ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The Company is including the following cautionary statement in this Quarterly Report on Form 10-Q to make applicable and utilize the safe harbor provision of the Private Securities Litigation Reform Act of 1995 regarding any forward-looking statements made by, or on behalf of, the Company. Forward-looking statements include statements concerning plans, objectives, goals, strategies, future events or performance and underlying assumptions and other statements, which are other than statements of historical facts. Certain statements contained herein are forward-looking statements and, accordingly, involve risks and uncertainties, which could cause actual results or outcomes to differ materially from those expressed in the forward-looking statements.

The Company's expectations, beliefs and projections are expressed in good faith and are believed by the Company to have a reasonable basis, including without limitations, examination of historical operating trends, data contained in records and other data available from third parties, but there can be no assurance that the Company's expectations, beliefs or projections will result, or be achieved, or be accomplished.

The Company's expectations, beliefs and projections are expressed in good faith and are believed by the Company to have a reasonable basis, including without limitations, examination of historical operating trends, data contained in records and other data available from third parties, but there can be no assurance that the Company's expectations, beliefs or projections will result, or be achieved, or be accomplished.

The company designs, manufactures, markets and sells advanced LED lighting products and solutions. The company's product line-up covers a broad range of technically innovative outdoor lighting, indoor general and accent lighting, and color-changing lighting lamps and fixtures that are used for applications in commercial, architectural, residential, hospitality, entertainment and consumer markets.

The company generates revenue from selling her lighting products and solutions into commercial, architectural, residential, and other markets. Commercial sales include the lighting solution design and applications of advanced LED lamps, fixtures, and associated control systems. Architectural sales mainly focus on the installation of wall wash lighting, light strips, and display panel. Residential sales are addressed on the replacement market which currently installed with traditional energy-consuming lighting products such as incandescent lamps, compact fluorescent lamps, and fluorescent tubes.

Revenue

Revenue is derived from sales of our advanced lighting products and solutions. These products consist of solid-state LED lighting lamps, fixtures, and control systems. Besides the LED lighting related businesses, some of our revenue comes from our professional project management service such as energy-saving system design, landscape lighting design, and language globalization services..

Cost of Goods Sold

The company's cost of goods sold consists primarily of labor-related overhead, such as R&D professionals, designers, and administrative personnel. We project management services based on customer orders. Besides our in-house resources, we also out-source part of projects to support such demand.

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Gross Profit

Our gross profit has been and will continue to be affected by a variety of factors, including changing of the foreign exchange rates for exporting, out-sourcing cost to support project demands, and average sales prices of our products, including fluctuations in the cost of our purchased components, sales price and the product life cycle.

Operating Expenses

Operating expenses consist primarily of salaries and associated costs for employees in finance, human resources, sales, information technology and administrative activities. In addition, operating expenses include charges relating to accounting, legal, insurance and stock-based compensation under Statement of Financial Accounting Standards No. 123(R), "Share-Based Payment."

Difference in sales and gross profit between 2009 Q1 and 2008 Q1 was due to the group acquiring the patent for it self-invented wafers and the improvement of related technology. The Company started to get the sales order of lighting and design service from the latter half of FY 2008 and service revenue increased for USD 853,000 in 2009 Q1 comparing with that in 2008 Q1. The Company introduced new products and new sales channel and thus sales revenue in 2009 Q1 increased for about US 150,000 comparing with that in 2008Q1. Since the cost of service revenue primarily consists of staff costs and such costs didn't rise in proportion to the percentage of service revenue increase, gross profit and gross profit ratio obviously increased.

Difference in operating expense between 2009 Q1 and 2008 Q1 was because that the Company had higher operating expense due to higher sales revenue. The other reason for the increase of USD $76,125 operating expense was due to the Companying moving its office to a larger office in early 2009. On the other hand, the Company didn't initiate the new R&D project and hence R&D cost in 2009Q1 decreased for US $745 comparing with that in 2008 Q1.

Difference in non-operating income and gain was due to the Company subleased its idle office space in 2008 Q1 but it didn't have such sublease in 2009Q1. Thus, it resulted in the decrease of non-operating income and gain for USD 1,600 .

Difference in non-operating expense and loss was because the Company paid off the entire bank loan and resulted in the decrease of USD $1,560 interest expense