Attached files

file filename
EX-32.1 - EXHIBIT 32.1 - LivingVentures, Inc.creh0930q_ex32z1.htm
EX-31.1 - EXHIBIT 31.1 - LivingVentures, Inc.creh0930q_ex31z1.htm
EX-31.2 - EXHIBIT 31.2 - LivingVentures, Inc.creh0930q_ex31z2.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549


Form 10-Q


[X]

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


For the quarterly period ended September 30, 2010


OR


[   ]

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



COMMISSION FILE NUMBER: 000-50196


CHINA RENEWABLE ENERGY HOLDINGS, INC.

(Exact name of registrant as specified in its charter)

Florida

(State or other jurisdiction of Incorporation or Organization)

65-0968842

(I.R.S. Employer Identification No.)


Suite 802, Beautiful Group Tower

74-77 Connaught Road Central

Hong Kong

 (Address of principal executive offices)

not applicable

(Zip Code)


(852) 2384-6070

(Registrant’s telephone number, including area code)


(Former name, former address and former fiscal year, if changed since last report)


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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes  ¨  No ¨ (Not required)


Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer or a non-accelerated filer.  See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act (check one).


Large accelerated filer

£

 

Accelerated filer

£

Non-accelerated filer

£

 

Smaller reporting company

S

(Do not check if smaller reporting company)

 

 

 

 


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

Indicated the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.  24,580,000 shares of common stock are issued and outstanding as of November 3, 2010.





TABLE OF CONTENTS


 

Page No.

PART I. - FINANCIAL INFORMATION

Item 1.

Financial Statements.

3

Item 2.

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

12

Item 3.

Quantitative and Qualitative Disclosures About Market Risk.

15

Item 4T

Controls and Procedures.

15

PART II - OTHER INFORMATION

Item 1.

Legal Proceedings.

16

Item 1A.

Risk Factors.

16

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds.

16

Item 3.

Defaults Upon Senior Securities.

16

Item 4.

Submission of Matters to a Vote of Security Holders.

16

Item 5.

Other Information.

16

Item 6.

Exhibits.

16


CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION


Certain statements in this report contain or may contain forward-looking statements.  These statements, identified by words such as “plan”, “anticipate”, “believe”, “estimate”, “should,” “expect” and similar expressions include our expectations and objectives regarding our future financial position, operating results and business strategy.  These statements are subject to known and unknown risks, uncertainties and other factors which may cause actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward - looking statements.  These forward-looking statements were based on various factors and were derived utilizing numerous assumptions and other factors that could cause our actual results to differ materially from those in the forward-looking statements.  These factors include, but are not limited to, economic, political and market conditions and fluctuations, government and industry regulation, interest rate risk, U.S. and global competition, and other factors.  Most of these factors are difficult to predict accurately and are generally beyond our control. You should consider the areas of risk described in connection with any forward-looking statements that may be made herein. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this report. Readers should carefully review this annual report in its entirety, including but not limited to our financial statements and the notes thereto and the risks described in our Annual Report on Form 10-K for the year ended December 31, 2009 appearing under Part I., Item 1. Description of Business - Risk Factors.  We advise you to carefully review the reports and documents we file from time to time with the Securities and Exchange Commission (the “SEC”), particularly our quarterly reports on Form 10-Q and our current reports on Form 8-K.  Except for our ongoing obligations to disclose material information under the Federal securities laws, we undertake no obligation to release publicly any revisions to any forward-looking statements, to report events or to report the occurrence of unanticipated events.


OTHER PERTINENT INFORMATION


Unless otherwise specifically stated, all reference to “us,” “our,” “we,” or the “Company” are to China Renewable Energy Holdings, Inc., a Florida corporation, and our subsidiaries China Clean & Renewable Energy Limited, a corporation formed under the laws of Hong Kong (“CCRL”), Renewable Energy Enterprises (Shanghai) Company, Ltd., a company formed under the laws of the Peoples Republic of China (“REEC”), and EEP Ltd., a company formed under the laws of Hong Kong (“EEPL”).





2



PART 1 - FINANCIAL INFORMATION


Item 1.

Financial Statements.




CHINA RENEWABLE ENERGY HOLDINGS, INC.

AND SUBSIDIARIES



CONTENTS


 

CONSOLIDATED BALANCE SHEETS AS OF SEPTEMBER 30, 2010 AND DECEMBER 31, 2009 (UNAUDITED).

 

CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, OF 2010 AND 2009 (UNAUDITED).

 

CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2010 AND 2009 (UNAUDITED).

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED).

 




3





China Renewable Energy Holdings, Inc. and Subsidiaries

Consolidated Balance Sheets

(Unaudited)


 

 

As of

 

As of

 

 

September 30,2010

 

December 31,2009

ASSETS

 

 

 

 

Current Assets

 

 

 

 

   Cash

$

177,245

$

14,005

   Deposits

 

94,721

 

14,243

   Accounts receivable

 

403,361

 

229,780

   Deferred charges

 

8,702

 

4,468

   Inventories

 

640,619

 

43,054

 

 

1,324,648

 

305,550

 

 

 

 

 

Fixed Assets, net

 

36,323

 

11,634

 

 

 

 

 

Total Assets

 

1,360,971

 

317,184

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities

 

 

 

 

   Accounts Payable

$

449,802 

$

13,130 

   Loan Payable

 

374,550 

 

341,744 

   Note payable-stockholder

 

491,820 

 

158,210 

   Accrued Interest

 

56,313 

 

12,574 

   Provision for Taxation

 

41,804 

 

   Accrued Expenses

 

129,136 

 

57,448 

 

 

1,543,425 

 

583,106 

Stockholders' (Deficit) Equity

 

 

 

 

   Preferred stock, $0.001 par value, 10,000,000 shares

 

 

 

 

       authorised, none issued and outstanding

 

 

   Common stock, $0.001 par value; 100,000,000 shares

 

 

 

 

      authorised, 24,580,000  shares issued

 

 

 

 

      and outstanding

 

24,580 

 

24,580 

   Additional paid-in capital

 

684,483 

 

684,483 

       Other comprehensive income

 

1,514 

 

1,183 

    Deficit

 

(893,031)

 

(976,168)

Total Stockholders' (Deficit)

 

(182,454)

 

(265,922)

 

 

 

 

 

Total Liabilities and

 

 

 

 

   Stockholders' Equity

$

1,360,971 

$

317,184 





See accompanying notes to financial statements


4






China Renewable Energy Holdings, Inc. & Subsidiaries

Consolidated Statements of Operations

(Unaudited)


 

 

For the three months ended September 30

 

For the nine months ended September 30

 

 

2010

 

 

2009

 

2010

 

 

2009

 

 

 

 

 

 

 

 

 

 

 

Revenue

$

 1,302,241 

 

$

89,197 

$

4,370,988 

 

$

340,359 

 

 

 

 

 

 

 

 

 

 

 

Cost of Revenue

 

 (1,141,807)

 

 

(80,413)

 

(3,968,634)

 

 

(310,398)

 

 

 

 

 

 

 

 

 

 

 

Gross Profit

 

 160,434 

 

 

8,784 

 

402,354 

 

 

29,961 

 

 

 

 

 

 

 

 

 

 

 

Operating Expenses

 

 

 

 

 

 

 

 

 

 

Professional fees

 

 11,407 

 

 

13,537 

 

33,952 

 

 

51,144 

Salary  Expense

 

 47,661 

 

 

42,151 

 

123,116 

 

 

127,574 

General and administrative

 

 35,324 

 

 

33,836 

 

117,462 

 

 

118,286 

Total Operating Expenses

 94,392 

 

 

89,524 

 

274,530 

 

 

297,004 

 

 

 

 

 

 

 

 

 

 

 

Profit/(Loss) from Operations

 66,042 

 

 

(80,740)

 

127,824 

 

 

(267,043)

 

 

 

 

 

 

 

 

 

 

 

Other Income(loss)

 

 679 

 

 

43 

 

676 

 

 

348 

Bad Debt provision written back

 

 

 

 

 

44,244 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest Income

 

 - 

 

 

 

97 

 

 

197 

Interest Expense

 

 (17,657)

 

 

(3,097)

 

(47,958)

 

 

(4,865)

Total other income(loss)

 

 (16,978)

 

 

(3,054)

 

(2,941)

 

 

(4,320)

 

 

 

 

 

 

 

 

 

 

 

Net profit/(loss) before provision for Income taxes

 49,064 

 

 

(83,794)

 

124,883 

 

 

(271,363)

 

 

 

 

 

 

 

 

 

 

 

Provision for Income  Taxes

 (9,629)

 

 

 

(41,746)

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Profit/(Loss)

$

 39,435 

 

$

(83,794)

$

83,137 

 

$

(271,363)

 

 

 

 

 

 

 

 

 

 

 

Net Profit/(Loss) Per Share  - basic and diluted

 0.00 

 

$

(0.00)

 

0.00 

 

 

(0.01)

 

 

 

 

 

 

 

 

 

 

 

Weighted average number of shares outstanding

 

 

 

 

 

 

 

 

 

  during the period - basic and diluted

 24,580,000 

 

 

24,580,000 

 

24,580,000 

 

 

24,580,000 





See accompanying notes to financial statements


5






China Renewable Energy Holdings, Inc. & Subsidiaries

Consolidated Statements of Cash Flows

(Unaudited)


 

 

For the nine months ended 30 September

 

 

2010

 

2009

 

 

 

 

 

Cash Flows From Operating Activities:

 

 

 

 

Net Profit /(Loss) for the period

$

83,137 

$

(271,363)

   Adjustments to reconcile net  profit /(loss) to net cash used in

 

 

 

 

   operations :-

 

 

 

 

   Profit on disposal of fixed assets

 

(676)

 

   Depreciation

 

4,061 

 

2,883 

   Change in operating assets and liabilities:

 

 

 

 

   (Increase) in accounts receivable

 

(173,581)

 

(35,214)

   (Increase) Decrease in deposits

 

(80,478)

 

5,136 

   (Increase) in prepaid expenses

 

(4,234)

 

(20,397)

   (Increase) in inventory

 

(597,565)

 

(9,813)

   Increase in accrued interest

 

43,739 

 

  Increase (Decrease) in accrued expenses

 

113,492 

 

(7,225)

  Increase in accounts payable

 

436,672 

 

4,327 

Net Cash Used In Operating Activities

 

(175,433)

 

(331,666)

 

 

 

 

 

Cash Flows From Investing Activities :

 

 

 

 

   Foreign currency exchange rate effect on cash

 

 

   Net proceeds from sales of fixed assets

 

3,102 

 

   Purchase of fixed assets

 

(31,177)

 

(7,137)

Net Cash Used in Investing Activities

 

(28,075)

 

(7,137)

 

 

 

 

 

Cash Flows From Financing Activities :

 

 

 

 

Note payable-stockholder

 

392,132 

 

154,155 

Repayment to stockholder

 

(58,522)

 

Repayment to other loan

 

(121,767)

 

Proceeds from other loan

 

154,573 

 

96,772 

Net Cash Provided by Financing Activities

 

366,416 

 

250,927 

 

 

 

 

 

Net Increase(Decrease) in Cash prior to effect of

 

 

 

 

Foreign currency transactions

 

162,908 

 

(87,876)

Foreign currency effect on cash flows

 

332 

 

(456)

Net Increase (Decrease) in cash

 

163,240 

 

(88,332)

Cash at Beginning of Period

 

14,005 

 

223,263 

Cash at End of Period

$

177,245

$

134,931 


The Company paid $543.75 and none for interest during the nine months in 2010 and 2009, respectively.
The Company did not pay taxes during the nine months in 2010 and 2009





See accompanying notes to financial statements


6






CHINA RENEWABLE ENERGY HOLDINGS, INC. and SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2010 AND 2009

(UNAUDITED)



NOTE 1

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND ORGANIZATION


(A)

Organization


China Renewable Energy Holdings, Inc. ("CREH") was incorporated under the laws of the State of Florida on December 17, 1999. China Renewable Energy Holdings, Inc. was originally organized to provide business services and financing to emerging growth entities, and later redirected its business focus to market and to distribute energy-efficient products in China.


China Clean and Renewable Energy Limited (“CCRL”) was incorporated under the laws of Hong Kong, China on April 19, 2006.  China Clean and Renewable Energy Limited was organized to provide consulting services on environmental protection projects in China.


Renewable Energy Enterprises (Shanghai) Co. Ltd (“REEC”) was incorporated under the laws of the People’s Republic of China on February 27, 2008. REEC was organized to provide renewable energy products and equipment in China.


EEP Limited (“EEPL”) was incorporated under the laws of Hong Kong, China on March 23, 2009.  The company was organized to market and distribute products and equipment that are environmentally friendly and energy-efficient in China.


C B Resources Limited (“CBRL”) was incorporated under the laws of Hong Kong, China.  The company was organized to own and invest in energy related facilities and resources in China.


CREH and its’ wholly owned subsidiaries, CCRL, REEC, EEPL, and CBRL are hereafter referred to as the “Company”.


(B)

Basis of Presentation


The accompanying unaudited consolidated financial statements include the accounts of the China Renewable Energy Holdings, Inc. (“CREH”), China Clean Renewable Energy Limited (“CCRL”) (Hong Kong), Renewable Energy Enterprise (Shanghai) and Company Limited (“REEC”), and EEP Limited.  As of September 30, 2010, C B Resources Limited (“CBRL”) did not have any business transaction recorded.  Both REEC and EEPL are wholly-owned subsidiaries of CCRL, which is itself a wholly-owned subsidiary of CREH.


The foregoing financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules and regulations of the Securities and Exchange Commission for interim financial information.  Accordingly, they do not include all the information necessary for the comprehensive presentation financial position and results of operations.


It is in the management’s opinion, however, that all material adjustments (consisting of normal recurring adjustments) have been made, which are necessary for a fair financial statements presentation.  The results for the interim period are not necessarily indicative of the results to be expected for the year.




7







(C)

Use of Estimates


In preparing financial statements in conformity with generally accepted accounting principles, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses during the reported period.  Actual results could differ from those estimates.


(D)

Cash and Cash Equivalents


For purposes of the cash flow statements, the Company considers all highly liquid investments with original maturities of three months or less at the time of purchase to be cash equivalents.


(E)

Accounts Receivable


The Company extends unsecured credit to its customers in the ordinary course of business but mitigates the associated credit risk by actively pursuing past due accounts.  There was no allowance for doubtful accounts provided as of September 30, 2010 and 2009.


(F)

Inventories


Inventories are stated at the lower of cost or market.  Cost is determined using the “first-in, first-out” (FIFO) method.  The Company buys raw materials to fill customer orders.  Excess in raw materials is created when a vendor imposes a minimum buy that is in excess of the actual requirement.  Any excess in materials not utilized after two fiscal years is fully reserved.  Any inventory item once designated as reserved is carried at zero value in all subsequent valuation activities.  The Company’s inventories consisting of raw materials were $640,619 and $43,054 at September 30, 2010 and December 31, 2009, respectively.


(G)

Concentrations of Credit Risk


Financial instruments, which potentially subject the Company to concentration of credit risk, consist principally of cash and trade receivables.  The Company places its cash with high credit quality institutions.  At times such amounts may be in excess of the FDIC insurance limits.  The Company has not experienced any losses in such account and believes that it is not exposed to any significant credit risk on the account.  With respect to the trade receivables, most of the Company’s products are custom made pursuant to contracts with customers.  The Company performs ongoing credit evaluations of its customers’ financial condition and maintains allowances for potential credit losses.  Actual losses and allowances have historically been within management’s expectations.


(H)

Earnings per Share


Basic and diluted net earnings per common share is computed based upon the weighted average common shares outstanding as defined by FASB ASC Topic 260 "Earnings per Share."  As of September 30, 2010 and 2009, respectively, there were no common share equivalents outstanding.


(I)

Income Taxes


The Company accounts for income taxes under FASB ASC Topic 740 “Income Taxes”.  Under Topic 740, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their




8






respective tax bases.  Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.  Under Topic 740, the effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.


(J)

Property and Equipment


The Company values property and equipment at cost and depreciates these assets using the straight-line method over their expected useful life.  The Company uses a three to five-year life for computer equipment.


(K)

Business Segments


The company considers its divisions as one segment for management purpose.


(L)

Revenue Recognition


The Company recognized revenue on arrangements in accordance with Securities and Exchange Commission Staff Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements" and No. 104, "Revenue Recognition".  In all cases, revenue is recognized only when the price is fixed and determinable, persuasive evidence of an arrangement exists, the service is performed and collectability of the resulting receivable is reasonably assured.


(M)

Recent Accounting Pronouncements


The Company has adopted all recently issued accounting pronouncements that are applicable to its operations.  The adoption of the accounting pronouncements, including those not yet effective, is not anticipated to have a material effect on the financial position or results of operations of the Company.


NOTE 2

PROPERTY, PLANT AND EQUIPMENT


As of September 30, 2010, property, plant, and equipment consist of the following:


 

 

 

Estimated

 

 

 

Useful Life

Office Equipment

$

19,683.18

3-5 years

Furniture and Fixture

 

478.39

 

Transportation Equipment

 

22,572.48

3-5 years

 

 

42,734.05

 

Less Accumulated Depreciation

 

6,410.95

 

 

$

36,323.09

 


Depreciation and amortization expense was $1,649.35 and $1,002.14 for the three months ended September 30, 2010 and 2009 respectively, and is included in General and Administrative expense in the accompanying Statements of Operations.


NOTE 3

NOTE PAYABLE


The Company has received the following loans from a principal stockholder:





9






·

The first loan of $10,000 was received on November 7, 2007.  Pursuant to the terms of the loan, the note bears interest at 7% p.a., was unsecured, and matured on November 8, 2008.  The loan was extended in the same terms until November 7, 2010, and $4,091.88 of which still remains to be repaid.


·

The second loan of $104,615.70 was received on April 29, 2009.  Pursuant to the terms of the loan, the note bears no interest, is unsecured.  The original maturation date of April 28, 2010 has been extended to April 28, 2011.\


·

The third loan of $25,770.80 was received on May 19, 2009.  Pursuant to the terms of the loan, the note bears interest at 4% p.a., is unsecured.  The original maturation date of November 18, 2009 was extended for another twelve months to November 18, 2010.


·

The fourth loan of $25,770.80 was received on September 24, 2009.  Pursuant to the terms of the loan, the note bears interest at 4% p.a., is unsecured.  The original maturation date of March 23, 2010 was extended for another twelve months to March 23, 2011.


·

The fifth loan of $25,770.80 was received on March 30, 2010.  Pursuant to the terms of the loan, the note bears interest at 4% p.a., is unsecured, and matured on March 29, 2011.


·

The sixth loan of $18,455.24 was received on February 11, 2010.  Pursuant to the terms of the loan, the note bears interest at 1% per month and is unsecured, and matures on February 10, 2011.


·

The seventh loan of $38,656.20 was received on April 12, 2010.  Pursuant to the terms of the loan, the note bears interest at 1% p.m., is unsecured, and matured on April 11, 2011.


·

The eighth loan of $45,098.90 was received on May 14, 2010.  Pursuant to the terms of the loan, the note bears interest at 1% per month and is unsecured, and matures on May 13, 2011.


·

The ninth loan of $164,933.12 was received on September 14, 2010.  Pursuant to the terms of the loan, the note bears interest at 1% per month and is unsecured, and matures on December 31, 2010.


In addition, the Company received a loan from another stockholder, who is also an executive officer:


·

The first loan of $38,656.20 was received from an EEPL director on March 10, 2010.  Pursuant to the terms of the loan, the note carried an interest at 1% per month, unsecured, originally matured on June 9, 2010, and was now extended to December 9, 2010.


The Company has also received from an unrelated creditor the following loans:


·

The first loan of $96,640.50 was received on May 25, 2009.  Pursuant to the terms of the loan, the note bears interest at 1% per month and is unsecured.  The original maturation date of November 24, 2009 was extended to November 20, 2010.





10






·

The second loan of $25,770.80 was received on October 12, 2009.  Pursuant to the terms of the loan, the note bears interest at 1% per month and is unsecured, and matures on October 11, 2010.


·

The third loan of $64,427 was received on November 11, 2009.  Pursuant to the terms of the loan, the note bears interest at 1% per month and is unsecured, and matures on November 10, 2010.


·

The fourth loan of $154,624.80 was received on November 26, 2009.  Pursuant to the terms of the loan, the note bears interest at 1% per month and is unsecured, and matures on November 25, 2010.


·

The fifth loan of $33,086.36 was received on January 20, 2010.  Pursuant to the terms of the loan, the note bears interest at 1% per month and is unsecured, and matures on January 19, 2011.


NOTE 4

RELATED PARTY TRANSACTIONS


The only related party transactions were the loans received from the principal stockholder as disclosed in NOTE 3 above.


NOTE 5

SUBSEQUENT EVENTS


There was no significant event outstanding subsequent to September 30, 2010.


NOTE 6

COMMITMENTS


There was no major commitment outstanding as at September 30, 2010.


NOTE 7

GOING CONCERN


The Company sustained a net loss of $893,032 for the period from December 17, 1999 (inception) to September 30, 2010, and used cash in operations of $1,357,607 from inception. This raises substantial doubt about its ability to continue as a going concern.  The ability of the Company to continue as a going concern is dependent on the Company’s ability to raise additional capital and implement its business plan.  The financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.





11







Item 2.

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


Overview


The Company is a smaller reporting Company as described by the Rules of the Securities and Exchange Commission Regulations. For a further disclosure of the Company and its operations see Note 1 of the financial statements for the period ended September 30, 2010 included in this quarterly report on Form 10-Q as well as the Company’s annual report on Form 10-K for the year ended December 31, 2009.


Business


China Renewable Energy Holdings, Inc. ("CREH") was incorporated under the laws of the State of Florida on December 17, 1999. We were originally organized to provide business services and financing to emerging growth entities, and later redirected its business focus to market and to distribute energy-efficient products in China.  In view of the growing concerns regarding BPA leaching by the PC materials, we vision a market for PC and clear ABS (CABS) substitutes emerging for industries such as toys and food packaging.  Starting in early 2009, we invested in formulating new resin products for the replacement of the more traditional CABS and PC materials.


Through EEPL, we continue our efforts to develop proprietary formulated resin products for substituting PC and CABS.  The new resin materials we focus in 2010 have been the K-resins/MS blend (KMS) product family.  The KMS materials are composed of K-resins, produced by Chevron Phillips, and SMMA, produced by Nippon Steel Chemical.  The KMS product EEPL currently produces and distributes is CRK 038.  This product is marketed as a non-PBA substitute for PC, which has a far better optical clarity and impact strength than CABS.  In terms of cost effectiveness to the users, CRK 038 has a strong price advantage compared PC.  Based on market feedback, CREH management developed a sales forecast near the beginning of 2010 for the new resin products to take up 0.003% (approximately 3,000 tons or $7,800,000 worth of sales) of the PC market in China in 2010.  Most of which are expected to be from one major client, Hasbro, in the toys industry.


During the third quarter ended September 30, we continued to experience a slower-than-forecast demand pattern due to the delayed adoption of CRK 038 by our major customer (Hasbro).  Since the toy industry operate on strict timetables, the delayed adoption resulted in pushing back the orders for CRK 038 until the next production cycle in early 2011.  As such, we expect the KMS sales to be 55% lower than our earlier forecast of 3,000 tons.


The revised KMS sales forecast has a negative impact of approximately $4,290,000 on our annual sales for 2010.  However, during the three-month period ended September 30, 2010, the sales of the other product line, the MB resins, have been significantly improved.  This trend is expected to continue and mitigate the negative effect of the slower than expectation KMS sales.  As a result, we adjusted our total annual sales forecast for 2010 from the originally $7,800,000 to $6,100,000.


The sole distribution service agreement with Hasbro regarding the supply of the KMS products expired on September 30, 2010.  We are no longer restricted from supply the KMS resins to other clients.  Therefore, we expect our client base to grow after the expiration of this exclusive service agreement.  However, the recent fluctuations in the styrene monomer (SM) supplies add uncertainty to the KMS markets.  The price increases of SM, which is an essential component in the KMS formulations, may in the near future hinder the sales growth of KMS.  Nonetheless, we are confident about market acceptance of CRK 038 and expect a steady take-up by customers going forward.





12






For the three months ended September 30, 2010, we generated revenues of $627,086 from the sales of the MB series and $675,155 from the newly formulated CRK products.  Total sales for the three months ended September 30, 2010 amounted to $1,302,241 with a cost of sales amounted to $1,141,807.  The cost of sales percentage for the three months was 87.68%, which was lower than our usual 92%.  The favorable variance was due to the difference between the increasing price trend for resins in the market and the pre-existing contract prices of our inventory.  We expect in longer term, the cost of sales will catch up with the market and maintain at around 92%.


For the three months ended September 30, 2010, the Company made a net profit of $39,435, compared to a net loss of $83,794 for the comparable period in 2009.  In view of the recent years’ limited operations, net losses, working capital deficiency and projected cash requirement, our independent registered public accounting firm, in their audit report, which covers the period through December 31, 2009, has expressed a substantial concern about our ability to continue as a going concern.  Since the 2008 private placement, in which we raised approximately $560,000 of capital, we have obtained loans in the amounts of $491,820 from a principle stockholder and an executive officer; and $374,550 from an unrelated company.   As at September 30, 2010, our cash on hand was $177,245.  Our ability to continue as a going concern is dependent upon whether or not we can generate sufficient revenues through the execution of our business plan for the funding of our operations.  While the operations in the three months ended September 30, 2010 continued to show more positive signs, we shall nonetheless continue to monitor and review our position from time to time, and exercise our best effort to secure the necessary financing to meet our obligations as they become due.


Should the funds generated from operating activities fall short of the cash needs, additional capital would need to be raised.  Where necessary, we plan to continue to provide for our capital requirements through the sale of equity securities; however, we have no firm commitments from any third party to provide this financing.  Although we maintain reasonably optimistic about our prospect of being solvent, we cannot assure you we will be successful in raising working capital as needed.  As such there are no assurances that we will have sufficient funds to execute our business plan, pay our obligations as they become due, or continue to generate positive operating results.


Results of Operations


Three and nine months ended September 30, 2010 as compared to the three and nine months ended September 30, 2009


During the three and nine months ended September 30, 2010 we report revenues of $1,302,241 and $4,370,988, respectively, compared to $89,197 and $340,359 during the three and nine months, respectively, ended September 30, 2009.  The increases in sales for the three and nine months ended September 30, 2010 were due to the sales of the KMS resin products and the MB Series resin products. Our costs of sales for the three and nine months ended September 30, 2010 were $1,141,807 and $3,968,634, respectively, as compared to $80,413 and $310,398 for the three and nine months, respectively, ended September 30, 2009. The difference in cost of sales was directly related to our increase in revenues in 2010. As a percentage, costs of sales for the three and nine months ended September 30, 2010 were 87.68% and 90.80%, respectively.  The difference in the percentages can be attributed to the favorable sales price variances and the change in the sales mix as the gross margin for the KMS products is higher than that of the MB line.


Our total operating expenses for the three months and nine months ended September 30, 2010 were $94,392 and $274,530, respectively, as compared to $89,524 and $297,004, respectively, for the corresponding periods of 2009.  The change is primarily due to the savings in the professional fees.  The slight increase in the salary expense was due to the addition of a management trainee to the staff for an increased operation level.  The decrease in the professional fees was due to the costs related to the post-




13






effective amendment and share registration occurred in the corresponding period in 2009 did not recur again in 2010.  For the three- and nine-month periods ended September 30, 2010, we incurred $47,661 and $123,116, respectively, in salary expense; while we spent $42,151 and $127,574 of salary in the three- and nine-month ended September 30 of 2009.


Regarding the general and administrative expenses, we incurred $35,324 and $117,462, respectively, during the three- and nine-month periods ended September 30, 2010; while we spent $33,836 and $118,286, respectively, for the comparable periods in 2009.  Our general and administrative expenses consisted of ordinary business expenses, including rent, traveling and entertainment related to business development, and advertising expenses.  The mild increase in the general and administrative expenses reflected an increased level of business activities in 2010 as compared to 2009.  As the management continues its cost rationalization efforts, we anticipate that our general and administrative expenses for the remaining of 2010 will remain at a level comparable to the nine months ended September 30, 2010.


Liquidity and Capital Resources


At September 30, 2010, we had a deficiency in working capital of $218,777 as compared to a deficiency of $277,556 at December 31, 2009.  Major changes in the liquidity include an increase in the cash balances by $163,240, an increase of $173,581 in accounts receivable, an increase of $597,565 in inventory, increase in accounts payable by $436,672, and an increase of $333,610 in notes payable to stockholder.  In particular, the cash position has changed as follows:


Net cash used in operating activities for the nine months ended September 30, 2010 was $175,433 as compared to $331,666 for the nine months ended September 30, 2009.


Net cash used in investing activities for the nine months ended September 30, 2010 was $28,075, as compared to $7,137 during the nine months ended September 30, 2009.


Net cash provided by financing activities for the nine months ended September 30, 2010 was $366,416, as compared to $250,927 for the nine months ended September 30, 2009 which represented proceeds to us from borrowing.


We originally had a long-term commitment to provide additional registered capital to Renewable Energy Enterprises (Shanghai) Company, Ltd.  The registered capital of Renewable Energy Enterprises (Shanghai) Company, Ltd. was $1,000,000.  According to the Articles of Association of Renewable Energy Enterprises (Shanghai) Company, Ltd., China Clean & Renewable Energy Limited had to fulfill 20% of registered capital requirements of $200,000, which had been fulfilled within three months (i.e. by May 27, 2008) from the date of incorporation.  The remaining of the registered capital requirements of $800,000 would need to be fulfilled within two years from date of incorporation.  In view of our refocused business strategy and the current financial situation, we filed to the State Administration of Foreign Exchange, Shanghai Bureau, an application for waiving CCRE’s obligation to fulfill its capital requirement of $800,000.  The application was approved and the $800,000 capital commitment requirement was waived by the approval.


We are not currently bound by any long or short-term agreements for the purchase or lease of capital expenditures. Any amounts expended for capital expenditures would be the result of an increase in the capacity needed to adequately service any increase in our business. To date we have paid for any needed additions to our capital equipment infrastructure from working capital funds and anticipate this being the case in the future.





14






Off Balance Sheet Transactions


None.



Item 3.

Quantitative and Qualitative Disclosures About Market Risk.


Not applicable for a smaller reporting company.



Item 4T.

Controls and Procedures.


Evaluation of Disclosure Controls and Procedures.  We maintain "disclosure controls and procedures" as such term is defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934.  In designing and evaluating our disclosure controls and procedures, our management recognized that disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of disclosure controls and procedures are met.  Additionally, in designing disclosure controls and procedures, our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures.  The design of any disclosure controls and procedures also is based in part upon certain assumptions about the likelihood of future events.  Based on his evaluation as of the end of the period covered by this report, our President who also serves as our principal executive officer and our principal financial officer, concluded that our disclosure controls and procedures are designed to provide reasonable assurance of achieving their objectives and were effective at the reasonable assurance level for which they were designed such that the information relating to our company, including our consolidating subsidiary, required to be disclosed by us in reports that it files or submits under the Securities Exchange Act of 1934 (i) is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms, and (ii) is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.


Changes in Internal Control over Financial Reporting.  There have been no changes in our internal control over financial reporting during our last fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.




15






PART II - OTHER INFORMATION


Item 1.

Legal Proceedings.


None.



Item 1A.

Risk Factors.


Not applicable for a smaller reporting company.



Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds.


None.



Item 3.

Defaults Upon Senior Securities.


None.



Item 4.

Submission of Matters to a Vote of Security Holders.


None.



Item 5.

Other Information.


None.



Item 6.

Exhibits


No.

Description


31.1

Rule 13a-14(a)/ 15d-14(a) Certification of principal executive officer

31.2

Rule 13a-14(a)/ 15d-14(a) Certification of principal financial and accounting officer

32.1

Section 1350 Certification of principal executive officer and principal financial and accounting officer





16






SIGNATURES


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



China Renewable Energy Holdings, Inc.

 

By: /s/ Allen Huie

Allen Huie, CEO, President, principal executive officer and principal financial and accounting officer

Date: November 13, 2010





17