e20vf
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 20-F
(Mark One)
|
|
|
o |
|
REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF
1934 |
OR
|
|
|
þ |
|
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended December 31, 2010
OR
|
|
|
o |
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
OR
|
|
|
o |
|
SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Date of event requiring this shell company report
For the transition period from to
Commission file number 000-29008
CHINA TECHNOLOGY DEVELOPMENT GROUP CORPORATION
(Exact name of Registrant as specified in its charter)
Not Applicable
(Translation of Registrants name into English)
British Virgin Islands
(Jurisdiction of incorporation or organization)
Unit 1010-1011, 10/F, West Tower, Shun Tak Centre, 168-200 Connaught Road Central, Hong Kong
(Address of principal executive offices)
Tairan Guo, Acting Chief Financial Officer
Telephone: (852)31128461; Fax: (852)31128410; E-mail:
tairan.guo@chinactdc.com
Unit 1010-1011, 10/F, West Tower, Shun Tak Centre, 168-200 Connaught Road Central, Hong Kong
(Name, Telephone, E-mail and/or Facsimile number and Address of The Company Contact
Person)
Securities registered or to be registered pursuant to Section 12(b) of the Act.
|
|
|
Title of each class |
|
Name of each exchange on which registered |
|
|
|
Common Stock, Par Value US$0.01 per share
|
|
Nasdaq Capital Market |
|
|
|
|
|
|
|
|
|
Securities registered or to be registered pursuant to Section 12(g) of the Act.
None
(Title of Class)
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act.
None
(Title of Class)
Indicate the number of outstanding shares of each of the issuers classes of capital or common
stock as of the close of the period covered by the annual report: 22,425,216 shares of Common Stock
and 1,000,000 shares of Preferred Stock.
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of
the Securities Act.
o Yes þ No
If this report is an annual or transition report, indicate by check mark if the registrant is not
required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. Yes o No þ
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. Yes þ No o
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,
or a non-accelerated filer. See definition of accelerated filer and large accelerated filer in
Rule 12b-2 of the Exchange Act. (Check one):
|
|
|
|
|
Large accelerated filer o
|
|
Accelerated filer o
|
|
Non-accelerated filer þ |
Indicate by check mark which basis of accounting the registration has used to prepare the financial
statements included in this filing:
|
|
|
|
|
U.S. GAAP þ
|
|
International Financial Reporting Standards as
issued by the International Accounting Standards Board o
|
|
Other o |
If Other has been checked in response to the previous question, indicate by check mark which
consolidated financial statement item the registrant has elected to follow.
Item 17 o Item 18 o
If this is an annual report, indicate by check mark whether the registrant is a shell company (as
defined in Rule 12b-2 of the Exchange Act). Yeso No þ
Introduction
This Annual Report on Form 20-F includes our audited consolidated financial statements as of
December 31, 2009 and 2010 and for each of the years in the three-year period ended December 31,
2010.
Our common stock, par value US$0.01 per share, is listed on the Nasdaq Capital Market, or Nasdaq,
under the symbol CTDC.
Except as otherwise required, in this Annual Report:
|
|
CTDC, the Company, us or we refer to China Technology Development Group Corporation
and the Group refers to the Company and all of its subsidiaries as a whole. The term you
refers to holders of our common stock and/or preferred stock; |
|
|
|
Hong Kong and the Government refer to the Hong Kong Special Administrative Region of
the Peoples Republic of China and its government, respectively; |
|
|
|
China and the Chinese government refer to the Peoples Republic of China, or PRC, and
its government, respectively; and |
|
|
|
All references to Renminbi, or Rmb are to the legal currency of China, all references
to U.S. dollars, dollars, $ or US$ are to the legal currency of the United States and
all references to Hong Kong dollars or HK$ are to the legal currency of Hong Kong. Any
discrepancies in any table between totals and sums of the amounts listed are due to rounding. |
For your convenience, this Annual Report contains translations of Renminbi amounts into U.S. dollar
amounts. Unless otherwise indicated, the translations have been made at Rmb6.60231 = US$1.00, which
was the exchange rates set forth in the H.10 statistical release of the U.S. Federal Reserve Board
on December 31, 2010. See Item 3 Key Information Selected Financial Data Exchange Rate
Information for historical information regarding this rate. You should not construe these
translations as representations that the Renminbi amounts actually represent such U.S. dollar
amounts or could have been or could be converted into U.S. dollars at the rate indicated or at any
other rates.
This Annual Report contains forward-looking statements, as defined in Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as
amended, that are based on our current expectations, assumptions, estimates and projections about
our Company, our industry, economic conditions in the markets in which we operate, and certain
other matters. Generally, these forward-looking statements can be identified by the use of
forward-looking terminology such as anticipate, believe, estimate, expect, intend,
will, project, seek, should and similar expressions. Those statements include, among other
things, the discussions of our business strategy and expectations concerning our market position,
future businesses and operations, margins, profitability, liquidity and capital resources. These
statements are subject to known and unknown risks, uncertainties and other factors, which may cause
actual results or outcomes to differ materially from those implied by the forward-looking
statements. Important factors that may cause actual results or outcomes to differ from those
implied by the forward-looking statements include, but are not limited to, those discussed in the
Item 3.D Risk Factors, Item 4. B Business Overview and Item 5 Operating and Financial Review
and Prospects sections in this Annual Report. In light of these and other uncertainties, you
should not conclude that the results or outcomes referred to in any of the forward-looking
statements will be achieved. All forward-looking statements included in this Annual Report are
based on information available to us on the date hereof, and we do not undertake to update these
forward-looking statements to reflect future events or circumstances.
This Annual Report includes statistical data about our industry that comes from information
published by third party sources, including financial analysts reports, governmental websites and
industry research papers. This type of data represents only the estimates of those sources of
industry data. In addition, although we believe that data from these companies and institutions is
generally reliable, this type of data may not be completely accurate. We caution you not to place
undue reliance on this data.
1
PART I
Item 1. Identity of Directors, Senior Management and Advisers
Not Applicable.
Item 2. Offer Statistics and Expected Timetable
Not Applicable.
Item 3. Key Information
A. Selected financial data.
The following selected consolidated statement of operations data for the years ended December
31, 2008, 2009 and 2010 and the selected consolidated balance sheet data as of as of December 31,
2009 and 2010 have been derived from our audited consolidated financial statements included
elsewhere in this Annual Report. The following selected consolidated statements of operations data
for the years ended December 31, 2006 and 2007 and the selected consolidated balance sheet data as
of December 31, 2006, 2007 and 2008 have been derived from our audited consolidated financial
statements not included in this Annual Report. The selected consolidated financial data should be
read in conjunction with those financial statements and the accompanying notes and Item 5.
Operating and Financial Review and Prospects below. Our audited consolidated financial statements
are prepared and presented in accordance with United States generally accepted accounting
principles, or U.S. GAAP. Our historical results do not necessarily indicate our results expected
for any future periods.
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Amounts in thousands, except share and per share data) |
|
|
|
Year Ended December 31, |
|
|
|
2006 |
|
|
2007 |
|
|
2008 |
|
|
2009 |
|
|
2010 |
|
|
2010 |
|
|
|
Rmb(1) |
|
|
Rmb(1) |
|
|
Rmb(1) |
|
|
Rmb(1) |
|
|
Rmb(2) |
|
|
US$ |
|
Consolidated Statement
of Operations Data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues |
|
|
|
|
|
|
|
|
|
|
10 |
|
|
|
|
|
|
|
53,700 |
|
|
|
8,134 |
|
Cost of sales |
|
|
|
|
|
|
|
|
|
|
20 |
|
|
|
|
|
|
|
(45,113 |
) |
|
|
(6,833 |
) |
Gross profit |
|
|
|
|
|
|
|
|
|
|
(10 |
) |
|
|
|
|
|
|
8,587 |
|
|
|
1,301 |
|
Operating loss |
|
|
(30,785 |
) |
|
|
(24,495 |
) |
|
|
(24,338 |
) |
|
|
(32,331 |
) |
|
|
(28,527 |
) |
|
|
(4,319 |
) |
Other income (expense) : |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income |
|
|
182 |
|
|
|
827 |
|
|
|
79 |
|
|
|
7 |
|
|
|
40 |
|
|
|
6 |
|
Finance costs |
|
|
|
|
|
|
|
|
|
|
(475 |
) |
|
|
(5,799 |
) |
|
|
(83 |
) |
|
|
(13 |
) |
Impairment on deposit
for business
acquisition |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(10,301 |
) |
|
|
(1,560 |
) |
Change in value of
trading securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,162 |
|
|
|
176 |
|
Gain on disposal of
trading securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,196 |
|
|
|
787 |
|
Dividend income from
available-for-sale
securities |
|
|
4 |
|
|
|
58 |
|
|
|
48 |
|
|
|
71 |
|
|
|
|
|
|
|
|
|
(Loss) gain on
disposal of
available-for-sale
securities |
|
|
(488 |
) |
|
|
15,405 |
|
|
|
(14,049 |
) |
|
|
111 |
|
|
|
(213 |
) |
|
|
(32 |
) |
Impairment on
available-for-sale
securities |
|
|
|
|
|
|
|
|
|
|
(15,213 |
) |
|
|
|
|
|
|
(3,549 |
) |
|
|
(538 |
) |
Impairment on other
investments |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(571 |
) |
|
|
(489 |
) |
|
|
(74 |
) |
Change in fair
value of investment
in convertible note |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,917 |
|
|
|
290 |
|
Change in fair
value of derivative
embedded in
convertible note |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(5,040 |
) |
|
|
|
|
|
|
|
|
Change in fair value
of warrants and
option rights |
|
|
|
|
|
|
|
|
|
|
(1,236 |
) |
|
|
3,798 |
|
|
|
555 |
|
|
|
84 |
|
Loss on debt
extinguishment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3,434 |
) |
|
|
|
|
|
|
|
|
Subsidies from
government |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
600 |
|
|
|
|
|
|
|
|
|
Exchange loss |
|
|
|
|
|
|
(482 |
) |
|
|
(268 |
) |
|
|
(218 |
) |
|
|
(442 |
) |
|
|
(68 |
) |
Others, net |
|
|
|
|
|
|
(7 |
) |
|
|
(36 |
) |
|
|
(2 |
) |
|
|
(491 |
) |
|
|
(74 |
) |
Loss from continuing
operations |
|
|
(31,087 |
) |
|
|
(9,084 |
) |
|
|
(54,776 |
) |
|
|
(42,696 |
) |
|
|
(35,121 |
) |
|
|
(5,319 |
) |
(loss) profit from
discontinued operations |
|
|
(83,499 |
) |
|
|
1,973 |
|
|
|
858 |
|
|
|
4,227 |
|
|
|
|
|
|
|
|
|
Net loss |
|
|
(114,586 |
) |
|
|
(7,111 |
) |
|
|
(53,918 |
) |
|
|
(38,469 |
) |
|
|
(35,121 |
) |
|
|
(5,319 |
) |
Net loss per share |
|
|
(10.13 |
) |
|
|
(0.50 |
) |
|
|
(3.34 |
) |
|
|
(2.42 |
) |
|
|
(1.69 |
) |
|
|
(0.26 |
) |
Net loss per share from
continuing operations |
|
|
(2.75 |
) |
|
|
(0.64 |
) |
|
|
(3.39 |
) |
|
|
(2.68 |
) |
|
|
(1.69 |
) |
|
|
(0.26 |
) |
Net (loss) earnings per
share from discontinued
operations |
|
|
(7.38 |
) |
|
|
0.14 |
|
|
|
0.05 |
|
|
|
0.26 |
|
|
|
|
|
|
|
|
|
Basic weighted average
common shares
outstanding |
|
|
11,311,888 |
|
|
|
14,249,051 |
|
|
|
16,160,172 |
|
|
|
15,927,168 |
|
|
|
20,746,185 |
|
|
|
20,746,185 |
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Amounts in thousands, except share data) |
|
|
|
As of December 31, |
|
|
|
2006 |
|
|
2007 |
|
|
2008 |
|
|
2009 |
|
|
2010 |
|
|
2010 |
|
|
|
Rmb |
|
|
Rmb |
|
|
Rmb |
|
|
Rmb |
|
|
Rmb(2) |
|
|
US$ |
|
Consolidated
Balance Sheet Data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
|
64,751 |
|
|
|
115,888 |
|
|
|
62,619 |
|
|
|
119,435 |
|
|
|
165,855 |
|
|
|
25,120 |
|
Total liabilities |
|
|
14,111 |
|
|
|
35,699 |
|
|
|
20,389 |
|
|
|
21,734 |
|
|
|
50,581 |
|
|
|
7,661 |
|
Shareholders equity |
|
|
50,640 |
|
|
|
80,189 |
|
|
|
42,230 |
|
|
|
97,701 |
|
|
|
115,274 |
|
|
|
17,459 |
|
Number of common
shares issued and
outstanding |
|
|
13,809,497 |
|
|
|
15,028,665 |
|
|
|
15,543,669 |
|
|
|
19,300,390 |
|
|
|
22,425,216 |
|
|
|
22,425,216 |
|
|
|
|
(1) |
|
Our management approved the disposal of our entire nutraceutical operations in April 2007. In
April 2008, we disposed of Green Energy Industry Ltd, including its subsidiaries Fullwing Ltd
and Margot Ltd, to Harvest Time International Holding Ltd, an independent third party, for
cash consideration of HK$10,000. In December 2008, we entered into a sale and purchase
agreement to sell our wholly-owned subsidiary Jingle and its subsidiaries, BHL Networks
Technology Co. Ltd. (Cayman), or BHLNet, and Beijing BHL Networks Technology Co. Ltd, or BBHL,
which we refer to collectively as the Jingle Group, to Sentron Enterprises Limited, an
independent party, for cash consideration of HK$0.2 million. During 2008, we regarded Jingle
Group as discontinued operations pursuant to Accounting Standard Codification 205-20 (formerly
refer to SFAS 144 Discontinued operations). We reported the operating results of these
businesses from the beginning of the year up to the date of disposal and the loss resulted
from the disposal are reported in the year of disposal as discontinued operations (see Note 5
to our audited consolidated financial statements included elsewhere in this Annual Report). To
conform to the presentation of the current year, we reclassified the comparative operating
results of the discontinued operations for the years ended December 31, 2006, 2007, 2008 and
2009 as discontinued operations. |
4
|
|
|
(2) |
|
In November 2010, we acquired 100% equity interest in Linsun Renewable Energy Corporation
Limited. The consideration for the acquisition was accounted for US$2,215 as of December 31,
2010, satisfied by the issuance of our 1,064,827 common stock. For details on purchase price
allocation and pro forma information, see Note 3 to our audited consolidated financial
statements relating to the acquisition of Linsun Renewable Energy Corporation Limited included
elsewhere in this Annual Report. |
Exchange Rate Information
We normally maintain our financial statements in Renminbi for our PRC operating subsidiaries, as
our business is primarily conducted in China and the Renminbi is Chinas legal currency. In July
2005, the Chinese government changed its policy of pegging the value of the Renminbi to the U.S.
dollar. This revaluation of the Renminbi was based on a conversion of Renminbi into U.S. dollars at
an exchange rate of US$1.00=Rmb8.11. Under this policy, the Renminbi is permitted to fluctuate
within a band against a basket of foreign currencies. This change in policy resulted initially in
an approximately 2.0% appreciation in the value of the Renminbi against the U.S. dollar and could
result in further and more significant appreciation or depreciation. The Chinese government has
signaled a return to a managed appreciation of the Renminbi against the dollar. Although we
generate substantially all of our revenue in Renminbi, our U.S. dollar cash deposits are subject to
foreign currency translation.
5
The following table sets forth certain information concerning exchange rates between the Renminbi
and the U.S. dollar for the periods indicated. These rates are provided solely for your convenience
and are not necessarily the exchange rates that we used in this Annual Report or will use in the
preparation of our periodic reports or any other information to be
provided to you. For the period prior to January 1, 2009, the
exchange rates reflect the noon buying rates from the Federal Reserve
Bank of New York. For the period after January 1, 2009, the
exchange rates reflect those set forth in the H.10 statistical
release of the U.S. Federal Reserve Bank.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average(1) |
|
High |
|
Low |
|
Period-end |
|
|
|
|
|
|
(Rmb per US$1.00) |
|
|
|
|
2005 |
|
|
8.1472 |
|
|
|
8.2765 |
|
|
|
8.0702 |
|
|
|
8.0702 |
|
2006 |
|
|
7.9579 |
|
|
|
8.0702 |
|
|
|
7.8041 |
|
|
|
7.8041 |
|
2007 |
|
|
7.5806 |
|
|
|
7.7714 |
|
|
|
7.2946 |
|
|
|
7.2946 |
|
2008 |
|
|
6.9193 |
|
|
|
7.1818 |
|
|
|
6.7899 |
|
|
|
6.8225 |
|
2009 |
|
|
6.8311 |
|
|
|
6.8895 |
|
|
|
6.7753 |
|
|
|
6.8270 |
|
2010 |
|
|
6.7683 |
|
|
|
6.8346 |
|
|
|
6.6008 |
|
|
|
6.6023 |
|
December 2010 |
|
|
6.6469 |
|
|
|
6.6745 |
|
|
|
6.6008 |
|
|
|
6.6023 |
|
January 2011 |
|
|
6.5973 |
|
|
|
6.6388 |
|
|
|
6.5810 |
|
|
|
6.6065 |
|
February 2011 |
|
|
6.5762 |
|
|
|
6.5971 |
|
|
|
6.5559 |
|
|
|
6.5716 |
|
March 2011 |
|
|
6.5649 |
|
|
|
6.5750 |
|
|
|
6.5470 |
|
|
|
6.5486 |
|
April 2011 |
|
|
6.5279 |
|
|
|
6.5478 |
|
|
|
6.4910 |
|
|
|
6.4910 |
|
May 2011 |
|
|
6.4953 |
|
|
|
6.5087 |
|
|
|
6.4789 |
|
|
|
6.4789 |
|
|
|
|
(1) |
|
Annual averages are calculated by averaging the rates on the last business day of each month
during the relevant year. |
On June 17, 2011, the exchange rates set forth in the H.10 statistical release of the U.S. Federal
Reserve Board was Rmb6.4700 = US$1.00.
B. Capitalization and indebtedness.
Not Applicable.
C. Reasons for the offer and use of proceeds.
Not Applicable.
D. Risk factors.
This Annual Report contains forward-looking statements that involve risks and uncertainties. Our
actual results could differ materially from those anticipated in these forward looking statements
as a result of certain factors, including those set forth in the following risk factors and
elsewhere in this Annual Report. You should carefully consider the risks described below and other
information in this Annual Report before deciding to invest in our Company. If any of the following
risks actually occur, our business, financial condition, liquidity, results of operation or
prospects could be materially and adversely affected. Accordingly, the trading price of our common stock could decline
and you may lose all or part of your investment in our Company.
The risks and uncertainties described below are not the only ones we face. Additional risks that we
currently do not know about or that we currently believe to be immaterial may also impair our
business operations or prospects.
6
Risks Related to Our Company and Our Industry
Our business strategy has evolved significantly over time, and our limited operating history in the
solar business may not serve as an adequate measure for our future results of operations.
We have limited experience in the solar business in which we are currently engaged. We were formed
in 1995 and have engaged in a number of different businesses, including sanitary wares and ceramic
tiles manufacturing, Internet-related business and nutraceutical-related business. We launched our
solar energy business in September 2007, completed the installation of our first SnO2 thin-film
base plate production line in June 2008 and made our first commercial shipment of solar base plates
in December 2008. Our technology for SnO2 base plates manufacturing is in its early stages, and we
did not successfully ramp up the production line to its full capacity as we expected, which
resulted in no sales of the SnO2 base plates in 2009. In 2010, we commenced the establishment of a
new factory to produce solar modules at our production base and realized the first shipment in
September 2010. At the end of 2010, we acquired a company producing PV modules located in Jinjiang,
Fujian Province, China. Our historical operating results do not reflect our current focus on the
solar industry and, as such, do not provide a meaningful basis for evaluating our current or
planned businesses or our future prospects. Accordingly, you should consider our business and
prospects in light of the risks, expenses and challenges that we face as an early-stage company
seeking to develop and manufacture new products in the rapidly evolving solar industry.
Accordingly, you should not rely on our results of operations for any prior periods as an
indication of our future performance.
We have incurred significant operating losses, and we do not know whether we will ever achieve or
sustain profitability.
We have incurred significant operating losses in the preceding five years as follows:
|
|
|
|
|
|
|
Operating loss |
Year |
|
(in thousands of Rmb) |
2006 |
|
|
(30,785 |
) |
2007 |
|
|
(24,495 |
) |
2008 |
|
|
(24,338 |
) |
2009 |
|
|
(32,331 |
) |
2010 |
|
|
(28,527 |
) |
Our solar business generated no revenues in 2007, de minimis revenues in 2008 and no revenues in
2009. We started to manufacture solar modules in May 2010 and realized the first shipment in
September 2010. During the past five years, we have expended and anticipate that we will continue
to expend significant financial and other resources as we expand our solar business. The rapidly
evolving markets in which we operate our solar business make it difficult for us to predict our
future performance. Our ability to achieve profitability in the future is uncertain and will depend
largely on the successful expansion of our solar product markets. If we fail to operate our
production lines up to their designed capacity, or if we fail to expand our sales network, our
results of operations will be materially adversely affected. We cannot accurately estimate our
future operating losses because our revenues, gross margins and operating results may fluctuate
significantly due to, among other things:
|
|
the need to procure additional equipment at reasonable cost and on a timely basis; |
|
|
|
the need to raise additional funds to finance the construction and expansion of
production lines, which we may be unable to obtain on reasonable terms or at all; |
|
|
|
product upgrading or updating by us or our competitors; |
|
|
|
demand for our solar products and services; |
|
|
|
our competitors price changes; |
|
|
|
our research and development and marketing activities; |
|
|
|
our acquisition costs of new technology or businesses; |
|
|
|
employee wage pressure arising from increased competition for skilled employees and
increased governmental staff welfare regulations; and |
|
|
|
extraordinary costs incurred for any acquisitions or reductions in force.
|
7
Our operating results could be materially adversely affected by any of these factors, or by
additional factors of which we are currently unaware. As a result, we do not know whether we will
ever achieve or sustain profitability.
We expect that we will need to obtain additional financing to continue to operate our solar
business, including significant capital expenditures to increase our production capacity. If we
cannot obtain additional financing when we need it, our growth prospects and results of operations
for our solar business may be materially adversely affected.
We have in the past experienced substantial losses and negative cash flow from operations, and we
expect that we will continue to need significant financing to operate our solar business. In
particular, we expect that we will require significant additional capital to increase the
manufacturing capacity of our solar production lines and to expand our sales network and project
development in overseas markets. We will also need cash resources to fund our solar research and
development activities in order to remain competitive in the marketplace. In addition, future
acquisitions, expansions, market changes or other developments may cause us to require additional
financing. Our ability to obtain external financing in the future is subject to a number of
uncertainties, including:
|
|
the trading price of our common stock on Nasdaq; |
|
|
|
our future financial condition, results of operations and cash flows; |
|
|
|
general market conditions for financing activities by companies in the solar industry;
and |
|
|
|
economic, political and other conditions in China and elsewhere. |
We do not know whether additional financing will be available or whether the terms of such
additional financing, if available, will be acceptable to us. If additional financing is not
available or not available on terms acceptable or favorable to us, our ability to fund our solar
business, expand our solar manufacturing operations, maintain our solar research and development
efforts or otherwise respond to competitive pressures may be significantly impaired. If we are
required to pay higher than anticipated costs for additional financing, our results of operations
or financial condition may be materially adversely affected. In addition, we could be required to
make operating and financial covenants that would restrict our operations. If new shares are issued
for equity financing or acquisition purposes, interests of existing shareholders will be diluted.
We may not be able to implement our growth strategy and manage our planned solar business expansion
effectively.
We anticipate growth in market demand for our photovoltaic, or PV, products in the future, which
will require us to continue to expand our business to capture emerging market opportunities and
increase our penetration and market share. Our growth strategy requires us to introduce additional
solar products through partnerships, joint ventures and acquisitions, including products for which
there are no established markets in China and products with respect to which we lack experience and
expertise. We do not know whether we will be able to deliver new solar products on a commercially
viable basis or in a timely manner, or at all. Any failure in implementing our growth strategy
could materially adversely affect our business, financial condition and results of operations.
To manage this planned expansion of our solar business operations, we will need to improve our
operational and financial systems, internal procedures and risk control system, increase our
manufacturing throughput, and recruit, train and manage our employee base, especially our
engineering and manufacturing operation management team. In addition, our management must maintain
and strengthen our relationship with our suppliers, strategic partners, customers and local
governments. We do not know whether our current and planned systems and internal controls will be
adequate to support our planned expansion. If we are not able to manage our business expansion
effectively, we will not be able to execute our business strategy or capitalize on market
opportunities, and our results of operations would be adversely affected.
We may not be able to compete successfully in a competitive solar market against competitors with
greater resources and more advanced technologies.
Many of our competitors in the solar industry have one or more of the following advantages over us:
|
|
longer operating history; |
|
|
|
greater financial, technological, marketing, sales and other resources; |
|
|
|
profitable operations; |
|
|
|
superior product functionality in certain areas; |
|
|
|
greater name recognition; |
|
|
|
a broader range of products to offer; and |
|
|
|
a larger base of customers.
|
8
Current and potential competitors have established, or may establish, cooperative relationships
among themselves or with third parties to enhance their sales, which may result in increased
competition. As a result of these and other factors, we may be unable to compete successfully with
our existing or new competitors. As a result of Chinas entrance into the World Trade Organization,
or WTO, more and more foreign companies are entering into the Chinese markets, which has resulted
in greater competition in Chinas developing solar industry.
Our primary competitors in manufacturing solar modules include Suntech Power Holdings, Trina Solar
Limited and Yingli Green Energy Holding Company Limited, all of which have greater name recognition
than our Company. In addition, we expect to compete with future entrants to the solar market that
offer new technological solutions. We may also face competition from large semiconductor
manufacturers, a few of which have already announced their intention to enter the solar business.
We may not be able to keep pace with the rapid technological changes in the solar market, new
competition, and new product developments.
The markets in which our solar business is involved are characterized by ongoing technological
developments, evolving industry standards and rapid changes in customer requirements. The solar
energy market is at a relatively early stage of development and the extent to which solar products
will be widely adopted is uncertain. Our success will depend on our ability to:
|
|
provide a broad range of reliable solar products at the lowest cost; |
|
|
|
timely develop and introduce new products incorporating technological advances; |
|
|
|
respond promptly to new customer requirements; |
|
|
|
comply promptly with evolving industry standards; |
|
|
|
control delays and cost overruns due to external factors beyond our control, such as
increases in raw materials prices and problems with equipment vendors; |
|
|
|
qualify for available government subsidies and incentives to support the development of
the solar energy industry; and |
|
|
|
execute our business strategy and expansion plan effectively. |
If we are unable to attract, train and retain a skilled labor force, our business may be materially
adversely affected.
Our future success depends significantly on our ability to attract, train and retain a skilled
labor force, particularly our technical personnel and executive officers. Recruiting and retaining
capable personnel, particularly those with expertise in the solar industry and operations
management, are vital to our success. If one or more of our executive officers or key technical
persons are unable or unwilling to continue their employment, we may not be able to replace them in
a timely and effective manner. In that event, our business could be severely disrupted and we may
incur significant expense to recruit and retain replacements. Furthermore, one or more of our
current key employees could join our competitors or form a new competitive company. Although we
have entered into non-competition and confidentiality agreements with a number of these key
employees, these types of agreements may not be enforceable in China and our business may be
materially adversely affected by a breach of any of these agreements.
We plan to acquire new businesses, products and technologies in the solar industry and diversify
our business by means of mergers and acquisitions. However, we have been unable to complete a
number of acquisitions that we have previously announced. We may not be able to complete future
acquisitions or effectively integrate any acquired businesses, products and technologies into our
Company. As a result, we may lose all or a portion of our investment.
The solar industry is highly competitive and has experienced a significant amount of consolidation,
and we expect this trend to continue. We plan to acquire or make investments in complementary
companies, products and technologies in the future, and we also intend to diversify our business
through mergers and acquisitions.
In October 2009, we entered into a stock purchase agreement with China Technology Solar Power
Holdings Limited, or CTSPHL Group, and its direct and indirect shareholders to acquire a 51% equity
interest in CTSPHL Group. CTSPHL Group is developing a 100 megawatt grid-connected solar power
plant project in Delingha City located in Qaidam Basin in Qinghai Province, Northwestern China.
Upon execution of the stock purchase agreement, we paid US$3 million in cash to Good Million
Investments Ltd., the direct shareholder of CTSPHL Group, as a deposit for the transaction.
Completion of the proposed transaction was subject to a number of conditions, including receipt of
an independent valuation report. However, due to the fact that the Chinese government has not
determined the specific subsidies and incentives for on-grid solar energy applications for Qinghai
Province, we encountered difficulties in determining the fair value of the solar power plant. As a
result,
9
on October 11, 2010, we entered into an agreement with CTSPHL Group to terminate the stock
purchase agreement.
In April 2010, we entered into a cooperation framework agreement with Xintang Media Technology
(Beijing) Limited, or Xintang, its shareholders and associated companies, pursuant to which we
intended to acquire Xintang. Xintang is a Chinese company that conducts advertising and media
business in China. Xinhua News Agency has granted Xintang exclusive rights to operate an
advertising network and other relevant value-added business using flat-panel displays installed in
lobbies, offices, elevators and other public areas in governmental buildings in certain provinces
in China. We paid more than Renminbi ten million to Xintang and its shareholders. The completion
of this acquisition was contingent upon the satisfaction of a number of conditions, including a
fair value determination by an international independent appraiser, completion of restructuring of
the target companies, execution of advertising and media business cooperation arrangements between
Xintang and Xinhua News Agency and approval from our shareholders in a general meeting. Since these
conditions precedent have not been satisfied, however, the parties agreed not to proceed with the
transactions. In 2011, our board of directors decided to terminate the cooperation framework
agreement and we are discussing with Xintang about the details regarding the termination.
Any acquisitions or strategic investments that we make will involve a number of risks, and we may
not realize the expected benefits of these transactions and we may also suffer from the losses. As
a result, we may lose all or a portion of our investment. In the event that an acquired company
does not perform as anticipated, we could be required to incur a significant impairment of goodwill
and other acquired assets. Any impairment of goodwill and other acquired assets may adversely and
materially affect our results of operations and financial condition. We may finance these
transactions by using our available cash and/or issuing common stock, which could result in
significant acquisition-related charges to earnings and dilution to our shareholders. Moreover, we
may incur or assume the acquired companys liabilities, including liabilities that are unknown at
the time of acquisition, which may result in a material adverse effect on financial condition,
results of operations and prospects.
We may encounter problems integrating any acquired businesses, including:
|
|
difficulties assimilating and managing the operations, technologies, intellectual
property, products and personnel of any acquired business; |
|
|
|
diversion of management attention to business concerns of the acquired business from
that of our existing operations; |
|
|
|
declining employee morale and retention issues for employees of the acquired business; |
|
|
|
risk of litigation by terminated employees and contractors; and |
|
|
|
our lack of familiarity with other conditions and business practices of the acquired
business. |
Any failure to successfully integrate any acquired business could materially adversely affect our
business, financial condition and results of operations.
Unauthorized use of our intellectual property by third parties and any expenses incurred in
protecting our intellectual property rights may adversely affect our business.
We rely on applicable trademark and copyright laws and confidentiality agreements with our
employees, customers, business partners and others to protect our intellectual property rights in
China. We have filed two patent applications and intend to seek additional patents as we deem
appropriate. We do not know whether patents will be issued for any of our pending applications.
Even if patents are issued, we do not know whether any claims allowed will be sufficiently broad to
cover our products or to effectively limit competition against us. Furthermore, any patents that
may be issued to us may be challenged, invalidated or circumvented. Although we intend to defend
our proprietary rights, policing unauthorized use of proprietary technology and products is
difficult.
Despite our precautions, it may be possible for third parties to obtain and use our intellectual
property without authorization. The validity, enforceability and scope of protection of
intellectual property in technological industries in China are uncertain and still evolving. In
particular, the laws and enforcement procedures in China do not protect intellectual property
rights to the same extent as do the laws and enforcement procedures in the United States.
Litigation may be necessary in the future to enforce our intellectual property rights. Future
litigation could result in substantial costs and diversion of our resources, and could disrupt our
business and have a material adverse effect on our financial condition and results of operations.
We have granted, and expect to continue to grant, stock options under our stock incentive option
plan, which could adversely impact our financial results.
We have adopted various stock option plans to provide incentives to our directors, employees and
consultants. As of December 31, 2010, we had an aggregate of 6,221,135 stock options outstanding
under our option plans held by directors, officers, employees and consultants. In our consolidated
financial statements, we are required to
10
recognize share-based compensation as compensation expense
based on the fair value of equity awards on the date of the grant, with the compensation expense
being recognized over the period in which the recipient is required to provide service in exchange
for the equity award. The expense associated with share-based compensation may adversely impact our
financial results and reduce the attractiveness of stock options as compensation to our directors,
officers, employees and consultants. If we do not offer sufficient equity compensation to our
directors, officers, employees or consultants, we may not be able to attract and retain key
personnel.
We have limited business insurance coverage and may incur losses resulting from product liability
claims, business disruption, litigation or natural disasters.
Insurance companies in China offer limited business insurance products and do not, to our
knowledge, offer business liability insurance. While business disruption insurance is available to
a limited extent in China, we have determined that the risk of disruption, cost of such insurance
and the difficulties associated with acquiring such insurance are prohibitive. As a result, except
for directors and officers liability insurance, employees compensation insurance and social
insurance, we do not have any business liability, disruption or litigation insurance coverage for
our operations in China. Any business disruption or litigation could result in substantial costs
and the diversion of resources.
Risks Associated with Business Operation in China.
A substantial majority of our assets are located in China, and a substantial majority of our
revenue is derived from our operations in China. Accordingly, our business, financial condition,
results of operations and prospects are subject, to a significant extent, to economic, political
and legal developments in China.
We are subject to risks relating to changes of political and economic policies and conditions in
China.
China has been, and will continue to be, our primary production base and a substantial majority of
our assets are currently located in China. Chinas economy differs from the economies of most
developed countries in many respects, including the extent of government involvement, control of
foreign currencies and allocation of resources. While the government has been pursuing economic
reforms to transform its economy from a planned economy to a market-oriented economy since 1978, a
substantial part of Chinas economy is still being operated under various controls of the Chinese
government. By imposing industrial policies and other economic measures, the Chinese government
exerts considerable direct and indirect influence on the development of industries. Many of the
economic reforms carried out by the Chinese government are unprecedented or experimental and are
expected to be refined and improved over time. Such refining and adjustment process may not
necessarily have a positive effect on our operations and our future business development. Our
business, prospects and results of operations may be materially adversely affected by changes in
the economic and social conditions and in the policies of the Chinese government, including the
following:
|
|
changes in government subsidies and economic incentives for the solar industry; |
|
|
|
adjustments in tax regulations; |
|
|
|
restrictions on currency conversion; |
|
|
|
changes in laws and regulations, or their interpretation; |
|
|
|
the imposition of confiscatory taxation; |
|
|
|
restrictions on imports and sources of supply; |
|
|
|
devaluations of currency; and |
|
|
|
the nationalization or other expropriation of private enterprises. |
Although the Chinese government has been pursuing economic reform policies that encourage private
economic activity and greater economic decentralization, we do not know whether the Chinese
government will continue to pursue these policies or will alter these policies.
We may experience foreign currency losses due to fluctuations in exchange rates.
A substantial portion of our sales is currently denominated in Euros and U.S. dollars, with the
remainder in Renminbi, while a substantial portion of our costs and expenses is denominated in
Renminbi, Hong Kong dollars and U.S. dollars. Fluctuations in currency exchange rates, particularly
among the U.S. dollar, Renminbi and Euro, have had, and could continue to have, an adverse effect
on our results of operations.
The value of the Renminbi against the U.S. dollar, Euro and other currencies is affected by, among
other things, changes in Chinas political and economic conditions and Chinas foreign exchange
policies. We rely on the Chinese governments foreign currency conversion policies, which may
change at any time, in regard to our currency exchange needs. In China, the Chinese government has
control over Renminbi reserves through, among other things, direct regulation of the conversion of
Renminbi into other foreign currencies and restrictions on foreign imports. Although foreign
currencies that are required for current account transactions, such as the payment of dividends to
shareholders of foreign invested enterprises like us, can be bought freely at authorized
11
Chinese
banks, procedural requirements prescribed by Chinese law must be met. Chinese companies are
required to sell their foreign exchange earnings to authorized Chinese banks, and the purchase of
foreign currencies for capital account transactions requires prior approval of the Chinese
government. This type of heavy regulation by the Chinese government of foreign currency exchange
restricts our business operations, and a change in any of these government policies could further
negatively impact our operations. The Chinese government recently signaled a return to a managed
appreciation of the Renminbi against the dollar. Appreciation or depreciation in the value of the
Renminbi to the U.S. dollar would affect our financial results reported in U.S. dollar terms
without any underlying change in our business or results of operations.
Very limited hedging instruments are available in China to reduce our exposure to exchange rate
fluctuations. To date, we have not entered into any hedging transactions in an effort to reduce our
exposure to foreign currency exchange risk. While we may decide to use some hedging instruments in
the future, the availability and effectiveness of these hedges may be limited and we may not be
able to successfully hedge our exposure at all.
We may have limited legal recourse under Chinese law if disputes arise under our contracts with
third parties.
The Chinese legal system is a civil law system based on written statutes. Unlike common law
systems, it is a system in which decided legal cases have little precedential value. In 1979, the
Chinese government began to promulgate a comprehensive system of laws and regulations governing
economic matters in general. The overall effect of legislation over the past 30 years has
significantly enhanced the protections afforded to various forms of foreign investment in China.
However, Chinese laws, regulations and legal requirements are constantly changing, and their
interpretation and enforcement involve uncertainties. These uncertainties could limit the legal
protections available to us and our foreign investors, including you. In addition, we cannot
predict the effect of future developments in the Chinese legal system, including the promulgation
of new laws, changes to existing laws or the interpretation or enforcement thereof, or the
preemption of local regulations by national laws.
The Chinese government has enacted some laws and regulations dealing with matters such as corporate
organization and governance, foreign investment, commerce, taxation and trade. However, our
experience in implementing, interpreting and enforcing these laws and regulations is limited, and
our ability to enforce commercial claims or to resolve commercial disputes is unpredictable. Our
current business operations may be subject to the implementation, interpretation and enforcement of
Chinas laws by courts or governmental agencies. The resolution of any such matters may be subject
to the exercise of considerable discretion by agencies of the Chinese government, and forces
unrelated to the legal merits of a particular matter or dispute may influence their determination.
Any rights we may have to enact specific performance, or to seek an injunction under Chinese law,
are severely limited, and without a means of recourse by virtue of the Chinese legal system, we may
be unable to prevent these situations from occurring. The occurrence of any such events could have
a material adverse effect on our business, financial condition and results of operations.
Our business may be adversely affected by Chinese government directives and regulations.
Growth of the solar energy market, particularly for on-grid applications, depends largely on the
availability and size of government subsidies and economic incentives. Until the Chinese
governments subsidies and economic incentives for on-grid and off-grid solar energy applications
for specific provinces and regions are determined, we are not able to predict the future demand, if
any, for our products. Globally speaking, the growth of many large solar markets, including
Germany, Spain and the United States, depends in part on the availability and amounts of government
subsidies and economic incentives. In China, the solar market is still in the early development
stage and the Chinese government subsidies policies or other incentive programs have not been
clearly specified. Although incentive policy trends, such as special government funding and tax
credits, are emerging, significant uncertainty still exists. The Chinese government may decide to
reduce or eliminate any of these economic incentives for political, financial or other reasons. Any
reduction or elimination of these subsidies or incentives would have a materially adverse impact to
the solar energy market in China and our financial performance.
Risks Associated with Investing in Our Common Stock.
Our stock price has been and may continue to be volatile.
The price
of our common stock has been volatile, ranging from a high of US$3.83
to a low of US$1.71
during the period from January 1, 2010 to June 24, 2011. On
June 24, 2011, the closing price of our
common stock on Nasdaq was US$1.80 per share. Factors such as variations in our revenue, earnings
and cash flow, announcements of new investments, cooperation arrangements or acquisitions, and
fluctuations in market prices for our products could cause the market price of our common stock to
change substantially. In addition, many factors that we cannot control affect our stock price,
including the global financial markets and the confidence of the investment community. Any of these
factors may result in large and sudden changes in the volume and price at which our common stock
trades. Accordingly, we expect that the price for our common stock on Nasdaq will continue to be
volatile in the future.
12
Our internal controls have been deficient historically and require improvement. If we fail to
maintain an effective system of internal controls, we may be unable to accurately report our
financial results or prevent fraud, and investor confidence and the market price of our common
shares may be adversely impacted.
We are subject to reporting obligations under the US securities laws and, under the Sarbanes-Oxley
Act of 2002, are required to include our managements assessment of our internal controls over
financial reporting in our annual report. In addition, if were classified as accelerated filer or
large accelerated filer, as defined by the SEC, in future years, our independent registered public
accounting firm must attest to, and report on, the effectiveness of our internal controls over
financial reporting.
As of December 31, 2010, our disclosure controls and procedures were not effective because our
management has identified material weaknesses in our internal control over financial reporting,
which are described in more detail in Item 15T Controls and Procedures. We plan to take steps to
improve our internal and disclosure controls to satisfy the requirements of Section 404 of the
Sarbanes-Oxley Act of 2002. However, if we are unable to address the existing deficiencies in our
existing internal and disclosure controls and procedures, or if we fail to maintain an effective
system of internal controls in the future, we may be unable to accurately report our financial
results or prevent fraud and as a result, investor confidence and the market price of our common
stock may be adversely impacted. We could also become subject to regulatory investigations and
sanctions by regulators such as the Securities and Exchange Commission.
The sale or availability for sale of substantial amounts of our common stock could adversely affect
the market price of our common stock.
We have issued a significant number of shares of common stock and warrants to purchase shares of
common stock in connection with the following transactions:
|
|
|
In September 2008, we issued an aggregate of 498,338 shares of common stock and
warrants to purchase up to an additional 1,526,306 shares of common stock to investors. In
June 2009, we issued an additional 60,000 shares of common stock and warrants to purchase
an additional 90,000 shares of common stock to the same investors. In October 2009, we
issued 222,821 shares to the investors upon their exercise of Series B Warrants due to the
occurrence of the price reset event. If we issue common stock at a price less than $3.01
per share in the future, we may trigger the anti-dilution provisions embedded in these
warrants. |
|
|
|
|
In April 2009, one of our wholly owned subsidiaries, China Green Holdings, Ltd., issued
a US$10.0 million convertible note to an investor. In November 2009, the investor
exchanged the entire principal amount of the convertible note for 3,322,260 shares of our
common stock. |
|
|
|
|
In May 2010, we issued and sold 2,000,000 shares of common stock to China Wanhe
Investment Ltd. at a price of $3.01 per share in connection with a private placement. |
|
|
|
|
In November 2010, we issued and allotted totally 1,064,827 shares of common stock to
Mr. Liao Lin-Hsiang and Goldpoly Company Limited as payment for the acquisition of Linsun
Renewable Energy Corporation Limited and its subsidiaries. |
We may require additional cash resources due to changes in business conditions or other future
developments, and we may need to obtain additional funds through issuance by us or by one or more
of our subsidiaries of new equity or debt securities. We have an effective registration statement
on Form F-3 pursuant to which we may offer and sell common stock at any time and from time to time
in one or more offerings for a maximum aggregate offering price of up to US$30.0 million. The sale
of additional equity or convertible debt securities could result in substantial dilution to our
shareholders. Sales of substantial amounts of our common stock or convertible debt securities in
the future, or the perception that these sales could occur, could adversely affect the market price
of our common stock and could materially impair our future ability to raise capital through
offerings of our common stock or convertible debt securities.
Rights of shareholders under British Virgin Islands law may be less than those of shareholders in
U.S. jurisdictions.
Our corporate affairs are governed by our Memorandum and Articles of Association and by the
International Business Companies Act of the British Virgin Islands. Principles of law relating to
such matters as the validity of corporate procedures, the fiduciary duties of our management,
directors and controlling shareholders and the rights of our shareholders differ from those that
would apply if we were incorporated in a jurisdiction within the United States. Further, the rights
of shareholders under British Virgin Islands law are not as clearly established as the rights of
shareholders under legislation or judicial precedent in existence in most United States
jurisdictions. Thus, you may have more difficulty in protecting your interests in the face of
actions by the management,
13
directors or controlling shareholders than you might have as a
shareholder of a corporation incorporated in a United States jurisdiction.
Under the laws of most jurisdictions in the United States, majority and controlling shareholders
generally have certain fiduciary responsibilities to the minority shareholders. Shareholder
action must be taken in good faith and actions by controlling shareholders which are obviously
unreasonable may be declared null and void. British Virgin Islands law protecting the interests of
minority shareholders may not be as protective in all circumstances as the law protecting minority
shareholders in United States jurisdictions. In addition, in most United States jurisdictions,
directors owe a fiduciary duty to the corporation and its shareholders, including a duty of care,
pursuant to which directors must properly apprise themselves of all reasonably available
information, and a duty of loyalty, pursuant to which they must protect the interests of the
corporation and refrain from conduct that injures the corporation or its shareholders or that
deprives the corporation or its shareholders of any profit or advantage. Many United States
jurisdictions have enacted various statutory provisions which permit the monetary liability of
directors to be eliminated or limited. Under British Virgin Islands law, liability of a corporate
director to the corporation is basically limited to cases of willful malfeasance in the performance
of his duties or to cases where the director has not acted honestly and in good faith and with a
view to the best interests of the corporation.
We do not know whether the courts of the British Virgin Islands would enforce, either in an
original action or in an action for enforcement of judgments of United States courts, liabilities
that are predicated upon the securities laws of the United States.
As a foreign private issuer for purposes of U.S. securities laws, we are not subject to certain
rules promulgated by Nasdaq that other Nasdaq-listed issuers are required to comply with.
Our common stock is currently listed on the Nasdaq Capital Market and, for so long as our
securities continue to be listed, we will remain subject to the rules and regulations established
by Nasdaq applicable to listed companies. As permitted under Nasdaq rules applicable to foreign
private issuers, we are exempt from compliance with the following Nasdaq rules:
|
|
|
our independent directors do not hold regularly scheduled meetings in executive session; |
|
|
|
|
the compensation of our executive officers is not determined by an independent committee
of the board or by the independent members of the board of directors, and our CEO may be present
and participate in the deliberations concerning his compensation; |
|
|
|
|
related party transactions are not required to be reviewed or approved by our audit
committee or other independent body of the board of directors; and |
|
|
|
|
we are not required to solicit shareholder approval of stock plans (including those in
which our officers or directors may participate), stock issuances that will result in a change in
control, the issuance of our stock in related party transactions or other transactions in which we
may issue 20% or more of our outstanding shares or below market issuances of 20% or more of our
outstanding shares to any person. |
As of the date of this Annual Report on Form 20-F, we have partially complied with the foregoing
rules and we may voluntarily comply with one or more of the foregoing provisions in the future.
Some information about us may be unavailable due to exemptions under applicable US securities laws
for a foreign private issuer.
We are a foreign private issuer for purposes of US securities laws. As such, we are exempt from
certain provisions applicable to United States domestic public companies, including:
|
|
|
the rules under the Securities Exchange Act of 1934, as amended, or Exchange Act,
requiring the filing with the Securities and Exchange Commission, or SEC, of quarterly reports on
Form 10-Q or current reports on Form 8-K; |
|
|
|
|
the provisions of Regulation FD aimed at preventing issuers from making selective
disclosures of material information; |
|
|
|
|
the provisions of the Exchange Act regulating the solicitation of proxies, consents or
authorizations in respect of a security registered under the Exchange Act; and |
|
|
|
|
the provisions of the Exchange Act requiring insiders to file public reports of their
stock ownership and trading activities and establishing insider liability for profits realized from
any short-swing trading transaction. |
Because of these exemptions, investors are not provided with the same information which is
generally available about domestic public companies organized in the United States.
14
Item 4. Information on the Company
A. History and development of the Company.
Our legal and commercial name is China Technology Development Group Corporation, and our company is
often referred to as CTDC. Our company was incorporated as an International Business Company under
the laws of the British Virgin Islands on September 19, 1995. Our company was formerly known as
Tramford International Limited, and we changed our name to China Technology Development Group
Corporation in November 2005. Our registered office is located at P.O. Box 71, Craigmuir Chambers,
Road Town, Tortola, British Virgin Islands, where only corporate administrative matters are
conducted through our registered agent, Harneys Corporate Services Limited. Our principal executive
office is located at Unit 1010-1011, 10/F, West Tower, Shun Tak Centre, 168-200 Connaught Road
Central, Hong Kong, and our telephone number is (852) 31128461. Our primary internet website is
www.chinactdc.com.
China Technology Investment Group Limited (formerly known as China Biotech Holdings Limited), or
CTIG, has been the largest shareholder of our company since January 2007. On November 27, 2006,
CTIG entered into a subscription agreement with us to purchase 1,500,000 shares of our common stock
and entered into a share purchase agreement with Beijing Holdings Limited to acquire 2,000,000
shares of our common stock. The transactions were completed on January 12, 2007. To the best of our
knowledge as of the date of this Annual Report, CTIG holds 4,132,168 shares of common stock and
1,000,000 shares of series A preferred stock of our company.
Prior Operations
We previously owned, through our wholly owned Hong Kong subsidiaries, Jing Tai Industrial
Investment Company Limited which was subsequently renamed BHL Solar Technology Company Limited, or
BHLHK and Jolly Mind Company Limited, or Jolly Mind, a 95% equity interest in each of Linyi Baoquan
Bathtub Company Limited, or Baoquan, and Linyi Xinhua Building Ceramics Company Limited, or Xinhua.
We refer to Baoquan and Xinhua together as the Sanitary Wares and Ceramics Operations. The Sanitary
Wares and Ceramics Operations were Sino-foreign equity joint ventures incorporated under the laws
of China. A wholly owned subsidiary of BHLHK, Beijing Taigong Sanitary Wares Company Limited, or
Taigong, was also incorporated in Beijing in 1997 under the laws of China as the administrative and
sales support office of our Sanitary Wares and Ceramics Operations.
Pursuant to a sale and purchase agreement entered into by BHLHK, Shandong Linyi Industrial Enamel
Joint Stock Company, or Linyi Industrial, Jolly Mind and Shandong Luozhang Group Company, or
Shandong Luozhang, on July 2, 1999, BHLHK sold its 60% interests in each of the Sanitary Wares and
Ceramics Operations to Shandong Luozhang for cash consideration of Rmb28 million. Pursuant to a
share purchase agreement dated July 2, 1999 entered into between our company and Linyi Industrial,
we sold all of our interest in Jolly Mind, which owned a 35% interest in each of the Sanitary Wares
and Ceramics Operations, to Linyi Industrial in exchange for 1,952,291 shares of our common stock
which was held by Linyi Industrial. Taigong was voluntarily dissolved in March 2000.
On June 30, 2000, Jingle Technology Co. Ltd., or Jingle, our wholly owned subsidiary incorporated
in the British Virgin Islands, entered into an agreement with China Internet Technology Co. Ltd.,
or China Internet, and Great Legend Internet Technology and Service Co.Ltd., or Great Legend, to
acquire all outstanding shares of BHL Networks Technology Co. Ltd., or BHLNet, a company
incorporated under the laws of the Cayman Islands, which owns a 76% interest in Beijing BHL
Networks Technology Co. Ltd., or BBHL, a company incorporated under the laws of China.
On October 31, 2005, we acquired from Beijing Holdings a 51% equity interest in China Natures
Technology Inc., or CNT, and on December 22, 2005, we exercised an option to acquire from Beijing
Holdings the remaining 49% equity interest of CNT. As a result, CNT became a wholly owned
subsidiary of our company. CNT owned an approximately 71% interest in Zhejiang University
(Hangzhou) Innoessen Bio-technology Inc., or Zhejiang Innoessen, the head office of CNTs research
and development and sale and marketing functions. CNT was incorporated in the British Virgin
Islands on January 28, 2003. CNT, Zheijiang Innoessen and Anji Bio were principally engaged in the
development, manufacturing and marketing of a series of nutraceutical products utilizing bio-active
components of bamboo.
Commencing in February 2006, we had a dispute with the then general manager and the minority
shareholders of Anji Bio, or Anji Buyers, regarding its future development strategy. Consequently,
Zhejiang Innoessen entered into a memorandum with Anji Buyers on July 27, 2006, which we refer to
as the Anji Memorandum, pursuant to
15
which our entire interest in Anji Bio held by Zhejiang
Innoessen would be sold to Anji Buyers. The disposal of Anji Bio was not completed by September 30,
2006, which as the original completion date set forth in the Anji Memorandum, due to difference in
interpretation of settlement terms between our company and the Anji Buyers. During the fourth
quarter of 2006, we continued to negotiate with the Anji Buyers on settlement terms. However, the
Anji Buyers refused to cooperate with us again in executing the Anji Memorandum. In view of the
fact that we could not exert operational and financial control over Anji Bio and the fact that the
property, plant and equipment had been idle for an extended period without regular and proper
maintenance, on December 29, 2006 our management decided to abandon Anji Bio and discontinue our
nutraceutical operation. Our management approved the disposal of our nutraceutical operations on
April 23, 2007.
On April 27, 2007, we entered into a sale and purchase agreement with Win Horse Investments
Limited, or Win Horse, to dispose of our entire interest in CNT for cash consideration of HK$10
million. The agreement was subsequently terminated due to the fact that we received no payment from
Win Horse. On December 18, 2007, we entered into a sale and purchase agreement with Total Trump
Limited, or Total Trump, an independent party, to dispose of our entire interest in CNT for
consideration of HK$10 million and we received a deposit of HK$1 million on the same date. As of
December 31, 2007, Total Trump was legally entitled to all right, title and interest of CNT. In
April 2008, Total Trump informed us of its financial inability to settle the remaining balance of
the consideration amount of HK$9 million, or the Unpaid Consideration, on or before June 30, 2008
as required under the sales and purchase agreement. CTIG, our companys major shareholder, signed a
memorandum with our Company to commit additional resources, on an unconditional best efforts basis,
to streamline our core business to the solar energy business. In addition, CTIG agreed to assume
all payment obligations of the Unpaid Consideration due from Total Trump by entering into an
Assignment Agreement with Total Trump on May 8, 2008. The Unpaid Consideration assumed by CTIG was
fully paid on June 16, 2008. Our management considered the above transactions as two separate
transactions even though they were related to the same disposed business unit due to the fact that
Total Trump and CTIG were two separate parties. The HK$1 million deposit received from Total Trump
was considered as forfeited by Total Trump. The HK$9 million received from CTIG on June 16, 2008
was recorded as shareholders contribution in the additional paid-in capital in shareholders equity
for the fiscal year ending December 31, 2008. The additional paid-in capital did not have a
dilutive effect on our shareholders.
In April 2008, our Board of Directors decided to discontinue certain non-operational BVI
subsidiaries in order to focus on our solar energy operations. On April 21, 2008, we disposed of
Green Energy Industry Ltd., including its subsidiaries Fullwing Ltd. and Margot Ltd., to Harvest
Time International Holdings Ltd., an independent third party, for a cash consideration of
HK$10,000. China Green Food Investment Ltd., Wellknown Ltd. and Green China Club Ltd., which have
no business operations and act merely as holding vehicles, are struck off the register according to
the board resolution on April 15, 2008. Under the BVI International Business Act, an inactive
private company may apply to the Registrar to be struck off the Register. If the company is struck
off continuously for more than ten years, it will be deemed to have been dissolved, provided that
within the ten-year period creditors or others can apply for the restoration of the company to the
Register.
On December 29, 2008, we entered into a sale and purchase agreement to sell our wholly-owned
subsidiary Jingle and its subsidiaries, BHLNet and BBHL, to Sentron Enterprises Limited, an
independent party, for cash consideration of HK$0.2 million. Upon the completion of the transaction
on February 16, 2009, we disposed all of our non-core business and concentrate all of resources on
the strategic expansion in the solar business.
Solar Energy Operations
In 2007, our Company was restructured to engage in the business of developing and manufacturing
solar energy products, which we refer to as our Solar Energy Operations.
On December 10, 2007, we acquired Faster Assets Limited, or Faster Assets, from CTIG. Faster Assets
is incorporated under the laws of British Virgin Islands and owns China Merchants Zhangzhou
Development Broad Shine Solar Technology Ltd., or Broad Shine, which was incorporated in China to
conduct the Solar Energy Operations. We refer to Faster Assets and Broad Shine together as the
Faster Group. In return, we issued 782,168 common shares and 1,000,000 preferred shares to CTIG as
consideration valued at Rmb20.7 million. Prior to the acquisition, Faster Group had no business
activities and its major assets and liabilities were cash of Rmb5.78 million, plant of Rmb16.70
million, land use right of Rmb4.00 million and balance due to a related party of Rmb5.78 million.
Accordingly, this transaction has been accounted for as an acquisition of assets.
On October 27, 2009, we entered into a stock purchase agreement with China Technology Solar Power
Holdings Limited, or CTSPHL Group, and its direct and indirect shareholders to acquire a 51% equity
interest in CTSPHL Group which, through its wholly-owned subsidiary, is developing a 100 megawatt
grid-connected solar power plant project located in Qinghai Province, China. Upon execution of the
stock purchase agreement, we paid US$3.0 million in cash to CTSPHL Group as a prepayment for the
transaction to be solely used for developing and constructing the solar power plant. Our technical
team consisting three engineers worked with CTSPHL Group on site to develop the solar power plant
since our execution of the agreement. Completion of the proposed transaction was subject to a
number of conditions, including receipt of an independent valuation report. However, due to the
16
fact that the Chinese government has not determined the specific subsidies and incentives for
on-grid solar energy applications for Qinghai Province, we encountered in difficulties in
determining the fair value of the solar power plant. Accordingly, on October 11, 2010, we entered
into an agreement with CTSPHL Group to terminate the stock purchase agreement.
In May 2010, we commenced the establishment of a new factory at our production base to produce
solar modules and by the end of 2010, the factory was already in operation and had an annual
production capacity of 65MW. In November 2010, we acquired Linsun Renewable Energy Corporation
Limited, including its wholly-owned subsidiary Linsun Power Technology (Quanzhou) Corp. Ltd., which
is manufacturing crystalline PV modules in China and exporting its solar products to the European
market. In March 2011, we incorporated LSP Solar GmbH, a company with limited liability, in Munich,
Germany, to expand our sales network in Europe. We aim to expand our aggregate production capacity
of crystalline PV modules to 300MW by the end of 2012.
The following diagram illustrates our corporate structure as of the date of this Annual Report:
B. Business overview.
Company Overview
We are a provider of solar energy products and solutions in China. Founded in September 1995, we
were formerly engaged in sanitary wares and ceramic tiles manufacturing, system integration
services, network security services and related software development, and manufacturing and
marketing of a series of nutraceutical products utilizing bio-active components of bamboo. In 2007,
we decided to pursue a different line of business principally engaging in the development of
eco-friendly technologies and products, which we refer to as the green industry. In September 2007,
we entered into the solar industry by manufacturing SnO2 solar base plates, which are a type of
transparent conductive oxide, or TCO, glass. TCO glass is a key component of thin-film solar cells.
In 2009, we participated in preliminary design and development of the grid-connected solar power
plant located in Qinghai Province, China. In 2010, we commenced manufacturing solar modules from
monocrystalline and multicrystalline solar cells.
Our company is headquartered in Hong Kong with production and distribution facilities, together
with research and development capability, strategically located in Fujian Province, China.
Business Strategy
Our strategic business goal is to become a leading renewable energy application solution provider.
We intend to achieve our strategic business goals primarily through the following strategies:
|
|
|
Capitalize upon future growth of solar market in China. Since 2008, we have devoted our
resources to developing solar application projects in China. The Chinese government has
supported solar power electricity generation through a variety of recent policy measures.
We believe these measures will stimulate the growth of the solar market in China. We plan
to continue to devote our financial, human |
17
|
|
|
and technical resources to develop
building-integrated photovoltaic, or BIPV, systems and solar power plants in the Chinese
market. |
|
|
|
Improve manufacturing technology and process through continuous innovation. We have
established a technical engineering team with strong research and development
capabilities. We have developed and supplied transparent solar modules for two on-grid
solar power plants in Italy. The transparent solar module which have both a nice
appearance and high transparency, is particularly suitable for BIPV projects. We plan to
continue to devote substantial resources to our research and development efforts in order
to optimize our manufacturing technology and processes with an emphasis on improving our
throughput, efficiency and product performance. |
|
|
|
|
Leverage our access to low cost resources to reduce manufacturing and operating costs
while providing reliable solar products and services. As a China-based solar company, we
believe that we enjoy cost advantages, including convenient access to low-cost technical
expertise, labor, land and facilities, over some of our competitors. In response to the
impact posed by the global economic environment, we plan to leverage our competitive cost
advantage to further reduce our manufacturing and operating costs while providing reliable
solar products and services. |
|
|
|
|
Expand our customer base and develop our solar markets. We intend to expand the
customer base and sales channels for our solar business both within and outside China. Our
marketing and sales strategy is based on the formation of strategic relationships with key
partners, including solar module distributors and solar farm developers. We believe that
we have the potential to ultimately serve as a provider of high value-added solar products
and solutions to our strategic partners. |
|
|
|
|
Implement acquisition growth strategy in the green energy industry. We intend to expand
our solar business through acquisitions of complementary companies and technologies. We
believe acquisitions will enable our Company to complete the solar industry value chain
integration and become an integrated platform for solar energy products and applications.
We intend to evaluate potential acquisition targets through the following factors: (a)
capability for technology development and innovation; (b) distribution channels for
end-products; (c) revenues and cash-in flow; and (d) growth potential in the industry. |
Our Products and Services
Our major products are solar modules for electricity generation and the related application
products, such as solar power stations, solar home systems, solar lighting and solar chargers.
Solar modules are assemblies of solar cells which are electrically interconnected and encapsulated
in a weatherproof panel. Solar cells are semiconductor devices that directly convert sunlight into
direct current electricity. We produce a variety of solar modules ranging from 5 to 280 watts in
power.
Were involved in the solar system integration and solar plant development and plan to continue to
expand our business into overseas markets. We design and install on-grid and off-grid solar systems
used in lighting for outdoor public facilities and in commercial buildings. Our service with
respect to solar system integration includes engineering, procurement of equipment, construction
management, monitoring and maintenance. We work with our strategic partners to develop solar power
plants. The power plant development process involves evaluation of sites, obtaining land rights,
building, construction and grid-interconnection permits, licenses and approvals from local
authorities, construction of the plant, operation and maintenance.
Sources of raw materials
The main raw material required in our manufacturing process is solar cells. We secure the supply
of solar cells by forming strategic partnership with the major cells suppliers in China. Other raw
materials include ribbon, back sheet, ethylene vinyl acetate, or EVA, connecting systems and
aluminum alloy framing and diodes. We believe that all of these raw materials can be purchased on
the open market in China from multiple vendors at competitive prices.
Sales and Marketing
We sell solar products through our direct sales personnel to residential, commercial, industrial
utilities and power plant developers. Our marketing programs include solar exhibitions, electronic
commerce, technology conferences and seminars, advertisement in magazines and newspapers and public
relations campaigns. We are developing customer relationships in the Chinese market and other
geographic regions to increase our sales.
18
Intellectual Property
In manufacturing our solar products, we use know-how available in the public domain as well as
unpatented know-how developed in-house. We rely on a combination of trade secrets and employee
contractual protections to establish and protect our proprietary rights. We believe that many
elements of our solar products and manufacturing processes involve proprietary know-how, technology
or data that is not coverable by patents or patent applications, including technical processes,
equipment designs and procedures. We have taken security measures designed to protect these
elements. Substantially all of our research and development personnel have entered into
confidentiality and proprietary information agreements with us. These agreements address
intellectual property protection issues and require our employees to assign to us all of the
inventions, designs and technologies they develop during the course of employment with us.
As of the date of this Annual Report, we have one issued patent and one patent application pending
in China, both of which relate to technology we are currently using.
We have pending trademark registration applications for the logos LSP and Linsun Power in the
EU and we have also filed a trademark registration application for the logo LSP in the United
States.
Our Group has not been subject to any material intellectual property claims.
Competition
In the production of solar modules, our direct competitors include Suntech Power Holdings, Trina
Solar Limited and Yingli Green Energy Holding Company Limited, all of which are well known public
companies in the solar industry.
Consistent with our business strategy, we plan to develop solar plant projects and expect to offer
solar electricity solutions to electric grids in Europe, and we also expect to face competition
from other providers of renewable energy solutions, including developers of photovoltaic, solar
thermal and concentrated solar power systems, and developers of other forms of renewable energy
projects.
Regulation
The most significant regulations or requirements that affect our business activities in China and
our shareholders right to receive dividends and other distribution from us are summarized below.
Renewable Energy Law and Other Government Directives
In February 2005, China enacted its Renewable Energy Law, which became effective on January 1,
2006. The Renewable Energy Law sets forth the national policy to encourage and support the
development and use of solar and other renewable energy and the use of on-grid generation. It
authorizes the relevant government authorities to set favorable prices for the purchase of
electricity generated by solar and other renewable power generation system.
The law also sets forth the national policy to encourage the installation and use of solar energy
water-heating systems, solar energy heating and cooling systems, solar photovoltaic systems and
other solar energy utilization systems. In addition, the law provides financial incentives, such as
national funding, preferential loans and tax preferences for the development of renewable energy
projects.
In January 2006, the PRC National Development and Reform Commission promulgated two implementation
directives with respect to the Renewable Energy Law. These directives set forth specific measures
relating to pricing of electricity
generated by solar and other renewal power generation systems and sharing by all utility end-users
of certain costs incurred by solar and other renewal power.
On March 23, 2009, Chinas Ministry of Finance promulgated the Interim Measures for Administration
of Government Subsidy Funds for Application of Solar Photovoltaic Technology in Building
Construction, or the Interim Measures, to support the demonstration and the promotion of solar
photovoltaic application in China. Local governments are encouraged to issue and implement
supporting policies for the development of solar photovoltaic technology. Under these Interim
Measures, the Ministry of Finance provides subsidies for projects with individual solar
installations that are greater that 50 kilowatt-peak in size and have more than 16% conversion
efficiency for monocrystalline photovoltaic products, more than 14% conversion efficiency for
multicrystalline photovoltaic products and more than 6% conversion efficiency for amorphous silicon
photovoltaic products, and gives priority support to solar photovoltaic technology integrated into
building construction, grid-connected solar photovoltaic building applications and some public
photovoltaic building applications such as schools, hospitals and offices. For 2009, the standard
subsidy is set at RMB20 per watt in principle and the detailed standard is to be determined by
factors including, but not limited to, the level of
19
integration of buildings with photovoltaic and
the technology of photovoltaic products. The Interim Measures do not apply to projects completed
before March 23, 2009, the promulgation date of the Interim Measures.
On April 16, 2009, the General Offices of the PRC Ministry of Finance and the PRC Ministry of
Housing and Urban-Rural Development jointly issued the Guidelines for Declaration of Demonstration
Project of Solar Photovoltaic Building Applications. These guidelines set the subsidy given out in
2009 to qualified solar projects at no more than RMB20 per watt for projects involving the
integration of photovoltaic components into buildings structural elements and at no more than
RMB15 per watt for projects involving the installation of photovoltaic components onto building
rooftops and wall surfaces.
Environmental Regulations
We are subject to a variety of governmental regulations related to the storage, use and disposal of
hazardous materials. The major environmental regulations applicable to us include the PRC
Environmental Protection Law, the PRC Law on the Prevention and Control of Water Pollution, the PRC
Implementation Rules of the Law on the Prevention and Control of Water Pollution, the PRC Law on
the Prevention and Control of Air Pollution, the PRC Law on the Prevention and Control of Solid
Waste Pollution and the PRC Law on the Prevention and Control of Noise Pollution.
Restriction on Foreign Investments
The principal regulation governing foreign ownership of solar power business in China is the
Foreign Investment Industrial Guidance Catalogue, updated and effective as of December 1, 2007.
Under this regulation, the solar power business is listed as an industry with foreign investments
permitted.
Tax
We are a tax exempted company incorporated in the British Virgin Islands. Our subsidiaries
incorporated in Hong Kong and PRC are subject to Hong Kong Profits Tax and Enterprise Income Tax in
the PRC, respectively.
Our subsidiaries incorporated in Hong Kong were subject to a tax rate of 16.5% in 2008, 2009 and
2010 on the assessable profits arising in or derived from Hong Kong. For those Hong Kong
subsidiaries which generate PRC sourced income, PRC income tax was payable on the assessable
profits at a rate of 25% in 2008, 2009 and 2010.
On March 16, 2007, the National Peoples Congress adopted the Enterprise Income Tax Law, or New
Income Tax Law, which became effective on January 1, 2008 and replaced the previous separate income
tax laws for domestic enterprises and foreign-invested enterprises (including PRC subsidiaries of
our company) by adopting a unified income tax rate of 25% for most enterprises. In accordance with
the implementation rules of the New Income Tax Law, the preferential tax treatments previously
granted to various of our PRC subsidiaries will not continue and those subsidiaries will be subject
to the statutory 25% tax rate. The 25% tax rate has been used in the calculation of our deferred
tax balances, except for Shenzhen Helios Energy and Zhangzhou Trendar. The tax rate for Shenzhen
Helios Energy was 20% in 2009 and 22% in 2010, and will increase to 24% in 2011 and 25% in 2012.
Among our PRC subsidiaries, only Zhangzhou Trendar obtained the preferential tax treatment that it
is fully exempt from the PRC enterprise income tax for 2008 and 2009, followed by a 50% tax
exemption for 2010 through 2012.
Since all the PRC subsidiaries of the Company reported accumulated deficits up to December 31,
2010, no provision for PRC dividend withholding tax has been made. Upon distribution of any future
earnings in the form of dividends or otherwise in the future, the Group would be subject to the
respective tax rate under PRC Enterprise Income Tax Law issued by the State Council.
The Group concluded that it does not have any material uncertain tax positions for the years 2008,
2009 and 2010. The Group classifies interest and/or penalties related to unrecognized tax benefits
as a component of income tax provisions; however, for the years ended December 31, 2008, 2009 and
2010, there were no interest and penalties related to uncertain tax positions, and the Group had no
material unrecognized tax benefit which would affect the effective income tax rate in future
periods. The Group does not anticipate any significant increases or decreases to its liability for
unrecognized tax benefits within the next twelve months. For our PRC subsidiaries, the years 2004
to 2010 remain subject to examination by the PRC tax authorities. For the Companys Hong Kong
subsidiaries, their respective tax positions are subject to inspection for the years 2004 to 2010
by the Hong Kong tax authorities.
20
C. Organizational structure.
The following table set forth the details of our significant subsidiaries as at the date of this
Annual Report:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Country of |
|
Ownerships |
|
|
Name |
|
Function |
|
Incorporation |
|
Interest |
|
Direct Parent |
BHL Solar
Technology Company
Limited, or BHLHK
(formerly named as
BHL Networks
Technology Co.Ltd.)
|
|
cash management vehicle
|
|
Hong Kong
|
|
|
100 |
% |
|
Company |
|
|
|
|
|
|
|
|
|
|
|
Linsun Renewable Energy Corporation Limited
|
|
sale of solar products
|
|
Hong Kong
|
|
|
100 |
% |
|
China Green Holdings
Ltd. |
|
|
|
|
|
|
|
|
|
|
|
Sino Solar Technology (HK) Limited
|
|
cooperation with HK
companies and
institutions
|
|
Hong Kong
|
|
|
100 |
% |
|
Southwick
International Ltd. |
|
|
|
|
|
|
|
|
|
|
|
LSP Solar GmbH
|
|
sale and marketing
office in Europe
|
|
Germany
|
|
|
100 |
% |
|
China Green
Investment Group
Ltd. |
|
|
|
|
|
|
|
|
|
|
|
Shenzhen Helios New
Energy Technology
Limited, or
Shenzhen Helios
Energy (formerly
named as Shenzhen
Innoessen Biotech
Inc.)
|
|
management, sale and
marketing office in
southern China
|
|
China
|
|
|
100 |
% |
|
Southwick
International Ltd. |
|
|
|
|
|
|
|
|
|
|
|
Linsun Power
Technology
(Quanzhou) Corp.
Ltd.
|
|
manufacturing solar modules
|
|
China
|
|
|
100 |
% |
|
Linsun Renewable
Energy Corporation
Limited |
|
|
|
|
|
|
|
|
|
|
|
China Merchants
Zhangzhou
Development Zone
Trenda Solar Ltd.or
Zhangzhou Trenda
|
|
research and
development
|
|
China
|
|
|
100 |
% |
|
Trenda International
Ltd. |
|
|
|
|
|
|
|
|
|
|
|
China Merchants
Zhangzhou
Development Zone
Trendar Solar Tech
Ltd., or Zhangzhou
Trendar Tech
|
|
manufacturing solar modules
|
|
China
|
|
|
100 |
% |
|
Sinofield Group Ltd. |
|
|
|
|
|
|
|
|
|
|
|
China Merchants Zhangzhou Development Zone
Broad Shine Solar Technology Limited, or Broad Shine
|
|
owning plant and
properties
|
|
China
|
|
|
100 |
% |
|
Faster Assets Limited |
D. Property, plants and equipment.
Our principal executive office is located at Unit 1010-1011, 10/F, West Tower, Shun Tak Centre,
168-200 Connaught Road Central, Hong Kong. Our five-year lease for this property commenced on June
30, 2010 and terminates on June 29, 2015. Our monthly rent for this property is HK$110,000, and we
occupy approximately 4,400 square feet of space.
Broad Shine owns a five-story plant at China Merchants ZhangZhou Development Zone in China. The
total area is 11,895 square meters, primarily occupied by our solar energy operations. Linsun Power
Technology (Quanzhou) Corp. Ltd. leases a plant with area of 2,535 square meters at Jinjiang
Economic Development Zone in China from December 10, 2009 to December 9, 2014. The current monthly
rent is RMB25,353 and will increase 5% per annum from December 15, 2011 in accordance with the
existing tenancy agreement.
We believe that our physical facilities are adequate to conduct our business for the next 12
months. We have not, to our knowledge, violated any environmental laws, ordinances or regulations,
and believe that all of our operations comply with applicable environmental laws in all material
respects.
|
|
|
Item 4A. |
|
Unresolved Staff Comments |
Not Applicable.
21
|
|
|
Item 5. |
|
Operating and Financial Review and Prospects |
MANAGEMENTS DISCUSSION AND ANALYSIS
The following discussion of our financial condition and results of operations should be read in
conjunction with the consolidated financial statements and related notes thereto included in this
Annual Report. The following discussion contains forward-looking statements that involve risks and
uncertainties. Our actual results could differ materially from those discussed herein. Factors that
could cause or contribute to such differences include, but are not limited to, risks and
uncertainties described in Item 3.D Risk Factors. All financial data referred to in the
following discussion have been prepared in accordance with accounting principles generally accepted
in the United States of America, or US GAAP.
Critical accounting policies and estimates
US GAAP requires that we adopt accounting policies and make estimates that our management believes
are appropriate under the circumstances for the purposes of providing a true and fair view of our
results of operations and financial condition. Our significant accounting policies are set forth in
Note 2 to our consolidated financial statements. Different policies, estimates and assumptions in
critical areas could lead to materially different results. Critical accounting policies are defined
as those that are reflective of significant judgments and uncertainties and potentially result in
materially different results under different assumptions and conditions. We believe the following
critical accounting policies may be affected by our judgments and estimates used in the preparation
of these consolidated financial statements.
Business combinations
The Group accounts for its business combinations using the purchase method of accounting. This
method requires that the acquisition cost to be allocated to the assets, including separately
identifiable intangible assets, and liabilities the Group acquired based on their estimated fair
values.
The cost of an acquisition is measured as the aggregate of the fair values at the date of exchange
of the assets given, liabilities incurred, and equity instruments issued as well as the contingent
considerations and all contractual contingencies as of the acquisition date. The costs directly
attributable to the acquisition are expensed as incurred. Identifiable assets, liabilities and
contingent liabilities acquired or assumed are measured separately at their fair value as of the
acquisition date, irrespective of the extent of any non-controlling interests. The excess of (i)
the total of cost of acquisition, fair value of the non-controlling interests and acquisition date
fair value of any previously held equity interest in the acquiree over (ii) the fair value of the
identifiable net assets of the acquiree is recorded as goodwill. If the cost of acquisition is less
than the fair value of the net assets of the subsidiary acquired, the difference is recognized
directly in the income statement.
The determination and allocation of fair values to the identifiable assets acquired and liabilities
assumed is based on various assumptions and valuation methodologies requiring considerable
management judgment. The most significant variables in these valuations are discount rates,
terminal values, the number of years on which to base the cash flow projections, as well as the
assumptions and estimates used to determine the cash inflows and outflows. The Company determines
discount rates to be used based on the risk inherent in the related activitys current business
model and industry comparisons. Terminal values are based on the expected life of assets and
forecasted life cycle and forecasted cash flows over that period. Although the Company believes
that the assumptions applied in the determination are reasonable based on information available at
the date of acquisition, actual results may differ from the forecasted amounts and the difference
could be material.
Impairment on available-for-sale securities
In accordance with ASC 320 (formerly SFAS No. 115, Accounting for Certain Investments in Debt and
Equity Securities), we review our investment in available-for-sale securities, or AFS securities,
for potential impairment based on the following factors: the length of the time and extent to which the market value has
been below investment cost; the financial condition and near-term prospects of the issuer of AFS
securities; and our intent and ability to retain AFS securities for a period of time sufficient to
allow for any anticipated recovery in market value. If we determine that the impairment is other
than temporary, we will recognize an impairment loss in earnings equal to the difference between
the investments cost and its fair value at the balance sheet date of the reporting period for
which the assessment is made. The fair value of the investment becomes the new cost basis of the
investment and will not be adjusted for subsequent recoveries in fair value. During the years ended
December 31, 2008, 2009 and 2010, we recognized Rmb15.2 million, Nil, Rmb3.5 million impairment on
AFS securities respectively.
22
Impairment or disposal of long lived assets
In accordance with ASC360-10-35 (formerly referred to SFAS No. 144 Accounting for the Impairment
or Disposal of Long-Lived Assets), we assess long-lived assets for impairment when events and
circumstances exist that indicate the carrying amount of these assets may not be recoverable.
Determination of recoverability is based on an estimate of undiscounted future cash flows resulting
from the use of the asset and its eventual disposition. Measurement of any impairment loss for
long-lived assets and certain identifiable intangible assets that management expects to hold and
use is based on the amount the carrying value exceeding the fair value of the asset. We recognized
no impairment charge for the year ended December 31, 2008. Impairment of property, plant and
equipment of RMB6,463 and Rmb591 was recognized for the years ended December 31, 2009 and 2010,
respectively. It was primarily related to planned abandonment of the operations of an asset group
relating to an SnO2 production line operated by China Merchants Zhangzhou Development Zone Trenda
Solar Ltd., a subsidiary of the Group in the PRC.
Long-lived assets to be disposed of are stated at the lower of fair value less cost to sell or
carrying amount. Expected future operating losses from discontinued operations are recorded in the
periods in which the losses are incurred.
Stock-based compensation
We grant stock options to our employees and certain non-employee consultants under our stock option
plans. We follow ASC 718 (formerly referred to as SFAS No. 123 (revised 2004) Share-Based
Payment), whereby entities are required to measure the cost of employee services received in
exchange for an award of equity instruments based on the grant-date fair value of the award (with
limited exceptions). That cost is recognized over the period during which an employee is required
to provide service, known as the requisite service period (usually the vesting period), in exchange
for the award. The grant -date fair value of employee share options and similar instruments are
estimated using a Binomial Model. If an equity award is modified after the grant date, incremental
compensation cost is recognized in an amount equal to the excess of the fair value of the modified
award over the fair value of the original award immediately before the modification.
The determination of the fair value of share options on the grant date using a Binomial Model is
affected by our stock price as well as assumptions regarding a number of complex and subjective
variables, including our expected stock price volatility over the vesting period, the risk-free
interest rate, the expected dividend yield and actual and projected employee stock option exercise
behavior. Furthermore, we are required to estimate forfeitures at the time of the grant and
recognize stock-based compensation expense only for those awards that are expected to vest. If
actual forfeitures differ from those estimates, we may need to revise those estimates used in
subsequent periods.
In accordance with ASC 718, we have elected to recognize share-based compensation expenses, net of
a forfeiture rate, using the straight-line method for awards with graded vesting features and
service conditions only, and using the graded-vesting attribution method for awards with graded
vesting features and performance conditions.
Warrants and option rights
In accordance with ASC 815 (formerly contained in FAS133 and EITF00-19 ), we had accounted for a
certain warrant, or Warrant A, and option rights as equity instruments and another warrant, or
Warrant B, as a liability instrument during the year ended December 31, 2008 and for the six months
ended June 30, 2009. Accordingly, Warrant B was carried at fair value at each reporting date with
changes in fair value being recorded in the statements of operations. In connection with the audit
of our financial statements for the year ended December 31, 2009 and the adoption of ASC 815-40-15
(earlier referred to as EITF 07-5) as of January 1, 2009, Warrant A and option rights were
reclassified as liabilities as Warrant A contains a reset feature whereby the exercise price would
be reset to the market price if the market price is lower than the exercise price at a specified
date and option rights contain similar features whereby the number of shares to be finally issued
under option rights are not fixed. Following the guidance under ASC 815-40-15, we have recorded the
cumulative effect of such change as an adjustment to the opening balance of
retained earnings. Going forward, warrants and option rights will be carried at fair value at each
reporting date with changes in fair value being recorded in the statements of operations. The fair
values of the warrants and option rights are estimated using a Binomial Model and Monte Carlo
simulation. The reclassification of Warrant A and option rights as liabilities resulted in an
increase of Rmb0.27 in net loss per share from Rmb2.42 to Rmb2.69 for the year ended December 31,
2009. In 2010, the Company continued to classify Warrant A and option rights as liabilities and
recorded the change in fair value in statements of operations for the year ended December 31, 2010.
The determination of the fair value of warrants on the grant date using a Binomial Model is
affected by our stock price as well as assumptions regarding a number of complex and subjective
variables, including our expected stock price volatility over the exercise period, the risk-free
interest rate, the expected dividend yield and actual and
23
projected exercise behavior. If actual
results differ from those estimates, we may need to revise those estimates used in subsequent
valuations (see Note 12 to the consolidated financial statements).
Convertible note
Upon issuance of a convertible note and for the six months ended June 30, 2009, we separately
accounted for the liability and the equity components in a manner that reflected our
non-convertible debt borrowing rate under APB 14-1. In connection with the audit of our financial
statements for the year ended December 31, 2009, we reclassified the conversion option as a
derivative liability in accordance with ASC 815, which had no impact on our net loss per share for
the year ended December 31, 2009. The fair value of the embedded derivative is estimated using a
Binomial Model (see Note 12 to the consolidated financial statements). In November 2009, the
convertible note was entirely exchanged for the Companys common stock. No convertible note was
issued in the year ended December 31, 2010.
Recent accounting pronouncements
In March 2010, the FASB issued Accounting Standards Update 2010-11 (ASU 2010-11), Derivative and
Hedging (Topic 815). All entities that enter into contracts containing an embedded credit
derivative feature related to the transfer of credit risk that is not only in the form of
subordination of one financial instrument to another will be affected by the amendments in this
Update because the amendments clarify that the embedded credit derivative scope exception in
paragraph 815-15-15-8 through 15-9 does not apply to such contracts. ASU 2010-11 is effective at
the beginning of the reporting entitys first fiscal quarter beginning after June 15, 2010. The
provisions of ASU 2010-11 did not have a material effect on our consolidated financial statements.
In April 2010, the FASB issued ASU 2010-13, Effect of Denominating the Exercise Price of a
Share-Based Payment Award in the Currency of the Market in which the Underlying Equity Security
TradesUpdates the guidance in ASC 718, CompensationStock Compensation, to clarify that
share-based payment awards with an exercise price denominated in the currency of a market in which
a substantial portion of the underlying equity security trades should not be considered to meet the
criteria requiring classification as a liability. The updated guidance is effective for fiscal
years, and interim periods within those fiscal years, beginning on or after December 15, 2010.
Early adoption is permitted. We are currently evaluating the potential impact, if any, on our
consolidated financial statements.
In April 2010, the FASB issued Update No. 2010-17, or ASU 2010-17, Revenue RecognitionMilestone
Method, which updates the guidance currently included under topic 605, Revenue Recognition. ASU
2010-17 provides guidance on defining the milestone and determining when the use of the milestone
method of revenue recognition for research or development transactions is appropriate. It provides
criteria for evaluating if the milestone is substantive and clarifies that a vendor can recognize
consideration that is contingent upon achievement of a milestone as revenue in the period in which
the milestone is achieved, if the milestone meets all the criteria to be considered substantive.
ASU 2010-17 is effective for milestones achieved in fiscal years, and interim periods within those
years, beginning after June 15, 2010 and should be applied prospectively. Early adoption is
permitted. We are still assessing the impact of this guidance, and we do not believe the adoption
of this guidance will have a material impact on our consolidated financial statements.
On July 2010, the FASB Issued Accounting Standards Update 2010-20, Receivables (Topic 310)
Disclosures about the Credit Quality of Financial Receivables and the Allowance for Credit Losses
(the ASU). In the aftermath of the global economic crisis, transparent financial reporting has
become the subject of worldwide attention, with a focus on improving accounting standards in a
number of areas, including financial instruments. The new ASU requires disclosure of additional
information to assist financial statement users understand more clearly an entitys credit risk
exposures to finance receivables and the related allowance for credit losses. For public companies,
the ASU is effective for interim and annual reporting periods ending on or after December 15, 2010
with specific items, such as the allowance rollforward and modification disclosures effective for
periods beginning after December 15, 2010. Nonpublic entities are required to apply the disclosure
requirements for annual reporting periods ending on or after December 15, 2011. The adoption of
ASU 2010-20 is not expected to have no material effect on our
consolidated financial statements.
In December 2010, the FASB issued Accounting Standards Update (ASU) No. 2010-28, Intangibles
Goodwill and Other (Topic 350): When to Perform Step 2 of the Goodwill Impairment Test for
Reporting Units with Zero or Negative Carrying Amounts. This ASU contains the final consensus
reached by the EITF meeting on November 19, 2010. The EITF consensus affects all entities that have
recognized goodwill and have one or more reporting units whose carrying amount for purposes of
performing Step 1 of the goodwill impairment test is zero or negative. The EITF decided to amend
Step 1 of the goodwill impairment test so that for those reporting units, an entity is required to
perform Step 2 of the goodwill impairment test if it is more likely than not that a goodwill
impairment exists. For public entities, the amendments in this Update are effective for fiscal
years, and interim
24
periods within those years, beginning after December 15, 2010. Early adoption is
not permitted. For nonpublic entities, the amendments are effective for fiscal years, and interim
periods within those years, beginning after December 15, 2011. Nonpublic entities may early adopt
the amendments using the effective date for public entities. The adoption of ASU 2010-28 is not
expected to have no material effect on our consolidated financial statements.
In December 2010, the FASB issued ASU 2010-29, Disclosure of Supplementary Pro Forma Information
for Business Combinations. The ASU 2010-29 specifies that if a public company presents comparative
financial statements, the entity should only disclose revenue and earnings of the combined entity
as though the business combination(s) that occurred during the current year had occurred as of the
beginning of the comparable prior annual reporting period. ASU 2010-29 is effective prospectively
for 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, 2010, with early adoption permitted. We
are currently evaluating the potential impact, if any, on our consolidated financial statements.
A. Operating results.
The following table presents selected statement of operations data for the years ended December 31,
2008, 2009 and 2010.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Amounts in thousands of Rmb) |
|
|
|
2008 |
|
|
2009 |
|
|
2010 |
|
|
|
Amount |
|
|
Amount |
|
|
Amount |
|
Revenues |
|
|
10 |
|
|
|
|
|
|
|
53,700 |
|
Cost of sales |
|
|
(20 |
) |
|
|
|
|
|
|
(45,113 |
) |
|
|
|
|
|
|
|
|
|
|
Gross income (loss) |
|
|
(10 |
) |
|
|
|
|
|
|
8,587 |
|
Research and development expenses |
|
|
(133 |
) |
|
|
(552 |
) |
|
|
(557 |
) |
Selling expenses |
|
|
|
|
|
|
|
|
|
|
(3,436 |
) |
General and administrative expenses |
|
|
(24,195 |
) |
|
|
(24,970 |
) |
|
|
(32,530 |
) |
Impairment on property, plant and equipment |
|
|
|
|
|
|
(6,463 |
) |
|
|
(591 |
) |
Impairment on inventories |
|
|
|
|
|
|
(346 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating loss |
|
|
(24,338 |
) |
|
|
(32,331 |
) |
|
|
(28,527 |
) |
Other income (expense): |
|
|
|
|
|
|
|
|
|
|
|
|
Interest income |
|
|
79 |
|
|
|
7 |
|
|
|
40 |
|
Finance costs |
|
|
(475 |
) |
|
|
(5,799 |
) |
|
|
(83 |
) |
Impairment on deposit for business acquisition |
|
|
|
|
|
|
|
|
|
|
(10,301 |
) |
Change in fair value of trading securities |
|
|
|
|
|
|
|
|
|
|
1,162 |
|
Gain on disposal of trading securities |
|
|
|
|
|
|
|
|
|
|
5,196 |
|
Dividend income from available-for-sale securities |
|
|
48 |
|
|
|
71 |
|
|
|
|
|
(Loss) gain on disposal of available-for-sale securities |
|
|
(14,049 |
) |
|
|
111 |
|
|
|
(213 |
) |
Impairment on available-for-sale securities |
|
|
(15,213 |
) |
|
|
|
|
|
|
(3,549 |
) |
Impairment on other investments |
|
|
|
|
|
|
(571 |
) |
|
|
(489 |
) |
Change in fair value of investment in convertible note |
|
|
|
|
|
|
|
|
|
|
1,917 |
|
Change in fair value of derivative embedded in convertible note |
|
|
|
|
|
|
(5,040 |
) |
|
|
|
|
Change in fair value of warrants and option rights |
|
|
(1,236 |
) |
|
|
3,798 |
|
|
|
555 |
|
Loss on debt extinguishment |
|
|
|
|
|
|
(3,434 |
) |
|
|
|
|
Subsidies from government |
|
|
|
|
|
|
600 |
|
|
|
|
|
Exchange loss |
|
|
(268 |
) |
|
|
(218 |
) |
|
|
(442 |
) |
Others, net |
|
|
(36 |
) |
|
|
(2 |
) |
|
|
(491 |
) |
Income tax credit |
|
|
712 |
|
|
|
112 |
|
|
|
104 |
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations |
|
|
(54,776 |
) |
|
|
(42,696 |
) |
|
|
(35,121 |
) |
Profit from discontinued operations |
|
|
858 |
|
|
|
4,227 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss for the year |
|
|
(53,918 |
) |
|
|
(38,469 |
) |
|
|
(35,121 |
) |
|
|
|
|
|
|
|
|
|
|
In December 2008, we entered into a sale and purchase agreement to sell our wholly-owned subsidiary
Jingle and its subsidiaries, BHLNet and BBHL, which we collectively refer to as the Jingle Group,
to Sentron Enterprises Limited, an independent party, for cash consideration of HK$0.2 million.
During the fiscal years ended December 31, 2008 and 2009, we classified Jingle Group as held for
sales and discontinued operations in accordance with Accounting Standard Codification 205-20
(formerly referred to as SFAS 144 Discontinued operations) Operating results for the year ended
December 31 2008 of Jingle Group and its subsidiaries and CNT and its subsidiaries are included in
Profit from discontinued operations. See Note 5 to the consolidated financial statements
Disposal and discontinued operations for further discussion.
25
Comparison of Years ended December 31, 2010, 2009 and 2008
Revenues. In 2010, we commenced to produce crystalline solar modules. We completed our first
commercial shipment in September 2010 and recognized Rmb53.70 million of revenue during 2010. The
global economic recession in 2008 and 2009 resulted in the cessation of business of many companies
that manufacture downstream solar products. Accordingly, the demand for our SnO2 base plate
products has been weak. We generated no revenues from our Solar Energy Operations in 2009 and
Rmb0.01 million of revenues in 2008 from one customer. Revenues generated by our discontinued
operations for 2009 and 2008 are included in profit from discontinued operations for each of those
years.
Cost of sales. We commenced commercial shipment and incurred Rmb45.11 million in cost of sales in
2010. Due to the weak demand on our solar products in 2009, there was no cost of sales for our
Solar Energy Operations in 2009. Cost of sales for our Solar Energy Operations was Rmb0.02 million
in 2008. Cost of sales for our discontinued operations in 2009 and 2008 are included in profit from
discontinued operations for each of those years.
Gross profit (loss). Our gross profit was Rmb8.59 million in 2010 from the sales of crystalline
solar modules. Gross profit (loss) for our Solar Energy Operations was nil in 2009 and Rmb(0.01)
million in 2008 primarily due to low prices offered to a new customer to promote sales.
Research and development expenses. Research and development expenses for our Solar Energy
Operations were Rmb0.56 million, Rmb0.55 million and Rmb0.13 million in 2010, 2009 and 2008,
respectively, primarily consisting of expenses incurred from significant improvements and
refinements to our production lines and existing products.
Selling expenses. Our selling expenses was Rmb3.44 million and nil in 2010 and 2009, respectively.
The selling expenses in 2010 consisted primarily:
|
|
|
Rmb3.12 million of goods transportation fees which were incurred resulting from
shipment to local and overseas customers; |
|
|
|
|
Rmb0.20 million of exhibition expenses; and |
|
|
|
|
Rmb0.08 million of salaries and benefits expenses. |
General and administrative expenses. Our general and administrative expenses increased by Rmb7.56
million, or 30.3 %, from Rmb24.97 million in 2009 to Rmb32.53 million in 2010. This increase was
primarily due to:
|
|
|
a Rmb5.31 million increase in consultant fees resulting from consultant fee payable to
a related party for assisting the Company in an acquisition, and warrants issued to a
related company and another institutional consultant as compensation for services to
introduce potential investors and investment projects. The warrants have been fully vested
upon grant and certain of the prescribed services will be rendered by these grantees after
the current period; |
|
|
|
|
a Rmb2.19 million, or 16.1%, increase in salaries and benefits expenses resulting from
an increase in head counts, increment in salaries and bonus paid; |
26
|
|
|
a Rmb0.67 million, or 36.9%, increase in audit fees resulting from an increase in fees
of our current auditor; |
|
|
|
a Rmb0.34 million, or 59.5%, increase in travel related expense resulting from increase
in local and overseas business trips of our staff caused by increase in business; |
|
|
|
a Rmb0.33 million increase in commission and fees expense, resulting primarily from
payment of commission for an acquisition; and |
|
|
|
a Rmb0.24 million increase in press release expense resulting from engaging new
external investor relationship consultancy service; |
partially offset by
|
|
|
a Rmb1.05 million, or 36.4%, decrease in legal and other professional fees resulting
from a decrease in corporate and securities matters and transactions and the enhanced use
of internal personnel for corporate governance, compliance and legal matters; and |
|
|
|
a Rmb0.94 million, or 36.2%, decrease in depreciation expenses resulting from the
impairment of SnO2 production line and allocation of depreciation for production
facilities to cost of sales. |
General and administrative expenses increased by Rmb0.77 million, or 3.0 %, from Rmb24.20 million
in 2008 to Rmb24.97 million in 2009. This increase was primarily due to:
|
|
|
a Rmb1.58 million, or 14.0%, increase in salaries and benefits expenses resulting from
an increase in stock-based compensation recognized; |
|
|
|
a Rmb0.48 million, or 22.8%, increase in depreciation expenses resulting from the
purchase of additional property, plant and equipment, as well as the expansion of our
Solar Energy Operations; and |
|
|
|
a Rmb0.21 million, or 12.9%, increase in audit fees resulting from an increase in fees
of our current auditor as well as an increase in fees of our former auditors in connection
with the issuance of a consent; |
partially offset by
|
|
|
a Rmb0.73 million, or 20.3%, decrease in legal and other professional fees resulting
from a decrease in corporate and securities matters and transactions and the enhancement
of internal personnel for corporate governance, compliance and legal matters; |
|
|
|
a Rmb0.31 million, or 31.7%, decrease in rental expenses resulting from our move to a
smaller office; |
|
|
|
a Rmb0.11 million, or 25.2%, decrease in consultant fees resulting from a decrease in
our use of external consultants for business development; |
|
|
|
a Rmb0.18 million, or 46.4%, decrease in office supplies expenses resulting from
strengthened control over costs and expenses; and |
|
|
|
a Rmb0.13 million, or 30.4%, decrease in insurance expenses resulting from a change of
insurance carriers in 2009 in respect of major insurance policies. |
Impairment on property, plant and equipment and inventories. There was no impairment on property,
plant and equipment and inventories in 2008. Impairment on property, plant and equipment was
Rmb6.46 million and Rmb0.59 million, respectively, in 2009 and 2010, primarily related to the first
SnO2 production line.
Impairment on inventories was Rmb0.35 million and nil in 2009 and 2010, respectively.
Other income (expense). For 2010, other income consisted mainly of: (i) Rmb1.16 million of change
in fair value of trading securities; (ii) Rmb5.20 million of gain on disposal of trading
securities; (iii) Rmb1.92 million of change in fair value of investment in convertible note; and
(iv) Rmb0.55 million of change in fair value of warrants and option rights. Other expense for 2010 consists mainly of (i) Rmb0.21 million of loss on disposal of
available-for-sales securities; (ii) Rmb0.49 million of impairment on other investments which were
fully impaired; (iii) Rmb10.30 million of impairment on deposit for business acquisition; (iv)
Rmb3.55 million of impairment on available-for-sale securities; and (v) Rmb0.44 million of exchange
loss. For 2009, other income consisted primarily of: (i) Rmb3.80 million of change in fair value
of warrants and option rights; (ii) Rmb0.11 million of
27
gain on disposal of available-for-sale
securities; (iii) Rmb0.60 million of subsidies from government and other expense consisted
primarily of: (i) Rmb5.76 million of interest expenses for accretion to the redemption of the
convertible note; (ii) Rmb5.04 million of change in fair value of derivative embedded in
convertible note; (iii) Rmb3.43 million of loss on debt extinguishment; (iv) Rmb0.22 million
exchange loss on bank account denominated in Hong Kong dollars. Other expense for 2008 consisted
primarily of: (i) Rmb15.21 million of impairment of available-for-sale securities; (ii) Rmb14.05
million of loss on disposal of available-for-sale securities; (iii) Rmb1.23 million of change in
fair value of warrant liabilities and (iv) Rmb0.48 million interest expenses related to overdraft
from security account.
Profit from discontinued operations. Profit from discontinued operations was Rmb4.23 million in
2009 and Rmb0.86 million in 2008. Profit from discontinued operations in 2009 and 2008 related
primarily to Jingle Group and its subsidiaries.
Net loss. Net loss for 2010 was Rmb35.12 million, a decrease of Rmb3.35million, or 8.7%, from
Rmb38.47million for 2009. Net loss for 2009 was Rmb38.47million, a decrease of Rmb15.45million, or
28.7%, from Rmb53.92 million for 2008.
Taxation
We are a tax exempted company incorporated in the British Virgin Islands. Our subsidiaries
incorporated in Hong Kong and PRC are subject to Hong Kong Profits Tax and Enterprise Income Tax in
the PRC, respectively.
Our subsidiaries incorporated in Hong Kong were subject to a tax rate of 16.5% in 2008, 2009 and
2010 on the assessable profits arising in or derived from Hong Kong. For those Hong Kong
subsidiaries which generate PRC sourced income, PRC income tax was payable on the assessable
profits at a rate of 25% in 2008, 2009 and 2010.
On March 16, 2007, the National Peoples Congress adopted the Enterprise Income Tax Law, or New
Income Tax Law, which became effective on January 1, 2008 and replaced the previous separate income
tax laws for domestic enterprises and foreign-invested enterprises (including PRC subsidiaries of
our company) by adopting a unified income tax rate of 25% for most enterprises. In accordance with
the implementation rules of the New Income Tax Law, the preferential tax treatments previously
granted to various of our PRC subsidiaries will not continue and those subsidiaries will be subject
to the statutory 25% tax rate. The 25% tax rate has been used in the calculation of our deferred
tax balances, except for Shenzhen Helios Energy and Zhangzhou Trendar Tech. The tax rate for
Shenzhen Helios Energy was 20% in 2009 and 22% in 2010, and will increase to 24% in 2011 and 25% in
2012. Among our PRC subsidiaries, only Zhangzhou Trendar Tech obtained the preferential tax
treatment that it will be fully exempt from the PRC enterprise income tax for 2008 and 2009,
followed by a 50% tax exemption for 2010 to 2012.
Since all the Companys PRC subsidiaries have accumulated deficits at December 31, 2010, no
provision for PRC dividend withholding tax has been made. Upon distribution of any future earnings
in the form of dividends or otherwise in the future, the Group would be subject to the respective
tax rate under PRC Enterprise Income Tax Law issued by the State Council.
The Group concluded that it does not have any material uncertain tax positions for the years 2008,
2009 and 2010. The Group classifies interest and/or penalties related to unrecognized tax benefits
as a component of income tax provisions; however, for the years ended December 31, 2008, 2009 and
2010, there were no interest and penalties related to uncertain tax positions, and the Group had no
material unrecognized tax benefit which would affect the effective income tax rate in future
periods. The Group does not anticipate any significant increases or decreases to its liability for
unrecognized tax benefits within the next twelve months. For our PRC subsidiaries, the years 2004
to 2010 remain subject to examination by the PRC tax authorities. For our Hong Kong subsidiaries,
their respective tax positions are subject to inspection for the years 2004 to 2010 by the Hong
Kong tax authorities.
28
B. Liquidity and capital resources
Our principal sources of liquidity have been cash generated from operating and financing
activities. Our financing activities consist of issuance and sale of our equity and/or debenture
securities to investors, and borrowings from third-party and/or related-party lenders. As of
December 31, 2010, our cash and cash equivalents of Rmb14.01 million consist of cash on hand
primarily and we had a short term loan liability with an outstanding principal amount of Rmb6.04
million.
We have been able to meet our working capital needs, and we believe that we will be able to meet
our working capital needs with our existing cash balance, operating cash flow and proceeds from
realization in the open market of available for sale and trading securities for the next 12 months.
Otherwise, in the short term and long-term, we expect to meet our liquidity needs from our
operating cash flows, proceeds from sales of our equity and/or debenture securities to investors
and borrowings, as would be considered necessary.
Working capital and cash flows
We have not engaged in any form of off-balance sheet arrangement/relationships with unconsolidated
entities or other persons that are reasonably likely to affect materially liquidity and the
availability of or requirements for capital resources, or any trading activities that include
non-exchange traded contracts accounted for at fair value. Except for the operating lease
commitments and capital commitments for construction in progress and investments, as disclosed in
Note 22 to our consolidated financial statements, we have no other commitments, which may cause us
to make future payments under contracts.
The following table sets forth the summary for cash flows for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the years ended December 31, |
|
|
|
2008 |
|
|
2009 |
|
|
2010 |
|
|
|
Rmb |
|
|
Rmb |
|
|
Rmb |
|
|
|
|
|
|
|
(thousands) |
|
|
|
|
|
Net cash generated in operating activities |
|
|
(15,131 |
) |
|
|
(17,268 |
) |
|
|
(31,958 |
) |
Net cash used in investing activities |
|
|
(13,953 |
) |
|
|
(35,791 |
) |
|
|
(21,969 |
) |
Net cash generated from financing activities |
|
|
18,676 |
|
|
|
70,929 |
|
|
|
44,470 |
|
Effect of exchange rate changes on cash |
|
|
(668 |
) |
|
|
(29 |
) |
|
|
(1,140 |
) |
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents |
|
|
(11,076 |
) |
|
|
17,841 |
|
|
|
(10,597 |
) |
Cash and cash equivalents at beginning of year |
|
|
18,906 |
|
|
|
6,770 |
|
|
|
24,611 |
|
Less: cash and cash equivalents at end of year from discontinued operations |
|
|
(1,060 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of year |
|
|
6,770 |
|
|
|
24,611 |
|
|
|
14,014 |
|
|
|
|
|
|
|
|
|
|
|
Our cash and cash equivalents on hand as of December 31, 2010 was Rmb14.01 million, representing an
decrease of Rmb10.60 million, or 43% from Rmb24.61 million at the beginning of the year. Our cash
and cash equivalents on hand as of December 31, 2009 was Rmb24.61 million, representing an increase
of Rmb17.84 million, or 264% from Rmb6.77 million at the beginning of the year.
Operating activities
Net cash outflow from operating activities in 2010 was Rmb31.96 million, representing an increase
of Rmb14.69 million from an outflow of Rmb17.27 million in 2009. The increase in net cash outflow
in 2010 was mainly due to the increase in amounts due from trade accounts receivable, increase in
amounts of value added tax and business tax recoverable, partially offset by increase in amounts
due to trade accounts payable and increase in other current liabilities and accrued expenses.
Net cash outflow from operating activities in 2009 was Rmb17.27 million, representing an increase
of Rmb2.14 million from an outflow of Rmb15.13 million in 2008. The increase in net cash outflow in
2009 was primarily due to the increase in amounts due from related parties.
Investing activities
Net cash outflow from investing activities in 2010 was Rmb21.97 million, representing a decrease of
Rmb13.82 million from an outflow of Rmb35.79 million in 2009. The decrease in net cash outflow in
2010 was mainly due to a decrease in the amount of cash used to finance business acquisitions
during the year.
Net cash outflow from investing activities in 2009 was Rmb35.79 million, representing an increase
of Rmb21.84 million from an outflow of Rmb13.95 million in 2008. The increase in net cash outflow
in 2009 was primarily due to the combined affects of (i) an increase of investment in securities
and (ii) prepayment for business acquisition.
29
Financing activities
Net cash inflow from financing activities in 2010 was Rmb44.47 million, representing a decrease of
Rmb26.46 million, from an inflow of Rmb70.93 million in 2009. This decrease was mainly because we
raised less funds in 2010 than in 2009.
Net cash inflow from financing activities in 2009 was Rmb70.93 million, representing an increase of
Rmb52.25 million, from an inflow of Rmb18.68 million in 2008. This increase was mainly due to the
combined effects of (i) Rmb68.67 million of proceeds from the convertible note during the year;
(ii)Rmb1.24 million of proceeds from the issuance of common stock and warrants in June 2009 and
(iii) Rmb2.59 million of proceeds from the exercise of stock options during the year.
As of December 31, 2010, after deducting our total liabilities from our cash and cash equivalents,
we had a net cash deficit of Rmb36.57 million, representing a decrease of Rmb39.45 million from a
net cash surplus of Rmb2.88 million as of December 31, 2009.
As of December 31, 2009, after deducting our total liabilities from our cash and cash equivalents,
we had a net cash surplus of Rmb2.88 million, representing an increase of Rmb16.50 million from a
net cash deficit of Rmb13.62 million as of December 31, 2008.
Restricted net assets
Under PRC laws and regulations, our PRC subsidiaries are restricted from transferring certain of
their net assets to us either in the form of dividends, loans or advances. Amounts restricted
include paid up capital and reserves of our PRC subsidiaries with positive net assets totaling
approximately Rmb31.63 million as of December 31, 2010.
Capital resources
Our capital expenditures in 2008, 2009 and 2010 were Rmb7.11 million, Rmb1.38 million and Rmb4.81
million, respectively. See Note 24 to the consolidated financial statements included in this Annual
Report. We expect our capital expenditures to increase in the future as we expand our Solar Energy
Operations.
In April 2009, we and two of our wholly-owned subsidiaries, China Green Industry Group Ltd. and
China Green Holdings Ltd., or CGHL, entered into a subscription agreement with CMTF Private Equity
One. Pursuant to the subscription agreement, CGHL issued to CMTF Private Equity One a convertible
note with a principal amount of US$10.0 million with three-year maturity and an interest rate equal
to the Hong Kong Prime Rate. The convertible note was, at the holders option, either (a)
convertible into the outstanding ordinary shares of CGHL or (b) exchangeable for shares of our
common stock. In November 2009, CMTF Private Equity One exchanged the convertible note for
3,322,260 shares of our common stock.
In April 2010, we entered into a subscription agreement with China Wanhe Investment Limited to
issue and sell 2,000,000 shares of our common stock in a private placement for a price equal to
US$3.01 per share. In May 2010, we received US$6.02 million from the transaction.
From time to time, we evaluate potential investments, acquisitions or divestments and may, if a
suitable opportunity arises, make an investment or acquisition or conduct a divestment. As a
result, we may need to obtain additional funds through issuance of new equity or debt securities.
We may have to seek additional financing sooner than currently anticipated, and we do not know
whether we will be able to obtain additional financing on terms acceptable to us, or at all.
Going Concern
During the
year ended December 31, 2008, 2009 and 2010, the Group reported net loss
of approximately Rmb53.92 million, Rmb38.47 million and
Rmb35.12 million respectively. During the year ended
December 31, 2008, 2009 and 2010, the Group reported net loss
and net negative cash flow from operations of approximately
Rmb15.13 million, Rmb17.27 million and
Rmb31.96 million respectively. The cash and
cash equivalent balance as at December 31, 2010 was Rmb14.01 million.
The
directors of the Company consider that the Group will be able to
generate adequate cash flows to finance
its operations and meet its cash obligations in the following 12 months from December 31, 2010 based on
the following:
|
|
positive operating cash flows are expected to be generated from the
profitable operations of manufacturing and sale of solar modules; |
|
|
realization in the open market of available for sale and trading
securities with ending carrying amounts at approximately Rmb34.55
million as of December 31, 2010, for cash; |
|
|
tight controls exercised by the board of directors on timing and
magnitude of cash outlays for investments initiatives; and |
|
|
proceeds from sales of equity and/or debt securities to
investors and borrowings, as would be considered necessary. |
30
Accordingly, the financial statements as of December 31, 2010 had been prepared on a going concern
basis.
C. Research and development, patents and licenses, etc.
Our major research and development section and manufacturing plants are located at China Merchants
Zhangzhou Development Zone in Fujian Province of the PRC. During 2009 and 2010, research and
development costs were incurred in the development of the new products and processes, including
significant improvements and refinements to existing products. Those R&D costs were expensed as
incurred.
D. Trend information.
Except as disclosed elsewhere in this Annual Report, we are not aware of any trends, uncertainties,
demands, commitments or events that are reasonably likely to have a material effect on our net
sales, profitability, liquidity or capital resources, or that caused the disclosed financial
information to be not necessarily indicative of future operating results or financial conditions.
E. Off-balance sheet arrangements.
We have no outstanding off-balance sheet arrangements. We do not engage in trading activities
involving non-exchange traded contracts.
F. Tabular disclosure of contractual obligations.
The following table summarizes our contractual obligations under a non-cancellable operating lease
as of December 31, 2010.
|
|
|
|
|
|
|
(Amounts in thousands) |
|
|
|
Rmb |
|
As of December 31, |
|
|
|
|
2011 |
|
|
1,770 |
|
2012 |
|
|
1,710 |
|
2013 |
|
|
1,537 |
|
2014 |
|
|
1,397 |
|
2015 |
|
|
523 |
|
|
|
|
|
Total |
|
|
6,937 |
|
|
|
|
|
Lease rental costs incurred by our company for the years ended December 31, 2008, 2009 and 2010
amounted to Rmb1.51 million, Rmb0.87 million and Rmb1.52 million, respectively.
Commitments
Capital commitments for construction in progress
In September 2007, China Merchants Zhangzhou Development Zone Trenda Solar Ltd., or Zhangzhou
Trenda, our wholly-owned subsidiary, entered into a cooperation contract with China Solar Energy
Group Limited, or China Solar, an independent third party, to purchase China Solars SnO2 solar
base plates production lines for an aggregate price of US$8.0 million (equivalent to Rmb58.36
million) for four SnO2 production lines. Half of the price for each production line was to be paid
upon delivery. The remaining 50% payment for each production line was to be made by upon successful
installation of the production lines and achievement of production requirements. The first SnO2
solar base plant production line was shipped to Zhangzhou Trenda and was installed and tested in
December 2008. Due to the inherent deficiencies of the first production line, we and China Solar
agreed to reduce the price for the first SnO2 solar base plate production line from US$2.0 million
to US$1.0 million. We paid US$1.0 million to China Solar in 2008. Pursuant to the cooperation
contract, Zhangzhou Trenda has the right to terminate the purchase of the remaining three SnO2
production lines at an aggregate price of US$6.0 million in the event that the first production
line fails to manufacture the products with quality satisfactory to the standard mutually agreed in
the cooperation agreement. For the fiscal year ended 2009 and 2010, impairment on the first SnO2
production line was recognized. Owing to the quality issue with the first production line, we dont
expect to purchase any additional production lines from China Solar in the near future.
31
G. Safe harbor.
Forward-Looking Statement Disclosure
This Annual Report contains forward-looking statements, as defined in Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as
amended, that are based on our current expectations, assumptions, estimates and projections about
us, our industry, economic conditions in the markets in which we operate, and certain other
matters. Generally, these forward-looking statements can be identified by the use of
forward-looking terminology such as anticipate, believe, estimate, expect, intend,
will, project, seek, should and similar expressions. Those statements include, among other
things, the discussions of our business strategy and expectations concerning our market position,
future operations, margins, profitability, liquidity and capital resources. These statements are
subject to known and unknown risks, uncertainties and other factors, which may cause actual results
or outcomes to differ materially from those implied by the forward-looking statements. Important
factors that may cause actual results or outcomes to differ from those implied by the
forward-looking statements include, but are not limited to, those discussed in the Item 3.D.Risk
Factors, Item 4. B. Business Overview and Item 5. Operating and Financial Review and Prospects
sections in this Annual Report. In light of these and other uncertainties, you should not conclude
that the results or outcomes referred to in any of the forward-looking statements will be achieved.
All forward-looking statements included in this Annual Report are based on information available to
us on the date hereof, and we do not undertake to update these forward-looking statements to
reflect future events or circumstances.
Item 6. Directors, Senior Management and Employees
A. Directors and senior management.
As of the date of this Annual Report, our Board of Directors consists of nine directors, four of
whom are executive directors and five of whom are independent directors. The following table sets
forth the name, age and position of each director and executive officer of our company as of the
date of this Annual Report:
|
|
|
|
|
|
|
Name |
|
Age |
|
Positions with the Company |
Alan Li
|
|
|
43 |
|
|
Chairman of the Board, Executive Director and Chief Executive Officer |
Zhenwei Lu
|
|
|
40 |
|
|
Executive Director |
Tairan Guo
|
|
|
33 |
|
|
Executive Director, Chief Business Development Officer and Acting
Chief Financial Officer |
Ju Zhang
|
|
|
48 |
|
|
Executive Director |
Loong Cheong Chang (1) (3)
|
|
|
65 |
|
|
Independent Director |
Xinping Shi (2) (3)
|
|
|
52 |
|
|
Independent Director |
Weidong Wang (2) (3)
|
|
|
44 |
|
|
Independent Director |
Yu Keung Poon (1) (2)
|
|
|
46 |
|
|
Independent Director |
Yezhong Ni (1)
|
|
|
41 |
|
|
Independent Director |
Lin-Hsiang Liao
|
|
|
31 |
|
|
Chief Operating Officer |
Bruno Luis Diaz Herrera
|
|
|
35 |
|
|
Chief Technology Officer |
Weining Zhang
|
|
|
41 |
|
|
Chief Communications Officer |
|
|
|
(1) |
|
Member of the Audit Committee |
|
(2) |
|
Member of the Compensation Committee |
|
(3) |
|
Member of the Nominating Committee |
32
Mr. Alan Li was appointed as an Executive Director on May 24, 2005. He has been our Chief Executive
Officer since January 8, 2007 and our Chairman of the Board of the Directors since May 23, 2007.
Prior to joining our company, he served as the Executive Director of Shun Tai Investment Limited, a
company engaged in investment, merger and acquisition of hospitals and pharmaceuticals factories in
China. From 2000 to 2002, Mr. Li was the Executive Director and Vice President of Linchest
Technology Ltd. Mr. Li has considerable experience in investment and management of conglomerate
companies. His current responsibilities include strategic planning, merger and acquisition and
capital market development. Mr. Li holds an MBA from Murdoch University, Australia.
Mr. Zhenwei Lu was appointed as an Executive Director on January 5, 2007. He was the General
Manager of China Merchants Technology Co., Ltd., or CMTH, a wholly owned subsidiary of China
Merchants Group. Mr. Lu has represented China Merchants Group to establish Shenzhen China Merchants
Group Yinke Investment Management Ltd, a RMB venture investment fund, and he is acting as General
Manager of this company. China Merchants Group is one of the largest state-owned enterprises
directly under the administration of the China State Council and has significant business
operations across Hong Kong and China in real estate, energy, logistics, ports, highways and
industrial zones. Mr. Lu holds a Bachelors degree from Shanghai Marine College and a Masters degree
from Zhongnan University of Economics and Law.
Mr. Tairan Guo was appointed as an Executive Director on January 31, 2010. He joined our company as
Assistant to our Chief Executive Officer in 2008 and was promoted to be Chief Business Development
Officer and Vice President in 2009. In addition, Mr. Guo has served as our Acting Chief Financial
Officer since June 11, 2010. Prior to joining us, Mr. Guo worked with the corporate business
development department of HTS, Haniel & Cie GmbH in Duisburg, Germany in 2005, and served as an SAP
project manager for Dorma Automatic GmbH in Wuppertal, Germany from 2006 to 2007. Mr. Guo holds
Bachelors degrees in German Literature and in Economics from Peking University in China and a
Masters degree of European Culture and Economy from Ruhr-University Bochum in Germany.
Mr. Ju Zhang was appointed as an Executive Director on May 24, 2005. He previously served as Deputy
Chairman of China Merchants Technology Holdings Co., Ltd. and was appointed as the Associate
Professor of Chinese Academy of Medical Sciences and Peking Union Medical College, the assistant
Director of Department of Research in National Committee of Science and Technology and Department
of Research in Chinese Ministry of Science and Technology. Mr. Zhang holds a Bachelors degree in
Energy Engineering from Tsinghua University and a Masters degree in Philosophy from the Chinese
Academy of Social Sciences.
Mr. Loong Cheong Chang was appointed as an Independent Director on January 5, 2007 and became the
Chairman of our Audit Committee and a member of our Nominating Committee on March 2, 2007. He
previously served as a member of senior management of Orient Overseas Container Line, Ltd. and
Island Navigation Corporation International Ltd., Director and General Manager of Noble Ascent
Company Ltd. Hong Kong, and Chairman of Audit Committee and Independent Non-Executive Director of
Guangshen Railway Company Limited. Mr. Chang is currently a Director of World Target Properties (Shanghai) Ltd. and the Director of Orient International
(Shanghai) Ltd. Mr. Chang holds a Certificate of Business Management from Hong Kong Management
Association.
Dr. Xinping Shi was appointed as an Independent Director on July 28, 2005 and the Chairman of our
Compensation Committee and Nominating Committee on March 2, 2007. Dr. Shi is holding positions as
Director of Logistics Management Research Centre, Coordinator of Logistics and Supply Chain
Management of the School of Business, and Associate Professor of the Department of Finance and
Decision Sciences of the Hong Kong Baptist University. Dr. Shi also serves as an Independent
Director of China Merchants Shekou Holdings Company Limited, a company listed on the Shenzhen Stock
Exchange; and as a Director of Weboptimal International Limited, a management consulting firm. He
is also Guest Professor of the College of Logistics of Beijing Normal University and Advisor of the
Chamber of Hong Kong Logistics. Dr. Shi holds a Doctorate degree from Middlesex University and a
Masters degree in Business Administration from Lancaster University, UK.
Mr. Weidong Wang was appointed as an Independent Director on July 28, 2005 and a member of our
Compensation Committee and Nominating Committee on March 2, 2007. Mr. Wang served as the Business
Representative of Henan Province in China from 1990 to 1991 and the Business Director of China
National Cereals, Oils & Foodstuffs Import & Export Corporation from 1991 to 2000. Mr. Wang was
appointed the Deputy General Manager of Ceroilfood Enterprises Limited, one of the foreign offices
of China Business Bureau in March 2000, and his responsibilities are in charge of overseas business
development and management. Mr. Wang has experience in import and export business of oil, cereal
products and foodstuffs. He qualified as International Business Engineer in China in 1994 and holds
a Masters degree in Public Finance from the Tianjin University of Finance & Economics and an MBA
from Murdoch University, Australia.
Mr. Yu Keung Poon was appointed as an Independent Director, a member of our Compensation Committee
and the financial expert of our Audit Committee on March 2, 2007. He is a Certified Public
Accountant of the Hong Kong Institute of Certified Public Accountants and a fellow member of the
Association of Chartered Certified Accountants in England. He is currently the Financial Controller
and the Company Secretary of Jiuzhou Development Company Limited. Prior to joining Jiuzhou
Development Company Limited, he worked in Ernst &
33
Young Hong Kong in the auditing field and had
assumed the accounting and financial management positions in a number of China affiliated and
multinational companies. Mr. Poon holds a professional Diploma in Accountancy from The Hong Kong
Polytechnic University and an Executive MBA degree from The Chinese University of Hong Kong.
Mr. Yezhong Ni was appointed as an Independent Director on April 28, 2005 and as a member of our
Audit Committee on March 2, 2007. He is a partner of the Kingson Law Firm, one of the leading law
firms in South China. He has experience in legal services for banking and finance, bankruptcy and
media. As perennial legal counsel of several large-scale enterprises and public institutions, Mr.
Ni deals with a large number of legal disputes, mainly syndicated loan related financial derivative
tools, comfort letter and floating rate note issues. As the special project legal counsel, Mr. Ni
provides legal services focusing on the non-performing-loan structural trade and the syndicated
loan issue .Mr. Ni has been appointed by the court as the bankruptcy supervisor for several
bankrupt enterprises. Mr. Ni graduated from the Law School of the Peking University.
Mr. Lin-Hsiang Liao was appointed as our Chief Operating Officer on December 13, 2010 and is
responsible for operation management of our Company and its subsidiaries. Mr. Liao was the founder
and has been Chief Executive Officer of Linsun Renewable Energy Corporation Limited (LSR) and has
been serving as the General Manager of Linsun Power Technology (Quanzhou) Corp. Ltd. (LSP) since
2009. Both LSR and LSP have been wholly-owned subsidiaries of our Company since November 23, 2010.
Mr. Liao is familiar with the photovoltaic, or PV, market in Europe with seasoned experiences in
operation, production management and marketing. Prior to establishing LSR, Mr. Liao worked as the
senior management in several renowned corporations. Mr. Liao holds a Bachelors degree in Computer
Science from Oxford Brookes University in the United Kingdom.
Mr. Bruno Luis Diaz Herrera was appointed as our Chief Technology Officer on December 13, 2010 and
is responsible for the technology management, product development and R&D strategy of our Company
and its subsidiaries. Prior to joining CTDC, Mr. Herrera worked as a senior technical and research
advisor for major corporations, such as Siemens and ITER. He also served as Professor in the Master
Program in Renewable Energies at University of La Laguna in Spain. Mr. Herrera is an expert with
practical experience in PV industry, with experience in designing and operating several solar
modules factories and designing and installing PV applications. Mr. Herrera also has experience in
the research of solar cell efficiency improvements. Mr. Herrera holds Bachelor Degree in Physics,
Engineering Degree in Industrial Engineering and Engineering Degree in Electronics at the
University of La Laguna in Spain and Master Degree of Business Administration. Mr. Herrera is
fluent in Spanish, English, French, German and Italian.
Ms. Weining Zhang was appointed as our Chief Communications Officer on June 15, 2011, in charge of
our public relations and investor relations. Prior to joining CTDC, she served as a director of
Perennial Financial Consulting, providing strategy and financial services to clients. Prior to
that she worked in the financial industry in roles that included serving as a closing analyst for
Credit Suisse First Boston/DLJ, a financial advisor for American Express, a senior manager for Real
Options Group, a senior account executive of CCG Elite Investor Relations. Ms. Zhang holds a
Bachelors degree in Economics (Quantitative Path) from University of California at Berkeley, US and
a specialized MBA from SDA Bocconi, Milan, Italy.
There are no family relationships between the above named officers and directors. Notwithstanding
that CTIG is our largest shareholder, we do not have any formal agreement or arrangement with CTIG
pursuant with respect to the nomination of directors to our board. All of our directors are
appointed and approved by resolutions passed in our board meetings and have been and will be
elected at our annual shareholders meeting. All candidates were nominated and recommended by the
Nominating Committee based on their experience and capability.
B. Compensation.
Except for Mr. Alan Li, the Chairman of our Board of Directors, who we paid HK$0.24 million in 2010
as allowance for his capacity as Chairman, we did not pay any cash compensation to our directors in
2010 in their capacity as directors.
The compensation for each member of senior management is principally comprised of base salary,
allowance, discretionary bonus and other fringe benefits. The compensation that we pay to our
senior management is evaluated on the basis of the following primary factors: our financial
results, individual performance, market rates and movements, as well as the individuals
anticipated contribution to our Company and its growth. The aggregate cash base salary, allowance
and bonus compensation which we paid to all members of senior management as a group was
approximately HK$4.11 million in 2010. The Mandatory Provident Fund, or MPF, that we paid to senior
management was HK$0.04 million in 2010. The monthly contribution to the MPF scheme is calculated on
the rules set out in the MPF Ordinance in Hong Kong, which is 5% of the relevant income of the
employee with a specific ceiling.
34
In 2010, we granted stock options covering an aggregate of 560,000 shares of common stock to the
following directors and executive officers as described as below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number |
|
Exercise |
|
|
|
|
|
|
Of |
|
Price |
|
|
Name |
|
Title/Office |
|
options |
|
Per option |
|
Expiration Date |
|
|
|
|
|
|
|
|
(US$) |
|
|
Alan Li
|
|
Chairman, Executive
Director and Chief
Executive Officer
|
|
|
120,000 |
|
|
|
2.50 |
|
|
December 15, 2015 (1) |
Zhenwei Lu
|
|
Executive Director
|
|
|
80,000 |
|
|
|
2.50 |
|
|
December 15, 2015 (1) |
Tairan Guo
|
|
Executive Director,
Chief Business
Development Officer and
Acting Chief Financial
Officer
|
|
|
80,000 |
|
|
|
2.50 |
|
|
December 15, 2015 (1) |
Xinping Shi
|
|
Independent Director
|
|
|
30,000 |
|
|
|
2.50 |
|
|
December 15, 2015 (1) |
Yezhong Ni
|
|
Independent Director
|
|
|
20,000 |
|
|
|
2.50 |
|
|
December 15, 2015 (1) |
Weidong Wang
|
|
Independent Director
|
|
|
20,000 |
|
|
|
2.50 |
|
|
December 15, 2015 (1) |
Loong Cheong Chang
|
|
Independent Director
|
|
|
30,000 |
|
|
|
2.50 |
|
|
December 15, 2015 (1) |
Yu Keung Poon
|
|
Independent Director
|
|
|
20,000 |
|
|
|
2.50 |
|
|
December 15, 2015 (1) |
Lin-Hsiang Liao
|
|
Chief Operating Officer
|
|
|
80,000 |
|
|
|
2.50 |
|
|
December 15, 2015 (1) |
Bruno Luis Diaz Herrera
|
|
Chief Technology Officer
|
|
|
80,000 |
|
|
|
2.50 |
|
|
December 15, 2015 (1) |
|
|
|
Notes: |
|
|
|
(1) |
|
These options were granted under our 2010 Stock Option Plan pursuant to a resolution of the
Compensation Committee passed on December 15, 2010. One-third of the options vest on December 15,
2011, one-third of the options vest on December 15, 2012, and the remaining one-third of the
options vest on December 15, 2013. |
We have no service contracts with any of our directors or executive officers that provide
additional benefits to them upon termination.
C. Board practices.
In 2010, our Board of Directors met in person or passed resolutions by written consent 13 times. No
director is entitled to any severance benefits upon termination of his directorship with us. Our
Board of Directors has concluded that Mr. Yu Keung Poon meets the criteria for an audit committee
financial expert as established by the US Securities and Exchange Commission, or SEC.
Board committees
Our Board of Directors has established an Audit Committee, a Compensation Committee and a
Nominating committee, which are solely comprised of independent directors.
Audit Committee. Mr. Loong Cheong Chang, Mr. Yu Keung Poon and Mr. Yezhong Ni have served as
members of our Audit Committee since March 2, 2007. According to our Audit Committee Charter, the
responsibilities of
35
the Audit Committee include the oversight of (1) the integrity of our financial
statements, (2) our compliance with legal and regulatory requirements, (3) the qualification,
appointment, compensation, retention and oversight of our independent auditors, including resolving
disagreements between management and the auditors regarding financial reporting and (4) the
performance of our independent auditors and of our internal control function. Each member of the
Audit Committee meets the independence requirements and standards established by Nasdaq rules and
SEC regulations.
The Audit Committee is given the resources and assistance necessary to discharge its
responsibilities, including appropriate funding as determined by the Audit Committee, unrestricted
access to our personnel, documents and independent auditors. The Audit Committee also has
authority, with notice to the Chairman of the Board, to engage outside legal, accounting and other
advisors as it deems necessary or appropriate.
The Audit Committee is required to meet at least two times a year and may call a special meeting as
required. All members of the Audit Committee are financially literate, which means having a basic
understanding of financial controls and reporting, and none of them receive, directly or
indirectly, any compensation from our company other than his or her directors fee and benefits.
Compensation Committee. Dr. Xinping Shi, Mr. Weidong Wang and Mr. Yu Keung Poon serve as members of
the Compensation Committee. The Compensation Committee makes recommendations to the Board of
Directors concerning salaries and incentive compensation for our officers, including our Chief
Executive Officer and Chief Financial Officer, directors and employees and administers our stock
option plans. Each member of the Compensation Committee meets the independence requirements and
standards established by Nasdaq rules and SEC regulations.
Nominating Committee. Dr. Xinping Shi, Mr. Loong Cheong Chang and Mr. Weidong Wang serve as members
of the Nominating Committee. The purpose of the Nominating Committee is to assist the Board of
Directors in identifying qualified individuals to become board members, consultants and officers of
our company, in determining the composition of the Board of Directors and in monitoring a process
to assess Board effectiveness. Each member of the Nominating Committee meets the independence
requirements and standards established by Nasdaq rules and SEC regulations.
The charters of the above-mentioned committees are available on our website: www.chinactdc.com.
Term of directors and executive officers
According to our Articles of Association, one-third of our directors retire from office by rotation
at each annual meeting of shareholders, provided that every director is subject to retirement at
least once every three years. A retiring director is eligible for re-election and will continue to
act as a director throughout the meeting at which he retires.
Our executive officers are elected and appointed by resolution of directors and may be removed at
any time, with or without cause, by a resolution of directors.
D. Employees.
As of December 31 of the respective past three years, we had full-time employees, classified by
function as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010 |
|
2009 |
|
2008 |
Corporate administration |
|
|
27 |
|
|
|
14 |
|
|
|
16 |
|
Finance and accounting |
|
|
9 |
|
|
|
7 |
|
|
|
9 |
|
Technology and engineering |
|
|
11 |
|
|
|
9 |
|
|
|
6 |
|
Sales and services |
|
|
8 |
|
|
|
0 |
|
|
|
4 |
|
Manufacturing |
|
|
178 |
|
|
|
5 |
|
|
|
34 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
233 |
|
|
|
35 |
|
|
|
69 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
36
Compared to the number of employees in 2009, the substantial increase in the number of employees as
of December 31, 2010 was mainly due to acquisition of Linsun Renewable Energy Corporation Limited
and the addition of working force in our factories.
We do not have any collective bargaining agreements with our employees. None of our employees is
represented by a labor union. We have never experienced any material labor disruptions and are
unaware of any current efforts or plans to organize employees. We believe we maintain a good
working relationship with our employees. From time to time, we also employ part-time employees and
independent contractors to support our manufacturing, research and development and sales and
marketing activities. We plan to hire additional employees for manufacturing and engineering as we
expand our solar business.
E. Share ownership.
To our knowledge, except Mr. Lin-Hsiang Liao, our Chief Operating Officer, none of other executive
officers or directors owns shares of our common stock as of the date of this Annual Report. The
names and titles of our executive officers and directors to whom we have granted stock options
which are vested and outstanding as of the date of this Annual Report and exercisable within 60
days from the date hereof (except as noted) and the number of shares of our common stock subject to
such options are set forth in the following table:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number |
|
Exercise |
|
|
|
|
|
|
Of |
|
Price |
|
|
Name |
|
Title/Office |
|
options |
|
Per option |
|
Expiration Date |
|
|
|
|
|
|
|
|
(US$) |
|
|
Alan Li
|
|
Chairman, Executive
Director and Chief
Executive Officer
|
|
|
75,000
100,000
150,000
100,000
120,000
53,000
223,000
150,000
|
|
|
|
1.85
3.18
3.13
2.04
1.79
2.12
2.12
2.12
|
|
|
September 20, 2015 (1)
September 18, 2016 (2)
May 23, 2012 (3)
November 10, 2013 (4)
December 30, 2013 (5)
October 1, 2019 (6)
October 1, 2014(7)
October 1, 2014(8) |
Zhenwei Lu
|
|
Executive Director
|
|
|
40,000
60,000
80,000
80,000
80,000
80,000
|
|
|
|
1.85
3.18
3.13
2.04
1.79
2.12
|
|
|
September 20, 2015 (1)
September 18, 2016 (2) May 23, 2012(3) November 10, 2013 (4)
December 30, 2013 (5) October 1, 2014(8) |
Ju Zhang
|
|
Executive Director
|
|
|
10,000
10,000
10,000
10,000
|
|
|
|
1.85
3.18
2.04
1.79
|
|
|
September 20, 2015 (1)
September 18, 2016 (2) November 10, 2013 (4) December 30, 2013 (5) |
Tairan Guo
|
|
Executive Director,
Chief Business
Development Officer
and Acting Chief
Financial Officer
|
|
|
20,000
40,000
50,000
|
|
|
|
2.04
1.79
2.12
|
|
|
November 10, 2013 (4)
December 30, 2013 (5) October 1, 2014(8) |
Xinping Shi
|
|
Independent Director
|
|
|
10,000
30,000
22,800
50,000
40,000
|
|
|
|
3.18
3.13
2.04
1.79
2.12
|
|
|
September18, 2016 (2)
May 23, 2012 (3)
November 10, 2013 (4)
December 30, 2013 (5)
October 1, 2014(8) |
Yezhong Ni
|
|
Independent Director
|
|
|
10,000
10,000
10,000
20,000
40,000
30,000
|
|
|
|
1.85
3.18
3.13
2.04
1.79
2.12
|
|
|
September 20, 2015 (1)
September 18, 2016 (2)
May 23, 2012 (3)
November 10, 2013 (4)
December 30, 2013 (5)
October 1, 2014(8) |
Weidong Wang
|
|
Independent Director
|
|
|
10,000
10,000
10,000
20,000
40,000
30,000
|
|
|
|
1.85
3.18
3.13
2.04
1.79
2.12
|
|
|
September 20, 2015 (1)
September 18, 2016 (2)
May 23, 2012(3)
November 10, 2013 (4)
December 30, 2013 (5)
October 1, 2014(8) |
Loong Cheong Chang
|
|
Independent Director
|
|
|
30,000
30,000
50,000
60,000
|
|
|
|
3.13
2.04
1.79
2.12
|
|
|
May 23, 2012 (3)
November 10, 2013 (4) December 30, 2013 (5)
October 1, 2014(8) |
37
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number |
|
Exercise |
|
|
|
|
|
|
Of |
|
Price |
|
|
Name |
|
Title/Office |
|
options |
|
Per option |
|
Expiration Date |
|
|
|
|
|
|
|
|
(US$) |
|
|
Yu Keung Poon
|
|
Independent Director
|
|
|
20,000
20,000
40,000
30,000
|
|
|
|
3.13
2.04
1.79
2.12
|
|
|
May 23, 2012 (3)
November 10, 2013 (4)
December 30, 2013 (5)
October 1, 2014(8) |
|
|
|
Notes: |
|
|
|
(1) |
|
These options were granted under our 1996 Stock Option Plan and 2000 Stock Option Plan
pursuant to a board resolution passed on September 20, 2005 and are fully vested. |
|
(2) |
|
These options were granted under our 2005 Stock Option Plan pursuant to a board resolution
passed on September 18, 2006 and are fully vested. |
|
(3) |
|
These options were granted under our 2006 Stock Option Plan pursuant to a resolution of the
Compensation Committee passed on May 23, 2007 and are fully vested. |
|
(4) |
|
These options were granted under our 2007 Stock Option Plan pursuant to a resolution of the
Compensation Committee passed on November 10, 2008. One-third of such options vested on
November 10, 2009, one-third vest on November 10, 2010 and the remaining one-third vest on
November 10, 2011. |
|
(5) |
|
These options were granted under our 2008 Stock Option Plan pursuant to a resolution of the
Compensation Committee passed on December 30, 2008. One-third of such options vested on
December 30, 2009, one-third vest on December 30, 2010 and the remaining one-third vest on
December 30, 2011. |
|
(6) |
|
These options were granted under our 2000 Stock Option Plan and 2005 Stock Option Plan
pursuant to a resolution of the Compensation Committee passed on October 1, 2009 and are fully
vested. |
|
(7) |
|
These options were granted under our 2006 Stock Option Plan pursuant to a resolution of the
Compensation Committee passed on October 1, 2009. One-third of such options vested on October
1, 2010 and the remaining two-thirds vest on October 1, 2011. |
|
(8) |
|
These options were granted under our 2009 Stock Option Plan pursuant to a resolution of the
Compensation Committee passed on October 1, 2009. One-third of such options vested on October
1, 2010, one-third vest on October 1, 2011 and the remaining one-third vest on October 1,
2012. |
Stock Option Plans
Our stock option plans are designed to provide incentives to our employees (including our directors
and officers) and to our non-employee consultants and to offer an additional inducement in
obtaining the services of such individuals. Our stock option plans were approved by our
shareholders on the following dates:
|
|
|
Stock Option Plan |
|
Date of Shareholder Approval |
1996 Stock Option Plan, or the 1996 Plan
|
|
October 10, 1996 |
2000 Stock Option Plan, or the 2000 Plan
|
|
September 5, 2000 |
2005 Stock Option Plan, or the 2005 Plan
|
|
October 20, 2005 |
2006 Stock Option Plan, or the 2006 Plan
|
|
December 22, 2006 |
2007 Stock Option Plan, or the 2007 Plan
|
|
October 19, 2007 |
2008 Stock Option Plan, or the 2008 Plan
|
|
December 12, 2008 |
2009 Stock Option Plan, or the 2009 Plan
|
|
September 11, 2009 |
2010 Stock Option Plan, or the 2010 Plan
|
|
December 10, 2010 |
38
1996 Plan
Options to purchase an aggregate of 200,000 shares of common stock were granted under the 1996
Plan, and we will not issue additional options under the 1996 Plan. The 1996 Plan was filed as an
exhibit to our Registration Statement on Form F-1 (File No. 333-6082).
2000 Plan
Options to purchase an aggregate of 400,000 shares of common stock were granted under the 2000
Plan, and we will not issue additional options under the 2000 Plan. The 2000 Plan was filed as an
exhibit to our Registration Statement on Form S-8 (File No. 333-127423).
2005 Plan
Options to purchase an aggregate of 1,000,000 shares of common stock were granted under the 2005
Plan, and we will not issue additional options under the 2005 Plan. The 2005 Plan was filed as an
exhibit to our Registration Statement on Form S-8 (File No. 333-139608).
2006 Plan
Options to purchase an aggregate of 1,000,000 shares of common stock were granted under the 2006
Plan, and we will not issue additional options under the 2006 Plan. The 2006 Plan was filed as an
exhibit to our Registration Statement on Form S-8 (File No. 333-147806).
2007 Plan
Options to purchase an aggregate of 1,000,000 shares of common stock were granted under the 2007
Plan, and we will not issue additional options under the 2007 Plan. The 2007 Plan was filed as an
exhibit to our Registration Statement on Form S-8 (File No. 333-160837).
2008 Plan
Options to purchase an aggregate of 1,500,000 shares of common stock were granted under the 2008
Plan, and we will not issue additional options under the 2008 Plan. The 2008 Plan was filed as an
exhibit to our Registration Statement on Form S-8 (File No. 333-160837).
2009 Plan
Options to purchase an aggregate of 1,000,000 shares of common stock were granted under the 2009
Plan, and we will not issue additional options under the 2009 Plan. The 2009 Plan was filed as an
exhibit to our Registration Statement on Form S-8 (File No. 333-168021).
2010 Plan
Options to purchase an aggregate of 1,000,000 shares of common stock were granted under the 2010
Plan, and we will not issue additional options under the 2010 Plan. The 2010 Plan is substantially
similar to the 2009 Plan.
39
Item 7. Major Shareholders and Related Party Transactions
A. Major shareholders.
The following table sets forth, as of the date of this Annual Report, the beneficial ownership of
(i) all persons known to us to be beneficial owners of equal or more than five percent or more of
our common stock, (ii) our current officers and directors and (iii) our current officers and
director as a group.
|
|
|
|
|
|
|
|
|
|
|
Shares of common stock |
|
Percent of |
Principal Shareholder |
|
beneficially owned (1) |
|
class |
China Technology Investment Group Limited
(formerly known as China Biotech Holdings Limited), or CTIG
5/F, B&H Plaza, 27 Industry Ave
Shekou, Shenzhen 518067
PR China
|
|
|
4,132,168 |
|
|
|
18.37 |
% |
CMTF Private Equity One
48/F, One Exchange Square, Central,
Hong Kong SAR, China
|
|
|
3,322,260 |
|
|
|
14.77 |
% |
China Wanhe Investment Limited
Suite 2616, Jardine House,
1 Connaught Place, Central,
Hong Kong SAR, China
|
|
|
2,000,000 |
|
|
|
8.89 |
% |
Lin-Hsiang Liao
c/o Unit 1010-1011, 10/F, West Tower, Shun Tak Centre, 168-200 Connaught Road Central
Hong Kong
|
|
|
709,920 |
|
|
|
3.16 |
% |
Alan Li (2)
c/o Unit 1010-1011, 10/F, West Tower, Shun Tak Centre, 168-200 Connaught Road Central
Hong Kong
|
|
|
0 |
|
|
|
* |
|
Zhenwei Lu (2)
c/o Unit 1010-1011, 10/F, West Tower, Shun Tak Centre, 168-200 Connaught Road Central
Hong Kong
|
|
|
0 |
|
|
|
* |
|
Ju Zhang
c/o Unit 1010-1011, 10/F, West Tower, Shun Tak Centre, 168-200 Connaught Road Central
Hong Kong
|
|
|
0 |
|
|
|
* |
|
Tairan Guo
c/o Unit 1010-1011, 10/F, West Tower, Shun Tak Centre, 168-200 Connaught Road Central
Hong Kong
|
|
|
0 |
|
|
|
* |
|
Loong Cheong Chang
c/o Unit 1010-1011, 10/F, West Tower, Shun Tak Centre, 168-200 Connaught Road Central
Hong Kong
|
|
|
0 |
|
|
|
* |
|
Xinping Shi
c/o Unit 1010-1011, 10/F, West Tower, Shun Tak Centre, 168-200 Connaught Road Central
Hong Kong
|
|
|
0 |
|
|
|
* |
|
Yezhong Ni
c/o Unit 1010-1011, 10/F, West Tower, Shun Tak Centre, 168-200 Connaught Road Central
Hong Kong
|
|
|
0 |
|
|
|
* |
|
Weidong Wang
c/o Unit 1010-1011, 10/F, West Tower, Shun Tak Centre, 168-200 Connaught Road Central
Hong Kong
|
|
|
0 |
|
|
|
* |
|
Yu Keung Poon
c/o Unit 1010-1011, 10/F, West Tower, Shun Tak Centre, 168-200 Connaught Road Central
Hong Kong
|
|
|
0 |
|
|
|
* |
|
Bruno Luis Diaz Herrera
c/o Unit 1010-1011, 10/F, West Tower, Shun Tak Centre, 168-200 Connaught Road Central
Hong Kong
|
|
|
0 |
|
|
|
* |
|
Weining Zhang
c/o Unit 1010-1011, 10/F, West Tower, Shun Tak Centre, 168-200 Connaught Road Central
Hong Kong
|
|
|
0 |
|
|
|
* |
|
All officers and directors as a group (11 persons) (2) |
|
|
709,920 |
|
|
|
3.16 |
% |
|
|
|
* |
|
less than 1%. |
|
(1) |
|
Unless otherwise noted, all persons named have sole voting and investment power with respect
to all shares of common stock beneficially owned by them, excluding any stock options. For
details of stock options granted to the directors and officers please refer to Item 6.E Share
ownership. |
|
(2) |
|
Mr. Alan Li, Chairman of the Board, Executive Director and Chief Executive Officer, and Mr.
Zhenwei Lu, Executive Director and Chief Operating Officer, are also directors of CTIG and
therefore may be deemed to beneficially own the shares of common stock owned by CTIG. |
40
We have issued a total of 1,000,000 shares of Series A Preferred Stock, all of which are owned by
CTIG. The Series A Preferred Stock represents 25% of the combined voting power of our common stock
and preferred stock. The rights, preferences and privileges of the Series A Preferred Stock are as
follows:
|
|
|
Voting rights. The 1,000,000 shares of Series A Preferred Stock have an aggregate
voting power equal to 25% of the combined voting power of our common stock and
preferred stock. |
|
|
|
|
Dividends. Holders of Series A Preferred Stock are entitled to receive dividends
only as, when and if such dividends are declared by the Board of Directors. |
|
|
|
|
Liquidation preference. In the event of any distribution of assets upon any
liquidation, dissolution or winding up of our company, whether voluntary or
involuntary, after payment or provision for payments of our debts and other liabilities, holders of Series A Preferred Stock are entitled
to receive out of our assets an amount equal to the consideration paid by them for
each such share plus any accrued and unpaid dividends with respect to such shares of
Series A Preferred Stock through the date of such liquidation, dissolution or winding
up. |
|
|
|
|
Redemption. The Series A Preferred Stock is not redeemable. |
|
|
|
|
Convertible. The Series A Preferred Stock is not convertible. |
We are not aware of any arrangement that may, at a subsequent date, result in a change of control
of our Company. As of the date of this Annual Report, we have 22,498,549 issued and outstanding
shares of common stock.
The transactions with related parties for the period from January 1, 2010 up to the date of this
Annual Report were as follows:
|
|
|
|
|
|
|
Amounts in thousands |
|
|
|
Rmb |
|
Transactions with related parties |
|
|
|
|
Advance from Liao Lin-Hsiang (1) |
|
8,097 |
|
Repayment of deposit from CTIG for acquisition of production line (2) |
|
6,626 |
|
Service fee paid and payable pursuant to a service agreement signed with CTIG (3) |
|
2,548 |
|
Short term loan from Best Scene Management Limited (6) |
|
1,699 |
|
41
|
|
|
(1) |
|
On November 23, 2010, the Group acquired 100% of the outstanding shares of Linsun Renewable
Energy Corporation Limited (LSRHK) and its wholly-owned subsidiary Linsun Power Technology
(Quanzhou) Corp. Ltd. (LSPPRC). Prior to the acquisition, Liao Lin-Hsiang was holding 66.67%
of LSRHK. Liao Lin-Hsiang advanced Rmb8.10 million to LSPPRC before the acquisition. The
advance was for LSPPRCs working capital purposes and Rmb7.80 million has been repaid before
December 31, 2010. |
|
(2) |
|
In December 2009, we entered into an agency contract regarding the purchase of one a-Si thin
film solar panel production line (the Agency Contract) with CTIG. Pursuant to the Agency
Contract, we appointed CTIG as our representative to liaise and negotiate with an equipment
supplier to purchase one a-Si thin film solar panel production line, together with a license
for patents, proprietary technology, technical service and training. We paid USD1.0 million to
CTIG as a deposit for the purchase. On May 13, 2010, we amended the Agency Contract to extend
the delivery date for three additional months. On June 22, 2010, we terminated the Agency
Contract, as amended, with CTIG and the deposit was refunded in full to us upon termination.
As of the date of this Annual Report, our balances with related parties are as follows: |
|
|
|
|
|
|
|
Amounts in |
|
|
|
thousands |
|
|
|
Rmb |
|
Balances with related parties: |
|
|
|
|
Due from related parties |
|
|
|
|
Funds held by CTIG for potential acquisition
of technology and business in China (2 and 3) |
|
2,455 |
|
|
|
|
|
|
|
2,455 |
|
|
|
|
|
Due to related parties: |
|
|
|
|
Due to CTIG (4) |
|
853 |
|
Due to CMZDZ (5) |
|
8,085 |
|
Due to Liao Lin-Hsiang (1) |
|
300 |
|
Due to Best Scene Management Limited (6) |
|
1,699 |
|
|
|
|
|
|
|
10,937 |
|
|
|
|
|
|
|
|
(3) |
|
CTIG has been the largest shareholder of our company since January 12, 2007. In view of
CTIGs experience with acquisitions in China, we deposited HK$6 million with CTIG for the
purpose of making (with the assistance of CTIG) potential acquisitions of technology and
businesses in China. There is no agreement between our company and CTIG for the deposited funds and we can withdraw the funds without restriction at any time.
In 2010, CTIG assisted the Company to successfully acquire Linsun Group. In May 2011, the
Company entered into an agreement with CTIG to pay a service fee amounting HK$3 million to CTIG
for the successful acquisition of Linsun Group. |
|
(4) |
|
The amount represents administrative expenses paid on behalf of Faster and Shenzhen Helios
Energy by CTIG in China. |
|
(5) |
|
Prior to the acquisition of Faster Group in 2007, Faster Group had no business activities and
its major asset was a right to purchase a real estate located in the Tangyang Industrial Zone
of China Merchants Zhangzhou Development Zone, from China Merchants Zhangzhou Development Zone
Ltd., or CMZDZ, for a consideration of Rmb13,085, of which Rmb5,783 was borne by the Faster
Group and Rmb7,302 was committed to be settled by CTIG. China Merchant Group (CMG) is the
ultimate holding company of CTIG, and CMZDZ is a subsidiary of CMG. In 2008, the Group
received Rmb7,302 from CTIG and paid Rmb5,000 to CMZDZ. The remaining balance due to CMZDZ is
Rmb8,085. |
|
(6) |
|
On June 1, 2011, Southwick International Limited entered a loan agreement with Best Scene
Management Limited, which is under common control with the Company. The loan is interest free
and it would mature six months after payment of loan. The loan remains outstanding as of this
Annual Report date. |
All the balances with related parties are unsecured and interest-free, and have no fixed terms of
repayment.
42
C. Interests of experts and counsel.
Not Applicable.
Item 8. Financial Information
A. Consolidated Statements and Other Financial Information.
Our consolidated financial statements are included herein under Item 18.
Except for an interim dividend paid in 1997, we have not paid any dividends on our common stock.
The payment of dividends in the future, if any, is within the discretion of our Board of Directors
and will depend upon our earnings, capital requirements and financial condition and other relevant
factors. We do not anticipate declaring or paying any dividends in the foreseeable future.
To our knowledge, there is no litigation pending or threatened against us which would reasonably
expected to materially adversely impact our financial condition.
B. Significant Changes.
None.
Item 9. The Offer and Listing.
A. Offer and listing details.
Our authorized share capital is made up of two classes of shares: 4,000,000,000 shares of common
stock, US$0.01 par value; and 1,000,000,000 shares of preferred stock, US$0.01 par value. As of the
date of this Annual Report, 22,498,549 shares of common stock and 1,000,000 shares of Series A
Preferred Stock are issued and outstanding.
The high and low market prices of our common stock for the most recent five full financial years
are as follows:
|
|
|
|
|
|
|
|
|
Nasdaq Capital Market |
|
US$ |
(Year Ended) |
|
High |
|
Low |
December 31, 2010 |
|
|
3.83 |
|
|
|
1.71 |
|
December 31, 2009 |
|
|
4.78 |
|
|
|
1.36 |
|
December 31, 2008 |
|
|
9.45 |
|
|
|
1.19 |
|
December 31, 2007 |
|
|
10.39 |
|
|
|
2.71 |
|
December 31, 2006 |
|
|
12.15 |
|
|
|
1.34 |
|
The high and low market prices of our common stock for each financial quarter during the two most
recent full financial years and all subsequent quarters are as follows:
|
|
|
|
|
|
|
|
|
Nasdaq Capital Market |
|
US$ |
(Quarter Ended) |
|
High |
|
Low |
March 31, 2011 |
|
|
2.61 |
|
|
|
2.11 |
|
December 31, 2010 |
|
|
2.83 |
|
|
|
1.84 |
|
September 30, 2010 |
|
|
2.51 |
|
|
|
1.71 |
|
June 30, 2010 |
|
|
3.83 |
|
|
|
2.64 |
|
March 31, 2010 |
|
|
3.08 |
|
|
|
2.46 |
|
December 31, 2009 |
|
|
4.78 |
|
|
|
2.12 |
|
September 30, 2009 |
|
|
2.89 |
|
|
|
1.98 |
|
June 30, 2009 |
|
|
3.25 |
|
|
|
2.16 |
|
March 31, 2009 |
|
|
3.54 |
|
|
|
1.36 |
|
The high and low market prices of our common stock for the most recent six months are as follows:
|
|
|
|
|
|
|
|
|
Nasdaq Capital Market |
|
US$ |
(Month Ended) |
|
High |
|
Low |
May 31, 2011 |
|
|
1.99 |
|
|
|
1.80 |
|
April 30, 2011 |
|
|
2.15 |
|
|
|
1.94 |
|
March 31, 2011 |
|
|
2.30 |
|
|
|
2.11 |
|
February 28, 2011 |
|
|
2.38 |
|
|
|
2.18 |
|
January 31, 2011 |
|
|
2.61 |
|
|
|
2.16 |
|
December 31, 2010 |
|
|
2.81 |
|
|
|
2.04 |
|
43
B. Plan of Distribution.
Not Applicable
C. Markets.
Our common stock is listed on the Nasdaq Capital Market under the symbol CTDC. Our common stock is
not listed on any other public trading market.
D. Selling Shareholders.
Not Applicable.
E. Dilution.
Not Applicable.
F. Expenses of the issue.
Not Applicable.
Item 10. Additional Information.
A. Share capital.
Not Applicable.
B. Memorandum and articles of association.
Our company, formerly known as Tramford International Limited, has been registered in the British
Virgin Islands, or BVI, since September 19, 1995, under the British Virgin Islands International
Business Companies Act (CAP.291) with number 161076. Set forth below is a brief summary of certain
provisions of our amended and restated Memorandum and Articles of Association adopted by our
shareholders at our annual general meeting held on October 19, 2007. This summary does not purport
to be complete and is qualified in its entirety by reference to our Memorandum and Articles of
Association incorporated by reference as an exhibit to this Annual Report.
Objects and Powers
Regulation 4 of our Memorandum of Association states that the objects for which our company is
established are to engage in any businesses which are not prohibited by law in force in the British
Virgin Islands.
Directors
A director who is materially interested in any transaction with us shall declare the material facts
of and nature of his interest in good faith at the meeting of the Board of Directors. A director
may vote or be counted as the quorum on any resolution of the Board in respect of any transaction
in which he is materially interested.
With the prior or subsequent approval by a resolution of members, the directors may subject to the
determination of the Compensation Committee, by a resolution of directors, fix the emoluments of
directors with respect to services to be rendered in any capacity to us.
The directors may, by a resolution of directors, exercise all the powers of the Company to borrow
money and to mortgage or charge its undertakings and property on any part thereof, to issue
debentures, debenture stock and other securities.
There is no age limit requirement for retirement or non-retirement of directors. A director shall
not require a share qualification.
Share Rights, Preferences and Restrictions
Our authorized share capital is made up of two classes of shares divided into 4,000,000,000 shares
of common stock, US$0.01 par value, and 1,000,000,000 shares of preferred stock, US$0.01 par value.
Our Board of Directors is vested with the authority to authorize by resolution from time to time
the issuance of the preferred shares in one or more series and to prescribe the number of preferred
shares within each such series and the voting powers, designations, preferences, limitations,
restrictions and relative rights of each such series.
44
Rights, preferences and restrictions attaching to common stock
No dividend shall be declared and paid unless our directors determine that immediately after the
payment of the dividend our company will be able to satisfy its liabilities as they become due in
the ordinary course of its business and the realizable value of the assets of our company will not
be less than the sum of its total liabilities and its capital. All dividends unclaimed for three
years after having been declared may be forfeited by resolution of the directors for the benefit of
our company.
All common shares vote as one class and each whole share has one vote. We may redeem, purchase or
acquire any of our own shares for such fair value as we by a resolution of directors determine, but
only out of surplus or in exchange for newly issued shares of equal value. All common shares have
the same rights with regard to dividends and distributions upon our liquidation.
Rights, preferences and restrictions attaching to Series A Preferred Stock
Pursuant to the authority conferred on the Board of Directors by the Memorandum of Association, we
have established and created a series of 1,000,000 shares of preferred stock, par value $0.01 per
share, designated as Series A Preferred Stock.
The holders of the Series A Preferred Stock shall be entitled to receive dividends only as, when
and if such dividends are declared by the Board of Directors with respect to shares of Preferred
Stock.
As to payment of dividends and as to distribution of assets upon liquidation, dissolution or
winding up of our company, all share of Series A Preferred Stock shall rank prior to all common
stock, par value $0.01 per share.
The 1,000,000 shares of Series A Preferred Stock shall have an aggregate voting power of 25% of the
combined voting power of our entire shares, including common stock and preferred stock.
In the event of any distribution of assets upon any liquidation, dissolution or winding-up, the
holder of the outstanding preferred stock shall be entitled to receive an amount equal to the
consideration paid by him for such shares plus any accrued and unpaid dividends, before any
payments or distributions are made to any other equity security of our company.
We have no right to redeem such Series A Preferred Stock.
Changing Share Rights
The rights of each class and series of shares that we are authorized to issue shall be fixed by the
resolution of directors. If the authorized capital is divided into different classes, the rights
attached to any class or series may be varied with the consent in writing of the holders of not
less than three-fourths of the issued shares of that class or series and of the holders of not less
than three-fourths of the issued shares of any other class or series which may be affected by such
variation.
Shareholder Meetings
Upon the written request of shareholders holding 20 percent or more of our outstanding voting
shares the directors shall convene a meeting of shareholders.
The directors shall convene an annual meeting of our shareholders for the election of directors and
such other matters at such times and in such manner and places as the directors consider necessary
or desirable.
At least 21 days notice of shareholder meetings shall be given to the members whose name appears
on the share register and who are entitled to vote at the meetings.
A shareholder meeting will be deemed duly constituted if there are present in person or by proxy
the holders of not less than one-third of the votes of the shares entitled to vote at the meeting.
Restrictions on Rights to Own Securities
There are no limitations on the rights to own our securities.
Change in Control Provisions
There are no provisions of our Memorandum of Association and Articles of Association that would
have an effect of delaying, deferring or preventing a change in our control and that would have
operated only with respect to a merger, acquisition or corporate restructuring involving us.
45
Disclosure of Share Ownership
There are no provisions governing the ownership threshold above which shareholder ownership must be
disclosed.
Applicable Law
Under the laws of most jurisdictions in the US, majority and controlling shareholders generally
have certain fiduciary responsibilities to the minority shareholders. Shareholder action must be
taken in good faith and actions by controlling shareholders which are obviously unreasonable may be
declared null and void. BVI law protecting the interests of minority shareholders may not be as
protective in all circumstances as the law protecting minority shareholders in US jurisdictions.
While BVI law does permit a shareholder of a BVI company to sue its directors derivatively, that
is, in the name of and for the benefit of our company, and to sue a company and its directors for
his benefit and for the benefit of others similarly situated, the circumstances in which any such
action may be brought, and the procedures and defenses that may be available in respect of any such action, may result in the rights of shareholders of a BVI
company being more limited than those of shareholders of a company organized in the US.
Our directors have the power to take certain actions without shareholder approval, including an
issue of our shares or an appointment of an independent registered accounting firm, which would
require shareholder approval under the laws of most US jurisdictions. In addition, the directors of
a BVI corporation, subject in certain cases to court approval but without shareholder approval,
may, among other things, implement a reorganization, certain mergers or consolidations, the sale,
transfer, exchange or disposition of any assets, property, part of the business, or securities of
the corporation, or any combination, if they determine it is in the best interests of our company,
its creditors, or its shareholders.
The International Business Companies Act of the British Virgin Islands permits shareholder approval
of corporate matters by written consent and the issuance of preferred shares. Currently, our
Memorandum and Articles of Association provide for shareholder approval of corporate matters by
written consent and the issuance of preferred shares. Our Board of Directors is vested with the
authority to authorize the issuance of the preferred shares in one or more series and to prescribe
the voting powers, designations, preferences and restrictions of each series of preferred stock.
Such ability could have the effect of delaying, deterring or preventing a change in our control
without any further action by the shareholders.
As in most US jurisdictions, the board of directors of a BVI corporation is charged with the
management of the affairs of the corporation. In most US jurisdictions, directors owe a fiduciary
duty to the corporation and its shareholders, including a duty of care, under which directors must
properly apprise themselves of all reasonably available information, and a duty of loyalty, under
which they must protect the interests of the corporation and refrain from conduct that injures the
corporation or its shareholders or that deprives the corporation or its shareholders of any profit
or advantage. Many US jurisdictions have enacted various statutory provisions which permit the
monetary liability of directors to be eliminated or limited. Under BVI law, liability of a
corporate director to the corporation is primarily limited to cases of willful malfeasance in the
performance of his duties or to cases where the director has not acted honestly and in good faith
and with a view to the best interests of the corporation. However, under our Articles of
Association, we are authorized to indemnify any director or officer who is made or threatened to be
made a party to a legal or administrative proceeding by virtue of being one of our directors or
officers, provided such person acted honestly and in good faith and with a view to our best
interests and, in the case of a criminal proceeding, such person had no reasonable cause to believe
that his conduct was unlawful. Our Articles of Association also enable us to indemnify any director
or officer who was successful in such a proceeding against expense and judgments, fines and amounts
paid in settlement and reasonably incurred in connection with the proceeding.
The above description of certain differences between BVI and US corporate laws is only a summary
and does not purport to be complete or to address every applicable aspect of such laws. However, we
believe that all material differences are disclosed above.
Changes in Capital
The authorized capital of our company may by an ordinary resolution of our shareholders be
increased or reduced. In respect of any unissued shares we may increase or reduce the number of
such shares, increase or reduce the par value of any such shares or effect any combination of the
foregoing by an ordinary resolution of shareholders.
46
Nasdaq Requirements
Our common shares are currently listed on the Nasdaq Capital Market and, for so long as our
securities continue to be listed, we will remain subject to the rules and regulations established
by Nasdaq as being applicable to listed companies. Nasdaq has adopted its Rule 5600 Series to
impose various corporate governance requirements on listed securities. Rule 5615 provides that
foreign private issuers such as our company are required to comply with certain specific
requirements of the Rule 5600 Series, but, as to the balance of the Rule 5600 Series, foreign
private issuers are not required to comply if the laws of their home country do not otherwise
require compliance.
We currently comply with the specifically mandated provisions of the Rule 5600 Series. In addition,
we have elected to voluntarily comply with certain other requirements of the Rule 5600 Series,
notwithstanding that our home country does not mandate compliance; although we may in the future
determine to cease voluntary compliance with those provisions of the Rule 5600 Series. However, we
have determined not to comply with the following provisions of the Rule 5600 Series since the laws
of the British Virgin Islands do not require compliance:
|
|
|
our independent directors do not hold regularly scheduled meetings in executive
session; |
|
|
|
|
the compensation of our executive officers is not determined by an independent
committee of the board or by the independent members of the board of directors, and our
CEO may be present and participate in the deliberations concerning his compensation; |
|
|
|
|
related party transactions are not required to be reviewed or approved by our audit
committee or other independent body of the board of directors; and |
|
|
|
|
we are not required to solicit shareholder approval of stock plans, including those in
which our officers or directors may participate; stock issuances that will result in a
change in control; the issuance of our stock in related party transactions or other
transactions in which we may issue 20% or more of our outstanding shares; or, below market
issuances of 20% or more of our outstanding shares to any person. |
We may in the future determine to voluntarily comply with one or more of the foregoing provisions
of the Rule 5600 Series.
C. Material contracts.
The following material contracts, except contracts entered into in the ordinary course of business,
have been entered into by us or our subsidiaries within the two years preceding the filing date of
this Annual Report:
On September 23, 2008, we entered into a Securities Purchase Agreement with certain institutional
investors, or Buyers, for a private placement transaction, and the deal was closed on September 26,
2008. Pursuant to the Securities Purchase Agreement, we sold to the Buyers (i) 498,338 shares of
our common stock for a purchase price of $3.01 per share; (ii) Series A Warrants to purchase
249,170 shares of our common stock at an exercise price of $6.00 per share exercisable within five
years after the closing date; and (iii) Series B Warrants to purchase 1,277,136 shares of our
common stock exercisable upon incurrence of a price reset protection clause and dilutive subsequent
issuance. Pursuant to the amendments to the Securities Purchase Agreement, the Buyers also have the
option to acquire up to an additional 498,338 shares of common stock, additional Series A Warrants
to purchase an aggregate amount of up to 249,170 and Series B Warrants to purchase an aggregate
amount of up to 1,277,136 until June 23, 2009. As of the date of this Annual Report, some of the
Buyers acquired 60,000 additional shares of our common stock, Series A Warrants to purchase up to
30,000 additional shares of common stock and Series B Warrants to purchase up to 60,000 additional
shares of our common stock upon incurrence of a price reset protection and dilutive subsequent
issuance. The exercise price of Series A Warrants has been adjusted and amended to US$3.00 with
effect from September 26, 2010, in accordance with the reset mechanism as set forth therein. The
Securities Purchase Agreement, the form of Series A Warrants and the form of Series B Warrants were
filed with SEC as Exhibit 99.2, Exhibit 99.3 and Exhibit 99.4 to our report on Form 6-K on
September 24, 2008 (File No. 000-29008).
On April 28, 2009, we and two of our subsidiaries, China Green Industry Group Ltd. and China Green
Holdings Ltd., or CGHL, entered into a Subscription Agreement with CMTF Private Equity One, or
Subscriber. Pursuant to the Subscription Agreement, CGHL issued to the Subscriber a convertible
note with principal amount of US$10.0 million with a three-year maturity and an interest rate equal
to Hong Kong Prime Rate. We guaranteed the obligations of CGHL under the convertible note. The
convertible note was, at the holders option, either convertible into the outstanding ordinary
shares of the CGHL or exchangeable for shares of our common stock. The Subscription Agreement and
other relevant transaction documents was filed with the SEC as exhibits to our report on Form 6-K
dated May 4, 2009 (File No. 000-29008). In November 2009, CMTF Private Equity One exchanged the
entire principal amount of the Convertible Note for 3,322,260 shares of our common stock. Such
shares have been registered with the SEC with effect from October 20, 2010 with our registration
statement on Form F-3 dated September 30, 2010 (File No. 333-169665).
47
On October 27, 2009, we entered into a Stock Purchase Agreement with China Technology Solar Power
Holdings Limited, or CTSPHL Group, and its direct and indirect shareholders to acquire a 51% equity
interest in CTSPHL Group in consideration of (i) a cash advance in amount of US$3.0 million; (ii) a
number of shares of our common stock to be issued at the closing of acquisition; and (iii) a
convertible note with a principal amount equal to US$4.18 million to be issued at the second
closing of acquisition. CTSPHL Group, through its wholly-owned subsidiary, is developing a 100
megawatt grid-connected solar power plant project located in Delingha City of Qaidam Basin in
Qinghai Province, Northwestern China. Upon execution of the stock purchase agreement, we paid
US$3.0 million in cash to Good Million Investments Ltd., the direct shareholder of CTSPHL Group, as
a prepayment for the transaction to be solely used for developing and constructing the solar power
plant. Due to the fact that the Chinese government has not determined the specific subsidies and
incentives for on-grid solar energy applications for Qinghai Province, we encountered difficulties
in determining the fair value of the solar power plant. As a result, on October 11, 2010, we
entered into an agreement with CTSPHL to terminate the stock purchase agreement. Pursuant to this
agreement and subsequent amendments, the cash advance will be repaid to us in instalments. As the
date of this Annual Report, the Company has received the first instalment settlement of US$1.0
million. The remaining balance of US$2.0 million will be repaid on or before August 31, 2011. The above-mentioned agreements and amendments thereto were filed with the SEC as exhibits
to our reports on Form 6-K (File No. 000-29008).
On December 15, 2009, we entered into an Agency Contract with CTIG, pursuant to which we appointed
CTIG as our representative to liaise and negotiate with an equipment supplier regarding the
purchase of one a-Si thin film solar panel production line, together with a license covering
related patents, proprietary technology, technical service and training. We paid US$1 million to
CTIG as a deposit for the purchase. On May 13, 2010, the parties amended the Agency Contract to
extend the delivery date for three additional months. On June 22, 2010, we terminated the Agency
Contract, as amended, with CTIG and the deposit was refunded in full to us upon termination. A
translation of the Agency Contract is filed with the SEC as exhibit to our annual report on Form
20-F dated June 30, 2010.
On April 28, 2010, we entered into a Cooperation Framework Agreement with Xintang Media Technology
(Beijing) Limited, or Xintang, its shareholders and associated companies, pursuant to which we
intended to acquire Xintang indirectly in consideration of (i) US$5 million in cash as advance
payment; (ii) shares of our common stock at a price US$3.01 per share (the Consideration Shares);
and (iii) warrants to purchase our common stock at an exercise price US$3.50 per share (the
Consideration Warrants). Xintang is a Chinese company and conducts advertising and media business
in China. We paid over Renminbi ten million to Xintang and its shareholders. The completion of this
acquisition was contingent upon the satisfaction of a number of conditions, including a fair value
determination by an international independent appraiser, completion of restructuring of the target
companies, execution of advertising and media business cooperation arrangements between Xintang and
Xinhua News Agency and approval from our shareholders in a general meeting. Since the aforesaid
conditions precedent have not been satisfied, the parties decided not to proceed with the
transaction and to terminate the cooperation framework agreement. We are discussing with Xintang
about the details regarding the termination. A translation of the Cooperation Framework Agreement
was filed with the SEC as exhibit to our report on Form 6-K dated April 29, 2010 (File No.
000-29008).
On April 28, 2010, we entered into a Subscription Agreement with China Wanhe Investment Limited in
connection with a private placement transaction, pursuant to which we agreed to issue and sell
2,000,000 shares of the our common stock at a price of US$3.01 per share. The transaction was
completed on May 6, 2010 and we received US$6.02 million of gross proceeds, which we used as
working capital for our operations. A translation of the Subscription Agreement was filed with the
SEC as exhibit to our report on Form 6-K dated April 29, 2010 (File No. 000-29008). The 2,000,000
shares have been registered with the SEC with effect from October 20, 2010 with our registration
statement on Form F-3 dated September 30, 2010 (File No. 333-169665).
On November 5, 2010, we, together with China Green Holdings Limited, one of our wholly-owned
subsidiaries, entered into a stock purchase agreement with Linsun Renewable Energy Corporation
Limited and its stockholders, pursuant to which we purchased and acquired 100% of the outstanding
shares of Linsun Renewable Energy Corporation Limited from its stockholders in consideration of
1,064,827 shares of our common stock. The acquisition was consummated on November 23, 2010. Linsun
Renewable Energy Corporation Limited has become one of our wholly-owned subsidiaries and, through
its wholly-owned subsidiary Linsun Power Technology (Quanzhou) Corp. Ltd., been manufacturing and
selling crystalline PV modules. The execution copy of the stock purchase agreement was filed with
the SEC as an exhibit to our report on Form 6-K dated November 8, 2010 (File No. 000-29008).
48
D. Exchange controls.
Chinas government imposes control over the convertibility of Rmb into foreign currencies. Under
the current unified floating exchange rate system, the Peoples Bank of China publishes a daily
exchange rate for Rmb, or the PBOC Exchange Rate, based on the previous days dealings in the
inter-bank foreign exchange market. Financial institutions authorized to deal in foreign currency
may enter into foreign exchange transactions at exchange rates within an authorized range above or
below the PBOC Exchange Rate according to market conditions.
Pursuant to the Foreign Currency Administration Rules promulgated in 1996 and amended in 1997 and
2008 and various regulations issued by State Administration of Foreign Exchange, or SAFE, and other
relevant PRC government authorities, the Renminbi is freely convertible for routine current-account
foreign exchange transactions, including trade-related receipts and payments, interests and
dividends. An enterprise can choose to either keep or sell its foreign exchange income under the
current account to financial institutions authorized to engage in foreign exchange settlement or
sales business. Capital account items, such as direct equity investments, loans and repatriation of
investment, require the prior approval from the PRC Ministry of Commerce, the SAFE or its local
counterpart and the PRC National Development and Reform Commission, or the NDRC for conversion of
Renminbi into a foreign currency, such as U.S. dollars, and remittance of the foreign currency
outside the PRC.
Pursuant to the above-mentioned administrative rules, foreign investment enterprises are required
to apply to SAFE for foreign exchange registration certificates for foreign investment
enterprises. With such foreign exchange registration certificates (which are granted to foreign
investment enterprises, upon fulfilling specified conditions and which are subject to review and
renewal by SAFE on an annual basis) or with the foreign exchange sales notices from the SAFE (which
are obtained on a transaction-by-transaction basis), foreign-invested enterprises may enter into
foreign exchange transactions at banks authorized to conduct foreign exchange business to obtain
foreign exchange for their needs.
E. Taxation.
The following discussion is a summary of certain anticipated British Virgin Islands and U.S. tax
consequences of an investment in our common stock. The discussion does not deal with all possible
tax consequences relating to an investment in our common stock and does not purport to deal with
the tax consequences applicable to all categories of investors, some of which (such as dealers in
securities, insurance companies and tax-exempt entities) may be subject to special rules. In
particular, the discussion does not address the tax consequences under state, local and other
national (e.g., non-British Virgin Island) tax laws. Accordingly, each prospective investor should
consult its own tax advisor regarding the particular tax consequences to it of an investment in our
common stock. The following discussion is based upon laws and relevant interpretations there of in
effect as of the date of this Annual Report, all of which are subject to change.
British Virgin Islands Taxation.
Under the International Business Companies Act of the British Virgin Islands as currently in
effect, a holder of common stock who is not a resident of the British Virgin Islands is exempt from
British Virgin Islands income tax on dividends paid with respect to the common stock and all
holders of common stock are not liable to British Virgin Islands income tax on gains realized
during the year on sale or disposal of such shares. The British Virgin Islands does not impose a
withholding tax on dividends paid by companies incorporated under the International Business
Companies Act.
There are no capital gains, gift or inheritance taxes levied by the British Virgin Islands on
companies incorporated under the International Business Companies Act. In addition, the common
stock is not subject to transfer taxes, stamp duties or similar charges.
There is no income tax treaty or convention currently in effect between the United States and the
British Virgin Islands.
United States Federal Income Taxation
U.S. Holders
This summary describes certain material U.S. federal income tax consequences for a U.S. Holder (as
defined below) of acquiring, owning and disposing of our common stock. This summary applies only to
a U.S. Holder that will hold our common stock as capital assets for tax purposes. This summary does
not apply to a U.S. Holder subject to special rules, such as:
|
|
|
certain financial institutions; |
|
|
|
|
insurance companies; |
|
|
|
|
brokers or dealers; |
|
|
|
|
U.S. expatriates; |
|
|
|
|
traders that elect to mark-to-market; |
|
|
|
|
tax-exempt entities; |
|
|
|
|
persons liable for alternative minimum tax; |
|
|
|
|
persons holding our common stock as part of a straddle, hedging, conversion or integrated transaction; |
|
|
|
|
persons whose functional currency is not the U.S. dollar; |
|
|
|
|
persons that actually or constructively own 10% or more of our voting stock; or |
|
|
|
|
persons holding common shares through partnerships or other entities treated as partnerships for U.S. federal income tax purposes. |
49
This summary is based on the United States Internal Revenue Code of 1986, as amended, or the Code,
its legislative history, existing and proposed regulations promulgated thereunder, published
rulings and court decisions, all as currently in effect. These laws are subject to change, possibly
on a retroactive basis. Accordingly, holders and prospective purchasers should consult their own
tax advisors concerning the U.S. federal, state, local and other national tax consequences of
purchasing, owning and disposing of common stock in light of their particular circumstances.
For purposes of this summary, a U.S. Holder is a beneficial owner of a share of common stock
that is:
|
|
|
a citizen or resident of the United States, including an alien individual who is a
lawful permanent resident of the United States or who meets the substantial presence
residency test under U.S. federal income tax laws; |
|
|
|
|
a corporation (or other entity taxable as a corporation for U.S. federal income tax
purposes) organized under the laws of the United States, any state in the United States or
the District of Columbia, unless otherwise provided by Treasury Regulations; |
|
|
|
|
an estate whose income is subject to U.S. Federal income taxation regardless of its
source; or |
|
|
|
|
a trust that (1) is subject to the primary supervision of a court within the United
States and one or more U.S. persons have the authority to control all substantial
decisions of the trust or (2) was in existence on August 20, 1996, was treated as a U.S.
person under the Internal Revenue Code on the previous day and has a valid election in
effect under applicable U.S. Treasury regulations to be treated as a U.S. person. |
This summary also assumes that we will not be treated as a controlled foreign corporation. Under
the Code, a controlled foreign corporation generally means any foreign corporation if, on any day
during its taxable year, more than 50% of either the total combined voting power of all classes of
stock of the corporation entitled to vote, or the total value of the stock of the corporation, is
owned, directly, indirectly or by attribution, by U.S. persons who each, in turn, own directly,
indirectly or by attribution, 10% or more of the total combined voting power of all classes of
stock of the corporation entitled to vote. If you are a partner in a partnership or other entity
taxable as a partnership that holds common shares, your tax treatment generally will depend on your
status and the activities of the partnership. If you are a partner or a partnership holding common
stock, you should consult your own tax advisors.
This discussion does not contain a detailed description of all the U.S. federal income tax
consequences to you in light of your particular circumstances and does not address the effects of
any state, local or non-U.S. tax laws.
Taxation of Dividends and Other Distributions on our Common Stock
In general, and subject to the discussion below under Passive Foreign Investment Company,
distributions paid with respect to our common stock to the extent of our current and accumulated
earnings and profits as determined under U.S. federal income tax principles, or Taxable Dividends,
will be taxed as ordinary income at the time of the receipt of such amounts by the U.S. Holder.
Taxable Dividends will be foreign source income and will not be eligible for the dividends-received
deduction available to domestic corporations. To the extent amounts paid as distributions on common
stock exceed our current and accumulated earnings and profits, these amounts will not be Taxable
Dividends but instead will be treated first as a tax-free return of capital reducing the U.S.
Holders basis in our common stock until such basis is reduced to zero, and then as gain from the
sale of the U.S. holders common shares. This reduction in a U.S. Holders basis in our common
stock would increase any capital gain, or reduce any capital loss, realized by the U.S. Holder upon
the subsequent sale, redemption or other taxable disposition of our common stock.
Under U.S. tax rules, distributions from foreign corporations are eligible for a reduced tax rate
if the distributions are received with respect to stock that is readily tradable on an established
securities market in the United States. Accordingly, provided that these rules are satisfied,
dividends paid to an individual U.S. Holder will be taxed at a maximum rate of 15% (through 2010),
provided that the shares with respect to which such dividends are paid are held by the individual
U.S. Holder for more than 60 days during the 121-day period beginning 60 days before the date that
the relevant share becomes ex-dividend with respect to such dividend. Under current law, the
preferential rate on qualified dividend income will expire for taxable years beginning after
December 31, 2010. However, there have been legislative proposals to extend the preferential
treatment of qualified dividend income for taxable years beginning after December 31, 2010.
Dividends that are not eligible for the treatment described above (including dividends received
when we are a passive foreign investment company, as described below) generally will be taxable to
U.S. Holders as ordinary income, and the special tax consequences described below may apply to such
dividends. You should consult your own tax advisor regarding the availability of the reduced
dividend rate in light of your own particular circumstances.
If we make a distribution in a currency other than U.S. dollars, you will be considered to receive
the U.S. dollar value of the distribution determined at the spot U.S. dollar rate for the foreign
currency on the date such distribution is received by you regardless of whether you convert the
distribution into U.S. dollars. Any gain or loss resulting from currency exchange fluctuations
during the period from the date the dividend payment is
50
includible in your income to the date you
convert the distribution into U.S. dollars will be treated as ordinary income or loss from U.S.
sources.
Sale, Exchange or Other Disposition of Common Stock
Subject to the discussion below under Passive Foreign Investment Company, upon a sale, exchange,
or other taxable disposition of common stock, a U.S. Holder will generally recognize capital gain
or loss for U.S. federal income tax purposes in an amount equal to the difference between (1) the sum of the amount of cash and the
fair market value of any property received and (2) the U.S. Holders adjusted tax basis in our
common stock that are disposed of. Such gain or loss generally will be long-term capital gain or
loss if the U.S. Holder has held our common stock for more than one year at the time of
disposition. Net long-term capital gain recognized by an individual U.S. Holder is generally
subject to taxation at lower rates than short-term capital gain or ordinary income. The
deductibility of capital losses is subject to limitations. Any gain generally will be treated as
U.S. source income.
Passive Foreign Investment Company
Based on our current income and assets, we do not believe that for our taxable year ended December
31, 2010, we should be classified as a passive foreign investment company, or PFIC, for U.S.
federal income tax purposes. We do not expect to be a PFIC in the future although there can be no
assurance in that regard.
In general, a non-U.S. corporation is considered a PFIC for U.S. federal income tax purposes if either:
|
|
at least 75% of its gross income is passive income (the income test) ; or |
|
|
|
at least 50% of the value of its assets (based on an average of the
quarterly values of the assets during a taxable year) is attributable to
assets that produce or are held for the production of passive income (the
asset test). |
For this purpose, passive income generally includes dividends, interest, royalties and rents (other
than royalties and rents derived in the active conduct of a trade or business and not derived from
a related person), and cash is categorized as a passive asset. We will be treated as owning our
proportionate share of the assets and earning our proportionate share of the income of any other
corporation in which we own, directly or indirectly, at least 25% (by value) of the shares.
We must make a separate determination each year as to whether we are a PFIC. As a result, our PFIC
status may change. In particular, because the total value of our assets for purposes of the asset
test generally will be calculated using the market price of our common stock, our PFIC status will
depend in large part on the market price of our common stock which may fluctuate considerably.
Accordingly, fluctuations in the market price of our common stock may result in our being a PFIC
for any year. In addition, the composition of our income and assets is affected by how, and how
quickly, we spend the cash we raise in any offering. If we are a PFIC for our taxable year ended
December 31, 2010 or any other year during which you hold our common stock, we will continue to be
treated as a PFIC for all succeeding years during which you hold our common stock.
If you are a U.S. holder, in the event we are a PFIC for any taxable year during which you hold our
common stock, you will be subject to special tax rules with respect to any excess distribution
that you receive and any gain you realize from a sale or other disposition (including a pledge) of
our common stock, unless you make a mark-to-market election as discussed below. Distributions you
receive in a taxable year that are greater than 125% of the average annual distributions you
received during the shorter of the three preceding taxable years or your holding period for our
common stock will be treated as an excess distribution. Under these special tax rules:
|
|
the excess distribution or gain will be allocated ratably over your holding period for our common stock |
|
|
|
the amount allocated to the current taxable year, and any taxable year prior to the first taxable year in which we
became a PFIC, will be treated as ordinary income; |
|
|
|
the amount allocated to each other taxable year will be subject to the highest tax rate in effect for that taxable year
and interest charge generally applicable to underpayments of tax will be imposed on the resulting tax attributable to
each such taxable year; and |
|
|
|
the total gain realized by you upon the sale or other disposition of the common stock will also be considered an excess
distribution and will be subject to tax as described above. |
The tax liability for amounts allocated to years prior to the year of disposition or excess
distribution cannot be offset by any net operating losses for such years, and gains (but not
losses) realized on the sale of our common stock cannot be treated as capital gains, even if you
hold our common stock as capital assets.
Alternatively, a U.S. Holder of marketable stock (as defined below) in a PFIC may make a
mark-to-market election for such stock of a PFIC to elect out of the tax treatment discussed in the
two preceding paragraphs. If you make a mark-to-market election for our common stock, you will
include in income each year an amount equal to the excess, if any, of the fair market value of our
common stock as of the close of your taxable year over your adjusted basis in such common stock.
You are allowed a deduction for the excess, if any, of the adjusted basis of our common stock over
their fair market value as of the close of the taxable year. However, deductions are
51
allowable only to the extent of any net mark-to-market gains on our common stock included in your income for prior
taxable years. Amounts included in your income under a mark-to-market election, as well as gain on
the actual sale or other disposition of our common stock, are treated as ordinary income. Ordinary
loss treatment also applies to the deductible portion of any mark-to-market loss on our common
stock, as well as to any loss realized on the actual sale or disposition of our common stock, but
only to the extent that the amount of such loss does not exceed the net mark-to-market gains
previously included for such common shares. Your basis in our common stock will be adjusted to
reflect any such income or loss amounts. If you make a mark-to-market election, tax rules that
apply to distributions by corporations which are not PFICs would apply to distributions by us
(except that the lower applicable capital gains rate would not apply).
The mark-to-market election is available only for marketable stock which is stock that is traded
in other than de minimis quantities on at least 15 days during each calendar quarter on a qualified
exchange or other market, as defined in applicable Treasury regulations. We expect that our common
stock will continue to be listed and traded on the Nasdaq Stock Market, and, consequently, if you
are a U.S. holder of our common stock, it is expected that the mark-to-market election would be
available to you if we are a PFIC.
If we are a PFIC, we do not intend to prepare or provide you with the information necessary to make
a qualified electing fund election.
Under certain attribution rules, if we are a PFIC, you will be deemed to own your proportionate
share of any subsidiary of ours which is also a PFIC, and will be deemed to realize your
proportionate share of any gain resulting from the indirect disposition of such subsidiary. In
general, no mark-to-market election with respect to such subsidiary will be available.
If you hold our common stock in any year in which we are a PFIC, you will be required to file U.S.
Internal Revenue Service Form 8621 regarding distributions received on our common stock and any
gain realized on the disposition of our common stock. In addition, every U.S. Holder who is a
shareholder in a PFIC must file an annual report containing the information required by the
Internal Revenue Service.
A U.S. holder is encouraged to consult its tax advisor regarding the potential tax consequences of
owning our common stock if we were to be treated as a PFIC.
Non-U.S. Holders
Information Reporting and Backup Withholding
Dividend payments with respect to common stock and proceeds from the sale or exchange of common
stock may be subject to information reporting to the Internal Revenue Service and possible U.S.
backup withholding at a current rate of 28%. Backup withholding will not apply, however, to a U.S.
Holder who furnishes a correct taxpayer identification number and makes any other required
certification or who is otherwise exempt from backup withholding. U.S. Holders who are required to
establish their exempt status must provide such certification on IRS Form W-9. U.S. Holders should
consult their tax advisors regarding the application of the U.S. information reporting and backup
withholding rules.
Backup withholding is not an additional tax. Amounts withheld as backup withholding may be credited
against your U.S. federal income tax liability, and you may obtain a refund of any excess amounts
withheld under the backup withholding rules by filing the appropriate claim for refund with the IRS
and furnishing any required information.
F. Dividends and paying agents.
Not Applicable.
G. Statement by experts.
Not Applicable.
H. Documents on display.
We are subject to the periodic reporting and other informational requirements of the Securities
Exchange Act of 1934, as amended, or the Exchange Act. Under the Exchange Act, we are required to
file reports and other information with the Securities and Exchange Commission. Specially, we are
required to file annually a Form 20-F no later than six months after the close of each fiscal year,
which is December 31. Copies of reports and other information, when so filed, may be inspected
without charge and may be obtained at prescribed rates at the public reference facilities
maintained by the Securities and Exchange Commission at Judiciary Plaza, 100 F. Street, N.E.,
Washington, D.C. 20549. The public may obtain information regarding the Washington, D.C. Public
Reference Room by calling the Commission at 1-800-SEC-0330. The SEC also maintains a Web site at
www.sec.gov that
52
contains reports and other information regarding registrants that make electronic
filings with the SEC using its EDGAR system. Documents concerning our company that are referred to in this Annual Report may also be inspected at our
office, which is Unit 1010-1011, 10/F, West Tower, Shun Tak Centre, 168-200 Connaught Road Central,
Hong Kong.
As a foreign private issuer, we are exempt from the rules under the Exchange Act prescribing the
furnishing and content of quarterly reports and proxy statements, and officers, directors and
principal shareholders are exempt from the reporting requirements and trading restrictions pursuant
to Section 16 of the Exchange Act. In addition, we are exempt from the provisions of Regulation FD
aimed at preventing issuers from making selective disclosures of material information.
I. Subsidiary Information.
Not Applicable.
Item 11. Quantitative and Qualitative Disclosures About Market Risk.
Foreign exchange risk
We are exposed to the risk of foreign currency exchange rate fluctuation. We have never used
derivative instruments to hedge our exchange rate risks. As part of our sales transactions are
conducted in Euro and the majority of goods sold are procured in Renminbi, therefore there are
foreign exchange transactional risks. The Group is also exposed to foreign currency risk on certain
financing activities, which are denominated in the U.S. dollars. As HK$ is pegged to the U.S
dollars and therefore we consider the foreign exchange exposure to fluctuation in exchange rate to
be minimal. The functional currency of our key operating subsidiaries is the Renminbi. Transactions
in other currencies are recorded in Renminbi at the rates of exchange prevailing when the
transactions occur. Monetary assets and liabilities denominated in other currencies are converted
into Renminbi at rates of exchange in effect at the balance sheet dates. Exchange gains and losses
are recorded in our statements of operations as a component of current period earnings.
The China State Administration for Foreign Exchange, under the authority of the Peoples Bank of
China, controls the conversion of Renminbi into foreign currencies. The principal regulation
governing foreign currency exchange in China is the Foreign Currency Administration Rules (1996),
as amended. Under the Rules, once various procedural requirements are met, Renminbi is convertible
for current account transactions, including trade and services, but not for capital account
transactions, including direct investment, loan or investment in securities outside China, unless
the prior approval of the State Administration of Foreign Exchange of China is obtained. Although
the Chinese government regulations now allow greater convertibility of Renminbi for current account
transactions, significant restrictions still remain. Capital investments by foreign-invested
enterprises outside China are also subject to limitations and requirements in China, such as prior
approvals from the PRC Ministry of Commerce, the SAFE and the PRC National Development and Reform
Commission, or the NDRC.
The value of the Renminbi is subject to changes in Chinas central government policies and to
international economic and political developments affecting supply and demand in the China Foreign
Exchange Trading System market. Since 1994, the conversion of Renminbi into foreign currencies,
including U.S. dollars, has been based on rates set by the Peoples Bank of China, which are set
daily based on the previous days interbank foreign exchange market rates and current exchange
rates on the world financial markets. Since 1994, the official exchange rate generally has been
stable. However, recently there has been increased political pressure on the Chinese government to
decouple the Renminbi from the U.S. dollar and the Chinese government recently signaled a return to
a managed appreciation of the Renminbi against the dollar.
A substantial portion of our operations is conducted through our Chinese operating companies, and
their financial performance and position are measured in terms of Renminbi. In addition, from time
to time we may have United States dollar denominated borrowings. Any devaluation of the Rmb against
the United States dollar would consequently have an adverse effect on our financial performance and
asset values when measured in terms of United States dollar.
Our solar products are primarily procured in China for Renminbi. A substantial portion of our solar
products are sold to customers in Europe and a substantial portion of our revenues are denominated
in Euro. Therefore a decoupling of the Euro may affect our financial performance in the future.
Interest rate risk
Our exposure to interest rate risk primarily rates to interest expenses incurred on our short-term
borrowings. We have not used any derivative financial instruments to manage our interest risk
exposure. Interest-earning instruments carry a degree of interest rate risk. We have not been
exposed, nor do we anticipate being exposed, to material risks due to changes in interest rates.
Inflation
In recent years, China has not experienced significant inflation, and thus inflation has not had a
material impact on our results of operations in recent years. According to the National Bureau of
Statistics of China, the change in Consumer Price Index in China was 5.9% in 2008, (0.7)% in 2009
and 3.3% in 2010. We have not in the past been materially affected by any such inflation, but we do
not know whether we will not be affected in the future.
Item 12. Description of Securities Other than Equity Securities.
Not Applicable.
53
PART II
Item 13. Default, Dividend Arrearages and Delinquencies.
None.
Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds.
Not Applicable.
Item 15T. Controls and Procedures.
Disclosure Controls and Procedures
As required by Rules 13a-15(e) and 15d-15(e) under the Exchange Act, our companys management,
including our Chief Executive Officer and our Acting Chief Financial Officer, is responsible for
establishing and maintaining effective disclosure controls and procedures, as defined under Rules
13a-15(e) and 15d-15(e) under the Exchange Act. As of December 31, 2010, we performed an evaluation
under the supervision and with the participation of our management on the effectiveness of our
companys disclosure controls and procedures. Based on that evaluation, our Chief Executive
Officers and our Acting Chief Financial Officer concluded that our disclosure controls and
procedures as of December 31, 2010 were not effective because management identified deficiencies in
our internal control over financial reporting that they considered to be material weakness in our
internal control over financial reporting.
Notwithstanding managements assessment that our disclosure controls and procedures were
ineffective as of December 31, 2010 and the material weakness described below, we believe that the
consolidated financial statements included in this Annual Report correctly present our financial
condition, results of operations and cash flows for the fiscal years covered thereby in all
material respects.
Managements Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over
financial reporting, as defined in Rule 13a-15(f) promulgated under the Exchange Act. Internal
control over financial reporting is a process designed to provide reasonable assurance regarding
the reliability of financial reporting and the preparation of an issuers financial statements for
external purposes in accordance with accounting principles generally accepted in the United States
of America, or GAAP. Internal control over financial reporting includes policies and procedures
that:
|
|
Pertain to the maintenance of records that, in reasonable details,
accurately and fairly reflect the transactions and dispositions of
an issuers assets; |
|
|
|
Provide reasonable assurance that transactions are recorded as
necessary to permit preparation of financial statements in
accordance with GAAP, and that an issuers receipts and
expenditures are being made only in accordance with authorizations
of its management and directors; and |
|
|
|
Provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use or disposition of an
issuers assets that could have a material effect on the financial
statements. |
Because of its inherent limitations, internal control over financial reporting may not prevent or
detect misstatements. Also, the application of any evaluation of effectiveness to future periods is
subject to the risk that
54
controls may become inadequate because of changes in conditions, or that
complication with the policies or procedures may deteriorate.
A material weakness is a deficiency, or a combination of deficiencies, in internal control over
financial reporting, such that there is a reasonable possibility that a material misstatement of
the issuers annual or interim financial statements will not be prevented or detected on a timely
basis. Because of the material weaknesses described below, management concluded that our internal
control over financial reporting was not effective as of December 31, 2010 using framework
established in Internal Control Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission.
The specific material weaknesses identified by management as of December 31, 2010 are described as
follows:
(1) |
|
lack of internal audit department to perform the internal auditing function over financial
reporting in our company; |
|
(2) |
|
lack of accounting personnel with knowledge of U.S. GAAP and SEC financial reporting
requirements; and |
|
(3) |
|
lack of an investment committee, which should comprise directors
with appropriate experience, in performing comprehensive pre-investment
feasibility study on prospective investment projects in order to assess the
risks associated with the projects, the expected returns, and the resources
that the Company is expected to deploy in these projects. There is also a lack
of such investment committee, or any other designated management and accounting
presonnel within the Company, who possess the required skills and knowledge to
monitor the ongoing peformance of the investments made by the Company, and to
perform periodic impairment assessment on the respective carrying amounts and
related prepayments and advances of the investments according to the requirements of
US GAAP when indicators of impairment exist. |
This Annual Report does not include an attestation report of our registered public accounting firm
regarding internal control over financial reporting due to final rules of the SEC with Release Nos.
33-9142 and 34-62914 for non-accelerated filers. Our managements report regarding internal control
over financial reporting in this Annual Report is not subject to attestation by our Companys
registered public accounting firm pursuant to final rules of the SEC with Release Nos. 33-8934,
34-58028 and 2009-213.
Changes in internal control over financial reporting
We are in the process of developing and implementing remediation plans to address our material
weakness. During the year ended December 31, 2010, we made the following changes to our internal
control over financial reporting that have materially affected, or are reasonably likely to
materially affect, our internal control over financial reporting:
(1) |
|
improvement of additional communications to receive internal and external information relating
to fraud prevention, |
|
(2) |
|
establishment of more detailed policies and procedures relating to fraud prevention in our
employee code of conduct, |
|
(3) |
|
training our existing accounting personnel on U.S. GAAP and other financial reporting
requirements promulgated by the SEC. |
Our management anticipates remedying the deficiencies to our companys internal controls and has
planned to implement a series of additional remedial measures in 2011, including (1) design
internal audit functions and assign proper personnel to take internal audit responsibilities, (2)
recruitment of more qualified personnel to take financial reporting responsibilities; (3)
establishment of investment committee and perform comprehensive pre-investment feasibility
assessments on prospective investment projects, and also conduct thorough impairment assessment on
all our investments on a regular basis; and (4) improvement of other internal policies. The
exercise will be supervised and with the participation of our management. We are currently still
reviewing our efforts to improve our internal controls and may in the future identify additional
deficiencies to our internal controls. Should we discover any additional deficiencies, we intend to
take appropriate measures to correct or improve our internal controls.
Item 16A. Audit Committee Financial Expert.
Our Board of Directors has appointed Mr. Loong Cheong Chang, Mr. Yu Keung Poon and Mr. Yezhong Ni,
all of whom are independent directors, as members of the Audit Committee, and determined Mr. Yu
Keung Poon qualifies as an audit committee financial expert as defined under the applicable rules
of the SEC issued pursuant to Section 407 of the Sarbanes-Oxley Act of 2002 and the Nasdaq Stock
Market.
55
Item 16B. Code of Ethics.
Our Board of Directors has adopted a Code of Ethics that applies to all of our directors and
officers, including our Chief Executive Officer, Chief Financial Officer and Principal Accounting
Officer. We filed the Code of Ethics as Exhibit 14.1 to our Annual Report on Form 20-F for the
fiscal year ended December 31, 2006 (File No. 000-29008). An electronic version of the Code of
Ethics is posted on our website www.chinactdc.com. A hardcopy of the Code of Ethics is
available upon request at our principal place of business at Unit 10-11, 10/F, West Tower, Shun Tak
Centre, 168-200 Connaught Road Central, Hong Kong.
Item 16C. Principal Accountant Fees and Services.
Audit Fees
The audit fees billed by PricewaterhouseCoopers Zhong Tian CPAs Limited Company, our independent
registered public accounting firm, for the fiscal year ended December 31, 2010 and 2009 amounted to
approximately Rmb2.32 million and Rmb1.37 million, respectively. The audit fees billed by Deloitte
Touche Tohmatsu CPA Ltd, our former independent registered public accounting firm, for the fiscal
year ended December 31, 2008 amounted to approximately Rmb1.04 million.
Audit-Related Fees
Deloitte Touche Tohmatsu CPA Ltd charged our company Rmb0.2 million to issue a consent for
inclusion of their audit report for the fiscal year ended December 31, 2008 in our 2010 Annual
Report.
Tax Fees
The statutory tax filings of BHLHK required by applicable regulations Hong Kong for the fiscal year
ended December 31, 2009 was performed by S L Lee & Lau.
Policy on Pre-Approval of Audit and Permissible Non-Audit Services of Independent Auditors
Our Audit Committee pre-approves all audit and permissible non-audit services provided by our
independent auditors. These services may include audit services and other services.
Audit of Financial Statements
PricewaterhouseCoopers Zhong Tian CPAs Limited Company has been our principal independent
registered public accounting firm for the years ended December 31, 2009 and 2010. Deloitte Touche
Tohmatsu CPA Ltd was our previous principal independent registered public accounting firm.
Item 16D. Exemptions from the Listing Standards for Audit Committee.
Not Applicable.
Item 16E. Purchase of Equity Securities by the Issuer and Affiliated Purchasers.
Not Applicable.
Item 16F. Change in Registrants Certifying Accountant.
Not Applicable.
Item 16G. Corporate Governance.
We are incorporated under the laws of British Virgin Islands. Our common stock is currently listed
on the Nasdaq Capital Market and, for so long as our securities continue to be listed, we will
remain subject to the rules and regulations established by Nasdaq as being applicable to listed
companies. Nasdaq has adopted its Rule 5600 Series to impose various corporate governance
requirements on listed securities. Rule 5615 provides that foreign private issuers such as our
company are required to comply with certain specific requirements of the Rule 5600 Series, but, as
to the balance of the Rule 5600 Series, foreign private issuers are not required to comply if the
laws of their home country do not otherwise require compliance.
We currently comply with the specifically mandated provisions of the Rule 5600 Series. However, we
are permitted to follow the corporate governance practices in the British Virgin Islands in lieu of
certain corporate governance requirements contained in the Rule 5600 Series and we have determined
not to comply with the following provisions of the Rule 5600 Series since the laws of the British
Virgin Islands do not require compliance:
56
|
|
Nasdaq Rule 5605(b)(2) requires U.S. domestic issuers to hold regularly scheduled meetings at
which only independent directors are present. Our independent directors did not meet in executive
session in 2010. |
|
|
|
Nasdaq Rule 5605(d) requires that compensation of executive officers must be determined, or
recommended to the board of directors for determination, either by committee comprised solely of
independent directors or by a majority of independent members of the board of directors. In
addition, Rule 5605(d) provides that the chief executive officer may not be present during a vote
or deliberations concerning his compensation. Our Compensation Committee, which is comprised
solely of independent directors, makes recommendations to our Board of Directors concerning
salaries and incentive compensation for our executive officers and directors and administrates our
stock option plans, but our Chief Executive Officer may be present and participate in the
deliberations concerning his compensation. In addition, the Compensation Committee has authorized
our Chief Executive Officer to determine the compensation and bonus for other executive officers. |
|
|
|
Nasdaq Rule 5630 requires related party transactions to be reviewed and overseen on an ongoing
basis by the companys audit committee or other independent body of the board of directors. |
|
|
|
In addition, we are not required to solicit shareholder approval of the following: stock plans,
including those in which our officers or directors may participate; stock issuances that will
result in a change in control; the issuance of our stock in related party transactions or other
transactions in which we may issue 20% or more of our outstanding shares; and below market
issuances of 20% or more of our outstanding shares to any person (Nasdaq Rule 5635). |
We may in the future determine to voluntarily comply with one or more of the foregoing provisions
of the Rule 5600 Series.
Item 17. Financial Statements.
We have elected to provide financial statements pursuant to Item 18 (see below).
Item 18. Financial Statements.
The financial statements are filed as Attachment A hereto and are included as part of this Annual
Report on Form 20-F.
57
Item 19. Exhibits.
The following exhibits are furnished along with this Annual Report or are incorporated by
reference as indicated.
|
|
|
Exhibit |
|
|
Number |
|
Description of Document |
|
|
|
1.1
|
|
Amended and Restated Memorandum and Articles of Association of China Technology Development
Group Corporation, adopted on October 19, 2007 (1) |
|
|
|
4.1
|
|
Stock Purchase Agreement with CTSPHL Group and its shareholders, dated as of October 27, 2009
(3) |
|
|
|
4.2
|
|
Translation of agreement with CTIG dated as of December 15, 2009 (4) |
|
|
|
4.3
|
|
Subscription Agreement with China Wanhe Investment Limited dated as of April 28, 2010 (5) |
|
|
|
4.4
|
|
Translation of Cooperation Framework Agreement with Xintang Media Technology (Beijing) Ltd.
dated as of April 28, 2010 (5) |
|
|
|
4.5
|
|
Stock Purchase Agreement with Linsun Renewable Energy Corporation Limited and its
shareholders dated as of November 5, 2010 (6) |
|
|
|
8.1
|
|
List of all subsidiaries |
|
|
|
11.1
|
|
Code of Ethics (2) |
|
|
|
12.1
|
|
Certification of Chief Executive Officer required by Section 302 of the Sarbanes-Oxley Act
of 2002 |
|
|
|
12.2
|
|
Certification of Acting Chief Financial Officer required by Section 302 of the
Sarbanes-Oxley Act of 2002 |
|
|
|
13.1
|
|
Certification of Chief Executive Officer and Acting Chief Financial Officer required by
Section 906 of the Sarbanes-Oxley Act of 2002 |
|
|
|
23.1
|
|
Consent of Deloitte Touche Tohmatsu CPA Ltd. to the incorporation by reference in the
Registration Statements on Form S-8 (file numbers 333-168021, 333-160837, 333-147806,
333-139608 and 333-127423) and Form F-3 (file number 333-169665) of their report dated June
26, 2009 included in our Annual Report on Form 20-F for the fiscal year ended December 31,
2010 |
|
|
|
23.2
|
|
Consent of PricewaterhouseCoopers Zhong Tian CPAs Limited Company to the incorporation by
reference in the Registration Statements on Form S-8 (file numbers 333-168021, 333-160837,
333-147806, 333-139608 and 333-127423) and Form F-3 (file number 333-169665)of their report
dated June 28, 2011 included in our Annual Report on Form 20-F for the fiscal year ended
December 31, 2010 |
|
|
|
Notes: |
|
(1) |
|
incorporated by reference to the exhibits to our annual report on Form 20- F for the fiscal
year ended December 31, 2007. |
|
(2) |
|
incorporated by reference to the exhibits to our annual report on Form 20-F for the fiscal
year ended December 31, 2006. |
|
(3) |
|
incorporated by reference to the exhibits to our report on Form 6-K filed with the SEC dated
October 27, 2009. |
|
(4) |
|
incorporated by reference to the exhibits to our annual report on Form 20-F for the fiscal
year ended December 31, 2009. |
|
(5) |
|
incorporated by reference to the exhibits to our report on Form 6-K filed with the SEC dated
April 29, 2010. |
|
(6) |
|
incorporated by reference to the exhibits to our report on Form 6-K filed with the SEC dated
November 8, 2010. |
58
SIGNATURES
The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and
that it has duly caused and authorized the undersigned to sign this Annual Report on its behalf.
|
|
|
|
|
|
CHINA TECHNOLOGY DEVELOPMENT
GROUP CORPORATION
|
|
|
|
|
|
|
Date: June 28, 2011 |
/s/ Tairan Guo
|
|
|
Name: |
Tairan Guo |
|
|
Title: |
Acting Chief Financial Officer |
|
59
CHINA TECHNOLOGY DEVELOPMENT GROUP CORPORATION
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
|
|
|
|
|
Page |
|
|
|
F 1 |
|
|
|
F 2 |
|
|
|
F 3 |
|
|
|
F 4 |
|
|
|
F 5 |
|
|
|
F 7 |
|
|
|
F 9 |
Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Directors of
China Technology Development Group Corporation
In our opinion, the accompanying consolidated balance sheets and the related consolidated
statements of operations, changes in shareholders equity and cash flows present fairly, in all
material respects, the financial position of China Technology Development Group Corporation (the
Company) and its subsidiaries (collectively, the Group) at December 31, 2010 and 2009, and the
results of their operations and their cash flows for each of the two years in the period ended
December 31, 2010 in conformity with accounting principles generally accepted in the United States
of America. These financial statements are the responsibility of the Companys management. Our
responsibility is to express an opinion on these financial statements based on our audits. We
conducted our audits of these statements in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles used and significant
estimates made by management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
/s/ PricewaterhouseCoopers Zhong Tian CPAs Limited Company
Shenzhen, the Peoples Republic of China
June 28, 2011
F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and Board of Directors of
China Technology Development Group Corporation
We have audited the accompanying consolidated statements of operations, changes in
shareholders equity, and cash flows of China Technology Development Group Corporation and its
subsidiaries (the Group) for the year ended December 31, 2008. These consolidated financial
statements are the responsibility of the Groups management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting
Oversight Board (United States). Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of material
misstatement. The Group is not required to have, nor were we engaged to perform, an audit of its
internal control over financial reporting. Our audit included consideration of internal control
over financial reporting as a basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Groups
internal control over financial reporting. Accordingly, we express no such opinion. An audit also
includes examining, on a test basis, evidence supporting the amounts and disclosures in the
financial statements, assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all material
respects, the results of China Technology Development Group Corporation and its subsidiaries
operations and their cash flows for the year ended December 31, 2008, in conformity with accounting
principles generally accepted in the United States of America.
/s/ Deloitte Touche Tohmatsu CPA Ltd.
Shenzhen, China
June 26, 2009
F-2
CHINA TECHNOLOGY DEVELOPMENT GROUP CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts expressed in thousands except per share data)
For the years ended December 31, 2008, 2009 and 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes |
|
|
2008 |
|
|
2009 |
|
|
2010 |
|
|
2010 |
|
|
|
|
|
|
|
Rmb |
|
|
Rmb |
|
|
Rmb |
|
|
US$ (Note 2 (h)) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues |
|
|
|
|
|
|
10 |
|
|
|
|
|
|
|
53,700 |
|
|
|
8,134 |
|
Cost of sales |
|
|
|
|
|
|
(20 |
) |
|
|
|
|
|
|
(45,113 |
) |
|
|
(6,833 |
) |
|
|
|
|
|
|
|
Gross income (loss) |
|
|
|
|
|
|
(10 |
) |
|
|
|
|
|
|
8,587 |
|
|
|
1,301 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development expenses |
|
|
|
|
|
|
(133 |
) |
|
|
(552 |
) |
|
|
(557 |
) |
|
|
(84 |
) |
Selling expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3,436 |
) |
|
|
(520 |
) |
General and administrative expenses* |
|
|
|
|
|
|
(24,195 |
) |
|
|
(24,970 |
) |
|
|
(32,530 |
) |
|
|
(4,927 |
) |
Impairment on property, plant and equipment |
|
|
9 |
|
|
|
|
|
|
|
(6,463 |
) |
|
|
(591 |
) |
|
|
(89 |
) |
Impairment on inventories |
|
|
|
|
|
|
|
|
|
|
(346 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating loss |
|
|
|
|
|
|
(24,338 |
) |
|
|
(32,331 |
) |
|
|
(28,527 |
) |
|
|
(4,319 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income |
|
|
|
|
|
|
79 |
|
|
|
7 |
|
|
|
40 |
|
|
|
6 |
|
Finance costs |
|
|
|
|
|
|
(475 |
) |
|
|
(5,799 |
) |
|
|
(83 |
) |
|
|
(13 |
) |
Impairment on prepayment for business acquisition |
|
|
7 |
|
|
|
|
|
|
|
|
|
|
|
(10,301 |
) |
|
|
(1,560 |
) |
Change in fair value of trading securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,162 |
|
|
|
176 |
|
Gain on disposal of trading securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,196 |
|
|
|
787 |
|
Dividend income from available-for-sale securities |
|
|
|
|
|
|
48 |
|
|
|
71 |
|
|
|
|
|
|
|
|
|
(Loss) gain on disposal of available-for-sale securities |
|
|
|
|
|
|
(14,049 |
) |
|
|
111 |
|
|
|
(213 |
) |
|
|
(32 |
) |
Impairment on available-for-sale securities |
|
|
|
|
|
|
(15,213 |
) |
|
|
|
|
|
|
(3,549 |
) |
|
|
(538 |
) |
Impairment on other investments |
|
|
|
|
|
|
|
|
|
|
(571 |
) |
|
|
(489 |
) |
|
|
(74 |
) |
Change in fair value of investment in convertible note |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,917 |
|
|
|
290 |
|
Change in fair value of derivative embedded in convertible note |
|
|
12,21 |
|
|
|
|
|
|
|
(5,040 |
) |
|
|
|
|
|
|
|
|
Change in fair value of warrants and option rights |
|
|
12,17 |
|
|
|
(1,236 |
) |
|
|
3,798 |
|
|
|
555 |
|
|
|
84 |
|
Loss on debt extinguishment |
|
|
21 |
|
|
|
|
|
|
|
(3,434 |
) |
|
|
|
|
|
|
|
|
Subsidies from government |
|
|
|
|
|
|
|
|
|
|
600 |
|
|
|
|
|
|
|
|
|
Exchange loss |
|
|
|
|
|
|
(268 |
) |
|
|
(218 |
) |
|
|
(442 |
) |
|
|
(68 |
) |
Others, net |
|
|
|
|
|
|
(36 |
) |
|
|
(2 |
) |
|
|
(491 |
) |
|
|
(74 |
) |
|
|
|
|
|
|
|
Loss before income tax expenses |
|
|
|
|
|
|
(55,488 |
) |
|
|
(42,808 |
) |
|
|
(35,225 |
) |
|
|
(5,335 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax credits (expenses) |
|
|
4 |
|
|
|
712 |
|
|
|
112 |
|
|
|
104 |
|
|
|
16 |
|
|
|
|
|
|
|
|
Loss from continuing operations |
|
|
|
|
|
|
(54,776 |
) |
|
|
(42,696 |
) |
|
|
(35,121 |
) |
|
|
(5,319 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discontinued operations: |
|
|
5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit from discontinued operations, net of income taxes |
|
|
|
|
|
|
858 |
|
|
|
4,227 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss for the year attributable to the shareholders of the Company |
|
|
|
|
|
|
(53,918 |
) |
|
|
(38,469 |
) |
|
|
(35,121 |
) |
|
|
(5,319 |
) |
|
|
|
|
|
|
|
Net loss per share |
|
|
14 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-Basic and diluted |
|
|
|
|
|
|
(3.34 |
) |
|
|
(2.42 |
) |
|
|
(1.69 |
) |
|
|
(0.26 |
) |
|
|
|
|
|
|
|
Net loss per share from continuing operations |
|
|
14 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-Basic and diluted |
|
|
|
|
|
|
(3.39 |
) |
|
|
(2.68 |
) |
|
|
(1.69 |
) |
|
|
(0.26 |
) |
|
|
|
|
|
|
|
Net earnings per share from discontinued operations |
|
|
14 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-Basic and diluted |
|
|
|
|
|
|
0.05 |
|
|
|
0.26 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares (in thousands) |
|
|
14 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-Basic and diluted |
|
|
|
|
|
|
16,160 |
|
|
|
15,927 |
|
|
|
20,746 |
|
|
|
20,746 |
|
|
|
|
|
|
|
|
|
|
|
* |
|
Included in general and administrative expenses are stock-based compensation of Rmb8,738,
Rmb8,706 and Rmb8,015 for the years ended December 31, 2008, 2009 and 2010, respectively. |
The accompanying notes are an integral part of these consolidated financial statements.
F-3
CHINA TECHNOLOGY DEVELOPMENT GROUP CORPORATION
CONSOLIDATED BALANCE SHEETS
(Amounts expressed in thousands except share and per share data)
As of December 31, 2009 and 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes |
|
|
2009 |
|
|
2010 |
|
|
2010 |
|
|
|
|
|
|
|
Rmb |
|
|
Rmb |
|
|
US$ (Note 2 (h)) |
|
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
|
|
|
|
|
24,611 |
|
|
|
14,014 |
|
|
|
2,123 |
|
Other investments |
|
|
|
|
|
|
336 |
|
|
|
|
|
|
|
|
|
Trading securities |
|
|
12 |
|
|
|
3,825 |
|
|
|
20,429 |
|
|
|
3,094 |
|
Available-for-sale securities |
|
|
12,19 |
|
|
|
27,432 |
|
|
|
14,120 |
|
|
|
2,139 |
|
Trade accounts receivable, net of Nil
allowance for doubtful accounts as of
December 31, 2009 and 2010, respectively |
|
|
|
|
|
|
|
|
|
|
19,354 |
|
|
|
2,931 |
|
Inventories (As of December 31, 2009
including raw materials of Rmb82, finished goods
of Rmb210; as of December 31, 2010 including raw
materials of Rmb5,661, work-in-progress of
Rmb279, finished goods of Rmb907) |
|
|
|
|
|
|
292 |
|
|
|
6,847 |
|
|
|
1,037 |
|
Value added tax and business tax recoverable |
|
|
|
|
|
|
|
|
|
|
5,481 |
|
|
|
830 |
|
Due from related parties |
|
|
15 |
|
|
|
12,053 |
|
|
|
2,455 |
|
|
|
372 |
|
Prepaid expenses and other current assets |
|
|
6 |
|
|
|
716 |
|
|
|
29,686 |
|
|
|
4,496 |
|
Prepayment for business acquisition, net of
impairment provision of nil and Rmb10,301 as
of December 31, 2009 and 2010 respectively |
|
|
7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL CURRENT ASSETS |
|
|
|
|
|
|
69,265 |
|
|
|
112,386 |
|
|
|
17,022 |
|
Prepayment for land use right |
|
|
8 |
|
|
|
4,310 |
|
|
|
4,220 |
|
|
|
639 |
|
Property, plant and equipment, net |
|
|
9 |
|
|
|
25,258 |
|
|
|
31,428 |
|
|
|
4,760 |
|
Intangible assets |
|
|
10 |
|
|
|
|
|
|
|
12,962 |
|
|
|
1,963 |
|
Goodwill |
|
|
10 |
|
|
|
|
|
|
|
4,859 |
|
|
|
736 |
|
Deposit for investment |
|
|
20 |
|
|
|
20,602 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL ASSETS |
|
|
|
|
|
|
119,435 |
|
|
|
165,855 |
|
|
|
25,120 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT LIABILITIES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade accounts payable |
|
|
|
|
|
|
3 |
|
|
|
11,803 |
|
|
|
1,788 |
|
Accrued professional fees |
|
|
|
|
|
|
3,713 |
|
|
|
4,098 |
|
|
|
621 |
|
Income tax payable |
|
|
|
|
|
|
|
|
|
|
63 |
|
|
|
10 |
|
Due to related parties |
|
|
15 |
|
|
|
8,944 |
|
|
|
9,238 |
|
|
|
1,399 |
|
Government subsidies |
|
|
|
|
|
|
300 |
|
|
|
300 |
|
|
|
45 |
|
Liabilities relating to warrants |
|
|
12 |
|
|
|
3,003 |
|
|
|
2,448 |
|
|
|
371 |
|
Short term loan |
|
|
11(a |
) |
|
|
|
|
|
|
6,041 |
|
|
|
915 |
|
Other current liabilities and accrued expenses |
|
|
11(b |
) |
|
|
3,465 |
|
|
|
11,156 |
|
|
|
1,689 |
|
|
|
|
|
|
|
|
TOTAL CURRENT LIABILITIES |
|
|
|
|
|
|
19,428 |
|
|
|
45,147 |
|
|
|
6,838 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred tax liabilities-non-current |
|
|
4 |
|
|
|
2,306 |
|
|
|
5,434 |
|
|
|
823 |
|
|
|
|
|
|
|
|
TOTAL LIABILITIES |
|
|
|
|
|
|
21,734 |
|
|
|
50,581 |
|
|
|
7,661 |
|
Contingencies and commitments |
|
|
22 |
|
|
|
|
|
|
|
|
|
|
|
|
|
SHAREHOLDERS EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock, (US$0.01 par value;
4,000,000,000 authorized in 2009 and 2010;
19,300,390 and 22,425,216 shares issued and
outstanding as of December 31, 2009 and 2010,
respectively) |
|
|
17 |
|
|
|
1,463 |
|
|
|
1,670 |
|
|
|
253 |
|
Preferred stock, (US$0.01 par value;
1,000,000,000 shares authorized; 1,000,000
shares issued and outstanding as of December
31, 2009 and 2010) |
|
|
18 |
|
|
|
77 |
|
|
|
77 |
|
|
|
12 |
|
Additional paid-in capital |
|
|
|
|
|
|
482,329 |
|
|
|
545,911 |
|
|
|
82,685 |
|
Accumulated deficit |
|
|
|
|
|
|
(384,299 |
) |
|
|
(419,420 |
) |
|
|
(63,527 |
) |
Accumulated other comprehensive loss |
|
|
|
|
|
|
(1,869 |
) |
|
|
(12,964 |
) |
|
|
(1,964 |
) |
|
|
|
|
|
|
|
TOTAL SHAREHOLDERS EQUITY |
|
|
|
|
|
|
97,701 |
|
|
|
115,274 |
|
|
|
17,459 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND SHAREHOLDERS EQUITY |
|
|
|
|
|
|
119,435 |
|
|
|
165,855 |
|
|
|
25,120 |
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
F-4
CHINA TECHNOLOGY DEVELOPMENT GROUP CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY
(Amounts in thousands except share data)
For the years ended December 31, 2008, 2009 and 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional |
|
|
|
|
|
|
other |
|
|
Total |
|
|
|
Preferred stock |
|
|
Common stock |
|
|
paid in |
|
|
Accumulated |
|
|
comprehensive |
|
|
shareholders |
|
|
|
Shares |
|
|
Amount |
|
|
Shares |
|
|
Amount |
|
|
capital |
|
|
deficit |
|
|
(loss) income |
|
|
equity |
|
|
|
|
|
|
|
Rmb |
|
|
|
|
|
|
Rmb |
|
|
Rmb |
|
|
Rmb |
|
|
Rmb |
|
|
Rmb |
|
Balance at January 1, 2008 |
|
|
1,000,000 |
|
|
|
77 |
|
|
|
15,028,665 |
|
|
|
1,170 |
|
|
|
369,779 |
|
|
|
(292,873 |
) |
|
|
2,036 |
|
|
|
80,189 |
|
Issue of common stock, warrants and options to investors (net of offering cost of Rmb682) |
|
|
|
|
|
|
|
|
|
|
498,338 |
|
|
|
34 |
|
|
|
7,809 |
|
|
|
|
|
|
|
|
|
|
|
7,843 |
|
Shares issued upon exercise of stock options |
|
|
|
|
|
|
|
|
|
|
16,666 |
|
|
|
1 |
|
|
|
357 |
|
|
|
|
|
|
|
|
|
|
|
358 |
|
Modification of warrants issued to non-employees in prior year |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,364 |
|
|
|
|
|
|
|
|
|
|
|
2,364 |
|
Stock-based compensation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,374 |
|
|
|
|
|
|
|
|
|
|
|
6,374 |
|
Contribution by major shareholder China Technology Investment Group Limited
(formerly known as China Biotech Holdings Limited), (CTIG) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,923 |
|
|
|
|
|
|
|
|
|
|
|
7,923 |
|
Components of comprehensive loss: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(53,918 |
) |
|
|
|
|
|
|
(53,918 |
) |
Reclassification adjustment upon disposal of available-for-sale securities, net of tax
provision of Rmb1,325 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(6,247 |
) |
|
|
(6,247 |
) |
Translation adjustment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,656 |
) |
|
|
(2,656 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive loss for the year |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(62,821 |
) |
|
|
|
Balance at December 31, 2008 |
|
|
1,000,000 |
|
|
|
77 |
|
|
|
15,543,669 |
|
|
|
1,205 |
|
|
|
394,606 |
|
|
|
(346,791 |
) |
|
|
(6,867 |
) |
|
|
42,230 |
|
Effect of adoption of ASC 815-40-15 resulting from reclassification of warrants and option rights (Note 17) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(8,488 |
) |
|
|
961 |
|
|
|
|
|
|
|
(7,527 |
) |
|
|
|
Balance at 1 January 2009 |
|
|
1,000,000 |
|
|
|
77 |
|
|
|
15,543,669 |
|
|
|
1,205 |
|
|
|
386,118 |
|
|
|
(345,830 |
) |
|
|
(6,867 |
) |
|
|
34,703 |
|
F-5
CHINA TECHNOLOGY DEVELOPMENT GROUP CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY
(Amounts in thousands except share data)
For the years ended December 31, 2008, 2009 and 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional |
|
|
|
|
|
|
other |
|
|
Total |
|
|
|
Preferred stock |
|
|
Common stock |
|
|
paid in |
|
|
Accumulated |
|
|
comprehensive |
|
|
shareholders |
|
|
|
Shares |
|
|
Amount |
|
|
Shares |
|
|
Amount |
|
|
capital |
|
|
deficit |
|
|
(loss) income |
|
|
equity |
|
|
|
|
|
|
|
Rmb |
|
|
|
|
|
|
Rmb |
|
|
Rmb |
|
|
Rmb |
|
|
Rmb |
|
|
Rmb |
|
Issue of shares upon exercise of option rights |
|
|
|
|
|
|
|
|
|
|
60,000 |
|
|
|
4 |
|
|
|
1,121 |
|
|
|
|
|
|
|
|
|
|
|
1,125 |
|
Shares issued upon exercise of stock options |
|
|
|
|
|
|
|
|
|
|
136,864 |
|
|
|
10 |
|
|
|
2,580 |
|
|
|
|
|
|
|
|
|
|
|
2,590 |
|
Issue of shares upon conversion of convertible note |
|
|
|
|
|
|
|
|
|
|
3,322,260 |
|
|
|
228 |
|
|
|
80,764 |
|
|
|
|
|
|
|
|
|
|
|
80,992 |
|
Issue of shares upon exercise of stock purchase warrant |
|
|
|
|
|
|
|
|
|
|
14,776 |
|
|
|
1 |
|
|
|
(1 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Issue of shares upon exercise of Warrant B |
|
|
|
|
|
|
|
|
|
|
222,821 |
|
|
|
15 |
|
|
|
3,041 |
|
|
|
|
|
|
|
|
|
|
|
3,056 |
|
Stock-based compensation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,706 |
|
|
|
|
|
|
|
|
|
|
|
8,706 |
|
Components of comprehensive loss: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(38,469 |
) |
|
|
|
|
|
|
(38,469 |
) |
Net unrealized gain on available-for-sale securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,228 |
|
|
|
9,228 |
|
Translation adjustment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4,230 |
) |
|
|
(4,230 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive loss for the year |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(33,471 |
) |
|
|
|
Balance at December 31, 2009 |
|
|
1,000,000 |
|
|
|
77 |
|
|
|
19,300,390 |
|
|
|
1,463 |
|
|
|
482,329 |
|
|
|
(384,299 |
) |
|
|
(1,869 |
) |
|
|
97,701 |
|
Issue of shares, net of offering costs |
|
|
|
|
|
|
|
|
|
|
3,064,827 |
|
|
|
203 |
|
|
|
52,324 |
|
|
|
|
|
|
|
|
|
|
|
52,527 |
|
Shares issued upon exercise of stock options |
|
|
|
|
|
|
|
|
|
|
59,999 |
|
|
|
4 |
|
|
|
752 |
|
|
|
|
|
|
|
|
|
|
|
756 |
|
Stock-based compensation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,015 |
|
|
|
|
|
|
|
|
|
|
|
8,015 |
|
Issue of warrants |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,491 |
|
|
|
|
|
|
|
|
|
|
|
2,491 |
|
Components of comprehensive loss: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(35,121 |
) |
|
|
|
|
|
|
(35,121 |
) |
Net unrealized loss on available-for-sale securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(9,374 |
) |
|
|
(9,374 |
) |
Translation adjustment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,721 |
) |
|
|
(1,721 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive loss for the year |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(46,216 |
) |
|
|
|
Balance at December 31, 2010 |
|
|
1,000,000 |
|
|
|
77 |
|
|
|
22,425,216 |
|
|
|
1,670 |
|
|
|
545,911 |
|
|
|
(419,420 |
) |
|
|
(12,964 |
) |
|
|
115,274 |
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
F-6
CHINA TECHNOLOGY DEVELOPMENT GROUP CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts expressed in thousands)
For the years ended December 31, 2008, 2009 and 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
|
2009 |
|
|
2010 |
|
|
2010 |
|
|
|
Rmb |
|
|
Rmb |
|
|
Rmb |
|
|
US$ |
|
Cash flows from operating activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
|
(53,918 |
) |
|
|
(38,469 |
) |
|
|
(35,121 |
) |
|
|
(5,319 |
) |
Adjustments to reconcile net loss to net cash used in operating activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation |
|
|
8,738 |
|
|
|
8,706 |
|
|
|
8,015 |
|
|
|
1,214 |
|
Warrants granted as service compensations |
|
|
|
|
|
|
|
|
|
|
2,491 |
|
|
|
377 |
|
Impairment on property, plant and equipment |
|
|
|
|
|
|
6,463 |
|
|
|
591 |
|
|
|
89 |
|
Impairment on inventories |
|
|
|
|
|
|
346 |
|
|
|
|
|
|
|
|
|
Amortization of intangible assets |
|
|
|
|
|
|
|
|
|
|
220 |
|
|
|
33 |
|
Amortization of long-term prepayment for land use right |
|
|
90 |
|
|
|
90 |
|
|
|
90 |
|
|
|
14 |
|
Depreciation |
|
|
2,093 |
|
|
|
2,425 |
|
|
|
2,043 |
|
|
|
309 |
|
Loss (gain) on disposal of available-for-sale securities |
|
|
14,049 |
|
|
|
(111 |
) |
|
|
213 |
|
|
|
32 |
|
Gain on disposal of trading securities |
|
|
|
|
|
|
|
|
|
|
(5,196 |
) |
|
|
(787 |
) |
Change in fair value of trading securities |
|
|
|
|
|
|
|
|
|
|
(1,162 |
) |
|
|
(176 |
) |
Change in fair value of investment in convertible note |
|
|
|
|
|
|
|
|
|
|
(1,917 |
) |
|
|
(290 |
) |
Impairment on available-for-sale securities |
|
|
15,213 |
|
|
|
|
|
|
|
3,549 |
|
|
|
538 |
|
Impairment on other investments |
|
|
|
|
|
|
571 |
|
|
|
489 |
|
|
|
74 |
|
Impairment on deposit for business acquisition |
|
|
|
|
|
|
|
|
|
|
10,301 |
|
|
|
1,560 |
|
Finance costs |
|
|
|
|
|
|
5,760 |
|
|
|
|
|
|
|
|
|
Loss on debt extinguishment |
|
|
|
|
|
|
3,434 |
|
|
|
|
|
|
|
|
|
Change in fair value of derivative embedded in convertible note |
|
|
|
|
|
|
5,040 |
|
|
|
|
|
|
|
|
|
Change in fair value of warrants and option rights |
|
|
1,236 |
|
|
|
(3,798 |
) |
|
|
(555 |
) |
|
|
(84 |
) |
Gain on disposal of subsidiaries |
|
|
|
|
|
|
(4,560 |
) |
|
|
|
|
|
|
|
|
Deferred tax benefit |
|
|
(112 |
) |
|
|
(112 |
) |
|
|
(167 |
) |
|
|
(25 |
) |
Changes in assets and liabilities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Decrease (increase) in trade accounts receivable |
|
|
289 |
|
|
|
398 |
|
|
|
(13,662 |
) |
|
|
(2,069 |
) |
Decrease (increase) in inventories |
|
|
16 |
|
|
|
(428 |
) |
|
|
(979 |
) |
|
|
(148 |
) |
(Increase) decrease in due from related parties and other current
assets |
|
|
201 |
|
|
|
(6,519 |
) |
|
|
1,230 |
|
|
|
186 |
|
Increase in value added tax and business tax recoverable |
|
|
|
|
|
|
|
|
|
|
(4,152 |
) |
|
|
(629 |
) |
(Decrease) increase in trade accounts payable |
|
|
(267 |
) |
|
|
(124 |
) |
|
|
10,539 |
|
|
|
1,596 |
|
Increase in government subsidies |
|
|
|
|
|
|
300 |
|
|
|
|
|
|
|
|
|
Increase in amount due to related parties |
|
|
2,301 |
|
|
|
|
|
|
|
2,548 |
|
|
|
386 |
|
(Decrease) increase in other current liabilities and accrued expenses |
|
|
(4,348 |
) |
|
|
2,260 |
|
|
|
(11,429 |
) |
|
|
(1,731 |
) |
(Decrease) increase in income taxes payable |
|
|
(600 |
) |
|
|
|
|
|
|
63 |
|
|
|
10 |
|
Increase in taxes recoverable |
|
|
(112 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Decrease in cash classified as held for sale |
|
|
|
|
|
|
1,060 |
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in operating activities |
|
|
(15,131 |
) |
|
|
(17,268 |
) |
|
|
(31,958 |
) |
|
|
(4,840 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Decrease (increase) in account maintained with a security broker |
|
|
11 |
|
|
|
(20 |
) |
|
|
|
|
|
|
|
|
Acquisitions of subsidiaries, net of cash acquired |
|
|
|
|
|
|
|
|
|
|
1,415 |
|
|
|
214 |
|
Cash and cash equivalents disposed of upon disposal of subsidiaries, net of
cash received |
|
|
|
|
|
|
(830 |
) |
|
|
|
|
|
|
|
|
Proceeds from disposal of available-for-sale securities and trading securities |
|
|
14,633 |
|
|
|
28,794 |
|
|
|
33,813 |
|
|
|
5,121 |
|
Purchase of available-for-sales securities and trading securities |
|
|
(13,100 |
) |
|
|
(46,853 |
) |
|
|
(28,427 |
) |
|
|
(4,306 |
) |
Investment in convertible notes |
|
|
|
|
|
|
|
|
|
|
(14,280 |
) |
|
|
(2,163 |
) |
Prepayment for acquisition of property and equipment |
|
|
(4,525 |
) |
|
|
4,525 |
|
|
|
|
|
|
|
|
|
Prepayment for business acquisition |
|
|
|
|
|
|
(20,602 |
) |
|
|
(10,301 |
) |
|
|
(1,560 |
) |
Purchases of property, plant and equipment |
|
|
(10,972 |
) |
|
|
(805 |
) |
|
|
(4,189 |
) |
|
|
(634 |
) |
|
|
|
Net cash used in investing activities |
|
|
(13,953 |
) |
|
|
(35,791 |
) |
|
|
(21,969 |
) |
|
|
(3,328 |
) |
F-7
CHINA TECHNOLOGY DEVELOPMENT GROUP CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(Amount expressed in thousands)
For the years ended December 31, 2008, 2009 and 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
|
2009 |
|
|
2010 |
|
|
2010 |
|
|
|
Rmb |
|
|
Rmb |
|
|
Rmb |
|
|
US$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from issue of common stock, warrants and/or option rights |
|
|
9,365 |
|
|
|
1,240 |
|
|
|
39,664 |
|
|
|
6,008 |
|
Offering costs for issue of common stock, warrants and/or option rights |
|
|
(469 |
) |
|
|
(74 |
) |
|
|
(1,991 |
) |
|
|
(302 |
) |
Proceeds from exercise of stock options |
|
|
358 |
|
|
|
2,590 |
|
|
|
756 |
|
|
|
115 |
|
Proceeds from issue of convertible note, net of issuance costs |
|
|
|
|
|
|
68,672 |
|
|
|
|
|
|
|
|
|
Overdraft from security account |
|
|
1,499 |
|
|
|
(1,499 |
) |
|
|
|
|
|
|
|
|
Contribution by a substantial shareholder- CTIG |
|
|
7,923 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from draw down of a short term loan |
|
|
|
|
|
|
|
|
|
|
6,041 |
|
|
|
915 |
|
|
|
|
Net cash generated from financing activities |
|
|
18,676 |
|
|
|
70,929 |
|
|
|
44,470 |
|
|
|
6,736 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash and cash equivalents |
|
|
(668 |
) |
|
|
(29 |
) |
|
|
(1,140 |
) |
|
|
(173 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (decrease) increase in cash and cash equivalents |
|
|
(11,076 |
) |
|
|
17,841 |
|
|
|
(10,597 |
) |
|
|
(1,605 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at beginning of year |
|
|
18,906 |
|
|
|
6,770 |
|
|
|
24,611 |
|
|
|
3,728 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: Cash and cash equivalents at end of period from
discontinued operations |
|
|
(1,060 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of year |
|
|
6,770 |
|
|
|
24,611 |
|
|
|
14,014 |
|
|
|
2,123 |
|
|
|
|
Supplemental disclosure of cash flow information |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest paid |
|
|
475 |
|
|
|
39 |
|
|
|
83 |
|
|
|
13 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure non-cash investing and financing activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issue of warrants as offering costs for financing
activities in 2008 and 2009 |
|
|
682 |
|
|
|
54 |
|
|
|
|
|
|
|
|
|
Construction costs funded through accrued expenses and
other current liabilities |
|
|
|
|
|
|
231 |
|
|
|
|
|
|
|
|
|
Conversion of convertible note in 2009 |
|
|
|
|
|
|
82,975 |
|
|
|
|
|
|
|
|
|
Purchase of property, plant and equipment funded
through accrued expenses and other current liabilities |
|
|
81 |
|
|
|
66 |
|
|
|
82 |
|
|
|
12 |
|
Business acquisition through issuance of shares (Note 3) |
|
|
|
|
|
|
|
|
|
|
14,854 |
|
|
|
2,215 |
|
The accompanying notes are an integral part of these consolidated financial statements.
F-8
CHINA TECHNOLOGY DEVELOPMENT GROUP CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts expressed in thousands, except share data or unless otherwise stated)
1 Nature of operations and basis of presentation
China Technology Development Group Corporation (the Company or CTDC) was incorporated
under the laws of the British Virgin Islands (BVI) on September 19, 1995 as a holding company.
The consolidated financial statements include the financial statements of the Company and its
subsidiaries (hereinafter collectively referred to as the Group).
On June 30, 2000, Jingle Technology Co., Ltd. (Jingle), the Companys wholly owned
subsidiary incorporated in BVI, entered into an agreement with China Internet Technology Co. Ltd.
(China Internet) and Great Legend Internet Technology and Service Co. Ltd. (Great Legend) to
acquire all of the outstanding shares of BHL Networks Technology Co. Ltd. (BHLNet), a company
incorporated under the laws of the Cayman Islands, which owns a 76% interest in Beijing BHL
Networks Technology Co. Ltd. (BBHL), a company incorporated under the laws of China.
On September 13, 2005, CTDC entered into a sale and purchase agreement with Beijing Holdings
Limited (Beijing Holdings), its then 47.18% shareholder, to acquire 51% and 49% equity interests
of China Natures Technology Inc. (CNT) and its interest in majority-owned subsidiaries, through
two separate transactions: the first transaction was effective from October 31, 2005 for
consideration of 2,233,800 common shares of CTDC; and the second transaction was effective from
December 22, 2005 for a consideration of 2,146,200 common shares of CTDC. Through the acquisition
of CNT and its interest in majority-owned subsidiaries, CTDC commenced its business of the
development, manufacturing and marketing of health food products utilizing bio-active components of
bamboo (Nutraceutical Operations). Due to the dispute between the minority shareholders of Anji
Science Bio-Product Inc. (Anji Bio), one of the major operating subsidiaries which was engaged in
Nutraceutical Operations, on December 29, 2006 management of the Company decided to abandon Anji
Bio and discontinue the Nutraceutical Operations.
On September 7, 2007, the management of the Company approved the Groups strategic plan and
decided to enter into the business of the development and manufacturing of solar energy products
(Solar Energy Operations) in order to become a provider of clean and renewable energy products
focusing on solar energy business. On December 10, 2007, the Group acquired Faster Assets Limited
(Faster Assets), a BVI company which owns 100% equity interest in China Merchants Zhangzhou
Development Zone Broad Shine Solar Technology Ltd. (Broad Shine), incorporated under laws of
China (collectively Faster Group) from CTIG, in order to enable the Group to enter into the Solar
Energy Operations. In return, the Company issued 782,168 shares of common stock (Common Stock)
and 1,000,000 shares of Series A preferred stock (Preferred Stock) to CTIG, one of the major
shareholders of CTDC, for consideration of Rmb20,700.
On December 29, 2008, the Company entered into a sale and purchase agreement to sell its
wholly-owned subsidiary Jingle and its subsidiaries, BHLNet and BBHL (collectively, Jingle
Group), to Sentron Enterprises Limited, an independent party for a cash consideration of HK$200.
(See Note 5 for details of disposal and discontinued operations).
On October 27, 2009, the Company entered into a Stock Purchase Agreement with China Technology
Solar Power Holdings Limited ( CTSPHL), and its direct and indirect shareholders to acquire a 51%
equity interest in CTSPHL. CTSPHL, through its wholly-owned subsidiary, is developing a 100
megawatt grid-connected solar power plant project located in Delingha City of Qaidam Basin in
Qinghai Province, Northwestern China. In connection therewith, the Company paid US$3,000 in cash to
Good Million Investment Ltd., the direct shareholder of CTSPHL, as a prepayment for the transaction
upon execution of the Stock Purchase Agreement. The Stock Purchase Agreement was terminated on
October 11, 2010 after discussion between the parties. Refer to Note 20 for details.
On April 28, 2010, the Group entered into a Cooperation Framework Agreement with Xintang Media
Technology (Beijing) Limited (Xintang), its shareholders and associated companies, pursuant to
which the Group intended to acquire 100% equity interests in Xintang indirectly. Xintang is a
company incorporated in China and conducts advertising and media business in China. Pursuant to
this proposed investment, the Company paid Rmb10,301 to Xintang and its shareholders as a
prepayment. Since certain of the aforesaid conditions precedent had not been satisfied, the
parties decided not to proceed with the transaction and to terminate the cooperation framework
agreement. See Note 7 for more details.
On November 5, 2010, the Group, together with China Green Holdings Limited, one of the
Companys wholly-owned subsidiaries, entered into a stock purchase agreement with Linsun Renewable
Energy Corporation Limited (LSRHK) and its shareholders, pursuant to which the Company purchased
and acquired 100% of the equity interests in LSRHK and its wholly-owned subsidiary Linsun Power
Technology (Quanzhou) Corp. Ltd. (LSPPRC), collectively known as (Linsun Group) from its
shareholders at a consideration of US$2,215, settled by the issuance of 1,064,827 shares of the
Companys common stock. The acquisition was completed on November 23, 2010 and LSRHK became one of
the Companys wholly-owned subsidiaries. Linsun Group is engaged in manufacturing and sale of
crystalline PV modules. See Note 3 for more details.
F-9
CHINA TECHNOLOGY DEVELOPMENT GROUP CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts expressed in thousands, except share data or unless otherwise stated)
1 Nature of operations and basis of presentation (Contd)
During
the year ended December 31, 2008, 2009 and 2010, the Group reported
net loss of approximately Rmb53,918, Rmb38,469 and Rmb35,121
respectively. During the year ended December 31, 2008, 2009 and 2010, the Group reported net
negative cash flow from operations of approximately Rmb15,131,
Rmb17,268 and Rmb31,958 respectively. The cash and cash
equivalent balance as at December 31, 2010 was Rmb14,014.
The
directors of the Company believe that the Group will be able to generate adequate cash flow
to finance its operations and meet its cash obligations in the following 12 months from December 31,
2010 based on the following:
|
|
|
positive operating cash flows are expected to be generated from the
profitable operations of manufacturing and sale of solar modules; |
|
|
|
|
realization in the open market of available for sale and trading securities
with ending carrying amounts at approximately Rmb34,549 as of December 31, 2010, for
cash; and |
|
|
|
|
tight controls exercised by the board of directors on timing and magnitude of
cash outlays for investments initiatives; and |
|
|
|
|
proceeds from sales of equity and/or debt securities to
investors and borrowings, as would be considered necessary. |
Accordingly, the financial statements as of December 31, 2010 had been prepared on a going
concern basis.
2 Summary of significant accounting policies
The accompanying consolidated financial statements of the Group have been prepared in
accordance with the accounting principles generally accepted in the United States of America (US
GAAP).
(a) Consolidation
The consolidated financial statements include the financial statements of the Company and its
wholly owned or controlled subsidiaries. All significant inter-company balances and transactions
have been eliminated upon consolidation.
The operating results of subsidiaries acquired during the year are included in the
accompanying consolidated statements of operations from the effective date of acquisition.
Historical operating results of segments disposed of are included in discontinued operations.
(b) Business combinations
The Group accounts for its business combinations using the purchase method of accounting. This
method requires that the acquisition cost to be allocated to the assets, including separately
identifiable intangible assets, and liabilities the Group acquired based on their estimated fair
values.
The cost of an acquisition is measured as the aggregate of the fair values at the date of exchange
of the assets given, liabilities incurred, and equity instruments issued as well as the contingent
considerations and all contractual contingencies as of the acquisition date. The costs directly
attributable to the acquisition are expensed as incurred. Identifiable assets, liabilities and
contingent liabilities acquired or assumed are measured separately at their fair value as of the
acquisition date, irrespective of the extent of any non-controlling interests. The excess of (i)
the total of cost of acquisition, fair value of the non-controlling interests and acquisition date
fair value of any previously held equity interest in the acquiree over (ii) the fair value of the
identifiable net assets of the acquiree is recorded as goodwill. If the cost of acquisition is less
than the fair value of the net assets of the subsidiary acquired, the difference is recognized
directly in the income statement.
The determination and allocation of fair values to the identifiable assets acquired and liabilities
assumed is based on various assumptions and valuation methodologies requiring considerable
management judgment. The most significant
variables in these valuations are discount rates, terminal values, the number of years on which to
base the cash flow projections, as well as the assumptions and estimates used to determine the cash
inflows and outflows. The Company determines discount rates to be used based on the risk inherent
in the related activitys current business model and industry comparisons. Terminal values are
based on the expected life of assets and forecasted life cycle and forecasted cash flows over that
period. Although the Company believes that the assumptions applied in the determination are
reasonable based on information available at the date of acquisition, actual results may differ
from the forecasted amounts and the difference could be material.
F-10
CHINA TECHNOLOGY DEVELOPMENT GROUP CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts expressed in thousands, except share data or unless otherwise stated)
2 Summary of significant accounting policies (continued)
(c) Use of Estimates
The preparation of the consolidated financial statements in conformity with US GAAP requires
management of the Group to make a number of estimates and assumptions relating to the reported
amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the
date of the consolidated financial statements and the reported amounts of revenues and expenses
during the period. Significant accounting estimates reflected in the Groups consolidated financial
statements included the valuation of deferred tax assets, useful lives and impairment of property,
plant and equipment, goodwill and intangible assets, impairment of inventories, impairment of
available-for-sale securities, impairment of deposits made for proposed acquisitions, and fair
value of stock options and financial instruments. Actual results could differ from those estimates.
(d) Revenues
Revenues arise from product sales and the rendering of services. Revenue is recognized when
all of the following criteria are met: (i) persuasive evidence of an arrangement exists; (ii)
delivery has occurred or services have been rendered; (iii) the sellers price to the buyer is
fixed or determinable; and (iv) collectability is reasonably assured. Specifically, product sales
represent the invoiced value of goods, net of discounts, supplied to customers. Revenues from
product sales are recognized upon delivery to customers, when the products have been accepted by
customers and when title has been passed. Rendering of services represents fees charged on the
provision of information technology and network security consulting services. Fees on such services
are subject to acceptance and are recognized upon the completion of the underlying services, the
receipt of customers acceptance and when collectability of the fees is reasonably assured.
The Companys subsidiaries are subject to value-added tax of 17% or business tax of 5% on the
revenue earned for goods and services, respectively, sold in the Peoples Republic of China
(PRC). The Group presents revenue, net of such value-added tax or business tax, which amounted to
Rmb5,518, Rmb4 and Rmb53,700 for the years ended December 31, 2008, 2009 and 2010, respectively.
(e) Income Taxes
Income taxes are provided using the assets and liability method in accordance with ASC 740
(formerly referred No. 109, Income Taxes, Accounting for Income Taxes). Deferred tax assets and
liabilities are recognized for the estimated future tax consequences attributable to differences
between the carrying amounts of existing assets and liabilities in the consolidated financial
statements and their respective tax bases and operating loss and tax credit carryforwards. Deferred
tax assets and liabilities are measured using enacted tax rates in effect for the year in which
those temporary differences are expected to be recovered or settled. The effect on deferred tax
asset and liabilities of a change in tax rates is recognized in income in the period that includes
the enactment date. The tax consequences of these differences are classified as current or
non-current based on the classification of the related asset or liability for financial reporting.
A valuation allowance is provided to reduce the amount of deferred tax assets if it is considered
more likely than not that some portion of, or all of, the deferred tax assets will not be realized.
The Group has no material uncertain tax positions as of December 31, 2008, 2009 and 2010.
F-11
CHINA TECHNOLOGY DEVELOPMENT GROUP CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts expressed in thousands, except share data or unless otherwise stated)
2 Summary of significant accounting policies (continued)
(f) Concentration of credit risk
During the year ended 31 December 2010, the Group started to engage in the business of
manufacturing and selling solar modules to industrial users. All the Groups revenue is derived
from sales to customers located in PRC, Hong Kong and Europe. For the year ended 31 December 2010,
4 customers accounted for 29.3%, 24.2%, 16.3% and 12.8% of the Companys net revenue respectively.
Financial instruments that potentially subject the Company to significant concentrations of credit
risk consist primarily of cash and cash equivalents, trade accounts receivable and amounts due from
related parties. As of December 31, 2009 and 2010, substantially all of the Companys cash and cash
equivalents were held by major financial institutions located in the PRC and Hong Kong, which the
management believes are of high credit quality. The Company has also put in place policies to
ensure that sale of goods to customers with an appropriate credit history and the Company performs
periodic credit evaluations of its customers. As of December 31, 2009, the Group did not have
trade accounts receivable balance.
(g) Foreign currency transaction gains and losses and translation of foreign currencies
Transactions denominated in other currencies are translated into the functional currency of
the respective entities at exchange rates prevailing at the dates of the transactions. Monetary
assets and liabilities denominated in foreign currencies are translated into functional currencies
at rates of exchange in effect on the balance sheet dates. All such exchange gains and losses are
included in the statements of operations.
The functional currency of the Company is Hong Kong dollar (HK$). The functional currency of
the subsidiaries of the Group that are established in the PRC is Renminbi (Rmb). The Group has
chosen Rmb as its reporting currency. Assets and liabilities are translated using the exchange
rates in effect at the balance sheet date and average exchange rates for the period are used for
translation of revenue and expense transactions. Gains and losses resulting from foreign currency
translation to reporting currency are recorded in accumulated other comprehensive (loss) income in
the consolidated statements of changes in shareholders equity for the years presented.
As majority of commercial transactions are conducted in the respective functional currency of
the entities within the Group, the foreign exchange risks are minimal. The Group is however exposed
to foreign currency risk on certain financing activities, which are denominated in the United
States Dollars (U.S. dollars or US$). Due to the fact that HK$ is pegged to the U.S. dollars,
the management considers the foreign exchange exposure to fluctuation in exchange rate between US$
and HK$ to be minimal.
The Group does not have a foreign currency hedging policy. However, management of the Group
monitors foreign exchange exposure and will consider hedging significant currency exposure should
the need arise.
(h) Translation into United States Dollars
The consolidated financial statements of the Group are presented in Rmb. Translations of
amounts from Rmb into U.S. dollars are solely for the convenience of the reader and were calculated
at the rate of (Rmb6.60231=US$1) on December 31, 2010 representing the exchange rates set forth in
the H.10 statistical release of the U.S. Federal Reserve Board. The translation is not intended to
imply that the Rmb amounts could have been, or could be, converted, realized or settled into U.S.
dollars at that rate on December 31, 2010 or at any other rate.
(i) Property, plant and equipment and land use right
Property, plant and equipment are stated at historical cost less accumulated depreciation.
Depreciation is computed using the straight-line method over the estimated useful lives of the
respective assets. The estimated useful lives of property, plant and equipment are as follows:
|
|
|
|
|
Buildings |
|
20 years |
Plant and machinery |
|
10 years |
Computer equipment |
|
3 years |
Furniture, fixtures and office equipment |
|
3 years |
Motor vehicles |
|
5 years |
F-12
CHINA TECHNOLOGY DEVELOPMENT GROUP CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts expressed in thousands, except share data or unless otherwise stated)
2 Summary of significant accounting policies (continued)
(i) Property, plant and equipment and land use right (continued)
All land in the PRC is owned by the government. According to PRC law, the government may sell
the right to use of the land for a specified period of time. Thus, all of the land use rights
purchased by the Group in the PRC are considered to be leasehold land and classified as land use
right. These land use rights are amortized on a straight-line basis over the term of the land use
rights of 50 years. Amortization expense was Rmb90, Rmb90 and Rmb90 for years ended December 31,
2008, 2009 and 2010, respectively.
(j) Construction in progress
Construction in progress represents buildings, structures, plant and machinery and other
property, plant and equipment under construction or installation and is stated at cost less any
impairment losses, and is not depreciated. Cost comprises direct costs of construction,
installation and testing as well as capitalized borrowing costs on related borrowed funds during
the period of construction or installation. No interest was capitalized for the years ended
December 31, 2008, 2009 and 2010. Construction in progress is reclassified to the appropriate
category of property, plant and equipment when completed and ready for use.
(k) Intangible assets acquired through business combinations
An intangible asset is required to be recognized separately from goodwill based on its estimated
fair value if such asset arises from contractual or legal right or if it is separable as defined by
ASC 805 (formerly referred to as SFAS No. 141 (Revised 2007) Business Combinations). Intangible
assets arising from the acquisitions of subsidiaries are initially recognized and measured at
estimated fair value upon acquisition. Amortization is computed using the straight-line method over
the following estimated useful lives:
|
|
|
|
|
Long term supply contract |
|
5 years |
Customer relationship |
|
5 years |
(l) Goodwill
Goodwill is measured as the excess of (i) the total of cost of acquisition, fair value of the
non controlling interests and acquisition date fair value of any previously held equity interest in
the acquiree over (ii) the fair value of the identifiable net assets of the acquiree. If the cost
of acquisition is less than the fair value of the net assets of the subsidiary acquired, the
difference is recognized directly in the income statement. In a business combination, any acquired
intangible assets that do not meet separate recognition criteria as specified in ASC 805 are
included within goodwill.
In accordance with ASC 350 (formerly referred to as SFAS No. 142 Goodwill and other intangible
assets), no amortization is recorded for goodwill. Goodwill is tested for impairment annually or
more frequently if events or changes in circumstances indicate that it might be impaired. In
December of each year, the Company tests impairment of goodwill at the reporting unit level and
recognizes impairment in the event that the carrying value exceeds the fair value of each reporting
unit. No impairment losses were recorded in the years ended December 31, 2008, 2009 and 2010.
(m) Impairment or disposal of long lived assets
Long-lived assets are assessed for impairment when events and circumstances exist that
indicate the carrying amount of these assets may not be recoverable. Determination of
recoverability is based on an estimate of undiscounted future cash flows resulting from the use of
the asset and its eventual disposition. Measurement of any
impairment loss for long-lived assets and certain identifiable intangible assets that
management expects to hold and use is based on the amount the carrying value exceeds the fair value
of the asset. No impairment charge was recognized for the year ended December 31, 2008. Impairment
of property, plant and equipment of RMB6,463 and Rmb591 was recognized for the years ended December
31, 2009 and 2010 respectively.
Long-lived assets to be disposed of are stated at the lower of fair value less cost to sell or
carrying amount. Expected future operating losses from discontinued operations are recorded in the
periods in which the losses are incurred.
F-13
CHINA TECHNOLOGY DEVELOPMENT GROUP CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts expressed in thousands, except share data or unless otherwise stated)
2 Summary of significant accounting policies (continued)
(n) Trade accounts receivable
Trade accounts receivable are stated at the amount invoiced, less allowance for doubtful
accounts. An allowance for doubtful accounts is recorded based on a combination of historical
experience, aging analysis and information on specific accounts. Account balances are written off
against the allowance after all means of collection have been exhausted and the potential for
recovery is considered remote. Management has determined that no allowance is required at December
31, 2008, 2009 and 2010.
(o) Inventories
Inventories are carried at the lower of cost or net realizable value. Cost is determined using
the weighted average method. Net realizable value is determined by reference to the sales proceeds
of items sold in the ordinary course of business or to a management estimate based on prevailing
market conditions.
(p) Cash and cash equivalents
Cash and cash equivalents include cash on hand, demand deposits with banks and liquid
investments with an original maturity of three months or less. The carrying value of cash
equivalents approximates their fair value.
(q) Investment in securities
The Company accounts for its investments in accordance with ASC 320 (formerly SFAS 115,
Accounting for Certain Investments in Debt and Equity Securities). The Company classifies the
investments in debt and equity securities as trading or available-for-sale. Investments that
are bought and held principally for the purpose of selling them in the near term are classified as
trading securities. Trading securities are reported at fair value with unrealized gains and losses
included in investment income. The Company does not have investments that are classified as
held-to-maturity.
Investments designated as available-for-sale (AFS) are reported at fair value, with
unrealized gains and losses, net of tax, recorded in accumulated other comprehensive (loss) income
in shareholders equity. Realized gains or losses are charged to the income during the period in
which the gain or loss is realized.
The Group reviews its investment in AFS for potential impairment based on: the length of the
time and extent to which the market value has been below cost; the financial condition and
near-term prospects of the issuer of the AFS; and its intent and ability to retain the AFS for a
period of time sufficient to allow for any anticipated recovery in market value. If it is
determined that the impairment is other than temporary, an impairment loss will be recognized in
earnings equal to the difference between the investments cost and its fair value at the balance
sheet date of the reporting period for which the assessment is made. The fair value of the
investment becomes the new cost basis of the investment and will not be adjusted for subsequent
recoveries in fair value. Subsequent increases and decreases in the fair value of AFS will be
included in comprehensive income through a credit or charge to shareholders equity except for an
other-than-temporary impairment, which will be charged to income.
Other investments, which do not have readily determinable fair values, are carried at cost
less impairment.
During the years ended December 31, 2008, 2009 and 2010,, impairment on AFS of Rmb15,213, nil
and Rmb3,549 was recognized, respectively in the consolidated statements of operations.
(r) Fair value Measurement
The carrying value of the Groups financial instruments, including cash and cash equivalents,
trading securities and available-for-sale securities, trade accounts receivable, value added tax
and business tax recoverable, other assets and trade accounts payable, accrued professional fees,
liabilities relating to warrants, short term loan and other current liabilities and accrued
expenses, approximate their fair values due to their relatively short-term nature.
(s) Research and development costs
Research and development (R&D) costs are incurred in the development of the new products and
processes, including significant improvements and refinements to existing products. R&D costs are
expensed as incurred.
F-14
CHINA TECHNOLOGY DEVELOPMENT GROUP CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts expressed in thousands, except share data or unless otherwise stated)
2 Summary of significant accounting policies (continued)
(t) Employee benefit plans
As stipulated by the regulations of the PRC, the Groups subsidiaries in the PRC participate
in various defined contribution plans organized by the municipal provincial governments for its
employees. The Group is required to make contributions to these plans at a percentage of the
salaries, bonuses and certain allowances of the employees. Under these plans, certain pension,
medical and other welfare are provided to employees after their retirement. The Group has no other
material obligation for the payment of employee benefits associated with these plans beyond the
annual contribution described above.
The contributions are charged to the consolidated statement of operations as they become
payable in accordance with the rules of the respective plans. For the years ended December 31,
2008, 2009 and 2010, the Group contributed Rmb672, Rmb211 and Rmb285, respectively, to the plans.
(u) Segment reporting
At the end of 2008, the Company classified Jingle Group as a discontinued operation. The
Company disposed of Jingle Group in Feburary 2009. Therefore, during 2008, 2009 and 2010, the
Groups continuing business is solely of one operating segement, which is the provision of Solar
Energy Operations. All of the Groups revenues are derived in the PRC, Hong Kong and Europe. All
long-lived assets are located in PRC.
(v) Comprehensive (loss) income
Accumulated other comprehensive (loss) income represents foreign currency translation
adjustments and the unrealized (loss) income on available-for-sale securities, net of tax, and is
included in the consolidated statements of shareholders equity.
(w) Advertising costs
The Group expenses advertising costs as incurred. Total advertising expenses included in the
consolidated statements of operations were Rmb15, Rmb4 and Rmb11 for the years ended December 31,
2008, 2009 and 2010, respectively.
(x) Earnings or loss per share
Basic earnings or loss per share represents income available to common shareholders divided by
the weighted-average number of common shares outstanding during the period. Diluted earnings or
loss per share reflects additional common shares that would have been outstanding if dilutive
common stock equivalents were issued, as well as any adjustment to income that would result from
the assumed issuance. Dilutive common stock equivalents that may be issued by the Group relate to
outstanding stock options and warrants, and are determined using the treasury stock method. The
effect of stock purchase warrants, stock options, warrants, option rights and convertible note is
excluded from the computation if the effect would be anti-dilutive.
(y) Stock-based compensation
The Group grants stock options to its employees and certain non-employees under the Companys
stock option plans. The Group follows ASC 718 (formerly referred to as SFAS No. 123 (revised 2004)
Share-Based Payment), whereby entities are required to measure the cost of employee services
received in exchange for an award of equity instruments based on the grant-date fair value of the
award (with limited exceptions). That cost will be recognized over the period during which an
employee is required to provide service, known as the requisite service period (usually the vesting
period), in exchange for the award. The grant-date fair value of employee share options and similar
instruments are estimated using option-pricing models. If an equity award is modified after the
grant date, incremental compensation cost is recognized in an amount equal to the excess of the fair value
of the modified award over the fair value of the original award immediately before the
modification.
(z) Convertible note
As discussed in Note 21, the Company issued a convertible note to a subscriber during 2009.
In accordance with ASC 815, Derivatives and Hedging, the Company accounted for the conversion
option as a freestanding instrument separately in the balance sheet. The debt host were recorded
with a discount equal to the value of the conversion option at the transaction date and will be
accreted to the redemption value of the convertible note over the life of the convertible note. The
change in fair value of the conversion option of Rmb5,040 was recorded in the consolidated
statements of operations for the year ended December 31, 2009. The interest expense recognized for
accretion to the redemption value of the convertible note was Rmb5,760 for the year ended December
31, 2009. Upon the conversion of convertible note, the loss on extinguishment, the difference
between the sum of the recorded amounts for the debt host and the conversion option, and the fair
value of the shares issued at the conversion date, of Rmb3,434 was recorded in the consolidated
statements of operations for the year ended December 31, 2009.
F-15
CHINA TECHNOLOGY DEVELOPMENT GROUP CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts expressed in thousands, except share data or unless otherwise stated)
2 Summary of significant accounting policies (continued)
(aa) Warrants and option rights
As detailed in Note 17, the Company issued common shares to certain
institutional investors attached with certain warrants and option
rights. In accordance with ASC 815 (formerly contained in FAS133 and
EITF00-19), the Company accounted for Warrant B (described in Note
17) as a liability instrument and it is carried at fair value with
changes in fair value being recorded in the consolidated statement of
operations. Warrant A and option rights (both described in Note 17)
were recorded as equity instruments. With the adoption of ASC
815-40-15 (earlier referred to as EITF 07-5) as of January 1, 2009,
Warrant A and option rights are classified as liabilities as Warrant
A contain a reset feature, whereby the exercise price of the
instruments would be reset to the market price if the market price is
lower than the exercise price at a specified date and option rights
contain similar features whereby the number of shares to be finally
issued under option rights are not fixed. Following the guidance
under ASC 815-40-15, the Company has recorded the cumulative effect
of such change as an adjustment to the opening balance of retained
earnings. Accordingly, both warrants and option rights are carried at
fair value at each reporting date with changes in fair value being
recorded in the consolidated statements of operations. The fair value
of the warrants and option rights are estimated using the Binomial
Model and Monte Carlo simulation.
(ab) Operating leases
Leases where substantially all the risk and rewards of ownership of assets remain with the
lessor are accounted for as operating leases. Payments made under operating leases net of any
incentives received from the leasing company are expensed on a straight-line basis over the lease
periods.
(ac) Government subsidies
Government subsidies are initially recorded as advanced subsidies and are recognized in income
when the associated obligations for earning such subsidies have been met. The Company received
government subsidies for general corporate purposes of Nil, Rmb900 and Nil during the years ended
December 31, 2008, 2009 and 2010, respectively, of which the Company has recognized government
subsidies of Nil, Rmb600 and Nil, respectively, as other income.
(ad) Shipping and handling
Expenses of Nil, Nil and Rmb3,125 related to shipping and handling costs were recognized as
selling expenses in the years ended December 31, 2008, 2009 and 2010, respectively in consolidated
statement of operations.
(ae) Recent accounting pronouncements
In April 2010, the FASB issued ASU 2010-13, Effect of Denominating the Exercise Price of a
Share-Based Payment Award in the Currency of the Market in which the Underlying Equity Security
TradesUpdates the guidance in ASC 718, CompensationStock Compensation, to clarify that
share-based payment awards with an exercise price denominated in the currency of a market in which
a substantial portion of the underlying equity security trades should not be considered to meet the
criteria requiring classification as a liability. The updated guidance is effective for fiscal
years, and interim periods within those fiscal years, beginning on or after December 15, 2010.
Early adoption is permitted. The Group is currently evaluating the potential impact, if any, on the
Groups consolidated financial statements.
In April 2010, the FASB issued Update No. 2010-17, or ASU 2010-17, Revenue
RecognitionMilestone Method, which updates the guidance currently included under topic 605,
Revenue Recognition. ASU 2010-17 provides guidance on defining the milestone and determining when
the use of the milestone method of revenue
recognition for research or development transactions is appropriate. It provides criteria for
evaluating if the milestone is substantive and clarifies that a vendor can recognize consideration
that is contingent upon achievement of a milestone as revenue in the period in which the milestone
is achieved, if the milestone meets all the criteria to be considered substantive. ASU 2010-17 is
effective for milestones achieved in fiscal years, and interim periods within those years,
beginning after June 15, 2010 and should be applied prospectively. Early adoption is permitted. The
Company is still assessing the impact of this guidance and do not believe the adoption of this
guidance will have a material impact on the Companys consolidated financial statements.
F-16
CHINA TECHNOLOGY DEVELOPMENT GROUP CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts expressed in thousands, except share data or unless otherwise stated)
2 Summary of significant accounting policies (continued)
(ae) Recent accounting pronouncements (continued)
On July 2010, the FASB Issued Accounting Standards Update 2010-20, Receivables (Topic 310)
Disclosures about the Credit Quality of Financial Receivables and the Allowance for Credit Losses
(the ASU). In the aftermath of the global economic crisis, transparent financial reporting has
become the subject of worldwide attention, with a focus on improving accounting standards in a
number of areas, including financial instruments. The new ASU requires disclosure of additional
information to assist financial statement users understand more clearly an entitys credit risk
exposures to finance receivables and the related allowance for credit losses. For public companies,
the ASU is effective for interim and annual reporting periods ending on or after December 15, 2010
with specific items, such as the allowance rollforward and modification disclosures effective for
periods beginning after December 15, 2010. Nonpublic entities are required to apply the disclosure
requirements for annual reporting periods ending on or after December 15, 2011. The adoption of ASU
2010-20 did not have a material effect on the Companys consolidated financial statements.
In December 2010, the FASB issued Accounting Standards Update (ASU) No. 2010-28, Intangibles
Goodwill and Other (Topic 350): When to Perform Step 2 of the Goodwill Impairment Test for
Reporting Units with Zero or Negative Carrying Amounts. This ASU contains the final consensus
reached by the EITF meeting on November 19, 2010. The EITF consensus affects all entities that have
recognized goodwill and have one or more reporting units whose carrying amount for purposes of
performing Step 1 of the goodwill impairment test is zero or negative. The EITF decided to amend
Step 1 of the goodwill impairment test so that for those reporting units, an entity is required to
perform Step 2 of the goodwill impairment test if it is more likely than not that a goodwill
impairment exists. For public entities, the amendments in this Update are effective for fiscal
years, and interim periods within those years, beginning after December 15, 2010. Early adoption is
not permitted. For nonpublic entities, the amendments are effective for fiscal years, and interim
periods within those years, beginning after December 15, 2011. Nonpublic entities may early adopt
the amendments using the effective date for public entities. The adoption of ASU 2010-28 is not
expected to have no material effect on the Companys consolidated financial statements.
In December 2010, the FASB issued ASU 2010-29, Disclosure of Supplementary Pro Forma
Information for Business Combinations. The ASU 2010-29 specifies that if a public company presents
comparative financial statements, the entity should only disclose revenue and earnings of the
combined entity as though the business combination(s) that occurred during the current year had
occurred as of the beginning of the comparable prior annual reporting period. ASU 2010-29 is
effective prospectively for 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, 2010, with early
adoption permitted. The Company does not believe the adoption of this guidance will have any impact
on the Companys consolidated financial statements.
3 Acquisition
On November 5, 2010, the Group, together with China Green Holdings Limited, one of the
Companys wholly-owned subsidiaries, entered into a stock purchase agreement with LSRHK and its
shareholders, pursuant to which the Company purchased and acquired 100% equity interest in LSRHK
from its shareholders at a consideration of US$2,215 (equivalent to approximately Rmb 14,854),
satisfied by the issuance of 1,064,827 common stock of the Company, resulting in a goodwill on
acquisition amounting to Rmb4,859 (the Goodwill) (Note 10). The acquisition was consummated on
November 23, 2010 and LSRHK became a wholly-owned subsidiary of the Company. Linsun Group is
principally engaged in manufacturing and selling crystalline PV modules.
Since Linsun Group is fully integrated into and the goodwill is attributable to the Solar
Energy Operations segment. The other intangible assets acquired from the transaction mainly
include customers relationship of Rmb6,030 and a supplier contract of Rmb7,152, both , have
weighted average useful lives of 5 years.
F-17
CHINA TECHNOLOGY DEVELOPMENT GROUP CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts expressed in thousands, except share data or unless otherwise stated)
3 Acquisition (continued)
Before the completion of the acquisition, the Group provided an advance of Rmb 2,000 to Linsun
Group which is included in the cash balance acquired of Linsun Group upon acquisition in the
purchase price allocation below. The table below reflects the purchase price related to this
acquisition and the resulting purchase price allocations as of the acquisition date:
|
|
|
|
|
|
|
|
|
|
|
Amortization Life |
|
|
Linsun Group |
|
|
|
(in Years) |
|
|
Rmb |
|
Current assets (including trade accounts receivable of Rmb5,692) |
|
|
|
|
|
|
15,146 |
|
Cash and cash equivalents |
|
|
|
|
|
|
3,415 |
|
Fixed assets/noncurrent assets |
|
|
|
|
|
|
4,614 |
|
Goodwill |
|
|
N/A |
|
|
|
4,859 |
|
Intangible assets: |
|
|
|
|
|
|
|
|
Supplier contract |
|
|
5 |
|
|
|
7,152 |
|
Customers relationship |
|
|
5 |
|
|
|
6,030 |
|
|
|
|
|
|
|
|
|
Total assets acquired |
|
|
|
|
|
|
41,216 |
|
|
|
|
|
|
|
|
|
|
Current liabilities |
|
|
|
|
|
|
(21,067 |
) |
Deferred tax liabilities non current |
|
|
|
|
|
|
(3,295 |
) |
|
|
|
|
|
|
|
|
Total liabilities assumed |
|
|
|
|
|
|
(24,362 |
) |
|
|
|
|
|
|
|
|
Total purchase consideration (1,064,827 common shares of the Company at US$2.08 per share and advances to Linsun Group by
the Group at Rmb2,000) |
|
|
|
|
|
|
16,854 |
|
|
|
|
|
|
|
|
|
There were no acquisition made in 2008 and 2009.
Unaudited Proforma information on the acquisition
The financial results of Linsun Group acquired in 2010 has been included in the consolidated
statements of operations and comprehensive loss since the acquisition date. The amount of revenues
and net income of Linsun Group included in the consolidated statements of operations and
comprehensive loss for 2010 were as follows:
|
|
|
|
|
|
|
December 31, 2010 |
|
|
|
RMB |
|
Revenues (including sales of Rmb3,250 made to the Groups subsidiary
after acquisition): |
|
|
25,793 |
|
|
|
|
|
|
|
|
|
|
Net income: |
|
|
1,059 |
|
|
|
|
|
The following unaudited pro forma consolidated financial information reflects the results of
operations for the years ended December 31, 2009 and 2010, as if the acquisition had occurred on
January 1, 2009, and after giving effect to purchase accounting adjustments. These pro forma
results have been prepared for comparative purposes only and do not purport to be indicative of
what operating results would have been had the acquisition actually taken place on the beginning of
the periods presented, and may not be indicative of future operating results.
|
|
|
|
|
|
|
|
|
|
|
December 31, 2009 |
|
|
December 31, 2010 |
|
|
|
RMB |
|
|
RMB |
|
Net revenues: |
|
|
|
|
|
|
87,765 |
|
Net loss attributable to common stockholders |
|
|
(38,469 |
) |
|
|
(41,282 |
) |
Net loss per share attributable to the Company basic and diluted |
|
|
(2.26 |
) |
|
|
(1.90 |
) |
F-18
CHINA TECHNOLOGY DEVELOPMENT GROUP CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts expressed in thousands, except share data or unless otherwise stated)
4 Income tax expenses (credits)
The income tax expenses (credits) represent the sum of the income tax payable and deferred
tax.
Income tax is based on taxable profit for the year. Taxable profit differs from net profit as
reported in the Statement of Operations because it excludes items of income or expense that are
taxable or deductable in other years and it further excludes items that are never taxable or
deductable. The Groups liability for income tax is calculated using tax rates that have been
enacted by the reporting date.
Deferred tax is the tax expected to be payable or recoverable on differences between the
carrying amounts of assets and liabilities in the financial statements and the corresponding tax
bases used in the computation of taxable profit, and is accounted for using the balance sheet
liability method. Deferred tax liabilities are generally recognized for all taxable temporary
differences and deferred tax assets are recognized to the extent that it is probable that taxable
profits will be available against which deductible temporary differences can be utilized.
For business combinations, deferred taxes are recognized to the extent that the fair value of
assets and liabilities acquired exceeds their respective tax bases.
The Company is a tax exempted company incorporated in the British Virgin Islands. The
Companys subsidiaries incorporated in Hong Kong and in the PRC are subject to Hong Kong Profits
Tax and Enterprise Income Tax in the PRC, respectively.
The Groups subsidiaries incorporated in Hong Kong were subject to a tax rate of 16.5% in
2008, 2009 and 2010 on the assessable profits arising in or derived from Hong Kong. For those Hong
Kong subsidiaries which generate PRC sourced income, PRC income tax was accrued on the assessable
profits at a rate of 25% in 2008, 2009 and 2010.
On March 16, 2007, the National Peoples Congress adopted the Enterprise Income Tax Law, or
New Income Tax Law, which became effective on January 1, 2008 and replaced the previous separate
income tax laws for domestic enterprises and foreign-invested enterprises (including PRC
subsidiaries of the Companys company) by adopting a unified income tax rate of 25% for most
enterprises. In accordance with the implementation rules of the New Income Tax Law, the
preferential tax treatments previously granted to certain PRC subsidiaries of the Company would not
continue and they would be subject to the statutory tax rate of 25%. The tax rate applicable for
Shenzhen Helios Energy was 20% and 22% in 2009 and will be 24% in 2011 and 25% in 2012. Among all
the Companys PRC subsidiaries, Zhangzhou Trendar Tech has obtained a preferential tax concession
from the tax bureau that it was fully exempt from the PRC enterprise income tax for two years
starting from the year 2008, followed by a 50% tax exemption for the next three years from 2010 to
2012.
Since all the PRC subsidiaries of the Company reported accumulated deficits up to December 31,
2010, no provision for PRC dividend withholding tax had been made. Upon distribution of any future
earnings in the form of dividends or otherwise in the future, the Group would be subject to the
respective withholding tax under the PRC Enterprise Income Tax Law issued by the State Council.
The Group had no material uncertain tax positions for the years 2008, 2009 and 2010 and there
were no interest and penalties related to uncertain tax positions. In addition, the Group had no
material unrecognized tax benefit which would affect the effective income tax rate in future
periods. The Group does not anticipate any significant increase or decrease in its liability for
unrecognized tax benefits within the next twelve months. The tax positions of the Companys PRC
subsidiaries for the years 2004 to 2010 are subject to inspection by the PRC tax authorities. For
the Companys Hong Kong subsidiaries, their respective tax positions are subject to inspection for
the years 2004 to 2010 by the Hong Kong tax authorities.
F-19
CHINA TECHNOLOGY DEVELOPMENT GROUP CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts expressed in thousands, except share data or unless otherwise stated)
4 Income tax expenses (credits) (continued)
Composition of income tax expenses (credits)
Income tax credits comprises of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
|
2009 |
|
|
2010 |
|
|
|
Rmb |
|
|
Rmb |
|
|
Rmb |
|
Current income tax expenses (credits) |
|
|
|
|
|
|
|
|
|
|
|
|
- Continuing operations |
|
|
(600 |
) |
|
|
|
|
|
|
63 |
|
Deferred income tax credits |
|
|
(112 |
) |
|
|
(112 |
) |
|
|
(167 |
) |
|
|
|
|
|
|
|
|
|
|
Income tax credits |
|
|
(712 |
) |
|
|
(112 |
) |
|
|
(104 |
) |
|
|
|
|
|
|
|
|
|
|
Reconciliation of income tax expenses by applying PRC statutory Enterprise Income Tax rate
Income tax expenses of the continuing operations differed from the amounts computed by
applying PRC statutory Enterprise Income Tax (EIT) rate of 25% in 2008, 2009 and 2010 as a result
of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
|
2009 |
|
|
2010 |
|
|
|
Rmb |
|
|
Rmb |
|
|
Rmb |
|
Net loss before provision for income taxes |
|
|
(55,488 |
) |
|
|
(42,808 |
) |
|
|
(35,225 |
) |
PRC statutory tax rate |
|
|
25% |
|
|
|
25% |
|
|
|
25% |
|
Income tax credit at PRC statutory EIT rate |
|
|
(13,872 |
) |
|
|
(10,702 |
) |
|
|
(8,806 |
) |
Effect of
income tax rate differences in other jurisdictions |
|
|
6,984 |
|
|
|
7,101 |
|
|
|
8,163 |
|
Income not subject to taxation |
|
|
(9 |
) |
|
|
|
|
|
|
(7 |
) |
Expenses not deductible for taxation purpose |
|
|
4,714 |
|
|
|
2,007 |
|
|
|
1,287 |
|
Effect of tax losses unrecognized in prior years |
|
|
(363 |
) |
|
|
|
|
|
|
|
|
Effect of over provision in prior years |
|
|
(600 |
) |
|
|
|
|
|
|
|
|
Effect of changes in Hong Kong statutory tax rate |
|
|
21 |
|
|
|
|
|
|
|
|
|
Change in valuation allowance |
|
|
2,413 |
|
|
|
1,482 |
|
|
|
(741 |
) |
|
|
|
|
|
|
|
|
|
|
Total income tax credits |
|
|
(712 |
) |
|
|
(112 |
) |
|
|
(104 |
) |
|
|
|
|
|
|
|
|
|
|
F-20
CHINA TECHNOLOGY DEVELOPMENT GROUP CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts expressed in thousands, except share data or unless otherwise stated)
4 Income tax expenses (credits) (continued)
The principal components of the deferred income tax assets and liabilities are as follows:
|
|
|
|
|
|
|
|
|
|
|
December 31, 2009 |
|
|
December 31, 2010 |
|
|
|
Rmb |
|
|
Rmb |
|
Deferred tax assets: |
|
|
|
|
|
|
|
|
Tax loss carryforwards |
|
|
4,167 |
|
|
|
4,588 |
|
Less: valuation allowance |
|
|
(4,167 |
) |
|
|
(4,588 |
) |
|
|
|
|
|
|
|
Non-current deferred tax assets, net |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred tax liability: |
|
|
|
|
|
|
|
|
Property, plant and equipment, net |
|
|
(1,836 |
) |
|
|
(1,734 |
) |
Prepayment for land use right |
|
|
(470 |
) |
|
|
(460 |
) |
Intangible assets |
|
|
|
|
|
|
(3,240 |
) |
|
|
|
|
|
|
|
Non-current deferred tax liabilities |
|
|
(2,306 |
) |
|
|
(5,434 |
) |
|
|
|
|
|
|
|
Total |
|
|
(2,306 |
) |
|
|
(5,434 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reported as: |
|
|
|
|
|
|
|
|
Current deferred tax assets |
|
|
|
|
|
|
|
|
Current deferred tax liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subtotal |
|
|
|
|
|
|
|
|
Non-current deferred tax assets |
|
|
|
|
|
|
|
|
Non-current deferred tax liabilities |
|
|
(2,306 |
) |
|
|
(5,434 |
) |
|
|
|
|
|
|
|
Total |
|
|
(2,306 |
) |
|
|
(5,434 |
) |
|
|
|
|
|
|
|
Tax loss of Rmb14,760 carryforwards from the Companys PRC subsidiaries can be carried forward
for one to five years and they expire on various dates through 2014. Tax loss of Rmb5,442 from the
Companys HK subsidiaries has no expiry date. The directors of the Company do not believe that
these subsidiaries would generate sufficient taxable profits in the near future and it is not more
likely than not that any of the deferred tax assets will be realized. Therefore, a full valuation
allowance had been established for the amount of deferred tax assets at December 31, 2009 and 2010.
In addition, in accordance with the requirements of ASC 740 (formerly referred to as SFAS No.
109), deferred tax liabilities were recognized upon acquisition of Faster Group in 2007 and Linsun
Group in 2010, which gave rise to the temporary differences between the accounting base and the tax
base of land and buildings and intangible assets.
5 Disposal and discontinued operations
(i) Disposal of Green Energy Industry Ltd
In April 2008, the Companys Board of Directors decided to discontinue certain non-operational
BVI subsidiaries in order to focus on current solar business. On April 21, 2008, the Group disposed
of Green Energy Industry Ltd, including its subsidiaries Fullwing Ltd and Margot Ltd (collectively,
the Green Energy), to Harvest Time International Holding Ltd, an independent third party for cash
consideration of HK$10.
The assets and liabilities held by Green Energy as of the disposal date are as follows:
|
|
|
|
|
|
|
2008 |
|
|
|
Rmb |
|
Net assets disposed of (excluding cash and cash equivalents): |
|
|
|
|
Other liabilities and accrued expenses |
|
|
(1 |
) |
|
|
|
|
|
|
|
(1 |
) |
Gain on disposal of discontinued operations |
|
|
10 |
|
|
|
|
|
|
|
|
9 |
|
|
|
|
|
|
|
|
|
|
Settled by: |
|
|
|
|
Consideration received |
|
|
9 |
|
Cash and cash equivalents disposed |
|
|
|
|
|
|
|
|
|
|
|
9 |
|
|
|
|
|
F-21
CHINA TECHNOLOGY DEVELOPMENT GROUP CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts expressed in thousands, except share data or unless otherwise stated)
5 Disposal and discontinued operations (continued)
(ii) Disposal of Jingle Group classified as held-for-sale
On December 29, 2008, the Group entered into a sale and purchase agreement to sell the Jingle
Group to Sentron Enterprises Limited, an independent party, for cash consideration of HK$200. The
transaction was completed and the consideration was received in February 2009.
As of December 31, 2008, the assets and liabilities held by Jingle Group were as follows:
|
|
|
|
|
|
|
2008 |
|
|
|
Rmb |
|
Assets held for sale |
|
|
|
|
Cash and cash equivalents |
|
|
1,060 |
|
Trade accounts receivable, net |
|
|
678 |
|
Inventories merchandise for resale |
|
|
40 |
|
Value added tax and business tax recoverable |
|
|
279 |
|
Prepaid expenses and other assets |
|
|
324 |
|
Property, plant & equipment, net |
|
|
58 |
|
|
|
|
|
|
|
|
2,439 |
|
|
|
|
|
Liabilities associated with assets classified as held for sale |
|
|
|
|
Trade accounts payable |
|
|
(218 |
) |
Tax payables |
|
|
(151 |
) |
Other liabilities and accrued expenses |
|
|
(991 |
) |
|
|
|
|
|
|
|
(1,360 |
) |
|
|
|
|
As of the disposal date (February 2009), the assets and liabilities held by Jingle Group are
as follows:
|
|
|
|
|
|
|
2009 |
|
|
|
Rmb |
|
Net assets disposed of (excluding cash and cash equivalents): |
|
|
|
|
Trade accounts receivable, net |
|
|
288 |
|
Inventories merchandise for resale |
|
|
42 |
|
Value added tax and business tax recoverable |
|
|
279 |
|
Prepaid expenses and other assets |
|
|
298 |
|
Property, plant and equipment, net |
|
|
49 |
|
Trade accounts payable |
|
|
(94 |
) |
Tax payable |
|
|
25 |
|
Other liabilities and accrued expenses |
|
|
(2,027 |
) |
Accumulated other comprehensive loss |
|
|
(4,250 |
) |
|
|
|
|
|
|
|
(5,390 |
) |
|
|
|
|
|
Gain on disposal of Jingle Group |
|
|
4,560 |
|
|
|
|
|
|
|
|
(830 |
) |
|
|
|
|
|
|
|
|
|
Discharged by: |
|
|
|
|
Consideration received |
|
|
176 |
|
Cash and cash equivalents disposed |
|
|
(1,006 |
) |
|
|
|
|
|
|
|
(830 |
) |
|
|
|
|
F-22
CHINA TECHNOLOGY DEVELOPMENT GROUP CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts expressed in thousands, except share data or unless otherwise stated)
5 Disposal and discontinued operations (continued)
In accordance with ASC360-10-35 (formerly refer to SFAS No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets), the financial results of the Jingle Group and IT
Operations are reported as discontinued operations for all the years presented. The financial
results of Green Energy which were included in Corporate as defined in Note 24 are also reported as
discontinued operations for all the years since its establishment. The financial results included
in discontinued operations were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended |
|
|
Year ended December 31, 2008 |
|
December 31, 2009 |
|
|
Rmb |
|
Rmb |
|
Total |
|
Rmb |
|
Total |
|
|
Green |
|
Jingle |
|
|
|
Jingle |
|
|
|
|
Energy |
|
Group |
|
2008 |
|
Group |
|
2009 |
Revenues |
|
|
|
|
|
|
5,518 |
|
|
|
5,518 |
|
|
|
4 |
|
|
|
4 |
|
Cost of sales |
|
|
|
|
|
|
(1,876 |
) |
|
|
(1,876 |
) |
|
|
(2 |
) |
|
|
(2 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit |
|
|
|
|
|
|
3,642 |
|
|
|
3,642 |
|
|
|
2 |
|
|
|
2 |
|
Selling expenses |
|
|
|
|
|
|
(595 |
) |
|
|
(595 |
) |
|
|
(182 |
) |
|
|
(182 |
) |
General and administrative expenses |
|
|
(25 |
) |
|
|
(2,899 |
) |
|
|
(2,924 |
) |
|
|
(153 |
) |
|
|
(153 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating (loss) profit |
|
|
(25 |
) |
|
|
148 |
|
|
|
123 |
|
|
|
(333 |
) |
|
|
(333 |
) |
Other income |
|
|
|
|
|
|
725 |
|
|
|
725 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit on disposal of subsidiaries |
|
|
10 |
|
|
|
|
|
|
|
10 |
|
|
|
4,560 |
|
|
|
4,560 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit (loss) from operations before income tax expenses |
|
|
(15 |
) |
|
|
873 |
|
|
|
858 |
|
|
|
4,227 |
|
|
|
4,227 |
|
Income tax expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit (loss) from operations |
|
|
(15 |
) |
|
|
873 |
|
|
|
858 |
|
|
|
4,227 |
|
|
|
4,227 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Carrying amounts of total assets and liabilities
included as part of the disposal group were as
follows: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets |
|
|
|
|
|
|
2,439 |
|
|
|
2,439 |
|
|
|
1,962 |
|
|
|
1,962 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities |
|
|
(1 |
) |
|
|
(1,360 |
) |
|
|
(1,361 |
) |
|
|
(6,346 |
) |
|
|
(6,346 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-23
CHINA TECHNOLOGY DEVELOPMENT GROUP CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts expressed in thousands, except share data or unless otherwise stated)
6 Prepaid expenses and other current assets
Prepaid expenses and other current assets consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
December 31, |
|
|
December 31, |
|
|
|
2009 |
|
|
2010 |
|
|
|
Rmb |
|
|
Rmb |
|
Rental and utility deposits |
|
|
124 |
|
|
|
327 |
|
Advance to staff |
|
|
400 |
|
|
|
280 |
|
Prepayment for insurance |
|
|
156 |
|
|
|
197 |
|
Prepayment for raw materials purchase (Note a) |
|
|
23 |
|
|
|
8,655 |
|
Prepayment for decoration |
|
|
|
|
|
|
10 |
|
Prepayment for consultancy fee |
|
|
|
|
|
|
207 |
|
Deposits for investments (Note 20) |
|
|
|
|
|
|
19,877 |
|
Others |
|
|
13 |
|
|
|
133 |
|
|
|
|
|
|
|
|
|
|
|
716 |
|
|
|
29,686 |
|
|
|
|
|
|
|
|
Note a: The balance included Rmb5,000 deposit paid to Goldpoly (Quanzhou) Science &
Technology Industry Company Limited (Goldpoly), an ex-shareholder of Linsun Group , who was also
a shareholder of CTDC as of December 31, 2010, for purchase of raw materials from Goldpoly for a
period from October 2010 to December 2011. Such deposit will be offset against the costs of raw
materials to be purchased from Goldpoly.
7 Prepayment for business acquisition
On April 28, 2010, the Group entered into a Cooperation Framework Agreement with Xintang Media
Technology (Beijing) Limited (Xintang), its shareholders and associated companies, pursuant to
which the Group intended to acquire equity interests in Xintang indirectly at the following
consideration of (i) US$5 million in cash as advance payment; (ii) shares of the common stock of
the Company at a price US$3.01 per share (the Consideration
Shares); and (iii) warrants to
purchase the common stock of the Company at an exercise price US$3.50 per share (the
Consideration Warrants). Xintang is a Chinese company and conducts advertising and media
business in China.
As at December 31, 2010, the Group had paid Rmb10.3 million to Xintang and its shareholders
(the Xintang Prepayment). The completion of this acquisition was contingent upon the satisfaction
of a number of conditions, including a fair value assessment to be performed on the equity interest
in Xintang by an international independent appraiser, completion of restructuring of the target
companies involved in the transaction, execution of advertising and media business cooperation
arrangements between Xintang and the Xinhua News Agency in China (an official media body of the
Chinese government), and approval of the transaction obtained from the shareholders of the Company
in a general meeting. Since certain of the aforesaid conditions precedent have not been satisfied,
the parties decided not to proceed with the transaction and to terminate the cooperation framework
agreement. The Company is currently in the process of negotiating with Xintang on the details
regarding the termination as well as recovery of the Xintang Deposit. Given the fact that Xintang
is a project company incorporated with minimal initial assets and operations, and the Company could
not assess the financial strengths of the shareholders of Xintang, as a result, the directors of
the Company consider that the timing of recovery and magnitude of amounts to be recovered of the
Xintang Prepayment could not be reasonably assured. Accordingly, the directors of the Company made
a full provision for impairment against the carrying amount of the Xintang Prepayment as of 31
December 2010.
F-24
CHINA TECHNOLOGY DEVELOPMENT GROUP CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts expressed in thousands, except share data or unless otherwise stated)
8 Prepayment for land use right
The land use right was acquired through the acquisition of the equity interest of Faster Group
in 2007. The value of the land use right was determined based on the fair value of the lease as of
the completion date of the acquisition of Faster Group. The Group is currently in progress of
obtaining the official land use right certificate from the relevant PRC authorities.
9 Property, plant and equipment, net
|
|
|
|
|
|
|
|
|
|
|
December 31, |
|
|
December 31, |
|
|
|
2009 |
|
|
2010 |
|
|
|
Rmb |
|
|
Rmb |
|
Buildings |
|
|
24,246 |
|
|
|
24,196 |
|
Plant and machinery |
|
|
1,609 |
|
|
|
8,727 |
|
Computer equipment |
|
|
486 |
|
|
|
640 |
|
Furniture, fixtures and office equipment |
|
|
2,022 |
|
|
|
3,601 |
|
Motor vehicles |
|
|
567 |
|
|
|
862 |
|
|
|
|
|
|
|
|
Total |
|
|
28,930 |
|
|
|
38,026 |
|
Less: accumulated depreciation |
|
|
(4,348 |
) |
|
|
(7,277 |
) |
Add: construction in progress |
|
|
676 |
|
|
|
679 |
|
|
|
|
|
|
|
|
|
|
|
25,258 |
|
|
|
31,428 |
|
|
|
|
|
|
|
|
Depreciation for the years ended December 31, 2008, 2009 and 2010 amounted to Rmb2,093,
Rmb2,425 and Rmb2,043, respectively.
Impairment of property, plant and equipment of RMB6,463 and Rmb591 was recognized for the
years ended December 31, 2009 and 2010, respectively. It was primarily related to planned
abandonment of the operations of an asset group relating to an SnO2 production line operated by
China Merchants Zhangzhou Development Zone Trenda Solar Ltd., a subsidiary of the Group in the PRC.
There was no impairment charge recognized for the year ended December 31, 2008.
F-25
CHINA TECHNOLOGY DEVELOPMENT GROUP CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts expressed in thousands, except share data or unless otherwise stated)
10 Goodwill and Other Intangible Assets
As mentioned in Note 3, the Company completed the business acquisition of Linsun Group in November,
2010. An aggregate consideration of Rmb14,854, resulted in Rmb13,182 of intangible assets and
RMB4,859 of goodwill.
(a) Goodwill
Goodwill represents the excess of the purchase price over the estimated fair value of the net
tangible and identifiable intangible assets acquired and is not deductible for tax purpose.
Goodwill primarily represents the expected synergies from combining the operations of the Group and
Linsun Group and any other intangible benefits that would accrue to the Group that do not qualify
for separate recognition. The Company did not recognize any goodwill impairment during the three
years ended December 31, 2010. The Companys goodwill is allocated primarily to the Solar Energy
Operations reportable operating segment (note 24).
(b) Intangible assets
The acquired intangible assets are amortized ratably over their respective useful lives of five
years from the acquisition date. The following table summarizes the components of gross and net
intangible asset balances as of December 31, 2010 and 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended |
|
|
Year ended |
|
|
|
December |
|
|
December |
|
|
|
31, 2010 |
|
|
31, 2009 |
|
|
|
Gross Carrying |
|
|
Accumulated |
|
|
Net Carrying |
|
|
Gross Carrying |
|
|
Accumulated |
|
|
Net Carrying |
|
|
|
Amount |
|
|
Amortization |
|
|
Amount |
|
|
Amount |
|
|
Amortization |
|
|
Amount |
|
|
|
Rmb |
|
|
Rmb |
|
|
Rmb |
|
|
Rmb |
|
|
Rmb |
|
|
Rmb |
|
Supplier contract |
|
|
7,152 |
|
|
|
(119 |
) |
|
|
7,033 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer relationship |
|
|
6,030 |
|
|
|
(101 |
) |
|
|
5,929 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,182 |
|
|
|
(220 |
) |
|
|
12,962 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization expense related to acquired intangible assets was Rmb220, nil and nil in 2010, 2009
and 2008, respectively.
Expected annual amortization expense related to acquired intangible assets as of December 31, 2010,
is as follows:
|
|
|
|
|
Years |
|
Rmb |
|
2011 |
|
|
2,636 |
|
2012 |
|
|
2,636 |
|
2013 |
|
|
2,636 |
|
2014 |
|
|
2,636 |
|
2015 |
|
|
2,418 |
|
|
|
|
|
|
|
|
|
12,962 |
|
|
|
|
|
|
11 Short term loan, other liabilities and accrued expenses
(a) Short term loan
On November 30, 2010, LSRHK, the wholly owned subsidiary of the Company, entered a loan agreement
with an individual ex-shareholder of Linsun Group , who was also a shareholder of CTDC, with a
principal amount of Rmb6,041, which remained outstanding as of December 31, 2010. The loan is
interest free and it would mature on or before the forty-fifth day following the drawdown date. The
loan had been fully repaid in January 2011.
There was no short term loan as of December 31, 2009.
F-26
CHINA TECHNOLOGY DEVELOPMENT GROUP CORPORATIONS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts expressed in thousands, except share data or unless otherwise stated)
11 Short term loan, other liabilities and accrued expenses
(b) Other liabilities and accrued expenses
|
|
|
|
|
|
|
|
|
|
|
December 31, |
|
|
December 31, |
|
|
|
2009 |
|
|
2010 |
|
|
|
Rmb |
|
|
Rmb |
|
Deposits received |
|
|
36 |
|
|
|
2,550 |
|
Accrued salaries and staff benefits |
|
|
831 |
|
|
|
894 |
|
Accrued liability for purchase of property, plant and equipment |
|
|
297 |
|
|
|
313 |
|
Interest payable |
|
|
1,900 |
|
|
|
1,833 |
|
Accrued freight charge |
|
|
|
|
|
|
3,012 |
|
Advance due to an ex-shareholder by Linsun Group |
|
|
|
|
|
|
2,000 |
|
Others |
|
|
401 |
|
|
|
554 |
|
|
|
2009 |
|
|
2009 |
|
|
|
|
3,465 |
|
|
|
11,156 |
|
|
|
|
|
|
|
|
12 Fair Value measurements
The Company adopted ASC 820 (formally referred to as SFAS 157, Fair value measurements and
Disclosures) on January 1, 2008 for all financial assets and liabilities and nonfinancial assets
and liabilities that are recognized or disclosed at fair value in the consolidated financial
statements on a recurring basis (at least annually). ASC 820 defines fair value as the price that
would be received to sell an asset or paid to transfer a liability (i.e. the exit price) in an
orderly transaction between market participants at the measurement date. When determining the fair
value measurements for assets and liabilities required or permitted to be recorded at fair value,
the Company considers the principal or most advantageous market in which it would transact and also
considers assumptions that market participants would use when pricing the asset or liability. ASC
820 also discusses valuation techniques, such as market, income and/or cost approaches and
specifies a three-level hierarchy of valuation inputs that prioritizes the inputs to valuation
techniques used to measure fair value.
Level 1: Observable inputs such as quoted prices (unadjusted) in active markets for identical
assets or liabilities.
Level 2: Inputs other than quoted prices that are observable for the asset or liability, either
directly or indirectly. These include quoted prices for similar assets or liabilities in active
markets and quoted prices for identical or similar assets or liabilities in markets that are not
active.
Level 3: Unobservable inputs that reflect the reporting entitys own assumptions.
The following represents the Companys assets and liabilities measured at fair value on a recurring
basis as of December 31, 2009 and 2010 and the respective basis of measurement:
F-27
CHINA TECHNOLOGY DEVELOPMENT GROUP CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts expressed in thousands, except share data or unless otherwise stated)
12 Fair Value measurements (continued)
Investment in Equity Securities (classified as Trading and AFS securities)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurement at December 31, 2009 |
|
|
|
Quoted Prices in |
|
|
Significant Other |
|
|
Significant |
|
|
|
|
|
|
Active Markets for |
|
|
Observable |
|
|
Unobservable |
|
|
Total at |
|
|
|
Identical Assets |
|
|
Inputs |
|
|
Inputs |
|
|
December 31, |
|
|
|
(Level 1) |
|
|
(Level 2) |
|
|
(Level 3) |
|
|
2009 |
|
|
|
Rmb |
|
|
Rmb |
|
|
Rmb |
|
|
Rmb |
|
Other investments |
|
|
|
|
|
|
|
|
|
|
336 |
|
|
|
336 |
|
Trading securities |
|
|
3,825 |
|
|
|
|
|
|
|
|
|
|
|
3,825 |
|
Available-for-sale securities |
|
|
27,432 |
|
|
|
|
|
|
|
|
|
|
|
27,432 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
31,257 |
|
|
|
|
|
|
|
336 |
|
|
|
31,593 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurement at December 31, 2010 |
|
|
|
Quoted Prices in |
|
|
Significant Other |
|
|
Significant |
|
|
|
|
|
|
Active Markets for |
|
|
Observable |
|
|
Unobservable |
|
|
Total at |
|
|
|
Identical Assets |
|
|
Inputs |
|
|
Inputs |
|
|
December 31 |
|
|
|
(Level 1) |
|
|
(Level 2) |
|
|
(Level 3) |
|
|
2010 |
|
|
|
Rmb |
|
|
Rmb |
|
|
Rmb |
|
|
Rmb |
|
Trading securities |
|
|
20,429 |
|
|
|
|
|
|
|
|
|
|
|
20,429 |
|
Available-for-sale securities |
|
|
14,120 |
|
|
|
|
|
|
|
|
|
|
|
14,120 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
34,549 |
|
|
|
|
|
|
|
|
|
|
|
34,549 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company held investments in marketable securities listed on the stock exchange of Hong Kong,
whose fair values were derived from quoted prices in active markets.
Investment in convertible note
On May 27, 2010, a wholly-owned subsidiary of the Company subscribed and acquired a three-year zero
coupon convertible bond (the Bond) at a principal amount of HK$16,390 from China Ruifeng Galaxy
Renewable Energy Holdings Limited, which is a renewable energy company listed on the Hong Kong
Stock Exchange engages in manufacturing, processing and sales of wind power equipment; constructing
power grid and transformer projects in China, supplying components manufacturing clean energy and
energy-saving equipment. The Bond was recorded as an investment in convertible note under ASC 825
and the changes in fair value from inception up to August 4, 2010 amounting to RMB1,917 was
recorded in the consolidated statements of operations for the year ended December 31, 2010. On
August 4, 2010, the Bond was converted into 11,000,000 ordinary shares of the issuer. After the
conversion, it was reclassified as trading securities under ASC 320.
The following represents the reconciliation of the beginning and ending balance of investment in
convertible note measured at fair value on a recurring basis using significant unobservable inputs
(Level 3) during the years ended December 31, 2009 and 2010:
Investment in Bond
|
|
|
|
|
|
|
|
|
|
|
2009 |
|
|
2010 |
|
|
|
Rmb |
|
|
Rmb |
|
Beginning balance at January 1 |
|
|
|
|
|
|
|
|
Investments made |
|
|
|
|
|
|
14,280 |
|
Total gains (realized/unrealized) included in earnings |
|
|
|
|
|
|
1,917 |
|
Conversion |
|
|
|
|
|
|
(16,197 |
) |
|
|
|
|
|
|
|
|
|
Ending balance at December 31 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-28
CHINA TECHNOLOGY DEVELOPMENT GROUP CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts expressed in thousands, except share data or unless otherwise stated)
12 Fair Value measurements (continued)
Liabilities relating to warrants and option rights
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Significant |
|
|
|
|
|
|
|
|
|
Quoted Prices in Active |
|
|
Other |
|
|
Significant |
|
|
|
|
|
|
Markets for Identical |
|
|
Observable |
|
|
Unobservable |
|
|
Balance as of |
|
|
|
Assets |
|
|
Inputs |
|
|
Inputs |
|
|
December 31, 2009 |
|
|
|
(Level 1) |
|
|
(Level 2) |
|
|
(Level 3) |
|
|
|
|
|
|
Rmb |
|
|
Rmb |
|
|
Rmb |
|
|
Rmb |
|
Warrant A (Notes 17) |
|
|
|
|
|
|
|
|
|
|
3,003 |
|
|
|
3,003 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Significant |
|
|
|
|
|
|
|
|
|
Quoted Prices in Active |
|
|
Other |
|
|
Significant |
|
|
|
|
|
|
Markets for Identical |
|
|
Observable |
|
|
Unobservable |
|
|
Balance as of |
|
|
|
Assets |
|
|
Inputs |
|
|
Inputs |
|
|
December 31, 2010 |
|
|
|
(Level 1) |
|
|
(Level 2) |
|
|
(Level 3) |
|
|
|
|
|
|
Rmb |
|
|
Rmb |
|
|
Rmb |
|
|
Rmb |
|
Warrant A (Notes 17) |
|
|
|
|
|
|
|
|
|
|
2,448 |
|
|
|
2,448 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The fair value of those warrants and option rights was derived based on the Binomial Model and
Monte Carlo simulation. The assumptions include selecting several comparables from the market
devoted to solar energy as reference to determine the volatility rate of the Company. Stock price,
volatility, expected term, risk-free rate and fundamental changes event probabilities are the
significant inputs into these valuation models.
The keys assumptions have been used were as follows:
|
|
|
|
|
|
|
|
|
|
|
2009 |
|
|
2010 |
|
Risk-free rate(1) |
|
|
2.110 |
% |
|
|
0.901 |
% |
Volatility rate(2) |
|
|
71.75 |
% |
|
|
76.54 |
% |
Dividend yield(3) |
|
|
|
|
|
|
|
|
|
|
|
1. |
|
The risk-free interest rate represents the yields to maturity of U.S. Government Strips with
respective terms to maturity as at the valuation date. |
|
2. |
|
Expected volatility is estimated based on the historical volatility of the Companys stock
price and/or the comparable public-traded companies. |
|
3. |
|
The Company has no expectation of paying dividends on its common stock. |
F-29
CHINA TECHNOLOGY DEVELOPMENT GROUP CORPORATIONS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts expressed in thousands, except share data or unless otherwise stated)
12 Fair Value measurements (continued)
The following represents the reconciliation of the beginning and ending balance of liabilities
relating to warrants and option rights measured at fair value on a recurring basis using
significant unobservable inputs (Level 3) during the years ended December 31, 2009 and 2010:
Warrants and option rights
|
|
|
|
|
|
|
|
|
|
|
2009 |
|
|
2010 |
|
|
|
Rmb |
|
|
Rmb |
|
Beginning balance at January 1 |
|
|
2,289 |
|
|
|
3,003 |
|
Fair value on January 1, 2009 upon adoption of
ASC 815-40-15 (Note 2(aa)) |
|
|
7,527 |
|
|
|
|
|
Issuances |
|
|
617 |
|
|
|
|
|
Total gains (realized/unrealized): |
|
|
|
|
|
|
|
|
Included in earnings |
|
|
(3,798 |
) |
|
|
(555 |
) |
Included in other comprehensive income (loss) |
|
|
|
|
|
|
|
|
Settlement/Cancelled upon expiry of terms |
|
|
(3,632 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Ending balance at December 31 |
|
|
3,003 |
|
|
|
2,448 |
|
|
|
|
|
|
|
|
|
|
As discussed in Notes 2(y) and 21, the Company issued a convertible note to a subscriber and
recorded the embedded conversion option as a derivative. The fair value of the derivative was
derived based on the Binomial Model. The assumptions include selecting several comparables from the
market devoted to solar energy as reference to determine the volatility rate of the Company. Stock
price, volatility, expected term and risk-free rate are the significant inputs into these valuation
models.
The following represents the reconciliation of the beginning and ending balances of liabilities
relating to derivative measured at fair value on a recurring basis using significant unobservable
inputs (Level 3) during the years ended December 31, 2009:
Derivative embedded in convertible note
|
|
|
|
|
|
|
2009 |
|
|
|
Rmb |
|
Beginning balance at January 1 |
|
|
|
|
Issuances |
|
|
29,960 |
|
Total losses (realized/unrealized) included in earnings |
|
|
5,040 |
|
Settlement |
|
|
(35,000 |
) |
|
|
|
|
|
Ending balance at December 31 |
|
|
|
|
|
|
|
|
|
F-30
CHINA TECHNOLOGY DEVELOPMENT GROUP CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts expressed in thousands, except share data or unless otherwise stated)
13 Stock-based compensation
(a) Stock Option
On October 10, 1996, the Companys shareholders approved a stock option plan to grant options
for a maximum of 200,000 shares (the 1996 Plan). The 1996 Plan provides for a grant of options
to employees, officers, directors and consultants of the Group. The 1996 Plan is administered by
the board of directors (the Board) or a committee appointed by the Board, which determines the
terms of an options grant, including the exercise price, the number of shares underlying the
option and the options exercisability. The exercise price of all options granted under the 1996
Plan must be at least equal to the fair market value of such shares on the date of grant. The
maximum term of options granted under the 1996 Plan is ten years.
On September 5, 2000, the Companys shareholders approved a stock option plan to grant options
for a maximum of 400,000 shares (the 2000 Plan). The 2000 Plan provides for a grant of options to
employees, officers, directors and consultants of the Group. The 2000 Plan is administered by the
Board or a committee appointed by the Board, which determines the terms of an options grant,
including the exercise price, the number of shares subject to the option and the options
exercisability. The exercise price of all options granted under the 2000 Plan must be at least
equal to the fair market value of such shares on the date of grant. The maximum term of options
granted under 2000 Plan is ten years. On October 20, 2005, the Companys shareholders approved a
stock option plan to grant options for a maximum of 1,000,000 shares (the 2005 Plan). The 2005
Plan provides for a grant of options to employees, officers, directors and consultants of the
Group. The 2005 Plan is administered by the Companys compensation committee (the Compensation
Committee), which determines the terms of an options grant, including the exercise price, the
number of shares subject to the option and the options exercisability. The exercise price of all
options granted under the 2005 Plan must be at least equal to the fair market value of such shares
on the date of grant. The maximum term of options granted under the 2005 Plan is ten years.
On December 22, 2006, the Companys shareholders approved a stock option plan to grant options
for a maximum of 1,000,000 shares (the 2006 Plan). The 2006 Plan provides for a grant of options
to employees, officers, directors and consultants of the Group. The 2006 Plan is administered by
the Compensation Committee, which determines the terms of an options grant, including the exercise
price, the number of shares subject to the option and the options exercisability. The exercise
price of all options granted under the 2006 Plan must be at least equal to the fair market value of
such shares on the date of grant. The maximum term of options granted under the 2006 Plan is five
years.
On October 19, 2007, the Companys shareholders approved a stock option plan to grant options
for a maximum of 1,000,000 shares (the 2007 Plan). The 2007 Plan provides for a grant of options
to employees, officers, directors and consultants of the Group. The 2007 Plan is administered by
the Compensation Committee, which determines the terms of an options grant, including the exercise
price, the number of shares subject to the option and the options exercisability. The exercise
price of all options granted under the 2007 Plan must be at least equal to the fair market value of
such shares on the date of grant. The maximum term of options granted under the 2007 Plan is five
years.
On December 12, 2008, the Companys shareholders approved a stock option plan to grant options
for a maximum of 1,500,000 shares (the 2008 Plan). The 2008 Plan provides for a grant of options
to employees, officers, directors and consultants of the Group. The 2008 Plan is administered by
the Compensation Committee, which determines the terms of an options grant, including the exercise
price, the number of shares subject to the option and the options exercisability. The exercise
price of all options granted under the 2008 Plan must be at least equal to the fair market value of such shares on the date of grant. The maximum term of options granted
under the 2008 Plan is five years.
F-31
CHINA TECHNOLOGY DEVELOPMENT GROUP CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts expressed in thousands, except share data or unless otherwise stated)
13 Stock-based compensation (continued)
(a) Stock Option (continued)
On September 11, 2009, the Companys shareholders approved a stock option plan to grant
options for a maximum of 1,000,000 shares (the 2009 Plan). The 2009 Plan provides for a grant of
options to employees, officers and director of the Group. The 2009 Plan is administered by the
Compensation Committee, which determines the terms of an options grant, including the exercise
price, the number of shares subject to the option and the options exercisability. The exercise
price of all options granted under the 2009 Plan must be at least equal to the fair market value of
such shares on the date of grant. The maximum term of options granted under the 2009 Plan is five
years.
On December 15, 2010, the Companys shareholders approved a stock option plan to grant options
for a maximum of 880,000 shares (the 2010 Plan). The 2010 Plan provides for a grant of options to
employees, officers and director of the Group. The 2010 Plan is administered by the Compensation
Committee, which determines the terms of an options grant, including the exercise price, the
number of shares subject to the option and the options exercisability. The exercise price of all
options granted under the 2010 Plan must be at least equal to the fair market value of such shares
on the date of grant. The maximum term of options granted under the 2010 Plan is five years.
The Company grants stock options to its employees and certain non-employees under the
Companys various stock option plans.
A summary of the stock option activity for both employees and non-employees is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, |
|
|
|
2008 |
|
|
2009 |
|
|
2010 |
|
|
|
|
|
|
|
Weighted |
|
|
|
|
|
|
Weighted |
|
|
|
|
|
|
Weighted |
|
|
|
|
|
|
|
average |
|
|
|
|
|
|
average |
|
|
|
|
|
|
average |
|
|
|
|
|
|
|
exercise |
|
|
|
|
|
|
exercise |
|
|
|
|
|
|
exercise |
|
|
|
|
|
|
|
price |
|
|
|
|
|
|
price |
|
|
|
|
|
|
price |
|
|
|
Number of |
|
|
(US$ per |
|
|
Number of |
|
|
(US$ per |
|
|
Number of |
|
|
(US$ per |
|
|
|
options |
|
|
option) |
|
|
options |
|
|
option) |
|
|
options |
|
|
option) |
|
Outstanding at beginning of year |
|
|
2,053,000 |
|
|
|
2.98 |
|
|
|
4,353,334 |
|
|
|
2.43 |
|
|
|
5,414,470 |
|
|
|
1.82 |
|
Granted |
|
|
2,410,000 |
|
|
|
2.00 |
|
|
|
1,366,000 |
|
|
|
2.14 |
|
|
|
1,235,000 |
|
|
|
2.50 |
|
Exercised |
|
|
(16,666 |
) |
|
|
3.13 |
|
|
|
(136,864 |
) |
|
|
2.75 |
|
|
|
(59,999 |
) |
|
|
1.90 |
|
Forfeited |
|
|
(93,000 |
) |
|
|
3.54 |
|
|
|
(168,000 |
) |
|
|
1.92 |
|
|
|
(368,336 |
) |
|
|
2.25 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at end of year |
|
|
4,353,334 |
|
|
|
2.43 |
|
|
|
5,414,470 |
|
|
|
1.82 |
|
|
|
6,221,135 |
|
|
|
2.38 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The weighted-average grant-date fair values of options granted during 2008, 2009 and 2010 were
US$1.17, US$1.50 and US$1.29 per option respectively.
F-32
CHINA TECHNOLOGY DEVELOPMENT GROUP CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts expressed in thousands, except share data or unless otherwise stated)
13 Stock-based compensation (continued)
(a) Stock Option (continued)
The following table summarizes information with respect to stock options outstanding and
exercisable at December 31, 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options outstanding |
|
|
Options exercisable |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted |
|
|
|
|
|
|
|
Weighted |
|
|
Weighted |
|
|
|
|
|
|
average |
|
|
|
|
|
|
|
average |
|
|
average |
|
|
|
|
|
|
exercise |
|
|
|
|
|
|
|
remaining |
|
|
exercise |
|
|
|
|
|
|
price |
|
|
|
Number |
|
|
contractual |
|
|
price (US$ |
|
|
Number |
|
|
(US$ per |
|
Date of grant |
|
outstanding |
|
|
life |
|
|
per share) |
|
|
exercisable |
|
|
share) |
|
February 8, 2005 |
|
|
50,000 |
|
|
6.11 years |
|
|
|
1.15 |
|
|
|
50,000 |
|
|
|
1.15 |
|
September 20, 2005 |
|
|
278,000 |
|
|
6.72 years |
|
|
|
1.85 |
|
|
|
278,000 |
|
|
|
1.85 |
|
September 18, 2006 |
|
|
770,000 |
|
|
7.28 years |
|
|
|
3.18 |
|
|
|
770,000 |
|
|
|
3.18 |
|
May 23, 2007 |
|
|
693,334 |
|
|
3.39 years |
|
|
|
3.13 |
|
|
|
219,991 |
|
|
|
3.13 |
|
August 3, 2007 |
|
|
80,000 |
|
|
3.59 years |
|
|
|
3.53 |
|
|
|
26,665 |
|
|
|
3.53 |
|
August 20, 2007 |
|
|
72,000 |
|
|
3.64 years |
|
|
|
3.74 |
|
|
|
23,998 |
|
|
|
3.74 |
|
July 28, 2008 |
|
|
130,000 |
|
|
4.57 years |
|
|
|
4.08 |
|
|
|
|
|
|
|
|
|
November 10, 2008 |
|
|
870,000 |
|
|
4.86 years |
|
|
|
2.04 |
|
|
|
|
|
|
|
|
|
December 30, 2008 |
|
|
1,410,000 |
|
|
5.00 years |
|
|
|
1.79 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,353,334 |
|
|
|
|
|
|
|
|
|
|
|
1,368,654 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table summarizes information with respect to stock options outstanding and
exercisable at December 31, 2009:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options outstanding |
|
|
Options exercisable |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted |
|
|
|
|
|
|
|
Weighted |
|
|
Weighted |
|
|
|
|
|
|
average |
|
|
|
|
|
|
|
average |
|
|
average |
|
|
|
|
|
|
exercise |
|
|
|
|
|
|
|
remaining |
|
|
exercise |
|
|
|
|
|
|
price |
|
|
|
Number |
|
|
contractual |
|
|
price (US$ |
|
|
Number |
|
|
(US$ per |
|
Date of grant |
|
outstanding |
|
|
life |
|
|
per share) |
|
|
exercisable |
|
|
share) |
|
February 8, 2005 |
|
|
50,000 |
|
|
5.11 years |
|
|
|
1.15 |
|
|
|
50,000 |
|
|
|
1.15 |
|
September 20, 2005 |
|
|
255,000 |
|
|
5.72 years |
|
|
|
1.85 |
|
|
|
255,000 |
|
|
|
1.85 |
|
September 18, 2006 |
|
|
725,000 |
|
|
6.28 years |
|
|
|
3.18 |
|
|
|
725,000 |
|
|
|
3.18 |
|
May 23, 2007 |
|
|
578,334 |
|
|
2.39 years |
|
|
|
3.13 |
|
|
|
578,334 |
|
|
|
3.13 |
|
August 3, 2007 |
|
|
80,000 |
|
|
2.59 years |
|
|
|
3.53 |
|
|
|
80,000 |
|
|
|
3.53 |
|
August 20, 2007 |
|
|
56,000 |
|
|
2.64 years |
|
|
|
3.74 |
|
|
|
56,000 |
|
|
|
3.74 |
|
July 28, 2008 |
|
|
130,000 |
|
|
3.57 years |
|
|
|
4.08 |
|
|
|
43,331 |
|
|
|
4.08 |
|
November 10, 2008 |
|
|
824,136 |
|
|
3.86 years |
|
|
|
2.04 |
|
|
|
244,127 |
|
|
|
2.04 |
|
December 30, 2008 |
|
|
1,410,000 |
|
|
4.00 years |
|
|
|
1.79 |
|
|
|
469,990 |
|
|
|
1.79 |
|
July 7, 2009 |
|
|
30,000 |
|
|
4.52 years |
|
|
|
2.35 |
|
|
|
|
|
|
|
|
|
October 1, 2009 |
|
|
1,276,000 |
|
|
4.75 years |
|
|
|
2.12 |
|
|
|
53,000 |
|
|
|
2.12 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,414,470 |
|
|
|
|
|
|
|
|
|
|
|
2,554,782 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-33
CHINA TECHNOLOGY DEVELOPMENT GROUP CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts expressed in thousands, except share data or unless otherwise stated)
13 Stock-based compensation (continued)
(a) Stock Option (continued)
The following table summarizes information with respect to stock options outstanding and
exercisable at December 31, 2010:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options outstanding |
|
|
Options exercisable |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted |
|
|
|
|
|
|
|
Weighted |
|
|
Weighted |
|
|
|
|
|
|
average |
|
|
|
|
|
|
|
average |
|
|
average |
|
|
|
|
|
|
exercise |
|
|
|
|
|
|
|
remaining |
|
|
exercise |
|
|
|
|
|
|
price |
|
|
|
Number |
|
|
contractual |
|
|
price (US$ |
|
|
Number |
|
|
(US$ per |
|
Date of grant |
|
outstanding |
|
|
life |
|
|
per share) |
|
|
exercisable |
|
|
share) |
|
February 8, 2005 |
|
|
50,000 |
|
|
4.10 years |
|
|
|
1.15 |
|
|
|
50,000 |
|
|
|
1.15 |
|
September 20, 2005 |
|
|
255,000 |
|
|
4.72 years |
|
|
|
1.85 |
|
|
|
255,000 |
|
|
|
1.85 |
|
September 18, 2006 |
|
|
725,000 |
|
|
5.71 years |
|
|
|
3.18 |
|
|
|
725,000 |
|
|
|
3.18 |
|
May 23, 2007 |
|
|
535,000 |
|
|
1.39 years |
|
|
|
3.13 |
|
|
|
535,000 |
|
|
|
3.13 |
|
August 3, 2007 |
|
|
80,000 |
|
|
1.59 years |
|
|
|
3.53 |
|
|
|
80,000 |
|
|
|
3.53 |
|
August 20, 2007 |
|
|
31,000 |
|
|
1.63 years |
|
|
|
3.74 |
|
|
|
31,000 |
|
|
|
3.74 |
|
July 28, 2008 |
|
|
130,000 |
|
|
2.57 years |
|
|
|
4.08 |
|
|
|
86,665 |
|
|
|
4.08 |
|
November 10, 2008 |
|
|
724,135 |
|
|
2.86 years |
|
|
|
2.04 |
|
|
|
477,462 |
|
|
|
2.04 |
|
December 30, 2008 |
|
|
1,280,000 |
|
|
3.00 years |
|
|
|
1.79 |
|
|
|
866,657 |
|
|
|
1.79 |
|
July 7, 2009 |
|
|
30,000 |
|
|
3.52 years |
|
|
|
2.35 |
|
|
|
10,000 |
|
|
|
2.35 |
|
October 1, 2009 |
|
|
1,146,000 |
|
|
4.41 years |
|
|
|
2.12 |
|
|
|
430,661 |
|
|
|
2.12 |
|
December 15, 2010 |
|
|
1,235,000 |
|
|
4.96 years |
|
|
|
2.50 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,221,135 |
|
|
|
|
|
|
|
|
|
|
|
3,547,445 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The aggregate intrinsic values for the stock options outstanding and stock options exercisable was
Rmb6,718 and Rmb1,916, respectively, as of December, 31, 2010.
F-34
CHINA TECHNOLOGY DEVELOPMENT GROUP CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts expressed in thousands, except share data or unless otherwise stated)
13 Stock-based compensation (continued)
As of December 31, 2010, the total compensation cost relating to non-vested awards not yet
recognized and the weighted-average period over which it is expected to be recognized is Rmb25,738
and 2.03 years, respectively.
During the years ended December 31, 2008, 2009 and 2010, there were no modifications made to the
original grants of the options.
The options granted on February 8, 2005 were made pursuant to the 1996 Plan and were
immediately exercisable. The options granted on September 20, 2005 included 60,000 options under
the 1996 Plan and 370,000 options under the 2000 Plan, all of which were immediately exercisable.
The options granted on September 18, 2006 included 30,000 options pursuant to the 2000 Plan and
1,000,000 options under the 2005 Plan, all were immediately exercisable. The 1,000,000 options
granted on May 23, 2007, August 3, 2007 and August 20, 2007, respectively, were made pursuant to
the 2006 Plan, and in each case, one-third (1/3) of the options granted are not exercisable until
one year after the date of grant and the remaining two-third (2/3) are not exercisable until two
years after the date of grant.
The 130,000 and 870,000 options granted on July 28, 2008 and November 10, 2008, respectively,
were made pursuant to the 2007 Plan, and in each case, one-third (1/3) of the options granted are
not exercisable until one year after the date of grant, the second one-third (1/3) of the options
granted are not exercisable until two years after the date of grant and the remaining one-third
(1/3) are not exercisable until three years after the date of grant, respectively. The 1,410,000
options granted on December 30, 2008 were made pursuant to the 2008 Plan and one-third (1/3) of the
options granted are not exercisable until one year after the date of grant, the second one-third
(1/3) of the options granted are not exercisable until two years after the date of grant, and the
remaining one-third (1/3) could not be exercisable until three years after the date of grant,
respectively.
The Company granted two groups of options to employees and non-employees during the year ended
December 31, 2008 under the 2007 Plan pursuant to resolutions passed by the Board on July 28, 2008
and November 10, 2008. 130,000 and 870,000 options were granted to certain directors and employees
and certain consultants of the Group.
The Company granted a group of options to employees and non-employees during the year ended
December 31, 2008 under the 2008 Plan pursuant to resolutions passed by the Board on December 30,
2008. 1,410,000 options were granted to certain directors and employees and certain consultants of
the Group.
Pursuant to resolutions passed by the Board on July 9, 2009, 90,000 options were granted to
certain directors and employees and certain consultants of the Group under the 2008 Plan.
One-third (1/3) of the options granted are not exercisable until one year after the date of grant,
the second one-third (1/3) of the options granted are not exercisable until two years after the
date of grant, and the remaining one-third (1/3) could not be exercisable until three years after
the date of grant, respectively.
Pursuant to resolutions passed on October 1, 2009, 1,000,000 options were granted to certain
directors and employees of the Group under the 2009 Plan. One-third (1/3) of the options granted
are not exercisable until one year after the date of grant, the second one-third (1/3) of the
options granted are not exercisable until two years after the date of grant, and the remaining
one-third (1/3) could not be exercisable until three years after the date of grant, respectively.
F-35
CHINA TECHNOLOGY DEVELOPMENT GROUP CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts expressed in thousands, except share data or unless otherwise stated)
13 Stock-based compensation (continued)
In addition, 276,000 options granted to directors on October 1, 2009 under various stock
option plans were either forfeited or expired unexercised and have, therefore, become available for
re-grant under the respective option plans.
Pursuant to resolutions passed by the Board on December 15, 2010, 880,000 options were granted
to certain directors and employees of the Group under the 2010 Plan. One-third (1/3) of the
options granted are not exercisable until one year after the date of grant, the second one-third
(1/3) of the options granted are not exercisable until two years after the date of grant, and the
remaining one-third (1/3) could not be exercisable until three years after the date of grant,
respectively.
Furthermore, a number of options under various stock option plans were granted to directors
and employees on December 15, 2010, namely 235,000 options under the 2009 Plan. The vesting
schedule of the 235,000 options granted under the 2009 Plan is: (1) One-third (1/3) on the first
anniversary of the date of grant; and (2) the remaining two-thirds ( 2/3) on the second anniversary
of the date of grant.
The Company recorded compensation expenses of Rmb6,198, Rmb7,804 and Rmb7,507 for the years
ended December 31, 2008, 2009 and 2010, respectively, recognized over the period during which an
employee is required to provide service, known as the requisite service period (usually the vesting
period), in exchange for the award. Cost of employee services received in exchange for an award of
equity instruments were measured based on the grant-date fair value of the award, estimated using
the Binomial Model.
Stock-based compensation to non-employees
The Company granted 140,000 options, 80,000 options and 30,000 options under the 2006 Plan to
certain consultants on May 23, 2007, August 3, 2007 and August 20, 2007, respectively, for their
advisory services provided to the Group. Pursuant to the option agreement of the 2006 Plan, the
vesting schedule is as follows: i) the first 1/3 of options vest on the 1st anniversary of the
grant date, and ii) the remaining 2/3 vest on the 2nd anniversary of the grant date, with the
condition of continuous service rendered to the Group from the grant date through the applicable
vesting dates. There were 160,000 options under the 2006 Plan which were exercisable as of December
31, 2010.
The Company granted 130,000 options under the 2007 Plan to certain consultants on July 28,
2008, Pursuant to the option agreement of the 2007 Plan, the vesting schedule is as follows: i) the
first 1/3 of options granted vest on the 1st anniversary of the grant date, ii) the second 1/3 of
options granted vest on the 2nd anniversary of the grant date, and iii) the remaining 1/3 of
options granted vest on the 3rd anniversary of the grant date, with the condition of continuous
service rendered to the Group from the grant date through the applicable vesting dates. . There
were 86,667 options under the 2007 Plan which were exercisable as of December 31, 2010.
The Company granted 240,000 options under the 2008 Plan to certain consultants on December 30,
2008 for their advisory services provided to the Group. Pursuant to the option agreement of the
2008 Plan, the vesting schedule is as follows: i) the first 1/3 of options granted vest on the
first 1st anniversary of the grant date, ii) the second 1/3 of options granted vest on the second
2nd anniversary of the grant date, iii) the remaining 1/3 of options granted vest on the third 3rd
anniversary of the grant date in the continuous service with the Group from the grant date through
the applicable vesting dates. There were 160,000 options under the 2008 Plan that were exercisable
as of December 31, 2010.
F-36
CHINA TECHNOLOGY DEVELOPMENT GROUP CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts expressed in thousands, except share data or unless otherwise stated)
13 Stock-based compensation (continued)
The Company granted 30,000 options under the 2008 Plan to certain consultants on July 7, 2009
for their advisory services provided to the Group. Pursuant to the option agreement of the 2008
Plan, the vesting schedule is as follows: i) the first 1/3 of options granted will vest on the
first 1st anniversary of the grant date, ii) the second 1/3 of options granted will vest on the
second 2nd anniversary of the grant date, iii) the remaining 1/3 of options granted will vest on
the third 3rd anniversary of the grant date with the condition of continuous service rendered to
the Group from the grant date through the applicable vesting dates. There were 10,000 options under
the 2008 Plan that were exercisable as of December 31, 2010. The Company granted 120,000 options
under the 2010 Plan to certain consultants on December 15, 2010 for their advisory services
provided to the Group. Pursuant to the 2010 Plan, the vesting schedule is as follows: i) the first
1/3 of options granted will vest on the first 1st anniversary of the grant date, ii) the second 1/3
of options granted will vest on the second 2nd anniversary of the grant date, iii) the remaining
1/3 of options granted will vest on the third 3rd anniversary of the grant date with the condition
of continuous service to be rendered to the Group from the grant date through the applicable
vesting dates. No options under the 2010 Plan are exercisable until December 31, 2011.
The Company recorded compensation expenses of Rmb176, Rmb902 and Rmb508 for the years ended
December 31, 2008, 2009 and 2010, respectively, recognized over the period during which an employee
is required to provide service, known as the requisite service period (usually the vesting period),
in exchange for the award. Cost of employee services received in exchange for an award of equity
instruments were measured based on the grant-date fair value of the award, estimated using the
Binomial Model.
The following assumptions have been used in the Binominal option pricing model adopted by the
directors of the Company in assessing the respective fair values of options granted to directors,
employees and non-employees for the years ended December 31, 2008, 2009 and 2010. The assumptions
include selecting several comparables from the market devoted to solar energy as references in
order to determine the volatility rate of the Company.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
|
|
Granted on |
|
|
|
July 28, 2008 |
|
|
November 10, 2008 |
|
|
December 30, 2008 |
|
Average risk-free rate of return(1)
|
|
|
3.393 |
% |
|
|
2.607 |
% |
|
|
1.508 |
% |
Volatility rate(2)
|
|
|
76.32 |
% |
|
|
85.20 |
% |
|
|
86.57 |
% |
Dividend yield(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009 |
|
|
|
Granted on |
|
|
|
July 07 ,2009 |
|
|
Oct 01 ,2009 |
|
Average risk-free rate of return(1)
|
|
|
2.79 |
% |
|
|
2.28 |
% |
Volatility rate(2)
|
|
|
79.65 |
% |
|
|
79.68 |
% |
Dividend yield(3)
|
|
|
|
|
|
|
|
F-37
CHINA TECHNOLOGY DEVELOPMENT GROUP CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts expressed in thousands, except share data or unless otherwise stated)
13 Stock-based compensation (continued)
|
|
|
|
|
|
|
2010 |
|
|
|
Granted on |
|
|
|
December 15, 2010 |
|
Average risk-free rate of return(1)
|
|
|
2.20 |
% |
Volatility rate(2)
|
|
|
76.79 |
% |
Dividend yield(3)
|
|
|
|
|
|
|
1. |
|
The risk-free interest rate is based on the U.S. Treasury yield for a term consistent with the
expected life of the awards in effect at the time of grant. |
|
|
|
2. |
|
Expected volatility is estimated based on the historical volatility of the Companys stock
price and/or the comparable public-traded companies. |
|
|
|
3. |
|
The Company has no expectation of paying dividends on its common stock. |
(b) Stock Purchase Warrants
On July 2, 2007, the Company issued two warrants, each of which entitled the holder to
purchase 100,000 shares of common stock, to two consultants for their advisory services provided to
the Group, at an exercise price of US$4.00 and US$5.00 per share, respectively. With reference to
the term of the warrant certificate, the exercise period was 4 years commencing on the issue of the
warrants. The warrants include cashless exercise provision whereby the holders may elect to receive
net shares upon exercise instead of paying cash to the Company. The warrants were fully vested upon
issuance and Rmb3,023 was recorded as compensation expense in the consolidated statement of
operations in 2007. One warrant holder exercised 100,000 warrants in full at exercise price of
US$4.00 on November 6, 2009 in lieu of making cash settlement, resulting in the issuance of 14,776
shares of common stock.
On August 31, 2007, the Company issued a warrant to purchase 200,000 shares of common stock to
a consultant for its advisory services provided to the Group, at an exercise price US$5.00 per
share. The warrant was fully vested upon issuance with an expiry date of August 30, 2008. On August
29, 2008, the Company amended to this warrant agreement, pursuant to which the expiration date of
the warrant was extended from August 30, 2008 to September 1, 2010. The initial compensation cost
recognized in the 2007 consolidated statements of operations was Rmb1,561, and the total
incremental compensation cost resulting from the modification was Rmb2,364 and was fully recognized
in the 2008 consolidated statement of operations. This warrant was not exercised and expired on
August 30, 2010.
F-38
CHINA TECHNOLOGY DEVELOPMENT GROUP CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts expressed in thousands, except share data or unless otherwise stated
13 Stock-based compensation (continued)
The fair value of above-mentioned warrants was determined on the date of issue using the
Binomial Model using the following assumptions:
|
|
|
|
|
|
|
|
|
|
|
2007 |
|
|
2008 |
|
|
|
August 31, 2007 |
|
|
August 29, 2008 |
|
Average risk-free rate of return |
|
|
4.06 |
% |
|
|
2.214 |
% |
Volatility rate |
|
|
76.51 |
% |
|
|
75.77 |
% |
Dividend yield |
|
|
|
|
|
|
|
|
On January 12, 2010, the Company issued a warrant to purchase 200,000 shares of common stock
to a consultant for its advisory services provided to the Group at an exercise price US$6.00 per
share. The warrant was fully vested and immediately exercisable upon issuance with an expiry date
of January 11, 2015. The related expenses recognized in the 2010 consolidated statements of
operations were Rmb946. This warrant has not been exercised as at December 31, 2010.
On April 14, 2010, the Company issued a warrant to purchase 300,000 shares of common stock to
a consultant for its advisory services provided to the Group at an exercise price US$3.50 per
share. The warrant was fully vested and immediately exercisable upon issuance with an expiry date
of April 13, 2012. The related compensation expenses recognized in the 2010 consolidated statements
of operations were Rmb1,544. This warrant has not been exercised as at December 31, 2010.
The fair values of above-mentioned warrants were determined on the dates of issue using the
Binomial Model using the following assumptions:
|
|
|
|
|
|
|
|
|
|
|
2010 |
|
|
2010 |
|
|
|
January 12, 2010 |
|
|
April 14, 2008 |
|
Average risk-free rate of return |
|
|
2.512 |
% |
|
|
0.992 |
% |
Volatility rate |
|
|
78.50 |
% |
|
|
83.06 |
% |
Dividend yield |
|
|
|
|
|
|
|
|
14 Net (loss) earnings per share
Net (loss) earnings per share is calculated based on the weighted average number of shares of
common stock issued and, as appropriate, diluted shares of common stock equivalents outstanding
during each of the relevant years and the related loss amounts. The number of incremental shares
from assumed exercise of stock options, stock purchase warrants, warrants, and option rights have
been determined using the treasury stock method. Under the treasury stock method, the proceeds from
the assumed conversion of options and warrants are used to repurchase common stock using the
average fair value of the common stock during those relevant years.
A convertible note was issued on May 12, 2009 (Note 21), and the holder exercised the option
to convert the entire principal amount of US$10,000 into 3,322,260 shares of the Companys common
stock in November 2009, all of which have been taken into account in the computation of the (loss)
earnings per share.
F-39
CHINA TECHNOLOGY DEVELOPMENT GROUP CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts expressed in thousands, except share data or unless otherwise stated)
14 Net (loss) earnings per share (continued)
Basic and diluted net (loss) earnings per share have been calculated in accordance with ASC
260 (formerly referred to SFAS No. 128 Earnings per Share), for the years ended December 31,
2008, 2009 and 2010 as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, |
|
|
|
2008 |
|
|
2009 |
|
|
2010 |
|
|
|
Rmb |
|
|
Rmb |
|
|
Rmb |
|
|
|
(Amounts expressed in thousands, except per share data) |
|
Net loss for the year attributable to the
shareholders of the Company |
|
|
(53,918 |
) |
|
|
(38,469 |
) |
|
|
(35,121 |
) |
|
|
|
|
|
|
|
|
|
|
Net loss from continuing operations attributable to
holders of Common Stock, basic and diluted |
|
|
(54,776 |
) |
|
|
(42,696 |
) |
|
|
(35,121 |
) |
|
|
|
|
|
|
|
|
|
|
Net income from discontinued operations attributable
to holders of Common Stock, basic and diluted |
|
|
858 |
|
|
|
4,227 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average shares used in computing basic and
diluted net loss per share |
|
|
16,160 |
|
|
|
15,927 |
|
|
|
20,746 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per share (in Rmb) |
|
|
|
|
|
|
|
|
|
|
|
|
- Basic and diluted |
|
|
(3.34 |
) |
|
|
(2.42 |
) |
|
|
(1.69 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per share from continuing operations (in Rmb) |
|
|
|
|
|
|
|
|
|
|
|
|
- Basic and diluted |
|
|
(3.39 |
) |
|
|
(2.68 |
) |
|
|
(1.69 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings per share from discontinued operations
(in Rmb) |
|
|
|
|
|
|
|
|
|
|
|
|
- Basic and diluted |
|
|
0.05 |
|
|
|
0.26 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three years ended December 31, 2008, 2009 and 2010, the number of shares used in the
calculation of diluted net (loss) income per share is equal to the number of shares used to
calculate basic (loss) earnings per share as the incremental effect of share options, stock
purchase warrants, warrants, options and convertible note would be antidilutive. The weighted
average number ordinary share equivalent of stock options, stock purchase warrants, convertible
note, warrants and option rights which have not been included in the calculation of diluted net
loss for continuing and discontinued operation per share for the years ended December 31, 2008,
2009 and 2010 were approximately 914,000, 7,549,000, 5,784,000, respectively.
F-40
CHINA TECHNOLOGY DEVELOPMENT GROUP CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts expressed in thousands, except share data or unless otherwise stated)
15 Related party transactions
The transactions with related parties were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, |
|
|
|
2008 |
|
|
2009 |
|
|
2010 |
|
|
|
Rmb |
|
|
Rmb |
|
|
Rmb |
|
Transactions with related parties |
|
|
|
|
|
|
|
|
|
|
|
|
Prepayment for acquisition of property from ZMRE (Note a) |
|
|
440 |
|
|
|
|
|
|
|
|
|
Proceeds from acquisition of property from CTIG (Note b) |
|
|
7,302 |
|
|
|
|
|
|
|
|
|
Payment for acquisition of property on behalf of CTIG (Note b) |
|
|
5,000 |
|
|
|
|
|
|
|
|
|
Loan from Chief Executive Officer, Alan Li (Note c) |
|
|
|
|
|
|
792 |
|
|
|
|
|
Repayment of overdraft of a security account CTIG (Note d) |
|
|
|
|
|
|
440 |
|
|
|
|
|
Issuance of an convertible note in principal amount of US$10,000 by
CGHL to CMTF (Note e) |
|
|
|
|
|
|
68,672 |
|
|
|
|
|
Deposit payment to CTIG for acquisition of a-Si thin film solar
panel production line
(Note f) |
|
|
|
|
|
|
6,867 |
|
|
|
|
|
Repayment of a deposit from CTIG for acquisition of the production
line (Note f) |
|
|
|
|
|
|
|
|
|
|
6,626 |
|
Advance from ex-shareholder of Linsun Group, Liao Lin-Hsiang (Note g) |
|
|
|
|
|
|
|
|
|
|
8,097 |
|
Service fee paid and payable pursuant to a service agreement signed
with CTIG (Note h) |
|
|
|
|
|
|
|
|
|
|
2,548 |
|
|
|
|
Note |
|
(a) |
|
Zhangzhou Trendar Tech and Broad Shine, two wholly-owned subsidiaries of the Company,
acquired four properties at an aggregate consideration of Rmb3,301 from Zhangzhou Merchants
Real Estate Ltd. (ZMRE) on July 3, 2007 and October 22, 2007, respectively. On March 20,
2008, Broad Shine acquired one property for consideration of Rmb440 from ZMRE. China Merchant
Group (CMG) is the ultimate holding company of CTIG, and ZMRE is a subsidiary of CMG. |
|
(b) |
|
Prior to the acquisition of Faster Group in 2007, Faster Group had no business activities and
its major asset was a right to purchase a real estate located at the Tangyang Industrial Zone
of the China Merchants Zhangzhou Development Zone from China Merchants Zhangzhou Development
Zone Ltd. (CMZDZ), for a consideration of Rmb13,085. China Merchant Group (CMG) is the
ultimate holding company of CTIG, and CMZDZ is a subsidiary of CMG. Out of the total payment
to be made, Rmb5,783 was to be was borne by the Faster Group and Rmb7,302 was to be settled by
CTIG on behalf of Faster Group. In 2008, the Group received Rmb7,302 from CTIG but it only
paid Rmb5,000 to CMZDZ for the purchase of the property. The remaining balance due to CMZDZ
was Rmb8,085 as of December 31, 2009 and 2010. |
|
(c) |
|
On February 25, 2009, BHL Solar Technology Company Limited (BHLHK), a wholly owned
subsidiary of the Company, entered into a loan agreement with Mr. Alan Li, to borrow HK$900
from him for a period of 10 months without interest. Mr. Alan Li is one of the directors of
BHLHK and is the Chairman of the Board of Directors, Executive Director and Chief Executive
Officer of the Company. The loan was for working capital financing purposes and the amount was
fully repaid in May 2009. |
F-41
CHINA TECHNOLOGY DEVELOPMENT GROUP CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts expressed in thousands, except share data or unless otherwise stated)
15 Related party transactions (continued)
(d) |
|
The amount represents repayment of overdraft of a securities account on behalf of BHLHK by
CTIG on February 5, 2009. |
|
(e) |
|
In April 2009, the Company and two of the Companys subsidiaries, China Green Industry Group
Ltd. and China Green Holdings Ltd. (CGHL), wholly-owned subsidiaries of the Company, entered
into a subscription agreement with CMTF Private Equity One, (CMTF). CMTF Private Equity One
is one of the funds managed by CMS Capital (HK) Co., Ltd. (formerly known as CMTF Asset
Management Limited), which is an indirect subsidiary of CMG. CMTF Private Equity One is a
shareholder of the Company as at December 31, 2010. Pursuant to the subscription agreement,
CGHL issued to CMTF a convertible note at a principal amount of US$10,000 with a three-year
maturity period and at an interest rate equal to the Hong Kong Prime Rate. The convertible
note was, at the holders option, either convertible into the outstanding ordinary shares of
CGHL or exchangeable for shares of the Companys common stock. In November 2009, CMTF
exchanged the convertible note for 3,322,260 shares of the Companys common stock. |
|
(f) |
|
On December 15, 2009, the Company entered into an agency contract regarding purchase of one
a-Si thin film solar panel production line with CTIG (the Agency Contract). Pursuant to the
Agency Contract, the Company appointed CTIG as its representative to liaise and negotiate with
equipment supplier to purchase one a-Si thin film solar panel production line, together with
the rights of use of its patents, proprietary technology, technical service and provision of
relevant training. The Company paid US$1,000 to CTIG for financing the payment of a deposit
for the purchases on December 16, 2009. On June 22, 2010, the Company decided not to
undertake the purchase and terminated the Agency Contract with CTIG. The deposit was refunded
in full to the Company before end of 2010. |
|
(g) |
|
On 23 November 2010, the Group acquired 100% shareholding of Linsun Group (Note 1). Prior to
the acquisition, Liao Lin-Hsiang held 66.67% interests in LSRHK. Liao Lin-Hsiang had advanced
Rmb8.10 million to LSPPRC before the acquisition for working capital financing purposes.
Rmb7.80 million had been repaid by the Group as at December 31, 2010. |
|
|
|
As of December 31, 2009 and 2010, the balances with related parties were as follows: |
|
|
|
|
|
|
|
|
|
|
|
December 31, |
|
|
|
2009 |
|
|
2010 |
|
|
|
Rmb |
|
|
Rmb |
|
Balances with related parties: |
|
|
|
|
|
|
|
|
Due from related parties |
|
|
|
|
|
|
|
|
Funds held by CTIG for acquisition of technology and
business in China (Note f and h) |
|
|
12,053 |
|
|
|
2,455 |
|
|
|
|
|
|
|
|
|
|
|
12,053 |
|
|
|
2,455 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Due to related parties: |
|
|
|
|
|
|
|
|
Due to CTIG (Note i) |
|
|
859 |
|
|
|
853 |
|
Due to CMZDZ (Note b) |
|
|
8,085 |
|
|
|
8,085 |
|
Due to Liao Lin-Hsiang (Note g) |
|
|
|
|
|
|
300 |
|
|
|
|
|
|
|
|
|
|
|
8,944 |
|
|
|
9,238 |
|
|
|
|
|
|
|
|
F-42
CHINA TECHNOLOGY DEVELOPMENT GROUP CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts expressed in thousands, except share data or unless otherwise stated)
15 Related party transactions (continued)
(h) |
|
In view of CTIGs experience in doing acquisitions in China, the Group made a temporary
advance of HK$6,000 to CTIG in order to facilitate it to make acquisitions of technology
related businesses in China. The advance is interest free and repayable on demand. In 2010,
CTIG assisted the Company to successfully acquire Linsun Group. In May 2011, the Company
entered into an agreement with CTIG to pay a service fee amounting HK$3,000 (equivalent to
approximately Rmb2,548) to CTIG for that transaction. Such services fee was deducted from the
temporary advance previously made to CTIG, as mutually agreed between the parties. |
(i) |
|
The amount represents administrative expenses paid on behalf of Faster Assets and Shenzhen
Helios Energy by CTIG in China. |
Except for Note c, all the balances with related parties were unsecured and interest-free, and
have no fixed terms of repayment.
16 Retirement benefits
As stipulated by the relevant regulations in the PRC, the PRC subsidiaries of the Group are
required to make contributions to a central retirement fund organized by the PRC government at a
rate of 20% of the base salaries of their employees. Employees of the Group in Hong Kong have
joined the Mandatory Provident Fund (MPF) Scheme which is also a defined contribution plan
operated by the Hong Kong government. The monthly contribution to the MPF Scheme is calculated
based on the rules set out in the MPF Ordinance in Hong Kong, which is 5% of the relevant income of
the employee with a specific ceiling. Contributions made in connection with the mandatory fund and
retirement fund, which had been expensed as incurred, were Rmb672, Rmb 212 and Rmb285 for the years
2008, 2009 and 2010, respectively. The PRC and HK subsidiaries have no further obligation for the
payment of additional pension benefits beyond the annual contributions described above.
17 Common stock
16,666 and 136,864 and 59,999 shares of common stock were issued upon exercise of stock
options during the years ended December 31, 2008, 2009 and 2010.
On September 23, 2008, the Company entered into a Securities and Purchase Agreement (the
SPA) with certain investors for a private placement transaction. Pursuant to the transaction,
the Company issued (i) 498,338 shares of common stock, (ii) 249,170 warrants to purchase common
stock at an exercise price of US$6.00 per share (Warrant A) and (iii) 1,277,136 warrants to
purchase common stock at an exercise price of US$0.01 per share (Warrant B) for a total net cash
proceeds of US$1,364 (Rmb9,365).
Warrant A and Warrant B are freestanding instruments which can be exercised separately on a
standalone basis. Warrant A is exercisable within five years after its initial issuance. Warrant B
is exercisable upon the occurrence of certain price reset protections or dilutive events. Warrant B
also includes a potential cash settlement feature that is outside the Companys control. Both
Warrant A and Warrant B are exercisable through either physical or net settlement. In case of net
settlement, the holder may elect to receive net number of shares upon cashless exercise in lieu of
making cash payment to the Company. The net number of shares would be based on the fair market
value of shares over certain days preceding the exercise date.
F-43
CHINA TECHNOLOGY DEVELOPMENT GROUP CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts expressed in thousands, except share data or unless otherwise stated)
17 Common stock (continued)
In connection with the issuance of the above instruments, the purchasers were also offered
option rights to acquire up to additional 498,338 shares of common stock, additional Warrant A to
purchase an aggregate amount of up to 249,170 and Warrant B to purchase an aggregate amount of up
to 1,277,136 as additional closing upon a period up to June 23, 2009, defined as the Additional
Closing date.
According to ASC 815 (formerly contained in FAS133, EITF0019, EITF07-05), the Company
determined that Warrant B was a liability instrument and further recorded its fair value at
issuance equal to US$ 154 (Rmb1,053) as warrant liability in the consolidated balance sheet.
Warrant B was further re-measured at December 31, 2008 with the change in fair value of US$185
(Rmb1,236) recorded in the consolidated statements of operations during the year ended December 31,
2008. The remaining proceeds of the private placement were then recorded in the consolidated
balance sheet between common stock and additional paid in capital based on the relative fair value
of the common stock and the other related financial instruments associated with the issuance.
With the adoption of ASC 815-40-15 on January 1, 2009, Warrant A and option rights were
recognized as liabilities as Warrant A contain a reset feature, whereby the exercise price of the
instruments would be reset to the market price if the market price is lower than the exercise price
at a specified date, and option rights contain similar features whereby the number of shares to be
finally issued under option rights are not fixed. The cumulative effect on the re-designation of
these financial instruments arising from the adoption of US$141 (Rmb961) had been recognized as an
adjustment made to the retained earnings brought forward as at January 1, 2009.
In June 2009, only a minority of the investors exercised the option rights to acquire (i)
60,000 additional shares of common stock of the Company, par value $0.01 per share, (ii) Warrant A
to purchase common stock at an exercise price of US$6.00 per share, and (iii) Warrant B to purchase
common stock at an exercise price of US$0.01 per share for a total net cash proceeds of US$180
(Rmb1,239). The remaining portion of the option rights which were not exercised lapsed upon the
expiry of Additional Closing, primarily due to different risk considerations and perceptions of the
various investors with respect to the fair value of the option rights. Fair value gain of US$663
(Rmb4,551) of option rights expired was reversed to the consolidated statements of operations
during the year ended December 31, 2009.
The holders of Warrant B had delivered a Notice of Cashless Exercise dated October 22, 2009
pursuant to which they exercised the Warrant B in full eligible number on a cashless basis,
resulting in the issuance to it of 222,821 shares of the Companys Common Stock on October 28,
2009. Fair value loss of US$81 (Rmb556) for Warrant B was recorded in the consolidated statements
of operations during the year ended December 31, 2009.
Warrant A was remeasured with the fair value gain of US$20 (Rmb132) recorded in the
consolidated statements of operations during the year ended December 31, 2010Warrant A was
remeasured with the fair value loss of US$26 (Rmb197) recorded in the consolidated statements of
operations during the year ended December 31, 2009.
On May 6, 2010, the Company issued 2,000,000 shares of the Companys Common Stock in another
private placement to a third party investor and received the gross proceeds in amount of Rmb39,664,
before deducting stock issuance expenses of Rmb1,991.
F-44
CHINA TECHNOLOGY DEVELOPMENT GROUP CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts expressed in thousands, except share data or unless otherwise stated)
18 Series A non-convertible and non-redeemable Preferred Stock
1,000,000 shares of Preferred Stock issued in 2007 were recorded at par value of Rmb77 which
was determined based on the difference between Rmb20,700 and fair value of Common Stock.
The rights, preferences and privileges with respect to the Preferred Stock are as follows:
|
|
Voting right |
|
|
|
The 1,000,000 shares of Preferred Stock have an aggregate voting power of 25% of the
combined voting power of the Companys shares, Common Stock and Preferred Stock. |
|
|
|
Dividends |
|
|
|
The holder is entitled to receive dividends only as, when and if such dividends are
declared by the Board with respect to shares of Preferred Stock. |
|
|
|
Liquidation preference |
|
|
|
In the event of any distribution of assets upon any liquidation, dissolution or
winding up of the Company, whether voluntary or involuntary, after payment or
provision for payments of the debts and other liabilities of the Company, the holder
is entitled to receive out of assets of the Company, whether such assets are capital,
surplus or earnings, an amount equal to the consideration paid by him for each such
share plus any accrued and unpaid dividends with respect to such shares of Preferred
Stock through the date of such liquidation, dissolution or winding up. |
|
|
|
Redemption |
|
|
|
The issuer has no right to redeem the Preferred Stock. |
|
|
|
Non-convertible |
|
|
|
The Preferred Stock is not convertible into common stock. |
F-45
CHINA TECHNOLOGY DEVELOPMENT GROUP CORPORATIONS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts expressed in thousands, except share data or unless otherwise stated)
19 Available-for-sale securities
The AFS securities as of December 31, 2009 and 2010 were marketable equity securities traded
on the Hong Kong Stock Exchange.
The following is a summary of the available-for-sale securities:
|
|
|
|
|
|
|
|
|
|
|
December 31, |
|
|
|
2009 |
|
|
2010 |
|
|
|
Rmb |
|
|
Rmb |
|
Cost of available-for-sale securities |
|
|
18,204 |
|
|
|
18,139 |
|
Impairment |
|
|
|
|
|
|
(3,549 |
) |
Unrecognized gain (loss) |
|
|
9,228 |
|
|
|
(470 |
) |
|
|
|
|
|
|
|
Fair value of available-for-sale securities |
|
|
27,432 |
|
|
|
14,120 |
|
|
|
|
|
|
|
|
The Company had recognized other than temporary impairment in respect of one of its AFS
securities as of December 31, 2010 as the related investment had been in a continuous unrealized
loss position for more than 12 months since the initial purchase date, and there are currently no
indicators for recovery of the loss in near future.
20 Deposit for investment
On October 27, 2009, the Company entered into a Stock Purchase Agreement with China Technology
Solar Power Holdings Limited (CTSPHL), and its direct and indirect shareholders to acquire a 51%
equity interest in CTSPHL in consideration of (i) a cash advance amounting to US$3,000 (the
Advance); (ii) a number of shares of the Companys common stock to be issued at the closing of
acquisition; and (iii) a convertible note with a principal amount equal to US$4.18 million to be
issued at the second closing date of acquisition. CTSPHL, through its wholly-owned subsidiary, is
developing a 100 megawatt grid-connected solar power plant project located in Delingha City of
Qaidam Basin in Qinghai Province, Northwestern China. Upon execution of the stock purchase
agreement in October 2009, the Company paid the Advance in cash to Good Million Investment Ltd.,
the direct shareholder of CTSPHL, as a prepayment for the transaction, designated to be solely used
for developing and constructing the solar power plant.
Due to the fact that the Chinese government has not determined the specific subsidy and
incentive arrangements for on-grid solar energy applications in the Qinghai Province, on October
11, 2010, the Company entered into an agreement with CTSPHL to terminate the stock purchase
agreement. Pursuant to a provision of the original Stock Purchase Agreement and subsequent
amendments, the Advance had to be repaid to the Group. According to the latest repayment
agreement, Good Million Investment Ltd. and its shareholders undertake to repay the full amount of
the Advance by two installments in cash, with US$1,000 to be paid before June 7, 2011, and
remaining US$2,000 to be paid before August 31, 2011. In addition, an individual shareholder of
Good Million Investment Ltd. personally guaranteed to CTDC for the due repayment of the Advance and
Good Million Investment Ltd. will pledge 40,000,000 ordinary shares of a Hong Kong listed company
as collateral to secure the repayment of US$2,000. As of June 24, 2011, the fair market value of
such collateral was approximately US$1,987. Accordingly, in accordance with the latest repayment
agreement, the deposit balance has been reclassified to Other current assets as of December 31,
2010. Subsequent to December 31, 2010 on June 7, 2011, the Company has received the first
installment settlement of US$1,000. The directors of the Company made an assessment and conclude
that there was no impairment of the remaining balance of the Advance as at December 31, 2010 and no
provision for impairment was required.
F-46
CHINA TECHNOLOGY DEVELOPMENT GROUP CORPORATIONS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts expressed in thousands, except share data or unless otherwise stated)
21 Convertible note
On April 28, 2009, a Subscription Agreement was entered into by and among the Company; China
Green Industry Group Ltd. and China Green Holdings Ltd. (CGHL), wholly-owned subsidiaries of the
Company; and CMTF. Pursuant to the Subscription Agreement, CGHL issued to the CMTF a convertible
note with principal amount of US$10,000 with a three-year maturity, with at an interest rate equal
to Hong Kong Prime Rate. The convertible note was, at the CMTFs option, either (a) convertible
into the outstanding ordinary shares of the CGHL, or (b) exchangeable for shares of the Companys
common stock. The transaction was closed on May 12, 2009.
In November 2009, CMTF exchanged the entire principal amount of the convertible note for
3,322,260 shares of the Companys common stock. The Company followed the guidance under ASC 815 to
bifurcate the conversion option from the host contract at the inception date and such option was
remeasured at fair value with such fair value being reflected in current earnings through the
conversion date. The debt host, including the related discount resulting from the bifurcation of
the conversion option had been accreted to the redemption value of convertible note over the life
of the convertible note. The loss on extinguishment, which represents the difference between the
sum of the recorded amounts for the debt host and the conversion option and the fair value of the
shares issued at the conversion date, was recorded in the consolidated statements of operation. For
the year ended December 31, 2009, the accretion interest of Rmb5,760, fair value change of
derivative of Rmb5,040 and the loss on extinguishment of Rmb3,434 was also recorded in the
consolidated statements of operation.
22 Contingencies and commitments
(a) Operating lease commitments
As of December 31, 2010, the Group had future aggregate minimum lease payments under non-cancelable
operating leases as follows:
|
|
|
|
|
As of December 31, |
|
Rmb |
|
2011 |
|
|
1,770 |
|
2012 |
|
|
1,710 |
|
2013 |
|
|
1,537 |
|
2014 |
|
|
1,397 |
|
2015 |
|
|
523 |
|
|
|
|
|
Total |
|
|
6,937 |
|
|
|
|
|
Rental expenses for the years ended December 31, 2008, 2009 and 2010 amounted to Rmb1,505,
Rmb868 and Rmb1,520 respectively.
F-47
CHINA TECHNOLOGY DEVELOPMENT GROUP CORPORATIONS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts expressed in thousands, except share data or unless otherwise stated)
22 Contingencies and commitments (continued)
(b) Capital commitments for construction in progress
SnO2 Solar Base Plate Production Lines
On September 7, 2007, China Merchants Zhangzhou Development Zone Trenda Solar Ltd. (Zhangzhou
Trenda), a wholly-owned subsidiary of the Group, entered into a cooperation contract with an
independent vendor (the Vendor A), in order to purchase four SnO2 solar base plates
production lines at an aggregate consideration of US$8,000 (US$2,000 per each line,
equivalent to Rmb58,357 in aggregate). Half of the consideration for each production line was
paid in accordance with each delivery. The remaining 50% consideration payment would be made
by the Group upon successful installation of the production lines and upon the time these
production lines have met the requirements for production.
The Groups first production line was delivered to Zhangzhou Trenda and was installed and
tested in December 2008. Due to its inherent deficiencies, the Group and Vendor A agreed to
reduce the purchase consideration from US$2,000 to US$1,000 for this production line and the
Group paid US$1,000 to Vendor A in 2008. Pursuant to the provisions of the cooperation
contract, Zhangzhou Trenda has the right to terminate the purchase of the remaining three
production lines which had an aggregate price of US$6,000, in the event that the first
production line fails to manufacture products with quality which satisfies the standard
mutually agreed in the cooperation agreement. For the years ended December 31, 2009 and 2010,
impairment provision was made to write down the full carrying amount of this production line
owing to the quality issue. In addition, the Company had determined not to continue with the
remaining contract terms and reserved the right to claim penalties from the Vendor. The
directors consider there would be no further obligation for the Group.
23 Restricted net assets
Under PRC laws and regulations, there are certain restrictions on the Companys PRC
subsidiaries with respect to transferring certain of their net assets to the Company either in the
form of dividends, loans, or advances. Amounts restricted include paid up capital and reserves of
the Companys PRC subsidiaries with positive net asset, totaling approximately Rmb31,625 as of
December 31, 2010.
24 Segment information
Prior to 2008, the Group and the Company operated two segments: the IT operations and the
Solar Energy Operations, in addition to corporate segment. With the IT Operations being classified
as discontinued operations in 2008, the Solar Energy Operations became the sole operating segment
of the Group in addition to corporate segment.
The chief operating decision maker evaluates the segment performance based upon operating
income or loss and allocates resources between segments. Such measure is then adjusted to exclude
items that are of a non-recurring or unusual nature. Management believes such discussions are the
most informative representation of how management evaluates performance.
F-48
CHINA TECHNOLOGY DEVELOPMENT GROUP CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts expressed in thousands, except share data or unless otherwise stated)
24 Segment information (continued)
Below represents summarized financial information for the Solar Energy Operations which
represent the Groups continuing operations for 2010, 2009 and 2008 as well as for the IT and
Nutraceutical Operations, which represent the discontinued operation of the Group:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net |
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating |
|
|
|
|
|
|
identifiable |
|
|
Depreciation |
|
|
|
|
|
|
|
|
|
|
income |
|
|
|
|
|
|
assets/ |
|
|
and |
|
|
Capital |
|
|
|
Revenues |
|
|
(loss) |
|
|
Assets |
|
|
(liabilities) |
|
|
amortization |
|
|
expenditures |
|
|
|
Rmb |
|
|
Rmb |
|
|
Rmb |
|
|
Rmb |
|
|
Rmb |
|
|
Rmb |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2010 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Solar Energy
Operations |
|
|
53,700 |
|
|
|
222 |
|
|
|
160,244 |
|
|
|
84,566 |
|
|
|
2,327 |
|
|
|
4,675 |
|
Corporate* |
|
|
|
|
|
|
(28,749 |
) |
|
|
5,611 |
|
|
|
30,707 |
|
|
|
26 |
|
|
|
134 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
53,700 |
|
|
|
(28,527 |
) |
|
|
165,855 |
|
|
|
115,273 |
|
|
|
2,353 |
|
|
|
4,809 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Solar Energy
Operations |
|
|
|
|
|
|
(12,329 |
) |
|
|
32,576 |
|
|
|
20,633 |
|
|
|
2,174 |
|
|
|
1,298 |
|
Corporate* |
|
|
|
|
|
|
(20,002 |
) |
|
|
86,859 |
|
|
|
77,068 |
|
|
|
341 |
|
|
|
81 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
|
|
|
|
(32,331 |
) |
|
|
119,435 |
|
|
|
97,701 |
|
|
|
2,515 |
|
|
|
1,379 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Solar Energy
Operations |
|
|
10 |
|
|
|
(4,334 |
) |
|
|
43,009 |
|
|
|
31,494 |
|
|
|
1,679 |
|
|
|
7,044 |
|
Corporate* |
|
|
|
|
|
|
(20,004 |
) |
|
|
17,171 |
|
|
|
9,657 |
|
|
|
504 |
|
|
|
47 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sub-total |
|
|
10 |
|
|
|
(24,338 |
) |
|
|
60,180 |
|
|
|
41,151 |
|
|
|
2,183 |
|
|
|
7,091 |
|
Discontinued
operation-IT
Operations |
|
|
|
|
|
|
|
|
|
|
2,439 |
|
|
|
1,079 |
|
|
|
|
|
|
|
16 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
|
|
10 |
|
|
|
(24,338 |
) |
|
|
62,619 |
|
|
|
42,230 |
|
|
|
2,183 |
|
|
|
7,107 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-49
CHINA TECHNOLOGY DEVELOPMENT GROUP CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts expressed in thousands, except share data or unless otherwise stated)
24 Segment information (continued)
|
|
|
* |
|
The detail of corporate/unallocated items including mainly staff costs, legal and professional
fees are as follows: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
2009 |
|
2010 |
|
|
Rmb |
|
Rmb |
|
Rmb |
|
|
|
|
|
|
|
|
|
|
|
|
|
Unallocated general and administrative expenses |
|
|
(20,004 |
) |
|
|
(20,002 |
) |
|
|
(28,749 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating loss |
|
|
(20,004 |
) |
|
|
(20,002 |
) |
|
|
(28,749 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
|
1,688 |
|
|
|
22,009 |
|
|
|
2,636 |
|
Other investments |
|
|
|
|
|
|
336 |
|
|
|
|
|
Trading securities |
|
|
|
|
|
|
3,825 |
|
|
|
20,429 |
|
Available-for-sale securities |
|
|
4,712 |
|
|
|
27,432 |
|
|
|
14,120 |
|
Due from related parties |
|
|
5,282 |
|
|
|
12,053 |
|
|
|
4,285 |
|
Prepayment for acquisition of property, plant
and equipment |
|
|
4,525 |
|
|
|
|
|
|
|
|
|
Other non-current assets |
|
|
|
|
|
|
20,602 |
|
|
|
200 |
|
Other assets |
|
|
963 |
|
|
|
603 |
|
|
|
3,097 |
|
Due to related parties |
|
|
(176 |
) |
|
|
(177 |
) |
|
|
|
|
Deferred tax liabilities |
|
|
|
|
|
|
|
|
|
|
(3,241 |
) |
Overdraft from security account |
|
|
(1,499 |
) |
|
|
|
|
|
|
|
|
Liabilities relating to warrants |
|
|
(2,289 |
) |
|
|
(3,003 |
) |
|
|
(2,449 |
) |
Other liabilities |
|
|
(3,549 |
) |
|
|
(6,612 |
) |
|
|
(8,370 |
) |
|
|
|
Net identifiable assets |
|
|
9,657 |
|
|
|
77,068 |
|
|
|
30,707 |
|
|
|
|
The Group was engaged in the sale and marketing of solar modules to a wide range of industries
and end users within the PRC. All of the Groups revenue is derived from sales to customers located
in the PRC, Hong Kong and Europe.
The Group operates mainly in the PRC as such, all long-lived assets are located in the PRC and
all revenues are generated with the PRC, Hong Kong and Europe.
Segment assets consist primarily of cash and cash equivalents, inventories, trade accounts
receivable, other assets and fixed assets. Segment liabilities comprise of operating liabilities.
F-50
CHINA TECHNOLOGY DEVELOPMENT GROUP CORPORATIONS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts expressed in thousands, except share data or unless otherwise stated)
25. Additional information- condensed financial statements of the Company
As of December 31, 2010 and 2009, approximately Rmb31,625 and Rmb24,164 of the restricted capital
and reserves were not available for distribution, respectively, and as such, the condensed
financial information of China Technology Development Group Corporation (the Company) has been
presented for the period ended December 31, 2008, 2009 and 2010.
The separate condensed financial information of China Technology Development Group Corporation, as
presented below have been prepared in accordance with Securities and Exchange Commission Regulation
S-X Rule 5-04 and Rule 12-04 and present the Companys investments in its subsidiaries under equity
method of accounting as prescribed in ASC 323. Such investment is presented on the separate
condensed balance sheets of the Company as Investment in subsidiaries.
The footnote disclosures contain supplemental information relating to the operations of the Company
and, as such, these statements should be read in conjunction with the notes to the Consolidated
Financial Statements of the Company. Certain information and footnote disclosures normally included
in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted.
As of December 31, 2009 and 2010, there were no material contingencies, significant provisions for
long-term obligations, or guarantees of the Company, except for those which have been separately
disclosed in the Consolidated Financial Statements, if any.
F-51
CHINA TECHNOLOGY DEVELOPMENT GROUP CORPORATION
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
STATEMENTS OF OPERATIONS
(Amounts expressed in thousands)
For the years ended December 31, 2008, 2009 and 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
|
2009 |
|
|
2010 |
|
|
2010 |
|
|
|
Rmb |
|
|
Rmb |
|
|
Rmb |
|
|
US$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative expenses |
|
|
(14,657 |
) |
|
|
(16,253 |
) |
|
|
(22,876 |
) |
|
|
(3,465 |
) |
|
|
|
Operating loss |
|
|
(14,657 |
) |
|
|
(16,253 |
) |
|
|
(22,876 |
) |
|
|
(3,465 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share of results of subsidiaries |
|
|
(37,912 |
) |
|
|
(16,175 |
) |
|
|
(2,763 |
) |
|
|
(418 |
) |
Interest income |
|
|
6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Finance costs |
|
|
|
|
|
|
(5,760 |
) |
|
|
|
|
|
|
|
|
Impairment on prepayment for business acquisition |
|
|
|
|
|
|
|
|
|
|
(10,301 |
) |
|
|
(1,560 |
) |
Change in fair value of derivative embedded in convertible note |
|
|
|
|
|
|
3,798 |
|
|
|
|
|
|
|
|
|
Change in fair value of warrants and option rights |
|
|
(1,236 |
) |
|
|
(5,040 |
) |
|
|
555 |
|
|
|
84 |
|
Loss on debt extinguishment |
|
|
|
|
|
|
(3,434 |
) |
|
|
|
|
|
|
|
|
Exchange loss |
|
|
(79 |
) |
|
|
(165 |
) |
|
|
167 |
|
|
|
25 |
|
Gain on disposal of subsidiaries |
|
|
|
|
|
|
4,560 |
|
|
|
|
|
|
|
|
|
Others, net |
|
|
(40 |
) |
|
|
|
|
|
|
97 |
|
|
|
15 |
|
|
|
|
Net loss for the year |
|
|
(53,918 |
) |
|
|
(38,469 |
) |
|
|
(35,121 |
) |
|
|
(5,319 |
) |
|
|
|
F-52
CHINA TECHNOLOGY DEVELOPMENT GROUP CORPORATION
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
BALANCE SHEETS
(Amounts expressed in thousands except share data)
As of December 31, 2009 and 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009 |
|
|
2010 |
|
|
2010 |
|
|
|
Rmb |
|
|
Rmb |
|
|
US$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT ASSETS |
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
|
8,509 |
|
|
|
299 |
|
|
|
45 |
|
Due from subsidiaries |
|
|
180,904 |
|
|
|
216,825 |
|
|
|
32,841 |
|
Prepaid expenses and other current assets |
|
|
179 |
|
|
|
20,293 |
|
|
|
3,074 |
|
|
|
|
TOTAL CURRENT ASSETS |
|
|
189,592 |
|
|
|
237,417 |
|
|
|
35,960 |
|
Property, plant and equipment, net |
|
|
336 |
|
|
|
161 |
|
|
|
24 |
|
Prepayment for acquisition of property, plant
and machinery |
|
|
|
|
|
|
|
|
|
|
|
|
Other non-current asset |
|
|
20,602 |
|
|
|
|
|
|
|
|
|
Investment in subsidiaries |
|
|
(102,180 |
) |
|
|
(109,283 |
) |
|
|
(16,552 |
) |
|
|
|
TOTAL ASSETS |
|
|
108,350 |
|
|
|
128,295 |
|
|
|
19,432 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
CURRENT LIABILITIES |
|
|
|
|
|
|
|
|
|
|
|
|
Accrued professional fees |
|
|
3,713 |
|
|
|
4,060 |
|
|
|
615 |
|
Due to a related party |
|
|
|
|
|
|
2,548 |
|
|
|
386 |
|
Due to subsidiaries |
|
|
1,669 |
|
|
|
1,910 |
|
|
|
289 |
|
Liabilities relating to warrants |
|
|
3,003 |
|
|
|
2,449 |
|
|
|
371 |
|
Other current liabilities and accrued expenses |
|
|
2,328 |
|
|
|
2,118 |
|
|
|
322 |
|
|
|
|
TOTAL CURRENT LIABILITIES |
|
|
10,713 |
|
|
|
13,085 |
|
|
|
1,983 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES |
|
|
10,713 |
|
|
|
13,085 |
|
|
|
1,983 |
|
Contingencies and commitments |
|
|
|
|
|
|
|
|
|
|
|
|
SHAREHOLDERS EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
Common stock, (US$0.01 par value;
4,000,000,000 authorized in 2008 and 2009;
shares issued and outstanding: 15,534,669 and
19,300,390 as of December 31, 2008 and 2009,
respectively) |
|
|
1,463 |
|
|
|
1,670 |
|
|
|
253 |
|
Preferred stock, (US$0.01 par value;
1,000,000,000 shares authorized; shares
issued and outstanding: 1,000,000 as of
December 31, 2008 and 2009) |
|
|
77 |
|
|
|
77 |
|
|
|
12 |
|
Additional paid-in capital |
|
|
482,265 |
|
|
|
545,847 |
|
|
|
82,675 |
|
Accumulated deficit |
|
|
(384,299 |
) |
|
|
(419,420 |
) |
|
|
(63,527 |
) |
Accumulated other comprehensiveloss |
|
|
(1,869 |
) |
|
|
(12,964 |
) |
|
|
(1,964 |
) |
|
|
|
TOTAL SHAREHOLDERS EQUITY |
|
|
97,637 |
|
|
|
115,210 |
|
|
|
17,449 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND SHAREHOLDERS EQUITY |
|
|
108,350 |
|
|
|
128,295 |
|
|
|
19,432 |
|
|
|
|
F-53
CHINA TECHNOLOGY DEVELOPMENT GROUP CORPORATION
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY
(Amounts in thousands except share data)
For the years ended December 31, 2008, 2009 and 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional |
|
|
|
|
|
|
Other |
|
|
Total |
|
|
|
Preferred stock |
|
|
Common stock |
|
|
paid in |
|
|
Accumulated |
|
|
comprehensive |
|
|
shareholders |
|
|
|
Shares |
|
|
Amount |
|
|
Shares |
|
|
Amount |
|
|
capital |
|
|
deficit |
|
|
income (loss) |
|
|
equity |
|
|
|
|
|
|
|
Rmb |
|
|
|
|
|
|
Rmb |
|
|
Rmb |
|
|
Rmb |
|
|
Rmb |
|
|
Rmb |
|
Balance at January 1, 2008 |
|
|
1,000,000 |
|
|
|
77 |
|
|
|
15,028,665 |
|
|
|
1,170 |
|
|
|
369,715 |
|
|
|
(292,873 |
) |
|
|
2,036 |
|
|
|
80,125 |
|
Issue of common stock, warrants and options to investors
(net of offering cost of Rmb682) |
|
|
|
|
|
|
|
|
|
|
498,338 |
|
|
|
34 |
|
|
|
7,809 |
|
|
|
|
|
|
|
|
|
|
|
7,843 |
|
Shares issued upon exercise of stock options |
|
|
|
|
|
|
|
|
|
|
16,666 |
|
|
|
1 |
|
|
|
357 |
|
|
|
|
|
|
|
|
|
|
|
358 |
|
Modification of warrants issued to non-employees in prior year |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,364 |
|
|
|
|
|
|
|
|
|
|
|
2,364 |
|
Stock-based compensation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,374 |
|
|
|
|
|
|
|
|
|
|
|
6,374 |
|
Contribution by major shareholder-China Biotech |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,923 |
|
|
|
|
|
|
|
|
|
|
|
7,923 |
|
Components of comprehensive loss: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(53,918 |
) |
|
|
|
|
|
|
(53,918 |
) |
Share of subsidiaries equity transactions: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net unrealized gain on available-for-
sale securities, net of Rmb1,325 tax provision |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(6,247 |
) |
|
|
(6,247 |
) |
Translation adjustment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,656 |
) |
|
|
(2,656 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive loss for the year |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(62,821 |
) |
|
|
|
Balance at December 31, 2008 |
|
|
1,000,000 |
|
|
|
77 |
|
|
|
15,543,669 |
|
|
|
1,205 |
|
|
|
394,542 |
|
|
|
(346,791 |
) |
|
|
(6,867 |
) |
|
|
42,166 |
|
Effect of
adoption of ASC 815-40-15 resulting from reclassification of warrants and option rights (Note16) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(8,488 |
) |
|
|
961 |
|
|
|
|
|
|
|
(7,527 |
) |
|
|
|
Balance at 1 January 2009 |
|
|
1,000,000 |
|
|
|
77 |
|
|
|
15,543,669 |
|
|
|
1,205 |
|
|
|
386,054 |
|
|
|
(345,830 |
) |
|
|
(6,867 |
) |
|
|
34,639 |
|
F-54
CHINA TECHNOLOGY DEVELOPMENT GROUP CORPORATION
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY
(Amounts in thousands except share data)
For the years ended December 31, 2008, 2009 and 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional |
|
|
|
|
|
|
Other |
|
|
Total |
|
|
|
Preferred stock |
|
|
Common stock |
|
|
paid in |
|
|
Accumulated |
|
|
comprehensive |
|
|
shareholders |
|
|
|
Shares |
|
|
Amount |
|
|
Shares |
|
|
Amount |
|
|
capital |
|
|
deficit |
|
|
income (loss) |
|
|
Equity |
|
|
|
|
|
|
|
Rmb |
|
|
|
|
|
|
Rmb |
|
|
Rmb |
|
|
Rmb |
|
|
Rmb |
|
|
Rmb |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issue of shares upon exercise of option rights |
|
|
|
|
|
|
|
|
|
|
60,000 |
|
|
|
4 |
|
|
|
1,121 |
|
|
|
|
|
|
|
|
|
|
|
1,125 |
|
Shares
issued upon exercise of stock options |
|
|
|
|
|
|
|
|
|
|
136,864 |
|
|
|
10 |
|
|
|
2,580 |
|
|
|
|
|
|
|
|
|
|
|
2,590 |
|
Issue of shares upon conversion of convertible note |
|
|
|
|
|
|
|
|
|
|
3,322,260 |
|
|
|
228 |
|
|
|
80,764 |
|
|
|
|
|
|
|
|
|
|
|
80,992 |
|
Issue of shares upon exercise of stock purchase warrant |
|
|
|
|
|
|
|
|
|
|
14,776 |
|
|
|
1 |
|
|
|
(1 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Issue of shares upon exercise of Warrant B |
|
|
|
|
|
|
|
|
|
|
222,821 |
|
|
|
15 |
|
|
|
3,041 |
|
|
|
|
|
|
|
|
|
|
|
3,056 |
|
Stock-based compensation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,706 |
|
|
|
|
|
|
|
|
|
|
|
8,706 |
|
Components of comprehensive loss: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(38,469 |
) |
|
|
|
|
|
|
(38,469 |
) |
Share of subsidiaries equity transactions: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net unrealized gain on available-for-
sale securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9,228 |
|
|
|
9,228 |
|
Translation adjustment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4,230 |
) |
|
|
(4,230 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive loss for the year |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(33,471 |
) |
|
|
|
Balance at
January 1, 2010 |
|
|
1,000,000 |
|
|
|
77 |
|
|
|
19,300,390 |
|
|
|
1,463 |
|
|
|
482,265 |
|
|
|
(384,299 |
) |
|
|
(1,869 |
) |
|
|
97,637 |
|
F-55
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY
(Amounts in thousands except share data)
For the years ended December 31, 2008, 2009 and 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional |
|
|
|
|
|
|
Other |
|
|
Total |
|
|
|
Preferred stock |
|
|
Common stock |
|
|
paid in |
|
|
Accumulated |
|
|
comprehensive |
|
|
shareholders |
|
|
|
Shares |
|
|
Amount |
|
|
Shares |
|
|
Amount |
|
|
capital |
|
|
deficit |
|
|
income (loss) |
|
|
Equity |
|
|
|
|
|
|
|
Rmb |
|
|
|
|
|
|
Rmb |
|
|
Rmb |
|
|
Rmb |
|
|
Rmb |
|
|
Rmb |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issue of shares, net of offering costs |
|
|
|
|
|
|
|
|
|
|
3,064,827 |
|
|
|
203 |
|
|
|
52,316 |
|
|
|
|
|
|
|
|
|
|
|
52,519 |
|
Shares issued upon exercise of stock options |
|
|
|
|
|
|
|
|
|
|
59,999 |
|
|
|
4 |
|
|
|
760 |
|
|
|
|
|
|
|
|
|
|
|
764 |
|
Stock-based compensation |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,491 |
|
|
|
|
|
|
|
|
|
|
|
2,491 |
|
Issue of warrants |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,015 |
|
|
|
|
|
|
|
|
|
|
|
8,015 |
|
Components of comprehensive loss: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(35,121 |
) |
|
|
|
|
|
|
(35,121 |
) |
Share of subsidiaries equity transactions: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Translation adjustment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(11,095 |
) |
|
|
(11,095 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive loss for the year |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(46,216 |
) |
|
|
|
Balance at December 31, 2010 |
|
|
1,000,000 |
|
|
|
77 |
|
|
|
22,425,216 |
|
|
|
1,670 |
|
|
|
545,847 |
|
|
|
(419,420 |
) |
|
|
(12,964 |
) |
|
|
115,210 |
|
|
|
|
F-56
CHINA TECHNOLOGY DEVELOPMENT GROUP CORPORATION
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
STATEMENTS OF CASH FLOWS
(Amounts expressed in thousands)
For the years ended December 31, 2008, 2009 and 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008 |
|
|
2009 |
|
|
2010 |
|
|
2010 |
|
|
|
Rmb |
|
|
Rmb |
|
|
Rmb |
|
|
US$ |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from operating activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(53,918 |
) |
|
|
(38,469 |
) |
|
|
(35,121 |
) |
|
|
(5,319 |
) |
|
|
|
Net cash used in operating activities |
|
|
(13,810 |
) |
|
|
(48,375 |
) |
|
|
(40,707 |
) |
|
|
(6,166 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities |
|
|
(4,784 |
) |
|
|
(15,961 |
) |
|
|
(81 |
) |
|
|
(12 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash generated from financing activities |
|
|
17,177 |
|
|
|
72,428 |
|
|
|
38,608 |
|
|
|
5,848 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash and cash
equivalents |
|
|
270 |
|
|
|
(872 |
) |
|
|
(6,030 |
) |
|
|
(914 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents |
|
|
(1,147 |
) |
|
|
7,220 |
|
|
|
(8,210 |
) |
|
|
(1,244 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at beginning of year |
|
|
2,436 |
|
|
|
1,289 |
|
|
|
8,509 |
|
|
|
1,289 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at end of year |
|
|
1,289 |
|
|
|
8,509 |
|
|
|
299 |
|
|
|
45 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure of cash flow information |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income taxes paid |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest paid |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure non-cash investing and
financing activities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issue of warrants as offering costs for
financing activities in 2008 |
|
|
682 |
|
|
|
54 |
|
|
|
|
|
|
|
|
|
Conversion of convertible note in 2009 |
|
|
|
|
|
|
82,975 |
|
|
|
|
|
|
|
|
|
Purchase of property, plant and equipment
funded through accrued expenses and other
current liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-57