Asia Electrical Power International (AEPW) 10-Q 2010 Q1 Quarterly report

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

o QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2010

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                    to                    .

Asia Electrical Power International Group Inc.

(Exact name of registrant as specified in Charter)

NEVADA	0-51787	98-0522960
(State or other jurisdiction of incorporation or organization)	(Commission File No.)	(IRS Employee Identification No.)

E-4, Floor 3, Haijin Square
Taizi Road, Nanshan District, Shenzhen, PRC 518067

(Address of Principal Executive Offices)

86 755 2823 1993

(Issuer Telephone number)

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.þ Yeso No

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).o Yeso No

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

Large Accelerated Filer o Accelerated Filer o  Non-Accelerated Filer o
(Do not check if a smaller reporting company) Smaller Reporting Company þ

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

State the number of shares outstanding of each of the issuer’s classes of common equity, as of June 14, 2010: 51,959,693 shares of common stock and 5,000,000 shares of preferred stock.

TABLE OF CONTENTS

	PART I — FINANCIAL INFORMATION
	Item 1. Financial Statements.
	Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
	Item 3. Quantitative and Qualitative Disclosures about Market Risks
	Item 4. Controls and Procedures
	PART II — OTHER INFORMATION
	Item 1. Legal Proceedings.
	Item 1A. Risk Factors.
	Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
	Item 3. Defaults Upon Senior Securities.
	Item 5. Other Information.
	Item 6. Exhibits
	SIGNATURES
EX-31.1
EX-31.2
EX-32

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements.

ASIA ELECTRICAL POWER INTERNATIONAL GROUP INC.
CONSOLIDATED BALANCE SHEETS

	March 31, 2010		December 31, 2009
	(Unaudited)		(Audited)
ASSETS
Current Assets:
Cash	$	2,893,551	$	3,013,027
Accounts receivables		4,898,291		5,381,315
Other receivables		154,576		161,290
Advances to suppliers		54,101		81,340
Inventory		3,027,837		2,851,726
Total current assets		11,028,356		11,488,698
Fixed Assets:
Land use right		2,711,375		2,727,123
Property plant & Equipment		7,937,991		4,945,096
		10,649,366		10,540,107
Less accumulated depreciation		1,558,822		1,449,790
Net fixed assets		9,090,544		9,090,317
Other Assets:
Deposits		657,619		554,345
Total other assets		657,619		554,345
Total Assets	$	20,776,519	$	21,133,360
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Accounts payable	$	5,611,987	$	5,935,828
Advances from customers		664,934		545,739
Accrued liabilities		270,978		713,579
Other liabilities		553,503		195,643
Convertible Note Payable		1,436,996		1,400,833
Total current liabilities		8,538,398		8,791,622
Stockholders’ Equity:
Common stock: authorized 150,000,000 shares of $0.001 par value; issued and outstanding 51,959,693 shares		51,960		51,960
Preferred stock: authorized 5,000,000 shares of $0.001 par value; issued and outstanding 5,000,000 shares		5,000		5,000
Capital in excess of par value		11,154,789		11,154,789
Accumulated deficit		11,119		94,546
Earnings appropriated for statutory reserves		183,749		183,749
Accumulated other comprehensive income		853,742		851,694
Total Stockholders’ equity		12,238,121		12,341,738
Total Liabilities and Stockholders’ Equity	$	20,776,519	$	21,133,360

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

2

ASIA ELECTRICAL POWER INTERNATIONAL GROUP INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three Month Periods Ended March 31, 2010 and 2009
(Unaudited)

	2010			2009
Revenue	$	3,536,923		$	2,079,282
Cost of Sales		2,830,142			1,702,321
Gross Profit		706,781			376,961
Selling and Administrative Expenses		773,216			495,160
Operating Loss		(66,435	)		(118,199	)
Other Income( Expense):
Interest Expense		(37,433	)		(38,006	)
Interest Income		1,468			2,310
Other Expense		(1,463	)		(5,831	)
Other Income		33,830			31,993
Net other income (expense)		(3,598	)		(9,534	)
Income before Income Taxes		(70,033	)		(127,733	)
Provision for Income Taxes:		35,632
Net Loss for the Period		(105,665	)		(127,733	)
Other Comprehensive Income: —
Foreign Currency Translation Adjustments		2,048			13,032
Total Comprehensive Loss	$	(103,617	)	$	(114,701	)
Income Per Common Share —
Basic and Diluted		($0.00	)		($0.00	)
Weighted Average Number of Shares Outstanding		51,959,693			51,959,693

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

3

ASIA ELECTRICAL POWER INTERNATIONAL GROUP INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Three Month Periods Ended March 31, 2010 and 2009

(Unaudited)

	2010			2009
CASH FLOWS FROM OPERATIONS:
Net loss	$	(105,665	)	$	(127,733	)
Adjustments to reconcile net loss to cash flows provided by operating activities:
Charges not requiring the outlay of cash:
Depreciation and amortization		147,151			109,909
Amortization of discount on convertible note		(36,163	)		(36,163	)
Changes in assets and liabilities:
Decreases in accounts receivable		483,895			20,753
Decrease(increase) in other receivables		6,740			(10,858	)
Decrease in advances to suppliers		27,253			24,282
(Increase)decrease in inventory		(175,654	)		468,257
Decreases in accounts payable		(324,670	)		(206,195	)
Increase (decrease) in advances from customers		119,109			(5,238	)
Increase( decrease) in other payable		357,537			(30,504	)
(Decrease)increase in accrued liabilities		(442,720	)		11,523
Net Cash Provided by Operating Activities		129,139			290,359
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of fixed assets		(145,915	)		(8,150	)
Return of guarantee deposit		0			203,029
Increases in deposits		(103,186	)		(213,642	)
Net Cash Consumed By Investing Activities		(249,101	)		(18,763	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments of loans		—			(201,346	)
Net Cash Consumed by Financing Activities		—			(201,346	)
Effect of exchange rates on cash		486			3,981
Net change in cash		(119,476	)		74,231
Cash balance, beginning of period		3,013,027			3,013,900
Cash balance, end of period	$	2,893,551		$	3,088,131

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

4

ASIA ELECTRICAL POWER INTERNATIONAL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2010
(Unaudited)

1. BASIS OF PRESENTATION

The audited interim financial statements of Asia Electrical Power International Group Inc. (“the Company”) as of March 31, 2010 and 2009 and for the three month periods ended March 31, 2010 and 2009, have been prepared in accordance with United States generally accepted accounting principles. In the opinion of management, such information contains all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the results for such periods. The results of operations for the quarter ended March 31, 2010 are not necessarily indicative of the results to be expected for the full fiscal year ending December 31, 2010.

Certain information and disclosures normally included in the notes to financial statements have been condensed or omitted as permitted by the rules and regulations of the Securities and Exchange Commission, although the Company believes the disclosure is adequate to make the information presented not misleading. The accompanying unaudited financial statements should be read in conjunction with the financial statements of the Company for the year ended December 31, 2009.

2. INCOME TAXES

The Company was granted a 50% exemption from income taxes for the years 2009 and 2010. Such exemptions are available to Chinese enterprises classified as foreign investment companies.

3. SUPPLEMENTAL DISCLOSURE OF CASH FLOWS INFORMATION

The Company did not make any cash payments of either interest or income taxes during the three month periods ended March 31, 2010 or 2009.

There were no non cash financing or investing transactions during either of the periods presented.

5

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Cautionary Notice Regarding Forward Looking Statements.

We desire to take advantage of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. This filing contains a number of forward-looking statements which reflect management’s current views and expectations with respect to our business, strategies, products, future results and events, and financial performance. All statements made in this filing other than statements of historical fact, including statements addressing operating performance, events, or developments which management expects or anticipates will or may occur in the future, including statements related to distributor channels, volume growth, revenues, profitability, new products, adequacy of funds from operations, statements expressing general optimism about future operating results, and non-historical information, are forward looking statements. In particular, the words “believe,” “expect,” “intend,” “anticipate,” “estimate,” “may,” variations of such words, and similar expressions identify forwarding-looking statements, but are not the exclusive means of identifying such statements, and their absence does not mean that the statement is not forward-looking. These forward-looking statements are subject to certain risks and uncertainties, including those discussed below. Our actual results, performance or achievements could differ materially from historical results as well as those expressed in, anticipated, or implied by these forward-looking statements. We do not undertake any obligation to revise these forward-looking statements to reflect any future events or circumstances. Readers should not place undue reliance on these forward-looking statements, which are based on management’s current expectations and projections about future events, are not guarantees of future performance, are subject to risks, uncertainties and assumptions (including those described below), and apply only as of the date of this filing. Our actual results, performance or achievements could differ materially from the results expressed in, or implied by, these forward-looking statements. Factors which could cause or contribute to such differences include, but are not limited to, the risks to be discussed in our next Annual Report on Form 10-K and in the press releases and other communications to shareholders issued by us from time to time which attempt to advise interested parties of the risks and factors which may affect our business. We undertake no obligations to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.

Background

Asia Electrical Power International Group Inc.(“AEPW”)was incorporated in the State of Nevada on August 30, 2002 as “Berita International Corporation.” On December 24, 2003, we changed our name to “Keiji International Group Inc.” and on September 30, 2004, we changed our name to “Asia Electrical Power International Group Inc.”

On January 23, 2003, we entered into an Asset and Share Exchange Agreement (the “Agreement”) with Shenzhen Naiji Electrical Equipment Co., Ltd. (“Naiji”), a PRC company whereby we acquired all the issued and outstanding stock of Naiji for consideration of 24,000,000 shares of our common stock.

The shareholders of Naiji unanimously approved the Agreement for the purpose of restructuring itself in anticipation of becoming listed on the OTC Bulletin Board. AEPW was formed by Naiji for this purpose. As a result, Naiji became our wholly-owned subsidiary. Prior to entering into the Agreement, we had no assets, liabilities, equity and had not issued any of our shares. In PRC, corporate ownership is determined by each shareholder’s proportionate capital contribution. As a result of entering into the Agreement, the shareholders of Naiji became the shareholders of AEPW in equal proportions wherein the 24,000,000 shares were allocated based on the capital contributions, or ownership, of Naiji. The Agreement therefore was a non-arms length transaction.

Naiji has produced high and mid-voltage electrical switchgears since its inception in 1997.

For the year ended December 31, 2009, we generated a pre-tax income of $553,733 compared with a pre-tax net income of $64,075 for the 2008 fiscal year end period.

6

Recent Events

On December 4, 2009, we filed a Schedule 13E-3 Transaction Statement including a Preliminary Information as an Exhibit with the Securities and Exchange Commission (“SEC”) in connection with the approval by the board of directors of a reverse stock split of one share for each 500 shares of the Company’s common stock presently issued and outstanding. The purpose of the reverse stock split is to reduce the number of stockholders of the Company as part of a process to permit the Company to terminate operating as a “reporting company” under the Securities Exchange Act of 1934 because of the disproportionate expense in remaining a “public company” compared with any benefits the Company receives as a result thereof. A Definitive Schedule 14C Information Statement will be sent or made available to all stockholders before the Company carries out the reverse stock split. No proxies are being solicited in connection with this transaction since stockholders holding approximately 70.8% of the issued and outstanding common stock of the Company have voted in favor of the reverse stock split.

We intend to carry out the reverse stock split by filing an amendment to our Articles of Incorporation with the Secretary of State of Nevada after the SEC approves the transaction disclosure documents and we complete the dissemination of transaction information materials to our stockholders. We also intend to file a final Schedule 13E-3 Transaction Statement and a Form 15 Certification and Notice of Termination of Registration with the SEC in order to effect the voluntary deregistration of our common stock after the reverse stock split is completed. For more information regarding the reverse stock split, please see our Schedule 13E-3 Transaction Statement, as amended, and the exhibits thereto, and Schedule 14C Preliminary Information Statement and the exhibits thereto, all of which were filed on March 11, 2010.

Results of Operations

March 31, 2010, compared to March 31, 2009

Revenues

	Three months ended					Three months ended
	March 31, 2010		% Sales			March 31, 2009		% Sales
Revenue	$	3,536,923		100	%	$	2,079,282		100	%
Cost of Sales		2,830,142		80	%		1,702,321		82	%
Gross Profit	$	706,781		20	%	$	376,961		18	%

Our revenues for the three months ended March 31, 2010 were $3,536,923, which represents an increase of $1,457,641 (or 70.1% which includes the effectiveness of the exchange rate) from revenues of $2,079,282 for the comparable 2009 period. The increase in revenues reflects further market penetration and the economic recovery.

Cost of Sales for the three month period in 2010 was $2,830,142, which represents an increase of $1,127,821 (or 66.2%) from $1,702,321 for the comparable 2009 period. The increase in cost of sales reflects the corresponding increase in sales for the period. Gross profit for the 2010 period was $706,781 representing an increase of $329,820 or $87.5% from $376,961 for the comparable period in 2009. The increase in gross profit is attributable to the increase in revenues for the 2010 period.

Selling and Administrative Expenses

Selling and administrative expenses (which includes salaries and benefits, depreciation and amortization, travel and promotion, technical support and related overhead, among other charges) for the 2010 three month period were $773,216, which represents an increase of $278,056 (or 56%) from $495,160 for the prior year period. The increase

7

in selling and administrative expenses for the 2010 three month period was due principally to the $350,000 executive salaries and bonuses paid to the Company’s CEO, Secretary and CFO in 2010 period compared to $0 for the 2009 period, offset by a decrease of $75,244 in salaries, benefit and dues. Additional changes include research & development expenses ($6,795 for the 2010 period compared with $25,318 for the 2009 period), technology support ($12,469 for the 2010 period compare with $8,418 for the 2009 period), automotive expense ($21,257 for 2010 period compared with $13,206 for the 2009 period), office and utilities ($22,604 for the 2010 period and $21,859 for 2009 period), bad debt expense (expense of $63 for the current period versus a prior year expense of $510), travel and promotion ($67,537 for the 2010 period compared with $62,790 for the 2009 period), depreciation ($68,072 for the 2010 period compared with $63,876 for the 2009 period), and other miscellaneous charges ($74,567 for the 2010 period compared with $74,008 for the 2009 period).

During the 2010 first three month period: the increase in transportation was attributed to the increase in sales; the salaries and bonuses in the first quarter of 2009 include $92,305 annual bonuses for the fiscal year 2008; additional depreciation for our new facilities, raised staff benefits and cost for a recruiter, in addition to the increased fuel expenses caused by increase gasoline price, are the main reasons for the increase in general and administrative expenses.

Operating Loss

During the first three months of 2010, we had an operating loss of $66,435 compared with an operating loss of $118,199 for the comparable period in 2009, due to the reasons discussed above.

Other Income (Expense)

The net amount of other income (expense) was $3,598 for the 2010 three month period compared with net expenses of $9,534 for the comparable 2009 period. The increase in other income (expense) for the 2010 three month period was due primarily to a reduction in the other expense category.

Income Taxes

We provided for income tax of $35,632 in the first quarter in 2010 compared with $0 in the same period of 2009. We did not pay income tax in 2009 because we recorded a net loss in the fiscal year 2008.

Income before Income Taxes, Net Income for the Period, Total Comprehensive Income, and Loss Per Common Share

For the 2010 first three month period, we had a loss before income tax of $70,033 compared with a loss of $127,733 for the comparable period in 2009. During the 2010 three month period, we also made a provision for income taxes of $35,632, compared with a provision of $0 for the comparable period in 2009.

Our net loss for the 2010 three month period was $105,665, compared with the net loss of $127,733 for the comparable period in 2009. Foreign currency translation adjustments, which are the impact of different foreign exchange rates applied to the balance sheet and income statement, were a gain of $2,048 for the 2010 three month period, compared to a gain of $13,032 for the same period in 2009. Total comprehensive loss of $103,617 for the first three months of 2010 compares with total comprehensive loss of $114,701 for the same period in 2009. Loss per Common Share for the three months ended March 31, 2010 and March 31, 2009 was less than $0.01 per share.

8

Current Trends in the Industry

With new developments in rural areas, the PRC will be accepting bids to service such areas to establish electrical networks. We anticipate such new developments may potentially increase our sales by 20% during fiscal 2010. A majority of our sales are generated through referrals from existing customer base. However with these new developments, we expect a substantial amount of our sales to be generated by fulfilling PRC contract bids to service rural areas in 2010.

Liquidity and Capital Resources

As of March 31, 2010, we had working capital of $2,489,958 compared to working capital of $2,697,076 as of December 31, 2009. The decrease is due principally to the decrease in accounts receivable, decrease of cash reserve and the increases in other liabilities and advances from customers, partially offset by decreases in accrued liabilities and accounts payable.

Over the next three months, we will require approximately $3,080,000 to sustain our working capital needs as follows, based on projected sales of $4,000,000:

Materials, Labor, Overhead	$	2,460,000
Selling Expenses and Administrative Expenses	$	620,000
Total	$	3,080,000

Sources of Capital

We expect our revenues generated from operations to cover our projected working capital needs; however, if additional capital is needed, we will explore financing options such as shareholder loans. Shareholder loans are without stated terms of repayment. In the past, we have been charged interest at the rate of 6% per annum. We have no formal agreement that ensures that we will receive such loans. In the event shareholder loans are not available, we may seek long or short term financing from local banks.

We do not have any credit facilities with any lender.

Material Commitments

We do not have any material commitments for capital expenditures.

Seasonal Aspects.

Our business is seasonal in that sales are particularly low in February, due to the Chinese New Year holiday, during which time our business is closed up to 2 weeks. Sales in March are usually higher than usual levels as a result.

Off Balance Sheet Arrangements.

We have no off balance sheet arrangements.

9

CRITICAL ACCOUNTING POLICIES, JUDGMENTS AND ESTIMATES.

Critical Accounting Estimates.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect certain reported amounts and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. The application of GAAP involves the exercise of varying degrees of judgment. The resulting accounting estimates will not always precisely equal the related actual results. Management considers an accounting estimate to be critical if:

• Assumptions are required to be made, and

• Changes in estimates could have a material adverse effect on our financial statements.

The following table presents information about our most critical accounting estimates and the effects of hypothetical changes in the assumptions used when making such estimates:

Balance Sheet	There is a risk of	How did we arrive	How accurate have	How likely to
Account	change because?	at these Estimates?	we been in the past?	change in the future?
Accounts Receivable	We provide an Allowance For Doubtful Accounts (AFDA) based on the age of each account. Uncollectible accounts are also written off, particularly when bankruptcy occurs.	AFDA provisions are made by analyzing agings of the accounts receivable.	These estimates of AFDA have been accurate in the past.	This method of determining AFDA will likely not change as the method used has provided accurate results.
Inventory	We review the net realizable value of our inventory to ensure that it is recorded at a lower of cost or market value. At this time, any obsolete inventory is written off. The market value could change due to the success of technical innovation on our part or by competitors within the switchgear Market.	The cost of our inventory (including manufacturing Overhead) is compared to net realizable value in the market.	Our procedure has produced reliable results.	We do not expect any change in procedure.
Fixed Assets	We calculate our depreciation using the straight line method based on useful lives of the assets. The useful lives of the asset could change due to technical innovation and or other factors and we may write off or write down obsolete assets.	The estimated lives of fixed assets are based on guidelines provided by Chinese tax authorities.	We believe our depreciation method has produced accurate results.	We do not foresee any changes.
Accrued Liabilities (Income Tax)	We are subject to income taxes in China. The determination of the tax liability is based on calculations which are further based on estimates such as, for example, allowances for bad debt. These estimates may change from time to time and the final tax outcome may increase or decrease our income tax expense provision made.	Income tax provision is calculated based on the statutory tax rate and level of operating income. Operating income is partially based on various estimates. These estimates may differ from actual results. This calculation is made monthly and installments are made toward the tax liability.	Our estimates currently have been in line with the actual assessment in our tax liability. Income tax provisions are calculated monthly.	Our estimates may change from time to time and this may affect the income tax provision. We may under or over remit our installments based on how our estimates differ from actual results.

10

Revenue Recognition.

Revenue is recognized when the product is delivered to customers. In determining delivery, consideration is given to the following: whether an arrangement exists with the buyer; whether delivery has occurred; whether the price to the buyer is fixed or determinable; and that collection is reasonably assured. No provision is made for any right of return that may exist as the criteria specified in pronouncement of the Financial Accounting Standards (SFAS) have been met.

Item 3. Quantitative and Qualitative Disclosures about Market Risks

Not applicable because we are a smaller reporting company.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures.

The Securities and Exchange Commission defines the term “disclosure controls and procedures” to mean a company’s controls and other procedures that are designed to ensure that information required to be disclosed in the reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported, within the time periods specified in the Commission’s rules and forms. Our chief executive officer and chief financial officer have concluded, based on the evaluation of the effectiveness of the disclosure controls and procedures by our management, with the participation of our chief executive officer and chief financial officer, as of the end of the period covered by this report, that our disclosure controls and procedures were effective for this purpose, except as noted below under “Changes in Internal Controls.”

Changes in Internal Controls over Financial Reporting.

As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)). Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that as of the end of the period covered by this Quarterly Report on Form 10-Q our disclosure controls and procedures were effective to enable us to accurately record, process, summarize and report certain information required to be included in the Company’s periodic SEC filings, and to accumulate and communicate to our management, including the Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.

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

11

Prior to the issuance of our financial statements, we completed the account reconciliations, analyses and our management review such that we can certify that the information contained in our financial statements for the year ended December 31, 2009, fairly presents, in all material respects, the financial condition and results of operations of the Company.

Limitations on Effectiveness of Controls and Procedures.

Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures or our internal controls will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include, but are not limited to, the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

12

PART II — OTHER INFORMATION

Item 1. Legal Proceedings.

     None.

Item 1A. Risk Factors.

     Not applicable to small reporting companies.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

     None.

Item 3. Defaults Upon Senior Securities.

     None.

Item 5. Other Information.

     None.

Item 6. Exhibits

31.1	Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.	Certification of Chief Executive Officer and Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

(Signatures appear on following page)

13

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

ASIA ELECTRICAL POWER INTERNATIONAL GROUP INC. Date: June 15, 2010
By:	/s/ Yunlong Guo
	Yulong Guo
	President and Chief Executive Officer
By:	/s/ Yunbin Li
	Yunbin Li
	Chief Financial Officer

14