LDK Solar Co., Ltd. - Asia Europe Clean Energy (Solar) Advisory Co ...

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LDK SOLAR CO., LTD. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued) FOR THE PERIOD FROM JULY 5, 2005 TO DECEMBER 31, 2005 AND THE YEAR ENDED DECEMBER 31, 2006 (Amounts in US$ thousands, except share and per share data) (r) Advertising expenses Advertising expenses are charged to the consolidated statement of operations in the period incurred. The Group incurred advertising expenses amounting to US$ nil and US$138 for the period from July 5, 2005 to December 31, 2005 and the year ended December 31, 2006, respectively. (s) Operating leases Payments made under operating leases are charged to the consolidated statements of operations on a straight-line basis over the respective lease terms. (t) Government subsidy Government subsidies are recognized when received and when all the conditions for their receipt have been met. Subsidies that compensate the Group for expenses incurred are recognized as a reduction of expenses in the consolidated statement of operations in the same period in which the related expenses are incurred. Subsidies that are not associated with expenses incurred or to be incurred are recognized as income. Xinyu Industry Development District and JXLDK reached an agreement that for electricity costs JXLDK pays at the market value of US$0.07 per kwh, the district will provide JXLDK with an unconditional subsidy of US$0.02 per kwh. For the year ended December 31, 2006, US$808 was received to compensate electricity costs and recorded as a reduction to cost of goods sold. A subsidy of US$240 was received from local government during 2006 to compensate JXLDK's research and development expenses and was recorded as a reduction of research and development expenses. JXLDK received a subsidy of US$1,268 in 2006 from the local government authority as an incentive for development of wafer industry in Xinyu, which was recorded as other income as there were no specific expenses required to be incurred by the Group to obtain the subsidy. (u) Income taxes Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is provided to reduce the carrying amount of deferred tax assets if it is considered more likely than not that some portion, or all, of the deferred tax assets will not be realized. (v) Share-based compensation The Group has adopted SFAS No. 123R, ""Share-based Payment'', which requires that share-based payment transactions with employees, such as share options, be measured based on the grant-date fair value of the equity instrument issued and recognized as compensation expense over the requisite service period, with a corresponding addition to additional paid-in capital. Under this method, compensation cost related to employee share options or similar equity instruments is measured at the grant date based on the fair value of F-14
LDK SOLAR CO., LTD. AND SUBSIDIARIES NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued) FOR THE PERIOD FROM JULY 5, 2005 TO DECEMBER 31, 2005 AND THE YEAR ENDED DECEMBER 31, 2006 (Amounts in US$ thousands, except share and per share data) the award and is recognized over the period during which an employee is required to provide service in exchange for the award, which generally is the vesting period. The Group accounts for equity instrument issued to non-employee vendors in accordance with the provisions of Emerging Issues Task Force (""EITF'') Issue No. 96-18, ""Accounting for Equity Instruments That are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services.'' All transactions in which goods or services are received in exchange for equity instruments are accounted for based on the fair value of the consideration received or the fair value of the equity instrument issued, whichever is more reliably measurable. The measurement date of the fair value of the equity instrument issued is the date on which the counterparty's performance is completed. (w) Embedded beneficial conversion of convertible instruments In accordance with the provisions of EITF Issue No. 98-5 ""Accounting for Convertible Securities with Beneficial Conversion Features or Contingently Adjustable Conversion Ratios'' and EITF Issue No. 00-27 ""Application of Issue No. 98-5 to Certain Convertible Instruments'', the Group recognizes and measures the embedded beneficial conversion feature of convertible instruments by allocating a portion of the proceeds from the convertible instruments equal to the intrinsic value of that feature to additional paid-in capital. The intrinsic value of the embedded beneficial conversion feature is calculated at the commitment date as the difference between the effective conversion price and the fair value of the common stock or other securities into which the security is convertible, multiplied by the number of shares into which the security is convertible. Any recorded discount resulting from the allocation of proceeds to the beneficial conversion feature are recognized as interest expenses for convertible instruments in the form of debt or as a deemed dividend for redeemable convertible preferred shares over the period from its date of issuance to its stated mandatory redemption date or to its earliest conversion date if the convertible instruments do not have a stated redemption date. Unamortized discount remaining at the date when the convertible instruments are converted into their respective underlying securities are immediately recognized as interest expenses or as a deemed dividend, as appropriate. Changes to the conversion terms that would be triggered by future events not controlled by the Group is accounted for as contingent conversion options, and the intrinsic value of the such contingent conversion options will not be recognized until and unless the triggering event occurs. (x) Employee benefit plans As stipulated by the regulations of the PRC, the Group's PRC subsidiary, JXLDK participates in various defined contribution plans organized by municipal and provincial governments for its employees. These companies are required to make contributions to these plans at a rate of 29% on a standard salary base as determined by the local Social Security Bureau, to a defined contribution retirement scheme organized by the local Social Security Bureau in respect of the retirement benefits for the Group's employees. Under these plans, certain pension, medical and other welfare benefits are provided to the employees. The Group has no other material obligation for the payment of employee benefits associated with these plans beyond the annual contributions described above. Employee benefits associated with these plans are expensed when incurred. The total amounts for such employee benefits, which were expensed as incurred, were US$ nil for the period from July 5, 2005 to December 31, 2005 and US$220 for the year ended December 31, 2006. (y) Net (loss) income per share Basic net (loss) income per share is computed by dividing net (loss) income available to ordinary shareholders by the weighted average number of ordinary shares outstanding during the period. Diluted net F-15
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PROSPECTUS 17,384,000 American Depo
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We were incorporated in the Cayman
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percentage of light energy from the
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Listing ÏÏÏÏÏÏÏÏÏÏÏÏÏ
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(1) Gross profit for the year ended
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RISK FACTORS Investment in our ADSs
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Reduction or elimination of governm
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capacity or to increase our manufac
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delivery or failure to meet deliver
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specifications or product defects.
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Compliance with environmental regul
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operations or the price of our ADSs
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tax rates and other measures. Forei
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company in connection with any incr
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of approximately $22.05 in the net
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outside the United States. As a res
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The forward-looking statements cont
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CAPITALIZATION The following table
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DILUTION If you invest in our ADSs,
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DIVIDEND POLICY We have never decla
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SELECTED CONSOLIDATED FINANCIAL AND
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MANAGEMENT'S DISCUSSION AND ANALYSI
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polysilicon prices will decline in
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listed public company in the United
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increase. See ""Risk Factors Ì Ris
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subjective. The assumptions used in
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2006 and February 6, 2007. During t
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value of the our business. Under th
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Year Ended December 31, 2006 (in th
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""Exchange Rate Information'' in th
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ended September 30, 2006, net incom
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For additional information relating
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The non-cancelable purchase obligat
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previously deemed material, but are
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module production will increase fro
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The following diagram illustrates t
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Because we are a pure-play solar wa
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Wafering. After passing inspection,
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our revenue and customer base to ta
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‚ Our agreement with E'mei Semi-c
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photovoltaic cell or modules, and w
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A breakdown of our employees by are
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tax treatments to foreign-invested
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On September 21, 2006, the CSRC pub
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Gang Wang is a non-executive direct
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directors on our audit committee wi
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monies of or belonging to us may be
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(10) Vests on July 31, 2007. Brilli
Page 100 and 101: Securities (USA) LLC, which is a re
Page 102 and 103: interest-bearing loans directly to
Page 104 and 105: person, by its duly authorized repr
Page 106 and 107: History of Securities Issuances The
Page 108 and 109: persuasive authority in the Cayman
Page 110 and 111: making any sale by public or privat
Page 112 and 113: Reports and Other Communications Wi
Page 114 and 115: Amendment and Termination How may t
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Page 118 and 119: SHARES ELIGIBLE FOR FUTURE SALE Upo
Page 120 and 121: TAXATION The following summary of m
Page 122 and 123: individual, up to $3,000 of capital
Page 124 and 125: person and on sales of ordinary sha
Page 126 and 127: The estimated offering expenses pay
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Page 130 and 131: ADS with a view to selling it to th
Page 132 and 133: EXPENSES RELATING TO THIS OFFERING
Page 134 and 135: ‚ no new admissible evidence rele
Page 136 and 137: WHERE YOU CAN FIND ADDITIONAL INFOR
Page 138 and 139: REPORT OF INDEPENDENT REGISTERED PU
Page 140 and 141: LDK SOLAR CO., LTD. AND SUBSIDIARIE
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