UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-Q
|
x
|
QUARTERLY REPORT PURSUANT TO
SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT
OF 1934
|
For the
quarterly period ended June 30, 2010
or
|
o
|
TRANSITION 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
|
Building
3
No.
28 Feng Tai North Road,
Beijing
China 100071
(Address
of principal executive offices)
(011)
86-10-63860500
(Registrant's
telephone number, including area code)
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).
o
Yes
o
No
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 as
at August 16, 2010 was 15,233,652.
TABLE
OF CONTENTS
INDEX
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Page
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PART
1 - FINANCIAL INFORMATION
|
|
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Item
1. Financial Statements
|
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Condensed
Consolidated Balance Sheets as at June 30, 2010 (unaudited) and December
31, 2009
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3
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Condensed
Consolidated Statements of Operations for the six Months Ended June 30,
2010 and 2009 (unaudited)
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4
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Condensed
Consolidated Statements of Cash Flows for the six Months Ended June 30,
2010 and 2009 (unaudited)
|
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5
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Condensed
Consolidated Statements of Stockholders' Equity and other comprehensive
Income for the six Months Ended June 30, 2010 (unaudited) and
2009
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6
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Notes
to Condensed Consolidated Financial Statements (unaudited)
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7
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Item
2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
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15
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Item
3. Quantitative and Qualitative Disclosures About Market
Risk
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19
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Item
4T. Controls and Procedures
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19
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PART
2 - OTHER INFORMATION
|
|
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Item
1. Legal Proceedings
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20
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Item
1A. Risk Factors
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Item
2. Unregistered Sales of Equity Securities and Use of
Proceeds
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Item
3. Defaults Upon Senior Securities
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Item
4. Removed and Reserved
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Item
5. Other Information
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Item
6. Exhibits
|
|
21
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Signatures
|
|
22
|
Item 1.
Financial
Statements
CHINA
SOLAR & CLEAN ENERGY SOLUTIONS, INC.
CONSOLIDATED
BALANCE SHEETS
|
|
|
As of
June
30,
2010
|
|
|
As of
December
31,
2009
|
|
|
|
|
(Unaudited)
|
|
|
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|
ASSETS
|
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
$
|
3,596,126
|
|
|
$
|
4,980,717
|
|
|
Accounts
receivable, net
|
|
|
9,982,618
|
|
|
|
8,067,944
|
|
|
Inventories
|
|
|
5,122,077
|
|
|
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4,547,170
|
|
|
Other
receivables and prepayments
|
|
|
3,119,287
|
|
|
|
1,733,695
|
|
|
Deferred
tax assets
|
|
|
587,932
|
|
|
|
588,016
|
|
|
Total
current assets
|
|
|
22,408,040
|
|
|
|
19,917,542
|
|
|
|
|
|
|
|
|
|
|
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|
Property
and equipment, net
|
|
|
13,646,414
|
|
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13,775,554
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|
Goodwill
|
|
|
1,977,652
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|
|
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1,967,153
|
|
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Land
use rights
|
|
|
1,583,016
|
|
|
|
1,592,140
|
|
|
Investment
in Trueframe International Limited
|
|
|
3,740,972
|
|
|
|
3,812,806
|
|
|
TOTAL
ASSETS
|
|
$
|
43,356,094
|
|
|
$
|
41,065,195
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
|
|
|
Accounts
payable, trade
|
|
$
|
1,602,749
|
|
|
$
|
1,601,002
|
|
|
Taxes
payable
|
|
|
1,459,445
|
|
|
|
1,278,974
|
|
|
Other
payables and accrued liabilities
|
|
|
9,794,925
|
|
|
|
9,977,178
|
|
|
Loan
payable-employee
|
|
|
1,998,277
|
|
|
|
1,266,747
|
|
|
Short-term
loans
|
|
|
736,279
|
|
|
|
|
|
|
Total
current liabilities
|
|
|
15,591,675
|
|
|
|
14,123,901
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term
liabilities
|
|
|
-
|
|
|
|
156,410
|
|
|
Total
liabilities
|
|
|
15,591,675
|
|
|
|
14,280,311
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders’
equity
|
|
|
|
|
|
|
|
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|
Common
stock, $0.001 par value, 66,666,667 shares authorized, 15,233,652 shares
issued and outstanding
|
|
|
15,233
|
|
|
|
15,233
|
|
|
Additional
paid-in capital
|
|
|
22,611,909
|
|
|
|
22,611,909
|
|
|
Accumulated
other comprehensive income
|
|
|
801,018
|
|
|
|
693,016
|
|
|
Retained
earnings
|
|
|
3,847,460
|
|
|
|
3,100,294
|
|
|
Total
stockholders’ equity-China Solar
|
|
|
27,275,620
|
|
|
|
26,420,452
|
|
|
Non-controlling
interest in subsidiary
|
|
|
488,799
|
|
|
|
364,432
|
|
|
Total
Stockholder’s Equity
|
|
|
27,764,419
|
|
|
|
26,784,884
|
|
|
TOTAL
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
$
|
43,356,094
|
|
|
$
|
41,065,195
|
|
See
accompanying notes to condensed consolidated financial statements.
CHINA
SOLAR & CLEAN ENERGY SOLUTIONS, INC.
CONSOLIDATED
STATEMENTS OF
INCOME
(Unaudited)
|
|
|
Three months
ended
June
30,
|
|
|
six months
ended
June
30,
|
|
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
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2009
|
|
|
|
|
|
|
|
(restated)
|
|
|
|
|
|
(restated)
|
|
|
Revenue,
net
|
|
$
|
10,705,927
|
|
|
$
|
13,306,863
|
|
|
$
|
14,602,341
|
|
|
$
|
16,960,658
|
|
|
Cost
of revenue
|
|
|
7,713,567
|
|
|
|
10,023,837
|
|
|
|
10,448,571
|
|
|
|
12,791,818
|
|
|
Gross
profit
|
|
|
2,992,360
|
|
|
|
3,283,026
|
|
|
|
4,153,770
|
|
|
|
4,168,840
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation
and amortization
|
|
|
104,311
|
|
|
|
103,285
|
|
|
|
226,824
|
|
|
|
191,906
|
|
|
Selling
and distribution
|
|
|
729,260
|
|
|
|
480,587
|
|
|
|
1,356,329
|
|
|
|
1,040,072
|
|
|
General
and administrative
|
|
|
695,125
|
|
|
|
650,909
|
|
|
|
1,291,786
|
|
|
|
1,550,535
|
|
|
Total
operating expenses
|
|
|
1,528,696
|
|
|
|
1,234,781
|
|
|
|
2,874,939
|
|
|
|
2,782,513
|
|
|
Income
from operations
|
|
|
1,463,664
|
|
|
|
2,048,245
|
|
|
|
1,278,831
|
|
|
|
1,386,327
|
|
|
Other
income (expenses):
|
|
|
|
|
|
|
0
|
|
|
|
|
|
|
|
|
|
|
Other
income
|
|
|
146
|
|
|
|
6,559
|
|
|
|
161
|
|
|
|
43,837
|
|
|
Interest
income
|
|
|
139
|
|
|
|
2,451
|
|
|
|
767
|
|
|
|
2,456
|
|
|
Other
expense
|
|
|
(3,682
|
)
|
|
|
(41,438
|
)
|
|
|
(3,801
|
)
|
|
|
(50,869
|
)
|
|
Reversal
of reserve for bad debts
|
|
|
-
|
|
|
|
127,245
|
|
|
|
-
|
|
|
|
127,245
|
|
|
Interest
expense
|
|
|
(88,165
|
)
|
|
|
(39,490
|
)
|
|
|
(160,340
|
)
|
|
|
(86,649
|
)
|
|
Loss
from non-consolidated subsidiries
|
|
|
(72,000
|
)
|
|
|
-
|
|
|
|
(72,000
|
)
|
|
|
-
|
|
|
Total
other income (expenses)
|
|
|
(163,562
|
)
|
|
|
55,327
|
|
|
|
(235,213
|
)
|
|
|
36,020
|
|
|
gain
on sale of discontinued operation net of tax
|
|
|
-
|
|
|
|
652,753
|
|
|
|
-
|
|
|
|
652,753
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income(Loss)
From Continuing Operations Before Income Taxes
|
|
|
1,300,102
|
|
|
|
2,756,325
|
|
|
|
1,043,618
|
|
|
|
2,075,100
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
tax expense
|
|
|
105,908
|
|
|
|
173,135
|
|
|
|
172,085
|
|
|
|
198,738
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income(Loss)
From Continuing Operations
|
|
|
1,194,194
|
|
|
|
2,583,190
|
|
|
|
871,533
|
|
|
|
1,876,362
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income(Loss)
From Discontinued Operations(net of tax)
|
|
|
-
|
|
|
|
-
|
|
|
-
|
|
|
|
(512,390
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Income(Loss)
|
|
|
1,194,194
|
|
|
|
2,583,190
|
|
|
|
871,533
|
|
|
|
1,363,972
|
|
|
Less:Net
Income Attributable To Non-controlling interest
|
|
|
119,368
|
|
|
76,543
|
|
|
|
124,367
|
|
|
|
86,549
|
|
|
Net
Income(Loss) Attributable To China Solar Shareholders
|
|
$
|
1,074,826
|
|
|
$
|
2,506,647
|
|
|
$
|
747,166
|
|
|
$
|
1,277,423
|
|
|
Basic
and Diluted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
continuing
operations
|
|
$
|
0.08
|
|
|
$
|
0.16
|
|
|
$
|
0.06
|
|
|
$
|
0.12
|
|
|
discontinued
operations
|
|
$
|
0.00
|
|
|
$
|
0.00
|
|
|
$
|
0.00
|
|
|
$
|
(0.03
|
)
|
|
|
|
|
0.08
|
|
|
|
0.16
|
|
|
|
0.06
|
|
|
|
0.09
|
|
|
Weighted
average shares outstanding – Basic and Diluted
|
|
|
15,233,652
|
|
|
|
16,173,016
|
|
|
|
15,233,652
|
|
|
|
16,123,921
|
|
See
accompanying notes to condensed consolidated financial statements.
CHINA
SOLAR & CLEAN ENERGY SOLUTIONS, INC.
CONSOLIDATED
STATEMENTS OF CASH FLOWS
(Currency
expressed in United States Dollars (“US$”))
(Unaudited)
|
|
|
six months
ended
June 30,
|
|
|
|
|
2010
|
|
|
2009
|
|
|
|
|
|
|
|
(restated)
|
|
|
Cash
flows from operating activities:
|
|
|
|
|
|
|
|
Net
effect of discontiuned operation
|
|
$
|
-
|
|
|
$
|
3,249,424
|
|
|
Net
cash used in operating activities
|
|
|
(2,143,894
|
)
|
|
|
(3,245,825
|
)
|
|
|
|
|
(2,143,894
|
)
|
|
|
3,599
|
|
|
Cash
flows from investing activities:
|
|
|
|
|
|
|
|
|
|
Acquisition
of companies,net of cash acquired
|
|
|
|
|
|
|
|
|
|
Disposal
of subsidiary
|
|
|
-
|
|
|
|
439,122
|
|
|
Purchase
of property, plant and equipment
|
|
|
(117,516
|
)
|
|
|
(231,528
|
)
|
|
payment
for other intangible assets
|
|
|
|
|
|
|
|
|
|
Net
effect of discontiuned operation
|
|
|
-
|
|
|
|
(8,420
|
)
|
|
Net
cash used in investing activities
|
|
|
(117,516
|
)
|
|
|
199,174
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
flows from financing activities:
|
|
|
|
|
|
|
|
|
|
Proceeds
from non-controlling shareholder
|
|
|
-
|
|
|
|
51,231
|
|
|
Cash
received from borrowings
|
|
|
732,732
|
|
|
|
|
|
|
Proceeds
from warrants exercised
|
|
|
|
|
|
|
|
|
|
Net
effect of discontiuned operation
|
|
|
|
|
|
|
|
|
|
Net
cash provided by financing activities
|
|
|
732,732
|
|
|
|
51,231
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign
currency translation adjustment
|
|
|
144,087
|
|
|
|
(10
|
)
|
|
|
|
|
|
|
|
|
|
|
|
NET
CHANGE IN CASH AND CASH EQUIVALENTS
|
|
|
(1,384,591
|
)
|
|
|
253,994
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH
AND CASH EQUIVALENTS, BEGINNING OF PERIOD
|
|
|
4,980,717
|
|
|
|
2,405,644
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH
AND CASH EQUIVALENTS, END OF PERIOD
|
|
$
|
3,596,126
|
|
|
$
|
2,659,638
|
|
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL
DISCLOSURE OF CASH FLOW INFORMATION
|
|
|
|
|
|
|
|
|
|
Cash
paid for income taxes
|
|
$
|
132,453
|
|
|
$
|
129,318
|
|
|
Cash
paid for interest expenses
|
|
$
|
101,715
|
|
|
$
|
86,649
|
|
See
accompanying notes to condensed consolidated financial statements
CHINA
SOLAR & CLEAN ENERGY SOLUTIONS, INC.
CONDENSED
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY AND OTHER COMPREHENSIVE
INCOME
(Currency
expressed in United States Dollars (“US$”), except for number of
shares)
(Unaudited)
|
|
|
Preferred stock
|
|
|
Common stock
|
|
|
Additional
|
|
|
Accumulated
other
|
|
|
|
|
|
Non-controlling
|
|
|
Total
|
|
|
|
|
No. of
shares
|
|
|
Par
value
|
|
|
No. of
shares
|
|
|
Par
value
|
|
|
paid-in
Capital
|
|
|
comprehensive
income
|
|
|
Retained
Earnings
|
|
|
interest
in
subsidiary
|
|
|
stockholders’
equity
|
|
|
Balance
as of Jan 1, 2010
|
|
|
-
|
|
|
|
-
|
|
|
|
15,233,652
|
|
|
|
15,233
|
|
|
|
22,611,909
|
|
|
|
693,016
|
|
|
|
3,100,294
|
|
|
|
364,432
|
|
|
|
26,784,884
|
|
|
Net
income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
747,166
|
|
|
|
124,367
|
|
|
|
871,533
|
|
|
Foreign
currency translation adjustment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
108,002
|
|
|
|
|
|
|
|
|
|
|
|
108,002
|
|
|
Balance
as of June 30, 2010
|
|
|
-
|
|
|
|
-
|
|
|
|
15,233,652
|
|
|
|
15,233
|
|
|
|
22,611,909
|
|
|
|
801,018
|
|
|
|
3,847,460
|
|
|
|
488,799
|
|
|
|
27,764,419
|
|
See
accompanying notes to condensed consolidated financial statements
CHINA
SOLAR & CLEAN ENERGY SOLUTIONS, INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Currency
expressed in United States Dollars (“US$”))
(Unaudited)
NOTE
1 - BASIS OF PRESENTATION
The
accompanying unaudited condensed consolidated financial statements 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, 2009.
The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
Estimates that are particularly susceptible to change include assumptions used
in determining the fair value of securities owned and non-readily marketable
securities.
The
results of operations for the six months ended June 30, 2010 are not necessarily
indicative of the results to be expected for the entire fiscal year ending
December 31, 2010 or for any future period.
NOTE
2 - ORGANIZATION AND BUSINESS
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)”). The acquisition of Deli Solar (BVI) was accounted for as a
recapitalization of Deli Solar (BVI).
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”). 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”).
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.
Deli
Solar (Beijing) ownes 91.82% of Tianjin Huaneng Energy Equipment Company
(“Tianjin Huaneng”), which manufactures energy saving boilers and environmental
protection equipment for industrial customers.
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 radiators. On July 6, 2009, Deli Solar (Beijing)
entered into a termination agreement (the "Termination Agreement") with the
three shareholders of SZPSP. The Termination Agreement terminates the equity
purchase and complementary agreements. We accounted for SZPSP as a wholly-owned
subsidiary from March 31, 2008 until March 31, 2009.
China
Solar, Deli Solar (BVI), Deli Solar (Bazhou), Ailiyang, Deli Solar (Beijing) and
Tianjin Huaneng are hereinafter referred to as the “Company”.
NOTE
3 - RECENTLY ISSUED ACCOUNTING STANDARDS
In
January 2010, the FASB issued Accounting Standards Update (“ASU”) 2010-06,
“improving Disclosures about Fair Value Measurements,” which clarifies certain
existing requirements in ASC 820 “Fair Value Measurements and Disclosures,” and
required disclosures related to significant transfers between each level and
additional information about Level 3 activity. FASB ASU 2010-06
begins phasing in the first fiscal period beginning after December 15,
2009. The Company is currently assessing the impact on its
consolidated results of operations and financial conditions.
In
February 2010, the FASB issued FASB ASU 2010-09, “Subsequent Events, Amendments
to Certain Recognition and Disclosure Requirements,” which clarifies certain
existing evaluation and disclosure requirements in ASC 855 “Subsequent Events”
related to subsequent events. FASB ASU 2010-09 requires SEC filers to evaluate
subsequent events through the date in which the financial Statements are issued
and are effective immediately. The new guidance does not have an effect on the
Company’s consolidated results of operations and financial
condition.
Management
does not believe that any other recently issued, but not yet effective,
accounting standards if currently adopted would have a material effect on the
accompanying financial statements.
NOTE
4-INVESTMENT IN TRUEFRAME INTERNATIONAL LTD.
Trueframe
International Limited
In
October, 2009 we acquired 28% of the outstanding equity of Truefame
International Limited ("Truefame"), which is a holding company that owns 55.78 %
of the outstanding common stock of AgriSolar Solutions, Inc. ("AGSO"), which
holds Shengzhen Fuwaysun Technology Co., Ltd. ("Fuwaysun") for approximately
$3,741,000. Fuwaysun is a PRC company primarily engaged in the development and
production of solar pest killing lamps and transportable solar generators.The
investment is accounted for under the equity method of accounting.
NOTE
5– BUSINESS DISPOSAL
On July
6, 2009, we entered into the Termination Agreement with the three former
shareholders of SZPSP to terminate “The Equity Purchase Agreement” and
“Complementary Agreement to the Equity Purchase Agreement”
The key
terms of the Termination Agreement are:
Pursuant
to the terms of the agreements the Company received RMB 28,800,000 and 939,364
shares of its common stock in exchange for its ownership of SZPSP. In
addition, the Company will receive a portion of the net profit, if any, of SZPSP
for the year ended March 31, 2009. No effect has been given to the
profit distribution in the accompanying financial statements.
The
operations of SZPSP have been presented as discontinued operations in the
accompanying financial statements from the date of acquisition to the date of
disposition, for the appropriate periods.
As
summary of the operations of SZPSP is follows:
|
|
|
March 31,
2009
|
|
|
Revenues
|
|
$
|
1,024,103
|
|
|
Income
before provision for income taxes from discontinued
operations
|
|
|
(501,120
|
)
|
|
Income
tax provision
|
|
|
11,270
|
|
|
Income(loss)
from discontinued operation, net of tax
|
|
$
|
(512,390
|
)
|
NOTE
6 - 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 the
aging of accounts receivable that management believes to be
reasonable.
|
|
|
June 30,
2010
|
|
|
December 31,
2009
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
Accounts
receivable, cost
|
|
$
|
11,544,327
|
|
|
$
|
9,621,122
|
|
|
Less
: allowance for doubtful accounts
|
|
|
(1,561,709
|
)
|
|
|
(1,553,178
|
)
|
|
Accounts
receivable, net
|
|
$
|
9,982,618
|
|
|
$
|
8,067,944
|
|
Inventories:
|
|
|
June 30,
2010
|
|
|
December 31,
2009
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
Raw
materials
|
|
$
|
2,265,357
|
|
|
$
|
1,186,188
|
|
|
Consumables
|
|
|
16,844
|
|
|
|
16,358
|
|
|
Work-in-process
|
|
|
73,018
|
|
|
|
57,357
|
|
|
Finished
goods
|
|
|
2,766,858
|
|
|
|
3,287,267
|
|
|
Inventories
|
|
$
|
5,122,077
|
|
|
$
|
4,547,170
|
|
Other
receivables and prepayments:
|
|
|
June 30,
2010
|
|
|
December 31,
2009
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
Advance
to suppliers
|
|
$
|
1,201,129
|
|
|
$
|
555,781
|
|
|
Other
receivables
|
|
|
1,918,158
|
|
|
|
1,177,914
|
|
|
Other
receivables and prepayments(1)
|
|
$
|
3,119,287
|
|
|
$
|
1,733,695
|
|
(1) The
amount includes the loan of RMB2, 000,000 for Xiongri. 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. 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. However
，
the parties came
to consensus after negotiation on October 23, 2009 that the agreement shall be
revoked and the three shareholders need to return RMB2, 000,000 in following two
years after signed.
Other
payables and accrued liabilities:
|
|
|
June 30,
2010
|
|
|
December 31,
2009
|
|
|
|
|
(Unaudited)
|
|
|
|
|
|
Customer
deposit
|
|
$
|
3,895,096
|
|
|
$
|
4,488,561
|
|
|
Salary
payable
|
|
|
420,544
|
|
|
|
521,951
|
|
|
Accrued
expenses
|
|
|
221,430
|
|
|
|
226,430
|
|
|
Other
payables
|
|
|
2,905,996
|
|
|
|
2,551,978
|
|
|
Warranty
provision
|
|
|
1,022,132
|
|
|
|
1,016,549
|
|
|
Current
portion of investment payable(1)
|
|
|
1,329,727
|
|
|
|
1,171,709
|
|
|
Totals
|
|
$
|
9,794,925
|
|
|
$
|
9,977,178
|
|
(1)
Represents liability in connection with the acquisition of Tianjin
Huaneng,
NOTE
7 - STOCKHOLDERS’ EQUITY
Common
stock
During
the year ended December 31, 2009, 373,566 shares of preferred stock were
converted to the same number of shares of common stock.
.
During
the year ended December 31, 2009, 939,364 shares of common stock were cancelled
due to termination with SZPSP.
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. The registration statement of 1,000,000
of the Make Good Shares to the investors was declared effective on July 20,
2009.
Warrants
for services
A summary
of the status of the Company’s outstanding common stock warrants:
|
|
|
Number of
Shares
|
|
|
Weighted-
average
Exercise Price
|
|
|
Weighted-
average
Remaining
Contractual
|
|
|
Outstanding
and Exercisable at January 1, 2009
|
|
|
7,091,682
|
|
|
$
|
2.76
|
|
|
3.53
years
|
|
|
Granted
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Forfeited
|
|
|
469,150
|
|
|
|
-
|
|
|
|
-
|
|
|
Expired
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Outstanding
and Exercisable at December 31, 2009
|
|
|
6,622,532
|
|
|
$
|
2.48
|
|
|
2.25
years
|
|
|
Granted
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Forfeited
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Expired
|
|
|
1,825,719
|
|
|
|
-
|
|
|
|
-
|
|
|
Outstanding
and Exercisable at June 30, 2010
|
|
|
4,796,813
|
|
|
|
1.95
|
|
|
2.3
years
|
|
NOTE
8 - 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 all of its net income from the operation of its
subsidiary in the PRC and is subject to the PRC tax jurisdiction.
NOTE
9 - SEGMENT REPORTING, GEOGRAPHICAL INFORMATION
(a)
Business information
During
the six months ended June 30, 2010, the Company had primarily three reportable
segments, (i) Solar Heater/Biomass Stove/Boiler related products, (ii) Heat pipe
related products and (iii) Building integrated energy-saving projects, under the
management of Bazhou, Tianjin Huaneng, and Deli Solar (Beijing),
respectively.
The
Company’s revenue, gross profit and total assets by reportable segment are as
follows:
Sales
Revenues
|
|
|
Three months ended
June
30,
|
|
|
Six
months ended
June
30,
|
|
|
|
|
2010
|
|
|
2009
|
|
|
2010
|
|
|
2009
|
|
|
Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Solar
heater/Biomass stove/Boiler related products
|
|
$
|
1,786,423
|
|
|
$
|
1,463,547
|
|
|
$
|
2,531,834
|
|
|
$
|
3,011,395
|
|
|
Heat
pipe related equipments/Energy-saving projects
|
|
|
8,920,032
|
|
|
|
11,843,316
|
|
|
|
12,071,035
|
|
|
|
13,949,263
|
|
|
Building
integrated energy saving projects
|
|
|
(528
|
)
|
|
|
-
|
|
|
|
(528
|
)
|
|
|
-
|
|
|
|
|
$
|
10,705,927
|
|
|
$
|
13,306,863
|
|
|
$
|
14,602,341
|
|
|
$
|
16,960,658
|
|
Gross
Profit
|
|
Three months ended
June
30,
|
|
Six
months ended
SepteJune
30,
|
|
|
|
2010
|
|
2009
|
|
2010
|
|
2009
|
|
|
Gross
profit:
|
|
|
|
|
|
|
|
|
|
Solar
heater/Biomass stove/Boiler related products
|
|
$
|
394,908
|
|
|
$
|
319,922
|
|
|
$
|
504,629
|
|
|
$
|
648,234
|
|
|
Heat
pipe related equipments/Energy-saving projects
|
|
|
2,597,980
|
|
|
|
2,963,104
|
|
|
|
3,649,669
|
|
|
|
3,520,606
|
|
|
Building
integrated energy saving projects
|
|
|
(528
|
)
|
|
|
-
|
|
|
|
(528
|
)
|
|
|
-
|
|
|
|
|
$
|
2,992,360
|
|
|
$
|
3,283,026
|
|
|
$
|
4,153,770
|
|
|
$
|
4,168,840
|
|
Total
assets
|
|
|
June
30,
2010
|
|
|
December
31,
2009
|
|
|
Total
assets
|
|
2010
|
|
|
2009
|
|
|
Solar
heater/Biomass stove/Boiler related products
|
|
$
|
20,036,244
|
|
|
$
|
17,075,566
|
|
|
Heat
pipe related equipments/Energy-saving projects
|
|
$
|
19,198,609
|
|
|
$
|
17,210,210
|
|
|
Building
integrated energy saving projects
|
|
$
|
1,394,158
|
|
|
$
|
1,774,920
|
|
|
Discontinued
operation
|
|
$
|
|
|
|
$
|
-
|
|
|
Other
|
|
$
|
2,727,083
|
|
|
$
|
5,004,499
|
|
|
|
|
$
|
43,356,094
|
|
|
$
|
41,065,195
|
|
(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 six months ended June30, 2010 and 2009 are analyzed as follows:
Revenue
|
|
Three months ended
June
30,
|
|
Six
months ended
SepteJune
30,
|
|
|
|
2010
|
|
2009
|
|
2010
|
|
2009
|
|
|
Revenue:
|
|
|
|
|
|
|
|
|
|
PRC
|
|
$
|
9,840,185
|
|
|
$
|
13,051,551
|
|
|
$
|
13,165,686
|
|
|
$
|
16,558,795
|
|
|
Others
|
|
|
865,742
|
|
|
|
255,312
|
|
|
|
1,436,655
|
|
|
|
401,863
|
|
|
|
|
$
|
10,705,927
|
|
|
$
|
13,306,863
|
|
|
$
|
14,602,341
|
|
|
$
|
16,960,658
|
|
|
|
Three months ended
June
30,
|
|
Six
months ended
SepteJune
30,
|
|
|
|
2010
|
|
2009
|
|
2010
|
|
2009
|
|
|
Gross
profit:
|
|
|
|
|
|
|
|
|
|
PRC
|
|
$
|
2,764,919
|
|
|
$
|
3,058,071
|
|
|
$
|
3,667,269
|
|
|
$
|
3,915,410
|
|
|
Others
|
|
|
227,441
|
|
|
|
224,955
|
|
|
|
486,501
|
|
|
|
253,430
|
|
|
|
|
$
|
2,992,360
|
|
|
$
|
3,283,026
|
|
|
$
|
4,153,770
|
|
|
$
|
4,168,840
|
|
Total
assets
|
|
June
30,
|
|
December 31,
|
|
|
|
2010
|
|
2009
|
|
|
Total
assets:
|
|
|
|
|
|
PRC
|
|
$
|
43,048,967
|
|
|
$
|
37,720,553
|
|
|
Others
|
|
$
|
307,127
|
|
|
$
|
3,344,642
|
|
|
|
|
$
|
43,356,094
|
|
|
$
|
41,065,195
|
|
CHINA
SOLAR & CLEAN ENERGY SOLUTIONS, INC.
NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Currency
expressed in United States Dollars (“US$”))
(Unaudited)
NOTE
10 –NET INCOME PER SHARE
The
following table sets forth the computation of basic and diluted net income per
share for the six months ended June 30, 2010 and 2009:
|
|
Three months ended
June
30,
|
|
Six
months ended
SepteJune
30,
|
|
|
|
2010
|
|
|
2009
|
|
2010
|
|
|
2009
|
|
|
Basic
and diluted net income per share calculation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Numerator:
|
|
|
|
|
|
|
|
|
|
|
|
Net
income from continuing operations
|
|
$
|
1,074,826
|
|
|
$
|
2,506,647
|
|
|
$
|
747,166
|
|
|
$
|
1,789,813
|
|
|
Net
(loss) income from discontinued operation
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(512,390
|
)
|
|
|
|
$
|
1,074,826
|
|
|
$
|
2,506,647
|
|
|
$
|
747,166
|
|
|
$
|
1,277,423
|
|
|
Denominator:
- Weighted average ordinary shares outstanding – Basic and
Diluted
|
|
|
15,233,652
|
|
|
|
16,173,016
|
|
|
|
15,233,652
|
|
|
|
16,123,921
|
|
NOTE
11 - SUBSEQUENT EVENT
The
Company has evaluated subsequent events after the balance sheet date through the
financial statements were issued , there are no subsequent events that are
required to be recorded or disclosed in the accompanying interim financial
statements.
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 solar and renewable energy business in the PRC. Our business is
conducted through our wholly-owned PRC based operating subsidiaries, Bazhou Deli
Solar, Beijing Deli Solar, and our indirect subsidiary Tianjin Huaneng (majority
owned).
The
Company has three reportable segments: (i) Solar Heater/Biomass Stove/Boiler
related products, (ii) Heat pipe related products and (iii) Building integrated
energy-saving projects, under the management of Bazhou, Tianjin Huaneng, and
Deli Solar (Beijing), respectively.
Deli
Solar (Bazhou) 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.
Deli
Solar (Beijing) is principally engaged in building integrated energy-saving
projects in major cities in the PRC, including Beijing.
Tianjin
Huaneng 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.
Approximately
17.34% of our net revenue for the six months ended June 30, 2010 was derived
from sales of our solar heater/biomass stove/boiler related products and 82.66%
from sales of our heat pipe related equipment/energy-saving projects,
respectively. Approximately 90.16% and 9.84% of our net revenues for the six
months ended June 30, 2010, were derived from sales made inside the PRC and
outside the PRC, respectively.
RESULTS
OF OPERATIONS
Three months ended
June 30, 2010 compared to three months ended June 30,
2009
Sales
Revenues
|
|
Three months ended
June
30,
|
|
|
|
2010
|
|
2009
|
|
|
Revenue:
|
|
|
|
|
|
Solar
heater/Biomass stove/Boiler related products
|
|
$
|
1,786,423
|
|
|
$
|
1,463,547
|
|
|
Heat
pipe related equipments/Energy-saving projects
|
|
|
8,920,032
|
|
|
|
11,843,316
|
|
|
Building
integrated energy saving projects
|
|
|
(528
|
)
|
|
|
-
|
|
|
|
|
$
|
10,705,927
|
|
|
$
|
13,306,863
|
|
Overall:
Sales revenue for the three months ended June 30, 2010 were $10,705,927 as
compared to $13,306,863 for the three months ended June 30, 2009, a decrease of
$2,600,936 or 19.55%. The decrease in sales was primarily attributable to the
decline in revenue from our heat pipe related equipments/Energy-saving projects
under the management of Tian Jin Hua Neng.
Solar
heater/Biomass stove/Boiler related products
:
Sales revenue for these
products for the three months ended June 30, 2010 were $1,786,423 as compared to
$1,463,547 for the three months ended June 30, 2009, a increase of $322,876 or
22.06%. The increase in sales revenue derived from solar heaters/biomass
stove/boiler related products was due to the increasing demand for solar
heater in the second quarter this year.
Heat pipe related
equipments/Energy-saving projects:
Sales revenue for the three months
ended June 30, 2010 was $8,920,032 compared to $11,843,316 for the three months
ended June 30, 2009, a decrease of $2,923,284 or 24.68%, because we pay little
attention to small orders this year. No enough attention to mini-orders results
in the decrease of sales in the past six months .However, we believe that new
and large order clients will increase, which will lead to the increase of sales
volume in the next half year.
Gross
Profit
|
|
Three months ended
June
30,
|
|
|
|
2010
|
|
2009
|
|
|
Gross
profit:
|
|
|
|
|
|
Solar
heater/Biomass stove/Boiler related products
|
|
$
|
394,908
|
|
|
$
|
319,922
|
|
|
Heat
pipe related equipments/Energy-saving projects
|
|
|
2,597,980
|
|
|
|
2,963,104
|
|
|
Building
integrated energy saving projects
|
|
|
(528
|
)
|
|
|
-
|
|
|
|
|
$
|
2,992,360
|
|
|
$
|
3,283,026
|
|
Overall:
Gross profit margin for the three months ended June 30, 2010 increased by
approximately 3.28% to 27.95%, as compared to 24.67% for the three months ended
June 30, 2009. This was primarily due to the increase in sales prices of our
heat pipe related equipments.
Solar
heater/Biomass stove/Boiler related products
: Gross profit margin for the
three months ended June 30, 2010 was approximately 22.11%, a slight increase of
0.25% as compared to 21.86% for the three months ended June 30,
2009.
Heat pipe related
equipments/Energy-saving projects:
Gross profit margin for the three
months ended June 30, 2010 was approximately 29.13%, a increase of 4.11% from
25.02% for the three months ended June 30, 2009 due to an increase in the sale
prices.
Operating
Expenses
Operating
expenses for the three months ended June 30, 2010 were $ 1,528,696, as compared
to $ 1,234,781 for the three months ended June 30, 2009, an increase of $
293,915, or 23.80%. The overall increase in operating expenses
was primarily due to the increase in the wages of the staff under the
management of Tianjin Huaneng.
Depreciation
and amortization expenses increased to $ 104,311 for the three months ended June
30, 2010, a increase of $ 1,026 or 0.99%, from $ 103,285 for the three months
ended June 30, 2009, primarily as a result of the increase of our manufacturing
equipment and building.
Selling
and distribution expenses increased to $ 729,260 for the three months ended June
30, 2010, a increase of $ 248,673 or 51.74%, from $ 480,587 for the three months
ended June 30, 2009, because we have improved the marketing personnel's wage
level this year.
General
and administrative expenses were $ 695,125 for the three months ended June 30,
2010 (or approximately 6.49% of sales) compared to $ 650,909 (or approximately
4.89% of sales) for the three months ended June 30, 2009, a increase of 6.79%,
because we have improved the wages level of management staff this
year.
Net
Income
Net
income was $ 1,074,826 for the three months ended June 30, 2010, compared to $
2,506,647 for the three months ended June 30, 2009. The decrease in net income
was mainly due to the gain on disposal of SZPSP last year and the increase in
the wages of the staff under the management of Tianjin Huaneng.
Six months ended
June 30, 2010 compared to six months ended June 30,
2009
Sales
Revenue
|
|
Six
months ended
June
30,
|
|
|
|
2010
|
|
2009
|
|
|
Revenue:
|
|
|
|
|
|
Solar
heater/Biomass stove/Boiler related products
|
|
$
|
2,531,834
|
|
|
$
|
3,011,395
|
|
|
Heat
pipe related equipments/Energy-saving projects
|
|
|
12,071,035
|
|
|
|
13,949,263
|
|
|
building
integrated energy saving projects
|
|
|
(528
|
)
|
|
|
-
|
|
|
|
|
$
|
14,602,341
|
|
|
$
|
16,960,658
|
|
Overall:
Sales revenue for the six months ended June 30, 2010 were $14,602,341 as
compared to $16,960,658 for the six months ended June 30, 2009, a decrease of
$2,358,317 or 13.90%. The decrease in sales was primarily attributable to the
decline in revenue from our heat pipe related equipments/Energy-saving projects
under the management of Tian Jin Hua Neng.
Solar
heater/Biomass stove/Boiler related products
:
Sales revenue for these
products for the six months ended June 30, 2010 were $2,531,834 as compared to
$3,011,395 for the six months ended June 30, 2009, a decrease of $479,561 or
15.92%. The decrease in sales revenue derived from solar heaters/biomass
stove/boiler related products was due to strong competition. Moreover, we
are foreign invested enterprise and can not get access to China favorable policy
or “China’s Home Appliance Subsidy Program For Rual Areas” as is called for
domestic enterprises.
Heat pipe related
equipments/Energy-saving projects:
Sales revenue for the six months ended
June 30, 2010 was $ 12,071,035 compared to $13,949,263 for the six months ended
June 30, 2009, a decrease of $1,878,228 or 13.46%. The decrease in sales was
because we pay little attention to small orders this year. No enough attention
to mini-orders results in the decrease of sales in the past six months .However,
we believe that new and large order clients will increase, which will lead to
the increase of sales volume in the next half year.
Gross
Profit
|
|
Six
months ended
June
30,
|
|
|
|
2010
|
|
2009
|
|
|
Gross
profit:
|
|
|
|
|
|
Solar
heater/Biomass stove/Boiler related products
|
|
$
|
504,629
|
|
|
$
|
648,234
|
|
|
Heat
pipe related equipments/Energy-saving projects
|
|
|
3,649,669
|
|
|
|
3,520,606
|
|
|
building
integrated energy saving projects
|
|
|
(528
|
)
|
|
|
-
|
|
|
|
|
$
|
4,153,770
|
|
|
$
|
4,168,840
|
|
Overall:
Gross profit margin for the six months ended June 30, 2010 increased by
approximately 3.87% to 28.45%, as compared to 24.58% for the six months ended
June 30, 2009. This was primarily due to the increase in sales volume and prices
of our heat pipe related equipments.
Solar
heater/Biomass stove/Boiler related products
: Gross profit margin for the
six months ended June 30, 2010 was approximately 19.93%, as compared to 21.53%
for the six months ended June 30, 2009. This was primarily due to weak market in
which we had to sell our products in lower price.
Heat pipe related
equipments/Energy-saving projects:
Gross profit margin for six months
ended June 30, 2010 was approximately 30.23% as compared to 25.24% from the six
months ended June 30, 2009, an increase of 5.00%.The increase is mainly due to
an increase in the sale prices.
Operating
Expenses
Operating
expenses for the six months ended June 30, 2010 were $ 2,874,939, as compared to
$ 2,782,513 for the six months ended June 30, 2009, an increase of $ 92,426, or
3.32%. The overall increase in operating expenses was primarily due to
increase of salary expense.
Depreciation
and amortization expenses increased to $ 226,824 for the six months ended June
30, or 18.20%, from $ 191,906 for the six months ended June 30, 2009, primarily
as a result of the increase of our manufacturing equipment and
building.
Selling
and distribution expenses increased to $ 1,356,329 for the six months ended June
30, or 30.41%, from $ 1,040,072 for six months ended June 30, 2009, because we
have improved the marketing personnel's wage level this year.
General
and administrative expenses were $ 1,291,786 for the six months ended June 30,
2010 (or approximately 8.8% of sales) compared to $ 1,550,535 (or approximately
9.14% of sales) for the six months ended June 30, 2009, a decrease of 16.69%.
The decrease was primarily due to the compression of operation
cost.
Net
Income (loss)
Net
income was $ 747,166 for the six months ended June 30, 2010, compared to the net
income of $ 1,277,423 for the six months ended June 30, 2009, primarily due to
increase of salary expense and strong competition.
LIQUIDITY
AND CAPITAL RESOURCES
Net cash
used by operating activities was $ 2,143,894 for the six months ended June 30,
2010, while net cash provided by our operating activities was $ 3,599 for the
six months ended June 30, 2009.
Net cash
used by investing activities was $ 117,516 for the six months ended June 30,
2010, compared with net cash provided by investing activities in the amount of $
199,174 for the six months ended June 30, 2009.
Net cash
provided by financing activities was $ 732,732 for the six months ended June 30,
2010, compared with net cash provided by financing activities in the amount of $
51,231 for the six months ended June 30, 2009.
We
believe that current cash flow is sufficient to meet anticipated working capital
and capital expenditures for at least the next twelve months. We may require
additional cash for further development of business, including any investments
or acquisitions we may decide to pursue. However, we cannot assure you that such
funding will be available.
Cash
Cash and
cash equivalents decreased to $ 3,596,126 as of June 30, 2010, compared to
$4,980,717 as of December 31, 2009, primarily as a result of the increase
in the operating activities in the second quarter of 2010.
Accounts
Receivable
Accounts
receivable increased to $9,982,618 as of June 30, 2010, from $8,067,944 as of
December 31, 2009, primarily due to Tian Jin Hua Neng.
Inventory
Inventories
increased to $ 5,122,077 as of June 30, 2010, as compared to $4,547,170 as of
December 31, 2009, primarily due to the increase of raw materials
considering the rise of the domestic steel prices.
Other
Receivables and Prepayments
Other
receivables and prepayments increased to $ 3,119,287 as of June 30, 2010,
compared to $1,733,695 as of December 31, 2009, primarily due to the increase of
temporary turnover.
Accounts
Payable
Accounts
payable increased to $ 1,602,749 as of June 30, 2010, compared to $1,601,002 as
of December 31, 2009. This increase was due to the increase in raw
materials.
Other
Payables and Accrued Liabilities
Other
payables and accrued liabilities slightly decreased to $ 9,794,925 as of June
30, 2010 from $9,977,178 as of December 31, 2009.
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, and results of
operations, liquidity or capital expenditures.
|
Item 3.
|
QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
|
Not
applicable.
|
Item 4T.
|
CONTROLS
AND PROCEDURES
|
Evaluation
of Disclosure Controls and Procedures
Pursuant
to Rule 13a-15(b) under the Securities Exchange Act of 1934 (“Exchange Act”),
the Company carried out an evaluation, with the participation of the Company’s
management, including the Company’s Chief Executive Officer (“CEO”) and Chief
Financial Officer (“CFO”) (the Company’s principal financial and accounting
officer), of the effectiveness of the Company’s disclosure controls and
procedures (as defined under Rule 13a-15(e) under the Exchange Act) as of the
end of the period covered by this report. Based upon that evaluation, the
Company’s CEO and CFO concluded that the Company’s disclosure controls and
procedures are effective to ensure that information required to be disclosed by
the Company in the reports that the Company files or submits under the Exchange
Act, is recorded, processed, summarized and reported, within the time periods
specified in the SEC’s rules and forms, and that such information is accumulated
and communicated to the Company’s management, including the Company’s CEO and
CFO, as appropriate, to allow timely decisions regarding required
disclosure.
Changes
in Internal Control over Financial Reporting
No change
in our system of internal control over financial reporting occurred during the
period covered by this report for the quarter ended June 30, 2010 that has
materially affected, or is reasonably likely to materially affect, our internal
control over financial reporting.
PART
II — OTHER INFORMATION
|
Item 1.
|
LEGAL
PROCEEDINGS
|
We are
currently not involved in any litigation that we believe could have a material
adverse effect on our financial condition or results of operations. There is no
action, suit, proceeding, inquiry or investigation before or by any court,
public board, government agency, self-regulatory organization or body pending
or, to the knowledge of the executive officers of our company or any of our
subsidiaries, threatened against or affecting our company, our common stock, any
of our subsidiaries or of our companies or our subsidiaries’ officers or
directors in their capacities as such, in which an adverse decision could have a
material adverse effect.
Not
applicable.
|
Item 2.
|
UNREGISTERED
SALES OF EQUITY SECURITIES AND USE OF
PROCEEDS
|
None.
|
Item 3.
|
DEFAULTS
UPON SENIOR SECURITIES
|
None.
|
Item 4.
|
REMOVED
AND RESERVED
|
|
Item 5.
|
OTHER
INFORMATION
|
RESTATEMENT
ON CONSOLIDATED FINANCIAL STATEMENTS
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 company’s
consolidated financial statements.
|
|
|
As of June 30,
2009
|
|
|
|
|
as
previously reported
|
|
|
as
restated
|
|
|
ASSETS
|
|
|
|
|
|
|
|
Accounts
receivable, net
|
|
$
|
8,457,470
|
|
|
$
|
8,457,470
|
|
|
Inventories
|
|
|
2,701,654
|
|
|
|
2,701,654
|
|
|
Total
current assets
|
|
|
21,526,868
|
|
|
|
21,526,868
|
|
|
Property,
plant and equipment, net
|
|
|
14,108,704
|
|
|
|
13,891,893
|
|
|
Goodwill
|
|
|
1,910,509
|
|
|
|
1,966,118
|
|
|
Total
assets
|
|
|
39,214,410
|
|
|
|
39,053,208
|
|
|
|
|
As of June 30,
2009
|
|
|
|
|
as
previously reported
|
|
|
as
restated
|
|
|
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
|
Income
tax payables
|
|
|
2,336,230
|
|
|
|
2,336,230
|
|
|
Other
payables and accrued liabilities
|
|
|
5,149,009
|
|
|
|
6,320,987
|
|
|
Total
current liabilities
|
|
|
10,513,980
|
|
|
|
11,685,958
|
|
|
Long-term
debt
|
|
|
-
|
|
|
|
286,483
|
|
|
Minority
interests
|
|
|
1,842,962
|
|
|
|
333,256
|
|
|
Stockholders’
equity:
|
|
|
|
|
|
|
|
|
|
Additional
paid-in capital
|
|
|
22,966,404
|
|
|
|
23,073,258
|
|
|
Retained
earnings
|
|
|
3,520,184
|
|
|
|
3,303,373
|
|
|
Total
stockholders’ equity
|
|
|
26,857,468
|
|
|
|
26,747,511
|
|
|
TOTAL
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
|
$
|
39,214,410
|
|
|
$
|
39,053,208
|
|
|
|
|
For
six months ended
June 30,2009
|
|
|
|
|
as
previously reported
|
|
|
as
restated
|
|
|
Revenue,
net
|
|
$
|
14,775,569
|
|
|
$
|
16,960,658
|
|
|
Cost
of revenue
|
|
|
11,729,756
|
|
|
|
12,791,818
|
|
|
Gross
profit
|
|
|
3,045,813
|
|
|
|
4,168,840
|
|
|
Depreciation
and amortization
|
|
|
191,906
|
|
|
|
191,906
|
|
|
Total
operating expenses
|
|
|
2,782,513
|
|
|
|
2,782,513
|
|
|
Income
from operations
|
|
|
263,300
|
|
|
|
1,386,327
|
|
|
Income
before income taxes
|
|
|
(392,550
|
)
|
|
|
1,562,710
|
|
|
Net
income
|
|
|
353,134
|
|
|
|
1,363,972
|
|
|
Net
income available to common stockholders
|
|
$
|
154,396
|
|
|
$
|
1,277,423
|
|
|
Net
income per share – basic and diluted
|
|
$
|
0.01
|
|
|
$
|
0.08
|
|
|
|
|
For
three months ended
June 30,
2009
|
|
|
|
|
as
previously reported
|
|
|
as
restated
|
|
|
Revenue,
net
|
|
$
|
9,659,248
|
|
|
|
13,306,863
|
|
|
Cost
of revenue
|
|
|
7,787,925
|
|
|
|
10,023,837
|
|
|
Gross
profit
|
|
|
1,871,323
|
|
|
|
3,283,026
|
|
|
Depreciation
and amortization
|
|
|
103,285
|
|
|
|
103,285
|
|
|
Total
operating expenses
|
|
|
1,234,781
|
|
|
|
1,234,781
|
|
|
Income
from operations
|
|
|
636,542
|
|
|
|
2,048,245
|
|
|
Income
before income taxes
|
|
|
615,327
|
|
|
|
2,756,325
|
|
|
Net
income
|
|
|
442,192
|
|
|
|
2,583,190
|
|
|
Net
income available to common stockholders
|
|
$
|
1,094,945
|
|
|
|
2,506,647
|
|
|
Net
income per share – basic and diluted
|
|
$
|
0.07
|
|
|
$
|
0.16
|
|
|
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 report to be signed on its behalf by the undersigned thereunto
duly authorized.
|
|
China
Solar & Clean Energy Solutions, Inc.
|
|
|
|
|
|
|
|
|
By:
|
/s/
Deli Du
|
|
|
|
|
Deli
Du
|
|
|
|
|
Chief
Executive Officer and President
|
|
|
|
|
(Principal
Executive Officer)
|
|
|
|
|
|
|
|
|
By:
|
/s/
Fangsong Zheng
|
|
|
|
|
Fangsong
Zheng
|
|
|
|
|
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.
|
China Solar and Clean En... (PK) (USOTC:CSOL)
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