10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2012

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____________________________ to _____________________________

Commission File Number: 000-53283

CHINA ENERGY RECOVERY, INC.

(Exact Name of Registrant as Specified in Its Charter)

Delaware	90-0459730
(State or Other Jurisdiction of	(I.R.S. Employer
Incorporation or Organization)	Identification No.)

Building#26, No. 1388 Zhangdong Road,
Zhangjiang Hi-tech Park
Shanghai, China	201203
(Address of Principal Executive Offices)	(Zip Code)

+86 (0)21 2028-1866

(Registrant's Telephone Number, Including Area Code)

(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x    No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer," and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer     ¨	Accelerated filer       ¨
Non-accelerated filer       ¨	Smaller reporting company     x

(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x     No¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨    No x

Number of shares outstanding of the registrant's common stock as of October 31, 2012:

31,072,061 shares of Common Stock, $0.001 par value per share

TABLE OF CONTENTS

			Page
Part I		Financial Information
	Item 1.	Unaudited Consolidated Financial Statements	3
		Consolidated Balance Sheets as of December 31, 2011 and September 30, 2012	3
		Consolidated Statements of Operations and Other Comprehensive Income for the Three and Nine Months Ended September 30, 2011 and 2012	4
		Consolidated Statements of Shareholders' Equity for the Year ended December 31,2011 and Nine Months Ended September 30, 2012	5
		Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2011 and 2012	6
		Notes to the Consolidated Financial Statements	7
	Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	45
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	63
	Item 4.	Controls and Procedures	64
Part II		Other Information
	Item 1.	Legal Proceedings	64
	Item 1A.	Risk Factors	64
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	64
	Item 3.	Defaults Upon Senior Securities	65
	Item 4.	Mine Safety Disclosures	65
	Item 5.	Other Information	65
	Item 6.	Exhibits	65

2

PART I

FINANCIAL INFORMATION

Item 1. Unaudited Consolidated Financial Statements

CHINA ENERGY RECOVERY, INC.  AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

AS OF DECEMBER 31, 2011 AND SEPTEMBER 30, 2012

(UNAUDITED)

	December 31,			September 30,
	2011			2012
ASSETS
CURRENT ASSETS:
Cash	$	3,579,446		$	1,326,939
Restricted cash		882,428			1,286,393
Notes receivable		1,779,233			978,352
Accounts receivable, net - third parties		11,639,138			11,465,468
Accounts receivable, net - related party		9,088,157			11,445,785
Inventories, net		14,678,312			9,543,298
Other current assets and receivables		333,376			1,079,160
Advances on purchases		21,276,652			11,217,899
Short-term investment		79,355			-
Total current assets		63,336,097			48,343,294
NON-CURRENT ASSETS:
Property, plant, and equipment, net		26,159,602			28,589,900
Deferred tax assets		621,940			474,080
Intangible assets		4,999,883			4,920,226
Long term accounts receivable, net - third parties		-			4,736,633
Long term accounts receivable, net - related party		-			2,951,128
Total non-current assets		31,781,425			41,671,967
Total Assets	$	95,117,522		$	90,015,261
CURRENT LIABILITIES:
Accounts payable	$	21,625,205		$	26,234,629
Notes payable		1,396,648			2,641,254
Accrued expenses and other liabilities		1,269,950			2,964,225
Advances from customers		42,742,078			21,894,241
Taxes payable		1,220,334			3,531,053
Long term loan, current portion		4,850,945			5,000,000
Short term loans		14,388,649			17,331,836
Derivative liability, current		21,274			-
Total current liabilities		87,515,083			79,597,238
NON-CURRENT LIABILITIES:
Warrant liability		22,806			8,188
Deferred revenue		89,068			154,273
Total non-current liabilities		111,874			162,461
Total Liabilities		87,626,957			79,759,699
SHAREHOLDERS' EQUITY:
Preferred stock($0.001 par value; 50,000,000 shares authorized, 200,000 shares issued and outstanding as of both December 31, 2011 and September 30, 2012)		189			189
Common stock($0.001 par value; 100,000,000 shares authorized, 31,085,859 and 31,085,859 shares issued and outstanding as of December 31, 2011 and September 30, 2012, respectively)		31,085			31,085
Treasury stock(Nil and 13,232 shares repurchased as of December 31, 2011 and September 30, 2012, respectively)		-			(5,024	)
Additional paid-in-capital		8,758,236			8,779,436
Accumulated deficit		(3,094,667	)		(466,542	)
Statutory reserves		509,596			509,596
Accumulated other comprehensive income		1,286,126			1,406,822
Total shareholders' equity		7,490,565			10,255,562
Total liabilities and shareholders' equity	$	95,117,522		$	90,015,261

The accompanying notes are an integral part of these unaudited consolidated financial statements.

3

CHINA ENERGY RECOVERY, INC.  AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND OTHER COMPREHENSIVE INCOME

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2011 AND 2012

(UNAUDITED)

	Three months ended September 30,						Nine months ended September 30,
	2011			2012			2011			2012
	(Note 2(v))						(Note 2(v))
REVENUES
Third parties:
Engineering, procurement, and construction - third parties	$	16,600,366		$	16,758,871		$	23,265,280		$	59,901,966
Engineering, procurement, and construction - related party (Note 16)		10,563,393			12,672			23,631,431			6,660,158
Total EPC revenues		27,163,759			16,771,543			46,896,711			66,562,124
Products - third parties		2,222,699			4,176,683			8,139,632			9,940,102
Total revenue		29,386,458			20,948,226			55,036,343			76,502,226
COST OF REVENUES
Cost of revenues – EPC (Note 16)		(22,691,015	)		(13,736,857	)		(39,309,553	)		(57,508,410	)
Cost of revenues - products		(1,607,384	)		(2,930,514	)		(6,257,642	)		(7,196,772	)
Total cost of revenues		(24,298,399	)		(16,667,371	)		(45,567,195	)		(64,705,182	)
GROSS PROFIT		5,088,059			4,280,855			9,469,148			11,797,044
Selling, general, and administrative expenses		(2,490,222	)		(2,650,738	)		(6,366,370	)		(7,336,024	)
INCOME FROM  OPERATIONS		2,597,837			1,630,117			3,102,778			4,461,020
OTHER INCOME (EXPENSE):
Change in fair value of derivative liability for warrant		248,332			(4,651	)		1,164,122			14,618
Change in fair value of derivative liability for loan		72,764			-			396,482			21,274
Other non-operating income/(expenses), net		330,541			(72,617	)		(73,586	)		259,476
Investment income		-			-			-			2,972
Interest expense, net		(370,400	)		(56,703	)		(1,345,664	)		(586,523	)
Total other income (expense), net		281,237			(133,971	)		141,354			(288,183	)
INCOME BEFORE INCOME TAXES		2,879,074			1,496,146			3,244,132			4,172,837
Income Tax Expense		(600,661	)		(595,527	)		(580,566	)		(1,544,712	)
NET INCOME		2,278,413			900,619			2,663,566			2,628,125
OTHER COMPREHENSIVE INCOME/(LOSS):
Foreign currency translation adjustment		458,788			344,248			766,370			120,696
COMPREHENSIVE INCOME	$	2,737,201		$	1,244,867		$	3,429,936		$	2,748,821
INCOME PER SHARE:
Basic	$	0.07		$	0.03		$	0.09		$	0.08
Diluted	$	0.07		$	0.03		$	0.09		$	0.08
WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic		31,085,859			31,078,083			31,015,385			31,082,790
Diluted		31,102,815			31,078,083			31,032,341			31,082,790

The accompanying notes are an integral part of these unaudited consolidated financial statements.

4

CHINA ENERGY RECOVERY, INC.  AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

(UNAUDITED)

	Preferred Stock				Common stock				Treasury Stock						Additional paid-in		Statutory		Accumulated			Accumulated other comprehensive
	Shares		Amount		Shares		Amount		Shares			Amount			capital		reserves		deficit			income/(loss)		Total
																			(Note 2(v))			(Note 2(v))
Balance at December 31, 2010		200,000		189		30,906,266		30,906		-			-			8,313,385		132,802		(4,713,541	)		410,646		4,174,387
Common stock issued for consulting services		-		-		50,385		50		-			-			40,258		-		-			-		40,308
Restricted common stock issued related to long-term loan		-		-		129,208		129		-			-			144,369		-		-			-		144,498
Stock based compensation		-		-		-		-		-			-			260,224		-		-			-		260,224
Net income		-		-		-		-		-			-			-		-		1,995,668			-		1,995,668
Appropriations to statutory reserves		-		-		-		-		-			-			-		376,794		(376,794	)		-		-
Foreign currency translation adjustment		-		-		-		-		-			-			-		-		-			875,480		875,480
										-			-
Balance at December 31, 2011		200,000		189		31,085,859		31,085		-			-			8,758,236		509,596		(3,094,667	)		1,286,126		7,490,565
Stock based compensation		-		-		-		-		-			-			21,200		-		-			-		21,200
Net income		-		-		-		-		-			-			-		-		2,628,125			-		2,628,125
Foreign currency translation adjustment		-		-		-		-		-			-			-		-		-			120,696		120,696
Repurchase of common stock		-		-		-		-		(13,232	)		(5,024	)		-		-		-			-		(5,024	)
Balance at September 30, 2012		200,000	$	189		31,085,859	$	31,085		(13,232	)		(5,024	)		8,779,436		509,596		(466,542	)		1,406,822		10,255,562

The accompanying notes are an integral part of these unaudited consolidated financial statements.

5

CHINA ENERGY RECOVERY, INC.  AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2011 AND 2012

(UNAUDITED)

	Nine months ended September 30,
	2011			2012
	(Note 2(v))
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	2,663,566		$	2,628,125
Adjustments to reconcile to cash provided by (used in) operating activities:
Depreciation and amortization		1,014,085			1,316,887
Loss on disposal of fixed assets		52,732
Discount reflected in revenue for payment extensions on long-term accounts receivable (Note 3)		-			1,703,369
Interest income – long term accounts receivable accretion (Note 3)		-			(911,283	)
(Gain on reversal of) charge to allowance for doubtful accounts		(37,624	)		106,907
Provision for inventories		26,621			-
Stock based compensation		253,158			21,200
Common stock for consulting services		40,308			-
Common stock issued to settle exchange rate loss related to long-term loan		144,498			-
(Gain) loss from changes in fair value of warrant and derivative liabilities		(1,560,604	)		(35,892	)
Accretion to face value on loan		198,584			149,055
Amortization of deferred financing cost		215,623			-
Cancellation of warrants		(15,547	)		-
Capitalized interest		(6,829	)		(55,382	)
Debt issue cost		-			7,747
Deferred tax benefit		(344,079	)		147,860
Changes in operating assets and liabilities:
Notes receivable		(213,108	)		800,881
Accounts receivable - third parties		(586,722	)		61,721
Accounts receivable - related party		(7,063,336	)		(2,357,628	)
Inventories		(5,230,423	)		5,135,995
Other receivables		682,203			(745,784	)
Advances on purchases		(21,062,854	)		10,058,753
Long term accounts receivable - related party		4,679,121			(3,993,404	)
Long term accounts receivable - third parties		-			(4,486,443	)
Accounts payable		9,344,972			5,571,893
Notes payable		-			1,244,606
Other payables and accrued liabilities		(902,707	)		1,694,275
Advances from customers		23,066,390			(20,847,837	)
Taxes payable		(1,235,278	)		2,310,719
Deferred revenue		-			65,205
Effects of exchange rate change in operating activities		914,029			55,631
Net cash provided by (used in) operating activities		5,036,779			(352,824	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant, and equipment		(9,011,203	)		(4,469,407	)
Purchase of intangible assets		(2,465,073	)		(37,366	)
Change in restricted cash		112,040			(403,965	)
Proceeds from disposal of property, plant, and equipment		24,863			-
Cash proceeds from short term investment		-			79,355
Net cash used in investing activities		(11,339,373	)		(4,831,383	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of long term loans		(3,259,843	)		-
Cash proceeds from short term loans		14,477,210			18,195,858
Repayment of short term loans		(1,162,700	)		(15,260,418	)
Acquisition of treasury stock		-			(5,024	)
Net cash provided by financing activities		10,054,667			2,930,416
EFFECTS OF EXCHANGE RATE CHANGES ON CASH		54,470			1,284
INCREASE (DECREASE) IN CASH		3,806,543			(2,252,507	)
CASH, beginning balance	$	2,996,076		$	3,579,446
CASH, ending balance	$	6,802,619		$	1,326,939
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for income taxes		506,692			403,256
Cash paid for interest		1,123,589			836,389
Supplemental schedule of non-cash investing and financing activities:
Common stock for consulting services		40,308			-
Common stock issued to settle exchange rate loss related to long-term loan		144,498			-
Accounts payable relating to purchase of buildings and equipment		5,191,982			-

The accompanying notes are an integral part of these unaudited consolidated financial statements.

6

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Note 1 – Organization and Basis of Presentation

China Energy Recovery, Inc. ("CER" or the "Company"), formerly known as MMA Media Inc. and Commerce Development Corporation Ltd., was incorporated under the laws of the State of Maryland in May, 1998. On February 5, 2008, the Company changed its name to China Energy Recovery, Inc. On January 24, 2008, the Company entered into a Share Exchange Agreement with Poise Profit International, Ltd. ("Poise Profit"), a company incorporated on November 23, 2007, under the laws of the British Virgin Islands, and the shareholders of Poise Profit. Pursuant to the Share Exchange Agreement, the Company agreed to acquire all of the issued and outstanding shares of Poise Profit's common stock in exchange for the issuance of 20,757,090 shares, or 81.5% of the Company's common stock on a post 1-for-2 reverse stock split basis, to the shareholders of Poise Profit. The share exchange transaction (the "Share Exchange") was consummated on April 15, 2008 and Poise Profit became a wholly-owned subsidiary of the Company. On April 16, 2008, the Company conducted a 1-for-2 reverse stock split pursuant to which each two shares of CER's common stock, issued and outstanding on the record date of April 15, 2008, converted into one share of CER's common stock.

Poise Profit is an off-shore holding company and has no operating business activities. Poise Profit owns 100% of HAIE Hi-tech Engineering (Hong Kong) Company, Limited ("Hi-tech") and CER (Hong Kong) Holdings Limited (“CER Hong Kong”), which were incorporated in Hong Kong on January 4, 2002 and August 13, 2008, respectively.

In order to restructure the holding structure of the Company, on December 2, 2008, 100% of the shares of CER Hong Kong were transferred to Poise Profit from Mr. Qinghuan Wu, the Company’s Chairman and Chief Executive Officer, and his wife, Mrs. Jialing Zhou, and all the contracts between Hi-tech and Shanghai Engineering were transferred to CER Hong Kong. Thereafter, CER Hong Kong, through its wholly owned subsidiaries and a consolidated variable interest entity (Shanghai Engineering) located in the People's Republic of China ("PRC"), designs, develops, manufactures and markets waste heat boilers and pressure vessels in the fields of chemical industry, petrochemical industry, oil refining, fine chemicals, water and power conservancy, metallurgical industry, environmental protection, waste heat utilization ,and power generation from waste heat recovery.

On November 11, 2008, CER Energy Recovery (Shanghai) Co., Ltd. (“CER Shanghai”) was incorporated in Shanghai by CER Hong Kong. CER Shanghai’s registered capital is $5,000,000. As of December 31, 2010, CER Hong Kong had contributed all the registered capital. CER Shanghai is mainly engaged in the development of energy recovery and environmental protection technologies, and design, installation and servicing of waste heat recovery systems.

CER Energy Recovery (Yangzhou) Co., Ltd. (“CER Yangzhou”) was incorporated on August 28, 2009 in Yangzhou by CER Hong Kong. CER Yangzhou’s registered capital is $20,000,000. As of December 31, 2011, CER Hong Kong had contributed all the registered capital. CER Yangzhou is mainly engaged in the development and manufacturing of waste heat recovery systems and other related energy efficiency equipment.

On July 2, 2012, CER Hong Kong and CER Shanghai entered into a share transfer agreement, whereby all of CER Hong Kong’s equity interests in CER Yangzhou were transferred to CER Shanghai. This share transfer is intended to change CER Yangzhou’s entity from foreign capital to domestic capital, so as to make it more competitive in the domestic Chinese economy. As a result of the reorganization, all of CER Hong Kong’s equity interests in CER Yangzhou were transferred to CER Shanghai. As the reorganization was under common control of the Company, except for income tax for the intra-entity sales of the subsidiary’s shares, it will not have a material impact on the Company’s consolidated financial position or results of operations of the Company or its subsidiaries in any material respect. The reorganization was completed on August 21, 2012 and income taxes of $206,147 for the intra-entity sales of the subsidiary’s shares were recorded in the consolidated statement of operation as of September 30, 2012.

7

CER, Poise Profit, CER Hong Kong, Hi-tech, Shanghai Engineering, CER Shanghai, and CER Yangzhou are collectively hereinafter referred to as the “Group”.

The basis of presentation for the Group’s financial statements is accounting principles generally accepted in the United States of America (U.S. GAAP) and the reporting currency is the U.S. dollar.

The accompanying financial statements have been prepared assuming the Group will continue as a going concern. However, as of September 30, 2012, the Group reported a negative working capital balance of $31.3 million and had negative operating cash flows of $0.4 million for the nine months ended September 30, 2012. The Group expects such negative working capital to continue into the foreseeable future and will need to obtain new sales orders and additional financing to fund its daily operations. These factors raise substantial doubt about the Group’s ability to continue as a going concern. In order to continue its operations, the Group must obtain additional sales orders to achieve profitable operations, raise more funds, and/or curtail its capital expenditures. The Group implemented plans to postpone spending for capital expenditures and has been and continues to be in negotiations with several domestic banks in China and state-owned companies for additional financing. There can be no assurance, however, that such financing will be successfully completed or completed on terms acceptable to the Group. The Group’s plans of operations, even if successful, may not result in cash flow sufficient to finance and maintain its business. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. Please refer to Note 7 – Short Term Loans for additional information. 

Note 2 – Summary of Significant Accounting Policies

The accompanying unaudited interim consolidated financial statements as of September 30, 2012 and for the three and nine months ended September 30, 2012 and 2011 have been prepared by the Company, in accordance with generally accepted accounting principles, or GAAP, for interim financial reports and the instructions for Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, certain information and footnote disclosures normally included in financial statements prepared under generally accepted accounting principles have been condensed or omitted pursuant to such regulations. In the opinion of the Company’s management, the unaudited interim consolidated financial statements include all adjustments, consisting of normal recurring adjustments, necessary for a fair statement of the Company’s financial position, results of operations and cash flows. The results of operations for the three and nine months ended September 30, 2012 are not necessarily indicative of the results of operations for the year ending December 31, 2012. The balance sheet at December 31, 2011 has been derived from the audited consolidated financial statements at that date. The unaudited interim financial statements and footnotes do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements.

The principal accounting policies adopted in the preparation of these consolidated financial statements are set out below:

(a) Principle of consolidation

The accompanying consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“US GAAP”). The consolidated financial statements include the financial statements of the Company, its wholly-owned subsidiaries Poise Profit, CER Hong Kong, Hi-tech, CER Shanghai, and CER Yangzhou; and its variable interest entity (“VIE”) Shanghai Engineering. All significant inter-company transactions and balances among the Company, its subsidiaries and VIE are eliminated upon consolidation.

In accordance with U.S. GAAP, variable interest entities are generally entities that lack sufficient equity to finance their activities without additional financial support from other parties or whose equity holders lack adequate decision making ability. Each variable interest entity with which the Company is affiliated must be evaluated to determine who the primary beneficiary of the risks and rewards of ownership of the variable interest entity. The primary beneficiary is required to consolidate the variable interest entity's financial information for financial reporting purposes.

Management has concluded that Shanghai Engineering is a variable interest entity and that CER Hong Kong is the primary beneficiary thereof. Pursuant to the contractual arrangements described elsewhere in this filing on Form 10-Q, the Company recovers substantially all of the profits of its VIE through service fees charged (particularly under a consulting and service agreement) and has the unilateral ability to do so through its wholly owned subsidiaries. Through such contractual arrangements, the Company (as applicable, through wholly-owned subsidiaries) has the power to direct the activities most significant to the economic performance of the VIE and absorbs all, or substantially all, of the profits or losses. Accordingly, the Company is the primary beneficiary of such arrangements. Under the requirements of the FASB’s accounting standard regarding VIEs, the Company consolidates the financial statements of Shanghai Engineering.

8

Under the contractual arrangements with Shanghai Engineering, the Company has the power to direct its activities, and can have assets transferred freely out of the entity without any restrictions. Therefore the Company considers that there is no asset of the consolidated VIE that can be used only to settle obligations of the VIE, except for registered capital and PRC statutory reserves of the VIE amounting to a total of $1.43 million as of September 30, 2012. As the consolidated VIE is incorporated as a limited liability company under the PRC Company Law, creditors of the VIE do not have recourse to the general credit of the Company for any of the liabilities of the consolidated VIE, which at September 30, 2012 consisted of receipts in advance of $6.6 million, payables to suppliers and agents of $10.1 million, and other accrued liabilities of $2.2 million, totaling $18.9 million. As of September 30, 2012, the VIE held a cash balance of $61,050. Currently there is no contractual arrangement that could require the Company to provide additional financial support to the consolidated VIE. As the Company is conducting certain business in the PRC mainly through the VIE, the Company may provide such support on a discretionary basis in the future, which could expose the Company to a loss.

(b) Use of estimates

In preparing financial statements in conformity with US GAAP, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses during the reported periods. Significant estimates include useful lives of equipment, allowances for doubtful accounts, deferred tax assets and related valuation allowances, and the completion percentage of construction contracts.  Actual results could differ from those estimates.

(c) Concentrations of risk

The Company maintains cash balances at financial institutions within the U.S., Hong Kong, and PRC. Balances at financial institutions or state owned banks within the PRC are not covered by insurance. Balances at financial institutions within the United States are covered by the Federal Deposit Insurance Corporation for $250,000 per depositor per institution. Balances at financial institutions within Hong Kong are insignificant. The Company has not experienced any losses in such accounts and believes it is not exposed to any significant credit risks on its cash in bank accounts.

For the three months ended September 30, 2011 and 2012, the Company’s five top customers accounted for 87% and 73% of the Company's sales, respectively. For the nine months ended September 30, 2011 and 2012, the Company’s five top customers accounted for 73% and 57% of the Company's sales, respectively. Receivables from these five top customers were 56% and 69% of total accounts receivable at September 30, 2011 and 2012, respectively. Among those customers, the two largest customers were Ningbo Xinfu and Wuxi Green. Ningbo Xinfu accounted for 19% of revenue for the nine months ended September 30, 2012 and 0% of receivables as of September 30, 2012. Wuxi Green accounted for 12% of revenue for the nine months ended September 30, 2012 and 0% of receivables as of September 30, 2012.

For the three months ended September 30, 2011 and 2012, the five top suppliers provided approximately 23% and 26% of the Company's purchases of raw materials, respectively. For the nine months ended September 30, 2011 and 2012, the five top suppliers accounted for approximately 25% and 18% of the Company's purchases of raw materials, respectively. Payables to these five suppliers were approximately 13% and 15.1% of total accounts payable at September 30, 2011 and 2012, respectively.

9

The Company's operations are carried out in the PRC. Accordingly, the Company's business, financial condition and results of operations may be influenced by the political, economic and legal environments in the country, and by the general state of the country's economy. The Company's operations in the PRC are subject to specific considerations and significant risks not typically associated with companies carrying out operations in the United States. These include risks associated with, among others, the political, economic and legal environments in the PRC and foreign currency exchange. The Company's results may be adversely affected by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency conversion and remittance abroad, and rates and methods of taxation, among other things.

(d) Foreign currency translation

The reporting and functional currency of the parent Company and of CER Hong Kong is the U.S. dollar. Our subsidiaries Shanghai Engineering, CER Shanghai, and CER Yangzhou use the Chinese yuan Renminbi ("RMB") as their functional currency. Results of operations are translated at average exchange rates during the period, and assets and liabilities are translated at the end of period exchange rates. Cash flows are also translated at average exchange rates for the period, therefore, amounts reported on the statement of cash flows will not necessarily agree with changes in the corresponding balances on the balance sheet. Translation adjustments resulting from this process are included in accumulated other comprehensive income (loss) in stockholders' equity. For the three months ended September 30, 2011 and 2012, foreign currency translation gains amounted to $458,788 and to $344,248, respectively. For the nine months ended September 30, 2011 and 2012, foreign currency translation gains amounted to $766,370and to $120,696, respectively.

Transaction gains and losses that arise from exchange rate fluctuations from transactions denominated in a currency other than the functional currency are included in the consolidated statements of operations and other comprehensive income (loss) as incurred within “non-operating income (expenses), net.”

The PRC government imposes significant exchange restrictions on fund transfers out of the PRC that are not related to business operations. These restrictions have not had a material impact on the Company because it has not engaged in any significant transactions that are subject to the restrictions.

Accumulated other comprehensive income amounted to $1,286,126 and $1,406,822 as of December 31, 2011 and September 30, 2012, respectively. The balance sheet accounts with the exception of equity at December 31, 2011 and September 30, 2012 were translated at RMB6.30 to $1.00 and RMB6.28 to $1.00 respectively.

The average translation rates applied to income and cash flow statement amounts for the three months ended September 30, 2011 and 2012 were RMB6.40 to $1.00 and RMB6.35 to $1.00 respectively. For the nine months ended September 30, 2011 and 2012, the average translation rates were RMB6.49 to $1.00 and RMB6.33 to $1.00, respectively.

(e) Cash and restricted cash

Cash includes cash on hand and demand deposits with banks, which are unrestricted as to withdrawal and use, and which have original maturities less than three months.

Restricted cash represents a cash portion of the guaranty for the bids on contracts and is deposited in a separate bank account subject to withdrawal restrictions controlled by the customer to secure the Company’s performance of the project in process. The deposit cannot be drawn or transferred by the Company until the restriction period has expired. The Company also classified certain cash as restricted that is not available for immediate use due to its collateralization on certain short term borrowings and notes payable, etc.

10

(f) Notes receivable

Notes receivable represent trade accounts receivable due from various customers where the customers’ banks have guaranteed the payment of the receivables. The notes are non-interest bearing and normally paid within three to six months. The Company has the ability to submit a request for payment to the customer’s bank earlier than the scheduled payment date, but will incur an interest charge and a processing fee. 

(g) Receivables and allowances for doubtful accounts

Receivables include trade accounts due from customers and revenues earned in excess of amounts billed on EPC contracts (unbilled receivables). Pursuant to ASC Topic 850, such amounts attributable to related parties are separately presented in the balance sheet. Management regularly reviews the aging of receivables and changes in payment trends, and records a reserve when collection of amounts due is at risk.  

Allowance for doubtful accounts, December 31, 2010	$	625,014
Additions charged to income		1,047,926
Reversals credited to income		(37,824	)
Translation adjustment		56,358
Allowance for doubtful accounts, December 31, 2011	$	1,691,474
Additions charged to income		106,907
Reversals credited to income		-
Translation adjustment		5,042
Allowance for doubtful accounts, September 30, 2012	$	1,803,423

Accounts receivable which are expected to be collected after one year are reclassified as long-term accounts receivable.  The provision for accounts receivable balances described above is further described in Note 3.

(h) Inventories

Inventories are comprised of raw materials, work in progress and finished goods and are stated at the lower of cost or market value. Costs of work in progress include direct labor, direct materials, and production overhead before the goods are ready for sale. Management reviews inventories for obsolescence or cost in excess of market value periodically. The obsolescence, if any, is recorded as a reserve against the inventory. The cost in excess of market value is written off and recorded as cost of revenues.

Provision for inventory, December 31, 2010	$	93,195
Additions charged to income		26,763
Realized		(5,471	)
Translation adjustment		5,276
Provision for inventory, December 31, 2011	$	119,763
Additions charged to income		-
Realized		-
Translation adjustment		302
Provision for inventory, September 30, 2012		120,065

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(i) Advances on purchases

Advances on purchases are money advanced to outside vendors for inventory purchases and property, plant and equipment purchases. This amount is refundable and bears no interest.

(j) Property, plant and equipment, net

Property, plant and equipment are stated at cost. Depreciation is calculated principally by use of the straight-line method over the estimated useful lives of the related assets. Expenditures for maintenance and repairs, which do not improve or extend the expected useful lives of the assets, are charged to operations as incurred, while renewals and betterments are capitalized.

Management established a 5% residual value for property, plant and equipment. The estimated useful lives of the property, plant and equipment are as follows:

Plant and buildings	20-38 years
Transportation equipment	3-10 years
Machinery equipment	5-10 years
Office equipment	3-5 years

The gain or loss on disposal of property, plant and equipment is the difference between the net sales proceeds and the carrying amount of the relevant assets’, gains or losses, if any, and are recognized in the consolidated statement of income and other comprehensive income. There were no disposals of assets during the three and nine months ended September 30, 2012. During the three and nine months ended September 30, 2011, the Company disposed of machinery with a carrying value of $37,949 and two cars with carrying value of $39,646 and recognized loss for disposal of $52,732 from the transactions.

(k) Impairment of assets

The Company assesses the carrying value of long-lived assets each reporting period, more often when factors indicating impairment are present, and reduces the carrying value of such assets by the amount of the impairment. The Company determines the existence of such impairment by measuring the expected future cash flows (undiscounted and without interest charges) and comparing such amount to the net asset carrying value. An impairment loss, if it exists, is measured as the amount by which the carrying amount of the asset exceeds the fair value of the asset. Fair value generally means based on either quoted market price, if available, or discounted cash flow analysis. There were no impairments of long lived assets recognized for the three and nine months ended September 30, 2011 and 2012.

(l) Advances from customers

Advances from customers represent amounts advanced by customers on product or service orders. The product (service) is shipped (rendered) within one year after receipt of the advance payment, and the related sales are recognized in accordance with the Company’s revenue recognition policy.

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(m) Income taxes

Income taxes are accounted for under the asset and liability method. Deferred income taxes are recognized for temporary differences between the tax bases of assets and liabilities and their reported amounts in the financial statements, net operating loss carry forwards and credits, by applying enacted statutory tax rates in the year in which those temporary differences are expected to be recovered or settled. Deferred tax assets are reduced by a valuation allowance when it is more likely than not that some portion or all of the deferred tax assets will not be realized. Current income taxes are provided for in accordance with the laws of the relevant taxing authorities.

In assessing uncertain tax positions, the Company applies a more likely than not threshold and a two-step approach for the tax position measurement and financial statement recognition. For the two-step approach, the first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount that is greater than 50% likely to be realized upon settlement. As of September 30, 2012, the Company does not have any uncertain tax positions required to be recognized and measured under the accounting standard for income taxes.

(n) Value added tax

Sales revenue represents invoiced values, net of a value-added tax ("VAT"). All of the Company's products that are sold in the PRC are subject to a Chinese value-added tax at a rate of 17% of the gross sales price. This VAT may be offset by VAT paid by the Company on raw materials and other materials. The Company records VAT payable and VAT receivable, net of payments, in the financial statements. The VAT tax return is filed offsetting the payables against the receivables.

(o) Operating leases

Leases where substantially all the rewards and risks of ownership of assets remain with the leasing company are accounted for as operating leases. Payments made under operating leases are charged to the statement of operations and comprehensive (loss) income on a straight line basis over the lease periods.

(p) Stock based compensation

In accordance with ASC 718, Compensation-Stock Compensation, the Company measures the cost of employee services received in exchange for stock based compensation at the grant date fair values of the awards.

The Company recognizes stock based compensation costs, net of a forfeiture rate, on a straight-line basis over the requisite service period for each award. ASC 718 requires forfeitures to be estimated at the time of grant and revised in subsequent periods if actual forfeitures differ from those estimates.  There were no stock options granted in the three and nine months ended September 30, 2011 and 2012.

Cost of goods acquired or services received from non-employees is measured based on the fair value of the awards issued on the measurement date as defined in ASC 505, “Equity.” Awards granted to non-employees are remeasured at each reporting date using the fair value as at each period end. Changes in fair values between the interim reporting dates are attributed consistent with the method used in recognizing the original stock based compensation costs.

(q) Shipping and handling costs

Shipping and handling costs are included in selling, general and administrative expenses which totaled $301,735 and $138,133 for the three month periods ended September 30, 2011 and 2012, respectively, and $410,108 and $285,422 for the nine month periods ended September 30, 2011 and 2012, respectively.

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(r) Revenue recognition

The Company derives revenues principally from:

(a) Provision of Engineering, Procurement and Construction ("EPC") services, which are essentially turnkey contracts where the Company provides all services in the whole construction process from design, development, engineering, manufacturing, and procurement to installation;

(b) Sales of energy recovery systems; and

(c) Provision of design services.

In accordance with the accounting standard regarding performance of construction-type and certain production-type contracts, and long-term construction-type contracts, the Company adopted the percentage of completion method to recognize revenues and cost of sales for EPC contracts. EPC contracts are long-term, complex contracts involving multiple elements, such as design, manufacturing and installation, which all form one integral EPC project. The energy recovery system involved in an EPC project is highly customized to the specific customer's facilities and essentially not transferable to any other facilities without significant modification and cost. It would be difficult, if not impossible, to beneficially use a single element of a specific EPC project on a standalone basis other than in connection with the facilities for which it was intended. EPC contracts are by nature long-term construction-type contracts, usually lasting more than one accounting period, and the Company is able to reasonably estimate the progress toward completion, including contract revenues and contract costs. EPC contacts specify the customers' rights to the goods, the consideration to be paid and received, and the terms of payment. Specifically, the Company has the right to require a customer to make progress payments upon completion of determined stages of the project which serve as evidence of the customer's approval and acceptance of the work completed to date as complying with the terms of the particular EPC contract.

Sales of the Company's energy recovery systems and related products are essentially product sales. The products consist mainly of waste heat boilers and other related equipment manufactured according to specific customers' specifications. Once manufactured, the Company ships the products to its customers in their entirety in one batch. The Company’s service arrangement also includes a limited warranty to its customers pursuant to which the customers retain between 5% and 10% of the particular contract price as retainage during the limited warranty period (usually 12-18 months). The Company generally recognizes revenues including retainage from product sales when (i) persuasive evidence of an arrangement exists, which is generally represented by a contract between the Company and the customer; (ii) products are shipped; (iii) title and risks of ownership have passed to the customer, which generally occurs at the time of delivery; (iv) the customer accepts the products upon a quality inspection performed by them; (v) the purchase price is agreed to between the Company and the customer; and (vi) collectability is reasonably assured. Net revenues represent the invoiced value of products, less returns and discounts, and are net of value-added tax.

In providing design services, the Company designs energy recovery systems and other related systems based on a customer's requirements and the deliverable consists of engineering drawings. The customer may elect to engage the Company to manufacture the designed system or choose to present the Company's drawings to other manufacturers for manufacturing and installation. The Company recognizes revenues from design services when the services are provided, the design drawings are delivered, invoices are issued and collectability is reasonably assured. The Company generally delivers the drawings in one batch.

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 (s) Fair value of financial instruments

The accounting standard regarding fair value measurements defines financial instruments and requires fair value disclosures for those financial instruments. The fair value standard also establishes a three-level valuation hierarchy for disclosures of fair value measurement and enhances disclosure requirements for fair value measurements. The carrying amounts reported in the accompanying consolidated balance sheets for current assets and current liabilities such as cash, restricted cash, accounts and notes receivable, long term accounts receivable, short term loans, accounts payable, and other payables qualify as financial instruments. Management concluded the carrying values of these financial instruments are reasonable approximations of their respective fair values because of the short period of time between the origination of such instruments and their expected realization and the current market rates of interest. The three levels of the valuation hierarchy are defined as follows:

¨	Level 1	Inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets. At December 31, 2011 and September 30, 2012, the Company did not have any fair value assets or liabilities classified as Level 1.
¨	Level 2	Inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the assets or liability, either directly or indirectly, for substantially the full term of the financial instruments.
¨	Level 3	Inputs to the valuation methodology are unobservable and significant to the fair value. Inputs reflected management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date. Consideration is given to the risk inherent in the valuation technique and the risk inherent in the inputs to the model.

The measurement basis for current assets and current liabilities such as cash, restricted cash, accounts and notes receivable, long term accounts receivable, short term loans, accounts payable, and other payables is carrying value, which approximates fair value. All such current assets and liabilities with the exception of cash and restricted cash (Level 1) and short term loans (Level 2) would be classified as Level 3 measurements due to the presence of Company-specific unobservable inputs. The following table presents information about the company’s fair value financial liabilities classified as Level 2 and Level 3 as of December 31, 2011 and September 30, 2012.

	Balance as of September 30, 2012
	Fair Value Measurements
	Using Fair Value Hierarchy
	Level 1		Level 2		Level 3
Derivative liability related to loan (Note 12)		-		-	$	-
Derivative liability related to warrant (Note 12)		-		-	$	8,188
Guaranty contract liability (Note 16)		-	$	154,273		-

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	Balance as of December 31, 2011
	Fair Value Measurements
	Using Fair Value Hierarchy
	Level 1		Level 2		Level 3
Derivative liability related to loan (Note 12)		-		-	$	21,274
Derivative liability related to warrant (Note 12)		-		-	$	22,806
Guaranty contract liability (Note 16)		-	$	89,068		-

A summary of changes in the Level 2-classified guaranty contract liability related to Zhejiang Kailin project (Note 16) for the year ended December 31, 2011 and for the nine months ended September 30, 2012 is as follows:

	Guaranty contract liability
Balance at December 31, 2010	$	-
Guaranty contract liability		90,745
Change in fair value of guaranty contract liability		(1,677	)
Balance at December 31, 2011	$	89,068
Guaranty contract liability		119,905
Change in fair value of guaranty contract liability		(54,700	)
Balance at September 30, 2012	$	154,273

For the three and nine months ended September 30, 2012, the Company recorded change in fair value of guaranty contract liability of $26,635 and $54,700, respectively.

A summary of changes in the Level 3-classified derivative liabilities related to stock purchase warrants and a loan for the year ended December 31, 2011 and for the nine months ended September 30, 2012 is as follows:

	Derivative liability for warrant			Derivative liability for loan
Balance at December 31, 2010	$	1,332,760			423,307
Warrant cancellation (Note 12)		(15,547	)		-
Change in fair value of derivative liability for warrant		(1,294,407	)		-
Change in fair value of derivative liability for loan		-			(402,033	)
Balance at December 31, 2011	$	22,806			21,274
Change in fair value of derivative liability for warrant		(14,618	)		-
Change in fair value of derivative liability for loan		-			(21,274	)
Balance at September 30, 2012	$	8,188			-

For the three and nine months ended September 30, 2012, the Company recorded $4,651 and $35,892 fair value change of derivative liability respectively.

(t) Segment reporting

The Group reports its segments in accordance with ASC 280. The Group primarily operates in China and measures its business as a single operating segment. All of the group’s long term assets are located in China.

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(u) Subsidy income

The Company, in connection with its occupancy and use of certain industrial park land, receives from time to time certain subsidies wholly at the discretion of the management authority of a third party research and development fund related to the industrial park which are not tied to future tenancy or performance by the Company; receipt of such subsidy income is not contingent upon any further actions or performance by the Company and the amounts do not have to be refunded under any circumstances. These amounts are not tied to land use rights or any other transactions. Upon receipt, these incentives are recognized within other income (loss) in the consolidated statements of operations and other comprehensive (loss) income.

(v) Restatements and reclassifications

The Company, effective with the annual 2011 financial statements included in Form 10-K, reclassified its presentation of revenue and costs of revenue in the consolidated statements of (loss) income and other comprehensive (loss) income to depict EPC revenue attributable to third party customers, EPC revenue attributable to related parties, and product revenue given the growth in the number and per-contract revenue associated with EPC contracts and 2011 amounts have been reclassified to conform to the current presentation.

On March 30, 2012 the Company filed, on Form 8-K, a report announcing the restatement of its unaudited quarterly financial statements for the first three quarters of 2011. The root cause of the necessary adjustments to the quarterly interim unaudited financial information for the first three quarters of 2011 was identified during the preparation of the Company’s annual 2011 financial statements as reported in Form 10-K filed March 30, 2012. The Company determined that transaction losses resulting from variations in foreign currency exchange rates on certain purchase transactions denominated in U.S. dollars involving the Company’s onshore PRC subsidiaries (which use the yuan renminbi, or RMB as their functional currency) were incorrectly classified as translation losses and were incorrectly included in other comprehensive income (loss). These losses should have been reported in the statement of operations within other income (expense). Such transaction losses only impacted the first three quarters of 2011 as the underlying business activity involving purchasing of raw materials related to the Group’s then-under-construction Yangzhou production facility started in 2011 and was substantially completed by the end of 2011. The transaction losses arose as a result of cash advances made for purchase transactions in which goods were acquired outside of mainland China and imported to the Company’s onshore PRC subsidiaries. Continued weakening of the U.S. dollar against the RMB led to a decrease in the RMB value of purchased goods subsequently received relative to the asset already recorded for the refundable purchase advance made in cash.

Accordingly, the Company undertook further evaluation to identify and quantify the necessary adjustments to restate the previously issued unaudited financial information for the first three quarters of 2011. Adjustments were limited to the change in classification of foreign exchange transaction losses from other comprehensive income to non-operating income (loss), net in the consolidated unaudited statement of operations. Such adjustments were reported in amended Forms 10-Q for the first three quarters of 2011 filed with the SEC on May 15, 2012. The comparative amounts for 2011 included in this Form 10-Q reflect the restated financial information.

(w) Recent accounting pronouncements

In December 2011, the FASB issued ASU 2011-11, Balance Sheet (Topic 210): Disclosures about Offsetting Assets and Liabilities (ASU 2011-11). This newly issued accounting standard requires an entity to disclose both gross and net information about instruments and transactions eligible for offset in the statements of financial position as well as instruments and transactions executed under a master netting or similar arrangement and was issued to enable users of financial statements to understand the effects or potential effects of those arrangements on their financial position. This ASU is required to be applied retrospectively and is effective for fiscal years, and interim periods within those years, beginning on or after January 1, 2013. As this accounting standard only requires enhanced disclosure, the adoption of this standard is not expected to have an impact on the Company’s financial position.

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Note 3 – Accounts Receivable, Net

(a) Accounts Receivable, Net

	December 31,		September 30,
	2011		2012
Current accounts receivable - third parties	$	11,639,138	$	11,465,468
Current accounts receivable - related party		9,088,157		11,445,785
Current accounts receivable		20,727,295		22,911,253
Subtract: Allowance for doubtful accounts		-		-
Current accounts receivable, net	$	20,727,295	$	22,911,253

Current receivables also include revenue recognized in excess of amounts billed for EPC contracts. As of December 31, 2011 and September 30, 2012, revenue recognized in excess of amounts billed amounted to approximately $18,085,048 and $ 18,791,747, respectively.

(b) Long-term Accounts Receivable, Net

The Company classifies accounts receivable and revenue recognized in excess of amounts billed which are to be collected after one year as long-term accounts receivable.

Long-term accounts receivable, net, which are presented in the below table net of the discounting effect for interest (see Note 16 for further description), included revenue recognized in excess of amounts billed of approximately $0 and $7,687,761 as of December 31, 2011 and September 30, 2012, respectively.

	December 31,			September 30,
	2011			2012
Long term accounts receivable - third party	$	1,691,474			6,540,056
Subtract: Allowance for doubtful accounts	$	(1,691,474	)		(1,803,423	)
Total		-			4,736,633
Long term accounts receivable - related party	$	-			2,951,128

Long-term accounts receivable consisted of two customers, Zhenjiang Kailin and Jiangsu SOPO, for both periods presented.

CER and Zhenjiang Kailin, a related party, agreed to revise the payment schedule of receivables related to a project originally entered into in January 2011, which was completed on May 31, 2012, from all remaining amounts due by August 31, 2012 to 4 installments due by December 31, 2013 with no interest to be earned (refer to note 16 for more details about the Zhenjiang Kailin receivable collection schedule).

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Maturity date	Amount due
December 31, 2012		4,773,300
June 30, 2013		2,863,980
September 30, 2013		3,182,200
December 31, 2013		3,338,521
Total		14,158,001

A reconciliation of the accounts receivable (including both current and non-current portions) from Zhenjiang Kailing and the amount from collection schedule as at September 30, 2012 is as follows:

	September 30,
	2012
Total payment amount		14,158,001
Accretion for interest income		661,093
Upgrade Contract (Note16)		1,281,188
Less - unearned finance income		(1,703,369	)
Total accounts receivables		14,396,913
Accounts receivable, net - related party		11,445,785
Long term accounts receivable, net - related party		2,951,128
Total accounts receivables		14,396,913

In August 2012, based on developments subsequent to the balance sheet date, including communication with Zhenjiang Kailin, it was determined that the first payment would be delayed to December 2012. Zhenjiang Kailin only begun to generate cash flow commencing in May 2012 due to the delayed opening of its facility following CER’s completion thereof and required extra time to pay by December 2012. There were no other payment installments that were subject to delay, and based upon an evaluation of all the facts and circumstances the Company determined that it expected to fully collect all amounts due over the revised payment schedule incorporating the December extension of the first installment. After considering the further extension of the first installment payment to December 31, 2012, the Company reassessed the discount impact applicable to this payment extension using the original interest rate of 10.65% (which considered the risk free rate and Zhenjiang Kailin’s credit risk). As of September 30, 2012, the accounts receivable (including both current and non-current portions) from Zhenjiang Kailin under the contract was $14,396,913 after discounting for the time value of money pursuant to applicable accounting guidance (the discount rate was determined as 10.65% considering the risk free rate and Zhenjiang Kailin’s credit risk). The discount reflected as a reduction to revenue in the statement of operations arising from this extension of payment terms was $0 and $1,703,369 for the three and nine months ended September 30, 2012; the accretion for interest income included in interest income was $661,093. Of the total balance of $14,396,913, $2,951,128 represented the non-current balance due from Zhenjiang Kailin which is to be collected over one year; the remaining $11,445,785 is included in current receivables due from a related party.

Long term accounts receivable, net due from third party of $4,736,633 represents a balance due from Jiangsu SOPO. On October 18, 2011, CER signed a contract for the manufacture, design, and installation of a major dock storage and tube project with Jiangsu SOPO, a third party customer of CER and related party of Zhenjiang Kailin. The contract was originally valued at RMB 50 million (approximately $7.9 million), including the procurement part of RMB 40 million (approximately $6.3 million) and construction part of RMB 10 million (approximately $1.6 million). Due to the strong relationship between CER and Jiangsu SOPO, CER was retained as the contractor, and was allowed to sub-contract substantially all of the work to a third party sub-contractor. Jiangsu SOPO has agreed to CER’s retention of 10% as a profit margin (based upon the contract value), or approximately an 11% markup on costs of the project. CER has concluded that gross recognition of the revenue is appropriate as it is the primary obligor and certain of the costs represent CER product.

19

On April 15, 2012, CER and Jiangsu SOPO entered into a repayment agreement. Pursuant to the agreement, the total contract price will be allocated 90% to the subcontractor and CER earns the remaining 10% margin. The project has been fully completed by the end of June 2012. The current best estimate of the total contract price is RMB 57.1 million (approximately $9 million) based upon project completion and discussions with Jiangsu SOPO, and this amount is the basis for the repayment agreement. Jiangsu SOPO will pay the project price of RMB 57.1 million (approximately $9 million), plus interest over time of RMB 6.4 million (approximately $1 million), for a total of RMB 63.5 million (approximately $10 million) in exchange for an extension of the payment terms involving 36 installments due on a monthly basis starting from May, 2012. The discount rate used to discount these receivable cash flows under the applicable accounting guidance for Jiangsu SOPO was 8% (considering its stated-owned background and AA credit rating), which is same as the contractual rate of interest included in the contract. For the three and nine months ended September 30, 2012, $0 and $8,259,628 in revenue was recognized in relation to this EPC project, respectively, and the accretion of interest income was $250,190, as further described in Note 14. The receivable from Jiangsu SOPO as of September 30, 2012 was $7,605,077, among which $4,736,633 was classified as long-term accounts receivable.

Both of the arrangements described above regarding extensions of payment terms for these two particular customers were originally recognized in the March 31, 2012 balances and revenue for the quarter then ended as the underlying facts and circumstances leading to the arrangements existed, or were in the early stages of negotiation, at that time. With respect to the additional discount reflected in revenue for the Zhenjiang Kailin project due to the extension of the August 2012 payment to December 2012, such adjustment was reflected in revenue for the quarter ended June 30, 2012 as it related to facts and circumstances which likely existed at June 30, 2012.

Note 4 – Inventories, Net

As of December 31, 2011 and September 30, 2012, inventories consist of the following:

	December 31,			September 30,
	2011			2012
Raw materials	$	1,601,998		$	2,395,338
Work in progress		12,978,418			7,049,818
Finished goods		217,659			218,207
Inventory cost	$	14,798,075		$	9,663,363
Less: inventory provision		(119,763	)		(120,065	)
Inventory, net	$	14,678,312		$	9,543,298

For the three months ended September 30, 2011 and 2012, no accrual for inventory provision was required. For the nine month periods ended September 30, 2011 and 2012, the Group accrued inventory provisions of $26,621 and $0, respectively, through charges to income.

20

Note 5 –Property, plant and equipment, Net

As of December 31, 2011 and September 30, 2012, property, plant and equipment, net consisted of the following:

	December 31,			September 30,
	2011			2012
Plant	$	21,416,681		$	21,576,369
Machinery equipment		4,496,365			4,289,211
Transportation equipment		366,270			367,193
Office equipment		839,790			926,247
Accumulated depreciation		(2,137,381	)		(3,090,578	)
Subtotal		24,981,725			24,068,442
Construction in progress		1,177,877			4,521,458
Property, plant and equipment, net	$	26,159,602		$	28,589,900

Depreciation expense for the three months ended September 30, 2011 and 2012 was $450,730, and $398,971, respectively. Depreciation expense for the nine months ended September 30, 2011 and 2012 was $949,145, and $1,187,929, respectively.

Note 6 – Intangible Assets

	December 31,			September 30,
	2011			2012
Cost:
Land use rights	$	5,023,217		$	5,035,878
Software		152,896			190,920
Less: Accumulated amortization		(176,230	)		(306,572	)
Intangible assets, net	$	4,999,883		$	4,920,226

Intangible assets mainly represent purchases of land usage rights in Yangzhou where the Company’s sole manufacturing plant is located and software. The Company obtained the usage title of its first land parcel in December 2009. The land use right was recorded at cost of $2,438,632 and is being amortized over the lease term of 50 years starting from November 2009 when it was acquired and the software is being amortized over 3 years. In July 2011, the Company obtained the usage title of another parcel of land. The land use right was recorded at cost of $2,331,869 and is being amortized over the lease term of 50 years starting from July 2011. Amortization expense for intangible assets recorded for three months ended September 30, 2011 and 2012 amounted to $30,785 and $40,610, respectively. Amortization expense for intangible assets recorded for the nine months ended September 30, 2011 and 2012 amounted to $64,940 and $128,958, respectively.

Note 7 – Short Term Loans

Short-term borrowings and letter of credit

A tabular reconciliation of the Company’s short term borrowings including balances outstanding at December 31, 2011 and September 30, 2012 and activity during the period (including letters of credit) is as follows. Where borrowings are denominated in Renminbi, the U.S. dollar outstanding balance at the respective period end, translated at the applicable period-end exchange rate, is included in the tabular presentation.

21

Borrowing	Borrowing date	Interest rate	Maturity date	Balance at Dec. 31, 2011	Balance at Sep. 30, 2012	Pledge or guarantee
RMB 29 million – Shanghai Pudong Development Bank, Shanghai Branch	Aug. 31, 2011	7.544%	May 31, 2012	RMB 29,000,000 (USD 4,602,590)	RMB 0 (repaid March 28, 2012)	Collateralized by CER’s office building in Zhangjiang, Shanghai.
RMB 9.5 million – Bank of China, Yizheng Branch	Nov. 17, 2011	7.216%	Oct. 19, 2012	RMB 9,500,000 (USD 1,507,745)	RMB 9,500,000 (USD 1,511,545) (repaid October 19, 2012)	Guaranteed by Qinghuan Wu, Jialing Zhou, CER Shanghai, Shanghai Engineering, and Yizheng Auto Industrial Park Investment and Development Co., Ltd., and pledged by a land use right in Yizheng, China.
RMB 11.5 million – Bank of China, Yizheng Branch	Nov. 23, 2011	7.216%	Nov. 16, 2012	RMB 11,500,000 (USD 1,825,165)	RMB 11,500,000 (USD 1,829,765)
RMB 6.68 million - Industrial and Commercial Bank of China Limited, Zhangjiang Branch	Dec. 29, 2011	6.405%	June 28, 2012	RMB 6,680,000 (USD 1,060,183)	RMB 0 (repaid June 20, 2012)	Collateralized by a pledge of several bank acceptance notes* owned by CER Shanghai in the amount of RMB 7,430,000.
RMB 5 million - Shanghai Pudong Zhanjiang Micro-credit Co.	Dec. 2011	12.000%	June 9, 2012	RMB 5,000,000 (USD 793,550)	RMB 0 (repaid April 15, 2012)	Collateralized by a building in Shanghai owned by Jiangsu SOPO; guaranteed by Mr. Qinghuan Wu.
RMB 21 million letter of credit – China Construction Bank	Sept. 30, 2011	5.02%	Jan. 6, 2012	RMB 21,000,000 (USD 3,332,910)	RMB 0 (repaid January 6, 2012)	Collateralized by machinery of CER Yangzhou.
RMB 7.98 million letter of credit – Industrial and Commercial Bank of China	Dec. 12, 2011	6.71%	May 28, 2012	RMB 7,980,000 (USD 1,266,506)	RMB 0 (repaid June 6, 2012)	Collateralized by a building in Shanghai owned by Jiangsu SOPO.
RMB 1.38 million - Industrial and Commercial Bank of China Limited, Zhangjiang Branch	Jan. 16, 2012	6.405%	July 15, 2012	-	RMB 0 (repaid June 20, 2012)	Collateralized by a pledge of several bank acceptance notes* owned by CER Shanghai in the amount of RMB 1,530,000.
RMB 10 million - Shanghai Pudong Zhanjiang Micro-credit Co., Ltd.	Feb. 29, 2012	12.000%	Feb. 20, 2013	-	RMB 4,600,000 (USD 729,655)	Collateralized by accounts receivable from Zhenjiang Kailin; also collateralized by CER’s office building in Zhangjiang Shanghai in case of default in repayment.

22

RMB 29 million - Bank of Communication, Shanghai Branch	Mar. 20, 2012	7.544%	Mar. 15, 2013	-	RMB 29,000,000 (USD 4,614,190)	Collateralized by CER’s office building in Zhangjiang, Shanghai and guaranteed by Qinghuan Wu.
RMB 11 million - Bank of Communication, Shanghai Branch	Apr. 12, 2012	7.544%	Apr. 12, 2013	-	RMB 11,000,000 (USD 1,750,210)
RMB 5 million - Industrial and Commercial Bank of China Limited, Zhangjiang Branch.	Mar. 23, 2012	6.405%	Sept. 28, 2012	-	RMB 0 (repaid August 24, 2012)	Collateralized by several bank acceptance notes* owned by CER Shanghai in the amount of RMB 5,600,000 (approximately $890,000).
RMB 10 million - China CITIC Bank Yizheng branch.	Jun. 6, 2012	7.544%	Jun. 6, 2013	-	RMB 10,000,000 (USD 1,591,100)	Guaranteed by Jiangsu SOPO, and guaranteed by Mr. Qinghuan Wu.
USD 1.15 million – Industrial and Commercial Bank of China Limited, Zhangjiang Branch.	Jun. 15, 2012	2.4789%	Sep. 14, 2012	-	USD 0 (repaid September 14, 2012)	Collateralized by cash deposit in the amount of RMB 7,710,000 (approximately $1,213,631).
RMB 7.9 million letter of credit – Industrial and Commercial Bank of China	May 18, 2012	6.405%	Sep. 17, 2012	-	RMB 0 (repaid September 29, 2012)	Collateralized by a building in Shanghai owned by Jiangsu SOPO.
RMB 4 million - Bank of Shanghai	Sep 11, 2012	7.2%	Sep 10, 2013	-	RMB 4,000,000 (USD 636,440 )	Guaranteed by Mr. Qinghuan Wu and Mrs. Jialing Zhou, and among which RMB 5,000,000 is collateralized by a building owned by Mr. Wu and his son, and RMB 10,000,000 is guaranteed by Shanghai Chuang Ye Jie Li Financing Guarantee Co., Ltd (Shanghai Chuangye)

23

RMB 95,000 – Shanghai Pudong Development Bank, Shanghai Branch	Jul. 12, 2012	6.44%	Nov. 9, 2012	-	RMB 95,000 (USD 15,115)	Collateralized by a pledge of several bank acceptance notes* owned by Shanghai Engineering in the amount of RMB 100,000.
RMB 10 million – China Great Wall Industry Corporation	Sep. 6, 2012	4.13%	Dec. 20, 2012	-	RMB 10,000,000 (USD 1,591,100)	Equivalent worth of equipment.
RMB 20 million – China Great Wall Industry Corporation	Sep. 25, 2012	4.13%	Mar. 15, 2013	-	RMB 20,000,000 (USD 3,182,200 )	Equivalent worth of equipment.
Less: Debt Issue Cost				-	RMB 750,957 (USD 119,485)
Total Short term loan				RMB 90,660,000 (USD 14,388,649)	RMB 108,929,896 (USD 17,331,836)

*The Group’s bank acceptance notes are reported in “Notes receivable” in the consolidated balance sheet and represent short-term notes receivable typically received from customers as a form of payment. The Group can discount such notes receivable for early payment, typically at a small percentage discount to face value. The Group typically uses the notes to collateralize short-term borrowings as a means of matching timing of cash inflows and outflows, or transfers the notes to settle payables to suppliers.

Descriptions of short-term borrowings

On August 31, 2011, CER Shanghai borrowed RMB 29,000,000 (approximately $4,500,000 at the then-existing exchange rate) from the Shanghai Pudong Development Bank, Luwan Branch. The loan was collateralized by CER’s office building in Zhangjiang, Shanghai. The term of the loan was 9 months. The loan agreement provided for quarterly interest payments at an annual interest rate of 7.544% and the total principal and interest were repaid on March 28, 2012.

On December 9, 2010, CER Yangzhou entered into a three-year loan facility with the Bank of China, Yizheng Branch. The facility is RMB 30,000,000 (approximately $4,500,000 at the then-existing exchange rate). Any amounts due under the loan are repayable no later than November 24, 2013. The loan facility has been guaranteed by Qinghuan Wu, the Company’s Chief Executive Officer; Jialing Zhou, a former director of the Company and wife of Mr. Wu; one of the Group’s subsidiaries and the Group’s VIE, CER Shanghai and Shanghai Engineering, respectively; and Yizheng Auto Industrial Park Investment and Development Co., Ltd. The Company has also collateralized the loan facility with its land use right in Yizheng. By the end of 2010, the Company drew down RMB 21,000,000 (approximately $3,171,000 at the then-existing exchange rate) under the facility as a short-term loan, due in one year, with an annual interest rate of 5.838%. On June 20, 2011, the Company drew down RMB 9,152,782 (approximately $1,414,288 at the then-existing exchange rate) under the facility as a short-term loan, due in six months, with an annual interest rate of 5.56%. On November 15, 2011 and November 18, 2011, CER Yangzhou repaid RMB 9,500,000 (approximately $1,497,572) and RMB 11,500,000 (approximately $1,809,656), respectively. On December 20, 2011, CER Yangzhou repaid RMB 9,152,782 (approximately $1,444,773). On November 17, 2011 and November 23, 2011, CER Yangzhou drew down RMB 9,500,000 (approximately $1,497,000 at the then-existing exchange rate) and RMB 11,500,000 (approximately $1,810,000 at the then-existing exchange rate), respectively, under the three-year loan facility. The loans are due in one year and carry an annual interest rate of 7.216%.  CER (Yangzhou) repaid RMB 9,500,000 (approximately $1,511,545) on October 24, 2012, and repaid RMB 6,000,000 (approximately $952,124) on November 1, 2012, respectively.

24

On December 29, 2011, CER Shanghai borrowed RMB 6,680,000 (approximately $1,057,682 at the then-existing exchange rate) from Industrial and Commercial Bank of China Limited, Zhangjiang Branch. The loan carries an annual interest rate of 6.405%. The term of the loan is six months commencing from December 29, 2011 to June 28, 2012. The loan is secured by a pledge of several bank acceptance notes owned by CER Shanghai in the amount of RMB 7,430,000 (approximately $1,176,433). The total principal and interest were repaid by several installments as of June 20, 2012.

In December 2011, CER Shanghai borrowed $789,639 (RMB 5,000,000 at the then-existing exchange rate) from Shanghai Pudong Zhanjiang Micro-credit Co., Ltd. The loan is collateralized by a building in Shanghai owned by Jiangsu SOPO, and guaranteed by Mr. Qinghuan Wu, the Chairman and Chief Executive Officer of CER. The loan carries an annual interest rate of 12% and the due date of the loan is June 9, 2012. The loan was drawn down in two installments, with $315,353 (RMB 2,000,000) and $474,286 (RMB 3,000,000) being drawn down on December 15, 2011 and December 22, 2011, respectively. The total amount of principal and interest amounting to RMB 5,043,333 (approximately $801,038) was repaid on April 16, 2012.

On January 16, 2012, CER Shanghai borrowed RMB 1,380,000 (approximately $217,989 at the then-existing exchange rate) from Industrial and Commercial Bank of China Limited, Zhangjiang Branch. The loan carries an annual interest rate of 6.405%. The term of the loan is six months commencing from January 16, 2012 to July 15, 2012. The loan was collateralized by several bank acceptance notes owned by CER Shanghai in the amount of RMB 1,530,000 (approximately $242,949). The total amount of principal and interest were repaid by several installments as of June 20, 2012.

On February 27, 2012, CER Shanghai signed a loan contract to borrow RMB 10 million from Shanghai Pudong Zhanjiang Micro-credit Co., Ltd. On February 29, 2012, CER Shanghai drew down $1,589,345 (RMB 10 million at the exchange rate at that time). The loan is guaranteed by Mr. Qinghuan Wu, the Chairman and Chief Executive Officer of CER and collateralized by the accounts receivable of CER Shanghai. If there is any default in repayment, CER Shanghai agrees to further secure the loan by way of CER’s office building in Zhangjiang, Shanghai. The loan carries an annual interest rate of 12% and the due date of the loan is February 20, 2013. CER Shanghai began to repay RMB 900,000 per month to Shanghai Pudong Zhanjiang Micro-credit Co., Ltd from April 2012. Amounts totaling RMB 5,400,000 had been repaid as of September 30, 2012.

On March 6, 2012, CER Shanghai entered into a short-term comprehensive loan facility with the Bank of Communication, Shanghai Branch. The facility is RMB 57,000,000 (approximately $9,000,000). CER Shanghai is entitled to draw down RMB 40,000,000 (approximately $6,300,000) as a short-term loan or RMB 57,000,000 (approximately $9,000,000) as bank acceptance notes after making a cash deposit of RMB 17,000,000 (approximately $2,700,000) to the bank. On March 20, 2012, CER Shanghai drew down RMB 29 million to replace the existing Shanghai Pudong Development Bank, Shanghai Branch loan. On April 12, CER Shanghai drew down RMB 11 million. These amounts are due in one year and carry an annual interest rate of 7.544%. The loan has been collateralized by CER’s office building in Zhangjiang, Shanghai and guaranteed by Qinghuan Wu, the Company’s Chief Executive Officer.

25

On March 29, 2012, CER Shanghai entered into a loan contract to borrow RMB 5,000,000 (approximately $795,000 at the exchange rate at that time) from Industrial and Commercial Bank of China Limited, Zhangjiang Branch. The loan carries an annual interest rate of 6.405%. The term of the loan is six months commencing from March 29, 2012. The loan is collateralized by several bank acceptance notes owned by CER Shanghai in the amount of RMB 5,600,000 (approximately $890,000). The total amount of principal and interest were repaid by several installments as of September 30, 2012.

On March 30, 2012, CER Yangzhou entered into a 2 year comprehensive credit facility with the China CITIC Bank, Yangzhou Branch. The facility is RMB 20,000,000 (approximately $3,175,000). This comprehensive line of credit can be used from March 30, 2012 to March 30, 2014. This facility is guaranteed by Jiangsu SOPO and guaranteed by Mr. Qinghuan Wu, the Company’s Chief Executive Officer. On June 6, 2012, CER Yangzhou drew down RMB 10 million (approximately $1,587,900) as a short-term loan. This amount is due in one year and carries an annual interest rate of 7.544%.

On June 15, 2012, CER Shanghai entered into an import financing agreement with the Industrial and Commercial Bank of China, which paid for certain procured imports on behalf of CER Shanghai. CER Shanghai is entitled to authorize Industrial and Commercial Bank of China to make a payment amounting to $1.15 million to an overseas supplier for import purchases. This amount is collateralized by a cash deposit in the amount of RMB 7,710,000 (approximately $1,213,631). This loan bears an annual interest rate of 2.4789%. The term of the loan is three months commencing from June 15, 2012 to September 14, 2012. The total amount of principal and interest were repaid on September 14, 2012.

On September 5, 2012, Shanghai Engineering entered into a comprehensive facility contract with Bank of Shanghai. The total amount is RMB 15,000,000 (approximately $2,364,625 at the then-existing exchange rate). This amount is due in one year and carries an annual interest rate of 7.2%. The loan is guaranteed by Mr. Qinghuan Wu, the Company’s Chief Executive Officer and Mrs. Jialing Zhou, Mr. Wu’s wife, and among which RMB 5,000,000 is collateralized by a building located in Shanghai, which is owned by Mr. Qinghuan Wu and his son. In addition, the remaining amount of RMB 10,000,000 of this loan is guaranteed by Shanghai Chuang Ye Jie Li Financing Guarantee Co., Ltd (“Shanghai Chuangye”), after making a cash deposit of 5% of the total guarantee amount to Shanghai Chuangye. Shanghai Chuangye charged a 3% fee and required a counter-guarantee by CER Yangzhou and CER Shanghai. Shanghai Chuangye also required second tier collateralization by the aforementioned building owned by Mr. Wu and his son and 60% of Mr. Wu’s ownership interest in Shanghai Engineering. Since this building had previously been collateralized under a facility agreement entered into with Ningbo Bank, Shanghai branch, this borrowing with the Bank of Shanghai will replace the existing Ningbo Bank facility. As of September 30, 2012, the Company drew down RMB 4,000,000 as short-term loan. The Company drew down RMB 4,000,000 on October 16, 2012, and RMB 7,000,000 on October 26, 2012 as short term loan, respectively.

On July 12, 2012, Shanghai Engineering borrowed RMB 95,000 (approximately $15,115 at the then-existing exchange rate) from Shanghai Pudong Development Bank, Shanghai Branch. The loan carries an annual interest rate of 6.44%. The term of the loan is four months commencing from July 12, 2012 to November 9, 2012. The loan is secured by a pledge of several bank acceptance notes owned by Shanghai Engineering in the amount of RMB 100,000 (approximately $15,911). Shanghai Engineering repaid RMB 95,000 on November 9, 2012.

Interest expense on short-term loans for the three months ended September 30, 2011 and 2012 was $98,370 and $250,197, respectively. Interest expense on short-term loans for the nine months ended September 30, 2011 and 2012 was $224,492 and $716,976, respectively.

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Descriptions of letters of credit

CER, through its subsidiary, CER Yangzhou imports goods from CER Hong Kong, which are purchased from overseas suppliers. CER Yangzhou issued a forward letter of credit (“L/C”) to CER Hong Kong for import purchases in September 2011. The L/C is collateralized by the machinery of CER Yangzhou’s plant. On September 30, 2011, CER Hong Kong discounted the L/C from Standard Chartered Bank’s Hong Kong branch in the amount of RMB 21,000,000 ($3,240,000 at the exchange rate at such date). The due date of the L/C is January 6, 2012. The discount rate is 5.02% annually. CER Yangzhou repaid RMB 21,000,000 on January 6, 2012.

On November 29, 2011, CER Shanghai issued a forward letter of credit (“L/C”) to CER Yangzhou for the purchase of goods. The L/C is collateralized by a building in Shanghai, which is owned by Jiangsu SOPO. On December 12, 2011, CER Yangzhou discounted the L/C from Industrial and Commercial Bank of China Limited, Zhangjiang Branch in the amount of RMB 7,980,000 (approximately $1,260,000 at the exchange rate at the time). The due date of the L/C is May 28, 2012. The discount rate is 6.71% annually. The total amount of the letter of credit was repaid on May 15, 2012. On May 18, 2012, CER Shanghai renewed the issuance of a forward letter of credit amounting to RMB 7,900,000 (approximately $ 1,235,586) to CER Yangzhou for purchase of goods. The discount rate is 6.405% annually. The due date of the renewed LC is September 17, 2012. CER Yangzhou repaid RMB 7,900,000 on September 29, 2012.

Interest expense on letters of credit for the three months ended September 30, 2011 and 2012 was $0 and $22,585, respectively. Interest expense on letters of credit for the nine months ended September 30, 2011 and 2012 was $0 and $74,191, respectively.

Descriptions of Product Financing

On August 10, 2012, CER signed two contracts with China Great Wall Industry Corporation (“Great Wall”) for sales and repurchases of certain goods within a 6-month period which in substance are a product financing arrangement. According to these two agreements, CER (Yangzhou) will sell certain equipment to Great Wall at a price of RMB 32,454,780 (approximately $5,108,707). The funding to CER consists of three components, two of which are letters of credit totaling RMB 30,000,000 (approximately $4,773,300); the rest is cash. At the same time, Great Wall agreed to resell the equipment to CER (Shanghai) at a price of RMB 33,038,966 (approximately $5,200,664) via a delayed collection arrangement as set forth below, where such amounts represent payments due from CER to Great Wall (or a bank, if the letters of credit are tendered for cash equal to the principal or face value less the bank’s discount)

	RMB	USD
December 20, 2012	10,180,000	1,619,740
March 15, 2013	20,360,000	3,239,480
April 7, 2013	2,498,965	397,610
Total	33,038,965	5,256,830

27

In September, 2012, Great Wall issued two letters of credit in the amount of RMB 10 million (approximately $1.6 million) and RMB 20 million (approximately $3.2 million) from Industrial and Commercial Bank of China Co., Ltd., Beijing West Railway Station Branch to CER (Yangzhou) in accordance with the aforementioned agreements, respectively. Then CER (Yangzhou) discounted them to draw down RMB 9.8 million (approximately $1.6 million) on September 6, 2012, with the maturity date of December 24, 2012, and draw down RMB 19.4 million (approximately $3.1 million) on September 25, 2012, with the maturity date of March 15, 2013, respectively, for a total amount of RMB 29.2 (approximately $4.7 million) million. The amount of RMB 29.2(approximately $4.7 million) million was recorded as short term loan and RMB 0.8 million (approximately $0.13 million) as debt issue cost which is amortized over the term the product financing at an effective interest rate of 5.37%. For the three months and nine months ended September 30, 2012, the amortization of debt issue cost was RMB 49,041(approximately $7,747). The final payment amounting to RMB 2,454,780 (approximately $390,580) will be paid by Great Wall in November, 2012. The price difference between sales and repurchase of the goods of RMB 584,185 (approximately $91,957) represents interest to be paid to Great Wall. The Company calculated this portion of interest with an effective interest rate of 4.13%. For the three months ended September 30, 2012, the interest payable of RMB 38,448 (approximately $6,073) was recorded as accrued expenses and other liabilities. In addition, China Energy Recovery, Inc., the parent company, guaranteed the repayment of CER Shanghai. There is no other collateral in the contract. This product financing arrangement was entered into to offset concerns related to the Company’s liquidity given the extension of payment terms on accounts receivable due from Zhenjiang Kailin, which are further discussed in Note 16, and the Company’s $5 million long term loan with Hold and Opt Investments originally due on September 29, 2012, and subsequently extended with a new maturity date of no later than December 15, 2012.

Formerly convertible debt (presented as current portion of long term loan)

Borrowing	Borrowing date	Interest rate		Maturity date	Balance at Dec. 31, 2011		Balance at Sep. 30, 2012		Pledge or guarantee
$ 5 million – Hold And Opt Investments Limited	Dec. 31, 2010	15.100	%	Sept. 29, 2012	USD	4,850,945	USD	5,000,000	Collateralized by 8,000,006 of Qinghuan Wu's shares in CER.

On May 21, 2009, the Company entered into a term loan agreement (“Convertible Notes Agreement”) with an investment company (the “Lender”). Pursuant to the Convertible Notes Agreement, the lender provided term loan financing (“Convertible Notes”) to the Company in an amount of up to $5,000,000 within 6 months of the making, which may be drawn from time to time, in whole or in installments, upon notice, but once repaid shall not be subject to reborrowing. The proceeds from this Convertible Note were used for the construction of the Company’s new plant located in Yangzhou, China including, the purchase of land for the plant, buildings, equipment, and for the facilitating of financing loans from one or more in-China banks and other institutional lenders. Any amount borrowed will bear interest at 9.5%, payable every six months, calculated and compounded quarterly. Each draw is due twenty-four (24) months after the draw down date, together with any accrued and unpaid interest. The Company drew down $5,000,000 on September 29, 2009. The Convertible Notes could be converted to 2,777,778 shares of common stock at the conversion price of $1.80. In addition, the Company issued the Lender a five-year common stock purchase warrant (“Warrants”) to purchase up to 1,388,889 shares of the Company’s common stock, which is that number of shares of the Company’s common stock equal to 50% of the principal sum of these Convertible Note divided by the conversion price of $1.80.

The Lender may recall a Convertible Note after the first anniversary of the draw down at a redemption price equal to the outstanding principal plus any accrued and unpaid interest upon the closing by the Company of any debt and/or equity financing (except for debt financings with banks or institutional lenders in China), in an amount up to 50% of the amount financed. Additionally, upon occurrence of certain events, the Lender can demand the entire outstanding principal, together with any accrued and unpaid interest to be immediately repaid in full or in part. The Company can also prepay the Convertible Note at any time it desires with accrued and unpaid interest.

28

The embedded conversion feature of the Convertible Notes was accounted for as an embedded derivative in accordance with ASC 815 “Derivatives and Hedging” because the conversion price is denominated in USD, which is a currency other than the Company’s functional currency, RMB. The conversion feature was accounted for as a derivative liability on the balance sheet and classified as a current liability based on the timing of the cash flows derived from the convertible notes. The Convertible Notes were recorded with a discount equal to the fair value of the conversion feature at the transaction date and were accreted to the redemption value of the Convertible Notes from the draw down date to September 30, 2011 (the date of extinguishment of the conversion feature) using the effective interest rate method. The change in fair value of the conversion feature derivative liability of $0 and $203,916 was recorded in the consolidated statement of operations and other comprehensive (loss) income for the three and nine months ended September 30, 2011, respectively with no similar amount for the quarters ended September 30, 2012 due to the termination of the derivative. The interest expense recognized for accretion to the redemption value of the Convertible Notes was $40,535 and $53,401 for the three months ended September 30, 2011 and 2012, respectively. The interest expense recognized for accretion to the redemption value of the Convertible Notes was $116,714 and $149,056 for the nine months ended September 30, 2011 and 2012, respectively.

The value of the Warrants at the grant date on May 21, 2009 was accounted for as a commitment fee for obtaining the Convertible Notes, and therefore the value was recorded as deferred financing cost to be amortized over the period from the grant date to September 30, 2011 (the date of extinguishment of the conversion feature) of the Convertible Notes. For the three and nine months ended September 30, 2011, $66,919 and $215,623 of deferred financing costs were amortized and charged to interest expense, respectively with no amounts recognized in 2012 due to the cessation of recognition of remaining costs in 2011. The Warrants were recorded as derivative liabilities in accordance with ASC 815, Derivatives and Hedging, because the exercise price of the warrants is denominated in USD, which is a currency other than the Company’s functional currency, RMB. Changes in fair value of the warrants (Note 12) for the three and nine months ended September 30, 2011 and 2012 were recorded in the consolidated statement of operations and other comprehensive (loss) income.

On December 31, 2010, the Company entered into a loan agreement with the Lender to replace and continue the prior lending arrangement which was entered into on May 21, 2009, to extend the term until which the principal amount of $5,000,000 is due to September 29, 2012, and to change certain of the terms of the loan. The aggregate principal amount of the loan extension is $5,000,000, and bears interest at the annual rate of 15.1%, calculated on a monthly compounded basis. The loan may be prepaid by the Company, without penalty. The loan agreement provides for the typical events of default (which includes default in payment of any part of the principal of or interest, performance or compliance with the collateral agreement, assets attached or seized by any third person and or any part of the loan agreement being declared null and void or its enforceability being challenged), including a cross default clause, and the Company has made various representations and given various covenants to the lender, which includes the audit of the Company’s annual financial statements and review of the interim financial statements as well as the timely filing of such statements, including any extension periods permitted under SEC rules and regulations. The Lender continues to have a right of first refusal with respect to future debt and equity fundings and a right to consent to certain debt and equity fundings by the Company and its subsidiaries and affiliates. As a guarantor of the payments under the loan extension, Mr. Wu, the Chief Executive Officer of the Company, pledged 8,000,006 of his shares in CER for the repayment of the principal due under the loan agreement.

On October 22, 2012, CER entered into an extension to continuation and loan arrangement with Hold And Opt Investments Limited, effective as of September 29, 2012 (“Loan Date”). At the Loan Date, both principal and interest due under the loan agreement remained outstanding. The extended maturity date for the Loan Amount is November 30, 2012, with a grace period not to extend beyond December 15, 2012. CER shall make a mandatory prepayment of $3,000,000 by no later than November 10, 2012. The outstanding principal and interest amount under this extension agreement shall bear interest at a rate of 1.5% per month, commencing on the Loan Date, and continuing until the principal is paid in full. CER repaid $2,000,000 on October 31, 2012.

29

The conversion feature expired, and there is no conversion term on the modified convertible debt described above, since September 30, 2011.

The Company has accounted for the replacement and extension of the loan agreement as a modification as the changes are not substantial such that there has been no accounting extinguishment in accordance with ASC 470, “Debt – Modifications and Extinguishments.” Accordingly a new effective interest rate was determined based on the carrying amount of the original debt and the revised cash flows of the new debt.

Since the loan is fixed in United States dollars, the lender will receive compensation when the Renminbi exchange rate increases against the US dollar as compared to the rate fixed at the borrowing date. Accordingly, the Company has accounted for this indexed feature as an embedded derivative and recognized a derivative liability in the amounts of $21,274 and $0 as of December 31, 2011 and September 30, 2012, respectively. There are no derivative liabilities under the compensation terms of the loan agreement as the original loan is due. The change in fair value of the derivative liability of $0 and $21,274 was recorded in the unaudited statements of operations and comprehensive income/loss for the three and nine months ended September 30, 2012, respectively.

Note 8 – Notes Payable

Notes payable represents bank acceptance drafts that are non-interest bearing and due within six months. The balance of the bank acceptance drafts is $1,396,648 and $2,641,254 as of December 31, 2011 and September 30, 2012, respectively.

Borrowing	Draw down date	Maturity date	Balance at Sep. 30, 2012	Pledge or guarantee
RMB 8.8 million – Industrial and Commercial Bank of China Limited, Shanghai Zhangjiang Branch	May. 30, 2012	Nov. 29, 2012	RMB 8,800,000 (USD 1,400,168)	Collateralized by a building in Shanghai owned by Jiangsu SOPO.
RMB 4.7 million – China CITIC Bank, Yangzhou Branch.	May. 23, 2012	Nov 23, 2012	RMB 4,700,000 (USD 747,817)	Guaranteed by Jiangsu SOPO, and guaranteed by Mr. Qinghuan Wu, the Company’s Chief Executive Officer.
RMB 3.1 million – China CITIC Bank, Yangzhou Branch.	Apr. 24, 2012	Oct. 24, 2012	RMB 3,100,178 (USD 493,269)	Guaranteed by Jiangsu SOPO, and guaranteed by Mr. Qinghuan Wu, the Company’s Chief Executive Officer.
Total notes payable			RMB 16,600,178 (USD 2,641,254)

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On November 24, 2011, bank acceptance drafts amounting to RMB 8.8 million (approximately $1.4 million) were arranged with Industrial and Commercial Bank of China Limited, Shanghai Zhangjiang Branch by CER Shanghai to settle its purchases from certain customers. The bank acceptance drafts are collateralized by a building in Shanghai owned by Jiangsu SOPO. The total amount of the bank acceptance drafts was repaid on May 22, 2012. On May 30, 2012, CER Shanghai renewed the issuance of the same amount of bank acceptance drafts from Industrial and Commercial Bank of China Limited. The expiration date is November 29, 2012. On November 1, 2012, the Company repaid RMB 8.8 million (approximately $1.4 million).

On January 9, 2012, Shanghai Engineering entered into a three-year loan facility with the Bank of Ningbo, Shanghai Branch. The facility is RMB 4,500,000 (approximately $713,000 at the exchange rate at that time). The funds have been drawn down in the form of bank acceptance drafts in two installments, with $635,160 (RMB 4,000,000) and $793,950 (RMB 5,000,000) being issued by the Bank of Ningbo on March 6, 2012 and March 21, 2012, respectively, with a cash deposit accounting for 50% of the total amount of bank acceptance. The loan has been guaranteed by Qinghuan Wu and Jialing Zhou and also collateralized by a building located in Hongkou District, Shanghai, which is owned by Mr. Wu and his son. Shanghai Engineering repaid RMB 9,000,000 by two installments in September, 2012.

On March 30, 2012, CER Yangzhou entered into a 2 year comprehensive credit facility with the China CITIC Bank, Yangzhou Branch. The facility is RMB 20,000,000 (approximately $3,175,000). The period of the comprehensive line of credit is from March 30, 2012 to March 30, 2014. This facility is guaranteed by Jiangsu SOPO, and guaranteed by Mr. Qinghuan Wu, the Company’s Chief Executive Officer. On April 24, 2012, CER Yangzhou drew down bank acceptance notes amounting to RMB 3,100,178 (approximately $493,269) after making a cash deposit of RMB 1,860,107(approximately $294,882) to the bank. On May 23, 2012, CER Yangzhou drew down bank acceptance notes amounting to RMB 4,700,000 (approximately $747,817) after making cash deposit of RMB 2,820,000 (approximately $448,690) to the bank. The expiration date is November 23, 2012. On October 23, 2012, CER Yangzhou repaid RMB 3,100,178 (approximately $493,269).

Note 9 – Taxation

USA

The Company is subject to U.S. income tax at a rate of 34% on its assessable profits.

Hong Kong

CER (Hong Kong) subsidiaries were subject to Hong Kong profit tax at a rate of 16.5% on their assessable profits. No Hong Kong profit tax has been assessed as the Group did not have assessable profit that was earned in or derived within the legal boundaries of Hong Kong during the periods presented.

PRC

The New Enterprise Income Tax ("EIT") law was effective January 1, 2008 and the standard EIT rate is 25%. Pursuant to the PRC tax law, net operating losses can be carried forward 5 years to offset future taxable income.

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For the quarter ended March 31, 2012, the Group’s Hong Kong subsidiary, CER (Hong Kong), had, for the first time, estimated taxable profits earned in the PRC; CER (Hong Kong) has generated estimated taxable profits since then. As such, CER (Hong Kong) is likely to be regarded under the PRC tax laws as having permanent establishment for business activities carried out in the PRC, and would be subject to PRC tax at the standard EIT rate of 25%. For interim periods in 2012, given the Group is likely to be regarded as having permanent establishment, CER (Hong Kong) provided taxes, included in the consolidated tax provision, of $732,592. The primary reason for CER (Hong Kong)’s generation of taxable income was the non-deductibility, under PRC tax law, of a $1.5 million expense incurred for a penalty payment to an EPC construction contract related party customer which is further described in Note 16 and income tax for the intra-entity sales of the subsidiary’s shares further described in Note 1. This tax provision, as well as increases in PRC tax expense for the Group’s profitable subsidiaries, were primarily responsible for the significant increase in the Group’s effective tax rate for interim periods in 2012 as compared to the corresponding interim periods in 2011.

Pursuant to the PRC income tax laws, Shanghai Engineering and CER Shanghai are subject to enterprise income tax at a statutory rate of 15% and 12.5% respectively, each for a three year period ending in 2014, as they were recognized as high and new technology entities (“HNTEs”) in April, 2011. CER Yangzhou is subject to enterprise income tax at a statutory rate of 25%.  

On February 22, 2008, the Ministry of Finance (“MOF”) and the State Administration of Taxation (“SAT”) jointly issued Cai Shui [2008] Circular 1 (“Circular 1”). According to Article 4 of Circular 1, distributions of accumulated profits earned by a foreign investment enterprise (“FIE”) prior to January 1, 2008 to foreign investor(s) in 2008 or after will be exempt from withholding tax (“WHT”) while distribution of the profit earned by an FIE after January 1, 2008 to its foreign investor(s) shall be subject to WHT at a rate up to 10% (lower rate is available under the protection of tax treaties). Since the Company intends to indefinitely reinvest its earnings to further expand the businesses in mainland China, the foreign invested enterprises do not intend to declare dividends to their immediate foreign holding companies in the foreseeable future. As a result, if any dividends are declared out of the cumulative retained earnings as of December 31, 2007, they should be exempt from WHT. Accumulated profits of non-US subsidiaries as of December 31, 2011 and September 30, 2012 were approximately $1,102,139 (RMB 7,687,921), and $5,151,841 (RMB 33,325,437), respectively, and they are considered to be indefinitely reinvested. Moreover, the Company’s liquidity position does not require transfers of cash outside of the PRC to the parent jurisdiction (U.S.), as all business activity and debt is carried on in the PRC. The Company has not paid dividends on its common shares and does not have an intention of doing so in the foreseeable future. Accordingly, no provision has been made for deferred taxes. No dividends were declared out of cumulative retained earnings as of December 31, 2011 or September 30, 2012.

The Company is incorporated in the U.S. and incurred a net operating loss for income tax purposes for the three months ended September 30, 2011 and 2012. The net operating loss carry forwards for the U.S. income tax purposes were approximately $8,355,602 and $8,867,820 at December 31, 2011 and September 30, 2012, respectively, which may be available to reduce future years' taxable income. These carry forwards will expire, if not utilized, in 20 years from origination. Management believes that the realization of the benefits arising from these accumulated net operating losses is uncertain due to the Company's limited operating history, continuing losses for United States income tax purposes, and the fact that substantially all of the Company’s business activity is derived from the PRC. Accordingly, the Company has offset substantially all of the gross deferred tax assets for such net operating losses with additional valuation allowances recorded through income tax expense, which are a significant driver of the Company’s effective tax rate, given the history of loss and the uncertainty regarding the future. Remaining net deferred tax assets consist only of those supported by reversing deferred tax liabilities, as well as any deferred tax assets related to the PRC that management has concluded are more likely than not of being realized.

As of September 30, 2012, the Company did not have any material uncertain tax positions subject to the provisions of ASC 740-10; as such, there are no liabilities for unrecognized tax benefits. As described earlier in this Note, the Group provided for PRC EIT tax on profits earned by the Group’s Hong Kong subsidiary in the PRC.

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Note 10 –Earnings / (Loss) per Share

The Company reports earnings per share in accordance with the provisions of ASC 260, “Earnings Per Share”. This standard requires presentation of basic and diluted earnings per share in conjunction with the disclosure of the methodology used in computing such earnings per share. Basic earnings/(losses) per share excludes dilution and is computed by dividing net income (loss) available to common stockholders by the weighted average common shares outstanding during the period under the two-class method. Diluted earnings per share takes into account the potential dilution that could occur if securities or other contracts to issue common stock were exercised and converted into common stock. In computing the dilutive effect of convertible securities, the number of shares is adjusted for the additional common stock to be issued as if the convertible securities are converted at the beginning of the period (or at the time of issuance, if later). In computing the dilutive effect of options and warrants, the treasury method is used. Under this method, options and warrants are assumed to be exercised at the beginning of the period and as if funds obtained thereby were used to purchase common stock at the average market price during the period.  The following table lists the potentially dilutive securities at September 30, 2012 related to our compensation plans under which shares of our common stock are authorized for issuance.

Potentially Dilutive Securities	Number of Securities to be Issued		Reference Index
Dilutive securities from warrants issued as part of financing with Series A preferred stock		1,852,820	Note 12
Dilutive securities from warrants issued with convertible notes		1,388,889	Note 12
Dilutive securities from options to Ye Tian (director)		500,000	Note 13
Dilutive securities from options to Estelle Lau (director)		60,000	Note 13
Dilutive securities from options to Sum Kung (director)		30,000	Note 13
Dilutive securities from options to Jules Silbert (director)		30,000	Note 13
Total potentially dilutive securities		3,861,709

For the three months and nine months ended September 30, 2011, warrants to purchase 3,241,709 shares of the Company’s common stock and options to purchase 575,000 shares were excluded from the diluted earnings per share calculation because of their anti-dilutive effect.

For the three and nine months ended September 30, 2012, warrants to purchase 3,241,709 shares of the Company’s common stock and options to purchase 635,000 shares were excluded from the diluted earnings per share calculation because of their anti-dilutive effects. The exercise price exceeded the current share price for all stock-based options and warrants.

The following are reconciliations of the basic and diluted earnings per share computations for the three and nine months ended September 30, 2011 and 2012:

	Three months ended September 30,
	2011			2012
Numerator:
Net income for the period		2,278,413			900,619
Amount allocated to preferred stockholders		(7,744	)		(3,062	)
Net income available to common stock holders – Basic and diluted		2,270,669			897,557
Denominator:
Denominator for basic earnings per share -weighted average common stocks outstanding		31,085,859			31,078,083
Weighted average stock options		16,956			-
Denominator for diluted earnings per share		31,102,815			31,078,083
Basic (loss)/earnings per share		0.07			0.03
Diluted (loss)/earnings per share		0.07			0.03

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	Nine months ended September 30,
	2011			2012
Numerator:
Net income for the period		2,663,566			2,628,125
Amount allocated to preferred stockholders		(9,074	)		(8,934	)
Net income available to common stock holders – Basic and diluted		2,654,492			2,619,191
Denominator:
Denominator for basic earnings per share -Weighted average common stock outstanding		31,015,385			31,082,790
Weighted average stock options		16,956			-
Denominator for diluted earnings per share		31,032,341			31,082,790
Basic earnings per share		0.09			0.08
Diluted earnings per share		0.09			0.08

Note 11 – Convertible Preferred Stock

Series A Convertible Preferred Stock

On April 15, 2008 and as a condition to closing of the Share Exchange, CER entered into Securities Purchase Agreements with 25 accredited investors pursuant to which CER issued and sold an aggregate of 7,874,241 units at a unit price of $1.08 (the "Financing"). Each unit consisted of one share of CER's Series A convertible preferred stock, par value of $0.001, and one warrant to purchase one-half of one share of CER's common stock at an exercise price of $1.29 per share. After the 1-for-2 reverse stock split conducted on April 16, 2008, the 7,874,241 shares of the Company’s Series A convertible preferred stock are convertible into 3,937,121 shares of common stock and the warrants are exercisable into 1,968,561 shares of the Company's common stock at an exercise price of $2.58 per share. The issuance costs of $1,859,902, including commissions, legal fees and transaction expenses were taken from the proceeds. The net proceeds were allocated between the Series A convertible preferred stock and warrants based on their relative fair values. As of the closing date, the fair value of Series A convertible preferred stock is estimated at $1.68 where as the fair value of the warrants is estimated at $0.85. As a result, an aggregate amount of $5,307,539 was allocated to Series A convertible preferred stock and $1,336,739 was allocated to the warrants. The fair value of the warrants was initially valued using the binomial model with assumptions such as, stock price, volatility, expected term, dividend, risk-free interest rate, etc.

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The rights, preferences and privileges with respect to the Series A convertible preferred stock are as follows:

Voting

Holders of Series A convertible preferred stock are entitled to the number of votes equal to the number of shares of common stock into which such shares of preferred stock could be converted and to vote as a single class.

Dividends

Holders of Series A convertible preferred stock are entitled to dividends when dividends are declared for common stockholders. There have been no dividends declared to date.

Liquidation

In the event of any liquidation, dissolution or winding up of the Company, the holders of Series A convertible preferred stock shall be entitled to receive the amount of the original issue price per share (as adjusted for the 1-for-2 reverse stock split) for each share of Series A convertible preferred stock, plus all declared and unpaid dividends.

Conversion

Each share of Series A convertible preferred stock is convertible into common stock on a one-for-one basis, anytime at the option of the holder. The current conversion price is $2.16 after taking into effect the 1-for-2 reverse stock split, and the conversion price is subject to adjustment in accordance with the anti-dilution clause.

Adjustment of Series A Convertible Preferred Stock Conversion Price and Warrant Exercise Price

In accordance to the anti-dilution clause of the afore-mentioned Financing, if the Company shall issue additional shares without consideration or for consideration per share less than the conversion price and/or the warrant exercise price immediately prior to the issuance, such conversion price and exercise price shall be adjusted.  

For the year and nine months ended December 31, 2011 and September 30, 2012, no shares of Series A convertible preferred stock were converted.

As of December 31, 2011 and September 30, 2012, the Company had 200,000 shares of Series A convertible preferred stock issued and outstanding.

Note 12 – Warrant and Derivative Liabilities

Under authoritative FASB Accounting Standards Codification guidance pertaining to whether an instrument (or embedded feature) is indexed to an entity’s own stock, instruments that do not have fixed settlement provisions are deemed to be derivative instruments. The conversion feature embedded derivative that extinguished in 2011 and the embedded derivative related to exchange rate settlement differentials of the Company’s convertible note (described in Note 7), the related warrants issued with the convertible note, and the warrants issued in connection with Series A convertible preferred stock do not have fixed settlement provisions because their conversion and exercise prices are denominated in USD, which is a currency other than the Company’s functional currency, RMB. Additionally, the Company was required to include the reset provision in order to protect the holders from potential dilution associated with future financings. In accordance with the FASB authoritative guidance, the conversion feature embedded derivative and exchange rate settlement differential embedded derivative of the Convertible Notes were separated from the host contract (i.e. the Convertible Notes) and recognized as derivative liabilities in the balance sheet, and the derivatives associated with warrants issued in connection with the Convertible Notes and Series A preferred stocks have been recorded as warrant liabilities in the balance sheet to be re-measured at the end of every reporting period with changes in fair value reported in the consolidated statements of income and other comprehensive income.

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As of September 30, 2011, the conversion feature expired on the formerly convertible debt and there is no longer any conversion term on the modified loan.

The derivative liabilities were valued using both the Black-Scholes and Binomial valuation techniques with the following assumptions. We calculated the fair value of the derivative liability related to the formerly convertible notes on exchange rate at repayment versus exchange rate at loan origination differential, which relates to the repayment of the notes and is distinct and separate from the embedded derivative liability formerly recorded for the now-expired conversion feature, based on the following key assumptions. As at September 30, 2012, the fair value of derivative liabilities associated with convertible notes was $0 as the terms of exchange rate differential payment expired on September 29, 2012. Accordingly, the amount to be paid due to the exchange difference in the principal was $20,107, which was recorded in accrued expenses and other liabilities as of September 30, 2012.

Derivative liability from convertible notes	December 31, 2011			September 30, 2012
Estimated forward rate		6.34			-
Discount rate		0.64	%		-
Discount factor		0.995			-
Fair value	$	21,274		$	-

Derivative liability associated with warrants issued in connection with convertible notes:

	December 31, 2011			September 30, 2012
Number of shares exercisable		1,388,889			1,388,889
Stock price		0.38			0.30
Exercise price		1.8			1.8
Expected dividend yield (d)		-			-
Expected life (in years) (c)		2.39			1.64
Risk-free interest rate (a)		0.32	%		0.21	%
Expected volatility (b)		61	%		60	%
Fair Value:
Derivative liability - warrants issued in connection with Convertible Notes		20,920			8,188

(a) The risk-free interest rate is based on U.S. Treasury securities with compatible life terms.

(b) Due to the short trading history of the Company’s stock, the Company uses the volatility of comparable guideline companies to estimate volatility.

(c) The expected life of the conversion feature of the notes was based on the term of the notes and the expected life of the warrants was determined by the expiration date of the warrants.

(d) The expected dividend yield was based on the fact that the Company has not paid dividends to common shareholders in the past and does not expect to pay dividends to common shareholders in the future.

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Note 13 - Stock-Based Compensation

Stock Option Plan

In September 2008, the board of directors approved the Company’s Stock Option Plan and granted 335,000 options to acquire the Company’s common stock at $2.90 per share to five non-employee directors and consultants under the 2008 Plan. The option plan was revised and approved at the shareholders’ meeting as of November 20, 2011 (there were no significant changes impacting valuation or accounting for share based compensation). Detailed terms of the plan are described as follows with each grant.

Stock Options

On June 24, 2009, the Company appointed one independent director and granted him stock options to purchase 500,000 shares of the Company’s common stock. The options will vest and become exercisable in eight equal installments evenly spread out during the three year period beginning from July 1, 2009. On September 7, 2009, the Company appointed another independent director and granted her a stock option to purchase 60,000 shares of the Company’s common stock; these options fully vested by October 2011. Unvested options shall be terminated and forfeited upon the termination of a holder’s director status.

On June 7, 2011, the Board of Directors resolved to modify these option grants and adjusted the exercise price of one incumbent director’s options from $1.22 to $0.73 per share and another director’s options from $1.58 to $0.73 per share. The Board also resolved to accelerate the vesting period of one retired director, such that all the shares underlying the option were deemed vested as of June 7, 2011. The total incremental compensation cost in respect of such acceleration and option modification was $202,106, which was recorded in the second quarter of 2011.

On June 13, 2011, with the resignation of two former directors, the Company appointed another two directors and granted them both stock options to purchase 60,000 shares of the Company’s common stock. The options will vest and become exercisable in eight equal quarterly installments evenly spread out during the two year period beginning from July 1, 2011. Unvested options shall be terminated and forfeited upon the termination of a holder’s director status.

The Company used the Black-Scholes Model to value the options at the time they were granted. The following table summarizes the assumptions used in the Black-Scholes Model when calculating the fair value of the options at the grant dates (for 2011, as there were no grants in 2012).

Fair value per share	$ 0.39- $ 0.47
Expected Term(Years)	4.00-5.56
Exercise Price	$0.73
Expected Volatility	72%-76%
Risk Free Interest Rate	1.16%-1.82%

Since the Company does not have sufficient applicable history of employee stock options activity, the Company uses the simplified method to estimate the life of the options by taking the sum of the vesting period and the contractual life and then calculating the midpoint which is the estimated term of the options.

For the three months ended September 30, 2011 and 2012, the Company recognized $12,090 and $7,067 of compensation expense, respectively. For the nine months ended September 30, 2011 and 2012, the Company recognized $253,158 and $21,200 of compensation expense, respectively.

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Following is a summary of the status of options outstanding at September 30, 2012:

Outstanding Options						Exercisable Options
				Remaining						Remaining
Exercise				contractual		Exercise				contractual
price		Number		term (years)		price		Number		term (years)
$	0.73		60,000		7.00	$	0.73		60,000		7.00
$	0.73		500,000		6.75	$	0.73		500,000		6.75
$	0.73		60,000		8.75	$	0.73		37,500		8.75
$	0.73		60,000		8.75	$	0.73		37,500		8.75
	Total		680,000						635,000

Following is a summary of the option activity:

Outstanding as of  December 31, 2010	560,000
Granted	120,000
Forfeited	-
Exercised	-
Outstanding as of  December 31, 2011	680,000
Granted	-
Forfeited	-
Exercised	-
Outstanding as of  September 30, 2012	680,000
Vested and exercisable as of September 30, 2012	635,000

Note 14– Interest Expense, Net

For a detailed discussion of borrowings and balances underlying interest expense, see Note 7. Interest income recorded for Zhenjiang Kailin’s and Jiangsu SOPO long term accounts receivable accretion, which is the cause of increases in interest income for the comparative periods, is further described in Note 14.

	Three months ended September 30,
	2011			2012
Interest on current portion of long term loan	$	161,651			179,06
Interest on long-term loans		12,825			-
Amortization of deferred financing costs		66,919			-
Accretion to face value on loans		40,535			53,401
Interest on short-term loans and letters of credit		98,370			278,855
Debt issue cost amortization		-			7,747
Bank note discount interest		566			30,141
Expense of exchange rate differential payment in relation to formerly convertible debt		-			20,107
Interest capitalized		(6,829	)		(12,304	)
Interest income		(3,637	)		(500,312	)
Total	$	370,400			56,703

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	Nine months ended September 30,
	2011			2012
Interest on current portion of long term loan	$	484,745			520,817
Interest on long-term loans		200,476			-
Amortization of deferred financing costs		215,623			-
Accretion to face value on loans		198,584			149,055
Expense of common stock issued in relation to long term loan		144,498			-
Common stock issued in relation to consulting services		40,308			-
Interest on short-term loans and letters of credit		224,492			797,240
Debt issue cost amortization		-			7,747
Bank note discount interest		84,744			87,055
Warrant cancellation		(15,547	)		-
Expense of exchange rate differential payment in relation to formerly convertible debt		-			20,107
Interest capitalized		(6,829	)		(55,382	)
Interest income		(225,430	)		(940,116	)
Total	$	1,345,664			586,523

Note 15 – Other Non-operating Income (Expense), Net

Other non-operating expenses consist primarily of foreign exchange losses on purchasing transactions.

	For the three months ended September 30,
	2011			2012
	(Note 2(v))
Foreign exchange losses		578,086			152,652
Other non-operating income		(908,627	)		(80,035	)
Total other non-operating expenses (income), net		(330,541	)		72,617

	For the nine months ended September 30,
	2011			2012
	(Note 2(v))
Foreign exchange losses (gains)		972,277			(96,090	)
Other non-operating income		(898,691	)		(163,386	)
Total other non-operating expenses (income), net		73,586			(259,476	)

As further described in Note 2(v), foreign exchange losses were adjusted for 2011 quarterly periods pursuant to a restatement of the Company’s quarterly financial statements for the first, second, and third quarters of 2011.

The transaction gains for the three and nine months ended September 30, 2012 arose as a result of cash advances made for purchase transactions in which goods were acquired outside of mainland China and imported to the Company’s onshore PRC subsidiaries. Appreciation of the U.S. dollar against the RMB over the nine months ended September 30, 2012 led to an increase in the RMB value of purchased goods subsequently received relative to the asset already recorded for the refundable purchase advance, resulting in gains as the RMB value of assets physically received exceeded the RMB value of the refundable purchase advances originally recorded.

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Other non-operating income mainly consisted of subsidy income received by CER Yangzhou from a research and development fund from the Yizheng industrial park. This subsidy income is not tied to any specific element of the business, and cannot be reclaimed by the research and development fund.

Note 16 – Related Party Transactions

On February 1, 2010, Mr. Qinghuan Wu arranged for a $1,000,000 loan from Haide, a company controlled by Mr. Qinghuan Wu, to the Company. The proceeds of this loan were used by CER Yangzhou for additional paid-in capital which helped fund the Company’s new plant in Yangzhou, China. The loan bore interest at the annual rate of 9.5% and was unsecured. The Company paid the sum of $23,750 at the end of every three calendar months. The principal is due in full on January 30, 2012; hence the remaining loan is classified as long-term loan to be repaid within one year. Shanghai Engineering has subordinated its loan to those under the loan agreements. The Company repaid principal of $460,000 in December 2010. On October 10, 2011, CER paid the remaining outstanding principal and interest of $548,550 under the long-term loan.

On October 20, 2011, CER (Hong Kong) entered into an advanced payment agreement amounting to $669,800 with Haide, a company controlled by Mr. Qinghuan Wu. The substance of this arrangement was a short term borrowing from a related party. Pursuant to the agreement, Haide on behalf of CER (Hong Kong) paid to certain vendors $450,000 on October 20, 2011 and $219,800 on November 1, 2011, respectively. The terms of the agreement provide for zero interest. CER (Hong Kong) repaid $550,000 to Haide on November 25, 2011. As of September 30, 2012, the remaining balance of $119,800 was recorded in accrued expenses and other liabilities.

In March 2012, Mrs. Jialing Zhou, a significant shareholder and wife of Mr. Qinghuan Wu, provided an interest-free loan of RMB 1,900,000 (approximately $251,856) to Shanghai Engineering by several installments. The total amount was repaid as of September 30, 2012.

Zhenjiang Kailin EPC project

On January 8, 2011, CER signed a contract for the design, manufacture, and installation of a major waste heat recovery system with Zhenjiang Kailin Clean Heat Energy Co., Ltd. (“Zhenjiang Kailin”) of Zhenjiang City. The contract was valued at RMB 300 million (approximately $46 million), including the engineering part of RMB 8 million (approximately $1 million), procurement part of RMB 240 million (approximately $37 million) and construction part of RMB 52 million (approximately $8 million). The system, which is now completed, is part of a new sulfuric acid plant and is capable of producing up to 122 tons of steam-per-hour at 485° C and 5.4 MPa from operations at the plant. Transactions between CER and Zhenjiang Kailin are presented as related party transactions because the Chairman, Chief Executive Officer and majority shareholder of Green Asia Resources, Inc. (“Green Asia”), the parent company of Zhenjiang Kailin, is the owner of a significant creditor, Hold and Opt Investments Limited (as discussed in Note 7, Short-Term Loans) and is a less than 5% shareholder of CER, our executive officers own, as a result of a private placement and prior consulting arrangement, a small number (less than 1%) of shares in Green Asia, and, that at the time the contract was signed, a less than 5% shareholder of both CER and Green Asia was a member of CER’s Board of Directors. Management of each company is different and the directors at Green Asia and Zhenjiang Kailin are independent of CER. For the three and nine months ended September 30, 2012, revenue earned from the contract amounted to $12,672 and $6,660,158, respectively.

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Guarantees related to Zhenjiang Kailin project

On November 25, 2011, CER Yangzhou entered into the first of two guaranty contracts regarding the Zhenjiang Kailin contract with third party CGN Energy Service Co., Ltd. (“CGN Energy”). CER Yangzhou and Zhenjiang Kailin agreed to engage CGN Energy to provide financing for a portion of the project contract price. CER sold certain equipment integral to the project to CGN Energy at a price of RMB24.1 million (approximately $3.82 million). As the financing party, CGN Energy resold the equipment to Zhenjiang Kailin via a structured payment arrangement covering a 24 month period. The substance of this transaction is Zhenjiang Kailin obtaining financing from third party CGN Energy to pay CER. CER Yangzhou entered into a guaranty contract with CGN Energy for the equipment sold, which was installed in the sulfuric acid waste heat recovery project. If there is any default by Zhenjiang Kailin, the first in guarantee order is Zhenjiang Kailin’s pledge for payment of its structured note with CGN Energy. The second in guarantee order is Jiangsu SOPO, a third party customer of CER and related party of Zhenjiang Kailin. Third in guarantee order is CER Yangzhou, which provided CGN Energy with an unconditional and irrevocable guarantee with joint responsibility to ensure that Zhenjiang Kailin will fulfill the duties and responsibilities to pay CGN Energy on time under the project contract. The amount of the guarantee, RMB 24.1 million, represents 7.8% of the RMB300 million project price.

On March 20, 2012, CER and Zhenjiang Kailin agreed to engage CGN Energy to provide financing for another portion of the project contract price (similar to the financing arrangement with CGN Energy in 2011). CER sold certain equipment integral to the project to CGN Energy at a price of RMB30 million (approximately $4.8 million). As the financing party, CGN Energy resold the equipment to Zhenjiang Kailin via a structured payment arrangement covering a 24 month period. CER Yangzhou also entered into a second guaranty contract with CGN Energy for the equipment sold, which was installed in the sulfuric acid waste heat power generation project. The guarantee contract is of the same character as the first financing arrangement, Zhenjiang Kailin’s pledge for payment of its structured note with CGN Energy is in the first guarantee order, Jiangsu SOPO in second guarantee order and CER Yangzhou in the third guarantee order, which provided CGN Energy with an unconditional and irrevocable guarantee with joint responsibility to ensure that Zhenjiang Kailin will fulfill the duties and responsibilities to pay CGN Energy on time under the project contract. The amount of the guarantee, RMB 30 million, represents 10% of the RMB 300 million project price.

On October 18, 2012, CER (Yangzhou) entered into a guaranty contract with Zhenjiang Kailin and CGN Energy in connection with a third financing for Zhenjiang Kailin project (similar to the financing arrangement with CGN Energy in 2011). CER Shanghai and Shanghai Engineering signed two contracts to sell certain equipment integral to the Zhenjiang Kailin sulfuric acid waste heat power generation project to CGN Energy each at a price of RMB9.9 million (approximately $1.57 million), for a total amount RMB 19.8 million (approximately $3.14 million). As the financing party, CGN Energy resold the equipment to Zhenjiang Kailin via a structured payment arrangement covering a 30 month period at a price of RMB23.4 million ( approximately $3.7 million).

There are no other guarantees for any other elements of the Zhenjiang Kailin project. The Company assessed the arrangement under SAB 104 revenue recognition criteria and concluded the criteria, particularly the criterion regarding collectability being reasonably assured, were met. As a similar guaranty could be obtained from a third party financial institution and performance of the contract is probable, the Company separated the deliverable represented by the guaranty from the rest of the contract price and recognized the initial fair value of the guaranty liability arising from the guaranty contract as deferred revenue based on the quote guarantee fee percentage for loans with similar terms from financial institutions. As of September 30, 2012, the deferred revenue was $154,273. This amount will be amortized to revenue according to applicable GAAP accounting requirements as the underlying structured payment obligation is satisfied by Zhenjiang Kailin’s payments to CGN Energy. As of September 30, 2012, Zhenjiang Kailin has made all required payments to CGN Energy in compliance with the payment schedule.

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Zhenjiang Kailin EPC project penalty and upgrade contract

On May 8, 2012, CER and Zhenjiang Kailin entered into an agreement whereby CER was to pay Zhenjiang Kailin RMB 8.9 million (approximately $1.5 million) as a penalty (“the penalty”) for the economic losses suffered by Zhenjiang Kailin resulting from project delays past the originally expected completion date of December 31, 2011. The original contract for the construction of the facility did not contain any provisions for late completion or liquidated damages. As part of this agreement, CER agreed to assume additional costs to bring the capacity of the sulfuric acid waste heat recovery system to original specifications and to install additional electric utilities. The penalty payment is included in the accrued expenses and other liabilities as of September 30, 2012.

Also, subsequent to the first quarter, on the same date, the two parties also signed an upgrade contract for the same facility valued at RMB 8 million (approximately $1.2 million). The purpose of the enhancements contemplated in this contract was to raise the capacity of the system from 800k tons to 900k tons of sulfuric acid per year. This enhancement project was completed at the end of May 2012 and permits $1.2 million of additional billings which are included in current accounts receivable on an undiscounted basis.

Zhenjiang Kailin payment schedule and discounting of receivables

As further described in Note 3 regarding accounts receivable, subsequent to March 30, 2012 CER and Zhenjiang Kailin agreed to revise the payment schedule of outstanding accounts receivable (excluding the enhancement project completed at the end of May 2012 described in the preceding section, for which receivables are current in nature) as below. These amounts represent undiscounted payments.

Maturity date	Amount due
December 31, 2012		4,773,300
June 30, 2013		2,863,980
September 30, 2013		3,182,200
December 31, 2013		3,338,521
Total		14,158,001

As further described in CER’s filing on Form 10-Q for the quarter ended March 31, 2012, the undiscounted payments depicted in the foregoing table were discounted pursuant to applicable accounting guidance, with the discount, which represented an apportionment of the total agreed contract value to future interest income rather than revenue, reflected in revenue for the quarter then ended.

In August 2012, including discussions with Zhenjiang Kailin, it was determined that the first payment would be delayed to December 2012. Zhenjiang Kailin only begun to generate cash flow commencing in May 2012 due to the delayed opening of its facility following CER’s completion thereof and required extra time to pay by December 2012. There were no other payment installments that were subject to delay, and based upon an evaluation of all the facts and circumstances, including consideration of the counterparty’s financial flexibility and liquidity, the Company determined that it expected to fully collect all amounts due over the revised payment schedule. After considering the further extension of the first installment payment to December 31, 2012, the Company reassessed the discount impact applicable to this payment extension using the original interest rate of 10.65% (which considered the risk free rate and Zhenjiang Kailin’s credit risk) and reflected the related discount about of $161,871 in the remaining project revenue. The discounts reflected as reductions to revenue in the statement of operations arising from this extension of payment terms were $0 and $1,703,369 for the three and nine months ended September 30, 2012, respectively; the accretion for interest income included in interest income was $661,093 for the nine months ended September 30, 2012 (there was no accretion for the quarter ended March 31, 2012 due to the timing of the repayment agreement). Of the total balance of $14,396,913 of accounts receivable at September 30, 2012, $2,951,128 represented the non-current balance due from Zhenjiang Kailin which is to be collected in over one year; the remaining $11,445,785 is included in current receivables.

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Pursuant to applicable construction contract accounting and other accounting guidance, the additional $1.2 million of revenue for the system upgrade project, the $1.5 million penalty for economic losses incurred by CER’s customer, and the discount effects arising from the payment term extensions were added to (or subtracted from, for the latter two items) the total contract revenue for the Zhenjiang Kailin project. The Company re-assessed all developments regarding this project, including the two guaranty arrangements entered into and the extensions afforded to Zhenjiang Kailin for remaining payments, under SAB 104 revenue recognition criteria and concluded the criteria, particularly the criterion regarding collectability being reasonably assured, were met. Accordingly, the deferred revenue related to the guaranty arrangements, and the discounts reflected in revenue for the payment extensions afforded to Zhenjiang Kailin, will be reflected as future interest income. As of August 2012, CER management concluded, on the basis of discussions with and evaluation of the counterparty’s financial viability and financing sources, that repayment was not significantly in question, but will continue to monitor the counterparty’s financial viability. Further supporting management’s conclusions was the fact that Zhenjiang Kailin has made required payments to date on a timely basis, excluding only the August installment delay.

For the three and nine months ended September 30, 2012, revenue earned from the contract amounted to $12,672 and $6,660,158. The cost of revenues associated with the original contract and the additional agreements entered into was $0 and $8,500,010 for the three and nine months ended September 30, 2012. The revenue, less the discount effects reflected in revenue and penalty assumed reflected in revenue, was not fully offset by the additional revenue agreed to; further, additional incurred costs reduced the margin on the project to negative 28% for the nine months ended September 30, 2012.

Note 17 – Retirement Benefits

As stipulated by the relevant laws and regulations applicable to enterprises operating in the PRC, the Company and its PRC subsidiaries and affiliates are required to maintain a defined contribution retirement plan for all of its employees who are residents of the PRC. The Company contributes to a statutory government retirement plan approximately 22% of the base salary of each of its employees and has no further obligations for the actual pension payments or post-retirement benefits beyond the annual contributions. The statutory government retirement plan is responsible for the entire pension obligations payable for all past and present employees.

The Company made contributions of $108,269 and $140,734 for employment benefits, including pension payments for the three months ended September 30, 2011 and 2012, respectively. The Company made contributions of $222,427 and $417,509 for employment benefits, including pension payments for the nine months ended September 30, 2011 and 2012, respectively.

Note 18 – Statutory Reserves

As stipulated by the relevant laws and regulations applicable to enterprises operating in the PRC, the Company and its PRC subsidiaries and affiliates are required to make annual appropriations to a statutory surplus reserve fund. Specifically, the Company is required to deposit 10% of its profits after taxes, as determined in accordance with the PRC accounting standards applicable to the Company, to a statutory surplus reserve until such reserve reaches 50% of the registered capital of the Company.

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The transfer to these reserves must be made before distribution of any dividends to shareholders. For the years ended December 31, 2011, there were $376,794 of transfers to statutory reserves for these subsidiaries and affiliates of the Company generating profits. Statutory reserves were $509,596 as of December 31, 2011 and September 30, 2012.

The surplus reserve fund is non-distributable other than during liquidation and can be used to fund previous years' losses, if any, and may be utilized for business expansion or converted into share capital by issuing new shares to existing shareholders in proportion to their shareholding or by increasing the par value of the shares currently held by them, provided that the remaining reserve balance after such issue is not less than 50% of the registered capital.  The remaining required contributions to the statutory reserves required were approximately $ 8,015,475 as of September 30, 2012.

Note 19 – Commitments and Contingencies

Subsequent to the first quarter, on May 8, 2012, CER and Zhenjiang Kailin entered into an agreement whereby CER will pay Zhenjiang Kailin RMB 8.9 million (approximately $1.5 million) as a penalty for the economic loss suffered by Zhenjiang Kailin resulting from project delays past the originally expected completion date of December 31, 2011. The penalty is included in accrued expenses and other liabilities. See Note 16 for further details.

Note 20 – Subsequent events

On October 15, 2012, CER Shanghai began to repay RMB 900,000 per month to Shanghai Pudong Zhanjiang Micro-credit Co., Ltd. under the loan contract of RMB 10 million described in Note 7. The loan carries an annual interest rate of 12% and the due date of the loan is February 20, 2013.

On October 18, 2012, CER (Yangzhou) entered into a guaranty contract with Zhenjiang Kailin and CGN Energy in connection with a third financing for Zhenjiang Kailin project (similar to the financing arrangement with CGN Energy in 2011). CER Shanghai and Shanghai Engineering signed two contracts to sell certain equipment integral to the Zhenjiang Kailin sulfuric acid waste heat power generation project to CGN Energy each at a price of RMB9.9 million (approximately $1.57 million), for a total amount RMB 19.8 million (approximately $3.14 million). As the financing party, CGN Energy resold the equipment to Zhenjiang Kailin via a structured payment arrangement covering a 30 month period at a price of RMB23.4 million ( approximately $3.7 million). CER Yangzhou entered into a guaranty contract with CGN Energy for the equipment sold, which was installed in the sulfuric acid waste heat power generation project. If there is any default by Zhenjiang Kailin, the first in guarantee order is Zhenjiang Kailin’s pledge for payment of its structured note with CGN Energy. The second in guarantee order is Jiangsu SOPO, a third party customer of CER and related party of Zhenjiang Kailin. Third in guarantee order is CER Yangzhou, which provided CGN Energy with an unconditional and irrevocable guarantee with joint responsibility to ensure that Zhenjiang Kailin will fulfill the duties and responsibilities to pay CGN Energy on time under the waste heat power generation project contract.

On October 22, 2012, CER entered into an extension to continuation and loan arrangement with Hold And Opt Investments Limited, effective as of September 29, 2012 (“Loan Date”). At the Loan Date, both principal and interest due under the loan agreement remained outstanding. The extended maturity date for the Loan Amount is November 30, 2012, with a grace period not to extend beyond December 15, 2012. CER shall make a mandatory prepayment of $3,000,000 by no later than November 10, 2012. CER repaid $2,000,000 on October 31, 2012 and the other $1,000,000 is expected to be repaid with the remaining principal in the next quarter. The outstanding principal and interest amount under this extension agreement shall bear interest at a rate of 1.5% per month, commencing on the Loan Date, and continuing until the principal is paid in full. 

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On October 25, 2012, CER Yangzhou entered into a one-year short term loan contract to borrow RMB 5,000,000 (approximately $793,059) with China Construction Bank, Yizheng Branch. The loan carries an annual interest rate of 6.3%. The term of the loan commence from October 25, 2012 to October 24, 2013. This loan is guaranteed by CER Shanghai, and collateralized by a mechanical equipment book valued at RMB 20,171,625 owned by CER Yangzhou.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains disclosures which are forward-looking statements. Forward-looking statements include all statements that do not relate solely to historical or current facts, such as, but not limited to, the discussion of economic conditions in market areas and their effect on revenue growth, the discussion of our growth strategy, the potential for and effect of future governmental regulation, fluctuation in global energy costs, the effectiveness of our management information systems, and the availability of financing and working capital to meet funding requirements, and can generally be identified by the use of words such as "may," "believe," "will," "expect," "project," "estimate," "anticipate," "plan" or "continue." These forward-looking statements are based on the current plans and expectations of our management and are subject to certain risks and uncertainties that could cause actual results to differ materially from historical results or those anticipated. These factors include, but are not limited to: the general economic conditions that may affect our customers desire or ability to invest in energy recovery systems; the cost of raw materials; the availability of environmental credits; the positive and adverse effect of governmental regulation affecting energy recovery systems; our reliance on customers in heavy industry, such as chemicals and steel production, and state owned or controlled enterprises; competition in the industry of heat and energy recovery systems; the availability of and costs associated with potential sources of financing; difficulties associated with managing future growth; our ability to increase manufacturing capacity to meet demand; fluctuations in currency exchange rates; restrictions on foreign investments in China; uncertainties associated with the Chinese legal system; the loss of key personnel; and our ability to attract and retain new qualified personnel.

These forward-looking statements speak only as of the date of this Quarterly Report on Form 10-Q. Except as required by law, we undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise

Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations

Overview

China Energy Recovery, Inc. (the "Company," "we," "us," or "our") is headquartered in Shanghai, China, and, through its subsidiaries and affiliates, is in the business of designing, fabricating, implementing and servicing industrial energy recovery systems. The Company's energy recovery systems capture industrial waste energy for reuse in industrial processes or to produce electricity and thermal power, thereby allowing industrial manufacturers to reduce their energy costs, shrink their emissions and generate sellable emissions credits. All of the manufacturing takes place at the Company's manufacturing facility in Yangzhou, China. The Company transports the manufactured systems in parts via truck, train or ship to the customers' facilities where the systems are assembled and installed. The Company has primarily sold energy recovery systems to chemical manufacturing plants to reduce their energy costs by increasing the efficiency of their manufacturing equipment. The Company mainly sells its energy recovery systems and services directly to customers.

On January 24, 2008, we entered into a Share Exchange Agreement (the "Share Exchange Agreement") with Poise Profit International, Ltd. ("Poise Profit") and the shareholders of Poise Profit. Pursuant to the Share Exchange Agreement, we acquired 100% of the issued and outstanding shares of Poise Profit's common stock in exchange for the issuance of 41,514,179 (pre reverse split) shares of our common stock to the shareholders of Poise Profit. The share exchange (the "Share Exchange") transaction was consummated on April 15, 2008.

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As a result of the Share Exchange, our business operations consist of those of Poise Profit's Chinese subsidiary, Hi-tech, which were subsequently transferred to CER Hong Kong on December 3, 2008. CER Hong Kong is principally engaged in designing, marketing, licensing, fabricating, implementing and servicing industrial energy recovery systems capable of capturing industrial waste energy for reuse in industrial processes or to produce electricity and thermal power.

CER Hong Kong carries out its operations through its subsidiaries CER Shanghai and CER Yangzhou and an affiliated entity (variable interest entity (“VIE”)) with which CER Hong Kong has a contractual relationship, Shanghai Engineering. Effective as of May 1, 2003, Shanghai Engineering's manufacturing activities were carried out by Vessel Works Division located in Shanghai, China, through a lease agreement with Vessel Works Division's owner, which was terminated April 2011. From May 2011, all of our production is carried out in CER Yangzhou, where we completed the first phase of construction of the plant by January 2011. The term “Company” refers to the group of companies described above.

The energy recovery systems that we produce capture industrial waste energy for reuse in industrial processes or to produce electricity and thermal power, which allow industrial manufacturers to reduce a portion of their energy costs, shrink their emissions and potentially generate saleable emissions credits. We have primarily sold energy recovery systems to chemical manufacturing plants to reduce their energy costs by increasing the efficiency of their manufacturing equipment and help control their pollution output. We have installed more than 140 energy recovery systems throughout China and in a variety of international markets.

In September 2011, the State Council issued the work plan for fulfilling the target of energy savings and emissions reduction during the PRC’s 12th five year plan for national economic development. The work plan addressed the importance of energy savings in industries such as coal, fossil fuels, paper manufacturing, and chemicals. The work plan also specified heat or pressure recovery as one of the projects especially encouraged and supported by the government.

Facing a possible large market opportunity and potential government support, we decided to enlarge our production capacity by setting up a new production base. Our plan is to establish CER Yangzhou as a world-class international manufacturing facility of waste heat equipment, in both products and technology. We plan to make highly efficient energy-saving products, using advanced manufacturing processes and equipment, We intend for this manufacturing facility to embody a completely new look of a modern factory, thus making the Company more competitive, while promoting the development of the local economy and further exploiting the manufacturing advantages in renewable energy equipment and waste heat recovery core equipment. In January 2011, Phase One construction of the plant was completed. The Phase One facility is about 14,000 square meters. Many technologically advanced pieces of equipment have been installed in the new factory. The new facility significantly expands our ability to accept new orders and will speed delivery of large-scale waste heat systems for new and retro-fitted industrial plants located in China and other international markets overseas. Phase Two is under construction.

With Phase One of the new facilities completed, we are prepared to expand our customer base and enter into more sectors. We expect to incur separate (unrelated to any particular customer project) research and development expenditures to support an expansion into new sectors, such as coke refining and cement, including adding more specialized skills to our engineering and design team. We are also planning on entering into marketing partnerships and licensing deals that should enable us to reach a boarder segment of the market. We believe that there is significant opportunity in international markets and we intend to enter these markets through partnerships.

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On January 8, 2011, CER signed an EPC contract for a major waste heat recovery system with Zhenjiang Kailin, a related party of CER. The contract was valued at RMB 300 million (approximately $46 million). This project was fully completed by June 30, 2012.

During 2011 and of the first three quarters of 2012, the demand for energy recovery systems significantly recovered in response to a series of factors, including the recovery of the global economy, especially the Chinese economy, government support, the implementation of incentive policies for energy savings industries, and increasing availability of financing. With our new manufacturing facility in operation and our ability to perform more EPC contracts, based on our currently signed contracts, forecasts and production schedule, we anticipate positive results in the next few years.

Critical Accounting Policies and Estimates

While our significant accounting policies are more fully described in Note 2 to our Notes to the Consolidated Financial Statements in this Quarterly Report on Form 10-Q, we believe that the accounting policies described below are the most critical to aid you in fully understanding and evaluating this management discussion and analysis. Management believes that there are certain accounting estimates and management judgments that have greater influence on the financial statements, including the process of determining percentage completion on EPC project contracts, allowances for doubtful accounts, provisioning for inventory, measurement of deferred taxes and related valuation allowances, and various fair value measurements. The most critical policies are discussed further herein and in Note 2 to the financial statements.

Revenue Recognition

The Company derives revenues principally from

(a) Provision of Engineering, Procurement and Construction ("EPC") services, which are essentially turnkey contracts where the Company provides all services in the whole construction process from design, development, engineering, manufacturing, and procurement to installation;

(b) Sales of energy recovery systems; and

(c) Provision of design services.

In accordance with the accounting standard regarding performance of construction-type and certain production-type contracts, and long-term construction-type contracts, the Company adopted the percentage of completion method to recognize revenues and cost of sales for EPC contracts. EPC contracts are long-term, complex contracts involving multiple elements, such as design, manufacturing and installation, which all form one integral EPC project. The energy recovery system involved in an EPC project is highly customized to the specific customer's facilities and essentially not transferable to any other facilities without significant modification and cost. It would be difficult, if not impossible, to beneficially use a single element of a specific EPC project on a standalone basis other than in connection with the facilities for which it was intended. EPC contracts are by nature long-term construction-type contracts, usually lasting more than one accounting period, and the Company is able to reasonably estimate the progress toward completion, including contract revenues and contract costs. EPC contacts specify the customers' rights to the goods, the consideration to be paid and received, and the terms of payment. Specifically, the Company has the right to require a customer to make progress payments upon completion of determined stages of the project which serve as evidence of the customer's approval and acceptance of the work completed to date as complying with the terms of the particular EPC contract.

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Sales of the Company's energy recovery systems and related products are essentially product sales. The products consist mainly of waste heat boilers and other related equipment manufactured according to specific customers' specifications. Once manufactured, the Company ships the products to its customers in their entirety in one batch. The Company’s service arrangement also includes a limited warranty to its customers pursuant to which the customers retain between 5% and 10% of the particular contract price as retainage during the limited warranty period (usually 12-18 months). The Company generally recognizes revenues including retainage from product sales when (i) persuasive evidence of an arrangement exists, which is generally represented by a contract between the Company and the customer; (ii) products are shipped; (iii) title and risks of ownership have passed to the customer, which generally occurs at the time of delivery; (iv) the customer accepts the products upon a quality inspection performed by them; (v) the purchase price is agreed to between the Company and the customer; and (vi) collectability is reasonably assured. Net revenues represent the invoiced value of products, less returns and discounts, and are net of value-added tax.

In providing design services, the Company designs energy recovery systems and other related systems based on a customer's requirements and the deliverable consists of engineering drawings. The customer may elect to engage the Company to manufacture the designed system or choose to present the Company's drawings to other manufacturers for manufacturing and installation. The Company recognizes revenues from design services when the services are provided, the design drawings are delivered, invoices are issued and collectability is reasonably assured. The Company generally delivers the drawings in one batch.

Consolidation of Variable Interest Entities

In accordance with U.S. GAAP, variable interest entities are generally entities that lack sufficient equity to finance their activities without additional financial support from other parties or whose equity holders lack adequate decision making ability. Each variable interest entity with which the Company is affiliated must be evaluated to determine who the primary beneficiary of the risks and rewards of ownership of the variable interest entity. The primary beneficiary is required to consolidate the variable interest entity's financial information for financial reporting purposes.

We have concluded that Shanghai Engineering is a variable interest entity and that CER Hong Kong is the primary beneficiary thereof. Pursuant to the contractual arrangements described elsewhere in this filing on Form 10-Q, the Company recovers substantially all of the profits of its VIE through service fees charged (particularly under the consulting and service agreement) and has the unilateral ability to do so through its wholly owned subsidiaries. Accordingly, through such contractual arrangements, the Company (as applicable, through wholly-owned subsidiaries) has the power to direct the activities most significant to the economic performance of the VIE and absorbs all, or substantially all, of the profits or losses; therefore, the Company is the primary beneficiary. Under the requirements of the FASB’s accounting standard regarding VIEs, CER Hong Kong consolidates the financial statements of Shanghai Engineering. As all companies are under common control (see Note 1 to our consolidated financial statements), the consolidated financial statements have been prepared as if the arrangements by which these entities became variable interest entities had occurred retroactively. We have eliminated inter-company items from our consolidated financial statements.

Fair Value Measurements

The accounting standard regarding fair value measurements defines financial instruments and requires fair value disclosures for those financial instruments. The fair value standard also establishes a three-level valuation hierarchy for disclosures of fair value measurement and enhances disclosure requirements for fair value measurements.  The carrying amounts reported in the accompanying consolidated balance sheets for current assets and current liabilities such as cash, restricted cash, accounts and notes receivable, long term accounts receivable, short term loans, accounts payable, and other payables qualify as financial instruments. Management concluded the carrying values of these financial instruments are reasonable approximations of their respective fair values because of the short period of time between the origination of such instruments and their expected realization and the current market rates of interest.  The three levels of the valuation hierarchy are defined as follows:

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¨	Level 1	Inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.
¨	Level 2	Inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the assets or liabilities, either directly or indirectly, for substantially the full term of the financial instruments.
¨	Level 3	Inputs to the valuation methodology are unobservable and significant to the fair value. Inputs reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date. Consideration is given to the risk inherent in the valuation technique and the risk inherent in the inputs to the model.

Recent Accounting Pronouncements

In December 2011, the FASB issued ASU 2011-11, Balance Sheet (Topic 210): Disclosures about Offsetting Assets and Liabilities (ASU 2011-11). This newly issued accounting standard requires an entity to disclose both gross and net information about instruments and transactions eligible for offset in the statements of financial position as well as instruments and transactions executed under a master netting or similar arrangement and was issued to enable users of financial statements to understand the effects or potential effects of those arrangements on their financial position. This ASU is required to be applied retrospectively and is effective for fiscal years, and interim periods within those years, beginning on or after January 1, 2013. As this accounting standard only requires enhanced disclosure, the adoption of this standard is not expected to have an impact on the Company’s financial position.

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Results of Operations

Comparison of Three Months Ended September 30, 2011 and September 30, 2012

The following table sets forth the results of our operations for the periods indicated as a percentage of revenues:

	Three months ended September 30,
	2011			% of Revenue			2012			% of Revenue
REVENUES
Third parties
EPC - third parties		16,600,366			56.5	%		16,758,871			80.0	%
EPC - related party		10,563,393			35.9	%		12,672			0.1	%
Total EPC revenues		27,163,759			92.4	%		16,771,543			80.1	%
Products - third parties		2,222,699			7.6	%		4,176,683			19.9	%
Total revenue		29,386,458			100.0	%		20,948,226			100.0	%
COST OF REVENUES
Cost of revenues – EPC		(22,691,015	)		(77.2	)%		(13,736,857	)		(65.6	)%
Cost of revenues - products		(1,607,384	)		(5.5	)%		(2,930,514	)		(14.0	)%
Total cost of revenues		(24,298,399	)		(82.7	)%		(16,667,371	)		(79.6	)%
GROSS PROFIT		5,088,059			17.3	%		4,280,855			20.4	%
Selling, general, and administrative expenses		(2,490,222	)		(8.5	)%		(2,650,738	)		(12.7	)%
INCOME FROM  OPERATIONS		2,597,837			8.8	%		1,630,117			7.8	%
OTHER INCOME / (EXPENSE):
Change in fair value of derivative liability for warrant		248,332			0.8	%		(4,651	)		(0.0	)%
Change in fair value of derivative liability for loan		72,764			0.2	%		-			-
Other non-operating (expenses) income, net		330,541			1.1	%		(72,617	)		(0.3	)%
Investment income		-						-			-
Interest expense, net		(370,400	)		(1.3	)%		(56,703	)		(0.3	)%
Total other income (expense), net		281,237			1.0	%		(133,971	)		(0.6	)%
INCOME BEFORE TAXES		2,879,074			9.8	%		1,496,146			7.1	%
BENEFIT / (PROVISION) FOR INCOME TAXES		(600,661	)		(2.0	)%		(595,527	)		(2.8	)%
NET INCOME		2,278,413			7.8	%		900,619			4.3	%
OTHER COMPREHENSIVE INCOME (LOSS):
Foreign currency translation adjustment		458,788			1.6	%		344,248			1.6	%
COMPREHENSIVE INCOME		2,737,201			9.3	%		1,244,867			5.9	%

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 Revenues. Revenue was $20,948,226 for the three months ended September 30, 2012, as compared to $29,386,458 for the three months ended September 30, 2011, a decrease of $8,438,231 or 29%. This decrease was mainly due to the decrease in average revenue per EPC and product contracts. Although the number of EPC contracts increased by 1 from 8 for the three months ended September 30, 2011 to 9 for the three months ended September 30, 2012, the average revenue recognized per EPC contract decreased by $1,522,525, from $3,395,470 per contract for the three months ended September 30, 2011 to $1,872,945 per contract for the three months ended September 30, 2012. This was mainly due to three of these projects carried out in the third quarter of 2012 were in the stage of completion and settlement, which resulted in less revenue being recognized for the three months ended September 30, 2012. Further, one significant EPC contract signed with a related party in mid-2010, Zhenjiang Kailin, lasting more than one year from early 2011 to mid-2012, which lead to more than $10 million of revenue for the three months ended September 30, 2011, accounting for 35% of the total revenue at that time, whereas none was recognized in the comparable period of 2012 due to the project has been completed as of June 30, 2012. Largely offsetting the above effect is one significant EPC contract signed with third party Ningbo Xinfu in early 2011, which is a general contract containing engineering, construction, electric, and water supply and drainage engineering components related to the entire HRS system valued at RMB 175.32 million (approximately $27.8 million). Due to the large size of the project and more complicated technology requiring more time for design and purchasing, this project did not commence activities until the first quarter of 2012. For the three months ended September 30, 2012, revenues amounting to $4.8 million were recognized and accounted for 28% of the total EPC revenues, with no such amount in the comparable period of 2011.

Although the number of product contracts increased by 10 from 4 to 14 for the three months ended September 30, 2011 versus the three months ended September 30, 2012, the average revenue per product contract decreased by $263,409 from $555,675 for the three months ended September 30, 2011 to $292,266 for the same period of 2012. This is mainly a result of the strategy of the Company, which put more focus on EPC projects than product sales since the beginning of this year. The continuing global economic downturn also contributed to market prices lower than the comparable period of 2011.

An analysis of the revenues is as follows:

	Three months ended September 30,
	2011		2012		Change ($)			Change (%)
Average Revenue per Contract
EPC		3,395,470		1,872,945		(1,522,525	)		(45	)%
Products	$	555,675		292,266		(263,409	)		(47	)%
Average Revenue per Contract	$	3,951,145		2,165,211		(1,785,934	)		(45	)%
Number of Contracts Completed
EPC		8		9		1			13	%
Products		4		14		10			250	%
Total Number of Contracts Completed		12		23		11			92	%

Cost of Revenues. Cost of revenues decreased to $16,667,371 for the three months ended September 30, 2012, as compared to $24,298,399 for the three months ended September 30, 2011, a decrease of $7,631,028, or 31%. The absolute decrease is consistent with the decrease of revenue. As a percentage of revenues, cost of revenues decreased from 82.7% for the three months ended September 30, 2011 to 79.6% for the three months ended September 30, 2012, a decrease of 3.1%. The largest driver of total gross margin is that we shifted production into our new manufacturing facility and began to incur anticipated lower costs related to our new facility which lowers the cost of revenue. The gross profit margin on EPC contracts increased from 16.5% for the three months ended September 30, 2011 to 18.0% for the three months ended September 30, 2012, an increase of 1.5%, mainly due to one big EPC contracts for customer Wuxi Gelin, undertaken in early 2012, which made up 21% of total EPC revenue, having a high margin of around 20%. Furthermore, one significant EPC contract for customer Zhenjiang Kailin, commencing from early 2011 to mid-2012, which made up 39% of total EPC revenue for the three months ended September 30, 2011, bears a relatively lower profit margin of 15% (excluding the impact of discounted revenue and penalty at that time) considering the contract value is very high. In addition, the gross profit margin on product sales increased from 27.7% to 30.5% owing to two export contracts which had higher margins.

51

The following table sets forth the analysis of cost of revenues and margin:

	Three months ended September 30,
	2011			2012
Cost of Revenues:
EPC		22,691,015			13,736,857
Products		1,607,384			2,930,514
Total Cost of Revenues	$	24,298,399			16,667,371
Gross Margin:
EPC		16.5	%		18.0	%
Products		27.7	%		30.5	%
Gross Profit Margin		17.3	%		20.4	%

Gross Profit. Gross profit was $4,280,855 for the three months ended September 30, 2012, as compared to $5,088,059 for the three months ended September 30, 2011, a decrease of $807,203 or 16%.  The gross margins were 17.3% and 20.4%, respectively, for the three months ended September 30, 2011 and 2012.  The higher gross profit is mainly due to the higher margin from product contracts.

Selling, General and Administrative Expenses. Selling, general and administrative expenses increased to $2,650,738 for the three months ended September 30, 2012, as compared to $2,490,222 for the three months ended September 30, 2011, an increase of $ 160,516 or 6%. Selling, general and administrative expenses, as a percentage of revenues, increased from 8.5% for the three months ended September 30, 2011 to 12.7% for the three months ended September 30, 2012, an increase of 4.2%. This increased effect as a percentage of sales resulted from the lower business and sales volume for the three months ended September 30, 2012 compared to the same period of 2011 when compared to costs which are less variable than sales. The absolute increase is mainly due to the effect of higher salaries as well as increased administration fees, offset by decreases in consulting service fee and traveling and transportation fee. Firstly, salary expenses increased by $267,647 or 25% for the three months ended September 30, 2012 as compared to the same period in 2011, as a result of additional administration staff needed for the new plant in Yangzhou, the addition of top and middle level management, and gradual increases in personnel salaries. Secondly, administration fees increased by $123,248, which is mainly due to the increase of import agent fee and customs clearance charges resulted from more goods imported from oversees. Thirdly, offsetting the above increases is a large decrease in consulting service fees and traveling and transportation fees, which is consistent with reducing of business volume.

The following table sets forth the principal changes in selling, general and administrative expenses:

	Three months ended September 30,
	2011		2012		Change($)			Change (%)
Salary expenses		1,051,779		1,319,426		267,647			25	%
Administration fees		161,264		284,512		123,248			76	%
Consulting service fee		396,392		180,591		(215,801	)		(54	)%
Traveling and transportation fee		471,872		307,213		(164,659	)		(35	)%
Subtotal		2,081,307		2,091,742		10,435			1	%

Income from Operations. As a result of the above, income from operations totaled $1,630,117 for the three months ended September 30, 2012, as compared to income of $2,597,837 for the same period in 2011, a decrease of $967,719, or 37%. As a percentage of revenues, income from operations represents 7.8% of total revenue for the three months ended September 30, 2012 and 8.8% for the three months ended September 30, 2011. The change is mainly attributable to the decrease in gross profit and the increase of administrative expenses.

52

Other Income / (Expense), net. For the three months ended September 30, 2012, the Company incurred other expense of $133,971 as compared to other income of $281,237 for the three months ended September 30, 2011, an absolute difference of $415,208, as further described in the next three paragraphs.

Change in fair value of derivative liabilities for warrants and loan - This resulted from the valuation of warrants and derivative liabilities. The $321,096 gain recognized in the third quarter of 2011 was due to significant declines in the Company's stock price, whereas a smaller loss of $4,651 was recognized in 2012 as the related contracts approached maturity.

Non-operating Income/(expenses), net – During the three months ended September 30, 2011, CER received a subsidy income $1,022,984 through CER Yangzhou from a research and development fund from the Yizheng industrial park while there is only $89,000 for the three months ended September 30, 2012. The subsidy income is not tied to any specific element of the business, and cannot be reclaimed by the research and development fund. Meanwhile, during the three months ended September 30, 2011, CER purchased imported equipment via advance payments to suppliers through the holding company CER Hong Kong, which then resold the equipment to mainland PRC inter-company subsidiaries (CER Shanghai and CER Yangzhou). With RMB appreciation against the US dollar from RMB6.47 to $1 to RMB6.35 to $1 over the three months ended September 30, 2011, an exchange loss of $578,086 was realized for the three months ended September 30, 2011 due to the large amount of import transactions related to CER Yangzhou, whereas due to the appreciation of RMB against USD from RMB6.35 to $1 to RMB6.28 to $1 over the three months ended September 30, 2012, an exchange loss of $152,652 was realized for the three months ended September 30, 2012.

Interest Expense, net - Interest expense was $56,703 for the three months ended September 30, 2012, as compared to interest expense of $370,400 for the three months ended September 30, 2011, a decrease of $313,697. This decrease was mainly due to the net-off impact of interest income recorded for Zhenjiang Kailin accounts receivable accretion, which is further described in Note 14.

Income From Operations Before Income Taxes. As a result of the foregoing, income before provision for income taxes was $1,496,146 for the three months ended September 30, 2012, as compared to income of $2,879,074 for the three months ended September 30, 2011, a decrease of $1,382,927 or 48%.

Income Tax Benefit/(Expense). The normal applicable income tax rate for the operating entities in China is 25%. Pursuant to the PRC income tax laws, Shanghai Engineering and CER Shanghai are subject to enterprise income tax at a statutory rate of 15% and 12.5% respectively as the high technology entities. For the three months ended September 30, 2012, the Company incurred $595,527 of income tax provision, as compared to an income tax provision of $600,661 for the three months ended September 30, 2011, an absolute change of $5,134.

For the quarter ended March 31, 2012, the Group’s Hong Kong subsidiary, CER (Hong Kong), had, for the first time, estimated taxable profits earned in the PRC. CER (Hong Kong) also has estimated taxable profits in the PRC for the quarter ended September 30, 2012. As such, CER (Hong Kong) is likely to be regarded under the PRC tax laws as having permanent establishment for business activities carried out in the PRC, and would be subject to PRC tax at the standard EIT rate of 25%. For the quarter ended September 30, 2012, given the Group is likely to be regarded as having permanent establishment, CER (Hong Kong) provided taxes, included in the consolidated tax provision, of $294,431. The primary reason for CER (Hong Kong)’s generation of taxable income was the non-deductibility, under PRC tax law, of a $1.5 million expense incurred for a penalty payment to an EPC construction contract related party customer which is further described in Note 16 and income tax for the intra-entity sales of the subsidiary’s shares further described in Note 1. This tax provision, as well as increases in PRC tax expense for the Group’s profitable subsidiaries, were primarily responsible for the significant increase in the Group’s effective tax rate for the quarter ended September 30, 2012 as compared to the quarter ended September 30, 2011.

53

Net Income Net income was $900,619 for the three months ended September 30, 2012, as compared to a net income of $2,278,413 for the three months ended September 30, 2011, a decrease of $1,377,793, or 60%. The decreased net income primarily attribute to the lower revenue and gross profit.

Comparison of Nine Months Ended September 30, 2011 and September 30, 2012

The following table sets forth the results of our operations for the periods indicated as a percentage of revenues:

	Nine months ended September 30,
	2011			% of Revenue			2012			% of Revenue
REVENUES
Third parties
EPC - third parties		23,265,280			42.3	%		59,901,966			78.3	%
EPC - related party		23,631,431			42.9	%		6,660,158			8.7	%
Total EPC revenues		46,896,711			85.2	%		66,562,124			87.0	%
Products - third parties		8,139,632			14.8	%		9,940,102			13.0	%
Total revenue		55,036,343			100.0	%		76,502,226			100.0	%
COST OF REVENUES
Cost of revenues – EPC		(39,309,553	)		(71.4	)%		(57,508,410	)		(75.2	)%
Cost of revenues - products		(6,257,642	)		(11.4	)%		(7,196,772	)		(9.4	)%
Total cost of revenues		(45,567,195	)		(82.8	)%		(64,705,182	)		(84.6	)%
GROSS PROFIT		9,469,148			17.2	%		11,797,044			15.4	%
Selling, general, and administrative expenses		(6,366,370	)		(11.6	)%		(7,336,024	)		(9.6	)%
INCOME FROM  OPERATIONS		3,102,778			5.6	%		4,461,020			5.8	%
OTHER INCOME / (EXPENSE):
Change in fair value of derivative liability for warrant		1,164,122			2.1	%		14,618			0.0	%
Change in fair value of derivative liability for loan		396,482			0.7	%		21,274			0.0	%
Other non-operating (expenses) income, net		(73,586	)		(0.1	)%		259,476			0.3	%
Investment income								2,972			0.0	%
Interest expense, net		(1,345,664	)		(2.4	)%		(586,523	)		(0.8	)%
Total other income (expense), net		141,354			0.3	%		(288,183	)		(0.4	)%
											-
INCOME BEFORE INCOME TAXES		3,244,132			5.9	%		4,172,837			5.5	%
BENEFIT / (PROVISION) FOR INCOME TAXES		(580,566	)		(1.1	)%		(1,544,712	)		(2.0	)%
NET INCOME		2,663,566			4.8	%		2,628,125			3.4	%
OTHER COMPREHENSIVE INCOME (LOSS):
Foreign currency translation adjustment		766,370			1.4	%		120,696			0.2	%
COMPREHENSIVE INCOME		3,429,936			6.2	%		2,748,821			3.6	%

54

 Revenues. Revenue was $76,502,226 for the nine months ended September 30, 2012, as compared to $55,036,343 for the nine months ended September 30, 2011, an increase of $21,465,883 or 39%. This increase was mainly due to the increase in the average revenue recognized per EPC contract and the increase in the number of EPC and product contracts. The average revenue per EPC contract increased by $529,416, from $3,908,059 per contract for the nine months ended September 30, 2011 to $4,437,475 per contract for the nine months ended September 30, 2012. This was mainly due to one significant EPC contract signed with third party Ningbo Xinfu in early 2011, which is a general contract containing engineering, construction, electric, and water supply and drainage engineering components related to the entire HRS system valued at RMB 175.32 million (approximately $27.8 million). Due to this large project with more complicated technology requiring more time for design and purchasing activities, this project did not commence until the first quarter of 2012. For the nine months ended September 30, 2012, revenues amounting to $14.9 million were recognized and accounted for 22% of the total EPC revenues, with no such amount in the comparable period of 2011. Further, a new contract with a third party customer, Jiangsu SOPO, commenced in the first half of 2012, which led to $8.3 million of revenue in the first half of 2012, accounting for 12% of the total EPC revenue. Also contributing to the increase in total revenues and revenue per EPC contract were two new large contracts with third party customers, for which EPC revenues of $9.1 million and $4.5 million were recognized for the nine months ended September 30, 2012, respectively, with no such amounts in the comparable prior period. Offsetting the above increase is one significant EPC contract signed with a related party in mid-2010, Zhenjiang Kailin, lasting more than one year from early 2011 to mid-2012, for which the revenue amounted to $24 million for the nine months ended September 30, 2011, whereas $6.7 million was recognized in the comparable period of 2012 due to the completion of the project. In addition, the average revenue per product contract decreased by $69,890 from $452,202 for the nine months ended September 30, 2011 to $382,312 for the same period of 2012. This is mainly a result of the Company to focus more on EPC projects and strategy to generate more profit on EPC projects.

An analysis of the revenues is as follows:

	Nine months ended September 30,
	2011		2012		Change ($)			Change (%)
Average Revenue per Contract
EPC		3,908,059		4,437,475		529,416			14	%
Products	$	452,202		382,312		(69,890	)		(15	)%
Average Revenue per Contract	$	4,360,261		4,819,787		459,526			11	%
Number of Contracts Completed
EPC		12		15		3			25	%
Products		18		26		8			44	%
Total Number of Contracts Completed		30		41		11			37	%

55

Cost of Revenues. Cost of revenues increased to $ 64,705,182 for the nine months ended September 30, 2012, as compared to $45,567,195 for the nine months ended September 30, 2011, an increase of $19,137,987, or 42%. The absolute increase is mostly consistent with the increase of revenue. As a percentage of revenues, cost of revenues increased from 82.8% for the nine months ended September 30, 2011 to 84.6% for the nine months ended September 30, 2012, an increase of 1.8%. As the largest driver of total gross margin, the gross profit margin on EPC contracts decreased from 16.2% for the nine months ended September 30, 2011 to 13.6% for the nine months ended September 30, 2012, mainly due to the two big EPC contracts for customers Zhenjiang Kailin and Jiangsu SOPO, which made up 22% of total EPC revenue. The gross margin for the Zhenjiang Kailin project decreased to a negative 28% for the nine months ended September 30, 2012 (as further discussed in Note 16 to the Company’s Consolidated Financial Statements) while the Jiangsu SOPO contract gross margin was about 11% (such contract is a normal construction contract which is not related to energy saving activities). Offsetting the gross margin impact from EPC contracts, the gross profit margin on product sales increased from 23.1% to 27.6% as we shifted production into our new manufacturing facility and began to incur anticipated lower costs related to our new facility. Owing to a focus on EPC contracts (which comprise almost 90% of revenue) from late 2011, the revenue from EPC contracts accounted for a greater proportion of total revenue; however, such contracts have lower margins than product contracts.

The following table sets forth the analysis of cost of revenues and margin:

	Nine months ended September 30,
	2011			2012
Cost of Revenues:
EPC		39,309,553			57,508,410
Products		6,257,642			7,196,772
Total Cost of Revenues	$	45,567,195			64,705,182
Gross Margin:
EPC		16.2	%		13.6	%
Products		23.1	%		27.6	%
Gross Profit Margin		17.2	%		15.4	%

Gross Profit. Gross profit was $11,797,044 for the nine months ended September 30, 2012, as compared to $9,469,148 for the nine months ended September 30, 2011, an increase of $2,327,896 or 25%.  The gross margins were 17.2% and 15.4%, respectively, for the nine months ended September 30, 2011 and 2012. The lower gross profit is mainly due to the lower margins generated from EPC contracts, which accounted for a larger proportion of total revenue.

56

Selling, General and Administrative Expenses. Selling, general and administrative expenses increased to $7,336,024 for the nine months ended September 30, 2012, as compared to $6,366,370 for the nine months ended September 30, 2011, an increase of $969,654 or 15%. Selling, general and administrative expenses, as a percentage of revenues, decreased from 11.6% for the nine months ended September, 2011 to 9.6% for the nine months ended September 30, 2012, a decrease of 2%. This decrease as a percentage of sales resulted from the larger business and sales volume for the nine months ended September 30, 2012 compared to the same period of 2011 when compared to costs which are less variable than sales. The absolute increase is mainly due to the effect of higher salaries as well as increased depreciation and amortization expense, offset by decreases in administration and option fees, consulting service fee as well as option amortization fees. Firstly, salary expenses increased by $1,400,782 or 58% for the nine months ended September 30, 2012 as compared to the same period in 2011, as a result of additional administration staff needed for the new plant in Yangzhou, the addition of top and middle level management, and gradual increases in personnel salaries. Secondly, depreciation and amortization expenses increased by $268,498, mainly due to the new office building which was purchased in June 2011 in Shanghai, and the purchase of more office equipment and software. Thirdly, offsetting the above increases is a decrease in administrative expense of $344,692 due to the Company incurring one-time costs in the closing of its former production facility, which generated total removal charges and transfer costs of $135,000 and the opening costs for the Yangzhou plant which amounted to $150,000 in early 2011. Furthermore, the property title deed tax of approximately $220,000 for the new office building in Shanghai incurred in June 2011 also contributed to the decrease of administration fees. Fourthly, consulting service fee decreased by $237,253 because, as our business is maturing, we have hired more full-time employees and relied less on consultants. Fifthly, option expense decreased by $231,958 because of the modification of options granted under the Company’s Option Plan in June 2011, when the Board of Directors resolved to adjust the exercise price of two Directors’ options from $1.22 to $0.73 per share and options from $1.58 to $0.73 per share. The Board also resolved to accelerate the vesting period of one Director’s options from 3 years to 2 years, such that all the shares underlying the option were deemed vested as of June 7, 2011. The modification of the options pursuant to US GAAP required the Company to record any incremental fair value arising from the modification as compensation cost. The total incremental compensation cost in respect of such acceleration and option modification is $202,106, with no such amounts in the current period.

The following table sets forth the principal changes in selling, general and administrative expenses:

	Nine months ended September 30,
	2011		2012		Change($)			Change (%)
Salary Expenses		2,423,788		3,824,570		1,400,782			58	%
Depreciation and amortization expense		303,245		571,743		268,498			89	%
Consulting service fee		761,325		524,071		(237,253	)		(31	)%
Option amortization		253,157		21,200		(231,958	)		(92	)%
Administration fee		1,083,423		738,731		(344,692	)		(32	)%
Subtotal		4,824,938		5,680,315		855,377			18	%

Income from Operations. As a result of the above, income from operations totaled $4,461,020 for the nine months ended September 30, 2012, as compared to income of $3,102,778 for the same period in 2011, an increase of $1,358,242, or 44%. As a percentage of revenues, income from operations represents 5.8% of total revenue for the nine months ended September 30, 2012 and 5.6% for the nine months ended September 30, 2011. The change is mainly attributable to the increase in gross profit.

Other Income / (Expense), net. For the nine months ended September 30, 2012, the Company incurred other expense of $288,183 as compared to other income of $141,354 for the nine months ended September 30, 2011, an absolute difference of 429,537, as further described in the next three paragraphs.

Change in fair value of derivative liabilities for warrants and loan - This resulted from the valuation of warrants and derivative liabilities. The $1,560,604 gain recognized in the first three quarters of 2011 was due to significant declines in the Company's stock price, whereas a smaller gain of $35,892 was recognized in 2012 were due to small increases in the Company's stock price as the related contracts approached maturity.

57

Non-operating Income/(expenses), net – During the nine months ended September 30, 2011, CER received a subsidy income $1,022,984 by CER Yangzhou from a research and development fund from the Yizheng industrial park compared to only $168,555 for the nine months ended September 30, 2012. The subsidy income is not tied to any specific element of the business, and cannot be reclaimed by the research and development fund. Meanwhile, during the nine months ended September 30, 2011, CER purchased imported equipment via advance payments to suppliers through the holding company CER Hong Kong, which then resold the equipment to mainland PRC inter-company subsidiaries (CER Shanghai and CER Yangzhou). With RMB appreciation against the US dollar from RMB 6.62 to $1 to RMB 6.35 to $1 over the nine months ended September 30, 2011, an exchange loss of $972,277 was realized for the nine months ended September 30, 2011 due to the large amount of import transactions related to CER Yangzhou, whereas due to the appreciation of RMB against USD from RMB 6.30 to $1 to RMB 6.28 to $1 over the nine months ended September 30, 2012, an exchange loss of $96,090 was realized for the nine months ended September 30, 2012.

Interest Expense, net - Interest expense was $586,523 for the nine months ended September 30, 2012, as compared to interest expense of $1,345,664 for the nine months ended September 30, 2011, a decrease of $759,141. This decrease was mainly due to slightly lower average long term loan balances borrowed mostly for trade financing and working capital and interest income recorded for Zhenjiang Kailin accounts receivable accretion, which is further described in Note 14.

Income From Operations Before Income Taxes. As a result of the foregoing, income before provision for income taxes was $4,172,837 for the nine months ended September 30, 2012, as compared to income of $3,244,132 for the nine months ended September 30, 2011, an increase of $928,705 or 29%.

Income Tax Benefit/(Expense). The normal applicable income tax rate for the operating entities in China is 25%. Pursuant to the PRC income tax laws, Shanghai Engineering and CER Shanghai are subject to enterprise income tax at a statutory rate of 15% and 12.5%, respectively, as the high technology entities. For the nine months ended September 30, 2012, the Company incurred $1,544,712 of income tax provision, as compared to an income tax provision of $580,566 for the nine months ended September 30, 2011, an absolute change of $964,146.

For the quarter ended March 31, 2012, the Group’s Hong Kong subsidiary, CER (Hong Kong), had, for the first time, estimated taxable profits earned in the PRC. CER (Hong Kong) also has estimated taxable profits in the PRC for the quarter ended June 30 and September 30, 2012. As such, CER (Hong Kong) is likely to be regarded under the PRC tax laws as having permanent establishment for business activities carried out in the PRC, and would be subject to PRC tax at the standard EIT rate of 25%. For the nine months ended September, 2012, given the Group is likely to be regarded as having permanent establishment, CER (Hong Kong) provided taxes, included in the consolidated tax provision, of $732,592. The primary reason for CER (Hong Kong)’s generation of taxable income was the non-deductibility, under PRC tax law, of a $1.5 million expense incurred for a penalty payment to an EPC construction contract related party customer which is further described in Note 16 and income tax for the intra-entity sales of the subsidiary’s shares further described in Note 1. This tax provision, as well as increases in PRC tax expense for the Group’s profitable subsidiaries, were primarily responsible for the significant increase in the Group’s effective tax rate for the nine months ended September 30, 2012 as compared to the nine months ended September 30, 2011.

Net Income Net income was $2,628,125 for the nine months ended September 30, 2012, as compared to net income of $2,663,566 for the nine months ended September 30, 2011, a decrease of $35,441, or 1%. The decrease in net income is primarily attribute to CER (Hong Kong) tax provision.

58

Liquidity and Capital Resources

Our principal sources of liquidity have been cash provided by operations and borrowings from banks and other lenders, including related parties. Our principal uses of cash have been to finance working capital, facility expansions, and other capital expenditures, as well as repay borrowings. We anticipate these uses will continue to be our principal uses of cash in the future.

As at September 30, 2012, we had cash of $1.3 million and a working capital deficit of $31 million (24.2 million as of December 31, 2011). Current liabilities exceeded current assets by $20.6 million after excluding advances from customers and advances to suppliers. The primary driver of the increased working capital deficit was the $11 million extension of payment terms of accounts receivable for customers Zhenjiang Kailin and Jiangsu SOPO (resulting in a reclassification of current receivables to noncurrent receivables), which were disclosed in the Company’s Form 10-Q for the quarter ended March 31, 2012 and are also described in Notes 3 and 16 to the unaudited interim consolidated financial statements. Meanwhile, fewer new EPC orders were secured during the nine months ended September 30, 2012 resulting in $20.8 million and $10.1 million decreases in customer deposits and advance to suppliers, respectively, compared to the year-end. We have been in an overall all-in net current liability position since 2010 and have operated our business with such a net current liability position for two years while continuing to grow our customer base, contract backlog, and business. Two years of operating history provides historical evidence that we can utilize advances received from our customers to fund operations. Except for the Zhenjiang Kailin EPC project and Jiangsu SOPO dock project (see Note 3(b)), we generate cash from operations predominantly from advances from our EPC customers before we make advances to our suppliers. This provides a window of time for us to utilize the advances from customers as short term financing with free interest to contribute to operating cash flows.

Given the downturn of macro-economic environment in China, many potential customers have tightened or delayed their spending on capital expenditures. We are facing more intense market competition in the third quarter of 2012. As we do not want to accept low-margin orders now, newly secured orders have significantly decreased in the third quarter. As at September 30, 2012, the secured backlog for the coming year decreased from $74 million to $50 million mainly due to the execution of the contracts in third quarter. Besides, another two big domestic EPC projects amounting to $ 41 million are in proposal status.

For the Zhenjiang Kailin project and SOPO dock project, we did not request significant advances from those customers, due to the close business relationships we have (see Note 16). We made such arrangements to balance our respective interests and keep long term strategic relationships. Subsequent to the first quarter, Jiangsu SOPO and CER entered into agreement to revise the payment schedule of outstanding receivables related to the SOPO dock project into 36 monthly installments of 3 years, starting from May 2012 and SOPO has made payments on schedule in the past 5 months, as further described in Note 3. Similarly, subsequent to the first quarter, Zhenjiang Kailin and CER also entered into an agreement to revise the payment schedule of outstanding receivables related to the Zhenjiang Kailin project, such that remaining payments related to the project are now due in December 2012, June 2013, September 2013, and December 2013. For more information, refer to Note 16.

Three month outlook

For the next three months, about $9.9 million of debt will come due based upon scheduled maturities; this includes a scheduled maturity (December 2012) of approximately $5 million for the Company’s long term loan from Hold and Opt Investments Limited (classified as the current portion of long term debt and further described in Note 7), which is an entity controlled by the Chairman and CEO of Green Asia Resources. CER was also owed approximately $5 million as an installment payment on accounts receivable by Zhenjiang Kailin, which is indirectly owned by Green Asia Resources, in August 2012 (further described in Note 16). CER expected to utilize the October receivable payment from Nuclear Energy to fund the debt payment to Hold and Opt.

59

To address the pressure on its short term financial position, on August 10, 2012, CER signed two contracts with China Great Wall Industry Corporation (“Great Wall”) for sales and repurchases of certain goods within a 6-month period which in substance are a product financing arrangement. According to these two agreements, CER (Yangzhou) will sell certain equipment to Great Wall at a price of RMB 32,454,780 (approximately $5,108,707). The funding to CER consists of three components, two of which are letters of credit totaling RMB 30,000,000; the rest is cash. At the same time, Great Wall agreed to resell the equipment to CER (Shanghai) at a price of RMB 33,038,966 (approximately $5,200,664) via a delayed collection arrangement as set forth below, where such amounts represent payments due from CER to Great Wall (or a bank, if the letters of credit are tendered for cash equal to the principal or face value less the bank’s discount)

	RMB		USD
December 20, 2012		10,180,000		1,619,740
March 15, 2013		20,360,000		3,239,480
April 7, 2013		2,498,965		397,610
Total		33,038,965		5,256,830

In substance, Great Wall is substituting its financing to provide letters of credit that CER may discount, and CER will discount the L/C in other banks as cash financing at the cost of discount fees, which would be reported as interest expense and usually represent 5% of the total amount. The price difference between sales and repurchase of the goods of RMB 584,185(approximately $91,957) represents interest to be paid to Great Wall. In addition, China Energy Recovery, Inc., the parent company, guaranteed the repayment of CER Shanghai. There is no other collateral in the contract.

With respect to the remaining $9.9 million of debt coming due in the fourth quarter, the Company expects that $5 million of cash will be required considering that $4.9 million is expected to be refinanced. For the cash requirements, management expects that further financing cash flows from Bank of China will provide adequate funds.

Twelve month outlook

Our forecasted cash flows for the forthcoming twelve months, which consider a range of possible outcomes, indicate that is possible that our cash resources may be exhausted. However, the Company is able to, and will, adjust and control capital expenditures and financing inflows in order to influence the core assumptions underlying this forecast, alleviate this pressure, and to raise sufficient funds for the Company to continue as a going concern. The key assumptions include, but are not limited to the following:

· A continued softening of the rate of growth of gross domestic product in the PRC and accompanying decisions by customers and potential customers to halt or slow their spending on construction projects (which has negatively affected our forecasted operating cash flows). Correspondingly, competition has increased, particularly in the most recent quarter;

· The assumption that if our cash flows and capital resources are insufficient to allow us to make scheduled payments on our indebtedness or to fund our other liquidity needs, we need to reduce or delay capital expenditures;

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· The assumption that we will continue to expend significant resources to continue and complete Phase II of our Yangzhou manufacturing plant;

· The assumption that existing debts which we plan to refinance can be refinanced on terms reasonably favorable to the Company; and

· The assumption that uncollateralized assets (particularly our uncollateralized land user rights associated with Phases I and II of our Yangzhou plant) can be collateralized to obtain new financing that will be used either for capital expenditures or to finance working capital.

We expect that net cash outflows from operations may be negative for the forthcoming twelve months, which takes into account the current macroeconomic environment and depressed margins, expected progress billings, expected margins, cash received in advance from customers, and cash to be expended for supplier advances, and the extension of payment terms on key receivables . By the end of September 2012, the Company has secured backlog of $50 million and two potential orders of $ 41 million in proposal stage. With or without taking the two potential orders into consideration, net operating cash flow is expected to be negative $6 million and negative $ 10 million in the subsequent four quarters, respectively.

Capital expenditures to continue and complete construction of our Yangzhou Phase II plant will require significant cash resources in the forthcoming 12 months, possibly as much as $20 million. Yangzhou Phase II is a capacity expansion project aligned to our goal to grow and fulfill EPC orders in the future. To a significant extent, higher future profit margins and ability to handle higher project and product volumes depend on the completion of this facility. We are seeking to obtain a borrowing (long-term loan) of $20 million from the Bank of China to be collateralized by the land use rights of Phase II and Plant of Phase I, which are currently uncollateralized, to finance this capacity expansion. However, consummation of this loan is not certain.

Management has significant ability to eliminate or delay capital expenditures (other than $7.2 million firmly committed as disclosed in the Contractual Obligations table in this section). Such actions would be taken if key developments threatening our cash flow assumptions occur (such as further reductions in forecasted operating cash flows, any inability to refinance existing debt, or any delay of long-term financing for Phase II of construction of the CER Yangzhou plant). Under a scenario where the in-progress financing with Bank of China is not obtained, management has the ability and business intention to use the land use rights of Phases I (completed) and II (in process) as collateral pledges to secure further borrowings.

As at September 30, 2012, the total interest-bearing debt balance was $22.3 million, including short-term bank loans of $17.3 million and a long-term loan due in December 2012 of $5 million. Except for the $5 million loan and $4.8 million product financing from Greatwall, all other debt was secured by tangible assets (mainly buildings and land use rights), bank acceptance notes, and was guaranteed by Mr. Wu (the controlling shareholder and CEO of CER). Management has obtained a letter of support from Mr. Wu to demonstrate his continuing commitments to CER by providing personal guarantees on all bank loans in 2012. With the support of Mr. Wu and tangible assets, management has confidence in resolving most of the existing debts in 2012. To the extent that factors underlying our core assumptions deteriorate further, we are able to eliminate or delay projected capital expenditures, and will consider further collateralization of existing available assets to try to obtain new financings, in an effort to have sufficient cash resources.

Given the uncertainties described above, we are considering all alternatives available to address our cash needs. There can be no assurance we will be able to satisfactorily address our cash needs, and if we are unable to do so it would have a material adverse effect on us and our financial condition and would raise substantial doubt about our ability to continue as a going concern.

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To improve our existing liquidity position, we are continuing our efforts to improve the collection of receivables and examine costs in an attempt to control or reduce expenses, all of which should have a positive effect on our working capital position and increase our cash resources. If these sources are insufficient to satisfy our cash requirements, we may seek to issue debt securities or additional equity or to obtain additional bank borrowings. The issuance of convertible debt securities or additional equity securities could result in additional dilution to our shareholders. The incurrence of indebtedness would result in increased debt service obligations and could result in operating and financial covenants that would restrict our operations and the placement of liens over some or all of our assets. We cannot assure that financing will be available in amounts or on terms acceptable to us, if at all.

The accompanying financial statements have been prepared assuming the Group will continue as a going concern. However, as of September 30, 2012, the Group reported a negative working capital balance of $31.3 million and had negative operating cash flows of $0.4 million for the nine months ended September 30, 2012. The Group expects such negative working capital to continue into the foreseeable future and will need to obtain new sales orders and additional financing to fund its daily operations. These factors raise substantial doubt about the Group’s ability to continue as a going concern. In order to continue its operations, the Group must obtain additional sales orders to achieve profitable operations, raise more funds, and/or curtail its capital expenditures. The Group implemented plans to postpone spending for capital expenditures and has been and continues to be in negotiations with several domestic banks in China and state-owned companies for additional financing. There can be no assurance, however, that such financing will be successfully completed or completed on terms acceptable to the Group. The Group’s plans of operations, even if successful, may not result in cash flow sufficient to finance and maintain its business. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. Please refer to Note 7 – Short Term Loans for additional information 

Cash Flows

The following table sets forth a summary of our cash flows for the periods indicated below:

	Nine months ended September 30,
	2011			2012
Net cash provided by/ (used in) operating activities	$	5,036,779			(352,824	)
Net cash used in investing activities		(11,339,373	)		(4,831,383	)
Net cash provided by financing activities		10,054,667			2,930,416
Effects of exchange rate change in cash		54,470			1,284
Increase (decrease) in cash		3,806,543			(2,252,507	)
Cash, beginning		2,996,076			3,579,446
Cash, ending	$	6,802,619			1,326,939

Operating Activities

Net cash used in operating activities was $352,824 for the nine months ended September 30, 2012 compared with net cash provided by operating activities of $5,036,779 for the nine months ended September 30, 2011. As of September 30, 2012, the cash balance was $1,326,939. Due to industry practice, the Company usually receives large customer deposits before starting projects and then makes payments to suppliers for purchases on a delayed basis, giving rise to a 2-3 month gap in which the Company can leverage the customer deposits interest free. For the nine months ended September 30, 2012, in relation to projects for customers Zhenjiang Kailin and Jiangsu SOPO, which accounted for 22% of total EPC revenue, CER paid money for purchases first but extended receivable payment terms, which had a negative effect on CER’s liquidity. Further, advances on purchases to suppliers and customer advances declined significantly as the Zhenjiang Kailin project and other projects were completed. Management expects the liquidity position will improve prospectively as CER has completed the Zhenjiang Kailin project and is approaching the completion stage of the Jiangsu SOPO project. This should lead to a position of net cash inflows (only inflows for collection of short and long term receivables as no outflows will be incurred).

Investing Activities

Net cash used in investing activities was $4,831,383 for the nine months ended September 30, 2012 compared to net cash used in investing activities of $11,339,373 for the nine months ended September 30, 2011. The change was mainly due to the expenditures incurred for the construction of CER Yangzhou plant (the more-intensive Phase I in the first quarter of 2011, and Phase II in the first half of 2012) and the purchase of an office building in Shanghai in the first half of 2011.

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Financing Activities

Net cash provided by financing activities was $2,930,416 for the nine months ended September 30, 2012 compared to net cash provided by financing activities of $10,054,667 for the nine months ended September 30, 2011, an absolute difference of $7,124,251. The Company drew down cash of $18.2 million from short term loans and repaid $15.3 million of short term loans in the first three quarter of 2012. In the comparable period of 2011, the Company repaid $3.26 million of long-term loans and $1.16 million of short-term loans according to the loan repayment schedule, while it drew down $14.4 million from short term loans and via discounting of letters of credit.

Capital Resources

The Company’s major capital injections have historically been through borrowings from banks or financial institutions. Amounts outstanding as of September 30, 2012 are listed in Note 7 to the Company’s Consolidated Financial Statements.

According to common practice of PRC banks, borrowers presenting proper collateral, especially real estate, with good credit, can usually get financing. Due to such unique practices and risk aversion in the banking industry, it is commonplace for short term financing to be secured by a borrower’s long term assets. The Company does not have any over collateralized assets and anticipates that its asset base, coupled with its credit standing and turnover in existing short term borrowings, will be sufficient to incur new borrowings as needed to meet the range of expected cash flow from financing activities.

Contractual Obligations

Tabular Disclosure of Contractual Obligations

The following table sets forth our contractual obligations as of September 30, 2012:

	Payment Due by Period
	Total		Less than 1 year		1-3 years
Short-term loans		22,331,836		22,331,836		-
Purchasing obligations		17,119,903		16,985,522		134,381
Capital investment obligations*		20,160,246		7,233,015		12,927,231
Total		59,611,985		46,550,373		13,061,612

*With the ongoing Phase Two construction of CER’s Yangzhou facility and other deployment needs, capital expenditures for 2012 are expected to range from $19 million to $21 million. The capital investment contractual obligation which cannot be terminated was about $7.233 million.

Off-Balance Sheet Arrangements

We have not entered into any other financial guarantees or other commitments to guarantee the payment obligations of any third parties. We have not entered into any derivative contracts that are indexed to our shares and classified as stockholders’ equity or that are not reflected in our consolidated financial statements. Furthermore, we do not have any retained or contingent interest in assets transferred to an unconsolidated entity that serves as credit, liquidity or market risk support to such entity. We do not have any variable interest in any unconsolidated entity that provides financing, liquidity, market risk or credit support to us or engages in leasing, hedging or research and development services with us.

Item 3 Quantitative and Qualitative Disclosures about Market Risk

Not required.

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Item 4 Controls and Procedures

Evaluation of Disclosure Controls and Procedures

The management team evaluated the effectiveness of our disclosure controls and procedures as of September 30, 2012. The term “disclosure controls and procedures,” as defined in Rule 13a-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, to allow timely decisions regarding required disclosure. Considering the material weaknesses previously reported in Item 9A, Controls and Procedures, of the Company’s Annual Report on Form 10-K filed March 30, 2012 for the year ended December 31, 2011, and based on the evaluation of our disclosure controls and procedures as of September 30, 2012, management concluded that, as of such date, our disclosure controls and procedures were not effective.

Changes in Internal Control over Financial Reporting

There have not been any changes in the Company’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal quarter ended September 30, 2012 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II

OTHER INFORMATION

Item 1 Legal Proceedings

We are not a party to and our property is not subject to any material pending legal proceedings nor are we aware of any threatened or contemplated proceeding by any governmental authority against the Company.

Item 1A Risk Factors

There have been no material changes to the risk factors previously disclosed in the Company's Annual Report on Form 10-K for the year ended December 31, 2011. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.

Item 2 Unregistered Sales of Equity Securities and Use of Proceeds

Item 703. Purchases of equity securities by the issuer and affiliated purchasers.

On December 22, 2011, the Company publicly announced a share repurchase program of up to $500,000 authorized by the Company’s board of directors for periodic repurchases of stock from time to time subject to applicable rules and regulations. The Company has not yet formally or constructively retired the re-purchased shares; as such, the cost of the shares at September 30, 2012 of $5,024 is presented as treasury stock in the unaudited interim consolidated financial statements.

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ISSUER PURCHASES OF EQUITY SECURITIES
Period	(a) Total Number of Shares (or Units) Purchased		(b) Average Price Paid per Share (or Unit)		(c) Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs		(d) Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs
April 1 to April 30, 2012		-		-		-	$	500,000
May1 to May 31, 2012		2,389		0.43		2,389	$	498,969
June 1 to June 30, 2012		510		0.36		510	$	498,788
July 1 to July 31, 2012		3,202		0.32		3,202	$	497,652
August 1 to August 31, 2012		2,386		0.38		2,386	$	496,716
Sep.1 to Sep. 30, 2012		4,745		0.35		4,745	$	494,976
Total		13,232		0.36		13,232	$	494,976

Item 3 Defaults upon Senior Securities

Not Applicable

Item 4 Mine Safety Disclosures

Not applicable.

Item 5 Other Information

None

Item 6 Exhibits

Exhibits:

10.1	Equipment procurement contract with Greatwall dated August 09, 2012
10.2	Equipment sales contract with Greatwall dated August 09, 2012
10.3	Integration credit agreement with Bank of Shanghai dated September 11, 2012
10.4	Zhenjiang Kailin Guarantee contract dated October 17, 2012
31.1	Certification of Chief Executive Officer Pursuant to Rules 13a-14 and 15d-14 of the Securities Exchange Act of 1934
31.2	Certification of Chief Financial Officer Pursuant to Rules 13a-14 and 15d-14 of the Securities Exchange Act of 1934
32.1	Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	CHINA ENERGY RECOVERY, INC.
November 14, 2012	By:	/s/ Qinghuan Wu
		Qinghuan Wu
		Chief Executive Officer

November 14, 2012	By:	/s/ Simon Dong
		Simon Dong
		Acting Chief Financial Officer (Principal Financial Officer)

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EX-10.1

Equipment procurement contract

Buyer: China Great Wall Industry Co. Ltd.

(中国长城工业集团有限公司)

Seller: CER Energy Recovery (Yangzhou) Co. Ltd.

(中江能源回收（扬州）有限公司)

Contract Number: 12GWITC-CG001

Signed Date: 2012-8-9

Signed place: Beijing

This contract is entered into by the below parties on August 09, 2012.

Seller: CER Energy Recovery (Yangzhou) Co. Ltd.

Address: No.100 Zhongjiang Road Automobile Industrial Park, Yizheng City, Jiangsu Province, China.

Buyer: China Great Wall Industry Co. Ltd.

Address: No. 88 Nancaiyuan Street Xicheng district, Beijing

Pursuant to “Contract Law of The People’s Republic of China” and related regulations, upon fully and friendly negotiated based on equality and free will between the two parties, both parties hereto agree as follows:

1. Definition :

“Contract” means this HRS Equipment Purchase Contract signed between the Buyer and the Seller, including all appendices.

“Total Price” means the sum price payable from the Buyer to the Seller under the Contract for the performance of its contractual obligations as given in Article 4.

“Product” and “Products” mean Seller’s proprietary HRS equipment, machinery, instruments, spare parts, tools, and other materials as described in contract which Buyer shall purchase from Seller under the terms and conditions of this Contract.

“Technical Documents” means all the technical drawings and documents issued by Seller in accordance.

“Effective Date of Contract” means the signature date of the Contract as set forth hereunder.

2. Product name, quantity and specification

Item	Product Name	Quantity		Unit Price		Price(RMB)
1	HRS boiler with steam drum		2		3,266,567.79		6,533,135.58
2	HRS boiler auxiliaries		2		858,599.29		1,717,198.58
3	HRS mist eliminators		2		2,489,762.04		4,979,524.08
4	HRS 1-stage distributor		2		2,776,461.91		5,552,923.82
5	HRS heater		2		1,963,355.21		3,926,710.42
6	HRS dilutor		2		2,771,758.70		5,543,517.40
7	HRS process analyzers		2		517,353.15		1,034,706.30
8	Lubrite Slide Plates		2		47,639.60		95,279.20
9	Steam Injection Chamber		2		344,902.10		689,804.20
10	Steam Injection Chamber		2		1,190,990.07		2,381,980.14

3. Contract Price

The Total Price of the Contract shall be RMB 32,454,779.72 (SAY RMB thirty two million four hundred fifty four thousand seven hundred and seventy nine point seven two).

The itemized unit price of this contract shall specify in this contract.

4. Payment Terms and Payment Schedule

4.1 Prepayment

The Buyer shall issue the irrevocable Letter of Credit in favor of the Seller within 15 calendar days from signature date of this contract, and the amount of L/C is RMB 10 million.

The Seller shall issue the corresponding amount of invoice of value added tax to the Buyer.

4.2 Progress payment

The Buyer shall issue the irrevocable Letter of Credit in favor of the Seller within 45 calendar days from signature date of this contract, and the amount of L/C is RMB 20 million.

The Seller shall issue the corresponding amount of invoice of value added tax to the Buyer and simultaneously provide the delivery order issued by carrier.

4.3 Delivery payment

The Buyer or designated party shall make the inspection and acceptance during delivery. When the Seller completes the installation and test as well as signed confirmation by two parties, within 30 calendar days from progress payment date, the Buyer shall make the delivery payment to the Seller via T/T, in the amount of RMB 2,454,779.72.

Seller’s bank details are as follows:

Company name: CER energy recovery (Yangzhou) Co. Ltd.

Account Bank: Bank of China, Yizheng branch

Account Number: 511858204774

5. Shipment and Delivery

5.1 Deliver the equipments via land carriage under this contract.

5.2 The Seller shall deliver the equipments to designated place within 60 calendar days from the signature date of this contract.

5.3 The Seller shall be responsible for the installation and test. The security management and responsibilities of security incidents shall be assumed by the Seller during test.

6. Quality Warranty

Subject to the Limitations of Article 9 and except as otherwise provided herein, Seller warrants title to the Products sold hereunder:

(1) In respect to the products, the Seller warrants, which are not subject to any encumbrance, and that they shall conform to Seller's specifications there for, and do not infringe upon the third party's intellectual property.

(2) Seller further warrants that the Products will be free from defects due to materials or workmanship until the expiration of the earlier of twelve (12) months from the date that acid is first introduced into the HRS Plant. If, within thirty (30) days after Buyer's discovery of any such defects, and, in any event, prior to the expiration of the Warranty Period, Buyer shall notify Seller thereof in writing, Seller shall, at its option promptly repair or replace, that portion of the Products found by Seller to be defective.

(3) During the Warranty Period, the equipment and/or materials to be supplied under Seller's warranty obligations, which is for repairing and/or replacing any defective items of the Products attributable to Seller’s faults, the Seller shall assume the expense of providing the equipment and/or materials during the range of warranty.

7. Settlement Ways of Quality Assurance

If Buyer finds defective items as specified in article 6, the Seller shall assume the corresponding responsibility.

The Seller has rights to address the quality assurance compensation event by the ways of following:

(1) Devalue the Products according to the degree of inferiority, extent of damage and amount of losses suffered by the Buyer.

(2) Repair or replace if needed, the defective Products partly or wholly with new parts, components or equipment which conforms to the specifications and quality as stipulated in this Contract. Buyer shall be responsible for the removal / installation costs.

8. Inspection

8.1 Before delivery, the Seller shall inspect the goods, issuing the inspection report and signing on it.

8.2 When delivery, the Buyer or Principal shall inspect the goods according to delivery list provided by the Seller.

8.3 When open-package inspecting, both parties shall confirm by signatures in respect to products’ quantity, model and external packing, if any dissent, both parties shall sign to confirm on the spot.

8.4 After the Seller completing the installation and test in accordance with the Buyer and this contract, both parties shall sign to confirm for the result of installation and test, if any dissent, both parties shall sign to confirm on the spot.

9. Default Responsibilities

9.1 If fails to make the payment before the maturity date as stipulated in this contract, the Buyer will assume the default responsibilities. In addition, the Seller still can charge an interest fee to Buyer, carrying a daily interest rate of 0.01% from the due date to actual payment date upon unpaid amount, but shall in no event exceed 5% of unpaid amount.

9.2 If fails to deliver the goods before the maturity date as stipulated in this contract, the Seller shall assume the corresponding default responsibilities. In addition, the Buyer still can charge an interest fee to Seller, carrying a daily interest rate of 0.01% from the stipulated delivery date to actual delivery date, but shall in no event exceed 5% of the amount of undelivered equipment.

10. Limitation of Liabilities

Seller’s aggregate total liability for any and all losses and damages arising out of any cause whatsoever shall in no event exceed the total contract price as listed in article 3.

11. Force Majeure

Where circumstances, which are beyond either Party’s reasonable control, cause delay in or failure of a Party’s performance of its obligations pursuant to this Contract, such Party shall not be considered in breach of this Contract or be liable to the other Party, and the term of implementation of such Party’s respective obligation may be extended accordingly. The aforementioned circumstances include, but shall not be limited to such cases which will affect the contract execution as natural disaster, war, unrest, fire, explosion, flood, strikes, port congestion, epidemic, enactment of new laws and acts of the government. When one party fails to perform or incompletely perform the obligations under this contract due to force majeure, shall inform the counter party of this contract within 15 calendar days from the date of force majeure occurred, and provided the corresponding evidence within 60 days. If one party fails to perform the obligations arising from force majeure, the involved party will be partly or fully exempted from liabilities, except as otherwise provided by law.

12. Disputes resolution

All disputes arising from the execution, performance or termination of or in connection with this Contract shall be settled amicably through friendly negotiation. In case no settlement can be reached through negotiation, the case shall then be finally resolved by submitting to China International Trading Arbitration Commission. The arbitration shall take place in Beijing and be conducted in Chinese language according to its procedures and rules of China International Trading Arbitration Commission and the law of the arbitration shall be the laws of China.

13. Others

The Contract is executed with four originals, two of which is held by Buyer and Seller, respectively. This Contract is effective from the date on which the sign and stamp.

( Signature page, no text )

Seller:

CER Energy Recovery (Yangzhou) Co., Ltd  ( Stamp )

The legal representative (authorized representative)

Buyer: China Great Wall Industry Co. Ltd. ( Stamp ) 

The legal representative (authorized representative)

EX-10.2

Equipments Sales Contract

Seller: China Great Wall Industry Co. Ltd.

(中国长城工业集团有限公司)

Buyer: CER Energy Recovery (Shanghai) Co. Ltd.

(中江能源回收（上海）有限公司)

Contract Number: 12GWITC-XS001

Signed Date: 2012-8-9

Signed place: Beijing

This contract is entered into by the below parties on August 09, 2012.

Seller: China Great Wall Industry Co. Ltd.

Address: No. 88 Nancaiyuan Street Xicheng district, Beijing

Buyer: CER Energy Recovery (Shanghai) Co. Ltd.

Address: Building#26, No. 1388 Zhangdong Road, Zhangjiang Hi-tech Park, Shanghai,China

Pursuant to “Contract Law of The People’s Republic of China” and related regulations, upon fully and friendly negotiated based on equality and free will between the two parties, both parties hereto agree as follows:

1. Definition :

“Contract” means this HRS Equipment Purchase Contract signed between the Buyer and the Seller, including all appendices.

“Total Price” means the sum price payable from the Buyer to the Seller under the Contract for the performance of its contractual obligations as given in Article 4.

“Product” and “Products” mean Seller’s proprietary HRS equipment, machinery, instruments, spare parts, tools, and other materials as described in contract which Buyer shall purchase from Seller under the terms and conditions of this Contract.

“Technical Documents” means all the technical drawings and documents issued by Seller in accordance.

“Effective Date of Contract” means the signature date of the Contract as set forth hereunder.

2. Product name, quantity and specification

Item	Product Name	Quantity		Unit Price		Price(RMB)
1	HRS boiler with steam drum		2		3,325,366.01		6,650,732.02
2	HRS boiler auxiliaries		2		874,054.08		1,748,108.16
3	HRS mist eliminators		2		2,534,577.76		5,069,155.52
4	HRS 1-stage distributor		2		2,826,438.22		5,652,876.44
5	HRS heater		2		1,998,695.60		3,997,391.20
6	HRS dilutor		2		2,821,650.36		5,643,300.72
7	HRS process analyzers		2		526,665.51		1,053,331.02
8	Lubrite Slide Plates		2		48,497.11		96,994.22
9	Steam Injection Chamber		2		351,110.34		702,220.68
10	Steam Injection Chamber		2		1,212,427.89		2,424,855.78

3. Contract Price

The Total Price of the Contract shall be RMB 33,038,965.76 (SAY RMB thirty three million thirty eight thousand nine hundred and sixty five point seven six).

The itemized unit price of this contract shall specify in this contract.

4. Payment Terms and Payment Schedule

4.1 The Buyer shall make the payment by T/T in the amount of RMB 10.18 million to the Seller before December 25, 2012.

The Seller shall issue the corresponding amount of invoice of value added tax to the Buyer within 25 calendar days from the signature date of this contract.

4.2 The Buyer shall make the payment by T/T in the amount of RMB 20.36 million to the Seller before March 10, 2013.

The Seller shall issue the corresponding amount of invoice of value added tax to the Buyer within 55 calendar days from the signature date of this contract.

4.3 The Buyer shall make the inspection and acceptance during delivery. The Seller or designated personnel shall complete the installation and test, as well as signature to confirm by both parties. The Buyer shall make the final payment within 28 calendar days from the progress payment (RMB 20.36 million) date. The Buyer shall make the final payment in the amount of RMB 2,498,965.76 to the Seller. And the Seller shall issue the corresponding amount of invoice of value added tax to the Buyer simultaneously.

4.4 All funds paid by Buyer to Seller shall be reached to the Seller’s bank account via bank. Seller’s bank details are as follows:

Company name: China Great Wall Industry Co. Ltd.

Account Bank: China’s Bank of Communication, haidian Branch

Account Number: 110060576012013001156

5. Shipment and Delivery

5.1 Deliver the equipments via land carriage under this contract.

5.2 The Seller shall deliver the equipments to designated place within 60 calendar days from the signature date of this contract.

5.3 The Seller shall be responsible for the installation and test. The security management and responsibilities of security incidents shall be assumed by the Seller during test.

6. Quality Warranty

Subject to the Limitations of Article 9 and except as otherwise provided herein, Seller warrants title to the Products sold hereunder:

(1) In respect to the products, the Seller warrants, which are not subject to any encumbrance, and that they shall conform to Seller's specifications there for, and do not infringe upon the third party's intellectual property.

(2) Seller further warrants that the Products will be free from defects due to materials or workmanship until the expiration of the earlier of twelve (12) months from the date that acid is first introduced into the HRS Plant. If, within thirty (30) days after Buyer's discovery of any such defects, and, in any event, prior to the expiration of the Warranty Period, Buyer shall notify Seller thereof in writing, Seller shall, at its option promptly repair or replace, that portion of the Products found by Seller to be defective.

(3) During the Warranty Period, the equipment and/or materials to be supplied under Seller's warranty obligations, which is for repairing and/or replacing any defective items of the Products attributable to Seller’s faults, the Seller shall assume the expense of providing the equipment and/or materials during the range of warranty.

7. Inspection

7.1 Before delivery, the Seller shall inspect the goods, issuing the inspection report and signing on it.

7.2 When delivery, the Buyer or Principal shall inspect the goods according to delivery list provided by the Seller.

 7.3 When open-package inspecting, both parties shall confirm by signatures in respect to products’ quantity, model and external packing, if any dissent, both parties shall sign to confirm on the spot.

 7.4 After the Seller completing the installation and test in accordance with the Buyer and this contract, both parties shall sign to confirm for the result of installation and test, if any dissent, both parties shall sign to confirm on the spot.

8. Settlement Ways of Quality Assurance

If Buyer finds defective items as specified in article 6, the Seller shall assume the corresponding responsibility.

The Seller has rights to address the quality assurance compensation event by the ways of following:

(1) Devalue the Products according to the degree of inferiority, extent of damage and amount of losses suffered by the Buyer.

(2) Repair or replace if needed, the defective Products partly or wholly with new parts, components or equipment which conforms to the specifications and quality as stipulated in this Contract. Buyer shall be responsible for the removal / installation costs.

9. Default Responsibilities

9.1 If fails to make the payment before the maturity date as stipulated in this contract, the Buyer will assume the default responsibilities. In addition, the Seller still can charge an interest fee to Buyer, carrying a daily interest rate of 0.01% from the due date to actual payment date upon unpaid amount, but shall in no event exceed 5% of unpaid amount.

9.2 If fails to deliver the goods before the maturity date as stipulated in this contract, the Seller shall assume the corresponding default responsibilities. In addition, the Buyer still can charge an interest fee to Seller, carrying a daily interest rate of 0.01% from the stipulated delivery date to actual delivery date, but shall in no event exceed 5% of the amount of undelivered equipment.

10. Limitation of Liabilities

Seller’s aggregate total liability for any and all losses and damages arising out of any cause whatsoever shall in no event exceed the total contract price as listed in article 3.

11. Warranty Liabilities

If the Buyer cannot make the payment on time, the Buyer’s shareholder, China Energy Recovery, will assume the joint guarantee liabilities for this contract.

12. Force Majeure

Where circumstances, which are beyond either Party’s reasonable control, cause delay in or failure of a Party’s performance of its obligations pursuant to this Contract, such Party shall not be considered in breach of this Contract or be liable to the other Party, and the term of implementation of such Party’s respective obligation may be extended accordingly. The aforementioned circumstances include, but shall not be limited to such cases which will affect the contract execution as natural disaster, war, unrest, fire, explosion, flood, strikes, port congestion, epidemic, enactment of new laws and acts of the government. When one party fails to perform or incompletely perform the obligations under this contract due to force majeure, shall inform the counter party of this contract within 15 calendar days from the date of force majeure occurred, and provided the corresponding evidence within 60 days. If one party fails to perform the obligations arising from force majeure, the involved party will be partly or fully exempted from liabilities, except as otherwise provided by law.

13. Disputes resolution

All disputes arising from the execution, performance or termination of or in connection with this Contract shall be settled amicably through friendly negotiation. In case no settlement can be reached through negotiation, the case shall then be finally resolved by submitting to China International Trading Arbitration Commission. The arbitration shall take place in Beijing and be conducted in Chinese language according to its procedures and rules of China International Trading Arbitration Commission and the law of the arbitration shall be the laws of China.

14. Others

The Contract is executed with four originals, two of which is held by Buyer and Seller, respectively. This Contract is effective from the date on which the sign and stamp.

( Signature page, no text )

Buyer : CER Energy Recovery (Shanghai) Co., Ltd  ( Stamp )

The legal representative (authorized representative)

Guarantee: China Energy Recovery, Inc.

The legal representative (authorized representative)

Seller: China Great Wall Industry Co. Ltd. ( Stamp )

The legal representative (authorized representative)

EX-10.3

Integration Credit Agreement

Contract No 201120589

Bank of Shanghai

Integration Credit Agreement

Borrower: Shanghai Hai Lu Kun Lun Hi-tech Engineering Co., Ltd (hereafter refer to Party A)

Registered Address: No. 1111, Zhongshan North Road, Shanghai

Zip: 200092

Business Address: Building#26, No. 1388 Zhangdong Road, Zhangjiang Hi-tech Park, Shanghai ,China

Zip: 201203

Tel: 20282382

Legal representative: Wu Qinghuan

Lender: Bank of Shanghai, Pudong Branch (hereafter refer to Party B)

Address no.699, Zhangyang road, Shanghai

Zip: 200120

Tel : 68409742

Legal representative: Zhu jijin

Signing address: Shanghai

Party A and Party B enter into this contract based on the honesty and credibility, with the principles of equality, voluntariness according to “The Law of Commercial Banks of the People's Republic of China" and “Contract Law of the People's Republic of China”

Article one Amount of the loan

Item 1 The amount that Party A can apply for the credit during the period of contract from Party B is RMB 21,000,000.

“Integration Credit amount” under this contract means the max credit which Party B can provide Party A.

If the currency type under comprehensive credit business item is different with the currency type under credit amount, for confirming the balance of credit purpose, convert the currency to credit amount according to exchange rate of Bank of Shanghai. When exchange rate changed, Party A have right to convert the currency according to the changed exchange rate.

Item 2 The amount under this contract is used for the following single credit business: working capital loan, bank acceptance, and non-financing guarantee

Item 3 The max credit amount of aforementioned single credit business and the proportion of cash deposit are as follows:

Credit amount RMB 21,000,000, among which only RMB 15,000,000 can be drawn down for loan purpose. The terms of the loan is one year, and can be used for working capital in circle, bank acceptance and performance security. The interest rate of the loan shall float up 20% based on the Benchmark interest rate, and the proportion of cash deposit for bank acceptance and performance security is 30%.

Article 2 Terms of Credit

Item 4 The use period of credit amount under item 1 of this contract is from 2012-09-11 to 2013-09-10.

Item 5 Party B has right to examine and check the fulfill status of each detail business at any time, and is entitled to terminate the terms of credit as agreed in advanced.

Article 3 Use of Credit Amount

Item 6 Under the terms and amount of this agreement, Party A shall provide written application to Party B for using the credit. The credit kind, terms and amount shall be listed in written application. If Party B agreed, both parties shall enter into additional specific business contract of single credit business (hereunder refer to specific business contract)

Item 7 Party A apply for the credit amount, shall satisfy the followings:

(1) This contract and guaranty contract are effective and continue to effective.

(2) Party A has submitted to Party B with credit amount application and relative materials.

(3) There are no significant negative changes on Party A’s operation and financing situation.

(4) Party A’s representation and warranty are authentic, accurate, integrated and effective. Party A can fulfill obligations agreed by this contract practically, and there are no default cases or may occur default cases.

Item 8 The balance of credit amount used by Party A (the accumulated amount which is using but not be repaid) cannot exceed the line of credit during credit terms. During the terms of credit, Party A can apply for using the credit once again for the repaid amounts, as for credit amounts which are not yet used will expire automatically.

Item 9 If this contract agreed line of credit of single business item, Party A shall not exceed the line of credit as agreed by the single business item at any time within contract period besides obeying item 8 of this agreement.

Item 10 Party A shall use the line of credit within the terms of credit. Line of credit of single business shall obey the agreement of specific business contract.

Article 4 Expenses

Item 11 Party B shall collect management fee and commitment fee from Party A according to the follows:

Management fee account for 0 % and Party B will charge it at maturity date.

Commitment fee account for 0%, and Party B will charge it at maturity date.

Item 12 Any interest rate, exchange rate and discounted rate which single credit contract applicable will be agreed by both parties in specific business contract.

Article 5 Warranty

Item 13 Party A shall provide the following guaranty to Party B when this contract entered into:

Guarantee: Shanghai Chuangye Jieli financing guaranty Co., Ltd. Contract No.:ZOB20112058901, “Maximum amount of the guaranty contract”

Guarantee: Wu Qinghuan and Wu Chuanwei. Contract No.:ZOB20112058902, “Maximum amount of the guaranty contract”

Item 14 When both parties entered into specific business contract, Party B has right to request Party A to provide another guaranty except the guaranty under item 13.

Article 6 Party A’s Representation and Warranty

Item 15 Party A is a company which complies with the laws and regulations of the People's Republic of China and has the civil rights and capacity for action. And Party A has got all the necessary ratification and authorization under this contract

Item 16 Party A guarantees that Party A will use the credit according to the law and the terms of this contract

Item 17 Party A guarantees that the financial statement and other information which required by Party B will send to Party B on time, and these documents, information should be true, accuracy, complete, legal and effective

Article 7 Party A’s Obligations and Commitments

Item 18 Party A shall use the line of credit in accordance with this agreement, and Party B has right to check and supervise the fulfill situation of Party A.

Item 19 Party A shall send true and complete financial report, bank account number and deposit balance according to Party B’s request.

Item 20 Without the approval of Party B, Party A cannot provide guaranty for third party or disposal significant assets under this contract.

Item 21 Party A shall make sure that its business nature and operation scope will not have material change after entered into this contract.

Item 22 During the effect period of credit, if there is any material change of Party A’s operation, including but not limited to transfer shares, merger, division, joint venture, cooperation, joint-operation etc. which may cause an adverse impact on Party B's rights and interests, Party A should notice Party B in 30 days advance and fulfill the repay and provide the guarantee which agreed by Party B.

Item 23 During the effect period, if there is any change of legal representative, project Manager, address and so on of Party A, Party A should inform Party B in 30 days in written from that day.

Item 24 Party A promises to repay the principal and interest on time and the related payable due under this contract.

Item 25 Party A shall not reject to pay any amounts which shall be assumed by Party A for the reason of commercial disputes.

Item 26 As for the payment due under this contract or specific business contract (including all due in advance), Party B has right to collect directly from the account opened in Bank of Shanghai or other branch by Party A without Party A’s permission in oral or written.

Item 27 Party A make the following commitment:

1. During the terms of credit, Party A’s settlement amount of import and export business will not less than RMB____. Among this, export business settlement will not less than RMB____.

2. Other foreign currency deposit and settlement as follows:

 Article 8 Default and Default Relief

Item 28 During the contract, Party A will be deemed as default if there is any event as following:

(1) During the period of this contract, Party A makes clearly or its behavior show that Party A stops repaying or cannot repay the debt and interest under this contract.

(2) Party A fails to use the debt according to this contract.

(3) Party A fails to fulfill obligations partly or totally according to this agreement, and have an adverse impact on Party B’s interest.

(4) Party A fails to fulfill obligations partly or totally according to loan contracts, guaranty contracts and facility contracts entered into with any other third parties.

(5) These affairs which Party B thinks it may or has damaged Party B’s interest, such as stop operation, bankrupt, lawsuit, administrative penalty and so on

(6) If there is any material events related to this contract which will damage Party B’s interest, and Party A fails to adopt measures to relief.

Item 29 If there is any default by Party A, Party B has right to adjust or terminate the remaining credit fulfillment of this contract according to the extent of severity, and has right to adopt the following measures:

(1) Declare that all debt under this contract and specific business contract due in advance, and request Party A pay off immediately.

(2) Request Party A assume all of expenses related to this debt ( including but not limited to lawsuit fee and legal fees)

(3) Request Party A add guarantee, the forms of guarantee including but not limited to guarantee, collateral and pledge.

(4) Adopt other measures in accordance with laws and regulations as well as this contract.

Article 9 Take Effect of Contract

Item 30 The contract will take effect after singing of both Parties and stamped.

Article 10 Dispute Resolution

Item 31 If there is any dispute raise from this contract, both parties should resolve by negotiation. If failed, both parties should resolve by lodge a complaint to the people's court where Party B located.

Article 11 Other

Item 32 The notice documents will be regarded as arrived once send if it through telegram and fax. If use post, then will regarded as arrived in 3 days since the day sent.

Item 33 All of information related to this contract shall be sent according to the address listed in contract in the form of written.

Item 34 The other matters not mentioned, can be the attachment of both parties. Any attachment, changed or supplement will consist the indivisibility part of the whole contract.

Item 35 This contract is in three originals. Party A, Party B and guarantee holding one, respectively, and these contracts have the equal legal effect.

Item 36 Other items agreed by two parties

The total open balance working capital loan, bank acceptance and guarantee is no more than RMB 15 million at any time.

Item 37 The Party B has brought the Party A's special attention to all terms in relation to the rights and obligations of each Party, asked the Party A to fully and accurately understand all such terms, and upon the Party A’s request, made explanation on relevant terms. The Party A has carefully read and fully understands all contractual terms hereof and has no dispute over the terms of this Contact.

This Contract is entered into at No. 699 Zhangyang Road on September 11, 2012.

Party A Shanghai Hai Lu Kun Lun Hi-tech Engineering Co., Ltd

Legal representative Wu Qinghuan

Sign Date: 2012-9-11

Party B Bank of Shanghai, Pudong Branch

Legal representative:

Sign Date: 2012-9-11

EX-10.4

Guaranty Contract for Kailin Energy Zhenjiang Ltd.

800kt/a sulfuric acid waste heat recovery project

Contract parties :

China Energy Recovery (Yangzhou) Co., Ltd (hereinafter referred to as “CER Yangzhou”);

Kailin Energy Zhenjiang Ltd. (hereinafter referred to as “Zhenjiang Kailin”); and China Guangdong Nuclear Energy Service Co., Ltd (hereinafter referred to as “CGN Energy”).

Zhenjiang Kailin has signed the contract “Kailin Energy Zhenjiang Ltd. equipment supply and engineering services for 800kt/a sulfuric acid waste heat recovery project” (Contract No: HT2012ISC007) and its supplemental contracts (hereinafter referred to as “waste heat recovery upgrading project contract”) with CGN Energy on October 17, 2012.

According to the "waste heat recovery upgrading project contract", CER Yangzhou will provide CGN Energy an unconditional and irrevocable guarantee with joint responsibility to ensure Zhenjiang Kailin’s fulfillment of the duties and responsibilities under "waste heat recovery upgrading project contract". After the tripartite consultation, CER Yangzhou is willing to perform the following responsibilities, as the basis for cooperation among all of the three parties.

Article 1: Guaranteed claims

The guaranteed claims under the contract arising from the obligations under the "waste heat recovery upgrading project contract" that Zhenjiang Kailin shall fulfill its obligations to CGN Energy, means that CGN Energy is entitled to rights as a creditor against Zhenjiang Kailin under the terms of the "waste heat recovery upgrading project contract”.

Article 2: Guarantee covers

(1) Zhenjiang Kailin shall pay all amounts payable to CGN Energy arising from the “waste heat recovery upgrading project contract”, such as contract prices, penalty, damages, and payments for the use of state funds and so on.

1

(2) All the expenses that CGN Energy incurred to enforce its rights as a creditor of Zhenjiang Kailin (including but not limited to legal fees, arbitration fees, property preservation fees, travel fees, execution fees, assessment fees, legal fees, auction fees and so on).

Article 3: Ways of guaranty

CER Yangzhou voluntarily provides this guarantee. CGN Energy has the right to directly request CER Yangzhou to undertake the payment obligation under scope of the guaranty contract, even if there is more than one guarantor and there is joint liability between them. CER Yangzhou confirms that CER Yangzhou can not have any plea if Zhenjiang Kailin fails to fulfill its obligations under "waste heat recovery upgrading project contract".

Article 4: Terms of guaranty

The guaranty shall terminate two years after Zhenjiang Kailn fulfills its obligations under the "waste heat recovery upgrading project contract". If the "waste heat recovery upgrading project contract" is found to be invalid or terminated, the guaranty period shall be two years from the date the "waste heat recovery upgrading project contract" was found to be invalid or terminated.

Article 5:

If Zhenjiang Kailin defaults or cannot fulfill its obligations under the "waste heat recovery upgrading project contract", CGN Energy should the first attempt to realize compensation from the mortgage of the equipment under the contract of HT2012ISC010 for the production line of Zhenjiang Kailin’s 800kt/a sulfuric acid waste heat recovery project and the guarantee of Jiangsu SOPO (Group) Company. The guarantee under this contract is independent and accumulated to any other guarantee which CGN Energy has or will obtain, and this guarantee will be not reduced or affected by any other guarantee which CGN Energy has or will obtain in any way. CGN Energy realized guarantee under this agreement will not in condition of undertaking any other guarantee. CER Yangzhou agreed, if CGN Energy fails to perform the rights related to this contract (including but not limited to the right of claim, right of guarantee and right of relief), in any case, which is not equal to CGN Energy abandon that rights, and will not have an impact on perform the rights completely under this agreement.

2

Article 6: Claims and Confirmations

Zhenjiang Kailin and CGN Energy should amend the contract price, period, penalty, damages, rights and obligations and so on in "waste heat recovery upgrading project contracts.” CER Yangzhou confirms that CER Yangzhou’s guarantee liability will not terminate, and do not require the consent of CER Yangzhou, if there is any changes in the terms of the “"waste heat recovery upgrading project contract" between Zhenjiang Kailin and CGN Energy. However, any addition to the contract price shall require the consent of CER Yangzhou, or else CER Yangzhou will not have any guarantee responsibility for the additional price.

Article 7: Other Contract Related

The effect of the guarantee contract is independent of the "waste heat recovery upgrading project contract" and its possible affiliations. The validity of all or part of the "waste heat recovery upgrading project contract" does not affect the validity of the guaranty contract. If the "waste heat recovery upgrading project contract" signed between Zhenjiang Kailin and CGN Energy is invalid and both of them are in default, CER Yangzhou will assume the joint responsibility according to the amount of compensation that Zhenjiang Kailin should undertake. Any contracts, agreements, guarantees, tacit understanding or disputes among Zhenjiang Kailin, CGN Energy and CER Yangzhou will have no influence to the validity of this guarantee contract. The guarantee of CER Yangzhou will not be reduced or eliminated if there is any merger, split, joint-stock reform, changes in capital, joint ventures, or other similar circumstances affecting Zhenjiang Kailin and CGN Energy during the contract period

Article 8: Other Clauses

During the guarantee period, CER Yangzhou will be requested for the guaranteed responsibility if there is any breach of contract under the "waste heat recovery upgrading project contract" or if CGN Energy regards that an event happened that affects its ability on realizing its claims.

Article 9: Representations and Warranties

CER Yangzhou guarantee :

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1. The provided guarantee to CGN Energy is legal, complete, true and effective;

2. CER Yangzhou’s financial station is sufficient to ensure the capability of fulfilling the guarantee; CER Yangzhou is willing to fulfill the responsibility with all its properties;

3. The provided guarantee procedure is legal and effective;

4. There is no matter undisclosed that should be, there is no case for infringement of legal rights of third parties, otherwise CER Yangzhou will assume all the legal responsibility arising from the dispute and compensate all the losses to CGN Energy;

5. In the meantime, CER Yangzhou will assume all the cost rising from the process allowing CGN Energy to achieve its own claims (including: evaluate and auction fee, litigation costs, implementation costs, counsel fees etc.)

Article 10: Effective

1. This contract shall take effect from the date of signing;

2. For the actual situation, each party can amend this agreement in the confirmed supplement after negotiation;

3. If there are any disputes based on this agreement, the contracting parties could attempt to resolve them through consultation. If negotiation fails, either party may bring proceedings in a court of law. This Contract shall be governed by and interpreted in accordance with the law of the People's Republic of China;

4. The contract is in three duplicates, one copy for each party;

4

( Signature page, no text )

Contract party :

CER Energy Recovery (Yangzhou) Co., Ltd  ( Stamp )

Signature

Kailin Energy Zhenjiang, Ltd. ( Stamp )

Signature

China Guangdong Nuclear Energy Service Co., Ltd (Stamp)

Signature

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EX-31.1

Exhibit 31.1

CERTIFICATION

PURSUANT TO RULES 13A-14 AND 15D-14

OF THE SECURITIES ACT OF 1934

I, Qinghuan Wu, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of China Energy Recovery, Inc.;

2. Based on my knowledge, the report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by the report;

3. Based on my knowledge, the financial statements, and other financial information included in the report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in the report;

4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which the report is being prepared;
b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)	Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in the report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by the report based on such evaluation; and
d)	Disclosed in the report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting.

5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: November 14, 2012	/s/ Qinghuan Wu
	Qinghuan Wu,
	Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION

PURSUANT TO RULES 13A-14 AND 15D-14

OF THE SECURITIES ACT OF 1934

I, Simon Dong, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of China Energy Recovery, Inc.;

2. Based on my knowledge, the report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by the report;

3. Based on my knowledge, the financial statements, and other financial information included in the report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in the report;

4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which the report is being prepared;
b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)	Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in the report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by the report based on such evaluation; and
d)	Disclosed in the report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting.

5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: November 14, 2012	/s/ Simon Dong
	Simon Dong,
	Acting Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of China Energy Recovery, Inc. (the "Company") for the quarterly period ended September 30, 2012, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), each of the undersigned, Qinghuan Wu, Chief Executive Officer of the Company, and Simon Dong, Acting Chief Financial Officer of the Company, hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to his knowledge:

(1)The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

 

By:	/s/ Qinghuan Wu
	Qinghuan Wu,
	Chief Executive Officer
	November 14, 2012
By:	/s/ Simon Dong
	Simon Dong,
	Acting Chief Financial Officer
	November 14, 2012

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Other Non-operating Income (Expense), Net (Tables)

9 Months Ended

Sep. 30, 2012

Other Income and Expenses [Abstract]

Schedule of Other Nonoperating Income (Expense) [Table Text Block]

Other non-operating expenses consist primarily of foreign exchange losses on purchasing transactions.

	For the three months ended September 30,
	2011			2012
	(Note 2(v))
Foreign exchange losses		578,086			152,652
Other non-operating income		(908,627	)		(80,035	)
Total other non-operating expenses (income), net		(330,541	)		72,617

	For the nine months ended September 30,
	2011			2012
	(Note 2(v))
Foreign exchange losses (gains)		972,277			(96,090	)
Other non-operating income		(898,691	)		(163,386	)
Total other non-operating expenses (income), net		73,586			(259,476	)

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Inventories, Net (Details) (USD $)	Sep. 30, 2012	Dec. 31, 2011
Raw materials	$ 2,395,338	$ 1,601,998
Work in progress	7,049,818	12,978,418
Finished goods	218,207	217,659
Inventory, Gross	9,663,363	14,798,075
Less: inventory provision	(120,065)	(119,763)
Total inventories	$ 9,543,298	$ 14,678,312

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Summary of Significant Accounting Policies (Details Textual)	3 Months Ended				9 Months Ended				12 Months Ended		3 Months Ended	9 Months Ended	12 Months Ended							3 Months Ended		9 Months Ended		3 Months Ended		9 Months Ended
	Sep. 30, 2012 USD ($)	Sep. 30, 2012 CNY	Sep. 30, 2011 USD ($)	Sep. 30, 2011 CNY	Sep. 30, 2012 USD ($)	Sep. 30, 2012 CNY	Sep. 30, 2011 USD ($)	Sep. 30, 2011 CNY	Dec. 31, 2011 USD ($)	Dec. 31, 2011 CNY	Sep. 30, 2012 Guaranty Contract Arrangement [Member] USD ($)	Sep. 30, 2012 Guaranty Contract Arrangement [Member] USD ($)	Dec. 31, 2011 Guaranty Contract Arrangement [Member] USD ($)	Sep. 30, 2011 Machinery and Equipment [Member] USD ($)	Sep. 30, 2011 Transportation Equipment [Member] USD ($)	Sep. 30, 2012 Maximum [Member]	Sep. 30, 2012 Minimum [Member]	Sep. 30, 2012 Kailin Energy Zhenjiang Ltd [Member]	Mar. 31, 2012 Kailin Energy Zhenjiang Ltd [Member]	Sep. 30, 2012 Sales Revenue, Services, Net [Member]	Sep. 30, 2011 Sales Revenue, Services, Net [Member]	Sep. 30, 2012 Sales Revenue, Services, Net [Member]	Sep. 30, 2011 Sales Revenue, Services, Net [Member]	Sep. 30, 2012 Supplier Concentration Risk [Member]	Sep. 30, 2011 Supplier Concentration Risk [Member]	Sep. 30, 2012 Supplier Concentration Risk [Member]	Sep. 30, 2011 Supplier Concentration Risk [Member]	Sep. 30, 2012 Accounts Receivable [Member]
VIE Consolidated, Sttlement Obligation	$ 1,430,000				$ 1,430,000
Cash Held At Vie	61,050				61,050
Concentration Risk, Percentage																				73.00%	87.00%	57.00%	73.00%	26.00%	23.00%	18.00%	25.00%	0.00%
Accrued Liabilties To Suppliers and Agents	10,100,000				10,100,000
Concentration Risk Percentage On Payables	15.10%	15.10%	13.00%	13.00%	15.10%	15.10%	13.00%	13.00%
Other Accrued Liabilities	2,200,000				2,200,000
Variable Interest Entity Advacnes from Creditors	6,600,000				6,600,000
Accrued Liabilities	18,900,000				18,900,000
Accumulated other comprehensive income	1,406,822				1,406,822				1,286,126
Foreign currency translation adjustment	344,248		458,788		120,696		766,370		875,480
Tax Benefit Percentage Realized	50.00%	50.00%			50.00%	50.00%
Value Added Tax Rate	17.00%	17.00%			17.00%	17.00%
Shipping, Handling and Transportation Costs	138,133		301,735		285,422		410,108
Contract Retainership Percentage																10.00%	5.00%
Warranty Period																18 months	12 months
Cash, FDIC Insured Amount	250,000				250,000
Concentration Risk Percentage On Receivables	69.00%	69.00%	56.00%	56.00%	69.00%	69.00%	56.00%	56.00%										0.00%	40.00%
Concentration Risk Percentage On Revenue																		12.00%	20.00%									19.00%
Translation Rate Applied To Balance Sheet	1.00	6.28			1.00	6.28			1.00	6.30
Translation Rate Applied To Income And Cash Flow Statement	1.00	6.35	1.00	6.40	1.00	6.33	1.00	6.49
Property, Plant and Equipment, Salvage Value, Percentage	5.00%	5.00%			5.00%	5.00%
Carrying Value Of Assets Disposed														37,949	39,646
Gain (Loss) On Sale Of Property Plant Equipment			52,732				52,732
Deferred Revenue, Period Increase (Decrease)											26,635	(54,700)	(1,677)
(Gain) loss from changes in fair value of warrant and derivative liabilities	$ 4,651				$ (35,892)		$ (1,560,604)

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Convertible Preferred Stock (Details Textual) (USD $)	1 Months Ended		9 Months Ended
	Apr. 30, 2008	Jan. 31, 2008	Sep. 30, 2012	Dec. 31, 2011	Jun. 13, 2011	Sep. 07, 2009	Jun. 24, 2009	May 21, 2009	Apr. 15, 2008
Accredited Investors									25
Units Issued Through Securities Purchase Agreement									7,874,241
Units Price									1.08
Preferred stock, par value (in dollars per share)			$ 0.001	$ 0.001					$ 0.001
Stockholders' Equity, Reverse Stock Split	After the 1-for-2 reverse stock split conducted on April 16, 2008, the 7,874,241 shares of the Company''s Series A convertible preferred stock are convertible into 3,937,121 shares of common stock and the warrants are exercisable into 1,968,561 shares of the Company''''''''''''''''s common stock at an exercise price of $2.58 per share.	1-for-2	1-for-2
Payments of Stock Issuance Costs	$ 1,859,902
Preferred Stock Liquidation Terms Description			In the event of any liquidation, dissolution or winding up of the Company, the holders of Series A convertible preferred stock shall be entitled to receive the amount of the original issue price per share (as adjusted for the 1-for-2 reverse stock split) for each share of Series A convertible preferred stock, plus all declared and unpaid dividends.
Preferred Stock Conversion Terms Description			The current conversion price is $2.16 after taking into effect the 1-for-2 reverse stock split, and the conversion price is subject to adjustment in accordance with the anti-dilution clause.
Preferred stock, shares issued			200,000	200,000
Preferred stock, shares outstanding			200,000	200,000
Class of Warrant or Right, Exercise Price of Warrants or Rights									$ 1.29
Convertible Preferred Stock, Shares Issued upon Conversion									3,937,121
Conversion of Stock, Shares Converted	7,874,241
Class of Warrant or Right, Number of Securities Called by Warrants or Rights			1,388,889		60,000	60,000	500,000	2,777,778
Warrant [Member]
Estimated Fair Value Per Share									$ 0.85
Equity, Fair Value Disclosure									1,336,739
Class of Warrant or Right, Exercise Price of Warrants or Rights									$ 2.58
Class of Warrant or Right, Number of Securities Called by Warrants or Rights									1,968,561
Convertible Preferred Stock [Member]
Estimated Fair Value Per Share									$ 1.68
Equity, Fair Value Disclosure									$ 5,307,539

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Inventories, Net (Details Textual) (USD $)	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Inventory Provisions	$ 0	$ 0	$ 0	$ 26,621

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Interest Expense, Net (Details) (USD $)	3 Months Ended		9 Months Ended		12 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011	Dec. 31, 2011
Interest on current portion of long term loan	$ 17,906	$ 161,651	$ 520,817	$ 484,745
Interest on long-term loans	0	12,825	0	200,476
Amortization of deferred financing costs	0	66,919	0	215,623
Accretion to face value on loans	53,401	40,535	149,055	198,584
Expense of common stock issued in relation to long term loan	20,107	0	20,107	184,806
Common stock issued in relation to consulting services	7,747	0	0	40,308
Interest on short-term loans and letters of credit	278,855	98,370	797,240	224,492
Bank note discount interest	30,141	566	87,055	84,744
Warrant cancellation		(15,547)	0		(15,547)
Expense of exchange rate differential payment in relation to formerly convertible debt	20,107	0	20,107	0
Interest capitalized	(12,304)	(6,829)	(55,382)	(6,829)
Interest income	(500,312)	(3,637)	(940,116)	(225,430)
Total	$ (56,703)	$ (370,400)	$ (586,523)	$ (1,345,664)

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Summary of Significant Accounting Policies (Details 4) (USD $)	3 Months Ended	9 Months Ended	12 Months Ended
	Sep. 30, 2011	Sep. 30, 2012	Dec. 31, 2011
Balance		$ 44,080	$ 1,756,067
Warrant cancellation	(15,547)	0	(15,547)
Change in fair value of derivative liability		0	(21,274)
Balance		8,188	44,080
Warrant [Member]
Balance		22,806	1,332,760
Warrant cancellation			(15,547)
Change in fair value of derivative liability		(14,618)	(1,294,407)
Balance		8,188	22,806
Loans [Member]
Balance		21,274	423,307
Warrant cancellation			0
Change in fair value of derivative liability		(21,274)	(402,033)
Balance		$ 0	$ 21,274

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Short Term Loans (Tables)

9 Months Ended

Sep. 30, 2012

Debt Disclosure [Abstract]

Schedule of Short-term Debt [Table Text Block]

A tabular reconciliation of the Company’s short term borrowings including balances outstanding at December 31, 2011 and September 30, 2012 and activity during the period (including letters of credit) is as follows. Where borrowings are denominated in Renminbi, the U.S. dollar outstanding balance at the respective period end, translated at the applicable period-end exchange rate, is included in the tabular presentation.

Borrowing	Borrowing date	Interest rate	Maturity date	Balance at Dec. 31, 2011	Balance at Sep. 30, 2012	Pledge or guarantee
RMB 29 million – Shanghai Pudong Development Bank, Shanghai Branch	Aug. 31, 2011	7.544%	May 31, 2012	RMB 29,000,000 (USD 4,602,590)	RMB 0 (repaid March 28, 2012)	Collateralized by CER’s office building in Zhangjiang, Shanghai.
RMB 9.5 million – Bank of China, Yizheng Branch	Nov. 17, 2011	7.216%	Oct. 19, 2012	RMB 9,500,000 (USD 1,507,745)	RMB 9,500,000 (USD 1,511,545) (repaid October 19, 2012)	Guaranteed by Qinghuan Wu, Jialing Zhou, CER Shanghai, Shanghai Engineering, and Yizheng Auto Industrial Park Investment and Development Co., Ltd., and pledged by a land use right in Yizheng, China.
RMB 11.5 million – Bank of China, Yizheng Branch	Nov. 23, 2011	7.216%	Nov. 16, 2012	RMB 11,500,000 (USD 1,825,165)	RMB 11,500,000 (USD 1,829,765)
RMB 6.68 million - Industrial and Commercial Bank of China Limited, Zhangjiang Branch	Dec. 29, 2011	6.405%	June 28, 2012	RMB 6,680,000 (USD 1,060,183)	RMB 0 (repaid June 20, 2012)	Collateralized by a pledge of several bank acceptance notes* owned by CER Shanghai in the amount of RMB 7,430,000.
RMB 5 million - Shanghai Pudong Zhanjiang Micro-credit Co.	Dec. 2011	12.000%	June 9, 2012	RMB 5,000,000 (USD 793,550)	RMB 0 (repaid April 15, 2012)	Collateralized by a building in Shanghai owned by Jiangsu SOPO; guaranteed by Mr. Qinghuan Wu.
RMB 21 million letter of credit – China Construction Bank	Sept. 30, 2011	5.02%	Jan. 6, 2012	RMB 21,000,000 (USD 3,332,910)	RMB 0 (repaid January 6, 2012)	Collateralized by machinery of CER Yangzhou.
RMB 7.98 million letter of credit – Industrial and Commercial Bank of China	Dec. 12, 2011	6.71%	May 28, 2012	RMB 7,980,000 (USD 1,266,506)	RMB 0 (repaid June 6, 2012)	Collateralized by a building in Shanghai owned by Jiangsu SOPO.
RMB 1.38 million - Industrial and Commercial Bank of China Limited, Zhangjiang Branch	Jan. 16, 2012	6.405%	July 15, 2012	-	RMB 0 (repaid June 20, 2012)	Collateralized by a pledge of several bank acceptance notes* owned by CER Shanghai in the amount of RMB 1,530,000.
RMB 10 million - Shanghai Pudong Zhanjiang Micro-credit Co., Ltd.	Feb. 29, 2012	12.000%	Feb. 20, 2013	-	RMB 4,600,000 (USD 729,655)	Collateralized by accounts receivable from Zhenjiang Kailin; also collateralized by CER’s office building in Zhangjiang Shanghai in case of default in repayment.

RMB 29 million - Bank of Communication, Shanghai Branch	Mar. 20, 2012	7.544%	Mar. 15, 2013	-	RMB 29,000,000 (USD 4,614,190)	Collateralized by CER’s office building in Zhangjiang, Shanghai and guaranteed by Qinghuan Wu.
RMB 11 million - Bank of Communication, Shanghai Branch	Apr. 12, 2012	7.544%	Apr. 12, 2013	-	RMB 11,000,000 (USD 1,750,210)
RMB 5 million - Industrial and Commercial Bank of China Limited, Zhangjiang Branch.	Mar. 23, 2012	6.405%	Sept. 28, 2012	-	RMB 0 (repaid August 24, 2012)	Collateralized by several bank acceptance notes* owned by CER Shanghai in the amount of RMB 5,600,000 (approximately $890,000).
RMB 10 million - China CITIC Bank Yizheng branch.	Jun. 6, 2012	7.544%	Jun. 6, 2013	-	RMB 10,000,000 (USD 1,591,100)	Guaranteed by Jiangsu SOPO, and guaranteed by Mr. Qinghuan Wu.
USD 1.15 million – Industrial and Commercial Bank of China Limited, Zhangjiang Branch.	Jun. 15, 2012	2.4789%	Sep. 14, 2012	-	USD 0 (repaid September 14, 2012)	Collateralized by cash deposit in the amount of RMB 7,710,000 (approximately $1,213,631).
RMB 7.9 million letter of credit – Industrial and Commercial Bank of China	May 18, 2012	6.405%	Sep. 17, 2012	-	RMB 0 (repaid September 29, 2012)	Collateralized by a building in Shanghai owned by Jiangsu SOPO.
RMB 4 million - Bank of Shanghai	Sep 11, 2012	7.2%	Sep 10, 2013	-	RMB 4,000,000 (USD 636,440 )	Guaranteed by Mr. Qinghuan Wu and Mrs. Jialing Zhou, and among which RMB 5,000,000 is collateralized by a building owned by Mr. Wu and his son, and RMB 10,000,000 is guaranteed by Shanghai Chuang Ye Jie Li Financing Guarantee Co., Ltd (Shanghai Chuangye)

RMB 95,000 – Shanghai Pudong Development Bank, Shanghai Branch	Jul. 12, 2012	6.44%	Nov. 9, 2012	-	RMB 95,000 (USD 15,115)	Collateralized by a pledge of several bank acceptance notes* owned by Shanghai Engineering in the amount of RMB 100,000.
RMB 10 million – China Great Wall Industry Corporation	Sep. 6, 2012	4.13%	Dec. 20, 2012	-	RMB 10,000,000 (USD 1,591,100)	Equivalent worth of equipment.
RMB 20 million – China Great Wall Industry Corporation	Sep. 25, 2012	4.13%	Mar. 15, 2013	-	RMB 20,000,000 (USD 3,182,200 )	Equivalent worth of equipment.
Less: Debt Issue Cost				-	RMB 750,957 (USD 119,485)
Total Short term loan				RMB 90,660,000 (USD 14,388,649)	RMB 108,929,896 (USD 17,331,836)

*The Group’s bank acceptance notes are reported in “Notes receivable” in the consolidated balance sheet and represent short-term notes receivable typically received from customers as a form of payment. The Group can discount such notes receivable for early payment, typically at a small percentage discount to face value. The Group typically uses the notes to collateralize short-term borrowings as a means of matching timing of cash inflows and outflows, or transfers the notes to settle payables to suppliers.

Schedule Of Product Financing [Table Text Block]

	RMB	USD
December 20, 2012	10,180,000	1,619,740
March 15, 2013	20,360,000	3,239,480
April 7, 2013	2,498,965	397,610
Total	33,038,965	5,256,830

Schedule of Long-term Debt Instruments [Table Text Block]

Formerly convertible debt (presented as current portion of long term loan)

Borrowing	Borrowing date	Interest rate		Maturity date	Balance at Dec. 31, 2011		Balance at Sep. 30, 2012		Pledge or guarantee
$ 5 million – Hold And Opt Investments Limited	Dec. 31, 2010	15.100	%	Sept. 29, 2012	USD	4,850,945	USD	5,000,000	Collateralized by 8,000,006 of Qinghuan Wu's shares in CER.

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Other Non-operating Income (Expense), Net (Details) (USD $)	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Foreign exchange losses (gain)	$ 152,652	$ 578,086	$ (96,090)	$ 972,277
Other non-operating income	(80,035)	(908,627)	(163,386)	(898,691)
Total other non-operating expenses (income), net	$ 72,617	$ (330,541)	$ (259,476)	$ 73,586

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Warrant and Derivative Liabilities (Details Textual) (USD $)	Sep. 30, 2012
Derivative Liabilities	$ 0
Foreign Exchange [Member]
Accrued Expenses and Other Current Liabilites	$ 20,107

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Property, plant and equipment, Net (Details Textual) (USD $)	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Depreciation	$ 398,971	$ 450,730	$ 1,187,929	$ 949,145

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Stock-Based Compensation (Details 2)	9 Months Ended	12 Months Ended
	Sep. 30, 2012	Dec. 31, 2011
Outstanding as of December 31, 2011	680,000	560,000
Granted	0	120,000
Forfeited	0	0
Exercised	0	0
Outstanding as of September 30, 2012	680,000	680,000
Vested and exercisable as of Sep 30, 2012	635,000

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Related Party Transactions (Details Textual)	1 Months Ended							3 Months Ended		9 Months Ended								1 Months Ended				1 Months Ended				1 Months Ended	3 Months Ended	6 Months Ended	9 Months Ended					1 Months Ended
	Aug. 31, 2012 CNY	May 31, 2012 USD ($)	May 31, 2012 CNY	Apr. 30, 2012 CNY	Nov. 30, 2011 USD ($)	Nov. 30, 2011 CNY	Feb. 28, 2010 USD ($)	Sep. 30, 2012 USD ($)	Sep. 30, 2011 USD ($)	Sep. 30, 2012 USD ($)	Sep. 30, 2012 CNY	Sep. 30, 2011 USD ($)	May 08, 2012 USD ($)	May 08, 2012 CNY	Apr. 30, 2012 USD ($)	Dec. 31, 2011 USD ($)	Sep. 09, 2009 USD ($)	Nov. 30, 2011 Haide [Member] USD ($)	Oct. 20, 2011 Haide [Member] USD ($)	Oct. 31, 2011 Haide [Member] USD ($)	Sep. 30, 2012 Haide [Member] USD ($)	Mar. 31, 2012 Mrs Jialing Zhou [Member] USD ($)	Mar. 31, 2012 Mrs Jialing Zhou [Member] CNY	Sep. 30, 2012 Mrs Jialing Zhou [Member] USD ($)	Sep. 30, 2012 Mrs Jialing Zhou [Member] CNY	Aug. 31, 2012 Zhenjiang Kailin [Member]	Sep. 30, 2012 Zhenjiang Kailin [Member] USD ($)	Jun. 30, 2012 Zhenjiang Kailin [Member]	Sep. 30, 2012 Zhenjiang Kailin [Member] USD ($)	Oct. 18, 2012 Zhenjiang Kailin and Cgn Energy [Member] USD ($)	Oct. 18, 2012 Zhenjiang Kailin and Cgn Energy [Member] CNY	Oct. 18, 2012 Cgn Energy Resold Equipment To Zhenjiang Kailin [Member] USD ($)	Oct. 18, 2012 Cgn Energy Resold Equipment To Zhenjiang Kailin [Member] CNY	May 31, 2012 Minimum [Member]	May 31, 2012 Maximum [Member]
Operating Lease Number Of Years										5 years	5 years
Related Party Transaction, Amounts of Transaction								$ 0	$ 13,203		8,900,000									$ 669,800
Due to Affiliate							1,000,000
Related Party Transaction, Rate							9.50%
Related Party Transaction, Terms and Manner of Settlement					As the financing party, CGN Energy resold the equipment to Zhenjiang Kailin via a structured payment arrangement covering a 24 month period.	As the financing party, CGN Energy resold the equipment to Zhenjiang Kailin via a structured payment arrangement covering a 24 month period.				The Company will pay the sum of $23,750 at the end of every three calendar months. The principal is due in full on January 30, 2012, hence the remaining loan is classified as long-term loan to be repaid within one year. The loan is unsecured and there are no guarantees of the interest or principal. Shanghai Engineering has subordinated its loan to those under the loan agreements. The Company repaid principal of $ 460,000 in December 2010. On October 10, 2011, CER paid the remaining outstanding principal due under the long-term loan. The prepayment sum of $548,550 represented the principal amount and the interest due.	The Company will pay the sum of $23,750 at the end of every three calendar months. The principal is due in full on January 30, 2012, hence the remaining loan is classified as long-term loan to be repaid within one year. The loan is unsecured and there are no guarantees of the interest or principal. Shanghai Engineering has subordinated its loan to those under the loan agreements. The Company repaid principal of $ 460,000 in December 2010. On October 10, 2011, CER paid the remaining outstanding principal due under the long-term loan. The prepayment sum of $548,550 represented the principal amount and the interest due.
Related Party Transaction, Description of Transaction										The contract was valued at RMB 300 million (approximately $46 million), including the engineering part of RMB 8 million (approximately $1 million), procurement part of RMB 240 million (approximately $37 million) and construction part of RMB 52 million (approximately $8 million). The system will be part of a new sulfuric acid plant and is capable of producing up to 122 tons of steam-per-hour at 485° C and 5.4 MPa from operations at the plant. 98 percent of the project was completed as of March 31, 2012 and the project has been fully completed by the end of May 2012	The contract was valued at RMB 300 million (approximately $46 million), including the engineering part of RMB 8 million (approximately $1 million), procurement part of RMB 240 million (approximately $37 million) and construction part of RMB 52 million (approximately $8 million). The system will be part of a new sulfuric acid plant and is capable of producing up to 122 tons of steam-per-hour at 485° C and 5.4 MPa from operations at the plant. 98 percent of the project was completed as of March 31, 2012 and the project has been fully completed by the end of May 2012
Related Party Transacion Description Of Nature Of Relationship										Transactions between CER and Zhenjiang Kailin are presented as related party transactions because the Chairman, Chief Executive Officer and majority shareholder of Green Asia Resources, Inc. ("Green Asia"), the parent company of Zhenjiang Kailin, is the owner of a significant creditor, Hold and Opt Investments Limited (as discussed in Note 7, Short-Term Loans) and is a less than 5% shareholder of CER, our executive officers own, as a result of a private placement and prior consulting arrangement, a small number (less than 1%) of shares in Green Asia, and, that at the time the contract was signed, a less than 5% shareholder of both CER and Green Asia was a member of CER''''''''''''''''s Board of Directors. Management of each company is different and the directors at Green Asia and Zhenjiang Kailin are independent of CER	Transactions between CER and Zhenjiang Kailin are presented as related party transactions because the Chairman, Chief Executive Officer and majority shareholder of Green Asia Resources, Inc. ("Green Asia"), the parent company of Zhenjiang Kailin, is the owner of a significant creditor, Hold and Opt Investments Limited (as discussed in Note 7, Short-Term Loans) and is a less than 5% shareholder of CER, our executive officers own, as a result of a private placement and prior consulting arrangement, a small number (less than 1%) of shares in Green Asia, and, that at the time the contract was signed, a less than 5% shareholder of both CER and Green Asia was a member of CER''''''''''''''''s Board of Directors. Management of each company is different and the directors at Green Asia and Zhenjiang Kailin are independent of CER
Revenue from Related Parties		1,260,000			3,820,000	24,100,000		5,830,916		4,800,000	30,000,000
Related Party Transaction Terms Of Guarantee Agreement					The amount of the guarantee, RMB 24.1 million, represents 7.8% of the RMB300 million project price.	The amount of the guarantee, RMB 24.1 million, represents 7.8% of the RMB300 million project price.		The amount of the guarantee, RMB 30 million, represents 10% of the RMB 300 million project price
Deferred Revenue																											178,975		178,975
Penalty For Project Delays													1,500,000	8,900,000
Related Party Transaction Additional Costs		600,000
Related Party Transaction Cost Of Upgradation		1,260,000	8,000,000
Capacity Of Power Generation System																																		800	900
Notes Receivable, Related Parties								12,684,386		12,684,386
Risk Free Discount Rate																										10.65%
Amortization of Debt Discount (Premium)								1,509,668
Construction Revenue																													1,200,000
Penalty Paid To Customers For Economic Losses Suffered																													1,500,000
Project Completion Percentage								98.00%		98.00%	98.00%
Revenue From Related Party Contract								816,571		6,647,487
Total cost of revenues								16,667,371	24,298,399	64,705,182		45,567,195															1,007,693		8,512,994
Project Margin Percentage																												(25.00%)
Related Party Transaction Amounts Paid To Vendors By Related Party																		219,800		450,000
Repayments of Related Party Debt				350,000														550,000
Due to Related Parties																					119,800
Long-term Debt																								214,366	1,350,000
Long term accounts receivable, net - third parties								4,736,633		4,736,633						0											2,951,128		2,951,128
Short term loans								17,331,836		17,331,836	108,929,896				729,655	14,388,649	5,000,000		669,800
Payment To Vendors																		219,800	450,000
Repayment of short term loans	3,600,000			10,000,000						15,260,418		1,162,700						550,000
Accrued Expenses and Other Current Liabilites																					119,800			251,856	1,900,000
Proceeds from Related Party Debt																						251,856	1,900,000
Discount On Revenue								161,871		1,706,280
Interest income								(500,312)	(3,637)	(940,116)		(225,430)
Long term accounts receivable, net - related party								2,951,128		2,951,128						0											5,613,367		5,613,367
Accounts receivable, net - related party								11,445,785		11,445,785						9,088,157											8,298,660		8,298,660
Deposit Liabilities, Accrued Interest																											329,435		329,435
Garanty Contract Aggrement,Carrying Amount Per Contract																														1,570,000	9,900,000
Guaranty Contract Aggrement Carrying Amount																														3,140,000	19,800,000
Structured Payment Arrangement Amount																																$ 3,700,000	23,400,000

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Stock-Based Compensation (Details Textual) (USD $)	1 Months Ended	3 Months Ended		9 Months Ended
	Sep. 30, 2008	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011	Sep. 07, 2009	Jun. 24, 2009	Jun. 07, 2009 Stock Option To First Independent Director [Member]	Jun. 07, 2009 Stock Option To Second Independent Director [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Net of Forfeitures	335,000
Share-based Compensation Arrangements by Share-based Payment Award, Options, Grants in Period, Weighted Average Exercise Price	$ 2.9
Share Based Compensation Stock Options Callable Number Of Shares						60,000	500,000
Share-based Compensation Arrangement by Share-based Payment Award, Plan Modification, Incremental Compensation Cost			$ 202,106
Allocated Share-Based Compensation Expense		$ 7,067	$ 12,090	$ 21,200	$ 253,158
Share Based Compensation Stock Options Excercise Price Before Modification								$ 1.22	$ 1.58
Share Based Compensation Stock Options Excercise Price After Modification								$ 0.73	$ 0.73

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Warrant and Derivative Liabilities (Details) (USD $)	9 Months Ended	12 Months Ended
	Sep. 30, 2012	Dec. 31, 2011
Estimated forward rate	0	6.34
Discount rate	0.00%	0.64%
Discount factor	0	0.995
Derivative Liablity Current	$ 0	$ 21,274

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Commitments and Contingencies

9 Months Ended

Sep. 30, 2012

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies Disclosure [Text Block]

Note 19 – Commitments and Contingencies

Subsequent to the first quarter, on May 8, 2012, CER and Zhenjiang Kailin entered into an agreement whereby CER will pay Zhenjiang Kailin RMB 8.9 million (approximately $1.5 million) as a penalty for the economic loss suffered by Zhenjiang Kailin resulting from project delays past the originally expected completion date of December 31, 2011. The penalty is included in accrued expenses and other liabilities. See Note 16 for further details.

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Accounts Receivable, Net (Details 1) (USD $)	Sep. 30, 2012	Dec. 31, 2011
Long term accounts receivable - third party	$ 6,540,056	$ 1,691,474
Subtract: Allowance for doubtful accounts	(1,803,423)	(1,691,474)
Total	4,736,633	0
Long term accounts receivable - related party	$ 2,951,128	$ 0

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Summary of Significant Accounting Policies (Details) (USD $)	9 Months Ended	12 Months Ended
	Sep. 30, 2012	Dec. 31, 2011
Allowance for doubtful accounts	$ 1,691,474	$ 625,014
Additions charged to income	106,907	1,047,926
Reversals credited to income	0	(37,824)
Translation adjustment	5,042	56,358
Allowance for doubtful accounts	$ 1,803,423	$ 1,691,474

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Stock-Based Compensation (Details 1) (USD $)								9 Months Ended		9 Months Ended		9 Months Ended		9 Months Ended			9 Months Ended		9 Months Ended		9 Months Ended		9 Months Ended
	Sep. 30, 2012	Jun. 13, 2011	Sep. 07, 2009	Jun. 24, 2009	May 21, 2009	Apr. 15, 2008	Sep. 30, 2012 Outstanding Options [Member]	Sep. 30, 2012 Outstanding Options [Member] Range One [Member]	Sep. 30, 2012 Outstanding Options [Member] Range One [Member]	Sep. 30, 2012 Outstanding Options [Member] Range Two [Member]	Sep. 30, 2012 Outstanding Options [Member] Range Two [Member]	Sep. 30, 2012 Outstanding Options [Member] Range Three [Member]	Sep. 30, 2012 Outstanding Options [Member] Range Three [Member]	Sep. 30, 2012 Outstanding Options [Member] Range Four [Member]	Sep. 30, 2012 Outstanding Options [Member] Range Four [Member]	Sep. 30, 2012 Exercisable Options [Member]	Sep. 30, 2012 Exercisable Options [Member] Range One [Member]	Sep. 30, 2012 Exercisable Options [Member] Range One [Member]	Sep. 30, 2012 Exercisable Options [Member] Range Two [Member]	Sep. 30, 2012 Exercisable Options [Member] Range Two [Member]	Sep. 30, 2012 Exercisable Options [Member] Range Three [Member]	Sep. 30, 2012 Exercisable Options [Member] Range Three [Member]	Sep. 30, 2012 Exercisable Options [Member] Range Four [Member]	Sep. 30, 2012 Exercisable Options [Member] Range Four [Member]
Begining Balance						$ 1.29			$ 0.73		$ 0.73		$ 0.73		$ 0.73			$ 0.73		$ 0.73		$ 0.73		$ 0.73
Number of Options	1,388,889	60,000	60,000	500,000	2,777,778			60,000		500,000		60,000		60,000			60,000		500,000		37,500		37,500
Remaining contractual term (years)								7 years		6 years 9 months		8 years 9 months		8 years 9 months			7 years		6 years 9 months		8 years 9 months		8 years 9 months
Options Outstanding Ending Balance							680,000									635,000

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Stock-Based Compensation (Tables)

9 Months Ended

Sep. 30, 2012

Disclosure Of Compensation Related Costs, Share-Based Payments [Abstract]

Stock Based Compensation, Assumption On Fair Value [Table Text Block]

The following table summarizes the assumptions used in the Black-Scholes Model when calculating the fair value of the options at the grant dates (for 2011, as there were no grants in 2012).

Fair value per share	$ 0.39- $ 0.47
Expected Term(Years)	4.00-5.56
Exercise Price	$0.73
Expected Volatility	72%-76%
Risk Free Interest Rate	1.16%-1.82%

Schedule Of Share Based Compensation Stock Option Outstanding [Table Text Block]

Following is a summary of the status of options outstanding at September 30, 2012:

Outstanding Options						Exercisable Options
				Remaining						Remaining
Exercise				contractual		Exercise				contractual
price		Number		term (years)		price		Number		term (years)
$	0.73		60,000		7.00	$	0.73		60,000		7.00
$	0.73		500,000		6.75	$	0.73		500,000		6.75
$	0.73		60,000		8.75	$	0.73		37,500		8.75
$	0.73		60,000		8.75	$	0.73		37,500		8.75
	Total		680,000						635,000

Schedule of Share-based Compensation, Stock Options, Activity [Table Text Block]

Following is a summary of the option activity:

Outstanding as of  December 31, 2010	560,000
Granted	120,000
Forfeited	-
Exercised	-
Outstanding as of  December 31, 2011	680,000
Granted	-
Forfeited	-
Exercised	-
Outstanding as of  September 30, 2012	680,000
Vested and exercisable as of September 30, 2012	635,000

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Accounts Receivable, Net (Details 3) (USD $)	Sep. 30, 2012	Dec. 31, 2011
Total payment amount	$ 14,158,001
Accounts receivable, net - related party	11,445,785	9,088,157
Long term accounts receivable, net - related party	2,951,128	0
Zhenjiang Kailin [Member]
Total payment amount	14,158,001
Accretion for interest income	661,093
Upgrade Contract (Note16)	1,281,188
Less - unearned finance income	(1,703,369)
Total accounts receivables	14,396,913
Accounts receivable, net - related party	11,445,785
Long term accounts receivable, net - related party	$ 2,951,128

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Earnings / (Loss) per Share (Details) (USD $)	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Weighted average stock options	0	16,956	0	16,956
Total potentially dilutive securities	$ 31,078,083	$ 31,102,815	$ 3,861,709	$ 31,032,341
Ye Tian [Member]
Weighted average stock options			500,000
Estelle Lau [Member]
Weighted average stock options			60,000
Sum Kung [Member]
Weighted average stock options			30,000
Jules Silbert [Member]
Weighted average stock options			30,000
Convertible Notes Payable [Member]
Weighted average stock options			1,388,889
Series Preferred Stock [Member]
Weighted average stock options			1,852,820

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Short Term Loans (Details 1)	Sep. 30, 2012 USD ($)	Sep. 30, 2012 CNY	Apr. 30, 2012 USD ($)	Dec. 31, 2011 USD ($)	Sep. 09, 2009 USD ($)	Sep. 30, 2012 Product Financing Arrangement [Member] USD ($)	Sep. 30, 2012 Product Financing Arrangement [Member] CNY	Sep. 30, 2012 Product Financing Arrangement [Member] Due 20-Dec-12 [Member] USD ($)	Sep. 30, 2012 Product Financing Arrangement [Member] Due 20-Dec-12 [Member] CNY	Sep. 30, 2012 Product Financing Arrangement [Member] Due 15-Mar-13 [Member] USD ($)	Sep. 30, 2012 Product Financing Arrangement [Member] Due 15-Mar-13 [Member] CNY	Sep. 30, 2012 Product Financing Arrangement [Member] Due 7-Apr-13 [Member] USD ($)	Sep. 30, 2012 Product Financing Arrangement [Member] Due 7-Apr-13 [Member] CNY
Total	$ 17,331,836	108,929,896	$ 729,655	$ 14,388,649	$ 5,000,000	$ 5,256,830	33,038,965	$ 1,619,740	10,180,000	$ 3,239,480	20,360,000	$ 397,610	2,498,965

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Summary of Significant Accounting Policies (Details 5) (Guaranty Contract Arrangement [Member], USD $)	3 Months Ended	9 Months Ended	12 Months Ended
	Sep. 30, 2012	Sep. 30, 2012	Dec. 31, 2011
Guaranty Contract Arrangement [Member]
Deferred Revenue		$ 89,068	$ 0
Guaranty contract liability		119,905	90,745
Change in fair value of guaranty contract liability	26,635	(54,700)	(1,677)
Balance at December 31, 2011	$ 154,273	$ 154,273	$ 89,068

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Accounts Receivable, Net

9 Months Ended

Sep. 30, 2012

Receivables [Abstract]

Loans, Notes, Trade and Other Receivables Disclosure [Text Block]

Note 3 – Accounts Receivable, Net

(a) Accounts Receivable, Net

	December 31,		September 30,
	2011		2012
Current accounts receivable - third parties	$	11,639,138	$	11,465,468
Current accounts receivable - related party		9,088,157		11,445,785
Current accounts receivable		20,727,295		22,911,253
Subtract: Allowance for doubtful accounts		-		-
Current accounts receivable, net	$	20,727,295	$	22,911,253

Current receivables also include revenue recognized in excess of amounts billed for EPC contracts. As of December 31, 2011 and September 30, 2012, revenue recognized in excess of amounts billed amounted to approximately $18,085,048 and $ 18,791,747, respectively.

(b) Long-term Accounts Receivable, Net

The Company classifies accounts receivable and revenue recognized in excess of amounts billed which are to be collected after one year as long-term accounts receivable.

Long-term accounts receivable, net, which are presented in the below table net of the discounting effect for interest (see Note 16 for further description), included revenue recognized in excess of amounts billed of approximately $0 and $7,687,761 as of December 31, 2011 and September 30, 2012, respectively.

	December 31,			September 30,
	2011			2012
Long term accounts receivable - third party	$	1,691,474			6,540,056
Subtract: Allowance for doubtful accounts	$	(1,691,474	)		(1,803,423	)
Total		-			4,736,633
Long term accounts receivable - related party	$	-			2,951,128

Long-term accounts receivable consisted of two customers, Zhenjiang Kailin and Jiangsu SOPO, for both periods presented.

CER and Zhenjiang Kailin, a related party, agreed to revise the payment schedule of receivables related to a project originally entered into in January 2011, which was completed on May 31, 2012, from all remaining amounts due by August 31, 2012 to 4 installments due by December 31, 2013 with no interest to be earned (refer to note 16 for more details about the Zhenjiang Kailin receivable collection schedule).

Maturity date	Amount due
December 31, 2012		4,773,300
June 30, 2013		2,863,980
September 30, 2013		3,182,200
December 31, 2013		3,338,521
Total		14,158,001

A reconciliation of the accounts receivable (including both current and non-current portions) from Zhenjiang Kailing and the amount from collection schedule as at September 30, 2012 is as follows:

	September 30,
	2012
Total payment amount		14,158,001
Accretion for interest income		661,093
Upgrade Contract (Note16)		1,281,188
Less - unearned finance income		(1,703,369	)
Total accounts receivables		14,396,913
Accounts receivable, net - related party		11,445,785
Long term accounts receivable, net - related party		2,951,128
Total accounts receivables		14,396,913

In August 2012, based on developments subsequent to the balance sheet date, including communication with Zhenjiang Kailin, it was determined that the first payment would be delayed to December 2012. Zhenjiang Kailin only begun to generate cash flow commencing in May 2012 due to the delayed opening of its facility following CER’s completion thereof and required extra time to pay by December 2012. There were no other payment installments that were subject to delay, and based upon an evaluation of all the facts and circumstances the Company determined that it expected to fully collect all amounts due over the revised payment schedule incorporating the December extension of the first installment. After considering the further extension of the first installment payment to December 31, 2012, the Company reassessed the discount impact applicable to this payment extension using the original interest rate of 10.65% (which considered the risk free rate and Zhenjiang Kailin’s credit risk). As of September 30, 2012, the accounts receivable (including both current and non-current portions) from Zhenjiang Kailin under the contract was $14,396,913 after discounting for the time value of money pursuant to applicable accounting guidance (the discount rate was determined as 10.65% considering the risk free rate and Zhenjiang Kailin’s credit risk). The discount reflected as a reduction to revenue in the statement of operations arising from this extension of payment terms was $0 and $1,703,369 for the three and nine months ended September 30, 2012; the accretion for interest income included in interest income was $661,093. Of the total balance of $14,396,913, $2,951,128 represented the non-current balance due from Zhenjiang Kailin which is to be collected over one year; the remaining $11,445,785 is included in current receivables due from a related party.

Long term accounts receivable, net due from third party of $4,736,633 represents a balance due from Jiangsu SOPO. On October 18, 2011, CER signed a contract for the manufacture, design, and installation of a major dock storage and tube project with Jiangsu SOPO, a third party customer of CER and related party of Zhenjiang Kailin. The contract was originally valued at RMB 50 million (approximately $7.9 million), including the procurement part of RMB 40 million (approximately $6.3 million) and construction part of RMB 10 million (approximately $1.6 million). Due to the strong relationship between CER and Jiangsu SOPO, CER was retained as the contractor, and was allowed to sub-contract substantially all of the work to a third party sub-contractor. Jiangsu SOPO has agreed to CER’s retention of 10% as a profit margin (based upon the contract value), or approximately an 11% markup on costs of the project. CER has concluded that gross recognition of the revenue is appropriate as it is the primary obligor and certain of the costs represent CER product.

On April 15, 2012, CER and Jiangsu SOPO entered into a repayment agreement. Pursuant to the agreement, the total contract price will be allocated 90% to the subcontractor and CER earns the remaining 10% margin. The project has been fully completed by the end of June 2012. The current best estimate of the total contract price is RMB 57.1 million (approximately $9 million) based upon project completion and discussions with Jiangsu SOPO, and this amount is the basis for the repayment agreement. Jiangsu SOPO will pay the project price of RMB 57.1 million (approximately $9 million), plus interest over time of RMB 6.4 million (approximately $1 million), for a total of RMB 63.5 million (approximately $10 million) in exchange for an extension of the payment terms involving 36 installments due on a monthly basis starting from May, 2012. The discount rate used to discount these receivable cash flows under the applicable accounting guidance for Jiangsu SOPO was 8% (considering its stated-owned background and AA credit rating), which is same as the contractual rate of interest included in the contract. For the three and nine months ended September 30, 2012, $0 and $8,259,628 in revenue was recognized in relation to this EPC project, respectively, and the accretion of interest income was $250,190, as further described in Note 14. The receivable from Jiangsu SOPO as of September 30, 2012 was $7,605,077, among which $4,736,633 was classified as long-term accounts receivable.

Both of the arrangements described above regarding extensions of payment terms for these two particular customers were originally recognized in the March 31, 2012 balances and revenue for the quarter then ended as the underlying facts and circumstances leading to the arrangements existed, or were in the early stages of negotiation, at that time. With respect to the additional discount reflected in revenue for the Zhenjiang Kailin project due to the extension of the August 2012 payment to December 2012, such adjustment was reflected in revenue for the quarter ended June 30, 2012 as it related to facts and circumstances which likely existed at June 30, 2012.

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Short Term Loans (Details 2) (USD $)	9 Months Ended
	Sep. 30, 2012
Convertible Debt Face Amount	$ 5,000,000
Convertible Debt Borrowing Date	Dec. 31, 2010
Debt Instrument, Convertible, Effective Interest Rate	15.10%
Convertible Debt Maturity Date	Sep. 29, 2012
Convertible Debt, Current	4,850,945
Balance at 30-Jun-12	$ 5,000,000
Pledge Or Guarntee Description	Collateralized by 8,000,006 of Qinghuan Wu's shares in CER.

XML

Summary of Significant Accounting Policies (Details 1) (USD $)	9 Months Ended		12 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Dec. 31, 2011
Provision for inventory	$ 119,763	$ 93,195	$ 93,195
Additions charged to income	0	26,621	26,763
Realized	0		(5,471)
Translation adjustment	302		5,276
Provision for inventory	$ 120,065		$ 119,763

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Accounts Receivable, Net (Tables)

9 Months Ended

Sep. 30, 2012

Receivables [Abstract]

Schedule of Accounts, Notes, Loans and Financing Receivable [Table Text Block]

(a) Accounts Receivable, Net

	December 31,		September 30,
	2011		2012
Current accounts receivable - third parties	$	11,639,138	$	11,465,468
Current accounts receivable - related party		9,088,157		11,445,785
Current accounts receivable		20,727,295		22,911,253
Subtract: Allowance for doubtful accounts		-		-
Current accounts receivable, net	$	20,727,295	$	22,911,253

Schedule Of Long Term Accounts Notes Loans and Financing Receivable [Table Text Block]

Long-term accounts receivable, net, which are presented in the below table net of the discounting effect for interest (see Note 16 for further description), included revenue recognized in excess of amounts billed of approximately $0 and $7,687,761 as of December 31, 2011 and September 30, 2012, respectively.

	December 31,			September 30,
	2011			2012
Long term accounts receivable - third party	$	1,691,474			6,540,056
Subtract: Allowance for doubtful accounts	$	(1,691,474	)		(1,803,423	)
Total		-			4,736,633
Long term accounts receivable - related party	$	-			2,951,128

Schedule Of Collection Of Accounts Receivable [Table Text Block]

CER and Zhenjiang Kailin, a related party, agreed to revise the payment schedule of receivables related to a project originally entered into in January 2011, which was completed on May 31, 2012, from all remaining amounts due by August 31, 2012 to 4 installments due by December 31, 2013 with no interest to be earned (refer to note 16 for more details about the Zhenjiang Kailin receivable collection schedule).

Maturity date	Amount due
December 31, 2012		4,773,300
June 30, 2013		2,863,980
September 30, 2013		3,182,200
December 31, 2013		3,338,521
Total		14,158,001

Schedule Of Reconciliation Of Related Party Accounts Receivable [Table Text Block]

A reconciliation of the accounts receivable (including both current and non-current portions) from Zhenjiang Kailing and the amount from collection schedule as at September 30, 2012 is as follows:

	September 30,
	2012
Total payment amount		14,158,001
Accretion for interest income		661,093
Upgrade Contract (Note16)		1,281,188
Less - unearned finance income		(1,703,369	)
Total accounts receivables		14,396,913
Accounts receivable, net - related party		11,445,785
Long term accounts receivable, net - related party		2,951,128
Total accounts receivables		14,396,913

XML

Summary of Significant Accounting Policies (Tables)

9 Months Ended

Sep. 30, 2012

Accounting Policies [Abstract]

Allowance for Credit Losses on Financing Receivables [Table Text Block]

Management regularly reviews the aging of receivables and changes in payment trends, and records a reserve when collection of amounts due is at risk.  

Allowance for doubtful accounts, December 31, 2010	$	625,014
Additions charged to income		1,047,926
Reversals credited to income		(37,824	)
Translation adjustment		56,358
Allowance for doubtful accounts, December 31, 2011	$	1,691,474
Additions charged to income		106,907
Reversals credited to income		-
Translation adjustment		5,042
Allowance for doubtful accounts, September 30, 2012	$	1,803,423

Schedule Of Provision For Inventory [Table Text Block]

The cost in excess of market value is written off and recorded as cost of revenues.

Provision for inventory, December 31, 2010	$	93,195
Additions charged to income		26,763
Realized		(5,471	)
Translation adjustment		5,276
Provision for inventory, December 31, 2011	$	119,763
Additions charged to income		-
Realized		-
Translation adjustment		302
Provision for inventory, September 30, 2012		120,065

Property, Plant and Equipment [Table Text Block]

The estimated useful lives of the property, plant and equipment are as follows:

Plant and buildings	20-38 years
Transportation equipment	3-10 years
Machinery equipment	5-10 years
Office equipment	3-5 years

Schedule of Derivative Liabilities at Fair Value [Table Text Block]

The following table presents information about the company’s fair value financial liabilities classified as Level 2 and Level 3 as of December 31, 2011 and September 30, 2012.

	Balance as of September 30, 2012
	Fair Value Measurements
	Using Fair Value Hierarchy
	Level 1		Level 2		Level 3
Derivative liability related to loan (Note 12)		-		-	$	-
Derivative liability related to warrant (Note 12)		-		-	$	8,188
Guaranty contract liability (Note 16)		-	$	154,273		-

	Balance as of December 31, 2011
	Fair Value Measurements
	Using Fair Value Hierarchy
	Level 1		Level 2		Level 3
Derivative liability related to loan (Note 12)		-		-	$	21,274
Derivative liability related to warrant (Note 12)		-		-	$	22,806
Guaranty contract liability (Note 16)		-	$	89,068		-

Schedule Of Changes In Level 3 Derivative Liabilities [Table Text Block]

A summary of changes in the Level 3-classified derivative liabilities related to stock purchase warrants and a loan for the year ended December 31, 2011 and for the nine months ended September 30, 2012 is as follows:

	Derivative liability for warrant			Derivative liability for loan
Balance at December 31, 2010	$	1,332,760			423,307
Warrant cancellation (Note 12)		(15,547	)		-
Change in fair value of derivative liability for warrant		(1,294,407	)		-
Change in fair value of derivative liability for loan		-			(402,033	)
Balance at December 31, 2011	$	22,806			21,274
Change in fair value of derivative liability for warrant		(14,618	)		-
Change in fair value of derivative liability for loan		-			(21,274	)
Balance at September 30, 2012	$	8,188			-

Deferred Revenue, by Arrangement, Disclosure [Table Text Block]

A summary of changes in the Level 2-classified guaranty contract liability related to Zhejiang Kailin project (Note 16) for the year ended December 31, 2011 and for the nine months ended September 30, 2012 is as follows:

	Guaranty contract liability
Balance at December 31, 2010	$	-
Guaranty contract liability		90,745
Change in fair value of guaranty contract liability		(1,677	)
Balance at December 31, 2011	$	89,068
Guaranty contract liability		119,905
Change in fair value of guaranty contract liability		(54,700	)
Balance at September 30, 2012	$	154,273

XML

Property, plant and equipment, Net (Details) (USD $)	Sep. 30, 2012	Dec. 31, 2011
Accumulated depreciation	$ (3,090,578)	$ (2,137,381)
Subtotal	24,068,442	24,981,725
Construction in progress	4,521,458	1,177,877
Property, plant and equipment, net	28,589,900	26,159,602
Plant [Member]
Subtotal	21,576,369	21,416,681
Machinery and Equipment [Member]
Subtotal	4,289,211	4,496,365
Transportation Equipment [Member]
Subtotal	367,193	366,270
Office Equipment [Member]
Subtotal	$ 926,247	$ 839,790

XML

Summary of Significant Accounting Policies (Details 2)	9 Months Ended
	Sep. 30, 2012
Minimum [Member] | Plant and Buildings [Member]
Property, Plant and Equipment, Useful Life	20 years
Minimum [Member] | Transportation Equipment [Member]
Property, Plant and Equipment, Useful Life	3 years
Minimum [Member] | Machinery and Equipment [Member]
Property, Plant and Equipment, Useful Life	5 years
Minimum [Member] | Office Equipment [Member]
Property, Plant and Equipment, Useful Life	3 years
Maximum [Member] | Plant and Buildings [Member]
Property, Plant and Equipment, Useful Life	38 years
Maximum [Member] | Transportation Equipment [Member]
Property, Plant and Equipment, Useful Life	10 years
Maximum [Member] | Machinery and Equipment [Member]
Property, Plant and Equipment, Useful Life	10 years
Maximum [Member] | Office Equipment [Member]
Property, Plant and Equipment, Useful Life	5 years

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Inventories, Net (Tables)

9 Months Ended

Sep. 30, 2012

Inventory Disclosure [Abstract]

Schedule of Inventory, Current [Table Text Block]

As of December 31, 2011 and September 30, 2012, inventories consist of the following:

	December 31,			September 30,
	2011			2012
Raw materials	$	1,601,998		$	2,395,338
Work in progress		12,978,418			7,049,818
Finished goods		217,659			218,207
Inventory cost	$	14,798,075		$	9,663,363
Less: inventory provision		(119,763	)		(120,065	)
Inventory, net	$	14,678,312		$	9,543,298

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Property, plant and equipment, Net (Tables)

9 Months Ended

Sep. 30, 2012

Property, Plant and Equipment [Abstract]

Property, Plant and Equipment [Table Text Block]

The estimated useful lives of the property, plant and equipment are as follows:

Plant and buildings	20-38 years
Transportation equipment	3-10 years
Machinery equipment	5-10 years
Office equipment	3-5 years

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Summary of Significant Accounting Policies

9 Months Ended

Sep. 30, 2012

Accounting Policies [Abstract]

Significant Accounting Policies [Text Block]

Note 2 – Summary of Significant Accounting Policies

The accompanying unaudited interim consolidated financial statements as of September 30, 2012 and for the three and nine months ended September 30, 2012 and 2011 have been prepared by the Company, in accordance with generally accepted accounting principles, or GAAP, for interim financial reports and the instructions for Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, certain information and footnote disclosures normally included in financial statements prepared under generally accepted accounting principles have been condensed or omitted pursuant to such regulations. In the opinion of the Company’s management, the unaudited interim consolidated financial statements include all adjustments, consisting of normal recurring adjustments, necessary for a fair statement of the Company’s financial position, results of operations and cash flows. The results of operations for the three and nine months ended September 30, 2012 are not necessarily indicative of the results of operations for the year ending December 31, 2012. The balance sheet at December 31, 2011 has been derived from the audited consolidated financial statements at that date. The unaudited interim financial statements and footnotes do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements.

The principal accounting policies adopted in the preparation of these consolidated financial statements are set out below:

(a) Principle of consolidation

The accompanying consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“US GAAP”). The consolidated financial statements include the financial statements of the Company, its wholly-owned subsidiaries Poise Profit, CER Hong Kong, Hi-tech, CER Shanghai, and CER Yangzhou; and its variable interest entity (“VIE”) Shanghai Engineering. All significant inter-company transactions and balances among the Company, its subsidiaries and VIE are eliminated upon consolidation.

In accordance with U.S. GAAP, variable interest entities are generally entities that lack sufficient equity to finance their activities without additional financial support from other parties or whose equity holders lack adequate decision making ability. Each variable interest entity with which the Company is affiliated must be evaluated to determine who the primary beneficiary of the risks and rewards of ownership of the variable interest entity. The primary beneficiary is required to consolidate the variable interest entity's financial information for financial reporting purposes.

Management has concluded that Shanghai Engineering is a variable interest entity and that CER Hong Kong is the primary beneficiary thereof. Pursuant to the contractual arrangements described elsewhere in this filing on Form 10-Q, the Company recovers substantially all of the profits of its VIE through service fees charged (particularly under a consulting and service agreement) and has the unilateral ability to do so through its wholly owned subsidiaries. Through such contractual arrangements, the Company (as applicable, through wholly-owned subsidiaries) has the power to direct the activities most significant to the economic performance of the VIE and absorbs all, or substantially all, of the profits or losses. Accordingly, the Company is the primary beneficiary of such arrangements. Under the requirements of the FASB’s accounting standard regarding VIEs, the Company consolidates the financial statements of Shanghai Engineering.

Under the contractual arrangements with Shanghai Engineering, the Company has the power to direct its activities, and can have assets transferred freely out of the entity without any restrictions. Therefore the Company considers that there is no asset of the consolidated VIE that can be used only to settle obligations of the VIE, except for registered capital and PRC statutory reserves of the VIE amounting to a total of $1.43 million as of September 30, 2012. As the consolidated VIE is incorporated as a limited liability company under the PRC Company Law, creditors of the VIE do not have recourse to the general credit of the Company for any of the liabilities of the consolidated VIE, which at September 30, 2012 consisted of receipts in advance of $6.6 million, payables to suppliers and agents of $10.1 million, and other accrued liabilities of $2.2 million, totaling $18.9 million. As of September 30, 2012, the VIE held a cash balance of $61,050. Currently there is no contractual arrangement that could require the Company to provide additional financial support to the consolidated VIE. As the Company is conducting certain business in the PRC mainly through the VIE, the Company may provide such support on a discretionary basis in the future, which could expose the Company to a loss.

(b) Use of estimates

In preparing financial statements in conformity with US GAAP, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses during the reported periods. Significant estimates include useful lives of equipment, allowances for doubtful accounts, deferred tax assets and related valuation allowances, and the completion percentage of construction contracts.  Actual results could differ from those estimates.

(c) Concentrations of risk

The Company maintains cash balances at financial institutions within the U.S., Hong Kong, and PRC. Balances at financial institutions or state owned banks within the PRC are not covered by insurance. Balances at financial institutions within the United States are covered by the Federal Deposit Insurance Corporation for $250,000 per depositor per institution. Balances at financial institutions within Hong Kong are insignificant. The Company has not experienced any losses in such accounts and believes it is not exposed to any significant credit risks on its cash in bank accounts.

For the three months ended September 30, 2011 and 2012, the Company’s five top customers accounted for 87% and 73% of the Company's sales, respectively. For the nine months ended September 30, 2011 and 2012, the Company’s five top customers accounted for 73% and 57% of the Company's sales, respectively. Receivables from these five top customers were 56% and 69% of total accounts receivable at September 30, 2011 and 2012, respectively. Among those customers, the two largest customers were Ningbo Xinfu and Wuxi Green. Ningbo Xinfu accounted for 19% of revenue for the nine months ended September 30, 2012 and 0% of receivables as of September 30, 2012. Wuxi Green accounted for 12% of revenue for the nine months ended September 30, 2012 and 0% of receivables as of September 30, 2012.

For the three months ended September 30, 2011 and 2012, the five top suppliers provided approximately 23% and 26% of the Company's purchases of raw materials, respectively. For the nine months ended September 30, 2011 and 2012, the five top suppliers accounted for approximately 25% and 18% of the Company's purchases of raw materials, respectively. Payables to these five suppliers were approximately 13% and 15.1% of total accounts payable at September 30, 2011 and 2012, respectively.

The Company's operations are carried out in the PRC. Accordingly, the Company's business, financial condition and results of operations may be influenced by the political, economic and legal environments in the country, and by the general state of the country's economy. The Company's operations in the PRC are subject to specific considerations and significant risks not typically associated with companies carrying out operations in the United States. These include risks associated with, among others, the political, economic and legal environments in the PRC and foreign currency exchange. The Company's results may be adversely affected by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency conversion and remittance abroad, and rates and methods of taxation, among other things.

(d) Foreign currency translation

The reporting and functional currency of the parent Company and of CER Hong Kong is the U.S. dollar. Our subsidiaries Shanghai Engineering, CER Shanghai, and CER Yangzhou use the Chinese yuan Renminbi ("RMB") as their functional currency. Results of operations are translated at average exchange rates during the period, and assets and liabilities are translated at the end of period exchange rates. Cash flows are also translated at average exchange rates for the period, therefore, amounts reported on the statement of cash flows will not necessarily agree with changes in the corresponding balances on the balance sheet. Translation adjustments resulting from this process are included in accumulated other comprehensive income (loss) in stockholders' equity. For the three months ended September 30, 2011 and 2012, foreign currency translation gains amounted to $458,788 and to $344,248, respectively. For the nine months ended September 30, 2011 and 2012, foreign currency translation gains amounted to $766,370and to $120,696, respectively.

Transaction gains and losses that arise from exchange rate fluctuations from transactions denominated in a currency other than the functional currency are included in the consolidated statements of operations and other comprehensive income (loss) as incurred within “non-operating income (expenses), net.”

The PRC government imposes significant exchange restrictions on fund transfers out of the PRC that are not related to business operations. These restrictions have not had a material impact on the Company because it has not engaged in any significant transactions that are subject to the restrictions.

Accumulated other comprehensive income amounted to $1,286,126 and $1,406,822 as of December 31, 2011 and September 30, 2012, respectively. The balance sheet accounts with the exception of equity at December 31, 2011 and September 30, 2012 were translated at RMB6.30 to $1.00 and RMB6.28 to $1.00 respectively.

The average translation rates applied to income and cash flow statement amounts for the three months ended September 30, 2011 and 2012 were RMB6.40 to $1.00 and RMB6.35 to $1.00 respectively. For the nine months ended September 30, 2011 and 2012, the average translation rates were RMB6.49 to $1.00 and RMB6.33 to $1.00, respectively.

(e) Cash and restricted cash

Cash includes cash on hand and demand deposits with banks, which are unrestricted as to withdrawal and use, and which have original maturities less than three months.

Restricted cash represents a cash portion of the guaranty for the bids on contracts and is deposited in a separate bank account subject to withdrawal restrictions controlled by the customer to secure the Company’s performance of the project in process. The deposit cannot be drawn or transferred by the Company until the restriction period has expired. The Company also classified certain cash as restricted that is not available for immediate use due to its collateralization on certain short term borrowings and notes payable, etc.

(f) Notes receivable

Notes receivable represent trade accounts receivable due from various customers where the customers’ banks have guaranteed the payment of the receivables. The notes are non-interest bearing and normally paid within three to six months. The Company has the ability to submit a request for payment to the customer’s bank earlier than the scheduled payment date, but will incur an interest charge and a processing fee. 

(g) Receivables and allowances for doubtful accounts

Receivables include trade accounts due from customers and revenues earned in excess of amounts billed on EPC contracts (unbilled receivables). Pursuant to ASC Topic 850, such amounts attributable to related parties are separately presented in the balance sheet. Management regularly reviews the aging of receivables and changes in payment trends, and records a reserve when collection of amounts due is at risk.  

Allowance for doubtful accounts, December 31, 2010	$	625,014
Additions charged to income		1,047,926
Reversals credited to income		(37,824	)
Translation adjustment		56,358
Allowance for doubtful accounts, December 31, 2011	$	1,691,474
Additions charged to income		106,907
Reversals credited to income		-
Translation adjustment		5,042
Allowance for doubtful accounts, September 30, 2012	$	1,803,423

Accounts receivable which are expected to be collected after one year are reclassified as long-term accounts receivable.  The provision for accounts receivable balances described above is further described in Note 3.

(h) Inventories

Inventories are comprised of raw materials, work in progress and finished goods and are stated at the lower of cost or market value. Costs of work in progress include direct labor, direct materials, and production overhead before the goods are ready for sale. Management reviews inventories for obsolescence or cost in excess of market value periodically. The obsolescence, if any, is recorded as a reserve against the inventory. The cost in excess of market value is written off and recorded as cost of revenues.

Provision for inventory, December 31, 2010	$	93,195
Additions charged to income		26,763
Realized		(5,471	)
Translation adjustment		5,276
Provision for inventory, December 31, 2011	$	119,763
Additions charged to income		-
Realized		-
Translation adjustment		302
Provision for inventory, September 30, 2012		120,065

(i) Advances on purchases

Advances on purchases are money advanced to outside vendors for inventory purchases and property, plant and equipment purchases. This amount is refundable and bears no interest.

(j) Property, plant and equipment, net

Property, plant and equipment are stated at cost. Depreciation is calculated principally by use of the straight-line method over the estimated useful lives of the related assets. Expenditures for maintenance and repairs, which do not improve or extend the expected useful lives of the assets, are charged to operations as incurred, while renewals and betterments are capitalized.

Management established a 5% residual value for property, plant and equipment. The estimated useful lives of the property, plant and equipment are as follows:

Plant and buildings	20-38 years
Transportation equipment	3-10 years
Machinery equipment	5-10 years
Office equipment	3-5 years

The gain or loss on disposal of property, plant and equipment is the difference between the net sales proceeds and the carrying amount of the relevant assets’, gains or losses, if any, and are recognized in the consolidated statement of income and other comprehensive income. There were no disposals of assets during the three and nine months ended September 30, 2012. During the three and nine months ended September 30, 2011, the Company disposed of machinery with a carrying value of $37,949 and two cars with carrying value of $39,646 and recognized loss for disposal of $52,732 from the transactions.

(k) Impairment of assets

The Company assesses the carrying value of long-lived assets each reporting period, more often when factors indicating impairment are present, and reduces the carrying value of such assets by the amount of the impairment. The Company determines the existence of such impairment by measuring the expected future cash flows (undiscounted and without interest charges) and comparing such amount to the net asset carrying value. An impairment loss, if it exists, is measured as the amount by which the carrying amount of the asset exceeds the fair value of the asset. Fair value generally means based on either quoted market price, if available, or discounted cash flow analysis. There were no impairments of long lived assets recognized for the three and nine months ended September 30, 2011 and 2012.

(l) Advances from customers

Advances from customers represent amounts advanced by customers on product or service orders. The product (service) is shipped (rendered) within one year after receipt of the advance payment, and the related sales are recognized in accordance with the Company’s revenue recognition policy.

(m) Income taxes

Income taxes are accounted for under the asset and liability method. Deferred income taxes are recognized for temporary differences between the tax bases of assets and liabilities and their reported amounts in the financial statements, net operating loss carry forwards and credits, by applying enacted statutory tax rates in the year in which those temporary differences are expected to be recovered or settled. Deferred tax assets are reduced by a valuation allowance when it is more likely than not that some portion or all of the deferred tax assets will not be realized. Current income taxes are provided for in accordance with the laws of the relevant taxing authorities.

In assessing uncertain tax positions, the Company applies a more likely than not threshold and a two-step approach for the tax position measurement and financial statement recognition. For the two-step approach, the first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount that is greater than 50% likely to be realized upon settlement. As of September 30, 2012, the Company does not have any uncertain tax positions required to be recognized and measured under the accounting standard for income taxes.

(n) Value added tax

Sales revenue represents invoiced values, net of a value-added tax ("VAT"). All of the Company's products that are sold in the PRC are subject to a Chinese value-added tax at a rate of 17% of the gross sales price. This VAT may be offset by VAT paid by the Company on raw materials and other materials. The Company records VAT payable and VAT receivable, net of payments, in the financial statements. The VAT tax return is filed offsetting the payables against the receivables.

(o) Operating leases

Leases where substantially all the rewards and risks of ownership of assets remain with the leasing company are accounted for as operating leases. Payments made under operating leases are charged to the statement of operations and comprehensive (loss) income on a straight line basis over the lease periods.

(p) Stock based compensation

In accordance with ASC 718, Compensation-Stock Compensation, the Company measures the cost of employee services received in exchange for stock based compensation at the grant date fair values of the awards.

The Company recognizes stock based compensation costs, net of a forfeiture rate, on a straight-line basis over the requisite service period for each award. ASC 718 requires forfeitures to be estimated at the time of grant and revised in subsequent periods if actual forfeitures differ from those estimates.  There were no stock options granted in the three and nine months ended September 30, 2011 and 2012.

Cost of goods acquired or services received from non-employees is measured based on the fair value of the awards issued on the measurement date as defined in ASC 505, “Equity.” Awards granted to non-employees are remeasured at each reporting date using the fair value as at each period end. Changes in fair values between the interim reporting dates are attributed consistent with the method used in recognizing the original stock based compensation costs.

(q) Shipping and handling costs

Shipping and handling costs are included in selling, general and administrative expenses which totaled $301,735 and $138,133 for the three month periods ended September 30, 2011 and 2012, respectively, and $410,108 and $285,422 for the nine month periods ended September 30, 2011 and 2012, respectively.

(r) Revenue recognition

The Company derives revenues principally from:

(a) Provision of Engineering, Procurement and Construction ("EPC") services, which are essentially turnkey contracts where the Company provides all services in the whole construction process from design, development, engineering, manufacturing, and procurement to installation;

(b) Sales of energy recovery systems; and

(c) Provision of design services.

In accordance with the accounting standard regarding performance of construction-type and certain production-type contracts, and long-term construction-type contracts, the Company adopted the percentage of completion method to recognize revenues and cost of sales for EPC contracts. EPC contracts are long-term, complex contracts involving multiple elements, such as design, manufacturing and installation, which all form one integral EPC project. The energy recovery system involved in an EPC project is highly customized to the specific customer's facilities and essentially not transferable to any other facilities without significant modification and cost. It would be difficult, if not impossible, to beneficially use a single element of a specific EPC project on a standalone basis other than in connection with the facilities for which it was intended. EPC contracts are by nature long-term construction-type contracts, usually lasting more than one accounting period, and the Company is able to reasonably estimate the progress toward completion, including contract revenues and contract costs. EPC contacts specify the customers' rights to the goods, the consideration to be paid and received, and the terms of payment. Specifically, the Company has the right to require a customer to make progress payments upon completion of determined stages of the project which serve as evidence of the customer's approval and acceptance of the work completed to date as complying with the terms of the particular EPC contract.

Sales of the Company's energy recovery systems and related products are essentially product sales. The products consist mainly of waste heat boilers and other related equipment manufactured according to specific customers' specifications. Once manufactured, the Company ships the products to its customers in their entirety in one batch. The Company’s service arrangement also includes a limited warranty to its customers pursuant to which the customers retain between 5% and 10% of the particular contract price as retainage during the limited warranty period (usually 12-18 months). The Company generally recognizes revenues including retainage from product sales when (i) persuasive evidence of an arrangement exists, which is generally represented by a contract between the Company and the customer; (ii) products are shipped; (iii) title and risks of ownership have passed to the customer, which generally occurs at the time of delivery; (iv) the customer accepts the products upon a quality inspection performed by them; (v) the purchase price is agreed to between the Company and the customer; and (vi) collectability is reasonably assured. Net revenues represent the invoiced value of products, less returns and discounts, and are net of value-added tax.

In providing design services, the Company designs energy recovery systems and other related systems based on a customer's requirements and the deliverable consists of engineering drawings. The customer may elect to engage the Company to manufacture the designed system or choose to present the Company's drawings to other manufacturers for manufacturing and installation. The Company recognizes revenues from design services when the services are provided, the design drawings are delivered, invoices are issued and collectability is reasonably assured. The Company generally delivers the drawings in one batch.

(s) Fair value of financial instruments

The accounting standard regarding fair value measurements defines financial instruments and requires fair value disclosures for those financial instruments. The fair value standard also establishes a three-level valuation hierarchy for disclosures of fair value measurement and enhances disclosure requirements for fair value measurements. The carrying amounts reported in the accompanying consolidated balance sheets for current assets and current liabilities such as cash, restricted cash, accounts and notes receivable, long term accounts receivable, short term loans, accounts payable, and other payables qualify as financial instruments. Management concluded the carrying values of these financial instruments are reasonable approximations of their respective fair values because of the short period of time between the origination of such instruments and their expected realization and the current market rates of interest. The three levels of the valuation hierarchy are defined as follows:

¨	Level 1	Inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets. At December 31, 2011 and September 30, 2012, the Company did not have any fair value assets or liabilities classified as Level 1.
¨	Level 2	Inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the assets or liability, either directly or indirectly, for substantially the full term of the financial instruments.
¨	Level 3	Inputs to the valuation methodology are unobservable and significant to the fair value. Inputs reflected management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date. Consideration is given to the risk inherent in the valuation technique and the risk inherent in the inputs to the model.

The measurement basis for current assets and current liabilities such as cash, restricted cash, accounts and notes receivable, long term accounts receivable, short term loans, accounts payable, and other payables is carrying value, which approximates fair value. All such current assets and liabilities with the exception of cash and restricted cash (Level 1) and short term loans (Level 2) would be classified as Level 3 measurements due to the presence of Company-specific unobservable inputs. The following table presents information about the company’s fair value financial liabilities classified as Level 2 and Level 3 as of December 31, 2011 and September 30, 2012.

	Balance as of September 30, 2012
	Fair Value Measurements
	Using Fair Value Hierarchy
	Level 1		Level 2		Level 3
Derivative liability related to loan (Note 12)		-		-	$	-
Derivative liability related to warrant (Note 12)		-		-	$	8,188
Guaranty contract liability (Note 16)		-	$	154,273		-

	Balance as of December 31, 2011
	Fair Value Measurements
	Using Fair Value Hierarchy
	Level 1		Level 2		Level 3
Derivative liability related to loan (Note 12)		-		-	$	21,274
Derivative liability related to warrant (Note 12)		-		-	$	22,806
Guaranty contract liability (Note 16)		-	$	89,068		-

A summary of changes in the Level 2-classified guaranty contract liability related to Zhejiang Kailin project (Note 16) for the year ended December 31, 2011 and for the nine months ended September 30, 2012 is as follows:

	Guaranty contract liability
Balance at December 31, 2010	$	-
Guaranty contract liability		90,745
Change in fair value of guaranty contract liability		(1,677	)
Balance at December 31, 2011	$	89,068
Guaranty contract liability		119,905
Change in fair value of guaranty contract liability		(54,700	)
Balance at September 30, 2012	$	154,273

For the three and nine months ended September 30, 2012, the Company recorded change in fair value of guaranty contract liability of $26,635 and $54,700, respectively.

A summary of changes in the Level 3-classified derivative liabilities related to stock purchase warrants and a loan for the year ended December 31, 2011 and for the nine months ended September 30, 2012 is as follows:

	Derivative liability for warrant			Derivative liability for loan
Balance at December 31, 2010	$	1,332,760			423,307
Warrant cancellation (Note 12)		(15,547	)		-
Change in fair value of derivative liability for warrant		(1,294,407	)		-
Change in fair value of derivative liability for loan		-			(402,033	)
Balance at December 31, 2011	$	22,806			21,274
Change in fair value of derivative liability for warrant		(14,618	)		-
Change in fair value of derivative liability for loan		-			(21,274	)
Balance at September 30, 2012	$	8,188			-

For the three and nine months ended September 30, 2012, the Company recorded $4,651 and $35,892 fair value change of derivative liability respectively.

(t) Segment reporting

The Group reports its segments in accordance with ASC 280. The Group primarily operates in China and measures its business as a single operating segment. All of the group’s long term assets are located in China.

(u) Subsidy income

The Company, in connection with its occupancy and use of certain industrial park land, receives from time to time certain subsidies wholly at the discretion of the management authority of a third party research and development fund related to the industrial park which are not tied to future tenancy or performance by the Company; receipt of such subsidy income is not contingent upon any further actions or performance by the Company and the amounts do not have to be refunded under any circumstances. These amounts are not tied to land use rights or any other transactions. Upon receipt, these incentives are recognized within other income (loss) in the consolidated statements of operations and other comprehensive (loss) income.

(v) Restatements and reclassifications

The Company, effective with the annual 2011 financial statements included in Form 10-K, reclassified its presentation of revenue and costs of revenue in the consolidated statements of (loss) income and other comprehensive (loss) income to depict EPC revenue attributable to third party customers, EPC revenue attributable to related parties, and product revenue given the growth in the number and per-contract revenue associated with EPC contracts and 2011 amounts have been reclassified to conform to the current presentation.

On March 30, 2012 the Company filed, on Form 8-K, a report announcing the restatement of its unaudited quarterly financial statements for the first three quarters of 2011. The root cause of the necessary adjustments to the quarterly interim unaudited financial information for the first three quarters of 2011 was identified during the preparation of the Company’s annual 2011 financial statements as reported in Form 10-K filed March 30, 2012. The Company determined that transaction losses resulting from variations in foreign currency exchange rates on certain purchase transactions denominated in U.S. dollars involving the Company’s onshore PRC subsidiaries (which use the yuan renminbi, or RMB as their functional currency) were incorrectly classified as translation losses and were incorrectly included in other comprehensive income (loss). These losses should have been reported in the statement of operations within other income (expense). Such transaction losses only impacted the first three quarters of 2011 as the underlying business activity involving purchasing of raw materials related to the Group’s then-under-construction Yangzhou production facility started in 2011 and was substantially completed by the end of 2011. The transaction losses arose as a result of cash advances made for purchase transactions in which goods were acquired outside of mainland China and imported to the Company’s onshore PRC subsidiaries. Continued weakening of the U.S. dollar against the RMB led to a decrease in the RMB value of purchased goods subsequently received relative to the asset already recorded for the refundable purchase advance made in cash.

Accordingly, the Company undertook further evaluation to identify and quantify the necessary adjustments to restate the previously issued unaudited financial information for the first three quarters of 2011. Adjustments were limited to the change in classification of foreign exchange transaction losses from other comprehensive income to non-operating income (loss), net in the consolidated unaudited statement of operations. Such adjustments were reported in amended Forms 10-Q for the first three quarters of 2011 filed with the SEC on May 15, 2012. The comparative amounts for 2011 included in this Form 10-Q reflect the restated financial information.

(w) Recent accounting pronouncements

In December 2011, the FASB issued ASU 2011-11, Balance Sheet (Topic 210): Disclosures about Offsetting Assets and Liabilities (ASU 2011-11). This newly issued accounting standard requires an entity to disclose both gross and net information about instruments and transactions eligible for offset in the statements of financial position as well as instruments and transactions executed under a master netting or similar arrangement and was issued to enable users of financial statements to understand the effects or potential effects of those arrangements on their financial position. This ASU is required to be applied retrospectively and is effective for fiscal years, and interim periods within those years, beginning on or after January 1, 2013. As this accounting standard only requires enhanced disclosure, the adoption of this standard is not expected to have an impact on the Company’s financial position.

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Intangible Assets (Tables)

9 Months Ended

Sep. 30, 2012

Goodwill and Intangible Assets Disclosure [Abstract]

Schedule of Finite-Lived Intangible Assets [Table Text Block]

December 31,			September 30,
	2011			2012
Cost:
Land use rights	$	5,023,217		$	5,035,878
Software		152,896			190,920
Less: Accumulated amortization		(176,230	)		(306,572	)
Intangible assets, net	$	4,999,883		$	4,920,226

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Statutory Reserves (Details Textual) (USD $)	Sep. 30, 2012	Dec. 31, 2011
Statutory Surplus Reserve Deposit Percentage	10.00%
Statutory Surplus Reserve Limit	50.00%
Transfer To Statutory Reserve	$ 8,015,475	$ 376,794
Statutory Reserve	$ 509,596	$ 509,596

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Related Party Transactions (Tables)

9 Months Ended

Sep. 30, 2012

Related Party Transactions [Abstract]

Schedule Of Outstanding Receivable From Related Party [Table Text Block]

These amounts represent undiscounted payments.

Maturity date	Amount due
December 31, 2012		4,773,300
June 30, 2013		2,863,980
September 30, 2013		3,182,200
December 31, 2013		3,338,521
Total		14,158,001

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Accounts Receivable, Net (Details Textual)	9 Months Ended				3 Months Ended	9 Months Ended	3 Months Ended	9 Months Ended
	Sep. 30, 2012 USD ($)	Sep. 30, 2012 CNY	Dec. 31, 2011 USD ($)	Sep. 29, 2011	Sep. 30, 2012 Epc Contract [Member] USD ($)	Sep. 30, 2012 Epc Contract [Member] USD ($)	Sep. 30, 2012 Zhenjiang Kailin [Member] USD ($)	Sep. 30, 2012 Zhenjiang Kailin [Member] USD ($)	Sep. 30, 2012 Jiangsu Sopo [Member] USD ($)
Unbilled Receivables, Current	$ 18,791,747		$ 18,085,048
Revenue Recognised In Excess, Non Current	7,687,761		0
Accounts Receivable, Net							14,396,913	14,396,913	7,605,077
Discount In Revenue	661,093						0	1,703,369
Long-term accounts receivables	4,736,633		0				2,951,128	2,951,128	4,736,633
Due from Related Parties, Current	8,298,660
Accounts Receivable current - Third parties	11,465,468		11,639,138						11,445,785
Long term accounts receivable, net - third parties	4,736,633		0				14,396,913	14,396,913	4,736,633
Contract Value	7,900,000	50,000,000
Contract Procurement Value	6,300,000	40,000,000
Contract Construction Value	1,600,000	10,000,000
Contract Fair Value	9,000,000	57,100,000
Interest On Contract Value	RMB 6.4 million (approximately $1 million)
Aggregate Contract Value	RMB 63.5 million (approximately $10 million)
Receivables Payment Frequency	36
Discount Rate	8.00%		671.00%	5.02%			10.65%	10.65%
Construction Revenue					0	8,259,628		1,200,000	8,273,746
Retention Percentage	10.00%
Mark Up Percentage	11.00%
Contract Price Percentage Subcontractor	90.00%
Contract Price Percentage Retained	10.00%
Estimated Contract Price	9,000,000	57,100,000
Interest Income Accrued	$ 250,190

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Warrant and Derivative Liabilities (Details 1) (USD $)	9 Months Ended		12 Months Ended
	Sep. 30, 2012		Dec. 31, 2011
Number of shares exercisable	1,388,889		1,388,889
Stock price	$ 0.3		$ 0.38
Exercise price	$ 1.8		$ 1.8
Expected dividend yield (d)	0.00%	[1]	0.00%	[1]
Expected life (in years) (c)	1 year 7 months 6 days	[2]	2 years 4 months 20 days	[2]
Risk-free interest rate (a)	0.21%	[3]	0.32%	[3]
Expected volatility (b)	60.00%	[4]	61.00%	[4]
Warrant [Member]
Derivative liability - warrants issued in connection with Convertible Notes	$ 8,188		$ 20,920

[1] The expected dividend yield was based on the fact that the Company has not paid dividends to common shareholders in the past and does not expect to pay dividends to common shareholders in the future

[2] The expected life of the conversion feature of the notes was based on the term of the notes and the expected life of the warrants was determined by the expiration date of the warrants.

[3] The risk-free interest rate is based on U.S. Treasury securities with compatible life terms.

[4] Due to the short trading history of the Company's stock, the Company uses the volatility of comparable guideline companies to estimate volatility.

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CONSOLIDATED BALANCE SHEETS(USD ($))	Sep. 30, 2012	Dec. 31, 2011
CURRENT ASSETS:
Cash	$ 1,326,939	$ 3,579,446
Restricted cash	1,286,393	882,428
Notes receivable	978,352	1,779,233
Accounts receivable, net - third parties	11,465,468	11,639,138
Accounts receivable, net - related party	11,445,785	9,088,157
Inventories, net	9,543,298	14,678,312
Other current assets and receivables	1,079,160	333,376
Advances on purchases	11,217,899	21,276,652
Short-term investment	0	79,355
Total current assets	48,343,294	63,336,097
NON-CURRENT ASSETS:
Property, plant, and equipment, net	28,589,900	26,159,602
Deferred tax assets	474,080	621,940
Intangible assets	4,920,226	4,999,883
Long term accounts receivable, net - third parties	4,736,633	0
Long term accounts receivable, net - related party	2,951,128	0
Total non-current assets	41,671,967	31,781,425
Total Assets	90,015,261	95,117,522
CURRENT LIABILITIES:
Accounts payable	26,234,629	21,625,205
Notes payable	2,641,254	1,396,648
Accrued expenses and other liabilities	2,964,225	1,269,950
Advances from customers	21,894,241	42,742,078
Taxes payable	3,531,053	1,220,334
Long term loan, current portion	5,000,000	4,850,945
Short term loans	17,331,836	14,388,649
Derivative liability, current	0	21,274
Total current liabilities	79,597,238	87,515,083
NON-CURRENT LIABILITIES:
Warrant liability	8,188	22,806
Deferred revenue	154,273	89,068
Total non-current liabilities	162,461	111,874
Total Liabilities	79,759,699	87,626,957
SHAREHOLDERS' EQUITY:
Preferred stock($0.001 par value; 50,000,000 shares authorized, 200,000 shares issued and outstanding as of both December 31, 2011 and September 30, 2012)	189	189
Common stock($0.001 par value; 100,000,000 shares authorized, 31,085,859 and 31,085,859 shares issued and outstanding as of December 31, 2011 and September 30, 2012, respectively)	31,085	31,085
Treasury stock(Nil and 13,232 shares repurchased as of December 31, 2011 and September 30, 2012, respectively)	(5,024)	0
Additional paid-in-capital	8,779,436	8,758,236
Accumulated deficit	(466,542)	(3,094,667)
Statutory reserves	509,596	509,596
Accumulated other comprehensive income	1,406,822	1,286,126
Total shareholders' equity	10,255,562	7,490,565
Total liabilities and shareholders' equity	$ 90,015,261	$ 95,117,522

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Summary of Significant Accounting Policies (Details 3) (USD $)	Sep. 30, 2012	Dec. 31, 2011
Derivative liability, current	$ 0	$ 21,274
Guaranty contract liability (Note 16)	154,273	89,068
Fair Value, Inputs, Level 1 [Member]
Guaranty contract liability (Note 16)	0	0
Fair Value, Inputs, Level 1 [Member] | Loans [Member]
Derivative liability, current	0	0
Fair Value, Inputs, Level 1 [Member] | Warrant [Member]
Derivative liability, current	0	0
Fair Value, Inputs, Level 2 [Member]
Guaranty contract liability (Note 16)	154,273	89,068
Fair Value, Inputs, Level 2 [Member] | Loans [Member]
Derivative liability, current	0	0
Fair Value, Inputs, Level 2 [Member] | Warrant [Member]
Derivative liability, current	0	0
Fair Value, Inputs, Level 3 [Member]
Guaranty contract liability (Note 16)	0	0
Fair Value, Inputs, Level 3 [Member] | Loans [Member]
Derivative liability, current	0	21,274
Fair Value, Inputs, Level 3 [Member] | Warrant [Member]
Derivative liability, current	$ 8,188	$ 22,806

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CONSOLIDATED STATEMENTS OF CASH FLOWS(USD ($))	9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$ 2,628,125	$ 2,663,566
Adjustments to reconcile to cash provided by (used in) operating activities:
Depreciation and amortization	1,316,887	1,014,085
Loss on disposal of fixed assets		52,732
Discount reflected in revenue for payment extensions on long-term accounts receivable (Note 3)	1,703,369	0
Interest income - long term accounts receivable accretion (Note 3)	(911,283)	0
(Gain on reversal of) charge to allowance for doubtful accounts	106,907	(37,624)
Provision for inventories	0	26,621
Stock based compensation	21,200	253,158
Common stock for consulting services	0	40,308
Common stock issued to settle exchange rate loss related to long-term loan	0	144,498
(Gain) loss from changes in fair value of warrant and derivative liabilities	(35,892)	(1,560,604)
Accretion to face value on loan	149,055	198,584
Amortization of deferred financing cost	0	215,623
Cancellation of warrants	0	(15,547)
Capitalized interest	(55,382)	(6,829)
Debt issue cost	7,747	0
Deferred tax benefit	147,860	(344,079)
Changes in operating assets and liabilities:
Notes receivable	800,881	(213,108)
Accounts receivable - third parties	61,721	(586,722)
Accounts receivable - related party	(2,357,628)	(7,063,336)
Inventories	5,135,995	(5,230,423)
Other receivables	(745,784)	682,203
Advances on purchases	10,058,753	(21,062,854)
Long term accounts receivable - related party	(3,993,404)	4,679,121
Long term accounts receivable - third parties	(4,486,443)	0
Accounts payable	5,571,893	9,344,972
Notes payable	1,244,606	0
Other payables and accrued liabilities	1,694,275	(902,707)
Advances from customers	(20,847,837)	23,066,390
Taxes payable	2,310,719	(1,235,278)
Deferred revenue	65,205	0
Effects of exchange rate change in operating activities	55,631	914,029
Net cash provided by (used in) operating activities	(352,824)	5,036,779
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant, and equipment	(4,469,407)	(9,011,203)
Purchase of intangible assets	(37,366)	(2,465,073)
Change in restricted cash	(403,965)	112,040
Proceeds from disposal of property, plant, and equipment	0	24,863
Cash proceeds from short term investment	79,355	0
Net cash used in investing activities	(4,831,383)	(11,339,373)
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of long term loans	0	(3,259,843)
Cash proceeds from short term loans	18,195,858	14,477,210
Repayment of short term loans	(15,260,418)	(1,162,700)
Acquisition of treasury stock	(5,024)	0
Net cash provided by financing activities	2,930,416	10,054,667
EFFECTS OF EXCHANGE RATE CHANGES ON CASH	1,284	54,470
INCREASE (DECREASE) IN CASH	(2,252,507)	3,806,543
CASH, beginning balance	3,579,446	2,996,076
CASH, ending balance	1,326,939	6,802,619
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for income taxes	403,256	506,692
Cash paid for interest	836,389	1,123,589
Supplemental schedule of non-cash investing and financing activities:
Common stock for consulting services	0	40,308
Common stock issued to settle exchange rate loss related to long-term loan	0	144,498
Accounts payable relating to purchase of buildings and equipment	$ 0	$ 5,191,982

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Intangible Assets (Details Textual) (USD $)	1 Months Ended		3 Months Ended		9 Months Ended
	Jul. 31, 2011	Nov. 30, 2009	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Finite-Lived Intangible Asset, Useful Life	50 years	50 years
Amortization Of Intangible Assets			$ 40,610	$ 30,785	$ 128,958	$ 64,940
Use Rights [Member]
Finite-Lived Intangible Assets, Net	2,331,869	2,438,632
Software [Member]
Finite-Lived Intangible Asset, Useful Life					3 years

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Earnings / (Loss) per Share (Tables)

9 Months Ended

Sep. 30, 2012

Earnings Per Share [Abstract]

Schedule of Antidilutive Securities Excluded from Computation of Earnings Per Share [Table Text Block]

The following table lists the potentially dilutive securities at September 30, 2012 related to our compensation plans under which shares of our common stock are authorized for issuance.

Potentially Dilutive Securities	Number of Securities to be Issued		Reference Index
Dilutive securities from warrants issued as part of financing with Series A preferred stock		1,852,820	Note 12
Dilutive securities from warrants issued with convertible notes		1,388,889	Note 12
Dilutive securities from options to Ye Tian (director)		500,000	Note 13
Dilutive securities from options to Estelle Lau (director)		60,000	Note 13
Dilutive securities from options to Sum Kung (director)		30,000	Note 13
Dilutive securities from options to Jules Silbert (director)		30,000	Note 13
Total potentially dilutive securities		3,861,709

Schedule of Calculation of Numerator and Denominator in Earnings Per Share [Table Text Block]

The following are reconciliations of the basic and diluted earnings per share computations for the three and nine months ended September 30, 2011 and 2012:

	Three months ended September 30,
	2011			2012
Numerator:
Net income for the period		2,278,413			900,619
Amount allocated to preferred stockholders		(7,744	)		(3,062	)
Net income available to common stock holders – Basic and diluted		2,270,669			897,557
Denominator:
Denominator for basic earnings per share -weighted average common stocks outstanding		31,085,859			31,078,083
Weighted average stock options		16,956			-
Denominator for diluted earnings per share		31,102,815			31,078,083
Basic (loss)/earnings per share		0.07			0.03
Diluted (loss)/earnings per share		0.07			0.03

	Nine months ended September 30,
	2011			2012
Numerator:
Net income for the period		2,663,566			2,628,125
Amount allocated to preferred stockholders		(9,074	)		(8,934	)
Net income available to common stock holders – Basic and diluted		2,654,492			2,619,191
Denominator:
Denominator for basic earnings per share -Weighted average common stock outstanding		31,015,385			31,082,790
Weighted average stock options		16,956			-
Denominator for diluted earnings per share		31,032,341			31,082,790
Basic earnings per share		0.09			0.08
Diluted earnings per share		0.09			0.08

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Notes Payable (Details Textual)	3 Months Ended	9 Months Ended																			9 Months Ended				9 Months Ended
	Mar. 31, 2012	Sep. 30, 2012 CNY	Sep. 30, 2012 USD ($)	May 23, 2012 USD ($)	May 23, 2012 CNY	Apr. 24, 2012 USD ($)	Apr. 24, 2012 CNY	Mar. 30, 2012 USD ($)	Mar. 30, 2012 CNY	Mar. 21, 2012 USD ($)	Mar. 21, 2012 CNY	Mar. 06, 2012 USD ($)	Mar. 06, 2012 CNY	Jan. 09, 2012	Dec. 31, 2011 USD ($)	Nov. 24, 2011 USD ($)	Nov. 24, 2011 CNY	Sep. 09, 2009 USD ($)	Sep. 30, 2012 Rmb 8.8 Million Industrial and Commercial Bank Of China Limited Shanghai Zhangjiang Branch [Member] USD ($)	Sep. 30, 2012 Rmb 8.8 Million Industrial and Commercial Bank Of China Limited Shanghai Zhangjiang Branch [Member] CNY	Sep. 30, 2012 Rmb 8.8 Million Industrial and Commercial Bank Of China Limited Shanghai Zhangjiang Branch [Member] Repayment Of Debt [Member] USD ($)	Sep. 30, 2012 Rmb 8.8 Million Industrial and Commercial Bank Of China Limited Shanghai Zhangjiang Branch [Member] Repayment Of Debt [Member] CNY	Sep. 30, 2012 Rmb 3.1 Million China Citic Bank Yangzhou Branch [Member] USD ($)	Sep. 30, 2012 Rmb 3.1 Million China Citic Bank Yangzhou Branch [Member] CNY	Sep. 30, 2012 Rmb 3.1 Million China Citic Bank Yangzhou Branch [Member] Repayment Of Debt [Member] USD ($)	Sep. 30, 2012 Rmb 3.1 Million China Citic Bank Yangzhou Branch [Member] Repayment Of Debt [Member] CNY	Sep. 30, 2012 Bankers Acceptance [Member] USD ($)	Dec. 31, 2011 Bankers Acceptance [Member] USD ($)	Mar. 31, 2012 Bankers Acceptance [Member] Industrial and Commercial Bank Of China Limited [Member] USD ($)
Line of Credit Facility, Maximum Borrowing Capacity		4,500,000	$ 713,000					$ 3,175,000	20,000,000
Notes payable		16,600,178	2,641,254	747,817	4,700,000	493,269	3,100,178			793,950	5,000,000	635,160	4,000,000		1,396,648	1,400,000	8,800,000	5,000,000	1,400,168	8,800,000			493,269	3,100,178			2,641,254	1,396,648	1,397,352
Cash Deposit Required For Line Of Credit Facility Percentage														50.00%
Line Of Credit Facility Period	2 years
Cash Deposit Required For Line Of Credit Facility Amount				448,690	2,820,000	294,882	1,860,107
Repayments of Notes Payable		9,000,000
Subsequent Event, Amount																					$ 1,400,000	8,800,000			$ 493,269	3,100,178
Subsequent Event, Date																					Nov. 01, 2012	Nov. 01, 2012			Oct. 23, 2012	Oct. 23, 2012

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Related Party Transactions

9 Months Ended

Sep. 30, 2012

Related Party Transactions [Abstract]

Related Party Transactions Disclosure [Text Block]

Note 16 – Related Party Transactions

On February 1, 2010, Mr. Qinghuan Wu arranged for a $1,000,000 loan from Haide, a company controlled by Mr. Qinghuan Wu, to the Company. The proceeds of this loan were used by CER Yangzhou for additional paid-in capital which helped fund the Company’s new plant in Yangzhou, China. The loan bore interest at the annual rate of 9.5% and was unsecured. The Company paid the sum of $23,750 at the end of every three calendar months. The principal is due in full on January 30, 2012; hence the remaining loan is classified as long-term loan to be repaid within one year. Shanghai Engineering has subordinated its loan to those under the loan agreements. The Company repaid principal of $460,000 in December 2010. On October 10, 2011, CER paid the remaining outstanding principal and interest of $548,550 under the long-term loan.

On October 20, 2011, CER (Hong Kong) entered into an advanced payment agreement amounting to $669,800 with Haide, a company controlled by Mr. Qinghuan Wu. The substance of this arrangement was a short term borrowing from a related party. Pursuant to the agreement, Haide on behalf of CER (Hong Kong) paid to certain vendors $450,000 on October 20, 2011 and $219,800 on November 1, 2011, respectively. The terms of the agreement provide for zero interest. CER (Hong Kong) repaid $550,000 to Haide on November 25, 2011. As of September 30, 2012, the remaining balance of $119,800 was recorded in accrued expenses and other liabilities.

In March 2012, Mrs. Jialing Zhou, a significant shareholder and wife of Mr. Qinghuan Wu, provided an interest-free loan of RMB 1,900,000 (approximately $251,856) to Shanghai Engineering by several installments. The total amount was repaid as of September 30, 2012.

Zhenjiang Kailin EPC project

On January 8, 2011, CER signed a contract for the design, manufacture, and installation of a major waste heat recovery system with Zhenjiang Kailin Clean Heat Energy Co., Ltd. (“Zhenjiang Kailin”) of Zhenjiang City. The contract was valued at RMB 300 million (approximately $46 million), including the engineering part of RMB 8 million (approximately $1 million), procurement part of RMB 240 million (approximately $37 million) and construction part of RMB 52 million (approximately $8 million). The system, which is now completed, is part of a new sulfuric acid plant and is capable of producing up to 122 tons of steam-per-hour at 485° C and 5.4 MPa from operations at the plant. Transactions between CER and Zhenjiang Kailin are presented as related party transactions because the Chairman, Chief Executive Officer and majority shareholder of Green Asia Resources, Inc. (“Green Asia”), the parent company of Zhenjiang Kailin, is the owner of a significant creditor, Hold and Opt Investments Limited (as discussed in Note 7, Short-Term Loans) and is a less than 5% shareholder of CER, our executive officers own, as a result of a private placement and prior consulting arrangement, a small number (less than 1%) of shares in Green Asia, and, that at the time the contract was signed, a less than 5% shareholder of both CER and Green Asia was a member of CER’s Board of Directors. Management of each company is different and the directors at Green Asia and Zhenjiang Kailin are independent of CER. For the three and nine months ended September 30, 2012, revenue earned from the contract amounted to $12,672 and $6,660,158, respectively.

Guarantees related to Zhenjiang Kailin project

On November 25, 2011, CER Yangzhou entered into the first of two guaranty contracts regarding the Zhenjiang Kailin contract with third party CGN Energy Service Co., Ltd. (“CGN Energy”). CER Yangzhou and Zhenjiang Kailin agreed to engage CGN Energy to provide financing for a portion of the project contract price. CER sold certain equipment integral to the project to CGN Energy at a price of RMB24.1 million (approximately $3.82 million). As the financing party, CGN Energy resold the equipment to Zhenjiang Kailin via a structured payment arrangement covering a 24 month period. The substance of this transaction is Zhenjiang Kailin obtaining financing from third party CGN Energy to pay CER. CER Yangzhou entered into a guaranty contract with CGN Energy for the equipment sold, which was installed in the sulfuric acid waste heat recovery project. If there is any default by Zhenjiang Kailin, the first in guarantee order is Zhenjiang Kailin’s pledge for payment of its structured note with CGN Energy. The second in guarantee order is Jiangsu SOPO, a third party customer of CER and related party of Zhenjiang Kailin. Third in guarantee order is CER Yangzhou, which provided CGN Energy with an unconditional and irrevocable guarantee with joint responsibility to ensure that Zhenjiang Kailin will fulfill the duties and responsibilities to pay CGN Energy on time under the project contract. The amount of the guarantee, RMB 24.1 million, represents 7.8% of the RMB300 million project price.

On March 20, 2012, CER and Zhenjiang Kailin agreed to engage CGN Energy to provide financing for another portion of the project contract price (similar to the financing arrangement with CGN Energy in 2011). CER sold certain equipment integral to the project to CGN Energy at a price of RMB30 million (approximately $4.8 million). As the financing party, CGN Energy resold the equipment to Zhenjiang Kailin via a structured payment arrangement covering a 24 month period. CER Yangzhou also entered into a second guaranty contract with CGN Energy for the equipment sold, which was installed in the sulfuric acid waste heat power generation project. The guarantee contract is of the same character as the first financing arrangement, Zhenjiang Kailin’s pledge for payment of its structured note with CGN Energy is in the first guarantee order, Jiangsu SOPO in second guarantee order and CER Yangzhou in the third guarantee order, which provided CGN Energy with an unconditional and irrevocable guarantee with joint responsibility to ensure that Zhenjiang Kailin will fulfill the duties and responsibilities to pay CGN Energy on time under the project contract. The amount of the guarantee, RMB 30 million, represents 10% of the RMB 300 million project price.

On October 18, 2012, CER (Yangzhou) entered into a guaranty contract with Zhenjiang Kailin and CGN Energy in connection with a third financing for Zhenjiang Kailin project (similar to the financing arrangement with CGN Energy in 2011). CER Shanghai and Shanghai Engineering signed two contracts to sell certain equipment integral to the Zhenjiang Kailin sulfuric acid waste heat power generation project to CGN Energy each at a price of RMB9.9 million (approximately $1.57 million), for a total amount RMB 19.8 million (approximately $3.14 million). As the financing party, CGN Energy resold the equipment to Zhenjiang Kailin via a structured payment arrangement covering a 30 month period at a price of RMB23.4 million ( approximately $3.7 million).

There are no other guarantees for any other elements of the Zhenjiang Kailin project. The Company assessed the arrangement under SAB 104 revenue recognition criteria and concluded the criteria, particularly the criterion regarding collectability being reasonably assured, were met. As a similar guaranty could be obtained from a third party financial institution and performance of the contract is probable, the Company separated the deliverable represented by the guaranty from the rest of the contract price and recognized the initial fair value of the guaranty liability arising from the guaranty contract as deferred revenue based on the quote guarantee fee percentage for loans with similar terms from financial institutions. As of September 30, 2012, the deferred revenue was $154,273. This amount will be amortized to revenue according to applicable GAAP accounting requirements as the underlying structured payment obligation is satisfied by Zhenjiang Kailin’s payments to CGN Energy. As of September 30, 2012, Zhenjiang Kailin has made all required payments to CGN Energy in compliance with the payment schedule.

Zhenjiang Kailin EPC project penalty and upgrade contract

On May 8, 2012, CER and Zhenjiang Kailin entered into an agreement whereby CER was to pay Zhenjiang Kailin RMB 8.9 million (approximately $1.5 million) as a penalty (“the penalty”) for the economic losses suffered by Zhenjiang Kailin resulting from project delays past the originally expected completion date of December 31, 2011. The original contract for the construction of the facility did not contain any provisions for late completion or liquidated damages. As part of this agreement, CER agreed to assume additional costs to bring the capacity of the sulfuric acid waste heat recovery system to original specifications and to install additional electric utilities. The penalty payment is included in the accrued expenses and other liabilities as of September 30, 2012.

Also, subsequent to the first quarter, on the same date, the two parties also signed an upgrade contract for the same facility valued at RMB 8 million (approximately $1.2 million). The purpose of the enhancements contemplated in this contract was to raise the capacity of the system from 800k tons to 900k tons of sulfuric acid per year. This enhancement project was completed at the end of May 2012 and permits $1.2 million of additional billings which are included in current accounts receivable on an undiscounted basis.

Zhenjiang Kailin payment schedule and discounting of receivables

As further described in Note 3 regarding accounts receivable, subsequent to March 30, 2012 CER and Zhenjiang Kailin agreed to revise the payment schedule of outstanding accounts receivable (excluding the enhancement project completed at the end of May 2012 described in the preceding section, for which receivables are current in nature) as below. These amounts represent undiscounted payments.

Maturity date	Amount due
December 31, 2012		4,773,300
June 30, 2013		2,863,980
September 30, 2013		3,182,200
December 31, 2013		3,338,521
Total		14,158,001

As further described in CER’s filing on Form 10-Q for the quarter ended March 31, 2012, the undiscounted payments depicted in the foregoing table were discounted pursuant to applicable accounting guidance, with the discount, which represented an apportionment of the total agreed contract value to future interest income rather than revenue, reflected in revenue for the quarter then ended.

In August 2012, including discussions with Zhenjiang Kailin, it was determined that the first payment would be delayed to December 2012. Zhenjiang Kailin only begun to generate cash flow commencing in May 2012 due to the delayed opening of its facility following CER’s completion thereof and required extra time to pay by December 2012. There were no other payment installments that were subject to delay, and based upon an evaluation of all the facts and circumstances, including consideration of the counterparty’s financial flexibility and liquidity, the Company determined that it expected to fully collect all amounts due over the revised payment schedule. After considering the further extension of the first installment payment to December 31, 2012, the Company reassessed the discount impact applicable to this payment extension using the original interest rate of 10.65% (which considered the risk free rate and Zhenjiang Kailin’s credit risk) and reflected the related discount about of $161,871 in the remaining project revenue. The discounts reflected as reductions to revenue in the statement of operations arising from this extension of payment terms were $0 and $1,703,369 for the three and nine months ended September 30, 2012, respectively; the accretion for interest income included in interest income was $661,093 for the nine months ended September 30, 2012 (there was no accretion for the quarter ended March 31, 2012 due to the timing of the repayment agreement). Of the total balance of $14,396,913 of accounts receivable at September 30, 2012, $2,951,128 represented the non-current balance due from Zhenjiang Kailin which is to be collected in over one year; the remaining $11,445,785 is included in current receivables.

Pursuant to applicable construction contract accounting and other accounting guidance, the additional $1.2 million of revenue for the system upgrade project, the $1.5 million penalty for economic losses incurred by CER’s customer, and the discount effects arising from the payment term extensions were added to (or subtracted from, for the latter two items) the total contract revenue for the Zhenjiang Kailin project. The Company re-assessed all developments regarding this project, including the two guaranty arrangements entered into and the extensions afforded to Zhenjiang Kailin for remaining payments, under SAB 104 revenue recognition criteria and concluded the criteria, particularly the criterion regarding collectability being reasonably assured, were met. Accordingly, the deferred revenue related to the guaranty arrangements, and the discounts reflected in revenue for the payment extensions afforded to Zhenjiang Kailin, will be reflected as future interest income. As of August 2012, CER management concluded, on the basis of discussions with and evaluation of the counterparty’s financial viability and financing sources, that repayment was not significantly in question, but will continue to monitor the counterparty’s financial viability. Further supporting management’s conclusions was the fact that Zhenjiang Kailin has made required payments to date on a timely basis, excluding only the August installment delay.

For the three and nine months ended September 30, 2012, revenue earned from the contract amounted to $12,672 and $6,660,158. The cost of revenues associated with the original contract and the additional agreements entered into was $0 and $8,500,010 for the three and nine months ended September 30, 2012. The revenue, less the discount effects reflected in revenue and penalty assumed reflected in revenue, was not fully offset by the additional revenue agreed to; further, additional incurred costs reduced the margin on the project to negative 28% for the nine months ended September 30, 2012.

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Warrant and Derivative Liabilities (Tables)

9 Months Ended

Sep. 30, 2012

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Schedule Of Derivative Liabilities From Convertible Notes [Table Text Block]

Derivative liability from convertible notes	December 31, 2011			September 30, 2012
Estimated forward rate		6.34			-
Discount rate		0.64	%		-
Discount factor		0.995			-
Fair value	$	21,274		$	-

Schedule Of Derivative Liabilities From Warrants [Table Text Block]

Derivative liability associated with warrants issued in connection with convertible notes:

	December 31, 2011			September 30, 2012
Number of shares exercisable		1,388,889			1,388,889
Stock price		0.38			0.30
Exercise price		1.8			1.8
Expected dividend yield (d)		-			-
Expected life (in years) (c)		2.39			1.64
Risk-free interest rate (a)		0.32	%		0.21	%
Expected volatility (b)		61	%		60	%
Fair Value:
Derivative liability - warrants issued in connection with Convertible Notes		20,920			8,188

(a) The risk-free interest rate is based on U.S. Treasury securities with compatible life terms.

(b) Due to the short trading history of the Company’s stock, the Company uses the volatility of comparable guideline companies to estimate volatility.

(c) The expected life of the conversion feature of the notes was based on the term of the notes and the expected life of the warrants was determined by the expiration date of the warrants.

(d) The expected dividend yield was based on the fact that the Company has not paid dividends to common shareholders in the past and does not expect to pay dividends to common shareholders in the future.

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Statutory Reserves

9 Months Ended

Sep. 30, 2012

Statutory Reserves [Abstract]

Stockholders' Equity Note Disclosure [Text Block]

Note 18 – Statutory Reserves

As stipulated by the relevant laws and regulations applicable to enterprises operating in the PRC, the Company and its PRC subsidiaries and affiliates are required to make annual appropriations to a statutory surplus reserve fund. Specifically, the Company is required to deposit 10% of its profits after taxes, as determined in accordance with the PRC accounting standards applicable to the Company, to a statutory surplus reserve until such reserve reaches 50% of the registered capital of the Company.

The transfer to these reserves must be made before distribution of any dividends to shareholders. For the years ended December 31, 2011, there were $376,794 of transfers to statutory reserves for these subsidiaries and affiliates of the Company generating profits. Statutory reserves were $509,596 as of December 31, 2011 and September 30, 2012.

The surplus reserve fund is non-distributable other than during liquidation and can be used to fund previous years' losses, if any, and may be utilized for business expansion or converted into share capital by issuing new shares to existing shareholders in proportion to their shareholding or by increasing the par value of the shares currently held by them, provided that the remaining reserve balance after such issue is not less than 50% of the registered capital.  The remaining required contributions to the statutory reserves required were approximately $ 8,015,475 as of September 30, 2012.

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Earnings / (Loss) per Share (Details 1) (USD $)	3 Months Ended		9 Months Ended		12 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011	Dec. 31, 2011
Numerator:
Net income	$ 900,619	$ 2,278,413	$ 2,628,125	$ 2,663,566	$ 1,995,668
Amount allocated to preferred stockholders	(3,062)	(7,744)	(8,934)	(9,074)
Net loss available to common stock holders - Basic and diluted	$ 897,557	$ 2,270,669	$ 2,619,191	$ 2,654,492
Denominator:
Denominator for basic earnings per share -weighted average common stocks outstanding (in shares)	31,078,083	31,085,859	31,082,790	31,015,385
Weighted average stock options	0	16,956	0	16,956
Denominator for diluted earnings per share (in shares)	31,078,083	31,102,815	31,082,790	31,032,341
Basic (loss)/earnings per share (in dollars per share)	$ 0.03	$ 0.07	$ 0.08	$ 0.09
Diluted (loss)/earnings per share (in dollars per share)	$ 0.03	$ 0.07	$ 0.08	$ 0.09

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Organization and Basis of Presentation

9 Months Ended

Sep. 30, 2012

Organization, Consolidation and Presentation Of Financial Statements [Abstract]

Organization, Consolidation and Presentation of Financial Statements Disclosure [Text Block]

Note 1 – Organization and Basis of Presentation

China Energy Recovery, Inc. ("CER" or the "Company"), formerly known as MMA Media Inc. and Commerce Development Corporation Ltd., was incorporated under the laws of the State of Maryland in May, 1998. On February 5, 2008, the Company changed its name to China Energy Recovery, Inc. On January 24, 2008, the Company entered into a Share Exchange Agreement with Poise Profit International, Ltd. ("Poise Profit"), a company incorporated on November 23, 2007, under the laws of the British Virgin Islands, and the shareholders of Poise Profit. Pursuant to the Share Exchange Agreement, the Company agreed to acquire all of the issued and outstanding shares of Poise Profit's common stock in exchange for the issuance of 20,757,090 shares, or 81.5% of the Company's common stock on a post 1-for-2 reverse stock split basis, to the shareholders of Poise Profit. The share exchange transaction (the "Share Exchange") was consummated on April 15, 2008 and Poise Profit became a wholly-owned subsidiary of the Company. On April 16, 2008, the Company conducted a 1-for-2 reverse stock split pursuant to which each two shares of CER's common stock, issued and outstanding on the record date of April 15, 2008, converted into one share of CER's common stock.

Poise Profit is an off-shore holding company and has no operating business activities. Poise Profit owns 100% of HAIE Hi-tech Engineering (Hong Kong) Company, Limited ("Hi-tech") and CER (Hong Kong) Holdings Limited (“CER Hong Kong”), which were incorporated in Hong Kong on January 4, 2002 and August 13, 2008, respectively.

In order to restructure the holding structure of the Company, on December 2, 2008, 100% of the shares of CER Hong Kong were transferred to Poise Profit from Mr. Qinghuan Wu, the Company’s Chairman and Chief Executive Officer, and his wife, Mrs. Jialing Zhou, and all the contracts between Hi-tech and Shanghai Engineering were transferred to CER Hong Kong. Thereafter, CER Hong Kong, through its wholly owned subsidiaries and a consolidated variable interest entity (Shanghai Engineering) located in the People's Republic of China ("PRC"), designs, develops, manufactures and markets waste heat boilers and pressure vessels in the fields of chemical industry, petrochemical industry, oil refining, fine chemicals, water and power conservancy, metallurgical industry, environmental protection, waste heat utilization ,and power generation from waste heat recovery.

On November 11, 2008, CER Energy Recovery (Shanghai) Co., Ltd. (“CER Shanghai”) was incorporated in Shanghai by CER Hong Kong. CER Shanghai’s registered capital is $5,000,000. As of December 31, 2010, CER Hong Kong had contributed all the registered capital. CER Shanghai is mainly engaged in the development of energy recovery and environmental protection technologies, and design, installation and servicing of waste heat recovery systems.

CER Energy Recovery (Yangzhou) Co., Ltd. (“CER Yangzhou”) was incorporated on August 28, 2009 in Yangzhou by CER Hong Kong. CER Yangzhou’s registered capital is $20,000,000. As of December 31, 2011, CER Hong Kong had contributed all the registered capital. CER Yangzhou is mainly engaged in the development and manufacturing of waste heat recovery systems and other related energy efficiency equipment.

On July 2, 2012, CER Hong Kong and CER Shanghai entered into a share transfer agreement, whereby all of CER Hong Kong’s equity interests in CER Yangzhou were transferred to CER Shanghai. This share transfer is intended to change CER Yangzhou’s entity from foreign capital to domestic capital, so as to make it more competitive in the domestic Chinese economy. As a result of the reorganization, all of CER Hong Kong’s equity interests in CER Yangzhou were transferred to CER Shanghai. As the reorganization was under common control of the Company, except for income tax for the intra-entity sales of the subsidiary’s shares, it will not have a material impact on the Company’s consolidated financial position or results of operations of the Company or its subsidiaries in any material respect. The reorganization was completed on August 21, 2012 and income taxes of $206,147 for the intra-entity sales of the subsidiary’s shares were recorded in the consolidated statement of operation as of September 30, 2012.

CER, Poise Profit, CER Hong Kong, Hi-tech, Shanghai Engineering, CER Shanghai, and CER Yangzhou are collectively hereinafter referred to as the “Group”.

The basis of presentation for the Group’s financial statements is accounting principles generally accepted in the United States of America (U.S. GAAP) and the reporting currency is the U.S. dollar.

The accompanying financial statements have been prepared assuming the Group will continue as a going concern. However, as of September 30, 2012, the Group reported a negative working capital balance of $31.3 million and had negative operating cash flows of $0.4 million for the nine months ended September 30, 2012. The Group expects such negative working capital to continue into the foreseeable future and will need to obtain new sales orders and additional financing to fund its daily operations. These factors raise substantial doubt about the Group’s ability to continue as a going concern. In order to continue its operations, the Group must obtain additional sales orders to achieve profitable operations, raise more funds, and/or curtail its capital expenditures. The Group implemented plans to postpone spending for capital expenditures and has been and continues to be in negotiations with several domestic banks in China and state-owned companies for additional financing. There can be no assurance, however, that such financing will be successfully completed or completed on terms acceptable to the Group. The Group’s plans of operations, even if successful, may not result in cash flow sufficient to finance and maintain its business. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. Please refer to Note 7 – Short Term Loans for additional information.

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CONSOLIDATED BALANCE SHEETS [Parenthetical] (USD $)	Sep. 30, 2012	Dec. 31, 2011
Preferred stock, par value (in dollars per share)	$ 0.001	$ 0.001
Preferred stock, shares authorized	50,000,000	50,000,000
Preferred stock, shares issued	200,000	200,000
Preferred stock, shares outstanding	200,000	200,000
Common stock, par value (in dollars per share)	$ 0.001	$ 0.001
Common stock, shares authorized	100,000,000	100,000,000
Common stock, shares issued	31,085,859	31,085,859
Common stock shares outstanding	31,085,859	31,085,859
Treasury Stock, Shares	13,232	0

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Convertible Preferred Stock

9 Months Ended

Sep. 30, 2012

Convertible Preferred Stock [Abstract]

Preferred Stock [Text Block]

Note 11 – Convertible Preferred Stock

Series A Convertible Preferred Stock

On April 15, 2008 and as a condition to closing of the Share Exchange, CER entered into Securities Purchase Agreements with 25 accredited investors pursuant to which CER issued and sold an aggregate of 7,874,241 units at a unit price of $1.08 (the "Financing"). Each unit consisted of one share of CER's Series A convertible preferred stock, par value of $0.001, and one warrant to purchase one-half of one share of CER's common stock at an exercise price of $1.29 per share. After the 1-for-2 reverse stock split conducted on April 16, 2008, the 7,874,241 shares of the Company’s Series A convertible preferred stock are convertible into 3,937,121 shares of common stock and the warrants are exercisable into 1,968,561 shares of the Company's common stock at an exercise price of $2.58 per share. The issuance costs of $1,859,902, including commissions, legal fees and transaction expenses were taken from the proceeds. The net proceeds were allocated between the Series A convertible preferred stock and warrants based on their relative fair values. As of the closing date, the fair value of Series A convertible preferred stock is estimated at $1.68 where as the fair value of the warrants is estimated at $0.85. As a result, an aggregate amount of $5,307,539 was allocated to Series A convertible preferred stock and $1,336,739 was allocated to the warrants. The fair value of the warrants was initially valued using the binomial model with assumptions such as, stock price, volatility, expected term, dividend, risk-free interest rate, etc.

The rights, preferences and privileges with respect to the Series A convertible preferred stock are as follows:

Voting

Holders of Series A convertible preferred stock are entitled to the number of votes equal to the number of shares of common stock into which such shares of preferred stock could be converted and to vote as a single class.

Dividends

Holders of Series A convertible preferred stock are entitled to dividends when dividends are declared for common stockholders. There have been no dividends declared to date.

Liquidation

In the event of any liquidation, dissolution or winding up of the Company, the holders of Series A convertible preferred stock shall be entitled to receive the amount of the original issue price per share (as adjusted for the 1-for-2 reverse stock split) for each share of Series A convertible preferred stock, plus all declared and unpaid dividends.

Conversion

Each share of Series A convertible preferred stock is convertible into common stock on a one-for-one basis, anytime at the option of the holder. The current conversion price is $2.16 after taking into effect the 1-for-2 reverse stock split, and the conversion price is subject to adjustment in accordance with the anti-dilution clause.

Adjustment of Series A Convertible Preferred Stock Conversion Price and Warrant Exercise Price

In accordance to the anti-dilution clause of the afore-mentioned Financing, if the Company shall issue additional shares without consideration or for consideration per share less than the conversion price and/or the warrant exercise price immediately prior to the issuance, such conversion price and exercise price shall be adjusted.  

For the year and nine months ended December 31, 2011 and September 30, 2012, no shares of Series A convertible preferred stock were converted.

As of December 31, 2011 and September 30, 2012, the Company had 200,000 shares of Series A convertible preferred stock issued and outstanding.

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Document And Entity Information	9 Months Ended
	Sep. 30, 2012	Oct. 31, 2012
Entity Registrant Name	China Energy Recovery, Inc.
Entity Central Index Key	0001208790
Current Fiscal Year End Date	--12-31
Entity Filer Category	Smaller Reporting Company
Trading Symbol	cgyv
Entity Common Stock, Shares Outstanding		31,072,061
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Sep. 30, 2012
Document Fiscal Period Focus	Q3
Document Fiscal Year Focus	2012

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Warrant and Derivative Liabilities

9 Months Ended

Sep. 30, 2012

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Instruments and Hedging Activities Disclosure [Text Block]

Note 12 – Warrant and Derivative Liabilities

Under authoritative FASB Accounting Standards Codification guidance pertaining to whether an instrument (or embedded feature) is indexed to an entity’s own stock, instruments that do not have fixed settlement provisions are deemed to be derivative instruments. The conversion feature embedded derivative that extinguished in 2011 and the embedded derivative related to exchange rate settlement differentials of the Company’s convertible note (described in Note 7), the related warrants issued with the convertible note, and the warrants issued in connection with Series A convertible preferred stock do not have fixed settlement provisions because their conversion and exercise prices are denominated in USD, which is a currency other than the Company’s functional currency, RMB. Additionally, the Company was required to include the reset provision in order to protect the holders from potential dilution associated with future financings. In accordance with the FASB authoritative guidance, the conversion feature embedded derivative and exchange rate settlement differential embedded derivative of the Convertible Notes were separated from the host contract (i.e. the Convertible Notes) and recognized as derivative liabilities in the balance sheet, and the derivatives associated with warrants issued in connection with the Convertible Notes and Series A preferred stocks have been recorded as warrant liabilities in the balance sheet to be re-measured at the end of every reporting period with changes in fair value reported in the consolidated statements of income and other comprehensive income.

As of September 30, 2011, the conversion feature expired on the formerly convertible debt and there is no longer any conversion term on the modified loan.

The derivative liabilities were valued using both the Black-Scholes and Binomial valuation techniques with the following assumptions. We calculated the fair value of the derivative liability related to the formerly convertible notes on exchange rate at repayment versus exchange rate at loan origination differential, which relates to the repayment of the notes and is distinct and separate from the embedded derivative liability formerly recorded for the now-expired conversion feature, based on the following key assumptions. As at September 30, 2012, the fair value of derivative liabilities associated with convertible notes was $0 as the terms of exchange rate differential payment expired on September 29, 2012. Accordingly, the amount to be paid due to the exchange difference in the principal was $20,107, which was recorded in accrued expenses and other liabilities as of September 30, 2012.

Derivative liability from convertible notes	December 31, 2011			September 30, 2012
Estimated forward rate		6.34			-
Discount rate		0.64	%		-
Discount factor		0.995			-
Fair value	$	21,274		$	-

Derivative liability associated with warrants issued in connection with convertible notes:

	December 31, 2011			September 30, 2012
Number of shares exercisable		1,388,889			1,388,889
Stock price		0.38			0.30
Exercise price		1.8			1.8
Expected dividend yield (d)		-			-
Expected life (in years) (c)		2.39			1.64
Risk-free interest rate (a)		0.32	%		0.21	%
Expected volatility (b)		61	%		60	%
Fair Value:
Derivative liability - warrants issued in connection with Convertible Notes		20,920			8,188

(a) The risk-free interest rate is based on U.S. Treasury securities with compatible life terms.

(b) Due to the short trading history of the Company’s stock, the Company uses the volatility of comparable guideline companies to estimate volatility.

(c) The expected life of the conversion feature of the notes was based on the term of the notes and the expected life of the warrants was determined by the expiration date of the warrants.

(d) The expected dividend yield was based on the fact that the Company has not paid dividends to common shareholders in the past and does not expect to pay dividends to common shareholders in the future.

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Related Party Transactions (Details) (USD $)	Sep. 30, 2012	Dec. 31, 2013 Zhenjiang Kailin [Member]	Sep. 30, 2013 Zhenjiang Kailin [Member]	Jun. 30, 2013 Zhenjiang Kailin [Member]	Dec. 31, 2012 Zhenjiang Kailin [Member]	Aug. 31, 2012 Zhenjiang Kailin [Member]	May 31, 2012 Zhenjiang Kailin [Member]
Related Party Transaction, Due from (to) Related Party	$ 14,158,001	$ 3,338,521	$ 3,182,200	$ 2,863,980	$ 4,773,300	$ 4,722,300	$ 14,158,001

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CONSOLIDATED STATEMENTS OF OPERATIONS AND OTHER COMPREHENSIVE INCOME (USD $)	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
REVENUES
Total EPC revenues	$ 16,771,543	$ 27,163,759	$ 66,562,124	$ 46,896,711
Products - third parties	4,176,683	2,222,699	9,940,102	8,139,632
Total revenue	20,948,226	29,386,458	76,502,226	55,036,343
COST OF REVENUES
Cost of revenues - EPC (Note 16)	(13,736,857)	(22,691,015)	(57,508,410)	(39,309,553)
Cost of revenues - products	(2,930,514)	(1,607,384)	(7,196,772)	(6,257,642)
Total cost of revenues	(16,667,371)	(24,298,399)	(64,705,182)	(45,567,195)
GROSS PROFIT	4,280,855	5,088,059	11,797,044	9,469,148
Selling, general, and administrative expenses	(2,650,738)	(2,490,222)	(7,336,024)	(6,366,370)
INCOME FROM OPERATIONS	1,630,117	2,597,837	4,461,020	3,102,778
OTHER INCOME (EXPENSE):
Other non-operating income/(expenses), net	(72,617)	330,541	259,476	(73,586)
Investment income	0	0	2,972	0
Interest expense, net	(56,703)	(370,400)	(586,523)	(1,345,664)
Total other income (expense), net	(133,971)	281,237	(288,183)	141,354
INCOME BEFORE INCOME TAXES	1,496,146	2,879,074	4,172,837	3,244,132
Income Tax Expense	(595,527)	(600,661)	(1,544,712)	(580,566)
NET INCOME	900,619	2,278,413	2,628,125	2,663,566
OTHER COMPREHENSIVE INCOME/(LOSS):
Foreign currency translation adjustment	344,248	458,788	120,696	766,370
COMPREHENSIVE INCOME	1,244,867	2,737,201	2,748,821	3,429,936
INCOME PER SHARE:
Basic (in dollars per share)	$ 0.03	$ 0.07	$ 0.08	$ 0.09
Diluted (in dollars per share)	$ 0.03	$ 0.07	$ 0.08	$ 0.09
WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic (in shares)	31,078,083	31,085,859	31,082,790	31,015,385
Diluted (in shares)	31,078,083	31,102,815	31,082,790	31,032,341
Warrant [Member]
OTHER INCOME (EXPENSE):
Change in fair value of derivative liability	(4,651)	248,332	14,618	1,164,122
Loans [Member]
OTHER INCOME (EXPENSE):
Change in fair value of derivative liability	0	72,764	21,274	396,482
Third Party [Member]
REVENUES
Engineering, procurement, and construction	16,758,871	16,600,366	59,901,966	23,265,280
Products - third parties		2,222,699		8,139,632
Related Party [Member]
REVENUES
Engineering, procurement, and construction	$ 12,672	$ 10,563,393	$ 6,660,158	$ 23,631,431

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Intangible Assets

9 Months Ended

Sep. 30, 2012

Goodwill and Intangible Assets Disclosure [Abstract]

Intangible Assets Disclosure [Text Block]

Note 6 – Intangible Assets

	December 31,			September 30,
	2011			2012
Cost:
Land use rights	$	5,023,217		$	5,035,878
Software		152,896			190,920
Less: Accumulated amortization		(176,230	)		(306,572	)
Intangible assets, net	$	4,999,883		$	4,920,226

Intangible assets mainly represent purchases of land usage rights in Yangzhou where the Company’s sole manufacturing plant is located and software. The Company obtained the usage title of its first land parcel in December 2009. The land use right was recorded at cost of $2,438,632 and is being amortized over the lease term of 50 years starting from November 2009 when it was acquired and the software is being amortized over 3 years. In July 2011, the Company obtained the usage title of another parcel of land. The land use right was recorded at cost of $2,331,869 and is being amortized over the lease term of 50 years starting from July 2011. Amortization expense for intangible assets recorded for three months ended September 30, 2011 and 2012 amounted to $30,785 and $40,610, respectively. Amortization expense for intangible assets recorded for the nine months ended September 30, 2011 and 2012 amounted to $64,940 and $128,958, respectively.

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Property, plant and equipment, Net

9 Months Ended

Sep. 30, 2012

Property, Plant and Equipment [Abstract]

Property, Plant and Equipment Disclosure [Text Block]

Note 5 –Property, plant and equipment, Net

As of December 31, 2011 and September 30, 2012, property, plant and equipment, net consisted of the following:

	December 31,			September 30,
	2011			2012
Plant	$	21,416,681		$	21,576,369
Machinery equipment		4,496,365			4,289,211
Transportation equipment		366,270			367,193
Office equipment		839,790			926,247
Accumulated depreciation		(2,137,381	)		(3,090,578	)
Subtotal		24,981,725			24,068,442
Construction in progress		1,177,877			4,521,458
Property, plant and equipment, net	$	26,159,602		$	28,589,900

Depreciation expense for the three months ended September 30, 2011 and 2012 was $450,730, and $398,971, respectively. Depreciation expense for the nine months ended September 30, 2011 and 2012 was $949,145, and $1,187,929, respectively.

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Retirement Benefits

9 Months Ended

Sep. 30, 2012

Compensation and Retirement Disclosure [Abstract]

Pension and Other Postretirement Benefits Disclosure [Text Block]

Note 17 – Retirement Benefits

As stipulated by the relevant laws and regulations applicable to enterprises operating in the PRC, the Company and its PRC subsidiaries and affiliates are required to maintain a defined contribution retirement plan for all of its employees who are residents of the PRC. The Company contributes to a statutory government retirement plan approximately 22% of the base salary of each of its employees and has no further obligations for the actual pension payments or post-retirement benefits beyond the annual contributions. The statutory government retirement plan is responsible for the entire pension obligations payable for all past and present employees.

The Company made contributions of $108,269 and $140,734 for employment benefits, including pension payments for the three months ended September 30, 2011 and 2012, respectively. The Company made contributions of $222,427 and $417,509 for employment benefits, including pension payments for the nine months ended September 30, 2011 and 2012, respectively.

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Stock-Based Compensation

9 Months Ended

Sep. 30, 2012

Disclosure Of Compensation Related Costs, Share-Based Payments [Abstract]

Disclosure of Compensation Related Costs, Share-based Payments [Text Block]

Note 13 - Stock-Based Compensation

Stock Option Plan

In September 2008, the board of directors approved the Company’s Stock Option Plan and granted 335,000 options to acquire the Company’s common stock at $2.90 per share to five non-employee directors and consultants under the 2008 Plan. The option plan was revised and approved at the shareholders’ meeting as of November 20, 2011 (there were no significant changes impacting valuation or accounting for share based compensation). Detailed terms of the plan are described as follows with each grant.

Stock Options

On June 24, 2009, the Company appointed one independent director and granted him stock options to purchase 500,000 shares of the Company’s common stock. The options will vest and become exercisable in eight equal installments evenly spread out during the three year period beginning from July 1, 2009. On September 7, 2009, the Company appointed another independent director and granted her a stock option to purchase 60,000 shares of the Company’s common stock; these options fully vested by October 2011. Unvested options shall be terminated and forfeited upon the termination of a holder’s director status.

On June 7, 2011, the Board of Directors resolved to modify these option grants and adjusted the exercise price of one incumbent director’s options from $1.22 to $0.73 per share and another director’s options from $1.58 to $0.73 per share. The Board also resolved to accelerate the vesting period of one retired director, such that all the shares underlying the option were deemed vested as of June 7, 2011. The total incremental compensation cost in respect of such acceleration and option modification was $202,106, which was recorded in the second quarter of 2011.

On June 13, 2011, with the resignation of two former directors, the Company appointed another two directors and granted them both stock options to purchase 60,000 shares of the Company’s common stock. The options will vest and become exercisable in eight equal quarterly installments evenly spread out during the two year period beginning from July 1, 2011. Unvested options shall be terminated and forfeited upon the termination of a holder’s director status.

The Company used the Black-Scholes Model to value the options at the time they were granted. The following table summarizes the assumptions used in the Black-Scholes Model when calculating the fair value of the options at the grant dates (for 2011, as there were no grants in 2012).

Fair value per share	$ 0.39- $ 0.47
Expected Term(Years)	4.00-5.56
Exercise Price	$0.73
Expected Volatility	72%-76%
Risk Free Interest Rate	1.16%-1.82%

Since the Company does not have sufficient applicable history of employee stock options activity, the Company uses the simplified method to estimate the life of the options by taking the sum of the vesting period and the contractual life and then calculating the midpoint which is the estimated term of the options.

For the three months ended September 30, 2011 and 2012, the Company recognized $12,090 and $7,067 of compensation expense, respectively. For the nine months ended September 30, 2011 and 2012, the Company recognized $253,158 and $21,200 of compensation expense, respectively.

Following is a summary of the status of options outstanding at September 30, 2012:

Outstanding Options						Exercisable Options
				Remaining						Remaining
Exercise				contractual		Exercise				contractual
price		Number		term (years)		price		Number		term (years)
$	0.73		60,000		7.00	$	0.73		60,000		7.00
$	0.73		500,000		6.75	$	0.73		500,000		6.75
$	0.73		60,000		8.75	$	0.73		37,500		8.75
$	0.73		60,000		8.75	$	0.73		37,500		8.75
	Total		680,000						635,000

Following is a summary of the option activity:

Outstanding as of  December 31, 2010	560,000
Granted	120,000
Forfeited	-
Exercised	-
Outstanding as of  December 31, 2011	680,000
Granted	-
Forfeited	-
Exercised	-
Outstanding as of  September 30, 2012	680,000
Vested and exercisable as of September 30, 2012	635,000

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Commitments and Contingencies (Details Textual) In Millions, unless otherwise specified	May 08, 2012 USD ($)	May 08, 2012 CNY
Penalty For Project Delays	$ 1.5	8.9

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Taxation

9 Months Ended

Sep. 30, 2012

Income Tax Disclosure [Abstract]

Income Tax Disclosure [Text Block]

Note 9 – Taxation

USA

The Company is subject to U.S. income tax at a rate of 34% on its assessable profits.

Hong Kong

CER (Hong Kong) subsidiaries were subject to Hong Kong profit tax at a rate of 16.5% on their assessable profits. No Hong Kong profit tax has been assessed as the Group did not have assessable profit that was earned in or derived within the legal boundaries of Hong Kong during the periods presented.

PRC

The New Enterprise Income Tax ("EIT") law was effective January 1, 2008 and the standard EIT rate is 25%. Pursuant to the PRC tax law, net operating losses can be carried forward 5 years to offset future taxable income.

For the quarter ended March 31, 2012, the Group’s Hong Kong subsidiary, CER (Hong Kong), had, for the first time, estimated taxable profits earned in the PRC; CER (Hong Kong) has generated estimated taxable profits since then. As such, CER (Hong Kong) is likely to be regarded under the PRC tax laws as having permanent establishment for business activities carried out in the PRC, and would be subject to PRC tax at the standard EIT rate of 25%. For interim periods in 2012, given the Group is likely to be regarded as having permanent establishment, CER (Hong Kong) provided taxes, included in the consolidated tax provision, of $732,592. The primary reason for CER (Hong Kong)’s generation of taxable income was the non-deductibility, under PRC tax law, of a $1.5 million expense incurred for a penalty payment to an EPC construction contract related party customer which is further described in Note 16 and income tax for the intra-entity sales of the subsidiary’s shares further described in Note 1. This tax provision, as well as increases in PRC tax expense for the Group’s profitable subsidiaries, were primarily responsible for the significant increase in the Group’s effective tax rate for interim periods in 2012 as compared to the corresponding interim periods in 2011.

Pursuant to the PRC income tax laws, Shanghai Engineering and CER Shanghai are subject to enterprise income tax at a statutory rate of 15% and 12.5% respectively, each for a three year period ending in 2014, as they were recognized as high and new technology entities (“HNTEs”) in April, 2011. CER Yangzhou is subject to enterprise income tax at a statutory rate of 25%.  

On February 22, 2008, the Ministry of Finance (“MOF”) and the State Administration of Taxation (“SAT”) jointly issued Cai Shui [2008] Circular 1 (“Circular 1”). According to Article 4 of Circular 1, distributions of accumulated profits earned by a foreign investment enterprise (“FIE”) prior to January 1, 2008 to foreign investor(s) in 2008 or after will be exempt from withholding tax (“WHT”) while distribution of the profit earned by an FIE after January 1, 2008 to its foreign investor(s) shall be subject to WHT at a rate up to 10% (lower rate is available under the protection of tax treaties). Since the Company intends to indefinitely reinvest its earnings to further expand the businesses in mainland China, the foreign invested enterprises do not intend to declare dividends to their immediate foreign holding companies in the foreseeable future. As a result, if any dividends are declared out of the cumulative retained earnings as of December 31, 2007, they should be exempt from WHT. Accumulated profits of non-US subsidiaries as of December 31, 2011 and September 30, 2012 were approximately $1,102,139 (RMB 7,687,921), and $5,151,841 (RMB 33,325,437), respectively, and they are considered to be indefinitely reinvested. Moreover, the Company’s liquidity position does not require transfers of cash outside of the PRC to the parent jurisdiction (U.S.), as all business activity and debt is carried on in the PRC. The Company has not paid dividends on its common shares and does not have an intention of doing so in the foreseeable future. Accordingly, no provision has been made for deferred taxes. No dividends were declared out of cumulative retained earnings as of December 31, 2011 or September 30, 2012.

The Company is incorporated in the U.S. and incurred a net operating loss for income tax purposes for the three months ended September 30, 2011 and 2012. The net operating loss carry forwards for the U.S. income tax purposes were approximately $8,355,602 and $8,867,820 at December 31, 2011 and September 30, 2012, respectively, which may be available to reduce future years' taxable income. These carry forwards will expire, if not utilized, in 20 years from origination. Management believes that the realization of the benefits arising from these accumulated net operating losses is uncertain due to the Company's limited operating history, continuing losses for United States income tax purposes, and the fact that substantially all of the Company’s business activity is derived from the PRC. Accordingly, the Company has offset substantially all of the gross deferred tax assets for such net operating losses with additional valuation allowances recorded through income tax expense, which are a significant driver of the Company’s effective tax rate, given the history of loss and the uncertainty regarding the future. Remaining net deferred tax assets consist only of those supported by reversing deferred tax liabilities, as well as any deferred tax assets related to the PRC that management has concluded are more likely than not of being realized.

As of September 30, 2012, the Company did not have any material uncertain tax positions subject to the provisions of ASC 740-10; as such, there are no liabilities for unrecognized tax benefits. As described earlier in this Note, the Group provided for PRC EIT tax on profits earned by the Group’s Hong Kong subsidiary in the PRC.

XML

Short Term Loans (Details)

9 Months Ended

9 Months Ended

Sep. 30, 2012

USD ($)

Sep. 30, 2012

CNY

Apr. 30, 2012

USD ($)

Mar. 29, 2012

Sep. 09, 2009

USD ($)

Sep. 30, 2012

RMB 29 million - Shanghai Pudong Development Bank, Shanghai Branch [Member]

USD ($)

Sep. 30, 2012

RMB 29 million - Shanghai Pudong Development Bank, Shanghai Branch [Member]

CNY

Sep. 30, 2012

RMB 9.5 million - Bank of China, Yizheng Branch [Member]

USD ($)

Sep. 30, 2012

RMB 9.5 million - Bank of China, Yizheng Branch [Member]

CNY

Sep. 30, 2012

RMB 11.5 million - Bank of China, Yizheng Branch [Member]

USD ($)

Sep. 30, 2012

RMB 11.5 million - Bank of China, Yizheng Branch [Member]

CNY

Sep. 30, 2012

RMB 6.68 million - Industrial and Commercial Bank of China Limited, Zhangjiang Branch [Member]

USD ($)

Sep. 30, 2012

RMB 6.68 million - Industrial and Commercial Bank of China Limited, Zhangjiang Branch [Member]

CNY

Sep. 30, 2012

RMB 5 million - Shanghai Pudong ZhanjiangMicro-credit Co [Member]

USD ($)

Sep. 30, 2012

RMB 5 million - Shanghai Pudong ZhanjiangMicro-credit Co [Member]

CNY

Sep. 30, 2012

RMB 21 million letter of credit - China Construction Bank [Member]

USD ($)

Sep. 30, 2012

RMB 21 million letter of credit - China Construction Bank [Member]

CNY

Sep. 30, 2012

RMB 7.98 million letter of credit - Industrial and Commercial Bank of China [Member]

USD ($)

Sep. 30, 2012

RMB 7.98 million letter of credit - Industrial and Commercial Bank of China [Member]

CNY

Sep. 30, 2012

RMB 1.38 million - Industrial and Commercial Bank of China Limited, Zhangjiang Branch [Member]

USD ($)

Sep. 30, 2012

RMB 1.38 million - Industrial and Commercial Bank of China Limited, Zhangjiang Branch [Member]

CNY

Sep. 30, 2012

RMB 10 million - Shanghai Pudong Zhanjiang Micro-credit Co., Ltd [Member]

USD ($)

Sep. 30, 2012

RMB 10 million - Shanghai Pudong Zhanjiang Micro-credit Co., Ltd [Member]

CNY

Sep. 30, 2012

RMB 29 million - Bank of Communication, Shanghai Branch [Member]

USD ($)

Sep. 30, 2012

RMB 29 million - Bank of Communication, Shanghai Branch [Member]

CNY

Sep. 30, 2012

RMB 11 million - Bank of Communication, Shanghai Branch [Member]

USD ($)

Sep. 30, 2012

RMB 11 million - Bank of Communication, Shanghai Branch [Member]

CNY

Sep. 30, 2012

RMB 5 million - Industrial and Commercial Bank of China Limited, Zhangjiang Branch [Member]

USD ($)

Sep. 30, 2012

RMB 5 million - Industrial and Commercial Bank of China Limited, Zhangjiang Branch [Member]

CNY

Sep. 30, 2012

RMB 10 million - China CITIC Bank Yizheng branch [Member]

USD ($)

Sep. 30, 2012

RMB 10 million - China CITIC Bank Yizheng branch [Member]

CNY

Sep. 30, 2012

USD 1.15 million - Industrial and Commercial Bank of China Limited, Zhangjiang Branch [Member]

USD ($)

Sep. 30, 2012

USD 1.15 million - Industrial and Commercial Bank of China Limited, Zhangjiang Branch [Member]

CNY

Sep. 30, 2012

RMB 7.9 million letter of credit - Industrial and Commercial Bank of China [Member]

USD ($)

Sep. 30, 2012

RMB 7.9 million letter of credit - Industrial and Commercial Bank of China [Member]

CNY

Sep. 30, 2012

Rmb 4 Million Bank Of Shanghai [Member]

USD ($)

Sep. 30, 2012

Rmb 4 Million Bank Of Shanghai [Member]

CNY

Sep. 30, 2012

Rmb 95,000 - Shanghai Pudong Development Bank, Shanghai Branch [Member]

USD ($)

Sep. 30, 2012

Rmb 95,000 - Shanghai Pudong Development Bank, Shanghai Branch [Member]

CNY

Sep. 30, 2012

Rmb 10 Million - China Great Wall Industry Corporation [Member]

USD ($)

Sep. 30, 2012

Rmb 10 Million - China Great Wall Industry Corporation [Member]

CNY

Sep. 30, 2012

Rmb 20 Million - China Great Wall Industry Corporation [Member]

USD ($)

Sep. 30, 2012

Rmb 20 Million - China Great Wall Industry Corporation [Member]

CNY

Borrowing date

Aug. 31, 2011

Aug. 31, 2011

Nov. 17, 2011

Nov. 17, 2011

Nov. 23, 2011

Nov. 23, 2011

Dec. 29, 2011

Dec. 29, 2011

Dec. 31, 2011

Dec. 31, 2011

Sep. 30, 2011

Sep. 30, 2011

Dec. 12, 2011

Dec. 12, 2011

Jan. 16, 2012

Jan. 16, 2012

Feb. 29, 2012

Feb. 29, 2012

Mar. 20, 2012

Mar. 20, 2012

Apr. 12, 2012

Apr. 12, 2012

Mar. 23, 2012

Mar. 23, 2012

Jun. 06, 2012

Jun. 06, 2012

Jun. 15, 2012

Jun. 15, 2012

May 18, 2012

May 18, 2012

Sep. 11, 2012

Sep. 11, 2012

Jul. 12, 2012

Jul. 12, 2012

Sep. 06, 2012

Sep. 06, 2012

Sep. 25, 2012

Sep. 25, 2012

Interest rate

12.00%

6.405%

7.544%

7.544%

7.216%

7.216%

7.216%

7.216%

6.405%

6.405%

12.00%

12.00%

5.02%

5.02%

6.71%

6.71%

6.405%

6.405%

12.00%

12.00%

7.544%

7.544%

7.544%

7.544%

6.405%

6.405%

7.544%

7.544%

2.4789%

2.4789%

6.405%

6.405%

7.20%

7.20%

6.44%

6.44%

4.13%

4.13%

4.13%

4.13%

Maturity date

May 31, 2012

May 31, 2012

Oct. 19, 2012

Oct. 19, 2012

Nov. 16, 2012

Nov. 16, 2012

Jun. 28, 2012

Jun. 28, 2012

Jun. 09, 2012

Jun. 09, 2012

Jan. 06, 2012

Jan. 06, 2012

May 28, 2012

May 28, 2012

Jul. 15, 2012

Jul. 15, 2012

Feb. 20, 2013

Feb. 20, 2013

Mar. 15, 2013

Mar. 15, 2013

Apr. 12, 2013

Apr. 12, 2013

Sep. 28, 2012

Sep. 28, 2012

Jun. 06, 2013

Jun. 06, 2013

Sep. 14, 2012

Sep. 14, 2012

Sep. 17, 2012

Sep. 17, 2012

Sep. 10, 2012

Sep. 10, 2012

Nov. 09, 2012

Nov. 09, 2012

Dec. 20, 2012

Dec. 20, 2012

Mar. 15, 2013

Mar. 15, 2013

Balance at Dec. 31,2011

$ 14,388,649

$ 729,655

$ 5,000,000

$ 4,602,590

29,000,000

$ 1,507,745

9,500,000

$ 1,825,165

11,500,000

$ 1,060,183

6,680,000

$ 793,550

5,000,000

$ 3,332,910

21,000,000

$ 1,266,506

7,980,000

$ 0

0

$ 0

0

$ 0

0

$ 0

0

$ 0

0

$ 0

0

$ 0

0

$ 0

0

$ 0

0

$ 0

$ 0

$ 0

Balance at Sep. 30, 2012

$ 17,331,836

108,929,896

$ 729,655

$ 5,000,000

$ 0

0

$ 1,511,545

9,500,000

$ 1,829,765

11,500,000

$ 0

0

$ 0

0

$ 0

0

$ 0

0

0

$ 0

4,600,000

$ 4,614,190

29,000,000

$ 1,750,210

11,000,000

$ 0

0

$ 1,591,100

10,000,000

$ 0

0

$ 0

0

$ 636,440

4,000,000

$ 15,115

95,000

$ 1,591,100

10,000,000

$ 3,182,200

20,000,000

Pledge or guarantee

Collateralized by 8,000,006 of Qinghuan Wu's shares in CER.

Collateralized by 8,000,006 of Qinghuan Wu's shares in CER.

Collateralized by CER’s office building in Zhangjiang, Shanghai.

Collateralized by CER’s office building in Zhangjiang, Shanghai.

Guaranteed by Qinghuan Wu, Jialing Zhou, CER Shanghai, Shanghai Engineering, and Yizheng Auto Industrial Park Investment and Development Co., Ltd., and pledged by a land use right in Yizheng, China.

Guaranteed by Qinghuan Wu, Jialing Zhou, CER Shanghai, Shanghai Engineering, and Yizheng Auto Industrial Park Investment and Development Co., Ltd., and pledged by a land use right in Yizheng, China.

Guaranteed by Qinghuan Wu, Jialing Zhou, CER Shanghai, Shanghai Engineering, and Yizheng Auto Industrial Park Investment and Development Co., Ltd., and pledged by a land use right in Yizheng, China.

Guaranteed by Qinghuan Wu, Jialing Zhou, CER Shanghai, Shanghai Engineering, and Yizheng Auto Industrial Park Investment and Development Co., Ltd., and pledged by a land use right in Yizheng, China.

Collateralized by a pledge of several bank acceptance notes* owned by CER Shanghai in the amount of RMB 7,430,000.

Collateralized by a pledge of several bank acceptance notes* owned by CER Shanghai in the amount of RMB 7,430,000.

Collateralized by a building in Shanghai owned by Jiangsu SOPO; guaranteed by Mr. Qinghuan Wu.

Collateralized by a building in Shanghai owned by Jiangsu SOPO; guaranteed by Mr. Qinghuan Wu.

Collateralized by machinery of CER Yangzhou.

Collateralized by machinery of CER Yangzhou.

Collateralized by a building in Shanghai owned by Jiangsu SOPO.

Collateralized by a building in Shanghai owned by Jiangsu SOPO.

Collateralized by a pledge of several bank acceptance notes* owned by CER Shanghai in the amount of RMB 1,530,000.

Collateralized by a pledge of several bank acceptance notes* owned by CER Shanghai in the amount of RMB 1,530,000.

Collateralized by accounts receivable from Zhenjiang Kailin; also collateralized by CER’s office building in Zhangjiang Shanghai in case of default in repayment.

Collateralized by accounts receivable from Zhenjiang Kailin; also collateralized by CER’s office building in Zhangjiang Shanghai in case of default in repayment.

Collateralized by CER’s office building in Zhangjiang, Shanghai and guaranteed by Qinghuan Wu.

Collateralized by CER’s office building in Zhangjiang, Shanghai and guaranteed by Qinghuan Wu.

Collateralized by CER’s office building in Zhangjiang, Shanghai and guaranteed by Qinghuan Wu.

Collateralized by CER’s office building in Zhangjiang, Shanghai and guaranteed by Qinghuan Wu.

Collateralized by several bank acceptance notes* owned by CER Shanghai in the amount of RMB 5,600,000 (approximately $890,000).

Collateralized by several bank acceptance notes* owned by CER Shanghai in the amount of RMB 5,600,000 (approximately $890,000).

Guaranteed by Jiangsu SOPO, and guaranteed by Mr. Qinghuan Wu.

Guaranteed by Jiangsu SOPO, and guaranteed by Mr. Qinghuan Wu.

Collateralized by cash deposit in the amount of RMB 7,710,000 (approximately $1,213,631).

Collateralized by cash deposit in the amount of RMB 7,710,000 (approximately $1,213,631).

Collateralized by a building in Shanghai owned by Jiangsu SOPO.

Collateralized by a building in Shanghai owned by Jiangsu SOPO.

Guaranteed by Mr. Qinghuan Wu and Mrs. Jialing Zhou, and among which RMB 5,000,000 is collateralized by a building owned by Mr. Wu and his son, and RMB 10,000,000 is guaranteed by Shanghai Chuang Ye Jie Li Financing Guarantee Co., Ltd (Shanghai Chuangye)

Guaranteed by Mr. Qinghuan Wu and Mrs. Jialing Zhou, and among which RMB 5,000,000 is collateralized by a building owned by Mr. Wu and his son, and RMB 10,000,000 is guaranteed by Shanghai Chuang Ye Jie Li Financing Guarantee Co., Ltd (Shanghai Chuangye)

Collateralized by a pledge of several bank acceptance notes* owned by Shanghai Engineering in the amount of RMB 100,000.

Collateralized by a pledge of several bank acceptance notes* owned by Shanghai Engineering in the amount of RMB 100,000.

Equivalent worth of equipment.

Equivalent worth of equipment.

Equivalent worth of equipment.

Equivalent worth of equipment.

XML

Short Term Loans

9 Months Ended

Sep. 30, 2012

Debt Disclosure [Abstract]

Short-term Debt [Text Block]

Note 7 – Short Term Loans

Short-term borrowings and letter of credit

A tabular reconciliation of the Company’s short term borrowings including balances outstanding at December 31, 2011 and September 30, 2012 and activity during the period (including letters of credit) is as follows. Where borrowings are denominated in Renminbi, the U.S. dollar outstanding balance at the respective period end, translated at the applicable period-end exchange rate, is included in the tabular presentation.

Borrowing	Borrowing date	Interest rate	Maturity date	Balance at Dec. 31, 2011	Balance at Sep. 30, 2012	Pledge or guarantee
RMB 29 million – Shanghai Pudong Development Bank, Shanghai Branch	Aug. 31, 2011	7.544%	May 31, 2012	RMB 29,000,000 (USD 4,602,590)	RMB 0 (repaid March 28, 2012)	Collateralized by CER’s office building in Zhangjiang, Shanghai.
RMB 9.5 million – Bank of China, Yizheng Branch	Nov. 17, 2011	7.216%	Oct. 19, 2012	RMB 9,500,000 (USD 1,507,745)	RMB 9,500,000 (USD 1,511,545) (repaid October 19, 2012)	Guaranteed by Qinghuan Wu, Jialing Zhou, CER Shanghai, Shanghai Engineering, and Yizheng Auto Industrial Park Investment and Development Co., Ltd., and pledged by a land use right in Yizheng, China.
RMB 11.5 million – Bank of China, Yizheng Branch	Nov. 23, 2011	7.216%	Nov. 16, 2012	RMB 11,500,000 (USD 1,825,165)	RMB 11,500,000 (USD 1,829,765)
RMB 6.68 million - Industrial and Commercial Bank of China Limited, Zhangjiang Branch	Dec. 29, 2011	6.405%	June 28, 2012	RMB 6,680,000 (USD 1,060,183)	RMB 0 (repaid June 20, 2012)	Collateralized by a pledge of several bank acceptance notes* owned by CER Shanghai in the amount of RMB 7,430,000.
RMB 5 million - Shanghai Pudong Zhanjiang Micro-credit Co.	Dec. 2011	12.000%	June 9, 2012	RMB 5,000,000 (USD 793,550)	RMB 0 (repaid April 15, 2012)	Collateralized by a building in Shanghai owned by Jiangsu SOPO; guaranteed by Mr. Qinghuan Wu.
RMB 21 million letter of credit – China Construction Bank	Sept. 30, 2011	5.02%	Jan. 6, 2012	RMB 21,000,000 (USD 3,332,910)	RMB 0 (repaid January 6, 2012)	Collateralized by machinery of CER Yangzhou.
RMB 7.98 million letter of credit – Industrial and Commercial Bank of China	Dec. 12, 2011	6.71%	May 28, 2012	RMB 7,980,000 (USD 1,266,506)	RMB 0 (repaid June 6, 2012)	Collateralized by a building in Shanghai owned by Jiangsu SOPO.
RMB 1.38 million - Industrial and Commercial Bank of China Limited, Zhangjiang Branch	Jan. 16, 2012	6.405%	July 15, 2012	-	RMB 0 (repaid June 20, 2012)	Collateralized by a pledge of several bank acceptance notes* owned by CER Shanghai in the amount of RMB 1,530,000.
RMB 10 million - Shanghai Pudong Zhanjiang Micro-credit Co., Ltd.	Feb. 29, 2012	12.000%	Feb. 20, 2013	-	RMB 4,600,000 (USD 729,655)	Collateralized by accounts receivable from Zhenjiang Kailin; also collateralized by CER’s office building in Zhangjiang Shanghai in case of default in repayment.

RMB 29 million - Bank of Communication, Shanghai Branch	Mar. 20, 2012	7.544%	Mar. 15, 2013	-	RMB 29,000,000 (USD 4,614,190)	Collateralized by CER’s office building in Zhangjiang, Shanghai and guaranteed by Qinghuan Wu.
RMB 11 million - Bank of Communication, Shanghai Branch	Apr. 12, 2012	7.544%	Apr. 12, 2013	-	RMB 11,000,000 (USD 1,750,210)
RMB 5 million - Industrial and Commercial Bank of China Limited, Zhangjiang Branch.	Mar. 23, 2012	6.405%	Sept. 28, 2012	-	RMB 0 (repaid August 24, 2012)	Collateralized by several bank acceptance notes* owned by CER Shanghai in the amount of RMB 5,600,000 (approximately $890,000).
RMB 10 million - China CITIC Bank Yizheng branch.	Jun. 6, 2012	7.544%	Jun. 6, 2013	-	RMB 10,000,000 (USD 1,591,100)	Guaranteed by Jiangsu SOPO, and guaranteed by Mr. Qinghuan Wu.
USD 1.15 million – Industrial and Commercial Bank of China Limited, Zhangjiang Branch.	Jun. 15, 2012	2.4789%	Sep. 14, 2012	-	USD 0 (repaid September 14, 2012)	Collateralized by cash deposit in the amount of RMB 7,710,000 (approximately $1,213,631).
RMB 7.9 million letter of credit – Industrial and Commercial Bank of China	May 18, 2012	6.405%	Sep. 17, 2012	-	RMB 0 (repaid September 29, 2012)	Collateralized by a building in Shanghai owned by Jiangsu SOPO.
RMB 4 million - Bank of Shanghai	Sep 11, 2012	7.2%	Sep 10, 2013	-	RMB 4,000,000 (USD 636,440 )	Guaranteed by Mr. Qinghuan Wu and Mrs. Jialing Zhou, and among which RMB 5,000,000 is collateralized by a building owned by Mr. Wu and his son, and RMB 10,000,000 is guaranteed by Shanghai Chuang Ye Jie Li Financing Guarantee Co., Ltd (Shanghai Chuangye)

RMB 95,000 – Shanghai Pudong Development Bank, Shanghai Branch	Jul. 12, 2012	6.44%	Nov. 9, 2012	-	RMB 95,000 (USD 15,115)	Collateralized by a pledge of several bank acceptance notes* owned by Shanghai Engineering in the amount of RMB 100,000.
RMB 10 million – China Great Wall Industry Corporation	Sep. 6, 2012	4.13%	Dec. 20, 2012	-	RMB 10,000,000 (USD 1,591,100)	Equivalent worth of equipment.
RMB 20 million – China Great Wall Industry Corporation	Sep. 25, 2012	4.13%	Mar. 15, 2013	-	RMB 20,000,000 (USD 3,182,200 )	Equivalent worth of equipment.
Less: Debt Issue Cost				-	RMB 750,957 (USD 119,485)
Total Short term loan				RMB 90,660,000 (USD 14,388,649)	RMB 108,929,896 (USD 17,331,836)

*The Group’s bank acceptance notes are reported in “Notes receivable” in the consolidated balance sheet and represent short-term notes receivable typically received from customers as a form of payment. The Group can discount such notes receivable for early payment, typically at a small percentage discount to face value. The Group typically uses the notes to collateralize short-term borrowings as a means of matching timing of cash inflows and outflows, or transfers the notes to settle payables to suppliers.

Descriptions of short-term borrowings

On August 31, 2011, CER Shanghai borrowed RMB 29,000,000 (approximately $4,500,000 at the then-existing exchange rate) from the Shanghai Pudong Development Bank, Luwan Branch. The loan was collateralized by CER’s office building in Zhangjiang, Shanghai. The term of the loan was 9 months. The loan agreement provided for quarterly interest payments at an annual interest rate of 7.544% and the total principal and interest were repaid on March 28, 2012.

On December 9, 2010, CER Yangzhou entered into a three-year loan facility with the Bank of China, Yizheng Branch. The facility is RMB 30,000,000 (approximately $4,500,000 at the then-existing exchange rate). Any amounts due under the loan are repayable no later than November 24, 2013. The loan facility has been guaranteed by Qinghuan Wu, the Company’s Chief Executive Officer; Jialing Zhou, a former director of the Company and wife of Mr. Wu; one of the Group’s subsidiaries and the Group’s VIE, CER Shanghai and Shanghai Engineering, respectively; and Yizheng Auto Industrial Park Investment and Development Co., Ltd. The Company has also collateralized the loan facility with its land use right in Yizheng. By the end of 2010, the Company drew down RMB 21,000,000 (approximately $3,171,000 at the then-existing exchange rate) under the facility as a short-term loan, due in one year, with an annual interest rate of 5.838%. On June 20, 2011, the Company drew down RMB 9,152,782 (approximately $1,414,288 at the then-existing exchange rate) under the facility as a short-term loan, due in six months, with an annual interest rate of 5.56%. On November 15, 2011 and November 18, 2011, CER Yangzhou repaid RMB 9,500,000 (approximately $1,497,572) and RMB 11,500,000 (approximately $1,809,656), respectively. On December 20, 2011, CER Yangzhou repaid RMB 9,152,782 (approximately $1,444,773). On November 17, 2011 and November 23, 2011, CER Yangzhou drew down RMB 9,500,000 (approximately $1,497,000 at the then-existing exchange rate) and RMB 11,500,000 (approximately $1,810,000 at the then-existing exchange rate), respectively, under the three-year loan facility. The loans are due in one year and carry an annual interest rate of 7.216%.  CER (Yangzhou) repaid RMB 9,500,000 (approximately $1,511,545) on October 24, 2012, and repaid RMB 6,000,000 (approximately $952,124) on November 1, 2012, respectively.

On December 29, 2011, CER Shanghai borrowed RMB 6,680,000 (approximately $1,057,682 at the then-existing exchange rate) from Industrial and Commercial Bank of China Limited, Zhangjiang Branch. The loan carries an annual interest rate of 6.405%. The term of the loan is six months commencing from December 29, 2011 to June 28, 2012. The loan is secured by a pledge of several bank acceptance notes owned by CER Shanghai in the amount of RMB 7,430,000 (approximately $1,176,433). The total principal and interest were repaid by several installments as of June 20, 2012.

In December 2011, CER Shanghai borrowed $789,639 (RMB 5,000,000 at the then-existing exchange rate) from Shanghai Pudong Zhanjiang Micro-credit Co., Ltd. The loan is collateralized by a building in Shanghai owned by Jiangsu SOPO, and guaranteed by Mr. Qinghuan Wu, the Chairman and Chief Executive Officer of CER. The loan carries an annual interest rate of 12% and the due date of the loan is June 9, 2012. The loan was drawn down in two installments, with $315,353 (RMB 2,000,000) and $474,286 (RMB 3,000,000) being drawn down on December 15, 2011 and December 22, 2011, respectively. The total amount of principal and interest amounting to RMB 5,043,333 (approximately $801,038) was repaid on April 16, 2012.

On January 16, 2012, CER Shanghai borrowed RMB 1,380,000 (approximately $217,989 at the then-existing exchange rate) from Industrial and Commercial Bank of China Limited, Zhangjiang Branch. The loan carries an annual interest rate of 6.405%. The term of the loan is six months commencing from January 16, 2012 to July 15, 2012. The loan was collateralized by several bank acceptance notes owned by CER Shanghai in the amount of RMB 1,530,000 (approximately $242,949). The total amount of principal and interest were repaid by several installments as of June 20, 2012.

On February 27, 2012, CER Shanghai signed a loan contract to borrow RMB 10 million from Shanghai Pudong Zhanjiang Micro-credit Co., Ltd. On February 29, 2012, CER Shanghai drew down $1,589,345 (RMB 10 million at the exchange rate at that time). The loan is guaranteed by Mr. Qinghuan Wu, the Chairman and Chief Executive Officer of CER and collateralized by the accounts receivable of CER Shanghai. If there is any default in repayment, CER Shanghai agrees to further secure the loan by way of CER’s office building in Zhangjiang, Shanghai. The loan carries an annual interest rate of 12% and the due date of the loan is February 20, 2013. CER Shanghai began to repay RMB 900,000 per month to Shanghai Pudong Zhanjiang Micro-credit Co., Ltd from April 2012. Amounts totaling RMB 5,400,000 had been repaid as of September 30, 2012.

On March 6, 2012, CER Shanghai entered into a short-term comprehensive loan facility with the Bank of Communication, Shanghai Branch. The facility is RMB 57,000,000 (approximately $9,000,000). CER Shanghai is entitled to draw down RMB 40,000,000 (approximately $6,300,000) as a short-term loan or RMB 57,000,000 (approximately $9,000,000) as bank acceptance notes after making a cash deposit of RMB 17,000,000 (approximately $2,700,000) to the bank. On March 20, 2012, CER Shanghai drew down RMB 29 million to replace the existing Shanghai Pudong Development Bank, Shanghai Branch loan. On April 12, CER Shanghai drew down RMB 11 million. These amounts are due in one year and carry an annual interest rate of 7.544%. The loan has been collateralized by CER’s office building in Zhangjiang, Shanghai and guaranteed by Qinghuan Wu, the Company’s Chief Executive Officer.

On March 29, 2012, CER Shanghai entered into a loan contract to borrow RMB 5,000,000 (approximately $795,000 at the exchange rate at that time) from Industrial and Commercial Bank of China Limited, Zhangjiang Branch. The loan carries an annual interest rate of 6.405%. The term of the loan is six months commencing from March 29, 2012. The loan is collateralized by several bank acceptance notes owned by CER Shanghai in the amount of RMB 5,600,000 (approximately $890,000). The total amount of principal and interest were repaid by several installments as of September 30, 2012.

On March 30, 2012, CER Yangzhou entered into a 2 year comprehensive credit facility with the China CITIC Bank, Yangzhou Branch. The facility is RMB 20,000,000 (approximately $3,175,000). This comprehensive line of credit can be used from March 30, 2012 to March 30, 2014. This facility is guaranteed by Jiangsu SOPO and guaranteed by Mr. Qinghuan Wu, the Company’s Chief Executive Officer. On June 6, 2012, CER Yangzhou drew down RMB 10 million (approximately $1,587,900) as a short-term loan. This amount is due in one year and carries an annual interest rate of 7.544%.

On June 15, 2012, CER Shanghai entered into an import financing agreement with the Industrial and Commercial Bank of China, which paid for certain procured imports on behalf of CER Shanghai. CER Shanghai is entitled to authorize Industrial and Commercial Bank of China to make a payment amounting to $1.15 million to an overseas supplier for import purchases. This amount is collateralized by a cash deposit in the amount of RMB 7,710,000 (approximately $1,213,631). This loan bears an annual interest rate of 2.4789%. The term of the loan is three months commencing from June 15, 2012 to September 14, 2012. The total amount of principal and interest were repaid on September 14, 2012.

On September 5, 2012, Shanghai Engineering entered into a comprehensive facility contract with Bank of Shanghai. The total amount is RMB 15,000,000 (approximately $2,364,625 at the then-existing exchange rate). This amount is due in one year and carries an annual interest rate of 7.2%. The loan is guaranteed by Mr. Qinghuan Wu, the Company’s Chief Executive Officer and Mrs. Jialing Zhou, Mr. Wu’s wife, and among which RMB 5,000,000 is collateralized by a building located in Shanghai, which is owned by Mr. Qinghuan Wu and his son. In addition, the remaining amount of RMB 10,000,000 of this loan is guaranteed by Shanghai Chuang Ye Jie Li Financing Guarantee Co., Ltd (“Shanghai Chuangye”), after making a cash deposit of 5% of the total guarantee amount to Shanghai Chuangye. Shanghai Chuangye charged a 3% fee and required a counter-guarantee by CER Yangzhou and CER Shanghai. Shanghai Chuangye also required second tier collateralization by the aforementioned building owned by Mr. Wu and his son and 60% of Mr. Wu’s ownership interest in Shanghai Engineering. Since this building had previously been collateralized under a facility agreement entered into with Ningbo Bank, Shanghai branch, this borrowing with the Bank of Shanghai will replace the existing Ningbo Bank facility. As of September 30, 2012, the Company drew down RMB 4,000,000 as short-term loan. The Company drew down RMB 4,000,000 on October 16, 2012, and RMB 7,000,000 on October 26, 2012 as short term loan, respectively.

On July 12, 2012, Shanghai Engineering borrowed RMB 95,000 (approximately $15,115 at the then-existing exchange rate) from Shanghai Pudong Development Bank, Shanghai Branch. The loan carries an annual interest rate of 6.44%. The term of the loan is four months commencing from July 12, 2012 to November 9, 2012. The loan is secured by a pledge of several bank acceptance notes owned by Shanghai Engineering in the amount of RMB 100,000 (approximately $15,911). Shanghai Engineering repaid RMB 95,000 on November 9, 2012.

Interest expense on short-term loans for the three months ended September 30, 2011 and 2012 was $98,370 and $250,197, respectively. Interest expense on short-term loans for the nine months ended September 30, 2011 and 2012 was $224,492 and $716,976, respectively.

Descriptions of letters of credit

CER, through its subsidiary, CER Yangzhou imports goods from CER Hong Kong, which are purchased from overseas suppliers. CER Yangzhou issued a forward letter of credit (“L/C”) to CER Hong Kong for import purchases in September 2011. The L/C is collateralized by the machinery of CER Yangzhou’s plant. On September 30, 2011, CER Hong Kong discounted the L/C from Standard Chartered Bank’s Hong Kong branch in the amount of RMB 21,000,000 ($3,240,000 at the exchange rate at such date). The due date of the L/C is January 6, 2012. The discount rate is 5.02% annually. CER Yangzhou repaid RMB 21,000,000 on January 6, 2012.

On November 29, 2011, CER Shanghai issued a forward letter of credit (“L/C”) to CER Yangzhou for the purchase of goods. The L/C is collateralized by a building in Shanghai, which is owned by Jiangsu SOPO. On December 12, 2011, CER Yangzhou discounted the L/C from Industrial and Commercial Bank of China Limited, Zhangjiang Branch in the amount of RMB 7,980,000 (approximately $1,260,000 at the exchange rate at the time). The due date of the L/C is May 28, 2012. The discount rate is 6.71% annually. The total amount of the letter of credit was repaid on May 15, 2012. On May 18, 2012, CER Shanghai renewed the issuance of a forward letter of credit amounting to RMB 7,900,000 (approximately $ 1,235,586) to CER Yangzhou for purchase of goods. The discount rate is 6.405% annually. The due date of the renewed LC is September 17, 2012. CER Yangzhou repaid RMB 7,900,000 on September 29, 2012.

Interest expense on letters of credit for the three months ended September 30, 2011 and 2012 was $0 and $22,585, respectively. Interest expense on letters of credit for the nine months ended September 30, 2011 and 2012 was $0 and $74,191, respectively.

Descriptions of Product Financing

On August 10, 2012, CER signed two contracts with China Great Wall Industry Corporation (“Great Wall”) for sales and repurchases of certain goods within a 6-month period which in substance are a product financing arrangement. According to these two agreements, CER (Yangzhou) will sell certain equipment to Great Wall at a price of RMB 32,454,780 (approximately $5,108,707). The funding to CER consists of three components, two of which are letters of credit totaling RMB 30,000,000 (approximately $4,773,300); the rest is cash. At the same time, Great Wall agreed to resell the equipment to CER (Shanghai) at a price of RMB 33,038,966 (approximately $5,200,664) via a delayed collection arrangement as set forth below, where such amounts represent payments due from CER to Great Wall (or a bank, if the letters of credit are tendered for cash equal to the principal or face value less the bank’s discount)

	RMB	USD
December 20, 2012	10,180,000	1,619,740
March 15, 2013	20,360,000	3,239,480
April 7, 2013	2,498,965	397,610
Total	33,038,965	5,256,830

In September, 2012, Great Wall issued two letters of credit in the amount of RMB 10 million (approximately $1.6 million) and RMB 20 million (approximately $3.2 million) from Industrial and Commercial Bank of China Co., Ltd., Beijing West Railway Station Branch to CER (Yangzhou) in accordance with the aforementioned agreements, respectively. Then CER (Yangzhou) discounted them to draw down RMB 9.8 million (approximately $1.6 million) on September 6, 2012, with the maturity date of December 24, 2012, and draw down RMB 19.4 million (approximately $3.1 million) on September 25, 2012, with the maturity date of March 15, 2013, respectively, for a total amount of RMB 29.2 (approximately $4.7 million) million. The amount of RMB 29.2(approximately $4.7 million) million was recorded as short term loan and RMB 0.8 million (approximately $0.13 million) as debt issue cost which is amortized over the term the product financing at an effective interest rate of 5.37%. For the three months and nine months ended September 30, 2012, the amortization of debt issue cost was RMB 49,041(approximately $7,747). The final payment amounting to RMB 2,454,780 (approximately $390,580) will be paid by Great Wall in November, 2012. The price difference between sales and repurchase of the goods of RMB 584,185 (approximately $91,957) represents interest to be paid to Great Wall. The Company calculated this portion of interest with an effective interest rate of 4.13%. For the three months ended September 30, 2012, the interest payable of RMB 38,448 (approximately $6,073) was recorded as accrued expenses and other liabilities. In addition, China Energy Recovery, Inc., the parent company, guaranteed the repayment of CER Shanghai. There is no other collateral in the contract. This product financing arrangement was entered into to offset concerns related to the Company’s liquidity given the extension of payment terms on accounts receivable due from Zhenjiang Kailin, which are further discussed in Note 16, and the Company’s $5 million long term loan with Hold and Opt Investments originally due on September 29, 2012, and subsequently extended with a new maturity date of no later than December 15, 2012.

Formerly convertible debt (presented as current portion of long term loan)

Borrowing	Borrowing date	Interest rate		Maturity date	Balance at Dec. 31, 2011		Balance at Sep. 30, 2012		Pledge or guarantee
$ 5 million – Hold And Opt Investments Limited	Dec. 31, 2010	15.100	%	Sept. 29, 2012	USD	4,850,945	USD	5,000,000	Collateralized by 8,000,006 of Qinghuan Wu's shares in CER.

On May 21, 2009, the Company entered into a term loan agreement (“Convertible Notes Agreement”) with an investment company (the “Lender”). Pursuant to the Convertible Notes Agreement, the lender provided term loan financing (“Convertible Notes”) to the Company in an amount of up to $5,000,000 within 6 months of the making, which may be drawn from time to time, in whole or in installments, upon notice, but once repaid shall not be subject to reborrowing. The proceeds from this Convertible Note were used for the construction of the Company’s new plant located in Yangzhou, China including, the purchase of land for the plant, buildings, equipment, and for the facilitating of financing loans from one or more in-China banks and other institutional lenders. Any amount borrowed will bear interest at 9.5%, payable every six months, calculated and compounded quarterly. Each draw is due twenty-four (24) months after the draw down date, together with any accrued and unpaid interest. The Company drew down $5,000,000 on September 29, 2009. The Convertible Notes could be converted to 2,777,778 shares of common stock at the conversion price of $1.80. In addition, the Company issued the Lender a five-year common stock purchase warrant (“Warrants”) to purchase up to 1,388,889 shares of the Company’s common stock, which is that number of shares of the Company’s common stock equal to 50% of the principal sum of these Convertible Note divided by the conversion price of $1.80.

The Lender may recall a Convertible Note after the first anniversary of the draw down at a redemption price equal to the outstanding principal plus any accrued and unpaid interest upon the closing by the Company of any debt and/or equity financing (except for debt financings with banks or institutional lenders in China), in an amount up to 50% of the amount financed. Additionally, upon occurrence of certain events, the Lender can demand the entire outstanding principal, together with any accrued and unpaid interest to be immediately repaid in full or in part. The Company can also prepay the Convertible Note at any time it desires with accrued and unpaid interest.

The embedded conversion feature of the Convertible Notes was accounted for as an embedded derivative in accordance with ASC 815 “Derivatives and Hedging” because the conversion price is denominated in USD, which is a currency other than the Company’s functional currency, RMB. The conversion feature was accounted for as a derivative liability on the balance sheet and classified as a current liability based on the timing of the cash flows derived from the convertible notes. The Convertible Notes were recorded with a discount equal to the fair value of the conversion feature at the transaction date and were accreted to the redemption value of the Convertible Notes from the draw down date to September 30, 2011 (the date of extinguishment of the conversion feature) using the effective interest rate method. The change in fair value of the conversion feature derivative liability of $0 and $203,916 was recorded in the consolidated statement of operations and other comprehensive (loss) income for the three and nine months ended September 30, 2011, respectively with no similar amount for the quarters ended September 30, 2012 due to the termination of the derivative. The interest expense recognized for accretion to the redemption value of the Convertible Notes was $40,535 and $53,401 for the three months ended September 30, 2011 and 2012, respectively. The interest expense recognized for accretion to the redemption value of the Convertible Notes was $116,714 and $149,056 for the nine months ended September 30, 2011 and 2012, respectively.

The value of the Warrants at the grant date on May 21, 2009 was accounted for as a commitment fee for obtaining the Convertible Notes, and therefore the value was recorded as deferred financing cost to be amortized over the period from the grant date to September 30, 2011 (the date of extinguishment of the conversion feature) of the Convertible Notes. For the three and nine months ended September 30, 2011, $66,919 and $215,623 of deferred financing costs were amortized and charged to interest expense, respectively with no amounts recognized in 2012 due to the cessation of recognition of remaining costs in 2011. The Warrants were recorded as derivative liabilities in accordance with ASC 815, Derivatives and Hedging, because the exercise price of the warrants is denominated in USD, which is a currency other than the Company’s functional currency, RMB. Changes in fair value of the warrants (Note 12) for the three and nine months ended September 30, 2011 and 2012 were recorded in the consolidated statement of operations and other comprehensive (loss) income.

On December 31, 2010, the Company entered into a loan agreement with the Lender to replace and continue the prior lending arrangement which was entered into on May 21, 2009, to extend the term until which the principal amount of $5,000,000 is due to September 29, 2012, and to change certain of the terms of the loan. The aggregate principal amount of the loan extension is $5,000,000, and bears interest at the annual rate of 15.1%, calculated on a monthly compounded basis. The loan may be prepaid by the Company, without penalty. The loan agreement provides for the typical events of default (which includes default in payment of any part of the principal of or interest, performance or compliance with the collateral agreement, assets attached or seized by any third person and or any part of the loan agreement being declared null and void or its enforceability being challenged), including a cross default clause, and the Company has made various representations and given various covenants to the lender, which includes the audit of the Company’s annual financial statements and review of the interim financial statements as well as the timely filing of such statements, including any extension periods permitted under SEC rules and regulations. The Lender continues to have a right of first refusal with respect to future debt and equity fundings and a right to consent to certain debt and equity fundings by the Company and its subsidiaries and affiliates. As a guarantor of the payments under the loan extension, Mr. Wu, the Chief Executive Officer of the Company, pledged 8,000,006 of his shares in CER for the repayment of the principal due under the loan agreement.

On October 22, 2012, CER entered into an extension to continuation and loan arrangement with Hold And Opt Investments Limited, effective as of September 29, 2012 (“Loan Date”). At the Loan Date, both principal and interest due under the loan agreement remained outstanding. The extended maturity date for the Loan Amount is November 30, 2012, with a grace period not to extend beyond December 15, 2012. CER shall make a mandatory prepayment of $3,000,000 by no later than November 10, 2012. The outstanding principal and interest amount under this extension agreement shall bear interest at a rate of 1.5% per month, commencing on the Loan Date, and continuing until the principal is paid in full. CER repaid $2,000,000 on October 31, 2012.

The conversion feature expired, and there is no conversion term on the modified convertible debt described above, since September 30, 2011.

The Company has accounted for the replacement and extension of the loan agreement as a modification as the changes are not substantial such that there has been no accounting extinguishment in accordance with ASC 470, “Debt – Modifications and Extinguishments.” Accordingly a new effective interest rate was determined based on the carrying amount of the original debt and the revised cash flows of the new debt.

Since the loan is fixed in United States dollars, the lender will receive compensation when the Renminbi exchange rate increases against the US dollar as compared to the rate fixed at the borrowing date. Accordingly, the Company has accounted for this indexed feature as an embedded derivative and recognized a derivative liability in the amounts of $21,274 and $0 as of December 31, 2011 and September 30, 2012, respectively. There are no derivative liabilities under the compensation terms of the loan agreement as the original loan is due. The change in fair value of the derivative liability of $0 and $21,274 was recorded in the unaudited statements of operations and comprehensive income/loss for the three and nine months ended September 30, 2012, respectively.

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Notes Payable

9 Months Ended

Sep. 30, 2012

Payables and Accruals [Abstract]

Mortgage Notes Payable Disclosure [Text Block]

Note 8 – Notes Payable

Notes payable represents bank acceptance drafts that are non-interest bearing and due within six months. The balance of the bank acceptance drafts is $1,396,648 and $2,641,254 as of December 31, 2011 and September 30, 2012, respectively.

Borrowing	Draw down date	Maturity date	Balance at Sep. 30, 2012	Pledge or guarantee
RMB 8.8 million – Industrial and Commercial Bank of China Limited, Shanghai Zhangjiang Branch	May. 30, 2012	Nov. 29, 2012	RMB 8,800,000 (USD 1,400,168)	Collateralized by a building in Shanghai owned by Jiangsu SOPO.
RMB 4.7 million – China CITIC Bank, Yangzhou Branch.	May. 23, 2012	Nov 23, 2012	RMB 4,700,000 (USD 747,817)	Guaranteed by Jiangsu SOPO, and guaranteed by Mr. Qinghuan Wu, the Company’s Chief Executive Officer.
RMB 3.1 million – China CITIC Bank, Yangzhou Branch.	Apr. 24, 2012	Oct. 24, 2012	RMB 3,100,178 (USD 493,269)	Guaranteed by Jiangsu SOPO, and guaranteed by Mr. Qinghuan Wu, the Company’s Chief Executive Officer.
Total notes payable			RMB 16,600,178 (USD 2,641,254)

On November 24, 2011, bank acceptance drafts amounting to RMB 8.8 million (approximately $1.4 million) were arranged with Industrial and Commercial Bank of China Limited, Shanghai Zhangjiang Branch by CER Shanghai to settle its purchases from certain customers. The bank acceptance drafts are collateralized by a building in Shanghai owned by Jiangsu SOPO. The total amount of the bank acceptance drafts was repaid on May 22, 2012. On May 30, 2012, CER Shanghai renewed the issuance of the same amount of bank acceptance drafts from Industrial and Commercial Bank of China Limited. The expiration date is November 29, 2012. On November 1, 2012, the Company repaid RMB 8.8 million (approximately $1.4 million).

On January 9, 2012, Shanghai Engineering entered into a three-year loan facility with the Bank of Ningbo, Shanghai Branch. The facility is RMB 4,500,000 (approximately $713,000 at the exchange rate at that time). The funds have been drawn down in the form of bank acceptance drafts in two installments, with $635,160 (RMB 4,000,000) and $793,950 (RMB 5,000,000) being issued by the Bank of Ningbo on March 6, 2012 and March 21, 2012, respectively, with a cash deposit accounting for 50% of the total amount of bank acceptance. The loan has been guaranteed by Qinghuan Wu and Jialing Zhou and also collateralized by a building located in Hongkou District, Shanghai, which is owned by Mr. Wu and his son. Shanghai Engineering repaid RMB 9,000,000 by two installments in September, 2012.

On March 30, 2012, CER Yangzhou entered into a 2 year comprehensive credit facility with the China CITIC Bank, Yangzhou Branch. The facility is RMB 20,000,000 (approximately $3,175,000). The period of the comprehensive line of credit is from March 30, 2012 to March 30, 2014. This facility is guaranteed by Jiangsu SOPO, and guaranteed by Mr. Qinghuan Wu, the Company’s Chief Executive Officer. On April 24, 2012, CER Yangzhou drew down bank acceptance notes amounting to RMB 3,100,178 (approximately $493,269) after making a cash deposit of RMB 1,860,107(approximately $294,882) to the bank. On May 23, 2012, CER Yangzhou drew down bank acceptance notes amounting to RMB 4,700,000 (approximately $747,817) after making cash deposit of RMB 2,820,000 (approximately $448,690) to the bank. The expiration date is November 23, 2012. On October 23, 2012, CER Yangzhou repaid RMB 3,100,178 (approximately $493,269).

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Earnings / (Loss) per Share

9 Months Ended

Sep. 30, 2012

Earnings Per Share [Abstract]

Earnings Per Share [Text Block]

Note 10 –Earnings / (Loss) per Share

The Company reports earnings per share in accordance with the provisions of ASC 260, “Earnings Per Share”. This standard requires presentation of basic and diluted earnings per share in conjunction with the disclosure of the methodology used in computing such earnings per share. Basic earnings/(losses) per share excludes dilution and is computed by dividing net income (loss) available to common stockholders by the weighted average common shares outstanding during the period under the two-class method. Diluted earnings per share takes into account the potential dilution that could occur if securities or other contracts to issue common stock were exercised and converted into common stock. In computing the dilutive effect of convertible securities, the number of shares is adjusted for the additional common stock to be issued as if the convertible securities are converted at the beginning of the period (or at the time of issuance, if later). In computing the dilutive effect of options and warrants, the treasury method is used. Under this method, options and warrants are assumed to be exercised at the beginning of the period and as if funds obtained thereby were used to purchase common stock at the average market price during the period.  The following table lists the potentially dilutive securities at September 30, 2012 related to our compensation plans under which shares of our common stock are authorized for issuance.

Potentially Dilutive Securities	Number of Securities to be Issued		Reference Index
Dilutive securities from warrants issued as part of financing with Series A preferred stock		1,852,820	Note 12
Dilutive securities from warrants issued with convertible notes		1,388,889	Note 12
Dilutive securities from options to Ye Tian (director)		500,000	Note 13
Dilutive securities from options to Estelle Lau (director)		60,000	Note 13
Dilutive securities from options to Sum Kung (director)		30,000	Note 13
Dilutive securities from options to Jules Silbert (director)		30,000	Note 13
Total potentially dilutive securities		3,861,709

For the three months and nine months ended September 30, 2011, warrants to purchase 3,241,709 shares of the Company’s common stock and options to purchase 575,000 shares were excluded from the diluted earnings per share calculation because of their anti-dilutive effect.

For the three and nine months ended September 30, 2012, warrants to purchase 3,241,709 shares of the Company’s common stock and options to purchase 635,000 shares were excluded from the diluted earnings per share calculation because of their anti-dilutive effects. The exercise price exceeded the current share price for all stock-based options and warrants.

The following are reconciliations of the basic and diluted earnings per share computations for the three and nine months ended September 30, 2011 and 2012:

	Three months ended September 30,
	2011			2012
Numerator:
Net income for the period		2,278,413			900,619
Amount allocated to preferred stockholders		(7,744	)		(3,062	)
Net income available to common stock holders – Basic and diluted		2,270,669			897,557
Denominator:
Denominator for basic earnings per share -weighted average common stocks outstanding		31,085,859			31,078,083
Weighted average stock options		16,956			-
Denominator for diluted earnings per share		31,102,815			31,078,083
Basic (loss)/earnings per share		0.07			0.03
Diluted (loss)/earnings per share		0.07			0.03

	Nine months ended September 30,
	2011			2012
Numerator:
Net income for the period		2,663,566			2,628,125
Amount allocated to preferred stockholders		(9,074	)		(8,934	)
Net income available to common stock holders – Basic and diluted		2,654,492			2,619,191
Denominator:
Denominator for basic earnings per share -Weighted average common stock outstanding		31,015,385			31,082,790
Weighted average stock options		16,956			-
Denominator for diluted earnings per share		31,032,341			31,082,790
Basic earnings per share		0.09			0.08
Diluted earnings per share		0.09			0.08

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Notes Payable (Details)

9 Months Ended

9 Months Ended

Sep. 30, 2012

USD ($)

Sep. 30, 2012

CNY

May 23, 2012

USD ($)

May 23, 2012

CNY

Apr. 24, 2012

USD ($)

Apr. 24, 2012

CNY

Mar. 21, 2012

USD ($)

Mar. 21, 2012

CNY

Mar. 06, 2012

USD ($)

Mar. 06, 2012

CNY

Dec. 31, 2011

USD ($)

Nov. 24, 2011

USD ($)

Nov. 24, 2011

CNY

Sep. 09, 2009

USD ($)

Sep. 30, 2012

Rmb 8.8 Million Industrial and Commercial Bank Of China Limited Shanghai Zhangjiang Branch [Member]

USD ($)

Sep. 30, 2012

Rmb 8.8 Million Industrial and Commercial Bank Of China Limited Shanghai Zhangjiang Branch [Member]

CNY

Sep. 30, 2012

Rmb 3.1 Million China Citic Bank Yangzhou Branch [Member]

USD ($)

Sep. 30, 2012

Rmb 3.1 Million China Citic Bank Yangzhou Branch [Member]

CNY

Sep. 30, 2012

Rmb 4.7 Million China Citic Bank Yangzhou Branch [Member]

USD ($)

Sep. 30, 2012

Rmb 4.7 Million China Citic Bank Yangzhou Branch [Member]

CNY

Draw down date

May 30, 2012

May 30, 2012

Apr. 24, 2012

Apr. 24, 2012

May 23, 2012

May 23, 2012

Maturity date

Nov. 29, 2012

Nov. 29, 2012

Oct. 24, 2012

Oct. 24, 2012

Nov. 23, 2012

Nov. 23, 2012

Balance at Sep.30, 2012

$ 2,641,254

16,600,178

$ 747,817

4,700,000

$ 493,269

3,100,178

$ 793,950

5,000,000

$ 635,160

4,000,000

$ 1,396,648

$ 1,400,000

8,800,000

$ 5,000,000

$ 1,400,168

8,800,000

$ 493,269

3,100,178

$ 747,817

4,700,000

Pledge or guarantee

Collateralized by 8,000,006 of Qinghuan Wu's shares in CER.

Collateralized by 8,000,006 of Qinghuan Wu's shares in CER.

Collateralized by a building in Shanghai owned by Jiangsu SOPO

Collateralized by a building in Shanghai owned by Jiangsu SOPO

Guaranteed by Jiangsu SOPO, and guaranteed by Mr. Qinghuan Wu, the Company’s Chief Executive Officer.

Guaranteed by Jiangsu SOPO, and guaranteed by Mr. Qinghuan Wu, the Company’s Chief Executive Officer.

Guaranteed by Jiangsu SOPO, and guaranteed by Mr. Qinghuan Wu, the Company’s Chief Executive Officer.

Guaranteed by Jiangsu SOPO, and guaranteed by Mr. Qinghuan Wu, the Company’s Chief Executive Officer.

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Subsequent events (Details Textual)	1 Months Ended		9 Months Ended								1 Months Ended		1 Months Ended		1 Months Ended
	Aug. 31, 2012 CNY	Apr. 30, 2012 CNY	Sep. 30, 2012 USD ($)	Sep. 30, 2011 USD ($)	Sep. 30, 2012 CNY	Apr. 30, 2012 USD ($)	Dec. 31, 2011 USD ($)	Sep. 09, 2009 USD ($)	Oct. 18, 2012 Zhenjiang Kailin and Cgn Energy [Member] USD ($)	Oct. 18, 2012 Zhenjiang Kailin and Cgn Energy [Member] CNY	Oct. 31, 2012 RMB 10 million - Shanghai Pudong Zhanjiang Micro-credit Co., Ltd [Member] CNY	Oct. 15, 2012 RMB 10 million - Shanghai Pudong Zhanjiang Micro-credit Co., Ltd [Member] USD ($)	Oct. 31, 2012 Hold and Opt Investments Limited [Member] USD ($)	Oct. 22, 2012 Hold and Opt Investments Limited [Member] USD ($)	Oct. 31, 2012 China Construction Bank, Yizheng Branch [Member] USD ($)	Oct. 25, 2012 China Construction Bank, Yizheng Branch [Member] CNY
Debt Instrument, Periodic Payment, Principal											900,000
Debt Instrument, Face Amount												10,000,000
Debt Instrument, Interest Rate, Stated Percentage												12.00%		1.50%		6.30%
Repayments Of Short-Term Debt	3,600,000	10,000,000	15,260,418	1,162,700									2,000,000		793,059
Short-Term Debt			17,331,836		108,929,896	729,655	14,388,649	5,000,000								5,000,000
Pledged Assets, Not Separately Reported, Other																20,171,625
Mandatory Prepayment Due														3,000,000
Garanty Contract Aggrement,Carrying Amount Per Contract									1,570,000	9,900,000
Garanty Contract Aggrement,Carrying Amount									3,140,000	19,800,000
Remaining Principal Amount			$ 1,000,000

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Taxation (Details Textual)	3 Months Ended		9 Months Ended		54 Months Ended						1 Months Ended		9 Months Ended	1 Months Ended
	Sep. 30, 2012 USD ($)	Sep. 30, 2011 USD ($)	Sep. 30, 2012 USD ($)	Sep. 30, 2011 USD ($)	Jun. 30, 2012	Dec. 31, 2011 USD ($)	Sep. 30, 2012 Non Us Subsidiaries [Member] USD ($)	Sep. 30, 2012 Non Us Subsidiaries [Member] CNY	Dec. 31, 2011 Non Us Subsidiaries [Member] USD ($)	Dec. 31, 2011 Non Us Subsidiaries [Member] CNY	Apr. 30, 2011 C E R Shanghai [Member]	Jan. 30, 2012 C E R Yangzhou [Member]	Sep. 30, 2012 C E R Hong Kong [Member] USD ($)	Apr. 30, 2011 Shanghai Engineering [Member]
Effective Income Tax Rate, Continuing Operations			34.00%
Effective Income Tax Rate Foreign			16.50%
Enterprise Income Tax Rate			25.00%		25.00%						12.50%	25.00%		15.00%
Net Operating Losses Carry Forward Years			5 years
Accrued Income Taxes	$ 1,500,000
With Holding Tax Rate			10.00%
Retained Earnings (Accumulated Deficit)							5,151,841	33,325,437	1,102,139	7,687,921
Operating Loss Carryforwards	8,867,820		8,867,820			8,355,602
Operating Loss Carryforwards, Expiration Dates			These carry forwards will expire, if not utilized, in 20 years from origination
Income Tax Expense	$ (595,527)	$ (600,661)	$ (1,544,712)	$ (580,566)									$ 732,592

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Short Term Loans (Details Textual)	1 Months Ended			3 Months Ended		9 Months Ended		12 Months Ended																				1 Months Ended			1 Months Ended	9 Months Ended		0 Months Ended	1 Months Ended			9 Months Ended																3 Months Ended	9 Months Ended							3 Months Ended			9 Months Ended			3 Months Ended												3 Months Ended		9 Months Ended								1 Months Ended		0 Months Ended		1 Months Ended												1 Months Ended		9 Months Ended													3 Months Ended		9 Months Ended								3 Months Ended		9 Months Ended
	Aug. 31, 2012 CNY	Apr. 30, 2012 CNY	Dec. 31, 2010 USD ($)	Sep. 30, 2012 USD ($)	Sep. 30, 2011 USD ($)	Sep. 30, 2012 USD ($)	Sep. 30, 2011 USD ($)	Dec. 31, 2011 USD ($)	Sep. 30, 2012 CNY	May 23, 2012 USD ($)	May 23, 2012 CNY	May 18, 2012 USD ($)	May 18, 2012 CNY	Apr. 30, 2012 USD ($)	Apr. 24, 2012 USD ($)	Apr. 24, 2012 CNY	Mar. 30, 2012 USD ($)	Mar. 30, 2012 CNY	Mar. 29, 2012	Dec. 12, 2011 CNY	Sep. 29, 2011 USD ($)	Sep. 29, 2011 CNY	Jun. 13, 2011	Sep. 09, 2009 USD ($)	Sep. 07, 2009	Jun. 24, 2009	May 21, 2009	Oct. 31, 2012 Hold and Opt Investments Limited [Member] USD ($)	Oct. 22, 2012 Hold and Opt Investments Limited [Member] USD ($)	Sep. 30, 2012 Hold and Opt Investments Limited [Member] USD ($)	Jul. 31, 2012 Cer Shanghai [Member] CNY	Sep. 30, 2012 Cer Shanghai [Member] USD ($)	Sep. 30, 2012 Cer Shanghai [Member] CNY	Nov. 09, 2012 Shanghai Engineering [Member] CNY	Apr. 30, 2012 Shanghai Pudong Zhanjiangmicro-Credit Co., Ltd [Member] USD ($)	Apr. 30, 2012 Shanghai Pudong Zhanjiangmicro-Credit Co., Ltd [Member] CNY	Mar. 31, 2012 Shanghai Pudong Zhanjiangmicro-Credit Co., Ltd [Member]	Sep. 30, 2012 Shanghai Pudong Zhanjiangmicro-Credit Co., Ltd [Member] CNY	Feb. 20, 2013 Shanghai Pudong Zhanjiangmicro-Credit Co., Ltd [Member]	Mar. 06, 2012 Shanghai Pudong Zhanjiangmicro-Credit Co., Ltd [Member] USD ($)	Mar. 06, 2012 Shanghai Pudong Zhanjiangmicro-Credit Co., Ltd [Member] CNY	Feb. 29, 2012 Shanghai Pudong Zhanjiangmicro-Credit Co., Ltd [Member] USD ($)	Feb. 29, 2012 Shanghai Pudong Zhanjiangmicro-Credit Co., Ltd [Member] CNY	Feb. 27, 2012 Shanghai Pudong Zhanjiangmicro-Credit Co., Ltd [Member] CNY	Dec. 31, 2011 Shanghai Pudong Zhanjiangmicro-Credit Co., Ltd [Member]	Dec. 29, 2011 Shanghai Pudong Zhanjiangmicro-Credit Co., Ltd [Member] USD ($)	Dec. 29, 2011 Shanghai Pudong Zhanjiangmicro-Credit Co., Ltd [Member] CNY	Dec. 22, 2011 Shanghai Pudong Zhanjiangmicro-Credit Co., Ltd [Member] USD ($)	Dec. 22, 2011 Shanghai Pudong Zhanjiangmicro-Credit Co., Ltd [Member] CNY	Dec. 15, 2011 Shanghai Pudong Zhanjiangmicro-Credit Co., Ltd [Member] USD ($)	Dec. 15, 2011 Shanghai Pudong Zhanjiangmicro-Credit Co., Ltd [Member] CNY	Jul. 12, 2012 Shanghai Pudong Zhanjiangmicro-Credit Co., Ltd [Member] Shanghai Engineering [Member] USD ($)	Jul. 12, 2012 Shanghai Pudong Zhanjiangmicro-Credit Co., Ltd [Member] Shanghai Engineering [Member] CNY	Mar. 31, 2011 Letter Of Credit [Member] USD ($)	Sep. 30, 2012 Letter Of Credit [Member] CNY	Sep. 30, 2012 Product Financing Arrangement [Member] USD ($)	Sep. 30, 2012 Product Financing Arrangement [Member] CNY	Aug. 10, 2012 Product Financing Arrangement [Member] China Great Wall Industry Corporation [Member] USD ($)	Aug. 10, 2012 Product Financing Arrangement [Member] China Great Wall Industry Corporation [Member] CNY	Aug. 31, 2011 Shanghai Pudong Development Bank [Member] USD ($)	Aug. 31, 2011 Shanghai Pudong Development Bank [Member] CNY	Sep. 30, 2012 Convertible Notes Payable [Member] USD ($)	Mar. 31, 2012 Convertible Notes Payable [Member] USD ($)	Sep. 30, 2011 Convertible Notes Payable [Member] USD ($)	Sep. 30, 2012 Convertible Notes Payable [Member] USD ($)	Sep. 30, 2011 Convertible Notes Payable [Member] USD ($)	May 21, 2009 Convertible Notes Payable [Member] USD ($)	Mar. 31, 2012 Industrial and Commercial Bank Of China Limited, Zhangjiang Branch [Member] USD ($)	Mar. 31, 2012 Industrial and Commercial Bank Of China Limited, Zhangjiang Branch [Member] CNY	Mar. 31, 2011 Industrial and Commercial Bank Of China Limited, Zhangjiang Branch [Member] USD ($)	Jun. 15, 2012 Industrial and Commercial Bank Of China Limited, Zhangjiang Branch [Member] USD ($)	Mar. 29, 2012 Industrial and Commercial Bank Of China Limited, Zhangjiang Branch [Member] USD ($)	Mar. 29, 2012 Industrial and Commercial Bank Of China Limited, Zhangjiang Branch [Member] CNY	Mar. 23, 2012 Industrial and Commercial Bank Of China Limited, Zhangjiang Branch [Member] USD ($)	Mar. 23, 2012 Industrial and Commercial Bank Of China Limited, Zhangjiang Branch [Member] CNY	Jan. 16, 2012 Industrial and Commercial Bank Of China Limited, Zhangjiang Branch [Member] USD ($)	Jan. 16, 2012 Industrial and Commercial Bank Of China Limited, Zhangjiang Branch [Member] CNY	Dec. 29, 2011 Industrial and Commercial Bank Of China Limited, Zhangjiang Branch [Member] USD ($)	Dec. 29, 2011 Industrial and Commercial Bank Of China Limited, Zhangjiang Branch [Member] CNY	Sep. 30, 2012 Industrial and Commercial Bank Of China Limited, Zhangjiang Branch [Member] China Great Wall Industry Corporation [Member] USD ($)	Sep. 30, 2012 Industrial and Commercial Bank Of China Limited, Zhangjiang Branch [Member] China Great Wall Industry Corporation [Member] CNY	Sep. 30, 2012 Industrial and Commercial Bank Of China Limited, Zhangjiang Branch [Member] China Great Wall Industry Corporation [Member] USD ($)	Sep. 30, 2012 Industrial and Commercial Bank Of China Limited, Zhangjiang Branch [Member] China Great Wall Industry Corporation [Member] CNY	Sep. 01, 2012 Industrial and Commercial Bank Of China Limited, Zhangjiang Branch [Member] China Great Wall Industry Corporation [Member] USD ($)	Sep. 01, 2012 Industrial and Commercial Bank Of China Limited, Zhangjiang Branch [Member] China Great Wall Industry Corporation [Member] CNY	Sep. 06, 2012 Industrial and Commercial Bank Of China Limited, Zhangjiang Branch [Member] China Great Wall Industry Corporation [Member] Due On December 24, 2012 [Member] USD ($)	Sep. 06, 2012 Industrial and Commercial Bank Of China Limited, Zhangjiang Branch [Member] China Great Wall Industry Corporation [Member] Due On December 24, 2012 [Member] CNY	Sep. 25, 2012 Industrial and Commercial Bank Of China Limited, Zhangjiang Branch [Member] China Great Wall Industry Corporation [Member] Due On March 15, 2013 [Member] USD ($)	Sep. 25, 2012 Industrial and Commercial Bank Of China Limited, Zhangjiang Branch [Member] China Great Wall Industry Corporation [Member] Due On March 15, 2013 [Member] CNY	Dec. 20, 2011 Bank Of China, Yizheng Branch [Member] USD ($)	Dec. 20, 2011 Bank Of China, Yizheng Branch [Member] CNY	Nov. 15, 2011 Bank Of China, Yizheng Branch [Member] USD ($)	Nov. 15, 2011 Bank Of China, Yizheng Branch [Member] CNY	Nov. 18, 2011 Bank Of China, Yizheng Branch [Member] USD ($)	Nov. 18, 2011 Bank Of China, Yizheng Branch [Member] CNY	Nov. 30, 2011 Bank Of China, Yizheng Branch [Member] CNY	Nov. 23, 2011 Bank Of China, Yizheng Branch [Member] USD ($)	Nov. 23, 2011 Bank Of China, Yizheng Branch [Member] CNY	Nov. 17, 2011 Bank Of China, Yizheng Branch [Member] USD ($)	Jun. 20, 2011 Bank Of China, Yizheng Branch [Member] USD ($)	Jun. 20, 2011 Bank Of China, Yizheng Branch [Member] CNY	Dec. 31, 2010 Bank Of China, Yizheng Branch [Member] USD ($)	Dec. 31, 2010 Bank Of China, Yizheng Branch [Member] CNY	Dec. 09, 2010 Bank Of China, Yizheng Branch [Member] USD ($)	Dec. 09, 2010 Bank Of China, Yizheng Branch [Member] CNY	Nov. 30, 2012 Bank Of China, Yizheng Branch [Member] Repayment Of Debt [Member] USD ($)	Nov. 30, 2012 Bank Of China, Yizheng Branch [Member] Repayment Of Debt [Member] CNY	Sep. 30, 2012 Bank Of China, Yizheng Branch [Member] Repayment Of Debt [Member] USD ($)	Sep. 30, 2012 Bank Of China, Yizheng Branch [Member] Repayment Of Debt [Member] CNY	Jun. 06, 2012 Citic Bank,Yangzhou Branch [Member] USD ($)	Jun. 06, 2012 Citic Bank,Yangzhou Branch [Member] CNY	Mar. 30, 2012 Citic Bank,Yangzhou Branch [Member] CNY	Sep. 30, 2012 Bank Of Communication Shanghai Branch [Member] USD ($)	Sep. 30, 2012 Bank Of Communication Shanghai Branch [Member] CNY	Apr. 12, 2012 Bank Of Communication Shanghai Branch [Member] USD ($)	Apr. 12, 2012 Bank Of Communication Shanghai Branch [Member] CNY	Mar. 20, 2012 Bank Of Communication Shanghai Branch [Member] USD ($)	Mar. 20, 2012 Bank Of Communication Shanghai Branch [Member] CNY	Dec. 31, 2011 Bank Of Communication Shanghai Branch [Member] USD ($)	Dec. 31, 2011 Bank Of Communication Shanghai Branch [Member] CNY	Sep. 30, 2012 Bank Of Communication Shanghai Branch [Member] Shanghai Engineering [Member] USD ($)	Sep. 30, 2011 Bank Of Communication Shanghai Branch [Member] Shanghai Engineering [Member] USD ($)	Sep. 30, 2012 Bank Of Communication Shanghai Branch [Member] Shanghai Engineering [Member] USD ($)	Sep. 30, 2011 Bank Of Communication Shanghai Branch [Member] Shanghai Engineering [Member] USD ($)	Oct. 26, 2012 Bank Of Communication Shanghai Branch [Member] Shanghai Engineering [Member] USD ($)	Oct. 16, 2012 Bank Of Communication Shanghai Branch [Member] Shanghai Engineering [Member] USD ($)	Sep. 05, 2012 Bank Of Communication Shanghai Branch [Member] Shanghai Engineering [Member] USD ($)	Sep. 05, 2012 Bank Of Communication Shanghai Branch [Member] Shanghai Engineering [Member] CNY	Mar. 06, 2012 Bank Of Communication Shanghai Branch [Member] Bankers Acceptance [Member] USD ($)	Mar. 06, 2012 Bank Of Communication Shanghai Branch [Member] Bankers Acceptance [Member] CNY	Sep. 30, 2012 Letter Of Credit Industrial and Commercial Bank Of China [Member] USD ($)	Sep. 30, 2011 Letter Of Credit Industrial and Commercial Bank Of China [Member] USD ($)	Sep. 30, 2012 Letter Of Credit Industrial and Commercial Bank Of China [Member] USD ($)	Sep. 30, 2011 Letter Of Credit Industrial and Commercial Bank Of China [Member] USD ($)	Sep. 30, 2012 Letter Of Credit Industrial and Commercial Bank Of China [Member] CNY	May 18, 2012 Letter Of Credit Industrial and Commercial Bank Of China [Member] USD ($)	May 18, 2012 Letter Of Credit Industrial and Commercial Bank Of China [Member] CNY	Dec. 31, 2011 Letter Of Credit Industrial and Commercial Bank Of China [Member] USD ($)	Dec. 31, 2011 Letter Of Credit Industrial and Commercial Bank Of China [Member] CNY
Short term loans				$ 17,331,836		$ 17,331,836		$ 14,388,649	108,929,896					$ 729,655										$ 5,000,000																		$ 1,589,345	10,000,000			$ 789,639	5,000,000	$ 474,286	3,000,000	$ 315,353	2,000,000	$ 15,115	95,000			$ 5,256,830	33,038,965			$ 4,500,000	29,000,000										$ 1,150,000	$ 795,000	5,000,000			$ 217,989	1,380,000	$ 1,057,682	6,680,000	$ 4.7	29.2	$ 4.7	29.2			$ 1,600,000	9,800,000	$ 3,100,000	19,400,000							9,500,000	$ 1,810,000	11,500,000	$ 1,497,000	$ 1,414,288	9,152,782	$ 3,171,000	21,000,000							$ 1,587,900	10,000,000		$ 4,614,190	29,000,000	$ 1,744,122	11,000,000	$ 4,588,390	29,000,000	$ 0	0	$ 4,000,000		$ 4,000,000		$ 7,000,000	$ 4,000,000	$ 2,364,625	15,000,000	$ 0	0	$ 0		$ 0		0	$ 1,249,111	7,900,000	$ 1,266,506	7,980,000
Short Term Borrowings Period																																																												9 months	9 months																																																						7 years 6 months	7 years 6 months
Interest Expense																																																														53,401		40,535	149,056	116,714																																																							249,373	98,370	466,779	224,492							24,620	0	51,606	0
Line of Credit Facility, Borrowing Capacity, Description																																					CER Shanghai is entitled to draw down RMB 40,000,000 (approximately $6,300,000) as a short-term loan or RMB 57,000,000 (approximately $9,000,000) as bank acceptance notes after making a cash deposit of RMB 17,000,000 (approximately $2,700,000) to the bank.
Repayment of short term loans	3,600,000	10,000,000				15,260,418	1,162,700																					2,000,000			3,000,000				801,038	5,043,333		5,400,000																	21,000,000													15,890	100,000													390,580	2,454,780							1,444,773	9,152,782	1,497,572	9,500,000	1,809,656	11,500,000
Short Term Borrowings Securtiy																																1,213,631	7,710,000																																									890,000	5,600,000	242,949	1,530,000	1,176,433	7,430,000																																																0
Cash Deposit Required For Line Of Credit Facility Amount										448,690	2,820,000				294,882	1,860,107																								2,700,000	17,000,000
Interest on short-term loans				278,855	98,370	797,240	224,492																																															0								46,037	26,986	36,542				217,406		63,401
Letter Of Credit Discounted								1,260,000				1,235,586	7,900,000							7,980,000	3,240,000	21,000,000
Discount Rate				8.00%		8.00%		671.00%													5.02%	5.02%										6.405%
Class of Warrant or Right, Number of Securities Called by Warrants or Rights				1,388,889		1,388,889																	60,000		60,000	500,000	2,777,778
Debt Instrument, Convertible, Conversion Price																																																														$ 1.80			$ 1.80
Converible Note Recolled Percentage				0.50		0.50
Change in fair value of derivative liability						0		(21,274)																																																								0		203,916
Short-term Debt, Description			On December 31, 2010, the Company entered into a loan agreement with the Lender to replace and continue the prior lending arrangement which was entered into on May 21, 2009, to extend the term until which the principal amount of $5,000,000 is due to September 29, 2012, and to change certain of the terms of the loan. The aggregate principal amount of the loan extension is $5,000,000, and bears interest at the annual rate of 15.1%, calculated on a monthly compounded basis. The principal and accrued interest is due September 29, 2012; hence the modified loan is classified as a current liability as of March 31, 2012.As a guarantor of the payments under the loan extension, Mr. Wu, the Chief Executive Officer of the Company, pledged 8,000,006 of his shares in CER for the repayment of the principal due under the loan agreement.
Derivative fair value			1,756,067	8,188		8,188		44,080
Debt Instrument Face Amount Percentage				50.00%		50.00%
Payments For Imports																																1,150,000
Interest Expense On Warrant Derivative Liability																																																																66,919		215,623
Subsequent Event, Amount																																		95,000																																																																								952,124	6,000,000	1,511,545	9,500,000
Subsequent Event, Date																																																																																																												Oct. 24, 2012	Oct. 24, 2012
Interest rate														12.00%					6.405%													2.4789%							12.00%						12.00%							6.44%	6.44%							7.544%	7.544%													6.164%	6.164%	6.405%	6.405%	6.405%	6.405%																		7.216%	7.216%		5.56%	5.56%	5.838%	5.838%							7.544%	7.544%		7.54%	7.54%							7.20%		7.20%								6.71%		6.71%
Assets Sold under Agreements to Repurchase, Carrying Amount																																																										5,108,707	32,454,780
Line of Credit Facility, Maximum Borrowing Capacity				713,000		713,000			4,500,000								3,175,000	20,000,000																						9,000,000	57,000,000			10,000,000														4,773,300	30,000,000								5,000,000				2,600,000			795,000	5,000,000																													4,500,000	30,000,000							20,000,000				57,000,000		57,000,000
Assets Sold under Agreements to Repurchase, Repurchase Liability																																																										5,200,664	33,038,966
Mandatory Prepayment Due																													3,000,000
Debt Instrument, Interest Rate, Stated Percentage																													1.50%																																																			5.37%	5.37%	5.37%	5.37%
Debt Instrument, Face Amount																																																																																				1,600,000	10,000,000
Amortization of deferred financing costs				0	66,919	0	215,623																																																																									7,747	49,041	7,747	49,041
Difference Between Repayment and Purchase Price Of Debt																																																																																		584,185	91,957
Interest Payable																																																																																6,073	38,448	6,073	38,448
Long-term Debt																														5,000,000
Debt issue cost				$ 7,747	$ 0	$ 7,747	$ 0																																																																											$ 130,000	800,000
Effective Interest Rate On Difference Between Repayment and Purchase Price Of Debt						4.13%

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Notes Payable (Tables)

9 Months Ended

Sep. 30, 2012

Payables and Accruals [Abstract]

Schedule Of Notes Payable To Bank [Table Text Block]

Notes payable represents bank acceptance drafts that are non-interest bearing and due within six months. The balance of the bank acceptance drafts is $1,396,648 and $2,641,254 as of December 31, 2011 and September 30, 2012, respectively.

Borrowing	Draw down date	Maturity date	Balance at Sep. 30, 2012	Pledge or guarantee
RMB 8.8 million – Industrial and Commercial Bank of China Limited, Shanghai Zhangjiang Branch	May. 30, 2012	Nov. 29, 2012	RMB 8,800,000 (USD 1,400,168)	Collateralized by a building in Shanghai owned by Jiangsu SOPO.
RMB 4.7 million – China CITIC Bank, Yangzhou Branch.	May. 23, 2012	Nov 23, 2012	RMB 4,700,000 (USD 747,817)	Guaranteed by Jiangsu SOPO, and guaranteed by Mr. Qinghuan Wu, the Company’s Chief Executive Officer.
RMB 3.1 million – China CITIC Bank, Yangzhou Branch.	Apr. 24, 2012	Oct. 24, 2012	RMB 3,100,178 (USD 493,269)	Guaranteed by Jiangsu SOPO, and guaranteed by Mr. Qinghuan Wu, the Company’s Chief Executive Officer.
Total notes payable			RMB 16,600,178 (USD 2,641,254)

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Accounts Receivable, Net (Details 2) (USD $)	Sep. 30, 2012	Dec. 31, 2013 Accounts Receivable [Member]	Sep. 30, 2013 Accounts Receivable [Member]	Jun. 30, 2013 Accounts Receivable [Member]	Dec. 31, 2012 Accounts Receivable [Member]
Related Party Transaction, Due from (to) Related Party	$ 14,158,001	$ 3,338,521	$ 3,182,200	$ 2,863,980	$ 4,773,300

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Other Non-operating Income (Expense), Net

9 Months Ended

Sep. 30, 2012

Other Income and Expenses [Abstract]

Other Income and Other Expense Disclosure [Text Block]

Note 15 – Other Non-operating Income (Expense), Net

Other non-operating expenses consist primarily of foreign exchange losses on purchasing transactions.

	For the three months ended September 30,
	2011			2012
	(Note 2(v))
Foreign exchange losses		578,086			152,652
Other non-operating income		(908,627	)		(80,035	)
Total other non-operating expenses (income), net		(330,541	)		72,617

	For the nine months ended September 30,
	2011			2012
	(Note 2(v))
Foreign exchange losses (gains)		972,277			(96,090	)
Other non-operating income		(898,691	)		(163,386	)
Total other non-operating expenses (income), net		73,586			(259,476	)

As further described in Note 2(v), foreign exchange losses were adjusted for 2011 quarterly periods pursuant to a restatement of the Company’s quarterly financial statements for the first, second, and third quarters of 2011.

The transaction gains for the three and nine months ended September 30, 2012 arose as a result of cash advances made for purchase transactions in which goods were acquired outside of mainland China and imported to the Company’s onshore PRC subsidiaries. Appreciation of the U.S. dollar against the RMB over the nine months ended September 30, 2012 led to an increase in the RMB value of purchased goods subsequently received relative to the asset already recorded for the refundable purchase advance, resulting in gains as the RMB value of assets physically received exceeded the RMB value of the refundable purchase advances originally recorded.

Other non-operating income mainly consisted of subsidy income received by CER Yangzhou from a research and development fund from the Yizheng industrial park. This subsidy income is not tied to any specific element of the business, and cannot be reclaimed by the research and development fund.

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Subsequent events

9 Months Ended

Sep. 30, 2012

Subsequent Events [Abstract]

Subsequent Events [Text Block]

Note 20 – Subsequent events

On October 15, 2012, CER Shanghai began to repay RMB 900,000 per month to Shanghai Pudong Zhanjiang Micro-credit Co., Ltd. under the loan contract of RMB 10 million described in Note 7. The loan carries an annual interest rate of 12% and the due date of the loan is February 20, 2013.

On October 18, 2012, CER (Yangzhou) entered into a guaranty contract with Zhenjiang Kailin and CGN Energy in connection with a third financing for Zhenjiang Kailin project (similar to the financing arrangement with CGN Energy in 2011). CER Shanghai and Shanghai Engineering signed two contracts to sell certain equipment integral to the Zhenjiang Kailin sulfuric acid waste heat power generation project to CGN Energy each at a price of RMB9.9 million (approximately $1.57 million), for a total amount RMB 19.8 million (approximately $3.14 million). As the financing party, CGN Energy resold the equipment to Zhenjiang Kailin via a structured payment arrangement covering a 30 month period at a price of RMB23.4 million ( approximately $3.7 million). CER Yangzhou entered into a guaranty contract with CGN Energy for the equipment sold, which was installed in the sulfuric acid waste heat power generation project. If there is any default by Zhenjiang Kailin, the first in guarantee order is Zhenjiang Kailin’s pledge for payment of its structured note with CGN Energy. The second in guarantee order is Jiangsu SOPO, a third party customer of CER and related party of Zhenjiang Kailin. Third in guarantee order is CER Yangzhou, which provided CGN Energy with an unconditional and irrevocable guarantee with joint responsibility to ensure that Zhenjiang Kailin will fulfill the duties and responsibilities to pay CGN Energy on time under the waste heat power generation project contract.

On October 22, 2012, CER entered into an extension to continuation and loan arrangement with Hold And Opt Investments Limited, effective as of September 29, 2012 (“Loan Date”). At the Loan Date, both principal and interest due under the loan agreement remained outstanding. The extended maturity date for the Loan Amount is November 30, 2012, with a grace period not to extend beyond December 15, 2012. CER shall make a mandatory prepayment of $3,000,000 by no later than November 10, 2012. CER repaid $2,000,000 on October 31, 2012 and the other $1,000,000 is expected to be repaid with the remaining principal in the next quarter. The outstanding principal and interest amount under this extension agreement shall bear interest at a rate of 1.5% per month, commencing on the Loan Date, and continuing until the principal is paid in full. 

On October 25, 2012, CER Yangzhou entered into a one-year short term loan contract to borrow RMB 5,000,000 (approximately $793,059) with China Construction Bank, Yizheng Branch. The loan carries an annual interest rate of 6.3%. The term of the loan commence from October 25, 2012 to October 24, 2013. This loan is guaranteed by CER Shanghai, and collateralized by a mechanical equipment book valued at RMB 20,171,625 owned by CER Yangzhou.

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Accounts Receivable, Net (Details) (USD $)	Sep. 30, 2012	Dec. 31, 2011
Current accounts receivable - third parties	$ 11,465,468	$ 11,639,138
Current accounts receivable - related party	11,445,785	9,088,157
Current accounts receivable	22,911,253	20,727,295
Subtract: Allowance for doubtful accounts	0	0
Current accounts receivable, net	$ 22,911,253	$ 20,727,295

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Organization and Basis of Presentation (Details Textual) (USD $)	1 Months Ended		9 Months Ended
	Apr. 30, 2008	Jan. 31, 2008	Sep. 30, 2012	Aug. 28, 2009	Dec. 02, 2008	Nov. 11, 2008	Jun. 30, 2008
Stock Issued During Period, Shares, Acquisitions		20,757,090
Business Acquisition, Equity Interest Issued or Issuable, Description		Pursuant to the Share Exchange Agreement, the Company agreed to acquire all of the issued and outstanding shares of Poise Profit's common stock in exchange for the issuance of 20,757,090 shares, or 81.5% of the Company's common stock on a post 1-for-2 reverse stock split basis, to the shareholders of Poise Profit
Equity Method Investment, Ownership Percentage					100.00%		100.00%
Capital				$ 20,000,000		$ 5,000,000
Stockholders' Equity, Reverse Stock Split	After the 1-for-2 reverse stock split conducted on April 16, 2008, the 7,874,241 shares of the Company''s Series A convertible preferred stock are convertible into 3,937,121 shares of common stock and the warrants are exercisable into 1,968,561 shares of the Company''''''''''''''''s common stock at an exercise price of $2.58 per share.	1-for-2	1-for-2
Subsidiary or Equity Method Investee, Deferred Income Tax Provision on Gain (Loss) Recognized, Amount			206,147
Working Capital Balance			31,300,000
Operating Cash Flows			$ 400,000

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CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (USD $)	Preferred Stock [Member]	Common Stock [Member]	Treasury Stock [Member]	Additional Paid-In Capital [Member]	Statutory Reserves [Member]	Retained Earnings [Member]	Accumulated Other Comprehensive Income (Loss) [Member]	Total
Balance at Dec. 31, 2010	$ 189	$ 30,906	$ 0	$ 8,313,385	$ 132,802	$ (4,713,541)	$ 410,646	$ 4,174,387
Balance (in shares) at Dec. 31, 2010	200,000	30,906,266
Common stock issued for consulting services	0	50	0	40,258	0	0	0	40,308
Common stock issued for consulting services (in shares)	0	50,385
Restricted common stock issued related to long-term loan	0	129	0	144,369	0	0	0	144,498
Restricted common stock issued related to long-term loan (in shares)	0	129,208
Stock based compensation	0	0	0	260,224	0	0	0	260,224
Net income	0	0	0	0	0	1,995,668	0	1,995,668
Appropriations to statutory reserves	0	0	0	0	376,794	(376,794)	0	0
Foreign currency translation adjustment	0	0	0	0	0	0	875,480	875,480
Balance at Dec. 31, 2011	189	31,085	0	8,758,236	509,596	(3,094,667)	1,286,126	7,490,565
Balance (in shares) at Dec. 31, 2011	200,000	31,085,859
Stock based compensation	0	0		21,200	0	0	0	21,200
Net income	0	0		0	0	2,628,125	0	2,628,125
Foreign currency translation adjustment	0	0		0	0	0	120,696	120,696
Repurchase of common stock			(5,024)					(5,024)
Repurchase of common stock (in shares)			(13,232)
Balance at Sep. 30, 2012	$ 189	$ 31,085	$ (5,024)	$ 8,779,436	$ 509,596	$ (466,542)	$ 1,406,822	$ 10,255,562
Balance (in shares) at Sep. 30, 2012	200,000	31,085,859	(13,232)

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Inventories, Net

9 Months Ended

Sep. 30, 2012

Inventory Disclosure [Abstract]

Inventory Disclosure [Text Block]

Note 4 – Inventories, Net

As of December 31, 2011 and September 30, 2012, inventories consist of the following:

	December 31,			September 30,
	2011			2012
Raw materials	$	1,601,998		$	2,395,338
Work in progress		12,978,418			7,049,818
Finished goods		217,659			218,207
Inventory cost	$	14,798,075		$	9,663,363
Less: inventory provision		(119,763	)		(120,065	)
Inventory, net	$	14,678,312		$	9,543,298

For the three months ended September 30, 2011 and 2012, no accrual for inventory provision was required. For the nine month periods ended September 30, 2011 and 2012, the Group accrued inventory provisions of $26,621 and $0, respectively, through charges to income.

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Intangible Assets (Details) (USD $)	Sep. 30, 2012	Dec. 31, 2011
Less: Accumulated amortization	$ (306,572)	$ (176,230)
Intangible assets, net	4,920,226	4,999,883
Use Rights [Member]
Finite-Lived Intangible Assets, Gross	5,035,878	5,023,217
Software [Member]
Finite-Lived Intangible Assets, Gross	$ 190,920	$ 152,896

XML

Retirement Benefits (Details Textual) (USD $)	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Description Of Defined Contribution Pension and Other Postretirement Plans			The Company contributes to a statutory government retirement plan approximately 22% of the base salary of each of its employees and has no further obligations for the actual pension payments or post-retirement benefits beyond the annual contributions.
Defined Contribution Plan, Employer Discretionary Contribution Amount	$ 140,734	$ 108,269	$ 417,509	$ 222,427

XML

Earnings / (Loss) per Share (Details Textual)	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Stock Options [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	635,000	575,000	635,000	575,000
Warrant [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	3,241,709	3,241,709	3,241,709	3,241,709

XML

Summary of Significant Accounting Policies (Policies)

9 Months Ended

Sep. 30, 2012

Accounting Policies [Abstract]

Consolidation, Policy [Policy Text Block]

(a) Principle of consolidation

The accompanying consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“US GAAP”). The consolidated financial statements include the financial statements of the Company, its wholly-owned subsidiaries Poise Profit, CER Hong Kong, Hi-tech, CER Shanghai, and CER Yangzhou; and its variable interest entity (“VIE”) Shanghai Engineering. All significant inter-company transactions and balances among the Company, its subsidiaries and VIE are eliminated upon consolidation.

In accordance with U.S. GAAP, variable interest entities are generally entities that lack sufficient equity to finance their activities without additional financial support from other parties or whose equity holders lack adequate decision making ability. Each variable interest entity with which the Company is affiliated must be evaluated to determine who the primary beneficiary of the risks and rewards of ownership of the variable interest entity. The primary beneficiary is required to consolidate the variable interest entity's financial information for financial reporting purposes.

Management has concluded that Shanghai Engineering is a variable interest entity and that CER Hong Kong is the primary beneficiary thereof. Pursuant to the contractual arrangements described elsewhere in this filing on Form 10-Q, the Company recovers substantially all of the profits of its VIE through service fees charged (particularly under a consulting and service agreement) and has the unilateral ability to do so through its wholly owned subsidiaries. Through such contractual arrangements, the Company (as applicable, through wholly-owned subsidiaries) has the power to direct the activities most significant to the economic performance of the VIE and absorbs all, or substantially all, of the profits or losses. Accordingly, the Company is the primary beneficiary of such arrangements. Under the requirements of the FASB’s accounting standard regarding VIEs, the Company consolidates the financial statements of Shanghai Engineering.

Under the contractual arrangements with Shanghai Engineering, the Company has the power to direct its activities, and can have assets transferred freely out of the entity without any restrictions. Therefore the Company considers that there is no asset of the consolidated VIE that can be used only to settle obligations of the VIE, except for registered capital and PRC statutory reserves of the VIE amounting to a total of $1.43 million as of September 30, 2012. As the consolidated VIE is incorporated as a limited liability company under the PRC Company Law, creditors of the VIE do not have recourse to the general credit of the Company for any of the liabilities of the consolidated VIE, which at September 30, 2012 consisted of receipts in advance of $6.6 million, payables to suppliers and agents of $10.1 million, and other accrued liabilities of $2.2 million, totaling $18.9 million. As of September 30, 2012, the VIE held a cash balance of $61,050. Currently there is no contractual arrangement that could require the Company to provide additional financial support to the consolidated VIE. As the Company is conducting certain business in the PRC mainly through the VIE, the Company may provide such support on a discretionary basis in the future, which could expose the Company to a loss.

Use of Estimates, Policy [Policy Text Block]

(b) Use of estimates

In preparing financial statements in conformity with US GAAP, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses during the reported periods. Significant estimates include useful lives of equipment, allowances for doubtful accounts, deferred tax assets and related valuation allowances, and the completion percentage of construction contracts.  Actual results could differ from those estimates.

Concentration Risk, Credit Risk, Policy [Policy Text Block]

(c) Concentrations of risk

The Company maintains cash balances at financial institutions within the U.S., Hong Kong, and PRC. Balances at financial institutions or state owned banks within the PRC are not covered by insurance. Balances at financial institutions within the United States are covered by the Federal Deposit Insurance Corporation for $250,000 per depositor per institution. Balances at financial institutions within Hong Kong are insignificant. The Company has not experienced any losses in such accounts and believes it is not exposed to any significant credit risks on its cash in bank accounts.

For the three months ended September 30, 2011 and 2012, the Company’s five top customers accounted for 87% and 73% of the Company's sales, respectively. For the nine months ended September 30, 2011 and 2012, the Company’s five top customers accounted for 73% and 57% of the Company's sales, respectively. Receivables from these five top customers were 56% and 69% of total accounts receivable at September 30, 2011 and 2012, respectively. Among those customers, the two largest customers were Ningbo Xinfu and Wuxi Green. Ningbo Xinfu accounted for 19% of revenue for the nine months ended September 30, 2012 and 0% of receivables as of September 30, 2012. Wuxi Green accounted for 12% of revenue for the nine months ended September 30, 2012 and 0% of receivables as of September 30, 2012.

For the three months ended September 30, 2011 and 2012, the five top suppliers provided approximately 23% and 26% of the Company's purchases of raw materials, respectively. For the nine months ended September 30, 2011 and 2012, the five top suppliers accounted for approximately 25% and 18% of the Company's purchases of raw materials, respectively. Payables to these five suppliers were approximately 13% and 15.1% of total accounts payable at September 30, 2011 and 2012, respectively.

The Company's operations are carried out in the PRC. Accordingly, the Company's business, financial condition and results of operations may be influenced by the political, economic and legal environments in the country, and by the general state of the country's economy. The Company's operations in the PRC are subject to specific considerations and significant risks not typically associated with companies carrying out operations in the United States. These include risks associated with, among others, the political, economic and legal environments in the PRC and foreign currency exchange. The Company's results may be adversely affected by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency conversion and remittance abroad, and rates and methods of taxation, among other things.

Foreign Currency Transactions and Translations Policy [Policy Text Block]

(d) Foreign currency translation

The reporting and functional currency of the parent Company and of CER Hong Kong is the U.S. dollar. Our subsidiaries Shanghai Engineering, CER Shanghai, and CER Yangzhou use the Chinese yuan Renminbi ("RMB") as their functional currency. Results of operations are translated at average exchange rates during the period, and assets and liabilities are translated at the end of period exchange rates. Cash flows are also translated at average exchange rates for the period, therefore, amounts reported on the statement of cash flows will not necessarily agree with changes in the corresponding balances on the balance sheet. Translation adjustments resulting from this process are included in accumulated other comprehensive income (loss) in stockholders' equity. For the three months ended September 30, 2011 and 2012, foreign currency translation gains amounted to $458,788 and to $344,248, respectively. For the nine months ended September 30, 2011 and 2012, foreign currency translation gains amounted to $766,370and to $120,696, respectively.

Transaction gains and losses that arise from exchange rate fluctuations from transactions denominated in a currency other than the functional currency are included in the consolidated statements of operations and other comprehensive income (loss) as incurred within “non-operating income (expenses), net.”

The PRC government imposes significant exchange restrictions on fund transfers out of the PRC that are not related to business operations. These restrictions have not had a material impact on the Company because it has not engaged in any significant transactions that are subject to the restrictions.

Accumulated other comprehensive income amounted to $1,286,126 and $1,406,822 as of December 31, 2011 and September 30, 2012, respectively. The balance sheet accounts with the exception of equity at December 31, 2011 and September 30, 2012 were translated at RMB6.30 to $1.00 and RMB6.28 to $1.00 respectively.

The average translation rates applied to income and cash flow statement amounts for the three months ended September 30, 2011 and 2012 were RMB6.40 to $1.00 and RMB6.35 to $1.00 respectively. For the nine months ended September 30, 2011 and 2012, the average translation rates were RMB6.49 to $1.00 and RMB6.33 to $1.00, respectively.

Cash and Cash Equivalents, Restricted Cash and Cash Equivalents, Policy [Policy Text Block]

(e) Cash and restricted cash

Cash includes cash on hand and demand deposits with banks, which are unrestricted as to withdrawal and use, and which have original maturities less than three months.

Restricted cash represents a cash portion of the guaranty for the bids on contracts and is deposited in a separate bank account subject to withdrawal restrictions controlled by the customer to secure the Company’s performance of the project in process. The deposit cannot be drawn or transferred by the Company until the restriction period has expired. The Company also classified certain cash as restricted that is not available for immediate use due to its collateralization on certain short term borrowings and notes payable, etc.

Notes Receivable Policy [Text Block]

(f) Notes receivable

Notes receivable represent trade accounts receivable due from various customers where the customers’ banks have guaranteed the payment of the receivables. The notes are non-interest bearing and normally paid within three to six months. The Company has the ability to submit a request for payment to the customer’s bank earlier than the scheduled payment date, but will incur an interest charge and a processing fee.

Trade and Other Accounts Receivable, Policy [Policy Text Block]

(g) Receivables and allowances for doubtful accounts

Receivables include trade accounts due from customers and revenues earned in excess of amounts billed on EPC contracts (unbilled receivables). Pursuant to ASC Topic 850, such amounts attributable to related parties are separately presented in the balance sheet. Management regularly reviews the aging of receivables and changes in payment trends, and records a reserve when collection of amounts due is at risk.  

Allowance for doubtful accounts, December 31, 2010	$	625,014
Additions charged to income		1,047,926
Reversals credited to income		(37,824	)
Translation adjustment		56,358
Allowance for doubtful accounts, December 31, 2011	$	1,691,474
Additions charged to income		106,907
Reversals credited to income		-
Translation adjustment		5,042
Allowance for doubtful accounts, September 30, 2012	$	1,803,423

Accounts receivable which are expected to be collected after one year are reclassified as long-term accounts receivable.  The provision for accounts receivable balances described above is further described in Note 3.

Inventory, Policy [Policy Text Block]

(h) Inventories

Inventories are comprised of raw materials, work in progress and finished goods and are stated at the lower of cost or market value. Costs of work in progress include direct labor, direct materials, and production overhead before the goods are ready for sale. Management reviews inventories for obsolescence or cost in excess of market value periodically. The obsolescence, if any, is recorded as a reserve against the inventory. The cost in excess of market value is written off and recorded as cost of revenues.

Provision for inventory, December 31, 2010	$	93,195
Additions charged to income		26,763
Realized		(5,471	)
Translation adjustment		5,276
Provision for inventory, December 31, 2011	$	119,763
Additions charged to income		-
Realized		-
Translation adjustment		302
Provision for inventory, September 30, 2012		120,065

Advances On Purchases Policy [Policy Text Block]

(i) Advances on purchases

Advances on purchases are money advanced to outside vendors for inventory purchases and property, plant and equipment purchases. This amount is refundable and bears no interest.

Property, Plant and Equipment, Policy [Policy Text Block]

(j) Property, plant and equipment, net

Property, plant and equipment are stated at cost. Depreciation is calculated principally by use of the straight-line method over the estimated useful lives of the related assets. Expenditures for maintenance and repairs, which do not improve or extend the expected useful lives of the assets, are charged to operations as incurred, while renewals and betterments are capitalized.

Management established a 5% residual value for property, plant and equipment. The estimated useful lives of the property, plant and equipment are as follows:

Plant and buildings	20-38 years
Transportation equipment	3-10 years
Machinery equipment	5-10 years
Office equipment	3-5 years

The gain or loss on disposal of property, plant and equipment is the difference between the net sales proceeds and the carrying amount of the relevant assets’, gains or losses, if any, and are recognized in the consolidated statement of income and other comprehensive income. There were no disposals of assets during the three and nine months ended September 30, 2012. During the three and nine months ended September 30, 2011, the Company disposed of machinery with a carrying value of $37,949 and two cars with carrying value of $39,646 and recognized loss for disposal of $52,732 from the transactions.

Impairment or Disposal of Long-Lived Assets, Policy [Policy Text Block]

(k) Impairment of assets

The Company assesses the carrying value of long-lived assets each reporting period, more often when factors indicating impairment are present, and reduces the carrying value of such assets by the amount of the impairment. The Company determines the existence of such impairment by measuring the expected future cash flows (undiscounted and without interest charges) and comparing such amount to the net asset carrying value. An impairment loss, if it exists, is measured as the amount by which the carrying amount of the asset exceeds the fair value of the asset. Fair value generally means based on either quoted market price, if available, or discounted cash flow analysis. There were no impairments of long lived assets recognized for the three and nine months ended September 30, 2011 and 2012.

Advances From Customers [Policy Text Block]

(l) Advances from customers

Advances from customers represent amounts advanced by customers on product or service orders. The product (service) is shipped (rendered) within one year after receipt of the advance payment, and the related sales are recognized in accordance with the Company’s revenue recognition policy.

Income Tax, Policy [Policy Text Block]

(m) Income taxes

Income taxes are accounted for under the asset and liability method. Deferred income taxes are recognized for temporary differences between the tax bases of assets and liabilities and their reported amounts in the financial statements, net operating loss carry forwards and credits, by applying enacted statutory tax rates in the year in which those temporary differences are expected to be recovered or settled. Deferred tax assets are reduced by a valuation allowance when it is more likely than not that some portion or all of the deferred tax assets will not be realized. Current income taxes are provided for in accordance with the laws of the relevant taxing authorities.

In assessing uncertain tax positions, the Company applies a more likely than not threshold and a two-step approach for the tax position measurement and financial statement recognition. For the two-step approach, the first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained, including resolution of related appeals or litigation processes, if any. The second step is to measure the tax benefit as the largest amount that is greater than 50% likely to be realized upon settlement. As of September 30, 2012, the Company does not have any uncertain tax positions required to be recognized and measured under the accounting standard for income taxes.

Value Added Tax Policy Text Block Policy [Policy Text Block]

(n) Value added tax

Sales revenue represents invoiced values, net of a value-added tax ("VAT"). All of the Company's products that are sold in the PRC are subject to a Chinese value-added tax at a rate of 17% of the gross sales price. This VAT may be offset by VAT paid by the Company on raw materials and other materials. The Company records VAT payable and VAT receivable, net of payments, in the financial statements. The VAT tax return is filed offsetting the payables against the receivables.

Operating Leases Policy [Policy Text Block]

(o) Operating leases

Leases where substantially all the rewards and risks of ownership of assets remain with the leasing company are accounted for as operating leases. Payments made under operating leases are charged to the statement of operations and comprehensive (loss) income on a straight line basis over the lease periods.

Share-based Compensation, Option and Incentive Plans Policy [Policy Text Block]

(p) Stock based compensation

In accordance with ASC 718, Compensation-Stock Compensation, the Company measures the cost of employee services received in exchange for stock based compensation at the grant date fair values of the awards.

The Company recognizes stock based compensation costs, net of a forfeiture rate, on a straight-line basis over the requisite service period for each award. ASC 718 requires forfeitures to be estimated at the time of grant and revised in subsequent periods if actual forfeitures differ from those estimates.  There were no stock options granted in the three and nine months ended September 30, 2011 and 2012.

Cost of goods acquired or services received from non-employees is measured based on the fair value of the awards issued on the measurement date as defined in ASC 505, “Equity.” Awards granted to non-employees are remeasured at each reporting date using the fair value as at each period end. Changes in fair values between the interim reporting dates are attributed consistent with the method used in recognizing the original stock based compensation costs.

Shipping and Handling Cost, Policy [Policy Text Block]

(q) Shipping and handling costs

Shipping and handling costs are included in selling, general and administrative expenses which totaled $301,735 and $138,133 for the three month periods ended September 30, 2011 and 2012, respectively, and $410,108 and $285,422 for the nine month periods ended September 30, 2011 and 2012, respectively.

Revenue Recognition, Policy [Policy Text Block]

(r) Revenue recognition

The Company derives revenues principally from:

(a) Provision of Engineering, Procurement and Construction ("EPC") services, which are essentially turnkey contracts where the Company provides all services in the whole construction process from design, development, engineering, manufacturing, and procurement to installation;

(b) Sales of energy recovery systems; and

(c) Provision of design services.

In accordance with the accounting standard regarding performance of construction-type and certain production-type contracts, and long-term construction-type contracts, the Company adopted the percentage of completion method to recognize revenues and cost of sales for EPC contracts. EPC contracts are long-term, complex contracts involving multiple elements, such as design, manufacturing and installation, which all form one integral EPC project. The energy recovery system involved in an EPC project is highly customized to the specific customer's facilities and essentially not transferable to any other facilities without significant modification and cost. It would be difficult, if not impossible, to beneficially use a single element of a specific EPC project on a standalone basis other than in connection with the facilities for which it was intended. EPC contracts are by nature long-term construction-type contracts, usually lasting more than one accounting period, and the Company is able to reasonably estimate the progress toward completion, including contract revenues and contract costs. EPC contacts specify the customers' rights to the goods, the consideration to be paid and received, and the terms of payment. Specifically, the Company has the right to require a customer to make progress payments upon completion of determined stages of the project which serve as evidence of the customer's approval and acceptance of the work completed to date as complying with the terms of the particular EPC contract.

Sales of the Company's energy recovery systems and related products are essentially product sales. The products consist mainly of waste heat boilers and other related equipment manufactured according to specific customers' specifications. Once manufactured, the Company ships the products to its customers in their entirety in one batch. The Company’s service arrangement also includes a limited warranty to its customers pursuant to which the customers retain between 5% and 10% of the particular contract price as retainage during the limited warranty period (usually 12-18 months). The Company generally recognizes revenues including retainage from product sales when (i) persuasive evidence of an arrangement exists, which is generally represented by a contract between the Company and the customer; (ii) products are shipped; (iii) title and risks of ownership have passed to the customer, which generally occurs at the time of delivery; (iv) the customer accepts the products upon a quality inspection performed by them; (v) the purchase price is agreed to between the Company and the customer; and (vi) collectability is reasonably assured. Net revenues represent the invoiced value of products, less returns and discounts, and are net of value-added tax.

In providing design services, the Company designs energy recovery systems and other related systems based on a customer's requirements and the deliverable consists of engineering drawings. The customer may elect to engage the Company to manufacture the designed system or choose to present the Company's drawings to other manufacturers for manufacturing and installation. The Company recognizes revenues from design services when the services are provided, the design drawings are delivered, invoices are issued and collectability is reasonably assured. The Company generally delivers the drawings in one batch.

Fair Value of Financial Instruments, Policy [Policy Text Block]

(s) Fair value of financial instruments

The accounting standard regarding fair value measurements defines financial instruments and requires fair value disclosures for those financial instruments. The fair value standard also establishes a three-level valuation hierarchy for disclosures of fair value measurement and enhances disclosure requirements for fair value measurements. The carrying amounts reported in the accompanying consolidated balance sheets for current assets and current liabilities such as cash, restricted cash, accounts and notes receivable, long term accounts receivable, short term loans, accounts payable, and other payables qualify as financial instruments. Management concluded the carrying values of these financial instruments are reasonable approximations of their respective fair values because of the short period of time between the origination of such instruments and their expected realization and the current market rates of interest. The three levels of the valuation hierarchy are defined as follows:

¨	Level 1	Inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets. At December 31, 2011 and September 30, 2012, the Company did not have any fair value assets or liabilities classified as Level 1.
¨	Level 2	Inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the assets or liability, either directly or indirectly, for substantially the full term of the financial instruments.
¨	Level 3	Inputs to the valuation methodology are unobservable and significant to the fair value. Inputs reflected management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date. Consideration is given to the risk inherent in the valuation technique and the risk inherent in the inputs to the model.

The measurement basis for current assets and current liabilities such as cash, restricted cash, accounts and notes receivable, long term accounts receivable, short term loans, accounts payable, and other payables is carrying value, which approximates fair value. All such current assets and liabilities with the exception of cash and restricted cash (Level 1) and short term loans (Level 2) would be classified as Level 3 measurements due to the presence of Company-specific unobservable inputs. The following table presents information about the company’s fair value financial liabilities classified as Level 2 and Level 3 as of December 31, 2011 and September 30, 2012.

	Balance as of September 30, 2012
	Fair Value Measurements
	Using Fair Value Hierarchy
	Level 1		Level 2		Level 3
Derivative liability related to loan (Note 12)		-		-	$	-
Derivative liability related to warrant (Note 12)		-		-	$	8,188
Guaranty contract liability (Note 16)		-	$	154,273		-

	Balance as of December 31, 2011
	Fair Value Measurements
	Using Fair Value Hierarchy
	Level 1		Level 2		Level 3
Derivative liability related to loan (Note 12)		-		-	$	21,274
Derivative liability related to warrant (Note 12)		-		-	$	22,806
Guaranty contract liability (Note 16)		-	$	89,068		-

A summary of changes in the Level 2-classified guaranty contract liability related to Zhejiang Kailin project (Note 16) for the year ended December 31, 2011 and for the nine months ended September 30, 2012 is as follows:

	Guaranty contract liability
Balance at December 31, 2010	$	-
Guaranty contract liability		90,745
Change in fair value of guaranty contract liability		(1,677	)
Balance at December 31, 2011	$	89,068
Guaranty contract liability		119,905
Change in fair value of guaranty contract liability		(54,700	)
Balance at September 30, 2012	$	154,273

For the three and nine months ended September 30, 2012, the Company recorded change in fair value of guaranty contract liability of $26,635 and $54,700, respectively.

A summary of changes in the Level 3-classified derivative liabilities related to stock purchase warrants and a loan for the year ended December 31, 2011 and for the nine months ended September 30, 2012 is as follows:

	Derivative liability for warrant			Derivative liability for loan
Balance at December 31, 2010	$	1,332,760			423,307
Warrant cancellation (Note 12)		(15,547	)		-
Change in fair value of derivative liability for warrant		(1,294,407	)		-
Change in fair value of derivative liability for loan		-			(402,033	)
Balance at December 31, 2011	$	22,806			21,274
Change in fair value of derivative liability for warrant		(14,618	)		-
Change in fair value of derivative liability for loan		-			(21,274	)
Balance at September 30, 2012	$	8,188			-

For the three and nine months ended September 30, 2012, the Company recorded $4,651 and $35,892 fair value change of derivative liability respectively.

Segment Reporting, Policy [Policy Text Block]

(t) Segment reporting

The Group reports its segments in accordance with ASC 280. The Group primarily operates in China and measures its business as a single operating segment. All of the group’s long term assets are located in China.

Subsidy Income Policy [Policy Text Block]

(u) Subsidy income

The Company, in connection with its occupancy and use of certain industrial park land, receives from time to time certain subsidies wholly at the discretion of the management authority of a third party research and development fund related to the industrial park which are not tied to future tenancy or performance by the Company; receipt of such subsidy income is not contingent upon any further actions or performance by the Company and the amounts do not have to be refunded under any circumstances. These amounts are not tied to land use rights or any other transactions. Upon receipt, these incentives are recognized within other income (loss) in the consolidated statements of operations and other comprehensive (loss) income.

Reclassification, Policy [Policy Text Block]

(v) Restatements and reclassifications

The Company, effective with the annual 2011 financial statements included in Form 10-K, reclassified its presentation of revenue and costs of revenue in the consolidated statements of (loss) income and other comprehensive (loss) income to depict EPC revenue attributable to third party customers, EPC revenue attributable to related parties, and product revenue given the growth in the number and per-contract revenue associated with EPC contracts and 2011 amounts have been reclassified to conform to the current presentation.

On March 30, 2012 the Company filed, on Form 8-K, a report announcing the restatement of its unaudited quarterly financial statements for the first three quarters of 2011. The root cause of the necessary adjustments to the quarterly interim unaudited financial information for the first three quarters of 2011 was identified during the preparation of the Company’s annual 2011 financial statements as reported in Form 10-K filed March 30, 2012. The Company determined that transaction losses resulting from variations in foreign currency exchange rates on certain purchase transactions denominated in U.S. dollars involving the Company’s onshore PRC subsidiaries (which use the yuan renminbi, or RMB as their functional currency) were incorrectly classified as translation losses and were incorrectly included in other comprehensive income (loss). These losses should have been reported in the statement of operations within other income (expense). Such transaction losses only impacted the first three quarters of 2011 as the underlying business activity involving purchasing of raw materials related to the Group’s then-under-construction Yangzhou production facility started in 2011 and was substantially completed by the end of 2011. The transaction losses arose as a result of cash advances made for purchase transactions in which goods were acquired outside of mainland China and imported to the Company’s onshore PRC subsidiaries. Continued weakening of the U.S. dollar against the RMB led to a decrease in the RMB value of purchased goods subsequently received relative to the asset already recorded for the refundable purchase advance made in cash.

Accordingly, the Company undertook further evaluation to identify and quantify the necessary adjustments to restate the previously issued unaudited financial information for the first three quarters of 2011. Adjustments were limited to the change in classification of foreign exchange transaction losses from other comprehensive income to non-operating income (loss), net in the consolidated unaudited statement of operations. Such adjustments were reported in amended Forms 10-Q for the first three quarters of 2011 filed with the SEC on May 15, 2012. The comparative amounts for 2011 included in this Form 10-Q reflect the restated financial information.

New Accounting Pronouncements, Policy [Policy Text Block]

(w) Recent accounting pronouncements

In December 2011, the FASB issued ASU 2011-11, Balance Sheet (Topic 210): Disclosures about Offsetting Assets and Liabilities (ASU 2011-11). This newly issued accounting standard requires an entity to disclose both gross and net information about instruments and transactions eligible for offset in the statements of financial position as well as instruments and transactions executed under a master netting or similar arrangement and was issued to enable users of financial statements to understand the effects or potential effects of those arrangements on their financial position. This ASU is required to be applied retrospectively and is effective for fiscal years, and interim periods within those years, beginning on or after January 1, 2013. As this accounting standard only requires enhanced disclosure, the adoption of this standard is not expected to have an impact on the Company’s financial position.

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Stock-Based Compensation (Details) (USD $)	12 Months Ended
	Dec. 31, 2011
Exercise Price	$ 0.73
Expected Volatility, Minimum	72.00%
Expected Volatility, Maximum	76.00%
Risk Free Interest Rate, Minimum	1.16%
Risk Free Interest Rate, Maximum	1.82%
Maximum [Member]
Fair value per share	$ 0.47
Expected Term(Years)	5 years 6 months 22 days
Minimum [Member]
Fair value per share	$ 0.39
Expected Term(Years)	4 years

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Interest Expense, Net (Tables)

9 Months Ended

Sep. 30, 2012

Interest Expenses [Abstract]

Schedule Of Interest Expense [Table Text Block]

For a detailed discussion of borrowings and balances underlying interest expense, see Note 7. Interest income recorded for Zhenjiang Kailin’s and Jiangsu SOPO long term accounts receivable accretion, which is the cause of increases in interest income for the comparative periods, is further described in Note 14.

	Three months ended September 30,
	2011			2012
Interest on current portion of long term loan	$	161,651			179,06
Interest on long-term loans		12,825			-
Amortization of deferred financing costs		66,919			-
Accretion to face value on loans		40,535			53,401
Interest on short-term loans and letters of credit		98,370			278,855
Debt issue cost amortization		-			7,747
Bank note discount interest		566			30,141
Expense of exchange rate differential payment in relation to formerly convertible debt		-			20,107
Interest capitalized		(6,829	)		(12,304	)
Interest income		(3,637	)		(500,312	)
Total	$	370,400			56,703

	Nine months ended September 30,
	2011			2012
Interest on current portion of long term loan	$	484,745			520,817
Interest on long-term loans		200,476			-
Amortization of deferred financing costs		215,623			-
Accretion to face value on loans		198,584			149,055
Expense of common stock issued in relation to long term loan		144,498			-
Common stock issued in relation to consulting services		40,308			-
Interest on short-term loans and letters of credit		224,492			797,240
Debt issue cost amortization		-			7,747
Bank note discount interest		84,744			87,055
Warrant cancellation		(15,547	)		-
Expense of exchange rate differential payment in relation to formerly convertible debt		-			20,107
Interest capitalized		(6,829	)		(55,382	)
Interest income		(225,430	)		(940,116	)
Total	$	1,345,664			586,523

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Interest Expense, Net

9 Months Ended

Sep. 30, 2012

Interest Expenses [Abstract]

Interest Income and Interest Expense Disclosure [Text Block]

Note 14– Interest Expense, Net

For a detailed discussion of borrowings and balances underlying interest expense, see Note 7. Interest income recorded for Zhenjiang Kailin’s and Jiangsu SOPO long term accounts receivable accretion, which is the cause of increases in interest income for the comparative periods, is further described in Note 14.

	Three months ended September 30,
	2011			2012
Interest on current portion of long term loan	$	161,651			179,06
Interest on long-term loans		12,825			-
Amortization of deferred financing costs		66,919			-
Accretion to face value on loans		40,535			53,401
Interest on short-term loans and letters of credit		98,370			278,855
Debt issue cost amortization		-			7,747
Bank note discount interest		566			30,141
Expense of exchange rate differential payment in relation to formerly convertible debt		-			20,107
Interest capitalized		(6,829	)		(12,304	)
Interest income		(3,637	)		(500,312	)
Total	$	370,400			56,703

	Nine months ended September 30,
	2011			2012
Interest on current portion of long term loan	$	484,745			520,817
Interest on long-term loans		200,476			-
Amortization of deferred financing costs		215,623			-
Accretion to face value on loans		198,584			149,055
Expense of common stock issued in relation to long term loan		144,498			-
Common stock issued in relation to consulting services		40,308			-
Interest on short-term loans and letters of credit		224,492			797,240
Debt issue cost amortization		-			7,747
Bank note discount interest		84,744			87,055
Warrant cancellation		(15,547	)		-
Expense of exchange rate differential payment in relation to formerly convertible debt		-			20,107
Interest capitalized		(6,829	)		(55,382	)
Interest income		(225,430	)		(940,116	)
Total	$	1,345,664			586,523