CH Lighting International (SBTI) 10-Q 2009 Q3 Quarterly report

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x  QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2009

OR

o TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT

For the transition period from ______ to __________

COMMISSION FILE NUMBER: 000-32161

CH LIGHTING INTERNATIONAL CORPORATION

(Exact name of registrant as specified in its charter)

Delaware	20-3828148
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)

658 Hongyan Road, Economic Development Zone, Shangyu City, Zhejiang Province,

The People’s Republic of China 312300

(Address of principal executive offices)

(011)86 575 8212 7538

(Registrant’s Telephone Number, Including Area Code)

(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)

Check whether the issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for such shorter period that the issuer was required to file such reports), and (2)has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company filer.  See definition of “accelerated filer” and “large accelerated filer” in Rule 12b-2 of the Exchange Act (Check one):

Large Accelerated Filer o Accelerated Filer o Non-Accelerated Filer o Smaller Reporting Company x 

Indicate by check mark whether the registrant is a shell company as defined in Rule 12b-2 of the Exchange Act.  Yes  o No x

State the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date:  As of August 14, 2009, the registrant had 120,000,000 shares of common stock, par value $0.001 per share, issued and outstanding.

TABLE OF CONTENTS

PART I FINANCIAL INFORMATION	3
ITEM 1. FINANCIAL STATEMENTS	3
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION	4
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	17
ITEM 4. CONTROLS AND PROCEDURES	18
PART II OTHER INFORMATION	18
ITEM 1. LEGAL PROCEEDINGS	18
ITEM 1A. RISK FACTORS	18
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	19
ITEM 3. DEFAULTS UPON SENIOR SECURITIES	19
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITYHOLDERS	19
ITEM 5. OTHER INFORMATION	19
ITEM 6. EXHIBITS	19
SIGNATURES	21

- 2 - -

PART I

FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

	Page
Unaudited Condensed Consolidated Statements of Operations and Other Comprehensive Income	F-1
Unaudited Condensed Consolidated Balance Sheets	F-2 – F-3
Unaudited Condensed Consolidated Statements of Changes in Equity	F-4
Unaudited Condensed Consolidated Statements of Cash Flows	F-5 – F-6
Notes to Unaudited Condensed Consolidated Financial Statements	F-7 – F-21

- 3 - -

CH Lighting International Corporation

(formerly Sino-Biotics, Inc.)

Unaudited Condensed Consolidated Statements of Operations and

Other Comprehensive Income

For the nine months ended June 30, 2009 

			Three months ended  June 30,						Nine months ended  June 30,
			2009			2008			2009			2008
	Note		US$’000			US$’000			US$’000			US$’000
Operating revenues:
Net sales to third parties				9,378			27,326			34,207			64,467
Cost of sales				(7,475	)		(18,984	)		(24,585	)		(44,332	)
Gross income				1,903			8,342			9,622			20,135
Operating expenses:
Selling, marketing and distribution expenses				(2,530	)		(909	)		(5,003	)		(1,904	)
General and administrative expenses				(2,131	)		(1,339	)		(4,180	)		(4,024	)
Operating (loss) income				(2,758	)		6,094			439			14,207
Government subsidies income		3		6,064			73			8,005			369
Other income				4			33			24			63
Interest income				936			169			2,789			412
Interest expense				(1,243	)		(747	)		(3,335	)		(2,993	)
Income before income taxes				3,003			5,622			7,922			12,058
Income taxes expenses		5		(1,264	)		(797	)		(1,796	)		(1,320	)
Net income				1,739			4,825			6,126			10,738
Net income attributable to non-controlling interests				-			-			-			-
Net income attributable to CH Lighting International Corporation				1,739			4,825			6,126			10,738
Other comprehensive income
Foreign currency translation adjustment				4			(4	)		41			832
Comprehensive income				1,743			4,821			6,167			11,570
Earnings per share		4
			Shares			Shares			Shares			Shares
Weighted average number of common stocks outstanding, basic and diluted				120,000,000			93,000,000			120,000,000			93,000,000
			US$			US$			US$			US$
Net income per share of common stock outstanding, basic and diluted				0.014			0.052			0.051			0.115

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

F-1

CH Lighting International Corporation

(formerly Sino-Biotics, Inc.)

Unaudited Condensed Consolidated Balance Sheets

As of June 30, 2009

						(Audited)
				As of June 30, 2009		As of September 30, 2008
	Note			US$’000		US$’000
ASSETS
Current assets:
Cash and cash equivalents					6,421		3,154
Restricted bank balances		6			32,538		16,314
Other financial assets					-		2,918
Account receivables, net		7			13,821		18,871
Other receivables					13,529		4,093
Prepayments					934		2,724
Due from related parties, current portion		12	(b)		33,633		7,058
Inventories, net		8			15,105		15,303
Total current assets					115,981		70,435
Long-term land lease prepayments, net					860		887
Property, plant and equipment, net		9			17,234		16,318
Due from related parties, long-term portion		12	(b)		7,032		27,444
Total assets					141,107		115,084
LIABILITIES AND EQUITY
Current liabilities:
Account payables					19,660		22,135
Note payables					3,059		4,519
Accrued expenses and other liabilities					2,503		1,024
Customer deposits					1,694		3,291
Due to related parties		12	(b)		25		3,626
Income tax payables					1,155		376
Short-term bank borrowings		10	(a)		79,301		50,849
Current portion of long-term interest-bearing loans,   secured		10	(b)		2,858		3,068
Total current liabilities					110,255		88,888
Long-term interest-bearing loans, secured		10	(b)		3,979		6,093
Government subsidies					-		96
Deferred tax liabilities					1,387		688
					115,621		95,765

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

F-2

CH Lighting International Corporation

(formerly Sino-Biotics, Inc.)

Unaudited Condensed Consolidated Balance Sheets

As of June 30, 2009

					(Audited)
			As of June 30, 2009		As of September 30, 2008
	Note		US$’000		US$’000
Commitments and contingencies		13		-		-
Stockholders’ equity:
Preferred stock, US$0.01 par value: 5,000,000 shares authorized, no share issued						-
Common stock, US$0.001 par value: 500,000,000 shares authorized as of June 30, 2009 and September 30, 2008						-
120,000,000 shares issued and outstanding as of June 30, 2009 and September 30, 2008				120		120
Additional paid-in capital				962		962
Statutory reserves				1,024		740
Accumulated other comprehensive income				2,165		2,124
Retained earnings				21,149		15,307
Total stockholders’ equity				25,420		19,253
Non-controlling interests				66		66
Total equity				25,486		19,319
Total liabilities and equity				141,107		115,084

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

F-3

CH Lighting International Corporation

(formerly Sino-Biotics, Inc.)

Unaudited Condensed Consolidated Statements of Changes in Equity

For the nine months ended June 30, 2009

	Stockholders’ equity
	Preferred stock issued				Common stock issued
	Number of shares		Amount		Number of shares		Amount		Additional  paid-in capital		Statutory reserves		Accumulated other compre- hensive  income		Retained earnings			Sub-total		Non- controlling interests		Total
			US$’000				US$’000		US$’000		US$’000		US$’000		US$’000			US$’000		US$’000		US$’000
Balance as of September 30, 2008 and October 1, 2008		-		-		120,000,000		120		962		740		2,124		15,307			19,253		66		19,319
Net income		-		-		-		-		-		-		-		6,126			6,126		-		6,126
Transfers to statutory reserves		-		-		-		-		-		284		-		(284	)		-		-		-
Foreign currency translation adjustment		-		-		-		-		-		-		41		-			41		-		41
Balance as of June 30, 2009		-		-		120,000,000		120		962		1,024		2,165		21,149			25,420		66		25,486

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

F-4

CH Lighting International Corporation

(formerly Sino-Biotics, Inc.)

Unaudited Condensed Consolidated Statements of Cash Flows

For the nine months ended June 30, 2009

	Nine months ended  June 30,
	2009			2008
	US$’000			US$’000
Cash flows from operating activities
Net income		6,126			10,738
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation of property, plant and equipment		1,151			967
Amortization of long-term land lease prepayments		27			28
Recognition of government subsidies		(96	)		(603	)
Accrued interest income		(2,198	)		-
Imputed interest expenses		-			175
Exchange differences		4			(84	)
Deferred taxation		699			627
Changes in operating assets and liabilities:
Account receivables, net		5,078			(13,082	)
Other receivables		(9,430	)		3,153
Prepayments		1,796			1,600
Inventories, net		220			5,707
Account payables		(2,508	)		7,189
Note payables		(1,467	)		(9	)
Accrued expenses and other accrued liabilities		1,477			(1,332	)
Customer deposits		(1,601	)		225
Income tax payables		778			(353	)
Net cash provided by operating activities		56			14,946
Cash flows from investing activities
Purchase of property, plant and equipment		(2,044	)		(3,753	)
Investment in restricted bank balances, net		(16,199	)		(12,225	)
Advance to related parties, net		(7,516	)		-
Net cash used in investing activities		(25,759	)		(15,978	)

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

F-5

CH Lighting International Corporation

(formerly Sino-Biotics, Inc.)

Unaudited Condensed Consolidated Statements of Cash Flows

For the nine months ended June 30, 2009

	Nine months ended  June 30,
	2009			2008
	US$’000			US$’000
Cash flows from financing activities
Advance to related parties, net		-			(23,690	)
Capital contribution to a subsidiary by its minority shareholder		-			64
Dividends paid		-			(1,419	)
Proceeds from short-term bank loans		51,616			30,395
Repayment of short-term bank loans		(43,000	)		(26,024	)
Proceeds from bills financing, net		22,689			15,835
Proceeds from long-term interest-bearing loans		-			4,445
Repayment of long-term interest-bearing loans		(2,338	)		(2,085	)
Net cash provided by (used in) financing activities		28,967			(2,479	)
Net increase (decrease) in cash and cash equivalents		3,264			(3,511	)
Cash and cash equivalents, at beginning of period		3,154			5,340
Effect on exchange rate changes		3			951
Cash and cash equivalents, at end of the period		6,421			2,780
Supplemental disclosure of cash flow information
Interest received		591			412
Interest paid		3,335			2,815
Income tax paid		519			1,056
Non-cash investing activities
Accrued interest income from related parties		2,198			-
Non-cash financing activities
Settlement of bills financing with other financial assets		2,918			-

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

F-6

CH Lighting International Corporation

(formerly Sino-Biotics, Inc.)

Notes to and Forming Part of Unaudited Condensed Consolidated Financial Statements

For the nine months ended June 30, 2009

1. ORGANIZATION AND PRINCIPAL ACTIVITIES

CH Lighting International Corporation (“CH Lighting”), formerly known as Sino-Biotics, Inc., was incorporated on July 6, 2005 under the laws of the State of Delaware, and adopted its existing name effective on August 25, 2008. Its common stock is currently trading on the Over-The-Counter Bulletin Board (“OTCBB”) of NASDAQ under the symbol “CHHN”.

CH Lighting is an investment holding company with no operation. The principal activities of its subsidiaries (together with CH Lighting, collectively referred as to “the Company”) are manufacture and sale of lighting source products and lighting electronic products and investment holding.

Details of CH Lighting’s subsidiaries as of June 30, 2009 are as follows:

Name	Place and date of establishment / incorporation	Percentage of effective equity interest / voting right attributable to the Company	Principal activities
CH International Holdings Limited (“CH International”)	British Virgin Islands	100%	Investment holding
Zhejiang CH Lighting Company Limited (“Zhejiang CH”) *	Zhejiang, the People’s Republic of China (“PRC”) September 27, 2000	100%	Manufacture and sales of lighting source products
Zhejiang CH Lighting Technology Company Limited (“CH Technology”) *	Zhejiang, the PRC March 31, 2003	100%	Manufacture and sales of lighting electronic products
Zhejiang Shaoxing CH Lamps Manufacturing Company Limited (“CH Lamps”) *	Zhejiang, the PRC December 13, 1999	100%	Manufacture of lighting source products
Shangyu CH Laboratory Testing Company Limited (“CH Lab”) *	Zhejiang, the PRC January 7, 2008	90%	Laboratory testing services of lighting source and electronic products
CH Lighting (Hong Kong) Limited (“CH Hong Kong”)	Hong Kong November 10, 2000	100%	Trading of lighting source products

* These are direct translation of name in Chinese for identification purpose only and are not the official name in English.

F-7

CH Lighting International Corporation

(formerly Sino-Biotics, Inc.)

Notes to and Forming Part of Unaudited Condensed Consolidated Financial Statements

For the nine months ended June 30, 2009

1. ORGANIZATION AND PRINCIPAL ACTIVITIES (CONTINUED)

On July 16, 2008, CH Lighting entered into a share exchange agreement (the “Share Exchange Agreement”) with CH International and KEG International Limited (“KEG”), a company incorporated in British Virgins Islands. Pursuant to the Share Exchange Agreement, CH Lighting acquired all of the issued and outstanding common stock of CH International from KEG in exchange for 93,000,000 newly-issued shares of CH Lighting’s common stock, par value of US$0.001, representing 77.5% of CH Lighting’s common stock issued and outstanding upon completion of the share exchange (the “Share Exchange Transaction”).

The acquisition by CH Lighting of CH International is deemed to be a reverse acquisition in accordance with generally accepted accounting principles. In accordance with the Accounting and Financial Reporting Interpretations and Guidance prepared by the staff of the U.S. Securities and Exchange Commission, CH Lighting (the legal acquirer) is considered the accounting acquiree and CH International (the legal acquiree) is considered the accounting acquirer. The consolidated financial statements of the consolidated entity will in substance be those of CH International, with the assets and liabilities, and revenues and expenses, of CH Lighting being included effective from the date of completion of Share Exchange Transaction. CH Lighting is deemed to be a continuation of the business of CH International.

In order to rationalize the corporate structure and prepare for the Share Exchange Transaction, CH International and other subsidiaries (collectively referred to as the “CH International Group”) underwent a reorganization (“Reorganization”) prior to the consummation of the Share Exchange Transaction.

Since the ultimate beneficial owner of the companies comprising the CH International Group was, all the time prior to the completion of the Reorganization, Mr. Zhao Guo Song (‘Mr. Zhao”), the ownership transfer transaction was accounted for as a transfer of entities under common control in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 141, “Business Combinations”. Hence, the consolidation has been accounted for at historical cost and prepared on the basis as if the Reorganization had become effective as of the beginning of the first period presented in the accompanying unaudited condensed consolidated financial statements.

F-8

CH Lighting International Corporation

(formerly Sino-Biotics, Inc.)

Notes to and Forming Part of Unaudited Condensed Consolidated Financial Statements

For the nine months ended June 30, 2009 

2. PREPARATION OF INTERIM FINANCIAL STATEMENTS

Basis of presentations

The unaudited condensed consolidated financial statements of the Company have been prepared by the management pursuant to the accounting principles generally accepted in the United States of America (“GAAP”) for interim financial reporting and the rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, certain information and note disclosures normally included in annual financial statements prepared in accordance with the GAAP have been condensed or omitted, although the management believes that the disclosures made are adequate to make the information not misleading.

To prepare the financial statements in conformity with the GAAP, the management makes estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of these financial statements and the reported amounts of income and expenses during the reporting period. Actual amounts may differ from these estimated amounts. In the opinion of the management, these unaudited condensed consolidated financial statements include all adjustments (consisting of normal recurring adjustments and reclassifications) necessary for a fair presentation of the Company’s financial position as of June 30, 2009, the results of operations for both the three months and nine months ended June 30, 2009 and 2008 and cash flows for the nine months ended June 30, 2009 and 2008.

The results of operations and cash flows for the nine months ended June 30, 2009 and 2008 are not necessarily indicative of the operating results and cash flows to be expected for the full year. These unaudited condensed consolidated financial statements should be read in conjunction with the audited financial statements and notes thereto included in the Company’s Form-10K for the year ended September 30, 2008 filed on December 29, 2008.

Basis of consolidation

The unaudited condensed consolidated financial statements include the financial information of CH Lighting and its subsidiaries. All significant intercompany accounts and transactions have been eliminated upon consolidation.

Recently issued accounting pronouncements

The management has reviewed all recently issued, for both effective and not yet effective, new accounting pronouncements and considered the following new accounting pronouncements are relevant to the Company:

F-9

CH Lighting International Corporation

(formerly Sino-Biotics, Inc.)

Notes to and Forming Part of Unaudited Condensed Consolidated Financial Statements

For the nine months ended June 30, 2009

2. PREPARATION OF INTERIM FINANCIAL STATEMENTS (CONTINUED)

Recently issued accounting pronouncements (Continued)

In December 2007, the Financial Accounting Standards Board (“FASB”) issued No. 160, “Non-controlling Interests in Consolidated Financial Statements—An Amendment of ARB No. 51” (“SFAS 160”). SFAS 160 changes the accounting and reporting for minority interests. Minority interests will be re-characterized as non-“controlling interests” and will be reported as a component of equity separate from the parent’s equity, and purchases or sales of equity interests that do not result in a change in control will be accounted for as equity transactions. In addition, net income attributable to the non-controlling interests will be included in net income and, upon a loss of control, the interest sold, as well as any interest retained, will be recorded at fair value with any gain or loss recognized in net income. SFAS 160 is effective fiscal years beginning on or after December 15, 2008 and will apply prospectively, except for the presentation and disclosure requirements, which will apply retrospectively. Except for the changes in the presentation and disclosure of non-controlling interests of the Company, the adoption of SFAS 160 has no material impact on the consolidated financial position or results of operations.

 In April 2009, the FASB issued three related FASB Staff Positions (“FSP”): (i) FSP FAS No. 115-2 and FAS No. 124-2, “Recognition of Presentation of Other-Than-Temporary Impairments” (“FSP FAS 115-2 and FAS 124-2”), (ii) FSP FAS No. 107-1 and Accounting Principles Board Opinion (“APB”) No. 28-1, “Interim Disclosures about Fair Value of Financial Instruments” (“FSP FAS 107-1 and APB 28-1”), and (iii) FSP FAS No. 157-4, “Determining the Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly” (“FSP FAS 157-4), which are effective for interim and annual reporting periods ending after June 15, 2009. FSP FAS 115-2 and FAS 124-2 amend the other-than-temporary impairment guidance in the GAAP for debt securities to modify the requirement for recognizing other-than-temporary impairments, change the existing impairment model, and modify the presentation and frequency of related disclosures. FSP FAS 107-1 and APB 28-1 require disclosures about fair value of financial instruments for interim reporting periods as well as in annual financial statements. FSP FAS 157-4 provides additional guidance for estimating fair value in accordance with SFAS No. 157, “Fair Value Measurements” (“SFAS 157”). The impact on the adoption of the three related FSPs related only to the disclosures of the Company’s financial instruments as detailed in Note 11 below and has no material impact on the consolidated financial position or results of operations. The management is assessing the impact of the adoption of the three related FSPs on the Company’s annual financial statements.

In May 2008, the FASB issued SFAS No. 163, “Accounting for Financial Guarantee Insurance Contracts – an interpretation of FASB Statement No. 60” (“SFAS 163”). SFAS 163 interprets FASB Statement No. 60 and amends existing accounting pronouncements to clarify their application to the financial guarantee insurance contracts included within the scope of that statement. SFAS 163 is effective for financial statements issued for fiscal years beginning after December 15, 2008, and all interim periods within those fiscal years. The management considers that the adoption of SFAS 163 has no material impact on the consolidated financial position or results of operations.

F-10

CH Lighting International Corporation

(formerly Sino-Biotics, Inc.)

Notes to and Forming Part of Unaudited Condensed Consolidated Financial Statements

For the nine months ended June 30, 2009 

2. PREPARATION OF INTERIM FINANCIAL STATEMENTS (CONTINUED)

Recently issued accounting pronouncements (Continued)

In May 2009, the FASB issued SFAS No. 165, “Subsequent Events” (“SFAS 165”), which establishes standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. It requires the disclosure of the date through which an entity has evaluated subsequent events and the basis for that date, i.e., whether that date represents the date the financial statements were issued or were available to be issued. SFAS 165 is effective for interim or annual financial periods ending after June 15, 2009. The management evaluated all events or transactions that occurred after June 30, 2009 up through August 14, 2009, the date that the management issued these financial statements. The management considers that the adoption of SFAS 165 has no material impact on the consolidated financial position or results of operations.

In June 2009, the FASB issued SFAS No. 166, “Accounting for Transfers of Financial Assets - an amendment of FASB Statement No. 140” (“SFAS 166”). SFAS 166 amends the de-recognition accounting and disclosure guidance relating to SFAS 140. SFAS 166 eliminates the exemption from consolidation for qualifying special-purpose entity “(QSPE”), it also requires a transferor to evaluate all existing QSPE to determine whether it must be consolidated in accordance with SFAS 167. SFAS 166 is effective for financial asset transfers occurring after the beginning of an entity’s first fiscal year that begins after November 15, 2009. The management believes that the adoption of SFAS 167 in future periods should not have a material impact on the consolidated financial position or results of operations.

In June 2009, the FASB issued SFAS No. 167, “Amendments to FASB Interpretation No. 46(R)” (“SFAS 167”), which amends FASB Interpretation No. 46 (revised December 2003) to address the elimination of the concept of a qualifying special purpose entity. SFAS 167 also replaces the quantitative-based risks and rewards calculation for determining which enterprise has a controlling financial interest in a variable interest entity with an approach focused on identifying which enterprise has the power to direct the activities of a variable interest entity and the obligation to absorb losses of the entity or the right to receive benefits from the entity. Additionally, SFAS 167 provides more timely and useful information about an enterprise’s involvement with a variable interest entity. SFAS 167 is effective for fiscal years beginning after November 15, 2009. The management believes that the adoption of SFAS 167 in future periods should not have a material impact on the consolidated financial position or results of operations.

In June 2009, the FASB issued SFAS No. 168, “The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles, a replacement of FASB Statement No. 162” (“SFAS 168”), which establishes the FASB Accounting Standards Codification as the source of authoritative accounting principles recognized by the FASB to be applied in the preparation of financial statements in conformity with the GAAP. SFAS 168 explicitly recognizes rules and interpretive releases of the SEC under federal securities laws as authoritative generally accepted accounting principles for SEC registrants. SFAS 168 is effective for financial statements issued for interim and annual periods ending after September 15, 2009. The management believes that the adoption of SFAS 168 in future periods should not have a material impact on the consolidated financial position or results of operations. However, because the FASB Accounting Standards Codification completely replaces existing standards, it will affect the way that the GAAP is referenced within the consolidated financial statements and accounting policies.

F-11

CH Lighting International Corporation

(formerly Sino-Biotics, Inc.)

Notes to and Forming Part of Unaudited Condensed Consolidated Financial Statements

For the nine months ended June 30, 2009

3. GOVERNMENT SUBSIDIES INCOME

The government subsidies income as granted was recognized as income because no specific condition was attached to the grant.

4. EARNINGS PER SHARE

Basic earnings per share is computed by dividing net income attributable to common stockholders of CH Lighting by the weighted-average number of common stocks outstanding during the period. Diluted earnings per share is computed similar to basic earnings per share except that the denominator is increased to include the number of additional common stocks that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive. There were no potentially dilutive securities for the nine months ended June 30, 2009 and 2008.

5. INCOME TAXES

Interpretation No. 48, “Accounting for Uncertainty in Income Taxes – an interpretation of FASB Statement No. 109” (“FIN 48”) issued by the FASB clarifies the accounting and disclosure for uncertainty in tax positions, as defined, and prescribes the measurement process and a minimum recognition threshold for a tax position, taken or expected to be taken in a tax return, that is required to be met before being recognized in the financial statements. Under FIN 48, the Company must recognize the tax benefit from an uncertain position only if it is more-likely-than-not the tax position will be sustained on examination by the taxing authority, based on the technical merits of the position. The tax benefits recognized in the financial statements attributable to such position are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon the ultimate resolution of the position.

Subject to the provision of FIN 48, the Company has analyzed its filing positions in all of the domestic and foreign jurisdictions where it is required to file income tax returns. As of June 30, 2009, the Company has identified the jurisdictions as “major” tax jurisdictions, as defined, in which it is required to file income tax returns are Hong Kong and the PRC. Based on the evaluations noted above, the Company has concluded that there are no significant uncertain tax positions requiring recognition in its consolidated financial statements.

As of June 30, 2009, the Company had no unrecognized tax benefits or accruals for the potential payment or interest and penalties. The Company’s policy is to record interest and penalties in this connection as a component of the provision for income tax expense. For the nine months ended June 30, 2009 and 2008, no interest or penalties were recorded.

F-12

CH Lighting International Corporation

(formerly Sino-Biotics, Inc.)

Notes to and Forming Part of Unaudited Condensed Consolidated Financial Statements

For the nine months ended June 30, 2009 

5.  INCOME TAXES (CONTINUED)

(a) Income tax expenses are comprised of the following:

	Three months ended  June 30,					Nine months ended  June 30,
	2009		2008			2009		2008
	US$’000		US$’000			US$’000		US$’000
Current taxes arising in Hong Kong and the PRC:
For the period		1,031		(69	)		1,097		693
Deferred taxes arising in Hong Kong and the PRC:
For the period		233		866			699		627
		1,264		797			1,796		1,320

(b) Reconciliation from the expected income tax expenses calculated with reference to the average statutory tax rate in the PRC of 25% and 28% for the nine months ended June 30, 2009 and 2008 respectively is as follows:

	Three months ended  June 30,					Nine months ended  June 30,
	2009		2008			2009			2008
	US$’000		US$’000			US$’000			US$’000
Expected income tax expenses		751		1,510			1,980			3,376
Difference in tax rates in the countries that the Company operates		-		(10	)		5			4
Effect on tax incentives / holiday		-		(1,306	)		(915	)		(2,654	)
Tax-exempted / Non-deductible items		352		(121	)		66			(116	)
Withholding tax		144		710			643			710
Others		17		14			17			-
Income tax expenses		1,264		797			1,796			1,320

F-13

CH Lighting International Corporation

(formerly Sino-Biotics, Inc.)

Notes to and Forming Part of Unaudited Condensed Consolidated Financial Statements

For the nine months ended June 30, 2009 

6. RESTRICTED BANK BALANCES

The restricted bank balances as of June 30, 2009 and September 30, 2008 represented time deposits with original maturity between three and twelve months to secure banking facilities granted by various financial institutions as follows:

	As of June 30, 2009		(Audited) As of September 30, 2008
	US$’000		US$’000
Note payables		2,530		4,519
Bills financing		27,086		7,367
Banking facilities granted to a related party		2,922		4,428
		32,538		16,314

7. ACCOUNT RECEIVABLES, NET

Account receivables are presented net of an allowance for doubtful accounts of US$1,549,000 and US$337,000 as of June 30, 2009 and September 30, 2008 respectively.

8. INVENTORIES, NET

Inventories are consisted of the following:

	As of June 30, 2009		(Audited) As of September 30, 2008
	US$’000		US$’000
Raw materials		2,109		3,397
Work-in-progress and semi-finished goods		4,845		2,277
Finished goods		8,151		9,629
		15,105		15,303

F-14

CH Lighting International Corporation

(formerly Sino-Biotics, Inc.)

Notes to and Forming Part of Unaudited Condensed Consolidated Financial Statements

For the nine months ended June 30, 2009 

9.  PROPERTY, PLANT AND EQUIPMENT, NET

Property, plant and equipment are summarized as follows:

	As of June 30, 2009			(Audited) As of September 30, 2008
	US$’000			US$’000
Buildings		6,884			6,869
Plant and machinery		10,898			9,729
Motor vehicles		1,001			1,000
Furniture, fixtures and office equipment		1,210			1,167
Construction-in-progress		3,394			2,548
		23,387			21,313
Accumulated depreciation		(6,153	)		(4,995	)
		17,234			16,318

10.  BANK BORROWINGS AND OTHER LOANS

Bank borrowings and other loans are comprised of the following:

	Note			As of June 30, 2009		(Audited) As of September 30, 2008
				US$’000		US$’000
Short-term bank borrowings		10	(a)		79,301		50,849
Long-term interest-bearing loans		10	(b)		6,837		9,161
					86,138		60,010

F-15

CH Lighting International Corporation

(formerly Sino-Biotics, Inc.)

Notes to and Forming Part of Unaudited Condensed Consolidated Financial Statements

For the nine months ended June 30, 2009

10.  BANK BORROWINGS AND OTHER LOANS (CONTINUED)

(a) Short-term bank borrowings

Short-term bank borrowings are comprised of the following:

	Note	As of June 30, 2009		(Audited) As of September 30, 2008
		US$’000		US$’000
Short-term bank loans	10(a)(i)		46,020		38,814
Bills financing	10(a)(ii)		33,281		12,035
			79,301		50,849

(i) Short-term bank loans

Short-term bank loans represent amounts due to various banks which are due within 12 months. These loans can normally be renewed with the banks upon expiry/maturity.

The loans are collateralized by land use rights and buildings of the Company with carrying values as follows:

	As of June 30, 2009		(Audited) As of September 30, 2008
	US$’000		US$’000
Land use rights		860		887
Buildings		5,400		5,640
		6,260		6,527

Various parties have also issued guarantees against these short-term bank loans as follows:

	As of June 30, 2009		(Audited) As of September 30, 2008
	US$’000		US$’000
Guarantees issued by related parties		5,844		13,858
Guarantees issued by unrelated parties		36,436		30,922

The weighted average annual interest rates of the short-term bank loans were 6.25% and 6.41% as of June 30, 2009 and September 30, 2008 respectively.

F-16

CH Lighting International Corporation

(formerly Sino-Biotics, Inc.)

Notes to and Forming Part of Unaudited Condensed Consolidated Financial Statements

For the nine months ended June 30, 2009

10.  BANK BORROWINGS AND OTHER LOANS (CONTINUED)

(a) Short-term bank borrowings (Continued)

(ii) Bills financing

Bills financing represents amounts due to various banks which are repayable within six months from the date of issue. The bills are guaranteed by related parties and secured by restricted bank balances and other financial assets of the Company with carrying values as follows:

	As of June 30, 2009		(Audited) As of September 30, 2008
	US$’000		US$’000
Restricted bank balances		27,086		7,367
Other financial assets		-		2,918
Guarantees issued by related parties		3,214		-
		30,300		10,285

The weighted average annual interest rates of the bills financing were 1.41% and 5.69% as of June 30, 2009 and September 30, 2008 respectively.

(b) Long-term interest-bearing loans

Long-term interest-bearing loans are collateralized by machineries with net book values of US$3,690,000 and US$3,929,000 as of June 30, 2009 and September 30, 2008, respectively, and guaranteed by a third party and certain related parties.

The long-term interest-bearing loans are repayable as follows:

	As of June 30, 2009			(Audited) As of September 30, 2008
	US$’000			US$’000
Not exceeding 1 year		2,858			3,068
More than 1 year but not exceeding 5 years		3,979			6,093
		6,837			9,161
Portion classified as current liabilities		(2,858	)		(3,068	)
Long-term portion		3,979			6,093

The weighted average annual interest rates of the long-term interest-bearing loans were 5.11% and 6.81% as of June 30, 2009 and September 30, 2008 respectively.

F-17

CH Lighting International Corporation

(formerly Sino-Biotics, Inc.)

Notes to and Forming Part of Unaudited Condensed Consolidated Financial Statements

For the nine months ended June 30, 2009

11.  FINANCIAL INSTRUMENTS

The Company’s financial instruments include cash and cash equivalents, restricted bank balances, other financial assets, account receivables/payables, other receivables/payables, prepayments, note payables, accrued expenses and other liabilities, customer deposits, amount due from/to related parties and bank borrowings and other loans. The management has estimated that the carrying amount of those current financial instruments approximates their fair value due to their short-term nature. The fair value of those non-current financial instruments, as estimated based on the current rates offered to the Company for debt of similar terms and maturities, was not materially different from their carrying value as of June 30, 2009 and September 30, 2008.

12.  RELATED PARTY BALANCES

(a) Names and relationship of related parties:

	Existing relationships with the Company
Mr. Zhao	Director and controlling stockholder of CH Lighting
Ms. Gan Cai Ying (“Ms. Gan”)	Director of CH Lighting and spouse of Mr. Zhao
Shangyu Chenhui Childcare Products Company Limited (“CH Childcare”) *	Under common control of Mr. Zhao
Shaoxing Umbrella Factory (“SX Umbrella”) *	Under common control of Mr. Zhao
Shangyu Hecheng Plastic and Metal Products Company Limited (“Hecheng”)*	Under common control of Mr. Zhao
Shangyu Henghui Electronic Products Manufacturing Company Limited (“Henghui”) *	Under common control of Mr. Zhao
Zhejiang Chenhui Yingbao Childcare Products Company Limited (“Yingbao Childcare”) *	Under common control of Mr. Zhao

* These are direct translation of names in Chinese for identification purpose only and are not official names in English.

F-18

CH Lighting International Corporation

(formerly Sino-Biotics, Inc.)

Notes to and Forming Part of Unaudited Condensed Consolidated Financial Statements

For the nine months ended June 30, 2009

12.  RELATED PARTY BALANCES (CONTINUED)

(b)  Summary of balances with related parties:

	As of June 30, 2009			(Audited) As of September 30, 2008
	US$’000			US$’000
Due from related parties:
Ms. Gan		1,874			636
CH Childcare		154			154
Henghui		29,438			26,352
Yingbao Childcare		7,813			7,360
Hecheng		1,386			-
		40,665			34,502
Portion classified as current assets		(33,633	)		(7,058	)
Long term portion		7,032			27,444

The amounts due from related parties represent unsecured advances which were interest-free up to July 15, 2008 and repayable on demand. From July 16, 2008 onwards, the amounts carry variable interest at 1-3 Years Lending Rate offered by the People’s Bank of China plus 0.5% per annum. Interest shall be paid annually. During the nine months ended June 30, 2009, interest income of US$2,198,000 was recognized in the unaudited condensed consolidated statements of operations and comprehensive income. The Company plans to collect the outstanding amounts due as of June 30, 2009 gradually over the next two years. The estimated amount to be collected after one year is approximately US$7,032,000 (As of September 30, 2008: US$27,444,000).

	As of June 30, 2009		(Audited) As of September 30, 2008
	US$’000		US$’000
Due to related parties:
Mr. Zhao		-		3,203
SX Umbrella		25		25
Hecheng		-		398
		25		3,626

The amounts due to related parties represent unsecured advances which are interest-free and repayable on demand.

F-19

CH Lighting International Corporation

(formerly Sino-Biotics, Inc.)

Notes to and Forming Part of Unaudited Condensed Consolidated Financial Statements

For the nine months ended June 30, 2009

13.  COMMITMENTS AND CONTINGENCIES

(a) Operating lease commitments

The following table summarizes the approximate future minimum rental payments under non-cancelable operating leases in effect as of June 30, 2009 and September 30, 2008:

	As of June 30, 2009		(Audited) As of September 30, 2008
	US$’000		US$’000
Within one year		27		21
One to two years		15		15
Two to three years		15		15
Three to four years		15		15
Four to five years		15		15
Over five years		6		3
Total		93		84

(b) Capital commitments

As of June 30, 2009 and September 30, 2008, the Company had capital expenditure commitments for construction projects and purchase of machinery of approximately US$10,114,000 and US$3,343,000 respectively.

(c) Contingencies

As of June 30, 2009 and September 30, 2008, the Company had provided corporate guarantees of approximately US$4,382,000 and US$5,106,000, respectively, for revolving bank loans and notes drawn by unrelated company incorporated in the PRC (“Company A”).

The guarantee for Company A arose from the mutual negotiation between Zhejiang CH and Company A. Associated with the corporate guarantee, Company A also provided a cross guarantee for the bank facilities of Zhejiang CH. The guarantee was for bank loans and notes drawn by Company A and will be terminated upon mutual agreements between Zhejiang CH and Company A. If Company A defaults on the repayment of its bank loans or notes when they fall due, Zhejiang CH is required to repay the outstanding balance. There is no recourse or collateralization provision in the guarantee. As of June 30, 2009, the guarantee provided for the bank loans and notes drawn by Company A was approximately RMB30,000,000 or US$4,382,000 or US$0.04 per share of common stock outstanding (As of September 30, 2008: RMB35,000,000 or US$5,106,000 or US$0.05 per share of common stock outstanding), which is also the maximum potential amount of future payments under the guarantee as of June 30, 2009 and September 30, 2008.

F-20

CH Lighting International Corporation

(formerly Sino-Biotics, Inc.)

Notes to and Forming Part of Unaudited Condensed Consolidated Financial Statements

For the nine months ended June 30, 2009

13.  COMMITMENTS AND CONTINGENCIES (CONTINUED)

(c) Contingencies (Continued)

However, default by Company A is considered remote by the management. Based on the information available to the management, the fair values of the guarantees granted by the Company are considered not material and therefore no liability for the guarantor’s obligation under the guarantee recognized as of June 30, 2009 and September 30, 2008.

14.  RETIREMENT PLAN COSTS

Contributions to defined contribution retirement schemes are charged to general and administrative expenses in the unaudited condensed consolidated statements of operations and comprehensive income as and when the related employee services are provided as follows:

	Three months ended  June 30,				Nine months ended June 30,
	2009		2008		2009		2008
	US$’000		US$’000		US$’000		US$’000
Contributions to defined contribution retirement schemes		57		111		138		181

15.  SEGMENT INFORMATION

For the nine months ended June 30, 2009 and 2008, the entire revenue of the Company represented net sales of lighting source and lighting electronics products. No financial information by business segment is therefore presented.

The table below summarizes the customer base by geographic region:

	Three months ended  June 30,				Nine months ended  June 30,
	2009		2008		2009		2008
	US$’000		US$’000		US$’000		US$’000
China, including Hong Kong		4,092		17,576		17,410		39,819
Europe		1,806		2,007		6,201		4,908
Middle East		1,164		3,685		5,429		7,708
Korea		1,349		2,919		2,918		7,794
United States		155		278		293		684
Africa		39		99		122		362
Others		773		762		1,834		3,192
Total		9,378		27,326		34,207		64,467

Revenue is attributed to countries based on location of customers.

All long-lived assets are located in China, including Hong Kong.

F-21

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

Forward Looking Statements

The following discussion of the financial condition and results of operations of CH Lighting International Corporation (the “Company”) is based upon and should be read in conjunction with our unaudited condensed consolidated financial statements and their related notes included in this report. This report contains forward-looking statements. Generally, the words “believes”, “anticipates”, “may”, “will”, “should”, “expect”, “intend”, “estimate”, “continue” and similar expressions or the negative thereof or comparable terminology are intended to identify forward-looking statements. Such statements are subject to certain risks and uncertainties, including the matters set forth in this report or other reports or documents we file with the SEC from time to time, which could cause actual results or outcomes to differ materially from those projected. Undue reliance should not be placed on these forward-looking statements which speak only as of the date hereof. We undertake no obligation to update these forward-looking statements.

Prior Operations of the Company

The Company’s predecessor, Innovative Coatings, a Georgia corporation, ceased operations in June 2003.  On August 1, 2003, ICC Holdings Corp. was formed as a wholly-owned subsidiary of Innovative Coatings.  Also on August 1, 2003, Instachem Systems was formed as a wholly-owned subsidiary of ICC Holdings Corp. and ICC Merger Corp. was formed as a wholly-owned subsidiary of Instachem Systems.  On August 11, 2003, ICC Holdings Corp. merged with its parent company, Innovative Coatings, to change its U.S. state of incorporation from Georgia to Oklahoma.  On August 12, 2003, ICC Merger Corp. bought ICC Holdings Corp. A new corporation with ownership unrelated to the above, Sino-Biotics, Inc. was formed in Delaware on July 6, 2005.  On July 18, 2005, Instachem Systems sold ICC Merger Corp. to an individual for $500.  On July 19, 2005, Sino-Biotics, Inc. bought Instachem Systems. As a result of the above, the pre-existing creditors of the original operating entity, Innovative Coatings, were spun off through the sale of ICC Merger in July 2005.

The Share Exchange Transaction

On July 16, 2008 (the “Closing Date”), Sino-Biotics, Inc. entered into a Share Exchange Agreement (the “Exchange Agreement”) with CH International Holdings Limited, a British Virgin Islands investment holding company (“CH International”) and KEG International Limited, a British Virgin Islands company and the sole stockholder of CH International (the “Stockholder”). As a result of the share exchange, Sino-Biotics, Inc. acquired all of the issued and outstanding securities of CH International from the Stockholder in exchange for Ninety-Three Million (93,000,000) newly-issued shares of Sino-Biotics, Inc.’s common stock, par value $0.001 per share (“Common Stock”), representing seventy-seven and one half percent (77.5%) of the issued and outstanding Common Stock as of the Closing Date (the “Exchange”).  As a result of the Exchange, CH International became a wholly-owned subsidiary of Sino-Biotics, Inc.

            From its inception through the closing of the Exchange, the Company has not had any operations. Prior to the Exchange, the Company was considered a “blank check” company with US$500 in assets and with a net loss of approximately US$80,227 for the fiscal year ending September 30, 2007.  As of June 30, 2008, the Company had approximately US$21,900 in liabilities. As of July 16, 2008, the Company did not have any liabilities.

CH International, the wholly-owned and chief operating subsidiary of the Company, is an international investment holding company founded in the British Virgin Islands on April 30, 2004.  CH International’s wholly-owned operating subsidiaries are as follows: (a) Zhejiang Shaoxing CH Lamps Manufacturing Company (“CH Lamps”), a company organized under the People’s Republic of China (the “PRC”) on December 13, 1999; (b) Zhejiang CH Lighting Company Limited (“CH Lighting PRC”), a company organized under the laws of the PRC on September 27, 2000; (c) CH Lighting (Hong Kong) Limited, a company organized under the laws of Hong Kong on November 10, 2000 and a wholly-owned subsidiary of CH Lighting PRC (“CH Hong Kong”); and (d) Zhejiang CH Lighting Technology Company Limited, a company organized under the laws of the PRC on March 31, 2003 (“CH Technology”).

- 4 - -

CH International also owns ninety percent (90%) of Shangyu CH Laboratory Testing Company Limited, a company organized under the laws of the PRC on January 7, 2008 (“CH Lab”).

Our Common Stock is currently traded on the Over-The-Counter Bulletin Board (“OTCBB”) and on the Pink Sheets under the symbol “CHHN.OB”.

Current Operations of the Company (General Development of Business)

Introduction

CH Lamps manufactures and sells fluorescent lamp tubes, bulbs, luminaries and other decorative products. CH Lighting PRC currently manufactures and sells lighting products and luminaries (light fitting parts).  In order to increase our sales volume in the international market and upon approval by the PRC’s Ministry of Commerce in November 2005, CH Lighting PRC purchased CH Hong Kong, which is mainly engaged in the export trade and information technology services.  CH Technology manufactures and sells sterilized electronic appliances, lighting equipment and luminaries.  CH Lab was established on January 7, 2008 in the PRC and currently provides laboratory testing services for lighting sources and electronic products.

Summary of Current Business of the Company

The Company is dedicated to developing, manufacturing and selling healthy, energy-efficient, environmentally-friendly (green) and innovative high-end products and relevant services in the fluorescent lighting field. The Company offers ten (10) series and over 1,000 types of products, including “special light” sources, “general light” sources and luminaries for the home and for businesses (office buildings), and lighting electronics. The Company is one of the leading producers in China’s “special light” market, including product innovation, specification and sales. Currently, the Company has the product series most collected in the “Government Purchasing List of Energy-Saving Products” in China (a list of compulsory purchase items by which the Chinese government enforces the procurement of energy-efficient products by governmentaldepartments and local authorities).

The Company has three (3) major production facilities: CH Lighting PRC, CH Lamps and CH Technology, collectively covering 62,000m2, with floor area of 70,000m2, having fifteen (15) automatic light source production lines, capable of producing 120 million light sources and 17 million sets of  luminaries annually.

The Company has also established a Special Light Source Research Center in 2003 and a Light Source and Fitting Inspection and Development Laboratory in January 2008, of which the latter has been declared a state-accredited laboratory. Furthermore, the Company employs an external consulting team composed of over 21 professors and experts in the industry. The Company has 132 patents (including 25 patents pending) and is a participant as well as contributor to various China Lighting Industry Standards.

The Company has 32 established offices in China and has cooperative agreements with over 450 distributors in the Chinese market and over 380 foreign customers in the international market. The Company has established agents in Saudi Arabia and Belgium that distribute self-owned brands in the Middle East and in the European markets.  The Company is currently in the process of establishing agents in the United States.

Description of Company Business Segments

The Company is dedicated to developing, manufacturing and selling healthy, energy-saving, green and innovative high-end products and relevant services in the fluorescent lighting field. The Company sets very high and strict quality and environmental standards for all of our products.  Our revenues are mostly generated from the sales of our products in China and abroad.  For the most part, our sales are seasonal, with the first calendar quarter being the low season, in light of the Chinese New Year festivities, and the fourth calendar quarter being our peak season.

We are not required to carry significant amounts of inventory to meet rapid delivery requirements of our foreign customers as most of our foreign sales are “made to order” products. However, we are required to carry significantamounts of inventory to meet rapid delivery requirements of our domestic (Chinese) customers.  We have not experience serious problems with the quality of our products, therefore we do not provide extra warranties or guarantees to our customers unless they return the goods because of issues with quality.  The Company has standard payment terms and for the most part, it does not provide payment extensions to customers.

- 5 - -

A list of our products and services can be found in our Annual Report on Form 10-K as filed with the SEC on December 29, 2008 and on our website at http://chlighting.com.

Enterprise Marketing Strategy and Methods of Distribution

Domestic Marketing Strategy

The Company owns patents for special lighting lamps and currently holds a leading position in the Chinese domestic market. The Company’s sale of products has yielded positive results since 2006 when it entered the Chinese market. Set forth below are some key features of the Company’s domestic marketing strategy:

· Effective and Professional Sales Team. The Company is aware of the importance of effective and professional sales teams.  As a result, we recruit dynamic and enthusiastic personnel.  We offer a very competitive package and we provide full-scale trainings to continuously enhance our personnel’s performance. In addition to day-to-day sales training, the Company’s domestic marketing center holds Marketing Training Camp, hiring renowned teachers from Beijing and other places throughout the country to provide training courses designed to build a cohesive, creative, strong team with effective marketing skills.

· Expansion of Sales Network. The Company aims to continue to expand its domestic market share and improve points of sales. At present, it has 32 offices and has relationships with more than 450 distributors.

· Energy Savings and Emission Reduction.The Company aims to participate actively in government projects involving replacement and procurement of green lighting, group procurement of enterprises and institutions and bidding for major projects. The Company plans to establish contacts with provincial and municipal governments to promote its energy-saving products. Through the Company’s implementation of a corresponding discount policy, the Company plans to increase the intensity of cultivation in the market, making the design and concepts of its products fully recognized by channel partners, consumer groups and lighting designers. At the same time, consistent with national policies of energy-savings and emissions reduction, the Company shall fully utilize its advantage in advanced lighting technology to enhance development with innovative lighting design, to provide complimentary products and to accelerate the upgrading of products. The Company plans to continue to maintain extensive cooperation with key branded enterprises to ensure increasing orders from old customers and to develop new customers.

· Strengthen Brand Promotion. In order to continuously enhance our customers’ awareness, the Company aims to continue to collaborate with various media sources to promote its brand. It has established strategic cooperation with CCTV2 (China Television) and with the print media as well as purchased large-scale outdoor advertising on the Shanghai-Hangzhou and Hangzhou - Ningbo Expressways. The Company also plans to continue to maintain its professional website (http://chlighting.com), search engines and exhibitions in China and abroad to develop new customer groups. Furthermore, the Company plans to continue to employ the top products planning corporation in China (Guangzhou Zhonghe Jiuding Planning Company) as the Company’s products promotion planning consultant.

International Marketing Strategy

· Participating in International Lighting Fair. The Company currently participates in more than 10 exhibitions abroad annually, such as international lighting fairs in Hong Kong, Frankfurt, Nuremberg, New York, Las Vegas and Italy and plans to continue to do so. The Company continues to improve its influence and to expand its sales in the international market. The purpose of participation in the exhibitions is not only to contact new customers but also to exhibit the strength of the Company and its brand image.

- 6 - -

· International Market District Management. The global market of the Company is divided into several regions, including Europe, America, Asia and the Middle East. There is a sales team responsible for the promotion of our products and negotiation of the business arrangements in each regional market. The Company plans to adopt specific strategies and practices for each of the regional markets. 

· Brand Enterprise (Manufacturer) Cooperation. There are two (2) methods employed with respect to the manufacturing of our products. The first is “ODM”, whereby the structure, appearance and technical aspects of our products are developed and designed by the Company.  However after the completion of their development and production, such products are sold with trademarks of certain clients. These products are usually mass produced in accordance with the placement of orders by such clients. The other method is “OEM”, whereby our products are made in cooperation with certain third party enterprises such as GE Lighting, Sylvania, and other large multinational groups. For example, our plant growth lamp co-developed by the Company and Huazhong Agricultural University is sold in Europe, the United States and Australia. We have established cooperation with a number of large enterprises such as Interpet, Arcardia of Britain, Croci SpA of Italy, PENN-PLAX and SUNPARK of United States, AVK LIGHTING of Australia and Narva of Germany to develop the global market for plant growth lamps.

Product Sales Strategy (Domestic and International Sales)

Domestic Sales through Distributors

The Company entered the high-tech domestic Chinese lighting market in 2006. Currently, 32 offices exist in China, forming a three-level sales network in counties, cities and provinces, with point-of-sale locations across the country.  These contribute toward an efficient marketing system. Each office is responsible for providing professional services to its local dealers and consumers. The Company has implemented a regional distribution system in the Chinese domestic market, establishing long-term cooperative relationships with approximately 450 distributors. The Company builds up composite-end sales channels including franchise stores, lighting centers and counters to increase its market competitiveness.

International Sales through Distributors

The Company also implements its distribution system in the international market. In the Middle East, the Company has a regional agent in Saudi Arabia that is solely responsible for the product in the local Middle East market.  In the European market, the Company has a regional agent in Belgium who is in charge of regional marketing. The Company has also set up a branch in Hong Kong responsible for marketing the businesses to the Asia-Pacific region.

Domestic Replacement Market

In 2007, the size of China's domestic for the T8 halogen powder lamp was 1 billion lamps. Currently, as a result of the requirements for energy savings and emissions reduction policies, T8 halogen powder lamps are one of the main products which should be replaced. The total replacement market for T8 halogen powder lamps, which have an average useful life of about 2 years, is estimated to be not less than 2 billion sets per year. If 10% of the lamps are to be replaced, the replacement market would be at least 200 million per year. Users that are pressing for replacement of such lamps in China include manufacturing enterprises, large-scale commercial enterprises (especially supermarket chains and large stores), colleges and universities, primary and secondary schools and other educational institutions, hospitals, railway stations, airports, libraries and other public buildings and facilities, government agencies, institutions and office buildings.

Our T5-integrated conversion stand product (also known as the “Power-Saving Treasure”) is most suitable to replace the T8 halogen powder lamp and ballast without changing the original lamps, and can provide significant energy-saving benefits to users. It can be used as the energy-saving replacement for units, enterprises, schools, stores, supermarkets and hospitals.

- 7 - -

Since the Company offers energy-saving lighting products such as the “Power-Saving Treasure”, we believe that we have the competitive edge in the replacement market and the marketing model of “contract energy management” (as described below). The participation and engagement of the Company in energy-saving lighting rebuilding (and replacement) projects is an important growth point for the development of the Company. The Company has already begun to provide replacement services for users.  This has given us positive evaluations and a good reputation in the field of energy-saving lighting since 2005. Typical users include the following:

· Government Offices. In October 2007, the Company was the first domestic enterprise appointed by Zhongnanhai (General Office of the State Council) to rebuild energy-saving lighting systems at the central and state agencies held by the Government Offices Administration of the State Council. The first group of users included: Zhongnanhai (General Office of the State Council), the Ministry of Finance, Ministry of Commerce, Ministry of Information Industry, State General Administration of Quality Supervision and Inspection, State Administration of Work Safety Supervision, Ministry of Supervision, the State Tourism Administration, the State Meteorological Administration, the Chinese Academy of Sciences, the Chinese Academy of Social Sciences, the Legal Affairs Office of the State Council, the State Bureau for Letters and Calls and the China Law Society.

· Green Lighting Procurement Projects. Recently, the Ministry of Finance and the State Development and Reform Commission jointly held the "National Project to Promote Efficient Lighting Products Tender" whereby more than 30 well-known enterprises bid for projects.  The Company won several bids for projects in 2008 and 2009, including the Green Lighting Procurement Project of Central Government Departments under the CPC Central Committee.

· Primary and Secondary Schools. In 2006, the Company’s products achieved the top integrated score among the three most successful enterprises (the Company, Philips and Matsushita) involved in an energy-saving lighting rebuilding project of Beijing’s primary and secondary schools organized by the Beijing Municipal Development and Reform Commission. The Company’s products were used in the implementation of energy-saving lighting rebuilding in more than 300 primary and secondary schools in the Changping, Huairou, Shunyi and Mentougou Districts of Beijing.In September 2008, the Company was named as the designated supplier of Shanghai Primary and Secondary School Classrooms Light Environment Improvement Projects.  The first phase of delivery and installation for the project was completed in November 2008.

· Colleges, Universities and other Well-known Enterprises. In August 2008, the Company was named as the sole supplier of Tianjin Vocational College New Campus Lighting Purchasing Project for which a dozen of lighting manufacturers in China submitted bids. In addition, the Company also successfully won the energy-saving lighting products replacement purchasing projects of Visual Arts College of Fudan University, the Ningbo Wanli International Aristocratic School, the Chengdu Institute of Technology, Foxconn (Suzhou) Co., Ltd. and Suning Appliance Chain Store (Suzhou) Co., Ltd.

Domestic Direct Sales

The Company is one of the key lighting products suppliers to the Chinese government.  The government procurement market is an important part the Company's business development, and the Company has been very successful in such endeavors. For example, the Company is the only enterprise in the Chinese lighting industry that was awarded the China Energy-Saving Contribution Award for two (2) consecutive years. It has the highest number of series of products on the Chinese government’s procurement list of energy-saving products out of all lighting enterprises.  The Company is a leading company participating in the national efficient lighting products promotion project. In addition, the Company’s products were given the status of “State Inspection-free Qualification” in China.

- 8 - -

The Company has a leading position in product technology, product quality, product variety, energy saving and environmental protection. The Company has won national key projects of government procurement of rebuilding energy-saving lighting systems.  Additionally, it has won bids for major national projects, including:

· Beijing Olympic Project. The Olympic Park National Conference Center was the main press centre and international broadcast centre of 2008 Beijing Olympic Games. In November 2007, when the Olympic Park National Conference Center invited lighting brands in China and abroad to tender bids, the Company won the first place.

· Olympic Fire Command Center. The Company won the bid for Beijing lighting systems at the Olympic Fire Command Center.

· Construction of Infrastructure Projects. The Company has also won projects in public infrastructure such as the lighting system project of Beijing Subway Line 5, the lighting systems project of the People's Square in Shanghai’s subway system. At the same time, the Company has also won projects for offices, hotels, hospitals and other projects to provide lighting products and services.

· Chinese Government Procurement of Green Lighting Project. In March 2008, the Company successfully won the bid for the Chinese Government Procurement of Green Lighting Project as a result of which, the Company’s energy-saving lighting systems were installed in various governmental departments and agencies, including: the Organization Department of the Chinese Government, the Chinese Government Commission for Discipline Inspection, the National Federation of Trade Unions, International Liaison Department of the Chinese Government, and the People's Daily, among others. In addition, the Company also became the designated supplier of the energy-saving lighting systems replacement projects of State Administration for Industry and Commerce and State Administration of Taxation.

· Eleventh National Games Competition Venues and Training Facilities Procurement Project. On July 12, 2008, the Company successfully became a designated brand of the Eleventh National Games Competition Venues and Training Facilities Procurement Project.

· Guangzhou 2010 Asian Games Venue Construction Projects. In October 2008, the Company successfully became a qualified supplier for the Guangzhou Asian Games Venue Construction Projects.  

· Hangzhou Civic Center Lighting Project. In September 2008, the Company successfully won the Hangzhou Civic Center Lighting Project.  The Company was required to deliver and complete the project within one month.  The Hangzhou Civic Center opened in October 2008 as the largest municipal building in the Zhejiang Province.

International Direct Sales

Through ten (10) years of hard work, the Company’s products have obtained critical certifications in a number of countries (such as the EU's CE, TUV and GS, UL in the United States, South Korea’s KS and Saudi Arabia’s SASO) which have enabled the Company to create opportunities for ODM and OEM production for many large companies in the international market. Through ODM and OEM, the Company's products are sold to major multinational lighting enterprises. The Company plans to use the influence of its brand for self-owned brand sales in the international market and to increase sales for end-users.

- 9 - -

Results of Operations

Results of Operations For the Three (3) Months Ended June 30, 2009 Compared To The Three (3) Months Ended June, 2008

The following table sets forth a summary of certain key components of our results of operations for the periods indicated, in dollars and as a percentage of revenues.

	Three (3) Months Ended June 30
	2009		2008		2009			2008
Operating revenues	$	9,378,000	$	27,326,000		100.00	%		100.00	%
Cost of sales	$	(7,475,000)	$	(18,984,000)		(79.71)	%		(69.47)	%
Gross income	$	1,903,000	$	8,342,000		20.29	%		30.53	%
Selling, marketing and distribution expenses	$	(2,530,000)	$	(909,000)		(26.98)	%		(3.33)	%
General and administrative expenses	$	(2,131,000)	$	(1,339,000)		(22.72)	%		(4.90)	%
Operating (loss) income	$	(2,758,000)	$	6,094,000		(29.41)	%		22.30	%
Government subsidies income	$	6,064,000	$	73,000		64.66	%		0.27	%
Other income	$	4,000	$	33,000		0.04	%		0.12	%
Interest income	$	936,000	$	169,000		9.98	%		0.62	%
Interest expense	$	(1,243,000)	$	(747,000)		(13.25)	%		(2.73)	%
Income before income taxes	$	3,003,000	$	5,622,000		32.02	%		20.57	%
Income taxes expense	$	(1,264,000)	$	(797,000)		(13.48)	%		(2.92)	%
Net income	$	1,739,000	$	4,825,000		18.54	%		17.66	%
Net income attributable to non-controlling interests	$	-	$	-		-	%		-	%
Net income attributable to CH lighting International Corporation	$	1,739,000	$	4,825,000		18.54	%		17.66	%
Other comprehensive income	$	4,000	$	(4,000)		0.04	%		0.01	%
Comprehensive income	$	1,743,000	$	4,821,000		18.59	%		17.65	%

Operating Revenues

Operating Revenues for the three months ended June 30, 2009 decreased by US$17,948,000 or 65.68%, to US$9,378,000 compared to US$27,326,000 for the corresponding period in 2008. The decrease occurred as a result of (i) a drop in export sales due to the global recession, (ii) a slow down of PRC government procurement orders after the Olympic Games and (iii) a change in lighting incentive policies of the PRC government from indirect subsidies on unit price of energy saving lighting products to direct subsidy funds granted.

Cost of Sales

Cost of sales for the three months ended June 30, 2009 and 2008 were US$7,475,000 and US$18,984,000, respectively, and cost rates were 79.71% and 69.47%, respectively. The increase in cost rates occurred as a result of the Company’s implementation of a price reduction strategy since January 2009 in response to the global recession. The unit selling price of the Company’s products was cut by about 5% to 10% as compared with the corresponding period in 2008.

- 10 - -

Selling, Marketing and Distribution Expenses

Selling, marketing and distribution expenses for the three months ended June 30, 2009 and 2008 were US$2,530,000 and US$909,000, respectively. The increase occurred as a provision for the rebate to the distributors of US$1,860,000 was made for domestic sales for the three months ended June 30, 2009. No such provision was required in the corresponding period in 2008 as such rebate schemes commenced in December 2008.

General and Administrative Expenses

General and administrative expenses for the three months ended June 30, 2009 and 2008 were US$2,131,000 and US$1,339,000, respectively. This increase is primarily due to the fact that a provision for doubtful accounts of US$989,000 was made for the three months ended June 30, 2009 compared to a provision of US$203,000 in the corresponding period in 2008, which is partially offset by the Company’s cost saving plans implemented since January 2009 in response to the global recession.

Government Subsidies Income

Government subsidies income for the three months ended June 30, 2009 and 2008 was US$6,064,000 and US$73,000, respectively. The increase relates to the change in lighting incentive policies of the PRC government, from indirect subsidies on the unit purchase price of energy saving lighting products to direct subsidy funds granted.

Interest Income

Interest income for the three months ended June 30, 2009 and 2008 was US$936,000 and US$169,000, respectively. The increase relates to the recognition of interest income receivables from related parties of US$706,000for the three months ended June 30, 2009, compared to the corresponding period in 2008 as the relevant interest has been charged since July 16, 2008.

Interest Expense

Interest expense of US$1,243,000 for the three months ended June 30, 2009 was higher than the interest expense of US$747,000 which were incurred during the corresponding period in 2008. This increase reflects the increase in short term bank borrowings.

Net Income

For the three months ended June 30, 2009 and 2008, the Company realized a net income of US$1,739,000 and US$4,825,000, respectively.

Results of Operations for the Nine (9) Months Ended June 30, 2009 Compared To the Nine (9) Months Ended June 30, 2008

The following table sets forth a summary of certain key components of our results of operations for the periods indicated, in dollars and as a percentage of revenues.

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	Nine (9) Months Ended June 30
			2009		2008	2009		2008
Operating revenues		$	34,207,000	$	64,467,000	100.00	%	100.00	%
Cost of sales		$	(24,585,000)	$	(44,332,000)	(71.87)	%	(68.77)	%
Gross income		$	9,622,000	$	20,135,000	28.13	%	31.23	%
Selling, marketing and distribution expenses		$	(5,003,000)	$	(1,904,000)	(14.63)	%	(2.95)	%
General and administrative expenses		$	(4,180,000)	$	(4,024,000)	(12.22)	%	(6.24)	%
Operating income		$	439,000	$	14,207,000	1.28	%	22.03	%
Government subsidies income		$	8,005,000	$	369,000	23.40	%	0.57	%
Other income		$	24,000	$	63,000	0.07	%	0.10	%
Interest income		$	2,789,000	$	412,000	8.15	%	0.62	%
Interest expense		$	(3,335,000)	$	(2,993,000)	(9.75)	%	(4.64)	%
Income before income taxes		$	7,922,000	$	12,058,000	23.16	%	18.70	%
Income taxes expense		$	(1,796,000)	$	(1,320,000)	(5.25)	%	(2.05)	%
Net income		$	6,126,000	$	10,738,000	17.91	%	16.66	%
Net income attributable to non-controlling interests		$	-	$	-	-	%	-	%
Net income attributable to CH  lighting International corporation		$	6,126,000	$	10,738,000	17.91	%	16.66	%
Other comprehensive income		$	41,000	$	832,000	0.12	%	1.29	%
Comprehensive income		$	6,167,000	$	11,570,000	18.03	%	17.95	%

Operating Revenues

Operating Revenues for the nine months ended June 30, 2009 decreased by US$30,260,000, or 46.94%, to US$34,207,000 compared to US$64,467,000for the corresponding period in 2008. The decrease occurred as a result of (i) a drop in export sales due to the global recession, (ii) a slow down of PRC government procurement orders after the Olympic Games and (iii) a change in lighting incentive policies of the PRC government from indirect subsidies on unit price of energy saving lighting products to direct subsidy funds granted.

Cost of Sales

Cost of sales for the nine months ended June 30, 2009 and 2008 were US$24,585,000and US$44,332,000, respectively, and cost rates were 71.87% and 68.77%, respectively. The reduction in the unit selling price of the Company’s products since January 2009 is partly offset by improvement in the operation efficiency.

Selling, Marketing and Distribution Expenses

Selling, marketing and distribution expenses for the nine months ended June 30, 2009 and 2008 were US$5,003,000 and US$1,904,000, respectively. The increase occurred as a provision for the rebate to the distributors of US$2,848,000was made for domestic sales for the nine months ended June 30, 2009. No such provision was required in the corresponding period in 2008 as such rebate schemes commenced in December 2008.

- 12 - -

General and Administrative Expenses

General and administrative expenses for the nine months ended June 30, 2009 and 2008 were US$4,180,000and US$4,024,000, respectively. The increase is primarily due to the fact that a provision for doubtful accounts of US$1,211,000 was made for nine months ended June 30, 2009 compared to a provision of US$208,000 during the corresponding period in 2008, which is partially offset by the Company’s cost saving plans implemented since January 2009 in response to the global recession.

Government Subsidies Income

Government subsidies income for the nine months ended June 30, 2009 and 2008 was US$8,005,000 and US$369,000, respectively.  The increase is attributable to the change in lighting incentive policies of the PRC government, from indirect subsidies on the unit purchase price of energy saving lighting products to direct subsidy funds granted.

Interest Income

Interest income for the nine months ended June 30, 2009 and 2008 was US$2,789,000and US$412,000, respectively. The increase is attributable to the recognition of interest income receivables from related parties of US$2,198,000 for the nine months ended June 30, 2009. No such income was reported in the corresponding period in 2008 as the relevant interest has been charged since July 16, 2008.

Interest Expense

Interest expense for the nine months ended June 30, 2009 and 2008 was US$3,335,000and US$2,993,000, respectively. The increase is attributable to new short term bank loans raised during the period and partially offset by the drop in bank borrowing interest rates in the PRC.

Net Income

For the nine month periods ended June 30, 2009 and 2008, the Company realized a net income of US$6,126,000and US$10,738,000, respectively.

Liquidity and Capital Resources

We generally finance our operations through our operating profit and borrowings from banks.

During the reporting periods, we arranged a number of bank loans to satisfy our financing needs. As of the date of this report, we have not experienced any difficulty in raising funds through bank loans, and we have not experienced any liquidity problems in settling our payables in the normal course of business and repaying our bank loans when they fall due.

The following table sets forth the summary of our cash flows, in dollars, for the periods indicated:

	Nine (9) Months Ended June 30
	2009		2008
Net cash provided by operating activities	$	56,000	$	14,946,000
Net cash used in investing activities	$	(25,759,000)	$	(15,978,000)
Net cash provided by (used in) financing activities	$	28,967,000	$	(2,479,000)
Net increase (decrease) in cash and cash equivalents	$	3,264,000	$	(3,511,000)
Effect of exchange rate changes on cash	$	3,000	$	951,000
Cash and cash equivalents at beginning of the period	$	3,154,000	$	5,340,000
Cash and cash equivalents at end of the period	$	6,421,000	$	2,780,000

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We believe that the level of financial resources is a significant factor for our future development and accordingly, we may determine from time to time to raise capital through private debt or equity financing to strengthen the Company’s financial position, to expand our facilities and to provide us with additional flexibility to take advantage of business opportunities.  No assurances can be given that we will be successful in raising such additional capital on terms acceptable to us.

Operating Activities

China's domestic market is different from the export market in that the Company produces “made to order” products for the export market as opposed to the domestic market where the Company prepares a sufficient stock of goods to meet the needs of clients at any time.  Furthermore, the export market requires advance payment of 20% to 80% of the balance due prior to delivery.  On the other hand, the Company offers clients in the domestic market credit lines with usual payment terms equal to 90 days.

The decrease in the net cash provided by operating activities was mainly due to the changes in the net operating assets and liabilities which are analyzed as follows, in dollars, for the periods indicated:

		Nine (9) Months Ended June 30
		2009		2008
Account  receivables, net	$	5,078,000	$	(13,082,000)
Inventories, net	$	220,000	$	5,707,000
Prepayments	$	1,796,000	$	1,600,000
Other receivables	$	(9,430,000)	$	3,153,000
Account payables	$	(2,508,000)	$	7,189,000
Note payables	$	(1,467,000)	$	(9,000)
Accrued expenses and other accrued liabilities	$	1,477,000	$	(1,332,000)
Customer deposits	$	(1,601,000)	$	225,000
Income tax payables	$	778,000	$	(353,000)
Changes in operating assets and liabilities	$	(5,657,000)	$	3,098,000

Investing Activities

The increase in net cash used in investing activities was mainly due to the investment in restricted bank balances the changes to which are connected with changes in bank borrowings. The net cash used in investing activities is analyzed as follows, in dollars, for the periods indicated:

	Nine (9) Months Ended June 30
	2009		2008
Purchase of property, plant and equipment	$	(2,044,000)	$	(3,753,000)
Investment in restricted bank balances, net	$	(16,199,000)	$	(12,225,000)
Advance to related parties, net	$	(7,516,000)	$	-
Net cash used in investing activities	$	(25,759,000)	$	(15,978,000)

Financing Activities

The Company obtains financing for its operations and development mainly through short-term bank loans, long-term interest-bearing loans and bill financings. The increase in net cash provided by financing activities is analyzed as follows, in dollars, for the periods indicated:

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		Nine (9) Months Ended June 30
		2009		2008
Advance to related parties, net	$	-	$	(23,690,000)
Capital contribution to a subsidiary by its minority shareholder	$	-	$	64,000
Dividends paid	$	-	$	(1,419,000)
Proceeds from short-term bank loans	$	51,616,000	$	30,395,000
Repayment of short-term bank loans	$	(43,000,000)	$	(26,024,000)
Proceeds from bills financing, net	$	22,689,000	$	15,835,000
Proceeds from long-term interest-bearing loans	$	-	$	4,445,000
Repayment of long-term interest-bearing loans	$	(2,338,000)	$	(2,085,000)
Net cash provided by (used in) financing activities	$	28,967,000	$	(2,479 ,000)

Working Capital

Account Receivables and Allowance for Doubtful Accounts

The Company’s business operations are conducted in the PRC.  During the normal course of business, the Company extends unsecured credit to its customers.  The Company had gross accounts receivable balances of US$15,370,000 as of June 30, 2009 and US$19,208,000as of September 30, 2008, a decrease of 19.98%.

Management reviews accounts receivable on a regular basis to determine if the allowance for doubtful accounts is adequate.  An estimate for doubtful accounts is recorded when collection of the full amount is no longer probable.  The Company’s management has determined its allowance for doubtful accounts was US$1,549,000and US$337,000 as of June 30, 2009 and September 30, 2008, respectively.

Other Receivables

The Company had other receivables of US$13,529,000as of June 30, 2009 and US$4,093,000 as of September 30, 2008, an increase of 230.54%, which is mainly driven by the recognition of subsidy income receivable from the PRC government of US$5,867,000. TheUS$3,409,000 mainly represented deposits made to a financial institution for certain finance leases of the Company. 

Prepayments

The Company had prepayments of US$934,000 as of June 30, 2009 and US$2,724,000 as of September 30, 2008. The decrease of 65.71% was due to the fact that several pre-paid deposits for purchases of raw materials were utilized during the period.

Inventories

Inventories are stated at the lower of cost or market under the weighted average method.  Management reviews its inventory on a regular basis for possible obsolete goods or to determine if any reserves are necessary for potential obsolescence.

The Company had balances for inventories (net) of US$15,105,000as of June 30, 2009 and US$15,303,000 as of September 30, 2008, a decrease of 1.29%.  As of June 30, 2009, the Company had determined that no reserves are necessary.

	As of  June 30,  2009		As of  September 30,  2008
Raw materials	$	2,109,000	$	3,397,000
Work-in-progress and semi-finished goods	$	4,845,000	$	2,277,000
Finished goods	$	8,151,000	$	9,629,000
Total inventories	$	15,105,000	$	15,303,000

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Cash and Cash Equivalents

The Company had cash and cash equivalents of US$6,421,000 as of June 30, 2009 and US$3,154,000 as of September 30, 2008, an increase of 103.58%.

Trade and Note Payables

The Company had trade and note payables of US$22,719,000 as of June 30, 2009 and US$26,654,000 as of September 30, 2008. The decrease of 14.76% was due to the reduction of the operating activities of the Company.

Accrued Expenses and Other Liabilities

The Company had accrued expenses and other liabilities of US$2,503,000 as of June 30, 2009, and US$1,024,000 as of September 30, 2008. The increase of 144.43% was due to a provision for sales rebates of US$1,468,000 as of June 30, 2009.

Capital Expenditures

The Company had property, plant and equipment (net) equal to US$17,234,000 as of June 30, 2009 and US$16,318,000 as of September 30, 2008.  The increase in assets was due to an increase in production capacity.

	As of  June 30,  2009		As of  September 30,  2008
Buildings	$	6,884,000	$	6,869,000
Plant and machinery	$	10,898,000	$	9,729,000
Motor vehicles	$	1,001,000	$	1,000,000
Furniture, fixtures and office equipment	$	1,210,000	$	1,167,000
Construction-in-progress	$	3,394,000	$	2,548,000
Accumulated depreciation	$	(6,153,000)	$	(4,995,000)
Property, plant and equipment	$	17,234,000	$	16,318,000

The Company had balances for long-term land lease prepayments (net) of US$860,000 and US$887,000 as of June 30, 2009 and September 30, 2008, respectively.

Off-Balance Sheet Arrangements

Financial Guarantees

The Company entered into cross financial guarantee contracts with unrelated third parties in the ordinary course of business. The maximum potential amount of future payments under these guarantees is as follows:

	As of  June 30,  2009		As of  September 30,  2008
Financial guarantees	$	4,382,000	$	5,106,000

- 16 - -

The Company does not have any variable interest in any unconsolidated entity that provides financing, liquidity, market risk or credit support to the Company or engages in leasing, hedging or research and development services with the Company.

Capital Commitments

As of June 30, 2009 and September 30, 2008, the Company had capital expenditure commitments for construction projects and purchases of machinery of approximately US$10,114,000 and US$3,343,000,   respectively.

Operating Lease Commitments

The following table summarizes rental payments under non-cancelable operating leases:

		As of  June 30,  2009		As of  September 30,  2008
Within one (1) year	$	27,000	$	21,000
2–3 years	$	30,000	$	30,000
4–5 years	$	30,000	$	30,000
Over five (5) years	$	6,000	$	3,000
Total operating lease obligations	$	93,000	$	84,000

Long Term Bank Indebtedness

The long-term interest-bearing loans are repayable as follows:

	As of  June 30,  2009		As of  September 30,  2008
Within one (1) year	$	2,858,000	$	3,068,000
2–3 years	$	3,979,000	$	6,093,000
Total  long term bank indebtedness	$	6,837,000	$	9,161,000

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

RMB Appreciation

The Company believes that inflation has not had a material effect on its operations to date.  However, continued appreciation of the RMB against the U.S. Dollar and its effect on the Company's export business, could have a material adverse effect on the Company.  In the even of a material adverse effect on the Company, our strategy would be to reduce our reliance on exports and to increase domestic sales.

Non-Tariff Technical Trade Barriers Could Have a Materially Adverse Effect on our Exporting Business

Non-tariff technical trade barriers imposed by governments such as the European Unions’s EuP Directive, could adversely affect our export business.  In response to the EuP Directive, the Company has launched a project to evaluate the impact of our products on the environment during each stage of a product’s life, from design, material procurement and manufacture, to maintenance, recovery and treatment.  This project conforms with the trend of reducing resource consumption and pollution as laid out in the EuP Directive.

- 17 - -

The Development of High-Tech Products Takes a Long Time and There Are Many Uncertainties in the Process

The special light source products developed by the Company are an innovation in the industry.  As a result there might be unpredictable or presently unavoidable technical flaws in the product, or the new products may not fit into the market demand.  Either way, the new products might not be able to enter mass production and be sold in the markets.  To avert such a risk, the Company has set up a new products decision committee and has hired senior experts in China to better oversee and grasp the developmental tendencies of the industry.  Prior to the development and trial of new products, we plan on conducting systematic and in-depth research to find market space and identify technical problems and key targets for breakthrough.

Theft of our Key Technologies Could Have a Material Adverse Effect on the Company’s Business and Development

To avert the risk of theft of our technologies, the Company uses management measures, such as performance bonuses and other project rewards, to maintain the stability of its technical team.  The Company (and its subsidiaries) also has in place confidentiality agreements with certain technical employees to prevent leakage of core technologies.

ITEM 4. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rule 13a-15(e) under the Exchange Act. Based on this evaluation, our management, including our principal executive officer and our principal financial officer, concluded that our disclosure controls and procedures were effective as of the fiscal quarter covered by this report, to ensure that information required to be disclosed by us in the reports filed or submitted by us under the Exchange Act (i) is recorded, processed, summarized and reported within the time period specified in SEC rules and forms, and (ii) is accumulated and communicated to our management, including our principal executive officer and our principal financial officer, as appropriate to allow appropriate decisions on a timely basis regarding required disclosure.

Internal Control over Financial Reporting

There were no changes in internal control over financial reporting that occurred during the fiscal quarter covered by this report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II

OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

In the normal course of business, we are named as defendant in lawsuits in which claims are asserted against us. In our opinion, the liabilities, if any, which may ultimately result from such lawsuits, are not expected to have a material adverse effect on our financial position, results of operations or cash flows. As of June 30, 2009, there was no pending or outstanding material litigation with the Company.

ITEM 1A. RISK FACTORS

Not required for a "smaller reporting company".

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ITEM 2. UREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

During the quarter ended June 30, 2009, the Company had no unregistered sales of equity securities.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITYHOLDERS

None.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS

(a) Exhibits:

EXHIBIT NO.	DESCRIPTION	LOCATION
2.1	Agreement and Plan of Reorganization regarding the merger of Innovative Coatings Corporation with and into ICC Holdings Corp.	Incorporated by reference to Instachem Systems, Inc.’s Current Report as filed with the SEC on August 29, 2003
2.2	Stock Purchase Agreement, by and between David Lennox and Instachem Systems, Inc.	Incorporated by reference to Exhibit 2.2 to the Company’s Annual Report on Form 10-KSB as filed with the SEC on January 20, 2006
2.3	Agreement and Plan of Merger between Instachem Systems, Inc. and Sino-Biotics, Inc.	Incorporated by reference to Exhibit 2.3 to the Company’s Annual Report on Form 10-KSB as filed with the SEC on January 20, 2006
2.4	Share Exchange Agreement, dated July 16, 2008, by and among Sino-Biotics, Inc., KEG International Limited and CH International Holdings Limited	Incorporated by reference to Exhibit 2.4 to the Company’s Current Report on Form 8-K as filed with the SEC on July 16, 2008
3.1	Certificate of Incorporation of Sino-Biotics, Inc.	Incorporated by reference to Exhibit 3.4 to the Company’s Annual Report on Form 10-KSB as filed with the SEC on January 20, 2006
3.2	Certificate of Amendment to Certificate of Incorporation of Sino-Biotics, Inc.	Incorporated by reference to Exhibit 3.5 to the Company’s Annual Report on Form 10-KSB as filed with the SEC on January 20, 2006
3.3	Restated Certificate of Incorporation of Sino-Biotics, Inc.	Incorporated by reference to Exhibit 3.6 to the Company’s Annual Report on Form 10-KSB as filed with the SEC on January 20, 2006
3.4	Certificate of Amendment to Certificate of Incorporation of Sino-Biotics, Inc. dated December 13, 2008 (increase of authorized shares).	Incorporated by reference to Exhibit 3.5 to the Company’s Current Report on Form 8-K as filed with the SEC on July 16, 2008
3.5	Memorandum and Articles of Associationof CH International Holdings Limited	Incorporated by reference to Exhibit 3.6 to the Company’s Current Report on Form 8-K as filed with the SEC on July 16, 2008
3.6	Amended and Restated Bylaws of CH Lighting International Corporation, effective as of August 25, 2008	Incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K as filed with the SEC on August 26, 2008
14.1	Code of Ethics	Incorporated by reference to the Company’s Annual Report on Form 10-K as filed with the SEC on December 29, 2008

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16.1	Auditor Letter, dated August 25, 2008	Incorporated by reference to the Company’s Annual Report on Form 10-K as filed with the SEC on December 29, 2008
21	List of Subsidiaries of CH Lighting International Corporation	Incorporated by reference to Exhibit 21 to the Company’s Current Report on Form 8-K as filed with the SEC on July 16, 2008
31.1	Certifications of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	Provided herewith
31.2	Certifications of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	Provided herewith
32.1	Certification Pursuant To 18 U.S.C. Section 1350, As Adopted Pursuant To Section 906 of the Sarbanes-Oxley Act Of 2002	Provided herewith
32.2	Certification Pursuant To 18 U.S.C. Section 1350, As Adopted Pursuant To Section 906 of the Sarbanes-Oxley Act Of 2002	Provided herewith
99.1	Audit Committee Charter	Incorporated by reference to Exhibit 99.1 to the Company’s Current Report on Form 8-K as filed with the SEC on August 26, 2008
99.2	Compensation Committee Charter	Incorporated by reference to Exhibit 99.2 to the Company’s Current Report on Form 8-K as filed with the SEC on August 26, 2008
99.3	Corporate Governance and Nominating Committee Charter	Incorporated by reference to Exhibit 99.3 to the Company’s Current Report on Form 8-K as filed with the SEC on August 26, 2008

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SIGNATURES

Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this Quarterly Report on Form 10-Q report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date:    August 14 , 2009	By:	/s/ Zhao Guosong
		Name: Zhao Guosong
		Its: President, Chief Executive Officer and Principal Executive Officer
Date:    August 14, 2009	By:	/s/ Huang Hsiao-I
		Name: Huang Hsiao-I
		Its: Chief Financial Officer, Corporate Secretary, Principal Financial and Accounting Officer

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