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 December 31, 2008





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 INTERATIONAL
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 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 February 16, 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
              
              F-iITEM
      1. FINANCIAL STATEMENTS
              
              F-iITEM
      2. MANAGEMENT’S DISCUSSION AND ANALYSIS OR PLAN OF
    OPERATION
              
              3ITEM
      3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
    RISK
              
              11ITEM
      4. CONTROLS AND PROCEDURES
              
              12PART
      II OTHER INFORMATION
              
              13ITEM
      1. LEGAL PROCEEDINGS
              
              13ITEM
      1A. RISK FACTORS
              
              13ITEM
      2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF
    PROCEEDS
              
              13ITEM
      3. DEFAULTS UPON SENIOR SECURITIES
              
              13ITEM
      4. SUBMISSION OF MATTERS TO A VOTE OF SECURITYHOLDERS
              
              13ITEM
      5. OTHER INFORMATION
              
              13ITEM
      6. EXHIBITS
              
              13SIGNATURES
              
              15EXHIBIT
      31.1
              
              31.1-1EXHIBIT
      31.2
              
              31.2-1EXHIBIT
      32.1
              
              32.1-1EXHIBIT
      32.2
              
              32.2-1




2





PART
I


FINANCIAL
INFORMATION




ITEM
1. FINANCIAL STATEMENTS





PageUnaudited
      Condensed Consolidated Statements of Operations andOther
      Comprehensive Income
                          
                          F-1Unaudited
      Condensed Consolidated Balance Sheets
                          
                          F-2
      – F-3Unaudited
      Condensed Consolidated Statements of Changes in Stockholders’
      Equity
                          
                          F-4Unaudited
      Condensed Consolidated Statements of Cash Flows
                          
                          F-5
      – F-6Notes
      to Unaudited Condensed Consolidated Financial Statements
                          
                          F-7
      –
F-19





F-i




CH
Lighting International Corporation
 (formerly
Sino-Biotics, Inc.)





Unaudited
Condensed Consolidated Statements of Operations and Other Comprehensive
Income


For the
three months ended December 31, 2008







Three months ended
                                                                    December 31,2008
                                                                  
                                                                  
                                                                  2007Note
                                                                  
                                                                  
                                                                  US$’000
                                                                  
                                                                  
                                                                  US$’000Operating
      revenues:Net sales to third
      parties
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  16,664
                                                                  
                                                                  
                                                                  
                                                                  21,859Cost
      of sales
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  (10,987
                                                                  )
                                                                  
                                                                  
                                                                  (14,953
                                                                  )Gross
      income
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  5,677
                                                                  
                                                                  
                                                                  
                                                                  6,906Operating
      expenses:Selling, marketing and
      distribution expenses
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  (1,854
                                                                  )
                                                                  
                                                                  
                                                                  (645
                                                                  )General and administrative
      expenses
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  (1,227
                                                                  )
                                                                  
                                                                  
                                                                  (861
                                                                  )Operating
      income
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  2,596
                                                                  
                                                                  
                                                                  
                                                                  5,400Government
      subsidy income
                                                                  
                                                                  
                                                                  3
                                                                  
                                                                  
                                                                  
                                                                  1,718
                                                                  
                                                                  
                                                                  
                                                                  148Other
      income
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  10
                                                                  
                                                                  
                                                                  
                                                                  24Interest
      income
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  1,243
                                                                  
                                                                  
                                                                  
                                                                  141Interest
      expense
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  (1,088
                                                                  )
                                                                  
                                                                  
                                                                  (853
                                                                  )Income
      before income taxes and minority interests
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  4,479
                                                                  
                                                                  
                                                                  
                                                                  4,860Income
      taxes expenses
                                                                  
                                                                  
                                                                  5
                                                                  
                                                                  
                                                                  
                                                                  (568
                                                                  )
                                                                  
                                                                  
                                                                  (702
                                                                  )Minority
      interests
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  -
                                                                  
                                                                  
                                                                  
                                                                  -Net
      income
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  3,911
                                                                  
                                                                  
                                                                  
                                                                  4,158Other
      comprehensive incomeForeign
      currency translation adjustment
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  3
                                                                  
                                                                  
                                                                  
                                                                  363Comprehensive
      income
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  
                                                                  3,914
                                                                  
                                                                  
                                                                  
                                                                  4,521Earnings
      per share
                                                                  
                                                                  
                                                                  4
  Shares
                                        
                                        
                                        SharesWeighted
      average number of common stocks outstanding,
                                          basic
      and diluted
                                        
                                        
                                        
                                        
                                        
                                        
                                        120,000,000
                                        
                                        
                                        
                                        93,000,000US$
                                        
                                        
                                        US$Net
      income per share of common stock outstanding,
                                          basic
      and diluted
                                        
                                        
                                        
                                        
                                        
                                        
                                        0.03
                                        
                                        
                                        
                                        0.05





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
December 31, 2008







(Audited)As of
                                                                                December 31,
                                                                                2008
                                                                              
                                                                              
                                                                              As of
                                                                                September 30,
                                                                                2008Note
                                                                              
                                                                              
                                                                              US$’000
                                                                              
                                                                              
                                                                              US$’000ASSETSCurrent
      assets:Cash
      and cash equivalents
                                                                              
                                                                              
                                                                              
                                                                              
                                                                              
                                                                              2,583
                                                                              
                                                                              
                                                                              
                                                                              3,154Restricted
      bank balances
                                                                              
                                                                              
                                                                              6
                                                                              
                                                                              
                                                                              
                                                                              32,331
                                                                              
                                                                              
                                                                              
                                                                              16,314Other
      financial assets
                                                                              
                                                                              
                                                                              
                                                                              
                                                                              
                                                                              
                                                                              -
                                                                              
                                                                              
                                                                              
                                                                              2,918Accounts
      receivable, net
                                                                              
                                                                              
                                                                              7
                                                                              
                                                                              
                                                                              
                                                                              16,367
                                                                              
                                                                              
                                                                              
                                                                              18,871Other
      receivables
                                                                              
                                                                              
                                                                              
                                                                              
                                                                              
                                                                              
                                                                              4,958
                                                                              
                                                                              
                                                                              
                                                                              4,093Prepayments
                                                                              
                                                                              
                                                                              
                                                                              
                                                                              
                                                                              
                                                                              1,668
                                                                              
                                                                              
                                                                              
                                                                              2,724Due
      from related parties, current portion
                                                                              
                                                                              
                                                                              12
                                                                              (b)
                                                                              
                                                                              
                                                                              11,390
                                                                              
                                                                              
                                                                              
                                                                              7,058Inventories,
      net
                                                                              
                                                                              
                                                                              8
                                                                              
                                                                              
                                                                              
                                                                              16,007
                                                                              
                                                                              
                                                                              
                                                                              15,303Total
      current assets
                                                                              
                                                                              
                                                                              
                                                                              
                                                                              
                                                                              
                                                                              85,304
                                                                              
                                                                              
                                                                              
                                                                              70,435Long-term
      land lease prepayments, net
                                                                              
                                                                              
                                                                              
                                                                              
                                                                              
                                                                              
                                                                              878
                                                                              
                                                                              
                                                                              
                                                                              887Property,
      plant and equipment, net
                                                                              
                                                                              
                                                                              9
                                                                              
                                                                              
                                                                              
                                                                              16,684
                                                                              
                                                                              
                                                                              
                                                                              16,318Due
      from related parties, long-term portion
                                                                              
                                                                              
                                                                              12
                                                                              (b)
                                                                              
                                                                              
                                                                              21,612
                                                                              
                                                                              
                                                                              
                                                                              27,444Total
      assets
                                                                              
                                                                              
                                                                              
                                                                              
                                                                              
                                                                              
                                                                              124,478
                                                                              
                                                                              
                                                                              
                                                                              115,084LIABILITIES
      AND STOCKHOLDERS’ EQUITYCurrent
      liabilities:Accounts
      payable
                                                                              
                                                                              
                                                                              
                                                                              
                                                                              
                                                                              
                                                                              20,508
                                                                              
                                                                              
                                                                              
                                                                              22,135Notes
      payable
                                                                              
                                                                              
                                                                              
                                                                              
                                                                              
                                                                              
                                                                              1,740
                                                                              
                                                                              
                                                                              
                                                                              4,519Accrued
      expenses and other liabilities
                                                                              
                                                                              
                                                                              
                                                                              
                                                                              
                                                                              
                                                                              2,779
                                                                              
                                                                              
                                                                              
                                                                              1,024Customer
      deposits
                                                                              
                                                                              
                                                                              
                                                                              
                                                                              
                                                                              
                                                                              2,921
                                                                              
                                                                              
                                                                              
                                                                              3,291Due
      to related parties
                                                                              
                                                                              
                                                                              12
                                                                              (b)
                                                                              
                                                                              
                                                                              95
                                                                              
                                                                              
                                                                              
                                                                              3,626Income
      taxes payable
                                                                              
                                                                              
                                                                              
                                                                              
                                                                              
                                                                              
                                                                              611
                                                                              
                                                                              
                                                                              
                                                                              376Short-term
      bank borrowings
                                                                              
                                                                              
                                                                              10
                                                                              (a)
                                                                              
                                                                              
                                                                              63,112
                                                                              
                                                                              
                                                                              
                                                                              50,849Current
      portion of long-term interest-bearing loans,
                                                                                secured
                                                                              
                                                                              
                                                                              10
                                                                              (b)
                                                                              
                                                                              
                                                                              3,003
                                                                              
                                                                              
                                                                              
                                                                              3,068Total
      current liabilities
                                                                              
                                                                              
                                                                              
                                                                              
                                                                              
                                                                              
                                                                              94,769
                                                                              
                                                                              
                                                                              
                                                                              88,888Long-term
      interest-bearing loans, secured
                                                                              
                                                                              
                                                                              10
                                                                              (b)
                                                                              
                                                                              
                                                                              5,363
                                                                              
                                                                              
                                                                              
                                                                              6,093Government
      subsidies
                                                                              
                                                                              
                                                                              
                                                                              
                                                                              
                                                                              
                                                                              90
                                                                              
                                                                              
                                                                              
                                                                              96Deferred
      tax liabilities
                                                                              
                                                                              
                                                                              
                                                                              
                                                                              
                                                                              
                                                                              1,023
                                                                              
                                                                              
                                                                              
                                                                              688101,245
                                                                              
                                                                              
                                                                              
                                                                              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
December 31, 2008





(Audited)As of
                                                          December 31,
                                                          2008
                                                        
                                                        
                                                        As of
                                                          September 30,
                                                          2008Note
                                                        
                                                        
                                                        US$’000
                                                        
                                                        
                                                        US$’000Minority
      interests
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        66
                                                        
                                                        
                                                        
                                                        66Commitments
      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
                                                          December
      31, 2008 and September 30, 2008120,000,000
      shares issued and outstanding as of December 31, 2008 and September 30,
      2008
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        120
                                                        
                                                        
                                                        
                                                        120Additional
      paid-in capital
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        962
                                                        
                                                        
                                                        
                                                        962Statutory
      reserves
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        833
                                                        
                                                        
                                                        
                                                        740Accumulated
      other comprehensive income
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        2,127
                                                        
                                                        
                                                        
                                                        2,124Retained
      earnings
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        19,125
                                                        
                                                        
                                                        
                                                        15,307Total
      stockholders’ equity
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        23,167
                                                        
                                                        
                                                        
                                                        19,253Total
      liabilities and stockholders’ equity
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        
                                                        124,478
                                                        
                                                        
                                                        
                                                        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 Stockholders'
Equity
 For the
three months ended December 31, 2008





Preferred 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
                
                
                TotalUS$’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
                
                
                
                19,253Net
      income
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                3,911
                
                
                
                3,911Transfers
      to statutory reserves
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                93
                
                
                
                -
                
                
                
                (93
                )
                
                
                -Foreign
      currency translation adjustment
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                3
                
                
                
                -
                
                
                
                3Balance
      as of December 31, 2008
                
                
                -
                
                
                
                -
                
                
                
                120,000,000
                
                
                
                120
                
                
                
                962
                
                
                
                833
                
                
                
                2,127
                
                
                
                19,125
                
                
                
                23,167


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
three months ended December 31, 2008





Three months ended
                                                      December 31,2008
                                                    
                                                    
                                                    2007US$’000
                                                    
                                                    
                                                    US$’000Cash
      flows from operating activitiesNet
      income
                                                    
                                                    
                                                    3,911
                                                    
                                                    
                                                    
                                                    4,158Adjustments
      to reconcile net income to net cash provided byoperating
      activities:Depreciation of property, plant
      and equipment
                                                    
                                                    
                                                    379
                                                    
                                                    
                                                    
                                                    253Amortization of long-term land
      lease prepayments
                                                    
                                                    
                                                    9
                                                    
                                                    
                                                    
                                                    9Recognition of government
      subsidies
                                                    
                                                    
                                                    (6
                                                    )
                                                    
                                                    
                                                    (570
                                                    )Accrued interest
      income
                                                    
                                                    
                                                    (1,000
                                                    )
                                                    
                                                    
                                                    -Exchange
      differences
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    81Deferred
    taxation
                                                    
                                                    
                                                    334
                                                    
                                                    
                                                    
                                                    118Changes
      in operating assets and liabilities:Accounts receivable,
      net
                                                    
                                                    
                                                    2,506
                                                    
                                                    
                                                    
                                                    (11,448
                                                    )Other
    receivables
                                                    
                                                    
                                                    (864
                                                    )
                                                    
                                                    
                                                    2,710Prepayments
                                                    
                                                    
                                                    1,056
                                                    
                                                    
                                                    
                                                    571Inventories,
net
                                                    
                                                    
                                                    (702
                                                    )
                                                    
                                                    
                                                    6,194Accounts
payable
                                                    
                                                    
                                                    (1,630
                                                    )
                                                    
                                                    
                                                    (381
                                                    )Notes payable
                                                    
                                                    
                                                    (2,780
                                                    )
                                                    
                                                    
                                                    48Accrued expenses and other
      accrued liabilities
                                                    
                                                    
                                                    1,755
                                                    
                                                    
                                                    
                                                    618Customer
    deposits
                                                    
                                                    
                                                    (370
                                                    )
                                                    
                                                    
                                                    3,473Taxes payable
                                                    
                                                    
                                                    234
                                                    
                                                    
                                                    
                                                    593Net
      cash provided by operating activities
                                                    
                                                    
                                                    2,832
                                                    
                                                    
                                                    
                                                    6,427Cash
      flows from investing activitiesPurchase
      of property, plant and equipment
                                                    
                                                    
                                                    (743
                                                    )
                                                    
                                                    
                                                    (1,896
                                                    )Investment
      in restricted bank balances, net
                                                    
                                                    
                                                    (16,015
                                                    )
                                                    
                                                    
                                                    7,451Advance
      to related parties, net
                                                    
                                                    
                                                    (1,026
                                                    )
                                                    
                                                    
                                                    -Net
      cash (used in) provided by investing activities
                                                    
                                                    
                                                    (17,784
                                                    )
                                                    
                                                    
                                                    5,555Cash
      flows from financing activitiesMovements
      in current accounts with related parties, net
                                                    
                                                    
                                                    -
                                                    
                                                    
                                                    
                                                    (8,875
                                                    )Proceeds
      from short-term bank loans
                                                    
                                                    
                                                    8,564
                                                    
                                                    
                                                    
                                                    2,738Repayment
      of short-term bank loans
                                                    
                                                    
                                                    (11,190
                                                    )
                                                    
                                                    
                                                    (2,738
                                                    )Proceeds
      from (Repayment of) bills financing, net
                                                    
                                                    
                                                    17,801
                                                    
                                                    
                                                    
                                                    (5,065
                                                    )Repayment
      of long-term interest-bearing loans
                                                    
                                                    
                                                    (796
                                                    )
                                                    
                                                    
                                                    (257
                                                    )Net
      cash provided by (used in) financing activities
                                                    
                                                    
                                                    14,379
                                                    
                                                    
                                                    
                                                    (14,197
                                                    )


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
three months ended December 31, 2008





Three months ended
                                                December 31,2008
                                              
                                              
                                              2007US$’000
                                              
                                              
                                              US$’000Net
      decrease in cash and cash equivalents
                                              
                                              
                                              (573
                                              )
                                              
                                              
                                              (2,215
                                              )Cash
      and cash equivalents, at beginning of period
                                              
                                              
                                              3,154
                                              
                                              
                                              
                                              5,340Effect
      on exchange rate changes
                                              
                                              
                                              2
                                              
                                              
                                              
                                              134Cash
      and cash equivalents, at end of the period
                                              
                                              
                                              2,583
                                              
                                              
                                              
                                              3,259Supplemental
      disclosure of cash flow informationInterest
      received
                                              
                                              
                                              243
                                              
                                              
                                              
                                              141Interest
      paid
                                              
                                              
                                              1,088
                                              
                                              
                                              
                                              853Tax
      paid
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -Non-cash
      investing activitiesAccrued
      interest income from related parties
                                              
                                              
                                              1,000
                                              
                                              
                                              
                                              -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 three months ended
December 31, 2008







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. It’s
common stocks are currently trading on the Over-The-Counter Bulletin Board
(“OTCBB”) of NASDAQ under the symbol “CHHN”.





CH
Lighting is a holding company with no operations. The principal activities of
its subsidiaries (together with CH Lighting, collectively referred as to “the
Company”) are the manufacture and sale of lighting source products and lighting
electronic products and investment holding.





Details
of CH Lighting’s subsidiaries as of December 31, 2008 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 three months ended
December 31, 2008





1.
            ORGANIZATION
      AND PRINCIPAL ACTIVITIES
(CONTINUED)





On July
16, 2008, CH Lighting entered into a Share Exchange Agreement (the “Exchange
Agreement”) with CH International and KEG International Limited (“KEG”), a
company incorporated in the 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
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 three months ended
December 31, 2008




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
GAAP have been condensed or omitted, although the management believes that the
disclosure made are adequate to make the information not
misleading.




To
prepare the financial statements in conformity with GAAP, the management must
make estimates and assumptions that affect the reported amounts of assets and
liabilities as of the date of these financial statements and 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 December 31, 2008 and September 30,
2008, the results of operations and cash flows for the three months ended
December 31, 2008 and 2007.




The
results of operations and cash flows for the three months ended December 31,
2008 and 2007 are not necessarily indicative of the operating results and cash
flows to be expected for the full year. These 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


There are
no new accounting pronouncements for which adoption are expected to have a
material effect on the Company’s financial statements.


F-9


CH
Lighting International Corporation


(formerly
Sino-Biotics, Inc.)





Notes
to and Forming Part of Unaudited Condensed Consolidated Financial
Statements
 For the
three months ended December 31, 2008





3.
            GOVERNMENT
      SUBSIDY INCOME





During
the three months ended December 31, 2008 and 2007, the Company was granted and
received government subsidies of approximately US$1,718,000 and US$148,000
respectively. The subsidy received 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 income available to common
stockholders 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 three months ended
December 31, 2008 and 2007.





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 December 31, 2008, 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
December 31, 2008, 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 three months ended December 31, 2008 and 2007,
no interest or penalties were recorded.


F-10




CH Lighting
International Corporation
 (formerly
Sino-Biotics, Inc.)
 
 Notes
to and Forming Part of Unaudited Condensed Consolidated Financial
Statements
 For the three months ended
December 31, 2008


5.
            INCOME
      TAXES (CONTINUED)





(a)
            Income
      tax expenses comprise of the
following:





Three months ended December 31,2008
                                                
                                                
                                                
                                                2007US$’000
                                                
                                                
                                                
                                                US$’000Current
      taxes arising in Hong Kong and the PRC:For the period
                                                
                                                
                                                234
                                                
                                                
                                                
                                                
                                                584Deferred
      taxes arising in Hong Kong and the PRC:For the period
                                                
                                                
                                                334
                                                
                                                
                                                
                                                
                                                118568
                                                
                                                
                                                
                                                
                                                702





(b)
            Reconciliation
      from the expected income tax expenses calculated with reference to the
      statutory tax rate in the PRC of 25% and 33% for the three months ended
      December 31, 2008 and 2007 respectively is as
  follows:





Three months ended December 31,2008
                                                          
                                                          
                                                          
                                                          2007US$’000
                                                          
                                                          
                                                          
                                                          US$’000Expected
      income tax expenses
                                                          
                                                          
                                                          1,120
                                                          
                                                          
                                                          
                                                          
                                                          1,604Difference
      in tax rates in the countries that the Companyoperates
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          
                                                          2Effect
      on tax incentives / holiday
                                                          
                                                          
                                                          (707
                                                          )
                                                          
                                                          
                                                          
                                                          (969
                                                          )Tax-exempted
      / Non-deductible items
                                                          
                                                          
                                                          (190
                                                          )
                                                          
                                                          
                                                          
                                                          65Withholding
      tax
                                                          
                                                          
                                                          345
                                                          
                                                          
                                                          
                                                          
                                                          -Income
      tax expenses
                                                          
                                                          
                                                          568
                                                          
                                                          
                                                          
                                                          
                                                          702




F-11




CH Lighting
International Corporation
 (formerly
Sino-Biotics, Inc.)
 
 Notes
to and Forming Part of Unaudited Condensed Consolidated Financial
Statements
 For the three months ended
December 31, 2008


6.
            RESTRICTED
      BANK BALANCES





Restricted
bank balances as of December 31, 2008 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
                        December 31,
                        2008
                      
                      
                      
                      (Audited)
                        As of
                        September 30,
                        2008US$’000
                      
                      
                      
                      US$’000Notes
      payable
                      
                      
                      1,740
                      
                      
                      
                      
                      4,519Bills
      financing
                      
                      
                      26,189
                      
                      
                      
                      
                      7,367Banking
      facilities granted to a related party
                      
                      
                      4,402
                      
                      
                      
                      
                      4,42832,331
                      
                      
                      
                      
                      16,314




7.
            ACCOUNTS
      RECEIVABLES, NET





Accounts
receivable are presented net of an allowance for doubtful accounts of US$468,000
and US$337,000 as of December 31, 2008 and September 30, 2008
respectively.




8.           INVENTORIES,
NET




Inventories consisted of the
followings:




As
      of
                      December 31,
                      2008
                    
                    
                    
                    (Audited)
                      As
      of
                      September 30,
                      2008US$’000
                    
                    
                    
                    US$’000Raw
      materials
                    
                    
                    3,726
                    
                    
                    
                    
                    3,397Work-in-progress
      and semi-finished goods
                    
                    
                    2,651
                    
                    
                    
                    
                    2,277Finished
      goods
                    
                    
                    9,630
                    
                    
                    
                    
                    9,62916,007
                    
                    
                    
                    
                    15,303




F-12




CH Lighting
International Corporation
 (formerly
Sino-Biotics, Inc.)
 
 Notes
to and Forming Part of Unaudited Condensed Consolidated Financial
Statements
 For the three months ended
December 31, 2008


9.
            PROPERTY,
      PLANT AND EQUIPMENT, NET





Property, plant and equipment is
summarized as follows:





As of
                      December 31,
                      2008
                    
                    
                    (Audited)
                      As of
                      September 30,
                      2008US$’000
                    
                    
                    US$’000Buildings
                    
                    
                    6,874
                    
                    
                    
                    6,869Plant
      and machinery
                    
                    
                    10,835
                    
                    
                    
                    9,729Motor
      vehicles
                    
                    
                    1,000
                    
                    
                    
                    1,000Furniture,
      fixtures and office equipment
                    
                    
                    1,169
                    
                    
                    
                    1,167Construction-in-progress
                    
                    
                    2,181
                    
                    
                    
                    2,54822,059
                    
                    
                    
                    21,313Accumulated
      depreciation
                    
                    
                    (5,375
                    )
                    
                    
                    (4,995
                    )16,684
                    
                    
                    
                    16,318




10.
            BANK
      BORROWINGS AND OTHER LOANS




Bank
borrowings and other loans comprise of the followings:





Note
                          
                          
                          As of
                            December 31,
                            2008
                          
                          
                          (Audited)
                            As of
                            September 30,
                            2008US$’000
                          
                          
                          US$’000Short-term
      bank borrowings
                          
                          
                          10(a)
                          
                          
                          
                          63,112
                          
                          
                          
                          50,849Long-term
      interest-bearing loans
                          
                          
                          10(b)
                          
                          
                          
                          8,366
                          
                          
                          
                          9,16171,478
                          
                          
                          
                          60,010


F-13


CH Lighting
International Corporation
 (formerly
Sino-Biotics, Inc.)
 
 Notes
to and Forming Part of Unaudited Condensed Consolidated Financial
Statements
 For the three months ended
December 31, 2008




10.
            BANK
      BORROWINGS AND OTHER LOANS
(CONTINUED)




(a)
            Short-term
      bank borrowings




Short-term
bank borrowings comprise of the followings:




Note
                                    
                                    
                                    As of
                                      December 31,
                                      2008
                                    
                                    
                                    (Audited)
                                      As of
                                      September 30,
                                      2008US$’000
                                    
                                    
                                    US$’000Short-term
      bank loans
                                    
                                    
                                    10(a)(i)
                                    
                                    
                                    
                                    34,734
                                    
                                    
                                    
                                    38,814Bills
      financing
                                    
                                    10(a)(ii)
                                    
                                    
                                    
                                    28,378
                                    
                                    
                                    
                                    12,03563,112
                                    
                                    
                                    
                                    50,849




(i)
            Short-term
      bank loans




Short-term
bank loans represent amounts due to various banks which are due within 12
months, and 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
                      December 31,
                      2008
                    
                    
                    (Audited)
                      As of
                      September 30,
                      2008US$’000
                    
                    
                    US$’000Land
      use rights
                    
                    
                    878
                    
                    
                    
                    887Buildings
                    
                    
                    5,561
                    
                    
                    
                    5,6406,439
                    
                    
                    
                    6,527




Various
parties have also issued guarantees against these short-term bank loans as
follows:





As of
                    December 31,
                    2008
                  
                  
                  (Audited)
                    As of
                    September 30,
                    2008US$’000
                  
                  
                  US$’000Personal
      guarantees issued by related parties
                  
                  
                  1,459
                  
                  
                  
                  13,858Corporate
      guarantees issued by unrelated parties
                  
                  
                  28,139
                  
                  
                  
                  30,922




The
weighted average annual interest rates of the short-term bank loans were 6.90%
and 6.41% as of December 31, 2008 and September 30, 2008
respectively.


F-14




CH Lighting
International Corporation
 (formerly
Sino-Biotics, Inc.)
 
 Notes
to and Forming Part of Unaudited Condensed Consolidated Financial
Statements
 For the three months ended
December 31, 2008




10.
            BANK
      BORROWINGS AND OTHER LOANS
(CONTINUED)




(a)
            Short-term
      bank borrowings (Continued)




(ii)
            Bills
      financing




Bills
financing represent amounts due to various banks which are repayable within six
months from the date of issue. The bills are secured by restricted bank balances
and other financial assets of the Company with carrying values as
follows:




As of
                    December 31,
                    2008
                  
                  
                  (Audited)
                    As of
                    September 30,
                    2008US$’000
                  
                  
                  US$’000Restricted
      bank balances
                  
                  
                  26,189
                  
                  
                  
                  7,367Other
      financial assets
                  
                  
                  -
                  
                  
                  
                  2,91826,189
                  
                  
                  
                  10,285




The
weighted average annual interest rates of the bills financing were 2.44% and
5.69% as of December 31, 2008 and September 30, 2008 respectively.




(b)
            Long-term
      interest-bearing loans





Long-term
interest-bearing loans are secured by machineries with net book values of
US$3,848,000 and US$3,929,000 as of December 31, 2008 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
                    December 31,
                    2008
                  
                  
                  (Audited)
                    As of
                    September 30,
                    2008US$’000
                  
                  
                  US$’000Not
      exceeding 1 year
                  
                  
                  3,003
                  
                  
                  
                  3,068More
      than 1 year but not exceeding 5 years
                  
                  
                  5,363
                  
                  
                  
                  6,0938,366
                  
                  
                  
                  9,161Portion
      classified as current liabilities
                  
                  
                  (3,003
                  )
                  
                  
                  (3,068
                  )Long-term
      portion
                  
                  
                  5,363
                  
                  
                  
                  6,093




The
weighted average annual interest rates of the long-term interest-bearings loans
were 6.69% and 6.81% as of December 31, 2008 and September 30, 2008
respectively.


F-15


CH Lighting
International Corporation
 (formerly
Sino-Biotics, Inc.)
 
 Notes
to and Forming Part of Unaudited Condensed Consolidated Financial
Statements
 For the three months ended
December 31, 2008




11.         FINANCIAL
INSTRUMENTS




The
Company’s financial instruments include cash and cash equivalents, restricted
bank balances, other financial assets, accounts receivable/payable, other
receivables/payables, prepayments, notes payable, 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 December 31, 2008 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-16


CH Lighting
International Corporation
 (formerly
Sino-Biotics, Inc.)
 
 Notes
to and Forming Part of Unaudited Condensed Consolidated Financial
Statements
 For the three months ended
December 31, 2008





12.          RELATED
PARTY BALANCES (CONTINUED)




(b)           Summary
of balances with related parties:




As of
                              December 31,
                              2008
                            
                            
                            (Audited)
                              As of
                              September 30,
                              2008US$’000
                            
                            
                            US$’000Due from related parties:Ms.
      Gan
                            
                            
                            338
                            
                            
                            
                            636CH
      Childcare
                            
                            
                            154
                            
                            
                            
                            154Henghui
                            
                            
                            25,136
                            
                            
                            
                            26,352Yingbao
      Childcare
                            
                            
                            7,374
                            
                            
                            
                            7,36033,002
                            
                            
                            
                            34,502




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 three months ended December 31, 2008, interest income of
US$1,000,000 was recognized in the unaudited condensed consolidated statements
of operations and comprehensive income. The Company plans to collect the
outstanding amounts as of December 31, 2008 gradually within two years. The
estimated amount to be collected after one year is approximately US$21,612,000
(September 30, 2008:
US$27,444,000).





As of
                                December 31,
                                2008
                              
                              
                              (Audited)
                                As of
                                September 30,
                                2008US$’000
                              
                              
                              US$’000Due
      to related parties:Mr.
      Zhao
                              
                              
                              -
                              
                              
                              
                              3,203SX
      Umbrella
                              
                              
                              25
                              
                              
                              
                              25Hecheng
                              
                              
                              70
                              
                              
                              
                              39895
                              
                              
                              
                              3,626




The
amounts due to related parties represent unsecured advances which are
interest-free and repayable on demand.





F-17


CH Lighting
International Corporation
 (formerly
Sino-Biotics, Inc.)
 
 Notes
to and Forming Part of Unaudited Condensed Consolidated Financial
Statements
 For the three months ended
December 31, 2008







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 December 31, 2008 and September
30, 2008:




As
      of
                              December 31,
                              2008
                            
                            
                            (Audited)
                              As
      of
                              September 30,
                              2008US$’000
                            
                            
                            US$’000Within
      one year
                            
                            
                            15
                            
                            
                            
                            21One
      to two years
                            
                            
                            15
                            
                            
                            
                            15Two
      to three years
                            
                            
                            15
                            
                            
                            
                            15Three
      to four years
                            
                            
                            15
                            
                            
                            
                            15Four
      to five years
                            
                            
                            15
                            
                            
                            
                            15Over
      five years
                            
                            
                            -
                            
                            
                            
                            3Total
                            
                            
                            75
                            
                            
                            
                            84





(b)
            Capital
      commitments





As of
December 31, 2008 and September 30, 2008, the Company had capital expenditure
commitments for construction projects and purchase of machinery of approximately
US$3,770,000 and US$3,343,000 respectively.





(c)
            Contingencies





As of
December 31, 2008 and September 30, 2008, the Company had provided corporate
guarantees of approximately US$4,377,000 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 December 31, 2008, the guarantee provided for
the bank loans and notes drawn by Company A was approximately RMB30,000,000 or
US$4,377,000 or US$0.04 per share of common stock outstanding (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 December 31, 2008 and September 30,
2008.





F-18


CH Lighting
International Corporation
 (formerly
Sino-Biotics, Inc.)
 
 Notes
to and Forming Part of Unaudited Condensed Consolidated Financial
Statements
 For the three months ended
December 31, 2008


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 December 31,
2008 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. Retirement plan costs were US$42,004 and US$51,629 for the three
months ended December 31, 2008 and 2007 respectively.





15.         SEGMENT
INFORMATION





For the
three months ended December 31, 2008 and 2007, revenue of the Company
represented net sales of lighting source and lighting electronics products. No
financial information by business segment is presented.





The table
below summarizes the customer base by geographic region:




Three months ended
                              December 31,2008
                            
                            
                            2007US$’000
                            
                            
                            US$’000China,
      including Hong Kong
                            
                            
                            9,387
                            
                            
                            
                            14,819Middle
      East
                            
                            
                            3,503
                            
                            
                            
                            1,812Korea
                            
                            
                            835
                            
                            
                            
                            2,636Europe
                            
                            
                            2,354
                            
                            
                            
                            1,249United
      States
                            
                            
                            76
                            
                            
                            
                            212Africa
                            
                            
                            -
                            
                            
                            
                            187Others
                            
                            
                            509
                            
                            
                            
                            944Total
                            
                            
                            16,664
                            
                            
                            
                            21,859




Revenue
is attributed to countries based on location of customer.





All
long-lived assets are located in China, including Hong Kong.





F-19




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




Forward
Looking Statements




The
following discussion of our financial condition and results of operations of CH
Lighting International Corporation (the “Company”) is based
upon and should be read in conjunction with our 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 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 had no
operations. Prior to the Exchange, the Company was considered a “blank check”
company with US$500 in assets and a net loss of approximately US$80,227 for the
fiscal year ending September 30, 2007.  As of March 31, 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 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”).




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”,
and together with CH International, CH Lamps, CH Lighting PRC, CH Hong Kong and
CH Technology, the “Group”).




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


3





Current
Operations of the Company (General Development of Business)




Introduction





CH Lamps
manufactures and sells fluorescent lamp tubes, bulbs, luminaires and other
decorative products. CH Lighting PRC currently manufactures and sells lighting
products and luminaires (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 luminaires (light fitting
parts).  CH Lab was established on January 7, 2008 in the PRC and
currently provides laboratory testing services of 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 luminaires 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 most product series 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 departments and local authorities).




The volume of production and sales of
linear fluorescent lamps amounted to 1.2 billion and 1.5 billion in China in
2006 and 2007, respectively, however there are only fifteen (15) enterprises
(including the Company) whose annual volume of production and sales of linear
fluorescent lamps exceeded 1 billion and 1.04 billion in 2006 and 2007,
respectively. In 2006, the Company accounted for eight percent (8%) of the
market share of China’s linear fluorescent lamp market, ranking third among
total linear fluorescent lamp manufacturers in China, and according to the China
Association of Lighting Industry, the Company’s T5 fluorescent lamp model was
and currently is the best selling product in the Chinese market.




The Company has three (3) major
production facilities: CH Lighting PRC, CH Lamps and CH Technology, collectively
covering 62,000 m2, 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 luminaires 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 200 distributors in the
Chinese market and over 300 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, and 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. Many of our products lead the Chinese market in
terms of quality, as do our services relating to environmental protection. We
primarily generate revenues through the sale of our products to third parties,
and to a certain extent, 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 (China) customers. Unless there
is a quality issue, we do not provide customers with the right to return
merchandise and we do not provide extended payment terms to our
customers.





4




Our revenues from the sale of our
products were US$14,047,000 for fiscal year 2005 (100% of all revenues),
US$15,225,000 for fiscal year 2006 (100% of all revenues), US$32,379,000 for
fiscal year 2007 (100% of all revenues) and US$90,864,000 for fiscal year 2008
(100% of all revenues). 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 at 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 China market. Set forth below are some key features of the
Company’s domestic marketing strategy:




·
              Building/Training
      Sales Team. The Company plans to strengthen and build its sales
      team and establish incentives for competitive marketing with internal
      sales competitions and a rotational training program to accelerate
      training of a modern sales team of professional competence. Apart from
      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 to build a
      cohesive, creative, strong team with effective marketing
      skills.
 
 ·
              Expansion of Sales
      Network. The Company plans to continue to expand domestic market
      share and improve points of sales. At present, it has set up 32 offices
      and has relationships with more than 200
  distributors.
 
 ·
              Energy Savings and
      Emission Reduction.The Company plans
      to participate actively in government projects of replacement and
      procurement for green lighting, group procurement of enterprises and
      institutions and major projects bidding. 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 emission reduction, the Company shall fully utilize its
      advantage of 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 the
      growing orders of old customer and to develop new
    customers.
 
 ·
              Strengthen Brand
      Promotion. The Company plans 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 large-scale outdoor advertising on the Shanghai-Hangzhou and Hangzhoum
      - 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 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.
 
 ·
              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 sale 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.
 5


·
              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 such products are sold with the trademark of certain
      clients after the production. 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 connection 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 and is
      sold in Europe, America and Australia. We have established cooperation
      with a number of large enterprises like 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 of plant
      growth lamps.
 
 Product
Sales Strategy (Domestic and International Sales)
 
 Domestic Sales through
Distributors
 
 The Company entered into the high-tech
domestic Chinese lighting market in 2006. Currently, 32 offices have been set up
in China, forming a three-level sales network in counties, cities and provinces,
with point-of-sale locations across the country, which contributes 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 200
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 promotion in the local market of the Middle East. In the
European market, the Company has a regional agent in Belgium who is in charge of
the regional marketing. The Group has also set up a branch in Hong Kong to take
the responsibility of marketing business in Asia-Pacific region.
 
 Domestic Replacement
Market
 
 In 2007,
China's domestic market size of the T8 halogen powder lamp was 1 billion lamps.
Currently, according to the requirements of energy savings and emissions
reduction, T8 halogen powder lamps are one of the main products to be replaced.
The sum total of growing data and stock amount of T8 halogen powder lamps are
estimated to be not less than 2 billion (each lamp for two years) annually. If
10% of the lamps are to be replaced, the replacement market would be still 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 organs, 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 for users. It can be used in the energy-saving replacement of units,
enterprises, schools, stores, supermarkets and hospitals.
 
 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 which gained high evaluation and high reputation
in the field of energy-saving lighting from 2005 to 2007. 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 organs
      held by the Government Offices Administration of the State Council. The
      first group of users include: 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.
  6
  ·
              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 and the Company won several bids
      for projects, including the Green Lighting Procurement Project of Central
      Government Departments under the CPC Central
  Committee.
 
 ·
              Primary and Secondary
      Schools.In 2006, in the
      energy-saving lighting rebuilding project of Beijing’s primary and
      secondary schools, organized by the Beijing Municipal Development and
      Reform Commission, with participation of global branded enterprises
      Philips, Matsushita and others, The Company’s products achieved the top
      integrated score among the three most successful enterprises (the Company,
      Philips, Matsushita). 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.
 
 ·
              Universities and Other
      Enterprises. The Company is and plans to continue competing for
      rebuilding (and hence, replacing) projects of energy-saving lighting
      projects in universities and other enterprises. For example, the Company
      has won projects and has sold products to the 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 suppliers
to the Chinese government of lighting products. The government procurement
market is an important part of development of the Company's business, and it 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
largest number of series of products on the state list of energy-saving products
in government procurement out of all lighting enterprises, and is the main
company participating in the national efficient lighting products promotion
project. At the same time, the quality for the major products obtained State
Inspection-free Qualification in China.
  The
Company has a leading position in product technology, quality, types, 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 the bidding of major national
projects, including:
 
 ·
              Beijing Olympic
      Project. Olympic Park National Conference Center: National
      Conference Centre is 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
  score.
 
 ·
              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.
 
 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 has enabled
the Company to create good conditions 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 its influence of its brand for self-owned brand sales in the
international market and to increase sales for end-users.
  7
 
 Results
of Operations
 
 Results
of Operations For the Three (3) Months Ended December 31, 2008 Compared To The
Three (3) Months Ended December 31, 2007
 
 Net
Profit.
 
 For the
three month periods ended December 31, 2008 and 2007, the Company realized a net
profit of US$3,914,000 and US$4,521,000, respectively.
 
 Revenues.
  Revenue
for the three month periods ended December 31, 2008 decreased by US$5.2 million,
or 23.77%, to US$16.7 million compared to US$21.9 million for the corresponding
period in 2007. The decrease occurred as a result of a slow down of government
procurement orders after the Olympic Games.
  Cost
of Sales
 
 Cost of
sales for the three month periods ended December 31, 2008 and 2007 were
US$10,987,000 and US$14,953,000, respectively, and cost rates were 65.93% and
68.40%, respectively.
 
 Selling
Expenses.
 
 Selling
expenses for the three month periods ended December 31, 2008 and 2007 were
US$1,854,000 and US$645,000, respectively. The increase occurred as a provision
for the rebate to the distributors was made for the domestic sales since
the three months ended December 31, 2008. No such provision was required in
previous periods.
  General
and Administrative Expenses.
 
 General
and administrative expenses for the three month periods ended December 31, 2008
and 2007 were US$1,227,000 and US$861,000, respectively. The increase relates to
a provision made for doubtful accounts and for the increase of research and
development expenses during the period.
  Interest
Expense.
 
 Interest
expense for the three month periods ended December 31, 2008 and 2007 was
US$1,088,000 and US$853,000, respectively.
  Liquidity
and Capital Resources
 
 As of
December 31, 2008, cash and cash equivalents totaled
US$2,583,000.  Net cash provided by operating activities and used in
investing activities amounted to US$2,832,000 and US$(17,784,000),
respectively.  While net cash provided by financing activities
amounted to US$14,379,000.  Please see table below:
 
 December 31, 2008
                  
                  
                  December 31, 2007Cash and Cash Equivalents
                  
                  $
                  2,583,000
                  
                  
                  $
                  3,259,000Net
      Cash provided by Operating Activities
                  
                  $
                  2,832,000
                  
                  
                  $
                  6,427,000Net
      Cash (used in) provided by Investing activities
                  
                  $
                  (17,784,000
                  )
                  
                  $
                  5,555,000Net
      Cash provided by (used in) Financing Activities
                  
                  $
                  14,379,000
                  
                  
                  $
                  (14,197,000
                  )
  8
  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 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 60 days.
  December 31, 2008
                  
                  
                  December 31, 2007Changes
      in operating assets and liabilities
                  
                  $
                  (795,000
                  )
                  
                  $
                  2,378,000Accounts
      receivables, net
                  
                  $
                  2,506,000
                  
                  
                  $
                  (11,448,000
                  )Inventories,
      net
                  
                  $
                  (702,000
                  )
                  
                  $
                  6,194,000Prepayment
                  
                  $
                  1,056,000
                  
                  
                  $
                  571,000Other
      receivables
                  
                  $
                  (864,000
                  )
                  
                  $
                  2,710,000Accounts
      payable
                  
                  $
                  (1,630,000
                  )
                  
                  $
                  (381,000
                  )Notes
      payable
                  
                  $
                  (2,780,000
                  )
                  
                  $
                  48,000Accrued
      expenses and other accrued liabilities
                  
                  $
                  1,755,000
                  
                  
                  $
                  618,000Customer
      deposits
                  
                  $
                  (370,000
                  )
                  
                  $
                  3,473,000Taxes
      payable
                  
                  $
                  234,000
                  
                  
                  $
                  593,000
 
 Investing
Activities
    December 31, 2008
                  
                  
                  December 31, 2007Net cash
      (used in) provided by investing activities
                  
                  $
                  (17,784,000
                  )
                  
                  $
                  5,555,000Purchase
      of property, plant and equipment
                  
                  $
                  (743,000
                  )
                  
                  $
                  (1,896,000
                  )Investment
      in restricted bank balances, net
                  
                  $
                  (16,015,000
                  )
                  
                  $
                  7,451,000Advance
      to related parties, net
                  
                  $
                  (1,026,000
                  )
                  
                  $
                  -
  Financing
Activities
 
 The
Company receives the funds it needs for development mainly through short-term
bank borrowings, long-term interest bearing loans from banks and bills financing
from related parties through mutual guarantees.
 
 Net
cashprovided
by (used in) financing activities were US$14,379,000 and
US$(14,197,000) for the three month periods ended December 31,
2008 and 2007, respectively.
  December 31, 2008
                    
                    
                    December 31, 2007Net cash provided
      by (used in) financing activities
                    
                    $
                    14,379,000
                    
                    
                    $
                    (14,197,000
                    )Movements
      in current accounts with related parties, net
                    
                    $
                    -
                    
                    
                    $
                    (8,875,000
                    )Proceeds
      from short-term bank loans
                    
                    $
                    8,564,000
                    
                    
                    $
                    2,738,000Repayment
      of short-term bank loans
                    
                    $
                    (11,190,000
                    )
                    
                    $
                    (2,738,000
                    )Proceeds
      from (Repayment of) bills financing, net
                    
                    $
                    17,801,000
                    
                    
                    $
                    (5,065,000
                    )Repayment
      of long-term interest bearing loans
                    
                    $
                    (796,000
                    )
                    
                    $
                    (257,000
                    )
  9
  Working
Capital
 
 Accounts
Receivable, Trade 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 accounts receivable balances of
US$16,367,000 at December 31, 2008 and US$18,871,000 at September 30, 2008, a
decrease of 13.27%.
 
 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.  Management has determined an allowance for doubtful
accounts was US$468,000 and US$337,000 at December 31, 2008 and September 30,
2008, respectively.
  Other
Receivable
 
 The
Company had balances of US$4,958,000 at December 31, 2008 and US$4,093,000 at
September 30, 2008, an increase of 21.13%. Other receivables mainly represented
deposits made to a financial institution in respect of certain finance
leases of the Company.
 
 Prepayment
 
 The
Company had prepayment balances of US$1,668,000 at December 31, 2008 and
US$2,724,000 at September 30, 2008. A decrease of 38.77% was due to several
pre-paid deposits for purchases of raw materials utilized during the period.
 
 Inventories
 
 Inventories
are stated at the lower of cost or market using 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 of US$16,007,000 at December 31, 2008 and
US$15,303,000 at September 30, 2008, an increase of 4.60%.  As of
December 31, 2008, the Company had determined that no reserves are
necessary.
  December 31, 2008
                  
                  
                  September 30, 2008Raw
      materials
                  
                  $
                  3,726,000
                  
                  
                  $
                  3,397,000Work-in-process
      goods
                  
                  $
                  2,651,000
                  
                  
                  $
                  2,277,000Finished
      goods
                  
                  $
                  9,630,000
                  
                  
                  $
                  9,629,000Total:
                  
                  $
                  16,007,000
                  
                  
                  $
                  15,303,000
  Cash
and Cash Equivalents
 
 The
Company had cash and cash equivalents of US$2,583,000 at December 31, 2008 and
US$3,154,000 at September 30, 2008, a decrease of 18.10%.
 
 Capital
Expenditures
 
 The
Company had property, plant and equipment (net) equal to US$16,684,000 at
December 31, 2008 and US$16,318,000 at September 30, 2008.  Our
increase in assets is due to an increase of production capacity.
  December 31, 2008
                  
                  
                  September 30, 2008Buildings
                  
                  $
                  6,874,000
                  
                  
                  $
                  6,869,000Plant
      and machinery
                  
                  $
                  10,835,000
                  
                  
                  $
                  9,729,000Motor
      vehicles
                  
                  $
                  1,000,000
                  
                  
                  $
                  1,000,000Furniture,
      fixtures and office equipment
                  
                  $
                  1,169,000
                  
                  
                  $
                  1,167,000Construction
      in progress
                  
                  $
                  2,181,000
                  
                  
                  $
                  2,548,000Accumulated
      depreciation
                  
                  $
                  (5,375,000
                  )
                  
                  $
                  (4,995,000
                  )Total:
                  
                  $
                  16,684,000
                  
                  
                  $
                  16,318,000
  10
  The
Company had balances for long-term land lease pre-payments (net) of US$878,000
and US$887,000 at December 31 and September 30, 2008, respectively.
  Off-Balance Sheet
Arrangements
 
 Financial
guarantees
    December 31, 2008
                  
                  
                  September 30, 2008Financial
      guarantees
                  
                  $
                  4,377,000
                  
                  
                  $
                  5,106,000
 
 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.
 
 The
long-term interest-bearing loans are repayable as follows:
  Long-Term Debt Obligations
                      
                      December 31, 2008
                      
                      
                      September 30, 2008Long-term
      loans, secured (within one (1) year)
                      
                      
                      3,003,000
                      
                      
                      
                      3,068,000Long-term
      loans, secured (2–5 years)
                      
                      $
                      5,363,000
                      
                      
                      $
                      6,093,000Total
                      
                      $
                      8,366,000
                      
                      
                      $
                      9,161,000
 
 
 As of
December 31, 2008 and September 30, 2008, the Company had capital expenditure
commitments for construction projects and purchase of machineries of
approximately US$3,770,000 and US$3,343,000, respectively.
 
 Purchase Obligations
                  
                  December 31, 2008
                  
                  
                  September 30, 2008Purchase
      of machineries (Within one (1) year)
                  
                  $
                  3,770,000
                  
                  
                  $
                  3,343,000Total
                  
                  $
                  3,770,000
                  
                  
                  $
                  3,343,000
 
 The
following table summarizes rental payments under non-cancelable operating
leases:
  Operating Lease Obligations
                  
                  December 31, 2008
                  
                  
                  September 30, 2008Within
      one (1) year
                  
                  $
                  15,000
                  
                  
                  $
                  21,0002–3
      years
                  
                  $
                  30,000
                  
                  
                  $
                  30,0004–5
      years
                  
                  $
                  30,000
                  
                  
                  $
                  30,000Over
      five (5) years
                  
                  
                  —
                  
                  
                  $
                  3,000Total
                  
                  $
                  75,000
                  
                  
                  $
                  84,000
 
 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, the Company's export business, could have a material adverse
effect on the Company.  The Company's response strategy would be to
reduce our reliance on exports and to increase domestic sales.
  11
  Non-Tariff
Technical Trade Barriers Could Have a Materially Adverse Effect on our Exporting
Business
 
 Non-tariff
technical trade barriers imposed by governments around the world could adversely
affect, including, for example, the European Unions’s EuP
Directive.  In response to the 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, which conforms to the trend of reducing
resources consumption and pollution laid out in the EuP Directive.
 
 The
Development of High-Tech Products Takes a Long Time and There Are Many
Uncertainties in the Process
 
 The
special light sources products developed by the Company is an innovation in the
industry, so there might be unpredictable or presently unavoidable technical
flaws, or perhaps the new products do not fit into the market
demand.  Either way, the new products might not be able to get into
mass production and sold in the markets.  To avert such 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
such risk, the Company uses management measures, such as performance bonuses and
other project awards, to maintain the stability of its technical
team.  The Company (and its subsidiaries) also have in place
confidentiality agreements with certain technical employees to prevent leakage
of core technologies.
 
 ITEM 4. CONTROLS AND
PROCEDURES
 
 Disclosure
Controls and Procedures
 
 The
Company maintains disclosure controls and procedures and internal controls
designed to ensure that information required to be disclosed in the Company’s
filings under the Securities Exchange Act of 1934, as amended is recorded,
processed, summarized and reported within the time periods specified in the U.S.
Securities and Exchange Commission’s rules and forms. As of the end of the
period covered by this report, we carried out an evaluation, under the
supervision and with the participation of our principal executive officer and
principal financial officer, of the effectiveness of the design and operation of
our disclosure controls and procedures. Based on this evaluation, our principal
executive officer and principal financial officer concluded that our disclosure
controls and procedures are effectively designed to ensure that information
required to be disclosed or filed by us is recorded, processed or summarized,
within the time periods specified in the rules and regulations of the Securities
and Exchange Commission. It should be noted that the design of any system of
controls is based in part upon certain assumptions about the likelihood of
future events, and there can be no assurance that any design will succeed in
achieving its stated goals under all potential future conditions, regardless of
how remote.
 
 Changes In Internal
Controls
 
 There was
no change in the Company’s internal control over financial reporting that was
identified in connection with such evaluation that occurred during the period
covered by this report that has materially affected, or is reasonably likely to
materially affect, the Company’s internal control over financial
reporting.
  12
  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 December 31, 2008 and the date hereof, there was and is no pending or
outstanding material litigation with the Company or with the Group.
  ITEM
1A. RISK FACTORS
 
 Not
required for a "smaller reporting company".
 
 ITEM
2. UREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
 
 During
the quarter ended December 31, 2008, 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
  13
 
 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
  14
  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: February 17,
      2009
                By:
                /s/ Zhao GuosongName:
      Zhao GuosongIts:
      President, Chief Executive Officer and Principal
                  Executive
      Officer
 
 Date: February 17,
      2009
                By:
                /s/Huang Hsiao-IName:
      Huang Hsiao-IIts:
      Chief Financial Officer, Corporate Secretary,
                  PrincipalFinancial
      and Accounting Officer
  15