Page
|
||||
Prospectus
Summary
|
1 | |||
Risk
Factors
|
8 | |||
Cautionary
Statement Regarding Forward-Looking Statements
|
23 | |||
Use
of Proceeds
|
24 | |||
Description
of Business
|
25 | |||
Management’s
Discussion and Analysis of Financial Condition and
Results of Operations
|
37 | |||
Management
|
49 | |||
Executive
Compensation
|
52 | |||
Certain
Relationships and Related Transactions
|
54 | |||
Security
Ownership of Certain Beneficial Owners and Management
|
55 | |||
Selling
Stockholders
|
58 | |||
Plan
of Distribution
|
62 | |||
Market
for Common Equity and Related Stockholder Matters
|
64 | |||
Description
of Securities
|
65 | |||
Indemnification
for Securities Act Liabilities
|
69 | |||
Legal
Matters
|
70 | |||
Experts
|
70 | |||
Where
You Can Find More Information
|
70 | |||
Index to Financial Statements | F-1 |
PROSPECTUS
SUMMARY
The
following is a summary that highlights what we believe to be the
most
important information regarding Wuhan General Group (China), Inc.
and the
securities being offered hereby. Because it is a summary, however,
it may
not contain all of the information that is important to you. To
understand
our business and this offering fully, you should read this entire
prospectus and our financial statements and related notes
carefully.
Unless
the context requires otherwise, the words “Company,” “Registrant,” “we,”
“us,” “our” and similar terms refer to Wuhan General Group (China), Inc.
and its wholly owned subsidiaries, Universe Faith Group, Ltd. (“UFG”),
Wuhan Blower Co., Ltd. (“Wuhan Blower”) and Wuhan Generating Equipment
Co., Ltd. (“Wuhan Generating”).
Wuhan
General Group (China), Inc.
We
are a holding company whose primary business operations are conducted
through our wholly owned subsidiary UFG, which has no operations
of its own and only serves to hold our Chinese operating
subsidiaries, Wuhan Blower and Wuhan Generating. Wuhan Blower
is a manufacturer of industrial blowers that are principally
components of steam-driven electrical power generation plants.
Through our Wuhan Generating subsidiary, we also manufacture
industrial steam and water turbines, also principally for use in
electrical power generation plants. Wuhan Blower and Wuhan Generating
conduct all of their operations in the People’s Republic of China, which
we refer to in this prospectus as PRC or China. Prior to our acquisition
of UFG in February 2007, we were a publicly held shell company
with no
operations other than efforts to identify suitable parties for
a merger
transaction.
Our
Corporate History
Wuhan
General Group (China), Inc. was incorporated on July 19, 1988 under
the
laws of the State of Colorado as Riverside Capital, Inc. Riverside
Capital
engaged in various business endeavors, and on March 18, 1992, acquired
100% of the outstanding shares of United National Film Corporation.
At
that time, we changed our name to United National Film Corporation.
We
were not successful in the film business and in June 2001, we suspended
all business activities and became a “reporting shell corporation.” In
October 2006, we changed our state of incorporation from Colorado
to
Nevada.
On
February 7, 2007, we completed a share exchange transaction, in
which we
issued to Fame Good International Limited (“Fame”),
as the
sole stockholder of UFG, 17,912,446 newly issued shares of our
common
stock in exchange for all of the issued and outstanding capital
stock of
UFG held by Fame. As a result, UFG became our wholly owned subsidiary,
Fame became our controlling stockholder and the management team
of Wuhan
Blower replaced our prior management team. Prior to the share exchange
transaction, we had no relationship with Fame, UFG, Wuhan Blower
or Wuhan
Generating. On March 13, 2007, the Company changed its name from
“United
National Film Corporation” to “Wuhan General Group (China),
Inc.”
UFG
was incorporated in the British Virgin Islands in August 2006.
Until the
share exchange transaction, UFG was a wholly owned subsidiary of
Fame,
also a BVI company and now our controlling stockholder. Our President
and
Chief Executive Officer, Mr. Xu Jie, acquired control of Fame,
and Fame
acquired control of UFG, in late August 2006. Neither Fame nor
UFG had any
active business operations until UFG acquired Wuhan Blower in September
2006.
|
Wuhan
Blower was founded in 1958 as the Wuhan Blower Company, a State-Owned
Enterprise (“SOE”) in the People’s Republic of China and became one of the
largest manufacturers of industrial blowers in central and southwest
China. In 2004, Mr. Xu purchased the company with the intention of
making
changes to its management structure, employee utilization, plant
location
and general operations which would transform it from a traditional
Chinese
SOE into a modern, efficient operating company. Mr. Xu relocated
the
company to the Eastlake New Technology Development Zone in Wuhan,
with
much improved access to railroads, waterways and roads necessary
for the
transportation of its products, and constructed a new headquarters,
research and development, and manufacturing facility at this location.
Principally as a result of these actions, combined with more efficient
use
of personnel, Wuhan Blower has experienced significant increases
in
revenues and net income over the last two years.
On
January 9, 2007, Wuhan Blower completed its acquisition of Wuhan
Generating, a manufacturer of water and steam turbines, which is
a
complementary business to that of Wuhan Blower.
We
are located in Wuhan, the capital of China’s Hubei Province. Hubei is
centrally located and is a key player in the Chinese automotive,
metallurgy, machinery, power generation, textiles and high-tech
industries. Wuhan is one of the major university cities in the
country,
providing a highly educated workforce to the surrounding
industries.
Recent
Events
Private
Placement
On
February 7, 2007, we completed a private placement transaction
in which we
issued to nine institutional investors an aggregate of 10,287,554
shares
of our newly created Series A Convertible Preferred Stock at
a price of
$2.33 per share for gross proceeds of $23,970,000. The Preferred
Stock is
convertible into shares of our common stock on a 1-for-1 basis.
The
holders of our Preferred Stock are not required to pay a conversion
price
or any other consideration upon a conversion of Preferred Stock
into
common stock. The Preferred Stock is entitled to a dividend equal
to 5%
per annum, payable quarterly. We must pay any unpaid dividends
on our
Preferred Stock before paying dividends on our common stock.
Except
with respect to specified transactions that may affect the Preferred
Stock
and except as otherwise required by Nevada law, the Preferred
Stock has no
voting rights. In the event that the registration statement of
which this
prospectus forms a part is declared effective and the trading
price of our
common stock achieves certain levels, the outstanding shares
of our
Preferred Stock will automatically be converted into shares of
our common
stock over a two year period following the effective date of
the
registration statement. In the event of our liquidation, the
holders of
Preferred Stock shall be entitled to receive, out of our assets
available
for distribution to stockholders, an amount equal to $2.33 per
share plus
any accrued and unpaid dividends before any payment can be made
to the
holders of our common stock.
The
shares of common stock offered by this prospectus represent
shares of
common stock underlying preferred stock we issued to investors in the
February 2007 private placement. Based on the average of the
bid and asked
prices of our common stock on February 6, 2008 as reported
on the OTC
Bulletin Board, the common stock offered by this prospectus
has an
aggregate market value of approximately $26.20 million.
In
the private placement, we also issued three series of common
stock
purchase warrants - Series A, B, and J - which entitle the holders
to
purchase an aggregate of 21,145,922 shares of our common stock
on the
terms set forth below.
The
investors in the February 2007 private placement received “60% warrant
coverage” on their investment. As a result, we issued to the investors,
on
a pro rata basis, Series A warrants to purchase an aggregate
of 6,172,531
shares of common stock. The Series A Warrants have an exercise
price of
$2.57 per share and expire on February 7, 2012.
|
In
addition, each of the private placement investors who invested
at least
$2,000,000 also is entitled to purchase shares of our common
stock on the
same terms as such investor’s initial purchase. To represent this
right, we issued Series J Warrants to these investors to purchase an
aggregate of 9,358,370 shares of common stock. The Series J
Warrants have
an exercise price of $2.33 per share and expire on November 7,
2008.
Investors
receiving Series J Warrants also received “60% warrant coverage” on this
additional investment, if made. We therefore issued Series
B Warrants to
these investors to purchase an aggregate of 5,615,021 shares
of common
stock. The Series B Warrants can only be exercised upon and
to the extent
that the Series J Warrants are exercised. The Series B Warrants
have an
exercise price of $2.57 and expire on February 7, 2012.
As
partial consideration for services rendered by 1st
BridgeHouse Securities, LLC, the placement agent for the February
2007
private placement, we agreed to issue warrants to purchase
common stock to
1st
BridgeHouse in an amount equal to 10% of all shares of Preferred
Stock
sold in the private placement, plus 10% of any shares of common
stock
issued pursuant to the Series A, B and J Warrants issued in
the private
placement. This right is represented by Series C, AA, BB and
JJ warrants
issued to 1st BridgeHouse. The
Series C, AA, BB and JJ Warrants relate to the Series A Preferred
Stock,
Series A Warrants, Series B Warrants and Series J Warrants,
respectively.
The exercise prices of the Series C, AA, BB and JJ Warrants
are $2.57,
$2.83, $2.83 and $2.57, respectively. These exercise prices
are 110% of
the purchase price that investors paid or will pay for the
related
security. 1st
BridgeHouse can purchase 1,028,755, up to 617,253, up to 561,502
and up to
935,837 shares of common stock pursuant to the Series C, AA,
BB and JJ
Warrants, respectively. The Series C, AA, BB and JJ Warrants
expire on
February 7, 2017.
The
offering price of the preferred stock in the February 2007
private
placement and the exercise price for each series of warrants
discussed
above were determined through negotiations between the Company
and the
private placement investors. These prices were not determined
by reference
to any market price of the Company’s securities.
Agreements
in connection with Private Placement
In
connection with the February 2007 private placement, we entered
into the
following agreements: securities escrow agreement, registration
rights
agreement, lock-up agreement and escrow agreement. A summary
of each of
these agreements is provided below.
The
Company and Fame, the Company's controlling stockholder, entered
into a
securities escrow agreement with the private placement investors
in which
Fame agreed to certain “make good” provisions. Fame deposited into escrow
a total of 9,000,000 shares of our common stock. If we do not
achieve
certain 2007 or 2008 performance thresholds, some or all of
the escrowed
shares will be delivered pro rata to the private placement
investors, with
the amount distributed dependent upon the amount by which we
fail to
achieve the performance thresholds. If we meet or exceed both
performance
thresholds, the escrowed shares will be returned to Fame. The
foregoing is
only a summary of the “make good” arrangements and is qualified by the
exact terms of the securities escrow agreement which was filed
as Exhibit
10.4 to our Form 8-K filed on February 13, 2007.
|
In
the registration rights agreement, we agreed to register
under the
Securities Act of 1933 the common stock underlying the preferred
stock and
warrants issued to investors. The registration statement
of which this
prospectus forms a part was filed pursuant to this registration
rights
agreement. In the event that the Securities and Exchange
Commission does
not permit us to register in the initial registration statement
all of the
common stock we agreed to register, the registration rights
agreement
requires us to use our best efforts to file subsequent registration
statements to register any shares of common stock that were
not registered
in the initial registration statement. Since the registration
statement of
which this prospectus forms a part was not declared effective
by July 7,
2007, we may be required to pay liquidated damages to the
private
placement investors. The foregoing is only a summary of the
registration
rights agreement and is qualified by the exact terms of the
agreement
which was filed as Exhibit 10.2 to our Form 8-K filed on
February 13,
2007.
Also
in connection with the private placement, we entered into
a lock-up
agreement with Fame. Under the terms of the lock-up agreement,
Fame agreed
not to sell any shares of our common stock until 36 months
after the
registration statement of which this prospectus forms a part
is declared
effective.
We
also entered into an escrow agreement that required us to
deposit $750,000
in an escrow account to cover fees and expenses in connection
with
investor relations, public relations or securities law compliance,
including related legal fees. The escrow will terminate upon
the earlier
of (i) the disbursement of all escrow funds and (ii) February
7,
2010.
|
Change
of Fiscal Year and Independent Auditor
The
share exchange transaction that we completed in February 2007 is
being
accounted for as a reverse acquisition because Fame - the sole
stockholder
of UFG prior to the share exchange - owned a majority of our common
stock
immediately following the share exchange. Thus, for accounting
purposes,
UFG is treated as the acquiring entity. To reflect this accounting
treatment, on March 5, 2007, our Board of Directors changed the
Company’s
fiscal year end from June 30 to December 31 (the fiscal year end
of UFG
and Wuhan Blower).
On
March 5, 2007, our Board of Directors elected to continue the existing
relationship of our subsidiary UFG with Samuel H. Wong & Co. LLP,
Certified Public Accountants (“Wong”),
and
appointed Wong as the Company’s independent auditor. In conjunction with
the engagement of Wong, our Board of Directors dismissed S.W. Hatfield,
CPA as our independent auditor.
Our
executive offices are located at Canglongdao Science Park, Wuhan
East Lake
Hi-Tech Development Zone, Wuhan, Hubei 430200 People’s Republic of China.
Our telephone number is (86) 27-5970-0069. Our internet address is
www.whblower.com.
|
Common
Stock Outstanding Prior to the Offering
|
19,712,446
shares
|
|
Common
Stock being offered by Selling Stockholders
|
2,903,213 shares
|
|
Use
of Proceeds
|
We
will not receive any proceeds from the sale of the common stock
by the
selling stockholders. See “Use of Proceeds.”
|
|
OTCBB
Symbol
|
WUHN.OB
|
|
Risk
Factors
|
The
securities offered by this prospectus are speculative and involve
a high
degree of risk and investors should not purchase the securities
unless
they can afford the loss of their entire investment. See “Risk Factors”
beginning on page 8.
|
For
the Nine Months Ended
|
For
the Year Ended
|
||||||||||||
September 30,
2007
|
September
30,
2006
|
December
31,
2006
|
December
31,
2005
|
||||||||||
SUMMARY INCOME STATEMENT DATA | |||||||||||||
Gross
profit
|
$
|
19,831,567
|
$
|
5,053,405
|
$
|
8,038,164
|
$
|
4,301,519
|
|||||
Operating
expenses
|
5,447,565
|
1,793,950
|
4,312,420
|
1,771,818
|
|||||||||
Operating income |
14,384,001
|
3,259,455
|
3,725,744
|
2,529,702
|
|||||||||
Income
tax
|
-
|
-
|
-
|
-
|
|||||||||
Net
income
|
12,590,960
|
2,899,404
|
3,202,269
|
2,371,760
|
|||||||||
As
of
|
As
of
|
||||||||||||
|
|
|
September
30,
|
December
31,
|
December
31,
|
||||||||
|
|
|
2007
|
2006
|
2005
|
||||||||
SUMMARY
BALANCE SHEET DATA
|
|||||||||||||
Current
assets
|
$
|
65,829,608
|
|
$
|
31,016,135
|
$
|
15,848,575
|
||||||
Total
assets
|
96,404,193
|
50,418,321
|
28,453,863
|
||||||||||
Current
liabilities
|
44,444,202
|
31,474,192
|
19,515,079
|
||||||||||
Total
liabilities
|
44,444,202
|
31,474,192
|
19,515,079
|
||||||||||
Stockholders’
equity
|
51,959,991
|
18,944,129
|
8,938,785
|
· |
inexperience
of management in transforming and then operating a non-state-owned
enterprise;
|
· |
unanticipated
adverse developments in our attempt to achieve efficient management
of our
workforce and operation of our
business;
|
· |
changes
in regulations affecting us following our privatization;
and
|
· |
the
speed with which we are able to implement more efficient management
systems, and the resulting levels of cost
savings.
|
· |
limiting
our ability to obtain additional financing to fund growth,
working
capital, capital expenditures, debt service requirements or other
cash
requirements;
|
· |
limiting
our operational flexibility due to the covenants contained in
our debt
agreements;
|
· |
limiting
our ability to invest operating cash flow in our business due
to debt
service requirements;
|
· |
limiting
our ability to compete with companies that are not as highly
leveraged and
that may be better positioned to withstand economic downturns;
and
|
· |
increasing
our vulnerability to fluctuations in market interest
rates.
|
· |
collaborative
arrangements may not be on terms favorable to
us;
|
· |
disagreements
with partners may result in delays in research and development,
termination of our collaboration agreements or time consuming
and
expensive legal action;
|
· |
we
cannot control the amount and timing of resources that our
partners devote
to our research and development and our partners may not allocate
sufficient funds or resources to our projects, or may not perform
their
obligations as expected;
|
· |
partners
may choose to research and develop, independently or with other
companies,
alternative products or technological advancements, including
products or
advancements that would compete with
ours;
|
· |
agreements
with partners may expire or be terminated without renewal,
or partners may
breach collaboration agreements with
us;
|
· |
business
combinations or significant changes in a partner’s business strategy might
adversely affect that partner’s willingness or ability to complete its
obligations to us; and
|
· |
the
terms and conditions of the relevant agreements may no longer
be
suitable.
|
· |
our
ability successfully and rapidly to expand sales to potential customers
in
response to potentially increasing
demand;
|
· |
the
costs associated with such growth, which are difficult to quantify,
but
could be significant; and
|
· |
rapid
technological change.
|
· |
access
to the capital markets of the United
States;
|
· |
the
increased market liquidity expected to result from exchanging stock
in a
private company for securities of a public company that are publicly
traded;
|
· |
the
ability to use securities to make acquisition of assets or
businesses;
|
· |
increased
visibility in the financial
community;
|
· |
enhanced
access to the capital markets;
|
· |
improved
transparency of operations; and
|
· |
perceived
credibility and enhanced corporate image of being a publicly
traded
company.
|
· |
level
of government involvement in the
economy;
|
· |
control
of foreign exchange;
|
· |
methods
of allocating resources;
|
· |
balance
of payments position;
|
· |
international
trade restrictions;
|
· |
international
conflict; and
|
· |
revaluation
of the Renminbi, which is the Chinese
currency.
|
· |
quarantines
or closures of some of our manufacturing facilities or offices which
would
severely disrupt our operations,
|
· |
the
sickness or death of our key officers and employees,
and
|
· |
a
general slowdown in the Chinese
economy.
|
· |
vulnerability
of our business to general economic
downturn;
|
· |
operating
in the PRC generally and the potential for changes in the laws
of the PRC
that affect our operations;
|
· |
our
failure to meet or timely meet contractual performance standards
and
schedules;
|
· |
our
dependence on the steel and iron
markets;
|
· |
exposure
to product liability and defect
claims;
|
· |
our
ability to obtain all necessary government certifications
and/or licenses
to conduct our business;
|
· |
the
cost of complying with current and future governmental
regulations and the
impact of any changes in the regulations on our operations;
and
|
· |
the
other factors referenced in this prospectus, including,
without
limitation, under the section entitled “Risk
Factors.”
|
Type
of Payment
|
Amount
of Payment
|
|
Dividends
on Preferred Stock
|
$299,625
per quarter1
|
|
Liquidated
Damages for Delay in Obtaining NASDAQ Listing
|
$13,537,5002
|
|
Liquidated
Damages for Delay in Effective Date of Registration
Statement
|
$309,9443
|
· |
blow
air into the firebox in order to increase oxygen and improve
combustion;
|
· |
blow
fuel (primarily coal dust) into the firebox;
and
|
· |
suck
out waste gases.
|
· |
a
blower will propel the exhaust gases through a pollution reduction
unit
(such as a de-sulphurization unit);
and
|
· |
a
final blower will push the “cleaned” gases to and through the
smokestack.
|
· |
Axial
fans.
These consist of a bladed impeller (fan) in an elongated cylindrical
casing and are primarily used to provide high-volume, low-pressure
air for
larger power stations of 200 to 1,000
megawatts.
|
· |
Centrifugal
Blowers.
These consist of a “squirrel cage” type impeller (or rotor) in a scroll-
or spiral-shaped casing. Air is drawn into the center of the squirrel
cage
through a hole in the side of the casing and is thrown out at a right
angle by the rotational force. These blowers provide lower volumes
of air,
but at higher pressures, and are used in medium-sized power stations
of
100 to 300 megawatts for blowing coal dust into furnaces. They are
also
used for aeration in sewage treatment
plants.
|
· |
Regular
steam turbines - these turbines are designed to make maximum use
of the
steam, with any waste steam vented into the atmosphere through cooling
towers.
|
· |
Co-generation
turbines - these turbines are designed to provide for the use of
“waste
steam” by a co-located industrial plant (such as a paper or chemical
plant).
|
· |
“Heat-centric”
turbines - these turbines are used by municipalities with a central
steam
system for home and factory use. The turbine is able to use this
lower-pressure steam for incremental power
output.
|
· |
“Variable
pressure output” turbines - these turbines have the ability to provide
waste steam at two or more pressures. Fundamentally, they allow for
tapping the steam at different pressure stages in the
generator.
|
· |
increase
steam generator thermal efficiency by approximately 5% to
7%;
|
· |
reduce
coal consumption by approximately 15 to 21g per KWH;
and
|
· |
increase
megawatt output by approximately 10% per
unit.
|
·
|
Xi’an;
|
·
|
Guangzhou;
|
·
|
Shanghai;
|
·
|
Beijing;
|
·
|
Chongqing;
and
|
·
|
Nanjing.
|
Name
of Bank or Note Holder
|
Due
Date
|
Interest
Rate Per Annum
|
Amount
Owed on 9/30/2007
|
|||||||
Shanghai
Pudong Development Bank
|
10/19/2007
|
6.03
|
%
|
$
|
2,128,339
|
|||||
Shanghai
Pudong Development Bank
|
5/22/2008
|
6.57
|
%
|
1,330,212
|
||||||
Shanghai
Pudong Development Bank
|
6/25/2008
|
6.57
|
%
|
532,085
|
||||||
Citic
Industrial Bank
|
9/25/2008
|
7.29
|
%
|
3,325,529
|
||||||
Citic
Industrial Bank
|
9/25/2008
|
7.29
|
%
|
16,541
|
||||||
Agricultural
Bank of China
|
10/31/2007
|
6.73
|
%
|
1,330,212
|
||||||
Agricultural
Bank of China
|
10/30/2007
|
6.73
|
%
|
1,330,212
|
||||||
Wuhan
East Lake Development District Zheng Bridge Committee
|
On
Demand
|
6.00
|
%
|
399,064
|
||||||
Bank
of China
|
On
Demand
|
6.83
|
%
|
698,361
|
||||||
Dalian
Chong Si Hydraulic Coupler Complete Sets of Equipment Ltd.
(Note
Payable)
|
On
Demand
|
0.00
|
%
|
133,021
|
||||||
Hubei
Committees Properties Co., Ltd. (Note Payable)
|
On
Demand
|
0.00
|
%
|
6,358,412
|
||||||
Wuhan-heavy
George Special Steel Co., Ltd. (Note Payable)
|
On
Demand
|
0.00
|
%
|
215,926
|
||||||
Wuhan
Jiabao Supplies Co., Ltd. (Note Payable)
|
On
Demand
|
0.00
|
%
|
104,465
|
||||||
Wuhan
Jianghan District Zhongnan Supplies Station (Note Payable)
|
On
Demand
|
0.00
|
%
|
156,911
|
||||||
Citic
Industrial Bank Wuhan Zhu Ye Shan Branch
|
2/17/2008
|
6.73
|
%
|
2,660,424
|
||||||
Citic
Industrial Bank Wuhan Zhu Ye Shan Branch
|
2/17/2008
|
6.73
|
%
|
2,660,424
|
||||||
59
Various Other Notes
|
Various
Dates
|
Various
Rates
|
1,448,320
|
|||||||
$
|
24,828,456
|
Buildings
|
30
years
|
|||
Machinery
and Equipment
|
10
years
|
|||
Furniture
and Fixtures
|
5
years
|
|||
Motor
Vehicles
|
5
years
|
Technical
License
|
10
years
|
|||
Trademark
|
20
years
|
Exchange
Rates
|
|
September 30,
2007
|
|
September 30,
2006
|
|
Period
end RMB: US$ exchange rate
|
|
7.5176
|
|
|
7.9168
|
Average
RMB during 9 month period: US$ exchange rate
|
|
7.67576
|
|
|
7.97711
|
Rate
|
Over
|
But
not over
|
Of Amount Over
|
|||||||
15%
|
0
|
50,000
|
0
|
|||||||
25%
|
50,000
|
75,000
|
50,000
|
|||||||
34%
|
75,000
|
100,000
|
75,000
|
|||||||
39%
|
100,000
|
335,000
|
100,000
|
|||||||
34%
|
335,000
|
10,000,000
|
335,000
|
|||||||
35%
|
10,000,000
|
15,000,000
|
10,000,000
|
|||||||
38%
|
15,000,000
|
18,333,333
|
15,000,000
|
|||||||
35%
|
18,333,333
|
-
|
0
|
Name
|
Age
|
Position
|
||
Xu
Jie
|
46
|
President,
Chief Executive Officer and Secretary; Chairman of the
Board
|
||
Jin
Qihai
|
52
|
Executive
General Manager and Director
|
||
Ge
Zengke
|
53
|
General
Manager and Director
|
||
David
K. Karnes
|
59
|
Director
|
||
Ku
Shaodong
|
48
|
Director
|
||
Brian
Lin
|
42
|
Director
|
·
|
Each
eligible director will receive an annual $15,000 cash retainer.
If our
common stock becomes listed on NASDAQ, the annual cash retainer
will
increase to $20,000 per year.
|
·
|
Each
eligible director residing in Wuhan, China will receive a
$1,000 fee for
each board or committee meeting attended. Each eligible director
who
resides outside of Wuhan, China, will receive a $1,000 fee
for each board
or committee meeting attended by telephone and $5,000 for
each board or
committee meeting attended in
person.
|
·
|
Each
eligible director will receive the option to purchase 20,000
shares of our
common stock per year. The stock options will vest in four
equal quarterly
installments over one year.
|
·
|
The
Chairman of our Audit Committee will receive an additional
annual fee of
$5,000.
|
·
|
All
directors will be reimbursed for out-of-pocket expenses associated
with
their service to the Company.
|
Name
|
Age
|
Position
|
||
Xu
Jie (1)
|
46
|
President,
Chief Executive Officer, Secretary and Chairman of the
Board
|
||
Jin
Qihai (1)
|
52
|
Executive
General Manager
|
||
Liu
Shupeng
|
50
|
Vice
General Manager (Blower)
|
||
Ge
Zengke (1)
|
53
|
General
Manager
|
||
Kuang
Yuandong
|
30
|
Chief
Financial Officer and Treasurer
|
Annual
Compensation
|
||||||||||
Name
and Position
|
Year
|
Salary
($)
|
Bonus
($)
|
|||||||
Xu
Jie
President,
Chief Executive Officer, Secretary and
Chairman
of the Board(1)
|
2006
2005
|
$
$
|
-
-
|
$
$
|
-
-
|
(1)
|
Mr.
Xu became our President, Chief Executive Officer, Secretary and
Chairman
of the Board upon the closing of the share exchange transaction
on
February 7, 2007. Prior to such date, Mr. Xu served at UFG and
Wuhan
Blower Co., Ltd. Mr. Xu did not receive any compensation from
UFG or Wuhan
Blower during the periods shown.
|
Name
of Beneficial Owner
|
Common
Stock Beneficially Owned (1)
|
Percentage
of Common Stock Owned (1)(8)
|
|||||
Xu
Jie
|
17,912,446
|
(2)
|
90.9
|
%
|
|||
Vision
Opportunity Master Fund Ltd.
|
2,100,035
|
(3)
|
9.9
|
%
|
|||
Blue
Ridge Investments, L.L.C.
|
2,165,962
|
(4)(8)
|
9.9
|
%
|
|||
Old
Lane LP
|
2,165,962
|
(5)(8)
|
9.9
|
%
|
|||
QVT
Fund, LP
|
2,165,962
|
(6)(8)
|
9.9
|
%
|
|||
TCW
Americas Development Association LP
|
2,165,962
|
(7)(8)
|
9.9
|
%
|
|||
Ge Zengke |
0
|
*
|
|||||
Jin
Qihai
|
0
|
*
|
|||||
David
K. Karnes
|
10,000
|
(9)
|
*
|
||||
Ku
Shaodong
|
10,000
|
(10)
|
*
|
||||
Brian
Lin
|
10,000
|
(11)
|
*
|
||||
Directors
and Executive Officers as a group (6 persons)
|
17,942,446
|
(12)
|
90.9
|
%
|
*
|
Less
than 1%.
|
(1) |
Applicable
percentage ownership is based on 19,712,446 shares of common
stock
outstanding as of February 7, 2008. Beneficial ownership is determined
in
accordance with the rules of the SEC and generally includes voting
or
investment power with respect to securities. Shares of common
stock that
are currently issuable upon conversion or exercisable within
60 days of
February 7, 2008, are deemed to be beneficially owned by the
person
holding such convertible securities or warrants for the purpose
of
computing the percentage of ownership of such person, but are
not treated
as outstanding for the purpose of computing the percentage ownership
of any other person.
|
(2) |
Xu
Jie, our President, Chief Executive Officer and Chairman of the
Board, is
also the President and Chief Executive Officer, as well as a
director and
the controlling stockholder, of Fame Good International Limited
and as a
result is deemed to be the beneficial owner of shares of the
Company held
by Fame. Mr. Xu does not own any shares of our common stock directly.
Mr.
Xu’s business address is Canglongdao Science Park of Wuhan, East
Lake
Hi-Tech Development Zone, Wuhan, Hubei 430200, People’s Republic of
China.
|
(3) |
Vision
Opportunity Master Fund Ltd. owns 600,000 shares of common stock
and
3,004,292 shares of Series A Convertible Preferred Stock, which
are
convertible into 3,004,292 shares of our common stock. In addition,
Vision
holds Series A, J and B Warrants, which entitle it to purchase
1,802,575,
3,004,292 and 1,802,575 shares of our common stock, respectively.
The
Series A Convertible Preferred Stock and warrants are not exercisable,
however, to the extent that the number of shares of common stock
to be
issued pursuant to such conversion or exercise would exceed,
when
aggregated with all other shares of common stock owned by Vision
at such
time, the number of shares of common stock which would result
in Vision
beneficially owning in excess of 9.9% of the then issued and
outstanding
shares of our common stock. Vision may waive this ownership cap
on 61
days’ prior notice to us. As a result of this ownership cap, Vision
beneficially owns 2,100,035 shares of our common stock as of
the date of
this prospectus. If
Vision waived this ownership cap, it would beneficially own 10,213,734
shares of our common stock or approximately 34.8% of our outstanding
common stock. The address of Vision Opportunity Master Fund Ltd. is
20 West 55th
Street, New York, New York 10019.
|
(4) |
Blue
Ridge Investments, L.L.C. owns 2,145,923 shares of Series A Convertible
Preferred Stock, which are convertible into 2,145,923 shares
of our common
stock. In addition, Blue Ridge holds Series A, J and B Warrants,
which
entitle it to purchase 1,287,554, 2,145,923 and 1,287,554 shares
of our
common stock, respectively. The Series A Convertible Preferred
Stock and
warrants are not exercisable, however, to the extent that the
number of
shares of common stock to be issued pursuant to such conversion
or
exercise would exceed, when aggregated with all other shares
of common
stock owned by Blue Ridge at such time, the number of shares
of common
stock which would result in Blue Ridge beneficially owning in
excess of
9.9% of the then issued and outstanding shares of our common
stock. Blue
Ridge may waive this ownership cap on 61 days’ prior notice to us. As a
result of this ownership cap, Blue Ridge beneficially owns 2,165,962
shares of our common stock as of the date of this prospectus. If
Blue Ridge waived this ownership cap, it would beneficially own
6,866,954
shares of our common stock or approximately 25.8% of our outstanding
common stock. The address of Blue Ridge Investments, L.L.C. is c/o
Bank of America, 9 West 57th
Street, New York, New York 10019.
|
(5) |
Old
Lane LP owns 2,062,232 shares of Series A Convertible Preferred
Stock,
which are convertible into 2,062,232 shares of our common stock.
In
addition, Old Lane holds Series A, J and B Warrants, which entitle
it to
purchase 1,237,339, 2,062,232 and 1,237,339 shares of our common
stock,
respectively. Old Lane is deemed to beneficially own these shares,
although record ownership of the Series A Convertible Preferred
Stock and
warrants is in the name of three separate entities affiliated
with Old
Lane. The Series A Convertible Preferred Stock and warrants are
not
exercisable, however, to the extent that the number of shares
of common
stock to be issued pursuant to such conversion or exercise would
exceed,
when aggregated with all other shares of common stock owned by
Old Lane at
such time, the number of shares of common stock which would result
in Old
Lane beneficially owning in excess of 9.9% of the then issued
and
outstanding shares of our common stock. Old Lane may waive this
ownership
cap on 61 days’ prior notice to us. As a result of this ownership cap, Old
Lane beneficially owns 2,165,962 shares of our common stock as
of the date
of this prospectus. If
Old Lane waived this ownership cap, it would beneficially own
6,599,142
shares of our common stock or approximately 25.1% of our outstanding
common stock. The address of Old Lane LP is 500 Park Avenue, New
York, New York 10036.
|
(6) |
QVT
Fund, LP owns 1,287,554 shares of Series A Convertible Preferred
Stock,
which are convertible into 1,287,554 shares of our common stock.
In
addition, QVT holds Series A, J and B Warrants, which entitle
it to
purchase 772,532, 1,287,554 and 772,532 shares of our common
stock,
respectively. The Series A Convertible Preferred Stock and warrants
are
not exercisable, however, to the extent that the number of shares
of
common stock to be issued pursuant to such conversion or exercise
would
exceed, when aggregated with all other shares of common stock
owned by QVT
at such time, the number of shares of common stock which would
result in
QVT beneficially owning in excess of 9.9% of the then issued
and
outstanding shares of our common stock. QVT may waive this ownership
cap
on 61 days’ prior notice to us. As a result of this ownership cap, QVT
beneficially owns 2,165,962 shares of our common stock as of
the date of
this prospectus. If
QVT waived this ownership cap, it would beneficially own 4,120,172
shares
of our common stock or approximately 17.3% of our outstanding
common
stock. The address of QVT Financial, LP is 1177 Avenue of the
Americas, New York, New York 10036.
|
(7) |
TCW
Americas Development Association LP owns 858,369 shares of Series
A
Convertible Preferred Stock, which are convertible into 858,369
shares of
our common stock. In addition, TCW holds Series A, J and B Warrants,
which
entitle it to purchase 515,021, 858,369 and 515,021 shares of
our common
stock, respectively. The Series A Convertible Preferred Stock
and warrants
are not exercisable, however, to the extent that the number of
shares of
common stock to be issued pursuant to such conversion or exercise
would
exceed, when aggregated with all other shares of common stock
owned by TCW
at such time, the number of shares of common stock which would
result in
TCW beneficially owning in excess of 9.9% of the then issued
and
outstanding shares of our common stock. TCW may waive this ownership
cap
on 61 days’ prior notice to us. As a result of this ownership cap, TCW
beneficially owns 2,165,962 shares of our common stock as of
the date of
this prospectus. If
TCW waived this ownership cap, it would beneficially own 2,746,780
shares
of our common stock or approximately 12.2% of our outstanding
common
stock. The address of TCW Americas Development Association LP
is 200 Park Avenue, New York, New York
10166.
|
(8) |
Unless
otherwise indicated, this shareholder does not presently own
any shares of
our common stock. In a private placement transaction on February
7, 2007,
we issued to this entity (a) shares of our Series A Convertible
Preferred
Stock, and (b) Series A, Series B and Series J Warrants to purchase
shares
of our common stock. The terms of the preferred stock and each
series of
warrants are described in this prospectus in the section entitled
“Description of Securities.” Until the preferred stock is converted or the
warrants exercised, the shareholder has only limited voting rights
with
respect to the preferred stock and no voting rights with respect
to the
warrants. Because the Series A Convertible Preferred Stock and
the
Warrants are presently convertible into or exercisable for shares
of
common stock, the holders are deemed to beneficially own such
shares of
common stock. It is for this reason that the percentages shown
add to more
than 100%.
|
(9) | Includes options to purchase 10,000 shares of common stock that are currently exercisable or are exercisable within 60 days of February 7, 2008. |
(10) | Includes options to purchase 10,000 shares of common stock that are currently exercisable or are exercisable within 60 days of February 7, 2008. |
(11) | Includes options to purchase 10,000 shares of common stock that are currently exercisable or are exercisable within 60 days of February 7, 2008. |
(12) | Includes options to purchase 30,000 shares of common stock that are currently exercisable or are exercisable within 60 days of February 7, 2008. |
Selling
Stockholder
|
Amount
of
Common
Stock
Owned
Before
the
Offering
|
Amount
of
Common
Stock
to
be Sold(1)
|
Number
of
Shares
of
Common
Stock
to
be Owned
upon
Completion
of
the
Offering(1)
|
Percentage
of
Shares
of
Common
Stock
Owned
After
Completion
of
the
Offering(1)
|
Percentage
of
Offering
Made
by
Selling
Stockholder
|
|||||||||||
Vision
Opportunity Master Fund Ltd.
|
3,604,292
|
(2)
|
400,000
|
3,204,292
|
10.7
|
%
|
13.8
|
%
|
||||||||
Blue
Ridge Investments, L.L.C. (3)
|
2,145,923
|
(4)
|
400,000
|
1,745,923
|
5.8
|
% |
13.8
|
% | ||||||||
Old
Lane LP
|
2,062,232
|
(5)
|
400,000
|
1,662,232
|
5.5
|
% |
13.8
|
% | ||||||||
QVT
Fund, LP
|
1,287,554
|
(6)
|
400,000
|
887,554
|
3.0
|
% |
13.8
|
% | ||||||||
TCW
Americas Development Association LP (3)
|
858,369
|
(7)
|
400,000
|
458,369
|
1.5
|
% |
13.8
|
% | ||||||||
Halter/Pope
USX China Fund
|
310,000
|
(8)
|
291,615
|
18,385
|
*
|
10.0
|
% | |||||||||
MidSouth
Investors Fund LP (3)
|
239,592
|
(9)
|
208,594
|
30,998
|
*
|
7.2
|
% | |||||||||
Whitebox
Advisors, LLC
|
214,592
|
(10)
|
208,594
|
5,998
|
*
|
7.2
|
% | |||||||||
Lighthouse
Consulting Limited
|
200,000
|
(11)
|
194,410
|
5,590
|
*
|
6.7
|
% |
* |
Less
than 1%.
|
(1) |
The
information presented assumes that all of the selling stockholders
will
fully convert the Series A Preferred Stock for shares of our
common stock
and that the selling stockholders will sell all shares of our
common stock
that they are offering under this
prospectus.
|
(2) |
Includes
3,004,292 shares of common stock issuable upon conversion of
Series A
Preferred Stock. Adam Benowitz, the managing member of the selling
stockholder, has sole voting and investment control over these
securities.
Mr. Benowitz disclaims beneficial ownership of these securities. The
Series A Convertible Preferred Stock is not convertible to the
extent that the number of shares of common stock to be issued
pursuant to
such conversion would exceed, when aggregated with all other
shares of
common stock owned by Vision at such time, the number of shares
of common
stock which would result in Vision beneficially owning in excess
of 9.9%
of the then issued and outstanding shares of our common stock.
Vision may
waive this ownership cap on 61 days’ prior notice to
us.
|
(3)
|
This
selling stockholder has identified itself as an affiliate of
a registered
broker-dealer and, in conjunction with the acquisition of the
Series A
Preferred Stock and warrants, represented to us that such selling
stockholder (x) acquired its Series A Preferred Stock and warrants
solely
for its own account for the purpose of investment and not with
a view to
or for sale in connection with a distribution and (y) did not
have a
present intention to sell the Series A Preferred Stock or the
warrants,
nor a present arrangement (whether or not legally binding)
or intention to
effect any distribution of the Series A Preferred Stock or
the warrants to
or through any person or entity. To the extent that we become
aware that
the representations provided by this selling stockholder were
not true, we
will file a post-effective amendment to the registration statement
of
which this prospectus forms a part to designate such affiliate
as an
“underwriter” within the meaning of the Securities Act of 1933, as
amended.
|
(4) |
Includes
2,145,923 shares of common stock issuable upon conversion of
Series A
Preferred Stock. Peter T. Santry, John B. Liptak and Stephen P.
Ewald share voting and investment control over these securities.
Messrs. Santry, Liptak and Ewald disclaim beneficial ownership of
these securities. The Series A Convertible Preferred Stock is
not convertible to the extent that the number of shares of common
stock to be issued pursuant to such conversion would exceed,
when
aggregated with all other shares of common stock owned by Blue
Ridge at
such time, the number of shares of common stock which would result
in Blue
Ridge beneficially owning in excess of 9.9% of the then issued
and
outstanding shares of our common stock. Blue Ridge may waive
this
ownership cap on 61 days’ prior notice to
us.
|
(5) |
Includes
2,062,232 shares of common stock issuable upon conversion of
Series A
Preferred Stock. Jonathan Barton, the managing director of the
selling
stockholder, has sole voting and investment control over these
securities.
The Series A Convertible Preferred Stock is not convertible to
the extent that the number of shares of common stock to be issued
pursuant
to such conversion would exceed, when aggregated with all other
shares of
common stock owned by Old Lane at such time, the number of shares
of
common stock which would result in Old Lane beneficially owning
in excess
of 9.9% of the then issued and outstanding shares of our common
stock. Old
Lane may waive this ownership cap on 61 days’ prior notice to
us.
|
(6) |
Includes
1,287,554 shares of common stock issuable upon conversion of
Series A
Preferred Stock. Management of QVT Fund LP is vested in its general
partner, QVT Associates GP LLC. QVT Financial LP is the investment
manager
for QVT Fund LP and shares voting and investment control over
the Company
securities held by QVT Fund LP. QVT Financial GP LLC is the general
partner of QVT Financial LP and as such has complete discretion
in the
management and control of the business affairs of QVT Financial
LP. QVT
Associates GP LLC is the general partner of QVT Fund LP and may
be deemed
to beneficially own the securities. The managing members of QVT
Financial
GP LLC are Daniel Gold, Lars Bader, Tracy Fu and Nicholas Brumm.
Each of
QVT Financial LP, QVT Financial GP LLC, Daniel Gold, Lars Bader,
Tracy Fu
and Nicholas Brumm disclaims beneficial ownership of the Company’s
securities held by QVT Fund LP. QVT Associates GP LLC disclaims
beneficial ownership of the securities held by QVT Fund LP, except
to the
extent of its pecuniary interest therein. The Series A Convertible
Preferred Stock is not convertible to the extent that the number of
shares of common stock to be issued pursuant to such conversion
would
exceed, when aggregated with all other shares of common stock
owned by QVT
at such time, the number of shares of common stock which would
result in
QVT beneficially owning in excess of 9.9% of the then issued
and
outstanding shares of our common stock. QVT may waive this ownership
cap
on 61 days’ prior notice to us.
|
(7) |
Includes
858,369 shares of common stock issuable upon conversion of
Series A
Preferred Stock. The
power to vote and direct the voting of securities held by the
selling
stockholder and the power to dispose and direct the disposition
of those
securities is delegated to TCW Asset Management Company, a
California
corporation and SEC registered investment adviser (“TAMCO”). TAMCO has a
27 member Board of Directors. TAMCO is wholly owned by The
TCW Group,
Inc., a Nevada corporation (“TCWG”). TCWG, together with its direct and
indirect subsidiaries, collectively constitute The TCW Group,
Inc.
business unit (the “TCW Business Unit”). The TCW Business Unit is
primarily engaged in the provision of investment management
services. The
ultimate parent company of TCWG is Société Générale, S.A., a company
incorporated under the laws of France (“SG”). The principal business of SG
is acting as a holding company for a global financial services
group,
which includes certain distinct specialized business units
that are
independently operated, including the TCW Business Unit. SG,
for purposes
of the federal securities laws, may be deemed ultimately to
control TCWG
and the TCW Business Unit. SG, its executive officers and directors,
and
its direct and indirect subsidiaries (including all of its
business units
except the TCW Business Unit), may beneficially own securities
of the
Company and such securities are not reported as shares owned
by the
selling stockholder. In accordance with Exchange Act Release
No. 34-39538
(January 12, 1998) and due to the separate management and independent
operation of its business units, SG disclaims beneficial ownership
of
securities of the Issuer beneficially owned by the TCW Business
Unit. Each
member of the TCW Business Unit disclaims beneficial ownership
of
securities of the Company beneficially owned by SG and any
of SG’s other
business units. TCW Brokerage Services, Inc., a wholly owned
subsidiary of
TCWG, is an SEC registered broker-dealer and a member of the
NASD. In
addition to the foregoing, Penelope D. Foley, David I.
Robbins, and Stacey Riccardo, managing directors of the selling
stockholder, share voting and investment control over these
securities.
Ms. Foley, Mr. Robbins and Ms. Riccardo disclaim beneficial
ownership of
these securities. The Series A Convertible Preferred Stock is not
exercisable to the extent that the number of shares of common
stock to be
issued pursuant to such conversion would exceed, when aggregated
with all
other shares of common stock owned by TCW at such time, the
number of
shares of common stock which would result in TCW beneficially
owning in
excess of 9.9% of the then issued and outstanding shares of
our common
stock. TCW may waive this ownership cap on 61 days’ prior notice to
us.
|
(8) |
Includes
300,000 shares of common stock issuable upon conversion of
Series A
Preferred Stock. William P. Wells, the President of Pope Asset
Management,
LLC, the advisor to the selling stockholder, and Stephen L.
Parr, the Vice
President of Pope Asset Management, LLC, the advisor to the
selling
stockholder, share voting and investment control over these
securities.
The Series A Convertible Preferred Stock is not exercisable
to the extent
that the number of shares of common stock to be issued pursuant
to such
conversion would exceed, when aggregated with all other shares
of common
stock owned by Halter/Pope at such time, the number of shares
of common
stock which would result in Halter/Pope beneficially owning
in excess of
9.9% of the then issued and outstanding shares of our common
stock.
Halter/Pope may waive this ownership cap on 61 days’ prior notice to
us.
|
(9) |
Includes
214,592 shares of common stock issuable upon conversion of
Series A
Preferred Stock. L.O. Heidtke, the general partner of the selling
stockholder, has sole voting and investment control over these
securities.
The Series A Convertible Preferred Stock is not exercisable
to the extent
that the number of shares of common stock to be issued pursuant
to such
conversion would exceed, when aggregated with all other shares
of common
stock owned by MidSouth at such time, the number of shares
of common stock
which would result in MidSouth beneficially owning in excess
of 9.9% of
the then issued and outstanding shares of our common stock.
MidSouth may
waive this ownership cap on 61 days’ prior notice to
us.
|
(10) |
Includes
214,592 shares of common stock issuable upon conversion of
Series A
Preferred Stock. Jason Cross, the portfolio manager of the
selling
stockholder, and Andrew Redleaf, the managing member, share voting
and investment control over these securities. The Series A
Convertible
Preferred Stock is not exercisable to the extent that the number
of shares
of common stock to be issued pursuant to such conversion would
exceed,
when aggregated with all other shares of common stock owned
by Whitebox at
such time, the number of shares of common stock which would
result in
Whitebox beneficially owning in excess of 9.9% of the then
issued and
outstanding shares of our common stock. Whitebox may waive
this ownership
cap on 61 days’ prior notice to us.
|
(11) |
Includes
200,000 shares of common stock issuable upon conversion of
Series A
Preferred Stock. Feng Bai Ye and Ignacio Badiola Menendez share
voting and
investment control over these securities. The Series A Convertible
Preferred Stock is not exercisable to the extent that the number
of shares
of common stock to be issued pursuant to such conversion would
exceed,
when aggregated with all other shares of common stock owned
by Lighthouse
Consulting at such time, the number of shares of common stock
which would
result in Lighthouse Consulting beneficially owning in excess
of 9.9% of
the then issued and outstanding shares of our common stock.
Lighthouse
Consulting may waive this ownership cap on 61 days’ prior notice to
us.
|
· |
ordinary
brokerage transactions and transactions in which the broker-dealer
solicits the purchaser;
|
· |
block
trades in which the broker-dealer will attempt to sell the
shares as agent
but may position and resell a portion of the block as principal
to
facilitate the transaction;
|
· |
purchases
by a broker-dealer as principal and re-sales by the broker-dealer
for its
account;
|
· |
an
exchange distribution in accordance with the rules of the
applicable
exchange;
|
· |
privately-negotiated
transactions;
|
· |
to
cover short sales made after the date that the registration
statement of
which this prospectus is a part is declared effective
by the
SEC;
|
· |
broker-dealers
may agree with the selling stockholders to sell a
specified number of such
shares at a stipulated price per
share;
|
· |
through
the writing of options on the
shares;
|
· |
a
combination of any such methods of sale;
and
|
· |
any
other method permitted pursuant to applicable
law.
|
1.
|
There
are outstanding 19,712,446 shares of common stock, 10,287,554
shares of
Series A Convertible Preferred Stock that are convertible into
shares of
our common stock, and warrants to purchase 24,289,269 shares
of our common
stock; and
|
2.
|
There
are no shares of our common stock that are eligible to be sold
pursuant to Rule 144 under the Securities
Act.
|
Independent
Auditor’s Report
|
F-3
|
|||
Consolidated
Balance Sheet
|
F-4
- F-5
|
|||
Consolidated
Statements of Income
|
F-6
|
|||
Consolidated
Statements of Stockholders’ Equity
|
F-7
|
|||
Consolidated
Statements of Cash Flows
|
F-8
|
|||
Notes
to Financial Statements
|
F-10
- F-21
|
Report
of Independent Registered Public Accounting Firm
|
F-23
|
|||
Consolidated
Balance Sheets
|
F-24
- F-25
|
|||
Consolidated
Statements of Income
|
F-26
|
|||
Consolidated
Statements of Stockholders’ Equity
|
F-27
- F-28
|
|||
Consolidated
Statements of Cash Flows
|
F-29
|
|||
Notes
to Financial Statements
|
F-31
- F-51
|
/s/ Samuel H. Wong & Co. LLP | ||
South San Francisco, California | Samuel H. Wong & Co., LLP | |
May 20, 2007 | Certified Public Accountants |
Note
|
2006
|
2005
|
||||||||
ASSETS
|
||||||||||
Current
Assets
|
||||||||||
Cash
|
2(e)
|
|
248,243
|
166,488
|
||||||
Restricted
Cash
|
3
|
382,530
|
1,388,554
|
|||||||
Accounts
Receivable
|
2(f),
4
|
12,488,083
|
3,698,744
|
|||||||
Other
Receivable
|
|
8,810,699
|
4,362,830
|
|||||||
Notes
Receivable
|
5
|
1,535,868
|
1,424,431
|
|||||||
Inventory
|
2(g),6
|
4,544,662
|
3,398,165
|
|||||||
Advance
to Suppliers
|
|
2,746,325
|
887,558
|
|||||||
Related
Party Receivable
|
7
|
255,836
|
521,805
|
|||||||
Prepaid
Taxes
|
|
3,888
|
-
|
|||||||
Total
Current Assets
|
|
31,016,134
|
15,848,575
|
|||||||
|
||||||||||
Long-term
Assets
|
|
|||||||||
Property,
Plant & Equipment, net
|
2(h),8
|
17,252,577
|
10,487,417
|
|||||||
Land
Use Rights, net
|
2(j),9
|
1,749,740
|
1,730,237
|
|||||||
Construction
in Progress
|
|
35,304
|
1,561
|
|||||||
Intangible
Assets, net
|
2(i),10
|
364,565
|
386,073
|
|||||||
|
19,402,186
|
12,605,288
|
||||||||
|
||||||||||
Total
Assets
|
|
$
|
50,418,320
|
$
|
28,453,863
|
|||||
|
||||||||||
LIABILITIES
& STOCKHOLDERS' EQUITY
|
||||||||||
|
||||||||||
Liabilities
|
||||||||||
Current
Liabilities
|
|
|||||||||
Bank
Loans & Notes
|
11
|
13,545,059
|
10,019,861
|
|||||||
Accounts
Payable
|
8,531,852
|
2,470,399
|
||||||||
Accrued
Liabilities
|
354,169
|
234,291
|
||||||||
Contract
Payable
|
12
|
1,137,623
|
2,479,414
|
|||||||
Taxes
Payable
|
1,723,544
|
693,473
|
||||||||
Other
Payable
|
4,594,639
|
1,924,334
|
||||||||
Customer
Deposits
|
1,587,306
|
1,693,307
|
||||||||
Total
Current Liabilities
|
31,474,192
|
19,515,079
|
||||||||
Total
Liabilities
|
31,474,192
|
19,515,079
|
Stockholders'
Equity
|
Note
|
2006
|
2005
|
|||||||
Preferred
Stock - $0.0001 Par Value 50,000,000 Shares Authorized; None
Issued &
Outstanding at December 31, 2006, and 2005.
|
-
|
-
|
||||||||
Common
Stock $0.0001 Par Value 100,000,000 Shares Authorized; 19,712,446
Shares
at $0.0001 Par Value Issued & Outstanding at December 31, 2006, and
2005.
|
13
|
1,971
|
1,971
|
|||||||
Additional
Paid in Capital
|
|
12,349,602
|
6,033,911
|
|||||||
Statutory
Reserve
|
2(t),14
|
622,151
|
-
|
|||||||
Retained
Earnings
|
|
5,200,284
|
2,620,167
|
|||||||
Accumulated
Other Comprehensive Income
|
2(u)
|
|
770,120
|
282,736
|
||||||
Total
Stockholders' Equity
|
18,944,128
|
8,938,785
|
||||||||
Total
Liabilities & Stockholders' Equity
|
$
|
50,418,320
|
$
|
28,453,863
|
Note
|
||||||||||
Revenue
|
2006
|
2005
|
||||||||
Sales
|
2(l)
|
|
$
|
16,702,043
|
$
|
11,577,588
|
||||
Cost
of Sales
|
2(m)
|
8,663,879
|
7,276,068
|
|||||||
Gross
Profit
|
8,038,164
|
4,301,519
|
||||||||
Operating
Expenses
|
||||||||||
Selling
Expenses
|
2(n)
|
1,193,971
|
710,973
|
|||||||
General
& Administrative Expenses
|
2(o)
|
2,874,348
|
1,060,845
|
|||||||
Warranty
Expense
|
244,101
|
-
|
||||||||
Total
Operating Expense
|
4,312,420
|
1,771,818
|
||||||||
Operating
Income/(Loss)
|
|
3,725,744
|
2,529,702
|
|||||||
Other
Income (Expenses)
|
||||||||||
Other
Income
|
15
|
26,977
|
100,806
|
|||||||
Interest
Income
|
|
348
|
-
|
|||||||
Other
Expenses
|
(1,830
|
)
|
(1,812
|
)
|
||||||
Interest
Expense
|
(548,970
|
)
|
(256,936
|
)
|
||||||
Total
Other Income (Loss) and Expense
|
(523,475
|
)
|
(157,941
|
)
|
||||||
Earnings
before Tax
|
|
3,202,269
|
2,371,760
|
|||||||
|
||||||||||
Income
Tax
|
2(s),16
|
-
|
-
|
|||||||
|
||||||||||
Net
Income
|
|
$
|
3,202,269
|
$
|
2,371,760
|
|||||
Preferred
Dividends Declared
|
-
|
-
|
||||||||
Net
Income Available to Common Stockholders
|
3,202,269
|
2,371,760
|
||||||||
Basic
& Diluted Earnings Per Share
|
$
|
0.16
|
$
|
0.12
|
||||||
Weighted
Average Shares Outstanding
|
19,712,446
|
19,712,446
|
Accumulated
|
||||||||||||||||||||||
No.
|
Additional
|
Other
|
||||||||||||||||||||
of
|
Common
|
Paid
in
|
Statutory
|
Retained
|
Comprehensive
|
|||||||||||||||||
Shares
|
Stock
|
Capital
|
Reserve
|
Earnings
|
Income
|
Total
|
||||||||||||||||
Balance,
January 1, 2005
|
19,712,446
|
1,971
|
6,033,911
|
-
|
248,406
|
76,678
|
6,360,966
|
|||||||||||||||
Net
Income
|
2,371,760
|
2,371,760
|
||||||||||||||||||||
Foreign
Currency Translation Adjustment
|
206,058
|
206,058
|
||||||||||||||||||||
Balance,
December 31, 2005
|
19,712,446
|
1,971
|
6,033,911
|
-
|
2,620,167
|
282,736
|
8,938,784
|
|||||||||||||||
Balance,
January 1, 2006
|
19,712,446
|
1,971
|
6,033,911
|
-
|
2,620,167
|
282,736
|
8,938,784
|
|||||||||||||||
Increases
to Additional Paid-In Capital from Contribution of Capital
Equipment
|
6,315,691
|
6,315,691
|
||||||||||||||||||||
Net
Income
|
3,202,269
|
3,202,269
|
||||||||||||||||||||
Appropriations
of Retained Earnings
|
622,151
|
(622,151
|
)
|
-
|
||||||||||||||||||
Foreign
Currency Translation Adjustment
|
487,384
|
487,384
|
||||||||||||||||||||
Balance,
December 31, 2006
|
19,712,446
|
1,971
|
12,349,602
|
622,151
|
5,200,284
|
770,120
|
18,944,128
|
2006
|
2005
|
||||||
Cash
Flow from Operating Activities:
|
|||||||
Cash
Received from Customers
|
$
|
3,395,609
|
$
|
5,041,752
|
|||
Cash
Paid to Suppliers & Employees
|
(4,710,988
|
)
|
(3,696,328
|
)
|
|||
Interest
Received
|
348
|
-
|
|||||
Interest
Paid
|
(548,970
|
)
|
(256,936
|
)
|
|||
Income
Tax Paid
|
-
|
-
|
|||||
Miscellaneous
Receipts
|
26,977
|
100,806
|
|||||
Cash
Sourced/(Used) in Operating Activities
|
(1,837,024
|
)
|
1,189,294
|
||||
Cash
Flows from Investing Activities:
|
|||||||
Cash
Invested in/(Withdrawn from) Restricted Time Deposits
|
(1,006,024
|
)
|
1,366,568
|
||||
Investment
in Note
|
148,213
|
1,401,877
|
|||||
Payments
for Purchases of Plant & Equipment
|
9,159,393
|
7,059,106
|
|||||
Payments
for Construction of Plant & Equipment
|
33,743
|
(245,115
|
)
|
||||
Payments
for Purchases of Land Use Rights
|
58,853
|
209,087
|
|||||
Payments
for Purchases of Intangible Assets
|
15,316
|
280,908
|
|||||
Cash
Used/(Sourced) in Investing Activities
|
8,409,494
|
10,072,431
|
|||||
Cash
Flows from Financing Activities:
|
|||||||
Increases
in Additional Paid in Capital from Contribution of Capital
Equipment
|
6,315,691
|
-
|
|||||
Proceeds
from Bank Borrowings
|
4,844,345
|
7,386,061
|
|||||
Proceeds
from Issuance/(Repayment) of Notes
|
(1,319,147
|
)
|
1,298,260
|
||||
Cash
Sourced/(Used) in Financing Activities
|
9,840,889
|
8,684,321
|
|||||
Net
Increase/(Decrease) in Cash & Cash Equivalents for the
Year
|
(405,629
|
)
|
(198,816
|
)
|
|||
Effect
of Currency Translation
|
487,384
|
6,279
|
|||||
Cash
& Cash Equivalents at Beginning of Year
|
166,488
|
359,025
|
|||||
Cash
& Cash Equivalents at End of Year
|
$
|
248,243
|
$
|
166,488
|
2006
|
2005
|
||||||
Net
Income
|
$
|
3,202,269
|
$
|
2,371,760
|
|||
Adjustments
to Reconcile Net Income to Net Cash Provided by Cash
Activities:
|
|||||||
Amortization
|
76,174
|
55,191
|
|||||
Depreciation
|
1,052,442
|
445,555
|
|||||
Provision
for Bad Debt on Note Receivable
|
36,776
|
-
|
|||||
Decrease/(Increase)
in Accounts Receivable
|
(8,789,339
|
)
|
(2,174,707
|
)
|
|||
Decrease/(Increase)
in Other Receivable
|
(4,447,869
|
)
|
(3,666,316
|
)
|
|||
Decrease/(Increase)
in Inventory
|
(1,146,497
|
)
|
(618,313
|
)
|
|||
Decrease/(Increase)
in Advance to Suppliers
|
(1,858,767
|
)
|
2,708,717
|
||||
Decrease/(Increase)
in Related Party Receivable
|
265,969
|
(513,543
|
)
|
||||
Decrease/(Increase)
in Prepaid VAT Taxes
|
(3,889
|
)
|
-
|
||||
Increase/(Decrease)
in Accounts Payable
|
6,061,453
|
1,454,556
|
|||||
Increase/(Decrease)
in Taxes Payable
|
1,030,071
|
576,311
|
|||||
Increase/(Decrease)
in Other Payable
|
2,670,305
|
1,140,347
|
|||||
Increase/(Decrease)
in Accrued Liabilities
|
119,878
|
104,548
|
|||||
Increase/(Decrease)
in Customer Advances
|
(106,001
|
)
|
(694,812
|
)
|
|||
Total
of all adjustments
|
(5,039,293
|
)
|
(1,182,466
|
)
|
|||
Net
Cash Provided by/(Used in) Operating Activities
|
$
|
(1,837,024
|
)
|
$
|
1,189,294
|
(a) |
Method
of Accounting
|
(b) |
Consolidation
|
(c) |
Economic
and Political Risks
|
(d) |
Use
of Estimates
|
(e) |
Cash
and Cash Equivalents
|
(f) |
Accounts
Receivable-Trade
|
(g) |
Inventory
|
(h) |
Property,
Plant, and Equipment
|
(i) |
Intangible
Assets
|
(j) |
Land
Use Rights
|
(k) |
Accounting
for Impairment of Long-Lived
Assets
|
(l) |
Revenue
Recognition
|
(m) |
Cost
of Sales
|
(n) |
Selling
Expenses
|
(o) |
General
& Administrative Expenses
|
(p) |
Advertising
|
(q) |
Research
and Development
|
(r) |
Foreign
Currency Translation
|
Exchange
Rates
|
2006
|
2005
|
|||||
Period
end RMB : US$ exchange rate
|
7.8175
|
8.0734
|
|||||
Average
period RMB : US$ exchange rate
|
7.98189
|
8.20329
|
(s) |
Income
Taxes
|
Rate
|
Over
|
But
not over
|
Of
Amount Over
|
|||
15%
|
0
|
50,000
|
0
|
|||
25%
|
50,000
|
75,000
|
50,000
|
|||
34%
|
75,000
|
100,000
|
75,000
|
|||
39%
|
100,000
|
335,000
|
100,000
|
|||
34%
|
335,000
|
10,000,000
|
335,000
|
|||
35%
|
10,000,000
|
15,000,000
|
10,000,000
|
|||
38%
|
15,000,000
|
18,333,333
|
15,000,000
|
|||
35%
|
18,333,333
|
-
|
0
|
(t) |
Statutory
Reserve
|
(u) |
Other
Comprehensive Income
|
(v) |
Recent
Accounting Pronouncements
|
2006
|
2005
|
||||||
Total
Accounts Receivable-Trade
|
$
|
12,807,824
|
$
|
3,712,272
|
|||
Less:
Allowance for Bad Debt
|
319,741
|
13,528
|
|||||
$
|
12,488,083
|
$
|
3,698,744
|
||||
Allowance
for Bad Debts
|
|||||||
Beginning
Balance
|
$
|
13,528
|
$
|
5,314
|
|||
Allowance
Created
|
306,213
|
8,214
|
|||||
Charged
Against Allowance
|
-
|
-
|
|||||
Ending
Balance
|
$
|
319,741
|
$
|
13,528
|
2006
|
2005
|
||||||
Notes
Receivable
|
$
|
1,572,644
|
$
|
1,424,431
|
|||
Less:
Allowance for Bad Debts
|
36,777
|
-
|
|||||
$
|
1,535,867
|
$
|
1,424,431
|
2006
|
2005
|
||||||
Raw
Materials
|
$
|
1,116,066
|
$
|
644,366
|
|||
Work
in Progress
|
2,058,889
|
299,789
|
|||||
Finished
Goods
|
1,369,707
|
2,454,010
|
|||||
$
|
4,544,662
|
$
|
3,398,165
|
Related
Party
|
Currency
|
2006
|
2005
|
|
(A.)
|
Xu
Jie
|
RMB
|
2,000,000
|
4,212,743
|
Equivalent
in US$
|
$
255,836
|
$
521,805
|
Name
|
USD
|
RMB
|
|||||
Zhang
Yuqun
|
30,873
|
241,351
|
|||||
Yu
Debao
|
3,279
|
25,634
|
|||||
Li
Yong
|
9,895
|
77,352
|
|||||
Wang
Saishi
|
76,013
|
594,233
|
|||||
Chen
Daili
|
44,792
|
350,159
|
|||||
Luo
Shenshen
|
1,287
|
10,060
|
|||||
Yan
Jiahuan
|
38,536
|
301,255
|
|||||
He
Maoxiang
|
51,162
|
399,956
|
|||||
|
$
|
255,837
|
2,000,000
|
2006
|
2005
|
||||||
Category
of Asset
|
|||||||
Buildings
|
$
|
9,597,812
|
$
|
9,160,359
|
|||
Machinery
& Equipment
|
8,353,453
|
1,168,248
|
|||||
Furniture
& Fixtures
|
259,092
|
216,493
|
|||||
Auto
|
652,156
|
499,811
|
|||||
18,862,513
|
11,044,911
|
||||||
Less:
Accumulated Depreciation
|
1,609,936
|
557,494
|
|||||
$
|
17,252,577
|
$
|
10,487,417
|
2006
|
2005
|
||||||
Category
of Asset
|
|||||||
Land
Use Rights
|
$
|
1,856,757
|
$
|
1,797,904
|
|||
Less:
Accumulated Amortization
|
107,017
|
67,667
|
|||||
$
|
1,749,740
|
$
|
1,730,237
|
2006
|
2005
|
||||||
Category
of Asset
|
|||||||
Trademarks
|
$
|
127,918
|
$
|
123,864
|
|||
Mitsubishi
License
|
280,571
|
271,678
|
|||||
CAD
License
|
3,901
|
1,920
|
|||||
Microsoft
License
|
12,217
|
11,829
|
|||||
424,607
|
409,291
|
||||||
Less:
Accumulated Amortization
|
60,042
|
23,218
|
|||||
$
|
364,565
|
$
|
386,073
|
Interest
Rate
|
|||||||||||||
Name
of Bank
|
Due
Date
|
per
annum
|
2006
|
2005
|
|||||||||
A. Bank
of Communication
|
4/11/2007
|
6.615
|
%
|
$
|
4,732,971
|
$
|
4,582,952
|
||||||
B. Bank
of Communication
|
4/11/2007
|
6.615
|
%
|
1,343,140
|
1,300,567
|
||||||||
C. CITIC
Industrial Bank
|
10/12/2007
|
6.732
|
%
|
2,430,445
|
2,353,407
|
||||||||
D. CITIC
Industrial Bank
|
9/11/2006
|
6.138
|
%
|
-
|
1,257,215
|
||||||||
E. Guangdong
Development Bank: Note Payable
|
On
Demand
|
-
|
-
|
61,932
|
|||||||||
F. Shanghai
Pudong Development Bank
|
10/18/2007
|
6.026
|
%
|
2,046,690
|
-
|
||||||||
G. Agricultural
Bank of China
|
10/31/2007
|
6.732
|
%
|
1,279,181
|
-
|
||||||||
H. Agricultural
Bank of China
|
10/31/2007
|
6.732
|
%
|
1,279,181
|
-
|
||||||||
I. CITIC
Industrial Bank : Motor vehicles loan
|
2/28/2008
|
6.696
|
%
|
49,697
|
92,197
|
||||||||
J. Wuhan
East Lake Development Zone Zheng Qiao Cun: Note Payable
|
On
Demand
|
6.000
|
%
|
383,754
|
371,591
|
||||||||
|
$
|
13,545,059
|
$
|
10,019,861
|
2006
|
2005
|
||||||
Common
Stock Capital
|
$
|
12,351,573
|
$
|
6,035,882
|
|||
50%
maximum thereof
|
$
|
6,175,786
|
$
|
3,017,941
|
|||
Less:
Amounts funded to Statutory Reserve
|
622,151
|
-
|
|||||
Unfunded
Commitment
|
$
|
5,553,635
|
$
|
3,017,941
|
2006
|
2005
|
||||||
Tax
Refund
|
$
|
26,977
|
$
|
72,910
|
|||
Sundry
Income
|
-
|
27,896
|
|||||
$
|
26,977
|
$
|
100,806
|
/s/ Samuel H. Wong & Co., LLP
|
|
Samuel H. Wong & Co., LLP
|
|
October 27, 2007
|
Certified Public Accountants
|
|
Note |
September 30,
2007
|
December 31,
2006
|
|||||||
(unaudited)
|
(audited)
|
|||||||||
ASSETS
|
||||||||||
Cash
|
2(e)
|
|
3,411,690
|
248,243
|
||||||
Restricted
Cash
|
3
|
8,808,513
|
382,530
|
|||||||
Notes
Receivable
|
4
|
987,401
|
1,535,868
|
|||||||
Accounts
Receivable
|
2(f),5
|
31,412,707
|
12,488,083
|
|||||||
Other
Receivable
|
2,598,356
|
8,810,699
|
||||||||
Inventory
|
2(g),6
|
9,254,143
|
4,544,662
|
|||||||
Advances
to Suppliers
|
7,921,193
|
2,746,325
|
||||||||
Advances
to Employees
|
7
|
291,090
|
255,836
|
|||||||
Prepaid
Taxes
|
47,188
|
3,889
|
||||||||
Real
Property Available for Sale
|
1,097,327
|
-
|
||||||||
Total
Current Assets
|
65,829,608
|
31,016,135
|
||||||||
Property,
Plant & Equipment, net
|
2(h),8
|
18,927,339
|
17,252,577
|
|||||||
Land
Use Rights, net
|
2(j),10
|
1,790,580
|
1,749,740
|
|||||||
Construction
in Progress
|
9
|
9,482,036
|
35,304
|
|||||||
Intangible
Assets, net
|
2(i),11
|
374,630
|
364,565
|
|||||||
Total
Assets
|
$
|
96,404,193
|
$
|
50,418,321
|
||||||
LIABILITIES
& STOCKHOLDERS' EQUITY
|
||||||||||
Liabilities
|
||||||||||
Bank
Loans & Notes
|
12
|
24,828,456
|
13,545,059
|
|||||||
Accounts
Payable
|
7,962,974
|
8,531,852
|
||||||||
Accrued
Liabilities
|
13
|
2,518,096
|
354,169
|
|||||||
Contract
Payable
|
14
|
-
|
1,137,623
|
|||||||
Taxes
Payable
|
905,586
|
1,723,544
|
||||||||
Other
Payable
|
2,575,985
|
4,594,639
|
||||||||
Dividend
Payable
|
599,250
|
-
|
||||||||
Customer
Deposits
|
5,053,854
|
1,587,306
|
||||||||
Total
Current Liabilities
|
44,444,202
|
31,474,192
|
||||||||
Total
Liabilities
|
44,444,202
|
31,474,192
|
|
|||||||||||||
Note |
September 30,
2007
|
December 31,
2006
|
|||||||||||
(unaudited)
|
(audited)
|
||||||||||||
Stockholders' Equity | |||||||||||||
Preferred
Stock - $0.0001 Par Value 50,000,000 Shares Authorized;
10,287,554 Shares
of Series A Convertible Preferred Stock Issued & Outstanding at
September 30, 2007
|
15
|
1,029
|
-
|
||||||||||
Additional
Paid in Capital - Preferred Stock
|
13,466,990
|
-
|
|||||||||||
Additional
Paid in Capital – Warrants
|
15
|
6,572,334
|
-
|
||||||||||
Additional
Paid in Capital – Beneficial Conversion Feature
|
10,501,982
|
-
|
|||||||||||
Common
Stock - $0.0001 Par Value 100,000,000 Shares Authorized;
19,712,446 Shares
Issued & Outstanding at September 30, 2007, December
31, 2006.
|
15
|
1,971
|
1,971
|
||||||||||
Additional
Paid in Capital
|
12,349,602
|
12,349,602
|
|||||||||||
Statutory
Reserve
|
2(t),16
|
622,151
|
622,151
|
||||||||||
Retained
Earnings
|
6,515,984
|
5,200,285
|
|||||||||||
Accumulated
Other Comprehensive Income
|
2(u)
|
|
1,927,948
|
770,120
|
|||||||||
Total
Stockholders' Equity
|
51,959,991
|
18,944,129
|
|||||||||||
Total
Liabilities & Stockholders' Equity
|
$
|
96,404,193
|
$
|
50,418,321
|
Note
|
3 months
|
3 months
|
9 months
|
9 months
|
||||||||||||
ended
|
ended
|
ended
|
ended
|
|||||||||||||
|
9/30/2007
|
9/30/2006
|
9/30/2007
|
9/30/2006
|
||||||||||||
Revenue
|
||||||||||||||||
Sales
|
$
|
30,523,074
|
$
|
5,160,151
|
$
|
60,342,774
|
$
|
11,612,051
|
||||||||
Cost
of Sales
|
20,039,259
|
2,835,764
|
40,511,207
|
6,558,646
|
||||||||||||
Gross
Profit
|
10,483,815
|
2,324,387
|
19,831,567
|
5,053,405
|
||||||||||||
Operating
Expenses
|
||||||||||||||||
Selling
Expenses
|
938,534
|
208,785
|
1,633,144
|
609,182
|
||||||||||||
General
& Administrative Expenses
|
1,480,755
|
443,001
|
3,299,901
|
1,184,768
|
||||||||||||
Warranty
Expense
|
2(v),13
|
91,059
|
514,520
|
-
|
||||||||||||
Total
Operating Expense
|
2,510,348
|
651,786
|
5,447,565
|
1,793,950
|
||||||||||||
Operating
Income
|
7,973,466
|
1,672,601
|
14,384,001
|
3,259,455
|
||||||||||||
Other
Income (Expenses)
|
||||||||||||||||
Other
Income
|
17
|
-
|
7,444
|
-
|
31,167
|
|||||||||||
Interest
Income
|
94,798
|
-
|
108,923
|
-
|
||||||||||||
Other
Expenses
|
(1,144,227
|
)
|
(1,675
|
)
|
(1,145,270
|
)
|
(2,189
|
)
|
||||||||
Interest
Expense
|
(369,187
|
)
|
(121,001
|
)
|
(756,695
|
)
|
(389,029
|
)
|
||||||||
Total
Other Income (Loss) & Expense
|
(1,418,616
|
)
|
(115,232
|
)
|
(1,793,042
|
)
|
(360,051
|
)
|
||||||||
Earnings
before Tax
|
6,554,851
|
1,557,369
|
12,590,960
|
2,899,404
|
||||||||||||
Income
Tax
|
2(s),
18
|
-
|
-
|
-
|
-
|
|||||||||||
Net
Income
|
$
|
6,554,851
|
$
|
1,557,369
|
$
|
12,590,960
|
$
|
2,899,404
|
||||||||
Preferred
Dividends Declared
|
299,625
|
-
|
773,279
|
-
|
||||||||||||
Constructive
Preferred Stock Dividend
|
-
|
-
|
10,501,982
|
-
|
||||||||||||
Income
Available to Common Shareholders
|
$
|
6,255,226
|
$
|
1,557,369
|
$
|
1,315,699
|
$
|
2,899,404
|
||||||||
Earnings
Per Share
|
||||||||||||||||
Basic
|
0.32
|
0.08
|
0.07
|
0.15
|
||||||||||||
Diluted
|
0.14
|
0.08
|
0.32
|
0.15
|
||||||||||||
Weighted
Average Shares Outstanding
|
||||||||||||||||
Basic
|
19,712,446
|
19,712,446
|
19,712,446
|
19,712,446
|
||||||||||||
Diluted
|
46,200,613
|
19,712,446
|
39,122,641
|
19,712,446
|
Preferred
|
Beneficial
Conversion
|
Common
|
|||||||||||||||||||||||||||||||||||
Stock
|
Warrants
|
Feature
|
Stock
|
Accumulated
|
|||||||||||||||||||||||||||||||||
Preferred
Stock
|
Additional
|
Additional
|
Additional
|
Common
Stock
|
Additional
|
Other
|
|||||||||||||||||||||||||||||||
Shares
|
Paid
in
|
Paid
in
|
Paid
in
|
Shares
|
Paid
in
|
Statutory
|
Retained
|
Comprehensive
|
|||||||||||||||||||||||||||||
Outstanding
|
Amount
|
Capital
|
Capital
|
Capital
|
Outstanding
|
Amount
|
Capital
|
Reserve
|
Earnings
|
Income
|
Total
|
||||||||||||||||||||||||||
Balance,
January 1, 2006
|
-
|
-
|
-
|
-
|
-
|
19,712,446
|
1,971
|
6,033,911
|
-
|
2,620,167
|
282,736
|
8,938,785
|
|||||||||||||||||||||||||
Increases
to Additional Paid-In Capital from Contribution of Capital
Equipment
|
|
|
|
|
|
|
6,315,691
|
|
|
|
6,315,691
|
||||||||||||||||||||||||||
Net
Income
|
|
|
|
|
|
|
|
|
3,202,269
|
|
3,202,269
|
||||||||||||||||||||||||||
Appropriations
of Retained Earnings
|
|
|
|
|
|
|
|
622,151
|
(622,151
|
)
|
|
-
|
|||||||||||||||||||||||||
Foreign
Currency Translation Adjustment
|
|
|
|
|
|
|
|
|
|
487,384
|
487,384
|
||||||||||||||||||||||||||
Balance,
December 31, 2006
|
-
|
-
|
-
|
-
|
-
|
19,712,446
|
1,971
|
12,349,602
|
622,151
|
5,200,285
|
770,120
|
18,944,129
|
|||||||||||||||||||||||||
Balance,
January 1, 2007
|
-
|
-
|
-
|
-
|
-
|
19,712,446
|
1,971
|
12,349,602
|
622,151
|
5,200,285
|
770,120
|
18,944,129
|
|||||||||||||||||||||||||
Issuance
of Common Stock for Cash
|
|
|
|
|
|
|
|
|
|
-
|
|||||||||||||||||||||||||||
Issuance
of Preferred Stock for Cash
|
10,287,554
|
1,029
|
|
|
|
|
|
|
|
|
1,029
|
||||||||||||||||||||||||||
Increase
in Additional Paid in Capital from Issuance of Preferred
Stock
|
|
|
13,466,990
|
|
|
|
|
|
|
|
13,466,990
|
||||||||||||||||||||||||||
Increase
in Additional Paid in Capital from Issuance of Warrants
|
|
|
|
6,572,334
|
|
|
|
|
|
|
6,572,334
|
||||||||||||||||||||||||||
Increase
in Additional Paid in Capital related to the Beneficial
Conversion Feature
of the Convertible Series A Preferred Stock
|
10,501,982 | 10,501,982 | |||||||||||||||||||||||||||||||||||
Net
Income
|
|
|
|
|
|
|
|
|
12,590,960
|
|
12,590,960
|
||||||||||||||||||||||||||
Preferred
Dividends Declared
|
|
|
|
|
|
|
|
|
(773,279
|
)
|
|
(773,279
|
)
|
||||||||||||||||||||||||
Constructive Preferred Stock Dividend
-Amortization of
Beneficial Conversion Feature
|
(10,501,982) | (10,501,982) | |||||||||||||||||||||||||||||||||||
Foreign
Currency Translation Adjustment
|
|
|
|
|
|
|
|
|
|
1,157,828
|
1,157,828
|
||||||||||||||||||||||||||
Balance,
September 30, 2007
|
10,287,554
|
1,029
|
13,466,990
|
6,572,334
|
10,501,982 |
19,712,446
|
1,971
|
12,349,602
|
622,151
|
6,515,984
|
1,927,948
|
51,959,991
|
9/30/2007
|
2006
|
2005
|
2004
|
Total
|
||||||||||||
Comprehensive
Income
|
||||||||||||||||
Net
Income
|
12,590,960
|
3,202,269
|
2,371,760
|
248,406
|
18,413,395
|
|||||||||||
Other
Comprehensive Income
|
||||||||||||||||
Foreign
Currency Translation Adjustment
|
1,157,828
|
487,384
|
206,058
|
76,678
|
1,927,948
|
|||||||||||
Total
Comprehensive Income
|
$
|
13,748,788
|
$
|
3,689,653
|
$
|
2,577,818
|
$
|
325,084
|
$
|
20,341,343
|
3
months
|
3
months
|
9
months
|
9
months
|
||||||||||
ended
|
ended
|
ended
|
ended
|
||||||||||
Cash
Flow from Operating Activities
|
9/30/2007
|
9/30/2006
|
9/30/2007
|
9/30/2006
|
|||||||||
Cash
Received from Customers
|
$
|
29,180,726
|
2,021,163
|
$
|
51,098,507
|
5,024,072
|
|||||||
Cash
Paid to Suppliers & Employees
|
(25,225,990
|
)
|
1,469,643
|
(57,904,148
|
)
|
64,493
|
|||||||
Interest
Received
|
94,798
|
-
|
108,923
|
-
|
|||||||||
Interest
Paid
|
(369,187
|
)
|
(121,001
|
)
|
(756,695
|
)
|
(389,029
|
)
|
|||||
Income
Tax Paid
|
-
|
-
|
-
|
||||||||||
Miscellaneous
Receipts
|
-
|
7,444
|
31,167
|
||||||||||
Cash
Sourced/(Used) in Operating Activities
|
3,680,348
|
3,377,249
|
(7,453,412
|
)
|
4,730,703
|
||||||||
Cash
Flows from Investing Activities
|
|||||||||||||
Cash
Invested in Restricted Time Deposits
|
794,351
|
(745,009
|
)
|
(8,425,983
|
)
|
(100,078
|
)
|
||||||
Repayment/(Investment)
in Notes
|
(225,257
|
)
|
(474,397
|
)
|
546,999
|
(758,043
|
)
|
||||||
Payments
for Purchases & Construction of Plant & Equipment
|
(3,162,369
|
)
|
(40,867
|
)
|
(12,595,728
|
)
|
(858,636
|
)
|
|||||
Payments
for Purchases of Land Use Rights
|
(27,146
|
)
|
-
|
(74,072
|
)
|
||||||||
Payments
for Purchases of Intangible Assets
|
(33,850
|
)
|
(9
|
)
|
(44,581
|
)
|
(1,871
|
)
|
|||||
Cash
Used/(Sourced) in Investing Activities
|
(2,654,271
|
)
|
(1,260,282
|
)
|
(21,690,692
|
)
|
(1,718,628
|
)
|
|||||
Cash
Flows from Financing Activities
|
|||||||||||||
Proceeds
from Issuance of Preferred Stock
|
(726,086
|
)
|
-
|
20,040,353
|
-
|
||||||||
Proceeds
from/(Repayment of) Bank Borrowings
|
(324,860
|
)
|
(1,767,618
|
)
|
2,866,342
|
(2,388,287
|
)
|
||||||
Proceeds
from Issuance of Notes
|
1,921,653
|
80,687
|
8,417,055
|
-
|
|||||||||
Dividends
Paid
|
-
|
-
|
(174,029
|
)
|
-
|
||||||||
Cash
Sourced/(Used) in Financing Activities
|
870,707
|
(1,686,931
|
)
|
31,149,722
|
(2,388,287
|
)
|
|||||||
Net
Increase/(Decrease) in Cash & Cash Equivalents for the
Period
|
108,833
|
430,036
|
2,005,617
|
623,788
|
|||||||||
Effect
of Currency Translation
|
566,953
|
10,003
|
1,157,831
|
11,291
|
|||||||||
Cash
& Cash Equivalents at Beginning of Period
|
248,243
|
361,528
|
248,243
|
166,488
|
|||||||||
Cash
& Cash Equivalents at End of Period
|
$
|
924,029
|
$
|
801,567
|
$
|
3,411,691
|
$
|
801,567
|
|||||
Non-Cash
Investing Activity:
|
|||||||||||||
Contribution
of equipment to capital
|
-
|
6,272,028
|
-
|
6,272,028
|
|||||||||
Value
of residential property surrendered by Hubei Dilong Industrial
Group Co.,
Ltd.
|
989,168
|
-
|
989,168
|
-
|
|||||||||
Constructive
Preferred Stock Dividend
|
-
|
-
|
10,501,982 | - |
3
months
|
3
months
|
9
months
|
9
months
|
||||||||||
ended
|
ended
|
Ended
|
ended
|
||||||||||
9/30/2007
|
9/30/2006
|
9/30/2007
|
9/30/2006
|
||||||||||
Net
Income
|
$
|
6,554,851
|
$
|
1,557,369
|
$
|
12,590,960
|
$
|
2,899,404
|
|||||
Adjustments
to Reconcile Net Income to Net Cash Provided by Cash
Activities:
|
|||||||||||||
Amortization
|
26,000
|
18,010
|
67,748
|
53,527
|
|||||||||
Depreciation
|
(430,594
|
)
|
379,043
|
336,611
|
748,054
|
||||||||
Provision
for Bad Debt on Note Receivable
|
537
|
-
|
1,467
|
-
|
|||||||||
Decrease/(Increase)
in Accounts Receivable
|
(8,260,400
|
)
|
(11,538,994
|
)
|
(18,924,625
|
)
|
(7,815,346
|
)
|
|||||
Decrease/(Increase)
in Other Receivable
|
6,456,082
|
(315,430
|
)
|
6,212,343
|
(352,153
|
)
|
|||||||
Decrease/(Increase)
in Inventory
|
(300,822
|
)
|
(651,645
|
)
|
(4,709,482
|
)
|
(444,465
|
)
|
|||||
Decrease/(Increase)
in Advances to Suppliers
|
(45,259
|
)
|
(1,566,449
|
)
|
(5,174,868
|
)
|
(77,631
|
)
|
|||||
Decrease/(Increase)
in Advances to Employees
|
(28,788
|
)
|
12,736
|
(35,254
|
)
|
12,736
|
|||||||
Decrease/(Increase)
in Prepaid Local & VAT Taxes
|
(15,379
|
)
|
(296,385
|
)
|
(43,299
|
)
|
(296,385
|
)
|
|||||
Increase/(Decrease)
in Accounts Payable
|
(3,279,865
|
)
|
3,947,356
|
(568,878
|
)
|
4,383,607
|
|||||||
Increase/(Decrease)
in Taxes Payable
|
(356,450
|
)
|
449,874
|
(817,959
|
)
|
801,996
|
|||||||
Increase/(Decrease)
in Other Payable
|
1,258,971
|
2,587,972
|
(2,018,652
|
)
|
3,159,480
|
||||||||
Increase/(Decrease)
in Accrued Liabilities
|
1,640,030
|
78,359
|
2,163,927
|
78,359
|
|||||||||
Increase/(Decrease)
in Customer Deposits
|
461,433
|
8,715,433
|
3,466,548
|
1,579,520
|
|||||||||
Total
of all adjustments
|
(2,874,503
|
)
|
1,819,880
|
(20,044,372
|
)
|
1,831,299
|
|||||||
Net
Cash Provided by Operating Activities
|
$
|
3,680,348
|
$
|
3,377,249
|
$
|
(7,453,412
|
)
|
$
|
4,730,703
|
1. |
ORGANIZATION
AND PRINCIPAL ACTIVITIES
|
2. |
SUMMARY
OF SIGNIFICANT ACCOUNTING
POLICIES
|
(a) |
Method
of Accounting
|
(b) |
Consolidation
|
(c) |
Economic
and Political Risks
|
(d) |
Use
of Estimates
|
(e) |
Cash
and Cash Equivalents
|
(f) |
Accounts
Receivable-Trade
|
(g) |
Inventory
|
(h) |
Property,
Plant, and Equipment
|
Buildings
|
30
years
|
Machinery
and Equipment
|
10
years
|
Furniture
and Fixtures
|
5
years
|
Motor
Vehicles
|
5
years
|
(i) |
Intangible
Assets
|
10
years
|
|
Trademark
|
20
years
|
(j) |
Land
Use Rights
|
(k) |
Accounting
for Impairment of Long-Lived
Assets
|
(l) |
Revenue
Recognition
|
(m)
|
Cost
of Sales
|
(n) |
Selling
Expenses
|
(o) |
General
& Administrative Expenses
|
(p) |
Advertising
|
(q) |
Research
and Development
|
(r) |
Foreign
Currency Translation
|
Exchange
Rates
|
September 30,
2007 |
December 31,
2006 |
September 30,
2006 |
|||||||
Period
end RMB : US$ exchange rate
|
7.5176
|
7.8175
|
7.9168
|
|||||||
Average
9 & 12 month RMB : US$ exchange rate
|
7.67576
|
7.98189
|
7.97711
|
(s) |
Income
Taxes
|
Rate
|
Over
|
But
not over
|
Of
Amount Over
|
|||||||
15%
|
0
|
50,000
|
0
|
|||||||
25%
|
50,000
|
75,000
|
50,000
|
|||||||
34%
|
75,000
|
100,000
|
75,000
|
|||||||
39%
|
100,000
|
335,000
|
100,000
|
|||||||
34%
|
335,000
|
10,000,000
|
335,000
|
|||||||
35%
|
10,000,000
|
15,000,000
|
10,000,000
|
|||||||
38%
|
15,000,000
|
18,333,333
|
15,000,000
|
|||||||
35%
|
18,333,333
|
-
|
0
|
(t) |
Statutory
Reserve
|
(u) |
Other
Comprehensive Income
|
(v) |
Warranty
Policy
|
(w) |
Earnings
Per Share
|
(x) |
Recent
Accounting Pronouncements
|
3. |
RESTRICTED
CASH
|
4. |
NOTES
RECEIVABLE
|
|
September 30,
2007
|
December 31,
2006
|
|||||
Notes
Receivable
|
$
|
1,025,645
|
$
|
1,572,644
|
|||
Less:
Allowance for Bad Debts
|
38,244
|
36,776
|
|||||
$
|
987,401
|
$
|
1,535,868
|
5. |
ACCOUNTS
RECEIVABLE
|
September 30,
2007
|
December 31,
2006
|
||||||
Total
Accounts Receivable-Trade
|
$
|
32,062,803
|
$
|
12,807,824
|
|||
Less:
Allowance for Bad Debt
|
650,096
|
319,741
|
|||||
$
|
31,412,707
|
$
|
12,488,083
|
||||
Allowance
for Bad Debts
|
|||||||
Beginning
Balance
|
319,741
|
13,528
|
|||||
Allowance
Provided
|
330,355
|
306,213
|
|||||
Charged
Against Allowance
|
-
|
-
|
|||||
Ending
Balance
|
650,096
|
319,741
|
6. |
INVENTORY
|
September 30,
2007
|
December 31,
2006
|
||||||
Raw
Materials
|
$
|
2,089,577
|
$
|
1,116,066
|
|||
Work
in Progress
|
3,720,085
|
2,058,889
|
|||||
Finished
Goods
|
3,444,481
|
1,369,707
|
|||||
$
|
9,254,143
|
$
|
4,544,662
|
7. |
ADVANCES
TO EMPLOYEES
|
8. |
PROPERTY,
PLANT AND EQUIPMENT
|
September 30,
2007
|
December 31,
2006
|
||||||
Category
of Asset
|
|||||||
Buildings
|
$
|
9,966,010
|
$
|
9,597,812
|
|||
Machinery
& Equipment
|
9,961,669
|
8,353,453
|
|||||
Furniture
& Fixtures
|
269,032
|
259,092
|
|||||
Auto
|
677,175
|
652,156
|
|||||
20,873,886
|
18,862,513
|
||||||
Less:Accumulated
Depreciation
|
1,946,547
|
1,609,936
|
|||||
$
|
18,927,339
|
$
|
17,252,577
|
9. |
CONSTRUCTION
IN PROGRESS
|
Description
|
||||
Wall
|
$
|
6,824
|
||
Parking
Lot
|
3,991
|
|||
Showroom
|
36,315
|
|||
Office
Building
|
3,010,003
|
|||
Generating
Workshop
|
3,990,635
|
|||
Generating
Workshop-Materials
|
1,729,275
|
|||
Dirt
for land filling
|
3,538
|
|||
Workshop
|
585,940
|
|||
Capitalized
Interest
|
105,470
|
|||
Miscellaneous
|
10,045
|
|||
$
|
9,482,036
|
10. |
LAND
USE RIGHTS
|
September 30,
2007
|
December
31,
2006
|
||||||
Category
of Asset
|
|||||||
Land
Use Rights
|
$
|
1,930,829
|
$
|
1,856,757
|
|||
Less:Accumulated
Amortization
|
140,249
|
107,017
|
|||||
$
|
1,790,580
|
$
|
1,749,740
|
11. |
INTANGIBLE
ASSETS
|
September 30,
2007
|
December 31,
2006
|
||||||
Category
of Asset
|
|||||||
Trademarks
|
$
|
133,021
|
$
|
127,918
|
|||
Mitsubishi
License
|
306,331
|
280,571
|
|||||
Tianyu
CAD License
|
4,057
|
3,901
|
|||||
Sunway
CAD License
|
13,075
|
-
|
|||||
Microsoft
License
|
12,704
|
12,217
|
|||||
469,188
|
424,607
|
||||||
Less:Accumulated
Amortization
|
94,560
|
60,042
|
|||||
Net
|
$
|
374,628
|
$
|
364,565
|
12.
|
BANK
LOANS AND
NOTES
|
Name
of Note Holder
|
Due
Date
|
Interest
Rate Per
Annum
|
9/30/2007
|
12/31/2006
|
||||||||
Bank
of Communication
|
On
Demand
|
6.62%
|
|
$
|
-
|
$
|
4,732,971
|
|||||
Bank
of Communication
|
On
Demand
|
6.62%
|
|
-
|
1,343,140
|
|||||||
Shanghai
Pudong Development Bank
|
10/19/2007
|
6.03%
|
|
2,128,339
|
2,046,690
|
|||||||
Shanghai
Pudong Development Bank
|
5/22/2008
|
6.57%
|
|
1,330,212
|
-
|
|||||||
Shanghai
Pudong Development Bank
|
6/25/2008
|
6.57%
|
|
532,085
|
-
|
|||||||
Citic
Industrial Bank
|
10/12/2007
|
6.73%
|
|
-
|
2,430,445
|
|||||||
Citic
Industrial Bank
|
9/25/2008
|
7.29%
|
|
3,325,529
|
-
|
|||||||
Citic
Industrial Bank
|
9/25/2008
|
7.29%
|
|
16,541
|
-
|
|||||||
Citic
Industrial Bank
|
2/28/2008
|
6.70%
|
|
-
|
49,697
|
|||||||
Agricultural
Bank of China
|
10/31/2007
|
6.73%
|
|
1,330,212
|
1,279,181
|
|||||||
Agricultural
Bank of China
|
10/30/2007
|
6.73%
|
|
1,330,212
|
1,279,181
|
|||||||
Wuhan
East Lake Development District Zheng Bridge Committee
|
On
Demand
|
6.00%
|
|
399,064
|
383,754
|
|||||||
Bank
of China
|
On
Demand
|
6.83%
|
|
698,361
|
-
|
|||||||
Dalian
Chong Si Hydraulic Coupler Complete Sets of Equipment Ltd.
(Note
Payable)
|
On
Demand
|
0.00%
|
|
133,021
|
-
|
|||||||
Hubei
Committees Properties Co., Ltd. (Note Payable)
|
On
Demand
|
0.00%
|
|
6,358,412
|
-
|
|||||||
Wuhan-heavy
George Special Steel Co., Ltd. (Note Payable)
|
On
Demand
|
0.00%
|
|
215,926
|
-
|
|||||||
Wuhan
Jiabao Supplies Co., Ltd. (Note Payable)
|
On
Demand
|
0.00%
|
|
104,465
|
-
|
|||||||
Wuhan
Jianghan District Zhongnan Supplies Station (Note Payable)
|
On
Demand
|
0.00%
|
|
156,911
|
-
|
|||||||
Citic
Industrial Bank Wuhan Zhu Ye Shan Branch
|
2/17/2008
|
6.73%
|
|
2,660,424
|
-
|
|||||||
Citic
Industrial Bank Wuhan Zhu Ye Shan Branch
|
2/17/2008
|
6.73%
|
|
2,660,424
|
-
|
|||||||
59
Various Other Notes
|
Various
Dates
|
Various
Rates
|
1,448,320
|
-
|
||||||||
$
|
24,828,456
|
$
|
13,545,059
|
13. |
WARRANTY
LIABILITY
|
Nine Months
Ended
September 30,
2007
|
Nine Months
Ended
September 30,
2006
|
||||||
Balance
at beginning of period
|
$
|
249,234
|
-
|
||||
Add:
Accruals
for current & pre-existing warranties issued during
period
|
514,520
|
-
|
|||||
Less:
Settlements made during period
|
-
|
-
|
|||||
Balance
at end of period
|
$
|
763,754
|
$
|
-
|
14. |
CONTRACT
PAYABLE
|
15. |
CAPITALIZATION
|
i.
|
Preferred
Stock at $0.0001 par value 10,287,554 shares issued and
outstanding
|
$
|
1,029
|
||||
ii.
|
Additional
Paid-in Capital attributable to Preferred Stock
|
13,466,990
|
|||||
iii.
|
Additional
Paid-in Capital attributable to Series A Warrants, Series
J Warrants, and
Series B Warrants
|
6,572,334
|
|||||
iv.
|
Additional
Paid-in Capital attributable to Beneficial Conversion
Feature
|
10,501,982
|
|||||
v.
|
Constructive
Preferred Stock Dividend Charged Against Retained Earnings
|
(10,501,982
|
) | ||||
$
|
20,040,353
|
·
|
Series
A Warrants to each of the preferred stock investors to
purchase shares of
common stock equal to 60% of the number of shares of preferred
stock
purchased, (i.e., 6,172,531 shares) at an exercise price
of $2.57 per
share expiring five years from the closing
date.
|
·
|
Series
J Warrants to each of the preferred stock investors who
invested at least
$2,000,000 to purchase shares of common stock equal to
100% of the number
of shares of preferred stock purchased, (i.e., 9,358,370
shares) at an
exercise price of $2.33 per share for a term of 21 months
from the closing
date.
|
·
|
Series
B Warrants to each recipient of Series J Warrants to purchase
shares of
common stock equal to 60% of the number of shares of common
stock
purchased pursuant to Series J Warrants, (i.e. 5,615,021
shares) at an
exercise price of $2.57 per share for a term of five years
from the
closing date.
|
Series
of Warrant
|
Number of Shares
|
Exercise Price
|
|||||
Series
C
|
1,028,755
|
$
|
2.57
|
||||
Series
AA
|
617,253
|
2.83
|
|||||
Series
BB
|
561,502
|
2.83
|
|||||
Series
JJ
|
935,837
|
2.57
|
|||||
3,143,347
|
Number of Shares
|
||||
Common
Stock Outstanding
|
19,712,446
|
|||
Common
Stock Issuable upon-:
|
||||
-
Conversion of Preferred Stock
|
10,287,554
|
|||
-
Exercise of Warrants
|
24,289,269
|
|||
Total
Amount of Fully Diluted Common Stock
|
54,289,269
|
16. |
COMMITMENTS
OF STATUTORY RESERVE
|
September 30,
2007
|
December 31,
2006
|
||||||
Common
Stock Capital
|
$
|
12,351,573
|
$
|
12,351,573
|
|||
50%
maximum thereof
|
$
|
6,175,786
|
$
|
6,175,786
|
|||
Less:
Amounts Appropriated to Statutory Reserve
|
622,151
|
622,151
|
|||||
Unfunded
Commitment
|
$
|
5,553,635
|
$
|
5,553,635
|
17. |
OTHER
INCOME
|
Nine
months
ended
September 30,
2007
|
Nine
months
ended
September 30,
2006
|
||||||
Tax
Refund
|
$
|
-
|
$
|
-
|
|||
Sundry
Income
|
-
|
31,167
|
|||||
$
|
-
|
$
|
31,167
|
18. |
INCOME
TAXES
|
19. |
FINANCING –
ISSUANCE OF SERIES A CONVERTIBLE PREFERRED
STOCK
|
20. |
EARNINGS
PER SHARE
|
3
months
ended
September 30,
2007
|
9
months
ended
September 30,
2007
|
3
months
ended
September 30,
2006
|
9
months
ended
September 30,
2006
|
||||||||||
Net
Income (A)
|
$
|
6,554,851
|
$
|
12,590,960
|
$
|
1,557,369
|
$
|
2,899,404
|
|||||
Preferred
Dividends (B)
|
|
299,625
|
|
773,279
|
|
-
|
|
-
|
|||||
Constructive
Preferred Dividends (C)
|
- |
10,501,982
|
- | - | |||||||||
Income
Available to Common Stockholders (D)
|
$
|
6,255,226
|
$
|
1,315,699
|
$
|
1,557,369
|
$
|
2,899,404
|
|||||
Basic
Weighted Average Shares Outstanding (E)
|
19,712,446
|
19,712,446
|
19,712,446
|
19,712,446
|
|||||||||
Dilutive
Shares:
|
|||||||||||||
- Addition
to Common Stock from Conversion of Preferred Stock
|
10,287,554
|
8,877,778
|
-
|
-
|
|||||||||
- Addition
to Common Stock from Exercise of Warrants
|
16,200,613
|
10,532,417
|
-
|
-
|
|||||||||
Diluted
Weighted Average Shares Outstanding: (F)
|
46,200,613
|
39,122,641
|
19,712,446
|
19,712,446
|
|||||||||
Earnings
Per Share
|
|||||||||||||
- Basic
(D)/(E)
|
$
|
0.32
|
$
|
0.07
|
$
|
0.08
|
$
|
0.15
|
|||||
- Diluted
(A)/(F)
|
$
|
0.14
|
$
|
0.32
|
$
|
0.08
|
$
|
0.15
|
|||||
Weighted
Average Shares Outstanding
|
|||||||||||||
- Basic
|
19,712,446
|
19,712,446
|
19,712,446
|
19,712,446
|
|||||||||
- Diluted
|
46,200,613
|
39,122,641
|
19,712,446
|
19,712,446
|
|||||||||
21.
|
OPERATING
SEGMENTS
|
Wuhan
|
Company,
|
||||||||||||
Wuhan
|
Generating
|
UFG,
|
|||||||||||
Blower
|
Equipment
|
Adjustments
|
Total
|
||||||||||
Sales
|
30,217,094
|
30,125,680
|
-
|
60,342,774
|
|||||||||
Cost
of Sales
|
18,678,246
|
21,832,961
|
-
|
40,511,207
|
|||||||||
Gross
Profit
|
11,538,848
|
8,292,719
|
-
|
19,831,567
|
|||||||||
Operating
Expenses
|
3,631,391
|
857,872
|
959,728
|
5,448,991
|
|||||||||
Other
Income (Expenses)
|
(680,629
|
)
|
(1,221
|
)
|
(1,111,191
|
) |
(1,793,042
|
)
|
|||||
Earnings
before Tax
|
7,226,827
|
7,433,625
|
(2,069,493
|
)
|
12,590,960
|
||||||||
Tax
|
-
|
-
|
-
|
-
|
|||||||||
Net
Income
|
7,226,827
|
7,433,625
|
(2,069,493
|
)
|
12,590,960
|
Wuhan
|
Company,
|
||||||||||||
Wuhan
|
Generating
|
UFG,
|
|||||||||||
Blower
|
Equipment
|
Adjustments
|
Total
|
||||||||||
Current
Assets
|
65,200,163
|
12,473,192
|
(11,843,746
|
)
|
65,829,609
|
||||||||
Non
Current Assets
|
21,411,087
|
9,163,497
|
-
|
30,574,584
|
|||||||||
Total
Assets
|
86,611,250
|
21,636,689
|
(11,843,746
|
)
|
96,404,193
|
||||||||
Current
Liabilities
|
59,429,942
|
7,469,875
|
(23,599,459
|
)
|
44,444,202
|
||||||||
Total
Liabilities
|
59,429,942
|
7,469,875
|
(23,599,459
|
)
|
44,444,202
|
||||||||
Net
Assets
|
27,181,308
|
14,166,815
|
10,611,868
|
51,959,991
|
|||||||||
Total
Liabilities & Net Assets
|
86,611,250
|
21,636,689
|
(11,843,748
|
)
|
96,404,193
|
22. |
CONTINGENCY
|
23. |
MAJOR
DEVELOPMENT IN SALES
|