UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-Q/A
(Amendment
No.1)
x
|
QUARTERLY REPORT PURSUANT TO
SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT
OF 1934
|
For the
quarterly period ended March 31, 2009
or
o
|
TRANS
ITION REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF
1934
|
For the
transition period from _______ to _________
Commission File No.
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)
|
|
I.R.S.
Employer Identification
Number
|
3/F
West Wing Dingheng Plaza,
45A
North Fengtai Road,
Beijing,
China, 100071
(Address
of principal executive offices)
(86) 10-6386-0500
(Registrant's
telephone number, including area code)
(Former
name, former address and former fiscal year, if changed since last
report)
Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.
x
Yes
o
No
Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every, Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files). Yes
o
No
o
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of “large accelerated filer,” “accelerated filer” and “small
reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
|
o
|
|
Accelerated filer
|
o
|
|
|
|
|
|
Non-accelerated filer
|
o
|
(Do not check if a smaller reporting company)
|
Smaller reporting company
|
x
|
Indicate by check mark
whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act).
o
Yes
x
No
The
number of shares of the issuer’s common stock, $.001 per share, outstanding at
May 21, 2009 was 16,173,016.
TABLE
OF CONTENTS
INDEX
|
|
Page
|
PART 1 - FINANCIAL
INFORMATION
|
|
|
|
|
|
Item
1. Financial Statements
|
3
|
|
|
|
|
Condensed
consolidated balance sheets, March 31, 2009 (unaudited) and December 31,
2008
|
3
|
|
Condensed
consolidated statements of operations, for the three months
ended March 31, 2009 and 2008 (unaudited)
|
4
|
|
Condensed
consolidated statements of stockholders' equity and comprehensive
income, for the year ended December 31, 2008 and for the three months
ended March 31, 2009 (unaudited)
|
5
|
|
Condensed
consolidated statements of cash flows, for the three months ended March
31, 2009 and 2008 (unaudited)
|
6
|
|
Notes
to condensed consolidated financial statements (unaudited)
|
7
|
|
|
|
|
Item
2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
|
18
|
|
|
|
PART 2 - OTHER
INFORMATION
|
|
|
|
|
|
Item
6. Exhibits
|
22
|
|
|
|
|
Signatures
|
23
|
In
accordance with Rule 12b-15 under the Exchange Act, each item of the Original
Filing that is amended by this Amended Filing is also restated in its entirety,
and this Amended Filing is accompanied by currently dated certifications on
Exhibits 31.1, 31.2, 32.1 and 32.2 by the Company’s Chief Executive Officer and
Chief Financial Officer. Except as described above, this Amended Filing does not
amend, update, or change any items, financial statements, or other disclosures
in the Original Filing, and does not reflect events occurring after the filing
of the Original Filing, including as to any exhibits to the Original Filing
affected by subsequent events. Information not affected by the changes described
above is unchanged and reflects the disclosures made at the time of the Original
Filing. Accordingly, this Amended Filing should be read in conjunction with the
Original Filing and our other SEC filings subsequent to the filing of the
Original Filing, including any amendments to those filings. Capitalized letters
not defined in the Amended Filing are as defined by the Original
Filing.
Item 1.
Financial
Statements
CHINA
SOLAR & CLEAN ENERGY SOLUTIONS, INC.
CONDENSED
CONSOLIDATED BALANCE SHEETS
(Currency
expressed in US Dollars)
|
|
March 31, 2009
|
|
|
December 31, 2008
|
|
|
|
(Unaudited)
|
|
|
(Resta
ted)
|
|
ASSETS
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
1,361,842
|
|
|
$
|
2,404,996
|
|
Investment,
at fair value
|
|
|
95,086
|
|
|
|
-
|
|
Accounts
receivable, net
|
|
|
5,174,548
|
|
|
|
6,040,065
|
|
Inventories
|
|
|
9,748,645
|
|
|
|
8,285,521
|
|
Other
receivables and prepayments
|
|
|
6,706,201
|
|
|
|
7,870,575
|
|
Lease
receivables, current
|
|
|
156,199
|
|
|
|
156,579
|
|
Total
current assets
|
|
|
23,242,521
|
|
|
|
24,757,736
|
|
|
|
|
|
|
|
|
|
|
Property
and equipment, net
|
|
|
15,089,472
|
|
|
|
15,149,198
|
|
Goodwill
|
|
|
2,340,512
|
|
|
|
2,340,512
|
|
Other
intangible assets, net
|
|
|
3,536,044
|
|
|
|
3,596,184
|
|
Lease
receivables, non current
|
|
|
684,528
|
|
|
|
654,578
|
|
TOTAL
ASSETS
|
|
$
|
44,893,077
|
|
|
$
|
46,498,208
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
|
|
Accounts
payable, net
|
|
$
|
4,696,729
|
|
|
$
|
5,301,349
|
|
Tax
payable
|
|
|
1,543,770
|
|
|
|
1,818,488
|
|
Other
payables and accrued liabilities
|
|
|
11,617,232
|
|
|
|
11,190,000
|
|
Total
current liabilities
|
|
|
17,857,731
|
|
|
|
18,309,837
|
|
|
|
|
|
|
|
|
|
|
Long-term
liabilities:
|
|
|
|
|
|
|
|
|
Deferred
tax liabilities
|
|
|
15,779
|
|
|
|
15,779
|
|
Long-term
debt
|
|
|
286,483
|
|
|
|
286,483
|
|
Total
liabilities
|
|
|
18,159,993
|
|
|
|
18,612,099
|
|
|
|
|
|
|
|
|
|
|
Minority
interests
|
|
|
204,098
|
|
|
|
194,542
|
|
|
|
|
|
|
|
|
|
|
Stockholders’
equity:
|
|
|
|
|
|
|
|
|
Convertible
preferred stock: par value $0.001, 25,000,000 shares authorized, 373,566
(unaudited) and 373,566 shares issued and outstanding,
respectively
|
|
|
373
|
|
|
|
373
|
|
Common
stock, $0.001 par value, 66,666,667 shares authorized, 13,799,450
(unaudited) and 13,799,450 shares issued and outstanding,
respectively
|
|
|
13,799
|
|
|
|
13,799
|
|
Additional
paid-in capital
|
|
|
23,073,258
|
|
|
|
23,073,258
|
|
Accumulated
other comprehensive loss
|
|
|
1,681,724
|
|
|
|
1,615,081
|
|
Retained
earnings
|
|
|
796,726
|
|
|
|
2,025,950
|
|
Profit
earning reserves
|
|
|
963,106
|
|
|
|
963,106
|
|
Total
stockholders’ equity
|
|
|
26,528,986
|
|
|
|
27,691,567
|
|
TOTAL
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
$
|
44,893,077
|
|
|
$
|
46,498,208
|
|
See
accompanying notes to condensed consolidated financial
statements.
CHINA
SOLAR & CLEAN ENERGY SOLUTIONS, INC.
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
(Currency
expressed in US Dollars)
(Unaudited)
|
|
For the three months ended March 31,
|
|
|
|
2009
|
|
|
2008
|
|
Revenue,
net
|
|
$
|
4,733,164
|
|
|
$
|
8,300,076
|
|
Cost
of revenue
|
|
|
3,818,027
|
|
|
|
5,845,016
|
|
Gross
profit
|
|
|
915,137
|
|
|
|
2,455,060
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses
|
|
|
|
|
|
|
|
|
Depreciation
and amortization
|
|
|
304,988
|
|
|
|
149,167
|
|
Selling
and distribution
|
|
|
545,899
|
|
|
|
502,563
|
|
General
and administrative
|
|
|
1,266,344
|
|
|
|
601,653
|
|
Total
operating expenses
|
|
|
2,117,231
|
|
|
|
1,253,383
|
|
|
|
|
|
|
|
|
|
|
Other
income (expenses):
|
|
|
|
|
|
|
|
|
Other
income
|
|
|
38,807
|
|
|
|
41,090
|
|
Interest
income
|
|
|
37,532
|
|
|
|
-
|
|
Other
expense
|
|
|
(9,431
|
)
|
|
|
-
|
|
Interest
expense
|
|
|
(47,159
|
)
|
|
|
(33,838
|
)
|
Total
other income
|
|
|
19,749
|
|
|
|
7,252
|
|
|
|
|
|
|
|
|
|
|
Income
before income taxes and minority interest
|
|
|
(1,182,345
|
)
|
|
|
1,208,929
|
|
Income
tax expenses
|
|
|
36,873
|
|
|
|
346,263
|
|
Minority
interest
|
|
|
10,006
|
|
|
|
473,015
|
|
|
|
|
|
|
|
|
|
|
NET
INCOME/(LOSS)
|
|
$
|
(1,229,224
|
)
|
|
$
|
389,651
|
|
|
|
|
|
|
|
|
|
|
NET
INCOME/(LOSS) AVAILABLE TO COMMON STOCKHOLDERS
|
|
$
|
(1,229,224
|
)
|
|
$
|
389,651
|
|
|
|
|
|
|
|
|
|
|
Net
income/(loss) per share - Basic
|
|
$
|
(0.08
|
)
|
|
$
|
0.05
|
|
Net
income/(loss) per share - Diluted
|
|
$
|
(0.08
|
)
|
|
$
|
0.03
|
|
|
|
|
|
|
|
|
|
|
Weighted
average shares outstanding - Basic
|
|
|
13,799,450
|
|
|
|
8,009,713
|
|
Weighted
average shares outstanding - Diluted
|
|
|
13,799,450
|
|
|
|
15,284,7
70
|
|
See
accompanying notes to condensed consolidated financial
statements.
CHINA
SOLAR & CLEAN ENERGY SOLUTIONS, INC.
CONDENSED
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY AND COMPREHENSIVE
INCOME
FOR
THE THREE MONTHS ENDED MARCH 31, 2009
(Currency
expressed in US Dollars)
|
|
Preferred stock
|
|
|
Common stock
|
|
|
Additional
|
|
|
Accumulated
other
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
No. of
|
|
|
Par
|
|
|
No. of
|
|
|
Par
|
|
|
paid-in
|
|
|
comprehensive
|
|
|
Retained
|
|
|
Earnings
|
|
|
stockholders ’
|
|
|
|
shares
|
|
|
value
|
|
|
shares
|
|
|
value
|
|
|
capital
|
|
|
income
|
|
|
earnings
|
|
|
reserve
|
|
|
equity
|
|
Balance
, 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
|
|
Comprehensive
income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(
1,229,224
|
)
|
|
|
|
|
|
|
(1,229,224
|
)
|
Foreign
currency translation adjustment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
66 ,
643
|
|
|
|
|
|
|
|
|
|
|
|
66 ,
643
|
|
Balance
, March 31, 2009
|
|
|
373,566
|
|
|
$
|
373
|
|
|
|
13,799,450
|
|
|
$
|
13,799
|
|
|
$
|
23,073,258
|
|
|
$
|
1,681,724
|
|
|
$
|
796,726
|
|
|
$
|
963,106
|
|
|
$
|
26,528,986
|
|
See
accompanying notes to condensed consolidated financial
statements.
CHINA
SOLAR & CLEAN ENERGY SOLUTIONS, INC.
CONSOLIDATED
STATEMENTS OF CASH FLOWS
(Currency
expressed in US Dollars)
(Unaudited)
|
|
Three months ended March 31,
|
|
|
|
2009
|
|
|
2008
|
|
Cash
flows from operating activities:
|
|
|
|
|
|
|
Net
cash used in operating activities
|
|
$
|
(829,589
|
)
|
|
$
|
(4,104,526
|
)
|
|
|
|
|
|
|
|
|
|
Cash
flows from investing activities:
|
|
|
|
|
|
|
|
|
Purchase
of property, plant and equipment
|
|
|
(185,122
|
)
|
|
|
(730,974
|
)
|
Cash
paid for investment in acquisition
|
|
|
(95,086
|
)
|
|
|
-
|
|
Net
cash used in investing activities
|
|
|
(280,208
|
)
|
|
|
(730,974
|
)
|
|
|
|
|
|
|
|
|
|
Cash
flows from financing activities:
|
|
|
|
|
|
|
|
|
Proceeds
from private placement sale of stock
|
|
|
-
|
|
|
|
9,995,156
|
|
Proceeds
from warrants exercised
|
|
|
-
|
|
|
|
107,500
|
|
Net
cash provided by financing activities
|
|
|
-
|
|
|
|
10,
102,656
|
|
|
|
|
|
|
|
|
|
|
Foreign
currency translation adjustment
|
|
|
66,643
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
NET
CHANGE IN CASH AND CASH EQUIVALENTS
|
|
|
(1,043,154
|
)
|
|
|
5,267,156
|
|
|
|
|
|
|
|
|
|
|
CASH
AND CASH EQUIVALENTS, BEGINNING OF PERIOD
|
|
|
2
,404,996
|
|
|
|
5,466,637
|
|
|
|
|
|
|
|
|
|
|
CASH
AND CASH EQUIVALENTS, END OF PERIOD
|
|
$
|
1,361,842
|
|
|
$
|
10,733,793
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL
DISCLOSURE OF CASH FLOW INFORMATION:
|
|
|
|
|
|
|
|
|
Cash
paid for income taxes
|
|
$
|
63,014
|
|
|
$
|
31,9
78
|
|
Cash
paid for interest expenses
|
|
$
|
47,159
|
|
|
$
|
33,838
|
|
See
accompanying notes to condensed consolidated financial
statements
CHINA
SOLAR & CLEAN ENERGY SOLUTIONS, INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Currency
expressed in US Dollars)
(Unaudited)
NOTE
1 - BASIS OF PRESENTATION
The
accompanying condensed consolidated balance sheet as of December 31, 2008 has
been derived from audited financial statements and the accompanying unaudited
condensed consolidated financial statements for the three months ended March 31,
2009 and 2008 have been prepared in accordance with accounting principles
generally accepted in the United States of America (“GAAP”) for interim
financial information and the interim reporting requirements of Regulation S-X.
They do not include all of the information and footnotes for complete
consolidated financial statements as required by GAAP. In management’s opinion,
all adjustments (consisting only of normal recurring adjustments) considered
necessary for a fair presentation have been included. These financial
statements should be read in conjunction with the audited financial statements
and notes thereto contained in the Company’s annual report on Form 10-K for the
year ended December 31, 2008.
The
results of operations for the three months ended March 31, 2009 and 2008 are not
necessarily indicative of the results to be expected for the entire fiscal year
ended December 31, 2009 or for any future period.
There is
no provision for dividends for the quarter to which this quarterly report
relates.
NOTE
2 - 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. (“Bazhou Deli Solar”), 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, Bazhou Deli Solar 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.
Bazhou
Deli Solar 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 Bazhou Deli Solar remains a wholly owned subsidiary
of Deli Solar (BVI).
On
November 21, 2005 Bazhou Deli Solar acquired Ailiyang Solar Energy Technology
Co., Ltd. (“Ailiyang”), an entity formerly controlled by the owners of Bazhou
Deli Solar. The transaction was accounted for as a transfer of entities under
common control.
CHINA
SOLAR & CLEAN ENERGY SOLUTIONS, INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Currency
expressed in US Dollars)
(Unaudited)
NOTE 2 - ORGANIZATION AND BUSINESS
BACKGROUND
, continued
Beijing
Deli Solar Technology Development Co., Ltd. (“Beijing Deli Solar”) was founded
in 2006 and is principally engaged in solar power heater integrated construction
projects in major cities in the PRC.
In
January 2007, Bazhou Deli Solar via Mr. Deli Du, set up a branch sales offices
in the city of Lian Yun Gang and the City of Bazhou to cope with the increasing
sales demand in that region. This branch office exists in the form of a
sole-proprietorship set up in the name of Mr. Deli Du but is beneficially owned
by Bazhou Deli Solar, so is regarded as a variable interest entity (“VIE”)
by the Company.
On July
1, 2007, Beijing Deli Solar acquired 51% of Tianjin Hua Neng Energy Equipment
Company (“Tianjin Huaneng”), which manufactures energy saving boilers and
environmental protection equipment for industrial customers.
On April
1, 2008, Beijing Deli Solar 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.
On
October 27, 2008, Beijing Deli Solar, 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), Bazhou Deli Solar, Ailiyang, Beijing Deli Solar,
Tianjin Huaneng and SZPSP are collectively hereinafter referred to as the
"Company".
NOTE
3 - RECENTLY ISSUED ACCOUNTING STANDARDS
In
February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for
Financial Assets and Financial Liabilities” (“SFAS No. 159”). SFAS No. 159
permits entities to choose to measure, on an item-by-item basis, specified
financial instruments and certain other items at fair value. Unrealized gains
and losses on items for which the fair value option has been elected are
required to be reported in earnings at each reporting date. SFAS No. 159 is
effective for fiscal years beginning after November 15, 2007, the provisions of
which are required to be applied prospectively. The Company believes that SFAS
159 will not have a material impact on the consolidated financial position or
results of operations.
In
December 2007, the FASB issued SFAS No. 141 (Revised 2007), “Business
Combinations” (“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 the Company engages in will be recorded
and disclosed following existing GAAP until January 1, 2009. The Company expects
SFAS No. 141R will have an impact on accounting for business combinations once
adopted but the effect is dependent upon acquisitions at that time. The Company
is still assessing the impact of this pronouncement.
CHINA
SOLAR & CLEAN ENERGY SOLUTIONS, INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Currency
expressed in US Dollars)
(Unaudited)
NOTE 3 - RECENTLY ISS
UED ACCOUNTING STANDARDS
,
continued
In
December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in
Consolidated Financial Statements-An Amendment of ARB No. 51 (“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. The Company believes that SFAS 160 will not have a material
impact on the consolidated financial position or results of
operations.
In March
2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments
and Hedging Activities” (“SFAS No. 161”). SFAS 161 requires companies with
derivative instruments to disclose information that should enable
financial-statement users to understand how and why a company uses derivative
instruments, how derivative instruments and related hedged items are accounted
for under FASB Statement No. 133 “Accounting for Derivative Instruments and
Hedging Activities” and how derivative instruments and related hedged items
affect a company’s financial position, financial performance and cash flows.
SFAS 161 is effective for financial statements issued for fiscal years and
interim periods beginning after November 15, 2008. The adoption of this
statement is not expected to have a material effect on the Company’s future
financial position or results of operations.
In May
2008, the FASB issued SFAS No. 162, “The Hierarchy of Generally Accepted
Accounting Principles” (“SFAS No. 162”). This statement identifies the sources
of accounting principles and the framework for selecting the principles to be
used in the preparation of financial statements in conformity with GAAP in
the United States. This statement is effective 60 days following the SEC’s
approval of the Public Company Accounting Oversight Board amendments to AU
Section 411, “The Meaning of Present Fairly in Conformity With Generally
Accepted Accounting Principles”. The Company does not expect the adoption of
SFAS No. 162 to have a material effect on the financial condition or results of
operations of the Company.
Also in
May 2008, the FASB issued SFAS No. 163, "Accounting for Financial Guarantee
Insurance Contracts—an interpretation of FASB Statement No. 60" ("SFAS No.
163"). SFAS No. 163 interprets Statement 60 and amends existing accounting
pronouncements to clarify their application to the financial guarantee insurance
contracts included within the scope of that Statement. SFAS No. 163 is effective
for financial statements issued for fiscal years beginning after December 15,
2008, and all interim periods within those fiscal years. As such, the Company is
required to adopt these provisions at the beginning of the fiscal year ended
December 31, 2009. The Company is currently evaluating the impact of SFAS No.
163 on its financial statements but does not expect it to have an effect on the
Company's financial position, results of operations or cash flows.
In May
2008, the FASB issued FSP APB 14-1, "Accounting for Convertible Debt Instruments
That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement)"
("FSP APB 14-1"). FSP APB 14-1 applies to convertible debt securities that,
upon conversion, may be settled by the issuer fully or partially in cash.
FSP APB 14-1 specifies that issuers of such instruments should separately
account for the liability and equity components in a manner that will reflect
the entity's nonconvertible debt borrowing rate when interest cost is recognized
in subsequent periods. FSP APB 14-1 is effective for financial statements issued
for fiscal years after December 15, 2008, and must be applied on a retrospective
basis. Early adoption is not permitted. The adoption of this statement is not
expected to have a material effect on the Company's future financial position or
results of operations.
In June
2008, the FASB issued FASB Staff Position ("FSP") EITF 03-6-1, "Determining
Whether Instruments Granted in Share-Based Payment Transactions Are
Participating Securities" ("FSP EITF 03-6-1"). FSP EITF 03-6-1 addresses whether
instruments granted in share-based payment transactions are participating
securities prior to vesting, and therefore need to be included in the earnings
allocation in computing earnings per share under the two-class method as
described in SFAS No. 128, Earnings per Share.
CHINA
SOLAR & CLEAN ENERGY SOLUTIONS, INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Currency
expressed in US Dollars)
(Unaudited)
NOTE 3 - RECENTLY ISSUED
ACCOUN
TING
STANDARDS
, continued
Under the
guidance of FSP EITF 03-6-1, unvested share-based payment awards that contain
non-forfeitable rights to dividends or dividend equivalents (whether paid or
unpaid) are participating securities and shall be included in the computation of
earnings-per-share pursuant to the two-class method. FSP EITF 03-6-1 is
effective for financial statements issued for fiscal years beginning after
December 15, 2008 and all prior-period earnings per share data presented shall
be adjusted retrospectively. Early application is not permitted. The Company is
assessing the potential impact of this FSP on the earnings per share
calculation.
In June
2008, the FASB ratified EITF No. 07-5, "Determining Whether an Instrument (or an
Embedded Feature) is Indexed to an Entity's Own Stock" ("EITF 07-5"). EITF 07-5
provides that an entity should use a two-step approach to evaluate whether an
equity-linked financial instrument (or embedded feature) is indexed to its own
stock, including evaluating the instrument's contingent exercise and settlement
provisions. EITF 07-5 is effective for financial statements issued for fiscal
years beginning after December 15, 2008. Early application is not permitted. The
Company is assessing the potential impact of this EITF 07-5 on the financial
condition and results of operations.
In April
2009, the FASB issued Financial Staff Position SFAS 107-1 and Accounting
Principles Board (APB) Opinion No. 28-1, “Interim Disclosures about Fair Value
of Financial Instruments” (FSP SFAS 107-1 and APB 28-1). The FSP
statement amends FASB Statement No. 107, “Disclosures about Fair Values of
Financial Instruments,” to require disclosures about fair value of financial
instruments in interim financial statements as well as in annual financial
statements. The statement also amends APB Opinion No. 28, “Interim
Financial Reporting,” to require those disclosures in all interim financial
statements. This statement is effective for interim periods ending
after June 15, 2009, but early adoption is permitted for interim periods
ending after March 15, 2009. We are evaluating the impact of this FSP
on our financial statements.
NOTE
4 - BALANCE SHEET COMPONENTS
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.
|
|
March
31,
2009
|
|
|
December
31,
2008
|
|
Accounts
receivable, cost
|
|
$
|
6,019,421
|
|
|
$
|
6,885,099
|
|
Less:
Allowance for doubtful accounts
|
|
|
(844,873
|
)
|
|
|
(845,034
|
)
|
Accounts
receivable, net
|
|
$
|
5,174,548
|
|
|
$
|
6,040,065
|
|
CHINA
SOLAR & CLEAN ENERGY SOLUTIONS, INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Currency
expressed in US Dollars)
(Unaudited)
NOTE 4 - BALANCE SHEET
COMPONENTS
, continued
Inventories
consisted of the following:
|
|
March 31, 2009
|
|
|
December 31, 2008
|
|
Raw
materials
|
|
$
|
1,961,283
|
|
|
$
|
1,443,266
|
|
Work-in-process
|
|
|
2,560,455
|
|
|
|
21,269
|
|
Finished
goods
|
|
|
5,188,362
|
|
|
|
6,816,666
|
|
Consumable
|
|
|
38,545
|
|
|
|
4,320
|
|
Total
inventory
|
|
$
|
9,748,645
|
|
|
$
|
8,285,521
|
|
Other
receivables and prepayments consisted of the following:
|
|
March 31, 2009
|
|
|
December 31, 2008
|
|
Advance
to suppliers
|
|
$
|
1,710,354
|
|
|
$
|
1,389,998
|
|
Notes
receivable
|
|
|
-
|
|
|
|
727,175
|
|
Prepaid
expenses
|
|
|
164,429
|
|
|
|
159,089
|
|
Income
tax receivable
|
|
|
-
|
|
|
|
195,549
|
|
Other
receivable
|
|
|
4,831,418
|
|
|
|
5,398,764
|
|
Other
receivables and prepayments
|
|
$
|
6,706,201
|
|
|
$
|
7,870,575
|
|
NOTE
5 - STOCKHOLDERS’ EQUITY
Common
Stock 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 is 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
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.
NOTE
6 - 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 Islands
(“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 all of its net income from the operation of its
subsidiary in the PRC and is subject to the PRC tax jurisdiction. The Company
has recorded an income tax provision for the three months ended March 31,
2009.
CHINA
SOLAR & CLEAN ENERGY SOLUTIONS, INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Currency
expressed in US Dollars)
(Unaudited)
NOTE 6 - INCOME TAXES
,
continued
United
States of America
China
Solar was incorporated in the State of Nevada and is subject to the tax laws of
United States of America. As of March 31, 2009, the operation in the United
States of America incurred $362,933 of net operating losses available for
federal tax purposes, which are available to offset future taxable income. The
net operating loss carry forwards will expire through 2028, if unutilized. The
Company has provided for a full valuation allowance against the deferred tax
assets of $54,440 on the expected future tax benefits from the net operating
loss carryforwards as the management believes it is more likely than not that
these assets will not be realized in the future.
British
Virgin Islands
Under the
current BVI law, the Company is not subject to tax on income.
The
PRC
The
Company’s subsidiaries operating in the PRC are Bazhou Deli Solar, Beijing Deli
Solar, Ailiyang, Tianjin Huaneng and SZPSP.
Of these
subsidiaries Ailiyang, Tianjin Huaneng are domestically owned and subject to the
Corporate Income Tax (“CIT”) governed by the Income Tax Law of the People’s
Republic of China, at a statutory rate of 25%.
In March
2005, the Bazhou Deli Solar became a foreign investment enterprise. Hence,
effective from the year ended 2005, Bazhou Deli Solar is entitled to a two-year
exemption from enterprise income tax (which expired at the end of March 2007)
and a reduced enterprise income tax rate of 15% for the following three
years.
On July
25, 2006, SZPSP was classified as an Advanced Technology Enterprise in the PRC.
The Company is exempted from CIT for the first two profit making years and then
the CIT is reduced to 15% in the following three years.
In
September 2006, the Beijing Deli Solar was founded as a foreign investment
enterprise. Hence, effective from the year ended 2006, Beijing Deli Solar 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. Tianjin Huaneng
is now is subject to CIT at a statutory rate of 25%. However, as foreign
invested enterprises, Bazhou Deli Solar, Beijing Deli Solar and SZPSP can
continue to enjoy the lower CIT rate of 15% until their tax holiday
expires.
The
Company’s effective income tax rates for the three months ended March 31, 2009
and 2008 were 18%. The Company’s effective income tax rate of 18% for the three
months ended March 31, 2008 was due to an exemption from enterprise income tax
provided by the PRC taxing authority during that period, as discussed
above.
CHINA
SOLAR & CLEAN ENERGY SOLUTIONS, INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Currency
expressed in US Dollars)
(Unaudited)
NOTE
7 - SEGMENT REPORTING, GEOGRAPHICAL INFORMATION
(a)
Business information
During
the three months ended March 31, 2009, the Company had primarily four reportable
segments, (i) solar heater/boiler related products, (ii) heat pipe related
products and (iii) energy-saving projects, (iv) solar heat collector and others,
under the management of Bazhou Deli Solar, Tianjin Huaneng, and Shenzhne
Pengsangpu, respectively.
During
the three months ended March 31, 2008, the Company had primarily two reportable
segments, (i) solar heater/boiler related products and (ii) heat pipe related
products.
The
Company’s revenue, gross profit and total assets by reportable segment for the
three months ended March 31, 2009 and 2008 are as follows:
|
|
2009
|
|
|
2008
|
|
Revenue:
|
|
|
|
|
|
|
Solar
water heaters/boilers & space heaters
|
|
$
|
1,547,847
|
|
|
$
|
2,829,815
|
|
Heat-pipe
related products and equipment
|
|
|
2,106,541
|
|
|
|
5,470,261
|
|
Energy-saving
projects
|
|
|
369,105
|
|
|
|
-
|
|
Solar
heat collector and others
|
|
|
709,671
|
|
|
|
-
|
|
|
|
$
|
4,733,164
|
|
|
$
|
8,300,076
|
|
|
|
|
|
|
|
|
|
|
Gross
profit:
|
|
|
|
|
|
|
|
|
Solar
water heaters/boilers & space heaters
|
|
$
|
328,312
|
|
|
$
|
574,893
|
|
Heat-pipe
related products and equipment
|
|
|
557,518
|
|
|
|
1,880,167
|
|
Energy-saving
projects
|
|
|
10,027
|
|
|
|
-
|
|
Solar
heat collector and others
|
|
|
19,280
|
|
|
|
-
|
|
|
|
$
|
915,137
|
|
|
$
|
2,455,060
|
|
|
|
|
|
|
|
|
|
|
Total
assets:
|
|
|
|
|
|
|
|
|
Solar
water heaters/boilers & space heaters
|
|
$
|
14,165,584
|
|
|
$
|
12,795,964
|
|
Heat-pipe
related products and equipment
|
|
|
13,650,457
|
|
|
|
14,360,410
|
|
Energy-saving
projects
|
|
|
2,333,218
|
|
|
|
7,916,717
|
|
Solar
heat collector and others
|
|
|
4,486,035
|
|
|
|
2,409,562
|
|
All
other
|
|
|
10,257,783
|
|
|
|
9,015,555
|
|
|
|
$
|
44,893,077
|
|
|
$
|
46,498,208
|
|
CHINA
SOLAR & CLEAN ENERGY SOLUTIONS, INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Currency
expressed in US Dollars)
(Unaudited)
NOTE 7 - SEGMENT REPORTING,
GEOGRAPHICAL INFORMATION
, continued
Other
segment in total assets refers to solar lighting products and sales of spare
parts/components. The amount of other assets is less than 10% in each category
and disclosed as an “all other” category in accordance with paragraph 21 of SFAS
131, “Disclosures about Segments of an Enterprise and Related Information”
(“SFAS No. 131”). There was no elimination or reversal of transactions between
reportable segments.
(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 revenue, gross profit and total assets by geographical market for
the three months ended March 31, 2009 and 2008 are analyzed as
follows:
|
|
March 31,
2009
|
|
|
March 31,
2008
|
|
Revenue:
|
|
|
|
|
|
|
PRC
|
|
$
|
4,586,613
|
|
|
$
|
7,320,833
|
|
Other
markets
|
|
|
146,551
|
|
|
|
979,243
|
|
|
|
$
|
4,733,164
|
|
|
$
|
8,300,076
|
|
|
|
|
|
|
|
|
|
|
Gross
profit:
|
|
|
|
|
|
|
|
|
PRC
|
|
$
|
886,662
|
|
|
$
|
2,165,363
|
|
Other
markets
|
|
|
28,475
|
|
|
|
289,697
|
|
|
|
$
|
915,137
|
|
|
$
|
2,455,060
|
|
|
|
|
|
|
|
|
|
|
Total
assets:
|
|
|
|
|
|
|
|
|
PRC
|
|
$
|
40,473,231
|
|
|
$
|
40,331,385
|
|
Other
markets
|
|
|
4,419,846
|
|
|
|
6,166,823
|
|
|
|
$
|
44,893,077
|
|
|
$
|
46,498,208
|
|
CHINA
SOLAR & CLEAN ENERGY SOLUTIONS, INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Currency
expressed in US Dollars)
(Unaudited)
NOTE
8 – CONTINGENCY
Under an
engagement agreement dated January 16, 2008 between the Company and Roth Capital
Partners, LLC (“Roth”), Roth acted as a placement agent for the Company in
connection with the private placement of approximately 4.7 million shares of our
common stock which was consummated in February 2008 (the “Offering”). Under a
certain agreement, dated as of March 21, 2007 by and among Trenwith Securities,
LLC (“Trenwith”) and the Company (the “Trenwith Agreement”), Trenwith was
granted certain rights, including the right to act as placement agent in
connection with a subsequent private placement of the Company’s securities
at fees which are mutually acceptable within a period of 24 months after the
closing of the June 2007 financing. Trenwith believes that it had the right to
act as placement agent with respect to the Offering and has threatened to bring
proceedings against the Company for alleged violation of its rights under the
Trenwith Agreement. The Company disputes these claims and intends to vigorously
defend any lawsuit which Trenwith may commence.
NOTE
9-RELATED PARTY
Zhang
Junru, CEO of Tianjin Huaneng, is one of the 21 individual investors for
Huaneng Installation Corporation, a subsidiary of Tianjin Huaneng, which
is the controlling shareholder of Huaneng Installion with 65% of the
equity. The 21 individual investors including Zhang Junru in combination
owns 35% of the shares in Huaneng Installation.
NOTE
10 - SUBSEQUENT EVENT
(a) Postponement
of Acquisition of 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 to be agreed upon 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 within 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 complete the Acquisition, Fuwaysun must 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 is required to pay us additional interest on such Loan
at a rate of 0.5% per day.
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.
CHINA
SOLAR & CLEAN ENERGY SOLUTIONS, INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Currency
expressed in US Dollars)
(Unaudited)
NOTE 10 - SUBSEQUENT EVENTS,
continued
(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 completed the
transfer of the 60% equity interests.. On April 9, 2009, the parties entered
into a supplemental agreement and agreed to complete the transfer of the 60%
equity interests by June 30, 2009.
NOTE
11- RESTATEMENT ON CONSOLIDATED FINANCIAL STATEMENTS
In April
14, 2010, we file an amendment of 10K of 2008, 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.
The
following is a summary of the effects of the restatement on the balance sheet as
of December 31, 2008.
|
|
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
|
|
The
following is a summary of the effects of the restatement on the 10Q for the
three months ended March 31, 2009.
|
|
As of March 31,
2009
|
|
|
|
as
previously
reported
|
|
|
as
restated
|
|
|
|
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
Accounts
receivable, net
|
|
$
|
6,658,667
|
|
|
$
|
5,174,548
|
|
Inventories
|
|
|
7,240,423
|
|
|
|
9,748,645
|
|
Total
current assets
|
|
|
22,218,418
|
|
|
|
23,242,521
|
|
Property,
plant and equipment, net
|
|
|
15,306,283
|
|
|
|
15,089,472
|
|
Goodwill
|
|
|
2,284,903
|
|
|
|
2,340,512
|
|
Total
assets
|
|
$
|
44,030,176
|
|
|
$
|
44,893,077
|
|
|
|
As of March 31,
2009
|
|
|
|
as
previously
reported
|
|
|
as
restated
|
|
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
Income
tax payables
|
|
$
|
2,210,157
|
|
|
$
|
1,543,770
|
|
Other
payables and accrued liabilities
|
|
|
7,343,0611
|
|
|
|
11,617,232
|
|
Total
current liabilities
|
|
|
14,249,947
|
|
|
|
17,857,731
|
|
Long-term
debt
|
|
|
-
|
|
|
|
286,483
|
|
Total
liabilities
|
|
|
14,265,726
|
|
|
|
18,159,993
|
|
Minority
interests
|
|
|
1,713,804
|
|
|
|
204,098
|
|
|
|
|
|
|
|
|
|
|
Stockholders’
equity:
|
|
|
|
|
|
|
|
|
Additional
paid-in capital
|
|
|
22,966,404
|
|
|
|
23,073,258
|
|
Retained
earnings
|
|
|
2,425,240
|
|
|
|
796,726
|
|
Total
stockholders’ equity
|
|
|
28,050,646
|
|
|
|
26,528,986
|
|
|
|
|
|
|
|
|
|
|
TOTAL
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
$
|
44,030,176
|
|
|
$
|
44,893,077
|
|
|
|
Three
months ended
March 31,
2009
|
|
|
|
as
previously
reported
|
|
|
as
restated
|
|
Revenue,
net
|
|
$
|
6,195,691
|
|
|
$
|
4,733,164
|
|
Cost
of revenue
|
|
|
4,991,878
|
|
|
|
3,818,027
|
|
Gross
profit
|
|
|
1,203,813
|
|
|
|
915,137
|
|
Income
before income taxes
|
|
|
(893,669
|
)
|
|
|
(1,182,345
|
)
|
Net
income
|
|
|
(940,548
|
)
|
|
|
(1,229,224
|
)
|
Net
income available to common stockholders
|
|
$
|
(940,548
|
)
|
|
$
|
(1,229,224
|
)
|
Net
income per share – basic
|
|
$
|
(0.07
|
)
|
|
$
|
(0.09
|
)
|
Net
income per share – diluted
|
|
$
|
(0.07
|
)
|
|
$
|
(0.09
|
)
|
Item
2. MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Forward-Looking
Information — This item includes “forward-looking statements”. All
statements, other than statements of historical facts, included in this item
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, which 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 timing and magnitude of
technological advances; the prospects for future acquisitions; the competition
in the solar water heaters and boilers industry and the impact of such
competition on pricing, revenues and margins; uncertainties surrounding budget
reductions or changes in funding priorities of existing government programs and
the cost of attracting and retaining highly skilled personnel.
Overview
We are
engaged in the renewable energy business in the PRC. Our business is conducted
through our wholly-owned PRC based operating subsidiaries, Deli Solar (Bazhou),
Deli Solar (Beijing), Ailiyang and our majority owned subsidiary Tianjin
Huaneng.
The
Company has three reportable segments: (i) Solar heater/Biomass stove/Building
integrated energy projects for households and buildings; (ii) Industrial waste
heat recovery/Energy-saving projects for industrial customers; and (iii) Heat
pipe related products.
Deli
Solar (Bazhou) manufactures and distributes solar products in the PRC. The
Company’ principal products are solar hot water heaters and multifunctional
space heaters, including coal-fired boilers for residential use. Deli Solar
(Bazhou) also sells spare parts for its products and provides after-sales
maintenance and repair services.
Deli
Solar (Beijing) is principally engaged in the service and installation of energy
saving equipments in residential and commercial buildings in major cities in the
PRC.
Tianjin
Huaneng provides waste heat recovery and energy saving solutions for industrial
customers. The Company manufactures heating products such as heating pipes, heat
exchangers, specialty heating pipes and tubes, high temperature hot blast
boilers, heating filters, normal pressure water boilers, solar energy water
heaters and radiators.
Three
months ended March 31, 2009 compared to three months ended March 31,
2008
Sales
Revenues
An
analysis of the Company’s revenues and gross profits for each segment is as
follows:
|
|
Three Months
Ended March 31,
2009
|
|
|
Three Months Ended
March 31, 2008
|
|
Revenue:
|
|
|
|
|
|
|
Solar
water heaters/boilers & space heaters
|
|
$
|
1,547,847
|
|
|
$
|
2,829,815
|
|
Heat-pipe
related products and equipment
|
|
|
2,106,541
|
|
|
|
5,470,261
|
|
Energy-saving
projects
|
|
|
369,105
|
|
|
|
-
|
|
Solar
heat collector and others
|
|
|
709,671
|
|
|
|
-
|
|
|
|
$
|
4,733,164
|
|
|
$
|
8,300,076
|
|
Overall:
Sales revenues for the three months ended March 31, 2009 were $4,733,164 as
compared to $8,300,076 for the same period last year, a decrease of $3,566,912
or 43% compared to the same period in 2008. The decrease in sales was primarily
attributable to a weakening economy. Sales for industrial enterprises in China
are usually slow for the first quarter due to the long holiday season around
Chinese Lunar New Year. We expect sales revenue to increase during the rest
of the year with the completion of pending projects in the first quarter and
collection of the account receivables corresponding to these
projects.
Solar
Heater/Boiler Related Products
:
Sales revenues for these
products for the three months ended March 31, 2009 were $1,547,847 as compared
to $2,829,815 for the same period last year, a decrease of $1,281,968 or 45.3%.
The decrease in sales revenue derived from solar heaters and boiler related
products was due to lower average selling price as a result of increased
competition and a weakening economy. We expect price competition to continue for
the remainder of 2009.
Heat Pipe Related
Products and Equipment:
Sales revenues for the three months ended March
31, 2009 were $2,106,541 compared to $5,470,261 for the same period last year, a
decrease of $3,363,720 or 61.5%. The decrease in sales of heat pipe related
products and equipments were a result of slowdown in demand amid economic
downturn. The average selling price decreased as a result of increased
competition. We expect an increase in sales of heat pipe related products and
equipments in the second half due to traditional seasonal increased market
demand for boiler related products as winter approaches and as a result of
aggressive investment in infrastructure construction as part of its stimulus
initiative by the Chinese government to revive the economy. This potential
increase in sales will be negatively affected by the continuing price
competition for the rest of 2009.
Energy
Saving
Projects:
Sales revenues for the three months ended March 31, 2009 were $
369,105 compared to 0 for the same period last year. The sales of energy saving
projects were attributable to the acquisition of SZPSP that was completed on
April 1, 2008.
S
olar Heat
Collector and Others:
Sales revenues for the three months ended March 31,
2009 were $ 709,671 compared to 0 for the same period last year. The sales of
solar heat collectors and others were attributable to the acquisition of SZPSP
completed on April 1, 2008.
Gross
Profit
|
|
For the Three
Months
Ended
March 31,
2009
|
|
|
For the Three
Months
Ended March
31, 2008
|
|
Revenue:
|
|
|
|
|
|
|
Solar
water heaters/boilers & space heaters
|
|
$
|
328,312
|
|
|
$
|
574,893
|
|
Heat-pipe
related products and equipment
|
|
|
557,518
|
|
|
|
1,880,167
|
|
Energy-saving
projects
|
|
|
10,027
|
|
|
|
-
|
|
Solar
heat collector and others
|
|
|
19,280
|
|
|
|
-
|
|
|
|
$
|
915,137
|
|
|
$
|
2,455,060
|
|
Overall:
Gross profit margin for the three months ended March 31, 2009 decreased by
approximately 10% from the corresponding period in 2008. This was primarily due
to a decrease in sales of low-margin products such as household water heaters
and the relatively higher cost of key raw materials such as stainless steel. The
Company added stockpiles when the stainless steel price was higher, which
translated to a higher production cost and lower gross profit. We expect the
gross profit for lower margin products, such as household water heaters, to
decrease as a result of increasingly intensive competition in the market, while
the gross profit for higher margin products, such as large-scale projects and
equipments, is to increase for the remaining of year with the completion of
pending projects and new orders for equipments.
Solar
Heate
r/Boiler Related
Products
: Gross profit margin remained fairly constant for the three
months ended March 31, 2009 (21%) compared to the three months ended March 30,
2008 (20%). Although we anticipate an increase in market demand in
the boiler related products as winter approaches, we expect the profit margin
for household solar water heater/boilers to decrease as the price competition is
likely to continue for the remainder of 2009.
Heat Pipe Related
Products and Equipments:
Gross profit margin for the three months ended
March 31, 2009 was approximately 26%, a decrease of 8% from the corresponding
period last year. The decrease in gross profit margin was to the lower average
product sales price as a result of increased competition for these
products.
Ene
rgy Saving
Projects:
Gross profit for the three months ended March 31, 2009 was $
10,027 (2.7% margin) . The profit margin for this category is attributable to
the decrease in average selling price and increase in expenditure for the
product promotion and marketing campaigns launched during the first three months
in SZPSP. We expect the gross profit for energy-saving projects to increase due
to an increase in government orders for infrastructure construction. There were
no sales of these products in the corresponding period for the prior year as
SZPSP was not one of the subsidiaries in 1Q of 2008.
Solar
Heat Collector and Others: Gross profit for the three months ended March 31,
2009 was $19,280 (2.7% margin) The profit margin for this category is
attributable to the decrease in average selling price and increase in
expenditures for the product promotion and marketing campaigns launched during
the first three months in SZPSP. There were no sales of these products in the
corresponding period for the prior year as SZPSP was not one of the subsidiaries
in 1Q of 2008.
Operating
Expenses
Operating
expenses for the three months ended March 31, 2009 were $2,117,231, as compared
to $1,253,383 for the same period in 2008, an increase of $863,848, or 68.9%.
The overall increase in operating expenses was primarily due to the acquisition
of SZPSP and the subsequent increase in sales and marketing expenses detailed
below.
Depreciation
and amortization expense increased to $304,988 as compared to $149,167 for the
same period last year. The increase was mainly due to an increase in
depreciation and amortization expense as a result of the acquisition of
SZPSP.
Operating Expenses,
continued
Selling
and distribution expense increased to $545,899 as compared to $502,563 for the
same period last year. The increase was mainly due to increased expenses
incurred in the development of sales network and promotion
programs.
General
and administrative expenses were $1,266,344 and $601,653, or approximately 26.8%
and 7.2% of sales, for the three months ended March 31, 2009 and 2008,
respectively. The net increase of $664,691 was mainly due to the acquisition of
SZPSP.
Net
Income
Net
income (loss) was ($1,229,224) for the three months ended March 31, 2009,
compared to $389,651 in the same period last year, a decrease of $1,618,875 or
approximately 415.5%. The net loss was due to slowdown in sales amid a weakening
economy and price competition among the peer companies.
LIQUIDITY
AND CAPITAL RESOURCES
Net cash
used in operating activities was ($829,589) and ($4,104,526) for the three
months ended March 31, 2009 and 2008, respectively. The decrease in net cash
used by operations was mainly due to the decrease in sales.
Net cash
used in investing activities was ($280,208) and ($730,974) for the three months
ended March 31, 2009 and 2008, respectively.
Net cash
provided by financing activities was $0 and $10,102,656 for the three months
ended March 31, 2009 and 2008, respectively.
We
believe that current cash will be sufficient to meet anticipated working capital
and capital expenditures for at least the next twelve months. However, we need
to require additional cash for further development of business, including any
investments or acquisitions we may decide to pursue. We cannot assure you that
such funding will be available.
Cash
Cash and
cash equivalents decreased to $1,361,842 at March 31, 2009 from $2,404,996 at
December 31, 2008, primarily as a result decrease in sales.
Accounts
Receivable
During
the three months ended March 31, 2009, account receivable decreased to
$5,174,548 from $6,040,065 as of December 31, 2008, primarily due to collection
positively. 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
during the three months ended March 31, 2009 were none.
Inventory
Inventories
as of March 31, 2009 increased to $9,748,645 from $8,285,521 as of December 31,
2008 principally because of an increase in inventories of finished goods by
Tianjin Huaneng. The inventory mainly consists of finished goods waiting
for transportation or installation.
Other
Receivables and Prepayments
Other
receivables and prepayments as of March 31, 2009 decreased to $6,706,201 from
$7,870,575 as of December 31, 2008. Other receivables and prepayments mainly
consist of prepaid expenses and deposits.
Accounts
Payable
Accounts
payable as of March 31, 2009 decreased to $4,696,729 from $5,301,349 as of
December 31, 2008 primarily due to the payments made to creditors under the term
of credit agreements.
Other
Payables and Accrued Liabilities
Other
payables and accrued liabilities as of March 31, 2009 increased to $11,617,232
from $11,190,000 as of December 31, 2008, primarily due to the increase of
deposit of contract.
PART
II — OTHER INFORMATION
Exhibit
No.
|
|
Document
Description
|
|
|
|
31.1
|
|
Certification
of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.
|
|
|
|
31.2
|
|
Certification
of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.
|
|
|
|
32.1
|
|
Certification
of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002.
|
|
|
|
32.2
|
|
Certification
of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley
Act of
2002.
|
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this Amendment No. 1 to Form 10-Q on Form 10-Q/A to be signed on its
behalf by the undersigned thereunto duly authorized.
|
China
Solar & Clean Energy Solutions, Inc.
|
|
|
|
May
4, 2010
|
By:
|
/s/
Deli Du
|
|
|
Deli
Du
Chief
Executive Officer and President
(Principal
Executive Officer)
|
|
|
|
|
By:
|
/s/ Yinan
Zhao
|
|
|
Yinan
Zhao
Acting
Chief Financial Officer
(Principal
Financial Officer)
|
Exhibit
Index
|
|
|
Exhibit
No.
|
|
Document
Description
|
|
|
|
31.1
|
|
Certification
of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.
|
|
|
|
31.2
|
|
Certification
of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.
|
|
|
|
32.1
|
|
Certification
of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002.
|
|
|
|
32.2
|
|
Certification
of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002.
|