UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549




FORM
10-K




xANNUAL REPORT PURSUANT
TO SECTION 13 OR 15(d) OF THE SECURITIES


EXCHANGE
ACT OF 1934




For the
fiscal year ended December 31, 2008





Commission
file number: 333-150768




UNIVERSAL
SOLAR TECHNOLOGY, INC.


(Name of
Small Business Issuer in its charter)




Nevada
              26-0768064(State
      or other jurisdiction of incorporation or
                organization)
              (I.R.S.
      Employer Identification
Number)




No. 1
Pingbei Road 2,


Nanping
Science & Technology Industrial Park


Zhuhai
City, Guangdong Province


The
People’s Republic of China 519060




Issuer's
telephone number: 86-756 8682610




Securities
registered under Section 12(b) of the Exchange Act: None




Securities
registered under Section 12(g) of the Exchange Act:




Common
Stock, Par Value $0.0001


(Title of
class)





Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act. Yes oNo x





Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Act. Yes oNo x





Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes xNo o





Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K (§229.405 of this chapter) is not contained herein, and will not
be contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. o





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





Large
accelerated filer oAccelerated filer oNon-accelerated filer oSmaller 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 oNo x




State the
aggregate market value of the voting and non-voting common equity held by
non-affiliates computed by reference to the price at which the common equity was
last sold, or the average bid and asked price of such common equity, as of the
last business day of the registrant’s most recently completed second fiscal
quarter:





The
registrant’s common stock is not trading on active markets and therefore has not
readily determinable market value.




The
registrant’s revenues for fiscal year end December 31, 2008:
$11,454.





The
number of shares outstanding of the registrant’s Common Stock on March
31, 2009: 22,574,974 shares.





TABLE
OF CONTENTS





PagePART
      ISpecial
      Note Regarding Forward-Looking Statements
                
                1Item
      1. Business
                
                1Item
      1A. Risk Factors
                
                18Item
      2. Properties
                
                35Item
      3. Legal Proceedings
                
                35Item
      4. Submission of Matters to a Vote of Security Holders
                
                35PART
      IIItem
      5. Market for Registrant's Common Equity, Related Stockholder Matters
      and Issuer Purchases of Equity Securities
                
                35Item
      6. Selected Financial Data - As a Smaller Reporting Company this item is
      not required
                
                36Item
      7. Management’s Discussion and Analysis of Financial Condition and Results
      of Operations
                
                36Item
      7A. Quantitative and Qualitative Disclosures About Market Risk - As a
      Smaller Reporting Company, this item is not required
                
                41Item
      8. Financial Statements and Supplementary Data
                
                41Item
      9. Changes in and Disagreements with Accountants on Accounting and
      Financial Disclosure
                
                42Item
      9A(T). Controls and Procedures
                
                42Item
      9B. Other Information
                
                42PART
      IIIItem
      10. Directors, Executive Officers and Corporate Governance
                
                42Item
      11. Executive Compensation
                
                44Item
      12. Security Ownership of Certain Beneficial Owners and Management and
      Related Stockholder Matters
                
                44Item
      13. Certain Relationships and Related Transactions, and Director
      Independence
                
                45Item
      14. Principal Accountant Fees and Services
                
                47PART
      IVItem
      15. Exhibits and Financial Statement Schedules
                
                47SIGNATURES
                
                48Index
      to Financial Statements
                
                F-1





PART
I





SPECIAL
NOTE REGARDING FORWARD—LOOKING STATEMENTS





On one or
more occasions, we may make forward-looking statements in this Annual Report on
Form 10-K regarding our assumptions, projections, expectations, targets,
intentions or beliefs about future events. Words or phrases such as
“anticipates,” “may,” “will,” “should,” “believes,” “estimates,” “expects,”
“intends,” “plans,” “predicts,” “projects,” “targets,” “will likely result,”
“will continue” or similar expressions identify forward-looking statements.
These forward-looking statements are only our predictions and involve numerous
assumptions, risks and uncertainties, including, but not limited to those listed
below and those business risks and factors described elsewhere in this report
and our other Securities and Exchange Commission filings.





We
undertake no obligation to publicly update or revise any forward-looking
statements, whether as a result of new information, future events or otherwise.
However, your attention is directed to any further disclosures made on related
subjects in our subsequent annual and periodic reports filed with the Securities
and Exchange Commission on Forms 10-K, 10-Q and 8-K.





Unless
the context requires otherwise, references to “we,” “us,” “our,” the “Company”
and “the Company” refer specifically to Universal Solar Technology,
Inc.





ITEM
1.  BUSINESS





ORGANIZATIONAL
HISTORY





Universal
Solar Technology, Inc. was incorporated in the State of Nevada on July 24, 2007.
It operates through its wholly owned subsidiary, Kuong U Science &
Technology (Group) Ltd. (“Kuong U”), a company incorporated in Macau, PRC on May
10, 2007.




OVERVIEW
OF OUR BUSINESS





We are a
development stage enterprise and intend to provide wafers, high efficiency solar
photovoltaic (“PV”) modules and other PV application products in the EU, North
America, Asia and Africa. We believe that demand for our proposed solar products
will develop due to growing energy needs, escalating energy prices, and
increasing environmental concerns.





Our
company was formed in July 2007, and to date has only 20 months of formation,
planning and analysis. On October 7, 2008, we received type test certificate
from Arizona State University Photovoltaic Testing Laboratory that our
Photovoltaic Modules, GYSP-175, satisfied the requirements of International
Engineering Consortium (“IEC”) 61215 standards. This product also passed EU
standard which is a prerequisite for selling our products in the EU countries.
Since meeting such standards, we have received purchase orders for such product
and are currently using a third-party manufacturer to produce the
product.





Strategy





As both
global energy demand and concern about air quality intensifies, our strategy is
to leverage our people, technological experience and relationships to develop
and provide innovative solar products to ensure a sustainable world future. We
intend to supply our customers with high efficiency and aesthetically pleasing
PV modules, other PV application products and related solutions. We believe that
aesthetics have been a barrier to a wider adoption of solar cell and solar
module products and systems among commercial and residential consumers. We
intend to provide innovative, modular, and flexible solar products and systems
that can be attractively integrated into building structures and a wide variety
of natural and urban environments.


1


With
growing global demand for solar power systems and solutions, we plan to scale
our product portfolio and production capacity to meet the demands of an
expanding customer pipeline via infrastructure development, acquisitions, and
continued joint-ventures and strategic outsourcing.





Founders
of Universal Solar and Kuong U were previous engaged in developing PV and PV
applications business through the solar energy department at Zhuhai Yuemao Laser
Facility Engineering Co., Ltd. (“Yuemao Laser”). Yuemao Laser’s main products
are laser scribing, cutting, welding, grooving, and marking machines. Yuemao
Laser's parent company is Yuemao Technology, specializing in steel trade, laser
facility, water purifying facility and real estate investment. Yuemao
Technology’s shareholders are our Chairman, Mr. Wensheng Chen with 50%
ownership, our other director, Ms. Hui Chen 25% ownership, and our President,
Ms. Ling Chen 25% ownership. Hui Chen and Ling Chen are daughters of Wenshen
Chen.




We formed
a subsidiary, Nanyang Universal Solar Technology Co., Ltd. (“Nanyang UST”), a
wholly foreign owned enterprise (“WFOE”) registered under the wholly
foreign-owned enterprises laws of the People's Republic of China ("PRC”) to
manufacturing our products. We hope to have our manufacturing facilities near
the silicon mine will help access the silicon raw material at competitive
costs.





After the
approval of the WFOE registration of Nanyang UST, we have begun our plans to
build new production capabilities with the build-out of a manufacturing facility
capable of producing 67M pieces solar wafers which will use 1,000 tons of
silicon ingots, 25 MW solar cells and 10-30 MW PV modules. We estimate the
investment of setting up the total manufacturing facilities will be
approximately $20 million.





Before we
setup our new manufacturing facilities mentioned above we will subcontract PM
modules orders and solar lighting system orders to a related party, the solar
department at Yuemao Laser. Currently our anticipated sales of PV modules have
passed EU standard and can be sold in Asia and Europe. Our solar lighting
systems do not require industry standard approval if sold to regions in Africa
and Asia.





We are in
the process of developing relationships with a number of original equipment
manufacturers (OEMs) to further expand our product portfolio. These OEMs have
the potential to provide us with a wide array of complementary products branded
and designed according to the Company’s specifications.





We are
developing several sales channels, including direct sales, as well as via
industry and country specific manufacturer sales representatives and
international strategic partnerships.





In
addition, we are in the process of developing a strong communications campaign
to build awareness among customers via speaking engagements and trade
events.





Our
management team is committed to quality design, production, research, and
innovation. We believe that this focus will continue to help us grow and develop
a strong and lasting enterprise. We are committed to improving the global
environment and the health and safety of our employees, customers and
communities. We are working to integrate our environmental mission into the
overall life cycle of our products - from raw material sourcing to end of life
reclamation and recycling.





OUR
MARKET





As
worldwide demand for electricity continues to increase, the electric power
industry is facing several challenges:





·
            Fossil fuel supply constraints:
      Limited supply and escalating consumption of coal, oil, and natural gas
      continue to drive up wholesale electricity prices, resulting in higher
      electricity costs for
consumers.


2


·
            Infrastructure constraints: In
      many parts of the world, electricity demand exceeds the capacity of
      existing electricity generation, transmission and distribution
      infrastructure.


·
            Desire for energy security: As
      political and economic instability in key oil and natural gas producing
      regions have increased, governments are increasingly focusing on
      developing reliable and secure energy
  sources.


·
            Environmental concerns: Long-term
      use of fossil fuels is associated with a range of environmental issues
      including global warming, air pollution and water pollution, the increased
      prevalence of which is driving increased environmental
      awareness.





Electricity
Generation





The
electric power industry is one of the world’s largest industrial segments, with
annual revenue of approximately $1.06 trillion in 2004, according to
Datamonitor. According to the International Energy Outlook 2007, total
electricity demand in the non-OECD nations is expected to grow from 2004 to 2030
at an annual rate that is nearly triple the rate of growth for electricity
demand in the OECD nations.





Amongst
the mix of primary fuels used to generate electricity worldwide, coal has always
been the most widely used fuel due to its abundance and cheap cost. Though
cheap, coal is a great contributor to pollution and greenhouse gas (GHG)
emissions. As global warming is worsening year after year, countries world-wide
are seeking ways to mitigate GHG emissions.





China
unfortunately has been experiencing drastic environmental degradations in recent
years due to its rapid increase in electricity usage generated from coal. This
is causing major health problems and side effects to its residents and even
residents in some of its neighboring countries. Furthermore, the existing fossil
fuel based infrastructure for the generation, transmission and distribution of
electricity, is inadequate to meet growing demand and is also extremely capital
intensive. Using renewable resources to generate electricity is likely to be a
key contributor in solving the world’s energy crisis. Hence, China and other
countries have been actively engaging in the investment and usage of renewable
natural resources to generate electricity.





Renewable
Resource Market





Renewable
resources include solar, biomass and waste, nuclear, wind, hydraulics, and
geothermal generations. Compared to fossil fuel (oil), renewable resources are
abundant in availability with the appropriate technology. In 2005, 58% of the
world renewable energy came from large hydro machinery (such as dams), 17% from
Biomass heat, 4.6% from wind, and almost 8% from solar and PV.





While
currently renewable energy sources only supply a modest fraction of current
energy use, there is great potential for these technologies to rapidly expand in
the future and replace the world’s dependency of fossil fuels. Renewable energy
technologies encompass a broad, diverse array of technologies, and the current
status of these different technologies varies considerably. Some technologies
are already mature and economically competitive (e.g. geothermal and
hydropower), other technologies need additional development steps to become
competitive without subsidies.





Governments
worldwide understand the long term benefits of using renewable resources and are
prioritizing the need to implement these green technologies. The Kyoto Protocol
is a good example of a global effort to mitigate GHGs. In February 2005, China
enacted the Renewable Energy Law that provides certain financial incentives for
the development of renewable energy projects.




Solar
Power Industry





Solar
power, or solar energy, is a source of energy that uses radiation emitted by the
Sun. It is a renewable energy source that has been used in many traditional
technologies for centuries. Solar power is also in widespread use where other
power supplies are absent, such as in remote locations and in space. In recent
years, solar energy has been used greatly in the generation of
electricity.


3


We
believe higher demand for solar energy, furthered by concerns about global
warming, will drive increases in the annual revenues of the global solar
equipment industry. The interest manifested by many electricity customers in
solar cells as a "green" alternative to fossil fuels is also likely to spur
increases in production of high-purity silicon required for the cells, according
to the report by Photon Consulting, a German research group.





“On-grid”
& “Off-grid” Applications





Solar
power systems are used for a variety of residential, commercial and industrial
applications generally described as either “on-grid” or “off-grid” in nature.
The market for “on-grid” applications, where solar power is used to supplement
electricity purchased from the utility network, represents the largest and
fastest growing segment of the solar power market. According to Solarbuzz, LLC,
an independent solar energy research and consulting company (“Solarbuzz”), in
2005 the global on-grid segment grew by 42% from what 889MW to 1,262 MW, and
since 2001, the on-grid segment has grown at an average annual rate of
approximately 55%.





On-grid
Applications: On-grid applications generate solar power used to
supplement on grid electricity use or generated and sold to utility networks;
this represents the largest and fastest growing segment of the solar power
market. PV modules enable grid-connected solar power plants to achieve optimal
electricity production – lowering the cost of generating solar electricity
and maximizing the return on investment for the solar system.





Off-grid
Applications: “Off-grid” markets, where access to utility networks is not
physically feasible or economical, offer additional opportunities for solar
technology. Off-grid industrial applications include road signs, highway call
boxes, communications support along remote pipelines and telecommunications
equipment, as well as rural residential applications. Off-grid consumer
applications include portable recreational power modules, garden lights, marine
lighting and camping equipment. As reported by Solarbuzz, the off-grid market
grew at 2% in 2005, from 194MW to 198 MW, and has grown at an average of 12% per
annum since 2001.





System
Manufacturing Value Chain





Currently,
Universal Solar plans to emphasize the use of silicon based technologies in its
products as a majority of installed solar systems around the world employ
crystalline silicon technologies. Crystalline silicon cells are manufactured
using monocrystalline silicon, multicrystalline silicon or string ribbon
technology. The crystalline silicon-based solar power manufacturing value chain
starts with the processing of quartz sand to produce metallurgical-grade
silicon. This material is further purified into semiconductor-grade or
solar-grade polysilicon feedstock.





In the
most widely used crystalline silicon-based solar manufacturing process,
feedstock is melted in high temperature furnaces, and then formed into ingots
through a crystallization process. Ingots are cut and shaped, then sliced into
wafers using high precision cutting techniques. Wafers are manufactured into
solar cells through a multiple step manufacturing process that entails etching,
doping, coating and applying electrical contacts. Solar cells are then
interconnected and packaged to form solar modules, which together with system
components such as batteries and inverters, are distributed to installers,
systems integrators, service providers or directly to end-users, for
installation for on-grid or off-grid systems.


4








Universal
plans to manufacture solar wafers, solar cell, PV Modules, and solar application
products such as solar lighting systems.





Solar
Power Benefits





Environmental
Friendliness and Renewability: Solar power is one
of the most environmentally friendly renewable resources available for
electricity generation. It does not produce air or water emissions, noise,
vibrations or any waste generation.





Peak
Energy Generation Ability: Solar power is well-suited to match peak
energy needs as maximum sunlight hours generally correspond to peak demand
periods when electricity prices are at their highest.





Easily
Located with End Users: Unlike other renewable resources such as
hydroelectric and wind power, solar power can be utilized anywhere that receives
sunlight and directly at the site where the power will be shed. As a result,
solar power avoids the expense of, and energy losses associated with,
transmission and distribution of electricity from large-scale electrical plants
to end users.





No
Fluctuations in Operating Costs: Unlike fossil or nuclear fuel, solar
energy does not have fuel price volatility. Although there is variability in the
amount and timing of sunlight over the day, season and year, a properly sized
and configured system can be designed for high reliability while supplying
electricity on a long-term, fixed-cost basis.





Reliability
and Durability: Without moving
parts or the need for periodic maintenance, solar power systems are among the
most reliable forms of electricity generation. Accelerated aging tests have
shown that solar modules can operate for at least 25 to 30 years without
requiring major maintenance.





Modularity:
Solar systems are easily modularized and scalable, and therefore can be deployed
in many different sizes and configurations to meet the specific needs of the
user. Solar modules are increasingly used to serve as both a power generator and
the exterior of a building. Like architectural glass, PV modules can be
installed on the roofs and facades of residential and commercial
buildings.





Global
Solar Trends





The solar
power market has grown significantly in the past decade. According to Solarbuzz,
the global solar power market, as measured by annual solar power system
installations, increased from 345 MW in 2001 to 1,460 MW in 2005, representing a
compounded annual growth rate, or CAGR, of 43.4%.





The
development and increased usage of solar power is, and for the foreseeable
future will be, affected by the existence of government incentives. A growing
number of countries have established attractive incentive programs for the
development of solar and other renewable energy sources. Countries in Europe,
Canada and Asia and several states in the United States have adopted a variety
of government subsidies to allow renewable sources of electricity to compete
with conventional sources of electricity, such as fossil fuels. Government
subsidies and incentives generally focus on grid-connected systems and take
several forms, including feed-in tariffs, net metering programs, renewable
portfolio standards, rebates, tax incentives and low interest
loans.


5


Under a
feed-in tariff subsidy, the government sets prices that regulated utilities are
required to pay for renewable electricity generated by end-users. The prices are
then set above market rates and may differ based on system size or application.
Net metering programs enable end-users to sell excess solar electricity to their
local utility in exchange for a credit against their utility bills. Net metering
allows end-users to get “full value” for the electricity generated by renewable
sources, rather than receiving a less desirable rate. The policies governing net
metering vary by state and utility; some utilities pay the end-user upfront,
while others credit the end-user’s bill.





United States: With
annual growth rates of 20-30%, the U.S. solar market continues to expand at a
steady pace. The US recently enacted a major energy bill that included federal
tax credits, purchasing goals and other programs designed to accelerate the
adoption of solar power. In addition, a number of states, including California,
New Jersey and Nevada, have committed substantial resources to the development
and implementation of renewable energy programs. For example, in early 2006,
California announced a $2.9 billion, 10 year government incentive program to
reach 3,000 MW of solar installations by 2017. This program, will subsidize
one-third of the installation costs of all new systems. In California, a
customer who has purchased solar energy products can receive a cash rebate from
the California Energy Commission, a state tax credit and can take advantage of
net metering. The customer’s cash rebate is based on the capital cost of the
solar power system, currently set at $2.60 per watt.





China: In 2005, China
enacted the Renewable Energy Law in order to help reach the government target of
400 MW and 1,000 MW installed by 2010 and 2020, respectively. This law
authorizes relevant authorities to set favorable prices for the purchase of
surplus on-grid solar-generated electricity and provides other financial
incentives for the development of renewable energy projects. In addition, the
State Council of China and the Ministry of Construction have recently created
directives encouraging the development and use of solar energy in both urban and
rural areas.





Meanwhile,
in 2005, the Shanghai municipal government launched a program called the
“100,000 Roofs Projects.” The goal of this program is to install solar power
systems onto 100,000 roofs (300MW) in Shanghai by 2015.





OUR
PROPOSED PRODUCTS





We plan
to set up a manufacturing facility in Nanyang City, Henan Province in China. We
plan to manufacture four types of products: solar wafers, solar cell, high
efficiency solar PV modules and solar lighting systems.





We plan
to manufacture all our products from our planned manufacturing facility in
Nanyang City, Henan Province, China. Before our manufacturing facilities to be
build we plan to subcontract the PV module business to the solar department at
Yuemao Laser. Prices for such contract manufacturing have not been determined.
Our Chairman and largest shareholder is also the owner of Yuemao
Laser.





Currently,
we are not producing solar wafer.





Our
subsidiary, Kuong U, has satisfied EU standard for its Photovoltaic Modules,
GYSP-175. GYSP-175 is the most common used PV module in the EU market. We plan
to apply for additional PV modules approvals.


6


To assist
in securing an EU standard, the company had a prototype product tested by an
independent testing facility. On January 14, 2008, Kuong U entered an agreement
with Arizona State University (“ASU”). During the agreement, Photovoltaic
Testing Laboratory (“PTL”) at ASU will conduct Crystalline Silicon Terrestrial
Photovoltaic (PV) Modules - Design Qualification and Type Approval (IEC 61215)
tests and Photovoltaic (PV) Module Safety Qualification Part 2 (IEC 61730-2)
tests on Kuong U’s GYSP-175 photovoltaic modules. A total of ten unconditioned
production modules and one laminate (frameless modules) were sent to the PTL to
complete the test program. Among the agreement, Kuong U paid $37,650 to ASU for
its services. The agreement period is from January 10, 2008 to December 31,
2008. Kuong U received test certificate for that its product GYSP-175
photovoltaic module satisfied IEC 61215 on October 7, 2008.





After
successful completion of the test, PTL has transferred an IEC test data report
to VDE Testing & Certifications Institute in Germany.




According
to http://www.vde.com, The VDE Testing and Certification Institute is accredited
on a national and international level for the area of testing and certification
of electro-technical equipment, components and systems. Testing of
electro-technical products is conducted for safety, electromagnetic
compatibility and other characteristics. The results of testing are evaluated
scientifically and contribute to the development of electro-technical
standards.




VDE is a
professional organization of electrical engineers; issues, in collaboration with
German Institute for Standardization (DIN), standards for the field of
electrical engineering. It also conducts testing and certification much likes UL
in the United States.





Kuong U
contacted VDE directly and established an IEC 61730 evaluation, to include the
construction evaluation requirements of IEC 61730-1, additional IEC 61730-2
module or materials tests, and factory inspection requirement. On January 18,
2008, Kuong U entered ordered testing services for VDE Certification based on
test report from ASU IEC61215 and IEC 21730-2 report. In addition, Kuong U
applied for VDE Certification and test according to IEC 61730-1 Photovoltaic
(PV) module safety qualification Part 1 (IEC 61730-1) with VDE. Total invoiced
fees for VDE certification and testing services are 7,956 EUR.





We
received VDE standard certificates of IEC 61730-1, and 71730-2, and IEC 61215,
as the EU standard allows +10% to -10% allowance, Kuong U would be able to
market and sell its main Photovoltaic Modules, GYSP175 and GYSP180, to EU
countries.





Currently
Kuong U is not producing any of the products including solar wafers, solar cell,
and PM modules. We plan to subcontract our product with related party, Yuamao
Laser, especially for the PV modules and solar lighting system.




We are
currently developing a strong product portfolio to serve the diverse needs of
our rapidly developing global customer pipeline. Products currently being
marketed, and/or developed include:





·
            PV
      modules·
            Solar
      lighting system including solar lamps for road and highway
      infrastructure





PV
Modules& Systems





Many of
our prototype PV modules are designed for large scale, grid-connected solar
power plants and are sold to leading solar project developers for use in
commercial PV projects. We also plan to provide technical support and product
documentation to customers to ensure that systems are optimized for high
performance and long term reliability.


7


Sample
Prototype Products in PV Module Series





The
following sample prototypes have been manufactured by Yuamao Laserunder an agreement with
us under which we retain all rights to the design of the products and exclusive
rights to market and sell the products.


■ Solar
      modules GYSP-200Characteristics
                    Open
      circuit voltage(Voc): 48V
                    Optimum
      operating voltage: (Vmp)37.5V
                    Short
      circuit current(Isc): 5.46A
                    Optimum
      operating current(Imp): 5.2A
                    Peak
      power(Pm): 200W
                  
                  Specifications
                    Monocrystalline
      silicon
                    Dimension(mm):1830x825x50
                    Tolerance:
      ±5%
                    Weight:16.9kg
                    Maximum
      system voltage: 1000V DC■Solar modules
      GYSP-180Characteristics
                    Open
      circuit voltage(Voc): 44.9V
                    Optimum
      operating voltage: (Vmp)38.6V
                    Short
      circuit current(Isc): 5.1A
                    Optimum
      operating current(Imp): 4.68A
                    Peak
      power(Pm): 180W
                  
                  Specifications
                    Monocrystalline
      silicon
                    Dimension(mm):
      1715x802x45
                    Tolerance:
      ±5%
                    Weight:
      16.9kg
                    Maximum
      system voltage: 1000V DC■Solar modules
      GYSP-175Characteristics
                    Open
      circuit voltage(Voc): 44.06V
                    Optimum
      operating voltage: (Vmp)35.5V
                    Short
      circuit current(Isc): 5.25A
                    Optimum
      operating current(Imp): 4.95A
                    Peak
      power(Pm): 175W
                  
                  Specifications
                    Monocrystalline
      silicon
                    Dimension(mm):
      1580x808x37
                    Tolerance:
      ±5%
                    Weight:
      15.3kg
                    Maximum
      system voltage: 1000V DC■ Solar
      modules GYSP-160Characteristics
                    Open
      circuit voltage(Voc): 43.2V
                    Optimum
      operating voltage (Vmp): 35V
                    Short
      circuit current (Isc): 5.1A
                    Optimum
      operating current (Imp): 4.59A
                    Peak
      power(Pm): 160W
                  
                  Specifications
                    Monocrystalline
      silicon
                    Dimension
      (mm): 1588x802x45
                    Tolerance:
      ± 5%
                    Weight:
      15.6kg
                    Maximum
      system voltage: 1000V DC■ Solar
      modules GYSP-130Characteristics
                    Open
      circuit voltage(Voc): 22.6V
                    Optimum
      operating voltage (Vmp): 17.6V
                    Short
      circuit current (Isc): 7.83A
                    Optimum
      operating current (Imp): 7.35A
                    Peak
      power(Pm): 130W
                  
                  Specifications
                    Monocrystalline
      silicon
                    Dimension
      (mm): 1466x656x40
                    Tolerance:
      ± 5%
                    Weight:
      13.2kg
                    Maximum
      system voltage: 1000V
DC




8





■ Solar
      modules GYSP-120Characteristics
                  Open
      circuit voltage(Voc): 22.5V
                  Optimum
      operating voltage (Vmp): 17.5V
                  Short
      circuit current (Isc): 7.12A
                  Optimum
      operating current (Imp): 6.8A
                  Peak
      power(Pm): 120W
                
                Specification
                  Monocrystalline
      silicon
                  Dimension
      (mm): 1425X650X40
                  Tolerance:
      ± 5%
                  Weight:
      10.8kg
                  Maximum
      system voltage: 1000V DC■ Solar
      modules GYSP-100Characteristics
                  Open
      circuit voltage(Voc): 21.6V
                  Optimum
      operating voltage (Vmp): 17.4V
                  Short
      circuit current (Isc): 7.24A
                  Optimum
      operating current (Imp): 6.14A
                  Peak
      power(Pm): 100W
                
                Specifications
                  Monocrystalline
      silicon
                  Dimension
      (mm): 1425X650X40
                  Tolerance:
      ± 5%
                  Weight:
      10.8kg
                  Maximum
      system voltage: 1000V DC■ Solar
      modules GYSP-80Characteristics
                  Open
      circuit voltage(Voc): 21.3 V
                  Optimum
      operating voltage (Vmp): 17.4 V
                  Short
      circuit current (Isc): 5.2A
                  Optimum
      operating current (Imp): 4.6A
                  Peak
      power(Pm): 80W
                
                Specifications
                  Monocrystalline
      silicon
                  Dimension(mm):
      802X802X35
                  Tolerance:
      ±5%
                  Weight:
      9.1kg
                  Maximum
      system voltage: 720V DC■ Solar
      modules GYSP-65Characteristics
                  Open
      circuit voltage(Voc): 21.6V
                  Optimum
      operating voltage (Vmp): 17.5V
                  Short
      circuit current (Isc): 3.51A
                  Optimum
      operating current (Imp): 3.71A
                  Peak
      power(Pm): 65W
                
                Specifications
                  Monocrystalline
      silicon
                  Dimension(mm):
      785X650X28
                  Tolerance:
      ±5%
                  Weight:
      5kg
                  Maximum
      system voltage: 720V DC■ Solar
      modules GYSP-50Characteristics
                  Open
      circuit voltage(Voc): 21.8V
                  Optimum
      operating voltage (Vmp): 17.9V
                  Short
      circuit current (Isc): 3.0A
                  Optimum
      operating current (Imp): 2.81A
                  Peak
      power(Pm): 50W
                
                Specifications
                  Monocrystalline
      silicon
                  Dimension(mm):
      540X710X35
                  Tolerance:
      ±5%
                  Weight:
      5.3kg
                  Maximum
      system voltage: 720V DC





9


■ Solar
      modules GYSP-40Characteristics
                                        Open
      circuit voltage(Voc): 21.8V
                                        Optimum
      operating voltage (Vmp): 17V
                                        Short
      circuit current (Isc): 2.55A
                                        Optimum
      operating current (Imp): 2.34A
                                        Peak
      power(Pm): 40W
                                    
                                    Specifications
                                        Monocrystalline
      silicon
                                        Dimension(mm):
      758X534X30
                                        Tolerance:
      ±5%
                                        Weight:
      5.8kg
                                        Maximum
      system voltage: 720V DC■ Solar
      modules GYSP-30Characteristics
                                      Open
      circuit voltage(Voc): 21.5V
                                      Optimum
      operating voltage (Vmp): 16.8V
                                      Short
      circuit current (Isc): 2.02A
                                      Optimum
      operating current (Imp): 1.79A
                                      Peak
      power(Pm): 30W
                                    
                                    Specifications
                                      Monocrystalline
      silicon
                                      Dimension(mm):
      435X650X25
                                      Tolerance:
      ±5%
                                      Weight:
      3.5kg
                                      Maximum
      system voltage: 720V DC■ Solar
      modules GYSP-20Characteristics
                                      Open
      circuit voltage(Voc): 21.5V
                                      Optimum
      operating voltage (Vmp): 16.9V
                                      Short
      circuit current (Isc): 1.35A
                                      Optimum
      operating current (Imp): 1.2A
                                      Peak
      power(Pm): 20W
                                    
                                    Specifications
                                      Monocrystalline
      silicon
                                      Dimension(mm):
      605X287X25
                                      Tolerance:
      ±5%
                                      Weight:
      3.1kg
                                      Maximum
      system voltage: 720V DC■ Solar
      modules GYSP-10Characteristics
                                      Open
      circuit voltage(Voc): 21.5V
                                      Optimum
      operating voltage (Vmp): 17V
                                      Short
      circuit current (Isc): 0.71A
                                      Optimum
      operating current (Imp): 0.58A
                                      Peak
      power(Pm): 10W
                                    
                                    Specifications
                                      Monocrystalline
      silicon
                                      Dimension(mm):
      288X310X28
                                      Tolerance:
      ±5%
                                      Weight:
      2.1kg
                                      Maximum
      system voltage: 720V
DC





Solar
Lighting Systems





We intend
to provide attractive, efficient and reliable solar powered systems for lighting
applications including parking lot, street lighting, security lighting, general
area lighting, trail and pathway lighting. New products under development relate
to outdoor advertising, billboard and sign lighting, and a variety of transit
applications. Solar powered systems can be used in lighting up dark areas with
dependable off-grid solar power. These systems install easily with no trenching
or wiring.





Solar
powered lighting is a relatively simple concept and an example of a common
off-grid solar application. In a basic way, the system operates like a bank
account. Withdrawals from the battery to power the light source must be
compensated for by commensurate deposits of energy from the solar panels. As
long as the system is designed so deposits exceed withdrawals on an average
daily basis, the battery remains charged and light source is reliably powered.
The sun provides a direct source of energy to the solar panel. The battery is
recharged during the day by direct-current (DC) electricity produced by the
solar panel. The light source is powered by the battery each night. Electronic
controls are used between the battery, light source and solar panels to protect
the battery from overcharge and discharge, and to control the timing and
operation of the light.





10





The types
of customers for this line of product include:





·
            City, county, state and federal
      governments: Streets, roads, signs, intersections, parks and
      docks


·
            Department of Defense
      installations: Perimeter security, parking lots,
      recreation


·
            Utilities companies: Emergency
      back-up lighting, remote customer
  lighting


·
            Advertisers: Billboards and
      advertising shelters


·
            Industrial/commercial customers:
      Parking lots, security, welcome
signs


·
            Department of Transportation
      Signage: On/off ramps and rest area
  lighting


·
            Residential developers,
      homeowners associations: Roads, bike paths and identification
      signage


·
            Homeowners: Garden lights, safety
      lighting, etc.





Sample
Products in PV Lighting Unit Series





Examples
of our products in the PV Lighting Unit Series, manufactured under our agreement
with Yuamao Laser, include:





GYSL-1
                
                GYSL-65V
      2.5AH Lead-Acid Battery
                  8 W
      light tube
                  Alternative
      charging Mode
                  Car
      charger
                  Adaptor
                  Solar
      panel
                  Charging
      time: 8 times
                  Continuously
      work for 30 hours
                  Carton
      size 68X40X52
                  23.5Kg
                
                6V
      1.5AH Ni-MH Battery
                  7
      Lumination Time 8 hours
                  Continuous
      Working Time 7 days
                  Body
      Material plastic body
                  Color
      white/Green/Yellow
                  1
      LED 10000mcd 8h 2Batteries
                  Carton
      size 35X45x56





11





GYSL-2
              
              GYSL-3
              
              GYSL-4
              
              GYSL-55V
      2.5AH Lead-Acid Battery
                8W
      Light Tube
                Alternative
      charging Mode
                Car
      charger
                Adaptor
                Solar
      panel
                Charging
      time: 8 times
                Continuously
      work for 30 hours
                Carton
      size 65X42X42.5
                10.5Kg
              
              Stainless
      Steel Body
                8W
      Light Tube
                Continuously
      work for 30 hours
                Carton
      size 65X42X42.5
                16.5Kg
              
              175W
      Solar Energy system
                70Ah
      Battery
                Controller
      7A
                Energy
      Conservation Lamp 15W
                Lumination
      Time 8 hours
                Continuous
      Working Time 7 days
              
              6V
      1.5AH Ni-MH Battery
                7W
      Light Tube
                Charging
      time: 8 times
                Continuously
      work for 30 hours
                Carton
      size 35X42X120
                Color
      White




GYSL-7
              
              GYSL-8
              
              GYSL-9
              
              GYSL-10100W
      Solar Energy system
                  60Ah
      Battery
                  Controller
      10A
                  Energy
      Conservation Lamp 15W
                  Lumination
      Time 8 hours
                  Continuous
      Working Time 7 days
              
              45W
      Solar Energy system
                  50Ah
      Battery
                  Controller
      7A
                  Energy
      Conservation Lamp 12W
                  Lumination
      Time 8 hours
                  Continuous
      Working Time 7 days
              
              40W
      Solar Energy system
                  65Ah
      Battery
                  Controller
      6A
                  Energy
      Conservation Lamp 11W
                  Lumination
      Time 8 hours
                  Continuous
      Working Time 7 days
              
              80W
      Solar Energy system
                  100Ah
      Battery
                  Controller
      7A
                  Energy
      Conservation Lamp 10W
                  Lumination
      Time 8 hours
                  Continuous
      Working Time 7 days




12


PRODUCTION
FACILITIES
 
 We plan
to set up our manufacturing facilities in Nanyang City, Henan province, China.
We plan setup three production lines to produce solar wafer, solar cell and
solar module. We estimated the following costs for the equipment of three
product lines:
 
 Equipment:
 Product Line
                                                    
                                                    
                                                    Annual Capacity
                                                    
                                                    
                                                    Equipment Details
                                                    
                                                    Total Estimated Equipment
                                                      Costs (US$)Solar
      Wafer
                                                    
                                                    
                                                    67M
      pieces
                                                    
                                                    
                                                    20
      cutting machines @ $500K-571K each
                                                    
                                                    $
                                                    10MSolar
      Cell
                                                    
                                                    
                                                    25MW
                                                    
                                                    
                                                    
                                                    
                                                    $
                                                    8.6MPV
      Module
                                                    
                                                    
                                                    30MW
                                                    
                                                    
                                                    3
      lines
                                                    
                                                    $
                                                    1.4MTotal:
                                                    
                                                    $
                                                    20M
 
 Land:
 We signed
a Land Purchase Agreement on December 1, 2008 with a local government for the
rights to use 107 acres of land for a term of 40 years at the cost of $3,970 per
acre. Our total cost is $423,420. We are in the process of obtaining our land
use right certificate from the relevant local government
authorities.
 
 Factory:
 We plan
to build a 5,000 square meters factory space. The construction costs for
building a new factory are estimated at $85.7 per square meter. Our total
estimated cost of the factory is $428,500. We have performed a site visiton the
land will be leased and also performed an evaluation on the factory setup
costs.
 
 We have
registered our subsidiary, Nanyang UST as a WFOE in Nanyang City, Henan province
in China, under the wholly foreign owned enterprise laws of China. We have
obtained all government approvals in connection with Nanyang UST’s WFOE
status.
 
 We plan
to complete factory construction and the first phase, the solar wafer production
line, by the end of December 31, 2009. In addition, we plan to build a second
phase of solar cell and PM module production lines.
 
 Before
our solar cell and PV module productions line are built, we plan to subcontract
the PM modules manufacturing to related party, solar department at Yuemao Laser.
We do not plan to manufacture the solar cell nor sub-contract manufacture before
our own solar cell production line is set up.
 
 RAW
MATERIAL
 
 We plan
to purchase silicon ingots from Henan Xuntianyu Technology Ltd. (also known as
Pro-EnterTech (Henan) Co. Ltd. (“Pro-Enter”). Pro-Enter’s new production
capacity can produce 1,000 tons of silicon ingots to us on an annual base. We
plan to enter a long term raw material purchasing agreement with Pro-Enter after
our WFOE is established in Nanyang City, in Henan Province, China. We expect
this will occur after we have the solar wafer production line ready for
manufacturing.
 
 TARGET
MARKETS AND PRINCIPAL CUSTOMERS
  Our
management team has engineering, product development and international sales
backgrounds in advanced laser technologies, solar cell manufacturing, and solar
manufacturing machinery design and sales. We intend to leverage our strong
industry contacts and relationships to develop a strong global customer
pipeline.
  13
  We plan
to sell our solar wafer products to Suntech Power Holdings Co. (NYSE: STP) in
Wuxi, China, Motech Industries, Inc. in Taiwan and JA Solar Holding (NASDAQ:
JASO) in Hebei Province, China, and other solar cell and solar module producers.
Our Chairman and management have had a multi-year relationship with these
potential customers due to their position with Yuemao Laser, which has sold them
laser equipment.
  We plan
to sell our solar cell and solar module product to customers in the EU, North
America, Asia and Africa.
 
 SALES
AND MARKETING
  We intend
to develop several sales channels - direct sales, industry specific / country
specific manufacturer’s sales representatives, and international strategic
partnerships. The Company’s sales strategy is designed to capitalize its
existing strong management relationships, rapidly growing market segments and
emerging trends.
 
 Direct
Sales
 
 Our
executive team has the unique advantage of being able to leverage relationships
from our strategic partner, Yuemao, whose business interests include steel
trade, silicon laser technologies, water purifying facilities and real estate
investments. The team has developed strong domestic and international
relationships through their success in launching and developing an advanced
laser technology company, Yuemao Laser, which focuses on serving the needs of
the silicon wafer and solar industry.
 
 The
executive team also handles direct sales activities, while managing operations,
product line enhancements, customer care, as well as vendor and agent
relationships. A dedicated direct sales force and senior sales executives will
be hired to sell to targeted trade channels in China, the US and Europe. This
expanded direct sales team is expected to be the major force behind our growth.
Emphasis will be given to growing and qualifying large accounts and or high
margin products across the US, Germany, Italy, Switzerland, Russia, India, Japan
and Taiwan.
 
 Manufacturers’
Sales Representatives
 
 We also
intend to align ourselves with a number of specialized representatives and
performance based contractors. These consist of individuals or small groups, who
dedicate their respective sales and marketing efforts to either a limited number
of companies or particular industry segments. They are small firms, each with
1-5 salespeople that we may have under contract. They will introduce our higher
margin products to potential new customers in new industry
segments.
 
 International
Distribution & Strategic Partners
 
 We are
evaluating potential contracts with a number of strategic distributors and
partners in international markets in Asia (outside of China), South America, and
Eastern Europe. These distributors will be encouraged to enter into agreements
with the Company which require each organization to produce a minimum annual
“dollar” sales amount per territory.
 
 Public
Relations
 
 We are
committed to raising our profile and leveraging additional publicity. To this
end, we plan to expand our dialogue with leading industry analysts and trade
publications. We plan to have members of our management speak at trade
conferences, and contribute articles and press releases to market-specific
publications. This will encourage industry analysts to view us as a keen
innovator, activist, and campaigner in the promotion of solar power across a
variety of applications.
  14
  We are
planning a communications campaign focusing on trade events, panel discussions,
speaking engagements, white papers, pitch letters, press announcements, direct
marketing and advertising. The primary goal is to reinforce sales efforts by
promoting positive testimonials and success stories from our initial base of
clients, while also being an advocate and educator for renewable and sustainable
energy sources. By participating in seminars and industry conferences, our
management team intends to develop stronger awareness and relationships with
current and potential customers.
 
 Advertising
 
 We intend
to initiate a conservative, yet effective advertising campaign in major trade
publications that will identify us as a quality purveyor of new, innovative, and
attractively designed solar modules and technologies.
  COMPETITION
  The solar
energy and renewable energy industries are both highly competitive and
continually evolving as participants strive to distinguish themselves within
their markets and compete within the larger electric power industry. Within the
renewable energy industry, Universal Solar believes that the main sources of
competition are crystalline silicon solar module manufacturers, other thin film
solar module manufacturers and companies developing solar thermal and
concentrated photovoltaic technologies. Among photovoltaic module and cell
manufacturers, the principal methods of competition are price per watt,
production capacity, conversion efficiency and reliability. We believe that we
can compete favorably with respect to these factors; however, we also believe
that our growing focus on providing aesthetically pleasing modular solutions and
an array of value added services and products helps further differentiate us
from similar peers.
 
 Our
product designs, price points, relationships, infrastructure, quality control
standards, and industry contacts represent substantial competitive advantages.
We maintain a substantially lower cost structure than competitors based in the
US and Europe. Foreign competitors currently cannot match us on pricing,
technological innovation, and efficient use of low cost manufacturing resources.
Furthermore, our competitive advantage in China is protected by significant
knowledge of government regulations, business practices, and strong
relationships.
 
 We
respect to our Chinese competitors, we view our strong marketing abilities and
flexibility in rapidly bringing new products to market as our key advantages. It
should be noted that many competitors are larger and have more financial
resources, larger production capacities and greater brand name recognition which
may, as a result, put them in a better position to adapt to changes in the
industry or the economy as a whole. Additionally, because global supply of pure
silicon is becoming scarce due to high demand in solar-powered appliances and
technologies, we are evaluating opportunities to acquire and or enter into a
joint-venture with a silicon mine that will help control cost pressures of
related rising silicon prices.
 
 PRINCIPAL
OFFICE
  Our
principal office is located at No. 1 Pingbei Road 2, Nanping Science &
Technology Industrial Park, Zhuhai City, Guangdong Province, the People’s
Republic of China 519060.
 
 EMPLOYEES
AND ORGANIZATION
 
 As of
December 31, 2008, we had four full-time employees. One employee is allotted to
the production team; one employee is allotted to the technical team; one
employee is allotted to the finance team and one is allotted to management. None
of our employees are covered by a collective bargaining agreement and we have
never experienced a work stoppage, and we consider our labor relations to be
excellent.
  15
  Subject
to receipt of additional financing, we plan to recruit 300 employees at the new
manufacturing facilities in Nanyang City, Henan Province in China. Our current
four management team plan to move to the new manufacturing facilities as well.
We plan to have the following composition of our organization:
 
 Function
                  
                  Planned HeadcountSales
                  
                  10Administration
      & Accounting
                  
                  40Senior
      Management
                  
                  4Production
                  
                  246Total
                  
                  300
 
 TAX
BENEFITS
 
 As a
WFOE, Nanyang UST is entitled to a two-year exemption from the enterprise income
tax for its first two profitable years of operation, and to a 50% reduction of
its applicable income tax rate of 25% for the succeeding three
years.
 
 RESEARCH
AND DEVELOPMENT
 
 Subject
to receipt of additional financing, we plan to devote continuously a substantial
amount of resources to research and development by focusing our efforts on the
following areas.
 
 Improving conversion efficiency of
solar modules: One of the most promising ways of increasing the
conversion efficiency of solar modules is maximizing the number of photons that
reach the absorption layer of the semiconductor material so that they can be
converted into electrons, maximizing the number of electrons that reach the
surface of the cadmium telluride and minimizing the electrical losses between
the semiconductor layer and the back metal conductor. We believe that our
ability to achieve higher module efficiencies is primarily a function of rapidly
transferring new technology developments into high-throughput module production
and continuously making incremental improvements to the solar module and the
manufacturing process internally or in conjunction with outsourced
manufactures.
 
 Optimization of Systems: We
are planning to commit resources to reduce the cost and optimize the
effectiveness of components in its photovoltaic system by collecting filed
performance data to identify opportunities for module and process improvement
and improve the performance of systems that use our modules. In addition, the
Company uses this data to enhance predictive models and simulations for the
end-users.
 
 Flexibility in Design & Quick
Implementation of Innovations: We are committed to being flexible to meet
customer needs and being able to evolve quickly with market innovations and
demands. The Company closely monitors trends and developing technologies in
order to help insure its ability to meet both current and future customer
preferences.
 
 Providing Attractive & Flexible
Lighting Systems and Solar Modules: Often overlooked by competitors, we
are keen to implement and market new module designs and lighting systems that
allow for better building and environmental integration. Staying in tune with
architectural preferences and ahead of peers will help the Company thrive and
prosper.
 
 GOVERNMENT
REGULATION
 
 This
section sets forth a summary of the most significant regulations or requirements
that affect our business activities in China or our shareholders’ rights to
receive dividends and other distributions from us.
  16
  Renewable
Energy Law and Other Government Directives
 
 In
February 2005, China enacted its Renewable Energy Law, which became effective on
January 1, 2006. The Renewable Energy Law sets forth policies to encourage the
development and use of solar energy and other non-fossil energy. The renewable
energy law sets out the national policy to encourage and support the use of
solar and other renewable energy and the use of on-grid generation. It also
authorizes the relevant pricing authorities to set favorable prices for the
purchase of electricity generated by solar and other renewable power generation
systems.
 
 The law
also sets out the national policy to encourage the installation and use of solar
energy water-heating systems, solar energy heating and cooling systems, solar
photovoltaic systems and other solar energy utilization systems. It also
provides the general principles regarding financial incentives for the
development of renewable energy projects. The projects, as listed in the
renewable energy industry development guidance catalogue, may obtain
preferential loans from financial institutions and can enjoy tax preferences.
The State Council is authorized to stipulate the specific tax preferential
treatments. However, so far, no rule has been issued by the State Council
pertaining to this matter. In January 2006, China’s National Development and
Reform Commission promulgated two implementation directives of the Renewable
Energy Law. These directives set out specific measures in setting prices for
electricity generated by solar and other renewal power generation systems and in
sharing additional expenses occurred. The directives further allocate the
administrative and supervisory authorities among different government agencies
at the national and provincial levels and stipulate responsibilities of
electricity grid companies and power generation companies with respect to the
implementation of the Renewable Energy Law.
 
 China’s
Ministry of Construction also issued a directive in June 2005, which seeks to
expand the use of solar energy in residential and commercial buildings and
encourages the increased application of solar energy in different townships. In
addition, the State Council promulgated a directive in July 2005 which sets out
specific measures to conserve energy resources.
 
 Environmental
Regulations
 
 We are
subject to a variety of foreign, federal, state and local governmental
regulations related to environmental protection. The major environmental
regulations applicable to our proposed manufacturing facility include the
Environmental Protection Law of the PRC, the Law of PRC on the Prevention and
Control of Water Pollution, Implementation Rules of the Law of PRC on the
Prevention and Control of Water Pollution, the Law of PRC on the Prevention and
Control of Air Pollution, Implementation Rules of the Law of PRC on the
Prevention and Control of Air Pollution, the Law of PRC on the Prevention and
Control of Solid Waste Pollution, and the Law of PRC on the Prevention and
Control of Noise Pollution.
 
 Our
proposed research and development activities and manufacturing facility are
expected to use, generate and discharge toxic, volatile or otherwise hazardous
chemicals and wastes. If we fail to comply with present or future environmental
laws and regulations, we could be subject to fines, suspension of production or
a cessation of operations. In addition, under some foreign, federal, state and
local statutes and regulations, a governmental agency may seek recovery and
response costs from operators of property where releases of hazardous substances
have occurred or are ongoing, even if the operator was not responsible for the
release or otherwise was not at fault.
  17
  Intellectual
Property Rights
 
 The
Patent Law (1984), as amended by the Decision on Amending the Patent Law (2000),
and the Implementing Rules of the Patent Law (2001), as amended by the Decision
on Amending the Implementing Rules of the Patent Law (2002) provide the
application and protection of patents. An invention patent shall be valid for
twenty years and an external design patent and a utility model patent shall be
valid for ten years, commencing on their application dates, respectively. Any
persons or entities using a patent without the consent of the patent owner,
making counterfeits of patented products, or conducting other activities which
infringe upon patent rights will be held liable for compensation to the patent
owner, fines charged by the administrative authorities and even criminal
punishment.
 
 Our
success depends, in part, on our ability to conduct business without infringing
on the proprietary rights of others. We rely primarily on a combination of trade
secrets, as well as employee and third party confidentiality agreements to
safeguard our intellectual property.
 
 ITEM
1A.  RISK FACTORS
 
 An
investment in our common stock is speculative and involves an extremely high
degree of risk and uncertainty. You should carefully consider the risks
described below, together with the other information contained in this
prospectus, including the consolidated financial statements and notes thereto of
our Company, before deciding to invest in our common stock. The risks described
below are not the only ones facing our Company. Additional risks not presently
known to us or that we presently consider immaterial may also adversely affect
our Company. If any of the following risks occur, our business, financial
condition and results of operations and the value of our common stock could be
materially and adversely affected.
 
 RISKS
RELATING TO OUR COMPANY
 
 WE
ARE AN EARLY STAGE COMPANY AND HAVE NO OPERATING HISTORY ON WHICH TO EVALUATE
OUR POTENTIAL FOR FUTURE SUCCESS.
 
 Our
company was formed in July 2007, and to date has only a short period of
formation, planning, analysis and testing. In addition, we have no operating
history under our proposed business model upon which you can evaluate our
business and prospects.
 
 Our lack
of operating history may prevent a meaningful evaluation of our business,
financial performance and prospects. Subject to successful product testing and
receiving a purchase order for such product in the second quarter of 2008, we
plan to have our first solar cell manufactured using a third-party manufacturer
to produce the product. We have only shipped a small number of solar cells and
have recognized very little revenues from sales of our solar cells.
 
 There can
be no assurance that we will derive significant revenues from products
sales.
 
 We are an
early stage company. You must consider the risks and uncertainties frequently
encountered by early stage companies in new and rapidly evolving markets such as
competing technologies, lack of customer acceptance of a new or improved service
or product and obsolescence of the technology before it can be fully
commercialized. If we are unsuccessful in addressing these risks and
uncertainties, our business, results of operations and financial condition will
be materially and adversely affected.
 
 Doubts
exist about our ability to continue as a going concern.
  18
  IF
WE DO NOT OBTAIN ADDITIONAL CAPITAL, WE MAY BE UNABLE TO SUSTAIN OUR
BUSINESS.
 
 Since our
inception in 2007, we have not received any funds from the issuance of common
stock.  We are actively seeking additional funding, but to date have not
entered into any agreements or other arrangements for such financing. There can
be no assurance that the required additional financing will be available on
terms favorable to us or at all.
 
 Without
additional funding, the company will not be able to pursue its business model.
If adequate funds are not available or are not available on acceptable terms
when required, we would be required to significantly curtail our operations and
would not be able to fund the development of the business envisioned by our
business model. These circumstances could have a material adverse effect on our
business and our ability to continue to operate as a going concern.  If
additional funds are raised through the issuance of equity or convertible debt
securities, our then existing shareholders may experience substantial dilution,
and such securities may have rights, preferences and privileges senior to those
of our common stock.
 
 IF
WE NEED ADDITIONAL CAPITAL TO FUND OUR GROWING OPERATIONS, WE MAY NOT BE ABLE TO
OBTAIN SUFFICIENT CAPITAL AND MAY BE FORCED TO LIMIT THE SCOPE OF OUR
OPERATIONS.
 
 As we
implement our growth strategies, we may experience increased capital needs and
we may not have enough capital to fund future operations without additional
capital investments. Our capital needs will depend on numerous factors,
including (1) our profitability; (2) the release of competitive products by our
competition; (3) the level of our investment in research and development; and
(4) the amount of our capital expenditures. We cannot assure you that we will be
able to obtain capital in the future to meet our needs.
 
 If we
cannot obtain additional funding, we may be required to:
  •
              reduce
      our investments in research and development;•
              limit
      our marketing efforts; and•
              decrease
      or eliminate capital expenditures.
  Such
reductions could have a material adverse affect our business and our ability to
compete.
  Even if
we do find a source of additional capital, we may not be able to negotiate
acceptable terms and conditions for receiving the additional capital. Any future
capital investments could dilute or otherwise materially and adversely affect
the holdings or rights of our existing shareholders. In addition, new equity or
convertible debt securities issued by us to obtain financing could have rights,
preferences and privileges senior to our common stock. We cannot give you any
assurance that any additional financing will be available to us, or if
available, will be on terms favorable to us.
 
 WE
MAY HAVE DIFFICULTY RAISING NECESSARY CAPITAL TO FUND OPERATIONS AS A RESULT OF
MARKET PRICE VOLATILITY OF OUR SHARES OF COMMON STOCK.
 
 If our
business development plans are successful, we may require additional financing
to continue to develop and exploit existing and new technologies and to expand
into new markets. The exploitation of our technologies may, therefore, be
dependent upon our ability to obtain equity financing through debt and equity or
other means. In recent years, the securities markets in the United States have
experienced a high level of price and volume volatility, and the market price of
securities of many companies have experienced wide fluctuations that have not
necessarily been related to the operations, performance, underlying asset values
or prospects of such companies.
  19
  For these
reasons, our shares of common stock can also be expected to be subject to
volatility resulting from purely market forces over which we will have no
control. Such volatility may make it more difficult to find investors willing to
invest in our common stock, or to negotiate equity financing or terms that are
acceptable to us.
 
 WE
HAVE INCURRED LOSSES IN CERTAIN PRIOR PERIODS AND MAY INCUR LOSSES IN THE
FUTURE.
 
 We
incurred net losses of $346,993 for the year ended December 31, 2008, and we may
incur losses in the future. We expect our costs and expenses to increase as we
expand our operations. Our ability to achieve and maintain profitability depends
on the growth rate of the solar power market, the continued global market
acceptance of solar power products in general and our future products in
particular, the pricing trend of solar power products, the competitiveness of
our proposed products as well as our ability to provide new products to meet the
demands of our customers and our ability to control our costs and expenses. We
may not be able to achieve or sustain profitability on a quarterly or annual
basis.
 
 THERE
ARE SIGNIFICANT RISKS IN EXECUTING OUR BUSINESS STRATEGY AND OUR BUSINESS PLANS
COULD CHANGE
 
 To
execute our business plan, we will need to recruit over 300 employees, secure
raw materials from suppliers, set up a manufacturing facility, establish a
distribution channel and secure purchase orders from customers. Each of these
elements carries substantial risk in our ability to execute on them, including
our ability to finance the costs — estimated at $20 million for the cost to
equip a facility to manufacture three product lines — and our ability to
successfully manage the startup. These uncertainties could cause us to
significantly change our strategy.
 
 TO
MAXIMIZE OUR POTENTIAL FOR FUTURE GROWTH AND ACHIEVE OUR EXPECTED REVENUES, WE
NEED TO MANAGE GROWTH IN OUR CURRENT OPERATIONS.
 
 In order
to maximize potential growth, we believe that we must establish our
manufacturing and marketing operations. This will place a significant strain on
our management and on our operational, accounting, and information systems. We
expect that as we grow we will need to improve our financial controls, operating
procedures, and management information systems to handle increased operations.
We will also need to effectively train, motivate, and manage our employees. Our
failure to manage our growth could disrupt our operations and ultimately prevent
us from generating the revenues we expect.
 
 WE
CANNOT ASSURE YOU THAT OUR ORGANIC GROWTH STRATEGY WILL BE
SUCCESSFUL.
 
 One of
our growth strategies is to grow organically by increasing the distribution and
sales of our products in new markets outside of China. However, many obstacles
to entering new markets exist, such as the costs associated with entering into
new markets, developing and implementing effective marketing efforts abroad and
maintaining attractive foreign exchange ratios. We cannot, therefore, assure you
that we will be able to successfully overcome such obstacles and establish our
products in any additional markets. Our inability to successfully implement our
organic growth strategy may have a negative impact on our growth strategy and on
our future financial condition, results of operations or cash
flows.
  20


WE
CANNOT ASSURE YOU THAT OUR ACQUISITION GROWTH STRATEGY WILL BE
SUCCESSFUL.





In
addition to our organic growth strategy we also expect to grow through strategic
acquisitions. We intend to pursue opportunities to acquire businesses that are
complementary or related to our existing product lines or may execute a
potential joint venture or acquisition with a silicon mine or other strategic
partner. We may not be able to locate suitable acquisition or joint venture
candidates at prices that we successfully consider appropriate. If we do
identify an appropriate candidate, we may not be able to successfully negotiate
the terms of an acquisition, finance the acquisition on terms that are
satisfactory to us or if the acquisition occurs successfully, integrate the
acquired business into our existing business. Acquisitions of businesses or
other material operations may require debt financing or additional equity
financing, resulting in leverage or dilution of ownership. Integration of
acquired business operations could disrupt our business by diverting management
away from day-to-day operations. The difficulties of integration may be
increased by the necessity of coordinating geographically dispersed
organizations, integrating personnel with disparate business backgrounds and
combining different corporate cultures. We also may not be able to maintain key
employees or customers of an acquired business or realize cost efficiencies or
synergies or other benefits we anticipated when selecting our acquisition
candidates. In addition, we may need to record write-downs from future
impairments of intangible assets, which could reduce our future reported
earnings. At times, acquisition candidates may have liabilities or adverse
operating issues that we fail to discover through due diligence prior to the
acquisition which will be required to comply with laws of the People's Republic
of China ("PRC"), to the extent applicable. There can be no assurance that any
proposed acquisition will be able to comply with PRC requirements, rules and/or
regulations, or that we will successfully obtain governmental approvals to the
extent required, which may be necessary to consummate such
acquisitions.





IF
WE ARE NOT ABLE TO IMPLEMENT OUR STRATEGIES TO ACHIEVE OUR BUSINESS OBJECTIVES,
OUR BUSINESS OPERATIONS AND FINANCIAL PERFORMANCE MAY BE ADVERSELY
AFFECTED.





Our
business plan and growth strategy is based on currently prevailing circumstances
and the assumption that certain circumstances will or will not occur, as well as
the inherent risks and uncertainties involved in various stages of development.
However, there is no assurance that we will be successful in implementing our
strategies or that our strategies, even if implemented, will lead to the
successful achievement of our objectives. If we are not able to successfully
implement our strategies, our business operations and financial performance may
be adversely affected.





WE
DEPEND ON OUR KEY MANAGEMENT PERSONNEL AND THE LOSS OF THEIR SERVICES COULD
ADVERSELY AFFECT OUR BUSINESS.





We place
substantial reliance upon the efforts and abilities of our executive officers,
Wensheng Chen, our Founder and Chairman; Ling Chen, our President; Jun Ren, Vice
President - Operations; and Renmin Li, Vice President - Product Development
& Research. The loss of the services of any of our executive officers could
have a material adverse effect on our business, operations, revenues or
prospects. We do not maintain key man life insurance on the lives of these
individuals. Mr. Wensheng Chen has significant activities outside the company
that put demands on his time that could detract from his management of the
company’s business.





FAILURE
TO ATTRACT AND RETAIN PERSONNEL COULD HAVE AN ADVERSE IMPACT ON OUR
OPERATIONS.





Our
future success depends on our ability to identify, attract, hire, retain and
motivate other well-qualified managerial, technical, sales and marketing
personnel.  There is intense competition for these individuals, and there
can be no assurance that these professionals will be available in the market or
that we will be able to meet their compensation requirements.


21





RISKS
RELATED TO OUR BUSINESS





SUPPLIERS
ARE CURRENTLY EXPERIENCING AN INDUSTRY-WIDE SHORTAGE OF SILICON INGOTS AND
WAFERS. THE PRICES THAT WE WOULD PAY FOR SILICON INGOTS AND WAFERS HAVE
INCREASED IN THE PAST AND WE EXPECT PRICES MAY CONTINUE TO INCREASE IN THE
FUTURE, WHICH MAY MATERIALLY AND ADVERSELY AFFECT OUR REVENUE GROWTH AND
DECREASE PROFIT MARGINS AND PROFITABILITY.





Silicon
ingots and wafers are an essential raw material in our production of wafers and
PV products. Silicon is created by refining quartz or sand, and is melted and
grown into crystalline ingots or other forms. Some of our potential suppliers
procure silicon ingots from companies that specialize in ingot growth and then
slice these ingots into wafers. We will depend on our suppliers for timely
delivery of silicon ingots and wafers in sufficient quantities and satisfactory
quality, and any disruption in supplies, including fluctuations in the delivery
of supplies or inability to obtain silicon ingots and wafers at an acceptable
cost or at all, will materially and adversely affect our business and
operations.





There is
currently an industry-wide shortage of silicon ingots and silicon wafers, which
has resulted in significant price increases. The average prices of silicon
ingots and silicon wafers may continue to increase. Moreover, we expect the
shortages of silicon ingots and silicon wafers to continue as the solar power
industry continues to grow and as additional manufacturing capacity is added.
Silicon wafers are also used in the semiconductor industry generally and any
increase in demand from that sector will exacerbate the current shortage. The
production of silicon ingots and silicon wafers are capital intensive and adding
manufacturing capacity requires significant lead time. While we are aware that
several new facilities for the manufacture of silicon ingots and silicon wafers
are under construction and many existing facilities are expanding their
production capacities, we do not believe that the supply shortage will be
remedied in the near term. We expect that the demand for silicon ingots and
silicon wafers will continue to outstrip supply for the foreseeable
future.





Since
some suppliers do not themselves manufacture silicon but instead purchase their
requirements from other vendors, it is possible that these suppliers will not be
able to obtain sufficient silicon to satisfy our requirements. In addition,
companies in the PV industry will compete with companies in the semiconductor
industry for silicon ingots and wafers, and companies in that sector typically
have greater purchasing power and market influence than companies in the PV
industry. If we acquire ingots and silicon wafers from suppliers through
short-term supply arrangements we would be subject to the risk that our
suppliers may cease supplying silicon ingots and silicon wafers to us for any
reason, including due to uncertainties in their financial viability. These
suppliers could also choose not to honor such contracts. If either of these
circumstances occurs, our supply of critical raw materials at reasonable costs
and our basic ability to conduct our business could be severely restricted.
Moreover, since some of our supply contracts may require prepayment of a
substantial portion of the contract price, we may not be able to recover such
prepayments and we would suffer loses should such suppliers fail to fulfill
their delivery obligations under the contracts. Furthermore, if we do not fix
the price for the silicon ingots and silicon wafers under supply contracts, the
price we will need to pay may need to be adjusted to reflect the prevailing
market price around the time of delivery, which may be higher than we expect.
Increases in the prices of silicon ingots and silicon wafers could increase our
production costs and may materially and adversely impact our cost of revenue,
gross margins and profitability.





There are
a limited number of silicon ingot and silicon wafer suppliers, and many of our
potential competitors also purchase silicon ingots and silicon wafers from these
suppliers. Our potential competitors may have longer and stronger relationships
with these suppliers than we do. Our potential competitors may also have in
place multi-year supply agreements with these suppliers with longer terms and
may be able to obtain silicon ingots and silicon wafers at a lower cost than we
do. Moreover, the inability to obtain silicon ingots and silicon wafers at
commercially reasonable prices or at all would harm our ability to meet existing
and future customer demand for our products, and could cause us to make fewer
shipments, lose customers and market share and generate lower than anticipated
revenue, thereby materially and adversely affecting our business, financial
condition, results of operations and prospects.


22


IF
PV TECHNOLOGY IS NOT SUITABLE FOR WIDESPREAD ADOPTION, OR SUFFICIENT DEMAND FOR
PV PRODUCTS DOES NOT DEVELOP OR TAKES LONGER TO DEVELOP THAN WE ANTICIPATED, OUR
SALES MAY NOT CONTINUE TO INCREASE OR MAY EVEN DECLINE, AND WE MAY BE UNABLE TO
SUSTAIN PROFITABILITY.





The PV
market is at a relatively early stage of development and the extent to which PV
products will be widely adopted is uncertain. Market data in the PV industry are
not as readily available as those in other more established industries where
trends can be assessed more reliably from data gathered over a longer period of
time. If PV technology proves unsuitable for widespread adoption or if demand
for PV products fails to develop sufficiently, we may not be able to grow our
business or generate sufficient revenues to achieve profitability. In addition,
demand for PV products in our targeted markets, including China, may not develop
or may develop to a lesser extent than we anticipated. Many factors may affect
the viability of widespread adoption of PV technology and demand for PV
products, including:





•
            availability
      of government subsidies and incentives to support the development of the
      PV industry;•
            cost-effectiveness
      of PV products compared to conventional and other non-solar energy sources
      and products;•
            performance
      and reliability of PV products compared to conventional and other
      non-solar energy sources and products;•
            success
      of other alternative energy generation technologies, such as fuel cells,
      wind power and biomass;•
            fluctuations
      in economic and market conditions that affect the viability of
      conventional and non-solar alternative energy sources, such as increases
      or decreases in the prices of oil, coal, natural gas and other fossil
      fuels;•
            the
      cost and availability of credit, loans and other funding mechanisms to
      finance the installation and maintenance of PV systems. For example, a
      rise in interest rates would likely render existing financings more
      expensive and be an obstacle for potential financings that would otherwise
      spur the growth of the PV industry;•
            capital
      expenditures by end users of PV products, which tend to decrease when the
      economy slows down; and•
            deregulation
      of the electric power industry and broader energy
  industry.





WE
POTENTIALLY FACE INTENSE COMPETITION FROM OTHER COMPANIES PRODUCING SOLAR ENERGY
AND OTHER RENEWABLE ENERGY PRODUCTS.





The PV
market is intensely competitive and rapidly evolving. According to Photon
International’s survey in March 2006, as of the end of 2005, 94 companies in the
world produced PV cells and 153 companies produced PV modules. Many of our
potential competitors have established more prominent market positions, and if
we fail to attract and retain customers and establish successful distribution
networks in our target markets for our products, we will be unable to generate
sales. Our competitors include PV divisions of large conglomerates such as Royal
Sanyo Group and Sharp Corporation, specialized cell manufacturers such as
Q-Cells AG, as well as integrated manufacturers of PV products such as Renewable
Energy Corporation and SolarWorld AG. Some of our potential competitors have
also become vertically integrated, from upstream silicon wafer manufacturing to
PV system integration. We expect to compete with future entrants to the PV
market that offer new technological solutions. We may also face competition from
semiconductor manufacturers, a few of which have already announced their
intention to start production of PV cells. Many of our potential competitors are
developing or currently producing products based on new PV technologies,
including thin film, ribbon, sheet and nano technologies, which they believe
will ultimately cost the same as or less than crystalline silicon technologies
similar to ours. In addition, the entire PV industry also faces competition from
conventional and non-solar renewable energy technologies. Due to the relatively
high manufacturing costs compared to most other energy sources, solar energy is
generally not competitive without government incentive
programs.


23





Most of
our potential competitors have substantially greater financial, technical,
manufacturing and other resources than we do. Greater size in some cases
provides them with a competitive advantage with respect to manufacturing costs
because of their economies of scale and their ability to purchase raw materials
at lower prices. For example, those companies that also manufacture
semiconductors may source both semiconductor grade silicon wafers and solar
grade silicon wafers from the same supplier. As a result, those companies may
have stronger bargaining power with the supplier and have an advantage over us
in negotiating favorable pricing, as well as securing silicon ingot and silicon
wafer supplies at times of shortages. Many of our potential competitors also
have greater brand name recognition, more established distribution networks and
larger customer bases. In addition, many of our potential competitors have
well-established relationships with our current and potential distributors and
have extensive knowledge of our target markets. As a result, they may be able to
devote greater resources to the research, development, promotion and sale of
their products or respond more quickly to evolving industry standards and
changes in market conditions than we can. Our failure to adapt to changing
market conditions and to compete successfully with existing or new entrants may
materially and adversely affect our financial condition and results of
operations. Our failure to develop and introduce new PV products could render
our products uncompetitive or obsolete, and reduce our sales and market
share.





The PV
industry is rapidly evolving and competitive. We will need to invest significant
financial resources in research and development to keep pace with technological
advances in the PV industry and to effectively compete in the future. However,
research and development activities are inherently uncertain, and we might
encounter practical difficulties in commercializing our research results. Our
significant expenditures on research and development may not reap corresponding
benefits. A variety of competing PV technologies that other companies may
develop could prove to be more cost-effective and have better performance than
our PV products. Therefore, our development efforts may be rendered obsolete by
the technological advances of others. Breakthroughs in PV technologies that do
not use crystalline silicon could mean that companies such as us that currently
rely entirely on crystalline silicon would encounter a sudden, sharp drop in
sales. Our failure to develop and introduce new PV products could render our
products uncompetitive or obsolete, and result in a decline in our market
share.





INTENSE
COMPETITION FROM EXISTING AND NEW ENTITIES MAY ADVERSELY AFFECT OUR REVENUES AND
PROFITABILITY.





We
compete with other companies, many of whom are developing, or can be expected to
develop, products similar to ours. Some of our competitors are more established
than we are, and have significantly greater financial, technical, marketing and
other resources than we presently possess. Some of our competitors have greater
name recognition and a larger customer base. These competitors may be able to
respond more quickly to new or changing opportunities and customer requirements
and may be able to undertake more extensive promotional activities, offer more
attractive terms to customers, and adopt more aggressive pricing policies. We
intend to create greater brand awareness for our brand name so that we can
successfully compete with our competitors. We cannot assure you that we will be
able to compete effectively with current or future competitors or that the
competitive pressures we face will not harm our business.





OUR
DEPENDENCE ON A LIMITED NUMBER OF SUPPLIERS FOR A SUBSTANTIAL PORTION OF SILICON
INGOTS AND SILICON WAFERS COULD PREVENT US FROM DELIVERING OUR PRODUCTS IN A
TIMELY MANNER TO OUR CUSTOMERS IN THE REQUIRED QUANTITIES, WHICH COULD RESULT IN
ORDER CANCELLATIONS, DECREASED REVENUE AND LOSS OF MARKET SHARE.





From
company inception to the date of filing of this report, we have not purchased
any silicon ingots and silicon wafers. We plan to purchase silicon wafer from
Suntech Power Holdings Co. (NYSE:STP), Motech Industries, Inc. and JA Solar
Holding (NASDAQ: JASO). To develop or secure our relationships with these
suppliers, we may extend interest-free loans or make prepayments to them, or
grant them warrants or other rights to purchase our ordinary shares, which could
increase our costs or expenses. If we fail to develop or maintain our
relationships with these or our other suppliers, we may be unable to manufacture
our products, our products may only be available at a higher cost or after a
long delay, or we could be prevented from delivering our products to our
customers in the required quantities, at competitive prices and on acceptable
terms of delivery. Problems of this kind could cause us to experience order
cancellations, decreased revenue and loss of market share. In general, the
failure of a supplier to supply materials and components that meet our quality,
quantity and cost requirements in a timely manner due to lack of supplies or
other reasons could impair our ability to manufacture our products or could
increase our costs, particularly if we are unable to obtain these materials and
components from alternative sources in a timely manner or on commercially
reasonable terms. We cannot assure you that we will not experience shortfalls of
silicon ingots or silicon wafers from our suppliers in the future or that, in
the event of such shortfalls, we will be able to find other silicon ingots and
silicon wafers suppliers to satisfy our production needs. Any disruption in the
supply of silicon wafers to us may adversely affect our business, financial
condition, results of operations and business prospects.


24





OUR DEPENDENCE ON A LIMITED NUMBER
OF CUSTOMERS MAY CAUSE SIGNIFICANT FLUCTUATIONS OR DECLINES IN OUR
REVENUES.





We plan
to sell a substantial portion of our wafers and PV products to a limited number
of customers, including distributors, engineering design firms, system
integrators, other value-added resellers, as well as integrated manufacturers of
PV products. To date, we have not had any customers or any sales. We plan to
conduct our sales to customers typically through non-exclusive, short-term
arrangements where the contract prices are typically agreed upon between our
customers and us on a quarterly basis, and as such, our actual revenues can vary
significantly. We anticipate that our dependence on a limited number of
customers would continue for the foreseeable future. Consequently, any one of
the following events may cause material fluctuations or declines in our revenues
and have a material adverse effect on our results of operations:





·
            reduction,
      delay or cancellation of orders from one or more significant
      customers;·
            selection
      by one or more significant customers of products competitive with
      ours;·
            loss
      of one or more significant customers and our failure to identify
      additional or replacement customers; and·
            failure
      of any significant customers to make timely payment for our
      products.




CHANGES
TO EXISTING REGULATIONS OVER THE UTILITY SECTOR AND THE PV INDUSTRY MAY PRESENT
TECHNICAL, REGULATORY AND ECONOMIC BARRIERS TO THE PURCHASE AND USE OF PV
PRODUCTS, WHICH MAY SIGNIFICANTLY REDUCE DEMAND FOR OUR PRODUCTS.





The
market for power generation products is heavily influenced by government
regulations and policies concerning the electric utility industry, as well as
the internal policies of electric utilities companies. These regulations and
policies often relate to electricity pricing and technical interconnection of
end user-owned power generation. In a number of countries, these regulations and
policies are being modified and may continue to be modified. End users’
purchases of alternative energy sources, including PV products, could be
deterred by these regulations and policies, which could result in a significant
reduction in the potential demand for our PV products. For example, utility
companies commonly charge fees to larger, industrial customers for disconnecting
from the electricity transmission grid or for having the capacity to use power
from the electricity transmission grid for back-up purposes. These fees could
increase end users’ costs of using our PV products and make our PV products less
desirable, thereby having an adverse effect on our business, prospects, results
of operations and financial condition.





We
anticipate that our PV products and their installation will be subject to
oversight and regulation in accordance with national and local ordinances
relating to building codes, safety, environmental protection, utility
interconnection and metering and related matters in various countries. It is
also burdensome to track the requirements of individual localities and design
equipment to comply with the varying standards. Any new government regulations
or utility policies pertaining to our PV products may result in significant
additional expenses to us, our distributors and end users and, as a result,
could cause a significant reduction in demand for our PV
products.


25





THE
REDUCTION OR ELIMINATION OF GOVERNMENT SUBSIDIES AND ECONOMIC INCENTIVES FOR
ON-GRID SOLAR ENERGY APPLICATIONS COULD CAUSE DEMAND FOR OUR PRODUCTS AND OUR
REVENUES TO DECLINE.





Almost
all of our solar cells sold are eventually utilized in the on-grid market, where
the solar power systems are connected to the utility grid and generate
electricity to feed into the grid. We believe that the near-term growth of the
market for on-grid applications depends in large part on the availability and
size of government subsidies and economic incentives. The reduction or
elimination of subsidies and economic incentives may adversely affect the growth
of this market or result in increased price competition, either of which could
cause our revenues to decline.





Today,
when upfront system costs are factored into cost per kilowatt, the cost of solar
power substantially exceeds the cost of power furnished by the electric utility
grid in many locations. As a result, national and local governmental bodies in
many countries, most notably in Germany, Spain, Italy, the United States and
China, have provided subsidies and economic incentives in the form of feed-in
tariffs, rebates, tax credits and other incentives to distributors, system
integrators and manufacturers of solar power products to promote the use of
solar energy in on-grid applications and to reduce dependence on other forms of
energy. These government economic incentives could potentially be reduced or
eliminated altogether. For example, Germany has been a strong supporter of solar
power products and systems, and is a significant market for our customers that
engage in solar module and system integration businesses. Utilities in Germany
are generally obligated to purchase electricity generated from grid-connected
solar power systems at defined feed-in tariff rates, which will decline over
time according to a predetermined schedule. Specifically, German subsidies
decline at a rate of 5.0% to 6.5% per year for systems installed after 2006
based on the type and size of the solar power systems, and discussions are
currently underway about amending the incentives for solar power systems under
the German Renewable Energy Law. Any political or market changes in Germany
could result in significant reductions or eliminations of subsidies or economic
incentives, such as a more accelerated reduction of feed-in tariffs than as
planned according to the current schedule. The solar power industry is currently
moving towards the economies of scale necessary for solar power to become
cost-effective in a non-subsidized market. Reductions in, or eliminations of,
subsidies and economic incentives for on-grid solar energy applications could
result in decreased demand for our products and cause our revenues to
decline.





WE
MAY INCUR SIGNIFICANT COSTS TO ENSURE COMPLIANCE WITH U.S. CORPORATE GOVERNANCE
AND ACCOUNTING REQUIREMENTS.





We may
incur significant costs associated with our public company reporting
requirements, costs associated with newly applicable corporate governance
requirements, including requirements under the Sarbanes-Oxley Act of 2002 and
other rules implemented by the Securities and Exchange Commission and the NASDAQ
OTCBB. We expect all of these applicable rules and regulations to increase our
legal and financial compliance costs and to make some activities more
time-consuming and costly. We also expect that these applicable rules and
regulations may make it more difficult and more expensive for us to obtain
director and officer liability insurance and we may be required to accept
reduced policy limits and coverage or incur substantially higher costs to obtain
the same or similar coverage. As a result, it may be more difficult for us to
attract and retain qualified individuals to serve on our board of directors or
as executive officers. We are currently evaluating and monitoring developments
with respect to these newly applicable rules, and we cannot predict or estimate
the amount of additional costs we may incur or the timing of such
costs.


26





PROBLEMS
WITH PRODUCT QUALITY OR PRODUCT PERFORMANCE MAY CAUSE US TO INCUR WARRANTY
EXPENSES, DAMAGE OUR MARKET REPUTATION AND PREVENT US FROM ACHIEVING INCREASED
SALES AND MARKET SHARE.





The PV
modules we plan to sell are typically sold with a 20 year warranty and 1-year
warranty for defects in materials and workmanship, respectively. The PV modules
may also contain a 10 year and 20 year warranty against declines of more than
8.0% and 10.0% of initial power generation capacity, respectively. As a result
of these warranties, we would bear the risk of extensive warranty claims long
after we have sold our products and recognized revenues. We have not retained
any third party insurance to cover certain warranty-related claims on our
products. We have not sold any PV modules since inception, and accordingly none
of our PV modules has been in use for more than five years. Because our products
have not been in use, we cannot assure you that our assumptions regarding the
durability and reliability of our products are reasonable. Our warranty
provisions in future may be inadequate, and we may have to incur substantial
expense to repair or replace defective products in the future. Furthermore,
widespread product failures may damage our market reputation and cause our sales
to decline.





WE
HAVE LIMITED INSURANCE COVERAGE AND MAY INCUR LOSSES RESULTING FROM PRODUCT
LIABILITY CLAIMS OR BUSINESS INTERRUPTIONS.





If we
secure any PV product sales, we would be exposed to risks associated with
product liability claims in the event that the use of the PV products sold
results in injury. Since our proposed products are electricity producing
devices, it is possible that users could be injured or killed by the products,
whether by product malfunctions, defects, improper installation or other causes.
We have not sold any products and, due to limited historical experience, we are
unable to predict whether product liability claims will be brought against us in
the future or the effect of any resulting adverse publicity on our business.
Moreover, we may have only limited product liability insurance and may not have
adequate resources to satisfy a judgment in the event of a successful claim
against us. The successful assertion of product liability claims against us
could result in potentially significant monetary damages and require us to make
significant payments. In addition, as the insurance industry in China is still
in an early stage of development, business interruption insurance available in
China offers limited coverage compared to that offered in many other
countries.





LEGISLATIVE
AND REGULATORY ACTIONS AND POTENTIAL NEW ACCOUNTING PRONOUNCEMENTS, INCLUDING
SECTION 404 OF THE SARBANES-OXLEY ACT OF 2002, ARE LIKELY TO IMPACT OUR FUTURE
FINANCIAL CONDITION AND RESULTS OF OPERATIONS.





There
have been certain regulatory changes, including the Sarbanes-Oxley Act of 2002,
and there may potentially be new accounting pronouncements or additional
regulatory changes, which will have an impact on our future financial condition
and results of operations.  The Sarbanes-Oxley Act of 2002 and other rule
changes as well as proposed legislative initiatives will increase our general
and administrative costs, as we will incur increased legal and accounting fees
to comply with such rule changes.  In addition, proposed initiatives are
expected to result in changes in certain accounting and disclosure rules.
 These and other potential changes could materially increase the expenses
we report in our financial statements and adversely affect our operating
results.





Section
404 of the Sarbanes-Oxley Act of 2002 requires management to assess its internal
controls over financial reporting and requires auditors to attest to that
assessment. Current regulations of the Securities and Exchange Commission will
require us to (1) include this assessment in our Annual Report on Form 10-K
commencing with the annual report for our fiscal year ending December 31, 2009,
and (2) include this attestation in our Annual Report on Form 10-K commencing
with the annual report for our fiscal year ending December 31,
2009.


27


We will
incur significant increased costs in implementing and responding to the new
requirements. In particular, the rules governing the standards that must be met
for management to assess its internal controls over financial reporting under
Section 404 are complex and require significant documentation, testing and
possible remediation. Our process of reviewing, documenting and testing our
internal controls over financial reporting may cause a significant strain on our
management, information systems and resources. We will have to invest in
additional accounting and software systems. We may be required to hire
additional personnel and to use outside legal, accounting and advisory services.
We will also incur additional fees from our auditors as they perform the
additional services necessary for them to provide their attestation. If we are
unable to favorably assess the effectiveness of our internal controls over
financial reporting when we are required, or if our independent auditors are
unable to provide an unqualified attestation report on such assessment, we may
be required to change our internal controls over financial reporting to
remediate deficiencies. In addition, investors may lose confidence in the
reliability of our financial statements causing our stock price to
decline.





ACTS
OF TERRORISM, RESPONSES TO ACTS OF TERRORISM AND ACTS OF WAR MAY IMPACT OUR
BUSINESS AND OUR ABILITY TO RAISE CAPITAL.





Future
acts of war or terrorism, national or international responses to such acts, and
measures taken to prevent such acts may harm our ability to raise capital or our
ability to operate, especially to the extent we depend upon activities conducted
in foreign countries, such as China.  In addition, the threat of future
terrorist acts or acts of war may have effects on the general economy or on our
business that are difficult to predict.  We are not insured against damage
or interruption of our business caused by terrorist acts or acts of
war.





RISKS
RELATING TO THE PEOPLE'S REPUBLIC OF CHINA





CURRENCY
CONVERSION AND EXCHANGE RATE VOLATILITY COULD ADVERSELY AFFECT OUR FINANCIAL
CONDITION.





The PRC
government imposes control over the conversion of Renminbi into foreign
currencies. Under the current unified floating exchange rate system, the
People's Bank of China publishes an exchange rate, which we refer to as the
People's Bank of China exchange rate, based on the previous day's dealings in
the inter-bank foreign exchange market. Financial institutions authorized to
deal in foreign currency may enter into foreign exchange transactions at
exchange rates within an authorized range above or below the People's Bank of
China exchange rate according to market conditions. Pursuant to the Foreign
Exchange Control Regulations of the PRC issued by the State Council which came
into effect on April 1, 1996, and the Regulations on the Administration of
Foreign Exchange Settlement, Sale and Payment of the PRC which came into effect
on July 1, 1996, regarding foreign exchange control, conversion of Renminbi into
foreign exchange by Foreign Investment Enterprises, for use on current account
items, including the distribution of and profits to foreign investors, is
permissible. Conversion of Renminbi into foreign currencies for capital account
items, including direct investment, loans, and security investment, is still
under certain restrictions. On January 14, 1997, the State Council amended the
Foreign Exchange Control Regulations and added, among other things, an important
provision, which provides that the PRC government shall not impose restrictions
on recurring international payments and transfers under current account
items.




Enterprises
in the PRC (including Foreign Investment Enterprises) which require foreign
exchange for transactions relating to current account items, may, without
approval of the State Administration of Foreign Exchange, or SAFE, effect
payment from their foreign exchange account or convert and pay at the designated
foreign exchange banks by providing valid receipts and proofs.


28





TO
THE EXTENT OUR ASSETS ARE LOCATED IN CHINA, ANY DIVIDENDS OR PROCEEDS FROM
LIQUIDATION IS SUBJECT TO THE APPROVAL OF THE RELEVANT CHINESE GOVERNMENT
AGENCIES.





Following
the approval of our subsidiary as a WFOE, we plan to set up our manufacturing
facilities in Nanyang city, Henan province, China, our assets will be
predominantly located inside China. Under the laws governing foreign invested
enterprises in China, dividend distribution and liquidation are allowed but
subject to special procedures under the relevant laws and rules. Any dividend
payment will be subject to the decision of the board of directors and subject to
foreign exchange rules governing such repatriation. Any liquidation is subject
to both the relevant government agency's approval and supervision as well the
foreign exchange control. This may generate additional risk for our investors in
case of dividend payment and liquidation.





CHINA’S
ECONOMIC POLICIES COULD AFFECT OUR BUSINESS.





To the
extent our assets will be located in China and to the extent our revenue will be
derived from our operations in China, our results of business and prospects
would be subject to the economic, political and legal developments in
China.





While
China's economy has experienced a significant growth in the past twenty years,
growth has been irregular, both geographically and among various sectors of the
economy. The Chinese government has implemented various measures to encourage
economic growth and guide the allocation of resources. Some of these measures
benefit the overall economy of China, but may also have a negative effect on us.
For example, our sales results and financial condition may be adversely affected
by the government control over capital investments or changes in tax regulations
with our future customers.





The
economy of China has been transitioning from a planned economy to a more
market-oriented economy. In recent years the Chinese government has implemented
measures emphasizing the utilization of market forces for economic reform and
the reduction of state ownership of productive assets and the establishment of
corporate governance in business enterprises; however, a substantial portion of
productive assets in China are still owned by the Chinese government. In
addition, the Chinese government continues to play a significant role in
regulating industry development by imposing industrial policies. It also
exercises significant control over China's economic growth through the
allocation of resources, controlling payment of foreign currency-denominated
obligations, setting monetary policy and providing preferential treatment to
particular industries or companies.





WE
MAY FACE OBSTACLES FROM THE COMMUNIST SYSTEM IN THE PEOPLE'S REPUBLIC OF
CHINA.





Foreign
companies conducting operations in The People's Republic of China face
significant political, economic and legal risks. The Communist regime in The
People's Republic of China includes a stifling bureaucracy which may hinder
Western investment.





WE
MAY HAVE DIFFICULTY ESTABLISHING ADEQUATE MANAGEMENT, LEGAL AND FINANCIAL
CONTROLS IN THE PEOPLE'S REPUBLIC OF CHINA.





The
People's Republic of China historically has been deficient in Western style
management and financial reporting concepts and practices, as well as in modern
banking, computer and other control systems. We may have difficulty in hiring
and retaining a sufficient number of qualified employees to work in The People's
Republic of China for our wholly foreign owned enterprise (WFOE) in China. As a
result of these factors, we may experience difficulty in establishing
management, legal and financial controls, collecting financial data and
preparing financial statements, books of account and corporate records and
instituting business practices that meet Western standards.


29


BECAUSE
OUR ASSETS AND OPERATIONS MIGHT BE LOCATED IN CHINA, YOU MAY HAVE DIFFICULTY
ENFORCING ANY CIVIL LIABILITIES AGAINST US UNDER THE SECURITIES AND OTHER LAWS
OF THE UNITED STATES OR ANY STATE.





We are a
holding company, and all of our assets might be located in the Republic of
China. In addition, our directors and officers are non-residents of the United
States, and all or a substantial portion of the assets of these non-residents
are located outside the United States. As a result, it may be difficult for
investors to effect service of process within the United States upon these
non-residents, or to enforce against them judgments obtained in United States
courts, including judgments based upon the civil liability provisions of the
securities laws of the United States or any state.





There is
uncertainty as to whether courts of the Republic of China would
enforce:





·
            Judgments
      of United States courts obtained against us or these non-residents based
      on the civil liability provisions of the securities laws of the United
      States or any state; or·
            In
      original actions brought in the Republic of China, liabilities against us
      or non-residents predicated upon the securities laws of the United States
      or any state. Enforcement of a foreign judgment in the Republic of China
      also may be limited or otherwise affected by applicable bankruptcy,
      insolvency, liquidation, arrangement, moratorium or similar laws relating
      to or affecting creditors' rights generally and will be subject to a
      statutory limitation of time within which proceedings may be
      brought.





THE
PRC LEGAL SYSTEM EMBODIES UNCERTAINTIES, WHICH COULD LIMIT LAW ENFORCEMENT
AVAILABILITY.





The PRC
legal system is a civil law system based on written statutes. Unlike common law
systems, decided legal cases have little precedence. In 1979, the PRC government
began to promulgate a comprehensive system of laws and regulations governing
economic matters in general. The overall effect of legislation over the past 27
years has significantly enhanced the protections afforded to various forms of
foreign investment in China. Each of our PRC operating subsidiaries and
affiliates is subject to PRC laws and regulations. However, these laws and
regulations change frequently and the interpretation and enforcement involve
uncertainties. For instance, we may have to resort to administrative and court
proceedings to enforce the legal protection that we are entitled to by law or
contract. However, since PRC administrative and court authorities have
significant discretion in interpreting statutory and contractual terms, it may
be difficult to evaluate the outcome of administrative court proceedings and the
level of law enforcement that we would receive in more developed legal systems.
Such uncertainties, including the inability to enforce our contracts, could
affect our business and operation. In addition, intellectual property rights and
confidentiality protections in China may not be as effective as in the United
States or other countries. Accordingly, we cannot predict the effect of future
developments in the PRC legal system, particularly with regard to the industries
in which we operate, including the promulgation of new laws. This may include
changes to existing laws or the interpretation or enforcement thereof, or the
preemption of local regulations by national laws. These uncertainties could
limit the availability of law enforcement, including our ability to enforce our
agreements with the government entities and other foreign
investors.


30


ANY
DIVIDENDS AND OTHER DISTRIBUTIONS FROM ANY SUBSIDIARIES IN CHINA IS SUBJECT TO
VARIOUS LEGAL AND CONTRACTUAL RESTRICTIONS AND UNCERTAINTIES, AND OUR ABILITY TO
PAY DIVIDENDS OR MAKE OTHER DISTRIBUTIONS TO OUR SHAREHOLDERS ARE NEGATIVELY
AFFECTED BY THOSE RESTRICTIONS AND UNCERTAINTIES.




We plan
to operate manufacturing facilities in Nanyang city, Henan province in China
through PRC subsidiaries.  As a result, our profits available for
distribution to our shareholders are dependent on the profits available for
distribution from PRC subsidiaries.  If the subsidiary incurs debt on its
own behalf, the debt instruments may restrict its ability to pay dividends or
make other distributions, which in turn would limit our ability to pay dividends
on our shares.  Under the current PRC laws, because we are incorporated in
the Nevada, any PRC subsidiaries would be regarded as Sino-foreign joint venture
enterprises in China.  Although dividends paid by foreign invested
enterprises, such as wholly foreign-owned enterprises and Sino-foreign joint
ventures, are not subject to any PRC corporate withholding tax, the PRC laws
permit payment of dividends only out of net income as determined in accordance
with PRC accounting standards and regulations.  Determination of net income
under PRC accounting standards and regulations may differ from determination
under U.S. GAAP in significant aspects, such as the use of different principles
for recognition of revenues and expenses.  In addition, if we make
additional capital contributions to PRC subsidiaries, (which may occur through
the capitalization of undistributed profits), then additional approval of the
PRC government would be required due to an increase in our registered capital
and total investment .  Under the PRC laws, a Sino-foreign joint venture
enterprise is required to set aside a portion of its net income each year to
fund designated statutory reserve funds.  These reserves are not
distributable as cash dividends.  As a result, our primary internal source
of funds of dividend payments from PRC subsidiaries are subject to these and
other legal and contractual restrictions and uncertainties, which in turn may
limit or impair our ability to pay dividends to our shareholders.
 Moreover, any transfer of funds from us to PRC subsidiaries, either as a
shareholder loan or as an increase in registered capital, is subject to
registration with or approval by PRC governmental authorities. We currently do
not intend on paying any dividends in the future and expect to retain all
available funds to support our operations and to finance growth and development
of our business. We have never declared dividends or paid cash dividends.
 Our board of directors will make any future decisions regarding dividends.
 We currently intend to retain and use any future earnings for the
development and expansion of our business and do not anticipate paying any cash
dividends in the near future.  Therefore, any gains on an investment in our
common stock will likely occur through an increase in our stock price, which may
or may not occur.





FAILURE
TO COMPLY WITH PRC REGULATIONS RELATING TO THE ESTABLISHMENT OF OFFSHORE SPECIAL
PURPOSE COMPANIES BY PRC RESIDENTS MAY SUBJECT OUR PRC RESIDENT STOCKHOLDERS TO
PERSONAL LIABILITY, LIMIT OUR ABILITY TO ACQUIRE PRC COMPANIES OR TO INJECT
CAPITAL INTO OUR PRC SUBSIDIARIES, LIMIT OUR PRC SUBSIDIARIES’ ABILITY TO
DISTRIBUTE PROFITS TO US OR OTHERWISE MATERIALLY ADVERSELY AFFECT
US.




In
October 2005, the PRC State Administration of Foreign Exchange, or SAFE, issued
the Notice on Relevant Issues in the Foreign Exchange Control over Financing and
Return Investment Through Special Purpose Companies by Residents Inside China,
generally referred to as Circular 75, which required PRC residents to register
with the competent local SAFE branch before establishing or acquiring control
over an offshore special purpose company, or SPV, for the purpose of engaging in
an equity financing outside of China on the strength of domestic PRC assets
originally held by those residents. Internal implementing guidelines issued by
SAFE, which became public in June 2007 (known as Notice 106), expanded the reach
of Circular 75 by (1) purporting to cover the establishment or acquisition of
control by PRC residents of offshore entities which merely acquire "control"
over domestic companies or assets, even in the absence of legal ownership; (2)
adding requirements relating to the source of the PRC resident's funds used to
establish or acquire the offshore entity; (i) covering the use of existing
offshore entities for offshore financings; (3) purporting to cover situations in
which an offshore SPV establishes a new subsidiary in China or acquires an
unrelated company or unrelated assets in China; and (4) making the domestic
affiliate of the SPV responsible for the accuracy of certain documents which
must be filed in connection with any such registration, notably, the business
plan which describes the overseas financing and the use of proceeds. Amendments
to registrations made under Circular 75 are required in connection with any
increase or decrease of capital, transfer of shares, mergers and acquisitions,
equity investment or creation of any security interest in any assets located in
China to guarantee offshore obligations, and Notice 106 makes the offshore SPV
jointly responsible for these filings. In the case of an SPV which was
established, and which acquired a related domestic company or assets, before the
implementation date of Circular 75, a retroactive SAFE registration was required
to have been completed before March 31, 2006; this date was subsequently
extended indefinitely by Notice 106, which also required that the registrant
establish that all foreign exchange transactions undertaken by the SPV and its
affiliates were in compliance with applicable laws and regulations. Failure to
comply with the requirements of Circular 75, as applied by SAFE in accordance
with Notice 106, may result in fines and other penalties under PRC laws for
evasion of applicable foreign exchange restrictions. Any such failure could also
result in the SPV’s affiliates being impeded or prevented from distributing
their profits and the proceeds from any reduction in capital, share transfer or
liquidation to the SPV, or from engaging in other transfers of funds into or out
of China.


31




We
believe our stockholders who are PRC residents as defined in Circular 75 have
registered with the relevant branch of SAFE, as currently required, in
connection with their equity interests in us and our acquisitions of equity
interests in our PRC subsidiaries.  However, we cannot provide any
assurances that their existing registrations have fully complied with, and they
have made all necessary amendments to their registration to fully comply with,
all applicable registrations or approvals required by Circular 75.
 Moreover, because of uncertainty over how Circular 75 will be interpreted
and implemented, and how or whether SAFE will apply it to us, we cannot predict
how it will affect our business operations or future strategies.  For
example, our present and prospective PRC subsidiaries' ability to conduct
foreign exchange activities, such as the remittance of dividends and foreign
currency-denominated borrowings, may be subject to compliance with Circular 75
by our PRC resident beneficial holders.  In addition, such PRC residents
may not always be able to complete the necessary registration procedures
required by Circular 75.  We also have little control over either our
present or prospective direct or indirect stockholders or the outcome of such
registration procedures.  A failure by our PRC resident beneficial holders
or future PRC resident stockholders to comply with Circular 75, if SAFE requires
it, could subject these PRC resident beneficial holders to fines or legal
sanctions, restrict our overseas or cross-border investment activities, limit
our subsidiaries' ability to make distributions or pay dividends or affect our
ownership structure, which could adversely affect our business and
prospects.





The value
of our common stock will be affected by the foreign exchange rate between U.S.
dollars and RMB, and between those currencies and other currencies in which our
sales may be denominated.  For example, if we need to convert U.S. dollars
into RMB for our operational needs and the RMB appreciates against the U.S.
dollar at that time, our financial position, our business, and the price of our
common stock may be harmed.  Conversely, if we decide to convert our RMB
into U.S. dollars for the purpose of declaring dividends on our common stock or
for other business purposes and the U.S. dollar appreciates against the RMB, the
U.S. dollar equivalent of our earnings from our subsidiaries in China would be
reduced.




IF
THE CHINA SECURITIES REGULATORY COMMISSION, OR CSRC, OR ANOTHER PRC REGULATORY
AGENCY, DETERMINES THAT CSRC APPROVAL IS REQUIRED IN CONNECTION WITH THIS
OFFERING, THIS OFFERING MAY BE DELAYED OR CANCELLED, OR WE MAY BECOME SUBJECT TO
PENALTIES.




On August
8, 2006, six PRC regulatory agencies, including the CSRC, promulgated the
Regulation on Mergers and Acquisitions of Domestic Companies by Foreign
Investors, which became effective on September 8, 2006. This new regulation,
among other things, has certain provisions that require SPVs formed for the
purpose of acquiring PRC domestic companies and controlled by PRC individuals,
to obtain the approval of the CSRC prior to publicly listing their securities on
an overseas stock market.  However, the new regulation does not expressly
provide that approval from the CSRC is required for the offshore listing of a
SPV which acquires, directly or indirectly, equity interest or shares of
domestic PRC entities held by domestic companies or individuals by cash payment,
nor does it expressly provide that approval from CSRC is not required for the
offshore listing of a SPV which has fully completed its acquisition of equity
interest of domestic PRC equity prior to September 8, 2006.  On September
21, 2006, the CSRC published on its official website a notice specifying the
documents and materials that are required to be submitted for obtaining CSRC
approval.  It is not clear whether the provisions in the new regulation
regarding the offshore listing and trading of the securities of a SPV applies to
an offshore company such as us which has acquired the equity interest of PRC
domestic entities in cash and has completed the acquisition of the equity
interest of PRC domestic entities prior to the effective date of the new
regulation.  Since the new regulation has only recently been adopted, there
remains some uncertainty as to how this regulation will be interpreted or
implemented.  Although the CSRC or another PRC regulatory agency has not
determined that CSRC approval is required for this offering, if the CSRC or
another PRC regulatory agency subsequently determines that the CSRC's approval
is required, we may face sanctions by the CSRC or another PRC regulatory agency.
If this happens, these regulatory agencies may impose fines and penalties on our
operations in the PRC, limit our operating privileges in the PRC, delay or
restrict the repatriation of the proceeds from this offering into the PRC,
restrict or prohibit payment or remittance of dividends to us or take other
actions that could have a material adverse effect on our business, financial
condition, results of operations, reputation and prospects, as well as the
trading price of our shares. The CSRC or other PRC regulatory agencies may also
take actions requiring us, or making it advisable for us, to delay or cancel
this offering before settlement and delivery of the shares being offered by
us.


32







WE
MAY BE EXPOSED TO LIABILITIES UNDER THE FOREIGN CORRUPT PRACTICES ACT, AND ANY
DETERMINATION THAT WE VIOLATED THE FOREIGN CORRUPT PRACTICES ACT COULD HAVE A
MATERIAL ADVERSE EFFECT ON OUR BUSINESS.




We are
subject to the Foreign Corrupt Practice Act, or FCPA, and other laws that
prohibit improper payments or offers of payments to foreign governments and
their officials and political parties by U.S. persons and issuers as defined by
the statute, for the purpose of obtaining or retaining business.  We have
operations, agreements with third parties and we make sales in China.  Our
activities in China create the risk of unauthorized payments or offers of
payments by the employees, consultants, sales agents or distributors of our
Company, even though they may not always be subject to our control.  It is
our policy to implement safeguards to discourage these practices by our
employees.  However, our existing safeguards and any future improvements
may prove to be less than effective, and the employees, consultants, sales
agents or distributors of our Company may engage in conduct for which we might
be held responsible.  Violations of the FCPA may result in severe criminal
or civil sanctions, and we may be subject to other liabilities, which could
negatively affect our business, operating results and financial condition. In
addition, the U.S. government may seek to hold our Company liable for successor
liability FCPA violations committed by companies in which we invest or that we
acquire.





RISKS
RELATED TO CORPORATE AND STOCK MATTERS





OUR
STOCK IS A PENNY STOCK. TRADING OF OUR STOCK MAY BE RESTRICTED BY THE SEC'S
PENNY STOCK REGULATIONS WHICH MAY LIMIT A STOCKHOLDER'S ABILITY TO BUY AND SELL
OUR STOCK.





Our stock
is a penny stock. The SEC has adopted Rule 15g-9 which generally defines "penny
stock" to be any equity security that has a market price (as defined) less than
$5.00 per share or an exercise price of less than $5.00 per share, subject to
certain exceptions. Our securities are covered by the penny stock rules, which
impose additional sales practice requirements on broker-dealers who sell to
persons other than established customers and "accredited investors". The term
"accredited investor" refers generally to institutions with assets in excess of
$5,000,000 or individuals with a net worth in excess of $1,000,000 or annual
income exceeding $200,000 or $300,000 jointly with their spouse. The penny stock
rules require a broker-dealer, prior to a transaction in a penny stock not
otherwise exempt from the rules, to deliver a standardized risk disclosure
document in a form prepared by the SEC which provides information about penny
stocks and the nature and level of risks in the penny stock market. The
broker-dealer also must provide the customer with current bid and offer
quotations for the penny stock, the compensation of the broker-dealer and its
salesperson in the transaction and monthly account statements showing the market
value of each penny stock held in the customer's account. The bid and offer
quotations, and the broker-dealer and salesperson compensation information, must
be given to the customer orally or in writing prior to effecting the transaction
and must be given to the customer in writing before or with the customer's
confirmation. In addition, the penny stock rules require that prior to a
transaction in a penny stock not otherwise exempt from these rules, the
broker-dealer must make a special written determination that the penny stock is
a suitable investment for the purchaser and receive the purchaser's written
agreement to the transaction. These disclosure requirements may have the effect
of reducing the level of trading activity in the secondary market for the stock
that is subject to these penny stock rules. Consequently, these penny stock
rules may affect the ability of broker-dealers to trade our securities. We
believe that the penny stock rules discourage investor interest in and limit the
marketability of our common stock.


33





NASD
SALES PRACTICE REQUIREMENTS MAY ALSO LIMIT A STOCKHOLDER'S ABILITY TO BUY AND
SELL OUR STOCK.





Section
15(g) of the Securities Exchange Act of 1934, as amended, and Rule 15g-2
promulgated thereunder by the SEC require broker-dealers dealing in penny stocks
to provide potential investors with a document disclosing the risks of penny
stocks and to obtain a manually signed and dated written receipt of the document
before effecting any transaction in a penny stock for the investor's
account.





Potential
investors in our common stock are urged to obtain and read such disclosure
carefully before purchasing any shares that are deemed to be "penny stock."
Moreover, Rule 15g-9 requires broker-dealers in penny stocks to approve the
account of any investor for transactions in such stocks before selling any penny
stock to that investor. This procedure requires the broker-dealer to (i) obtain
from the investor information concerning his or her financial situation,
investment experience and investment objectives; (ii)reasonably determine, based
on that information, that transactions in penny stocks are suitable for the
investor and that the investor has sufficient knowledge and experience as to be
reasonably capable of evaluating the risks of penny stock transactions; (iii)
provide the investor with a written statement setting forth the basis on which
the broker-dealer made the determination in (ii) above; and (iv) receive a
signed and dated copy of such statement from the investor, confirming that it
accurately reflects the investor's financial situation, investment experience
and investment objectives. Compliance with these requirements may make it more
difficult for holders of our common stock to resell their shares to third
parties or to otherwise dispose of them in the market or otherwise.





SHARES
ELIGIBLE FOR FUTURE SALE MAY ADVERSELY AFFECT THE MARKET PRICE OF OUR COMMON
STOCK, AS THE FUTURE SALE OF A SUBSTANTIAL AMOUNT OF OUR RESTRICTED STOCK IN THE
PUBLIC MARKETPLACE COULD REDUCE THE PRICE OF OUR COMMON STOCK.





From time
to time, certain of our stockholders may be eligible to sell all or some of
their shares of common stock by means of ordinary brokerage transactions in the
open market pursuant to Rule 144, promulgated under the Securities Act ("Rule
144"), subject to certain limitations. In general, pursuant to Rule 144, a
stockholder (or stockholders whose shares are aggregated) who has satisfied a
one-year holding period may, under certain circumstances, sell within any
three-month period a number of securities which does not exceed the greater of
1% of the then outstanding shares of common stock or the average weekly trading
-volume of the class during the four calendar weeks prior to such sale. Rule 144
also permits, under certain circumstances, the sale of securities, without any
limitations, by a non-affiliate of our company that has satisfied a two-year
holding period. Any substantial sale of common stock pursuant to Rule 144 or
pursuant to any resale prospectus may have an adverse effect on the market price
of our securities.


34


WE
HAVE A HIGH CONCENTRATION OF STOCK OWNERSHIP AND CONTROL, AND A SMALL NUMBER OF
SHAREHOLDERS HAVE THE ABILITY TO EXERT SIGNIFICANT CONTROL IN MATTERS REQUIRING
SHAREHOLDER VOTES AND MAY HAVE INTERESTS THAT CONFLICT WITH YOURS.





Our
common stock ownership is highly concentrated. See “Principal Shareholders.” As
a result, a relatively small number of shareholders, acting together, have the
ability to control all matters requiring shareholder approval, including the
election of directors and approval of mergers and other significant corporate
transactions. This concentration of ownership may have the effect of delaying,
preventing or deterring a change in control of our company. It could also
deprive our shareholders of an opportunity to receive a premium for their shares
as part of a sale of our company and it may affect the market price of our
common stock. In deciding how to vote on such matters, those shareholders’
interests may conflict with yours.





ITEM
2.  PROPERTIES





Our
principal executive offices are located at No. 1 Pingbei Road 2, Nanping Science
& Technology Industrial Park, Zhuhai City, Guangdong Province, the People’s
Republic of China 519060. This is the office of our Chairman and CEO, Mr.
Wensheng Chen, and the cost of using that office is approximately $15,000 per
year. Our telephone number at our principal executive office is 86-756-8682610.
In addition, we have acquired land use rights to 71,280 square meters of land
located at Houlin Village Erlangmiao Town in Henan Province in China where we
plan to build our manufacturing facilities. We have reserved a domain and intend
to maintain an Internet website at www.Kuong-U.com in both Chinese and English
language. Information on our websites is not part of this report.





ITEM
3.  LEGAL PROCEEDINGS





We are
currently not involved in any litigation that could have a material adverse
effect on our financial condition or results of operations. There is no action,
suit, proceeding, inquiry or investigation before or by any court, public board,
government agency, self-regulatory organization or body pending or, to the
knowledge of the executive officers of our Company or any of our subsidiaries,
threatened against or affecting our company, our common stock, any of the
Company’s subsidiaries or of the Company's subsidiaries' officers or directors
in their capacities as such, in which an adverse decision could have a material
adverse effect.





ITEM
4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS





None.





PART
II





ITEM
5.  MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS
AND ISSUER PURCHASES OF EQUITY SECURITIES





MARKET
INFORMATION





There is
currently no active market for our securities.





SHAREHOLDERS
OF RECORD





As of
March 11, 2009, there were 49 holders of record of our common stock, not
including holders who hold their shares in street name.


35





DIVIDENDS





We have
never paid cash dividend on our common stock. We intend to keep future earnings,
if any, to finance the expansion of our business, and we do not anticipate that
any cash dividends will be paid in the foreseeable future. Our future payment of
dividend will depend on our earnings, capital requirements, expansion plans,
financial condition and other relevant factors.





ITEM
6.  SELECTED FINANCIAL DATA





Not
required for smaller reporting company.





ITEM
7.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS





HISTORY





Universal
Solar Technology, Inc. was incorporated in the State of Nevada on July 24, 2007.
It operates through its wholly owned subsidiary, Kuong U Science &
Technology (Group) Ltd. (“Kuong U”), a company incorporated in
Macau, Special Administrative Region of the People's Republic of China
(Macau SARC) on May 10, 2007.





We are a
development stage company and have not generated or realized any revenues from
our business operations.





We have
completed the development of our prototype product, and selected Yuemao Laser as
the third party manufacturer should we receive orders. We believe the technical
aspects of our prototype products are sufficiently developed and are ready to
market in the EU and elsewhere.





In
addition, we have received test results for our Photovoltaic Modules, GYSP175
and have passed the VDE standard certificates of IEC 61730-1, and 61730-2, and
IEC 61215. As a result of meeting these standards, we are able to market our
Photovoltaic Modules, GYSP175 in Europe.





We have
also registered our subsidiary, Nanyang UST as a WFOE in Nanyang City, Henan
Province, China, under the foreign owned enterprise laws of China. We plan to
manufacturing solar wafers, solar cell and Photovoltaic Modules.





We must
raise cash from sources other than operations. Our only other source for cash at
this time is investments by others in our company. We must raise cash to
implement our project and continue our operations in China. We have raised total
net proceeds of $241,733 in a stock offering in 2008, we do not know how long
the money will last, however, we do believe it will last twelve months. We have
begun China operations with money raised from this offering.





We have
begun China operations but we cannot guarantee that we will be able to sustain
our China operations if we are unable to successfully sell our PV modules
products internationally. We may quickly use up the proceeds from our stock
offering in 2008 and will need to find alternative sources of funding, like a
second public offering, a private placement of securities, or loans from our
officers or others in order for us to maintain our operations. At the present
time, we have not made any arrangements to raise additional cash, other than
through the stock offering in 2008 and private loans from our Chairman. If we
need additional cash and cannot raise it we will either have to suspend
operations until we do raise the cash, or cease operations entirely. Once we
exhaust our net proceeds from the stock offering in 2008, we will have to revert
to obtaining additional money as described in this paragraph. Other than as
described in this paragraph, we have no other financing plans.


36


PLAN
OF OPERATION





We
believe with the net proceeds from the stock offering in 2008, we can satisfy
our cash requirements during the next 12 months. We will not produce any product
before we receive down payment from our buyer. We do not expect to purchase or
sell plant or significant equipment. Further we do not expect significant
changes in the number of employees. Our specific goal is to profitably sell our
products and to begin factory constructions in Nanyang city, Henan province in
China.





In 2008
we have accomplished the following milestones:





1.
Completedour public offering. We raised total net proceeds of $241,733, and as a
result we have begun our operations in Nanyang City, Henan Province, China. We
have also begun phase 1 of our factory construction in Nanyang City, Henan
Province, China.





2. We
received the certificates of IEC 61730-1, and 61730-2, and IEC 61215. As a
result we are now able to market our Photovoltaic Modules, GYSP175 to Europe. We
have also begun marketing our PV modules and solar lighting systems to Asia and
Africa countries and have received small orders from Asia, including India and
the Middle East.





3. We
entered into a 40 year Lang Purchase Agreement on December 1, 2008 for the land
use right for 107 acres of land at the cost of approximately $2,970 per acre for
a total of  $423,420 with the local government in Nanyang City, China. We
expect to receive the necessary land use certificate from the local government
imminently. We plan to build a 5,000 square meters factory space. Our estimated
costs for building the new factory is estimated at $85.7 per square meter. Our
total estimated cost of the factory construction is $428,500. We have visited
the actual site and conducted an evaluation on the factory setup costs
accordingly. We will not begin factory construction before we find strategic
investors.





4. We
registered our subsidiary Nanyang UST as a Wholly Foreign Owned Enterprise
(WFOE) in Nanyang City, Henan Province in China in the second quarter in 2008.
We have received all necessary permits and licenses from the Nanyang Industrial
and Commerical Administration Bureau on March 7, 2009.





Looking
forward to 2009, we plan to accomplish the following:





1. Raise
capital through both equity and debt financing to provide for the construction
of our factory in Nanyang City, China.





2.
Profitably market and sell our products.





Limited
Operating History; Need For Additional Capital





There is
no historical financial information about us upon which to base an evaluation of
our performance. We are a development stage company and have not generated any
revenues. We cannot guarantee that we will be successful in our business
operations. Our business is subject to risks inherent in the establishment of a
new business enterprise, including limited capital resources and possible cost
overruns due to price and cost increases in services and products.





To become
profitable, we have to sell our products and generate revenue. In addition,
because our new WFOE manufacturing setup in China will require additional
investment, we are seeking both equity and debt financing to provide the capital
required to implement our business plan in China.





We have
no assurance that future financing will be available to us on acceptable terms.
If financing is not available on satisfactory terms, we may be unable to
continue, develop or expand our operations into China. Equity financing could
result in additional dilution to existing shareholders.


37


RESULTS
OF OPERATIONS




Comparison
of Years ended December 31, 2008 to December 31, 2007:





Revenue.Our revenue for the year
ended December 31, 2008 is $11,454 compared to $0 for the year ended December
31, 2007.  All of our revenue was generated from sales of products
manufactured by third parties.





Cost of Sales.  Our
cost of sales increased from $0 for the year ended December 31, 2007 to $10,985.
the increase is attributable to the sales of products manufactured by third
parties.





General and Administrative
Expenses.  General and administrative expenses increased by
$155,889 or 99% to $312,800 for the year ended December 31, 2008 from $156,911
for the same period in 2007. The increase was mainly due to expenses associated
with consulting, legal and audit expenses associated with the registration of
our common stock with the SEC, the fees for obtaining the EU standard
certifications for our products, salary and office expenses.





Net Loss.  Net loss
increased by $190,082 or 121% from $156,911 for the year ended December 31, 2007
to $346,993 for the same period in 2008.  The increase in net loss is
mainly due to reasons discussed above.





LIQUIDITY
AND CAPITAL RESOURCES





As of
December 31, 2008, we had total assets of $709,111 and total liabilities of
$814,223 and we had cash of $259,025.





Net cash
used in operating activities was $251,628 which is an increase of $110,438 from
net cash used in operating activities of $141,190 for the same period in 2007.
The increase was mainly due to payment associated with obtaining the EU standard
certifications for our products, salary, office expenses and legal
fees.





Net cash
used in investing activities for the fiscal year 2008 was $423,420, increased
from $0 for the same period in 2007. This increase was due to acquisition of
land.





Net cash
provided by financing activities for the fiscal year 2008 was $856,323, an
increase of $618,836 from $237,487. This increase was due to increase of loans
from stockholders and proceeds from the sale of our common stock.





We are
actively seeking additional external funding, but to date we have not
consummated any financing transactions other than a personal loan from our Chief
Executive Officer in the principal amount of $22,485 and $698,836.





Without
additional funding, the Company will not be able to pursue its business model.
If adequate funds are not available or are not available on acceptable terms
when required, we would be required to significantly curtail our operations and
would not be able to fund the development of the business envisioned by our
business model.  These circumstances could have a material adverse
effect on our business and result in our ability to continue to operate as a
going concern.


38




CRITICAL
ACCOUNTING POLICIES





Basis
of presentation - development stage company





The
Company has been obtaining the requisite approvals from the Chinese government
and since inception, has not earned any revenue from operations exclusive of
minimal sales of non-solar related merchandise.  Accordingly, the
Company’s activities have been accounted for as those of a “Development Stage
Enterprise”, as set forth in Financial Accounting Standards Board Statement No.
7 (SFAS 7").  Among the disclosures required by SFAS 7 are that the
Company’s financial statements be identified as those of a development stage
company, and that the statements of operations, stockholder’s equity and cash
flows disclose activity since the date of the Company’s inception.





The
consolidated financial statements include the accounts of the Company and all of
its subsidiaries.  All significant inter-company accounts and
transactions have been eliminated. These financial statements have been prepared
in conformity with accounting principles generally accepted in the United States
of America. Our functional currency is the Chinese Renminbi (RMB); however, the
accompanying financial statements have been translated and presented in United
States dollars (USD).





Certain
amounts included in the 2007 financial statement have been reclassified to
conform to the 2008 financial statement presentation.





Uses
of estimates in the preparation of financial statements





The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of net revenue and expenses during each reporting
period.  Actual results could differ from those
estimates.





Cash
and cash equivalents





The
Company maintains cash with financial institutions in the Peoples Republic of
China (“PRC”) which are not insured or otherwise protected.  Should
any of these institutions holding the Company’s cash become insolvent, or if the
Company is unable to withdraw funds for any reason, the Company could lose the
cash on deposit with that institution.





Cash and
cash equivalents include cash in hand and cash in time deposits, certificates of
deposit and all highly liquid debt instruments with original maturities of three
months or less.





Property
and equipment




Property
and equipment are recorded at cost.  Depreciation is provided in
amounts sufficient to amortize the cost of the related assets over their useful
lives using the straight line method for financial reporting purposes, whereas
accelerated methods are used for tax purposes.




Nanyang
UST obtained the right to use a parcel of land for its office and production
facilities.  Pursuant to the contract from the local government of the
PRC, the contract expires in 2048.  This land use right was recorded
at cost and will be amortized over the life of the lease when the land is in
service.




Maintenance,
repairs and minor renewals are charged to expense when
incurred.  Replacements and major renewals are
capitalized.


39




Impairment
of long-lived assets


The
Company accounts for the impairment of long-lived assets in accordance with SFAS
No. 144, “Accounting for the
Impairment or Disposal of Long-Lived Assets”.  Long-lived
assets are reviewed for impairment when circumstances indicate the carrying
value of an asset may not be recoverable.  For assets that are to be
held and used, an impairment is recognized when the estimated undiscounted cash
flows associated with the asset or group of assets is less than their carrying
value.  If impairment exists, an adjustment is made to write the asset
down to its fair value, and a loss is recorded as the difference between the
carrying value and fair value.  Fair values are determined based on
quoted market values, discounted cash flows or internal and external appraisals,
as applicable.  Assets to be disposed of are carried at the lower of
carrying value or estimated net realizable value.





Research
and development costs





Research
and development costs are charged to expenses as incurred.





Deferred
income taxes





The
Company accounts for income taxes in accordance with Statement of Financial
Accounting Standards No. 109 (ASFAS
109") which requires that deferred tax assets and liabilities be recognized for
future tax consequences attributable to differences between financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases.  In addition, SFAS 109 requires recognition of future tax
benefits, such as carryforwards, to the extent that realization of such benefits
is more likely than not and that a valuation allowance be provided when it is
more likely than not that some portion of the deferred tax asset will not be
realized.





Currency
translation





Since the
Company operates primarily in the PRC, the Company’s functional currency is the
Chinese Yuan (”RMB”).  Revenue and expense accounts are translated at
the average rates during the period, and balance sheet items are translated at
year-end rates.  Translation adjustments arising from the use of
differing exchange rates from period to period are included as a separate
component of shareholders’ equity.  Gains and losses from foreign
currency transactions are recognized in current operations.





The RMB
is not freely convertible into foreign currency and all foreign exchange
transactions must take place through authorized institutions. No representation
is made that the RMB amounts could have been, or could be, converted into USD at
the rates used in translation.





Income
(loss) per common share





Basic
income (loss) per common share amounts are computed by dividing net income by
weighted-average common stock outstanding during the period.  Diluted
income (loss) per common share are calculated using weighted-average shares
outstanding, adjusted for the dilutive effect of shares issuable upon the
assumed exercise of common stock equivalents.  As of December 31, 2008
and 2007 there were no common stock equivalents outstanding.





Comprehensive
income





Comprehensive
income is defined to include all changes in equity except those resulting from
investments by shareholders and distributions to shareholders.  Among
other disclosures, all items that are required to be recognized under current
accounting standards as components of comprehensive income are required to be
reported in a financial statement that is presented with the same prominence as
other financial statements.  Comprehensive income includes net income
and the foreign currency translation gain, net of tax.


40


Statement
of cash flows





In
accordance with Statement of Financial Accounting Standards No. 95, “Statement
of Cash Flows,” cash flows from the Company’s operations are calculated based
upon the local currencies. As a result, amounts related to assets and
liabilities reported on the statement of cash flows will not necessarily agree
with changes in the corresponding balances on the balance sheet.





NEW
ACCOUNTING PRONOUNCEMENTS





In
September 2006, the FASB issued Statement of Financial Accounting Standards
(SFAS) No. 157, “Fair Value
Measurements”.  This statement defines fair value, establishes
a framework for measuring fair value in generally accepted accounting
principles, and expands disclosures about fair value
measurements.  The statement is effective in the first fiscal quarter
of 2008 except for non-financial assets and liabilities recognized or disclosed
at fair value on a recurring basis, for which the effective date is fiscal years
beginning after November 15, 2008.  The Company believes that the
adoption of SFAS No. 157 will not have a material effect on its results of
operations, cash flows or financial position.





In
February 2007, the FASB issued FASB Statement No, 159, “The Fair Value Option for Financial
Assets and Liabilities” – including an amendment of FASB Statement No.
115 (FAS 159).  FAS 159 will become effective for the company on April
1, 2008.  This standard permits companies to choose to measure many
financial instruments and certain other items at fair value and report
unrealized gains and losses in earnings.  Such accounting is optional
and is generally to be applied instrument by instrument.  The Company
does not anticipate that the election if any, of this fair value option will
have a material effect on results or operations or consolidated financial
position.





In
December 2007, the FASB issued SFAS No. 141(R), Business Combinations, and
SFAS No. 160, Non-controlling
Interests in Consolidated Financial Statements.  SFAS 141 (R)
requires an acquirer to measure the identifiable assets acquired, the
liabilities assumed, and any non-controlling interest in the acquiree at their
fair values on the acquisition date, with goodwill being the excess value over
the net identifiable assets acquired.  SFAS No. 160 clarifies that a
non-controlling interest in a subsidiary should be reported as equity in the
consolidated financial statements.  SFAS No. 141 (R) and SFSS No. 160
are effective for financial statements issued for fiscal years beginning after
December 15, 2008.  Early adoption is prohibited.  The
Company has not yet determined the effect on its financial statements, if any,
upon adoption of SFAS No. 141 (R) or SFAS No.
160.     SFAS 141 (R) will significantly affect the
accounting for future business combinations and the Company will determine the
accounting as new combinations are determined.





EITF
Issue 07-1, Accounting for
Collaborative Arrangements Related to the Development and Commercialization of
Intellectual Propertyis effective for financial statements issued for
fiscal years beginning after December 15, 2008.  This issue addresses
the income statement classification of payments made between parties in a
collaborative arrangement.  The adoption of EITF07-1 is not expected
to have a significant impact on the Company’s results of operations, cash flows
or financial position.





ITEM
7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK





Not
required for smaller reporting company.





ITEM
8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY FINANCIAL DATA





The full
text of our audited financial statements as of December 31, 2008 and 2007 begins
on page F-1 of this report.


41


ITEM
9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE





None.





ITEM
9A(T).  CONTROLS AND PROCEDURES





Evaluation
of Disclosure Controls and Procedures





Pursuant
to Rule 13a-15(b) under the Securities Exchange Act of 1934 (“Exchange Act”),
the Company carried out an evaluation, with the participation of the Company’s
management, including the Company’s Chief Executive Officer (“CEO”) and Chief
Accounting Officer (“CAO”) (the Company’s principal financial and accounting
officer), of the effectiveness of the Company’s disclosure controls and
procedures (as defined under Rule 13a-15(e) under the Exchange Act) as of the
end of the period covered by this report. Based upon that evaluation, the
Company’s CEO and CAO concluded that the Company’s disclosure controls and
procedures are effective to ensure that information required to be disclosed by
the Company in the reports that the Company files or submits under the Exchange
Act, is recorded, processed, summarized and reported, within the time periods
specified in the SEC’s rules and forms, and that such information is accumulated
and communicated to the Company’s management, including the Company’s CEO and
CAO, as appropriate, to allow timely decisions regarding required
disclosure.




Management’s
Report on Internal Controls over Financial Reporting




Internal
control over financial reporting is a process to provide reasonable assurance
regarding the reliability of consolidated financial reporting and the
preparation of financial statements for external purposes in accordance with
U.S. generally accepted accounting principles.  There has been no change in
the Company’s internal control over financial reporting during the quarter ended
September 30, 2008 that has materially affected, or is reasonably likely to
materially affect, the Company’s internal control over financial
reporting.





The
Company’s management, including the Company’s CEO and CFO, does not expect that
the Company’s disclosure controls and procedures or the Company’s 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 the
controls can provide absolute assurance that all control issues and instances of
fraud, if any, within the Company have been detected.





ITEM
9B.  OTHER INFORMATION





None.





PART
III





ITEM
10.  DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE
GOVERNANCE





MANAGEMENT
AND BOARD OF DIRECTORS





The
following table sets forth the names and ages of our current directors and
executive officers, their principal offices and positions and the date each such
person became a director or executive officer of our company. Our executive
officers are elected annually by the Board of Directors. Our directors serve one
year terms until their successors are elected. The executive officers serve
terms of one year or until their death, resignation or removal by the Board of
Directors. In addition, there were no arrangements or understanding between any
executive officer and any other person pursuant to which any person was selected
as an executive officer. Currently, directors are not compensated for serving on
the Board of Directors. We have not established compensation or executive
committees. Currently, our entire board of directors serves as our audit
committee. Because of the small size of the Company and the risk attendant to a
small public company, we are currently unable to attract an audit committee
financial expert to our Board of Directors. None of our directors are
independent within the meaning set forth in the rules of NASDAQ as currently in
effect.


42





Name
                      
                      Age
                      
                      Position
                      
                      Date Of AppointmentWensheng Chen
                      
                      75
                      
                      Chief
      Executive Officer and Chairman of the Board of Directors
                      
                      July
      25, 2007,Ling
      Chen
                      
                      44
                      
                      President,
      Chief Financial Officer, Treasurer, Secretary and Board
      Director
                      
                      July
      25,
2007





BIOGRAPHIES
OF OFFICERS AND DIRECTORS




Wensheng
Chen, Founder, Chief Executive Officer & Chairman of the Board




Mr.
Wensheng Chen is the founder of Universal Solar and currently serves as the
Company’s Chief Executive Officer and Chairman. He has over 40 years executive
experience in technology manufacturing, sales, and product innovation. He is
also the Founder and a current Board Member of Yuemao Laser which supplies laser
scribing, cutting, welding, grooving to solar cell and modules manufacturers
such as SunTech Power Holdings. Mr. Chen worked as manager and executive at
Shenyang Liming Machine Making Company from 1958 to 1984. In 1984 he founded a
trading company in Beijing. In 1999, Mr. Chen established Yuemao Laser in Zhuhai
City. He studied at Liaoning University and majored in TV Broadcasting from 1964
to 1967. In 1967 he continued his education by majoring in politics and
philosophy.





Ling
Chen, President and Chief Financial Officer and Board Director





Ling Chen
currently serves as the President, Chief Financial Officer, Treasurer, Secretary
and Board Member of Universal Solar and has over twenty five years of business
consulting and advisory experience. She is the daughter of Mr. Wensheng Chen and
has been a shareholder and advisor to Yuemao Laser since 1999. Ms. Chen held
various management positions with Shenyang Associates, a retail shopping mall
company from October 1982 to November 1990. From November 1991 to 1997 she held
various positions with Shenyang Shopping Mall.




INDEMNIFICATION
OF DIRECTORS AND OFFICERS




Our
articles of incorporation limit the liability of directors to the maximum extent
permitted by Nevada law. This limitation of liability is subject to exceptions
including intentional misconduct, obtaining an improper personal benefit and
abdication or reckless disregard of director duties. Our articles of
incorporation and bylaws provide that we may indemnify its directors, officer,
employees and other agents to the fullest extent permitted by law. Our bylaws
also permit us to secure insurance on behalf of any officer, director, employee
or other agent for any liability arising out of his or her actions in such
capacity, regardless of whether the bylaws would permit indemnification. We
currently do not have such an insurance policy.




Insofar
as indemnification for liabilities arising under the Securities Act of 1933 may
be permitted for our directors, officers and controlling persons pursuant to the
foregoing provisions, or otherwise, we have been advised that in the opinion of
the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act and is, therefore,
unenforceable.


43


SECTION
16(A) BENEFICIAL OWNERSHIP COMPLIANCE





Section
16(a) of the Securities Exchange Act of 1934, as amended, requires our executive
officers and directors and persons who own more than 10% of a registered class
of our equity securities to file with the Securities and Exchange Commission
initial statements of beneficial ownership, reports of changes in ownership and
annual reports concerning their ownership of our common stock and other equity
securities on forms 3, 4 and 5 respectively. Executive officers, directors and
greater than 10% shareholders are required by the Securities and Exchange
Commission regulations to furnish our Company with copies of all Section 16(a)
reports they file. Our executive officers, directors and 10% shareholders have
not complied with Section 16(a) filing requirements.





ITEM
11. EXECUTIVE COMPENSATION





The
executives of the Company received no compensation from the Company for the
period from inception to December 31, 2007. The Company currently has no
agreements for compensation of its executives, and has no stock option plan or
other equity compensation plan for its employees. The following table sets forth
compensation we paid to the following employee, officer and our Chairman of the
board during the year ended December 31, 2008.





Name
                            
                            Year
                            
                            Salary
                            
                            Bonus
                            
                            Stock
                            
                            Option
                            
                            Non-Equity
                            
                            Nonqualified
                            
                            Other
                            
                            TotalWensheng
      Chen
                            
                            2008
                            
                            $
                            10,215
                            
                            -
                            
                            
                            -
                            
                            -
                            
                            
                            -
                            
                            -
                            
                            -
                            
                            $
                            10,2152007
                            
                            $
                            -
                            
                            -
                            
                            
                            -
                            
                            -
                            
                            
                            -
                            
                            -
                            
                            -
                            
                            $
                            -Ling
      Chen
                            
                            2008
                            
                            $
                            10,215
                            
                            -
                            
                            
                            -
                            
                            -
                            
                            
                            -
                            
                            -
                            
                            -
                            
                            $
                            10,2152007
                            
                            $
                            -
                            
                            -
                            
                            
                            -
                            
                            -
                            
                            
                            -
                            
                            -
                            
                            -
                            
                            $
                            -





We have
no Outstanding Equity Awards and director compensation plan.





Employment
Agreements; Termination of Employment and Change of Control
Arrangements





We have
no employment agreements with our executive officers.





ITEM
12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS





The
following table sets forth certain information regarding beneficial ownership of
common stock as of March 11, 2009 by each of our directors, each of our named
executive officers; all executive officers and directors as a group and each
person who is known by us to beneficially own more than 5% of our outstanding
common stock. Except as otherwise indicated, all persons listed below have (i)
sole voting power and investment power with respect to their shares of Common
Stock, except to the extent that authority is shared by spouses under applicable
law, and (ii) record and beneficial ownership with respect to their shares of
stock. The percentage of beneficial ownership is based upon 22,574,974 shares of
Common Stock outstanding as of March 11, 2009. Unless otherwise identified, the
address of the directors, officers of the Company listed above is the company’s
principal business address.





Name
                              
                              Position
      Held
                              
                              Shares
      Owned
                              
                              
                              %
      OwnedOfficers
      and DirectorsWensheng
      Chen
                              
                              Chairman
      of the Board of Directors
                              
                              
                              15,000,000
                              (1)
                              
                              66.4
                              %Ling
      Chen
                              
                              President
      & Chief Financial Officer
                              
                              
                              193,233
                              (2)
                              
                              *
                              %All
      executive officers and directors as a group (2
    persons)
                              
                              
                              15,193,233
                              
                              
                              67.3
                              %5%
      ShareholderHui
      Chen
                              
                              
                              
                              
                              5,000,000
                              
                              
                              22.1
                              %Yuming
      Liu
                              
                              
                              
                              
                              5,000,000
                              
                              
                              22.1
                              %


*Less
than 1%.


(1)
Includes 5,000,000 shares held by Yumin Liu, Mr. Chen’s wife.


(2) Shares
are held by Xiaodong Wu, Ms. Chen’s husband.


44


Item
13. CERTAIN RELATIONSHIP AND RELATED TRANSACTIONS





Founders
of Universal Solar and Kuong U were previously engaged in developing PV modules
and PV applications business through the solar energy department at Yuemao
Laser. Yuemao Laser's parent company is Yuemao Science & Technology Group
(“Yuemao Technology”). Yuemao Technology’s shareholders are our Chairman and
largest shareholder, Mr. Wensheng Chen with 50% ownership, Ms. Hui Chen 25%
ownership, and Ms. Ling Chen 25% ownership. Hui Chen and Ling Chen (our
President and Chief Financial Officer) are daughters of Wensheng Chen (our
Chairman of the Board and Chief Executive Officer).





Our
principal executive offices are located at property owned by of our Chairman,
Wensheng Chen. We did not pay any rent to Mr. Chen for 2007. In the year ended
December 31, 2008, we incurred rental expenses of $15,468.





We have
developed our prototype products through the solar department at Yuemao Laser.
Prototypes have been manufactured by Yuamao Laserunder an agreement with
us under which we retain all rights to the design of the products and exclusive
rights to market and sell the products. Based on the agreement between Kuong U
and Yuemao Laser, Yuemao Laser has been developing these prototype products
without an up-front payment. According to the agreement, Kuong U will pay Yuemao
Laser a 1% royalty fee on Kuong U’s actual products sales.





Until our
manufacturing facilities are built we plan to subcontract the manufacturing of
our PV module products to the solar department at Yuemao Laser. Prices for such
contract manufacturing have not been determined.





On
November 2, 2008 we entered into a loan agreement with our Chairman and CEO, Mr.
Wenshen Chen for the principal amount of $22,483. The loan matures in five years
and carries an annual interest rate of 5%.





From
March 1, 2007 to December 3, 2008, our Chairman and CEO, Mr. Wensheng Chen paid
various expense for the Company, including consulting, legal and audit fees and
expenses. These payments on behalf of the Company are considered as personal
loans to the Company. The total loan to the Company was in the principal amount
of HK$5,332,506 (approximately US$698,836). This loan is non-interest bearing
and due on demand. Interest was imputed in the amount of $36,616 for the year
ended December 31, 2008





The
Company has developed prototype products through the solar department though a
related party company with no charge.





During
the year ended December 31, 2008, the Company purchased solar panels totaling
$10,985 from a company owned by our CEO.





On March
27, 2007, Kuong U entered a consulting agreement with Allstar Capital Inc.
(“Allstar”). On February 28, 2008, Kuong U and Allstar amended and restated the
consulting agreement.





According
to Amended and Restated Consulting Agreement, among other things, Allstar and
its chosen consultants provide advice on the capital structure of UST, financing
options, types of financial instruments to be offered, and the market segment
for which the financial instruments are suitable. In addition, Allstar and its
chosen consultants will also provide linguistic services for UST, including
assisting with translations from English to Chinese and Chinese to English;
introduce professional firms and individuals to UST, including a U.S. law firm,
a U.S. accounting firm, a broker dealer and investment bank; and provide advice
on UST’s incorporation in the state of Nevada. Allstar and its chosen
consultants also advise UST, with the help of UST’s U.S. securities counsel, on
its registered offering of common stock and related filing with U.S. Securities
and Exchange Commission and, when UST engages a market maker, to file its
applications with the Financial Industry Regulatory Authority (FINRA) to be
quoted on Over-the-counter Bulletin Board.


45


Kuong U
paid Allstar $90,000 on March 27, 2007; and $75,000 on May 29,
2008.





Hongtao
Shi, Liuyi Zhang and Fred Chang are partner consultants at Allstar Capital Inc.
Yulan He was an individual finder for Allstar. Ms. He introduced UST to Allstar.
Pursuant to a Revenue and Success Sharing Agreements between (i) Allsar and
Hongtao Shi and (ii) Allstar and Liuyi Zhang and a Finder Agreement between
Allstar and Yulan He, these individuals and companies received the following
percent of cash from Allstar when it received the above described cash payments
from UST:




Name
      of Individuals
                    
                    %
      of
                      SharingHongtao
      Shi
                    
                    
                    35
                    %Liuyi
      Zhang
                    
                    
                    25
                    %Yulan
      He
                    
                    
                    15
                    %Allstar
                    
                    
                    25
                    %Total
                    
                    
                    100
                    %





UST will
owe Allstar an additional $75,000 if this registration statement is declared
effective and an additional $50,000 if the common stock is admitted for
quotation on the Over-the-counter Bulletin Board.





On June
19, 2007, Avenndi, LLC (“Avenndi”) entered a consulting agreement with Kuong U.
Avenndi is a corporate strategy and consultancy firm based in Los Angeles,
California. Avenndi recommended various corporate strategies and actions aimed
to improve the company’s overall business image and value. Furthermore, Avenndi
assisted UST in the development of a business information memorandum and
executive business summary for UST. UST paid $12,000 for Avenndi’s
services.





In
February 2008, pursuant to the Revenue and Success Sharing Agreements between
(i) Allsar and Hongtao Shi and (ii) Allstar and Liuyi Zhang, the Finder
Agreement between Allstar and Yulan He, and the agreement between Allstar and
Avenndi, LLC, these individuals and companies received an allocation of common
shares from UST when UST issued Allstar a total 942,408 common shares as payment
upon entering into the Amended and Restated Consulting Agreement.





Three of
the recipients of an allocation of Allstar’s common shares from UST designated a
nominee controlled by them to be the record holder of the shares. Hongtao Shi,
Liuyi Zhang and Allstar designated the following companies: First Prestige, Inc,
JD Infinity Holdings, Inc. and Catalpa Holdings, Inc., to hold the common
shares. All of these three companies are the British Virgin Islands’ companies.
First Prestige, Inc. is controlled by Hongtao Shi; JD Infinity Holdings, inc. is
controlled by Liuyi Zhang; and Catalpa Holdings, Inc. is controlled by Fred
Chang. In addition, Avenndi, LLC is controlled by John Kennedy and Allstar
Capital Inc. is a Maryland registered consulting company owned by Fred
Chang.





The
designees listed below are the current holders of the 942,408 common shares
issuded by UST in February 2008:





First
      Prestige, Inc.
                
                
                326,343JD
      Infinity Holdings, Inc.
                
                
                233,102Catalpa
      Holdings, Inc.
                
                
                233,102Yulan
      He
                
                
                139,861Avenndi
      LLC
                
                
                10,000


46


ITEM
14. PRINCIPAL ACCOUNTANT FEES AND SERVICES





Auditor
Fees and Services in Our 2007 and 2006 Fiscal Years





Our
registered independent public accounting firm is Paritz & Company, P.A. The
fees billed by Paritz & Company, P.A. in 2008 was as follows:




2008Audit
      Fees
                          
                          $
                          27,500Audit-Related
      Fees
                          
                          
                          -Total
      Audit and Audit-Related Fees
                          
                          
                          27,500Tax
      Fees
                          
                          
                          -All
      Other Fees
                          
                          
                          -Total
      for independent public audit firms
                          
                          $
                          27,500





Audit Fees
consist of fees billed for professional services rendered for the audit of the
Company's consolidated annual financial statements, and review of the interim
consolidatd financial statements included in quarterly reports and services that
are normally provided by Paritz & Company, P.A. in connectin with statutory
and regulatory filings or engagements.





Audit-Related
Fees include accounting consultations related to accounting, financial reporting
or disclosure matters not classified as "Audit Fees." Tax Fees include tax
compliance, tax advice and tax planning services. These services related to the
preparation of various state and federal tax returns and review of Section 409A
compliance.





PART
IV





ITEM
15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES





Exhibit
                    No.
                  
                  Description3.1
                  
                  Articles
      of Incorporation(1)3.2
                  
                  Bylaws
      of the Company(1)10.1
                  
                  Agreement
      between Kuong U Science & Technology (Group) Ltd. and the Arizona
      Board of Regents on behalf of Arizona State
  University(1)10.2
                  
                  Prototype
      Product Development Agreement between Kuong U Science & Technology
      (Group) Ltd. and Zhuhai Yuemao Laser Facility Engineering Co.,
      Ltd.(1)10.3
                  
                  Land
      Purchase Agreement dated December 1, 2008*21.1
                  
                  List
      of Subsidiaries(1)31.1
                  
                  Certification
      of Principal Executive Officer pursuant to Rule 13a-14 and Rule 15d-14(a),
      promulgated under the Securities and Exchange Act of 1934, as
      amended*31.2
                  
                  Certification
      of Principal Financial Officer pursuant to Rule 13a-14 and Rule 15d 14(a),
      promulgated under the Securities and Exchange Act of 1934, as
      amended*32.1
                  
                  Certification
      pursuant to Section 906 of Sarbanes Oxley Act of 2002 (Chief Executive
      Officer)*32.2
                  
                  Certification
      pursuant to Section 906 of Sarbanes Oxley Act of 2002 (Chief Financial
      Officer)*


*Filed
herewith


(1) Filed
as exhibit to the Company’s Registration Statement on Form S-1 filed on May 9,
2008.


47


SIGNATURES





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





Date:
April 9, 2009


Universal
      Solar Technology, Inc.By:
                /s/ Wensheng ChenWensheng
      ChenChief
      Executive Officer and Chairman of the Board of
Directors(Principal
      Executive Officer)





Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the Registrant and in the
capacities and on the dates indicated:




SIGNATURE
                        
                        TITLE/s/ Wensheng Chen
                        
                        CEO
      and ChairmanWensheng
      Chen
                        
                        (Principal
      Executive Officer)
                        
                        April
      9, 2009/s/ Ling Chen
                        
                        Chief
      Financial Officer and DirectorLing
      Chen
                        
                        (Principal
      Financial and Accounting Officer)
                        
                        April
      9, 2009


48


REPORT OF INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM





Board of
Directors


Universal
Solar Technology, Inc. and Subsidiaries


(A
Development Stage Company)


Zhuhai,
China





We have
audited the accompanying consolidated balance sheets of Universal Solar
Technology, Inc. and Subsidiaries (A Development Stage Company) (the “Company”)
as of December 31, 2008 and 2007 and the related consolidated statements of
operations and comprehensive loss, changes in stockholders’ deficiency and cash
flows for the period from inception (July 24, 2007) to December 31,
2008.  These financial statements are the responsibility of the
Company's management.  Our responsibility is to express an opinion on
these financial statements based on our audit.





We
conducted our audit in accordance with auditing standards of the Public Company
Accounting Oversight Board (United States).  Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement.  An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements.  An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation.  We believe that our audit provides a reasonable basis
for our opinion.





The
accompanying consolidated financial statements have been prepared assuming that
the Company will continue as a going concern.  As shown in the
accompanying financial statements, the Company has sustained a loss since
inception and at December 31, 2008 the Company’s current liabilities exceeded
its current assets by $506,057 and the Company has not earned any revenues from
operations since inception. These factors, among others, raise substantial doubt
about the Company’s ability to continue as a going concern. The accompanying
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.





In our
opinion, the consolidated financial statements referred to above present fairly,
in all material respects, the financial position of Universal Solar Technology,
Inc. and Subsidiaries (A Development Stage Company) as of December 31, 2008 and
2007, and the results of its operations and its cash flows for the period from
inception (July 24, 2007) to December 31, 2008, in conformity with accounting
principles generally accepted in the United States of America.





Paritz
& Company, P.A.





Hackensack,
New Jersey


March 25,
2009


F-1


UNIVERSAL
SOLAR TECHNOLOGY, INC. AND SUBSIDIARIES


(A
Development Stage Company)





December
      31,2008
                
                
                2007ASSETSCURRENT
      ASSETS:Cash
                
                $
                259,025
                
                
                $
                91,183Other
      sundry current assets
                
                
                26,666
                
                
                
                1,779TOTAL
      CURRENT ASSETS AND TOTAL ASSETS
                
                
                285,691
                
                
                
                92,962LAND
      USE RIGHT
                
                
                423,420
                
                
                
                -TOTAL
      ASSETS
                
                $
                709,111
                
                
                $
                92,962LIABILITIES’
      AND STOCKHOLDERS’ DEFICIENCYCURRENT
      LIABILITIES:Accounts
      payable
                
                $
                12,867
                
                
                $
                -Due
      to related party
                
                
                50,462
                
                
                
                -Accrued
      expenses
                
                
                29,583
                
                
                
                17,500Due
      to stockholders
                
                
                698,836
                
                
                
                106,730TOTAL
      CURRENT LIABILITIES
                
                
                791,748
                
                
                
                124,230LONG-TERM
      DEBT
                
                
                22,485
                
                
                
                -STOCKHOLDERS’
      DEFICIENCY:Preferred
      stock, $0.0001 par value, 10,000,000 shares authorized, 0 shares issued
      and outstanding
                
                
                -
                
                
                
                -Common
      stock, $0.0001 par value, 90,000,000 shares authorized, 22,574,974 and
      20,000,000 shares issued and outstanding at December 31, 2008 and 2007,
      respectively
                
                
                2,257
                
                
                
                2,000Additional
      paid-in capital
                
                
                416,273
                
                
                
                128,757Deficit
      accumulated during development stage
                
                
                (503,904
                )
                
                
                (156,911
                )Accumulated
      other comprehensive income
                
                
                (19,748
                )
                
                
                (5,114
                )TOTAL
      STOCKHOLDERS’ DEFICIENCY
                
                
                (105,122
                )
                
                
                (31,268
                )TOTAL
      LIABILITIES AND STOCKHOLDERS’ DEFICIENCY
                
                $
                709,111
                
                
                $
                92,962





See notes
to financial statements


F-2


UNIVERSAL
SOLAR TECHNOLOGY, INC. AND SUBSIDIARIES


(A
Development Stage Company)





CONSOLIDATED
STATEMENT OF OPERATIONS AND COMPREHENSIVE LOSS





Year Ended
                          December 31, 2008
                        
                        
                        From Inception
                          (July 24, 2007) to
                          December 31, 2007
                        
                        
                        From Inception
                          (July 24, 2007) to
                          December 31, 2008SALES
                        
                        $
                        11,454
                        
                        
                        $
                        -
                        
                        
                        $
                        11,454COSTS
      AND EXPENSES:Cost
      of goods sold
                        
                        
                        10,985
                        
                        
                        
                        
                        
                        
                        
                        10,985General
      and administrative expenses
                        
                        
                        312,800
                        
                        
                        
                        156,911
                        
                        
                        
                        469,711TOTAL
      COSTS AND EXPENSES
                        
                        
                        323,785
                        
                        
                        
                        156,911
                        
                        
                        
                        480,696LOSS
      FROM OPERATIONS
                        
                        
                        (312,331
                        )
                        
                        
                        (156,911
                        )
                        
                        
                        (469,242
                        )OTHER
      INCOME (EXPENSES):Interest
      expense
                        
                        
                        (36,616
                        )
                        
                        
                        -
                        
                        
                        
                        (36,616
                        )Dividend
      and interest income
                        
                        
                        471
                        
                        
                        
                        -
                        
                        
                        
                        471Gain
      on foreign currency transactions
                        
                        
                        1,483
                        
                        
                        
                        -
                        
                        
                        
                        1,483NET
      LOSS
                        
                        
                        (346,993
                        )
                        
                        
                        (156,911
                        )
                        
                        
                        (503,904
                        )OTHER
      COMPREHENSIVE LOSS:Foreign
      currency translation adjustment
                        
                        
                        (14,634
                        )
                        
                        
                        (5,114
                        )
                        
                        
                        (19,748
                        )COMPREHENSIVE
      LOSS
                        
                        $
                        (361,627
                        )
                        
                        $
                        (162,025
                        )
                        
                        $
                        (523,652
                        )BASIC
      AND DILUTED EARNINGS PER COMMON SHARE
                        
                        $
                        (0.02
                        )
                        
                        $
                        (0.01
                        )
                        
                        $
                        (0.02
                        )WEIGHTED
      AVERAGE NUMBER OF SHARES OUTSTANDING
                        
                        
                        20,997,561
                        
                        
                        
                        20,000,000
                        
                        
                        
                        20,666,254





See notes
to financial statements


F-3


UNIVERSAL
SOLAR TECHNOLOGY, INC. AND SUBSIDIARIES


(A
Development Stage Company)





CONSOLIDATED
STATEMENT OF CHANGES IN STOCKHOLDERS’ DEFICIENCY





COMMON
      STOCK
                
                
                ADDITIONAL
                  PAID-IN
                  CAPITAL
                
                
                ACCUMULATED
                  DEFICIT
                
                
                OTHER
                  COMPREHENSIVE
                  INCOME
                
                
                TOTALSHARES
                
                
                AMOUNTBALANCE
      – JULY 24, 2007
                
                
                -
                
                
                $
                -
                
                
                
                
                
                $
                -
                
                
                $
                -
                
                
                $
                -Sale
      of common stock
                
                
                20,000,000
                
                
                
                2,000
                
                
                
                128,757
                
                
                
                -
                
                
                
                -
                
                
                
                130,757Foreign
      currency translation adjustment
                
                
                -
                
                
                
                -
                
                
                
                
                
                
                
                -
                
                
                
                (5,114
                )
                
                
                (5,114
                )Net
      loss
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                (156,911
                )
                
                
                -
                
                
                
                (156,911
                )BALANCE
      – DECEMBER 31, 2007
                
                
                20,000,000
                
                
                
                2,000
                
                
                
                128,757
                
                
                
                (156,911
                )
                
                
                (5,114
                )
                
                
                (31,268
                )Stock
      issued for services
                
                
                942,408
                
                
                
                94
                
                
                
                9,330
                
                
                
                -
                
                
                
                -
                
                
                
                9,424Sale
      of common stock
                
                
                1,632,566
                
                
                
                163
                
                
                
                241,570
                
                
                
                -
                
                
                
                -
                
                
                
                241,733Imputed
      interest on stockholder loan
                
                
                -
                
                
                
                -
                
                
                
                36,616
                
                
                
                -
                
                
                
                -
                
                
                
                36,616Foreign
      currency translation adjustment
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                (14,634
                )
                
                
                (14,634
                )Net
      loss
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                (346,993
                )
                
                
                -
                
                
                
                (346,993
                )BALANCE
      – DECEMBER 31, 2008
                
                
                22,574,974
                
                
                $
                2,257
                
                
                $
                416,273
                
                
                $
                (503,904
                )
                
                $
                (19,748
                )
                
                $
                (105,122
                )





See notes
to financial statements


F-4


UNIVERSAL
SOLAR TECHNOLOGY, INC. AND SUBSIDIARIES


(A
Development Stage Company)





CONSOLIDATED
STATEMENT OF CASH FLOWS





Year Ended
                  December 31, 2008
                
                
                From Inception
                  (July 24, 2007) to
                  December 31, 2007
                
                
                From Inception
                  (July 24, 2007) to
                  December 31, 2008OPERATING
      ACTIVITIES:Net
      loss
                
                $
                (346,993
                )
                
                $
                (156,911
                )
                
                $
                (503,904
                )Adjustments
      to reconcile net loss to net cash used in operating
      activities:Imputed
      interest on stockholder loan
                
                
                36,616
                
                
                
                -
                
                
                
                36,616Stock
      issued for services
                
                
                9,424
                
                
                
                -
                
                
                
                9,424Changes
      in operating assets and liabilities:Other
      current assets
                
                
                (26,087
                )
                
                
                (1,779
                )
                
                
                (27,866
                )Accrued
      expenses
                
                
                12,083
                
                
                
                17,500
                
                
                
                29,583Accounts
      payable
                
                
                12,867
                
                
                
                -
                
                
                
                12,867Other
      payables
                
                
                50,462
                
                
                
                -
                
                
                
                50,462NET
      CASH USED IN OPERATING ACTIVITIES
                
                
                (251,628
                )
                
                
                (141,190
                )
                
                
                (392,818
                )INVESTING
      ACTIVITIES:Acquisition
      of property and equipment
                
                
                (423,420
                )
                
                
                -
                
                
                
                (423,420
                )NET
      CASH USED IN INVESTING ACTIVITIES
                
                
                (423,420
                )
                
                
                -
                
                
                
                (423,420
                )FINANCING
      ACTIVITIES:Loan
      from stockholders
                
                
                614,590
                
                
                
                106,730
                
                
                
                721,320Sale
      of common stock
                
                
                241,733
                
                
                
                130,757
                
                
                
                372,490NET
      CASH PROVIDED BY FINANCING ACTIVITIES
                
                
                856,323
                
                
                
                237,487
                
                
                
                1,093,810EFFECT
      OF EXCHANGE RATE ON CASH
                
                
                (13,433
                )
                
                
                (5,114
                )
                
                
                (18,547
                )INCREASE
      IN CASH
                
                
                167,842
                
                
                
                91,183
                
                
                
                259,025CASH
      – BEGINNING OF PERIOD
                
                
                91,183
                
                
                
                -
                
                
                
                -CASH
      – END OF PERIOD
                
                $
                259,025
                
                
                $
                91,183
                
                
                $
                259,025


See
notes to financial statements


F-5


UNIVERSAL
SOLAR TECHNOLOGY, INC. AND SUBSIDIARIES


(A
Development Stage Company)





NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS





DECEMBER
31, 2008





1
            BUSINESS
      DESCRIPTION





Universal
Solar Technology, Inc. (the “Company”) was incorporated in the State of Nevada
on July 24, 2007.  The Company operates through its wholly-owned
subsidiaries, Kuong U Science & Technology (Group) Ltd. (“Kuong U”), a
company incorporated in Macau, Peoples Republic of China (“PRC”) on May 10, 2007
and Nanyang Universal Solar Technology Co., Ltd. (“NUST”), a company
incorporated in Nanyang, PRC on September 8, 2008.    The
Company intends to provide silicon wafers, solar cell, high efficiency solar
photovoltaic (“PV”) modules and other PV application products such as solar
lighting systems in the European Union, North America, Africa and
Asia.





2
            SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES





Basis of
presentation - development stage company





The
Company has been obtaining the requisite approvals from the Chinese government
and since inception, has not earned any revenue from operations exclusive of
minimal sales of non-solar related merchandise.  Accordingly, the
Company’s activities have been accounted for as those of a “Development Stage
Enterprise”, as set forth in Financial Accounting Standards Board Statement No.
7 (SFAS 7").     Among the disclosures required by SFAS
7 are that the Company’s financial statements be identified as those of a
development stage company, and that the statements of operations, stockholder’s
equity and cash flows disclose activity since the date of the Company’s
inception.





The
consolidated financial statements include the accounts of the Company and all of
its subsidiaries.  All significant inter-company accounts and
transactions have been eliminated. These financial statements have been prepared
in conformity with accounting principles generally accepted in the United States
of America. Our functional currency is the Chinese Renminbi (RMB); however, the
accompanying financial statements have been translated and presented in United
States dollars (USD).





Certain
amounts included in the 2007 financial statement have been reclassified to
conform to the 2008 financial statement presentation.





Uses
of estimates in the preparation of financial statements





The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of net revenue and expenses during each reporting
period.  Actual results could differ from those
estimates.





Cash
and cash equivalents





The
Company maintains cash with financial institutions in the Peoples Republic of
China (“PRC”) which are not insured or otherwise protected.  Should
any of these institutions holding the Company’s cash become insolvent, or if the
Company is unable to withdraw funds for any reason, the Company could lose the
cash on deposit with that institution.





Cash and
cash equivalents include cash in hand and cash in time deposits, certificates of
deposit and all highly liquid debt instruments with original maturities of three
months or less.


F-6







Property
and equipment




Property
and equipment are recorded at cost.  Depreciation is provided in
amounts sufficient to amortize the cost of the related assets over their useful
lives using the straight line method for financial reporting purposes, whereas
accelerated methods are used for tax purposes.




NUST
obtained the right to use a parcel of land for its office and production
facilities.  Pursuant to the contract from the local government of the
PRC, the contract expires in 2048.  This land use right was recorded
at cost and will be amortized over the life of the lease when the land is in
service.




Maintenance,
repairs and minor renewals are charged to expense when
incurred.  Replacements and major renewals are
capitalized.




Impairment
of long-lived assets




The
Company accounts for the impairment of long-lived assets in accordance with SFAS
No. 144, “Accounting for the
Impairment or Disposal of Long-Lived Assets”.  Long-lived
assets are reviewed for impairment when circumstances indicate the carrying
value of an asset may not be recoverable.  For assets that are to be
held and used, an impairment is recognized when the estimated undiscounted cash
flows associated with the asset or group of assets is less than their carrying
value.  If impairment exists, an adjustment is made to write the asset
down to its fair value, and a loss is recorded as the difference between the
carrying value and fair value.  Fair values are determined based on
quoted market values, discounted cash flows or internal and external appraisals,
as applicable.  Assets to be disposed of are carried at the lower of
carrying value or estimated net realizable value.




Research
and development costs




Research
and development costs are charged to expenses as incurred.




Deferred
income taxes




The
Company accounts for income taxes in accordance with Statement of Financial
Accounting Standards No. 109 (ASFAS 109")
which requires that deferred tax assets and liabilities be recognized for future
tax consequences attributable to differences between financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases.  In addition, SFAS 109 requires recognition of future tax
benefits, such as carryforwards, to the extent that realization of such benefits
is more likely than not and that a valuation allowance be provided when it is
more likely than not that some portion of the deferred tax asset will not be
realized.




Currency
translation





Since the
Company operates primarily in the PRC, the Company’s functional currency is the
Chinese Yuan (”RMB”).  Revenue and expense accounts are translated at
the average rates during the period, and balance sheet items are translated at
year-end rates.  Translation adjustments arising from the use of
differing exchange rates from period to period are included as a separate
component of shareholders’ equity.  Gains and losses from foreign
currency transactions are recognized in current operations.





The RMB
is not freely convertible into foreign currency and all foreign exchange
transactions must take place through authorized institutions. No representation
is made that the RMB amounts could have been, or could be, converted into USD at
the rates used in translation.


F-7







Income
(loss) per common share





Basic
income (loss) per common share amounts are computed by dividing net income by
weighted-average common stock outstanding during the period.  Diluted
income (loss) per common share are calculated using weighted-average shares
outstanding, adjusted for the dilutive effect of shares issuable upon the
assumed exercise of common stock equivalents.  As of December 31, 2008
and 2007 there were no common stock equivalents outstanding.





Comprehensive
income





Comprehensive
income is defined to include all changes in equity except those resulting from
investments by shareholders and distributions to shareholders.  Among
other disclosures, all items that are required to be recognized under current
accounting standards as components of comprehensive income are required to be
reported in a financial statement that is presented with the same prominence as
other financial statements.  Comprehensive income includes net income
and the foreign currency translation gain, net of tax.





Statement
of cash flows





In
accordance with Statement of Financial Accounting Standards No. 95, “Statement
of Cash Flows,” cash flows from the Company’s operations are calculated based
upon the local currencies. As a result, amounts related to assets and
liabilities reported on the statement of cash flows will not necessarily agree
with changes in the corresponding balances on the balance sheet.





New
accounting pronouncements





In
September 2006, the FASB issued Statement of Financial Accounting Standards
(SFAS) No. 157, “Fair Value
Measurements”.  This statement defines fair value, establishes
a framework for measuring fair value in generally accepted accounting
principles, and expands disclosures about fair value
measurements.  The statement is effective in the first fiscal quarter
of 2008 except for non-financial assets and liabilities recognized or disclosed
at fair value on a recurring basis, for which the effective date is fiscal years
beginning after November 15, 2008.  The Company believes that the
adoption of SFAS No. 157 will not have a material effect on its results of
operations, cash flows or financial position.





In
February 2007, the FASB issued FASB Statement No, 159, “The Fair Value Option for Financial
Assets and Liabilities” – including an amendment of FASB Statement No.
115 (FAS 159).  FAS 159 will become effective for the company on April
1, 2008.  This standard permits companies to choose to measure many
financial instruments and certain other items at fair value and report
unrealized gains and losses in earnings.  Such accounting is optional
and is generally to be applied instrument by instrument.  The Company
does not anticipate that the election if any, of this fair value option will
have a material effect on results or operations or consolidated financial
position.





In
December 2007, the FASB issued SFAS No. 141(R), Business Combinations, and
SFAS No. 160, Non-controlling
Interests in Consolidated Financial Statements.  SFAS 141 (R)
requires an acquirer to measure the identifiable assets acquired, the
liabilities assumed, and any non-controlling interest in the acquiree at their
fair values on the acquisition date, with goodwill being the excess value over
the net identifiable assets acquired.  SFAS No. 160 clarifies that a
non-controlling interest in a subsidiary should be reported as equity in the
consolidated financial statements.  SFAS No. 141 (R) and SFSS No. 160
are effective for financial statements issued for fiscal years beginning after
December 15, 2008.  Early adoption is prohibited.  The
Company has not yet determined the effect on its financial statements, if any,
upon adoption of SFAS No. 141 (R) or SFAS No.
160.     SFAS 141 (R) will significantly affect the
accounting for future business combinations and the Company will determine the
accounting as new combinations are determined.





F-8


EITF
Issue 07-1, Accounting for
Collaborative Arrangements Related to the Development and Commercialization of
Intellectual Propertyis effective for financial statements issued for
fiscal years beginning after December 15, 2008.  This issue addresses
the income statement classification of payments made between parties in a
collaborative arrangement.  The adoption of EITF07-1 is not expected
to have a significant impact on the Company’s results of operations, cash flows
or financial position.





3
            LAND
      USE RIGHT





On
December 1, 2008 the Company obtained the right to use a parcel of land for
forty years for its office and production facilities from the local government
in the PRC.  The cost of $423,420 was paid upon signing the contract,
which expires in 2048.





4
            DUE
      TO STOCKHOLDERS





The
amounts due to stockholders are non-interest bearing and are due on
demand.  The Company has Imputed interest of approximately $36,000 for
the year ended December 31, 2008 which has been recorded as a contribution to
capital.





5
            DUE
      TO RELATED PARTY





This
amount is due to an entity owned by the principal shareholder of the Company.
The obligation is non-interest bearing and due on demand.





6
            LONG-TERM
      DEBT





This
note, payable to the Company’s Chief Executive Officer, bears interest at 5% per
annum and is due November 1, 2013.





7
            INCOME
      TAXES





The
Company has net operating loss carry-forwards in China of approximately
$300,0000 which expire between 2012 and 2013.





The
Company has a deferred tax asset resulting from tax loss carry-forwards of
approximately $77,000 for which the Company has provided a 100% valuation
allowance.





8
            RELATED
      PARTY TRANSACTIONS





The
Company’s principal executive office is that of the Company’s
chairman.  Rental expense for the year ended December 31, 2008 and the
period ended December 31, 2007 were $15,468 and $0, respectively.





The
Company has developed prototype products through the solar department through a
related company with no charge.





During
the year ended December 31, 2008 the Company purchased solar panels totaling
$10,985 from a Company owned by the Company’s CEO.







F-9


9
            RISK
      FACTORS





Vulnerability
due to Operations in PRC





The
Company=s operations
may be adversely affected by significant political, economic and social
uncertainties in the PRC.  Although the PRC government has been
pursuing economic reform policies for more than 20 years, there is no guarantee
that the PRC government’s pursuit of economic reforms will be consistent or
effective.





The PRC
has adopted currency and capital transfer regulations.  These
regulations require that the Company complies with complex regulations for the
movement of capital.  Because most of the Company’s future revenues
will be in RMB, any inability to obtain the requisite approvals, or any future
restrictions on currency exchanges, will limit the Company’s ability to fund its
business activities outside China or to pay dividends to its
shareholders.





The
Company’s assets will be predominantly located inside China.  Under
the laws governing foreign invested enterprises in China, dividend distribution
and liquidation are allowed, but subject to special procedures under the
relevant laws and rules.  Any dividend payment will be subject to the
decision of the board of directors and subject to foreign exchange rules
governing such repatriation.  Any liquidation is subject to both the
relevant government agency’s approval and supervision, as well as the foreign
exchange control.





In
addition, the results of business and prospects are subject, to a significant
extent, to the economic, political and legal developments in China.





While
China’s economy has experienced a significant growth in the past twenty years,
growth has been irregular, both geographically and among various sectors of the
economy.  The Chinese government has implemented various measures to
encourage economic growth and guide the allocation of resources.  Some
of these measures benefit the overall economy of China, but may also have a
negative effect on the Company.  The Company’s sales and financial
condition may be adversely affected by the government control over capital
investments or changes in tax regulations.





Foreign
companies conducting operations in the PRC face significant political, economic
and legal risks.  The Communist regime in the PRC includes a stifling
bureaucracy which may hinder Western investment. Any new government regulations
or utility policies pertaining to the Company’s PV products may result in
significant additional expenses to the Company, Company’s distributors and end
users and, as a result, could cause a significant reduction in demand for the
Company’s PV products.


F-10