The following discussion and analysis should be read in conjunction with the condensed consolidated financial statements and notes thereto included in Item 1 of this Quarterly Report on Form 10-Q and with Management's Discussion and Analysis of Financial Condition and Results of Operations contained in our Annual Report on Form 10-K filed with the Securities and Exchange Commission on April 4, 2012.

FORWARD-LOOKING STATEMENTS:

This Quarterly Report on Form 10-Q for the three months ended June 30, 2012 contains "forward-looking statements" within the meaning of Section 21E of the Securities and Exchange Act of 1934, as amended, including statements that include the words "believes," "expects," "anticipates," or similar expressions. These forward-looking statements include, among others, statements concerning our expectations regarding our working capital requirements, financing requirements, business, growth prospects, competition and results of operations, and other statements of expectations, beliefs, future plans and strategies, anticipated events or trends, and similar expressions concerning matters that are not historical facts. The forward-looking statements in this Quarterly Report on Form 10-Q for the three months ended June 30, 2012 involve known and unknown risks, uncertainties and other factors that could cause our actual results, performance or achievements to differ materially from those expressed in or implied by the forward-looking statements contained herein.

OVERVIEW OF OUR BUSINESS

We primarily manufacture, market and sell silicon wafers to manufacturers of solar cells. In addition, we manufacture PV modules with solar cells purchased from third parties.

Product Line 1 - Silicon Wafers

We produce silicon wafers by extracting purified mono-crystalline silicon from virgin poly-silicon feedstock utilizing mono-crystalline silicon ingot growers. Then we cut the purified mono-crystalline silicon ingots into silicon wafers with multi-wire saws. Silicon wafers are one of the most important components in solar cells.

As of June 30, 2012, we have eleven mono-crystalline silicon ingot growers. Maximum production capacity of each mono-crystalline silicon ingot grower is approximately one ton of mono-crystalline silicon ingots per month. Our current mono-crystalline silicon ingot production capacity is approximately 132 tons per annum.

We are also equipped with five multi-wire saws, each of which can produce approximately 70 silicon wafers per kilogram of mono-crystalline silicon ingot. Based on an estimated 2.8 watts (W) per silicon wafer, our current silicon wafer production capacity is approximately 20MW per annum.

During the six months ended June 30, 2012, the capacity utilization rate of our silicon wafer production machines fluctuated between 20% and 30%.

Product Line 2 - PV Modules

We have two semi-automatic production lines that manufacture PV modules. Our existing production capacity is approximately 20MW of PV modules per annum. During 2012, we produced various types of PV module samples; however we did not produce PV module products in commercial quantities. Currently, we purchase solar cells from third parties to manufacture PV modules. During the six months ended June 30, 2012, the Company did not produce any PV modules.

Overview of Properties, Plant and Equipment

We have acquired land-use rights to 71,346 square meters for industrial usage in Henan Province, PRC. The land use rights expire on July 23, 2060. We began the construction of our manufacturing facilities on this site in 2008. As of June 30, 2012, we have completed the construction of five workshops. Two of the five workshops are in operation with each comprises of 2,016 square meters.

As of June 30, 2012, the net book value of our property, plant and equipment was $6,946,779.

Critical Accounting Policies

During the six months ended June 30, 2012, there were no changes to our critical accounting policies and the use of estimates. For further information, please refer to "Critical Accounting Policies" included in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2011.

Operation

In July 2010, we began manufacturing silicon wafers. In September 2010, we began to ship our silicon wafers to customers primarily located in China.

We are also expanding the production capacity of our existing product lines through the purchase of additional equipment and recruitment of personnel. We also plan to produce solar cells by ourselves and provide advanced applications of solar energy to complete the value chain of this industry.

RESULTS OF OPERATIONS

Comparison of Three Months Ended June 30, 2012 and 2011:

Revenues. In the current period, revenue was $243,163, compared to $768,035 for the prior period, a decrease of $524,872 or 68.3%. The decrease was due to a decrease of our silicon wafers sales. Our revenues were generated from the sales of silicon wafers for both periods. During the second quarter of 2012, the selling price of our silicon wafers was unexpectedly low due to fierce competition. As a result, the company decided to reduce the sales amount of silicon wafers, which resulted in a decline in our revenue.

Cost of Sales. Cost of sales was $250,089 compared to $1,477,235 for the prior period, a $1,227,146 or 83.1% decrease. The decrease was primarily due to the decreased sales of silicon wafers.

Gross Loss. In the current period, gross loss was $6,926; compared to gross loss of $709,200 for the same period in previous year, gross loss margin increased to negative 2.85% in the current period from negative 92.22% for the same period in previous year. During the three months ended June 30, 2011, the Company sold products below costs and took inventory markdown of approximately $363,000 because of difficult market condition.

General and Administrative Expenses.General and administrative expenses consist primarily of salaries and other personnel-related costs, professional fees and other costs. General and administrative expenses remained at same level as the prior period. General and administrative expenses incurred during the three months ended June 30, 2012 was $221,356 representing $19,799 or 9.8% increase compared with $201,557 for the same period of 2011.

Selling Expenses. Selling expenses include exhibition and other selling expenses. Selling expenses for the three months ended June 30, 2012 and 2011 were $4,811 and $6,111, respectively, representing a decrease of $1,300 or 21.3%. The decrease was primarily due to the company's cut in certain exhibition and other selling efforts because of its tight cash flow situation during the second quarter of 2012.

Non-operating Income. During three months ended June 30, 2012, non-operating income was $6,994. During the corresponding period of 2011, non-operating income was $21,263.

Interest Expenses. Interest expenses, net of interest income, increased by $27,161 or 27.8% from $97,592 in the prior period to $124,753 in the current period. The increase was mainly due to an increased amount of loans.

Net Loss. In the current period, net loss decreased by $642,345 or 64.7% to $350,852 from $993,197 for the prior period. The decrease was mainly due to the reasons discussed above.

Comparison of Six Months Ended June 30, 2012 and 2011:

Revenues. In the current period, revenue was $618,198, compared to $1,723,046 for the prior period, a decrease of $1,104,848 or 64.1%. The decrease was due to a decrease of our silicon wafers sales. Our revenues were generated from the sales of silicon wafers for both periods. During the first half of 2012, the selling price of our silicon wafers was unexpectedly low due to fierce competition. As a result, the company decided to reduce the sales amount of silicon wafers, which resulted in a decline in our revenue.

Cost of Sales. Cost of sales was $777,036 for six months ended June 30, 2012; compared to $2,393,180 for the same period prior year, a $1,616,144 or 67.5% decrease. The decrease was primarily due to the decreased sales of silicon wafers.

Gross Loss. In the first half of 2012, gross loss was $158,838; compared to gross loss of $670,134 for the same period in previous year. Gross loss margin increased to negative 25.69% in the current period from negative 38.89% for the same period in previous year. The Company sold products below costs and took inventory markdown of $86,761 and $362,856 for the six month ended June 30, 2012 and 2011, respectively.

General and Administrative Expenses.General and administrative expenses consist primarily of salaries and other personnel-related costs, professional fees and other costs. General and administrative expenses remained at same level as the prior period. General and administrative expenses incurred during the six months ended June 30, 2012 was $387,844, representing $10,566 or 2.8% increase compared with $377,278 for the same period of 2011.

Selling Expenses. Selling expenses include exhibition and other selling expenses. Selling expenses for the six months ended June 30, 2012 and 2011 were $7,498 and $18,224, respectively, representing a decrease of $10,726 or 58.9%. The decrease was primarily due to the company's cut in certain exhibition and other selling efforts because of its tight cash flow situation during the first half of 2012.

Non-operating Income. During six months ended June 30, 2012, non-operating income was $6,994. During the corresponding period of 2011, non-operating income was $21,263.

Interest Expenses. Interest expenses, net of interest income, increased by $33,450 or 16.0% from $209,206 in the prior period to $242,656 in the current period. The increase was mainly due to an increased amount of loans.

Net Loss. In the current period, net loss decreased by $463,737 or 37.0% to $789,842 from $1,253,579 for the prior period. The increase was mainly due to the reasons discussed above.

LIQUIDITY AND CAPITAL RESOURCES

As of June 30, 2012, we had total current assets of $2,387,637 and total current liabilities of $2,401,498, resulting in a negative working capital of $13,861. Cash and cash equivalents were $44,474 at the beginning of the period and increased to $67,861 at the end of the period ended June 30, 2012.

During the first half of 2012, cash used in operations was $456,757, a decrease of 83.1% from $2,698,182 for the same period of 2011. The decrease was mainly due to the increase in accounts payable and the decrease in raw materials purchased in the period. During current period, net cash inflow resulting from increased accounts payable was $91,758, in contrast, the Company generated net cash outflow of $290,988 resulting from decreased accounts payable during the same period previous year. Net cash outflow used in inventory was 225,485 in six months ended June 30, 2011, decreased $978,987 comparing with $1,204,472 cash outflow used in the same period last year.

During six months ended June 30, 2012, our investing activities provided net cash inflow of $126,220, mainly due to government subsidy on property and equipment of $150,308 granted to the Company during first half of 2012. There was no subsidy of such received during the same period of 2011. During six months ended June 30, 2011, we spent $203,106 in acquisition of property and equipment. We spent $24,088 acquiring property and equipment, representing $179,018 or 88.1% decrease in amount of cash used in this regard.

Net cash provided by financing activities in the first half of 2012 was $355,048, a 87.1% decrease from $2,751,574 for the same period of 2011. This decrease was mainly due to a decrease in advances received from related parties. The Company received loans from related parties in the amount of $830,494 in the current period, compared to $4,434,088 in the same period prior year. The Company did not receive any loans from any other unrelated parties in the current period, but it repaid $475,446 and 1,682,514 loans from a local financial institution in the six months ended June 30, 2012 and 2011, respectively.

The Company's difficult financial position, continuous losses and low share price and inactive stock trading volume have made it difficult for the Company to raise additional capital.

Related party loans

The following table presents amounts of related party loans:

            Related parties                Maturity date      Interest rate      June 30, 2012       December 31, 2011
Mr. Wensheng Chen, Chief Executive
Officer, Chairman of Board                December 1, 2013               3.5 %   $    3,217,550     $         3,217,743
Ms. Ling Chen, President                     Due on demand               3.5 %        1,018,495                 352,801
Zhuhai Yuemao Laser Facility
Engineering Co., Ltd.  ("Yuemao Laser")   December 1, 2013               3.5 %          476,856                 475,691
Yuemao Science & Technology Group
("Yuemao Technology")                     December 1, 2013               3.5 %        8,165,745               8,083,538
Total                                                                            $   12,878,646     $        12,129,773

Due to related parties - current
portion                                                                          $    1,018,495     $           352,801
Due to related parties - non-current
portion                                                                              11,860,151              11,776,972
Total                                                                            $   12,878,646     $        12,129,773

1. Both Yuemao Laser and Yuemao Technology are PRC companies and controlled by the Company's chairman and Chief Executive Officer, Mr. Wensheng Chen.

Mr. Wensheng Chen, Chairman and Chief Executive Officer of the Company

Non-Trade Transactions

All loans the Company borrowed from Mr. Chen will bear interest at the interest rate of 3.5% per annum starting from January 1, 2011. The Company can make repayment of the accrued interest when its cash flow circumstance allows. During the six months ended June 30, 2012, the Company accrued an interest of $57,577 on the loans from Mr. Chen.

Ms. Ling Chen, President of the Company

Non-Trade Transactions

As of June 30, 2012, the Company borrowed approximately $1,018,495 from Ms. Ling Chen. On May 5, 2011, Ms. Ling Chen and the Company entered into an amendment to the loans. The amendment sets forth that all loans from Ms. Ling Chen will bear an interest at the rate of 3.5% per annum starting from January 1, 2011. The Company can make repayment of accrued interest when its cash flow circumstance allows. Loans borrowed from Ms. Ling Chen are payable on demand. During the six months ended June 30, 2012, the Company accrued an interest of $10,124 on the loans from Ms. Ling Chen.

Yuemao Science & Technology Group ("Yuemao Technology")

Yuemao Technology is a private company established under the laws of the PRC, which is controlled by our Chairman and Chief Executive Officer, Mr. Wensheng Chen.

Non-Trade Transaction

On May 5, 2011, Yuemao Technology and the Company entered into an amendment to the loan. all loans from Yuemao Technology will bear an interest at the rate of 3.5% per annum starting from January 1, 2011. The Company can make repayment of accrued interest when its cash flow circumstance allows. During the six months ended June 30, 2012, the Company accrued an interest of approximately $140,943 on the loans from Yuemao Technology.

Zhuhai Yuemao Laser Facility Engineering Co., Ltd. ("Yuemao Laser")

Yuemao Laser is a private company established under the laws of the PRC, which is controlled by our Chairman and Chief Executive Officer, Mr. Wensheng Chen.

Non-Trade Transactions

On May 5, 2011, Yuemao Laser and the Company entered into an amendment to the loans. The amendment sets forth that all loans the Company borrowed from Yuemao Laser will bear an interest at the rate of 3.5% per annum starting from January 1, 2011. The Company can make repayment of accrued interest when its cash flow circumstance allows. During the six months ended June 30, 2012, the Company accrued an interest of approximately $8,329 on loans from Yuemao Laser.

Future Cash Requirements

During 2012, the Company plans to raise approximately $18 million to either complete construction of a solar cell production facility or to acquire an existing production facility. As a result, the Company expects to require significantly greater capital resources compared to the previous fiscal year.

The Company's cash requirements can be divided into two categories.

(1) Capital demand in daily operations. This includes costs associated with being a public company, including legal fees, audit/review fees and other professional fees; and costs incurred by the Company's operating subsidiary, including wages, utilities and other operating costs. The Company expects its cash requirements under this category to be approximately $120,000 per month.

(2) Capital demand for the construction of its solar cell production facility or to acquire an existing solar cell production facility.

As of June 30, 2012, the Company does not have sufficient capital to meet its planned expansion. Due to the negative profit margins during the six months ended June 30, 2012, the Company does not expect to achieve positive cash flow in the short-term. In addition, given the Company's short operating history, it is difficult to predict when the Company would begin to generate sufficient cash to support its operations. However, in the foreseeable future, related-parties intend to continue to provide financial resources to meet the Company's daily operating cash needs, including the Company's CEO, Mr. Wensheng Chen, Yuemao Technology, and Yuemao Laser. The Company plans to raise funds from domestic and foreign banks and/or financial institutions to increase working capital in order to meet its capital demand described in category (2) above.

Going forward, the Company anticipates that it will require an additional $18 million to build new solar cell manufacturing facilities.

Without additional funding, the Company will not be able to pursue its business model. If adequate funds are not available or are not available on acceptable terms when required, we would be required to significantly curtail our operations and would not be able to fund the development of the business envisioned by our business model. These circumstances could have a material adverse effect on our business, which could affect our ability to continue to operate as a going concern.

The recent and unprecedented disruption in the credit markets has had a significant impact on a number of financial activities. Additional financing is desirable within the next nine months in order to meet our current and projected cash flow deficits from business operations and future development.

Off-Balance Sheet Arrangements

As of June 30, 2012, we have not entered into any financial guarantees or other commitments to guarantee the payment obligations of any other parties. We do not have any off balance sheet arrangements that are reasonably likely to have a current or future effect on our financial condition, operating results and cash flows.