Attached files
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EX-23.2 - EXHIBIT 23.2 - WORLDWIDE ENERGY & MANUFACTURING USA INC | ex232.htm |
EX-5.1 - EXHIBIT 5.1 - WORLDWIDE ENERGY & MANUFACTURING USA INC | ex51.htm |
As filed
with the Securities and Exchange Commission on February 12, 2010
Registration
No. 333-_________
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
S-1
REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OF 1933
WORLDWIDE
ENERGY & MANUFACTURING USA, INC.
(Exact
Name of Registrant as Specified in its Charter)
Colorado
|
3990
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77-0423745
|
||
(State
or other jurisdiction of
incorporation
or organization)
|
(Primary
Standard Industrial
Classification
Code Number)
|
(IRS
Employer Identification Number)
|
408
N. Canal Street
South
San Francisco, CA 94080
(650)
794-9888
(Address,
including zip code, and telephone number, including area code, of registrant’s
principal executive offices)
Jimmy
Wang
Chief
Executive Officer
408
N. Canal Street
South
San Francisco, CA 94080
(650) 794-9888
(Name,
address, including zip code, and telephone number, including area code, of agent
for service)
Copies
to:
Darrin
M. Ocasio, Esq.
Sichenzia
Ross Friedman Ference, LLP
61
Broadway, 32 nd
Floor
New
York, New York 10006
Telephone:
(212) 930-9700
Approximate
date of commencement of proposed sale to the public: As soon as practicable
after this registration statement becomes effective.
If any of
the securities being registered on the Form are to be offered on a delayed or
continuous basis pursuant to Rule 415 under the Securities Act of 1933,
check the following box: þ
1
If this
Form is filed to register additional securities for an offering pursuant to Rule
462(b) under the Securities Act, please check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering: o
If this
Form is a post-effective amendment filed pursuant to Rule 462
(c) under the Securities Act, please check the following box and list the
Securities Act registration statement number of the earlier registration
statement for the same offering: o
If this
Form is a post-effective amendment filed pursuant to Rule 462(d) under the
Securities Act, check the following box and list the Securities Act registration
statement number of the earlier registration statement for the same offering:
o
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
definitions of “large accelerated filer,” “accelerated filer,” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act. (Check
one):
Large
accelerated filer o
|
Accelerated
filer o
|
Non-accelerated
filer o
|
Smaller
reporting company þ
|
CALCULATION
OF REGISTRATION FEE
PROPOSED
|
PROPOSED
|
|||||||||||||||
AMOUNT
TO
|
MAXIMUM
|
MAXIMUM
|
||||||||||||||
TITLE
OF EACH CLASS OF
|
BE
|
OFFERING
|
AGGREGATE
|
AMOUNT
OF
|
||||||||||||
SECURITITES
TO BE
|
REGISTERED
|
PRICE
PER
|
OFFERING
|
REGISTRATION
|
||||||||||||
REGISTERED
|
(1)
|
SHARE
(2)
|
PRICE
|
FEE
|
||||||||||||
Common
stock, no par value per share (3)
|
1,970,956
|
$
|
4.85
|
$
|
9,559,137
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$
|
681.57
|
|||||||||
Common
stock, no par value per share (4)
|
2,188,270
|
$
|
4.85
|
$
|
10,613,109
|
$
|
756.71
|
|||||||||
Total
|
4,159,226
|
$
|
4.85
|
$
|
20,172,246
|
$
|
1,438.28
|
_______________
(1)
|
In
the event of a stock split, stock dividend, or similar transaction
involving the common stock, the number of shares registered shall
automatically be increased to cover the additional shares of common stock
issuable pursuant to Rule 416.
|
(2)
|
Estimated
solely for purposes of calculating the registration fee pursuant to Rule
457(c) of the Securities Act of 1933, as amended, based on the average
high and low prices of the common stock of the Registrant as reported on
the OTC Bulletin Board on February 11, 2010.
|
(3)
|
Represents
shares of the Registrant’s common stock being registered for resale that
are issuable to the selling stockholders named in the prospectus or a
prospectus supplement.
|
(4)
|
Represents
shares of the Registrant’s common stock being registered for resale that
are issuable to the selling stockholders named in the prospectus or a
prospectus supplement upon exercise of outstanding warrants to purchase
shares of common stock
|
THE
REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS
MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A
FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THERAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE
SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
2
The
information in this prospectus is not complete and may be changed. The selling
stockholders may not sell these securities until the registration statement
filed with the Securities and Exchange Commission is effective. This prospectus
is not an offer to sell these securities and it is not soliciting an offer to
buy these securities in any state where the offer or sale is not
permitted.
PRELIMINARY
PROSPECTUS
SUBJECT
TO COMPLETION, DATED FEBRUARY 12, 2010
WORLDWIDE
ENERGY & MANUFACTURING USA, INC.
4,159,226
Shares of Common Stock
This
prospectus relates to the resale of up to 4,159,226 shares of our common stock
by the selling stockholders identified under the section entitled “Selling
Stockholders” in this prospectus. The shares of common stock offered by this
prospectus consist of (i) 1,970,956 shares of our common stock and (ii)
2,188,270 shares of our common stock issuable upon exercise of outstanding
warrants.
All of
the shares of common stock offered by this prospectus are being sold by the
selling stockholders. It is anticipated that the selling stockholders will sell
these shares of common stock from time to time in one or more transactions, in
negotiated transactions or otherwise, at prevailing market prices or at prices
otherwise negotiated (see “Plan of Distribution” beginning on page 39). We will
not receive any proceeds from the sales by the selling
stockholders. We may receive proceeds from any exercise of
outstanding warrants. The selling shareholders and placement agents may exercise
the warrants on a cashless basis if the shares of common stock underlying the
warrants are not then registered pursuant to an effective registration
statement. In the event the selling shareholders or placement agents’ exercise
the Warrants on a cashless basis, then we will not receive any
proceeds.
Our
common stock is quoted on the Over-the-Counter Bulletin Board, commonly known as
the OTCBB, under the symbol “WEMU.OB.” On February 11, 2010, the last sale price
of our common stock on the OTCBB was $5.00
per share.
No
underwriter or person has been engaged to facilitate the sale of shares of our
common stock in this offering. None of the proceeds from the sale of common
stock by the selling stockholder will be placed in escrow, trust or any similar
account. There are no underwriting commissions involved in this offering. We
have agreed to pay all the costs of this offering other than customary brokerage
and sales commissions. The selling stockholders will pay no offering expenses
other than those expressly identified in this prospectus.
Investing
in our securities involves a high degree of risk. You should carefully consider
the risks and uncertainties described under the heading “Risk Factors” beginning
on page 3 of this prospectus before making a decision to purchase our common
stock.
Neither
the Securities and Exchange Commission nor any state securities commission has
approved or disapproved of these securities or determined if this prospectus is
truthful or complete. Any representation to the contrary is a criminal
offense.
The date
of this prospectus is __________, 2010
3
TABLE
OF CONTENTS
Page
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||||
PROSPECTUS
SUMMARY
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5 | |||
RISK
FACTORS
|
8 | |||
CAUTIONARY
STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
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14 | |||
USE
OF PROCEEDS
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15 | |||
MARKET
FOR OUR COMMON STOCK AND RELATED STOCKHOLDER MATTERS
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15 | |||
MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL POSITION AND PLAN OF
OPERATION
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17 | |||
BUSINESS
|
28 | |||
MANAGEMENT
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32 | |||
EXECUTIVE
COMPENSATION
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36 | |||
CERTAIN
RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
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38 | |||
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
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38 | |||
SELLING
STOCKHOLDERS
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39 | |||
PLAN
OF DISTRIBUTION
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45 | |||
PENNY
STOCK
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46 | |||
DESCRIPTION
OF SECURITIES
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47 | |||
EXPERTS
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48 | |||
LEGAL
MATTERS
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48 | |||
WHERE
YOU CAN FIND MORE INFORMATION
|
48 | |||
INDEX
TO FINANCIAL STATEMENTS
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F-1 | |||
You
should rely only on the information contained in this prospectus. We have not
authorized anyone to provide you with information different from that contained
in this prospectus. The selling stockholders are offering to sell shares of our
common stock and seeking offers to buy shares of our common stock only in
jurisdictions where such offers and sales are permitted. You should assume that
the information appearing in this prospectus is accurate only as of the date on
the front cover of this prospectus. Our business, financial condition, results
of operations and prospects may have changed since that date.
4
PROSPECTUS
SUMMARY
The
following summary highlights information contained elsewhere in this prospectus.
It may not contain all the information that may be important to you. You should
read this entire prospectus carefully, including the sections entitled “Risk
Factors” and “Management’s Discussion and Analysis or Plan of Operation,” and
our historical financial statements and related notes included elsewhere in this
prospectus.
In this
prospectus, unless the context requires otherwise, references to the “Company,”
“WEMU,” “we,” “our” and “us,” refer to Worldwide Energy & Manufacturing USA,
Inc., a Colorado corporation together with its subsidiaries.
Company
History
We were
incorporated under the laws of the State of Colorado on March 17, 2000 as
Tabatha III, Inc. We changed our name to Worldwide Manufacturing USA,
Inc. on November 4, 2003. On February 4, 2008 we changed our name to
Worldwide Energy and Manufacturing USA, Inc. to better reflect our business plan
to engage in the solar module market. We were formed as a “blind pool” or “blank
check” company whose business plan was to seek to acquire a business opportunity
through completion of a merger, exchange of stock, or other similar type of
transaction. In furtherance of our business plan, we voluntarily elected to
become subject to the periodic reporting obligations of the Securities Exchange
Act of 1934 by filing a registration statement on Form 10-SB.
Prior to
our identification of Worldwide Manufacturing USA, Inc., a privately held
California corporation (“Worldwide USA”) as an acquisition target, our only
business activities were the organizational activities described above,
including the filing of a registration statement on Form SB-2 under the
Securities Exchange Act of 1934, and our efforts to locate a suitable business
opportunity for acquisition.
On
September 30, 2003, we acquired all of the issued and outstanding common stock
of Worldwide USA in a share exchange transaction. We issued 27,900,000 shares of
common stock in the share exchange transaction for 100%, or 10,000, of the
issued and outstanding shares of Worldwide USA’s common stock. As a result of
the share exchange transaction, Worldwide USA became our wholly owned
subsidiary.
The
former stockholders of Worldwide USA acquired 93% of our issued and outstanding
common stock as a result of the completion of the share exchange transaction.
Therefore, although Worldwide USA became our wholly owned subsidiary, the
transaction was accounted for as a recapitalization of Worldwide USA, whereby
Worldwide USA is deemed to be the accounting acquirer and is deemed to have
adopted our capital structure. No finder’s fee was paid to any person in
connection with the transaction.
All
operating activities are carried out through our subsidiaries located in
and around Shanghai, Ningbo and Nantong, China which
include:
1.
|
Shanghai
Intech Electro-Mechanical Products Co. Ltd., wholly owned subsidiary of
Worldwide Energy and Manufacturing USA,
Inc.,
|
2.
|
Shanghai
Intech-Tron Electric & Electronics Company Ltd., 55% owned by
Worldwide Energy and Manufacturing USA,
Inc,
|
3.
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Shanghai
Detron Electric & Electronics Co., Ltd., 100% owned by Shanghai
Intech-Tron Electric and Electronics
Co.,
|
4.
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Shanghai
Intech Precision Machinery Co., Ltd.,51% owned by Shanghai Intech Electro
Mechanical Products Co. and 49% owned by Worldwide Energy and
Manufacturing USA, Inc.,
|
5.
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Shanghai
Shutai Precision Casting Co., Ltd., 55% owned by Shanghai Intech
Electro-Mechanical Products Co. and 45% owned by Worldwide Energy and
Manufacturing USA, Inc.,
|
6.
|
Worldwide
Energy and Manufacturing (Ningbo) Co., Ltd.,100% owned by Worldwide Energy
and Manufacturing USA, Inc., and
|
7.
|
Worldwide
Energy and Manufacturing (Nantong) Co., Ltd., 100% owned by Worldwide
Energy and Manufacturing USA, Inc.
|
Business
Overview
The
Company, together with its Chinese subsidiaries, is a contract manufacturer,
engineering firm and direct manufacturer. A contract manufacturer supplies
components and assemblies, either through direct manufacturing or through sub
contracting to other manufacturers, according to the customers’ designs,
drawings and quality criteria. When utilizing our subcontractors, they
will provide the plant, equipment, manufacturing working capital and factory
labor and we provide the sales, management, production control and
technical support for the products. Our goal is to provide timely delivery and
high quality components at manufacturing costs less than what our customers
would pay for similar parts in the United States. Our recently created (February
2008) Solar Division markets and sells Photovoltaic (PV) Solar Modules, either
manufactured by one of our two solar subsidiaries or through subcontractors
certified to produce under the AmeriSolar brand.
For the
nine months ended September 30, 2009, we reported revenues of approximately
$39.2 million, an increase of 25.1% from revenues of approximately $31.3 million
reported for the nine months ended September 30, 2008. The majority
of this growth ($7.9 million) is attributable to our Solar
Division.
For the
year ended December 31, 2008, we reported revenues of approximately $45.9
million, an increase of 278% from revenues of approximately $12.1 million
reported for the year ended December 31, 2007. Again, the majority of this
growth ($31.0 million) was generated by our Solar
Division.
Our
principal executive offices are located at 408 N. Canal Street South San
Francisco, CA 94080 and our telephone number is (650) 794-9888. We
maintain a website at www.wwmusa.com which
contains a description of our company, but such website is not part of this
prospectus. Please note that you should not view such website as part of this
prospectus and should not rely on such website in making a decision to invest in
our common stock.
5
The
Offering
Common
stock offered by the selling stockholders:
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4,159,226
shares (1)
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|||
Common
stock outstanding:
|
(2) 3,671,611
|
|||
Use
of proceeds:
|
We
will not receive any proceeds from the sales by the selling
stockholders. We may receive proceeds from any exercise of
outstanding warrants. The selling shareholders and placement agents may
exercise the warrants on a cashless basis if the shares of common stock
underlying the warrants are not then registered pursuant to an effective
registration statement. In the event the selling shareholders or placement
agents’ exercise the Warrants on a cashless basis, then we will not
receive any proceeds.
|
|||
Risk
factors:
|
An
investment in our common stock involves a high degree of risk. You should
carefully consider the information set forth in this prospectus and, in
particular, the specific factors set forth in the “Risk Factors” section
beginning on page 3 of this prospectus before deciding whether or not to
invest in shares of our common stock.
|
|||
OTC
Bulletin Board symbol:
|
WEMU.OB
|
|||
(1)
|
Represents
(i) 1,970,956 shares of our common stock and (ii) 2,188,270 shares of our
common stock issuable upon exercise of outstanding warrants.
|
|
(2)
|
Represents
the number of shares of our common stock outstanding as of February 12,
2010, and excludes:
·
1,970,956 shares of our common stock, which shares are being offered by
this prospectus;
·
2,188,270 shares of our common stock underlying outstanding warrants that
are being offered by this prospectus;
|
6
Issuance of Shares to the
Selling Stockholders
On
January 26, 2010, we entered in a securities purchase agreement with certain
accredited investors pursuant to which we issued and sold 1,777,777 of our
common stock and warrants to purchase an aggregate of 1,777,777 shares of our
common stock for an aggregate purchase price of $8,000,000. Ladenburg
Thalmann & Co., LLC acted as the lead placement agent on the private
placement.
On
February 9, 2010, we entered into an amendment agreement with approximately 74%
of such accredited investors to amend the transaction documents to increase the
maximum amount of securities sold to $9,000,000. On February 9, 2010,
we entered into a second securities purchase agreement with certain accredited
investors pursuant to which we issued and sold 193,179 shares of our common
stock and warrants to purchase an aggregate of 193,179 shares of our common
stock for an aggregate purchase price of $869,307.
The
warrants are exercisable for a term of five years at an exercise price of $5.65
per share. The warrants also contain anti-dilution provisions,
including but not limited to, if the Company issues shares of its common stock
at less than the then existing conversion price, the conversion price of the
warrants will automatically be reduced to such lower price and the number of
shares to be issued upon exercise will be proportionately
increased. The warrants contain limitations on exercise, including
the limitation that the holders may not convert their warrants to the
extent that upon exercise the holder, together with its affiliates, would own in
excess of 4.99% of the Company’s outstanding shares of common
stock.
We have
entered into a registration rights agreement with the investors pursuant to
where we are obligated to file a “resale registration statement” with the SEC
within 30 days of the closing of the transaction and cause the effectiveness
therefore within 120 days. Notwithstanding
certain circumstances, the failure of us to perform the foregoing could result
in our having to pay liquidated damages to the investors.
Additionally,
as further consideration for the transaction, we, along with the investors,
entered into a make good escrow agreement with certain insiders of the Company
who placed an aggregate of 1,970,956 shares of the Company’s common stock into
escrow, to be distributed if certain financial milestones of the Company are not
met. Pursuant to the terms of the make good escrow agreement, if the
Adjusted EBITDA reported in the Company’s 2010 Annual Report is less than
$4,000,000, then the investors shall be entitled to receive on a “pro rata”
basis, determined by dividing each investor’s investment amount by the
aggregate of all investment amounts delivered to us by the investors, for no
consideration other than their part of their respective investment amount at
closing, some or all of the escrow shares determined according to the following
formula:
E
|
Minus
|
C
|
((A
/ B) X D)
|
For the
purposes of the foregoing formula:
A = 2010
Adjusted EBITDA
B = 2010
EBITDA Milestone
C = Total
number of shares issued to the selling stockholders
D =
4.50
E = Total
Investment Amount
7
RISK
FACTORS
Investing
in our common stock involves a high degree of risk. Prospective
investors should carefully consider the risks described below and other
information contained in this prospectus before purchasing shares of our common
stock. There are numerous and varied risks that may prevent us from achieving
our goals. If any of these risks actually occur, our business, financial
condition or results of operations may be materially adversely affected. If this
were to happen, the trading price of our common stock could decline
significantly and investors in our common stock might lose all or a part of
their investment.
Risks
Related to Business Operations
We
may be unable to manage our growth.
We are
planning for rapid growth and intend to aggressively expand operations. The
growth in the size and geographic range of our business will place significant
demands on management and our operating systems. Our ability to manage growth
effectively will depend on our ability to attract additional management
personnel; to develop and improve operating systems; to hire, train, and manage
an employee base; and to maintain adequate service capacity. Additionally, the
proposed expansion of operations may require hiring additional management
personnel to oversee procurement duties. We will also be required to rapidly
expand operating systems and processes in order to support the projected
increase in product demand. There can be no assurance that we will be able to
effectively manage growth and build the infrastructure necessary to achieve
growth as management has forecasted.
The
strategy of acquiring complementary businesses and assets may fail which could
reduce our ability to compete for customers.
As part
of our business strategy, we have pursued, and intend to continue to pursue,
selective strategic acquisitions of businesses, assets and technologies that
complement our existing business. We intend to make other acquisitions in the
future if suitable opportunities arise. Acquisitions involve uncertainties and
risks, including:
•
|
potential
ongoing financial obligations and unforeseen or hidden
liabilities;
|
•
|
failure
to achieve the intended objectives, benefits or revenue-enhancing
opportunities;
|
•
|
costs
and difficulties of integrating acquired businesses and managing a larger
business; and
|
•
|
diversion
of resources and management
attention.
|
The
failure to address these risks successfully may have a material adverse effect
on our financial condition and results of operations. Any such acquisition may
require a significant amount of capital investment, which would decrease the
amount of cash available for working capital or capital expenditures. In
addition, if we use our equity securities to pay for acquisitions, we may dilute
the value of your shares. If we borrow funds to finance acquisitions, such debt
instruments may contain restrictive covenants that could, among other things,
restrict us from distributing dividends. Such acquisitions may also generate
significant amortization expense related to intangible assets.
Resale of our securities may be
difficult because there may not be sufficient market activity to provide
liquidity of the Company’s shares.
There is
no assurance that the market for the Company’s shares will be maintained or that
it will be sufficiently active or liquid to allow stockholders to easily dispose
of their shares.
A
few customers and suppliers account for a large percentage of our business.
Therefore, the loss of any one customer or supplier could reduce our
sales significantly or impede our ability to comply with our manufacturing
contracts, respectively.
In 2008,
our six largest customers, Pramac Swiss SA, Enesystem Inc., Provent Solarpark,
Pvline Gmbh, and Schueco International KG accounted for 72% of our consolidated
business. In 2007, Joslyn Sunbank, Joslyn Manufacturing, Radiowaves Corporation,
Teleflex Electrical, GE Transportation and Pacific Scientific accounted for
approximately 48% of our consolidated net sales. Our five largest suppliers in
2008 were: Changzhou Trina Solar Energy, Zhejiang Shuqimeng Photo Voltaic,
Jiangsu Aide Solar Energy Technology Co, Jiangyin Hareon Power Co., Ltd. and
Baoding Tianwei Yingli New Energy Resource. These represented
approximately $23 million of our purchases from external suppliers, or
approximately 75% of materials purchased by the Company. In 2007, our two
largest material suppliers were Shanghai Huanxinnuo Electro-Mechanical Products
Company (formerly named Shanghai Xinli Trading Company Ltd.) and Shanghai
Machine Tool Co. Ltd. Together they accounted for $573,328 or 6.8% and $724,891
or 8.6% respectively of the total materials purchased by Worldwide. The loss of
any one customer could significantly reduce our sales. The loss of one
supplier could cause delays in our performance of contracts or reduce our
gross margin if a substitute manufacturer could not deliver on time or at the
same contract price.
8
Taxing
authorities could modify our tax exemptions or challenge our tax allocations and
require us to pay more taxes.
Our
operations are predominantly located in China, where tax incentives have been
extended to encourage foreign investment. Our effective tax rate could increase
if these tax incentives are not renewed upon expiration or tax rates applicable
to us are increased. Tax authorities in jurisdictions in the United States could
challenge the manner in which profits are allocated between US and Chinese
subsidiaries and if we do not prevail in any such challenge we will be required
to pay more taxes
Unforeseen changes in suppliers can
result in losses of tooling deposits and other pre-production costs supporting
our Contract Manufacturing Division.
In most
cases the tool, die, or mold from which a part is made is paid for and owned by
the customer, and is designed for a specific customer. We require our customers
to provide a non-refundable down payment to cover tooling costs, including
pre-production machine set-up costs. In the event that a supplier is unable to
fulfill its production agreements with us, management believes that other
suppliers can be found. However, a change in suppliers would cause a delay in
the production process and could result in loss of tooling deposits and other
supplier advances, causing Worldwide to not comply with the timely delivery
requirements of our contract with our customer, and loss of tooling deposits
will reduce our gross margin on the contract.
Doing business in China is subject to
legal risks and political and economic changes over which we have no
control.
Under its
current leadership, the Chinese government has been pursuing economic reform
policies. Changes in these policies or political instability could affect our
ability to operate, to repatriate funds from China, or increase our costs of
doing business or our tax rate. The Chinese government could change its policies
toward private enterprise or even nationalize or expropriate private
enterprises, which could result in the total loss of our investment in that
country.
We
periodically enter into agreements governed by Chinese law. Unlike the United
States, China has a civil law system based on written statutes in which judicial
decisions have little precedential value. The Chinese government has enacted
some laws and regulations dealing with matters such as corporate organization
and governance, foreign investment, commerce, taxation and trade. However, the
government’s experience in implementing, interpreting and enforcing these
recently enacted laws and regulations is limited, and our ability to enforce
commercial claims or to resolve commercial disputes is uncertain. Furthermore,
enforcement of the laws and regulations may be subject to the exercise of
considerable discretion by agencies of the Chinese government, and forces
unrelated to the legal merits of a particular matter or dispute may influence
their determination. These uncertainties mean that we cannot rely on legal
protections to ensure that suppliers honor their contracts with us. If we suffer
a loss because of breach of contract by a Chinese supplier, we might not be able
to recover the loss.
Currency
fluctuations can cause us significant losses.
Some of
our costs such as payroll, material and equipment costs are denominated in
Chinese Renminbi. In addition, most of our solar module customers pay in
Euros. Changes in the exchange rate between the Renminbi, Euros and the U.S.
dollar will affect our costs of sales and operating margins.
Our
present and future performance will depend on the continued service of senior
management personnel, key sales personnel, and consultants. The key employees
include Jimmy Wang, the Company’s Chief Executive Officer. The loss of the
services of Mr. Wang could have an adverse effect on us.
We
are dependent on third parties to transport our products, so their failure to
transport the products could adversely affect our earnings, sales and geographic
market.
We use
third parties for the vast majority of our shipping and transportation needs. If
these parties fail to deliver products in a timely fashion, including lack of
available trucks or drivers, labor stoppages or if there is an increase in
transportation costs, including increased fuel costs, it would have a material
adverse effect on our earnings and could reduce our sales and geographic
market.
We
have limited business insurance coverage and potential liabilities could exceed
our ability to pay them.
The
insurance industry in the PRC is still at an early stage of development.
Insurance companies in the PRC offer limited business insurance products. We do
not have any business liability or disruption insurance coverage for our
operations in the PRC. Any business disruption, litigation or natural disaster
may result in substantial costs and the diversion of our
resources.
9
Risks
Related to Corporate Governance and Common Stock
Our
common stock is classified as a “penny stock” as that term is generally defined
in the Securities Exchange Act of 1934 to mean equity securities with a price of
less than $5.00. Our common stock will be subject to rules that
impose sales practice and disclosure requirements on broker-dealers who engage
in certain transactions involving a penny stock.
We are
subject to the penny stock rules adopted by the Securities and Exchange
Commission that require brokers to provide extensive disclosure to its customers
prior to executing trades in penny stocks. These disclosure requirements may
cause a reduction in the trading activity of our Common Stock, which in all
likelihood would make it difficult for the Company’s stockholders to sell their
securities.
Rule
3a51-1 of the Securities Exchange Act of 1934 establishes the definition of a
"penny stock," for purposes relevant to us, as any equity security that has a
minimum bid price of less than $5.00 per share or with an exercise price of less
than $5.00 per share, subject to a limited number of exceptions which are not
available to us. It is likely that our shares will be considered to be penny
stocks for the immediately foreseeable future. This classification severely and
adversely affects any market liquidity for our common stock.
For any
transaction involving a penny stock, unless exempt, the penny stock rules
require that a broker or dealer approve a person's account for transactions in
penny stocks and the broker or dealer receive from the investor a written
agreement to the transaction setting forth the identity and quantity of the
penny stock to be purchased. In order to approve a person's account for
transactions in penny stocks, the broker or dealer must obtain financial
information and investment experience and objectives of the person and make a
reasonable determination that the transactions in penny stocks are suitable for
that person and that that person has sufficient knowledge and experience in
financial matters to be capable of evaluating the risks of transactions in penny
stocks.
The
broker or dealer must also deliver, prior to any transaction in a penny stock, a
disclosure schedule prepared by the SEC relating to the penny stock market,
which, in highlight form, sets forth:
·
|
the
basis on which the broker or dealer made the suitability determination,
and
|
|
·
|
that
the broker or dealer received a signed, written agreement from the
investor prior to the transaction.
|
Disclosure
also has to be made about the risks of investing in penny stocks in both public
offerings and in secondary trading and commissions payable to both the
broker-dealer and the registered representative, current quotations for the
securities and the rights and remedies available to an investor in cases
of fraud in penny stock transactions.
Finally,
monthly statements have to be sent disclosing recent price information for the
penny stock held in the account and information on the limited market in penny
stocks.
Because
of these regulations, broker-dealers may not wish to engage in the
above-referenced necessary paperwork and disclosures and/or may encounter
difficulties in their attempt to sell shares of our common stock, which may
affect the ability of selling shareholders or other holders to sell
their shares in any secondary market and have the effect of reducing the
level of trading activity in any secondary market. These additional sales
practice and disclosure requirements could impede the sale of our common stock.
In addition, the liquidity for our common stock may decrease, with a
corresponding decrease in the price of our common stock. Our common stock is
subject to such penny stock rules for the foreseeable future and our
shareholders will, in all likelihood, find it difficult to sell their common
stock.
10
The
market for penny stock has experienced numerous frauds and abuses which could
adversely impact subscribers of our stock.
We
believe that the market for penny stocks has suffered from patterns of fraud and
abuse. Such patterns include:
·
|
control
of the market for the security by one or a few broker-dealers that are
often related to the promoter or issuer;
|
|
·
|
manipulation
of prices through prearranged matching of purchases and sales and false
and misleading press releases;
|
|
·
|
“boiler
room" practices involving high pressure sales tactics and unrealistic
price projections by inexperienced sales persons;
|
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·
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excessive
and undisclosed bid-ask differentials and markups by selling
broker-dealers; and
|
|
·
|
wholesale
dumping of the same securities by promoters and broker-dealers after
prices have been manipulated to a desired level, along with the inevitable
collapse of those prices with consequent investor
losses.
|
We
believe that many of these abuses have occurred with respect to the promotion of
low price stock companies that lacked experienced management, adequate financial
resources, an adequate business plan and/or marketable and successful business
or product.
Our
certificate of incorporation limits the liability of members of the Board of
Directors.
Our
certificate of incorporation limits the personal liability of the director of
the Company for monetary damages for breach of fiduciary duty as a director,
subject to certain exceptions, to the fullest extent allowed. We are organized
under Colorado law. Accordingly, except in limited circumstances, our directors
will not be liable to our stockholders for breach of their fiduciary
duties.
Provisions
of our certificate of incorporation, bylaws and Colorado corporate law have
anti-takeover effects.
Some
provisions in our certificate of incorporation and bylaws could delay or prevent
a change in control of us, even if that change might be beneficial to our
stockholders. Our certificate of incorporation and bylaws contain provisions
that might make acquiring control of us difficult, including provisions limiting
rights to call special meetings of stockholders and regulating the ability of
our stockholders to nominate directors for election at annual meetings of our
stockholders. In addition, our board of directors has the authority, without
further approval of our stockholders, to issue common stock having such rights,
preferences and privileges as the board of directors may determine. Any such
issuance of common stock could, under some circumstances, have the effect of
delaying or preventing a change in control of us and might adversely affect the
rights of holders of common stock.
In
addition, we are subject to Colorado statutes regulating business combinations,
takeovers and control share acquisitions, which might also hinder or delay a
change in control of us. Anti-takeover provisions in our certificate of
incorporation and bylaws, anti-takeover provisions that could be included in the
common stock when issued and the Colorado statutes regulating business
combinations, takeovers and control share acquisitions can depress the market
price of our securities and can limit the stockholders’ ability to receive a
premium on their shares by discouraging takeover and tender offer bids, even if
such events could be viewed by our shareholders or others as beneficial
transactions.
Our internal financial reporting
procedures are still being developed. During the fiscal year ending December 31,
2010, the Company will need to allocate significant resources to meet applicable
internal financial reporting standards...
We have
adopted disclosure controls and procedures that are designed to ensure that
information required to be disclosed by us in the reports that we submit under
the Securities Exchange Act of 1934, as amended, are recorded, processed,
summarized and reported, within the time periods specified in the Securities and
Exchange Commission’s rules and forms. Disclosure controls and procedures
include, without limitation, controls and procedures designed to ensure that
information required to be disclosed by us in the reports that we file or submit
under the Exchange Act are accumulated and communicated to management, including
principal executive and principal financial officers, as appropriate to allow
timely decisions regarding required disclosure. We are taking steps to develop
and adopt appropriate disclosure controls and procedures.
These
efforts require significant time and resources. If we are unable to establish
appropriate internal financial reporting controls and procedures, our reported
financial information may be inaccurate and we will encounter difficulties in
the audit or review of our consolidated financial statements by our independent
auditors, which in turn may have material adverse effects on our ability to
prepare consolidated financial statements in accordance with generally accepted
accounting principles in the United States of America and to comply with SEC
reporting obligations.
11
Failure
to achieve and maintain effective internal controls in accordance with Section
404 of the Sarbanes Oxley Act of 2002 could prevent us from producing reliable
financial reports or identifying fraud. In addition, current and potential
stockholders could lose confidence in our financial reporting, which could have
an adverse effect on our stock price.
We are
subject to Section 404 of the Sarbanes-Oxley Act of 2002. Effective internal
controls are necessary for us to provide reliable financial reports and
effectively prevent fraud, and a lack of effective controls could preclude the
Company from accomplishing these critical functions. We are required to document
and test our internal control procedures in order to satisfy the requirements of
Section 404 of the Sarbanes-Oxley Act of 2002, in connection with, Public
Company Accounting Oversight Board (“PCAOB”) Auditing Standard No. 5 (“AS 5”)
which requires annual management assessments of the effectiveness of our
internal controls over financial reporting. Although we intend to
augment our internal control procedures and expand our accounting staff, there
is no guarantee that this effort will be adequate.
During
the course of testing, we may identify deficiencies which we may not be able to
remediate in time to meet the deadline imposed by the Sarbanes-Oxley Act for
compliance with the requirements of Section 404 and AS5. In addition, if we fail
to maintain the adequacy of our internal accounting controls, as such standards
are modified, supplemented or amended from time to time, we may not be able to
ensure that we can conclude on an ongoing basis that we have effective internal
controls over financial reporting in accordance with Section 404. Failure to
achieve and maintain effective internal controls could cause us to face
regulatory action and also cause investors to lose confidence in our reported
financial information, either of which could have an adverse effect on our stock
price.
Shareholders
may have difficulty trading and obtaining quotations for our common
stock.
Our
common stock may not be actively traded, and the bid and ask prices for our
common stock on the OTCBB may fluctuate widely. As a result, shareholders may
find it difficult to dispose of, or to obtain accurate quotations of the
price of, our securities. This severely limits the liquidity of the common
stock, and would likely reduce the market price of our common stock and hamper
our ability to raise additional capital.
The
market price of our common stock may, and is likely to continue to be, highly
volatile and subject to wide fluctuations.
The
market price of our common stock is likely to be highly volatile and could be
subject to wide fluctuations in response to a number of factors that are beyond
our control, including:
•
|
dilution
caused by the issuance of additional shares of common stock and other
forms of equity securities in connection with future capital financings to
fund business operations and growth, to attract and retain valuable
personnel and in connection with future strategic partnerships with other
companies;
|
|
•
|
announcements
of new acquisitions or other business initiatives by the Company’s
competitors;
|
|
•
|
our
ability to take advantage of new acquisitions or other business
initiatives;
|
|
•
|
fluctuations
in revenue from our petroleum products;
|
|
•
|
changes
in the market for petroleum products and/or in the capital markets
generally;
|
|
•
|
changes
in the demand for petroleum products, including changes resulting from the
introduction or expansion of new petroleum products;
|
|
•
|
quarterly
variations in our revenues and operating expenses;
|
|
•
|
changes
in the valuation of similarly situated companies, both in our industry and
in other industries;
|
|
•
|
changes
in analysts’ estimates affecting us, our competitors and/or our
industry;
|
|
•
|
changes
in the accounting methods used in or otherwise affecting our
industry;
|
|
•
|
additions
and departures of key personnel;
|
|
•
|
announcements
of technological innovations or new products available to our
industry;
|
|
•
|
announcements
by relevant governments pertaining to incentives for biodegradable product
development programs;
|
|
•
|
fluctuations
in interest rates and the availability of capital in the capital markets;
and
|
|
•
|
significant
sales of our common stock, including sales by the investors following
registration of the shares of common stock issued in future offerings by
us.
|
These and
other factors are largely beyond our control, and the impact of these risks,
singly or in the aggregate, may result in material adverse changes to the market
price of our common stock and/or our results of operations and financial
condition.
Our
operating results may fluctuate significantly, and these fluctuations may cause
our stock price to decline.
Operating
results will likely vary in the future primarily as the result of fluctuations
in our revenues and operating expenses, expenses that we incur, and other
factors. If results of operations do not meet the expectations of current or
potential investors, the price of our common stock may decline.
12
Risks
Related to the Company’s Corporate Structure
PRC
laws and regulations governing our business and the validity of certain
contractual arrangements are uncertain. If we are found to be in violation, we
could be subject to sanctions which could result in significant disruptions to
our operations and/or our ability to generate revenues.
There are
substantial uncertainties regarding the interpretation and application of PRC
laws and regulations, including, but not limited to, the laws and regulations
governing our business, or the enforcement and performance of our contractual
arrangements with our vendors and customers. We are considered a foreign person
or foreign enterprise under PRC law. These laws and regulations are
relatively new and may be subject to change, and their official interpretation
and enforcement may involve substantial uncertainty. The effectiveness of newly
enacted laws, regulations or amendments may be delayed, resulting in detrimental
reliance by foreign investors. New laws and regulations that affect existing and
proposed future businesses may also be applied retroactively.
The PRC
government has broad discretion in dealing with violations of laws and
regulations, including levying fines, revoking business and other licenses and
requiring actions necessary for compliance. In particular, licenses and permits
issued or granted to us by relevant governmental bodies may be revoked at a
later time by higher regulatory bodies. We cannot predict the effect of the
interpretation of existing or new PRC laws or regulations on our business. We
cannot assure our shareholders that our current ownership and operating
structure would not be found in violation of any current or future PRC laws or
regulations. As a result, we may be subject to sanctions, including fines, and
could be required to restructure our operations or cease to provide certain
services. Any of these or similar actions could significantly disrupt our
business operations or restrict us from conducting a substantial portion of our
business operations, which could materially and adversely affect our business,
financial condition and results of operations.
Risks
Related to Doing Business in China
Governmental
control of currency conversion may affect the value of your
investment.
The PRC
government imposes controls on the convertibility of Renminbi (“RMB”) into
foreign currencies and, in certain cases, the remittance of currency out of
China. We receive substantially all of our revenues in RMB. Under our current
structure, our cash receipts are primarily derived from cash transfers from our
PRC subsidiaries. Shortages in the availability of foreign currency may restrict
the ability of our PRC subsidiaries and our affiliated entities to remit
sufficient foreign currency to pay cash or other payments to us, or otherwise
satisfy their foreign currency denominated obligations. Under existing PRC
foreign exchange regulations, payments of current account items, including
profit distributions, interest payments and expenditures from trade-related
transactions, can be made in foreign currencies without prior approval from the
PRC State Administration of Foreign Exchange by complying with certain
procedural requirements. However, approval from appropriate government
authorities is required where RMB is to be converted into foreign currency and
remitted out of China to pay capital expenses such as the repayment of bank
loans denominated in foreign currencies. The PRC government may also at its
discretion restrict access in the future to foreign currencies for current
account transactions. If the foreign exchange control system prevents us from
obtaining sufficient foreign currency to satisfy our currency demands, we may
not be able to pay dividends in foreign currencies to our shareholders,
including holders of our common stock.
13
Fluctuation
in the value of the RMB may have a material adverse effect on your
investment.
The value
of the RMB against the U.S. dollar and other currencies may fluctuate and is
affected by, among other things, changes in political and economic conditions..
On July 21, 2005, the PRC government changed its decade-old policy of pegging
the value of the RMB to the U.S. dollar. Under the new policy, the RMB is
permitted to fluctuate within a narrow and managed band against a basket of
certain foreign currencies.. While the international reaction to the RMB
revaluation has generally been positive, there remains significant international
pressure on the PRC government to adopt an even more flexible currency policy,
which could result in a further and more significant appreciation of the RMB
against the U.S. dollar. Our revenues and costs are denominated in RMB. An
appreciation of RMB against the U.S. dollar would also result in foreign
currency translation losses for financial reporting purposes when we translate
our RMB denominated financial assets into U.S. Dollars, as the U.S. Dollar is
our reporting currency.
PRC
regulations relating to the establishment of offshore special purpose companies
by PRC residents, if applied to us, may subject the PRC resident shareholders of
us or our parent company to personal liability and limit our ability to acquire
PRC companies or to inject capital into our PRC subsidiary, limit our PRC
subsidiary's ability to distribute profits to us or otherwise materially
adversely affect us.
In
October 2005 SAFE issued a public notice, the Notice on Relevant Issues in the
Foreign Exchange Control over Financing and Return Investment Through Special
Purpose Companies by Residents Inside China, or the SAFE notice, which requires
PRC residents, including both legal persons and natural persons, to register
with the competent local SAFE branch before establishing or controlling any
company outside of China, referred to as an "offshore special purpose company,"
for the purpose of overseas equity financing involving onshore assets or equity
interests held by them. In addition any PRC resident that is the
shareholder of an offshore special purpose company is required to amend its SAFE
registration with the local SAFE branch with respect to that offshore special
purpose company in connection with any increase or decrease of capital transfer
of shares, merger, division, equity investment or creation of any security
interest over any assets located in China. Moreover, if the offshore special
purpose company was established and owned the onshore assets or equity interests
before the implementation date of the SAFE notice, a retroactive SAFE
registration is required to have been completed before March 31, 2006. If any
PRC shareholder of any offshore special purpose company fails to make the
required SAFE registration and amendment, the PRC subsidiaries of that offshore
special purpose company may be prohibited from distributing their profits and
the proceeds from any reduction in capital, share transfer or liquidation to the
offshore special purpose company. Moreover, failure to comply with the SAFE
registration and amendment requirements described above could result in
liability under PRC laws for evasion of applicable foreign exchange
restrictions. After the SAFE notice, an implementation rule on the SAFE notice
was issued on May 29, 2007 which provides for implementation guidance and
supplements the procedures as provided in the SAFE notice.
Due to
lack of official interpretation of SAFE notice and implementation rules, some of
the terms and provisions in the SAFE remain unclear and implementation by
central SAFE and local SAFE branches of the SAFE notice has been inconsistent
since its adoption. Based on the advice of our PRC counsel and after
consultation with relevant SAFE officials, we believe the PRC resident
shareholders of our parent company, Worldwide Energy & Manufacturing USA,
Inc., were required to complete their respective SAFE registrations pursuant to
the SAFE notice. Moreover, because of uncertainty over how the SAFE
notice and its implementation rules will be interpreted and implemented, and how
or whether SAFE notice and implementation rules will apply it to us, we cannot
predict how it will affect our business operations or future strategies. For
example our present and prospective PRC subsidiaries’ ability to conduct foreign
exchange activities, such as the remittance of dividends and foreign
currency-denominated borrowings, may be subject to compliance with the SAFE
notice by our or our parent company's PRC resident beneficial holders. In
addition, such PRC residents may not always complete the necessary registration
procedures required by the SAFE notice. We also have little control
over either our present or prospective direct or indirect shareholders or the
outcome of such registration procedures. A failure by our or our parent
company's PRC resident beneficial holders or future PRC resident shareholders to
comply with the SAFE notice, if SAFE requires it, could subject us to fines or
legal sanctions, restrict our overseas or cross-border investment activities,
limit our subsidiary's ability to make distributions or pay dividends or affect
our ownership structure, which could adversely affect our business and
prospects.
CAUTIONARY
STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This
prospectus contains forward-looking statements. All statements other than
statements of historical facts contained in this prospectus, including
statements regarding our future results of operations and financial position,
business strategy and plans and objectives of management for future operations,
are forward-looking statements. These statements involve known and unknown
risks, uncertainties and other factors that may cause our actual results,
performance or achievements to be materially different from any future results,
performance or achievements expressed or implied by the forward-looking
statements.
In
some cases, you can identify forward-looking statements by terms such as "may,"
"will," "should," "expects," "plans," "anticipates," "could," "intends,"
"target," "projects," "contemplates," "believes," "estimates," "predicts,"
"potential" or "continue" or the negative of these terms or other similar words.
These statements are only predictions. We have based these forward-looking
statements largely on our current expectations and projections about future
events and financial trends that we believe may affect our business, financial
condition and results of operations. We discuss many of the risks in greater
detail under the heading "Risk Factors." Also, these forward-looking statements
represent our estimates and assumptions only as of the date of this prospectus.
Except as required by law, we assume no obligation to update any forward-looking
statements after the date of this prospectus.
14
This
prospectus also contains estimates and other statistical data made by
independent parties and by us relating to market size and growth and other
industry data. This data involves a number of assumptions and limitations, and
you are cautioned not to give undue weight to such estimates. We have not
independently verified the statistical and other industry data generated by
independent parties and contained in this prospectus and, accordingly, we cannot
guarantee their accuracy or completeness. In addition, projections, assumptions
and estimates of our future performance and the future performance of the
industries in which we operate are necessarily subject to a high degree of
uncertainty and risk due to a variety of factors, including those described in
“Risk Factors” and elsewhere in this prospectus. These and other factors could
cause results to differ materially from those expressed in the estimates made by
the independent parties and by us.
We will
not receive any proceeds from the sales by the selling
stockholders. We may receive proceeds from any exercise of
outstanding warrants. The selling shareholders and placement agents may exercise
the warrants on a cashless basis if the shares of common stock underlying the
warrants are not then registered pursuant to an effective registration
statement. In the event the selling shareholders or placement agents exercise
the Warrants on a cashless basis, then we will not receive any proceeds. Any
proceeds received from the exercise of warrants will be used for
general working capital purposes.
MARKET
FOR OUR COMMON STOCK AND RELATED STOCKHOLDER MATTERS
Our
common stock has been quoted on the OTC Bulletin Board since June 1, 2004
and currently trades under the symbol "WEMU.OB”. The quotations reflect
inter-dealer prices, without retail mark-ups, mark-downs, or commissions and may
not necessarily represent actual transactions.
The
closing price of our common stock on the OTC Bulletin Board on February 11,
2010 was $5.00
per share.
15
The
following table sets forth the range of high and low sales prices as reported on
the OTC Bulletin Board for the periods indicated.
Sales
Price
|
||||||||
Year
Ended December 31, 2009
|
High |
Low
|
||||||
First
quarter ended March 31, 2009
|
$ | 4.45 | $ | 2.61 | ||||
Second
quarter ended June 30, 2009
|
$ | 5.60 | $ | 2.85 | ||||
Third
quarter ended September 30, 2009
|
$ | 7.50 | $ | 2.05 | ||||
Fourth
quarter ended December 31, 2009
|
$ | 5.94 | $ | 3.05 |
Sales
Price
|
||||||||
Year
Ended December 31, 2008
|
High
|
Low
|
||||||
First
quarter ended March 31, 2008
|
$ | 10.01 | $ | 8.00 | ||||
Second
quarter ended June 30, 2008
|
$ | 9.15 | $ | 6.50 | ||||
Third
quarter ended September 30, 2008
|
$ | 8.00 | $ | 6.00 | ||||
Fourth
quarter ended December 31, 2008
|
$ | 7.00 | $ | 3.25 |
Holders
As of
February 12, 2010, an aggregate of 5,642,567 shares of our common stock were
issued and outstanding and were owned by approximately 129 stockholders of
record, based on information provided by our transfer agent.
Dividends
We have
not paid any cash dividends to shareholders. We are required to pay
dividends on a quarterly basis to the holders of our outstanding series A
preferred stock. The declaration of any future cash dividends is at the
discretion of our board of directors and depends upon our earnings,
if any, our capital requirements and financial position, our general economic
conditions, and other pertinent conditions. It is our present
intention not to pay any cash dividends in the foreseeable future, unless
required. We intend to reinvest earnings, if any, in our business
operations.
Recent
Sales of Unregistered Securities
On June
23, 2008, we issued 1,055,103 shares of common stock , 685,817 Series A Warrants
of the Company (the “Series A Warrants”) and an aggregate of 369,286 Series B
Warrants of the Company (the “Series B Warrants”), in connection with a
financing... The Series A Warrants are exercisable for a period of 24 months
from closing at an exercise price of $7.00 per share. The Series B
Warrants are exercisable for a period of 36 months from the closing at an
exercise price of $9.00 per share.
On July
24, 2008, we issued 56,006 shares of common stock , 36,404 Series A
Warrants and an aggregate of 19,602 Series B Warrants, in connection with a
financing.. The Series A Warrants are exercisable for a period of 24 months from
closing at an exercise price of $7.00 per share. The Series B Warrants are
exercisable for a period of 36 months from the closing at an exercise price of
$9.00 per share
On March
6, 2009, we issued 120,000 shares of its common stock to consultants, valued at
$187,200, as part of their compensation for the consulting services. We
amortized the consultancy fee of $187,200 over the 12-month term of the
agreement from January 1, 2009 to December 31, 2009. The expense is $15,600 for
each month and total stock-based compensation expense would have been $46,800
for the quarter ended March 31, 2009. However, on January 2, 2009, one of the
consultants returned 4,000 shares to us for the work that he did not perform,
valued at $14,680 or $3.67 per share, so the total for the quarter was
$32,120.
On March
20, 2009, we issued 8,000 shares of its common stock in exchange for one unit
investment of JK Advisors Fund LLC, of which 1,000 shares were paid to the
broker arranging the sale and the remainder was distributed to the members of
the fund. On June 23, 2009, the Company and JK Advisors mutually
agreed to cancel the transaction with no penalties or fees for either
party.
On June
23, 2009, the Company issued a total of 12,100 restricted shares for services
consisting of 1) 5,000 shares being issued to its outside independent Board of
Directors, 2) 4,000 shares being issued for legal services, and 3) 3,100 shares
being issued to employees in China.
On
November 1, 2009, the Company issued 10,000 shares for financial consultancy
services.
On
January 11, 2010, the Company issued 40,000 shares as part of compensation
packages for two employees.
On
January 26, 2010, we issued an aggregate of 1,777,777 shares of common stock and
warrants to purchase 1,777,777shares of common stock pursuant to a financing
agreement, the terms of which are discussed herein. In conjunction
with such financing, we issued the placement agent a warrant to purchase 213,333
shares of common stock. The warrants are exercisable for a term of five years at
an exercise price of $5.65 per share. The warrants also contain
anti-dilution provisions, including but not limited to, if the Company issues
shares of its common stock at less than the then existing conversion price, the
conversion price of the warrants will automatically be reduced to such lower
price and the number of shares to be issued upon exercise will be
proportionately increased. The warrants contain limitations on
exercise, including the limitation that the holders may not convert their
warrants to the extent that upon exercise the holder, together with its
affiliates, would own in excess of 4.99% of the Company’s outstanding shares of
common stock.
On
February 9, 2010, we issued an aggregate of 193,179 shares of common stock and
warrants to purchase 193,179 shares of common stock pursuant to a financing
agreement, the terms of which are discussed herein. In conjunction
with such financing, we issued the placement agent a warrant to purchase 3,981
shares of common stock. The warrants are exercisable for a term of five years at
an exercise price of $5.65 per share. The warrants also contain
anti-dilution provisions, including but not limited to, if the Company issues
shares of its common stock at less than the then existing conversion price, the
conversion price of the warrants will automatically be reduced to such lower
price and the number of shares to be issued upon exercise will be
proportionately increased. The warrants contain limitations on
exercise, including the limitation that the holders may not convert their
warrants to the extent that upon exercise the holder, together with its
affiliates, would own in excess of 4.99% of the Company’s
Equity Compensation Plan
Information
We
established a stock option plan for its employees on April 1, 2004 in order to
attract and retain qualified employees on behalf of the Company, as well as
provide employees with an opportunity to participate in the growth of the
Company. Worldwide approved the authorization of 200,000 shares. As of
February 12, 2010, no option shares have been exercised under this plan and
105,283 previously issued options have been cancelled. The 2004 Stock Option
Plan provides the opportunity for employees to purchase shares at
$6.00.
16
The
following table sets forth certain information as of February 12, 2010, with
respect to compensation plans under which the Company’s equity securities are
authorized for issuance:
(a)
|
(b)
|
(c)
|
||
_________________
|
_________________
|
_________________
|
||
Number
of securities to be issued upon exercise of outstanding options, warrants
and rights
|
The
weighted-average exercise price of outstanding options, warrants and
rights
|
Number
of securities remaining available for future issuance under equity
compensation plans (excluding securities reflected in column
(a))
|
||
Equity
compensation
|
94,717
|
$6.00
|
0
|
|
Plans
approved by
|
||||
Security
holders
|
||||
Equity
compensation
|
None
|
-
|
-
|
|
Plans
not approved
|
||||
By
security holders
|
||||
Total
|
Selected
Financial Data
Summary
Consolidated Financial Data
The
following summary of consolidated statements of income data for the years ended
December 31, 2008, 2007, 2006 and 2005 and the selected consolidated balance
sheet data as of the years ended December 31, 2008, 2007, 2006 and 2005 are
derived from, and are qualified by reference to, the audited consolidated
financial statements of Worldwide that have been audited by Child, Van Wagoner
& Bradshaw, PLLC, independent registered public accounting firms, and that
are included elsewhere in this report.
The
following summary of consolidated financial information should be read in
conjunction with our consolidated financial statements and related notes and the
information contained in “Management’s Discussion and Analysis of Financial
Condition and Results of Operations,” appearing elsewhere in this report. Our
historical results are not necessarily indicative of our results for any future
periods.
December
31, 2008
(restated)
|
December
31, 2007
|
December
31, 2006
|
December
31, 2005
|
December
31, 2004
|
December
31, 2003
|
|||||||||||||||||||
Statement
of Income Data
|
||||||||||||||||||||||||
Revenues
|
$ | 45,913,957 | $ | 12,132,710 | $ | 11,409,300 | $ | 8,713,431 | $ | 6,700,593 | $ | 5,999,630 | ||||||||||||
Cost
of Sales
|
$ | 39,746,286 | $ | 8,350,621 | $ | 8,022,875 | $ | 5,911,417 | $ | 4,153,368 | $ | 4,051,225 | ||||||||||||
Operating
Expenses
|
$ | 4,389,883 | $ | 3,086,327 | $ | 2,183,056 | $ | 2,285,085 | $ | 1,777,379 | $ | 1,948,405 | ||||||||||||
Income
From Operations
|
$ | 1,777,788 | $ | 695,762 | $ | 1,203,369 | $ | 516,929 | $ | 769,846 | $ | 520,777 | ||||||||||||
Income
Taxes
|
$ | (284,278 | ) | $ | 65,726 | $ | 38,937 | $ | 1,700 | $ | 256,492 | $ | 38,500 | |||||||||||
Net
Income
|
$ | 1,001,648 | $ | 575,674 | $ | 969,429 | $ | 581,166 | $ | 521,486 | $ | 540,872 | ||||||||||||
Number
of Shares Issued and Outstanding
|
3,493,512 | 2,047,363 | 2,030,863 | 2,024,002 | 2,011,842 | 2,000,000 | ||||||||||||||||||
Income
from Operations Per Share
|
.65 | .34 | .59 | .26 | .38 | .26 | ||||||||||||||||||
Weighted
Average Number of Shares Outstanding
|
2,731,995 | 2,035,495 | 2,030,863 | 2,024,002 | 2,011,842 | 2,000,000 | ||||||||||||||||||
Net
Income Per Share
|
.37 | .28 | .48 | .29 | .26 | .27 |
December
31, 2008
|
December
31, 2007
|
December
31, 2006
|
December
31, 2005
|
December
31, 2004
|
December
31, 2003
|
|||||||||||||||||||
Balance
Sheet Data
|
||||||||||||||||||||||||
Current
Assets
|
$ | 14,660,221 | 8,210,711 | $ | 6,599,094 | $ | 4,916,119 | $ | 2,199,978 | $ | 1,760,468 | |||||||||||||
Total
Assets
|
$ | 19,133,009 | 8,762,841 | $ | 7,127,847 | $ | 5,427,736 | $ | 2,621,760 | $ | 2,562,792 | |||||||||||||
Total
Current Liabilities
|
$ | 7,125,493 | 4,447,946 | $ | 3,562,899 | $ | 2,773,935 | $ | 1,311,219 | $ | 1,751,211 | |||||||||||||
Total
Long-Term Liabilities
|
$ | 997,099 | 498,812 | $ | 522,024 | $ | 1,268 | $ | 16,827 | $ | 174,353 | |||||||||||||
Total
Shareholders’ Equity
|
$ | 10,397,778 | 3,816,083 | $ | 3,042,924 | $ | 1,942,573 | $ | 1,293,714 | $ | 637,228 |
AND
RESULTS OF OPERATION
Management's
Discussion and Analysis of Financial Condition and Results of Operations
("MD&A") is designed to provide information that is supplemental to, and
should be read together with, the Company’s consolidated financial statements
and the accompanying notes contained in this Prospectus. Information in this
Item 7 is intended to assist the reader in obtaining an understanding of
the consolidated financial statements, the changes in certain key items in those
financial statements from year to year, the primary factors that accounted for
those changes, and any known trends or uncertainties that the Company is aware
of that may have a material effect on the Company’s future performance, as well
as how certain accounting principles affect the consolidated financial
statements. MD&A includes the following sections:
•
Highlights and Executive Summary
•
Results of Operations—an analysis of the Company’s consolidated results of
operations, for the two years presented in the consolidated financial
statements
•
Liquidity and Capital Resources—an analysis of the effect of the Company’s
operating, financing and investing activities on the Company’s liquidity and
capital resources
•
Off-Balance Sheet Arrangements—a discussion of such commitments and
arrangements
•
Critical Accounting Policies and Estimates—a discussion of accounting policies
that require significant judgments and estimates
•
New Accounting Pronouncements—a summary and discussion of the Company’s plans
for the adoption of relevant new accounting standards relevant
The following discussion
contains forward-looking statements that reflect the Company’s plans, estimates
and beliefs. Actual results could differ materially from those discussed in
these forward-looking statements. Factors that could cause or contribute to
these differences include, but are not limited to, those discussed below and
elsewhere in this Prospectus particularly in "Special Note Regarding
Forward-Looking Statements," "Market Data" and "Risk
Factors."
17
Highlights
and Executive Summary
We are an
engineering, contract manufacturing and direct manufacturing company, primarily
servicing customers globally for our solar modules and companies in the United
States that outsource their smaller scale production orders for offshore
production in China. From our inception in 1993 until 2005, we were strictly an
intermediary or “middleman,” working with our customers and our subcontractors
to assure that our customers received high quality components on a timely basis.
While we still subcontract a significant portion of our business, since 2005 we
have begun the transition to becoming a direct contract manufacturer, operating
some of our own factories.
In the
fourth quarter of 2005 we established a die-casting and machining factory
through leasing an existing facility from a former supplier and initially
investing approximately $500,000 to upgrade the equipment and manufacturing
buildings. In these transactions we acquired assets, the expertise of the
employees, the managers of the factories, and a portion of the existing customer
base of those factories. In the third quarter of 2005, we also established an
electronics manufacturing factory.
In
February of 2008, Worldwide established a solar division that focuses on
photovoltaic module technology under the brand name of “AmeriSolar.” On
February 4, 2008, we changed our name from Worldwide Manufacturing USA, Inc. to
Worldwide Energy and Manufacturing USA, Inc. in order to reflect our expansion
into the solar energy industry. The Company issued 300,000 restricted shares for
the AmeriSolar brand name. Worldwide then leased a 129,167 square foot facility
in Ningbo, China. The lease term is from July 18, 2008 to July 17,
2013. This facility houses the production operations and R&D
center for the Company’s solar division. This factory has the capability of
producing approximately 60MW in solar modules per year. By opening
this factory we increased gross and net margins in our Solar Division.
Furthermore, it will help us through the R&D department to continue to
improve, develop and enhance our solar modules. We continue to explore
opportunities as well as expand our solar sales and distribution network
globally. In mid-2009 we announced our plans to build a PV solar
module factory in Nantong China. Construction of Phase 1 will be
complete in second quarter 2010 and has enough area for 100MW of production
capacity. This division generated $31.0 million in sales for the
twelve month period ending December 31, 2008.
On August
15, 2008, we formed a new Company called Worldwide Energy and Manufacturing
(Ningbo) Co. Ltd. (Ningbo), which is the solar energy research and development
manufacturer of PV Solar Modules. This subsidiary operates out of the facility
in Ningbo China as listed above.
On
October 14, 2008, we completed the acquisition of 55% of Shanghai De Hong
Electric and Electronic Company Limited (“De Hong”) through acquiring 55% of the
outstanding capital stock of De Hong, a Chinese corporation, through our wholly
owned subsidiary Intech Electro-Mechanical Products Co., Ltd., a China
corporation (“Intech”). The terms of the Agreement dated February 3, 2008 were
that Intech paid cash consideration of approximately $1 million dollars for a
55% interest in De Hong in two installments. We funded the
acquisition with some of the proceeds from the sale of 1,055,103 shares of its
common stock, or $4,747,970, on June 23, 2008. After completion of the
acquisition, the company changed the name of the subsidiary to Shanghai
Intech-Tron Electric and Electronics Co., which owns the operating subsidiary
Shanghai Detron Electric and Electronics Co.
Intech-Tron
is a power supply factory in Shanghai, China with designing and R & D
capabilities and their revenues were about $6.17 million for the twelve
months ended December 31, 2008, and $ 4.1 million for the twelve months
ended December 31, 2007.
18
On
February 27, 2009, we established a new company called Worldwide Energy and
Manufacturing (Nantong) Co. Ltd (Nantong). This entity will operate
out of our soon to be completed facility in Nantong China, as described
above.
We made the
transition to become a direct manufacturer in several product areas because we
felt that as a contract manufacturer we were constrained in our growth. Many
Fortune 500 and other large companies either cannot or choose not to work with
contract manufacturers, preferring to go directly to the source that can
manufacture the product and thereby avoid the additional expense of a middleman.
This is particularly true for very large orders where the added cost of a
middleman can have a material impact on the customer’s bottom line. As a result,
our revenues have for the most part been limited to smaller scale production
orders placed by companies that are not among the largest companies in the
United States or elsewhere. Additionally, as a middleman we must share any
potential gross profit with the subcontracting factory. Therefore, our customers
are generally smaller, the orders they place are smaller, and the income and
profit we can generate from those orders is of necessity limited because we are
not directly manufacturing the products.. On the other hand, when we subcontract
the actual manufacturing of our customers’ products and components, we do not
need to hire factory employees, purchase materials, purchase and maintain
manufacturing equipment or incur the costs of the manufacturing facilities. To
some extent, these costs are built into the price charged by our subcontractors,
but if we do not place orders, we do not incur those costs.
The
establishment of these factories, including asset purchases and factory
upgrades, was funded by three separate sources. The earlier acquisitions of the
die cast and electronic factory primarily was financed by loans from Jimmy and
Mindy Wang, our principal stockholders and executive officers, as well as
increased lines of credit. Our credit line increased to $3,025,000 with Bank of
the West from a $2,250,000 line with Wells Fargo during 2008. The power
supply company and the establishment of the two new solar module companies were
funded by two equity transactions dated June 23 and July 24, 2008 where the
Company raised approximately $5,000,000. In the future, we expect to continue to
acquire or newly-establish factories that will give us the capability to
manufacture those product lines our management believes are the most
profitable.
With the
continuing transition into direct manufacturing and the renewable energy field,
we expect to continue to increase sales outside the United States, and in
particular, increase the number of customers in PRC, other Asian markets and
Europe. Our costs to establish and improve these factories will increase along
with sales and profits.
19
The
impact of our factory operations is as follows:
(i)
|
In
February of 2008, Worldwide established a solar division that focuses on
photovoltaic module technology under the brand name of “AmeriSolar.”
For the year ended December 31, 2008, this division generated
$30,999,962 in sales with a net profit of $865,860. For the nine months
ending September 31, 2009, this division delivered $29.4 million in
revenue and $1.47 million in net
profit.
|
(ii)
|
Our
Diecast companies generated revenues of approximately $3,887,410 and a net
income of $144,000 for the year ending December 31, 2008. Revenues
increased by $1,042,410 or approximately 36.6% over period ending December
31, 2007 where revenues were $2,845,000. Revenue increase as a
result of increased orders from Shanghai GM. Net profit decreased
from $257,000 for the year ending December 31, 2007 to $144,000 for the
period ending December 31, 2008. The decrease was $113,000 or
approximately 44%. This decrease in net profit was the result of
renovation costs for a high capacity machine that will be placed into
operation in the second half of 2009. In addition, the profit margins on
GM products are less than other die-cast customers, resulting in lower
margins and causing the decline in net
profits.
|
(iii)
|
Shanghai
Intech, the Company’s quality assurance arm and electronics factory, had
revenues of approximately $6,613,502 and net income of $382,088 for the
year ending December 31, 2008 compared to revenues of $5,969,000 for the
year ending December 31, 2007 and net income of $287,000. Revenues
increased by $644,502 or 10.8%. Additionally, net profits increased by
$95,088 or 33.1%. The increase in net profit and revenues was result
of continued demand from our customers. Further, the recently announced
Detron acquisition will be combined with Intech’s electronics factory.
This will serve to reduce overhead and streamline some of the operations.
In 2008, Detron had revenues of approximately $5,401,962 and a net profit
of $518,670. The acquisition was not completed until October 14, 2008;
therefore, Detron’s revenue numbers and profits have little impact on
Intech’s financial results.
|
Through
the development of our product mix, which consists of solar modules, foundry,
machining and stamping, electronics and fiber optics products lines, our
business has become more diverse. In the past, foundry and machining and
stamping accounted for more than 90% of our business. This percentage has
decreased to approximately 20-25% since forming our Solar Division. We expect
that the solar module business will continue to become a larger part of the
Company’s revenues and profits. For 2009, we expect solar modules sales to
represent in excess of 80% of our total revenues.
Generally,
our operating results have been, and will continue to be, affected by a number
of factors, including the following:
•
|
our
customers may cancel or delay orders or change production
quantities;
|
|
•
|
the
overall market conditions in the solar industry;
|
|
•
|
the
integration of acquired businesses and
facilities; and
|
|
•
|
the
management of our growth and changes in our
operations.
|
We also
are subject to other risks, including risks associated with operating in foreign
countries, changes in our tax rates, and fluctuations in currency exchange
rates.
20
Management’s
Discussion for September 30, 2009
Results
of Operations
Net sales
for the three months ending September 30, 2009 were $18,618,508 compared to net
sales of $19,102,654 for the same period in 2008. This decrease of $484,146, or
2.5% is due to a drop in market level pricing on Solar Modules (our MW shipments
actually increased by approximately 2.99 MW when comparing these periods) and by
the decreased volume from our Contract Manufacturing division. We have
seen significant market price deterioration in the last several months on PV
solar Modules, but in the last several weeks, we have seen a stabilization of
pricing and expect this to continue through second quarter 2010. Lower volume in
our Contract Manufacturing division is brought about by lower overall
consumption by our customers due to the current global economic conditions and
as the economy recovers, we expect our sales volume to correspondingly increase.
The Company continues to focus on the sales and marketing of its solar
modules by establishing sales teams in China, United States and European
countries. Solar module revenues comprise approximately 83.4% of the
Company's gross sales in the three-month period ending September 30, 2009
compared to 82.6% in the same period of 2008.
Net sales
for the nine-month period ending September 30, 2009 was $39,217,288 compared to
sales of $31,348,064 in the nine-month period ending September 30, 2008.
The increase of $7,869,224 or approximately 25.1% was the result of an
increase in shipments from the Solar division. The Company continues to focus on
market penetration for its PV Solar Modules and expect sales to increase.
Solar module revenues comprise approximately 75.1% of the Company's gross
sales in the nine-month period ending September 30, 2009 compared to 68.8 % in
the same period of 2008.
Gross
profit increased by $1,497,331, or 109.8% from $1,363,933 in the quarter ending
September 30, 2008 to $2,861,264 for the three months ending September 30, 2009.
The gross profit from solar module sales was $1,797,729 for the three
months ended September 30, 2009 compared to $437,595 in the same period of 2008.
This represents an increase of $1,360,134 in gross profit for our energy
division or approximately 310% and is due to lower material costs for module
production. As stated before, the supply chain for PV solar modules has
experienced market dynamics and significant price pressures, although current
levels seem to have stabilized. The gross profit for contract
manufacturing for the three months ended September 30, 2009 was $1,063,535
compared to $926,338 in the same period of 2008, an increase of $137,197 or
14.9% and is due to cost reduction programs and the inclusion of the higher
margin electronics sales at Detron.
For the
nine months ending September 30, 2009 gross profit was $6,562,456 compared to
gross profit of $3,854,089 in the same period in 2008. This represents an
increase of $2,708,367 or 70.3%. The gross profit for the nine months
ended September 30, 2009 for the solar division was $3,590,782 compared to
$1,151,325 in the same period of 2008. This represents an increase of $2,439,457
in gross profit in the nine months ending September 30, 2009 or an approximate
increase of 211.8% due to robust sales and material cost reductions compared to
2008. The gross profit for contract manufacturing for the nine months
ended September 30, 2009 was $2,971,674 compared to $2,702,764 in the same
period of 2008, an increase of $268,411 or approximately 9.9% due to the
inclusion of higher margin electronics sales at Detron and cost reduction
efforts at all manufacturing facilities.
Cost of
goods sold for the three months ended September 30, 2009 was $15,757,244
compared to $17,738,721 for the same period in 2008. The decrease is
$1,981,477 or approximately 11.2% was primarily due to the softer sales from
both of our divisions and heavy reductions in the cost of materials for solar
modules. The cost of goods for solar modules for quarter ending September
30, 2009 was $13,734,458 compared to $15,338,086 for the same period in 2008.
The decrease of $1,603,628 reflects the economies achieved by our procurement
teams in sourcing the solar components. The costs of goods sold for
Contract Manufacturing was $2,022,786 for the quarter ending September 30, 2009
compared to cost of goods sold of $2,400,635, a $377,849 reduction, due to lower
sales volume and aggressive cost reduction measures coming to fruition.
Cost of
goods sold for the nine months ended September 30, 2009 was $32,654,832 compared
to $27,493,975 for the same period in 2008, an increase of $5,160,857 or
approximately 18.8%. The cost of goods for the energy division for nine
months ending September 30, 2009 was $26,330,403 compared to $20,416,103 for the
same period in 2008. The increase of $5,914,300 or 29% was due to the higher
sales. The costs of goods sold for contract manufacturing was $6,324,529
for the nine months ending September 30, 2009 compared to cost of goods sold of
$7,077,874 in the same period of 2008, a reduction of approximately 10.6% due to
the inclusion of higher margin business at Detron and cost reduction
efforts.
The gross
margin was 15.4% for the three months ending September 30, 2009 compared to 7.1%
in the same period in 2008. The gross margin for our Solar Division for
the quarter ending September 30, 2009 was approximately 11.6% compared to 2.8%
for the same period in 2008. This increase is due to the before mentioned
cost reductions. The gross margin for contract manufacturing for the
quarter ending September 30, 2009 was 34.5% compared to 27.8% in the same period
in 2008. The improvement of gross margin in contract manufacturing was due to
improved margins at the Electro Mechanical division and the inclusion of
Detron.
The gross
margin was 16.7% for the nine months ending September 30, 2009 compared to 12.3%
in the same period in 2008. Gross margin for Solar for the period
increased from 5.3% to 12.2% due to material cost reductions and economies
brought about with higher sales volume, both in sales value and Mega-Watts
shipped. Gross margin for Contract Manufacturing increased from 27.7% to
30.4 % due to aforementioned cost reduction programs and higher margin business
from Detron.
21
In the
nine month period ending September 30, 2009 there was stock based compensation
of $162,020 compared to $95,000 for stock based compensation in 2008. Further
the Company had depreciation expense of $246,366 in the nine month period ending
September 30, 2009 compared to $10,713 in the same period of 2008, due to the
greater amount of depreciable assets owned by the Company.
Net
income before tax for the three months ending September 30, 2009 was $1,428,873
compared to a net income before tax of $555,237 for the three months ended
September 30, 2008. The increase of $873,636 or approximately 157.3% is
primarily due to the higher gross profit driven by our material cost reductions.
For the
nine-month period ending September 30, 2009, net income before tax was
$2,248,995 compared to net income of $1,210,765 in the same period in 2008. The
increase of $1,038,230 or approximately 85.7%, was the result of increase sales
for our solar modules and increased gross profit from cost reductions. Net
income after tax for the three months ending September 30, 2009 was $1,001,376
compared to a net profit of $546,723 for the three months ended September 30,
2008. The increase of $454,653 or approximately 83.2% was driven by greater
profitability of both the Solar and Contract Manufacturing divisions.
Net
income after tax for the nine months ending September 30, 2009 was $1,578,874
compared to a net profit of $1,193,952 for the nine months ended September 30,
2008. The increase of $384,922 or approximately 32.2% was the result of greater
gross margins across the corporation.
Selling,
general and administration expenses for the three months ended September 30,
2009, totaled $1,316,386 compared to $750,983 in the same quarter in 2008, an
increase of $565,403 or approximately 75.3%. Sales, general and administration
expenses were $514,516 for three month period ending September 30, 2009 compared
to $231,008 in the same period in 2008 an increase of $283,508 or 122.7% for our
solar module division as this division continues to grow its sales and marketing
efforts. Sales, general and administration expenses for the three months ended
September 30, 2009 for our contract manufacturing division was $801,870 compared
to $519,975 in the same period of 2008. The increase of $281,895 or 54.2% was
due primarily to the inclusion of Detron.
For the
nine-month period ending September 30, 2009 sales, general and administration
expenses was $3,728,136 compared to $2,227,502 in the same period in 2008, an
increase of $1,500,634 or approximately 67.4%. Sales, general and
administration expenses were $1,964,547 for nine month period ending September
30, 2009 compared to $718,575 in the same period in 2008 an increase of
$1,245,972 or 172.0% for our solar module division as this division continues to
grow. Sales, general and administration expenses for the nine-month period ended
September 30, 2009 for our contract manufacturing division was $1,763,589
compared to $1,508,927 in the same period of 2008. The increase of $254,662 or
16.9% was due primarily to the increase of Detron. We do not anticipate
significant increases in sales, general and administration expenses other than
those directly attributed to increases in sales such as marketing and sales
commissions.
LIQUIDITY
AND CAPITAL RESOURCES
The
following is a summary of Worldwide’s cash flows from (used in) operating,
investing, and financing activities during the periods indicated:
Nine
months ended September 30,
|
||||||||
2009
|
2008
|
|||||||
Cash
at Beginning of Period
|
$ | 5,092,476 | $ | 2,111,825 | ||||
Net
Cash provided by (used by) Operating Activities
|
272,579 | (1,441,275 | ) | |||||
Net
Cash used by Investing Activities
|
(2,161,574 | ) | (1,628,709 | ) | ||||
Net
Cash provided by Financing Activities
|
1,873,707 | 5,306,492 | ||||||
Effect
of Exchange Rate Changes on Cash
|
(9,550 | ) | 114,411 | |||||
Cash
at End of Period
|
$ | 5,067,638 | $ | 4,462,744 |
In 2008
our credit line was increased by approximately $775,000 from a line of
credit in the amount of $2.25 million with Golden Gate Bank to $3.025 million,
as a result of securing two new credit lines with Bank of the West, one for
$1,025,000 and the other for $2,000,000. The credit line with Golden Gate Bank
was subsequently closed. These revolving lines of credit are secured by the
assets of the Company and guaranteed by its officers. The maturity date of these
two credit lines is May 20, 2010 and June 1, 2011, respectively. The balance
outstanding on the first line of credit as of September 30, 2009 is $2,000,000,
and $0 is still available for use. Additionally, the second line of credit has a
balance outstanding of $763,285 and $261,715 is still available for use as of
September 30, 2009.
22
For the
nine-month period ending September 30 2009, net cash provided by operations was
$272,579 compared to net cash used by September 30, 2008 of $1,441,275. The
major factor for the increase in net cash provided by operations was the
increase in profitability of the Company. Net cash used in investing was
$2,161,574 in the nine- month period ending September 30, 2009, compared to net
cash used of $1,628,709 in the same period of 2008. This increase was the result
of our acquisition of property, plant and equipment and the construction in
progress of our new solar module factory and the transfer of $1,417,356 into a
restricted account for the start-up of the new solar factory. The Company
anticipates further growth in 2009 as the economy is anticipated to improve. If
such growth materializes we will finance this growth through Company
profitability as well as outside sources of funding if required. Net cash flows
provided by financing activities in the nine-month period ending September 30,
2009 was $1,873,707 compared to $5,306,492 in 2008.
As the
company continues to grow our Solar division, we must follow industry trends in
regards to extended payment terms to our customers. Typically these market
conditions affect the whole supply chain and as extended terms are offered to
consumers, favorable terms can be negotiated with the supplier base. Our current
cash position allows flexibility to accommodate these market
conditions.
We raised
approximately, $4,747,970 on June 23, 2008 and an additional $252,027 on July
24, 2008 for gross proceeds of approximately $5 million, or net proceeds of
$4,650,139 after offering expenses. The Company issued 1,111,109 restricted
common shares along with warrants to purchase an additional 1,111,109 shares
with 722,221 warrants having an exercise price of $7.00 and 388,888 of those
warrants having an excise price of $9.00. These funds were used to expand our
energy division through the establishment of a new solar module factory
announced on November 10, 2008 along the acquisition of a power supply Company
with design and R&D capabilities. Additionally, these funds will be
used to provide additional working capital for the solar module factory to
purchase raw materials and to expand the solar module business segment.
However, certain contingencies are associated with this sale:
“If (a)
the Company fails to report at least $2,500,000 in EBITDA less noncash
expenditures for the fiscal year ending December 31, 2009, as disclosed in the
Company’s Form 10-K for the fiscal year ending December 31, 2009 (“2009
Milestone”), the date of disclosure of such 2009 Milestone (“2009 Milestone
Date”) and such 10-K, and (b) if the average of the ten closing prices for each
of the ten trading days immediately following the 2009 Milestone Date is less
than the lesser of the Per Share Purchase Price and the 2008 Milestone Price,
which is $4.50 (“2009 Milestone Price”), then, within 13 Trading Days of the
2009 Milestone Date, the Company shall issue to each Purchaser a number of
shares of Common Stock equal to the difference between (i) the number of shares
of Common Stock issued to such Purchaser on the Closing Date along with any 2008
Milestone Shares issued pursuant to the 2008 Milestone Date, which are
none, and (ii) the number of shares of Common Stock that would otherwise
have been issuable to such Purchaser on the closing date if the Per Share
Purchase Price was equal to the 2009 Milestone Price.” Jimmy and Mindy
Wang have deposited into an escrow account 1,620,954 shares of common stock to
satisfy the issuance of any shares related to the 2009 Milestone
Shares.
PLAN
OF OPERATION
We will
continue to focus on the expansion of its renewable energy division by the
continued development of its newly established solar factory in Ningbo, China as
well as the continued quality enhancements of its solar module brand,
"Amerisolar". Additionally, we intend to develop the U.S. solar module
market and plan to expand our operation in this market. We believe that the
renewable energy division offers the Company its greatest growth and profit
potential in both the present and foreseeable future. The Company presently has
enough liquidity to meet its expansion plans. However, depending on growth the
Company may need additional funding in the future.
Off-Balance
Sheet Arrangements
We do not
have any off-balance sheet arrangements that are currently material or
reasonably likely to be material to our financial position or results of
operations.
Contractual
Obligations
The 1st
“Rights for Construction” for our Nantong facility was issued on December 19,
2008 to Worldwide Energy and Manufacturing USA by the Department of Interior of
Jiangsu Province, China.
There was
an official agreement between the Department of Civil Engineering (in building
and constructions) for the city of Nantong and Worldwide Manufacturing Solar
Division located in Nantong dated May 27, 2009 in detailing of the construction
for the PV solar module manufacturing facility.
An
amendment subsequently followed in further requirements and commitments of both
parties were executed on May 29, 2009.
23
Critical
Accounting Policies and Estimates
This
discussion and analysis of financial condition and results of operations is
based on our consolidated financial statements, which have been prepared in
accordance with U.S. generally accepted accounting principles. The preparation
of these financial statements requires us to make estimates and judgments that
affect the reported amounts of assets, liabilities, revenues and expenses and
related disclosures. On an on-going basis, we evaluate our estimates, including
those related to property, plant and equipment, inventories, revenue
recognition, inventories, accounts receivable and foreign currency transactions
and translation. We base our estimates on historical experience and on various
other market-specific assumptions that are believed to be reasonable under the
circumstances, the results of which form the basis for making judgments about
the carrying values of assets and liabilities that are not readily apparent from
other sources. Actual results, however, may differ significantly from
these estimates.
We
believe the following critical accounting policies reflect the more significant
judgments and estimates used in the preparation of our consolidated financial
statements:
Revenue
Recognition
We
recognize revenues in accordance with the guidelines of the Securities and
Exchange Commission (“SEC”) Staff Accounting Bulletin (“SAB”) No. 104 “Revenue
Recognition”... We recognize revenue from product sales when the orders are
completed and shipped, provided that collection of the resulting receivable is
reasonably assured. Amounts billed to customers are recorded as sales while the
shipping costs are included in cost of sales. Returns on defective custom parts
may only be exchanged for replacement parts within 30 days of the invoice date.
Returns on defective parts, which can be resold, may be exchanged for
replacement parts or for a refund. Revenue from non-refundable customer
tooling deposits is recognized when the materials are shipped or when the
deposit is forfeited, whichever is earlier.
Foreign
Currency Transactions and Translation
The
Company’s principal country of operations is The People’s Republic of China. The
financial position and results of operations of the Company are determined using
the local currency (“Renminbi” or “Yuan”) as the functional currency. The
results of operations denominated in foreign currency are translated at the
average rate of exchange during the reporting period.
Assets
and liabilities denominated in foreign currencies at the balance sheet date are
translated at the exchange rates prevailing at the balance sheet date. The
registered equity capital denominated in the functional currency is translated
at the historical rate of exchange at the time of capital contribution. All
translation adjustments resulting from the translation of the financial
statements into the reporting currency (“US Dollars”) are dealt with as a
separate component within stockholders’ equity. Translation adjustments totaled
$83,423 and $146,017 for the three months ended September 30, 2009 and 2008,
respectively and $191,079 and $102,835 for the nine months ended September 30,
2009 and 2008, respectively.
As of
September 30, 2009 and 2008, the exchange rate was RMB 6.8376 and RMB 6.8551 per
U.S. Dollar, respectively. The average exchange rate for the nine months
ended September 30, 2009 and 2008 was RMB 6.8425 and RMB 6.9989,
respectively.
Management
has discussed the development and selection of these critical accounting
policies with the Board of Directors and the Board has reviewed the disclosures
presented above relating to them.
Management’s
Discussion for December 31, 2008
Financial
Condition
As of
December 31, 2008, our current assets were $14,660,221 compared to current
assets as of December 31, 2007 of $8,210,711. This represents an increase of
$6,449,510 or approximately 78.5%. The increase in current assets was primarily
the result of an increase in cash, accounts receivable, and inventory. The
Company’s cash increased by $2,980,651 largely as a result of the Company’s
sales in June 2008 of 1,055,103 shares of its common stock. As well, the Company
had additional subscriptions for the sale of an aggregate of $252,027, or 56,007
shares of common stock. In addition, accounts receivable increased by 1,515,482
or 31.6% as a result of the Company’s sales growth. Accounts receivable were
$4,790,506 for the year ending December 31, 2008 compared to $3,275,024 for the
year ending December 31, 2007. The last major factor contributing to the
increase in current assets was the increase in inventory of $1,421,617.
Inventory was $3,754,765 for the year ending December 31, 2008 compared to
$2,333,148 for the year ending December 31, 2007. Inventory increased as a
result of the establishment in December of 2008 of the Ningbo Solar factory and
the acquisition of Detron in October of 2008.
Current
liabilities at December 31, 2008 totaled $7,125,493 compared with $4,447,946 at
December 31, 2007. This represents an increase of $2,677,547 or 60.20%.
The increase in current liabilities was due to an increase in accounts
payable of $946,936 or 38.6% as the result of the Company’s growth. Accounts
payables were $3,400,253 in December of 2008 compared to accounts payable of
$2,453,317 in December of 2007. The other major contributor to the increase in
current liabilities was liabilities due to our recent acquisition of Detron in
October of 2008, which amounted to $1,243,024.
24
Total
assets were $ 19,133,009 for the year ended December 31, 2008 compared to
$8,762,841 for the year ended December 31, 2007. The increase of $10,370,168 or
approximately 118.3% was the result of the following factors: (1) sale of
unregistered securities for $4,597,587; (2) the acquisition of Detron, and the
establishment of the new solar factory in Ningbo, China. This resulted in
increases in property plant and equipment of $808,045. (3) Property, Plant and
equipment totaled $1,353,539
in year ending December 31, 2008 compared to $545,494 in December of 2007; (4)
increase in inventory and accounts receivable due to the Company’s growth in
2008, and (5) the purchase of the AmeriSolar brand name and
technology.
Results
of Operations
Net sales
for the year ending December 31, 2008 were $45,913,957 compared to $12,132,710
for the year ending December 31, 2007, an increase of $33,781,247 or
approximately 278.4%. The primary reason for the increase was due to our
energy division which started in February 2008 and generating sales of
$30,999,962. Additionally, the acquisition of Detron generated sales of
$1,720,965 for the Company in the fourth quarter.
For the
year ending December 31, 2008, gross profits were $6,167,671 (13.4%) compared to
$3,782,089 in 2007 (31% of sales). The decline of gross profits as a percentage
of sales (17.6 percentage points) occurred because the Company utilized more
sub-contractors for the production of our solar modules, along with softness in
the price of solar modules. It is expected that gross margins will improve as
the Company continues its transition of becoming a direct manufacturer for its
solar module products as the newly established factory becomes operational. As
well, the outlook for solar modules margins will improve as the raw material
necessary for the production of modules are expected to decline.
Cost of
goods sold for the year ending December 31, 2008 was $39,746,286 compared to
$8,350,621 for the year ending December 31, 2007. The increase of $31,395,665 or
376% was the result of greater sales and lower margins in the solar module
industry.
Net
profit for the year ending December 31, 2008 was $1,001,648 compared to $575,674
for the year ending December 31, 2007. The increase of $425,974 or 74.0% was the
result of higher sales from our solar division. Net profit from this division
was approximately 3%. It is expected that gross margins will improve as
the Company continues its transition to becoming a direct manufacturer for its
solar module products as the newly established factory becomes operational.
Further, the outlook for solar modules margins looks to improve as raw material
necessary for production of modules are expected to decline.
General
and administrative expenses for the year ending December 31, 2008 were
$3,832,363 (8.3% of sales) compared to $2,769,847 (22.8% of sales) for the year
ending December 31, 2007. The increase of $ 1,004,900, or 35.5%, was the result
of increased staff and expenses associated with providing an appropriate
infrastructure to support our growth and future growth. Further, the costs
associated with being public increased over the last year.
Liquidity
The
following is a summary of our cash flows from operating, investing, and
financing activities during the periods indicated:
25
Year
ended December 31,
|
||||||||
2008
|
2007
|
|||||||
Operating
activities
|
$ | 2,682,044 | $ | 252,456 | ||||
Investing
activities
|
$ | (2,811,318 | ) | $ | (791,302 | ) | ||
Financing
activities
|
$ | 3,169,596 | $ | 1,133,674 | ||||
Net
effect on cash
|
$ | 2,980,651 | $ | 672,024 | ||||
We funded
our growth largely from its proceeds of $4,747,970 from the sale on June 23,
2008 of 1,055,103 shares of its common stock. As well, the Company had
additional subscriptions for the sale of an aggregate of $252,027 or 56,007
shares of common stock. This was used to help fund these new acquisitions
and to provide additional working capital for the Company. The Company netted
$4,608,036 from the sales of these securities.
In 2008
our credit line was increased by approximately $775,000 from a line of
credit in the amount of $2.25 million with Golden Gate Bank to $3.025 million,
as a result of securing two new credit lines with Bank of the West, one for
$1,025,000 and the other for $2,000,000. The credit line with Golden Gate Bank
was subsequently cancelled. These revolving lines of credit are secured by the
assets of the Company and guaranteed by its officers. At December 31, 2008 and
2007, the balances on the lines of credit with Bank of the West were $921,619
and $1,758,584, respectively. The maturity date of these two credit lines is May
20, 2009 and June 1, 2011, respectively. The balance outstanding as of March 31,
2009 is $1,300,000, and $700,000 is still available for use on the line of
credit. Additionally, the second line of credit has a balance of $877,869 as of
March 31, 2009, with $147,131 still available for use of equipment and facility
purchases.
Further,
the increase in net profits of $884,201 or 153.6% over the last year provided
the Company with greater liquidity and financial resources. The Company feels
that it has sufficient capital to continue to fund its operations.
For 2008,
net cash provided by operations was $2,682,044 compared to net cash provided by
operations of $252,456 for the year ended December 31, 2007, an increase of
$2,429,588. The major factors for this increase in net cash through operations
were customer deposits for our solar modules which totaled $960,873, and our
accounts receivables, which provided $521,719 due to growth in solar modules.
Net cash used in investing was $2,811,318 in 2008, compared to net cash used of
$791,302 in 2007. This increase was the result of our acquisition of Detron and
the establishment of our new solar module factory. The Company anticipates
further expansion in 2009 and will finance this growth through Company
profitability as well as outside sources of funding if required. Net cash flows
provided by financing activities in 2008 was $3,169,596 compared to $1,133,674
in December 31, 2007. The increase was due to proceeds from the Company’s sales
of unregistered securities which provided the Company with net proceeds of
$4,608,036, and which helped the Company to expand its operations.
New
Markets and Expansion of Operations in 2009
We plan
to continue our expansion efforts in the solar module industry through expansion
of our solar module factory in Ningbo, China. We will attempt to increase our
customer base in this industry by achieving greater product enhancements and
sales efforts. Further, we feel that our recent acquisition of Detron will bring
more revenues and profits as we continue to streamline our present electronic
factory into the new acquisition as well as improve the operation of Detron and
our other factories in China.
Off-Balance
Sheet Arrangements
We do not
have any off-balance sheet arrangements that are currently material or
reasonably likely to be material to our financial position or results of
operations.
26
Tabular
disclosure of contractual obligations as of December 31, 2008
Contractual
obligations
|
Payments
due by period
|
||||||||||||||||
Total
|
Less
than 1 year
|
1-3
years
|
3-5
years
|
More
than
5
years
|
|||||||||||||
Long-Term
Debt Obligations
|
921,619 | 921,619 | |||||||||||||||
Capital
Lease Obligations
|
911,111 | 267,831 | 340,984 | 302,296 | |||||||||||||
Operating
Lease Obligations
|
|||||||||||||||||
Purchase
Obligations
|
|||||||||||||||||
Other
Long-Term Liabilities Reflected on the Registrant’s Balance Sheet under
GAAP
|
75,480 | 75,480 | |||||||||||||||
Total
|
1,908,210 | 267,831 | 416,464 | 1,223,915 |
Critical
Accounting Policies, Estimates and Judgments
This
discussion and analysis of financial condition and results of operations is
based on our consolidated financial statements, which have been prepared in
accordance with U.S. generally accepted accounting principles. The preparation
of these financial statements requires us to make estimates and judgments that
affect the reported amounts of assets, liabilities, revenues and expenses and
related disclosures. On an on-going basis, we evaluate our estimates, including
those related to property, plant and equipment, inventories, revenue
recognition, inventories, accounts receivable and foreign currency transactions
and translation. We base our estimates on historical experience and on various
other market-specific assumptions that are believed to be reasonable under the
circumstances, the results of which form the basis for making judgments about
the carrying values of assets and liabilities that are not readily apparent from
other sources. Actual results, however, may differ significantly from these
estimates.
We
believe the following critical accounting policies reflect the more significant
judgments and estimates used in the preparation of our consolidated financial
statements:
Property,
plant and equipment
Property,
plant and equipment are stated at historical cost and are depreciated over the
useful lives of the assets. Leasehold improvements and capitalized leased
equipment are amortized over the life of the lease. Repair and maintenance
expenditures that do not significantly add to the value of the equipment or
prolong its life are charged to expense as incurred. Gains and losses on
dispositions of property, plant and equipment are included in the related
period’s statement of operations. Depreciation is computed primarily using the
straight-line method based on estimated useful lives, which range from 3 to 25
years.
Inventories
Inventories
consist of finished goods of manufactured products. Our inventory is based on
customer orders and the duration of those orders. Cost is stated at the lower of
cost or market on a first-in, first-out (FIFO) basis. We have not recorded an
allowance for slow-moving or obsolete inventory. Obsolete inventory at December
31, 2008 and 2007 was minimal.
27
Management
has discussed the development and selection of these critical accounting
policies with the Board of Directors and the Board has reviewed the disclosures
presented above relating to them.
BUSINESS
Company
History
We were
incorporated under the laws of the State of Colorado on March 17, 2000 as
Tabatha III, Inc. We changed our name to Worldwide Manufacturing USA,
Inc. on November 4, 2003. On February 4, 2008 we changed our name to
Worldwide Energy and Manufacturing USA, Inc. to better reflect our business plan
to engage in the solar module market. We were formed as a “blind pool” or “blank
check” company whose business plan was to seek to acquire a business opportunity
through completion of a merger, exchange of stock, or other similar type of
transaction. In furtherance of our business plan, we voluntarily elected to
become subject to the periodic reporting obligations of the Securities Exchange
Act of 1934 by filing a registration statement on Form 10-SB.
Prior to
our identification of Worldwide Manufacturing USA, Inc., a privately held
California corporation (“Worldwide USA”) as an acquisition target, our only
business activities were the organizational activities described above,
including the filing of a registration statement on Form SB-2 under the
Securities Exchange Act of 1934, and our efforts to locate a suitable business
opportunity for acquisition.
On
September 30, 2003, we acquired all of the issued and outstanding common stock
of Worldwide USA in a share exchange transaction. We issued 27,900,000 shares of
common stock in the share exchange transaction for 100%, or 10,000, of the
issued and outstanding shares of Worldwide USA’s common stock. As a result of
the share exchange transaction, Worldwide USA became our wholly owned
subsidiary.
The
former stockholders of Worldwide USA acquired 93% of our issued and outstanding
common stock as a result of the completion of the share exchange transaction.
Therefore, although Worldwide USA became our wholly owned subsidiary, the
transaction was accounted for as a recapitalization of Worldwide USA, whereby
Worldwide USA is deemed to be the accounting acquirer and is deemed to have
adopted our capital structure. No finder’s fee was paid to any person in
connection with the transaction.
All
operating activities are carried out through Worldwide USA and our subsidiaries
located in and around Shanghai,Ningbo and Nantong, China which
include:
1.
|
Shanghai
Intech Electro-Mechanical Products Co. Ltd., wholly owned subsidiary of
Worldwide Energy and Manufacturing USA,
Inc.,
|
2.
|
Shanghai
Intech-Tron Electric & Electronics Company Ltd., 55% owned by
Worldwide Energy and Manufacturing USA,
Inc,
|
3.
|
Shanghai
Detron Electric & Electronics Co., Ltd., 100% owned by Shanghai
Intech-Tron Electric and Electronics
Co.,
|
4.
|
Shanghai
Intech Precision Machinery Co., Ltd.,51% owned by Shanghai Intech Electro
Mechanical Products Co. and 49% owned by Worldwide Energy and
Manufacturing USA, Inc.,
|
5.
|
Shanghai
Shutai Precsion Casting Co., Ltd., 55% owned by Shanghai Intech
Electro-Mechanical Products Co. and 45% owned by Worldwide Energy and
Manufacturing USA, Inc.,
|
6.
|
Worldwide
Energy and Manufacturing (Ningbo) Co., Ltd.,100% owned by Worldwide Energy
and Manufacturing USA, Inc., and
|
7.
|
Worldwide
Energy and Manufacturing (Nantong) Co., Ltd., 100% owned by Worldwide
Energy and Manufacturing USA, Inc.
|
Our
factories employ approximately 450 workers in China. Intech, Our quality
assurance arm located in Shanghai, China employs 33 engineers. As the
engineering division and quality assurance arm of the Company, Intech provides
technical advice, design, delivery, material procurement and manufacturing
quality control services to companies in the United States seeking to
manufacture or purchase components from manufacturers in China. Our
manufacturing operations are located in China and its sales and headquarters are
located in the state of California.
In 2005,
we began to make the transition from being an engineering and contract
manufacturing firm which depended completely on subcontractors to becoming a
direct manufacturer. In the beginning of 2005 we did not own any of our own
factories and used as our suppliers of material and labor approximately 100
factories in China, mostly from Shanghai or the surrounding area.
On August
18, 2005, we established an electronics manufacturing division located in
Shanghai, China. We purchased approximately $250,000 worth of electronics
production equipment from Opel Technology, a former Worldwide electronics
supplier, as the initial manufacturing equipment. In establishing this
electronics factory, Worldwide has been able to compete more effectively in the
PC board and cable assembly industry, as well as gain complete control over its
electronics assemblies production. We established Shanghai Intech Precision
Mechanical Products Manufacturing Ltd. (“Precision”) on November 1, 2005.
Precision is 51% owned by Intech and 49% owned by Worldwide. This factory
performs die-casting and machining services for the automotive, motorcycle,
telecommunications and home supply industries. Precision is located in the
suburbs of Shanghai, PRC, and occupies an area of approximately 71,043 square
feet. The factory contains three workshops: a die-casting production area as
well as a precision machining shop.
28
In
February 2008 we established a solar division that focuses on photovoltaic
module technology under the brand name of “AmeriSolar.” We issued 300,000
restricted shares for the AmeriSolar brand name. This division generated
$30,999,962 in sales for the period ending December 31, 2008. On
October 14, 2008, Worldwide, through Intech, completed the acquisition of 55% of
Shanghai De Hong Electric and Electronic Company Limited (“De Hong”). The terms
of the Agreement dated February 3, 2008 were that Intech paid cash consideration
of approximately $1 million dollars for a 55% interest in De Hong in two
installments, with the first installment of $714,286.00 being paid on October
10, 2008, and the second installment of $285,714 being paid no later than
December 15, 2008. We funded the acquisition with some of the proceeds
from its sale of 1,055,103 ($4,747,970) shares of unregistered common stock on
June 23, 2008. After completion of the acquisition, the company changed
the name of the subsidiary to Shanghai Intech-Tron Electric and Electronics
Co. Shanghai De Hong Electric and Electronic Company is the holding
company for the operating subsidiary Shanghai Detron Electric and Electronics
Co.,Ltd. Therefore, Worldwide received 55% control of the operating subsidiary
Shanghai Detron Electric and Electronics Company (“Detron”). Detron’s
management remained in place.
Detron is
a power supply factory in Shanghai, China with design and R & D
capabilities. Detron’s revenues were about $6.1million for the twelve months
ended December 31, 2008, and $4.1 million for the twelve months ended
December 31, 2007.
Overview
The
Company, together with its Chinese subsidiaries, is a contract manufacturer,
engineering firm and direct manufacturer. A contract manufacturer supplies
components and assemblies, either through direct manufacturing or through sub
contracting to other manufacturers, according to the customers’ designs,
drawings and quality criteria. When utilizing our subcontractors, they
will provide the plant, equipment, manufacturing working capital and factory
labor and we provide the sales, management, production control and technical
support for the products. Our goal is to provide timely delivery and high
quality components at manufacturing costs less than what our customers would pay
for similar parts in the United States. Our recently created (February 2008)
Solar Division markets and sells Photovoltaic (PV) Solar Modules, either
manufactured by one of our two solar subsidiaries or through subcontractors
certified to produce under the AmeriSolar brand. Our website address is www.wwmusa.com.
We
provide our products and services to several companies globally, primarily in
the solar module, aerospace, automotive, and electronics industries. Although we
historically focused on manufacturing components for high tech industries, in
2008 we expanded into the solar module markets. Our CEO, Jimmy Wang, realizes
that the solar module industry provided us with a unique opportunity to use its
core strength of providing high quality components and assemblies, with timely
delivery, to develop a solar module team capable of successfully entering the
solar module markets. Our solar module brand “AmeriSolar” has already earned
numerous quality certifications including IEC612215, TUV, CE and has recently
applied for the UL certification. These solar modules meet or exceed all
industry norms for performance, quality and functional life in the field.
With
respect to our contract manufacturing business, we have the ability to arrange
for the manufacture of products, parts, and components for a broad number of
industries and customers. In order to ensure a consistently high quality
product, it is imperative for a company in the contract manufacturing business
to have a local quality assurance team. The team’s responsibility is to
institute quality assurance procedures that ensure the quality of products from
start to finish. This function is carried out through our wholly owned
subsidiary, Intech.
We sell
to our customers under purchase orders. We have only a few long-term contracts
with customers. As a result, it is difficult to forecast revenues, and planning
for future operations is also difficult. Because many of our costs and operating
expenses are fixed, any unforeseen reduction in purchase orders can affect our
gross margin and operating income.
We employ
rigid quality assurance procedures, product enhancements and strict testing of
its products to attract customers. Other than rigid quality controls and timely
delivery, another important factor in attracting customers from the United
States is our Kanban program. The Kanban program is an inventory system that
stocks at least one month’s supply of inventory needed to meet the various
customers’ demand. Thus, if Worldwide receives a contract with a scheduled
six months or more of deliveries, we will stock at least one month’s inventory
in the California warehouse, or a warehouse that is close to the customer’s
facility so a twenty-four hour delivery turn-around may be accomplished. This
process of stocking at least one month’s worth of inventory is maintained until
the entire contract is completed. We have won many new customers as a result of
the Kanban inventory program. Using Kanban inventory controls allows us to help
customers meet challenges with working capital returns, and the need to have
supply products necessary to complete manufacturing of those parts in a shorter
period of time.
We manage
the entire production of its customers’ products. Our engineers maintain the
highest levels of quality by supervising all aspects of the manufacturing
process. Our engineers write the production and inspection procedures, obtain
the materials, audit and perform all of the in-progress and final
inspections.
All of
our active subcontractors have received ISO 9000 certifications. ISO-9000
certifications are issued by the International Organization for Standardization
and represents the approval of the manufactures quality system and the
application of said quality system to the production processes. These
certifications are issued to each factory after its management receives the
prerequisite training and is verified by periodic audits.
29
The
unique business relationships between us and our subcontractors allow us to
offer our customers lower manufacturing costs, and at the same time maintain
high standards of quality and timely delivery schedules.
Our
success stems from the following factors for both direct manufacturing and
outsourcing of its production service:
We have a
wide range of manufacturing capability as a result of:
|
- offering,
through subcontractor and our own factories, many of manufacturing
processes required for our customers components and
assemblies,
|
|
-
providing
engineering services to interact with the various factories,
and
|
|
-
coordinating
and planning for complete turn-key
assemblies.
|
Our
quality control is highly effective as a result of:
|
-
setting
inspection criterion for manufacturers based on the customers’ quality
criteria,
|
|
-
conducting
material auditing, in process inspection, and the final inspection,
and
|
|
-
providing
incentive-reward packages to our quality control
employees.
|
Our quick
turn-around time compared with other offshore suppliers is ensured
by:
|
- committing
60-75 days for completing complicated tooling and two to six weeks for
basic tooling;
|
|
- committing
30-60 days for first delivery, and seven days for the deliveries
afterwards, and
|
|
- our
team in China is continually monitoring production
progress.
|
We
offer:
|
-
competitive
prices,
|
|
-
significant
flexibility towards customers’
needs,
|
|
-
local
team to perform quality assurance
functions,
|
|
-
the
Kanban inventory for 24-hour delivery for its contract parts,
and
|
|
-
quick
responses to customer questions and
concerns.
|
Additionally,
Worldwide has a customer reception office at its Shanghai subsidiary, which
makes arrangements for its customers’ airline tickets and hotels at a discounted
rate, along with providing local transportation and language interpretation
during customer visits.
We are
able to provide its customers with considerable cost advantages while
eliminating the disadvantages of quality and delivery issues frequently
experienced by companies which have direct contracts with manufacturers in
China.
Since we
primarily employ engineers and engages a broad variety of subcontractors, we are
able to manufacture parts for a broad range of industries. As demand for
manufacturing slows for a particular product, industry or sector, Worldwide is
able to remain flexible as a result of its being in a position to pursue
opportunities to manufacture other products. There are no special
governmental regulations or governmental approvals with respect to our
business.
Suppliers
and Customers
In 2008,
our six largest customers were: Pramac Swiss SA, Enesystem Inc, Provent
Solarpark, Pvline Gmbh and Schueco International KG; accounting for 72% of our
consolidated business. In 2007 Joslyn Sunbank, Joslyn Manufacturing, Radio Waves
Corp and Teleflex Electrical, GE Transportation and Pacific Scientific-CA
accounted for approximately 48% of consolidated net sales. The shift in our top
customers was the result of the Company’s 2008 entry into solar module markets,
where we experienced the majority of our sales.
30
Our five
largest suppliers in 2008 were Changzhou Trina Solar Energy, Zhejiang Shuqimeng
Photo Voltaic, Jiangsu Aide Solar Energy Technology Co., Jiangyin Hareon Power
Co., Ltd. and Baoding Tianwei Yingli New Energy Resource. These represented
approximately $23 million of our purchases from external suppliers, or
approximately 75% of materials purchased by the Company. In 2007, our two
largest material suppliers were Shanghai Huanxinnuo Electro-Mechanical Products
Company (formerly named Shanghai Xinli Trading Company Ltd.) and Shanghai
Machine Tool Co. Ltd. They accounted for $573,328 or 6.8% and $724,891 or 8.6%
respectively, of the total materials purchased by Worldwide. The shift in
our top suppliers was also the result of the Company’s focus on the solar module
industry.
Competition
We strive
to ensure quality and provide low cost to customers so that it can remain
competitive. The solar module industry and the contract manufacturing service
industry remain strongly competitive. There are hundreds of companies, many
larger than Worldwide, that have substantially greater manufacturing, financial,
research and development, engineering and marketing resources. Worldwide is a
small competitor in these multi-billion dollar industries for both solar modules
and contract manufacturing. If overall demand for solar modules and contract
manufacturing services should decrease, this could result in substantial pricing
pressure, which would negatively affect our revenue and net profit.
Facilities
Currently
we operate out of three manufacturing locations in China:
1)
|
Shanghai
Intech-Tron and Shanghai Detron jointly operate out of a facility in
Shanhai (leased)
|
2)
|
Shanghai
Intech Precision and Shanghai Shutai jointly operate out of a facility in
a rural section of Shanghai (owned)
|
3)
|
Worldwide
Energy and Manufacturing (Ningbo) operates out of a facility in Ningbo
(leased)
|
We also
own a facility that is currently under construction in Nantong,
China. It will be completed in April 2010.
In
addition to these manufacturing locations, we have two leased offices: one for
Shanghai Intech Electro-Mechanical and one that acts as the headquarters for the
Solar Division.
In the
U.S., we lease an office/warehouse building for our corporate offices, sales and
customer service for Contract Manufacturing accounts in the US and inventory
storage for both Contract Manufacturing and Solar divisions.
Business
Strategy
Our
strategic direction and emphasis for growth resides in the Renewable Energy
industry, specifically the Photovoltaic Solar sector. The value chain
supporting this industry is simply described with the following steps or
stages:
1.
|
Crystalline
silicon purification
|
2.
|
Silicon
Ingot production,
|
3.
|
Wafer
processing
|
4.
|
Solar
Cell production,
|
5.
|
PV
Module production,
|
6.
|
Distribution,
|
7.
|
System
Integration,
|
8.
|
System
operation/ownership.
|
Our strategy is to continue to
expand our PV module manufacturing capability and capacity, further develop our
global distribution channels and in the near future, incorporate System
Integration into our service offering.
Foreign
Currency Translation Adjustment
Our
operating subsidiaries purchase virtually all raw materials and services PRC
denominated in RMB, and receive payment from customers in globally denominated
in RMB, USD and Euro and therefore we are affected by fluctuations in exchange
rates across these currencies. While our reporting currency is the
U.S. Dollar, all of our consolidated revenues and the majority of consolidated
operating costs and expenses are denominated in RMB. At this time, we
have not entered into any hedging transactions in an effort to reduce our
exposure to foreign exchange risk.
We
incurred a foreign currency translation adjustment of $192,253 for the year
ended December 31, 2008, as compared with the foreign currency translation
adjustment of $191,079 for the Nine months ending September 31, 2009. Assets and
liabilities are translated at exchange rates at the balance sheet dates and
revenue and expenses are translated at the average exchange rates for the
periods presented and shareholders’ equity is translated at historical exchange
rates.
31
Legal
Proceedings
Other
than routine litigation arising in the ordinary course of business that we do
not expect, individually or in the aggregate, to have a material adverse effect
on us, there is no currently pending legal proceeding and, as far as we are
aware, no governmental authority is contemplating any proceeding to which we are
a party or to which any of our properties is subject.
Employees
We
currently employ approximately 450 employees, including 33 staff engineers and
12 administrative personnel at our wholly owned subsidiary Intech in Shanghai,
China and 400 employees who work at our factories in China. The remaining 13
employees work at the California office in South San Francisco. Five of these
employees are in sales with the remaining eight employees working in support and
administrative roles. All employees are full time.
Properties
On June
1, 2008, we entered into a 61-month lease for 9,680 square feet of office/
warehouse space located at 408 N canal Street, South San Francisco, California.
The rent per month is $10,164 with rent increasing three percent each year. The
rent for 2008 was $60,984, and the lease expires on May 31, 2013. On June
1, 2008, Shanghai Intech, the Company’s quality control division, entered into a
lease expiring April 30, 2010. In addition, we leased a 129,167 square foot
facility in Ningbo, China. The lease term is from July 18, 2008 to July 17,
2013.This facility houses the production operations and R&D center for the
Company’s solar division. The rent is approximately $17,600 per month; the first
three months were free.
The
following is a tabular description of our lease obligations:
Company
|
Lease
Term
|
Square
Feet
|
Monthly
Rent
|
2008
rent
|
Expected
2009 rent
|
Worldwide
(California headquarters warehouse)
|
June
1, 2008 to May 31, 2013
|
9,680
|
$10,164
(increase of 3% per year)
|
$121,968
|
$124,102
|
Shanghai
Intech Electro-Mechanical Products Co., Ltd.- Office
|
May
1, 2007- April 30, 2010
|
6,500
|
$9,054
|
$83,491
|
$83,491
|
Shanghai
Intech-Detron Electric and Electronic Company Limited
|
Jan
1, 2008- Dec 31, 2013
|
32,500
|
$11,227
|
$134,724 |
$134,724
|
Ningbo
Solar Factory
|
July
18, 2008 to July 17, 2013
|
129,167
|
$17,600
|
$44,000 |
$211,200
|
Shanghai
Intech Precision and Shanghai Shutai jointly operate out of an owned facility in
rural Shanghai that was purchased in November 2005 in the Die Cast
acquisition. We are currently building a factory in Nantong China for
our newly formed company, Worldwide Energy and Manufacturing (Nantong) Co.;
construction will be completed in second quarter 2010.
32
MANAGEMENT
The
following table sets forth the names, ages, and positions of the Company’s
executive officers and directors as of December 21, 2009.
Name
|
Age
|
Positions
and Offices Held
|
||
Jimmy
Wang
|
54
|
Chief
Executive Officer and Chairman
|
||
Mindy
Wang
|
52
|
Secretary,
Treasurer and Director
|
||
Jeff
Watson
|
47
|
President
and Chief Financial Officer
|
||
Jennifer
Maliar
|
51
|
Director
|
||
Gerald
DeCiccio
|
52
|
Director
|
||
Michael
Steigrebe
|
50
|
Director
|
||
Jehu
Hand
|
54
|
Director
|
||
Lauren
Byrne
|
52
|
Director
|
The
following summarizes the occupation and business experience for the Company’s
officers, directors, and key employees. Executive officers are
elected annually by the Company’s Board of Directors. Each executive officer
holds his office until he resigns, is removed by the Board, or his successor is
elected and qualified. Directors are elected annually by the Company’s
shareholders at the annual meeting. Each director holds his office until his
successor is elected and qualified or his earlier resignation or
removal.
Jimmy
Wang, Chief Executive Officer, Chairman
Jimmy
Wang has over twelve years experience in a wide range of component
manufacturing. From 1996 to the present, Mr. Wang has been President, CEO and
director of WORLDWIDE ENERGY AND MANUFACTURING USA, INC. (California). He became
President, CEO and Chairman of the Colorado holding company of the same name on
September 30, 2003. From 1990 to 1995, Mr. Wang was the Sales Manager for MP
World Manufacturing, Inc. From September 1993 to May 1996 Mr. Wang and Mindy
Wang operated a sole proprietorship under the name Worldwide Manufacturing USA.
In 1996, Mr. Wang incorporated WORLDWIDE ENERGY AND MANUFACTURING USA, INC. In
1990, Mr. Wang earned a Masters Degree in Applied Economics from the University
of Minnesota, and in 1982 received a Bachelors of Science Degree in Economics
from the Shanghai Institute of Foreign Trade. Mr. Wang is the husband of Mindy
Wang.
Mindy
Wang, Vice President, Secretary, Treasurer and Director
Mindy
Wang has over twelve years of accounting and financial management experience
with Technology Power and Worldwide Manufacturing. From 1996 to the present, Ms.
Wang has been controller and Director of WORLDWIDE ENERGY AND MANUFACTURING USA,
INC. In September 1996, Ms. Wang founded, with her husband, WORLDWIDE ENERGY AND
MANUFACTURING USA, INC. She became Controller and Director of the Colorado
holding company of the same name on September 30, 2003. From 1991 to 1993 she
was an accountant with Technology Power. The business of Technology Power was
assembling personal computers for retail and business customers. From September
1993 to May 1996 Mr. Wang and Mindy Wang operated a sole proprietorship under
the name Worldwide Manufacturing USA. Ms. Wang earned the equivalent of a
Bachelors Degree in International Business from the University of California at
the Los Angeles Institute of Economics and Management in Beijing and attended
the Master’s program of the Business Education of the University of Minnesota.
Ms. Wang is the wife of Jimmy Wang.
Jeff
Watson, President, President and Chief Financial Officer
Mr.
Watson was elected as President on January 14, 2008 and Chief Financial Officer
on September 25, 2009. He has over 23 years of manufacturing experience
supporting a variety of industries and markets. He started his career as
an engineer in the power transmission industry with Fasco Gearmotors, a
vertically integrated design and manufacturing company producing gear-motors,
linear actuators and the supporting electronic controls. He held several
engineering and managerial positions until leading the organization as General
Manager from 1999 to 2001. In 2001, Mr. Watson joined Joslyn Sunbank and
led the company as President until 2008. Joslyn Sunbank, a division of the
Danaher Corporation, is as leader in the design and manufacture of high
reliability electrical components and sub-systems serving Aerospace and Defense
markets globally. Mr. Watson has grown the businesses that he has led
through operational excellence and the successful application of Lean
Manufacturing principles. He earned a Bachelor of Science Degree in
Mechanical Engineering from the University of Missouri.
.
Jennifer
Maliar, Director
On June
1, 2009, the Board appointed Jennifer Maliar. Ms. Maliar has been a principal of
the public accounting firm of Comiskey & Company PC in Denver, Colorado
since 1998, where her primary emphasis has been auditing and consulting services
for publicly held companies, while overseeing all audit and accounting
engagements performed by the firm, and frequently consulting with clients on
financial, regulatory, or technology related issues. Ms. Maliar holds an
active CPA license in the states of Colorado, New York, and Louisiana.
She graduated Summa Cum Laude with a Bachelor of Business Administration
Degree with a Major in Accounting from Dowling College, Oakdale, New
York.
33
Gerald
DeCiccio, Director
On June
1, 2009, the Board appointed Gerald DeCiccio as Director. Since June 2007, Mr.
DeCiccio has been the Vice President and Corporate Controller of Ritz
Interactive, Inc. Prior to that he was the Chief Financial Officer and a board
member of GTC Telecom Corp. and its subsidiary, Perfexa Solutions, Inc.
(Mr. DeCiccio took GTC public in 1999) and Chief Financial Officer for National
Telephone & Communications, Inc. In these roles, he managed the
finance, accounting, SEC reporting, treasury, human resources, investor
relations, and legal departments. Mr. DeCiccio also held senior
financial roles at Newport Corporation and Parker Hannifin Corporation and was a
Supervising Senior Accountant for Ernst and Young. He has also been a member of
the Board of Directors and Audit Committee for Interplay Entertainment, Inc. and
GT Data Corp
Michael
Steingrebe, Director
On June
1, 2009, the Board appointed Michael Steingrebe as director. From November 1986
to March 1990, Mr. Michael Steingrebe acted in a senior finance role with Penn
Central Corporation (PC). From March 1990 to March 1994, at Dover
Corporation (DOV) he was actively involved in worldwide M&A transactions as
well as the spin-off of the contract manufacturing division as a stand-alone
public company (DOVT). From March 1994 to July 1995, Mr. Steingrebe was
the Co-founder and CFO of Adaptive Systems, Inc. From July 1995 through May
1999, he was Vice President of Finance for SyVox Corporation during which the
company raised its largest round of private financing. In June of 1999 he became
the VP of Corporate Development for DataPlay, Inc. where he was responsible for
raising over $70 million in private financing, securing debt financing,
completing a joint venture in Japan with Toshiba and the negotiation of multiple
strategic partnerships. In October 2003, he was the Co-founder of
EnVysion, LLC, which was sold in June 2004. From June 2004 until August
2006, Mr. Steingrebe was the CFO & COO of V.T. Mobile, Inc. where he was
responsible for the restructuring of the company’s debt facilities as well as
managing all operations and software development. From August 2006 through
February 2007 he was the Interim VP of Finance for Newmerix Corp. where he
closed the company’s fourth round of private financing. From March 2007 to
March 2008 he was CEO of Control Works, Inc. where he repositioned the company’s
products and services as a “Green Tech” solution that lead to a strategic
partnership with CH2MHill. In March 2008 he became Co-founder of
eParkGuide and served as CEO until December 2008 and continues to sit on the
company’s advisory board. Since December 2008, Mr. Steingrebe has been
working as a consult providing strategic and financial services His background
includes international experience in Europe and Asia, and he has helped raise
over $100 million in equity financing from both financial and strategic
investors. He has completed acquisitions in Europe and the United States,
created a joint venture in Japan with a large Japanese electronics company, and
has been responsible for the integration of business and finance operations
domestically and internationally.
Mr.
Steingrebe currently sits on the Advisory Board of eParkGuide, LLC, (San Jose
CA) and Firehole Techmplogies, Inc. (Laramie WY).
Mr.
Steingrebe has a Bachelors degree in Accounting and Business Administration from
Pacific Lutheran University in Tacoma, Washington and is a Certified Management
Accountant.
Jehu
Hand, Director
Jehu Hand
has been a director and Chairman of the Corporate Governance Committee since
April, 2009. Mr. Hand has been engaged in the practice of corporate and
securities law since May 1994 when Hand & Hand incorporated as a law
corporation. From January 1991 to December 1992, he was the Vice
President, Corporate Counsel and Secretary of Biolase Technologies, Inc., which
designs, manufactures and markets dental lasers and endodontics equipment.
He was also a director of Biolase from February 1992 to February 1993.
From January 1992 to October 1992, Mr. Hand was Counsel to the Law Firm of
Lewis, D'Amato, Brisbois & Bisgaard. From January 1991 to January
1992, he was a shareholder of McKittrick, Jackson, DeMarco & Peckenpaugh, a
law corporation. Mr. Hand received a J.D. from New York
University School of Law and a B.A. from Brigham Young University. From 1992
until February, 2010, he was a registered principal of Jackson, Kohle & Co.,
a broker-dealer and member of FINRA..
Lauren
Byrne, Director
On April
15, 2009, the Board appointed Lauren Byrne as director. Ms. Byrne has been
President of Lincoln & Creed, Inc., a staffing and recruiting agency for the
civil engineering industry, since March 2009. Prior to that, from June
2005 to March 2009, Ms. Byrne served as Vice President of The JRP Group, a
franchise of MRI Network, Inc. She was responsible for the hiring,
training and development of executive search consultants, as well as for
providing consulting services and executive search services for her own
clientele of engineering firms. Prior to that, from June 2002 to June 2005, she
was a senior business development consultant with MRI Network, Inc., a publicly
held staffing and recruiting agency. She was involved in business
planning, strategic goal setting, hiring, and the training and development of
employees in high level sales positions. From May 2000 to June 2002, Ms.
Byrne was the senior account manager for MR Tucson Foothills, a privately held
staffing and recruiting agency. At MR Tucson Foothills, she supported the
technical recruiting needs of clients in the semiconductor, wireless,
nanotechnology and optical networking industries. From January 1996 to May
2000 she was employed by Dun & Bradstreet, where she was responsible for the
training and development of 40 associates
34
Family
Relationships
Jimmy
Wang, our Chairman and Chief Executive Officer is married to Mindy Wang, our
Vice President, Secretary, Treasurer and Director
Certain
potential conflicts of interest are inherent in the relationships between our
officers and directors and us.
From time
to time, one or more of our affiliates may form or hold an ownership interest in
and/or manage other businesses both related and unrelated to the type of
business that we own and operate. These persons expect to continue to form, hold
an ownership interest in and/or manage additional other businesses which may
compete with our business with respect to operations, including financing and
marketing, management time and services and potential customers. These
activities may give rise to conflicts between or among the interests of us and
other businesses with which our affiliates are associated. Our affiliates are in
no way prohibited from undertaking such activities, and neither us nor our
shareholders will have any right to require participation in such other
activities.
Further,
because we intend to transact business with some of our officers, directors and
affiliates, as well as with firms in which some of our officers, directors or
affiliates have a material interest, potential conflicts may arise between the
respective interests of us and these related persons or entities. We believe
that such transactions will be effected on terms at least as favorable to us as
those available from unrelated third parties.
With
respect to transactions involving real or apparent conflicts of interest, we
have adopted policies and procedures which require that: (i) the fact of the
relationship or interest giving rise to the potential conflict be disclosed or
known to the directors who authorize or approve the transaction prior to such
authorization or approval, (ii) the transaction be approved by a majority of our
disinterested outside directors, and (iii) the transaction be fair and
reasonable to us at the time it is authorized or approved by our
directors.
Our
policies and procedures regarding transactions involving potential conflicts of
interest are not in writing. The Company understands that it will be
difficult to enforce our policies and procedures and will rely and trust our
officers and directors to follow our policies and procedures. We will
implement our policies and procedures by requiring the officer or director who
is not in compliance with our policies and procedures to remove himself and the
other officers and directors will decide how to implement the policies and
procedures, accordingly.
Involvement
in Certain Legal Proceedings
To our
knowledge, during the past five (5) years, none of our directors, executive
officers, promoters, control persons, or nominees has been:
· the
subject of any bankruptcy petition filed by or against any business of
which such person was a general partner or executive officer either at the
time of the bankruptcy or within two years prior to that
time;
|
|
·
convicted in a criminal proceeding or is subject to a pending criminal
proceeding (excluding traffic violations and other minor
offenses);
|
·
subject to any order, judgment, or decree, not subsequently reversed,
suspended or vacated, of any court of competent jurisdiction, permanently
or temporarily enjoining, barring, suspending or otherwise limiting his
involvement in any type of business, securities or banking activities;
or
|
Compliance
With Section 16(A) Of The Exchange Act.
Section
16(a) of the Exchange Act requires our officers and directors, and persons who
beneficially own more than 10% of a registered class of our equity securities,
to file reports of ownership and changes in ownership with the Securities and
Exchange Commission and are required to furnish copies to us. To the best of our
knowledge, any reports required to be filed are timely filed for the fiscal
years ended June 30, 2009 and 2008, respectively.
35
On August
27, 2004, the Company adopted a Code of Ethics.
Audit
Committee Financial Expert
Worldwide
did not have an audit committee in 2008. The entire board of directors functions
as the audit committee. Worldwide has established an audit committee effective
in February of 2009 along with a financial expert on its audit committee. These
new members are outside the Company and are independent. There are three members
on our audit committee.
Compensation
Committee
We did not have a Compensation Committee in 2008.
Worldwide established a Compensation Committee effective February 2009
which is comprised
of one independent director.
EXECUTIVE
COMPENSATION
Summary
Compensation Table
The
following table shows the compensation awarded or paid to, or earned by the
officers of Worldwide Energy & Manufacturing USA, Inc. for the years ended
December 31, 2009, 2008 and 2007, respectively.
Name
and Principal Position
|
Year
|
Salary
($)
|
Bonus
($)
|
Stock
Awards
($)
|
Option
Awards
($)
|
Non-Equity
Incentive Plan Compensation ($)
|
Non-Qualified
Deferred Compensation Earnings
($)
|
All
Other Compensation
($)
|
Totals
($)
|
||||||||||
Jimmy
Wang,
Chief
Executive
|
2009
|
$195,000
|
0
|
0
|
0
|
0
|
0
|
0
|
$195,000
|
||||||||||
Officer,
Chairman
|
2008
|
$185,000
|
0
|
0
|
0
|
0
|
0
|
0
|
$185,000
|
||||||||||
2007
|
139,167
|
0
|
0
|
0
|
0
|
0
|
0
|
139,167
|
|||||||||||
Jeff
Watson,
Chief
Financial Officer, President
|
2009
|
$120,000
|
0
|
0
|
0
|
0
|
0
|
$120,000
|
|||||||||||
|
2008
|
$116,000
|
0
|
0
|
0
|
0
|
0
|
0
|
$116,000
|
||||||||||
2007
|
--
|
--
|
--
|
--
|
--
|
--
|
--
|
--
|
|||||||||||
Mindy
Wang, Secretary, Treasurer and
|
2009
|
$140,000
|
0
|
0
|
0
|
0
|
0
|
0
|
$140,000
|
||||||||||
Director
|
2008
|
$85,000
|
0
|
0
|
0
|
0
|
0
|
0
|
$85,000
|
||||||||||
2007
|
$70,833
|
0
|
0
|
0
|
0
|
0
|
0
|
$70,833
|
|||||||||||
36
All directors are
reimbursed for their reasonable out-of-pocket expenses incurred in connection
with their duties to us. For the years ended December 31, 2007 and 2008,
directors did not receive compensation for their services. For the year ended
December 31, 2009, directors received 1,000 shares of our common
stock in consideration for their services as directors.
Employment
Agreements-
On May
25, 2008, we entered into an employment agreement with Jimmy Wang whereby Mr.
Wang will serve as an employee of the Company for an annual salary of $206,000.
The
term of the agreement is one year. However, the executive continues to be
employed by the Company without an employment contract.
On May
25, 2008, we entered into an employment agreement with Mindy Wang whereby Ms.
Wang will serve as an employee of the Company for an annual salary of $100,000.
The
term of the agreement is one year. However, the executive continues to be
employed by the Company without an employment contract.
On May
25, 2008, we entered into an employment agreement with Jeff Watson whereby Mr.
Watson will serve as an employee of the Company for an annual salary of $120,000
and 200,000 shares of our restricted common stock, which will be allocated over
10 years in equal proportions. The term
of the agreement is one year. However, the executive continues to be employed by
the Company without an employment contract.
37
CERTAIN
RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
Other
than as set forth below, since the beginning of 2007, we have not entered into
or been a participant in any transaction in which a related person had or will
have a direct or indirect material interest in an amount that exceeds the lesser
of $120,000 or 1% of the average of the company’s total assets for the last
three completed fiscal years.
Mr. Jimmy
Wang and Mrs. Mindy Wang, who are principal stockholders, executive officers and
members of the Board of Directors of the Company, have advanced funds to the
Company for working capital purposes. At December 31, 2008, the Company
owed Jimmy and Mindy Wang $60,024. The advances are interest bearing at 8%
per annum, with a default interest rate of 10%. All unpaid amounts on this note
are due in full on January 1, 2010. The Company paid cash in the amount of
$27,284 for interest expense to Mr. and Mrs. Wang for the year ended December
31, 2008. The
Company repaid Jimmy Wang and Mindy Wang in full on March 2,
2009.
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The
following tables set forth certain information as of February 12, 2010 regarding
the beneficial ownership of our common stock by (i) each person or entity
who, to our knowledge, owns more than 5% of our common stock; (ii) each
executive officer; (iii) each director; and (iv) all of our executive
officers and directors as a group. Unless otherwise indicated in the footnotes
to the following table, each of the stockholders named in the table has sole
voting and investment power with respect to the shares of our common stock
beneficially owned.
(1
|
)
|
|||||||
Beneficial
Owner (2)
|
Number
of Shares
Beneficially
Owned
|
Percentage
of
Class
|
||||||
Jimmy
Wang
|
817,477
|
14.49
|
||||||
Mindy
Wang
|
815,477
|
14.45
|
||||||
Jeff
Watson
|
36,400
|
*
|
||||||
Jennifer
Maliar
|
1,000
|
*
|
||||||
Gerald
DeCiccio
|
1,000
|
*
|
||||||
Michael
Steingrebe
|
1,000
|
*
|
||||||
Jehu
Hand
|
1,000
|
*
|
||||||
Lauren
Byrne
|
1,000
|
*
|
||||||
Officers
and Directors as a Group (8 persons)
|
1,674,354
|
29.67
|
(1) Based
upon 5,642,567 shares of stock issued and outstanding as of February 12,
2010
(2)
Unless otherwise stated, the address for all the officers and directors is 708
North Canal Street, South San Francisco, CA 94080.
(3) Jimmy
Wang is the Chief Executive Officer and the Chairman of the Board of
Directors.
(4) Mindy
Wang is Secretary, Treasurer and Director.
(5) Jeff
Watson is the Chief Financial Officer and President
* Less
than 1%
38
SELLING
STOCKHOLDERS
The table
below sets forth information concerning the resale of the shares of common stock
by the selling stockholders of up to 4,159,226 shares of our common stock, all
of which are being registered for sale for the accounts of the selling
stockholders and include (i) 1,970,956 shares of our common stock and (ii)
2,188,270 shares of our common stock issuable upon exercise of outstanding
warrants. All of the securities being registered were issued pursuant
to a private placement which we entered into on January 26, 2010 and, pursuant
to an amendment, on February 9, 2010.
The
shares of common stock referred to above are being registered to permit public
sales of the shares, and the selling stockholders may offer the shares for
resale from time to time pursuant to this prospectus. The selling stockholders
may also sell, transfer or otherwise dispose of all or a portion of their shares
in transactions exempt from the registration requirements of the Securities Act
or pursuant to another effective registration statement covering those shares.
We may from time to time include additional selling stockholders in supplements
or amendments to this prospectus.
Other
than as set forth in the following table, the selling stockholders have not held
any position or office or had any other material relationship with us or any of
our predecessors or affiliates within the past three years.
Name
of Selling Stockholder
|
Total
Shares Held Including Shares of Common Stock and Shares Issuable Upon
Full exercise of the warrant (2)(3)
|
Total
Percentage of Outstanding Shares Assuming Full exercise
(1)
|
Shares
of Common Stock Included in Prospectus (3)
|
Beneficial
Ownership After the Offering(4)
|
Percentage
of Common Stock Owned After Offering(4)
|
|||||||||||||||
Jean
Foster Hendry(5)
|
4,000 | * | 4,000 | -- | -- | |||||||||||||||
Anson
Investments Master Fund LP(6)
|
44,444 | * | 44,444 | -- | -- | |||||||||||||||
Taliaferro
H. Taylor Jr. (7)
|
4,500 | * | 4,500 | -- | -- | |||||||||||||||
Perritt
Emerging Opportunities Fund (8)
|
333,334 | 5.7 | 333,334 | -- | -- | |||||||||||||||
Crescent
International Ltd9
|
150,000 | 2.6 | 150,000 | -- | -- | |||||||||||||||
Chestnut
Ridge Partners LP (10)
|
244,443 | 5.7 | 133,332 | 111,111 | 1.9 | |||||||||||||||
Daybreak
Special Situations Master Fund Ltd. (11)
|
44,446 | * | 44,446 | -- | -- | |||||||||||||||
Shui
Fong Shum(12)
|
8,000 | * | 8,000 | -- | -- | |||||||||||||||
Ying
Waung (13)
|
4,000 | * | 4,000 | -- | -- | |||||||||||||||
Taylor
International Fund Ltd. (14)
|
200,000 | 3.5 | 200,000 | -- | -- | |||||||||||||||
Linda
Lou (15)
|
40,000 | * | 40,000 | -- | -- | |||||||||||||||
Jayhawk
Private Equity Fund II LP (16)
|
444,444 | 7.6 | 444,444 | -- | -- | |||||||||||||||
Valor
Capital Management (17)
|
110,000 | 1.9 | 110,000 | -- | -- | |||||||||||||||
CNH
Diversified Opportunities Master Account LP (18)
|
222,222 | 3.9 | 222,222 | -- | -- | |||||||||||||||
Changxing
Chen (19)
|
6,000 | * | 6,000 | -- | -- | |||||||||||||||
Charles
Cagnon (20)
|
41,000 | * | 20,000 | -- | -- | |||||||||||||||
Chinhuei
Tsai (21)
|
5,000 | * | 5,000 | -- | -- | |||||||||||||||
Hao
Chen (22)
|
6,000 | * | 6,000 | -- | -- | |||||||||||||||
Li-Pin
Pai (23)
|
2,644 | * | 2,644 | -- | -- | |||||||||||||||
Linda
Yue Ying Liu (24)
|
15,000 | * | 15,000 | -- | -- | |||||||||||||||
Paul
Ping Liu (25)
|
8,000 | * | 8,000 | -- | -- | |||||||||||||||
The
Yingchao Zheng & Ping Gao 2006 Revocable Living Trust dated March 18,
2006 (26)
|
40,000 | * | 40,000 | -- | -- | |||||||||||||||
Sam
Xiang Liu (27)
|
1,000 | * | 1,000 | -- | -- | |||||||||||||||
Shurong
Yi (28)
|
40,000 | * | 40,000 | -- | -- | |||||||||||||||
Tiffany
Liu Shiming Miachael Liu (29)
|
10,000 | * | 10,000 | -- | -- | |||||||||||||||
Diane
Thelen (30)
|
73,489 | 1.3 | 48,888 | 48,888 | * | |||||||||||||||
Michael
A. McClaran (31)
|
55,556 | * | 55,556 | -- | -- | |||||||||||||||
Teresa
A. McClaran (32)
|
9,588 | * | 8,888 | 770 | * | |||||||||||||||
Robert
Batta (33)
|
17,778 | * | 17,778 | -- | -- | |||||||||||||||
JW
Partners LP (34)
|
22,222 | * | 22,222 | -- | -- | |||||||||||||||
Westhouse
Holdings PLC (35)
|
115,778 | 2.0 | 43,556 | 72,222 | 1.3 | |||||||||||||||
Hammerman
Capital Partners LP (36)
|
70,000 | 1.2 | 70,000 | -- | -- | |||||||||||||||
Silver
Rock II, Ltd (37)
|
120,000 | 2.1 | 120,000 | -- | -- | |||||||||||||||
Matthew
M. Hayden (38)
|
43,992 | * | 43,992 | -- | -- | |||||||||||||||
Barry
Honig (39)
|
44,444 | * | 44,444 | -- | -- | |||||||||||||||
Cranshire
Capital LP (40)
|
111,112 | 2.0 | 111,112 | -- | -- | |||||||||||||||
Shira
Capital (41)
|
22,222 | * | 22,222 | -- | -- | |||||||||||||||
Pentwater
Growth Fund Ltd. (42)
|
288,900 | 4.99 | 288,900 | -- | -- | |||||||||||||||
Pentwater
Equities
Opportunities Master Fund
Ltd. (43)
|
366,660 | 6.3 | 366,660 | -- | -- | |||||||||||||||
Oceana
Master Fund Ltd. (44)
|
344,440 | 5.9 | 344,440 | -- | -- |
39
DBGJ
Irrevocable Trust(45)
|
44,444 | * | 44,444 | -- | -- | |||||||||||||||
Karl
Ziegler(46)
|
12,000 | * | 12,000 | -- | -- | |||||||||||||||
Gloria
Constantin (47)
|
4,000 | * | 4,000 | -- | -- | |||||||||||||||
Mary
Siefert (48)
|
8,000 | * | 8,000 | -- | -- | |||||||||||||||
David
Latham (49)
|
4,000 | * | 4,000 | -- | -- | |||||||||||||||
John
Ballard (50)
|
101,784 | 1.8 | 44,444 | 57,304 | 1.0 | |||||||||||||||
Ladenburg
Thalmann
|
||||||||||||||||||||
&Co, Inc.
(51)
|
217,314 | 3.7 | 217,314 | -- | -- | |||||||||||||||
The
Bourquin Family
Trust
UAD 5/7/1998 (52)
|
20,000 | * | 20,000 | -- | -- | |||||||||||||||
Anne
R. Brown Irrevocable Trust UAD 3/30/1990 (53)
|
20,000 | * | 20,000 | -- | -- | |||||||||||||||
Katharine
Bard Dickson &
Mark
A. Dickson JTWROS(54)
|
40,000 | * | 40,000 | -- | -- | |||||||||||||||
Leonard
M. Herman Trust
UAD
5/3/1993 (55)
|
30,000 | * | 30,000 | -- | -- | |||||||||||||||
Sidney
N. Herman(56)
|
20,000 | * | 20,000 | -- | -- | |||||||||||||||
U.
S. Trust Company of Delaware
FBO
William K. Kellogg III 53 Trust(57)
|
20,000 | * | 20,000 | -- | -- | |||||||||||||||
T.
Michael Johnson &
Patricia
R Johnson JTWROS(58)
|
10,000 | * | 10,000 | -- | -- | |||||||||||||||
John
Bard Manulis(59)
|
10,000 | * | 10,000 | -- | -- | |||||||||||||||
Laurie
Manulis Harmon(60)
|
10,000 | * | 10,000 | -- | -- | |||||||||||||||
R.S.
Pierrepont 1932 Trust(61)
|
10,000 | * | 10,000 | -- | -- | |||||||||||||||
M.
Edward Sellers and
Suzan
D. Boyd JTWROS(62)
|
20,000 | * | 20,000 | -- | -- | |||||||||||||||
Robert
S. Steinbaum (63)
|
10,000 | * | 10,000 | -- | -- | |||||||||||||||
Janet
J. Underwood Trust
UAD
6/25/2002 (64)
|
20,000 | * | 20,000 | -- | -- | |||||||||||||||
Bard
Micro-Cap Value Fund, L.P.(65)
|
30,000 | * | 30,000 | -- | -- | |||||||||||||||
Timothy
B. Johnson (66)
|
10,000 | * | 10,000 | -- | -- | |||||||||||||||
Timothy
B. Johnson
|
10,000 | * | 10,000 | -- | -- | |||||||||||||||
C/F
Alexis B. Johnson(67)
|
||||||||||||||||||||
Dale
F. Snavely(68)
|
30,000 | * | 30,000 | -- | -- |
*Less
than 1%
40
(1)
|
Based
on 5,642,567 shares of common stock issued and outstanding as of February
12, 2010.
|
(2)
|
The
number and percentage of shares beneficially owned is determined in
accordance with Rule 13d-3 of the Securities Exchange Act of 1934, and the
information is not necessarily indicative of beneficial ownership for any
other purpose. Under such rule, beneficial ownership includes any shares
as to which the selling stockholders has sole or shared voting power or
investment power and also any shares, which the selling stockholders has
the right to acquire within 60 days. The actual number of shares of common
stock issuable upon the conversion of the secured convertible notes is
subject to adjustment depending on, among other factors, the future market
price of the common stock, and could be materially less or more than the
number estimated in the table.
|
(3)
|
The
Selling Stockholder may not exercise its warrants and receive shares of
our common stock such that the number of shares of common stock held by
them in the aggregate and their affiliates after such conversion or
exercise exceeds 4.99% of the then issued and outstanding shares of common
stock. Accordingly, the number of shares of common stock set forth
in the table for the selling stockholders exceeds the number of shares of
common stock that the selling stockholders could own beneficially at any
given time through their ownership of the secured convertible notes and
the warrants. In that regard, the beneficial ownership of the common stock
by the selling stockholder set forth in the table is not determined in
accordance with Rule 13d-3 under the Securities Exchange Act of 1934, as
amended.
|
(5)
|
Includes
(i) 2,000 shares of our common stock and (ii) 2,000 shares of our common
stock issuable upon exercise of outstanding
warrants.
|
(6)
|
Includes
(i) 22,000 shares of our common stock and (ii) 22,000 shares of our common
stock issuable upon exercise of outstanding warrants. Bruce
Winson has sole voting and dispositive power over the shares held by Anson
Investments Master Fund LP.
|
(7)
|
Includes
(i) 2,250 shares of our common stock and (ii) 2,250 shares of our common
stock issuable upon exercise of outstanding
warrants.
|
(8)
|
Includes
(i) 166,666 shares of our common stock and (ii) 166,667 shares of our
common stock issuable upon exercise of outstanding
warrants. Michal Corett has sole voting and dispositive power
over the shares held by Perritt Emerging Opportunities
Fund.
|
(9)
|
Includes
(i) 75,000 shares of our common stock and (ii) 75,000 shares of our common
stock issuable upon exercise of outstanding warrants. Maxi
Brezzi and Bachir Taleb-Ibrahimi have sole voting and dispositive
power over the shares held by Crescent International
Ltd.
|
(10)
|
Includes
(i) 66,666 shares of our common stock, (ii) 66,666 shares of our common
stock issuable upon exercise of outstanding warrants, (iii) 72,222 of our
Class A warrants and (iv) 38,889 of our Class B
warrants. Kenneth Pasternak has sole voting and dispositive
power over the shares held by Chestnut Ridge Partners
LP
|
(11)
|
Includes
(i) 22,223 shares of our common stock and (ii) 22,223 shares of our common
stock issuable upon exercise of outstanding warrants. Larry
Butz has sole voting and dispositive power over the shares held by
Daybreak Special Situations Mater Fund
Ltd.
|
(12)
|
Includes
(i) 4,000 shares of our common stock and (ii) 4,000 shares of our common
stock issuable upon exercise of outstanding
warrants.
|
(13)
|
Includes
(i) 2,000 shares of our common stock and (ii) 2,000 shares of our common
stock issuable upon exercise of outstanding
warrants..
|
(14)
|
Includes
(i) 100,000 shares of our common stock and (ii) 100,000 shares of our
common stock issuable upon exercise of outstanding
warrants.
|
(15)
|
Includes
(i) 20,000 shares of our common stock and (ii) 20,000 shares of our common
stock issuable upon exercise of outstanding
warrants.
|
(16)
|
Includes
(i) 222,000 shares of our common stock and (ii) 222,000 shares of our
common stock issuable upon exercise of outstanding
warrants. Kent C. McCarthy has sole voting and dispositive
power over the shares held by Jayhawk Private Equity Fund II
LP.
|
(17)
|
Includes
(i) 55,000 shares of our common stock and (ii) 55,000 shares of our common
stock issuable upon exercise of outstanding warrants. John M.
Kratky has sole voting and dispositive power over the shares held by Valor
Capital Management.
|
(18)
|
Includes
(i) 111,000 shares of our common stock and (ii) 111,000 shares of our
common stock issuable upon exercise of outstanding
warrants. Todd PUlvino has sole voting and dispositive power
over the shares held by CNH Diversified Opportunities Master Account
LP.
|
41
(19)
|
Includes
(i) 3,000 shares of our common stock and (ii) 3,000 shares of our common
stock issuable upon exercise of outstanding
warrants.
|
(20)
|
Includes
(i) 31,000 shares of our common stock and (ii) 10,000 shares of our common
stock issuable upon exercise of outstanding
warrants.
|
(21)
|
Includes
(i) 2,500 shares of our common stock and (ii) 2,500 shares of our common
stock issuable upon exercise of outstanding
warrants.
|
(22)
|
Includes
(i) 3,000 shares of our common stock and (ii) 3,000 shares of our common
stock issuable upon exercise of outstanding
warrants.
|
(23)
|
Includes
(i) 1,322 shares of our common stock and (ii) 1,322 shares of our common
stock issuable upon exercise of outstanding
warrants.
|
(24)
|
Includes
(i) 7,500 shares of our common stock and (ii) 7,500 shares of our common
stock issuable upon exercise of outstanding
warrants.
|
(25)
|
Includes
(i) 4,000 shares of our common stock and (ii) 4,000 shares of our common
stock issuable upon exercise of outstanding
warrants.
|
(26)
|
Includes
(i) 20,000 shares of our common stock and (ii) 20,000 shares of our common
stock issuable upon exercise of outstanding warrants.. Ying
Chao Zheng and Ping Gao have sole voting and dispositive power over the
shares held by The Yingchao Zheng & Ping Gao 2006 Revocable Living
Trust dated March 18, 2006.
|
(27)
|
Includes
(i) 500 shares of our common stock and (ii) 500 shares of our common stock
issuable upon exercise of outstanding
warrants.
|
(28)
|
Includes
(i) 20,000 shares of our common stock and (ii) 20,000 shares of our common
stock issuable upon exercise of outstanding
warrants..
|
(29)
|
Includes
(i) 5,000 shares of our common stock and (ii) 5,000 shares of our common
stock issuable upon exercise of outstanding
warrants
|
(30)
|
Includes
(i) 49,045 shares of our common stock and (ii) 24,444 shares of our common
stock issuable upon exercise of outstanding
warrants..
|
(31)
|
Includes
(i) 27,778 shares of our common stock and (ii) 27,778shares of our common
stock issuable upon exercise of outstanding
warrants
|
(32)
|
Includes
(i) 5,214 shares of our common stock and (ii) 4,444 shares of our common
stock issuable upon exercise of outstanding
warrants..
|
(33)
|
Includes
(i) 8,889 shares of our common stock and (ii) 8,889 shares of our common
stock issuable upon exercise of outstanding
warrants.
|
(34)
|
Includes
(i) 11,111 shares of our common stock and (ii) 11,111 shares of our common
stock issuable upon exercise of outstanding warrants. Jason
Wild has sole voting and dispositive power over the shares held by JW
Partners LP.
|
(35)
|
Includes
(i) 94,000 shares of our common stock and (ii) 21,778 shares of our common
stock issuable upon exercise of outstanding warrants. Jonathan
Azis has sole voting and dispositive power over the shares held by
Westhouse Holdings PLC
|
(36)
|
Includes
(i) 35,000 shares of our common stock and (ii) 35,000 shares of our common
stock issuable upon exercise of outstanding warrants. Jason A.
Hammerman has sole voting and dispositive power over the shares held by
Hammerman Capital Partners LP.
|
(37)
|
Includes
(i) 60,000 shares of our common stock and (ii) 60,000 shares of our common
stock issuable upon exercise of outstanding warrants. Ezaat
Jallad has sole voting and dispositive power over the shares held by
Silver Rock Capital II
|
(38)
|
Includes
(i) 21,996 shares of our common stock and (ii) 21,996 shares of our common
stock issuable upon exercise of outstanding
warrants.
|
42
(39)
|
Includes
(i) 22,222 shares of our common stock and (ii) 22,222 shares of our common
stock issuable upon exercise of outstanding
warrants..
|
(40)
|
Includes
(i) 55,556 shares of our common stock and (ii) 55,556 shares of our common
stock issuable upon exercise of outstanding warrants. Downsview
Capital, Inc. (“Downsview”) is the general partner of Cranshire Capital,
L.P. (“Cranshire”) and consequently has voting control and investment
discretion over securities held by Cranshire. Mitchell P. Kopin
(“Mr. Kopin”), President of Downsview, has voting control over
Downsview. As a result of the foregoing, each of Mr. Kopin and
Downsview may be deemed to have beneficial ownership (as determined under
Section 13(d) of the Securities Exchange Act of 1934, as amended) of the
shares of common stock beneficially owned by Cranshire Capital,
L.P..
|
(41) | Includes (i) 11,111 shares of our common stock and (ii) 11,111 shares of our common stock issuable upon exercise of outstanding warrants. Montgomery Cornell has sole voting and dispositive power over the shares held by Shira Capital. |
(42) | Includes (i) 144,450 shares of our common stock and (ii) 144,450 shares of our common stock issuable upon exercise of outstanding warrants. Matthew Halbower has sole voting and dispositive power over the shares held by Pentwater Growth Fund Ltd |
(43) | Includes (i) 183,330 shares of our common stock and (ii) 183,330 shares of our common stock issuable upon exercise of outstanding warrants. Matthew Halbower has sole voting and dispositive power over the shares held by Pentwater Equity Opportunities Master Fund Ltd. |
(44) | Includes (i) 172,220 shares of our common stock and (ii) 172,220 shares of our common stock issuable upon exercise of outstanding warrants. Matthew Halbower has sole voting and dispositive power over the shares held by Oceana Master Fund Ltd. |
(45) | Includes (i) 22,222 shares of our common stock and (ii) 22,222 shares of our common stock issuable upon exercise of outstanding warrants. Joel Brauser has sole voting and dispositive power over the shares held by DBGJ Irrevocable Trust. |
(46) | Includes (1) 6,000 shares of our common stock and (ii) 6,000 shares of our common stock issuable upon exercise of outstanding warrants. |
(47) | Includes (1) 2,000 shares of our common stock and (ii) 2,000 shares of our common stock issuable upon exercise of outstanding warrants. |
(48) | Includes (1) 4,000 shares of our common stock and (ii) 4,000 shares of our common stock issuable upon exercise of outstanding warrants. |
(49) | Includes (1) 2,000 shares of our common stock and (ii) 2,000 shares of our common stock issuable upon exercise of outstanding warrants. |
(50) |
Includes
(1) 136,830 shares of our common stock and (ii) 22,222 shares of our
common stock issuable upon exercise of outstanding warrants.
Mr. Ballard served as our Chief Financial Officer from September 30,
2003 until September 25, 2009.
|
(51)
|
Represents
217,314 shares of our common stock issuable upon exercise of outstanding
warrants. Diane Chellimi has sole voting and dispositive power over
the shares held by Ladenburg Thalmann & Co.,
Inc.
|
43
(52)
|
Represents
(i) 10,000 shares of our common stock and (ii) 10,000 shares of our common
stock issuable upon exercise of outstanding warrants. Either Kent R.
Bourquin or Mary Bard Bourquin Trustees, have sole voting and dispositive
power over the shares held by The Bourquin Family Trust UAD
5/7/1998.
|
(53)
|
Represents
(i) 10,000 shares of our common stock and (ii) 10,000 shares of our common
stock issuable upon exercise of outstanding warrants. Rocky W.
Hudson, Trustee has sole voting and dispositive power over the shares held
by Anne R. Brown Irrevocable Trust UAD
3/30/1990.
|
(54)
|
Represents
(i) 20,000 shares of our common stock and (ii) 20,000 shares of our common
stock issuable upon exercise of outstanding warrants. Katharine Bard
Dickson has sole voting and dispositive power over the shares held by
Katharine Bard Dickson & Mark A Dickson,
JTWROS.
|
(55)
|
Represents
(i) 15,000 shares of our common stock and (ii) 15,000 shares of our common
stock issuable upon exercise of outstanding warrants. Leonard M.
Herman, Trustee, has sole voting and dispositive power over the shares
held by Leonard M. Herman Trust UAD
3/3/93.
|
(56)
|
Represents
(i) 10,000 shares of our common stock and (ii) 10,000 shares of our common
stock issuable upon exercise of outstanding warrants. Debra
Patterson has sole voting and dispositive power over the shares held by WK
Kellogg 1953 Trust, U.S. Trust Co of Delaware
Trustee.
|
(57)
|
Represents
(i) 10,000 shares of our common stock and (ii) 10,000 shares of our common
stock issuable upon exercise of outstanding
warrants.
|
(58)
|
Represents
(i) 5,000 shares of our common stock and (ii) 5,000 shares of our common
stock issuable upon exercise of outstanding
warrants.
|
(59)
|
Represents
(i) 5,000 shares of our common stock and (ii) 5,000 shares of our common
stock issuable upon exercise of outstanding
warrants.
|
(60)
|
Represents
(i) 5,000 shares of our common stock and (ii) 5,000 shares of our common
stock issuable upon exercise of outstanding
warrants.
|
(61)
|
Represents
(i) 5,000 shares of our common stock and (ii) 5,000 shares of our common
stock issuable upon exercise of outstanding warrants. Seth
Pierrepont, Trustee has sole voting and dispositive power over the shares
held by R.S. Pierrepont 1932 Trust.
|
(62)
|
Represents
(i) 10,000 shares of our common stock and (ii) 10,000 shares of our common
stock issuable upon exercise of outstanding warrants. M.Edward
Sellers & Suzan D. Boyd has sole voting and dispositive power over the
shares held by M. Edward Sellers & Suzan D. Boyd
JTWROS.
|
(63)
|
Represents
(i) 5,000 shares of our common stock and (ii) 5,000 shares of our common
stock issuable upon exercise of outstanding
warrants.
|
(64)
|
Represents
(i) 10,000 shares of our common stock and (ii) 10,000 shares of our common
stock issuable upon exercise of outstanding warrants. Janet J.
Underwood has sole voting and dispositive power over the shares held by
Janet J. Underwood Trust UAD
6/5/02.
|
(65)
|
Represents
(i) 15,000 shares of our common stock and (ii) 15,000 shares of our common
stock issuable upon exercise of outstanding
warrants.
|
(66)
|
Represents
(i) 5,000 shares of our common stock and (ii) 5,000 shares of our common
stock issuable upon exercise of outstanding
warrants.
|
(67)
|
Represents
(i) 5,000 shares of our common stock and (ii) 5,000 shares of our common
stock issuable upon exercise of outstanding
warrants.
|
(68)
|
Represents
(i) 15,000 shares of our common stock and (ii) 15,000 shares of our common
stock issuable upon exercise of outstanding
warrants.
|
44
PLAN
OF DISTRIBUTION
Each
Selling Stockholder (the “Selling
Stockholders”) of the common stock and any of their pledgees, assignees
and successors-in-interest may, from time to time, sell any or all of their
shares of common stock covered hereby on the OTC Bulletin Board or any other
stock exchange, market or trading facility on which the shares are traded or in
private transactions. These sales may be at fixed or negotiated
prices. A Selling Stockholder may use any one or more of the
following methods when selling shares:
·
|
ordinary
brokerage transactions and transactions in which the broker-dealer
solicits purchasers;
|
·
|
block
trades in which the broker-dealer will attempt to sell the shares as agent
but may position and resell a portion of the block as principal to
facilitate the transaction;
|
·
|
purchases
by a broker-dealer as principal and resale by the broker-dealer for its
account;
|
·
|
an
exchange distribution in accordance with the rules of the applicable
exchange;
|
·
|
privately
negotiated transactions;
|
·
|
settlement
of short sales entered into after the effective date of the registration
statement of which this prospectus is a
part;
|
·
|
in
transactions through broker-dealers that agree with the Selling
Stockholders to sell a specified number of such shares at a stipulated
price per share;
|
·
|
through
the writing or settlement of options or other hedging transactions,
whether through an options exchange or
otherwise;
|
·
|
a
combination of any such methods of sale;
or
|
·
|
any
other method permitted pursuant to applicable
law.
|
The
Selling Stockholders may also sell shares under Rule 144 under the Securities
Act of 1933, as amended (the “Securities Act”), if
available, rather than under this prospectus.
Broker-dealers
engaged by the Selling Stockholders may arrange for other brokers-dealers to
participate in sales. Broker-dealers may receive commissions or
discounts from the Selling Stockholders (or, if any broker-dealer acts as agent
for the purchaser of shares, from the purchaser) in amounts to be negotiated,
but, except as set forth in a supplement to this Prospectus, in the case of an
agency transaction not in excess of a customary brokerage commission in
compliance with FINRA Rule 2440; and in the case of a principal transaction a
markup or markdown in compliance with FINRA IM-2440.
In
connection with the sale of the common stock or interests therein, the Selling
Stockholders may enter into hedging transactions with broker-dealers or other
financial institutions, which may in turn engage in short sales of the common
stock in the course of hedging the positions they assume. The Selling
Stockholders may also sell shares of the common stock short and deliver these
securities to close out their short positions, or loan or pledge the common
stock to broker-dealers that in turn may sell these securities. The
Selling Stockholders may also enter into option or other transactions with
broker-dealers or other financial institutions or create one or more derivative
securities which require the delivery to such broker-dealer or other financial
institution of shares offered by this prospectus, which shares such
broker-dealer or other financial institution may resell pursuant to this
prospectus (as supplemented or amended to reflect such
transaction).
45
The
Selling Stockholders and any broker-dealers or agents that are involved in
selling the shares may be deemed to be “underwriters” within the meaning of the
Securities Act in connection with such sales. In such event, any
commissions received by such broker-dealers or agents and any profit on the
resale of the shares purchased by them may be deemed to be underwriting
commissions or discounts under the Securities Act. Each Selling
Stockholder has informed the Company that it does not have any written or oral
agreement or understanding, directly or indirectly, with any person to
distribute the Common Stock. In no event shall any broker-dealer receive fees,
commissions and markups which, in the aggregate, would exceed eight percent
(8%).
The
Company is required to pay certain fees and expenses incurred by the Company
incident to the registration of the shares. The Company has agreed to
indemnify the Selling Stockholders against certain losses, claims, damages and
liabilities, including liabilities under the Securities Act.
Because
Selling Stockholders may be deemed to be “underwriters” within the meaning of
the Securities Act, they will be subject to the prospectus delivery requirements
of the Securities Act including Rule 172 thereunder. The Selling
Stockholders have advised us that there is no underwriter or coordinating broker
acting in connection with the proposed sale of the resale shares by the Selling
Stockholders.
We agreed
to keep this prospectus effective until the earlier of (i) the date on which the
shares may be resold by the Selling Stockholders without registration and
without regard to any volume or manner-of-sale limitations by reason of Rule
144, without the requirement for the Company to be in compliance with the
current public information under Rule 144 under the Securities Act or any other
rule of similar effect or (ii) all of the shares have been sold pursuant to this
prospectus or Rule 144 under the Securities Act or any other rule of similar
effect. The resale shares will be sold only through registered or
licensed brokers or dealers if required under applicable state securities laws.
In addition, in certain states, the resale shares of Common Stock covered hereby
may not be sold unless they have been registered or qualified for sale in the
applicable state or an exemption from the registration or qualification
requirement is available and is complied with.
Under applicable rules and regulations
under the Exchange Act, any person engaged in the distribution of the resale
shares may not simultaneously engage in market making activities with respect to
the common stock for the applicable restricted period, as defined in Regulation
M, prior to the commencement of the distribution. In addition, the
Selling Stockholders will be subject to applicable provisions of the Exchange
Act and the rules and regulations thereunder, including Regulation M, which may
limit the timing of purchases and sales of shares of the common stock by the
Selling Stockholders or any other person. We will make copies of this
prospectus available to the Selling Stockholders and have informed them of the
need to deliver a copy of this prospectus to each purchaser at or prior to the
time of the sale (including by compliance with Rule 172 under the Securities
Act).
PENNY
STOCK
The
Securities and Exchange Commission has adopted Rule 15g-9 which establishes the
definition of a "penny stock," for the purposes relevant to us, as any equity
security that has a market price of less than $5.00 per share or with an
exercise price of less than $5.00 per share, subject to certain exceptions. For
any transaction involving a penny stock, unless exempt, the rules
require:
·
|
that
a broker or dealer approve a person's account for transactions in penny
stocks; and
|
·
|
the
broker or dealer receive from the investor a written agreement to the
transaction, setting forth the identity and quantity of the penny stock to
be purchased.
|
In order
to approve a person's account for transactions in penny stocks, the broker or
dealer must
·
|
obtain
financial information and investment experience objectives of the person;
and
|
·
|
make
a reasonable determination that the transactions in penny stocks are
suitable for that person and the person has sufficient knowledge and
experience in financial matters to be capable of evaluating the risks of
transactions in penny stocks.
|
The
broker or dealer must also deliver, prior to any transaction in a penny stock, a
disclosure schedule prescribed by the Commission relating to the penny stock
market, which, in highlight form:
·
|
sets
forth the basis on which the broker or dealer made the suitability
determination; and
|
·
|
that
the broker or dealer received a signed, written agreement from the
investor prior to the transaction.
|
Disclosure
also has to be made about the risks of investing in penny stocks in both public
offerings and in secondary trading and about the commissions payable to both the
broker-dealer and the registered representative, current quotations for the
securities and the rights and remedies available to an investor in cases of
fraud in penny stock transactions. Finally, monthly statements have to be sent
disclosing recent price information for the penny stock held in the account and
information on the limited market in penny stocks.
46
DESCRIPTION
OF SECURITIES
Common
Stock
We are
authorized to issue 100,000,000 shares of common stock, no par value per
share. As of February12, 2010 there were 5,642,567 common shares
issued and outstanding.
The
holders of our common stock have equal ratable rights to dividends from funds
legally available if and when declared by the Company’s board of directors and
are entitled to share ratably in all of our assets available for distribution to
holders of common stock upon liquidation, dissolution or winding up of our
affairs. Our common stock does not provide the right to a preemptive,
subscription or conversion rights and there are no redemption or sinking fund
provisions or rights. Our common stock holders are entitled to one
non-cumulative vote per share on all matters on which shareholders may
vote.
All
shares of common stock now outstanding are fully paid for and
non-assessable. Our Articles of Incorporation, Bylaws and the
applicable statutes of the State of Colorado for a more complete description of
the rights and liabilities of holders of the Company’s
securities. All material terms of our common stock have been
addressed in this section.
Holders
of shares of our common stock do not have cumulative voting rights, which means
that the holders of more than 50% of the outstanding shares, voting for the
election of directors, can elect all of the directors to be elected, if they so
choose, and, in that event, the holders of the remaining shares will not be able
to elect any of the Company’s directors.
Preferred
Stock
We are
authorized to issue 10,000,000 shares of preferred stock, no par value per
share. The terms of the preferred shares are at the discretion of the
board of directors. We have not issued any shares of preferred
stock.
Dividends
The
Company has not paid any cash dividends to shareholders. The
declaration of any future cash dividends is at the discretion of the Company’s
board of directors and depends upon the Company’s earnings, if any,
the Company’s capital requirements and financial position, the Company’s general
economic conditions, and other pertinent conditions. It is the
Company’s present intention not to pay any cash dividends in the foreseeable
future, but rather to reinvest earnings, if any, in the Company’s business
operations.
Warrants
As of
February 12, 2010, there are 3,299,379 outstanding warrants to purchase the
Company’s securities.
Options
As of
February 12, 2010, there were 109,213 options to purchase the Company’s
securities issued or outstanding.
Transfer
Agent
Our
transfer agent is Corporate Stock Transfer, 3200 Cherry Creek Drive South, Suite
430, Denver, CO 80209.
Indemnification
of Directors and Officers
The
Company’s directors and officers are indemnified as provided by the Colorado
Statutes and the Company’s Bylaws. The Company has agreed to indemnify each of
the Company’s directors and certain officers against certain liabilities,
including liabilities under the Securities Act of 1933. Insofar as
indemnification for liabilities arising under the Securities Act of 1933 may be
permitted to the Company’s directors, officers and controlling persons pursuant
to the provisions described above, or otherwise, The Company have been advised
that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act of
1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the Company’s payment of
expenses incurred or paid by the Company’s director, officer or controlling
person in the successful defense of any action, suit or proceeding) is asserted
by such director, officer or controlling person in connection with the
securities being registered, The Company will, unless in the opinion of the
Company’s counsel the matter has been settled by controlling precedent, submit
to a court of appropriate jurisdiction the question whether such indemnification
by it is against public policy as expressed in the Securities Act and will be
governed by the final adjudication of such issue.
47
Insofar
as indemnification for liabilities arising under the Securities Act of 1933, as
amended, may be permitted to our directors, officers and persons controlling us,
we have been advised that it is the Securities and Exchange Commission’s opinion
that such indemnification is against public policy as expressed in the
Securities Act of 1933, as amended, and is, therefore,
unenforceable.
The
consolidated financial statements included in this prospectus have been audited
by Child, Van Wagoner & Bradshaw, PLLC, an independent registered public
accounting firm, given on the authority of that firm as experts in accounting
and auditing to the extent and for the periods indicated in their report
appearing elsewhere herein.
Sichenzia
Ross Friedman Ference LLP, 61 Broadway, 32 nd Floor, New York, New York
10006 has passed upon the validity of the shares of common stock to be sold in
this offering.
We have
filed with the Securities and Exchange Commission a registration statement on
Form S-1, together with any amendments and related exhibits, under the
Securities Act, with respect to our shares of common stock offered by this
prospectus. The registration statement contains additional information about us
and our shares of common stock that we are offering in this
prospectus.
We file
annual, quarterly and current reports and other information with the Securities
and Exchange Commission under the Securities Exchange Act of 1934, as amended.
Our Securities and Exchange Commission filings are available to the public over
the Internet at the Securities and Exchange Commission’s website at
http://www.sec.gov. You may also read and copy any document we file at the
Securities and Exchange Commission’s public reference room located at 100 F
Street, N.E., Washington, D.C. 20549. Please call the Securities and Exchange
Commission at 1-800-SEC-0330 for further information on the public reference
rooms and their copy charges. Access to those electronic filings is available as
soon as practicable after filing with the Securities and Exchange Commission.
You may also request a copy of those filings, excluding exhibits, from us at no
cost. Any such request should be addressed to us at: 408 N. Canal Street, South
San Francisco, CA 94080.
48
WORLDWIDE
ENERGY AND MANUFACTURING USA, INC. AND SUBSIDIARIES
CONDENSED
CONSOLIDATED BALANCE SHEETS
AS
OF SEPTEMBER 30, 2009 AND DECEMBER 31, 2008
September
30, 2009
|
December
31, 2008
|
|||||||
ASSETS
|
(Unaudited)
|
|||||||
Current
assets:
|
||||||||
Cash
and cash equivalents
|
$ | 5,067,638 | $ | 5,092,476 | ||||
Restricted
cash
|
1,417,356 | - | ||||||
Accounts
receivables, net of allowances of $281,000 and $46,000,
respectively
|
14,985,055 | 4,790,506 | ||||||
Notes
receivable
|
354,263 | 269,507 | ||||||
Inventories
|
4,926,189 | 3,754,765 | ||||||
Income
tax receivable
|
186,157 | - | ||||||
Advances
to suppliers
|
539,394 | 99,824 | ||||||
Other
receivables
|
111,006 | 185,400 | ||||||
Prepaid
and other current assets
|
401,260 | 206,770 | ||||||
Total
current assets
|
27,988,318 | 14,399,248 | ||||||
Property,
plant and equipment, net
|
3,554,610 | 1,353,539 | ||||||
Intangible
assets
|
1,101,000 | 1,101,000 | ||||||
Goodwill
|
285,714 | 285,714 | ||||||
Investment
at cost
|
51,892 | 51,892 | ||||||
Deposits
paid for contracts in process
|
- | 1,673,084 | ||||||
Long
term receivable – related party
|
253,996 | 260,973 | ||||||
Other
assets
|
- | 7,559 | ||||||
Total
assets
|
$ | 33,235,530 | $ | 19,133,009 | ||||
LIABILITIES
AND EQUITY
|
||||||||
Current
liabilities:
|
||||||||
Accounts
payable
|
$ | 14,481,008 | $ | 3,400,253 | ||||
Accrued
expenses
|
1,029,332 | 867,291 | ||||||
Line
of credit
|
2,000,000 | - | ||||||
Acquisition
cost payable
|
- | 285,714 | ||||||
Tax
payable
|
492,516 | 364,213 | ||||||
Due
to related parties
|
1,351,276 | 1,243,024 | ||||||
Customer
deposits
|
175,723 | 964,998 | ||||||
Total
current liabilities
|
19,529,855 | 7,125,493 | ||||||
Non-current
liabilities
|
||||||||
Line
of credit
|
763,285 | 937,075 | ||||||
Loan
payable to stockholders
|
- | 60,024 | ||||||
Total
non-current liabilities
|
763,285 | 997,099 | ||||||
Total
liabilities
|
20,293,140 | 8,122,592 | ||||||
Stockholders’
equity
|
||||||||
Common
stock (No Par Value; 100,000,000 shares authorized; 3,621,611 and
3,493,511 shares issued and outstanding, respectively)
|
6,270,399 | 6,108,379 | ||||||
Retained
earnings
|
5,160,166 | 3,801,921 | ||||||
Accumulated
other comprehensive income
|
665,510 | 487,478 | ||||||
Total
equity attributable to Worldwide
|
12,096,075 | 10,397,778 | ||||||
Non-controlling
interest
|
846,315 | 612,639 | ||||||
Total
stockholders’ equity
|
12,942,390 | 11,010,417 | ||||||
Total
liabilities and stockholders’ equity
|
$ | 33,235,530 | $ | 19,133,009 |
See
accompanying notes to unaudited condensed consolidated financial
statements
F-1
WORLDWIDE
ENERGY AND MANUFACTURING USA, INC. AND SUBSIDIARIES
UNAUDITED
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE
INCOME
For
the Three Months Ended
|
For
the Nine Months Ended
|
|||||||||||||||
September
30,
|
September
30,
|
|||||||||||||||
2009
|
2008
|
2009
|
2008
|
|||||||||||||
Revenue
|
||||||||||||||||
Sales
|
$ | 18,618,508 | $ | 19,102,654 | $ | 39,217,288 | $ | 31,348,064 | ||||||||
Cost
of goods sold
|
15,757,244 | 17,738,721 | 32,654,832 | 27,493,975 | ||||||||||||
Gross
profit
|
2,861,264 | 1,363,933 | 6,562,456 | 3,854,089 | ||||||||||||
Operating
Expenses
|
||||||||||||||||
Selling,
general and administrative expenses
|
1,316,386 | 750,983 | 3,728,136 | 2,227,502 | ||||||||||||
Management
and professional fees paid to shareholders (Note 14)
|
80,000 | 72,680 | 260,000 | 225,680 | ||||||||||||
Stock
based compensation
|
46,800 | (15,000 | ) | 162,020 | 95,000 | |||||||||||
Depreciation
|
83,485 | 2,879 | 246,366 | 10,713 | ||||||||||||
Total
operating expenses
|
1,526,671 | 811,542 | 4,396,522 | 2,558,895 | ||||||||||||
Net
operating income
|
1,334,593 | 552,391 | 2,165,934 | 1,295,194 | ||||||||||||
Other
Income (expenses)
|
||||||||||||||||
Interest
income
|
3,007 | 8,267 | 14,164 | 12,217 | ||||||||||||
Interest
expense
|
(20,114 | ) | (1,287 | ) | (40,923 | ) | (74,375 | ) | ||||||||
Interest
expense paid to shareholders (Note 14)
|
- | (9,838 | ) | - | (27,284 | ) | ||||||||||
Other
income (expense)
|
13,391 | 5,704 | 6,399 | 5,704 | ||||||||||||
Exchange
gain (loss)
|
97,996 | - | 103,421 | (691 | ) | |||||||||||
Total
other expenses
|
94,280 | 2,846 | 83,061 | (84,429 | ) | |||||||||||
Income
before income taxes
|
1,428,873 | 555,237 | 2,248,995 | 1,210,765 | ||||||||||||
Income
taxes
|
(427,497 | ) | (8,514 | ) | (670,121 | ) | (16,813 | ) | ||||||||
Income
after taxes
|
1,001,376 | 546,723 | 1,578,874 | 1,193,952 | ||||||||||||
Net
income(loss) from discontinued operations, net of tax
|
- | (6,115 | ) | - | 2,017 | |||||||||||
Net
income before non-controlling interest
|
1,001,376 | 540,608 | 1,578,874 | 1,195,969 | ||||||||||||
Net
income attributable to non-controlling interest
|
(98,019 | ) | - | (220,629 | ) | - | ||||||||||
Net
income attributable to Worldwide
|
903,357 | 540,608 | 1,358,245 | 1,195,969 | ||||||||||||
Other
comprehensive income
|
||||||||||||||||
Foreign
currency translation, net of tax
|
83,423 | 146,017 | 191,079 | 102,835 | ||||||||||||
Comprehensive
income (loss) attributable to non-controlling interest
|
524 | - | (13,047 | ) | - | |||||||||||
Total
comprehensive income
|
$ | 987,304 | $ | 686,625 | $ | 1,536,277 | $ | 1,298,804 | ||||||||
Basic
and diluted earnings per share from continuing operations
|
$ | 0.25 | $ | 0.17 | $ | 0.38 | $ | 0.48 | ||||||||
Basic
and diluted earnings per share from discontinued
operations
|
$ | 0.00 | $ | (0.00 | ) | $ | 0.00 | $ | 0.00 | |||||||
Basic
and diluted earnings per share
|
$ | 0.25 | $ | 0.17 | $ | 0.38 | $ | 0.48 | ||||||||
Basic
and diluted weighted average shares outstanding
|
3,621,611 | 3,170,906 | 3,578,014 | 2,471,384 | ||||||||||||
See
accompanying notes to unaudited condensed consolidated financial
statements
F-2
WORLDWIDE
ENERGY AND MANUFACTURING USA, INC. AND SUBSIDIARIES
UNAUDITED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
For
the Nine Months Ended
|
||||||||
September
30,
|
||||||||
2009
|
2008
|
|||||||
Cash
flows from operating activities:
|
||||||||
Net
income attributable to Worldwide
|
$ | 1,358,245 | $ | 1,195,969 | ||||
Net
income attributable to non-controlling interest
|
220,629 | - | ||||||
Adjustments
to reconcile net income to net cash used in operating
activities:
|
||||||||
Depreciation
|
246,564 | 74,646 | ||||||
Allowance
for bad debts
|
234,796 | (20,000 | ) | |||||
Stock
based compensation
|
162,020 | 95,000 | ||||||
Changes
in operating assets and liabilities:
|
||||||||
Accounts
receivable
|
(10,250,963 | ) | (2,496,611 | ) | ||||
Notes
receivable
|
(84,468 | ) | - | |||||
Inventories
|
(1,167,944 | ) | (1,433,804 | ) | ||||
Income
tax receivable
|
(185,921 | ) | (2,375 | ) | ||||
Advance
to suppliers
|
(438,754 | ) | (4,847 | ) | ||||
Related
party payable
|
6,497 | - | ||||||
Prepaid
and other current assets
|
(198,622 | ) | (277,531 | ) | ||||
Accounts
payable
|
11,155,323 | 1,308,977 | ||||||
Accrued
expense and acquisition cost payable
|
(123,636 | ) | 105,196 | |||||
Tax
payable
|
128,152 | 14,105 | ||||||
Customer
deposits
|
(789,339 | ) | - | |||||
Net
cash provided by (used by) operating activities
|
272,579 | (1,441,275 | ) | |||||
Cash
flows from investing activities:
|
||||||||
Loan
to related parties
|
- | (207,130 | ) | |||||
Capital
expenditures
|
(744,218 | ) | (648,887 | ) | ||||
Deposits
paid for investment in subsidiaries
|
- | (772,692 | ) | |||||
Deposits
to restricted account
|
(1,417,356 | ) | - | |||||
Net
cash used by investing activities
|
(2,161,574 | ) | (1,628,709 | ) | ||||
Cash
flows from financing activities:
|
||||||||
Proceeds
from issuance of common stock
|
- | 4,578,494 | ||||||
Repayment
of loans payable to shareholders
|
(60,024 | ) | (438,788 | ) | ||||
Proceeds
from related parties
|
107,521 | - | ||||||
Net
proceeds from line of credit
|
2,000,000 | 1,166,786 | ||||||
Repayment
of bank loans
|
(173,790 | ) | - | |||||
Net
cash flows provided by financing activities:
|
1,873,707 | 5,306,492 | ||||||
Effect
of exchange rate changes on cash and cash equivalents
|
(9,550 | ) | 114,411 | |||||
Net
increase (decrease) in cash and cash equivalents
|
(24,838 | ) | 2,350,919 | |||||
Cash
and cash equivalents- beginning of period
|
5,092,476 | 2,111,825 | ||||||
Cash
and cash equivalents- end of period
|
$ | 5,067,638 | $ | 4,462,744 |
See
accompanying notes to unaudited condensed consolidated financial
statements
F-3
Supplemental
disclosure of non cash activities:
|
||||||
Cash
paid during the period for:
|
||||||
Interest
|
$
|
40,923
|
$
|
101,659
|
||
Income
tax
|
$
|
390,217
|
$
|
35,758
|
See
accompanying notes to unaudited condensed consolidated financial
statements
F-4
WORLDWIDE
ENERGY AND MANUFACTURING USA, INC. AND SUBSIDIARIES
NOTES
TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE NINE MONTH PERIODS ENDED SEPTEMBER 30, 2009 AND 2008
1.
MANAGEMENT'S
REPRESENTATION OF INTERIM FINANCIAL INFORMATION
The
accompanying unaudited condensed consolidated financial statements have been
prepared by Worldwide Energy and Manufacturing USA, Inc. and subsidiaries
without audit pursuant to the rules and regulations of the Securities and
Exchange Commission. Certain information and disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted as allowed by such rules and
regulations, and management believes that the disclosures are adequate to make
the information presented not misleading. These condensed consolidated financial
statements include all of the adjustments, which in the opinion of management
are necessary to a fair presentation of financial position and results of
operations. All such adjustments are of a normal and recurring nature. Interim
results are not necessarily indicative of results for a full year. These
condensed consolidated financial statements should be read in conjunction with
the audited financial statements at December 31, 2008 as filed in the Company
Form 10-K filed with the Commission on April 14, 2009 and the amended 10K/A
filed August 19, 2009 and September 1, 2009.
2.
SIGNIFICANT
ACCOUNTING POLICIES
This
summary of significant accounting policies of the Company is presented to assist
in understanding the Company’s financial statements. The financial statements
and notes are representations of the Company’s management, which is responsible
for their integrity and objectivity. These accounting policies conform to
generally accepted accounting principles and have been consistently applied in
the preparation of the condensed consolidated financial statements and the
restated December 31, 2008 financials included in the 10-K/A filed on September
1, 2009.
In June
2009 the FASB established the Accounting Standards Codification ("Codification"
or "ASC") as the source of authoritative accounting principles recognized by the
FASB to be applied by nongovernmental entities in the preparation of financial
statements in accordance with generally accepted accounting principles in the
United States ("GAAP"). Rules and interpretive releases of the Securities and
Exchange Commission ("SEC") issued under authority of federal securities laws
are also sources of GAAP for SEC registrants. Existing GAAP was not intended to
be changed as a result of the Codification, and accordingly the change did not
impact our financial statements. The ASC does change the way the guidance is
organized and presented.
Description
of Business
Worldwide
Energy and Manufacturing USA, Inc. (“Worldwide” or “the Company”) is an
international manufacturing and engineering firm, concentrating on PV solar
modules and contract manufacturing services, using multiple factories in China.
Worldwide services customers primarily in Europe, South Korea for our solar
modules and United States-based companies for their outsource of smaller and
scale production orders for offshore production in China. From our inception in
1993 until 2005, we were strictly an intermediary or “middle man,” working with
our customers and our subcontractors to assure that our customers received high
quality components on a timely basis that fulfilled their specific needs. While
we still subcontract a significant portion of our business, since 2005, we have
begun the transition to becoming a direct contract manufacturer, operating
several of our own factories. Recently, we announced the opening of two
additional factories, allowing us to become a direct manufacturer for solar
modules and for power supply units as described below.
In
February of 2008, Worldwide established a solar division that focuses on
photovoltaic module technology under the brand name of “Amerisolar.” On February
25, 2008, the Company changed its name from Worldwide Manufacturing USA, Inc. to
Worldwide Energy and Manufacturing USA, Inc. in order to reflect its expansion
into the solar energy industry. The Company issued 300,000 restricted shares for
the Amerisolar brand name.
F-5
WORLDWIDE
ENERGY AND MANUFACTURING USA, INC. AND SUBSIDIARIES
NOTES
TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE NINE MONTH PERIODS ENDED SEPTEMBER 30, 2009 AND 2008
2.
SIGNIFICANT
ACCOUNTING POLICIES (CONTINUED)
Worldwide
leased a 129,167 square foot facility in Ningbo, China. The lease term is from
July 18, 2008 to July 17, 2013. This facility houses the production operations
and R&D center for the Company’s solar division. Operations at this facility
began during the first quarter of 2009.
On
October 14, 2008, Worldwide completed the acquisition of 55% of Shanghai De Hong
Electric and Electronic Company Limited (“De Hong”), through acquiring 55% of
the outstanding capital stock of De Hong, a China corporation, through
Worldwide’s wholly owned subsidiary Intech Electro-Mechanical Products Co.,
Ltd., a Chinese corporation (“Intech”). Shanghai De Hong Electric and Electronic
Company is the holding Company for the operating subsidiary Shanghai
Intech-Detron Electronic Co. (“Detron”). The Company purchased De Hong based on
the fair value of its assets at the time of purchase.
The terms
of the purchase agreement stated that Worldwide would pay a cash consideration
of $1,022,700 dollars for 55% interest in DeHong. Intech paid the first
installment of $714,286 on behalf of Worldwide in September 2008. During the
three months ended March 31, 2009, Worldwide paid $308,414 for the second
installment and the total consideration of the purchase price of $1,022,700 was
paid in full.
The
Company funded the acquisition with some of the proceeds from its sale of
1,055,103 shares of its common stock, or $4,747,970, which took place in June
2008. Worldwide received 55% control of the operating subsidiary, Detron. Detron
is a power supply factory in Shanghai, China with design and R&D
capabilities. This was accounted for as a purchase of Detron, where Worldwide
has operating control. The Company began to consolidate Detron into the
Company’s consolidated financial statements beginning on October 1,
2008.
On August
15, 2008, Worldwide formed a new Company called Nantong Ningbo Solar factory
(“Ningbo Solar”), which is our solar energy research, development and
manufacturing subsidiary. The Company established a factory to provide
installation services to different solar project. The Company also acts as an
agent to import or export the products and services overseas. The Ningbo Solar
factory began operations during the first quarter of 2009.
On
November 14, 2005, Worldwide established a die-casting and machining presence
through leasing an existing facility from a former supplier, and initially
investing approximately $500,000 to upgrade the equipment and manufacturing
buildings. In this transaction, we acquired assets, the expertise of the
employees, the managers of the factories, and a portion of the existing
customers of those factories. In the third quarter of 2005, we also established
an electronics manufacturing factory.
As of
December 31, 2008 we own and operate four factories that we now use for the
manufacturing of certain product lines that we historically had to subcontract,
and we are using the services of approximately 40 subcontractors to manufacture
those product lines for which we do not have our own manufacturing
capabilities.
F-6
WORLDWIDE
ENERGY AND MANUFACTURING USA, INC. AND SUBSIDIARIES
NOTES
TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE NINE MONTH PERIODS ENDED SEPTEMBER 30, 2009 AND 2008
2.
SIGNIFICANT
ACCOUNTING POLICIES (CONTINUED)
Principles
of Consolidation
The
accompanying consolidated financial statements include Worldwide Energy and
Manufacturing USA, Inc., a Colorado corporation and a public company, its
operating subsidiary, Worldwide USA, a California corporation, and six
subsidiary companies, Shanghai Intech Electro-Mechanical Products Co.,
Ltd.(“Intech”), Shanghai Intech Precision Mechanical Products Ltd(“Die Cast”).,
Shanghai Intech-Detron Electric and Electronic Company Limited (“Detron”),
Ningbo Solar Factory (“Ningbo Solar”), Nantong Solar Factory (“Nantong”) and
Shanghai De Hong Electric and Electronic Company Limited (“De Hong”), owned by
Worldwide USA.
Effective
January 1, 2009, the Consolidation Topic, ASC 810-10-45-16, revised the
accounting treatment for non-controlling minority interests of partially-owned
subsidiaries. Non-controlling minority interests represent the portion of
earnings that is not within the parent Company’s control. These amounts are now
required to be reported as equity instead of as a liability on the balance
sheet. This change resulted in a $612,639 reclassification from other long-term
liabilities to shareholders’ equity on the December 2008 consolidated balance
sheet and is primarily related to the $1,022,700 investment in Shanghai De Hong
Electric and Electronic Company Limited (‘De Hong”). Additionally, this
statement requires net income from non-controlling minority interests to be
shown separately on the consolidated statements of income and other
comprehensive income. These amounts are $98,019 and $220,629 for the three and
nine month periods respectively ending September 30, 2009, and shown separately
in the unaudited consolidated statement of income and other comprehensive
income. All significant intercompany balances and transactions have been
eliminated in consolidation.
The
Company also consolidates any variable interest entities (VIEs), of which it is
the primary beneficiary, as defined. The Company does not have any VIEs that
need to be consolidated at this time. When the Company does not have a
controlling interest in an entity, but exerts a significant influence over the
entity, the Company would apply the equity method of accounting.
Comprehensive
Income
The
Company reports comprehensive income in accordance with FASB ASC Topic 220
“Comprehensive Income," which established standards for reporting and displaying
comprehensive income and its components in a financial statement that is
displayed with the same prominence as other financial statements.
The
accumulated other comprehensive income on the consolidated balance sheets at
September 30, 2009 and December 31, 2008 are summarized as follows:
September
30, 2009
|
December
31, 2008
|
|||||||
Accumulated
Other Comprehensive Income
|
||||||||
Foreign
Currency Translation Adjustment
|
$ | 665,510 | $ | 487,478 | ||||
Total
|
$ | 665,510 | $ | 487,478 |
F-7
WORLDWIDE
ENERGY AND MANUFACTURING USA, INC. AND SUBSIDIARIES
NOTES
TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE NINE MONTH PERIODS ENDED SEPTEMBER 30, 2009 AND 2008
2.
SIGNIFICANT
ACCOUNTING POLICIES (CONTINUED)
Comprehensive
Income (continued)
The
components of comprehensive income on the statements of income and comprehensive
income for the three and nine month periods ended September 30, 2009 and 2008
are summarized as follows:
For
the Three Months Ended September 30,
|
For
the Nine Months Ended September 30,
|
|||||||||||||||
2009
|
2008
|
2009
|
2008
|
|||||||||||||
Other
Comprehensive Income
|
||||||||||||||||
Net
Income attributable to Worldwide
|
$ | 903,357 | $ | 540,608 | $ | 1,358,245 | $ | 1,195,969 | ||||||||
Foreign
Currency Translation Adjustment
|
83,423 | 146,017 | 191,079 | 102,835 | ||||||||||||
Comprehensive
Income (Loss) attributable to Non-Controlling Interest
|
524 | - | (13,047 | ) | - | |||||||||||
Total
Comprehensive Income
|
$ | 987,304 | $ | 686,625 | $ | 1,536,277 | $ | 1,298,804 |
Accounts
Receivable
Trade
accounts receivables are recorded at the invoiced amount and do not bear
interest. Amounts collected on trade accounts receivables are included in net
cash provided by operations activities in the consolidated cash flow statements.
The Company maintains an allowance for doubtful accounts for estimated losses
inherent in its accounts receivable portfolio. In establishing the required
allowance, management considers historical losses, current receivables aging
reports and existing industry and People’s Republic of China (“PRC”) economic
data. The Company reviews its allowances every month. Past due invoices over 90
days that exceed a specific amount are reviewed individually for collectability.
During the nine month period ended September 30, 2009, a total amount of $9,610
was charged off against the allowance after all means of collection were
exhausted and the potential for recovery was considered remote.
Property
and equipment
Property,
plant and equipment are stated at cost. Depreciation is computed over the
estimated useful lives of the related asset type using the straight-line method
for financial statement purposes. Maintenance and repairs are expensed as
incurred and the costs of additions and betterments that increase the useful
lives of the assets are capitalized. When property or equipment is disposed, the
cost and related accumulated depreciation and amortization are removed from the
accounts and any gain or loss is included in other income or expenses. We
evaluate the
F-8
WORLDWIDE
ENERGY AND MANUFACTURING USA, INC. AND SUBSIDIARIES
NOTES
TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE NINE MONTH PERIODS ENDED SEPTEMBER 30, 2009 AND 2008
2. SIGNIFICANT
ACCOUNTING POLICIES (CONTINUED)
Property
and equipment (continued)
the
recoverability of property, plant and equipment and intangible assets in
accordance with FASB ASC Topic 360, “Property, Plant, and
Equipment,” and FASB ASC Topic 205, “Presentation of Financial
Statements.” We test for impairment losses on long-lived assets used in
operations when indicators of impairment are present and the undiscounted cash
flows estimated to be generated by those assets are less than then assets’
carrying amounts. An impairment loss is recognized in the event the carrying
value of these assets exceeds the fair value of the applicable assets.
Impairment evaluations involve management estimates of asset useful lives and
future cash flows. Actual useful lives and cash flows could be different from
those estimated by management, which could have a material effect on our
operating results and financial position. As of September 30, 2009, management
determined that there was no such impairment.
The
estimated service lives of property and equipment are as follows:
Buildings
and leasehold improvements
|
7
to 40 years
|
Machinery
and equipment
|
5
years
|
Transportation
vehicles
|
5
years
|
Furniture
and fixtures
|
7
years
|
Computers
and computer software
|
3
years
|
Construction
in-progress
Plant and
production lines currently under development are accounted for as
construction-in-progress. Construction-in-progress is recorded at acquisition
cost, including land rights cost, development expenditure, professional fees and
the interest expenses capitalized during the course of construction for the
purpose of financing the project. Upon completion and readiness for use of the
project, the cost of construction-in-progress is to be transferred to fixed
assets, at which time depreciation will commence. As of September 30, 2009, the
Company has incurred and capitalized into construction-in-progress $1,522,818 of
construction costs. This construction in progress includes $1,082,644 for the
building of a new solar factory and $440,174 for a new building and die cast
machinery. The Company had no capitalized interest and to date has funded this
construction through operations without the use of outside financing. The
estimated additional cost to be incurred in 2009 is $400,000 and the total cost
of the project will be $4,500,000. Upon completion of the construction in
progress, the Company will record to property and equipment and beginning to
depreciate over the useful life.
Long-Lived
Assets
The
Company’s long-lived assets and other assets are reviewed for impairment in
accordance with the guidance of the FASB ASC 360-10, Property, Plant, and
Equipment, whenever events or changes in circumstances indicate that the
carrying amount of the asset may not be recoverable. Recoverability of an asset
to be held and used is measured by a comparison of the carrying amount of an
asset to the future undiscounted cash flows expected to be generated by the
asset. If such asset is considered to be impaired, the impairment to be
recognized is measured by the amount by which the carrying amount of the asset
exceeds its fair value. Fair value is determined through various valuation
techniques including discounted cash flow models, quoted market values and
third-party independent appraisals, as considered necessary. Through September
30, 2009, the Company had not experienced impairment losses on its long-lived
assets. However, there can be no assurances that demand for the Company’s
products or services will continue, which could result in an impairment of
Long-Lived assets in the future.
F-9
WORLDWIDE
ENERGY AND MANUFACTURING USA, INC. AND SUBSIDIARIES
NOTES
TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE NINE MONTH PERIODS ENDED SEPTEMBER 30, 2009 AND 2008
2.
SIGNIFICANT
ACCOUNTING POLICIES (CONTINUED)
Inventories
Inventories
are stated at lower of cost or market and consist of materials, labor and
overhead. The Company determines the cost of inventory by the first-in,
first-out method. The Company evaluates inventories for excess quantities and
obsolescence. This evaluation includes analyses of sales levels by product and
projections of future demand. In order to state the inventory at lower of cost
or market, the Company maintains reserves against its inventory. If future
demand or market conditions are less favorable than the Company’s projections, a
write-down of inventory may be required, and would be reflected in cost of goods
sold in the period the revision is made. Inventories consist of raw material,
work in progress and finished goods of manufactured products.
Revenue
Recognition
The
Company recognizes revenues in accordance with the guidelines of the Securities
and Exchange Commission (“SEC”) Staff Accounting Bulletin (“SAB”) No. 104
“Revenue Recognition”. The Company recognizes revenue from product sales when
the orders are completed and shipped, provided that collection of the resulting
receivable is reasonably assured. Amounts billed to customers are recorded as
sales while the shipping costs are included in cost of sales. Returns of
defective custom parts may only be exchanged for replacement parts within 30
days of the invoice date. Returns of defective parts, may be exchanged for
replacement parts or for a refund. Revenue from non-refundable customer tooling
deposits is recognized when the materials are shipped or when the deposit is
forfeited, whichever is earlier. During the current quarter, industry conditions
and market forces have necessitated the Company to extend their payment terms in
the marketplace; however, this change in terms does not prohibit the Company
from recognizing revenue in accordance with SAB No. 104.
Cash
and Cash Equivalents
For
purposes of the statement of cash flows, the Company considers all highly liquid
debt instruments purchased with a maturity of three months or less to be cash
equivalents. A substantial amount of the Company’s cash is held in bank accounts
in the People’s Republic of China and is not protected by the Federal Deposit
Insurance Corporation (FDIC) insurance or any other similar insurance. Accounts
held at U.S. financial institutions are insured by the FDIC up to $250,000. As
of September 30, 2009 the Company’s cash balance held at U.S banks was
$2,762,295 which was $2,262,295 in excess of the insured amounts. Given the
current economic environment and the financial conditions of the banking
industry there is a risk that deposits may not be readily available or covered
by such insurance. The Company has had no loss on excess cash in domestic or
foreign banks in past years.
Income
tax
The
Company is subject to income taxes in the U.S. and China. Significant judgment
is required in evaluating our uncertain tax positions and determining our
provision for income taxes. In accordance with FASBASC Topic 740, “Income Taxes,” we provide
for the recognition of deferred tax assets if realization of such assets is more
likely than not.
F-10
WORLDWIDE
ENERGY AND MANUFACTURING USA, INC. AND SUBSIDIARIES
NOTES
TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE NINE MONTH PERIODS ENDED SEPTEMBER 30, 2009 AND 2008
2.
SIGNIFICANT
ACCOUNTING POLICIES (CONTINUED)
Income
tax (continued)
Taxation
on profits earned in the PRC has been calculated on the estimated assessable
profits for the year at rates of taxation prevailing in the municipalities in
the PRC in which the Company operates.
The
Company does not accrue United States income tax on unremitted earnings from
foreign operations, as it is the Company’s intention to invest these earning in
the foreign operations indefinitely.
Under the
Provisional Regulations of The People’s Republic of China Concerning Income Tax
on Enterprises promulgated by the State Council which came into effect on
January 1, 1994, income tax is payable by a Wholly Foreign Owned Enterprises at
a rate of 15% of their taxable income. Preferential tax treatment may, however,
be granted pursuant to any law or regulations from time to time promulgated by
the State Council. On March 16, 2007, The People’s Republic of China enacted a
new Enterprise Income Tax Law for the purpose of unifying the tax treatment of
domestic and foreign enterprises. This new law eliminates the preferential tax
treatment for new Wholly Foreign Owned Enterprises but allows previously granted
exemptions to stay in place through 2012, with the exception that the statutory
tax rate will increase by 2% per year from 15% in 2006 to 25% by 2012. The
Company did not have any subsidiaries that qualified for any preferred tax
treatment. For income tax purposes, we use 39% blended rate (US Federal and
state) for US operations an approximately 10% to 25%, based on the municipality
in which the subsidiary resides, for China based operations. These rates are
applied to Net Income before Income Taxes.
Goodwill
The
Company evaluates goodwill and other intangible assets in accordance with FASB
ASC Topic 350, “Intangibles —
Goodwill and Other.” Goodwill is recorded at the time of an acquisition
and is calculated as the difference between the total consideration paid for an
acquisition and the fair value of the net tangible and intangible assets
acquired. Accounting for acquisitions requires extensive use of accounting
estimates and judgments to allocate the purchase price to the fair value of the
net tangible and intangible assets acquired, including in-process research and
development (“IPR&D”). Goodwill and intangible assets deemed to have
indefinite lives are not amortized, but are subject to annual impairment tests.
If the assumptions and estimates used to allocate the purchase price are not
correct, or if business conditions change, purchase price adjustments or future
asset impairment charges could be required. The value of our intangible assets,
including goodwill, could be impacted by future adverse changes such as: (i) any
future declines in our operating results, (ii) a decline in the valuation of
technology Company stocks, including the valuation of our common stock, (iii) a
significant slowdown in the worldwide economy or (iv) any failure to meet the
performance projections included in our forecasts of future operating results.
In accordance with FASB ASC Topic 350, the Company tests goodwill for impairment
on an annual basis or more frequently if the Company believes indicators of
impairment exist. Impairment evaluations involve management estimates of asset
useful lives and future cash flows. Significant management judgment is required
in the forecasts of future operating results that are used in the evaluations.
It is possible, however, that the plans and estimates used may be incorrect. If
our actual results, or the plans and estimates used in future impairment
analysis, are lower than the original estimates used to assess the
recoverability of these assets, we could incur additional impairment charges in
a future period.
F-11
WORLDWIDE
ENERGY AND MANUFACTURING USA, INC. AND SUBSIDIARIES
NOTES
TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE NINE MONTH PERIODS ENDED SEPTEMBER 30, 2009 AND 2008
2.
SIGNIFICANT
ACCOUNTING POLICIES (CONTINUED)
Goodwill
(Continued)
The
Company performs its annual impairment review of goodwill in December, and when
a triggering event occurs between annual impairment tests. The Company recorded
no impairment loss for December 31, 2008 or for the period ending September 30,
2009.
Non-Cash
Equity Transactions
Shares of
equity instruments issued for non-cash consideration are recorded at the fair
value of the consideration received based on the market value of services to be
rendered, or at the value of the stock given, considered in reference to
contemporaneous cash sale of stock.
Estimates
The
preparation of these consolidated financial statements in accordance 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 disclosures of contingent assets and
liabilities at the dates of the consolidated financial statements and the
reported amounts of net sales and expenses during the reported periods. Actual
results may differ from those estimates and such differences may be material to
the financial statements. The more significant estimates and assumptions by
management include among others: useful lives and residual values of fixed
assets, valuation of inventories and accounts receivable, stock based
compensation, purchase price allocation, and goodwill and intangible assets
impairment tests. The current economic environment has increased the degree of
uncertainty inherent in these estimates and assumptions.
Foreign
Currency Transactions and Translation
The
Company’s principal country of operations is The People’s Republic of China. The
financial position and results of operations of the Company are determined using
the local currency (“Renminbi” or “Yuan”) as the functional currency. The
results of operations denominated in foreign currency are translated at the
average rate of exchange during the reporting period.
Assets
and liabilities denominated in foreign currencies at the balance sheet date are
translated at the exchange rates prevailing at the balance sheet date. The
registered equity capital denominated in the functional currency is translated
at the historical rate of exchange at the time of capital contribution. All
translation adjustments resulting from the translation of the financial
statements into the reporting currency (“US Dollars”) are dealt with as a
separate component within stockholders’ equity. Translation adjustments net of
tax totaled $83,423 and $146,017, for the three months ended September 30, 2009
and 2008, respectively and $191,079 and $102,835, for the nine months ended
September 30, 2009 and 2008, respectively.
As of
September 30, 2009 and 2008, the exchange rate was RMB 6.8376 and RMB 6.8551 per
U.S. Dollar, respectively. The average exchange rate for the nine months ended
September 30, 2009 and 2008 was RMB 6.8425 and RMB 6.9989,
respectively.
F-12
WORLDWIDE
ENERGY AND MANUFACTURING USA, INC. AND SUBSIDIARIES
NOTES
TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE NINE MONTH PERIODS ENDED SEPTEMBER 30, 2009 AND 2008
2.
SIGNIFICANT
ACCOUNTING POLICIES (CONTINUED)
Fair
Value Measurements
Effective
April 1, 2009, the FASB ASC Topic 825, Financial Instruments,
requires disclosures about fair
value of financial instruments in quarterly reports as well as in annual
reports. For Worldwide, this statement applies to certain investments and
long-term debt.
The FASB
ASC Topic 820, Fair Value
Measurements and Disclosures, clarifies the definition of fair value for
financial reporting, establishes a framework for measuring fair value and
requires additional disclosures about the use of fair value
measurements.
Various
inputs are considered when determining the fair value of the Company’s
investments and long-term debt. The inputs or methodologies used for valuing
securities are not necessarily an indication of the risk associated with
investing in these securities. These inputs are summarized in the three broad
levels listed below.
·
|
Level
1 – observable market inputs that are unadjusted quoted prices for
identical assets or liabilities in active
markets.
|
·
|
Level
2 – other significant observable inputs (including quoted prices for
similar securities, interest rates, credit risk,
etc…).
|
·
|
Level
3 – significant unobservable inputs (including the Company’s own
assumptions in determining the fair value of
investments).
|
The
Company adoption of FASB ASC Topic 825 did not have a material impact on the
Company’s consolidated financial statements.
The
carrying value of financial assets and liabilities recorded at fair value is
measured on a recurring or nonrecurring basis. Financial assets and liabilities
measured on a non-recurring basis are those that are adjusted to fair value when
a significant event occurs. The Company had no financial assets or liabilities
carried and measured on a nonrecurring basis during the reporting periods.
Financial assets and liabilities measured on a recurring basis are those that
are adjusted to fair value each time a financial statement is prepared. The
Company’s had no financial assets and/or liabilities carried at fair value on a
recurring basis at September 30, 2009.
As of
September 30, 2009 and December 31, 2008 the fair value of cash, accounts
receivable, other receivables, accounts payable, commercial notes payable, lines
of credit and accrued expenses approximated carrying value due to the short
maturity of the instruments, quoted market prices, or interest rates, which
fluctuate with market rates.
F-13
WORLDWIDE
ENERGY AND MANUFACTURING USA, INC. AND SUBSIDIARIES
NOTES
TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE NINE MONTH PERIODS ENDED SEPTEMBER 30, 2009 AND 2008
2.
SIGNIFICANT
ACCOUNTING POLICIES (CONTINUED)
Fair
Value Measurements (Continued)
The
availability of inputs observable in the market varies from instrument to
instrument and depends on a variety of factors including the type of instrument,
whether the instrument is actively traded, and other characteristics particular
to the transaction. For many financial instruments, pricing inputs are readily
observable in the market, the valuation methodology used is widely accepted by
market participants, and the valuation does not require significant management
discretion. For other financial instruments, pricing inputs are less observable
in the market and may require management judgment.
Basic
and diluted earnings per share
Basic
earnings per share are based on the weighted-average number of shares of common
stock outstanding. Diluted earnings per share is based on the weighted-average
number of shares of common stock outstanding adjusted for the effects of common
stock that may be issued as a result of the following types of potentially
dilutive instruments:
·
|
Warrants,
|
·
|
Employee
stock options, and
|
·
|
Other
equity awards, which include long-term incentive
awards.
|
The FASB
ASC Topic 260, Earnings Per
Share, requires Worldwide to include additional shares in the computation
of earnings per share, assuming dilution.
Diluted
earnings per share are based on the assumption that all dilutive options were
converted or exercised. Dilution is computed by applying the treasury stock
method. Under this method, options are assumed to be exercised at the time of
issuance, and as if funds obtained thereby were used to purchase common stock at
the average market price during the period.
Basic and
diluted earnings per share are the same as there was no dilutive effect of the
warrants and stock options for the three and nine months ended September 30,
2009 and 2008.
F-14
WORLDWIDE
ENERGY AND MANUFACTURING USA, INC. AND SUBSIDIARIES
NOTES
TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE NINE MONTH PERIODS ENDED SEPTEMBER 30, 2009 AND 2008
2.
SIGNIFICANT
ACCOUNTING POLICIES (CONTINUED)
Concentrations,
Risks, and Uncertainties
All of
the Company’s manufacturing is located in the Peoples Republic of China (“PRC”).
There can be no assurance that the Company will be able to successfully continue
to manufacture its products and failure to do so would have a material adverse
effect on the Company’s financial position, results of operations and cash
flows. Also, the success of the Company’s operations is subject to numerous
contingencies, some of which are beyond management’s control. These
contingencies include general economic conditions, price of raw material,
competition, governmental and political conditions, and changes in regulations.
Because the Company is dependent on foreign trade in PRC, the Company is subject
to various additional political, economic and other uncertainties. Among other
risks, the Company’s operations will be subject to risk of restrictions on
transfer of funds, domestic and international customs, changing taxation
policies, foreign exchange restrictions, and political and governmental
regulations.
The
Company operates in China, which may give rise to significant foreign currency
risks from fluctuations and the degree of volatility of foreign exchange rates
between U.S. dollars and the Chinese currency RMB.
At
September 30, 2009, one customer accounted for more than 10% of the Company’s
accounts receivable, with a total amount of $8,851,808, representing 59.1% of
total accounts receivable in aggregate. This accounts receivable includes sales
with extended payment terms due to market conditions and competitive pressures.
At September 30, 2008, three customers individually accounted for more than 10%
of the Company’s accounts receivable, these customers’ total accounts receivable
amounts to $2,830,204, representing 48.0% of total accounts receivable in
aggregate.
At
September 30, 2009, one customer accounted for more than 10% of our quarterly
sales with a sales mount of $10,859,160 or 58.3% of sales. At September 30,
2008, two customers individually accounted for greater than 10% of quarterly
sales with a total sales volume in the quarter of $14,390,132, or
75.3%.
At
September 30, 2009, one supplier accounted for more than 10% of our Cost of
Goods Sold for the quarter. Purchases from this supplier totaled $9,036,295 or
57.3% of the quarterly Cost of Goods Sold. Market conditions have allowed the
Company to negotiate extended payment periods from this supplier. At September
30, 2008, one supplier accounted for greater than 10% of our Cost of Goods Sold
in the period at $2,436,595 or 13.7% of the quarterly Cost of Goods
sold.
Payments
of dividends may be subject to some restrictions due to the fact that the
operating activities are conducted in subsidiaries residing in the Peoples
Republic of China.
As part
of the production process, the Company may be required by its suppliers to
advance funds under short-term agreements for tooling and other pre-production
costs. The advances are generally unsecured and may carry interest at the
prevailing market rate for short-term instruments. Such tooling is in most
cases, either owned by the supplier or our customers and is generally of value
primarily for the specific needs of the Company’s customers. At September 30,
2009, the Company has made advances to its suppliers of $539,394 for materials
and inventory. The Company in turn requires its customers to provide a
non-refundable down payment to offset such startup costs. As of September 30,
2009, the Company has customer deposits of $175,723. In the event that a
supplier is unable to fulfill its production agreements with the Company,
management believes that other suppliers can be found for the Company’s
products. However, a change in suppliers would cause a delay in the production
process, and could result in loss of tooling deposits and other supplier
advances, which could negatively affect the Company’s operating
results.
F-15
WORLDWIDE
ENERGY AND MANUFACTURING USA, INC. AND SUBSIDIARIES
NOTES
TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE NINE MONTH PERIODS ENDED SEPTEMBER 30, 2009 AND 2008
2.
SIGNIFICANT
ACCOUNTING POLICIES (CONTINUED)
Concentrations,
Risks, and Uncertainties (continued)
The
Company sells its goods and services internationally, with the majority of its
revenue currently being derived from customers in the United States and Europe.
As such, the Company is susceptible to credit risk on accounts and notes
receivable from customers. Generally, the Company does not obtain security from
its customers in support of accounts receivable.
Subsequent
Events
In May
2009, the FASB issued accounting guidance now codified as FASB ASC Topic 855,
“Subsequent Events,”
which establishes general standards of accounting for, and disclosures
of, events that occur after the balance sheet date but before financial
statements are issued or are available to be issued. FASB ASC Topic 855 is
effective for interim or fiscal periods ending after June 15, 2009. The Company
has evaluated subsequent events for the period from September 30, 2009, the date
of these financial statements, through November 13, 2009, which represents the
date these financial statements are being filed with the Commission. Pursuant to
the requirements of FASB ASC Topic 855, there were no events or transactions
occurring during this subsequent event reporting period that require recognition
or disclosure in the financial statements. With respect to this disclosure, the
Company has not evaluated subsequent events occurring after November 13,
2009.
Stock
Based Compensation
For
purposes of determining the variables used in the calculation of stock
compensation expense under the provisions of FASB ASC Topic 505, “Equity” and FASB ASC Topic
718, “Compensation — Stock
Compensation,” we perform an analysis of current market data and
historical Company data to calculate an estimate of implied volatility, the
expected term of the option and the expected forfeiture rate. With the exception
of the expected forfeiture rate, which is not an input, we use these estimates
as variables in the Black-Scholes option pricing model. Depending upon the
number of stock options granted, any fluctuations in these calculations could
have a material effect on the results presented in our condensed consolidated
statement of income and other comprehensive income. In addition, any differences
between estimated forfeitures and actual forfeitures could also have a material
impact on our financial statements.
Share-based
compensation costs that have been included in operating expenses amounted to
$162,020 and $95,000 for the nine months ended September 30, 2009 and 2008,
respectively. For the three month period ending September 30, 2009 and September
3, 2008, stock based compensation was $46,800 and ($15,000),
respectively.
Recently
Enacted Accounting Standards
Accounting
Standards Update ("ASU") ASU No. 2009-05 (ASC Topic 820), which amends
Fair
Value
Measurements and Disclosures - Overall, ASU No. 2009-13 (ASC Topic 605),
Multiple Deliverable Revenue Arrangements, ASU No. 2009-14 (ASC Topic 985),
Certain Revenue Arrangements that include Software Elements, and various other
ASU's No. 2009-2 through ASU No. 2009-15 which contain technical corrections to
existing guidance or affect guidance to specialized industries or entities were
recently issued. These updates have no current applicability to the Company, or
their effect on the financial statements would not have been
significant.
F-16
WORLDWIDE
ENERGY AND MANUFACTURING USA, INC. AND SUBSIDIARIES
NOTES
TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE NINE MONTH PERIODS ENDED SEPTEMBER 30, 2009 AND 2008
3.
COMMITMENTS
AND CONTINGENCIES
The
Company leases its office spaces and certain vehicles and equipment under
non-cancelable operating leases. Minimum future rental payments under
non-cancelable operating leases with remaining terms in excess of one year as of
December 31, 2008, in the aggregate and for each of the five succeeding fiscal
years are as follows:
Year
ended December 31
|
||||
2009
|
$ | 154,302 | ||
2010
|
526,253 | |||
2011
|
494,713 | |||
2012
|
498,663 | |||
2013
|
320,603 | |||
|
||||
Total
minimum future rental payment
|
$ | 1,994,534 | ||
Total
rent and lease expense was $338,784 and $158,448 for the nine months ended
September 30, 2009 and 2008, respectively.
Total
rent and lease expense was $112,331 and $65,098 for the three months ended
September 30, 2009 and 2008, respectively.
The
Company has various purchase commitments for materials, supplies and services
incident to the ordinary conduct of business, generally for quantities required
for the Company’s business and at prevailing market prices. No material annual
loss is expected from these commitments.
The
Company has advances to several material and inventory suppliers in the amount
of $539,394 which will be offset against future purchases from those
suppliers.
The
company has a contingency associated with our capital raises done in 2008
requiring certain milestones to be met. The contingency states: “If (a) the
Company fails to report at least $2,500,000 in EBITDA less noncash expenditures
for the fiscal year ending December 31, 2009, as disclosed in the Company’s Form
10-K for the fiscal year ending December 31, 2009 (“2009 Milestone”), the date
of disclosure of such 2009 Milestone (“2009 Milestone Date”) and such 10-K, and
(b) if the average of the ten closing prices for each of the ten trading days
immediately following the 2009 Milestone Date is less than the lesser of the Per
Share Purchase Price and the 2008 Milestone Price, which is $4.50 (“2009
Milestone Price”), then, within 13 Trading Days of the 2009 Milestone Date, the
Company shall issue to each Purchaser a number of shares of Common Stock equal
to the difference between (i) the number of shares of Common Stock issued to
such Purchaser on the Closing Date along with any 2008 Milestone Shares issued
pursuant to the 2008 Milestone Date, which are none, and (ii) the number of
shares of Common Stock that would otherwise have been issuable to such Purchaser
on the closing date if the Per Share Purchase Price was equal to the 2009
Milestone Price.” (“2009 Milestone Shares”).” Jimmy and Mindy Wang have
deposited into an escrow account 1,620,954 shares of common stock to satisfy the
issuance of any shares related to the 2009 Milestone Shares.
The
Company is not involved in any legal matters except for the Other Receivable
listed in Note 6 and those arising in the normal course of business. While
incapable of estimation, in the opinion of the management, the individual
regulatory and legal matters in which it might involve in the future are not
expected to have a material adverse effect on the Company’s financial position,
results of operations, or cash flows.
F-17
WORLDWIDE
ENERGY AND MANUFACTURING USA, INC. AND SUBSIDIARIES
NOTES
TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE NINE MONTH PERIODS ENDED SEPTEMBER 30, 2009 AND 2008
4.
ACCOUNTS
RECEIVABLE
Accounts
receivable by major categories are summarized as follows:
September
30, 2009
|
December
31, 2008
|
|||||||
Accounts
Receivable – pledged to banks
|
$ | 7,672,948 | $ | 3,385,298 | ||||
Accounts
Receivable – not pledged
|
7,592,845 | 1,450,842 | ||||||
15,265,793 | 4,836,140 | |||||||
Less:
allowances for doubtful accounts
|
(280,738 | ) | (45,634 | ) | ||||
Total
|
$ | 14,985,055 | $ | 4,790,506 |
Under the
terms of a revolving line of credit agreement with Bank of the West indicated in
Note 13, the revolving line of credit is secured by 70% of accounts receivable
and all business assets of Worldwide USA and guaranteed by certain of its
officers.
5.
INVENTORIES
Inventories
by major categories are summarized as follows:
September
30, 2009
|
December
31, 2008
|
|||||||
Raw
materials
|
$ | 872,268 | $ | 752,249 | ||||
Work
in progress
|
353,447 | 1,107,857 | ||||||
Finished
goods
|
2,808,705 | 1,914,021 | ||||||
Finished
goods – pledged to the bank
|
911,178 | - | ||||||
4,945,598 | 3,774,127 | |||||||
Less:
allowances for slowing moving items
|
(19,409 | ) | (19,362 | ) | ||||
Total
|
$ | 4,926,189 | $ | 3,754,765 |
Under the
terms of a revolving line of credit agreement with Bank of the West indicated in
Note 13, the revolving line of credit is secured by 50% of inventories and all
business assets of of Worldwide USA and guaranteed by certain of its
officers.
F-18
WORLDWIDE
ENERGY AND MANUFACTURING USA, INC. AND SUBSIDIARIES
NOTES
TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE NINE MONTH PERIODS ENDED SEPTEMBER 30, 2009 AND 2008
6.
OTHER
RECEIVABLE
The
Company has other receivables of $111,006 due from a supplier. In the China
legal system we have received a judgment for the total amount in May 2009. The
supplier appealed the judgment, but the original decision was upheld in August
2009. Management believes we will be able to collect this amount by the end of
the first half of 2010.
7. INCOME
TAX
Our
statutory federal income tax is 34% and our state income tax rate is 9.3%. The
Company has no amounts of federal tax due in the periods presented. The
provision for income taxes consists of the following:
For
The Nine Months Ended
|
For
The Three Months Ended
|
|||||||||||||||
September
30,
|
September
30,
|
|||||||||||||||
2009
|
2008
|
2009
|
2008
|
|||||||||||||
Current
income tax expense in China
|
$ | 134,835 | $ | 16,813 | $ | 65,380 | $ | 8,514 | ||||||||
U.S
Federal Tax
|
463,023 | - | 304,633 | - | ||||||||||||
State
and local income taxes currently paid or payable U.S
|
72,263 | - | 57,484 | - | ||||||||||||
Income
tax expense
|
$ | 670,121 | $ | 16,813 | $ | 427,497 | $ | 8,514 |
8.
PROPERTY
AND EQUIPMENT
The
Company has $16,709 property and equipment located in the United States for
period ending September 30, 2009. For period ending December 31, 2008, $22,437
of property plant and equipment was located in the United States. Property and
equipment for September 30, 2009 was $3,537,901 in the PRC. For the period
ending December 31, 2008, $1,331,102 of the Company’s property and equipment was
located in the PRC. The Company’s property and equipment consisted of the
following at September 30, 2009 and December 31, 2008:
F-19
WORLDWIDE
ENERGY AND MANUFACTURING USA, INC. AND SUBSIDIARIES
NOTES
TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE NINE MONTH PERIODS ENDED SEPTEMBER 30, 2009 AND 2008
8.
PROPERTY
AND EQUIPMENT (Continued)
September
30, 2009
|
December
31, 2008
|
|||||||||||
Vehicles
|
$ | 415,923 | $ | 248,112 | ||||||||
Furniture
and fixtures
|
259,478 | 100,346 | ||||||||||
Equipment
|
1,742,999 | 1,107,151 | ||||||||||
Software
|
37,266 | 37,237 | ||||||||||
Others
|
55,496 | 57,669 | ||||||||||
Leasehold
improvements
|
668,332 |
-
|
||||||||||
3,179,494 | 1,550,515 | |||||||||||
Less:
accumulated depreciation
|
(1,147,702 | ) | (627,791 | ) | ||||||||
2,031,792 | 922,724 | |||||||||||
Construction
in progress
|
1,522,818 | 430,815 | ||||||||||
Total
|
$ | 3,554,610 | $ | 1,353,539 |
9.
INTANGIBLE
ASSETS
The
1,101,000 or $3.67 per share. The “AMERISOLAR” modules are backed by ISO
9001:2000 and ISO 14000 environmental quality
Intangible
assets consist of the brand name “Amerisolar”. The brand name “Amerisolar” was
purchased on February 25, 2008 from a third party in exchange for 300,000 shares
of the Company’s restricted stock. The Company valued the stock at $3.67 per
share for stated value of $1,101,000 which represents a 25% discount to the
closing price of $4.60 on February 25, 2008.
The
"AMERISOLAR" modules are backed by ISO 9001:2000 and ISO 14000 environmental
quality certifications.
The brand
name is carried at cost and is not being amortized as management has determined
the asset has an indefinite useful life. If no legal, regulatory, contractual,
competitive, economic or other factors limit the useful life of the asset it
shall be considered to be indefinite. In recording of the brand name is was
determined that the expected useful life is indefinite and cash flows from the
brand name are expected to contribute to the Company over an indefinite period
of time. No impairment has been recognized during the nine-month periods ended
September 30, 2009 and 2008.
10.
INVESTMENT
AT COST
On June
24, 2008, the Company paid $51,892 for an Investment in Tomii International
representing approximately 19% equity interest in Tomii International; Tomii
International is a privately held Company that is a development stage entity
with no significant operations. The Company’s accounting for this Investment on
the cost basis - management has determined there is no impairment on investment
as of September 30, 2009.
11.
RESTRICTED
CASH
During
the nine months ended September 30, 2009, the Company paid $2,500,000 and
deposited this amount in an escrow account in the Bank of China for the
incorporation of the subsidiary of Nantong Ningbo Solar factory located in China
for the purpose of registered capital and working capital. The fund has been
transferred to a cash account accessible by the division specifically for
facility start-up costs. The Chinese government requires us to have registered
capital in order to complete the project. Total spending as of September 30,
2009 is $1,082,644 and has been used for land purchase and initial construction
expenses. The factory will be completed in April, 2010.
F-20
WORLDWIDE
ENERGY AND MANUFACTURING USA, INC. AND SUBSIDIARIES
NOTES
TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE NINE MONTH PERIODS ENDED SEPTEMBER 30, 2009 AND 2008
12.
GOODWILL
On
October 14, 2008, Worldwide Energy and Manufacturing USA, Inc. completed the
acquisition of 55% of Shanghai De Hong Electric and Electronic Company Limited
(“De Hong”) through acquiring 55% of the outstanding capital stock of De Hong, a
China corporation. After the completion of the acquisition, it changed its name
to Shanghai Intech-Tron Electron-Electric Co., Ltd (“Intech-Tron”). The terms of
the Purchase Agreement dated February 3, 2008 was that Worldwide USA paid cash
consideration of $1,022,700 for 55% interest in DeHong. Intech paid the first
installment of $714,286 on behalf of Worldwide in September 2008. During the
three months ended March 31, 2009, Worldwide paid $308,414 for the second
installment and the total consideration of the investment of $1,022,700. This
was accounted for as a purchase of Detron, where Worldwide has operating
control. Detron was consolidated into the consolidated financial statements of
Worldwide as of October 1, 2008.
Detron's
assets are comprised of mostly currents assets where only $158,520 were related
to equipment or fixed assets. The Company determined fair value by taking the
net tangible assets (less all allowance for receivables and inventory which
Worldwide subsidiaries had verified through on-site observation and valuation)
and discounted all currents liabilities which were determined to be owed and
current based on Company records (invoices) providing $1,326,214 in net tangible
assets of which $729,421 or 55% (Worldwide's ownership) was determined to be
fair value for Detron's assets. The Company paid $1,022,700 for these assets of
which $285,714 was allocated to goodwill.
Cash
|
$ | 411,316 | ||
Accounts
Receivable
|
1,929,314 | |||
Note
receivable
|
226,877 | |||
Inventories
|
774,295 | |||
Advances
to suppliers
|
21,703 | |||
Prepaid
and other current assets
|
231,967 | |||
Property,
plant and equipment, net
|
158,520 | |||
Other
assets
|
11,059 | |||
Goodwill
|
285,714 | |||
Trade
payables
|
(962,839 | ) | ||
Accrued
expenses
|
(422,943 | ) | ||
Income
taxes payable
|
(29,717 | ) | ||
Related
parties payable
|
(1,015,773 | ) | ||
45%
Minority Interest
|
(596,793 | ) | ||
|
||||
55%
Net assets acquired
|
$ | 1,022,700 |
F-21
WORLDWIDE
ENERGY AND MANUFACTURING USA, INC. AND SUBSIDIARIES
NOTES
TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE NINE MONTH PERIODS ENDED SEPTEMBER 30, 2009 AND 2008
13.
LINE
OF CREDIT
As of
September 30, 2009, the Company has the following line of credit
Banker
|
Amount
of
the
credit line
|
Loan
period
|
Interest
rate
|
Secured
by
|
September
30, 2009
|
|||||||||||
Bank
of the West
|
$ | 2,000,000 |
5/20/2008
- 5/20/2010
|
4% |
70%
Accounts receivable + 50% inventory
|
$ | 2,000,000 | |||||||||
Bank
of the West
|
$ | 1,025,000 |
5/20/2008
- 6/01/2011
|
4% |
70%
Accounts receivable + 50% inventory
|
$ | 763,285 | |||||||||
Total
loans
|
$ | 2,763,285 | ||||||||||||||
Less:
long term portion
|
(763,285 | ) | ||||||||||||||
$ | 2,000,000 |
For
maturities of long-term loans are as follows as of September 30,
2009
22009 | - | |||||
22010 | 2,000,000 | |||||
22011 | 763,285 | |||||
$ | 2,763,285 |
On May
20, 2008 the Company paid off its line of credit with Well Fargo in the amount
of $960,000 and established a new line of credit facility with Bank of the West.
Under the terms of the revolving line of credit agreement with Bank of the West,
dated May 20, 2008, the Company could borrow up to $3,025,000 at a rate of 5.0%.
This rate is subject to change based on the prime rate which was 3.25% as of
September 30, 2009. The interest rate as of September 30, 2009 was 4% for both
lines of credit. The revolving line of credit is secured by the assets of the
Company and guaranteed by certain of its officers. Payments on the lines of
credit are due monthly and payment varies according to the balance outstanding
and interest rate.
The
Company can borrow up to $2,000,000 and $1,025,000 within two credit lines. The
maturity date of these two credit lines is May 20, 2010 and June 1, 2011
respectively. The balance outstanding under both lines of credit as of September
30, 2009 is $2,000,000 and $763,285, respectively. The Company has approximately
$261,715 available under both lines of credit combined. The Company was in
compliance with bank covenants at September 30, 2009.
F-22
WORLDWIDE
ENERGY AND MANUFACTURING USA, INC. AND SUBSIDIARIES
NOTES
TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE NINE MONTH PERIODS ENDED SEPTEMBER 30, 2009 AND 2008
14.
STOCK
TRANSACTIONS
On
January 2, 2009, a consultant returned 4,000 shares to the Company for the work
that was not performed. There was a $14,680 reduction in stock based
compensation and additional paid in capital with this transaction.
On March
6, 2009, the Company issued 120,000 shares of its common stock to consultants,
valued at $187,200, for the consulting services to be performed during 2009. The
Company will amortize the consultancy fee of $187,200 over the 12-month term of
the agreement from January 1, 2009 to December 31, 2009. A compensation expense
of $15,600 will be recorded each month during the term of the agreement. Total
compensation expense under this agreement for the three and nine month period
ending September 30, 2009 was $46,800 and $140,400, respectively. Total
remaining stock based compensation to be expensed in the future total $46,800 as
of September 30, 2009.
On March
20, 2009, the Company issued 8,000 shares of its common stock in exchange for
one unit of JK Advisors Fund LLC, which was distributed to the shareholders of
the fund. On June 23, 2009 the Company and JK advisors mutually agreed to cancel
the transaction with no penalties or fees for either party.
On June
23, 2009 the Company issued a total of 12,100 restricted shares for services
consisting of 1) 5,000 shares being issued to its outside independent Board of
Directors, 2) 4,000 shares being issued for legal services and 3,100 shares
being issued to employees in China. The shares had a fair market value of $3.00
which was determined by taking the bid price of $4.63 and discounting by 35% due
to the restricted nature, the low trading volume and wide fluctuations in stock
price. The Company recorded $36,300 stock-based compensation expense for these
transactions during the period ending June 30, 2009.
15.
PENSION
PLAN AND STOCK OPTION PLAN
The
Company established a stock option plan on April 1, 2004 for the benefit of all
full-time employees. The Company approved the plan to issue up to 300,000 shares
of common stock. The stock option plan provides employees, consultants and
directors the opportunity to purchase shares. The exercise price of an incentive
stock option granted under this plan must be equal to or greater than the fair
market value of the shares of the Company’s common stock on the date the option
is granted. The exercise price of a non-qualified option granted under this plan
must be equal to or greater than 85% of the fair market value of the shares of
the common stock on the date the option is granted. An incentive stock option
granted to an optionee owning more than 10% of the voting stock must have an
exercise price equal to or greater than 110% of the fair market value of our
common stock on the date the option is granted. On April 1, 2004, the Board
granted options to purchase 109,213 shares at an exercise price of $6.00 per
share. As of September 30, 2009 no stock options have been
exercised.
F-23
WORLDWIDE
ENERGY AND MANUFACTURING USA, INC. AND SUBSIDIARIES
NOTES
TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE NINE MONTH PERIODS ENDED SEPTEMBER 30, 2009 AND 2008
16.
RELATED
PARTY TRANSACTIONS
(1) Long
term receivable – related party
September
30,
|
December
31,
|
|||||||
2009
|
2008
|
|||||||
(unaudited)
|
||||||||
Mr.
Ding Honglin – Mr. Ding is the General Manager of Shanghai Intech
Precision Machinery Co. Ltd – Loan to accommodate partnership
separation
|
$ | 253,996 | $ | 260,973 | ||||
The
amounts due from related party are unsecured, interest free and have no fixed
repayment dates.
(2) Due
to a related party
September
30,
|
December
31,
|
|||||||
2009
|
2008
|
|||||||
(unaudited)
|
||||||||
Shanghai
Jinde Electro-Mechanical Co. Ltd, the shareholder of Shanghai Intech-Tron
Electron-Electric Co., Ltd advanced to Detron for working capital
purposes.
|
$ | 1,351,276 | $ | 1,243,024 |
The
amounts due to a related party are unsecured, interest free and have no fixed
repayment dates.
(3) Loan
payable to stockholders
September30,
|
December
31,
|
|||||||
2009
|
2008
|
|||||||
(unaudited)
|
||||||||
Mr.
Jimmy Wang and Mrs. Mindy Wang, principal stockholders, executive officers
and members of the Board of Directors of the Company
|
$ | - | $ | 60,024 |
The loan
payable was for working capital purposes and was fully paid during the nine
months ending September 30, 2009.
F-24
WORLDWIDE
ENERGY AND MANUFACTURING USA, INC. AND SUBSIDIARIES
NOTES
TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE NINE MONTH PERIODS ENDED SEPTEMBER 30, 2009 AND 2008
17.
EARNINGS
PER SHARE
FASB ASC
Topic 260, Earnings Per
Share, requires a reconciliation of the numerator and denominator of the
basic and diluted earnings per share (EPS) computations.
For the
three and nine months ended September 30, 2009 and the same period in 2008, the
following were included as potential dilutive shares. Employee stock options of
109,213 with an exercise price of $6.00. Class A warrants to purchase 722,221
common shares at an exercise price of $7.00 and Class B warrants to purchase
388,888 shares at an exercise price of $9.00 of common stock. Due to the
exercise price being in excess of the estimated fair market value of the
Company’s stock, using the treasury stock method, all potential dilutive shares
were deemed to be anti-dilutive.
The
following table sets forth the computation of basic and diluted net income per
share:
For
The Three Months Ended
|
For
The Nine Months Ended
|
|||||||||||||||
September
30,
|
September
30,
|
|||||||||||||||
2009
|
2008
|
2009
|
2008
|
|||||||||||||
(unaudited)
|
(unaudited)
|
(unaudited)
|
(unaudited)
|
|||||||||||||
Net
income attributable to the common stockholders
|
$ | 903,357 | $ | 540,608 | $ | 1,358,245 | $ | 1,195,969 | ||||||||
Basic
weighted average outstanding shares of common stock
|
3,621,611 | 3,170,906 | 3,578,014 | 2,471,384 | ||||||||||||
Dilutive
effect of options and warrants
|
- | - | - | - | ||||||||||||
Diluted
weighted average common stock and common stock equivalents
|
3,621,611 | 3,170,906 | 3,578,014 | 2,471,384 | ||||||||||||
Earnings
per share:
|
||||||||||||||||
Basic
|
$ | 0.25 | $ | 0.17 | $ | 0.38 | $ | 0.48 | ||||||||
Diluted
|
$ | 0.25 | $ | 0.17 | $ | 0.38 | $ | 0.48 |
18.
OPERATING
RISK
Interest rate
risk
The
interest rates and terms of repayment of bank lines of credit are disclosed in
Note 13. Other financial assets and liabilities do not have material interest
rate risk.
Credit
risk
The
Company is exposed to credit risk from its cash in bank and accounts receivable.
The credit risk on cash in banks is limited because the counterparties are
recognized financial institutions. Accounts receivable are subjected to credit
evaluations and as such are inherently subject to credit risk. An allowance has
been made for estimated irrecoverable amounts which have been determined by
reference to past default experience and the current economic
environment.
Foreign currency
risk
Most of
the transactions of the Company were settled in Renminbi and Euros. Thus, the
Company has significant foreign currency risk exposure.
Company’s operations are
substantially in foreign countries.
Substantially
all of the Company’s products are manufactured in China. The Company’s
operations are subject to various political, economic, and other risks and
uncertainties inherent in China. Among other risks, the Company’s operations are
subject to the risks of restrictions on transfer of funds, export duties,
quotas, and embargoes, domestic and international customs and tariffs, changing
taxation policies, foreign exchange restrictions and political conditions and
governmental regulations.
19.
SEGMENT
INFORMATION
The
Company’s operations are classified into two principal reportable segments that
provide different products or services. These two segments are contract
manufacturing and solar. Worldwide USA contract manufacturing division purchases
and sells a wide variety of manufactured goods from China procured by its
subsidiaries or contractors in China to a wide range of customers from different
industries. Our solar module division procures and manufactures solar modules
for sale to the solar industry. Our solar industry represents 83% of our
business. Although both segments are involved in manufacturing they serve
different customers and are managed separately requiring specialized expertise.
We determine our operating segments in accordance with FASB ASC Topic 280, “Segment Reporting” Our CEO
has been identified as the chief operating decision maker as defined by FASB ASC
Topic 280.
F-25
WORLDWIDE
ENERGY AND MANUFACTURING USA, INC. AND SUBSIDIARIES
NOTES
TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR
THE NINE MONTH PERIODS ENDED SEPTEMBER 30, 2009 AND 2008
19.
SEGMENT
INFORMATION (CONTINUED)
Segmental
Data – Three months ended September 30, 2009 and September 30, 2008
Reportable
Segments (amounts
in thousands)
September 30, 2009
|
September 30, 2008
|
||||||||||||||||||||||||
Solar
|
Contract Mfg
|
Total
|
Solar
|
Contract Mfg
|
Disc. Op.
|
Total
|
|||||||||||||||||||
External
revenue
|
15,533 | 3,086 | 18,619 | 15,776 | 3,327 | 19,103 | |||||||||||||||||||
Costs
of goods
|
(13,734 | ) | (2,023 | ) | (15,757 | ) | (15,338 | ) | (2,401 | ) | (17,739 | ) | |||||||||||||
Gross
profit
|
1,798 | 1,063 | 2,861 | 438 | 926 | 1,364 | |||||||||||||||||||
G/A
Expenses
|
(515 | ) | (801 | ) | (1,316 | ) | (231 | ) | (520 | ) | (751 | ) | |||||||||||||
Operating
profit
|
1,225 | 110 | 1,335 | 207 | 346 | 552 | |||||||||||||||||||
Interest
income
|
1 | 2 | 3 | - | 8 | 8 | |||||||||||||||||||
Interest
expenses
|
- | (20 | ) | (20 | ) | - | (1 | ) | (1 | ) | |||||||||||||||
Depreciation
|
(35 | ) | (48 | ) | (83 | ) | - | (3 | ) | (3 | ) | ||||||||||||||
Net
profit after tax
|
827 | 174 | 1,001 | 207 | 340 | 547 | |||||||||||||||||||
Expenditures
for long-lived assets
|
(494 | ) | (9 | ) | (503 | ) | - | (475 | ) | (475 | ) |
In our
solar division, Europe represented approximately 90.9% and South Korea
represented approximately 8.8% of our sales in the three months ended September
30, 2009. For the three-month period ending September 30, 2008 Europe
represented 61.0% of our business with South Korea representing 39.0% of our
total solar sales. For our contract manufacturing business, the United States
represents approximately 35.8% and China represents 64.0% of sales for the
three-month period ending September 30, 2009. For the 2008, the United States
represented 48.5% and China 48.1% of that division’s sales.
Segmental
Data – Nine months ended September 30, 2009 and September 30, 2008
Reportable Segments (amounts
in thousands)
Solar
|
Contract Mfg
|
Total
|
Solar
|
Contract Mfg
|
Disc. Op.
|
Total
|
||||||||||||||||||||||
External
revenue
|
29,433 | 9,784 | 39,217 | 21,567 | 9,768 | 13 | 31,348 | |||||||||||||||||||||
Costs
of goods
|
(26,330 | ) | (6,325 | ) | (32,655 | ) | (20,416 | ) | (7,078 | ) | (27,494 | ) | ||||||||||||||||
Gross
profit
|
3,591 | 2,971 | 6,562 | 1,151 | 2,703 | 3,854 | ||||||||||||||||||||||
G/A
Expenses
|
(1,964 | ) | (1,764 | ) | (3,728 | ) | (719 | ) | (1,509 | ) | (2,228 | ) | ||||||||||||||||
Operating
profit
|
1,915 | 251 | 2,166 | 432 | 863 | 1,295 | ||||||||||||||||||||||
Interest
income
|
2 | 12 | 14 | - | 12 | 12 | ||||||||||||||||||||||
Interest
expenses
|
- | (41 | ) | (41 | ) | - | (74 | ) | (74 | ) | ||||||||||||||||||
Depreciation
|
(91 | ) | (155 | ) | (246 | ) | (4 | ) | (7 | ) | (11 | ) | ||||||||||||||||
Net
profit after tax
|
1,469 | 110 | 1,579 | 424 | 761 | 9 | 1,194 | |||||||||||||||||||||
Expenditures
for long-lived assets
|
(641 | ) | (103 | ) | (744 | ) | (173 | ) | (475 | ) | (648 | ) |
In our
solar division, Europe represented approximately 84.2% of our sales and South
Korea represented 14.6% of our sales for the nine-month period ended September
30, 2009. For the nine-month period ending September 30, 2008, Europe
represented 62.8% of our business with South Korea representing 32.5% of our
total sales. For our contract manufacturing business in the nine-month period
ending September 30, 2009, the United States represents approximately 41.5% and
China represents approximately 57.1%. For 2008, the United States represented
54.8% and China 42.1.
F-26
WORLDWIDE
ENERGY AND MANUFACTURING USA, INC. AND SUBSIDIARIES
Index
to Consolidated Financial Statements
CONTENTS
Page
|
|
Report
of Independent Registered Public Accounting Firm
|
F-28
|
Consolidated
Balance Sheets
|
F-29
|
Consolidated
Statements of Operations and Other Comprehensive Income
|
F-30
|
Consolidated
Statements of Stockholders’ Equity
|
F-31
|
Consolidated
Statements of Cash Flows
|
F-32
|
Notes
to Consolidated Financial Statements
|
F-34
|
F-27
Report
of Independent Registered Public Accounting Firm
To the
Audit Committee/Board of Directors Stockholders of Worldwide Energy and
Manufacturing USA, Inc.
South San
Francisco, California
We have
audited the consolidated balance sheets of Worldwide Energy and Manufacturing
USA, Inc. (the Company) as of December 31, 2008 and 2007, and the related
consolidated statements of operations and comprehensive income, stockholders’
equity and cash flows for the years ended December 31, 2008 and 2007. These
consolidated financial statements are the responsibility of the Company’s
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the
consolidated financial statements are free of material misstatement. The company
is not required to have, nor were we engaged to perform, an audit of its
internal control over financial reporting. Our audit included consideration of
internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the company’s internal control
over financial reporting. Accordingly, we express no such opinion. An audit also
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the consolidated financial statements, assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall consolidated financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our
opinion, the consolidated financial statements referred to above present fairly,
in all material respects, the financial positions of Worldwide Energy and
Manufacturing USA, Inc. as of December 31, 2008 and 2007, and the results of its
consolidated operations and its consolidated cash flows for the years ended
December 31, 2008 and 2007, in conformity with accounting principles generally
accepted in the United States of America.
Since our
previous report dated April 5, 2009, it was determined that the financial
statements needed restatement to make corrections as described in note
17.
Child,
Van Wagoner & Bradshaw, PLLC Salt Lake City, Utah
April 5,
2009, except for note 17 which is dated August 18, 2009
J. Russ
Bradshaw, CPA
William
R. Denney, CPA
Russell
E. Anderson, CPA
Scott L.
Farnes
1284 W.
Flint Meadow Dr. #D Kaysville, Utah 84037 Telephone 801.927.1337 Facsimile
801.927.1344
5296 S.
Commerce Dr. #300 Salt Lake City, Utah 84107 Telephone 801.281.4700 Facsimile
801.281.4701
Suite A,
5/F Max Share Centre 373 King’s Road North Point, Hong Kong Telephone
852.21.555.333
F-28
WORLDWIDE ENERGY AND MANUFACTURING USA,
INC. AND SUBSIDIARIES
CONSOLIDATED
BALANCE SHEETS
December
31
|
December
31
|
|||||||
(Restated)
2008
|
2007
|
|||||||
ASSETS
|
||||||||
Current
assets:
|
||||||||
Cash
and cash equivalents
|
$ | 5,092,476 | $ | 2,111,825 | ||||
Accounts
receivables, net of allowances of $45,634
|
4,790,506 | 3,275,024 | ||||||
Notes
receivables
|
269,507 | - | ||||||
Inventories
|
3,754,765 | 2,333,148 | ||||||
Income
tax receivable
|
- | 82,131 | ||||||
Advances
to suppliers
|
99,824 | 260,540 | ||||||
Related
parties receivables
|
446,373 | 30,422 | ||||||
Prepaid
and other current assets
|
206,770 | 117,621 | ||||||
|
|
|||||||
Total
current assets
|
14,660,221 | 8,210,711 | ||||||
Deposits
paid for investment
|
1,724,976 | - | ||||||
Property,
plant and equipment, net
|
1,353,539 | 545,494 | ||||||
Intangible
assets
|
1,386,714 | - | ||||||
Other
assets
|
7,559 | 6,636 | ||||||
Total
assets
|
$ | 19,133,009 | $ | 8,762,841 | ||||
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
||||||||
Current
liabilities:
|
||||||||
Accounts
payable
|
$ | 3,400,253 | $ | 2,453,317 | ||||
Lines
of credit
|
- | 1,758,584 | ||||||
Accrued
expenses
|
867,291 | 156,524 | ||||||
Tax
payable
|
364,213 | 78,637 | ||||||
Acquisition
Cost Payable
|
285,714 | - | ||||||
Due
to related parties
|
1,243,024 | - | ||||||
Customer
deposits
|
964,998 | - | ||||||
Current
portion of long-term debt (note 10)
|
- | 884 | ||||||
|
|
|||||||
Total
current liabilities
|
7,125,493 | 4,447,946 | ||||||
Non-current
liabilities
|
||||||||
Long
term loan
|
937,075 | - | ||||||
Loan
payable to stockholders
|
60,024 | 498,812 | ||||||
Total
non-current liabilities
|
997,099 | 498,812 | ||||||
|
|
|||||||
Total
liabilities
|
8,122,592 | 4,946,758 | ||||||
Minority
interest in subsidiary
|
612,639 | - | ||||||
Stockholders’
equity
|
||||||||
Common
stock (No Par Value: 100,000,000 shares authorized;
|
||||||||
3,493,512
shares issued and outstanding)
|
6,108,379 | 270,746 |
Retained
earnings
|
3,801,921 | 3,250,112 | ||||||
Accumulated
other comprehensive income
|
487,478 | 295,225 | ||||||
Total
stockholders’ equity
|
10,397,778 | 3,816,083 | ||||||
Total
liabilities and stockholders’ equity
|
$ | 19,133,009 | $ | 8,762,841 |
See
accompanying notes to consolidated financial statements.
F-29
WORLDWIDE
ENERGY AND MANUFACTURING USA, INC. AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF INCOME AND
COMPREHENSIVE
INCOME
For
The Year Ended
|
||||||||
December
31
|
||||||||
(Restated)
2008
|
2007
|
|||||||
Revenue
|
||||||||
Regular
sales, net of returns of $0 in 2007 and $0 in 2006
|
$ | 45,913,957 | $ | 12,132,710 | ||||
Cost
of goods sold
|
39,746,286 | 8,350,621 | ||||||
Gross
profit
|
6,167,671 | 3,782,089 | ||||||
Operating
Expenses
|
||||||||
Other
selling, general and administrative expenses
|
3,832,363 | 2,769,847 | ||||||
Management
and professional fees paid to shareholders (Note 13)
|
306,000 | 210,000 | ||||||
Stock
based compensation
|
128,597 | - | ||||||
Depreciation
|
122,923 | 106,480 | ||||||
|
|
|||||||
Total
operating expenses
|
4,389,883 | 3,086,327 | ||||||
Net
operating income
|
1,777,788 | 695,762 | ||||||
Other
Income (expenses)
|
||||||||
Interest
income
|
21,995 | 12,548 | ||||||
Interest
expenses
|
(120,038 | ) | (79,544 | ) | ||||
Interest
expense paid to shareholders (Note 13)
|
(27,284 | ) | (17,371 | ) | ||||
Other
income
|
114,057 | 254,265 | ||||||
Other
expenses
|
(243,765 | ) | - | |||||
Dividend
income
|
242,770 | |||||||
Exchange
loss
|
(364,067 | ) | (355,712 | ) | ||||
Loss
on Disposal
|
(101,982 | ) | ||||||
Gain
on disposal
|
- | - | ||||||
|
|
|||||||
Total
other expenses
|
(478,314 | ) | (185,814 | ) | ||||
Income
from continuing operations before income taxes
|
1,299,474 | 509,948 | ||||||
Income
taxes (expense) /benefit
|
(284, 368 | ) | 65,726 | |||||
|
|
|||||||
Income
from continuing operations before minority interest
|
1,015,106 | 575,674 | ||||||
Loss
share by minority interest
|
(15,843 | ) | - | |||||
|
|
|||||||
Income
from continuing operations
|
$ | 999,263 | $ | 575,674 | ||||
Income
from discontinued operations, net of tax
|
2,385 | |||||||
|
|
|||||||
Net
income
|
1,001,648 | 575,674 | ||||||
Other
comprehensive income
|
||||||||
Foreign
currency translation
|
192,253 | 135,610 | ||||||
Comprehensive
income
|
$ | 1,193,901 | $ | 711,284 | ||||
Earnings
per share
|
||||||||
Continuing
operations
|
$ | 0,37 | $ | 0.28 | ||||
Discontinued
operations
|
$ | 0.00 | $ | 0.00 | ||||
Weighted
average shares outstanding
|
2,731,995 | 2,035,495 |
See
accompanying notes to the consolidated financial statements
F-30
WORLDWIDE
ENERGY AND MANUFACTURING USA, INC. AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF STOCK HOLDERS’ EQUITY
Common
Stock No
Par Value
|
Accumulated
Other Comprehensive
|
|||||||||||||||||||
Number
of
Shares
|
Amount
|
Retained
Earnings
|
Income
|
Total
Stockholders’
Equity
|
||||||||||||||||
Balance,
December 31, 2006
|
2,030,863 | $ | 208,871 | $ | 2,674,438 | $ | 159,615 | $ | 3,042,924 | |||||||||||
Share
Issued at $3.75 per share for services
|
16,500 | 61,875 | - | - | 61,875 | |||||||||||||||
Net
income for the year ended December 31, 2007
|
- | - | 575,674 | - | 575,674 | |||||||||||||||
Comprehensive
income - unrealized loss on foreign currency translation
|
- | - | - | 135,610 | 135,610 | |||||||||||||||
Balance,
December 31, 2007
|
2,047,363 | $ | 270,746 | $ | 3,250,112 | $ | 295,225 | $ | 3,816,083 | |||||||||||
Share
Issued at $3.67 per share for services
|
35,040 | 128,597 | - | - | 128,597 | |||||||||||||||
Share
Issued at $3.67 per share for acquisition of brand name
|
300,000 | 1,101,000 | - | - | 1,101,000 | |||||||||||||||
Share
Issued at $4.5 per share for raising fund by deducting the issuance cost
of $391,961
|
1,055,103 | 4,356,009 | - | - | 4,356,009 | |||||||||||||||
Share
Issued at $4.5 per share for raising fund
|
56,006 | 252,027 | - | - | 252,027 | |||||||||||||||
Net
income for the year
|
- | - | 1,001,648 | - | 1,001,648 | |||||||||||||||
Comprehensive
income - unrealized loss on foreign currency translation
|
- | - | - | 192,253 | 192,253 | |||||||||||||||
Dividend
paid to ex-shareholders of new acquired subsidiary
|
- | - | (449,839 | ) | - | (449,839 | ) | |||||||||||||
Balance,
December 31, 2008
|
3,493,512 | $ | 6,108,379 | $ | 3,801,921 | $ | 487,478 | $ | 10,397,778 | |||||||||||
(restated)
|
(restated) | (restated) |
See
accompanying notes to the consolidated financial statements
F-31
WORLDWIDE
ENERGY AND MANUFACTURING USA, INC. AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF CASH FLOWS
For
The Year Ended
|
||||||||
December
31,
|
||||||||
(Restated)
2008
|
2007
|
|||||||
Cash
flows from operating activities
|
||||||||
Net
income
|
$ | 1,001,648 | $ | 575,674 | ||||
Adjustments
to reconcile net income to net cash used in operating
activities:
|
||||||||
Depreciation
|
193,948 | 106,480 | ||||||
Allowance
for bad debts
|
(20,000 | ) | (75,349 | ) | ||||
Stock
based compensation expense
|
128,597 | 61,875 | ||||||
Dividend
paid to shareholders of new subsidiary
|
(449,837 | ) | - | |||||
Minority
interest
|
15,843 | - | ||||||
Gain
on disposal of property, plant and equipment
|
42,763 | - | ||||||
Loss
on disposal of subsidiary
|
101,982 | - | ||||||
Changes
in operating assets and liabilities:
|
||||||||
Accounts
receivable
|
521,719 | (787,967 | ) | |||||
Inventories
|
(610,826 | ) | 213,309 | |||||
Notes
receivable
|
(44,064 | ) | - | |||||
Income
tax receivable
|
80,906 | 339 | ||||||
Advances
to suppliers
|
187,228 | (32,765 | ) | |||||
Related
parties payable
|
- | |||||||
Prepaid
and other current assets
|
( 89 , 149 | ) | (66,740 | ) | ||||
Accounts
payable
|
(189,464 | ) | 800,624 | |||||
Accrued
expenses
|
595,964 | (615,741 | ) | |||||
Income
tax payable
|
253,913 | 36,192 | ||||||
Customer
deposits
|
960,873 | 36,525 | ||||||
Net
cash provided by operating activities
|
2,682,044 | 252,456 | ||||||
Cash
flows from investing activities
|
||||||||
Cash
from acquired subsidiary
|
411,316 | - | ||||||
Loan
to related parties
|
- | (585,854 | ) | |||||
Capital
expenditure
|
(768,411 | ) | (205,448 | ) | ||||
Acquisition
of investment in subsidiary
|
(729,421 | ) | - | |||||
Deposits
paid for investment in subsidiaries
|
(1,724,802 | ) | - | |||||
|
|
|||||||
Net
cash used in investing activities
|
(2,811,318 | ) | (791,302 | ) | ||||
Cash
flows from financing activities
|
||||||||
Proceeds
from issuance of common stock
|
4,608,036 | - | ||||||
Repayment
/ proceeds of line of credit
|
(1,758,584 | ) | 1,141,732 | |||||
Proceeds
/ repayment from long-term debt
|
937,074 | (1,151 | ) | |||||
Repayment
of shareholders loan
|
(439,672 | ) | (23,212 | ) | ||||
Loan
to related parties
|
(410,364 | ) | 16,305 | |||||
Loan
from related parties
|
233,106 | - | ||||||
Net
cash flows provided by financing activities:
|
3,169,596 | 1,133,674 | ||||||
See
accompanying notes to the consolidated financial statements
F-32
WORLDWIDE
ENERGY AND MANUFACTURING USA, INC. AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF CASH FLOWS- CONTINUED
Effect
of exchange rate changes in cash
|
(59,671 | ) | 77,196 | |||||
Net
increase in cash
|
2,980,651 | 672,024 | ||||||
Cash-
beginning of year
|
2,111,825 | 1,439,801 | ||||||
Cash-
end of year
|
$ | 5,092,476 | $ | 2,111,825 | ||||
Supplemental
disclosure of non cash investing and financing activities:
|
||||||||
Stock
based compensation expenses
|
$ | 128,597 | $ | |||||
Acquisition
cost payable
|
$ | 285,714 | $ | |||||
Acquisition
of intangible assets by issuance of shares
|
$ | 1,101,000 | $ |
|
||||
Interest
paid in cash
|
$ | 147,322 | $ | 93,296 | ||||
Income
taxed paid in cash
|
$ | 28,509 | $ | 96,768 |
See
accompanying notes to the consolidated financial statements
F-33
WORLDWIDE
ENERGY AND MANUFACTURING USA, INC. AND SUBSIDIARIES
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS
ENDED DECEMBER 31, 2008 AND 2007
1.
SIGNIFICANT
ACCOUNTING POLICIES
This
summary of significant accounting policies of the Company is presented to assist
in understanding the Company’s financial statements. The financial
statements and notes are representations of the Company’s management, which is
responsible for their integrity and objectivity. These accounting policies
conform to generally accepted accounting principles and have been consistently
applied in the preparation of the financial statements.
Description
of Business
Worldwide
Energy and Manufacturing USA, Inc. (“Worldwide” or “the Company”) is a
manufacturing engineering firm and international contract manufacturer, using
factories in China, primarily servicing
customers in Europe, South Korea for our solar modules and United States-based
companies that outsource their smaller scale production orders for offshore
production in China. From our inception in 1993 until 2005, we were strictly an
intermediary or “middle man,” working with our customers and our subcontractors
to assure that our customers received high quality components on a timely basis
that fulfilled their specific needs. While we still subcontract a significant
portion of our business, since 2005, we have begun the transition to becoming a
direct contract manufacturer, operating several of our own factories.
Recently, we announced two additional factories allowing us to become a
direct manufacturer for solar modules and for power supply units as described
below:
In February of 2008,
Worldwide established a solar division that focuses on photovoltaic module
technology under the brand name of “AmeriSolar.” On February 25, 2008, the
Company changed its name from Worldwide Manufacturing USA, Inc. to Worldwide
Energy and Manufacturing USA, Inc. in order to reflect its expansion into the
solar energy industry. The Company issued 300,000 restricted shares for the
AmeriSolar brand name. Worldwide leased a 129,167 square foot facility in
Ningbo, China. The lease term is from July 18, 2008 to July 17, 2013.This
facility houses the production operations and R&D center for the Company’s
solar division. This factory has the capability of producing 80MW which
translates into approximately $224 million in revenues at full capacity based on
current prices. By opening this factory we hope to increase gross margins and
net margins in our solar division. Further, it will help us through the R&D
department to continue to improve, develop and enhance our solar modules. We
will continue to explore opportunities as well as expand our solar sales and
distribution in the United States and Latin America. We currently sell our solar
modules in Europe and South Korea. Our research shows that the United States has
an abundance of solar rebate programs for both the commercial and residential
markets at the local, state and federal level. We feel we are well positioned to
sell our modules to large institutions in the U.S. This division generated
$30,999,962 in sales for period ending December 31, 2008.
F-34
WORLDWIDE
ENERGY AND MANUFACTURING USA, INC. AND SUBSIDIARIES
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS
ENDED DECEMBER 31, 2008 AND 2007
1.
SIGNIFICANT
ACCOUNTING POLICIES (CONTINUED)
On
October 14, 2008, Worldwide completed the acquisition of 55% of Shanghai De Hong
Electric and Electronic Company Limited (“De Hong”) through acquiring 55% of the
outstanding capital stock of De Hong, a China corporation, through Worldwide’s
wholly owned subsidiary Intech Electro- Mechanical Products Co., Ltd., a Chinese
corporation (“Intech”). The terms of the Agreement dated February 3, 2008 were
that Intech paid cash consideration of approximately 1 million dollars for 55%
interest in DeHong in two installments with the first installment of $714,286.00
being paid within three months of receiving the business license which occurred
on October 10, 2008 and the second installment of $285,714 being paid no later
than December 15, 2008. The Company funded the acquisition with the sale
of 1,055,103 shares of its common stock, or $4,747,970. The sale took place on
June 23, 2008. Shanghai De Hong Electric and Electronic Company is the
holding company for the operating subsidiary Shanghai Intech -Detron Electronic
Co. (“Detron”). Therefore, Worldwide received 55% control of the operating
subsidiary Shanghai Intech-Detron Electric and Electronic Company Limited
(“Detron”). Detron is a power supply factory in Shanghai, China with designing
and R & D capabilities. Detron’s revenues were about $5.4 million for
the twelve months ended December 31, 2008. Current management of Detron
remained in place.
On May
18, 2005, the Company formed a new company called Changchun Chengde Automobile
Air-Conditioner Co., Limited (“Chengde”), which is the manufacturer of
automobile air-conditioners. In May 2008, Chengde ceased its business. As of
September 30, 2008, Chengde completed the cessation process and the results of
operations are recorded under the discontinued operations, amounting to $2,385
for the year ended December 31, 2008. A detailed description of the
cessation is described in footnote 17.
On
November 14, 2005, we established a die-casting and machining factory through
leasing an existing facility from a former supplier, and initially investing
approximately $500,000 to upgrade the equipment and manufacturing buildings. In
these transactions we acquired assets, the expertise of the employees, the
managers of the factories, and a portion of the existing customers of those
factories. In the third quarter of 2005, we also established an electronics
manufacturing factory. As a result, of these two continued factory operations
and the recently announce new factories described above, as of December 31, 2008
we own and operate four factories that we now use for the manufacture of certain
product lines that we historically had to subcontract, and we are using the
services of approximately 40 subcontractors to manufacture those product lines
for which we do not have our own manufacturing capabilities.
Principles
of Consolidation
The
accompanying financial statements include Worldwide Energy and Manufacturing
USA, Inc., a Colorado corporation (formerly Tabatha III, Inc.) and a public
company, its operating subsidiary, Worldwide USA, a California corporation, and
three subsidiary companies owned by Worldwide USA. Intercompany
transactions have been eliminated in consolidation.
F-35
WORLDWIDE
ENERGY AND MANUFACTURING USA, INC. AND SUBSIDIARIES
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS
ENDED DECEMBER 31, 2008 AND 2007
1.
SIGNIFICANT
ACCOUNTING POLICIES (CONTINUED)
Property
and equipment
Property
and equipment are stated at historical cost and are depreciated over the useful
lives of the assets. Depreciation is computed primarily using the straight-line
method based on estimated useful lives, which range from 3 to 25 years.
Impairment
of Long-lived Assets
Long-lived
tangible assets and definite-lived intangible assets are reviewed for possible
impairment whenever events or changes in circumstances indicate that the
carrying amount of such assets may not be recoverable. The Company uses an
estimate of undiscounted future net cash flows of the assets over the remaining
useful lives in determining whether the carrying value of the assets is
recoverable. If the carrying values of the assets exceed the expected future
cash flows of the assets, the Company recognizes an impairment loss equal to the
difference between the carrying values of the assets and their estimated fair
values. Impairment of long-lived assets is assessed at the lowest levels for
which there are identifiable cash flows that are independent from other groups
of assets. The evaluation of long-lived assets requires the Company to use
estimates of future cash flows. However, actual cash flows may differ from the
estimated future cash flows used in these impairment tests.
Inventories
Inventories
consist of finished goods of manufactured products. Cost is stated at the
lower of cost or market on a first-in, first-out (FIFO) basis. The Company
has not recorded an allowance for slow-moving or obsolete inventory.
Obsolete inventory at December 31, 2008 and December 31, 2007 was minimal.
Advertising
Costs
The
Company generally expenses advertising costs as incurred. Advertising expenses
charged to operations were $1,116 and $0 in 2008 and 2007,
respectively.
F-36
WORLDWIDE
ENERGY AND MANUFACTURING USA, INC. AND SUBSIDIARIES
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS
ENDED DECEMBER 31, 2008 AND 2007
1.
SIGNIFICANT
ACCOUNTING POLICIES (CONTINUED)
Revenue
Recognition
The
Company recognizes revenues in accordance with the guidelines of the Securities
and Exchange Commission (“SEC”) Staff Accounting Bulletin (“SAB”) No. 104
“Revenue Recognition”. The Company recognizes revenue from product sales
when the orders are completed and shipped, provided that collection of the
resulting receivable is reasonably assured. Amounts billed to customers
are recorded as sales while the shipping costs are included in cost of sales.
Returns on defective custom parts may only be exchanged for replacement parts
within 30 days of the invoice date. Returns on defective catalogue parts,
which can be resold, may be exchanged for replacement parts or for a refund.
Revenue from non-refundable customer tooling deposits is recognized when
the materials are shipped or when the deposit is forfeited, whichever is
earlier.
Repairs
and Maintenance
Repairs
and maintenance of a routine nature are charged as incurred to operations, while
those that extend or improve the life of existing assets are capitalized.
Cash
and Cash Equivalents
For
purposes of the statement of cash flows, the Company considers all highly liquid
debt instruments purchased with a maturity of three months or less to be cash
equivalents.
Income
Taxes
The
Company uses the liability approach to financial accounting and reporting for
income taxes. The differences between the financial statement and tax
bases of assets and liabilities are determined annually. Deferred income
tax assets and liabilities are computed for those differences that have future
tax consequences using the currently enacted tax laws and rates that apply to
the period in which they are expected to affect taxable income. Valuation
allowances are established, if necessary, to reduce deferred tax asset accounts
to the amounts that will more likely than not be realized. Income tax
expense is the current tax payable or refundable for the period, plus or minus
the net change in the deferred tax asset and liability accounts.
F-37
WORLDWIDE
ENERGY AND MANUFACTURING USA, INC. AND SUBSIDIARIES
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS
ENDED DECEMBER 31, 2008 AND 2007
1.
SIGNIFICANT
ACCOUNTING POLICIES (CONTINUED)
The
September 30, 2003 recapitalization of the Company qualifies as a reverse
acquisition under Section 1.1502-75(d)(3) of the Internal Revenue Code.
Prior to this date, the stockholders of the Company had elected for it to
be taxed as a “Subchapter S” corporation. Subsequent to the
recapitalization, the Company filed a consolidated tax return.
Intangibles
Patent
costs and other identifiable intangibles are capitalized and generally amortized
over useful lives of 10 years. If an intangible asset has an indefinite useful
life it is not amortized. The useful life of an intangible asset is the period
over which the asset is expected to contribute directly or indirectly to the
future cash flows of the Company. If no legal, regulatory, contractual,
competitive, economic or other factors limit the useful life of the asset it
shall be considered to be indefinite.
Research
and Development
The
Company expenses the cost of research and development as incurred. No
research and development costs were charged to operations during 2008 or 2007.
Non-Cash
Equity Transactions
Shares of
other equity instruments issued for non-cash consideration are recorded at the
fair value of the consideration received, or at the value of the stock given,
considered in reference to contemporaneous cash sale of stock.
Estimates
The
preparation of financial statements in accordance with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the amounts of assets and liabilities, as
well as footnote disclosures included in the financial statements and
accompanying notes. Actual results may differ from those estimates and
such differences may be material to the financial statements. The more
significant estimates include: useful lives and residual values of fixed
assets, fair market values of inventory, goodwill and intangible impairment
tests, reserves for warranty, returns, and product liability losses, and credits
losses.
Accounting
Method
The
Company’s financial statements are prepared using the accrual method of
accounting.
F-38
WORLDWIDE
ENERGY AND MANUFACTURING USA, INC. AND SUBSIDIARIES
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS
ENDED DECEMBER 31, 2008 AND 2007
1.
SIGNIFICANT
ACCOUNTING POLICIES (CONTINUED)
Foreign
Currency Transactions and Translation
Transaction
gains and losses result from a change in exchange rates between the functional
currencies in which a foreign currency transaction is denominated. They
represent an increase or decrease in (a) the actual functional current cash
flows realized upon settlement of foreign currency transactions and (b) the
expected functional currency cash flows on unsettled foreign currency
transactions. All transaction gains and losses are included in other
income or expense. For all years presented, sales to customers were
primarily denominated in U.S. dollars.
Assets
and liabilities of Intech are translated into U.S. dollars at the prevailing
exchange rate in effect at each period end. Revenue and expenses are
translated into U.S. dollars at the average exchange rate during the reporting
period. Contributed capital is translated into U.S. dollars at the
historical exchange rate when capital was injected. Any difference
resulting from using the current rate, historical rate, and average rate in
determination of retained earnings is accounted for as a translation adjustment
and reported as part of comprehensive income or loss in the equity section.
Exchange differences are recognized in the income statement in the period
in which they occur.
Fair
Value of Financial Instruments
Unless
otherwise indicated, the fair value of all reported assets and liabilities,
which represent financial instruments (none of which are held for trading
purposes), approximate the carrying values of such instruments. At
December 31, 2008 and 2007, accounts receivable in the amounts of $921,619 and
$1,326,487 respectively, were pledged as collateral in connection with bank
loans.
Compensated
Absences
Employees
of the Company are entitled to be compensated for absences depending on job
classification, length of service, and other factors. At December 31, 2008
and 2007, the minimal amoun
ts unused by employees could not be estimated, and accordingly, no provision
is recorded.
Concentrations,
Risks, and Uncertainties
In 2008,
our six largest customers, Pramac Swiss SA, Enesystem Inc, Provent Solarpark,
Pvline Gmbh and Schueco International KG accounted for 72% of our consolidated
business. In 2007 Joslyn Sunbank, Joslyn Manufacturing, Radio Waves Corp and
Teleflex Electrical, GE Transportation and Pacific Scientific-CA accounted for
approximately 48% of consolidated net sales. The shift in our top customers was
the result of the Company’s transition to solar modules where in 2008 the
majority of our sales were achieved.
F-39
WORLDWIDE
ENERGY AND MANUFACTURING USA, INC. AND SUBSIDIARIES
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS
ENDED DECEMBER 31, 2008 AND 2007
1.
SIGNIFICANT
ACCOUNTING POLICIES (CONTINUED)
Our five
largest suppliers in 2008 were Changzhou Trina Solar Energy, Zhejiang Shuqimeng
Photo Voltaic, Jiangsu Aide Solar Energy Technology Co, Jiangyin Hareon Power
Co., Ltd and Baoding Tianwei Yingli New Energy Resource represented
approximately $23 million of our purchases from external suppliers or
approximately 75% of material purchase by the Company. In year ending 2007 our
two largest material suppliers were Shanghai Huanxinnuo Electro-Mechanical
Products Company (formerly named Shanghai Xinli Trading Company Ltd.) and
Shanghai Machine Tool Co. Ltd., and they accounted for $573,328 or 6.8% and
$724,891 or 8.6% respectively of the total materials purchased by Worldwide.
The shift in our top suppliers was also the result of the Company’s focus
on the solar module industry. Worldwide Manufacturing has no agreements with any
of these suppliers.
The
Company’s customers in the aerospace, telecommunications, automotive, and
electronics industries comprised the majority of its sales in 2007. These
four industries counted for 60% of the Company’s sales in 2007. For the
year ended December 31, 2008, 67.5% of the Company’s business was in the
renewable energy industry.
As part
of the production process, the Company may be required by its suppliers to
advance funds under short-term agreements for tooling and other pre-production
costs. The loans are generally unsecured and may carry interest at the
prevailing market rate for short-term instruments. Such tooling is in most
cases owned by the suppliers, and is a value primarily for the specific needs of
the Company’s customers. The Company in turn requires its customers to
provide a non-refundable down payment to cover such startup costs. In the
event that a supplier is unable to fulfill its production agreements with the
Company, management believes that other suppliers can be found for the Company’s
products. However, a change in suppliers would cause a delay in the
production process, and could result in loss of tooling deposits and other
supplier advances, which could negatively affect the Company’s operating
results. At December 31, 2008 and 2007, the balance of advances owed to
the Company is $99,824 and $260,540, respectively.
The
Company sells its goods and services internationally, although the majority of
its revenue is derived from customers in Europe, South Korea and the United
States and Europe. As such, the Company is susceptible to credit risk on
accounts and notes receivable from customers in that region.
F-40
WORLDWIDE
ENERGY AND MANUFACTURING USA, INC. AND SUBSIDIARIES
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS
ENDED DECEMBER 31, 2008 AND 2007
1.
SIGNIFICANT
ACCOUNTING POLICIES (CONTINUED)
Stock Based Compensation
The
Company will account for employee stock option plans under the intrinsic value
method prescribed by Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to
Employees,” and has adopted the disclosure only provisions of Statement
of Financial Accounting Standards No. 123, “Accounting for Stock-Based
Compensation” (“SFAS 123”). The Company accounts for equity
instruments issued to non-employees in accordance with the provisions of SFAS
No. 123 and Emerging Issues Task Force No. 96-18, “Accounting for Equity Instruments that are
Issued to Other than Employees for Acquiring, or in Conjunction with Selling
Goods and Services.”
Earnings
Per Share
The
Company adopted Statement of Financial Accounting Standard No. 128, “Earnings
per Share” (“SFAS No. 128”), which is effective for annual periods ending after
December 15, 1997. Earnings per share (EPS) are computed based on the
weighted average number of shares actually outstanding.
For
the Year Ended
|
December
31, 2008
|
December
31, 2007
|
||||||
Weighted
average number of common shares used
|
2,731,995 | 2,035,495 | ||||||
Recent
Accounting Pronouncements
SFAS
No. 141 (revised 2007), “Business Combinations
(“SFAS 141R”)
In
December 2007, the FASB issued SFAS No. 141 (revised 2007), Business
Combinations (“SFAS 141R”). SFAS 141R establishes principles and
requirements for how an acquirer recognizes and measures in its financial
statements the identifiable assets acquired, the liabilities assumed, any
noncontrolling interest in the acquiree and the goodwill acquired.
SFAS 141R also establishes disclosure requirements to enable the evaluation
of the nature and financial effects of the business combination. This statement
is effective for the Company beginning January 1, 2009. The Company is
currently evaluating the potential impact of the adoption of SFAS 141R on
its consolidated financial position, results of operations or cash
flows.
SFAS
No. 160, “Noncontrolling
Interests in Consolidated Financial Statements—an amendment of Accounting
Research Bulletin No. 51” -
F-41
WORLDWIDE
ENERGY AND MANUFACTURING USA, INC. AND SUBSIDIARIES
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS
ENDED DECEMBER 31, 2008 AND 2007
1.
SIGNIFICANT
ACCOUNTING POLICIES (CONTINUED)
Recent Accounting
Pronouncements (Continued)
In
December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in
Consolidated Financial Statements—an amendment of Accounting Research Bulletin
No. 51 (“SFAS 160”). SFAS 160 establishes accounting and
reporting standards for ownership interests in subsidiaries held by parties
other than the parent, the amount of consolidated net income attributable to the
parent and to the noncontrolling interest, changes in a parent’s ownership
interest, and the valuation of retained noncontrolling equity investments when a
subsidiary is deconsolidated. SFAS 160 also establishes disclosure
requirements that clearly identify and distinguish between the interests of the
parent and the interests of the noncontrolling owners. This statement is
effective for the Company beginning January 1, 2009. The Company is
currently evaluating the potential impact of the adoption of SFAS 160 on
its consolidated financial position, results of operations or cash
flows.
In March
2008, the FASB issued SFAS No. 161 “Disclosures about Derivative Instruments and
Hedging Activities amendment of FASB Statement No. 133” (“SFAS 161”). This
statement changes the disclosure requirements for derivative instruments and
hedging activities. Entities are required to provide enhanced disclosures
stating how and why an entity uses derivative instruments; how derivatives and
related hedged items are accounted for under SFAS No. 133, “Accounting for
Derivative Instruments and Hedging Activities” (“SFAS 133”) and its related
interpretations; and how derivative instruments and related hedge items affect
an entity’s financial position, financial performance and cash flows. SFAS
161 is effective in fiscal years beginning after November 15, 2008 and is
required to be adopted by the Company in the first quarter of fiscal year 2009.
The Company does not expect the adoption of SFAS 161 will have a material
impact on the Company’s disclosures.
In May
2008, the FASB issued Statement of Financial Accounting Standards No. 162, The Hierarchy of Generally Accepted Accounting
Principles (“FAS 162”). This Standard identifies the sources of
accounting principles and the framework for selecting the principles to be used
in the preparation of financial statements of nongovernmental entities that are
presented in conformity with generally accepted accounting principles. FAS 162
directs the hierarchy to the
entity, rather than the independent auditors, as the entity is responsible for
selecting accounting principles for financial statements that are presented in
conformity with generally accepted accounting principles. The Standard is
effective 60 days following SEC approval of the Public Company Accounting
Oversight Board amendments to remove the hierarchy of generally accepted
accounting principles from the auditing standards. FAS 162 is not expected to
have an impact on the financial statements.
F-42
WORLDWIDE
ENERGY AND MANUFACTURING USA, INC. AND SUBSIDIARIES
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS
ENDED DECEMBER 31, 2008 AND 2007
|
1.
SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Recent Accounting
Pronouncements (Continued)
In April
2008, the FASB issued FASB Staff Position (FSP) FAS 142-3, Determination of the Useful Life of
Intangible Assets, which amends the factors that should be considered in
developing renewal or extension assumptions used to determine the useful life of
a recognized intangible asset under FASB Statement No. 142, Goodwill and Other Intangible
Assets. This Staff Position is effective for financial statements issued
for fiscal years beginning after December 15, 2008, and interim periods within
those fiscal years. Early adoption is prohibited. Application of this FSP is not
expected to have a significant impact on the financial statements or (This FSP
is not currently applicable to the Company).
In June
2008, the FASB issued FSP EITF 03-6-1, Determining Whether Instruments
Granted in Share-Based Payment Transactions are Participating Securities.
This FSP provides that unvested share-based payment awards that contain
nonforfeitable rights to dividends or dividend equivalents (whether paid or
unpaid) are participating securities and shall be included in the computation of
earnings per share pursuant to the two-class method. The Company does not
currently have any share-based awards that would qualify as participating
securities. Therefore, application of this FSP is not expected to have an effect
on the Company’s financial reporting.
In May
2008, the FASB issued FASB Staff Position (FSP) APB 14-1, Accounting for Convertible Debt That
May Be Settled in Cash upon Conversion (Including Partial Cash Settlement)
(“FSP 14-1”). FSP 14-1 will be effective for financial statements issued
for fiscal years beginning after December 15, 2008. The FSP includes guidance
that convertible debt instruments that may be settled in cash upon conversion
should be separated between the liability and equity components, with each
component being accounted for in a manner that will reflect the entity’s
nonconvertible debt borrowing rate when interest costs are recognized in
subsequent periods. FSP 14-1 is not currently applicable to the Company since
the Company does not have convertible debt.
In
May 2008, the FASB issued SFAS No. 163, Accounting for Financial
Guarantee Insurance Contracts, an interpretation of FASB Statement No. 60
(SFAS 163). This statement clarifies accounting for financial guarantee
insurance contracts by insurance enterprises under FASB Statement No. 60,
Accounting and Reporting by Insurance Enterprises. SFAS 163 is effective for
fiscal years, and interim periods within those years, beginning after
December 15, 2008. Because the Company does not issue financial guarantee
insurance contracts, the Company does not expect the adoption of this standard
to have an effect on our financial position or results of
operations.
F-43
WORLDWIDE
ENERGY AND MANUFACTURING USA, INC. AND SUBSIDIARIES
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS
ENDED DECEMBER 31, 2008 AND 2007
1.
SIGNIFICANT
ACCOUNTING POLICIES (CONTINUED)
Recent Accounting
Pronouncements (Continued)
In June
2008, the FASB issued FSP EITF 03-6-1, Determining Whether Instruments Granted
in Share-Based Payment Transactions are Participating Securities. This FSP
provides that unvested share-based payment awards that contain nonforfeitable
rights to dividends or dividend equivalents (whether paid or unpaid) are
participating securities and shall be included in the computation of earnings
per share pursuant to the two-class method. The Company does not currently have
any share-based awards that would qualify as participating securities.
Therefore, application of this FSP is not expected to have an effect on the
Company’s financial reporting.
2.
BUSINESS
ACQUISITIONS
SHANGHAI-INTECH DETRON ELECTRONIC
COMPANY, LTD.
On
October 14, 2008, Worldwide Energy and Manufacturing USA, Inc. completed the
acquisition of 55% of Shanghai De Hong Electric and Electronic Company Limited
(“De Hong”) through acquiring 55% of the outstanding capital stock of De Hong, a
Chinese corporation. After the completion of the acquisition, it changed its
name into Shanghai Intech- Detron Electronic Co., Ltd (“Detron”). The terms of
the Agreement dated February 3, 2008, were that Worldwide USA paid cash
consideration of approximately $1 million dollars for 55% interest in DeHong
with working capital dividend income of $270,579; as a result, the net purchase
consideration of acquiring DeHong was $729,421. The purchase consideration
will be paid in two installments with the first installment of $714,286 being
paid within three months of receiving the business license which occurred on
October 10, 2008 and the second installment of $285,714 being paid no later than
December 15, 2008. The Company funded the acquisition with some of the proceeds
($4,747,970) of the sale of 1,055,103 shares of its common stock.
Intech
paid the first installment of $714,286 on behalf of Worldwide in September 2008
and the second installment of $285,714 was paid on March 2009.
Shanghai
De Hong Electric and Electronic Company is the holding company for the operating
subsidiary Shanghai Intech -Detron Electronic Co. (“Detron”). Through this
operating subsidiary, Detron is a power supply factory in Shanghai, China with
design and R & D capabilities. Detron revenues were about $4.1 million for
the twelve months ended December 31, 2007 and about $6.17 million for the year
ended December 31, 2008. Current management of Detron has remained in
place, although changes will be made in management of Shanghai De Hong Electric
and Electronic Company where Intech and Shanghai Jingde Electric and Electronics
Company limited will have 55% and 45 % control, respectively.
F-44
WORLDWIDE
ENERGY AND MANUFACTURING USA, INC. AND SUBSIDIARIES
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS
ENDED DECEMBER 31, 2008 AND 2007
2.
BUSINESS
ACQUISITIONS – (CONTINUED)
The
Company adopted SFAS No. 141, Business Combinations, which requires the use of
the purchase method of accounting for any business combinations initiated after
June 30, 2002. The results of Detron and the estimated fair market values of the
assets and liabilities have been included in our consolidated financial
statements from the date of acquisition of September 30, 2009. The purchase
price for Detron was allocated to the assets acquired and liabilities assumed of
Detron based on fair values.
Cash
|
$ | 411,316 | ||
Accounts
Receivable
|
1,929,314 | |||
Note
receivable
|
226,877 | |||
Inventories
|
774,295 | |||
Advances
to suppliers
|
21,703 | |||
Prepaid
and other current assets
|
231,967 | |||
Property,
plant and equipment, net
|
158,520 | |||
Other
assets
|
3,494 | |||
Trade
payables
|
(962,839 | ) | ||
Accrued
expenses
|
(422,943 | ) | ||
Income
taxes payable
|
(29,717 | ) | ||
Related
parties payable
|
(1,015,773 | ) | ||
45%
Minority Interest
|
(596,793 | ) | ||
|
||||
55%
Net assets acquired
|
$ | 729,421 |
3.
CASH
AND CASH EQUIVALENTS
Financial
instruments that potentially subject the Company to significant concentrations
of credit risk consist of cash and cash equivalents and pledged deposits. As of
December 31, 2008, substantially all of the Company’s cash and cash equivalents
were held by major banks located in the PRC and United States, which management
believes are high credit quality financial institutions.
F-45
WORLDWIDE
ENERGY AND MANUFACTURING USA, INC. AND SUBSIDIARIES
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS
ENDED DECEMBER 31, 2008 AND 2007
4.
COMMITMENTS
AND CONTINGENCIES
The
Company leases its office spaces and certain vehicles under non-cancelable
operating leases. The Worldwide office lease requires increasing annual
payments plus a share of operating costs. Minimum future rental payments
under non-cancelable operating leases with remaining terms in excess of one year
as of December 31, 2008, in the aggregate and for each of the five succeeding
fiscal years are as follows:
Year
ended December 31,
|
||||
2009
|
$ | 267,831 | ||
2010
|
188,641 | |||
2011
|
152,343 | |||
2012
|
152,343 | |||
2013
|
149,953 | |||
Total
minimum future rental payment
|
$ | 911,111 |
Total
rent and lease expense was $273,803 and $175,783 as of December 30, 2008 and
2007, respectively.
5.
ACCOUNTS
RECEIVABLE
Accounts
receivable by major categories are summarized as follows:
2008
|
2007
|
|||||||
Accounts
Receivable – pledged to banks
|
$ | 921,619 | $ | 2,543,951 | ||||
Accounts
Receivable – others
|
3,914,521 | 847,984 | ||||||
4,836,140 | 3,391,935 | |||||||
Less:
allowances for doubtful accounts
|
(45,634 | ) | (116,911 | ) | ||||
Total
|
$ | 4,790,506 | $ | 3,275,024 |
Under the
terms of a revolving line of credit agreement with Bank of the West indicated in
note 7, the revolving line of credit is secured by 70% of accounts receivable
and all business assets of the Company and guaranteed by its
officers.
Concentrations
in Accounts Receivable - at December 31, 2008, no customer accounted for more
than 10% of the Company’s accounts receivable. At December 31, 2007, one
customer accounted for more than 10% of the Company’s accounts receivable, with
total amounts of $672,186, representing 21% of total accounts receivable in
aggregate.
F-46
WORLDWIDE
ENERGY AND MANUFACTURING USA, INC. AND SUBSIDIARIES
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS
ENDED DECEMBER 31, 2008 AND 2007
|
6.
INVENTORIES
Inventories
by major categories are summarized as follows:
2008
|
2007
|
|||||||
Raw
materials
|
$ | 752,249 | $ | 254,265 | ||||
Work
in progress
|
1,107,857 | - | ||||||
Finished
goods
|
1,914,021 | 2,078,883 | ||||||
3,774,127 | 2,333,148 | |||||||
Less:
allowances for slowing moving items
|
19,362 | - | ||||||
Total
|
$ | 3,754,765 | $ | 2,333,148 |
7.
PROPERTY AND EQUIPMENT
Property
and equipment, which is located in the USA and PRC, consisted of the following
at December 31, 2008:
2008
|
2007
|
|||||||
Vehicles
|
$ | 248,112 | $ | 174,663 | ||||
Furniture
& fixtures
|
100,346 | 4,496 | ||||||
Equipment
|
1,107,151 | 768,734 | ||||||
Software
|
37,237 | 35,461 | ||||||
Leasehold
improvements
|
57,669 | 9,170 | ||||||
|
|
|||||||
1,550,515 | 992,524 | |||||||
Less:
accumulated depreciation
|
(627,791 | ) | (447,030 | ) | ||||
Construction
in progress
|
430,815 | - | ||||||
Total
|
$ | 1,353,539 | $ | 545,494 |
F-47
WORLDWIDE
ENERGY AND MANUFACTURING USA, INC. AND SUBSIDIARIES
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS
ENDED DECEMBER 31, 2008 AND 2007
8.
INTANGIBLE ASSET
The
intangible asset of $1,101,000 represents the brand name of “AmeriSolar”
and the Company acquired this brand name by the issuance of 300,000
restricted shares. The value is 1,101,000 or $3.67 per share. The
“AMERISOLAR” modules are backed by ISO 9001:2000 and ISO 14000
environmental quality certifications along with our commitment to provide
the highest quality products.
|
The brand
name is carried at cost and is not being amortized. If an intangible asset has
an indefinite useful life it is not amortized. The useful life of an intangible
asset is the period over which the asset is expected to contribute directly or
indirectly to the future cash flows of the Company. If no legal, regulatory,
contractual, competitive, economic or other factors limit the useful life of the
asset it shall be considered to be indefinite. In recording of the brand
name is was determined that the expected useful life is indefinite and cash
flows from the brand name are expected to contribute to the Company over an
indefinite period of time.
9.
DEPOSITS PAID FOR INVESTMENT
The
deposits paid for investment represents Investment in Tomii International and
Investment in Worldwide Energy and Manufacturing Ningbo (Solar factory) Co.,
Ltd, amounting to $51,876 and $1,673,100. The $51,876 gave Worldwide a 21%
interest in Tomii International which is developing a pocket translation device
for Chinese and English. The investment of $1,673,100 is for registered capital
and working capital for the Ningbo Solar factory located in China.
10.
BANK
LOAN
As of
December 31, 2008, the Company has the following line of credit:
Banker
|
Amount
of the
credit
line
|
Loan
period
|
Interest
rate
|
Secured
by
|
Balance
as at December 31, 2008
|
||||||||||
Bank
of the West
|
$ | 1,025,000 |
5/20/2008
-6/1/2011
|
Wall
Street Journal prime + 0.5%
|
70%
Accounts receivable + 50% inventory
|
$ | 921,619 | ||||||||
Total
loans
|
$ | 921,619 | |||||||||||||
Less:
long term portion
|
(921,619 | ) | |||||||||||||
$ | - |
F-48
WORLDWIDE
ENERGY AND MANUFACTURING USA, INC. AND SUBSIDIARIES
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS
ENDED DECEMBER 31, 2008 AND 2007
10.
BANK LOAN – (CONTINUED)
For
maturities of long-term loans are as follows as of December 31,
2008:
|
June
1, 2011
|
$ | 921,619 |
On May
20, 2008 the Company paid off its line of credit with Well Fargo in the amount
of $960,000 and established a new credit facility with Bank of the West. Under
the terms of the revolving line of credit agreement with Bank of the West dated
May 20, 2008, the Company could borrow up to $3,025,000 at a rate of 5% this
rate is subject to change based on the prime rate for both credit lines. The
revolving line of credit is secured by the assets of the Company and guaranteed
by its officers.
The
Company can borrow up to $2,000,000 and $1,025,000 within two credit lines. The
maturity date of these two credit lines is May 20, 2009 and June 1, 2011
respectively. The balance outstanding as of March 31, 2009 is $1,300,000, and
$700,000 is still available for use on the line of credit. Additionally, the
second line of credit has a balance of $877,869 as of March 31, 2009, with
$147,131 still available for use of equipment and facility
purchases.
11.
STOCK
TRANSACTION
On
January 1, 2008, the Company issued 15,040 shares of its common stock to outside
consultants and 20,000 shares of its common stock to an employee, valued at
$128,597, fair value, which is reflected in stock based compensation expense. In
addition, the Company’s stock symbol changed from “WWMU” to “WEMU” in the first
quarter of 2008 to better reflect the Company’s change in focus to the renewable
clean energy sector.
In
February of 2008, Worldwide established a solar division that focuses on
photovoltaic module technology under the brand name of “AmeriSolar.” On
February 25, 2008, the Company changed its name from Worldwide Manufacturing
USA, Inc. to Worldwide Energy and Manufacturing USA, Inc. in order to reflect
its expansion into the solar energy industry. The Company issued 300,000
restricted shares for the AmeriSolar brand name. This division generated
$30,999,962 in sales for period ending December 31, 2008.
F-49
WORLDWIDE
ENERGY AND MANUFACTURING USA, INC. AND SUBSIDIARIES
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS
ENDED DECEMBER 31, 2008 AND 2007
11.
STOCK TRANSACTION – (CONTINUED)
On June
23, 2008, the Company received subscriptions for the sale of an aggregate of
$4,747,970.50 or 1,055,103 shares of common stock and the Company received the
net amount of $4,356,009 after the deduction of the offering expenses of
$391,961.50. Concurrently with the issuance of the Shares, the Company also
issued an aggregate of 685,817 Series A Warrants of the Company (the “Series A
Warrants”) and an aggregate of 369,286 Series B Warrants of the Company (the
“Series B Warrants”). The Series A Warrants are exercisable for a period of 24
months from closing at an exercise price of $7.00 per share. The Series B
Warrants are exercisable for a period of 36 months from the closing at an
exercise price of $9.00 per share. The Series A and Series B Warrants provide
the investors with full ratchet anti-dilution protection with relation to the
exercise price of the warrant for a period of 18 months from the closing. The
Series A and Series B Warrants may not be exercised if, after such exercise,
such holder would beneficially own, as determined in accordance with Section
13(d) of the Securities Exchange Act of 1934 and the rules and regulations
promulgated thereunder, more than 9.99% of the number of shares of common stock
then issued and outstanding.
On July
24, 2008, the Company received subscriptions for the sale of an aggregate of
$252,027 or 56,006 shares of common stock (the “Shares”). Concurrently with the
issuance of the Shares, the Company also issued an aggregate of 36,404 Series A
Warrants of the Company (the “Series A Warrants”) and an aggregate of 19,602
Series B Warrants of the Company (the “Series B Warrants”). The Series A
Warrants are exercisable for a period of 24 months from closing at an exercise
price of $7.00 per share. The Series B Warrants are exercisable for a
period of 36 months from the closing at an exercise price of $9.00 per share.
The Series A and Series B Warrants provide the investors with full ratchet
anti-dilution protection with relation to the exercise price of the warrant for
a period of 18 months from the closing. The Series A and Series B Warrants may
not be exercised if, after such exercise, such holder would beneficially
own, as determined in accordance with Section 13(d) of the Securities Exchange
Act of 1934 and the rules and regulations promulgated thereunder, more than
9.99% of the number of shares of common stock then issued and outstanding. From
these two sales of unregistered securities the Company received proceeds of
$4,608,036.
The total
number of common stock outstanding as of December 31, 2008 was
3,493,512.
F-50
WORLDWIDE
ENERGY AND MANUFACTURING USA, INC. AND SUBSIDIARIES
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS
ENDED DECEMBER 31, 2008 AND 2007
12.
PENSION
PLAN AND STOCK OPTION PLAN
The
Company established a SEP plan for the benefit of all full-time employees.
Contributions to the plan are limited to a statutory amount per employee.
No contributions were made for 2005 or 2006. The Company also
established a stock option plan for its employees on April 1, 2004. The
Company approved the plan to issue up to 300,000 shares of common stock.
The stock option plan provides employees, consultants and directors the
opportunity to purchase shares. The exercise price of an incentive stock
option granted under this plan must be equal to or greater than the fair market
value of the shares of the Company’s common stock on the date the option is
granted. The exercise price of a non-qualified option granted under this
plan must be equal to or greater than 85% of the fair market value of the shares
of the common stock on the date the option is granted. An incentive stock
option granted to an optionee owning more than 10% of the voting stock must have
an exercise price equal to or greater than 110% of the fair market value of our
common stock on the date the option is granted. On April 1, 2004, the Board
granted options to purchase 109,213 shares at an exercise price of $6.00 per
share.
13.
RELATED
PARTY TRANSACTIONS
The
Company paid wages in the amount of $306,000 and $210,000 to certain
stockholders, who are also members of the Board of Directors, as of December 31,
2008 and 2007 respectively.
Mr. Jimmy
Wang and Mrs. Mindy Wang, who are principal stockholders, executive officers and
members of the Board of Directors of the Company, have advanced funds to the
Company for working capital purposes. At December 31, 2008, the Company
owed Jimmy and Mindy Wang $60,024. The advances are interest bearing at 8%
per annum, with a default interest rate of 10%. All unpaid amounts on this note
are due in full on January 1, 2010. The Company paid cash in the amount of
$27,284 for interest expense to Mr. and Mrs. Wang for the year ended December
31, 2008.
F-51
WORLDWIDE
ENERGY AND MANUFACTURING USA, INC. AND SUBSIDIARIES
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS
ENDED DECEMBER 31, 2008 AND 2007
14.
OPERATING
RISK
Interest
rate risk
The
interest rates and terms of repayment of bank and other borrowings from
stockholders are disclosed in Note 5 and Note 8. Other financial assets and
liabilities do not have material interest rate risk.
Credit
risk
The
Company is exposed to credit risk from its cash in bank and bills and accounts
receivable. The credit risk on cash in bank is limited because the
counterparties are recognized financial institutions. Bills and accounts
receivable are subjected to credit evaluations. An allowance has been made
for estimated irrecoverable amounts which have been determined by reference to
past default experience and the current economic environment.
Foreign
currency risk
Most of
the transactions of the Company were settled in Renminbi, U.S. dollars and
Euros. Therefore, the Company has significant foreign currency risk
exposure.
The
Company’s operations are substantially in foreign countries:
Substantially
all of the Company’s products are manufactured in China. The Company’s
operations are subject to various political, economic, and other risks and
uncertainties inherent in China. Among other risks, the Company’s operations are
subject to the risks of restrictions on transfer of funds; export duties,
quotas, and embargoes; domestic and international customs and tariffs; changing
taxation policies; foreign exchange restrictions; and political conditions and
governmental regulations.
F-52
WORLDWIDE
ENERGY AND MANUFACTURING USA, INC. AND SUBSIDIARIES
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS
ENDED DECEMBER 31, 2008 AND 2007
15. INCOME
TAXES
The
Company and its subsidiaries are included in a consolidated United States
federal and state income tax return. The Company computes its provision for
deferred federal income taxes using the liability method in which deferred tax
assets and liabilities are determined based on differences between financial
reporting and tax bases of assets and liabilities for the Company and each of
its subsidiaries, and are measured using the enacted tax rates. Income tax
expense for the years ended December 31, 2008 and 2007 consists of the
following:
2007
|
Current
|
Deferred
|
Total
|
|||||||||
Federal
|
$ | 6,337 | $ | - | $ | 6,337 | ||||||
State
|
3,134 | - | 3,134 | |||||||||
Foreign
|
4,893 | - | 4,893 | |||||||||
$ | 14,364 | $ | - | $ | 14,364 |
2008
|
Current
(Restated)
|
Deferred
|
Total
(Restated)
|
|||||||||
Federal
|
$ | 161,469 | $ | - | $ | 161,469 | ||||||
State
|
55,579 | - | 55,579 | |||||||||
Foreign
|
67, 230 | - | 67, 230 | |||||||||
$ | 284,278 | $ | - | $ | 284,278 |
F-53
WORLDWIDE
ENERGY AND MANUFACTURING USA, INC. AND SUBSIDIARIES
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS
ENDED DECEMBER 31, 2008 AND 2007
16.
SEGMENT
INFORMATION
The
Company’s operations are classified into four principal reportable segments that
provide different products or services. Worldwide USA purchases and sells
manufactured goods and solar modules from China procured by its subsidiary,
Shanghai Intech Electro-Mechanical Products Co., Ltd. (“Intech Electro”).
Intech Electro provides technical advisory, design, delivery, material
procurement, and manufacturing quality control services. Additionally, Intech
Electro produces various types of electrical parts. Intech Precision is the
Company’s die cast factory producing parts primarily in the auto industry.
Detron is a power supply factory in Shanghai, China with designing and R & D
capabilities.
Separate
management of each segment is required because each business unit is subject to
different marketing, production, and technology strategies, and because of the
geographic location of each entity.
Segmental
Data – 2008
Reportable
Segments
(amounts
in thousands)
WWMUSA
Manufacturing
|
Intech
Electro
|
Intech
Precision
|
Detron
|
Discontinued
Operations
|
Total
|
||||||||||||||||||||
External
revenue
|
39,666 | 588 | 3,939 | 1,721 | - | 45,914 | |||||||||||||||||||
Intersegment
revenue
|
- | 6,025 | - | - | - | 6,025 | |||||||||||||||||||
Interest
income
|
18 | - | 4 | - | - | 22 | |||||||||||||||||||
Interest
expense
|
(93 | ) | (27 | ) | - | - | - | (120 | ) | ||||||||||||||||
Depreciation
|
(13 | ) | (26 | ) | (7 | ) | (77 | ) | - | (123 | ) | ||||||||||||||
Net
income (loss) after tax
|
438 | 382 | 144 | 35 | 2 | 1,001 | (1) | ||||||||||||||||||
Expenditures
for long-lived assets
|
1 | 183 | 12 | 102 | - | 768 |
(1)
$(216) in inter-company profit
was eliminated in consolidation.
F-54
WORLDWIDE
ENERGY AND MANUFACTURING USA, INC. AND SUBSIDIARIES
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS
ENDED DECEMBER 31, 2008 AND 2007
16.
SEGMENT
INFORMATION (CONTINUED)
Segmental
Data – 2007
Reportable
Segments
(amounts
in thousands)
WWMUSA
|
Intech
Electro
|
Intech
Precision
|
Discontinued
Operations
|
Total
|
|||||||||||||||||
External
revenue
|
8,723 | 298 | 2,845 | 267 | 12,133 | ||||||||||||||||
Intersegment
revenue
|
- | 5,671 | - | - | 5,671 | ||||||||||||||||
Interest
income
|
7 | 2 | 4 | - | 13 | ||||||||||||||||
Interest
expense
|
(79 | ) | - | - | - | (79 | ) | ||||||||||||||
Depreciation
|
(88 | ) | (15 | ) | (3 | ) | (4 | ) | (106 | ) | |||||||||||
Net
income (loss) after tax
|
(81 | ) | 409 | 248 | - | 576 | (1) | ||||||||||||||
Expenditures
for long-lived assets
|
23 | 23 | 128 | - | 174 |
(1)
$5,010 in inter-company profit was eliminated in consolidation.
F-55
WORLDWIDE
ENERGY AND MANUFACTURING USA, INC. AND SUBSIDIARIES
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS
ENDED DECEMBER 31, 2008 AND 2007
17.
DISCONTINUED
OPERATION
Changchun
Chengde Automobile Air-Conditioner Co., Limited, the Company’s wholly owned
air-condition factory that makes units for small trucks, ceased its business in
May 2008. The results of operations are recorded under the discontinued
operations amounting $782 and $2,385 for the years ended December 31, 2008 and
2007 respectively. The discontinued operations incurred a loss on the disposal
of $101,982.
18.
SUBSEQUENT
EVENT
On
November 10, 2008 the Company announced the establishment of a new solar module
production and R&D facility. Worldwide Energy and Manufacturing has leased a
129K square-foot facility in Ningbo, China. This facility will house the
Company’s research center and part of its photovoltaic (PV) manufacturing
operations.
The city
of Ningbo is about a two-hour and 15 minute drive from downtown Shanghai. The
capacity of the factory is 60 to 80 megawatts per year. Based on current market
prices for solar modules 60 to 80 megawatts equates to approximately US$225
million to $300 million in potential revenues per year.
In
February of 2009 the Company filed an application to list its securities on the
NASDAQ Capital Market. The Company has been responding to comments by NASDAQ and
feels it meets all requirements for listing at this time with the exception of
not having a bid price of $4.00 on its common shares.
19.
RESTATEMENT
On August
10, 2009, the management of Worldwide Energy and Manufacturing USA, Inc.
concluded that its financial statements for the year ended December 31, 2008,
which are included in its Form 10-K for the year ended December 31, 2008, did
not properly account for certain items as of December 31, 2008 and for the year
then ended in accordance with United States generally accepted accounting
principles, and, as a result, the financial statements have been restated to
correct the errors. In particular, the following items were not properly
accounted for:
F-56
WORLDWIDE
ENERGY AND MANUFACTURING USA, INC. AND SUBSIDIARIES
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS
YEARS
ENDED DECEMBER 31, 2008 AND 2007
As
Previously
Reported
|
Retroactive
Adjustment
|
As
Restated
|
||||||||||
At December 31, 2008
|
||||||||||||
-
Prepaid and other current assets
|
$ | 451,770 | $ | 206,770 | $ | (245,000 | ) | |||||
-
Total current assets
|
$ | 14,905,211 | $ | 14,660,221 | $ | (245,000 | ) | |||||
-
Intangible assets
|
$ | 1,101,000 | $ | 1,386,714 | $ | 285,714 | ||||||
-
Total assets
|
$ | 19,092,295 | $ | 19,133,009 | $ | 40,714 | ||||||
-
Acquisition cost payable
|
$ | -- | $ | 285,714 | $ | 285,714 | ||||||
-
Taxes payable
|
$ | 0 | $ | 217,048 | $ | 217,048 | ||||||
-
Total current liabilities
|
$ | 6,622,731 | $ | 7,125,493 | $ | 502,762 | ||||||
-
Total liabilities
|
$ | 7,619,830 | $ | 8,122,592 | $ | 502,762 | ||||||
-
Retained earnings
|
$ | 4,259,533 | $ | 3,801,921 | $ | (457,612 | ) | |||||
-
Accumulated other comprehensive income
|
$ | 491,914 | $ | 487,478 | $ | (4,436 | ) | |||||
-
Total stockholders’ equity
|
$ | 10,859,826 | $ | 10,397,778 | $ | (435,048 | ) | |||||
-
Total liabilities and stockholders’ equity
|
$ | 19,092,295 | $ | 19,133,009 | $ | 40,714 | ||||||
Fiscal Year 2008
|
||||||||||||
-
Loss on Disposal
|
$ | 0 | $ | ( 101,982 | ) | $ | ( 101,981 | ) | ||||
-
Gain on Disposal
|
$ | 138,582 | $ | 0 | $ | ( 138,582 | ) | |||||
-
Total other expenses
|
$ | (237,750 | ) | $ | (478,314 | ) | $ | (240,564 | ) | |||
-
Income from continuing operations before income
taxes
|
$ | 1,540,038 | $ | 1,299,474 | $ | (240,564 | ) | |||||
-
Income from continuing operations before minority
|
||||||||||||
Interest
|
$ | 1,472,718 | $ | 1,015,106 | $ | (457,612 | ) | |||||
-
Income from continuing operations
|
$ | 1,456,875 | $ | 999,263 | $ | (457,612 | ) | |||||
-
Net income
|
$ | 1,459,260 | $ | 1,001,648 | $ | (457,612 | ) | |||||
-
Foreign currency translation
|
$ | 196,689 | $ | 192,253 | $ | (4,436 | ) | |||||
-
Comprehensive income
|
$ | 1,655,949 | $ | 1,193,901 | $ | (462,048 | ) | |||||
-
Earnings Per Share
|
$ | 0.53 | $ | 0.37 | $ | (0.16 | ) | |||||
The
reclassification adjustments described above do not affect the previously
reported balance sheet or results of operations for the fiscal year ended
December 31, 2007.
F-57
Description
|
||
2.1
|
Agreement
for Sale and Purchase of Business Assets, dated September 1, 2004
(incorporated by reference to the Current Report on Form 8-K, filed with
the Securities and Exchange Commission on September 7,
2004)
|
|
2.2
|
Agreement
for Sale and Purchase of Business Assets, dated February 25, 2005
(incorporated by reference to the Current Report on Form 8-K, filed with
the Securities and Exchange Commission on February 28,
2005)
|
|
2.3
|
Agreement
on Contractual Joint Venture dated February 3, 2008 (incorporated by
reference to the Current Report on Form 8-K, filed with the Securities and
Exchange Commission on October 17, 2008)
|
|
3.1
|
Articles
of Incorporation (incorporated by reference from Registration Statement on
Form 10-SB filed with the Securities and Exchange Commission on October
11, 2000)
|
|
3.2
|
Bylaws
(incorporated by reference from Registration Statement on Form 10-SB filed
with the Securities and Exchange Commission on October 11,
2000)
|
|
3.3
|
Amendment
to the Articles of Incorporation to change the name of the Company from
Tabatha III, Inc. to Worldwide Manufacturing USA, Inc., filed with the
Colorado Secretary of State on November 4, 2003((incorporated by reference
from Form 10-K filed with the Securities and Exchange Commission on April
14, 2009),
|
|
3.4
|
Amendment
to the Articles of Incorporation to change the name of the Company from
Worldwide Manufacturing USA, Inc. to Worldwide Energy and Manufacturing
USA, Inc., filed with the Colorado Secretary of State on February 4,
2008((incorporated by reference from Form 10-K filed with the Securities
and Exchange Commission on April 14, 2009)
|
|
3.5
|
Amended
and Restated Bylaws (incorporated by reference to the Current Report on
Form 8-K filed with the Securities and Exchange Commission on January 28,
2010)
|
|
4.1
|
Specimen
Common Stock Certificate (incorporated by reference from Registration
Statement on Form 10-SB filed with the Securities and Exchange Commission
on October 11, 2000)
|
|
4.2
|
Specimen
Class A Convertible Preferred Stock Certificate (incorporated by reference
from Registration Statement on Form 10-SB/A filed with the Securities and
Exchange Commission on October 11, 2000)
|
|
4.3
|
Form
of Warrant (incorporated by reference to the Current Report on Form 8-K
filed with the Securities and Exchange Commission on January 28,
20
Form
of Warrant (incorporated by reference from Form 8-K filed with
the Securities and Exchange Commission on February 10,
2010)
|
|
5.1
|
Opinion
of Sichenzia Ross Friedman Ference LLP*
|
|
10.1
|
Common
Stock Purchase Warrant (incorporated by reference from Form 10-KSB filed
with the Securities and Exchange Commission on September 27,
2001)
|
|
10.2
|
Form
of Securities Purchase Agreement dated June 23, 2008(incorporated by
reference to the Current Report on Form 8-K filed with the Securities and
Exchange Commission on June 24, 2008)
|
|
10.3
|
Form
of Series A Common Stock Purchase Warrant(incorporated by reference to the
Current Report on Form 8-K filed with the Securities and Exchange
Commission on June 24, 2008)
|
|
10.4
|
Form
of Series B Common Stock Purchase Warrant(incorporated by reference to the
Current Report on Form 8-K filed with the Securities and Exchange
Commission on June 24, 2008)
|
|
10.5
|
Form
of Lock-UP Agreement (incorporated by reference to the Current Report on
Form 8-K filed with the Securities and Exchange Commission on June 24,
2008)
|
|
10.6 | Form of Securities Purchase Agreement dated July 24, 2008 (incorporated by reference to the Current Report on Form 8-K filed with the Securities and Exchange Commission on July 30, 2008) | |
10.7
|
Form
of Lock Up Agreement (incorporated by reference to the Current Report on
Form 8-K filed with the Securities and Exchange Commission on July 30,
2008)
|
|
10.8
|
Employment
Agreement with Jimmy Wang (incorporated by reference from Form 10-K filed
with the Securities and Exchange Commission on April 14,
2009).
|
|
10.9
|
Employment
Agreement with Mindy Wang (incorporated by reference from Form 10-K filed
with the Securities and Exchange Commission on April 14,
2009)
|
|
10.10
|
Employment
Agreement with John Ballard (incorporated by reference from Form 10-K
filed with the Securities and Exchange Commission on April 14,
2009)
|
|
10.11
|
Employment
Agreement with Jeff Watson (incorporated by reference from Form 10-K filed
with the Securities and Exchange Commission on April 14,
2009)
|
49
10.12
|
Form
of Securities Purchase Agreement dated January 26, 2010 (incorporated by
reference from Form 8-K/A filed with the Securities and
Exchange Commission on January 29, 2010)
|
|
10.13
|
Form
of Registration Rights Agreement dated January 26, 2010 (incorporated by
reference from Form 8-K filed with the Securities and Exchange
Commission on January 28, 2010)
|
|
10.14 | Form of Share Escrow Agreement dated January 26, 2010 (incorporated by reference from Form 8-K/A filed with the Securities and Exchange Commission on January 29, 2010) | |
10.15 | Form of Amendment Agreement dated February 9, 2010 (incorporated by reference from Form 8-K filed with the Securities and Exchange Commission on February 10, 2010) | |
10.16 | Form of Securities Purchase Agreement dated February 9, 2010 (incorporated by reference from Form 8-K filed with the Securities and Exchange Commission on February 10, 2010) | |
10.17 | Form of Registration Rights Agreement dated February 9, 2010(incorporated by reference from Form 8-K filed with the Securities and Exchange Commission on February 10, 2010) | |
10.18 | Form of Share Escrow Agreement dated February 9, 2010 (incorporated by reference from Form 8-K filed with the Securities and Exchange Commission on February 10, 2010) | |
10.19
|
Form
of Securities Purchase Agreement dated February 9, 2010 (incorporated by
reference from Form 8-K filed with the Securities and Exchange
Commission on February 10, 2010)
|
|
14
|
Code
of Ethics (incorporated by reference from Form 10-KSB filed with the
Securities and Exchange Commission on March 31, 2005)
|
|
23.1
|
Consent
of Sichenzia Ross Friedman Ference LLP (included in Exhibit
5.1)*
|
|
23.2
|
Consent
of Child Van Wagoner & Bradshaw,
PLLC*
|
___________
* Filed
herewith
Item 17.
Undertakings
The
undersigned registrant hereby undertakes:
(1) To
file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To
include any prospectus required by Section 10(a)(3) of the Securities Act
of 1933;
(ii) To
reflect in the prospectus any facts or events arising after the effective date
of the registration statement (or the most recent post-effective amendment
thereof) which, individually or in the aggregate, represent a fundamental change
in the information set forth in the registration statement. Notwithstanding the
foregoing, any increase or decrease in volume of securities offered (if the
total dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated maximum
offering range may be reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume
and price represent no more than a 20 percent change in the maximum
aggregate offering price set forth in the “Calculation of Registration Fee”
table in the effective registration statement;
(iii) To
include any material information with respect to the plan of distribution not
previously disclosed in the registration statement or any material change to
such information in the registration statement.
(2) That,
for the purpose of determining any liability under the Securities Act of 1933,
each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(3) To
remove from registration by means of a post-effective amendment any of the
securities being registered which remain unsold at the termination of the
offering.
Insofar
as indemnification for liabilities arising under the Securities Act of 1933 may
be permitted to directors, officers and controlling persons of the registrant
pursuant to the foregoing provisions, or otherwise, the registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act of
1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act of 1933 and will be governed by the final adjudication of such
issue.
50
SIGNATURES
Pursuant
to the requirements of the Securities Act of 1933, the registrant has duly
caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in San Francisco, California, on this
12th day of February, 2010.
WORLDWIDE
ENERGY & MANUFACTURING USA, INC.
|
||||
By:
|
/s/
Jimmy Wang
|
|||
Name:
|
Jimmy
Wang
|
|||
Title:
|
Chief
Executive Officer (Principal Executive Officer) and
Director
|
By:
|
/s/
Jeff Watson
|
|||
Name:
|
Jeff
Watson
|
|||
Title:
|
Chief
Financial Officer and President (Principal Financial and Accounting
Officer)
|
POWER
OF ATTORNEY
KNOW ALL
MEN BY THESE PRESENTS, that each person whose signature appears below
constitutes and appoints Jimmy
Wang, his true and lawful attorney-in-fact and agent with full power of
substitution and re-substitution, for him/her and in his name, place and stead,
in any and all capacities to sign any or all amendments (including, without
limitation, post-effective amendments) to this Registration Statement, any
related Registration Statement filed pursuant to Rule 462(b) under the
Securities Act of 1933 and any or all pre- or post-effective amendments thereto,
and to file the same, with all exhibits thereto, and all other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorney-in-fact and agent, full power and authority to do and perform each
and every act and thing requisite and necessary to be done in and about the
premises, as fully for all intents and purposes as he or she might or could do
in person, hereby ratifying and confirming that said attorney-in-fact and agent,
or any substitute or substitutes for him, may lawfully do or cause to be done by
virtue hereof.
Pursuant
to the requirements of the Securities Act of 1933, this registration statement
has been signed by the following persons in the capacities and on the dates
indicated.
SIGNATURE
|
TITLE
|
DATE
|
||
/s/
Jimmy Wang
Jimmy
Wang
|
Chief
Executive Officer and Director
(Principal
Executive Officer)
|
February
12, 2010
|
||
/s/
Jeff Watson
Jeff Watson |
Chief
Financial Officer, President
(Principal
Financial and Accounting Officer)
|
February
12, 2010
|
||
/s/
Mindy Wang
Mindy Wang |
Secretary,
Treasurer and Director
|
February
12, 2010
|
||
/s/
Jennifer Maliar
Jennifer Maliar |
Director
|
February
12, 2010
|
/s/
Michael Steingrebe
Michael
Steingrebe
|
Director
|
February
12, 2010
|
||||
/s/
Jehu Hand
Jehu
Hand
|
Director
|
February
12, 2010
|
/s/
Lauren Byrne
Lauren Byrne |
Director
|
Febraury
12, 2010
|
||
/s/
Gerald DeCiccio
Gerald DeCiccio |
Director |
Febraury
12, 2010
|
51
Description
|
||
2.1
|
Agreement
for Sale and Purchase of Business Assets, dated September 1, 2004
(incorporated by reference to the Current Report on Form 8-K, filed with
the Securities and Exchange Commission on September 7,
2004)
|
|
2.2
|
Agreement
for Sale and Purchase of Business Assets, dated February 25, 2005
(incorporated by reference to the Current Report on Form 8-K, filed with
the Securities and Exchange Commission on February 28,
2005)
|
|
2.3
|
Agreement
on Contractual Joint Venture dated February 3, 2008 (incorporated by
reference to the Current Report on Form 8-K, filed with the Securities and
Exchange Commission on October 17, 2008)
|
|
3.1
|
Articles
of Incorporation (incorporated by reference from Registration Statement on
Form 10-SB filed with the Securities and Exchange Commission on October
11, 2000)
|
|
3.2
|
Bylaws
(incorporated by reference from Registration Statement on Form 10-SB filed
with the Securities and Exchange Commission on October 11,
2000)
|
|
3.3
|
Amendment
to the Articles of Incorporation to change the name of the Company from
Tabatha III, Inc. to Worldwide Manufacturing USA, Inc., filed with the
Colorado Secretary of State on November 4, 2003((incorporated by reference
from Form 10-K filed with the Securities and Exchange Commission on April
14, 2009),
|
|
3.4
|
Amendment
to the Articles of Incorporation to change the name of the Company from
Worldwide Manufacturing USA, Inc. to Worldwide Energy and Manufacturing
USA, Inc., filed with the Colorado Secretary of State on February 4,
2008((incorporated by reference from Form 10-K filed with the Securities
and Exchange Commission on April 14, 2009)
|
|
3.5
|
Amended
and Restated Bylaws (incorporated by reference to the Current Report on
Form 8-K filed with the Securities and Exchange Commission on January 28,
2010)
|
|
4.1
|
Specimen
Common Stock Certificate (incorporated by reference from Registration
Statement on Form 10-SB filed with the Securities and Exchange Commission
on October 11, 2000)
|
|
4.2
|
Specimen
Class A Convertible Preferred Stock Certificate (incorporated by reference
from Registration Statement on Form 10-SB/A filed with the Securities and
Exchange Commission on October 11, 2000)
|
|
4.3
|
Form
of Warrant (incorporated by reference to the Current Report on Form 8-K
filed with the Securities and Exchange Commission on January 28,
20
Form
of Warrant (incorporated by reference from Form 8-K filed with
the Securities and Exchange Commission on February 10,
2010)
|
|
5.1
|
Opinion
of Sichenzia Ross Friedman Ference LLP*
|
|
10.1
|
Common
Stock Purchase Warrant (incorporated by reference from Form 10-KSB filed
with the Securities and Exchange Commission on September 27,
2001)
|
|
10.2
|
Form
of Securities Purchase Agreement dated June 23, 2008(incorporated by
reference to the Current Report on Form 8-K filed with the Securities and
Exchange Commission on June 24, 2008)
|
|
10.3
|
Form
of Series A Common Stock Purchase Warrant(incorporated by reference to the
Current Report on Form 8-K filed with the Securities and Exchange
Commission on June 24, 2008)
|
|
10.4
|
Form
of Series B Common Stock Purchase Warrant(incorporated by reference to the
Current Report on Form 8-K filed with the Securities and Exchange
Commission on June 24, 2008)
|
|
10.5
|
Form
of Lock-UP Agreement (incorporated by reference to the Current Report on
Form 8-K filed with the Securities and Exchange Commission on June 24,
2008)
|
|
10.6 | Form of Securities Purchase Agreement dated July 24, 2008 (incorporated by reference to the Current Report on Form 8-K filed with the Securities and Exchange Commission on July 30, 2008) | |
10.7
|
Form
of Lock Up Agreement (incorporated by reference to the Current Report on
Form 8-K filed with the Securities and Exchange Commission on July 30,
2008)
|
|
10.8
|
Employment
Agreement with Jimmy Wang (incorporated by reference from Form 10-K filed
with the Securities and Exchange Commission on April 14,
2009).
|
|
10.9
|
Employment
Agreement with Mindy Wang (incorporated by reference from Form 10-K filed
with the Securities and Exchange Commission on April 14,
2009)
|
|
10.10
|
Employment
Agreement with John Ballard (incorporated by reference from Form 10-K
filed with the Securities and Exchange Commission on April 14,
2009)
|
|
10.11
|
Employment
Agreement with Jeff Watson (incorporated by reference from Form 10-K filed
with the Securities and Exchange Commission on April 14,
2009)
|
52
10.12
|
Form
of Securities Purchase Agreement dated January 26, 2010 (incorporated by
reference from Form 8-K/A filed with the Securities and
Exchange Commission on January 29, 2010)
|
|
10.13
|
Form
of Registration Rights Agreement dated January 26, 2010 (incorporated by
reference from Form 8-K filed with the Securities and Exchange
Commission on January 28, 2010)
|
|
10.14 | Form of Share Escrow Agreement dated January 26, 2010 (incorporated by reference from Form 8-K/A filed with the Securities and Exchange Commission on January 29, 2010) | |
10.15 | Form of Amendment Agreement dated February 9, 2010 (incorporated by reference from Form 8-K filed with the Securities and Exchange Commission on February 10, 2010) | |
10.16 | Form of Securities Purchase Agreement dated February 9, 2010 (incorporated by reference from Form 8-K filed with the Securities and Exchange Commission on February 10, 2010) | |
10.17 | Form of Registration Rights Agreement dated February 9, 2010(incorporated by reference from Form 8-K filed with the Securities and Exchange Commission on February 10, 2010) | |
10.18 | Form of Share Escrow Agreement dated February 9, 2010 (incorporated by reference from Form 8-K filed with the Securities and Exchange Commission on February 10, 2010) | |
10.19
|
Form
of Securities Purchase Agreement dated February 9, 2010 (incorporated by
reference from Form 8-K filed with the Securities and Exchange
Commission on February 10, 2010)
|
|
14
|
Code
of Ethics (incorporated by reference from Form 10-KSB filed with the
Securities and Exchange Commission on March 31, 2005)
|
|
23.1
|
Consent
of Sichenzia Ross Friedman Ference LLP (included in Exhibit
5.1)*
|
|
23.2
|
Consent
of Child Van Wagoner & Bradshaw,
PLLC*
|
___________
* Filed
herewith