UNITED STATES


SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 
 
 FORM 10-K/A
 (Amendment No. 2)
  
 
 x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
 SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended June 30, 2010
 
 OR
 
  ̈ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
 SECURITIES EXCHANGE ACT OF 1934
 
 For the transition period from ______ to ______
 
 Commission File Number 000-53263
 
 CHINA LITHIUM TECHNOLOGIES, INC.
 (Exact name of registrant as specified in its charter)
 
 NEVADA
41-1559888(State or other jurisdiction of

Incorporation or organization)
(IRS Employer Identification No.)
 
 15 West 39th Street Suite 14B, New York, NY 10018
 (Address of principal executive offices)
 
 212-391-2688
 (Issuer's telephone number, including area code)
 
 
 Securities registered pursuant to Section 12(b) of the Act:
 COMMON STOCK
 
 Securities registered pursuant to Section 12(g) of the Act:
 NONE
 
 Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes  ̈ No x
 
 Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes  ̈ No x
 
 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No  ̈
 
 Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  ̈
 
 Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of "accelerated filer and large accelerated filer" in Rule 12b-2 of the Exchange Act.
 
 Large accelerated filer  ̈
Accelerated filer  ̈
Non-accelerated filer  ̈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  ̈ No x
 
 As of September 13, 2010, there were 20,159,811 shares of common stock outstanding.
 
 DOCUMENTS INCORPORATED BY REFERENCE
 
 None
  
 
 AMENDMENT NO. 2
 
 This amendment is being filed in order to:
 
 ·
Amend Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” to include disclosure of revenue attributable to each of our product lines;
 
 ·
Restate the Statements of Changes in Stockholders’ Equity for the reasons set forth in Note 15 to the Financial Statements and make corresponding changes to the Stockholders’ Equity section of the Balance Sheets and the calculation of Earnings Per Share on the Statements of Operations;
 
 ·
Amend Note 11 to the Financial Statements to include disclosure regarding deferred tax assets and liabilities;
 
 ·
Amend Note 15 to the Financial Statements to state all effects of the restatement of the financial statements filed with the initial Form 10-K;
 
 ·
Modify  Item 9A(T), “Controls and Procedures:  Management’s Report on Internal Control over Financial Reporting” to state management’s conclusion that the Company’s internal controls over financial reporting were not effective as of June 30, 2010;
 
 ·
Amend Item 13, “Certain Relationships and Related Transactions” to provide further disclosure regarding loans from related parties; and
 
 ·
Include additional exhibits.
 
 No effort has been made to update the disclosure, nor has any other aspect of the disclosures been modified.  For current information regarding the Company, the reader should refer to the recent filings by the Company with the Securities and Exchange Commission.
  
 
 China Lithium Technologies, Inc.
 
 FORM 10-K/A
 (Amendment No. 2)
 
 For the Year Ended June 30, 2010
 
 TABLE OF CONTENTS
 
 Page

No.PART IITEM 1.

Business

1ITEM 1A.

Risk Factors

11ITEM 1B.

Unresolved Staff Comments

17ITEM 2.

Properties

17ITEM 3.

Legal Proceedings

18ITEM 4.

Submission of Matters to a Vote of Security Holders

18PART IIITEM 5.

Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

19ITEM 6.

Selected Financial Data

19ITEM 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

19ITEM 7A.

Quantitative and Qualitative Disclosures About Market Risk

24ITEM 8.

Financial Statements and Supplementary Data

24ITEM 9.

Changes In and Disagreements with Accountants on Accounting and Financial Disclosure

48ITEM 9A(T).

Controls and Procedures

48ITEM 9B.

Other Information

49PART IIIITEM 10.

Directors and Executive Officers of the Registrant and Corporate Governance

49ITEM 11.

Executive Compensation

52ITEM 12.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

54ITEM 13.

Certain Relationships and Related Transactions, and Director Independence

55ITEM 14.

Principal Accountant Fees and Services

56PART IVITEM 15.

Exhibits, Financial Statement Schedules

56SIGNATURES

58
  
 
 INFORMATION REGARDING FORWARD-LOOKING STATEMENTS
 
 This Annual Report on Form 10-K contains forward-looking statements. These statements relate to future events or our future financial performance. These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance, or achievements expressed or implied by forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as "may," "will," "should," "expect," "plan," "anticipate," "believe," "estimate," "predict," "potential" or "continue," the negative of such terms or other comparable terminology. These statements are only predictions. Actual events or results may differ materially.
 
 Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Moreover, neither we nor any other person assumes responsibility for the accuracy and completeness of the forward-looking statements. We undertake no duty to update any of the forward-looking statements after the date of this report to conform such statements to actual results or to changes in our expectations.
 
 Readers are also urged to carefully review and consider the various disclosures made by us which attempt to advise interested parties of the factors which affect our business, including without limitation the disclosures made in PART I. ITEM 1A. "Risk Factors" and PART II. ITEM 6 "Management's Discussion and Analysis or Plan of Operation" included herein.
 
 PART I.
 
 ITEM 1.  Business
 
 Overview
 
 We are holding company incorporated in the State of Nevada. Through our operating entity in China, we design, manufacture and market Polymer lithium-ion battery modules, lithium-ion battery chargers, lithium-ion battery management systems as well as other lithium-ion battery management devices essential to proper power utilization.
 
 Our PLI battery products produce a relatively high average of 3.8 volts per cell, which makes them attractive in terms of both weight and volume. Additionally, they can be manufactured in very thin configurations and with large footprints. PLI cells can be configured in almost any prismatic shape, and can be made thinner than 0.0195 inches (0.5 mm) to fill virtually any shape efficiently. This combination of power and versatility makes rechargeable PLI batteries particularly attractive for use in consumer products such as portable computers, personal digital assistants (PDA's) and cellular telephones. However, one of the bottleneck problems in the existing lithium-ion battery industry is the battery capacity loss. Through years of efforts in research and development, we developed an efficient battery management system in a way to balance the process of charging and discharging of multiple lithium-ion battery cells and adjust the charging frequency to the change of temperature of the ambient environment. We also incorporated the battery management system in our design of lithium-ion battery module and battery pack.
 
 Research & Development is one of our most important strengths. Our management team is attentive to develop the core technologies to satisfy the needs of our customers. As of September 2010, we have three patents pending in China reflecting our R&D achievements for the past four years of development. Our R&D researchers are focused on the improvement of lithium battery module groups applicable to vehicle ignition power and wireless charging technology, our manufacturing processes for lithium-ion battery modules, and automated production of lithium-ion battery power systems and chargers. We are proud of our environmentally friendly product line. In order to meet domestic and international market demand, we are constantly upgrading our existing products to expand our market share.
  1
 
 Our Corporate History
 
 We were incorporated under the laws of the State of Minnesota on July 7, 1986 as Sweet Little Deal, Inc. The Company was formed to invest in and develop recreational real estate, and to invest in other businesses, particularly medical technology. On October 10, 1991, the Company changed its name to Physicians Insurance Services, Ltd..
 
 On August 1, 2007, the board members appointed new directors, Michael Friess and Chloe DiVita, and then resigned as officers and directors of the Company. The new board members appointed Sanford Schwartz to the board as a Director. On September 30, 2007, the Company issued 245,455 shares of its common stock to two individuals, (Sanford Schwartz and Michael Friess), for a $6,116 cash payment. Additionally, the Company agreed to issue additional shares to these two individuals resulting in 80% control of the Company for an additional cash payment following the proposed increase in the Company's authorized capital. The two individuals were issued 560,902 shares on January 31, 2009 to settle the agreement.
 
 On January 12, 2009 the Company completed the migratory merger to Nevada . The Company completed the 1 for 5 reverse split of its common stock effective March 20, 2009. Until March 19, 2010, we were defined as a "shell" company, whose sole purpose at this time is to locate and consummate a merger or acquisition with a private entity.
 
 Acquisition of Achieve Achieve
 
 On March 19, 2010, we acquired all of the outstanding capital stock of Sky Achieve. As a result of the Acquisition, China Lithium Technologies issued 19,151,827 shares of its common stock to the shareholders of Sky Achieve (the "Share Issuance"). Those shares represent 95 % of the outstanding shares of China Lithium Technologies. Of the 19,151,827 shares issued, 17,236,645 of the shares were issued to Kun Liu, who is the Chief Executive Officer of Sky Achieve and now the Chairman of China Lithium Technologies. The remaining 1,915,183 shares were issued to Youhua Yu, the Chairman of Sky Achieve. Also on March 19, 2010, Kun Liu (the "Purchaser"), 100% owner of Beijing GuoQiang, purchased from Michael Friess and Sanford Schwartz, the former principal stockholders ("Selling Shareholders") of China Lithium Technologies pursuant to a Stock Purchase Agreement (the "SPA") dated March 4, 2010. As a result of these transactions, persons associated with Beijing Guoqiang now own securities that represent 96% of the equity in China Lithium Technologies. The shares issued have not been registered under the Securities Act of 1933, as amended, in reliance upon an exception under Sections 4(2) of said act.
 
 Change of Name and Reverse Split
 
 Effective on June 2, 2010, we changed our name to China Lithium Technologies, Inc. and effectuated a reverse split of our common stock in the ratio of 1:2.2 (the "Reverse Split").
 
 Corporate Structure
 
 We operate our business in China through Sky Achieve Holdings, Inc, a company under the laws of British Virgin Islands ("Sky Achieve"), and Beijing GuoQiang Global Science & Technology Development Co.,Ltd, a PRC limited liability company ("Beijing Guoqiang"), wholly owned by our Chief Executive Officer, Kun Liu a PRC citizen. Pursuant to our Variable Interest Agreements ("VIE Agreements") with Beijing Guoqiang and its shareholder, we provide consulting and management services to Beijing Guoqiang. We have exclusive control over Beijing Guoqiang's daily operations and financial affairs, appoint its senior executives and approve all matters requiring shareholder approval. As a result of these contractual arrangements, we are the beneficiary of Beijing Guoqiang. Accordingly, we have consolidated Beijing Guoqiang's financial results, assets and liabilities in our financial statements since the execution of the VIE Agreements.
  2
 
 Material Operating Entities
 
 Sky Achieve Holdings, Inc.
 
 Sky Achieve was organized on November 5, 2009 under the laws of British Virgin Islands. It had no business activity from its inception until January 5, 2010. On January 5, 2010, Sky Achieve obtained control over the business of Beijing Guoqiang by entering into five agreements with Beijing Guoqiang and the equity owners of Beijing Guoqiang. The agreements are designed to transfer to Sky Achieve all of the responsibilities for management of the operations of Beijing Guoqiang, as well as all of the benefits and all of the risks that arise from the operations of Beijing Guoqiang. The relationship is purely contractual, however, so the rights and responsibilities of Sky Achieve with respect to Beijing Guoqiang are ultimately dependent on the willingness of the courts of the PRC to enforce the agreements. We are not aware of any judicial test of similar agreements to date. For accounting purposes, Beijing Guoqiang is deemed to be a variable interest entity with respect to Sky Achieve, and its balance sheet accounts and financial results are consolidated with the accounts and results of Sky Achieve for financial reporting purposes.
 
 The five agreements that define the relationship between Sky Achieve and Beijing Guoqiang each has a term of ten years. The following summarize the material terms of the agreements:
 
 Consulting Services Agreement and Operating Agreement. These two agreements provide that Sky Achieve will be fully responsible for the management of Beijing Guoqiang, both financial and operational. Sky Achieve has assumed responsibility for the debts incurred by Beijing Guoqiang and for any shortfall in its registered capital. In exchange for these services and undertakings, Beijing Guoqiang pays a fee to Sky Achieve equal to the net profits of Beijing Guoqiang. In addition, Beijing Guoqiang pledges all of its assets, including accounts receivable, to Sky Achieve. Meanwhile, Beijing Guoqiang's shareholders pledged the equity interests of Beijing Guoqiang to Sky Achieve to secure the payment of the Fee.
 
 Proxy Agreement. In this agreement, the shareholder of Beijing Guoqiang granted an irrevocable proxy to the designated person by Sky Achieve to exercise the voting rights and other rights of shareholder.
 
 Purchase Option Agreement. In this agreement, the shareholder of Beijing Guoqiang granted to Sky Achieve the right to purchase all his equity interest in the registered capital of Beijing Guoqiang or the assets of Beijing Guoqiang. The option may be exercised whenever the transfer is permitted under the laws of the PRC. The purchase price shall be equal to the original paid-in price of the Purchased Equity Interest by the Transferor, unless the applicable PRC laws and regulations require appraisal of the equity interests or stipulate other restrictions on the purchase price of equity interests. The agreement also contains covenants designed to prevent any material change occurring in the legal or financial condition of Beijing Guoqiang without the consent of Sky Achieve.
 
 Equity Pledge Agreement. In this agreement, Beijing Guoqiang shareholder agrees to pledge all its equity interest in Beijing Guoqiang to Sky Achieve as security for the performance of the obligation under the Consulting Services Agreement and the payment of Consulting Services Fees under each agreement.
 
 Beijing GuoQiang Global Science & Technology Development Co., Ltd
 
 Beijing Guoqiang is a leading edge lithium-ion battery power technology company that was founded on March 27, 2007 under the laws of the PRC with registered capital of 1 million RMB (US$ 147,058). Beijing Guoqiang designs, manufactures and markets Polymer lithium-ion battery modules, lithium-ion battery chargers, lithium-ion battery management systems as well as other lithium-ion battery management devices essential to proper power utilization ("PLI battery products"). Through years of development, Beijing Guoqiang's lithium-ion battery products have been widely used in electric tools, electric bicycles, electric motorcycles and vehicles, electric bus, electric/hybrid automobiles, golf and tour vehicle, yacht, and other electric products.
  3
 
 Our Products
 
 We design, manufacture and market Polymer lithium-ion battery modules, lithium-ion battery chargers, lithium-ion battery management systems as well as other lithium-ion battery management devices essential to proper power utilization. We believe that lithium-ion batteries will play an increasingly important role in facilitating a shift toward cleaner forms of energy. Our batteries and battery systems provide a combination of power, safety and life.
 
 A lithium-ion battery (sometimes abbreviated Li-ion battery) is a type of rechargeable battery in which the cathode (positive electrode) contains lithium. The anode (negative electrode) is generally made of a type of porous carbon. During discharging, the current flows within the battery (when the external circuit is connected) from the anode to the cathode, as in any type of battery: the internal process is the movement of electrons from the anode to the cathode, through the non- aqueous electrolyte and separator diaphragm. Lithium-ion batteries are common in portable consumer electronics because of their high energy-to-weight ratios, lack of memory effect, and slow self-discharge when not in use. In addition to consumer electronics, lithium-ion batteries are increasingly used in defense, automotive, and aerospace applications due to their high energy density.
 
 With its light and self-discharge characteristics, Lithium-ion battery can be formed into a wide variety of shapes and sizes so as to efficiently fill available space in the devices they power. However, such advantages are limited due to the technology difficulties of preserving the energy loss of the battery as a result of the imbalanced charge and discharge of multiple Lithium-ion battery cells. High temperature of the ambient environment will also shorten the life of lithium-ion battery. Through research and development, we developed an efficient battery management system in a way to balance the process of charging and discharging of multiple lithium-ion battery cells and adjust the charging frequency to the change of temperature of the ambient environment. We also incorporated the battery management system in our design of lithium-ion battery module and battery pack. Our products are widely distributed and used in the electric automobiles, motorcycles and bicycles in China.
 
 Specifically, our main products include the following:
 
 * Lithium-ion Battery Management System ("BMS")
 
 BMS is the link between rechargeable lithium-ion battery and users. Our BMS is very efficient in monitoring and load balancing battery cells' electricity charging and discharging running or charging, thus extending the life span of the battery pack and battery module we design. We have developed auxiliary battery clamp pressure equalization system, battery maintenance system, and bi-directional current automatic conversion system to address the common battery capacity loss problem in Lion battery industry.
 
 Our BMS has the following functions: real-time detection of the voltage of all single units, multi-point battery temperature and environment temperature, current working status of battery pack, insulation resistance, record of charge and discharge times, assessment over state of charge (SOC) of battery pack, battery malfunction alarm, communication with vehicle-mounted monitoring equipment and transfer battery state to the display, balancing of charge and discharge power, efficiency, electric quantity, AH,WH, dump energy, An WH min Km , flexibly set alarm parameters of upper and lower limits of tension, electric current, electric quantity, communicating with charger and motor controller and thus improving the battery safety, realizing the optimal combination of different battery packs in the module, and etc.
 
 Currently, our BMS is widely used in electric automobiles, and the picture below is BMS monitor interface on vehicle-mounted display of the electric automobiles.
  4
 
 
 * Lithium-ion battery module
 
 In 2009, we incorporated our BMS technology into our own lithium-ion battery modules known as" lithium magic cube" series. The series include nominal voltage 12V / 36V / 48V with nominal capacity ranging from 5AH to 60AH, and battery cells of Lithium cobalt(III) oxide /ternary materials/ lithium maganate /lithium iron phosphate. Below is the picture of one type of product in the Series.
 
 
 Lithium-ion battery module from "lithium magic cube" series
 
 Our 10AH and 20AH products from the "lithium magic cube" series only weigh 1/3 of lead-acid battery of the same mechanical appearance and thus they are very popular in electric bicycles and motorcycles. Our 60AH product from the "lithium magic cube" series can realize high voltage and capacity power easily and they can be used in electric automobiles through parallel connections. The pictures below are the electric car and farm truck powered by our lithium-ion battery modules resulting from our R&D cooperation efforts with a car manufacturer in China.
 Small electric passenger car
Electric farm truck
 
 * High-power Lithium-ion battery charger
 Beijing Guoqiang is capable of providing high-power lithium-ion (Plumbous acid /Nickel Cadmium/ silicon energy) battery charger (charger/charging station) products of above 200W 10KW. In June 2009, our lithium-ion battery charger of 12V, 24V, 36V, 48V obtained European CE certification with certificate number of BST09062243003C-1 and BST09062243003C-2.
 
 Our battery charger products are widely used by one hundred standard vehicles. We can also design and produce customer-made chargers to satisfy the special needs of vehicle manufacturers. Specifically, we have the following series of standard charger products:
  5
 
 (1) 200W 10KW A~K Full-intelligent charger/battery waterproof charger
 (2) Programmed intelligent battery charger
 
 Below are the pictures of some of our charger products.
 K-type full-intelligent battery charger,
D-type full-intelligent battery charger,
9KW programmable battery intelligent charger
 
 Core Technology and R&D
 
 The lithium-ion battery management technology is the core technology in the field of electric vehicles and electric bicycles, while battery management system (BMS) is the key element in battery management. It is vital in safe application and life-time dilation in bunching use of lithium-ion power battery. Through R&D efforts of our technology teams, we have developed a very competitive battery management system capable of real-time monitoring over battery statement in the process of car running or charging. Our Controller Area Network (“CAN”) system is designed to connect the motor controller and the charger in such a way as to minimize heat and maximize power output.
 
 We have three patent applications pending in China, which were filed in August 2010. The applications cover the rechargeable battery, lithium ion battery balance charge protection system, and charger system that are elements of our three wire charging system. The three wire charging system invention provides a safe solution to the automobile using lithium-ion battery module. It includes a digital control voltage feedback multilevel current device to resolve an equilibrium problem of connecting large-capacity lithium-ion batteries in series. It also includes a bidirectional current automatic converter to make a standard automotive two-wire battery charge and discharge system  achieve a three-wire system function of lithium-ion battery. We expect that the approval of the patent will give us an impetus to grow in Lithium-ion battery industry in its application in automobile industry.
 
 Because of the light weight, potential long life cycle, energy-efficient and environmental-friendly characteristics, the lithium-ion battery is a good alternative source of power for the automobile industry. On the other hand, energy loss due to the imbalanced charge and discharge of lithium-ion battery pack, the two-wire system used in existing auto charger system prevent the application of lithium-ion battery in automobile industry. However, we use our innovative approaches which provide good solution to the above technical problems.
 
 We have two R&D centers: one in Beijing Zhongguancun S&T Park and the other in Hangzhou. Our first R&D center in Beijing was established in 2007, which is focused on the development of battery modules. In October 2009, we established our second research center in Hangzhou, Zhejiang province in China, which is mainly focused on the research and development of battery protection and management system. Our two R&D centers have a senior R&D team of 38 personnel each of whom has strong academic and technology background in different sections of the Lithium-ion battery industry. Most of our R&D team members have work experiences of over 5 years and have extensive experience in the lithium-ion battery industry. We have also developed long-term and wide cooperation with institutions with expertise in lithium-ion battery industry including the 19th Institute of Chinese Electronic S&T Group, the 15th institute of Chinese Electronic S&T Group, Beijing University of Aeronautics and Astronautics, and Beijing University of Information Science and Technology, in the field of power lithium-ion battery.
  6
 
 Our Lithium-ion Battery Management System (BMS)
 
 Our proprietary Lithium-ion Battery Management System (BMS) solves the energy loss and safety issues in lithium-ion vehicle batteries, optimizes power utilization, and realizes the high power need for ignition of car batteries, especially in low temperatures.
 
 Our lithium-ion BMS as shown in diagram below has the following strength:
 
 
 
 (1)      Our lithium-ion auto battery design uses a clamp pressure diversion device (i.e to use the technology of voltage-stabilizing bypass circuit diffluence to stabilize cell voltage and convert the surplus electric current from constant current source into bypass heat energy) to realize constant-current charger's function of constant current first and then constant pressure.
 (2)      Our system adopts a bi-circulating charge protection system in the charge of lithium-ion auto battery to solve the energy loss and safety issues in lithium-ion auto battery.
 (3)      To solve the equalization problem in connecting high-capacity lithium-ion battery, we use NC voltage-feedback multilevel electric current, which uses single-circuit battery to equalize the unequal battery in the mode of single charge.
 (4)      Our lithium-ion BMS uses a three-wire system which would automatically shut off charging the control circuit when discharging to reduce power consumption of the system.
 (5)      Our design also has a charge and discharge protection system in the battery to prevent against the problems of overcharge, over-discharge, over-temperature and overflow.
 (6)      To realize high power needed in the ignition of car batteries (especially in low temperatures), we use a super capacitor to ignite the electric automobile and balance the charging to provide the power and balance needed to start an electric automobile.
 
 * Wireless Charging Technology
 
 In addition, we are developing proprietary wireless charging technology for Lithium-ion automobile batteries. Wireless charging increases the convenience and user-friendliness of electric cars using electromagnetic induction to charge the battery of batteries. Our current wireless charging system has 5KW of power and the estimated transmission efficiency is over 85%. We expect to launch the wireless recharge products for 5KW, 20KW in the third quarter of 2010.Our wireless charging system can be shown as the picture below.
  7
 
 
 
 Industry and Market Opportunity
 
 In 2009, China became the world's largest auto making nation and the largest automobile market. Global trends for the rising cost of oil, stricter environmental standards and regulations, and support for energy sources that environmentally friendly technology are increasing market demand for technologies that can reduce oil dependence. Also, China has one of the world's most aggressive green energy national agendas.
 
 In the transportation market, we believe the high prices of conventional fuel, greater awareness of environmental issues and government regulation are increasing the demand for Hybrid Engineering Vehicle (HEV), Plug-in Bybrid Engine Vehicle (PHEV) and Electric Vehicle (EV). These vehicles offer improved gas mileage and reduced carbon emissions and may ultimately provide an alternative vehicle that eliminates the need for gasoline engines.
 
 We believe these trends are contributing to the growing demand for advanced battery technologies in the transportation, electric grid services and portable power markets.
 
 According to a leader in global research and market analysis, by 2011 the market demand for power lithium-ion battery in China is projected to reach $15.740 billion. The combination of electric automobiles, including electric passenger car and electric highway passenger car, accounts for over 96% of the total market, with the electric bicycle market accounting for 2.4% of the total.
 
 Globally, four types of companies are mainly involved in the lithium-ion battery industry:
 
 -
Major lithium battery manufacturers (such as Sanyo, LG chemistry, LG Chemical, TOSHIBA)
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Innovative high use rechargeable power technology companies (such as A123)
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automobile manufacturers (such as Toyota, Daimler), and
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auto parts manufacturers (such as Continental Group, Magna, Bosch)
 
 Most are Japanese and South Korean companies.
 
 This is a cutting-edge industry with no dominant players yet. We believe our technology and low cost of research and technology development will enable us to become a leading company in this industry. Also, the Company is based in China and is a leading provider of power systems for in Hybrid and Electric cars and vehicles in China.
 
 Physical Plants and Production
 
 We have two plants: one located in Beijing for the assembly and quality control of battery modules with the production capacity of 1,000 pieces per day,. The plant has three production lines. The address for the plant in Beijing is Er Bo Zi Industrial Region West 88-A, Changping District, Beijing China. The second plant is located in Guangzhou with the production capacity of 10,000 chargers per day and 1,000 units of battery management systems and switching power supply per day. The plant has five production lines to produce charger and battery management systems. The address for the plant in Guangzhou is Minyin Technology District 1633, Beitai Rd., Baiyun district, Guangzhou China. The total areas for the two plants are approximately 10,000 square meters, and we lease the two spaces. In addition, we also lease two spaces for our R& D centers, one located in Beijing and the other in Hangzhou. The total annual lease payments for the four spaces during the year ended June 30, 2010 was approximately $16,029 (RMB109,000) The leases for the plant in Er Bo Zi, Zhongguancun R&D center, Hangzhou R&D center, and Guangzhou plant will expire in December 2010, November 2010, August 2012, and August 2013, respectively; but we expect to be able to renew these leases.
  8
 
 Marketing
 
 At present, we only distribute products to domestic customers within China. With the development of new technologies and new products, we are actively seeking overseas customers and developing overseas market. Upon the request from the potential customers from Australian, France, Germany, and Taiwan we have shipped them samples of our products for their examinations. We are expecting to develop overseas customers in the near future.
 
 Domestic sales
 
 We sell our products to our customers through the entering of sales contracts. Our customers include hybrid and electric vehicle manufacturers, power tool and consumer electronics manufacturers, E-bikes conversion providers, etc. Through three years of cooperation, we have developed good business relationships with these customers. Each year, we entered into sales contracts with each of our customers to provide them our products of lithium-ion battery packs, battery management systems, and chargers. During the year ended June 30, 2010, none of our customers represent 10% or larger of our sales. During the year ended June 30, 2010, we developed 4 new customers. The four new customers are: Guangzhou Chuangxin Power Technologies, Inc; Tianjin Chenxing Scooter Company; Beijing Lianneng Charger Technologies, Inc; and Hebei Xinda Vehicle, Inc. In aggregate, the revenues from the four new customers contributes to 8.9% of the total revenue of the fiscal year ended June 30, 2010.
 
 Our future marketing strategy includes:
 
 •
Maintaining our sales contracts with our existing Hybrid and Electric vehicle manufacturers, power tool and consumer electronics manufacturers, and E-bikes conversion providers;
 •
Extending our sales efforts in three marketing centers of Lithium-ion battery industry in China: the Jingjintang area centered in Beijing area, Zhujiang Delta centered in Guangdong province located in the southeast China, and Changjiang Delta centered in Shanghai area;
 •
Developing local sales distributors to sell our own branded lithium-ion battery products;
 •
Expanding our cooperation with government agency in China, including the efforts to participating government-subsidized projects;
 
 China has over 120-million E-bikes on its streets. Since early in 2010 the government of China has had under consideration a regulation titled “Electrical Motorcycle and Electrical Bicycle Safety Regulation.” The regulation, if enacted by the government of China, will classify electric bicycles as motorcycles if they weigh more than 20kg or travel faster than 20km/h. If that regulation is adopted, the demand for lighter E-bikes will increase, because classification of a vehicle as a motorcycle subjects it to all of the regulation applicable to ownership and operation of a motor vehicle, such as the requirement of an operator license and insutance. Also, motorcycles are banned in many cities in China. A demand for lighter E-bikes is likely to shift market demand from E-bikes carrying heavier lead-acid batteries to E-bikes build with Lithium-ion batteries.
 
 Overseas sales
 
 We intend to expand to overseas markets with our manufacturing partners, particularly in E-bikes, electric scooters, hybrid and electric cars. The Company will expand its lithium-ion battery business as a cost-effective, reliable power solution supplier to hybrid and electronic vehicle manufacturers and consumer electronics manufacturers.
  9
 
 We believe that the market demand in the nations of European Union for 60 Ah and 80 Ah large capacity battery module products is likely to increase in the near future.  In 2006 the Restiction of Hazardous Substance Directive (2002/95/EC) and the Waste Electrical and Electronic Equipment Directive (2002/96/EC) became effective in the European Union. The directives restrict the use of lead, among other hazardous materials, in the manufacture of equipment. As a result, we expect increased momentum in the replacement of lead batteries by lithium-ion batteries for tour buses and motorcycles, which primarily use 60AH and 80AH batteries. We have been testing the two types of battery modules in the lab ofour research center. We expected to produce a small batch of the two types of products in October, 2010 and planned to market them mainly in the overseas market. Each of the two battery modules consist of three parts: battery, management system and charger. The three parts can be sold as acombined set, or each part canbe sold separately. For the combined set, the gross margin could reach 30-40%.
 
 Raw Material and Suppliers
 
 One of our significant costs are of Lithium-ion cells. Heilongjiang ZhongQiang Power-Tech Co., Ltd ("Heilongjiang Zhongqiang") is our major supplier in this regard. Our purchase from Heilongjiang Zhongqiang accounted for 88.54% and 92.74%, respectively of our total purchase during the year ended June 30, 2010 and 2009. Through years of cooperation, we have developed a good business relationship with Heilongjiang Zhongqiang. We have entered into supply contracts with Heilongjiang Zhongqiang since 2007. The contracts are renewable each year. We believe that we are able to access abundant supply of lithium-ion cells through our relationship with Heilongjiang Zhongqiang. In the event that Heilongjiang Zhongqiang cannot provide a sufficient supply to us, we believe that we can find alternative suppliers in the market with similar pricing. The major lithium-ion cell manufacturers in the market of China include Tianjin Lishen Battery Joint Stock Co., Ltd, China TCL Corporations, and BYD Company Limited.
 
 Our Strategy
 
 Our goal is to utilize our materials, science, expertise, our battery and battery systems engineering expertise and our manufacturing process technologies to provide advanced battery solutions. We intend to pursue the following strategies to attain this goal:
 
 •
Pursue markets and customers where our technology creates a competitive advantage. We will continue to focus our efforts in markets where customers place a premium on high-quality batteries, innovation and differentiated performance.
 
 •
Partner with industry leaders in China to adapt and commercialize our products to meet the requirements of our target markets. In each of our target markets, our joint development and supply agreements with industry-leading companies in China provide us insight into the performance requirements of that market, allow us to share product development costs and position our products to serve as a key strategic element for our partners' success.
 •
Remain on the forefront of innovation and commercialization of new battery and system technologies. We believe that our battery design technologies provide us with a competitive advantage, and we intend to continue to innovate in materials science and product design.
 •
Reduce costs through assembling improvements, supply chain efficiencies, innovation in materials and battery technologies. We believe that we can lower our battery and battery system costs by improving our assembling performance, lowering our raw material procurement costs, improving our inventory and supply chain management and through further materials science and battery innovation that can help reduce our need for expensive control and electronic components.
  10
 
 Employees
 
 Beijing Guoqiang has 282 employees, including 22 managerial personnel as well as 35 technology R&D personnel, 50 people in the 57 managerial and technological personnel have bachelor degrees or above, 20 have master's degrees or above.
 
 Environmental Law Compliance
 
 We assemble our products from components. Some of the components are generic off-the-shelf electronic items. Some of the components were designed by our research and development staff, but are manufactured to our order by suppliers. We do not utilize any minerals in their natural state nor engage in any chemical processing. For that reason, our environmental law compliance costs are minimal. In addition, since China does not have additional environmental regulations dealing with climate change that apply to our operations, we have not planned material capital expenditures for environmental control facilities or changes in our business practices specific to climate change.
 
 Website Access to our SEC Reports
 
 You may obtain a copy of the following reports, free of charge through the SEC's website at www.sec.gov as soon as reasonably practicable after electronically filing them with, or furnishing them to, the SEC: our previous Annual Reports on Form 10-K; our Quarterly Reports on Form 10-Q; our Current Reports on Form 8-K; and amendments to those reports filed or furnished pursuant to Section 13(a) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Our Internet website and the information contained therein or connected thereto are not intended to be incorporated into this Annual Report on Form 10-K.
 
 The public may also read and copy any materials filed with the SEC at the SEC's Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. The Public Reference Room may be contact at (800) SEC-0330. You may also access our other reports via that link to the SEC website.
 
 ITEM 1A. Risk Factors
 
 RISKS RELATED TO OUR BUSINESS
 
 Investing in our common stock involves a significant degree of risk. You should carefully consider the risks described below together with all of the other information contained in this Report, including the financial statements and the related notes, before deciding whether to purchase any shares of our common stock. If any of the following risks occurs, our business, financial condition or operating results could materially suffer. In that event, the trading price of our common stock could decline and you may lose all or part of your investment.
 
 Our business and growth will suffer if we are unable to hire and retain key personnel that are in high demand.
 
 Our future success depends on our ability to attract and retain highly skilled engineers, technical, marketing and customer service personnel, especially qualified personnel for our operations in China. Qualified individuals are in high demand in China, and there are insufficient experienced personnel to fill the demand. Therefore we may not be able to successfully attract or retain the personnel we need to succeed.
 
 We may not be able to adequately protect our intellectual property, which could cause us to be less competitive.
 
 We are designing and developing new technology. We rely on a combination of patent and trade secret laws and restrictions on disclosure to protect our intellectual property rights. Unauthorized use of our technology could damage our ability to compete effectively. In China, monitoring unauthorized use of our products is difficult and costly. In addition, intellectual property law in China is less developed than in the United States and historically China has not protected intellectual property to the same extent as it is protected in other jurisdictions, such as the United States. Any resort to litigation to enforce our intellectual property rights could result in substantial costs and diversion of our resources, and might be unsuccessful.
  11
 
 The demand for batteries in the transportation and other markets depends on the continuation of current trends resulting from dependence on fossil fuels.
 
 We believe that much of the present and projected demand for advanced batteries in the transportation and other markets results from the recent increases in the cost of oil, the dependency of the China on oil from unstable or hostile countries, government regulations and economic incentives promoting fuel efficiency and alternate forms of energy, as well as the belief that climate change results in part from the burning of fossil fuels. If the cost of oil decreased significantly, the outlook for the long-term supply of oil to China improved, the government eliminated or modified its regulations or economic incentives related to fuel efficiency and alternate forms of energy, or if there is a change in the perception that the burning of fossil fuels negatively impacts the environment, the demand for our batteries could be reduced, and our business and revenue may be harmed.
 
 If we are unable to develop, manufacture and market products that improve upon existing battery technology and gain market acceptance, our business may be adversely affected. In addition, many factors outside of our control may affect the demand for our batteries and battery systems.
 
 We are researching, developing, manufacturing and selling lithium-ion batteries and battery systems. The market for advanced rechargeable batteries is at a relatively early stage of development, and the extent to which our lithium-ion batteries will be able to meet our customers' requirements and achieve significant market acceptance is uncertain. Rapid and ongoing changes in technology and product standards could quickly render our products less competitive, or even obsolete if we fail to continue to improve the performance of our battery chemistry and systems. Other companies that are seeking to enhance traditional battery technologies have recently introduced or are developing batteries based on nickel metal-hydride, liquid lithium-ion and other emerging and potential technologies. These competitors are engaged in significant development work on these various battery systems. One or more new, higher energy rechargeable battery technologies could be introduced which could be directly competitive with, or superior to, our technology. The capabilities of many of these competing technologies have improved over the past several years. Competing technologies that outperform our batteries could be developed and successfully introduced, and as a result, there is a risk that our products may not be able to compete effectively in our target markets. If our battery technology is not adopted by our customers, or if our battery technology does not meet industry requirements for power and energy storage capacity in an efficient and safe design our batteries will not gain market acceptance.
 
 In addition, the market for our products depends upon third parties creating or expanding markets for their end-user products that utilize our batteries and battery systems. If such end-user products are not developed, if we are unable to have our products designed into these end user products, if the cost of these end-user products is too high, or the market for such end-user products contracts or fails to develop, the market for our batteries and battery systems would be expected similarly to contract or collapse. Our customers operate in extremely competitive industries, and competition to supply their needs focuses on delivering sufficient power and capacity in a cost, size and weight efficient package. The ability of our customers to adopt new battery technologies will depend on many factors outside of our control. For example, in the automotive industry, we depend on our customers' ability to develop HEV, PHEV and EV platforms that gain broad appeal among end users.
 
 Many other factors outside of our control may also affect the demand for our batteries and battery systems and the viability of widespread adoption of advanced battery applications, including:
 
 •
performance and reliability of battery power products compared to conventional and other non-battery energy sources and products;
 •
success of alternative battery chemistries, such as nickel-based batteries, lead-acid batteries and conventional lithium-ion batteries and the success of other alternative energy technologies, such as fuel cells and ultra capacitors;
  12
 
 •
end-users' perceptions of advanced batteries as relatively safe and reliable energy storage solutions, which could change over time if alternative battery chemistries prove unsafe or become the subject of significant product liability claims and negative publicity is generated on the battery industry as a whole;
 •
cost-effectiveness of our products compared to products powered by conventional energy sources and alternative battery chemistries;
 •
availability of government subsidies and incentives to support the development of the battery power industry;
 •
fluctuations in economic and market conditions that affect the cost of energy stored by batteries, such as increases or decreases in the prices of electricity;
 •
continued investment by the federal government and our customers in the development of battery powered applications;
 •
heightened awareness of environmental issues and concern about global warming and climate change; and
 •
regulation of energy industries.
 
 Adverse business or financial conditions affecting the automotive industry may have a material adverse effect on our development and marketing partners and our battery business.
 
 Adverse business or financial conditions affecting individual automotive manufacturers or the automotive industry generally, including potential bankruptcies, as well as market disruption that could result from future consolidation in the automotive industry, could have a material adverse effect on our business. Automotive manufacturers may discontinue or delay their planned introduction of HEVs, PHEVs or EVs as a result of adverse changes in their financial condition or other factors. Automotive manufacturers may also seek alternative battery systems from other suppliers which may be more cost-effective or require fewer modifications in standard manufacturing processes than our products. We may also experience delays or losses with respect to the collection of payments due from customers in the automotive industry experiencing financial difficulties.
 
 We are dependent on one major supplier for our raw materials. In the event we are no longer able to secure raw materials from this supplier and are unable to find alternative sources of supply at similar or more competitive rates, our operations and profitability will be adversely affected.
 
 For the production of our lithium-ion battery modules and management systems, we rely on our major supplier Heilongjiang Zhongqiang Energy Technology Development Limited ("Heilongjiang Zhongqiang") to provide us the lithium-ion battery cell. The purchase from Heilongjiang Zhongqiang accounted for 88.54% and 92.74%, respectively, of our total purchase of raw materials during the year ended June 30, 2010 and 2009. Although we believe that we are able to find substitute suppliers easily in China such as Tianjin Lishen Battery Joint Stock Co., Ltd, China TCL Corporations, and BYD Company Limited, in the event that we are unable to find alternative sources of supply at similar or more competitive rates, our business and operations will be adversely affected.
 
 Most of our assets are located in China, any dividends or proceeds from liquidation are subject to the approval of the relevant Chinese government agencies.
 
 Our assets are predominantly located inside China. Under the laws governing Foreign-invested Entities in China, dividend distribution and liquidation are allowed but subject to special procedures under the relevant laws and rules. Any dividend payment will be subject to the decision of the board of directors and subject to foreign exchange rules governing such repatriation. Any liquidation is subject to both the relevant government agency's approval and supervision as well the foreign exchange control. This may generate additional risk for our investors in case of dividend payment or liquidation.
  13
 
 We have limited business insurance coverage.
 
 The insurance industry in China is still at an early stage of development. Insurance companies in China offer limited business insurance products, and do not, to our knowledge, offer business liability insurance. As a result, we do not have any business liability insurance coverage for our operations. Moreover, while business disruption insurance is available, we have determined that the risks of disruption and cost of the insurance are such that we do not require it at this time. Any business disruption, litigation or natural disaster might result in substantial costs and diversion of our resources.
 
 Our operations are in China, and we are subject to significant political, economic, legal and other uncertainties (including, but not limited to, trade barriers and taxes that may have an adverse effect on our business and operations.
 
 We assemble all of our products in China and substantially all of the net book value of our total fixed assets is located there. However, we plan to sell our products to customers outside of China. As a result, we may experience barriers to conducting business and trade in our targeted markets in the form of delayed customs clearances, customs duties and tariffs. In addition, we may be subject to repatriation taxes levied upon the exchange of income from local currency into foreign currency, as well as substantial taxes of profits, revenues, assets or payroll, as well as value-added tax. The markets in which we plan to operate may impose onerous and unpredictable duties, tariffs and taxes on our business and products. Any of these barriers and taxes could have an adverse effect on our finances and operations.
 
 We may be required to raise additional financing by issuing new securities with terms or rights superior to those of our shares of common stock, which could adversely affect the market price of our shares of common stock.
 
 We may require additional financing to fund future operations, develop and exploit existing and new products and to expand into new markets. We may not be able to obtain financing on favorable terms, if at all. If we raise additional funds by issuing equity securities, the percentage ownership of our current shareholders will be reduced, and the holders of the new equity securities may have rights superior to those of the holders of shares of common stock, which could adversely affect the market price and the voting power of shares of our common stock. If we raise additional funds by issuing debt securities, the holders of these debt securities would similarly have some rights senior to those of the holders of shares of common stock, and the terms of these debt securities could impose restrictions on operations and create a significant interest expense for us.
 
 We do not intend to pay any cash dividends on our common stock in the foreseeable future and, therefore, any return on your investment in our common stock must come from increases in the fair market value and trading price of our common stock.
 
 We have never paid a cash dividend on our common stock. We do not intend to pay cash dividends on our common stock in the foreseeable future and, therefore, any return on your investment in our common stock must come from increases in the fair market value and trading price of our common stock.
 
 Our international operations require us to comply with a number of U.S. and international regulations.
 
 We need to comply with a number of international regulations in countries outside of the United States. In addition, we must comply with the Foreign Corrupt Practices Act, or FCPA, which prohibits U.S. companies or their agents and employees from providing anything of value to a foreign official for the purposes of influencing any act or decision of these individuals in their official capacity to help obtain or retain business, direct business to any person or corporate entity or obtain any unfair advantage. Any failure by us to adopt appropriate compliance procedures and ensure that our employees and agents comply with the FCPA and applicable laws and regulations in foreign jurisdictions could result in substantial penalties or restrictions on our ability to conduct business in certain foreign jurisdictions. The U.S. Department of The Treasury's Office of Foreign Asset Control, or OFAC, administers and enforces economic and trade sanctions against targeted foreign countries, entities and individuals based on U.S. foreign policy and national security goals. As a result, we are restricted from entering into transactions with certain targeted foreign countries, entities and individuals except as permitted by OFAC which may reduce our future growth.
  14
 
 Our contractual arrangements with Beijing Guoqiang and its shareholders may not be as effective in providing control over these entities as direct ownership.
 
 We have no equity ownership interest in Beijing Guoqiang and rely on the contractual arrangements of the VIE Agreements to control and operate Beijing Guoqiang. These contractual arrangements may not be as effective in providing control over Beijing Guoqiang as direct ownership. For example, Beijing Guoqiang could fail to take actions required for our business or fail to pay dividends to Sky Achieve despite its contractual obligation to do so. If Beijing Guoqiang fails to perform its obligation under the VIE Agreements, we may have to rely on legal remedies under PRC law, which may not be effective. In addition, we cannot assure you that Beijing Guoqiang's shareholders will always act in our best interests.
 
 Our operations are subject to PRC laws and regulations that are sometimes vague and uncertain. Any changes in such PRC laws and regulations, or the interpretations thereof, may have a material and adverse effect on our business.
 
 Our principal operating subsidiary, Sky Achieve Inc., is considered a foreign invested enterprise under PRC laws, and as a result is required to comply with PRC laws and regulations. Unlike the common law system prevalent in the United States, decided legal cases have little value as precedent in China. There are substantial uncertainties regarding the interpretation and application of PRC laws and regulations, including but not limited to the laws and regulations governing our business and the enforcement and performance of our arrangements with customers in the event of the imposition of statutory liens, death, bankruptcy or criminal proceedings. The Chinese government has been developing a comprehensive system of commercial laws. However, because these laws and regulations are relatively new, and because of the limited volume of published cases and judicial interpretation and their lack of force as precedents, interpretation and enforcement of these laws and regulations involve significant uncertainties. New laws and regulations that affect existing and proposed future businesses may also be applied retroactively. We cannot predict what effect the interpretation of existing or new PRC laws or regulations may have on our businesses. If the relevant authorities find us in violation of PRC laws or regulations, they would have broad discretion in dealing with such a violation.
 
 The capital investments that we plan may result in dilution of the equity of our present shareholders.
 
 We intend to raise a large portion of the funds necessary to implement our business plan by selling equity in our company. At present we have no commitment from any source for those funds. We cannot determine, therefore, the terms on which we will be able to raise the necessary funds. It is possible that we will be required to dilute the value of our current shareholders' equity in order to obtain the funds. If, however, we are unable to raise the necessary funds, our growth will be limited, as will our ability to compete effectively.
 
 We may have difficulty establishing adequate management and financial controls in China.
 
 The PRC has only recently begun to adopt the management and financial reporting concepts and practices that investors in the United States are familiar with. We may have difficulty in hiring and retaining employees in China who have the experience necessary to implement the kind of management and financial controls that are expected of a United States public company. If we cannot establish such controls, we may experience difficulty in collecting financial data and preparing financial statements, books of account and corporate records and instituting business practices that meet U.S. standards.
  15
 
 We may incur significant costs to ensure compliance with U.S. corporate governance and accounting requirements.
 
 We may incur significant costs associated with our public company reporting requirements, costs associated with newly applicable corporate governance requirements, including requirements under the Sarbanes-Oxley Act of 2002, or Sarbanes-Oxley, and other rules implemented by the Securities and Exchange Commission. We expect all of these applicable rules and regulations to increase our legal and financial compliance costs and to make some activities more time-consuming and costly. We also expect that these applicable rules and regulations may make it more difficult and more expensive for us to obtain director and officer liability insurance and we may be required to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. As a result, it may be more difficult for us to attract and retain qualified individuals to serve on our board of directors, on committees of our board of directors or as executive officers.
 
 As a public company, we are required to comply with rules and regulations of the SEC, including expanded disclosure, accelerated reporting requirements and more complex accounting rules. This will continue to require additional cost management resources. We will need to continue to implement additional finance and accounting systems, procedures and controls as we grow to satisfy these reporting requirements. In addition, we may need to hire additional legal and accounting staff with appropriate experience and technical knowledge, and we cannot assure you that if additional staffing is necessary that we will be able to do so in a timely fashion. If we are unable to complete the required annual assessment as to the adequacy of our internal reporting or if our independent registered public accounting firm is unable to provide us with an unqualified report as to the effectiveness of our internal controls over financial reporting in the future, we could incur significant costs to become compliant.
 
 Our financial results may be affected by mandated changes in accounting and financial reporting.
 
 We prepare our financial statements in conformity with accounting principles generally accepted in the United States of America. These principles are subject to interpretation by the Securities and Exchange Commission and other regulatory institutions responsible for the promulgation and interpretation of securities rules and accounting policies. A change in these policies may have a significant effect on our reported results and may even retroactively affect previously reported transactions.
 
 Capital outflow policies in China may hamper our ability to pay dividends to shareholders in the United States.
 
 The PRC has adopted currency and capital transfer regulations. These regulations require that we comply with complex regulations for the movement of capital. Although Chinese governmental policies were introduced in 1996 to allow the convertibility of RMB into foreign currency for current account items, conversion of RMB into foreign exchange for capital items, such as foreign direct investment, loans or securities, requires the approval of the State Administration of Foreign Exchange. We may be unable to obtain all of the required conversion approvals necessary for our operations, and Chinese regulatory authorities may impose greater restrictions on the convertibility of the RMB in the future. Because most of our future revenues will be in RMB, any inability to obtain the requisite approvals or any future restrictions on currency exchanges will limit our ability to pay dividends to our shareholders.
 
 Currency fluctuations may adversely affect our operating results.
 
 Beijing Guoqiang generates revenues and incurs expenses and liabilities in Renminbi, the currency of the PRC. However, as a Variable Interest Entity ("VIE") of China Lithium Technologies, it will report its financial results in the United States in U.S. Dollars. As a result, our financial results will be subject to the effects of exchange rate fluctuations between these currencies. From time to time, the government of China may take action to stimulate the Chinese economy that will have the effect of reducing the value of Renminbi. In addition, international currency markets may cause significant adjustments to occur in the value of the Renminbi. Any such events that result in a devaluation of the Renminbi versus the U.S. Dollar will have an adverse effect on our reported results. We have not entered into agreements or purchased instruments to hedge our exchange rate risks.
  16
  All of our assets are located in China. So any dividends or proceeds from liquidation are subject to the approval of the relevant Chinese government agencies.
 
 Our assets are located inside China. Under the laws governing FIEs in China, dividend distribution and liquidation are allowed but subject to special procedures under the relevant laws and rules. Any dividend payment will be subject to the decision of the board of directors and subject to foreign exchange rules governing such repatriation. Any liquidation is subject to both the relevant government agency's approval and supervision as well the foreign exchange control. This may generate additional risk for our investors in case of dividend payment or liquidation.
 
 We are not likely to hold annual shareholder meetings in the next few years.
 
 Management does not expect to hold annual meetings of shareholders in the next few years, due to the expense involved. The current members of the Board of Directors were appointed to that position by the previous directors. If other directors are added to the Board in the future, it is likely that the current directors will appoint them. As a result, the shareholders of the Company will have no effective means of exercising control over the operations of the Company.
 
 Because our funds are held in banks which do not provide insurance, the failure of any bank in which we deposit our funds could affect our ability to continue in business.
 
 Banks and other financial institutions in the People's Republic of China do not provide insurance for funds held on deposit. As a result, in the event of a bank failure, we may not have access to funds on deposit. Depending upon the amount of money we maintain in a bank that fails, our inability to have access to our cash could impair our operations, and, if we are not able to access funds to pay our suppliers, employees and other creditors, we may be unable to continue in business.
 
 We may be affected by global climate change or by legal, regulatory, or market responses to such change.
 
 Concern over climate change, including global warming, has led to legislative and regulatory initiatives directed at limiting greenhouse gas (GHG) emissions. For example, proposals that would impose mandatory requirements on GHG emissions continue to be considered by policy makers in the territories that we operate. Laws enacted that directly or indirectly affect our production, distribution, packaging, cost of raw materials, fuel, ingredients, and water could all impact our business and financial results.
 
 ITEM 1B.Unresolved Staff Comments
 
 Not applicable.
 
 ITEM 2.Properties
 
 The Company carries on operations in five locations, each of which is a leasehold. We believe that this assembly of property will be adequate for our operations for the foreseeable future. The lessors of our properties in China are third parties who have no other relationship with the Company. The lessor of our offices in New York City is Advanced Battery Technologies, Inc., which is the parent corporation for our largest supplier of batteries. The properties leased to the Company are:
  17
 
 Leased

Properties

Location

Use

Lease Term

Space

(Square Feet)


Annual RentBeijing Plant

88A West, North Industry Area, Erbozi Industrial Region West 88-A, Huilongguan, Changping District, Beijing, China

Assembly of battery modules

1/1/2008-12/31/2012


16,146


$
31,636Executive Offices

34 South Zhongguancun Rd, Suite 1701, Haidian District, Beijing, China.

Administrative, sales, R&D

11/10/2009-10/09/2014


3,186


$
29,293Guangzhou Plant

Minyin Technology District, 1633 Beitai Rd, Baiyun District, Guangzhou, Guangdong Province, China

Assembly of battery modules

9/2/2009-9/1/2014


19,375


$
31,636Hangzhou Center

351 Changhe Rd, Suite 4-A201, Binjiang District, Hangzhou, Zhejiang Province, China

Research & development

9/4/2009-9/3/2012


3,229


$
24,313New York Office

15 West 39th Street Suite 14B, New York, NY 10018

Investor Relations

Montly


215


$
12,000
 
 ITEM 3.Legal Proceedings
 
 We are currently not aware of any pending legal proceedings which involve us or any of our properties or subsidiaries.
 
 ITEM 4.Submission of Matters to a Vote of Security Holders
 
 There were no matters submitted to a vote of security holders from June 30, 2009 to June 30, 2010.
  18
 
 PART II.
 
 ITEM 5.
Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchase of Equity Securities
 
 MARKET INFORMATION
 
 There is only a very limited market for the Company's securities. Prior to March 20, 2009 there was no marked for the Company’s securities.  The Company's securities were listed on the OTC Bulletin Board on March 20, 2009, and are currently listed under the symbol "CLTT". Prior to June, 2010, our securities were listed under the symbol "PISV". There are no outstanding options or warrants to purchase shares of common stock or securities convertible into shares of the Company's common stock. The Company has no obligations to register any of its shares of common stock under the Securities Act of 1933. The following table shows the high and low prices of our common shares on the OTC Bulletin Board for each quarter in the period from March 20, 2009 to June 30, 2010.
 High ($)


Low ($)Year Ended June 30, 2010First Quarter Ended September 30, 2009


0.044



0.0002Second Quarter Ended December 31, 2009


0.066



0.0002Third Quarter Ended March 31, 2010


2.596



0.066Fourth Quarter Ended June 30, 2010


0.176



0.176Year Ended June 30, 2009


-



-Third Quarter Ended March 31, 2009


-



-Fourth Quarter Ended June 30, 2009


0.044



0.044
 
 HOLDERS
 
 As of September 2, 2010, there were 64 holders of record of our common stock.
 
 DIVIDENDS
 
 None
 
 ITEM 6.Selected Financial Data
 
 N/A
 
 ITEM 7.Management's Discussion and Analysis or Financial Condition and Results of Operation
 
 The accounting effect of the Entrusted Management Agreements entered into on January 05, 2010 is to cause the balance sheets and financial results of Beijing Guoqiang for the years ended June 30, 2010 and 2009 to be consolidated with those of Sky Achieve, with respect to which Beijing Guoqiang is now a Variable Interest Entity ("VIE").
 
 As a wholly-owned subsidiary of China Lithium Technologies, the consolidated financial statements of Sky Achieve, Inc. will be further consolidated with the financial statements of China Lithium Technologies in future filings. For that reason, the financial statements of Beijing Guoqiang and Sky Achieve have been filed with this Report, and the discussion below concerns the financial condition and results of operations of Sky Achieve and Beijing Guoqiang.
  19
 
 RESULTS OF OPERATIONS
 
 Year Ended June 30, 2010 compared to Year Ended June 30, 2009
 
 Total Net Revenues
  The following table shows the revenues attributable to each of our product lines during the past two fiscal years:
  Year Ended June

30,2010


Year Ended June

30,2009Battery Management Systems

$
8,404,660


$
7,461,318Battery Modules

$
1,470,849


$
331,165Battery Patches

$
1,632,175


$
2,274,690Electric Vehicle Batteries

$
1,211,820


$
895,754Power Supplies

$
1,290,470



–Chargers

$
79,510



–
 
 Total revenues for the year ended June 30, 2010 were $14,089,484 as compared to total revenues of $10,962,927 for the year ended June 30, 2009, an increase of $3,126,557 or approximately 28.52%. The increase of revenues was due to our success in marketing our new products and developing additional customers during the year ended June 30, 2010. We did a product adjustment at the beginning of this fiscal year. We stopped manufacturing two products because of their low profit margin due to the oversupply of similar products in the market. We began to manufacture two new products with high profit margin and high market demand, which are 5kw chargers and 3kw chargers. Meanwhile, during the year ended June 30, 2010, we developed 4 new customers. The four new customers are: Guangzhou Chuangxin Power Technologies, Inc; Tianjin Chenxing Scooter Company; Beijing Lianneng Charger Technologies, Inc; and Hebei Xinda Vehicle, Inc. In aggregate, the revenues from the four new customers contributes 8.9% of the total revenue of the fiscal year ended June 30, 2010.
 
 Cost of Goods Sold
 
 Cost of goods sold included direct material cost and direct labor cost. For the year ended June 30, 2010, our total cost of goods sold amounted to $9,568,363 or approximately 67.91% of revenues as compared to cost of goods sold of $7,989,327 or approximately 72.88% of revenues for the year ended June 30, 2009. The decrease in cost of goods sold as a percentage of total revenue was primarily due to changes in the assortment of non-system sales made during the year. The most significant change was that we reduced by 28% our sales of battery patches, since their sales revenue yielded less than 4% in operating income, and introduced a line of power products which produced $1.2 million in sales revenue and over $600 thousand in operating income..
 
 Gross Profit
 
 Gross profit for the year ended June 30, 2010 was $4,521,121 or 32.09% of revenues, as compared to $2,973,600 or 27.12% of revenues for the year ended June 30, 2009. The increase in gross profit margin was attributable to the decrease in cost of sales as a percentage of revenue. The increase in the gross profit is also attributable to our production and marketing of two of our new products with higher profit margins. Because of the high market demands, the sales prices for those two new products are high, and that makes us almost 40% gross profit from them. We expect our gross profit margin to remain in its current level with slight growth in the future.
 
 Operating Expenses
 
 Total operating expenses for the year ended June 30, 2010 were $1,255,993, an increase of $586,341 or approximately 87.56%, from total operating expenses in the year ended June 30, 2009 of $669,652. This increase included the following:
 
 For the year ended June 30, 2010, the manufacturing expenses amounted to $250,037 as compared to $112,022 for the fiscal year of 2009, an increase of $138,015 or approximately 123.20%. The manufacturing expenses include low value consumables, equipment maintenance, plant management cost. For the fiscal year 2010, we expanded our manufacture size, which almost doubled of the manufacture size of the year ended June 30, 2009. Amortization of our intangible assets and depreciation on our fixed assets are included in this part too.
 
 For the year ended June 30, 2010, we made substantial efforts in our research and development. First of all, in October 2009, we established our second research center in Hangzhou, Zhejiang province in China which mainly focuses on the research and development on battery protecting and management system. Second, we were developing a new product - customizable high capacity lithium-ion battery module, upon request of a special order from a customer, which has a large market potential demand. Lastly, we improved the function and the quality of our current products, such as adding a coulometer display to the management system.
  20
 
 For the year ended June 30, 2010, sales expenses amounted to $419,547 as compared to $258,791 for the fiscal year of 2009, an increase of $160,756 or approximately 62.12%. For the year ended June 30, 2010, we signed two advertisement contracts to advertise our products. The total advertising fee is about $100,000. We also engaged additional3 senior salesmen whohave brought us 4 new customers during the year ended June 30, 2010.
 
 For the year ended June 30, 2010, general and administrative expenses were $471,414 as compared to $255,703 for the fiscal year of 2009, an increase of $215,711 or approximately 84.36%. This increase was due to the establishment of our New York office in 2010 and the second research center in Hangzhou in October 2009.. The wages and salary and benefit for employees work in all the general and administrative departments are also part of our expenses. The Chinese government increased the minimum wage and salary level by approximately 20%.
 
 Income from Operations
 
 We reported income from operations of $3,265,128 for the year ended June 30, 2010 as compared to income from operations of $2,303,948 for the year ended June 30, 2009, an increase of $961,180 or approximately 41.72%.
 
 Other Expense and (Income)
 
 For the year ended June 30, 2010, total other expense amounted to $1,324 as compared to other expense of $798 for the year ended June 30, 2009, an increase of $526.
 
 During the fiscal year 2009, we have a short term loan of $100,000, and we paid $7,830 interest income by 7.83% interest rate on it. The loan was paid back at the beginning of the year ended June 30, 2010.
 
 Income Taxes
 
 For the year ended June 30, 2010, our income tax expense was $837,486 as compared to income tax expense of $574,229 for the year end June 30, 2009. The income tax rate is 25% for our industry in China.
 
 Net Income
 
 As a result of these factors, we reported net income of $2,428,966 for the year ended June 30, 2010 as compared to net income of $1,722,687 for the year ended June 30, 2009. This translated to basic and diluted net income per common share of $0.12, $20,159,811 and $1.72, $1,007,936 for the years ended June 30, 2010 and 2008, respectively.
 
 Other Comprehensive Income
 
 The functional currency of our subsidiaries and affiliate operating in the PRC is the RMB. The financial statements of our subsidiaries and affiliate are translated into U.S. dollars using yearend rates of exchange for assets and liabilities, and average rates of exchange (for the year) for revenues, costs, and expenses. Net gains and losses resulting from foreign exchange transactions are included in the consolidated statements of operations. As a result of these translations, which are a non-cash adjustment, we reported a foreign currency translation gain of $27,207 for the year ended June 30, 2010 as compared to $7,993 for the fiscal year of 2009. This non-cash gain increased our reported comprehensive income.
  21
 
 Comprehensive Income
 
 As a result of our foreign currency translation gains, we had comprehensive income for the year ended June 30, 2010 of $2,456,173, compared with $1,730,680 for the year ended June 30, 2009.
 
 LIQUIDITY AND CAPITAL RESOURCES
 After our shareholders made the initial contribution of our registered capital, the growth of our business has been funded, primarily, by the revenues resulted from our business operations. As a result, at June 30, 2010, we had no long term debts.
 
 Our working capital at June 30, 2010 totaled $5,156,264, an increase of $2,432,468 or 89.3% from our $2,723,796 in working capital as of June 30, 2009. At June 30, 2010 and 2009, we had a cash balance of $2,761,427 and $407,333, respectively.
 
 As of June 30, 2010, our accounts receivable, net of allowance for doubtful accounts, was $4,054,189 as compared to $2,404,088 as of June 30, 2009, an increase of $1,650,101. The primary reason for the increase in receivables was the increase in our overall sales activity. At the same time, however, during fiscal year 2010 we provided new customers extended payment terms as an incentive to initiate a relationship with us. Our standard payment terms are 0/60/90 days from delivery. To some of our significant new customers, however, we offered payment terms of 60/90/120 days, albeit on their initial orders only. Since we had a number of new customers during fiscal year 2010, this promotion contributed to the increased level of our accounts receivable. At June 30, 2010, $807,770 of our accounts receivable had been outstanding for more than 90 days.
 
 As of June 30, 2010, our inventories totaled $786,013, as compared to $2,567,320 as of June 30, 2009, a decrease of $1,781,307. This change was primarily due to improvements in our inventory management system. Under our new “ABC inventory management” system, we classified the components used for our products by availability and price sensitivity. We maintained low or no inventories of commonly available components and purchased them as needed. On the other hand, we purchased components with long delivery cycles when prices appeared low, and kept them in stock to assure availability. The result was a significant reduction in our inventory levels. . We expect our inventory will maintain at its current level in the near future.
 
 As of June 30, 2010, our advances to suppliers were $12,297 as compared to $785 as of June 30, 2009, an increase of $11,512. The increase was primarily attributable to the increase in manufacturing size and purchase orders, which needed more raw materials from the suppliers.  .
 
 As of June 30, 2010, our Prepaid Expenses was $68,169 as compared to $106,476 as of June 30, 3009, a decrease of $38,307. The decrease primarily occurred as a result of expensing of prepaid rent.
 
 As of June 30, 2010, we had a property and equipment, net of accumulated depreciation, of $261,811 as compared to $116,426 as of June 30, 2009, an increase of $145,385. The increase was primarily attributable to the increased purchases of approximately $136,898 for our Guangzhou plant. On the other hand, there is long-term depreciation adjusted into this account.
 
 As of June 30, 2010, we had intangible assets, net of accumulated amortization, of $72,907 as compared to $80,101 as of June 30, 2009, which remained the same level.
 
 As of June 30, 2010, we had accounts payable of $1,832,512 as compared to $1,819,740 as of June 30, 2009.
 
 As of June 30, 2010, we had Payroll payable of $57,186 as compared to $34,123 as of June 30, 2009, an increase of $23,063. The increase in payroll payable was primarily due to the increased number of employees and the Chinese government's new regulation on the increase of the average salary level.
  22
 
 As of June 30, 2010, we had a taxes payable of $310,989 as compared to $174,998 as of June 30, 2009, an increase of $135,991. The increase in the taxes payable was mainly due to three reasons:
 
 1.
The added value of products increased, which lead to the raise of the value-added tax.
 2.
The profit increased, so the amount of company's income tax increased.
 3.
The payroll tax increased under the Chinese government's new regulation.
 
 As of June 30, 2010, we had no interest payable as compare to $32,732 as of June 30, 2009. In the fiscal year 2009, we have short-term debt and we paid the interest. We pay off the short-term debt in fiscal year 2010, and there is no interest needed to be paid any more.
 
 At June 30, 2010, we had a $83,492 loan from shareholder as compared to $381,334 at June 30, 2009, a decrease of $297,842. The loan was mainly from Mr. Liu, our CEO. We expect to pay back most of the loans to him in the near future.
 
 Net cash provided by operating activities for the year ended June 30, 2010 was $2,728,015 as compared to net cash provided by operating activities of $763,205 for the year ended June 30, 2009. For the year ended June 30, 2010, net cash provided by operating activities was primarily attributable to an increase in net income of $2,428,966, an increase in adjustments to depreciation and amortization expense of $79,582, an increase in accounts receivable of $1,650,101, a decrease in inventories of $1,781,307, a decrease in prepaid expenses of $38,308, an increase in other current assets of $35,626, an increase in accounts payable of $12,771 and accrued expenses of $15,188, an increase in tax payables of $135,991, an increase in payroll payable of $23,063 and an decrease in interest payable of $32,732, and increase in warrant of $50,773, with an decrease in other account payable of $118,378. For the year ended June 30, 2009, net cash provided by operating activities was primarily attributable to an increase in accounts receivable of $1,539,295, an increase in inventories of $199,629, an increase in prepaid expenses of $65,075 and other current assets of $13,628, an increase in accounts payable of $958,692 and accrued expenses of $15,043, an increase in taxes payable of $41,206, an increase in payroll payable of $138 and an increase in interest payable of $8,273, and increase in warrant of $110,117, with an decrease in other account payable of $317,440. and the add back of net income of $1,722,687, adjustments to depreciation and amortization of $39,793.
 
 Net cash used in investing activities for the year ended June 30, 2010 amounted to $226,268. For the year ended June 30, 2010, net cash used in investing activities was attributable to the purchase of property and equipment of $223,292, and the installments on intangible assets of $2,975. Net cash used in investing activities for the year ended June 30, 2009 was $20,712 and was attributable to the purchase of property and equipment of $20,082, and the purchase of intangible assets of $630.
 
 Net cash used in financing activities was $115,356 for the year ended June 30, 2010. For the year ended June 30, 2010, net cash used in financing activities was attributable to repayment to shareholder's loan of $229,842. Net cash provided by financing activities was attributable to capital contribution of $114,486. Net cash used in financing activities was $596,643 for the year ended June 30, 2009 and was mainly attributable to the repayment to shareholder's loan of $305,598 and repayment to short term loan of $291,045.
 
 Our business plan contemplates that we intend to increase our production capacity of lithium-ion battery module to 3,000 per day, charger to 10,000 per day, and BMS to 4,000 per day. Implementation of this plan will require significant funds. The funds are needed in order to:
 
 •
Improve and upgrade our R&D center including purchase of more advanced research equipments and hiring of key technical talents in lithium-ion industry;
 •
Improve and expand our manufacture facilities including purchase of new machinery and equipment and construction of new workshops;
  23
 
 •
Develop regional distributors for the development of our own branded products; and
 •
Implement an advertising and marketing program adequate to assure us of substantial market presence.
 
 Our plan is to sell a portion of our equity in order to obtain the necessary funds, which will dilute the equity share of our existing shareholders. To date, however, we have received no commitment from any source for funds.
 
 CRITICAL ACCOUNTING POLICIES AND ESTIMATES
 
 In preparing our financial statements we are required to formulate working policies regarding valuation of our assets and liabilities and to develop estimates of those values. In our preparation of the Financial Statements for the year ended June 30, 2010, there were two estimates made which were (a) subject to a high degree of uncertainty and (b) material to our results:
 
 ·
Our decision, set forth in Note 6 to the Financial Statements, to record $147,022 as the allowance for doubtful accounts among the $4,201,211 in accounts receivable on our books at June 30, 2010. The determination of the allowance was based on our review of each account, including age of the account, payment history of the debtor, credit worthiness of the debtor, and any other factors we deemed relevant.
 
 ·
Our decision, set forth in Note 9 to the Financial Statements, to accrue an allowance for warranty claims equal to 1.0 percent of sales. The determination was based on our history of warranty claim payment, which has been less than 0.5% of sales.
 
 ITEM 7A.Quantitative and Qualitative Disclosures about Market Risks
 
 N/A
 
 ITEM 8.Financial Statements and Supplementary Data
 
 The audited financial statements of China Lithium Technologies for the fiscal year endedJune 30, 2010 is filed herein with and discussed in this Form 10k Report. The accounting effect of the Entrusted Management Agreements entered into on January 05, 2010 is to cause the balance sheets and financial results of Beijing Guoqiang for the years ended June 30, 2010 and 2009 to be consolidated with those of Sky Achieve, with respect to which Beijing Guoqiang is now a Variable Interest Entity ("VIE"). Also as a wholly-owned subsidiary of China Lithium Technologies, the consolidated financial statements of Sky Achieve, Inc. and Beijing Guoqiang will be further consolidated with the financial statements of China Lithium Technologies. For that reason, the audited financial statements of Beijing Guoqiang and Sky Achieve for the year ended June 30, 2010 and 2009 have been filed and discussed with this Report.
  24




CHINA LITHIUM TECHNOLOGIES, INC.





FINANCIAL STATEMENTS FOR THE YEAR ENDED JUNE 30, 2010 AND 2009





PAGEREPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

F-26FINANCIAL STATEMENTS:CONSOLIDATED BALANCE SHEETS

F-27 & 28CONSOLIDATED STATEMENTS OF INCOME

F-29CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY

F-30CONSOLIDATED STATEMENTS OF CASH FLOWS

F-31NOTES TO FINANCIAL STATEMENTS

F-33




F-25




REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM




To the Board of Directors and Stockholders of


China Lithium Technologies, Inc.





We have audited the accompanying consolidated balance sheets of China Lithium Technologies, Inc. (the “Company”) as of June 30, 2010 and 2009, and the related consolidated statements of operations and comprehensive income, consolidated statements of changes in stockholders’ equity and consolidated statements of cash flows for the years then ended. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.





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





In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of China Lithium Technologies, Inc. as of June 30, 2010 and 2009, and the results of its operations and cash flows for the years then ended in conformity with accounting principles generally accepted in the United States.





The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting as of June 30, 2010. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control over financial reporting. Accordingly, we express no such opinion.





/s/P.C.LIU, CPA, P.C.P.C.LIU, CPA, P.C.Flushing, NYAugust 31, 2010

(August 30, 2011 as to the effects of therestatement)




F-26




CHINA LITHIUM TECHNOLOGIES, INC.





CONSOLIDATED BALANCE SHEETS





June 30, 2010


June 30, 2009(Restated)ASSETSCurrent Assets:Cash and Cash Equivalents

$
2,761,427


$
407,333Accounts Receivable


4,054,189



2,404,088Other Accounts Receivable


48,621



24,507Advanced to Suppliers


12,297



785Inventories


786,013



2,567,320Prepaid Expenses


68,169



106,476Total Current Assets


7,730,716



5,510,510Property, Plant and Equipment, net


261,811



116,426Patent and Other Intangibles, net


72,907



80,101Total Assets


8,065,434



5,707,037





“ Continued on next page”





“ The accompanying notes are an integral part of these financial statements”





F-27


CHINA LITHIUM TECHNOLOGIES, INC.





CONSOLIDATED BALANCE SHEETS





June 30, 2010


June 30, 2009(Restated)LIABILITIES AND STOCKHOLDERS' EQUITYCurrent Liabilities:Accounts Payable


1,832,512



1,819,740Advance from Customers


3,329



4,426Payroll Payable


57,186



34,123Tax Payable


310,989



174,998Other Accounts Payable


4,495



122,873Interest Payable


-



32,732Accrued Expenses


45,074



29,886Loan from Shareholders


83,492



381,334Warranty Accrual


237,374



186,601Total Current Liabilities


2,574,452



2,786,714Total Liabilities


2,574,452



2,786,714Stockholders' Equity:Preferred Stock, par value $0.001, 20,000,000 shares authorized; 0 share issued and outstanding as of June 30, 2009 and 2010


-



-Comon stock, par value $0.001, 780,000,000 shares authorized; 19,151,875 shares issued and outstanding as of June 30, 2009; 20,159,811 shares issued and outstanding as of June 30, 2010


20,159



19,151Additional Paid in Capital


252,771



139,293Reserved Funds


467,186



-Accumulated Other Comprehensive Income


98,594



71,387Retained Earnings


4,652,271



2,690,492Total Stockholders' Equity


5,490,982



2,920,323Total Liabilities and Stockholders' Equity

$
8,065,434


$
5,707,037





“ The accompanying notes are an integral part of these financial statements”





F-28





CHINA LITHIUM TECHNOLOGIES, INC.





CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME





FOR THE YEARS ENDED JUNE 30, 2010 AND 2009





2010


2009(Restated)


(Restated)Revenues

$
14,089,484


$
10,962,927Cost of Goods Sold


9,568,363



7,989,327Gross Profit


4,521,121



2,973,600Operating Expenses:Manufacturing Expenses


250,037



112,022R & D Expenses


114,995



43,135Sales Expenses


419,547



258,791General and Administrative Expenses


471,414



255,703Total Operating Expenses


1,255,993



669,652Income from Operations before Other Expenses(Income)


3,265,128



2,303,948Other Expenses (Income):Financial Expense (Income)


-



7,830Other Expenses (Income)


(1,324
)


(798
)Total Other Expenses (Income)


(1,324
)


7,032Income before Income Taxes


3,266,452



2,296,916Provision for Income Taxes


837,486



574,229Net Income


2,428,966



1,722,687Other Comprehensvie Income:Unrealized Gain (Loss) on Foreign Currency Translation


27,207



7,993Comprehensive Income

$
2,456,173


$
1,730,680Earnings Per Common Share-Basic and Diluted

$
0.12


$
0.09Weighted Average Common Share - Basic and Diluted


19,436,314



19,151,875





“The accompanying notes are an integral part of these financial statement”





F-29





CHINA LITHIUM TECHNOLOGIES, INC.





CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY





FOR THE YEARS ENDED JUNE 30, 2010 AND 2009





AccumulatedPreferred Stock


Common Stock


Additional


Other











TotalPaid in


Comprehensive


Retained


Reserved


Comprehensive


Stockholders'Shares


Amount


Shares


Amount


Capital


Income


Earnings


Funds A


Income


EquityBalance - June 30, 2008 (Restated)


-


$
-



19,151,875


$
19,151


$
139,293


$
63,394


$
967,805


$
-





$
1,189,643Net income


























1,722,687







1,722,687



1,722,687Retained earning to reserved funds


























-



-







-Foreign currency translation gain






















7,993











7,993



7,993Comprehensive Income


































1,730,680Balance - June 30, 2009 (Restated)


-


$
-



19,151,875


$
19,151


$
139,293


$
71,387


$
2,690,492


$
-






$
2,920,323Reverse acquisition equity adjustments










1,007,936



1,008



113,478



















114,486Net income


























2,428,966







2,428,966



2,428,966Retained earning to reserved funds


























(467,186
)


467,186







-Foreign currency translation gain






















27,207











27,207



27,207Comprehensive Income


































2,456,173Balance - June 30, 2010


-


$
-



20,159,811


$
20,159


$
252,771


$
98,594


$
4,652,271


$
467,186






$
5,490,982Footnote A (Reseved Funds):

Restrictived retained earnings for the benefit of empoyees




“The accompanying notes are an integral part of these financial statements”





F-30


CHINA LITHIUM TECHNOLOGIES, INC.





CONSOLIDATED STATEMENTS OF CASH FLOWS





FOR THE YEARS ENDED JUNE 30, 2010 AND 2009





2010


2009(Restated)Cash Flows From Operating Activities:Net Income

$
2,428,966


$
1,722,687Adjustments to Reconcile Net Income to Net Cash(Used) Provided by Operating Activities:Depreciation and Amortization Expense


79,582



39,793(Increase) or Decrease in Current Assets:Accounts Receivable


(1,650,101
)


(1,539,295
)Inventories


1,781,307



(199,629
)Prepaid Expenses


38,308



(65,075
)Advanced to Suppliers


(11,512
)


(58
)Other Accounts Receivable


(24,114
)


(13,638
)Increase or (Decrease) in Current Liabilities:Accounts Payable


12,772



958,692Advance from Customers


(1,097
)


2,391Taxes Payable


135,991



41,206Payroll  Payable


23,063



138Interest Payable


(32,732
)


8,273Warranty Accrual


50,773



110,117Other Account Payable


(118,378
)


(317,440
)Accrued Expenses


15,188



15,043Net Cash (Used) Provided by Operating Activities


2,728,016



763,205Cash Flows From Investing Activities:Purchases of Property, Plant and Equipment


(223,292
)


(20,082
)Purchases of Intangible Assets


(2,975
)


(630
)Net Cash (Used) Provided by Investing Activities


(226,267
)


(20,712
)





“Continued on next page”





“ The accompanying notes are an integral part of theses financial statements”





F-31


CHINA LITHIUM TECHNOLOGIES, INC.





CONSOLIDATED STATEMENTS OF CASH FLOWS





FOR THE YEARS ENDED JUNE 30, 2010 AND 2009





2010


2009Cash Flows From Financing Activities:Loan from (Repayment to) Shareholder


(297,842
)


(305,598
)Capital Contribution


114,486



-(Repayment) to Short Term Loan


-



(291,045
)Net Cash (Used) Provided by Financing Activities


(183,356
)


(596,643
)Effect of Exchange Rate Changes on Cash and Cash Equivalents


35,701



(3,208
)Increase in Cash and Cash Equivalents


2,354,094



142,642Cash and Cash Equivalents - Beginning Balance


407,333



264,691Cash and Cash Equivalents - Ending Balance

$
2,761,427


$
407,333Supplemental Disclosures of Cash Flow Information:Cash Paid During the Years for:Interest Paid

$
32,732


$
-Income Taxes Paid

$
837,963


$
493,444





“ The accompanying notes are an integral part of these financial statements”




F-32




CHINA LITHIUM TECHNOLOGIES, INC.
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  JUNE 30, 2010 AND 2009


1.
ORGANIZATION AND BASIS OF PRESENTATION





The Company was incorporated as Sweet Little Deal, Inc. in 1986 under the laws of the State of Minnesota. On October 10, 1991, the Company changed its name to Physicians Insurance Services, Ltd. On July 23, 2008, the Company held a shareholder meeting approving a migratory merger to Nevada and changed its name to PI Services, Inc., which became effective January 12, 2009. On May 6, 2010, PI Services, Inc. changed its name to China Lithium Technologies, Inc. (the “Company”) to reflect the reverse merger of Sky Achieve Holdings, Inc. (“Sky Achieve") into the Company, which became effective on June 2, 2010.




On March 19, 2010 the Company acquired all of the outstanding capital stock of Sky Achieve, a British Virgin Islands limited liability corporation registered in November, 2009 (the “Share Exchange”). Pursuant to ASC 805-10-55-12 et seq., Sky Achieve is deemed to be the acquirer in the Share Exchange, as the prior owner of Sky Achieve obtained the largest portion of the voting rights in the combined entity, and the assets and earnings of Sky Achieve substantially exceeded those of PI Services. The effect of the Share Exchange is such that a reorganization of the entities has occurred for accounting purposes and is deemed to be a reverse merge recapitalization of Sky Achieve. The financial statements presented in this report are those of Sky Achieve and its subsidiaries, including their VIEs, as if the Share Exchange had been in effect retroactively for all periods presented.





Sky Achieve was organized on November 5, 2009 under the laws of British Virgin Islands. It had no business activity from its inception until January 5, 2010. On January 5, 2010, Sky Achieve obtained control over the business of Beijing Guoqiang Science and Technology Development Co., Ltd (“Beijing Guoqiang”) by entering into five agreements with and the equity owners of Beijing Guoqiang. The agreements are designed to transfer to Sky Achieve all of the responsibilities for management of the operations of Beijing Guoqiang, as well as all of the benefits and all of the risks that arise from the operations of Beijing Guoqiang. The relationship is purely contractual, however, so the rights and responsibilities of Sky Achieve with respect to Beijing Guoqiang are ultimately dependent on the willingness of the courts of the PRC to enforce the agreements. For accounting purposes, Beijing Guoqiang is deemed to be a variable interest entity with respect to Sky Achieve, and its balance sheet accounts and financial results are consolidated with the accounts and results of Sky Achieve for financial reporting purposes.





The Company issued 19,151,875 shares of its common stock to the shareholders of Sky Achieve. Those shares represented 95 % of the outstanding shares of the Company. Mr. Kun Liu, the Chairman of Beijing Guoqiang purchased additional 1% of the outstanding shares of the Company simultaneously with the share exchange. As a result of these transactions, persons associated with Beijing Guoqiang owned securities that represented 96% of the equity in the Company as of the completion of the Share Exchange.





Beijing Guoqiang designs, manufacturers and markets Polymer Lithium-ion Battery Modules, Lithium-ion Battery Chargers, Lithium-ion Battery Management Systems as well as other Lithium-ion Battery Management Devices essential to proper power utilization ("PLI Battery Products"). During December of 2009, the Company set up two manufacturing facilities in Hangzhou and Guangzhou to produce power and battery charger.





F-33





CHINA LITHIUM TECHNOLOGIES, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  JUNE 30, 2010 AND 2009


1.
ORGANIZATION AND BASIS OF PRESENTATION (continued)





Reverse stock split


On June 2, 2010, the Company implemented a 1-for 2.2 reverse split of its common stock. All enumerations herein of numbers of common shares or per share amounts have been adjusted as needed to give retroactive effect to the reverse stock split.





2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES





Principles of consolidation


The accompanying audited consolidated financial statements include China Lithium Technologies, Inc. and its wholly owned subsidiary, Sky Achieve Holdings, Inc., as well as its variable interest entity, Beijing Guoqiang Global Science and Technology Development Co, Ltd. All significant inter-company transactions and balances have been eliminated in the consolidation.





Variable interest entity


The accounts of Beijing Guoqiang have been consolidated with the accounts of the Company because Beijing Guoqiang is a variable interest entity with respect to Sky Achieve, which is a wholly-owned subsidiary of the Company. Sky Achieve is party to five agreements dated January 5, 2010 with the owners of the registered equity of Beijing Guoqiang and with Beijing Guoqiang. The agreements transfer to Sky Achieve all of the benefits and all of the risk arising from the operations of Beijing Guoqiang, as well as complete managerial authority over the operations of Beijing Guoqiang. Sky Achieve is the guarantor of all of the obligations of Beijing Guoqiang. By reason of the relationship describe in these agreements, Beijing Guoqiang is a variable interest entity with respect to Sky Achieve because the following characteristics in ASC 810-10-15-14 are present:





●The holders of the equity investment in Beijing Guoqiang lack the direct or indirect ability to make decisions about the entity’s activities that have a significant effect on the success of Beijing Guoqiang, having assigned their voting rights and all managerial authority to Sky Achieve. (ASC 810-10-15-14(b)(1)).





●The holders of the equity investment in Beijing Guoqiang lack the obligation to absorb the expected losses of Beijing Guoqiang, having assigned to Sky Achieve all revenue and responsibility for all payables. (ASC 810-10-15-14(b)(2)).





●The holders of the equity investment in Beijing Guoqiang lack the right to receive the expected residual returns of Beijing Guoqiang, having granted to Sky Achieve all revenue as well as an option to purchase the equity interests at a fixed price. (ASC 810-10-15-14(b)(3)).





Because the relationship between Beijing Guoqiang and Sky Achieve is entirely contractual, the Company’s interest in Beijing Guoqiang depends on the enforceability of those agreements under the laws of the PRC. We are not aware of any judicial decision as to the enforceability of similar agreements under PRC law.




F-34




CHINA LITHIUM TECHNOLOGIES, INC.
 
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
 JUNE 30, 2010 AND 2009


2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)





Reclassification


Certain prior period amounts have been reclassified to conform to the current period presentation. These reclassifications had no effect on reported total assets, liabilities, stockholders’ equity or net income.





Cash and cash equivalent


For purposes of the statement of cash flows, the Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents.





Trade accounts receivable


Trade accounts receivable are stated at net realizable value, net of allowances for doubtful accounts and sales returns. The allowance for doubtful accounts is established based on the management’s assessment of the recoverability of accounts and other receivables.





The Company determines the allowance based on historical write-off experience, customer specific facts and current crisis on economic conditions. Bad debt expense is included in the general and administrative expenses.





Outstanding account balances are reviewed individually for collectability. Account balances are charged off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote.





Inventories


Inventories are initially stated at the level of the original cost. The cost of inventories is determined using first-in first-out cost method, and includes expenditure incurred in acquiring the inventories and bringing them to their existing location and condition. In case of finished goods and work in progress, cost includes an appropriate share of production overhead based on normal operating capacity.





The Company regularly reviews the cost of inventories against their estimated fair market value and records a lower of cost or market write-down for inventories that have cost in excess of estimated market value.





Advances to suppliers


The Company makes advances to certain vendors for inventory purchases. The advances to suppliers were $12,297 and $785 as of June 30, 2010 and 2009 respectively.





Property and equipment


Property and equipment are stated at cost, net of accumulated depreciation. Maintenance, repairs and betterments, including replacement of minor items, are charged to expense; major additions to physical properties are capitalized.





Plant and equipments are depreciated using the straight-line method over 3-5 years estimated useful lives.





Leasehold improvements are amortized using the straight-line method over the term of the leases or the estimated useful lives, whichever is shorter.





F-35




CHINA LITHIUM TECHNOLOGIES, INC.
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  JUNE 30, 2010 AND 2009


2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)





Construction in progress


Construction in progress represents direct costs of construction or acquisition and design fees incurred. Capitalization of these costs ceases and the construction in progress is transferred to plant and equipment when substantially all the activities necessary to prepare the assets for their intended use are completed. No depreciation is provided until it is completed and ready for intended use. The values of construction in progress were $0 and $9,828 as of June 30, 2010 and 2009 respectively.





Impairment of long-lived assets


The Company accounts for long-lived assets in accordance with ASC 360 “Accounting for the Impairment of Disposal of Long-Lived Assets”, which became effective January 1, 2002. Under ASC 360, the Company reviews long-term assets for impairment whenever events or circumstances indicate that the carrying amount of those assets may not be recoverable. The Company has not incurred any losses in connection with the adoption of this statement.





Revenue recognition


The Company recognizes revenue on product sales when each of the following conditions has been satisfied:





●Persuasive evidence of a sales arrangement exists in the form of a written contract or an order and acknowledge.





●The sales price has been fixed and made determinable by sales contract and/or invoice.





●   The product has been delivered to the customer’s warehouse – unless other terms for delivery have been specified in the contract – at which time the customer takes ownership and the risk of loss passes to the customers.





●Payment has been received or the Company determines that collection of the related receivable is probable. Probability of collection is determined based on recurrent visits by the Company’s sales staff and accounting staff to the customer’s premises to assess the health of the customer’s business.





●The 15 day right of return that we afford to customers has expired.





Net sales of products represent the invoiced value of goods, net of Value Added Taxes (“VAT”), sales returns, trade discounts and allowances. The Company is subject to VAT which is levied on the majority of the products of the Company at the rate of 17% on the invoiced value of sales. Output VAT is borne by customers in addition to the invoiced value of sales and input VAT is borne by the Company in addition to the invoiced value of purchases to the extent not refunded for export sales. Our standard contract allows customers, within 15 days after delivery, to return for cash or exchange products with which they are not satisfied. Shipping charges on the return are allocated between the customer and the Company based on relative fault. We do not recognize revenue until the 15 day right of return has expired. After the 15 days has expired, the Company provides customers with no additional post-delivery rights, except as set forth in its product warrant. We record a provision for warranty claims, which is based on historical warranty claims data and represents the Company’s best estimate of warranty claims it will experience.




F-36


CHINA LITHIUM TECHNOLOGIES, INC.
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  JUNE 30, 2010 AND 2009


2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)





Cost of goods sold


Cost of goods sold consists primarily of material, and related expenses, which are directly attributable to the production of products. The Company presents cost of goods sold and manufacturing expenses separately in the income statement.





Use of estimates


In preparing the financial statements in conformity with accounting principles generally accepted in the United States of America, management makes estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the dates of the financial statements, as well as the reported amounts of revenues and expenses during the reporting year. Significant estimates, required by management, include the recoverability of long-lived assets and valuation allowances for receivables.  Actual results could differ from those estimates.





Concentration of credit risk


Financial instruments that potentially subject the Company to significant concentrations of credit risk consist of cash and cash equivalents and accounts and other receivables. As of June 30, 2010 and June 30, 2009, substantially all of the Company’s cash and cash equivalents were held by major banks located in the PRC of which the Company’s management believes high credit quality banks. With respect to accounts receivable, the Company extends credit based on an evaluation of the customer’s financial condition and customer payment practices to minimize collection risk on account receivable.





Foreign currency translation


The functional currency of Beijing Guoqiang is Chinese Renminbi (“RMB”). For financial reporting purposes, RMB has been translated into United States Dollars ("USD") as the reporting currency. Assets and liabilities are translated at the exchange rates at the balance sheet date, equity accounts are translated at historical exchange rates, and income and expenses items are translated using the average rate for the period. Translation adjustments arising from the use of different exchange rates from period to period are included as a component of stockholders' equity as "Accumulated other comprehensive income." Gains and losses resulting from foreign currency translation are included in accumulated other comprehensive income.





RMB is not a fully convertible currency. All foreign exchange transactions involving RMB must take place either through the People’s Bank of China (the “PBOC”) or other institutions authorized to buy and sell foreign exchange. The exchange rates adopted for the foreign exchange transactions are the rates of exchange quoted by the PBOC. Translation of amounts from RMB into US dollar has been made at the following exchange rates for the respective years:





June 30, 2010Balance sheet
RMB 6.7889 to US $1.00Statement of income and other comprehensive income
RMB 6.8180 to US $1.00





F-37




CHINA LITHIUM TECHNOLOGIES, INC.
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  JUNE 30, 2010 AND 2009


2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)





June 30, 2009Balance sheet
RMB 6.8259 to US $1.00Statement of income and other comprehensive income
RMB 6.8259 to US $1.00





Income taxes


The Company accounts for income tax under the provisions of FASB ASC 740 "Accounting for Income Taxes", which requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns.  Under this method, deferred income taxes are recognized for the tax consequences in future years of differences between the tax bases of assets and liabilities and their financial reporting amounts at each period end based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, whenever necessary, against net deferred tax assets when it is more likely than not that some portion or the entire deferred tax asset will not be realized. There are no deferred tax amounts at June 30, 2010 and 2009.





Fair value of financial instruments


The Company’s financial instruments include cash and cash equivalents, accounts receivable, advances to suppliers, other receivables, accounts payable, accrued expenses, taxes payable, payroll and other loans payable. Management has estimated that the carrying amounts approximate their fair value due to the short-term nature.





Commitments and contingencies


Liabilities for loss contingencies arising from claims, assessments, litigation, fines and penalties and other sources are recorded when it is probable that a liability has been incurred and the amount of the assessment can be reasonably estimated.





Intangible assets


Intangible assets mainly consist of patents. Patents have being amortized using the straight-line method over the 10 years. Other intangible assets have being amortized using the straight-line method over the 5 years.  The Company also evaluates intangible assets for impairment, at least on an annual basis and whenever events or changes in circumstances indicate that the carrying value may not be recoverable from its estimated future cash flows.





Comprehensive income


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





Statement of cash flows


In accordance with Accounting Standards Codification, ASC 230, “Statement of Cash Flows,” cash flows from the Company’s operations are calculated based upon the local currencies. As a result, amounts related to assets and liabilities reported on the statement of cash flows will not necessarily agree with changes in the corresponding balances on the balance sheet.





F-38




CHINA LITHIUM TECHNOLOGIES, INC.
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  JUNE 30, 2010 AND 2009


2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)


Reserved funds


Until June 20, 2006, entities organized in the PRC were required to transfer 15% of their profit after taxation, as determined in accordance with Chinese accounting standards and regulations, to the surplus reserve fund. Subject to certain restrictions set out in the Chinese Companies Law, the surplus reserve fund may be distributed to stockholders in the form of share bonus issues and/or cash dividends. After June 30, 2006, such reserve is no longer mandatory under the Chinese Law. However the Company from time to time allocates funds to its reserve fund for its future development.





Recently issued accounting standards





In January 2010, FASB issued ASU No. 2010-06 - Improving Disclosures about Fair Value Measurements. This update provides amendments to Subtopic 820-10 that requires new disclosure as follows: 1) Transfers in and out of Levels 1 and 2. A reporting entity should disclose separately the amounts of significant transfers in and out of Level 1 and Level 2 fair value measurements and describe the reasons for the transfers. 2) Activity in Level 3 fair value measurements. In the reconciliation for fair value measurements using significant unobservable inputs (Level 3), a reporting entity should present separately information about purchases, sales, issuances, and settlements (that is, on a gross basis rather than as one net number). This update provides amendments to Subtopic 820-10 that clarifies existing disclosures as follows: 1) Level of disaggregation. A reporting entity should provide fair value measurement disclosures for each class of assets and liabilities. A class is often a subset of assets or liabilities within a line item in the statement of financial position. A reporting entity needs to use judgment in determining the appropriate classes of assets and liabilities. 2) Disclosures about inputs and valuation techniques. A reporting entity should provide disclosures about the valuation techniques and inputs used to measure fair value for both recurring and nonrecurring fair value measurements. Those disclosures are required for fair value measurements that fall in either Level 2 or Level 3. The new disclosures and clarifications of existing disclosures are effective for interim and annual reporting periods beginning after December 15, 2009, except for the disclosures about purchases, sales, issuances, and settlements in the roll forward of activity in Level 3 fair value measurements. Those disclosures are effective for fiscal years beginning after December 15, 2010, and for interim periods within those fiscal years. The Company is currently evaluating the impact of its ASU; however, the Company does not expect the adoption of this ASU to have a material impact on its financial statements.





In January 2010, FASB issued ASU No. 2010-02 - Accounting and Reporting for Decreases in Ownership of a Subsidiary - a Scope Clarification. The amendments in this Update affect accounting and reporting by an entity that experiences a decrease in ownership in a subsidiary that is a business or nonprofit activity. The amendments also affect accounting and reporting by an entity that exchanges a group of assets that constitutes a business or nonprofit activity for an equity interest in another entity. The amendments in this update are effective beginning in the period that an entity adopts SFAS No. 160, "Non-controlling Interests in Consolidated Financial Statements - An Amendment of ARB No. 51." If an entity has previously adopted SFAS No. 160 as of the date the amendments in this update are included in the Accounting Standards Codification, the amendments in this update are effective beginning in the first interim or annual reporting period ending on or after December 15, 2009. The amendments in this update should be applied retrospectively to the first period that an entity adopted SFAS No. 160. The Company does not expect the adoption of this ASU to have a material impact on its financial statements.




F-39




CHINA LITHIUM TECHNOLOGIES, INC.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  JUNE 30, 2010 AND 2009


2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)





In January 2010, FASB issued ASU No. 2010-01- Accounting for Distributions to Shareholders with Components of Stock and Cash. The amendments in this Update clarify that the stock portion of a distribution to shareholders that allows them to elect to receive cash or stock with a potential limitation on the total amount of cash that all shareholders can elect to receive in the aggregate is considered a share issuance that is reflected in EPS prospectively and is not a stock dividend for purposes of applying Topics 505 and 260 (Equity and Earnings Per Share). The amendments in this update are effective for interim and annual periods ending on or after December 15, 2009, and should be applied on a retrospective basis. The Company does not expect the adoption of this ASU to have a material impact on its financial statements.





In January 2010, FASB issued ASU No. 2010-02 regarding accounting and reporting for decreases in ownership of a subsidiary. Under this guidance, an entity is required to deconsolidate a subsidiary when the entity ceases to have a controlling financial interest in the subsidiary. Upon deconsolidation of a subsidiary, and entity recognizes a gain or loss on the transaction and measures any retained investment in the subsidiary at fair value. In contrast, an entity is required to account for a decrease in its ownership interest of a subsidiary that does not result in a change of control of the subsidiary as an equity transaction. This ASU clarifies the scope of the decrease in ownership provisions, and expands the disclosures about the deconsolidation of a subsidiary or de-recognition of a group of assets. This ASU is effective for beginning in the first interim or annual reporting period ending on or after December 31, 2009. The Company is currently evaluating the impact of this ASU; however, the Company does not expect the adoption of this ASU to have a material impact on its financial statements.





In December, 2009, FASB issued ASU No. 2009-17, Improvements to Financial Reporting by Enterprises Involved with Variable Interest Entities. This Accounting Standards Update amends the FASB Accounting Standards Codification for the issuance of FASB Statement No. 167, Amendments to FASB Interpretation No. 46(R). The amendments in this Accounting Standards Update replace the quantitative-based risks and rewards calculation for determining which reporting entity, if any, has a controlling financial interest in a variable interest entity with an approach focused on identifying which reporting entity has the power to direct the activities of a variable interest entity that most significantly impact the entity's economic performance and (1) the obligation to absorb losses of the entity or (2) the right to receive benefits from the entity. An approach that is expected to be primarily qualitative will be more effective for identifying which reporting entity has a controlling financial interest in a variable interest entity. The amendments in this Update also require additional disclosures about a reporting entity's involvement in variable interest entities, which will enhance the information provided to users of financial statements. The Company is currently evaluating the impact of this ASU; however, the Company does not expect the adoption of this ASU to have a material impact on its financial statements.




F-40


CHINA LITHIUM TECHNOLOGIES, INC.
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  JUNE 30, 2010 AND 2009


2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)





In December 2009, FASB issued ASU No. 2009-16, Accounting for Transfers of Financial Assets. This Accounting Standards Update amends the FASB Accounting Standards Codification for the issuance of FASB Statement No. 166, Accounting for Transfers of Financial Assets-an amendment of FASB Statement No. 140. The amendments in this Accounting Standards Update improve financial reporting by eliminating the exceptions for qualifying special-purpose entities from the consolidation guidance and the exception that permitted sale accounting for certain mortgage securitizations when a transferor has not surrendered control over the transferred financial assets.





In December 2009, FASB issued ASU No. 2009-16, Accounting for Transfers of Financial Assets. This Accounting Standards Update amends the FASB Accounting Standards Codification for the issuance of FASB Statement No. 166, Accounting for Transfers of Financial Assets-an amendment of FASB Statement No. 140.The amendments in this Accounting Standards Update improve financial reporting by eliminating the exceptions for qualifying special-purpose entities from the consolidation guidance and the exception that permitted sale accounting for certain mortgage securitizations when a transferor has not surrendered control over the transferred financial assets. In addition, the amendments require enhanced disclosures about the risks that a transferor continues to be exposed to because of its continuing involvement in transferred financial assets. Comparability and consistency in accounting for transferred financial assets will also be improved through clarifications of the requirements for isolation and limitations on portions of financial assets that are eligible for sale accounting. The Company does not expect the adoption of this ASU to have a material impact on its financial statements.





3.   INVENTORIES




The components of inventories at June 30, 2010 and 2009 are as follows:





June 30, 2010


June 30, 2009Raw Materials

$
440,027


$
1,774,234Work in Process


90,428



529Finished Goods


253,827



790,034Low Value Items


1,731



2,523Total

$
786,013


$
2,567,320





As of June 30, 2010 and 2009, the Company has not recorded any reserve for inventory obsolescence.





F-41





CHINA LITHIUM TECHNOLOGIES, INC.





NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





JUNE 30, 2010 AND 2009





4.   PROPERTY AND EQUIPMENT





A summary of property and equipment at June 30, 2010 and 2009 are as follows:





June 30, 2010


June 30, 2009Building and Improvement

$
41,859


$
0Machinery and Equipment


307,249



124,480Motor Vehicle


29,460



29,300Construction in Progress


-



9,828Less: Accumulated Depreciation


(116,757
)


(47,182
)Total Property and Equipment, net

$
261,811


$
116,426





Depreciation expenses for years ended June 30, 2010 and 2009 were $69,021 and $29,533 respectively.





5. PATENT AND OTHER INTANGIBLES





The net book value of intangible assets as of June 30, 2010 and 2009 was comprised of the following:





June 30, 2010


June 30, 2009Intangible Assets

$
106,719


$
103,180Less: Accumulated Amortization


(33,811
)


(23,079
)TotalIntangible Assets, net

$
72,907


$
80,101





Amortization expenses for years ended June 30, 2010 and 2009 were $10,561 and $10,260 respectively.





Based upon current assumptions, the Company expects that, during the next five years, its intangible assets will be amortized according to the following schedule:





Balance at June 30,

Amount2011

$
10,7332012


10,7332013


10,7332014


10,7332015


10,733Total 5 years

$
53,665


F-42


CHINA LITHIUM TECHNOLOGIES, INC.





NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





JUNE 30, 2010 AND 2009





6.  ACCOUNTS RECEIVABLE





Accounts receivable are uncollateralized, non-interest bearing customer obligations typically due under terms requiring payment from the invoice date. Payments of accounts receivable are allocated to the specific invoices identified on the customer’s remittance advice or, if unspecified, are applied to the oldest unpaid invoices. As of June 30, 2010 and 2009, accounts receivable and allowance for doubtful account as follow:





June 30, 2010


June 30, 2009Accounts Receivable

$
4,201,211


$
2,475,997Less: Allowance for Doubtful Accounts


(147,022
)


(71,908
)TotalAccounts Receivable, net

$
4,054,189


$
2,404,088





7.  ACCOUNTS PAYABLE





The Company has accounts payable related to the purchase of inventory. The amount of $1,832,512 and $1,819,740 as of June 30, 2010 and June 30, 2009 respectively, represent the accounts payable by the Company to the suppliers.





8.  ACCRUED EXPENSES AND OTHER PAYABLE





Accrued expenses consist of audit fee and the payroll taxes for the current year. As of June 30, 2010 and June 30, 2009, the balance was $45,074 and $29,886, respectively. Other accounts payable consists of miscellaneous items. As of June 30, 2010 and June 30, 2009, the balances were $4,495 and $122,873, respectively.





9. WARRANTY ACCRUAL





The Company provides its customers a 2 years warranty on all products sold. In anticipation of warranty repairs, the Company accrues 1% of the sales amount as a “Warranty Accrual.” The Company believes that the accrual is adequate based on its historical warranty experience. If the goods sold have no quality problems within 2 years, the Company reverses the warranty accrual. As of June 30, 2010 and June 30, 2009, the warranty accrual was $237,374 and $186,601 respectively.





For the year ended June 30, 2010, the Company honored warranty claims for a total of $33,961, which equaled 0.3% of sales during the year ended June 30, 2009 and 0.2% of sales during the year ended June 30, 2010.





10. STOCKHOLDERS’ EQUITY





As of June 30, 2010, 780,000,000 shares have been authorized and 20,159,811 shares are outstanding. The Company implemented a 1-for-2.2 reverse split on June 2, 2010. Retroactive effect is being given to the reverse split in these financial statements.  Income statements have retroactively used the new outstanding shares to calculate the EPS. Stated capital in the stockholders’ equity section has been reduced accordingly.


F-43


CHINA LITHIUM TECHNOLOGIES, INC.





NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





JUNE 30, 2010 AND 2009





11. INCOME TAXES




The Company’s VIE, Beijing Guoqiang, is registered and operates in Beijing, PRC. In accordance with the relevant tax laws and regulations of PRC, Beijing Guoqiang is subject to income tax at an effective rate of 25% from January 1, 2008 on income reported in the statutory financial statements after appropriated tax adjustments. Because there is no income tax in the British Virgin Islands, Sky Achieve is not subject to taxation in its domicile.
 
 The Company had no uncertain tax positions as of June 30, 2010 and 2009. The following table sets forth the components of the Company’s income before income tax expense and the components of income tax expense for the year ended June 30, 2010 and 2009:
 
 June 30, 2010


June 30, 2009China Pre-tax Income (Loss)

$
3,349,944


$
2,296,916Domestic Pre-tax Income (Loss)


(83,492
)


-Total Pre-tax Income (Loss)

$
3,266,452


$
2,296,916
 
 June 30, 2010


June 30, 2009China Income Tax Expense

$
837,486


$
574,229Domestic Income Tax Expense


-



-Total Current Income Tax Expense

$
837,486


$
574,229
 
 A reconciliation of tax at United States federal statutory rate to provision for income tax recorded in the financial statements is as follows:
 
 June 30, 2010


June 30, 2009U.S. Statutory Income Tax Rate


34.0
%


34.0
%Foreign Income not Recognized in the U.S.


(34.0
%)


(34.0
%)China Statutory Income Tax Rate


25.0
%


25.0
%Other Items (a)


0.64
%


-Effective Consolidated Current Income Tax Rate


25.64
%


25.00
%
 
 (a). The 0.64% represents $83,492 of corporate expenses incurred by the Company’s US office that are not subject to PRC income tax for year ended June 30, 2010. There was no US office during the year ended June 30, 2009.
 
 The Company was incorporated in the United States. It incurred net operating losses for U.S. income tax purposes for the years ended June 30, 2010. Net operating loss carry forwards for United States income tax purposes amounted to $83,492 as of June 30, 2010, which may be available to reduce future periods’ US taxable income. These carry forwards will expire, if not utilized, beginning in 2029 through 2030. Management believes that the realization of the benefits arising from this loss appear to be uncertain due to Company's limited operating history and continuing losses for United States income tax purposes. Accordingly, the Company has provided a 100% valuation allowance at June 30, 2010 for the temporary difference related to the loss carry-forwards. Management reviews this valuation allowance periodically and makes adjustments as warranted. At June 30, 2010 and 2009, the deferred tax assets/ (liabilities) and the related valuation allowance were as follows:
 
 June 30, 2010


June 30, 2009U.S. Holding Company Net Operating Loss Carry-forward

$
28,387



-Other Deferred Tax Assets


-



-Less: Valuation Allowance


(28,387
)


-Net


-



-
 12. CURRENT VULNERABILITY DUE TO CERTAIN CONCENTRATIONS





The Company's operations are carried out in the PRC. Accordingly, the Company's business, financial condition and results of operations may be influenced by the political, economic and legal environments in the PRC, and by the general state of the PRC's economy.


F-44


CHINA LITHIUM TECHNOLOGIES, INC.





NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





JUNE 30, 2010 AND 2009





12. CURRENT VULNERABILITY DUE TO CERTAIN CONCENTRATIONS(continued)




The Company's operations in the PRC are subject to specific considerations and significant risks not typically associated with companies in the North America and Western Europe. These include risks associated with, among others, the political, economic and legal environments and foreign currency exchange. The Company's results may be adversely affected by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency conversion and remittance abroad, and rates and methods of taxation, among other things.





The future profitability of the Company is dependent upon the Company's abilities to secure service contracts and maintain the operating expense at a competitive level.





Concentration of credit risk


Financial instruments that potentially subject to significant concentrations of credit risk consist of cash and cash equivalents. As of June 30, 2010 and June 30, 2009, substantially all of the Company’s cash and cash equivalents were held by major banks which located in the PRC. The Company’s management believes that there are remote chances the Company will loss money on those banks. With respect to accounts receivable, the Company extends credit based on an evaluation of the customer’s financial condition and customer payment practices to minimize collection risk on account receivables.





The major customers which represented more than 5% of total Accounts Receivable as follows:





June 30, 2010


June 30, 2009Customer Name

Amount


%


Amount


%Beijing Anhualianhe Co., Ltd


275,539



6.56
%


-



0.00
%Beijing Renxinyu Trading Co., Ltd


474,070



11.28
%


84,753



3.42
%Yangguangsanwei Electronic Appliance Co., Ltd


258,880



6.16
%


5,418



0.22
%Beijing Ziqiangfa Technology Co., Ltd


256,231



6.10
%


49,388



1.99
%Beijing Jiruiyueda Electronic Facility Co., Ltd


349,617



8.32
%


-



0.00
%Guangzhou Chuangxin Power Technology Co., Ltd


413,795



9.85
%


-



0.00
%





The major vendors which represented more than 5% of total Accounts Payable as follows:





June 30, 2010


June 30, 2009Vendor Name

Amount


%


Amount


%Heilongjiang Zhongqiang Power Tech Ltd


1,593,055



86.93
%


1,462,803



80.39
%Guangzhou Fanyubaiyun Electronic Co., Ltd


98,574



5.38
%


-



0.00
%


F-45


CHINA LITHIUM TECHNOLOGIES, INC.





NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





JUNE 30, 2010 AND 2009





12. CURRENT VULNERABILITY DUE TO CERTAIN CONCENTRATIONS(continued)





The major clients which represented 5% and more of the total sales for the years ended June 30, 2010 and 2009 are as follows:





June 30, 2010


June 30, 2009Customer Name

Amount


%


Amount


%Guangzhou Chuangxin Power Technology Co., Ltd


696,983



4.96
%


-



0.00
%Yangguangsanwei Electronic Appliance Co., Ltd


931,367



6.62
%


943,450



8.61
%Tianjin Dongfang Weier Technology Co., Ltd


683,181



4.86
%


864,861



7.89
%Beijing Fuerxuan Technology Co., Ltd


649,665



4.62
%


815,219



7.44
%Beijing Ziqiangfa Technology Co., Ltd


842,380



5.99
%


576,399



5.26
%Beijing Renxinyu Trading Co., Ltd


1,108,604



7.24
%


691,245



6.31
%Beijing Anhualianhe Co., Ltd


954,797



6.79
%


583,005



5.32
%Hebei Shijihengxing Electronic Technology Co., Ltd


819,221



5.83
%


500,276



4.56
%





The major vendors which represented more than 5% of the total purchases for the years ended June 30, 2010 and 2009:





June 30, 2010


June 30, 2009Vendor Name

Amount


%


Amount


%Heilongjiang Zhongqiang Power Tech Ltd


6,713,349



88.54
%


7,479,764



92.74
%Guangzhou Fanyubaiyun Electronic Co., Ltd


397,352



5.24
%


-



0.00
%





13. RELATED PARTY TRANSACTIONS





A significant portion of the Company’s raw materials were purchased from Heilongjiang Zhongqiang Power Tech Co., Ltd (Heilongjiang ZQPT), which is a subsidiary of Advanced Battery Technologies, Inc (ABAT). One of the Company’s directors, Mr. Qiang Fu, is an immediate family member of the CEO of ABAT, which has exclusive control over the business of Heilongjiang ZQPT. Purchases from Heilongjiang ZQPT was $6,713,349, or 88.54% of the total purchases for the year ended June 30, 2010, and $7,479,764, or 92.74% of the total purchases for the year ended June 30, 2009. As of June 30, 2010, the total amount due to Heilongjiang ZQPT was $1,593,055, or 86.93% of the total accounts payable. As of June 30, 2009, the total amount due to Heilongjiang ZQPT was $1,462,803, or 80.39% of the total accounts payable.





As of June 30, 2010, there are two supply contracts outstanding between the Company and Heilongjiang ZQPT, one dated February 24, 2010 and the other dated March 22, 2010. The February 24 contact contains the parties’ agreement to purchase and sell 3000 units of a specified 72 volt battery for 27,000 RMB per unit. Delivery will be scheduled by Beijing Guoqiang by notice not less than 25 days before delivery. Heilongjiang ZQPT shall pay transportation costs. Title transfers ex factory, and national testing standards will apply. The March 22 contract has identical terms, but contemplates the purchase and sale of 60,000 units of a 3.2 volt battery at 105 RMB per unit.


F-46


CHINA LITHIUM TECHNOLOGIES, INC.





NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





JUNE 30, 2010 AND 2009





14. SUBSEQUENT EVENT





On September 2, 2010, a principal shareholder of the Company transferred 358,500 shares of common stock to the Company’s employees in recognition of prior services. The Company has recorded the transfer as a contribution to the Company’s capital and a stock-based compensation expense, which was valued by the closing stock price of $2.00 at the date of transfer, since these shares were fully-vested and non-forfeitable. The contribution to capital and compensation cost recorded to in relation to this transfer was $717,000.




15.   RESTATEMENT




We have restated the Consolidated Statements of Changes in Stockholders’ Equity for the years ended June 30, 2009 and June 30, 2010. The reason for the restatement is that the Consolidated Statements of Changes in Stockholders’ Equity as originally issued failed to properly account for the reverse merger of Sky Achieve Holdings into the Company in March 2010. Pursuant to ASC 805-40-45-1, the Consolidated Statements of Changes in Stockholders’ Equity of the Company after the reverse merger should reflect the historic capital structure of Sky Achieve Holdings (the accounting acquirer) adjusted to reflect the legal capital of the Company prior to the reverse merger. As a result of the restatement, the shares issued to the prior owners of Sky Achieve Holdings in the reverse merger and thecapital associated with the shares issued in the reverse merger are is shown as outstanding in the balance at June 30, 2008 and thereafter, and the shares of the public company outstanding at the time of the reverse merger and the capital associated with those shares are shown as issued at the time of the reverse merger.The effect of the restatement on the Consolidated Statements of Changes in Stockholders Equity is shown below:
 
 As Originally Reported


As Restated6/30/08

Balance

Common Stock – Shares


-



19,151,875Common Stock – Amount

$
129,340


$
19,151Additional Paid in Capital

$
29,104


$
139,293Comprehensive Income Consolidation Adjustment

Common Stock – Amount

$
(129,340
)


-Additional Paid in Capital

$
(29,104
)


-Issuance of Common Stock

Common Stock - Shares


1,007,936



-Common Stock - Amount

$
1,008



-Additional Paid in Capital

$
157,436



-6/30/09

Balance

Common Stock - Shares


1,007,936



19,151,875Common Stock - Amount

$
1,008


$
19,151Additional Paid in Capital

$
157,436


$
139,293Issuance of Common

Common Stock - Shares


19,151,875



1,007,936Stock/Reverse Acquisition

Common Stock - Amount

$
19,151


$
1,008Equity Adjustments*

Additional Paid in Capital

$
72,352


$
113,4786/30/10

Balance

Additional Paid in Capital

$
229,788


$
252,771Total Stockholders’ Equity

$
5,467,999


$
5,490,982
 
 *  The effects of the reverse merger on shareholders’ equity were identified as “issuance of common stock” in our original filing and are identified as “reverse acquisition equity adjustments” in the amended filing.
 
 The restatement resulted in a recalculation of weighted average shares outstanding for each of the past two fiscal years.  The effect of that recalculation on earnings per share is shown below:
 
 Earnings Per Share

As Originally Reported


As RestatedYear Ended June 30, 2010

$
0.12


$
0.12Year Ended June 30, 2009

$
1.71


$
0.09


F-47




ITEM 9.Changes In and Disagreements with Accountants on Accounting and Financial Disclosure





None.





ITEM 9A(T).   Controls and Procedures





Evaluation of Disclosure Controls and Procedures





The Company's management, with the participation of the Chief Executive Officer and the Chief Financial Officer has evaluated the effectiveness of the Company's disclosure controls and procedures as of the end of the period covered by this annual report (the "Evaluation Date"). Based on that evaluation, the Company's Chief Executive Officer and Chief Financial Officer have concluded that, as of the Evaluation Date, such controls and procedures were not effective. The weaknesses in the Company's controls and procedures consisted of (a) a lack of expertise in identifying and addressing accounting issues under U.S. Generally Accepted Accounting Principles among the personnel in the Company's accounting department, which has resulted in certain errors in accounting identified in Note 15 to the Consolidated Financial Statements, (b) a lack of expertise among Company personnel with regard to the disclosure requirements arising under the Rules of the Securities and Exchange Commission, and (c) inadequate review by management personnel of the Company's reports prior to filing, which has resulted in errors identified on the cover page of this amended report as the reasons for the amendment.





Management's Report on Internal Control over Financial Reporting





Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934, as amended). Our management assessed the effectiveness of our internal control over financial reporting as of June 30, 2010. Our internal control over financial reporting is a process designed by or under the supervision of our principal executive and principal financial officers to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.





Our internal control over financial reporting includes policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect transactions and dispositions of assets; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures are being made only in accordance with authorizations of management and the directors of the Company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company's assets that could have a material effect on our financial statements.




In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO") in 'Internal Control - Integrated Framework'. As a result of that assessment, our management determined that there were  weaknesses in our internal control over financial reporting.  The specific weaknesses are those identified  above in “Evaluation of Disclosure Controls and Procedures.”  Accordingly, our management has concluded that, as of June 30, 2010, our internal control over financial reporting was not effective.
 
 This annual report does not include an attestation report of the company's registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by the company's registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the company to provide only management's report in this annual report.
 
 There were no changes in our internal controls over financial reporting that have materially affected, or are reasonably likely to materially affect our internal controls over financial reporting.




48




ITEM 9B.Other Information




None.




PART III.





ITEM 10.Directors and Executive Officers of the Registrant, and Corporate Governance




DIRECTORS AND OFFICERS




The following are the officers and directors of China Lithium Technologies. All directors hold office until the next annual meeting of our shareholders and until their successors have been elected and qualify. We believe that each officer and director has the experience, qualifications, attributes and skills necessary to serve on the Board or as an officer because of his academic background, knowledge in the battery industry and in business generally. Officers serve at the pleasure of the Board of Directors. As the Company has not held an annual meeting in the recent past and does not anticipate doing so in the foreseeable future, the term of office of members of our Board of Directors is, effectively, indefinite.




Name

Age

Positions with the CompanyKun Liu

34

Chairman, CEOChunping Fong

54

Chief Financial OfficerFang Ai

30

Chief Technology OfficerJijun Zhang

31

Vice President and DirectorQiang Fu

33

DirectorChengzhou Xu

61

Chief Engineer





Mr. Kun Liu
Chairman and CEO. Mr. Liu is the founder of Beijing Guoqiang and has been the Chairman of the Company since 2007. Mr. Liu was appointed to the Board of Directors in order to contribute his vision for the growth of the Company.  From 2004 to 2006, he was president in Beijing Ulong Runsheng S&T Development Co.,Ltd. a company engaged in manufacturing related battery products like protected board, charger, etc. From 2002 to 2004, he was general manager in Tianjin Runyi S&T Development Co., Ltd. a company engaged in research and development of power Li-thium batteries. Mr. Liu has a Master of Engineering of Industry Engineering Department in Tsinghua University.


49





Ms. ChunPing Fong
Chief Financial Officer. Ms. Fong has worked for Beijing Guoqiang since 2008. From 1993 to 1998, she was financial officer and deputy audit officer in Beijing Printing Group a company engaged in printing industry. From 1986 to 1992, she was deputy factory director in Beijing Grand View Garden Industrial Arts Factory a company engaged in industrial art and from 1976 to 1985 she was financial officer in Beijing Machine Factory a company engaged in metallurgy industry. From 1998 to 2008, Ms. Fong was employed as manager of the accounting department of Beijing Printing Corp.  She has a bachelor's degree graduated from Beijing Technology and Business University majored in accounting.Mr. Fang Ai
Chief Technology Officer..Mr. Ai has worked for Beijing Guoqiang since 2008. From 2007 to 2008, he was business manager in Tongfang Integrated Circuit Co., Ltd. a company engaged in digital information and security system. From 2003 to 2007, he was associate general engineer in Hengxin China Holding Co., Ltd., one of the largest digital television's chip designer and manufacturer in China. Mr. Ai has a Master of Engineering of Electronic Message Engineering System in Beijing Information S&T University.Mr. JiJun Zhang
Vice President and Director. Mr. Zhang has worked for Beijing Guoqiang since 2009.  Mr. Zhang was appointed to the Company’s Board of Directors in order to contribute the insights into the management of growth companies that he has gained in his previous employment and education.  From 2008 to 2009, he was office chief in Beijing Fuqiang Global Consulting Co., Ltd. a consulting company. From 2006 to 2008, he taught at Hebei Normal University. From 2004 to 2005, he was training manager in Beijing JSD Management Consulting Co., Ltd, a company engaged in financial consultation. . Mr. Zhang has a Master's degree graduated from Hebei University of Economics & Business in the major of administration management.Mr. ChengZhou Xu
Chief Engineer. Mr. Xu has worked for Beijing Guoqiang since 2007. He worked at Zhejiang Fujitec a company engaged in manufacturing product lines as a general engineer from 2002 to 2003 and was general engineer at Zhejiang Philips a company engaged in electrical wiring industry from 1997 to 2002. He was general engineer at Henan Huaxia Electric Group a company engaged in the manufacture and distribution of electric products. From 1994 to 1996 and general engineer and director in Illumination Company of Hainan Asian Pacific Group a company engaged in research and development of traditional electrical and light power. From 2003 to 2005, Mr Xu was employed as ChiefEngineer of Henan Huaxia Electric Group and from 2005 to 2007 as Chief Engineer for Philip Zhejiang Corp. Mr. Xu has a bachelor's degree from Shanghai University of Technology in the major of communication and electronic engineering.Qiang Fu
Director. Mr. Fu became our director in March, 2010.  Mr. Fu was appointed to the Board of Directors in order to contribute the understanding he has acquired regarding the management of a U.S. public company with Chinese operations.  Mr. Fu is also the Chairman of the Board and CEO of China Digital Animation Development, Inc. a company engaged in the business of digital animation production, financial information services, and cultural productions in China. He has been employed since 2003 as the President of Heilongjiang Science & Technology Development Co., Ltd., the subsidiary of China digital Animation in China, which is engaged in the business of developing software and information technology networks. In 1998 Fu Qiang obtained a certificate for attending the Business Administration Training Program by Qinghua University and in 1996 he earned a Bachelor's Degree in Law from Heilongjiang Public Administration Institute.




There are no agreements or understandings for any of our executive officers or directors to resign at the request of another person, and no officer or director is acting on behalf of nor will any of them act at the direction of any other person.


50




FAMILY RELATIONSHIPS




There are no family relationships among our officers, directors, persons nominated for such positions, or holders of 10% or more of our outstanding common shares.




INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS




None of our directors, executive officers, or control persons has been involved in any of the following events during the past ten years:




•
Any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of bankruptcy or within two years prior to that time; or





•
Any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offenses); or





•
Being subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities; or





•
Being found by a court of competent jurisdiction (in a civil violation), the SEC or the Commodity Future Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated; or





•
Being the subject of, or a party to, any Federal or State judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or vacated, relating to an alleged violation of: any Federal or State securities or commodities law or regulation; or any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order; or any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity. This violation does not apply to any settlement of a civil proceeding among private litigants; or





•
Being the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the Exchange Act (15 U.S.C. 78c(a)(26))), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act (7 U.S.C. 1(a)(29))), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member.




SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING REQUIREMENTS.


For companies registered pursuant to section 12(g) of the Exchange Act, Section 16(a) of the Exchange Act requires our executive officers and directors, and persons, who beneficially own more than ten percent of our equity securities, to file reports of ownership and changes in ownership with the Securities and Exchange Commission. During the year ended June 30, 2010 each of our officers and directors filed the reports required under Section 16(a), except that Chunping Fong, Fang Ai and Jijun Zhang failed to file Form 3.  To our knowledge, based solely on a review of the copies of reports filed with the Securities and Exchange Commission, Section 16(a) filing requirements applicable to our officers, directors and greater than ten percent beneficial owners were met during the Company's last fiscal year and there has been no change in beneficial ownership.




All officers and directors owning shares of common stock have filed the required reports under Section 16(A) of the Act.


51




BOARD COMMITTEES




Audit Committee; Compensation Committee; Nominating Committee




Due to the small size of our Board of Directors, we have not constituted an audit committee, a compensation committee or a nominating committee. Decisions regarding nominations to the Board will be made by all currently-serving members of the Board. For the same reason, we do not have an audit committee financial expert among the members of our Board of Directors.




CODE OF ETHICS




The Company has a Code of Ethics pursuant to Section 406 of the Sarbanes-Oxley Act of 2002 on January 24, 2008, which is applicable to all directors, officers and employees of the Company. The Code is designed to deter wrongdoing and to promote:




•
Honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships;


•
Full, fair, accurate, timely and understandable disclosure in reports and documents that we file with, or submit to, the SEC, and in other public communications that we made;


•
Compliance with applicable governing laws, rules and regulations;


•
The prompts internal reporting of violations of the Code to the appropriate person or persons; and


•
Accountability for adherence to this Code.





The Company will provide a copy of the Code of Ethics, without cost to any person who sends a written request for a copy of the Code, addressed to Kun Liu, China Lithium Technologies, Inc., 15 West 39th Street, Suite 14C, New York, NY 10018.




ITEM 11.  Executive Compensation





COMPENSATION DISCUSSION AND ANALYSIS





Background and Compensation Philosophy





Our boards of directors have historically determined the compensation to be paid to our executive officers based on our financial and operating performance and prospects, and contributions made by the officers' to our success. Each of the named officers will be measured by a series of performance criteria by the board of directors, on a yearly basis. Such criteria will be based on certain objective parameters such as job characteristics, required professionalism, management skills, interpersonal skills, related experience, personal performance and overall corporate performance.





Our board of directors have not adopted or established a formal policy or procedure for determining the amount of compensation paid to our executive officers. As our executive leadership and board of directors grow, our board of directors may decide to form a compensation committee charged with the oversight of executive compensation plans, policies and programs.





We provide our executive officers solely with a base salary to compensate them for services rendered during the year. Our policy of compensating our executives with a cash salary has served us well. To date, we have not believed it necessary to provide our executives discretionary bonuses, equity incentives, or other benefits in order for us to continue to be successful. However, as the Company grows and the operations become more complex, the Board of Directors may deem it in the best interest of the Company to provide such additional compensation to existing executives and in order to attract new executives.


On March 4, 2010, we entered into a reverse acquisition transaction with Sky Achieve and Beijing Guoqiang that was structured as a share exchange and in connection with that transaction; Mr. Liu became the Chairman and President. Prior to the effective date of the reverse acquisition, Mr. Liu served at Beijing Guoqiang as the Chairman. The annual, long term and other compensation shown in this table include the amount Mr. Liu received from Beijing Guoqiang prior to the consummation of the reverse acquisition.




52




The following table sets forth information for the period indicated with respect to the persons who served as our CEO, CFO and other most highly compensated executive officers.





SUMMARY COMPENSATION TABLE


Name and

Position

Year

Salary

($)


Bonus

($)


Stock

Awards

($)


Option

Awards

($)


Non-Equity

Incentive

Plan

Compensation

($)


Nonqualified

Deferred

Compensation

Earnings

($)


All Other

Compensation

($)


Total

($)Kun Liu, CEO

2010

$
17,647



-



-



-



-



-



-


$
17,6472009

$
17,647



-



-



-



-



-



-


$
17,6472008

$
17,647



-



-



-



-



-



-


$
17,647Xin Xu (1)

2010

$
35,346



-



-



-



-



-



-


$
35,3462009

$
14,700



-



-



-



-



-



-


$
14,7002008

$
14,700



-



-



-



-



-



-


$
14,700Chunping Fong, CFO

2010

$
14,700



-



-



-



-



-



-


$
14,7002009

$
14,700



-



-



-



-



-



-


$
14,7002008

$
14,700



-



-



-



-



-



-


$
14,700




(1) Xin Xu resigned as the CEO on July 15, 2010 for personal reasons. On the same day, Kun Liu, the Registrant's President and Chairman of the Board of Directors, was appointed as the CEO by the Board of Directors. Please see the detailed information in the Form 8-K filed on July 18, 2010.




Compensation of Directors





Employees who are also members of the Board of Directors are not additionally compensated for their services as a director.  None of the non-employee directors received compensation for services on the Board during the year ended June 30, 2010.




OPTION GRANTS IN THE LAST FISCAL YEAR




We did not grant any options or stock appreciation rights to our named executive officers or directors in the fiscal year 2010. As of June 30, 2010, none of our executive officers or directors owned any of our derivative securities.




INDEMNIFICATION OF DIRECTORS AND EXECUTIVE OFFICERS




Our bylaws provide for the indemnification of our present and prior directors and officers or any person who may have served at our request as a director or officer of another corporation in which we own shares of capital stock or of which we are a creditor, against expenses actually and necessarily incurred by them in connection with the defense of any actions, suits or proceedings in which they, or any of them, are made parties, or a party, by reason of being or having been director(s) or officer(s) of us or of such other corporation, in the absence of negligence or misconduct in the performance of their duties. This indemnification policy could result in substantial expenditure by us, which we may be unable to recoup.




53




Insofar as indemnification by us for liabilities arising under the Securities Exchange Act of 1934 may be permitted to our directors, officers and controlling persons pursuant to provisions of the Amended Articles of Incorporation and Bylaws, or otherwise, we have been advised that in the opinion of the SEC, such indemnification is against public policy and is, therefore, unenforceable. In the event that a claim for indemnification by such director, officer or controlling person of us is in the successful defense of any action, suit or proceeding is asserted by such director, officer or controlling person in connection with the securities being offered, we will, unless in the opinion of our counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by us is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.




At the present time, there is no pending litigation or proceeding involving a director, officer, employee or other agent of ours in which indemnification would be required or permitted. We are not aware of any threatened litigation or proceeding which may result in a claim for such indemnification.




ITEM 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters




The following table lists, as of September 20, 2010, the number of shares of Common Stock beneficially owned by (i) each person or entity known to the Company to be the beneficial owner of more than 5% of the outstanding common stock; (ii) each officer and director of the Company, and (iii) all officers and directors as a group. Information relating to beneficial ownership of common stock by our principal stockholders and management is based upon information furnished by each person using "beneficial ownership" concepts under the rules of the Securities and Exchange Commission. Under these rules, a person is deemed to be a beneficial owner of a security if that person has or shares voting power, which includes the power to vote or direct the voting of the security, or investment power, which includes the power to vote or direct the voting of the security. The person is also deemed to be a beneficial owner of any security of which that person has a right to acquire beneficial ownership within 60 days.




Under the Securities and Exchange Commission rules, more than one person may be deemed to be a beneficial owner of the same securities, and a person may be deemed to be a beneficial owner of securities as to which he or she may not have any pecuniary beneficial interest. Except as noted below, each person has sole voting and investment power.




The percentages below are calculated based on 20,159,811 shares of Common Stock issued and outstanding as of September 15, 2010.




Name and Address of

Beneficial Owner(1)

Amount and Nature

Of

Beneficial

Ownership(2)


Percentage

of ClassKun Liu(1)


5,514,503



27.4
%Jijun Zhang


0



0
%Qiang Fu (2)


5,000,000



24.8
%All officers and directorsas a group (5 persons)(3)


10,639,503



52.7
%





(1) The address of Kun Liu are c/o with the Company at 15 West 39th Street Suite 14B, New York, NY 10018


54





(2) The address of Qiang Fu is 26 Shangzhi St West 13 Dao, Daoli District, Harbin, Heilongjiang Province, China.




(3) All shares are owned both of record and beneficially.




CHANGES OF CONTROL




There are currently no arrangements which would result in a change in control.




ITEM 13.Certain Relationships and Related Transactions





INTERESTED PERSON TRANSACTIONS





In July 2007, the Company issued 161,271 shares of its common stock to former shareholders of the Company (including 157,575 shares issued to 5 former directors of the Company) in consideration for the cancellation of $94,500 of convertible debt. On September 30, 2007 the Company issued 245,455 shares of its common stock to two former directors and officers of the Company for a $6,116 cash payment. During the year ended December 31, 2008, the two former directors and officers of the Company advanced the Company an additional $13,884 in exchange for 560,902 additional shares of common stock following the increase in the Company's authorized capital effective January 12, 2009. The shares were issued on January 31, 2009.





In 2010, 2009, 2008 and 2007, Beijing Guoqiang entered into supply contracts of lithium-ion battery cell with Heilongjiang Zhongqiang, our major supplier. Our purchases from Heilongjiang Zhongqiang accounted for 88.54% and 92.74%, respectively of our total purchase during the year ended June 30, 2010 and 2009. One of our directors, Fu Qiang's father, Mr. Zhiguo Fu, is the CEO of Advanced Battery Technologies, Inc., which has exclusive control over the business of Heilongjiang Zhongqiang through entrusted management agreements. We believe that the terms of the supply contracts are fair as to our company and the prices of the lithium-ion battery cells are comparable to those produced by other lithium-ion battery cell manufacturers.




From time to time during the year ended June 30, 2010, the Company borrowed funds from Kun Liu, its Chief Executive Offices, to pay expenses incurred in the United States.  The first loan of $45,459 was made on April 20, 2010, followed by three additional loans that brought the balance due to $83,493, which was the amount due from the Company to Kun Liu at June 30, 2010.  No portion of the loans has been repaid.  The loans are interest-free and due on demand.  The Company expects to continue to borrow funds from Kun Liu to pay its U.S. expenses until it obtains Dollars from a financing transaction or secures approval for a conversion of Renminbi to Dollars.
  During the period from March 2007 to July 2008, as it was initiating its business activities, Beijing Guoqiang borrowed funds from Kun Liu for working capital.  The largest aggregate debt owed by Beijing Guoqiang to Kun Liu at any one time was 3,926,942 RMB ($581,000) owed at November 30, 2007.  The balance due at the end of the 2008 fiscal year was 3,720,464 RMB ($541,411).  Beijing Guoqiang repaid 1,120,000 RMB ($162,985) during the year ended June 30, 2009 and repaid the remaining 2,602,964 RMB ($381,334) during the year ended June 30, 2010.  The loans were interest-free and due on demand.
  In May 2007 Beijing Guoqiang borrowed 1,000,000 RMB ($145,522) from Yuanchao Zhang, a shareholder in Beijing Guoqiang.  Beijing Guoqiang repaid the debt in December 2008.




REVIEW, APPROVAL OR RATIFICATION OF TRANSACTIONS WITH RELATED PERSONS




All ongoing and future transactions between us and any of our officers and directors and their respective affiliates, including loans by our officers and directors, will be on terms believed by us to be no less favorable than are available from unaffiliated third parties. Such transactions or loans, including any forgiveness of loans, will require prior approval by the members of our board who do not have an interest in the transaction, in either case who had access, at our expense, to our attorneys or independent legal counsel. We will not enter into any such transaction unless our disinterested directors determine that the terms of such transaction are no less favorable to us than those that would be available to us with respect to such a transaction from unaffiliated third parties. We will not enter into a business combination or invest alongside any of our directors, officers, any affiliate of ours or of any of our directors or officers or a portfolio company of any affiliate of our directors or officers.




POTENTIAL CONFLICTS OF INTERESTS




Save as disclosed below and under the section "Interested Person Transactions", during the past three financial years:


55




a)
None of our directors, executive officers or controlling shareholder or their affiliates has had any interest, direct or indirect, in any material transaction to which we are a party.


b)
None of our directors, executive officers or controlling shareholder or their affiliates has had any interest, direct or indirect, in any company that carries the same business or similar trade which competes materially and directly with our existing business.


c)
None of our directors, executive officers or controlling shareholder or their affiliates has had any interest, direct or indirect, in any enterprise or company that is our major customer or supplier of goods or services.


d)
None of our directors, executive officers or controlling shareholder or their affiliates has had any interest, direct or indirect, in any material transaction we have undertaken within the last three years.





ITEM 14.Principal Accountant Fees and Services




The following is a summary of the fees billed to us by P.C. Liu, the Company's current auditor, and Schumacher & Associates, Inc., the Company's former auditor, for the fiscal year ended June 30, 2010 and 2009:




Services (US$'000)

2010


2009Audit Fees

$
45,000


$
30,000Audit Related Fees


-



-Tax Fees


-



-All Other Fees


-



-TOTAL

$
45,000


$
30,000




Audit fees consist of the aggregate fees billed for services rendered for the audit of our annual financial statements, the reviews of the financial statements included in our Forms 10-Q and for any other services that are normally provided by our independent auditors in connection with our statutory and regulatory filings or engagements.




Audit related fees consist of the aggregate fees billed for professional services rendered for assurance and related services that reasonably related to the performance of the audit or review of our financial statements that were not otherwise included in audit fees.




Tax fees consist of the aggregate fees billed for professional services rendered for tax compliance, tax advice and tax planning. These services include assistance regarding federal, state and local tax compliance and consultation in connection with various transactions and acquisitions.




All other fees consist of the aggregate fees billed for products and services provided by our independent auditors and not otherwise included in audit fees, audit related fees or tax fees.




PART IV.




ITEM 15.Exhibits, Financial Statement Schedules




(a) Financial Statements




The financial statements are set forth under Item 8 of this Annual Report on Form 10-K. Financial statement schedules have been omitted since they are either not required, not applicable, or the information is otherwise included.




56




(b) Exhibits




Exhibit

Number

Description10-1

Share Purchase Agreement dated March 4, 2010 between Kun Liu and Michael Friess and Sanford Schwartz (incorporated by reference to the Current Report on Form 8k filed with SEC on March 25, 2010)10-2

Share Exchange Agreement dated February 12, 2010 between China Lithium Technologies, Inc. and Sky Achieve (incorporated by reference to the Current Report on Form 8k filed with SEC on March 25, 2010)10-3

Consulting Agreement dated January 5, 2010 between the Sky Achieve and Beijing Guoqiang (incorporated by reference to the Current Report on Form 8k filed with SEC on March 25, 2010)10-4

Operating Agreement dated January 5, 2010 between the Sky Achieve and Beijing Guoqiang (incorporated by reference to the Current Report on Form 8k filed with SEC on March 25, 2010)10-5

Equity Pledge Agreement dated January 5, 2010 between the Sky Achieve and Beijing Guoqiang (incorporated by reference to the Current Report on Form 8k filed with SEC on March 25, 2010)10-6

Option Agreement dated January 5, 2010 between the Sky Achieve and Beijing Guoqiang (incorporated by reference to the Current Report on Form 8k filed SEC on March 25, 2010)10-7

Proxy Agreement dated January 5, 2010 between the Sky Achieve and Beijing Guoqiang (incorporated by reference to the Current Report on Form 8k filed with SEC on March 25, 2010)10.8

Supply Agreement dated February 24, 2010 between Beijing Guoqiang Global Science & Technology Development Co., Ltd. and Heilongjiang Zhongqiang Power Tech Ltd - filed with Amendment No. 1 to the Form 10-K.10.9

Supply Agreement dated March 22, 2010 between Beijing Guoqiang Global Science & Technology Development Co., Ltd. and Heilongjiang Zhongqiang Power Tech Ltd - filed with Amendment No. 1 to the Form 10-K.10.10

Loan Agreement dated January 1, 2011 between Kun Liu and China Lithium Technologies, Inc.21.1

Subsidiaries of the registrant - filed with the initial Form 10-K.23

Consent of Independent Registered Public Accounting Firm.31.1

Certification of the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, as amended).31.2

Certification of the Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act, as amended).32.1

Certification pursuant to 18 U.S.C. Section 1350, as adopted, pursuant to Section 906 of the Sarbanes- Oxley Act of 2002 from the Chief Executive Officer32.2

Certification pursuant to 18 U.S.C. Section 1350, as adopted, pursuant to Section 906 of the Sarbanes- Oxley Act of 2002 from the Chief Financial Officer


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SIGNATURES




In accordance with Section 13 or 15(d) of the Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.




CHINA LITHIUM TECHNOLOGIES, INC./s/ Kun LiuDated: August 30, 2011
Kun Liu, Chief Executive Officer and Chairman

(Principal executive officer)/s/ Chunping FangDated: August 30, 2011
Chunping Fang, Chief Financial Officer

(Principal financial officer and principal

accounting officer)




Pursuant to the requirements of the Exchange Act, this report has been duly signed below by the following persons on behalf of us and in the capacities and on the dates indicated.




Name

Title(s)

Date/s/ Kun Liu

Chairman/Chief Executive Officer (Principal executive officer)

August 30, 2011Kun Liu/s/ Chunping Fang

Chief Financial Officer (Principal financial officer and principalaccounting officer)

August 30, 2011Chunping Fang/s/ Jijun Zhang

Director

August 30, 2011Jijun Zhang




58