| Delaware                 |   | 20-1198142                           |
|--------------------------|--------|--------------------------------------|
| (State of incorporation) |   | (I.R.S. Employer Identification No.) |

| Large accelerated filer  ̈                                     | Accelerated filer  ̈    |
|----------------------------------------------------------------------------|-------------------------------------|
|                                                                       |                                |
| Non-accelerated filer  ̈ (Do not check if a smaller reporting company) | Smaller reporting company x |

| Class                                     |   | Outstanding at August 16, 2011 |
|-------------------------------------------|--------|--------------------------------|
| Common Stock, US$.001 par value per share |   | 2,521,341 shares               |

----

|                                                                                                 | Page   |
|------------------------------------------------------------------------------------------------------|--------|
| Part I: Financial Information                                                                        | 1      |
|                                                                                                 |   |
| Item 1 -Financial Statements (unaudited)                                                             | 1      |
|                                                                                                 |   |
| Consolidated Balance Sheets                                                                          | 1      |
|                                                                                                 |   |
| Consolidated Statements of Income and Comprehensive Income                                           | 2      |
|                                                                                                 |   |
| Consolidated Statements of Cash Flows                                                                | 3      |
|                                                                                                 |   |
| Notes to Consolidated Financial Statements                                                           | 4      |
|                                                                                                 |   |
| Item 2 - Management’s Discussion and Analysis of Financial Condition and Results of Operations | 14     |
|                                                                                                 |   |
| Item 3 - Quantitative and Qualitative Disclosures about Market Risk                                  | 22     |
|                                                                                                 |   |
| Item 4 - Controls and Procedures                                                                | 22     |
|                                                                                                 |   |
| Part II. Other Information                                                                           | 23     |
|                                                                                                 |   |
| Item 1 - Legal Proceedings                                                                           | 23     |
|                                                                                                 |   |
| Item 1A - Risk Factors                                                                               | 23     |
|                                                                                                 |   |
| Item 2 - Unregistered Sales of Equity Securities and Use of Proceeds                                 | 23     |
|                                                                                                 |   |
| Item 3 - Defaults Upon Senior Securities                                                             | 23     |
|                                                                                                 |   |
| Item 4 – (Removed and Reserved)                                                                | 23     |
|                                                                                                 |   |
| Item 5 – Other Information                                                                     | 23     |
|                                                                                                 |   |
| Item 6 – Exhibits                                                                              | 24     |
|                                                                                                 |   |
| Signatures                                                                                           | 25     |

----

| Item 1. | Financial Statements |
|---------|----------------------|

|                                                                                                                                     |   | June 30, 2011 |    |   | December 31, 2010 |   |
|------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------|---------|--------|-----------------------------|--------|
| ASSETS                                                                                                                                   |   |               |    |   |                        |   |
| Current assets                                                                                                                           |   |               |    |   |                        |   |
| Cash and cash equivalents                                                                                                                |   | $                  | 3       |   |                        | $      | 5 |   |
| Restricted cash                                                                                                                          |   |               | 4       |   |                        |   | 4 |   |
| Accounts receivable, net                                                                                                                 |   |               | 100,361 |   |                        |   | 60,046 |   |
| Advances to suppliers, net                                                                                                               |   |               | 10,393  |   |                        |   | 10,161 |   |
| Other current assets                                                                                                                     |   |               | 23      |   |                        |   | 19 |   |
| Pledged deposit                                                                                                                          |   |               | 1,364   |   |                        |   | 1,334 |   |
|                                                                                                                                     |   |               |    |   |                        |   |   |   |
| Total current assets                                                                                                                     |   |               | 112,148 |   |                        |   | 71,569 |   |
|                                                                                                                                     |   |               |    |   |                        |   |   |   |
| Property, plant and equipment, net                                                                                                       |   |               | 150     |   |                        |   | 156 |   |
|                                                                                                                                     |   |               |    |   |                        |   |   |   |
| Total Assets                                                                                                                             |   | $                  | 112,298 |   |                        | $      | 71,725 |   |
|                                                                                                                                     |   |               |    |   |                        |   |   |   |
| LIABILITIES AND STOCKHOLDERS’ EQUITY/(DEFICIT)                                                                                     |   |               |    |   |                        |   |   |   |
| Current liabilities                                                                                                                      |   |               |    |   |                        |   |   |   |
| Short-term bank loans                                                                                                                    |   | $                  | 9,932   |   |                        | $      | 9,710 |   |
| Short-term loan payable                                                                                                                  |   |               | 325     |   |                        |   | 318 |   |
| Accounts payable                                                                                                                         |   |               | 14,745  |   |                        |   | 10,923 |   |
| Accrued expenses and other accrued liabilities                                                                                           |   |               | 5,631   |   |                        |   | 5,030 |   |
| Trade deposits received                                                                                                                  |   |               | 4,869   |   |                        |   | 4,846 |   |
| Due to shareholders                                                                                                                      |   |               | 683     |   |                        |   | 676 |   |
| Income taxes payable                                                                                                                     |   |               | 6,206   |   |                        |   | 6,068 |   |
| Other taxes payable                                                                                                                      |   |               | 28,166  |   |                        |   | 26,097 |   |
| Accrued penalties                                                                                                                        |   |               | 16,574  |   |                        |   | 12,601 |   |
|                                                                                                                                     |   |               |    |   |                        |   |   |   |
| Total current liabilities                                                                                                                |   |               | 87,131  |   |                        |   | 76,269 |   |
|                                                                                                                                     |   |               |    |   |                        |   |   |   |
| Stockholders’ equity/(deficit)                                                                                                     |   |               |    |   |                        |   |   |   |
| Preferred stock, par value US$0.001; authorized 10,000,000 shares; none issued                                                           |   |               | -       |   |                        |   | - |   |
| Common stock, par value US$0.001; authorized 100,000,000 shares;  Issued and outstanding 2,521,341 shares at both periods |   |               | 3       |   |                        |   | 3 |   |
| Additional paid-in capital                                                                                                               |   |               | 3,306   |   |                        |   | 3,306 |   |
| Statutory reserve                                                                                                                        |   |               | 1,042   |   |                        |   | 1,042 |   |
| Retained earnings/(accumulated deficit)                                                                                                  |   |               | 14,123  |   |                        |   | (15,029 | ) |
| Accumulated other comprehensive income                                                                                                   |   |               | 6,693   |   |                        |   | 6,134 |   |
|                                                                                                                                     |   |               |    |   |                        |   |   |   |
| Total stockholders’ equity/(deficit)                                                                                               |   |               | 25,167  |   |                        |   | (4,544 | ) |
|                                                                                                                                     |   |               |    |   |                        |   |   |   |
| Total liabilities and Stockholders’ equity/(deficit)                                                                               |   | $                  | 112,298 |   |                        | $      | 71,725 |   |

----

|                                                                           |   | Three months ended June 30, |      |   | Six months ended June 30, |   |
|--------------------------------------------------------------------------------|--------|-------------------------------------------------|-----------|--------|---------------------------|--------|
|                                                                           |   | 2011                                            |      |   | 2010                      |   |   | 2011 |   |   | 2010 |   |
| Net sales                                                                      |   | $                                               | 4,642     |   |                      | $      | 6,473 |   |   | $ | 8,556 |   |   | $ | 14,064 |   |
|                                                                           |   |                                            |      |   |                      |   |   |   |   |   |   |   |   |   |   |   |
| Cost of sales                                                                  |   |                                            | 4,252     |   |                      |   | 5,997 |   |   |   | 7,789 |   |   |   | 12,992 |   |
|                                                                           |   |                                            |      |   |                      |   |   |   |   |   |   |   |   |   |   |   |
| Gross profit                                                                   |   |                                            | 390       |   |                      |   | 476 |   |   |   | 767 |   |   |   | 1,072 |   |
|                                                                           |   |                                            |      |   |                      |   |   |   |   |   |   |   |   |   |   |   |
| Operating expenses:                                                            |   |                                            |      |   |                      |   |   |   |   |   |   |   |   |   |   |   |
| Selling expenses                                                               |   |                                            | 6         |   |                      |   | 21 |   |   |   | 12 |   |   |   | 62 |   |
| General and administrative expenses                                            |   |                                            | 722       |   |                      |   | 115 |   |   |   | 746 |   |   |   | 142 |   |
| Research and development expenses                                              |   |                                            | -         |   |                      |   | 4 |   |   |   | - |   |   |   | 9 |   |
| Depreciation and amortization                                                  |   |                                            | 5         |   |                      |   | 7 |   |   |   | 10 |   |   |   | 15 |   |
| Allowance for doubtful accounts                                                |   |                                            | -         |   |                      |   | - |   |   |   | - |   |   |   | (251 | ) |
| Total Operating Expenses                                                       |   |                                            | 733       |   |                      |   | 147 |   |   |   | 768 |   |   |   | (23 | ) |
|                                                                           |   |                                            |      |   |                      |   |   |   |   |   |   |   |   |   |   |   |
| Income from operations                                                         |   |                                            | (343      | )      |                      |   | 329 |   |   |   | (1 | ) |   |   | 1,095 |   |
|                                                                           |   |                                            |      |   |                      |   |   |   |   |   |   |   |   |   |   |   |
| Other income/(expenses)                                                        |   |                                            |      |   |                      |   |   |   |   |   |   |   |   |   |   |   |
| Interest expense                                                               |   |                                            | (341      | )      |                      |   | (577 | ) |   |   | (674 | ) |   |   | (790 | ) |
| Other (expenses)/income, net                                                   |   |                                            | (2,195    | )      |                      |   | - |   |   |   | 29,827 |   |   |   | (1,252 | ) |
|                                                                           |   |                                            |      |   |                      |   |   |   |   |   |   |   |   |   |   |   |
| (Loss)/income before income tax expense                                        |   |                                            | (2,879    | )      |                      |   | (248 | ) |   |   | 29,152 |   |   |   | (947 | ) |
|                                                                           |   |                                            |      |   |                      |   |   |   |   |   |   |   |   |   |   |   |
| Income tax (expenses)/benefit                                                  |   |                                            |      |   |                      |   |   |   |   |   |   |   |   |   |   |   |
| Current tax expense                                                            |   |                                            | -         |   |                      |   | - |   |   |   | - |   |   |   | - |   |
| Deferred taxes benefit                                                         |   |                                            | -         |   |                      |   | - |   |   |   | - |   |   |   | 245 |   |
|                                                                           |   |                                            |      |   |                      |   |   |   |   |   |   |   |   |   |   |   |
| Net (loss)/income                                                              |   |                                            | (2,879    | )      |                      |   | (248 | ) |   |   | 29,152 |   |   |   | (702 | ) |
|                                                                           |   |                                            |      |   |                      |   |   |   |   |   |   |   |   |   |   |   |
| Other comprehensive income                                                     |   |                                            |      |   |                      |   |   |   |   |   |   |   |   |   |   |   |
| Foreign currency translation adjustment                                        |   |                                            | 496       |   |                      |   | 183 |   |   |   | 559 |   |   |   | 191 |   |
|                                                                           |   |                                            |      |   |                      |   |   |   |   |   |   |   |   |   |   |   |
| Comprehensive (loss)/income                                                    |   | $                                               | (2,383    | )      |                      | $      | (65 | ) |   | $ | 29,711 |   |   | $ | (511 | ) |
| (Loss)/earnings per share:                                                     |   |                                            |      |   |                      |   |   |   |   |   |   |   |   |   |   |   |
| Basic and diluted                                                              |   | $                                               | (0.945    | )      |                      | $      | (0.026 | ) |   | $ | 11.784 |   |   | $ | (0.206 | ) |
|                                                                           |   |                                            |      |   |                      |   |   |   |   |   |   |   |   |   |   |   |
| Weighted average number of common shares outstanding – basic and diluted |   |                                            | 2,521,341 |   |                      |   | 2,479,667 |   |   |   | 2,521,341 |   |   |   | 2,479,667 |   |

----

|                                                                                 |   | Six months ended June 30 |    |
|--------------------------------------------------------------------------------------|--------|----------------------------------------------|---------|
|                                                                                 |   | 2011                                         |    |   | 2010 |   |
|                                                                                 |   | (Unaudited)                                  |    |   | (Unaudited) |   |
| Cash flows from operating activities                                                 |   |                                         |    |   |   |   |
| Net (loss)/income                                                                    |   | $                                            | 29,152  |   |   | $ | (702 | ) |
| Adjustments to reconcile net (loss)/income to net cash used by operating activities: |   |                                         |    |   |   |   |   |   |
| Deferred tax                                                                         |   |                                         | -       |   |   |   | (245 | ) |
| Depreciation                                                                         |   |                                         | 10      |   |   |   | 14 |   |
| Bad debt expenses                                                                    |   |                                         | (33,680 | ) |   |   | 1,252 |   |
| Loss due to liability for possible settlement to accounts payable                    |   |                                         | 3,638   |   |   |   | - |   |
| Accounts receivable                                                                  |   |                                         | (4,762  | ) |   |   | (9,466 | ) |
| Note receivable                                                                      |   |                                         | -       |   |   |   | 2,780 |   |
| Customer deposits                                                                    |   |                                         | -       |   |   |   | 1,449 |   |
| Other current assets                                                                 |   |                                         | (4      | ) |   |   | - |   |
| Accounts payables                                                                    |   |                                         | 3,542   |   |   |   | 1,545 |   |
| Accrued expenses, other accrued liabilities and other tax payable                    |   |                                         | 1,946   |   |   |   | 3,005 |   |
| Trade deposits received                                                              |   |                                         | (63     | ) |   |   | - |   |
| Net cash flows used in operating activities                                          |   |                                         | (221    | ) |   |   | (368 | ) |
|                                                                                 |   |                                         |    |   |   |   |   |   |
| Net change in cash and cash equivalents                                              |   |                                         | (221    | ) |   |   | (368 | ) |
|                                                                                 |   |                                         |    |   |   |   |   |   |
| Effect of foreign exchange rate changes on cash and cash equivalent                  |   |                                         | 219     |   |   |   | 0 |   |
|                                                                                 |   |                                         |    |   |   |   |   |   |
| Cash and cash equivalent - beginning of year                                         |   |                                         | 5       |   |   |   | 374 |   |
|                                                                                 |   |                                         |    |   |   |   |   |   |
| Cash and cash equivalent - end of year                                               |   | $                                            | 3       |   |   | $ | 6 |   |
|                                                                                 |   |                                         |    |   |   |   |   |   |
| Supplemental disclosure for cash flow information                                    |   |                                         |    |   |   |   |   |   |
| Interest paid                                                                        |   | $                                            | -       |   |   | $ | - |   |
| Income taxes paid                                                                    |   | $                                            | -       |   |   | $ | - |   |

----

| 1. | ORGANIZATION |
|----|--------------|

| 2. | DESCRIPTION OF BUSINESS |
|----|-------------------------|

| 3. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
|----|--------------------------------------------|

----

| 4. | RESTRICTED CASH |
|----|-----------------|

| 5. | ACCOUNTS RECEIVABLE |
|----|---------------------|

----

| 6. | ADVANCES TO SUPPLIERS, NET |
|----|----------------------------|

|                                  |   | June 30, 2011 |    |   | December 31, 2010 |   |
|---------------------------------------|--------|-------------------------|---------|--------|-----------------------------|--------|
|                                  |   | (US$’000)         |    |   | (US$’000)             |   |
|                                  |   |                    |    |   |                        |   |
| Trade deposit paid                    |   | $                       | 25,074  |   |                        | $      | 24,514 |   |
| Less: allowance for doubtful accounts |   |                    | (14,681 | )      |                        |   | (14,353 | ) |
| Total                                 |   | $                       | 10,393  |   |                        | $      | 10,161 |   |

| 7. | OTHER CURRENT ASSETS |
|----|----------------------|

| 8. | PLEDGED DEPOSIT |
|----|-----------------|

----

| 9. | PROPERTY, PLANT AND EQUIPMENT |
|----|-------------------------------|

|                           |   | June 30, 2011 |   |   | December 31, 2010 |   |
|--------------------------------|--------|-------------------------|--------|--------|-----------------------------|--------|
|                           |   | US$’000           |   |   | US$’000               |   |
| Moulds                         |   |                    | 4      |   |                        |   | 4 |   |
| Leasehold improvements         |   |                    | 131    |   |                        |   | 131 |   |
| Office equipment               |   |                    | 323    |   |                        |   | 323 |   |
| Motor vehicles                 |   |                    | 303    |   |                        |   | 303 |   |
|                           |   |                    | 761    |   |                        |   | 761 |   |
| Less: Accumulated depreciation |   |                    | (611   | )      |                        |   | (605 | ) |
|                           |   |                    |   |   |                        |   |   |   |
|                           |   |                    | 150    |   |                        |   | 156 |   |

| 10. | SHORT-TERM BANK LOANS |
|-----|-----------------------|

| At June 30,2011               |   | Amount(RMB’000)        |   | Annualinterest rate |   | Term   |                                          | Guarantee provided by |
|-----------------------------------------|--------|------------------------------|--------|--------------------------|--------|--------|-----------------------------------------------|---------------------------------|
|                                    |   |                         |   |                     |   |   |                                          |                            |
| Loan from Beijing Rural Commercial Bank |   |  47,000 (US$7,271) |   |                     | 10.08  | %      | From September 28, 2008 to September 27, 2009 |                            | Director Liu Yu; A guarantee company; pledged deposit of US$1,290 |
|                                    |   |                         |   |                     |   |   |                                          |                            |   |
| Loan from Huaxia Bank                   |   |  17,200 (US$2,661) |   |                     | 6.3720 | %      | From February 20,2009 to February 20, 2010    |                            | Director Liu Yu; Two third party companies; Distributor Xingwang. |
|                                    |   |                         |   |                     |   |   |                                          |                            |   |
| Total                                   |   |  64,200 (US$9,932) |   |                     |   |   |                                          |                            |   |

| At December 31,2010           |   | Amount(RMB’000)        |   | Annualinterest rate |   | Term   |                                          | Guarantee provided by |
|-----------------------------------------|--------|------------------------------|--------|--------------------------|--------|--------|-----------------------------------------------|---------------------------------|
|                                    |   |                         |   |                     |   |   |                                          |                            |
| Loan from Beijing Rural Commercial Bank |   |  47,000 (US$7,109) |   |                     | 10.08  | %      | From September 28, 2008 to September 27, 2009 |                            | Director Liu Yu; A guarantee company; pledged deposit of US$1,290 |
|                                    |   |                         |   |                     |   |   |                                          |                            |   |
| Loan from Huaxia Bank                   |   |  17,200 (US$2,601) |   |                     | 6.3720 | %      | From February 20, 2009 to February 20, 2010   |                            | Director Liu Yu; Two third party companies; Distributor Xingwang. |
|                                    |   |                         |   |                     |   |   |                                          |                            |   |
| Total                                   |   | 64,200(US$9,710)             |   |                     |   |   |                                          |                            |   |

----

| 11. | SHORT-TERM LOAN FROM A NON-FINANCIAL INSTITUTION |
|-----|--------------------------------------------------|

| 12. | AMOUNT DUE TO SHAREHOLDERS AND RELATED PARTY TRANSACTIONS |
|-----|-----------------------------------------------------------|

|   | (a) | Name and relationship of shareholders |
|--------|-----|---------------------------------------|

| Related party |   | Relationship                                                                |
|--------------------|--------|-----------------------------------------------------------------------------|
|               |   |                                                                        |
| Mr. Liu Yu         |   | Director and shareholder of the Company                                     |
| Mr. Wang Xin       |   | Shareholder and former director of the Company (Resigned on March 27, 2009) |

|   | (b) | Summary of balances due to shareholders and related party transactions |
|--------|-----|------------------------------------------------------------------------|

|                                |   | June 30, 2011 |   |   | December 31, 2010 |   |
|-------------------------------------|--------|-------------------------|--------|--------|-----------------------------|--------|
|                                |   | US$’000           |   |   | US$’000               |   |
| Due to shareholders                 |   |                    |   |   |                        |   |
| Mr. Liu Yu                          |   |                    | 471    |   |                        |   | 465 |   |
| Mr. Wang Xin                        |   |                    | 212    |   |                        |   | 211 |   |
|                                |   |                    | 683    |   |                        |   | 676 |   |
| Bank loans guaranteed by Mr. Liu Yu |   |                    | 9,932  |   |                        |   | 9,780 |   |

| 13. | COMMITMENTS AND CONTINGENCIES |
|-----|-------------------------------|

|   | (a) | Operating lease commitments |
|--------|-----|-----------------------------|

|   | (b) | Contingencies |
|--------|-----|---------------|

----

| 14. | UNAPPROPRIATED RETAINED EARNINGS |
|-----|----------------------------------|

| 15. | STOCK OPTIONS |
|-----|---------------|

----

| Expected dividend yield         |   |     | -      |   |
|---------------------------------|--------|----------|--------|--------|
| Expected stock price volatility |   |     | 85.07  | %      |
| Risk free interest risk         |   |     | 3.61   | %      |
| Expected life of share options  |   | 10 Years |   |

|                                |   | Number ofshare options |    |
|-------------------------------------|--------|----------------------------------|---------|
|                                |   | (Unaudited)                      |    |
| As of January 1, 2011               |   |                             | 614,000 |   |
| Granted                             |   |                             | -       |   |
| Exercised                           |   |                             | -       |   |
| One-for-twelve split reduced shares |   |                             | 562,833 |   |
| As of June 30, 2011                 |   |                             | 51,167  |   |

|                                       |   | OptionsOutstanding |    |   | WeightedAverageExercisePrice |   |   | Weighted-averageremainingcontractualterm(Years) |   |
|--------------------------------------------|--------|--------------------|---------|--------|------------------------------|--------|--------|-------------------------------------------------|--------|
| Outstanding as of December 31, 2010        |   |               | 614,000 |   |                         | $      | 2.26   |                                            |   |   | 7.67 |   |
| Granted                                    |   |               | -       |   |                         |   |   |                                            |   |   | - |   |
| Forfeited                                  |   |               | -       |   |                         |   |   |                                            |   |   | - |   |
| Exercised                                  |   |               | -       |   |                         |   |   |                                            |   |   | - |   |
| One-for-twelve reverse split reduced share |   |               | 562,833 |   |                         |   |   |                                            |   |   |   |   |
| Outstanding as of June 30, 2011            |   |               | 51,167  |   |                         | $      | 0.19   |                                            |   |   | 7.17 |   |

| 16. | LIABILITIES FOR POSSIBLE SETTLEMENT OF ACCOUNTS PAYABLE |
|-----|---------------------------------------------------------|

| 17. | PENSION COSTS |
|-----|---------------|

----

| 18. | INCOME TAXES |
|-----|--------------|

----

| 19. | EARNINGS PER SHARE |
|-----|--------------------|

|                                                                                                  |   | Six months ended June 30, |      |
|-------------------------------------------------------------------------------------------------------|--------|-----------------------------------------------|-----------|
|                                                                                                  |   | 2011                                          |      |   | 2010 |   |
|                                                                                                  |   | (Unaudited)                                   |      |   | (Unaudited) |   |
|                                                                                                  |   |                                          |      |   |   |   |
| Numerator used in basic net income per share:                                                         |   |                                          |      |   |   |   |
| Net (loss)/income                                                                                     |   |                                          | 29,711    |   |   |   | (511 | ) |
|                                                                                                  |   |                                          |      |   |   |   |   |   |
| Shares (denominator):                                                                                 |   |                                          |      |   |   |   |   |   |
| Weighted average common shares outstanding                                                            |   |                                          | 2,521,341 |   |   |   | 2,479,667 |   |
| Plus: weighted average incremental shares from assumed exercise of warrants                      |   |                                          | -         |   |   |   | - |   |
| Weighted average common shares outstanding used in computing diluted net income per common share |   |                                          | 2,521,341 |   |   |   | 2,479,667 |   |
| Earnings per ordinary share-basic and diluted                                                         |   | $                                             | 11.784    |   |   | $ | (0.206 | ) |

| 20. | CONCENTRATIONS AND CREDIT RISKS |
|-----|---------------------------------|

|   | (a) | During the six months ended June 30, 2011 and 2010, the Company’s operating revenue was mainly derived from two distributors. For the six months ended June 30, 2011 and 2010, 94.65% and 92.2%, respectively, of total revenue was derived from our largest distributor Xingwang. There were no trade deposits received from Xingwang as of June 30, 2011 and 2010. Accounts receivable from Xingwang were US$100,361 and US$92,867 as of June 30, 2011 and December 31, 2010, respectively. As mentioned in Note 5, “Accounts Receivable”, in the year 2008, a guarantee company provided a guarantee of up to US$46,411 (RMB300 million) for the accounts receivable from Xingwang for two years from the date they are due. The agreement was renewed on March 30, 2011 among the Company, Zhonghui and Xingwang.  Under this contract, Zhonghui renewed its guarantee amount to the Company for any receivables to Xingwang from RMB300 million to not more than RMB500 million. On August 19, 2011, guarantee contract signed on March 30, 2011 was again renewed and Zhonghui increased its guarantee amount to the Company for any receivables to Xingwang from RMB500 million to not more than RMB650 million. This new agreement covers the same period as the prior contract, from January 1, 2011 to December 31, 2011. |
|--------|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

----

|   | (b) | Suppliers accounting for over 10% of the Company’s purchases are as follows: |
|--------|-----|------------------------------------------------------------------------------------|

|       |   | Three months ended June 30 |   |   | Six months ended June 30 |   |
|------------|--------|------------------------------------------------|--------|--------|----------------------------------------------|--------|
|       |   | 2011                                           |   |   | 2010                                         |   |   | 20 11 |   |   | 2010 |   |
|       |   | %                                              |   |   | %                                            |   |   | % |   |   | % |   |
|       |   | (Unaudited)                                    |   |   | (Unaudited)                                  |   |   | (Unaudited) |   |   | (Unaudited) |   |
| Supplier A |   |                                           | 90     |   |                                         |   | 63 |   |   |   | 86 |   |   |   | 29 |   |
| Supplier B |   |                                           | 10     |   |                                         |   | 37 |   |   |   | 14 |   |   |   | 61 |   |
| Supplier C |   |                                           |   |   |                                         |   |   |   |   |   |   |   |   |   | 10 |   |
| Total      |   |                                           | 100    |   |                                         |   | 100 |   |   |   | 100 |   |   |   | 100 |   |

|   | (c) | Geographical information of the carrying amount of long-lived assets is as follows: |
|--------|-----|-------------------------------------------------------------------------------------|

|                    |   | 30-June-11                                      |   |   | 31-Dec-10                                     |   |
|-------------------------|--------|-------------------------------------------------|--------|--------|-----------------------------------------------|--------|
|                    |   | US$’000                                   |   |   | US$’000                                 |   |
|                    |   |    (unaudited)    |   |   |    (audited)    |   |
| PRC                     |   |                                            | 149    |   |                                          |   | 156 |   |
| Hong Kong               |   |                                            | 1      |   |                                          |   | 2 |   |
| Total long-lived assets |   |                                            | 150    |   |                                          |   | 158 |   |

| 21. | GOING CONCERN AND MANAGEMENT PLAN |
|-----|-----------------------------------|

| 22. | SUBSEQUENT EVENTS |
|-----|-------------------|

----

| Item 2. | Management Discussion and Analysis of Financial Conditions and Results of Operations |
|---------|--------------------------------------------------------------------------------------|

----

----

|                                  |   | Six months ended |   |   | Six months ended |   |   |          |   |
|---------------------------------------|--------|----------------------------|--------|--------|----------------------------|--------|--------|---------------|--------|
|                                  |   | 30-Jun-11                  |   |   | 30-Jun-10                  |   |   | Comparison    |   |
|                                  |   | US$000’              |   |   | % of Revenue     |   |   | US$000’ |   |   | % ofRevenue |   |   | US$000’ |   |   | % |   |
|                                  |   |                       |   |   |                       |   |   |          |   |   |   |   |   |   |   |   |   |   |
| Net sales                             |   |                       | 8,556  |   |                       |   | 100.00 | %             |   |   | 14,064 |   |   |   | 100.00 | % |   |   | (5,508 | ) |   |   | (39.16 | )% |
| Cost of sales                         |   |                       | 7,789  |   |                       |   | 91.04  | %             |   |   | 12,992 |   |   |   | 92.38 | % |   |   | (5,203 | ) |   |   | (40.05 | )% |
| Sales expenses                        |   |                       | 12     |   |                       |   | 0.14   | %             |   |   | 62 |   |   |   | 0.44 | % |   |   | (50 | ) |   |   | (80.65 | )% |
| General & administrative expenses |   |                       | 746    |   |                       |   | 8.72   | %             |   |   | 142 |   |   |   | 1.01 | % |   |   | 604 |   |   |   | 425.35 | % |
| Research and development expenses     |   |                       | 0      |   |                       |   | 0.00   | %             |   |   | 9 |   |   |   | 0.06 | % |   |   | (9 | ) |   |   | (100.00 | )% |
| Depreciation and amortization         |   |                       | 10     |   |                       |   | 0.12   | %             |   |   | 15 |   |   |   | 0.11 | % |   |   | (5 | ) |   |   | (33.33 | )% |
| Allowance for doubtful accounts       |   |                       | 0      |   |                       |   | 0.00   | %             |   |   | (251 | ) |   |   | (1.78 | )% |   |   | 251 |   |   |   | (100.00 | )% |
| Interest expenses                     |   |                       | (674   | )      |                       |   | (7.88  | )%            |   |   | (790 | ) |   |   | (5.62 | )% |   |   | 116 |   |   |   | (14.68 | )% |
| Other (expenses)/income, net          |   |                       | 29,827 |   |                       |   | 348.61 | %             |   |   | (1,252 | ) |   |   | (8.90 | )% |   |   | 31,079 |   |   |   | (2,482.35 | )% |
| Income before income tax expense      |   |                       | 29,152 |   |                       |   | 340.72 | %             |   |   | (947 | ) |   |   | (6.74 | )% |   |   | 30,099 |   |   |   | (3,178.35 | )% |
| Deferred taxes benefit                |   |                       | -      |   |                       |   | -      |          |   |   | 245 |   |   |   | 1.74 | % |   |   | (245 | ) |   |   | (100.00 | )% |
| Net (loss)/income                     |   |                       | 29,152 |   |                       |   | 340.72 | %             |   |   | (702 | ) |   |   | (4.99 | )% |   |   | 29,854 |   |   |   | (4,252.71 | )% |

|                      |   | Six months ended June 30, 2011 |   |
|---------------------------|--------|---------------------------------------------------------|--------|
| Cellularphones model |   | Amount(US$’000)                                   |   |   | % of total revenue |   |
| F608                      |   |                                                    | 2,027  |   |   |   | 24 | % |
| TC158                     |   |                                                    | 1,734  |   |   |   | 20 | % |
| YT668                     |   |                                                    | 1,692  |   |   |   | 20 | % |
| A1806                     |   |                                                    | 1,435  |   |   |   | 17 | % |
| Total                     |   |                                                    | 6,878  |   |   |   | 81 | % |

----

|                                                 |   | Six months ended June 30, 2011 |   |
|------------------------------------------------------|--------|---------------------------------------------------------|--------|
|                                                 |   | Amount(US$’000)                                   |   |   | % of total sales |   |
| Beijing Xingwang Shidai Tech & Trading Co., Ltd. |   |                                                    | 8,101  |   |   |   | 94.68 | % |
| Jinan Wanxiang                                       |   |                                                    | 361    |   |   |   | 4.22 | % |
| Shenzhen Oubei                                       |   |                                                    | 94     |   |   |   | 1.1 | % |
| Total                                                |   |                                                    | 8,556  |   |   |   | 100 | % |

----

|                                  |   | Three months ended |   |   | Three months ended |   |   |          |   |
|---------------------------------------|--------|------------------------------|--------|--------|------------------------------|--------|--------|---------------|--------|
|                                  |   | 30-Jun-11                    |   |   | 30-Jun-10                    |   |   | Comparison    |   |
|                                  |   | US$000’                |   |   | % of Revenue       |   |   | US$000’ |   |   | % ofRevenue |   |   | US$000’ |   |   | % |   |
|                                  |   |                         |   |   |                         |   |   |          |   |   |   |   |   |   |   |   |   |   |
| Net sales                             |   |                         | 4,642  |   |                         |   | 100.00 | %             |   |   | 6,473 |   |   |   | 100.00 | % |   |   | (1,831 | ) |   |   | (28.29 | )% |
| Cost of sales                         |   |                         | 4,252  |   |                         |   | 91.60  | %             |   |   | 5,997 |   |   |   | 92.65 | % |   |   | (1,745 | ) |   |   | (29.10 | )% |
| Sales expenses                        |   |                         | 6      |   |                         |   | 0.13   | %             |   |   | 21 |   |   |   | 0.32 | % |   |   | (15 | ) |   |   | (71.43 | )% |
| General & administrative expenses |   |                         | 722    |   |                         |   | 15.55  | %             |   |   | 115 |   |   |   | 1.78 | % |   |   | 607 |   |   |   | 527.83 | % |
| Research and development expenses     |   |                         | 0      |   |                         |   | 0.00   | %             |   |   | 4 |   |   |   | 0.06 | % |   |   | (4 | ) |   |   | (100.00 | )% |
| Depreciation and amortization         |   |                         | 5      |   |                         |   | 0.11   | %             |   |   | 7 |   |   |   | 0.11 | % |   |   | (2 | ) |   |   | (28.57 | )% |
| Interest expenses                     |   |                         | (341   | )      |                         |   | (7.35  | )%            |   |   | (577 | ) |   |   | (8.91 | )% |   |   | 236 |   |   |   | (40.90 | )% |
| Other (expenses)/income, net          |   |                         | (2,195 | )      |                         |   | (47.29 | )%            |   |   | 0 |   |   |   | 0.00 | % |   |   | (2,195 | ) |   |   | 0.00 | % |
| Income before income tax expense      |   |                         | (2,879 | )      |                         |   | (62.02 | )%            |   |   | (248 | ) |   |   | (3.83 | )% |   |   | (2,631 | ) |   |   | 1,060.89 | % |
| Net (loss)/income                     |   |                         | (2,879 | )      |                         |   | (62.02 | )%            |   |   | (248 | ) |   |   | (3.83 | )% |   |   | (2,631 | ) |   |   | 1,060.89 | % |

----

|                      |   | Three months ended June 30, 2011 |   |
|---------------------------|--------|------------------------------------------------------|--------|
| Cellularphones model |   | Amount(US$’000)                                |   |   | % of total revenue |   |
| TC158                     |   |                                                 | 1,734  |   |   |   | 37 | % |
| A1806                     |   |                                                 | 1,435  |   |   |   | 31 | % |
| YT668                     |   |                                                 | 993    |   |   |   | 21 | % |
| Total                     |   |                                                 | 4,162  |   |   |   | 89 | % |

|                                                 |   | Three months ended June 30, 2011 |   |
|------------------------------------------------------|--------|----------------------------------|--------|
|                                                 |   | Amount(US$’000)            |   |   | % of total sales |   |
| Beijing Xingwang Shidai Tech & Trading Co., Ltd. |   |                             | 4,642  |   |   |   | 100 | % |
| Total                                                |   |                             | 4,642  |   |   |   | 100 | % |

----

----

|                                                                          |   | Three Months Ended June, 31                 |   |
|-------------------------------------------------------------------------------|--------|---------------------------------------------|--------|
|                                                                          |   | 2011                                        |   |   | 2010 |   |
|                                                                          |   | Amount in thousand US dollars ($’000) |   |
|                                                                          |   |                                        |   |   |   |   |
| Net cash used in operating activities                                         |   | $                                           | (221   | ) |   | $ | (368 | ) |
| Net cash used in investing activities                                    |   |                                        |   |   |   |   | 0 |   |
| Net cash provided by financing actives                                        |   |                                        |   |   |   |   | 0 |   |
| Effect of foreign currency exchange rate changes on cash and cash equivalents |   |                                        | 219    |   |   |   | 0 |   |
| Net (decrease) / increase in cash and cash equivalents                        |   | $                                           | (2     | ) |   | $ | (368 | ) |

----

| Item 3. | Quantitative and Qualitative Disclosures About Market Risk. |
|--------------|-------------------------------------------------------------|

| Item 4. | Controls and Procedures. |
|---------|--------------------------|

----

| Item 1. | Legal Proceedings. |
|---------|--------------------|

| Item 1A. | Risk Factors. |
|----------|---------------|

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

|   | (a) | None. |
|--------|-----|-------|

|   | (b) | Not applicable. |
|--------|-----|-----------------|

|   | (c) | None. |
|--------|-----|-------|

| Item 3. | Defaults Upon Senior Securities. |
|---------|----------------------------------|

| Item 4. | (Removed and Reserved). |
|---------|-------------------------|

| Item 5. | Other Information. |
|---------|--------------------|

----

| Item 6. | Exhibits. |
|---------|-----------|

| Exhibit Number |   | Exhibit Description                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|---------------------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| 3.1                 |   | Certificate of Incorporation of Orsus Xelent Technologies, Inc. (incorporated by reference from Exhibit 3.1 to the Registration Statement on Form SB-2 filed with the Securities and Exchange Commission on July 28, 2004 as amended by that Plan of Merger and Agreement of Merger attached as Exhibit 2.1 to the Current Report on Form 8-K filed with the SEC on April 20, 2005 and by the Certificate of Amendment attached as Exhibit 3.5 to the Current Report on Form 8-K filed with the SEC on April 28, 2011) |
|                |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| 3.2                 |   | Amended and Restated Bylaws of the Registrant (incorporated by reference from Exhibit 3.2 to the Annual Report on Form 10-K filed with the Securities and Exchange Commission on April 15, 2011)                                                                                                                                                                                                                                                                                                                       |
|                |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| 4.1                 |   | Specimen Certificate of Common Stock (incorporated by reference to Exhibit 4.1 to Amendment 2 to the Registration Statement on Form SB-2/A filed with the Securities and Exchange Commission on October 19, 2004)                                                                                                                                                                                                                                                                                                      |
|                |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| 10.1                |   | 2007 Omnibus Long-Term Incentive Plan (incorporated by reference from Exhibit 10.1 to the Current Report on Form 8-K filed with the Securities and Exchange Commission on January 11, 2008)                                                                                                                                                                                                                                                                                                                            |
|                |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| 10.2                |   | Master Distributor Agreement, dated as of August 7, 2008, by and between Beijing Orsus Xelent Technology & Trading Company Limited and Beijing Xingwang Shidai Commerce Co., Ltd. (incorporated by reference from Exhibit 10.1 to the Current Report on Form 8-K filed with the Securities and Exchange Commission on August 20, 2008)                                                                                                                                                                             |
|                |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| 10.3                |   | Lease Contract, dated as of January 1, 2009, by and between Beijing Longyida Property Management Co. Ltd. and Orsus Xelent Technologies, Inc. (incorporated by reference from Exhibit 10.3 to the Annual Report on Form 10-K filed with the Securities and Exchange Commission on April 15, 2011)                                                                                                                                                                                                                      |
|                |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| 10.4                |   | Extension of Lease Contract, dated as December 31, 2009, by and between Beijing Longyida Property Management Co. Ltd. and Orsus Xelent Technologies, Inc. (incorporated by reference from Exhibit 10.4 to the Annual Report on Form 10-K filed with the Securities and Exchange Commission on April 15, 2011)                                                                                                                                                                                                          |
|                |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| 10.5                |   | Credit Guarantee Contract, dated March 30, 2011, by and among  Beijing Xingwang Shidai Tech & Trading Co., Ltd, Beijing Orsus Xelent Tech& Trading Company, and Zhong Hui Guarantee Corporation (incorporated by reference from Exhibit 10.5 to the Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on May 23, 2011)                                                                                                                                                 |
|                |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| 10.6                |   | Credit Guarantee Contract, dated August 19, 2011, by and among  Beijing Xingwang Shidai Tech & Trading Co., Ltd, Beijing Orsus Xelent Tech& Trading Company, and Zhong Hui Guarantee Corporation *                                                                                                                                                                                                                                                                                                   |
|                |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| 31.1                |   | Certification of Principal Executive Officer under Section 302 of the Sarbanes-Oxley Act of 2002 *                                                                                                                                                                                                                                                                                                                                                                                                                     |
|                |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| 31.2                |   | Certification of Principal Financial Officer under Section 302 of the Sarbanes-Oxley Act of 2002 *                                                                                                                                                                                                                                                                                                                                                                                                                     |
|                |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| 32.1                |   | Certification of Principal Executive Officer under Section 906 of the Sarbanes-Oxley Act of 2002 *                                                                                                                                                                                                                                                                                                                                                                                                                     |
|                |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| 32.2                |   | Certification of Principal Financial Officer under Section 906 of the Sarbanes-Oxley Act of 2002 *                                                                                                                                                                                                                                                                                                                                                                                                                     |
|                |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|                |   | * Filed herewith                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |

----

|   | ORSUS XELENT TECHNOLOGIES, INC. |
|--------|---------------------------------|
|   |                            |
|   | By:                             | /s/ Guoji Liu |
|   |                            | Guoji Liu |
|   |                            | Chief Executive Officer |
|   |                            |   |
|   | By:                             | /s/ Hua Chen |
|   |                            | Hua Chen |
|   |                            | Chief Financial Officer |

----

| Exhibit Number |   | Exhibit Description                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
|---------------------|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| 3.1                 |   | Certificate of Incorporation of Orsus Xelent Technologies, Inc. (incorporated by reference from Exhibit 3.1 to the Registration Statement on Form SB-2 filed with the Securities and Exchange Commission on July 28, 2004 as amended by that Plan of Merger and Agreement of Merger attached as Exhibit 2.1 to the Current Report on Form 8-K filed with the SEC on April 20, 2005 and by the Certificate of Amendment attached as Exhibit 3.5 to the Current Report on Form 8-K filed with the SEC on April 28, 2011) |
|                |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| 3.2                 |   | Amended and Restated Bylaws of the Registrant (incorporated by reference from Exhibit 3.2 to the Annual Report on Form 10-K filed with the Securities and Exchange Commission on April 15, 2011)                                                                                                                                                                                                                                                                                                                       |
|                |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| 4.1                 |   | Specimen Certificate of Common Stock (incorporated by reference to Exhibit 4.1 to Amendment 2 to the Registration Statement on Form SB-2/A filed with the Securities and Exchange Commission on October 19, 2004)                                                                                                                                                                                                                                                                                                      |
|                |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| 10.1                |   | 2007 Omnibus Long-Term Incentive Plan (incorporated by reference from Exhibit 10.1 to the Current Report on Form 8-K filed with the Securities and Exchange Commission on January 11, 2008)                                                                                                                                                                                                                                                                                                                            |
|                |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| 10.2                |   | Master Distributor Agreement, dated as of August 7, 2008, by and between Beijing Orsus Xelent Technology & Trading Company Limited and Beijing Xingwang Shidai Commerce Co., Ltd. (incorporated by reference from Exhibit 10.1 to the Current Report on Form 8-K filed with the Securities and Exchange Commission on August 20, 2008)                                                                                                                                                                             |
|                |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| 10.3                |   | Lease Contract, dated as of January 1, 2009, by and between Beijing Longyida Property Management Co. Ltd. and Orsus Xelent Technologies, Inc. (incorporated by reference from Exhibit 10.3 to the Annual Report on Form 10-K filed with the Securities and Exchange Commission on April 15, 2011)                                                                                                                                                                                                                      |
|                |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| 10.4                |   | Extension of Lease Contract, dated as December 31, 2009, by and between Beijing Longyida Property Management Co. Ltd. and Orsus Xelent Technologies, Inc. (incorporated by reference from Exhibit 10.4 to the Annual Report on Form 10-K filed with the Securities and Exchange Commission on April 15, 2011)                                                                                                                                                                                                          |
|                |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| 10.5                |   | Credit Guarantee Contract, dated March 30, 2011, by and among  Beijing Xingwang Shidai Tech & Trading Co., Ltd, Beijing Orsus Xelent Tech& Trading Company, and Zhong Hui Guarantee Corporation (incorporated by reference from Exhibit 10.5 to the Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on May 23, 2011)                                                                                                                                                 |
|                |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| 10.6                |   | Credit Guarantee Contract, dated August 19, 2011, by and among  Beijing Xingwang Shidai Tech & Trading Co., Ltd, Beijing Orsus Xelent Tech& Trading Company, and Zhong Hui Guarantee Corporation *                                                                                                                                                                                                                                                                                                   |
|                |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| 31.1                |   | Certification of Principal Executive Officer under Section 302 of the Sarbanes-Oxley Act of 2002 *                                                                                                                                                                                                                                                                                                                                                                                                                     |
|                |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| 31.2                |   | Certification of Principal Financial Officer under Section 302 of the Sarbanes-Oxley Act of 2002 *                                                                                                                                                                                                                                                                                                                                                                                                                     |
|                |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| 32.1                |   | Certification of Principal Executive Officer under Section 906 of the Sarbanes-Oxley Act of 2002 *                                                                                                                                                                                                                                                                                                                                                                                                                |
|                |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
| 32.2                |   | Certification of Principal Financial Officer under Section 906 of the Sarbanes-Oxley Act of 2002 *                                                                                                                                                                                                                                                                                                                                                                                                                |
|                |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|                |   | * Filed herewith                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |

----