The companies main operations come from the subsidiary Harbin SQ, a majority-owned subsidiary, which focuses primarily on the production of turbine blades and combine harvesters. Their primary product is a blade for wind turbine generators which allows for variable pitch and speed. Different from other blades of the 600KW and 750KW type produced in China, our blade products provide variable speed and pitch adjustments to achieve high efficiency. They have 5 individual patents on our wind turbine blades. The market competition appears to be fierce according to the last press release, but the planned development may also be up for tender.
At first glance, the financials appear to be operating at a loss, however, the deeper one reads the strategic sale of land usage rights has net a good cashflow to the company worthy of actually looking at how they are operating in China, and the lack of dilution that has occurred due to these assets and ventures. Strategically, I believe the company has made intelligent moves worthy of a long-term visionary management team but lacking in action outside of this move, or at least news that reflects it. The China Construction Bank loan that was pledged in February 2009 gives a positive indication of the ability of this company to execute on its commitments and achieve financing without shareholder loss of control.
Regardless of some key assets being pledged for the debt, the construction is clearly underway according to this loan.
The company has on the books loaned funds to an officer of which the total amount has not been paid, in addition, this could be in contravention with SEC regulations if they are subject to Sarbanes Oxley, but I don’t think they are as much as subject to scrutiny on this factor as an OTCBB. At least the funds are written as loans. The loan was made prior to the companies reverse merger or acquisition, therefore, I don’t think it is as material but a fair disclosure. I believe based on the original intention of the loan prior to going public, it is not as material as it seems. I can imagine the repayment of this loan would be in the direction of them strengthening the company for a bigger board listing, and thus, they are in the habit of full disclosure to a higher standard compared to most OTC companies. I believe this level of disclosure is a good sign versus a negative. If anything, it is a positive since the Director has a history of repaying the forwarded money:
“As of April 30, 2009 Shouquan Sun, our President, Chief Executive Officer, Chief Financial Officer, Principal Accounting Officer, Secretary, Treasurer and sole director, owed us $797,665. This loan was provided to Mr. Sun by Harbin SQ prior to our acquisition of Harbin SQ. No funds have been forwarded to Mr. Sun since our acquisition of Harbin SQ. From April 30, 2008 to April 30, 2009, Mr. Sun repaid a total of $1,115,592 on the loan. We have received $419,611 of that repayment since our acquisition of Harbin SQ. Mr. Sun has promised to repay the outstanding balance as soon as possible and, in any event, no later than March 31, 2010.”
Therefore it is foreseeable that by March 31st 2010 the Shouquan Sun will have put $378,054 back into the company, which is a positive material event in my eyes.
As of April 30, 2009 the company had cash of $769,301. It is important to consider where the cashflow seems to be currently coming from to the company, because on November 6, 2007 they entered into a contract with Heilongjiang Nongken Taixin Real Estate Development Ltd., Co. (“Heilongjiang”) to sell their land usage rights in Harbin City, China. The total price of the contract is approximately $10,090,000. As of April 30, 2009 they have received $7,694,585 in advance payments from Heilongjiang for this sale. These advance payments are listed as a liability on their balance sheets since they have only received partial payment for the transfer of the land usage rights to Heilongjiang, and they have not yet completed the transfer. Because they have not yet completed the transfer, the land usage rights are listed as an intangible asset on the balance sheets.
I suppose what I would like to see from this company is any of the following:
– Acquisition of additional rights and companies within this sector
– Sale of rights for usage of property similar to others made in the past
– Joint ventures for the development of lands for wind energy in China
– Continued financing and or loans from grants, construction and development banks, to finish the current projects which one would assume is the reasoning behind a monthly burn rate depending on continued sourcing of equity
– The production and or future sale of their product
– Financing via the sale of equity
– Servicing of the wind market in China based upon their expertise and construction contacts within China
The property rights sale is impressive, and the loan from the China Construction Bank is promising to give the intention of the deals real value, the repayment by the CEO of company debts, and potential of the market in China all add up to an interesting company to watch in the coming months and year. I would believe by March 30th 2010 followed up by subsequent filings, the company should have achieved some of the goals I set above. Hopefully we will see some news on this company soon and the CEO is as influential as one would hope with the Government contacts in Asia.
If you are interested in purchasing the China Wind Energy report go to http://www.earthtimes.org/articles/show/research-and-markets-global-and-china-wind-power-industry-report-2008-2009,888806.shtml
In consideration of the management of CWEY, the CEO is the inventor of several of the patents held, and thus, relationships related to the patents is also a potential cashflow segment of the company assets.
Here is the profile of the CEO:
Shouquan Sun
President of the Company and Harbin SQ; Director, Chief Executive Officer, Chief Financial Officer, Chief Accounting Officer, Secretary and Treasurer
China Wind Energy, Incorporated
Heilongjiang Provnce , CI
Officer since May 2008
50 Years Old
Shouquan Sun has been the President, Chief Executive Officer, Chief Financial Officer, Principal Accounting Officer, Secretary, Treasurer and director since May 26, 2008. Mr. Sun founded Harbin SQ in 2000 and has been Chairman, Chief Executive Officer and director of Harbin SQ from its inception to the present. Mr. Sun has over 19 years experience in business development and management. Mr. Sun is also the inventor, or co-inventor, of several patents secured by Harbin SQ relating to their wind turbine blades. Mr. Sun was also awarded two national-level scientific technology honors in 1992: the Provincial Technology Leader and National Expert with Outstanding Contribution entitled to Government Special Allowance for life in 1995.