Unassociated Document

10-Q 1 v184881_10q.htm Unassociated Document

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 March 31, 2010

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

For the transition period from _______ to _________

Commission File No. 000-12561

CHINA SOLAR & CLEAN ENERGY SOLUTIONS, INC.

(Exact name of registrant as specified in its charter)

Nevada		95-3819300


(State or other jurisdiction of incorporation)		I.R.S. Employer Identification Number

Building 3

No. 28 Feng Tai North Road,

Beijing China 1000071

(Address of principal executive offices)

(011) 86-10-63860500

(Registrant's telephone number, including area code)

Deli Solar (USA), Inc.

(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. x Yes ¨ No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). oYes o No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “small reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	o		Accelerated filer	o

Non-accelerated filer	o	(Do not check if a smaller reporting company)	Smaller reporting company	x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

o Yes x No

The number of shares of the issuer’s common stock, $.001 per share, outstanding as at May 12, 2010 was 15,233,652.

TABLE OF CONTENTS

INDEX

		Page
PART 1 - FINANCIAL INFORMATION

	Item 1. Financial Statements

	Condensed Consolidated Balance Sheets as at March 31, 2010 (unaudited) and December 31, 2009	3
	Condensed Consolidated Statements of Operations for the Three Months March 31, 2010 and 2009 (unaudited)	4
	Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2010 and 2009 (unaudited)	5
	Condensed Consolidated Statements of Stockholders' Equity and Comprehensive Income for the Three Months Ended March 31, 2010 (unaudited) and 2009	6
	Notes to Condensed Consolidated Financial Statements (unaudited)	7

	Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations	15

	Item 3. Quantitative and Qualitative Disclosures About Market Risk	18

	Item 4T. Controls and Procedures	18

PART 2 - OTHER INFORMATION

	Item 1. Legal Proceedings	19
	Item 1A. Risk Factors	19
	Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	19
	Item 3. Defaults Upon Senior Securities	19
	Item 4. Submission of Matters to a Vote of Security Holders	19
	Item 5. Other Information	19
	Item 6. Exhibits	19

	Signatures	20

Item 1. Financial Statements

CHINA SOLAR & CLEAN ENERGY SOLUTIONS, INC.

CONSOLIDATED BALANCE SHEETS

	As of March 31,2010		As of December 31,2009

ASSETS
Current assets:
Cash and cash equivalents	$	3,438,258	$	4,980,717
Accounts receivable, net		6,448,108		8,067,944
Inventories		6,416,927		4,547,170
Other receivables and prepayments		3,151,989		1,733,695
Deferred tax assets		588,016		588,016
Total current assets		20,043,298		19,917,542

Property and equipment, net		13,709,943		13,775,554
Goodwill		1,967,545		1,967,153
Land use rights		1,583,578		1,592,140
Investment in Trueframe International Limited		3,812,972		3,812,806
TOTAL ASSETS	$	41,117,336	$	41,065,195

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable, trade	$	1,979,026	$	1,601,002
Taxes payable		998,937		1,278,974
Other payables and accrued liabilities		10,211,109		9,977,178
Loan payable-employee		1,304,799		1,266,747
Total current liabilities		14,493,871		14,123,901

Long-term liabilities:
Deferred tax liabilities		-		-
Long-term liabilities		156,410		156,410
Total liabilities		14,650,281		14,280,311

Stockholders’ equity
Common stock, $0.001 par value, 66,666,667 shares authorized, 15,233,652 and 15,233,652 shares issued and outstanding, respectively		15,233		15,233
Additional paid-in capital		22,611,909		22,611,909
Accumulated other comprehensive income		697,848		693,016
Retained earnings		2,772,634		3,100,294
Profit earning reserves		-		-
Total stockholders’ equity-China Solar		26,097,624		26,420,452
Non-controlling interest in subsidiary		369,431		364,432
Total Stockholder’s Equity		26,467,055		26,784,884
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	41,117,336	$	41,065,195

See accompanying notes to condensed consolidated financial statements.

CHINA SOLAR & CLEAN ENERGY SOLUTIONS, INC.

CONSOLIDATED STATEMENTS OF INCOME

	Three months ended March 31,
	2010			2009
				（restated）
Revenue, net	$	3,896,414		$	3,653,794

Cost of revenue		2,735,004			2,767,980

Gross profit		1,161,410			885,814

Operating expenses:
Depreciation and amortization		122,513			88,621
Selling and distribution		627,069			559,485
General and administrative		596,661			899,626

Total operating expenses		1,346,243			1,547,732

Income(Loss) from operations		(184,833	)		(661,918	)
Other income (expenses):
Other income(expenses)		(104	)		27,847
Interest income		628			5
Interest expense		(72,175	)		(47,159	)
Total other income (expenses)		(71,651	)		(19,307	)

Income(Loss) From Continuing Operations Before Income Taxes		(256,484	)		(681,225	)

Income tax expense		66,177			25,603

Income(Loss) From Continuing Operations		(322,661	)		(706,828	)

Income(Loss) From Discontinued Operation (net of tax)		-			(512,390	)

Net Income(Loss)		(322,661	)		(1,219,218	)
Less: Net Income Attributable To Non-controlling Interest		4,999			10,006
Net Income(Loss) Attributable To China Solar Shareholders	$	(327,660	)	$	(1,229,224	)

Basic Earning Per Share
Continuing operations	$	(0.02	)	$	(0.04	)
Discontinued operation		-			(0.03	)
	$	(0.02	)	$	(0.07	)
Weighted average shares outstanding – basic and diluted		15,815,125			16,125,984

See accompanying notes to condensed consolidated financial statements.

CHINA SOLAR & CLEAN ENERGY SOLUTIONS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Currency expressed in United States Dollars (“US$”))

(Unaudited)

	Three months ended March 31,
	2010			2009
Cash flows from operating activities:
Net cash provided by operating activities	$	(1,433,190	)	$	(366,734	)
Net effect of discontinued operation					(462,855	)
		(1,433,190	)		(829,589	)
Cash flows from investing activities:
Purchase of property, plant and equipment		(110,255	)		(185,122	)
Net effect of discontinued operation					(95,086	)
Net cash provided by investing activities		(110,255	)		(280,208	)

Effect of exchange rate on cash		986			66,643

NET CHANGE IN CASH AND CASH EQUIVALENTS		(1,542,459	)		(1,043,154	)

CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD		4,980,717			2,404,996

CASH AND CASH EQUIVALENTS, END OF PERIOD	$	3,438,258		$	1,361,842

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for income taxes	$	95,658		$	63,014
Cash paid for interest expense	$	72,535		$	47,159

See accompanying notes to condensed consolidated financial statements

CHINA SOLAR & CLEAN ENERGY SOLUTIONS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY AND COMPREHENSIVE INCOME

(Currency expressed in United States Dollars (“US$”), except for number of shares)

	Preferred stock						Common stock						Additional			Accumulated other									Non-controlling			Total
	No. of shares			Par value			No. of shares			Par value			paid-in Capital			comprehensive income			Retained Earnings			Earnings reserve			interest in subsidiary			stockholders’ equity
Balance as of January 1, 2009		373,566			373			13,799,450			13,799			23,073,258			1,615,082			2,025,949			963,106			194,542			27,886,109
Disposal subsidiary														(460,288	)								(963,106	)					(1,423,394	)
Preferred share converted		(373,566	)		(373	)		373,566			373																		-
Net income																				1,074,345						131,636			1,205,981
Foreign currency translation adjustment																	(922,066	)											(922,066	)
Appropriation of dividents																										(12,986	)		(12,986	)
Appropriation of statutory surplus reserves																													-
Capital contribution from non-controlling shareholder																										51,240			51,240
Cancellaction common stock								(939,364	)		(939	)		939															-
Shares released and to be released from escrow								2,000,000			2,000			(2,000	)														-
Balance as of December 31, 2009		-		$	-			15,233,652		$	15,233		$	22,611,909		$	693,016		$	3,100,294		$	-		$	364,432		$	26,784,884
Net income																				(327,660	)					4,999			(322,661	)
Foreign currency translation adjustment																	4,832												4,832
Balance as of March 31, 2010		-		$	-			15,233,652		$	15,233		$	22,611,909		$	697,848		$	2,772,634		$	-		$	369,431		$	26,467,055

See accompanying notes to condensed consolidated financial statements

CHINA SOLAR & CLEAN ENERGY SOLUTIONS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Currency expressed in United States Dollars (“US$”))

(Unaudited)

NOTE 1 - BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and the interim reporting requirements of Regulation S-X. They do not include all of the information and footnotes for complete consolidated financial statements as required by GAAP. In management’s opinion, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation have been included. These financial statements should be read in conjunction with the audited financial statements and notes thereto contained in the Company’s annual report on Form 10-K for the year ended December 31, 2009.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Estimates that are particularly susceptible to change include assumptions used in determining the fair value of securities owned and non-readily marketable securities.

The results of operations for the three months ended March 31, 2010 are not necessarily indicative of the results to be expected for the entire fiscal year ended December 31, 2010 or for any future period.

NOTE 2 - ORGANIZATION AND BUSINESS

China Solar & Clean Energy Solutions, Inc. (“China Solar”), formerly known as Deli Solar (USA) Inc. was incorporated in the State of Nevada on March 21, 1983 as Meditech Pharmaceuticals, Inc. (“Meditech”). In late 2004, the Board of Directors of Meditech contemplated a strategic reorganization with Deli Solar Holding Ltd., a corporation organized in the British Virgin Islands (“Deli Solar (BVI)”). The acquisition of Deli Solar (BVI) was accounted for as a recapitalization of Deli Solar (BVI).

On August 1, 2004, Deli Solar (BVI) purchased Bazhou Deli Solar Energy Heating Co., Ltd. (“Deli Solar (Bazhou)”), a corporation duly organized under the laws of the People’s Republic of China (“PRC”). As a result of this transaction, Deli Solar (Bazhou) became a wholly-foreign owned enterprise (“WFOE”) under PRC law on March 30, 2005. This acquisition was accounted for as a transfer of entities under common control.

Deli Solar (Bazhou) was incorporated on August 19, 1997 under the laws of the PRC. In the PRC, Ltd, or Limited, is equivalent to Inc, or Incorporated, in the United States (“US”).

On November 21, 2005 Deli Solar (Bazhou) acquired Ailiyang Solar Energy Technology Co., Ltd. (“Ailiyang”), an entity formerly controlled by the owners of Deli Solar (Bazhou). The transaction was accounted for as a transfer of entities under common control.

Beijing Deli Solar Technology Development Co., Ltd. (“Deli Solar (Beijing)”) was founded in 2006 and is principally engaged in solar power heater integrated construction projects in major cities in the PRC.

Deli Solar (Beijing) ownes 91.82% of Tianjin Huaneng Energy Equipment Company (“Tianjin Huaneng”), which manufactures energy saving boilers and environmental protection equipment for industrial customers.

On April 1, 2008, Beijing Deli Solar Technology Development Co., Ltd (“Deli Solar (Beijing)”) acquired 100% of Shenzhen Pengsangpu Solar Industrial Products Corporation (“SZPSP”), which is engaged in the re-sale of energy-saving related heating products such as heat pipes, heat exchangers, pressure water boilers, solar energy heaters and radiators. On July 6, 2009, Deli Solar (Beijing) entered into a termination agreement (the "Termination Agreement") with the three shareholders of SZPSP. The Termination Agreement terminates the equity purchase and complementary agreements. We accounted for SZPSP as a wholly-owned subsidiary from March 31, 2008 until March 31, 2009.

China Solar, Deli Solar (BVI), Deli Solar (Bazhou), Ailiyang, Deli Solar (Beijing) and Tianjin Huaneng are hereinafter referred to as the “Company”.

NOTE 3 - RECENTLY ISSUED ACCOUNTING STANDARDS

In January 2010, the FASB issued Accounting Standards Update (“ASU”) 2010-06, “improving Disclosures about Fair Value Measurements,” which clarifies certain existing requirements in ASC 820 “Fair Value Measurements and Disclosures,” and required disclosures related to significant transfers between each level and additional information about Level 3 activity. FASB ASU 2010-06 begins phasing in the first fiscal period beginning after December 15, 2009. The Company is currently assessing the impact on its consolidated results of operations and financial conditions.

In June 2009, the FASB issued additional guidance under ASC 860 “Accounting for Transfer of financial Assets and Extinguishment of Liabilities” which improves the relevance, representational faithfulness, and comparability of the information that a reporting entity provides in its financial statements about a transfer of financial asset; the effects of a transfer on its financial position, financial performance, and cash flows; and a transferor’s continuing involvement, if any, in transferred financial assets. This additional guidance requires that a transferor recognize and initially measure at fair value all assets obtained (including a transferor's beneficial interest) and liabilities incurred as a result of a transfer of financial assets accounted for as a sale. Enhanced disclosures are required to provide financial statement users with greater transparency about transfers of financial assets and a transferor's continuing involvement with transferred financial assets. This additional guidance must be applied as of the beginning of each reporting entity's first annual reporting period that begins after November 15, 2009, for interim periods within that first annual reporting period and for interim and annual reporting periods thereafter. Earlier application is prohibited. This additional guidance must be applied to transfers occurring on or after the effective date. The adoption of this ASC 860 is not expected to have a material impact on the Company's financial statements and disclosures.

In February 2010, the FASB issued FASB ASU 2010-09, “Subsequent Events, Amendments to Certain Recognition and Disclosure Requirements,” which clarifies certain existing evaluation and disclosure requirements in ASC 855 “Subsequent Events” related to subsequent events. FASB ASU 2010-09 requires SEC filers to evaluate subsequent events through the date in which the financial Statements are issued and are effective immediately. The new guidance does not have an effect on the Company’s consolidated results of operations and financial condition.

In June 2009, the FASB issued a pronouncement amending previous topic guidance, and changes how a company determines when an entity that is insufficiently capitalized or is not controlled through voting (or similar rights) should be consolidated. The determination whether a company is required to consolidate an entity is based on, among other things, an entity’s purpose and design and a company’s ability to direct the activities of the entity that most significantly impact the entity’s economic performance. This pronouncement is effective for financial statements issued for fiscal years beginning after December 15, 2009 and interim periods within those fiscal years. The Company is evaluating the impact that this pronouncement will have on the Company’s consolidated financial statements.

Management does not believe that any other recently issued, but not yet effective, accounting standards if currently adopted would have a material effect on the accompanying financial statements.

NOTE 4-INVESTMENT IN TRUEFRAME INTERNATIONAL LTD.

Trueframe International Limited

In October, 2009 we acquired 28% of the outstanding equity of Truefame International Limited ("Truefame"), which is a holding company that owns 55.78 % of the outstanding common stock of AgriSolar Solutions, Inc. ("AGSO"), which holds Shengzhen Fuwaysun Technology Co., Ltd. ("Fuwaysun") for approximately $3,813,000. Fuwaysun is a PRC company primarily engaged in the development and production of solar pest killing lamps and transportable solar generators.

NOTE 5– BUSINESS DISPOSAL

On July 6, 2009, we entered into the Termination Agreement with the three former shareholders of SZPSP to terminate “The Equity Purchase Agreement” and “Complementary Agreement to the Equity Purchase Agreement”

The key terms of the Termination Agreement are:

Pursuant to the terms of the agreements the Company received RMB 28,800,000 and 939,364 shares of its common stock in exchange for its ownership of SZPSP. In addition, the Company will receive a portion of the net profit, if any, of SZPSP for the year ended March 31, 2009. No effect has been given to the profit distribution in the accompanying financial statements.

The operations of SZPSP have been presented as discontinued operations in the accompanying financial statements from the date of acquisition to the date of disposition, for the appropriate periods.

As summary of the operations of SZPSP is follows:

	March 31，2009

Revenues	$	1,024,103
Income before provision for income taxes from discontinued operations		(501,120	)
Income tax provision		11,270
Income(loss) from discontinued operation, net of tax	$	(512,390	)

NOTE 6 - BALANCE SHEET COMPONENTS

Accounts receivable, net

The majority of the Company’s sales are on open credit terms and in accordance with terms specified in the contracts governing the relevant transactions. The Company evaluates the need of an allowance for doubtful accounts based on the aging of accounts receivable that management believes to be reasonable.

	March 31, 2010			December 31, 2009
	(Unaudited)

Accounts receivable, cost	$	8,001,605		$	9,621,122
Less : allowance for doubtful accounts		(1,553,497	)		(1,553,178	)

AAccounts receivable, net	$	6,448,108		$	8,067,944

Inventories:

	March 31, 2010		December 31, 2009
	(Unaudited)

Raw materials	$	2,202,518	$	1,186,188
Consumables		15,174		16,358
Work-in-process		1,399,537		57,357
Finished goods		2,799,698		3,287,267
Inventories	$	6,416,927	$	4,547,170

Other receivables and prepayments:

	March 31, 2010		December 31, 2009
	(Unaudited)

Advance to suppliers	$	1,231,456	$	555,781
Other receivables		1,920,533		1,177,914
Other receivables and prepayments(1)	$	3,151,989	$	1,733,695

(1) The amount includes the loan of RMB2, 000,000 for Xiongri. In 2006, we entered into a series of agreements with the three shareholders of Shenzhen Xiongri Solar Co., Ltd. (“Xiongri”) to purchase 60% of the entire equity interests of Xiongri for RMB2, 000,000. The three shareholders agreed to loan RMB2, 000,000 to Xiongri as working capital. We have not completed the transfer of the 60% equity interests. However，the parties came to consensus after negotiation on October 23, 2009 that the agreement shall be revoked and the three shareholders need to return RMB2, 000,000 in following two years after signed.

Other payables and accrued liabilities:

	March 31, 2010		December 31, 2009
	(Unaudited)

Customer deposit	$	4,742,974	$	4,488,561
Salary payable		425,057		521,951
Accrued expenses		220,846		226,430
Other payables		2,632,158		2,551,978
Warranty provision		1,016,757		1,016,549
Current portion of investment payable(1)		1,173,317		1,171,709
Totals	$	10,211,109	$	9,977,178

(1) Represents liability in connection with the acquisition of Tianjin Huaneng,

NOTE 7 - STOCKHOLDERS’ EQUITY

Common stock

During the year ended December 31, 2009, 373,566 shares of preferred stock were converted to the same number of shares of common stock.

During the year ended December 31, 2009, 939,364 shares of common stock were cancelled due to termination with SZPSP.

Common Stocks Held in Escrow

In connection with the private placement on February 29, 2008, the Company deposited 2,000,000 shares of common stock (“Make Good Shares”) into escrow and we are required to deliver (i) 1,000,000 of the Make Good Shares to the investors on a pro rata basis for no additional consideration in the event that the Company’s after-tax net income for the fiscal year ending December 31, 2008 is less than $4.8 million; and (ii) 1,000,000 of the Make Good Shares to the investors on a pro rata basis for no additional consideration in the event that the Company’s after-tax net income for the fiscal year ending December 31, 2009 is less than $8 million. As of December 31, 2008, the after-tax net income target of $4.8 million has not been met. The registration statement of 1,000,000 of the Make Good Shares to the investors was declared effective on July 20, 2009.

Warrants for services

A summary of the status of the Company’s outstanding common stock warrants:

	Number of Shares	Weighted- average Exercise Price		Weighted- average Remaining Contractual
Outstanding and Exercisable at January 1, 2009	7,091,682	$	2.76	3.53 years
Granted	-		-	-
Exercised	-		-	-
Forfeited	469,150		-	-
Expired	-		-	-
Outstanding and Exercisable at December 31, 2009	6,622,532	$	2.48	2.25 years
Granted	-		-	-
Exercised	-		-	-
Forfeited	-		-	-
Expired	1,825,719		-	-
Outstanding and Exercisable at March 31, 2010	4,769,813		1.95	2.76 years

NOTE 8 - INCOME TAXES

The Company is registered in the United States of America and has operations in three tax jurisdictions: the United States of America, British Virgin Island (“BVI”) and the PRC. The operations in the United States of America and British Virgin Island have incurred net operating losses for income tax purposes. The Company generated substantially all of its net income from the operation of its subsidiary in the PRC and is subject to the PRC tax jurisdiction.

NOTE 9 - SEGMENT REPORTING, GEOGRAPHICAL INFORMATION

(a) Business information

During the three months ended March 31, 2010, the Company had primarily three reportable segments, (i) Solar Heater/Biomass Stove/Boiler related products, (ii) Heat pipe related products and (iii) Building integrated energy-saving projects, under the management of Bazhou, Tianjin Huaneng, and Deli Solar (Beijing), respectively.

The Company’s revenue, gross profit and total assets by reportable segment are as follows:

	Three months ended of March 31,
	2010		2009
Revenue:
Solar Heater/Biomass Stove/Boiler related products	$	745,411	$	1,547,847
Heat pipe related products		3,151,003		2,105,947
Building integrated energy-saving projects		-		-
	$	3,896,414	$	3,653,794

Gross profit:
Solar Heater/Biomass Stove/Boiler related products	$	109,721	$	328,312
Heat pipe related products		1,051,689		557,502
Building integrated energy-saving projects		-		-
	$	1,161,410	$	885,814

	March 31,2010		December 31,2009
Total assets:
Solar Heater/Biomass Stove/Boiler related products	$	16,799,273	$	17,075,566
Heat pipe related products		17,152,612		17,210,210
Building integrated energy-saving projects		1,379,024		1,774,920
Administration		5,786,427		5,004,499
	$	41,117,336	$	41,065,195

(b) Geographic information

The Company operates in the PRC and all of the Company’s long lived assets are located in the PRC. In respect of geographical segment reporting, sales are based on the country in which the customer is located and total assets and capital expenditure are based on the country where the assets are located.

The Company’s operations are located in PRC, which is the main geographical area. The Company’s revenue, gross profit and total assets by geographical market for the three months ended March 31, 2010 and 2009 are analyzed as follows:

	Three months ended of March 31,
	2010		2009
PRC	$	3,325,501	$	3,507,243
Other markets		570,913		146,551
	$	3,896,414	$	3,653,794

Gross profit:
PRC	$	902,350	$	857,339
Other markets		259,060		28,475
	$	1,161,410	$	885,814

	March 31, 2010		December 31,2009
Total assets:
PRC	$	37,813,231	$	36,645,349
Other markets		3,304,105		4,419,846
	$	41,117,336	$	41,065,195

CHINA SOLAR & CLEAN ENERGY SOLUTIONS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Currency expressed in United States Dollars (“US$”))

(Unaudited)

NOTE 10 –NET INCOME PER SHARE

The following table sets forth the computation of basic and diluted net income per share for the three months ended March 31, 2010 and 2009:

	Three months ended of March 31
	2010			2009

Basic and diluted net income per share calculation

Numerator:
Net income from continuing operations	$	(327,660	)	$	(716,834	)
Net (loss) income from discontinued operation		-			(512,390	)
	$	(327,660	)	$	(1,229,224	)
Denominator: - Weighted average ordinary shares outstanding		15,815,125			16,125,984

NOTE 11 - SUBSEQUENT EVENT

The Company has evaluated subsequent events after the balance sheet date through the financial statements were issued , there are no subsequent events that are required to be recorded or disclosed in the accompanying interim financial statements.

Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward-Looking Information — this item includes “forward-looking statements”. All statements, other than statements of historical facts, included in this item regarding the Company's financial position, business strategy and plans and objectives of management of the Company for future operations are forward-looking statements. These forward-looking statements rely on a number of assumptions concerning future events and are subject to a number of uncertainties and other factors, many of which are outside of the Company's control, which could cause actual results to materially differ from such statements. While the Company believes that the assumptions concerning future events are reasonable, it cautions that there are inherent difficulties in predicting certain important factors, especially the timing and magnitude of technological advances; the prospects for future acquisitions; the competition in the solar water heaters and boilers industry and the impact of such competition on pricing, revenues and margins; uncertainties surrounding budget reductions or changes in funding priorities of existing government programs and the cost of attracting and retaining highly skilled personnel.

Overview

We are engaged in the solar and renewable energy business in the PRC. Our business is conducted through our wholly-owned PRC based operating subsidiaries, Bazhou Deli Solar, Beijing Deli Solar, and our indirect subsidiary Tianjin Huaneng (majority owned).

The Company has three reportable segments: (i) Solar Heater/Biomass Stove/Boiler related products, (ii) Heat pipe related products and (iii) Building integrated energy-saving projects, under the management of Bazhou, Tianjin Huaneng, and Deli Solar (Beijing), respectively.

Deli Solar (Bazhou) designs, manufactures and sells renewable energy systems to produce hot water and for space heating in the PRC. Bazhou Deli Solar’s principal products are solar hot water heaters and multifunctional space heaters, including coal-fired boilers for residential use. Bazhou Deli Solar also sells component parts for its products and provides after-sales maintenance and repair services.

Deli Solar (Beijing) is principally engaged in building integrated energy-saving projects in major cities in the PRC, including Beijing.

Tianjin Huaneng manufactures heating products such as heating pipes, heat exchangers, specialty heating pipes and tubes, high temperature hot blast boilers, heating filters, normal pressure water boilers, solar energy water heaters and radiators.

Approximately 19.1% of our net revenue for the three months ended March 31, 2010 was derived from sales of our solar heater/biomass stove/boiler related products and 80.9% from sales of our heat pipe related equipment/energy-saving projects, respectively. Approximately 85.4% and 14.6% of our net revenues for the three months ended March 31, 2010, were derived from sales made inside the PRC and outside the PRC, respectively.

Three months ended March 31, 2010 compared to three months ended March 31, 2009

Sales Revenue

	Three months ended March 31
Revenue	2010		2009
Solar heater/Biomass stove/Boiler related products	$	745,411		$	1,547,847
Heat pipe related equipments		3,151,003			2,105,947
total	$	3,896,414		$	3,653,794

Overall: Sales revenue for the three months ended March 31, 2010 were $3,896,414 as compared to $3,653,794 for the three months ended March 31, 2009, an increase of $242,620 or 6.6%. The increase in sales was primarily attributable to the rise in revenue from our heat pipe related equipments under the management of Tianjin Huangneng. We expect overall sales revenue for heat pipe related equipments and energy-saving projects to keep growth momentum during the rest of the year with the recovery of finance crisis.

Solar heater/Biomass stove/Boiler related products: Sales revenue for these products for the three months ended March 31, 2010 were $745,411 as compared to $1,547,847 for the three months ended March 31, 2009, a decrease of $802,436 or 51.8%. The decrease in sales revenue derived from solar heaters/biomass stove/boiler related products was due to strong competition. Moreover, we are foreign invested enterprise and can not get access to China favorable policy or “China’s Home Appliance Subsidy Program For Rual Areas” as is called for domestic enterprises.

Heat pipe related equipments/Energy-saving projects: Sales revenue for the three months ended March 31, 2010 was $3,151,003 compared to $2,105,947 for the three months ended March 31, 2009, a substantial increase of $1,045,056 or 49.6%. The increase in sales of heat pipe related equipments/energy-saving projects was due to recovery from financial crisis which creates robust market for Huaneng.

Gross Profit

	Three months ended March 31
Gross profit	2009		2008
Solar heater/Biomass stove/Boiler related products	$	109,721		328,312
Heat pipe related equipments/Energy-saving projects	$	1,051,689		557,502
	$	1,161,410		885,814

Overall: Gross profit margin for the three months ended March 31, 2010 increased by approximately 5.6% to 29.8%, as compared to 24.2% for the three months ended March 31, 2009. This was primarily due to the increase in sales volume and prices of our heat pipe related equipments.

Solar heater/Biomass stove/Boiler related products: Gross profit margin for the three months ended March 31, 2010 was approximately 14.7%, as compared to 21.2% for the three months ended March 31, 2009. This was primarily due to weak market in which we had to sell our products in lower price.

Heat pipe related equipments/Energy-saving projects: Gross profit margin for the three months ended March 31, 2010 was approximately 33.4% as compared to 26.5% from the three months ended March 31, 2009, an increase of 6.9%.The increase is mainly due to an increase in the sale prices.

Operating Expenses

Operating expenses for the three months ended March 31, 2010 were $1,346,243, as compared to $1,547,732 for the three months ended March 31, 2009, a decrease of $201,489, or 13.0%. The overall decrease in operating expenses was primarily due to the compression of operation cost.

Depreciation and amortization expenses increased to $122,513 for the three months ended March 31, 2010, or 38.2%, from $88,621 for the three months ended March 31, 2009, primarily as a result of the increase of our manufacturing equipment and building.

Selling and distribution expenses increased to $627,069 for the three months ended March 31, 2010, or 12.1%, from $559,485 for the three months ended March 31, 2009, primarily due to the increase in sales of our heat pipe related equipments.

General and administrative expenses were $596,661 for the three months ended March 31, 2010 (or approximately 15.3% of sales) compared to $899,626 (or approximately 24.6% of sales) for the three months ended March 31, 2009, a decrease of 33.7%. The decrease was primarily due to the compression of operation cost.

Net Income (loss)

Net loss was $327,660 for the three months ended March 31, 2010, compared to $1,229,224 for the three months ended March 31, 2009, primarily due to the compression of operation cost and the increase in sales of our heat pipe related equipments.

LIQUIDITY AND CAPITAL RESOURCES

Net cash used by operating activities was $1,433,190 for the three months ended March 31, 2010, while net cash used in our operating activities was $829,589 for the three months ended March 31, 2009.

Net cash used by investing activities was $110,255 for the three months ended March 31, 2010, compared with net cash used in investing activities in the amount of $280,208 for the three months ended March 31, 2009.

We believe that current cash flow is sufficient to meet anticipated working capital and capital expenditures for at least the next twelve months. We may require additional cash for further development of business, including any investments or acquisitions we may decide to pursue. However, we cannot assure you that such funding will be available.

Cash

Cash and cash equivalents decreased to $3,438,258 as of March 31, 2010, compared to $4,980,717 as of December 31, 2009, primarily as a result of the increase in the operating activities in the first quarter of 2010.

Accounts Receivable

Accounts receivable decreased to $6,448,108 as of March 31, 2010, from $8,067,944 as of December 31, 2009, primarily due to the collection of accounts receivable of Tianjin Huaneng.

Inventory

Inventories increased to $6,416,927 as of March 31, 2010, as compared to $4,547,170 as of December 31, 2009, primarily due to the increase of raw materials considering the rise of the domestic steel prices.

Other Receivables and Prepayments

Other receivables and prepayments increased to $3,151,989 as of March 31, 2010, compared to $1,733,695 as of December 31, 2009, primarily due to the increase of temporary turnover.

Accounts Payable

Accounts payable increased to $1,979,026 as of March 31, 2010, compared to $1,601,002 as of December 31, 2009. This increase was due to the increase in raw materials.

Other Payables and Accrued Liabilities

Other payables and accrued liabilities slightly increased to $10,211,109 as of March 31, 2010 from $9,977,178 as of December 31, 2009.

Off-Balance Sheet Arrangements

We do not have any off balance sheet arrangements that are reasonably likely to have a current or future effect on our financial condition, revenues, and results of operations, liquidity or capital expenditures.

Item 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.

Item 4T.

CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Pursuant to Rule 13a-15(b) under the Securities Exchange Act of 1934 (“Exchange Act”), the Company carried out an evaluation, with the participation of the Company’s management, including the Company’s Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”) (the Company’s principal financial and accounting officer), of the effectiveness of the Company’s disclosure controls and procedures (as defined under Rule 13a-15(e) under the Exchange Act) as of the end of the period covered by this report. Based upon that evaluation, the Company’s CEO and CFO concluded that the Company’s disclosure controls and procedures are effective to ensure that information required to be disclosed by the Company in the reports that the Company files or submits under the Exchange Act, is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to the Company’s management, including the Company’s CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

No change in our system of internal control over financial reporting occurred during the period covered by this report for the quarter ended March 31, 2010 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II — OTHER INFORMATION

Item 1.

LEGAL PROCEEDINGS

We are currently not involved in any litigation that we believe could have a material adverse effect on our financial condition or results of operations. There is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the executive officers of our company or any of our subsidiaries, threatened against or affecting our company, our common stock, any of our subsidiaries or of our companies or our subsidiaries’ officers or directors in their capacities as such, in which an adverse decision could have a material adverse effect.

Item 1A.

RISK FACTORS

Not applicable.

Item 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

Item 3.

DEFAULTS UPON SENIOR SECURITIES

None.

Item 4.

SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

Item 5.

OTHER INFORMATION

None.

Item 6.

EXHIBITS

(b) Exhibits

Exhibit No.		Document Description
31.1		Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2		Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1		Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2		Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	China Solar & Clean Energy Solutions, Inc.

May 14, 2010	By:	/s/ Deli Du
		Deli Du
		Chief Executive Officer and President
		(Principal Executive Officer)

May 14, 2010	By:	/s/ Yinan Zhao
		Yinan Zhao
		Acting Chief Financial Officer
		(Principal Financial Officer)

Exhibit Index

Exhibit No.		Document Description
31.1		Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2		Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1		Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2		Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.