UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-QSB (Mark One) xQUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period endedJune 30, 2006 [
        ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT For the transition period from __________ to __________ Commission file number000-30299 GLOBAL INNOVATIVE SYSTEMS INC.(Exact name of small business issuer as specified in its charter)  Nevada
        
        98-0217653(State or other jurisdiction of incorporation or organization)
        
        (IRS Employer Identification No.)  16/F., Hang Seng Mongkok Building, 677 Nathan Road, Mongkok, Kowloon, Hong Kong(Address of principal executive offices)  (852) 2546-1808(Issuers telephone number)  N/A(Former name, former address and former fiscal year, if changed since last report) Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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.     YesxNo o APPLICABLE ONLY TO CORPORATE ISSUERS State the number of shares outstanding of each of the issuers classes of common equity, as of the latest practicable date: 33,612,642 common shares issued and outstanding as of August 10, 2006. Transitional Small Business Disclosure Format (Check one):
        Yes [
        ]
        Nox Indicate by check mark whether the registrant is a shell company (as defined in Rule 2b-2 of the Exchange Act). Yes [
        ]
        Nox        2     GLOBAL INNOVATIVE SYSTEMS INC. PART I - FINANCIAL INFORMATION Item1.Condensed Financial Statements.  Unaudited Condensed Consolidated Balance Sheets as at June 30, 2006 and March 31, 2006 (Audited)  Unaudited Condensed Consolidated Statements of Operations for the three months ended June 30, 2006 and 2005  Unaudited Condensed Consolidated Statements of Cash Flows for the three months ended June 30, 2006 and 2005  Notes to Unaudited Condensed Consolidated Financial Statements  Item 2. Managements Discussion and Analysis or Plan of Operation.  Item 3. Controls and Procedures.  PART II - OTHER INFORMATION  Item 1. Legal Proceedings.  Item 6. Exhibits.                     3   Item 1. Financial Statements.     GLOBAL INNOVATIVE SYSTEMS INC. INTERIM CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 2006 UNAUDITED                            4   GLOBAL INNOVATIVE SYSTEMS INC.  CONDENSED CONSOLIDATED BALANCE SHEETS
Expressed in US dollars  June 30,
        March 31,2006
        2006(Unaudited)
        (Audited)$
        $ASSETSCurrent assets:Cash and cash equivalents
        147,866
        158,832Restricted deposits
        225,715
        224,092Other investments
        31,516
        31,516Trade receivables, net of allowance for doubtful accounts
        1,880,377
        1,312,775of $154,242 on June 30, 2006 and $210,096 on March 31, 2006Net investment in sales-type leases
        176,108
        174,828Prepaid expenses and other current assets
        901,696
        1,314,014Amount due from a shareholder
        124,730
        160,243Amount due from a related company
        -
        385,527Inventories
        2,368,729
        3,532,602Total current assets
        5,856,737
        7,294,429Intangible assets
        4,311,159
        3,669,275Goodwill
        5,383,872
        4,086,888Investment in corporate joint ventures
        75,832
        839Investments  restricted
        676,397
        679,396Equipment, net
        3,636,448
        3,714,367Construction in progress
        1,942,551
        1,937,360Net investment in sales-type leases
        464,625
        515,76516,490,884
        14,603,890TOTAL ASSETS
        22,347,621
        21,898,319LIABILITIES AND SHAREHOLDERS' EQUITYCurrent liabilities:Short-term borrowings
        1,739,781
        2,077,878Trade payables
        793,121
        2,093,053Amount due to a director
        2,127,733
        3,375,283Amounts due to directors of a subsidiary
        911,207
        1,028,178Amount due to a minority shareholder of a subsidiary
        -
        517,962Amounts due to shareholders
        582,382
        64,420Amounts due to related companies
        1,217,301
        26,992Accrued expenses and other current liabilities
        1,079,529
        943,522Current portion of obligations under capital leases
        740
        740Income tax payable
        271,697
        177,899Total current liabilities
        8,723,491
        10,305,927Non-current liabilities:Obligations under capital leases
        1,666
        1,851       5   GLOBAL INNOVATIVE SYSTEMS INC.  CONDENSED CONSOLIDATED BALANCE SHEETS (continued)
Expressed in US dollars  June 30,
        March 31,2006
        2006(Unaudited)
        (Audited)$
        $Total non-current liabilities
        1,666
        1,851Total liabilities
        8,725,157
        10,307,778Minority interest
        1,506,626
        2,633,652Shareholders' equity:Common stockAuthorized:800,000,000 common shares, par value $0.001 per share100,000,000 preferred shares, par value $0.001 per shareIssued and outstanding:33,612,642 common shares at June 30, 2006 and30,535,719 common shares at March 31, 2006
        33,613
        30,535Common stock warrants
        -
        573,692Additional paid-in capital
        18,622,616
        14,667,387Accumulated other comprehensive loss
        (43,051)
        (40,339)Accumulated deficit
        (6,497,340)
        (6,274,386)Total shareholders' equity
        12,115,838
        8,956,889TOTAL LIABILITIES ANDSHAREHOLDERS' EQUITY
        22,347,621
        21,898,319  See notes to unaudited condensed consolidated financial statements.                6   GLOBAL INNOVATIVE SYSTEMS INC.  CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
Expressed in US dollars  Three Months Ended
June 30,2006
        2005$
        $Revenues:Sale of energy saving products
        7,394
        218,838Sale of lighting source products
        1,889,229
        -Rental income
        964
        964Commission and service income
        15,904
        5,719Sales-type lease income
        5,023
        4,575Total net revenues
        1,918,514
        230,096Cost of revenues:Sale of energy saving products
        (14,729)
        (134,472)Sale of lighting source products
        (635,488)
        -Rental income
        (474)
        (474)Commission and service income
        (2,455)
        (723)Total cost of revenues
        (653,146)
        (135,669)Gross profit
        1,265,368
        94,427Amortization of intangible assets
        (147,246)
        (125,052)Selling and marketing expenses
        (147,319)
        (165,912)General and administrative expenses
        (979,924)
        (431,372)Loss from operations
        (9,121)
        (627,909)Interest expense
        (90,430)
        (22,214)Interest income
        1,624
        10,585Other income
        75,318
        781,280Equity share of the result of corporate joint venture
        64,710
        -Profit before income tax and minority interests
        42,101
        141,742Income tax
        (93,798)
        (127,255)Net (loss) / profit
        (51,697)
        14,487Minority interests
        (171,257)
        -Net (loss) / profit attributable to shareholders of the Company
        (222,954)
        14,487Basic and diluted (loss) / profit per share
        (0.01)
        0.00Weighted average number of commonshares outstanding, basic and diluted
        30,603,344
        19,343,888  See notes to unaudited condensed consolidated financial statements.       7   GLOBAL INNOVATIVE SYSTEMS INC.  CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Expressed in US dollars  Three Months Ended
June 30,2006
        2005$
        $Cash flows from operating activities:Net profit / (loss)
        (222,954)
        14,487Adjustment to reconcile net profit / (loss) tonet cash used in operating activities:Amortization of intangible assets
        147,246
        125,052Depreciation expense
        98,887
        19,625Equity share of the result of corporate joint venture
        (64,710)
        -Write-off of equipment
        -
        118Write-off of bad debts
        210,846
        -Minority interest
        171,258
        -Changes in operating assets and liabilities, net of acquisitions:Trade receivables
        (715,911)
        (879,725)Net investment in sales-type leases
        49,860
        35,911Prepaid expenses and other current assets
        349,780
        (49,783)Inventories
        1,163,872
        (128,696)Trade payables
        (1,299,932)
        209,868Amount due from related companies
        399,743
        -Accrued expenses and other current liabilities
        136,007
        113,732Income tax payable
        93,800
        127,256Net cash from / (used in) operating activities
        517,792
        (412,155)Cash flows from investing activities:Purchase of equipment
        (20,157)
        (25,275)Increase in construction in progress
        (5,191)
        -Advance to shareholders
        (74,936)
        (104,337)Cash paid for incorporation of a joint venture
        (10,283)
        -Advance from a shareholder
        110,450
        17,745Repayment to shareholders
        -
        (61,846)Increase in restricted deposits
        (1,623)
        (292)Cash used in investing activities
        (1,740)
        (174,005)             8   GLOBAL INNOVATIVE SYSTEMS INC.  CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (continued)
Expressed in US dollars  Three Months Ended
June 30,2006
        2005$
        $Cash flows from financing activities:Proceeds from short-term borrowings
        185,387
        -Repayment of short-term borrowings and short-term debts
        (523,484)
        (20,677)Repayment of capital lease obligations
        (185)
        (19,186)Net proceeds from issuance of share capital and common stock warrants
        -
        1,320,828Advances from directors of a subsidiary
        (116,972)
        -Advance from a related company
        1,863,753
        -Repayment to a related company
        (687,661)
        -Advance from a director
        187,831
        68,947Repayment to a director
        (1,435,381)
        (676,238)Net cash (used in) / provided by financing activities
        (526,712)
        673,674Effect of foreign exchange rates change
        (306)
        -Net increase in cash and cash equivalents
        (10,966)
        87,514Cash and cash equivalents at beginning of the year
        158,832
        32,694Cash and cash equivalents at end of the period
        147,866
        120,208Supplemental disclosure of cash flows informationCash paid for:Bank interest expenses
        50,977
        -   See notes to unaudited condensed consolidated financial statements.               9   GLOBAL INNOVATIVE SYSTEMS INC.  NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED JUNE 30, 2006 (Unaudited)  NOTE 1.  BASIS OF PRESENTATION  The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the accounting principles generally accepted in the United States of America for interim financial information and pursuant to the rules of the Securities and Exchange Commission.  Accordingly, certain information and disclosures, normally included in annual financial statements, have been condensed or omitted pursuant to those rules and regulations.  In the opinion of the management, all adjustments, consisting only of normal recurring adjustments, necessary to fairly present the financial position, results of operations and cash flows with respect to the interim unaudited consolidated financial statements have been included.  The results from operations for the three months ended June 30, 2006 are not necessarily indicative of the results for the entire fiscal year.  The management recommends that these unaudited condensed consolidated financial statements be read in conjunction with the audited consolidated March 31, 2006 financial statements and notes thereto of the Company and its subsidiaries included in our annual report on Form 10-KSB filed July 14, 2006.  NOTE 2.  ORGANIZATION AND NATURE OF OPERATIONS  Global Innovative Systems Inc., and its subsidiaries (collectively referred to as the "Company") is principally engaged as a developer, manufacturer and integrator of energy saving products and technologies and the provision of consulting and customer training services.  In addition, the Company engaged in the manufacture and distribution of lighting source products as well as the provision of LED lighting effect services following the acquisition of Beijing Illumination (Hong Kong) Limited and the formation of the Lightscape Technologies (Macau) Ltd. joint venture.  The principal subsidiaries / corporate joint ventures of the Company as of June 30, 2006 include the following:  Date of
        Place of
        Percentage ofName of subsidiary / corporate joint venture
        incorporation
        incorporation
        effective ownershipTech Team Holdings Limited (TTHL)
        February 15, 2002
        The Cayman Islands
        100Tech Team Investment Limited (TTIL)
        March 24, 2000
        The British Virgin
        100IslandsTech Team Development (Zhuhai) Limited
        August 23, 2002
        The People's Republic
        100(TT (Zhuhai))
        
        of ChinaTech Team Development Limited (TTDL)
        October 22, 1999
        Hong Kong
        100Tech Team Engineering Limited (TTEL)
        August 23, 2000
        Hong Kong
        100Grandplex Development Limited (GDL)
        January 18, 1999
        Hong Kong
        100Tech Team China Limited (TTCL)
        May 22, 2002
        The British Virgin Island
        100Tomi Fuji Energy Management
        March 10, 2004
        Hong Kong
        100Services Consultants Limited (TFEMS)       10    Beijing Illumination (Hong Kong) Limited (Beijing Illumination)
        October 11, 2002
        Hong Kong
        76.8Beijing Aihua New Enterprise Lighting
        July 26, 1999
        The People's Republic
        76.8Appliance Company Limited (Beijing Aihua)
        
        of ChinaTomi Fuji Energy Pte. Limited (TFEPL)
        December 17, 2004
        Singapore
        80Powerland Technology Limited (PTL)
        September 8, 2005
        The British Virgin Island
        100Lightscape Technologies (Macau) Limited (Lightscape Macau)
        February 6, 2006
        Macau
        50.4Pro Shing Construction Team Macau Limited (Pro Shing)
        June 19, 2006
        Macau
        80  The unaudited condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. As shown in the unaudited condensed consolidated financial statements, the Company has a net working capital deficit of $2,866,754 as of June 30, 2006. The continuation of the Company is dependent upon the continuing financial support of its directors and shareholders, and obtaining long-term financing, as well as achieving and maintaining a profitable level of operations through successful product development and sales.  These factors, among others, indicate that the Company may be unable to continue as a going concern. The unaudited condensed consolidated financial statements do not include any adjustments relating to the recoverability and classification of liabilities that
might be necessary should the Company be unable to continue as a going concern.  Management recognizes that the Companys continuation as a going concern is dependent upon its ability to generate sufficient cash flow to allow the Company to satisfy its obligations on a timely basis.  The Company commenced a discussion which included negotiating credit arrangements with certain bankers, raising new equity financing sufficient to retire all outstanding liabilities and to fund the restructuring.  Upon successful completion of the discussion, management has determined the Company will be better positioned to fund its current obligations and obtain new financing.  While the Company is expending its best efforts to achieve the restructuring and new acquisitions, there is no assurance that any such activity will be successful and will generate funds necessary for continued operation of the Company.  NOTE 3. ACQUISITIONS OF BUSINESS Acquisition of Interest in Beijing Illumination Pursuant to a Sale and Purchase Agreement dated September 27, 2005 (as amended by a letter agreement dated October 3, 2005) by and among the Company, Glory Goal Investments Limited (Glory Goal) and Ko Yin, the Company acquired 26.0% of the shares of Beijing Illumination on February 27, 2006. As consideration for the 26.0% interest in Beijing Illumination, the Company issued to Glory Goal 1,750,000 common shares of the Company and paid to Glory Goal $1,928,021 (approximately HK$15,000,000) in cash.  Pursuant to an Option Deed Agreement dated September 27, 2005 (as amended by a letter agreement dated October 3, 2005) and pursuant to a Supplemental Deed Agreement dated February 22, 2006, both by and among the Company, Admire Fame Investments Limited (Admire Fame), Gain Huge Investments Limited (Gain Huge), Splendid Fortune Investments Limited (Splendid Fortune) and Ko Yin, the Company acquired an additional 30.8% of the shares of Beijing Illumination on February 27, 2006 in     11   exchange for the issuance of an aggregate 8,856,230 common shares of the Company to Admire Fame, Gain Huge and Splendid Fortune.  Following the closing of the acquisition of interests in Beijing Illumination on February 27, 2006, our company expanded our business into the manufacturing and sale of lighting and specialty lighting source products.  $Shares allotted (based on market value on February 27, 2006)
        7,954,672Cash consideration
        1,928,021Professional fees paid on acquisition
        120,272Total consideration
        10,002,965  Acquisition of Additional Interest in Beijing Illumination Pursuant to a Purchase Agreement dated March 29, 2006 by and among the Company and Aeneas, the Company acquired 5.0% of the shares of Beijing Illumination on June 29, 2006 in exchange for the issuance of 1,250,000 common shares of the Company to Aeneas. Pursuant to a Purchase Agreement dated April 3, 2006 by and among the Company and Aeneas, the Company acquired an additional 15.0% of the shares of Beijing Illumination on June 29, 2006 in exchange for the issuance of 1,826,923 common shares of the Company to Aeneas. In aggregate, the Company owns 960 of the 1,250 issued and outstanding ordinary shares of Beijing Illumination, representing approximately 76.8% of the shares of Beijing Illumination as of June 30, 2006.  $Shares allotted (based on market value on June 29, 2006)
        3,384,615Total consideration
        3,384,615The purchase price has been allocated based on the estimated fair values of the assets acquired and liabilities assumed as of the date of acquisition.  The following represents the allocation of the purchase price:Net assets in Beijing Illumination at date of acquisition:Other investment
        31,516Property, plant and equipment
        3,345,249Construction in progress
        1,942,550Inventories
        1,904,917Trade receivables
        1,811,550Prepayment and other receivables
        409,414Tax recoverable
        12,009Bank balances and cash
        129,099Trade payables
        (714,815)Accrued expenses and other payables
        (562,637)Taxation payable
        (78,199)Loan from a shareholder
        (517,962)Loan from directors
        (911,207)Short-term bank loans
        (308,978)Minority shareholders interests
        (1,506,261)Net assets attributable to existing shareholdings
        (3,687,744)Net assets
        1,298,501       12    Intangible assets:     Completed technology  AHP
        294,479-      Completed technology  HID
        296,232-      Trademark
        144,036-      Customer lists and relationships
        11,630-      Distributor list
        42,753Total intangible assets
        789,130Goodwill
        1,296,984Total consideration
        3,384,615  The following table sets forth the unaudited pro forma results of operations of the Company as if the acquisition of the 76.8% interest in Beijing Illumination had occurred at the beginning of the fiscal year.  These pro forma amounts do not purport to be indicative of the results that would have actually been obtained if the acquisition occurred as of the beginning of the periods presented or that not be obtained in the future.  Unaudited Pro Forma ResultsTwelve months ended
March 31, 2006
$Revenue
        6,712,976Net loss attributable to shareholders of the Company
        (3,312,923)  Acquisition of Interest in Lightscape Holding Ltd.  On March 30, 2006, TTIL, our wholly-owned subsidiary, entered into a Sale and Purchase Agreement with Yuen Yu Woo as vendor, and Michelle Siu Kwan Lam and Joseph Sui Kei Lam as guarantors.  Pursuant to the terms and conditions of the Sale and Purchase Agreement, the Company agreed to purchase six shares, or approximately 60%, of the issued and outstanding shares of Lightscape Holding Ltd. from Yuen Yu Woo in consideration for the issuance of 3,000,000 common shares by the Company to Ms. Woo.  As at the balance sheet date, the Company has not closed the transactions contemplated in the Sale and Purchase Agreement.  Lightscape Holding Ltd. holds all of the issued and outstanding shares of Luminous LED Technologies Limited which, in turn, holds the minority interest in Lightscape Macau, our joint venture company.  NOTE 4.  SUMMARY OF PRINCIPAL ACCOUNTING POLICIES  Basis of Presentation  The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States of America.  Principle of Consolidation  The unaudited condensed consolidated financial statements include the financial statements of the Company and its majority-owned subsidiaries.  All significant intercompany transactions and balances are eliminated on consolidation.  Use of Estimates  The preparation of financial statements 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 revenues and expenses during the reported period.  Actual results could differ from those estimates.      13    Cash and Cash Equivalents Cash and cash equivalents consist of cash on hand and demand deposits which are unrestricted as to withdrawal and use, and which have maturities of three months or less when purchased. Investment in Corporate Joint Venture  Corporate joint venture refers to a corporation owned and operated by a small group of businesses as a separate and specific business or project for the mutual benefit of the members of the group. The purpose of a corporate joint venture frequently is to share risks and rewards in developing a new market, product or technology; to combine complementary technological knowledge; or to pool resources in developing production or other facilities. The Company accounts for its investment in corporate joint venture using the equity method of accounting.  Investments - Restricted  The Company classifies investments in mutual funds as available-for-sale securities and carries them at market value. The unrealized holding gains and losses on these securities are excluded from earnings and are reported as a separate component of other comprehensive income or loss until realized. Realized gains and losses from the sale of available-for-sale securities are determined on a specific identification basis and are reflected in unaudited condensed consolidated statement of operations.  The Company assesses declines in the value of individual investments to determine whether such decline is other-than-temporary and thus the investment is impaired. This assessment is made by considering available evidence including changes in general market conditions, specific industry and individual company data in which the guaranteed mutual funds are invested in, the length of time and the extent to which the market value has been less than cost, the financial condition and near-term prospects of the individual company in which the guaranteed mutual funds are invested in, and the Companys intent and ability to hold the investment.  Other Investment  Other investment is stated at cost less accumulated impairment loss. It represents the investment in Xianghe Aihua New Enterprise Lighting Equipment Company Ltd. (Xianghe Aihua), an indirect 51% owned subsidiary of Beijing illumination which is, in turn, an indirect 76.8% owned subsidiary of the Company.  The control of Xianghe Aihua does not reside with the Company and the Company does not have significant influence on it. The Company is unable to obtain any updated financial statements of Xianghe Aihua. As a consequence, the results of Xianghe Aihua were not included in the unaudited condensed consolidated financial statements of the Company.  Trade Receivables and Allowance for Doubtful Accounts  In regards to the Companys allowance for doubtful accounts, the Company periodically records a provision for doubtful accounts based on an evaluation of the collectibility of accounts receivable by assessing, among other factors, the customers willingness or ability to pay, repayment history, general economic conditions, and the ongoing relationship with the Company's customers.  The total amount of this provision is determined by first identifying the receivables of customers that are considered to be a higher credit risk based on their current overdue accounts, difficulties in collecting from these customers in the past and their overall financial condition.  For each of these customers, the Company estimates the extent to which the customer will be able to meet its financial obligations, and the Company records an allowance that reduces its accounts receivable for that customer to the amount
that is reasonably believed will be collected.  Additional allowances may be required in the future if the financial condition of the Company's customers or general economic conditions deteriorate, thereby reducing net income.      14    Inventories  Inventories are stated at the lower of cost or market value. Cost is determined on the first-in, first-out basis. Write-down of potentially obsolete or slow-moving inventory is recorded based on managements analysis of inventory levels and the Company's assessment of estimated obsolescence based upon assumptions about future demand and market conditions. Further write-down of the value may be required in the future if there is rapid technological and structural change in the industry. This may reduce the results of operations of the Company.  Goodwill  The Company accounted for acquisitions of business in accordance with SFAS No. 141 Business Combinations, which resulted in the recognition of goodwill. Goodwill represents the excess of the purchase price over the fair value of net assets acquired in business combinations accounted for under the purchase method. Goodwill is not subject to amortization but will be subject to periodic evaluation for impairment. Goodwill is stated in the unaudited condensed consolidated balance sheet at cost less accumulated impairment loss.  Intangible Assets  The Company acquired certain intangible assets through the acquisition of TFEMS in January 2005.  These intangible assets are comprised of trademark, customer lists and relationships, and unfulfilled purchase orders.  The Company also acquired certain intangible assets through the acquisition of Beijing Illumination in February 2006 and in June 2006.  These intangible assets consisted of completed technology for the production of Aihua Ultra-High Pressure Mercury (AHP) lamps and HID lamps, trademark, a customer base and a distributor base. The acquired trademarks were determined to have an indefinite useful life which are not subject to amortization, unless and until their useful life are determined no longer to be indefinite.  The Company tests for impairment of trademarks annually, or more frequently if events or changes in circumstances indicate that the asset might be impaired.  The completed technologies for the production of AHP and HID, distributor base, customer lists and relationships and unfulfilled purchase orders are subject to amortization over their respective economic useful life and reviewed for impairment if the carrying amount of these intangible assets are not recoverable and their carrying amount exceeds their fair market value.  After an impairment loss is recognized, the adjusted carrying amount of the intangible assets shall be their new accounting basis.  The estimation of the useful life of the trademarks, completed technologies for the production of AHP and HID, distributor base, customer lists and relationships will be affected by factors such as change in demand, unanticipated competition and other economic factors including stability of industry, change in technology, legislative action that results in an uncertain or an adverse change in the regulatory environment and changes in distribution channels and business climate.  If impairment loss is recognized, the results of operations and the financial condition of the Company will be adversely affected.  Impairment of Long-Lived Assets  The Company reviews long-lived assets for potential impairment based on a review of projected undiscounted cash flows associated with these assets.  Long-lived assets are included in impairment evaluations when events and circumstances exist that indicate the carrying amount of these assets may not be recoverable.  Measurement of impairment losses for long-lived assets that the Company expects to hold and use is based on the estimated fair value of the assets.  Therefore, future changes in the Company's strategy and other changes in its operations could impact the projected future operating results that are inherent in estimates of fair value, resulting in impairments in the future.  Additionally, other changes in the estimates and assumptions, including the discount rate and expected long-term growth rate, which drive the     15   valuation techniques employed to estimate the fair value of long-lived assets could change and, therefore, impact the assessments of impairment in the future.  Equipment and Construction in Progress  Equipment is recorded at cost less accumulated depreciation. Depreciation is provided on a straight-line basis over the estimated useful lives of the assets. Estimated useful lives of equipment are as follows:  Testing equipment
        4 yearsOffice equipment
        3 - 4 yearsFurniture and fixtures
        3 - 4 yearsLeasehold improvements
        shorter of 4 years or the remaining terms of the leasesMotor vehicles
        5 - 7 yearsEnergy savers
        10 yearsFactory machinery and equipment
        10 - 16 years  Energy savers are electronic devices sold by the Company that assist in regulating the consumption of electricity by certain equipment thereby resulting in energy savings. The Company retains a number of these devices as demonstration units for marketing and promotion purposes.  Construction in progress is stated at cost which comprises all direct costs incurred in relation to their construction.  The cost of construction in progress will not be amortized until they are put into use and are transferred to a specific category of plant and equipment when the construction is completed.  Expenditures for repairs, maintenance and minor renewals and betterments are expensed.  Net Investment in Sales - Type Leases  At the time a sales-type lease is consummated, the Company records the gross finance receivable, less unearned income.  Unearned income is recognized as lease income using the interest method over the term of the lease and is included as financing revenue in the Company's consolidated statements of operations.  The Company reviews minimum lease payments receivable considered at risk on a periodic basis.  The review primarily consists of an analysis based upon current information available about the client as well as the current economic environment, value of leased assets net of repossession cost and prior history.  Impairment is measured using the fair value of the leased assets when foreclosure is probable.  Using this information, the Company determines the expected cash flow for the receivable and calculates a recommended estimate of the potential loss and the probability of loss.  For those accounts in
which the loss is probable, the Company records a specific reserve.  Revenue Recognition  The Company recognizes revenue when it is realized or realizable and earned.  The Company considers revenue realized or realizable and earned when it has persuasive evidence of an arrangement, the product has been delivered and installed or the services have been provided to the customer, the sales price is fixed or determinable, and collectibility is reasonably assured.  In addition to the aforementioned general policy, the following are specific revenue recognition policies for each major category of revenue.  Sale of energy saving products- The Company sells its products directly to end users with installation ("Direct Sales Contracts") and through distributors ("Trading Contracts").  Direct Sales Contracts revenue from hardware sales or sales-type leases is recognized when the product is delivered to the customer and related installation is completed when there are no unfulfilled company obligations that affect the customer's final acceptance of the arrangement and when all other revenue recognition criteria are met.  Revenue from Trading Contracts is recognized when the product is delivered and title is transferred and when all other revenue recognition criteria are met.      16    Sale of lighting source products-The Company sells its products directly to end users and through distributors. Revenue is recognized when the product is delivered to the customer and all other revenue recognition criteria are met.  Rental Income -Revenue from rentals and operating leases without any acceptance provisions is recognized on a straight-line basis over the term of the rental or lease.  Commission and Services Income:  -
        Revenue from consultancy services related to energy - saving feasibility study is recognized when granted.  Services are considered granted when the Company delivers its assessment to its customer and the customer signs the acceptance report.  -
        Commissions earned from customer marketing services, where the Company is acting as an agent for petroleum distribution companies, are recorded upon notification by the petroleum distribution companies for the amount earned, which is based on a pre-determined amount, per unit of gasoline sold to referred customers.  Sales-type lease income- Represents finance income attributable to sales-type leases and is recognized over the term of the lease, using the effective interest method.  Income Taxes  Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the carrying amounts of existing assets and liabilities and their respective tax bases as well as operating loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Valuation allowances are established when it is more likely than not that some or all of the deferred tax assets will not be realized.  Foreign Currency Translation  The functional currency of the Company is in Hong Kong dollars ("HKD"). Transactions in other currencies are recorded in HKD at the rates of exchange prevailing when the transactions occur. Monetary assets and liabilities denominated in other currencies are measured in HKD at rates of exchange in effect at the balance sheet dates. Exchange gains and losses are recorded in the condensed consolidated statements of operations as a component of current period earnings.  The Company changed its reporting currency from HKD to United States dollars (USD) during the year ended March 31, 2006. However, HKD is pegged to USD and hence there is no translation adjustment impact on the Companys unaudited condensed consolidated financial statements.  Segment Information  The Companys segment reporting is prepared in accordance with SFAS No. 131, Disclosures about Segments of an Enterprise and Related Information.  The management approach required by SFAS 131 designates that the internal reporting structure that is used by management for making operating decisions and assessing performance should be used as the source for presenting the Companys reportable segments.       17  Concentration of Credit Risk  Financial instruments that potentially expose the Company to concentrations of credit risk consist primarily of cash, trade receivables, deposits for goods and net investment in sales-type leases. The Company places its cash with financial institutions with high-credit ratings and quality.  The Company conducts credit evaluation of customers and generally does not require collateral or other security from its customers. The Company establishes an allowance for doubtful accounts primarily based upon the age of the receivables and factors surrounding the credit risk of specific customers.  The Company relies on supplies from numerous vendors. For the quarter ended June 30, 2006, the Company had one vendor that accounted for more than 20% of total supply purchases for the period.  If the vendor terminates its relationship with the Company or if the Companys supply from a vendor is interrupted or terminated for any reason, the Company may not have sufficient time to replace the supply of products from the remaining vendors.  Any such interruption would negatively impact the Company's ability to sell and distribute its products.  The Companys business, assets and operations is currently focused on the sale of specialty lighting source products and electrical energy-saving products in China, and accordingly, is affected to a significant degree by any economic, political and legal developments in China.  Fair Value of Financial Instruments  The carrying amounts of cash and cash equivalents, trade receivables, short-term borrowings and trade payables approximate their fair values due to the short-term maturity of these instruments. The fair value of long-term debts, and capital lease obligations approximate their carrying value as the interest rates approximate those which would have been available for loans of similar remaining maturity at the respective period ends.  Comprehensive Income  Comprehensive income is defined to include all changes in equity except those resulting from investments by owners and distributions to owners. The Company reports its comprehensive income (loss) in the unaudited condensed consolidated statement of shareholders' equity (deficit).  Net Profit / (Loss) per Share  Basic net profit / (loss) per share is based on the weighted average number of shares of common stock outstanding for the period.  The effects of warrants have not been included in the net loss per share computation for the three month periods ended June 30, 2006 and 2005 as their effect would have been anti-dilutive.  Recent Accounting Pronouncements  In February 2006, FASB issued SFAS No. 155, Accounting for Certain Hybrid Financial Instruments. SFAS No. 155 amends SFAS No 133, Accounting for Derivative Instruments and Hedging Activities, and SFAF No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities. SFAS No. 155, permits fair value remeasurement for any hybrid financial instrument that contains an embedded derivative that otherwise would require bifurcation, clarifies which interest-only strips and principal-only strips are not subject to the requirements of SFAS No. 133, establishes a requirement to evaluate interest in securitized financial assets to identify interests that are freestanding derivatives or that are hybrid financial instruments that contain an embedded derivative requiring bifurcation, clarifies that concentrations of credit risk in the form of
subordination are not embedded derivatives, and amends SFAS No. 140 to eliminate the prohibition on the qualifying special-purpose entity from holding a derivative financial instrument that pertains to a beneficial interest other than another derivative financial instrument. This statement is effective for all financial instruments acquired or issued after the beginning of the Groups first fiscal year that begins after September 15, 2006. The Group management has not evaluated the impact of this pronouncement on the Groups financial statements.      18    In March 2006 FASB issued SFAS 156 Accounting for Servicing of Financial Assets this Statement amends FASB Statement No. 140, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities, with respect to the accounting for separately recognized servicing assets and servicing liabilities. This Statement:  - Requires an entity to recognize a servicing asset or servicing liability each time it undertakes an obligation to service a financial asset by entering into a servicing contract.  - Requires all separately recognized servicing assets and servicing liabilities to be initially measured at fair value, if practicable.  - Permits an entity to choose 'Amortization method' or Fair value measurement method for each class of separately recognized servicing assets and servicing liabilities.  At its initial adoption, permits a one-time reclassification of available-for-sale securities to trading securities by entities with recognized servicing rights, without calling into question the treatment of other available-for-sale securities under Statement 115, provided that the available-for-sale securities are identified in some manner as offsetting the entity's exposure to changes in fair value of servicing assets or servicing liabilities that a servicer elects to subsequently measure at fair value.  - Requires separate presentation of servicing assets and servicing liabilities subsequently measured at fair value in the statement of financial position and additional disclosures for all separately recognized servicing assets and servicing liabilities. An entity should adopt this Statement as of the beginning of its first fiscal year that begins after September 15, 2006.  The Groups management believes that this statement will not have a significant impact on the Groups financial statements.  In June 2006, the FASB issued Interpretation No. 48, "Accounting for Uncertainty in Income Taxes - an interpretation of FASB Statement No. 109" ("FIN 48") which prescribes a recognition threshold and measurement attribute, as well as criteria for subsequently recognizing, derecognizing and measuring uncertain tax positions for financial statement purposes. FIN 48 also requires expanded disclosure with respect to the uncertainty in income tax assets and liabilities. FIN 48 is effective for fiscal years beginning after December 15, 2006, which will be our fiscal 2008, and is required to be recognized as a change in accounting principle through a cumulative-effect adjustment to retained earnings as of the beginning of the year of adoption. The adoption of FIN 48 is not expected to have a material impact on our consolidated results of operations or financial position.  In June 2006, the Financial Accounting Standards Board ("FASB") ratified the provisions of Emerging Issues Task Force ("EITF") Issue No. 06-3, "How Taxes Collected from Customers and Remitted to Governmental Authorities Should Be Presented in the Income Statement (That Is, Gross versus Net Presentation)." EITF Issue No. 06-3 requires that the presentation of taxes within revenue-producing transactions between a seller and a customer, including but not limited to sales, use, value added, and some excise taxes, should be on either a gross (included in revenue and cost) or a net (excluded from revenue) basis. In addition, for any such taxes that are reported on a gross basis, a company should disclose the amounts of those taxes in interim and annual financial statements for each period for which an income statement is presented if those amounts are significant. The disclosure of those taxes can be done on an
aggregate basis. EITF Issue No. 06-3 is effective for fiscal years beginning after December 15, 2006, which will be our fiscal 2008. The adoption of EITF Issue No. 06-3 is not expected to have a material impact on our consolidated results of operations or financial position.      19   NOTE 5.  NET INVESTMENT IN SALES-TYPE LEASES  Net investment in sales-type leases is for leases that relate to the Company's hardware sales and are generally for terms ranging from three to five years.  Interest rates range from 2.5% to 5% and the leases are secured by the respective leased assets.  The details of net investment in sales-type leases are as follows:  June 30,
2006
(Unaudited)
$
        
        March 31,
2006
(Audited)
$Total minimum lease payments to be received
        673,501
        
        727,431Less: Unearned income
        (32,768)
        
        (36,838)Net investment in sales-type leases
        640,733
        
        690,593Current portion
        (176,108)
        
        (174,828)Net investment in sales-type leases, less current portion
        464,625
        
        515,765  Contracted maturities of the sales-type leases as of June 30, 2006 are as follows:  Twelve months ending June 30,
        
        $2007
        
        176,1082008
        
        180,6802009
        
        138,6742010
        
        117,3922011
        
        27,879640,733  NOTE 6. PREPAID EXPENSES AND OTHER CURRENT ASSETS  Prepaid expenses and other current assets consist of the following:  June 30,
2006
(Unaudited)
$
        
        March 31,
2006
(Audited)
$Trade deposits
        430,038
        
        634,681Rental, utilities and other deposits
        35,382
        
        73,942Prepaid expenses
        219,917
        
        334,225Tax recoverable
        12,008
        
        31,945Staff advances
        98,437
        
        73,915Other receivable
        105,914
        
        123,591Others
        -
        
        41,715901,696
        
        1,314,014  NOTE 7.  INVENTORIES  Inventories by major categories are summarized as follows:        20    June 30,
2006
(Unaudited)
$
        
        March 31,
2006
(Audited)
$Raw materials
        721,318
        
        519,621Work in progress
        61,986
        
        954,310 Finished goods
        1,585,425
        
        2,058,6712,368,729
        
        3,532,602  NOTE 8.  EQUIPMENT, NET  Equipment, net consists of the following:  June 30,
2006
(Unaudited)
$
        
        March 31,
2006
(Audited)
$Testing equipment
        83,715
        
        83,715Office equipment
        500,233
        
        479,265Furniture and fixtures
        97,317
        
        97,317Leasehold improvements
        30,247
        
        30,247Motor vehicles
        99,632
        
        99,632Energy savers
        360,723
        
        360,723Factory machinery and equipment
        3,667,055
        
        3,667,055Total
        4,838,922
        
        4,817,954Less: Accumulated depreciation
        (1,202,474)
        
        (1,103,587)Equipment, net
        3,636,448
        
        3,714,367  Equipment, net held under capital leases are summarized as follows:  June 30,
2006
(Unaudited)
$
        
        March 31,
2006
(Audited)
$Office equipment
        3,702
        
        3,702Less: Accumulated depreciation
        (1,954)
        
        (1,028)Equipment, net held under capital leases
        1,748
        
        2,674  Equipment, net leased under operating leases to customers is summarized as follows:  June 30,
2006
(Unaudited)
$
        
        March 31,
2006
(Audited)
$Energy savers
        -
        
        18,953Less: Accumulated depreciation
        -
        
        (8,845)Equipment, net leased under operating leases to customers
        -
        
        10,108  NOTE 9.  CONSTRUCTION IN PROGRESS  Construction in progress consists of the following:       21    June 30,
2006
(Unaudited)
$
        
        March 31,
2006
(Audited)
$Production facilities for Xenon lights
        1,066,922
        
        1,064,062Production facilities for AHP lamps
        488,035
        
        453,183 Others
        387,594
        
        420,1151,942,551
        
        1,937,360  NOTE 10.  INTANGIBLE ASSETS  Intangible assets arise from the acquisitions of interests in TFEMS and Beijing Illumination as stated in Note 3 above.  Acquired intangible assets consist of the following:  June 30,
2006
(Unaudited)
$
        
        March 31,
2006
(Audited)
$Completed technology  AHP
        1,172,616
        
        878,137Completed technology  HID
        1,214,012
        
        917,780Trademark
        1,186,002
        
        1,813,175Customer lists and relationships
        1,357,109
        
        2,502,291Distributors list
        179,350
        
        136,597Unfulfilled purchase orders
        4,113
        
        4,113Total
        5,113,202
        
        6,252,093Less: Accumulated amortization
- completed technology - AHP
- completed technology - HID
- customer lists and relationships
- distributors list
- unfulfilled purchase orders
Impairment loss on trademark
Impairment loss on customer lists and relationships
        (41,816)
(76,483)
(664,454)
(15,177)
(4,113)
-
-
        
        (10,454)
(19,120)
(617,316)
(3,794)
(4,113)
(771,209)
(1,156,812)Total
        4,311,159
        
        3,669,275  Amortization expenses charged to net income from operations for the three months ended June 30, 2006 and 2005 were $147,246 and $125,052, respectively.  Anticipated amortization expense on intangible assets for each of the next five years is as follows:  Twelve months ending June 30,
        
        $2007
        
        720,5242008
        
        720,5242009
        
        700,5962010
        
        467,0022011
        
        172,0962,780,742  NOTE 11.  INVESTMENT IN CORPORATE JOINT VENTURES On February 6, 2006, the Company incorporated a joint venture company named Lightscape Macau.  TTIL, a wholly-owned subsidiary of the Company, holds 50.4% of the share capital of Lightscape Macau and Luminous LED Technologies Ltd., a Hong Kong based researcher, developer, manufacturer and distributor of advanced light emitting diode, or LED, lighting products and technologies, holds the remaining 49.6% of the share capital of Lightscape Macau.      22   Financial statements of Lightscape Macau are summarized as follows:  Balance Sheet
        June 30,
        
        March 31,2006
        
        2006$
        
        $Current assetsCash at bank and on hand
        134
        
        135Amounts due from related companies
        77
        
        3,213Trade receivable
        1,028,278
        
        -Prepayment and other current assets
        -
        
        385,604Total current assets
        1,028,489
        
        388,952Current liabilitiesTrade payable
        (867,609)
        
        -Amount due to a related company
        (29,254)
        
        (387,147)Amount due to a director
        (141)
        
        (141)Total current liabilities
        (897,004)
        
        (387,288)Total net assets
        131,485
        
        1,664Shareholders equity:Common stock
        3,213
        
        3,213Accumulated profit/(deficit)
        128,272
        
        (1,549)Total shareholders equity
        131,485
        
        1,664   Profit and loss account Three months ended
June 30,2006
$
        
        February 6, 2006 to March31, 2006
$Turnover
        1,028,278
        
        -Cost of sales
        (867,609)
        
        -Gross profit
        160,669
        
        -General and administrative expenses
        (30,848)
        
        (1,549)Profit / (loss) for the period
        129,821
        
        (1,549) On June 19, 2006, the Company incorporated a joint venture company named Pro Shing.  TTIL, a wholly-owned subsidiary of the Company, holds 80% of the share capital of Pro Shing and Proficiency Macau Construction Company Limited, a Macau based construction company, holds the remaining 20% of the share capital of Pro Shing.  Financial statements of Pro Shing are summarized as follows:      23    Balance Sheet
        June 30,2006$Current assetsAmounts due from related companies
        12,853Total current assets
        12,853Current liabilitiesAccrued expenses and other current liabilities
        (900)Total current liabilities
        (900)Total net assets
        11,953Shareholders equity:Common stock
        12,853Accumulated deficit
        (900)Total shareholders equity
        11,953   Profit and loss account June 19, 2006 to
June 30,2006
$General and administrative expenses
        (900)Loss for the period
        (900)  NOTE 12.  SHORT-TERM BORROWINGS  The Company's short-term borrowings consist of the following:  June 30,
2006
(Unaudited)
$
        
        March 31,
2006
(Audited)
$Bank loans
        
        1,208,721
        
        1,370,872Bank overdrafts
        
        345,674
        
        707,006Others
        
        185,386
        
        -1,739,781
        
        2,077,878Weighted average interest rate on borrowings at end of quarter
        
        8%
        
        7.82%At end of quarter:Bank credit facilities
        
        1,579,914
        
        2,037,662Utilized
        
        (1,538,748)
        
        (2,045,803)Bank credit facilities utilized/(overutilized)
        
        41,166
        
        (8,141)  Interest rates are generally based on the bank's best lending rate plus certain percentage and the credit lines are normally subject to periodic review.  In accordance with certain bank covenants, TTHL needs to maintain a net worth of not less than $1,092,545 from July 2003 onwards and to release the existing     24   floating charge on all assets of TTDL; however, these financial covenants have not been fulfilled by TTHL.  Other than the aforesaid requirements, there are no other significant covenants or other financial restrictions relating to the Companys short-term borrowings that the Company did not comply with.  As of June 30, 2006, the above facilities are secured by the following:  (a)
        All assets of TTDL amounting to $3,087,579 as of June 30, 2006; (b)
        Investments of the Company of $676,397; (c)
        Cash deposits of the Company of $225,715; (d)
        A subordination agreement from a director of the Company to subordinate the advance of $16,710 to TTDL; (e)
        The residual value on the legal charge over a property belonged to a director of the Company; (f)
        Joint and several personal guarantee from two directors of the Company and a director of one of the subsidiaries of the Company; (g)
        A personal guarantee from an independent third party of $899,743; (h)
        A letter of undertaking from TTDL in pledging 5% of its export bills proceeds; (i)
        Net investment in sales-type leases and all proceeds associated with certain Direct Sales Contracts of the Company amounting to approximately $226,395; (j)
        Cross Corporate Guarantee for $3,856,041 amongst TTHL, TTDL and GDL; (k)
        Corporate guarantee executed by a third party for the bank loan of Beijing Aihua amounting to $308,978; and (l)
        Pledging of Beijing Aihuas machinery with fair value of approximately $1,235,911.  Other than the investments and restricted cash deposits, there is no restriction on the use of the assets collateralized for the above facilities and bank loans.  NOTE 13. OBLIGATIONS UNDER CAPITAL LEASES  June 30,
2006
(Unaudited)
$
        
        March 31,
2006
(Audited)
$Total minimum lease payments
        2,406
        
        2,591Less: Amounts representing interests
        -
        
        -Present value of minimum lease payments
        2,406
        
        2,591Less: Current portion of obligations under capital leases
        (740)
        
        (740)Long-term portion of obligations under capital leases
        1,666
        
        1,851  The following is a summary of future minimum lease payments under capital leases as of June 30, 2006:  Twelve months ending June 30,
        $2007
        7402008
        7402009
        7402010
        1862,406  The Company entered into capital lease arrangements for leasing equipment used in its operations. The lease is for a term of 3 years. For the three months ended June 30, 2006, the capital lease arrangement was on a non-interest bearing basis. The leases are on a fixed repayment basis and no arrangement entered into includes contingent rental payments.      25   The interest expenses incurred on these capital leases were $nil and $962 for the three months ended June 30, 2006 and 2005, respectively.  NOTE 14. FOREIGN CURRENCY TRANSACTION GAIN OR LOSS  Aggregate foreign currency transaction (loss) and gain of $(8,163) and of $1,829 for the three months ended June 30, 2006 and 2005 were included in determining net loss, for the respective quarters.  NOTE 15.  INCOME TAX  The components of profit / (loss) before income tax and minority interests are as follows:  June 30,
2006
$
        
        June 30,
2005
$Hong Kong
        127,261
        
        205,341Mainland, the Peoples Republic of China (PRC)
        (169,362)
        
        (63,599)(42,101)
        
        141,742  Taxes laws applicable to the Company are as follows:  -
        TTHL is a tax-exempted company incorporated in the Cayman Islands. -
        Under the current BVI law, TTCs, TTILs and PTLs income are not subject to taxation. -
        Global Innovative Systems Inc. and TFEPL also had no assessable profits earned during the periods presented. -
        No provision for PRC income tax has been made as TT(Zhuhai) had no assessable profits earned during the three months ended June 30, 2006 and three months ended June 30, 2005.  Preferential tax treatment has been agreed with the relevant tax authorities and TT(Zhuhai) is exempted from PRC income tax in the first two profitable years and is subject to half of the standard statutory tax rate of 15% in the subsequent three years. -
        Pursuant to the relevant laws and regulations in the PRC, Beijing Aihua is exempted from PRC enterprise income tax for two years starting from its first profit-making year i.e. 2004 after it became a wholly foreign owned enterprise and followed by a 50% reduction for the next three years. -
        Other companies are dormant and had no assessable profits earned during the periods presented.  Income tax expense for the three months ended June 30, 2006 and 2005 represents the provision for current income tax of the subsidiaries operating in Hong Kong and has been calculated at 17.5% of the estimated assessable profit for the period.  NOTE 16. COMMITMENTS  The Company as Lessor  Energy saver rental income earned was $964 and $964 for the three months ended June 30, 2006 and 2005, respectively.  The Company as Lessee  The Company has operating lease agreements principally for its office facilities. Such leases have remaining terms of 2 to 54 months. The following is a summary of future minimum lease payments under operating leases as of June 30, 2006. Rental expense was $58,433 and $27,190 for the periods ended June 30, 2006 and 2005, respectively.      26    Twelve months ending June 30,  $2007
        169,3772008
        96,5062009
        96,4012010
        96,4012011
        48,201506,886  Royalties  Pursuant to a supplier agreement (Agreement) dated March 8, 2006, entered into between Beijing Illumination and an independent third party, the independent third party appointed Beijing Illumination as a non-exclusive licensed OEM manufacturer with rights to make and distribute certain products worldwide and Beijing Illumination shall pay to the independent third party during the term of the Agreement 7% of gross revenues of certain products sold to customers or distributors other than this independent third party.  Such royalty payments shall survive for five years after termination of the Agreement.  NOTE 17.  RELATED PARTY BALANCES AND TRANSACTIONS  Related Party Transactions  TFCL, a shareholder of the Company, paid certain expenses totaling $30,435 on behalf of the Company and the Company repaid $68,933 during the three months ended June 30, 2006.  A director of the Company advanced loans of $187,831 to the Company during the three months ended June 30, 2006. The loans are non-interest bearing and payable on demand. In addition, the Company repaid to a director $1,435,381 for the three months ended June 30, 2006.  As of June 30, 2006, net investment in sales-type leases amounting to approximately $474,868 was collateralized for credit facilities granted to a shareholder of the Company.  During the three months ended June 30, 2006, the Company paid office rent of $11,568 to a third party which was beneficially owned by the family members of a director of a subsidiary.  The Company incurred interest expense of $25,829 payable to a shareholder of the Company for the three months ended June 30, 2006.  Pursuant to the terms of the agreements in relation to the acquisition of interest in TFEMS as mentioned in Note 3 above, a beneficial owner of TFCL has guaranteed to pay the shortfall to the Company should the net profit of TFEMS for the period from the date of acquisition to June 30, 2005 (the guaranteed period) fall below a warranted sum. The profits for the guaranteed period fell short of $604,546 and the Company is currently pursuing the guarantor for the enforcement of this guarantee.  A director of the Company is also the independent non-executive director of Galaxy Entertainment Group Limited, the owner of Galaxy StarWorld Hotel in Macau. Lightscape Technologies (Macau) Limited, our 50.4% owned corporate joint venture, received a Letter of Award amounting to approximately $2,250,000 for the design, supply, installation, testing and commissioning of tailor-made lighting solutions for the outside facade wall of the Galaxy StarWorld Hotel in Macau.  Related Party Balances  As of June 30, 2006, the amounts due from/to related companies, directors and shareholders represent cash advances to or from them and are unsecured and have no fixed repayment terms. Except for an amount of     27   $526,448 due to a director of a subsidiary, Mr. Ko Yin, carried interest at 9.6% per annum and another amount of $517,962 due to a shareholder of the Company, Aeneas Portfolio Company LP, carried interest at 20% per annum, others are non-interest bearing.  The balances related to such advances are as follows:  June 30,
2006
(Unaudited)
$
        
        March 31,
2006
(Audited)
$Amount due from a related companyLightscape Macau
        -
        
        385,527Amount due from a shareholderTFCL
        124,730
        
        160,243Amount due to a directorBondy Tan
        2,127,733
        
        3,375,283Amounts due to directors of a subsidiaryKo Yin
        871,362
        
        988,333Lam So Ying
        39,845
        
        39,845911,207
        
        1,028,178Amount due to a minority shareholder of a subsidiaryAeneas Portfolio Company LP (Aeneas)
        -
        
        517,962Amounts due to shareholdersDavid Yu
        64,420
        
        64,420Aeneas
        517,962
        
        -582,382
        
        64,420Amounts due to  related companiesPalun Development Limited
        30,848
        
        26,992Luminous LED Technologies Ltd.
        1,176,093
        
        -Pro Shing
        10,283
        
        -Lightscape Macau
        77
        
        -1,217,301
        
        26,992  Palun Development Limited is beneficially owned by the family members of a director of a subsidiary.  NOTE 18.  SEGMENT INFORMATION  (i) The Company operates in two segments, namely energy savings and sales of lighting source products. The Company is engaged as a developer, manufacturer and integrator of energy saving products and technologies and provision of consulting and customer training services related to such products.  In addition, the Company has expanded its business into the manufacturing and sale of lighting and specialty lighting source products.  The accounting policies of the operating segments are the same as those described in the Summary of Principal Accounting Policies (see Note 4). We evaluate performance based on profit or loss from operations, excluding corporate, general and administrative expenses.      28    June 30,
        June 30,2006
(Unaudited)
$
        2005
(Unaudited)
$Net revenues:Energy saving business
        29,285
        
        230,096Lighting source business
        1,889,229
        
        -1,918,514
        
        230,096Interest expenses:Energy saving business
        50,977
        
        22,214Lighting source business
        39,453
        
        -90,430
        
        22,214Amortization of intangible assets:Energy saving business
        46,285
        
        125,052Lighting source business
        100,961
        
        -147,246
        
        125,052Depreciation:Energy saving business
        18,028
        
        19,753Lighting source business
        80,859
        
        -98,887
        
        19,753Other income:Energy saving business
        2,631
        
        781,280Lighting source business
        72,687
        
        -75,318
        
        781,280Income tax expenses:Energy saving business
        -
        
        127,255Lighting source business
        93,798
        
        -93,798
        
        127,255  (ii) Geographical Information: June 30,
        June 30,2006
(Unaudited)
$
        
        2005
(Unaudited)
$Total sales:Mainland, the PRC
        
        784,402
        
        180,913Hong Kong
        
        20,689
        
        49,183India
        
        102,301
        
        -Singapore
        
        925,450
        
        -United States
        
        14,554
        
        -Others
        
        71,118
        
        -1,918,514
        
        230,096       29   (iii) The location of the Companys long-lived assets excluding restricted investments is as follows:  June 30,
2006
(Unaudited)
$
        
        March 31,
2006
(Audited)
$Hong Kong
        10,328,798
        
        8,450,664Macau
        75,832
        
        839Mainland, the PRC
        5,409,857
        
        5,472,99115,814,487
        
        13,924,494  NOTE 19.  SHARE CAPITAL AND WARRANTS  Share Capital  Pursuant to a Purchase Agreement dated March 29, 2006 by and among the Company and Aeneas, the Company acquired 5.0% of the shares of Beijing Illumination on June 29, 2006 in exchange for the issuance of 1,250,000 common shares of the Company to Aeneas.  Pursuant to a Purchase Agreement dated April 3, 2006 by and among the Company and Aeneas, the Company acquired an additional 15.0% of the shares of Beijing Illumination on June 29, 2006 in exchange for the issuance of 1,826,923 common shares of the Company to Aeneas. Warrants  All outstanding common stock warrants expired unexercised during the period May 17, 2006 through May 27, 2006 and the remaining balances were transferred to additional paid-in capital.        30   Item2.Managements Discussion and Analysis or Plan of Operation. FORWARD-LOOKING STATEMENTS Forward-Looking Statements This quarterly report contains forward-looking statements as that term is defined in Section 27A of the United States Securities Act of 1933 and Section 21E of the United States Securities Exchange Act of 1934. These statements relate to future events or our future financial performance. In some cases, you can identify forward-looking statements by terminology such as "may", "should", "intends", "expects", "plans", "anticipates", "believes", "estimates", "predicts", "potential", or "continue" or the negative of these terms or other comparable terminology. These statements are only predictions and involve known and unknown risks, uncertainties and other factors, including the risks in the section entitled "Risk Factors", which may cause our or our industrys actual results, levels of activity or performance to be materially different from any future results, levels of activity or performance expressed or
implied by these forward-looking statements. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity or performance. Except as required by applicable law, including the securities laws of the United States, we do not intend to update any of the forward-looking statements to conform these statements to actual results. In this quarterly report, unless otherwise specified, all dollar amounts are expressed in United States dollars and all references to "common shares" refer to the common shares in our capital stock. Our financial statements are prepared in accordance with United States generally accepted accounting principles.      31   As used in this quarterly report and unless otherwise indicated, the terms "we", "us" and "our" refer to Global Innovative Systems Inc. and our wholly-owned subsidiaries. COMPANY OVERVIEW We were incorporated under the laws of the State of Nevada under the name Legacy Bodysentials Inc. on September 14, 1995.  On September 25, 1996, we changed our name to Legacy Minerals Inc. and on May 18, 1998, we changed our name to Global Commonwealth Inc.  On November 12, 1999, we changed our name to Global Innovative Systems Inc.  Following the sale of Energy Medicine Developments in September 2003, our company was a development stage company whose business purpose was to identify and complete a merger or acquisition of a business or business opportunity.  Upon the acquisition of Tech Team on January 13, 2005, we commenced the business of selling energy-saving products through Tech Team, our wholly-owed operating subsidiary. Acquisition of Tomi Fuji Energy Management Services Consultants In October 2004, Tech Team, through one of its subsidiaries, Tech Team Investment Limited, entered into a share purchase agreement with Tomi Fuji Corporation Limited which became a shareholder of our company on January 13, 2005.  Pursuant to the terms of the share purchase agreement, Tech Team acquired 100% of the issued and outstanding shares in the capital of Tomi Fuji Energy Management Services Consultants, a non-operating company that held certain intangible assets.  In exchange for acquiring all of the issued and outstanding shares of Tomi Fuji Energy Management Services Consultants, Tech Team issued 4,284 ordinary shares of Tech Team Investment Limited to Tomi Fuji Corporation on October 4, 2004.  On the same date, Tech Team entered into another share purchase agreement with Tomi Fuji Corporation and issued 85,285,713 ordinary shares at a deemed issue price of $0.02 per share to Tomi Fuji
Corporation in exchange for its entire interest in Tech Team Investment Limited arising from first share purchase agreement in October 2004.  The closing of the share exchange occurred on October 4, 2004. Acquisition of Tech Team On January 7, 2005, we entered into a share exchange agreement among our company, Tech Team, Bondy Tan and the shareholders of Tech Team as set out in the share exchange agreement.  The share exchange agreement contemplated our company acquiring all of the issued and outstanding shares of Tech Team. The closing of the transactions contemplated in the share exchange agreement and the acquisition by our company of all of the issued and outstanding ordinary stock of Tech Team was completed as of January 13, 2005.  In accordance with the closing of the share exchange agreement on January 13, 2005, we acquired all of the 354,798,533 issued and outstanding ordinary shares of Tech Team, in exchange for the issuance by our company of 13,000,000 shares of our common stock to the shareholders of Tech Team on the basis of one share of our company for every 27.29219 ordinary shares of Tech Team.  As a result of the share exchange transaction, Tech Team became a wholly-owned subsidiary of our company as of January 13, 2005. As a result of the acquisition on January 13, 2005, the former shareholders of Tech Team owned 13,000,000 shares of our companys common stock, which represented approximately 68.3% of the issued and outstanding shares of our company.  As the former shareholders of Tech Team held 68.3% of our shares as of the acquisition date, and because the business of Tech Team represented the only business operations of our company, the acquisition of Tech Team was deemed to be a reverse acquisition for accounting purposes.  Starting with the periodic report for the quarter in which the acquisition was consummated, our company commenced filing quarterly and annual reports based on the March 31 fiscal year end of Tech Team.  Such financial statements depict the operating results of Tech Team, including the acquisition of our company, from January 13, 2005.      32   BUSINESS OF TECH TEAM Tech Team is a developer, manufacturer and integrator of energy-saving products and technologies.  Tech Teams primary product is the Eco-Pro® Energy Saver, a proprietary system which reduces energy consumed by lighting and other electrical equipment and acts as a protective buffer against voltage surges and other distortions.  The technology can be applied to a broad range of commercial, industrial, civil and residential applications, including commercial buildings, office buildings, factories, industrial plants and street lighting.  In addition, Tech Team distributes complementary energy-efficiency products which can be integrated with the Eco-Pro Energy Saver system.  Tech Team also provides consulting and customer training services which enables Tech Team to offer comprehensive energy management solutions to prospective clients.  Following the acquisition of a majority interest in Beijing
Illumination and the formation of a joint venture involving Lightscape Technologies, our company commenced the business of offering specialty lighting products and services. RECENT DEVELOPMENTS Beijing Illumination As a result of the closing of several agreements described under the heading Acquisition of Interest in Beijing Illumination (Hong Kong) Limited, we acquired 960 of the 1,250 issued and outstanding ordinary shares of Beijing Illumination, representing approximately 76.8% of the shares of Beijing Illumination.  As a result, Beijing Illumination is now a majority-owned subsidiary of our company.  Following the acquisition of a majority interest in Beijing Illumination on February 27, 2006, our company expanded our business into the manufacturing and sale of lighting and specialty lighting source products.  Beijing Illumination is an investment holding company which is engaged in the manufacture, sale, research and development of lighting equipment.  Beijing Illumination, through its wholly-owned subsidiary Beijing Aihua, manufactures and sells the following three main categories of HID related
lighting products: (1) metal halide lamps; (2) high-pressure sodium lamps; and (3) special application HID lamps. Besides HID lamps, Beijing Illumination has expanded its product mix into ultra high-pressure mercury lamps, which are classified as specialty lighting source products and are key components for modern light-weight digital crystal projectors. Lightscape Technologies On February 6, 2006, we incorporated a joint venture company named Lightscape Technologies (Macau) Limited.  Tech Team Investment Limited, our wholly-owned subsidiary, holds 50.4% of the issued and outstanding shares of Lightscape Technologies. Luminous LED Technologies Ltd., a Hong Kong based researcher, developer, manufacturer and distributor of advanced LED lighting products and technologies, holds the remaining 49.6% of the issued and outstanding shares of Lightscape Technologies.  Lightscape Technologies is a full service design and production company specializing in computer-aided interior set design and fabrication, lighting special effects, intelligent lighting, laser lighting and multimedia technologies.  Lightscape Technologies provides innovative turnkey designs and solutions for target clients including casinos, trade shows, conventions, motion pictures and video productions, concerts and special
events, as well as theaters, disco clubs and shopping malls. Lightscape Holding On March 30, 2006, Tech Team Investment, our wholly-owned subsidiary, entered into a Sale and Purchase Agreement with Yuen Yu Woo as vendor, and Michelle Siu Kwan Lam and Joseph Sui Kei Lam as guarantors.  Pursuant to the terms and conditions of the Sale and Purchase Agreement, our company agreed to purchase six shares, or approximately 60%, of the issued and outstanding shares of Lightscape Holding from Yuen Yu Woo in consideration for the issuance of 3,000,000 common shares by our company to Ms. Woo.  As of June 29, 2006, our company has not closed the transactions contemplated in the Sale and Purchase Agreement.  Lightscape Holding holds all of the issued and outstanding shares of     33   Luminous LED Technologies which, in turn, holds the minority interest in Lightscape Technologies, our joint venture company. Material Trends and Uncertainties Periodic changes occur in our companys industry and business that make it reasonably likely that aspects of our future operating results will be materially different from our historical operating results.  Sometimes these matters have not occurred, but their existence is sufficient to raise doubt regarding the likelihood that historical operating results are an accurate gauge of future performance.  Our company attempts to identify and describe these trends, events, and uncertainties to assist investors in assessing the likely future performance of our company.  Investors should understand that these matters typically are new, sometimes unforeseen, and often are fluid in nature.  Moreover, the matters described below are not the only issues that may result in variances between past and future performance nor are they necessarily the only material trends, events, and uncertainties that will affect our
company.  As a result, investors are encouraged to use this and other information to judge for themselves the likelihood that past performance will be indicative of future performance. The trends, events, and uncertainties set out in the remainder of this section have been identified by our company as those we believe are reasonably likely to materially affect the comparison of historical operating results reported herein to either past period results or to future operating results. Following the acquisition of Beijing Illumination and the formation of the Lightscape Technologies joint venture, our company diversified our business into the lighting and LED markets.  The future performance of this business may materially affect the future performance of our company. Summary of Key Results Total net revenue for the three months ended June 30, 2006 was $1,918,514, which represents a 734% increase over the total net revenue of $230,096 for the three months ended June 30, 2005. Operating expenses including selling and marketing expenses and general and administrative expenses for the three months ended June 30, 2006 were $1,127,243, which represents an 89% increase in operating expenses of $597,284 for the three months ended June 30, 2005. Interest expenses for the three months ended June 30, 2006 were $90,430, which represents a 307% increase from $22,214 for the three months ended June 30, 2005. Profit before income tax and minority interest for the three months ended June 30, 2006 was $42,101 compared to $141,742 for the three months ended June 30, 2005. Results of Operations  Three Months Ended June 30, 2006 Our companys net profit before tax and minority interest for the three months ended June 30, 2006 was $42,101, as compared to a net profit before tax and minority interest of $141,742 for the three months ended June 30, 2005. Revenues and Cost of Revenues Total net revenues for the three months ended June 30, 2006was $1,918,514, which represents a 734% increase over the total net revenue of $230,096 for the three months ended June 30, 2005. The increase in net revenues was primarily attributable to the sale of lighting source products derived from Beijing Illumination, our recently acquired subsidiary, during the three months ended June 30, 2006. Specifically, sale of hardware related to energy-saving systems for the three months ended June 30, 2006 decreased to $7,394, a decrease of $211,444 or 97% over the three months ended June 30, 2005. The     34   decrease in revenues from the sale of energy-saving hardware systems was due primarily to the recent change in business focus from the sale of energy-saving products to the sale of specialty lighting products and services. Sales of lighting source products derived from our recently acquired subsidiary Beijing Illumination represented 98% of our companys total revenue for the three months ended June 30, 2006. Our company expanded its operations into the new business segments of manufacturing and sales of lighting source products, as well as the provision of specialty lighting effects during the three months ended June 30, 2006. As a result of the increased sales of our specialty lighting products segment, we are reviewing our marketing strategy related to the promotion of our energy-saving products. We intend to implement new marketing strategies within the next twelve month period in order to increase
product sales in our energy-saving segment. Cost of revenues for the three months ended June 30, 2006 was $653,146, which represents an increase of $517,477 as compared with cost of revenues of $135,669 for the three months ended June 30, 2005. The increase in the cost of revenues during the three months ended June 30, 2006 was directly associated with the corresponding increase in the sales of lighting source products. Our company acquired certain intangible assets through the acquisitions of Tomi Fuji Energy Management Services and Beijing Illumination.  These intangible assets are comprised of completed technology for the production of AHP and HID lamps, trademarks, a customer base and a distributors list.  Amortization of intangible assets incurred for the three months ended June 30, 2006 was $147,246 as compared to $125,052 for the three months ended June 30, 2005. Operating Expenses Operating expenses for the three months ended June 30, 2006 were $1,127,243 which represents an 88% increase over the operating expenses of $597,284 for the three months ended June 30, 2005. Selling and marketing expenses as well as general and administrative expenses constitute the major components of our company's operating expenses. Selling and marketing expenses for the three months ended June 30, 2006 decreased approximately 11% to $147,319 from $165,912 for the three months ended June 30, 2005. The decrease reflects decreased costs as a result of the salaries of sales personnel of Tech Team Development and decreased advertising expenses associated with marketing campaigns and promotional activities during the period. General and administrative expenses increased 127% during the three months ended June 30, 2006 to $979,924 from $431,372 for the three months ended June 30, 2005. The increase was mainly due to increased salaries, rental fees and consultancy fees incurred as a result of the expansion of our companys operations, including the acquisition of Beijing Illumination.  Our company anticipates that these costs will increase in the future as our companys operations continue to expand. Interest expense increased to $90,430 for the three months ended June 30, 2006 as compared to $22,214 for the three months ended June 30, 2005. The increase reflects an increase in interest bearing debt as a result of the acquisition of Beijing Illumination and the general interest rate increases in Hong Kong. Liquidity and Capital Resources Our companys principal cash requirements are for operating expenses, including staff costs, funding costs of inventory and accounts receivable, and net investment in sales-type leases. As of June 30, 2006, our company had a net working capital deficit of $2,866,754 compared with a deficit of $3,011,498 as of March 31, 2006, representing a decrease in the deficit of $144,744. The cash and cash equivalents of our company decreased to $147,866 as of June 30, 2006 as compared to $158,832 as of March 31, 2006. As of June 30, 2006, our company had total credit facilities of $1,579,914 and had utilized $1,538,748 on the same date.      35   The ability of our company to meet our financial commitments is primarily dependent upon the continued extension of credit by our creditors, the continued financial support of our directors and shareholders, the continued issuance of equity to new shareholders, and our ability to achieve and maintain profitable operations. Management believes that our companys cash and cash equivalents, cash provided by operating activities, if any, and our unused credit facilities will not be sufficient to meet our working capital requirements for the next twelve months. Our company plans to raise the capital required to satisfy our immediate short-term needs and additional capital required to meet our estimated funding requirements for the next twelve months primarily through the private placement of equity securities. The issuance of additional equity securities by our company may result in a significant dilution in the equity interests of our current shareholders. There is no assurance that our company will be able to obtain further funds required for our continued working capital requirements. These factors, among others, indicate that the Company may be unable to continue as a going concern. Cash Flow Related to Operating Activities Operating activities provided cash of $517,792 for the three months ended June 30, 2006 as compared to cash used of $412,155 for the three months ended June 30, 2005. The net cash provided by operating activities was mainly due to the decrease in prepaid expenses and other current assets and the repayment from related companies. Cash Flow Related to Investing Activities Net cash used in investing activities amounting to $1,740 during the three months ended June 30, 2006 as compared with $174,005 during the three months ended June 30, 2005. Cash Flow Related to Financing Activities Financing activities used cash of $526,712 for the three months ended June 30, 2006 as compared to cash provided of $673,674 for the three months ended June 30, 2005. Net repayment to a director and short term borrowing amounted to $1,247,550 and $338,097 respectively .and was partially financed by a net advance from a related company of $1,176,092 during the three months ended June 30, 2006 Capital Expenditures Our company incurred capital expenditures of $20,157 during the three months ended June 30, 2006 and $25,275 for the three months ended June 30, 2005.  The decrease in capital expenditures for the three months ended June 30, 2006 as compared to June 30, 2005 was mainly attributable to the purchase of office equipment.  As of June 30, 2006, our company did not have any material commitments for capital expenditures and management does not anticipate that our company will spend additional material amounts on capital expenditures in the near future. Off-Balance Sheet Arrangements Our company has no outstanding derivative financial instruments, off-balance sheet guarantees, interest rate swap transactions or foreign currency contracts.  Our company does not engage in trading activities involving non-exchange traded contracts. Contractual Obligations Operating leases include commitments for office space of $51,182.  Our companys principal business office is located at 16/F., Hang Seng Mongkok Building, 677 Nathan Road, Mongkok, Kowloon, Hong Kong.  The 3,652 square feet office space serves as the base of our corporate, managerial, accounting, financial, administrative, sales and marketing functions.  The monthly fixed rent is $4,694 plus a monthly     36   service charge of $1,596.  Our company also leases an office at Rooms 1108-9, 11th Floor, Tower II, Enterprise Square, 9 Sheung Yuet Road, Kowloon Bay, Kowloon, Hong Kong. The 4,058 square feet office space serves as the base of the corporate, accounting, sales and marketing functions of Beijing Illumination. Our company also leases a facility at 1st Floor, Block B, Cui Wei Industrial Building, 668 Cui Xei Road West, Zhuhai, Guangdong, the Peoples Republic of China.  It serves as a base for research, development and assembly of the Eco-Pro Energy Saver line of products, as well as sales and marketing activity within China. Our Company also leases a facility at 1st to 4th floor, No. 7 Shuang-qiao Xili Chaoyang District, Beijing, the Peoples Republic of China. It serves as the base for manufacturing, research and development of the lighting and specialty lighting source products, as well as sales
and marketing activity within China.  The obligations of these leases are set out as follows:  Obligations by PeriodContractual Obligations
        
        Total
        
        Less ThanOne Year
        
        2-3 Years
        
        4-5 Years
        
        After5 YearsOperating Leases
        $
        506,886
        $
        169,377
        $
        192,907
        
        144,602
        
        - Our company has entered into a capital lease arrangement for leasing equipment used in our operations.  The contractual obligations as of June 30, 2006 were: Obligations  by  PeriodContractualObligations(1)
        
        Total
        
        Less ThanOne Year
        
        2-3 Years
        
        4-5 Years
        
        After5 YearsCapital Lease Obligations
        $
        2,406
        $
        740
        $
        1,480
        $
        186
        $
        -Total Contractual Obligations
        $
        2,406
        $
        740
        $
        1,480
        $
        186
        $
        -  (1)Other than as disclosed in the off-balance sheet arrangements section, set out above, there have been no material changes to the contractual obligations of our company subsequent to June 30, 2006. Risk Factors Much of the information included in this quarterly report includes or is based upon estimates, projections or other forward looking statements.  Such forward looking statements include any projections or estimates made by us and our management in connection with our business operations.  While these forward-looking statements, and any assumptions upon which they are based, are made in good faith and reflect our current judgment regarding the direction of our business, actual results will almost always vary, sometimes materially, from any estimates, predictions, projections, assumptions or other future performance suggested herein. Such estimates, projections or other forward looking statements involve various risks and uncertainties as outlined below.  We caution the reader that important factors in some cases have affected and, in the future, could materially affect actual results and cause actual results to differ materially from the results expressed in any such estimates, projections or other forward looking statements.  Prospective investors should consider carefully the risk factors set out below.      37   Risks Related to Our Business We will require additional financing, the availability of which cannot be assured, and if our company is unable to obtain such financing, our business may fail. Our business plan calls for expenses necessary to continue the development of our products and expand our position in the market.  However, there is no assurance that actual cash requirements will not exceed our estimates.  We may need to raise additional funds to: - support our planned rapid growth; - develop new or enhanced services and technologies; - increase our marketing efforts; - acquire complementary businesses or technologies; and/or - respond to competitive pressures or unanticipated requirements. We have not yet achieved sustainable positive cash flows.  As such, we will depend to a large extent on outside capital over the near-term to fund our capital needs.  Such outside capital may be obtained from additional debt or equity financing.  We do not currently have any arrangement for financing and there is no assurance that capital will be available to meet our continuing development costs or, if the capital is available, that it will be on terms acceptable to us.  The issuance of additional equity securities by us would result in a dilution in the equity interests of our current stockholders.  Obtaining commercial loans, assuming those loans would be available, will increase our liabilities and future cash commitments.  If we are unable to obtain financing in the amounts and on terms deemed acceptable to us, we may be unable to implement our business and growth strategies, respond to changing business
or economic conditions, withstand adverse operating results, consummate desired acquisitions or compete effectively. We operate in a highly-competitive industry and our failure to compete effectively may adversely affect our ability to generate revenue. Management is aware of similar products which compete directly with our products and some of the companies developing these similar products have greater financial, technical and marketing resources, larger distribution networks, and generate greater revenue and have greater name recognition than us.  These companies may develop products superior to those of our company.  Such competition will potentially affect our chances of achieving profitability in the future. This may place us at a disadvantage in responding to our competitors pricing strategies, technological advances, marketing campaigns, global expansion, alliances and other initiatives.  Some of our competitors conduct more extensive promotional activities and offer lower prices to customers than we do, which could allow them to gain greater market share or prevent us from increasing our market share.  In the future, we may need to decrease our prices if our competitors continue to lower their prices.  Our competitors may be able to respond more quickly to new or changing opportunities, technologies and customer requirements.  Further, to the extent our competitors are able to attract and retain customers based on the convenience of one-stop shopping or because of international operations or arrangements, our business and ability to grow could be adversely affected in a material manner.  To be
successful, we must establish and strengthen our brand awareness, effectively differentiate our product line from those of our competitors and build our international partnerships.  To achieve this we may have to substantially increase marketing and research and development in order to compete effectively.      38   Rapid technological changes in our industry could render our products non-competitive or obsolete and consequently affect our ability to generate revenues. Currently, we derive a majority of our revenues from the sale of specialty lighting products, and a minor portion of our current and expected future revenues from the sale of energy-saving products.  Both the electrical energy-saving industry and the specialty lighting products and services industry are characterized by rapid technological change, new products and services, new sales channels, evolving industry standards and changing client preferences.  Our success will depend, in part, upon our ability to make timely and cost-effective enhancements and additions to our technology and to introduce new products and services that meet customer demands.  We expect new products and services to be developed and introduced by other companies that compete with our products and services.  The proliferation of new electrical energy-saving technology may reduce demand for our Eco-Pro Energy Saver brand.  In addition,
the rapid technological advancements in HID lighting products may render our current specialty lighting products obsolete.  There can be no assurance that we will be successful in responding to these or other technological changes, to evolving industry standards or to new products and services offered by our current and future competitors.  In addition, we may not have access to sufficient capital for our research and development needs in order to develop new products and services. We could lose our competitive advantages if we are not able to protect our proprietary technology and intellectual property rights against infringement, and any related litigation could be time-consuming and costly. Our success and ability to compete depends in part on our proprietary technology incorporated in our products.  If any of our competitors copy or otherwise gain access to our proprietary technology or develop similar technologies independently, we would not be able to compete as effectively.  We consider our registered trademarks invaluable to our ability to continue to develop and maintain the goodwill and recognition associated with our brands.  The measures we take to protect the proprietary technology, and other intellectual property rights, which presently are based upon a combination of trademark and trade secret laws, may not be adequate to prevent their unauthorized use.  Further, the laws of foreign countries may provide inadequate protection of such intellectual property rights.  We may need to bring legal claims to enforce or protect such intellectual property rights.  Any litigation, whether
successful or unsuccessful, could result in substantial costs and a diversion of corporate resources.  In addition, notwithstanding any rights we have secured to our intellectual property, other persons may bring claims against us claiming that we have infringed on their intellectual property rights, including claims that our intellectual property rights are not valid.  Any claims against us, with or without merit, could be time-consuming and costly to defend or litigate, divert our attention and resources, result in the loss of goodwill associated with our trademarks or require us to make changes to our technologies. We hold no patents on our products and may not be able to protect our proprietary technology. Although we have not obtained patent protection for any of our products, we have sought to protect our proprietary technology through a combination of trademark and trade secret laws and other forms of intellectual property protection.  We have filed patent applications in China, Hong Kong and the United States and have patents pending for the Eco-Pro Energy Saver product as an energy saving device.  There is no assurance that these patents will be granted. We own trademark registrations for the name and logo for Eco-Pro in China, Hong Kong, Macau, Thailand and the European Community.  There can be no assurance that our operations do not or will not violate the intellectual property rights of others, that they would be upheld if challenged or that we, would, in such an event, not be prevented from using such companys intellectual property rights, any of which could have a material adverse effect on our business, financial condition and results of operations. In addition, our failure to obtain licenses required from third parties for other technology and intellectual property could delay or prevent the development, manufacture or sale of our products.  Although we rely, in part, on contractual provisions to protect our trade secrets and proprietary know-how, there is no     39   assurance that these agreements will not be breached, that we would have adequate remedies for any breach or that our trade secrets will not otherwise become known or be independently developed by competitors.  Although no lawsuits against us regarding infringement of any existing patents or other intellectual property rights are pending, nor have any claims been asserted, there can be no assurance that such infringement claims will not be asserted by third parties in the future.  There also can be no assurance in the event of such claims of infringement that we will be able to obtain licenses on reasonable terms. Our involvement in any intellectual property dispute or action to protect trade secrets and know-how, including actions brought by us, could result in a material adverse effect on our business.  Adverse determinations in litigation in which we may become involved could subject us to liabilities to third parties, require us to grant licenses to or seek licenses from third parties and prevent us from manufacturing and selling our products.  Any of these situations could have a material adverse effect on our business, financial condition and results of operations. We may not be able to hire and retain qualified personnel to support our growth and if we are unable to retain or hire such personnel in the future, our ability to improve our products and implement our business objectives could be adversely effected. To continue our growth, we will need to recruit additional senior management personnel, including persons with financial and sales experience.  In addition, we must hire, train and retain a number of other skilled personnel, including persons with experience in engineering, energy management consulting and lighting system design and manufacturing.  We have encountered competition for these personnel.  We may not be able to find or retain qualified personnel, which would have a material adverse impact on our business. Our growth could be impaired if we are not able to develop and maintain the relationships we need to implement our international strategy. Our growth will depend, in large part, on the success of our international strategy.  We have limited experience in marketing and selling our products outside of Hong Kong, China and Macau.  We will depend on partnerships and/or joint ventures in international markets to help us build our international operations and sales.  We depend upon each of our international partners to provide marketing and relationship building expertise, and a base of existing customers.  If we are unable to develop and maintain these relationships, or to develop additional relationships in other countries, our ability to penetrate, and successfully compete in foreign markets would be materially affected in an adverse manner.  To fully implement our international strategy, we will need to expand our current relationships with international partners.  These partners may not agree to expand these relationships. Our company is subject to supply channel risk due to a concentration of supply lines with a limited number of vendors and any significant interruption from these vendors may have a material adverse effect on our company.  Our company currently relies on several vendors, one of which accounts for more than 20% of our purchases for the quarter ended June 30, 2006.  If this vendor terminates its relationship with our company or if our companys supply from a vendor is interrupted or terminated for any reason, we may not have sufficient time to replace the supply of products from the remaining vendors.  Any such interruption would negatively impact our ability to sell and distribute our products. Our growth could be impaired if we do not successfully handle certain risks associated with international business. There are risks inherent in doing business in international markets, including: - fluctuations in currency exchange rates; - difficulties in staffing and managing foreign operations;      40   - changes in regulatory requirements, tariffs and other trade barriers; - potential adverse tax consequences; and - inadequate protection for intellectual property rights. One or more of these factors may make it difficult for us to fully implement our international business strategies and may have a material adverse effect on our current or future international operations. Any changes in the political and economic policies of, or any new regulations implemented by, the Chinese government could affect, or even restrict, the operation of our business and our ability to generate revenues. Our business is currently focused on the sale of electrical energy-saving products and specialty lighting products in China.  Accordingly, our business, results of operations and financial conditions are affected to a significant degree by any economic, political and legal developments in China. Since the late 1970s, the Chinese government has been reforming its economic system.  Although we believe that economic reform and the macroeconomic measures adopted by the Chinese government have had and will continue to have a positive effect on the economic development in China, there can be no assurance that the economic reform strategy will not from time to time be modified or revised.  Some modifications or revisions, if any, could have a material adverse effect on the overall economic growth of China and the development of electrical energy-saving products in China.  Any such changes would have a material adverse effect on our business.  Furthermore, there is no guarantee that the Chinese government will not impose other economic or regulatory controls that would have a material adverse effect on our business.  Any changes in the political, economic and social conditions in China, adjustments in
policies by the Chinese government or changes in laws and regulations on the sale of electrical energy-saving products could affect the manner in which we operate our business and restrict or prohibit transactions initiated or conducted by our company.  Any such changes or new regulations could affect our ability to develop and sell our products and therefore affect our ability to generate revenues. Chinas current and future economic, political and social conditions, as well as government policies could have an adverse effect on our companys overall financial condition and ability to generate revenues and profits. We expect that a substantial portion of our business, assets and operations of our company will be located and conducted in China.  The economy of China differs from the economies of most developed countries in many respects, including: - government involvement; - level of development; - growth rate; - control of foreign exchange; and - allocation of resources. While Chinas economy has experienced significant growth in the past twenty years, growth has been uneven, 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 operating results and financial condition may be adversely affected by government control over capital investments or changes in tax regulations applicable to us.  If there are any changes in any     41   policies by the Chinese government and our business is negatively affected as a result, then our financial results, including our ability to generate revenues and profits, will also be negatively affected.  Our company is subject to foreign exchange rate risk, particularly fluctuations in the exchange rate between Chinese Renminbi and United States dollars.  Our company may enter sales transaction denominated in Chinese Renminbi.  The Peoples Republic of China State Administration for Foreign Exchange, under the authority of the Peoples Bank of China, controls the conversion of Renminbi into foreign currencies.  The principal regulation governing foreign currency exchange in China is the Foreign Currency Administration Rules (1996), as amended.  Under the Rules, once various procedural requirements are met, Renminbi is convertible for current account transactions, including trade and services, but not for capital account transactions, including direct investment, loan or investment in securities outside China, unless the prior approval of the State Administration of Foreign Exchange of the Peoples Republic of China is obtained.  Although the Chinese government regulations now allow greater convertibility of Renminbi for current account
transactions, significant restrictions still remain.  The value of the Renminbi is subject to changes in Chinas central government policies and to international economic and political developments affecting supply and demand in the China Foreign Exchange Trading System market.  Since 1994, the conversion of Renminbi into foreign currencies, including United States dollars, has been based on rates set by the Peoples Bank of China, which are set daily based on the previous days interbank foreign exchange market rates and current exchange rates on the world financial markets. Since 1994, the official exchange rate generally has been stable, but the Chinese government recently announced that it will no longer peg its currency exclusively to the United States dollar but will switch to a managed floating exchange rate based on market supply and demand with reference to a basket of currencies yet to be named by the Peoples Bank of China, which
will likely increase the volatility of Renminbi as compared to United States dollars. Our company has experienced minimal foreign exchange gains and losses to date due to the relative stability of the Renminbi.  We do not know what affect, if any, the decoupling of the Renminbi from the United States dollar will have on our financial statements and results of operations.  We do not currently engage in hedging activities to reduce our exposure to exchange rate fluctuation. Our companys success largely relies on the ability of our agents and distributors to sell our products, and on our ability to effectively monitor the activities of such persons and the failure to establish and maintain productivity from our agents and distributors may have a material adverse effect on our operations. Our company relies on agents and distributors to earn revenue by means of selling our products directly to end users with installation (Direct Sales Contracts) and through distributors (Trading Contracts), with a majority of revenues generated by the latter.  The current over-dependence on external distributors requires an effective and efficient monitoring system to ensure our success in delivering products to customers.  Our company monitors the activities of our agents and distributors but there can be no assurance that our monitoring efforts are successful in achieving a productive and efficient distribution network.  Failure to establish and maintain high levels of productivity and efficiency from our distribution network may have a material adverse effect on our operations. The future success of our company is largely dependent upon our ability to obtain or generate sufficient cash flow and the failure to obtain sustainable levels of cash flow will have a material adverse effect on our operating results. Our company generally extends a 120-day credit period to customers within our hardware sales trading contracts.  For direct sales contracts with installation, our company offers financing terms of up to 60 months to new customers.  Our company, however, is required to pay our vendors for the cost of supplies and hardware in accordance with credit terms ranging from cash on delivery to payment within 30 days.  Such financing arrangements create a time lag between the payment for inventory and the collection of revenue from sales contracts, which has placed working capital restraints on our company.  Our company     42   has established relationships with several financial institutions to provide financing options directly to our customers for the purchase of our equipment which may assist in alleviating these working capital restraints on our company.  There can be no assurance, however, that any financial institutions will agree to provide such a financing option, and if our company is unable to arrange such financing options for our customers, the working capital restraints on our company would be expected to continue, which could have a material adverse effect on the financial condition and operations of our company. New or changing government policies or regulations related to the energy savings industry or the specialty lighting industry in our markets may have an adverse effect on our operations and may further require our company to modify our business plan. Our management oversees trends in our market industries by accessing available market information, including updated governmental policies and regulations related to such industries from time to time.  Both short and long-term changes in governmental policies or regulations affecting the energy savings industry and/or the specialty lighting products industry may trigger our company to take appropriate measures to re-position our company to achieve our business plan or alter the business plan as a whole.  We cannot assure that our company will be able to adapt to changing policies and regulations efficiently in order to maintain the currently anticipated level of business, results of operations or financial condition. Risks Related to Our Industry A drop in the retail price of electrical energy may have a negative effect on our business. A customers decision to purchase our companys energy saving products is primarily driven by the payback on the investment resulting from the increased energy savings.  Although management believes that current retail energy prices support a reasonable return on investment for our energy saving products, there can be no assurances that future retail pricing of electrical energy will remain at such levels. Risks Related to Our Common Stock A decline in the price of our common stock could affect our ability to raise further working capital and adversely impact our operations. A prolonged decline in the price of our common stock could result in a reduction in the liquidity of our common stock and a reduction in our ability to raise capital.  Because our operations have been primarily financed through the sale of equity securities, a decline in the price of our common stock could be especially detrimental to our liquidity and our continued operations.  Any reduction in our ability to raise equity capital in the future would force us to reallocate funds from other planned uses and would have a negative effect on our business plans and operations, including our ability to develop new products and continue our current operations.  If the stock price declines, there can be no assurance that we can raise additional capital or generate funds from operations sufficient to meet our obligations.  We believe the following factors could cause the market price of our common stock to continue to
fluctuate widely and could cause our common stock to trade at a price below the price at which you purchase your shares: - actual or anticipated variations in our quarterly operating results, - announcements of new services, products, acquisitions or strategic relationships by us or our competitors, - trends or conditions in the energy management services industry, - changes in accounting treatments or principles, - changes in earnings estimates by securities analysts and in analyst recommendations,      43   - changes in market valuations of other energy management services companies, and - general political, economic and market conditions. The market price for our common stock may also be affected by our ability to meet or exceed expectations of analysts or investors.  Any failure to meet these expectations, even if minor, could materially adversely affect the market price of our common stock. If we issue additional shares in the future, it will result in the dilution of our existing stockholders. Our certificate of incorporation authorizes the issuance of 800,000,000 shares of common stock and 100,000,000 shares of preferred stock.  Our board of directors has the authority to issue additional shares up to the authorized capital stated in the certificate of incorporation.  Our board of directors may choose to issue some or all of such shares to acquire one or more businesses or to provide additional financing in the future.  The issuance of any such shares will result in a reduction of the book value or market price of the outstanding shares of our common stock.  If we do issue any such additional shares, such issuance also will cause a reduction in the proportionate ownership and voting power of all other stockholders.  Further, any such issuance may result in a change of control of our corporation. If a market for our common stock does not develop, stockholders may be unable to sell their shares. There is currently a limited market for our common stock, which trades through the Over-the-Counter Bulletin Board quotation system.  Trading of stock through the Over-the-Counter Bulletin Board is frequently thin and highly volatile.  There is no assurance that a sufficient market will develop in the stock, in which case it could be difficult for stockholders to sell their stock. Trading of our stock may be restricted by the Securities and Exchange Commissions penny stock regulations which may limit a stockholders ability to buy and sell our stock. The Securities and Exchange Commission has adopted regulations which generally define 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 Securities and Exchange Commission 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.      44   The National Association of Securities Dealers Inc., or NASD, has adopted sales practice requirements, which may limit a stockholders ability to buy and sell our shares. In addition to the penny stock rules described above, the NASD has adopted rules requiring that in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer.  Prior to recommending speculative low-priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customers financial status, tax status, investment objectives and other information.  Under interpretations of these rules, the NASD believes that there is a high probability that speculative low-priced securities will not be suitable for at least some customers.  The NASD requirements make it more difficult for broker-dealers to recommend that their customers buy our common stock, which may limit our shareholders ability to buy and sell our stock and which may have an
adverse effect on the market for our shares. Most of our assets and all of our directors and officers are outside the United States, with the result that it may be difficult for investors to enforce within the United States any judgments obtained against us or any of our directors or officers. Although we are organized under the laws of the State of Nevada, our principal executive office is located in Hong Kong.  Outside the United States, it may be difficult for investors to enforce judgments against us obtained in the United States in any such actions, including actions predicated upon civil liability provisions of federal securities laws.  In addition, all of our officers and directors reside outside the United States, and nearly all of the assets of these persons and our assets are located outside of the United States.  As a result, it may not be possible for investors to effect service of process within the United States upon such persons or to enforce against us or such persons judgments predicated upon the liability provisions of the United States securities laws.  There is substantial doubt as to the enforceability against us or any of our directors and officers located outside the United
States in original actions or in actions of enforcement of judgments of United States courts or liabilities predicated on the civil liability provisions of United States federal securities laws. Item3.Controls and Procedures. As required by Rule 13a-15 under the Securities Exchange Act of 1934, as of the end of the period covered by this quarterly report, being June 30, 2006, we have carried out an evaluation of the effectiveness of the design and operation of our companys disclosure controls and procedures.  This evaluation was carried out under the supervision and with the participation of our companys management, including our companys Chief Executive Officer.  Based upon that evaluation, our companys Chief Executive Officer has identified certain weaknesses in internal controls which the management are in the process of rectifying the weaknesses.  There have been no significant changes in our internal controls over financial reporting that occurred during our most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect our internal controls over financial reporting. Disclosure controls and procedures and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported, within the time period specified in the Securities and Exchange Commissions rules and forms.  Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed under the Securities Exchange Act of 1934 is accumulated and communicated to management, including our Chief Executive Officer, to allow timely decisions regarding required disclosure.      45   PART II-OTHER INFORMATION Item1.Legal Proceedings. We know of no material, existing or pending legal proceedings against our company, nor are we involved as a plaintiff in any material proceeding or pending litigation. There are no proceedings in which any of our directors, officers or affiliates, or any registered or beneficial shareholder, is an adverse party or has a material interest adverse to our interest. Item6.Exhibits Exhibits required by Item 601 of Regulation S-B  Exhibit Number
        Description(2)
        Plan of Purchase, Sale, Reorganization, Arrangement, Liquidation or Succession2.1
        Share Exchange Agreement dated January 7, 2005, among Global Innovative Systems Inc., Tech Team Holdings Limited, Bondy Tan and the Selling Shareholders (incorporated by reference from our Current Report on Form 8-K filed on January 18, 2005)(3)
        (i) Articles of Incorporation; and (ii) Bylaws3.1
        Charter (incorporated by reference from our Registration Statement on Form 10-SB filed on April 11, 2000).3.2
        Articles of Incorporation (incorporated by reference from our Registration Statement on Form 10-SB filed on April 11, 2000).3.3
        Bylaws (incorporated by reference from our Registration Statement on Form 10-SB filed on April 11, 2000).3.4
        Certificate of Reverse Stock Split filed with the Nevada Secretary of State on November 12, 2003 (incorporated by reference from our Current Report on Form 8-K filed on December 17, 2003).3.5
        Certificate of Amendment to Articles of Incorporation filed with the Secretary of State of Nevada on March 3, 2004 (incorporated by reference from our Quarterly Report on Form 10-QSB filed on May 15, 2004)3.6
        Certificate of Change filed with the Secretary of State of Nevada on December 23, 2004 (incorporated by reference from our Current Report on Form 8-K filed on January 6, 2005)(10)
        Material Contracts10.1
        Share Purchase Agreement, dated September 30, 2003, between Global Innovative Systems Inc., Fraser Lawrie and Robert Fletcher (incorporated by reference from our Current Report on Form 8-K filed on November 7, 2003).10.2
        Acquisition Agreement, dated January 22, 2003, between Ken Bergestad, Walter Niemi, Lloyd Olson, Fraser Lawrie, Robert M. Fletcher and Global Innovative Systems Inc. (incorporated by reference from our Annual Report on Form 10-KSB filed on December 23, 2003).10.3
        Letter of Intent, dated September 21, 2004, between Global Innovative Systems Inc. and the shareholders of Tech Team Holdings Limited (incorporated by reference from our Annual Report on Form 10-KSB filed on December 30, 2004)10.4
        Amendment to Letter of Intent, dated October 20, 2004, between Global Innovative Systems Inc. and the shareholders of Tech Team Holdings Limited (incorporated by reference from our Annual Report on Form 10-KSB filed on December 30, 2004)       46    10.5
        Sales Agreement dated March 27, 2002, between Tech Team Development Limited and Macau Jockey Club (incorporated by reference from our Current Report on Form 8-K filed on January 18, 2005)10.6
        Sales Agreement dated September 10, 2003, between Tech Team Development Limited and Dongguan Guan Lan Golf Club Company Limited.10.7
        Sales Agreement dated March 31, 2004, between Tech Team Development Limited and K. Wah Concrete Co. Ltd. (incorporated by reference from our Current Report on Form 8-K filed on January 18, 2005)10.8
        Assignment Agreement dated February 11, 2004, between Tech Team Development Limited and Southern Cross Technologies Limited (incorporated by reference from our Current Report on Form 8-K filed on January 18, 2005)10.9
        Assignment Agreement dated February 11, 2004, between Grandplex Development Limited and Scnider Limited (incorporated by reference from our Current Report on Form 8-K filed on January 18, 2005)10.10
        Management Contract between Tech Team Holdings Limited / Tech Team Development Limited and Bondy Tan (incorporated by reference from our Current Report on Form 8-K filed on January 18, 2005)10.11
        Management Contract between Tech Team Development Limited and Victor Chang (incorporated by reference from our Current Report on Form 8-K filed on January 18, 2005)10.12
        Management Contract between Grandplex Development Limited and Ronny Lau (incorporated by reference from our Current Report on Form 8-K filed on January 18, 2005)10.13
        Management Contract between Tech Team Development Limited and Mandy Kee (incorporated by reference from our Current Report on Form 8-K filed on January 18, 2005)10.14
        Management Contract between Tech Team Development Limited and Raymond Ho (incorporated by reference from our Current Report on Form 8-K filed on January 18, 2005)10.15
        Proposal on Sales and Marketing Services to Tech Team Development Ltd. (incorporated by reference from our Current Report on Form 8-K filed on January 18, 2005)10.16
        Sales Agreement dated February 7, 2005, between Tomi Fuji Energy Management Services Consultants Limited and Versatech Group Limited (incorporated by reference from our Quarterly Report on Form 10-QSB filed on February 14, 2005)10.17
        Subscription Agreements of the following private placements that were issued to non-U.S. persons (as that term is defined in Regulation S of the Securities Act of 1933) in offshore transactions relying on Regulation S and/or Section 4(2) of the Securities Act of 1933 (incorporated by reference from our Annual Report on Form 10-KSB filed on July 18, 2005):Name
        Date ofAgreement
        Numberof Units
        GrossProceedsVolitans Limited
        May 17, 2005
        133,333
        $200,000Sin Mei Yan
        May 27, 2005
        200,000
        $300,000Philip Yu-Hong Wong
        May 27, 2005
        106,393
        $159,590Siu Hung Chan
        May 27, 2005
        100,000
        $150,000Ho Sum Yeung
        May 27, 2005
        100,000
        $150,000Forever Success CompanyLimited
        May 27, 2005
        100,000
        $150,000Chun Hok Yeung
        May 27, 2005
        66,667
        $100,000       47    Yin Mee Ho
        May 27, 2005
        50,000
        $75,000Each unit consists of one share and one share purchase warrant exercisable for a period of twelve months at an exercise price of $2.0010.18
        Subscription Agreements of the following private placements that were issued to non-U.S. persons (as that term is defined in Regulation S of the Securities Act of 1933) in offshore transactions relying on Regulation S and/or Section 4(2) of the Securities Act of 1933(incorporated by reference from our Annual Report on Form 10-KSB filed on July 18, 2005):Name
        Date ofAgreement
        Numberof Units
        GrossProceedsRonald Chong
        May 17, 2005
        12,000
        $18,000Ronco FamilyHoldings Limited
        May 17, 2005
        8,000
        $12,000Allan Watt
        May 26, 2005
        10,000
        $15,000Thomas N. Bell
        May 26, 2005
        10,000
        $15,000Each unit consists of one share and one share purchase warrant exercisable for a period of twelve months at an exercise price of $2.0010.19
        Sales Agreement dated September 8, 2005, between Tomi Fuji Energy Management Services Consultants Limited and Geopower Corporation (incorporated by reference from our Quarterly Report on Form 10-QSB filed on August 22, 2005)10.20
        Addendum to Sales Agreement dated September 16, 2005, between Tomi Fuji Energy Management Services Consultants Limited and Geopower Corporation (incorporated by reference from our Quarterly Report on Form 10-QSB filed on August 22, 2005)10.21
        Assignment Agreement dated September 16, 2005, between Tomi Fuji Energy Management Services Consultants Limited and GD Inet Electric Construction Co. Ltd. (incorporated by reference from our Quarterly Report on Form 10-QSB filed on August 22, 2005)10.22
        Sale and Purchase Agreement dated September 27, 2005, between Glory Goal Investments Limited, Global Innovative Systems Inc., and Ko Yin (incorporated by reference from our Current Report on Form 8-K filed on October 3, 2005)10.23
        Option Deed dated September 27, 2005, between Admire Fame Invests Limited, Gain Huge Investments Limited, Splendid Fortune Investments Limited, Global Innovative Systems Inc. and Ko Yin (incorporated by reference from our Current Report on Form 8-K filed on October 3, 2005)10.24
        Amendment to Sale and Purchase Agreement and Option Deed dated October 3, 2005, between Glory Goal Investments Limited, Admire Fame Investments Limited, Gain Huge Investments Limited, Splendid Fortune Investments Limited, Ko Yin and Global Innovative Systems Inc. (incorporated by reference from our Current Report on Form 8-K filed on October 3, 2005)10.25
        Supplemental Deed Agreement dated February 22, 2006 between Admire Fame Investments Limited, Gain Huge Investments Limited, Splendid Fortune Investments Limited, Ko Yin and Global Innovative Systems Inc. (incorporated by reference from our Current Report on Form 8-K filed on February 28, 2006)10.26
        Sale and Purchase Agreement dated March 30, 2006 between Tech Team Investment Limited, Woo Yuen Yu, Michelle Siu Kwan Lam and Joseph Sui Kei Lam (incorporated by reference from our Current Report on Form 8-K filed on April 4, 2006)10.27
        Purchase Agreement between Global Innovative Systems Inc. and Aeneas Portfolio Company LP, dated March 29, 2006 (incorporated by reference from our Current Report on Form 8-K filed on July 5, 2006)10.28
        Purchase Agreement between Global Innovative Systems Inc. and Aeneas Portfolio Company LP, dated April 3, 2006 (incorporated by reference from our Current Report on Form 8-K filed on July 5, 2006)10.29
        Amendment Agreement between Global Innovative Systems Inc. and Aeneas Portfolio Company LP dated June 21, 2006 to Purchase Agreement between Global Innovative Systems Inc. and Aeneas Portfolio Company LP, dated March 29, 2006 (incorporated by reference from our Current Report on Form 8-K filed on July 5, 2006)10.30
        Amendment Agreement between Global Innovative Systems Inc. and Aeneas Portfolio Company LP dated June 21, 2006 to Purchase Agreement between Global Innovative Systems Inc. and Aeneas Portfolio Company LP, dated April 3, 2006 (incorporated by reference from our Current Report on Form 8-K filed on July 5, 2006)(14)
        Code of Ethics14.1
        Code of Ethics (incorporated by reference from our Annual Report on Form 10-KSB filed on December 30, 2004)(31)
        Rule 13a-14(a)/15d-14(a) Certifications31.1*
        Certification of Principal Executive Officer and Principal Financial Officer filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.(32)
        Section 1350 Certifications32.1*
        Certification of Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. *Filed herewith SIGNATURES In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. GLOBAL INNOVATIVE SYSTEMS INC.  By:  /s/ Bondy Tan Bondy Tan President, Secretary and Treasurer and Chief Executive Officer and Director (Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer) Date: August 21, 2006