases

The Company engages in installing energy-saving facilities and leasing the equipment facilities to customers under sales-type leasing arrangement.

As of December 31, 2008, the future minimum rentals to be received on non-cancelable sales-type leases are as follows:

Years ending December 31,
2009		147,251
2010		147,251
2011		147,251
2012		147,251
2013		147,251
Thereafter		1,138,228
	$	1,874,483

8. PROPERTY, PLANT AND EQUIPMENT, NET

Property, plant and equipment, net, consisted of the following:

	As of December 31,
	2008			2007

Buildings	$	9,122,488		$	5,573,982
Plant and machinery		3,498,396			1,836,914
Office equipments		242,497			1,004,118
Motor vehicles		737,009			81,497
Computer equipment		239,309			13,507
Construction in progress		4,263,517			2,118,615
		18,103,216			10,628,633

Less: accumulated depreciation		(2,954,018	)		(1,809,417	)

Property, plant and equipment, net	$	15,149,198		$	8,819,216

F-18

CHINA SOLAR & CLEAN ENERGY SOLUTIONS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Currency expressed in United States Dollars (“US$”))

Depreciation expenses for the years ended December 31, 2008 and 2007 were $955,443 and $282,822, respectively.

9. INTANGIBLE ASSETS, NET

Intangible assets consisted of the following:

	As of December 31,
	2008				2007

Land use rights, at cost		$	1,827,990			$	1,654,998
Less: accumulated amortization			(118,806	)			(57,077	)

Land use rights, net		$	1,709,184			$	1,597,921

All lands in the PRC are owned by the PRC government. The government in the PRC, according to the relevant PRC law, may sell the right to use the land for a specified period of time. Thus, all of the Company’s land purchases in the PRC are considered to be leasehold land and are stated at cost less accumulated amortization and any recognized impairment loss. Amortization is provided over the term of the land use right agreement which is 50 years, on a straight-line basis. Amortization expenses for the years ended December 31, 2008 and 2007 were $61,729 and $41,335, respectively.

Customer relationships and intellectual property – unpatented consisted of the following:

	As of December 31,
	2008				2007

Customer relationships		$	1,100,000			$	0
Less: accumulated amortization			(82,500	)			0
Intellectual property - unpatented		$	940,000			$	0
Less: accumulated amortization			(70,500	)			0
Customer relationships and intellectual property – unpatented, net		$	1,887,000			$	0

Customer relationships and intellectual property – unpatented were obtained from SZPSP acquisition. The estimated amortization period is 10 years.

10. OTHER PAYABLES AND ACCRUED LIABILITIES

Other payables and accrued liabilities consisted of the following:

	As of December 31,
	2008		2007

Accrued expenses		738,898		608,315
Customer deposits		4,479,768		2,281,909
Other payables		1,403,293		3,508,066
Taxes payables		2,236,298		1,359,140
Investment payable		1,171,978
Deferred revenue		1,159,765		795,022
	$	11,190,000	$	8,552,452

During the year ended December 31, 2007, the Company repaid Mr. Deli Du the amount of $22,528. Related party payable to Mr. Deli Du as of December 31, 2007 and 2008was in the amount of $-0-.

11. STOCK HOLDERS’ EQUITY

Authorized Capital

The Company’s authorized capital stock consists of 66,666,667 shares of $0.001 par value per share common stock and 25,000,000 shares of $0.001 par value per share preferred stock

F-19

CHINA SOLAR & CLEAN ENERGY SOLUTIONS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Currency expressed in United States Dollars (“US$”))

Class A Preferred stock

The Company has designated 3,500,000 of its Preferred Shares as Class A Convertible Preferred Shares. In the event of any voluntary or involuntary liquidation, dissolution, or winding up of the corporation, Class A Convertible Preferred Shareholders shall be entitled to receive out of the assets of the Corporation, an amount equal to $1.55 per share. Each share of Series A Preferred Stock shall be initially convertible into one (1) share of Common Stock subject to adjustment for stock dividend and stock splits, sale or issuance of common stock at a price which is less than $1.55, at the option of the investors, at any time after the original issue date.

The Class A Convertible Preferred Shares contain a beneficial conversion feature in favor of the holder. The beneficial conversion feature was measured at its intrinsic value at the date of issuance of the shares and is recognized immediately as a return to the preferred shareholders through a charge to retained earnings, since the conversion feature is immediately exercisable by the holders. Although there is no impact on net income, the charge to retained earnings affects the computation of both basic and diluted EPS for US GAAP in the same way that dividends on the preferred shares do. The charge during the year of 2008 and 2007 was $0 and $975,807.

Sale of Units

On June 13, 2007, the Company entered into a Securities Purchase Agreement with Barron Partners L.P., and two accredited investors in a private placement (“Private Placement) providing for the sale of: (i) 1,774,194 shares of our Series A Convertible Preferred Stock; (ii) stock purchase warrants to purchase an aggregate of 1,774,194 shares of common stock at a price of $1.90 per share; and (iii) stock purchase warrants to purchase an aggregate of 1,774,194 shares of common stock at a price of $2.40 per share. In connection with the Private Placement, the Company deposited 900,000 shares of Series A Convertible Preferred Stock into escrow as security in the event (i) the earnings target for 2007 is not met and (ii) the earnings target for 2008 is not met. The 900,000 shares held in escrow were not included in the diluted earnings per share calculation as the earnings target for 2007 was met and the fulfillment of earnings target for 2008 has not been determined. Net proceeds of $2,581,000 were used to finance business acquisitions.

During the year of 2008, 1,400,628 shares of preferred stock were converted to the same number of shares of common stock.

Registration Rights

In connection with the private placement on June 13, 2007, the Company deposited 900,000 shares of Series A Convertible Preferred Stock into escrow as security. If the Company’s consolidated pre-tax income for the year ended December 31, 2007 was less than $3,000,000 (or pretax income per share of $0.22 on a fully diluted basis), the Company was required to deliver to the investors (pro rata according to the relative size of their investment) a number of the escrow shares to be determined based on the shortfall by which the Company failed to achieve the 2007 earnings target. If the Company’s consolidated pre-tax income for the year ending December 31, 2008 is less than $5,500,000 (or pretax income per share of $0.40 on a fully diluted basis) the investors were entitled to receive (pro rata according to the relative size of their investment) a number of the remaining escrow shares to be determined based on the shortfall by which the Company failed to achieve 2008 earnings target. The agreement with the investors further provided that the investors will not be entitled to any of the remaining escrow shares and all remaining escrow shares shall be returned to the Company if the Company did not receive at least $4,000,000 from the investors, either through the exercise of warrants, or additional equity financing, within 90 days after the effectiveness of the first registration statement filed pursuant to a certain registration rights agreement entered into with the investors concurrently. The registration statement in question was declared effective on February 7, 2008 The earnings target for the year ended December 31, 007 was met, thus 900,000 escrow shares remained in escrow at the beginning of the year ending December 31, 2008. However, the 900,000 shares held in escrow were not included in the diluted earnings per share calculation for the twelve months ended December 31, 2008 as the escrow shares were to be returned to the Company since the investors did not provide at least $4,000,000 in additional equity financing within 90 days after the effectiveness of the first registration statement and the diluted earnings per share were the same as basic earnings per share due to the net loss result in 2008.

F-20

CHINA SOLAR & CLEAN ENERGY SOLUTIONS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Currency expressed in United States Dollars (“US$”))

Common stock

On March 30, 2005, the Company issued 4,067,968 shares of its common stock in the recapitalization transaction with Deli Solar (BVI).

On March 30, 2005, the Company issued 1,714,290 shares of its common stock at $3.50 per share in a private placement transaction along with five year warrants to purchase 1,714,290 additional common shares at $3.85 per share. Gross proceeds to the Company totaled $6,000,015 and costs of issuance totaled $1,348,626.

On August 15, 2005 the Company affected a 1:6 reverse stock split. Fractional shares were rounded up to the nearest whole share. These financial statements have been retroactively restated to give effect to the reverse split for all periods presented. Immediately prior to the reverse stock split there were 36,850,379 common shares outstanding and following the split there were 6,145,290 shares outstanding.

In October 2005, the Company issued 60,000 shares of its common stock in exercise of warrants.

On February 29, 2008, the Company completed a private placement of 4,691,499 shares of common stock for an aggregate purchase price of approximately $11,300,000. The Company received $9,995,156 as net proceeds from this financing.

During the twelve months ended December 31, 2008, the Company issued 1,400,628 shares of common stock as part of the conversion of Series A Preferred Stock.

During the twelve months ended December 31, 2008, certain investors exercised their warrants to purchase an aggregate of 75,000 shares of common stock totaling $107,500.

During the twelve months ended December 31, 2008, the Company granted 7,304 shares of common stock to a former Board member in exchange for services. The shares were valued at $2.08 per share or an aggregate total of $15,192.

Common Stocks Held in Escrow

In connection with the private placement on February 29, 2008, the Company deposited 2,000,000 shares of common stock (“Make Good Shares”) into escrow and we are required to deliver (i) 1,000,000 of the Make Good Shares to the investors on a pro rata basis for no additional consideration in the event that the Company’s after-tax net income for the fiscal year ending December 31, 2008 is less than $4.8 million; and (ii) 1,000,000 of the Make Good Shares to the investors on a pro rata basis for no additional consideration in the event that the Company’s after-tax net income for the fiscal year ending December 31, 2009 is less than $8 million. As of December 31, 2008, the after-tax net income target of $4.8 million has not been met.

Warrants for services

In connection with the Private Placement on June 13, 2007, the Board of Directors granted to consultants and agents warrants to purchase an aggregate of 181,452 shares of the Company’s common stock, of which 75,000 warrants are exercisable at US$2.90 per share and 106,452 warrants are exercisable at US$2.71 per share, or on a cashless exercise basis. The warrants vested immediately and expire on June 13, 2012. The market price of the stock was US$2.10 per share on the grant date. The Company valued the 75,000 warrants at US$0.74 per share and the 106,452 warrants at US$0.78 per share, or $138,338 in aggregate in accordance with SFAS 123R, which were recorded as offering cost in additional paid-in capital in the accompanying consolidated financial statements for the year ended December 31, 2007.

The fair value of the warrants was estimated at the date of grant using the Black-Scholes option-pricing model with the following assumptions:

Risk free interest rate (%)		5.00	%
Dividend yield (%)		0.00	%
Expected life of warrant grants (years)	5 years
Expected volatility of warrant grants (%)		43.79	%

F-21

On March 30, 2005, in conjunction with a private placement sale of common stock the Company issued five year warrants to purchase 1,714,290 shares of common stock at a price of $3.85 per share to investors. Concurrently, the Company issued five year warrants to purchase 171,429 common shares at $3.85 per share to financial advisers and others. No share-based compensation expense was recorded, as management determined this transaction to be a cost of issuance.

The Company issued a warrant (the "Warrant") to its placement agent in connection with its private placement in February 2008. The Warrant authorizes the agent to purchase 469,150 shares of its common stock at a fixed price ($2.88 per share), for a five-year period. The Warrant contains a cashless exercise provision which permits the placement agent, at its option, to exercise the Warrant without tendering the exercise price, in exchange for a reduced number of shares. The number of shares will be calculated according to a formula should the placement agent decide to opt to exercise the Warrant under the cashless provision. If the Company is sold during the exercise period (referred to as a "fundamental transaction" in the Warrant), the placement agent has the right to exercise its Warrant and thus participate in the proceeds from the sale to the same extent as any other shareholder. These warrants are immediately exerciseable. The fair value of the warrants was estimated at the date of grant using the Black-Scholes option-pricing model. In calculating the fair value of the warrants, management used the closing price of the common stock on February 29, 2008, of $2.71 per share, plus the following assumptions:

Risk fee interest rate (%)		5	%
Dividend yield (%)		0.00	%
Expected life of warrant grants (years)	5 years
Expected volatility of warrant grants (%)		43.79	%

The Company valued the warrants at US$1.155 per share, or $541,695 in aggregate, in accordance with SFAS 123R, which were recorded as offering costs which offset additional paid-in capital in the accompanying consolidated financial statements for the twelve months ended December 31, 2008.

The Company issued a warrant (the "Warrant") to minority shareholder of Tianjin in connection with acquisition on October 27, 2008. The Warrant authorizes the minority shareholder to purchase 1,000,000 shares of its common stock at a fixed price ($1.10 per share), for a five-year period. These warrants are immediately exercisable. The fair value of the warrants was estimated at the date of grant using the Black-Scholes option-pricing model. In calculating the fair value of the warrants, management used the closing price of the common stock on October 27, 2008, of $1.10 per share, plus the following assumptions:

Risk free interest rate (%)		1.15	%
Dividend yield (%)		0.00	%
Expected life of warrant grants (years)	5 years
Expected volatility of warrant grants (%)		98.26	%

The Company valued the warrants at US$0.77 per share, or $766,038 in aggregate, in accordance with SFAS 123R, which were recorded as investment cost which offset additional paid-in capital in the accompanying consolidated financial statements for the twelve months ended December 31, 2008.

A summary of the status of the Company’s outstanding common stock warrants as of December 31, 2008 and 2007:

	Number of Shares			Weighted- Average Exercise Price		Weighted- average Remaining Contractual Term		Aggregate Intrinsic Value
Outstanding at December 31, 2005		1,825,719		$	3.85		—	$	—
Granted		—			—		—		—
Exercised		—			—		—		—
Forfeited		—			—		—		—
Expired		—			—		—		—
Outstanding at December 31, 2006		1,825,719			3.85	2.25 years			—
Granted		3,729,840			2.18	4.50 years			354,839
Exercised		—			—		—		—
Forfeited		—			—		—		—
Expired		—			—		—		—
Outstanding and Exercisable at December 31, 2007		5,555,559		$	2.73	3.76 years		$	354,839
Granted		1,611,123			1.74	4.75 years			633,888
Exercised		(75,000	)		-		-
Forfeited		-			-		-
Expired		-			-		-
Outstanding and Exercisable at December 31, 2008		7,091,682		$	2.76	3.53 years		$	988,727

Registration Rights Agreement

In connection with the private placement, the Company entered into a registration rights agreement with the investors on February 25, 2008 which requires us to file with the SEC a “resale” registration statement providing for the resale of (i) all of the 4,691,499 shares of common stock sold to the investors, (ii) the 2,000,000 “make good shares” and (iii) the 469,150 shares underlying the placement agent warrants (collectively, the “registrable securities”) for an offering to be made on a continuous basis pursuant to Rule 415 of the Securities Act of 1933, as amended.

The Company agreed, among other things, to prepare and file an initial registration statement within 45 days of the closing date (i.e. April 14, 2008) to register for resale part of the registrable securities (other than the 2,000,000 make good shares and the 469,150 shares underlying the placement agent warrants) and to cause that registration statement to be declared effective by July 28, 2008.

The Company is required to file additional registration statements covering all of the remaining registrable securities (or such lesser number as the SEC deems appropriate) if any registrable securities could not be registered in the initial registration statement, by the 15th day following the date on which we are able to effect the registration of such securities in accordance with any SEC restrictions.

The Company’s failure to meet this schedule and other timetables provided in the registration rights agreement could result in the imposition of liquidated damages. No liquidated damages will accrue in respect of any registrable securities which the SEC has requested (due to the application of Rule 415) the Company to remove from the registration statement and the required effectiveness date for such registrable securities will be tolled until such time as the Company is able to effect the registration of those securities in accordance with any SEC restrictions.

On February 29, 2008, the Company completed a private placement of 4,691,499 shares of the common stock at a price per share of $2.40 for an aggregate purchase price of approximately $11,300,000. The Company received $9,995,156 as net proceeds from this financing.

On July 28, 2008, the Company incurred liquidated damages equal to $112,596 which represents 1% of $11,259,587 (the aggregate of investment amount by the investors) due to the fact that the Company failed to have the registration statement declared effective on or prior to that date. The liquidated damages continue to accrue per diem with respect to all investors at the monthly rate of 1% and pro rated for partial months. The registration statement did not go effective until December 17, 2008. Accordingly, as of December 17, 2008, the Company had incurred $523,026 in liquidated damages for failing to have the registration statement declared effective by July 28, 2008.

F-22

CHINA SOLAR & CLEAN ENERGY SOLUTIONS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Currency expressed in United States Dollars (“US$”))

12.	INCOME TAXES

The Company is registered in the United States of America and has operations in three tax jurisdictions: the United States of America, British Virgin Island (“BVI”) and the PRC. The operations in the United States of America and British Virgin Island have incurred net operating losses for income tax purposes. The Company generated substantially its net income from the operation of its subsidiary in the PRC and subject to the PRC tax jurisdiction. The Company has recorded income tax provision for the years ended December 31, 2008 and 2007.

The components of (loss) income before income taxes separating U.S., BVI and PRC tax jurisdictions are as follows:

	Years ended December 31,
	2008				2007

Tax jurisdictions from:
Loss subject to U.S.		$	(493,890	)		(461,433
Loss subject to BVI			(1,157,723	)		(184,056
Income subject to the PRC			(2,839,246	)		3,985,699

Income before income taxes		$	(4,490,859	)		3,340,210

United States of America

China Solar is registered in the State of Nevada and is subject to the tax laws of United States of America.

As of December 31, 2008, the operation in the United States of America incurred $493,890 of net operating losses available for federal tax purposes, which are available to offset future taxable income. The net operating loss carry forwards will to expire through 2028, if unutilized. The Company has provided for a full valuation allowance against the deferred tax assets of $493,890 on the expected future tax benefits from the net operating loss carry forwards as the management believes it is more likely than not that these assets will not be realized in the future.

F-23

CHINA SOLAR & CLEAN ENERGY SOLUTIONS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Currency expressed in United States Dollars (“US$”))

British Virgin Island

Under the current BVI law, the Company is not subject to tax on income.

The PRC

The Company's subsidiary operating in the PRC, Ailiyang and Tianjin Huaneng are domestically owned and subject to the Corporate Income Tax governed by the Income Tax Law of the People’s Republic of China, at a statutory rate of 33%, which is comprised of a 30% national income tax and 3% local income tax.

In March 2005, the Deli Solar (Bazhou) became a foreign investment enterprise. Hence, effective from the year ended 2005, Deli Solar (Bazhou) is entitled to a two-year exemption from enterprise income tax and a reduced enterprise income tax rate of 15% for the following three years.

In September 2006, the Deli Solar (Beijing) was founded as a foreign investment enterprise. Hence, effective from the year ended 2006, Deli Solar (Beijing) is entitled to a two-year exemption from enterprise income tax and a reduced enterprise income tax rate of 15% for the following three years.

On March 16, 2007, the National People’s Congress approved the Corporate Income Tax Law of the People’s Republic of China (the “New CIT Law”). The new CIT Law, among other things, imposes a unified income tax rate of 25% for both domestic and foreign invested enterprises with effect from January 1, 2008. Deli Solar (Bazhou) and Deli Solar (Beijing) are considered a foreign invested enterprise and its ultimate applicable effective tax rate in 2008 and beyond will depend on many factors, including but not limited to whether certain of its legal entity will be subject to a transitional policy under the Corporate Income Tax Law, whether Deli Solar (Bazhou) and Deli Solar (Beijing) can continue to enjoy the unexpired tax holidays.

The reconciliation of income tax rate to the effective income tax rate based on income before income taxes stated in the statements of operations for the years ended December 31, 2008 and 2007 is as follows:

	Years ended December 31,
	2008			2007

Income before income taxes	$	(4,490,859	)	$	3,340,210
Statutory income tax rate		15	%		33	%
		0			1,102,269
Less: items not subject to taxes
Effect for tax holiday		193,418			(486,944	)

Income tax expenses	$	193,418		$	615,325

F-24

CHINA SOLAR & CLEAN ENERGY SOLUTIONS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Currency expressed in United States Dollars (“US$”))

The following table sets forth the significant components of the aggregate deferred tax assets of the Company as of December 31, 2008 and 2007:

	As of December 31,
	2008			2007
Deferred tax assets:
- Net operating loss carried forward	$	0			1,432,326
Less: valuation allowance		0	)		(1,432,326	)

Deferred tax assets	$	-		$	-

13.	NET INCOME PER SHARE

Basic net income per share is computed using the weighted average number of the ordinary shares outstanding during the year. Diluted net income per share is computed using the weighted average number of ordinary shares and ordinary share equivalents outstanding during the year less number of warrants issued during the year in note 10.

The following table sets forth the computation of basic and diluted net income per share for the years ended December 31, 2008 and 2007:

	Years ended December 31,
	2008			2007
				As adjusted and restated (Note 19)
Basic and diluted net income per share calculation

Numerator:
Net income	$	(5,503,170	)		2,525,141
Less: Preferred stock dividends					(975,807	)
Net income available to common stockholders in computing basic and diluted net income per share	$	(5,503,170	)	$	1,549,334

Denominator: - Weighted average ordinary shares outstanding		12,158,482			6,205,290
- Weighted average preferred stock outstanding					-
- Weighted average warrant shares outstanding					191,407
- Weighted average contingent shares outstanding
		12,158,482			6,396,697

Basic net income per share	$	(0.45	)	$	0.25

Diluted net income per share	$	(0.45	)	$	0.24

For the year ended December 31, 2008, warrants have been excluded from the diluted earnings per share calculation as they are antidilutive.

For the year ended December 31, 2007, warrants to purchase 2,007,171 shares of common stock have been excluded from the diluted earnings per share calculation as the average market price of the common stock was less than the exercise price of the warrants, thereby making the warrants antidilutive under the treasury method. Convertible preferred stocks were also excluded from the denominator and the associated beneficial conversion was excluded from the numerator as the assumed conversion had an antidilutive effect.

F-25

CHINA SOLAR & CLEAN ENERGY SOLUTIONS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Currency expressed in United States Dollars (“US$”))

14.	SEGMENT REPORTING, GEOGRAPHICAL INFORMATION

(a)	Business information

The Company has four reportable segments namely solar heater/boiler related products, heat pipe related products, Energy-saving projects and Solar Heat collector and others for the two year ended December 31, 2008 and 2007. The solar heater/boiler related products are mainly under the management of Deli Solar (Bazhou) while the heat pipe related products under the management of Tianjin Huaneng, and energy-savings projects under the management of Shenzhen PengSangPu.

An analysis of the Company’s revenue and total assets are as follows:

	Years ended December 31,
	2008			2007
Revenue:
Solar Heater/Biomass Stove/Boiler related products		$	25,098,563		$	26,693,850
Heat Pipe related products			14,369,716			7,002,015
Energy-saving projects			9,078,203			3,376,481
Solar Heat collector and others			2,952,514			-
		$	51,498,996		$	37,072,346

	Years ended December 31,
	2008			2007
Gross profit:
Solar Heater/Biomass Stove/Boiler related products		$	4,357,289		$	5,672,443
Heat Pipe related products			1,750,929			1,820,524
Energy-saving projects			1,576,041			807,301
Solar Heat collector and others			512,577			-
		$	8,196,836		$	8,300,268

	As of December 31,
	2008		2007
Total assets:
Solar Heater/Biomass Stove/Boiler related products	$	21,038,061	$	18,690,225
Heat Pipe related products		15,214,984		9,029,994
Energy-saving projects		7,916,717		2,919,494
Solar Heat collector and others		2,328,446		-
	$	46,498,208	$	30,639,713

Total goodwill:
Solar Heater/Biomass Stove/Boiler related products	$	-	$	-
Heat Pipe related products		1,705,430		1,789,324
Energy-saving projects		635,082		-
	$	2,340,512	$	1,789,324

Other segment in total revenue, gross profit, and assets refers to solar lighting products and sales of spare parts/components. The amount of other segment revenue, gross profit, and assets are less than 10% in each category and disclosed as an “all other” category in accordance with paragraph 21 of SFAS 131. There was no elimination or reversal of transactions between reportable segments.

F-26

CHINA SOLAR & CLEAN ENERGY SOLUTIONS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Currency expressed in United States Dollars (“US$”))

(b)	Geographic information

The Company operates in the PRC and all of the company’s long lived assets are located in the PRC. In respect of geographical segment reporting, sales are based on the country in which the customer is located and total assets and capital expenditure are based on the country where the assets are located.

The Company’s operations are located in PRC, which is the main geographical area. The Company’s sales and total assets by geographical market are analyzed as follows:

	Years ended December 31,
	2008		2007
Revenue:
PRC	$	38,614,920	$	32,623,664
Others		12,884,076		4,448,682

	$	51,498,996	$	37,072,346

	Years ended December 31,
	2008		2007
Gross profit:
PRC	$	5,960,069	$	6,806,220
Others		2,236,767		1,494,048

	$	8,196,836	$	8,300,268

	As of December 31,
	2008		2007
Total assets:
PRC	$	35,321,666	$	29,107,727
Others		11,176,542		1,531,986

	$	46,498,208	$	30,639,713

15.	CHINA CONTRIBUTION PLAN

Under the PRC Law, full-time employees of the Company’s subsidiaries, Deli Solar (Bazhou), Ailiyang, Deli Solar (Beijing) and Tianjin Huaneng are entitled to staff welfare benefits including medical care, welfare subsidies, unemployment insurance and pension benefits through a China government-mandated multi-employer defined contribution plan. The Company is required to accrue for these benefits based on certain percentages of the employees’ salaries. The total contributions made for such employee benefits were $603,996 and $327,257 for the years ended December 31, 2008 and 2007, respectively.

F-27

CHINA SOLAR & CLEAN ENERGY SOLUTIONS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Currency expressed in United States Dollars (“US$”))

16.	CONCENTRATION OF RISK

(a)	Major customers

No revenue from customers that individually represent greater than 10% of the total revenue for each of the years ended December 31, 2008 and 2007.

(b)	Major vendors

The following is a table summarizing the purchases from vendors that individually represent greater than 10% of the total purchases for each of the years ended December 31, 2008 and 2007 and their outstanding balances as at year-end date:

	Year ended December 31, 2008
Vendor	Purchases		Percentage of total purchases			Accounts payable, trade
Vendor A	$	12,729,348		55	%		437,756

	Year ended December 31, 2007
Vendor	Purchases		Percentage of total purchases			Accounts payable, trade
Vendor A	$	5,475,372		50.4	%	$	667,718

(c)	Credit risks

Financial instruments that are potentially subject to credit risk consist principally of cash and trade receivables. All cash held in financial institutions are not insured and therefore subject to credit risk. The Company believes the concentration of credit risk in its trade receivables is substantially mitigated by its ongoing credit evaluation process and relatively short collection terms. The Company does not generally require collateral from customers. The Company evaluates the need for an allowance for doubtful accounts based upon factors surrounding the credit risk of specific customers, historical trends and other information.

(d)	Interest rate risk

As the Company has no significant interest-bearing assets, the Company’s income and operating cash flows are substantially independent of changes in market interest rates.

The Company’s interest-rate risk arises from short-term borrowings. Borrowings issued at floating rates expose the Company to cash flow and fair value interest-rate risk. Company policy is to maintain approximately all of its borrowings in floating rate instruments. At the year end, all of borrowings were at floating rates.

F-28

CHINA SOLAR & CLEAN ENERGY SOLUTIONS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Currency expressed in United States Dollars (“US$”))

17.	COMMITMENTS AND CONTINGENCIES

(a)	Operating lease commitment

The Company leases land and buildings under non-cancelable operating lease agreements. Based on the current rental lease agreements, the future minimum rental payments required for the coming years are as follows:

Years ending December 31:
2008	$	20,015
2009		20,015
2010		20,015
2011		20,015

Total future minimum operating lease payments	$	80,059

For the years ended December 31, 2008 and 2007, rental expenses were $74,693 and $101,780, respectively.

18.	SUBSEQUENT EVENTS

(a)	Postponement of Acquisition of Shenzhen Fuwaysun Technology Co., Ltd.

(b)	Postponement of Acquisition of Shenzhen Xiongri Solar Co., Ltd.

In 2006, we entered into a series of agreements with the three shareholders of Shenzhen Xiongri Solar Co., Ltd. (“Xiongri”) to purchase 60% of the entire equity interests of Xiongri for RMB2,000,000 ($282,901). The three shareholders agreed to loan RMB2, 000,000 to Xiongri as working capital. We have not complete the transfer of the 60% equity interests.. On April 9, 2009, the parties entered into a supplement agreement and agreed to complete the transfer of the 60% equity interests by June 30, 2009.

F-29

CHINA SOLAR & CLEAN ENERGY SOLUTIONS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Currency expressed in United States Dollars (“US$”))

19.	RESTATEMENT ON CONSOLIDATED FINANCIAL STATEMENTS

In April 2008, we filed a registration statement on Form S-1 with the Securities and Exchange Commission relating to the sale by certain selling stockholders identified in the related prospectus of up to 5,160,649 shares of our common stock including 469,150 shares they may acquire on exercise of warrants. When reviewing our financial statements for inclusion in the prospectus, we became aware of an error in the calculation of diluted net income per share for the year ended December 31, 2007. We misapplied the treasury stock and the “if converted” methods under SFAS No. 128 and because of the error we identified, we have restated our historical financial statements for 2007 to record an increase of 10¢ in diluted net income per share.

This 10¢ per share adjustment was non-cash. The error had no impact on our reported assets, liabilities, equity, revenue, expenses or earnings. There was no cumulative effect on retained earnings or other components of equity in the balance sheet at December 31, 2007. It had no impact on basic earnings per share. Nor did it have any impact on cash or cash equivalents. It had no impact on prior year financial statements and, likewise, will have no impact on future financial statements.

The following table sets forth the income statement impact of the restatement:

	December 31, 2007
	As reported		Adjustmen t		As Restated

Diluted - Total weighted average shares outstanding		11,233,026	(4,836,329	)		6,396,697

Diluted net income per share	$	0.14	0.10			0.24

The impact of the restatement on the disclosures of earnings per share data is set forth in the table below:

	December 31, 2007
	As reported		Adjustment		As Adjusted
Denominator:
- Weighted average preferred stock outstanding		1,337,097	(1,337,097	)		0
- Weighted average warrant shares outstanding		3,690,639	(3,499,232	)		191,407
Diluted - Total weighted average shares		11,233,026	4,836,329			6,396,697

Diluted net income per share	$	0.14	0.10			0.24

On March 30, 2009, we concluded, based, in part, on the recommendation of its current independent auditors, that the financial statements included in the Form 10-K for the period ended December 31, 2008 and the financial statements included in Form 10Q for the periods ended March 31, 2009, June 30, 2009 and September 30, 2009 should be restated

The following are the reasons the restatement is required.

The acquisition of the additional 29.97% interest in Tianjin Hua Neng Energy Equipment Company on October 27, 2009 was not properly recorded. As disclosed in Note 4 to the financial statements of 2008, the Registrant paid $515,026 at the completion of the agreement with the remainder, aggregating approximately $1,047,611 plus interest to be paid over the next three years. We only recorded the amount actually paid and did not record the corresponding debt. In addition there 1,000,000 warrants to purchase the company’s common stock were issued as part of the purchase price and were not valued and included as additional purchase price.

The using right of building of Deli Solar (Beijing) will expire in August, 2011. But the Company never depreciated for it. So the Company decided to correct it.

After further analysis of the Company’s revenue recognition policy, it has decided to change the revenue recognition of its consolidated subsidiary Tianjin Hua Neng. The Company will make the appropriate entries to properly record the revenue and associated costs of revenue.

F-30

The following is a summary of the effects of the restatement on the company’s consolidated financial statements.

	As of December 31,2008
	as previously reported		as restated

ASSETS
Accounts receivable, net	$	7,284,255	$	6,040,065
Inventories		6,950,844		8,285,521
Total current assets		24,667,249		24,757,736
Property, plant and equipment, net		15,366,009		15,149,198
Goodwill		2,284,903		2,340,512
Total assets	$	46,568,923	$	46,498,2083

	As of December 31,2008
	as previously reported		as restated
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Income tax payables	$	2,236,298	$	1,818,488
Other payables and accrued liabilities		8,386,698		11,900,000
Total current liabilities		15,924,345		18,309,837
Long-term debt		-		286,483
Total liabilities		15,940,124		18,612,099
Minority interests		1,704,248		194,542

Stockholders’ equity:
Additional paid-in capital		22,966,404		23,073,258
Retained earnings		3,365,788		2,025,950
Total stockholders’ equity		28,924,551		27,691,567

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	46,568,923	$	46,498,208

	Year Ended December 31,2008
	as previously reported			as restated
Revenue, net	$	53,683,651		$	51,498,996
Cost of revenue		44,363,787			43,302,160
Gross profit		9,319,863			8,196,836
Depreciation and amortization		955,443			1,172,253
Total operating expenses		9,077,912			9,294,723
Income from operations		241,951			(1,097,887)	)
Income before income taxes		(3,151,022	)		(4,490,860	)
Net income		(4,163,332	)		(5,503,170	)
Net income available to common stockholders	$	(4,163,332	)	$	(5,503,170	)
Net income per share – basic	$	(0.34	)	$	(0.45	)
Net income per share – diluted	$	(0. 34	)	$	(0.45	)

F-31

SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	CHINA SOLAR & CLEAN ENERGY SOLUTIONS, INC.

Date: April 14, 2010	By:	/s/ Deli Du
		Deli Du
		Chief Executive Officer, President and Director (Principal Executive Officer)

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.

Name and Title		Date
/s/ Deli Du		April 14, 2010

Deli Du,
Chief Executive Officer, President and Director
(Principal Executive Officer)
/s/ Yinan Zhao		April 14, 2010

Yinan Zhao
Acting Chief Financial Officer
(Principal Financial and Accounting Officer)
/s/ Zhaolin Ding		April 14, 2010

Zhaolin Ding
Director
/s/ Zhenhang Jia		April 14, 2010

Zhenhang Jia
Director
/s/ Joseph J. Levinson		April 14, 2010

Joseph J. Levinson
Director

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CSOL China Solar and Clean Energy Solutions Inc (PK)