The terms of the June 13, 2007 financing imposed restrictions on us that may affect our ability to successfully operate our business.  The transaction documents contain a number of covenants that may restrict our ability to operate, including, among other things, covenants that restrict our ability:

A customer's decision to purchase our solar power products is primarily driven by the poor electricity supply system in the rural areas of the PRC, as well as the energy savings from our solar power products. An improvement in the power supply infrastructure in the rural areas of the PRC could adversely affect the demand for our products. In addition, fluctuations in economic and market conditions that impact the viability of conventional and non-solar alternative energy sources, such as decreases in the prices of oil and other fossil fuels could cause the demand for our solar power heaters to decline. Although we believe that current retail energy prices support a reasonable return on investment for our products, there can be no assurance that future retail pricing of conventional energy and non-solar alternative energy will remain at such levels.

The PRC's economy is in a transition from a planned economy to a market oriented economy subject to five-year and annual plans adopted by the government that set national economic development goals. Policies of the PRC government can have significant effects on the economic conditions of the PRC. The PRC government has confirmed that economic development will follow the model of a market economy. Under this direction, we believe that the PRC will continue to strengthen its economic and trading relationships with foreign countries and business development in the PRC will follow market forces. While we believe that this trend will continue, there can be no assurance that this will be the case.

A change in policies by the PRC government could adversely affect our interests by, among other factors: changes in laws, regulations or the interpretation thereof, confiscatory taxation, restrictions on currency conversion, imports or sources of supplies, or the expropriation or nationalization of private enterprises. Although the PRC government has been pursuing economic reform policies for more than two decades, there is no assurance that the government will continue to pursue such policies or that such policies may not be significantly altered, especially in the event of a change in leadership, social or political disruption, or other circumstances affecting the PRC's political, economic and social life.

SAFE, issued a public notice ("SAFE #75") effective from November 1, 2005, which requires our PRC resident shareholders to register with SAFE. If they do not register the PRC entity cannot remit any of its profits out of the PRC as dividends or otherwise. Our PRC resident largest shareholder, Mr. Du, has taken all necessary steps required by the local SAFE branch at Bazhou City to comply with SAFE #75 by filing a disclosure form regarding his ownership status; however, we cannot assure you that this disclosure document will be sufficient. It is also unclear exactly whether our other PRC resident shareholders must make disclosure to SAFE. While our PRC counsel has advised us that only the PRC resident shareholders who receive ownership of the foreign holding company in exchange for ownership in the PRC operating company are subject to SAFE #75, there can be no assurance that SAFE will not require our three other PRC resident shareholders to register and make the applicable disclosure. In addition, SAFE #75 requires that any monies remitted to PRC residents outside of the PRC be returned within 180 days; however, there is no indication of what the penalty will be for failure to comply or if shareholder non-compliance will be considered to be a violation of SAFE #75 by us or otherwise affect us.

In the event that the proper procedures are not followed under SAFE #75, we could lose the ability to remit monies outside of the PRC and would therefore be unable to pay dividends or make other distributions. Our PRC resident shareholders could be subject to fines, other sanctions and even criminal liabilities under the PRC Foreign Exchange Administrative Regulations promulgated January 29, 1996, as amended.

The practical effect of the PRC legal system on our business operations in the PRC can be viewed from two separate but intertwined considerations. First, as a matter of substantive law, the Foreign Invested Enterprise laws provide significant protection from government interference. In addition, these laws guarantee the full enjoyment of the benefits of corporate Articles and contracts to Foreign Invested Enterprise participants. These laws, however, do impose standards concerning corporate formation and governance, which are qualitatively different from the general corporation laws of the United States. Similarly, the PRC accounting laws mandate accounting practices, which are not consistent with U.S. generally accepted accounting principles. PRC’s accounting laws require that an annual "statutory audit" be performed in accordance with PRC accounting standards and that the books of account of Foreign Invested Enterprises are maintained in accordance with Chinese accounting laws. Article 14 of the People's Republic of China Wholly Foreign-Owned Enterprise Law requires a wholly foreign-owned enterprise to submit certain periodic fiscal reports and statements to designated financial and tax authorities, at the risk of business license revocation. While the enforcement of substantive rights may appear less clear than United States procedures, the Foreign Invested Enterprises and Wholly Foreign-Owned Enterprises are Chinese registered companies, which enjoy the same status as other Chinese registered companies in business-to-business dispute resolution. Any award rendered by an arbitration tribunal is enforceable in accordance with the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (1958). Therefore, as a practical matter, although no assurances can be given, the Chinese legal infrastructure, while different in operation from its United States counterpart, should not present any significant impediment to the operation of Foreign Invested Enterprises.

All of our directors and officers except Kevin Randolph, reside outside the United States. In addition, our operating subsidiaries, Deli Solar (Bazhou), Deli Solar (Beijing), Tianjin Huaneng and Tianjin HuanengSZPSP are located in the PRC and substantially all of their assets are located outside of the United States. It may therefore be difficult for investors in the United States to enforce their legal rights based on the civil liability provisions of the U.S. Federal securities laws against us in the courts of either the U.S. or the PRC and, even if civil judgments are obtained in U.S. courts, to enforce such judgments in PRC courts. Further, it is unclear if extradition treaties now in effect between the United States and the PRC would permit effective enforcement against us or our officers and directors of criminal penalties, under the U.S. Federal securities laws or otherwise.

We have inWestern style of management, financial reporting concepts and practices, modern banking, computer and other control systems are relatively new to the PRC. In the past we have had difficulties in hiring and retaining qualified senior management and we may continue to have difficulty in hiring and retaining a sufficient number of senior management and other qualified employees to work for us.employees. Accordingly, we may experience difficulty in establishing management, legal and financial controls, collecting financial data and preparing financial statements, books of account and corporate records and instituting business practices that meet westernWestern standards.

We intend to retain any future earnings for use in the operation and expansion of our business. We do not expect to pay any cash dividends in the foreseeable future as we are contractually restricted from doing so. As a holding company, our ability to pay dividends and meet other obligations depends upon the receipt of dividends or other payments from our operating subsidiaries based in the PRC. Our PRC based operating subsidiaries are subject to restrictions on their ability to make distributions to us, including restrictions on the conversion of local currency into U.S. dollars.

Prior to the reverse merger our shares were not publicly traded although shares of the shell into whom we merged were thinly traded. Through the reverse merger, we have essentially become public without the typical initial public offering procedures which usually include a large selling group of broker-dealers who may provide market support after going public. We have undertaken efforts to develop market recognition for our stock, including through the retention of Hayden Communications International, Inc. on July 23, 2007.a public relations firm. As of March 24,November 25, 2008, there were 13,136,30515,799,450 shares of our common stock issued and outstanding, and there were approximately 2,5332,529 holders of record of our outstanding shares of common stock. OurThe market capitalization as of November 25, 2008 (excluding shares held by our affiliates) was approximately $12,476,711.$8.8 million. As a result, there is limited market activity in our stock and we are too small to attract the interest of many brokerage firms and analysts. We cannot give you any assurance that a broader or more active public trading market for our common stock will develop or be sustained. Currently our common stock is quoted in the OTC Bulletin Board market and the trading volume we will develop may be limited by the fact that many major institutional investment funds, including mutual funds, as well as individual investors follow a policy of not investing in Bulletin Board stocks and certain major brokerage firms restrict their brokers from recommending Bulletin Board stocks because they are considered speculative, volatile and thinly traded. The OTC Bulletin Board market is an inter-dealer market much less regulated than the major exchanges and our common stock is subject to abuses and volatilities and shorting. Thus there is currently no broadly followed and established trading market for our common stock. An established trading market may never develop or be maintained. Active trading markets generally result in less price volatility and more efficient execution of buy and sell orders. Absence of an active trading market reduces the liquidity of the shares traded there.

The trading volume of our common stock has been limited and sporadic. As a result of this trading activity, the quoted price for our common stock on the OTC Bulletin Board may not necessarily be a reliable indicator of its fair market value. Further, if we cease to be quoted, holders would find it more difficult to dispose of, or to obtain accurate quotations as to the market value of our common stock and as a result, the market value of our common stock likely would decline.

The market price of our common stock could fluctuate substantially due to a variety of factors, including market perception of our ability to achieve our planned growth, quarterly operating results of other companies in the same industry, trading volume in our common stock, changes in general conditions in the economy and the financial markets or other developments affecting our competitors or us. In addition, the stock market is subject to extreme price and volume fluctuations. This volatility has had a significant effect on the market price of securities issued by many companies for reasons unrelated to their operating performance and could have the same effect on our common stock.

This is an offering of 5,160,6494,691,499 shares of our common stock by the selling stockholders, among which 469,150 shares may be acquired on exercise of the placement agent warrants.stockholders. As of March 31,November 25, 2008, there were 13,136,30515,799,450 shares of our common stock issued and outstanding and 2,509,678373,566 shares of Series A Preferred Stock (900,000 of(excluding 900,000 shares which are held in escrow to be delivered pro rataand which are in the process of being released to the June 07 investors if we fail to achieve certain income levels for 2008)company). Assuming (i) exercise of the 469,150 shares that may be acquired on exercise of all of the outstanding placement agent warrants, (ii) conversion of the 1,609,678373,566 shares of Series A Preferred Stock issued in June 13, 2007 financing which have not yet been converted, (ii)and (iii) the exercise of the other outstanding warrants to purchase an aggregate of 5,505,5594,041,698 shares of common stock, there will be 20,720,69220,683,864 shares of common stock outstanding. Of these 20,720,69220,683,864 shares (i) 5,160,6494,691,499 shares are being registered for resale in this prospectus, (ii) all of the 1,609,678373,566 shares of Series A Preferred Stock outstanding may be sold without restriction under Rule 144 by non affiliates, (iii) 3,952,025 shares were registered for resale in a registration statement declared effective on July 18, 2006, (iv) the 4,067,964 issued in the reverse merger may be sold subject to the requirements of Rule 144, and (v) 508,734 shares ofunderlying the 1,774,194 of the Classclass A Warrantswarrants were registered for resale in the registration statement declared effective on February 7, 2008 and all of the remainder1,734,194 shares underlying the class A warrants currently outstanding and all of the 1,774,194 shares underlying the Classclass B Warrantswarrants may now be sold after June 2008resold if purchased by way of a cashless exercise.

Sales of substantial amounts of common stock, or a perception that such sales could occur, and the existence of options or warrants to purchase shares of common stock at prices that may be below the then current market price of the common stock, could adversely affect the market price of our common stock and could impair our ability to raise capital through the sale of our equity securities.

We are authorized to issue 25,000,000 shares of preferred stock, of which 3,500,000 shares have been designated as Series A Preferred Stock. As of March 31,November 25, 2008 there were 2,509,678373,566 shares of Series A Preferred Stock (900,000 of(excluding 900,000 shares which are held in escrow to be delivered pro rataand which are in the process of being released to the June 07 investors if we fail to achieve certain income levels for 2008)company). The Board of Directors is authorized under our Restated Articles of Incorporation to provide for the issuance of additional shares of preferred stock by resolution, and by filing a certificate of designations under Nevada law, to fix the designation, powers, preferences and rights of the shares of each such series and the qualifications, limitations or restrictions thereof without any further vote or action by the stockholders. Any shares of preferred stock so issued are likely to have priority over the common stock (but not the Series A Preferred Stock) with respect to dividend or liquidation rights. In the event of issuance, the preferred stock could be utilized, under certain circumstances, as a method of discouraging, delaying or preventing a change in control, which could have the effect of discouraging bids for our company and thereby prevent stockholders from receiving the maximum value for their shares. We have no present intention to issue any shares of its preferred stock in order to discourage or delay a change of control. However, there can be no assurance that preferred stock will not be issued at some time in the future.

This prospectus relates to the offer and sale of our common stock by the selling stockholders identified in the table below. Each of the selling stockholders acquired the shares of our common stock pursuant to our private placement transaction completed on February 29, 2008. Each investor was an “accredited investor” within the meaning of Rule 501 of Regulation D promulgated under the Securities Act. The placement agent warrants were issued to Roth Capital Partners, LLC for services rendered in connection with the private placement.

NoneExcept as set forth below none of the selling stockholders has held a position as an officer or director of the Company, nor has any selling stockholder had a material relationship of any kind with the Company. As of November 25, 2008, (i) Ardsley and its affiliates and (ii) The Quercus Trust may be deemed to be an “affiliate” by virtue of the fact that it is the beneficial owner of in excess of 10% of the outstanding common stock.

The table set forth below lists the names of the selling stockholders as well as (1) the number of shares of common stock acquired by the selling stockholder in the February 29, 2008 private placement which are being registered, and (2) the number of shares underlying the placement agent warrants issued to the placement agent (and its assignees) in the February 29, 2008 private placement which are being registered.

After due inquiry and investigation and based on information provided by the selling stockholders, none of the selling stockholders has an existing short position in our stock.stock and other than Ancora Greater China Fund LP, none of the selling stockholders is a broker-dealer or an affiliate of a broker-dealer. Ancora is an affiliate of a broker dealer. At the time of purchase Ancora represented to us that it bought the securities in the ordinary course of business and they had no agreement or understanding directly or indirectly with any persons to distribute the shares held by them being registered.

Other than as described in this prospectus, the Company has not in the past three years engaged in any securities transaction with any of the selling stockholders, any affiliates of the selling stockholders, or, after due inquiry and investigation, to the knowledge of the management of the Company, any person with whom any selling stockholder has a contractual relationship regarding the transaction (or any predecessors of those persons). In addition, other than in connection with the contractual obligations set forth in (i) the securities purchase agreement (and the related registration rights agreement) entered into between the Company on one hand and each of the selling stockholders on the other hand, (ii) the placement agent agreement between the Company and Roth Capital Partners, LLC entered into on January 17, 2008, we do not have any agreement or arrangement with any selling stockholder with respect to the performance of any current or future obligations.

Upon us being notified in writing by a selling stockholder that any material arrangement has been entered into with a broker-dealer for the sale of common stock through a block trade, special offering, exchange distribution or secondary distribution or a purchase by a broker or dealer, a supplement to this prospectus will be filed, if required, pursuant to Rule 424(b) under the Securities Act, disclosing (i) the name of each such selling stockholder and of the participating broker-dealer(s), (ii) the number of shares involved, (iii) the price at which such the shares of common stock were sold, (iv) the commissions paid or discounts or concessions allowed to such broker-dealer(s), where applicable, (v) that such broker-dealer(s) did not conduct any investigation to verify the information set out in this prospectus, and (vi) other facts material to the transaction. In addition, upon the Company being notified in writing by a selling stockholder that a donee or pledgee intends to sell more than 500 shares of common stock, a supplement to this prospectus will be filed if then required in accordance with applicable securities law.

The selling stockholders also may transfer the shares of common stock in other circumstances, in which case the transferees, pledgees or other successors in interest will be the selling beneficial owners for purposes of this prospectus.

The selling stockholders and any broker-dealers or agents that are involved in selling the shares may be deemed to be "underwriters" within the meaning of the Securities Act in connection with such sales. In such event, any commissions received by such broker-dealers or agents and any profit on the resale of the shares purchased by them may be deemed to be underwriting commissions or discounts under the Securities Act. Discounts, concessions, commissions and similar selling expenses, if any, that can be attributed to the sale of securities will be paid by the selling stockholder and/or the purchasers. Each selling stockholder has represented and warranted to us that it acquired the securities subject to this registration statement in the ordinary course of such selling stockholder’s business and, at the time of its purchase of such securities such selling stockholder had no agreements or understandings, directly or indirectly, with any person to distribute any such securities.

We have advised each selling stockholder that it may not use shares registered on this registration statement to cover short sales of common stock made prior to the date on which this registration statement shall have been declared effective by the SEC. If a selling stockholder uses this prospectus for any sale of the common stock, it will be subject to the prospectus delivery requirements of the Securities Act. The selling stockholders will be responsible to comply with the applicable provisions of the Securities Act and Exchange Act, and the rules and regulations thereunder promulgated, including, without limitation, Regulation M, as applicable to such selling stockholders in connection with resales of their respective shares under this registration statement.

We are required to pay all fees and expenses incident to the registration of the shares (estimated to be approximately $86,000), but we will not receive any proceeds from the sale of the shares of common stock. The selling stockholders will pay all of the selling commissions, brokerage fees and related expenses. We have agreed to indemnify the selling stockholders against certain liabilities, including liabilities under the Securities Act.

We will not receive any of the proceeds from the sales of the shares of the common stock by the selling stockholders. To the extent the placement agent warrants are exercised for cash, if at all, we will receive the exercise price for those warrants. Under the terms of the placement agent warrants cashless exercise is permitted but only after one year and then only if the underlying shares have not been registered.  We intend to use any cash proceeds received from the exercise of the placement agent warrants for working capital and other general corporate purposes. We cannot assure you that any of the warrants will ever be exercised for cash or at all.

Our common stock is quoted on the Over-the-Counter Bulletin Board (“OTCBB”) under the symbol "CSOL.OB". There has never been any active public market for shares of our common stock and it is characterized by low volume and high volatility.

The following table sets forth the high and low bid prices, in the over-the-counter market, as reported and summarized by the OTCBB, for each fiscal quarter during each of the fiscal years ended December 31, 2005, December 31, 2006 and December 31, 2007 and for the quarterquarters ended March 31, 2008, June 30, 2008 and September 30, 2008. These prices are based on inter-dealer prices, without retail markup, markdown or commission and may not represent actual transactions.

As of April 7,November 25, 2008, the last reported sale price of our common stock was $1.91$0.95 per share.

Since the completion of the reverse merger, our common stock has traded sporadically and with high volatility. Consequently, our historical prices may not be an accurate indication of the future prices of our common stock.

As of March 24,November 25, 2008, there were 13,136,30515,799,450 shares of our common stock issued and outstanding, and there were approximately 2,5332,527 holders of record of our outstanding shares of common stock. This does not reflect the number of persons or entities who held stock in nominee or "street" name through various brokerage firms.

We have never declared or paid any cash dividends on our common stock and are restricted from paying dividends both contractually and by virtue of the fact that we are a holding company. We currently intend to retain all earnings, if any, for use in business operations and we do not anticipate declaring any dividends in the near future.

The payment of dividends is contingent on the ability of our PRC based operating subsidiaries Deli Solar (Bazhou), Deli Solar (Beijing), Tianjin Huaneng and Tianjin HuanengSZPSP to obtain approval to send monies out of the PRC. The PRC's national currency, the Yuan, is not a freely convertible currency. The PRC government imposes controls on the convertibility of Renminbi into foreign currencies and, in certain cases, the remittance of currency out of the PRC. Shortages in the availability of foreign currency may restrict our ability to remit sufficient foreign currency to pay dividends.

In addition, under the terms of the certificate of designation which was filed in the office of Secretary of State for the State of Nevada on June 12, 2007 in connection with the issuance of the Series A Preferred Stock, we are restricted in paying dividends on our common stock.

We currently do not have any equity compensation plans.

The SEC has adopted regulations which generally define "penny stock" to be an equity security that has a market price of less than $5.00 per share. As of November 25, 2008, the last reported sale price of our common stock was $0.95 per share. Our common stock falls within the definition of penny stock and is subject to rules that impose additional sales practice requirements on broker-dealers who sell such securities to persons other than established customers and accredited investors (generally those with assets in excess of $1,000,000, or annual incomes exceeding $200,000 or $300,000, together with their spouse).

For transactions covered by these rules, the broker-dealer must make a special suitability determination for the purchase of such securities and have received the purchaser's prior written consent to the transaction. Additionally, for any transaction, other than exempt transactions, involving a penny stock, the rules require the delivery, prior to the transaction, of a risk disclosure document mandated by the Commission relating to the penny stock market. The broker-dealer also must disclose the commissions payable to both the broker-dealer and the registered representative, current quotations for the securities and, if the broker-dealer is the sole market-maker, the broker-dealer must disclose this fact and the broker-dealer's presumed control over the market. Finally, monthly statements must be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks. Consequently, the "penny stock" rules may restrict the ability of broker-dealers to sell the common stock and may affect the ability of investors to sell their common stock in the secondary market.

There is no established trading market for our common stock. Future sales of substantial amounts of our common stock in the trading market could adversely affect market prices.

This is an offering of 5,160,6494,691,499 shares of our common stock by the selling stockholders, among which 469,150 shares may be acquired on exercise of the placement agent warrants.stockholders. As of March 31,November 25, 2008, there were 13,136,30515,799,450 shares of our common stock issued and outstanding and 2,509,678373,566 shares of Series A Preferred Stock (900,000 of(excluding 900,000 shares which are held in escrow to be delivered pro ratabut are in the process of being returned to the June 07 investors if we fail to achieve certain income levels for 2008)Company). Assuming (i) exercise of all of the 469,150 shares that may be acquired on exercise of the placement agent warrants, (ii) conversion of the 1,609,678373,566 shares of Series A Preferred Stock issued in June 13, 2007 financing which have not yet been converted, (ii)(iii) the exercise of the other outstanding warrants to purchase an aggregate of 5,505,5594,041,698 shares of common stock, there will be 20,720,69220,683,864 shares of common stock outstanding. Of these 20,720,69220,683,864 shares (i) 5,160,6494,691,499 shares are being registered for resale in this prospectus, (ii) all of the 1,609,678373,566 shares of Series A Preferred Stock outstanding may be sold without restriction under Rule 144 by non affiliates, (iii) 3,952,025 shares were registered for resale in a registration statement declared effective on July 18, 2006, (iv) the 4,067,964 issued in the reverse merger may be sold subject to the requirements of Rule 144, (v) 508,734 shares ofunderlying the 1,774,194 of the Classclass A Warrantswarrants were registered for resale in the registration statement declared effective on February 7, 2008 and all of the remainder1,734,194 shares underlying the class A warrants currently outstanding and all of the 1,774,194 shares underlying the Classclass B Warrents shareswarrants may now be sold after June 2008 if purchased by way of a cashless exercise.

Other than the registration rights set forthgranted to (i) the investors and placement agent in the registration rights agreement entered into on February 25, 2008 withprivate placement and (ii) the selling stockholders andJune 2007 investors (and the registration rights agreement entered into on June 13, 2007 with the investorsplacement agent in that transaction under which we remain all of the 1,265,460 shares underlying the obligated to selling stockholderstransaction) we have no other obligation to register under the Securities Act any of our shares of common stock. The registration rights granted to the June 2007 investors require us to register all of the shares underlying the class A warrants and the class B warrants.

We are engaged in the solar and renewable energy business in the People's Republic of China (“PRC”).

Deli Solar (Bazhou), founded in 1997, designs, manufactures and sells renewable energy systems to produce hot water and for space heating in the PRC. Deli Solar (Bazhou)’s principal products are solar hot water heaters and multifunctional space heating products,heaters, including coal-fired boilers for residential use. Deli Solar (Bazhou) also sells component parts for its systems,products and provides after-sales maintenance and repair services.

Deli Solar (Beijing), established during the second quarter of 2006, is principally engaged in the installation of large solar water heaters in construction projects in major cities in the PRC, including Beijing. However, so far there is no revenue derived from Deli Solar (Beijing).

Tianjin Huaneng manufactures heating products such as heating pipes, heat exchangers, specialty heating pipes and tubes, high temperature hot blast stoves, heating filters, normal pressure water boilers, solar energy water heaters and radiators.

SZPSP is principally engaged in the resalemanufacture of energy-saving heating products such as heat pipes, heat exchangers, pressuresolar hot water boilers,systems for commercial use. Its customers include factories, hospitals, schools and hotels. SZPSP’s solar energy products include flat plate solar collectors, solar water heatersheater systems, central solar water heater system and radiators.  Currently, SZPSP is also operating a distribution facility in Shenzhen, PRC.solar energy photovoltaic technology.

88%Approximately 99.9% of our sales revenues for the fiscal yearnine month period ended December 31, 2007September 30, 2008 were derived from sales made to PRC based customers. Approximately 12%0.1% of our sales revenues were derived from the international market.market, all of which were sales of heat pipe related products made by Tianjin Huaneng.

On February 29,25, 2008 we raised gross proceeds of approximately $11,300,000 in a private placement providing from the sale to investors of 4,691,499 shares of common stock at a price of $2.40 per share.

On March 31,April 1, 2008 Deli Solar (Beijing) completed the acquisition of 100% of the outstanding equity interests of Shenzhen PengSangPu Solar Industrial Products Corporation (“SZPSP”)SZPSP from its three shareholders. SZPSP was incorporated as a limited liability company under the laws of the PRC on September 23, 1993.  

The preparationsales and operating income amounts related to the acquisitions of financial statementsSZPSP and Tianjin Huaneng Group Energy Equipment Co., Ltd are separately stated under Energy Savings Projects and Heat Pipe Related Products respectively as these are now separate product lines of the company. We believe that presenting the operating results of these product lines separately from other product lines results in greater clarity on the reasons for changes in operating results.

Depreciation and amortization expense increased to $183,216 from $82,731 for the same period last year. The increase was mainly due to an increased depreciation and amortization expense of $19,446 as a result of the consolidated financial statements.acquisition of SZPSP as well as increased depreciation expense of $30,039 as a result of new equipment used.

Selling and distribution expense increased to $1,440,357 or 147%, from $583,166 for the same period last year. The areas described below are affected by critical accounting estimates and are impacted significantly by judgments and assumptionsincrease was mainly due to increased expenses incurred in the preparationdevelopment of sales network and promotion programs. Selling expenses consisted of sales promotion expense ($354,467.00), traveling and transportation expenses ($508,662), agency administration expenses ($ 388,713.94) and after sales service ($ 188,513.97).

General and administrative expenses were $719,601 for the consolidated financial statements. Actual results could differ materially fromthree months ended September 30, 2008 (or approximately 5.2% of sales) compared to $532,137 (or approximately 8.7% of sales) for the amounts reported basedsame period in 2007. The net increase of $187,464 was mainly due to the acquisition of SZPSP.

Product sales are recognized whenOperating expenses for the products are deliveredthree months ended September 30, 2008 were $831,227 compared to $574,332 for the same period in 2007. The increase in operating expenses was primarily due to the increase of selling expenses. Operating expenses included selling expenses of $465,709, depreciation and inspected by customersamortization expenses of $64,286 and title has passed. Deli Solar (Bazhou) provides a three-year standard warranty on allgeneral and administrative expenses of $301,233.

Operating expenses for the products it manufactures. Under this standard warranty program, repairthree months ended June 30, 2008 were $252,646 compared to none for the same period in 2007. The increase in operating expenses was primarily due to the acquisition of SZPSP completed in April 1, 2008. Operating expenses included selling expenses $82,513, depreciation and replacement of defective component parts are free of any charge during the first year following the purchase. In the secondamortization expenses $19,445, and third year, replacement parts must be paid for by the customer but not the labor. Most of our warranty services are performed by our independent sales agentsgeneral and distributors in return for a 1-2% discount of the purchase price they pay for our products. Accordingly, we have recorded no liability for warranty reserve. We also allow our sales agents and distributors to return any defective product for exchange.administrative expenses $150,687.

The overall increase in sales is the result of (i) the acquisitions of SZPSP, which contributed $7,353,623 to our sales revenues and (ii) our investment in marketing, sales promotion of our solar water heaters and the development of a more extensive sales distribution network for our solar water heaters and our boiler related products discussed below.

Gross margin (gross profit as a percentage of sales) during the nine months ended September 30, 2008 was approximately 24% compared to approximately 21% in the same period in 2007. The higher profit margin achieved during the nine months ended September 30, 2008 is due to sales of Tianjin Huaneng’s products with higher profit margins. The profit margins on our solar heaters have been falling because of market pressure to keep our prices competitive (down by 2% compared to the same period last year). We are facing severe price competition in the traditional solar water heater market. We expect price competition to continue through the end of 2008. As a result, we expect our gross profit margin for our solar water heaters to continue to decrease. However, we anticipate that Tianjin Huaneng’s energy saving boilers and environmental protection equipment will generate better gross profit margins to offset the decline in our profit margins for solar water heaters and residential boilers. The gross margin on the sale of the Tianjin Huaneng’s products was 33% during the nine months ended September 30 2008.

Depreciation and amortization are recorded utilizingexpense during the straight-line method overnine months ended September 30, 2008 increased by $310,902 to $464,599.00 or 202% from $153,697 for the estimated original useful livessame period in 2007. The increase was due to an increased depreciation and amortization expense of $68,892 as a result of the assets. Amortizationacquisition of leasehold improvements is calculated onSZPSP as well as increased depreciation expense of $191,010 as a straight-line basis overresult of new equipment used.

Income from operations during the lifenine months ended September 30, 2008 was $5,340,838 an increase of $3,499,713 or 190% as compared to $1,841,125.00 for the same period in 2007. The increased operating income was due to the increased sales revenue and the acquisition of SZPSP and our commencement of the assetsale of its respective products. As a percentage of sales, operating income was approximately 10.93% during the nine months ended September 30, 2008 as compared to approximately 7.35% for the same period in 2007. The increase in operating income as a percentage of sales was substantially due to the increase in sales and controlling selling expenses during the nine months ended September 30, 2008.

We did not carry on any business or maintain any branch office in the United States during the first nine months of 2008 or the termsame period in 2007. Therefore, no provision for U.S. federal income taxes or tax benefits on the undistributed earnings and/or losses has been made.

Currently, Most PRC companies are subject to enterprise income tax at the rate of 25%, value added tax at the rate of 17% for most of the lease, whichevergoods sold, and business tax on services at a rate ranging from 3% to 5% annually. However, pursuant to the applicable laws and regulations in the PRC, Deli Solar (Bazhou), and Deli Solar (Beijing) as wholly foreign owned enterprises (“WFOEs”) in the PRC, are entitled to an exemption from the PRC enterprise income tax for two years commencing from its first profitable year, after loss carry-forwards from the previous five years have been recovered. Since Deli Solar (Bazhou) was converted into a WFOE in March 2005, it enjoyed a two-year tax-exempt treatment in the PRC which ended on March 31, 2007. Since then it has been subject to 50% of its enterprise income tax from 2007 until 2010. Our direct subsidiary, Deli Solar (Beijing), had a net loss during the first nine months of 2008. Consequently, it did not incur income tax. Tianjin Huaneng is shorter. Major renewalsdomestically owned and betterments are capitalized and depreciated; maintenance and repairs that do not extendsubject to the lifeCorporate Income Tax governed by the Income Tax Law of the respective assets are chargedPeople’s Republic of China, at a statutory rate of 25%.

Because our fiscal year is the calendar year, throughout this section we refer to the fiscal years ended December 31, 2007 and 2006 as “2007” and 2005 as “2007,” “2006,” and “2005,” respectively.

Significant financial items during 2007 include:

The overall increase in sales is the result of (i) the acquisition of Tianjin Huaneng and the commencement by us of the sale of their products which contributed $7,002,015 to our sales revenues and (ii) our investment in marketing, sales promotion of our solar water heaters and the development of a more extensive sales distribution network for our solar water heaters and our boiler related products discussed below.

The increase in sales of solar heaters and boiler related products was a result of our investment in marketing and sales promotion and the development of a more extensive sales distribution network for our solar water heaters and our boiler related products. The increase in sales revenues was not associated with a one time event. The increase in sales is not the result of an increase in sales prices of our products but the result of increased sales volume. On the contrary the sales prices for our solar heater and boiler related products have been declining due to increased competition. Going forward we believe that the continued organic growth of revenue of this segment will be negatively impacted by increased competition in the solar heater segment which is causing us to lower our prices. We expect price competition to continue for the next year and we expect sales revenues on this product segment to decrease.

Gross margin (gross profit as a percentage of sales) in 2007 was approximately 22.4% compared to approximately 21.5% in 2006. The profit margin in 2007 increased slightly over 2006 due to the acquisition of Tianjin Huaneng whose products have higher profit margins than our other products. The profit margins on our solar heaters have been falling because of market pressure to keep our prices competitive. We are facing severe price competition in the traditional solar water heater market. We expect price competition to continue through the end of 2008. As a result, we expect our gross profit margin for our solar water heaters to continue to decrease. However, we anticipate that Tianjin Huaneng’s energy saving boilers and environmental protection equipment will generate better gross profit margins to offset the decline in our profit margins for solar water heaters and residential boilers. The gross margin on the sale of the Tianjin Huaneng’s products was 26% in 2007.

InAssets in solar heater were $18,690,225, about a 47% increase as compared to 2006 of approximately 12,716,185. The increase is in line with the 73% increase in our overall sales our costsgenerated from solar heater.

Assets in heat pipe were $9,029,994 compared with nil balance in 2006; the increase was mainly due to acquisition of goods sold were $28,772,078 for 2007, an increaseTianjin Huaneng.

Assets in other segments of $11,929,084 or 71% from $16,842,994 for 2006. Excluding Tianjin Huaneng our cost$2,919,494 refer to solar lighting products and sales of sales increased to $21,798,724 or 79%spare parts/ components which are less than 10% of sales. Management is continuing to focus on cost controls for raw materials. The supply of raw materials is currently a buyer’s market and management believes this trend will continue, which will provide us with the opportunity to be more selective in our purchase of raw materials. We try to minimize our product costs and keep our product prices competitive.total assets.

Operating expenses increased to $5,114,634 for 2007 as compared to $3,414,707 for 20062006. This represented an increase of $1,699,927 or about 50%. ExcludingThe overall increase in operating expenses was primarily due to the acquisition of Tianjin Huaneng our(whose operating expenses decreasedamounted to $3,392,905 or 12.35% of sales.$1,721,729) as well as increased selling and distribution expenses described below (which amounted to $827,839) and increased advertising expenses which amounted to $1,415,493.

General and administrative expenses were $4,003,973 for 2007 or(or approximately 11% of sales,sales) compared to $ 2,800,015 or$2,800,015 (or approximately 13% of sales,sales) for 2006. The net increase of $1,203,958 was mainly due to the acquisition of Tianjin Huaneng which incurredhad general and administrative expenses of $1,486,751. This was offset by the decrease in general and administrative expenses by Deli Solar (Bazhou) of approximately $1,486,751;$0.3 million. Deli Solar (Bazhou) and Deli Solar (Beijing)’s expenses incurredwere approximately $1,852,430 and the Company at the U.S. level incurred a total of $664,792 which included legal fees of approximately $340,197. General and administrative expenses include advertising expenses and salaries and benefits.

Depreciation and amortization expense for 2007 increased by $127,876 to $282,822 or 83% from $154,946 for 2006. The increase was due to an increased depreciation and amortization expense of $109,066 as a result ifof the acquisition of Tianjin Huaneng acquisition. Per employee, salaries and benefits decreased from $1,188 for 2006 to $890 for 2007,as well as increased depreciation expense of $18,810 as a decreaseresult of $ 298 or 25% from the same corresponding period last year.new equipment used.

Operating incomeIncome from operations for 2007 was $3,185,634, for 2007 as compared to operating income of $1,210,612 for 2006, an increase of $1,975,022 or 163%. as compared to $1,210,612 for 2006. The increased operating income was due to ourthe increased sales revenue and the acquisition of Tianjin Huaneng and our commencement of the increased sales revenue and our budget control on operating expenses in 2007.sale of their products. As a percentage of sales, operating income was 8.59% in 2007 as compared to 5.64% for 2006. Excluding Tianjin Huaneng our operating income was $2,288,660 or 8% of sales. The increase in operating income as a percentage of sales was substantially due to the increase in sales and controlling selling expenses in 2007.

We did not carry on any business or maintain any branch office in the United States during 2007 or 2006. Therefore, no provision for U.S. federal income taxes or tax benefits on the undistributed earnings and/or losses has been made.

Normally a PRC company is subject to enterprise income tax at the rate of 33%, value added tax at the rate of 17% for most of the goods sold, and business tax on services at a rate ranging from 3% to 5% annually. However, pursuant to the applicable laws and regulations in the PRC, Deli Solar (Bazhou), and Deli Solar (Beijing) as wholly foreign owned enterprises (“WFOEs”) in the PRC, are entitled to an exemption from the PRC enterprise income tax for two years commencing from its first profitable year, after loss carry-forwards from the previous five years have been recovered. Since Deli Solar (Bazhou) was converted into a WFOE in March 2005, it enjoyed a two-year tax-exempt treatment in the PRC which ended on March 31, 2007. Since then it has been subject to 50% of its enterprise income tax from 2007 until 2010. Our direct subsidiary, Deli Solar (Beijing), had a net loss for 2007. Consequently, it did not incur income tax. Tianjin Huaneng is domestically owned and subject to the Corporate Income Tax governed by the Income Tax Law of the People’s Republic of China, at a statutory rate of 33%, which is comprised of a 30% national income tax and 3% local income tax.

Net cash used in investing activities was $8,541,976 for the nine months ended September 30, 2008, compared with $2,877,802 for the same period of 2007. The increase was due to acquisition of SZPSP and purchase of common share interests from Tianjin Huaneng minnority shareholders, and the purchase of $199,744 arisenew facilities and assembly lines in connection with the SZPSP acquisition.

During the nine months ended September 30, 2008, accounts receivable increased to $8,971,587 from $7,453,009 as of December 31, 2007, primarily due to share of profits by minority interests from consolidation with Tianjin Huaneng.SZPSP. SZPSP recorded $1,174,334 of accounts receivable. The majority of each of our company’s sales is on credit terms in accordance with terms specified in the contracts governing the relevant transactions. We evaluate the need for an allowance for doubtful accounts based on specifically identified amounts that we believe to be uncollectible. If actual collections experience changes, revisions to the allowance may be required. Based upon the aforementioned criteria, the allowances for doubtful accounts during the nine months ended September 30 2008 were none.

Net income was $2,525,141 inInventories as of September 30, 2008 increased to $6,746,185 from $3,875,658 as of December 31, 2007 an increaseprincipally because of $1,285,640 or about 104% from $1,239,501 for 2006. Excludingconsolidation with SZPSP, which recorded $852,844 of inventories as of September 30, 2008. In addition, Tianjin Huaneng our net income was $2,134,129 inincreased its inventories from $3,016,025 to $4,182,844 due to increased purchases of raw materials for the next production season. The inventory mainly consists of finished goods waiting for transportation or installation.

Accounts payable as of September 30, 2008 decreased to $1,875,042 from $2,111,028 as of December 31, 2007 an increase of 72% from 2006. The increase was primarily due to an increasethe payments made to creditors under the term of credit agreements.

Other payables and accrued liabilities as of September 30, 2008 decreased to $8,021,059 from $8,552,452 as of December 31, 2007, primarily due to consolidation with SZPSP. The decrease is mainly due to decrease in our revenueaccrued expenses, customer deposits, other payables, taxes payable and our acquisition of Tianjin Huaneng and resultant sales of its products.deferred revenue.

We are engaged in the solar and renewable energy business in the People's Republic of China (“PRC”).

Our business is conducted through our wholly-owned PRC based operating subsidiaries, Deli Solar (Bazhou), Deli Solar (Beijing) and our recently acquired indirect majority owned subsidiarysubsidiaries Tianjin Huaneng.Huaneng and SZPSP.

Deli Solar (Bazhou), founded in 1997, designs, manufactures and sells renewable energy systems to produce hot water and for space heating in the PRC. Deli Solar (Bazhou)’s principal products are solar hot water heaters and multifunctional space heating products, including coal-fired boilers for residential use. Deli Solar (Bazhou) also sells component parts for its systems, and provides after-sales maintenance and repair services.

Most end users of Deli Solar (Bazhou)’s products use them to heat water for their homes, with a concentration in rural areas where electricity is in short supply. Deli Solar (Bazhou)’s coal-fired boilers, furnaces and heating stoves are also used as primary household space heaters during cold weather and as cooking stoves.

Deli Solar (Beijing), established during the second quarter of 2006, is principally engaged in the installation of large solar water heaters in construction projects in major cities in the PRC, including Beijing.

Tianjin Huaneng, acquired in July 2007, manufactures and installs waste heat recovery systems primarily for use in manufacturing facilities whose manufacturing processes require the generation of large amounts of heat, such as steel and chemical plants. The waste heat can be used to generate hot water at the manufacturing facilities Tianjin Huaneng’s products include heating pipes, heat exchangers, specialty heating pipes and tubes, high temperature hot blast stoves, heating filters, normal pressure water boilers, solar energy water heaters and radiators. Products and systems manufactured and sold by Tianjin Huaneng during the period from July 1, 2007 (the date of acquisition) through December 31, 2007 represented 19% of our sales revenues for the fiscal year ended December 31, 2007. Tianjin Huaneng’s products are sold in more than 28 provinces in the PRC as well as Singapore Indonesia, and North Korea.Taiwan.

SZPSP, which we acquired effective March 31, 2008, is principally engaged in the resale of energy-saving heating products such as heat pipes, heat exchangers, pressure water boilers, solar energy water heaters and radiators.  Currently, SZPSP is also operating a distribution facility in Shenzhen, PRC. This acquisition will addhas added to the assortment of solar water products which we have available for sale.

For the fiscal yearnine month period ended December 31, 2007, approximately 88%September 30, 2008 almost all of our sales revenues were derived from sales made to PRC based customers and approximately 12% were derived from the international marketcustomers.

We manufacture two types of solar hot water heaters: evacuated tubular solar water heaters and flat plate solar water heaters. Our solar water heaters are primarily used to generate hot water for residential use. Among evacuated tubular solar water heaters, regular evacuated tubular solar water heaters using all-glass vacuum collectors are our best selling product, comprising approximately 77% of our total solar water heater revenues for the nine month period ended September 30, 2008 and 85% of our total solar water heater revenues for 2007. This type of solar water heater can generate hot water even in cold weather and therefore can be used throughout the year. Further, these water heaters are relatively easy and inexpensive to produce compared to other solar hot water heaters using other types of vacuum collectors. Because our primary market is in rural areas of the PRC, our regular evacuated tubular solar water heaters annually account for most of our sales.

We also manufacture boilers, furnaces, stove heating, and space heating products. Most of our boilers and space heating products are coal-fired, small scale units for residential space heating and cooking.

SalesApproximately 49% of our hot water heaterssales revenues for the nine month period ended September 30, 2008 and boilers comprised approximately 72% of our total sales revenues in 2007.2007 were derived from sales of our solar water heaters and boiler related products.

We also manufacture waste heat recovery systems, heating products such as heating pipes, heat exchangers, specialty heating pipes and tubes, high temperature hot blast stoves, heating filters, normal pressure water boilers, solar energy water heaters and radiators.