WEB NEWS Comments & Business Outlook
PERFECTENERGY INTERNATIONAL LIMITED
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
FOR THE ELEVEN MONTHS ENDED SEPTEMBER 30, 2011 AND FISCAL YEAR ENDED OCTOBER 31, 2010
Eleven Months Ended
Fiscal Year Ended
September 30,
October 31,
2011
2010
REVENUES
$
50,327,548
$
74,601,090
COST OF REVENUES
52,658,649
67,234,057
GROSS PROFIT
(2,331,101
)
7,367,033
OPERATING EXPENSES:
Selling, general and administrative
5,438,135
9,126,080
Research and development
446,413
509,181
Total operating expenses
5,884,548
9,635,261
LOSS FROM OPERATIONS
(8,215,649
)
(2,268,228
)
OTHER INCOME (EXPENSE):
Interest expense and other bank charges
(49,925
)
(6,541
)
Non-operating income
661,964
56,457
Change in fair value of derivative instruments
-
29,564
Total other income, net
612,039
79,480
LOSS BEFORE PROVISION FOR INCOME TAXES
(7,603,610
)
(2,188,748
)
PROVISIONFOR INCOME TAXES
23,567
539,350
NET LOSS
(7,627,177
)
(2,728,098
)
OTHER COMPREHENSIVE INCOME
Foreign currency translation adjustments
501,079
164,540
COMPREHENSIVE LOSS
$
(7,126,098
)
$
(2,563,558
)
LOSS PER SHARE:
Basic
$
(0.26
)
$
(0.09
)
Diluted
$
(0.26
)
$
(0.09
)
WEIGHTED AVERAGE NUMBER OF SHARES:
Basic
29,626,916
29,626,916
Diluted
29,626,916
29,626,916
CFO Trail
Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
(b)
Departure of Chief Financial Officer
Effective April 1, 2012, Xiaolin (Edward) Zhuang, resigned as the registrant’s Chief Financial Officer and Secretary. Mr. Zhuang will serve as a consultant to the registrant from April 1, 2012 through June 30, 2012.
Comments & Business Outlook
PERFECTENERGY INTERNATIONAL LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND OTHER COMPREHENSIVE LOSS
(UNAUDITED)
Two months ended
Three months ended
Eight months ended
Nine months ended
June 30, 2011
July 31, 2010
June 30, 2011
July 31, 2010
REVENUES
$
14,506,662
$
20,729,634
$
38,574,314
$
57,199,650
COST OF REVENUES
13,776,260
19,692,856
37,125,070
52,491,070
GROSS PROFIT
730,402
1,036,778
1,449,244
4,708,580
OPERATING EXPENSES:
Selling, general and administrative
1,115,914
1,984,530
3,420,523
6,073,930
Research and development
76,701
157,849
269,758
404,985
Total operating expenses
1,192,615
2,142,379
3,690,281
6,478,915
LOSS FROM OPERATIONS
(462,213
)
(1,105,601
)
(2,241,037
)
(1,770,335
)
OTHER INCOME (EXPENSE):
Interest expense and other bank charges
(6,719
)
-
(28,273
)
-
Interest income
1,133
2,799
7,402
1,639
Non-operating income (expense)
(297,439
)
(89,618
)
(92,163
)
(4,144
)
Change in fair value of warrants
-
208
-
29,563
Total other income (expense)
(303,025
)
(86,611
)
(113,034
)
27,058
LOSS BEFORE PROVISION FOR INCOME TAXES
(765,238
)
(1,192,212
)
(2,354,071
)
(1,743,277
)
PROVISION (BENEFIT) FOR INCOME TAXES
(63,930
)
(210,995
)
33,547
202,105
NET LOSS
(701,308
)
(981,217
)
(2,387,618
)
(1,945,382
)
OTHER COMPREHENSIVE INCOME (LOSS):
Foreign currency translation adjustments
64,516
163,691
278,920
99,890
COMPREHENSIVE LOSS
$
(636,792
)
$
(817,526
)
$
(2,108,698
)
$
(1,845,492
)
EARNINGS PER SHARE:
Basic
$
(0.02
)
$
(0.03
)
$
(0.08
)
$
(0.07
)
Diluted
$
(0.02
)
$
(0.03
)
$
(0.08
)
$
(0.07
)
WEIGHTED AVERAGE NUMBER OF SHARES:
Basic
29,626,916
29,626,916
29,626,916
29,626,916
Diluted
29,626,916
29,626,916
29,626,916
29,626,916
Comments & Business Outlook
Six months ended
April 30, 2011
April 30, 2010
April 30, 2011
April 30, 2010
REVENUES
$
15,796,619
$
19,142,768
$
24,067,652
$
36,470,016
COST OF REVENUES
15,835,931
17,184,406
23,348,810
32,798,214
GROSS PROFIT
(39,312
)
1,958,362
718,842
3,671,802
OPERATING EXPENSES:
Selling, general and administrative
941,359
2,239,732
2,304,609
4,089,400
Research and development
97,458
74,306
193,057
247,136
Total operating expenses
1,038,817
2,314,038
2,497,666
4,336,536
LOSS FROM OPERATIONS
(1,078,129
)
(355,676
)
(1,778,824
)
(664,734
)
OTHER INCOME (EXPENSE):
Interest expense and other bank charges
(10,143
)
(9,658
)
(21,554
)
(16,332
)
Interest income
3,131
8,688
6,269
15,172
Non-operating income (expense)
194,280
(16,817
)
205,276
85,474
Change in fair value of warrants
0
2,494
0
29,355
Total other income (expense)
187,268
(15,293
)
189,991
113,669
LOSS BEFORE PROVISION FOR INCOME TAXES
(890,861
)
(370,969
)
(1,588,833
)
(551,065
)
PROVISION (BENEFIT) FOR INCOME TAXES
209,971
349,309
97,477
413,100
NET LOSS
(1,100,832
)
(720,278
)
(1,686,310
)
(964,165
)
OTHER COMPREHENSIVE INCOME (LOSS):
Foreign currency translation adjustments
(29,987
)
38,385
214,404
(63,801
)
COMPREHENSIVE LOSS
$
(1,130,819
)
$
(681,893
)
$
(1,471,906
)
$
(1,027,966
)
EARNINGS PER SHARE:
Basic
$
(0.04
)
$
(0.02
)
$
(0.06
)
$
(0.03
)
Diluted
$
(0.04
)
$
(0.02
)
$
(0.06
)
$
(0.03
)
WEIGHTED AVERAGE NUMBER OF SHARES:
Basic
29,626,916
29,626,916
29,626,916
29,626,916
Diluted
29,626,916
29,626,916
29,626,916
29,626,916
The decrease in revenue is attributable to a slow-down in production due to adverse weather conditions in Europe and decreased demand in the market conditions during February 2011 that did not occur during the same months in 2010. Another significant factor was the reduction is average sales prices in Europe, which is our dominant geographic market, of our PV modules from €1.28 per watt to €1.16 watt to stay competitive in response to reductions in sales prices by our competitors.
Liquidity Requirements
As of January 31, 2011, we had cash and cash equivalents of $1.0 million as compared to $2.4 million at October 31, 2010.
We will require a significant amount of cash to fund expansion of our operations. Despite a reduction in revenues in the current quarter, management projects growth of our business in future periods. Reduced revenue and profitability, which under present facts and circumstances management believes are temporary, have led us to revise our plans for capital spending and expansion to defer certain steps until we achieve greater profitability or obtain access to capital on terms attractive to us.
Comments & Business Outlook
PERFECTENERGY INTERNATIONAL LTD. AND SUBSIDIARIES
(UNAUDITED)
Three months ended
January 31, 2011
January 31, 2010
REVENUES
$
8,271,033
$
17,327,248
COST OF REVENUES
7,512,879
15,613,808
GROSS PROFIT
758,154
1,713,440
OPERATING EXPENSES:
Selling, general and administrative
1,363,250
1,849,668
Research and development
95,599
172,830
Total operating expenses
1,458,849
2,022,498
LOSS FROM OPERATIONS
(700,695
)
(309,058
)
OTHER INCOME (EXPENSE):
Interest expense and other bank charges
(8,274
)
(190
)
Non-operating income
10,996
102,291
Change in fair value of derivative instruments
-
26,861
Total other income
2,722
128,962
LOSS BEFORE PROVISION FOR INCOME TAXES
(697,973
)
(180,096
)
PROVISION (BENEFIT) FOR INCOME TAXES
(112,494
)
63,791
NET LOSS
(585,479
)
(243,887
)
OTHER COMPREHENSIVE INCOME (LOSS):
Foreign currency translation adjustments
244,391
(102,186
)
COMPREHENSIVE LOSS
$
(341,088
)
$
(346,073
)
EARNINGS PER SHARE:
Basic
$
(0.02
)
$
(0.01
)
Diluted
$
(0.02
)
$
(0.01
)
WEIGHTED AVERAGE NUMBER OF SHARES:
Basic
29,626,916
29,626,916
Diluted
29,626,916
29,626,916
Liquidity Requirements
In October 2007,
we entered into an Investment Agreement with Shanghai Zizhu Science Park Development Co., Ltd. (“Science Park”), under which we planned to construct a new solar cell production facility on certain land in the Shanghai Zizhu Science-Based Industrial District of Shanghai, China, allowing us to expand our lamination lines and our cell production lines to 200MW of total new production capacity. As required by the Investment Agreement, on February 28, 2008, we formed Perfectenergy Solar-Tech under PRC laws as a wholly owned subsidiary of Perfectenergy BVI. Perfectenergy BVI was required to contribute $20 million to the registered capital of Perfectenergy Solar-Tech, of which $4 million has been contributed with the remaining $16 million to have been contributed by February 28, 2010. Perfectenergy Solar-Tech obtained the land use rights from Science Park, for which Perfectenergy Solar-Tech was to pay the local PRC land bureau approximately $2.71 million. We paid $0.28 million of the $2.71 million during the fiscal year ended October 31, 2008 and made no additional payments since then. Due to supplementary land use restrictions, we submitted an application to the local PRC land bureau to cancel the project and requested a refund of our advanced payment of $0.28 million for the land. In early December 2009, we received a refund of the entire advanced payment from the local PRC land bureau. On June 2, 2010, we obtained approval from the local authority for a reduction in Perfectenergy Solar-Tech’s required registered capital from $20 million to $4 million, and our capital commitment will be adjusted accordingly based on the approval.
In September 2010, we completed all necessary procedures for the capital reduction in Perfectenergy Solar-Tech. With such restructuring, we have no major capital commitments and a more flexible organizational structure for future operations .
Comments & Business Outlook
CONSOLIDATED STATEMENTS OF OPERATIONS AND OTHER COMPREHENSIVE LOSS
2010
2009
REVENUES
$
74,601,090
$
31,454,956
COST OF REVENUES
67,234,057
30,346,831
GROSS PROFIT
7,367,033
1,108,125
OPERATING EXPENSES:
Selling, general and administrative
9,126,080
7,274,047
Research and development
509,181
409,148
Total operating expenses
9,635,261
7,683,195
LOSS FROM OPERATIONS
(2,268,228
)
(6,575,070
)
OTHER INCOME (EXPENSE):
Interest income (expense) and other bank charges
(6,541
)
5,826
Non-operating income (expense)
56,457
(152,414
)
Change in fair value of derivative instruments
29,564
700,125
Total other income (expense)
79,480
553,537
LOSS BEFORE PROVISION FOR INCOME TAXES
(2,188,748
)
(6,021,533
)
PROVISION (BENEFIT) FOR INCOME TAXES
539,350
(337,198
)
NET LOSS
(2,728,098
)
(5,684,335
)
OTHER COMPREHENSIVE LOSS:
Foreign currency translation adjustments
164,540
225,774
COMPREHENSIVE LOSS
$
(2,563,558
)
$
(5,458,561
)
LOSS PER SHARE:
Basic
$
(0.09
)
$
(0.19
)
Diluted
$
(0.09
)
$
(0.19
)
WEIGHTED AVERAGE NUMBER OF SHARES:
Basic
29,626,916
29,626,916
Diluted
29,626,916
29,626,916
GeoTeam® Note : The fourth quarter was $0.02 in the 2010 and 2009 fourth quarter.
Liquidity Requirements
In October 2007, we entered into an Investment Agreement with Shanghai Zizhu Science Park Development Co., Ltd. (“Science Park”), under which we planned to construct a new solar cell production facility on certain land in the Shanghai Zizhu Science-Based Industrial District of Shanghai, China, allowing us to expand our lamination lines and our cell production lines to 200MW of total new production capacity. As required by the Investment Agreement, on February 28, 2008, we formed Perfectenergy Solar-Tech under PRC laws as a wholly owned subsidiary of Perfectenergy BVI. Perfectenergy BVI was required to contribute $20 million to the registered capital of Perfectenergy Solar-Tech, of which $4 million has been contributed with the remaining $16 million to have been contributed by February 28, 2010 . Perfectenergy Solar-Tech obtained the land use rights from Science Park, for which Perfectenergy Solar-Tech was to pay the local PRC land bureau approximately $2.71 million. We paid $0.28 million of the $2.71 million during the fiscal year ended October 31, 2008 and made no additional payments since then. Due to supplementary land use restrictions, we submitted an application to the local PRC land bureau to cancel the project and requested a refund of our advanced payment of $0.28 million for the land. In early December 2009, we received a refund of the entire advanced payment from the local PRC land bureau. On June 2, 2010, we obtained initial approval from the local authority for a reduction in Perfectenergy Solar-Tech’s required registered capital from $20 million to $4 million , and our capital commitment will be adjusted accordingly based on the approval. Remaining procedures are underway and are expected to be completed within the next few months. With such restructuring, we will have no capital commitment and more flexible organizational structure for future operations.
Share Structure
Recently effected a 4-for-1 reverse stock split of the issued and outstanding shares of the Company's common stock. This reduced the number of shares of the Company's common stock outstanding from approximately 118 million to approximately 30 million. Source: PR Newswire (March 7, 2008 )