We are a company limited by shares domiciled in the Cayman Islands.
The corporate affairs of Daqo New Energy Corp. are governed by our
Fourth Amended and Restated Memorandum and Articles of Association,
the Companies Act (Revised) of the Cayman Islands and the common
law of the Cayman Islands.
In 2008, we established Chongqing Daqo as our wholly owned
operating subsidiary in China. Through Chongqing Daqo, we focused
primarily on the manufacturing and sale of polysilicon and later
expanded into wafer manufacturing. In addition to Chongqing Daqo,
we established Nanjing Daqo New Energy Co., Ltd., or Nanjing Daqo,
in China in 2007, through which we conducted our module
manufacturing business. In 2009, we established our wholly owned
subsidiary Daqo Solar Energy North America, or Daqo North America,
in California to promote our products in North America.
Daqo Group established Daqo New Material in 2006 in Chongqing,
China. Although all of Daqo Group’s equity interest holders also
beneficially own shares of Daqo Cayman, Daqo Group does not have
any shareholding in our company. Subsequent to the establishment of
Chongqing Daqo in July 2008, Chongqing Daqo entered into a lease
agreement with Daqo New Material to rent all of Daqo New Material’s
land, production infrastructure, machinery, equipment, facilities,
factories, buildings and other assets for polysilicon production.
This lease was terminated on December 30, 2013. Under Financial
Accounting Standards Board Accounting Standards Codification
810-10-15, “Variable Interest Entities,” we were deemed to be Daqo
New Material’s primary beneficiary and Daqo New Material had been
consolidated from July 1, 2008 to December 30, 2013. As a result of
the voluntary termination of our contractual arrangements with Daqo
New Material, starting from December 31, 2013, we deconsolidated
Daqo New Material.
We commenced commercial production at the Phase 1 polysilicon
facilities in July 2008. Production at the Phase 1 polysilicon
facilities used equipment and property from both us and Daqo New
Material. Even though we do not directly or indirectly hold any
equity interests in Daqo New Material, under U.S. GAAP, Daqo New
Material has been deemed to be our predecessor business from
November 16, 2006 through June 30, 2008.
Under a non-competition agreement with us, Daqo Group has agreed
not to engage in the business of manufacturing, marketing or
distributing polysilicon or any other solar power products anywhere
in the world or compete in any manner with our businesses without
our consent for an indefinite term. Under the non-competition
agreement, we, through Daqo Cayman and Chongqing Daqo, are entitled
to seek temporary restraining orders, injunctions or other
equitable relief, in addition to monetary remedies specified in the
agreement, if Daqo Group breaches its non-competition obligations.
Any related party transactions are subject to our audit committee’s
review and approval. With the approval of our audit committee, we
gave our consent to Daqo Group to enter the photovoltaic cell
manufacturing business in China. Daqo Group incorporated a wholly
owned subsidiary, Zhenjiang Daqo Solar Co., Ltd., or Zhenjiang
Daqo, which started commercial production of photovoltaic cells in
On October 7, 2010, we listed our ADSs, each representing five
ordinary shares of Daqo New Energy Corp., on the NYSE under the
symbol “DQ” in connection with an initial public offering. We
issued a total of 9,200,000 ADSs at $9.50 per ADS in connection
with our initial public offering.
In February 2011, we incorporated a wholly owned subsidiary,
Xinjiang Daqo, in Shihezi Economic Development Area in Xinjiang
Autonomous Region, China, to build our Phase 2A polysilicon
production facilities. We finished construction of our Phase 2A
polysilicon facilities in September 2012 and engaged in commercial
production at these facilities beginning from the first quarter of
In April 2011, we incorporated a wholly owned subsidiary, Daqo New
Energy Holdings (Canada) Ltd., or Daqo Canada, to expand our
operations in North America. Through Daqo Canada, we set up a joint
venture with JNE Solar Inc., a party unrelated to us prior to this
transaction, in Hamilton, Ontario. This joint venture was
terminated in April 2012. We liquidated Daqo Canada in October
In September 2012, to focus on our core businesses of polysilicon
and wafer production, we sold our 100% equity interest in our
module business to Daqo Group for a consideration of $9.9 million.
On December 21, 2012, we effected a change of the ADS to ordinary
share ratio from one ADS representing five ordinary shares to one
ADS representing 25 ordinary shares. The ratio change had the same
effect as a 1-for-5 reverse ADS split.
In September 2012, we halted polysilicon production in order to
begin maintenance and technology improvement projects at the Phase
1 polysilicon facilities with the primary objective of lowering the
cost to produce polysilicon at these facilities. In conjunction
with the production stoppage, a supplementary lease agreement with
Daqo New Material was reached which reduced lease payments
beginning in 2013 to approximately $zero.