x
|
ANNUAL
REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE
ACT OF 1934
|
o
|
TRANSITION
REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE
ACT OF 1934
|
Delaware
|
|
02-0563302
|
(State
or Other Jurisdiction of
incorporation
or organization)
|
|
(I.R.S.
Employer
Identification
No.)
|
Title
of each class
|
Name
of each exchange
on
which registered
|
|
None
|
|
Not
Applicable
|
|
Page
Number
|
|
PART I | ||
Item 1
|
5
|
|
Item 2
|
22
|
|
Item 3
|
22
|
|
Item 4
|
23
|
|
Item 5
|
23
|
|
Item 6
|
25
|
|
Item 7
|
34
|
|
Item 8
|
34
|
|
Item 8A
|
35
|
|
Item 8B
|
35
|
|
Item 9
|
35
|
|
Item 10
|
38
|
|
Item 11
|
40
|
|
Item 12
|
42
|
|
Item 13
|
43
|
|
Item 14
|
44
|
(1)
|
Participate
in government organization’s energy conservation and emission reduction
meetings. Through government or industry association to participate
in
government organized energy saving conferences to meet potential
energy
equipment suppliers and to establish relations with Chinese large
and
medium size high energy consumption enterprises to learn the energy
saving
needs of these enterprises. We will also participate directly in
the
consulting and reconstruction services of energy conservation projects
organized by government
bureaus.
|
(2)
|
Participate
directly in the bidding of customer projects to obtain energy saving
reconstruction contracts.
|
(3)
|
Use
commissions and agents system to obtain energy saving reconstruction
contracts.
|
·
|
intense
competition;
|
·
|
changes
in specifications required by our customers, plumbing codes and/or
regulatory agencies;
|
·
|
technically
complex products; and
|
·
|
constant
improvement to existing products and introductions of new
products.
|
a.
|
Implement
and improve our operational, financial and other systems, procedures
and
controls on a timely basis.
|
b.
|
Expand,
train and manage our workforce, particularly our sales and marketing
and
support organizations.
|
Year
Ended December 31, 2006:
|
High
|
Low
|
|||||
3/31/2006
|
$
|
10.50
|
$
|
6.30
|
|||
6/30/2006
|
$
|
5.60
|
$
|
3.50
|
|||
9/30/2006
|
$
|
2.45
|
$
|
2.45
|
|||
12/31/2006
|
$
|
0.51
|
$
|
0.51
|
|||
Year
Ended December 31, 2007:
|
High
|
Low
|
|||||
3/31/2007
|
$
|
0.51
|
$
|
0.51
|
|||
6/30/2007
|
$
|
0.75
|
$
|
0.51
|
|||
9/30/2007
|
$
|
0.51
|
$
|
0.2
|
|||
12/31/2007
|
$
|
0.65
|
$
|
0.25
|
|||
Year
Ended December 31, 2008:
|
High
|
Low
|
|||||
3/31/2008
|
$
|
0.60
|
$
|
.11
|
|||
1.
|
On
September 15, 2006, we consummated a private sale of 29,100,000
shares of our restricted common stock to Mr. Gang Li, pursuant to the
terms and conditions of a Subscription and Stock Purchase Agreement,
dated
September 5, 2006. The aggregate purchase price for the Shares was
$560,000 or approximately $.02 per
share.
|
2.
|
On
November 30, 2006, we issued the Neng Fa Shareholders 12,000,000
shares of
common stock of the Company in exchange for all of the shares of
capital
stock of Neng Fa owned by the Neng Fa shareholders, pursuant to Plan
of
Exchange, dated November 15, 2006.
|
3.
|
On
December 27, 2006, we issued 17,100,000 shares of our restricted
common
stock to existing shareholders in exchange for conversion of shareholders
loan in the amount of $4,240,506.
|
4.
|
On
August 8, 2007, we issued an additional 1,700,000 shares of our restricted
common stock to Mr. Gang Li, our President and Director for a purchase
price of $870,000.
|
Depreciable life
|
Residual value
|
||
Plant
and machinery
|
3 – 20
years
|
5%
|
|
Furniture,
fixture and equipment
|
5 – 8
years
|
5%
|
Year
Ended
|
Year
Ended
|
|
|||||||||||||||||
Dec.
31 2007
|
Dec.
31 2006
|
Change
|
|||||||||||||||||
Amount
|
% of Total
Revenues
|
Amount
|
% of Total
Revenues
|
Amount
|
%
change
|
||||||||||||||
REVENUES
|
|||||||||||||||||||
Products
|
$
|
6,224,114
|
60.21
|
%
|
$
|
4,787,915
|
90.87
|
%
|
$
|
1,436,199
|
30
|
%
|
|||||||
Service
|
2,037,053
|
19.71
|
%
|
481,098
|
9.13
|
%
|
1,555,955
|
323
|
%
|
||||||||||
Projects
|
2,075,282
|
20.08
|
%
|
-
|
-
|
2,075,282
|
-
|
||||||||||||
Total
Operating Revenues
|
$
|
10,336,449
|
100.00
|
%
|
$
|
5,269,013
|
100.00
|
%
|
$
|
5,067,436
|
96
|
%
|
Year Ended
|
Year Ended
|
|
|||||||||||||||||
Dec. 31 2007
|
Dec. 31 2006
|
Change
|
|||||||||||||||||
Amount
|
% of Total Cost
of Revenues
|
Amount
|
% of Total Cost
of Revenues
|
Amount
|
%
change
|
||||||||||||||
COST
OF REVENUES
|
|||||||||||||||||||
Cost
of Products
|
$
|
4,398,433
|
63.16
|
%
|
$
|
3,597,911
|
93.99
|
%
|
$
|
800,522
|
22
|
%
|
|||||||
Cost
of Service
|
1,530,116
|
21.97
|
%
|
229,915
|
6.01
|
%
|
1,300,201
|
566
|
%
|
||||||||||
Cost
of Projects
|
1,035,691
|
14.87
|
%
|
-
|
-
|
1,035,691
|
-
|
||||||||||||
Total
Cost of Revenues
|
$
|
6,964,240
|
100.00
|
%
|
$
|
3,827,826
|
100.00
|
%
|
$
|
3,136,414
|
82
|
%
|
Year Ended
|
|||||||||||||||||||||||||
December 31, 2007
|
|||||||||||||||||||||||||
Products
|
%
|
Service
|
%
|
Projects
|
%
|
Total
|
%
|
||||||||||||||||||
Revenues
|
$
|
6,224,114
|
100.00
|
%
|
$
|
2,037,053
|
100.00
|
%
|
$
|
2,075,282
|
100.00
|
%
|
$
|
10,336,449
|
100.00
|
%
|
|||||||||
Cost
of Revenues
|
4,398,433
|
70.67
|
%
|
1,530,116
|
75.11
|
%
|
1,035,691
|
49.91
|
%
|
6,964,240
|
67.38
|
%
|
|||||||||||||
Gross
Margin
|
$
|
1,825,681
|
29.33
|
%
|
$
|
506,937
|
24.89
|
%
|
$
|
1,039,591
|
50.09
|
%
|
$
|
3,372,209
|
32.62
|
%
|
|||||||||
|
Year Ended
|
||||||||||||||||||||||||
December 31, 2006
|
|||||||||||||||||||||||||
|
|
Products |
%
|
Service |
|
% |
Projects
|
|
%
|
Total |
|
%
|
|||||||||||||
Revenues
|
$
|
4,787,915
|
100.00
|
%
|
$
|
481,098
|
100.00
|
%
|
-
|
-
|
$
|
5,269,013
|
100.00
|
%
|
|||||||||||
Cost
of Revenues
|
3,597,911
|
75.15
|
%
|
229,915
|
47.79
|
%
|
-
|
-
|
3,827,826
|
72.65
|
%
|
||||||||||||||
Gross
Margin
|
$
|
1,190,004
|
24.85
|
%
|
$
|
251,183
|
52.21
|
%
|
-
|
-
|
$
|
1,441,187
|
27.35
|
%
|
Name
|
Age
|
Position
|
||
|
|
|
||
Gang
LI
|
54
|
Chairman,
Chief Executive Officer and President
|
||
Li
Hua WANG
|
47
|
Chief
Financial Officer and Director
|
||
Hong
LI
|
29
|
Director
|
· |
Honest
and ethical conduct, including the ethical handling of actual or
apparent
conflicts of interest between personal and professional
relationships
|
· |
Full,
fair, accurate, timely and understandable disclosure in reports
and
documents that a small business issuer files with, or submits to,
the
Commission and in other public communications made by the small
business
issuer
|
· |
Compliance
with applicable governmental laws, rules and
regulations
|
·
|
The
prompt internal reporting of violations of the code to an appropriate
person or persons identified in the
code
|
· |
Accountability
for adherence to the code
|
SUMMARY
COMPENSATION TABLE
|
||||||||||||||||||||||||||||
Name
and
principal position
(a)
|
Year
(b) |
|
Salary
($)
(c) |
|
Bonus
($)
(d)
|
|
Stock
Awards
($)
(e)
|
|
Option
Awards
($)
(f)
|
|
Nonequity
Incentive Plan Compensation
($)
(g)
|
|
Nonqualified
Deferred Compensation Earnings ($)
(h)
|
|
All
Other Compensation
($)
(i)
|
|
Total
($)
(j)
|
|||||||||||
Gang,LI
Chief
Executive
|
2007
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
|||||||||||||||||||
Officer
and President
|
2006
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
|||||||||||||||||||
Li
Hua, WANG
|
2007
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
|||||||||||||||||||
Chief Financial Officer |
2006
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
0
|
DIRECTOR
COMPENSATION
For
the year ended December 31, 2007
|
||||||||||||||||||||||
Name
(a)
|
|
Fees earned or
paid in cash
($)
(b)
|
|
Stock
Awards ($)
(c)
|
|
Option
Awards
($)
(d)
|
|
Non-equity
Incentive Plan Compensation ($)
(e)
|
|
Nonqualified
Deferred Compensation Earnings ($)
(f)
|
|
All
Other Compensation ($)
(g)
|
|
Total
($)
(h)
|
|
|||||||
Gang
LI
Chairman
|
_
|
_
|
_
|
_
|
_
|
_
|
_
|
|||||||||||||||
Li
Hua WANG
Director
|
_
|
_
|
_
|
_
|
_
|
_
|
_
|
|||||||||||||||
Hong
Li
Director
|
_
|
_
|
_
|
_
|
_
|
_
|
_
|
Title
of Class
|
Name
and Address
of
Beneficial Owner(s)
|
Amount and Nature
of Beneficial Ownership
|
Percent of class
|
|||||||
|
|
|
|
|||||||
Common
Stock
($.001
par value)
|
Pelaria
International Ltd. P.O. Box 957 Offshore Incorporations Centre Road Town, Tortola, British Virgin Islands |
19,991,429
|
60.17
|
%
|
||||||
Common
Stock
($.001
par value)
|
Cloverbay
International Ltd. P.O. Box 957 Offshore Incorporations Centre Road Town, Tortola, British Virgin Islands |
5,820,000
|
17.52
|
%
|
Title
of Class
|
Name
and Address
of
Beneficial Owner(s)
|
Amount and Nature
of
Beneficial
Ownership
|
Percent of class
|
|||||||
|
|
|
|
|||||||
Common
Stock
($.001
par value)
|
Gang,
Li
21-Jia
Bei Si Dong Road,
Tie
Xi Qu, Shenyang City
Liaoning
Province, P. R. China 110021
|
20,649,143
|
62.15
|
%
|
||||||
Common
Stock
($.001
par value)
|
Li
Hua, Wang
21-Jia
Bei Si Dong Road,
Tie
Xi Qu, Shenyang City
Liaoning
Province, P. R. China 110021
|
5,162,286
|
15.54
|
%
|
||||||
Common
Stock
($.001
par value)
|
All
officers and directors as a group (three persons)
|
|
25,811,429
|
77.69
|
%
|
(a)
|
On
February 8, 2006, the three individual owners of Neng Fa completed
an
asset transfer transaction with the Neng Fa whereby they agreed to
transfer $2,237,001 worth of plant and equipment to Neng Fa in exchange
for a shareholders loan. The term of the shareholders loan was interest
free, unsecured and repayable on
demand.
|
(b)
|
On
September 15, 2006, we consummated a private sale of 29,100,000
shares of our restricted common stock to Mr. Gang Li, pursuant to
the
terms and conditions of a Subscription and Stock Purchase Agreement,
dated
September 5, 2006. The aggregate purchase price for the Shares was
$560,000 or approximately $.02 per
share.
|
(c)
|
On
November 30, 2006, we issued Neng Fa Shareholders 12,000,000 shares
of
common stock of the Company in exchange for all of the shares of
capital
stock of Neng Fa owned by the Neng Fa shareholders, pursuant to Plan
of
Exchange, dated November 15, 2006.
|
(d)
|
On
December 27, 2006, we issued 17,100,000 shares of our restricted
common
stock to existing shareholders in exchange for conversion of shareholders
loan in the amount of $4,240,506.
|
(e)
|
On
August 8, 2007, pursuant to the terms and conditions of a Subscription
and
Stock Purchase Agreement, dated April 11, 2007, we consummated a
private
sale of 1,700,000 shares of our restricted common stock to Mr. Gang
Li,
our chairman, chief executive officer and president. The aggregate
purchase price for the Shares was $870,000 or approximately $.51
per
share. As a result of this transaction, Mr. Li owns approximately
60.2% of
the issued and outstanding shares of the Registrant’s Common
Stock.
|
(f)
|
On
January 10, 2008, Gang Li, NFES Chairman and CEO, and Lihua Wang,
NFES
Director and CFO, transferred an aggregate of 25,811,429 shares in
NFES
(the “Shares”) to Pelaria International Ltd. (“Pelaria”) and Cloverbay
International Limited (“Cloverbay”) for a total sales price of
$1,352,228.58. Pelaria and Cloverbay are wholly owned by Hong Kong
Nengfa
New Energy Development Co., Limited, which is a wholly-owned subsidiary
of
Liaoning Nengfa Weiye New Energy Application Co., Ltd. (“Weiye Energy”).
Weiye Energy is owned by Gang Li and Lihua Wang, each holding 80%
and 20%,
respectively.
|
Exhibit
Number
|
Description
|
Incorporated
by
Reference
to
|
||
2
|
Agreement
and Plan of Merger of City View, Inc., a Florida corporation and
Global
Broadcast Group, Inc., formerly known as Galli Process, Inc., a Delaware
corporation
|
Exhibits
with the corresponding numbers filed with our registration statement
on
Form 10-SB filed January 17, 2003.
(File
No. 000-50155).
|
||
3.1
|
Certificate
of Incorporation
|
Exhibits
with the corresponding numbers filed with our registration statement
on
Form 10-SB filed January 17, 2003.
(File
No. 000-50155).
|
||
3.2
|
Certificate
of Amendment
|
Exhibits
submitted with our registration statement on Form 10-SB filed January
17,
2003.
(File
No. 000-50155)
|
||
3.3
|
Authorization
to Transact Business in Florida
|
Exhibits
submitted with our registration statement on Form 10-SB filed January
17,
2003. (File No. 000-50155)
|
||
3.4
|
Bylaws
|
Exhibits
submitted with our registration statement on Form 10-SB filed January
17,
2003. (File No. 000-50155)
|
||
5
|
Opinion
and Consent of Adorno & Yoss, P.A
|
Exhibit
submitted with our Form SB-2, filed April 29, 2004.
(File
No. 333-114985)
|
||
23.1
|
Consent
of Rotenberg & Co. LLP
|
Exhibit
submitted with our Form SB-2, filed April 29, 2004.
(File
No. 333-114985)
|
||
23.2
|
Consent
of Adorno & Yoss
|
Exhibit
5 submitted with our registration statement on Form SB-2 filed on
May 11,
2004
(File
No. 222-50155)
|
||
32.2* | Section 1350 Certifications of Chief Financial Officer | |||
* Filed herewith |
Year
Ended December 31
|
2007
|
2006
|
|||||
Zhong
Yi
|
Zhong
Yi
|
||||||
Audit
Fees (1)
|
$
|
45,000
|
(3)
|
$
|
46,000
|
(2)
|
|
Audit-Related
Fees (4)
|
—
|
—
|
|||||
Tax
Fees (5)
|
—
|
||||||
All
Other Fees (6)
|
—
|
—
|
|||||
Total
Accounting Fees and Services
|
$
|
45,000
|
$
|
46,000
|
(1) |
Audit
Fees.
These are fees for professional services for the audit of the Company's
annual financial statements, and for the review of the financial
statements included in the Company's filings on Form 10-QSB, and
for
services that are normally provided in connection with statutory
and
regulatory filings or engagements.
|
(2)
|
The
amounts $46,000 shown for Zhong Yi in 2006 relate to (i) the audit
of the
Company's annual financial statements for the fiscal year ended December
31, 2006, and (ii) the review of the financial statements included
in the
Company's filings on Form 10-QSB for the first, second and third
quarters
of 2007.
|
(3) |
The
amounts $45,000 shown for Zhong Yi in 2007 relate to the audit of
the
Company's annual financial statements for the fiscal year ended December
31, 2007.
|
(4) |
Audit-Related
Fees.
These are fees for the assurance and related services reasonably
related
to the performance of the audit or the review of the Company's financial
statements.
|
(5) |
Tax
Fees.
These are fees for professional services with respect to tax compliance,
tax advice, and tax planning.
|
(6) |
All
Other Fees.
These are fees for permissible work that does not fall within any
of the
other fee categories, i.e., Audit Fees, Audit-Related Fees, or Tax
Fees.
|
|
NF
ENERGY SAVING CORPORATION OF AMERICA
|
|
Date:
March 28, 2008
|
|
/s/
Gang Li
|
|
Gang
Li
|
|
|
Chairman,
Chief Executive Officer and President
|
|
Date:
March 28, 2008
|
|
/s/
Li Hua Wang
|
|
Li
Hua Wang
|
|
|
Chief
Financial Officer and Director
|
|
Date:
March 28, 2008
|
|
/s/
Hong Li
|
|
Hong
Li
|
|
|
Director
|
Page
|
|
F-2
|
|
F-3
|
|
F-4
|
|
F-5
|
|
F-6
|
|
F-7 –
F- 23
|
Zhong
Yi (Hong Kong) C.P.A. Company Limited
|
2007
|
2006
|
||||||
ASSETS
|
|||||||
Current
assets:
|
|||||||
Cash
and cash equivalents
|
$
|
2,240,901
|
$
|
796,944
|
|||
Accounts
receivable, trade
|
4,061,352
|
1,398,031
|
|||||
Inventories
|
1,448,386
|
1,812,184
|
|||||
Prepayments
and other receivables
|
605,989
|
276,864
|
|||||
Total
current assets
|
8,356,628
|
4,284,023
|
|||||
Plant
and equipment, net
|
2,514,795
|
2,195,512
|
|||||
TOTAL
ASSETS
|
$
|
10,871,423
|
$
|
6,479,535
|
|||
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
|||||||
Current
liabilities:
|
|||||||
Accounts
payable, trade
|
$
|
1,259,081
|
$
|
676,898
|
|||
Customer
deposits
|
22,719
|
17,661
|
|||||
Income
tax payable
|
-
|
378,069
|
|||||
Value
added tax payable
|
70,604
|
25,871
|
|||||
Other
payables and accrued liabilities
|
355,390
|
153,256
|
|||||
Total
current liabilities
|
1,707,794
|
1,251,755
|
|||||
Stockholders’
equity:
|
|||||||
Common
stock, $0.001 par value; 50,000,000 shares authorized; issued
and
outstanding: 33,227,328 and 30,527,328 shares as of December
31, 2007 and
2006
|
33,227
|
30,527
|
|||||
Additional
paid-in capital
|
5,713,232
|
4,335,932
|
|||||
Statutory
reserve
|
517,774
|
115,139
|
|||||
Accumulated
other comprehensive income
|
557,503
|
70,360
|
|||||
Retained
earnings
|
2,341,893
|
675,822
|
|||||
Total
stockholders’ equity
|
9,163,629
|
5,227,780
|
|||||
TOTAL
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
$
|
10,871,423
|
$
|
6,479,535
|
Years
ended December 31,
|
|||||||
2007
|
2006
|
||||||
OPERATING
REVENUE:
|
|||||||
Products
|
$
|
6,224,114
|
$
|
4,787,915
|
|||
Service
|
2,037,053
|
481,098
|
|||||
Projects
|
2,075,282
|
-
|
|||||
Total
operating revenues
|
10,336,449
|
5,269,013
|
|||||
COST
OF REVENUES:
|
|||||||
Cost
of products
|
4,398,433
|
3,597,911
|
|||||
Cost
of service
|
1,530,116
|
229,915
|
|||||
Cost
of projects
|
1,035,691
|
-
|
|||||
Total
cost of revenues
|
6,964,240
|
3,827,826
|
|||||
GROSS
PROFIT
|
3,372,209
|
1,441,187
|
|||||
OPERATING
EXPENSES:
|
|||||||
Consulting
and professional fee
|
75,593
|
79,183
|
|||||
Sales
and marketing
|
36,092
|
-
|
|||||
Research
and development
|
370,633
|
-
|
|||||
General
and administrative
|
836,421
|
210,078
|
|||||
Total
operating expenses
|
1,318,739
|
289,261
|
|||||
INCOME
FROM OPERATIONS
|
2,053,470
|
1,151,926
|
|||||
OTHER
INCOME:
|
|||||||
Interest
income
|
5,127
|
1,623
|
|||||
Other
income
|
10,109
|
15,481
|
|||||
Total
other income
|
15,236
|
17,104
|
|||||
INCOME
BEFORE INCOME TAXES
|
2,068,706
|
1,169,030
|
|||||
Income
tax expenses
|
-
|
(378,069
|
)
|
||||
NET
INCOME
|
$
|
2,068,706
|
$
|
790,961
|
|||
Other
comprehensive income:
|
|||||||
-
Foreign currency translation gain
|
487,143
|
70,360
|
|||||
COMPREHENSIVE
INCOME
|
$
|
2,555,849
|
$
|
861,321
|
|||
Net
income per share – Basic and diluted
|
$
|
0.06
|
$
|
0.20
|
|||
Weighted
average number of shares outstanding during the year – Basic and
diluted
|
32,081,217
|
3,877,328
|
Years
ended December 31,
|
|
||||||
|
|
2007
|
|
2006
|
|||
Cash
flows from operating activities:
|
|||||||
Net
income
|
$
|
2,068,706
|
$
|
790,961
|
|||
Adjustments
to reconcile net income to net cash used in operating
activities
|
|||||||
Depreciation
|
270,188
|
188,613
|
|||||
Gain
on disposal of plant and equipment
|
(7,732
|
)
|
-
|
||||
Shares
issued for service rendered, non-cash
|
510,000
|
-
|
|||||
Change
in operating assets and liabilities:
|
|||||||
Accounts
receivable
|
(2,483,442
|
)
|
(1,398,031
|
)
|
|||
Inventories
|
471,229
|
(1,812,184
|
)
|
||||
Prepayments
and other receivables
|
(278,349
|
)
|
(276,864
|
)
|
|||
Accounts
payable
|
518,395
|
676,898
|
|||||
Customer
deposits
|
3,727
|
17,661
|
|||||
Income
tax payable
|
(396,900
|
)
|
378,069
|
||||
Value
added tax payable
|
41,554
|
25,871
|
|||||
Other
payables and accrued liabilities
|
59,219
|
153,256
|
|||||
Net
cash provided by (used in) operating activities
|
776,595
|
(1,255,750
|
)
|
||||
Cash
flows from investing activities:
|
|||||||
Purchase
of plant and equipment
|
(399,757
|
)
|
(16,125
|
)
|
|||
Proceeds
from disposal of plant and equipment
|
80,461
|
-
|
|||||
Net
cash used in investing activities
|
(319,296
|
)
|
(16,125
|
)
|
|||
Cash
flows from financing activities:
|
|||||||
Proceeds
from private placement
|
870,000
|
-
|
|||||
Proceeds
from and additions to shareholder loans
|
-
|
1,872,159
|
|||||
Capital
contribution from stockholders
|
-
|
124,370
|
|||||
Net
cash provided by financing activities
|
870,000
|
1,996,529
|
|||||
Foreign
currency translation adjustment
|
116,658
|
70,360
|
|||||
NET
CHANGE IN CASH AND CASH EQUIVALENTS
|
1,443,957
|
795,014
|
|||||
CASH
AND CASH EQUIVALENTS, BEGINNING OF YEAR
|
796,944
|
1,930
|
|||||
|
|||||||
CASH
AND CASH EQUIVALENTS, END OF YEAR
|
$
|
2,240,901
|
$
|
796,944
|
|||
SUPPLEMENTAL
DISCLOSURE OF CASH FLOW INFORMATION:
|
|||||||
Cash
paid for income taxes
|
$
|
396,900
|
$
|
-
|
|||
Cash
paid for interest expenses
|
$
|
-
|
$
|
-
|
|||
SUPPLEMENTAL
DISCLOSURE OF NON-CASH TRANSACTIONS:
|
|||||||
Plant
and equipment in exchange for loan due to owners
|
$
|
-
|
$
|
2,237,001
|
|||
Conversion
of debt-to-equity
|
$
|
-
|
$
|
4,240,506
|
Common stock
|
|
|||||||||||||||||||||
No. of shares
|
Amount
|
Additional
paid-in capital
|
|
Accumulated
other
comprehensive
income
|
|
Statutory
reserve
|
|
Retained
earnings
|
|
Total
stockholders’ equity |
||||||||||||
Balance
as of January 1, 2006
|
1,427,328
|
$
|
1,427
|
$
|
2,040,885
|
$
|
-
|
$
|
-
|
$
|
(2,040,729
|
)
|
$
|
1,583
|
||||||||
Issuance
of new shares in reverse acquisition
|
12,000,000
|
12,000
|
112,370
|
-
|
-
|
-
|
124,370
|
|||||||||||||||
Recapitalization
|
-
|
-
|
(2,040,729
|
)
|
-
|
-
|
2,040,729
|
-
|
||||||||||||||
Conversion
of debt-to-equity
|
17,100,000
|
17,100
|
4,223,406
|
-
|
-
|
-
|
4,240,506
|
|||||||||||||||
Foreign
currency transactions adjustment
|
-
|
-
|
-
|
70,360
|
-
|
-
|
70,360
|
|||||||||||||||
Net
income for the year
|
-
|
-
|
-
|
-
|
-
|
790,961
|
790,961
|
|||||||||||||||
Transfer
of retained earnings to statutory reserve
|
-
|
-
|
-
|
-
|
115,139
|
(115,139
|
)
|
-
|
||||||||||||||
Balance
as of December 31, 2006
|
30,527,328
|
$
|
30,527
|
$
|
4,335,932
|
$
|
70,360
|
$
|
115,139
|
$
|
675,822
|
$
|
5,227,780
|
|||||||||
Shares
issued for service rendered
|
1,000,000
|
1,000
|
509,000
|
-
|
-
|
-
|
510,000
|
|||||||||||||||
Shares
issued for private placement
|
1,700,000
|
1,700
|
868,300
|
-
|
-
|
-
|
870,000
|
|||||||||||||||
Foreign
currency translation adjustment
|
-
|
-
|
-
|
487,143
|
-
|
-
|
487,143
|
|||||||||||||||
Net
income for the year
|
-
|
-
|
-
|
-
|
-
|
2,068,706
|
2,068,706
|
|||||||||||||||
Transfer
of retained earnings to statutory reserve
|
-
|
-
|
-
|
-
|
402,635
|
(402,635
|
)
|
-
|
||||||||||||||
|
||||||||||||||||||||||
Balance
as of December 31, 2007
|
33,227,328
|
$
|
33,227
|
$
|
5,713,232
|
$
|
557,503
|
$
|
517,774
|
$
|
2,341,893
|
$
|
9,163,629
|
NOTE - 1 |
ORGANIZATION
AND BUSINESS BACKGROUND
|
NOTE - 2 |
SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES
|
l |
Basis
of presentation
|
l |
Use
of estimates
|
l |
Basis
of consolidation
|
l |
Cash
and cash equivalents
|
l |
Accounts
receivable
|
l |
Inventories
|
l |
Plant
and equipment, net
|
Depreciable life
|
Residual value
|
||||||
Plant
and machinery
|
3
– 20 years
|
5%
|
|
||||
Furniture,
fixture and equipment
|
5
– 8 years
|
5%
|
|
l |
Construction
in progress
|
l |
Impairment
of long-lived assets
|
l |
Revenue
recognition
|
(a) |
Sale
of products
|
(b) |
Service
revenue
|
(c) |
Project
revenue
|
(d) |
Interest
income
|
l |
Cost
of revenues
|
l |
Advertising
costs
|
l |
Research
and development
|
l |
Stock-based
compensation
|
l |
Retirement
plan costs
|
l |
Income
taxes
|
l |
Net
income per share
|
l |
Comprehensive
income
|
l |
Product
warranty
|
l |
Foreign
currencies translation
|
2007
|
2006
|
||||||
Months
end RMB:US$ exchange rate
|
7.3141
|
7.9051
|
|||||
Average
monthly RMB:US$ exchange rate
|
7.5633
|
7.9913
|
l |
Related
parties
|
l |
Segment
reporting
|
l |
Fair
value of financial instruments
|
l |
Recently
issued accounting
pronouncements
|
NOTE - 3 |
ACCOUNTS
RECEIVABLE, TRADE
|
NOTE - 4 |
INVENTORIES
|
December
31,
|
|||||||
2007
|
2006
|
||||||
Raw
materials
|
$
|
310,040
|
$
|
269,759
|
|||
Work-in-process
|
734,711
|
701,206
|
|||||
Finished
goods
|
403,635
|
841,219
|
|||||
$
|
1,448,386
|
$
|
1,812,184
|
NOTE - 5 |
PREPAYMENTS
AND OTHER RECEIVABLES
|
December
31,
|
|||||||
2007
|
2006
|
||||||
Prepayment
to vendors for raw materials
|
$
|
558,047
|
$
|
-
|
|||
Prepayment
to equipment vendors
|
-
|
266,183
|
|||||
Prepaid
expenses
|
25,874
|
-
|
|||||
Value
added tax receivable
|
12,537
|
-
|
|||||
Advances
to staff
|
9,531
|
10,681
|
|||||
$
|
605,989
|
$
|
276,864
|
NOTE - 6 |
PLANT
AND EQUIPMENT, NET
|
December
31,
|
|||||||
2007
|
2006
|
||||||
Plant
and machinery
|
$
|
2,566,042
|
$
|
2,351,240
|
|||
Furniture,
fixture and equipment
|
33,968
|
32,885
|
|||||
Construction
in progress
|
223,029
|
-
|
|||||
Foreign
translation difference
|
162,460
|
-
|
|||||
2,985,499
|
2,384,125
|
||||||
Less:
accumulated depreciation
|
(448,981
|
)
|
(188,613
|
)
|
|||
Less:
foreign translation difference
|
(21,723
|
)
|
-
|
||||
Plant
and equipment, net
|
$
|
2,514,795
|
$
|
2,195,512
|
NOTE - 7 |
OTHER
PAYABLES AND ACCRUED
LIABILITIES
|
December
31,
|
|||||||
2007
|
2006
|
||||||
Rent
payable
|
$
|
37,599
|
$
|
35,200
|
|||
Government
levies payable
|
-
|
7,295
|
|||||
Welfare
payable
|
108,125
|
59,495
|
|||||
Accrued
expenses
|
74,576
|
51,266
|
|||||
Payable
to equipment vendors
|
135,090
|
-
|
|||||
$
|
355,390
|
$
|
153,256
|
NOTE - 8 |
INCOME
TAXES
|
Years
ended December 31,
|
|||||||
2007
|
2006
|
||||||
Tax
jurisdictions:
|
|||||||
Loss
subject to U.S. operation
|
$
|
(574,989
|
)
|
$
|
(9,662
|
)
|
|
Income
subject to the PRC operation
|
2,643,695
|
1,178,692
|
|||||
Income
before income taxes
|
$
|
2,068,706
|
$
|
1,169,030
|
Years
ended December 31,
|
|||||||
2007
|
2006
|
||||||
Income
before income taxes from PRC operation
|
$
|
2,643,695
|
$
|
1,178,692
|
|||
Statutory
income tax rate
|
33
|
%
|
33
|
%
|
|||
872,419
|
388,968
|
||||||
Effect
from tax holiday
|
(859,327
|
)
|
-
|
||||
Tax
effect of expenses not deductible for tax purposes:
|
|||||||
-
Provisions
|
(13,092
|
)
|
(10,899
|
)
|
|||
Income
tax expense
|
$
|
-
|
$
|
378,069
|
December
31,
|
|||||||
2007
|
2006
|
||||||
Deferred
tax assets:
|
|||||||
-
Net operating loss carried forward
|
$
|
204,628
|
$
|
3,382
|
|||
-
Accrued liabilities
|
13,092
|
10,899
|
|||||
|
|
217,720
|
14,281
|
||||
Less:
valuation allowance
|
(217,720
|
)
|
(14,281
|
)
|
|||
Deferred
tax assets
|
$
|
-
|
$
|
-
|
NOTE - 9 |
NET
INCOME PER SHARE
|
Years
ended December 31,
|
|||||||
2007
|
2006
|
||||||
Basis
and diluted net income per share calculation
|
|||||||
Numerator:
|
|||||||
-
Net income in computing basic and diluted net income per
share
|
$
|
2,068,706
|
$
|
790,961
|
|||
Denominator:
|
|||||||
-
Weighted average ordinary shares outstanding
|
29,381,217
|
2,181,365
|
|||||
-
Stock issued for debt-to-equity conversion
|
-
|
1,695,963
|
|||||
-
Stock issued for private placement
|
1,700,000
|
-
|
|||||
-
Stock issued for service rendered
|
1,000,000
|
-
|
|||||
Shares
used in computing basic and diluted net income per share
|
32,081,217
|
3,877,328
|
|||||
Basic
and diluted net income per share
|
$
|
0.06
|
$
|
0.20
|
NOTE - 10 |
STOCK-BASED
COMPENSATION
|
NOTE - 11 |
CAPITAL
TRANSACTION
|
NOTE - 12 |
CHINA
CONTRIBUTION PLAN
|
NOTE - 13 |
STATUTORY
RESERVES
|
NOTE - 14 |
SEGMENT
INFORMATION
|
Valves
manufacturing business
|
Energy-saving
related business
|
Total
|
||||||||
Operating
revenues
|
||||||||||
-
Products
|
$
|
6,224,114
|
$
|
-
|
$
|
6,224,114
|
||||
-
Services
|
-
|
2,037,053
|
2,037,053
|
|||||||
-
Projects
|
-
|
2,075,282
|
2,075,282
|
|||||||
Total
operating revenues
|
6,224,114
|
4,112,335
|
10,336,449
|
|||||||
Cost
of revenues
|
(4,398,433
|
)
|
(2,565,807
|
)
|
(6,964,240
|
)
|
||||
Gross
profit
|
1,825,681
|
1,546,528
|
3,372,209
|
|||||||
Depreciation
|
170,644
|
99,544
|
270,188
|
|||||||
Net
income
|
893,318
|
1,175,388
|
2,068,706
|
|||||||
Long-lived
assets
|
1,588,279
|
926,516
|
2,514,795
|
|||||||
Capital
expenditure
|
$
|
252,476
|
$
|
147,281
|
$
|
399,757
|
Valves
manufacturing business
|
Energy-saving
related business
|
Total
|
||||||||
Operating
revenues
|
||||||||||
-
Products
|
$
|
4,787,915
|
$
|
-
|
$
|
4,787,915
|
||||
-
Services
|
-
|
481,098
|
481,098
|
|||||||
Total
operating revenues
|
4,787,915
|
481,098
|
5,269,013
|
|||||||
Cost
of revenues
|
(3,597,911
|
)
|
(229,915
|
)
|
(3,827,826
|
)
|
||||
Gross
profit
|
1,190,004
|
251,183
|
1,441,187
|
|||||||
Depreciation
|
177,296
|
11,317
|
188,613
|
|||||||
Net
income
|
703,955
|
87,006
|
790,961
|
|||||||
Long-lived
assets
|
2,063,641
|
131,871
|
2,195,512
|
|||||||
Capital
expenditure
|
$
|
15,158
|
$
|
967
|
$
|
16,125
|
NOTE - 15 |
CONCENTRATION
AND RISK
|
(a) |
Major
customers and vendors
|
Customers
|
Revenues
|
Percentage
of revenues
|
Accounts
receivable, trade
|
|||||||||
Customer
A
|
$
|
4,536,777
|
43
|
% |
$
|
1,351,567
|
||||||
Customer
B
|
1,113,225
|
11
|
% |
619,673
|
||||||||
Total:
|
$
|
5,650,002
|
54
|
% |
Total:
|
$
|
1,971,240
|
|||||
Vendors
|
Purchases
|
Percentage
of
purchases
|
Accounts
payable
|
|||||||||
Vendor
A
|
$
|
2,258,473
|
32
|
% |
$
|
45,542
|
Customers
|
Revenues
|
Percentage
of revenues
|
Accounts
receivable, trade
|
|||||||||
Customer
A
|
$
|
2,971,183
|
56
|
% |
$
|
192,775
|
||||||
Customer
C
|
617,823
|
12
|
% |
141,992
|
||||||||
Customer
D
|
1,298,102
|
25
|
% |
958,721
|
||||||||
Total:
|
$
|
4,887,108
|
93
|
% |
Total:
|
$
|
1,293,488
|
|||||
Vendors
|
Purchases
|
Percentage
of purchases
|
Accounts
payable
|
|||||||||
|
||||||||||||
Vendor
A
|
$
|
2,277,489
|
59
|
% |
$
|
135,347
|
(b) |
Credit
risk
|
(c) |
Exchange
rate risk
|
NOTE - 16 |
COMMITMENT
AND CONTINGENCIES
|
(a)
|
Operating
lease commitment
|
(b)
|
Capital
commitment
|
(c)
|
Litigation
|
NOTE - 17 |
SUBSEQUENT
EVENTS
|