Solar power is the generation of electricity from sunlight through a process known as the photovoltaic effect. Solar cells perform the conversion of sunlight into electricity. These solar cells are interconnected and packaged into solar modules, which are mounted in areas with exposure to the sun.

Solar power systems, which are comprised of multiple solar modules and system components such as batteries, inverters, electronic components and supporting structures are used in residential, commercial and industrial applications in both on-grid and off-grid applications. The market for on-grid applications, where solar power is used to supplement a customer’s electricity purchased from a utility grid, represents the largest and fastest growing segment of the market.

The solar power market has grown significantly in the past several years. According to Photon Consulting, an independent solar energy research firm, the global solar power market, as measured by annual solar power production, increased by 41.7% from 1.2 GW in 2004 to 1.7 GW in 2005. During the same period, solar power industry revenues grew from approximately $8 billion in 2004 to approximately $12 billion in 2005. Photon Consulting projects that solar power industry revenues and solar power production will reach $72 billion and 10.4 GW, respectively, by 2010.

Solar power production is expected to grow at a CAGR of 43.7% from 2005 to 2010, driven largely by rising grid prices, government initiatives and new distribution channels, according to Photon Consulting.

The Company produces standard solar modules, ranging from 160 W to 185 W in power output, built to general specifications for use in a wide range of residential, commercial, industrial and other solar power generation systems. This power output is slightly below the amount of power required for a typical 29-inch television set with a 200 W specification.

The variation in power output is based on the conversion efficiency of the cells used in solar modules. The Company also designs and produces solar modules based on customers’ specifications. The Company’s solar modules are sealed, weatherproof and able to withstand high levels of ultraviolet radiation and moisture. The Company primarily sells its modules under its own brand.

From time to time, the Company designs and manages the installation of solar power systems for selected solar projects funded or subsidized by the Chinese government.

The Company manufactures ingots, wafers and modules. The Company’s facilities include module, ingots and wafer production lines with the current annual manufacturing capacity of 59.8 MW, 49.7 MW and 33.0 MW per year, respectively.

Gross profit in the nine months ended September 30, 2006 increased by $18.3 million to $21.0 million, from $2.7 million in the nine months ended September 30, 2005.

Operating expenses increased by $8.9 million, from $1.1 million in the nine months ended September 30, 2005 to $10.0 million in the nine months ended September 30, 2006.

Interest expenses increased by $762,318, from $305,851 in the nine months ended September 30, 2005 to $1.1 million in the nine months ended September 30, 2006.

Net income increased significantly, from $1.1 million in the nine months ended September 30, 2005 to $7.8 million in the nine months ended September 30, 2006, representing an increase of $6.7 million.