CHANGZHOU, China, Nov. 22, 2010 /PRNewswire-Asia/ -- China
Architectural Engineering, Inc. (Nasdaq: CAEI or the Company), a
self-developer of online games and a provider of high-end building
envelope architectural systems, today announced its financial
results for the third quarter ended September 30, 2010.
Mr. Alan Leung, Chief Executive
Officer of China Architectural Engineering, commented, "The third
quarter is a transitional period for CAE, as we continue with our
corporate restructuring and shift our focus towards online game
developments and opportunities, and increasingly diversify away
from unprofitable international construction projects."
Mr. Leung continued, "In the architecture construction and
engineering segment, we remained disciplined and selective, as we
contracted only quality projects in China that offer higher profits and pose lower
risks. In the online gaming segment, we are marching closer towards
our first commercial launch. We recently completed a fourth closed
beta test of our highly-anticipated "Warring State" MMORPG game,
and based on testers' and experts' positive feedback, we are
excited about its eventual commercialization in China. We are also thrilled that we were able
to successfully utilize our proprietary "Apocalypse" game-engine to
create a training simulation used by a local government to help
make driving safer in China, which
not only generated approximately $0.2
million in revenue during the third quarter but also created
goodwill with the local community."
Third Quarter 2010 Results
Revenues from contracts for the third quarter of 2010 were
$4.4 million, a decrease of
$21.2 million, or 83%, from
$25.6 million for the comparable
period in 2009, mainly as a result of fewer projects, due to the
declining global economy and construction industry, and the
Company's cessation of international projects. Out of the total
contract revenues earned, approximately $0.2
million was generated from operations through ConnGame.
Gross loss was $1.0 million,
compared to a gross profit $0.5
million for the third quarter of 2009. Gross margin for the
three months ended September 30, 2010
was -23 %, compared with 2% for the three months ended September 30, 2009. The decrease in gross profit
was primarily a result of increases in raw material, labor and
administrative costs in China, as
well as adjustments made in accordance to the
percentage-of-completion method of accounting because of increases
in estimated costs of current projects.
Selling, general and administrative expenses were $5.6 million for the third quarter of 2010,
versus $5.5 million a year ago. The
change was due to a combination of a decrease in revenue earned and
a $3.3 million bad debts expenses for
PRC projects. Among the selling, general and administrative
expenses, payroll and social securities accounted for approximately
33%, while depreciation and rental expenses accounted for 5% and
3%, respectively.
Interest and financing expenses were $1.8
million for the third quarter ended September 30, 2010, an increase of $0.1 million from $1.7
million a year ago. The expenses mainly represented
interests on the convertible bonds, and the increase was primarily
due to the additional interest expense related to borrowing by
short-term bank loans.
Income tax expenses were nil for the three months ended
September 30, 2010 as compared to
$114,000 for the comparable period of
2009.
Net loss in the third quarter of 2010 was $8.7 million, compared with a net loss of
$8.4 million for the comparable
period in 2009 mainly due to the decrease in contract revenues
earned.
Liquidity and Capital Resources
As of September 30, 2010, the
Company had cash and cash equivalents of $3.0 million, as compared with $0.6 million as of June
30, 2010. Net cash provided by operating activities was
$5.6 million for the nine months
ended September 30, 2010, as compared
to $11.2 million net cash used in the
same period in 2009.
Other business update
In July 2010, the Company met the
master contractor of the Dubai Railway Project to discuss
resolution of the ongoing dispute, and the master contractor agreed
to arrange a further meeting to explore the possibility of
settlement; however, no such meeting was arranged. On November 8, 2010 the Company issued a notice
informing the master contractor that the Company would seek
resolution through arbitration with 56 day waiting period for the
master contractor to respond. The Company intends to commence
arbitration proceedings after expiration of the 56 day waiting
period in the event that no positive responses are received from
the master contractor.
About China Architectural Engineering
China Architectural Engineering, Inc. is a self-developer of
online games and provider of high-end building envelope
architectural systems. Through its subsidiary, Shanghai ConnGame
Network, the Company leverages its innovative game engines,
scalable development platforms, and accomplished production teams
to develop and operate MMORPGs. The first game "Warring State"
focuses on China's historic themes
and the second game "Revolution" focuses at Western fantasy style.
The Company also provides design, engineering, fabrication and
installation services of high-end curtain wall systems, roofing
systems, steel construction systems, and eco-energy systems. For
further information on China Architectural Engineering, Inc.,
please visit www.caebuilding.com.
Forward-Looking Statements
In addition to historical information, the statements set forth
above may include forward-looking statements that may involve risk
and uncertainties that could cause actual results to differ
materially from those in the forward-looking statements. Actual
results could differ materially from the expectations contained in
forward-looking statements as a result of risks and uncertainties,
including, but not limited to, the proposed acquisition of
ConnGame; difficulties in moving into the online gaming market; the
Company's ability to integrate the personnel and operations of the
Company and ConnGame; required Company payments under the waiver
agreement and ability to maintain the conditions of the bondholder
extension; identification and remediation of the Company's
deficiencies and weaknesses in its internal controls over financial
reporting, potential claims or litigation that may result from the
occurrence of restatements, ability to identify and secure debt,
equity, and/or other financing required to continue the operations
of the Company; difficulties related to integration and management
of the combined operations; reduction or reversal of the Company's
recorded revenue or profits due to "percentage of completion"
method of accounting and expenses; increasing provisions for bad
debt related to the Company's accounts receivable; fluctuation and
unpredictability of costs related to our products and services;
adverse capital and credit market conditions; fluctuation and
unpredictability of costs related to the Company's products and
services; expenses and costs associated with its convertible bonds,
regulatory approval requirements and competitive conditions; and
various other matters, many of which are beyond our control. These
and other factors that may result in differences are discussed in
greater detail in the Company's reports and other filings with the
Securities and Exchange Commission.
Investor Contact:
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Email: ir.caeinc@gmail.com
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CHINA ARCHITECTURAL
ENGINEERING, INC.
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CONSOLIDATED BALANCE
SHEETS
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AS OF
SEPTEMBER 30, 2010 (UNAUDITED) AND DECEMBER 31, 2009(STATED IN US
DOLLARS)
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September
30, 2010
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December 31,
2009
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(unaudited)
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ASSETS
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Current assets
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Cash and cash equivalents
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$
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3,009,063
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$
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740,125
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Restricted cash
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1,080,415
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3,033,819
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Contract receivables, net
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84,434,212
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89,189,103
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Costs and earnings in excess of
billings
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3,436,002
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8,100,580
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Job disbursements advances
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2,526,634
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2,696,794
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Other receivables
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24,577,249
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30,768,067
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Inventories
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172,882
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727,499
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Deferred income taxes, current
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112,988
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113,033
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Other current assets
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306,235
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297,838
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Total current assets
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119,655,680
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135,666,858
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Non-current assets
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Plant and equipment, net
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3,197,473
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2,539,457
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Intangible assets
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175,514
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70,610
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Goodwill
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23,771,636
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7,995,896
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Other non-current asset
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393,701
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287,586
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TOTAL ASSETS
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$
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147,194,004
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$
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146,560,407
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LIABILITIES AND STOCKHOLDERS'
EQUITY
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Current liabilities
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Short-term bank loans
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$
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6,903,751
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$
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9,529,880
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Accounts payable
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26,664,322
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26,614,484
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Billings over costs and estimated earnings
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1,595,284
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6,098,666
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Amount due to shareholder
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9,098,900
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10,080,345
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Other payables
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14,253,808
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9,360,314
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Business and other taxes payable
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4,659,759
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4,923,771
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Customers' deposits
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5,741,681
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6,392,676
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Other Accrual
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4,065,003
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4,324,011
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Total current liabilities
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72,982,508
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77,324,147
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Non-current liabilities
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Long term bank loans
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$
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51,386
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$
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109,239
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Convertible bond payable, net
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27,688,956
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24,564,161
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TOTAL LIABILITIES
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$
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100,722,850
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$
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101,997,547
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STOCKHOLDERS' EQUITY
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Preferred stock, $0.001 par
value, 10,000,000 shares authorized, 0 shares issued and
outstanding at September 30, 2010 and December 31, 2009;
Common stock, $0.001 par
value, 150,000,000 shares authorized, 80,156,874 shares issued and
outstanding at September 30, 2010 and 53,256,874 shares issued at
and outstanding December 31, 2009
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$
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80,157
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$
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53,257
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Additional paid in capital
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43,820,878
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26,495,876
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Statutory reserves
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3,040,595
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3,040,595
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Accumulated other comprehensive
income
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4,020,091
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3,868,437
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Retained earnings
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(4,205,083)
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11,131,084
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Total Company
shareholders' equity
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46,756,638
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44,589,249
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Noncontrolling interests
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(285,484)
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(26,389)
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Total shareholders' equity
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46,471,154
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44,562,860
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TOTAL LIABILITIES AND
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STOCKHOLDERS' EQUITY
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$
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147,194,004
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$
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146,560,407
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CHINA
ARCHITECTURAL ENGINEERING, INC.
UNAUDITED CONSOLIDATED
STATEMENTS OF
INCOME
FOR THE THREE-
AND NINE-MONTH PERIODS
ENDED SEPTEMBER 30, 2010 AND
2009
(STATED IN US
DOLLARS)
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Three Months
Ended
September
30,
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Nine
Months
Ended
September
30,
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2010
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2009
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2010
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2009
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Contract revenues earned
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$
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4,442,495
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$
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25,558,074
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$
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21,623,035
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$
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92,500,112
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Cost of contract
revenues earned
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(5,452,809)
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(25,082,910)
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(20,734,794)
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(73,892,287)
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Gross profit/(loss)
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$
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(1,010,314)
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$
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475,164
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$
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888,241
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$
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18,607,825
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Selling, general and administrative
expenses
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(5,609,538)
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(5,548,946)
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(11,678,113)
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(17,619,775)
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Income/(loss) from
operations
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$
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(6,619,852)
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$
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(5,073,782)
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$
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(10,789,872)
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$
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988,050
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Interest income
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3,668
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4,835
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8,951
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54,800
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Interest expense
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(1,779,371)
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(1,741,368)
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(5,273,367)
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(4,524,936)
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Other expenses
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(350,764)
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-
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(359,694)
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-
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Other income
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4,001
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335,104
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827,929
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495,560
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Loss before taxation
on continuing operations
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$
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(8,742,318)
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$
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(6,475,211)
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$
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(15,586,053)
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$
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(2,986,526)
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Income tax
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-
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(114,113)
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(9,575)
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(114,113)
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Discontinued operation
loss, net of tax
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-
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(1,829,971)
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-
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(1,829,971)
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Net loss
including non-controlling
interests
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(8,742,318)
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(8,419,295)
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(15,595,628)
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(4,930,610)
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Loss attributable to non-controlling
interest
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256,371
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38,009
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259,461
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36,604
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Net loss attributable to the
Company
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$
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(8,485,947)
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$
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(8,381,286)
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$
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(15,336,167)
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$
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(4,894,006)
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Loss per share:
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Basic
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$
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(0.13)
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$
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(0.16)
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$
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(0.26)
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$
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(0.09)
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Diluted
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$
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(0.13)
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$
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(0.16)
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$
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(0.26)
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$
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(0.09)
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Weighted average shares
outstanding:
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Basic
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66,970,061
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53,256,874
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58,969,374
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53,256,874
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Diluted
|
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66,970,061
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53,256,874
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58,969,374
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53,256,874
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SOURCE China Architectural Engineering, Inc.