UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10−Q

(Mark One)

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended: September 30, 2011

[   ] 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: 000-53547

CHINA GREEN ENERGY INDUSTRIES, INC.
(Exact Name of Registrant as Specified in Its Charter)

Jiangsu Wujin Lijia Industrial Park
Lijia Town
Wujin District, Changzhou City
Jiangsu Province 213176
People’s Republic of China
(Address of principal executive offices, Zip Code)

(86) 519-86230102
(Registrant’s telephone number, including area code)

_______________________________________________________________________
(Former name, former address and former fiscal year, if changed since last report)

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

Yes [X]                     No [ ]

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes [   ]                 No [X]

The number of shares outstanding of each of the issuer’s classes of common stock, as of November 14, 2011 is as follows:

TABLE OF CONTENTS

PART I

FINANCIAL INFORMATION

ITEM 1.      FINANCIAL STATEMENTS.

CHINA GREEN ENERGY INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER 30, 2011 AND 2010

1

China Green Energy Industries, Inc.
(Formerly TradeOn, Inc.)
Condensed Consolidated Statements of Operations and Comprehensive Income/(Loss)
For the three and nine months ended September 30, 2011 and 2010

See the accompanying Notes to Condensed Consolidated Financial Statements

2

China Green Energy Industries, Inc.
(Formerly TradeOn, Inc.)
Condensed Consolidated Balance Sheets
As of September 30, 2011 and December 31, 2010

See the accompanying Notes to Condensed Consolidated Financial Statements

3

China Green Energy Industries, Inc.
(Formerly TradeOn, Inc.)
Condensed Consolidated Statements of Cash Flows
For the nine months ended September 30, 2011 and 2010

See the accompanying Notes to Condensed Consolidated Financial Statements

4

China Green Energy Industries, Inc.
(Formerly TradeOn, Inc.)
Notes to Condensed Consolidated Financial Statements
For the three and nine months ended September 30, 2011 and 2010

5

China Green Energy Industries, Inc.
(Formerly TradeOn, Inc.)
Notes to Condensed Consolidated Financial Statements
For the three and nine months ended September 30, 2011 and 2010

6

China Green Energy Industries, Inc.
(Formerly TradeOn, Inc.)
Notes to Condensed Consolidated Financial Statements
For the three and nine months ended September 30, 2011 and 2010

7

China Green Energy Industries, Inc.
(Formerly TradeOn, Inc.)
Notes to Condensed Consolidated Financial Statements
For the three and nine months ended September 30, 2011 and 2010

Details of customers representing 10% or more of the Company’s trade accounts receivables as of September 30, 2011 and December 31, 2010, respectively, are as follows:

8

China Green Energy Industries, Inc.
(Formerly TradeOn, Inc.)
Notes to Condensed Consolidated Financial Statements
For the three and nine months ended September 30, 2011 and 2010

10

China Green Energy Industries, Inc.
(Formerly TradeOn, Inc.)
Notes to Condensed Consolidated Financial Statements
For the three and nine months ended September 30, 2011 and 2010

Maintenance or repairs are charged to expense as incurred. Upon sale or disposition, the applicable amounts of asset cost and accumulated depreciation are removed from the accounts and the net amount less proceeds from disposal is charged or credited to income.

Construction in progress mainly represents expenditures for the Company’s offices and factories under construction. All direct costs relating to the acquisition or construction of the Company’s offices and factories are capitalized as construction in progress. No depreciation is provided for on construction in progress.

Land use rights

Land use rights are stated at cost less accumulated amortization. Amortization is provided using the straight-line method over the terms of the lease of 50 years obtained from the relevant PRC land authority.

Intangible assets

The determination of fair value requires significant judgment and estimates, and the ultimate allocation of purchase price may change. Acquired intangibles with definite lives will be amortized on a straight-line basis over the remaining estimated economic life of the underlying assets. Intangible assets with indefinite lives are not amortized. The Company reviews its indefinite and definite-lived intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of a long-lived asset may not be recoverable. Recoverability of an asset group is measured by comparison of its carrying amount to the expected future undiscounted cash flows that the asset group is expected to generate. If it is determined that an asset group is not recoverable, an impairment loss is recorded in the amount by which the carrying amount of the asset group exceeds its fair value. The Company conducts an impairment analysis annually and as necessary if changes in facts and circumstances indicate that the fair value of the Company’s purchased intangible assets may be less than its carrying amount. The Company assesses its intangible assets for impairment and identified no such impairment loss as of September 30, 2011.

11

China Green Energy Industries, Inc.
(Formerly TradeOn, Inc.)
Notes to Condensed Consolidated Financial Statements
For the three and nine months ended September 30, 2011 and 2010

Net sales of products represent the 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 majority of their products 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. Provision for sales returns are recorded as a reduction of revenue in the same period that revenue is recognized. The provision for sales returns, which is based on historical sales returns data, is the Company’s best estimate of the amounts of goods that will be returned from their customers. During the reporting periods, there were no sales returns and the Company did not recognize any provision for sales returns.

12

China Green Energy Industries, Inc.
(Formerly TradeOn, Inc.)
Notes to Condensed Consolidated Financial Statements
For the three and nine months ended September 30, 2011 and 2010

13

China Green Energy Industries, Inc.
(Formerly TradeOn, Inc.)
Notes to Condensed Consolidated Financial Statements
For the three and nine months ended September 30, 2011 and 2010

14

China Green Energy Industries, Inc.
(Formerly TradeOn, Inc.)
Notes to Condensed Consolidated Financial Statements
For the three and nine months ended September 30, 2011 and 2010

15

China Green Energy Industries, Inc.
(Formerly TradeOn, Inc.)
Notes to Condensed Consolidated Financial Statements
For the three and nine months ended September 30, 2011 and 2010

No additional allowance for obsolete inventories was recognized during the three and nine months ended September 30, 2011 and 2010.

16

China Green Energy Industries, Inc.
(Formerly TradeOn, Inc.)
Notes to Condensed Consolidated Financial Statements
For the three and nine months ended September 30, 2011 and 2010

Notes:

The amounts were interest-free, unsecured and repayable on demand. All the related parties are controlled by certain family members of officers of the Company.

17

China Green Energy Industries, Inc.
(Formerly TradeOn, Inc.)
Notes to Condensed Consolidated Financial Statements
For the three and nine months ended September 30, 2011 and 2010

During the reporting periods, depreciation is included in:

As of September 30, 2011 and December 31, 2010, property, plant and equipment with net book values of $1,576,137 and $1,598,264, respectively, were pledged as collateral under certain loan arrangements (Note 15).

18

China Green Energy Industries, Inc.
(Formerly TradeOn, Inc.)
Notes to Condensed Consolidated Financial Statements
For the three and nine months ended September 30, 2011 and 2010

Intangible assets represent the brand name of “Niconia” for LEV’s purchased for a total consideration of RMB 20 million. The Company acquired the brand in January 2011 for which $2,207,204 has been paid and the remaining $886,796 is due January 2012. The Brand name is amortized on the straight line basis over the estimated useful life of 20 years.

The Company obtained the right from the relevant PRC land authority for a period of fifty years to use the land on which the office premises, production facilities and warehouses of the Company are situated.

As of September 30, 2011 and December 31, 2010, land use rights with net book values of $1,054,558 and $1,037,606, respectively, were pledged as collateral under certain loans agreements (Note 15).

Amortization for the nine months ended September 30, 2011 and 2010 amounted to $17,017 and $15,970, respectively. Amortization for the three months ended September 30, 2011 and 2010 amounted to $6,015 and $5,192, respectively. The estimated amortization expense for each years following September 30, 2011 is approximately $23,000 per year.

19

China Green Energy Industries, Inc.
(Formerly TradeOn, Inc.)
Notes to Condensed Consolidated Financial Statements
For the three and nine months ended September 30, 2011 and 2010

All bank loans are repayable within one year.

The bank loans as of September 30, 2011 and December 31, 2010 carried annual interest from 6.06% to 8.10% and are due at various dates through June 2012. Twelve loans totaling approximately $9.85 million were renewed in 2011 with higher interest rates for an additional year.

The short term bank loans were secured by the Company’s following assets, which are presented at their net book values:

The unsecured bank loans as of September 30, 2011 and December 31, 2010 were guaranteed by Mr. and Mrs. Shi and two non-related parties. Each of the aforementioned parties did not receive any compensation for acting as guarantors for the Company.

During the reporting periods, there were no covenant requirements under the bank loans granted to the Company. The Company has available approximately $1.96 million remaining under these loan agreements which it can borrow.

20

China Green Energy Industries, Inc.
(Formerly TradeOn, Inc.)
Notes to Condensed Consolidated Financial Statements
For the three and nine months ended September 30, 2011 and 2010

21

China Green Energy Industries, Inc.
(Formerly TradeOn, Inc.)
Notes to Condensed Consolidated Financial Statements
For the three and nine months ended September 30, 2011 and 2010

22

China Green Energy Industries, Inc.
(Formerly TradeOn, Inc.)
Notes to Condensed Consolidated Financial Statements
For the three and nine months ended September 30, 2011 and 2010

23

China Green Energy Industries, Inc.
(Formerly TradeOn, Inc.)
Notes to Condensed Consolidated Financial Statements
For the three and nine months ended September 30, 2011 and 2010

24

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

Special Note Regarding Forward Looking Statements

In addition to historical information, this report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. We use words such as “believe,” “expect,” “anticipate,” “project,” “target,” “plan,” “optimistic,” “intend,” “aim,” “will” or similar expressions which are intended to identify forward-looking statements. Such statements include, among others, those concerning market and industry segment growth and demand and acceptance of new and existing products; any projections of sales, earnings, revenue, margins or other financial items; any statements of the plans, strategies and objectives of management for future operations; any statements regarding future economic conditions or performance; as well as all assumptions, expectations, predictions, intentions or beliefs about future events. You are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, including those identified in Item 1A “Risk Factors” included in our Annual Report on Form 10-K for the year ended December 31, 2010, as well as assumptions, which, if they were to ever materialize or prove incorrect, could cause the results of the Company to differ materially from those expressed or implied by such forward-looking statements.

Readers are urged to carefully review and consider the various disclosures made by us in this report and our other filings with the SEC. These reports attempt to advise interested parties of the risks and factors that may affect our business, financial condition and results of operations and prospects. The forward-looking statements made in this report speak only as of the date hereof and we disclaim any obligation, except as required by law, to provide updates, revisions or amendments to any forward-looking statements to reflect changes in our expectations or future events.

Use of Terms

Except where the context otherwise requires and for the purposes of this report only:

• “CGRE,” “the Company,” “we,” “us,” or “our,” refer to the combined business of China Green Energy Industries, Inc., a Nevada corporation, its wholly-owned subsidiaries, Best Green BVI and Best Green Changzhou, and its variable interest entities, Best Cable and Best Appliances;

• “Best Green BVI” refers to Best Green Energy Industries Limited, a BVI company;

• “Best Green Changzhou” refers to Best Green Energy (Changzhou) Co., Ltd., a PRC company;

• “Best Cable” refers to Changzhou City Wujin Best Electronic Cables Co., Ltd., a PRC company;

• “Best Appliances” refers to Jiangsu Best Electrical Appliances Co., Ltd., a PRC company;

• “BVI” refers to the British Virgin Islands;

• “PRC” and “China” refer to the People’s Republic of China, excluding Hong Kong, Macau and Taiwan;

• “SEC” refers to the Securities and Exchange Commission;

• “Securities Act” refers to the Securities Act of 1933, as amended;

• “Exchange Act” refers to the Securities Exchange Act of 1934, as amended;

• “Renminbi” and “RMB” refer to the legal currency of China; and

• “U.S. dollars,” “dollars” and “$” refer to the legal currency of the United States.

Overview of our Business

We manufacture and distribute clean technology-based consumer products. We also manufacture and distribute network and HDMI cables. Our products consist of light electric vehicles, or LEVs, and cryogen-free refrigerators. We manufacture several different varieties of LEVs and cryogen-free refrigerators. We sell some of our products under our own brand name of “BEST” and the balance of our products as an original equipment manufacturer, or OEM, for other companies, who are our customers. On January 25, 2011, we acquired the “NICONIA LEV” brand name and retail sales network, which we believe will compliment our line of LEVs.

Our corporate headquarters and manufacturing base are located in Changzhou, China, where we own an aggregate of approximately 46,800 square meters of manufacturing facilities and office space. We own the right to use a total of 49,900 square meters of land in China. We believe that our existing and planned facilities are adequate for our requirements for the foreseeable future. Our annual manufacturing capacity for our LEVs, Cryogen-free refrigerators and sets of network and HDMI cables (combined) is 20,000 units, 115,000 units and 25 million sets, respectively.

25

Recent Developments

Third Quarter Financial Performance Highlights

The following summarizes certain key financial information for the third quarter of 2011:

• Revenues: Revenues were $7.09 million for the three months ended September 30, 2011, an increase of $0.95 million, or 15.48%, from $6.14 million for the same period last year.

• Gross profit and margin: Gross profit was $0.89 million for the three months ended September 30, 2011, a decrease of $2.02 million, or 69.4%, from $2.91 million for the same period last year. Gross margin was 12.6% for the three months ended September 30, 2011, as compared to 47.7% for the same period last year, a 35.1% decrease.

• Net income (loss): Net loss was $0.87 million for the three months ended September 30, 2011, a decrease of $2.46 million from $1.59 million of net income for the same period of last year.

• Fully diluted net income (loss) per share: Fully diluted net loss per share for the three months ended September 30, 2011 was $0.04, as compared to net income per share of $0.07 for the same period last year.

Results of Operations

Comparison of Three Months Ended September 30, 2011 and September 30, 2010

The following table shows key components of our results of operations during the three months ended September 30, 2011 and 2010, in both dollars and as a percentage of our total revenues.

Revenues. To date, most of our revenues have been generated through sales in the PRC and Hong Kong regions. Our revenues increased $0.95 million, or 15.48%, to $7.09 million for the three months ended September 30, 2011 from $6.14 million during the same period in 2010. The increase was due to an increase in sales of light electric vehicles. Revenue of cable products decreased by 38.73% from $4.39 million in the three months ended September 30, 2010 to $2.69 million in the three months ended September 30, 2011. The decrease was mainly due to reduced customer demand as a result of general market decline. Revenue from refrigerators decreased by 13.15% from $1.75 million in the three months ended September 30, 2010 to $1.52 million in the three months ended September 30, 2011. The decrease was mainly due to reduced customer demand as a result of general market decline. We experienced an increase in LEV sales from $1,887 in the three months ended September 30, 2010 to $2.87 million in the three months ended September 30, 2011, which was attributable to the acquisition of the Niconia LEV brand.

26

Cost of revenues. Our cost of revenues is primarily comprised of the costs of our raw materials, components, labor and overhead. Our cost of revenues increased $2.97 million, or 92.0%, to $6.20 million in the three months ended September 30, 2011, from $3.23 million during the same period in 2010. As a percentage of revenues, our cost of revenues increased from 52.6% in the three months ended September 30, 2010 to 87.5% in the three months ended September 30, 2011. The increase was primarily due to increased raw material prices.

Gross profit. Our gross profit is equal to the difference between our revenue and our cost of revenues. Our gross profit decreased $2.02 million, or 69.4%, to $0.89 million in the three months ended September 30, 2011, from $2.91 million during the same period in 2010. Such decrease was generally in line with our increased cost of revenues, attributed to the increase in raw material costs. Gross profit as a percentage of revenue was 12.6% and 47.4% for three months ended September 30, 2011 and 2010, respectively.

General and administrative expenses. General and administrative expenses consist primarily of compensation and benefits to our general management, finance and administrative staff, professional advisor fees, bad debts reserve and other expenses incurred in connection with general operations. Our general and administrative expenses increased $1.04 million, or 167%, to $1.67 million in the three months ended September 30, 2011, from $0.63 million during the same period in 2010. The increase was mainly due to the increase of our accounts receivable bad debt reserve, intangible amortization and the provision on our loan guarantees.

Selling expenses. Our selling expenses consist primarily of compensation and benefits to our sales and marketing staff, sales commission, cost of advertising, promotion, business travel, transportation costs and other sales related costs. Our selling expenses increased $0.08 million, or 61.54%, to $0.21 million in the three months ended September 30, 2011, from $0.13 million during the same period in 2010. The increase was primarily attributable to increased spending on marketing and exhibitions.

Finance costs. Our finance costs increased $0.08 million, or 61.5%, to $0.21 million for the three months ended September 30, 2011, from $0.13 million during the same period in 2010. Such increase was mainly due to an increase in amounts borrowed under bank loans.

Income (loss) before income taxes. Our income before income taxes decreased $3.22 million, to a $1.07 million loss in the three months ended September 30, 2011, from $2.16 million income during the same period in 2010, as a result of the factors described above.

Income taxes. We incurred an income tax credit of $0.19 million for the three months ended September 30, 2011, a decrease of $0.77 million from an income tax expense of $0.58 million during the same period in 2010. This decrease in income tax expense was due to the drop in our taxable profit from last year.

Net income (loss). As a result of the factors described above, we generated a net loss of $0.87 million in the three months ended September 30, 2011, a decrease of $2.46 million from $1.59 million in net income during the same period in 2010.

Comparison of Nine Months Ended September 30, 2011 and September 30, 2010

The following table shows key components of our results of operations during the nine months ended September 30, 2011 and 2010, in both dollars and as a percentage of our total revenues.

27

Revenues. Our revenues decreased $5.57 million, or 23.36%, to $18.28 million for the nine months ended September 30, 2011 from $23.85 million during the same period in 2010. The decrease was due to a decrease in sales of both cable products and refrigerators. Revenue of cable products decreased by 74.58% from $14.28 million in the nine months ended September 30, 2010 to $8.18 million in the nine months ended September 30, 2011. The decrease was mainly due to reduced customer demand as a result of general market decline. Revenue from refrigerators decreased by 56.67% from $8.86 million in the nine months ended September 30, 2010 to $3.84 million in the nine months ended September 30, 2011. The decrease was mainly due to reduced customer demand as a result of general market decline. We experienced an increase in LEV sales from $0.70 million in the nine months ended September 30, 2010 to $6.26 million in the nine months ended September 30, 2011. The increase was attributable to the acquisition of the Niconia LEV brand. Since the end of the first quarter, the problem of worker shortage has been resolved. We were able to increase our production volume to satisfy expected orders with our existing manufacturing capacity.

Cost of revenues. Our cost of revenues decreased $0.37 million, or 2.4%, to $15.30 million in the nine months ended September 30, 2011, from $15.67 million during the same period in 2010. The decrease in cost of goods sold was attributed to our decreased sales volume and revenues. As a percentage of revenues, our cost of revenues increased from 65.7% in the nine months ended September 30, 2010 to 83.7% in the nine months ended September 30, 2011. The increase was primarily due to increased fixed production costs and raw material price.

Gross profit. Our gross profit decreased $5.21 million, or 63.6%, to $2.98 million in the nine months ended September 30, 2011, from $8.19 million during the same period in 2010. Such decrease was generally in line with our increased cost of revenues, attributed to the increase in raw material costs and fixed production costs. Gross profit as a percentage of revenue was 16.3% and 34.3% for nine months ended September 30, 2011 and 2010, respectively. Such decrease was principally attributed increase in raw material cost.

General and administrative expenses. Our general and administrative expenses increased $2.24 million, or 178%, to $3.50 million in the nine months ended September 30, 2011, from $1.26 million during the same period in 2010. Such increase was attributable to increased payroll expenses resulting from an increase in staff number due to the expansion of the LEV business as well as stock compensation expenses and additional bad debt reserve.

Selling expenses. Our selling expenses increased $0.39 million, or 92.86%, to $0.81 million in the nine months ended September 30, 2011, from $0.42 million during the same period in 2010. The increase was primarily attributable to increased spending on marketing and exhibitions for all products lines.

Finance costs. Our finance costs increased $0.20 million, or 58.8%, to $0.54 million for the nine months ended September 30, 2011, from $0.34 million during the same period in 2010. Such increase was mainly due to an increase in bank loans.

Income (loss) before income taxes. Our income (loss) before income taxes decreased $7.93 million, to a $1.45 million loss in the nine months ended September 30, 2011, from $6.48 million income during the same period in 2010, as a result of the factors described above.

Income taxes. We incurred income tax credit of $0.23 million for the nine months ended September 30, 2011, a decrease of $1.86 million from an income tax expense of $1.63 million during the same period in 2010. This decrease in income tax expense was due to the decrease in our taxable profit from last year.

Net income (loss). As a result of the factors described above, we generated a net loss of $1.21 million in the nine months ended September 30, 2011, a decrease of $6.06 million from $4.85 million in net income during the same period in 2010.

28

Liquidity and Capital Resources

As of September 30, 2011, we had cash and cash equivalents of approximately $0.59 million, primarily consisting of cash on hand and demand deposits. The following table provides a summary of our net cash flows from operating, investing, and financing activities.

Cash Flow

Operating Activities

Net cash used in operating activities was $3.12 million for the nine months ended September 30, 2011, as compared to $2.77 million net cash provided by operating activities for the same period in 2010. The decrease was primarily attributable to (i) net income decreasing by $6.06 million, (ii) increase in inventories of $2.14 million, and (iii) pay down of $5.95 million of accounts payable, other payables and accrued charges, offset by $1.04 million of collection of accounts receivable and other non-cash charges.

Investing Activities

Net cash used in investing activities for the nine months ended September 30, 2011 was $9.60 million, as compared to $5.69 million during the same period in 2010. The increase in net cash used in investing activities was mainly attributable to (i) an increase in spending on intangible assets by $2.21 million primarily resulting from the purchase of the Niconia LEV brand and (ii) additional restricted cash deposit requirements of $6.20 million as a result of the issuance of bills payable.

Financing Activities

Net cash provided by financing activities for the nine months ended September 30, 2011 was $12.09 million, as compared to $4.25 million during the same period in 2010. The increase was mainly attributable to (i) net of short term loan repayments of $2.44 million, and (ii) increase in bills payable of $10.27 million.

Loan Commitments

As of the date of the report, we are party to several loan and bill acceptance agreements as follows:

Loan Agreements:

• Loan Agreement between Best Cable and Wujin Rural Commercial Bank, pursuant to which Wujin Rural Commercial Bank provided a loan with a total amount of RMB1,450,000 (approximately $226,900) at September 30, 2011. The loan matures on June 20, 2012. The monthly interest rate is 0.729%. The balance outstanding at September 30, 2011 totaled approximately $226,900.

• Loan Agreement between Best Cable and Wujin Agriculture Bank, pursuant to which Wujin Agriculture Bank provided loans with a total amount available to borrow of RMB10,000,000 (approximately $1,565,000) at September 30, 2011. We borrowed RMB3,000,000 (approximately $469,500) in August 2011 and RMB5,000,000 (approximately $782,500) in June 2011, for a term maturing June 25, 2012 and December 26, 2011, respectively. The monthly interest rate is 0.601% and 0.561%, respectively. The amount outstanding at September 30, 2011 totaled approximately $1,252,000.

29

• Loan Agreement between Best Cable and Wujin ICBC, pursuant to which Wujin ICBC provided loans with a total amount available to borrow of RMB26,000,000 (approximately $4,069,000) at September 30, 2011. Wujin ICBC loaned RMB18,800,000 (approximately $2,942,200) to Best Cable, of which RMB5,000,000 will mature in November 2011 and RMB 13,800,000 will mature in December 2011. The monthly interest rate is 0.505%. The loan outstanding at September 30, 2011 totaled approximately $2,942,200.

• Loan Agreement between Best Appliances and Wujin Rural Commercial Bank for a loan with a total amount available to borrow of RMB21,000,000 (approximately $3,286,500) at September 30, 2011. Wujin Rural Commercial Bank loaned an aggregate of RMB19,670,000 (approximately $3,078,400) to Best Appliances. The monthly interest rate ranges is 0.81% and the loan will mature on December 9, 2011. The amount outstanding at September 30, 2011 totaled approximately $3,078,400.

• Loan Agreement between Best Appliance and Wujin Rural Commercial Bank, pursuant to which Wujin Rural Commercial Bank provided a loan with a total amount available to borrow of RMB7,000,000 (approximately $1,095,500) at September 30, 2011. The loan matures on May 26, 2013. The monthly interest rate is 0.729%. Wujin Rural Commercial Bank loaned RMB5,000,000 (approximately $782,500) to Best Appliance, which matures on April 25, 2012. The amount outstanding at September 30, 2011 totaled approximately $782,500.

• Loan Agreement between Best Cable and Pudong Development Bank Changzhou Branch, pursuant to which Pudong Development Bank Changzhou Branch provided a loan with a total amount available to borrow of RMB 10,000,000 (approximately $1,565,000) at September 30, 2011. The loan matures on March 19, 2012. The monthly interest rate is 0.661%. Pudong Development Bank Changzhou Branch loaned RMB10,000,000 (approximately $1,565,000) to Best Cable. The amount outstanding at September 30, 2011 totaled approximately $1,565,000.

Certain bank loans are secured by our buildings and land rights. Other unsecured bank loans were guaranteed by Mr. Shi, our Chairman and Chief Executive Officer, his wife Ms. Xueqin Wang, and two non-related parties. Eight loans totaling approximately $9.85 million were renewed in 2011 under similar terms for an additional year.

Bill Acceptance Agreements:

• Commercial Bill Acceptance Agreement, between Best Cable and Pudong Development Bank Changzhou Branch, pursuant to which Pudong Development Bank Changzhou Branch provided commercial bills with a total amount available to borrow of RMB40,000,000 (approximately $6,260,000) at September 30, 2011. The agreement matures on January 6, 2012, however, the bills payable at September 30, 2011 become due at various times through March 2012. As we incur future expenses, we will borrow additional funds under these arrangements. The amount outstanding at September 30, 2011 totaled $6,260,000.

• Commercial Bill Acceptance Agreement, between Best Cable and Communication Bank Fangzhicheng Subbranch, pursuant to which Communication Bank Fangzhicheng Subbranch provided commercial bills with a total amount available to borrow of RMB10,000,000 (approximately $1,565,000) at September 30, 2011. The agreement matures on March 28, 2012. The bills payable at September 30, 2011 become due at various times through March 2012. As we incur future expenses, we will borrow additional funds under these arrangements. The amount outstanding at September 30, 2011 totaled $1,565,000.

• Commercial Bill Acceptance Agreement, between Best Cable and Wujin Agricultural Bank, pursuant to which Wujin ABC provided four commercial bills with a total amount available to borrow of RMB6,500,000 (approximately $1,017,000) at September 30, 2011. The agreement matures on November 30, 2011, guaranteed by our CEO Mr. Shi, Ms. Wang, and KK Lighting, an unrelated party however. The bills payable at September 30, 2011 become due at various times through January 2012. As we incur future expenses, we will borrow additional funds under these arrangements. The amount outstanding at September 30, 2011 totaled $1,017,000.

• Bank Acceptance Agreement, between Best Cable and Wujin Rural Commercial Bank pursuant to which Wujin Rural Commercial Bank provided a bill with a total amount available to borrow of RMB24,000,000 (approximately $3,756,000) at September 30, 2011. The agreement matures on April 20, 2012, however, the bills payable at September 30, 2011 become due at various times through November 2011. As we incur future expenses, we will borrow additional funds under these arrangements. The amount outstanding at September 30, 2011 totaled $3,756,000.

• Bank Acceptance Agreement, between Best Cable and Wujin ICBC pursuant to which Wujin ICBC provided a bill with a total amount available to borrow of RMB2,650,000 (approximately $415,000) at September 30, 2011. The agreement matures on October 31, 2011. As we incur future expenses, we will borrow additional funds under these arrangements. The amount outstanding at September 30, 2011 totaled $0.

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• Bank Acceptance Agreement, between Best Cable and Wujin Construction Bank pursuant to which Wujin Construction Bank provided a bill with a total amount available to borrow of RMB10,000,000 (approximately $1,565,000) at September 30, 2011. The agreement matures on December 2, 2011, however, the bills payable at September 30, 2011 become due at various times through October 2011. As we incur future expenses, we will borrow additional funds under these arrangements. The amount outstanding at September 30, 2011 totaled $1,565,000.
  
• Bank Acceptance Agreement, between Best Appliance and Jiangsu Bank University Subbranch pursuant to which Jiangsu Bank University Subbranch provided a bill with a total amount available to borrow of RMB29,000,000 (approximately $4,538,500) at September 30, 2011. The agreement matures on May 17, 2012, however, the bills payable at September 30, 2011 become due at various times through January 2012. As we incur future expenses, we will borrow additional funds under these arrangements. The amount outstanding at September 30, 2011 totaled $4,538,500.

Capital Expenditures and Capital Requirements

Our capital expenditures for the nine months ended September 30, 2011 and 2010 were $3.23 million and $2.42 million, respectively, representing the total amount of investment activities. Our capital expenditures during the nine months ended September 30, 2011 consisted of capital expenditures relating to the purchase of the Niconia LEV brand and certain equipment, as compared to the same period of 2010, when we acquired certain equipment.

To date, we have financed our operations primarily through cash flows from operations, augmented by short-term bank loans and equity contributions by our stockholders. We believe that our cash on hand and cash flow from operations will meet a portion of our present cash needs and we will require additional cash resources, including equity investment, to meet our expected capital expenditures and working capital requirements for the next 12 months. We may, however, in the future, require additional cash resources due to changed business conditions, implementation of our strategy to expand our marketing efforts and increase brand awareness, or acquisitions we may decide to pursue. If our own financial resources are insufficient to satisfy our capital requirements, we may seek to sell additional equity or debt securities or obtain additional credit facilities. The sale of additional equity securities could result in dilution to our stockholders. The incurrence of indebtedness would result in increased debt service obligations and could require us to agree to operating and financial covenants that would restrict our operations. Financing may not be available in amounts or on terms acceptable to us, if at all. Any failure by us to raise additional funds on terms favorable to us, or at all, could limit our ability to expand our business operations and could harm our overall business prospects.

Inflation

Inflation and changing prices have not had a material effect on our business, and we do not expect that inflation or changing prices will materially affect our business in the foreseeable future. However, our management will closely monitor price changes in the Chinese economy and our industry and continually maintain effective cost controls in operations.

Off Balance Sheet Arrangements

As of September 30, 2011 and December 31, 2010, we had capital commitments amounting to $588,127 and $610,242, respectively, with respect to the acquisition of property, plant and equipment that were contracted for but not provided in the condensed consolidated financial statements. Such commitments will be recorded to the financial statements when the property, plant and equipment is received.

As of September 30, 2011 and December 31, 2010, we acted as guarantor for bank loans granted to certain business associates totaling $7,214,650 and $6,272,100, respectively. The maximum amount that can be drawn on these guaranteed loans is $11,361,900 at September 30, 2011 and these guarantees expire at various times through September 2012. None of our directors or executive officers are involved in the normal operations or have invested in the business of the guaranteed business associates. All the business associates have a healthy record of paying back the loans in a timely manner.

All the above guarantees have no recourse provisions that would enable us to recover from the business associates any amounts paid under the guarantees and any assets held as collateral that we can obtain or liquidate to recover all or a portion of the amounts that could be paid under the guarantees. If the business associates fail to perform under their contractual obligation, we are obligated to make future payments including the contractual principal amounts, related interest and penalties.

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Management has assessed the fair value of the obligation arising from the above financial guarantees and considered it is immaterial to the condensed consolidated financial statements. Therefore, no obligations with respect of the above guarantees were recognized as of September 30, 2011 and December 31, 2010, respectively.

Seasonality

Our operating results and operating cash flows historically have been subject to seasonal variations. Our revenues usually increase over each quarter of the calendar year with the first quarter usually the slowest quarter because fewer projects are undertaken during and around the Chinese spring festival.

Critical Accounting Policies

Critical accounting policies are those we believe are most important to portraying our financial conditions and results of operations and also require the greatest amount of subjective or complex judgments by management. Judgments and uncertainties regarding the application of these policies may result in materially different amounts being reported under various conditions or using different assumptions. There have been no material changes to the critical accounting policies previously disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2010.

Recent Accounting Pronouncements

See Note 2 to our unaudited condensed consolidated financial statements included elsewhere in this report.

ITEM 3.      QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Not Applicable.

ITEM 4.      CONTROLS AND PROCEDURES.

Evaluation of Disclosure Controls and Procedures

As required by Rule 13a-15(e), our management has carried out an evaluation, with the participation and under the supervision of our Chief Executive Officer, Mr. Jianliang Shi, and Chief Financial Officer, Ms. Jianfeng Xu, of the effectiveness of the design and operation of our disclosure controls and procedures, as of September 30, 2011.

Disclosure controls and procedures refer to controls and other procedures designed to ensure that information required to be disclosed in the reports we file or submit under the Securities Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC and (ii) accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating and implementing possible controls and procedures.

An control deficiency exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent or detect misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control over financial reporting that is less severe than a material weakness, yet important enough to merit attention by those responsible for oversight of our financial reporting.

Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act. The Company’s internal control system over financial reporting is a process designed under the supervision of the Company's Chief Executive Officer and Chief Financial Officer to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the consolidated financial statements in accordance with United States generally accepted accounting principles (“U.S. GAAP”). Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies and procedures may deteriorate.

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Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act. Our management is also required to assess and report on the effectiveness of our internal control over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act of 2002 (“Section 404”).Management conducted its evaluation of disclosure controls and procedures under the supervision of our chief executive officer and our chief financial officer. Based upon, and as of the date of this evaluation, our chief executive officer and chief financial officer concluded that, as of September 30, 2011, our disclosure controls and procedures were not effective due to the material weaknesses in our internal control over financial reporting described below:

- We failed to properly apply US GAAP to the transactions of accounting shares issued at fair value and adequate reserves for doubtful accounts.

- We inappropriately recorded certain transactions as additional paid-in capital which was not in compliance with US GAAP.

Remediation Initiative

We have engaged a consulting firm to modify our accounting policies based on US GAAP. The modifications are currently being reviewed by the management, and they will be released and implemented upon approval of the management and the audit committee.

Changes in Internal Control over Financial Reporting

During the quarter ended September 30, 2011, there was no other change in our internal controls over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act), except as described above, that has materially affected, or that is reasonably likely to materially affect, our internal control over financial reporting.

A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control systems are met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues, if any, within a company have been detected. Such limitations include the fact that human judgment in decision-making can be faulty and that breakdowns in internal control can occur because of human failures, such as simple errors or mistakes or intentional circumvention of the established process.

PART II
OTHER INFORMATION

ITEM 1.     LEGAL PROCEEDINGS.

From time to time, we may become involved in various lawsuits and legal proceedings, which arise, in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these, or other matters, may arise from time to time that may harm our business. We are currently not aware of any such legal proceedings or claims that we believe will have a material adverse affect on our business, financial condition or operating results.

ITEM 1A.   RISK FACTORS.

Not Applicable.

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

On June 14, 2011, the Company issued 80,000 shares to Mass Media 77 for their consulting services. On June 21, 2011, the Company issued an aggregate of 3,500 shares to the Company’s IR firm Crescendo Investor Relations for their consulting services. On June 21, 2011, the Company issued an aggregate of 13,000 shares to certain consultants for their services. These shares were unregistered and issued pursuant to the exemption provided under Section 4(2) of the Securities Act.

ITEM 3.     DEFAULTS UPON SENIOR SECURITIES.

None.

ITEM 4.     (REMOVED AND RESERVED).

ITEM 5.     OTHER INFORMATION.

We have no information to disclose that was required to be in a report on Form 8-K during the period covered by this report, but was not reported. There have been no material changes to the procedures by which security holders may recommend nominees to our board of directors.

ITEM 6.     EXHIBITS.

The following exhibits are filed as part of this report or incorporated by reference:

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SIGNATURES

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

EXHIBIT INDEX