10-Q

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

_______________________

FORM 10-Q

_______________________

(Mark One)

[ X ] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the quarterly period ended March 31, 2011

OR

 [  ] 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: 001-34230

CHINA POWER TECHNOLOGY, INC.
(Exact name of registrant as specified in its charter)

Nevada	22-3969766
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)

No. 12, Gongyuan Road
Kaifeng City, Henan Province
People's Republic of China	475002
(Address of principal executive offices)	(Zip Code)

(86) 378-299-6222
(Registrant's telephone number, including area code)

N/A
(Former Name)
_______________________

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes [ X ] No [  ]

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

Yes [  ] No [  ]

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

Large accelerated filer [  ]	Accelerated filer [  ]
Non-accelerated filer [ X ]	Smaller reporting company [  ]
(Do not check if a smaller reporting company)

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

Yes [  ] No [ X ]

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: 10,925,960 shares of common stock, par value $0.001 per share, outstanding on May 13, 2011.

TABLE OF CONTENTS

PART I — FINANCIAL INFORMATION			1
	Item 1.	Financial Statements (unaudited)	1
	Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	2
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	11
	Item 4.	Controls and Procedures	12
PART II — OTHER INFORMATION			13
	Item 1.	Legal Proceedings	13
	Item 1A.	Risk Factors	13
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	13
	Item 3.	Defaults Upon Senior Securities	13
	Item 4.	(Removed and Reserved)	13
	Item 5.	Other Information	13
	Item 6.	Exhibits	13

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements (unaudited)

CHINA POWER TECHNOLOGY, INC. AND SUBSIDIARIES

_________________________________________________

Consolidated Financial Statements

March 31, 2011 (unaudited) and December 31, 2010

_________________________________________________

CHINA POWER TECHNOLOGY, INC. AND SUBSIDIARIES

CONTENTS

	Page
Consolidated financial statements:
Consolidated balance sheets	F-2
Consolidated statements of income and comprehensive income	F-3
Consolidated statements of cash flows	F-4
Notes to the consolidated financial statements	F-5~F-20

F-1

CHINA POWER TECHNOLOGY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Amounts in US$)

		March 31,		December 31,
		2011		2010
		(Unaudited)
ASSETS
Current assets
Cash and cash equivalents	$	22,786,815	$	18,777,744
Accounts receivable, net		27,655,085		22,264,573
Inventories		9,034,841		8,562,788
Amount due from noncontrolling stockholder		445,112		440,958
Prepayments and other receivables		3,080,770		3,010,447
Total current assets		63,002,623		53,056,510
Non-current assets
Property, plant and equipment, net		4,578,760		4,461,886
Land use rights, net		4,418,409		4,401,781
Long-term investment		763,347		756,224
Deferred tax assets		82,295		56,069
Intangible assets		5,844,147		6,130,176
Goodwill		1,721,979		1,705,910
Total non-current assets		17,408,937		17,512,046
Total assets	$	80,411,560	$	70,568,556
LIABILITIES AND EQUITY
Current liabilities
Accounts payable	$	5,484,841	$	3,646,232
Accrued expenses and other payables		4,754,565		5,447,110
Income tax payable		1,782,527		1,220,688
Short-term loans		3,053,388		3,024,895
Total current liabilities		15,075,321		13,338,925
Non-current liabilities
Deferred tax liabilities		1,461,037		1,532,544
Total liabilities		16,536,358		14,871,469
Commitments and contingences		-		-
Equity
Common stock (US$0.001 par value, 190,000,000 shares authorized, 10,925,960 shares outstanding as of March 31, 2011 and December 31, 2010, respectively)		10,926		10,926
Additional paid-in capital		17,045,055		17,045,055
Appropriated retained earnings		3,996,376		3,996,376
Unappropriated retained earnings		30,631,737		23,590,814
Accumulated other comprehensive income		4,729,040		4,159,901
Total stockholders’ equity		56,413,134		48,803,072
Noncontrolling interest		7,462,068		6,894,015
Total equity		63,875,202		55,697,087
Total liabilities and equity	$	80,411,560	$	70,568,556

See notes to the consolidated financial statements

F-2

CHINA POWER TECHNOLOGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(Amounts in US$, except shares and per share data)

		March 31,
		2011			2010
		(Unaudited)			(Unaudited)
Revenues	$	34,614,351		$	20,561,994
Cost of goods sold		22,468,740			13,635,697
Gross profit		12,145,611			6,926,297
Operating expenses
Selling expenses		1,005,814			677,951
General and administrative expenses		1,364,137			453,302
Total operating expenses		2,369,951			1,131,253
Income from operations		9,775,660			5,795,044
Other income (expenses)
Interest income		22,146			7,310
Interest expense		(48,561	)		(67,514	)
Others		2,071			3,981
		(24,344	)		(56,223	)
Income before income tax expense and noncontrolling interest		9,751,316			5,738,821
Income tax expense		2,144,147			1,178,356
Net income		7,607,169			4,560,465
Less: net income attributable to noncontrolling interest		566,246			-
Net income attributable to China Power’s common stockholders	$	7,040,923		$	4,560,465
Comprehensive income:
Net income	$	7,607,169		$	4,560,465
Foreign currency translation adjustment		570,546			4,161
Comprehensive income		8,178,115			4,564,626
Less: comprehensive income attributable to noncontrolling interest		(568,053	)		-
Comprehensive income attributable China Power’s common stockholders	$	7,610,062		$	4,564,626
Basic and diluted earnings per share	$	0.64		$	0.50
Weighted average common shares outstanding - basic and diluted		10,925,960			9,200,000

See notes to the consolidated financial statements

F-3

CHINA POWER TECHNOLOGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in US$)

		March 31,
		2011			2010
		(Unaudited)			(Unaudited)
Cash flows from operating activities
Net income	$	7,607,169		$	4,560,465
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization expenses		509,328			98,676
Change in operating assets and liabilities:
Accounts receivable		(5,164,309	)		2,486,710
Inventories		(390,149	)		1,622,387
Prepayments and other receivables		(450,151	)		(245,736	)
Accounts payable		1,798,625			(654,307	)
Deferred tax		111,286			-
Accrued expenses and other payables		523,868			(176,223	)
Income tax payable		548,590			182,908
Net cash provided by operating activities		3,823,949			7,874,880
Cash flows from investing activities
Purchase of property, plant and equipment		(1,535	)		(19,540	)
Net cash used in investing activities		(1,535	)		(19,540	)
Cash flows from financing activities
Dividends paid		-			(8,630,740	)
Net cash used in financing activities		-			(8,630,740	)
Effect of foreign currency exchange rate net changes in cash and cash equivalents		186,657			993
Net changes in cash and cash equivalents		4,009,071			(774,407	)
Cash and cash equivalents, beginning of period		18,777,744			6,124,516
Cash and cash equivalents, end of period	$	22,786,815		$	5,350,109
Cash paid during the period for:
Interest paid	$	48,561		$	67,514
Income tax paid	$	1,681,226		$	995,449

See notes to the consolidated financial statements

F-4

CHINA POWER TECHNOLOGY, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in US$)
(Unaudited)

1.	PRINCIPAL ACTIVITIES AND ORGANIZATION
	The consolidated financial statements include the financial statements of China Power Technology, Inc. (the “Company” or “China Power”) and its subsidiaries, China Niceview Power Technology Limited (“China Niceview”), Hong Kong Niceview Power Technology Co., Limited (“Hong Kong Niceview”), Kaifeng Nice View Power Technology Co., Ltd. (“Kaifeng Nice View”), Henan Kaifeng Desheng Boiler Co., Ltd. (“Desheng Boiler”), Henan Desheng Boiler Installation Co., Ltd. (“Desheng Installation”) and Shandong Fuyuan Equipment Installation Co., Ltd. (“Fuyuan Installation”). The Company and its subsidiaries are collectively referred to as the “Group”.
	Principal activities
	China Power, formerly named Lincoln Floorplanning Co., Inc., was incorporated on September 25, 2007 for the purpose of providing floor plan financing to used car dealerships in North Carolina at interest rates and fees competitive in the market place for this type of financing. However, it did not engage in any operations and was dormant from its inception until its reverse acquisition of China Niceview on June 1, 2010.
	On June 1, 2010, China Power completed a reverse acquisition transaction through a share exchange with China Niceview whereby China Power issued 36,800,000 new shares (9,200,000 as adjusted to reflect two subsequent reverse stock splits), representing 92% of its issued and outstanding shares on a fully-diluted basis immediately after the consummation of the reverse acquisition, to acquire 100% of the issued and outstanding shares of China Niceview. As a condition precedent to the consummation of the reverse acquisition, Ms. Sha Chen, the sole director and officer of the Company before the reverse acquisition, cancelled 4,898,750 (1,244,688 as adjusted to reflect two subsequent reverse stock splits), shares of China Power’s common stock owned by her. As a result of the reverse acquisition, China Niceview became China Power’s wholly- owned subsidiary, and Wise Winning Limited (“Wise Winning”), the former sole stockholder of China Niceview, became China Power’s controlling stockholder. The share exchange transaction with China Niceview was treated as a reverse acquisition, with China Niceview as the accounting acquirer and China Power as the acquired party. All the statements prior to June 1, 2010 were solely for Desheng Boiler and Desheng Installation.
	On June 16, 2010, the Company completed a private placement transaction with a group of investors (the “investors”), in which the Company issued to the investors an aggregate of 3,703,704 (925,928 as adjusted to reflect two subsequent reverse stock splits), shares of its common stock for an aggregate purchase price of approximately US$10 million, or US$2.70 per share ($10.80 per share as adjusted to reflect two subsequent reverse stock splits). The net proceeds after deducting offering cost amounted to approximately US$9.5 million.
	China Niceview was incorporated as a limited liability company on April 19, 2010, in British Virgin Islands (“BVI”), with registered capital of US$50,000.
	Hong Kong Niceview was incorporated as a limited liability company on April 27, 2010, in Hong Kong, with registered capital of HK$10,000.
	Kaifeng Niceview, a wholly-owned subsidiary of Hong Kong Niceview, was incorporated as a limited liability company on May 11, 2010 in Kaifeng city, Henan province, PRC, with registered capital of US$10,600,000.
	Desheng Boiler was incorporated in Kaifeng city, Henan province, People’s Republic of China (“PRC”) on April 28, 1997 with registered capital of Renminbi (“RMB”) 13,911,600. Desheng Boiler is engaged in manufacturing, sales and post-sale service of boilers, pressure containers and chemical industry equipments. The registered capital of Desheng Boiler was increased to RMB25,341,600 on May 24, 2004.
	Desheng Installation was incorporated in Kaifeng city, Henan province, PRC on April 23, 2007 with registered capital of RMB10,000,000. Desheng Installation is engaged in processing, technology and information consulting services of installation, reconstruction and maintenance of boilers.
	Fuyuan Installation was incorporated in Jinan city, Shandong province, People’s Republic of China (“PRC”) on August 9, 2001 with current registered capital of RMB50,160,000. Fuyuan Installation is engaged in boiler installation, other boiler-related services, high pressure pipe installation and the installation of other equipment.
	On July 1, 2010, Desheng Installation entered into an acquisition agreement (the “Acquisition Agreement”) with Mr. Shisen Zhang, one of the original owners of Fuyuan Installation. According to the Acquisition Agreement, Desheng Installation acquired 60% of the equity interests of Fuyuan Installation for cash consideration RMB63,000,000 (US$9.3 million).

F-5

CHINA POWER TECHNOLOGY, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in US$)
(Unaudited)

Reorganization

On May 19, 2010, China Niceview and Mr. Shiyong Fan, the sole stockholder of Hong Kong Niceview, entered into a share transfer agreement, pursuant to which Mr. Shiyong Fan transferred all his shares in Hong Kong Niceview to China Niceview, resulting in Hong Kong Niceview becoming a wholly-owned subsidiary of China Niceview.

Kaifeng Nice View entered into a loan agreement with Mr. Shiyong Fan to borrow approximately RMB35 million (approximately $5.2 million) from Mr. Shiyong Fan. The term of the loan was one year with no interest. Using the proceeds of the loan, Kaifeng Nice View acquired a 100% controlling interest in Desheng Boiler and Desheng Installation. The loan was cancelled pursuant to a loan cancellation agreement between Kaifeng Nice View and Mr. Shiyong Fan on May 28, 2010, resulting in the increase in additional paid-in capital of Kaifeng Nice View. According to the PRC taxation law, such waived liability from stockholder is deemed as income of the entity and subject to the PRC income tax. As a result, Kaifeng Nice View accrued the income tax payable at the applicable tax rate of 25%, and such tax liability was charged against additional paid-in capital, amounting to approximately RMB8.8 million (approximately US$1.3 million) accordingly.

On May 17, 2010, pursuant to various share transfer agreements signed between Kaifeng Nice View and Mr. Honghai Zhang, who wholly controls Desheng Boiler and Desheng Installation directly and indirectly, Mr. Honghai Zhang transferred all his controlling interests in Desheng Boiler and Desheng Installation to Kaifeng Nice view, resulting in Desheng Boiler and Desheng Installation becoming the wholly-owned subsidiaries of Kaifeng Nice View.

On May 6, 2010, Mr. Shiyong Fan granted Mr. Honghai Zhang an option to acquire all controlling interest in Wise Winning (the “Option Agreement”). The option will be exercisable by Mr. Honghai Zhang in the five-year period commencing on the date that is six months after the date on which a resale registration statement for the Company’s shares issued to the investors in the Company’s June 2010 private placement is declared effective by U.S. Securities and Exchange Commission (the “SEC”).

Before and after this reorganization, Mr. Honghai Zhang continued to serve as chairman and chief executive officer of Desheng Boiler and chairman of Desheng Installation (Desheng Boiler and Desheng Installation, together, the “Operating Subsidiaries”) and, together with other management of the Company, continued to direct both the day-to-day operating and management of the Operating Subsidiaries, as well as their strategic direction. At the time the parties entered into the Option Agreement, it was expected that Mr. Honghai Zhang would exercise the option and regain the ownership of the Company in accordance with the Option Agreement. Furthermore, under the Option Agreement, without Mr. Honghai Zhang’s prior consent, Mr. Shiyong Fan may not increase the number of authorized shares of capital stock of, or cause a change in control of, Wise Winning or any direct or indirect subsidiary or affiliate of Wise Winning. The reorganization plan effectively resulted in Mr. Honghai Zhang continuing to bear the residual risks and rewards related to the Operating Subsidiaries. Because of the reasons described above, the Company is substantively controlled by Mr. Honghai Zhang, and the Company continued to consolidate the Operating Subsidiaries during the reorganization. The reorganization transaction is considered as a transaction between the parties under common control and did not establish a new basis in the assets and liabilities of the Operating Subsidiaries.

As a result, during the reorganization, China Niceview, Hong Kong Niceview, Kaifeng Nice View, Desheng Boiler and Desheng Installation were under common control of Mr. Honghai Zhang. Therefore, the reorganization was effectively a legal recapitalization accounted for as transactions between entities under common control at the carry over basis, in a manner similar to pooling-of-interests accounting. The effect of the reorganization was applied retroactively to the prior year’s consolidated financial statements as if the current structure existed since inception.

Make good escrow agreement

In connection with the private placement transaction which is described in “Principle activities”, the Company also entered into a make good escrow agreement with Mr. Honghai Zhang, the investors, the lead investor and Escrow, LLC, as escrow agent, pursuant to which the parties agreed to the establishment of an escrow account into which Mr. Honghai Zhang delivered certificates evidencing 1,250,000 shares of common stock, to be held for the benefit of the investors in the event that the Company do not meet certain financial performance thresholds for fiscal years 2010 and/or 2011. Under the make good escrow agreement, Mr. Honghai Zhang agreed that if (i) the Company’s earnings per share for 2010 was less than $2.00 per share or (ii) the Company’s earnings per share for 2011 is less than $2.80 per share, he would transfer to the investors, on a pro rata basis and within ten business days after the filing of the annual report on Form 10-K for the respective fiscal year, an aggregate number of shares equal to (1) $10,000,000/(actual 2010 earnings per share*5.36) - 925,928, for 2010, or (2) $10,000,000/(actual 2011 earnings per share*3.80) - 925,928, for 2011. If the earnings per share for 2010 was not less than $2.00 per share, then one-half of the shares held in escrow shall be released back to Mr. Honghai Zhang, and if the earnings per share for 2011 is no less than $2.80 per share for 2011, then the remaining half of the shares held in escrow shall be released to Mr. Honghai Zhang. The earnings per share thresholds and the relevant components of the make good formula are to be calculated on a fully diluted basis and include adjustments for any stock splits, stock combinations, stock dividends or similar transactions. If the number of shares of common stock required to be delivered to the investors by Mr. Honghai Zhang exceeds 1,250,000, then Mr. Honghai Zhang shall be required to promptly deposit into escrow an additional 750,000 shares of common stock.

F-6

CHINA POWER TECHNOLOGY, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in US$)
(Unaudited)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a)	Change in reporting entity and basis of presentation
	The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in United Sates of America. (“U.S. GAAP”).
	The accompanying consolidated financial statements include the financial statements of the Company and its subsidiaries. All significant inter-company transactions and balances have been eliminated in consolidation.
	The reverse acquisition described in Note 1 was treated as recapitalization of the Company. As such, China Niceview is the continuing entity for financial reporting purposes. In a reverse acquisition the historical shareholder’s equity of the accounting acquirer prior to the merger is retroactively reclassified (a recapitalization) for the equivalent number of shares received in the merger after giving effect to any difference in par value of the registrant’s and the accounting acquirer’s stock by an offset in paid in capital. Therefore, the consolidated financial statements have been prepared as if China Niceview had always been the reporting company and then on the reverse acquisition date, had changed its name and reorganized its capital stock.
	Noncontrolling interest represents the ownership interests in a subsidiary that is held by owners other than the parent and is part of the equity of the consolidated group. The noncontrolling interest is reported in the consolidated statement of financial position within equity, separately from the parent’s equity. Net income or loss and comprehensive income or loss are attributed to the parent and the noncontrolling interest. If losses attributable to the parent and the noncontrolling interest in a subsidiary exceed their interests in the subsidiary’s equity, the excess, and any further losses attributable to the parent and the noncontrolling interest, is attributed to those interests.
	The consolidated interim financial information as of March 31, 2011 and for the three-month periods ended March 31, 2011 and 2010 have been prepared without audit, pursuant to the rules and regulations of the SEC. Certain information and footnote disclosures, which are normally included in consolidated financial statements prepared in accordance with U.S. GAAP have not been included, The interim consolidated financial information should be read in conjunction with the Financial Statements and the notes thereto, included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2010, previously filed with the SEC.
	In the opinion of management, all adjustments (which include normal recurring adjustments) necessary to present a fair statement of the Company’s consolidated financial position as of March 31, 2011, its consolidated results of operations and cash flows for the three-month periods ended March 31, 2011 and 2010, as applicable, have been made. The interim results of operations are not necessarily indicative of the operating results for the full fiscal year or any future periods.
	Reverse stock splits
	Effective November 23, 2010 and January 14, 2011, each two shares of then issued and outstanding common stock were reverse stock split into one share of common stock. These two reverse stock splits affected only issued and outstanding shares. The effects of the reverse stock splits were applied retroactively to the consolidated financial statements, as if the reverse stock splits were completed at the beginning of the periods presented. As such, the total number of the common stock shares outstanding as of December 31, 2010 was 10,925,960 shares.
(b)	Use of estimates
	The preparation of consolidated financial statements in conformity with U.S. GAAP requires the Group to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, depreciation period of property, plant and equipment, and related disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates.

F-7

CHINA POWER TECHNOLOGY, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in US$)
(Unaudited)

(c)	Cash and cash equivalents
	Cash includes not only currency on hand but demand deposits with banks or other financial institutions. Cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash and have original maturities of three months or less. No cash and cash equivalents are restricted as to withdrawal or usage.
(d)	Accounts receivable
	Accounts receivable are recognized and carried at original sales amounts less an allowance for uncollectible accounts, as needed.
	Accounts receivable are reviewed periodically as to whether they are past due based on contractual terms and their carrying value has become impaired. An allowance for doubtful accounts is recorded in the period in which loss is determined to be probable based on an assessment of specific evidence indicating doubtful collection, historical experience, account balance aging and prevailing economic conditions. Accounts receivable balances are written off after all collection efforts have been exhausted. No accounts receivable balance was written off for the three months ended March 31, 2011 and 2010, respectively.
(e)	Inventories
	Inventories are stated at lower of cost or market. Cost is determined using weighted average method. Inventory includes raw materials, work in process and finished goods. The variable production overheads are allocated to each unit of production on the basis of the actual use of the production facilities. The allocation of fixed production overheads to the cost of conversion is based on the normal capacity of the production facilities.
	Where there is evidence that the utility of inventories, in their disposal in the ordinary course of business, will be less than cost, whether due to physical deterioration, obsolescence, changes in price levels, or other causes, a provision is accrued.
(f)	Property, plant and equipment
	Other than those acquired in a business combination, property, plant and equipment are stated at historical cost less accumulated depreciation and impairment. The historical cost of acquiring an item of property, plant and equipment includes the costs necessarily incurred to bring it to the condition and location necessary for its intended use. If an item of property, plant and equipment requires a period of time in which to carry out the activities necessary to bring it to that condition and location, the interest cost incurred during that period as a result of expenditures for the item is a part of the historical cost. This item is categorized as construction in progress and is not depreciated until substantially all the activities necessary to bring it to the condition and location necessary for its intended use are completed.
	Depreciation of property, plant and equipment is calculated using the straight-line method (after taking into account their respective estimated residual value) over the estimated useful lives of the assets as follows.

		Residual
	Years	value
Buildings and improvements	20	5%
Machineries	7~10	5%
Office equipment and furnishing	5	5%
Motor vehicles	5~8	5%

Depreciation of property, plant and equipment attributable to manufacturing activities is capitalized as part of inventories, and expensed to cost of goods sold when inventories are sold.

Expenditures for maintenance and repairs are expensed as incurred.

The gain or loss on the disposal of property, plant and equipment is the difference between the net sales proceeds and the carrying amount of the relevant assets and is recognized in the consolidated statements of income.

Construction in progress represented capital expenditure in respect of direct costs of construction or acquisition and design fees incurred. Capitalization of these costs ceases and the construction in progress is transferred to the appropriate category of property, plant and equipment when substantially all the activities necessary to prepare the assets for their intended use are completed. Construction in progress is not depreciated.

F-8

CHINA POWER TECHNOLOGY, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in US$)
(Unaudited)

(g)	Land use rights
	Land use rights represent the exclusive right to occupy and use a piece of land in the PRC during the contractual term of the land use right. Land use rights are carried at cost and charged to expense on a straight line basis over the respective periods of the rights or the remaining period of the rights upon acquisition.
(h)	Intangible assets
	Intangible assets represent licenses for boiler and pressure pipe installation and unfinished contracts. The intangible assets are recognized at their fair values and amortized using straight-line method over their useful lives five years and three months for the licenses for boiler and pressure pipe installation and unfinished contracts, respectively.
(i)	Business combination
	For a business combination, the assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree were recognized at the acquisition date, measured at their fair values as of that date. In a business combination achieved in stages, the identifiable assets and liabilities, as well as the noncontrolling interest in the acquiree, were recognized at the full amounts of their fair values. In a bargain purchase in which the total acquisition-date fair value of the identifiable net assets acquired exceeds the fair value of the consideration transferred plus any noncontrolling interest in the acquiree, that excess in earnings was recognized as a gain attributable to the Group.
	Deferred tax liability and asset were recognized for the deferred tax consequences of differences between the tax bases and the recognized values of assets acquired and liabilities assumed in a business combination in accordance with Accounting Standard Codification (“ASC”) Topic 740-10.
	Goodwill represents the excess of acquisition costs over the fair value of tangible net assets and identifiable intangible assets of businesses acquired. Goodwill and certain other intangible assets deemed to have indefinite lives are not amortized. Intangible assets determined to have definite lives are amortized over their useful lives. Goodwill and indefinite lived intangible assets are subject to impairment testing annually as of the fiscal year-end or whenever events or changes in circumstances indicate that the carrying amount may not be fully recoverable, using the guidance and criteria described in ASC Topic 350, “Goodwill and Other Intangible Assets”. This testing compares carrying values to fair values and, when appropriate, the carrying value of these assets is reduced to fair value.
(j)	Long-term investment
	Long-term investment consists of ownership in the private financial institution, which the Group does not exercise significant influence, is accounted for under the cost method of accounting. Under cost method, the Group’s share of the earnings or losses of the investee are not reflected in investment gain or loss in the consolidated statement of income, unless the investee announces the dividend distribution.
(k)	Impairment of long-lived assets
	A long-lived asset (asset group) classified as held for sale is measured at the lower of its carrying amount or fair value less cost to sell. A long-lived asset is not depreciated (amortized) while it is classified as held for sale. A gain or loss not previously recognized that results from the sale of a long-lived asset (asset group) are recognized at the date of sale.
	A long-lived asset (asset group) is tested for recoverability whenever events or changes in circumstances indicate that its carrying amount may not be recoverable. An impairment loss is recognized only if the carrying amount of a long-lived asset (asset group) is not recoverable and exceeds its fair value. The carrying amount of a long-lived asset (asset group) is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset (asset group). The assessment is based on the carrying amount of the asset (asset group) at the date it is tested for recoverability, whether in use or under development. An impairment loss is measured as the amount by which the carrying amount of a long-lived asset (asset group) exceeds its fair value. There were no events or changes in circumstances that necessitated a review of impairment of long-lived assets as of March 31, 2011 and December 31, 2010.

F-9

CHINA POWER TECHNOLOGY, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in US$)
(Unaudited)

(l)	Foreign currency translation and transactions
	The Company, China Niceview and Hong Kong Niceview’s functional currency is the United States dollar (“US$”). The functional currency of the Company’s subsidiaries in the PRC is RMB.
	At the date a foreign currency transaction is recognized, each asset, liability, revenue, expense, gain, or loss arising from the transaction is measured initially in the functional currency of the recording entity by use of the exchange rate in effect at that date. The increase or decrease in expected functional currency cash flows upon settlement of a transaction resulting from a change in exchange rates between the functional currency and the currency in which the transaction is denominated is recognized as foreign currency transaction gain or loss that is included in determining net income for the period in which the exchange rate changes. At each balance sheet date, recorded balances that are denominated in a foreign currency are adjusted to reflect the current exchange rate.
	The Group’s reporting currency is US$. Assets and liabilities are translated to the reporting currency at the current exchange rate at the balance sheet dates, and revenues and expenses are translated at the average exchange rates during the reporting periods. Translation adjustments are reported in other comprehensive income.
(m)	Commitment and contingencies
	In the normal course of business, the Group is subject to loss contingencies, such as legal proceedings and claims arising out of its business, that cover a wide range of matters, including, among others, government investigations, product and environmental liability, and tax matters. In accordance with ASC Topic 450, the Group records accruals for such loss contingencies when it is probable that a liability has been incurred and the amount of loss can be reasonably estimated. Historically, the Group has not experienced any material service liability claims.
(n)	Appropriated retained earnings
	The income of the Company’s PRC subsidiaries is distributable to its stockholders after transfer to reserves as required by relevant PRC laws, regulations and the articles of association. Appropriations to the reserves are approved by the respective boards of directors.
	Reserves include statutory reserves and other reserves. Statutory reserves can be used to make good previous years’ losses, if any, and may be converted into capital in proportion to the existing equity interests of stockholders, provided that the balance after such conversion is not less than 25% of the registered capital. The appropriation of statutory reserve may cease to apply if the balance of the fund is equal to 50% of the entity’s registered capital. Pursuant to relevant PRC laws and articles of association of Desheng Boiler and Desheng Installation, the appropriation to the statutory reserves and other reserves is 15% of net profit after taxation of respective entity, as determined in accordance with PRC accounting standards and regulations. The results of operations reflected in the financial statements prepared in accordance with U.S. GAAP might differ from those reflected in the statutory financial statements of the Company’s subsidiaries.
(o)	Revenue recognition
	Sales of boilers
	The Group recognizes revenue from sales of boiler in accordance with ASC Topic 605. All of the following criteria must exist in order for the Group to recognize revenue: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred or services have been rendered; (3) price to the buyer is fixed or determinable; and (4) collectability is reasonably assured.
	Delivery does not occur until products have been shipped to the customers, risk of loss has transferred to the customers and customers’ acceptance has been obtained, or the Group has objective evidence that the criteria specified in customers’ acceptance provisions have been satisfied. The sales price is not considered to be fixed or determinable until all contingencies related to the sale have been resolved.
	In the PRC, value added tax (the "VAT") of 17% on invoice amount is collected in respect of the sales of goods on behalf of tax authorities. The revenues are recognized on the net basis.
	Installation, technology and information consulting services

F-10

CHINA POWER TECHNOLOGY, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in US$)
(Unaudited)

	The Group recognizes the revenue of installation and technology and information consulting services in accordance with ASC Topic 605-35, “Construction-Type and Production-Type Contracts”, using the percentage-of-completion method. Under this method, contract revenue is computed as that percentage of estimated total revenue that costs incurred to date bear to total estimated costs, after giving effect to the most recent estimates of costs to complete. Repair and maintenance service revenue is recognized when the services are delivered. From time to time, the Group will record costs and estimated profits in excess of billings for a contract. Revisions in costs and revenue estimates are reflected in the period in which the revisions are determined. Provisions for estimated losses on uncompleted contracts are made in the period in which such losses are determined without regard to the percentage-of-completion.
(p)	Research and development costs
	Research and development costs are expensed as incurred. These expenses consist of the costs of the Group’s internal research and development activities and the costs of developing new products and enhancing existing products. Research and development costs amounted to US$101,244 and US$409,067 for the three months ended March 31, 2011 and 2010 respectively were recorded in the general and administrative expenses and cost of goods sold .
(q)	Advertising
	Advertising which generally represents the cost of promotions to create or stimulate a positive image of the Group or a desire to buy the Group’s products and services, are expensed as incurred. Advertising costs amounted to nil and US$1,989 for the three months ended March 31, 2011and 2010 respectively were recorded in the selling expenses.
(r)	Retirement and other postretirement benefits
	Full-time employees of the Group in a government mandated defined contribution plan, pursuant to which certain pension benefits, medical care and other welfare benefits are provided to employees. Chinese labor regulations require that the Group makes contributions to the government for these benefits based on certain percentages of the employees’ salaries. The Group has no legal obligation for the benefits beyond the contributions made. The total amounts for such employee benefits, which were expensed as incurred, were US$422,140 and US$182,282 for the three months ended March 31, 2011 and 2010, respectively.
(s)	Income tax
	The Group follows ASC Topic 740 which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred income tax are recognized for the tax consequences in future years of differences between the tax bases of assets and liabilities and their financial reporting amounts at each period end based on enacted tax laws and statutory tax rates, applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.
(t)	Uncertain tax positions
	The Group follows ASC Topic 740 prescribes a more-likely-than-not threshold for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. This Interpretation also provides guidance on derecognition of income tax assets and liabilities, classification of current and deferred income tax assets and liabilities, accounting for interest and penalties associated with tax positions, accounting for income tax in interim periods, and income tax disclosures. The Group did not have any interest and penalties associated with tax positions and did not have any significant unrecognized uncertain tax positions as of March 31, 2011 and December 31, 2010.
(u)	Comprehensive income
	The Group follows ASC Topic 220, which establishes standards for reporting and display of comprehensive income, its components and accumulated balances. Comprehensive income is defined to include all changes in equity except those resulting from investments by owners and distributions to owners. Among other disclosures, ASC Topic 220 requires that all items that are required to be recognized under current accounting standards as components of comprehensive income be reported in a financial statement that is displayed with the same prominence as other financial statements. During the periods presented, the Group’s comprehensive income represents its net income and foreign currency translation adjustments.

F-11

CHINA POWER TECHNOLOGY, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in US$)
(Unaudited)

(v)	Earnings per share
	Earnings per share are calculated in accordance with ASC Topic 260. Basic earnings per share is computed by dividing income attributable to holders of common shares by the weighted average number of common shares outstanding during the period. Diluted earnings per common share reflects the potential dilution that could occur if securities or other contracts to issue common shares were exercised or converted into common shares. The Group did not have potential dilution on the earning per share for the three months ended March 31, 2011 and 2010.
(w)	Segment reporting
	The management has determined that the Group, as defined by ASC Topic 280-10, has two operating segments, for sales of products and for providing the installation, technology and information consulting services.
	As the Group generates all of its revenues from customers in the PRC, no geographical segments are presented.
(x)	Fair value measurements
	Financial instruments include cash and cash equivalents, accounts receivable, prepayments and other receivables, short-term loans, accounts payable and other payables. The carrying amounts of these financial instruments approximate their fair value due to the short term maturities of these instruments.
	The Group adopted ASC Topic 820-10, on January 1, 2008 for all financial assets and liabilities and non-financial assets and liabilities that are recognized or disclosed at fair value in the consolidated financial statements on a recurring basis (at least annually). ASC Topic 820-10 defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. The Group has not adopted ASC Topic 820-10 for non-financial assets and non-financial liabilities, as these items are not recognized at fair value on a recurring basis.
	ASC Topic 820-10 defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the Group considers the principal or most advantageous market in which it would transact and it considers assumptions that market participants would use when pricing the asset or liability.
	ASC Topic 820-10 establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. ASC Topic 820-10 establishes three levels of inputs that may be used to measure fair value:
	Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.
	Level 2 applies to assets or liabilities for which there are inputs other than quoted prices included within Level 1 that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model- derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.
	Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.
(y)	Recently issued accounting standards
	In 1st quarter of 2011, The Financial Accounting Standards Board (“FASB”) has issued ASU No. 2011-01 through ASU 2011-3, which are not expected to have a material impact on the consolidated financial statements upon adoption.
(z)	Concentration of risks

F-12

CHINA POWER TECHNOLOGY, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in US$)
(Unaudited)

Concentration of credit risk

Assets that potentially subject the Group to significant concentration of credit risk primarily consist of cash and cash equivalents, accounts receivable. As of March 31, 2011 and December 31, 2010, all of the Group’s cash and cash equivalents were deposited in financial institutions located in the PRC, which management believes are of high credit quality. Accounts receivable are typically unsecured and are derived from revenue earned from customers in the PRC. The risk with respect to accounts receivable is mitigated by credit evaluations the Group performs on its customers and its ongoing monitoring process of outstanding balances.

Concentration of customers

There are no revenues from any customers which individually represent greater than 10% of the total revenues for three months ended March 31, 2011 and year ended 2010.

Concentration of suppliers

The Group currently relies on some major suppliers as its source for steel plates and steel pipes, the primary raw material that is needed to produce its products. Raw materials are purchased only from pre-selected suppliers after evaluation, management believes that any of the current suppliers terminate their business arrangements with the Group or increase their prices of materials supplied, it would delay product shipments and materially adversely affect the Group’s business operations and profitability. A summary of the suppliers who individually accounted for 10% or more of the Group’s combined purchases is as follows:

	March 31,
	2011	2010
	(Unaudited)	(Unaudited)
Tianjin Seamless Pipe Factory Zhengzhou office Industry Co., Ltd.	16%	<10%

Current vulnerability due to certain other concentrations

The Group’s operations may be adversely affected by significant political, economic and social uncertainties in the PRC. Although the PRC government has been pursuing economic reform policies for more than 30 years, no assurance can be given that the PRC government will continue to pursue such policies or that such policies may not be significantly altered, especially in the event of a change in leadership, social or political disruption or unforeseen circumstances affecting the PRC’s political, economic and social conditions. There is also no guarantee that the PRC government’s pursuit of economic reforms will be consistent or effective.

The Group transacts all of its business in RMB, which is not freely convertible into foreign currencies. On January 1, 1994, the PRC government abolished the dual rate system and introduced a single rate of exchange as quoted daily by the People’s Bank of China (the “PBOC”). However, the unification of the exchange rates does not imply that RMB may be readily convertible into US$ or other foreign currencies. All foreign exchange transactions continue to take place either through the PBOC or other banks authorized to buy and sell foreign currencies at the exchange rates quoted by the PBOC. Approval of foreign currency payments by the PBOC or other institutions requires submitting a payment application form together with suppliers’ invoices, shipping documents and signed contracts.

Additionally, the value of RMB is subject to changes in central government policies and international economic and political developments affecting supply and demand in the PRC foreign exchange trading system market.

3. ACCOUNTS RECEIVABLE, NET

Accounts receivable consist of the following:

		March 31,			December 31,
		2011			2010
		(Unaudited)
Accounts receivable	$	27,984,266		$	22,590,682
Less: allowance for doubtful accounts		(329,181	)		(326,109	)
	$	27,655,085		$	22,264,573

F-13

CHINA POWER TECHNOLOGY, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in US$)
(Unaudited)

	The Group had a thorough review of the status of the accounts receivable and $329,181 and US$326,109 of allowance was provided for doubtful accounts as of March 31, 2011 and December 31, 2010, respectively.
4.	INVENTORIES
	Inventories consist of the following:

		March 31,		December 31,
		2011		2010
		(Unaudited)
Raw materials	$	2,704,141	$	3,193,148
Work in process		3,866,086		4,264,638
Finished goods		2,464,614		1,105,002
	$	9,034,841	$	8,562,788

5.	AMOUNT DUE FROM NONCONTROLLING STOCKHOLDER
	The amounts due from noncontrolling stockholder represented the prepayment to Mr. Shisen Zhang, the noncontrolling stockholder of Shandong Fuyuan, for the purpose of project advance. The balance was fully settled in May 2011.
6.	PREPAYMENTS AND OTHER RECEIVABLES
	Prepayments and other receivables consist of the following:

		March 31,		December 31,
		2011		2010
		(Unaudited)
Prepayments to suppliers	$	635,794	$	483,244
Prepayment for equipment		1,337,228		1,487,625
Prepayment for service fee		888,572		708,832
Other receivables		219,176		330,746
	$	3,080,770	$	3,010,447

7.	PROPERTY, PLANT AND EQUIPMENT, NET
	Property, plant and equipment consist of the following:

		March 31,			December 31,
		2011			2010
		(Unaudited)
Buildings and improvements	$	4,535,939		$	4,493,611
Machinery		3,891,459			3,690,731
Office equipment and furnishings		300,893			293,789
Motor vehicles		396,684			397,338
Construction in progress		1,488,990			1,475,095
		10,613,965			10,350,564
Less: accumulated depreciation		(6,035,205	)		(5,888,678	)
	$	4,578,760		$	4,461,886

The Group recorded depreciation expenses of US$142,079 and US$75,062 for the three months ended March 31, 2011 and 2010, respectively.

F-14

CHINA POWER TECHNOLOGY, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in US$)
(Unaudited)

	Certain buildings with an aggregate carrying value of US$1,460,654 and US$1,447,023 were pledged as collateral for bank loans as of March 31, 2011 and December 31, 2010 respectively.
8.	LAND USE RIGHTS, NET
	The following balances represented the land use rights of the Group as of the period ends presented:

		March 31,			December 31,
		2011			2010
		(Unaudited)
Land use rights	$	4,942,737		$	4,901,540
Less: accumulated amortization		(524,328	)		(499,759	)
	$	4,418,409		$	4,401,781

	Land use rights represent cost of the land use rights in respect of land located in the PRC. The Group recorded amortization expenses of US$24,569 and US$23,614 for the three months ended March 31, 2011 and 2010, respectively.
	All the land use rights were pledged as collateral for bank loans as of March 31, 2011 and December 31, 2010, respectively.
9.	INTANGIBLE ASSETS
	Intangible assets represent the licenses for boiler, and pressure pipe installation, which were acquired in the business combination with Fuyuan Installation on July 1, 2010, are amortized using straight-line method over their estimated useful life of five years.
	Intangible assets consist of the following:

		March 31,			December 31,
		2011			2010
		(Unaudited)
License for boiler installation	$	5,554,572		$	5,502,737
License for pressure pipe installation		1,320,895			1,308,570
Unfinished contracts		-			335,685
		6,875,467			7,146,992
Less: accumulated amortization		(1,031,320	)		(1,016,816	)
	$	5,844,147		$	6,130,176

	Total amortization expenses were US$342,680 and nil for the three months ended March 31, 2011 and 2010. As of March 31, 2011 license for boiler installation and pressure pipe installation has a remaining useful life of four years and three months, and will be amortized at US$1,028,040 in 2011, US$1,370,720 in each year from 2012 to 2014, and US$703,947 in 2015, respectively.
10.	LONG-TERM INVESTMENT
	According to a share purchase agreement entered into by and between Kaifeng Cigarettes Sales Company (“Kaifeng Cigarettes”) and Desheng Boiler dated December 31, 2005, Desheng Boiler purchased 0.4% of the equity interests of Kaifeng Municipal Commercial Bank from Kaifeng Cigarettes for consideration of RMB5,000,000, or approximately US$763,347, which accounted for 0.4% of the total registered capital of the bank. No dividends were received by Desheng Boiler from Kaifeng Municipal Commercial Bank during the three months ended March 31, 2011. No event or change in circumstance indicates that its carrying amount of the long-term investment is not recoverable, and no impairment was recognized during the three months ended March 31, 2011 and 2010, respectively.

F-15

CHINA POWER TECHNOLOGY, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in US$)
(Unaudited)

11.	SHORT-TERM LOANS
	Short-term loans consist of the following:

	March 31, 2011(unaudited)				December 31, 2010
	Interest	Maturity			Interest
Lender	rate	date		Balance	rate	Maturity date		Balance
Shanghai Pudong Development Bank	5.84%	July 19, 2011	$	3,053,388	5.84%	July 19, 2011	$	3,024,895
Total			$	3,053,388			$	3,024,895

All short-term loans were denominated in RMB for working capital purposes and were secured by buildings and land use rights, with weighted average balances of US$3,053,388 and US$4,616,485, and weighted average interest rates of 5.840% and 5.769% for the three months ended March 31, 2011 and 2010, respectively.

The following table summarizes the unused lines of credit:

March 31, 2011 (unaudited)

December 31, 2010

Starting

Maturity

Facility

Unused

Starting

Maturity

Facility

Unused

Lender

date

date

amount

facility

date

date

amount

facility

Shanghai Pudong Development Bank

Aug 12, 2008

Aug 11, 2011

$

4,580,083

$

1,526,695

Aug 12, 2008

Aug 11, 2011

$

4,537,342

$

1,512,447

	The above lines of credit were secured by buildings and land use rights and may be used for working capital and general corporate purposes. The unused credit facilities can be drawn upon demand if the Group complies with the underlying undertakings, that is pre-approval by lender regarding liquidation, bankruptcy, merger, split-up, restructuring, or disposal of material assets, or changes in shareholding structure.
12.	ACCRUED EXPENSES AND OTHER PAYABLES
	Accrued expenses and other payables as of the end of the periods presented consist of the following:

		March 31,		December 31,
		2011		2010
		(Unaudited)
Advance from customers	$	1,214,074	$	2,505,306
Payroll and welfare payable		943,493		715,277
VAT payable		366,971		62,825
Other taxes payable		577,255		436,655
Accrued expenses		40,940		56,509
Other payables		1,611,832		1,670,538
	$	4,754,565	$	5,447,110

The other payables mainly represent the amounts due to project managers for the purpose of boiler and pressure pipe installation, which will be settled when the projects are completed.

13.	RESTRICTED NET ASSETS
	As described in Note 2(n), the net income of the Group is distributable only after sufficient appropriation of reserves. Amounts restricted to transfer funds to the stockholder through loans, advances, or dividends, include paid-in capital, additional paid-in capital and reserve funds of the Group as determined pursuant to the PRC accounting standards and regulations, totaling approximately US$21,052,357 and US$21,052,357 as of March 31, 2011 and December 31, 2010 respectively. Therefore in accordance with Rules 504 and 4.08(e)(3) of Regulation S-X, the condensed parent company only financial statements are disclosed in Note 18.
14.	REVENUES
	Top ten customer aggregate sales and sales percentages for the periods presented are as follows:

F-16

CHINA POWER TECHNOLOGY, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in US$)
(Unaudited)

		Three Months Ended March 31,
		2011		2010
		(Unaudited)		(Unaudited)
Aggregated top 10 customer sales amount	$	7,728,221	$	6,535,930
Percent of total sales amount		22%		32%

F-17

CHINA POWER TECHNOLOGY, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in US$)
(Unaudited)

15.	TAXATION
	The Company and its’ subsidiaries each files their taxes individually.

1)	VAT
	Pursuant to the provisional regulation of the PRC on the VAT and its implementing rules, all entities and individuals (“taxpayers”) that are engaged in the sale of products in the PRC are generally required to pay the VAT at a rate of 17% of the gross sales proceeds received, less any deductible the VAT already paid or borne by the taxpayers. Further, when exporting goods, the exporter is entitled to a portion of or all the refund of VAT that it has already paid or incurred.
	Desheng Boiler is subject to the VAT at 17% for its revenues.
2)	Business Tax (“BT”)
	Pursuant to the provisional regulation of China on BT and its implementing rules, all entities and individuals that are engaged in providing services which are not subject to VAT in China are generally required to pay BT at a certain rate of the gross revenues from services.
	Desheng Installation is subject to BT at tax rate of 3% for its revenues from installation services and tax rate of 5% for its revenues from technology and information consulting services.
	Fuyuan Installation is subject to BT at tax rate of 3% for its revenues from installation services and other services.
3)	Income tax
	United States
	China Power is subject to United States tax at a tax rate of 34%. In the three months ended March 31, 2011 and 2010, the Company did not provide for U.S. income taxes on foreign subsidiary’s undistributed earnings as they will be permanently reinvested in foreign operations
	BVI
	China Niceview is incorporated in BVI and is governed by the income tax law of BVI. According to current BVI income tax law, the applicable income tax rate for China Niceview is 0%.
	Hong Kong
	Hong Kong Niceview was incorporated in the Hong Kong, and under the current laws of Hong Kong, is subject to Hong Kong income tax at a tax rate of 16.5%. In the three months ended March 31, 2011 and 2010, the Hong Kong Niceview did not provide for Hong Kong income taxes on the PRC subsidiary’s undistributed earnings as they will be permanently reinvested in the PRC operations.
	PRC
	In accordance with the relevant tax laws and regulations of the PRC, a company registered in the PRC is subject to income taxes within the PRC at the applicable tax rate on the taxable income. The statutory tax rate is 25%.
	Desheng Boiler was qualified as New and High-Tech Enterprise ("NHTE") before and after the EIT Law and therefore it enjoyed a preferential tax rate of 15% in calendar years of 2010 and 2011.
	Kaifeng Nice View and Desheng Installation and Fuyuan Installation were subject to the statutory tax rate of 25% in calendar years of 2010 and 2011.
	The following table reconciles the Group’s effective tax for the periods presented:

F-18

CHINA POWER TECHNOLOGY, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in US$)
(Unaudited)

		March 31,
		2011			2010
		(Unaudited)			(Unaudited)
Expected enterprise income tax at statutory tax rate	$	2,437,870		$	7,340,180
Effect of preferential tax rate		(302,213	)		(1,045,712	)
Expenses non-deductable for tax purpose		-			54,354
Additional deductable expenses		-			(22,128	)
Others		8,490			(7,472	)
Effective enterprise income tax	$	2,144,147		$	6,319,222

The significant components of income tax expense are as follows:

		March 31,
		2011			2010
		(Unaudited)			(Unaudited)
Current tax expenses	$	2,215,654		$	1,178,356
Deferred tax benefits		(71,507	)		-
Income tax expenses	$	2,144,147		$	1,178,356

Deferred tax assets and deferred tax liabilities reflect the tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purpose and the tax bases used for income tax purpose. The following represents the tax effect of each major type of temporary difference:

		March 31,		December 31,
		2011		2010
		(Unaudited)
Effect of deductible temporary differences on bad debt allowance	$	82,295	$	56,069
Effect of taxable temporary differences between assigned value of licenses for boiler installation and pressure pipe installation and their tax base in a business combination	$	1,461,037	$	1,532,544

16.	COMMITMENTS AND CONTINGENCIES
	The Group did not have any significant capital or lease commitments as of March 31, 2011 and December 31, 2010.
	The Group is not currently a party to any legal proceeding, investigation or claim which, in the opinion of the management, is likely to have a material adverse effect on the business, financial condition or results of operations.
	The Group did not record any contingencies as of March 31, 2011 and December 31, 2010.

F-19

CHINA POWER TECHNOLOGY, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in US$)
(Unaudited)

17.	SEGMENT REPORTING
	The management has determined that the Group, as defined by ASC 280-10, “Segment Reporting”, has two operating segments, for sales of boiler and for providing installation and other boiler related services and their financial summary is as follows:

						Installation and other boiler related
		Boiler manufacture				services				Total
		Three Months Ended March 31,				Three Months Ended March 31,				Three Months Ended March 31,
		2011		2010		2011		2010		2011		2010
		(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)
Revenues	$	16,533,509	$	13,492,866	$	18,080,842	$	7,069,128	$	34,614,351	$	20,561,994
Cost of goods sold		12,142,267		9,902,710		10,326,473		3,732,987		22,468,740		13,635,697
Operating expenses		1,334,998		978,723		1,034,953		152,530		2,369,951		1,131,253
Income tax expense		453,319		383,009		1,690,828		795,347		2,144,147		1,178,356
Segment profit		2,568,807		2,174,431		5,038,362		2,386,034		7,607,169		4,560,465
Expenditure for segment assets		1,535		19,540		-		-		1,535		19,540
Segment assets	$	36,532,907	$	23,286,087	$	41,029,265	$	8,069,845	$	77,562,172	$	31,355,932

18. PARENT COMPANY ONLY CONDENSED FINANCIAL INFORMATION

       Condensed balance sheets

		March 31		December31,
		2011		2010
		(Unaudited)
ASSETS
Investment in China Niceview	$	56,413,134	$	48,803,072
		56,413,134		48,803,072
LIABILITIES AND EQUITY
Stockholders' equity
Common stock (US$0.001 par value, 100,000,000 and 190,000,000 shares authorized, 10,925,960 shares outstanding as of March 31, 2011 and December 31, 2010, respectively)		10,926		10,926
Additional paid-in capital		17,045,055		17,045,055
Unappropriated retain earnings		39,357,153		31,747,091
Total stockholders’ equity		56,413,134		48,803,072
	$	56,413,134	$	48,803,072
Condensed statements of income
		March 31,
		2011		2010
		(Unaudited)		(Unaudited)
Operating income
Equity in profit of China Niceview	$	7,610,062	$	5,746,315
Net income	$	7, 610,062	$	5,746,315

F-20

CHINA POWER TECHNOLOGY, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Amounts in US$)
(Unaudited)

Condensed cash flow statements
		March 31,
		2011			2010
		(Unaudited)			(Unaudited)
Cash flows from operating activities:
Net income	$	7,610,062		$	5,746,315
Adjustments to reconcile net income to net cash provided by operating activities:
Equity in profit of China Niceview		(7,610,062	)		(5,746,315	)
Net cash provided by operating activities		-			-
Net change in cash and cash equivalents		-			-
Cash and cash equivalents, beginning of year		-			-
Cash and cash equivalents, end of year	$	-		$	-

	Basis of Presentation
	The parent company only condensed financial statements have been provided pursuant to the requirements of Rule 12-04(a), 5-04(c) and 4-08(e)(3) of Regulation S-X, which require condensed financial statements as to the financial position, changes in financial position and results of operations of a parent company as if the same dates and for the same periods for which audited consolidated financial statements have been presented when the restricted net assets of the consolidated and unconsolidated subsidiaries (including variable interest entities) together exceed 25 percent of consolidated net assets as of the end of the most recently completed fiscal year. As of March 31, 2011, US$21,052,357 of the restricted net assets was not available for distribution, and as such, the condensed financial statements of the Company have been presented for March 31, 2011 and December 31, 2010, and the three months ended March 31, 2011 and 2010.
	For the presentation of the parent company only condensed financial information, the Company records its investment in subsidiaries under the equity method of accounting as prescribed in ASC Topic 313. Such investment is presented on the balance sheets as “Investment in China Niceview” and 100% of the subsidiary profit or loss as “Equity in profit of China Niceview” on the statements of income.
19.	EARNINGS PER SHARE

		March 31,
		2011		2010
		(Unaudited)		(Unaudited)
Net income attributable to China Power’s common stockholders	$	7,040,923	$	4,560,465
Basic and diluted earnings per share	$	0.64	$	0.50
Weighted average common shares outstanding- basic and diluted		10,925,960		9,200,000

20.	SUBSEQUENT EVENT
	The Group has evaluated subsequent events through the issuance of the consolidated financial statements and no subsequent event is identified.

F-21

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Use of Defined Terms

Except as otherwise indicated by the context, references to:

• “we,” “us,” “our,” “our Company,” or “the Company” are to the combined business of China Power and its consolidated subsidiaries, China Niceview, Hong Kong Niceview, Kaifeng Nice View, Desheng Boiler, Desheng Installation and Fuyuan Installation, but do not include the stockholders of China Power; • “BVI” are to the British Virgin Islands;

• “CAGR” are to compound annual growth rate;

• “China Niceview” are to China Niceview Power Technology Limited, a BVI company;

• “China Power” are to China Power Technology, Inc., a Nevada corporation;

• “Desheng Boiler” are to Henan Kaifeng Desheng Boiler Co., Ltd., a PRC company;

• “Desheng Installation” are to Henan Desheng Boiler Installation Co., Ltd., a PRC company;

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

• “Fuyuan Installation” are to Shandong Fuyuan Equipment Installation Co., Ltd., a PRC company;

• “Hong Kong” are to the Hong Kong Special Administrative Region of the People’s Republic of China;

• “Hong Kong Niceview” are to Hong Kong Niceview Power Technology Co., Limited, a Hong Kong company;

• “Kaifeng Nice View” are to Kaifeng Nice View Power Technology Co., Ltd., a PRC company;

• “PRC” and “China” are to the People’s Republic of China;

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

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

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

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

Forward-Looking Statements

This Quarterly Report on Form 10-Q contains statements that constitute “forward-looking statements” within the meaning of Section 21E of the Exchange Act and Section 27A of the Securities Act. The words “may,” “will,” “expect,” “anticipate,” “continue,” “estimate,” “project,” “intend,” and similar expressions are intended to identify forward-looking statements. These statements appear throughout this Quarterly Report and include statements regarding the intent, belief or expectations of the Company and our directors or officers with respect to events, conditions, and financial trends that may affect our future plans of operations, business strategy, operating results, and financial position. Persons reviewing this Quarterly Report are cautioned that any forward-looking statements are not historical facts or guarantees of future performance and are subject to risks and uncertainties and that actual results may differ materially from those included within the forward-looking statements as a result of various factors. These risks and uncertainties include, but are not limited to, the factors mentioned in the “Risk Factors” section of our Annual Report on Form 10-K for the fiscal year ended December 31, 2010, and other risks mentioned in this Quarterly Report or in our other reports filed with the SEC.

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Although these forward-looking statements, and any assumptions upon which they are based, are made in good faith and reflect our current judgment regarding the direction of our business, actual results will almost always vary, sometimes materially, from any estimates, predictions, projections, assumptions or other future performance suggested herein. Except as required by law, we undertake no responsibility or obligation to update publicly these forward-looking statements, but may do so in the future in written or oral statements. Investors should take note of any future statements made by us or on our behalf.

The following discussion should be read in conjunction with our unaudited consolidated financial statements and the related notes that appear in Part I, Item 1, “Financial Statements,” of this Quarterly Report. Our unaudited consolidated financial statements are stated in United States Dollars and are prepared in accordance with GAAP. The following discussion and analysis covers the Company's unaudited consolidated results of operations for the three month periods ended March 31, 2011 and 2010.

Overview

We are a leading manufacturer of circulating fluidized bed, or CFB, industrial boilers in China. CFB boilers represent a clean, energy efficient combustion technology characterized by high thermal efficiency and low pollution emission. According to an industry research report, our 2009 market share in China’s CFB industrial boiler industry was 14.0% in terms of sales revenues, making us the second largest enterprise in the industry. We have two major business segments: (i) industrial boiler manufacturing business, and (ii) installation and services business. Our headquarters and primary production facilities are located in Kaifeng City of Henan Province in China.

Demand for energy conservation and environmental protection has led to increased demand for our products and services. Compared to traditional grate boilers, CFB boilers have lower emission of sulphur dioxide and nitrogen dioxide, higher thermal efficiency of up to 90%, better load adjustability and lower carbon content in ash. The growth in CFB boilers in China has outpaced traditional boilers as demonstrated by the fact that steam capacity and sales value for CFB industrial boilers increased at compound annual grown rates, or CAGRs, of approximately 22.7% and 32.3% from 2004 to 2009, respectively, while those for industrial boilers increased at CAGRs of approximately 15.7% and 25.5%, respectively, during the same period. In addition, according to the 11th Five-Year Plan of China, existing small to medium coal fired boilers are required to be replaced by CFB boilers or pulverized coal fired boilers in order to enhance thermal efficiency. The 11th Five Year Plan also calls for a 20% reduction in energy content per unit of gross domestic product, or GDP, which we anticipate will further increase the rate of installation of CFB boilers. In light of these stated goals and other favorable government policies that encourage energy efficient and environmentally friendly businesses, along with our position as one of the few total solutions providers of CFB industrial boilers, we believe we are well positioned to capitalize on the business opportunities arising from the growing trend in demand for CFB boilers.

Our manufacturing business consists of the design, development, manufacture and sale of CFB industrial boilers. Our product range, which consists of 143 models in 12 series with steam capacity ranging from 4 tons/hour to 75 tons/hour, is sufficiently broad to meet most industrial needs for heat or steam generation and to accommodate most choices of fuel. In 2010, we sold boilers with a total steam capacity of 4,861 tons/hour, compared with 4,023 tons/hour in 2009. We operate our industrial boiler manufacturing business through our subsidiary Desheng Boiler. Desheng Boiler has more than 50 years of operating history. Its operations can be traced back to Kaifeng Boiler Factory, which jointly designed and developed China’s first generation CFB boilers with the Chinese Academy of Sciences in 1987. Over the years, we have successfully established a well known brand name, Kai Guo ( ).

Our installation and services business consists of installation services for boilers, pressure pipes, other equipment and a broad range of ancillary value-added services, including performance enhancement services, such as testing, desulphurization, denitrification and coating, and design and maintenance services, such as boiler room planning and operational support. Our installation team, which consists of approximately 1,600 full-time and part-time technicians divided into 53 sub-teams, is one of the largest among boiler manufacturers in China. We operate our installation and services business through our subsidiaries Desheng Installation and Fuyuan Installation. Desheng Installation has over 20 years of boiler installation experience and primarily supports customers who purchase CFB industrial boilers from Desheng Boiler. Fuyuan Installation has almost ten years of boiler installation experience and is primarily engaged in the installation of various types of boilers, including large power plant boilers, and high pressure pipes. Our installation and services business generally recognizes higher gross margins compared to our manufacturing business.

3

Our principal business office is located in China at No. 12 Gongyuan Road, Kaifeng City, Henan Province 475002. The telephone number at our executive offices is (86) 378 299 6222. We maintain a website at www.chinapowerti.com that contains information about our Company, but that information is neither part of this report nor incorporated herein by reference.

As of March 31, 2011, we had 1,510 employees. Our facilities occupy an area of 75,185 square meters.

Recent developments

As previously disclosed, on May 9, 2011, the Company’s board of directors appointed Marcum Bernstein & Pinchuk LLP (“MarcumBP”) as its independent registered public accounting firm for the fiscal year ending December 31, 2011. The Company’s previous independent registered public accounting firm, Bernstein & Pinchuk (“B&P”), entered into a joint venture agreement with MarcumBP in a transaction pursuant to which, effective April 18, 2011, B&P merged its China operations into MarcumBP and certain of the professional staff of B&P joined MarcumBP. Accordingly, as of April 18, 2011, B&P resigned as the Company’s independent registered public accounting firm.

First Quarter Financial Performance Highlights

The following are some financial highlights for the third quarter of 2010:

• Sales Revenue: Sales revenue increased $14.0 million, or 68.3%, to $34.6 million for the first quarter of 2011 from $20.6 million for the same period of last year.

• Gross Profit: Gross profit of $12.1 million represented 35.1% of sales revenue for the first quarter of 2011, compared with gross profit of $6.9 million that represented 33.7% of sales revenue for the same period in 2010.

• Net Income attributable to China Power’s common stockholders: Net income attributed to our stockholders increased $2.5 million, or 54.4%, to $7.0 million for the first quarter of 2011, from $4.6 million for the same period of last year.

• Basic and diluted net income per share: Basic and diluted net income per share was $0.64 for the first quarter of 2011, compared with $0.50 for the same period last year.

Key Statements of Income and Comprehensive Income Items

Revenues

We derive our revenues from selling boilers and providing installation and other boiler-related services to customers. We generally enter into two separate agreements with our customers, one for the sale and one for the installation and/or other services.

Manufacturing Business. We sell our boilers to PRC customers in a wide range of industries, including chemicals, machinery, food and beverage, fabric printing and dyeing, paper and paper products, pharmaceutical, coal mining, and utilities. We also sell our boilers to distributors for resale for domestic heating purposes. It takes about two to three months to manufacture a boiler depending on its size. We recognize the revenue from sale of a boiler upon delivery of the boiler. Between 5% and 10% of the purchase price of a boiler is deferred until the end of the warranty period of generally one year to one and one-half years, and we record the deferred amount as a receivable.

4

Installation and Services Business. In most cases, a customer that purchases a boiler from us also engages us to install the boiler. It takes another two to three months to complete the installation of a boiler. We recognize revenue from our installation service according to the percentage of completion method. In addition to the installation of CFB boilers, our installation and services business also includes the installation of power plant boilers and pressure pipes for customers and general maintenance of boilers. The table below sets forth, for the periods indicated, revenues in our two business segments:

		Three Months Ended March 31,
		2011		2010
Manufacturing	$	16,533,509	$	13,492,866
Installation and Services		18,080,842		7,069,128

Cost of Goods Sold

Our two business segments have different cost structures.

Manufacturing. The cost of goods sold for our manufacturing business primarily consists of costs of raw materials, direct labor, manufacturing supplies, depreciation, electricity and other utilities. The principal raw materials for our manufacturing business are steel plates and steel pipes and boiler-related supplies. The price of our principal raw materials, such as steel plates and steel pipes, depend on the price of steel. Steel is a commodity whose price depends on world economic conditions and global demand. We keep a small inventory of steel plates and steel pipes. Generally, once the specifications of the selected model has been determined, we enter into a definitive contract with the customer, specifying the price and delivery schedule. Then we procure the steel plates and pipes for the model. By keeping the time between signing purchase contracts with customers and procurement of steel plates and pipes short, we have been able to reduce our susceptibility to price swings in steel and generally have been able to pass a substantial part of price increase to our customers. On the other hand, we generally do not benefit from decrease in steel prices, especially on orders won by bidding as we have to price our boilers competitively in view of other bidders. Transportation cost is generally borne by customers.

Installation and Services. The cost of goods sold for our installation and services business primarily consists of the cost of installation materials and labor cost. Installation materials include anti-flammable materials and materials used to connect different parts of boilers. Fuyuan Installation’s boiler installation business has a similar cost structure. Fuyuan Installation requires much less raw materials for its pressure pipe installation business, so labor cost accounts for most of the cost of goods sold for the pressure pipe installation business.

The table below sets forth, for the periods indicated, the cost of goods sold in our two business segments:

		Three Months Ended March 31,
		2011		2010
Manufacturing	$	12,142,267	$	9,902,710
Installation and Services		10,326,473		3,732,987

Gross Profit Margin

Manufacturing. We believe our manufacturing business has a favorable gross profit margin compared with our competitors. While many other boiler producers only manufacture the main parts of boilers and outsource the supplementary parts to other smaller factories, we produce both main parts and supplementary parts ourselves. Like other companies in industrial manufacturing businesses, we have relatively high fixed costs. Consequently, the marginal cost for producing supplementary parts is relatively low. We started to produce CFB boilers in the late 1980s and a lot of our machines are fully depreciated from an accounting standpoint, but these machines are still in good working condition due to our regular maintenance work. The lower depreciation expenses help us to maintain a high profit margin. We are planning to upgrade some of our machines to improve our efficiency and increase our production capacity. As that will be a gradual process, it will not have a significant impact on our profit margin. Kaifeng, where our production facility is based, has a lower cost of living compared to the more developed cities in China and labor cost is relatively low compared with other, more developed areas. All these factors contribute to a higher profit margin for us.

5

Compared to power plant boilers, which are usually larger in steam capacity and standardized in technology parameters, CFB industrial boilers generally have numerous uses and generally must be tailored to meet the specific needs and constraints of widely varying industrial processes and specific application conditions, including the mix of available fuels, the application of steam, the space limitations in a particular plant. We offer a comprehensive suite of CFB industrial boilers with 143 models in 12 series with steam capacities ranging from 4 tons/hour to 75 tons/hour, which is sufficiently broad enough to meet most industrial needs for heat or steam generation and to accommodate most choices of fuel. Due to the comprehensive suite of product offerings, value-added customization as well as the non-standard features of our CFB industrial boilers, we usually have greater pricing power and enjoy higher gross margin relative to manufacturers of power plant boilers.

Installation and Services. Our installation and services business normally enjoys a higher gross margin compared with our manufacturing business. Because a major part of our installation and services business involves boilers designed, produced and sold by us, we are able to recognize a significant profit margin for two main reasons. First, as a total solutions provider, we can take advantage of the economies of scale by providing full service to our customers and installing boilers with which we are familiar. Second, the knowledge we have accumulated over our long history of providing installation services allows us to keep our costs low. Our installation teams are very familiar with the features of the boilers we produce. Most customers recognize our competitive advantages as a boiler-related services provider and are willing to pay us a premium for more effective installation and maintenance services. In 2009, we introduced two new services, the boiler room design service and the boiler operation service, which were well accepted by our customers. Because we have been in this field for a long time, we have experienced employees to render such services. Thus we did not need to hire more staff to provide such services and, as a result, the gross margin for these two services are high.

The table below sets forth, for the periods indicated, gross profit in our two business segments:

		Three Months Ended March 31,
		2011		2010
Manufacturing	$	4,391,243	$	3,590,156
Installation and Services		7,754,368		3,336,141

Operating Expenses

Operating expenses primarily consist of selling expenses and general and administrative expenses.

Selling Expenses. Selling expenses primarily consist of sales commission, base salary of sales and marketing personnel, advertisement expenses and travel expenses among which sales commission is the single large selling expense. Sales commission for a period is calculated based on a fixed percentage of the realized sales amount in the period.

General and Administrative Expenses. General and administrative expenses primarily consist of salary of administrative personnel, social benefit, amortization and depreciation, entertainment, travelling, office supplies and utilities.

Interest Expense

Interest expense consists primarily of interest on our outstanding indebtedness.

Taxation

China Power is subject to United States tax at a tax rate of 34%. No provision for income taxes in the United States has been made as China Power had no U.S. taxable income for the first quarters of 2011 and 2010.

6

China Niceview was incorporated in the BVI and under the current laws of the BVI, is not subject to income taxes.

Hong Kong Niceview was incorporated in Hong Kong, and under the current laws of Hong Kong, is subject to Hong Kong profits tax, assessed on Hong Kong-sourced profits only, at a tax rate of 16.5% .

Desheng Boiler was certified as a New and High-Tech Enterprise and was subject to enterprise income tax at a preferential tax rate of 15% for the three months ended March 31, 2011 and 2010. Desheng Installation and Fuyuan Installation were each subject to enterprise income tax at a rate of 25%. See Item 1 “Business—PRC Government Regulations—Taxation” for more information regarding the EIT Law and its implementation.

Results of Operations

Comparison of three months ended March 31, 2011 and March 31, 2010

		Three Months Ended
		March 31,
		(unaudited)
		2011		2010		$ Change	%Change
		(In thousands, except percentages)
Statement of Operations data
Revenues	$	34,614		20,562		14,052	68.3 %
Cost of goods sold		22,469		13,636		8,833	64.8 %
Gross profit		12,145		6,926		5,219	75.4 %
Operating expenses
Selling expenses		1,006		678		328	48.4 %
General and administrative expenses		1,364		453		911	200.9 %
Total operating expenses		2,370		1,131		1,239	109.5 %
Income from operations		9,775		5,795		3,980	68.7
							%
Interest income		22		7		15	214.3 %
Interest expenses		(48	)	(68	)	20	(29.4	) %
Others		2		4		2	(50.0	)
Other expenses		(24	)	(57	)	37	(64.9	)
Income before income tax expense and noncontrolling interest		9,751		5,738		4,013	69.9 %
Income taxes		2,144		1,178		966	82.0 %
Net income before noncontrolling interest		7,607		4,560		3,047	66.8 %
Net income attributable to noncontrolling interest		566		-		566	N/A %
Net income attributable to China Power’s common stockholders	$	7,041		4,560		2,481	54.4 %

Revenues. Revenues increased $14.0 million, or 68.3%, to $34.6 million in the three months ended March 31, 2011 from $20.6 million in the same period of 2010. The increase was mainly due to two factors. First, our scale of operations increased after the acquisition of Fuyuan Installation during the third quarter of 2010. Second, our sales activities increased partly as a result of more stringent environmental control by local governments.

As a result of the foregoing, our revenues from the manufacturing business increased by $3.0 million, or 22.5%, to $16.5 million in the three months ended March 31, 2011 from $13.5 million in the same period of 2010. We sold boilers with a total capacity of 1,567 steam tons in the three months ended March 31, 2011, as compared to 1,268 steam tons in the same period of 2010. The average size of the boilers sold in first quarter of 2011 was relatively smaller compared with the same period of 2010. However, we raised our boiler selling prices to partially shift the increase of raw material prices to customers. Therefore, the average selling price per steam ton remained stable, which was $10,551 and $10,641 in the first quarter of 2011 and 2010, respectively. Revenues from the installation and services business increased by $11.0 million, or 155.8%, to $18.1 million in the first quarter of 2011 from $7.1 million in the first quarter of 2010. The significant increase was mainly due to the consolidation of $6.6 million in revenues from Fuyuan Installation in the first quarter of 2011.

7

Cost of Goods Sold. Our cost of goods sold increased $8.9 million, or 64.8%, to $22.5 million in the three months ended March 31, 2011 from $13.6 million in the same period of 2010. This increase was mainly due to an increase in the total capacity of boilers produced. As a percentage of revenues, cost of goods sold decreased from 66.3% in the first quarter of 2010 to 64.9% in the first quarter of 2011. For the manufacturing business, certain types of steel plates and steel pipes had higher average prices compared to 2010. Cost of goods sold as a percentage of revenues for the installation and services business increased slightly to 57.1% for the first quarter of 2011 from 52.8% in the first quarter of 2010. The slight increase was mainly due to the consolidation of the operating results of Fuyuan Installation, which had a higher cost of goods sold as a percentage of revenues at 59.7%, compared with that of Desheng Installation at 55.0% .

Gross Profit. As a result of the foregoing, our gross profit increased $5.2 million, or 75.4%, to $12.1 million during the three months ended March 31, 2011 from $6.9 million in the same period of 2010. Gross profit margin was 35.1% in the first quarter of 2011 as compared to 33.7% in the first quarter of 2010. Gross profit margin increased because our cost of goods sold did not increase as fast as our revenues.

Selling Expenses. Our selling expenses increased $0.3 million, or 48.4%, to $1.0 million during the three months ended March 31, 2011, from $0.7 million in the same period of 2010. Because sales commission is the single largest selling expense item, the increase in the revenues in the first quarter of 2011 had a corresponding impact on the increase in selling expenses as a whole. As a percentage of revenues, selling expenses in the first quarter of 2011 decreased to 2.9%, as compared to 3.3% in the same period in 2010. The decrease was mainly because we implemented effective cost control measures, including stricter approval procedures, on other selling expenses, which caused our selling expenses to increase at a slower rate compared to our revenue.

General and Administrative Expenses. Our general and administrative expenses increased $0.9 million, or 200.9%, to $1.4 million during the three months ended March 31, 2011 from $0.5 million in the same period of 2010. As a percentage of revenues, general and administrative expenses in the first quarter of 2011 increased to 3.9%, as compared to 2.2% in the same period in 2010. The significant increase was due to the amortization of intangible assets derived from acquisition of Fuyuan Installation. In addition, in order to meet the SEC reporting requirements as a public company, we hired more management staff and our salary expenses increased accordingly in 2010.

Income Before Income Tax Expense and Noncontrolling Interest. Income before income tax expense and noncontrolling interest increased $4.1 million, or 69.9%, to $9.8 million in the three months ended March 31, 2011 from $5.7 million in the same period of 2010. Income before income tax expense and noncontrolling interest as a percentage of our revenues increased to 28.2% in the three months ended March 31, 2011, as compared to 27.9% in the same period in 2010, as a result of the factors described above.

Income Tax Expense. Our income tax expense increased by $1.0 million, or 82.0%, to $2.1 million in the three months ended March 31, 2011 from $1.2 million in the same period of 2010. The increase of income tax expense was mainly due to the increased income before income tax expense as a result of the expansion of our business. The effective tax rate for the three months ended ,March 31, 2011 was 22.0% while that for the same period of 2010 was 20.5% . The applicable income tax rate for our installation and services business was 25% while that for our manufacturing business was 15% in both years. As the percentage of our installation revenue against total revenue increased in the first quarter of 2011, the effective tax rate increased.

8

Net income attributable to China Power’s common stockholders. Our net income attributable to common stockholders increased $2.5 million, or 54.4%, to $7.0 million in the three months ended March 31, 2011 from $4.6 million in the same period of 2010 as result of the above factors.

Liquidity and Capital Resources

Cash generated from our operations and borrowing capacity under our lines of credit are used as our primary source of liquidity. As of March 31, 2011, we had cash and cash equivalents of $22.8 million. We anticipate that cash generated from our operations and borrowing capacity under our lines of credit will be sufficient to satisfy our obligations. The following table sets forth a summary of our cash flows for the periods indicated:

	Three months Ended March 31,
	2011		2010
	(Unaudited; in thousands)
Net cash provided by operating activities	3,824		7,875
Net cash provided by (used in) investing activities	(2	)	(20	)
Net cash provided by (used in) financing activities	-		(8,631	)
Effect of foreign currency exchange rate fluctuation on cash and cash equivalents	187		1
Net changes in cash and cash equivalents	4,009		(775	)
Cash and cash equivalents at the beginning of period	18,778		6,125
Cash and cash equivalents at the end of period	22,787		5,350

Operating Activities

Net cash provided by operating activities was $3.8 million for the three months ended March 31, 2011, as compared to $7.9 million in net cash provided by operating activities for the same period in 2010. The decrease was mainly attributable to the combined results of two factors from contrary directions. i) The increase in net income in the three months ended March 31, 2011 compared the same period of 2010. ii) We received more sales proceeds of prior period in the first three months ended March 31, 2010 which was also reflected by the sharp decrease in accounts receivable during this period.

Investing Activities

Net cash used in investing activities was $0.002 million for the three months ended March 31, 2011, as compared to $0.02 million in net cash used in investing activities for the same period in 2010.

Financing Activities

Net cash used in financing activities was nil for the three months ended March 31, 2011, as compared to $8.6 million used in financing activities for the same period in 2010. The net cash used in the three months ended March 31, 2010 was the dividend distribution while we did not distribute any dividends in the same period of 2011.

Obligations Under Material Contracts

Short Term Loans

The following table sets forth our material contractual obligations as of March 31, 2011:

		Payments Due by Period
				Less than						More than
Contractual Obligations		Total		1 year		1-3 years		3-5 years		5 years
Short-term debt obligations	$	3,053,388	$	3,053,388	$	-	$	-	$	-
Interest expense obligations for outstanding debt		53,251		53,251		-		-		-
Total	$	3,106,639	$	3,106,639	$	-	$	-	$	-

As of March 31, 2011, we had no material long-term debt obligations.

9

Lines of Credit

The following table sets forth our outstanding lines of credit as of March 31, 2011.

	March 31, 2011 (Unaudited)
Lender	Starting Date	Maturity Date	Facility Amount	Unused Facility
Shanghai Pudong Development Bank	Aug.12,2008	Aug.11,2011	$4,580,083	$1,526,695

Critical Accounting Policies

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) requires our management to make assumptions, estimates, and judgments that affect the amounts reported, including the notes thereto, and related disclosures of commitments and contingencies, if any. We have identified certain accounting policies that are significant to the preparation of our financial statements. These accounting policies are important for an understanding of our financial condition and results of operations. Critical accounting policies are those that are most important to the portrayal of our financial condition and results of operations and require management’s difficult, subjective, or complex judgment, often as a result of the need to make estimates about the effect of matters that are inherently uncertain and may change in subsequent periods. Certain accounting estimates are particularly sensitive because of their significance to consolidated financial statements and because of the possibility that future events affecting the estimate may differ significantly from management’s current judgments. We consider our critical accounting policies to be those that require the most significant estimates and judgments in the preparation of our consolidated financial statements, including the following:

Revenue recognition

Manufacturing. We recognize revenue from boiler sales in accordance with Accounting Standards Codification, or ASC, Topic 605. All of the following criteria must exist in order for us to recognize revenue: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred or services have been rendered; (3) price to the buyer is fixed or determinable; and (4) collectability is reasonably assured. Delivery does not occur until products have been shipped to the customers, risk of loss has transferred to the customers and customers’ acceptance has been obtained, or we have objective evidence that the criteria specified in customers’ acceptance provisions have been satisfied. In the PRC, a value added tax, or VAT, of 17% on invoice amount is collected in respect of the sales of goods on behalf of tax authorities. The VAT collected is not revenue of the Company. The revenues are recognized on the net basis.

Installation and Services. We recognize revenue from the delivery of installation service in accordance with ASC Topic 605-35, “Construction-Type and Production-Type Contracts,” using the percentage-of-completion method. Under this method, contract revenue is computed as that percentage of estimated total revenue that costs incurred to date bear to total estimated costs, after giving effect to the most recent estimates of costs to complete. Repair and maintenance service revenue is recognized when the service is delivered. From time to time, we will record costs and estimated profits in excess of billings for a contract. Revisions in costs and revenue estimates are reflected in the period in which the revisions are determined. Provisions for estimated losses on uncompleted contracts are made in the period in which such losses are determined without regard to the percentage-of-completion.

Accounts receivable

Accounts receivable are recognized and carried at original sales amounts less an allowance for uncollectible accounts, as needed. Accounts receivable are reviewed periodically as to whether they are past due based on contractual terms and their carrying value has become impaired. An allowance for doubtful accounts is recorded in the period in which loss is determined to be probable based on an assessment of specific evidence indicating doubtful collection, historical experience, account balance aging and prevailing economic conditions. Accounts receivable balances are written off after all collection efforts have been exhausted.

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There are no outstanding amounts from customers that individually represent greater than 10% of the total balance of accounts receivable as of March 31, 2011.

Inventory

Inventories are stated at lower of cost or market. Cost is determined using weighted average method. Inventory includes raw materials, work in process and finished goods. The variable production overheads are allocated to each unit of production on the basis of the actual use of the production facilities. The allocation of fixed production overheads to the cost of conversion is based on the normal capacity of the production facilities.

Where there is evidence that the utility of inventories, in their disposal in the ordinary course of business, will be less than cost, whether due to physical deterioration, obsolescence, changes in price levels, or other causes, a provision is accrued.

Intangible Assets

Intangible assets represent licenses for boiler and pressure pipe installation. The intangible assets are recognized at their fair values and amortized using straight-line method over their useful lives five years.

Goodwill

Goodwill represents the excess of the purchase price over the net of the fair value of the identifiable tangible and intangible assets acquired and the then fair value of liabilities, totaling $1,660,922, assumed upon the acquisition of Fuyuan Installation. We evaluate the carrying value of goodwill for impairment annually or when a possible impairment is indicated.

Recently issued accounting pronouncements

In the first quarter of 2011, The Financial Accounting Standards Board (“FASB”) has issued ASU No. 2011-01 through ASU 2011-3, which are not expected to have a material impact on the consolidated financial statements upon adoption.

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

Off-Balance Sheet Transactions

We do not have any off-balance sheet arrangements.

Seasonality

Our operating results and operating cash flows historically have not been subject to seasonal variations. This pattern may change, however, as a result of new market opportunities or new product introductions.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

We have exposure to several types of market risk: changes in foreign currency exchange rates and interest rates. We neither hold nor issue financial instruments for trading purposes nor do we make use of derivative instruments to hedge the risks discussed below. The following sections provide quantitative information on our exposure to market risks. Our use of sensitivity analyses are inherently limited in estimating actual losses in fair value that can occur from changes in market conditions.

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Foreign Currency Exchange Rates

All of our revenues are collected in and substantially all of our expenses are paid in Chinese RMB. We face foreign currency rate translation risks when our results are translated to U.S. dollars. The registered equity capital denominated in the functional currency is translated at the historical rate of exchange at the time of capital contribution.

The Chinese RMB was relatively stable against the U.S. dollar at approximately 8.28 RMB to the $1.00 U.S. dollar until July 21, 2005 when the Chinese currency regime was altered resulting in a 2.1% revaluation versus the U.S. dollar. This move initially had the effect of pegging the exchange rate of the RMB at 8.11 RMB per U.S. dollar. Now the RMB exchange rate is no longer linked to the U.S. dollar but rather to a basket of currencies with a 0.3% margin of fluctuation resulting in further appreciation of the RMB against the U.S. dollar. Since June 30, 2009, the exchange rate had remained stable at 6.8307 RMB to 1.00 U.S. dollar until June 30, 2010 when the Chinese Central Bank allowed a further appreciation of the RMB by 0.43% to 6.798 RMB to 1.00 U.S. dollar. On May 6, 2011, the RMB traded at 6.4872 to the U.S. dollar.

There remains international pressure on the Chinese government to adopt an even more flexible currency policy and the exchange rate of RMB is subject to changes in China’s government policies which are, to a large extent, dependent on the economic and political development both internationally and locally and the demand and supply of RMB in the domestic market. There can be no assurance that such exchange rate will continue to remain stable in the future amongst the volatility of currencies, globalization and the unstable economies in recent years. Since (i) our income and profit are denominated in RMB, and (ii) the payment of dividends, if any, will be in U.S. dollars, any decrease in the value of the RMB against other foreign currencies would adversely affect the value of the shares and dividends payable to shareholders, in foreign currency terms.

Interest Rate Risk

We are exposed to interest rate risk primarily with respect to our short-term bank loans and long-term bank loans. Although the interest rates, which are based on the banks’ prime rates with respect to our short-term loans are fixed for the terms of the loans, the terms are typically three to twelve months for short-term bank loans and interest rates are subject to change upon renewal. There were no material changes in interest rates for short-term bank loans renewed during the three months ended March 31, 2011.

A hypothetical 1.0% increase in the annual interest rates for all of our borrowings at March 31, 2011, would decrease income before income tax expense and noncontrolling interest by approximately $7,633 for the three months ended March 31, 2011. Management monitors the banks’ prime rates in conjunction with our cash requirements to determine the appropriate level of debt balances relative to other sources of funds. We have not entered into any hedging transactions in an effort to reduce our exposure to interest rate risk.

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act). Disclosure controls and procedures refer to controls and other procedures designed to ensure that information required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

As required by Rule 13a-15(e), our management has carried out an evaluation, with the participation and under the supervision of our Chief Executive Officer and Chief Financial Officer of the effectiveness of the design and operation of our disclosure controls and procedures, as of March 31, 2011. We implemented several measures to address the material weaknesses that were previously identified by our independent auditors. The remaining material weakness identified and unaddressed was the establishment of an internal audit department. In the first three months of 2011, we set up an internal audit department, which reports to the board of directors directly. The internal audit department will be responsible for performing regular internal audits over financial and other operational functions. With the creation of our internal audit department, all the control weaknesses have been remediated. Based upon the foregoing, and as of the date of this evaluation, our Chief Executive Officer and Chief Financial Officer determined that the design and operation of these disclosure controls and procedures were effective as of the end of the period covered by this report.

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Changes in Internal Control over Financial Reporting

As mentioned above, in the first three months of 2011, we set up an internal audit department.. Our internal control was further enhanced.

PART II — OTHER INFORMATION

Item 1. Legal Proceedings.

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

Item 1A. Risk Factors

None.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. (Removed and Reserved)

Item 5. Other Information.

None.

Item 6. Exhibits.

EXHIBITS.

31.1*	Certification of Principal Executive Officer filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*	Certification of Principal Financial Officer filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1*	Certification of Principal Executive Officer furnished pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2*	Certification of Principal Financial Officer furnished pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

*Filed herewith.

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SIGNATURE

Pursuant to the requirements 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.

DATED: May 16, 2011

CHINA POWER TECHNOLOGY, INC.

/s/ S.D. Liu                                   
S.D. Liu
Chief Financial Officer
(Principal Financial Officer)

EXHIBIT INDEX

31.1*	Certification of Principal Executive Officer filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*	Certification of Principal Financial Officer filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1*	Certification of Principal Executive Officer furnished pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2*	Certification of Principal Financial Officer furnished pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

*Filed herewith.

EX-31.1

Exhibit 31.1

Certification of Chief Executive Officer Pursuant to
Securities Exchange Act Rules 13a-14(a) and 15d-14(a)
as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Honghai Zhang, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of China Power Technology, Inc.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we have:
	(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
	(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
	(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
	(d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
	(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
	(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 16, 2011

/s/ Honghai Zhang
Honghai Zhang
Chief Executive Officer

EX-31.2

Exhibit 31.2

Certification of Chief Financial Officer Pursuant to
Securities Exchange Act Rules 13a-14(a) and 15d-14(a)
as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, S.D. Liu, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of China Power Technology, Inc.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we have:
	(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
	(b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
	(c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
	(d)	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
	(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
	(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 16, 2011

/s/ S.D. Liu                            
S.D. Liu
Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906
OF THE SARBANES-OXLEY ACT OF 2002

The undersigned, Honghai Zhang, the Chief Executive Officer of CHINA POWER TECHNOLOGY, INC. (the “Company”), DOES HEREBY CERTIFY that, to the best of his knowledge:

1. The Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2011 (the “Report”), fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934; and

2. Information contained in the Report fairly presents, in all material respects, the financial condition and results of operation of the Company.

Date: May 16, 2011

/s/ Honghai Zhang                   
Honghai Zhang
Chief Executive Officer
(Principal Executive Officer)

A signed original of this written statement required by Section 906 has been provided to China Power Technology, Inc. and will be retained by China Power Technology, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

The forgoing certification is being furnished to the Securities and Exchange Commission pursuant to § 18 U.S.C. Section 1350. It is not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not to be incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing.

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906
OF THE SARBANES-OXLEY ACT OF 2002

The undersigned, S.D. Liu, the Chief Financial Officer of CHINA POWER TECHNOLOGY, INC. (the “Company”), DOES HEREBY CERTIFY that, to the best of his knowledge:

1. The Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2011 (the “Report”), fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934; and

2. Information contained in the Report fairly presents, in all material respects, the financial condition and results of operation of the Company.

Date: May 16, 2011

/s/ S.D. Liu                       
S.D. Liu
Chief Financial Officer
(Principal Financial Officer)

A signed original of this written statement required by Section 906 has been provided to China Power Technology, Inc. and will be retained by China Power Technology, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

The forgoing certification is being furnished to the Securities and Exchange Commission pursuant to § 18 U.S.C. Section 1350. It is not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and is not to be incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing.