UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


WASHINGTON,
D.C. 20549





FORM
10-K





x
            ANNUAL
      REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF
      1934




For the
fiscal year ended December 31, 2009





o
            TRANSITION
      REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF
      1934




For the
transition period from ___________ to ___________





Commission
file number 000-12561





CHINA SOLAR & CLEAN ENERGY
SOLUTIONS, INC.


(Name
of small business issuer in its charter)





Nevada
            95-3819300(State
      of organization)
            (I.R.S.
      Employer Identification No.)





3/F
West Wing Dingheng Plaza,


45A
North Fengtai Road,


Beijing,
China, 100071


(Address
of principal executive offices)





(86)
10-6386-0500


(Registrant's
telephone number)





SECURITIES
REGISTERED UNDER SECTION 12(B) OF THE EXCHANGE ACT:


None





SECURITIES
REGISTERED UNDER SECTION 12(G) OF THE EXCHANGE ACT:


Common
Stock, $0.001 par value per share




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


YES oNO x





Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Act.    Yes oNo x





Check
whether the issuer: (1) filed all reports required to be filed by Section 13 or
15(d) of the Exchange Act during the past 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 xNO o





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 (Section 232.405 of
this chapter) during the preceding 12 months (or for such shorter period that
the registrant was required to submit and post such files). Yes oNo o




Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not
be contained, to the best of registrant’s knowledge, in definitive proxy or
information statements incorporated by reference Part III of this Form 10-K or
any amendment to this Form 10-K.   x





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,” “acceleratedfiler,” and smaller
reporting companies in Rule 12b-2 of the Exchange Act.




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





The
aggregate market value of the registrant’s voting common stock held by
non-affiliates as of June 30, 2009 based upon the closing price reported for
such date on the OTC Bulletin Board was US $4,472,192.




As of
March 31, 2010, the registrant had 15,233,652 shares of its common stock
outstanding.





Documents Incorporated by
Reference: None.









TABLE
OF CONTENTS





PAGEPART
      IITEM
      1.
            
            Business
            
            1ITEM
      1A.
            
            Risk
      Factors
            
            14ITEM
      2.
            
            Properties
            
            14ITEM
      3.
            
            Legal
      Proceedings
            
            16PART
      IIITEM
      5.
            
            Market
      for Registrant’s Common Equity, Related Stockholder Matters and Issuer
      Purchases of Equity Securities
            
            16ITEM
      6.
            
            Selected
      Financial Data
            
            18ITEM
      7.
            
            Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operation
            
            18ITEM
      7A.
            
            Quantitative
      and Qualitative Disclosures About Market Risk
            
            21ITEM
      8.
            
            Financial
      Statements and Supplementary Data
            
            21ITEM
      9.
            
            Changes
      in and Disagreements with Accountants on Accounting and Financial
      Disclosure
            
            22ITEM
      9A(T).
            
            Controls
      and Procedures
            
            22PART
      IIIITEM
      10.
            
            Directors,
      Executive Officers and Corporate Governance
            
            23ITEM
      11.
            
            Executive
      Compensation
            
            25ITEM
      12.
            
            Security
      Ownership of Certain Beneficial Owners and Management and Related
      Stockholder Matters
            
            27ITEM
      13.
            
            Certain
      Relationships and Related Transactions
            
            27ITEM
      14.
            
            Principal
      Accounting Fees and Services
            
            28PART
      IVITEM
      15.
            
            Exhibits,
      Financial Statement Schedules
            
            28SIGNATURES
            
            
            
            31










PART
I





ITEM
1. BUSINESS





Overview





We design
and provide integrated renewable energy solutions for industrial clients and
real estate developers in China. We manufacture and distribute solar water
heaters, biomass stove, spacing heating devices along with industrial waste heat
recovery systems, including hot tube heat exchanger, high temperature hot air
furnace, heat pipe evaporator, dust removal and desulfurization system and
constant pressure hot water boiler. Our business is conducted through our
wholly-owned PRC-based operation subsidiaries, Tianjin Huaneng, Deli Solar
(Beijing) and Deli Solar (Bazhou).





Growth
Strategy





Organic
and Acquisition-Oriented Growth





Our
business strategy includes organic growth through our core businesses and
acquisition-oriented growth through acquisitions and investments. As part of our
business strategy, we review acquisition and strategic investment prospects that
we believe would complement our current product and service offerings, increase
our market coverage or enhance our technical capabilities, or otherwise offer
growth opportunities. Expanding business channels tour investments in new
businesses and we expect to make investments in expanding distribution channels
within China and in acquiring world leading cleantech technologies in the
future.





We
suspended mergers and acquisitions in the year of 2009 in light of the
deteriorating economic and market environment. This helps us to leverage our
resources on more profitable business





One of
the key factors for enhancing our organic growth is our human resources growth
strategy. We plan to strengthen our technical capability through recruiting
specialized personnel, internal training and outside technology collaborations,
including our technical research and development and support services, which
will help facilitate our plan to enter into the high-end solar technology
market. At the same time, we expect to recruit management executives to help
execute our growth oriented strategies. Another key factor in the development of
our core business and markets is our emphasis on brand recognition. We plan to
increase the amount and type of our product advertisements, establish a
nationwide sales channel and export channel, hold technology promotion
conferences, increase public relations activities and create an after-sales
service network.





Government  Supportive
New Energy Policy and Programs





Chinese
government launched a series of policies with subsidy programs, inclusive of the
compulsory market share and financial incentives, to support the development of
the Chinese new energy industry. China’s National Development and Reform
Commission (“NDRC”) requires the
renewable energy projects to account for 15% of China’s total energy consumption
by the year 2020. Additionally, the Energy Conservation Law was enacted in 2008
along with the Guidelines for Public Building Energy Conservation and the
Guidelines for Civilian Building Energy Conservation. On July 9th, 2009, Chinese
ministry of Finance and Ministry of Housing and Urban-Rural Development
collectively unveiled a cash subsidy program to support the use of renewable
energy technologies in the buildings. The cash subsidies ranging from RMB50
million (US$7.33 million) to RMB80 million yuan from the central government
budget.





The
application and promotion of cleantech are strongly supported by the PRC
government. These policies show the government’s intention to provide the
subsidies needed to drive solar adoption by end users throughout the country.
This is certainly a long-term positive for the industry as it provides
significant business opportunities for low-carbon industries, including the
efficiency of energy consumption and the adoption of cleantech. We believe that
such government policies may help us promote our new energy products and
services in China, further increase our growth opportunities in other low-carbon
industries, and develop new markets.




1





Low-Carbon
Industry Opportunities





The PRC
government’s policy to reduce the CO2 emissions provides significant business
opportunities for the low-carbon industry. Our investments in this area will
include direct investments, technical collaborations and marketing cooperation.
Opportunities in the low-carbon market include the demand for building
integrated new energy solutions, energy efficiency evaluations, energy
conservation programs, and energy conversion options, utilization of renewable
energy, as well as clean energy and new energy alternatives.





We plan
to recruit professionals with expertise in energy efficiency evaluation services
and provide energy conservation and conversion services through the EPC method
(Energy Performance Contracting). The potential market for the reuse of waste
heat and energy efficiency projects in China is significant, and the investment
cost for such projects is relatively low. We believe that if we can successfully
recruit personnel with technological expertise and develop marketable
technological products to address the low-carbon industry market, our business
in this market should grow rapidly.





Rural
Market Opportunities





We market
our single solar products and biomass stove primarily for the rural markets of
the PRC because the size of the rural market for these products in the PRC is,
we believe, about eight times larger than that of the urban market. Further, we
believe our rural customers regard purchasing a hot water heater as a long-term
investment in a durable good, more so than urban customers.





We have
12 years of marketing and sales experience in rural areas. Presently, we sell
our solar water heaters and space heaters primarily in the rural areas of the
northeastern part of the PRC including Hebei, Beijing, Tianjin, Heilongjiang,
and Liaoning, where there is prolonged sunny and dry weather. Our marketing and
sales team works with our local agents to educate our end users and inform them
of the utility, functionality and comparative cost advantages of our products as
compared to electricity and gas water heaters. As a result of the feedback from
rural customers, we have been able to design our products to address their
specific needs and concerns.





Technical
Capabilities





Our
technical capabilities in the design and manufacturing of industrial waste heat
systems are of the leading position as compared to peer companies in China. We
have obtained 10 patents for our hot tube heat exchanger and high temperature
hot air furnace. We will enhance our technical strength through recruiting
high-end technical professionals, especially the inventors who have the rights
to the patents in the relevant fields. In addition, we further plan on
developing the collaborations with industrial design institutions and large
construction corporations, capitalizing on the production capacity of Tianjin
Huaneng and its ability to participate in the bids of EPC projects
(Engineering/Procurement/Construction Contractor).





On
November 9th, 2009,
we have entered into a strategic alliance agreement with KOE Environmental
Consulting Inc. (Japan), a consulting firm which helps Japanese environmental
investment institutions to identify suitable projects under the Kyoto Protocol's
Clean Development Mechanism ("CDM"). Under the terms of the strategic alliance
agreement, China Solar and KOE will work together to identify and develop
potential CDM projects across the industrial and real estate energy saving
projects of China Solar, go through the UNFCCC ("United Nations Framework
Convention on Climate Change") registration process and trade the Certified
Emission Reduction ("CER") and Verified Emission Reduction ("VER") credits thus
generated.





Brand
Strategy





Brand
Identity





We
further plan on strengthening our corporate identification system (CIS) to
transform our core culture into a vigorous slogan though repetition in our
advertisements, enterprise outward appearances, product packaging and product
instruction booklets, as well as in various promotional activities and public
relations events. We will use the same slogan to create a unified image to the
public for all of our different brands.




2





Advertising





Based on
various advertising effectiveness studies in the PRC, we believe that large
scale advertising on TV and other mass media can have a significant impact on
rural residential purchase decisions. We spent approximately $497,117, or 1.8%
of sales, on advertising in 2008 compared to $1,423,914, or 2.7% of
sales.





Business
Promotion





As a
specialty product manufacturer, technical seminars and public relations
activities are an important part for our business. We need to communicate with
our customers with regard to the company and our culture, technology, values and
services and we also invite the participation of governmental officers, who are
responsible for the development of energy, financial and tax and technology
policies, in our activities. In addition, we organize activities for various
industries for them to communicate and exchange ideas about their technologies.
Such activities help promote our company our products and services.





Our
Multi-Brand Strategy





In order
to position our products in different tiers of markets, we have utilized a
multi-brand approach. Our solar hot water heater brands include: “Ailiyang,” “De
Yu” and “Deli Solar.” Ailiyang is not a registered trademark. Our space heating
brands include “De Yu” and “Du Deli”. Each of these brands targets a different
type of customer. We classify the brand names of the solar hot heaters into
three types: Premium, Standard, and Economy, and space heating products into two
types: Premium and Standard. Below are some of our products and related brand
names and classifications:





Our Brand Name
            
            ClassificationSolar Water
      HeatersDeli
      Solar
            
            PremiumDeYu
            
            StandardSpace
      Heating SeriesDu
      Deli
            
            PremiumDeYu
            
            Standard





We intend
to achieve the following objectives through the Multi-Brand
Strategy:





·
            to
      target different products in different tiers of the same geographical
      market;





·
            to
      eliminate agency dominance in a regional market by granting non-exclusive
      agencies to more than one distributor in a
  region;





·
            to
      create competition among agents by assigning only one specific brand of
      our products to one distributor in a sales region so that each different
      distributor will be responsible for selling a brand different from other
      distributors in the same geographical region. We periodically evaluate the
      performance of distributors in the same region, and then provide
      suggestions to help them perform better. In addition, we also encourage
      them to increase sales of our premium products;
  and





·
            to
      increase the market share of our
products.





Our
Distribution and Agency Network





We use a
network of wholesalers, dealers and retailers to distribute our products. After
we manufacture and assemble our products, we sell them to our wholesalers,
generally located in major cities or provincial hubs, who then sell our products
on to a network of smaller distributors, or dealers, in outlying areas.
Sometimes when the dealers are closer to our warehouse, we also sell directly to
dealers to simplify the payment process and reduce transportation costs. Because
these dealers are usually developed by the wholesalers, each direct sale to a
dealer will be recorded on the account of the wholesaler who developed the
business relationship with such dealer. Our end users purchase their products
from either wholesalers or dealers, who also handle the installation and
warranty service of the systems for the end users. We also have a marketing
department consisting of approximately 87 marketing and sales personnel who
collect feedback from our customers and other market information for our
management and our product development team. In 2009, we plan on developing
certain foreign markets, and establishing the regional sales and service
networks through cooperating with local agencies.




3





Our
After-Sales Services Network





We are in
the process of implementing an after-sales services network in parallel with our
national sales and distribution network. Our after-sales services are primarily
performed by our sales agents and distributors. We have begun to provide
technical training to our 300 domestic distributors in order to provide
after-sales services to our end users. We believe local distributors are
enthusiastic to have the ability to provide after-sales services to the end
users, which also provides the distributors with a new source of revenue. One
additional benefit to us provided by the after-sales services network is the
ability to receive product feedback from our end users on a constant basis. We
can use this information to continuously adjust our production plans, product
designs, inventory control and marketing and sales strategies based on the most
current customer feedback. With respect to our export markets, we request that
our local general agents attend our training courses in the PRC, and that when
they sell our products in their home jurisdictions, that they establish service
networks in such jurisdictions to fulfill the same service standards and
policies as ours.





Corporate
Organization and History





Corporate
Structure





The
following diagram sets forth our current corporate structure:













*
            Neither
      China Solar nor Deli Solar (BVI) has any operations or currently intend to
      have any operations in the future other than acting as a holding company
      and management company for Deli Solar (Bazhou) and Deli Solar (Beijing)
      and raising capital for their
operations.




4




Corporate
History





China
Solar & Clean Energy Solutions, Inc.





We were
formerly known as Deli Solar (USA), Inc. until October 29, 2007 when we changed
our name to China Solar & Clean Energy Solutions, Inc. Deli Solar (USA),
Inc. was formerly known as Meditech Pharmaceuticals, Inc. (“Meditech”).
Meditech was incorporated in Nevada on March 21, 1983. On August 15, 2005,
Meditech changed its name from Meditech to Deli Solar (USA), Inc. and completed
a one six reverse stock split of its common stock. On August 29, 2005 Meditech
completed a spin-off of its drug development business to East West Distributors,
Inc., its wholly-owned subsidiary.





Deli
Solar (Bazhou)





Deli
Solar, incorporated under the laws of the PRC in 1997, designs, manufactures and
sells renewable energy systems to produce hot water and for space heating in the
PRC. Deli Solar (Bazhou)’s principal products are solar hot water heaters and
multifunctional space heating products, including coal-fired boilers for
residential use. Deli Solar (Bazhou) also sells component parts for its systems,
and provides after-sales maintenance and repair services.





In 2004,
Deli Solar (BVI) was organized as a limited liability company under the
International Business Companies Act of the British Virgin Islands by Mr. Deli
Du of Bazhou City, Hebei Province, PRC and others (with Mr. Du owning 80%) as a
holding company for Deli Solar (Bazhou). On August 1, 2004, Deli Solar (BVI)
purchased all the capital stock of Deli Solar (Bazhou) from Messrs. Deli Du, his
brother Xiaosan Du and Xiao’er Du, for RMB6,800,000 (approximately $879,920). As
a result of that transaction, Deli Solar (Bazhou) became a wholly foreign-owned
enterprise (“WFOE”) under PRC law, by virtue of its status as a wholly-owned
subsidiary of a foreign company, Deli Solar (BVI).





Reverse
Merger and Financing





On March
31, 2005, Meditech entered into a stock contribution agreement with the
shareholders of Deli Solar (BVI) under which Meditech acquired all of the issued
and outstanding shares of capital stock of





Deli
Solar (BVI) in exchange for the issuance to the shareholders of Deli Solar (BVI)
of 4,067,964 shares of Meditech’s common stock. In connection with such stock
contribution, we received net proceeds of $5,748,015 from the sale of 1,642,990
shares of common stock and warrants to a number of accredited investors in a
private placement (adjusted to give effect to the one-for-six reverse stock
split of the common stock, which became effective on August 15,
2005).





As a
result of foregoing transactions, the former shareholders of Deli Solar (BVI)
(including Mr. Du) became holders of a majority of the common stock of Meditech
and Deli Solar (BVI) became a wholly-owned subsidiary of Meditech. Following (i)
Mr. Du’s purchase of the 56,259 shares from a third party for $500,000, (ii) the
issuance to him of the additional 3,254,371 shares in exchange for his 80% of
the outstanding shares of Deli Solar (BVI) and (iii) the simultaneous issuance
by us of an additional 1,642,990 shares to accredited investors in the private
placement, Mr. Du became the owner of 57% of our issued and outstanding common
stock.





Deli
Solar (Beijing)





During
the quarter ended June 30, 2006, we established a new wholly-owned subsidiary,
Deli Solar (Beijing) to further develop our business in Beijing. We contributed
$1 million into Deli Solar (Beijing) for its registered capital. Deli Solar
(Beijing) is principally engaged in the installation of large solar water
heaters in construction projects in major cities in the PRC, including
Beijing.




5





Tianjin
Huaneng





Tianjin
Huaneng, incorporated in 1987, manufactures and installs industrial waste heat
recovery systems. Tianjin Huaneng’s products are sold throughout the PRC as well
as in Singapore, Taiwan and Indonesia. Tianjin Huaneng was formerly a
state-owned enterprise with 51% of its equity formerly-owned by Tianjin
Municipal Ji County State-owned Assets Administration Commission (“SAAC”) and
49% owned by the employees. On May 18, 2007, Deli Solar (Beijing) entered into
an agreement with SAAC to purchase 51% of the equity interests in Tianjin
Huaneng for a purchase price of RMB24,100,000 (approximately $3.1 million). The
transaction closed on July 1, 2007 and we paid approximately $1,575,600 in July
2007. By supplemental agreement between the parties dated August 8, 2007, the
purchase price was reduced to approximately $1,689,741. However in addition to
the purchase price we are required to pay a finder’s fee of approximately
$769,418. In addition, Deli Solar (Beijing) assumed 51% of the liabilities of
Tianjin Huaneng and contributed RMB20,000,000 (approximately $2.6 million) as
working capital to Tianjin Huaneng. Deli Solar (Beijing) also agreed to employ
the 550 current Tianjin Huaneng employees pursuant to new three year employment
contracts.





On
October 27, 2008, Deli Solar (Beijing) entered into an agreement to acquire
approximately 30% of the outstanding equity interest of Tianjin Huaneng, from
the minority shareholders of Tianjin Huaneng for a cash purchase price of
RMB10.68 million (approximately $1.5 million). In addition, we agreed to issue
to the Tianjin Huaneng shareholders a total of 1,000,000 five year warrants to
purchase our common stock at an exercise price of $1.10 per share. We also
agreed to increase equity interest in Tianjin Huaneng by contributing an
additional RMB 15,740,000 (approximately $2.3 million) to the registered capital
of Tianjin Huaneng. As a result of the consummation of the agreement and the
additional capital contribution, we now own approximately 92% of the equity
interest in Tianjin Huaneng.





Tianjin
is a city in the PRC which is approximately 50 miles from Beijing. It has a
population of 11.76 million (as of December 31, 2008), and is one of only four
municipal cities directly governed by the central government in
China.





Shenzhen
Pengsangpu Solar Industrial Products Corporation





SZPSP,
incorporated in 1993, was principally engaged in the resale of energy-saving
heating products such as heat pipes, heat exchangers, pressure water boilers,
solar energy water heaters and radiators. SZPSP also operated a distribution
facility in Shenzhen, PRC. On March 31, 2008 Deli Solar (Beijing) acquired 100%
of the outstanding equity interests of SZPSP from its three shareholders for an
aggregate purchase price of RMB28,800,000 (approximately $4 million) in cash,
1,419,729 shares of our common stock, and five year warrants to purchase 141,973
shares of common stock at an exercise price of $2.50 per share (subject to
adjustment). Deli Solar (Beijing) had the right to elect a majority of the board
members of SZPSP. The three shareholders agreed to loan the cash purchase price
back to Deli Solar (Beijing) to be used as working capital. Fifty (50%) of the
principal amount of this loan was required to be repaid within one year and the
remaining balance is required to be repaid within two years. In addition to the
payment of the cash purchase price, we paid RMB20 million for SZPSP’s trademarks
and other intangible assets which was paid by the issuance of 1,419,729 shares
of our common stock. We agreed that if on the first anniversary of the closing
our common stock price is lower than the share price ($2), we will pay the
difference.





SZPSP
warranted that if (i) for the year ended December 31, 2008 its net revenues are
less than RMB99 million (approximately $13.7 million) or its after-tax net
profits are less than RMB9.43 million (approximately $1.3 million) or (ii) for
the year ended December 31, 2009, net revenues are less than RMB143.9 million
(approximately $19.9 million) or its after-tax net profits are less than
RMB12.13 million (approximately $1.7 million), SZPSP will pay the difference
between the revenue and the targeted revenue of the year specified by reducing
the amount payable on the shareholders’ loan. If the shareholders’ loan is not
sufficient to pay the difference, the common shares held by SZPSP will be
returned to us to the extent necessary for the remaining balance.





On July
6, 2009, Deli Solar (Beijing) entered into the Termination Agreement terminating
the agreements wherein Deli Solar (Beijing) acquired 100% of the outstanding
equity interests of SZPSP. Pursuant to the Termination Agreement, the three
shareholders of SZPSP will return to Deli Solar (Beijing) the RMB28,800,000 in
cash and 939,364 shares of our common stock they received in connection with
Deli Solar (Beijing)'s acquisition of the equity interests in SZPSP and also pay
to Deli Solar (Beijing) a portion of SZPSP's net profit for the period from
April 1, 2008 to March 31, 2009, an amount which will be determined at a future
date by SZPSP's shareholders and Deli Solar (Beijing). By December 3, 2009,
SZPSP have returned a total RMB15,839,513.7 to Deli Solar (Beijing) and the
spin-off of SZPSP has been completed.




6





Executive
Office





Our
executive office is located at 3/F, West Wing Dingheng Plaza, 45A Fengtai Road,
Beijing, China, 100071 and our telephone number is +8610 6386 0500.





Products





Solar
Water Heater and Boilers and Space Heating Products





Our solar
water heaters are primarily used to generate hot water for residential use. We
manufacture two types of solar hot water heaters: evacuated tubular solar water
heaters and flat plate solar water heaters. There are two major types of
evacuated tubular solar water heaters: standard evacuated tubular solar water
heaters and evacuated heat pipe solar water heaters. We also manufacture
boilers, furnaces, stove heating, and space heating products, Most of our
boilers and space heating products are coal-fired, small scale units for
residential space heating and cooking.





Solar
water heaters use sunlight to heat either water or a heat-transfer fluid in
collectors. The solar collector is installed either on roof top on mounted on or
near a house facing south. As sunlight passes through the collector's glazing,
it strikes an absorbing material. This material converts sunlight into heat, and
the glazing prevents the heat from escaping. The two most common types of solar
collectors used in solar water heaters in the PRC market are evacuated tube
collectors and glazed flat plates. Solar-heated water is stored in an insulated
tank until use. Hot water is drawn off the tank when tap water is used, and cold
make-up water enters at the bottom of the tank. Solar water heaters tend to have
a slightly larger hot water storage capacity than conventional water heaters.
This is because solar heat is available only during the day and sufficient hot
water must be stored to meet evening and morning requirements.





We have
also developed two environmentally friendly boilers: smokeless coal-fired
boilers and bio-materials furnaces. The former does not produce smoke and the
latter utilizes waste materials such as dry hay to generate heat. The
development of these products has been completed and we have sent samples of
these products to our distributors. As of the date of this report, we have not
made significant sales of these new products.





Approximately
21% of our total revenues for 2009 were derived from sales of our solar water
heaters and boilers and space heating stayed the same percentage compared to 64%
of our total revenues for 2008.





Waste
Heat Recovery Systems and Industrial Energy-Saving Industrial
System





We also
manufacture industrial waste heat recovery systems, heating products such as
heating pipes, heat exchangers, specialty heating pipes and tubes, high
temperature hot blast stoves, heating filters, normal pressure water boilers,
and radiators. These products are used primarily in manufacturing facilities in
which the manufacturing processes require the generation of large amounts of
heat, such as steel and chemical plants. The waste heat can be used to generate
hot water at the manufacturing facilities. Tianjin Huaneng has twenty-years of
experience in manufacturing equipments for industrial waste heat recovery. Its
waste heat recovery systems and energy-saving heating products have excellent
reputations in the marketplace and have a loyal customer in the chemical and
metallurgic fields. Based upon Tianjin Huaneng’s technical strength and
production capacity, we have revised its operational procedures and incorporated
new technologies to increase its production capacity and reduce its operating
costs. In addition, we are prepared to cooperate with the prestigious domestic
industrial design institutions to increase the production capacity of
energy-saving industrial kilns in 2010.Sales of these products and systems
comprised approximately 78% of our total net revenues in 2009 compared to 31% of
our total revenues for 2008.





Integrated
Solar Heating Packages





A number
of our products are being used in complete building integrated solar heating
packages, which integrate our solar hot water and space heating systems directly
into the construction of new multi-family dwellings, commercial office buildings
and industrial developments. In August 2009, we signed a contract to be the sole
supplier of the new energy systems for the Jinhaihu town house developed by LVC
Group (www.lvcgroup.com)
in Pinggu county of Beijing. We designed, supplied and installed solar water
heater and radiant floor heating systems for the townhouse. The contract value
is approximately RMB2 million. The project was completed in December 2009. It is
a good start to work with real estate developers in China and strong credential
of our capacity in building integrated energy efficiency solutions. We expect
more revenue from this segment in the following years.




7





New
Product Pipeline





We have
the following products in the product planning and developing
stage:





Photovoltaic Powered Water
Heaters.  We are in the process of improving the physical
performance of photovoltaic powered water heaters. Photovoltaic technology (PV)
is a technology that converts solar energy into electricity. Photovoltaic
modules or panels are made of semiconductors that allow sunlight to be converted
directly into electricity. These modules can provide customers with a safe,
reliable, maintenance-free and environmentally friendly source of power for a
very long time. This system consists of a photovoltaic array connected to
several resistive heating elements within a water storage tank. The PV array
produces electrical power during periods of solar irradiation and this power is
immediately dissipated in the resistive elements. We believe that the following
factors make photovoltaic powered water heaters an attractive addition to our
existing product line:





·
            Severe
      electricity shortages for the PRC’s grid-connected
    residents,





·
            Absence
      of grid electricity for millions of others and the poor prospect of
      improvement via incremental central station capacity and grid development
      in the near future, and





·
            Abundance
      of solar energy resource in the PRC and an active rural banking
      system.





Our sales
of photovoltaic powered water heaters have not been significant thus
far.





Densely Covered Regular Tubular
Heaters.  We have developed a new solar water heater which is
designed with densely covered evacuated tubes to improve heating efficiency with
only a small cost increase. As an updated regular evacuated tubular heater, this
product installs more tubes in one square meter than normal products do. For
instance, it has ten tubes on one collector while others only have
eight.





Manufacturing





Process,
Cost, and Capacity





Deli
Solar (Bazhou) assembles and manufactures most of its products in its own
production facility in Bazhou. Tianjin Huaneng assembles and manufactures most
of its products in its own production facility in Tianjin. Our senior
manufacturing personnel include a number of professional engineers and senior
technology consultants. Deli Solar (Bazhou) utilizes an automated production
line for the manufacture of water tanks, while our other products are
manufactured utilizing manual labor.





Set forth
below is certain information regarding our current manufacturing
capacity:





Current
Manufacturing Capacity





Daily
      Unit No.
            
            Annual
      Unit No.Solar
      Water Heaters
            
            
            500
            
            133,000Boilers
      and Space Heating Products
            
            
            120
            
            26,000Biomass
      Stove
            
            
            100
            
            21,700





Raw
Materials and Principal Suppliers





The
primary raw materials for manufacturing our products are stainless steel plate,
vacuum tubes, iron and regular steel plate. These raw materials are generally
available on the market and we have not experienced any raw material shortage in
the past. Because of the general availability of these raw materials, it has not
been our standard practice to enter into long-term contracts or arrangements
with most of our raw materials suppliers. We believe that this gives us the
flexibility to select the most suitable suppliers based on product quality and
price terms provided by suppliers each year. We generally have at least three
suppliers that are pre-approved for each raw material supply. However, this
arrangement does not provide any guarantee that necessary raw materials will
continue to be available at prices or delivery terms acceptable to
us.




8





During
the past three years, we have purchased stainless steel plate primarily from
Lingyi Co. in Shandong Province. Our three principal suppliers of vacuum tubes
have been Shangdong Taian Co., Beijing Linuo Co. and Beijing Tianpu Co. Our
principal supplier of steel and iron plate has been from the local market in
Bazhou City, where Deli Solar (Bazhou) is located, which has approximately 100
steel suppliers. We do not rely on any particular suppliers to procure other raw
materials.





During
the past three years, we have purchased stainless steel plate primarily from
Haihui Co. in Tianjin Province. Our principal supplier of steel and iron plate
has been from the local market in Tianjin City, where Tianjin Huanneng is
located, which has approximately 100 steel suppliers. We do not rely on any
particular suppliers to procure other raw materials.





Quality
Control





Our
manufacturing processes follow strict guidelines and standard operating
procedures. Deli Solar (Bazhou) has been issued ISO14000 certification and is in
the process of applying for 3C Certification – the Compulsory Certification of
China and anticipates that the certification will be issued by the end of
2009.  Tianjin Huaneng was issued ISO9000 on November 5th,
2004.





Because
of our stringent quality control system, most of our products are certified by
governmental quality control testing centers, such as the Institute of China
Product Quality Association, Hebei Province New Energy Products and Projects
Quality Control and Testing Center, and Beijing Technology Supervisory Bureau.
We also received awards from Hebei Province Consumers Organization and Hebei
Province Administration of Industry and Commerce, as well as endorsement from
the China Rural Areas Energy Industry Association. The following table sets
forth the brands of our products that are certified by Beijing Technology
Supervisory Bureau to have met the National Industry Standard NY-T 343-1998,
which is the testing standard for solar hot water heaters’ thermal
power:





Brands
            
            Products
            
            Model
      NumbersDeli
      Solar Brand
            
            Solar
      Water Heaters
            
            DLYG-12/75Ailiyang
      Brand
            
            Solar
      Water Heaters
            
            ALY-12/75Dudeli
      Brand
            
            Space
      Heating Series
            
            DDL-12/75Deyu
      Brand
            
            Space
      Heating Series
            
            DY-12/75





Demand
for Our Products





The
majority of the demand for our solar water heaters and space heaters is from
residential households in the PRC, particularly in rural areas. Presently, we
sell our solar water heaters and space heaters primarily in the rural areas of
the north-east part of the PRC including Hebei, Beijing, Tianjin, Heilongjiang,
and Liaoning, where there is prolonged sunny and dry weather.





We
believe the rural residential market has additional growth potential with
supportive government subsidies for the construction of new rural area and
adoption of new energy facilities in buildings. Additionally, as the PRC’s rural
population has been earning incremental discretionary income in recent years,
modern hot water and space heating systems have become increasingly affordable
and a priority for discretionary spending.





Due to
the national policies for saving energy and reducing the emission of pollutants,
as well as the fundamental needs for manufacturing enterprises to efficiently
utilize energy and reduce production costs, there remains a strong demand for
our waste heat recovery systems and energy saving heating products in the near
term. Tianjin Huaneng is primarily engaged in the production of energy
conservation and waste heat recycling systems tailored in accordance with
contracts from. However, we believe that cleantech will gradually replace the
current widely-adopted low-end technology in the industrial market. We expect to
enhance the operations of Tianjin Huaneng towards the design and production of
energy-saving products and services for high energy-consumption companies
including the petrochemical factories, chemical fertilizer plants and power
plants.




9





Seasonality
of Business





Sales of
our solar hot water heaters and boilers are both affected by seasonality. Spring
is usually the high season for solar water heater because it performs the best
when solar energy is abundant, while autumn is usually the high season for
boilers as customers purchase the space heating products for the winter. The
combined supply of solar hot water heaters and space heating devices allows us
to provide our distributors, wholesalers and retailers with marketable products
throughout the whole year. In general, revenue from Tianjin Huaneng tends to be
higher.





Our
Product Warranty





We
provide a three-year standard warranty to our end users for all of the solar
heater and boiler and space heating products we manufacture. Under this standard
warranty program, we provide free repair and exchange of component parts in the
first year following the purchase, and we charge labor costs for repair and
maintenance but provide free exchange of component parts in the second and third
years following the purchase. Thereafter, end users are required to pay for any
repair and maintenance services, as well as exchange of component parts. Most of
our warranty services are performed by our independent sales agents and
distributors in return for a 1 – 2% discount of the purchase price
they pay for our products. According to the standard terms of our agreement with
sales agents, we allow our sales agents and distributors to return any defective
product for exchange.





We
provide a one-year standard warranty to our customers for all of heat pipe
related equipment products we manufacture. Under this standard warranty program,
we provide free repair and exchange of component parts in the first year
following the purchase. After one year, our customers will pay our quality
margin.





Distribution





The
distribution network of the industrial waste heat recovery systems by Tianjin
Huaneng gradually expand, while the distribution of single solar products
shrank. The PRC is a vast country geographically and the markets for our
products span many regions. To penetrate these markets effectively, especially
the less-developed rural areas, we have established a distribution and sales
network that includes approximately __ distributors and wholesalers and
approximately ___ local appliance retailers covering 26 provinces in China, with
a focus on the northern PRC area, north-eastern PRC area, Beijing metropolitan
area, and Tianjin metropolitan area. The northern PRC area includes Hebei
Province, Henan Province, Shandong Province, Shanxi Province and An’hui
Province. The north-eastern PRC area includes Liaoning Province and Heilongjiang
Province. Sales to these areas constitute approximately __ of our annual net
revenues. We believe that our comprehensive distribution and sales network
enables us to efficiently serve the rural communities without having to rely on
any particular agent or distributor for our sales. In the past five years, no
single agent or distributor has generated more than 5% of our total net revenues
in any single year.





We are
consolidating our network of distributors, sales agents, and retailers to
promote the sales of our single solar products








·
            We
      carefully select our distributors and provide support to them. Our
      contracts with our wholesalers and distributors normally have a three- to
      five-year term. While most of our agency and distributor contracts are
      non-exclusive, we are seeking to establish exclusive distribution
      relationships with some strong distributors. We require new sales agents
      to deposit a significant amount of cash as a down payment towards the
      purchase of our systems. We consider the following factors in our
      selection of a new distributor or wholesaler: (i) local solar energy
      status and market potential; (ii) local competition; (iii) sales and
      market potential in the covered area; (iv) presence of alternatives, such
      as gas or electricity; and (iv) credibility of the candidate. For each
      candidate we select, we enter into an agency contract with it, under which
      we provide warranty cards, product testing certificates, product
      brochures, and other promotional materials. In addition, we help them
      design store logos and show rooms, provide them with uniforms, and assist
      them to make marketing plans.




10


Research
and Development Activities





Currently,
we have a research and development team of seven full time staff led by Dr.
Xiang Weizhong, our Chief Technology Officer based in Beijing. Six research
staff members are located in Tianjin Huaneng and one in BeijingOur senior
engineer members include: Luo Yunjun, who also serves as the chairman of the
Beijing Solar Industry Association, and Hao Fangzhou, who also serves as the
chairman of the Chinese Economic Boiler Association.





In
February 2006, we executed a non-binding Cooperation Memorandum (the “Memo”)
with the Key Laboratory of Heat Transmission and Energy Saving Education of
Beijing University of Industry (“BUI”) in February 2006 for cooperation on
research and development of renewable energy technologies. The Memo sets forth a
general cooperation framework between the two parties: we make available funding
for certain renewable energy research and development projects undertaken by
BUI. Further details of each party’s rights and obligations will be on a project
by project basis with specific agreements. To date we have not incurred any
expenses under this arrangement.





Intellectual
Property





Trademarks





Deli
Solar (Bazhou) is the holder of the following trademarks registered with the
Trademark Offices of the PRC National Industrial and Commerce Administrative
Bureau (the “PRC Trademark Offices”):





Trademark
            
            Authorized
      Scope
            
            Valid
      Term
            
            Certificate
              NumberDeli
      Solar
            
            Boiler
      (Space Heating Utility);
            
            03/14/2003
            
            to
      1978396Solar
      Hot Water Utility;
            
            03/13/2013Solar
      Stove and Solar EnergyCollection
      HeaterDu
      Deli
            
            The
      same as the above
            
            01/28/2003
            
            to
      197853201/27/2013De
      Yu
            
            Solar
      Energy Collection Heat and Boiler (Not machine accessory)
            
            07/28/1998
            
            to
      119560907/27/2008Aili
      Solar (to replace our brand “Ailiyang”)
            
            Approved,
      pending the trademark certificate delivery





A
registered trademark is protected for a term of ten years, renewable for another
term of ten years under the trademark law of the PRC, so long as an application
for renewal is submitted to the PRC Trademark Offices within six months prior to
the expiration of the initial term.





Patents





Tianjin
Huaneng had obtained the following patents in the PRC for its unique solar
energy selective absorbing coat and manufacturing technology:





Authorized
      Scope
            
            Valid
      Term
            
            Certificate
      NumberCold
      water recovery system in solar heating
            
            2015
            
            ZL200620016815XRecycle
      Heating Product in different temperature system
            
            n/a
            
            Application
      obtained 7/4/09 UPDATE





Domain
Names





We own
and operate a website under the internet domain name http://www.delisolar.com.
Tianjin Huaneng owns and operates a website under the internet domain name
http://http://www.tjhuaneng.com/.
We have also employed alibaba as our product distribution platform at http://delienergy.en.alibaba.com/.
Traffic to our other internet domain names www.delienergy.com is
directed to that the main domain name www.delisolar.com. The information
contained in these websites does not form part of this report.




11





Logos





Our brand
logos are the following:










Industry





The
PRC’s Economic Growth, Energy Shortage and Renewable Energy Policy





The rapid
economic growth of the PRC in recent years has fueled a massive demand for coal,
oil and gas, which has caused depletion in the country’s coal and oil reserves
and a resulting shortage in supply, as well as serious environmental problems.
Recognizing that accelerating the country's transition to efficient and
renewable energy would ease this depletion and environmental concerns, the
National People's Congress, the PRC’s parliament, passed the China Renewable
Energy Promotion Act, which became effective on January 1, 2006. The Act aims to
promote the use of renewable energy as an alternative source of energy to the
more polluting fuels. Renewable energy currently accounts for a negligible
percentage of the country’s total energy supply. The Act, however, does not
provide for any incentive schemes for purchasers.





Urban
and Rural Market Segmentation for Hot Water and Space Heating Systems in
China





Recently
the market for hot water and space heating systems in the PRC has shown
substantial growth. According to research conducted by the China Hardware
Products Association and the China Information Center in 2002, only 71.5% of
urban households had modern hot water systems. We do not know the number of
rural households that currently have hot water systems but believe that it
significantly less due to the fact that modern hot water and heating systems
have still not become available to and are not affordable in many households in
the country. Only recently have some of these households started to earn the
disposable income required to purchase the hot water and space heating
systems.





In the
rural areas of the PRC the infrastructure is insufficient to facilitate delivery
of conventional energy solutions that are available in more developed countries.
The infrastructure to deliver natural gas or propane, two of the most common
energy sources used in the United States, for example, are not well developed in
the PRC, even in larger cities. As to electrical energy, while it has become
more available in the urban areas of the PRC, it remains much less available in
rural areas. Large portions of the PRC’s rural areas do not have electricity
production and are not connected to the electric grid, and approximately 60% of
rural communities that are grid-connected experience serious shortages of
electricity. According to the National Renewable Energy Laboratories eleven
rural counties with a total population of approximately 70 million have no
electricity at all. In addition, the cost of electricity is high in many rural
areas, making it impractical for hot water and space heating
purposes.




12





We
believe that for most provinces in the PRC, solar-generated hot water for rural
home use is the most readily available and economical solution. Compared with
electricity, natural gas or propane, we believe that solar hot water is more
readily available, less expensive and more suitable to rural household needs as
shown in the following table:





Cost
Economics of Solar Water Heaters





Solar
            
            Gas
            
            ElectricInitial
      Equipment Cost
            
            
            241
            
            
            
            120
            
            
            
            72Engineering
      Life (Years)
            
            
            15
            
            
            
            6
            
            
            
            5Equipment
      Cost (15 years)
            
            
            241
            
            
            
            300
            
            
            
            216Annual
      Additional Energy Cost
            
            
            —
            
            
            
            98
            
            
            
            81Total
      Operating Cost (15 years)
            
            
            241
            
            
            
            1,770
            
            
            
            1,431





Projected
Growth of Solar Hot Water Industry





The PRC
solar hot water industry is an emerging, but fast growing industry. It has
experienced an annual growth rate of approximately 30% since 1999 as measured by
the square meters of systems installed. The Solar Energy Usage Commission of the
PRC Rural Energy Industry Association and the PRC Renewable Energy Industries
Association project such growth to continue at an annual average rate of 27.36%
until 2015 as shown in the following table:







Annual
      Sales1999
      A
            
            
            5.0
      million m(2)2000
      A
            
            
            6.0
      million m(2)2001
      A
            
            
            8.0
      million m(2)2002
      A
            
            
            10.0
      million m(2)2003
      A
            
            
            12.0
      million m(2)2004
      A
            
            
            16.2
      million m(2)2015
      F
            
            
            232.0
      million m(2)





A =
actual. F = forecast. Source: China Solar Hot Water
Industries Development and Research Report (2001 – 2003), jointly
published by the solar energy association and commission described
above.





The
market prospects for the solar energy industry have been recognized by more and
more countries, businesses and the financial sector. Many developed countries
and regions have developed photovoltaic energy plans. By 2010, the United States
plans to install 4.6GW, the EU plans to install 3.7GW, Japan plans to install
5GW, and other developing countries plan to install 1.5GW, with the world’s
accumulated installation expected to be 14 – 15GW with anticipated net
revenue of $30 billion dollars. According to long-term renewable energy
development planning by 2010 China's solar photovoltaic capacity will reach a
total of 400MW and by 2020, it is expected to reach 2200MW.





Similarly,
we expect the solar water heater market will become more mature. According to
the Chinese Solar Energy Society, by 2010 Chinese solar water heater production
will reach 30 million square meters, storage volume will reach 150 million
square meters, every thousand people will have 109 square meters to share, and
by 2020, it is predicted that production will reach 45 million square meters,
storage volume will reach 300 million square meters, and every thousand people
will have 210 square meter to share.





Because
of the rapid growth in the solar hot water industry, solar hot water heaters
have become one of the three major hot water sources along with gas-fired
heaters and electric heaters for PRC households and the PRC has become the
world's largest producer and consumer of solar hot water heaters.





Growth
Projection for Industrial Waste Heat Recovery Systems





The PRC
space heating industry is not new, but we believe the systems that we sell are
new for our customers. While many rural PRC households have in the past
considered hot water a luxury, heat generating facilities for cooking and space
heating purposes in one form or another are now considered basic necessities.
These heat generating facilities are generally extremely primitive and
inefficient, and usually consist of hearths and biomass stoves, which are dirty,
unsafe and difficult to handle with respect to fuel. As many rural households
have started to earn disposable income in recent years, many of them can afford
to modernize their cooking and space heating facilities by using coal-fired
boilers, which have become one of the principal means for such modernization
among the PRC rural households.




13





Competition





The solar
hot water market in the PRC is highly fragmented. According to statistics from
the Chinese Energy Research Association, there are currently over 3,500 solar
hot water heater manufacturers producing products under more than 3,000 brands.
The top 51 companies have, on average, over 10 million RMB in sales
(approximately $1.2 million), with the top ten companies together controlling
17% of the domestic market.





We
believe our success lies in our quality control, brand recognition strategy,
comprehensive distribution network and advertising.





Government
Regulation





We are
not subject to any requirements for governmental permits or approvals or any
self regulatory professional associations for the manufacture and sale of solar
hot water heaters. We are required to obtain a production approval from the
Quality and Technology Supervisory and Control Bureau at the provincial level
for the manufacture and sale of boilers and space heating products. Deli Solar
(Bazhou) obtained the approval to manufacture, install and repair small and
regular size pressure boilers and space heating products from Hebei Provincial
Quality and Technology Supervisory and Control Bureau on August 28, 2002
effective for five years. We are currently in the process of renewing the
certificate. Other than the foregoing, Deli Solar (Bazhou) is not subject to any
other significant government regulation of its business or production, or any
other government permits or approval requirements, except for the laws and
regulations of general applicability for corporations formed under the laws of
the PRC. We are not aware of any PRC environmental law which affects the
production or sale of our products.




Employees





As of
December 31, 2009 we had approximately 700 full time employees and 100 part time
employees.





Deli
Solar (Bazhou) requires each employee to enter into a one-year standard
employment agreement. Tianjin employees have three year agreements. The standard
employment agreement contains a confidentiality clause and a
covenant-not-to-compete clause, under which an employee must keep confidential
all manufacturing technology including drawings and other technology materials,
sales and financial information, and trade secrets obtained through his or her
employment with us. Breach of this confidentiality clause will result in
termination of employment. Further, each employee may not compete against us for
a certain period of time following the termination of employment with us. We
purchase group workers' compensation policies on behalf of our employees, and
the premium is deducted from each employee's paycheck.





ITEM 1A. RISK FACTORS





Not
applicable because we are a smaller reporting company.




ITEM 2. PROPERTY





All land
in the PRC is owned by the government and cannot be sold to any individual or
entity. Instead, the government grants landholders a “land use right.” The
following are the details regarding our land use rights with regard to the two
pieces of land that we use in our business. The land use rights owned by Deli
Du, our Chief Executive Officer, President and Director, were transferred to us
in October 2005 for a price of RMB20,000 (approximately $2,588). The application
for the change of the land use right certificate for this piece of land was
submitted to Bazhou City National Land Resources Bureau on January 16, 2006.
Once the application is approved, the registered holder for this land will be
Deli Solar (Bazhou). As of October 11, 2007, the application has not yet been
approved and the registered holder is still Mr. Du.




14





Deli
Solar (Bazhou)’s factory facilities are located outside of the city of Bazhou in
Hebei Province, PRC. Deli Solar (Bazhou) utilizes one factory in Bazhou with a
total of over 10,000 square meters of production, warehouse, and office space
and space for use as a distribution center and approximately 2,000 square meters
of office space and exhibition center in Beijing.





Deli
Solar (Bazhou) built a new facility in 2008 with an area 9,900 square meters.
Total construction costs were $2,926,287, all of which were paid in
2008.





Tianjin
Huaneng’s factory facilities are located outside of the Tianjin municipalities
of the PRC. Tianjin Huaneng’s utilizes one factory in Tianjin with over 51,000
square meters of production, warehouse, and office space and space for use as a
distribution center.





Tianjin
Huaneng built a new facility with over 7,500 square meters in March 2008, which
commenced operations in November, 2008. Total construction costs were $984,287
by the end of 2009.





On March
17, 2006, Deli Solar (Bazhou) entered into an agreement with the local
government to acquire land use rights of a parcel of land of 61,530 square
meters at the price of approximately $919,858. This piece of land is close to
the present Bazhou factory and is used to enlarge the present manufacturing base
at Bazhou City. The land use right has been approved by the local government
after payment of approximately $919,858. An official certificate evidencing the
land lease has not yet been delivered from the government to us.





The
following table sets forth information regarding parcels of lands used by us in
our operations:





Registered
              Holder
            
            Location
              Deed
      Number
            
            Usage
      and
              Nature
            
            Square
              Meters
            
            Construction/Building
      on the Land
            
            Term
      of Use Right
            
            Transfer
      PriceDeli
      Solar (Bazhou)
            
            Bazhou,
      Ningnan Village; #98060026
            
            Industrial
      Transferred Land
            
            15,625
              Sq.
      M
            
            Plant,
      warehouses, accessories room, convention center
            
            50
      years (from November, 1999 to November, 2043)
            
            RMB615,000
              (approximately
      $79,581) was paid to the Langfang Municipal Land Administration Bureau,
      plus annual land use fee of RMB5122 (approximately
  $662.79)Mr.
      Deli Du
            
            Eighty
      kilometers from Bazhou Jingbao Road North; #20010700405
            
            Office
      space for Deli Solar Bazhou Granted Land
            
            816
              Sq.
      M
            
            Office
      building, accessories room
            
            50
      years (from June 11, 2001 to June 3, 2051)
            
            RMB
      20,000 (approximately $2,588) was paid to the Langfang Municipal Land
      Administration BureauDeli
      Solar (Bazhou)
            
            Close
      to Bazhou Jingbao Road
            
            Factory
      Facilities
            
            61,530
              Sq.
      M
            
            Factory
      facilities
            
            Pending
      the Land Use Right Certificate
            
            approximately
      $919,858 was paid to Bazhou local governmentTianjin
      Huaneng Group Energy Equipment Co. Ltd.
            
            No.
      119 Yuyang South Road
              Ji
      County, Tianjin
            
            Factory
      Facilities
            
            4,891.70
              Sq.
      M
            
            Factory
      facilities
            
            50
      years (from September 2004 to September 2054)
            
            Approximately
      RMB1,054,996 was paid to Ji countyTianjin
      Huaneng Group Energy Equipment Co. Lt
            
            The
      north of Jinguo road
              Ji
      County, Tianjin
            
            Factory
      Facilities
            
            11,318.40
              Sq.
      M
            
            Factory
      facilities
            
            50
      years (from September 2004 to September 2054)
            
            Approximately
      RMB3,216,931 was paid to Ji countyTotal
            
            
            
            
            
            94,181.10
      Sq. M




15




We lease
19,140 square meters of land (“Leased
Land”) from Tianjin Ji County Credit Union Lianshe Branch (“Credit
Union”) for an office building pursuant to a 20 year renewal lease at an
annual rent of RMB120,000 (approximately $15,528) which commenced on May 1,
2003. The lease is automatically renewable for another 20 year term subject to
terms to be negotiated at the expiration of the first 20-year term. We are
retaining a majority of the building's usable space for our business and seeking
to sublease the rest to parties with business related to ours such as our sales
agents, distributors, accessory parts dealers, and after-sales service agents.
We also constructed a business center on the Leased Land. The business center is
to be used for show rooms, retail stores, and a distribution center for solar
related products and space heating products.





We lease
our Beijing office facility of approximately 2,000 square meters at No. 28,
Fengtai Bei Road, Fengtai District from Beijing Dajiangxia Technology and Trade
Co., Ltd. pursuant to a renewable lease with a term from October 1, 2005 to
August 8, 2011 for an annual rent of RMB400,000 in 2008. The rental is subject
to annual negotiation.





ITEM 3. LEGAL PROCEEDINGS





There are
no pending legal proceedings to which the Company is a party or in which any
director, officer or affiliate of the Company, any owner of record or
beneficially of more than 5% of any class of voting securities of the Company,
or security holder is a party adverse to the Company or has a material interest
adverse to the Company. The Company’s property is not the subject of any pending
legal proceedings.




PART
II





ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS





Market
Information





Our
common stock is quoted on the OTCBB under the symbol “CSOL.OB”. There has never
been an active public market for shares of our common stock and trading has been
characterized by low volume and high volatility.





The
following table sets forth the high and low bid prices, in the over-the-counter
market, as reported and summarized by the OTCBB, for each fiscal quarter during
each of the fiscal years ended December 31, 2007, December 31, 2008 and December
31, 2009. These prices are based on inter-dealer prices, without retail markup,
markdown or commission and may not represent actual transactions.





High
            
            
            
            LowYear
      Ended December 31, 200903/31/2009
            
            
            1.00
            
            
            
            0.1706/30/2009
            
            
            0.71
            
            
            
            0.2709/30/2009
            
            
            0.52
            
            
            
            0.2912/31/2009
            
            
            0.70
            
            
            
            0.31Year
      Ended December 31, 200803/31/2008
            
            
            3.70
            
            
            
            1.5006/30/2008
            
            
            2.36
            
            
            
            1.3609/30/2008
            
            
            1.65
            
            
            
            1.0512/31/2008
            
            
            1.41
            
            
            
            0.70Year
      Ended December 31, 200703/31/2007
            
            
            3.73
            
            
            
            3.5006/30/2007
            
            
            2.60
            
            
            
            1.8109/30/2007
            
            
            3.45
            
            
            
            1.7512/31/2007
            
            
            4.50
            
            
            
            2.40




16


Since the
completion of the reverse merger, our common stock has traded sporadically and
with high volatility. Consequently, our historical prices may not be an accurate
indication of the future prices of our common stock.





Holders





As of
March 31, 2010, there were 15,233,652 shares of our common stock issued and
outstanding, and there were approximately 2,512 holders of record of our
outstanding shares of common stock. This does not reflect the number of persons
or entities who held stock in nominee or “street” name through various brokerage
firms.





Dividends





We have
never declared or paid any cash dividends on our common stock and are restricted
from paying dividends both contractually and by virtue of the fact that we are a
holding company. We currently intend to retain all earnings, if any, for use in
business operations and we do not anticipate declaring any dividends in the near
future.





The
payment of dividends, if any, is at the discretion of the Board of Directors and
is contingent on the Company's revenues and earnings, capital requirements,
financial conditions and the ability of our PRC based operating subsidiaries
Deli Solar Bazhou, Deli Solar (Beijing) and Tianjin Huaneng to obtain approval
to send monies out of the PRC. The PRC’s national currency, the Yuan, is not a
freely convertible currency. The PRC government imposes controls on the
convertibility of Renminbi into foreign currencies and, in certain cases, the
remittance of currency out of the PRC. Shortages in the availability of foreign
currency may restrict our ability to remit sufficient foreign currency to pay
dividends.





In
addition, under the terms of the certificate of designation which was filed in
the office of Secretary of State for the State of Nevada on June 12, 2007 in
connection with the issuance of the Series A Preferred Stock, we are restricted
in paying dividends on our common stock.





Securities
Authorized for Issuance under Equity Compensation Plans





We
currently do not have any equity compensation plans.





Penny
Stock Regulations





The SEC
has adopted regulations which generally define “penny stock” to be an equity
security that has a market price of less than $5.00 per share. As of November
25, 2008, the last reported sale price of our common stock was $0.95 per share.
Our common stock falls within the definition of penny stock and is subject to
rules that impose additional sales practice requirements on broker-dealers who
sell such securities to persons other than established customers and accredited
investors (generally those with assets in excess of $1,000,000, or annual
incomes exceeding $200,000 or $300,000, together with their
spouse).




17





For
transactions covered by these rules, the broker-dealer must make a special
suitability determination for the purchase of such securities and have received
the purchaser's prior written consent to the transaction. Additionally, for any
transaction, other than exempt transactions, involving a penny stock, the rules
require the delivery, prior to the transaction, of a risk disclosure document
mandated by the Commission relating to the penny stock market. The broker-dealer
also must disclose the commissions payable to both the broker-dealer and the
registered representative, current quotations for the securities and, if the
broker-dealer is the sole market-maker, the broker-dealer must disclose this
fact and the broker-dealer's presumed control over the market. Finally, monthly
statements must be sent disclosing recent price information for the penny stock
held in the account and information on the limited market in penny stocks.
Consequently, the “penny stock” rules may restrict the ability of broker-dealers
to sell the common stock and may affect the ability of investors to sell their
common stock in the secondary market.





ITEM
6. SELECTED FINANCIAL DATA




Not applicable because we are a smaller reporting
company.





ITEM
7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF
OPERATIONS





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





Overview





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





The
Company has three reportable segments: (i) Solar heater/Biomass stove/Building
integrated energy projects for households and buildings; (ii) Industrial waste
heat recovery/Energy-saving projects for industrial customers; and (iii) Heat
pipe related products.





Deli
Solar (Bazhou) manufactures and distributes solar products in the PRC. The
Company’ principal products are solar hot water heaters and multifunctional
space heaters, including coal-fired boilers for residential use. Deli Solar
(Bazhou) also sells spare parts for its products and provides after-sales
maintenance and repair services.





Deli
Solar (Beijing) is principally engaged in the service and installation of energy
saving equipments in residential and commercial buildings in major cities in the
PRC.





Tianjin
Huaneng provides waste heat recovery and energy saving solutions for industrial
customers. The Company manufactures heating products such as heating pipes, heat
exchangers, specialty heating pipes and tubes, high temperature hot blast
boilers, heating filters, normal pressure water boilers, solar energy water
heaters and radiators.





Approximately
21% of our net revenue for the year ended December 31, 2009 was derived from
sales of our solar heater/Biomass stove, 78% from sales of our Building
integrated energy projects Industrial waste heat recovery/energy-saving
projects, and 1% from sales of our Building integrated energy projects,
respectively. Approximately 99.0% and 1.0% of our net revenues for the year
ended December 31, 2009, were derived from sales made inside the PRC and outside
the PRC, respectively.




18





Recent
Developments





On July
6, 2009, Deli Solar (Beijing) entered into the Termination Agreement terminating
the agreements wherein Deli Solar (Beijing) acquired 100% of the outstanding
equity interests of SZPSP. Pursuant to the Termination Agreement, the three
shareholders of SZPSP will return to Deli Solar (Beijing) the RMB28,800,000 in
cash and 939,364 shares of our common stock they received in connection with
Deli Solar (Beijing)'s acquisition of the equity interests in SZPSP and also pay
to Deli Solar (Beijing) a portion of SZPSP's net profit for the period from
April 1, 2008 to March 31, 2009, an amount which will be determined at a future
date by SZPSP's shareholders and Deli Solar (Beijing). By December 3, 2009,
SZPSP have returned a total RMB15,839,513.7 to Deli Solar (Beijing) and the
spin-off of SZPSP has been completed.





RESULTS
OF OPERATIONS





Results
of operations for the year ended December 31, 2009 compared to the year ended
December 31, 2008





Sales
Revenue





2009
            
            
            2008Solar
      heater/Biomass stove/Boiler related products
            
            $
            5,561,891
            
            
            $
            26,635,576Heat
      pipe related equipments/Energy-saving projects
            
            
            20,486,387
            
            
            
            14,880,477Building
      integrated energy-saving projects
            
            
            267,393
            
            
            
            —$
            26,315,671
            
            
            $
            41,516,053




Overall:
Sales revenue for 2009 was $26,315,671 as compared to $41,516,053 for 2008, a
decrease of $15,200,382 or 36.6% compared to 2008. The decrease in sales revenue
was primarily attributable to a weakening economy that led to decline in revenue
from the solar heater/biomass stove/boiler related products under the management
of Deli Solar (Bazhou).





Solar
heater/Biomass stove/Boiler related products: Sales revenue for these products
for 2009 was $5,561,891 as compared to $26,635,576 for 2008, a decrease of
$21,073,685 or 79.1%. The decrease in sales revenue derived from solar
heater/biomass stove/boiler related products was due to a weak market and fierce
competition. We expect competition to continue for 2010.




Heat pipe
related equipments/Energy-savings projects: Sales revenue for 2009 was
$20,486,387 compared to $14,880,477 for 2008, an increase of $5,605,910 or
37.7%. The increase in sales of heat pipe related equipments/energy-saving
projects was a result of increase in demand and strengthening
marketing.





Cost of
revenue





2009
            
            
            2008Solar
      heater/Biomass stove/Boiler related products
            
            $
            4,292,012
            
            
            $
            21,690,188Heat
      pipe related equipments/Energy-saving projects
            
            
            14,416,564
            
            
            
            12,847,173Building
      integrated energy-saving projects
            
            
            154,376
            
            
            
            —$
            18,862,952
            
            
            $
            34,537,361




Overall:
Cost of revenue for 2009 was $18,862,952 as compared to $34,537,361 for 2008, a
decrease of $15,674,409 or 45.3% compared to 2008. The decrease in cost of
revenue was primarily attributable to the decline in revenue from the solar
heater/biomass stove/boiler related products under the management of Deli Solar
(Bazhou).





Solar
heater/Biomass stove/Boiler related products: Cost of revenue for these products
for 2009 was $4,292,012 as compared to $21,690,188 for 2008, a decrease of
$17,398,176 or 80.2%. The decrease in cost of revenue derived from solar
heater/biomass stove/boiler related products was due to a weak market and
competition. We expect competition to continue for 2010.




19




Heat pipe
related equipments/Energy-savings projects: Cost of revenue for 2009 was
$14,416,564 compared to $12,847,173 for 2008, an increase of $1,569,391 or
12.2%. The increase in cost of revenue of heat pipe related
equipments/energy-saving projects was due to the increase of sales of those
products.





Gross
Profit




Gross
      profit
            
            2009
            
            
            2008Solar
      heater/Biomass stove/Boiler related products
            
            $
            1,269,879
            
            
            
            4,945,388Heat
      pipe related equipments/Energy-saving projects
            
            $
            6,069,823
            
            
            
            2,033,304Building
      integrated energy-saving projects
            
            
            113,017
            
            
            
            -$
            7,452,719
            
            
            
            6,978,692





Overall:
Gross profit margin for 2009 was $7,452,719 as compared to $6,978,692 for 2008,
an increase of $474,027 or 6.8% compared to 2008. The increase in gross profit
margin was primarily attributable to the increase in revenue from Heat pipe
related equipments/Energy-savings projects.





Solar
heater/Biomass stove/Boiler related products: Gross profit margin for these
products for 2009 was $1,269,879 as compared to $4,945,388 for 2008, a decrease
of $3,675,509 or 74.3%. The decrease in gross profit margin derived from solar
heater/biomass stove/boiler related products was due to a weak market and
competition. We expect competition to continue for 2010.




Heat pipe
related equipments/Energy-savings projects: Gross profit margin for 2009 was
$6,069,823 compared to $2,033,304 for 2008, an increase of $4,036,519 or 198.5%.
The increase in sales of heat pipe related equipments/energy-saving projects was
due to higher sales price and lower cost of material.





Operating
Expenses





Operating
expenses for 2009 were $6,626,691, as compared to $8,547,091 for 2008, a
decrease of $1,920,400 or 22.5%. The overall decrease in operating expenses was
primarily due to cutting down all kinds of expenses because of the decrease in
sales.





Depreciation
and amortization included in operating expense decreased to $383,531 for 2009
from $1,172,254 for 2008, primarily as a result of the end of useful life for
certain manufacturing equipments in 2009.





Selling
and distribution expense decreased to $2,410,181, for 2009 or 38.6%, from
$3,926,931 for 2008, primarily due to the decrease in sales of solar
heater/biomass stove/boiler related products, which led to decrease advertising
expense, transport costs and travelling expense.





General
and administrative expenses were $3,832,979 (or approximately 14% of sales
revenue) for 2009, compared to $3,447,906 (or approximately 8.3% of sales
revenue) for 2008, primarily due to the decrease in sales of solar
heater/biomass stove/boiler related products, which led to cut down our
operation expense, for example, public fair fee and agent fee, and so on
..





Net
Income




Net
income was $1,074,345 for 2009, compared to $5,503,170 of net loss for 2008, an
increase of $6,577,515. The increase in net income was due to primarily the
economic recovery in China in the second half of the year ended December 31,
2009.





LIQUIDITY
AND CAPITAL RESOURCES





Net cash
provided by operating activities was $975,372 for 2009, while net cash used in
our operating activities was $5,221,227 for 2008. This was due to a decrease in
inventories and an increase in gross margin of sales.




20




Net cash
provided by investing activities was $2,143,883 for 2009, compared with net cash
used in investing activities in the amount of $9,007,996 for 2008. This was due
to disinvestment of SZPSP, from the deal we received $2,758,277 in
2009.





Net cash
provided by financing activities was $51,240 for 2009, compared with $10,102,656
for 2008, when we issued 4,691,499 shares of common stock for
$9,995,156.





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





Cash





Cash and
cash equivalents increased to $4,980,717 as of December 31, 2009, compared to
$1,820,882 as of December 31, 2008, primarily as a result of collection
investment cost of SZPSP.





Accounts
Receivable





Accounts
receivable increased to $8,067,944 as at December 31, 2009, from $5,445,036 as
of December 31, 2008, primarily due to an increase in accounts receivable in
connection with an increase of sales under Tianjin Huaneng.





Inventory





Inventories
decreased to $4,547,170 as of December 31, 2009, as compared to $6,492,830 as at
December 31, 2008. This substantial decrease was primarily due to strong sales
and a sharp decrease in finished products inventory by Tianjin
Huaneng.





Other
Receivables and Prepayments





Other
receivables and prepayments decreased to $1,733,695 as at December 31, 2009,
compared to $5,978,403 as at December 31, 2008, primarily due to transferring
$3,812,806 to investment of Trueframe.




Off-Balance
Sheet Arrangements





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




ITEM7A. Qualitative AND
QUALITATIVE DISCLOSURES ABOUT MARKET RISK









ITEM
8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA




21




ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE




Effective as of July 16, 2009, we
dismissed Cordovano and Honeck (“Cordovano”), our independent registered public
accounting firm. The decision to change accountants was recommended by our Audit
Committee and approved by our Board of Directors.





Cordovano
reported on the Company’s consolidated financial statements for the years ending
December 31, 2008 and 2007 and reviewed the Company’s consolidated financial
statements for the period ending March 31, 2009. For these periods and up to
July 16, 2009, there were no disagreements with Cordovano on any matter of
accounting principle or practices, financial statement disclosure, or auditing
scope or procedure, which disagreement(s), if not resolved to the satisfaction
of Cordovano, would have caused it to make reference thereto in its report on
the financial statements for such years.





The
reports of Cordovano on the financial statements of the Company for the fiscal
years ended December 31, 2008 and 2007 did not contain any adverse opinion or
disclaimer of opinion and were not qualified or modified as to uncertainty,
audit scope or accounting principles. During the Company's two most recent
fiscal years and subsequent interim period through the date of termination,
there were no reportable events as the term is described in Item 304(a)(1)(v) of
Regulation S-K.





On July
20, 2009, we appointed Paritz & Company, P.A. (“Paritz”) as its new
independent registered public accounting firm for the fiscal year ending
December 31, 2009. During the Company’s two most recent fiscal years and any
subsequent interim period prior to the engagement of Paritz, neither the Company
nor anyone on the Company’s behalf consulted with Paritz regarding either (i)
the application of accounting principles to a specified transaction, either
contemplated or proposed, or the type of audit opinion that might be rendered on
the Company’s financial statements, or (ii) any matter that was either the
subject of a “disagreement” or a “reportable event.”




ITEM 9A(T). CONTROLS AND PROCEDURES.





Evaluation
of Disclosure Controls and Procedures





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





Management's
Annual Report on Internal Control over Financial Reporting.





The
management of the Company is responsible for establishing and maintaining
adequate internal control over financial reporting for the
Company.  Our internal control system was designed to, in general,
provide reasonable assurance to the Company’s management and board regarding the
preparation and fair presentation of published financial statements, but because
of its inherent limitations, internal control over financial reporting may not
prevent or detect misstatements.  Also, projections of any evaluation
of effectiveness to future periods are subject to the risk that controls may
become inadequate because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate.





Our
management assessed the effectiveness of the Company’s internal control over
financial reporting as of December 31, 2009.  The framework used by
management in making that assessment was the criteria set forth in the document
entitled “ Internal Control – Integrated Framework” issued by the Committee of
Sponsoring Organizations of the Treadway Commission. Based on that assessment,
our management has determined that as of December 31, 2009, the Company’s
internal control over financial reporting was effective for the purposes for
which it is intended.




22





This
annual report does not include an attestation report of the Company’s registered
public accounting firm regarding internal control over financial reporting.
Management's report was not subject to attestation by the Company's registered
public accounting firm pursuant to temporary rules of the Securities and
Exchange Commission that permit the Company to provide only management's report
in this annual report.




Changes
in Internal Control over Financial Reporting





No change
in our system of internal control over financial reporting occurred during the
period covered by this report, fourth quarter of the fiscal year ended December
31, 2009 that has materially affected, or is reasonably likely to materially
affect, our internal control over financial reporting.




PART
III





ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE
GOVERNANCE




Our
executive officers and directors as of the date of this prospectus are as
follows:





Name
            
            Position
            
            AgeDeli
      Du
            
            President,
      CEO, Director
            
            45Yinan
      Zhao(1)
            
            Acting
      Chief Financial Officer
            
            36Zhaolin
      Ding
            
            Director
            
            42Zhenhang
      Jia
            
            Director
            
            62Joseph
      J. Levinson
            
            Director
            
            33











Our board
of directors currently consists of four members. We also have an audit committee
and a compensation committee. Messrs. Zhenhang Jia, Zhaolin Ding and Joseph J.
Levinson serve on the audit committee. Messrs. Jia, Ding and Du serve on the
compensation committee. The directors serve until our next annual meeting or
until their successors are duly elected and qualified. The officers serve at the
pleasure of the Board.





Under the
terms of the securities purchase agreement entered into on June 13, 2007 with
the investors in that financing, we were required, prior to July 13, 2007, to
increase the size of our Board to five or seven and cause the appointment of a
majority of the Board of Directors to be “independent directors,” as defined by
the rules of the Nasdaq Stock Market. Prior to November 1, 2007 our Board
consisted of four members two of whom were “independent.” Under the terms of the
securities purchase agreement we are required to pay those investors liquidated
damages equal to one percent (1%) per month of the purchase price of the then
outstanding shares of Series A Preferred Stock, in cash or in Series A Preferred
Stock at the option of the investors, based on the number of days that such
obligation is not met beyond certain grace periods. Accordingly, we were
delinquent by 110 days in meeting this obligation and we are required to pay the
investors a total of $99,000. The Company is negotiating with the investors for
a reduction of the amount due, but no agreement has yet been reached. Effective
March 31, 2008 Mr. Jianmin Li resigned from our board of directors.





Effective
July 25, 2008 Mr. Joseph J. Levinson was appointed as a director. Mr. Levinson
is qualified as an “independent director” as defined by the rules of the Nasdaq
Stock Market and as a result of his appointment we continue to have a majority
of “independent directors,” as three of our directors, namely Messrs. Ding, Jia
and Levinson, are “independent directors” pursuant to NASDAQ Marketplace Rule
5605(a)(2). On March 17, 2009, Mr. Yihai Yang resigned as the Chief Financial
Officer of the Company and resigned as a director as of March 31,
2009.




23





In
addition, under the terms of the securities purchase agreement, we were
required, prior to August 12, 2007 to appoint (i) an audit committee comprised
of at least three directors, all of whom are independent, and a (ii)
compensation committee comprised of at least three directors, a majority of whom
are independent. From July 25, 2008 our audit committee has consisted of three
members, all of whom are independent, namely Messrs. Zhaolin Ding, Zhenghang Jia
and Joseph J. Levinson. Our compensation committee consists of three members two
of whom are independent, namely Messrs. Ding and Jia. Accordingly, we were
delinquent in this obligation until July 25, 2008. However, under the terms of
the securities purchase agreement no liquidated damages were required to be paid
for this breach during any period for which liquidated damages were payable for
failing to have an independent board. Accordingly, damages accrued for breach of
this provision from November 1, 2007 through July 25, 2008. As a result we are
required to pay investors a total of approximately $176,800.00. The Company is
negotiating with the investors for a reduction of the amount due, but no
agreement has yet been reached.





Du Deli
has been our President and CEO since March 31, 2005. Mr. Du founded Deli Solar
(Bazhou) in 1997 and has been its controlling equity holder, Chairman and CEO
during the past five (5) years. Since June 2004, he has also been a director and
general manager of Deli Solar (BVI), Mr. Du is standing committee member of
China Solar Energy Utilization Association and China Efficiency Boiler
Association. He has been awarded China Outstanding Entrepreneur and China Top 10
Reformer in Enterprise Innovative Practices. Mr. Du graduated from EMBA program
in Tsinghua University in 2005.





Yinan Zhaohas been our Acting Chief Financial Officer since May 12, 2009. From
January 2008 to May 2009, Ms. Zhao was the finance controller of Hinge Software
Co. LTD, a software company based in China. Prior to that she was an audit
manager in the Beijing office of Deloitte Touché Tohmatsu, where Ms. Zhao’s
client responsibilities included U.S. public companies. Ms. Zhao received a
Bachelor’s degree from the Liaoning Institute of Technology University in 1997
and became a CPA in 1999, and a CTA and CPV in 2000.





Zhaolin Dingwas appointed as our director on August 3, 2007. Mr. Ding is currently
the director of Everbright International Executive Management Education Center,
an adjunct professor of the Executive Program, School of Continuing Education,
Tsinghua University and a visiting professor of the executive program of Peking
University and Renmin University of China. He is an officially appointed news
commentator of China National Radio. He also worked as research associate in the
Center for International Communication Studies of Tsinghua University. He holds
an MBA degree from Harvard University, a Master’s degree in International
Journalism from the China School of Journalism, and a bachelor degree of Law in
International Affairs from the University of International
Relations.





Zhenhang Jiahas been our director since August 3, 2007. He has been a director of
Beijing Mechanical Engineering and Reusable Energies and Vice Secretary-in-Chief
of China Rural Energy Association Energy Saving Space Heating Professional
Society from April 1994. He also has been vice chairman, vice secretary-in-chief
of Beijing Municipal New Energy and a director in Beijing Mechanics and
Engineering Committee, Energy Resources and Engineering Branch from
1995.





Joseph J.
Levinsonhas served on our board of directors since July 25, 2008. He has
been a United States Certified Public Accountant for more than 14 years. He
speaks, reads and writes Chinese fluently and has vast experience in China
working with Chinese companies.  He was previously a Manager in the banking
practice of the New York office of Deloitte and Touche and was involved in
numerous transactions involving complex financial structures. He also previously
worked at KPMG in New York and Hong Kong.  In the 1990s, Mr. Levinson
served as an executive of Hong Kong Stock Exchange-listed China Strategic
Holdings, where his major responsibilities included its subsidiary China Tire,
one of the first Mainland Chinese companies to list on the NYSE.  Mr.
Levinson graduated summa cum laude from the University at Buffalo in 1994 with a
double major in accounting and finance.





Resignations





Effective
April 30, 2009, Ms. Jing Chen resigned from her position as Chief Financial
Officer of the Company. There were no disagreements between Ms. Chen and the
Company on any matter relating to the Company’s operations, policies or
practices, which resulted in her resignation as Chief Financial Officer of the
Company.




24





Board of
Directors





Our
current directors hold office until the annual meeting of stockholders of the
Company following the election or until their successors are duly elected and
qualified. Officers are appointed by the Board of Directors and serve at its
discretion.





Our
directors may receive compensation as determined by us from time to time by vote
of the Board of Directors. Such compensation might be in the form of stock
options. Directors may be reimbursed by us for expenses incurred in attending
meetings of the Board of Directors. Vacancies in the Board are filled by
majority vote of the remaining directors.





Family
Relationships





No family
relationships exist among our directors, executive officers, or persons
nominated or chosen by us to become directors or executive
officers.





Involvement in Certain Legal
Proceedings




To the
best of our knowledge, none of our directors or executive officers have been
convicted in a criminal proceeding, excluding traffic violations or similar
misdemeanors, or has been a party to any judicial or administrative proceeding
during the past five years that resulted in a judgment, decree or final order
enjoining the person from future violations of, or prohibiting activities
subject to, federal or state securities laws, or a finding of any violation of
federal or state securities laws, except for matters that were dismissed without
sanction or settlement. Except as set forth in our discussion below in “Certain
Relationships and Related Transactions,” none of our directors, director
nominees or executive officers has been involved in any transactions with us or
any of our directors, executive officers, affiliates or associates which are
required to be disclosed pursuant to the rules and regulations of the
SEC.





Code of
Ethics




We have
has adopted a Code of Ethics applicable to our Chief Executive Officer and Chief
Financial Officer. This Code of Ethics is filed with the Annual Report on Form
10-KSB/A for the fiscal year ended December 21, 2006 filed by the company with
the SEC on April 11, 2007.




ITEM 11. EXECUTIVE COMPENSATION





Compensation of Executive
Officers





The
following table reflects the compensation paid to our principal executive
officer during each of our fiscal years ending December 31, 2009, 2008 and 2007.
None of our other executive officers was paid a salary and bonus of more than
$100,000 in 2007, 2008 and 2009 and so none are included in this
table.





Name
      and Principal Position
            
            Year
            
            Salary
              ($)
            
            
            Bonus
              ($)
            
            
            Stock
              Awards
              ($)
            
            
            Option
              Awards
              ($)
            
            
            Non-Equity
              Incentive
      Plan
              Compensation
              ($)
            
            
            Non-Qualified
              Deferred
              Compensation
              Earnings
              ($)
            
            
            All
      Other
              Compensation
              ($)
            
            
            Total
              ($)Deli
      Du(1)
            
            2009
            
            
            80,000
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            80,000President, CEO
            
            2008
            
            
            80,000
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            80,000and
      Director
            
            2007
            
            
            80,000
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            80,000










(1)
              Commencing
      March 31, 2005, Mr. Du receives an annual salary of
    $80,000.
  25


Outstanding
Equity Awards at 2009 Fiscal Year End





There
were no option exercises or options outstanding in 2009.





Employment
Agreements





We have
written employment agreements with all of our executive officers. The standard
employment agreement, in compliance with PRC labor law and regulations, includes
the terms of the employment such as the length of the employment, the provision
of labor-related insurances, termination notice, the holiday and sick leave and
the labor-related benefits.





Compensation
Discussion and Analysis





Overview
of Compensation Program and Philosophy





The
Company’s compensation committee currently has three member’s two of whom are
independent, namely Messrs. Zhenhang Jia, and Zhaolin Ding. Under the terms of
the June 2007 securities purchase agreement with Barron Partners and the other
investors, we were required, prior to August 12, 2007 to appoint a compensation
committee comprised of at least three directors, a majority of whom are
independent directors.





The
Compensation Committee’s goal in determining compensation levels is to
adequately reward the efforts and achievements of executive officers for the
management of the Company. The Company currently has no pension plan, stock
option plan, non-equity incentive plan or deferred compensation arrangement. The
Company has not used a compensation consultant in any capacity but believes that
it executive compensation package is comparable to similar businesses in its
location of its operations.





Director
Compensation





Our
standard arrangement with our directors provides that we pay each director
annual compensation in the amount of $20,000 for serving as a director. There
are no other elements of compensation paid to our directors but it is expected
that in the future, we may create a remuneration and expense reimbursement plan.
It is anticipated that such a plan would be primarily based on stock
options.





The
following table reflects the compensation of directors for our fiscal year ended
December 31, 2009:





Name
      of Director
            
            Fees
              Earned
      or
              Paid
      in
              Cash
              ($)
            
            Stock
              Awards
              ($)
            
            Option
              Awards
              ($)
            
            Non-Equity
              Incentive
      Plan
              Compensation
              ($)
            
            Change
      in
              Pension
      Value and
              Nonqualified
      Deferred
              Compensation
              Earnings
            
            All
      Other
              Compensation
              ($)
            
            Total
              ($)Zhaolin
      Ding
            
            
            20,000
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            20,000Deli
      Du
            
            
            20,000
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            20,000Zhenhang
      Jia
            
            
            20,000
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            20,000Yang
      Yi Hai(1)
            
            
            5,000
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            5,000Joseph
      J. Levinson
            
            
            20,000
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            20,000





(1)
            Mr.
      Yang was appointed as a director on July 25, 2008. His annual compensation
      as a director was $20,000 and he received $8,400 for his service as a
      director for the partial year he served on our board of directors in 2008.
      On March 31, 2009, Mr. Yang resigned from his position as a director of
      the Company.




26




ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT





The
following table sets forth certain information with respect to the beneficial
ownership of the voting securities by (i) any person or group with more than 5%
of the Company's securities, (ii) each director, (iii) each executive officer
and (iv) all executive officers and directors as a group as of the date
hereof.





Named
      and Address of Beneficial Owner
            
            Amount and
              Nature of
              Beneficial
              Ownership
            
            
            Percent (%) of
              Class (1)Deli
      Du,
              President,
      CEO and director
              No.
      28, Fengtai Bei Road
              Fengtai
      District, Beijing, PRC 100071
            
            
            5,186,225
            
            
            
            34.0
            %Yinan,Zhao
              Acting
      Chief Financial Officer
              No.
      28, Fengtai Bei Road
              Fengtai
      District, Beijing, PRC 100071
            
            
            0
            
            
            
            0
            %Zhaolin
      Ding, director
              No.
      28, Fengtai Bei Road
              Fengtai
      District, Beijing, PRC 100071
            
            
            0
            
            
            
            0
            %Zhenhang
      Jia, director
              No.
      28, Fengtai Bei Road
              Fengtai
      District, Beijing, PRC 100071
            
            
            0
            
            
            
            0
            %Joe
      Levinson, director
              No.
      28, Fengtai Bei Road
              Fengtai
      District, Beijing, PRC 100071
            
            
            0
            
            
            
            0
            %Tri-State
      Title & Escrow, LLC
              360
      Main Str., Suite 100
              P.O.
      Box 391
              Washington,
      VA.  22747
            
            
            1,000,000
            
            
            
            6.56
            %All
      directors and officers as a group (5 persons)
            
            
            5,186,225
            
            
            
            34.0
            %







(1)
            As
      of the date hereof, we had 15,233,652 outstanding shares of common stock.
      In determining the percent of common stock owned by a stockholder: (a) the
      numerator is the number of shares of common stock beneficially owned by
      such stockholder, including shares the beneficial ownership of which may
      be acquired, within 60 days upon the conversion of convertible securities
      or the exercise of warrants held by such stockholder, and (b) the
      denominator is the sum of (i) 15,233,652, the number of shares outstanding
      on the date hereof, and (ii) the total number of shares underlying the
      convertible securities and warrants, which such stockholders has the right
      to acquire within 60 days following the date
  hereof.





ITEM 13. CERTAIN RELATIONSHIPS AND RELATED
TRANSACTIONS





Since
January 1, 2009 we have not engaged in any transactions with any related persons
which would require disclosure under Item 404 of Regulation S-K.





Three of
our four directors are independent directors under the definition of
“independent director” pursuant to NASDAQ Marketplace Rule
5605(a)(2).




27





ITEM
14. PRINCIPAL ACCOUNTING FEES AND SERVICES





Audit
Fees





Effective
July 20, 2009, we engaged Paritz & Company, P.A. as our principal
independent registered public accounting firm to examine our consolidated
financial statements for the fiscal year ended December 31,
2009.  Cordovano and Honeck, LLP was the our independent registered
public accounting firm engaged to examine the Company’s consolidated financial
statements for the fiscal year ended December 31, 2008.





Fees for
the fiscal years ended December 31, 2009 and 2008.





Audit
Fees. The audit fee of Paritz & Company, P.A. is $105,000 for
professional services rendered for the audit of our annual financial statements
for the fiscal year ended December 31, 2009 and the reviews of the financial
statements included in our Quarterly Reports on Form 10-QSB for the periods
ended June 30, 2009 and September 30, 2009. Cordovano and Honeck, LLP was paid
aggregate fees of approximately $190,257 for professional services rendered for
the audit of our annual financial statements for the fiscal year ended December
31, 2008 and for the reviews of the financial statements included in our
Quarterly Reports on Form 10-QSB for the periods ended March 31, 2008, June 30,
2008, September 30 and March 31, 2009.





Audit Related
Fees





There
were no fees for audit related services for the years ended December 31, 2009
and 2008.




Tax Fees




For the
Company’s fiscal years ended December 31, 2009 and 2008, we were not billed for
professional services rendered for tax compliance, tax advice, and tax
planning.




All Other
Fees




The
Company did not incur any other fees related to services rendered by our
principal accountant for the fiscal years ended December 31, 2009 and
2008.




PART
IV





ITEM
15.  EXHIBITS, FINANCIAL STATEMENT
SCHEDULES.




(a) The
following documents are filed as part of this report:





(1)Financial Statements and
Report of Independent Registered Public Accounting Firm, which are set forth in
the index to Consolidated Financial Statements on pages F-1 through F-32 of this
report.





Report
      of Independent Registered Public Accounting Firm—Cordovano and Honeck
      LLP
            
            F-1Report
      of Independent Registered Public Accounting Firm—Paritz and Company,
      P.A.
            
            F-2Consolidated
      Balance Sheets
            
            F-3Consolidated
      Statements of Operations
            
            F-4Consolidated
      Statements of Stockholders' Equity
            
            F-5Consolidated
      Statements of Cash Flows
            
            F-6Notes
      to Consolidated Financial Statements
            
            F-7
      to F-32





(2) Financial Statement Schedule:
None.




28




REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
 The Board
of Directors and stockholders of
 CHINA
SOLAR & CLEAN ENERGY SOLUTIONS, INC.
  We have
audited the accompanying consolidated balance sheet of China Solar & Clean
Energy Solutions, Inc. (the “Company”) as of December 31, 2008 and the related
consolidated statements of income, cash flows and changes in stockholders’
equity and comprehensive income for the year ended December 31, 2008. 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 audit.
  We
conducted our audit 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 audits include 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 audit provides a reasonable basis for our opinion.
  In our
opinion, the consolidated financial statements referred to above present fairly,
in all material respects, the financial position of the Company as of December
31, 2008 and the results of their operations and their cash flows for the year
ended December 31, 2008 in conformity with accounting principles generally
accepted in the United States of America.
  As
discussed in Note 21 to the consolidated financial statements, the Company has
restated its 2008 consolidated financial statements.
 
 
 /s/ Cordovano and Honeck
LLP
  Englewood,
Colorado USA
  April 15,
2009, except for Note 4 and Note 19
 which are
dated April 12, 2010




F-1


Paritz
      & Company, P.A.
                15
      Warren Street, Suite 25
                  Hackensack,
      New Jersey 07601
                  (201)342-7753
                  Fax:
      (201) 342-7598
                  E-Mail:
      paritz @paritz.comCertified
      Public Accountants
  REPORT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM
  To
the Stockholders and Board of Directors
 China
Solar & Clean Energy Solutions, Inc.
   We
have audited the accompanying consolidated balance sheet of China Solar &
Clean Energy Solutions, Inc as of December 31, 2009 and the related consolidated
statement of income, statement of stockholders’ equity and comprehensive income,
and cash flows for the year then ended. These financial statements are the
responsibility of the Company's management.  Our responsibility is to
express an opinion on these financial statements based on our
audit.
  We
conducted our audit 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 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 includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial
statements.  An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation.  We believe
that our audit provides a reasonable basis for our opinion.
  In
our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of China Solar &
Clean Energy Solutions, Inc as of December 31, 2009, and the results of its
operations and its cash flows for the year then ended, in conformity with
accounting principles generally accepted in the United States of
America.
 
 Hackensack,
New Jersey
 April
15, 2010
  F-2
  CHINA
SOLAR & CLEAN ENERGY SOLUTIONS, INC.
 CONSOLIDATED
BALANCE SHEETS
 
 As of December 31,2009
              
              
              2008
                (Restated)ASSETSCurrent
      assets:Cash
      and cash equivalents
              
              $
              4,980,717
              
              
              $
              1,820,882Accounts
      receivable, net
              
              
              8,067,944
              
              
              
              5,445,036Inventories
              
              
              4,547,170
              
              
              
              6,492,830Other
      receivables and prepayments
              
              
              1,733,695
              
              
              
              5,978,403Deferred
      tax assets
              
              
              588,016
              
              
              
              -Total
      current assets
              
              
              19,917,542
              
              
              
              19,737,151Property
      and equipment, net
              
              
              13,775,554
              
              
              
              13,738,880Goodwill
              
              
              1,967,153
              
              
              
              2,340,512Land
      use rights
              
              
              1,592,140
              
              
              
              1,709,184Investment
      in Trueframe International Limited
              
              
              3,812,806
              
              
              
              -Assets
      of discontinued operations
              
              
              -
              
              
              
              8,972,481TOTAL
      ASSETS
              
              $
              41,065,195
              
              
              $
              46,498,208LIABILITIES
      AND STOCKHOLDERS’ EQUITYCurrent
      liabilities:Accounts
      payable, trade
              
              $
              1,601,002
              
              
              $
              1,148,428Taxes
      payable
              
              
              1,278,974
              
              
              
              1,405,057Other
      payables and accrued liabilities
              
              
              9,977,178
              
              
              
              9,998,227Loan
      payable-employee
              
              
              1,266,747
              
              
              
              1,575,454Total
      current liabilities
              
              
              14,123,901
              
              
              
              14,127,166Long-term
      liabilities:Deferred
      tax liabilities
              
              
              -
              
              
              
              15,779Long-term
      liabilities
              
              
              156,410
              
              
              
              286,483Liabilities
      of discontinued operations
              
              
              -
              
              
              
              4,182,671Total
      long-term liabilities
              
              
              156,410
              
              
              
              4,484,933Stockholders’
      equityConvertible
      preferred stock: par value $0.001, 25,000,000 shares authorized,
                none
      and 373,566 shares issued and outstanding, respectively
              
              
              -
              
              
              
              373Common
      stock, $0.001 par value, 66,666,667 shares authorized, 15,233,652
                and
      13,799,450  shares issued and outstanding,
      respectively
              
              
              15,233
              
              
              
              13,799Additional
      paid-in capital
              
              
              22,611,909
              
              
              
              23,073,258Accumulated
      other comprehensive income
              
              
              693,016
              
              
              
              1,615,082Retained
      earnings
              
              
              3,100,294
              
              
              
              2,025,949Profit
      earning reserves
              
              
              -
              
              
              
              963,106Total
      stockholders’ equity-China Solar
              
              
              26,420,452
              
              
              
              27,691,567Non-controlling
      interest in subsidiary
              
              
              364,432
              
              
              
              194,542Total
      Stockholder’s Equity
              
              
              26,784,884
              
              
              
              27,886,109TOTAL
      LIABILITIES AND STOCKHOLDERS’ EQUITY
              
              $
              41,065,195
              
              
              $
              46,498,208
 
 See
accompanying notes to consolidated financial statements.
  F-3
  CHINA
SOLAR & CLEAN ENERGY SOLUTIONS, INC.
 CONSOLIDATED  STATEMENTS OF
INCOME
  Years
      ended December 31,2009
              
              
              2008(restated)Revenue,
      net
              
              $
              26,315,671
              
              
              $
              41,516,053Cost
      of revenue
              
              
              18,862,952
              
              
              
              34,537,361Gross
      profit
              
              
              7,452,719
              
              
              
              6,978,692Operating
      expenses:Depreciation
      and amortization
              
              
              383,531
              
              
              
              1,172,254Selling
      and distribution
              
              
              2,410,181
              
              
              
              3,926,931General
      and administrative
              
              
              3,832,979
              
              
              
              3,447,906Total
      operating expenses
              
              
              6,626,691
              
              
              
              8,547,091Income(Loss)
      from operations
              
              
              826,028
              
              
              
              (1,568,399
              )Other
      income (expenses):Other
      income(expenses)
              
              
              717,750
              
              
              
              (350,204
              )Interest
      income
              
              
              4,613
              
              
              
              262,233Impairment
      expense
              
              
              -
              
              
              
              (3,012,488
              )Interest
      expense
              
              
              (218,882
              )
              
              
              (226,528
              )Total
      other income (expenses)
              
              
              503,481
              
              
              
              (3,326,987
              )Income(Loss)
      From Continuing Operations Before Income Taxes
              
              
              1,329,509
              
              
              
              (4,895,386
              )Income
      tax expense
              
              
              266,168
              
              
              
              96,167Income(Loss)
      From Continuing Operations
              
              
              1,063,341
              
              
              
              (4,991,553
              )Income(Loss)
      From Discontinued Operation (net of tax)
              
              
              (512,390
              )
              
              
              307,276Gain
      On Sale Of Discontinued Operation (net of tax)
              
              
              652,753
              
              
              
              -Net
      Income(Loss)
              
              
              1,203,704
              
              
              
              (4,684,277
              )Less:
      Net Income Attributable To Non-controlling Interest
              
              
              129,359
              
              
              
              818,893Net
      Income(Loss) Attributable To China Solar Shareholders
              
              $
              1,074,345
              
              
              $
              (5,503,170
              )Basic
      Earning Per ShareContinuing
      operations
              
              $
              0.07
              
              
              $
              (0.48
              )Discontinued
      operation
              
              
              (0.04
              )
              
              
              0.03Gain
      on sale of discontinued operation
              
              
              0.05
              
              
              
              -$
              0.08
              
              
              $
              (0.45
              )Diluted
      Earning Per ShareContinued
      operation
              
              $
              0.07
              
              
              $
              (0.48
              )Discontinued
      operation
              
              
              (0.04
              )
              
              
              0.03Gain
      on sale of discontinued operation
              
              
              0.05
              
              
              
              -$
              0.08
              
              
              $
              (0.45
              )Weighted
      average shares outstanding – basic and diluted
              
              
              15,815,125
              
              
              
              12,158,482
 
 See
accompanying notes to consolidated financial statements.
 
 F-4
  CHINA
SOLAR & CLEAN ENERGY SOLUTIONS, INC.
 CONSOLIDATED
STATEMENTS OF CASH FLOWS
 
 Years
      ended December 31,2009
              
              
              2008
                RestatedCash
      flows from operating activities:Net
      income(loss)
              
              $
              1,074,345
              
              
              $
              (5,503,170
              )Loss(income)
      from discontinued operation
              
              
              512,390
              
              
              
              (307,276
              )Income(Loss)
      from continuing operations
              
              
              1,586,735
              
              
              
              (5,810,446
              )Adjustments
      to reconcile net income to net cash provided by operating
      activities:Depreciation
      and amortization
              
              
              722,561
              
              
              
              642,310Impairment
      of assets
              
              
              -
              
              
              
              2,702,487Provision
      for allowance on accounts receivable
              
              
              708,144
              
              
              
              978,006Provision
      for inventory writes downs
              
              
              139,854
              
              
              
              246,408Gain
      on sale of discontinued operation
              
              
              (652,753
              )
              
              
              -Noncontrolling
      interest in income of subsidiary
              
              
              129,359
              
              
              
              818,893Changes
      in operating assets and liabilities:Accounts
      receivable, trade
              
              
              (3,331,052
              )
              
              
              1,199,307Inventories
              
              
              1,811,220
              
              
              
              (3,101,796
              )Other
      receivables and prepayments
              
              
              431,902
              
              
              
              (5,067,630
              )Accounts
      payable, trade
              
              
              452,574
              
              
              
              3,190,321Income
      tax payable
              
              
              (126,083
              )
              
              
              296,624Other
      payables and accrued liabilities
              
              
              (218,021
              )
              
              
              (2,197,839
              )Net
      cash provided by(used in) operating activities
              
              
              1,654,440
              
              
              
              (6,103,355
              )Net
      cash (used in)provided by discontinued operation
              
              
              (679,068
              )
              
              
              882,128Net
      cash provided by(used in)operating activities
              
              
              975,372
              
              
              
              (5,221,227
              )Cash
      flows from investing activities:Proceeds
      from disposal of subsidiary
              
              
              2,758,277
              
              
              
              -Acquisition
      of a subsidiary, net of cash acquired
              
              
              (130,298
              )
              
              
              (662,491
              )Purchase
      of intangible assets
              
              
              -
              
              
              
              (1,123,639
              )Purchase
      of property, plant and equipment
              
              
              (484,096
              )
              
              
              (6,966,354
              )Net
      cash provided by(used in) investing activities
              
              
              2,143,883
              
              
              
              (8,752,484
              )Net
      cash used in discontinued operation
              
              
              -
              
              
              
              (255,512
              )Net
      cash provided by(used in)investing activities
              
              
              2,143,883
              
              
              
              (9,007,996
              )Cash
      flows from financing activities:Proceeds
      from warrants exercised
              
              
              -
              
              
              
              107,500Capital
      contribution received from shareholders
              
              
              -
              
              
              
              9,995,156Capital
      contribution from non-controlling shareholder
              
              
              51,240
              
              
              
              -Net
      cash provided by financing activities
              
              
              51,240
              
              
              
              10,102,656Foreign
      currency translation adjustment
              
              
              (10,660
              )
              
              
              480,812NET
      CHANGE IN CASH AND CASH EQUIVALENTS
              
              
              3,159,835
              
              
              
              (3,645,755
              )CASH
      AND CASH EQUIVALENTS, BEGINNING OF YEAR
              
              
              1,820,882
              
              
              
              5,466,637CASH
      AND CASH EQUIVALENTS, END OF YEAR
              
              $
              4,980,717
              
              
              $
              1,820,882SUPPLEMENTAL
      DISCLOSURE OF CASH FLOW INFORMATIONCash
      paid for income taxes
              
              $
              381,563
              
              
              $
              538,332Cash
      paid for interest expense
              
              $
              129,012
              
              
              $
              302,961SUPPLEMENTAL
      DISCLOSURE OF NONCASH INVESTING AND FINANCING TRANSACTIONSWarrant
      shares granted for offering costs
              
              $
              -
              
              
              $
              541,695Issuance
      of common stock for acquisitions of SZPSP
              
              $
              -
              
              
              $
              2,839,458Issuance
      of warrants for the acquisitions of SZPSP
              
              $
              -
              
              
              $
              92,193Preferred
      shares converted to common shares
              
              $
              373
              
              
              $
              1,401
  See
accompanying notes to consolidated financial statements.
 
 F-5
  CHINA
SOLAR & CLEAN ENERGY SOLUTIONS, INC.
 CONSOLIDATED
STATEMENTS OF STOCKHOLDERS' EQUITY AND COMPREHENSIVE INCOME
 (Currency
expressed in United States Dollars (“US$”), except for number of
shares)
 Preferred
      stock
                
                
                
                Common
      stock
                
                
                
                Additional
                  paid-in
                
                
                
                Accumulated
                  other
                
                
                
                Retained
                
                
                
                
                
                
                Non-controlling interest
                
                
                
                TotalNo.
      of
                  shares
                
                
                
                Par
                  value
                
                
                
                No.
      of
                  shares
                
                
                
                Par
                  value
                
                
                
                Capital
                  Retated
                
                
                
                comprehensive income
                
                
                
                Earnings
                  Restated
                
                
                Earnings
                  reserve
                
                
                
                in
                  subsidiary
                
                
                
                stockholders’
                  equityBalance
      as of January 1, 2008
                
                
                1,774,194
                
                
                $
                1,774
                
                
                
                6,205,290
                
                
                $
                6,205
                
                
                $
                9,260,607
                
                
                $
                1,134,270
                
                
                $
                7,529,119
                
                
                
                
                
                $
                935,825
                
                
                $
                18,867,800Shares
      issued for private placement, net of offering costs of $1,264,451 in cash
      and $541,695 in warrants.
                
                
                
                
                
                
                
                
                
                
                4,691,499
                
                
                
                4,691
                
                
                
                9,990,465
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                9,995,156Shares
      and warrants issued for the acquisition of subsidiary at fair
      value
                
                
                
                
                
                
                
                
                
                
                1,419,729
                
                
                
                1,420
                
                
                
                2,930,231
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                2,931,651Shares
      issued for services
                
                
                
                
                
                
                
                
                
                
                7,304
                
                
                
                7
                
                
                
                15,185
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                15192Warrant
                
                
                
                
                
                
                
                
                
                
                75,000
                
                
                
                75
                
                
                
                107,425
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                107,500Preferred
      share converted
                
                
                -1,400,628
                
                
                
                -1,401
                
                
                
                1,400,628
                
                
                
                1,401
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                -Minority
      share purchased
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                769,345
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                769,345Comprehensive
      income:
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                -Net
      income
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                -5,503,170
                
                
                
                
                
                
                939,944
                
                
                
                -4,563,226Foreign
      currency translation adjustment
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                480,812
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                480,812Acquisition
      from minority interests
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                -1,681,227
                
                
                
                -1,681,227Profit
      earning reserves
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                963,106
                
                
                
                
                
                
                
                963,106Balance
      as of December 31, 2008
                
                
                373,566
                
                
                
                373
                
                
                
                13,799,450
                
                
                
                13,799
                
                
                
                23,073,258
                
                
                
                1,615,082
                
                
                
                2,025,949
                
                
                
                963,106
                
                
                
                194,542
                
                
                
                27,886,109Disposal
      subsidiary
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                -460,288
                
                
                
                
                
                
                
                
                
                
                
                -963,106
                
                
                
                
                
                
                
                -1,423,394Preferred
      share converted
                
                
                -373,566
                
                
                
                -373
                
                
                
                373,566
                
                
                
                373
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                -Net
      income
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                1,074,345
                
                
                
                
                
                
                
                131,636
                
                
                
                1,205,981Foreign
      currency translation adjustment
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                -922,066
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                -922,066Appropriation
      of dividents
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                -12,986
                
                
                
                -12,986Appropriation
      of statutory surplus reserves
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                -Capital
      contribution from non-controlling shareholder
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                51,240
                
                
                
                51240Cancellaction
      common stock
                
                
                
                
                
                
                
                
                
                
                -939,364
                
                
                
                -939
                
                
                
                939
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                -Shares
      released and to be released from escrow
                
                
                
                
                
                
                
                
                
                
                2,000,000
                
                
                
                2,000
                
                
                
                -2,000
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                -Balance
      as of December 31, 2009
                
                
                0
                
                
                $
                0
                
                
                
                15,233,652
                
                
                $
                15,233
                
                
                $
                22,611,909
                
                
                $
                693,016
                
                
                $
                3,100,294
                
                
                $
                -
                
                
                $
                364,432
                
                
                $
                26,784,884
 
 See
accompanying notes to consolidated financial statements.
  F-6
 
 CHINA
SOLAR & CLEAN ENERGY SOLUTIONS, INC.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 1.
              ORGANIZATION
      AND BUSINESS BACKGROUND
 
 China
Solar & Clean Energy Solutions, Inc. (“China Solar” or ” the Company”),
formerly known as Deli Solar (USA) Inc. was incorporated in the State of Nevada
on March 21, 1983 as Meditech Pharmaceuticals, Inc. (“Meditech”).
 
 Deli
Solar (BVI) was formed in June 2004. On August 1, 2004, Deli Solar (BVI)
purchased Bazhou Deli Solar Energy Heating Co., Ltd. (“Deli Solar (Bazhou)”), a
corporation duly organized on August 19, 1997 under the laws of the People’s
Republic of China (“PRC”) from Messrs. Deli Du, Xiao’er Du, and Xiaosan Du for
RMB 6,800,000. As a result of this transaction, Deli Solar (Bazhou) became a
wholly-foreign owned enterprise (“WFOE”) under PRC law on March 30, 2005. This
acquisition was accounted for as a transfer of entities under common
control.
 
 The
result of the above transactions is that Deli Solar (BVI) is now China Solar’s
direct, wholly-owned subsidiary and Deli Solar (Bazhou) remains a wholly-owned
subsidiary of Deli Solar (BVI).
 
 Beijing
Deli Solar Technology Development Co., Ltd. (“Deli Solar (Beijing)”), a wholly
owned subsidiary was founded in 2006 and is principally engaged in solar power
heater integrated construction projects in major cities in the PRC.
 
 On July
1, 2007, Deli Solar (Beijing) acquired 51% of Tianjin Huaneng Energy Equipment
Company (“Tianjin Huaneng”), which manufactures energy saving boilers and
environmental protection equipment for industrial customers. On October 27,
2008, Deli Solar (Beijing) purchased an additional 29.97% of the outstanding
equity interest of Tianjin Huaneng from the minority shareholders of Tianjin
Huaneng. Following this transaction, the Company increased the registered
capital of Tianjin Huaneng from RMB5.94 million to RMB21.68 million by
contributing an additional RMB15,740,000 ($2,295,531). As a result, the
Company’s equity interest in Tianjin Huaneng increased to approximately
91.82%.
 
 On April
1, 2008, Deli Solar (Beijing) acquired 100% of Shenzhen Pengsangpu Solar
Industrial Products Corporation (“SZPSP”), which is engaged in the re-sale of
energy-saving related heating products such as heat pipes, heat exchangers,
pressure water boilers, solar energy heaters and radiators. On July 6, 2009,
Deli Solar (Beijing) entered into a termination agreement (the "Termination
Agreement") with the three shareholders of SZPSP, (the "SZPSP Shareholders"),
terminated the equity purchase and complementary agreements (collectively, the
"Equity Purchase and Complementary Agreements") entered into with the SZPSP
Shareholders on January 9, 2009 and supplemented on March 25, 2008.
  F-7
  CHINA
SOLAR & CLEAN ENERGY SOLUTIONS, INC.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 
 2.
              SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES
 
 Basis
      of presentation
 
 These
accompanying financial statements have been prepared in accordance with
generally accepted accounting principles in the United States of America (“US
GAAP”).
 
 Basis
      of consolidation
 
 The
consolidated financial statements include the financial statements of China
Solar, Deli Solar (BVI), Deli Solar (Bazhou), Ailiyang, Deli Solar (Beijing),
Tianjin Huaneng.
 
 All
significant intercompany balances and transactions within the Company have been
eliminated upon consolidation.
 
 Use
      of estimates
 
 In
preparing these financial statements, management makes estimates and assumptions
that affect the reported amounts of assets and liabilities in the balance sheets
and revenues and expenses during the years reported. Actual results may differ
from these estimates.
 
 Cash
      and cash equivalents
 
 The
Company considers all highly liquid securities with original maturities of three
months or less when acquired to be cash equivalents.  Cash and cash
equivalents kept with financial institutions in People’s Republic of China
(“PRC”) are not insured or otherwise protected. Should any of those institutions
holding the Company’s cash become insolvent, or the Company is unable to
withdraw funds for any reason, the Company could lose the cash on deposit on
that institution.
 
 Accounts
      receivable and allowance for doubtful
accounts
 
 Accounts
receivable consists of amounts due from customers. The Company extends unsecured
credit to its customers in the ordinary course of business but mitigates the
associated risks by performing credit checks and actively pursuing past due
accounts. An allowance for doubtful accounts is established and determined based
on management’s assessment of known requirements, aging of receivables, payment
history, the customer’s current credit worthiness and the economic
environment.
 
 Inventories
 
 Inventories
include direct materials, labor and factory overhead and are stated at lower of
cost or market value, cost being determined on a first-in, first-out basis. The
Company periodically reviews historical sales activity to determine excess, slow
moving items and potentially obsolete items and also evaluates the impact of any
anticipated changes in future demand. The Company provides inventory allowances
based on excess and obsolete inventories. As of December 31, 2009, and 2008, the
Company recorded $139,854 and $246,408 in inventory writes downs.
 
 F-8
  CHINA
SOLAR & CLEAN ENERGY SOLUTIONS, INC.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 
 Property,
      plant and equipment
 
 Property,
plant and equipment are stated at cost less accumulated depreciation and
accumulated impairment losses, if any. Depreciation is calculated on the
straight-line basis over the following expected useful lives from the date on
which they become fully operational and after taking into account their
estimated residual values. Property, plant and equipment are depreciated over
their estimated useful lives as follows:
  Depreciable lifeBuildings
              
              6-50
      yearsPlant
      and machinery
              
              10
      yearsOffice
      equipments
              
              7
      yearsMotor
      vehicles
              
              7
      yearsComputer
      equipment
              
              3
      years
 
 Goodwill
      and intangible assets
  We
account for business combinations in accordance with current authoritative
guidance, which requires that the purchase method of accounting be used for all
business combinations. It requires intangible assets acquired in a business
combination to be recognized and reported separately from goodwill.
 
 Furthermore,
it requires purchased intangible assets other than goodwill to be amortized over
their useful lives unless these lives are determined to be indefinite. No
impairment of intangibles has been identified since the date of
acquisition.
 
 Goodwill
represents the cost of the acquired businesses in excess of the fair value of
identifiable tangible and intangible net assets purchased. The company generally
seeks the assistance of independent valuation experts in determining the fair
value of the identifiable tangible and intangible net assets of the acquired
business.
  We test
goodwill for impairment on an annual basis. In this process, we rely on a number
of factors including operating results, business plans and future cash flows.
Recoverability of goodwill is evaluated using a two-step process. The first step
involves a comparison of the fair value of a reporting unit with its carrying
value. If the carrying amount of the reporting unit exceeds its fair value,
the second step of the process involves a comparison of the fair value and
carrying value of the goodwill of that reporting unit. If the carrying value of
the goodwill of a reporting unit exceeds the fair value of that goodwill, an
impairment loss is recognized in an amount equal to the excess. Goodwill of a
reporting unit will be tested for impairment between annual tests if an event
occurs or circumstances change that would more likely than not reduce the fair
value of the reporting unit below its carrying amount.
 
 During
the year ended December 31, 2009, we didn’t find the goodwill impairment
after testing.We
evaluate intangible assets for recoverability whenever events or changes in
circumstances indicate that their carrying amounts may not be recoverable.
Recoverability of assets to be held and used is measured by a comparison of the
carrying amount of an asset to the future undiscounted net cash flows expected
to be generated by the asset. If these assets are considered to be impaired, the
impairment to be recognized is measured by the amount by which the carrying
value of the assets exceeds the fair value of the assets.
  Land use
rights
 
 All lands
in the PRC are owned by the PRC government. The government in the PRC, according
to the relevant PRC law, may sell the right to use the land for a specified
period of time. Thus, all of the Company’s land purchases in the PRC are
considered to be leasehold land and are stated at amortized cost. Amortization
is provided over the term of the land use right agreements on a straight-line
basis, which is 50 years and they will expire in 2043, 2046 and
2054.
 
 Impairment
      of long-lived assets
 
 Long-lived
assets and certain identifiable intangible assets held and used by the Company
are reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable. Recoverability of
assets to be held and used is evaluated by a comparison of the carrying amount
of assets to estimated undiscounted net cash flows expected to be generated
by the assets. If such assets are considered to be impaired, the impairment to
be recognized is measured by the amount by which the carrying amounts of the
assets exceed the fair value of the assets. There has been no impairment as of
December 31, 2009 and 2008.
 
 Investment
in Trueframe International Limited
 
 The
Company’s investment in Trueframe International Limited (“TFIL”) is accounted
for by the equity method of accounting. (See note 4 )
  F-9
  CHINA
SOLAR & CLEAN ENERGY SOLUTIONS, INC.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
  Revenue
      recognition
 
 The
Company’s sales include furnishing equipment to end users, installing and
testing the equipment and providing maintenance.  Revenue is
recognized after testing and acceptance by the customer if a formal relationship
exists, the price is fixed or determinable, no other significant obligations of
the Company exists and collectability is reasonably assured.
 The
Company provides equipment purchasers with a maintenance warranty ranging from
one year to eighteen months. The Company accrues expected warranty costs at the
time the related sales revenue is recognized. Warranty reserves have been
established by charging cost of sales and recording a warranty provision. The
reserves are estimated by management to be adequate to cover expected warranty
related costs under unexpired warranty periods.
 
 Revenue
from the provision of energy-saving projects are recognized when persuasive
evidence of an arrangement exists, transfer of title has occurred or services
have been rendered, the selling price is fixed or determinable and
collectability is reasonably assured.
 
 The
Company recognizes its revenues net of value-added taxes (“VAT”). The Company is
subject to VAT which is levied on the majority of the products at the rate of
17% on the invoiced value of sales. Output VAT is borne by customers in addition
to the invoiced value of sales and input VAT is borne by the Company in addition
to the invoiced value of purchases to the extent not refunded for export
sales.
 
 Advertising
      expense
 
 Advertising
costs are expensed as incurred. Advertising expense for the years ended December
31, 2009 and 2008 were $497,117 and $1,423,914, respectively.
 
 Comprehensive
      income
 
 Comprehensive
income as defined includes all changes in equity during a period from non-owner
sources. Accumulated other comprehensive income, as presented in the
accompanying statement of changes in owners’ equity consists of changes in
unrealized gains and losses on foreign currency translation. This comprehensive
income is not included in the computation of income tax expense or
benefit.
 
 F-10
  CHINA
SOLAR & CLEAN ENERGY SOLUTIONS, INC.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 
 Income
      taxes
 
 The
Company accounts for income tax using the asset and liability approach for
financial accounting and reporting for income taxes. Under this approach,
deferred income taxes are provided for the estimated future tax effects
attributable to temporary differences between financial statement carrying
amounts of assets and liabilities and their respective tax bases, and for the
expected future tax benefits from loss carry-forwards and provisions, if any.
Deferred tax assets and liabilities are measured using the enacted tax rates
expected in the years of recovery or reversal and the effect from a change in
tax rates is recognized in the statement of operations and comprehensive (loss)
income in the period of enactment. A valuation allowance is provided to reduce
the amount of deferred tax assets if it is considered more likely than not that
some portion of, or all of the deferred tax assets will not be
realized.
 
 Net
      income per share
 
 Basic
income per share is computed by dividing the net income by the weighted-average
number of common shares outstanding during the period. Diluted income per share
is computed similar to basic income per share except that the denominator is
increased to include the number of additional common shares that would have been
outstanding if the potential common stock equivalents had been issued and if the
additional common shares were dilutive.
 
 Foreign
      currency translation
 
 The
financial records of the Company’s operating subsidiaries are maintained in
their local currency, the Renminbi (“RMB”), which is the functional currency.
Assets and liabilities are translated at the exchange rates at the balance sheet
date, equity accounts are translated at historical exchange rates, and income
and expenses items are translated using the average rate for the
period. The translation adjustments are recorded in accumulated other
comprehensive income in the statements of changes in stockholders’ equity and
comprehensive income. Realized foreign exchange gains and losses are recognized
in the period on which they occur.
 
 Stock
      based compensation
 
 Under
authoritative guidance issued by FASB, stock-based compensation expense is
measured at the grant date based on the value of the option or restricted stock
and is recognized as expense, less expected forfeitures, over the requisite
service period.
  F-11
  CHINA
SOLAR & CLEAN ENERGY SOLUTIONS, INC.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 
 Product
      Warranty
 
 The
Company provides a three-year standard warranty to all Deli Solar (Bazhou)
manufactured products. Repair and replacement of defective component parts
during the first year following purchase are covered under the standard warranty
program. In the second and third year, repair services are covered under the
warranty program but customers pay for the purchase of the replacement parts.
Warranty services are performed by our independent sales agents and distributors
in return for a 1%-2% discount of the purchase price they pay for our products.
No discount is provided to independent sales agents and distributors unless and
until warranty services are provided to the Company. The Company has not
experienced any material returns and therefore has not provided any discount to
independent sales agents and distributors for warranty services.
 
 Segment
      reporting
 
 The
Company establishes standards for reporting information about operating segments
on a basis consistent with the Company’s internal organization structure as well
as information about geographical areas, business segments and major customers
in financial statements. The Company operates in three principal reportable
segments: Sales of solar heater or boiler related products, heat pipe related
products, integrated energy-saving projects.
 
 Fair
      value of financial instruments
 
 The
Company values its financial instruments as required by authoritative guidance.
The estimated fair value amounts have been determined by the Company, using
available market information and appropriate valuation methodologies. The
estimates presented herein are not necessarily indicative of amounts that the
Company could realize in a current market exchange.
 
 The
Company’s financial instruments primarily include cash and cash equivalents,
accounts receivable, other receivables and prepayments, accounts payable, other
payables and accrued liabilities. As of the balance sheet date, the estimated
fair values of financial instruments were not materially different from their
carrying values as presented due to short maturities of these
instruments.
 
 F-12
  CHINA
SOLAR & CLEAN ENERGY SOLUTIONS, INC.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 
 Uncertain
      tax positions
 
 Accounting
guidance prescribes a more likely than not threshold for financial statement
recognition and measurement of a tax position taken or expected to be taken in a
tax return. This Interpretation also provides guidance on derecognizing of
income tax assets and liabilities, classification of current and deferred income
tax assets and liabilities, accounting for interest and penalties associated
with tax positions, accounting for income taxes in interim periods, and income
tax disclosures.
 
 The
Company or one of its subsidiaries files income tax returns in the U.S. federal
jurisdiction and foreign jurisdictions, principally the PRC. With few
exceptions, the Company is no longer subject to U.S. federal, state and local,
or non-U.S. income tax examinations by tax authorities for years prior to the
reverse merger on March 31, 2005. The Internal Revenue Service (IRS) has not
commenced any examinations of the Company's U.S. income tax returns for the year
2005, of which reverse merger taking place, through 2008.
 
 The
Company did not have any adjustment to the opening balance of retained earnings
as of January 1, 2008 as a result of the implementation of any uncertain
tax position.
 
 3.           RECENTLY
ISSUED ACCOUNTING STANDARDS
 
 In
January 2010, the FASB issued Accounting Standards Update (“ASU”) 2010-06,
“improving Disclosures about Fair Value Measurements,” which clarifies certain
existing requirements in ASC 820 “Fair Value Measurements and Disclosures,” and
required disclosures related to significant transfers between each level and
additional information about Level 3 activity.  FASB ASU 2010-06
begins phasing in the first fiscal period beginning after December 15,
2009.  The Company is currently assessing the impact on its
consolidated results of operations and financial conditions.
  In June
2009, the FASB issued additional guidance under ASC 860 “Accounting for Transfer
of financial Assets and Extinguishment of Liabilities” which improves the
relevance, representational faithfulness, and comparability of the information
that a reporting entity provides in its financial statements about a transfer of
financial asset; the effects of a transfer on its financial position, financial
performance, and cash flows; and a transferor’s continuing involvement, if any,
in transferred financial assets.  This additional guidance requires
that a transferor recognize and initially measure at fair value all assets
obtained (including a transferor's beneficial interest) and liabilities incurred
as a result of a transfer of financial assets accounted for as a sale. Enhanced
disclosures are required to provide financial statement users with greater
transparency about transfers of financial assets and a transferor's continuing
involvement with transferred financial assets. This additional guidance must be
applied as of the beginning of each reporting entity's first annual reporting
period that begins after November 15, 2009, for interim periods within that
first annual reporting period and for interim and annual reporting periods
thereafter. Earlier application is prohibited. This additional guidance must be
applied to transfers occurring on or after the effective date. The adoption of
this ASC 860 is not expected to have a material impact on the Company's
financial statements and disclosures.
  In
February 2010, the FASB issued FASB ASU 2010-09, “Subsequent Events, Amendments
to Certain Recognition and Disclosure Requirements,” which clarifies certain
existing evaluation and disclosure requirements in ASC 855 “Subsequent Events”
related to subsequent events. FASB ASU 2010-09 requires SEC filers to evaluate
subsequent events through the date in which the financial statements are issued
and is effective immediately. The new guidance does not have an effect on the
Company’s consolidated results of operations and financial
condition.
  In June
2009, the FASB issued a pronouncement amending previous topic guidance, and
changes how a company determines when an entity that is insufficiently
capitalized or is not controlled through voting (or similar rights) should be
consolidated. The determination whether a company is required to consolidate an
entity is based on, among other things, an entity’s purpose and design and a
company’s ability to direct the activities of the entity that most significantly
impact the entity’s economic performance. This pronouncement is effective for
financial statements issued for fiscal years beginning after December 15, 2009
and interim periods within those fiscal years. The Company is evaluating
the impact that this pronouncement will have on the Company’s consolidated
financial statements.
  Management
does not believe that any other recently issued, but not yet effective,
accounting standards if currently adopted would have a material effect on the
accompanying financial statements.
 
 F-13
  CHINA
SOLAR & CLEAN ENERGY SOLUTIONS, INC.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 
 4.
              BUSINESS
      ACQUISITIONS
 
 TianJin
HuaNeng
 
 On July
1, 2007, the Company’s wholly owned subsidiary, Deli Solar (“Beijing”) acquired
51% equity interest in Tianjin Huaneng, for a total purchase price of
$1,689,741. The Company also incurred additional cost of $769,418 related to
finder’s fee, which has been included in the total cost of the acquisition
of $2,459,159. In addition, the Company agreed to provide working capital of
approximately $2.6 million to Tianjin Huaneng. This acquisition was accounted
for under the purchase method. Tianjin Huaneng results of operations have been
included in our consolidated financial statements since the date of acquisition.
Goodwill recorded as part of the purchase price allocation was $1,708,665.
Identifiable intangible assets acquired as part of the acquisition included
definite-lived intangibles such as land use rights which totaled $256,157, with
a weighted average amortization period of approximately 50 years.
 
 In June
2008, the purchase price allocation was finalized which resulted to no
adjustment to the fair value of assets acquired and liabilities assumed. The
following table represents the final purchase price allocation to the estimated
fair value of the assets acquired and liabilities assumed:
  As of July 1,
                2007Current
      assets
              
              $
              4,666,441Property,
      plant and equipment
              
              
              589,985Land
      use rights
              
              
              256,157Goodwill
              
              
              1,789,324Total
      assets acquired
              
              $
              7,301,907Current
      liabilities
              
              $
              4,444,999Deferred
      tax liabilities
              
              
              16,059Long-term
      payables
              
              
              381,690Total
      liabilities assumed
              
              
              4,842,748Net
      assets acquired
              
              $
              2,459,159
  On
October 27, 2008, Deli Solar (Beijing), entered into an agreement to acquire
approximately an additional 29.97% of the outstanding equity interest of Tianjin
Huaneng, from the minority shareholders of Tianjin Huaneng.
 
 Under the
agreement, Deli Solar (Beijing) agreed to pay to the Tianjin Huaneng
shareholders RMB 10.68 million ($1,557,578 US Dollars) payable in cash within
seven days of the execution of the agreement. RMB 3.56 million ($515,026) was
actually paid at the completion of the acquisition, the remaining RMB 7.12
million ($1,047,611) is payable over three years. In addition, the Company
agreed to pay to the Tianjin Huaneng shareholders RMB 2.848 million ($416,000)
payable in cash in three installments, which will be respectively RMB890, 000,
RMB890, 000 and RMB1, 068, 000 in the first year, in the second year and the
third year at the completion of the acquisition.
 
 F-14
  In
addition to the cash purchase price, the Company also agreed to issue to the
Tianjin Huaneng shareholders a total of 1,000,000 five year warrants to purchase
the Company’s common stock at an exercise price of $1.10 per share.
 
 The
Company additionally decided to increase its equity interest in Tianjin Huaneng
by contributing an additional RMB 15,740,000 ($2,295,531 US Dollars) to the
registered capital of Tianjin Huaneng for an additional 10.85% interest in
Tianjin Huaneng.
 
 As a
result of the consummation of the agreement and the additional capital
contribution, the Company owns approximately 91.82% of the equity interest in
Tianjin Huaneng.
 
 The
$1,789,324 of goodwill was assigned to the heat pipe related products
segment.
 
 ShenZhen
PSP
  On
January 9, 2008 and March 25, 2008, Deli Solar (Beijing)” entered into an Equity
Purchase Agreement, a Complementary Agreement and a Supplementary Agreement,
with Shenzhen PengSangPu Solar Industrial Products Corporation (“SZPSP”) and its
shareholders to acquire 100% of the outstanding equity interests of SZPSP. The
closing was effective March 31, 2008.
  Part of
the consideration of the transaction is RMB 28.8 million ($4,087,832) payable in
cash. This purchase price is based on an appraisal of SZPSP. The three
shareholders of SZPSP agreed to loan the cash proceeds back to SZPSP interest
free to be used for working capital. Fifty (50%) of the principal amount of the
loan was required to be paid prior to March 31, 2009 and the remaining 50%
balance was required to be paid prior to March 31, 2010.
 
 In
addition to the payment of the cash purchase price under the Complementary
Agreement the parties agreed to an appraisal value of RMB 20 million of SZPSP’s
intangible assets which was paid in 1,419,729 shares of common stock. Provided
that if on the first anniversary of the closing the common stock price is lower
than $2, the Company will pay the difference. In addition, as part of the
purchase price, the shareholders of SZPSP received five years warrants to
purchase a total of 141,973 shares of common stock at an exercise price of $2.5
per share subject to future adjustments such as stock splits and transactions
similar in nature.
 
 SZPSP
warranted in the Complementary Agreement that if (i) its sales revenue is less
than RMB 99 million (approximately $13,670,068) with an after-tax net profit of
less than RMB 9.43 million (approximately $1,302,108) for the year ended
December 31, 2008; or (ii) if in the year ended December 31, 2009, it does not
reach the targeted sales revenue of RMB 143.9 million (approximately
$19,868,336) or the after-tax net profit of RMB 12.13 million (approximately
$1,674,789), the differential part that has not achieved the profit for the year
specified will be paid by reducing the amount payable on the shareholders’ loan.
If the shareholders’ loan is not sufficient to pay the difference, the common
shares held by SZPSP will be returned to us to the extent necessary for the
remaining balance. For the year ended December 31, 2008, RMB 7 million
(approximately $1,029,336) has been accrued to reduce the amount payable on the
shareholders’ loan.
 
 F-15
  The
current shareholders of SZPSP, being the management of SZPSP, will enter into
employment contracts with the Company for a term of three years to remain in
their current managing positions of SZPSP, subject to further amendments of such
employment arrangement.
 
 The
accounting date of the acquisition was April 1, 2008 and was accounted for under
the purchase method. SZPSP results of operations for the nine months ended
December 31, 2008 have been included in consolidated financial
statements.
 
 The
estimated aggregate purchase price was $7,019,483. Below is a summary of the
total purchase price:
 
 Cash
              
              
              4,087,832Fair
      value of 1,419,729 common stock
              
              
              2,839,458Fair
      value of 141,973 warrants
              
              
              92,193Total
      purchase price
              
              
              7,019,483
 
 Our
purchase price allocation for the SZPSP acquisition was finalized on June 30,
2008. The following table represents the final purchase price allocation to the
estimated fair value of the assets acquired and liabilities
assumed:
 
 As of April 1,
                2008(Unaudited)Current
      assets
              
              
              1,224,924Net
      investment in sales-type leases
              
              
              966,806Property,
      plant and equipment
              
              
              1,275,287Customer
      relationships
              
              
              1,100,000Intellectual
      property
              
              
              1,250,000Goodwill
              
              
              3,055,769Total
      assets acquired
              
              $
              8,872,786Total
      liabilities assumed
              
              
              1,853,303Net
      assets acquired
              
              $
              7,019,483
 
 The
$3,055,769 of goodwill was expected to be assigned to the solar heater/boiler
related products segment and a new segment of energy-saving projects. Of the
$2,350,000 of acquired intangible assets, $310,000 was assigned to in-process
research and development (“IPRD”) which was written off during the year ended
December 31, 2008, $940,000 was assigned to existing intellectual property, and
$1,100,000 was assigned to customer relationships. The acquired identifiable
intangibles assets have a weighted-average amortization period totaling
approximately 10 years.
 
 Upon
further review, certain R&D underway was later determined to not warrant
completion and that future products based on the R&D were discontinued given
the demand in the market.
 
 F-16
  Our
internal technology specialists did a scientific and technological evaluation of
the research expenditures of Shenzen Pengsangpu Solar Industrial Products
Corporation. Our evaluation was based on a number of factors,
including,
 
 1)
              Commercial
      viability of products being researched and developed2)
              Anticipated
      level of patent protection
 3)
              Competitive
      environment for products being researched and
  developed
 
 At the
date of acquisition, the technology feasibility has not been established and
there is no alternative future use. Through this evaluation we determined that
$310,000 of expenditures had no future value and accordingly should be written
off immediately.
 
 The
following unaudited pro forma financial information gives effect to the
acquisition of SPPSP as if the acquisition occurred on January 1, 2008. These
pro forma results do not purport to be indicative of the results of operations
which actually would have resulted had the acquisitions occurred on such date or
to project the Company’s results of operations for any future period.
 
 For
      the Year
                EndedDecember
      31,
                2008(Unaudited)Pro
      forma revenues
              
              $
              54,077,571Pro
      forma net loss
              
              $
              (4,163,333
              )Pro
      forma loss per common shareBasic
      and diluted
              
              $
              (0.34
              )Weighted
      average common shares outstanding
              
              
              12,158,482
  Trueframe
International Limited
 
 On
January 21, 2008, we entered into a letter of intent (“LOI”) with the three
shareholders holding the entire equity interests of Shengzhen Fuwaysun
Technology Co., Ltd. (“Fuwaysun”), a PRC company primarily engaged in the
development and production of solar pest killing lamps and transportable solar
generators. Pursuant to the LOI, we will acquire 60% of Fuwaysun’s entire equity
interests (the “Acquisition”) from the Fuwaysun Shareholders at a purchase price
equal to 60% of Fuwaysun’s audited net assets as of January 30, 2008 (the
“Purchase Price”). We will pay the purchase price with cash and our shares as to
be agreed by the parties.
 
 In April,
2008, we entered into two loan agreements with Fuwaysun (the “Loan Agreements”),
pursuant to which we made two loans to Fuwaysun as working capital for six
months, one for $3,000,000 and the other for RMB3,000,000 ($424,352) (the
“Loans”), respectively. The Loan Agreements are substantially identical, except
for the amounts of the loans. Pursuant to the Loan Agreements, if we
complete the Acquisition within six months, we will cancel the Loans to offset
the Purchase Price; if we cannot complete the Acquisition within six months,
Fuwaysun must repay the Loans with 30 days after the expiration of the six
months plus interest on the Loans at a rate of 12% per annum. However, if
Fuwaysun refuses to our Acquisition, Fuwaysun shall repay the Loans plus accrued
interest at a rate of 20% per annum within 30 days thereafter and pay us
liquidated damages equal to 5% of the Purchase Price. If Fuwaysun fails to
repay either Loan pursuant to the applicable Loan Agreement, it shall pay us
additional interest on such Loan at a rate of 0.5% per day. We later made
several loans to Fuwaysun for a total of RMB3, 550,000 as an addition working
capital under the Loan Agreement for RMB3, 000,000 from June 2008 to January
2009. Thus, the two Loan Agreements between us and Fuwaysun changed to be one
for $3,000,000 and the other for RMB6,550,000($959,257)
 
 F-17
  The loan
is included in other receivables in the 2008 financial statements.
 
 On
January 8, 2010, Fuwaysun entered into a Share Exchange Agreement with AgriSolar
Solutions, Inc., a Colorado corporation (formerly V2K International, Inc., and
hereinafter referred to as the “Registrant”). Pursuant to the terms of the
Exchange Agreement, the Registrant agreed to acquire all of the issued and
outstanding shares of common stock in Fuwaysun, in exchange for the issuance of
an aggregate of up to 58,055,000 shares of the Registrant’s common stock to the
shareholders of Fuwaysun, thereby causing Fuwaysun and its wholly-owned
subsidiaries, Fuwaysun Technology (HK) Limited, a Hong Kong corporation
(“FTHK”), Forboss Solar (ShenZhen) Co, Ltd, a PRC corporation (“Forboss”), and
Shenzhen Fuwaysun Technology Company Limited, a PRC corporation (“Shenzhen
Fuwaysun”) to become wholly-owned subsidiaries of the Registrant (the “Share
Exchange”). As a result of the Share Exchange, Trueframe International Limited
is the owner of 32,550,000 shares, or approximately 55.78% of our issued and
outstanding common stock. In October, 2009, the loans, exclusive of RMB
1,000,000 (approximately $146,451) were converted into 28% of the outstanding
equity of Truefame international limited (“Truefame”). Trufame is a holding
company that owns 55.78 % of Fuwaysun. The remaining RMB 1,000,000 is due when
Fuwaysun receives adequate funding.
 
 5.BUSINESS DISPOSAL
 
 On July
6, 2009, we entered into the Termination Agreement with the three former
shareholders of SZPSP to terminate “The Equity Purchase Agreement” and
“Complementary Agreement to the Equity Purchase Agreement”
 
 The key
terms of the Termination Agreement are:
 
 Pursuant
to the terms of the agreements the Company received RMB 28,800,000 and 939,364
shares of its common stock in exchange for its ownership of SZPSP.  In
addition, the Company will receive a portion of the net profit, if any, of SZPSP
for the year ended March 31, 2009.  No effect has been given to the
profit distribution in the accompanying financial statements.
 
 F-18
  The
operations of SZPSP have been included as discontinued operations in the
accompanying financial statements from the date of acquisition to the date of
disposition.
 
 As
summary of the operations of SZPSP is follows:
 
 March
      31,2009
              
              
              December
      31, 2008Revenues
              
              $
              1,024,103
              
              
              $
              9,982,944Income
      before provision for income taxes from discontinued
    operations
              
              
              (501,120
              )
              
              
              404,526Income
      tax provision
              
              
              11,270
              
              
              
              97,250Income(loss)
      from discontinued operation, net of tax
              
              $
              (512,390
              )
              
              $
              307,276
 
 As
summary of the balance of SZPSP is follows:
  December
      31, 2008Cash
      and cash equivalents
              
              $
              584,114Accounts
      receivable, net
              
              
              1,322,204Inventories
              
              
              1,792,691Other
      receivables and prepayments
              
              
              1,164,997Lease
      receivables, current
              
              
              156,579Property
      and equipment, net
              
              
              1,410,318Customer
      relationships, net
              
              
              1,017,500Intellectual
      property - unpatented technology, net
              
              
              869,500Lease
      receivables, non current
              
              
              654,578Assets
      of discontinued operations
              
              $
              8,972,481Income
      tax payable
              
              $
              413,431Other
      payables and accrued liabilities
              
              
              3,769,240Liabilities
      of discontinued operations
              
              $
              4,182,671
 
 As of
December 31, 2009, we have received all installments from SZPSP
Shareholders.
 
 6.
              ACCOUNTS
      RECEIVABLE, NET
 
 Accounts
receivable, net consists of the following:
  As of December 31,2009
              
              
              2008Accounts
      receivable, cost
              
              $
              9,621,122
              
              
              $
              6,290,070Less:
      allowance for doubtful accounts
              
              
              (1,553,178
              )
              
              
              (845,034
              )Accounts
      receivable, net
              
              $
              8,067,944
              
              
              $
              5,445,036
 
 For the
year ended December 31, 2009 and 2008, the company recorded bad debt expense of
$1,129,533 and 0, respectively.
  F-19
  CHINA
SOLAR & CLEAN ENERGY SOLUTIONS, INC.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 
 7.          INVENTORIES
 
 Inventories
consisted of the following:
 
 As of December 31,2009
              
              
              2008Raw
      materials
              
              $
              1,186,188
              
              
              $
              1,261,714Consumables
              
              
              16,358
              
              
              
              4,320Work-in-process
              
              
              57,357
              
              
              
              21,269Finished
      goods
              
              
              3,287,267
              
              
              
              5,205,527Inventories
              
              $
              4,547,170
              
              
              $
              6,492,830
  8.         OTHER
RECEIVABLES AND PREPAYMENTS
 
 Other
receivables and prepayments consisted of the following:
 
 As of December 31,2009
              
              
              2008Advance
      to suppliers
              
              $
              555,781
              
              
              $
              414,257Prepaid
      expenses
              
              
              -
              
              
              
              99,000Income
      tax receivable
              
              
              -
              
              
              
              195,549Other
      receivables
              
              
              1,177,914
              
              
              
              5,269,597Other
      receivables and prepayments
              
              $
              1,733,695
              
              
              $
              5,978,403
  9.          PROPERTY,
PLANT AND EQUIPMENT, NET
 
 Property,
plant and equipment, net, consisted of the following:
 
 As of December 31,2009
              
              
              2008Buildings
              
              $
              13,662,321
              
              
              $
              9,122,488Plant
      and machinery
              
              
              1,913,019
              
              
              
              1,854,960Office
      equipments
              
              
              49,404
              
              
              
              32,135Motor
      vehicles
              
              
              507,579
              
              
              
              465,939Electronic
      equipment
              
              
              350,451
              
              
              
              239,309Construction
      in progress
              
              
              -
              
              
              
              4,263,51716,482,774
              
              
              
              15,978,348Less:
      accumulated depreciation
              
              
              (2,707,220
              )
              
              
              (2,239,468
              )Property,
      plant and equipment, net
              
              $
              13,775,554
              
              
              $
              13,738,880
 
 F-20
 
 CHINA
SOLAR & CLEAN ENERGY SOLUTIONS, INC.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 
 10.         LAND
USE RIGHTS
 
 Intangible
assets consisted of the following:
 
 As of December 31,2009
              
              2008Land
      use rights, at cost
              
              $
              1,758,200
              
              
              $
              1,827,990Less:
      accumulated amortization
              
              
              (166,060
              )
              
              
              (118,806
              )Land
      use rights, net
              
              $
              1,592,140
              
              
              $
              1,709,184
 
 Amortization
expense for the years ended December 31, 2009 and 2008 was $55,164 and $61,729,
respectively.
  11.       OTHER
PAYABLES AND ACCRUED LIABILITIES
 
 Other
payables and accrued liabilities consisted of the following:
 
 As of December 31,2009
              
              
              2008Salary
      payable
              
              $
              521,951
              
              
              $
              506,936Accrued
      expenses
              
              
              226,430
              
              
              
              715,257Customer
      deposits
              
              
              4,488,561
              
              
              
              4,458,943Other
      payables
              
              
              2,551,978
              
              
              
              2,008,304Warranty
      provision
              
              
              1,016,549
              
              
              
              1,136,809Current
      of investment payable(1)
              
              
              1,171,709
              
              
              
              1,171,978$
              9,977,178
              
              
              $
              9,998,227
 
 (1)
Represents liability in connection with the acquisition of Tianjin Huaneng, see
Note 4.
 
 12.       LONG-TERM
LIABILITIES
 
 As of December 31,2009
              
              2008Loan
      payable relating to acquisition of Tianjin Huaneng
              
              $
              1,328,119
              
              
              $
              1,458,461Less:
      current portion
              
              
              1,171,709
              
              
              
              1,171,978156,410
              
              
              
              286,483
 
 The
balance of Long-term liability as of December 31, 2009 is
$156,410(RMB1,068,000), which will be paid in 2011 about the third installment
of acquisition the minority interest of Tianjin.
  13.
              LOAN
      PAYABLE EMPLOYEE
 
 Loan
payable – employee consist of loans from employees of TianJin HuaNeng which bear
interest rate at 10% per year and have no fixed maturity date.
 
 14.       STOCK
HOLDERS’ EQUITY
 
 F-21
  CHINA
SOLAR & CLEAN ENERGY SOLUTIONS, INC.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
  Common
stock
 
 On
February 29, 2008, the Company completed a private placement of 4,691,499 shares
of common stock for an aggregate sales price of approximately $11,300,000. The
Company received $9,995,156 as net proceeds from this financing.
 
 During
the year ended December 31, 2008, the Company issued 1,400,628 shares of common
stock as part of the conversion of Series A Preferred Stock.
 
 During
the year ended December 31, 2008, certain investors exercised their warrants to
purchase an aggregate of 75,000 shares of common stock totaling
$107,500.
 
 During
the year ended December 31, 2008, the Company granted 7,304 shares of common
stock to a former Board member in exchange for services. The shares were valued
at $2.08 per share or an aggregate total of $15,192.
 
 During
the year ended December 31, 2008, the Company issued 1,429,729 shares of common
stock for the acquisition of SZPSP.
 
 During
the year ended December 31, 2009, 373,566 shares of preferred stock were
converted to the same number of shares of common stock
 
 Common
Stocks Held in Escrow
 
 In
connection with the private placement on February 29, 2008, the Company
deposited 2,000,000 shares of common stock (“Make Good Shares”) into escrow and
we are required to deliver (i) 1,000,000 of the Make Good Shares to the
investors on a pro rata basis for no additional consideration in the event that
the Company’s after-tax net income for the fiscal year ending December 31, 2008
is less than $4.8 million; and (ii) 1,000,000 of the Make Good Shares to the
investors on a pro rata basis for no additional consideration in the event that
the Company’s after-tax net income for the fiscal year ending December 31, 2009
is less than $8 million. As of December 31, 2008, the after-tax net income
target of $4.8 million has not been met. The registration statement of 1,000,000
of the Make Good Shares to the investors was declared effective on July 20,
2009.
 
 Warrants
for services
 
 The
Company issued a warrant (the "Warrant") to its placement agent in connection
with its private placement in February 2008. The Warrant authorizes the agent to
purchase 469,150 shares of its common stock at a fixed price ($2.88 per share),
for a five-year period. The Warrant contains a cashless exercise provision which
permits the placement agent, at its option, to exercise the Warrant without
tendering the exercise price, in exchange for a reduced number of shares. The
number of shares will be calculated according to a formula should the placement
agent decide to opt to exercise the Warrant under the cashless provision. If the
Company is sold during the exercise period (referred to as a "fundamental
transaction" in the Warrant), the placement agent has the right to exercise its
Warrant and thus participate in the proceeds from the sale to the same extent as
any other shareholder. These warrants are immediately exercisable. The fair
value of the warrants was estimated at the date of grant using the Black-Scholes
option-pricing model. In calculating the fair value of the warrants, management
used the closing price of the common stock on February 29, 2008, of $2.71 per
share, plus the following assumptions:
 
 Risk
      fee interest rate (%)
              
              
              5
              %Dividend
      yield (%)
              
              
              0.00
              %Expected
      life of warrant grants (years)
              
              5
      yearsExpected
      volatility of warrant grants (%)
              
              
              43.79
              %
 
 The
Company valued the warrants at US$1.155 per warrant, or $541,695 in aggregate,
which were recorded as offering costs which offset additional paid-in capital in
the accompanying consolidated financial statements for the twelve months ended
December 31, 2008.
 
 The
Company issued warrants (the "Warrant") in connection with acquisition on
October 27, 2008. The Warrant authorizes the holders to purchase 1,000,000
shares of its common stock at a fixed price ($1.10 per share), for a five-year
period. These warrants are immediately exercisable. The fair value of the
warrants was estimated at the date of grant using the Black-Scholes
option-pricing model. In calculating the fair value of the warrants, management
used the closing price of the common stock on October 27, 2008, of $1.10 per
share, plus the following assumptions:
 
 Risk
      free interest rate (%)
              
              
              1.15
              %Dividend
      yield (%)
              
              
              0.00
              %Expected
      life of warrant grants (years)
              
              5
      yearsExpected
      volatility of warrant grants (%)
              
              
              98.26
              %
 
 The
Company valued the warrants at US$0.77 per warrant, or $766,038 in aggregate,
which were recorded as investment cost which offset additional paid-in capital
in the accompanying consolidated financial statements for the twelve months
ended December 31, 2008.
 
 A summary
of the status of the Company’s outstanding common stock warrants as of December
31, 2009:
  F-22
 
 Number of
                Shares
              
              
              Weighted-
                average
                Exercise Price
              
              
              Weighted-
                average
                Remaining
                Contractual
                TermOutstanding
      and Exercisable at January 1, 2008
              
              
              5,555,559
              
              
              $
              2.73
              
              
              3.76
      yearsGranted
              
              
              1,611,123
              
              
              
              1.74
              
              
              4.75
      yearsExercised
              
              
              (75,000
              )
              
              
              -
              
              
              
              -Forfeited
              
              
              -
              
              
              
              -
              
              
              
              -Expired
              
              
              -
              
              
              
              -
              
              
              
              -Outstanding
      and Exercisable at December 31, 2008
              
              
              7,091,682
              
              
              $
              2.76
              
              
              3.53
      yearsGranted
              
              
              -
              
              
              
              -
              
              
              
              -Exercised
              
              
              -
              
              
              
              -
              
              
              
              -Forfeited
              
              
              469,150
              
              
              
              -
              
              
              
              -Expired
              
              
              -
              
              
              
              -
              
              
              
              -Outstanding
      and Exercisable at December 31, 2009
              
              
              6,622,532
              
              
              $
              2.48
              
              
              2.25
      years
 
 Registration
Rights Agreement
 
 In
connection with the private placement, the Company entered into a registration
rights agreement with the investors on February 25, 2008 which requires us to
file with the SEC a “resale” registration statement providing for the resale of
(i) all of the 4,691,499 shares of common stock sold to the investors, (ii) the
2,000,000 “make good shares” and (iii) the 469,150 shares underlying the
placement agent warrants (collectively, the “registrable securities”) for an
offering to be made on a continuous basis pursuant to Rule 415 of the Securities
Act of 1933, as amended.
 
 The
Company agreed, among other things, to prepare and file an initial registration
statement within 45 days of the closing date (i.e. April 14, 2008) to register
for resale part of the registrable securities (other than the 2,000,000 make
good shares and the 469,150 shares underlying the placement agent warrants) and
to cause that registration statement to be declared effective by July 28,
2008.
 
 The
Company is required to file additional registration statements covering all of
the remaining registrable securities (or such lesser number as the SEC deems
appropriate) if any registrable securities could not be registered in the
initial registration statement, by the 15th day following the date on which we
are able to effect the registration of such securities in accordance with any
SEC restrictions.
 
 The
Company’s failure to meet this schedule and other timetables provided in the
registration rights agreement could result in the imposition of liquidated
damages. No liquidated damages will accrue in respect of any registrable
securities which the SEC has requested (due to the application of Rule 415) the
Company to remove from the registration statement and the required effectiveness
date for such registrable securities will be tolled until such time as the
Company is able to effect the registration of those securities in accordance
with any SEC restrictions.
 
 On July
28, 2008, the Company incurred liquidated damages equal to $112,596 which
represents 1% of $11,259,587 (the aggregate of investment amount by the
investors) due to the fact that the Company failed to have the registration
statement declared effective on or prior to that date. The agreement called for
the liquidated damages to continue to accrue with respect to all investors at
the monthly rate of 1% and pro rated for partial months. The registration
statement did not go effective until December 17, 2008. Accordingly, as of
December 17, 2008, the Company had incurred $523,026 in liquidated damages for
failing to have the registration statement declared effective by July 28, 2008.
Due to the fact that the resale restriction period removed in 6 months from the
purchase of shares and this overlaps the penalty period, it has been determined
that the penalty period of damages ended after one month, since the investors’
damage ceased after the resale restriction had been removed, and were
subsequently determined to aggregate the original $112,596. Accordingly the
company reversed the overaccrued amount of approximately $410,000 during the
year ended December 31, 2009 which amount is classified as other income in the
accompanying consolidated statement of operations.
 
 F-23
  CHINA
SOLAR & CLEAN ENERGY SOLUTIONS, INC.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 
 15.       INCOME
TAXES
 
 The
Company is registered in the United States of America and has operations in
three tax jurisdictions: the United States of America,
British Virgin Island (“BVI”) and the PRC. The operations in the
United States of America and British Virgin Island have incurred net
operating losses for income tax purposes. The Company generated substantially
its net income from the operation of its subsidiary in the PRC and subject to
the PRC tax jurisdiction.
 
 United
States of America
 
 China
Solar was incorporated in the State of Nevada and is subject to the tax laws of
United States of America. As of December 31, 2009, the operation in the United
States of America had $760,320 of net operating profit available for federal tax
purposes, which are available to offset prior taxable loss.
  British
Virgin Island
 
 Under the
current BVI law, the Company is not subject to tax on income.
 
 The
PRC
 
 The
Company’s subsidiaries operating in the PRC are Deli Solar (Bazhou), Deli Solar
(Beijing), Ailiyang and Tianjin Huaneng.
 
 Ailiyang
is domestically owned and subject to the Corporate Income Tax (“CIT”) governed
by the Income Tax Law of the People’s Republic of China, at a statutory rate of
25%.
 
 On
November 4, 2008, Tianjin Huaneng was classified as an Advanced Technology
Enterprise in the PRC, and then the CIT is reduced to 15% for the years of 2008,
2009 and 2010.
 
 On July
25, 2006, SZPSP was classified as an Advanced Technology Enterprise in the PRC.
The Company is exempted from CIT for the first two profit making years and then
the CIT is reduced to 15% in the following three years. On July 6, 2009,
Deli-Solar (Beijing), entered into the Termination Agreement with SZPSP's
shareholders. From April 1, 2008 up to March 31, 2009 shares of SZPSP were held
by Deli-Solar (Beijing) and we accounted for SZPSP as a wholly-owned subsidiary.
As of March 31, 2009, the operation in SZPSP incurred $461,641 of net operating
losses.
 
 F-24
  In
September 2006, the Deli Solar (Beijing) was founded as a foreign investment
enterprise. Hence, effective from the year ended 2006, Deli Solar (Beijing) is
entitled to a two-year exemption from enterprise income tax and a reduced
enterprise income tax rate of 15% for the following three years.
 
 On March
16, 2007, the National People’s Congress approved the Corporate Income Tax Law
of the People’s Republic of China (the “New CIT Law”). The New CIT Law, among
other things, imposes a unified income tax rate of 25% for both domestic and
foreign invested enterprises with effect from January 1, 2008. However, as
foreign invested enterprises, Deli Solar (Bazhou) and Deli Solar (Beijing) can
continue to enjoy the lower CIT rate of 15% until their tax holiday
expires.
 
 The
provisions for income taxes are summarized as follows:
 
 As of December 31,2009
              
              
              2008Current
              
              $
              344,059
              
              
              $
              193,418Deferred
              
              
              (66,621
              )
              
              
              -$
              277,438
              
              
              $
              193,418
 
 The tax
effects of temporary differences that give rise to the Company’s net deferred
tax asset as of December 31, 2009 and 2008 are as follows:
 
 As of December 31,2009
              
              
              2008Deferred
      tax assets:Inventory
      markdown
              
              $
              20,978
              
              
              $
              36,961Bad
      debt expense
              
              
              240,426
              
              
              
              142,135Deferred
      revenue
              
              
              152,482
              
              
              
              170,521Accrued
      insurance not paid
              
              
              174,130
              
              
              
              160,508Net
      loss carry forward
              
              
              160,132
              
              
              
              -Gross
      deferred tax assets
              
              
              748,148
              
              
              
              510,125Valuation
      allowance
              
              
              (160,132
              )
              
              
              (510,125
              )Total
      deferred tax assets
              
              
              588,016
              
              
              
              -Deferred
      tax liabilities:Other
              
              
              -
              
              
              
              (15,779
              )Total
      deferred tax assets
              
              $
              -
              
              
              $
              (15,779
              )
 
 F-25
  CHINA
SOLAR & CLEAN ENERGY SOLUTIONS, INC.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
  16.        NET
INCOME PER SHARE
 
 Basic net
income per share is computed using the weighted average number of the ordinary
shares outstanding during the year. Diluted net income per share is computed
using the weighted average number of ordinary shares and ordinary share
equivalents outstanding during the year less number of warrants issued during
the year in note 10.
 
 The
following table sets forth the computation of basic and diluted net income per
share for the years ended December 31, 2009 and 2008:
 
 2009
              
              2008Basic
      and diluted net income per share calculationNumerator:Net
      income from continuing operations
              
              $
              933,982
              
              
              $
              (5,810,446
              )Net
      (loss) income from discontinued operation
              
              
              (512,390
              )
              
              
              307,276Gain
      on sales of discontinued operation
              
              
              652,7531,074,345
              
              
              
              (5,503,170
              )Denominator:
      - Weighted average ordinary shares outstanding
              
              
              15,815,125
              
              
              
              12,158,482
 
 For the
year ended December 31, 2009 and 2008, warrants have been excluded from the
diluted earnings per share calculation as they are anti dilutive.
 
 F-26
  CHINA
SOLAR & CLEAN ENERGY SOLUTIONS, INC.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 
 17.       SEGMENT
REPORTING, GEOGRAPHICAL INFORMATION
  (a)       
Business information
 
 The
Company has three reportable segments namely Solar Heater/Biomass Stove/Boiler
related products, Heat pipe related products, Building integrated energy-saving
projects for the years ended December 31, 2009 and 2008.
 
 An
analysis of the Company’s revenue and total assets are as follows:
  Year
      ended of December,312009
              
              2008Revenue:Solar
      Heater/Biomass Stove/Boiler related products andother
              
              $
              5,561,891
              
              
              $
              26,635,576Heat
      Pipe related products
              
              
              20,486,387
              
              
              
              14,880,477Building
      integrated energy-saving projects
              
              
              267,393
              
              
              
              -$
              26,315,671
              
              
              $
              41,516,053
  Year
      ended of December,312009
              
              2008Gross profit:Solar
      Heater/Biomass Stove/Boiler related products
              
              $
              1,269,879
              
              
              $
              4,945,388Heat
      Pipe related products
              
              
              6,069,823
              
              
              
              2,033,304Building
      integrated energy-saving projects
              
              
              113,017
              
              
              
              -$
              7,452,719
              
              
              $
              6,978,692
  As
      of December,312009
              
              
              2008Total
      assets:Solar
      Heater/Biomass Stove/Boiler related products
              
              $
              17,075,566
              
              
              $
              12,795,964Heat
      Pipe related products
              
              
              17,210,210
              
              
              
              14,756,478Building
      integrated energy-saving projects
              
              
              1,774,920
              
              
              
              -Discontinued
      operation
              
              
              -
              
              
              
              8,972,481Administration
              
              
              5,004,499
              
              
              
              9,973,285$
              41,065,195
              
              
              $
              46,498,208Total
      goodwill:Solar
      Heater/Biomass Stove/Boiler related products
              
              $
              -
              
              
              $
              -Heat
      Pipe related products
              
              
              1,967,153
              
              
              
              1,705,430Energy-saving
      projects
              
              
              -
              
              
              
              635,082$
              1,967,153
              
              
              $
              2,340,512
 
 F-27
  CHINA
SOLAR & CLEAN ENERGY SOLUTIONS, INC.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 
 (b)        Geographic
information
 
 The
Company operates in the PRC and all of the company’s long lived assets are
located in the PRC.   In respect of geographical segment reporting, sales
are based on the country in which the customer is located and total assets and
capital expenditure are based on the country where the assets are
located.
 
 The
Company’s operations are located in PRC, which is the main geographical area.
The Company’s revenue, gross profit from continuing operation and total assets
by geographical market are analyzed as follows:
  Year
      ended of December,312009
              
              2008Revenue:PRC
              
              $
              25,840,921
              
              
              $
              28,631,977Others
              
              
              474,750
              
              
              
              12,884,076$
              26,315,671
              
              
              $
              41,516,053
  Year
      ended of December,312009
              
              2008Gross profit:PRC
              
              $
              7,127,693
              
              
              $
              4,741,925Others
              
              
              325,026
              
              
              
              2,236,767$
              7,452,719
              
              
              $
              6,978,692
  As
      of December,312009
              
              2008Total
      assets:PRC
              
              $
              37,720,553
              
              
              $
              40,331,385Others
              
              
              3,344,642
              
              
              
              6,166,823$
              41,065,195
              
              
              $
              46,498,208
  18.       CHINA
CONTRIBUTION PLAN
 
 Under the
PRC Law, full-time employees of the Company’s subsidiaries, Deli Solar (Bazhou),
Ailiyang, Deli Solar (Beijing) and Tianjin Huaneng are entitled to staff welfare
benefits including medical care, welfare subsidies, unemployment insurance and
pension benefits through a China government-mandated multi-employer defined
contribution plan. The Company is required to accrue for these benefits based on
certain percentages of the employees’ salaries. The total contributions made for
such employee benefits were $602,541 and $603,996 for the years ended December
31, 2009 and 2008, respectively.
  F-28
  CHINA
SOLAR & CLEAN ENERGY SOLUTIONS, INC.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
  19.       CONCENTRATION OF RISK
 
 (a)        Major
customer
 
 Approximately
13% and 1% of the Company’s sales were to one customer during the year ended
December 31,2009 and 2008, respectively. Approximately $164,426 and $0 was due
from the customer at December 31, 2009 and 2008, respectively.
 
 (b)        Major
vendors
 
 Approximately
30% and 55% of the Company’s purchase were from one vendor during the year ended
December 31,2009 and 2008. Approximately $366,358 and $437,756 was owed to the
vendor at December 31, 2009 and 2008, respectively.
  F-29
  CHINA
SOLAR & CLEAN ENERGY SOLUTIONS, INC.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
  20.       COMMITMENTS
AND CONTINGENCIES
 
 (a)        Operating
lease commitment
  The
Company leases buildings under non-cancelable operating lease agreements. Based
on the current rental lease agreements, the future minimum rental payments
required for the coming years are as follows:
  Years
      ending December 31:2010
              
              $
              165,2972011
              
              
              147,9672012
              
              
              113,4162013
              
              
              67,2842014
              
              
              18,845Remaining
      operating lease payments
              
              
              151,808Total
      future minimum operating lease payments
              
              $
              664,617
 
 For the
years ended December 31, 2009 and 2008, rental expenses were $163,970
and$74,693, respectively.
  21.       SUBSEQUENT
EVENTS
 
 The
Company evaluated subsequent events through April 15, 2010, the date the
financial statements were released.  No reportable or disclosure
transactions occurred through that date.
 
 F-30
  CHINA
SOLAR & CLEAN ENERGY SOLUTIONS, INC.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
  22.       RESTATEMENT
ON CONSOLIDATED FINANCIAL STATEMENTS
 
 On March
29, 2009, we concluded that the financial statements included in the Form 10-K
for the period ended December 31, 2008 and the financial statements included in
Form 10Q for the periods ended March 31, 2009, June 30, 2009 and September 30,
2009 should be restated
 
 The
following are the reasons the restatement is required.
 
 The
acquisition of the additional 29.97% interest in Tianjin Hua Neng Energy
Equipment Company on October 27, 2009 was not properly recorded. As disclosed in
Note 4 to the financial statements of 2008, the Registrant paid $515,026 at the
completion of the agreement with the remainder, aggregating approximately
$1,047,611 plus interest to be paid over the next three years. We only recorded
the amount actually paid and did not record the corresponding debt. In addition
there 1,000,000 warrants to purchase the company’s common stock were issued as
part of the purchase price and were not valued and included as additional
purchase price.
 
 The using
right of building of Deli Solar (Beijing) will expire in August, 2011. But the
Company never depreciated for it. So the Company decided to correct
it.
 
 After
further analysis of the Company’s revenue recognition policy, it has decided to
change the revenue recognition of its consolidated subsidiary Tianjin Hua Neng.
The Company will make the appropriate entries to properly record the revenue and
associated costs of revenue.
 
 The
following is a summary of the effects of the restatement on the company’s
consolidated financial statements.
 
 As of December 31,2008as
      previously
                reported
              
              
              as
      restatedASSETSAccounts
      receivable, net
              
              $
              7,284,255
              
              
              $
              6,040,065Inventories
              
              
              6,950,844
              
              
              
              8,285,521Total
      current assets
              
              
              24,667,249
              
              
              
              24,757,736Property,
      plant and equipment, net
              
              
              15,366,009
              
              
              
              15,149,198Goodwill
              
              
              2,284,903
              
              
              
              2,340,512Total
      assets
              
              
              46,568,923
              
              
              
              46,498,2083
 
 F-31
  As of December 31,2008as
      previously
                reported
              
              
              as
      restatedLIABILITIES
      AND STOCKHOLDERS’ EQUITYCurrent
      liabilities:Income
      tax payables
              
              
              2,236,298
              
              
              
              1,818,488Other
      payables and accrued liabilities
              
              
              8,386,698
              
              
              
              11,900,000Total
      current liabilities
              
              
              15,924,345
              
              
              
              18,309,837Long-term
      debt
              
              
              -
              
              
              
              286,483Minority
      interests
              
              
              1,704,248
              
              
              
              194,542Stockholders’
      equity:Additional
      paid-in capital
              
              
              22,966,404
              
              
              
              23,073,258Retained
      earnings
              
              
              3,365,788
              
              
              
              2,025,950Total
      stockholders’ equity
              
              
              28,924,551
              
              
              
              27,691,567TOTAL
      LIABILITIES AND STOCKHOLDERS’ EQUITY
              
              $
              46,568,923
              
              
              $
              46,498,208
 
 Year Ended December 31,2008as
      previously
                reported
              
              
              as
      restatedRevenue,
      net
              
              $
              53,683,651
              
              
              $
              51,498,996Cost
      of revenue
              
              
              44,363,787
              
              
              
              43,302,160Gross
      profit
              
              
              9,319,863
              
              
              
              8,196,836Depreciation
      and amortization
              
              
              955,443
              
              
              
              1,172,253Total
      operating expenses
              
              
              9,077,912
              
              
              
              9,294,723Income
      from operations
              
              
              241,951
              
              
              
              (1,097,887)
              )Income
      before income taxes
              
              
              (3,151,022
              )
              
              
              (4,490,860
              )Net
      income
              
              
              (4,163,332
              )
              
              
              (5,503,170
              )Net
      income available to common stockholders
              
              $
              (4,163,332
              )
              
              $
              (5,503,170
              )Net
      income per share – basic
              
              $
              (0.34
              )
              
              $
              (0.45
              )Net
      income per share – diluted
              
              $
              (0. 34
              )
              
              $
              (0.45
              )
 
 F-32
  3) Exhibits




ExhibitsNo.
            
            Description
      of Exhibits3.1
            
            Certificate
      of Incorporation.(1)3.2-1
            
            Bylaws.(2)3.2-2
            
            Amendment
      to Bylaws dated October 17, 2005(3)3.2-3
            
            Articles
      of Merger of Du Solar, Inc. into the Company(10)4.1
            
            Common
      Stock Specimen(4)4.2
            
            Form
      of Warrant(1)4.3
            
            Certificate
      of Designation as filed with the Secretary of State of Nevada on June 12 ,
      2007(8)4.4
            
            Series
      A Preferred Stock Specimen(8)4.5
            
            Form
      of Class A Warrant(8)4.6
            
            Form
      of Class B Warrant(8)4.7
            
            Form
      of Placement Agent Warrant(13)5.1
            
            Legal
      Opinion of DLA Piper Hong Kong re legality of the common stock being
      registered.10.1
            
            Stock
      Contribution Agreement, dated March 28, 2005, entered into by and between
      theCompany
      and Deli Du(5)10.2
            
            Stock
      Purchase Agreement, dated March 30, 2005, by and among Deli Du, Halter
      Capital Corporation, and the Company(5)10.3
            
            Form
      of Unit Purchase Agreement(1)10.4
            
            Form
      of Engagement Agreement(1)10.5
            
            Form
      of Lock Up Agreement between the Company and the members of the Financial
      Advisor Group(1)10.6
            
            Land
      Purchase Agreement by and between Deli Solar (Bazhou) and Deli Du (English
      Translation)(4)10.7
            
            Stock
      Purchase Agreement by and between Deli Solar (Bazhou) and Ailiyang
      Shareholders(6).10.8
            
            Land
      Use Rights Purchase Agreement by and between Deli Solar (Bazhou) and the
      Governance Commission of Beijiahe Village Chaheji County Bazhou City dated
      March 16, 2006 (English Translation)(7)10.9
            
            Securities
      Purchase Agreement dated June 13, 2007 by and among the Company, Barron
      Partners LP and the other investors named therein(8)10.10
            
            Registration
      Rights Agreement dated June 13, 2007 by and among the Company, Barron
      Partners LP and the other investors named(8)10.11
            
            Stock
      Escrow Agreement dated June 13, 2007 by and between the Company and
      Tri-State Title & Escrow, LLC, as escrow agent(8)10.12
            
            Closing
      Escrow Agreement dated June 13, 2007 by and between the Company and Barron
      Partners, L.P., and the other investors named therein and Tri-State Title
      & Escrow, LLC, as escrow agent(8)10.13
            
            Investor
      Relations Consulting Agreement dated July 23, 2007 between the Company and
      Hayden Communications International, Inc.(9)10.14
            
            Securities
      Purchase Agreement dated as of February 25, 2008 by and among the Company
      and the investors named therein(10)10.15
            
            Registration
      Rights Agreement dated as of February 25, 2008 by and among the Company
      and the investors named therein(10)10.16
            
            Make
      Good Escrow Agreement dated as of February 25, 2008 by and between the
      Company, the investors named therein, Roth Capital Partners, LLC and
      Tri-State Title & Escrow, LLC, as escrow agent,(10)10.17
            
            Escrow
      Agreement dated as of February 25, 2008 by and between the Company, Roth
      Capital Partners, LLC and Tri-State Title & Escrow, LLC, as escrow
      agent(10)10.18
            
            Waiver
      and Consent dated as of February 25, 2008.(10)10.19
            
            Equity
      Purchase Agreement, between Deli Solar (Beijing) Technology Development
      Co. Ltd. and Shenzhen PengSangPu Solar Industrial Products Corporation,
      dated as of January 9, 2008.(15)10.20
            
            Complementary
      Agreement to the Equity Purchase Agreement, between Deli Solar (Beijing)
      Technology Development Co. Ltd. and Shenzhen Peng Sang Pu Solar Industrial
      Products Corporation, dated as of January 9, 2008.(15)10.21
            
            Supplementary
      Agreement to the Equity Purchase Agreement, by and among, Deli Solar
      (Beijing) Technology Development Co. Ltd., Shenzhen PengSangPu Solar
      Industrial Products Corporation and its shareholders named therein, dated
      as of March 25, 2008.(16)




29




10.22
            
            Equity
      Interest Purchase Agreement, between Deli Solar (Beijing) Technology
      Development Co. Ltd. and Tianjin Huaneng Group Energy Equipment Co., Ltd.,
      dated as of October 27, 2008.(17)10.23
            
            Termination
      Agreement to the Equity Purchase Agreement, Complementary Agreement and
      Supplementary Agreement, by and among Deli Solar (Beijing) Technology Co.
      Ltd. and the SZPSP shareholders, dated July 6, 2009.(18)14
            
            Code
      of Ethics.(11)21.1
            
            List
      of subsidiaries.(12)31.1
            
            Certificate
      of the Chief Executive Officer pursuant to Section 302 of the
      Sarbanes-Oxley Act of 200231.2
            
            Certificate
      of the Chief Financial Officer pursuant to Section 302 of the
      Sarbanes-Oxley Act of 200232.1
            
            Certificate
      of the Chief Executive Officer pursuant to Section 906 of the
      Sarbanes-Oxley Act of 200232.2
            
            Certificate
      of the Chief Financial Officer pursuant to Section 906 of the
      Sarbanes-Oxley Act of 2002







(1)
            Incorporated
      herein by reference to the Registration Statement on Form SB-2 filed with
      the SEC on November 2, 2005.





(2)
            Incorporated
      herein by reference to the Registration Statement on Form S-1 filed with
      the SEC in August 2003.





(3)
            Incorporated
      herein by reference to the Registration Statement on Form SB-2 filed with
      the SEC on March 26, 2001.





(4)
            Incorporated
      herein by reference to the Registration Statement Amendment No. 1 on Form
      SB-2 filed with the SEC on February 6,
2006.





(5)
            Incorporated
      herein by reference to Schedule 13D filed by the Company on April 18,
      2005.





(6)
            Incorporated
      herein by reference to the Current Report on Form 8-K filed by the Company
      on November 28, 2005.





(7)
            Incorporated
      herein by reference to the Registration Statement Amendment No. 2 on Form
      SB-2 filed with the SEC on May 22,
2006.





(8)
            Incorporated
      herein by reference to the Current Report on Form 8-K filed by the Company
      on June 19, 2007.





(9)
            Incorporated
      herein by reference to Amendment No. 2 to the Registration Statement on
      Form SB-2 filed with the SEC on January 1,
  2008..





(10)
            Incorporated
      herein by reference to our Current Report on Form 8-K filed by the Company
      with the SEC on March 3, 2008.





(11)
            Incorporated
      herein by reference to our Annual Report on Form 10-KSB/A for the fiscal
      year edned December 21, 2006 filed by the company with the SEC on April
      11, 2007.(12)
            Incorporated
      herein by reference to the Annual Report on Form 10-KSB filed by the
      Company on April 10, 2008.





(13)
            Incorporated
      herein by reference to the Registration Statement on Form S-1 filed by the
      Company on April 14, 2008.





(14)
            Incorporated
      herein by reference to Amendment No. 1 the Registration Statement on Form
      S-1 filed by the Company on June 25,
2008.





(15)
            Incorporated
      herein by reference to Amendment No. 3 to the Registration Statement on
      Form S-1 filed by the Company on August 27,
  2008.





(15)
            Incorporated
      herein by reference to the Current Report on Form 8-K filed by the Company
      with the SEC on January 15, 2008.





(16)
            Incorporated
      herein by reference to the Current Report on Form 8-K filed by the Company
      with the SEC on April 1, 2008.





(17)
            Incorporated
      herein by reference to the Current Report on Form 8-K filed by the Company
      with the SEC on October 31, 2008.





(18)
            Incorporated
      herein by reference to the Current Report to Amendment No. 1 on Form 8-K
      filed by the Company with the SEC on July 15,
  2009.




30





SIGNATURES





In
accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.




CHINA SOLAR & CLEAN ENERGY
      SOLUTIONS, INC.Date:
      April 15, 2010
              By:
              /s/ Deli
      DuDeli
      DuChief
      Executive Officer, President and Director(Principal
      Executive Officer)




In
accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.




Name
      and Title
              
              
              Date/s/
      Deli Du
              
              
              April
      15, 2010Deli
      Du,Chief
      Executive Officer, President and Director(Principal
      Executive Officer)/s/
      Yinan Zhao
              
              
              April
      15, 2010Yinan
      ZhaoActing
      Chief Financial Officer(Principal
      Financial and Accounting Officer)/s/
      Zhaolin Ding
              
              
              April
      15, 2010Zhaolin
      DingDirector/s/
      Zhenhang Jia
              
              
              April
      15, 2010Zhenhang
      JiaDirector/s/
      Joseph J. Levinson
              
              
              April
      15, 2010Joseph
      J. LevinsonDirector




31