Worldwide Energy & Manufacturing USA 10-Q 2010 Q1 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended March 31, 2010

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

For the transition period from ____ to ____

WORLDWIDE ENERGY AND MANUFACTURING USA, INC.

(Exact name of registrant as specified in its charter)

Colorado	0-31761	77-0423745
(State or other jurisdiction of incorporation or organization)	(Commission File Number)	(I.R.S. Employer Identification No.)
408 N. Canal Street South San Francisco, CA  94080
(Address of principal executive offices)

Registrant’s telephone number, including area code: (650) 794-9888

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

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 the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer [ ] Accelerated filer [ ]

Non-accelerated filer [ ] Smaller reporting company [X]

1

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

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 (§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 [ ] No [ ]

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS

DURING THE PRECEDING FIVE YEARS

Indicate by check mark whether the registrant filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of securities under a plan confirmed by a court. Yes / / No / /

APPLICABLE ONLY TO CORPORATE ISSUERS

Indicate the number of shares outstanding of each of the issuer's classes of stock, as of the latest practicable date.

Class of Securities	Shares Outstanding at May 15, 2010
Common Stock, no par value	5,642,567

2

INDEX

	PAGE
ITEM 1.          FINANCIAL STATEMENTS	4
CONDENSED CONSOLIDATED BALANCE SHEETS	5
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME	6
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME	7
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS	8
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS	9
ITEM 2.          MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	26
ITEM 3.          QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK	35
ITEM 4.          CONTROLS AND PROCEDURES	35
PART II.  OTHER INFORMATION	39
SIGNATURES	41

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PART 1 - FINANCIAL INFORMATION

ITEM 1.                      FINANCIAL STATEMENTS

(a)   The unaudited condensed consolidated financial statements of registrant for the three months ended March 31, 2010 and 2009 follow.  The condensed consolidated financial statements reflect all adjustments which are, in the opinion of management, necessary to a fair statement of the results for the interim periods presented.  All such adjustments are of a normal and recurring nature.

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WORLDWIDE ENERGY AND MANUFACTURING USA, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

	March 31, 2010		December 31, 2009
ASSETS	(Unaudited)
Current assets:
Cash and cash equivalents	$	16,085,154	$	9,180,974
Restricted cash		2,759,444		2,456,040
Accounts receivable, net of allowances of $274,000 and $312,000, at March 31, 2010 and December 31, 2009, respectively		18,391,032		12,239,790
Notes receivable		40,180		40,680
Inventories		5,288,745		4,567,343
VAT tax receivable		484,626		570,615
Advances to suppliers		988,663		488,395
Deferred tax asset		100,000		100,000
Note receivable from officer		-		50,000
Prepaid and other current assets		325,265		363,309
Total current assets		44,463,109		30,057,146
Property and equipment, net		3,712,226		2,968,958
Intangible assets		1,101,000		1,101,000
Goodwill		285,714		285,714
Long term receivable – related party		237,343		237,305
Total assets	$	49,799,392	$	34,650,123
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable	$	21,544,883	$	14,177,570
Accrued expenses		2,197,596		1,895,127
Lines of credit		1,743,750		2,679,167
Warrant derivative liability		6,491,463		1,626,586
Tax payable		616,444		768,289
Due to related parties		1,246,316		1,646,114
Customer deposits		1,215,860		1,254,558
Total liabilities		35,056,312		24,047,411
Commitments and contingencies (Note 3)
Stockholders’ equity
Common stock (No Par Value; 100,000,000 shares authorized; 5,642,567 and 3,671,611 shares issued and outstanding at March 31, 2010 and December 31, 2009, respectively; including 1,620,954 shares held in escrow subject to contingent future events as of March 31, 2010)		5,002,079		2,920,372
Retained earnings		8,055,321		6,104,586
Accumulated other comprehensive income		549,702		551,943
Total equity attributable to Worldwide		13,607,102		9,576,901
Non-controlling interest		1,135,978		1,025,811
Total stockholders’ equity		14,743,080		10,602,712
Total liabilities and stockholders’ equity	$	49,799,392	$	34,650,123

See accompanying notes to unaudited condensed consolidated financial statements

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WORLDWIDE ENERGY AND MANUFACTURING USA, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME

	For the Three Months Ended
	March 31,
	2010			2009
Revenue
Sales	$	30,331,571		$	10,281,867
Cost of goods sold		26,539,873			8,562,800
Gross profit		3,791,698			1,719,067
Operating Expenses
Selling, general and administrative expenses		1,934,696			826,155
Management and professional fees paid to stockholders		90,000			90,000
Stock based compensation		12,500			32,120
Depreciation		154,539			73,176
Total operating expenses		2,191,735			1,021,451
Net operating income		1,599,963			697,616
Other Income (expenses)
Interest income		5,443			11,113
Interest expense		(24,541	)		(7,602	)
Other income		1,260,473			19,405
Exchange  gain (loss)		(487,213	)		3,965
Total other income		754,162			26,881
Income before income taxes		2,354,125			724,497
Income taxes		(293,374	)		(38,546	)
Net income		2,060,751			685,951
Less: net income attributable to non-controlling interest		(110,016	)		(25,157	)
Net income attributable to Worldwide	$	1,950,735		$	660,794
Earnings per share attributable to Worldwide stockholders:
Basic and diluted earnings per share from continuing operations	$	0.39		$	0.19
Basic and diluted earnings per share	$	0.39		$	0.19
Basic and diluted weighted average shares outstanding		5,043,130			3,522,933

See accompanying notes to unaudited condensed consolidated financial statements

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WORLDWIDE ENERGY AND MANUFACTURING USA, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

	WEMU Shareholders					Non-controlling Interest					Total
	Three months ended March 31,
	2010			2009		2010		2009			2010			2009
Net income	$	1,950,735		$	660,794	$	110,016	$	25,157		$	2,060,751		$	685,951
Foreign currency translation, net of tax		(2,241	)		21,035		-		-			(2,241	)		21,035
Comprehensive income attributable to non-controlling interest		-			-		151		(13,552	)		151			(13,552	)
Total comprehensive income	$	1,948,494		$	681,829	$	110,167	$	11,605		$	2,058,661		$	693,434

See accompanying notes to unaudited condensed consolidated financial statements

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WORLDWIDE ENERGY AND MANUFACTURING USA, INC. AND SUBSIDIARIES

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

	For the Three Months Ended
	March 31,
	2010			2009
Cash flows from operating activities:
Net income	$	2,060,751		$	685,951
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation		154,539			73,176
Allowance for bad debts – accounts receivable		(38,794	)		226,718
Stock based compensation expense		12,500			32,120
Change in warrant derivative liability		(1,229,999	)		(18,502	)
Provision for warranty		9,730			-
Changes in operating assets and liabilities:
Accounts receivable		(6,108,296	)		(4,032,814	)
Notes receivable		500			(645,560	)
Inventories		(720,960	)		(908,147	)
VAT tax receivable		86,086			(239,967	)
Advance to suppliers		(500,195	)		-
Loan receivable - affiliate		-			119,892
Prepaid and other current assets		32,645			39,200
Accounts payable		7,366,684			4,363,837
Accrued expense and acquisition cost payable		280,065			(565,987	)
Tax payable		(151,884	)		(26,444	)
Customer deposits		(38,738	)		(831,558	)
Net cash provided by (used in) operating activities		1,214,634			(1,728,085	)
Cash flows from investing activities:
Capital expenditures		(897,331	)		(760,013	)
Deposits paid for investment in subsidiaries		-			(285,714	)
Restricted cash		(303,404	)		-
Net cash used in investing activities		(1,200,735	)		(1,045,727	)
Cash flows from financing activities:
Net proceeds from issuance of common stock and warrants		8,176,583			-
Repayment of loans payable to shareholders		-			(60,024	)
Proceeds of borrowing from related parties		50,000			6,133
Repayment of loans payable to shareholders		(400,000	)		-
Net proceeds from lines of credit		-			1,256,251
Repayment of bank loans		(935,417	)		-
Net cash flows provided by financing activities:		6,891,166			1,202,360
Effect of exchange rate changes on cash and cash equivalents		(885	)		(625	)
Net increase (decrease) in cash and cash equivalents		6,904,180			(1,572,077	)
Cash and cash equivalents- beginning of period		9,180,974			5,092,476
Cash and cash equivalents- end of period	$	16,085,154		$	3,520,399
Supplemental disclosure of non cash activities:
Cash paid during the period for:
Interest	$	34,036		$	39,564
Income tax	$	242,000		$	35,758

Non-cash investing and financing activities:

During the period ended March 31, 2010, the Company accounted for $6,094,876 of warrants issued in its 2010 Financing as a warrant derivative liability.

See accompanying notes to unaudited condensed consolidated financial statements

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WORLDWIDE ENERGY AND MANUFACTURING USA, INC. AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTH PERIODS ENDED MARCH 31, 2010

1.           MANAGEMENT'S REPRESENTATION OF INTERIM FINANCIAL INFORMATION

The accompanying unaudited condensed consolidated financial statements have been prepared by Worldwide Energy and Manufacturing USA, Inc. and subsidiaries without audit pursuant to the rules and regulations of the Securities and Exchange Commission.  Certain information and disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted as allowed by such rules and regulations, and management believes that the disclosures are adequate to make the information presented not misleading.  These condensed consolidated financial statements include all of the adjustments, which in the opinion of management are necessary to a fair presentation of financial position and results of operations.  All such adjustments are of a normal and recurri ng nature. Interim results are not necessarily indicative of results for a full year. These condensed consolidated financial statements should be read in conjunction with the audited financial statements at December 31, 2009 as filed in the Company Form 10-K filed with the Commission on April 15, 2010.

2.           SIGNIFICANT ACCOUNTING POLICIES

This summary of significant accounting policies of the Company is presented to assist in understanding the Company’s financial statements.  The financial statements and notes are representations of the Company’s management, which is responsible for their integrity and objectivity. These accounting policies conform to generally accepted accounting principles and have been consistently applied in the preparation of the condensed consolidated financial statements and the December 31, 2009 financials included in the 10-K filed on April 15, 2010.

In June 2009 the FASB established the Accounting Standards Codification ("Codification" or "ASC") as the source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities in the preparation of financial statements in accordance with generally accepted accounting principles in the United States ("GAAP"). Rules and interpretive releases of the Securities and Exchange Commission ("SEC") issued under authority of federal securities laws are also sources of GAAP for SEC registrants. Existing GAAP was not intended to be changed as a result of the Codification, and accordingly the change did not impact our financial statements. The ASC does change the way the guidance is organized and presented.  All accounting references have been updated and therefore, all FASB references have been repl aced with ASC references.

The Company operates in two segments in accordance with accounting guidance FASB ASC Topic 280, “Segment Reporting”.  Our Chief Executive Officer has been identified as the chief operating decision maker as defined by FASB ASC Topic 280.

Description of Business

Worldwide Energy and Manufacturing USA, Inc. (“Worldwide” or “the Company”) is an international manufacturing and engineering firm, concentrating on photovoltaic (“PV”) solar modules and contract manufacturing services, using multiple factories in China. Worldwide services customers primarily in Europe and South Korea for our solar modules and United States-based companies for their outsource of smaller and scale production orders for offshore production in China. From our inception in 1993 until 2005, we were strictly an intermediary or “middle man,” working with our customers and our subcontractors to assure that our customers received high quality components on a timely basis that fulfilled their specific needs. While we still subcontract a significant portion of our business, since 20 05, we have begun the transition to becoming a direct contract manufacturer, operating several of our own factories.  Recently, we announced the opening of two additional factories, allowing us to become a direct manufacturer for solar modules and for power supply units as described below.

In February of 2008, Worldwide established a solar division that focuses on PV module technology under the brand name of “Amerisolar.”  On February 25, 2008, the Company changed its name from Worldwide Manufacturing USA, Inc. to Worldwide Energy and Manufacturing USA, Inc. in order to reflect its expansion into the solar energy industry. The Company issued 300,000 restricted shares for the Amerisolar brand name.

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WORLDWIDE ENERGY AND MANUFACTURING USA, INC. AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTH PERIODS ENDED MARCH 31, 2010

Worldwide leases a 129,167 square foot facility in Ningbo, China. The lease term is from July 18, 2008 to July 17, 2013. This facility houses the production operations and R&D center for the Company’s solar division. Operations at this facility began during the first quarter of 2009.

On October 14, 2008, Worldwide completed the acquisition of 55% of Shanghai De Hong Electric and Electronic Company Limited (“De Hong”), through acquiring 55% of the outstanding capital stock of De Hong, a China corporation, through Worldwide’s wholly owned subsidiary Intech Electro-Mechanical Products Co., Ltd., a Chinese corporation (“Intech”).  De Hong is the holding Company for the operating subsidiary Shanghai Intech-Detron Electronic Co. (“Detron”).  The Company purchased De Hong based on the fair value of its assets at the time of purchase.

The terms of the purchase agreement stated that Worldwide would pay a cash consideration of $1,022,700 for 55% interest in DeHong. Intech paid the first installment of $714,286 on behalf of Worldwide in September 2008. During the three months ended March 31, 2009, Worldwide paid $308,414 for the second installment and the total consideration of the purchase price of $1,022,700 was paid in full.

The Company funded the acquisition with some of the proceeds from its sale of 1,055,103 shares of its common stock, or $4,747,970, which took place in June 2008.   Worldwide received 55% control of the operating subsidiary, Detron.  Detron is a power supply factory in Shanghai, China with design and R&D capabilities.  This was accounted for as a purchase of Detron, where Worldwide has operating control. The Company began to consolidate Detron into the Company’s consolidated financial statements beginning on October 1, 2008.

On August 15, 2008, Worldwide formed a new Company called Nantong Ningbo Solar factory (“Ningbo Solar”), which is our solar energy research, development and manufacturing subsidiary. The Company established a factory to provide installation services to different solar project. The Company also acts as an agent to import or export the products and services overseas. The Ningbo Solar factory began operations during the first quarter of 2009.

On November 14, 2005, Worldwide established a die-casting and machining presence through leasing an existing facility from a former supplier, and initially investing $500,000 to upgrade the equipment and manufacturing buildings. In this transaction, we acquired assets, the expertise of the employees, the managers of the factories, and a portion of the existing customers of those factories. In the third quarter of 2005, we also established an electronics manufacturing factory.

As of March 31, 2010 we own and operate four factories that we now use for the manufacturing of certain product lines that we historically had to subcontract, and we are using the services of approximately 40 subcontractors to manufacture those product lines for which we do not have our own manufacturing capabilities.

Principles of Consolidation

The accompanying consolidated financial statements include Worldwide Energy and Manufacturing USA, Inc., a Colorado corporation and a public company, its operating subsidiary, Worldwide USA, a California corporation, and six subsidiary companies, Intech, Shanghai Intech Precision Mechanical Products Ltd (“Die Cast”), Detron, Ningbo Solar, Nantong Solar Factory (“Nantong”) and De Hong.

Effective January 1, 2009, the Consolidation Topic, ASC 810-10-45-16, revised the accounting treatment for non-controlling minority interests of partially-owned subsidiaries.  Non-controlling minority interests represent the portion of earnings that is not within the parent Company’s control. These amounts are now required to be reported as equity instead of as a liability on the balance sheet.  These amounts are $1,135,978 and $1,025,811 as of March 31, 2010 and December 31, 2009, respectively.  Additionally, this statement requires net income from non-controlling minority interests to be shown separately on the consolidated statements of income.  These amounts are $110,016 and $25,157 for the three month periods ending March 31, 2010 and 2009, respectively, and shown separately in the una udited consolidated statement of income. All significant intercompany balances and transactions have been eliminated in consolidation.

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WORLDWIDE ENERGY AND MANUFACTURING USA, INC. AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTH PERIODS ENDED MARCH 31, 2010

The Company also consolidates any variable interest entities (VIEs), of which it is the primary beneficiary, as defined.  The Company does not have any VIEs that need to be consolidated at this time. When the Company does not have a controlling interest in an entity, but exerts a significant influence over the entity, the Company would apply the equity method of accounting.

Comprehensive Income

The Company reports comprehensive income in accordance with FASB ASC Topic 220 “Comprehensive Income," which established standards for reporting and displaying comprehensive income and its components in a financial statement that is displayed with the same prominence as other financial statements.

Total comprehensive income is defined as all changes in stockholders' equity during a period, other than those resulting from investments by and distributions to stockholders (i.e., issuance of equity securities and dividends). Generally, for the Company, total comprehensive income equals net income plus or minus adjustments for currency translation.  Total comprehensive income represents the activity for a period net of related tax and was income of $1,948,494 and $681,829 for the three months ended March 31, 2010 and 2009, respectively.

While total comprehensive income is the activity in a period and is largely driven by net earnings in that period, accumulated other comprehensive income or loss (“AOCI”) represents the cumulative balance of other comprehensive income as of the balance sheet date.  For the Company, AOCI is primarily the cumulative balance related to the currency adjustments and increased overall equity by $549,702 and $551,943 as of March 31, 2010 and 2009, respectively.

Accounts Receivable

Trade accounts receivables are recorded at the invoiced amount and do not bear interest. Amounts collected on trade accounts receivables are included in net cash provided by operations activities in the consolidated cash flow statements. The Company maintains an allowance for doubtful accounts for estimated losses inherent in its accounts receivable portfolio. In establishing the required allowance, management considers a number of factors, including historical losses, current receivables aging reports, the counter party’s current ability to pay its obligation to the Company, and existing industry and People’s Republic of China (“PRC”) economic data. The Company reviews its allowances every month. Past due invoices over 90 days that exceed a specific amount are reviewed individually for collectability. During th e three month periods ended March 31, 2010 and 2009, no amounts were charged off against the allowance.  The Company does not have any off Balance Sheet exposure related to its customers.

Property and equipment

Property, plant and equipment are stated at cost. Depreciation is computed over the estimated useful lives of the related asset type using the straight-line method for financial statement purposes. Maintenance and repairs are expensed as incurred and the costs of additions and betterments that increase the useful lives of the assets are capitalized. When property or equipment is disposed, the cost and related accumulated depreciation and amortization are removed from the accounts and any gain or loss is included in other income or expenses.

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WORLDWIDE ENERGY AND MANUFACTURING USA, INC. AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTH PERIODS ENDED MARCH 31, 2010

The estimated service lives of property and equipment are as follows:

Buildings and leasehold improvements	7 to 40 years
Machinery and equipment	5 years
Transportation vehicles	5 years
Furniture and fixtures	7 years
Computers and computer software	3 years

Construction in-progress

Plant and production lines currently under development at the Nantong China facility are accounted for as construction-in-progress. Construction-in-progress is recorded at acquisition cost, including land rights cost, development expenditure, professional fees and the interest expenses capitalized during the course of construction for the purpose of financing the project. Upon readiness for use of the project, the cost of construction-in-progress is to be transferred to property and equipment, at which time depreciation will commence. The Company had no capitalized interest and to date has funded this construction through operations without the use of outside financing.  As of March 31, 2010, the Company has incurred a total of $2,155,174 of construction in progress and transferred $1,100,183 to property and equipment as the Company has begun in 2010 to operate out of the Nantong facility.  The Nantong facility is scheduled to be completed in June 2010.  The estimated additional cost to be incurred in 2010 is $350,000 and the total cost of the project has been revised to approximately $2,500,000 from $4,500,000 due to the Company not currently purchasing certain machinery and equipment. However, the Company may purchase this machinery and equipment in the future.

Long-Lived Assets

The Company’s long-lived assets and other assets are reviewed for impairment in accordance with the guidance of the FASB Topic ASC 360-10, “Property, Plant, and Equipment”, and FASB Topic ASC 205 “Presentation of Financial Statements”.  The Company tests for impairment losses on long-lived assets used in operations whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable. Recoverability of an asset to be held and used is measured by a comparison of the carrying amount of an asset to the future undiscounted cash flows expected to be generated by the asset. If such asset is considered to be impaired, the impairment to be recognize d is measured by the amount by which the carrying amount of the asset exceeds its fair value.  Impairment evaluations involve management’s estimates on asset useful lives and future cash flows.  Actual useful lives and cash flows could be different from those estimated by management which could have a material effect on our reporting results and financial positions.  Fair value is determined through various valuation techniques including discounted cash flow models, quoted market values and third-party independent appraisals, as considered necessary. Through March 31, 2010, the Company had not experienced impairment losses on its long-lived assets. However, there can be no assurances that demand for the Company’s products or services will continue, which could result in an impairment of Long-Lived assets in the future.

Inventories

Inventories consist of raw material, work in progress and finished goods of manufactured products.

Inventories are stated at lower of cost or market and consist of materials, labor and overhead.  The Company determines the cost of inventory by the first-in, first-out method.  The value of inventory is determined using the weighted average cost method and includes any related production overhead costs incurred in bringing the inventory to their present location and condition. Overhead costs included in finished goods include, direct labor cost and other costs directly applicable to the manufacturing process.  The Company evaluates inventories for excess, slow moving, and obsolete inventories as well as inventory whose volume is in excess of its net realizable value.  This evaluation includes analyses of sales levels by product and projections of future demand. In order to state the inventory at lower of cost or market, the Company maintains reserves against its inventory.  If future demand or market conditions are less favorable than the Company’s projections, a write-down of inventory may be required, and would be reflected in cost of goods sold in the period the revision is made.  Inventory amounts are reported net of such allowances.  Management has recorded a $70,000 inventory allowance as of March 31, 2010.

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WORLDWIDE ENERGY AND MANUFACTURING USA, INC. AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTH PERIODS ENDED MARCH 31, 2010

Revenue Recognition

The Company recognizes revenues in accordance with the guidelines of the Securities and Exchange Commission (“SEC”) Staff Accounting Bulletin (“SAB”) No. 104 “Revenue Recognition”.  The Company recognizes revenue from product sales when the orders are completed and shipped, provided that collection of the resulting receivable is reasonably assured.  Amounts billed to customers are recorded as sales while the shipping costs are included in cost of sales. Returns of defective custom parts may only be exchanged for replacement parts within 30 days of the invoice date.  Returns of defective parts may be exchanged for replacement parts or for a refund.  Revenue from non-refundable customer tooling deposits is recognized when the materials are shipped or when the deposit is forfeit ed, whichever is earlier.  During the current quarter and in the prior year, industry conditions and market forces have necessitated the Company to extend their payment terms in the marketplace; however, this change in terms does not prohibit the Company from recognizing revenue in accordance with SAB No. 104.

Cash and Cash Equivalents

For purposes of the statements of cash flows, the Company considers all highly liquid debt instruments purchased with a maturity of three months or less to be cash equivalents.  A substantial amount of the Company’s cash is held in bank accounts in the People’s Republic of China (“PRC”) and is not protected by the Federal Deposit Insurance Corporation (FDIC) insurance or any other similar insurance. Cash held in China amounted to $16,616,598 (including restricted cash of $2,759,444) at March 31, 2010.  Accounts held at U.S. financial institutions are insured by the FDIC up to $250,000. As of March 31, 2010, the Company’s cash balance held at U.S banks was $2,228,000 which was $1,978,000 in excess of the insured amounts, respectively.  Given the current economic environment and the financial conditions of the banking industry there is a risk that deposits may not be readily available or covered by such insurance. The Company has had no loss on excess cash in domestic or foreign banks in past years.

Accounting for Derivatives

The Company evaluates stock options, stock warrants or other contracts to determine if those contracts or embedded components of those contracts qualify as derivatives to be separately accounted for under the relevant sections of Accounting Standards Codification (“ASC”), Topic 815-40, “Derivative Instruments and Hedging: Contracts in Entity’s Own Equity” (“ASC Topic 815-40”).  The result of this accounting treatment could be that the fair value of a financial instrument is classified as a derivative instrument and is marked-to-market at each balance sheet date and recorded as a liability.  In the event that the fair value is recorded as a liability, the change in fair value is recorded in the statement of operations a s other income or other expense.  Upon conversion or exercise of a derivative instrument, the instrument is marked to fair value at the conversion date and then that fair value is reclassified to equity.  Financial instruments that are initially classified as equity that become subject to reclassification under ASC Topic 815-40 are reclassified to a liability account at the fair value of the instrument on the reclassification date.

Estimates

The preparation of these condensed consolidated financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the dates of the condensed consolidated financial statements and the reported amounts of net sales and expenses during the reported periods.  Actual results may differ from those estimates and such differences may be material to the financial statements.  The more significant estimates and assumptions by management include among others:  useful lives and residual values of fixed assets, valuation of inventories, accounts receivable and notes receivable, stock based compensation, valuations of warr ant derivative liability, and goodwill and intangible assets impairment tests, warranties, and deferred taxes. The current economic environment has increased the degree of uncertainty inherent in these estimates and assumptions.

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WORLDWIDE ENERGY AND MANUFACTURING USA, INC. AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTH PERIODS ENDED MARCH 31, 2010

Product Warranties

We provide a limited warranty to the original purchasers of our PV solar modules for five years against defects in materials and workmanship under normal use and service conditions following the date of sale, and we provide a warranty that the modules will produce at least 90% of their power output rating during the first 10 years following the date of sale and at least 80% of their power output rating during the following 15 years.  In resolving claims under both the defects and power output warranties, we have the option of either repairing or replacing the covered module or, under the power output warranty, providing additional modules to remedy the power shortfall.  Our warranties are transferable when product remains installed in the original location.  When we recognize revenue for module sales, we a ccrue a liability for the estimated future costs of meeting our warranty obligations for those modules.  We make and revise this estimate based on the number of solar modules under warranty at customer locations, our historical experience with warranty claims, our in-house testing of our solar modules and our estimated per-module replacement cost.  As of March 31, 2010, our accrued warranty liability was approximately $45,000.

Foreign Currency Transactions and Translation

The Company’s principal country of operations is The People’s Republic of China. The financial position and results of operations of the Company are determined using the local currency Renminbi (“RMB”) as the functional currency. The results of operations denominated in foreign currency are translated at the average rate of exchange during the reporting period.

Assets and liabilities denominated in foreign currencies at the balance sheet date are translated at the exchange rates prevailing at the balance sheet date. The registered equity capital denominated in the functional currency is translated at the historical rate of exchange at the time of capital contribution. All translation adjustments resulting from the translation of the financial statements into the reporting currency (“US Dollars”) are dealt with as a separate component within stockholders’ equity. Translation adjustments net of tax totaled $2,241 and $21,035, for the three months ended March 31, 2010 and 2009, respectively.

Fair Value of Financial Instruments

The Company applies the provisions of accounting guidance, FASB Topic ASC 825 that requires all entities to disclose the fair value of financial instruments, both assets and liabilities recognized and not recognized on the balance sheet, for which it is practicable to estimate fair value, and defines fair value of a financial instrument as the amount at which the instrument could be exchanged in a current transaction between willing parties.  As of March 31, 2010, the fair value of cash and cash equivalents, accounts receivable, other receivables, accounts payable, line of credit and other payables approximated carrying value due to the short maturity of the instruments, quoted market prices or interest rates which fluctuate with market rates except for related party debt or receivables for which it is not practicable to esti mate fair value.

Fair Value Measurements

Effective January 1, 2009, the FASB ASC Topic 825, Financial Instruments, requiresdisclosures about fair value of financial instruments. 

The FASB ASC Topic 820, Fair Value Measurements and Disclosures, clarifies the definition of fair value for financial reporting, establishes a framework for measuring fair value and requires additional disclosures about the use of fair value measurements.   

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WORLDWIDE ENERGY AND MANUFACTURING USA, INC. AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTH PERIODS ENDED MARCH 31, 2010

Various inputs are considered when determining the fair value of the Company’s investments, warrant derivative liability, and long-term debt.  The inputs or methodologies used for valuing securities are not necessarily an indication of the risk associated with investing in these securities.  These inputs are summarized in the three broad levels listed below.

·   Level 1 – observable market inputs that are unadjusted quoted prices for identical assets or liabilities in active markets.

·   Level 2 – other significant observable inputs (including quoted prices for similar securities, interest rates, credit risk, etc.).

·   Level 3 – significant unobservable inputs (including the Company’s own assumptions in determining the fair value of investments).

The Company adoption of FASB ASC Topic 825 did not have a material impact on the Company’s condensed consolidated financial statements.

The carrying value of financial assets and liabilities recorded at fair value is measured on a recurring or nonrecurring basis. Financial assets and liabilities measured on a non-recurring basis are those that are adjusted to fair value when a significant event occurs. The Company had no financial assets or liabilities carried and measured on a nonrecurring basis during the reporting periods. Financial assets and liabilities measured on a recurring basis are those that are adjusted to fair value each time a financial statement is prepared. The Company has two warrant derivative liabilities carried at fair value on a recurring basis at March 31, 2010 and December 31, 2009.

The following are the major categories of assets and liabilities measured at fair value on a recurring basis as of the period ended March 31, 2010 and December 31, 2009, using quoted prices in active markets for identical assets (Level 1); significant other observable inputs (Level 2); and significant unobservable inputs (Level 3).

Description	Level 1: Quoted Prices in Active Markets for Identical Assets		Level 2: Significant Other Observable Inputs		Level 3: Significant Unobservable Inputs		Total at March 31, 2010
Warrant Derivative Liability - 2008	$	-	$	1,315,576	$	-	$	1,315,576
Warrant Derivative Liability - 2010	$	-	$	5,175,887	$	-	$	5,175,887
Total	$	-	$	6,491,463	$	-	$	6,491,463

Description	Level 1: Quoted Prices in Active Markets for Identical Assets		Level 2: Significant Other Observable Inputs		Level 3: Significant Unobservable Inputs		Total at December 31, 2009
Warrant Derivative Liability - 2008	$	-	$	1,626,586	$	-	$	1,626,586
Total	$	-	$	1,626,586	$	-	$	1,626,586

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WORLDWIDE ENERGY AND MANUFACTURING USA, INC. AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTH PERIODS ENDED MARCH 31, 2010

The availability of inputs observable in the market varies from instrument to instrument and depends on a variety of factors including the type of instrument, whether the instrument is actively traded, and other characteristics particular to the transaction. For many financial instruments, pricing inputs are readily observable in the market, the valuation methodology used is widely accepted by market participants, and the valuation does not require significant management discretion. For other financial instruments, pricing inputs are less observable in the market and may require management judgment.

Concentrations, Risks, and Uncertainties

All of the Company’s manufacturing is located in the PRC.  There can be no assurance that the Company will be able to successfully continue to manufacture its products and failure to do so would have a material adverse effect on the Company’s financial position, results of operations and cash flows. Also, the success of the Company’s operations is subject to numerous contingencies, some of which are beyond management’s control. These contingencies include general economic conditions, price of raw material, competition, governmental and political conditions, and changes in regulations. Because the Company is dependent on foreign trade in PRC, the Company is subject to various additional political, economic and other uncertainties. Among other risks, the Company’s operations will be subject to risk of restrictions on transfer of funds, domestic and international customs, changing taxation policies, foreign exchange restrictions, and political and governmental regulations.

The Company operates in China, which may give rise to significant foreign currency risks from fluctuations and the degree of volatility of foreign exchange rates between U.S. dollars and the Chinese currency RMB.

At March 31, 2010, one customer accounted for more than 10% of the Company’s accounts receivable, with a total amount of $9,509,606, representing 51.7% of total accounts receivable in aggregate. This accounts receivable includes sales with extended payment terms due to market conditions and competitive pressures.

At March 31, 2010, one customer accounted for more than 10% of our quarterly sales with a sales mount of $19,871,031 or 65.5% of sales.  At March 31, 2009, two customers individually accounted for greater than 10% of quarterly sales with a total sales volume in the quarter of $5,991,779, or 58.3%.

At March 31, 2010, two suppliers accounted for more than 10% of our Cost of Goods Sold for the quarter.  Purchases from this supplier totaled $20,107,326 or 75.8% of the quarterly Cost of Goods Sold.  At March 31, 2009, two suppliers accounted for greater than 10% of our Cost of Goods Sold in the period at $5,635,749 or 65.8% of the quarterly Cost of Goods sold.

Payments of dividends may be subject to some restrictions due to the fact that the operating activities are conducted in subsidiaries residing in the Peoples Republic of China.

As part of the production process, the Company may be required by its suppliers to advance funds under short-term agreements for tooling and other pre-production costs.  The advances are generally unsecured and may carry interest at the prevailing market rate for short-term instruments.  Such tooling is in most cases, either owned by the supplier or our customers and is generally of value primarily for the specific needs of the Company’s customers.  At March 31, 2010, the Company has made advances to its suppliers of $988,663 for materials and inventory.  The Company in turn requires its customers to provide a non-refundable down payment to offset such startup costs.  As of March 31, 2010, the Company has customer deposits of $1,215,860. In the event that a supplier is unable to fulfill its production agreements with the Company, management believes that other suppliers can be found for the Company’s products.  However, a change in suppliers would cause a delay in the production process, and could result in loss of tooling deposits and other supplier advances, which could negatively affect the Company’s operating results.  

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WORLDWIDE ENERGY AND MANUFACTURING USA, INC. AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTH PERIODS ENDED MARCH 31, 2010

The Company sells its goods and services internationally, with the majority of its revenue currently being derived from customers in the United States and Europe.  As such, the Company is susceptible to credit risk on accounts and notes receivable from customers.  Generally, the Company does not obtain security from its customers in support of accounts receivable.

Stock Based Compensation

For purposes of determining the variables used in the calculation of stock compensation expense under the provisions of FASB ASC Topic 505, “Equity” and FASB ASC Topic 718, “Compensation — Stock Compensation,” we perform an analysis of current market data and historical Company data to calculate an estimate of implied volatility, the expected term of the option and the expected forfeiture rate. With the exception of the expected forfeiture rate, which is not an input, we use these estimates as variables in th e Black-Scholes option pricing model. Depending upon the number of stock options granted, any fluctuations in these calculations could have a material effect on the results presented in our condensed consolidated statement of income. In addition, any differences between estimated forfeitures and actual forfeitures could also have a material impact on our financial statements.

Share-based compensation costs that have been included in operating expenses amounted to $12,500 and $32,120 for the three months ended March 31, 2010 and 2009, respectively.

Recently Enacted Accounting Standards

The FASB issued Accounting Standards Update (ASU) No. 2010-11, Derivatives and Hedging (Topic 815): Scope Exception Related to Embedded Credit Derivatives. The FASB believes this ASU clarifies the type of embedded credit derivative that is exempt from embedded derivative bifurcation requirements. Specifically, only one form of embedded credit derivative qualifies for the exemption - one that is related only to the subordination of one financial instrument to another. As a result, entities that have contracts containing an embedded credit derivative feature in a form other than such subordination may need to separately account for the embedded credit derivative feature.  The amendments in the ASU are effective for each reporting entity at the beginning of its first fisca l quarter beginning after June 15, 2010. Early adoption is permitted at the beginning of each entity’s first fiscal quarter beginning after March 5, 2010.  The Company has not determined the impact that this guidance may have on its financial statements.

The FASB has issued the following two updates to the Codification:

·   ASU No. 2010-04, Accounting for Various Topics: Technical Corrections to SEC Paragraphs ; and

·   ASU No. 2010-05, Compensation - Stock Compensation (Topic 718): Escrowed Share Arrangements and the Presumption of Compensation .

ASU 2010-04 and ASU 2010-05 contain revisions to various “S” Sections in the Codification. These Sections reflect certain rules, regulations, interpretive releases of the SEC, which represent authoritative guidance for SEC registrants. The “S” Sections also include content from certain SEC Staff Accounting Bulletins as well as SEC Staff Announcements and SEC Observer Comments made at EITF meetings.

The technical corrections in ASU 2010-04 primarily reflect revisions to “S” Sections of various Codification Topics related to SEC Staff Announcements, to reflect the appropriate Codification references.

ASU 2010-05 updates paragraph 718-10-S99-2 of Codification Topic 718, Compensation - Stock Compensation, to reflect an SEC Staff Announcement on the SEC staff’s views on overcoming the presumption that escrowed share arrangements represent compensation for certain shareholders. This SEC Announcement codifies the SEC staff view documented in EITF Topic D-110, “Escrowed Share Arrangements and the Presumption of Compensation.”  The Company has not determined the impact that this guidance may have on its financial statements.

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WORLDWIDE ENERGY AND MANUFACTURING USA, INC. AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTH PERIODS ENDED MARCH 31, 2010

3.           COMMITMENTS AND CONTINGENCIES

The Company has various purchase commitments for materials, supplies and services incident to the ordinary conduct of business, generally for quantities required for the Company’s business and at prevailing market prices. No material annual loss is expected from these commitments.

The Company has a contingency associated with its capital raises in 2010 which requires certain milestones to be met. The contingency states:  Additionally, as further consideration for the transaction, we, along with the investors, entered into a make good escrow agreement with certain insiders (“CI”) of the Company who placed an aggregate of 1,620,954 shares of the Company’s common stock into escrow, to be distributed if certain financial milestones of the Company are not met.  Pursuant to the terms of the make good escrow agreement, if the Adjusted EBIDTA reported in the Company’s 2010 Annual Report is less than $4,000,000, then the investors shall be entitled to receive on a “pro rata” basis, determined by dividing each investor’s investment amount by the aggregate of al l investment amounts delivered to us by the investors, for no consideration other than their part of their respective investment amount at closing, some or all of the escrow shares determined according to the following formula:

E	Minus	C
((A / B) X D)

For the purposes of the foregoing formula:

A = 2010 Adjusted EBITDA

B = 2010 EBITDA Milestone

C = Total number of shares issued to the selling stockholders

D = 4.50

E = Total Investment Amount

In addition, the agreement states: Notwithstanding the foregoing, in the event that the Company reports an Adjusted EBITDA of $2,000,000 or less for the year ended December 31, 2010 or the Company fails to file its 2010 Form 10-K with the Commission on or before the last date that such form is required to be filed (after any permitted extensions under the Exchange Act), the “2010 EBITDA Milestone Price” shall equal $2.25 resulting in a potential maximum number of additional shares issued to the investors of 1,970,956.

Should a contingency arise, the contingency would be first satisfied by the CI shares and should the CI shares not be sufficient, then shares would be issued from the Company’s treasury.  The CI shares are considered to be primary consideration in satisfying any potential contingency and are included in outstanding shares and the calculation of earnings per share.

As of March 31, 2010, there are no indications that the milestones will not be met.

The Company is not involved in any legal matters except for those arising in the normal course of business. While incapable of estimation, in the opinion of the management, the individual regulatory and legal matters in which it might involve in the future are not expected to have a material adverse effect on the Company’s financial position, results of operations, or cash flows.

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WORLDWIDE ENERGY AND MANUFACTURING USA, INC. AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTH PERIODS ENDED MARCH 31, 2010

4.           ACCOUNTS RECEIVABLE

Accounts receivable by major categories are summarized as follows:

	March 31, 2010				December 31, 2009
Accounts Receivable	$	18,312,398			$	12,131,157
Accounts Receivable – other		352,251		(1)		421,002
		18,664,649				12,552,159
Less: allowances for doubtful accounts		(273,617	)			(312,369	)
Total	$	18,391,032			$	12,239,790

Under the terms of a revolving line of credit agreement with Bank of the West indicated in Note 10, the revolving line of credit is secured by all business assets of the Company and guaranteed by certain of its officers.

(1) The Company receives letters of credit from its customers as payment for product shipped.

5. INVENTORIES

Inventories by major categories are summarized as follows:

	March 31, 2010			December 31, 2009
Raw materials	$	1,970,752		$	1,466,835
Work in progress		223,623			285,449
Finished goods		3,164,370			2,885,059
		5,358,745			4,637,343
Less: allowances for slowing moving items		(70,000	)		(70,000	)
Total	$	5,288,745		$	4,567,343

6.           INCOME TAX

Our statutory federal income tax is 34% and our state income tax rate is 9.3%. The Company has no amounts of federal tax due in the periods presented. The provision for income taxes consists of the following:

	For The Three Months Ended
	March 31,
	2010		2009
Current income tax expense in China	$	263,374	$	37,746
U.S Federal Tax		30,000		-
State and local income taxes currently paid or payable U.S		-		800
Income tax expense	$	293,374	$	38,546

19

WORLDWIDE ENERGY AND MANUFACTURING USA, INC. AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTH PERIODS ENDED MARCH 31, 2010

7. PROPERTY AND EQUIPMENT

The Company has $13,200 property and equipment located in the United States at March 31, 2010.  At December 31, 2009, $14,993 of property plant and equipment was located in the United States.  Property and equipment for March 31, 2010 was $3,699,026 in the PRC. At December 31, 2009, $2,953,965 of the Company’s property and equipment was located in the PRC. The Company’s property and equipment consisted of the following at March 31, 2010 and December 31, 2009:

	March 31, 2010			December 31, 2009
Vehicles	$	610,498		$	534,594
Furniture and fixtures		278,104			254,961
Equipment		2,317,882			535,784
Software		24,923			24,923
Land rights		415,053			249,919
Leasehold improvements		253,459			466,561
		3,899,919			2,066,742
Less: accumulated depreciation		(1,242,684	)		(1,120,544	)
		2,657,235			946,198
Construction in progress		1,054,991			2,022,760
Total	$	3,712,226		$	2,968,958

8.           NOTES RECEIVABLE

On June 24, 2008, the Company paid $40,680 for an investment in Tomii International (“Tomii”) representing approximately 21.5% equity interest in Tomii.  Tomii is a privately held company that is a development stage entity with no significant operations.  Subsequent to December 31, 2009, Tomii has changed its business model to focus on products that are not compatible with the Company’s business model.  As such, Tomii has agreed to repay the Company’s investment over a two year period at $500 per month for 12 months from April 2010 through March 2011 and $2,890 per month for the remaining 12 months from April 2011 to March 2012.  As of the date of this filing, Tomii has made all payments under this note receivable.

9.           RESTRICTED CASH

Through March 31, 2010, the Company has deposited approximately $10 million (approximately $4.5 million in fiscal year 2009 and $5.5 million in the three months ended March 31, 2010) into an escrow account in the Bank of China for the purpose of registered capital and working capital.  With the deposit of these funds, the Company has fulfilled the requirement of the Chinese government that we have sufficient registered capital to complete the project.  The funds have been transferred to a cash account accessible by the division specifically for facility start-up project costs and working capital.  Total expenditures related to the project as of March 31, 2010 was $2,155,174 and has been used for land purchase and initial construction expenses.  As of March 31, 2010, $5,085,382 has been used for working capital purposes.  The factory is scheduled to be completed in June 2010.  The balance of restricted cash at March 31, 2010 is $2,759,444 which the Company expects to use approximately $350,000 to complete the factory and an additional $500,000 to acquire machinery and equipment with the balance to provide for working capital purposes.

20

WORLDWIDE ENERGY AND MANUFACTURING USA, INC. AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTH PERIODS ENDED MARCH 31, 2010

10.           LINES OF CREDIT

As of March 31, 2010, the Company has the following lines of credit

Banker	Amount of the credit line		Loan period	Interest rate		Secured by	March 31, 2010
Bank of the West	$	2,000,000	5/20/2008 - 5/20/2010		4%	All Corporate assets	$	1,150,000
Bank of the West	$	1,025,000	5/20/2008 - 6/01/2011		4%	All Corporate assets	$	593,750
Total loans							$	1,743,750

Under the terms of the revolving line of credit agreement with Bank of the West, dated May 20, 2008, the Company could borrow up to $3,025,000 at a rate of prime plus 0.75%.  This rate is subject to change based on the prime rate which was 3.25% as of March 31, 2010.  The revolving line of credit is secured by the assets of the Company and guaranteed by certain of its officers.  Payments on the lines of credit are due monthly and payment varies according to the balance outstanding and interest rate.

The Company can borrow up to $2,000,000 and $1,025,000 within two credit lines.  The maturity date of these two credit lines is May 20, 2010 and June 1, 2011 respectively.  The balance outstanding under both lines of credit as of March 31, 2010 is $1,150,000 and $593,750, respectively.  The Company was not in compliance with its bank covenants at March 31, 2010.  As a result, the entire balance has been reclassified to a current liability.  The Company has the funds to repay these loans if necessary.  The Company is in negotiations with the bank for a 90 day extension.

11.           STOCK TRANSACTIONS

On January 26, 2010, we entered in a securities purchase agreement with certain accredited investors pursuant to which we issued and sold 1,777,777 of our common stock and warrants to purchase an aggregate of 1,777,777 shares of our common stock for $7,332,790, net of offering costs of $677,210.  Ladenburg Thalmann & Co., LLC acted as the lead placement agent on the private placement.

On February 9, 2010, we entered into an amendment agreement with approximately 74% of such accredited investors to amend the transaction documents to increase the maximum amount of securities sold to $9,000,000.  On February 9, 2010, we entered into a second securities purchase agreement with certain accredited investors pursuant to which we issued and sold 193,179 shares of our common stock and warrants for $843,793, net of offering costs of $25,514.

The warrants are exercisable for a term of five years at an exercise price of $5.65 per share.  The warrants also contain anti-dilution provisions, including but not limited to, if the Company issues shares of its common stock at less than the then existing conversion price, the conversion price of the warrants will automatically be reduced to such lower price and the number of shares to be issued upon exercise will be proportionately increased.  The warrants contain limitations on exercise, including the limitation that the holders may not convert their Series A Warrants to the extent that upon exercise the holder, together with its affiliates, would own in excess of 4.9% of the Company’s outstanding shares of common stock.

21

WORLDWIDE ENERGY AND MANUFACTURING USA, INC. AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTH PERIODS ENDED MARCH 31, 2010

In addition, Ladenburg Thalmann & Co., LLC acted as the lead placement agent on the private placement and received warrants to purchase 104,657 shares of the Company's common stock (warrants to purchase 4,000 shares of common stock were issued to a second placement agent at an exercise price of $6.75) (based on 150% of the per share equivalent of $4.50 in the transaction).  The warrants vest immediately and have a five year term.

12.           WARRANTS

Accounting for the Warrants

In connection with the Company’s 2008 equity financing (completed on June 23, 2008 and July 24, 2008 (“2008 Financing”), the Company issued 1,111,109 restricted common shares along with warrants to purchase an additional 1,111,109 shares with 722,221 warrants having an exercise price of $7.00 and 388,888 of those warrants having an excise price of $9.00.  In addition, in connection with the Company’s 2010 equity financing (completed on January 26, 2010 and February 9, 2010 (“2010 Financing”), the Company issued 1,970,956 restricted common shares along with warrants to purchase an additional 2,079,613 shares with 1,970,956 warrants having an exercise price of $5.65 and 108,657 of those warrants having an excise price of $6.75.  The Company analyzed the warrants issued in these two transactions (“Warrants”) in accordance with ASC Topic 815 (a codification of EITF 00-19, “Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company’s Own Stock”) to determine whether the Warrants meet the definition of a derivative under ASC Topic 815 and, if so, whether the Warrants meet the scope exception of ASC Topic 815, which is that contracts issued or held by the reporting entity that are both (1) indexed to its own stock and (2) classified in stockholders’ equity shall not be considered to be derivative instruments for purposes of ASC Topic 815.  The provisions of ASC Topic 815 subtopic 40 “Determining Whether an Instrument (or Embedded Feature) Is Indexed to an Entity’s Own Stock” (“ASC Topic 815 subtopic 40”) apply to any freestanding financial instruments or embedded features that have the characteristics of a derivative, as defined by ASC Topic 815 and to any freestanding financia l instruments that are potentially settled in an entity’s own common stock.  The Company concluded that the warrants issued in the 2008 Financing should be treated as a derivative liability as the 2008 Financing includes certain milestone provisions which the Company must be in compliance with for each of the years ended December 31, 2009 and 2008.  If the Company fails to meet these milestones, the Company will be required to issue additional shares of common stock to each purchaser in the 2008 Financing equal to the difference between the original purchase price and the average of the ten closing prices for each of the ten trading days immediately following the milestone date (as defined in the agreement).  In addition, the warrant agreement provides for a price adjustment provision to allow the Conversion Price to be reduced and the number of warrants shares increased in the event the Company fails to meet certain contingencies associated with the 2008 Financing. As the se provisions provide for the possible issuance of additional shares which are indeterminate, the Company determined that the proper accounting for the 2008 Financing warrants should be as a derivative liability under ASC Topic 815 (codification of EITF 00-19).  With respect to the 2010 Financing, the Company concluded that the warrants issued should be treated as a derivative liability as a result of the 2008 Financing which includes provisions that could provide for the possible issuance of additional shares which are indeterminate.  Additionally, the 2010 Financing contains a Registration Payment Arrangement which requires the Company to timely file its required public filings for 12 months in accordance with SEC Rule 144.  As a result, the warrant derivatives should be measured at fair value and re-measured at fair value at each reporting date with changes in fair value recorded in earnings under other income/expense in the Condensed Consolidated Statement of Operations. 0; Effective April 15, 2010 with the filing of the Company’s Annual Report on Form 10-K, the Company has met all contingencies and related 2008 milestone requirements, as defined, and as a result, the Company will reclassify the warrants associated with the 2008 Financing to equity on April 16, 2010.  The warrants associated with the 2010 Financing will continue to be accounted as a derivative liability.  Should the Company timely file its required public filings for 12 months, then the Company expects to reclassify the warrant derivatives associated with the 2010 Financing to equity in 2011.

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WORLDWIDE ENERGY AND MANUFACTURING USA, INC. AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTH PERIODS ENDED MARCH 31, 2010

During the three month periods ending March 31, 2010 and 2009, the Company recorded a gain on warrant re-valuation of $1,299,999 and $18,502, respectively.

Fair Value of the Warrants

Fair value is generally based on independent sources such as quoted market prices or dealer price quotations. To the extent certain financial instruments trade infrequently or are non-marketable securities, they may not have readily determinable fair values. The Company estimated the fair value of the Warrants using a Black Scholes option pricing model and available information that management deems most relevant. Among the factors considered in determining the fair value of financial instruments: The stock price is the closing price of the Company’s stock on the valuation date; the risk free interest rate is based on the U.S. Government Securities average rate for 1 and 2 year maturities on the date of issuance; the volatility is a statistical measure (standard deviation) of the tendency of the Company’s stock price to cha nge over time; the exercise price is the price at which the warrant can be purchased by exercising prior to its expiration; the dividend yield is not applicable due to the Company not intending to declare dividends; the contractual life is based on the average exercise period of the warrant; and the fair market value is value of the warrants based on the Black Scholes model on the valuation date . The following table provides the valuation inputs used to value the Warrants issued in connection with the 2008 Financing.

2008 Financing Warrants - Valuation Inputs
Attribute	March 31, 2010			March 31, 2009
Stock Price	$	4.98			$	3.20
Risk Free Interest Rate		2.26 – 2.69	%			2.26 – 2.69	%
Volatility		81.5 – 87.0	%			81.5 – 87.0
Exercise Price	$	7.00 – 9.00			$	7.00 – 9.00	%
Dividend Yield		0	%			0	%
Contractual Life (Years)		1.0 – 1.5				1.0 – 1.5
Fair Market Value	$	1,315,576			$	467,854

The following table provides the valuation inputs used to value the Warrants issued in connection with the 2010 Financing.

2010 Financing Warrants - Valuation Inputs
Attribute	March 31, 2010			January 2010
Stock Price	$	4.98		$	5.65
Risk Free Interest Rate		1.03 – 1.12	%		1.03 – 1.12	%
Volatility		90.5	%		90.5	%
Exercise Price	$	5.65 – 6.75		$	5.65 – 6.75
Dividend Yield		0	%		0	%
Contractual Life (Years)		2.5			2.5
Fair Market Value	$	5,175,887		$	6,094,876

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WORLDWIDE ENERGY AND MANUFACTURING USA, INC. AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTH PERIODS ENDED MARCH 31, 2010

13.           RELATED PARTY TRANSACTIONS

(1) Long term receivable – related party

	March 31,		December 31,
	2010		2009
	(unaudited)
Mr. Ding Honglin – Mr. Ding is the General Manager of Shanghai Intech Precision Machinery Co. Ltd – Loan to accommodate partnership separation	$	237,343	$	237,305

The amounts due from related party are unsecured, interest free and have no fixed repayment dates.

(2) Note receivable from officer

	March 31,		December 31,
	2010		2009
Mr. Jimmy Wang and Mrs. Mindy Wang, principal stockholders, executive officers and members of the Board of Directors of the Company.	$	-	$	50,000

The amounts due from a related party are unsecured, interest free and have no fixed repayment dates.  As of January 5, 2010, all amounts were repaid.

(3) Due to a related party

	March 31,		December 31,
	2010		2009
Shanghai Jinde Electro-Mechanical Co. Ltd, the shareholder of Shanghai Intech-Tron Electron-Electric Co., Ltd advanced to Detron for working capital purposes.	$	1,246,316	$	1,246,114
A relative of Mr. Jimmy Wang and Mrs. Mindy Wang, principal stockholders, executive officers and members of the Board of Directors of the Company	$	-	$	400,000	(1)
	$	1,246,316	$	1,646,114

The amounts due to a related party are unsecured, interest free and have no fixed repayment dates.

(1) On September 28, 2009, the Company borrowed $400,000 from an employee, who is related to an officer of the Company, for working capital purposes.  The note provides for the Company to make a lump sum payment on September 27, 2010, including interest at an annual rate of 4.25%. The borrowing plus interest of $6,328 was repaid on February 9, 2010.

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WORLDWIDE ENERGY AND MANUFACTURING USA, INC. AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTH PERIODS ENDED MARCH 31, 2010

14.           EARNINGS PER SHARE

FASB ASC Topic 260, Earnings Per Share, requires a reconciliation of the numerator and denominator of the basic and diluted earnings per share (EPS) computations. 

For the three months ended March 31, 2010 and the same period in 2009, the following were included as potential dilutive shares. Employee stock options of 96,217 with an exercise price of $6.00.  Class A warrantsto purchase 722,221 common shares at an exercise price of $7.00 and Class B warrants to purchase 388,888 shares at an exercise price of $9.00 of common stock.  Due to the exercise price being in excess of the estimated fair market value of the Company’s stock, using the treasury stock method, all potential dilutive shares were deemed to be anti-dilutive.

The following table sets forth the computation of basic and diluted net income per share:

	For The Three Months Ended
	March 31,
	2010		2009
	(unaudited)		(unaudited)
Net income attributable to the common stockholders	$	1,950,735	$	660,794
Basic weighted average outstanding shares of common stock		5,043,130		3,522,933
Dilutive effect of options and warrants		-		-
Diluted weighted average common stock and common stock equivalents		5,043,130		3,522,933
Earnings per share:
Basic	$	0.39	$	0.19
Diluted	$	0.39	$	0.19

15.           SEGMENT INFORMATION

The Company’s operations are classified into two principal reportable segments that provide different products or services.  These two segments are solar and contract manufacturing.  Our solar module division procures and manufactures solar modules for sale to the solar industry. Our solar industry represents 86.4% of our business. The contract manufacturing division purchases and sells a wide variety of manufactured goods from China procured by its subsidiaries or contractors in China to a wide range of customers from different industries. Although both segments are involved in manufacturing they serve different customers and are managed separately requiring specialized expertise. We determine our operating segments in accordance with FASB ASC Topic 280, “Seg ment Reporting.”

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WORLDWIDE ENERGY AND MANUFACTURING USA, INC. AND SUBSIDIARIES

NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTH PERIODS ENDED MARCH 31, 2010

Segmental Data – Three months ended March 31, 2010 and 2009

Reportable Segments(amounts in thousands)

	March 31, 2010									March 31, 2009
	Solar			Contract Mfg			Total			Solar			Contract Mfg			Total
Revenue		26,211			4,121			30,332			6,890			3,392			10,282
Cost of goods		(23,408	)		(3,132	)		(26,540	)		(5,904	)		(2,659	)		(8,563	)
Gross profit		2,803			989			3,792			986			733			1,719
Operating profit		1,498			102			1,600			737			(39	)		698
Net income		1,796			155			1,951			700			(36	)		661
Segment accounts receivable		11,047			7,344			18,391
Segment assets		33,971			15,828			49,799
Expenditures for long-lived assets		749			148			897

In our solar division, Germany represented approximately 81.3%, Italy represented approximately 9.3%, the United Kingdom represented approximately 4.3% and the United States represented approximately 2.2% of our sales in the three months ended March 31, 2010.  For the three months ended March 31, 2009, Germany represented 69.4% of our business, Italy representing 21.2% and the United States representing 3.7% of our total solar sales.  For our contract manufacturing business, the United States represents approximately 36.4% and China represents 63.6% of sales for the three months ended March 31, 2010.  For the three months ended March 31, 2009, the United States represented 53.8% and China 46.2% of that division’s sales.

In our solar division, the Germany represented approximately 83.4%, the United Kingdom represented approximately 7.1%, and Italy represented approximately 5.9% of solar accounts receivable as of March 31, 2010.  As of March 31, 2009, the Germany represented approximately 74.6% and Italy represented approximately 18.4% of the solar accounts receivable.  For our contract manufacturing business, China represents approximately 73.2%, the United States represents approximately 26.8%ccontract manufacturing accounts receivable as of March 31, 2010.  As of March 31, 2009, China represents approximately 71.8% and the United States represents 28.3% of the contract manufacturing accounts receivable.

16.           SUBSEQUENT EVENTS

In May 2009, the FASB issued accounting guidance now codified as FASB ASC Topic 855, “Subsequent Events,” which establishes general standards of accounting for, and disclosures of, events that occur after the balance sheet date but before financial statements are issued or are available to be issued. FASB ASC Topic 855 is effective for interim or fiscal periods ending after June 15, 2009.  Accordingly, the Company has evaluated subsequent events for the period from March 31, 2010, the date of these financial statements, through May 15, 2010, which represents the date these financial statements are being issued.

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ITEM  2.       MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

DISCLAIMER REGARDING FORWARD LOOKING STATEMENTS

Certain statements in this Form 10-Q, which are not statements of historical fact, are what are known as "forward-looking statements," which are basically statements about the future. For that reason, these statements involve risk and uncertainty since no one can accurately predict the future. Words such as "plans," "intends," "hopes," "seeks," "anticipates," "expects," and the like, often identify such forward looking statements, but are not the only indication that a statement is a forward-looking statement. Such forward-looking statements include statements concerning our plans and objectives with respect to our present and future operations, and statements which express or imply that such present and future operations will or may produce revenues, income or profits. These and other factors may cause our actual results to differ mat erially from any forward-looking statement.  We caution you not to place undue reliance on these forward-looking statements.  Although we base these forward-looking statements on our expectations, assumptions, and projections about future events, actual events and results may differ materially, and our expectations, assumptions, and projections may prove to be inaccurate. The forward-looking statements speak only as of the date hereof, and we expressly disclaim any obligation to publicly release the results of any revisions to these forward-looking statements to reflect events or circumstances after the date of this filing.

Overview

Worldwide Energy and Manufacturing USA, Inc. (“Worldwide” or “the Company”) is an international manufacturing and engineering firm, concentrating on PV solar modules and contract manufacturing services, using multiple factories in China.  We service customers primarily in Europe, South Korea for our solar modules and United States-based companies for their outsource of smaller and scale production orders for offshore production in China.  From our inception in 1993 until 2005, we were strictly an intermediary or “middle man,” working with our customers and our subcontractors to assure that our customers received high quality components on a timely basis that fulfilled their specific needs.  While we still subcontract a significant portion of our business, since 2005, we have begun the transition to becoming a direct contract manufacturer, operating several of our own factories.  Recently, we announced the opening of two additional factories, allowing us to become a direct manufacturer for solar modules and for power supply units as described below:

In February of 2008, we established a solar division that focuses on photovoltaic module technology under the brand name of “AmeriSolar.”  On February 4, 2008, we changed our name from Worldwide Manufacturing USA, Inc. to Worldwide Energy and Manufacturing USA, Inc. in order to reflect our expansion into the solar energy industry.  We issued 300,000 restricted shares for the AmeriSolar brand name.  We then leased a 129,167 square foot facility in Ningbo, China.  The lease term is from July 18, 2008 to July 17, 2013.  This facility houses the production operations and R&D center for our solar division.  This factory has the capability of producing 60MW in solar modules per year, which translates into approximately $114 million in revenues at full capacity, based on current prices.  By opening this factory we hope to increase gross and net margins in our solar division.  Furthermore, it will help us through the R&D department to continue to improve, develop and enhance our solar modules. We will continue to explore opportunities as well as expand our solar sales and distribution globally. We currently sell our solar modules in Europe and South Korea.  Our research shows that there is an abundance of solar rebate programs paid by Federal, State, and Local governments for both the commercial and residential markets globally.  We feel we are well positioned to sell our modules to large institutions in the U.S. This division generated $26,211,272 and $6,889,539 in sales for three months ended March 31, 2010 and 2009, respectively.

On October 14, 2008, we completed the acquisition of 55% of Shanghai De Hong Electric and Electronic Company Limited (“De Hong”) through acquiring 55% of the outstanding capital stock of De Hong, a China corporation, through our wholly owned subsidiary Intech Electro- Mechanical Products Co., Ltd., a Chinese corporation (“Intech”).  We funded the acquisition with the sale of 1,055,103 shares of our common stock, or $4,747,970 on June 23, 2008 and an additional sale of 56,007 shares of common stock, $252,027 on July 24, 2008.  Shanghai De Hong Electric and Electronic Company is the holding company for the operating subsidiary Shanghai Intech-Detron Electronic Co. (“Detron”).  We hold 55% control of the operating subsidiary Shanghai Intech-Detron Electric and Electronic Co mpany Limited (“Detron”).  Detron is a power supply factory in Shanghai, China with design and R & D capabilities.  Under the terms of the purchase agreement dated February 3, 2008, we paid cash consideration of $1,022,700 for a 55% interest in De Hong.  Intech paid the first installment of $714,286 on behalf of us in September, 2008.  On March 31, 2009, we paid $308,414 for the second installment, such that the total consideration of the investment is $1,022,700.

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Detron’s revenues were a $1,717,727 and $1,087,427 for the three months ended March 31, 2010 and 2009, respectively.

On August 15, 2008, we formed a new company called Nantong Ningbo Solar Factory (“Ningbo Solar”), which is the solar energy research and development manufacturer.  We established a factory to provide installation services to different solar projects.  We also act as agent to import or export the products and services overseas.

On November 10, 2008 we announced the establishment of a new solar module production and R&D facility.  We leased a 128,000-square-foot facility in Ningbo, China.  This facility houses our research center and part of our photovoltaic (PV) manufacturing operations.  We believe the establishment of this facility will help to improve margins for our solar modules.  We will focus our efforts on the solar module industry both at present as well as in the future.  The trend for the future for us will be to continue to expand and seek opportunities to increase market share in the solar module industry.

The city of Ningbo is about two hours away from downtown Shanghai.  The production capacity of the factory is between 60 to 80 megawatts per year, depending on staffing.

Despite these additions and enlarging our capability as a direct manufacturer for several products lines we are still constrained in our growth for a number of reasons.  Many Fortune 500 and other large companies either cannot, or choose not, to work with contract manufacturers preferring to go directly to the source that can manufacture the product and thereby avoid the additional expense of the middleman.  This is particularly true for very large orders, where the added cost of the middleman can have a material impact on the customers’ bottom line.  As a result, our revenues have for the most part, but not entirely, been limited to smaller scale production orders primarily (but not entirely) placed by companies that are not among the largest companies in the United States or elsewhere.  A dditionally, as a middleman we must share any potential gross profit with the subcontracting factory.  Therefore, our customers are generally smaller, the orders they place are generally smaller and the income and profit we can generate from those orders is of necessity limited because we are not directly manufacturing the products.  On the other hand, when we subcontract the actual manufacturing of our customers’ products and components, we do not need to hire factory employees, purchase materials, purchase and maintain manufacturing equipment or incur the costs of the manufacturing facilities.  To some extent, these costs are built into the price charged by our subcontractors, but if we do not place orders, we do not incur those costs.

Our management has carefully considered these factors and during 2004 made the strategic decision to move us away from our historical complete reliance on subcontractors.  The future trend of these decisions is to control our entire production process and improve profit margins.  At the beginning of 2005 we did not own any of our own factories and used as our suppliers of materials and labor approximately 100 factories in China, mostly in Shanghai or the surrounding area.  Since 2005 we have acquired an electronics factory, and acquired a die-casting and machining factory through the leasing of an existing facility from a former vendor.  Then we made an initial investment of approximately $500,000 to upgrade the equipment and manufacturing buildings.  We also recently acquired of a powe r supply company with designing and R&D capabilities and the establishment of a solar module factory on November 10, 2008.  In these transactions we acquired assets, the expertise of the employees, the managers of the factories, and a portion of the existing customers of those factories with the exception of the solar module factory which we established on our own.  As a result, we currentlyown and operate four factories that we now use for the manufacture of certain product lines that we historically had to subcontract, and we are using the services of approximately 40 subcontractors to manufacture those product lines for which we do not have our own manufacturing capabilities.

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The establishment of these factories, including asset purchases and factory upgrades, was funded by three separate sources. The earlier acquisitions of the die cast and electronic factory primarily was financed by loans from Jimmy and Mindy Wang, our principal stockholders and executive officers, as well as increased lines of credit.  Our credit line increased to $3,025,000 with Bank of the West from a $2,250,000 line with Wells Fargo during 2008.  The Company was not in compliance with its related loan covenants at December 31, 2009 and March 31, 2010.  The power supply company and the establishment of the new solar module factory were funded by two equity transactions dated June 23 and July 24, 2008 where we raised approximately $5,000,000.  In the future, we expect to continue to acquire or ne wly-establish factories that will give us the capability to manufacture those product lines our management believes are the most profitable.

With the continuing transition into direct manufacturing and the renewable energy field, we expect to continue to increase sales outside the United States, and in particular, increase the number of customers in China, other Asian markets and Europe. Our costs to establish and improve these factories will increase along with sales and profits.

Through the development of our product mix, which consists of solar modules, casting, machining and stamping, electronics and fiber optics products lines, our business has become more diverse. In the past, foundry and machining and stamping accounted for more than 90% of our business.  This percentage has decreased since forming our own factories along with our new energy division which now represents approximately 86.4% and 67.0% of our sales volume for the three months ending March 31, 2010 and 2009, respectively.  With greater market penetration, and the market expanding, the solar content of our overall business is expected to increase.

Generally, our operating results have been, and will continue to be, affected by a number of factors, including the following:

•  our customers may cancel or delay orders or change production quantities;

•   overall market conditions in the solar industry;

•  integration of acquired businesses and facilities; and

•  managing growth and changes in our operations.

We also are subject to other risks, including risks associated with operating in foreign countries, changes in our tax rates, and fluctuations in currency exchange rates.

We recognize revenues in accordance with the guidelines of the Securities and Exchange Commission (“SEC”) Staff Accounting Bulletin (“SAB”) No. 104 “Revenue Recognition”.  We recognize revenue from product sales when the orders are completed and shipped, provided that collection of the resulting receivable is reasonably assured.  Amounts billed to customers are recorded as sales while the shipping costs are included in cost of sales. Returns on defective custom parts may only be exchanged for replacement parts within 30 days of the invoice date. Returns on defective parts, which can be resold, may be exchanged for replacement parts or for a refund.  Revenue from non-refundable customer tooling deposits is recognized when the materials are shipped or when the deposit is f orfeited, whichever is earlier.

Results of Operations

Revenues – Revenues increased by $20,049,704 or 195.0% to $30,331,571 for the three months ended March 31, 2010 from $10,281,867 for the three months ended March 31, 2009.  The revenues from solar module sales were $26,211,272 for the three months ended March 31, 2010 compared to $6,889,539 in the same period of 2009.  This represents an increase of $19,321,733 in revenue for our Solar Division or approximately 280.4%.  The revenues for Contract Manufacturing for the three months ended March 31, 2010 were $4,120,299 compared to $3,392,328 in the same period of 2009, an increase of $728,921 or 21.5%.  This increase in solar sales is due to the continued market penetration of our Amerisolar brand of PV solar modules a s we have shipped a higher quantity of units but we are experiencing a lower sales price per unit as compared to the previous year.  Market level pricing of solar modules has proven to be much more stable thus far in 2010, and is expected to remain so, than the dynamic pricing of 2009.  The increase in sales for our Contract Manufacturing division is due to increased shipments from our Die Casting and Electronics facilities.  The Company continues to focus on the sales and marketing of its solar modules by establishing sales teams in China, United States and several European countries.  Solar module revenues comprise approximately 86.4% of the Company's gross sales for the three months ending March 31, 2010 compared to 67.0% in the same period of 2009.

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Cost of Sales - Cost of goods sold increased by $17,977,073 or 209.9% to $26,539,873 for the three months ended March 31, 2010 from $8,562,800 for the three months ended March 31, 2009.  The increase was primarily due to the increased sales of the solar division.  The cost of goods for solar modules for the three months ending March 31, 2010 was $23,408,381 compared to $5,903,515 for the same period in 2009.  The increase of $17,504,866 reflects the increase in solar module sales and is offset partially by the reduced material costs associated with solar module production as compared to same period last year.  The costs of goods sold for Contract Manufacturing was $3 ,131,492 for the three months ending March 31, 2010 compared to cost of goods sold of $2,659,285 for the same period in 2009, an increase of $472,207, due to increased sales volume from this division.

Gross Profit - Gross profit increased by $2,072,631, or 120.6% to $3,791,698 for the three months ending March 31, 2010 from $1,719,067 for the three months ending March 31, 2009.  The gross profit from solar module sales was $2,802,891 for the three months ended March 31, 2010 compared to $986,024 in the same period of 2009.  This represents an increase of $1,816,867 in gross profit for the division or approximately 184.3% and is due to the increased number of units shipped as well as the lower material costs associated with the crystalline silicon material for module production.  As stated before, the PV solar module market experiences market dynamics and significant price pressures throughout the whole supply chain, affecting us on both the sales and cost side of the solar division.  The gross profit for contract manufacturing for the three months ended March 31, 2010 was $988,807 compared to $733,043 in the same period of 2009, an increase of $255,764 or 34.9% and is due to higher sales volume for the division, driven by increased volume from our Die Casting and Electronics production facilities.

Gross Margin - The gross margin was 12.5% for the three months ending March 31, 2010 compared to 16.7% in the same period in 2009.  The gross margin for our solar division for the three months ending March 31, 2010 was approximately 10.7% compared to 14.3% for the same period in 2009.  This decrease is driven by the lower sales price per unit which has exceeded our reduced material costs from our suppliers for silicon cells.  The gross margin for contract manufacturing for the three months ending March 31, 2010 was 24.0% compared to 21.6%.  This increase is due to sales mix in that a higher percentage of the contact manufacturing sales are from our Electronics company which maintains a higher gross margin than the other c ontact manufacturing companies.

Operating Expenses – Selling, general and administration expenses for the three months ended March 31, 2010, totaled $1,934,696 compared to $826,155 in the same period in 2009, an increase of $1,108,541 or approximately 134.2%.  Sales, general and administration expenses were $1,218,348 for the three months ending March 31, 2010 compared to $249,592 in the same period in 2009 an increase of $968,756 or 388.1% for our Solar Module division, reflective of the increased sales expenses for sales associate  salaries and commissions on increased sales volume and the expenses associated with adding administrative infrastructure for our current and anticipated sales growth.  Sales, general and administration expenses for the three mo nths ended March 31, 2010 for our contract manufacturing division was $716,348 compared to $771,859 in the same period of 2009.  The decrease of $55,511 or 7.2% is primarily due to cost reduction measures, such as, maintaining a reduced headcount achieved in 2009 on a reduced sales level.

For the three months ending March 31, 2010 there was stock based compensation of $12,500 compared to $32,120 for stock based compensation in the same period of 2009.  Further the Company had depreciation expense of $154,539 in the three months ending March 31, 2010 compared to $73,176 in the same period of 2009, due to the greater amount of depreciable assets owned by the Company.

Income Before Income Taxes - Income before tax for the three months ending March 31, 2010 was $2,354,125 compared to a net income before tax of $724,497 for the year ended March 31, 2009.  The increase of $1,629,628 or approximately 224.9% is primarily due to the change in the warrant derivative liability of $1,229,999 and the higher gross profit driven by our material cost reductions.

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We do not anticipate significant increases in sales, general and administration expenses other than those directly attributed to increases in sales such as marketing and sales commissions and our compliance costs as we implement the requirements of Sarbanes Oxley.

Liquidity and Capital Resources

General – Overall, we had an increase in cash flows of $6,904,180 in the three months ending March 31, 2010 resulting from $1,214,634 of cash provided by operating activities, cash provided by financing activities of $6,891,166, offset partially by cash used by investing activities of $1,200,735.

The following is a summary of our cash flows provided by (used in) operating, investing, and financing activities during the periods indicated:

	Three months ended March 31,
	2010			2009
Cash at beginning of period	$	9,180,974		$	5,092,476
Net cash provided by (used in) operating activities		1,214,634			(1,728,085	)
Net cash used by investing activities		(1,200,735	)		(1,045,727	)
Net cash provided by financing activities		6,891,166			1,202,360
Effect of exchange rate changes on cash		(885	)		(625	)
Cash at end of period	$	16,085,154		$	3,520,399

In 2009, our credit line was increased by approximately $775,000 from a line of credit in the amount of $2.25 million with Wells Fargo Bank to $3.025 million, as a result of securing two new credit lines with Bank of the West, one for $2,000,000 and the other for $1,025,000.  The credit line with Wells Fargo Bank was subsequently closed.  These revolving lines of credit are secured by our assets and guaranteed by certain of our officers.  The maturity dates of these two credit lines are May 20, 2010 and June 1, 2011, respectively.

The Company was not in compliance with its bank covenants at March 31, 2010.  As a result, the entire balance has been reclassified to a current liability.  The Company has the funds to repay this loan if necessary.  The Company is in negotiations with the bank for a 90 day extension.

Cash Flows from Operating Activities – For the three months ending March 31 2010, net cash provided by operations was $1,214,634 compared to net cash used in operations of $1,728,085 for the three months ending March 31, 2009.  The increase in net cash provided by operations was primarily due to net income of $2,060,751 for the three months ended March 31, 2010, and the changes in operating assets and liabilities of $245,907 primarily due to increases in accounts payable of $7,366,684, and accrued expenses and acquisition cost payable of $280,065, offset primarily by the decreases of $6,108,296 in accounts receivable, $151,884 in taxes payable, $500,195 in advances to suppliers, and $720,960 in inventories; offset primarily by the change in the warrant derivative liability of $1,299,999.

Cash Flows from Investing Activities – Net cash used in investing was $1,200,735 in the three months ending March 31, 2010, compared to net cash used of $1,045,727 in the same period of 2009.  The decrease net cash used by investing activities was due to capital expenditures of $897,331, and increases in deposits to restricted accounts of $303,404.

Cash Flows from Financing Activities – Net cash flows provided by financing activities in the three months ending March 31, 2010 was $6,891,166 compared to $1,202,360 in 2009.  The increase in net cash provided by financing activities was primarily due to proceeds from issuance of common stock and warrants, net of offering costs, of $8,176,583, and proceeds of borrowing from related party of $50,000, offset primarily by repayment of loan payable to shareholder of $400,000, and repayments of bank loans of $935,417.

As we continue to grow our Solar division, we must follow industry trends in regards to extended payment terms to our customers.  Typically these market conditions affect the whole supply chain and as extended terms are offered to consumers, favorable terms can be negotiated with the supplier base.  Our current cash position allows flexibility to accommodate these market conditions.

Financing – We believe our current working capital position, together with our expected future cash flows from operations will be adequate to fund our operations in the ordinary course of business, anticipated capital expenditures, debt payment requirements and other contractual obligations for at least the next twelve months.  However, this belief is based upon many assumptions and is subject to numerous risks, and there can be no assurance that we will not require additional funding in the future.

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We expect to have a total of approximately $1,100,000 of capital expenditures for the remainder of 2010 primarily $350,000 to complete the factory and an additional $500,000 to acquire machinery and equipment for our new Nantong China facility and $250,000 for continued expansion of our business.

We have no present agreements or commitments with respect to any material acquisitions of other businesses, products, product rights or technologies or any other material capital expenditures.  However, we will continue to evaluate acquisitions of and/or investments in products, technologies, capital equipment or improvements or companies that complement our business and may make such acquisitions and/or investments in the future.  Accordingly, we may need to obtain additional sources of capital in the future to finance any such acquisitions and/or investments.  We may not be able to obtain such financing on commercially reasonable terms, if at all.  Due to the ongoing global economic crisis, we believe it may be difficult to obtain additional financing if needed.  Even if we are able t o obtain additional financing, it may contain undue restrictions on our operations, in the case of debt financing, or cause substantial dilution for our stockholders, in the case of equity financing.

Note Payable – On September 28, 2009, the Company borrowed $400,000 from an employee of the Company for working capital purposes.  The note provides for the Company to make a lump sum payment on September 27, 2010, including interest at an annual rate of 4.25%. The borrowing plus interest was repaid on February 9, 2010.

Equity Financing – On January 26, 2010, we entered in a securities purchase agreement with certain accredited investors pursuant to which we issued and sold 1,777,777 of our common stock and warrants to purchase an aggregate of 1,777,777 shares of our common stock for $7,332,790, net of offering costs of $667,210.  Ladenburg Thalmann & Co., LLC acted as the lead placement agent on the private placement.

On February 9, 2010, we entered into an amendment agreement with approximately 74% of such accredited investors to amend the transaction documents to increase the maximum amount of securities sold to $9,000,000.  On February 9, 2010, we entered into a second securities purchase agreement with certain accredited investors pursuant to which we issued and sold 193,179 shares of our common stock for $843,793, net of offering costs of $25,514.

The warrants are exercisable for a term of five years at an exercise price of $5.65 per share.  The warrants also contain anti-dilution provisions, including but not limited to, if we issue shares of our common stock at less than the then existing conversion price, the conversion price of the warrants will automatically be reduced to such lower price and the number of shares to be issued upon exercise will be proportionately increased.  The warrants contain limitations on exercise, including the limitation that the holders may not convert their warrants to the extent that upon exercise the holder, together with our affiliates, would own in excess of 4.9% of the Company’s outstanding shares of common stock.

In addition, Ladenburg Thalmann & Co., LLC acted as the lead placement agent on the private placement and received warrants to purchase 104,657 shares of the Company's common stock (warrants to purchase 4,000 shares of common stock were issued to a second placement agent at an exercise price of $6.75) (based on 150% of the per share equivalent of $4.50 in the transaction).  The warrants vest immediately and have a five year term.

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Additionally, as further consideration for the transaction, we, along with the investors, entered into a make good escrow agreement with certain of our insiders who along with the Company will place an aggregate of 1,970,956 shares, that are already issued and outstanding, of our common stock into escrow, to be distributed if certain financial milestones of the Company are not met.  Pursuant to the terms of the make good escrow agreement, if the Adjusted EBIDTA reported in our 2010 Annual Report is less than $4,000,000, then the investors shall be entitled to receive on a “pro rata” basis, determined by dividing each investor’s investment amount by the aggregate of all investment amounts delivered to us by the investors, for no consideration other than their part of their respective investment amount at clos ing, some or all of the escrow shares determined according to the following formula:

E	Minus	C
((A / B) X D)

For the purposes of the foregoing formula:

A = 2010 Adjusted EBITDA

B = 2010 EBITDA Milestone

C = Total number of shares issued to the selling stockholders

D = 4.50

E = Total Investment Amount

In addition, the agreement states: Notwithstanding the foregoing, in the event that the Company reports an Adjusted EBITDA of $2,000,000 or less for the year ended December 31, 2010 or the Company fails to file its 2010 10-K with the Commission on or before the last date that such form is required to be filed (after any permitted extensions under the Exchange Act), the “2010 EBITDA Milestone Price” shall equal $2.25 resulting in a potential maximum number of additional shares issued to the investors of 1,970,956.

As of March 31, 2010, there are no indications that the milestones will not be met.

PLAN OF OPERATION

We will continue to focus on the expansion of our renewable energy division by the continued development of our newly established solar factory in Ningbo, China as well as the continued quality enhancements of our solar module brand, "Amerisolar".  Additionally, we intend to develop the U.S. solar module market and plan to expand our operation in this market. We believe that the renewable energy division offers us our greatest growth and profit potential in both the present and foreseeable future. We presently have enough liquidity to meet our expansion plans. However, depending on growth the Company may need additional funding in the future.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements that are currently material or reasonably likely to be material to our financial position or results of operations.

Contractual Obligations

The 1st “Rights for Construction” for our Nantong facility was issued on December 19, 2008 to Worldwide Energy and Manufacturing USA by the Department of Interior of Jiangsu Province, China.

There was an official agreement between the Department of Civil Engineering (in building and constructions) for the city of Nantong and Worldwide Manufacturing Solar Division located in Nantong dated May 27, 2009 in detailing of the construction for the PV solar module manufacturing facility.  Agreement details:

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1)   Land usages and rights

2)   Fees and application process

3)   Date of Completions

4)   All and other related subjects

An amendment subsequently followed in further requirements and commitments of both parties were executed on May 29, 2009.

The amount of the Agreement is approximately $1.8 million of which approximately $1.2 million has been expended through March 31, 2010.

Critical Accounting Policies and Estimates

This discussion and analysis of financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosures. On an on-going basis, we evaluate our estimates, including those related to property, plant and equipment, inventories, revenue recognition, inventories, accounts receivable and foreign currency transactions and translation. We base our estimates on historical experience and on various other market-specific assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgm ents about the carrying values of assets and liabilities that are not readily apparent from other sources.  Actual results, however, may differ significantly from these estimates.

We believe the following critical accounting policies reflect the more significant judgments and estimates used in the preparation of our consolidated financial statements:

Revenue Recognition and Accounts Receivable

The Company follows the provisions of SAB 104, “Revenue Recognition in Financial Statements”, for revenue recognition. Under SAB 104, four conditions must be met before revenue can be recognized: (i) there is persuasive evidence that an arrangement exists, (ii) delivery has occurred or service has been rendered, (iii) the price is fixed or determinable, and (iv) collection is reasonably assured.  The Company provides for an allowance for doubtful account based history and experience considering economic and industry trends. The Company does not have any off-Balance Sheet exposure related to its customers.

Warrant Derivative Liability

The Company issued warrants in connection with the sale of common stock in 2008 and 2010.  The Company analyzed the accounting treatment and classification of the warrants and summarized the effects and conclusions. The Company accounts for the warrants pursuant to FASB ASC Topic 815.

Impairment analysis for long-lived assets and intangible assets

The Company’s long-lived assets and other assets (consisting of property and equipment and purchased intangible assets) are reviewed for impairment in accordance with the guidance of the FASB Topic ASC 360, “Property, Plant, and Equipment”, and FASB ASC Topic 205 “Presentation of Financial Statements”.  The Company tests for impairment losses on long-lived assets used in operations whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable.  Recoverability of an asset to be held and used is measured by a comparison of the carrying amount of an asset to the future undiscounted cash flows expected to be generated by the as set.  If such asset is considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the asset exceeds its fair value.  Impairment evaluations involve management’s estimates on asset useful lives and future cash flows.  Actual useful lives and cash flows could be different from those estimated by management which could have a material effect on our reporting results and financial positions.  Fair value is determined through various valuation techniques including discounted cash flow models, quoted market values and third-party independent appraisals, as considered necessary. Through March 31, 2010, the Company had not experienced impairment losses on its long-lived assets. 

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Inventories

Inventories consist of finished goods of manufactured products.  Inventory is based on customer orders and the duration of those orders.  Cost is stated at the lower of cost or market on a first-in, first-out (FIFO) basis.  The Company has recorded an allowance for slow-moving or obsolete inventory of $70,000 at March 31, 2010.

Management has discussed the development and selection of these critical accounting policies with the Board of Directors and the Board has reviewed the disclosures presented above relating to them.

ITEM 3.        QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are a smaller reporting Company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.

ITEM 4.        CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

We conducted an evaluation, with the participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act, as of March 31, 2010 to ensure that information required to be disclosed by us in the reports filed or submitted by us under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities Exchange Commission's rules and forms, including to ensure that information required to be disclosed by us in the reports filed or submitted by us under the Exchange Act is accumulated and communicated to our management, including our principal executive and principal financial of ficers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that as of March 31, 2010, our disclosure controls and procedures were not effective at the reasonable assurance level due to the material weaknesses described below.

In light of the material weaknesses described below, we performed additional analysis and other post-closing procedures to ensure our financial statements were prepared in accordance with generally accepted accounting principles. Accordingly, we believe that the financial statements included in this report fairly present, in all material respects, our financial condition, results of operations and cash flows for the periods presented.

A material weakness is a control deficiency (within the meaning of the Public Company Accounting Oversight Board (PCAOB) Auditing Standard No. 5) or combination of control deficiencies, such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected. Management has identified the following three material weaknesses which have caused management to conclude that, as of March 31, 2010, our disclosure controls and procedures were not effective at the reasonable assurance level:

1.   In March 2010, we became aware that we:

·   had failed to recognize a bonus accrual that was earned in 2008. The error had an effect of on our previously issued consolidated financial statements for the year ended December 31, 2008 by over stating income and understating liabilities by $206,000. 

·   had failed to recognize a Warrant Derivative Liability we granted in 2008 in connection with our equity raise in May 2008 and June 2008 and the subsequent re-measurement of fair value of the warrants derivative, as required by FASB ASC Topic 815 (codification of Financial Accounting Standards Board (SFAS) 133 and Emerging Issues Task Force 00-19).  The error had the a significant effect on our previously issued consolidated financial statements for the year ended December 31, 2008, and for each of the quarters for the year ended December 31, 2009.

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·   had failed to properly classify direct labor and overhead as cost of goods sold for the year ended December 31, 2008. We previously classified the direct labor and overhead as a component of selling, general and administrative expenses, a line item in the consolidated statements of operations of our previously issued consolidated financial statements, in the amount of $621,584.

As a result of identifying these errors, we concluded that accounting adjustments were necessary to correct the previously issued financial statements for the year ended December 31, 2008 and for each of the quarters for the year ended December 31, 2009.and that the reports we filed with the SEC that included the financial statements that reported the erroneous information for that periods should no longer be relied upon.  Accordingly, we have restated our financial statements for the year ended December 31, 2008 included with our Annual Report on Form 10-K filed with the SEC on April 15, 2010.

In July 2009, we became aware that we:

·   had failed to record a Goodwill related to our acquisition of Detron in October 2008. The error had an effect of on our previously issued consolidated financial statements for the year ended December 31, 2008 by over understating assets and liabilities by $285,000.  

·   had incorrectly recorded a gain on sale of subsidiary in accordance with FASB ASC Topic 205 “Presentation of Financial Statements”(codification of SFAS 144 “Accounting for the Impairment or Disposal of Long-Lived Assets). The error had an effect on our previously issued consolidated financial statements for the year ended December 31, 2008 by overstating our gain on disposal of subsidiary by $245,000. 

·   had failed to record an income tax liability. The error had an effect of on our previously issued consolidated financial statements for the year ended December 31, 2008 by over overstating our net income and understating our income tax liability by $217,000.  

As a result of identifying these errors, we concluded that accounting adjustments were necessary to correct the previously issued financial statements for the December 31, 2008 and that the reports we filed with the SEC that included the financial statements that reported the erroneous information for that period should no longer be relied upon.  We have restated our financial statements for the year ended December 31, 2008 in our filing of our amended Form 10-K filed on August 10, 2009.

We determined that these failures and related re-statements demonstrated the following weaknesses in our internal control over financial reporting:

  · Accounting and Finance Personnel Weaknesses — The Company lacks appropriate resources within the accounting function.  Our accounting staff comprises of few people and the department lacks the required skill set, competence, infrastructure and expertise to meet the higher demands of being a public company.  This lack of resources has led to a lack of segregation of duties and insufficient attention to the internal control process over financial reporting.

  · Reliance on Third-Party Professionals: We retained an individual to provide support and accounting advice to the Company for the year ended December 31, 2008.  We may not have adequately assessed this individual’s qualifications to ascertain his level of experience to render the services for which we retained the individual.  Moreover, we did not adequately monitor the individual’s work and placed undue reliance on its expertise without confirming the accuracy of the finished product.

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Remediation Plan for Material Weakness in Internal Control over Financial Reporting

In light of the foregoing, we have introduced and plan to implement a number of remediation measures to address the material weaknesses described above.  Many of these measures are entity level in nature and we believe that the organizational and process changes we intend to adopt will improve our internal controls and governance environment.  Management recognizes that many of these enhancements require continual monitoring and evaluation for effectiveness.  The development of these actions is an iterative process and will evolve as the Company continues to evaluate and improve our internal controls over financial reporting.  Initially, we may be foreclosed from implementing some of the more obvious measures, such as retaining additional accounting personnel who have particular areas of expertise, gi ven our resource constraints.  However, as we grow, we expect to adopt and implement those measures and to retain additional qualified personnel as management deems necessary to satisfy our control and governance requirements.

Specifically, we have:

·   In mid-February 2010, we hired a new Big 4 CFO with over 25 years experience working in publicly traded companies (see Biographical Information in Item 10).

·   In June 2009, we established an audit committee of the Board of Directors.  Our audit committee members both qualify as "audit committee financial expert," as such term is defined in Item 407(d)(5) of Regulation S-K.

·   In September 2009, we hired an Accounting Manager in our Corporate office to add to the Company’s accounting expertise.  With the hiring of our CFO, the Accounting Manager resigned.  We are in the process of hiring a replacement for the Accounting Manager.

·   We are in the process of documenting our processes and procedures in accordance with the requirements of Section 404 (a) of Sarbanes-Oxley.  Upon completion, we will implement the necessary changes.

Over the balance of the 2010 year, we will undertake an entity-level review of and test our control procedures and analyze the application of our controls and our control environment generally.  In addition, we plan to hire additional accounting personnel in China with knowledge of proper accounting rules.  We also expect that the audit committee will set a tone for effective entity-wide corporate governance; inspire rigorous, uniform application of our internal controls and provide ongoing oversight of the preparation and review of our financial statements.  In addition, we expect that the audit committee will review and propose improvements to our entity level controls and procedures and other process level controls.  We believe that the audit committee and our new financial professionals will substantially decrease the possibility of the occurrence of errors in our financial statements.

Management has discussed these material weaknesses with our Board of Directors and will continue to review progress on these activities on a consistent and ongoing basis at the senior management level in conjunction with our Board of Directors.  We also plan to take additional steps to elevate Company awareness about, and communication of, these important issues through formal channels such as Company meetings and training.

We cannot assure you at this time that the actions and remediation efforts we have taken or ultimately will implement will effectively remediate the material weakness described above or prevent the incidence of other significant deficiencies or material weaknesses in our internal control over financial reporting in the future.

These remediation efforts are designed to address the material weakness identified by Child and to improve and strengthen our overall control environment. We believe these actions will prevent the material weaknesses from reoccurring. Our management, including our principal executive officer and principal financial officer, does not expect that disclosure controls or internal controls over financial reporting will prevent all errors, even as the aforementioned remediation measures are implemented and further improved to address all deficiencies. The design of any system of controls is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

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The implementation of our remediation plan will require substantial expenditures, could take a significant period of time to complete, and could distract our officers and employees from the operation of our business. However, our management believes that these remediation efforts will be complete by the end of the 2010 fiscal year.

Our management has evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of the date of this report, under the supervision and with the participation of our president (also our principal executive officer) and chief financial officer (also our principal financial and accounting officer), in order to conclude if our disclosure controls and procedures are effective. Based on the information set forth above, our management has determined that, as of the date of this report, we do not have effective disclosure controls and procedure.

Changes in Internal Control over Financial Reporting

In the first quarter of fiscal 2010, the Company hired a new Big 4 CFO and has contracted with an outside consultant to assist us with the self-assessment required by Section 404 of the Sarbanes-Oxley Act of 2002 of our internal controls and procedures. The Company will hire additional employees in the United States and China to help management refine such documentation.

Based upon the foregoing, our management has determined that there were changes in our internal control over financial reporting with the hiring of our new Big 4 CFO and contracting with an outside consultant to assist us with the self-assessment required by Section 404 of the Sarbanes-Oxley Act of 2002 of our internal controls and procedures, identified in connection with the evaluation that occurred during our last fiscal quarter, under the supervision and with the participation of our president (also our principal executive officer) and chief financial officer (also our principal financial and accounting officer), that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II.  OTHER INFORMATION

Item 1.            Legal Proceedings.

None.

Item 1A.         Risk Factors (herein incorporated by reference from Annual Report on Form 10-K filed with the Securities and Exchange Commission on April 14, 2009).

Item 2.            Unregistered Sales of Equity Securities and Use of Proceeds

On January 26, 2010, we issued and sold 1,777,777 of our common stock and warrants to purchase an aggregate of 1,777,777 shares of our common stock for $7,332,790, net of offering costs of $667,210 to certain accredited investors.

On February 9, 2010, we issued and sold 193,179 shares of our common stock for $843,793 to certain accredited investors.

The warrants are exercisable for a term of five years at an exercise price of $5.65 per share. The warrants also contain anti-dilution provisions, including but not limited to, if we issue shares of our common stock at less than the then existing conversion price, the conversion price of the warrants will automatically be reduced to such lower price and the number of shares to be issued upon exercise will be proportionately increased. The warrants contain limitations on exercise, including the limitation that the holders may not convert their warrants to the extent that upon exercise the holder, together with our affiliates, would own in excess of 4.9% of the Company's outstanding shares of common stock.

In addition, Ladenburg Thalmann & Co., LLC acted as the lead placement agent on the private placement and received warrants to purchase 104,657 shares of the Company's common stock (warrants to purchase 4,000 shares of common stock were issued to a second placement agent at an exercise price of $6.75) (based on 150% of the per share equivalent of $4.50 in the transaction). The warrants vest immediately and have a five year term.

Item 3.            Defaults upon Senior Securities

None.

Item 4.            Removed and Reserved

Item 5.            Other Information

On August 3, 2009, the Board of Directors adopted a code of ethics, which is attached as an exhibit to this Quarterly Report.

Item 6.            Exhibits

The following exhibits are filed herewith:

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3.1	Articles of Incorporation (incorporated by reference from Registration Statement on Form 10-SB filed with the Securities and Exchange Commission on October 11, 2000).
3.2	Bylaws (incorporated by reference from Registration Statement on Form 10-SB filed with the Securities and Exchange Commission on October 11, 2000).
3.3	Amendment to the Articles of Incorporation to change the name of the Company from Tabatha III, Inc. to Worldwide Manufacturing USA, Inc., filed with the Colorado Secretary of State on November 4, 2003 (incorporated by reference from Form 10-K filed with the Securities and Exchange Commission on April 14, 2009).
3.4	Amendment to the Articles of Incorporation to change the name of the Company from Worldwide Manufacturing USA, Inc. to Worldwide Energy and Manufacturing USA, Inc., filed with the Colorado Secretary of State on February 4, 2008 (incorporated by reference from Form 10-K filed with the Securities and Exchange Commission on April 14, 2009).
3.5	Amended and Restated Bylaws (Incorporated by Reference to the Company’s Form 8-K filed with the Securities and Exchange Commission on January 28, 2010)
4.1	Specimen Common Stock Certificate (incorporated by reference from Registration Statement on Form 10-SB filed with the Securities and Exchange Commission on October 11, 2000).
4.2	Specimen Class A Convertible Preferred Stock Certificate (incorporated by reference from Registration Statement on Form 10-SB/A filed with the Securities and Exchange Commission on October 11, 2000).
4.3	Form of Common Stock Purchase Warrant (Incorporated by Reference to the Company’s Form 8-K filed with the Securities and Exchange Commission on January 28, 2010)
4.4	Form of Common Stock Purchase Warrant (Incorporated by Reference to the Company’s Form 8-K filed with the Securities and Exchange Commission on February 10, 2010)
10.1	Common Stock Purchase Warrant (incorporated by reference from Form 10-KSB filed with the Securities and Exchange Commission on September 27, 2001).
10.2	Employment Agreement with Jimmy Wang (incorporated by reference from Form 10-K filed with the Securities and Exchange Commission on April 14, 2009).
10.3	Employment Agreement with Mindy Wang (incorporated by reference from Form 10-K filed with the Securities and Exchange Commission on April 14, 2009).
10.4	Employment Agreement with John Ballard (incorporated by reference from Form 10-K filed with the Securities and Exchange Commission on April 14, 2009).
10.5	Employment Agreement with Jeff Watson (incorporated by reference from Form 10-K filed with the Securities and Exchange Commission on April 14, 2009).
10.6	Form of Securities Purchase Agreement (Incorporated by Reference to the Company’s Form 8-K filed with the Securities and Exchange Commission on January 28, 2010)
10.7	Form of Registration Rights Agreement (Incorporated by Reference to the Company’s Form 8-K filed with the Securities and Exchange Commission on January 28, 2010)
10.8	Form of Share Escrow Agreement (Incorporated by Reference to the Company’s Form 8-K filed with the Securities and Exchange Commission on January 28, 2010)
10.9	Form of Securities Purchase Agreement Form of Common Stock Purchase Warrant (Incorporated by Reference to the Company’s Form 8-K/A filed with the Securities and Exchange Commission on January 28, 2010)
10.10	Form of Share Escrow Agreement (Incorporated by Reference to the Company’s Form 8-K filed with the Securities and Exchange Commission on January 29, 2010)
10.11	Form of Securities Purchase Agreement (Incorporated by Reference to the Company’s Form 8-K filed with the Securities and Exchange Commission on February 1o, 2010)
10.12	Form of Registration Rights Agreement (Incorporated by Reference to the Company’s Form 8-K filed with the Securities and Exchange Commission on February 10, 2010)
10.13	Form of Share Escrow Agreement (Incorporated by Reference to the Company’s Form 8-K filed with the Securities and Exchange Commission on February 10, 2010)
14.1	Code of Ethics. *
31.1	Certification pursuant to Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934, as amended. *
31.2	Certification pursuant to Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934, as amended. *
32.1	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. *
32.2	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. *

* filed herewith

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SIGNATURES

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

	WORLDWIDE ENERGY AND MANUFACTURING USA, INC.
Date:  May 17, 2010	By:	/s/ JIMMY WANG
		Jimmy Wang, CEO and Director (duly authorized officer)

Date:  May 17, 2010	By:	/s/ GERALD DECICCIO
		Gerald DeCiccio, Chief Financial Officer (principal financial and accounting officer)

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