SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549





FORM
10-Q





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





For
the quarterly period ended June 30, 2009





OR





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





For
the transition period from ______ to __________





COMMISSION
FILE NUMBER: 000-32161





CH LIGHTING INTERNATIONAL
CORPORATION


(Exact
name of registrant as specified in its charter)





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





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


The
People’s Republic of China 312300





(Address
of principal executive offices)





(011)86 575 8212
7538


(Registrant’s
Telephone Number, Including Area Code)





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





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




Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files). Yes oNo o




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




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





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





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









TABLE
OF CONTENTS





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


- 2
-


PART
I


FINANCIAL
INFORMATION





ITEM
1. FINANCIAL STATEMENTS


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


- 3
-


CH
Lighting International Corporation
 (formerly
Sino-Biotics, Inc.)
 
 Unaudited
Condensed Consolidated Statements of Operations and
 Other Comprehensive
Income
 For the
nine months ended June 30, 2009
 
 Three
      months ended
                                                                  June
      30,
                                                                
                                                                
                                                                Nine
      months ended
                                                                  June
      30,2009
                                                                
                                                                
                                                                2008
                                                                
                                                                
                                                                2009
                                                                
                                                                
                                                                2008Note
                                                                
                                                                
                                                                US$’000
                                                                
                                                                
                                                                US$’000
                                                                
                                                                
                                                                US$’000
                                                                
                                                                
                                                                US$’000Operating
      revenues:Net sales to third
      parties
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                9,378
                                                                
                                                                
                                                                
                                                                27,326
                                                                
                                                                
                                                                
                                                                34,207
                                                                
                                                                
                                                                
                                                                64,467Cost
      of sales
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                (7,475
                                                                )
                                                                
                                                                
                                                                (18,984
                                                                )
                                                                
                                                                
                                                                (24,585
                                                                )
                                                                
                                                                
                                                                (44,332
                                                                )Gross
      income
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                1,903
                                                                
                                                                
                                                                
                                                                8,342
                                                                
                                                                
                                                                
                                                                9,622
                                                                
                                                                
                                                                
                                                                20,135Operating
      expenses:Selling,
      marketing and distribution expenses
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                (2,530
                                                                )
                                                                
                                                                
                                                                (909
                                                                )
                                                                
                                                                
                                                                (5,003
                                                                )
                                                                
                                                                
                                                                (1,904
                                                                )General
      and administrative expenses
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                (2,131
                                                                )
                                                                
                                                                
                                                                (1,339
                                                                )
                                                                
                                                                
                                                                (4,180
                                                                )
                                                                
                                                                
                                                                (4,024
                                                                )Operating
      (loss) income
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                (2,758
                                                                )
                                                                
                                                                
                                                                6,094
                                                                
                                                                
                                                                
                                                                439
                                                                
                                                                
                                                                
                                                                14,207Government
      subsidies income
                                                                
                                                                
                                                                3
                                                                
                                                                
                                                                
                                                                6,064
                                                                
                                                                
                                                                
                                                                73
                                                                
                                                                
                                                                
                                                                8,005
                                                                
                                                                
                                                                
                                                                369Other
      income
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                4
                                                                
                                                                
                                                                
                                                                33
                                                                
                                                                
                                                                
                                                                24
                                                                
                                                                
                                                                
                                                                63Interest
      income
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                936
                                                                
                                                                
                                                                
                                                                169
                                                                
                                                                
                                                                
                                                                2,789
                                                                
                                                                
                                                                
                                                                412Interest
      expense
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                (1,243
                                                                )
                                                                
                                                                
                                                                (747
                                                                )
                                                                
                                                                
                                                                (3,335
                                                                )
                                                                
                                                                
                                                                (2,993
                                                                )Income
      before income taxes
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                3,003
                                                                
                                                                
                                                                
                                                                5,622
                                                                
                                                                
                                                                
                                                                7,922
                                                                
                                                                
                                                                
                                                                12,058Income
      taxes expenses
                                                                
                                                                
                                                                5
                                                                
                                                                
                                                                
                                                                (1,264
                                                                )
                                                                
                                                                
                                                                (797
                                                                )
                                                                
                                                                
                                                                (1,796
                                                                )
                                                                
                                                                
                                                                (1,320
                                                                )Net
      income
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                1,739
                                                                
                                                                
                                                                
                                                                4,825
                                                                
                                                                
                                                                
                                                                6,126
                                                                
                                                                
                                                                
                                                                10,738Net
      income attributable to non-controlling interests
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                -
                                                                
                                                                
                                                                
                                                                -
                                                                
                                                                
                                                                
                                                                -
                                                                
                                                                
                                                                
                                                                -Net
      income attributable to CH Lighting International
    Corporation
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                1,739
                                                                
                                                                
                                                                
                                                                4,825
                                                                
                                                                
                                                                
                                                                6,126
                                                                
                                                                
                                                                
                                                                10,738Other
      comprehensive incomeForeign
      currency translation adjustment
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                4
                                                                
                                                                
                                                                
                                                                (4
                                                                )
                                                                
                                                                
                                                                41
                                                                
                                                                
                                                                
                                                                832Comprehensive
      income
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                1,743
                                                                
                                                                
                                                                
                                                                4,821
                                                                
                                                                
                                                                
                                                                6,167
                                                                
                                                                
                                                                
                                                                11,570Earnings
      per share
                                                                
                                                                
                                                                4Shares
                                                                
                                                                
                                                                Shares
                                                                
                                                                
                                                                Shares
                                                                
                                                                
                                                                SharesWeighted
      average number of common stocks outstanding, basic and
    diluted
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                120,000,000
                                                                
                                                                
                                                                
                                                                93,000,000
                                                                
                                                                
                                                                
                                                                120,000,000
                                                                
                                                                
                                                                
                                                                93,000,000US$
                                                                
                                                                
                                                                US$
                                                                
                                                                
                                                                US$
                                                                
                                                                
                                                                US$Net
      income per share of common stock outstanding, basic and
      diluted
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                
                                                                0.014
                                                                
                                                                
                                                                
                                                                0.052
                                                                
                                                                
                                                                
                                                                0.051
                                                                
                                                                
                                                                
                                                                0.115
 
 The
accompanying notes are an integral part of these unaudited condensed
consolidated financial statements.
  F-1
 
 CH
Lighting International Corporation
 (formerly
Sino-Biotics, Inc.)
 
 Unaudited
Condensed Consolidated Balance Sheets
 As of
June 30, 2009
 
 (Audited)As
      of
                                June
      30,
                                2009
                              
                              
                              As
      of
                                September
      30,
                                2008Note
                              
                              
                              US$’000
                              
                              
                              US$’000ASSETSCurrent
      assets:Cash
      and cash equivalents
                              
                              
                              
                              
                              
                              6,421
                              
                              
                              
                              3,154Restricted
      bank balances
                              
                              
                              6
                              
                              
                              
                              32,538
                              
                              
                              
                              16,314Other
      financial assets
                              
                              
                              
                              
                              
                              
                              -
                              
                              
                              
                              2,918Account
      receivables, net
                              
                              
                              7
                              
                              
                              
                              13,821
                              
                              
                              
                              18,871Other
      receivables
                              
                              
                              
                              
                              
                              
                              13,529
                              
                              
                              
                              4,093Prepayments
                              
                              
                              
                              
                              
                              
                              934
                              
                              
                              
                              2,724Due
      from related parties, current portion
                              
                              
                              12
                              (b)
                              
                              
                              33,633
                              
                              
                              
                              7,058Inventories,
      net
                              
                              
                              8
                              
                              
                              
                              15,105
                              
                              
                              
                              15,303Total
      current assets
                              
                              
                              
                              
                              
                              
                              115,981
                              
                              
                              
                              70,435Long-term
      land lease prepayments, net
                              
                              
                              
                              
                              
                              
                              860
                              
                              
                              
                              887Property,
      plant and equipment, net
                              
                              
                              9
                              
                              
                              
                              17,234
                              
                              
                              
                              16,318Due
      from related parties, long-term portion
                              
                              
                              12
                              (b)
                              
                              
                              7,032
                              
                              
                              
                              27,444Total
      assets
                              
                              
                              
                              
                              
                              
                              141,107
                              
                              
                              
                              115,084LIABILITIES
      AND EQUITYCurrent
      liabilities:Account
      payables
                              
                              
                              
                              
                              
                              
                              19,660
                              
                              
                              
                              22,135Note
      payables
                              
                              
                              
                              
                              
                              
                              3,059
                              
                              
                              
                              4,519Accrued
      expenses and other liabilities
                              
                              
                              
                              
                              
                              
                              2,503
                              
                              
                              
                              1,024Customer
      deposits
                              
                              
                              
                              
                              
                              
                              1,694
                              
                              
                              
                              3,291Due
      to related parties
                              
                              
                              12
                              (b)
                              
                              
                              25
                              
                              
                              
                              3,626Income
      tax payables
                              
                              
                              
                              
                              
                              
                              1,155
                              
                              
                              
                              376Short-term
      bank borrowings
                              
                              
                              10
                              (a)
                              
                              
                              79,301
                              
                              
                              
                              50,849Current
      portion of long-term interest-bearing loans,
                                secured
                              
                              
                              10
                              (b)
                              
                              
                              2,858
                              
                              
                              
                              3,068Total
      current liabilities
                              
                              
                              
                              
                              
                              
                              110,255
                              
                              
                              
                              88,888Long-term
      interest-bearing loans, secured
                              
                              
                              10
                              (b)
                              
                              
                              3,979
                              
                              
                              
                              6,093Government
      subsidies
                              
                              
                              
                              
                              
                              
                              -
                              
                              
                              
                              96Deferred
      tax liabilities
                              
                              
                              
                              
                              
                              
                              1,387
                              
                              
                              
                              688115,621
                              
                              
                              
                              95,765
 
 The
accompanying notes are an integral part of these unaudited condensed
consolidated financial statements.
  F-2
 
 CH
Lighting International Corporation
 (formerly
Sino-Biotics, Inc.)
 
 Unaudited
Condensed Consolidated Balance Sheets
 As of
June 30, 2009
 
 (Audited)As
      of
                          June
      30,
                          2009
                        
                        
                        As
      of
                          September
      30,
                          2008Note
                        
                        
                        US$’000
                        
                        
                        US$’000Commitments
      and contingencies
                        
                        
                        13
                        
                        
                        
                        -
                        
                        
                        
                        -Stockholders’
      equity:Preferred
      stock, US$0.01 par value:
                          5,000,000 shares authorized, no
      share issued
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        -Common
      stock, US$0.001 par value:
                          500,000,000
      shares authorized as of
                          June
      30, 2009 and September 30, 2008
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        -120,000,000
      shares issued and outstanding as of
                          June
      30, 2009 and September 30, 2008
                        
                        
                        
                        
                        
                        
                        120
                        
                        
                        
                        120Additional
      paid-in capital
                        
                        
                        
                        
                        
                        
                        962
                        
                        
                        
                        962Statutory
      reserves
                        
                        
                        
                        
                        
                        
                        1,024
                        
                        
                        
                        740Accumulated
      other comprehensive income
                        
                        
                        
                        
                        
                        
                        2,165
                        
                        
                        
                        2,124Retained
      earnings
                        
                        
                        
                        
                        
                        
                        21,149
                        
                        
                        
                        15,307Total
      stockholders’ equity
                        
                        
                        
                        
                        
                        
                        25,420
                        
                        
                        
                        19,253Non-controlling
      interests
                        
                        
                        
                        
                        
                        
                        66
                        
                        
                        
                        66Total
      equity
                        
                        
                        
                        
                        
                        
                        25,486
                        
                        
                        
                        19,319Total
      liabilities and equity
                        
                        
                        
                        
                        
                        
                        141,107
                        
                        
                        
                        115,084
  The
accompanying notes are an integral part of these unaudited condensed
consolidated financial statements.
  F-3
 
 CH
Lighting International Corporation
 (formerly
Sino-Biotics, Inc.)
 
 Unaudited
Condensed Consolidated Statements of Changes in Equity
 For the
nine months ended June 30, 2009
 
 Stockholders’
      equityPreferred
      stock issued
                                                                                      
                                                                                      
                                                                                      Common
      stock issuedNumber
                                                                                        of
      shares
                                                                                      
                                                                                      
                                                                                      Amount
                                                                                      
                                                                                      
                                                                                      Number
                                                                                        of
      shares
                                                                                      
                                                                                      
                                                                                      Amount
                                                                                      
                                                                                      
                                                                                      Additional
                                                                                        paid-in
                                                                                        capital
                                                                                      
                                                                                      
                                                                                      Statutory
                                                                                        reserves
                                                                                      
                                                                                      
                                                                                      Accumulated
                                                                                        other
                                                                                        compre-
                                                                                        hensive
                                                                                        income
                                                                                      
                                                                                      
                                                                                      Retained
                                                                                        earnings
                                                                                      
                                                                                      
                                                                                      Sub-total
                                                                                      
                                                                                      
                                                                                      Non-
                                                                                        controlling
                                                                                        interests
                                                                                      
                                                                                      
                                                                                      TotalUS$’000
                                                                                      
                                                                                      
                                                                                      
                                                                                      
                                                                                      
                                                                                      US$’000
                                                                                      
                                                                                      
                                                                                      US$’000
                                                                                      
                                                                                      
                                                                                      US$’000
                                                                                      
                                                                                      
                                                                                      US$’000
                                                                                      
                                                                                      
                                                                                      US$’000
                                                                                      
                                                                                      
                                                                                      US$’000
                                                                                      
                                                                                      
                                                                                      US$’000
                                                                                      
                                                                                      
                                                                                      US$’000Balance
      as of September 30, 2008 and October 1, 2008
                                                                                      
                                                                                      
                                                                                      -
                                                                                      
                                                                                      
                                                                                      
                                                                                      -
                                                                                      
                                                                                      
                                                                                      
                                                                                      120,000,000
                                                                                      
                                                                                      
                                                                                      
                                                                                      120
                                                                                      
                                                                                      
                                                                                      
                                                                                      962
                                                                                      
                                                                                      
                                                                                      
                                                                                      740
                                                                                      
                                                                                      
                                                                                      
                                                                                      2,124
                                                                                      
                                                                                      
                                                                                      
                                                                                      15,307
                                                                                      
                                                                                      
                                                                                      
                                                                                      19,253
                                                                                      
                                                                                      
                                                                                      
                                                                                      66
                                                                                      
                                                                                      
                                                                                      
                                                                                      19,319Net
      income
                                                                                      
                                                                                      
                                                                                      -
                                                                                      
                                                                                      
                                                                                      
                                                                                      -
                                                                                      
                                                                                      
                                                                                      
                                                                                      -
                                                                                      
                                                                                      
                                                                                      
                                                                                      -
                                                                                      
                                                                                      
                                                                                      
                                                                                      -
                                                                                      
                                                                                      
                                                                                      
                                                                                      -
                                                                                      
                                                                                      
                                                                                      
                                                                                      -
                                                                                      
                                                                                      
                                                                                      
                                                                                      6,126
                                                                                      
                                                                                      
                                                                                      
                                                                                      6,126
                                                                                      
                                                                                      
                                                                                      
                                                                                      -
                                                                                      
                                                                                      
                                                                                      
                                                                                      6,126Transfers
      to statutory reserves
                                                                                      
                                                                                      
                                                                                      -
                                                                                      
                                                                                      
                                                                                      
                                                                                      -
                                                                                      
                                                                                      
                                                                                      
                                                                                      -
                                                                                      
                                                                                      
                                                                                      
                                                                                      -
                                                                                      
                                                                                      
                                                                                      
                                                                                      -
                                                                                      
                                                                                      
                                                                                      
                                                                                      284
                                                                                      
                                                                                      
                                                                                      
                                                                                      -
                                                                                      
                                                                                      
                                                                                      
                                                                                      (284
                                                                                      )
                                                                                      
                                                                                      
                                                                                      -
                                                                                      
                                                                                      
                                                                                      
                                                                                      -
                                                                                      
                                                                                      
                                                                                      
                                                                                      -Foreign
      currency translation adjustment
                                                                                      
                                                                                      
                                                                                      -
                                                                                      
                                                                                      
                                                                                      
                                                                                      -
                                                                                      
                                                                                      
                                                                                      
                                                                                      -
                                                                                      
                                                                                      
                                                                                      
                                                                                      -
                                                                                      
                                                                                      
                                                                                      
                                                                                      -
                                                                                      
                                                                                      
                                                                                      
                                                                                      -
                                                                                      
                                                                                      
                                                                                      
                                                                                      41
                                                                                      
                                                                                      
                                                                                      
                                                                                      -
                                                                                      
                                                                                      
                                                                                      
                                                                                      41
                                                                                      
                                                                                      
                                                                                      
                                                                                      -
                                                                                      
                                                                                      
                                                                                      
                                                                                      41Balance
      as of June 30, 2009
                                                                                      
                                                                                      
                                                                                      -
                                                                                      
                                                                                      
                                                                                      
                                                                                      -
                                                                                      
                                                                                      
                                                                                      
                                                                                      120,000,000
                                                                                      
                                                                                      
                                                                                      
                                                                                      120
                                                                                      
                                                                                      
                                                                                      
                                                                                      962
                                                                                      
                                                                                      
                                                                                      
                                                                                      1,024
                                                                                      
                                                                                      
                                                                                      
                                                                                      2,165
                                                                                      
                                                                                      
                                                                                      
                                                                                      21,149
                                                                                      
                                                                                      
                                                                                      
                                                                                      25,420
                                                                                      
                                                                                      
                                                                                      
                                                                                      66
                                                                                      
                                                                                      
                                                                                      
                                                                                      25,486
  The
accompanying notes are an integral part of these unaudited condensed
consolidated financial statements.
  F-4
 
 CH
Lighting International Corporation
 (formerly
Sino-Biotics, Inc.)
 
 Unaudited
Condensed Consolidated Statements of Cash Flows
 For the
nine months ended June 30, 2009
 
 Nine months ended
                    June 30,2009
                  
                  
                  2008US$’000
                  
                  
                  US$’000Cash
      flows from operating activitiesNet
      income
                  
                  
                  6,126
                  
                  
                  
                  10,738Adjustments
      to reconcile net income to net cash provided by
                    operating
      activities:Depreciation of property, plant
      and equipment
                  
                  
                  1,151
                  
                  
                  
                  967Amortization of long-term land
      lease prepayments
                  
                  
                  27
                  
                  
                  
                  28Recognition of government
      subsidies
                  
                  
                  (96
                  )
                  
                  
                  (603
                  )Accrued interest
      income
                  
                  
                  (2,198
                  )
                  
                  
                  -Imputed interest
      expenses
                  
                  
                  -
                  
                  
                  
                  175Exchange
      differences
                  
                  
                  4
                  
                  
                  
                  (84
                  )Deferred
    taxation
                  
                  
                  699
                  
                  
                  
                  627Changes
      in operating assets and liabilities:Account receivables,
      net
                  
                  
                  5,078
                  
                  
                  
                  (13,082
                  )Other
    receivables
                  
                  
                  (9,430
                  )
                  
                  
                  3,153Prepayments
                  
                  
                  1,796
                  
                  
                  
                  1,600Inventories,
net
                  
                  
                  220
                  
                  
                  
                  5,707Account
payables
                  
                  
                  (2,508
                  )
                  
                  
                  7,189Note payables
                  
                  
                  (1,467
                  )
                  
                  
                  (9
                  )Accrued expenses and other
      accrued liabilities
                  
                  
                  1,477
                  
                  
                  
                  (1,332
                  )Customer
    deposits
                  
                  
                  (1,601
                  )
                  
                  
                  225Income tax
    payables
                  
                  
                  778
                  
                  
                  
                  (353
                  )Net
      cash provided by operating activities
                  
                  
                  56
                  
                  
                  
                  14,946Cash
      flows from investing activitiesPurchase
      of property, plant and equipment
                  
                  
                  (2,044
                  )
                  
                  
                  (3,753
                  )Investment
      in restricted bank balances, net
                  
                  
                  (16,199
                  )
                  
                  
                  (12,225
                  )Advance
      to related parties, net
                  
                  
                  (7,516
                  )
                  
                  
                  -Net
      cash used in investing activities
                  
                  
                  (25,759
                  )
                  
                  
                  (15,978
                  )
  The
accompanying notes are an integral part of these unaudited condensed
consolidated financial statements.
  F-5
 
 CH
Lighting International Corporation
 (formerly
Sino-Biotics, Inc.)
 
 Unaudited
Condensed Consolidated Statements of Cash Flows
 For the
nine months ended June 30, 2009
 
 Nine months ended
                            June 30,2009
                          
                          
                          2008US$’000
                          
                          
                          US$’000Cash
      flows from financing activitiesAdvance
      to related parties, net
                          
                          
                          -
                          
                          
                          
                          (23,690
                          )Capital
      contribution to a subsidiary by its minority shareholder
                          
                          
                          -
                          
                          
                          
                          64Dividends
      paid
                          
                          
                          -
                          
                          
                          
                          (1,419
                          )Proceeds
      from short-term bank loans
                          
                          
                          51,616
                          
                          
                          
                          30,395Repayment
      of short-term bank loans
                          
                          
                          (43,000
                          )
                          
                          
                          (26,024
                          )Proceeds
      from bills financing, net
                          
                          
                          22,689
                          
                          
                          
                          15,835Proceeds
      from long-term interest-bearing loans
                          
                          
                          -
                          
                          
                          
                          4,445Repayment
      of long-term interest-bearing loans
                          
                          
                          (2,338
                          )
                          
                          
                          (2,085
                          )Net
      cash provided by (used in) financing activities
                          
                          
                          28,967
                          
                          
                          
                          (2,479
                          )Net
      increase (decrease) in cash and cash equivalents
                          
                          
                          3,264
                          
                          
                          
                          (3,511
                          )Cash
      and cash equivalents, at beginning of period
                          
                          
                          3,154
                          
                          
                          
                          5,340Effect
      on exchange rate changes
                          
                          
                          3
                          
                          
                          
                          951Cash
      and cash equivalents, at end of the period
                          
                          
                          6,421
                          
                          
                          
                          2,780Supplemental
      disclosure of cash flow informationInterest
      received
                          
                          
                          591
                          
                          
                          
                          412Interest
      paid
                          
                          
                          3,335
                          
                          
                          
                          2,815Income
      tax paid
                          
                          
                          519
                          
                          
                          
                          1,056Non-cash
      investing activitiesAccrued
      interest income from related parties
                          
                          
                          2,198
                          
                          
                          
                          -Non-cash
      financing activitiesSettlement
      of bills financing with other financial assets
                          
                          
                          2,918
                          
                          
                          
                          -
 
 The
accompanying notes are an integral part of these unaudited condensed
consolidated financial statements.
  F-6
  CH
Lighting International Corporation
 (formerly
Sino-Biotics, Inc.)
 
 Notes
to and Forming Part of Unaudited Condensed Consolidated Financial
Statements
 For the
nine months ended June 30, 2009
 1.
              ORGANIZATION
      AND PRINCIPAL ACTIVITIES
  CH
Lighting International Corporation (“CH Lighting”), formerly known as
Sino-Biotics, Inc., was incorporated on July 6, 2005 under the laws of the State
of Delaware, and adopted its existing name effective on August 25, 2008. Its
common stock is currently trading on the Over-The-Counter Bulletin Board
(“OTCBB”) of NASDAQ under the symbol “CHHN”.
 
 CH
Lighting is an investment holding company with no operation. The principal
activities of its subsidiaries (together with CH Lighting, collectively referred
as to “the Company”) are manufacture and sale of lighting source products and
lighting electronic products and investment holding.
 
 Details
of CH Lighting’s subsidiaries as of June 30, 2009 are as follows:
 
 Name
                          
                          Place
      and
                            date
      of
                            establishment
      /
                            incorporation
                          
                          Percentage
      of
                            effective
      equity
                            interest
      / voting
                            right
      attributable
                            to
      the Company
                          
                          Principal
      activitiesCH
      International Holdings Limited (“CH International”)
                          
                          British
      Virgin Islands
                          
                          100%
                          
                          Investment
      holdingZhejiang
      CH Lighting Company Limited (“Zhejiang CH”) *
                          
                          Zhejiang,
                            the
      People’s Republic of China (“PRC”)
                            September
      27, 2000
                          
                          100%
                          
                          Manufacture
      and sales of lighting source productsZhejiang
      CH Lighting Technology Company Limited (“CH Technology”) *
                          
                          Zhejiang,
                            the
      PRC
                            March
      31, 2003
                          
                          100%
                          
                          Manufacture
      and sales of lighting electronic productsZhejiang
      Shaoxing CH Lamps Manufacturing Company Limited (“CH Lamps”)
    *
                          
                          Zhejiang,
                            the
      PRC
                            December
      13, 1999
                          
                          100%
                          
                          Manufacture
      of lighting source productsShangyu
      CH Laboratory Testing Company Limited (“CH Lab”) *
                          
                          Zhejiang,
                            the
      PRC
                            January
      7, 2008
                          
                          90%
                          
                          Laboratory
      testing services of lighting source and electronic
  productsCH
      Lighting (Hong Kong) Limited (“CH Hong Kong”)
                          
                          Hong
      Kong
                            November
      10, 2000
                          
                          100%
                          
                          Trading
      of lighting source
products
 
 *
              These
      are direct translation of name in Chinese for identification purpose only
      and are not the official name in
English.
 
 F-7
 CH
Lighting International Corporation
 (formerly
Sino-Biotics, Inc.)
 
 Notes
to and Forming Part of Unaudited Condensed Consolidated Financial
Statements
 For the
nine months ended June 30, 2009
  1.
              ORGANIZATION
      AND PRINCIPAL ACTIVITIES
(CONTINUED)
 
 On July
16, 2008, CH Lighting entered into a share exchange agreement (the “Share
Exchange Agreement”) with CH International and KEG International Limited
(“KEG”), a company incorporated in British Virgins Islands. Pursuant to the
Share Exchange Agreement, CH Lighting acquired all of the issued and outstanding
common stock of CH International from KEG in exchange for 93,000,000
newly-issued shares of CH Lighting’s common stock, par value of US$0.001,
representing 77.5% of CH Lighting’s common stock issued and outstanding upon
completion of the share exchange (the “Share Exchange
Transaction”).
 
 The
acquisition by CH Lighting of CH International is deemed to be a reverse
acquisition in accordance with generally accepted accounting principles. In
accordance with the Accounting and Financial Reporting Interpretations and
Guidance prepared by the staff of the U.S. Securities and Exchange Commission,
CH Lighting (the legal acquirer) is considered the accounting acquiree and CH
International (the legal acquiree) is considered the accounting acquirer. The
consolidated financial statements of the consolidated entity will in substance
be those of CH International, with the assets and liabilities, and revenues and
expenses, of CH Lighting being included effective from the date of completion of
Share Exchange Transaction. CH Lighting is deemed to be a continuation of the
business of CH International.
 
 In order
to rationalize the corporate structure and prepare for the Share Exchange
Transaction, CH International and other subsidiaries (collectively referred to
as the “CH International Group”) underwent a reorganization (“Reorganization”)
prior to the consummation of the Share Exchange Transaction.
  Since the
ultimate beneficial owner of the companies comprising the CH International Group
was, all the time prior to the completion of the Reorganization, Mr. Zhao Guo
Song (‘Mr. Zhao”), the ownership transfer transaction was accounted for as a
transfer of entities under common control in accordance with Statement of
Financial Accounting Standards (“SFAS”) No. 141, “Business Combinations”. Hence,
the consolidation has been accounted for at historical cost and prepared on the
basis as if the Reorganization had become effective as of the beginning of the
first period presented in the accompanying unaudited condensed consolidated
financial statements.
 
 F-8
  CH
Lighting International Corporation
 (formerly
Sino-Biotics, Inc.)
 
 Notes
to and Forming Part of Unaudited Condensed Consolidated Financial
Statements
 For the
nine months ended June 30, 2009
  2.
              PREPARATION
      OF INTERIM FINANCIAL STATEMENTS
  Basis
of presentations
 The
unaudited condensed consolidated financial statements of the Company have been
prepared by the management pursuant to the accounting principles generally
accepted in the United States of America (“GAAP”) for interim financial
reporting and the rules and regulations of the Securities and Exchange
Commission (“SEC”). Accordingly, certain information and note disclosures
normally included in annual financial statements prepared in accordance with the
GAAP have been condensed or omitted, although the management believes that the
disclosures made are adequate to make the information not
misleading.
  To
prepare the financial statements in conformity with the GAAP, the management
makes estimates and assumptions that affect the reported amounts of assets and
liabilities as of the date of these financial statements and the reported
amounts of income and expenses during the reporting period. Actual amounts may
differ from these estimated amounts. In the opinion of the management, these
unaudited condensed consolidated financial statements include all adjustments
(consisting of normal recurring adjustments and reclassifications) necessary for
a fair presentation of the Company’s financial position as of June 30, 2009, the
results of operations for both the three months and nine months ended June 30,
2009 and 2008 and cash flows for the nine months ended June 30, 2009 and
2008.
  The
results of operations and cash flows for the nine months ended June 30, 2009 and
2008 are not necessarily indicative of the operating results and cash flows to
be expected for the full year. These unaudited condensed consolidated financial
statements should be read in conjunction with the audited financial statements
and notes thereto included in the Company’s Form-10K for the year ended
September 30, 2008 filed on December 29, 2008.
  Basis
of consolidation
 The
unaudited condensed consolidated financial statements include the financial
information of CH Lighting and its subsidiaries. All significant intercompany
accounts and transactions have been eliminated upon
consolidation.
  Recently
issued accounting pronouncements
 The
management has reviewed all recently issued, for both effective and not yet
effective, new accounting pronouncements and considered the following new
accounting pronouncements are relevant to the Company:
 
 F-9
  CH
Lighting International Corporation
 (formerly
Sino-Biotics, Inc.)
 
 Notes
to and Forming Part of Unaudited Condensed Consolidated Financial
Statements
 For the
nine months ended June 30, 2009
  2.
              PREPARATION
      OF INTERIM FINANCIAL STATEMENTS
(CONTINUED)
 
 Recently
issued accounting pronouncements (Continued)
 In
December 2007, the Financial Accounting Standards Board (“FASB”) issued No. 160,
“Non-controlling Interests in
Consolidated Financial Statements—An Amendment of ARB No. 51” (“SFAS
160”). SFAS 160 changes the accounting and reporting for minority interests.
Minority interests will be re-characterized as non-“controlling interests” and
will be reported as a component of equity separate from the parent’s equity, and
purchases or sales of equity interests that do not result in a change in control
will be accounted for as equity transactions. In addition, net income
attributable to the non-controlling interests will be included in net income
and, upon a loss of control, the interest sold, as well as any interest
retained, will be recorded at fair value with any gain or loss recognized in net
income. SFAS 160 is effective fiscal years beginning on or after December 15,
2008 and will apply prospectively, except for the presentation and disclosure
requirements, which will apply retrospectively. Except for the changes in the
presentation and disclosure of non-controlling interests of the Company, the
adoption of SFAS 160 has no material impact on the consolidated financial
position or results of operations.
 
 In
April 2009, the FASB issued three related FASB Staff Positions (“FSP”): (i) FSP
FAS No. 115-2 and FAS No. 124-2, “Recognition of Presentation of
Other-Than-Temporary Impairments” (“FSP FAS 115-2 and FAS 124-2”), (ii)
FSP FAS No. 107-1 and Accounting Principles Board Opinion (“APB”) No. 28-1,
“Interim Disclosures about
Fair Value of Financial Instruments” (“FSP FAS 107-1 and APB 28-1”), and
(iii) FSP FAS No. 157-4, “Determining the Fair Value When the
Volume and Level of Activity for the Asset or Liability Have Significantly
Decreased and Identifying Transactions That Are Not Orderly” (“FSP FAS
157-4), which are effective for interim and annual reporting periods ending
after June 15, 2009. FSP FAS 115-2 and FAS 124-2 amend the other-than-temporary
impairment guidance in the GAAP for debt securities to modify the requirement
for recognizing other-than-temporary impairments, change the existing impairment
model, and modify the presentation and frequency of related disclosures. FSP FAS
107-1 and APB 28-1 require disclosures about fair value of financial instruments
for interim reporting periods as well as in annual financial statements. FSP FAS
157-4 provides additional guidance for estimating fair value in accordance with
SFAS No. 157, “Fair Value Measurements” (“SFAS 157”). The impact on the adoption
of the three related FSPs related only to the disclosures of the Company’s
financial instruments as detailed in Note 11 below and has no material impact on
the consolidated financial position or results of operations. The management is
assessing the impact of the adoption of the three related FSPs on the Company’s
annual financial statements.
 
 In May
2008, the FASB issued SFAS No. 163, “Accounting for Financial Guarantee
Insurance Contracts – an interpretation of FASB Statement No. 60” (“SFAS
163”). SFAS 163 interprets FASB Statement No. 60 and amends existing accounting
pronouncements to clarify their application to the financial guarantee insurance
contracts included within the scope of that statement. SFAS 163 is effective for
financial statements issued for fiscal years beginning after December 15, 2008,
and all interim periods within those fiscal years. The management considers that
the adoption of SFAS 163 has no material impact on the consolidated financial
position or results of operations.
 
 F-10
  CH
Lighting International Corporation
 (formerly
Sino-Biotics, Inc.)
 
 Notes
to and Forming Part of Unaudited Condensed Consolidated Financial
Statements
 For the
nine months ended June 30, 2009
  2.
              PREPARATION
      OF INTERIM FINANCIAL STATEMENTS
(CONTINUED)
 
 Recently
issued accounting pronouncements (Continued)
 In May
2009, the FASB issued SFAS No. 165, “Subsequent Events” (“SFAS
165”), which establishes standards of accounting for and disclosure of events
that occur after the balance sheet date but before financial statements are
issued or are available to be issued. It requires the disclosure of the date
through which an entity has evaluated subsequent events and the basis for that
date, i.e., whether that date represents the date the financial statements were
issued or were available to be issued. SFAS 165 is effective for interim or
annual financial periods ending after June 15, 2009. The management evaluated
all events or transactions that occurred after June 30, 2009 up through August
14, 2009, the date that the management issued these financial statements. The
management considers that the adoption of SFAS 165 has no material impact on the
consolidated financial position or results of operations.
 
 In June
2009, the FASB issued SFAS No. 166, “Accounting for Transfers of
Financial Assets - an amendment of FASB Statement No. 140” (“SFAS 166”).
SFAS 166 amends the de-recognition accounting and disclosure guidance relating
to SFAS 140. SFAS 166 eliminates the exemption from consolidation for qualifying
special-purpose entity “(QSPE”), it also requires a transferor to evaluate all
existing QSPE to determine whether it must be consolidated in accordance with
SFAS 167. SFAS 166 is effective for financial asset transfers occurring after
the beginning of an entity’s first fiscal year that begins after November 15,
2009. The management believes that the adoption of SFAS 167 in future periods
should not have a material impact on the consolidated financial position or
results of operations.
 
 In June
2009, the FASB issued SFAS No. 167, “Amendments to FASB Interpretation
No. 46(R)” (“SFAS 167”), which amends FASB Interpretation No. 46 (revised
December 2003) to address the elimination of the concept of a qualifying special
purpose entity. SFAS 167 also replaces the quantitative-based risks and rewards
calculation for determining which enterprise has a controlling financial
interest in a variable interest entity with an approach focused on identifying
which enterprise has the power to direct the activities of a variable interest
entity and the obligation to absorb losses of the entity or the right to receive
benefits from the entity. Additionally, SFAS 167 provides more timely and useful
information about an enterprise’s involvement with a variable interest entity.
SFAS 167 is effective for fiscal years beginning after November 15, 2009. The
management believes that the adoption of SFAS 167 in future periods should not
have a material impact on the consolidated financial position or results of
operations.
 
 In June
2009, the FASB issued SFAS No. 168, “The FASB Accounting Standards
Codification and the Hierarchy of Generally Accepted Accounting Principles, a
replacement of FASB Statement No. 162” (“SFAS 168”), which establishes
the FASB Accounting Standards Codification as the source of authoritative
accounting principles recognized by the FASB to be applied in the preparation of
financial statements in conformity with the GAAP. SFAS 168 explicitly recognizes
rules and interpretive releases of the SEC under federal securities laws as
authoritative generally accepted accounting principles for SEC registrants. SFAS
168 is effective for financial statements issued for interim and annual periods
ending after September 15, 2009. The management believes that the adoption of
SFAS 168 in future periods should not have a material impact on the consolidated
financial position or results of operations. However, because the FASB
Accounting Standards Codification completely replaces existing standards, it
will affect the way that the GAAP is referenced within the consolidated
financial statements and accounting policies.
 
 F-11
  CH
Lighting International Corporation
 (formerly
Sino-Biotics, Inc.)
 
 Notes
to and Forming Part of Unaudited Condensed Consolidated Financial
Statements
 For the
nine months ended June 30, 2009
 
 3.
              GOVERNMENT
      SUBSIDIES INCOME
 
 The
government subsidies income as granted was recognized as income because no
specific condition was attached to the grant.
 
 4.
              EARNINGS
      PER SHARE
 
 Basic
earnings per share is computed by dividing net income attributable to common
stockholders of CH Lighting by the weighted-average number of common stocks
outstanding during the period. Diluted earnings per share is computed similar to
basic earnings per share except that the denominator is increased to include the
number of additional common stocks that would have been outstanding if the
potential common shares had been issued and if the additional common shares were
dilutive. There were no potentially dilutive securities for the nine months
ended June 30, 2009 and 2008.
 
 5.
              INCOME
      TAXES
  Interpretation
No. 48, “Accounting for Uncertainty in Income Taxes – an interpretation of FASB
Statement No. 109” (“FIN 48”) issued by the FASB clarifies the accounting and
disclosure for uncertainty in tax positions, as defined, and prescribes the
measurement process and a minimum recognition threshold for a tax position,
taken or expected to be taken in a tax return, that is required to be met before
being recognized in the financial statements. Under FIN 48, the Company must
recognize the tax benefit from an uncertain position only if it is
more-likely-than-not the tax position will be sustained on examination by the
taxing authority, based on the technical merits of the position. The tax
benefits recognized in the financial statements attributable to such position
are measured based on the largest benefit that has a greater than 50% likelihood
of being realized upon the ultimate resolution of the position.
  Subject
to the provision of FIN 48, the Company has analyzed its filing positions in all
of the domestic and foreign jurisdictions where it is required to file income
tax returns. As of June 30, 2009, the Company has identified the jurisdictions
as “major” tax jurisdictions, as defined, in which it is required to file income
tax returns are Hong Kong and the PRC. Based on the evaluations noted above, the
Company has concluded that there are no significant uncertain tax positions
requiring recognition in its consolidated financial statements.
  As of
June 30, 2009, the Company had no unrecognized tax benefits or accruals for the
potential payment or interest and penalties. The Company’s policy is to record
interest and penalties in this connection as a component of the provision for
income tax expense. For the nine months ended June 30, 2009 and 2008, no
interest or penalties were recorded.
 
 F-12
  CH
Lighting International Corporation
 (formerly
Sino-Biotics, Inc.)
 
 Notes
to and Forming Part of Unaudited Condensed Consolidated Financial
Statements
 For the
nine months ended June 30, 2009
 
 5.
              INCOME
      TAXES (CONTINUED)
 
 (a)
              Income
      tax expenses are comprised of the
following:
   Three
      months ended
                    June
      30,
                  
                  
                  Nine months ended
                    June 30,2009
                  
                  
                  2008
                  
                  
                  2009
                  
                  
                  2008US$’000
                  
                  
                  US$’000
                  
                  
                  US$’000
                  
                  
                  US$’000Current
      taxes arising in Hong Kong and the PRC:For
      the period
                  
                  
                  1,031
                  
                  
                  
                  (69
                  )
                  
                  
                  1,097
                  
                  
                  
                  693Deferred
      taxes arising in Hong Kong and the PRC:For
      the period
                  
                  
                  233
                  
                  
                  
                  866
                  
                  
                  
                  699
                  
                  
                  
                  6271,264
                  
                  
                  
                  797
                  
                  
                  
                  1,796
                  
                  
                  
                  1,320
 
 (b)
              Reconciliation
      from the expected income tax expenses calculated with reference to the
      average statutory tax rate in the PRC of 25% and 28% for the nine months
      ended June 30, 2009 and 2008 respectively is as
  follows:
 
 Three
      months ended
                June
      30,
              
              
              Nine months ended
                June 30,2009
              
              
              2008
              
              
              2009
              
              
              2008US$’000
              
              
              US$’000
              
              
              US$’000
              
              
              US$’000Expected
      income tax expenses
              
              
              751
              
              
              
              1,510
              
              
              
              1,980
              
              
              
              3,376Difference
      in tax rates in the countries that the Company operates
              
              
              -
              
              
              
              (10
              )
              
              
              5
              
              
              
              4Effect
      on tax incentives / holiday
              
              
              -
              
              
              
              (1,306
              )
              
              
              (915
              )
              
              
              (2,654
              )Tax-exempted
      / Non-deductible items
              
              
              352
              
              
              
              (121
              )
              
              
              66
              
              
              
              (116
              )Withholding
      tax
              
              
              144
              
              
              
              710
              
              
              
              643
              
              
              
              710Others
              
              
              17
              
              
              
              14
              
              
              
              17
              
              
              
              -Income
      tax expenses
              
              
              1,264
              
              
              
              797
              
              
              
              1,796
              
              
              
              1,320
  F-13
 
 CH
Lighting International Corporation
 (formerly
Sino-Biotics, Inc.)
 
 Notes
to and Forming Part of Unaudited Condensed Consolidated Financial
Statements
 For the
nine months ended June 30, 2009
 
 6.
              RESTRICTED
      BANK BALANCES
  The
restricted bank balances as of June 30, 2009 and September 30, 2008 represented
time deposits with original maturity between three and twelve months to secure
banking facilities granted by various financial institutions as
follows:
 
 As
      of
                          June
      30,
                          2009
                        
                        
                        (Audited)
                          As
      of
                          September
      30,
                          2008US$’000
                        
                        
                        US$’000Note
      payables
                        
                        
                        2,530
                        
                        
                        
                        4,519Bills
      financing
                        
                        
                        27,086
                        
                        
                        
                        7,367Banking
      facilities granted to a related party
                        
                        
                        2,922
                        
                        
                        
                        4,42832,538
                        
                        
                        
                        16,314
  7.
              ACCOUNT
      RECEIVABLES, NET
 
 Account
receivables are presented net of an allowance for doubtful accounts of
US$1,549,000 and US$337,000 as of June 30, 2009 and September 30, 2008
respectively.
  8.
              INVENTORIES,
      NET
  Inventories are consisted of the
following:
  As
      of
                        June
      30,
                        2009
                      
                      
                      (Audited)
                        As
      of
                        September
      30,
                        2008US$’000
                      
                      
                      US$’000Raw
      materials
                      
                      
                      2,109
                      
                      
                      
                      3,397Work-in-progress
      and semi-finished goods
                      
                      
                      4,845
                      
                      
                      
                      2,277Finished
      goods
                      
                      
                      8,151
                      
                      
                      
                      9,62915,105
                      
                      
                      
                      15,303
  F-14
  CH
Lighting International Corporation
 (formerly
Sino-Biotics, Inc.)
 
 Notes
to and Forming Part of Unaudited Condensed Consolidated Financial
Statements
 For the
nine months ended June 30, 2009
 
 9.
              PROPERTY,
      PLANT AND EQUIPMENT, NET
 
 Property, plant and equipment are
summarized as follows:
 
 As
      of
                            June
      30,
                            2009
                          
                          
                          (Audited)
                            As
      of
                            September
      30,
                            2008US$’000
                          
                          
                          US$’000Buildings
                          
                          
                          6,884
                          
                          
                          
                          6,869Plant
      and machinery
                          
                          
                          10,898
                          
                          
                          
                          9,729Motor
      vehicles
                          
                          
                          1,001
                          
                          
                          
                          1,000Furniture,
      fixtures and office equipment
                          
                          
                          1,210
                          
                          
                          
                          1,167Construction-in-progress
                          
                          
                          3,394
                          
                          
                          
                          2,54823,387
                          
                          
                          
                          21,313Accumulated
      depreciation
                          
                          
                          (6,153
                          )
                          
                          
                          (4,995
                          )17,234
                          
                          
                          
                          16,318
  10.
              BANK
      BORROWINGS AND OTHER LOANS
  Bank
borrowings and other loans are comprised of the following:
 
 Note
                              
                              
                              As
      of
                                June
      30,
                                2009
                              
                              
                              (Audited)
                                As
      of
                                September
      30,
                                2008US$’000
                              
                              
                              US$’000Short-term
      bank borrowings
                              
                              
                              10
                              (a)
                              
                              
                              79,301
                              
                              
                              
                              50,849Long-term
      interest-bearing loans
                              
                              
                              10
                              (b)
                              
                              
                              6,837
                              
                              
                              
                              9,16186,138
                              
                              
                              
                              60,010
 
 F-15
  CH
Lighting International Corporation
 (formerly
Sino-Biotics, Inc.)
 
 Notes
to and Forming Part of Unaudited Condensed Consolidated Financial
Statements
 For the
nine months ended June 30, 2009
  10.
              BANK
      BORROWINGS AND OTHER LOANS
(CONTINUED)
  (a)
              Short-term
      bank borrowings
  Short-term
bank borrowings are comprised of the following:
 Note
                            
                            
                            As of
                              June 30,
                              2009
                            
                            
                            (Audited)
                              As of
                              September 30,
                              2008US$’000
                            
                            
                            US$’000Short-term
      bank loans
                            
                            10(a)(i)
                            
                            
                            
                            46,020
                            
                            
                            
                            38,814Bills
      financing
                            
                            10(a)(ii)
                            
                            
                            
                            33,281
                            
                            
                            
                            12,03579,301
                            
                            
                            
                            50,849
  (i)
              Short-term
      bank loans
  Short-term
bank loans represent amounts due to various banks which are due within 12
months. These loans can normally be renewed with the banks upon
expiry/maturity.
  The loans
are collateralized by land use rights and buildings of the Company with carrying
values as follows:
 As of
                        June 30,
                        2009
                      
                      
                      (Audited)
                        As of
                        September 30,
                        2008US$’000
                      
                      
                      US$’000Land
      use rights
                      
                      
                      860
                      
                      
                      
                      887Buildings
                      
                      
                      5,400
                      
                      
                      
                      5,6406,260
                      
                      
                      
                      6,527
  Various
parties have also issued guarantees against these short-term bank loans as
follows:
 
 As of
                      June 30,
                      2009
                    
                    
                    (Audited)
                      As of
                      September 30,
                      2008US$’000
                    
                    
                    US$’000Guarantees
      issued by related parties
                    
                    
                    5,844
                    
                    
                    
                    13,858Guarantees
      issued by unrelated parties
                    
                    
                    36,436
                    
                    
                    
                    30,922
  The
weighted average annual interest rates of the short-term bank loans were 6.25%
and 6.41% as of June 30, 2009 and September 30, 2008 respectively.
  F-16
 CH
Lighting International Corporation
 (formerly
Sino-Biotics, Inc.)
 
 Notes
to and Forming Part of Unaudited Condensed Consolidated Financial
Statements
 For the
nine months ended June 30, 2009
 10.
              BANK
      BORROWINGS AND OTHER LOANS
(CONTINUED)
  (a)
              Short-term
      bank borrowings (Continued)
  (ii)
              Bills
      financing
  Bills
financing represents amounts due to various banks which are repayable within six
months from the date of issue. The bills are guaranteed by related parties and
secured by restricted bank balances and other financial assets of the Company
with carrying values as follows:
 As of
                        June 30,
                        2009
                      
                      
                      (Audited)
                        As of
                        September 30,
                        2008US$’000
                      
                      
                      US$’000Restricted
      bank balances
                      
                      
                      27,086
                      
                      
                      
                      7,367Other
      financial assets
                      
                      
                      -
                      
                      
                      
                      2,918Guarantees
      issued by related parties
                      
                      
                      3,214
                      
                      
                      
                      -30,300
                      
                      
                      
                      10,285
  The
weighted average annual interest rates of the bills financing were 1.41% and
5.69% as of June 30, 2009 and September 30, 2008 respectively.
  (b)
              Long-term
      interest-bearing loans
 
 Long-term
interest-bearing loans are collateralized by machineries with net book values of
US$3,690,000 and US$3,929,000 as of June 30, 2009 and September 30, 2008,
respectively, and guaranteed by a third party and certain related
parties.
 
 The
long-term interest-bearing loans are repayable as follows:
 As of
                      June 30,
                      2009
                    
                    
                    (Audited)
                      As of
                      September 30,
                      2008US$’000
                    
                    
                    US$’000Not
      exceeding 1 year
                    
                    
                    2,858
                    
                    
                    
                    3,068More
      than 1 year but not exceeding 5 years
                    
                    
                    3,979
                    
                    
                    
                    6,0936,837
                    
                    
                    
                    9,161Portion
      classified as current liabilities
                    
                    
                    (2,858
                    )
                    
                    
                    (3,068
                    )Long-term
      portion
                    
                    
                    3,979
                    
                    
                    
                    6,093
  The
weighted average annual interest rates of the long-term interest-bearing loans
were 5.11% and 6.81% as of June 30, 2009 and September 30, 2008
respectively.
  F-17
  CH
Lighting International Corporation
 (formerly
Sino-Biotics, Inc.)
 
 Notes
to and Forming Part of Unaudited Condensed Consolidated Financial
Statements
 For the
nine months ended June 30, 2009
 11.
              FINANCIAL
      INSTRUMENTS
  The
Company’s financial instruments include cash and cash equivalents, restricted
bank balances, other financial assets, account receivables/payables, other
receivables/payables, prepayments, note payables, accrued expenses and other
liabilities, customer deposits, amount due from/to related parties and bank
borrowings and other loans. The management has estimated that the carrying
amount of those current financial instruments approximates their fair value due
to their short-term nature. The fair value of those non-current financial
instruments, as estimated based on the current rates offered to the Company for
debt of similar terms and maturities, was not materially different from their
carrying value as of June 30, 2009 and September 30, 2008.
 
 12.
              RELATED
      PARTY BALANCES
  (a)
                Names
      and relationship of related
parties:
 Existing relationships with the
      CompanyMr.
      Zhao
                  Director
      and controlling stockholder of CH LightingMs.
      Gan Cai Ying (“Ms. Gan”)
                  Director
      of CH Lighting and spouse of Mr. ZhaoShangyu
      Chenhui Childcare Products Company Limited (“CH Childcare”)
    *
                  Under
      common control of Mr. ZhaoShaoxing
      Umbrella Factory (“SX Umbrella”) *
                  Under
      common control of Mr. ZhaoShangyu
      Hecheng Plastic and Metal Products Company Limited
      (“Hecheng”)*
                  Under
      common control of Mr. ZhaoShangyu
      Henghui Electronic Products Manufacturing Company Limited (“Henghui”)
      *
                  Under
      common control of Mr. ZhaoZhejiang
      Chenhui Yingbao Childcare Products Company Limited (“Yingbao Childcare”)
      *
                  Under
      common control of Mr.
Zhao
  *
                These
      are direct translation of names in Chinese for identification purpose only
      and are not official names in
English.
  F-18
 CH
Lighting International Corporation
 (formerly
Sino-Biotics, Inc.)
 
 Notes
to and Forming Part of Unaudited Condensed Consolidated Financial
Statements
 For the
nine months ended June 30, 2009
 12.
              RELATED
      PARTY BALANCES (CONTINUED)
  (b)
              Summary
      of balances with related parties:
  As
      of
                              June
      30,
                              2009
                            
                            
                            (Audited)
                              As
      of
                              September
      30,
                              2008US$’000
                            
                            
                            US$’000Due
      from related parties:Ms.
      Gan
                            
                            
                            1,874
                            
                            
                            
                            636CH
      Childcare
                            
                            
                            154
                            
                            
                            
                            154Henghui
                            
                            
                            29,438
                            
                            
                            
                            26,352Yingbao
      Childcare
                            
                            
                            7,813
                            
                            
                            
                            7,360Hecheng
                            
                            
                            1,386
                            
                            
                            
                            -40,665
                            
                            
                            
                            34,502Portion
      classified as current assets
                            
                            
                            (33,633
                            )
                            
                            
                            (7,058
                            )Long
      term portion
                            
                            
                            7,032
                            
                            
                            
                            27,444
  The
amounts due from related parties represent unsecured advances which were
interest-free up to July 15, 2008 and repayable on demand. From July 16, 2008
onwards, the amounts carry variable interest at 1-3 Years Lending Rate offered
by the People’s Bank of China plus 0.5% per annum. Interest shall be paid
annually. During the nine months ended June 30, 2009, interest income of
US$2,198,000 was recognized in the unaudited condensed consolidated statements
of operations and comprehensive income. The Company plans to collect the
outstanding amounts due as of June 30, 2009 gradually over the next two years.
The estimated amount to be collected after one year is approximately
US$7,032,000 (As of September
30, 2008: US$27,444,000).
 
 As
      of
                    June
      30,
                    2009
                  
                  
                  (Audited)
                    As
      of
                    September
      30,
                    2008US$’000
                  
                  
                  US$’000Due
      to related parties:Mr.
      Zhao
                  
                  
                  -
                  
                  
                  
                  3,203SX
      Umbrella
                  
                  
                  25
                  
                  
                  
                  25Hecheng
                  
                  
                  -
                  
                  
                  
                  39825
                  
                  
                  
                  3,626
  The
amounts due to related parties represent unsecured advances which are
interest-free and repayable on demand.
  F-19
  CH
Lighting International Corporation
 (formerly
Sino-Biotics, Inc.)
 
 Notes
to and Forming Part of Unaudited Condensed Consolidated Financial
Statements
 For the
nine months ended June 30, 2009
 13.
              COMMITMENTS
      AND CONTINGENCIES
 
 (a)
                Operating
      lease commitments
 
 The
following table summarizes the approximate future minimum rental payments under
non-cancelable operating leases in effect as of June 30, 2009 and September 30,
2008:
 
 As
      of
                    June
      30,
                    2009
                  
                  
                  (Audited)
                    As
      of
                    September
      30,
                    2008US$’000
                  
                  
                  US$’000Within
      one year
                  
                  
                  27
                  
                  
                  
                  21One
      to two years
                  
                  
                  15
                  
                  
                  
                  15Two
      to three years
                  
                  
                  15
                  
                  
                  
                  15Three
      to four years
                  
                  
                  15
                  
                  
                  
                  15Four
      to five years
                  
                  
                  15
                  
                  
                  
                  15Over
      five years
                  
                  
                  6
                  
                  
                  
                  3Total
                  
                  
                  93
                  
                  
                  
                  84
 
 (b)
              Capital
      commitments
 
 As of
June 30, 2009 and September 30, 2008, the Company had capital expenditure
commitments for construction projects and purchase of machinery of approximately
US$10,114,000 and US$3,343,000 respectively.
 
 (c)
              Contingencies
 
 As of
June 30, 2009 and September 30, 2008, the Company had provided corporate
guarantees of approximately US$4,382,000 and US$5,106,000, respectively, for
revolving bank loans and notes drawn by unrelated company incorporated in the
PRC (“Company A”).
 
 The
guarantee for Company A arose from the mutual negotiation between Zhejiang CH
and Company A. Associated with the corporate guarantee, Company A also provided
a cross guarantee for the bank facilities of Zhejiang CH. The guarantee was for
bank loans and notes drawn by Company A and will be terminated upon mutual
agreements between Zhejiang CH and Company A. If Company A defaults on the
repayment of its bank loans or notes when they fall due, Zhejiang CH is required
to repay the outstanding balance. There is no recourse or collateralization
provision in the guarantee. As of June 30, 2009, the guarantee provided for the
bank loans and notes drawn by Company A was approximately RMB30,000,000 or
US$4,382,000 or US$0.04 per share of common stock outstanding (As of September 30, 2008:
RMB35,000,000 or US$5,106,000 or US$0.05 per share of common stock
outstanding), which is also the maximum potential amount of future
payments under the guarantee as of June 30, 2009 and September 30,
2008.
  F-20
 CH
Lighting International Corporation
 (formerly
Sino-Biotics, Inc.)
 
 Notes
to and Forming Part of Unaudited Condensed Consolidated Financial
Statements
 For the
nine months ended June 30, 2009
 13.
              COMMITMENTS
      AND CONTINGENCIES (CONTINUED)
 
 (c)
              Contingencies
      (Continued)
 
 However,
default by Company A is considered remote by the management. Based on the
information available to the management, the fair values of the guarantees
granted by the Company are considered not material and therefore no liability
for the guarantor’s obligation under the guarantee recognized as of June 30,
2009 and September 30, 2008.
 
 14.
              RETIREMENT
      PLAN COSTS
 
 Contributions
to defined contribution retirement schemes are charged to general and
administrative expenses in the unaudited condensed consolidated statements of
operations and comprehensive income as and when the related employee services
are provided as follows:
 
 Three months ended
                        June 30,
                      
                      
                      Nine months ended
                        June 30,2009
                      
                      
                      2008
                      
                      
                      2009
                      
                      
                      2008US$’000
                      
                      
                      US$’000
                      
                      
                      US$’000
                      
                      
                      US$’000Contributions
      to defined contribution retirement schemes
                      
                      
                      57
                      
                      
                      
                      111
                      
                      
                      
                      138
                      
                      
                      
                      181
 
 15.
              SEGMENT
      INFORMATION
 
 For the
nine months ended June 30, 2009 and 2008, the entire revenue of the Company
represented net sales of lighting source and lighting electronics products. No
financial information by business segment is therefore presented.
 
 The table
below summarizes the customer base by geographic region:
 
 Three months ended
                        June 30,
                      
                      
                      Nine months ended
                        June 30,2009
                      
                      
                      2008
                      
                      
                      2009
                      
                      
                      2008US$’000
                      
                      
                      US$’000
                      
                      
                      US$’000
                      
                      
                      US$’000China,
      including Hong Kong
                      
                      
                      4,092
                      
                      
                      
                      17,576
                      
                      
                      
                      17,410
                      
                      
                      
                      39,819Europe
                      
                      
                      1,806
                      
                      
                      
                      2,007
                      
                      
                      
                      6,201
                      
                      
                      
                      4,908Middle
      East
                      
                      
                      1,164
                      
                      
                      
                      3,685
                      
                      
                      
                      5,429
                      
                      
                      
                      7,708Korea
                      
                      
                      1,349
                      
                      
                      
                      2,919
                      
                      
                      
                      2,918
                      
                      
                      
                      7,794United
      States
                      
                      
                      155
                      
                      
                      
                      278
                      
                      
                      
                      293
                      
                      
                      
                      684Africa
                      
                      
                      39
                      
                      
                      
                      99
                      
                      
                      
                      122
                      
                      
                      
                      362Others
                      
                      
                      773
                      
                      
                      
                      762
                      
                      
                      
                      1,834
                      
                      
                      
                      3,192Total
                      
                      
                      9,378
                      
                      
                      
                      27,326
                      
                      
                      
                      34,207
                      
                      
                      
                      64,467
 
 Revenue
is attributed to countries based on location of customers.
 
 All
long-lived assets are located in China, including Hong Kong.
  F-21


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




Forward
Looking Statements




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




Prior
Operations of the Company




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





The
Share Exchange Transaction





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




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





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


- 4
-




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




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




Current
Operations of the Company (General Development of Business)




Introduction





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





Summary
of Current Business of the Company




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




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




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




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





Description
of Company Business Segments




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




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


- 5
-





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





Enterprise
Marketing Strategy and Methods of Distribution





Domestic
Marketing Strategy




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




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




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




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




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




International
Marketing Strategy




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


- 6
-





·
                International Market
      District Management. The global market of the Company is divided
      into several regions, including Europe, America, Asia and the Middle East.
      There is a sales team responsible for the promotion of our products and
      negotiation of the business arrangements in each regional market. The
      Company plans to adopt specific strategies and practices for each of the
      regional markets.·
                Brand Enterprise
      (Manufacturer) Cooperation. There are two (2) methods employed with
      respect to the manufacturing of our products. The first is “ODM”, whereby
      the structure, appearance and technical aspects of our products are
      developed and designed by the Company.  However after the
      completion of their development and production, such products are sold
      with trademarks of certain clients. These products are usually mass
      produced in accordance with the placement of orders by such clients. The
      other method is “OEM”, whereby our products are made in cooperation with
      certain third party enterprises such as GE Lighting, Sylvania, and other
      large multinational groups. For example, our plant growth lamp
      co-developed by the Company and Huazhong Agricultural University is sold
      in Europe, the United States and Australia. We have established
      cooperation with a number of large enterprises such as Interpet, Arcardia
      of Britain, Croci SpA of Italy, PENN-PLAX and SUNPARK of United States,
      AVK LIGHTING of Australia and Narva of Germany to develop the global
      market for plant growth
lamps.




Product
Sales Strategy (Domestic and International Sales)





Domestic
Sales through Distributors





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




International
Sales through Distributors





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





Domestic
Replacement Market





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




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


- 7
-





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




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




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




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




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





Domestic
Direct Sales





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


- 8
-




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




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




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




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




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




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




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




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





International
Direct Sales





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


- 9
-





Results
of Operations





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




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




Three (3) Months Ended June 302009
                  
                  
                  2008
                  
                  
                  2009
                  
                  
                  2008Operating
      revenues
                  
                  $
                  9,378,000
                  
                  
                  $
                  27,326,000
                  
                  
                  
                  100.00
                  %
                  
                  
                  100.00
                  %Cost
      of sales
                  
                  $
                  (7,475,000)
                  
                  
                  $
                  (18,984,000)
                  
                  
                  
                  (79.71)
                  %
                  
                  
                  (69.47)
                  %Gross
      income
                  
                  $
                  1,903,000
                  
                  
                  $
                  8,342,000
                  
                  
                  
                  20.29
                  %
                  
                  
                  30.53
                  %Selling,
      marketing and distribution expenses
                  
                  $
                  (2,530,000)
                  
                  
                  $
                  (909,000)
                  
                  
                  
                  (26.98)
                  %
                  
                  
                  (3.33)
                  %General
      and administrative expenses
                  
                  $
                  (2,131,000)
                  
                  
                  $
                  (1,339,000)
                  
                  
                  
                  (22.72)
                  %
                  
                  
                  (4.90)
                  %Operating
      (loss) income
                  
                  $
                  (2,758,000)
                  
                  
                  $
                  6,094,000
                  
                  
                  
                  (29.41)
                  %
                  
                  
                  22.30
                  %Government
      subsidies income
                  
                  $
                  6,064,000
                  
                  
                  $
                  73,000
                  
                  
                  
                  64.66
                  %
                  
                  
                  0.27
                  %Other
      income
                  
                  $
                  4,000
                  
                  
                  $
                  33,000
                  
                  
                  
                  0.04
                  %
                  
                  
                  0.12
                  %Interest
      income
                  
                  $
                  936,000
                  
                  
                  $
                  169,000
                  
                  
                  
                  9.98
                  %
                  
                  
                  0.62
                  %Interest
      expense
                  
                  $
                  (1,243,000)
                  
                  
                  $
                  (747,000)
                  
                  
                  
                  (13.25)
                  %
                  
                  
                  (2.73)
                  %Income
      before income taxes
                  
                  $
                  3,003,000
                  
                  
                  $
                  5,622,000
                  
                  
                  
                  32.02
                  %
                  
                  
                  20.57
                  %Income
      taxes expense
                  
                  $
                  (1,264,000)
                  
                  
                  $
                  (797,000)
                  
                  
                  
                  (13.48)
                  %
                  
                  
                  (2.92)
                  %Net
      income
                  
                  $
                  1,739,000
                  
                  
                  $
                  4,825,000
                  
                  
                  
                  18.54
                  %
                  
                  
                  17.66
                  %Net
      income attributable to non-controlling interests
                  
                  $
                  -
                  
                  
                  $
                  -
                  
                  
                  
                  -
                  %
                  
                  
                  -
                  %Net
      income attributable to CH lighting International
    Corporation
                  
                  $
                  1,739,000
                  
                  
                  $
                  4,825,000
                  
                  
                  
                  18.54
                  %
                  
                  
                  17.66
                  %Other
      comprehensive income
                  
                  $
                  4,000
                  
                  
                  $
                  (4,000)
                  
                  
                  
                  0.04
                  %
                  
                  
                  0.01
                  %Comprehensive
      income
                  
                  $
                  1,743,000
                  
                  
                  $
                  4,821,000
                  
                  
                  
                  18.59
                  %
                  
                  
                  17.65
                  %





Operating
Revenues





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





Cost
of Sales





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


- 10
-





Selling,
Marketing and Distribution Expenses





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





General
and Administrative Expenses





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





Government
Subsidies Income





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





Interest
Income





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





Interest
Expense





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





Net
Income





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





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





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


- 11
-




Nine (9) Months Ended June 302009
                  
                  
                  
                  2008
                  
                  
                  
                  2009
                  
                  
                  
                  2008Operating
      revenues
                  
                  $
                  34,207,000
                  
                  
                  $
                  64,467,000
                  
                  
                  
                  100.00
                  %
                  
                  
                  100.00
                  %Cost
      of sales
                  
                  $
                  (24,585,000)
                  
                  
                  $
                  (44,332,000)
                  
                  
                  
                  (71.87)
                  %
                  
                  
                  (68.77)
                  %Gross
      income
                  
                  $
                  9,622,000
                  
                  
                  $
                  20,135,000
                  
                  
                  
                  28.13
                  %
                  
                  
                  31.23
                  %Selling,
      marketing and distribution expenses
                  
                  $
                  (5,003,000)
                  
                  
                  $
                  (1,904,000)
                  
                  
                  
                  (14.63)
                  %
                  
                  
                  (2.95)
                  %General
      and administrative expenses
                  
                  $
                  (4,180,000)
                  
                  
                  $
                  (4,024,000)
                  
                  
                  
                  (12.22)
                  %
                  
                  
                  (6.24)
                  %Operating
      income
                  
                  $
                  439,000
                  
                  
                  $
                  14,207,000
                  
                  
                  
                  1.28
                  %
                  
                  
                  22.03
                  %Government
      subsidies income
                  
                  $
                  8,005,000
                  
                  
                  $
                  369,000
                  
                  
                  
                  23.40
                  %
                  
                  
                  0.57
                  %Other
      income
                  
                  $
                  24,000
                  
                  
                  $
                  63,000
                  
                  
                  
                  0.07
                  %
                  
                  
                  0.10
                  %Interest
      income
                  
                  $
                  2,789,000
                  
                  
                  $
                  412,000
                  
                  
                  
                  8.15
                  %
                  
                  
                  0.62
                  %Interest
      expense
                  
                  $
                  (3,335,000)
                  
                  
                  $
                  (2,993,000)
                  
                  
                  
                  (9.75)
                  %
                  
                  
                  (4.64)
                  %Income
      before income taxes
                  
                  $
                  7,922,000
                  
                  
                  $
                  12,058,000
                  
                  
                  
                  23.16
                  %
                  
                  
                  18.70
                  %Income
      taxes expense
                  
                  $
                  (1,796,000)
                  
                  
                  $
                  (1,320,000)
                  
                  
                  
                  (5.25)
                  %
                  
                  
                  (2.05)
                  %Net
      income
                  
                  $
                  6,126,000
                  
                  
                  $
                  10,738,000
                  
                  
                  
                  17.91
                  %
                  
                  
                  16.66
                  %Net
      income attributable to non-controlling interests
                  
                  $
                  -
                  
                  
                  $
                  -
                  
                  
                  
                  -
                  %
                  
                  
                  -
                  %Net
      income attributable to CH  lighting International
      corporation
                  
                  $
                  6,126,000
                  
                  
                  $
                  10,738,000
                  
                  
                  
                  17.91
                  %
                  
                  
                  16.66
                  %Other
      comprehensive income
                  
                  $
                  41,000
                  
                  
                  $
                  832,000
                  
                  
                  
                  0.12
                  %
                  
                  
                  1.29
                  %Comprehensive
      income
                  
                  $
                  6,167,000
                  
                  
                  $
                  11,570,000
                  
                  
                  
                  18.03
                  %
                  
                  
                  17.95
                  %





Operating
Revenues





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





Cost
of Sales





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





Selling,
Marketing and Distribution Expenses





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


- 12
-





General
and Administrative Expenses





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





Government
Subsidies Income





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





Interest
Income





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





Interest
Expense





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





Net
Income





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





Liquidity
and Capital Resources





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




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




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




Nine (9) Months Ended June
                  302009
                
                
                2008Net
      cash provided by operating activities
                
                $
                56,000
                
                
                $
                14,946,000Net
      cash used in investing activities
                
                $
                (25,759,000)
                
                
                $
                (15,978,000)Net
      cash provided by (used in) financing activities
                
                $
                28,967,000
                
                
                $
                (2,479,000)Net
      increase (decrease) in cash and cash equivalents
                
                $
                3,264,000
                
                
                $
                (3,511,000)Effect
      of exchange rate changes on cash
                
                $
                3,000
                
                
                $
                951,000Cash
      and cash equivalents at beginning of the period
                
                $
                3,154,000
                
                
                $
                5,340,000Cash
      and cash equivalents at end of the period
                
                $
                6,421,000
                
                
                $
                2,780,000


- 13
-




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





Operating
Activities





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





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




Nine (9) Months Ended June
                  302009
                
                
                
                2008Account  receivables,
      net
                
                $
                5,078,000
                
                
                $
                (13,082,000)Inventories,
      net
                
                $
                220,000
                
                
                $
                5,707,000Prepayments
                
                $
                1,796,000
                
                
                $
                1,600,000Other
      receivables
                
                $
                (9,430,000)
                
                
                $
                3,153,000Account
      payables
                
                $
                (2,508,000)
                
                
                $
                7,189,000Note
      payables
                
                $
                (1,467,000)
                
                
                $
                (9,000)Accrued
      expenses and other accrued liabilities
                
                $
                1,477,000
                
                
                $
                (1,332,000)Customer
      deposits
                
                $
                (1,601,000)
                
                
                $
                225,000Income
      tax payables
                
                $
                778,000
                
                
                $
                (353,000)Changes
      in operating assets and liabilities
                
                $
                (5,657,000)
                
                
                $
                3,098,000




Investing
Activities





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




Nine
                  (9) Months Ended June 302009
                
                
                2008Purchase
      of property, plant and equipment
                
                $
                (2,044,000)
                
                
                $
                (3,753,000)Investment
      in restricted bank balances, net
                
                $
                (16,199,000)
                
                
                $
                (12,225,000)Advance
      to related parties, net
                
                $
                (7,516,000)
                
                
                $
                -Net
      cash used in investing activities
                
                $
                (25,759,000)
                
                
                $
                (15,978,000)





Financing
Activities





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


- 14
-




Nine (9) Months Ended June
                  302009
                
                
                
                2008Advance
      to related parties, net
                
                $
                -
                
                
                $
                (23,690,000)Capital
      contribution to a subsidiary by its minority shareholder
                
                $
                -
                
                
                $
                64,000Dividends
      paid
                
                $
                -
                
                
                $
                (1,419,000)Proceeds
      from short-term bank loans
                
                $
                51,616,000
                
                
                $
                30,395,000Repayment
      of short-term bank loans
                
                $
                (43,000,000)
                
                
                $
                (26,024,000)Proceeds
      from bills financing, net
                
                $
                22,689,000
                
                
                $
                15,835,000Proceeds
      from long-term interest-bearing loans
                
                $
                -
                
                
                $
                4,445,000Repayment
      of long-term interest-bearing loans
                
                $
                (2,338,000)
                
                
                $
                (2,085,000)Net
      cash provided by (used in) financing activities
                
                $
                28,967,000
                
                
                $
                (2,479
      ,000)




Working
Capital





Account
Receivables and Allowance for Doubtful Accounts





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





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





Other
Receivables





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





Prepayments





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





Inventories





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





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





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





- 15
-





Cash
and Cash Equivalents





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





Trade
and Note Payables





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





Accrued
Expenses and Other Liabilities





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





Capital
Expenditures





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





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





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





Off-Balance
Sheet Arrangements





Financial
Guarantees




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





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


- 16
-





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





Capital
Commitments





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




Operating
Lease Commitments





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





As of
                        June 30,
                        2009
                      
                      
                      As of
                        September 30,
                        2008Within
      one (1) year
                      
                      $
                      27,000
                      
                      $
                      21,0002–3
      years
                      
                      $
                      30,000
                      
                      $
                      30,0004–5
      years
                      
                      $
                      30,000
                      
                      $
                      30,000Over
      five (5) years
                      
                      $
                      6,000
                      
                      $
                      3,000Total
      operating lease obligations
                      
                      $
                      93,000
                      
                      $
                      84,000





Long
Term Bank Indebtedness





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





As of
                    June 30,
                    2009
                  
                  
                  As of
                    September
                    30,
                    2008Within
      one (1) year
                  
                  $
                  2,858,000
                  
                  
                  $
                  3,068,0002–3
      years
                  
                  $
                  3,979,000
                  
                  
                  $
                  6,093,000Total  long
      term bank indebtedness
                  
                  $
                  6,837,000
                  
                  
                  $
                  9,161,000





ITEM
3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK





RMB
Appreciation





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





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





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


- 17
-





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





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





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





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





ITEM
4. CONTROLS AND PROCEDURES





Disclosure
Controls and Procedures




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




Internal
Control over Financial Reporting




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




PART
II


OTHER
INFORMATION





ITEM
1. LEGAL PROCEEDINGS





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




ITEM
1A. RISK FACTORS





Not
required for a "smaller reporting company".


- 18
-





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





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





ITEM
3. DEFAULTS UPON SENIOR SECURITIES





None.





ITEM
4. SUBMISSION OF MATTERS TO A VOTE OF SECURITYHOLDERS





None.





ITEM
5. OTHER INFORMATION





None.





ITEM
6. EXHIBITS





(a) Exhibits:




EXHIBIT NO.
                        
                        DESCRIPTION
                        
                        LOCATION2.1
                        
                        Agreement
      and Plan of Reorganization regarding the merger of Innovative Coatings
      Corporation with and into ICC Holdings Corp.
                        
                        Incorporated
      by reference to Instachem Systems, Inc.’s Current Report as filed with the
      SEC on August 29, 20032.2
                        
                        Stock
      Purchase Agreement, by and between David Lennox and Instachem Systems,
      Inc.
                        
                        Incorporated
      by reference to Exhibit 2.2 to the Company’s Annual Report on Form 10-KSB
      as filed with the SEC on January 20, 20062.3
                        
                        Agreement
      and Plan of Merger between Instachem Systems, Inc. and Sino-Biotics,
      Inc.
                        
                        Incorporated
      by reference to Exhibit 2.3 to the Company’s Annual Report on Form 10-KSB
      as filed with the SEC on January 20, 20062.4
                        
                        Share
      Exchange Agreement, dated July 16, 2008, by and among Sino-Biotics, Inc.,
      KEG International Limited and CH International Holdings
      Limited
                        
                        Incorporated
      by reference to Exhibit 2.4 to the Company’s Current Report on Form 8-K as
      filed with the SEC on July 16, 20083.1
                        
                        Certificate
      of Incorporation of Sino-Biotics, Inc.
                        
                        Incorporated
      by reference to Exhibit 3.4 to the Company’s Annual Report on Form 10-KSB
      as filed with the SEC on January 20, 20063.2
                        
                        Certificate
      of Amendment to Certificate of Incorporation of Sino-Biotics,
      Inc.
                        
                        Incorporated
      by reference to Exhibit 3.5 to the Company’s Annual Report on Form 10-KSB
      as filed with the SEC on January 20, 20063.3
                        
                        Restated
      Certificate of Incorporation of Sino-Biotics, Inc.
                        
                        Incorporated
      by reference to Exhibit 3.6 to the Company’s Annual Report on Form 10-KSB
      as filed with the SEC on January 20, 20063.4
                        
                        Certificate
      of Amendment to Certificate of Incorporation of Sino-Biotics, Inc. dated
      December 13, 2008 (increase of authorized shares).
                        
                        Incorporated
      by reference to Exhibit 3.5 to the Company’s Current Report on Form 8-K as
      filed with the SEC on July 16, 20083.5
                        
                        Memorandum
      and Articles of Associationof CH
      International Holdings Limited
                        
                        Incorporated
      by reference to Exhibit 3.6 to the Company’s Current Report on Form 8-K as
      filed with the SEC on July 16, 20083.6
                        
                        Amended
      and Restated Bylaws of CH Lighting International Corporation, effective as
      of August 25, 2008
                        
                        Incorporated
      by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K as
      filed with the SEC on August 26, 200814.1
                        
                        Code
      of Ethics
                        
                        Incorporated
      by reference to the Company’s Annual Report on Form 10-K as filed with the
      SEC on December 29,
2008


- 19
-





16.1
                
                Auditor
      Letter, dated August 25, 2008
                
                Incorporated
      by reference to the Company’s Annual Report on Form 10-K as filed with the
      SEC on December 29, 200821
                
                List
      of Subsidiaries of CH Lighting International Corporation
                
                Incorporated
      by reference to Exhibit 21 to the Company’s Current Report on Form 8-K as
      filed with the SEC on July 16, 200831.1
                
                Certifications
      of the Chief Executive Officer pursuant to Section 302 of the
      Sarbanes-Oxley Act of 2002
                
                Provided
      herewith31.2
                
                Certifications
      of the Chief Financial Officer pursuant to Section 302 of the
      Sarbanes-Oxley Act of 2002
                
                Provided
      herewith32.1
                
                Certification
      Pursuant To 18 U.S.C. Section 1350, As Adopted Pursuant To Section 906 of
      the Sarbanes-Oxley Act Of 2002
                
                Provided
      herewith32.2
                
                Certification
      Pursuant To 18 U.S.C. Section 1350, As Adopted Pursuant To Section 906 of
      the Sarbanes-Oxley Act Of 2002
                
                Provided
      herewith99.1
                
                Audit
      Committee Charter
                
                Incorporated
      by reference to Exhibit 99.1 to the Company’s Current Report on Form 8-K
      as filed with the SEC on August 26, 200899.2
                
                Compensation
      Committee Charter
                
                Incorporated
      by reference to Exhibit 99.2 to the Company’s Current Report on Form 8-K
      as filed with the SEC on August 26, 200899.3
                
                Corporate
      Governance and Nominating Committee Charter
                
                Incorporated
      by reference to Exhibit 99.3 to the Company’s Current Report on Form 8-K
      as filed with the SEC on August 26,
2008


- 20
-


SIGNATURES





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




Date:    August
      14 , 2009
                  By:
                  /s/
      Zhao GuosongName:
      Zhao GuosongIts:
      President, Chief Executive Officer and Principal
                    Executive
      OfficerDate:    August
      14, 2009
                  By:
                  /s/
      Huang Hsiao-IName:
      Huang Hsiao-IIts:
      Chief Financial Officer, Corporate Secretary,
                    Principal
      Financial and Accounting
Officer


- 21
-