UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

(Mark One)

(x ~~X )~~ ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.

FOR THE FISCAL YEAR ENDED MAY 31, ~~2014~~2015

(¨ ) 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 0-54205

HUAYUE ELECTRONICS, INC. (Name of Registrant in its Charter)
Delaware	20-2188353
(State of Other Jurisdiction of incorporation or organization)	(I.R.S.) Employer I.D. No.)
51 Huilingxi Road, Zhouhuizheng, Wujin District Changzhou, Jiangsu Province, P.R. China 213022
(Address of Principal Executive Offices)

HUAYUE ELECTRONICS, INC.

~~Issuer's~~(Name ~~Telephone~~of ~~Number:~~Registrant ~~86-519-83630688~~in its Charter)

Delaware	20-2188353
(State of Other Jurisdiction of incorporation or organization)	(I.R.S.) Employer I.D. No.)

475 Park Avenue South, 30^th Floor,
New York, NY 10016

(Address of Principal Executive Offices)

Issuer’s Telephone Number: 646-478-2676

Securities Registered Pursuant to Section 12(b) of the Exchange Act: NONE

Securities Registered Pursuant to Section 12(g) of the Exchange Act:

COMMON STOCK, $0.001 PAR VALUE

(Title of Class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 406 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 Act. Yes __ ¨ No √_ x

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Sections 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 ~~(1)~~ has ~~filed~~submitted ~~all~~electronically ~~reports~~and posted on its corporate Web site, if any, every Interactive Data File required to be ~~filed~~submitted byand ~~Sections~~posted 13pursuant orto ~~15(d)~~Rule 405 of ~~the~~Regulation ~~Securities~~S-T ~~Exchange~~(§232.405 ~~Act~~ of ~~1934~~this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to ~~file~~submit ~~such reports),~~ and ~~(2)~~post ~~has been subject to~~ such ~~filing requirements for the past 90 days~~files. ) Yes √_ x No __ ¨

Indicate by check mark ~~whether the registrant has submitted electronically and posted on its corporate Web site,~~ if ~~any,~~disclosure ~~every~~of ~~Interactive~~delinquent ~~Data~~filers ~~File required to be submitted and posted~~ pursuant to ~~Rule~~Item 405 of Regulation S-TK (§~~232~~ 229.405) ofis ~~this~~not ~~chapter)~~contained ~~during~~herein, and will not be contained, to the ~~preceding~~best 12of ~~months~~registrant’s knowledge, in ~~(or~~definitive ~~for~~proxy ~~such~~or information statements ~~shorter~~incorporated by ~~period~~reference in ~~that~~Part ~~the~~III ~~registrant~~of ~~was~~this ~~required~~Form to10-K ~~submit~~or ~~and~~any ~~post~~amendment to ~~such~~this ~~files~~Form 10-K.~~) Yes √_~~ ~~No ___~~x

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405) 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. [X]

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. (Check One)

Large accelerated filer ¨ Accelerated filer ~~________~~ ¨ Non-accelerated filer ¨ Smaller reporting company _X 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 November 30, ~~2013~~2014, the last day of the registrant’s most ~~recent~~recently ~~fiscal~~completed second fiscal quarter, the aggregate market value of the common stock held by non-affiliates was $349,~~284~~350,~~090~~000 based upon the closing sale price on November 30, ~~2013~~2014 of $20.7055 per share.

As of September 15, ~~2014~~2015, there were 31 24,~~327~~325,741 shares of common stock outstanding.

Documents incorporated by reference: NO

	Part I	PAGE
ITEM 1.	Business	2
ITEM 1A.	Risk Factors	7
ITEM 1B.	Unresolved Staff Comments	27
ITEM 2.	Description of Property	27
ITEM 3.	Legal Proceedings	27
ITEM 4.	Mine Safety Disclosures	27

	Part II
ITEM 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	28
ITEM 6.	Selected Financial Data	29
ITEM 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	29
ITEM 7A.	Quantitative and Qualitative Disclosures about Market Risk	29
ITEM 8.	Financial Statements and Supplementary Data	30
ITEM 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	31
ITEM 9A.	Controls and Procedures	31
ITEM 9B.	Other Information	32

	Part III
ITEM 10.	Directors, Executive Officers and Corporate Governance	33
ITEM 11.	Executive Compensation	34
ITEM 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	35
ITEM 13.	Certain Relationships and Related Transactions, and Director Independence	36
ITEM 14.	Principal Accountant Fees and Services	36

	Part IV
ITEM 15.	Exhibits and Financial Statement Schedules	37

SIGNATURES

PART I

FORWARD-LOOKING STATEMENTS: NO ASSURANCES INTENDED

In addition to historical information, this Annual Report contains forward-looking statements, which are generally identifiable by use of the words “believes,” “expects,” “intends,” “anticipates,” “plans to,” “estimates,” “projects,” or similar expressions. These forward-looking statements represent Management’s belief as to the future of Huayue Electronics, Inc. Whether those beliefs become reality will depend on many factors that are not under Management’s control. Many risks and uncertainties exist that could cause actual results to differ materially from those reflected in these forward-looking statements. Factors that might cause such a difference include, but are not limited to, those discussed in Section 1A of this Report, entitled “Risk Factors.” Readers are cautioned not to place undue reliance on these forward-looking statements. We undertake no obligation to revise or publicly release the results of any revision to these forward-looking statements.

ITEM 1.

BUSINESS

Huayue Electronics, Inc. is a Delaware corporation that, through a subsidiary, owns all of the registered capital of Changzhou Huayue Electronic Co., Ltd. (“Changzhou Huayue”). Changzhou Huayue was organized in 1999 under the laws of the People’s Republic of China (“PRC”). Changzhou Huayue is engaged in the businesses of developing, producing and selling two major product lines:History

·We ~~energy~~were incorporated ~~efficient~~in ~~lights~~Delaware ~~including~~on November 19, 2010 under the name China International Enterprise Corp. In 2011, we changed our name to HXT Holdings, Inc. On September 2, 2011, we acquired all of the outstanding capital stock of China Metal Holding, Inc. (“China Metal”), a privately-owned corporation formed in the State of Delaware. China Metal is a holding company whose only asset, held through a subsidiary, is 100% of the registered capital of Changzhou Huayue Electronics Company, Limited (“Changzhou Huayue”), a limited liability company organized under the laws of the People’s Republic of China (“China” or “PRC”). Changzhou Huayue is engaged in developing, manufacturing and selling high frequency induction lights and ~~LED~~electrolytic ~~lights;~~capacitors. Changzhou Huayue’s offices and ·manufacturing facilities ~~electrolytic~~are ~~capacitors~~located in China. Effective November 2, 2011, we changed our name to Huayue Electronics, Inc.

~~While~~On ~~revenues~~April in23, ~~fiscal~~2015, ~~year~~we ~~2014~~purchased ~~(which~~a ~~ended~~51% oninterest in ~~May~~SavWatt ~~31,~~Kazahstan ~~2014)~~Ltd. ~~were~~SavWatt ~~split~~Kazakhstan ~~approximately~~Ltd. ~~87%~~was -recently ~~13% between~~formed ~~these~~to ~~business~~engage ~~lines,~~in wethe ~~anticipate~~business ~~that~~of ~~our~~manufacturing ~~future~~and ~~growth~~distributing energy ~~will~~efficient beproducts ~~derived~~in ~~primarily~~Kazakhstan ~~from~~and ~~the~~other former ~~lighting~~Soviet ~~business~~Union countries.

~~History~~In May 2015, we approved plans to dispose of China Metal, including our subsidiary Changzhou Huayue. On June 12, 2015, we consummated the sale of 100% of the outstanding stock of China Metal to Mr. Shudang Pan, our Chairman of the Board at such time and the Chief Executive Officer of Changzhou Huayue, in consideration of the sale and transfer by Mr. Pan to us of 10,000,000 shares of our outstanding common stock.

~~Changzhou~~On ~~Huayue~~July ~~was~~24, ~~founded in November~~2015, our ~~1999~~board ~~as a corporation under the laws~~ of ~~the~~directors ~~PRC~~approved ~~by Mr. Shudong Pan. Initially, Changzhou Huayue was engaged in~~ the ~~business~~change of ~~developing,~~our ~~producing~~name ~~and~~to ~~selling~~Tarsier ~~electrolytic capacitors~~Ltd. ~~In 2008~~, ~~Changzhou~~subject ~~Huayue’s management team decided~~ to ~~expand~~stockholder ~~the company’s activities by entering the business of producing and selling high frequency induction lights~~approval. ~~Towards this end, Changzhou Huayue leased and outfitted a production facility in Changzhou in 2009.~~

~~Following~~On ~~its~~September ~~entry into the induction lighting business~~10, 2015, ~~Changzhou~~we ~~Huayue~~entered ~~obtained~~into ~~the required PRC government certificates and~~ a ~~patent~~purchase ~~for~~agreement ~~induction~~to ~~lamps~~acquire in100% ~~March,~~of ~~2009. During~~ the ~~first~~membership ~~half~~interests of ~~2010,~~BlueCo ~~the~~Energy ~~company~~LLC ~~met certification requirements for compliance with international and European Community standards~~(“BlueCo”). ~~Changzhou~~ BlueCo ~~Huayue~~is ~~participated~~engaged in the ~~drafting~~business of ~~three~~reselling ofenergy ~~the~~in ~~PRC National Induction Lighting Efficiency Standards and acted as~~ the ~~principal~~State ~~drafter~~ of ~~two~~New ~~of them~~York. China’s Standardization Administration finally approved three induction standards in late 2012, which means all regulated corporations and government entities can now procure induction lighting from listed companies. Changzhou Huayue, as one of the principle drafters, was listed on all three and ranked number 1 on one of them.

InCompany ~~2011, Changzhou Huayue added a full line of LED products to further meet global lighting demand.~~Overview

After completing the reorganization of our business and management in May 2015 as discussed above, we intend to engage in the business of:

developing and selling LED street lighting and state-of-the-art Smart City technology;

providing large corporations, institutions, facilities and factories with energy management software and solutions;

providing energy audit services that help customers reduce their energy consumption and save money;

providing commercial and residential customers sustainable energy products; and

developing innovative energy-saving products, including LED light bulbs and fixtures, battery back-up systems and micro-grid technology.

Smart City Technology

Cities worldwide compete daily to engage and attract new residents, businesses and visitors. As a result, constant attention must be paid to providing safer neighborhoods, less stressful means of transportation, a vibrant economic climate and an overall better quality of life. Local and regional government leaders continue to look toward “Smart City” technology to provide a strong foundation on which they can build their city’s future. We plan to capitalize on this emerging opportunity by establishing our company as an innovative developer and provider of Smart City technology. We believe that the streetlight will become the eyes and ears of a city. Each streetlight pole is capable of illuminating, monitoring and protecting its assigned territory. Through advances in technology, the streetlight is quickly morphing into a multi-faceted observation tower capable of providing a city’s control center with important real-time data, including pedestrian activity, traffic flow, video surveillance and weather information. The newest LED lights can be Wi-Fi-enabled or equipped with BLE (Bluetooth Low Energy), VLC (Visual Light Communication) components that allow a city to build a vast data network that can be used to obtain and/or provide critical information and content to its workers, residents or visitors via their mobile devices.

We believe Smart Cities will not only be safer and more convenient cities, but they will be “greener,” more cost-effective cities as the advances in LED lighting can dramatically reduce a city’s energy consumption. We are in the process of developing and/or acquiring the innovative talent, patents and technology that we believe will be required to enable our company to be a driving force in shaping the cities of tomorrow. We plan on being pioneers as the world of utility merges with the worlds of convenience, data dissemination, media and lifestyle.

Energy Management Software and Solutions

While many companies have rightfully sought out more cost-effective energy suppliers, we intend to establish a team of innovators in the area of “energy consumption reduction.” By combining their expertise with a comprehensive energy management software solution, we believe we can help our clients to significantly reduce their energy cost without disrupting their respective businesses. We are currently negotiating to acquire this technology, which will be marketed under the name T-Flow Energy Management Software. If we are able to complete this software acquisition, of which there can be no assurances, we will be able to go into any large building, facility, campus or factory and monitor the energy demand of its equipment (e.g. HVAC, Heavy Machinery, Lighting, etc.). Our software would then continually provide the critical “load data” our clients need to effectively manage overall demand. Clients are compensated in the form of cash rebates for this access and we plan to participate in a percentage of that rebate in exchange for providing the software and monitoring services.

According to the Federal Energy Regulatory Commission, demand response (DR) is defined as “changes in electric usage by end-use customers from their normal consumption patterns in response to changes in the price of electricity over time, or to incentive payments designed to induce lower electricity use at times of high wholesale market prices or when system reliability is jeopardized.” DR includes all intentional modifications to consumption patterns of electricity of customers that are intended to alter the timing, level of instantaneous demand, or the total electricity consumption. It is expected that demand response programs will be designed to decrease electricity consumption or shift it from on-peak to off-peak periods depending on consumers’ preferences and lifestyles. Demand response activities are defined as “actions voluntarily taken by a consumer to adjust the amount or timing of his energy consumption”. Actions are generally in response to an economic signal (e.g. energy price, or government and/or utility incentive). Demand response is a reduction in demand designed to reduce peak demand or avoid system emergencies. As a result, demand response can be a more cost-effective alternative than adding generation capabilities to meet the peak and or occasional demand spikes. The underlying objective of DR is to actively engage customers in modifying their consumption in response to pricing signals. The goal is to reflect supply expectations through consumer price signals or controls and enable dynamic changes in consumption relative to price.

~~History~~In electricity grids, DR can be used as a dynamic demand mechanism to manage customer consumption of ~~Lighting~~electricity in response to supply conditions. For example, DR can be applied to have electricity customers reduce their consumption at critical times or in response to market prices. The difference is that demand response mechanisms respond to explicit requests to shut off, whereas dynamic demand devices passively shut off when stress in the grid is sensed. Demand response can involve actually curtailing power used or by starting on-site generation which may or may not be connected in parallel with the grid. This is a quite different concept from energy efficiency, which means using less power to perform the same tasks, on a continuous basis or whenever that task is performed. At the same time, demand response is a component of smart energy demand, which also includes energy efficiency, home and building energy management, distributed renewable resources, and electric vehicle charging.

~~Both~~Current ~~LED~~demand ~~lights~~response schemes are implemented with large and ~~high~~small ~~frequency~~commercial, ~~induction~~as well as residential customers, often through the use of dedicated control systems to shed loads in response to a request by a utility or market price conditions. Services (lights, ~~represent~~machines, air conditioning) are reduced according to a preplanned load prioritization scheme during the ~~fourth~~critical ~~generation~~time frames. An alternative to load shedding is on-site generation of ~~lighting~~electricity ~~products~~to supplement the power grid. ~~The~~ ~~first~~Under ~~three~~conditions ~~generations~~of ~~were~~tight ~~incandescent~~electricity ~~lights~~supply, ~~fluorescent~~demand ~~lamps~~response can significantly decrease the peak price and, ~~energy-saving~~in ~~lights:~~general, electricity price volatility.

·Demand ~~The~~response ~~incandescent~~is ~~light~~generally ~~bulb,~~used ~~invented~~to byrefer to ~~Thomas~~mechanisms ~~Edison~~used into ~~1879,~~encourage ~~creates~~consumers ~~light~~to byreduce ~~heating a filament inside the tube. The heat makes the filament white hot~~demand, ~~producing~~thereby ~~visible~~reducing ~~light. Because light is created through heat, about 90% of~~ the ~~energy~~peak ~~these~~demand ~~lamps~~for ~~produce is in the form of heat or infrared radiation~~electricity. ·Since Inelectrical generation ~~the~~and ~~early~~transmission ~~20th~~systems ~~Century,~~are ~~conventional~~generally ~~fluorescent~~sized ~~lights~~to ~~were~~correspond ~~patented.~~to Inpeak ~~these~~demand ~~lamps,~~(plus ~~mercury~~margin ~~vapor~~for orforecasting ~~another~~error ~~type~~and ~~of gas in the tube~~unforeseen events), ~~when~~lowering ~~excited~~peak bydemand anreduces ~~electrode,~~overall ~~produces~~plant ~~invisible~~and ~~ultraviolet~~capital ~~light~~cost requirements. ~~These~~Depending ~~light waves hit the white powder coating~~ on the ~~inside~~configuration of ~~the tube~~generation capacity, ~~called phosphors~~however, ~~which~~demand ~~then~~response ~~produces~~may ~~white~~also ~~visible~~be ~~light.~~used ~~This~~to ~~method~~increase ofdemand ~~producing~~(load) ~~light~~at istimes ~~more~~of ~~energy~~high ~~efficient~~production ~~than~~and ~~incandescent~~low ~~lighting, producing only about 30% of the heat~~demand. ·Some systems ~~Energy-saving~~may ~~lamps,~~thereby ~~such~~encourage asenergy ~~compact~~storage ~~fluorescent lights, were developed~~ to ~~replace~~arbitrage ~~standard~~between ~~incandescent~~periods ~~bulbs, producing the same amount~~ of ~~light~~low ~~with reduced power use~~ and ~~cost.~~high ~~However,~~demand ~~the~~(or ~~presence~~low ~~of electrodes in conventional fluorescent lights imposes many restrictions on lamp design~~ and ~~performance~~high ~~and limits lamp life~~prices).

InThere ~~contrast~~are tothree ~~traditional~~types ~~lamps~~of demand response - emergency demand response, ~~induction~~economic ~~lights~~demand response and ~~LED~~ancillary ~~lights~~services ~~involve~~demand ~~neither~~response. ~~filaments~~Emergency ~~nor~~demand ~~electrodes,~~response ~~and~~is noemployed to ~~electrical~~avoid ~~connection~~involuntary ~~goes~~service oninterruptions ~~inside~~during ~~the~~times ~~glass~~of ~~tube~~supply scarcity. ~~Instead,~~ ~~for~~Economic ~~induction~~demand ~~lights,~~response ~~energy~~ is ~~transferred~~employed ~~through~~to ~~the~~allow ~~glass~~electricity customers ~~tube~~to ~~solely~~curtail bytheir ~~electromagnetic~~consumption ~~induction. Power~~when tothe ~~create~~productive ~~the~~or ~~light~~convenience isof ~~transferred~~consuming ~~from~~that ~~outside~~electricity ~~the~~is ~~glass~~worth ~~tube~~less byto ~~means~~them ofthan paying afor ~~magnetic~~the ~~field~~electricity. As ~~with~~Ancillary aservices ~~conventional~~demand ~~fluorescent~~response ~~lamp,~~consists ~~the~~of ~~power~~a ~~excites~~number ~~mercury~~of orspecialty aservices ~~mercury~~that ~~alloy,~~are ~~producing~~needed ~~ultraviolet~~to ~~light~~ensure the ~~which~~secure ~~hits~~operation of the ~~phosphors~~transmission ~~resulting~~grid inand ~~visible~~which ~~light~~have traditionally been provided by generators.

~~“LED”~~Energy is the acronym for light emitting diode, the element of LED lighting that transforms electric current into light. Engineers create diodes by pairing a negatively charged semiconductor. When electric power is connected to the diode, the semiconductors are forced into imbalance and release light as electrons jump to a different energy level.Audits

~~Types~~Few commercial or residential energy customers are aware of ~~Induction~~how ~~Lamps~~much energy they waste every single day. We plan to form a new division, to be known as Tarsier Advisors, to address this opportunity. The “energy audit” will not only help customers save money, but it will help the planet by reducing a consumer’s carbon footprint. In addition, it will help us build a credible dialogue with new customers, each of which will be in need of services such as: Sustainable Energy (Electric and ~~Our~~Gas) ~~Edge~~- a service that we expect to provide through our Tarsier Energy division; LED Lighting - products that can be provided by our recently-formed Tarsier Innovation division; and Energy Management, a service that we expect to provide by our Tarsier Systems division. We believe this seamless vertical integration will help position us as a leader in energy, energy savings and Smart City technology.

~~There~~LED ~~are two basic types of induction lights: external induction lamps~~ Bulbs and internal induction lamps. In an external induction lamp, electromagnets are wrapped around a part of the tube. The tube contains mercury atoms which are provided by a pellet of mercury amalgam. High frequency energy from the ballast is sent through wires which are wrapped in a coil around a ferrite inductor. This creates a powerful magnetic force, which excites the mercury atoms. As with the other forms of fluorescent lighting, the mercury emits ultraviolet light which hits the phosphors and produces visible light.Fixtures

~~Internal~~Emitting ~~induction~~more ~~lamps~~light ~~resemble~~per watt than incandescent bulbs ~~lights~~and incapable ~~shape. The~~to ~~bulb~~lasting ~~contains~~up ~~inert~~to ~~gas~~100,000 ahours, ~~pellet~~LED ~~from~~lights aare ~~mercury~~revolutionizing ~~amalgam~~the orlighting ~~alloy,~~industry. ~~phosphors~~Unlike ~~coating~~their ~~the~~virtually obsolete ~~interior~~counterparts, ~~and~~LED alights ~~glass~~contain ~~tube~~no ~~extending~~harmful ~~from~~ultraviolet ~~bottom~~rays, ofdo ~~the~~not ~~bulb~~visibly toflicker, ~~form~~and ado ~~cavity. This~~not ~~test~~contain ~~tube-like~~any ~~cavity~~toxic ~~contains~~substances. Additionally, anLED ~~induction~~lighting ~~coil~~can ~~wound~~reduce ~~around~~energy aconsumption ~~ferrite shaft. The inductor is excited~~ by ~~high~~as ~~frequency~~much ~~electric~~as ~~power~~80% ~~from~~when ancompared ~~external~~to ~~ballast~~traditional bulbs. ~~This~~ ~~causes~~As a ~~magnetic~~result, ~~field to penetrate~~ the market ~~glass~~for ~~and~~LED ~~excite~~technology in the ~~mercury~~United ~~atoms,~~States ~~which~~has ~~emit~~grown ~~ultraviolet~~from ~~light. These~~$7 ~~waves~~billion ~~are converted~~ to ~~visible~~$10.7 ~~light~~billion bythis ~~the~~year ~~phosphor coating~~alone.

~~The~~Our ~~induction~~Tarsier ~~technology~~Innovation ~~developed~~division, bywhich ~~Huayue~~was formed ~~enables~~to usengage in the development and sales of innovative energy-savings products, has aligned itself with manufacturers of quality LED products, including, but not limited to, ~~make~~LED ~~all~~streetlights ~~our~~and ~~induction~~LED ~~lamps~~tubes, ~~internal~~spots and floodlights. ~~There~~We ~~are~~plan noto ~~stand-alone~~supply ~~power~~both ~~components~~residential customers ~~attached~~and commercial businesses with LED lighting solutions. In ~~addition,~~Our weTarsier ~~have~~Innovation ~~achieved~~division ~~universal~~expects ~~adaptability~~to work closely with municipalities and state governments interested in ~~our~~procuring ~~induction~~LED ~~lamps,~~lighting soand ~~customers~~other ~~can~~Smart ~~simply~~City ~~replace~~technology ~~conventional~~to ~~bulbs~~not ~~without~~only ~~changing~~provide ~~any~~them ~~part~~with the best possible solution, but to assist them in the procurement of ~~their~~financing ~~electric~~from ~~system~~China-based lenders that are working closely with our Chinese manufacturing partners.

~~Huayue~~To ~~LED~~spur ~~lights~~adoption of energy efficient products, U.S. federal law mandated that all light bulbs become 30% more efficient by 2012. The Federal government currently offers tax deductions of up to $.60 per square foot if a new lighting system is installed that reduces power usage by 25% to 40% of the standard lighting power values specified by AHSRAE standard 90.1-2001. As a result of these incentives and ~~Our~~intensified ~~Edge~~marketing by LED manufacturers and retailers, the LED market in the United States is expected to be valued at $20.4 billion by the end of 2015.

The ~~development of LED~~ lighting byindustry ~~Changzhou~~is ~~Huayue~~intensely ~~was~~competitive and ~~premised~~many onof our ~~expectation~~competitors ~~that~~are ~~the~~large, ~~global~~well-funded ~~cost~~companies ofthat ~~diodes~~have ~~will~~substantially ~~decline~~larger ~~as demand widens~~staffs, somanufacturing ~~that~~and ~~competition~~distribution facilities inand ~~the~~financial ~~LED~~resources ~~marketplace~~than ~~will~~we behave ~~based~~at on the ~~ability~~present oftime. In the ~~lamp~~LED ~~manufacturer~~market, towe ~~efficiently~~will ~~assemble~~compete ~~high~~with ~~quality~~companies ~~lamps. Our~~that ~~research~~manufacture or ~~and~~sell ~~development~~nitride-based ~~efforts,~~LED ~~therefore,~~chips ~~were~~as ~~focused~~well onas ~~techniques~~those tothat ~~reduce~~sell ~~manufacturing~~LED ~~cost while maintaining product quality~~components. ~~Changzhou~~Competitors ~~Huayue~~are isoffering ~~not~~new ablue, ~~manufacture~~green ofand ~~the~~white ~~actual~~LEDs with ~~light~~aggressive ~~emitting~~prices ~~diodes;~~and ~~but~~improved ~~our~~performance. ~~experience~~These incompetitors ~~the~~may ~~capacitor~~reduce ~~industry~~average ~~has~~sales ~~provided~~prices usfaster ~~the~~than ~~relationships~~we ~~that~~are ~~allow~~able us to ~~purchase~~reduce costs, ~~high~~and ~~quality diodes at~~ competitive ~~prices.~~pricing Wepressures ~~incorporate~~may ~~these~~accelerate ~~diodes~~the ~~into~~rate ~~our~~of ~~proprietary~~decline ~~product design to achieve a balance~~ of ~~high~~our ~~quality~~average ~~and~~sales ~~low cost~~prices.

~~Advantages~~We ofalso will compete with major lighting manufacturers, including General Electric, Philips and Sylvania. Although these companies have established reputations in the marketplace, we believe we can establish our company as a trusted brand because essentially everyone is a newcomer to the LED space. In addition, while these larger companies have more intensive research and ~~Induction~~development, ~~Lighting~~sales and marketing resources, we believe our smaller infrastructure should allow us to be more nimble, be able to bring new innovations to market faster and be more price competitive as we too are working with high-yield manufacturers. While we also face competition from smaller U.S.-based lighting companies, we believe or product innovation, as well as our branding and marketing expertise, will help us rise above the weakest competition and stay head-to-head with the best competitors in the marketplace.

~~LED~~We ~~lamps~~intend to gain market share is by vertically integrating our energy audit businesses, our energy reselling business and ~~high~~our ~~frequency~~LED ~~induction~~products ~~lamps~~business. We believe that clients that engage in an energy audit will also be seeking out cost-effective, energy-consumption-reducing LED products. Similarly, we believe our Tarsier Energy division customers will have a ~~number~~similar ofneed ~~advantages~~as ~~over~~they ~~other~~seek ~~types~~to reduce energy costs by reducing consumption. We are currently in the process of developing an online retail portal that will allow both commercial and residential customers to purchase lighting: products online. It is currently contemplated that our Tarsier Energy and Tarsier Advisors division clients will have the opportunity to redeem rebate certificates we provide to them on this site to secure a variety of LED lights at a substantial savings.

● Longer Life Span. Electrodes in incandescent and conventional fluorescent lamps decay, producing less light over time, and are generally the limiting factor in the lives of the light. The average life span of a traditional lamp is no more than one year. By avoiding the use of electrodes, induction lamps and LED lamps can have life spans of up to 60,000 hours. As a result, we are able to offer five year warranties on our products. The extended life reduces the frequency and cost of replacement. It also makes our lamps particularly suitable for locations or structures where servicing and light replacement are difficult. ● High Luminous Efficiency. Electrodes in incandescent or conventional fluorescent lighting give rise to power loss and place limits on the gas pressure and its composition. These restrictions do not apply to electrodeless LED and induction lighting. As a result, the power rating and light output of the lamps can be significantly increased. ● Quick Start. Both LED and induction lights can be started or restarted without preMicro-~~heating.~~Grid/Battery ~~Only~~Back a low current is necessary to initiate operation. This enables the size of the distribution box to be reduced, lowering the installation cost. Their quick start-up makes both technologies particularly well suited for emergency lighting. ● Automatic Brightness Adjustment. All our products can be designed to incorporate programmable smart cards, which can adjust the level of brightness based on such factors as the time of day or the level of natural light. The lamps can function at any point down to 30% of their capacity, providing significant flexibility. ● Ballast Efficiency. High frequency ballasts operate at around 98% efficiency while 10-15% of the energy is wasted by the ballast in traditional lighting designs. As a result¸ our ballasts reduce energy demand and the related pollution.Up

●In ~~Energy~~October ~~Efficiency.~~2012, ~~Both~~Hurricane ~~technologies~~Sandy ~~can~~devastated power ~~save~~infrastructures asfrom ~~much~~Jamaica asand ~~75%~~Cuba ofto ~~the~~New ~~energy~~York ~~that~~City ~~would~~and bebeyond. ~~used~~Power inwas ~~conventional~~disrupted ~~fluorescent~~to ~~lamps.~~millions ●of ~~Environmentally~~families ~~Friendly~~and businesses for days, weeks and even months. ~~Induction~~Electric ~~lights~~grid ~~use~~vulnerability ~~amalgams~~was ~~(mercury~~back ~~alloys)~~in ~~instead~~the mind of ~~liquid~~government ~~mercury~~leaders, emergency management personnel and even customers. ~~This~~The ~~difference~~advances ~~reduces~~in battery technology over the ~~amount~~last decade is palpable. The purchases of ~~pollution~~electric ~~that~~cars ~~occurs~~have ~~from~~gone well beyond the ~~disposal~~“early ofadopters” and into the ~~lamps~~mainstream. ~~LED~~Fledgling ~~lamps~~companies dolike ~~not~~Tesla ~~contain~~have ~~mercury~~emerged as formidable competition for Detroit’s oldest brands, and Tesla has recently announced that it has set its sights on other major applications for its innovative battery technologies. ●We ~~High~~also ~~Lighting~~plan ~~Quality~~to become a formidable competitor in the world of battery storage and micro-grid technology. ~~Because~~While ~~they~~the ~~operate~~world athas embraced the concept of “energy saving,” there is still a ~~high~~heavy ~~frequency~~reliance on the worldwide energy grid, ~~induction~~the ~~lights~~complex dosystem ~~not~~of ~~produce~~energy ~~glare~~supply ~~and~~that dospans ~~not~~the ~~flicker~~globe. ~~This~~Ultimately, ~~makes~~it ~~them~~is ~~ideal~~those ~~for~~that ~~use~~achieve intotal independence from this energy grid that will be the ~~workplace~~least vulnerable and most valuable. Over the next several years, ~~avoiding~~our ~~those~~Tarsier ~~lighting~~Innovation division ~~effects~~plans to forge new ground in battery storage and micro-grid technology. As discussed above, we are currently negotiating to acquire a software program that can ~~cause~~manage ~~migraines.~~energy ~~LEDs~~that ~~also~~is ~~emit~~purchased ~~steady~~at ~~light~~“off peak” times, ~~producing~~when costs are lower, stored on a ~~very~~battery ~~limited~~and ~~amount~~re-deployed ofduring ~~flickering~~peak ~~under~~times ~~steady~~when ~~current~~energy costs typically are higher. However, there can be no assurance that we will successfully complete such acquisition.

~~Our~~Energy ~~Applications~~Reselling

~~Changzhou~~We ~~Huayue~~recently entered into an agreement to acquire BlueCo Energy LLC, asa ofNew ~~2014~~York ESCO (Energy Savings Company). BlueCo has historically served approximately 5,000 customers within New York state. If acquired, BlueCo will adopt the Tarsier Energy brand. The current plan is ~~targeting~~for Tarsier Energy to continue to offer a variety of pricing models, which include fixed-price plans, BlueCo’s flat-rate plan for natural gas, and variable-price plan for some of BlueCo’s natural gas and electricity customers. Under our fixed price service options, our customers will purchase natural gas and electricity at a fixed price over the life of the customer contract, which provides our customers with protection against increases in natural gas and electricity prices. Our fixed-price contracts will typically have a term of one to two years for residential customers and up to three years for commercial~~/industrial~~ ~~sector~~customers. Most will provide for an early termination fee in the event that the customer terminates service prior to the expiration of the contract term. Our variable-price service options will provide for a month-to-month term and they will be priced based on our forecasts of underlying commodity prices and other market factors, including the competitive landscape in the market and the regulatory environment. For instance, in a typical market, we can offer fixed-price electricity plans for 6, 12 and 24 months and natural gas plans from 12 to 24 months, which may come with ~~its~~or ~~induction~~without ~~products~~a monthly service fee and/or a termination fee. ~~Followings~~We ~~are~~can ~~some~~also offer variable price natural gas and electricity plans that offer an introductory fixed price that is generally applied for a certain number of billing cycles, typically two billing cycles in our ~~applications:~~current markets, then switches to a variable price based on market conditions. Our variable plans may or may not provide for a termination fee, depending on the market and customer type.

●Our ~~High~~Tarsier ~~Bay~~Energy ~~Lighting.~~division ~~Factories~~also ~~with~~plans ~~high ceilings often require that the surface brightness of the lighting source be lowered~~ to offer anrenewable ~~indoor~~and ~~natural~~carbon ~~lighting~~neutral ~~level.~~(“green”) ~~Induction~~products ~~lamps provide a bright, but more pleasant, lighting source than traditional forms of lighting~~ in ~~these~~certain ~~plants~~markets. ~~Where~~Green ~~they have been installed, the accident rate has gone down and less~~ energy isproducts ~~consumed. For these reasons, Chinese factories~~ are ~~increasingly~~a ~~using~~growing ~~induction~~market opportunity ~~lamps.~~and ●typically ~~Roadway~~provide ~~Lighting.~~increased ~~Induction~~unit ~~lamps~~margins ~~are~~as ~~well~~a ~~suited~~result ~~for the lighting~~ of ~~roadways,~~improved ~~particularly~~customer insatisfaction ~~locations~~and ~~where~~less ~~maintenance is difficult~~competition. ~~For~~Renewable electricity ~~example,~~products ~~the~~allow ~~Nanpu~~customers ~~Bridge~~to ~~lighting~~choose ~~project~~electricity ~~used~~sourced ~~induction lamps, which resulted in a 34% reduction in cost~~ from ~~the original lamps. ● Lighting in Tunnels. Because of their lack of glare~~wind, ~~quick start~~solar, ~~ability~~hydroelectric ~~to automatically adjust brightness,~~ and ~~lower~~bio ~~maintenance~~fuels ~~cost~~sources, ~~induction~~through the ~~lamps~~purchase ~~are~~of ~~used~~renewable inenergy ~~over~~credits ~~100~~(“RECs”). ~~tunnels~~Carbon inneutral ~~the~~gas ~~PRC,~~products ~~such~~give ascustomers the ~~Shanghai~~option ~~Waitan~~to ~~Tunnel~~reduce or ~~and~~eliminate ~~all~~ the ~~tunnels~~carbon onfootprint ~~the~~associated ~~Wuhan-Guangzhou~~with ~~high-speed~~their ~~railway.~~energy ●usage ~~Lighting~~through ~~for Public Facilities. The ability to adjust~~ the ~~brightness~~purchase ~~level~~of ~~through~~carbon ~~programmable~~offset ~~smart~~credits. ~~cards~~These ~~makes~~products typically ~~induction~~provide ~~lamps highly attractive~~ for ~~use~~fixed inor ~~outdoor~~variable ~~public~~prices ~~locations.~~and ~~Our~~generally ~~LED~~follow ~~products~~the ~~are~~terms ~~particular~~of ~~popular~~our ~~for~~other ~~indoor~~products ~~lighting~~with ~~projects~~the ~~such~~added asbenefit ~~public~~of ~~library,~~carbon reduction ~~hospital~~ and ~~schools~~reduced environmental impact.

~~Marketing~~We plan to identify market opportunities by redeveloping price curves in each of ~~our~~the ~~LED~~markets ~~products~~we isserve ~~focused~~and oncomparing the ~~domestic~~market prices and ~~home~~the ~~office~~price ~~sector~~the local regulated utility is offering. ~~Huayue~~We can then determine if there is ~~now~~an ~~actively~~opportunity ~~looking~~in ~~for~~a ~~retail~~particular ~~channel~~market ~~both~~based ~~domestically~~on ~~and~~our ~~internationally~~ability to create an attractive customer value proposition that ~~will~~is ~~target~~also ~~home/office~~able ~~owners~~to enhance our profitability. WeThe ~~believe~~attractiveness ~~that~~of ~~LED~~a ~~products~~product ~~will~~from bea ~~the~~consumer’s standpoint ~~engine~~is ~~for~~based ~~our~~on ~~international~~a ~~growth~~variety of factors, asincluding ~~our~~overall ~~ability~~pricing, toprice ~~provide~~stability, ~~quality~~contract ~~products~~term, atsources aof ~~highly~~generation ~~competitive~~and environmental ~~price~~impact ~~should~~and ~~permit~~whether or not the ~~Company~~contract toprovides ~~penetrate~~for termination and other fees. Product pricing will also be based on several other factors, including the ~~global~~cost to acquire customers in the market, ~~aggressively~~the competitive landscape and supply issues that may affect pricing.

Once a product has been created for a particular market, we plan to develop a marketing campaign using a combination of sales channels, with an emphasis on door-to-door marketing, outbound telemarketing, event marketing, geo-targeted internet advertising/social media and local advertising/PR. We plan to identify and acquire customers through a variety of additional sales channels, including our inbound customer care call center, online marketing, email marketing, direct mail, direct sales, brokers and consultants. We also believe that our uniqueness will be that both our Energy ~~Efficient~~Audit ~~Lighting: Competition~~and Energy Management divisions will help us identify new customers and vice versa. We plan on entering into non-exclusive arrangements with independent sales, marketing and public relations vendors and our marketing team will continually monitor their effectiveness. We will track our customer acquisition costs to ensure that we are maximizing the return on our marketing dollars.

~~The~~Our ~~global~~management ~~market~~and ~~for~~marketing ~~lighting~~teams ~~products~~will not isonly ~~dominated~~devote bysignificant ~~very~~attention ~~large~~to ~~multi-national~~customer ~~corporations~~acquisition, ~~headquartered~~but ~~outside~~both ofa ~~the~~“refer-a-friend” ~~PRC,~~incentive ~~such~~and ~~as Philips, Osram (~~a ~~subsidiary~~“loyalty” incentive ofprogram ~~Seimens)~~will ~~and~~be ~~General Electric~~developed. We ~~believe~~will ~~that,~~continually toeducate ~~date,~~our ~~these~~customers ~~companies~~and ~~have~~keep ~~not~~them ~~made~~informed ~~induction~~of ~~lighting~~their ahistorical ~~priority. The market for LED lights~~usage, attrition onrates ~~the~~and ~~other~~consumer ~~hand,~~behavior isso ~~highly~~we ~~competitive~~can ascontinue ~~Philips,~~to inbuild ~~particular, has made this market a priority~~trust. We ~~believe~~This ~~that Huayue~~ will bealso ~~able~~allow us to ~~compete~~specifically intailor ~~this market as the cost-effective design of our~~ competitive products ~~will~~that ~~provide~~aim usto ~~significant~~maximize ~~price~~the ~~advantages.~~total Inexpected ~~addition,~~return ~~our~~from ~~technological~~energy ~~advances~~sales ~~are~~to ~~protected~~a byspecific ~~88 patents issued in the PRC~~customer. ~~Nevertheless,~~This ~~the~~is ~~multi-national~~what ~~giants~~we ~~have~~refer ~~many~~to ~~times~~as ~~the~~Customer Lifetime ~~resources~~Value ~~of Changzhou Huayue; so the competitive situation could be daunting~~(CLV).

~~For~~We ~~induction~~plan ~~lighting~~to hedge and procure our energy requirements from various wholesale energy markets, weincluding ~~also~~both ~~have~~physical ~~numerous~~and ~~domestic~~financial ~~competitors~~markets inthrough ~~the~~short ~~market~~and ~~for~~long ~~induction~~term ~~lighting~~contracts. ~~Most~~ Our ofin-house ~~these~~energy ~~companies~~supply ~~have~~team ~~targeted~~will ~~the~~be ~~low~~responsible ~~power~~for ~~segment~~managing our commodity positions (including energy procurement, ascapacity, transmission, ~~opposed~~renewable toenergy, ~~the~~and ~~high~~resource ~~frequency~~adequacy ~~products~~requirements) ~~that~~within ~~are~~risk ~~Changzhou~~tolerance ~~Huayue’s~~as ~~focus~~defined by our risk management policies. We ~~believe~~plan ~~that~~to ~~those~~procure ~~competitors~~our ~~that~~natural ~~have~~gas ~~attempted~~and toelectricity ~~develop~~requirements ~~high~~at ~~power~~various ~~induction~~trading ~~lighting~~hubs, ~~have~~city ~~encountered~~gates ~~serious~~and ~~problems,~~load ~~including~~zones. ~~low~~When ~~research~~we ~~productivity,~~procure commodities ~~unsophisticated~~at ~~product~~trading ~~design~~hubs, ~~unstable~~we ~~quality~~will ~~control,~~be ~~and~~responsible ~~limited~~for ~~product~~delivery ~~applicability~~to the applicable local regulated utility for distribution.

~~Huayue~~We ~~believes~~plan itto ~~has~~purchase ~~significant~~physical ~~competitive~~natural ~~advantages~~gas supply ~~over~~from ~~these~~several ~~local~~counter ~~enterprises. Along~~parties ~~with~~in ~~having~~the ~~our~~wholesale ~~technology~~natural ~~protected~~gas bymarket. ~~international~~We ~~patents,~~plan ~~our~~to ~~products~~periodically ~~benefit~~adjust ~~from~~our ~~representing~~portfolio ~~high~~of ~~quality~~purchase/sale contracts atbased aupon ~~low~~continual ~~cost. The~~analysis ~~incorporation~~ of ~~smart cards into~~ our ~~lamps~~forecasted ~~provides~~load ~~constant~~requirements. ~~power~~Natural ~~control~~gas ~~and~~will ~~the~~then ~~ability~~be delivered to ~~automatically~~the ~~adjust~~local ~~brightness. We~~regulated utility ~~have~~city-gate ~~the~~or ~~facilities~~other tospecified ~~mass~~delivery ~~produce~~points ~~300~~where ~~watt~~the ~~induction~~local ~~lamps~~regulated ~~with~~utility ~~long~~takes ~~lives~~control ~~that~~of dothe ~~not~~natural ~~require~~gas ~~frequent~~and ~~maintenance,~~delivers it asto ~~demonstrated~~individual bycustomers’ ~~our warranties~~locations.

WeIn ~~also~~most ~~have~~markets, ~~substantial~~we ~~equity~~will intypically hedge our ~~brand~~electricity ~~name. Our~~exposure ~~electrolytic~~with ~~capacitors~~financial ~~achieved~~products ~~widespread domestic popularity~~ and ~~became~~then ~~internationally~~purchase ~~known~~the ~~through~~physical ~~their~~power ~~export~~directly tofrom ~~ten~~the ~~countries. Since~~Independent ~~our~~System ~~entry~~Operator (“ISO”) ~~into~~for ~~the~~delivery. ~~efficient~~From ~~lighting~~time ~~market~~to time, we ~~have~~plan ~~won~~to use a ~~number~~combination of ~~awards~~physical and ~~have~~financial ~~been~~products ~~appointed~~ to ~~serve~~hedge ~~important~~our electricity ~~industry~~exposure ~~functions~~before bybuying physical electricity in the ~~PRC~~day ~~government~~ahead real-time market from the ISO.

~~Huayue~~We ~~further~~will ~~believes~~be ~~that~~assessed itmonthly ~~derives~~for aancillary charges, ~~meaningful~~such ~~distribution~~as reserves and ~~transportation~~capacity ~~advantages~~in ~~from~~the ~~its~~electricity ~~location~~sector inby athe ~~central~~ISOs. ~~area~~For instance, the ISOs will charge all retail electricity providers for ~~lighting~~monthly ~~companies~~reserves inthat the ~~town~~ISO ofdetermines ~~Zouqu~~are innecessary ~~Changzhou~~to ~~City~~protect the integrity of the grid. ~~Changzhou~~ ~~City~~We isattempt ~~located~~to estimate such amounts but they are difficult to estimate because they are charged in arrears by the ~~“Yangtze~~ISOs ~~River~~and ~~Golden~~are ~~Triangle”~~subject ~~within~~to ~~drivable~~fluctuations based ~~distance~~on ~~from~~weather ~~two~~ and other market conditions. Many of the ~~PRC’s~~utilities ~~largest~~we ~~cities,~~will ~~Shanghai~~serve will also allocate natural gas transportation and ~~Nanjing~~storage assets to us as a part of their competitive choice program. In ~~addition,~~We ~~the~~will ~~Shanghai-Nanjing~~be ~~Railway~~required to fill our allocated storage capacity with natural gas, ~~the~~which ~~Shanghai-Nanjing~~creates ~~highway~~commodity supply and price risk. Sometimes we will not be able to hedge the ~~Beijing-Hangzhou~~volumes ~~Grand~~associated with ~~Canal~~these ~~run~~assets ~~through~~because they will be too small compared to the ~~city~~much oflarger ~~Changzhou~~bulk transaction volumes required for trades in the wholesale market or it will not be economically feasible to do so.

~~Marketing~~The markets in which we will operate are highly competitive. In markets that are open to competitive choice of retail energy suppliers, our primary competition will come from the incumbent utility and ~~Distribution~~other independent retail energy companies. In the electricity sector, these competitors will include larger, well-capitalized energy retailers such as Direct Energy, Inc., FirstEnergy Solutions Inc., Just Energy Group Inc. and NRG Energy. We also will compete with small local retail energy providers in the electricity sector that are focused exclusively on certain markets. Each market has a different group of local retail energy providers. With respect to natural gas, our national competitors will be primarily Direct Energy and Constellation Energy. Our national competitors will generally have diversified energy platforms with multiple marketing approaches and broad geographic coverage similar to us. Competition in each case will be based primarily on product offering, price and customer service.

~~Huayue~~If ~~believes~~we ~~that~~complete our ~~the~~acquisition ~~annual~~of ~~market~~BlueCo, ~~demand~~we ~~for~~will ~~all~~operate ~~types~~in ofthe ~~industrial~~highly-regulated ~~lighting~~natural ingas ~~China~~and iselectricity ~~400~~retail ~~billion~~sales ~~Chinese~~industry. ~~Renminbi~~We ~~(“RMB”),~~will orbe required ~~$62.7~~to ~~billion,~~comply with the ~~lighting~~legislation ofand ~~public~~regulations ~~facilities~~in ~~and~~these ~~high~~jurisdictions ~~bays~~in ~~accounting~~order ~~for~~to ~~300~~maintain ~~billion~~our ~~RMB~~licensed ofstatus ~~this~~and ~~amount~~to continue our operations, and to obtain the ~~remaining~~necessary ~~100~~licenses ~~billion~~in ~~RMB~~jurisdictions ~~relating~~in which we plan to ~~the~~compete. ~~lighting~~Licensing ofrequirements vary ~~private~~by ~~property. Huayue~~state, ~~has~~but ~~targeted~~generally involve regular, standardized reporting in order to maintain a license in good standing with the ~~former~~state commission ~~segment~~responsible offor ~~this~~regulating ~~market~~retail electricity and gas suppliers. ~~The~~ ~~market~~There is potential for ~~induction~~changes ~~lighting~~to state legislation and regulatory measures addressing licensing requirements that may impact our business model in the ~~PRC~~applicable ~~has~~jurisdiction. ~~been~~In addition, ~~estimated~~our tomarketing beactivities asand ~~large~~customer asenrollment ~~100~~procedures ~~billion~~are ~~RMB. Our~~subject ~~entry~~to ~~into~~rules and regulations at the ~~international~~state ~~market~~and ~~will~~federal level, ~~further~~and ~~expand~~failure to comply with requirements imposed by federal and state regulatory authorities could impact our ~~sales~~licensing ~~potential~~in a particular market.

WeITEM ~~recently changed our domestic distribution strategy for induction lights~~1A. ~~Prior~~ toRISK fiscal 2012 our target market for lighting products had been end users, to whom our in-house sales staff marketed directly. During fiscal 2012 we added an emphasis on developing customer relationships with regional distributors of lighting products and construction materials. Our sales transactions with distributors are not significantly different than our sales transactions with end users: none of our distributors has been given an exclusive territory, their purchases are based on the same price list as we give to end users, and our revenue recognition policies are the same for each type of sale. However, the relationship with distributors provides us a cost-effective way of expanding the scope of our marketing. FACTORS

AInvesting ~~growing~~in ~~aspect of~~ our common ~~lighting~~stock ~~business~~involves ~~is our participation in energy management contracts (“EMC”)~~risk. InYou ~~this~~should ~~business~~carefully ~~model,~~consider ~~energy~~the ~~efficient~~risks ~~equipment~~described isbelow ~~sold~~together towith anall ~~end~~of ~~user~~the onother ainformation contained ~~payment~~in ~~plan~~this ~~designed~~Report, toincluding ~~net no cost to~~ the ~~customer:~~financial ~~payments~~statements byand the ~~customer~~related ~~are~~notes, ~~scheduled~~before todeciding ~~conform~~whether to ~~the~~purchase ~~savings~~any ~~realized from use~~ shares of ~~the~~our ~~energy~~common ~~efficient equipment~~stock. ~~Changzhou~~ ~~Huayue~~If ~~offers~~any ~~this~~of ~~option~~the tofollowing ~~customers~~risks ~~directly~~occurs, asour ~~well~~business, asfinancial tocondition ~~contractors~~or asoperating ~~part~~results ofcould ~~a broader EMC program~~materially suffer. ~~Although~~ anIn ~~EMC~~that ~~sale results in significantly longer payment terms than a conventional net-90 days sale~~event, ~~profit~~the ~~margins~~trading onprice ~~EMC~~of ~~sales~~our ~~are~~common ~~far~~stock ~~higher~~could ~~than~~decline onand ~~conventional~~you ~~sales,~~may aslose ~~customers~~all ~~are~~or ~~much~~part ~~less~~of ~~price-resistant~~your ~~in the EMC model~~investment.

~~Historically,~~WE ~~Changzhou~~ARE ~~Huayue~~AN ~~had~~EARLY-STAGE COMPANY ~~exported~~AND ~~its~~HAVE ~~electrolytic~~A ~~capacitors~~LIMITED ~~and~~HISTORY ~~related~~OF ~~products~~OPERATIONS toIN ~~the~~OUR ~~United~~CURRENT ~~States,~~LINES ~~Europe~~OF ~~and other countries in Asia~~BUSINESS, ~~creating~~MAKING ~~global~~AN ~~brand~~EVALUATION ~~awareness. For~~OF ~~our~~US ~~induction~~EXTREMELY ~~lighting products, we have been securing the government approvals necessary to engage in export, and are currently in the process of negotiating terms with prospective international sales agents~~DIFFICULT. ~~Our~~ AT ~~plan~~THIS ~~is to price our products sold internationally at a 20% premium to our domestic sales~~STAGE, inEVEN ~~order~~WITH toOUR ~~provide~~GOOD aFAITH ~~margin for adverse currency movements. In addition~~EFFORTS, ~~once~~THERE weIS ~~receive~~NOTHING ~~approval~~ON ~~for~~WHICH ~~international~~TO ~~marketing,~~BASE weAN ~~will~~ASSUMPTION beTHAT ~~eligible~~WE toWILL ~~purchase~~BECOME ~~receivables~~PROFITABLE OR ~~insurance~~GENERATE ~~that~~ANY ~~the~~SIGNIFICANT ~~Chinese~~AMOUNT ~~government~~OF ~~offers for eligible offshore sales~~REVENUES. ~~Besides significantly reducing the risk of international sales, the government insurance facilitates receivables financing, which is generally difficult in China.~~

~~Induction~~We have ~~Lighting: Involvement~~only a limited operating history in our current lines of business on which you can evaluate our business, financial condition and operating results. We have not yet recognized revenues from our continuing operations, and since we divested our former Changzhou Huayue subsidiary we have incurred significant operating losses and negative cash flows. We have been focused on start-up activities and business plan development since we divested our former Changzhou Huayue subsidiary. There is nothing at this time on which to base an assumption that our business operations will prove to be successful or that we will ever be able to operate profitably. Our future operating results will depend on many factors, including our ability to raise adequate working capital, demand for our products, the ~~PRC~~level ~~Government~~of our competition and our ability to attract and maintain key management and employees. If we cannot achieve operating profitability, we may not be able to meet our working capital requirements, which will have a material adverse effect on our operating results and financial condition.

~~Changzhou~~WE ~~Huayue~~WILL ~~has~~REQUIRE ADDITIONAL ~~enjoyed~~FINANCING ~~the~~IN ~~support~~ORDER ofTO ~~the~~IMPLEMENT ~~PRC~~OUR ~~government. Leaders~~BUSINESS within the government as well as specialists from such entities as the Policy Research Center of the Communist Party of China and the Economic Research Office of the State Council visited our site and reviewed our technology in early 2010PLAN. ~~That~~ ~~same~~IN ~~year,~~THE aEVENT ~~group~~WE ofARE ~~experts~~UNABLE ~~recommended~~TO ~~that~~ACQUIRE ~~the~~ADDITIONAL ~~induction lighting industry and its technology be further developed as a matter of public policy. As a result~~FINANCING, ~~the~~WE ~~PRC~~MAY NOT ~~government~~BE ~~designated~~ABLE ~~induction~~TO ~~lamps~~IMPLEMEENT asOUR ~~high-efficiency~~BUSINESS ~~products~~PLAN ~~that~~RESULTING ~~would~~IN beA ~~eligible~~LOSS ~~for~~OF ~~preferential~~REVENUES ~~policies~~AND ~~and~~ULTIMATELY ~~subsidies. Among~~THE ~~the~~LOSS ~~benefits~~OF ~~that~~YOUR ~~we have received from the government’s favorable attitude toward induction lighting are the following:~~INVESTMENT.

·	Having qualified for the Chinese government’s incentive program to promote innovation in technology, Changzhou Huayue currently enjoys a 15% income tax rate (reduced from the standard 25% corporate income tax rate) until November 2014, at which time we will be eligible to apply for an extension.
·	The national government’s policy favoring the use of induction lighting has expanded the market for our products.

We require immediate financing to put our anticipated business into action. We plan to raise working capital additional funds through private placements, registered offerings, debt financing or other sources to maintain and expand our operations. Adequate funds for this purpose on terms favorable to us may not be available, and if available, such financing may be on terms significantly more adverse to us than are manageable. Without new funding, we may be only partially successful or completely unsuccessful in implementing our business plan, and our stockholders will lose part or all of their investment.

InTHE ~~cooperation~~LOSS ~~with~~OR ~~several~~UNAVILABILITY TO ofUS ~~our~~OF ~~customers~~MR. ~~who~~SUTTON’S ~~serve~~SERVICES asWOULD ~~contractors~~HAVE onAN ~~projects~~ADVERSE ~~funded~~EFFECT byON ~~various~~OUR ~~governmental ministries and commissions~~BUSINESS, weOPERATIONS ~~have~~AND ~~installed~~PROSPECTS ~~induction~~IN ~~lamps~~THAT onWE ~~the~~MAY ~~Shengli~~NOT BE ~~Oilfield~~ABLE ~~and~~TO ~~the~~OBTAIN ~~Shanghai~~NEW ~~Middle~~MANAGEMENT ~~Ring~~UNDER ~~Highway,~~THE ~~and~~SAME ~~are~~FINANCIAL ~~working on the installation of induction lamps as a part of such projects as Beijing International Airport~~ARRANGEMENTS, ~~Petro~~WHICH ~~China,~~COULD ~~SinoPec~~RESULT ~~and~~IN ~~Saicgroup. Huayue~~A ~~believes~~LOSS ~~that~~OF ~~these~~YOUR ~~projects will improve awareness of our brands and expand our market share~~INVESTMENT.

~~Electrolytic~~Our business ~~Capacitors~~plan is significantly dependent upon the abilities and continued participation of Mr. Isaac Sutton, our Chief Executive Officer and a director. It would be difficult to replace Mr. Sutton at our early stage of development. The loss by or unavailability to us of Mr. Sutton’s services would have an adverse effect on our business, operations and prospects. In the event that we are unable to locate or employ personnel to replace Mr. Sutton, we would likely be required to cease pursuing our business opportunity, which would result in a loss of your investment.

~~Changzhou~~BUSINESS Huayue’s historic business has been the development, manufacture and sale of electrolytic capacitors. This business contributed approximately 80% of our revenues in the year ended May 31, 2010, 44% of our revenue in the year ended May 31, 2011, and 38% of our revenue in the year ended May 3,1 2012. This number has further declined to 27% and 13% as our revenue from efficient lighting increase in the years ended May 31, 2013 and 2014, respectively. We manufacture the electrolytic capacitors in the same facility in Changzhou as the induction lamps, but in a different workshop. We distribute our capacitors through both domestic retailers in the PRC and international trading companies. Strong sales and performance of this product line in the past have created good will for Changzhou Huayue and established a global brand.RISKS

~~Competition~~Business inrisks ~~the market for electrolytic capacitors has been particularly intense in recent years. A number of firms have entered the industry, many of which~~ are ~~larger~~risks ~~and have technology superior to~~ that ofare ~~Changzhou~~associated with ~~Huayue. We~~general ~~have~~business ~~responded~~conditions, ~~by targeting~~ the ~~lower~~economy ~~end of the market where we remain competitive on the basis of price, name recognition,~~ and ~~the dependence of clients who have purchased~~ our ~~capacitors in the past~~operations. ~~However,~~ ~~given~~Business ~~these~~risks ~~difficult~~are ~~competitive conditions and the increasing cost of labor, we have determined, as a strategic matter,~~ not torisks ~~make~~associated ~~significant~~with ~~additional~~our specific investments or inan ~~this~~offering ~~area. Moreover, the technology is fairly developed and only 5%~~ of our ~~product development expenditures over the past three years have related to this business~~securities.

OUR RESULTS OF OPERATIONS, FINANCIAL CONDITION AND BUSINESS COULD BE HARMED IF WE WERE UNABLE TO BALANCE CUSTOMER DEMAND AND CAPACITY.

~~Raw~~As ~~Materials~~customer demand for our products changes, we must be able to ramp up or adjust our production capacity to meet demand. We are continually taking steps to address our manufacturing capacity needs for our products. If we are not able to increase our capacity or if we increase our capacity too quickly, our business and ~~Our~~results ~~Suppliers~~of operations could be adversely impacted. If we experience delays or unforeseen costs associated with adjusting our capacity levels, we may not be able to achieve our financial targets.

InOUR ~~connection~~BUSINESS ~~with~~MAY ~~our~~BE ~~induction~~ADVERSELY ~~lighting~~AFFECTED ~~business,~~BY weTHE ~~purchase~~GLOBAL ~~glass shells~~ECONOMIC DOWNTURN, ~~high~~THE ~~temperature~~CONTINUING ~~cables,~~UNCERTAINTIES ~~power~~IN ~~supplies,~~THE ~~mercury~~FINANCIAL ~~amalgam,~~MARKETS ~~and~~AND ~~aluminum~~OUR, ~~blocks. The~~OR ~~key~~OUR ~~supplies~~CUSTOMERS’ ~~purchased~~OR ~~for~~SUPPLIERS’ ~~our~~ABILITY ~~electrolytic~~TO ACCESS ~~capacitors~~THE ~~are~~CAPITAL ~~positive and negative foil~~MARKETS.

~~During~~Global ~~fiscal~~financial ~~year~~markets ~~2014~~are ~~and~~continuing to ~~2013~~experience disruptions, weincluding ~~significantly~~severely ~~revamped~~diminished ~~our~~liquidity ~~purchasing~~and ~~policies. Management~~credit ~~diversified~~availability, ~~its~~declines ~~purchase~~in ofconsumer ~~raw~~confidence, ~~materials~~declines in toeconomic ~~include~~growth, aincreases ~~variety~~in ofunemployment ~~suppliers~~rates, ~~including~~and ~~Anhui~~uncertainty ~~Tianchangxinlong~~about ,economic ~~Zhongshan~~stability. ~~Leiyou, Changzhou~~Given ~~Ruiqi~~these ~~Electronics~~uncertainties, ~~Yangzhou~~there is ~~Ruike,~~no ~~and~~assurance ~~Jiangsu~~that ~~Baoying.~~there Aswill anot ~~result~~be further deterioration in the global economy, ~~there~~the ~~was~~global nofinancial ~~reliance~~markets onand ~~any~~consumer ~~specific~~confidence. We ~~supplier~~are ~~for~~unable ~~more~~to ~~than~~predict ~~16%~~the likely duration and severity of ~~our~~the ~~purchases~~current ~~during~~global economic downturn or disruptions in the ~~fiscal~~financial markets. ~~years~~If ~~ended~~economic ~~May~~conditions 31deteriorate further, ~~2014~~our business and ~~2013~~results of operations could be materially and adversely affected.

~~Our~~IF ~~Customers~~WE FAIL TO EVALUATE, IMPLEMENT AND INTEGRATE STRATEGIC OPPORTUNITIES SUCCESSFULLY, OUR BUSINESS MAY SUFFER.

~~Throughout~~As we continue with our ~~history~~corporate reorganization, which ~~the~~we ~~bulk~~commenced ofin ~~our~~April ~~annual~~2015, ~~sales~~we ~~have~~are ~~been~~evaluating ~~made~~strategic opportunities available to aus ~~few~~for ~~major~~product, ~~customers~~technology or business acquisitions. ~~However~~ If we choose to make acquisitions, ~~with~~we face certain risks, such as failure of the ~~growth~~acquired inbusiness to meet our ~~lighting~~performance expectations, ~~business~~diversion of management attention, ~~the~~retention ~~degree~~of existing customers of ~~concentration~~our current and acquired businesses, and difficulty in ~~our~~integrating ~~customer~~the ~~list~~acquired ~~has~~business’s ~~declined~~operations, personnel and financial and operating systems into our current business.

~~For~~We ~~the~~may ~~2013~~not ~~fiscal~~be ~~year,~~able ~~there~~to ~~were~~adequately ~~two~~address these ~~significant~~risks ~~accounts~~or ~~which~~any ~~together~~other ~~produced~~problems ~~30%~~that ofarise ~~our~~from ~~revenue~~any future acquisitions. ~~These~~Any ~~were~~failure ~~project-based~~to ~~contracts~~successfully inevaluate ~~Yinchuan~~strategic opportunities and ~~with~~address ~~Muyang~~risks ~~Holding~~or ~~Ltd.~~other Weproblems dothat ~~not~~arise ~~anticipate~~related to any ~~significant~~acquisition ~~future~~could ~~sales~~adversely toaffect ~~these~~our ~~same~~business, ~~customers~~results of operations or financial condition.

~~For~~WE ~~the~~FACE ~~2014~~SIGNIFICANT ~~fiscal~~CHALLENGES ~~year,~~MANAGING OUR ~~there were two significant accounts which together produced 12% of our revenue~~GROWTH. ~~These were energy saving management contracts with Changzhou Gaoke Property Management Co. and with Guiyang Gaoke Holding Co. We do not anticipate any significant future sales to these same customers.~~

~~Intellectual~~We ~~Property~~plan to transform our business to support a global components and LED lighting product customer base. In order to manage our growth and change in our strategy effectively, we must continue to:

We· ~~have~~maintain ~~proprietary~~or ~~rights~~contract ~~with~~for ~~respect~~adequate tomanufacturing ~~our~~facilities ~~technology. We are currently operating with 110 patents~~ and ~~have~~equipment 15to ~~new~~meet ~~applications~~customer ~~pending. We believe that the breadth of description of our patents gives us significant protection.~~demand;

~~Changzhou~~· ~~Huayue~~maintain ~~also~~a ~~uses~~sufficient ~~holds~~supply ~~registered~~of ~~trademarks~~raw ~~for~~materials ~~its~~to ~~LED,~~support ~~induction~~our ~~lamp and electrolytic capacitor businesses.~~growth;

~~Insurance~~· expand research and development, sales and marketing, technical support, distribution capabilities and administrative functions;

~~Changzhou~~· ~~Huayue~~expand ~~maintains~~ the ~~insurance~~skills ~~required by the PRC Labor~~ and ~~Social~~capabilities ~~Security Law. That law mandates that we contribute an amount equal to a percentage~~ of our ~~payroll~~current tomanagement several multi-employer welfare programs. The aggregate contribution is approximately 25% of payroll. As a result, as our business expands and our payroll increases, our contributions to these programs will increase proportionately.team;

In· ~~addition,~~add weexperienced ~~insured~~senior ~~certain~~level ~~property~~managers; ~~against accidents in our commercial insurance policy. The total annual premium on this policy is 308,936 RMB or approximately $50,000.~~and

attract and retain qualified employees.

While we intend to focus on managing our costs and expenses during the extremely challenging economic environment, over the long term, we expect to invest substantially to support our growth and may have additional unexpected costs. We may not be able to expand quickly enough to exploit potential market opportunities.

~~Environmental~~In ~~Considerations~~connection with our efforts to cost-effectively manage our growth, we will initially produce our products overseas and will rely on subcontractors for production capacity, logistics support and certain administrative functions, such as payroll processing. If these service providers do not perform effectively, we may not be able to achieve the expected cost savings and may incur additional costs to correct errors or fulfill customer demand. Depending on the function involved, such errors may also lead to business disruption, processing inefficiencies or the loss of or damage to intellectual property through security breach, or impact employee morale. Our operations may also be negatively impacted if any of these service providers do not have the financial capability to withstand the continuing financial downturn.

~~Induction~~WE ~~lamps,~~ARE ~~such~~SUBJECT asTO ~~those~~COMMODITY ~~manufactured~~PRICE ~~by Changzhou Huayue, are considered to be highly environmentally friendly and preferable to induction and fluorescent lights on environmental grounds~~RISK. Because of their longer life spans, induction lamps need to be discarded much less frequently. Moreover, the solid mercury amalgam used in induction lamps can be disposed of with reasonable efforts and does not produce either water or ground pollution. The Company was in compliance with local environmental laws and regulations for the fiscal 2014 and 2013.

~~Employees~~If we consummate our acquisition of BlueCo, our financial results will be largely dependent on the prices at which we can acquire the commodities we resell. The prevailing market prices for natural gas and electricity have historically, and may continue to, fluctuate substantially over relatively short periods of time, potentially adversely impacting our results of operations, financial condition and cash flows. Changes in market prices for natural gas and electricity may result from many factors that are outside of our control, including the following:

We· ~~currently~~weather have a total of 106 employees. Of the overall total, 25 employees are in management. 13 employees specialize in research and development and a team of 30 employees are devoted to sales. The remainder of our employees are in production.conditions;

~~ITEM~~· ~~1A. RISK FACTORS~~seasonality;

~~Investing~~· indemand ~~our~~for ~~common~~energy ~~stock~~commodities ~~involves 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~~general ~~related~~economic 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.conditions;

~~The~~· ~~market~~disruption ~~for~~of ~~energy~~natural ~~efficient~~gas ~~lights~~or iselectricity ~~highly~~transmission ~~competitive,~~or ~~which~~transportation ~~could~~infrastructure ~~adversely~~or ~~affect~~other ~~our~~constraints ~~sales~~or ~~and financial condition.~~inefficiencies;

~~Several~~· ~~major~~reduction multi-national enterprises dominate the global market for lighting. These competitors are much larger than we are and have substantially greater financial resources that allow them to be in a better position to withstand changes in the industry. Many also have been in the business for a longer period of time and have greater accumulated experience and higher global name recognition. In addition, our existing competitors may introduce new products based on alternative technologies that may cause us to lose customers which would result in a decline in our sales volume and earnings. It is also likely that new competitors will enter the lighting market in China. These entities may broaden or ~~enhance~~unavailability ~~their offerings to provide a product similar to ours or to compete more effectively with our products. While we currently have advantages over our competitors in certain limited portions~~ of ~~the~~generating ~~Chinese market for energy efficient lighting~~capacity, ~~there~~including ~~can~~temporary ~~be no assurance we will be able to maintain these advantages over time. The effort necessary to compete effectively - funding acquisitions~~outages, ~~hiring new employees~~mothballing, broadening sales efforts and incurring the other costs of marketing expansion - will increase expenses and thus adversely affect our margins. Costs incurred in research and development may also increase. Competition could cause us to lose market share, or ~~increase expenditures or reduce pricing, each of which would have an adverse effect on the results of our operations, cash flows and financial condition.~~retirements;

We· ~~have been actively engaged in~~ the ~~energy~~level ~~efficient~~of ~~lighting~~prices ~~business,~~and ~~the~~availability ~~anticipated source~~ of ~~the~~natural ~~enterprise’s~~gas ~~growth,~~and ~~only~~competing ~~since~~energy ~~2009. Unless~~sources, weincluding ~~effectively~~the ~~manage~~impact ~~our~~of ~~growth,~~changes wein ~~may~~environmental ~~not~~regulations beimpacting ~~profitable.~~suppliers;

~~Although~~· ~~Changzhou Huayue was founded in 1999, until 2009 we were engaged solely in~~ the ~~electrolytic~~creditworthiness capacitor business, a business that is substantially unrelated to our lighting operations. While we have met with initial success in the development, production and sales of energy efficient lamps, there can be no assurance that this will lead to positive financial results in the future. Management also anticipates a major expansion of the operations carried on by Changzhou Huayue. To achieve the objectives in our business plan, we must hire and train additional personnel and will require new equipment, facilities, information technology and other infrastructure resources. We do not know if we will be able to expand our business rapidly enough or ~~adequately~~bankruptcy ~~manage this growth. If we do not accurately predict demand for our products, we may have too much~~ or ~~too~~other ~~little production capacity. If growth is not effectively managed, it may have a substantial negative impact on our operations and profitability. Also, improvement may be needed in operational,~~ financial ~~and~~distress ~~management controls and our reporting systems and procedures. The complexity~~ of, ~~and~~market intense competition in, this business will cause us to face many challenges, some of which are not foreseeable. If an ongoing source of financing is not available, the ability to continue ongoing operations could be compromised.participants;

changes in market liquidity;

natural disasters, wars, embargoes, acts of terrorism and other catastrophic events;

federal, state, foreign and other governmental regulation and legislation; and

demand side management, conservation, alternative or renewable energy sources.

Additionally, significant changes in the pricing methods in the wholesale markets in which we operate could affect our commodity prices. Regulatory policies concerning how markets are structured, how compensation is provided for service, and the kinds of different services that can or must be offered, may change and could have significant impacts on our costs of doing business.

OUR FINANCIAL RESULTS MAY BE ADVERSELY IMPACTED BY WEATHER CONDITIONS.

Weather conditions directly influence the demand for and availability of natural gas and electricity offered by BlueCo and affect the prices of energy commodities. Generally, on most utility systems, demand for natural gas peaks in the winter and demand for electricity peaks in the summer. Typically, when winters are warmer or summers are cooler, demand for energy is lower than expected, resulting in less natural gas and electricity consumption than forecasted. When demand is below anticipated levels due to weather patterns, BlueCo may be forced to sell excess supply at prices below our acquisition cost, which could result in reduced margins or even losses.

Conversely, when winters are colder or summers are warmer, consumption may outpace the volumes of natural gas and electricity against which BlueCo has hedged, and BlueCo may be unable to meet increased demand with storage or swing supply. In these circumstances, BlueCo may experience reduced margins or even losses if it is required to purchase additional supply at higher prices. If we complete our acquisition of BlueCo, BlueCo’s failure to accurately anticipate demand due to fluctuations in weather or to effectively manage its supply in response to a fluctuating commodity price environment could negatively impact our financial results.

~~Our~~BLUECO’S ~~expansion~~RISK MANAGEMENT ~~into~~POLICIES ~~the~~AND ~~international~~HEDGING ~~market~~PROCEDURES ~~will~~MAY ~~require~~NOT ~~capital~~MITIGATE ~~investment~~RISK AS PLANNED, ~~which~~AND ~~may~~BLUECO ~~result~~MAY inFAIL ~~dilution~~TO ofFULLY ~~the~~OR ~~equity~~EFFECTIVELY ofHEDGE OUR ~~our~~COMMODITY ~~present~~SUPPLY ~~shareholders~~AND orPRICE ~~significantly~~RISK ~~increased~~EXPOSURE ~~borrowing~~AGAINST ~~costs~~CHANGES IN CONSUMPTION VOLUMES OR MARKET RATES.

~~Our~~To provide ~~business~~energy ~~plan~~to ~~contemplates~~its ~~that~~customers, weBlueCo ~~will~~purchases ~~expand~~the ~~our~~relevant ~~sales~~commodity ~~both~~in ~~domestically~~the ~~and~~wholesale ~~internationally. To~~energy ~~achieve that aim~~markets, wewhich ~~will~~are ~~need~~often ~~capital~~highly volatile. So ~~our~~BlueCo’s ~~business~~commodity ~~plan~~risk ~~contemplates~~management ~~that~~strategy weis ~~will~~designed ~~raise $30 million in capital during the next two years in order~~ to ~~build~~hedge asubstantially ~~new~~all ~~production~~of ~~and~~its ~~sales~~forecasted ~~distribution~~volumes ~~center~~on its ~~and~~fixed- ~~implement~~price ~~our~~customer ~~growth~~contracts, ~~strategy. We~~as ~~intend~~well toas ~~raise all or~~ a ~~large~~ portion of the ~~necessary~~near-term ~~funds~~volumes byon ~~selling~~its ~~equity~~variable-price incustomer ~~our company~~contracts. At ~~present~~BlueCo uses weboth ~~have~~physical noand ~~commitment~~financial ~~from~~products ~~any~~to ~~source~~hedge ~~for~~its ~~those~~fixed-price ~~funds~~exposure. We ~~cannot~~The ~~determine,~~efficacy ~~therefore,~~of ~~the~~BlueCo’s ~~terms~~risk onmanagement ~~which~~program may ~~we will~~ be ~~able~~adversely toimpacted ~~raise~~by ~~the~~unanticipated ~~necessary~~events ~~amounts. It~~and iscosts ~~possible~~ that weBlueCo ~~will~~is benot ~~required~~able to ~~dilute~~effectively ~~the~~hedge, ~~value~~including ofabnormal ~~our~~customer attrition ~~current~~and ~~shareholders’~~consumption, ~~equity~~certain invariable ~~order~~costs toassociated ~~obtain~~with ~~the~~electricity ~~funds. On~~grid ~~the~~reliability, ~~other~~pricing ~~hand,~~differences ifin wethe ~~are~~local markets ~~forced~~for tolocal ~~borrow~~delivery ~~these~~of ~~amounts~~commodities, ~~our~~unanticipated ~~cost~~events ofthat ~~capital~~impact ~~will~~supply ~~significantly~~and ~~increase. But~~demand, ifsuch weas ~~are~~extreme ~~unable~~weather, toand ~~raise~~abrupt changes in the ~~necessary~~markets ~~funds~~for, ~~our~~or ~~growth~~availability ~~will~~or becost ~~limited~~of, asfinancial ~~will~~instruments ~~our~~that ~~ability~~help to ~~compete~~hedge ~~effectively~~commodity price.

~~The~~BlueCo ~~nature~~is exposed to basis risk in its operations when the commodities it hedges are sold at different delivery points from the exposure BlueCo is seeking to hedge. For example, if BlueCo hedges its natural gas commodity price with New York basis but physical supply must be delivered to the individual delivery points of ~~our~~specific ~~receivables~~utility systems around the New York metropolitan area, BlueCo is exposed to basis risk between the New York basis and the ~~unavailability~~individual ofutility ~~receivables~~system ~~financing~~delivery points. These differences can be significant from time to time, particularly during extreme, unforecasted cold weather conditions. Similarly, in ~~China~~certain ~~will~~of ~~restrict~~its ~~our~~electricity ~~cash~~markets, ~~flows~~customers pay the load zone price for electricity, ~~and~~so if BlueCo purchases supply to be delivered at a hub, it may ~~interfere~~have ~~with~~basis ~~our~~risk ~~ability~~between the hub and the load zone electricity prices due to ~~fund~~local ~~growth~~congestion that is not reflected in the hub price. BlueCo attempts to hedge basis risk where possible, but hedging instruments are sometimes not economically feasible or available in the smaller quantities that BlueCo requires.

~~Our~~In ~~standard~~addition, ~~arrangement~~BlueCo ~~with~~incurs ~~customers~~costs ~~requires payment~~ monthly for ~~sales~~ancillary 90charges ~~days~~such ~~after~~as ~~delivery. In~~reserves ~~many~~and ~~situations,~~capacity ~~however,~~in wethe ~~afford~~electricity ~~customers~~sector ~~much~~by ~~longer to pay~~ISOs. For ~~example~~instance, ~~when~~the weISOs ~~provide~~will ~~lamps~~charge toall ~~contractors~~retail electricity ~~working~~providers onfor ~~government~~monthly ~~construction~~reserves ~~projects,~~that ~~we respect~~ the ~~government~~ISO ~~practice~~determines ofare ~~paying~~necessary ~~only~~to ~~after~~protect the ~~entire~~integrity ~~project is inspected by requiring payment 90 days after actual installation~~ of the ~~lamps~~grid. In ~~addition,~~BlueCo aattempts to ~~growing~~estimate ~~portion~~such ofamounts ~~our~~but ~~business~~they ~~involves~~are ~~entering~~difficult ~~into~~to ~~energy~~estimate ~~management~~because ~~contracts~~they ~~with~~are ~~customers~~charged ~~or participating~~ in ~~energy~~arrears ~~management contracts written~~ by ~~contractors, under which~~ the ~~customer~~ISOs isand ~~not~~are ~~required~~subject to fluctuations ~~pay~~based ~~until~~on ~~cost~~weather ~~savings~~and ~~from~~other ~~the~~market ~~energy efficient lamps are realized~~conditions. In ~~these~~BlueCo ~~and~~may ~~similar~~be ~~circumstances,~~unable ~~our~~to ~~collection~~fully ofpass ~~receivables~~the ~~will~~higher ~~take~~cost ~~place over an extended period~~ of ~~time. In~~ancillary ~~the~~reserves and ~~meantime,~~reliability ~~however,~~services ~~the~~through ~~current efforts of China’s government~~ to ~~restrict~~its ~~bank~~customers, ~~lending~~ and ~~control~~increases ~~monetary expansion prevent us from financing our receivables. As a result,~~ in ~~many cases our cash resources must be used to pay ongoing expenses before~~ the ~~cash~~cost ~~revenue~~of ~~arising~~these ~~from~~ancillary ~~those~~reserves ~~expenses is collected. This situation limits our cash resources~~ and ~~may,~~reliability inservices could ~~turn,~~negatively ~~limit~~impact ~~our~~its ~~growth~~results ~~and prevent us from taking advantage~~ of ~~opportunities for expansion and market penetration that present themselves~~operations.

~~Changes~~Additionally, assumptions that BlueCo uses in ~~technology~~establishing ~~could~~its ~~make~~hedges ~~our~~may ~~products~~reduce ~~obsolete~~the effectiveness of its hedging instruments. Considerations that may affect its hedging policies include, but are not limited to, human error, assumptions about customer attrition, the relationship of prices at different trading or ~~uneconomic~~delivery points, assumptions about future weather, and its load forecasting models.

~~Our~~Many ~~proprietary~~of ~~technology~~the ~~for~~natural ~~energy~~gas ~~efficient~~utilities ~~induction~~BlueCo serves ~~lamps~~allocate is a ~~key~~share ~~competitive~~of ~~advantage~~transportation ~~for~~and ~~us. Certain~~storage ~~aspects~~capacity ofto ~~our~~BlueCo ~~lamps~~as ~~are~~a ~~protected~~part byof ~~patents~~their incompetitive ~~the~~market ~~PRC~~operations. ~~However,~~ ~~new~~BlueCo is ~~developments~~required into ~~the~~fill ~~field~~its ofallocated ~~lighting~~storage ~~are~~capacity ~~occurring~~with atnatural agas, ~~rapid~~which ~~pace,~~creates commodity supply and ~~there~~price ~~can~~risk. beSometimes noBlueCo cannot ~~assurance~~hedge ~~that~~the ~~such~~volumes ~~development~~associated ~~will~~with ~~not~~these ~~give~~assets ~~rise~~because they are too small compared to athe ~~different~~much ~~type~~larger ofbulk ~~lamp~~transaction ~~that~~volumes required for trades in the wholesale market or it is ~~superior~~not economically feasible to ~~those~~do ~~offered~~so. byIn ~~Changzhou~~some ~~Huayue. To~~regulatory ~~the~~programs ~~extent~~or ~~that~~under ~~our~~some contracts, ~~competitors~~this ~~can~~capacity ~~take~~may ~~advantage~~be ofsubject ~~new~~to ~~technologies~~recall by the utilities, ~~competition~~which incould have the ~~market~~effect ~~for~~of ~~lighting~~BlueCo ~~will~~being ~~increase~~required ~~and~~to ~~our~~access the ~~revenues~~spot ~~could~~market ~~decline~~to cover such recall.

~~Our~~BLUECO ~~inability~~DEPENDS toON CONSISTENT ~~protect~~REGULATION ~~our~~WITHIN ~~trademarks~~A PARTICULAR UTILITY TERRITORY (OR STATE), ~~patent~~AS ~~and~~WELL ~~trade~~AS ~~secrets~~AT ~~may~~THE ~~prevent~~FEDERAL usLEVEL, ~~from~~TO ~~successfully~~PERMIT ~~marketing~~IT ~~our~~TO ~~products~~OPERATE IN ~~and~~RESTRICTIVE, ~~competing~~COMPETITIVE ~~effectively~~SEGMENTS OF THE NATURAL GAS AND ELECTRICITY INDUSTRIES. IF COMPETITIVE RESTRUCTURING OF THE NATURAL GAS AND ELECTRICITY UTILITY INDUSTRIES IS ALTERED, REVERSED, DISCONTINUED OR DELAYED, BLUECO’S BUSINESS PROSPECTS AND FINANCIAL RESULTS COULD BE MATERIALLY ADVERSELY AFFECTED.

Failure to protect our intellectual property could harm our brands and our reputation, and adversely affect our ability to compete effectively. Further, enforcing or defending our intellectual property rights, including our trademarks, patents, copyrights and trade secrets, could result in the expenditure of significant financial and managerial resources. We produce, market and sell our products under the brand “Huayue” using a number of trademarks that we have registered. We cannot provide any assurance that trademark protection will provide adequate protection for our brands. We regard our intellectual property, particularly our trademarks and trade secrets, to be of considerable value and importance to our business and our success. We rely on a combination of trademark, patent, and trade secrecy laws, and contractual provisions to protect our intellectual property rights. There can be no assurance that the steps taken by us to protect these proprietary rights will be adequate or that third parties will not infringe or misappropriate our trademarks, trade secrets or similar proprietary rights. In addition, there can be no assurance that other parties will not assert infringement claims against us, and we may have to pursue litigation against other parties to assert our rights. Any such claim or litigation could be costly and we may lack the resources required to defend against such claims. In addition, any event that would jeopardize our proprietary rights or any claims of infringement by third parties could have a material adverse effect on our ability to market or sell our brands, and profitably exploit our products.

WeBlueCo ~~currently~~operates ~~benefit~~in ~~from~~ the ~~support~~highly ofregulated natural ~~the~~gas ~~PRC~~and ~~government~~electricity ~~and~~retail ~~would~~sales industry. Regulations may be ~~adversely~~revised ~~affected~~or ~~were~~reinterpreted ~~the~~or ~~government~~new laws and regulations may be adopted or become applicable to ~~change~~it or its ~~view~~operations. Such changes may have a detrimental impact on its business.

~~The~~In ~~PRC~~certain ~~government~~restructured ~~provides~~energy ~~Changzhou~~markets, state ~~Huayue~~legislatures, ~~with~~governmental ~~the~~agencies ~~benefits~~and/or ofother ~~preferential~~interested ~~policies. Among~~parties ~~the benefits that~~ have ~~had~~made aproposals ~~direct~~to ~~impact~~fully onor ~~our~~partially ~~financial~~re-regulate these ~~results~~markets, ~~are~~which ~~grants~~would ~~for~~interfere ~~technology~~with ~~development~~BlueCo’s ~~and~~ability ~~favorable~~to ~~tax~~do ~~rates~~business. Of ~~perhaps~~If ~~even~~we ~~more~~complete ~~importance to~~ our ~~overall~~proposed ~~financial~~acquisition ~~results~~of isBlueCo, competitive ~~the~~restructuring ~~fact that induction lamps are on the government procurement list and the national government has expressed a policy favoring the use~~ of ~~induction~~natural ~~lamps~~gas inor ~~government~~electricity ~~funded~~markets ~~construction~~is ~~projects. Projects~~altered, ~~initiated by government ministries and commissions have increased the demand for our products. If the government were to change its position on the induction lighting industry in general~~reversed, discontinued or ~~Changzhou Huayue specifically~~delayed, itour ~~would~~financial ~~have~~results could abe ~~material~~adversely ~~adverse effect on the company~~affected.

~~Our~~THE ~~electrolytic~~RETAIL ~~capacitor~~ENERGY BUSINESS ~~business~~IS ~~operates~~SUBJECT atTO aA ~~disadvantage~~HIGH toLEVEL ~~certain~~OF ~~competitors~~FEDERAL, ~~and~~STATE weAND ~~have~~LOCAL ~~not make substantial new investments in this activity, making it highly unlikely that it will generate any meaningful growth in the future~~REGULATION.

~~The~~State, federal ~~market~~and ~~for~~local ~~electrolytic~~rules ~~capacitors~~and inregulations affecting the ~~PRC~~retail isenergy ~~highly~~business ~~competitive~~are subject to change, ~~and~~which ~~the~~may ~~product~~adversely isimpact our ~~mature~~business model. We ~~regard~~BlueCo’s itcosts asof adoing ~~sunset~~ business. 40may offluctuate ~~our~~based ~~employees~~on ~~work~~these inregulatory ~~this~~changes. ~~area~~For example, ~~and~~many ~~workforce~~electricity markets ~~turnover~~have ~~and~~rate ~~increased~~caps, ~~labor~~and ~~costs~~changes ~~are~~to ~~significant~~these ~~problems. Certain~~rate ofcaps ~~our~~by ~~competitors~~regulators ~~have~~can ~~advantages~~impact infuture ~~technology~~price ~~and~~exposure. ~~economies~~Similarly, ofregulatory ~~scale. We~~changes can ~~have~~result ~~targeted~~in ~~the~~new ~~lower~~fees ~~end~~or ofcharges ~~the~~that ~~market,~~may ~~where~~not wehave ~~can~~been ~~continue~~anticipated towhen ~~compete,~~existing ~~but~~retail ~~have~~contracts ~~not~~were drafted, ~~and~~which ~~will~~can ~~not,~~create financial ~~devote~~exposure. ~~significant~~For ~~additional~~example, ~~resources~~mandates to ~~this~~purchase ~~business,~~a ~~either~~certain ~~for~~quantity ~~research~~or ~~and~~type ~~development~~of orelectricity ~~new~~capacity ~~facilities. We~~can ~~hope~~create tounanticipated costs. ~~maintain~~BlueCo’s ~~the~~ability ~~absolute~~to ~~levels~~manage ofcost ~~revenue~~increases ~~and~~that ~~profit~~result offrom ~~the~~regulatory ~~electrolytic~~changes ~~capacitor~~will ~~business~~depend, ~~but~~in dopart, ~~not~~on ~~view~~how itthe as“change in alaw ~~source~~provisions” of ~~future~~its ~~growth~~contracts are interpreted and enforced, among other factors.

WeOperators of systems providing for the delivery of natural gas and electricity maintain detailed tariffs that are kept on file with regulators. These tariffs and market rules applicable to operators are often very long and complex, and often are subject to service provider proposals to change them. BlueCo may ~~have~~not ~~difficulty~~be ~~establishing~~able ~~adequate~~to ~~management~~prevent adoption of adverse tariff changes. Users of energy delivery systems also have rules and ~~financial~~obligations applicable ~~controls~~to inthem that are established by regulators. For instance, transactions involving a shipper’s release of interstate pipeline capacity are subject to regulation at the ~~PRC~~federal level. BlueCo’s failure to abide by tariffs, market rules or other delivery system rules may result in fines, penalties and damages.

~~The~~BlueCo ~~PRC~~is ~~has~~also ~~only~~subject ~~recently begun~~ to ~~adopt~~regulatory ~~the~~scrutiny in ~~management~~all ~~and~~of ~~financial~~our ~~reporting~~markets ~~concepts and practices~~ that ~~investors~~can ingive ~~the~~rise ~~United~~to ~~States~~compliance ~~are~~fees, ~~familiar~~licensing ~~with. This~~fees, isor aenforcement ~~significant change for Huayue’s management~~penalties. We ~~currently~~Regulations dovary ~~not~~widely in ~~have employees who have~~ the ~~experience~~markets ~~necessary~~in towhich ~~implement~~it ~~the~~operates, ~~kind of management~~ and ~~financial~~these ~~controls~~regulations ~~that~~change ~~are~~from ~~expected~~time ofto ~~a U~~time. S.Failure ~~public~~to ~~company~~follow ~~and~~prescribed ~~may~~regulatory ~~have~~guidelines could ~~difficulty~~result ~~hiring and retaining such employees~~ in ~~the~~customer ~~PRC. If~~complaints ~~we cannot establish such controls, we may experience difficulty in collecting financial data~~ and ~~preparing~~regulatory ~~financial statements, books of account and corporate records and instituting business practices that meet U~~sanctions.~~S. standards.~~

~~General~~In ~~economic~~addition, regulators are continuously examining certain aspects of our industry. For example, a number of public utility commissions in the northeast are investigating the impact of the harsh weather conditions during the 2013-2014 winter season on consumers in their territories due to the ~~PRC,~~number of ~~including~~consumer ~~difficult~~complaints ~~credit~~attributable to high bills for the winter season and ~~construction~~are urging FERC to investigate circumstances during that period in wholesale energy markets,. ~~affect~~This ~~demand~~heightened ~~for~~regulatory scrutiny resulted in additional obligations on retailers in various markets to provide more detailed disclosures to consumers as well as additional and more stringent requirements on notifying customers when their fixed contract converts to variable pricing. These new regulations could adversely affect our customer attrition rates and cause us to incur higher compliance costs. To the extent any of these commissions takes further regulatory action to address these complaints, such as imposing limits on products, services, rates or other business limitations, our business prospects in these regions could be materially adversely affected.

~~The~~In ~~success~~addition, ~~of our future sales efforts will~~ door-to-door anmarketing ~~extent~~and outbound ~~depend~~telemarketing onare ~~the~~a ~~positive~~significant ~~momentum~~part of ~~the~~our ~~Chinese~~marketing ~~economy~~efforts. ~~and~~Each ~~the strength~~ of ~~Chinese~~these ~~public~~channels ~~entities~~is ~~and~~continually ~~enterprises. Recent~~under ~~actions~~scrutiny by state ~~the~~and ~~governmental~~federal ~~authorities~~regulators ~~indicate~~and alegislators. ~~desire~~If towe ~~slow~~complete ~~the~~our ~~acceleration~~acquisition of ~~the economy. Also~~BlueCo, ~~many~~additional ~~observers~~regulation ~~are~~or ~~predicting~~restriction aof these ~~significant~~marketing ~~drop~~practices incould ~~commercial~~negatively ~~real estate prices, which would have a material negative~~ impact onBlueCo’s ~~the~~customer ~~overall~~acquisition ~~economy. A significant economic slowdown or~~plan, ~~more~~and ~~importantly,~~therefore ~~a recession could substantially hinder~~ our ~~efforts~~financial ~~to implement our business plan~~results.

BLUECO’S BUSINESS IS DEPENDENT ON RETAINING LICENSES IN THE MARKETS IN WHICH WE OPERATE.

~~Currency~~BlueCo ~~fluctuations~~generally ~~may~~must ~~adversely~~apply ~~affect~~to ~~our~~the ~~operating~~relevant state ~~results~~utility commission to become a retail marketer of natural gas and/or electricity in the markets that it serves. Approval by the state regulatory body is subject to its understanding of and compliance with various federal, state and local regulations that govern the activities of retail marketers. If BlueCo fails to comply with any of these regulations, it could suffer certain consequences, which may include:

~~Changzhou~~· ~~Huayue~~higher ~~generates~~customer ~~revenues~~complaints and ~~incurs~~increased ~~expenses~~unanticipated and liabilities in RMB. However, Huayue will report its consolidated 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 PRC government may take action to stimulate the Chinese economy that will have the effect of reducing the value of the RMB. In addition, international currency markets may cause significant adjustments to occur in the value of the RMB. Any such events that result in a devaluation of the RMB 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.attrition;

~~Capital~~· ~~outflow~~damage ~~policies in China may hamper our ability~~ to ~~pay~~its ~~dividends~~reputation towith ~~shareholders~~customers inand ~~the~~regulators; ~~United States.~~and

~~The~~· ~~PRC~~increased ~~has~~regulatory ~~adopted~~scrutiny ~~currency~~ and capital transfer regulations. These regulations require that we comply with complex regulations for the movement of capital. Although PRC governmental policies were introduced in 1996 to allow the convertibility of RMB into foreign currency for current account itemssanctions, ~~conversion~~including offines 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 ~~the~~termination ~~PRC regulatory authorities may impose greater restrictions on the convertibility~~ of ~~the~~its ~~RMB in the future~~license. 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.

WeBlueCo’s ~~cannot~~business ~~determine~~model ~~whether,~~is ~~under~~dependent on ~~the~~continuing ~~EIT~~to ~~Law, we may~~ be ~~classified~~licensed asin aexisting ~~“resident~~markets. ~~enterprise”~~If ofBlueCo ~~China.~~has ~~Such~~a ~~classification~~license ~~would~~revoked ~~likely~~or ~~result~~is innot ~~unfavorable~~granted ~~tax~~renewal ~~consequences~~of toa uslicense, ~~and~~or ~~our~~if its ~~non-PRC~~license ~~stockholders. Our~~is ~~inability~~adversely toconditioned ~~make~~or ~~the~~modified ~~determination~~(e.g., ~~will~~by ~~subject~~increased ~~our~~bond ~~shareholders~~posting toobligations), ~~uncertainty~~its ~~regarding~~financial ~~whether~~results ~~sale~~could ofbe materially ~~their~~negatively ~~shares~~impacted, ~~will~~which ~~subject~~could ~~them~~materially tonegatively ~~taxation~~impact inits ~~China~~financial results.

~~Under~~In ~~the New Income Tax (“EIT”) Law~~addition, ~~enterprises~~FERC ~~established~~regulates ~~outside~~ the ~~PRC~~sale ~~whose~~of wholesale ~~“de~~electricity ~~facto~~by ~~management~~requiring ~~bodies”~~BlueCo ~~are located in the PRC are considered “resident enterprises”~~ and ~~their~~other ~~global~~companies ~~income~~who ~~will~~sell ~~generally~~into ~~be subject to~~ the ~~uniform~~wholesale ~~25%~~market ~~enterprise~~to ~~income~~obtain ~~tax~~market-based rate. On December 6, 2007, the PRC State Council promulgated the Implementation Regulations on the New Income Tax Law (the “Implementation Regulations”), which define “de facto management bodies” as bodies that have material and overall management control over the business, personnel, accounts and properties of an enterpriseauthority. If Inwe ~~addition,~~complete aour ~~recent~~proposed ~~circular~~acquisition ~~issued by the State Administration~~ of ~~Taxation~~BlueCo onand ~~April~~if ~~22, 2009 provides~~ that aauthority ~~foreign~~were ~~enterprise~~revoked, ~~controlled~~our byfinancial aresults ~~PRC~~could ~~company or a PRC company group will~~ be ~~classified~~materially adversely ~~as a “resident enterprise” with its “de facto management bodies” located within the PRC if the following requirements are satisfied:~~affected.

i.THE ~~the~~MARKETS ~~senior~~IN ~~management~~WHICH ~~and~~WE ~~core~~OPERATE ~~management~~ARE ~~departments~~HIGHLY inCOMPETITIVE AND ~~charge~~HAVE ofEVOLVING ~~its~~TECHNICAL ~~daily operations function mainly in the PRC; ii~~REQUIREMENTS. its financial and human resources decisions are subject to determination or approval by persons or bodies in the PRC; iii. its major assets, accounting books, company seals, and minutes and files of its board and shareholders' meetings are located or kept in the PRC; and iv. more than half of the enterprise's directors or senior management with voting rights reside in the PRC.

The markets for our products are highly competitive. In the LED market, we compete with companies that manufacture or sell nitride- based LED chips as well as those that sell LED components. Competitors are offering new blue, green and white LEDs with aggressive prices and improved performance. These competitors may reduce average sales prices faster than we are able to reduce costs, and competitive pricing pressures may accelerate the rate of decline of our average sales prices.

AS A RESULT OF OUR CONTINUED EXPANSION IN LED COMPONENTS AND LED LIGHTING PRODUCTS, OUR CUSTOMERS MAY REDUCE ORDERS.

Through acquisitions and organic growth, we intend to continue to expand in new markets for LED lighting products. In these new markets, some of our customers may perceive us as a competitor. In response, our customers may reduce their orders for our products. This reduction in orders could occur faster than our sales growth in these new markets, which could adversely affect our business, results of operations or financial condition.

OUR OPERATING RESULTS ARE SUBSTANTIALLY DEPENDENT ON THE DEVELOPMENT AND ACCEPTANCE OF NEW PRODUCTS.

Our future success may depend on our ability to develop new and lower cost solutions for existing and new markets and for customers to accept those solutions. We must introduce new products in a timely and cost-effective manner, and we must secure production orders for those products from our customers. The development of new products is a highly complex process, and we historically have experienced delays in completing the development and introduction of new products. The successful development and introduction of these products depends on a number of factors, including the following:

achievement of technology breakthroughs required to make commercially viable devices;

acceptance of our new product designs;

acceptance of new technology in certain markets;

the availability of qualified research and development personnel;

our timely completion of product designs and development;

our ability to expand sales and influence key customers to adopt our products; and

~~Because~~· ~~the~~our ~~EIT~~ability ~~Law,~~to ~~its~~develop ~~implementing~~repeatable ~~rules~~processes ~~and~~to ~~the~~manufacture ~~recent circular are relatively~~ new, noproducts ~~official~~in ~~interpretation~~sufficient orquantities application of this new “resident enterprise” classification is available. Therefore, it is unclear how tax authorities will determine tax residency based on the facts of each case. Because we lack guidance regarding how the PRC tax authorities will interpret and ~~apply~~at ~~the~~low ~~EIT~~enough ~~Law,~~costs ~~our management has determined that it will not make a decision as to whether Huayue Electronics is a resident enterprise~~ for ~~PRC~~commercial ~~enterprise income tax purposes unless and until we either plan to remit funds from our Chinese subsidiary to its Delaware shareholder or we plan to pay dividends to the shareholders of our U~~sales.~~S. parent corporation. In either situation, our determination would be based on interpretations of the EIT Law prevailing at that time.~~

IfOUR ~~the~~FINANCIAL ~~PRC~~RESULTS ~~tax~~FLUCTUATE ~~authorities~~ON ~~determine~~A ~~that~~SEASONAL ~~Huayue~~AND ~~Electronics is a “resident enterprise” for PRC enterprise income tax purposes, a number of unfavorable PRC tax consequences could follow:~~QUARTERLY BASIS.

·Our ~~First,~~overall weoperating ~~may~~results beare ~~subject~~ expected to ~~the~~fluctuate ~~enterprise~~substantially ~~income~~on ~~tax at~~ a ~~rate~~seasonal ofbasis ~~25%~~depending on: ~~our~~(1) ~~worldwide~~the ~~taxable~~geographic ~~income.~~mix ~~This~~of ~~would~~our ~~mean~~customer ~~that~~base; ~~any~~(2) ~~non-China~~the ~~source~~concentration of ~~income~~our ~~would~~product bemix; ~~subject~~(3) tothe ~~PRC~~impact ~~enterprise~~of ~~income~~weather ~~tax~~conditions aton acommodity ~~rate~~pricing ofand ~~25%~~demand, ~~the~~(4) ~~same~~variability ~~rate~~in ~~applied~~market toprices ~~corporate~~for natural ~~income~~gas ~~earned~~and ~~within China. Currently~~electricity, ~~however,~~and we(5) ~~have~~changes noin ~~non-China~~the ~~source~~cost ~~income.~~of ·delivery ~~Second,~~of ~~although~~such ~~under~~commodities ~~the~~through ~~EIT~~energy ~~Law~~delivery ~~and~~networks. ~~its~~These factors ~~implementing~~can ~~rules~~have ~~dividends~~material ~~paid to our non~~short-~~PRC~~term ~~subsidiary~~impacts ~~from~~on ~~our~~monthly ~~PRC~~and ~~subsidiary~~quarterly ~~would~~operating ~~qualify as “tax-exempt income~~results,” wewhich ~~cannot~~may ~~guarantee that such dividends will not~~ be ~~subject~~misleading towhen aconsidered outside ~~10%~~of ~~withholding~~the ~~tax,~~context asof ~~the~~our ~~PRC~~annual ~~foreign~~operating ~~exchange~~cycle. ~~control~~In ~~authorities~~addition, ~~which~~our ~~enforce~~accounts ~~the~~payable ~~withholding~~and ~~tax,~~accounts ~~have~~receivable ~~not~~are ~~yet~~expected ~~issued~~to be ~~guidance~~impacted ~~with~~by ~~respect~~seasonality due to the ~~processing~~timing ofdifferences ~~outbound~~between ~~remittances~~when towe ~~entities~~expect ~~that~~to ~~are~~pay ~~treated~~our assuppliers ~~resident enterprises~~ for ~~PRC~~accounts ~~enterprise~~payable ~~income~~versus when ~~tax~~we ~~purposes.~~expect ~~Currently,~~to ~~neither~~collect from our ~~U.S.~~customers ~~parent~~on ~~corporation~~accounts ~~nor~~receivable. ~~our~~We ~~Delaware~~expect ~~subsidiary~~to ~~has~~typically ~~any~~pay ~~significant~~our ~~cash~~suppliers ~~resources~~for orpurchases ~~liquid~~on a ~~assets~~monthly basis. ~~Unless~~However, ~~and~~it ~~until~~takes ~~our~~approximately ~~U.S.~~two ~~parent~~months ~~corporation obtains funds~~ from the ~~sale~~time ofBlueCo ~~securities,~~delivers the ~~funds~~electricity ~~required~~or tonatural ~~operate~~gas ~~our~~to ~~U.S.~~its customers ~~parent~~before ~~corporation~~it ~~and~~collects ~~our Delaware subsidiary must be obtained either~~ from ~~loans~~its bycustomers ~~related~~on ~~parties~~accounts orreceivable byattributable ~~dividends~~to ~~paid~~those ~~by our PRC subsidiary~~supplies. ~~Imposition~~This oftiming adifference ~~withholding tax on such dividends~~ could affect ~~interfere with~~ our ~~ability~~future tocash ~~finance~~flows, ~~the~~especially ~~operations~~during ofpeak ~~our~~cycles ~~U.S.~~in ~~parent~~the winter and ~~Delaware~~summer ~~subsidiary~~months. ~~· Third~~Furthermore, itas isa ~~possible~~result ~~that~~of ~~future guidance issued with respect to~~ the ~~new~~anticipated seasonality ~~“resident~~of ~~enterprise”~~our ~~classification~~business, ~~could~~we ~~result~~may inreserve a ~~situation~~portion inof ~~which the PRC will attempt to impose a 10% withholding tax on dividends that Huayue Electronics pays to~~ our ~~non-PRC~~excess ~~stockholders.~~cash ·available ~~Finally,~~for itdistribution isin ~~possible~~the ~~that~~first ~~resident~~and ~~enterprise~~fourth ~~classification could result~~ quarters in ~~the~~order ~~PRC seeking~~ to ~~tax~~fund ~~any gains derived by~~ our ~~non-PRC~~second ~~stockholders~~and ~~from~~third ~~transferring~~quarter ~~their shares in our company~~distributions. ~~Although~~Because ~~most~~ of ~~our non-PRC shareholders would not be subject to~~ the ~~jurisdiction~~seasonal nature of ~~the~~our ~~PRC~~business ~~tax~~and ~~authorities~~operating results, it ~~the uncertainty regarding whether they~~ may be ~~liable~~difficult tofor ~~pay~~investors ~~such~~to aaccurately ~~tax~~and ~~could~~adequately bevalue aour ~~burden~~business ~~for~~based ~~some~~on of our ~~shareholders~~interim result, ~~particularly~~which ~~those~~could ~~who~~materially negatively ~~have~~impact ~~business~~our orfinancial ~~other interests in the PRC~~results.

WeBLUECO ~~have~~MAY ~~limited~~HAVE ~~business~~DIFFICULTY ~~insurance~~RETAINING ~~coverage~~CUSTOMERS OR OBTAINING A SIGNIFICANT NUMBER OF NEW CUSTOMERS.

~~The~~A ~~insurance~~significant ~~industry~~decrease in the ~~PRC~~retail isprice of ~~still~~natural atgas anor ~~early~~electricity ~~stage~~may ofcause ~~development.~~BlueCo’s ~~Insurance~~customers ~~companies~~to inswitch ~~China~~retail ~~offer~~energy ~~limited~~service ~~business~~providers ~~insurance~~during ~~products. Chinese~~their ~~insurance~~contract terms ~~companies do not,~~ to ~~our~~obtain ~~knowledge,~~more ~~offer~~favorable ~~business~~prices. ~~liability~~Although ~~insurance. Other~~BlueCo ~~than~~generally ~~coverage~~has ~~for~~a ~~certain~~right ~~accidents,~~to wecollect doa ~~not~~termination ~~have~~fee ~~general~~from ~~business~~each ~~liability~~customer ~~insurance~~on a ~~coverage~~fixed-price ~~for~~contract ~~our~~who ~~operations. Moreover,~~terminates ~~while~~their ~~business~~contract ~~disruption~~following ~~insurance~~such isan ~~available~~event, weit ~~have~~may ~~determined~~not ~~that~~be ~~the~~able ~~risks~~to ofcollect ~~disruption and cost of~~ the ~~insurance~~termination ~~are~~fees in ~~such~~full ~~that~~or ~~we do not require it~~ at ~~this time~~all. ~~Any~~ ~~business~~BlueCo’s ~~disruption,~~variable-price ~~litigation~~contracts ortypically ~~natural~~may ~~disaster~~be ~~might~~terminated ~~result~~by inits ~~substantial~~customers ~~costs~~at ~~and~~any ~~diversion~~time ofwithout ~~resources~~penalty.

~~Because~~Furthermore, ~~our~~significant ~~funds~~ongoing ~~are~~competition exists ~~held~~for customers in ~~banks~~the ~~which~~markets dowhere ~~not~~BlueCo ~~provide insurance~~operates, ~~the~~and ~~failure~~BlueCo cannot guarantee that it will be able to retain customers or obtain a sufficient number of ~~any~~new ~~bank~~customers. We anticipate that BlueCo will incur significant costs as it enters new markets and pursue customers by utilizing a variety of marketing methods. In order for it to recover these expenses, BlueCo must attract and retain these customers on economic terms and for extended periods. BlueCo cannot be certain that its future efforts to retain its customers or secure additional customers will generate sufficient gross margins for it to expand into additional markets or that BlueCo will be able to prevent customer attrition and attract new customers in ~~which~~existing wemarkets. ~~deposit~~If we complete our ~~funds~~proposed ~~could~~acquisition ~~affect~~of BlueCo and BlueCo’s marketing strategy is not successful, our ~~ability~~financial toresults ~~continue~~could inbe ~~business~~adversely affected.

~~Banks~~BLUECO ~~and~~EXPERIENCES ~~other~~STRONG ~~financial~~COMPETITION ~~institutions~~FROM inLOCAL ~~the~~REGULATED UTILITIES ~~PRC~~AND doOTHER ~~not provide insurance for funds held on deposit~~COMPETITORS. 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.

The markets in which BlueCo competes are highly competitive, and BlueCo may not be able to compete effectively, especially against established industry competitors and new entrants with greater financial resources. BlueCo encounters significant competition from local regulated utilities or their retail affiliates and traditional and new retail energy providers with greater financial resources, well established brand names and/or large, existing installed customer bases. In most markets, its principal competitor may be the local regulated utility company or its affiliated retail arm. The local regulated utilities have the advantage of longstanding relationships with their customers, and they may have longer operating histories, better access to data, greater financial and other resources and greater name recognition in their markets than BlueCo does. Convincing customers to switch to a new company for the supply of a critical commodity such as natural gas or electricity is a challenge.

~~Failure~~In tocertain ~~comply~~markets, ~~with~~local ~~PRC~~regulated ~~regulations~~utilities may ~~relating~~seek to ~~the~~decrease ~~establishment~~their oftariffed ~~offshore~~retail ~~special~~rates ~~purpose~~to ~~companies~~limit byor ~~PRC~~to ~~residents~~preclude ~~may~~opportunities ~~subject~~for ~~our~~retail ~~PRC~~energy ~~resident~~providers ~~shareholders~~ to ~~personal~~acquire ~~liability~~market share, ~~limit~~and ~~our~~otherwise ~~ability~~seek to ~~acquire~~establish ~~PRC~~rates, ~~companies~~terms orand conditions to ~~inject~~the ~~capital~~disadvantage ~~into~~of ~~our~~retail ~~PRC~~energy ~~subsidiary~~providers such that these retail energy providers cannot remain competitive in that market. Also, ~~limit~~in ~~our~~states ~~PRC~~where ~~subsidiary’s~~the ~~and~~utility ~~affiliate’s~~service ~~ability~~rate tois ~~distribute~~set ~~profits~~through the toprocurement usof energy over a period of months or ~~otherwise~~years, ~~materially~~the ~~adversely~~utility ~~affect~~service usrate will lag behind market conditions. If energy prices rise significantly above the utility service rate over a prolonged period of time, BlueCo may be forced to reduce its operating margins in order to price more competitively with the utility service rate and may experience increased customer attrition, as some customers may switch to the service offer from the utility.

In ~~October~~addition ~~2005, SAFE issued the Notice on Relevant Issues in the Foreign Exchange Control over Financing and Return Investment Through Special Purpose Companies by Residents Inside China, generally referred~~ to ascompetition ~~Circular~~from ~~75. Circular 75 required PRC residents to register with~~ the ~~competent~~ local regulated ~~SAFE branch before establishing or acquiring control over an offshore special purpose company~~utilities, orBlueCo ~~SPV,~~faces ~~for~~competition ~~the~~from ~~purpose~~a ofnumber ~~engaging in an equity financing outside~~ of ~~China~~other onretail ~~the~~energy ~~strength~~providers. ofBlueCo ~~domestic~~also ~~PRC~~may ~~assets~~face ~~originally~~competition from ~~held~~large bycorporations ~~those~~with ~~residents.~~similar ~~Internal~~billing ~~implementing~~and ~~guidelines~~customer ~~issued~~service ~~by SAFE~~capabilities, ~~which~~such ~~became public in June 2007 (known~~ as ~~Notice~~telecommunication ~~106),~~service ~~expanded~~providers ~~the~~and nationally ~~reach~~branded ofproviders ~~Circular 75 by (1) purporting to cover the establishment or acquisition~~ of ~~control~~consumer byproducts ~~PRC~~and ~~residents~~services ofthat ~~offshore~~have ~~entities~~a ~~which~~significant ~~merely~~base ~~acquire “control” over domestic companies or assets, even in the absence~~ of ~~legal~~existing ~~ownership;~~customers. ~~(2)~~Many ~~adding requirements relating to the source~~ of ~~the~~these competitors ~~PRC resident’s funds used to establish~~ or ~~acquire~~potential ~~the~~competitors ~~offshore~~are ~~entity;~~larger ~~covering~~than ~~the~~BlueCo ~~use~~and ofhave ~~existing~~access ~~offshore entities for offshore financings; (3) purporting~~ to ~~cover~~more ~~situations~~significant incapital ~~which~~resources. anFor ~~offshore SPV establishes~~ example, a ~~new~~larger ~~subsidiary~~competitor inmay ~~China~~be orable ~~acquires~~to anincur ~~unrelated~~more ~~company~~costs orto ~~unrelated~~acquire ~~assets~~customers inif ~~China;~~its ~~and~~cost ~~(4) making the domestic affiliate~~ of ~~the~~capital ~~SPV~~is ~~responsible~~lower ~~for~~than ~~the~~ours. ~~accuracy~~Similarly, marketers ofwith ~~certain~~a ~~documents~~larger ~~which~~presence ~~must be filed~~ in ~~connection with any such registration, notably,~~ the ~~business~~relevant ~~plan~~market ~~which~~or ~~describes~~that ~~the~~have ~~overseas~~interruptible ~~financing~~load ~~and~~as ~~the~~part ~~use~~ of ~~proceeds. Amendments~~their tocustomer ~~registrations~~base ~~made~~may ~~under~~benefit from ~~Circular~~synergies ~~75 are required in connection with any increase~~ or ~~decrease~~scale ofeconomies ~~capital,~~that ~~transfer~~smaller ~~of shares~~marketers, ~~mergers and acquisitions, equity investment~~ or ~~creation~~marketers ofserving ~~any~~only ~~security~~firm ~~interest~~customers, incannot ~~any~~obtain. ~~assets~~In ~~located in China to guarantee offshore obligations~~addition, product ~~and~~offerings ~~Notice~~that ~~106~~provide ~~makes~~a ~~the~~consumer ~~offshore SPV jointly responsible for these filings. Failure to comply~~ with ~~the~~an ~~requirements~~alternative source of ~~Circular 75~~energy, such as ~~applied~~a bysolar ~~SAFE in accordance with Notice 106~~panel, may ~~result~~become inmore ~~fines~~common and indirectly ~~other~~compete ~~penalties~~with ~~under PRC laws for evasion of applicable foreign exchange restrictions~~us. ~~Any~~If ~~such~~we ~~failure~~complete ~~could~~our ~~also~~proposed ~~result~~acquisition inof ~~the~~BlueCo ~~SPV~~and BlueCo’s ~~affiliates~~marketing ~~being~~strategy ~~impeded~~is ornot ~~prevented from distributing their profits and the proceeds from any reduction in capital~~successful, it ~~share~~may ~~transfer~~affect orour ~~liquidation~~financial ~~to the SPV, or from engaging in other transfers of funds into or out of China~~results.

WeIF ~~have~~WE ~~advised~~ARE ~~our~~UNABLE ~~shareholders~~TO ~~who~~EFFECTIVELY ~~are PRC residents~~DEVELOP, asMANAGE ~~defined~~AND inEXPAND OUR ~~Circular~~DISTRIBUTION ~~75,~~CHANNELS toFOR ~~register~~OUR ~~with the relevant branch of SAFE~~PRODUCTS, asOUR ~~currently~~OPERATING ~~required,~~RESULTS inMAY ~~connection with their equity interests in us and our acquisitions of equity interests in our PRC subsidiary and affiliate~~SUFFER. However, we cannot provide any assurances that their existing registrations have fully complied with, and they have made all necessary amendments to their registration to fully comply with, all applicable registrations or approvals required by Circular 75. Moreover, because of uncertainty over how Circular 75 will be interpreted and implemented, and how or whether SAFE will apply it to us, we cannot predict how it will affect our business operations or future strategies. For example, our present and prospective PRC subsidiary’s and affiliate’s ability to conduct foreign exchange activities, such as the remittance of dividends and foreign currency-denominated borrowings, may be subject to compliance with Circular 75 by our PRC resident beneficial holders. In addition, such PRC residents may not always be able to complete the necessary registration procedures required by Circular 75. We also have little control over either our present or prospective direct or indirect shareholders or the outcome of such registration procedures. A failure by our PRC resident beneficial holders or future PRC resident shareholders to comply with Circular 75, if SAFE requires it, could subject these PRC resident beneficial holders to fines or legal sanctions, restrict our overseas or cross-border investment activities, limit our subsidiary’s and affiliate’s ability to make distributions or pay dividends or affect our ownership structure, which could adversely affect our business and prospects.

~~Failure~~We have expanded into new business channels that are different from those that we have historically operated in as we grow our business and sell LED lighting products. If we are unable to ~~comply~~effectively ~~with~~penetrate these new distribution channels to ensure our products are reaching the Uappropriate Scustomer base, our financial results may be adversely impacted. ~~Foreign~~In ~~Corrupt~~addition, ~~Practices~~if ~~Act~~we ~~could~~successfully ~~subject~~penetrate usthese new distribution channels, we cannot guarantee that customers will accept our products or that we will be able to ~~penalties~~manufacture and ~~other~~deliver ~~adverse~~them ~~consequences~~in the time line established by our customers.

AsIF ~~our~~OUR ~~ultimate~~PRODUCTS ~~holding~~FAIL ~~company~~TO isPERFORM aOR ~~U.S.~~FAIL ~~corporation,~~TO weMEET ~~are~~CUSTOMER REQUIREMENTS ~~subject~~OR ~~to the U.S. Foreign Corrupt Practices Act~~EXPECTATIONS, ~~which~~WE ~~generally~~COULD ~~prohibits~~INCUR ~~U.S.~~SIGNIFICANT ~~companies~~ADDITIONAL ~~from engaging in bribery or other prohibited payments to foreign officials for the purpose of obtaining or retaining business. Foreign companies~~COSTS, ~~including~~INCLUDING ~~some~~COSTS ~~that~~ASSOCIATED ~~may~~WITH ~~compete~~THE ~~with~~RECALL ~~us,~~OF ~~are not subject to these prohibitions~~THOSE ITEMS. Corruption, extortion, bribery, pay-offs, theft and other fraudulent practices may occur from time-to-time in the PRC. We can make no assurance, however, that our employees or other agents will not engage in such conduct for which we might be held responsible. If our employees or other agents are found to have engaged in such practices, we could suffer severe penalties and other consequences that may have a material adverse effect on our business, financial condition and results of operations.

~~Uncertainties~~The ~~with~~manufacture ~~respect~~of our products involves highly complex processes. Our customers specify quality, performance and reliability standards that we must meet. If our products do not meet these standards, we may be required to replace or rework the ~~PRC~~products. ~~legal~~In ~~system~~some ~~could~~cases, ~~limit~~our ~~the~~products ~~legal~~may ~~protections~~contain ~~available~~undetected defects or flaws that only become evident after shipment. Even if our products meet standard specifications, our customers may attempt to ~~you~~use our products in applications they were not designed for or in products that were not designed or manufactured properly, resulting in product failures and uscreating customer satisfaction issues.

WeIf ~~conduct~~we ~~substantially~~experience ~~all~~product ofquality, ~~our~~performance or ~~business~~reliability ~~through~~problems ~~our operating subsidiaries in the PRC. Our operating subsidiaries are generally subject to laws~~ and ~~regulations~~defects ~~applicable~~or ~~to foreign investments in China and~~failures, inwe ~~particular,~~may ~~laws~~need ~~applicable~~ to ~~foreign-invested~~recall ~~enterprises.~~our ~~The PRC legal system is based on written statutes, and prior court decisions may be cited for reference but have limited precedential value~~products. ~~Since~~These ~~1979,~~recalls acould ~~series~~result ofin ~~new~~significant losses ~~PRC~~due ~~laws and regulations have significantly enhanced the protections afforded~~ to ~~various~~costs ~~forms~~associated ofwith ~~foreign investments in China. However, since~~ the ~~PRC legal system continues to evolve~~removal, ~~the~~collection ~~interpretations of many laws, regulations~~ and ~~rules~~destruction ~~are not always uniform and enforcement~~ of ~~these~~the ~~laws,~~product ~~regulations and rules involve uncertainties~~recalled, ~~which may limit legal protections available to us. In addition, any litigation in China may be protracted and result in substantial costs and diversion of resources and management attention.~~including:

payments made to replace recalled product;

a rise in warranty expense and costs associated with customer support;

the write down or destruction of existing inventory subject to the recall;

lost sales due to the unavailability of product for a period of time;

delays, cancellations or rescheduling of orders for our products; or

increased product returns.

We also may be the target of product liability lawsuits and could suffer losses from a significant product liability judgment against us if the use of our products at issue is determined to have caused injury. A significant product recall or product liability case could also result in adverse publicity, damage to our reputation, and a loss of customer confidence in our products.

WeINCREASED ~~are~~COLLATERAL aREQUIREMENTS ~~Delaware~~IN ~~holding~~CONNECTION ~~company~~WITH and most of our assets are located outside of the United States. All of our current operations are conducted in the PRC. In addition, all of our directors and officers are nationals and residents of the PRC. All of the assets of these persons is located outside the United States. As a result, it may be difficult for you to effect service of process within the United States upon these persons. It may also be difficult for you to enforce in U.BLUECO’S. SUPPLY ~~courts~~ACTIVITIES ~~judgments~~MAY onRESTRICT ~~the~~ITS ~~civil~~LIQUIDITY ~~liability provisions of the U.S. federal securities laws against us and our officers and directors~~WHICH, ~~who~~IF ~~are~~WE ~~not~~COMPLETE ~~residents~~OUR inACQUISITION ~~the~~OF ~~United States and the substantial majority of whose assets are located outside of the United States. In addition~~BLUECO, ~~there~~COULD isLIMIT ~~uncertainty~~OUR asABILITY toTO ~~whether~~GROW ~~the~~OUR BUSINESS ~~courts~~OR ofPAY ~~the PRC would recognize or enforce judgments of U~~DIVIDENDS.S. courts. Courts in China may recognize and enforce foreign judgments in accordance with the requirements of the PRC Civil Procedures Law based on treaties between China and the country where the judgment is made or on reciprocity between jurisdictions. China does not have any treaties or other arrangements that provide for the reciprocal recognition and enforcement of foreign judgments with the United States. In addition, according to the PRC Civil Procedures Law, courts in the PRC will not enforce a foreign judgment against us or our directors and officers if they decide that the judgment violates basic principles of PRC law or national sovereignty, security or the public interest. So it is uncertain whether a PRC court would enforce a judgment rendered by a court in the United States.

~~The~~BlueCo’s ~~Company~~contractual isagreements ~~not~~with certain ~~likely~~local regulated utilities and its supplier counterparties require BlueCo to ~~hold~~maintain ~~annual~~restricted ~~shareholder~~cash ~~meetings~~balances or letters of credit as collateral for credit risk or the performance risk associated with the future delivery of natural gas or electricity. These collateral requirements may increase as BlueCo grows its customer base. Collateral requirements will increase based on the volume or cost of the commodity it purchases in any given month and the ~~next~~amount ~~few~~of ~~years~~capacity or service contracted for with the local regulated utility. Significant changes in market prices also can result in fluctuations in the collateral that local regulated utilities or suppliers require.

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 CompanyBLUECO’sS ~~shareholders~~SUPPLY ~~will~~CONTRACTS ~~have~~EXPOSE noBLUECO ~~effective~~TO ~~means~~COUNTERPARTY CREDIT ~~of exercising control over its operations~~RISK.

~~Our~~BlueCo ~~common~~does ~~stock~~not isindependently ~~subject~~produce natural gas and electricity and depend upon third parties for its supply. If the counterparties to ~~penny~~its ~~stock~~supply ~~rules~~contracts are unable to perform their obligations, BlueCo may suffer losses, including as a result of being unable to secure replacement supplies of natural gas or electricity on a timely and cost-effective basis or at all. If we complete our proposed acquisition of BlueCo and BlueCo cannot identify alternative supplies of natural gas or electricity, or secure natural gas or electricity in a timely fashion, our financial results could be adversely affected.

~~Our~~BLUECO ~~common~~IS ~~stock~~SUBJECT isTO ~~subject to Rule 15g-1 through 15g-9 under the Exchange Act~~CREDIT, ~~the~~OPERATIONAL ~~SEC~~AND ~~regulations~~FINANCIAL ~~for~~RISKS RELATED ~~“penny~~TO ~~stocks.”~~CERTAIN ~~Penny~~LOCAL ~~stocks~~REGULATED ~~include~~UTILITIES ~~any~~THAT ~~equity~~PROVIDE ~~security~~BILLING ~~that~~SERVICES isAND ~~not~~GUARANTEE ~~listed~~THE onCUSTOMER aRECEIVABLES ~~national~~FOR ~~exchange~~THEIR ~~and has a market price of less than $5~~MARKETS.00 per share, subject to certain exceptions. The regulations impose certain sales practice requirements on broker-dealers which sell penny stock to persons other than established customers and “accredited investors” (generally, individuals with a net worth in excess of $1,000,000 or an annual incomes exceeding $200,000 (or $300,000 together with their spouses)). For transactions covered by this rule, a broker-dealer must make a special suitability determination for the purchaser and have received the purchaser's written consent to the transaction prior to the sale. In addition, prior to any non-exempt buy/sell transaction in a penny stock, a disclosure schedule defined by the SEC relating to the penny stock market must be delivered to the purchaser of such penny stock. This disclosure must include the amount of commissions payable to both the broker-dealer and the registered representative and current price quotations for the common stock. The regulations also require that monthly statements be sent to holders of penny stock that disclose recent price information for the penny stock and information of the limited market for penny stocks. These rules adversely affect the ability of broker-dealers to sell penny stock, and may adversely affect the market liquidity of our common stock if it becomes subject to the penny stock rules.

~~ITEM~~In ~~1B UNRESOLVED~~Purchase ~~STAFF~~of ~~COMMENTS~~Receivables (“POR”) markets, BlueCo relies on the local regulated utility to purchase its customer accounts receivable and to perform timely and accurate billing. POR markets represented approximately 100% of its retail revenues. As its business grows, the portion of customers BlueCo serves in POR markets could increase. The bankruptcy of a local regulated utility could result in a default in such local regulated utility’s payment obligations to BlueCo, or efforts to reject contracts for service that they have with BlueCo if they believe there is a high value alternative opportunity.

~~Not~~In ~~Applicable~~POR markets where local regulated utilities purchase BlueCo’s receivables and in certain other markets, local regulated utilities are responsible for billing services. Local regulated utilities that provide billing services rely on BlueCo for accurate and timely communication of contract rates and other information necessary for accurate billing to customers. The number of territories within which BlueCo provides natural gas and electricity supply poses a constant challenge that demands considerable management, personnel and information system resources. Each territory requires unique and often varied electronic data interface systems. Rules that govern the exchange of data may be changed by the local regulated utilities. In certain instances, BlueCo must rely on manual processes and procedures to communicate data to local regulated utilities for inclusion in customer bills. In addition, some utilities may experience difficulty in providing accurate, timely data when changing metering equipment (e.g, from manually-read to telemetry). Failure to provide accurate data to local regulated utilities on a timely basis could result in underpayment or nonpayment by its customers, and if we complete our proposed acquisition of BlueCo, therefore adversely affect our financial results.

IF WE ARE UNABLE TO EFFECTIVELY DEVELOP, MANAGE AND EXPAND OUR DISTRIBUTION CHANNELS FOR OUR PRODUCTS, OUR OPERATING RESULTS MAY SUFFER.

We have expanded into new business channels that are different from those that we have historically operated in as we grow our business and sell LED lighting products. If we are unable to effectively penetrate these new distribution channels to ensure our products are reaching the appropriate customer base, our financial results may be adversely impacted. In addition, if we successfully penetrate these new distribution channels, we cannot guarantee that customers will accept our products or that we will be able to manufacture and deliver them in the time line established by our customers.

IF OUR PRODUCTS FAIL TO PERFORM OR FAIL TO MEET CUSTOMER REQUIREMENTS OR EXPECTATIONS, WE COULD INCUR SIGNIFICANT ADDITIONAL COSTS, INCLUDING COSTS ASSOCIATED WITH THE RECALL OF THOSE ITEMS.

The manufacture of our products involves highly complex processes. Our customers specify quality, performance and reliability standards that we must meet. If our products do not meet these standards, we may be required to replace or rework the products. In some cases, our products may contain undetected defects or flaws that only become evident after shipment. Even if our products meet standard specifications, our customers may attempt to use our products in applications they were not designed for or in products that were not designed or manufactured properly, resulting in product failures and creating customer satisfaction issues.

If we experience product quality, performance or reliability problems and defects or failures, we may need to recall our products. These recalls could result in significant losses due to costs associated with the removal, collection and destruction of the product recalled, including:

payments made to replace recalled product;

a rise in warranty expense and costs associated with customer support;

the write down or destruction of existing inventory subject to the recall;

lost sales due to the unavailability of product for a period of time;

delays, cancellations or rescheduling of orders for our products; or

increased product returns.

WE ARE SUBJECT TO RISKS RELATED TO INTERNATIONAL PURCHASES AND SALES.

We purchase our products from overseas sources. As a result, our international sales and purchases are subject to numerous U.S. and foreign laws and regulations, including, without limitation, tariffs, trade barriers, regulations relating to import-export control, technology transfer restrictions, the International Traffic in Arms Regulation promulgated under the Arms Export Control Act, the Foreign Corrupt Practices Act and the anti-boycott provisions of the U.S. Export Administration Act. If we fail to comply with these laws and regulations, we could be liable for administrative, civil or criminal liabilities, and in the extreme case, we could be suspended or debarred from government contracts or our export privileges could be suspended, which could have a material adverse effect on our business. International sales and purchases are also subject to a variety of other risks, including risks arising from currency fluctuations, collection issues and taxes. Our international sales are subject to variability as our selling prices become less competitive in countries with currencies that are declining in value against the U.S. Dollar and more competitive in countries with currencies that are increasing in value against the U.S. Dollar. In addition, our international purchases can become more expensive if the U.S. Dollar weakens against the foreign currencies in which we are billed. We have not entered into any foreign currency derivative financial instruments; however, we may choose to do so in the future in an effort to manage or hedge our foreign exchange rate risk.

BLUECO DEPENDS ON THE ACCURACY OF DATA IN ITS BILLING SYSTEMS. IF WE COMPLETE OUR PROPOSED ACQUISITION OF BLUECO, INACCURATE DATA COULD HAVE A NEGATIVE IMPACT ON OUR RESULTS OF OPERATIONS, FINANCIAL CONDITION, CASH FLOWS AND REPUTATIONS WITH CUSTOMERS AND/OR REGULATORS.

BlueCo depends on the accuracy and timeliness of customer billing, collections and consumption information in its information systems. BlueCo relies on many internal and external sources for this information, including:

its internal marketing, pricing and customer operations functions; and

various local regulated utilities and ISOs for volume or meter read information, certain billing rates and billing types (e.g., budget billing) and other fees and expenses.

Inaccurate or untimely information, which may be outside of our direct control, could result in:

inaccurate and/or untimely bills sent to customers;

inaccurate accounting and reporting of customer revenues, gross margin and accounts receivable activity;

inaccurate measurement of usage rates, throughput and imbalances;

customer complaints; and

increased regulatory scrutiny.

BlueCo may become liable for incorrectly calculating taxes, and certain of its charges may become uncollectable due to billing errors. Although customers are responsible for the payment of taxes related to the sales of natural gas and electricity, BlueCo estimates the amount of taxes they owe and invoice its customers through its billing process. BlueCo subsequently remits those taxes to the relevant taxing authorities. If BlueCo were to later determine that the amount it billed them for taxes was insufficient, BlueCo would not be able to recover the difference from them and would ultimately be responsible for those costs. Additionally, some of the markets in which BlueCo operate requires it to bill customers within a specific period of time. If BlueCo do not bill its customer within that period of time, the customer may not be obligated to pay.

Regulations in the restructured markets in which BlueCo operates require that meter reading be performed by the local regulated utility; and BlueCo is required to rely on the local regulated utility to provide it with its customers’ information regarding energy usage. BlueCo’s inability to obtain this usage information or confirm information received from the utilities could negatively impact its billing systems and reputation with customers and, if we complete our proposed acquisition of BlueCo, our financial results.

INFORMATION MANAGEMENT SYSTEMS COULD PROVE UNRELIABLE.

BlueCo operates in a high volume business with an extensive array of data interchanges and market requirements. BlueCo is highly dependent on its information management systems to track, monitor and correct or otherwise verify a high volume of data to ensure the reported financial results and its forecasting efforts are accurate. BlueCo’s information management systems are designed to help it forecast new customer enrollments and their energy requirements, which helps ensure that BlueCo is able to supply new customers estimated average energy requirements without exposing it to excessive commodity price risk.

BlueCo may be subject to disruptions in its information flow arising out of events beyond its control, such as natural disasters, epidemics, failures in hardware or software, power fluctuations, telecommunications and other similar disruptions. In addition, BlueCo’s information management systems may be vulnerable to computer viruses, incursions by intruders or hackers and cyber terrorists and other similar disruptions. The failure of its information management systems to perform as anticipated for any reason or any significant breach of security could disrupt its business and result in numerous adverse consequences, including reduced effectiveness and efficiency of its operations, inappropriate disclosure of confidential information and increased overhead costs, all of which could impact our financial results if we complete our proposed acquisition of BlueCo.

OUR BUSINESS IS SUBJECT TO CYBER-ATTACKS AND DATA BREACHES, INCLUDING THE RISK THAT SENSITIVE CUSTOMER DATA MAY BE COMPROMISED, WHICH COULD RESULT IN AN ADVERSE IMPACT TO ITS REPUTATION AND RESULTS OF OPERATIONS.

We are dependent on information technology systems that we own and that are owned and managed by third parties. Parties that wish to disrupt our operations could view our computer systems or networks and those of our third party outsourced providers as attractive targets for cyber-attack. BlueCo’s business requires access to sensitive customer data in the ordinary course of business. Examples of sensitive customer data are names, addresses, account information, historical electricity usage, expected patterns of use, payment history, credit bureau data, credit and debit card account numbers, drivers’ license numbers, social security numbers and bank account information. BlueCo provides sensitive customer data to vendors and service providers who require access to this information in order to provide billing and transaction services.

A successful cyber-attack on the systems that control our billing and transaction and customer information systems could severely disrupt business operations, preventing us from serving customers or collecting revenues. A cyber-attack or security breach on us or our third party outsourced system providers could result in significant expenses to investigate and repair security breaches or system damage and could lead to litigation, fines, other remedial action, heightened regulatory scrutiny and damage to our reputation. In addition, the misappropriation, corruption or loss of personally identifiable information and other confidential data could lead to significant breach notification expenses and mitigation expenses such as credit monitoring. We do not maintain cyber-liability insurance that covers certain damage caused by potential cyber incidents. A significant cyber incident could materially and adversely affect our business, financial condition and results of operations.

CATASTROPHIC EVENTS MAY DISRUPT OUR BUSINESS.

A disruption or failure of our systems or operations in the event of a natural disaster or man-made catastrophic event could cause delays in completing sales, continuing production or performing other critical functions of our business, especially in the case of a single site for our operations and assembly. A catastrophic event that results in the destruction or disruption to our supply chain or any of our critical business or information technology systems could severely affect our ability to conduct normal business operations and, as a result, our operating results could be adversely affected.

BLUECO DEPENDS ON LOCAL TRANSPORTATION AND TRANSMISSION FACILITIES OF THIRD PARTIES TO SUPPLY ITS CUSTOMERS. IF WE COMPLETE OUR PROPOSED ACQUISITION OF BLUECO, OUR FINANCIAL RESULTS MAY BE ADVERSELY IMPACTED IF TRANSPORTATION AND TRANSMISSION AVAILABILITY IS LIMITED OR UNRELIABLE.

BlueCo depends on transportation and transmission facilities owned and operated by local regulated utilities and other energy companies to deliver the natural gas and electricity it sells to customers. Under the regulatory structures adopted in most jurisdictions, BlueCo is required to enter into agreements with regulated local regulated utilities for use of the local distribution systems and to establish functional data interfaces necessary to serve its customers. Any delay in the negotiation of such agreements or inability to enter into reasonable agreements could delay or negatively impact BlueCo’s ability to serve customers in those jurisdictions. Additionally, failure to coordinate upstream and downstream receipts and deliveries on an energy transportation network can result in significant penalties. If we complete our proposed acquisition of BlueCo, any of these factors could have an adverse impact on our financial results.

BlueCo also depends on local regulated utilities for maintenance of the infrastructure through which it delivers natural gas and electricity to its customers. BlueCo is unable to control the level of service the utilities provide to its customers, including the timeliness and effectiveness of upkeep and repairs to infrastructure. Any infrastructure failure that interrupts or impairs delivery of electricity or natural gas to our customers could cause customer dissatisfaction, which could adversely affect BlueCo’s business. If transportation or transmission/distribution is disrupted, or if transportation or transmission/distribution capacity is inadequate, BlueCo’s ability to sell and deliver products may be hindered. Such disruptions could also hinder BlueCo providing electricity or natural gas to its customers and adversely impact our risk management policies and hedge contracts.

In addition, the power generation and transmission/distribution infrastructure in the United States is very complex. Maintaining reliability of the infrastructure requires appropriate oversight by regulatory agencies, careful planning and design, trained and skilled operators, sophisticated information technology and communication systems, ongoing monitoring and, where necessary, improvements to various components of the infrastructure, including with regard to security. Major electric power blackouts are possible, which could disrupt electrical service for extended periods of time to large geographic regions of the United States. If such a major blackout were to occur, BlueCo may be unable to deliver electricity to our customers in the affected region, which would have an adverse impact our financial results if we complete our proposed acquisition of BlueCo.

THE ADOPTION OF DERIVATIVES LEGISLATION BY CONGRESS WILL CONTINUE TO HAVE AN ADVERSE IMPACT ON BLUECO’S ABILITY TO HEDGE RISKS ASSOCIATED WITH ITS BUSINESS.

The Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Act”), enacted on July 21, 2010, established federal oversight and regulation of the over-the-counter derivatives market and entities, such as BlueCo, that participate in that market. Although BlueCo qualifies for the end-user exception to the mandatory clearing and uncleared swap margin requirements for swaps to hedge its commercial risks, the application of such requirements to other market participants, such as swap dealers, has changed the cost and availability of the swaps that BlueCo uses for hedging.

The full impact of the Act and related regulatory requirements upon BlueCo’s business will not be known until the regulations are implemented and the market for derivatives contracts has adjusted. The Act and any new regulations could significantly increase the cost of derivative transactions, materially alter the terms of derivative contracts, reduce the availability of derivatives to protect against risks that BlueCo encounters, or reduce its ability to monetize or restructure our existing derivative contracts. If BlueCo reduces its use of derivatives as a result of the Act and related regulations, BlueCo’s results of operations may become more volatile and its cash flows may be less predictable, which could adversely affect its ability to plan for and fund capital expenditures. If we complete our proposed acquisition of BlueCo, any of these consequences could have a material adverse effect our financial results.

WE INTEND TO GROW OUR BUSINESS IN PART THROUGH STRATEGIC ACQUISITION OPPORTUNITIES FROM THIRD PARTIES. IF WE ARE UNABLE TO MAKE ACQUISITIONS ON ECONOMICALLY ACCEPTABLE TERMS OR WE CANNOT CONSUMMATE ACQUISITIONS DUE TO CAPITAL CONSTRAINTS, OUR FUTURE GROWTH MAY BE LIMITED.

Our ability to grow depends in part on our ability to make acquisitions that are accretive to our Adjusted EBITDA. If we are unable to make accretive acquisitions, whether because we are (i) unable to identify attractive acquisition candidates or negotiate commercially acceptable terms for such acquisitions, (ii) unable to obtain financing for these acquisitions on economically feasible terms, or (iii) outbid by competitors, then our future growth may be limited to organic growth.

WE MAY NOT BE ABLE TO MANAGE OUR GROWTH SUCCESSFULLY, WHICH COULD STRAIN OUR LIQUIDITY AND OTHER RESOURCES AND LEAD TO POOR CUSTOMER SATISFACTION WITH OUR SERVICES.

The growth of our operations will depend upon our ability to expand our customer base in our existing markets and to enter new markets in a timely manner at reasonable costs. As we expand our operations, we may encounter difficulties implementing new product offerings or integrating new customers and employees as well as any legacy systems of acquired entities.

We may experience difficulty managing the growth of a portfolio of customers that is diverse with respect to the types of service offerings, applicable market rules and the infrastructure for product delivery. We also may experience difficulty integrating an acquired company’s personnel and operations, or key personnel of the acquired company may decide not to work for us. Furthermore, if we acquire the residential or commercial businesses of an incumbent local regulated utility or other energy provider in a particular market, the customers of that business may not be under any obligation to use our services. These difficulties could disrupt our ongoing business, distract our management and employees, increase our expenses and adversely affect our cash flows.

Expanding our operations could result in increased liquidity needs to support working capital for the purchase of natural gas and electricity supply to meet our customers’ needs, for the credit requirements of forward physical supply and for generally higher operating expenses. Expanding our operations also may require continued development of our operating and financial controls and may place additional stress on our management and operational resources. If we are unable to manage our growth and development successfully, this could affect our financial results.

OUR SUCCESS DEPENDS ON KEY MEMBERS OF OUR MANAGEMENT, THE LOSS OF WHOM COULD DISRUPT OUR BUSINESS OPERATIONS.

We depend on the continued employment and performance of key management personnel. A number of our senior executives have substantial experience in consumer and energy markets that have undergone regulatory restructuring and have extensive risk management and hedging expertise. We believe their experience is important to our continued success. We do not maintain key life insurance policies for our executive officers. If our key executives do not continue in their present roles and are not adequately replaced, our financial results could be adversely affected.

WE RELY ON A CAPABLE, WELL-TRAINED WORKFORCE TO OPERATE EFFECTIVELY. RETENTION OF EMPLOYEES WITH STRONG INDUSTRY OR OPERATIONAL KNOWLEDGE IS ESSENTIAL TO OUR ONGOING SUCCESS.

Many of the employee positions within our customer operations, energy supply, information systems, pricing, marketing, risk management and finance functions require extensive industry, operational, regulatory or financial experience or skills that may not be easily replaced if an employee were to leave employment with us. While some normal employee turnover is expected, high turnover could strain our ability to manage our ongoing operations as well as inhibit organic and acquisition growth.

BLUECO RELIES ON A THIRD PARTY VENDOR FOR ITS CUSTOMER BILLING AND TRANSACTIONS PLATFORM WHICH EXPOSES BLUECO TO THIRD PARTY PERFORMANCE RISK.

BlueCo has outsourced its back office customer billing and transactions functions to a third party, and it relies heavily on the continued performance of that vendor under the outsourcing agreement. Failure of BlueCo’s vendor to operate in accordance with the terms of the outsourcing agreement or the vendor’s bankruptcy or other event that prevents it from performing under its outsourcing agreement could have a material adverse effect on our financial results if we complete our proposed acquisition of BlueCo.

THE FAILURES OR QUESTIONABLE ACTIVITIES OF VARIOUS LOCAL REGULATED UTILITIES AND OTHER RETAIL MARKETERS WITHIN THE MARKETS THAT BLUECO SERVES ADVERSELY IMPACTS BLUECO.

A general positive perception on the part of customers and regulators of utilities and retail energy providers in general, and of BlueCo in particular, is essential for its continued growth and success. Questionable pricing, billing, collections, marketing or customer service practices on the part of any utility or retail marketer, or unsuccessful implementation of competitive energy programs can damage the reputation of all market participants, which could result in lower customer renewals and impact BlueCo’s ability to sign-on new customers. Any utility or retail marketer that defaults on its obligations to its customers, suppliers, lenders, hedge counterparties, or employees can have similar impacts on the retail energy industry as a whole and on BlueCo’s operations in particular. If we complete our proposed acquisition of BlueCo, any of these factors could affect our financial results.

THE SUPPLIERS FROM WHICH BLUECO PURCHASES ITS NATURAL GAS AND ELECTRICITY ARE SUBJECT TO ENVIRONMENTAL LAWS AND REGULATIONS THAT IMPOSE EXTENSIVE AND INCREASINGLY STRINGENT REQUIREMENTS ON THEIR OPERATIONS.

The assets of the suppliers from which BlueCo purchases natural gas and electricity are subject to numerous and significant federal, state and local laws, including statutes, regulations, guidelines, policies, directives and other requirements governing or relating to, among other things: protection of wildlife, including threatened and endangered species; air emissions; discharges into water; water use; the storage, handling, use, transportation and distribution of dangerous goods and hazardous, residual and other regulated materials, such as chemicals; the prevention of releases of hazardous materials into the environment; the prevention, presence and remediation of hazardous materials in soil and groundwater, both on and offsite; land use and zoning matters; and workers’ health and safety matters. Environmental laws and regulations have generally become more stringent over time. Significant costs may be incurred for capital expenditures under environmental programs to keep the assets compliant with such environmental laws and regulations, which could have a material adverse impact on the businesses of BlueCo’s producers, which may increase the prices they charge BlueCo for natural gas and electricity and, if we complete our proposed acquisition of BlueCo, have a material adverse effect on our financial results.

TECHNOLOGICAL IMPROVEMENTS AND CHANGING CONSUMER PREFERENCES COULD REDUCE DEMAND AND ALTER CONSUMPTION PATTERNS.

Technological improvements in energy efficiency could potentially reduce the overall demand for natural gas and electricity. Additionally, increased competitiveness of alternative energy sources or consumer preferences that alter fuel choices could potentially reduce the demand for natural gas and electricity. A prolonged decrease in demand for natural gas and electricity in the retail energy markets would adversely affect our financial results if we complete our proposed acquisition of BlueCo.

BLUECO EMPLOYS INDEPENDENT CONTRACTORS TO BROKER SALES FOR WHICH THEY RECEIVE RESIDUAL COMMISSIONS. THE RESIDUAL COMMISSIONS PAID TO INDEPENDENT CONTRACTORS COULD ADVERSELY AFFECT BLUECO’S OPERATING MARGINS AND FINANCIAL PERFORMANCE, PARTICULARLY IF ITS COSTS RISE AND BLUECO DOES NOT ADJUST ITS PRICING STRATEGY.

Some of BlueCo’s independent contractors earn ongoing residual commissions. Residual commissions are calculated based on a fixed percentage of revenues attributable to a customer’s energy consumption, without regard to BlueCo’s wholesale supply costs. Should BlueCo’s supply costs rise, and if we complete our proposed acquisition of BlueCo, our operating margins and financial results could be adversely affected.

BLUECO’S ACCESS TO MARKETING CHANNELS MAY BE CONTINGENT UPON THE VIABILITY OF ITS TELEMARKETING AND DOOR-TO-DOOR AGREEMENTS WITH ITS VENDORS.

BlueCo’s vendors are essential to its telemarketing and door-to-door sales activities. Its ability to increase revenues in the future will depend significantly on its access to high quality vendors. If BlueCo is unable to attract new vendors and retain existing vendors to achieve our marketing targets, its growth may be materially reduced. There can be no assurance that competitive conditions will allow these vendors and their independent contractors to continue to successfully sign up new customers. Further, if BlueCo’s products are not attractive to, or do not generate sufficient revenue for its vendors, BlueCo may lose its existing relationships, which would have a material adverse effect on our business, revenues, results of operations and financial condition if we complete our proposed acquisition of BlueCo. In addition, the decline in landlines reduces the number of potential customers that may be reached by BlueCo’s telemarketing efforts and as a result its telemarketing sales channel may become less viable.

BLUECO’S VENDORS MAY EXPOSE IT TO RISKS.

BlueCo is subject to reputational risks that may arise from the actions of its vendors and their independent contractors that are wholly or partially beyond its control, such as violations of its marketing policies and procedures as well as any failure to comply with applicable laws and regulations. If BlueCo’s vendors engage in marketing practices that are not in compliance with local laws and regulations, it may be in breach of applicable laws and regulations which may result in regulatory proceeding, disadvantageous conditioning of its energy retailer license, or the revocation of our energy retailer license. If we complete our proposed acquisition of BlueCo, these risks would materially impact our financial results.

Unauthorized activities in connection with sales efforts by agents of BlueCo’s vendors, including calling consumers in violation of the Telephone Consumer Protection Act and predatory door-to-door sales tactics and fraudulent misrepresentation could subject BlueCo to class action lawsuits against which the BlueCo will be required to defend. Such defense efforts will be costly and time consuming.

In addition, the independent contractors of BlueCo’s vendors may consider BlueCo to be their employer and seek compensation.

LITIGATION COULD ADVERSELY AFFECT OUR OPERATING RESULTS AND FINANCIAL CONDITION.

We may be involved in patent or trademark infringement litigation. Defending against potential litigation will likely require significant attention and resources and, regardless of the outcome, result in significant legal expenses, which could adversely affect our results unless covered by insurance or recovered from third parties. If our defenses are ultimately unsuccessful, or if we are unable to achieve a favorable resolution, we could be liable for damage awards that could materially adversely affect our results of operations and financial condition.

OUR BUSINESS MAY BE IMPAIRED BY CLAIMS THAT WE, OR OUR CUSTOMERS, INFRINGE INTELLECTUAL PROPERTY RIGHTS OF OTHERS.

Vigorous protection and pursuit of intellectual property rights characterize our industry. These traits have resulted in significant and often protracted and expensive litigation. Litigation to determine the validity of patents or claims by third parties of infringement of patents or other intellectual property rights could result in significant legal expense and divert the efforts of our technical personnel and management, even if the litigation results in a determination favorable to us. In the event of an adverse result in such litigation, we could be required to:

pay substantial damages;

indemnify our customers;

stop the manufacture, use and sale of products found to be infringing;

incur asset impairment charges;

discontinue the use of processes found to be infringing;

expend significant resources to develop non-infringing products and processes; and/or

obtain a license to use third party technology.

There can be no assurance that third parties will not attempt to assert infringement claims against us, or our customers, with respect to our products. In addition, our customers may face infringement claims directed to the customer’s products that incorporate our products, and an adverse result could impair the customer’s demand for our products. We may also promise certain of our customers that we will indemnify them in the event they are sued by our competitors for infringement claims directed to the products we supply. Under these indemnification obligations, we could be responsible for future payments to resolve infringement claims against them. From time to time we receive correspondence asserting that our products or processes are or may be infringing patents or other intellectual property rights of others. If we believe the assertions may have merit or in other appropriate circumstances, we will take appropriate steps to seek to obtain a license or to avoid the infringement. However, we cannot predict whether a license will be available; that we would find the terms of any license offered acceptable; or that we would be able to develop an alternative solution. Failure to obtain a necessary license or develop an alternative solution could cause us to incur substantial liabilities and costs and to suspend the manufacture of affected products.

In addition to patent protection, we also rely on trade secrets and other non-patented proprietary information relating to our product development and manufacturing activities. We try to protect this information through appropriate efforts to maintain its secrecy, including requiring employees and third parties to sign confidentiality agreements. We cannot be sure that these efforts will be successful or that the confidentiality agreements will not be breached. We also cannot be sure that we would have adequate remedies for any breach of such agreements or other misappropriation of our trade secrets, or that our trade secrets and proprietary know-how will not otherwise become known or be independently discovered by others.

CHANGES IN OUR EFFECTIVE TAX RATE MAY HAVE AN ADVERSE EFFECT ON OUR RESULTS OF OPERATIONS.

Our future effective tax rates may be adversely affected by a number of factors including:

changes in government administrations, such as the Presidency and Congress of the U.S. as well as in the states and countries in which we operate, including the highly predicted expiration of the so-called “Bush Tax Cuts;”

changes in tax laws or interpretation of such tax laws and changes in generally accepted accounting principles;

the jurisdiction in which profits are determined to be earned and taxed;

the resolution of issues arising from tax audits with various authorities;

changes in the valuation of our deferred tax assets and liabilities;

adjustments to estimated taxes upon finalization of various tax returns;

increases in expenses not deductible for tax purposes, including write-offs of acquired in-process research and development and impairment of goodwill in connection with acquisitions;

changes in available tax credits;

the recognition and measurement of uncertain tax positions;

the lack of sufficient excess tax benefits (credits) in our additional paid in capital (“APIC”) pool in situations where our realized tax deductions for certain stock-based compensation awards (such as non-qualified stock options and restricted stock) are less than those originally anticipated; and

the repatriation of non-U. S. earnings for which we have not previously provided for U.S. taxes, or any changes in legislation that may result in these earnings being taxed within the U.S., regardless of our decision regarding repatriation of funds.

For example, current proposals have been made by various U.S. governmental bodies to change the U.S. tax laws that include, among other things, limiting U.S. tax deductions for expenses related to un-repatriated foreign-source income and modifying the U.S. foreign tax credit rules. Although the scope of the proposed changes is unclear, it is possible that these or other changes in U.S. tax laws could increase our income tax liability and adversely affect our profitability. At this time, we cannot determine the timing that the proposed changes, if enacted, are to become effective.

Any significant increase in our future effective tax rates could adversely impact net income for future periods. In addition, the determination of our income tax provision requires complex estimations, significant judgments and significant knowledge and experience concerning the applicable tax laws. To the extent our income tax liability materially differs from our income tax provisions and accruals due to factors, including the above, which were not anticipated at the time we estimated our tax provision, our net income or cash flows could be adversely affected.

IN ORDER TO COMPETE, WE MUST ATTRACT, MOTIVATE AND RETAIN KEY EMPLOYEES, AND OUR FAILURE TO DO SO COULD HARM OUR RESULTS OF OPERATIONS.

In order to compete, we must attract, motivate and retain executives and other key employees, including those in managerial, technical, sales, marketing and support positions. Hiring and retaining qualified executives, scientists, engineers, technical staff and sales personnel are critical to our business, and competition for experienced employees in our industry can be intense. To help attract, motivate and retain key employees, we may use stock-based compensation awards such as non-qualified stock options and restricted stock. If the value of such stock awards does not appreciate, as measured by the performance of the price of our common stock, or if our share-based compensation otherwise ceases to be viewed as a valuable benefit, our ability to attract, retain and motivate employees could be weakened, which could harm our business and results of operations.

OUR OPERATIONS IN FOREIGN COUNTRIES, INCLUDING CHINA AND OTHER ASIAN COUNTRIES, EXPOSE US TO CERTAIN RISKS INHERENT IN DOING BUSINESS INTERNATIONALLY, WHICH MAY ADVERSELY AFFECT OUR BUSINESS, RESULTS OF OPERATIONS OR FINANCIAL CONDITION.

As a result of our operations, manufacturing facilities and subcontract arrangements in foreign countries that expose us to certain risks. For example, fluctuations in exchange rates may affect our revenues, expenses and results of operations as well as the value of our assets and liabilities as reflected in our financial statements. We are also subject to other types of risks, including the following:

protection of intellectual property and trade secrets;

tariffs and other barriers;

timing and availability of export licenses;

rising labor costs;

disruptions in the infrastructure of the foreign countries where we operate;

difficulties in accounts receivable collections;

difficulties in staffing and managing international operations;

the burden of complying with foreign and international laws and treaties; and

the burden of complying with and changes in international taxation policies.

In addition, abrupt political change, terrorist activity and armed conflict pose a risk of general economic disruption in affected countries, which could result in an adverse effect on our business and results of operations.

OUR RESULTS OF OPERATIONS COULD VARY AS A RESULT OF THE METHODS, ESTIMATES AND JUDGMENTS THAT WE USE IN APPLYING OUR ACCOUNTING POLICIES, INCLUDING CHANGES IN THE ACCOUNTING REGULATIONS TO BE APPLIED.

The methods, estimates and judgments that we use in applying our accounting policies have a significant impact on our results of operations. Such methods, estimates and judgments are, by their nature, subject to substantial risks, uncertainties and assumptions, and factors may arise over time that lead us to change our methods, estimates and judgments. Changes in those methods, estimates and judgments could significantly affect our results of operations.

Likewise, our results of operations may be impacted due to changes in the accounting rules to be applied, such as the increased use of fair value measurement rules and the potential requirement that U.S. registrants prepare financial statements in accordance with International Financial Reporting Standards.

WE INCUR INCREASED COSTS AS A RESULT OF BEING A PUBLIC COMPANY.

As a publicly-traded company, we are required to comply with laws, regulations and requirements, including corporate governance provisions of the Sarbanes-Oxley Act of 2002 and rules and regulations of the SEC. Additional or new regulatory requirements may be adopted in the future. The requirements of existing and potential future rules and regulations increase our legal, accounting and financial compliance costs, make some activities more difficult, time-consuming or costly and may also place undue strain on our personnel, systems and resources, which could adversely affect our business, financial condition.

AS A RESULT OF BECOMING A PUBLIC COMPANY, WE ARE OBLIGATED TO DESIGN AND OPERATE PROPER AND EFFECTIVE INTERNAL CONTROL OVER FINANCIAL REPORTING AND TO REPORT OUR FINANCIAL RESULTS IN A TIMELY FASHION. IF OUR INTERNAL CONTROL OVER FINANCIAL REPORTING IS DETERMINED TO BE INEFFECTIVE OR WE FAIL TO MEET FINANCIAL REPORTING DEADLINES, INVESTOR CONFIDENCE IN OUR COMPANY, AND OUR COMMON STOCK PRICE, MAY BE ADVERSELY AFFECTED.

We are required to comply with certain of the SEC’s rules that implement Section 404 of the Sarbanes-Oxley Act which require management to certify financial and other information in our quarterly and annual reports and provide an annual management report on the effectiveness of our internal control over financial reporting commencing with our second annual report. This assessment will need to include the disclosure of any material weakness in internal control over financial reporting identified by our management and our independent registered public accounting firm. A “material weakness” is a deficiency, or 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. Also, prior to our initial public offering, we were not previously required to prepare quarterly financial statements, nor were we required to generate financial statements in the time frames mandated for public companies by the Commission’s reporting requirements.

Our independent registered public accounting firm will not be required to formally attest to the effectiveness of our internal control over financial reporting until the end of the fiscal year after we are no longer an “emerging growth company” under the JOBS Act, which may be for up to five fiscal years after the completion of our initial public offering.

RISK FACTORS RELATED TO OUR COMMON STOCK

There is no liquid market for our common stock. Our shares are traded Over the Counter and the trading volume has historically been very low. An active trading market for our shares may not develop or be sustained. We cannot predict at this time how actively our shares will trade in the public market or whether the price of our shares in the public market will reflect our actual financial performance.

OUR COMMON STOCK PRICE HAS FLUCTUATED CONSIDERABLY AND STOCKHOLDERS MAY NOT BE ABLE RESELL THEIR SHARES AT OR ABOVE THE PRICE AT WHICH SHARES WERE PURCHASED.

The market price of our common stock may fluctuate significantly. In recent years, our share price has fluctuated in response to various factors. Speculation in the press or investment community about our strategic position, financial condition, results of operations, or significant transactions can also cause changes in our stock price. In particular, speculation around our market opportunities for energy efficient lighting may have dramatic effects on our stock price, especially as various government agencies announce their planned investments in energy efficient technology, including lighting.

OUR COMMON STOCK MAY BE CONSIDERED A “PENNY STOCK” AND MAY BE DIFFICULT TO SELL.

The SEC has adopted regulations which generally define “penny stock” to be an equity security that has a market price of less than $5.00 per share or an exercise price of less than $5.00 per share, subject to specific exemptions. The market price of our common stock has been for much of its trading history since July 2007, and may continue to be less than $5.00 per share, and, therefore, may be designated as a “penny stock” according to SEC rules. This designation requires any broker or dealer selling these securities to disclose certain information concerning the transaction, obtain a written agreement from the purchaser and determine that the purchaser is reasonably suitable to purchase the securities. These rules may restrict the ability of brokers or dealers to sell our common stock and may affect the ability of investors to sell their shares.

COMPLIANCE AND CHANGING REGULATIONS AND PUBLIC DISCLOSURE MAY RESULT IN ADDITIONAL EXPENSE.

Changing laws, regulations and standards relating to corporate governance and public disclosure may create uncertainty regarding compliance matters. New or changed laws, regulations and standards are subject to varying interpretations in many cases. As a result, their application in practice may evolve over time. We are committed to maintaining high standards of corporate governance and public disclosure. Complying with evolving interpretations of new or changed legal requirements may cause us to incur higher costs as we revise current practices, policies and procedures, and may divert management time and attention from the achievement of revenue generating activities to compliance activities. If our efforts to comply with new or changed laws, regulations and standards differ from the activities intended by regulatory or governing bodies due to uncertainties related to practice, our reputation might be harmed which would could have a significant impact on our stock price and our business. In addition, the ongoing maintenance of these procedures to be in compliance with these laws, regulations and standards could result in significant increase in costs.

OUR CHIEF EXECUTIVE OFFICER HAS SIGNIFICANT VOTING POWER AND MAY TAKE ACTIONS THAT MAY NOT BE IN THE BEST INTERESTS OF ALL OTHER STOCKHOLDERS.

The Company’s chief executive officer is Isaac H. Sutton. If we complete our proposed acquisition of BlueCo from GoCOM Corporation, a company controlled by Mr. Sutton, Mr. Sutton will beneficially own approximately 52% of the voting power of our shareholders. Mr. Sutton, our Director and President, also beneficially owns Sutton Global Associates, Inc. He may be able to exert significant control over our management and affairs requiring stockholder approval, including approval of significant corporate transactions. This concentration of ownership may expedite approvals of our decisions, or have the effect of delaying or preventing a change in control, adversely affect the market price of our common stock, or be in the best interests of all our stockholders.

YOU COULD BE DILUTED FROM THE ISSUANCE OF ADDITIONAL COMMON STOCK.

As of September 15, 2015, there were 24,325,741 shares of our common stock issued and outstanding and no shares of preferred stock outstanding. We have received Board and stockholder approval to increase our authorized capital stock to 150,000,000 shares of common stock and 10,000,000 shares of preferred stock. To the extent of such authorization, our Board of Directors will have the ability, without seeking stockholder approval, to issue additional shares of common stock or preferred stock in the future for such consideration as the Board of Directors may consider sufficient. The issuance of additional common stock or preferred stock in the future may reduce your proportionate ownership and voting power.

ITEM 1B.

UNRESOLVED STAFF COMMENTS

Not Applicable.

ITEM 2.

DESCRIPTION OF PROPERTY

~~Changzhou~~We are ~~Huayue~~currently ~~produces~~occupying ~~both~~shared ~~its~~office ~~induction~~space ~~lamps~~for ~~and~~$2,000 ~~electrolytic~~per ~~capacitors~~month aton a ~~facility~~month into ~~Changzhou~~month ~~City~~arrangement. ~~This~~ ~~factory~~The ~~has~~office ais ~~production~~located ~~base~~at of475 15Park Avenue South,~~000~~ ~~square~~30th ~~meters~~Floor, ~~and~~New isYork, ~~owned~~NY ~~by the Company~~10016.

We expect that our current facilities will be adequate for our operations for the foreseeable future.

ITEM 3.

LEGAL PROCEEDINGS

None.

ITEM 4.

MINE SAFETY DISCLOSURES

Not Applicable.

PART II

ITEM 5.

MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.

(a) Market Information. Our common stock is currently traded on the over-the-counter market under the symbol “HUAY.” The following table sets forth for the respective periods the high and low bid prices of our common stock. Such prices are based on inter-dealer bid and asked prices, without markup, markdown, commissions, or adjustments and may not represent actual transactions.

Our common stock is currently listed for quotation on the OTCQB Market under the symbol “HUAY.” The following table sets forth for the respective periods indicated the prices of the common stock, as reported by the OTCQB Market. Such prices are based on inter-dealer bid and asked prices, without markup, markdown, commissions, or adjustments and may not represent actual transactions.

	Bid
Quarter Ending	High		Low
August 31, 2013	$	3.00	$	2.70
November 30, 2013	$	2.70	$	2.70
February 28, 2014	$	2.70	$	2.70
May 31, 2014	$	2.00	$	1.75

August 31, 2014	$	3.80	$	2.00
November 30, 2014	$	3.30	$	1.25
February 28, 2015	$	2.20	$	0.76
May 31, 2015	$	0.90	$	0.55

	Bid
Quarter Ending	High		Low
August 31, 2012	$	2.80	$	1.25
November 30, 2012	$	3.01	$	2.80
February 28, 2013	$	3.15	$	2.00
May 31, 2013	$	3.00	$	.70
August 31, 2013	$	3.00	$	2.70
November 30, 2013	$	2.70	$	2.70
February 28, 2014	$	2.70	$	2.70
May 31, 2014	$	2.00	$	1.75

(b) Shareholders. On September 15, 2015, there were 449 holders of record of our common stock.

(bc) Dividends. Since ~~Shareholders~~our incorporation, no dividends have been paid on our common stock. We intend to retain any earnings for use in our business activities, so it is not expected that any dividends on our common stock will be declared and paid in the foreseeable future.

On(d) Securities Authorized ~~September~~for ~~14,~~Issuance ~~2014,~~Under ~~there~~Equity ~~were~~Compensation ~~approximately~~Plans. ~~439~~The ~~holders~~information ofset ~~record~~forth in the table below regarding equity compensation plans (which include individual compensation arrangements) was determined as of ~~our~~May ~~common~~31, ~~stock~~2015.

	Number of securities to be issued upon exercise of outstanding options, warrants and rights		Weighted average exercise price of outstanding options, warrants and rights	Number of securities remaining available for future issuance under equity compensation plans

Equity compensation plans approved by security holders		0	N.A.		0

Equity compensation plans not approved by security holders		0	N.A.		0

Total		0	N.A.		0

~~Since~~(e) Sale of ~~the~~Unregistered ~~Company’s incorporation, no dividends have been paid on our Common Stock~~Securities. We ~~intend~~did tonot ~~retain~~effect any ~~earnings~~unregistered ~~for~~sales ~~use~~of inequity ~~our~~securities ~~business~~during ~~activities,~~the sofourth itquarter isof ~~not~~the fiscal ~~expected~~year ~~that~~ended ~~any~~May ~~dividends~~31, ~~on our common stock will be declared and paid in the foreseeable future~~2015.

1728

(df) Repurchase of Equity Securities. ~~Authorized~~We ~~for~~did ~~Issuance~~not ~~Under~~repurchase ~~Equity~~any ~~Compensation~~of ~~Plans~~our equity securities that were registered under Section 12 of the Securities Act during the fourth quarter of the fiscal year ended May 31, 2015.

The information set forth in the table below regarding equity compensation plans (which include individual compensation arrangements) was determined as of May 31, 2014.

	Number of securities to be issued upon exercise of outstanding options, warrants and rights		Weighted average exercise price of outstanding options, warrants and rights	Number of securities remaining available for future is suance under equity compensation plans
Equity compensation plans approved by security holders		0	N.A.		0
Equity compensation plans not approved by security holders		0	N.A.		0
Total.		0	N.A.		0

(e) Sale of Unregistered Securities

Huayue Electronics did not effect any unregistered sales of equity securities during the fourth quarter of the fiscal year ended May 31, 2014.

(f) Repurchase of Equity Securities

Huayue Electronics, Inc. did not repurchase any of its equity securities that were registered under Section 12 of the Securities Act during the fourth quarter of the fiscal year ended May 31, 2014.

ITEM 6.

SELECTED FINANCIAL DATA

Not ~~applicable~~required for smaller reporting companies.

ITEM 7.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS

Results of Operations

~~The~~In ~~following~~May ~~data~~2015, iswe approved ~~derived~~plans ~~from~~to ~~the~~dispose ~~Company’s~~of ~~Consolidated~~our ~~Statements~~wholly-owned subsidiary, China Metal Holdings, Inc. The results of ~~Income~~China ~~and~~Metal ~~Comprehensive~~are ~~Income~~presented as Net income from discontinued operations in our consolidated statements of income for the years ended May 31, 2015 and 2014. Refer to Note 2 in the notes to the consolidated financial statements for a breakdown of major income and ~~2013:~~expense items of the discontinued entity.

18We did not have any sales for the years ended May 31, 2015 and May 31, 2014. During the year ended May 31, 2015 and 2014, the continuing entity incurred $48,750 and $0, respectively, in operating expenses. The increase in fiscal year 2015 pertains to professional fees and the salary of our newly appointed chief executive officer.

	For The Years Ended May 31,
	2014			2013			Change			Percentage Change
Net sales	$	12,239,726		$	14,326,370			(2,086,644	)		-15	%
Cost of goods sold		6,568,911			8,785,610			(2,216,699	)		-25	%
Gross profit		5,670,815			5,540,760			130,055			2	%
Gross Profit Margin %		46	%		39	%		8	%
Selling expenses		58,037			36,660			21,377			58	%
General and administrative expenses		1,500,862			717,292			783,570			109	%
Income from operations		4,111,916			4,786,808			(674,892	)		-14	%
Interest income (expense)		(112,951	)		(263,670	)		150,719			-57	%
Other income (expenses)		249,778			83,619			166,159			199	%
Income before income taxes		4,248,743			4,606,757			(358,014	)		-8	%
Income taxes		(637,311	)		(849,473	)		212,162			-25	%
Net income	$	3,611,432		$	3,757,284			(145,852	)		-4	%
Basic and diluted earning per common share	$	0.12		$	0.12			-			0	%

Net loss from continuing operations for the years ended May 31, 2015 and 2014 was $48,750 and $0, respectively.

Sales

Since 2009 the Company’s operations have gradually refocused from an exclusive involvement in the manufacture and sale of electrolytic capacitors to a primary focus on the sale of energy efficient lighting products. The continuation of this refocusing during fiscal year 2014 is demonstrated in the following comparison of sales by product for year ended May 31, 2014 and the year ended May 31, 2013:

	For The Years Ended May 31,
Product Category	2014		% of total sales of 2014			2013		% of total sales of 2013			Change			Percentage Change
Electrolytic capacitors	$	1,558,383		13	%	$	3,915,661		27	%		(2,357,278	)		-60	%
Induction lighting
Sales from products only		8,305,359		68	%		4,376,041		31	%		3,929,318			90	%
Sales from products with installation		-		0	%		6,034,668		42	%		(6,034,668	)		-100	%
Sales from energy management contracts		2,375,984		19	%		-		0	%		2,375,984			100	%
Total	$	12,239,726		100	%	$	14,326,370		100	%		(2,086,644	)		-15	%

As the table indicates, our traditional capacitor business decreased 60% in revenue. At the same time, however, our energy efficient lighting business recorded a 3% increase in fiscal 2014 compared to fiscal 2013. The primary causes of the increase were:

·	Late in fiscal 2012 we introduced our line of LED products, which expanded our target market from the government/commercial market we target with induction lighting to include the retail and home office market for which LED lighting is most appropriate. In fiscal 2014, LED products produced most of our lighting revenues.
·	In the middle of fiscal 2012, we changed our distribution strategy, moving from direct sales to the development of regional sales agents. The use of sales agents to market our products has yielded consecutive and steady progress.

At the same time, however, changes in the nature of our sales structure have slowed the pace of growth of our lighting business. During fiscal 2013, we offered installation service to commercial customers when they purchased lighting from us. The revenue from these sales and installation packages were attributable to three major customers, who accounted for more than 42% of our total sales in fiscal year 2013. However, we did not generate revenue from similar business in fiscal year 2014. Instead, in 2014 our focus has been on marketing of energy management contracts ("EMC"). During fiscal 2014, we received revenue of $2.38 million from EMCs. We expect more revenue will be generated from EMC contracts in the future. However, the revenue that we realize from EMCs is spread over the life of the contract. Therefore EMC sales do not grow revenue as rapidly as product and installation sales that dominated our business in fiscal 2013.

We expect our lighting sales to continue to grow in fiscal 2015 and beyond. The principal factors that will contribute to the future growth of lighting sales will be:

· Our domestic distribution network continues to grow, particularly for the sale of LED lights, a massive market that we have only recently begun to penetrate. · We are in the final stages of securing an international distribution network and the governmental approvals necessary for international sales. We expect international sales to yield a significant portion of our revenue in fiscal 2015. · A small but growing portion of our lighting sales are now made in connection with an energy management contract (“EMC”). The EMC extends the payment term for the sale over the period when energy savings will allow the customer to recoup the cost of the lighting. The EMC, therefore, delays our revenue recognition, but allows us to demand very high margins on EMC sales. We have entered into a number of EMC contracts during fiscal 2014, and we expect more EMC will be signed in future periods. · Our engineers continue to enhance our existing products and develop new lighting products, each of which opens a new submarket for us.

Gross Profit

The profitability of our sales increased significantly in fiscal 2014, during which we achieved a gross margin of 46% compared to 39% gross margin recorded in fiscal 2013. The primary reason for the increase was that in fiscal 2014, our new EMC program yielded a relatively high gross margin, up to 82% on some contracts, as customers are willing to pay higher prices for lighting when assured that the cost will be offset by energy savings. Since 19% of total revenue was attributable to EMC sales during the fiscal year 2014, the high profitability of EMC sales pushed our overall gross margins higher comparing to fiscal year 2013.

Gross profit for the year ended May 31, 2014 is $5.67 million, comparing to $5.54 million recorded in fiscal year 2013.

Operating Expenses

Total operating expenses for the fiscal year ended May 31, 2014 were $1,558,899, an increase of $804,947 or 107%, from $753,952 recorded in fiscal year ended May 31, 2013. The primary reason for the increase was an allowance of $761,933 that we recorded in fiscal 2014 for bad debt expense related to accounts receivable and advance to vendors. Among the methods that the Company utilized to evaluate the collectability of its receivables is an aging schedule. Provision for doubtful accounts was increased in fiscal 2014 comparing to fiscal 2013 for both accounts receivable and advances to suppliers due to the increased balance of accounts receivable and advances aged over one year.

General and administrative expenses will continue to increase in the coming year, as we assume the obligations attendant to being a U.S. public company, including legal and accounting expenses and other expenses related to the nurturing of our new shareholder base.

Net Income

As a result of our significant increase of G&A expenses, our income from operations decreased from $4,786,808 in the fiscal year ended May 31, 2013 to $4,111,916 in the fiscal year ended May 31, 2014.

Until recently, the expansion of our business was funded primarily by short-term loans. As discussed in “Liquidity and Capital Resources” below, our cash flow has in most years been slowed by the relatively lengthy period required to collect many of our receivables. To fill the gaps in our cash flow, we required debt financing. Interest expense, therefore, has historically represented a significant reduction in our net income. As of May 31, 2014, however, we have short term loans of $2,960,474 comparing to the total of short term loans and bank notes of $4,687,626 as of May 31, 2013. As a result, our interest expense for the fiscal year ended May 31, 2014 was $187,298 compared to interest expense of $258,392 in fiscal 2013.

Although the corporate income tax rate in China is 25%, through November 2014 our Chinese subsidiary will be the beneficiary of a 15% tax rate afforded to high-tech companies in their growth stage. For that reason, our income tax burden for the fiscal year ended May 31, 2014 was $637,311, resulting in net income of $3,611,432 ($.12 per share), compared to net income of $3,757,284 ($.12 per share) recorded in fiscal 2013.

Our business operates primarily in Chinese Renminbi (“RMB”), but we report our results in our SEC filings in U.S. Dollars. The conversion of our accounts from RMB to Dollars will result in translation adjustments. While our net income will be added to the retained earnings on our balance sheet, the translation adjustments will be added to a line item labeled “accumulated other comprehensive income,” since they will be more reflective of changes in the relative values of U.S. and PRC currencies than the success of our business. Due to the deprecation of U.S. Dollars against RMB, an “other comprehensive loss” of $183,993 was recorded during fiscal 2014 compared to an “other comprehensive income” of $209,066 during fiscal 2013.

Liquidity and Capital Resources

~~Until~~We ~~recently~~have ~~the~~presented cash ~~operations~~flows ~~of the Company had been funded by contributions and short-term loans~~ from ~~our founder~~operating, ~~Mr. Shudong Pan~~investing, and ~~his~~financing ~~family. In~~activities ~~recent~~from ~~periods,~~discontinued ~~however,~~operations weon ~~have~~the ~~developed~~consolidated ~~bank~~statements ~~lending relationships, which are now our primary source~~ of ~~liquidity. Today,~~cash flows ~~our~~for current liabilities are in large part made up of short term debt payable to Chinese banks. Most of these debts have been guaranteed by related entities or secured by property owned by related parties. The proceeds of these loans have been utilized primarily to finance the ~~development~~years ofended ~~our~~May ~~lighting~~31, ~~business~~2015 and ~~the expanded sales effort for the new LED lighting products~~2014.

21At May 31, 2015 and May 31, 2014, we did not have any cash in our continuing operations. We did not have any cash flows from operating, investing, and financing activities for the years then ended.

As of May 31, 2014, short-term loans accounted for 29% of the current liabilities, compared to short-term loans and notes accounted for 63% of current liabilities as of May 31, 2013. The balance has decreased to $2,960,474 as of May 31, 2014 compared to $4,687,626 at May 31, 2013.

As is common in China, all of our bank borrowing is done on a short-term basis. As a result, the entire amount of $2,960,474 that we owed to lending institutions at May 31, 2014 has been classified as short-term debt, although we have every reason to believe that the institutions will replace the loans as they come due.

The largest component of our current assets is our accounts receivable. Accounts receivable of $5,753,108 as of May 31, 2014 is largely relative to recent revenue. In our efforts to achieve a substantial beachhead in the induction lighting market, after we are assured that the customer has the capability and intent to make payment, we offer our customers relatively generous payment terms. Our standard payment terms are 90 days after delivery. However, for particularly attractive customers, with strong credit histories, we apply a variety of payment practices:

· While the Company’s standard payment policy is 90 days, in many cases the Company has offered customers payment terms beyond 90 days.

· The Company recognizes that Chinese government bureaucracies often pay for construction only when an entire project is complete and has been inspected. The Company, therefore, has special payment terms that it often provides to government contractors, in which payment is due 90 days after the actual installation of the lighting products on the jobsite.

Our generous payment terms reduce our liquidity to some extent. The practice is harmful to our cash flow, particularly in light of the requirement that we prepay many of our vendors for raw materials and components, as discussed below. The practice can also be damaging to our operating results. For example, an increase of $641,390 in our allowance for bad debts was recorded during fiscal 2014. But our generous payment terms do help us develop long-term, repeat customers.

The other large non-cash component of our current assets was our advances to supplies. In China, to secure a guaranteed supply of raw materials and components, it is common practice to make prepayments to your principal suppliers, often to the extent of several months’ requirements. In addition, rather than providing Changzhou Huayue with a line of credit, the Company’s banks pay Changzhou Huayue’s vendors directly, which makes prepayment for raw materials and components a method of assuring that credit is available when needed. As of May 31, 2014, we have a balance of advance to vendors of $288,183.

Our new EMC program produced another large non-cash component of current assets, as well as a significant other asset. When we sign an electricity management contract with a customer and deliver and install the purchased lighting, we recognize revenue in our statements of income over the life of the contract - generally one to two years, although EMCs may extend up to five years. The present value of the lease payments, net of costs, is recorded on our balance sheets as an “investment in sales type lease.” At May 31, 2014, we had $2,184,168 in assets from EMC, allocated between current and non-current assets of $1,000,168 and $1,184,000, respectively.

During fiscal 2014, cash provided from operating activities was $5,770,579 compared to cash used in operating activities of $3,942,313 for the fiscal 2013. Cash flow increased despite the reduction in net income due primarily to a $2.6 million increase in our accounts payable and accrued expenses, a $1.0 million increase in our taxes payable, and the fact that our net income in the recent period was reduced by a non-cash provision for doubtful accounts totaling $781,796.

Cash used in investing activities was $5,560,286 during fiscal 2014 compared to $7,542,932 during fiscal 2013. In both cases the cash was used to purchase and equip our new factory for lighting production

Cash used in financing activities was $130,508 during fiscal 2014, as we used the proceeds from bank loans and related party loans to satisfy other bank loans and notes. During fiscal year 2013, our financing activities provided $3,721,932 in cash, as our principal shareholders made a $3 million capital contribution and purchased shares for an additional $3.2 million, which allowed us to reduce our short term bank loans by $4.0 million.

We believe our liquid assets and cash flow will be adequate to fund our working capital needs for the next twelve months. We are actively seeking for equity financing in US capital market to further expand our business, but have received no commitments for such financing at this time. If we are forced to finance our capital needs through the issuance of debt or long term borrowing, the interest rates we pay and our interest cost of financing would increase.

Critical Accounting Policies and Estimates

InOur ~~preparing~~significant accounting ~~our~~policies ~~financial statements we~~ are ~~required~~fully todescribed ~~formulate~~in ~~working~~Note ~~policies~~4 ~~regarding valuation of our assets and liabilities and~~ to ~~develop estimates of those values. In~~ our ~~preparation~~consolidated ~~of the~~ financial statements for the fiscal year ended May 31, ~~2014,~~2015 contained ~~there were two estimates made which were (a) subject to a high degree of uncertainty and (b) material to our results~~herein. ~~These were:~~

·	The determination, recorded Note 3 to our Financial Statements, to make an increase of $641,390 and $120,543 in our allowance for bad debt on Accounts Receivable and Advance to Suppliers, respectively.
·	The determination, noted in Note 4 to our Financial Statements, that no allowance for impairment of inventory value was warranted at May 31, 2014. The determination was based on our review of the turnover in inventory and the likelihood of realization of the value of the inventory.

Impact of Accounting Pronouncements

~~There~~In ~~were~~April no2014, the ~~recent~~FASB ~~accounting~~issued ~~pronouncements~~authoritative guidance, which specifies that ~~have~~only ~~had~~disposals, such as a ~~material~~disposal ~~effect~~of ona major line of business, representing a strategic shift in operations should be presented as discontinued operations. In addition, the ~~Company’s~~new guidance requires expanded disclosures about discontinued operations that will provide financial ~~position~~statement orusers ~~results~~with more information about the assets, liabilities, income, and expenses of discontinued operations. We have adopted the guidance as described in Note 2 in the notes to the consolidated financial statements.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition or results of operations.

ITEM 7A . QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Not Applicable.

2329

ITEM 8.

FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

Index to the Consolidated Financial Statements

Page

Page

F-1-F-2	Report of Independent Registered Public Accounting Firms

F-3	Consolidated Balance Sheets as of May 31, 2015 and 2014.

F-4	Consolidated Statements of Income for the Years Ended May 31, 2015 and 2015.

F-5	Consolidated Statements of Changes in Stockholders’ Equity for the Years Ended May 31, 2015 and 2014.

F-6	Consolidated Statements of Cash Flows for the Years Ended May 31, 2015 and 2014.

F-7 to F-13	Notes to Consolidated Financial Statements.

F-1	Report of Independent Registered Public Accounting Firm - 2014.
F-2	Report of Independent Registered Public Accounting Firm - 2013.
F-3	Consolidated Balance Sheets as of May 31, 2014 and 2013.
F-4	Consolidated Statements of Income and Comprehensive Income for the Years Ended May 31, 2014 and 2013.
F-5	Consolidated Statements of Stockholders’ Equity for the Years Ended May 31, 2014 and 2013.
F-6	Consolidated Statements of Cash Flows for the Years Ended May 31, 2014 and 2013.
F-7 to F-16	Notes to Consolidated Financial Statements.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of:

Huayue Electronics, Inc.

We have audited the accompanying consolidated balance sheet of Huayue Electronics, Inc. (the “Company”) as of May 31, 2014, and the related consolidated statements of income and comprehensive income, stockholders’ equity, and cash flows for the fiscal year then ended. The ~~Company~~C ompany’s management is responsible for these consolidated financial statements. Our responsibility is to express an opinion on these consolidated financial statements based on our audit.

We conducted our audit in accordance with 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 consolidated financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit 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. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation. We believe that our audit provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Huayue Electronics, Inc. as of May 31, 2014, and the consolidated results of their operations and their cash flows for the fiscal year then ended in conformity with accounting principles generally accepted in the United States of America.

/s/ KCCW Accountancy Corp.

Diamond Bar, California

September 15, 2014 (January 7, 2015 as to the effects of the restatement discussed in Note 3)

FHuayue -Electronics 1Inc.

~~REPORT~~Consolidated OFBalance ~~INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM~~Sheets

To(In ~~the~~US ~~Board of Directors and~~Dollars)

Stockholders of Huayue Electronics Inc

Assets
Current Assets:	May 31, 2015			May 31, 2014
				(Restated)
Assets from discontinued operations (Note 2)	$	8,703,090		$	9,890,531
Total Current Assets		8,703,090			9,890,531
Assets from discontinued operations (Note 2)		4,161,668			13,959,482
Total Assets		12,864,758			23,850,013

Liabilities and Stockholders' Equity
Current Liabilities:
Accounts payable and accrued expenses	$	48,750		$	–
Liabilities from discontinued operations (Note 2)		11,928,595			10,038,813
Total Current Liabilities		11,977,345			10,038,813
Liabilities from discontinued operations (Note 2)		337,590			164,487
Total Liabilities		12,314,935			10,203,300

Stockholders' Equity:

Common stock, $0.001 par value, 60,000,000 shares authorized; 34,325,241 and 31,325,241 shares issued and outstanding at May 31, 2015 and 2014, respectively		34,325			31,325
Additional paid-in capital		6,866,355			6,866,355
Accumulated other comprehensive income		–			139,612
Retained earnings (deficit)		(6,350,857	)		6,609,421
Total Stockholders' Equity		549,823			13,646,713
Total Liabilities and Stockholders' Equity	$	12,864,758		$	23,850,013

WeSee ~~have audited the~~ accompanying ~~consolidated~~notes ~~balance~~to ~~sheet of Huayue Electronics Inc. as of May 31 2013, and the related~~ consolidated ~~statements of income and comprehensive income, stockholders’ equity, and cash flows for year ended May 31, 2013. Huayue Electronics Inc.’s management is responsible for these~~ financial statements~~. Our responsibility is to express an opinion on these financial statements based on our audit.~~

We conducted our audit 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. The company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit 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. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.F-3

~~In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of~~ Huayue Electronics Inc. ~~as of May 31 2013, and the results of its operations and its cash flows for the year ended May 31, 2013 in conformity with accounting principles generally accepted in the United States of America.~~

~~/s/~~Consolidated ~~Friedman~~Statements ~~LLP~~of Income and Comprehensive Income

~~Friedman~~(In ~~LLP~~US Dollars)

New York, NY

	For the Fiscal Years Ended
	May 31, 2015			May 31, 2014
				(Restated)
Net sales	$	–		$	–
Cost of goods sold		–			–
Gross profit		–			–
Operating expenses:
Professional fees		18,750			–
General and administrative		30,000			–
Total operating expenses		48,750			–
Loss from operations		(48,750	)		–

Income tax provision		–			–
Net loss from continuing operations		(48,750	)		–

Net (loss) income from discontinued operations, net of taxes (Note 2)		(13,048,140	)		2,291,071

Net (loss) income	$	(13,096,890	)	$	2,291,071

Foreign currency translation loss		–			(158,828	)

Net comprehensive (loss) income		(13,096,890	)		2,132,243

Basic and diluted (loss) income from continuing operations	$	(0.00	)	$	–
Basic and diluted (loss) income from discontinued operations	$	(0.41	)	$	0.07
Basic and diluted (loss) income per share	$	(0.41	)	$	0.07

Weighted average number of common shares		31,637,570			31,325,241

~~August~~See ~~28,~~accompanying ~~2013~~notes to consolidated financial statements

F - 24

Huayue Electronics Inc
Consolidated Balance Sheets
(In US Dollars)
	May 31,		May 31,
	2014		2013
ASSETS
CURRENT ASSETS
Cash	$	344,636	$	269,065
Restricted cash		-		969,854
Accounts receivable, net		5,753,108		8,399,472
Other receivables		1,662,856		71,047
Inventory, net		1,972,209		940,328
Advances to suppliers		288,183		258,832
Investment in sales-type lease-current		1,000,168		-
Deferred tax assets		164,567		39,159
Total current assets		11,185,727		10,947,757
PROPERTY AND EQUIPMENT, net		12,740,996		8,001,633
OTHER ASSETS
Investment in sales-type lease-non current		1,184,000		-
Deferred tax assets		34,486		-
Total other assets		1,218,486		-
TOTAL ASSETS	$	25,145,209	$	18,949,390
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Short term bank loans	$	2,960,474	$	2,909,561
Notes payable		-		1,778,065
Accounts payable and accrued expenses		3,062,789		501,238
Taxes payable		2,940,416		1,976,952
Advances from customers		411,268		269,104
Deferred revenue-current		71,771		-
Due to related parties		592,095		-
Total current liabilities		10,038,813		7,434,920
LONG TERM LIABILITIES-DEFERRED REVENUE		164,487		-
TOTAL LIABILITIES		10,203,300		7,434,920
COMMITMENT AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Common stock, $0.001 Par value; 60,000,000 shares authorized; 31,327,741 shares issued and outstanding		31,328		31,328
Additional paid in capital		6,866,352		6,866,352
Statutory Reserves		768,133		406,991
Accumulated other comprehensive income		114,447		298,440
Retained earnings		7,161,649		3,911,359
Total stockholders' equity		14,941,909		11,514,470
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$	25,145,209	$	18,949,390

Huayue Electronics Inc.

FConsolidated -Statements 3of Changes in Stockholders’ Equity

Huayue Electronics Inc
Consolidated Statements of Income and Comprehensive Income
(In US Dollars)
	For the Fiscal Years Ended May 31,
	2014			2013
Net sales	$	12,239,726		$	14,326,370
Cost of goods sold		6,568,911			8,785,610
Gross profit		5,670,815			5,540,760
Selling expenses		58,037			36,660
General and administrative expenses		1,500,862			717,292
Total expenses		1,558,899			753,952
Income from operations		4,111,916			4,786,808
Non-operating income (expenses):
Interest income		(112,951	)		(263,670	)
Other expense		249,778			83,619
Total non-operating income (expenses)		136,827			(180,051	)
Income before income taxes		4,248,743			4,606,757
Income tax provision (benefit)
Current		800,712			849,473
Deferred		(163,401	)		-
Total income tax provision		637,311			849,473
Net income		3,611,432			3,757,284
Other comprehensive income (loss) item
Foreign currency translation gain (loss)		(183,993	)		209,066
Comprehensive Income	$	3,427,439		$	3,966,350
Basic and diluted earnings per common share	$	0.12		$	0.12
Weighted average number of common shares		31,327,741			30,727,083

(In US Dollars)

F - 4

										Accumulated
	Common Stock				Additional		Retained			Other
	($0.001 par value)				Paid-in		Earnings /			Comprehensive			Stockholders'
	Shares		Amount		Capital		(Deficit)			Income			Equity

Balance at June 1, 2013		31,325,241	$	31,325	$	6,866,355	$	4,318,350		$	298,440		$	11,514,470

Net income from discontinued operations (Restated)		–		–		–		2,291,071			–			2,291,071

Foreign currency translation loss (Restated)		–		–		–		–			(158,828	)		(158,828	)

Balance at May 31, 2014 (Restated)		31,325,241		31,325		6,866,355		6,609,421			139,612			13,646,713

Common stock issued pursuant to related party acquisition		3,000,000		3,000		–		(3,000	)		–			–

Net loss from continuing operations		–		–		–		(48,750	)		–			(48,750	)

Net loss from discontinued operations		–		–		–		(13,048,140	)		–			(13,048,140	)

Realization of accumulated other comprehensive income		–		–		–		139,612			(139,612	)		–

Balance at May 31, 2015		34,325,241	$	34,325	$	6,866,355	$	(6,350,857	)	$	–		$	549,823

Huayue Electronics Inc
Consolidated Statements of Stockholders' Equity
(In US Dollars)
	Common stock				Additional paid-in capital		Statutory Reseves		Accumulated other comprehensive income			Retained earnings			Total
	Shares		Amount
Balance at June 1, 2012		30,067,741	$	30,068	$	669,932	$	31,263	$	89,374		$	529,803		$	1,350,440
Common Stock issued		1,260,000		1,260		3,148,740		-		-			-			3,150,000
Capital contribution made by major shareholder		-		-		3,047,680		-		-			-			3,047,680
Net income for the year		-		-		-		-		-			3,757,284			3,757,284
Statutory reserve for current year's profit		-		-		-		375,728		-			(375,728	)		-
Foreign currency translation gain		-		-		-		-		209,066			-			209,066
Balance at May 31, 2013		31,327,741		31,328		6,866,352		406,991		298,440			3,911,359			11,514,470
Net income for the year		-		-		-		-		-			3,611,432			3,611,432
Statutory reserve for current year's profit		-		-		-		361,142		-			(361,142	)		-
Foreign currency translation loss		-		-		-		-		(183,993	)		-			(183,993	)
Balance at May 31, 2014		31,327,741	$	31,328	$	6,866,352	$	768,133	$	114,447		$	7,161,649		$	14,941,909

See accompanying notes to consolidated financial statements

F - 5

Huayue Electronics Inc
Consolidated Statements of Cash Flows
(In US Dollars)
	For the Fiscal Years Ended May 31,
	2014			2013
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	3,611,432		$	3,757,284
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation		647,257			230,908
Provision for doubtful accounts		781,796			224,035
Deferred tax benefit		(163,400	)		-
Decrease (increase) in assets:
Accounts receivable		1,955,555			(4,541,691	)
Other receivable		(1,623,460	)		1,016,446
Advances to suppliers		(157,770	)		1,988,689
Inventory		(1,061,517	)		1,074,214
Investment in sales-type lease		(2,226,605	)		-
Increase (decrease) in current liabilities:
Accounts payables and accrued expenses		2,616,432			(256,681	)
Advances from customers		147,670			(443,845	)
Taxes payable		1,002,341			1,699,894
Deferred revenue		240,848			(195,594	)
Other payables		-			(611,346	)
Net cash provided by operating activities		5,770,579			3,942,313
CASH FLOWS FROM INVESTING ACTIVITIES:
Payment on equipment purchase		(5,560,286	)		-
Deposit made for equipment purchase		-			(7,542,932	)
Net cash used in investing activities		(5,560,286	)		(7,542,932	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash released from bank notes		978,809			-
Repayments of bank notes		(1,794,483	)		158,881
Proceeds from bank loans		4,159,937			(3,972,037	)
Repayments of bank loans		(4,078,370	)		-
Net proceeds from related parties loans		603,599			1,337,408
Proceeds from stock issuance					3,150,000
Capital contribution by major shareholder		-			3,047,680
Net cash (used in) provided by financing activities		(130,508	)		3,721,932
EFFECT OF EXCHANGE RATE CHANGE ON CASH		(4,214	)		9,012
NET INCREASE IN CASH		75,571			130,325
CASH - beginning of period		269,065			138,740
CASH - end of period	$	344,636		$	269,065
SUPPLEMENTAL CASH FLOW DISCLOSURE
Income tax paid	$	-		$	-
Interest paid	$	187,298		$	252,105

Huayue Electronics Inc.

FConsolidated -Statements 6of Cash Flows

(In US Dollars)

	For the Fiscal Years Ended
	May 31, 2015			May 31, 2014
				(Restated)
Cash flows from operating activities:
Net (loss) income	$	(13,096,890	)	$	2,291,071
Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities:
Net loss (income) from discontinued operations		13,048,140			(2,291,071	)
Changes in operating assets and liabilities:
Accounts payable and accrued expenses		48,750			–
Net cash used in operating activities - continuing operations		–			–
Net cash (used in) provided by operating activities - discontinued operations		(1,768,627	)		5,770,579
Net cash (used in) provided by operating activities		(1,768,627	)		5,770,579

Cash flows from investing activities:
Net cash used in investing activities - continuing operations		–			–
Net cash used in investing activities - discontinued operations		–			(5,560,286	)
Net cash used in investing activities		–			(5,560,286	)

Cash flows from financing activities:
Net cash used in financing activities - continuing operations		–			–
Net cash provided by (used in) financing activities - discontinued operations		1,496,441			(130,508	)
Net cash provided by (used in) financing activities		1,496,441			(130,508	)

Effect of exchange rate on cash and cash equivalents - discontinued operations		(24,289	)		(4,214	)

Net increase (decrease) in cash and cash equivalents		(296,475	)		75,571

Cash at beginning of year - discontinued operations		344,636			269,065
Less: Cash at end of year - discontinued operations		(48,161	)		(344,636	)
Cash at end of year - continuing operations	$	–		$	–

Supplemental schedule of non-cash financing activities:
Common stock issued pursuant to related party acquisition	$	3,000		$	–

See accompanying notes to consolidated financial statements

F-6

HUAYUE ELECTRONICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 – ORGANIZATION AND BASIS OF PRESENTATION

Huayue Electronics, Inc. (the “~~Huayue Electronics~~Company”) orwas incorporated in Delaware on November 19, 2010 under the ~~“Company”)~~name isChina International Enterprise Corp. In 2011, the ~~new~~Company changed its name ~~for~~to HXT Holdings, Inc., ~~effective~~On onSeptember ~~November~~ 2, 2011, the Company acquired all of the outstanding capital stock of China Metal Holding, Inc. (“China Metal”), a privately-owned corporation formed in the State of Delaware. China Metal is a holding company whose only asset, held through a subsidiary, is 100% of the registered capital of Changzhou Huayue Electronics Company, ~~Inc.~~Limited ~~was~~(“Changzhou ~~incorporated~~Huayue”), ~~under~~a limited liability company organized under the laws of the ~~State~~People’s Republic of ~~Delaware~~China on(“China” ~~January~~or 13“PRC”). Changzhou Huayue is engaged in developing, ~~2005~~manufacturing and selling high frequency induction lights and electrolytic capacitors. Changzhou Huayue’s offices and manufacturing facilities are located in China. Effective November 2, 2011, the Company changed its name to Huayue Electronics, Inc.

On ~~September~~April 223, ~~2011~~2015, ~~Huayue~~the ~~Electronics~~Company ~~acquired~~entered ~~all~~into a ofPartnership ~~the~~Interest ~~outstanding~~Purchase ~~capital~~Agreement ~~stock~~to purchase 51% of ~~China~~the ~~Metal~~limited ~~Holding,~~liability ~~Inc~~partnership interests in SavWatt Kaz Ltd. (“~~China Metal~~SavWatt”), a ~~privately~~limited ~~owned~~liability ~~corporation~~partnership formed inunder the ~~State~~laws of ~~Delaware~~Kazakhstan. ,Effective ~~United~~this ~~States of America~~date, bySavWatt’s operations ~~merging~~will ~~HXT~~be ~~Acquisition~~included ~~Corp.,~~in ~~a newly formed Delaware corporation that was wholly owned by~~ the Company,’s ~~into~~consolidated ~~China~~financial ~~Metal.~~position ~~China~~and ~~Metal~~results. isSavWatt aKaz ~~holding~~was ~~company~~formed ~~whose~~by Sutton ~~only~~Global ~~asset~~Associates, ~~held~~Inc. ~~through~~(see aNote ~~subsidiary,~~6) ison ~~100%~~April ~~of the registered capital of Changzhou Huayue Electronics Company~~8, ~~Limited~~2015 ~~(“Changzhou~~to ~~Huayue”),~~engage ain ~~limited liability company organized under~~ the ~~laws~~business of ~~the People’s Republic of China (“China” or “PRC”). Changzhou Huayue is engaged in developing,~~ manufacturing and ~~selling~~distributing ~~high~~energy efficient ~~frequency~~products ~~induction~~in ~~lights~~Kazakhstan and ~~electrolytic~~other ~~capacitors.~~former ~~Changzhou~~Soviet ~~Huayue’s~~Union ~~offices and manufacturing facilities are located in China~~countries.

~~The~~In ~~consolidated~~May ~~financial~~2015, ~~statements of~~ the Company ~~are~~approved ~~prepared~~plans into ~~accordance~~dispose ~~with accounting principles generally accepted in the United States~~ of ~~America~~China ~~(“US GAAP”). The financial statements reflect the financial position~~Metal, ~~results~~including ~~of operations and cash flows of the Company and~~ its subsidiary, Changzhou Huayue ~~Electronic Co~~., ~~Ltd.,~~Refer asto ofNote ~~May~~2 ~~31, 2014 and 2013 and~~ for ~~the~~further ~~fiscal years then ended~~discussion.

~~NOTE~~On 2July -24, ~~SUMMARY~~2015 the OFCompany ~~SIGNIFICANT~~amended ~~ACCOUNTING~~its ~~POLICIES~~name to Tarsier Ltd., subject to shareholder notification.

The consolidated financial statements of the Company are prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”). The financial statements reflect the financial position, results of operations and cash flows of the parent entity, Huayue Electronics, and its subsidiary, SavWatt, which did not have any operations for the year ended May 31, 2015. The consolidated financial statements also present the financial position, results of operations and cash flows of the discontinued entity, China Metal, as of May 31, 2015 and 2014 and for the fiscal years then ended.

NOTE 2 – DISCONTINUED OPERATIONS

In May 2015, the Company approved plans to dispose of its subsidiary China Metal, including China Metal’s wholly-owned subsidiary, Changzhou Huayue. Management elected to dispose of the entities because the Company intends to focus its operations outside of China and rather in the U.S. and other foreign markets. On June 2, 2015, the Company entered into a Stock Purchase Agreement to sell 100% of the issued and outstanding shares of common stock of China Metal. The Company completed the sale on June 9, 2015.

In accordance with ASC 205-20, China Metal, and its wholly-owned subsidiary Changzhou Huayue, have been presented as a discontinued business in the consolidated financial statements for the fiscal year ended May 31, 2015. Previously reported results for the comparable year ended May 31, 2014 have been reclassified to reflect this presentation.

The operational results of China Metal are presented in the “Net income from discontinued operations, net of taxes” line item on the consolidated statements of income. The assets and liabilities of the discontinued business are presented on the consolidated balance sheets as assets and liabilities from discontinued operations.

F-7

HUAYUE ELECTRONICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

On June 12, 2015, the Company completed its sale of China Metal. The Company purchased 10,000,000 shares of HUAY common shares from the seller at a market value of $0.55 per share for an aggregate purchase price of $5,500,000. The Company delivered to the seller 100% of the outstanding capital stock of China Metal.

The major components of net (loss) income from discontinued operations were as follows:

	Fiscal Year Ended May 31,
	2015			2014
				(Restated)
Net sales	$	6,930,162		$	12,239,726
Cost of goods sold		4,425,503			8,122,277
Gross profit		2,504,659			4,117,449
Selling expenses		31,362			58,037
General and administrative expenses		7,412,847			1,500,862
(Loss) income from operations		(15,659,804	)		2,558,550
(Loss) income before income taxes		(15,504,124	)		2,695,378
Net (loss) income		(13,178,506	)		2,291,071
Realization of discontinued operations accumulated other comprehensive income (loss)		130,365			-
Net (loss) income from discontinued operations, net of taxes	$	(13,048,140	)	$	2,291,071

The major classes of assets and liabilities from discontinued operations were as follows:

	As of May 31,
	2015		2014
			(Restated)
Cash	$	48,161	$	344,636
Accounts and other receivables		2,776,773		7,415,964
Advances to suppliers		1,866,075		288,183
Investment in sales-type lease		2,384,088		1,000,168
Total current assets		8,703,090		9,890,531
Property and equipment		1,045,827		12,740,996
Investment in sales-type lease - noncurrent		2,950,151		1,184,000
Total assets	$	12,864,758	$	23,850,013

Short-term loans		2,984,834		2,960,474
Accounts payable		2,630,700		3,062,789
Taxes payable		2,685,297		2,940,416
Due to related parties		2,136,921		592,095
Total current liabilities		11,928,595		10,038,813
Total liabilities	$	12,266,185	$	10,203,300

F-8

HUAYUE ELECTRONICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3 - RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS

Subsequent to the filing of its Annual Report on Form 10K for the year ended May 31, 2014, the Company reviewed its measurement for inventory valuation, and determined that the estimate for the inventory valuation had been understated. Certain sales transactions occurred through the date the financial statements were issued in which the sales price of certain products was substantially lower than its cost, indicating that the book value of all similar inventory should be reduced. In accordance with ASC 855, “Subsequent Event”, management reassessed and recorded a loss of $1,553,366 on reduction of inventory to the lower of cost or market for the fiscal year ended May 31, 2014.

The effects of the adjustments on the Company’s previously issued balance sheet as of May 31, 2014 is summarized as follows:

	Previously		Impact of
	Reported		Restatement			Restated
Assets:
Inventory, net	$	1,972,209	$	(1,523,760	)	$	448,449
Deferred tax assets		164,567		228,564			393,131
Total current assets		11,185,727		(1,296,196	)		9,890,531
Total assets		25,145,209		(1,295,196	)		23,850,013

Stockholders’ equity:
Statutory reserves		768,133		(132,036	)		636,097
Accumulated other comprehensive income		114,447		25,165			139,612
Retained earnings		7,161,649		(1,188,325	)		5,973,324
Total stockholders’ equity		14,941,909		(1,295,196	)		13,646,713
Total liabilities and stockholders’ equity	$	25,145,209	$	(1,295,196	)	$	23,850,013

Note - The restatement above refers to the operations of the discontinued entity. Statutory reserves were reclassified into retained earnings per the consolidated financial statements.

NOTE 4 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of consolidation

The consolidated financial statements include the financial statements of the Company, ~~China Metal~~ and ~~Changzhou~~its ~~Huayue~~subsidiaries. All inter-company transactions and balances are eliminated in consolidation.

Use of estimates

The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant accounting estimates reflected in the Company’s consolidated financial statements include: the allowance for bad debt, the valuation of inventory, and estimated useful lives and impairment of property and equipment. Actual results could differ from those estimated by management.

~~Cash and cash equivalents~~F-9

For purposes of the statement of cash flow, the Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. All cash balances are in bank accounts in PRC and are not insured by the Federal Deposit Insurance Corporation or other programs.

Restricted Cash

Restricted cash represents required cash deposits as a part of collateral for bankers acceptance notes payable and letters of credit. The Company is required to maintain 50% to 100% of the balance of the bank’s acceptance notes payable to ensure future credit availability.

Accounts Receivable and Allowance for Doubtful Accounts

Accounts receivable are stated at net realizable value. An allowance for doubtful accounts is established based on the management’s assessment of the recoverability of accounts and other receivables. A considerable amount of judgment is required in assessing the realization of these receivables, including the current credit worthiness of each customer and the related aging analysis. Delinquent account balances are written-off against allowance for doubtful accounts after management has determined that the likelihood of collection is not probable. As of May 31, 2014 and 2013, management assessed and recorded allowance for doubtful accounts of $909,591 and $268,201, respectively.

F - 7

HUAYUE ELECTRONICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~Inventory~~Non-controlling interests

~~Inventory~~Non-controlling interests ~~consists~~in ofour ~~raw~~subsidiaries ~~materials~~are ~~and~~recorded ~~packing~~in ~~materials~~accordance ~~for~~with ~~manufacturing,~~the ~~work~~provisions inof ~~process~~ASC 810 “Consolidation”, and ~~finished~~are ~~goods.~~reported as ~~Inventories~~a ~~are~~component ~~valued~~of atequity, separate from the ~~lower~~parent ofcompany’s ~~cost~~equity. Purchase or ~~market~~sale ~~with~~of ~~cost~~equity ~~determined~~interests onthat do not result in a ~~weighted~~change ~~average~~of ~~basis.~~control ~~Management~~are ~~compares~~accounted ~~the~~for ~~cost~~as ofequity ~~inventory~~transactions. ~~with~~Results ~~the~~of ~~market~~operations ~~value~~attributable ~~and~~to anthe ~~allowance~~non-controlling isinterests are ~~made~~included ~~for~~in ~~writing~~our ~~down~~consolidated ~~the~~results ~~inventory~~of tooperations ~~its~~and, ~~market~~upon ~~value~~loss of control, ifthe ~~lower~~interest ~~than~~sold, ~~cost.~~as Aswell ofas ~~May~~interest 31retained, if ~~2014~~any, ~~and~~will ~~2013,~~be ~~management~~reported ~~had~~at ~~identified~~fair novalue ~~slow~~with ~~moving~~any gain or ~~obsolete~~loss ~~inventory~~recognized in earnings.

~~Plant~~There is a non-controlling interest who owns 49% of the partnership interest in the Company’s subsidiary, ~~property~~SavWatt ~~and~~Kaz, ~~equipment~~Ltd. There were no non-controlling interest balances per the financial statements as SavWatt did not have any operations for the year ended May 31, 2015.

~~Plant,~~Cash ~~property~~ and ~~equipment~~cash are stated at cost. The cost of an asset comprises its purchase price and any directly attributable costs of bringing the asset to its present working condition and locations for its intended use. Depreciation is calculated using the straight-line method over the following useful lives:equivalents

Buildings	20 years
Machinery and equipment	5-10 years
Transportation equipment	5 years

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

Expenditures for maintenance and repairs are charged to expense as incurred. Additions, renewals and betterments are capitalized.

Impairment of long-lived assets

The Company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may no longer be recoverable. An impairment loss, measured based on the fair value of the asset, is recognized if expected future undiscounted cash flows are less than the carrying amount of the assets. As of May 31, 2014 and 2013, no impairment of long-lived assets is believed to exist.

Revenue recognition

The Company’s revenue is derived from the sale of products. The Company’s revenue recognition policies are in compliance with Staff Accounting Bulletin 104, included in the Accounting Standards Codification ("“ASC"”) as ASC 605, Revenue Recognition. Our determination to recognize revenue is based on the following:

· Persuasive evidence that an arrangement (sales contract) exists between a willing customer and usthe Company that outlines the terms of the sale (including customer information, product specification, quantity of goods, purchase price and payment terms).

· Delivery is considered to have occurred when the risks, rewards and ownership of the products are transferred from us to our customers. ~~· Our price to the customer is fixed and determinable as specifically outlined in the sales contract.~~

· ~~For~~The ~~customers~~Company’s toprice ~~whom credit terms are extended, we assess a number of factors~~ to ~~determine~~the ~~whether~~customer ~~collection from them~~ is ~~probable,~~fixed ~~including past transaction history with them~~ and ~~their~~determinable ~~credit-worthiness.~~as ~~All~~specifically ~~credit~~outlined ~~extended~~in ~~to customers is pre-approved by management. If we determine that collection is not reasonably assured, we defer~~ the ~~recognition~~sales ~~of revenue until collection becomes reasonably assured, which is generally upon receipt of payment~~contract.

F· For customers to whom credit terms are extended, the Company assesses a number of factors to determine whether collection from them is probable, including past transaction history with them and their credit-worthiness. 8All credit extended to customers is pre-approved by management. If Management determines that collection is not reasonably assured, the Company will defer the recognition of revenue until collection becomes reasonably assured, which is generally upon receipt of payment.

HUAYUE ELECTRONICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Payments received before satisfaction of all of the relevant criteria for revenue recognition are recorded as advance from customers.

The Company currently does not offer customers a right of return. Therefore, uncertainty regarding customer acceptance does not exist and delivered elements are not subject to general or customer-specified return or refund privileges.

The Company commenced an “Energy Management Contract” program in the current fiscal year. Under the program, the Company provides the lighting products and the installation for the customers and the Company is compensated by a fee based on an agreement regarding the anticipated energy bill savings. The lighting products will belong to the customer at the end of the term, which is one to five years for current signed contracts. These agreements are classified as sales type leases in accordance with ASC 840, Leases. The present value of the aggregate lease payment receivable is recorded as sales type lease revenue. For balance sheet purposes, the aggregate lease payments receivable are recorded net of unearned income as net investment in leases. The Company amortizes unearned income, or deferred revenue, to interest income over the lease term on an internal rate of return method. The interest income for the fiscal years ended May 31, 2014 and 2013 were $63,253 and $0, respectively.

Income taxes

The Company’s ~~subsidiaries in China are subject to the income tax laws of the PRC. No taxable income was generated outside the PRC for the fiscal years ended May 31, 2014 and 2013. The Company~~ accounts for income tax under the asset and liability method as stipulated by ASC 740, , which requires recognition of deferred tax assets and liabilities for the expected future tax consequences of the events that have been included in the financial statements or tax returns. Deferred income taxes will be recognized if significant temporary differences between tax and financial statements occur. Valuation allowances are established against net deferred tax assets when it is more likely than not that some portion or all of the deferred tax asset will not be realized. As of May 31, ~~2014~~2015 and ~~2013~~2014, no valuation allowance is considered necessary.

An uncertain tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded. Penalties and interest incurred related to underpayment of income tax are classified as income tax expense in the period incurred. No significant penalties or interest relating to income taxes have been incurred during the fiscal years ended May 31, 2014 and 2013.F-10

~~Value-added~~HUAYUE ~~tax~~ELECTRONICS, INC.

~~Sales~~NOTES ~~revenue~~TO ~~represents~~CONSOLIDATED FINANCIAL the invoiced value of goods, net of a Value-Added Tax (“VAT”). All of the Company’s products that are sold in the PRC are subject to a Chinese value-added tax at a rate of 17% of the gross sales price. This VAT may be offset by VAT paid by the Company on raw materials and other materials included in the cost of producing their finished product.STATEMENTS

~~The~~An ~~Company~~uncertain ~~recorded~~tax position ~~VAT~~is ~~payable~~recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of ~~$985~~tax benefit that is greater than 50% likely of being realized on examination. For tax positions not meeting the “more likely than not” test,~~580~~ no tax benefit is recorded. Penalties and ~~$812,243~~interest asincurred related to underpayment of income tax are classified as income tax expense in the period incurred. No significant penalties or interest relating to income taxes have been incurred during the fiscal years ended May 31, ~~2014~~2015 and ~~2013, respectively~~2014.

Fair value of financial instruments

The Financial Accounting Standards Board’s ASC Topic 820, “Fair Value Measurements”, defines fair value, establishes a three-level valuation hierarchy for fair value measurements and enhances disclosure requirements.

The three levels are defined as follows:

Level 1 - inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.

Level 2 - inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, quoted market prices for identical or similar assets in markets that are not active, inputs other than quoted prices that are observable, and inputs derived from or corroborated by observable market data.

Level 3 - inputs to the valuation methodology are unobservable.

~~Unless~~The ~~otherwise disclosed, the fair value of the~~ Company’s ~~financial instruments including cash, restricted cash,~~ accounts ~~receivable, due from related parties, loans to third parties, advances to suppliers, accounts~~ payable, and ~~due to related parties, customer deposits,~~ accrued expenses, ~~short~~approximate ~~term~~fair ~~bank loans and bankers acceptance notes payable approximates their recorded~~ values due to their short-term maturities. Receivables on sales-type leases are based on interest rates implicit in the lease and the carrying amounts reported is a reasonable estimate of their fair value because of the short period of time between the origination of such instruments and their expected realization and their current market rate of interest.

F - 9

HUAYUE ELECTRONICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Foreign currency translation

The functional currency of the U.S. parent company is USD. The functional currency of the ~~Company’s~~discontinued ~~Chinese~~ subsidiary is RMB and its reporting currency is U.S dollars for the purpose of these financial statements. The accounts of the Chinese subsidiary were translated into USD in accordance with ASC Topic 830 “Foreign Currency Matters,” According to Topic 830, all assets and liabilities were translated at the exchange rate on the balance sheet date; stockholders’ equity is translated at historical rates and statement of income items are translated at the weighted average exchange rate for the period. The resulting translation adjustments are reported under other comprehensive income in accordance with ASC Topic 220, “Comprehensive Income.” Gains and losses resulting from the translations of foreign currency transactions and balances are reflected in the statements of income and other comprehensive income. ~~The company has recorded other comprehensive loss and gain of $183,993 and $209,066 for the twelve months ended May 31, 2014 and 2013, respectively, as a result of foreign currency translation.~~

The following exchange rates were adopted to translate the amounts from RMB into United States dollars (“USD$”) for the respective fiscal years:

	May 31,		May 31,
	2014		2013
Fiscal Year-End RMB Exchange Rate (RMB/USD$)		6.2490		6.1865
Average Yearly RMB Exchange Rate (RMB/USD$)		6.1299		6.2940

Concentrations of credit risk

Financial instruments which potentially subject the Company to concentrations of credit risk consist principally of cash and trade accounts receivable. All of the Company’s cash is maintained with banks within the People’s Republic of China of which no deposits are covered by insurance. The Company has not experienced any losses in such accounts. A significant portion of the Company's sales are credit sales which are primarily to customers whose ability to pay is dependent upon the industry economics prevailing in these areas. The Company also performs ongoing credit evaluations of its customers to help further reduce credit risk.

Reclassification

Certain prior period amounts have been reclassified to conform to the current period presentation. The reclassification had no impact on net income or cash.

~~NOTE~~Certain 3items ~~– ACCOUNTS~~of the ~~RECEIVABLE~~discontinued entity, ~~NET~~such as statutory reserves, were reclassified to retained earnings in the consolidated statements of changes in stockholders’ equity.

~~The~~NOTE ~~Company~~5 ~~provides~~- anSTOCKHOLDERS’ ~~allowance for doubtful accounts related to its receivables. The receivables and allowance balances at May 31, 2014 and 2013 are as follows:~~EQUITY

	May 31,
	2014		2013
Accounts Receivable	$	6,662,699	$	8,667,673
Less: Allowance for Doubtful Accounts		(909,591)		(268,201)
Accounts Receivable, Net	$	5,753,108	$	8,399,472

Pursuant to the Partnership Interest Purchase Agreement dated April 23, 2015, the Company issued 3,000,000 common shares to a related party. Refer to Note 6 for further discussion.

F - 1011

HUAYUE ELECTRONICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~NOTE~~As 4of ~~– INVENTORY~~May 31, 2015 and 2014, the Company had 34,325,241 and 31,325,241 shares issued and outstanding, respectively.

~~Inventory~~NOTE ~~consists~~6 of– ~~finished~~RELATED ~~goods,~~PARTY ~~work-in-process, and raw materials, net of valuation allowance. No allowance for inventory was made as of May 31, 2014 and 2013.~~TRANSACTIONS

The components of inventories as of May 31, 2014 and 2013 were as follows:

	May 31,
	2014		2013
Raw materials	$	1,581,409	$	341,240
Packaging		-		61,339
Work-in-progress		-		224,783
Finished goods		390,800		312,966
Total Inventories	$	1,972,209	$	940,328

NOTE 5 – PLANT, PROPERTY AND EQUIPMENT, NET

The components of property and equipment as of May 31, 2014 and 2013 were as follows:

	May 31,
	2014		2013
Machinery Equipment	$	8,307,078	$	2,881,586
Building		5,408,865		5,463,509
Electronic Equipment		642,658		649,150
Transportation Equipment		288,250		291,162
Subtotal		14,646,851		9,285,407
Less: Accumulated Depreciation		(1,905,855)		(1,283,774)
Total plant, property and equipment, net	$	12,740,996	$	8,001,633

The depreciation expense for the fiscal years ended May 31, 2014 and 2013 was $647,257 and $230,908, respectively.

NOTE 6 - RELATED PARTY TRANSACTIONS AND BALANCES

An individual or entity is considered to be a related party if the person or the entity has the ability, directly or indirectly, to control the other party or exercise significant influence over the other party in making financial and operational decisions. An individual or entity is also considered to be related if the person or the entity is subject to common control or common significant influence.

FOn -April 1123, 2015, the Company issued 3,000,000 common shares to Sutton Global Associates, Inc. (“Sutton Global”), the owner of SavWatt Kaz Ltd., for a 51% controlling interest in SavWatt. Sutton Global is controlled by the chief executive officer of the Company. At May 31, 2015, Sutton Global owned 8.7% of the Company’s outstanding common stock.

In accordance with ASC Topic 805-50-05, ‘Transactions Between Entities Under Common Control’, the acquisition of SavWatt was recorded at carrying value, i.e. the par value of common stock. The par value of common shares issued of $3,000 is treated as a distribution to the shareholder and a reduction to retained earnings in the consolidated statements of changes in stockholders’ equity.

In May 2015, the Company approved plans to sell 100% of China Metal as part of its disposition plans. Per the Stock Purchase Agreement dated June 2, 2015, the buyer is an officer and director of China Metal and Changzhou Huayue. The sale was recorded as an arm’s-length transaction.

In April 2015, Shudong Pan, Han Zhou and Qing Biao resigned as Chief Executive Officer, Chief Financial Officer and Secretary, respectively, of the Company. Mr. Pan and Mr. Zhou will continue as Chief Executive Officer and Chief Financial Officer, respectively, of the discontinued Chinese entities.

Related parties of the discontinued entity at May 31, 2015 and May 31, 2014 consist of the following:

Name of entity or individual		Relationship with the Discontinued Entity
Changzhou Wujin Hengtong Metal Steel Wires Co. Ltd.		Entity controlled by Ms. Pan Yile’s family members
Changzhou Hanyu Electronic Co., Ltd		Entity controlled by Mr. Pan Shudong’s sister
Chuangzhou Ruiyuan Steel Pipe Co. Ltd		Entity controlled by Mr. Pan Shudong’s sister
Changzhou Shiji Jinyue Packaging Co.,Ltd		Entity controlled by Mr. Pan Shudong’s brother in law
Changzhou Laiyue Electronic Co.,Ltd		Entity controlled by Mr. Pan Shudong
Changzhou Jinyue Electronic Co.,Ltd		Entity controlled by Mr. Pan Shudong’s brother in-law

(i)

Due from related parties

At May 31, 2015 and 2014, there were no amounts due from related parties.

(ii)

Due to related parties

Due to related parties at May 31, 2015 and 2014 consisted of the following:

		May 31, 2015		May 31, 2014
Changzhou Wujin Hengtong Metal	$	282,349	$	320,051
Changzhou Shiji Jinyue Packaging		838,980		-
Ruiyuan Steel Pipe Co. Ltd Changzhou		-		192,031
Changzhou Laiyue Electronic		6,944		-
Changzhou Jinyue Electronic		886,092		-
Hanyu Electronic Co., Ltd		-		80,013
Li Ximmei		122,556		-
Due to related parties	$	2,136,921	$	592,095

Due to related parties were unsecured, had no written agreement were due on demand with no maturity date, and bare no interest.

NOTE 7 – COMMITMENTS AND CONTINGENCIES

On April 27, 2015, the Company entered into an employment agreement with Isaac H. Sutton to serve as Chief Executive Officer of the Company. The agreement provides for an initial term of three years and will terminate on April 27, 2018. The employment agreement will be extended automatically for successive one-year periods thereafter unless the Company or Mr. Sutton gives written notice to the other to allow the employment agreement to expire. Mr. Sutton will be paid an initial annual base salary of $120,000. In addition, Mr. Sutton will be eligible to receive each year an incentive bonus in an amount up to 100% of his base salary and a revenue bonus in an amount equal to 0.75% of the amount by which the Company’s net revenues in such year exceed $25 million.

F-12

HUAYUE ELECTRONICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~NOTE~~Subject 6to the approval of the Board, the Company will also grant to Mr. Sutton a stock option to purchase 3,000,000 shares of the Company’s common stock at a price per share not less than the per-share ~~RELATED~~fair ~~PARTY~~market ~~TRANSACTIONS~~value ~~AND~~of ~~BALANCES~~the ~~(continued)~~common stock on the date of grant. The option will vest with respect to one-third of the shares on the first anniversary of the date of grant and as to the remaining two-thirds of the shares in 24 equal monthly installments thereafter.

The ~~related~~employment agreement ~~parties~~also provides that Mr. Sutton will be entitled to participate in any short-term and long- term incentive plans generally available to executive officers of the ~~company~~Company, ~~are~~to ~~comprised~~participate with other executive officers in any of the Company’s employee fringe benefit plans, and to be reimbursed for certain business-related expenses. In addition, the employment agreement provides for certain benefits upon termination of Mr. Sutton’s employment under certain circumstances, including a change of control of the Company, as ~~follows:~~defined in the employment agreement, and to certain death benefits.

~~Name~~NOTE of8 ~~entity~~– RECENT ACCOUNTING or individual Relationship with the Company Changzhou Jinyue Electronic Co.,Ltd Entity controlled by Mr. Pan Shudong’s Sister Changzhou Wujin Hengtong Metal Steel Wires Co. Ltd. Entity controlled by Ms. Pan Yile’s family members Changzhou Hanyu Electronic Co.,Ltd Entity controlled by Mr. Pan Shudong’s Sister Chuangzhou Ruiyuan Steel Pipe Co. Ltd Entity controlled by Mr. Pan Shudong’s Sister Mr. Pan Shudong Controlling Shareholder and CEO of the Company Ms. Pan Yile Mr. Pan Shudong’s Daughter and an Officer of the CompanyPRONOUNCEMENTS

~~(i)~~In ~~Due~~April ~~from~~2014, the ~~Related~~FASB ~~Parties:~~ issued authoritative guidance, which specifies that only disposals, such as a disposal of a major line of business, representing a strategic shift in operations should be presented as discontinued operations. In addition, the new guidance requires expanded disclosures about discontinued operations that will provide financial statement users with more information about the assets, liabilities, income, and expenses of discontinued operations. The Company has adopted the guidance as described in Note 2.

AtNOTE ~~May~~9 ~~31, 2014 and 2013, there were no amounts due from related parties.~~- SUBSEQUENT EVENTS

~~(ii)~~Pursuant ~~Due~~to the Stock Purchase Agreement dated June 2, 2015, the Company sold 100% of the issued and outstanding common shares of its wholly-owned subsidiary, China Metal, to ~~Related~~Shudong ~~Parties~~Pan, the Company’s Chairman of the Board and Chief Executive Officer at such time, in consideration of 10,000,000 shares of the Company’s outstanding common stock. The sale was completed on June 12, 2015. The discontinued entity was valued at $5,500,000, which represented the 10,000,000 shares at a market value of $0.55 as of June 9, 2015. At the time of sale, China Metal’s net assets were $598,573, resulting in a gain on the sale of $4,901,427 recognized in fiscal year 2016.

~~Due~~On toJune ~~Related~~12, ~~Parties~~2015, the atBoard ~~May~~and 31shareholders approved the increase of authorized common stock from 60,000,000 ~~2014~~to ~~and~~150,000,000 ~~2013~~shares. ~~consisted~~The ofBoard also approved the ~~follows:~~increase of authorized preferred stock from 1,000,000 to 10,000,000 shares.

	May 31 2014		May 31 2013
Changzhou Wujin Hengtong Metal Steel Wires Co. Ltd.	$	320,051	$	-
Changzhou Ruiyuan Steel Pipe Co. Ltd		192,031		-
Changzhou Hanyu Electronic Co.,Ltd		80,013		-
Total due to related parties	$	592,095	$	-

On June 12, 2015, the Board accepted the resignations of Shudong Pan and Ximmei Li from the Board of Directors. The Board appointed Dr. Yunzhoung Wu and Yile Lisa Pan to the Board of Directors effective immediately.

~~Due~~On toJuly ~~related parties were unsecured~~24, ~~had no written agreement~~2015, the ~~were~~Board ~~due~~elected onMiller ~~demand~~Mays ~~with~~III noand ~~maturity~~Randall ~~date,~~Satin ~~and~~to ~~bore~~the noBoard ~~interest~~of Directors.

~~(ii)~~In ~~Sales~~August 2015, the Company agreed to ~~related~~issue ~~parties~~options to purchase 2,000,000 shares of common stock per consulting agreements. These options, as well as the options per Isaac H. Sutton’s employment agreement, are subject to Board approval at the time of this report.

~~During~~On September 10, 2015, the ~~fiscal~~Company ~~years~~entered ~~ended~~into ~~May~~a ~~31,~~purchase ~~2014,~~agreement to acquire 100% of the ~~Company~~limited ~~made~~liability nomembership ~~sales~~interests toof ~~related~~BlueCo ~~parties.~~Energy LLC, ~~During~~a ~~the~~New ~~fiscal~~York ~~year~~limited ~~ended~~liability ~~May~~company 31(“BlueCo”), ~~2013~~in consideration for the issuance of 20,000,0000 common shares. Upon closing, the Company ~~sold~~will ~~products~~issue ~~for~~the common shares to GoCOM Corporation, a ~~total~~Nevada ofcorporation ~~$108~~(“GoCOM”),~~756~~ towhich ~~Changzhou~~is ~~Jinyue~~controlled ~~Electronic~~by CoIsaac H., ~~Ltd~~Sutton.

F - 1213

HUAYUE ELECTRONICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 7 – SHORT-TERM BANK LOANS

The Company’s short term bank loans consisted of the follows:

	May 31, 2014		May 31, 2013
Loan from China Industrial and Commercial Bank (6.0% annual interest rate, due on September 27, 2014, renewed on September 4, 2014 with annual interest rate of 6.3% and maturity date on August 26, 2015)	$	848,136	$	-
Loan from China Industrial and Commercial Bank (6.0% annual interest rate, due on July 21, 2014, renewed on July 17, 2014 with maturity date on April 15, 2015)		480,077		-
Loan from Changzhou Wujinyingfeng Agriculture Credit Union (1.86% monthly interest rate, due on September 21, 2014)		480,077
Loan from China Industrial and Commercial Bank (6.0% annual interest rate, due on October 30, 2014, renewed on September 9, 2014 with annual interest rate of 6.3% and maturity date on June 1, 2015)		480,077		-
Loan from China Industrial and Commercial Bank (6.0% annual interest rate, due on September 25, 2014, renewed on September 9, 2014 annual interest rate of 6.3% and maturity date on August 6, 2015)		352,056
Loan from China Merchant Bank (7.80% annual interest rate, due on June 18, 2014)		320,051		-
Loan from China Merchant Bank (7.68% annual interest rate, due on August 15, 2013)		-		1,131,496
Loan from China Industrial and Commercial Bank (6.0% annual interest rate, due on January 9, 2014)		-		969,854
Loan from Changzhou Wujinyinfeng Agriculture Credit Union (0% annual interest rate, due on June 28, 2013)		-		808,211
Total	$	2,960,474	$	2,909,561

The above loans are guaranteed by affiliate companies controlled by the CEO or his family members. The interest expenses related to the above loans for the fiscal years ended May 31, 2014 and 2013 were $187,298 and $258,392, respectively.

On June 6, 2014, the company obtained a new loan from Huaxia Bank in the amount of $320,051, or RMB 2,000,000, with 8.4% annual interest rate and the maturity date of June 6, 2015.

NOTE 8 – NOTES PAYABLE

	May 31,
	2014		2013
Notes payable issued by Huaxian Bank for six months, matured on October 23, 2013	$	-	$	1,616,423
Notes payable to China Industrial and Commercial Bank for six months, matured on October 25, 2013		-		161,642
Total notes payable	$	-	$	1,778.065

$0 and $969,854 was held in bank as restricted cash as of May 31, 2014 and 2013, respectively.

F - 13

HUAYUE ELECTRONICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 9 - TAXES PAYABLE

Taxes payable at May 31, 2014 and 2013 are as follows:

	As of May 31,
	2014		2013
Corporate Income Tax	$	1,694,388	$	973,163
Value-Added Tax		985,580		812,243
Other Tax & Fees		260,448		191,546
Total	$	2,940,416	$	1,976,952

NOTE 10 - INCOME TAXES

Changzhou Huayue Electronics Co., Ltd was registered in the PRC and was qualified as a high-tech company and is entitled to a preferential tax rate of 15% through November, 2014.

For the fiscal years ended May 31, 2014 and 2013, Changzhou Huayue Electronics Co., Ltd recorded income tax provisions of $637,312 and $849,473 respectively.

(i) The components of the income tax expense (benefit) are as follows:

	For the fiscal years ended May 31,
	2014		2013
Current	$	800,712	$	849,473
Deferred		(163,401)		-
Total Income tax expense (benefit)	$	637,311	$	849,473

(ii) The following table summarizes deferred taxes resulting from differences between financial accounting basis and tax basis of assets and liabilities:

	May 31, 2014		May 31, 2013
Current assets and liabilities	$	135,378	$	39,159
Accounts receivable allowances		18,423		-
Advances to suppliers allowances		10,766		-
Deferred revenue		164,567		39,159
Total deferred tax assets - current
Long term assets and liabilities
Deferred revenue		24,673		-
Accumulated depreciation		9,813		-
Total deferred tax assets - Non current		34,486		-
Valuation allowances		-		-
Total deferred tax assets, net	$	199,053	$	39,159

F - 14

HUAYUE ELECTRONICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 10 - INCOME TAXES (Continued)

(iii) The following table is a reconciliation of the statutory tax rate to the effective tax rate for the fiscal years ended May 31, 2014 and 2013:

	For the fiscal years ended May 31,
	2014		2013
U.S. federal statutory rate		34.0%		34.0%
Foreign tax rate differencial		(19.0%)		(19.0%)
Other		-		3.4%
Effective income tax rate		15%		18.4%

Note 11 – CONCENTRATIONS

For the fiscal year ended May 31, 2014, no single customer accounted for over 10% of the total sales. For the fiscal year ended May 31, 2013, three major customers accounted for approximately 22%, 16% and 11% of the total sales, respectively.

For the fiscal year ended May 31, 2014, two major suppliers accounted for approximately 16% and 16% of the Company’s total purchases, respectively. For the fiscal year ended May 31, 2013, one major supplier accounted for approximately 10% of the Company’s total purchases.

NOTE 12 - CONTINGENCIES

Guarantee

On March 13, 2013, the Company signed an agreement with China Industry and Commerce Bank under which the Company guaranteed borrowing by Changzhou Hanyu Electronics Inc, a non-related third party, for bank credit (including loans, notes payable, letter of credit and other credit forms) up to RMB 5.1 million, approximately $823,000 . The guarantee is effective from March 16, 2013 to March 15, 2015.

Shares to be issued

On March 12, 2013 the Company entered into a written agreement with Buckman, Buckman & Reid, Inc. (“BB&R”). The agreement provides that for a one year term BB&R will serve as exclusive consultant to the Company in connection with corporate structure, public market strategies and fundraising activities. In partial compensation for the services of BB&R, the Company committed to sell to BB&R for nominal consideration common stock equal to five percent of the outstanding shares of Company common stock on a fully-diluted basis. The sale has been completed through transfer of shares from Ms. Li Xinmei, a Director of the Company, to BB&R subsequent to May 31, 2014.

NOTE 13 - STOCKHOLDERS’ EQUITY

Stock issuance

On November 21, 2012, the Company’s Board of Directors approved and authorized the sale of 1,260,000 shares at $2.50 per share to Ms. Li Xinmei, a major shareholder of the Company. The Company received total proceeds of $3,150,000 from Ms. Li.

Additional paid in capital

During the fiscal year ended May 31, 2014, there is no change to additional paid in capital. In the fiscal year ended May 31, 2013, Ms. Li Xinmei contributed $3,047,681 to the Company.

F - 15

HUAYUE ELECTRONICS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 13 - STOCKHOLDERS’ EQUITY (Continued)

Statutory Reserve

Subsidiaries incorporated in China are required to make appropriations to reserve funds, based on after-tax net income determined in accordance with generally accepted accounting principles of the People’s Republic of China (“PRC GAAP”). Effective January 1, 2006, the Company is required to contribute to one statutory reserve fund at 10% of net income after tax per annum, and any contributions are not to exceed 50% of the respective companies’ registered capital.

For the fiscal years ended May 31, 2014 and 2013, the Company appropriated $361,142 and 375,728 to the statutory reserve, respectively.

Shares to be Issued

On March 12, 2013 the Company entered into a letter agreement with Buckman, Buckman & Reid, Inc. (“BB&R”). The agreement provides that for a one year term BB&R will serve as exclusive consultant to the Company in connection with corporate structure, public market strategies and fundraising activities. In partial compensation for the services of BB&R, the Company committed to sell to BB&R for nominal consideration common stock equal to five percent of the outstanding shares of Company common stock on a fully-diluted basis. The sale has been completed through transfer of shares from Ms. Li Xinmei to BB&R subsequent to May 31, 2014.

NOTE 14 - SUBSEQUENT EVENTS

Management has evaluated subsequent events through September 15, 2014, the date which the consolidated financial statements were available to be issued. All subsequent events requiring recognition as of May 31, 2014 have been incorporated into these consolidated financial statements and there are no subsequent events that require disclosure in accordance with FASB ASC Topic 855, “Subsequent Events”.

F - 16

ITEM 9.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

~~Not~~During ~~applicable~~the year ended May 31, 2015, we changed our independent registered accounting firm from KCCW Accountancy Corp. to Canuswa Accounting & Tax Services, Inc. The changes were not a result of any disagreement with KCCW Accountancy Corp.

ITEM 9A.

CONTROLS AND PROCEDURES

(a)

Evaluation of Disclosure Controls and Procedures.

Evaluation of Disclosure Controls and Procedures. Our Chief Executive Officer and Chief Financial Officer carried out an evaluation of the effectiveness of ~~the~~our ~~Company’s~~ disclosure controls and procedures (as defined in Rule13a-15(e) promulgated by the Securities and Exchange Commission) as of May 31, ~~2014~~2015. The evaluation revealed that there are material weaknesses in our disclosure controls, specifically:

· The relatively small number of employees who are responsible for accounting functions prevents us from segregating duties within our internal control system. ~~· Our accounting personnel lack expertise in identifying and addressing complex accounting issues under U.S. Generally Accepted Accounting Principles.~~

~~Based~~· onOur ~~their~~accounting ~~evaluation,~~personnel ~~our~~lack ~~Chief~~expertise ~~Executive~~in ~~Officer~~identifying and ~~Chief~~addressing ~~Financial~~complex ~~Officer~~accounting ~~concluded~~issues ~~that~~under ~~the~~U.S. ~~Company’s~~Generally ~~system~~Accepted ofAccounting ~~disclosure controls and procedures was not effective as of May 31, 2014~~Principles.

Based on their evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our system of disclosure controls and procedures was not effective as of May 31, 2015.

(b)

Changes in Internal Controls.

There was no change in internal controls over financial reporting (as defined in Rule 13a-15(f) promulgated under the Securities Exchange Act or 1934) identified in connection with the evaluation described in the preceding paragraph that occurred during ~~the~~our ~~Company’s~~ fourth fiscal quarter that has materially affected or is reasonably likely to materially affect ~~the~~our ~~Company’s~~ internal control over financial reporting.

(c)

Management’s Report on Internal Control over Financial Reporting.

~~Management~~Our ~~of the Company~~ 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. We have assessed the effectiveness of those internal controls as of May 31, ~~2014~~ 2015, using the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) Internal Control – Integrated Framework (1992) as a basis for our assessment.

Because of inherent limitations, internal control over financial reporting may not prevent or detect misstatements. 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. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.

A material weakness in internal controls is a deficiency in internal control, or combination of control deficiencies, that adversely affects ~~the~~our ~~Company’s~~ ability to initiate, authorize, record, process, or report external financial data reliably in accordance with accounting principles generally accepted in the United States of America such that there is more than a remote likelihood that a material misstatement of ~~the~~our ~~Company’s~~ annual or interim financial statements that is more than inconsequential will not be prevented or detected. In the course of making our assessment of the effectiveness of internal controls over financial reporting, we identified two material weaknesses in our internal control over financial reporting. These material weaknesses consisted of:

2531

· The relatively small number of employees who are responsible for accounting functions prevents us from segregating duties within our internal control system. ~~· Our accounting personnel lack expertise in identifying and addressing complex accounting issued under U.S. Generally Accepted Accounting Principles.~~

~~Management~~· isOur ~~currently~~accounting ~~reviewing~~personnel ~~its~~lack ~~staffing~~expertise ~~and their training~~ in ~~order~~identifying toand ~~remedy~~addressing ~~the~~complex ~~weaknesses identified in this assessment. To date, we are not aware of significant~~ accounting ~~problems~~issued ~~resulting~~under ~~from these weaknesses; so we have to weigh the cost of improvement against the benefit of strengthened controls~~U. ~~However,~~S. ~~because~~Generally ofAccepted ~~the~~Accounting ~~above conditions, management’s assessment is that the Company’s internal controls over financial reporting were not effective as of May 31, 2014~~Principles.

Management is currently reviewing its staffing and their training in order to remedy the weaknesses identified in this assessment. To date, we are not aware of significant accounting problems resulting from these weaknesses; so we have to weigh the cost of improvement against the benefit of strengthened controls. However, because of the above conditions, management’s assessment is that our internal controls over financial reporting were not effective as of May 31, 2015.

ITEM 9B.

OTHER INFORMATION

None.

PART III

ITEM 10.

DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The following sets forth information about our executive officers and directors as of ~~the~~September ~~Company~~15, ~~are~~2015:

Name	~~Age~~	~~Positions with the Company~~Age	Positions with the Company	Effective Date
Shudong Pan	49	Chairman of the Board of Directors and Chief Executive Officer
Isaac H. Sutton		61	Chairman of the Board of Directors	April 27, 2015
Li Xinmei	50	Director
			and Chief Executive Officer
Zhiqiang Zhou	39	Chief Technical Officer
Dr. Yunzhoung Wu		46	Director	June 12, 2015
Han Zhou	38	Chief Financial Officer
Yile Lisa Pan		26	Director	June 12, 2015
Wenjun Li	57	Chief Marketing Officer
Miller Mays III		70	Director	July 24, 2015
Yile Pan	25	Vice President of International Affairs
Randall Satin		49	Director	July 24, 2015

The following sets forth biographical information regarding ~~the~~our ~~Company’s~~executive officers and directors.

~~Shudong~~Isaac ~~Pan~~H. Sutton is our Chairman of the Board and Chief Executive Officer. Mr. ~~Pan~~Sutton ~~founded~~has ~~Changzhou~~been ~~Huayue~~an ininternational ~~1999~~entrepreneur infor ~~the~~over ~~town~~40 ofyears ~~Zouqu,~~focusing on ~~Changzhou~~emerging markets and ~~has worked for the company since then~~technologies. ~~Prior~~ toDuring ~~founding~~such ~~Yuayue~~period, Mr. ~~Pan~~Sutton ~~was~~has ~~employed~~conducted ~~for~~business 16in ~~years~~many bycountries, ~~the~~including ~~Bureau~~Taiwan, Korea, ofthe ~~Taxation~~Philippines, inPoland ~~China~~and Uzbekistan. Mr. ~~Pan~~Sutton ~~holds~~has aextensive ~~Diploma~~experience in ~~Accounting~~a ~~awarded~~variety byof ~~the~~industries, ~~Changzhou~~including ~~Financial~~marketing, import ~~Institute~~and inexport, ~~1986~~electronics, telecommunications, information technology and capital markets. He has served as a ~~researcher~~founding ~~for~~member and executive officer of numerous ventures over such period, including GoCOM Corporation, the ~~Economic~~parent ~~Research~~of BlueCo Energy LLC, a New York limited liability company, which he founded in June 2011 and ~~Development~~has ~~Institute~~since atserved ~~Hehai~~as ~~University. In~~its ~~May~~chief ~~2009~~executive officer, MrSavWatt USA Inc., ~~Pan~~a ~~was~~supplier ~~elected~~of ~~Vice~~LED ~~President~~bulbs, offor which he was the ~~Association~~chief ofexecutive ~~Lighting~~officer ~~Devices~~from inMarch ~~the~~2010 ~~city~~to ofDecember ~~Changzhou. He~~2012, ~~has~~GoIP ~~participated~~Global inInc., a ~~drafting~~provider ~~the~~of ~~Chinese~~a ~~National~~text ~~Standards~~messaging platform, for ~~Induction~~which ~~Lights. Mr.~~he ~~Pan~~was isthe ~~married~~chief executive officer from 2006 to ~~Xinmei~~2010 Liand Starinvest Group, ~~the~~Inc., a ~~other~~business ~~member~~development ofcompany, for which he was the ~~Board~~chief ofexecutive ~~Directors~~officer from 1997 to 2006. Mr. Sutton holds a Bachelor’s Degree in Business Administration from Pace University.

~~Xinmei~~Dr. LiYunzhoung Wu has ~~been~~for ~~employed~~more bythan ~~Changzhou~~the ~~Huayue~~past asfive ~~Chief~~years ~~Financial~~been ~~Officer~~a ~~since~~senior ~~2002. During~~professor ~~the~~in ~~same~~structural ~~period,~~materials ~~Ms.~~at LiDalian ~~has~~Maritime ~~been~~University ~~employed~~in asDalian, Liaoning ~~Chief~~Province, ~~Executive~~The ~~Officer~~People’s Republic of ~~Changzhou~~China. Dr. ~~Heng~~Wu ~~Chuan~~has ~~Plastics~~published ~~Co.,~~numerous ~~Ltd. Prior~~academic toarticles ~~2002,~~and ~~Ms.~~technical Lipapers in ~~was~~a ~~employed~~number ~~for~~of 21international ~~years~~publications, inhas ~~various~~headed ~~positions~~approximately inten ~~the~~national ~~banking~~level ~~industry~~research projects in China~~. In~~ ~~2005~~and ~~she~~has ~~was~~ been awarded aseven ~~Bachelor’s~~Chinese ~~Degree~~national inor ~~Economic~~provincial ~~Management~~scientific byresearch ~~Southeastern University in China~~achievements. Ms Dr. LiWu isreceived a ~~certified~~masters ~~public accountant~~ in ~~China. She~~business isadministration from ~~married~~Macao toUniversity ~~Shudong~~in ~~Pan~~Macao, ~~the~~China ~~other~~and ~~member~~a ofDoctorate ~~the~~in ~~Board~~Transportation offrom ~~Directors~~Dalian Maritime University.

26Yile Lisa Pan has, since March 2014, been a Deputy General Manager of Changzhou Wujin Hengtong Metal Co. Ltd. and, from June 2011 to March 2013, was a Deputy General Manager of Changzhou Huayue Electronic Co. Ltd., one of our subsidiaries at that time. In 2011, Ms. Pan received a Bachelor degree from Simon Fraser University in Canada.

~~Zhiqiang~~Miller ~~Zhou~~Mays isIII ~~our~~has ~~Chief~~over ~~Technical~~40 ~~Officer~~years of international experience in creating, capitalizing and managing business platforms in numerous and varied industries, including public representations. Since 2008, Mr. ~~Zhou~~Mays has been ~~employed~~the byChief ~~Changzhou~~Executive ~~Huayue~~Officer inof ~~this~~Jones ~~capacity~~Production and Management L.L.C., ~~researching~~a company ~~and~~that ~~designing~~trades ~~new~~various ~~product~~fossil ~~lines~~fuel products via its chain of distributors and also purchases, ~~since~~cuts ~~2008~~and resells large loads of scrap metals domestically. He ~~will~~Mr. ~~lead~~Mays ~~the~~is ~~induction~~also ~~light~~currently ~~research~~the President and ~~development~~Chief ~~team~~Executive Officer of Mays Consulting LLC, ~~designing~~which holds ~~operating~~an ~~systems~~international ~~and~~license ~~hardware~~for ~~and~~medical ~~solving~~products ~~technology~~produced ~~issues~~by Tib Baroi Shumo LLC. Mr. ~~Zhou~~Mays ~~received~~earned ahis ~~Masters~~Bachelor ~~Degree~~of inBusiness ~~Electrical~~Administration from ~~Engineering~~Louisiana ~~and~~Technical ~~Information~~University ~~Systems~~ in ~~Canada~~1966, majoring in ~~2008~~Transportation & Logistics.

~~Han~~Randall ~~Zhou~~Satin has ~~been~~25 ~~employed~~years ~~since~~of ~~2010~~experience in asthe ~~chief~~lighting ~~accounting~~industry. ~~clerk~~He ofhas ~~Changzhou Huayue~~designed, ~~the~~supplied ~~operating~~and ~~subsidiary~~implemented ofLED ~~Huayue~~conversions ~~Electronics,~~for ~~and~~many ~~was~~luxury ~~elevated~~commercial toclients. Mr. Satin is now concentrating on the ~~position~~consumer ofmarket, ~~Chief~~proving ~~Financial~~that ~~Officer~~his ofsystems ~~Huayue~~have ~~Electronics~~the insame ~~June~~benefits ~~2013.~~for ~~From~~residential ~~2000~~use. toSince ~~2010~~1988, Mr. Satin ~~Zhou~~has ~~was~~been ~~employed~~the asPresident ~~chief~~and ~~financial~~cofounder ~~officer~~ of ~~Huawei~~1800 ~~Electronics~~NY BULBS, ~~which~~Ltd. ~~was~~Mr. anSatin ~~affiliate~~earned ofhis ~~Changzhou Huayue~~B. ~~In 2003 Mr~~A. ~~Zhou~~from ~~was~~The ~~awarded~~George aWashington ~~Masters Degree~~ University in ~~Industrial Accounting by the Shanghai Unversity of Finance and Economics~~1988.

Wenjun Li is our Chief Marketing Officer. He has been employed as Sales Director by Changzhou Huayue since 2010. From 2006 to 2010, Mr. Li was the Assistant Sales Manager for Jiangsu Nuoming Light Device Ltd. He served in the administration of the Shanxi Provincial Bureau of Education between 2000 and 2006. In 2007, Mr. Li received a Bachelor’s Degree in Chinese literature from China Northwest University and a Certificate in Corporate Management.33

~~Yile~~All ~~(“Lisa”)~~of ~~Pan. Since~~our ~~2012~~directors hold ~~Ms.~~offices ~~Pan~~until ~~has~~our ~~been~~next ~~employed~~annual asmeeting ~~Sales Manager by Changzhou Huayue, the operating subsidiary~~ of ~~Huayue Electronics. From 2011 to 2012 Ms. Pan was employed by Changzhou Huayue as Assistant to~~ the ~~General~~shareholders, ~~Manager. In~~and ~~2011~~until ~~Ms.~~their ~~Pan~~successors ~~was~~have ~~awarded~~been aqualified ~~Bachelor~~after ofbeing ~~Arts~~elected or ~~Degree with a major in Economics by the University of British Columbia~~appointed. Officers ~~Ms.~~serve ~~Pan’s~~at ~~parents are Shudong Pan and Xinmei Li, who are~~ the ~~members~~discretion of the board of directors ~~of Huayue Electronics, Inc~~.

All of our directors hold offices until the next annual meeting of the shareholders of the Company, and until their successors have been qualified after being elected or appointed. Officers serve at the discretion of the board of directors.

Audit Committee; Compensation Committee; Nominating Committee

~~The~~Our ~~Board~~board of ~~Directors~~directors have ~~has~~ not yet appointed an Audit Committee, a Compensation Committee or a Nominating Committee. The functions that would be performed by such committees are performed by ~~the~~our ~~Board~~board of ~~Directors~~directors. ~~The~~Our ~~Board~~board of ~~Directors~~directors does not have yet an “audit committee financial expert,” ~~as we have only recently become a U~~.~~S. public company.~~

Procedure for Nominating or Recommending for Nomination Candidates for Director

The Board of Directors will consider candidates recommended by shareholders. However, the Board has no plan to hold an annual meeting of shareholders unless and until the Company’s securities are listed on an exchange. In the meantime, any shareholder who wishes to recommend a candidate for the Board should address the recommendation in writing to the Chairman of the Board at the Company’s principal executive offices.

Code of Ethics

~~The~~We ~~Company~~have ~~has~~ not yet adopted a Code of Ethics that applies to ~~its~~our executive officers. ~~The~~ Our ~~Board~~board of directors intends to adopt such a code in the coming year.

Section 16(a) Beneficial Ownership Reporting Compliance

None of ~~the~~our officers, directors or beneficial owners of more than 10% of ~~the~~our ~~Company’s~~ common stock failed to file on a timely basis the reports required by Section 16(a) of the Exchange Act during the year ended May 31, ~~2014~~2015.

ITEM 11.

EXECUTIVE COMPENSATION

The following table sets forth ~~all~~the compensation ~~awarded to, earned by, or~~ paid ~~by Changzhou Huayue~~ to ~~Shudong~~our ~~Pan,~~named ~~the~~executive ~~Company’s~~officers ~~Chief Executive Officer, for services rendered~~ in ~~all~~our ~~capacities~~fiscal ~~to the Company during the~~ years ended May 31, ~~2014,~~2015 ~~2013~~ and ~~2012~~2014. There ~~were~~was no other executive officers whose total salary and bonus for the fiscal ~~year~~years ended May 31, 2015 and 2014 exceeded $100,000.

	Fiscal Year		Salary				Bonus				Stock Awards				Option Awards				Other Compensation
													Stock				Option				Other
Shudong Pan	2014			2,777				--				--				--				--
Name and Principal Position		Fiscal Year			Salary				Bonus				Awards				Awards				Compensation
	2013			2,777				--				--				--				--
Shudong Pan - former Chief Executive Officer		2015			$	2,777				-				-				-				-
	2012			2,777				--				--				--				--
		2014			$	2,777				-				-				-				-
Isaac H. Sutton - Chief Executive Officer*		2015			$	20,000				-				-				-				-

Mr. Pan resigned as our Chief Executive Officer, and Mr. Sutton was appointed our Chief Executive Officer, on April 27, 2015. Mr. Sutton’s salary was deferred in fiscal year 2015.

Employment Agreements

InOn ~~connection~~April 27, 2015, we entered into an employment agreement with ~~the~~Isaac ~~Company’s~~H. ~~acquisition~~Sutton ofto ~~Changzhou~~serve ~~Huayue~~as inour ~~September~~Chief ~~2011,~~Executive ~~the~~Officer. ~~Company~~The ~~entered~~agreement ~~into~~provides for an ~~Entrusted~~initial ~~Management~~term ~~Agreement~~of ~~with~~three ~~Pan~~years and ~~Shudong~~will ~~and~~terminate Lion ~~Xinmei~~April 27, ~~who~~2018. ~~were~~The ~~the~~employment ~~two~~agreement ~~principal~~will ~~managers~~be ofextended ~~Changzhou~~automatically ~~Huayue. The~~for ~~Entrusted~~successive ~~Management~~one-year ~~Agreement~~periods ~~provides~~thereafter unless ~~that~~we or Mr. ~~Pan~~Sutton ~~and~~gives ~~Ms.~~written Linotice (to the ~~“Managers”)~~other to allow the employment agreement to expire. Mr. Sutton will ~~serve~~be aspaid an ~~members~~initial annual base salary of ~~the~~$120,000. ~~Company’s~~In ~~Board~~addition, ofMr. ~~Directors~~Sutton ~~for~~will abe ~~three~~eligible to receive each year ~~term. They~~an ~~also~~incentive ~~undertake~~bonus ~~responsibility~~in an ~~for~~amount ~~day-~~up to~~-day~~ ~~management~~100% of ~~the~~his ~~Company~~base salary and ~~its~~a ~~subsidiaries,~~revenue ~~although~~bonus ~~they~~in ~~may~~an ~~engage~~amount ~~other~~equal ~~officers~~to ~~and~~0.75% ~~agent~~of tothe ~~assist~~amount ~~them~~by which our net revenues in such year exceed $25 million. In ~~compensation~~Subject ~~for~~to ~~their~~the ~~services,~~approval of the ~~Company~~Board, ~~issued~~we will also grant to ~~them~~Mr. 20Sutton a stock option to purchase 3,~~201~~000,~~500~~000 shares of ~~restricted~~our common stock~~. The~~ ~~shares~~at ~~may~~a ~~not~~price beper ~~transferred~~share ~~for~~not ~~three~~less ~~years,~~than ~~and~~the ~~then~~per-share nofair ~~more~~market ~~than~~value ~~4,040,300~~of ~~may~~the becommon ~~transferred~~stock inon the ~~any~~date ~~year~~of grant. In ~~addition,~~The ifoption ~~the~~will ~~Company’s~~vest ~~annual~~with ~~return~~respect onto ~~equity~~one-third ~~for~~of the ~~period~~shares ~~from~~on ~~September~~the 2,first ~~2011~~anniversary toof ~~September~~the 1,date ~~2014~~of isgrant ~~less~~and as ~~than~~to ~~five~~the ~~percent,~~remaining two-thirds of the shares ~~will~~in be24 ~~cancelled~~equal monthly installments thereafter.

The employment agreement also provides that Mr. Sutton will be entitled to participate in any short-term and long- term incentive plans generally available to executive officers, to participate with other executive officers in any of our employee fringe benefit plans, and to be reimbursed for certain business-related expenses. In addition, the employment agreement provides for certain benefits upon termination of Mr. Sutton’s employment under certain circumstances, including a change of control of our company, as defined in the employment agreement, and to certain death benefits.

Compensation of Directors

~~Shudong~~There ~~Pan~~was ~~and~~no Licompensation to ~~Xinmei are the only members of~~ our board of directors~~. They~~ ~~receive no compensation~~ for ~~service on~~ the ~~board,~~year ~~other~~ended ~~than~~May ~~the~~31, ~~compensation that they receive for service as officers of the Company~~2015.

Equity Grants

~~The~~Mr. ~~following~~Sutton ~~tables~~is ~~set~~entitled ~~forth~~to ~~certain~~receive ~~information~~an ~~regarding~~option to purchase 3,000,000 shares of our common stock at a price per share not less than the per-share fair market value of the common stock ~~options~~on ~~acquired~~the date of grant, as reasonably determined by the ~~Company~~Board (or a committee thereof). The option will vest with respect to thirty-three and one-third percent (33 ⅓%) of the shares subject to the option on the first anniversary of the grant date of the option. The remaining sixty-six and two-thirds percent (66 ⅔%) of the shares subject to the option will vest in twenty-four (24) substantially equal monthly installments thereafter. In each case, the vesting of the option is subject to Mr. Sutton’s continued ~~Chief~~employment ~~Executive~~by ~~Officer~~our ~~during~~company through the ~~year~~respective ~~ended~~vesting ~~May~~date. 31The maximum term of the option will be ten (10) years, subject ~~2014~~to ~~and~~earlier ~~those~~termination ~~options~~upon ~~held~~the bytermination ~~him~~of onMr. ~~May~~Sutton’s 31employment with our company, ~~2014~~a change in control of our company and similar events.

28At May 31, 2015, the option grant was still subject to Board approval.

Option Grants in the Last Fiscal Year

	Number of securities underlying option		Percent of total options granted to employees in fiscal		Exercise Price		Expiration		Potential realizable value at assumed annual rates of appreciation for option term
	granted		year		($/share)		Date			5%	10%
Shudong Pan		--		--		--		--		--	--

The following tables set forth certain information regarding the stock grants received by the executive officer named in the table above during the year ended May 31, 2014 and held by him unvested at May 31, 2014.

Unvested Stock Awards in the Last Fiscal Year

Number of Shares That Have Not Vested Market Value of Shares That Have Not Vested Shudong Pan -- --

ITEM 12.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The following table sets forth information known to us with respect to the beneficial ownership of our common stock ~~as of the date of this prospectus~~ by the following:

· each shareholder known by us to own beneficially more than 5% of our common stock; ~~· Shudong Pan, our Chief Executive Officer · each of our directors; and · all directors and executive officers as a group.~~

~~There~~· ~~are~~Isaac ~~31,327,741 shares of our common stock outstanding on the date of this report~~H. ~~Except~~ ~~as otherwise indicated~~Sutton, weour ~~believe~~Chief ~~that~~Executive the beneficial owners of the common stock listed below have sole voting power and investment power with respect to their shares, subject to community property laws where applicable. Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission.Officer

each of our directors; and

all directors and executive officers as a group.

There were 24,325,241 shares of our common stock outstanding on September 15, 2015. Except as otherwise indicated, we believe that the beneficial owners of the common stock listed below have sole voting power and investment power with respect to their shares, subject to community property laws where applicable. Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission.

In computing the number of shares beneficially owned by a person and the percent ownership of that person, we include shares of common stock subject to options or warrants held by that person that are currently exercisable or will become exercisable within 60 days. We do not, however, include these “issuable” shares in the outstanding shares when we compute the percent ownership of any other person.

2935

Beneficial Owner	Amount and Nature of Beneficial Ownership(1)		Percentage of Class
	Amount and Nature of		Percentage of
Pan Shudong(2)		13,079,370		41.8	%
Beneficial Owner	Beneficial Ownership (1)		Class
Li Xinmei(2)		13,079,370		41.8	%
Sutton Global Associates Inc. (2)		3,000,000		12.3	%
All officers and directors As a group (6 persons)		13,082,370		41.8	%
Isaac H. Sutton (2)		3,000,000		12.3	%
Huakang Zhou(3)		4,057,930		13.0	%
Shudong Pan / Ximmei Li (3)		3,079,370		12.7	%
Huaking Zhou (4)		4,722,153		19.4	%
Yunzhoung Wu		322,000		1.3	%
Yile Lisa Pan		-		0.0	%
Miller Mays III		-		0.0	%
Randall Satin		-		0.0	%
All officers and directors as a group (5 persons)		3,322,000		13.7	%

(1)	Except as otherwise noted, all shares are owned of record and beneficially.
(2)	Pan Shudong and Li Xinmei are married to each other. Accordingly, each is a beneficial owner of shares owned of record by the other. Their record ownership is: Pan Shudong - 10,809,000; Li Xinmei -2,270,370. The shares owned by Pan Shudong and Li Xinmei are restricted by the terms of the Entrusted Management Agreement dated September 2, 2011. In the event that the Company’s annual return on equity for the three years ended September 2, 2014 is less than five percent, the shares will be cancelled.
(3)	Includes 2,000,000 shares owned of record by Moutasia Capital Opportunity Fund, LLC, over which Mr. Zhou exercises voting and dispositional control, 1,000,000 shares owned of record by Mr. Zhou’s spouse, Xiaojin Wang, and 857,930 and 200,000 shares owned by Ying Wang and Lan Wang, respectively, over which Mr. Zhou exercises voting and dispositional control.

(1)

Except as otherwise noted, all shares are owned of record and beneficially.

~~ITEM~~(2) 13Represents ~~CERTAIN~~shares ~~RELATIONSHIPS~~owned ~~AND~~by ~~RELATED~~Sutton ~~TRANSACTIONS~~Global Associates, ~~AND~~Inc., ~~DIRECTOR~~which ~~INDEPENDENCE~~is controlled by Isaac H. Sutton, our Chief Executive Officer.

(3)

Shudong Pan and Xinmei Liare married to each other. Accordingly, each is a beneficial owner of shares owned of record by the other. Their record ownership is: Shudong Pan - 809,000; Li Xinmei -2,270,370. The shares owned by Shudong Pan and Xinmei Li are restricted by the terms of the Entrusted Management Agreement dated September 2, 2011.

(4)

Includes 2,000,000 shares owned of record by Moutasia Capital Opportunity Fund, LLC, over which Mr. Zhou exercises voting and dispositional control, 1,472,153, shares owned of record by Mr. Zhou’s spouse, Xiaojin Wang, and 600,000, 450,000 and 200,000 shares owned by Ying Wang, Hao Wang and Ian Wang, respectively, over which Mr. Zhou exercises voting and dispositional control.

ITEM 13.

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

Certain Relationships and Related Transactions

~~Changzhou~~None ~~Huayue~~noted ~~is one of several entities owned by our CEO, Shudong Pan, and/or members of his family. Since Changzhou Huayue was organized, the entities have utilized each~~ other than asdisclosed ~~sources~~in ofNote ~~raw~~6 ~~materials and as intermediate customers, thereby taking advantage of available cash flows and advantageous relationships. Prior~~ to ~~September~~the 2,consolidated ~~2011,~~financial ~~when Huayue Electronics acquired Changzhou Huayue, these transactions were not necessarily equivalent to arms-length~~statements. ~~Since that date, any purchases by Huayue from related parties or sales by Huayue to related parties have been carried out on fair market terms.~~

As a result of these recurrent transactions, Changzhou Huayue has throughout its history had amounts due to these related parties and due from these related parties. As of May 31, 2012 it owed $194,312 to two entities that are related parties, and was owed $1,390,074 by five entities and three persons who are related parties. All of those obligations were satisfied during the year ended May 31, 2013. During fiscal year 2014, the Company had related party obligations of $592,095 owing to the entities owned by the CEO’s family members at May 31, 2014.

Except as noted above, none of the officers or directors of Huayue Electronics has engaged in any transaction with Huayue Electronics or its subsidiaries during the past two fiscal years or the current fiscal year that had a transaction value in excess of the lesser of $120,000 or one percent of the average of the Company’s total assets as of May 31, 2014.

Director Independence

There are no members of our Board of Directors who are independent, as “independent” is defined in the rules of the NYSE Amex.

ITEM 14.

PRINCIPAL ACCOUNTANT FEES AND SERVICES

KCCW Accountancy Corporation was engaged to serve as ~~the~~our ~~Company’s~~ independent registered public accountant in August 2014. Previously, Friedman LLP served as ~~the~~our ~~Company’s~~ independent registered public accountant.

During the year ended May 31, 2015, we dismissed KCCW Accountancy Corp. and engaged Canuswa Accounting & Tax Services to serve as our independent registered public accountant.

Audit Fees

~~KCCW~~Canuswa ~~Accountancy~~Accounting & ~~Corporation~~Tax ~~billed~~Services ~~$40,000 to the Company for professional services rendered for the audit of financial statements for the fiscal year ended May 31, 2014. Friedman, LLP~~ billed $5045,000 to ~~the~~us ~~Company~~ for professional services rendered for the audit of financial statements for the fiscal year ended May 31, ~~2013~~2015.

KCCW Accountancy Corporation billed $40,000 to us for professional services rendered for the audit of financial statements for the fiscal year ended May 31, 2014.

Audit-Related Fees

KCCW Accountancy Corporation billed $5,000 for assurance and related services that are reasonably related to the performance of the fiscal 2014 audit or review of the quarterly financial statements. Friedman, LLP billed $5,000 to the Company during fiscal 2013 for assurance and related services that are reasonably related to the performance of the fiscal 2013 audit or review of the quarterly financial statements.

Tax Fees

~~KCCW~~None ~~Accountancy Corporation billed $0 to the Company during fiscal 2014 for professional services rendered for tax compliance, tax advice and tax planning~~noted. ~~Friedman, LLP billed $0 to the Company during fiscal 2013 for professional services rendered for tax compliance, tax advice and tax planning.~~

All Other Fees

~~KCCW~~None ~~Accountancy Corporation billed $0 to the Company in fiscal 2014 for services not described above~~noted. ~~Friedman, LLP billed $0 to the Company in fiscal 2013 for services not described above.~~

It is ~~the~~our policy ~~of the Company~~ that all services other than audit, review or attest services must be pre-approved by the Board of Directors. No such services have been performed by ~~KCCW~~Canuswa ~~Accountancy~~Accounting ~~Corporation~~& ,Tax ~~Friedman,~~Services ~~LLP~~ or byKCCW ~~GZTY~~Accountancy ~~CPA Group, LLC~~Corporation.

Subcontracted Services

The hours expended on KCCW Accountancy Corporation’s engagement to audit ~~the~~our ~~Company’s~~ financial statements for the year ended May 31, 2014 that were attributed to work performed by persons other than full-time permanent employees of KCCW Accountancy Corporation was not greater than 50% of the total hours expended.

31PART IV

ITEM 15 . EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a)

Exhibit List

3-a	Certificate of Incorporation - filed as an exhibit to the Company’s Registration Statement on Form 8-A on November 19, 2010 and incorporated herein by reference.
3.1	Certificate of Incorporation - filed as an exhibit to the Company’s Registration Statement on Form 8-A on November 19, 2010 and incorporated herein by reference.
3-a(1)	Certificate of Amendment of Certificate of Incorporation dated August 16, 2006 - filed as an exhibit to the Company’s Registration Statement on Form 8-A on November 19, 2010 and incorporated herein by reference.
3.2	Certificate of Amendment of Certificate of Incorporation dated August 16, 2006 - filed as an exhibit to the Company’s Registration Statement on Form 8-A on November 19, 2010 and incorporated herein by reference.
3-a(2)	Certificate of Amendment of Certificate of Incorporation dated October 17, 2011 - filed as an exhibit to the Company’s Current Report on Form 8-K on November 3, 2011 and incorporated herein by reference.
3.3	Certificate of Amendment of Certificate of Incorporation dated October 17, 2011 - filed as an exhibit to the Company’s Current Report on Form 8-K on November 3, 2011 and incorporated herein by reference.
3-b	Bylaws - Filed as an exhibit to the Company’s Registration Statement on Form 8-A on November 19, 2010 and incorporated herein by reference.
3.4	Bylaws - Filed as an exhibit to the Company’s Registration Statement on Form 8-A on November 19, 2010 and incorporated herein by reference.
10-a	Entrusted Management Agreement dated September 31, 2011 among HXT Holdings, Inc., Pan Shudong and Li Xinmei - filed as an exhibit to the Company’s Current Report on Form 8-K on September 2, 2011 and incorporated herein by reference.
10.1	Entrusted Management Agreement dated September 31, 2011 among HXT Holdings, Inc., Pan Shudong and Li Xinmei - filed as an exhibit to the Company’s Current Report on Form 8-K on September 2, 2011 and incorporated herein by reference.
21	Subsidiaries – China Metal Holding, Inc. a Delaware corporation
10.2	Partnership Interest Purchase Agreement, dated as of April 23, 2015, by and between the Company and Sutton Global Associates Inc. – filed as exhibit 2.1 to the Company’s Current Report on Form 8-K filed with the SEC on May 1, 2015 and incorporated herein by reference (The exhibits and schedules to the Asset Purchase Agreement have been omitted. The Company will furnish such exhibits and schedules to the SEC upon request.)
	Changzhou Huayue Electronic Co., Ltd., a joint stock company organized in the People’s Republic of China
10.3	Employment Agreement dated as of April 22, 2015 between the Company and Isaac H. Sutton – filed as exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on May 1, 2015 and incorporated herein by reference.
31.1	Rule 13a-14(a) Certification – CEO
10.4	Stock Purchase Agreement, dated June 12, 2015, between the Company and Shudang Pan – filed as exhibit 2.1 to the Company’s Current Report on Form 8-K filed with the SEC on June 25, 2015 and incorporated herein by reference.
31.2	Rule 13a-14(a) Certification - CFO
10.5	Shareholders’ Agreement dated as of June 12, 2015 among the Company and Shudang Pan, Xinmei Li, Kuanlian Peng, Hao Wang, Jianxin Li, Shurong Li and Sutton Global Associates Inc. – filed as exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on June 25, 2015 and incorporated herein by reference.
32	Rule 13a-14(b) Certifications
101 INS	XBRL Instance Document*
101 SCH	XBRL Schema Document*
101 CAL	XBRL Calculation Linkbase Document*
101 DEF	XBRL Definition Linkbase Document*
101 LAB	XBRL Labels Linkbase Document*
101 PRE	XBRL Presentation Linkbase Document*

* The XBRL related information in Exhibit 101 shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to liability of that section and shall not be incorporated by reference into any filing or other document pursuant to the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing or document.37

10.6*	Membership Interest Purchase Agreement dated as of September 10, 2015 between the Company and GoCOM Corporation. (The exhibits and schedules to the Membership Interest Agreement have been omitted. The Company will furnish such exhibits and schedules to the SEC upon request.)

21	Subsidiaries – 51% ownership interest in SavWatt Kazakhstan Ltd., a limited liability partnership organized under the laws of Kazakhstan.

31*	Rule 13a-14(a) Certification of principal executive officer and principal financial officer

32*	Rule 13a-14(b) Certification of principal executive officer and principal financial officer

101 INS*	XBRL Instance Document

101 SCH*	XBRL Schema Document

101 CAL*	XBRL Calculation Linkbase Document

101 DEF*	XBRL Definition Linkbase Document

101 LAB*	XBRL Labels Linkbase Document

101 PRE*	XBRL Presentation Linkbase Document

Filed herewith

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.

	HUAYUE ELECTRONICS, INC.
Date: September 15, 2014	By: /s/ Shudong Pan
Date: September 15, 2015	By:	/s/ Isaac H. Sutton
	Shudong Pan, Chief Executive Officer
	Chief Executive Officer

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

/s/ Shudong Pan	September 15, 2014
Name		Title		Date
Shudong Pan
/s/Isaac Sutton		Chief Executive Officer and Director (principal executive officer and principal accounting officer)	September 15, 2015
Director, Chief Executive Officer
Isaac Sutton
/s/ Han Zhou	September 15, 2014
/s/Yunzhoung Wu		Director	September 15, 2015
Han Zhou
Yunzhoung Wu
Chief Financial and Accounting Officer
/s/Yile Lisa Pan		Director	September 15, 2015
/s/ Li Xinmei	September 15, 2014
Yile Lisa Pan
Li Xinmei, Director
/s/Miller Mays III		Director	September 15, 2015
Miller Mays III
/s/Randall Satin		Director	September 15, 2015
Randall Satin

Filing Compare · Tarsier Ltd.