Selling, general and administrative expenses

Selling, general and administrative expenses were $4.3 million in the third quarter of 2011, compared to $3.9 million in second quarter of 2011 and $2.7 million in the third quarter of 2010. The increase of $0.4 million in this quarter from that of the second quarter of 2011 was primarily due to operating expense associated with Xinjiang expansion project. The increase of $1.6 million in this quarter from that of the third quarter of 2010 was primarily due to the operating expense associated with Xinjiang expansion project.

Research and development expenses

Research and development expense was $152 thousand in the third quarter of 2011, compared to $165 thousand in the second quarter of 2011 and $318 thousand in the third quarter of 2010.

Other operating income

Other operating income $1.8 million in the third quarter of 2011, compared to $3.8 million in the second quarter of 2011 and $131 thousand in the third quarter of 2010. Other operating income mainly composed of unrestricted cash incentives that the Company received from local government authorities, which contributed the fluctuations from period to period.

Operating income and margin

As a result of foregoing, operating income in the third quarter of 2011 was $17.1 million, compared to $32.6 million in the second quarter of 2011 and $24.0 million in the third quarter of 2010. Operating margin was 28.8%, compared to 46.2% in the second quarter of 2011 and 38.0% in the third quarter of 2010.

Net Interest expense

Net interest expense in the third quarter of 2011 was $1.9 million, compared to $1.7 million in the second quarter of 2011 and $2.3 million in the third quarter of 2010.

Income tax expense

Income tax expense in the third quarter of 2011 was $2.9 million, compared to $4.5 million in the second quarter of 2011 and $3.0 million in the third quarter of 2010. The change from the second quarter of 2011 and the third quarter of 2010 was primarily due to the lower income before tax in the third quarter of 2011 combined with $970 thousand valuation allowence of deferred tax assets of modules business in the third quarter of 2011.

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