POS AM

As filed with the Securities and Exchange Commission on September 25, 2012   Registration No.   333-170324

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

POST-EFFECTIVE AMENDMENT 3 TO

FORM S-1

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

KEYUAN PETROCHEMICALS, INC.

(Exact name of Registrant as specified in its charter)

Nevada	1311	45-0538522
(State or Other Jurisdiction of Incorporation or Organization)	(Primary Standard Industrial Classification Code Number)	(I.R.S. Employer Identification Number)

Qingshi Industrial Park

Ningbo Economic & Technological Development Zone

Ningbo, Zhejiang Province

P.R. China 315803

(86) 574-8623-2955

 (Address, including zip code, and telephone number,

including area code, of Registrant’s principal executive offices)

Copies to:

Louis E. Taubman, Esq.

Hunter Taubman Weiss LLP

17 State Street, Suite 2000

New York, New York 10004

Approximate date of commencement of proposed sale to the public: From time to time after this Registration Statement becomes effective.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box.  x   

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  o

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  o

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  o

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 definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.  (Check one):

Large accelerated filer	o	Accelerated filer	o
Non-accelerated filer	o	Smaller reporting company	x
(Do not check if a smaller reporting company)

CALCULATION OF REGISTRATION FEE

Title of each class of securities to be registered	Amount to be Registered(1)		Proposed maximum offering price per share			Proposed maximum aggregate offering price	Amount of registration fee(16)
Share Common Stock		4,720,182 (2)	$	4.30(3)	$	20,296,782.00	$	1,447.16(4)
Common Stock Underlying Series A Warrants		747,554 (5)	$	4.30(3)	$	3,214,482.20	$	229.19(4)
Shares Common Stock Underlying Series B Warrants		748,204 (6)	$	4.30(3)	$	3,217,277.20	$	229.39(4)
Shares Common Stock Underlying Placement Agent Warrants in April-May 2010 Private Placement		598,963(7)	$	4.30(3)	$	2,575,540.90	$	183.64(4)
Shares Common Stock Underlying Placement Agent Series A Warrants		59,896(8)	$	4.30(3)	$	257,552.80	$	18.36(4)
Shares Common Stock Underlying Placement Agent Series B Warrants		59,896(9)	$	4.30(3)	$	257,552.80	$	18.36(4)
Common Stock Underlying Preferred Stock		5,333,340(10)	$	5.13(11)	$	27,360,034.20	$	1,950.77(12)
Common Stock Underlying Series C Warrants		810,002(13)	$	5.13(11)	$	4,155,310.26	$	296.27 (12)
Common Stock Underlying Series D Warrants		810,002(14)	$	5.13(11)	$	4,155,310.26	$	296.27 (12)
Common Stock Underlying Placement Agent Warrants		561,601(15)	$	5.13(11)	$	2,881,013.13	$	205.42(12)
Total		14,449,640			$	68,370,855.75	$	4,874.83

(1)	Pursuant to Rule 416 under the Securities Act of 1933, this registration statement includes an indeterminate number of additional shares as may be issuable as a result of stock splits or stock dividends which occur during this continuous offering.
(2)	Includes 4,692,159 shares of the Company’s common stock, par value $0.001 per share, issued pursuant to the financings that the Company consummated in April and May, 2010 and September 2010, and 28,023 shares of common stock issued to various consultants pursuant to consulting agreements with the Company, which we agreed to register.
(3)	Estimated solely for purposes of calculating the registration fee in accordance with Rule 457(c) under the Securities Act of 1933, as amended based upon the average of the bid and asked price of the Company's common stock as quoted on the OTC Bulletin Board of $4.30 on May 20, 2010.
(4)	These securities were previously registered on Registration Statement No. 333-167029, which was filed on October 15, 2010. The registration fee for these securities was paid and is transferred and carried forward to this registration statement pursuant to Rule 429 under the Securities Act.
(5)	Represents shares of common stock underlying Series A Warrants at an exercise price of $4.50 per share that the Company issued pursuant to the financings consummated in April and May, 2010.
(6)	Represents shares of common stock underlying Series B Warrants at an exercise price of $5.25 per share that the Company issued pursuant to the financings consummated in April and May, 2010.
(7)	Represents shares of common stock underlying Placement Agent Warrants at an exercise price of $3.50 per share that the Company issued to the placement agent in connection with the financings consummated in April and May, 2010, including 539,067 shares of common stock underlying the Placement Agent’s Warrants to purchase that same number of shares of Series A Preferred Stock.
(8)	Represents shares of common stock underlying Placement Agent Warrants at an exercise price of $4.50 per share that the Company issued to the placement agent in connection with the financings consummated in April and May, 2010.
(9)	Represents shares of common stock underlying Placement Agent Warrants at an exercise price of $5.25 per share that the Company issued to the placement agent in connection with the financings consummated in April and May, 2010.
(10)	Represents shares of common stock underlying the Company’s Series B Convertible Preferred Stock, par value $0.001 per share, convertible into the same number of shares of the Company’s common stock, par value $0.001 per share, the Company issued pursuant to the financing that the Company consummated on September 28, 2010.
(11)	Estimated solely for purposes of calculating the registration fee in accordance with Rule 457(c) under the Securities Act of 1933, as amended based upon the average of the bid and asked price of the Company's common stock as quoted on the Nasdaq Stock Market of $5.19 on November 1, 2010.
(12)	These securities were previously registered on Registration Statement No.333-170324, which was filed on January 14, 2011. The registration fee for these securities was paid and is transferred and carried forward to this registration statement pursuant to Rule 429 under the Securities Act.
(13)	Represents shares of common stock underlying Series C Warrants at an exercise price of $4.50 per share that the Company issued pursuant to the financing consummated on September 28, 2010.
(14)	Represents shares of common stock underlying Series D Warrants at an exercise price of $5.25 per share that the Company issued pursuant to the financing consummated on September 28, 2010.
(15)	Represents shares of common stock underlying Placement Agent Warrants that the Company issued to the placement agent in connection with the financing consummated on September 28, 2010, including 432,001 shares of common stock underlying Placement Agent Warrants at an exercise price of $3.75 per share; 64,800 shares of common stock underlying Placement Agent Warrants at an exercise price of $4.50 per share and 64,800 shares of common stock underlying Placement Agent Warrants at an exercise price of 5.25 per share.
(16)	The registration fee was calculated applying the Securities and Exchange Commission filing fee rate of 0.00007130 which was effective when  the registration statement on Form S-1 (File No’s. 3333-167029 and 333-170324) was originally filed. This Registration Statement is filed to conform the disclosure contained herein to our Annual Report on Form 10-K for the fiscal year ended December 31, 2011, filed on April 13, 2012, and our Quarterly Report on Form 10-Q for the period ended June 30, 2012, filed on August 20, 2012, wherein it contains a combined prospectus pursuant to Rule 429 under the Securities Act , and upon effectiveness, shall act as a post-effective amendment to such previously filed registration statements.

The Registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with section 8(a) of the Securities Act of 1933, as amended, or until the registration statement shall become effective on such date as the Commission, acting pursuant to said section 8(a), may determine.

 EXPLANATORY NOTE

Our Post Effective Amendment No. 3 to Registration Statement (File No. 333-170324)was inadvertently filed as Form S-1/A on September 26, 2012. Therefore, we are refilling this Post Effective Amendment No. 3 to correct this error. Except the correction of the title error, the content of this filing remains the same as the Form S-1/A we filed on September 26, 2012 which should have been marked as a Post Effective Amendment. 

We need to file this prospectus to conform the disclosure contained herein to our Annual Report on Form 10-K for the fiscal year ended December 31, 2011, filed on April 13, 2012.   This Registration Statement contains a combined prospectus pursuant to Rule 429 under the Securities Act that relates to, among other things, the exercise of warrants that have previously been registered with the Securities and Exchange Commission pursuant to the Company’s Registration Statements on Form S-1 (File No’s. 3333-167029 and 333-170324).  Accordingly, upon effectiveness, this Registration Statement shall act as a post-effective amendment to such previously filed Registration Statements.  The information in this Registration Statement updates the information contained in Registration Statement No’s. 3333-167029 and 333-170324. 

THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED.  THE SELLING STOCKHOLDERS MAY NOT SELL THESE SECURITIES PUBLICLY UNTIL THE REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE.  THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.

SUBJECT TO COMPLETION, DATED SEPTEMBER 25, 2012

PROSPECTUS

KEYUAN PETROCHEMICALS, INC.

14,449,640 Shares of Common Stock

 This prospectus relates to the resale of up to 14,449,640 shares of our common stock, $0.001 par value (the “Common Stock”), including 4,720,182 shares of our Common Stock that are currently issued and outstanding, 5,333,340 shares of our Common Stock underlying Series B preferred stock, $0.001 par value (the “Series B Preferred Stock”), and 4, 396,118 shares of our Common Stock issuable upon exercise of warrants (the “Warrant Shares”). The Warrant Shares are comprised of (i) 747,554 shares of Common Stock issuable upon exercise of Series A Warrants to purchase our Common Stock, (ii) 748,204 shares of Common Stock issuable upon exercise of Series B Warrants to purchase our Common Stock ,  (iii) 718,755 shares of Common Stock issuable upon exercise of Placement Agent Warrants, Placement Agent Series A Warrants and Placement Agent Series B Warrants  to purchase our Common Stock issued to TriPoint Global Equities, LLC , as placement agent in connection with the April-May 2010 Private Placement. Syndicated Capital, Inc., Brill Securities, Meyers Associates LP also served as sub-placement agents in connection with the Private Placement and received the shares they are offering for resale in this prospectus as placement agent compensation in connection with the Private Placement, (iv) 810,0002 shares of Common Stock issuable upon exercise of Series C Warrants, (v) 810,002 shares of Common Stock issuable upon exercise of Series D Warrants, (vi) 561,601 shares of Common Stock issuable upon exercise of Placement Agent Warrants  to purchase our Common Stock issued to TriPoint Global Equities, LLC, as placement agent in connection with the September 2010 Private Placement. The selling stockholders named herein may sell common stock from time to time in the principal market on which the stock is traded at the prevailing market price, at prices related to such prevailing market price, in negotiated transactions or a combination of such methods of sale. We will not receive any proceeds from the sales by the selling stockholders.

Our Common Stock is quoted on the OTCQB under the symbol “KEYP” and has very limited trading. The closing price for our Common Stock on the OTCQB on September  19, 2012 was $1.20 per share.

The selling stockholders, and any broker-dealer executing sell orders on behalf of the selling stockholders, may be deemed to be “underwriters” within the meaning of the Securities Act of 1933, as amended.  Commissions received by any broker-dealer may be deemed underwriting commissions under the Securities Act of 1933, as amended.

THIS INVESTMENT INVOLVES A HIGH DEGREE OF RISK.  YOU SHOULD PURCHASE SHARES ONLY IF YOU CAN AFFORD A COMPLETE LOSS OF YOUR INVESTMENT.  SEE “RISK FACTORS” BEGINNING ON PAGE 11 FOR A DISCUSSION OF RISKS APPLICABLE TO US AND AN INVESTMENT IN OUR COMMON STOCK.

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES, OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

The date of this prospectus is SEPTEMBER 25, 2012.

TABLE OF CONTENTS

Item 3. SummaryInformation, Risk Factors and Ratio of Earnings to Fixed Charges	1
Item 4. Use of Proceeds	27
Item 5. Determination of Offering Price	27
Item 6. Dilution	27
Item 7. Selling Security Holders	27
Item 8. Plan of Distribution	41
Item 9. Description of Securities	44
Item 10. Interests of Named Experts and Counsel	47
Item 11. Information with respect to the Registrant	47
Item 11A. Material Changes	122
Item 12. Incorporation of Certain Information by Reference	122
Item 12A. Disclosure of Commission Position on Indemnification for Securities Act Liabilities	122
PART II. INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuances and Distribution	123
Item 14. Indemnification of Directors and Officers	123
Item 15. Recent Sales of Unregistered Securities	123
Item 16. Exhibits and Financial Statement Schedule	126
Item 17. Undertakings	129

We have not authorized any person to give you any supplemental information or to make any representations for us. You should not rely upon any information about us that is not contained in this prospectus or in one of our public reports filed with the Securities and Exchange Commission (“SEC”) and incorporated into this prospectus. Information contained in this prospectus or in our public reports may become stale. You should not assume that the information contained in this prospectus, any prospectus supplement or the documents incorporated by reference are accurate as of any date other than their respective dates, regardless of the time of delivery of this prospectus or of any sale of the shares. Our business, financial condition, results of operations and prospects may have changed since those dates. The selling stockholders are offering to sell, and seeking offers to buy, shares of our common stock only in jurisdictions where offers and sales are permitted.

In this prospectus the “Company,” “we,” “us,” and “our” refer to KEYUAN PETROCHEMICALS, INC., a Nevada corporation and its subsidiaries, after giving effect to the Share Exchange that the Company completed on April 22, 2010.

All dealers that effect transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus.  This is in addition to the dealers’ obligation to deliver a prospectus when acting as underwriters.

ITEM 3. SUMMARY INFORMATION, RISK FACTORS AND RATIO OF EARNINGS TO FIXED CHANGES

This summary highlights selected information appearing elsewhere in this prospectus. While this summary highlights what we consider to be the most important information about us, you should carefully read this prospectus and the registration statement of which this prospectus is a part in their entirety before investing in our common stock, especially the risks of investing in our common stock, which we discuss later in “Risk Factors,” and our financial statements and related notes beginning on page 6 and 51, respectively. Unless the context requires otherwise, the words the “Company,” “Keyuan” “we,” “us” or “our” are references to the combined business of Keyuan Petrochemicals, Inc. and its consolidated subsidiaries.  References to “Keyuan International” are references to our wholly-owned subsidiary, Keyuan International Group Limited”; references to “Keyuan HK” are references to our wholly-owned subsidiary, Keyuan Group Limited; references to “Ningbo Keyuan” are references to our wholly-owned subsidiary, Ningbo Keyuan Plastics Co.,Ltd.; references to “Ningbo Keyuan Petrochemicals” are to our wholly-owned subsidiary, Ningbo Keyuan Petrochemicals Co., Ltd, references to “Keyuan Synthetic Rubbers” are references to our wholly-owned subsidiary, Ningbo Keyuan Synthetic Rubbers Co., Ltd; references to “Guangxi Keyuan” are references to our wholly-owned subsidiary Guangxi Keyuan New Materials Co., Ltd. References to “China” or “PRC” are references to the People’s Republic of China.  References to “RMB” are to Renminbi, the legal currency of China, and all references to “$” and dollar are to the U.S. dollar, the legal currency of the United States. All market and industry data provided in this prospectus represents information that is generally available to the public and was not prepared for us for a fee. We did not fund nor were we otherwise affiliated with these sources and we are not attempting to incorporate the information on external web sites into this prospectus. We are only providing textual reference of the information of market and industry data and the web addresses provided in this prospectus are not intended to be hyperlinks and we do not assure that those external web sites will remain active and current.

Special Note Regarding Forward-Looking Statements

This report contains forward-looking statements and information that are based on the beliefs of our management as well as assumptions made by and information currently available to us.  Such statements should not be unduly relied upon.  When used in this report, forward-looking statements include, but are not limited to, the words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “plan” and similar expressions, as well as statements regarding new and existing products, technologies and opportunities, statements regarding market and industry segment growth and demand and acceptance of new and existing products, any projections of sales, earnings, revenue, margins or other financial items, any statements of the plans, strategies and objectives of management for future operations, any statements regarding future economic conditions or performance, uncertainties related to conducting business in China, any statements of belief or intention, and any statements or assumptions underlying any of the foregoing.  These statements reflect our current view concerning future events and are subject to risks, uncertainties and assumptions.  There are important factors that could cause actual results to vary materially from those described in this report as anticipated, estimated or expected, including, but not limited to: competition in the industry in which we operate and the impact of such competition on pricing, revenues and margins, volatility in the securities market due to the general economic downturn; Securities and Exchange Commission (the “SEC”) regulations which affect trading in the securities of “penny stocks,” and other risks and uncertainties.  Except as required by law, we assume no obligation to update any forward-looking statements publicly, or to update the reasons actual results could differ materially from those anticipated in any forward- looking statements, even if new information becomes available in the future.  Depending on the market for our stock and other conditional tests, a specific safe harbor under the Private Securities Litigation Reform Act of 1995 may be available.  Notwithstanding the above, Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) expressly state that the safe harbor for forward-looking statements does not apply to companies that issue penny stock.  Because we may from time to time be considered to be an issuer of penny stock, the safe harbor for forward-looking statements may not apply to us at certain times.

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Our Company

Prior to the consummation of the share exchange transaction described below, we were a shell company with nominal operations and nominal assets. Currently, we are a holding companyoperating through our wholly-owned subsidiaries, Ningbo Keyuan, Ningbo Keyuan Petrochemicals and Keyuan Synthetic Rubbers, located in Ningbo, China and Guangxi Keyuan New Materials located in Guangxi, China. We are a manufacturer and supplier of various petrochemical products in China. Through Ningbo Keyuan and Ningbo Keyuan Petrochemicals, our operations include (i) an annual petrochemical manufacturing capacity of 720,000 metric tons (MT) of a variety of petrochemical products, (ii) facilities for the storage and loading of raw materials and finished goods, (iii) a manufacturing technology that can support our manufacturing process with relatively low raw material costs and high utilization and yields, all of which are led by a management team consisting of petrochemical experts with proven track records from some of China’s largest state-owned enterprises in the petrochemical industry.

Due to China’s growing demand for refined petrochemical products, we expanded our annual production capacity from 550,000 MT to 720,000 MT in April 2011. We also completed the construction of a Styrene-Butadience-Styrene (the “SBS”) production facility with an annual production capacity of 70,000 MT in September 2011.  One SBS production line began commercial production in December 2011 and the second line began commercial production in August, 2012. In addition, we plan to complete an additional storage capacity, a raw material pre-treatment facility and an asphalt production facility by the end of 2012. However, management is currently evaluating the effectiveness and feasibility of the entire manufacturing capacity expansion strategy considering the long-term development and the industry environment and the timetable may be adjusted based on the evaluation results.

In January 2012, we signed a cooperation agreement with Fangchenggang City to build a new petrochemicals production facility, Guangxi Keyuan New Materials Industrial Park, in Guangxi Province. The total investment amount to construct this new production facility is RMB 12.8 billion (approximately USD $2.02 billion). We commenced  pre-construction in February 2012, and plan to finish the initial stage of construction and begin operation by the end of 2013 (the “Guangxi Project”). However, the timeline is subject to revision pending the status of project financing. This new production facility, as a part of our expansion plan, will improve our competitive position by extending and expanding our supply chain and manufacturing base. Once the facility is fully operational, it is expected to have annual production capacity of 400,000 metric tons of Acrylonitrile Butadiene Styrene (the “ABS”). We plan to fund the construction and operation of the new production facility through financings. According to the cooperation agreement, the government of Fangchenggang City will be responsible to provide land use right for the facility.

In order to expand our facility, we need to acquire use rights of additional land. In China, the government is responsible for overall land planning and they will often select a target company to maximize the benefits of land use for a particular area. In China, a land bidding process is a necessary legal proceeding to acquire the land use rights. We submitted our application to the local government for a land bidding process for land use rights for approximately 1.2 million square feet of land adjacent to our current Ningbo production facility which was slated on July 13, 2010. We were the only bidder in this process because the land is well integrated with our existing site. The bidding process was completed on August 13, 2010 and we entered into land use right transfer agreements with the local government on August 18, 2010.

(1)    Organization

Keyuan Petrochemicals, Inc. (“Company” or “the Company”, formerly known as “Silver Pearl Enterprises, Inc.”, together with its subsidiaries, herein referred to as “we” “us” and “our”) was incorporated in the State of Texas on May 4, 2004.

On April 22, 2010, the Company entered into a share exchange agreement (the “Exchange Agreement”) with Keyuan International Group Limited (“Keyuan International”), a privately held investment holding company organized on June 11, 2009 under the laws of the British Virgin Islands, Delight Reward Limited (“Delight Reward”), the sole stockholder of Keyuan International and Denise D. Smith (“Smith”), the Company’s former principal stockholder. Pursuant to the terms of the Exchange Agreement, Delight Reward transferred to the Company all of its shares of Keyuan International in exchange for 47,658 shares of the Company’s Series M convertible preferred stock (the “Share Exchange”). On an “as converted” basis, the Series M convertible preferred stock represented approximately 95% of the Company’s outstanding common stock right after the Share Exchange.  The Series M convertible preferred stock voted with the common stock on an “as converted basis” and was converted into 47,658,000 shares of the Company’s common stock on December 28, 2010.

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As a result of the Share Exchange, Keyuan International became a wholly-owned subsidiary of the Company and Delight Reward became the controlling stockholder of the Company. The Share Exchange was accounted for as a reverse acquisition and recapitalization whereby Keyuan International is deemed to be the accounting acquirer (and the legal acquire).  The common stock of the Company continues post the Share Exchange, while the retained deficit of the Company was eliminated as the historical operations are deemed to be those of Keyuan International.

On May 12, 2010, the Company formed a corporation under the laws of the State of Nevada called Keyuan Petrochemicals, Inc. and on the same day, acquired 100% of the entity’s stock for cash. As such, the entity became the Company’s wholly-owned subsidiary (the “Merger Subsidiary”).

Effective as of May 17, 2010, the Merger Subsidiary was merged with and into the Company. As a result of the merger, the Company’s name was changed to “Keyuan Petrochemicals, Inc.”.  Prior to the merger, the Merger Subsidiary had no liabilities and nominal assets and, as a result of the merger, the separate existence of the merger subsidiary ceased.  The Company is the surviving corporation in the merger and, except for the name change, there was no change in the Company’s directors, officers, capital structure or business.

On August 8, 2010, Keyuan Group Limited (“Keyuan HK”) established a wholly owned subsidiary in the People’s Republic of China (“PRC”), Ningbo Keyuan Petrochemicals Co., Ltd (“Ningbo Keyuan Petrochemicals”), which is engaged in the sale of petrochemical products in the PRC. On April 4, 2012, Guangxi Keyuan New Material Co., Ltd was incorporated in Guangxi province as a base to develop the Guangxi Project. On June 15, 2012, Ningbo Keyuan Synthetic Rubbers Co,, Ltd was incorporated as a foreign owned enterprise to engage in the sales and marketing of various petrochemical products, specifically synthetic rubbers.

(2)   History of Keyuan International before the Share Exchange

Immediately prior to the date of the Share Exchange, the Company was a shell company with no operations and a nominal amount of cash, and Keyuan International, through Keyuan Group Limited (“Keyuan HK”) and its indirect subsidiary, Ningbo Keyuan, was engaged in the manufacturing and sale of petrochemical products.

 Keyuan HK was established in Hong Kong in 2009, and is a holding company with no significant assets or operations. On April 26, 2007, Ningbo Keyuan was established as a wholly foreign owned enterprise in Ningbo, PRC by Hong Kong Keyuan PEC Investment Holdings Limited (“Hong Kong Keyuan”, 51%), Hong Kong Development Enterprise Co., Limited (“Hong Kong Development”, 26%) and Wayes International Trading Limited (“Wayes International”, 23%).  Hong Kong Keyuan was controlled by Mr. Chunfeng Tao, Hong Kong Development was controlled by Mr. Jicun Wang and Wayes International was controlled by Mr. Peijun Chen. Ningbo Keyuan had an original registered capital of USD $12,000,000. The Ningbo Foreign Trade & Economic Cooperation Bureau approved Ningbo Keyuan’s increase in its registered capital from USD$12,000,000 to USD$20,400,000 on February 27, 2009. The registered capital of Ningbo Keyuan was then increased from USD $20,400,000 to USD$50,400,000 and a new Certificate of Approval was issued by the Ningbo Foreign Trade & Economic Cooperation Bureau on March 22, 2010.

On April 1, 2008 Ningbo Litong Petrochemical (“Ningbo Litong”) acquired 12.75% of the shares of Ningbo Keyuan from Hong Kong Keyuan on behalf of Mr. Chunfeng Tao.  On November 25, 2008 Ningbo Kewei Investments Co., Limited (“Ningbo Kewei”), a company controlled by Mr. Tao acquired 12.75% of Ningbo Keyuan from Ningbo Litong.  On June 24, 2009, Ningbo Kewei acquired 15.75% of Ningbo Keyuan from Hong Kong Keyuan through a capital increase.  On July 17, 2009, Hong Kong Keyuan acquired 28.5% shares from Ningbo Kewei.  Through these transactions Mr. Tao’s 51% ownership of Ningbo Keyuan remained unchanged.

In 2009, Apex Smart Limited, Best Castle Investments Limited, Chance Brilliant Holdings Limited, Delight Reward Limited and Keyuan International Group Limited were established in the British Virgin Island (BVI) and Keyuan HK was established in Hong Kong. Delight Reward Limited holds 100% of the equity interests of Keyuan International Group Limited which holds 100% of the equity interests of Keyuan HK. Delight Reward Limited is owned by:

3

● Apex Smart Limited (45.6132%), which was 100% held by Stewart Shiang Lor and subsequently by Mr. Brian Pak-Lun Mok and subsequently by Mr. Chunfeng Tao, who exercised his options to acquire ownership from Mr. Mok.  The transfer of ownership from Mr. Mok to Mr. Tao is currently being processed and should be completed shortly.

● Best Castle Investments Limited (23.2523%), which was 100% held by Mr. O. Wing Po and subsequently by Mr. Jicun Wang.

● Chance Brilliant Holdings Limited (20.5694%), which was 100% held by Mr. Lo Kan Kwan and subsequently by Mr. Peijun Chen.

● Harvest Point Limited (5.3896%), which was 100% held by Mr. Brian Pak-Lun Mok and subsequently by Ms. Muxia Duan.

● Strategic Synergy Limited (5.1755%), which was 100% held by Mr. Brian Pak-Lun Mok and subsequently Mr. Mok transferred one third of the ownership to Mr. Xin Yue.

On November 16, 2009 Keyuan HK acquired 100% of Ningbo Keyuan from Hong Kong Keyuan, HongKong Development and Wayes International.  Mr. Brian Pak-Lun Mok, Mr. O. Wing Po and Mr. Lo Kan Kwan also agreed to support Mr. Chunfeng Tao, Mr. Jicun Wang and Mr. Peijun Chen respectively to retain their controls in Delight Reward Limited and its subsidiaries. The reorganization is considered as restructuring under common control and Mr. Chunfeng Tao, Mr. Jicun Wang and Mr. Peijun Chen remained as the controlling parties.

On April 2, 2010, Mr. Brian Pak-Lun Mok, Mr. O. Wing Po, and Mr. Lo Kan Kwan, who indirectly held 100% of the equity interests in Delight Reward Limited, entered into certain share transfer agreements with Mr. Chunfeng Tao, Mr.  Jicun Wang, Mr.  Peijun Chen and Mr.  Xin Yue, pursuant to which each of these persons agreed to transfer all of its interests in Apex Smart Limited, Best Castle Investments Limited and Chance Brilliant Holdings Limited, Harvest Point Limited and Strategic Synergy Limited (collectively the “BVI Holding Companies”),  to Mr. Chunfeng Tao, Mr.  Jicun Wang, Mr. Peijun Chen and Mr. Xin Yue respectively, subject to achievement of certain performance targets of Ningbo Keyuan.  The performance targets are the Company achieving: at least $39 million of gross revenue for the three months commencing from July 2010 to September 2010; at least $40 million of gross revenue for the three months commencing from October 2010 to December 2010; and, at least $41 million of gross revenue for the three months commencing from January 2011 to March 2011.

Pursuant to the share transfer agreements, (i) Mr. Brian Pak-Lun Mok granted Mr.Chunfeng Tao an option to acquire 100% of the equity of Apex Smart Limited in three installments provided that certain performance targets are met; (ii) Mr. O. Wing Po granted Mr.  Jicun Wang an option to acquire 100% of the Best Castle Investments Limited in three installments provided that certain performance targets are met; (iii) Mr. Lo Kan Kwan granted Mr.  Peijun Chen an option to acquire 100% of the equity of Chance Brilliant Holdings Limited in three installments provided that  certain performance targets are met; (iv) Mr. Brian Pak-Lun Mok granted Mr.  Xin Yue an option to acquire 100% of the equity of Harvest Point Limited in three installments provided that certain performance targets are met; and (v) Mr. Brian Pak-Lun Mok granted Mr. Xin Yue an option to acquire 100% of the equity of Strategic Synergy Limited in three installments provided the performance targets are met ( the share transfer agreements are herein referred as “Slow Walk Agreement(s)” or “Slow Walk”. Options are herein sometimes referred as “Slow Walk Option(s)”).

(d)  Current Shareholding Structure of the Company

On November 4, 2010, the Company exercised its conversion rights under the terms of the Series A Preferred Stock to convert all of outstanding shares of its Series A 6% Cumulative Convertible Preferred Stock into a total of 6,132,032 shares of Common Stock, $0.001 par value per share. As a result, following the conversion, all 6,132,032 shares of Series A Preferred Stock that had been outstanding were cancelled and were automatically converted, without any delivery of conversion notice required on the part of the holders of Series A preferred stock.

On November 15, 2010, one-third of the Slow Walk Options were exercised after the first performance target was met.

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On December 28, 2010, the Company exercised its mandatory conversion rights under the terms of the Series M preferred stock to convert all of outstanding shares of its Series M preferred stock into a total of 47,658,000 shares of Common Stock, $0.001 par value per share, all of which are held by Delight Reward Limited.

On April 29, 2011, Harvest Point Limited transferred 1,028 shares of Delight Reward Limited’s stock to Strategic Synergy Limited, changing their ownership of Delight Reward Limited’s stock to 3.334% and 7.232% respectively. On the same day, Mr. Brian Pak-Lun Mok and Mr. Xin Yue transferred 33,333 shares and 16,667 shares of Harvest Point Limited, respectively, to Ms. Muxia Duan thus transferred 100% ownership of Harvest Point Limited to Ms. Muxia Duan.

After the second and third performance targets of Slow Walk Agreements were met, Mr. Peijun Chen and Mr. Jicun Wang exercised their remaining two-thirds of the Slow Walk Options on February 15, 2012. On March 30, 2012, Mr. Chunfeng Tao exercised his remaining two thirds of the Slow Walk Options and the transfer of the shares of Apex Smart Limited from Mr. Brian Pak-Lun Mok to Mr. Chunfeng Tao is currently being processed. As the date hereof, Mr. Xin Yue has not exercised his remaining two-thirds of the Slow Walk Options.

As a result, the shareholding structure following the restructuring is as follows:

(e) Independent Investigation and Nasdaq Delisting Decision

During the process of preparing the Company’s Annual Report on Form 10-K for the year ending December 31, 2010,  on or about March 24, 2011, KPMG, the Company’s former independent auditor, raised certain issues primarily  relating to unexplained issues regarding certain cash transactions and recorded sales and requested that the Audit Committee conduct an independent investigation. Based on the issues raised by KPMG, on March 31, 2011, our Audit Committee elected to commence an independent investigation of the issues raised and engaged the services of independent counsel, Pillsbury Winthrop Shaw Pittman LLP (“Pillsbury”), which in turn engaged Deloitte Financial Advisory Services LLP (“Deloitte”), as independent forensic accountants, and King & Wood, as Audit Committee counsel in the People’s Republic of China (Pillsbury, Deloitte and King & Wood are collectively referred herein as “Investigation Team”).

On September 28, 2011, the Investigation Team completed the investigation.  On October 3, 2011, the Company provided the Nasdaq Hearings Panel with a copy of the final investigation report along with a comprehensive list of remedial actions the Company has taken and is committed to taking to remediate the accounting and internal control issues. On October 5, 2011, the Company was notified that the Nasdaq Hearings Panel exercised its discretionary authority pursuant to NASDAQ Listing Rule 5101 to delist the Company’s securities from the Nasdaq Stock Market. As a result, the Company’s shares resumed trading in the pink sheets under the ticker symbol KEYP.PK beginning October 7, 2011. The Company’s common stock is currently traded on OTCQBunder the symbol KEYP.

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(f) Financings

April – May 2010 Private Placement

Following the Share Exchange, we entered into a securities purchase agreement with 122 accredited investors for the issuance and sale of 748,704 Units  at a purchase price of $35 per unit, for aggregate gross proceeds of approximately $26,204,640   consisting of, in the aggregate, (a) 6,738,336 shares of Series A convertible preferred stock, par value $0.001 per share convertible into the same number of shares of Common Stock, (b) 748,704 shares of Common Stock, (c) three-year Series A Warrants to purchase up to 748,704 shares of Common Stock, at an exercise price of $4.50 per, and (d) three-year Series B Warrants to purchase up to 748,704 shares of Common Stock, at an exercise price of $5.25 per share (the “April-May 2010 Private Placement”).

In connection with the April-May 2010 Private Placement, we also entered into a registration rights agreement  with the investors, in which we agreed to file a registration statement  with the SEC to register for resale of the Common Stock, the Common Stock issuable upon conversion of the Series A Preferred Stock, the Series A Warrant Shares and the Series B Warrant Shares issued in the financing, within 30 calendar days of April 22, 2010 and to have such registration statement declared effective within 150 calendar days of April 22, 2010 or within 180 calendar days of April 22, 2010 in the event of a full review of the registration statement by the SEC. If we can not comply with the foregoing obligations under the registration rights agreement, we will be required to pay liquidated damages in cash to each investor, at the rate of 1% of the applicable subscription amount for each 30 day period in which we are not in compliance; provided, that such liquidated damages will be capped at 10% of the subscription amount of each investor and will not apply to any registrable securities that may be sold pursuant to Rule 144 under the Securities Act if all of the conditions in Rule 144(i)(2) are satisfied at the time of the proposed sale, or are subject to an SEC comment with respect to Rule 415 promulgated under the Securities Act.

Accordingly, we filed a registration statement on Form S-1 in connection with the April-May 2010 private placement transaction. Amendment No. 4 to such Form S-1 which we filed on October 15, 2010 was declared effective on October 19, 2010. However, because of the delinquency of the Company’s annual report on Form 10-K for fiscal year ended December 31, 2010 and interim reports on Form 10-Q for three months ended March 31, 2011 and June 30, 2011 respectively, as of October 14, 2011, the Amendment No. 4 to such Form S-1 is no longer effective. As a result, we began to accrue penalties pursuant to the terms of the registration rights agreement in April, 2011.

Pursuant to the terms of the securities purchase agreement and the terms of the Certificate of Designation of Series A preferred stock, we exercised our conversion rights to convert all of the outstanding Series A preferred stock into a total of 6,132,032 shares of Common Stock. As a result of the conversation, since November 4, 2010, we have no longer incurred the Series A dividends, payable quarterly, at the rate of 6% per annum for each outstanding share.

September 2010 Private Placement

On September 28, 2010, we closed an offering for $20,250,000 consisting of  a total of 540,001 units at a purchase price of $37.50 per unit, each unit consisting of, (a) ten (10) shares of Series B convertible preferred stock of the Company, (b) one and a half (1.5) three year Series C warrants  to purchase one  and a half (1.5) shares of Common Stock, at an exercise price of $4.50 per share, and (c) one and a half (1.5) three year Series D warrants  to purchase one and a half (1.5 ) shares of Common Stock, at an exercise price of $5.25 per share (the “ September 2010 Private Placement”) in reliance upon the exemption from securities registration afforded by Regulation S as promulgated under the Securities Act of 1933.

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In connection with the September 2010 Private Placement, we also entered into a Registration Rights Agreement with the investors, in which we agreed to file a registration statement  with the Commission to register for resale the Common Stock issuable upon conversion of the Series B Preferred Stock, the Series C Warrant Shares and the Series D Warrant Shares, within 30 calendar days of October 19, 2010 and to have the registration statement declared effective within 150 calendar days of October 19, 2010 or within 180 calendar days of October 19, 2010 in the event of a full review of the registration statement by the Commission. If we do not comply with the foregoing obligations under the registration rights agreement, we will be required to pay cash liquidated damages to each Series B Investor, at the rate of 1% of the applicable subscription amount for each 30 day period in which the Company is not in compliance; provided, that such liquidated damages will be capped at 10% of the subscription amount of each investor and will not apply to any registrable securities that may be sold pursuant to Rule 144 under the Securities Act if all of the conditions in Rule 144(i)(2) are satisfied at the time of the proposed sale, or are subject to an SEC comment with respect to Rule 415 promulgated under the Securities Act.

Accordingly, we filed a registration statement on Form S-1 in connection with the September 2010 private placement transaction. Amendment No. 2 to such Form S-1, which we filed on January 14, 2011, was declared effective on January 19, 2011. However, because of the delinquency of the Company’s annual report on Form 10-K for fiscal year ended December 31, 2010 and interim reports on Forms 10-Q for three months ended March 31, 2011 and June 30, 2011 respectively, as of October 14, 2011, Amendment No. 2 to such Form S-1 is no longer effective. As a result, we began to accrue penalties pursuant to the terms of the registration rights agreement in April, 2011.

Mandatory Conversion of Series M Preferred Stock

On December 28, 2010, we exercised our mandatory conversion rights under the terms of the Series M preferred stock to convert all of the outstanding shares of the Series M preferred stock into a total of 47,658,000 shares of Common Stock, $0.001 par value per share. As a result, following the conversion, all 47,658 shares of Series M preferred stock that had been outstanding were cancelled and were automatically converted, without any delivery of conversion notice required on the part of the holders of Series M Preferred Stock.

Stock Repurchase Program

On September 17, 2012, our Board of Directors authorized the repurchase of $2 million of its stock up to $1.50 per share. We are  currently communicating with several candidate brokers to design and execute the stock repurchase program for us.

Principal Executive Office

Our principal executive offices are located at Qingshi Industrial Park, Ningbo Economic & Technological Development Zone, Ningbo, China 315803, Tel: (86) 574-8623-2955.

Risk Factors

The securities offered by this prospectus are speculative and involve a high degree of risks associated with our business.  For more discussion of these and other risk factors affecting us and our business, see the “Risk Factors” section beginning on page 11 of this prospectus.

The Offering

Common Stock being offered by Selling Stockholders	Up to 14,449,640 shares(1)
Common Stock outstanding	62,979,500 shares as of the date of this Prospectus
Common Stock outstanding after the Offering	62,979,500  (2)
Use of Proceeds	We will not receive any proceeds from the sale of shares by the Selling Stockholders, although we may receive additional proceeds of up to $20,121,743 if all of the Warrants are exercised for cash. We will not receive any additional proceeds to the extent that the Warrants are exercised by cashless exercise.

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Trading Symbol	KEYP
Risk Factors	The securities offered by this prospectus are speculative and involve a high degree of risk and investors purchasing securities should not purchase the securities unless they can afford the loss of their entire investment. See “Risk Factors” beginning on page 11.

(1) This prospectus relates to the resale by the Selling Stockholders of up to 14,449,640 shares of our Common Stock, including 4,720,182 shares of our Common Stock that are currently issued and outstanding, 5,333,340 shares of our Common Stock underlying Series B preferred stock, $0.001 par value (the “Series B Preferred Stock”), and 4,396,118 shares of our Common Stock issuable upon exercise of warrants (the “Warrant Shares”). The Warrant Shares are comprised of (i) 747,554 shares of Common Stock issuable upon exercise of Series A Warrants to purchase our Common Stock, (ii) 748,204 shares of Common Stock issuable upon exercise of Series B Warrants to purchase our Common Stock ,  (iii) 718,755 shares of Common Stock issuable upon exercise of Placement Agent Warrants, Placement Agent Series A Warrants and Placement Agent Series B Warrants  to purchase our Common Stock issued to TriPoint Global Equities, LLC , as placement agent in connection with the April-May 2010 Private Placement. Syndicated Capital, Inc., Brill Securities, Meyers Associates LP also served as sub-placement agents in connection with the Private Placement and received the shares they are offering for resale in this prospectus as placement agent compensation in connection with the Private Placement, (iv) 810,002 shares of Common Stock issuable upon exercise of Series C Warrants, (v) 810,002 shares of Common Stock issuable upon exercise of Series D Warrants, (vi) 561,601 shares of Common Stock issuable upon exercise of Placement Agent Warrants  to purchase our Common Stock issued to TriPoint Global Equities, LLC , as placement agent in connection with the September 2010 Private Placement. The selling stockholders named herein may sell common stock from time to time in the principal market on which the stock is traded at the prevailing market price, at prices related to such prevailing market price, in negotiated transactions or a combination of such methods of sale. We will not receive any proceeds from the sales by the selling stockholders.  

(2) Assumes issuance of all Conversion Shares and Warrant Shares.

Summary Financial Information

The following summary financial data for the fiscal years ended December 31, 2011 and 2010, were derived from the consolidated financial statements. This information is only a summary and does not provide all of the information contained in our financial statements and related notes. You should read the “Management’s Discussion and Analysis or Plan of Operation” beginning on page 124 of this prospectus and our financial statements and related notes included elsewhere in this prospectus.

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Statement of Operations Data:  

	For the Years Ended  December 31,						For the Quarter ended June  30,			For the Six Months Ended June 30,
	2011			2010			2012			2012
Sales	$	626,684,917		$	558,752,069		$	184,425,717		$	367,750,405
Cost of sales		604,669,534			490,923,433			178,005,456			351,857,165
Gross profit (loss)		22,015,383			67,828,636			6,420,261			15,893,240
Operating expenses
Selling expenses		1,240,709			623,652			388,217			641,123
General and administrative expenses		17,858,807			9,517,814			2,656,620			5,266,815
Total operating expenses		19,099,516			10,141,466			3,044,837			5,907,938
Income (loss) from operations		2,915,867			57,687,170			3,375,424			9,985,302
Other income (expenses):
Interest Income		4,320,393			556,159			1,882,812			2,822,046
Interest Expense		(15,796,772	)		(9,945,389	)		(2,930,281	)		(7,308,982	)
Foreign Exchange gain (loss), net		3,661,599			2,711,984			(542,352	)		(364,518	)
Liquidated damages expenses		(2,493,326	)
Other income(expenses), netOther income (expense),netOther income (expense),net		3,102,661			(396,797	)		(147,022	)		(217,039	)
Total other expenses		(7,205,445	)		7,074,043			(1,442,799	)		(5,068,493	)
Income (loss) before income tax		(4,289,578	)		(50,613,127	)		1,932,625			4,916,809
Income tax expense (benefit)		2,851,718			(13,492,704	)		870,277			2,009,469
Net Income (loss)		(7,141,296	)		(37,120,423	)		1,062,348			2,907,340
Other comprehensive income
Foreign currency translation adjustment		3,235,395			2,247,635			130,680			708,091
Comprehensive income (loss)	$	(3,905,901	)	$	39,368,058		$	1,193,028		$	3,615,431
Basic earnings (loss) per common share	$	(0.14	)		0.71		$	0.02		$	0.05
Diluted earnings (loss) per common share	$	(0.14	)	$	0.66		$	0.02		$	0.05
Weighted average number of common shares
outstanding
Basic		57,585,040			50,929,526			57,646,160			57,646,160
Diluted		57,585,040			56,057,994			62,979,500			62,979,500

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Balance Sheet Data:   

	As of December 31, 2011		As of December 31, 2010		As of June 30, 2012
Cash	$	7,325,017	$	29,336,241	$	9,879,169
Pledged bank deposits		156,318,066		98,053,146		239,816,494
Bills receivable		1,574,000		9,194,513		3,309,663
Inventories		38,945,968		86,831,556		73,048,249
Prepayments to suppliers		15,781,294		14,071,219		44,507,626
Property and equipment, net		190,867,621		129,781,304		209,768,917
Total assets		529,843,840		452,968,948		766,485,188
Accounts payable		97,588,137		92,225,936		79,936,476
Bills payable		63,550,250		60,224,900		111,267,000
Short term bank borrowings		225,969,421		135,768,634		393,534,612
Total liabilities		444,146,539		360,569,003		676,419,385
Stockholders’ equity		69,245,749		75,698,380		73,614,251

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RISK FACTORS

 THE FOLLOWING MATTERS MAY HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS, FINANCIAL CONDITION, LIQUIDITY, RESULTS OF OPERATIONS OR PROSPECTS, FINANCIAL OR OTHERWISE. REFERENCE TO THIS CAUTIONARY STATEMENT IN THE CONTEXT OF A FORWARD-LOOKING STATEMENT OR STATEMENTS SHALL BE DEEMED TO BE A STATEMENT THAT ANY ONE OR MORE OF THE FOLLOWING FACTORS MAY CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE IN SUCH FORWARD-LOOKING STATEMENT OR STATEMENTS.

Risks Related to Our Business

Our limited operating history makes evaluation of our business difficult.

We have a limited operating history and have encountered and expect to continue to encounter many of the difficulties and uncertainties often faced by early stage companies. Our limited operating history makes it difficult to evaluate our future prospects, including our ability to develop a wide customer and distribution network for our services, to expand our operations to include additional services and to control raw material costs, all of which are critical to our success. An investor must consider our business and our prospects in light of the risks, uncertainties and difficulties common to early stage companies. We may encounter unanticipated problems, expenses and delays in developing and marketing our services and securing additional blending and storage facilities. We may not be able to successfully address these risks. If we are unable to address these risks, our business may not grow, our stock price may suffer, and we may be unable to stay in business.

Key employees are essential to growing our business.

Mr.Chunfeng Tao, Mr. Jingtao Ma, Mr. Shifa Wang, and Mr. Mingliang Liu are essential to our ability to continue to grow our business. They have established relationships with customers and suppliers within the industries in which we operate. If one or more of these key employees were to leave us, our relationships with our customers and suppliers may become strained, and our growth strategy might be hindered, which could limit our ability to increase revenue.

In addition, although we are located in an area with a good supply of skilled labor, we still face competition from other companies located in the same area for attracting skilled personnel. If we fail to attract and retain qualified personnel to meet current and future needs, this could slow our ability to grow our business, which could result in a decrease in market share.

We continue to be dependent on bank loans and other short term financing in order to fund our purchases of raw materials.

In order to operate our business efficiently, we rely on short term bank financing to fund the purchase of raw materials.  As of June 30, 2012, we had approximately RMB2483 million (approximately USD $394 million) of short term debt, RMB100 million (USD $16  million) in current portion of long-term debt, and lines of credit from 9  banks.   Typically, the term for a short term bank loan is one year while a long term bank loan has a term of three or four years. Bank loans are renewable at the banks’ option. In 2011, we paid back approximately RMB1,119 million (USD $171 million) and borrowed approximately RMB1,653 million (USD $258 million) in the form of short terms loans. During the six months ended June 30, 2012, we paid back approximately RMB 1,848  million (USD $291 million) and borrowed approximately RMB  2,908 million (USD $458 million) in the form of short term loans. If one or more of these banks were to revoke their line of credit or fail to renew such line of credit when it is due, we would be unable to continue to purchase raw materials in the amounts necessary to continue production at our current capacity.

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We need additional capital to expand our manufacturing facility and we may not be able to obtain it at acceptable terms, or at all, which could adversely affect our ability to increase our production capacity and expand our business.

We are working to expand our manufacturing capacity to include additional storage capacity, a raw material pre-treatment facility, an asphalt production facility and an ABS production facility. The estimated cost of the additional storage capacity, raw material pretreatment facility and asphalt production facility (excluding land costs) is approximately $70 million, including $20 million for facility construction, $40 million for new equipment, and $10 million for working capital.  We are currently estimating the cost for the ABS production facility. We plan to fund these expansions through short-term borrowings, cash from operations and potential equity financing. However, our ability to obtain additional capital on acceptable terms is subject to a variety of uncertainties, including, but not limited to:

•   investors’ perception of, and demand for, securities of petrochemical manufacturing and supply companies;

•   conditions of the U.S. and other capital markets in which we may seek to raise funds;

•   our future results of operations, financial condition and cash flow;

•   PRC governmental regulation of foreign investment in petrochemical manufacturing companies in China;

•   economic, political and other conditions in China; and

•   PRC governmental policies relating to foreign currency borrowings

Our operations may be adversely affected by the cyclical nature of the petroleum and petrochemical market and by the volatility of prices of our raw materials and petrochemical products.

All of our revenues are attributable to petrochemical products, which have historically been cyclical and sensitive to the availability and price of raw materials and general economic conditions. Markets for many of our products are sensitive to changes in industry capacity and output levels, cyclical changes in regional and global economic conditions, the price and availability of substitute products and changes in consumer demand, which from time to time have had a significant impact on product prices in the regional and global markets. Historically, the markets for these products have experienced alternating periods of tight supply, causing prices and margins to increase, followed by periods of capacity additions, finally resulting in oversupply and declining prices and margins. As tariffs and other import restrictions are reduced and the control of product pricing is relaxed in China, the markets for many of our products have become increasingly subject to the cyclicality of regional and global markets. Raw material costs accounted for more than 90% of our Cost of Goods Sold. Volatility of raw material costs could have significant negative impact on our profitability.

Our operation may be interrupted by weather conditions and power shutdowns and our operating results may therefore be adversely affected

Our operating results depend largely on the uninterrupted operation of our business. Our facilities are located at Beilun, Ningbo, China, by the east coast. Severe weather conditions and natural disasters, such as hurricanes, storms, floods, and other severe weather events could disrupt our operations. Additionally, we are located in an industrial park where the infrastructure such as the electricity grid is in need of periodic upgrade. Disruptions to our operations due to natural conditions discussed above and/or mandatory power shutdowns due to the periodic electricity grid upgrades could significantly affect our ability to manufacture and/or sell products, which would result in a substantial loss of sales and revenues and substantial harm to our operating results.

Our manufacturing processes could expose us to substantial product liability claims which may negatively impact our profitability.

We face an inherent business risk of exposure to product liability claims in the event that the use of our products is alleged to have resulted in adverse side effects. Side effects or marketing or manufacturing problems pertaining to any of our products could result in product liability claims or adverse publicity. These risks will exist for those products in clinical development and with respect to those products that have received regulatory approval for commercial sale. To date, we have not experienced any product liability claims. However, that does not mean that we will not have any such claims with respect to our products in the future which may negatively impact our profitability.

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In the past several years we have derived a significant portion of our revenues from a small group of customers and we have purchased raw material from a small group of suppliers. If we are to remain dependent upon only a few customers and a few raw material suppliers, such dependency could negatively impact our business, operating results and financial condition.

For the year ended December 31, 2011, our five largest customers accounted for 44% of our total sales. For the six months ended June 30, 2012, our five largest customers accounted for 36% of our total sales. As our customer base may change from year-to-year, during such years that the customer base is comparatively highly concentrated, the loss of, or reduction of our sales to, any of such major customers could have a material adverse effect on our business, operating results and financial condition.

For the year ended December 31, 2011, our three largest suppliers accounted for 76% of our total raw material purchases. For the six months ended June 30, 2012,  our  three largest suppliers accounted for 80% of our total raw material purchases. As our supplier base may change from year-to-year, during such years that the supplier base is highly concentrated, the loss of, or reduction of our raw material supply from, any of such major suppliers could have a material adverse effect on our business, operating results and financial condition.

We may be exposed to risks relating to our disclosure controls and our internal controls and may need to incur significant costs to comply with applicable requirements.

Effective internal controls are necessary for us to provide reliable financial reports and to effectively prevent fraud. We maintain a system of internal controls over financial reporting, which is defined as a process designed by, or under the supervision of, our principal executive officer and principal financial officer, or persons performing similar functions, and effected by our Board of Directors, management and other personnel, 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.

During the process of preparing the Company’s Annual Report on Form 10-K for the year ended December 31, 2010, on or about March 24, 2011,  KPMG, the Company’s prior independent auditor, raised certain issues primarily  relating to the unexplained issues regarding certain cash transactions and recorded sales  and requested that the Audit Committee conduct an independent investigation. Based on the issues raised by KPMG, on March 31, 2011, our Audit Committee elected to commence an independent Investigation of the issues raised and engaged the services of the Investigation Team. Following the Investigation, the Audit Committee identified, among other issues, inadequate disclosure and issues regarding internal control and procedures.  In order to improve corporate governance and enhance internal controls, management and our Board of Directors are committed to fully adopting and implementing the recommendations of the Audit Committee in addition to all of the corrective actions the Company has taken to date. For more details of the corrective actions, please refer to Item 9A Controls and Procedures in our Form 10-K for the year ended December 31, 2011.  

Notwithstanding the foregoing corrective actions, we cannot currently ensure that our controls and procedures will be effective at any time in the immediate future.  Moreover, in order to improve our controls and procedures we anticipate that we will continue to incur significant costs.  Failure to properly improve our controls and procedures could result in our failure to meet our reporting obligations, result in the restatement of our past financial statements, cause harm to our operating results, subject us to regulatory scrutiny and sanction, cause investors to lose confidence in our reported financial information and have a negative effect on the market price for shares of our common stock, all of which present significant risk to our investors.

Insurance coverage for some of our operations may be insufficient to cover losses.

The insurance industry in China is still at an early stage of its development. Insurance companies in China offer limited business insurance products or offer them at a high price. We do not maintain insurance coverage for various risks, including environmental claims. A significant uninsured claim against us would have a material adverse effect on our financial position and results of operations.

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Failure to comply with environmental laws and regulations may have a material adverse effect on our business and results of operations.

We are subject to various environmental laws and regulations that require us to obtain environmental permits for our operations. We have obtained relevant environmental licenses or approvals to conduct the manufacturing of petrochemical products in our operating subsidiary Ningbo Keyuan. If we fail to obtain all required environmental permits for our operations, or comply with the provisions of our permit, we could be subject to fines, criminal charges or other sanctions by regulators, including the suspension or termination of our operations. We are required to comply with extensive and complex environmental laws and regulations at various levels in the PRC relating to, among other things:

•   the handling of petrochemical products;

•   the operation of petrochemical product storage facilities;

  •   workplace safety;

•   environmental damage; and

•   hazardous waste disposal.

If we are involved in a spill or other accident involving hazardous substances, or if we are found to be in violation of environmental laws or regulations, we could be subject to liabilities that could have a material adverse effect on our business, financial condition and results of operations. If we should fail to comply with applicable environmental regulations, we could be subject to substantial fines or penalties and to civil and criminal liability. Our facilities passed inspection by the Ningbo City environmental protection authorities after the completion of construction. However, we cannot assure you that at all times we will be in compliance with environmental laws and regulations or our environmental permits or that we will not be required to expend significant funds to comply with, or discharge liabilities arising under, environmental laws, regulations and permits.

Our failure to protect our technologies could have a negative impact on our business.

Our manufacturing technologies and process, which have or have not been patented or registered as our property, are key components of our competitive advantage and our growth strategy. On January 25, 2011 we received approval for a patent related to the Company's proprietary production process, called MEP (Multiple Ethylene Propylene). MEP is an exclusive and leading technology used in Keyuan's existing production process. The utility model patent received, #ZL-2010-2-0191523.6, applies to a processing technology used in the production of ethylene and propylene. We also rely on confidentiality and license agreements with certain of our employees, customers and others to protect the confidentiality of our technologies. If we are unable to adequately protect the confidentiality of these technologies, our business, results of operations, financial condition and prospects could be materially and adversely affected.

We incur increased costs as a result of being a public company.

Though we are currently a smaller reporting company (market cap less than $75,000,000), we have incurred significant legal, accounting and other expenses that we did not incur as a private company. Additionally, from April 2011 to December 2011, we have incurred approximately $5,800,000 in connection with the Independent Investigation commenced by our Audit Committee at the request of our former auditor KPMG. We may continue to incur costs for the various corrective actions we are taking and committed to taking to improve our internal controls and procedures, as well as corporate governance. Furthermore, if the Company’s market cap exceeds $75 million, we will be subject to the requirements of the Sarbanes-Oxley Act Section 404.  In addition, the Sarbanes-Oxley Act, as well as new rules subsequently implemented by the SEC, has required changes in corporate governance practices of public companies. We expect these rules and regulations, along with the corrective actions to improve our controls and procedures, to increase our legal, accounting and financial compliance costs and to make certain corporate activities more time-consuming and costly. We are currently evaluating and monitoring developments with respect to these rules, and we cannot predict or estimate the amount of additional costs we may incur or the timing of such costs. Additionally, if we are unable to comply with the Sarbanes-Oxley Act’s internal controls requirements, we may not be able to obtain the independent auditor certifications that Sarbanes-Oxley Act requires publicly-traded companies to obtain.

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We may be subject to penalties or fines from the Chinese government as a result of possible violations of PRC laws or regulations

Our management and our Board of Directors have reviewed our past practices and have been advised that several of these practices may result in possible violation of PRC laws or regulations. Specifically, a) we maintained an off-balance account to pay service providers who were not able to issue formal invoices, to distribute cash bonus to our key employees and officers, to pay rental for certain officers’ dormitories whose residences are far from our factory, etc. However, we are advised that such practices may result in violation of PRC laws.  As a result, we ceased the use of such off-balance account in April 2011 and have recorded, and will record, all transactions in that account into our financial statement in  the relevant annual report and interim report.  b) In September 2010, we adopted a numbering system to bar scan our products to avoid any misrepresentation of the nature of our products.   In the past we sometimes accommodated requests from our customers to change the name of products so that our customers could save on freight costs. c) in the past, in order to overcome the restrictions regarding the use of certain bank loans or to satisfy the banks’ internal requirements to demonstrate the usage of the loans, we engaged with certain related and other parties in short term financings.  Though we are current on our loan payments and as a general rule, the risk of prosecution and or civil liabilities is diminished if the loans have been repaid; we are advised that such practices may have been in violation of PRC banking laws. d) in 2010,  RMB 21 million was transferred by Ningbo Keyuan to one of its employees with no collateral or written agreement. The RMB 21 million was subsequently returned by the employee. The funds were used by the employee to assist an investor in the September 2010 Private Placement, in converting RMB to U.S. dollars. However, such action may violate PRC foreign exchange laws and regulations. If Ningbo Keyuan is held responsible for any such violation conducted by the employee and the investor, Ningbo Keyuan may be subject to penalties. Though we have discontinued the above mentioned practices, Ningbo Keyuan may be in violation of PRC laws or regulations due to our past practices.  Additionally, Ningbo Keyuan discounted and continues to discount bank notes in order to use its effective credit lines to finance our growth. Though Ningbo Keyuan is current on its loan payments and we have been advised by our PRC counsel that as long as payments to bank loans are current, the chance that Ningbo Keyuan will be subject to a final, penalty or civil liability because of discounting bank notes is remote, there is a risk that such practice may be a potential violation of PRC banking laws. Therefore, we cannot assure you that we may not be subject to penalties or fines from the Chinese regulators if they decide to proceed against us and we cannot assure you that there will be no other violation of any current PRC laws or regulations identified by the relevant government regulators in the future.

We may face litigation and/or regulatory action as a result of recent events.

In November 2011, The Rosen Law Firm filed a class action law suit against us. We believe there is no basis to the law suit and intend to defend the law suit vigorously. Moreover, as a result of recent events, including but not limited to the delisting of our stock from the NASDAQ, our failure to file periodic reports as they are due for approximately six months and our failure to comply with certain registration requirements related to common shares underlying our preferred stock and warrants, we may become subject to litigation from shareholders and other investors.  Additionally, we may also become subject to regulatory enforcement actions in either the U.S. and/or China. On September 11, 2012, we received a “Wells Notice” from the Staff of the U.S. Securities and Exchange Commission ( the “Commission”) stating that the Staff intends to recommend that the Commission bring a civil injunctive action against the Company, alleging that the Company violated certain U.S. securities law. Though a  Wells Notice by the Staff is neither a formal allegation of wrongdoing nor a determination of wrongdoing, it  indicates that the Commission has determined it may bring a civil action and provides the Company with an opportunity to provide the Commission with information as to why such action should not be brought. We cannot predict the outome of the matter with the Commission, including whether a lawsuit will be filled or the term of any settlement that may be reached. At this time, the company does not expect the notice to materially interfere with its day to day operating business. If we are forced to defend either a civil law suit brought by outside shareholders or investors and/or a regulatory action, we will be required to expend significant additional funds that could otherwise be utilized for business purposes.  Additionally, defense of such claims will result in management expending additional time and focus in connection with such defense that may materially impact its ability to effectively run our business.

Risks Relating to Regulation of Our Business

Uncertainties with respect to the governing regulations could have a material and adverse effect on us.

There are substantial uncertainties regarding the interpretation and application of the PRC laws and regulations, including, but not limited to, the laws and regulations governing our business and our ownership of the equity interests in our PRC subsidiaries, both of which are wholly foreign owned enterprise under the PRC laws. These laws and regulations are relatively new and may be subject to change, and their official interpretation and enforcement may involve substantial uncertainty. The effectiveness of newly enacted laws, regulations or amendments may be delayed, resulting in detrimental reliance by foreign investors. New laws and regulations that affect existing and proposed future businesses may also be applied retroactively.

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The PRC government has broad discretion in dealing with violations of laws and regulations, including levying fines, revoking business permits and other licenses and requiring actions necessary for compliance. In particular, licenses and permits issued or granted to the PRC subsidiary by relevant governmental bodies may be revoked at a later time by higher regulatory bodies. We cannot predict the effect of the interpretation of existing or new PRC laws or regulations on our businesses. We cannot assure you that our current ownership and operating structure would not be found to be in violation of any current or future PRC laws or regulations. As a result, we may be subject to sanctions, including fines, and could be required to restructure our operations or cease to provide certain services. In addition, any litigation in China may be protracted and result in substantial costs and diversion of resources and management attention. Any of these or similar actions could significantly disrupt our business operations or restrict us from conducting a substantial portion of our business operations, which could materially and adversely affect our business, financial condition and results of operations.

Our PRC subsidiaries will be subject to restrictions on dividend payments.

We conduct all of our business through our consolidated subsidiaries incorporated in the PRC. We rely on dividends paid by these consolidated subsidiaries for our cash needs, including the funds necessary to pay any dividends and other cash distributions to our stockholders, to service any debt we may incur and to pay our operating expenses. The payment of dividends by entities established in the PRC is subject to limitations.  Current regulations in the PRC would permit the PRC subsidiary to pay dividends to us only out of its accumulated distributable profits, if any, determined in accordance with Chinese accounting standards and regulations. In addition, our PRC subsidiaries will be required to set aside at least 10% (up to an aggregate amount equal to half of its registered capital) of its accumulated profits each year. Such cash reserve may not be distributed as cash dividends. In addition, if the PRC subsidiary incurs debt on its own behalf in the future, the instruments governing the debt may restrict its ability to pay dividends or make other payments to us. Under U.S. GAAP (Financial Accounting Standard Board (“FASB”) Accounting Standard Codification (“ASC”) Topic 740-30), no deferred tax expense is required to be recorded on the earnings of foreign subsidiaries when the parent company establishes that the earnings will be permanently reinvested outside the U.S.  If dividend payments are made by our subsidiaries to the US parent, additional U.S. tax could become due in future years.  At the time of the repatriation or investment in U.S. property, the U.S. will tax the foreign earnings as a dividend and will allow a foreign tax credit for any foreign taxes previously paid on the earnings.  To the extent that dividend payments are made by our PRC subsidiaries to our US Parent additional tax may be due.

PRC regulations on loans and direct investments by overseas holding companies in PRC entities may delay or prevent us to make overseas loans or additional capital contributions to our PRC subsidiary.

Under the PRC laws, foreign investors may make loans to their PRC subsidiaries or foreign investors may make additional capital contributions to their PRC subsidiaries. Any loans to such PRC subsidiaries are subject to the PRC regulations and foreign exchange loan registrations, i.e. loans by foreign investors to their PRC subsidiaries to finance their activities cannot exceed statutory limits and must be registered with the State Administration of Foreign Exchange (the “SAFE”), or its local branch. Foreign investors may also decide to finance their PRC subsidiaries by means of additional capital contributions. These capital contributions must be examined and approved by the Ministry of Commerce of the People’s Republic of China (the “MOFCOM”), or its local branch in advance.

Under the PRC Enterprise Income Tax Law, we may be classified as a “resident enterprise” of China, and such classification would likely result in unfavorable tax consequences to us and our non-PRC stockholders.

On March 16, 2007, the National People’s Congress (the “NPC”), approved and promulgated the PRC Enterprise Income Tax Law (herein referred as the “New EIT Law”). The New EIT Law took effect on January 1, 2008. Under the New EIT Law, Foreign Investment Enterprises (“FIEs”), and domestic companies are subject to a uniform tax rate of 25%. In addition, an enterprise established outside of China with “de facto management bodies” within China is considered a “resident enterprise” which means that we may be treated in a manner similar to a Chinese enterprise for enterprise income tax purposes.

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Under the New EIT Law, an enterprise established outside of China with “de facto management bodies” within China is considered a “resident enterprise,” meaning that it can be treated in a manner similar to a Chinese enterprise for enterprise income tax purposes. The implementing rules of the New EIT Law define de facto management as “substantial and overall management and control over the production and operations, personnel, accounting, and properties” of the enterprise. On April 22, 2009, the State Administration of Taxation, or the SAT, issued a circular, or SAT Circular 82, which provides certain specific criteria for determining whether the “de facto management body” of a PRC-controlled enterprise that is incorporated offshore is located in China, which include all of the following conditions: (a) the location where senior management members responsible for an enterprise’s daily operations discharge their duties; (b) the location where financial and human resource decisions are made or approved by organizations or persons; (c) the location where the major assets and corporate documents are kept; and (d) the location where more than half (inclusive) of all directors with voting rights or senior management have their habitual residence. Although the SAT Circular 82 only applies to offshore enterprises controlled by PRC enterprises or PRC enterprise groups, not those controlled by PRC individuals or foreigners, the determining criteria set forth in the SAT Circular 82 may reflect the SAT’s general position on how the “de facto management body” text should be applied in determining the tax resident status of all offshore enterprises, regardless of whether they are controlled by PRC enterprises or individuals. Due to the short history of the New EIT Law and lack of applicable legal precedents, it remains unclear how the PRC tax authorities will determine the PRC tax resident treatment of a foreign company controlled by individuals like us.

If the PRC tax authorities determine that we are “resident enterprises” for PRC enterprise income tax purposes, a number of unfavorable PRC tax consequences could follow. First, we may be subject to the enterprise income tax at a rate of 25% on our worldwide taxable income as well as PRC enterprise income tax reporting obligations. In our case, this would mean that income such as interest on offering proceeds and non-China source income would be subject to PRC enterprise income tax at a rate of 25%. Second, although under the New EIT Law and its implementing rules, dividends paid to us from our PRC subsidiaries would qualify as “tax-exempt income,” we cannot guarantee that such dividends will not be subject to a 10% withholding tax Finally, it is possible that “resident enterprise” classification could result in a situation in which a 10% withholding tax is imposed on dividends we pay to our non-PRC enterprise stockholders and with respect to gains derived by our non-PRC enterprise stockholders from transferring our shares and a 20% withholding tax is imposed on dividends we pay to our non-PRC individual stockholders and with respect to gains derived by our non-PRC individual stockholders from transferring our shares.. We are actively monitoring the possibility of “resident enterprise” treatment for the applicable tax years and are evaluating appropriate organizational changes to avoid this treatment, to the extent possible.

If we were treated as a “resident enterprise” by PRC tax authorities, we would be subject to taxation in both the U.S. and China, and our PRC tax may not be credited against our U.S. tax.

If we receive any dividends from our PRC subsidiaries in the future, the dividends may be subject to PRC withholding tax.

The New EIT Law and the Implementation Rules of the New EIT Law provides that an income tax rate of 10% may be applicable to dividends payable to non-PRC investors that are “non-resident enterprises”, which (i) do not have an establishment or place of business in the PRC, or (ii) have such establishment or place of business in the PRC but the relevant income is not effectively connected with the establishment or place of business, to the extent such dividends are derived from sources within the PRC. The income tax for non-resident enterprises shall be subject to withholding at the income source, with the payer acting as the obligatory withholder under the New EIT Law, and therefore such income taxes are generally called withholding tax in practice. It is currently unclear in what circumstances a source will be considered as located within the PRC. We are an offshore holding company. Thus, if Keyuan HK is considered as a “non-resident enterprise” under the New EIT Law and the dividends paid to us by our subsidiaries in the PRC are considered income sourced within the PRC, such dividends may be subject to a withholding tax at a rate up to 10%.

In January 2009, the State Administration of Taxation, or SAT, promulgated the Provisional Measures for the Administration of Withholding of Enterprise Income Tax for Non-resident Enterprises (“Measures”), pursuant to which, the entities which have the direct obligation to make the following payment to a non-resident enterprise shall be the relevant tax withholders for such non-resident enterprise, and such payment includes: incomes from equity investment (including dividends and other return on investment), interests, rents, royalties, and incomes from assignment of property as well as other incomes subject to enterprise income tax received by non-resident enterprises in China. Given these Measures, our PRC subsidiaries have an obligation to withhold income tax in respect of the dividends paid to non-resident enterprise investors.

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The new tax law provides only a framework of the enterprise tax provisions, leaving many details on the definitions of numerous terms as well as the interpretation and specific applications of various provisions unclear and unspecified. Any increase in the combined company’s tax rate in the future could have a material adverse effect on our financial conditions and results of operations.

We face uncertainty from China’s Circular on Strengthening the Administration of Enterprise Income Tax on Non-Resident Enterprises' Share Transfer (Circular 698 that was released in December 2009 with retroactive effect from January 1, 2008.)

The Chinese State Administration of Taxation released a circular (“Circular 698”) on December 10, 2009 that addresses the transfer of shares by nonresident companies. Circular 698, which is effective retroactively to January 1, 2008, may have a significant impact on many companies that use offshore holding companies to invest in China. Pursuant to Circular 698, where the withholding agent does not withhold in accordance with laws or can’t perform the withholding obligation, the non-resident enterprises shall file a tax declaration with the PRC tax authority located at the place of the resident enterprise whose equity has been transferred, within seven days agree the date of the equity transfer provided under the contracts.

Where a foreign investor indirectly transfers equity interests in a Chinese resident enterprise by selling the shares in an offshore holding company, and the latter is located in a country or jurisdiction where the effective tax burden is less than 12.5% or where the offshore income of his, her, or its residents is not taxable, the foreign investor is required to provide the tax authority in charge of that Chinese resident enterprise with the relevant information within 30 days of the transfers. Moreover, where a foreign investor indirectly transfers equity interests in a Chinese resident enterprise through an abuse of form of organization and there are no reasonable commercial purposes such that the corporate income tax liability is avoided, the PRC tax authority will have the power to re-assess the nature of the equity transfer in accordance with PRC’s “substance-over-form” principle and deny the existence of the offshore holding company that is used for tax planning purposes.

There is uncertainty as to the application of Circular 698. For example, while the term "indirectly transfer" is not defined, it is understood that the relevant PRC tax authorities have jurisdiction regarding requests for information over a wide range of foreign entities having no direct contact with China. Moreover, the relevant authority has not yet promulgated any formal provisions or formally declared or stated how to calculate the effective tax in the country or jurisdiction and to what extent and the process of the disclosure to the tax authority in charge of that Chinese resident enterprise. In addition, there are no formal declarations with regard to how to decide abuse of form of organization and reasonable commercial purpose, which can be utilized by us to balance if our company complies with the Circular 698. As a result, we may become at risk of being taxed under Circular 698 and we may be required to expend valuable resources to comply with Circular 698 or to establish that we should not be taxed under Circular 698, which could have a material adverse effect on our financial condition and results of operations.

Our PRC subsidiaries are obligated to withhold and pay PRC individual income tax on behalf of our employees who are subject to PRC individual income tax. If we fail to withhold or pay such individual income tax in accordance with applicable PRC regulations, we may be subject to certain sanctions and other penalties and may become subject to liability under PRC laws.

Under PRC laws, Ningbo Keyuan and Ningbo Keyuan Petrochemicals are obligated to withhold and pay individual income tax on behalf of our employees who are subject to PRC individual income tax. If any PRC subsidiary fails to withhold and/or pay such individual income tax in accordance with PRC laws, it may be subject to certain sanctions and other penalties and may become subject to liability under PRC laws. We paid employees, senior management members and outside individual service providers cash compensation or awards totaling approximately RMB 4.8 million (approximately $709,000) in Year 2009, 2010 and first two months of 2011 without withholding individual income tax. Though we have stopped such practice and will follow any compensation recommendation from our compensation committee in the future, we may be subject to certain sanctions and other penalties and may become subject to liability under applicable tax laws in China.

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In addition, the SAT has issued several circulars concerning employee stock options. Under these circulars, our employees working in the PRC (which could include both PRC employees and expatriate employees subject to PRC individual income tax) who exercise stock options will be subject to PRC individual income tax. Our PRC subsidiaries have obligations to file documents related to employee stock options with relevant tax authorities and withhold and pay individual income taxes for those employees who exercise their stock options. While tax authorities may advise us that our policy is compliant, they may change their policy, and we could be subject to sanctions

Regulations of Overseas Investments and Listings may increase the administrative burden we face and create regulatory uncertainties.

On August 8, 2006, six PRC regulatory agencies, including the MOFCOM, the China Securities Regulatory Commission (the“CSRC”), the State Asset Supervision and Administration Commission (the “SASAC”), the State Administration of Taxation (the “SAT”), the State Administration for Industry and Commerce (the “SAIC”) and SAFE, amended and released the New M&A Rule, which took effect as of September 8, 2006. This regulation, among other things, includes provisions that purport to require that an offshore company formed for purposes of overseas listing of equity interest in PRC companies and controlled directly or indirectly by PRC companies or individuals (an “SPV”) obtain the approval of CSRC prior to the listing and trading of such SPV’s securities on an overseas stock exchange.

The application of the New M&A Rule with respect to overseas listings of SPVs remains unclear.

It is not clear whether the provisions in the new regulation regarding the offshore listing and trading of the securities of a SPV apply to an offshore company such as us which owns equity interests in Ningbo Keyuan and Ningbo Keyuan Petrochemicals. We believe that the M&A Rules and CSRC approval are not required in the context of the share exchange under our transaction because (i) such share exchange is a purely foreign related transaction governed by foreign laws, not subject to the jurisdiction of PRC laws and regulations; (ii) at the time of Share Exchange, we were not an SPV formed or controlled by PRC companies or PRC individuals; (iii) Ningbo Keyuan was established as a Sino-foreign joint venture by means of direct investment rather than by merger or acquisition of an existing PRC domestic company; (iv) at the time of Share Exchange, we were owned and  controlled by foreigners; and (v) there is no clear requirement in the New M&A Rule that would require an application to be submitted to the MOFCOM or CSRC for the approval of the listing and trading of our common stock on the U.S. security market. However, we cannot be certain that the relevant PRC government agencies, including CSRC, would reach the same conclusion, and we still cannot rule out the possibility that CSRC may deem that the transactions effected by the share exchange circumvented the M&A Rules, the PRC Securities Law and other rules and notices.

However, through the Slow Walk Options, we are indirectly owned or substantially controlled by PRC individuals, Mr. Chunfeng Tao, Mr. Jicun Wang and Mr. Peijun Chen.  If CSRC or another PRC regulatory agency subsequently determines that CSRC’s approval is required for the transaction, we may face sanctions by CSRC or another PRC regulatory agency. If this happens, these regulatory agencies may impose fines and penalties on our operations in the PRC, limit our operating privileges in the PRC, delay or restrict the repatriation of the proceeds from financings into the PRC, restrict or prohibit payment or remittance of dividends to us or take other actions that could have a material adverse effect on our business, financial condition, results of operations, reputation and prospects, as well as the trading price of our shares. CSRC or other PRC regulatory agencies may also take actions requiring us, or making it advisable for us, to delay or cancel the transaction.

The M&A Rules, along with foreign exchange regulations discussed in the above subsection, will be interpreted or implemented by the relevant government authorities in connection with our future offshore financings or acquisitions, and we cannot predict how they will affect our business development strategy.

PRC regulations relating to the establishment of offshore holding companies by PRC residents may subject our PRC resident beneficial owners or our PRC subsidiaries to liability or penalties, limit our ability to inject capital into our PRC subsidiaries, limit our PRC subsidiaries’ ability to increase their registered capital or distribute profits to us, or may otherwise adversely affect us.

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In October 2005, SAFE issued the Notice on Issues Relating to the Administration of Foreign Exchange in Fund-raising and Return Investment Activities of Domestic Residents Conducted via Offshore Special Purpose Companies, or SAFE Notice 75, which became effective as of November 1, 2005. SAFE has also issued implemented rules to SAFE Notice 75.  SAFE Notice 75 and its implementation rules require PRC residents (including both corporate entities and natural persons) to register with SAFE or its competent local branch in connection with their direct or indirect shareholding in any company outside of China referred to as an “offshore special purpose company” established for the purpose of raising funds from overseas to acquire assets of, or equity interests in, PRC companies. Under SAFE Notice 75, a “special purpose vehicle”, or SPV, refers to an offshore entity established or controlled, directly or indirectly, by PRC residents for the purpose of seeking offshore equity financing using assets or interests owned by such PRC residents in onshore companies. In addition, any PRC resident that is the shareholder of an offshore special purpose company is required to amend his or her SAFE registration with the SAFE or its competent local branch, with respect to that offshore special purpose company in connection with any of its increase or decrease of capital, transfer of shares, merger, division, equity investment or creation of any security interest over any assets located in China. The SAFE regulations require retroactive approval and registration of direct or indirect investments previously made by PRC residents in offshore special purpose companies. PRC subsidiaries of an offshore special purpose company are required to coordinate and supervise the filing of SAFE registrations by the offshore holding company’s shareholders who are PRC residents in a timely manner. In the event that a PRC resident shareholder with a direct or indirect investment in an offshore parent company fails to obtain the required SAFE approval and make the required registration, the PRC subsidiaries of such offshore parent company may be prohibited from making distributions of profits to the offshore parent and from paying the offshore parent proceeds from any reduction in capital, share transfer or liquidation in respect of the PRC subsidiaries. Further, failure to comply with the various SAFE approval and registration requirements described above, as currently drafted, could result in liability under PRC law for foreign exchange evasion.

There still remain uncertainties as to how certain procedures and requirements under the aforesaid SAFE regulations will be enforced, and it remains unclear how these existing regulations, and any future legislation concerning offshore or cross-border transactions, will be interpreted, amended and implemented by the relevant government authorities. Although we have requested PRC residents who, to our knowledge,  hold direct or indirect interests in our company to make the necessary applications, filings and amendments as required under the SAFE Notice 75 and other related rules, our PRC resident beneficial holders have not completed such approvals and registrations required by the SAFE regulations. We cannot assure you that such PRC residents will be able to complete the necessary approval and registration procedures required by the SAFE regulations. We will attempt to comply, and attempt to ensure that all of our shareholders subject to these rules comply with the relevant requirements. We cannot, however, assure the compliance of all of our China-resident shareholders. Any current or future failure to comply with the relevant requirements could subject us to fines or sanctions imposed by the Chinese government, including restrictions on certain of our subsidiaries’ ability to pay dividends or hinder our investment in those subsidiaries or affect our ownership structure, which could adversely affect our business and prospects.

Failure to comply with PRC regulations regarding the registration requirements for employee stock ownership plans or share option plans may subject the PRC plan participants or us to fines and other legal or administrative sanctions.

In December 2006, the People’s Bank of China promulgated the Administrative Measures of Foreign Exchange Matters for Individuals, which set forth the respective requirements for foreign exchange transactions by individuals (both PRC or non-PRC citizens) under either the current account or the capital account. In January 2007, SAFE issued implementing rules for the Administrative Measures of Foreign Exchange Matters for Individuals, which, among other things, specified approval requirements for certain capital account transactions such as a PRC citizen’s participation in the employee stock ownership plans or stock option plans of an overseas publicly-listed company. In March 2007, SAFE promulgated the Application Procedures of Foreign Exchange Administration for Domestic Individuals Participating in Employee Stock Ownership Plan or Stock Option Plan of Overseas-Listed Company, or the Stock Option Rules. Under these rules, PRC citizens who participate in an employee stock ownership plan or a stock option plan in an overseas publicly-listed company are required to register with SAFE or its local branch and complete certain other procedures. For participants of an employee stock ownership plan, an overseas custodian bank should be retained by the PRC agent, which could be the PRC subsidiary of such overseas publicly-listed company, to hold on trusteeship all overseas assets held by such participants under the employee share ownership plan. In the case of a stock option plan, the PRC agent is required to retain a financial institution with stock brokerage qualification at the place where the overseas publicly-listed company is listed or a qualified institution designated by the overseas publicly-listed company to handle matters in connection with the exercise or sale of stock options for the stock option plan participants. For participants who had already participated in an employee stock ownership plan or stock option plan before the date of the Stock Option Rules, the Stock Option Rules require their PRC employers or PRC agents to complete the relevant formalities within three months of the date of this rule.

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Further, a notice concerning the individual income tax on earnings from employee share options jointly issued by Ministry of Finance, or the MOF, and the State Administration of Taxation, or the SAT, and its implementing rules, provide that domestic companies that implement employee share option programs shall (a) file the employee share option plans and other relevant documents to the local tax authorities having jurisdiction over them before implementing such employee share option plans; (b) file share option exercise notices and other relevant documents with the local tax authorities having jurisdiction over them before exercise by the employees of the share options, and clarify whether the shares issuable under the employee share options mentioned in the notice are the shares of publicly listed companies; and (c) withhold taxes from the PRC employees in connection with the PRC individual income tax.

We and our PRC citizen employees who participate in the employee stock incentive plan, which we adopted in 2010, will be subject to these regulations.  We and our PRC option grantees have not completed the registrations under these regulations. We cannot assure you that we and our PRC option grantees will be able to complete the required registrations. Any current or future failure to comply with the relevant requirements could subject us to fines or sanctions imposed by the Chinese government, which could adversely affect our business and prospects.

Failure to comply with PRC laws and regulations relating to the environmental protection and safety in production requirements in China may result in severe penalties and liabilities.

The Chinese government has been adopting increasingly stringent regulations relating to the safety and environmental protection, and our business depends upon compliance with the aforesaid regulations and requirements. We completed an as-build acceptance inspection and we obtained relevant safety production permits and approvals from a variety of government authorities upon completion of the aforesaid inspection. The as-build inspection was conducted by the local government to make sure that a company meets all the conditions for normal production. We obtained all the necessary permits and approvals including environmental protection, firefighting and safety production before our trial production and submitted the application for as-build acceptance inspection at the end of 2009. The as-build acceptance inspection needs to be conducted within 12 months after the submission of application and we received the complete set of permits and approvals from relevant government authorities on December 16, 2010. However, there is no assurance that we will obtain or renew all such permits or approvals, which are subject to our fulfillment of the standards and requirements set out by the regulatory authorities. If we fail to pass the as-build acceptance inspection or obtain required licenses, we may be subject to fines, penalties or legal proceedings. Our operations at our production facilities are subject to periodic checks by the relevant authorities in the PRC and they have the power to take action against us, impose fines, withdraw or suspend our relevant licenses or activities or impose other penalties if we fail to comply with relevant regulations, in the event of which our business operations may be adversely affected. In addition, any change in the scope or application of these laws and regulations may limit our production capacity or increase our cost of operation and could therefore have an adverse effect on our business operations, financial condition and operating results. Our failure to comply with these laws and regulations could result in fines, penalties or legal proceedings. There can be no assurance that the Chinese government will not impose additional or stricter laws or regulations, compliance with which may cause us to incur significant capital expenditures, which it may not be able to pass on to our customers.

Risks Associated With Doing Business in China

There are substantial risks associated with doing business in China, as set forth in the following risk factors.

Our operations and assets in China are subject to significant political and economic uncertainties.

Changes in PRC laws and regulations, or their interpretation, or the imposition of confiscatory taxation, restrictions on currency conversion, imports and sources of supply, devaluations of currency or the nationalization or other expropriation of private enterprises could have a material adverse effect on our business, results of operations and financial condition. Under its current leadership, the Chinese government has been pursuing economic reform policies that encourage private economic activity and greater economic decentralization. There is no assurance, however, that the Chinese government will continue to pursue these policies, or that it will not significantly alter these policies from time to time without notice.

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We derive all of our sales from China.

Substantially all of our sales are generated from China. We anticipate that sales of our products in China will continue to represent a substantial proportion of our total sales in the near future. Any significant decline in the condition of the PRC economy could adversely affect consumer demand of our products, among other things, which in turn would have a material adverse effect on our business and financial condition.

Currency fluctuations and restrictions on currency exchange may adversely affect our business, including limiting our ability to convert Chinese Renminbi into foreign currencies and, if Chinese Renminbi were to decline in value, reducing our revenue in U.S. dollar terms.

Our reporting currency is the U.S. dollar and our operations in China use their local currency as their functional currencies. Substantially all of our revenue and expenses are in Chinese Renminbi. We are subject to the effects of exchange rate fluctuations with respect to any of these currencies. For example, the value of the Renminbi depends to a large extent on Chinese government policies and China’s domestic and international economic and political developments, as well as supply and demand in the local market. Since 1994, the official exchange rate for the conversion of Renminbi to the U.S. dollar had generally been stable and the Renminbi had appreciated slightly against the U.S. dollar. However, on July 21, 2005, the Chinese government changed its policy of pegging the value of Chinese Renminbi to the U.S. dollar. Under the new policy, Chinese Renminbi may fluctuate within a narrow and managed band against a basket of certain foreign currencies. As a result of this policy change, Chinese Renminbi depreciated approximately 0.06% against the U.S. dollar in 2009 and appreciated approximately 3.57% in 2010. Chinese Renminbi further appreciated approximately 4.86% in 2011. It is possible that the Chinese government could adopt a more flexible currency policy, which could result in more significant fluctuation of Chinese Renminbi against the U.S. dollar. We can offer no assurance that Chinese Renminbi will be stable against the U.S. dollar or any other foreign currency.

The statements of our operations are translated into U.S. dollars at the average exchange rates in each applicable period. To the extent the U.S. dollar strengthens against foreign currencies, the translation of these foreign currency denominated transactions could result in reduced revenue, operating expenses and net income for our international operations. Similarly, to the extent the U.S. dollar weakens against foreign currencies, the translation of these foreign currency denominated transactions could result in increased revenue, operating expenses and net income for our international operations. We are also exposed to foreign exchange rate fluctuations as we convert the financial statements of our foreign subsidiaries into U.S. dollars in consolidation. If there is a change in foreign currency exchange rates, the conversion of the foreign subsidiaries’ financial statements into U.S. dollars will lead to a translation gain or loss which is recorded as a component of other comprehensive income. In addition, we have certain assets and liabilities that are denominated in currencies other than the relevant entity’s functional currency. Changes in the functional currency value of these assets and liabilities create fluctuations that will lead to a transaction gain or loss. We have not entered into agreements or purchased instruments to hedge our exchange rate risks, although we may do so in the future. The availability and effectiveness of any hedging transaction may be limited and we may not be able to successfully hedge our exchange rate risks.

Although Chinese governmental policies were introduced in 1996 to allow the convertibility of Chinese Renminbi into foreign currency for current account items, conversion of Chinese Renminbi into foreign exchange for capital items, such as foreign direct investment, loans or securities, requires the approval of SAFE which is under the authority of the People’s Bank of China. These approvals, however, do not guarantee the availability of foreign currency conversion. We cannot be sure that we will be able to obtain all required conversion approvals for our operations or that Chinese regulatory authorities will not impose greater restrictions on the convertibility of Chinese Renminbi in the future. Because a significant amount of our future revenue may be in the form of Chinese Renminbi, our inability to obtain the requisite approvals or any future restrictions on currency exchanges could limit our ability to utilize revenue generated in Chinese Renminbi to fund our business activities outside of China, or to repay foreign currency obligations, including our debt obligations, which would have a material adverse effect on our financial condition and results of operations.

22

We may have limited legal recourse under PRC laws if disputes arise under our contracts with third parties.

The Chinese government has enacted laws and regulations dealing with matters such as corporate organization and governance, foreign investment, commerce, taxation and trade. However, their experience in implementing, interpreting and enforcing these laws and regulations is limited, and our ability to enforce commercial claims or to resolve commercial disputes is unpredictable. If our new business ventures are unsuccessful, or other adverse circumstances arise from these transactions, we face the risk that the parties to these ventures may seek ways to terminate the transactions, or, may hinder or prevent us from accessing important information regarding the financial and business operations of these acquired companies. The resolution of these matters may be subject to the exercise of considerable discretion by agencies of the Chinese government, and forces unrelated to the legal merits of a particular matter or dispute may influence their determination. Any rights we may have to specific performance, or to seek an injunction under PRC law, in either of these cases, are severely limited, and without a means of recourse by virtue of the Chinese legal system, we may be unable to prevent these situations from occurring. The occurrence of any such events could have a material adverse effect on our business, financial condition and results of operations.

Because our funds are held in banks in uninsured PRC bank accounts, the failure of any bank in which we deposit our funds could affect our ability to continue our business.

Funds on deposit at banks and other financial institutions in the PRC are often uninsured. A significant portion of our assets are in the form of cash deposited with banks in the PRC, and in the event of a bank failure, we may not have access to our funds on deposit. Depending upon the amount of money we maintain in a bank that fails, our inability to have access to our cash could impair our operations, and, if we are not able to access funds to pay our suppliers, employees and other creditors, we may be unable to continue in business.

Our business could be severely harmed if the Chinese government changes its policies, laws, regulations, tax structure or its current interpretations of its laws, rules and regulations, relating to our operations in China.

Our business is located in Ningbo, China and virtually all of our assets are located in China. We generate our sales revenue only from customers located in China. Our results of operations, financial state of affairs and future growth are, to a significant degree, subject to China’s economic, political and legal development and related uncertainties. Our operations and results could be materially affected by a number of factors, including, but not limited to:

•   Changes in policies by the Chinese government resulting in changes in laws or regulations or the interpretation of laws or regulations,

•   changes in taxation,

•   changes in employment restrictions,

•   import duties, and

•   currency revaluation.

Over the past several years, the Chinese government has pursued economic reform policies including the encouragement of private economic activities and greater economic decentralization. If the Chinese government does not continue to pursue its present policies that encourage foreign investment and operations in China, or if these policies are either not successful or are significantly altered, then our business could be harmed. Following the Chinese government’s policy of privatizing many state-owned enterprises, the Chinese government has attempted to augment its revenues through increased tax collection. It also exercises significant control over China’s economic growth through the allocation of resources, controlling payment of foreign currency-denominated obligations, setting monetary policy and providing preferential treatment to particular industries or companies. Continued efforts to increase tax revenues could result in increased taxation expenses being incurred by us. Economic development may be limited as well by the imposition of austerity measures intended to reduce inflation, the inadequate development of infrastructure and the potential unavailability of adequate power and water supplies, transportation and communications. In addition, the Chinese government continues to play a significant role in regulating industry by imposing industrial policies.

23

Failure to comply with the U.S. foreign corrupt practices act and Chinese anti-corruption laws could subject us to penalties and other adverse consequences.

Our executive officers, employees and other agents are subject to anti-corruption and anti-bribery laws including China’s anti-corruption laws and the U.S. Foreign Corrupt Practices Act, or the FCPA, which generally prohibits United States companies from engaging in bribery or other prohibited payments to foreign officials for the purpose of obtaining or retaining business. In addition, we are required to maintain records that accurately and fairly represent our transactions and have an adequate system of internal accounting controls. Foreign companies, including some that may compete with us, are not subject to these prohibitions, and therefore may have a competitive advantage over us. The PRC also strictly prohibits bribery of government officials. However, corruption, extortion, bribery, pay-offs, theft and other fraudulent practices occur from time-to-time in the PRC.

While we intend to implement measures to ensure compliance with the FCPA and China’s anti-corruption laws by all individuals involved with our company, our employees or other agents may engage in such conduct for which we might be held responsible. Since we became a U.S. public company, we have implemented strict requirements to preclude payments to government officials and limits on the amount employees can spend on gifts and entertaining clients.  Although prior to our becoming a U.S public company we had given culturally traditional gifts to government officials during Spring Festival and other Chinese traditional holidays, we believe the amounts of such gifts are below the amounts that generally trigger criminal liability under PRC law. The gifts were not made with the intent to bribe or wrongfully influence any such officials.    However, if our employees or other agents are found to have engaged in practices that violate either U.S or PRC laws, we could suffer severe penalties and other consequences that may have a material adverse effect on our business, financial condition and results of operations. In addition, our brand and reputation, our sales activities or our stock price could be adversely affected if we become the target of any negative publicity as a result of actions taken by our employees or other agents.

Changes in foreign exchange regulations in the PRC may affect our ability to pay dividends in foreign currency or conduct other foreign exchange business.

The Renminbi is not a freely convertible currency currently, and the restrictions on currency exchanges may limit our ability to use revenues generated in Renminbi to fund our business activities outside the PRC or to make dividends or other payments in United States dollars. The PRC government strictly regulates conversion of Renminbi into foreign currencies. Over the years, foreign exchange regulations in the PRC have significantly reduced the government’s control over routine foreign exchange transactions under current accounts. In the PRC, SAFE regulates the conversion of the Renminbi into foreign currencies. Pursuant to applicable PRC laws and regulations, foreign invested enterprises incorporated in the PRC are required to apply for “Foreign Exchange Registration Certificates.” Currently, conversion within the scope of the “current account” (e.g. remittance of foreign currencies for payment of dividends, etc.) can be effected without requiring the approval of SAFE. However, conversion of currency in the “capital account” (e.g. for capital items such as direct investments, loans, securities, etc.) still requires the approval of SAFE.

The Chinese government exerts substantial influence over the manner in which we must conduct our business activities.

China has only recently permitted provincial and local economic autonomy and private economic activities, and, as a result, we are dependent on our relationship with the local government in the province in which we operate our business. Chinese government has exercised and continues to exercise substantial control over virtually every sector of the Chinese economy through regulation and state ownership. Our ability to operate in China may be harmed by changes in its laws and regulations, including those relating to taxation, environmental regulations, land use rights, property and other matters. We believe that our operations in China are in material compliance with all applicable legal and regulatory requirements. However, the central or local governments of these jurisdictions may impose new, stricter regulations or interpretations of existing regulations that would require additional expenditures and efforts on our part to ensure our compliance with such regulations or interpretations. Accordingly, government actions in the future, including any decision not to continue to support recent economic reforms and to return to a more centrally planned economy or regional or local variations in the implementation of economic policies, could have a significant effect on economic conditions in China or particular regions thereof, and could require us to divest ourselves of any interest we then hold in Chinese properties.

24

PRC employment contract law and increases in the labor costs in China may hurt our business and profitability.

A Chinese employment contract law that became effective on January 1, 2008, imposes more stringent requirements on employers in relation to entry into fixed-term employment contracts, recruitment of temporary employees and dismissal of employees. In addition, under the Regulations on Paid Annual Leave for Employees, which also became effective on January 1, 2008, employees who have worked continuously for more than one year are entitled to a paid vacation ranging from 5 to 15 days, depending on the length of the employee’s service. Employees who waive such vacation entitlements at the request of the employer will be compensated for three times their normal daily salaries for each vacation day so waived. As a result of the new law and regulations, our labor costs may increase. There is no assurance that disputes, work stoppages or strikes will not arise in the future.

Increases in the labor costs or future disputes with our employees could damage our business, financial condition or operating results. According to PRC labor laws, the employer shall be responsible to deal with and pay social insurances and housing funds for all of its employees based on the actual salary of the employees. In addition, as required by PRC regulations, we participate in various employee benefit plans that are organized by municipal and provincial governments, including pension, work-related injury benefits, maternity insurance, medical and unemployment benefit plans. We are required under PRC laws to make contributions to the employee benefit plans at specified percentages of the salaries, bonuses and certain allowances of our employees, up to a maximum amount specified by the local government from time to time. Members of the retirement plan are entitled to a pension equal to a fixed proportion of the salary prevailing at the member’s retirement date. There is no guarantee that we and our subsidiaries will be able to comply with the relevant requirements. Failure to comply with the various PRC Labor Laws and regulation requirements described above could result in liability under PRC law.

Future inflation in China may inhibit our ability to conduct business in China.

In recent years, the Chinese economy has experienced periods of rapid expansion and high rates of inflation. These factors have led to the adoption by the Chinese government, from time to time, of various corrective measures designed to restrict the availability of credit, or regulate growth and contain inflation. High inflation may in the future cause the Chinese government to impose controls on credit and/or prices, or to take other action, which could inhibit economic activity in China, and thereby harm the market for our products.

We may have difficulty establishing adequate management, legal and financial controls in the PRC.

We may have difficulty in hiring and retaining a sufficient number of qualified employees to work in the PRC. As a result, we may experience difficulty in establishing management, legal and financial controls, collecting financial data and preparing financial statements, books of account and corporate records and instituting business practices that meet Western standards. We may have difficulty establishing adequate management, legal and financial controls in the PRC.  Please refer to Controls and Procedures on page 138 for additional information on this matter.

You may experience difficulties in effecting service of legal process, enforcing foreign judgments or bringing original actions in China based on United States or other foreign laws, against us and our management.

We conduct substantially all of our operations in China and substantially all of our assets are located in China. In addition, some of our directors and executive officers reside within China. As a result, it may not be possible to effect service of process within the United States or elsewhere outside China upon some of our directors and senior executive officers, including with respect to matters arising under U.S. federal securities laws or applicable state securities laws. It would also be difficult for investors to bring an original lawsuit against us or our directors or executive officers before a Chinese court based on U.S. federal securities laws or otherwise. Moreover, China does not have treaties with the United States or many other countries providing for the reciprocal recognition and enforcement of judgment of courts.

Because Chinese laws govern almost all of our business’ material agreements, we may not be able to enforce our rights within the PRC or elsewhere, which could result in a significant loss of business, business opportunities or capital.

25

The Chinese legal system is similar to a civil law system based on written statutes. Unlike common law systems, it is a system in which decided legal cases have little precedential value. Although legislation in the PRC over the past 26 years has significantly improved the protection afforded to various forms of foreign investment and contractual arrangements in the PRC, these laws, regulations and legal requirements are relatively new. Due to the limited volume of published judicial decisions, their non-binding nature, the short history since their enactments, the discrete understanding of the judges or government agencies of the same legal provision, inconsistent professional abilities of the judicators, and the inclination to protect local interest in the court room, interpretation and enforcement of PRC laws and regulations involve uncertainties, which could limit the legal protection available to us, and foreign investors, including you. The inability to enforce or obtain a remedy under any of our future agreements could result in a significant loss of business, business opportunities or capital and could have a material adverse impact on our business, prospects, financial condition, and results of operations. In addition, the PRC legal system is based in part on government policies and internal rules (some of which are not published on a timely basis or at all) that may have a retroactive effect. As a result, we may not be aware of our violation of these policies and rules until some time after the violation. In addition, any litigation in the PRC, regardless of outcome, may be protracted and result in substantial costs and diversion of resources and management attention.

Risks Related to our Securities

Insiders have substantial control over us, and they could delay or prevent a change in our corporate control even if our other stockholders wanted it to occur.

Pursuant to a share transfer agreement, Mr. Chunfeng Tao, our Chairman, Chief Executive Officer and President has an option, subject to certain performance targets, to purchase from Mr. Brian Pak-Lun Mok, the current sole shareholder of Apex Smart Limited (the current owner of 45.6132% of the share capital of Delight Reward Limited), up to 100% of Apex Smart Limited’s equity, which, upon exercise, would entitle Mr. Tao to own 45.6132% of the equity of Delight Reward Limited. Delight Reward Limited holds 47,658,000 shares of our common stock, representing approximately 82.60% of our common stock. Accordingly, Mr. Tao (indirectly controls approximately 37.68% of our common stock) and other insiders are able to control all matters requiring stockholder approval, including the election of directors and approval of significant corporate transactions. This could delay or prevent an outside party from acquiring or merging with us even if our other stockholders wanted it to occur.

There may not be sufficient liquidity in the market for our securities in order for investors to sell their securities.

There is currently only a limited public market for our common stock and there can be no assurance that a trading market will develop further or be maintained in the future.

The market price of our common stock may be volatile.

The market price of our common stock has been and will likely continue to be highly volatile, as is the stock market in general. Some of the factors that may materially affect the market price of our Common Stock are beyond our control, such as changes in financial estimates by industry and securities analysts, conditions or trends in the industry in which we operate or sales of our common stock. Additionally, on April 1, 2011 trading in our common stock was halted by Nasdaq and on October 5, 2011 our common stock was delisted from Nasdaq.  On October 7, 2011, our stock began trading on the Pink Sheets and is currently trading on OTCQB. It is likely that it will experience significant pressure for some time as a result of the lack of liquidity during the period in which it was halted.

These factors and the event listed above may materially adversely affect the market price of our common stock, regardless of our performance. In addition, the public stock markets have experienced extreme price and trading volume volatility. This volatility has significantly affected the market prices of securities of many companies for reasons frequently unrelated to the operating performance of the specific companies. These broad market fluctuations may adversely affect the market price of our common stock.

Because we became public by means of a reverse merger, we may not be able to attract the attention of major brokerage firms.

26

Since we became public through a “reverse merger,” the newly-issued common shares issued in connection with the “reverse merger” and the private placement are restricted shares. As a result, our common stock will continue to be very thinly traded after the reverse merger, until a considerable number of such shares are registered in an effective registration statement or become sellable under Rule 144 if all of the conditions in Rule 144(i)(2) are satisfied at the time of the proposed sale. Therefore, securities analysts of major brokerage firms may not provide coverage of our Company since there is little incentive to brokerage firms to recommend the purchase of our common stock. No assurance can be given that brokerage firms will want to conduct any secondary offerings on behalf of the Company in the future.

ITEM 4.  USE OF PROCEEDS

We will not receive any of the proceeds from the sale of the Shares being offered by the Selling Stockholders, although we may receive additional proceeds of up to approximately $20,124,148 if all of the Warrants are exercised for cash. We will not receive any additional proceeds to the extent that the Warrants are exercised by cashless exercise. We expect to use the proceeds received from the exercise of the Warrants, if any, for general working capital purposes. We cannot assure you however that any of the Warrants will ever be exercised.

ITEM 5.  DETERMINATION OF OFFERING PRICE

Not applicable.

ITEM 6.  DILUTION

Not applicable.

ITEM 7.  SELLING STOCKHOLDERS

We are registering for resale shares of our Common Stock that are issued and outstanding, and shares of Common Stock underlying our Series A Preferred Stock and Warrants held by the Selling Stockholders identified below. The shares were issued in accordance with the exemption from the registration provisions of the Securities Act of 1933, as amended, provided by Section 4(2) of such Act for issuances not involving any public offering and Rule 506 of Regulation D promulgated thereunder. We are registering the shares to permit the Selling Stockholders and their pledgees, donees, transferees and other successors-in-interest that receive their shares from a Selling Stockholder as a gift, partnership distribution or other non-sale related transfer after the date of this prospectus to resell the shares when and as they deem appropriate in the manner described in the “Plan of Distribution.”  As of the date of this prospectus there are 57,646,160  shares of Common Stock issued and outstanding. 

The following table sets forth:

● the name of the Selling Stockholders,

● the number of shares of our Common Stock that the Selling Stockholders beneficially owned prior to the offering for resale of the shares under this prospectus,

● the maximum number of shares of our Common Stock that may be offered for resale for the account of the Selling Stockholders under this prospectus, and

● the number and percentage of shares of our Common Stock beneficially owned by the Selling Stockholders after the offering of the shares (assuming all of the offered shares are sold by the Selling Stockholders).

Except for Hayden Communications International Inc., and Hampton Growth, each of which has been engaged by us as an investor relations firm, and TriPoint Global Equities, LLC, our financial advisor and placement agent in the Private Placement, we have not had a material relationship with any of the Selling Stockholders within the last three years.

27

 Each of Hayden Communications International Inc., and Hampton Growth were issued the shares registered herein in exchange for services provided to us pursuant to separate investor relations agreements dated April 19, 2010 between us and such entities. Other than Hayden Communications International Inc., and Hampton Growth all of the Selling Stockholders named below received their shares in connection with the April-May 2010 Private Placement and September 2010 Private Placement.

We entered into a placement agent agreement with TriPoint Global on March 18, 2009 whereby we paid a cash fee to TriPoint Global equal to 6% of the gross proceeds received by us in connection with the Private Placement and we issued to TriPoint Global and its designees (i) Warrants to purchase 59,896 shares of Common Stock, (ii) Warrants to purchase 539,067 shares of Series A Preferred Stock, (iii) Series A Warrants to purchase 59,896 shares of Common Stock and (iv) Series B Warrants to purchase 59,896 shares of Common Stock, and (iv) Placement Agent Warrants to purchase 561,601 shares of  Common Stock.

Except for TriPoint Global, Syndicated Capital, Inc., Brill Securities and Meyers Associates LP, none of the Selling Stockholders is a broker dealer.

Except for Ancora Greater China Fund LP, Burt Stangarone, Anthony G. Polak, IRA FBO Ronald Lazar, Pershing LLC as Custodian, RL Capital Partners, Ashar Qureshi and Paul Calvin Hickey, none of the Selling Stockholders is an affiliate of a broker dealer. However, Each of Ancora Greater China Fund LP, Burt Stangarone, Anthony G. Polak, IRA FBO Ronald Lazar, Pershing LLC as Custodian, RL Capital Partners, Ashar Qureshi and Paul Calvin Hickey confirmed to us that it or he bought the securities in the ordinary course of business and at the time of purchase, it or he had no agreements or understandings, directly or indirectly, with any person to distribute the securities. None of the Selling Stockholders has any agreement or understanding to distribute any of the Shares being registered.

Each Selling Stockholder may offer for sale all or part of the Shares from time to time. The table below assumes that the Selling Stockholders will sell all of the Shares offered for sale. A Selling Stockholder is under no obligation, however, to sell any Shares pursuant to this prospectus.

Name of Selling Stockholder	Shares of Common Stock Beneficially Owned Prior to Offering (1)	Maximum Number of Shares of Common Stock to be Sold (2)	Number of Shares of Common Stock Owned After Offering (3)	Percentage Ownership After Offering (4)
Paul Calvin Hickey (5)	6,000	6,000	0	*
The Gary Reed Hawkins Family Trust (6)	36,000	36,000	0	*
Gary Reed Hawkins (7)	27,600	27,600	0	*
Hawkins-Smith General Partnership (8)	36,000	36,000	0	*
Greg Freihofner (9)	24,000	24,000	0	*
Lawrence Kaplan (10)	28,000	28,000	0	*
IRA FBO Ronald M. Lazar, Pershing LLC as Custodian(11)	1,430	1,430	0	*
RL Capital Partners(12)	2,860	2,860	0	*
Steve Strasser(13)	8,000	8,000	0	*
Far East Wind LLC.(14)	17,148	17,148	0	*
Trading Systems, LLC(15)	12,813	12,813	0	*
Stanley A. Kaplan(16)	7,000	7,000	0	*
Anthony G. Polak(17)	3,000	3,000	0	*
Michael Miller(18)	36,000	36,000	0	*
Futurtec, L.P.(19)	36,000	36,000	0	*
Burt Stangarone(20)	60,000	60,000	0	*

28

Alan Kenneth Mercer (21)	34,320	34,320	0	*
Philip Leeton Gregory(22)	36,000	36,000	0	*
Kenneth Walter Chad(23)	25,704	25,704	0	*
Dennis Jason Wong, Sole Trustee of the Dennis and Shannon Wong Family Trust(24)	72,000	72,000	0	*
SPI Hawaii Investments, LP(25)	48,000	48,000	0	*
Dynacap Global Capital Fund II LP(26)	86,400	86,400	0	*
Silver Rock II, LTD.(27)	136,584	136,584	0	*
Lennox Capital Partners, LP(28)	222,852	222,852	0	*
Squires Family LP(29)	120,000	120,000	0	*
Tangiers Investors, LP(30)	1,430	1,430	0	*
Taylor International Fund, Ltd(31)	809,263	809,263	0	*
William Paul Haus(32)	3,000	3,000	0	*
JW Partners, LP(33)	11,428	11,428	0	*
Charles M Ognar(34)	20,000	20,000	0	*
John C Kleinert(35)	1,500	1,500	0	*
Westpark Capital, L.P.(36)	20,000	20,000	0	*
Ancora Greater China Fund LP(37)	171,432	171,432	0	*
Jayhawk Private Equity Fund II, L.P.(38)	114,000	114,000	0	*
Trillion Growth China LP(39)	108,000	108,000	0	*
Marion Lynton(40)	13,200	13,200	0	*
Ardsley Offshore Fund, Ltd.(41)	56,400	56,400	0	*
Ardsley Partners Institutional Fund, L.P.(42)	349,200	349,200	0	*
Ardsley Partners Fund II, L.P.(43)	438,000	438,000	0	*
Eric E. Shear(44)	8,580	8,580	0	*
BBS Capital Fund, LP(45)	17,144	17,144	0	*
Edward Kovary Jr.(46)	14,400	14,400	0	*
Straus Partners L.P.(47)	244,636	244,636	0	*
Daybreak Special Situations Master Fund Ltd.(48)	53,104	53,104	0	*
Hua-Mei 21st Century Partners, LP(49)	445,716	445,716	0	*
Guerrilla Partners LP(50)	240,000	240,000	0	*
Vision Opportunity China, LP(51)	114,284	114,284	0	*
Saugatuck Energy LLC(52)	342,864	342,864	0	*
Laszlo Bodak(53)	15,400	15,400	0	*
U&M Desai, Ltd(54)	31,427	31,427	0	*
Strassburg & Company(55)	17,136	17,136	0	*
Michael Maximillian Lipman(56)	4,800	4,800	0	*
John R. Duffy, Lorrain Duffy(57)	2,000	2,000	0	*
Jeffry D.K. Johnson(58)	300	300	0	*
Gary Andreasen(59)	400	400	0	*
Jeffrey A. Grossman(60)	6,000	6,000	0	*
Steven Gianniotis(61)	3,600	3,600	0	*
Joseph Maida/Angela LaRosa(62)	30,700	30,700	0	*
Cubs Capital Corp.(63)	900	900	0	*
Michael J. Leone(64)	300	300	0	*
Russell Wimberley (65)	2,000	2,000	0	*
Richard Bartlett Tranter(66)	2,400	2,400	0	*
Martin Joseph Legge(67)	2,000	2,000	0	*
Stephan Huwer(68)	1,200	1,200	0	*
Ray and Orla Wiley(69)	1,200	1,200	0	*
Zion Amsalem(70)	800	800	0	*
Avi Shandi, Simon Teyer(71)	800	800	0	*
Giles Bulmer(72)	2,400	2,400	0	*
Robert Kammann(73)	900	900	0	*
Martin George Findlay(74)	5,500	5,500	0	*

29

Meir Duke(75)		51,420	51,420		0	*
Gerard Michael Penfold(76)		1,300	1,300		0	*
Merrill Lynch Custodian for Carling Bassett-Seguso IRA (77)		12,000	12,000		0	*
Steve Davidson(78)		340	340		0	*
Harry S. Rust Residuary Trust (79)		800	800		0	*
Hampton Investment Group(80)		1,800	1,800		0	*
Terry D. Smith IRA(81)		200	200		0	*
Paul Silansky(82)		400	400		0	*
Joseph Myers(83)		6,000	6,000		0	*
Ashar Qureshi(84)		4,000	4,000		0	*
Steve Levin(85)		1,000	1,000		0	*
Alma Rust Trust(86)		800	800		0	*
CT Partnership (87)		250	250		0	*
Robert Leng (88)		900	900		0	*
Rodney A. Omanoff (89)		12,000	12,000		0	*
Charles Barovian (90)		200	200		0	*
Humminah Limited Partnership (91)		12,000	12,000		0	*
Brett Maas (92)		600	600		0	*
Mike Slinger (93)		200	200		0	*
Martin Feinberg (94)		36,000	36,000		0	*
Robert Converse (95)		400	400		0	*
Paul E. Triulzi IRA (96)		400	400		0	*
William Rooney(97)		400	400		0	*
Arnold & Linda Wieland (98)		1,200	1,200		0	*
Lutz Engineering PSP Robert E. Lutz(99)		2,000	2,000		0	*
Barbara Mishan(100)		570	570		0	*
Robert Snavely(101)		400	400		0	*
A.E.J. Doyer(102)		1,400	1,400		0	*
Bruce Meyers(103)		2,000	2,000		0	*
David Salomon(104)		29,284	29,284		0	*
Todd Taricco(105)		4,000	4,000		0	*
Tim Schmidt(106)		7,000	7,000		0	*
Yocca Venture Investment Partnership II(107)		2,400	2,400		0	*
Chestnut Ridge Partners, LP(108)		17,142	17,142		0	*
Alpha Capital Anstalt(109)		14,400	14,400		0	*
Whalehaven Capital Fund Limited(110)		22,856	22,856		0	*
Excalibur Special Opportunities LP(111)		48,572	48,572		0	*
Martin Feinberg(112)		18,000	18,000		0	*
Cranshire Capital LP(113)		5,714	5,714		0	*
Compact Poolen Modehuset AB(114)		2,000	2,000		0	*
Peter Stellan Ekberg(115)		5,136	5,136		0	*
Kari Ekholm(116)	12,000			12,000	0	*
Exsultat AB(117)	3,450			3,450	0	*
Enebybergs Revisionsbyra AB(118)	24,000			24,000	0	*
Garolf AB(119)	36,000			36,000	0	*
Ulf Ivarsson(120)	28,800			28,800	0	*
David Sandgren(121)	34,284			34,284	0	*
PK Solutions AB(122)	24,000			24,000	0	*
Robin Whaite(123)	24,000			24,000	0	*
Leonard L. Goldberg(124)	12,000			12,000	0	*
Robert and Christi Kaplan (125)	2,856			2,856	0	*
China Reinv Partners, L.P. (126)	825,590			825,590	0	*
Hayden Communications International Inc. (127)	4,000			4,000	0	*

30

Hampton Growth Resources, LLC(128)	24,023	24,023	0	*
TriPoint Global Equities, LLC (129)	1,233,327	1,233,327	0	*
Syndicated Capital, Inc.( (130)	10,864	10,864	0	*
Meyers Associates LP(131)	14,629	14,629	0	*
Brill Securities(132)	7,684	7,684	0	*
Dragon State International Limited (133)	6,933,342	6,933,342	0	*
Steve Bencivenga (134)	1,573	1,573	0	*
John Riccardi (135)	3,996	3,996	0	*
Joel Solar (136)	2,664	2,664	0	*
Leor Yohhanan (137)	1,525	1,525	0	*
Bruce Meyers (138)	3,044	3,044	0	*
John Fendrich (139)	600	600	0	*
Joseph Salino (140)	300	300	0	*
Michael Desano (141)	50	50	0	*
Marlen Vigdorov (142)	50	50	0	*
John Revzin (143)	50	50	0	*

* Represents beneficial ownership of less than one percent of our outstanding shares.

1)   Unless otherwise noted, the Selling Stockholder became one of our shareholders pursuant to the April-May 2010 Private Placement and September 2010 Private Placement.  Accordingly, prior to the Offering, the Selling Stockholder only owned shares of common stock , shares of common stock underlying the preferred stock and warrants received in the Private Placement (the “Securities”); however, based upon the terms of the both the preferred stock and the Warrants, holders may not convert the preferred stock and/or exercise the warrants, if on any date, such holder would be deemed the beneficial owner of more than 9.9%, depending upon their agreement, of the then outstanding shares of our common stock; however, a holder may elect to waive the cap upon 61 days notice to us, except that during the 61 day period prior to the expiration date of their warrants, they can waive the cap at any time, but a waiver during such period will not be effective until the expiration date of the warrant. Therefore, unless otherwise noted, this number represents the number of Securities the Selling Stockholder received in the Private Placement that he/she can own based upon the ownership cap, assuming the ownership cap is not waived. Additionally, the shares of preferred stock are subject to certain anti-dilution provisions, which would be triggered if we were to sell securities at a price below the price at which we sold the Notes. See “Prospectus Summary – Financing” and “Description of Securities.”

2)  This number represents all of the Securities that the Selling Stockholder received in the April-May 2010 and September 2010 Private Placement and all of the Securities beneficially owned by our investor relations firm, which we agreed to register in this Registration Statement pursuant to the Registration Rights Agreement we entered into in connection with the Private Placement.

3)  Since we do not have the ability to control how many, if any, of their shares each of the selling shareholders listed above will sell, we have assumed that the selling shareholders will sell all of the shares offered herein for purposes of determining how many shares they will own after the Offering and their percentage of ownership following the offering.

4) All Percentages have been rounded up to the nearest one hundredth of one percent.

5)  Consists of 3,000 shares underlying Series A Warrants and 3,000 shares underlying Series B Warrants.

6) Consists of 30,000 shares of common stock, 3,000 shares underlying Series A Warrants and 3,000 shares underlying Series B Warrants. The person having voting, dispositive or investment powers over Gary Reed Hawkins Family Trust is R. Gail Hawkins. The address for Gary Reed Hawkins Family Trust is 855 W. Broad St., Suite 300, Boise, ID 83702-7153.

7) Consists of 23,000 shares of common stock, 2,300 shares underlying Series A Warrants and 2,300 shares underlying Series B Warrants.

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8) Consists of 30,000 shares of common stock, 3,000 shares underlying Series A Warrants and 3,000 shares underlying Series B Warrants. The person having voting, dispositive or investment powers over Hawkins-Smith General Partnership is Gary Reed Hawkins. The address for Hawkins-Smith General Partnership is 855 W. Broad St., Suite 300, Boise, ID 83702-7153.

9) Consists of 20,000 shares of common stock, 2,000 shares underlying Series A Warrants and 2,000 shares underlying Series B Warrants.

10) Consists of 20,000 shares of common stock, 2 4,000 shares underlying Series A Warrants and 4,000 shares underlying Series B Warrants.

11) Consists of 715 shares underlying Series A Warrants and 715 shares underlying Series B Warrants. The person having voting, dispositive or investment powers over IRA FBO Ronald M. Lazar is Ronald Lazar and Pershing LLC acts as Custodian. The address for IRA FBO Ronald M. Lazar is 200 Winston Drive, #3109, Cliffside Park, NJ 07010.

12) Consists of 1,430 shares underlying Series A Warrants and 1,430 shares underlying Series B Warrants. The persons having voting, dispositive or investment powers over RL Capital Partners are Ronald Lazar and Anthony Polak. The address for RL Capital Partners is 405 Lexington Avenue; 2nd Floor, New York, NY 10174.

13) Consists of 4,000 shares underlying Series A Warrants and 4,000 shares underlying Series B Warrants.

14)  Consists of 14,290 shares of common stock, 1,429 shares underlying Series A Warrants and 1,429 shares underlying Series B Warrants. The person having voting, dispositive or investment powers over Far East Wind LLC. is Edwin R. Thurston. The address for Far East Wind LLC. is P.O. Box 1841 Rancho Santa Fe, CA 92067.

15) Consists of 6,813 shares of common stock, 3,000 shares underlying Series A Warrants and 3,000 shares underlying Series B Warrants. The person having voting, dispositive or investment powers over Trading Systems, LLC is Gary J McAdam. The address for Trading Systems, LLC is 14 Red Tail Drive, Highlands Ranch, CO 80126.

16) Consists of 5,000 shares of common stock, 1,000 shares underlying Series A Warrants and 1,000 shares underlying Series B Warrants.

17) Consists of 1,000 shares of common stock, 1,000 shares underlying Series A Warrants and 1,000 shares underlying Series B Warrants.

18) Consists of 30,000 shares of common stock, 3,000 shares underlying Series A Warrants and 3,000 shares underlying Series B Warrants.

19) Consists of 30,000 shares of common stock, 3,000 shares underlying Series A Warrants and 3,000 shares underlying Series B Warrants. The person having voting, dispositive or investment powers over Futurtec, L.P. is Ido Klear. The address for Futurtec, L.P. is 111 Great Neck Rd. Suite 301, Great Neck, NY 11021.

20) Consists of 50,000 shares of common stock, 5,000 shares underlying Series A Warrants and 5,000 shares underlying Series B Warrants.

21) Consists of 28,600 shares of common stock, 2,860 shares underlying Series A Warrants and 2,860 shares underlying Series B Warrants.

22) Consists of 30,000 shares of common stock, 3,000 shares underlying Series A Warrants and 3,000 shares underlying Series B Warrants.

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23) Consists of 21,420 shares of common stock, 2,142 shares underlying Series A Warrants and 2,142 shares underlying Series B Warrants.

24) Consists of 60,000 shares of common stock, 6,000 shares underlying Series A Warrants and 6,000 shares underlying Series B Warrants. Mr. Dennis Jason Wong has voting and dispositive power over the shares held by Dennis Jason Wong, Sole Trustee of the Dennis and Sharon Wong Family Trust.  Mr. Wong may be deemed to beneficially own the shares of Common Stock held by Dennis Jason Wong, Sole Trustee of the Dennis and Sharon Wong Family Trust. Mr. Wong disclaims beneficial ownership of such shares. The address for Dennis Jason Wong, Sole Trustee of the Dennis and Sharon Wong Family Trust is 88 Kearny Street, Suite 1818, San Francisco, CA 94108.

25) Consists of 40,000 shares of common stock, 4,000 shares underlying Series A Warrants and 4,000 shares underlying Series B Warrants. The person having voting, dispositive or investment powers over SPI Hawaii Investments, LP is Dennis Jason Wong. The address for SPI Hawaii Investments, LP is 88 Kearny Street, Suite 1818, San Francisco, CA 94108.

26) Consists of 72,000 shares of common stock, 7,200 shares underlying Series A Warrants and 7,200 shares underlying Series B Warrants. The person having voting, dispositive or investment powers over Dynacap Global Capital Fund II LP is Charles Smith. The address for Dynacap Global Capital Fund II LP is 1541 E. Interstate 30, Suite 140, Rockwall TX 75087.

27) Consists of 110,584 shares of common stock, 13,000 shares underlying Series A Warrants and 13,000 shares underlying Series B Warrants. The person having voting, dispositive or investment powers over Silver Rock II, LTD. is Ezzat Jallad. The address for Silver Rock II, LTD. is P.O. Box 213994, Dubai, UAE.

28) Consists of 185,710 shares of common stock, 18,571 shares underlying Series A Warrants and 18,571 shares underlying Series B Warrants. The person having voting, dispositive or investment powers over Lennox Capital Partners, LP is Richard D. Squires. The address for Lennox Capital Partners, LP is 2101 Cedar Springs Road, Suite 1230, Dallas, TX 75201.

29) Consists of 100,000 shares of common stock, 10,000 shares underlying Series A Warrants and 10,000 shares underlying Series B Warrants. The person having voting, dispositive or investment powers over Squires Family LP is Richard D. Squires. The address for Squires Family LP is 2101 Cedar Springs Road, Suite 1230, Dallas, TX 75201.

30) Consists of 715 shares underlying Series A Warrants and 715 shares underlying Series B Warrants. The person having voting, dispositive or investment powers over Tangiers Investors, LP is Michael Sobeck. The address for Tangiers Investors, LP is 402 W. Broadway, Suite 400, San Diego, CA 92101.

31) Consists of 666,407 shares of common stock, 71,428 shares underlying Series A Warrants and 71,428 shares underlying Series B Warrants. The person having voting, dispositive or investment powers over Taylor International Fund, Ltd is Stephen S. Taylor. The address for Taylor International Fund, Ltd is 714 S. Dearborn St., Second Floor, Chicago, IL 60605.

32) Consists of 1,500 shares underlying Series A Warrants and 1,500 shares underlying Series B Warrants.

33) Consists of 5,714 shares underlying Series A Warrants and 5,714 shares underlying Series B Warrants. The person having voting, dispositive or investment powers over JW Partners, LP is Jason Wild. The address for JW Partners, LP is 900 Third Ave, Suite 1401, New York, NY 10022.

34) Consists of 10,000 shares underlying Series A Warrants and 10,000 shares underlying Series B Warrants.

35) Consists of 750 shares underlying Series A Warrants and 750 shares underlying Series B Warrants.

36) Consists of 10,000 shares underlying Series A Warrants and 10,000 shares underlying Series B Warrants. The person having voting, dispositive or investment powers over Westpark Capital, L.P. is Patrick J, Brosnahan. The address for Westpark Capital, L.P. is 520 Madison Avenue, 12th Floor, New York, NY 10022.

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37) Consists of 142,860 shares of common stock, 14,286 shares underlying Series A Warrants and 14,286 shares underlying Series B Warrants. The person having voting, dispositive or investment powers over Ancora Greater China Fund LP is John P. Micklitsch. The address for Ancora Greater China Fund LP is 2000 Auburn Dr, #300, Cleveland, OH 44122.

38) Consists of 57,000 shares underlying Series A Warrants and 57,000 shares underlying Series B Warrants. The person having voting, dispositive or investment powers over Jayhawk Private Entity Fund II, L.P. is Kent C. McCarthy. The address for Jayhawk Private Equity Fund II, L.P. is 930 Tahoe Blvd, 802-281, Incline Village, NV 89451.

39) Consists of 90,000 shares of common stock, 9,000 shares underlying Series A Warrants and 9,000 shares underlying Series B Warrants. The person having voting, dispositive or investment powers over Trillion Growth China LP is Corey Mitchell. The address for Trillion Growth China LP is 1000, 888-3rd St. S.W, Calgary, AB, T2P 5C5, Canada.

40) Consists of 10,800 shares of common stock, 1,200 shares underlying Series A Warrants and 1,200 shares underlying Series B Warrants.

41) Consists of 47,000 shares of common stock, 4,700 shares underlying Series A Warrants and 4,700 shares underlying Series B Warrants. The person having voting, dispositive or investment powers over Ardsley Offshore Fund, Ltd. is Philip J. Hempleman. The address for Ardsley Offshore Fund, Ltd. is 262 Harbor Drive, 4th floor, Stamford, CT 06902.

42) Consists of 291,000 shares of common stock, 29,100 shares underlying Series A Warrants and 29,100 shares underlying Series B Warrants. The person having voting, dispositive or investment powers over Ardsley Partners Institutional Fund L.P. is Philip J. Hempleman. The address for Ardsley Partners Institutional Fund L.P. is 262 Harbor Drive, 4th floor, Stamford, CT 06902.

43) Consists of 365,000 shares of common stock, 36,500 shares underlying Series A Warrants and 36,500 shares underlying Series B Warrants. The person having voting, dispositive or investment powers over Ardsley Partners Fund II L.P. is Philip J. Hempleman. The address for Ardsley Partners Fund II L.P. is 262 Harbor Drive, 4th floor, Stamford, CT 06902.

44) Consists of 7,150 shares of common stock, 715 shares underlying Series A Warrants and 715 shares underlying Series B Warrants.

45) Consists of 8,572 shares underlying Series A Warrants and 8,572 shares underlying Series B Warrants. The person having voting, dispositive or investment powers over BBS Capital Fund, LP is Berke Bakay. The address for BBS Capital Fund, LP is 520 Madison Avenue, 12th Floor, NY, NY 10022.

46) Consists of 12,000 shares of common stock, 1,200 shares underlying Series A Warrants and 1,200 shares underlying Series B Warrants.

47) Consists of 201,780 shares of common stock, 21,428 shares underlying Series A Warrants and 21,428 shares underlying Series B Warrants. The person having voting, dispositive or investment powers over Straus Partners L.P. is Melville Straus. The address for Straus Partners L.P. is 767 3rd Ave 21st, New York, NY, 10017.

48) Consists of 38,820 shares of common stock7,142 shares underlying Series A Warrants and 7,142 shares underlying Series B Warrants. The person having voting, dispositive or investment powers over Daybreak Special Situations Master Fund Ltd. is Larry Butz or John Prinz. The address for Daybreak Special Situations Master Fund Ltd. is 100 E. Cook Avenue, Suite 100, Libertyville, IL 60048.

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49) Consists of 371,430 shares of common stock, 37,143 shares underlying Series A Warrants and 37,143 shares underlying Series B Warrants. The persons having voting, dispositive or investment powers over Hua-Mei 21st Century Partners are Peter Siris and Leigh S. Curry. The address for Hua-Mei 21st Century Partners, LP is 237 Park Avenue, 9th Floor, New York, NY 10017.

50) Consists of 200,000 shares of common stock, 20,000 shares underlying Series A Warrants and 20,000 shares underlying Series B Warrants. The persons having voting, dispositive or investment powers over Guerrilla Partners LP are Peter Siris and Leigh S. Curry. The address for Guerrilla Partners LP is 237 Park Ave., 9th Floor, New York, NY 10017.

51) Consists of, 57,142 shares underlying Series A Warrants and 57,142 shares underlying Series B Warrants. The person having voting, dispositive or investment powers over Vision Opportunity China LP is Adam Benowitz. The address for Vision Opportunity China, LP is c/o Praxis Fund Services Limited, Suites 13 and 15, Sarnia House, Le Truchot, St. Peter Port, Guernsey, GY1 4NA.

52) Consists of 285,720 shares of common stock, 28,572 shares underlying Series A Warrants and 28,572 shares underlying Series B Warrants. The person having voting, dispositive or investment powers over Saugatuck Energy LLC is David B. Murphy. The address for Saugatuck Energy LLC is 354 Pequot Avenue, P.O. Box 1032, Southport, CT 06890.

53) Consists of 12,600 shares of common stock, 1,400 shares underlying Series A Warrants and 1,400 shares underlying Series B Warrants.

54) Consists of 25,713 shares of common stock, 2,857 shares underlying Series A Warrants and 2,857 shares underlying Series B Warrants. The persons having voting, dispositive or investment powers over U&M Desai, Ltd are Mounang Desai and Urmi Desai. The address for U&M Desai, Ltd is 6003 Isla Vista Court, Houston, TX, 77041.

55) Consists of 14,280 shares of common stock, 1,428 shares underlying Series A Warrants and 1,428 shares underlying Series B Warrants. The person having voting, dispositive or investment powers over Strassburg & Company is Randy C. Strassburg. The address for Strassburg & Company is 1223 N. Rock Road, Suite J100, Wichita, KS 67206.

56) Consists of 4,000 shares of common stock, 400 shares underlying Series A Warrants and 400 shares underlying Series B Warrants.

57) Consists of 1,000 shares underlying Series A Warrants and 1,000 shares underlying Series B Warrants.

58) Consists of 150 shares underlying Series A Warrants and 150 shares underlying Series B Warrants.

59) Consists of 200 shares underlying Series A Warrants and 200 shares underlying Series B Warrants.

60) Consists of 3,000 shares underlying Series A Warrants and 3,000 shares underlying Series B Warrants.

61) Consists of 3,000 shares of common stock, 300 shares underlying Series A Warrants and 300 shares underlying Series B Warrants.

62) Consists of 23,500 shares of common stock, 3,600 shares underlying Series A Warrants and 3,600 shares underlying Series B Warrants.

63) Consists of 450 shares underlying Series A Warrants and 450 shares underlying Series B Warrants. The person having voting, dispositive or investment powers over Cubs Capital Corp. is Morris Resner. The address for Cubs Capital Corp. , c/o Meyers Associates L.P., is 45 Broadway, New York, NY 10006.

64) Consists of 150 shares underlying Series A Warrants and 150 shares underlying Series B Warrants.

35

65)  Consists of 1,000 shares underlying Series A Warrants and 1,000 shares underlying Series B Warrants.

66) Consists of 2,000 shares of common stock, 200 shares underlying Series A Warrants and 200 shares underlying Series B Warrants.

67) Consists of 1,000 shares underlying Series A Warrants and 1,000 shares underlying Series B Warrants.

68) Consists of 1,000 shares of common stock, 100 shares underlying Series A Warrants and 100 shares underlying Series B Warrants.

69) Consists of 1,000 shares of common stock, 100 shares underlying Series A Warrants and 100 shares underlying Series B Warrants.

70) Consists of 400 shares underlying Series A Warrants and 400 shares underlying Series B Warrants.

71) Consists of 400 shares underlying Series A Warrants and 400 shares underlying Series B Warrants.

72) Consists of 2,000 shares of common stock, 200 shares underlying Series A Warrants and 200 shares underlying Series B Warrants.

73) Consists of 450 shares underlying Series A Warrants and 450 shares underlying Series B Warrants.

74) Consists of 5,500 shares of common stock.

75) Consists of 42,850 shares of common stock, 4,285 shares underlying Series A Warrants and 4,285 shares underlying Series B Warrants.

76) Consists of 650 shares of  Common Stock and 650 shares underlying Series B Warrants.

77) Consists of 6,000 shares underlying Series A Warrants and 6,000 shares underlying Series B Warrants. The person having voting, dispositive or investment powers over Merrill Lynch Custodian for Carling Bassett Seguso IRA is Carling Bassett-Seguso.  The address for Merrill Lynch Custodian for Carling Bassett Seguso IRA, c/o Meyers Associates is 45 Broadway, New York, NY 10006.

78) Consists of 170 shares underlying Series A Warrants and 170 shares underlying Series B Warrants.

79) Consists of 400 shares underlying Series A Warrants and 400 shares underlying Series B Warrants. The person having voting, dispositive or investment powers over Harry S. Rust Residuary Trust is Ron Rust TTTE. The address for Harry S. Rust Residuary Trust, c/o Meyers Associates is 45 Broadway, New York, NY 10006.

80) Consists of 1,500 shares of common stock, 150 shares underlying Series A Warrants and 150 shares underlying Series B Warrants. The person having voting, dispositive or investment powers over Hampton Investment Group is Ron Rust TTTE. The address for Hampton Investment Group, c/o Meyers Associates is 45 Broadway, New York, NY 10006.

81) Consists of 100 shares underlying Series A Warrants and 100 shares underlying Series B Warrants. The person having voting, dispositive or investment powers over Terry D. Smith IRA is Terry D. Smith. The address for Terry D. Smith IRA, c/o Meyers Associates is 45 Broadway, New York, NY 10006.

82) Consists of 200 shares underlying Series A Warrants and 200 shares underlying Series B Warrants.

83) Consists of 3,000 shares underlying Series A Warrants and 3,000 shares underlying Series B Warrants.

84) Consists of 2,000 shares underlying Series A Warrants and 2,000 shares underlying Series B Warrants.

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85) Consists of 500 shares underlying Series A Warrants and 500 shares underlying Series B Warrants.

86) Consists of 400 shares underlying Series A Warrants and 400 shares underlying Series B Warrants. The person having voting, dispositive or investment powers over Alma Rust Trust is Ron Rust TTTE. The address for Alma Rust Trust, c/o Meyers Associates is 45 Broadway, New York, NY 10006.

87) Consists of 125 shares underlying Series A Warrants and 125 shares underlying Series B Warrants. The person having voting, dispositive or investment powers over CT Partnership is Ronald Rust. The address for CT Partnership, c/o Meyers Associates is 45 Broadway, New York, NY 10006.

88) Consists of 450 shares underlying Series A Warrants and 450 shares underlying Series B Warrants.

89) Consists of 10,000 shares of common stock, 1,000 shares underlying Series A Warrants and 1,000 shares underlying Series B Warrants.

90) Consists of 100 shares underlying Series A Warrants and 100 shares underlying Series B Warrants.

91) Consists of 10,000 shares of common stock, 1,000 shares underlying Series A Warrants and 1,000 shares underlying Series B Warrants. The person having voting, dispositive or investment powers over Humminah Limited Partnership is Ethan Woods. The address for Humminah Limited Partnership, c/o Meyers Associates is 45 Broadway, New York, NY 10006.

92) Consists of 300 shares underlying Series A Warrants and 300 shares underlying Series B Warrants.

93) Consists of 100 shares underlying Series A Warrants and 100 shares underlying Series B Warrants.

94) Consists of 30,000 shares of common stock, 3,000 shares underlying Series A Warrants and 3,000 shares underlying Series B Warrants.

95) Consists of 200 shares underlying Series A Warrants and 200 shares underlying Series B Warrants.

96) Consists of 200 shares underlying Series A Warrants and 200 shares underlying Series B Warrants. The person having voting, dispositive or investment powers over Paul E. Triulzi IRA is Sterne Agee. The address for Paul E. Triulzi IRA is Sterne Agee C/F Paul Paul Triulzi IRA,2 Perimeter Park S., Suite 100W, Birmingham, AL 35243.

97) Consists of 200 shares underlying Series A Warrants and 200 shares underlying Series B Warrants.

98) Consists of 1,000 shares of common stock, 100 shares underlying Series A Warrants and 100 shares underlying Series B Warrants.

99) Consists of 1,000 shares underlying Series A Warrants and 1,000 shares underlying Series B Warrants.

100) Consists of 285 shares underlying Series A Warrants and 285 shares underlying Series B Warrants.

101) Consists of 200 shares underlying Series A Warrants and 200 shares underlying Series B Warrants.

102) Consists of 700 shares underlying Series A Warrants and 700 shares underlying Series B Warrants.

103) Consists of 1,000 shares underlying Series A Warrants and 1,000 shares underlying Series B Warrants.

104) Consists of 23,570 shares of common stock, 2,857 shares underlying Series A Warrants and 2,857 shares underlying Series B Warrants.

105) Consists of 2,000 shares underlying Series A Warrants and 2,000 shares underlying Series B Warrants.

37

106) Consists of 5,000 shares of common stock, 1,000 shares underlying Series A Warrants and 1,000 shares underlying Series B Warrants.

107) Consists of 2,000 shares of common stock, 200 shares underlying Series A Warrants and 200 shares underlying Series B Warrants. The person having voting, dispositive or investment powers over Yocca Venture Investment Partnership II is Nick Yocca. The address for Yocca Venture Investment Partnership II, c/o Meyers Associates is 45 Broadway, New York, NY 10006.

108) Consists of 8,571 shares underlying Series A Warrants and 8,571 shares underlying Series B Warrants. The person having voting, dispositive or investment powers over Chestnut Ridge Partners, LP is Kenneth Pasternak. The address for Chestnut Ridge Partners, LP is 10 Forest Avenue, Paramus, NJ 07652.

109) Consists of 7,200 shares underlying Series A Warrants and 7,200 shares underlying Series B Warrants. The person having voting, dispositive or investment powers over Alpha Capital Anstalt is Konrad Ackemann. The address for Alpha Capital Anstalt is Pradafent 7 9490 Furstentuns, Vaduz, Liechenstien.

110) Consists of 11,428 shares underlying Series A Warrants and 11,428 shares underlying Series B Warrants. The persons having voting, dispositive or investment powers over Whalehaven Capital Fund Ltd. are Michael Finkelstein and Eric Weisblum. The address for Whalehaven Capital Fund Ltd. is 560 Sylvan Avenue, Third Floor, Englewood Cliffs, NJ 07632.

111) Consists of 14,285 shares underlying Series A Warrants, 14,285 shares underlying Series B Warrants,  10,001 shares of Common Stock underlying Series C Warrants and 10,001 shares of Common Stock underlying Series D Warrants. The person having voting, dispositive or investment powers over Excalibur Special Opportunities LP is William Hechter. The address for Excalibur Special Opportunities LP is 150 Bloor Street West, Suite 14, Toronto ON M552X9, Canada.

112) Consists of 15,000 shares of common stock, 1,500 shares underlying Series A Warrants and 1,500 shares underlying Series B Warrants.

113) Consists of 2,857 shares underlying Series A Warrants and 2,857 shares underlying Series B Warrants.  Downsview Capital, Inc. (“Downsview”) is the general partner of Cranshire Capital, L.P. (“Cranshire”) and consequently has voting control and investment discretion over securities held by Cranshire. Mitchell P. Kopin (“Mr. Kopin”), President of Downsview, has voting control over Downsview. As a result of the foregoing, each of Mr. Kopin and Downsview may be deemed to have beneficial ownership (as determined under Section 13 (d) of the Securities Exchange Act of 1934, as amended) of the shares of common stock beneficially owned by Cranshire. The address for Cranshire is 3100 Dundee Road, Suite 703, Northbrook, IL 60062.

114) Consists of 1,000 shares underlying Series A Warrants and 1,000 shares underlying Series B Warrants. The person having voting, dispositive or investment powers over Compact Poolen Modehuset AB, c/o Syndicated Capital is Mr. Bjorn Torstonson. The address for Compact Poolen Modehuset AB, c/o Syndicated Capital is 1299 Ocean Ave, Suite 210, Santa Monica, CA 90401.

115) Consists of 4,280 shares of common stock, 428 shares underlying Series A Warrants and 428 shares underlying Series B Warrants.

116) Consists of 10,000 shares of common stock, 1,000 shares underlying Series A Warrants and 1,000 shares underlying Series B Warrants.

117) Consists of 600 shares of common stock, 1,425 shares underlying Series A Warrants and 1,425 shares underlying Series B Warrants. The person having voting, dispositive or investment powers over Exsultat AB is Ulf Luarsson. The address for Exsultat AB, Ulf Luarsson, c/o Syndicated Capital is 1299 Ocean Ave, Suite 210, Santa Monica, CA 90401.

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118) Consists of 20,000 shares of common stock, 2,000 shares underlying Series A Warrants and 2,000 shares underlying Series B Warrants. The person having voting, dispositive or investment powers over Enebybergs Revisionsbyra AB  is Lars Krister Svantemark. The address for Enebybergs Revisionsbyra AB, c/o Syndicated Capital is 1299 Ocean Ave, Suite 210, Santa Monica, CA 90401.

119) Consists of 30,000 shares of common stock, 3,000 shares underlying Series A Warrants and 3,000 shares underlying Series B Warrants. The person having voting, dispositive or investment powers over Garolf AB c/o Syndicated Capital, Inc. is Tommy Martensson. The address for Garolf AB, c/o Syndicated Capital, Inc. is, 1299 Ocean Avenue, Suite 210, Santa Monica, CA 90401.

120) Consists of 24,000 shares of common stock, 2,400 shares underlying Series A Warrants and 2,400 shares underlying Series B Warrants.

121) Consists of 28,570 shares of common stock, 2,857 shares underlying Series A Warrants and 2,857 shares underlying Series B Warrants.

122) Consists of 20,000 shares of common stock, 2,000 shares underlying Series A Warrants and 2,000 shares underlying Series B Warrants. The person having voting, dispositive or investment powers over PK Solutions AB is Peter Gustafson. The address for PK Solution AB c/o Syndicated Capital is 1299 Ocean Avenue, Suite 120, Santa Monica, CA 90401.

123) Consists of 20,000 shares of common stock, 2,000 shares underlying Series A Warrants and 2,000 shares underlying Series B Warrants.

124) Consists of 6,000 shares of common stock, 3,000 shares underlying Series A Warrants and 3,000 shares underlying Series B Warrants.

125) Consists of 1,428 shares underlying Series A Warrants and 1,428 shares underlying Series B Warrants.

126) Consists of 654,162 shares of common stock, 85,714 shares underlying Series A Warrants and 85,714 shares underlying Series B Warrants. Messrs. Kelly and Calderbank may be deemed to share dispositive power over the shares of Common Stock held by China Reinv Partners, L.P. and each disclaim such beneficial ownership of such shares of Common Stock, and neither person has any legal right to maintain such delegated authority. Messrs. Stephen John Kelly and Damian Jones Calderbank have delegated authority from the members of Hawkland with respect to the shares of Common Stock owned by China Reinv Partners, L.P. By virtue of such relationship, Hawkland may be deemed to have dispositive power over the shares owned by China Reinv. Hawkland disclaims such beneficial ownership of such shares of Common Stock.   The address for China Reinv Partners, L.P.is China Reinv Partners, L.P., Hawkland Investments Limited of Akara Bldg, 24 De Castro Street Wickhams Cay 1 PO Box 3136, Road Town, Tortola, BVA.

127)  Reflects 4,000 shares of common stock beneficially owned by the stockholder. Hayden Communications International Inc. has been engaged as our investor relations firm.  Mr. Matt Hayden has voting and dispositive power over the shares held by Hayden Communications International Inc. Mr. Hayden may be deemed to beneficially own the shares of common stock held by Hayden Communications International Inc. The address for Hayden Communications International Inc. is 2975 Highway A1A, Melbourne Beach, FL 32951.

128) Reflects 24,023 shares of common stock beneficially owned by the stockholder. Hampton Growth Resources, LLC has been engaged as our investor relations firm. Andrew Hag has voting and dispositive power over the shares held by Hampton Growth Resources, LLC. The address for Hampton Growth Resources, LLC is 520 Broadway Suite 350 #111, Santa Monica, CA 90401.

129) Consists of  503,792 shares of Common Stock underlying shares of the Company’s Series A Preferred Stock underlying a placement agent Warrant to purchase same, 55,978 shares of common stock underlying a placement agent warrant to purchase same, 55,978 shares of common stock underlying placement agent Series A Warrant and 55,978 shares of common stock underlying placement agent Series B Warrants, 561,601 shares of Common Stock underlying placement agent Warrant to purchase same, subject to a 9.99% limitation on beneficial ownership of our Common Stock as more fully described in note 1 above. Mark Elenowitz and Michael Boswell share voting and dispositive power over the securities held by TriPoint Global Equities, LLC. The address for TriPoint Global Equities, LLC is 17 State Street, 20th Floor, New York, NY 10004.

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130) Consists of  8,149 shares of Common Stock underlying shares of the Company’s Series A Preferred Stock underlying a placement agent Warrant to purchase same, 905 shares of common stock underlying a placement agent warrant to purchase same, 905 shares of common stock underlying placement agent Series A Warrant and 905 shares of common stock underlying placement agent Series B Warrants, subject to a 9.99% limitation on beneficial ownership of our Common Stock as more fully described in note 1 above. Ms. Faith Lee has voting and dispositive power over the securities held by Syndicated Capital, Inc. The address for Syndicated Capital, Inc is 1299 Ocean Avenue, Suite 210, Santa Monica, CA 90401.

131) Consists of  12,191 shares of the Company’s Common Stock underlying a placement agent Warrant to purchase same, 1,219 shares of common stock underlying placement agent Series A Warrant and 1,219 shares of common stock underlying placement agent Series B Warrants, subject to a 9.99% limitation on beneficial ownership of our Common Stock as more fully described in note 1 above. Mr. Bruce Meyers has voting and dispositive power over the securities held by Meyers Associates LP. The address for Meyers Associates LP is 45 Broadway, 2nd Floor, New York NY 10006.

132) Consists of  5,764 shares of Common Stock underlying shares of the Company’s Series A Preferred Stock underlying a placement agent Warrant to purchase same, 640 shares of common stock underlying a placement agent warrant to purchase same, 640 shares of common stock underlying placement agent Series A Warrant and 640 shares of common stock underlying placement agent Series B Warrants, subject to a 9.99% limitation on beneficial ownership of our Common Stock as more fully described in note 1 above. Mr. Robert Brown has voting and dispositive power over the securities held by Brill Securities. The address for Brill Securities is 152 W. 57th Street, New York NY 10017.

133)  Consists of 5,333,340 shares of Common Stock underlying Series B Preferred Stock, 800,001  shares of Common Stock underlying Series C Warrants and 800,001  shares of Common Stock  underlying Series D Warrants.  The person having voting, dispositive or investment powers over Dragon State International Limited are its general partners: Jose Luis Artiga, Fernando Vila, Jie-ping Yao and Lei Xu.  The address for Dragon State International Limited is Room 4607-11 The Centre, 99 Queen’s Road Central, Central Hong Kong.

134) Consists of  1,311 shares of the Company’s Common Stock underlying a placement agent Warrant to purchase same, 131 shares of common stock underlying placement agent Series A Warrant and 131 shares of common stock underlying placement agent Series B Warrants, subject to a 9.99% limitation on beneficial ownership of our Common Stock as more fully described in note 1 above.

135) Consists of  3,330 shares of the Company’s Common Stock underlying a placement agent Warrant to purchase same, 333 shares of common stock underlying placement agent Series A Warrant and 333 shares of common stock underlying placement agent Series B Warrants, subject to a 9.99% limitation on beneficial ownership of our Common Stock as more fully described in note 1 above.

136) Consists of  2,220 shares of the Company’s Common Stock underlying a placement agent Warrant to purchase same, 222 shares of common stock underlying placement agent Series A Warrant and 222 shares of common stock underlying placement agent Series B Warrants, subject to a 9.99% limitation on beneficial ownership of our Common Stock as more fully described in note 1 above.

137) Consists of  1,271 shares of the Company’s Common Stock underlying a placement agent Warrant to purchase same, 127 shares of common stock underlying placement agent Series A Warrant and 127 shares of common stock underlying placement agent Series B Warrants, subject to a 9.99% limitation on beneficial ownership of our Common Stock as more fully described in note 1 above.

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138) Consists of  2,536 shares of the Company’s Common Stock underlying a placement agent Warrant to purchase same, 254 shares of common stock underlying placement agent Series A Warrant and 254 shares of common stock underlying placement agent Series B Warrants, subject to a 9.99% limitation on beneficial ownership of our Common Stock as more fully described in note 1 above.

139) Consists of  500 shares of the Company’s Common Stock underlying a placement agent Warrant to purchase same, 50 shares of common stock underlying placement agent Series A Warrant and 50 shares of common stock underlying placement agent Series B Warrants, subject to a 9.99% limitation on beneficial ownership of our Common Stock as more fully described in note 1 above.

140) Consists of  250 shares of the Company’s Common Stock underlying a placement agent Warrant to purchase same, 25 shares of common stock underlying placement agent Series A Warrant and 25 shares of common stock underlying placement agent Series B Warrants, subject to a 9.99% limitation on beneficial ownership of our Common Stock as more fully described in note 1 above.

141) Consists of  42 shares of the Company’s Common Stock underlying a placement agent Warrant to purchase same, 4 shares of common stock underlying placement agent Series A Warrant and 4 shares of common stock underlying placement agent Series B Warrants, subject to a 9.99% limitation on beneficial ownership of our Common Stock as more fully described in note 1 above.

142) Consists of  42 shares of the Company’s Common Stock underlying a placement agent Warrant to purchase same, 4 shares of common stock underlying placement agent Series A Warrant and 4 shares of common stock underlying placement agent Series B Warrants, subject to a 9.99% limitation on beneficial ownership of our Common Stock as more fully described in note 1 above.

143) Consists of  42 shares of the Company’s Common Stock underlying a placement agent Warrant to purchase same, 4 shares of common stock underlying placement agent Series A Warrant and 4 shares of common stock underlying placement agent Series B Warrants, subject to a 9.99% limitation on beneficial ownership of our Common Stock as more fully described in note 1 above.

ITEM 8.  PLAN OF DISTRIBUTION

The Selling Stockholders and any of their pledgees, donees, transferees, assignees and successors-in-interest may, from time to time, sell any or all of their Shares on any stock exchange, market or trading facility on which the Shares are traded or quoted or in private transactions. These sales may be at fixed prices, at prevailing market prices at the time of sale, at prices related to the prevailing market price, at varying prices determined at the time of sale, or at negotiated prices. The Selling Stockholders may use any one or more of the following methods when selling Shares:

· ordinary brokerage transactions and transactions in which the broker-dealer solicits Investors;

· block trades in which the broker-dealer will attempt to sell the Shares as agent but may position and resell a portion of the block as principal to facilitate the transaction;

· purchases by a broker-dealer as principal and resale by the broker-dealer for its account;

· an exchange distribution in accordance with the rules of the applicable exchange;

· privately negotiated transactions;

· to cover short sales made after the date that this registration statement is declared effective by the SEC;

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· broker-dealers may agree with the Selling Stockholders to sell a specified number of such Shares at a stipulated price per share;

· through the writing or settlement of options or other hedging transactions, whether through an options exchange or otherwise;

· a combination of any such methods of sale; and

· any other method permitted pursuant to applicable law.

The Selling Stockholders may also sell Shares under Rule 144 under the Securities Act, if  all of the conditions in Rule 144(i)(2) are satisfied at the time of the proposed sale, rather than under this prospectus.

In connection with the sale of the Common Stock or interests therein, the Selling Stockholders may enter into hedging transactions with broker-dealers or other financial institutions, which may in turn engage in short sales of the Common Stock in the course of hedging the positions they assume. The Selling Stockholders may also sell shares of the Common Stock short and deliver these securities to close out their short positions, or loan or pledge the Common Stock to broker-dealers that in turn may sell these securities. The Selling Stockholders may also enter into option or other transactions with broker-dealers or other financial institutions or the creation of one or more derivative securities which require the delivery to such broker-dealer or other financial institution of Shares offered by this prospectus, which shares such broker-dealer or other financial institution may resell pursuant to this prospectus (as supplemented or amended to reflect such transaction).

Broker-dealers engaged by the Selling Stockholders may arrange for other brokers-dealers to participate in sales. Broker-dealers may receive commissions or discounts from the Selling Stockholders (or, if any broker-dealer acts as agent for the purchaser of shares, from the purchaser) in amounts to be negotiated. The Selling Stockholders do not expect these commissions and discounts to exceed what is customary in the types of transactions involved.

The Selling Stockholders may from time to time pledge or grant a security interest in some or all of the Shares owned by them and, if they default in the performance of their secured obligations, the amendment or supplement to this prospectus under Rule 424(b)(3) or other applicable provision of the Securities Act of 1933 will be filed amending the list of Selling Stockholders to include the pledgee, transferee or other successors in interest as Selling Stockholders under this prospectus and the pledgees or secured parties may offer and sell shares of Common Stock from time to time under the supplement or  amendment to this prospectus.

The Selling Stockholders also may transfer the shares of Common Stock in other circumstances, in which case the transferees, pledgees or other successors in interest will be the selling beneficial owners for purposes of this prospectus.

The Selling Stockholders and any broker-dealers or agents that are involved in selling the Shares may be deemed to be “underwriters” within the meaning of the Securities Act in connection with such sales. In such event, any commissions received by such broker-dealers or agents and any profit on the resale of the Shares purchased by them may be deemed to be underwriting commissions or discounts under the Securities Act. Discounts, concessions, commissions and similar selling expenses, if any, that can be attributed to the sale of Shares will be paid by the Selling Stockholder and/or the purchasers. Each Selling Stockholder has represented and warranted to the Company that it acquired the securities subject to this registration statement in the ordinary course of such Selling Stockholder’s business and, at the time of its purchase of such securities such Selling Stockholder had no agreements or understandings, directly or indirectly, with any person to distribute any such securities.

TriPoint Global Equities, LLC (“TriPoint Global”) is a registered broker dealer and FINRA member firm and listed as a Selling Stockholder in this prospectus. TriPoint Global served as placement agent for our Private Placement, which was completed on May 17, 2010.  Syndicated Capital, Inc., Brill Securities and Meyers Associates LP also served as sub-placement agents in connection with the Private Placement and received the shares they are offering for resale in this prospectus as placement agent compensation in connection with the Private Placement.

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We entered into a placement agent agreement with TriPoint Global on March 18, 2009 whereby we paid a cash fee to TriPoint Global equal to 6% of the gross proceeds received by us in connection with the Private Placement and we issued to TriPoint Global and its designees (i) Warrants to purchase 59,896 shares of Common Stock, (ii) three-year Warrants to purchase 539,067 shares of our Series A Preferred Stock, (iii) Series A Warrants to purchase 59,896 shares of Common Stock , (iv) Series B Warrants to purchase 59,896 shares of Common Stock, and (v) Warrants to purchase 561,601 shares of Common Stock. The registration statement of which this prospectus forms a part includes the shares of Common Stock underlying Warrants granted to TriPoint Global and its designees. The shares of Common Stock issuable upon exercise of placement agent Warrants received by TriPoint Global are transferable within TriPoint Global or to its assigns or designees, at the discretion of TriPoint Global, and in accordance with the Securities Act of 1933, as amended.

TriPoint Global does not have an underwriting agreement with us and/or the Selling Stockholders and no Selling Stockholders are required to execute transactions through TriPoint Global. Further, other than any existing brokerage relationship as customers with TriPoint Global, no Selling Stockholders has any pre-arranged agreement, written or otherwise, with TriPoint Global to sell their securities through TriPoint Global.

FINRA Rule 5110 requires FINRA member firms (unless an exemption applies) to satisfy the filing requirements of Rule 5110 in connection with the resale, on behalf of Selling Stockholders, of the securities on a principal or agency basis. NASD Notice to Members 88-101 states that in the event a Selling Stockholder intends to sell any of the shares registered for resale in this prospectus through a member of FINRA participating in a distribution of our securities, such member is responsible for insuring that a timely filing, if required, is first made with the Corporate Finance Department of FINRA and disclosing to FINRA the following:

· it intends to take possession of the registered securities or to facilitate the transfer of such certificates;

· the complete details of how the selling shareholders’ shares are and will be held, including location of the particular accounts;

· whether the member firm or any direct or indirect affiliates thereof have entered into, will facilitate or otherwise participate in any type of payment transaction with the selling shareholders, including details regarding any such transactions; and

· in the event any of the securities offered by the selling shareholders are sold, transferred, assigned or hypothecated by any selling shareholder in a transaction that directly or indirectly involves a member firm of FINRA or any affiliates thereof, that prior to or at the time of said transaction the member firm will timely file all relevant documents with respect to such transaction(s) with the Corporate Finance Department of FINRA for review.

No FINRA member firm may receive compensation in excess of that allowable under FINRA rules, including Rule 2710, in connection with the resale of the securities by the selling shareholders, which total compensation may not exceed 8%.

We have advised each Selling Stockholder that it may not use Shares registered on this registration statement to cover short sales of Common Stock made prior to the date on which this registration statement shall have been declared effective by the Commission. If a Selling Stockholder uses this prospectus for any sale of the Common Stock, it will be subject to the prospectus delivery requirements of the Securities Act. The Selling Stockholders will be responsible to comply with the applicable provisions of the Securities Act and Exchange Act, and the rules and regulations thereunder promulgated, including, without limitation, Regulation M, as applicable to such Selling Stockholders in connection with resales of their respective Shares under this registration statement.

We are required to pay all fees and expenses incident to the registration of the Shares, but the Company will not receive any proceeds from the sale of the Common Stock. The Company has agreed to indemnify the Selling Stockholders against certain losses, claims, damages and liabilities, including liabilities under the Securities Act.

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ITEM 9.  DESCRIPTION OF SECURITIES TO BE REGISTERED

Authorized Capital Stock

We have 140,000,000 shares of authorized capital stock, consisting of 100,000,000 shares of Common Stock, par value $0.001, and 40,000,000 shares of the Company’s Preferred Stock, par value $0.001, 11,000,000 of which are designated as Series A Convertible Preferred Stock, 8,000,000 shares of Series B Convertible Preferred Stock and 47,658 shares are designated as Series M Convertible Preferred Stock.

Common Stock

As of the date hereof, 57,646,160 shares of our Common Stock are issued and outstanding. Holders of Common Stock are entitled to cast one vote for each share on all matters submitted to a vote of shareholders, including the election of directors. The holders of Common Stock are entitled to receive ratably such dividends, if any, as may be declared by the Board out of funds legally available therefore. See “Dividend Policy.” Such holders do not have any preemptive or other rights to subscribe for additional shares. All holders of Common Stock are entitled to share ratably in any assets for distribution to shareholders upon the liquidation, dissolution or winding up of the Company. There are no conversion, redemption or sinking fund provisions applicable to the Common Stock. All outstanding shares of Common Stock are fully paid and nonassessable.

Preferred Stock

The Board is authorized, without further action by the shareholders, to issue, from time to time, up to 40,000,000 shares of preferred stock in one or more classes or series. Similarly, the Board will be authorized to fix or alter the designations, powers, preferences, and the number of shares which constitute each such class or series of preferred stock. Such designations, powers or preferences may include, without limitation, dividend rights (and whether dividends are cumulative), conversion rights, if any, voting rights (including the number of votes, if any, per share), redemption rights (including sinking fund provisions, if any), and liquidation preferences of any unissued shares or wholly unissued series of preferred stock. As of the date hereof, the Board has designated three classes of Preferred Stock, consisting of Series M Preferred Stock and Series A Preferred Stock and Series B Preferred Stock; and does not have any current intention to designate any other class of preferred stock.

Series B Preferred Stock

As of the date hereof, we have 5,333,340 shares of Series B Preferred Stock issued and outstanding. The Series B Preferred Shares by its principal terms:

(a)	pay a cumulative dividend at an annual rate of 6% during the first year immediately from and after the issuance date, payable quarterly, at our option, in cash or in shares of Common Stock;
(b)	shall rank junior to our Series A preferred stock but have a preference over the Common Stock and Series M Preferred Stock and to all other classes and series of our equity securities on dividend rights and rights on liquidation, dissolution or winding up of the Company equal to the original purchase price per Series A Preferred Share;
(c)	are convertible in whole or in part, at the option of the holders, at one-to-one ratio,  into shares of our common stock at $3.75 per share prior to the Maturity, and all outstanding shares of the Series B Preferred Stock shall automatically convert to shares of common stock upon Maturity, provided, however, at no time may holders convert shares of Series B Preferred Stock if (i) we have not obtained the Shareholder Approval; or (ii) the number of shares of common stock to be issued pursuant to such conversion would cause the number of shares of common stock beneficially owned by such holder and its affiliates in excess of 9.99% of the then issued and outstanding shares of common stock outstanding at such time, unless the holder provides us with a waiver notice in such form and with such content specified in the Series B Certificate of Designation.
(e)	the conversion price and the number of common shares underlying the Series B Preferred Stock are subject to customary adjustments, including weighted average broad-based anti-dilution protection, at any time or from time to time after the issuance date; and
(f)	requires that we, prior to taking certain corporate actions (including certain issuances or redemptions of its securities or changes in its organizational documents), obtain the approval of more than 50% of the Series B Preferred Shares then issued and outstanding, voting as a group.

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The Series A Warrants

As of the date hereof, there are 807,450 Series A Warrants issued and outstanding, including 59,896 warrants issued to the placement agent in the Private Placement. The Series A Warrants will, by its principal terms,

(a)	entitle the holder to purchase one (1) share of Common Stock;
(b)	be exercisable at any time after the consummation of the Private Placement and shall expire on the date that is three (3) years following the original issuance date of the Series A Warrants;
(c)	be exercisable, in whole or in part, at an exercise price of $4.50 per share;
(d)	be exercised only for cash (except that there will be a cashless exercise option at any time during which a registration statement covering such shares is not effective); and

(e)  be callable at $0.01 by us following the date that the VWAP of the Common Stock equals or exceeds $9.00 for fifteen (15) consecutive trading days with the average daily trading volume of no less than 75,000 shares.

The Series B Warrants

As of the date hereof, there are 808,100 Series B Warrants issued and outstanding, including 59,896 warrants issued to the placement agent in the Private Placement. The Series B Warrants will, by its principal terms,

(a)	entitle the holder to purchase one (1) share of Common Stock;
(b)	be exercisable at any time after consummation of the Private Placement and shall expire on the date that is three (3) years following the original issuance date of the Series B Warrants;
(c)	be exercisable, in whole or in part, at an exercise price of $5.25 per share;
(d)	be exercised only for cash (except that there will be a cashless exercise option at any time during which registration statement covering such shares is not effective); and

(e) be callable at $0.01 by us following the date that the VWAP of the Common Stock equals or exceeds $10.50 for fifteen (15) consecutive trading days with the average daily trading volume of no less than 75,000 shares.

THE SERIES C WARRANTS

As of the date hereof, there are 874,802 Series C Warrants issued and outstanding, including 64,800 warrants issued to the placement agent in the Private Placement. The Series C Warrants will, by its principal terms,

(a)	entitle the holder to purchase one (1) share of Common Stock;
(b)	be exercisable at any time after the consummation of the Private Placement and shall expire on the date that is three (3) years following the original issuance date of the Series C Warrants, subject to that the Company has obtained the shareholder approval;
(c)	be exercisable, in whole or in part, at an exercise price of $4.50 per share;
(d)	be exercised only for cash (except that there will be a cashless exercise option at any time during which a registration statement covering such shares is not effective); and
(e)	Non-callable

THE SERIES D WARRANTS

As of the date hereof, there are 874,802  Series D Warrants issued and outstanding, including 64,800 warrants issued to the placement agent in the Private Placement. The Series D Warrants will, by its principal terms,

(a)	entitle the holder to purchase one (1) share of Common Stock;
(b)	be exercisable at any time after consummation of the Private Placement and shall expire on the date that is three (3) years following the original issuance date of the Series D Warrants; subject to that the Company has obtained shareholder approval;
(c)	be exercisable, in whole or in part, at an exercise price of $5.25 per share;
(d)	be exercised only for cash (except that there will be a cashless exercise option at any time during which registration statement covering such shares is not effective); and
(e)	Non-callable.

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The Placement Agent Warrants

The warrants issued to the placement agent in April-May 2010 Private Placement contain the same terms and conditions as those issued to the Investors.  However, the Placement Agent received warrants to purchase up to 539,067 shares of the Company’s Series A Preferred Stock, at an exercise price of $3.50 per share and warrants to purchase up to 59,896 shares of the Company’s Common Stock at an exercise price of $3.50 per share.

The warrants issued to the placement agent in September 2010 Private Placement contain the same terms and conditions as those issued to the Investors.  However, the Placement Agent received warrants to purchase up to 561,601 shares of the Company’s common stock, including warrants to purchase up to 432,001 shares of common stock at an exercise price of $3.75 per share; warrants to purchase up to 64,800 shares of Common Stock at an exercise price of $4.5 per share and warrants to purchase up to 64,800 shares of Common Stock at an exercise price of $5.25 per share.

Registration Rights

In connection with the April-May 2010 Private Placement, we  entered into a registration rights agreement  with the investors, in which we agreed to file a registration statement  with the SEC to register for resale of the Common Stock, the Common Stock issuable upon conversion of the Series A Preferred Stock, the Series A Warrant Shares and the Series B Warrant Shares issued in the financing, within 30 calendar days of April 22, 2010 and to have such registration statement declared effective within 150 calendar days of April 22, 2010 or within 180 calendar days of April 22, 2010 in the event of a full review of the registration statement by the SEC. If we can not comply with the foregoing obligations under the registration rights agreement, we will be required to pay liquidated damages in cash to each investor, at the rate of 1% of the applicable subscription amount for each 30 day period in which we are not in compliance; provided, that such liquidated damages will be capped at 10% of the subscription amount of each investor and will not apply to any registrable securities that may be sold pursuant to Rule 144 under the Securities Act if all of the conditions in Rule 144(i)(2) are satisfied at the time of the proposed sale, or are subject to an SEC comment with respect to Rule 415 promulgated under the Securities Act.

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Accordingly, we filed a registration statement on Form S-1 in connection with the April-May 2010 private placement transaction. Amendment No. 4 to such Form S-1 which we filed on October 15, 2010 was declared effective on October 19, 2010. However, because of the delinquency of the Company’s annual report on Form 10-K for the year ended December 31, 2010 and interim reports on Form 10-Q for the three months ended March 31, 2011 and June 30, 2011 respectively, as of September 19, 2012, Amendment No. 4 to such Form S-1 is no longer effective. As a result, we began to accrue penalties pursuant to the terms of the registration rights agreement from  April, 2011 to November 1, 2011,the period that the registerable securities were not able to be sold pursuant to Rule 144 under the Securities Act.

In connection with the September 2010 Private Placement, we also entered into a Registration Rights Agreement with the investors, in which we agreed to file a registration statement  with the Commission to register for resale the Common Stock issuable upon conversion of the Series B Preferred Stock, the Series C Warrant Shares and the Series D Warrant Shares, within 30 calendar days of October 19, 2010 and to have the registration statement declared effective within 150 calendar days of October 19, 2010 or within 180 calendar days of October 19, 2010 in the event of a full review of the registration statement by the Commission. If we do not comply with the foregoing obligations under the registration rights agreement, we will be required to pay cash liquidated damages to each Series B Investor, at the rate of 1% of the applicable subscription amount for each 30 day period in which the Company is not in compliance; provided, that such liquidated damages will be capped at 10% of the subscription amount of each investor and will not apply to any registrable securities that may be sold pursuant to Rule 144 under the Securities Act if all of the conditions in Rule 144(i)(2) are satisfied at the time of the proposed sale, or are subject to an SEC comment with respect to Rule 415 promulgated under the Securities Act.

Accordingly, we filed a registration statement on Form S-1 in connection with the September 2010 private placement transaction. Amendment No. 2 to such Form S-1 which we filed on January 14, 2011 was declared effective on January 19, 2011. However, because of the delinquency of the Company’s annual report on Form 10-K for fiscal year ended December 31, 2010 and interim reports on Form 10-Q for three months ended March 31, 2011 and June 30, 2011 respective, as of September 19, 2012, the Amendment No. 2 to such Form S-1 is no longer effective. As a result, we began to accrue penalties pursuant to the terms of the registration rights agreement from  April, 2011 to November 1, 2011,the period that the registerable securities were not able to be sold pursuant to Rule 144 under the Securities Act.

Transfer Agent

The transfer agent for our common stock and preferred stock is Empire Stock Transfer Inc., 1859 Whitney Mesa Dr Henderson, NV 89014, Tel: (702) 818-5898

Item 10.  Interest of Named Experts and Counsel

Legal Matters

Certain legal matters with respect to the shares of common stock offered hereby will be passed upon for us by Hunter Taubman Weiss LLP, New York, New York 10004.

Experts

The audited consolidated financial statements of Keyuan Petrochemicals, Inc. and subsidiaries included herein and elsewhere in the registration statement have been audited by GHP Horwath, P.C., independent registered public accounting firm, for the periods and to the extent set forth in their Report (which includes explanatory paragraphs that relate to unusually important events that occurred in 2011 and significant transactions and relationships with related parties and certain other parties) appearing herein and elsewhere in the registration statement. Such financial statements have been so included in reliance upon the report of such firm given upon the firm’s authority as expert in accounting and auditing.

Item 11.  Information with Respect to the Registrant

We manufacture and supply a variety of petrochemical products, including BenzeneToluene-Xylene Aromatics (BTX Aromatics), propylene, styrene, liquid petroleum gas (LPG), Methyl Tertiary Butyl Ether (MTBE) and other petrochemicals, each of which is described below:

● BTX Aromatics: consists of benzene, toluene, xylene and other chemical components used for further processing into plastics, gasoline and solvent materials widely used in paint, ink, construction coating and pesticide;

● Propylene: a chemical intermediate which is one of the building blocks for an array of chemical and plastic products that are commonly used to produce polypropylene, acrylonitrile, oxo alcohols, propylene oxide, cumene, isopropyl alcohol, acrylic acid and other chemicals for paints, household detergents, automotive brake fluids, indoor/outdoor carpeting, textile, insulating materials, auto parts and electrical appliances;

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● Styrene: a precursor to polystyrene and several copolymers widely used for packaging materials, construction materials, electronic parts, home appliances, household goods, home furnishings, toys, sporting goods and other products;

● LPG: a mixture of hydrocarbon gases used as fuel in heating appliances and vehicles. A replacement for chlorofluorocarbons as an aerosol propellant and a refrigerant which reduces damage to the ozone layer; and

● MTBE & Other Chemicals: MTBE, oil slurry, sulphur and others which are used for a variety of applications including fuel components, refrigeration systems, fertilizers, insecticides and fungicides.

Production Capacity and Expansion

The following chart depicts our production capacity in 2011:

Breakdown of 2011 Capability of 720,000 (MT)

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In order to develop our business to meet the increasing customer demands, we have been working to expand our manufacturing capacity by focusing on the following improvements to our infrastructure:

a)	upgrading  the catalytic pyrolysis processing equipment used in production facilities to expand annual design capacity from 550,000 MT to 720,000 MT;
b)	a SBS production facility with a design capacity of 70,000 MT per year. The construction was completed in September 2011. One SBS production line began commercial production in December 2011 and the second line began commercial production in August 2012;

c) additional storage capacity which will allow us to take better advantage of price variations in our raw materials costs, our finished products sales, as well as to support the storage needs of overall expanded production capacity;

d) a raw material pre-treatment facility which will allow us to handle lower grade raw materials thereby helping us to further decrease raw material costs, improve efficiency in current production processes and provide necessary feedstock for asphalt production;

e)	an asphalt production facility, which will add 300,000 MT annual capacity to our current facility; and
f)	a production facility in Guangxi Province, which will have annual production capacity of 400,000 metric tons of ABS. The Company began preconstruction activities in February 2012, and the first phase is expected to be completed by the end of 2013.

Our annual designed manufacturing capacity was 550,000 metric tons of a variety of petrochemical products at the end of 2010. We upgraded the catalytic pyrolysis processing equipment used in production facilities to expand the capacity from 550,000 MT to 720,000 MT. This capacity expansion project started in March 2011 and was completed in April 2011.

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In September 2011, we completed building a new facility designed for producing SBS, one of the Styreneic Block Copolymers.  SBS is a product with higher product margin with major application for footwear, adhesive, polymer modification and modified asphalt industries. The SBS facility was built on part of the 1.2 million square feet of land for which we obtained the right of use in August 2010 The construction started in September, 2010 and was completed as scheduled in September 2011. One SBS production line began commercial production in December 2011 and the second line began commercial production in August 2012. The designed capacity of the SBS facility allows for production of up to 70,000 metric tons per year.   We expect to generate net profit margins of 10% from our production of SBS once the facility reaches normal production levels. The SBS facility is anticipated to achieve a 60% utilization rate in 2012, the first full year of production, and generate approximately $80 million to $100 million in sales and $10 million to $15 million in profit in 2012. Market conditions, the volatility of feedstock and SBS product prices can significantly impact the estimated profitability.

In anticipation of the increasing needs for raw materials and the production of finished goods, we are currently working to expand our manufacturing capacity to include:

a)   additional storage capacity for raw materials and for finished goods to increase our current 100,000 MT of storage capacity to 280,000 MT. The additional storage capacity will allow us to take better advantage of price variations in our raw materials costs and our finished products sales, as well as to support the storage needs of overall expanded production capacity.

b)   a raw material pre-treatment facility which will greatly enhance our capability to handle tougher raw materials and reduce raw material cost. The pre-treatment equipment will be utilized prior to the catalytic pyrolysis processing. After pre-treatment, the “higher quality” raw materials will go to the catalytic pyrolysis process and the “lower quality” raw materials will go to the asphalt production facility. To be more specific, the raw materials coming from storage tanks will go through heat exchanging process and will be mixed with solvent in the mixer before going to the two level extractors for separating process. Through different levels of separation, the higher quality raw material will go to catalytic pyrolysis process and the lower quality raw material will be generated into asphalt products through the modifying process. Raw material pre-treatment facility will allow us to introduce an even lower grade heavy oil which ultimately lowers raw material costs.

c)   an asphalt production facility which will add with 300,000 MT annual capacities to our current facility. We plan to produce high-grade pavement asphalt which is the building material for highways and various grades of roads including urban fast roads and trunk roads with heavy traffic flow. High-grade pavement asphalt can also be used as raw materials for emulsified asphalt, diluted asphalt and modified asphalt.  We expect the asphalt facility will be completed by the end of September, 2012.We believe that developing an asphalt production capability fits into our overall business. First, there is a large market demand in China due to China’s focus on building infrastructure to support further economic growth and the under-developed domestic supply; Second, asphalt production can provide a better use of our production residuals and lower quality materials. Currently, our production residuals are sold as scrap, however, with our expanded asphalt production, we can use those residuals to produce asphalt which can be sold at a higher price. We expect that the increased revenue and net profit from asphalt production will contribute significantly to our overall success. Third, our management team has in-depth knowledge and expertise in designing, building and managing an asphalt production facility. Our CEO, Mr. Chunfeng Tao successfully built and managed Ningbo Daxie Liwan Petrochemical Co. (later purchased by China National Offshore Oil Company) to an annual production of 500,000 metric tons of high grade asphalt.  

d)  a production facility in Guangxi Province, which will have annual production capacity of 400,000 metric tons of ABS. ABS, being the most common thermoplastic resin, is widely used in house hold appliances, electronic components, automotive parts and other fields. Recently, the demand for ABS in China has  increased significantly  due to domestic growth in the  appliances market and the development of the automobile industry.

The estimated cost of the storage capacity expansion, raw material pre-treatment facility and asphalt facility is approximately $75.8 million including $5.8 million for land, $20 million for facility construction, $40 million for new equipment, and $10 million for working capital. We are currently estimating the cost of the ABS production facility. Upon full completion of our expansion, our total production capacity will reach 1,490,000 MT a year including our current expanded production of 720,000 MT, SBS facility of 70,000 MT, asphalt facility of 300, 000 MT and ABS facility of 400,000 MT. The following chart depicts the breakdown of our new production capacity of 1,490,000 MT.

However, management is currently evaluating the effectiveness and feasibility of the entire manufacturing capacity expansion strategy considering the long-term development and the industry environment and the timetable may be adjusted based on  the evaluation results.

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Capacity Breakdown after expansion projects (1,490,000 MT)

We are currently evaluating the timeline for the expansion projects. Our current estimate is as follows, pending our evaluation:

Expansion Project	Expected Completion Date
Catalytic pyrolysis processing equipment upgrade	Completed in April 2011
SBS Production Facility	Completed in September 2011
Storage Facility	End of Q4, 2012
Raw Materials Pre-treatment Facility	End of Q4, 2012
Asphalt Production Facility	End of Q4, 2012
ABS Production Facility	End of Q4, 2013

Petrochemical Manufacturing Process

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The following chart illustrates our petrochemical manufacturing process:

Petrochemical Market in China

China has the world’s second largest petrochemical market after the U.S. in terms of production and consumption. China’s petrochemical output value grew from RMB 1,240 billion in 2000 to RMB 11,000 billion in 2011, representing a Compound Annual Growth Rate (CAGR) of 21.95%. China Petrol and Chemical Industry Association (CPCIA) expect that the total profits in the petrochemical industry will increase 18% in 2012. (Source: http://www.cinic.org.cn/site951/schj/2012-01-17/529907.shtml)

China’s increasing domestic demand for petrochemical products has exceeded the domestic supply in the past several years: 

· China’s benzene supply grew from 2.13 million MT in 2002 to 6.659 million MT in 2011 representing a CAGR of 13.5%. China’s benzene demand increased from 2.08 million MT in 2002 to 5.609 million MT in 2010, representing a CAGR of 11.65%. ( data source: http://chem.chem365.net/Web/jckxx_news/47755.htm )

· China’s toluene supply grew from 697,000 MT in 2002 to 2.55 million MT in 2011, representing a CAGR of 15.5 %. China’s toluene demand increased from 1.56 million MT in 2002 to 2.30 million MT in 2010, representing a CAGR of 5%.(data source: http://info.pcrm.hc360.com/2012/02/020858176690.shtml)

· China’s xylene supply grew from 820,000 MT in 2002 to 6.5 million MT in 2010, representing a CAGR of 30%. China’s xylene demand increased from 1.1 million MT in 2002 to 7.5 million MT in 2009 representing a CAGR of 32%.(data source: www.stats.gov.cn ) (www.chem99.com)

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· China’s propylene supply has grown from 3.78 million MT in 2000 to 16.22 million MT in 2011, representing a CAGR of 14.16%. China’s propylene demand has risen from 4.39 million MT in 2000 to 18.60 million MT in 2010, representing a CAGR of  16%.(data source: http://www.oilchem.net/chemical/5_3_37153.html)

· China’s styrene supply has grown from 0.89 million MT in 2002 to 3.806 million MT in 2010, representing a CAGR of 20%. China’s Styrene demand has increased from 2.69 million MT in 2002 to 7.3 million MT in 2010, representing a CAGR of 13%.(data source:  http://chem.chem365.net/Web/jckxx_news/30869.htm, http://static.sse.com.cn/cs/zhs/scfw/gg/ssgs/2010-04-29/600481_20100429_3.pdf )

· China’s LPG supply has grown from 12.56 million MT in 2003 to 21.811 million MT in 2011, representing a CAGR of 7.14%. China’s LPG demand has increased from 18.77 million MT in 2003 to 23.64 million MT in 2010, representing a CAGR of 3%.(data source: http://www.oilchem.net:88/coalchem/2_1_2991360.html,)

As a result, China has imported petrochemical products to meet the domestic demand, which is expected to continue for a number of years (source: Publication by Business Monitor International Ltd.: China Petrochemicals Report, Includes 5 Year Forecast to 2014; Q2 2010):

● China imported 1.813 million MT of benzene between 2003 and 2011. (data source: http://ie.sci99.com/Product/18)

● China imported 863,000 MT of toluene in 2002 and 655,100 MT in 2011 (data source: http://info.pcrm.hc360.com/2012/02/020858176690.shtml ;http://chem.chem365.net/Web/jckxx_news/47682.htm)

● China imported 271,000 MT of xylene in 2002 and 4.98million MT in 2011 (data source: http://ie.sci99.com/Product/167/2011)

● China’s imports of propylene increased from 210,000 MT in 2004 to 1.95 million MT in 2011 (data source: http://chem.chem99.com/news/1263734.html; http://chem.chem99.com/news/1287660.html))

● China’s imports of styrene increased from 1.79 million MT in 2002 to 3.607 million MT in 2011(http://ie.sci99.com/Product/17/2011)

Asphalt Market in China and Pretreatment & Asphalt Process

In addition to its use as raw materials for emulsified, diluted and modified asphalt-based products, asphalt is widely used for highways, roads and airport pavements. At the end of 2011,  the length of China’s highways has reached 85,000 km (52,816 miles) in the aggregate (http://www.ptbtv.com/news.asp?ID=78058), which made China rank the second in the world in terms of the length of its highway system. According to the PRC government plan, the length of China's highways will reach 100,000 km (62,137 miles) by 2020 (http://www.cngaosu.com/a/2010/1109/71783.html). In November 2008, the PRC Ministry of Communication issued a RMB 5 trillion investment plan and according to this plan, the average annual investment for construction of highways in the next five years will be RMB 980 billion, among which 60% will be used for construction of expressways, 20% for provincial highways and 20% for highways in the countryside.

To ensure the high-quality condition of roads and highways, the PRC government requires regular pavement maintenance every five years. In the past five years, the domestic demand for asphalt in China has exceeded supply with total imports of approximately 5.6 million MT in 2010.

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The following chart depicts the pretreatment and asphalt process:

Environmental Protection and Safety Measures

We are committed to environmental protection, facility safety and quality control throughout the design, maintenance and growth of our operation facilities and manufacturing process.

Environmental Protection

We have taken various measures to meet national standards and ensure our environmental compliance. For example, we recycle the water for cooling in our production process and large amounts of water can be saved through recycling. Sulfureted hydrogen generated in production is sent to the facility for sulfur recovery. The waste water and waste gas is treated by our sewage water treatment station and emission control facility to meet the national standards before discharge. The industrial residue and garbage is sent to qualified companies for safe treatment.

Safety Measures

Our safety control measures include:

1.	Distribution control system;
2.	Emergency shutdown mechanism;
3.	Automatic interlocking system;
4.	Detection & alarm system for flammable and toxic gas;
5.	Fire detection & automatic sprinkler system; and
6.	Real-time system and process monitoring system

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Quality Control

With our commitment to quality control, our petrochemical products have met all applicable national standards for petrochemical products set by the General Administration of Quality Supervision, Inspection and Quarantine of the PRC. For instance, the purity of our Styrene product exceeded the national standard of 99.7%, and the purity and our Propylene product exceeded the national standard of 99.5%.

Our Competitive Strengths

As an independent petrochemical manufacturer and supplier, our competitive strengths include:

Technology Advantage

We have proprietary manufacturing technologies that allow for better use of raw materials, higher yield rate and enhanced operational efficiency.

Specifically, we possess the technology to use heavy oil, instead of naphtha which is a commonly used feedstock in the petrochemical production industry. Heavy oil is approximately 15% cheaper per ton and more readily available than naphtha, which provides us with competitive advantage in the selection of raw materials. In addition, we use proprietary catalytic pyrolysis with higher reaction temperatures, which results in a 15% higher Olefin yield rate than that of conventional fluidized catalytic cracking processes. Finally, we use enhanced technologies in our production process that allow for lower capital investment and higher operations efficiency.

Our yield rate in 2010 for our entire production line indicates a yield rate of 87.6% for the finished products.  The yield rate in 2011 for our entire line is 87.2% for the finished products. Yield rate represents the percentage of finished product produced from input of raw material and net input of unfinished products and is calculated by dividing the sum of crude oil and net unfinished input into the individual net production of finished products. A yield rate of 87.2% means, for instance, 100 tons of heavy oil can generate approximately 87.2 tons of finished products.

In addition, we use enhanced technologies in our production process that allow for lower capital investment and higher operations efficiency. Our proprietary catalytic pyrolysis process uses a set of dual risers for one precipitator and one regenerator, while the commonly-used fluidized catalytic cracking process uses one riser for one precipitator and one regenerator respectively. The dual riser, one precipitator and one regenerator are integrated into one complete process which provides for ease of operation, higher operation efficiency and higher reaction temperature. It was estimated that the technology generates a 15% higher olefin yield rate than that of the fluidized catalytic cracking process, which allows us to produce more higher-margin olefin products such as styrene and propylene

Finally, a catalytic pyrolysis process with high temperatures can produce more olefin hydrocarbon based products compared with other equipment using low temperatures for the same product. In other words, our cost is reduced while producing the same amount of the product.

Our management considers our manufacturing technologies and manufacturing design critical to our business, and has taken steps to protect these technologies. In January 2011, we received the approval for our patent application for MEP technology (Multiple Ethylene Propylene) from the National Intellectual Property Bureau in China, #ZL-2010-2-0191523.6. In addition to patent protection, we also entered into confidentiality and license agreements with certain employees, customers and others to protect the confidentiality of our technologies.

Elite Workforce

Our management team, composed of seasoned petrochemical experts with proven track records from China’s largest state-owned enterprises, provides us with specialized operating management and technical administration. In addition, we have allied with many industry-renowned technology experts and advisors assisting us to achieve consistent technological improvement.

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Ideal Location

Our operation and storage facilities are at the ocean front and in close proximity to suppliers and customers which provides us with an advantage of lower logistics cost and readily available access to raw materials and target customers. In addition, being located in Qingshi Chemical Park in Ningbo provides us with access to skilled labor and industry resources.

Sales and Pricing

Sales

In selling our products, most of our customers pay cash in advance; for core customers with excellent credit history, we may occasionally make an exception by conducting credit sales, which is part of our strategy to maintain customer relationship.

In order to meet customers’ demand, we have improved our manufacturing technologies and streamlined our conversion process to achieve an approximately 30 days’ raw material-to-sales cycle.

In order to facilitate our future growth, Ningbo Keyuan Petrochemicals, Ltd was incorporated in Ningbo, China with a registered capital of $3 million as a wholly-owned subsidiary of Keyuan Group (the BVI entity) on August 27, 2010. Ningbo Keyuan Petrochemicals is responsible for the sales and marketing, raw materials sourcing and market analysis for the Company. Dr. Jingtao Ma was appointed as the General Manager of the new entity. Dr. Ma was the head of the former sales and marketing division of Ningbo Keyuan. This new entity will also serve as the “market thermometer” that can better monitor market conditions and obtain first hand market data through buying and selling activities. Management believes that the consolidation of the sales and marketing and raw material procurement function under one business unit will help efficiently manage the future expansion of the Company.

In order to facilitate our future growth, Ningbo Keyuan Petrochemicals, Ltd was incorporated in Ningbo, China with a registered capital of $3 million as a wholly-owned subsidiary of Keyuan Group (the BVI entity) on August 27, 2010. Ningbo Keyuan Petrochemicals is responsible for the sales and marketing, raw materials sourcing and market analysis for the Company. Dr. Jingtao Ma was appointed as the General Manager of the new entity. Dr. Ma was the head of the former sales and marketing division of Ningbo Keyuan. This new entity will also serve as the “market thermometer” that can better monitor market conditions and obtain first hand market data through buying and selling activities. Management believes that the consolidation of the sales and marketing and raw material procurement function under one business unit will help efficiently manage the future expansion of the Company. On June 15, 2012, Ningbo Keyuan Synthetic Rubbers Co., Ltd was incorporated as a foreign owned enterprise to engage in the sales and marketing of various petrochemical products, specifically synthetic.

Pricing

Our raw material price fluctuations are primarily attributable to international oil prices and market effects of supply and demand. We set our selling prices based upon benchmark prices published by national petrochemical companies, and/or through individually negotiated prices with customers. Specifically, BTX aromatic prices are influenced by benchmark prices set by National Development and Reform Commission, or NDRC.

Customers

Our main customer base is downstream petrochemicals manufacturers and distributors (trading companies) located in and near the Yangtze River Delta and Pearl River Delta. 14% of our sales are direct sales to petrochemical companies that use our products as raw materials for their own products such as polystyrene, isoprene, dicyclopentadiene, acrylic acid, oil fuel products and other chemical products. 86% of our sales are through the trading companies, i.e., distributors who sell our products to petrochemicals derivative companies and manufacturers. We engage distributors as customers mainly because: (1) distributors customarily pay the entire purchase price prior to shipment, while end-users often request credit payment terms; and (2) it decreases our overhead by allowing for a more streamlined sales force as distributors do not require regular client visits, entertaining or a highly specialized sales team to maintain the relationships.

In order to estimate the total orders for a year, we conduct surveys with our major customers to obtain their preliminary orders for the next one or two years and update the information annually. We enter into purchase contracts with customers on an order-to-order basis. In each contract, price is determined based on market price and the quantity is specified based on (1) the customer demand for a particular order and (2) our capability to satisfy that particular order. Our five largest customers accounted for 44% and 40% of the sales for the years ended December 31, 2011 and 2010, respectively.   We anticipate that our overall customer composition and the concentration of our top customers will change as we expand our business and modify our product portfolio to include new products and higher-margin products; however, we can give no assurance that this will be the case.

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Intellectual Property

We have a pending trademark application for the Ningbo Keyuan company logo with the State Administration for Industry and Commerce, Trademark Office. On January 25, 2011 we received approval for a patent related to the Company's proprietary production process, called MEP (Multiple Ethylene Propylene). MEP is an exclusive and leading technology used in Keyuan's existing production process. Through the ingenuity of our CEO, Mr.  Tao, we have developed this proprietary production process that improves the manufacturing efficiency and flexibility for a wide range of petrochemicals. The utility model patent received, #ZL-2010-2-0191523.6, applies to a processing technology used in the production of ethylene and propylene. This technology allows us to use lower grade feedstock (such as heavy oil) instead of a higher grade feedstock commonly used in other existing petrochemical production processes. It also allow us to improve the yield and utilization rate of its production line, resulting in a 15% cost savings.

Government Regulation

In addition to U.S. securities laws, banking laws and laws applicable to all companies, such as The Foreign Corrupt Practices Act, as a China-based entity, we are subject to various Chinese regulations. This section sets forth a summary of the most significant China regulations or requirements that may affect our business activities operated in China or our shareholders’ right to receive dividends and other distributions of profits from the PRC subsidiary.

Foreign Investment in PRC Operating Companies

The Foreign Investment Industrial Catalogue jointly issued by China's Ministry of Commerce (MOFCOM) and NDRC in 2007 classified various industries/businesses into three different categories: (i) encouraged for foreign investment; (ii) restricted to foreign investment; and (iii) prohibited from foreign investment. For any industry/business not covered by any of these three categories, they will be deemed industries/businesses permitted for foreign investment. Except for those expressly provided with restrictions, encouraged and permitted industries/businesses are usually 100% open to foreign investment and ownership. With regard to those industries/businesses restricted to foreign investment, there is always a limitation on foreign investment and ownership. Foreign investment is prohibited in prohibited industries/business. The PRC subsidiary’s business does not fall under the industry categories that are restricted to, or prohibited from foreign investment and is not subject to limitation on foreign investment and ownership.

Regulation of Foreign Currency Exchange

Foreign currency exchange in the PRC is governed by a series of regulations, including the Foreign Currency Administrative Rules (1996), as amended, and the Administrative Regulations Regarding Settlement, Sale and Payment of Foreign Exchange (1996), as amended. Under these regulations, the Renminbi is freely convertible for trade and service-related foreign exchange transactions, but not for direct investment, loans or investments in securities outside the PRC without the prior approval of State Administration of Foreign Exchange (SAFE). Pursuant to the Administrative Regulations Regarding Settlement, Sale and Payment of Foreign Exchange (1996), foreign investment enterprises, or FIEs may purchase foreign exchange without the approval of SAFE for trade and service-related foreign exchange transactions by providing commercial documents evidencing these transactions. They may also retain foreign exchange, subject to a cap approved by SAFE, to satisfy foreign exchange liabilities or to pay dividends. However, the relevant Chinese government authorities may limit or eliminate the ability of FIEs to purchase and retain foreign currencies in the future. In addition, foreign exchange transactions for direct investment, loan and investment in securities outside the PRC are still subject to limitations and require approvals from SAFE.

Regulation of FIEs’ Dividend Distribution

The principal laws and regulations in the PRC governing distribution of dividends by FIEs include:

(i)   The Sino-foreign Equity Joint Venture Law (1979), as amended, and the Regulations for the Implementation of the Sino-foreign Equity Joint Venture Law (1983), as amended;

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(ii)   The Sino-foreign Cooperative Enterprise Law (1988), as amended, and the Detailed Rules for the Implementation of the Sino-foreign Cooperative Enterprise Law (1995), as amended;

(iii)   The Foreign Investment Enterprise Law (1986), as amended, and the Regulations of Implementation of the Foreign Investment Enterprise Law (1990), as amended.

Under these regulations, FIEs in the PRC may pay dividends only out of their accumulated profits, if any, determined in accordance with Chinese accounting standards and regulations. In addition, the wholly-owned foreign enterprises in the PRC are required to set aside at least 10% of their respective accumulated profits each year, if any, to fund certain reserve funds unless such reserve funds have reached 50% of their respective registered capital. These reserves are not distributable as cash dividends.

Regulation of a Foreign Currency’s Conversion into RMB and Investment by FIEs

On August 29, 2008, SAFE issued a Notice of the General Affairs Department of the State Administration of Foreign Exchange on the Relevant Operating Issues concerning the Improvement of the Administration of Payment and Settlement of Foreign Currency Capital of Foreign-Invested Enterprises or Notice 142, to further regulate the foreign exchange of FIEs. According to Notice 142, FIEs shall obtain a verification report from a local accounting firm before converting its registered capital in foreign currency into Renminbi, and the converted Renminbi shall be used for the business within its permitted business scope. Notice 142 explicitly prohibits FIEs from using RMB converted from foreign capital to make equity investments in the PRC, unless the domestic equity investment is within the approved business scope of the FIE and has been approved by SAFE in advance. In addition, SAFE strengthened its oversight over the flow and use of Renminbi funds converted from the foreign currency-dominated capital of a FIE. The use of such Renminbi may not be changed without approval from SAFE, and may not be used to repay Renminbi loans if the proceeds of such loans have not yet been used. Violations of Notice 142 may result in severe penalties, including substantial fines as set forth in the SAFE rules.

Regulation of Foreign Exchange in Certain Onshore and Offshore Transactions

In October 2005, SAFE issued the Notice on Issues Relating to the Administration of Foreign Exchange in Fund-raising and Return Investment Activities of Domestic Residents Conducted via Offshore Special Purpose Companies, or SAFE Notice 75, which became effective as of November 1, 2005. SAFE has also issued implemented rules to SAFE Notice 75.  SAFE Notice 75 and its implementation rules require PRC residents (including both corporate entities and natural persons) to register with SAFE or its competent local branch in connection with their direct or indirect shareholding in any company outside of China referred to as an “offshore special purpose company” established for the purpose of raising fund from overseas to acquire assets of, or equity interests in, PRC companies. Under SAFE Notice 75, a “special purpose vehicle”, or SPV, refers to an offshore entity established or controlled, directly or indirectly, by PRC residents for the purpose of seeking offshore equity financing using assets or interests owned by such PRC residents in onshore companies. In addition, any PRC resident that is the shareholder of an offshore special purpose company is required to amend his or her SAFE registration with the SAFE or its competent local branch, with respect to that offshore special purpose company in connection with any of its increase or decrease of capital, transfer of shares, merger, division, equity investment or creation of any security interest over any assets located in China. The SAFE regulations require retroactive approval and registration of direct or indirect investments previously made by PRC residents in offshore special purpose companies. PRC subsidiaries of an offshore special purpose company are required to coordinate and supervise the filing of SAFE registrations by the offshore holding company’s shareholders who are PRC residents in a timely manner. In the event that a PRC resident shareholder with a direct or indirect investment in an offshore parent company fails to obtain the required SAFE approval and make the required registration, the PRC subsidiaries of such offshore parent company may be prohibited from making distributions of profit to the offshore parent and from paying the offshore parent proceeds from any reduction in capital, share transfer or liquidation in respect of the PRC subsidiaries. Further, failure to comply with the various SAFE approval and registration requirements described above, as currently drafted, could result in liability under PRC law for foreign exchange evasion.

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There still remain uncertainties as to how certain procedures and requirements under the aforesaid SAFE regulations will be enforced, and it remains unclear how these existing regulations, and any future legislation concerning offshore or cross-border transactions, will be interpreted, amended and implemented by the relevant government authorities. Although we have requested PRC residents who, to our knowledge,  hold direct or indirect interests in our Company  to make the necessary applications, filings and amendments as required under the SAFE Notice 75 and other related rules, our PRC resident beneficial holders have not completed such approvals and registrations required by the SAFE regulations. We will attempt to comply, and attempt to ensure that all of our shareholders subject to these rules comply with the relevant requirements. We cannot, however, assure the compliance of all of our China-resident shareholders. Any current or future failure to comply with the relevant requirements could subject us to fines or sanctions imposed by the Chinese government, including restrictions on certain of our subsidiaries’ ability to pay dividends or hinder our investment in those subsidiaries or affect our ownership structure, which could adversely affect our business and prospects.

Regulations on Employee Stock Option Plans

In December 2006, the People’s Bank of China promulgated the Administrative Measures of Foreign Exchange Matters for Individuals, which set forth the respective requirements for foreign exchange transactions by individuals (both PRC or non-PRC citizens) under either the current account or the capital account. In January 2007, SAFE issued implementing rules for the Administrative Measures of Foreign Exchange Matters for Individuals, which, among other things, specified approval requirements for certain capital account transactions such as a PRC citizen’s participation in the employee stock ownership plans or stock option plans of an overseas publicly-listed company. In March 2007, SAFE promulgated the Application Procedures of Foreign Exchange Administration for Domestic Individuals Participating in Employee Stock Ownership Plan or Stock Option Plan of Overseas-Listed Company, or the Stock Option Rules. Under these rules, PRC citizens who participate in an employee stock ownership plan or a stock option plan in an overseas publicly-listed company are required to register with SAFE or its local branch and complete certain other procedures. For participants of an employee stock ownership plan, an overseas custodian bank should be retained by the PRC agent, which could be the PRC subsidiary of such overseas publicly-listed company, to hold on trusteeship all overseas assets held by such participants under the employee share ownership plan. In the case of a stock option plan, the PRC agent is required to retain a financial institution with stock brokerage qualification at the place where the overseas publicly-listed company is listed or a qualified institution designated by the overseas publicly-listed company to handle matters in connection with the exercise or sale of stock options for the stock option plan participants. For participants who had already participated in an employee stock ownership plan or stock option plan before the date of the Stock Option Rules, the Stock Option Rules require their PRC employers or PRC agents to complete the relevant formalities within three months of the date of this rule.

Further, a notice concerning the individual income tax on earnings from employee share options jointly issued by Ministry of Finance, or the MOF, and the State Administration of Taxation, or the SAT, and its implementing rules, provide that domestic companies that implement employee share option programs shall (a) file the employee share option plans and other relevant documents to the local tax authorities having jurisdiction over them before implementing such employee share option plans; (b) file share option exercise notices and other relevant documents with the local tax authorities having jurisdiction over them before exercise by the employees of the share options, and clarify whether the shares issuable under the employee share options mentioned in the notice are the shares of publicly listed companies; and (c) withhold taxes from the PRC employees in connection with the PRC individual income tax.

We and our PRC citizen employees who participate in the employee stock incentive plan, which we adopted in 2010, will be subject to these regulations. We and our PRC option grantees have not completed the registrations under these regulations. We cannot assure you that we and our PRC option grantees will be able to complete the required registrations. Any current or future failure to comply with the relevant requirements could subject us to fines or sanctions imposed by the Chinese government, which could adversely affect our business and prospects.

Government Regulations Relating to Taxation

On March 16, 2007, the National People’s Congress or NPC, approved and promulgated the PRC Enterprise Income Tax Law, which we refer to as the New EIT Law. The New EIT Law took effect on January 1, 2008. Under the New EIT Law, FIEs and domestic companies are subject to a uniform tax rate of 25%. The New EIT Law provides a five-year transition period starting from its effective date for those enterprises which were established before the promulgation date of the New EIT Law and which were entitled to a preferential lower tax rate under the then-effective tax laws or regulations.

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On December 26, 2007, the State Council issued a Notice on Implementing Transitional Measures for Enterprise Income Tax, or the Notice, providing that the enterprises that have been approved to enjoy a low tax rate prior to the promulgation of the New EIT Law will be eligible for a five-year transition period beginning January 1, 2008, during which time the tax rate will be increased step by step to the 25% unified tax rate set out in the New EIT Law. From January 1, 2008, for the enterprises whose applicable tax rate was 15% before the promulgation of the New EIT Law, the tax rate will be increased to 18% for 2008, 20% for 2009, 22% for 2010, 24% for 2011, and 25% for 2012. For the enterprises whose applicable tax rate was 24%, the tax rate will be changed to 25% from January 1, 2008.

The New EIT Law and Implementation Rules of the New EIT Law provide that an income tax rate of 10% may be applicable to dividends payable to non-PRC investors that are “non-resident enterprises”, which (i) do not have an establishment or place of business in the PRC, or (ii) have such establishment or place of business in the PRC but the relevant income is not effectively connected with the establishment or place of business, to the extent such dividends are derived from sources within the PRC. The income tax for non-resident enterprises shall be subject to withholding at the income source, with the payor acting as the obligatory withholder under the New EIT Law, and therefore such income taxes generally called withholding tax in practice. Such income tax may be exempted or reduced by the State Council of the PRC or pursuant to a tax treaty between the PRC and the jurisdictions in which our non-PRC shareholders reside. For example, the 10% withholding tax is reduced to 5% pursuant to the Double Tax Avoidance Agreement Between Hong Kong and Mainland China if a Hong Kong resident enterprise owns more than 25% of the registered capital in a company in the PRC and is determined by the competent PRC tax authority to have satisfied the other conditions and requirements under such Double Tax Avoidance Agreement Between Hong Kong and Mainland China and other applicable laws. We are a U.S. holding company and substantially all of our income is derived from dividends we receive from our subsidiaries located in the PRC. Thus, if Keyuan HK are considered as a “non-resident enterprise” under the New EIT Law and the dividends paid to Keyuan HK by our subsidiaries in the PRC are considered income sourced within the PRC, such dividends may be subject to a withholding tax at a rate up to 10%.

The new tax law provides only a framework of the enterprise tax provisions, leaving many details on the definitions of numerous terms as well as the interpretation and specific applications of various provisions unclear and unspecified. Any increase in the combined Company’s tax rate in the future could have a material adverse effect on our financial condition and results of operations.

For the years ended December 31, 2011, 2010 and 2009, the Company was subject to the 25% tax rate. In order to support the growth of certain local enterprises, the local government granted certain credit back to Ningbo Keyuan. In the first two profitable years, the local government will credit back to the Company the entire local portion of the income tax which equals to 40% of the whole Enterprise Income Tax the Company paid applying the 25% tax rate.; in the subsequent three profitable years, the local government will credit back 50% of the local income tax the Company paid under the 25% tax rate.  The Company will recognize the subsidy related to income tax at the time the cash is received.

Regulations on Work Safety

On June 29, 2002, the Work Safety Law (“WSL”) of the PRC was adopted by Standing Committee of the 9th National People’s Congress and came into effect on November 1, 2002, as amended on August 27, 2009. The WSL provides general work safety requirements for entities engaging in manufacturing and business activities within the PRC. Additionally, Regulation on Work Safety Licenses (“RWSL”), as adopted by the State Council on January 7, 2004 effective on January 13, 2004, requires enterprises engaging in the manufacture of dangerous chemicals to obtain a work safety license with a term of three years. If a work safety license needs to be extended, the enterprise must go through extension procedures with authorities three months prior to its expiration. In addition, on May 17, 2004, the Measures for Implementation of Work Safety Licenses of Dangerous Chemicals Production was promulgated as implementing measures to the Regulation on Work Safety Licenses which provides that entities producing dangerous chemicals are required to obtain work safety licenses pursuant to specific requirements. Without work safety licenses, no entity may engage in the formal manufacture of dangerous chemicals. The Measures for Implementation of Work Safety Licenses of Dangerous Chemicals Production was amended on August 5, 2011 and the amended regulation will become effective on December 1, 2011. The amended regulation provides for more detailed and comprehensive requirements and conditions for obtaining work safety licenses for dangerous chemicals production.

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The Regulations on the Safety Administration of Dangerous Chemicals (“RSADC”) was promulgated by the State Council on January 26, 2002, effective as of March 15, 2002. It sets forth general requirements for manufacturing and storage of dangerous chemicals in China. The RSADC requires that companies manufacturing dangerous chemicals establish and strengthen their internal regulations and rules on safety control and fulfill the national standards and other relevant provisions of the State. In addition, according to the RSADC, companies that manufacture, store, transport or use dangerous chemicals shall be required to obtain corresponding approvals or licenses with the State Administration of Work Safety and its local branches and other proper authorities. Companies that manufacture or store dangerous chemicals without approval or registration with the proper authorities can be shut down, ordered to stop manufacturing or ordered to destroy the dangerous chemicals. Such companies can also be subject to fines. If criminal law is violated, the persons chiefly liable, along with other personnel directly responsible for such impropriety, shall be subject to relevant criminal liability. The RSADC was amended on March 2, 2011 and the amended regulation will become effective on December 1, 2011. The amended regulation strengthens the administration of dangerous chemicals production.

The Company has put work place safety as one of the top priorities for our work. In order to comply with the aforementioned rules and regulations, we have made considerable investment for major equipment with a total estimated amount of RMB 23 million (about USD 3.37 million). We have installed a distribution control system (DCS), emergency shutdown system, electric explosion protection, automatic interlocking system, detecting & alarming system for inflammable and toxic gas, fire fighting and fire detecting system, auto-sprinkling system, pressure release and control system. The Company’s operating subsidiary Ningbo Keyuan has obtained a work safety license effective from March 25, 2011 to March 24, 2014 for producing petrochemical products.

Regulations on Environmental Protection

According to the Prevention and Control of Water Pollution Law, as adopted by the Standing Committee of the 10th National People’s Congress on February 28, 2008 and effective on June 1, 2008, China adopted a licensing system for pollutant discharge. Companies directly or indirectly responsible for discharge of industrial waste water or medical sewage to waters are required to obtain a pollutant discharge license. All companies are prohibited from discharging wastewater and sewage to waters without the license or in violation of the terms of the pollutant discharge license. As Ningbo city is currently working on setting up an inspection system of the pollutant discharge, there is no specific pollutant discharge license for our operating subsidiary Ningbo Keyuan. However, Ningbo Keyuan’s facilities have passed inspection with Ningbo city environmental protection authorities which includes an approval for the pollutant discharge.

The Regulations on the Administration of Construction Projects Environmental Protection (“RACPEP”), as adopted by the State Council on November 18, 1998 and effective on November 29, 1998, governs construction projects and the impact such projects will have on the environment. Pursuant to the RACPEP, the governing body is responsible for supervising the implementation of a three tiered system that includes (i) reviewing and approving a construction project, (ii) overseeing the construction project and (iii) inspecting the finished construction project and ensuring that all harmful pollutants are disposed of correctly. Manufacturing companies are required to apply for inspection with environmental protection authorities upon completion of a construction project. Our facilities have passed the inspection by the environmental protection authorities.

In order to meet the above mentioned requirements for environmental protection, we have invested about RMB 28 million (about USD 4.1 million) and built facilities including a sewage treatment facility, a sulphur recovery facility, a sea water desulphurization facility, a  flue gas treatment facility and a real-time monitoring system for environmental protection. With these facilities, we believe we are able to meet all the environmental protection standards set by the government.

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Research and Development

We consider ourselves as a technology driven innovative Company. Our senior management combined has over one hundred years of industry experience. We continue to enhance our technology through internal and external research and development.

On January 25, 2011 we received approval for a patent related to the Company's proprietary production process, called MEP (Multiple Ethylene Propylene). MEP is an exclusive and leading technology used in Keyuan's existing production process. The utility model patent received, #ZL-2010-2-0191523.6, applies to a processing technology used in the production of ethylene and propylene. This technology allows us to use lower grade feedstock (such as heavy oil) instead of a higher grade feedstock commonly used in other existing petrochemical production processes. It also allows us to improve the yield and utilization rate of its production line.

On February 1, 2011, we signed an agreement with Ningbo Institute of Technology, an affiliate of Zhejiang University, to jointly develop commercial applications for Butadiene Styrene Resin. This is one component of Keyuan's long-term strategy to invest in technology advancement. Keyuan will work with researchers from the Ningbo Institute of Technology to research and develop synthesis technology for Butadiene Styrene Resin over the next 2 years. Butadiene Styrene Resin is a block co-polymer with excellent transparency and anti-impact properties, including flexibility and durability. It is currently used in packaging and plastic products such as medical instruments and toys. This partnership will focus on developing commercial applications for Butadiene Styrene Resin in synthetic rubber products. We and Ningbo Institute of Technology will share the rights to products and technologies developed from this cooperation.

In the first six months of 2012, the extreme fluctuation in international oil prices has caused substantial negative impact to the petrochemical industry including us. To address this issue, we engaged with Shanghai East China University of Science and Technology and Ningbo Institute of Technology, Zhejiang University to study the possibility and feasibility of diversifying our products, developing high value-added products and improving our production efficiency so that we can have a more stable long-term development plan, to optimize product structures, and to reduce the adverse effects of oil price fluctuations and the general economic environment.

Description of Property

We have acquired the state-granted use rights to land set forth in the table below.

	Address	Size	Leased/Owned/Granted	Function
1.	Qingshi Industrial Park, Beilun District, Ningbo, Zhejiang, China	231,084 Square meters	Granted use rights	Plant land
2.	No.8 Lianhe Road 239 Block, Qijiashan Neighborhood, Beilun District, Ningbo, Zhejiang, China	4,948 Square meters	Owned	Dormitory Building

Employees

As of September 19, 2012, we had 505 full-time employees, including 1 executive officer and 14 other senior management members, 26 engineers, 16 sales people, 7 researchers and developers and 55 administrative staff. The remaining 386 full-time employees are production facility manufacturers. All of the employees have signed labor contracts with us and receive monthly salaries as well as other social benefits including pension insurance, unemployment insurance, accidental insurance, medical insurance and housing funds, etc. We do not have any other employees in addition to our full-time employees.

We are compliant with local prevailing wage, contractor licensing and insurance regulations, and have good relations with our employees. 

As required by PRC regulations, we participate in various employee benefit plans that are organized by municipal and provincial governments, including pension, work-related injury benefits, maternity insurance, and medical and unemployment benefit plans. We are required under PRC laws to make contributions to the employee benefit plans at specified percentages of the salaries, bonuses and certain allowances of our employees, up to a maximum amount specified by the local government from time to time. Members of the retirement plan are entitled to a pension equal to a fixed proportion of the salary prevailing at the member’s retirement date.

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Executive Offices

Our offices are located at Qingshi Industrial Park, Ningbo Economic & Technological Development Zone, Ningbo, Zhejiang Province, P. R. China 315803.

FOR ADDITIONAL INFORMATION

We are a reporting company and file annual, quarterly and current reports, proxy statements and other information with the SEC. For further information with respect to the Company, you may read and copy its reports, proxy statements and other information, at the SEC public reference rooms at 100 F. Street, N.E., Washington, D.C. 20549. You can request copies of these documents by writing to the SEC and paying a fee for the copying cost. Please call the SEC at 1-800-SEC-0330  for more information about the operation of the public reference rooms. The Company’s SEC filings are also available at the SEC’s web site at http://www.sec.gov.

Copies of Company’s Annual Reports on Form 10K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 are all available at our website (http://www.keyuanpetrochemicals.com/)  free of charge, within a week after we file same with the SEC or by sending a request for a paper copy to our outside securities counsel: Hunter Taubman Weiss LLP, c/o Keyuan Petrochemicals, Inc., 17 State Street, Suite 2000, New York, NY 10004.

Legal Proceedings

We may from time to time become a party to various legal or administrative proceedings arising in the ordinary course of our business.

On November 15, 2011, The Rosen Law Firm, P.A. filed a class action suit, alleging the Company had violated federal securities laws by issuing materially false and misleading statements and omitting material facts with regard to disclosure of related party transactions and the effectiveness of internal controls in past public filings. The Company filed a motion to dismiss on July 27, 2012, which is presently scheduled to be heard by the Court in October 2012.  Discovery has not yet commenced, and will be stayed pending resolution of the motion to dismiss.  The Company believes there is no basis to the suit filed by the Rosen Law Firm and intends to contest the case vigorously.

On January 9, 2012, Ningbo Keyuan filed a law suit in Ningbo Beilun District People’s Court against Zhenjiang Kaiyuan Installation Group (now known as Zhenjiang Industry Equipment Installation Group Co., Ltd) in breach of a project construction contract and alleged damages of RMB 98,000. Zhenjiang Industry Equipment filed a counter claim requiring us to pay RMB 9,825,615 of project cost and RMB 1,350,000 of interest. The two parties have settled the case and Ningbo Keyuan agreed to pay Zhenjiang Industry Equipment  a total amount of RMB 7,220,000 (approximately $1,144,738).

In June 2012, Ningbo Keyuan filed a law suit in Ningbo Beilun District People’s Court against Ningbo Lianneng Thermo Co., Ltd (“Ningbo Lianneng”) in a dispute over a power supply contract alleging damages of RMB 10,964,366 (approximately $1,740,300).  In August 2012, Ningbo Lianneng filed a counter claim in Ningbo Intermediate People’s Court (the “Intermediate Court”) against Ningbo Keyuan for the same dispute for RMB 15,444,539 (approximately $ 2,451,500).  A civil trial for the counter claim was held at the Intermediate Court on August 30, 2012, but no decision has been made as of September 25, 2012. In addition, Ningbo Keyuan filed the same law suit in the Intermediate Court in late August 2012, and a civil trial for this claim is scheduled for October 18, 2012.

On September 11, 2012, the Company received a “Wells Notice” from the Staff of the U.S. Securities and Exchange Commission ( the “Commission”) stating that the Staff intends to recommend that the Commission bring a civil injunctive action against the Company, alleging that the Company violated Section 17(a) of the Securities Act of 1933 as well as Section 10(b), 13(a), and 13b(2) of the Securities Exchange Act of 1934 and Rules 10b-5 and 13a-13 thereunder. On the same day, the Commission also issued a Wells Notice to Mr. Chunfeng Tao, the Company’s Chief Executive Officer, advising him that the Staff intends to recommend that the Commission bring a civil injunctive action against him alleging that he violated Section 304 of the Sarbanes-Oxley Act.

A Wells Notice by the Staff is neither a formal allegation of wrongdoing nor a determination of wrongdoing. A Wells Notice indicates that the Commission has determined it may bring a civil action and provides the Company and Mr. Tao with an opportunity to provide the Commission with information as to why such action should not be brought.

The Company cannot predict the outcome of the matter with the Commission, including whether a lawsuit will be filled or the term of any settlement that may be reached. The Company will determine how to proceed based on further consultation with its legal counsel. At this time, the company does not expect the notice to materially interfere with its day to day operating business.

Other than as set forth herein, we are currently not a party to any material legal or administrative proceedings and are not aware of any pending or threatened legal or administrative proceedings against us.

MARKET FOR OUR COMMON STOCK, DIVIDENDS AND

RELATED STOCKHOLDER INFORMATION

Our Common Stock is quoted on the OTCQB under the symbol “KEYP”, our cusip number is 493722102. We first began trading on April 22, 2010 on the Over the Counter Bulletin Board.  Beginning on September 15, 2010, we began trading on the Nasdaq Capital Market under the symbol “KEYP”.  On January 18, 2011, our common stock commenced trading on the Nasdaq Global Market. On April 1, 2011 trading in our stock was halted by Nasdaq and delisted on October 5, 2011 resulting our shares trading on the Pink Sheets commencing on October 7, 2011.

The following table sets forth the quarterly high and low bid prices for the common stock since the quarter ended June 30, 2010.  The prices set forth below represent inter-dealer quotations, without retail markup, markdown or commission and may not be reflective of actual transactions.

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	High			Low
The quarter ended June 30, 2010		5.20			0.25
The quarter ended September 30,2010		5.55			3.15
The quarter ended December 31,2010		5.75			3.67
The quarter ended March 31, 2011		5.56			4.12
The quarter ended June 30, 2011		5.56	*		4.12*
The quarter ended September 30, 2011		5.56	*		4.12*
The quarter ended December 31, 2011		4.88	*		1.02	*
The quarter ended March 31, 2012		2.20			0.62
The quarter ended June 30, 2012		1.77			1.35

* For the period from April 1, 2011 to October 6, 2011, trading in our stock was halted by Nasdaq.

As of September 19, 2012, the closing bid price of the common stock was $1.20 and we had approximately 109  record holders of our commons stock and one record holders of our Series B Preferred Stock. This number excludes any estimate by us of the number of beneficial owners of shares held in street name, the accuracy of which cannot be guaranteed.

As of  September 21, 2012, there are (i) three-year Series A Warrants to purchase up to 807,450 shares of Common Stock, at an exercise price of $4.50 per share; (ii) three-year Series B Warrants to purchase up to 808,600 shares of Common Stock, at an exercise price of $5.25 per share. (iii) three-year Series C Warrants to purchase up to 874,802 shares of Common Stock, at an exercise price of $4.50 per share; and (iv) three-year Series D Warrants to purchase up to 874,802 shares of Common Stock, at an exercise price of $5.25 per share. We also granted warrants to purchase 718,755 shares of Common Stock to TriPoint Global Equities, LLC, the placement agent in the April-May 2010 Financing.  In connection with the September 2010 financing, we granted placement agent warrants to purchase up to 561,601 shares of Common Stock to Tripoint Global Equities, Inc.  

Effective August 11, 1993, the SEC adopted Rule 15g-9, which established the definition of a "penny stock," for purposes relevant to the Company, as any equity security that has a market price of less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to certain exceptions. For any transaction involving a penny stock, unless exempt, the rules require: (i) that a broker or dealer approve a person's account for transactions in penny stocks; and (ii) that the broker or dealer receive from the investor a written agreement to the transaction, setting forth the identity and quantity of the penny stock to be purchased. In order to approve a person's account for transactions in penny stocks, the broker or dealer must (i) obtain financial information and investment experience and objectives of the person; and (ii) make a reasonable determination that the transactions in penny stocks are suitable for that person and that person has sufficient knowledge and experience in financial matters to be capable of evaluating the risks of transactions in penny stocks. The broker or dealer must also deliver, prior to any transaction in a penny stock, a disclosure schedule prepared by the Commission relating to the penny stock market, which, in highlight form, (i) sets forth the basis on which the broker or dealer made the suitability determination; and (ii) states that the broker or dealer received a signed, written agreement from the investor prior to the transaction. Disclosure also has to be made about the risks of investing in penny stock in both public offerings and in secondary trading, and about commissions payable to both the broker-dealer and the registered representative, current quotations for the securities and the rights and remedies available to an investor in cases of fraud in penny stock transactions. Finally, monthly statements have to be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks

Dividend Policy

On January 27, 2011, the Company’s Board of Directors approved the distribution of an annual cash dividend of $0.36 per share for 2011 to be paid quarterly to its common stock shareholders at the assigned dates of record.  The first quarterly dividend of $0.09 per share was paid to shareholders of record as of March 1, 2011; distribution occurred on April 15, 2011. The second quarterly dividend of $0.09 per share was paid to shareholders of record as of June 1, 2011; distribution occurred on July 15, 2011. In October 2011, the Company's Board of Directors suspended the payment of quarterly cash dividends on the Company’s common stock while it considered strategic alternatives including, but not limited to, taking the Company private, a merger or other transaction.

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Management agreed to waive their rights to receive cash dividends with regards to common stock indirectly owned by them. In addition, PRAX Capital agreed to waive their rights to receive cash dividends should they choose to convert their preferred stock before the record date. The Company and the Board are evaluating its current dividend policy for shareholders in connection with the distribution of the third quarterly dividend of 2011 and future dividend payments.

Description of Equity Compensation Plans Approved By Shareholders

On June 29, 2010, the Board of Directors approved the Company’s 2010 Equity Incentive Plan (the “Plan”)  to authorize  6,000,000 shares for issuance  under equity incentive awards, effective June 30, 2010. On December 6, 2010, we filed Definitive Schedule 14C information statement with the Commission proposing to adopt the Plan. The information statement was mailed to shareholders on December 6, 2010 and it became effective on December 21, 2010.

Plan category	Number of securities to be issued upon exercise of outstanding options, warrants and rights			Weighted-average exercise price of outstanding options, warrants and rights		Number of securities remaining available for further issuance under equity compensation plans (excluding securities reflected in column (a))
Equity compensation plans approved by security holders		2,930,000	(1)(2)	$	4.2		2,820,000
Equity compensation plans not approved by security holders		100,000	(3)	$	4.5
Total		3,030,000					2,820,000

(1)   On June 30, 2010, the Company granted stock options to certain senior management employees to purchase in the aggregate 3,000,000 shares of the Company’s common stock at an exercise price of $4.20 per share and the grant-date fair value of these stock options amounted to $3,347,298. However, options to purchase in the aggregate 150,000 shares of the Company’s common stock were later forfeited in 2010 because two optionees left the Company. A total of 2,810,000 stocks options vest over three years as follows: 30% shall vest and become exercisable one year after grant date, 40% shall vest and become exercisable two years after grant date, and 30% shall vest and become exercisable three years after grant date. For the remaining 190,000 stock options: 40% shall vest and become exercisable one year after grant date and 60% shall vest and become exercisable two years after grant date.

(2)   On July 1, 2010, the Company granted stock options to two independent directors with contractual terms of 5 years. The exercise price of these stock options is $4.20 per share and the grant-date fair value of these stock options amounted to $91,349. A total of 40,000 options shall vest and become exercisable one year after the grant date and the remaining 40,000 options shall vest and become exercisable two years after the grant date, provided that the independent directors are re-elected for successive one year terms one year after the stock options issuance date.

(3)   On August 4, 2010, we granted five-year options to 79 managers and employees to purchase in the aggregate 700,000 shares of the Company’s common stock at an exercise price of $4.50 per share, in consideration of their services to the Company. Of these options, 30% of the Options shall vest immediately one year after the issuance, 40% of the options shall vest two years after the issuance and 30% of the options shall vest three years after the issuance.  The shares were issued in accordance with the exemption from the registration provisions of the Securities Act of 1933, as amended, provided by Section 4(2) of such Act for issuances not involving any public offering and Regulation S promulgated under the Securities Act of 1933, as amended. We made this determination based upon the representations of the respective Optionees that none of them were “U.S. person[s]” as that term is defined in Rule 902(k) of Regulation S under the Securities Act. Based on feedback received from the employees after the option award which indicated that most of those employees would prefer tangible cash rewards, management proposed canceling  600,000 of these stock options that had been granted to 77 of the 79 employees. On December 29 2010, the Board of Directors approved the proposal to cancel such stock options.

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Financial Statements

 KEYUAN PETROCHEMICALS, INC. AND SUBSIDIAIRES

CONDENSED CONSOLIDATED BALANCE SHEETS

			June 30,		December 31,
	Note		2012		2011
			(Unaudited)
ASSETS
Current assets:
Cash		3	$	9,879,169	$	7,325,017
Pledged bank deposits				239,816,494		156,318,066
Bills receivable				3,309,663		1,574,000
Accounts receivable		4		4,014,076		2,226,288
Inventories		5		73,048,249		38,945,968
Prepayments to suppliers		6		44,507,626		15,781,294
Consumption tax refund receivable		7		107,023,606		55,809,560
Amounts due from related parties		22		39,625		39,350
Other current assets		8		60,646,615		45,978,428
Deferred income tax assets		17		37,609		37,348
Total current assets				542,322,732		324,035,319
Property, plant and equipment, net		9		209,768,917		190,867,621
Intangible assets, net		10		931,848		978,503
Land use rights		11		10,920,476		11,068,762
VAT recoverable				2,541,215		2,893,635
Total assets			$	766,485,188	$	529,843,840
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Short-term bank borrowings		12	$	393,534,612	$	225,969,421
Bills payable				111,267,000		63,550,250
Current portion of long-term bank borrowings		13		15,850,000		15,740,000
Accounts payable				79,936,476		97,588,137
Advances from customers		4		41,202,535		7,821,623
Accrued expenses and other payables		14		30,254,525		30,287,946
Income taxes payable		17		1,224,165		186,326
Dividends payable				2,381,759		2,381,759
Amounts due to related parties		22		768,313		621,077
Total liabilities, all current				676,419,385		444,146,539
Series B convertible preferred stock:
Par value: $0.001; Authorized: 8,000,000 shares
6% cumulative dividend for one year from insurance, with liquidation preference
over common stock
Issued and outstanding: 5,333,340 shares,
liquidation preference of $20,000,000				16,451,552		16,451,552
Commitments and contingencies		18		-		-
Stockholders’ equity:
Common stock:
Par value:$0.001; Authorized: 100,000,000 shares;
Issued and outstanding: 57,646,160 shares as at June 30, 2012 and
December 31, 2011				57,646		57,646
Additional paid-in capital				49,951,346		49,198,278
Statutory reserve				3,744,304		3,744,304
Accumulated other comprehensive income				7,253,902		6,545,811
Retained earnings				12,607,053		9,699,710
Total stockholders’ equity				73,614,251		69,245,749
Total liabilities and stockholders' equity			$	766,485,188	$	529,843,840

See accompanying notes to the condensed consolidated financial statements.

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KEYUAN PETROCHEMICALS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (UNAUDITED)

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2012			2011			2012			2011
Sales
External parties	$	184,425,717		$	115,281,945		$	367,750,405		$	239,436,744
Related parties		-			35,607,658			-			58,217,477
Total Sales		184,425,717			150,889,603			367,750,405			297,654,221
Cost of sales
External parties		178,005,456			111,055,933			351,857,165			224,870,131
Related parties		-			37,977,326			-			58,276,685
Total Cost of sales		178,005,456			149,033,259			351,857,165			283,146,816
Gross profit		6,420,261			1,856,344			15,893,240			14,507,405
Operating expenses
Selling expenses		388,217			215,548			641,123			754,680
General and administrative expenses		2,656,620			4,529,744			5,266,815			7,764,824
Total operating expenses		3,044,837			4,745,292			5,907,938			8,519,504
Income (loss) from operations		3,375,424			(2,888,948	)		9,985,302			5,987,901
Other income (expense):
Interest income		1,882,812			781,941			2,822,046			1,688,885
Interest expense		(2,930,281	)		(2,638,734	)		(7,308,982	)		(5,835,364	)
Foreign exchange (loss) gain, net		(542,352	)		3,200,356			(364,518	)		2,052,713
Liquidated damages expense		-			(1,300,730	)		-			(1,300,730	)
Other income (expense), net		147,022			1,689,404			(217,039	)		3,716,178
Total other expense (income)		(1,442,799	)		1,732,237			(5,068,493	)		321,682
Income (loss) before income taxes		1,932,625			(1,156,711	)		4,916,809			6,309,583
Income tax expense		870,277			665,828			2,009,469			2,917,979
Net income (loss) attributable to Keyuan
Petrochemicals Inc. stockholders		1,062,348			(1,822,539	)		2,907,340			3,391,604
Dividends to Series B convertible
preferred stockholders		-			306,247			-			602,507
Net income (loss) attributable to Keyuan
Petrochemicals Inc. common stockholders	$	1,062,348		$	(2,128,786	)	$	2,907,340		$	2,789,097
Net income (loss) attributable to Keyuan
Petrochemicals Inc. stockholders	$	1,062,348		$	(1,822,539	)	$	2,907,340		$	3,391,604
Other comprehensive income
Foreign currency translation adjustment		130,680			617,550			708,091			1,174,874
Comprehensive Income (loss)	$	1,193,028		$	(1,204,989	)	$	3,615,431		$	4,566,478
Earnings (loss)  per share: Attributable to common stock:
- Basic	$	0.02		$	(0.04	)	$	0.05		$	0.05
- Diluted	$	0.02		$	(0.04	)	$	0.05		$	0.05
Weighted average number of shares of common stock used in calculation
Basic		57,646,160			57,579,239			57,646,160			57,578,896
Diluted		62,979,500			57,579,239			62,979,500			63,836,892

See accompanying notes to the condensed consolidated financial statements.  

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KEYUAN PETROCHEMICALS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

	Six Months Ended June 30,
	2012			2011
	(Unaudited)			(Unaudited)
Cash flows from operating activities:
Net income	$	2,907,340		$	3,391,604
Adjustments to reconcile net income to net cash
(Used in) provided by operating activities:
Loss on disposal of property and equipment		-			3,504
Depreciation		5,452,134			4,671,566
Amortization		53,548			51,675
Land use rights amortization		225,868			217,999
Share-based compensation expense		819,496			1,285,185
Changes in operating assets and liabilities:
Bills receivable		(1,726,404	)		5,665,046
Account receivable		2,244,109			-
Inventories		(33,864,254	)		(14,517,420	)
Prepayments to suppliers		(25,882,018	)		11,118,823
Consumption tax refund receivable		(50,875,322	)		5,455,515
Other current assets		(16,565,560	)		(23,036,081	)
Accounts payable		(18,462,125	)		44,000,832
Advances from customers		29,341,763			4,320,196
Income taxes payable		879,675			(9,427,659	)
Accrued expenses and other payables		(1,483,151	)		1,500,872
Net cash(used in) provided by operating activities		(106,934,901	)		34,701,657
Cash flows from investing activities:
Proceeds from property disposal of property and equipment		-			10,512
Purchase of property, plant and equipment,		(21,295,703	)		(11,574,245	)
Net cash used in investing activities		(21,295,703	)		(11,563,733	)
Cash flows from financing activities:
Pledged bank deposits used for bank borrowings		(82,489,175	)		(52,211,458	)
Proceeds from short-term bank borrowings		457,866,240			74,477,809
Repayment of short-term bank borrowings		(291,149,318	)		(45,167,450	)
Proceeds from bills payable		111,379,320			51,215,295
Repayment of bills payable		(64,058,975	)		(60,784,670	)
Repayments of long-term bank borrowings		-			(13,014,350	)
Short-term financing from related parties		-			13,144,234
Short-term financing to related parties		-			(13,144,234	)
Repayment to Ningbo Litong		-			(95,094	)
Proceeds from warrant exercise		-			7,332
Dividends paid		-			(1,396,964	)
Net cash provided by (used in) financing activities		131,548,092			(46,969,550	)
Effect of foreign currency exchange rate changes on cash		(763,336	)		278,395
Net increase (decrease) in cash		2,554,152			(23,553,231	)
Cash at beginning of the period		7,325,017			29,336,241
Cash at end of the period	$	9,879,169		$	5,783,010
Supplemental disclosure of cash flow information:
Income taxes paid	$	1,028,792		$	12,345,638
Interest paid, net of capitalized interest	$	588,578		$	5,835,363
Non-cash financing activities:
Payable for purchase of property, plant and equipment	$	4,433,893		$	24,433,051

See accompanying notes to the condensed consolidated financial statements.

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KEYUAN PETROCHEMICALS, INC. AND SUBSIDIARIES NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.

1         ORGANIZATION AND DESCRIPTION OF BUSINESS

(a)       Organization

Keyuan Petrochemicals, Inc. (the “Company”) was incorporated in the State of Texas on May 4, 2004 in the former name of “Silver Pearl Enterprises, Inc”.  The Company, through its wholly-owned subsidiary, Keyuan International Group Limited (“Keyuan International”) and its indirect subsidiaries, Keyuan Group Limited (“Keyuan HK”),  Ningbo Keyuan Plastics Co., Ltd. (“Ningbo Keyuan”), Ningbo Keyuan Petrochemicals Co., Ltd. (Ningbo Keyuan Petrochemicals), Ningbo Keyuan Synthetic Rubbers Co., Ltd. (“Ningbo Keyuan Synthetic Rubbers”), and Guangxi Keyuan New Materials Co., Ltd. (“Guanxi Keyuan”), are collectively referred herein below as “the Group” and are engaged in the manufacture and sale of petrochemical products in the People’s Republic of China (“PRC”).

(b)       Other Events

In 2011, the Company’s former auditor, KPMG, LLP (“KPMG”), brought certain issues to the Company’s Audit Committee’s attention through a March 28, 2011 memorandum and an April 18, 2011 letter (collectively, the “KPMG Memoranda”). KPMG requested that the Company’s Audit Committee conduct an independent investigation (the “Independent Investigation”) into those issues. On March 31, 2011, the Audit Committee elected to commence such Independent Investigation and engaged the services of independent counsel, Pillsbury Winthrop Shaw Pittman LLP (“Pillsbury”), which in turn engaged the services of Deloitte Financial Advisory Services LLP (“Deloitte”), as independent forensic accountants, and King & Wood, as Audit Committee counsel in the PRC. Pillsbury, Deloitte and King & Wood are collectively referred to herein as the “Investigation Team”. On September 28, 2011, the Independent Investigation was completed. The Independent Investigation identified possible violations of PRC laws and U.S. Securities laws, including the maintenance of an off-balance sheet cash account that was used primarily to pay service providers and other Company-related expenses. Total activity in the off-balance sheet cash account amounted to approximately $800,000 through December 31, 2010, with a net income statement effect of approximately $12,000, and $400,000 for the period from January 1, 2011 to March 31, 2011, with a net income statement effect of approximately $192,000, at which time the Company ceased its use. The Independent Investigation identified certain other issues that could result in potential violations of PRC or U.S. laws. The Company continues to work with its legal counsel to evaluate the matters identified in the investigation and to determine the extent to which the Company may be exposed to fines and penalties. The Company has preliminarily concluded that the extent to which it may be exposed to fines and penalties in the PRC is limited, and to date, has not received any PRC governmental or regulatory communication or inquiry related to these matters. However, management is currently unable to determine the final outcome of these matters and their possible effects on the consolidated financial statements.

On October 7, 2011, trading of the Company’s common stock was delisted by NASDAQ, and is currently quoted on the Over-the-Counter Bulletin Board (symbol: KEYP).

The Company’s management believes that the Company’s cash, working capital, and access to cash through its bank loans provide adequate capital resources to fund its operations and working capital needs for at least the next twelve months.

2         BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (U.S. GAAP) and include the financial statements of the Company and its subsidiaries. All intercompany balances and transactions are eliminated in consolidation. The financial statements have been prepared in accordance with U.S. GAAP applicable to interim financial information and the requirements of Form 10-Q and Article 10 of Regulation S-X of the Securities and Exchange Commission. Accordingly, they do not include all of the information and disclosures required by accounting principles generally accepted in the United States of America for complete financial statements. These interim financial statements should be read in conjunction with the audited financial statements for the years ended December 31, 2011 and 2010, as not all disclosures required by generally accepted accounting principles for annual financial statements are presented. The interim financial statements follow the same accounting policies and methods of computation as the audited financial statements for the years ended December 31, 2011 and 2010. Interim results are not necessarily indicative of results for a full year. In the opinion of management, all adjustments, consisting of normal recurring adjustments, considered necessary for a fair presentation of the financial position and the results of operations and cash flows for the interim periods have been included.

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3         CASH

Cash consists of cash on hand and cash at banks. As of June 30, 2012 and December 31, 2011, cash of $9,029,095 and $7,101,505, respectively, was held in major financial institutions located in the PRC; and cash of $736,386 and $124,355, respectively was held in the Hong Kong Special Administrative Region. Management performs periodic evaluations of the relative credit standings of these major financial institutions, and believes that these major financial institutions have high credit ratings.

4         ACCOUNTS RECEIVABLE

The Group generally requires a prepayment of 100% of the sales contract price from its customers shortly before products are delivered. Such prepayment is recorded as “advances from customers” in the Group’s consolidated balance sheet, until the products are delivered and the customer takes ownership and assumes the risk of loss. With the approval of the Company’s general manager, the Company occasionally extends credit to its long-term customers with a good credit rating. As of June 30, 2012 and December 31, 2011, the balance of accounts receivable was $4,014,076 and $2,226,288 respectively. The $4,014,076 of accounts receivable as of June 30, 2012 was received in July 2012.

5         INVENTORIES

Inventories consist of the following:

	June 30,		December 31,
	2012		2011
	（Unaudited）
Raw materials	$	48,865,084	$	26,226,388
Finished goods		20,219,210		10,891,825
Work-in-process		3,963,955		1,827,755
Total	$	73,048,249	$	38,945,968

6         PREPAYMENTS TO SUPPLIERS

As of June 30, 2012 and December 31, 2011, prepayments to suppliers are made in connection with the purchase of raw materials and the construction of the Group’s facilities. Prepayments to suppliers are reclassified to inventories or construction-in-progress, when the Group applies the prepayments to related purchases of materials after the related invoices are received.

7         CONSUMPTION TAX REFUND RECEIVABLE

The PRC government has enacted a regulation that provides that domestically purchased heavy oil to be used for producing ethylene and aromatics products is to be exempted from a consumption tax. In addition, the consumption tax paid for imported heavy oil is to be refunded if it is used for producing ethylene and aromatics products. Given all the Group’s purchased heavy oils are, or are to be used for the production of ethylene and aromatics products, the Group recognizes a consumption tax refund receivable when the consumption tax has been paid and the relevant heavy oils have been used for production. As of June 30, 2012 and December 31, 2011, the Group recorded an estimated consumption tax refund receivable amounting to $107,023,606 and $55,809,560, respectively.

On August 15, 2012, the Group received a consumption tax refund of $95,124,967 and consumption tax claims of $11,898,639 are in process and are expected to be approved and refunded by the end of September 2012.

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8         OTHER CURRRENT ASSETS

Other current assets consist of the following:

	June 30,		December 31,
	2012		2011
	（Unaudited）
VAT recoverable	$	23,360,510	$	9,991,877
Receivable from Ningbo Litong (Note 22)		-		2,740,970
Customs deposits for imported inventories		27,398,747		29,102,193
Others		9,887,358		4,143,388
	$	60,646,615	$	45,978,428

The estimate of deductible input VAT on the purchase of property, plant and equipment is determined using vendor contracts, engineering and other estimates, as well as historical experience, and is included in VAT recoverable. Approximately $2.5 million and $2.9 million is included in non-current assets as of June 30, 2012 and December 31, 2011, respectively.

Customs deposits for imported inventories represent amounts paid to the local customs office in connection with the importing of raw materials inventories. Upon approval by the customs authorities, these amounts become refundable by the local tax authority and are reclassified as consumption tax refund receivable (Note 7).

9         PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment consist of the following:

	June 30,			December 31,
	2012			2011
	（Unaudited）
Buildings	$	3,915,407		$	3,888,234
Machinery and equipment		177,358,013			175,736,470
Vehicles		786,083			663,985
Office equipment and furniture		139,728			134,929
Construction-in-progress		50,141,011			27,449,846
		232,340,242			207,873,464
Less: Accumulated depreciation		(22,571,325	)		(17,005,843	)
	$	209,768,917		$	190,867,621

Depreciation expense on property, plant and equipment is allocated to the following items:

	Three months ended June 30,				Six months ended June 30,
	2012		2011		2012		2011
	（Unaudited）		（Unaudited）		（Unaudited）		（Unaudited）
Cost of sales	$	2,580,156	$	2,246,111	$	5,347,643	$	4,589,859
Selling, general and administrative expenses		55,355		40,473		104,491		81,707
	$	2,635,511	$	2,286,584	$	5,452,134	$	4,671,566

For the six months ended June 30, 2012 and the year ended December 31,2011, interest capitalized amounted to $587,984 and $1,246,179 respectively.

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10       INTANGIBLE ASSETS

Intangible assets consist of the following:

	Amortization		June 30,			December 31,
	Period		2012			2011
	Years		（Unaudited）
Licensing agreements		10-20	$	1,505,750		$	1,495,300
Less: Accumulated amortization				(573,902	)		(516,797	)
			$	931,848		$	978,503

For the six months ended June 30, 2012 and 2011, amortization expense for intangible assets amounted to $53,548 and $51,675, respectively. For the three months ended June 30, 2012 and 2011, amortization expense for intangible assets amounted to $26,774 and $25,995, respectively. Estimated amortization expense for each of the next five years is estimated to be approximately $100,000.

11       LAND USE RIGHTS

	June 30,			December 31,
	2012			2011
	（Unaudited）
Land use rights	$	12,267,235		$	12,182,100
Less: Accumulated amortization		(1,346,759	)		(1,113,338	)
	$	10,920,476		$	11,068,762

For the six months ended June 30, 2012 and 2011, amortization expense related to land use rights was $225,868 and $217,999, respectively. For the three months ended June 30, 2012 and 2011, amortization expense related to land use rights was $112,934 and $109,677, respectively.

12       SHORT-TERM BANK BORROWINGS

	June 30,		December 31,
	2012		2011
	（Unaudited）
Bank borrowings-secured/guaranteed	$	393,534,612	$	225,969,421

Short−term bank borrowings outstanding as of June 30, 2012 carry a weighted average interest rate of 5.91% (2011: 5.32%) for bank loans in RMB; a weighted average interest rate of 4.48% (2011: 3.42%) for bank loans in USD, and have maturity terms ranging from one to twelve months and interest rates ranging from 1.57% to 7.93% (2011: 2.97% to 4.3%).

At June 30, 2012, approximately $48,835,000 included in short-term bank borrowings is payable to Shanghai Pudong Development Bank, which is secured by a one-year fixed term deposit with a carrying amount of $50,403,000. In addition, $62,393,870 payable to Bank of China is secured by Ningbo Keyuan's one year fixed term deposit and pledged deposits with a carrying amount of $63,835,423 as of June 30, 2012; $11,000,000 payable to China CITIC Bank is secured by Ningbo Keyuan’s one-year fixed term deposit with a carrying amount of $11,246,860 as of June 30, 2012; and $22,591,104 payable to China Construction Bank is secured by pledged deposits with a carrying amount of $22,825,797 as of June 30, 2012. Among the rest of the Group's short-term borrowings, $248,714,638 is guaranteed by related party and third-party entities and individuals, including $15,850,000 which is guaranteed by the Group’s Chief Executive Officer and $11,000,000 that is secured by the Group’s land, buildings and equipment with a carrying amount of $90,798,902 as of June 30, 2012.

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13       LONG-TERM BANK BORROWINGS

	June 30,			December 31,
	2012			2011
	（Unaudited）
Loan from China Construction Bank	$	15,850,000		$	15,740,000
Less: current portion		(15,850,000	)		(15,740,000	)
	$	-		$	-

As of June 30, 2012  and December 31, 2011,  the Group's long-term bank loans are secured/ guaranteed by related-party entities and Mr. Tao (Note 22), bearing interest from 7.29% to 7.74% (2011:5.76% to 6.98%) and are due on various dates through October 2012.There were no additional long-term bank borrowings in the six months ended June 30, 2012.

14       ACCRUED EXPENSES AND OTHER PAYABLES

Accrued expenses and other payables as of June 30, 2012 and December 31, 2011 consist of:

	June 30,		December 31,
	2012		2011
	（Unaudited）
Payables for the purchase of property, plant and equipment	$	24,419,569	$	24,590,217
Accrued payroll and welfare		341,775		1,061,508
Liquidated damages		2,493,326		2,493,326
Other accruals and payables		2,999,855		2,142,895
	$	30,254,525	$	30,287,946

15       STOCKHOLDERS’ EQUITY AND RELATED FINANCING AGREEMENTS

Dividends

Fixed dividends are accrued and cumulative one year from the date of the initial issuance of the Series B convertible preferred stock, are payable on a quarterly basis, and are determined as 6% of $3.75 for each share of the Series B convertible preferred stock.

On January 17, 2011, the Company’s Board of Directors approved the distribution of annual cash dividend of $0.36 per share for 2010 to be paid quarterly to its common stock stockholders at the assigned dates of record. In January 2011, certain stockholders of the Company announced the waiver of their rights to receive such cash dividends. In addition, Dragon State International Limited, the primary Series B convertible stockholder agreed to waive their rights to receive cash dividend for 2010 should they choose to convert their preferred stock before the record date. The estimated dividends to be distributed and the dividends waived are approximately $3.5 million and $17.2 million, respectively. In October 2011, the Company’s Board of Directors suspended the payment of quarterly cash dividends on the Company’s common stock while it pursues strategic alternatives including, but not limited to, taking the Company private, a merger or other transaction.

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During the year ended December 31, 2011, 66,670 shares of the Series B convertible preferred stock were converted into 66,670 shares of the Company’s common stock. In addition,1,150 Series A warrants and  500 Series B warrants were exercised, and the Company issued 1,150 shares and 500 shares of the Company’s common stock, receiving proceeds of $4,863 and $2,468, respectively. There were no dividends to be paid and accrued for the three and six months ended June 30, 2012.

Registration rights agreement

In connection with the Series A Private Placement, the Company entered into a registration rights agreement  with the Series A Investors, in which the Company agreed to file a registration statement  with the Securities and Exchange Commission (“SEC”) to register for resale of the issued common stock,  the common stock issuable upon conversion of the Series A convertible preferred stock, and the common stock underlying the Series A and Series B Warrants and the Placement agent warrants, within 30 calendar days of April 22, 2010 and to have this registration statement declared effective within 150 calendar days of April 22, 2010 or within 180 calendar days of April 22, 2010 in the event of a full review of the registration statement by the SEC. If the Company doesn’t comply with the foregoing obligations under the registration rights agreement, the Company will be required to pay liquidated damages in cash to each investor, at the rate of 1% of the applicable subscription amount for each 30 day period in which the Company is not in compliance; provided, that such liquidated damages will be capped at 10% of the subscription amount of each investor and will not apply to any registrable securities that may be sold pursuant to Rule 144 under the Securities Act if all of the conditions in Rule 144(i)(2) are satisfied at the time of the proposed sale, or are subject to an SEC comment with respect to Rule 415 promulgated under the Securities Act.

In connection with the Series B private placement, the Company entered into a registration rights agreement  with the Series B Investors, in which the Company agreed to file a registration statement with the SEC to register for resale of the common stock issuable upon the conversion of the Series B convertible preferred stock, common stock underlying the Series C and Series D Warrants, and common stock underlying the placement agent warrants, within 30 calendar days following the later of (i) the closing date of the offering or (ii) the effective date of the prior registration statement for resale of the Issued Common Stock and common stock issuable upon the conversion of the Series A Preferred Stock, Series A and Series B Warrants, and placement agent warrants issued in the Series A Private Placement (the “Prior Registration Statement”), and to have the registration statement declared effective within 150 calendar days ( or 180 calendar days of the Closing Date in the event of a full review of the registration statement by the SEC)  following the later to occur of (i) the closing date of the Series B Private Placement or (ii) the effective date of the Prior Registration Statement.  If the Group does not comply with the foregoing obligations under the registration rights agreement, the Group will be required to pay cash liquidated damages to each Series B Investor, at the rate of 1% of the applicable subscription amount for each 30 day period in which the Group are not in compliance; provided, that such liquidated damages will be capped at 10% of the subscription amount of each investor and will not apply to any registrable securities that may be sold pursuant to Rule 144 under the Securities Act if all of the conditions in Rule 144(i)(2) are satisfied at the time of the proposed sale, or are subject to an SEC comment with respect to Rule 415 promulgated under the Securities Act.

Liquidated damages are also payable in the event that the Registration Statement is not maintained continuously effective for approximately 180 days, or if trading of the Company’s common stock is suspended or if the Company’s common stock is delisted from the principal exchange on which it is traded (NASDAQ) for more than three days.

On April 1, 2011, trading of the Company’s common stock was suspended and on October 7,2011, was delisted by NASDAQ. Management determined that the registration statements were no longer effective commencing on April 7, 2011 and registerable securities in connection with the Series A and B private placements were not able to be sold pursuant to Rule 144 under the Securities Act until November 1, 2011. Accordingly, in the year ended December 31, 2011, an estimated contingent liability for $2,493,326 was accrued with a corresponding charge to earnings. There were no liquidated damages during the three and six months ended June 30, 2012.

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16       SHARE-BASED PAYMENTS

Effective June 30, 2010, the Board of Directors approved the Company’s 2010 Equity Incentive Plan ( the “Plan”). The maximum numbers of shares of common stock of the Company issuable pursuant to the Plan is 6,000,000 shares.  The Plan shall be administered by the Board; provided however, that the Board may delegate such administration to a plan Committee.

On June 30, 2010, the Company granted a total of 3,000,000 stock options to certain senior management employees with a contractual term of 5 years. The exercise price of these stock options is $4.20 per share and the grant-date fair value of these stock options amounted to $3,347,298. A total of 2,810,000 stocks options vest over three years as follow: 30% shall vest and become exercisable one year after a grant date, 40% shall vest and become exercisable two years after the grant date, and 30% shall vest and become exercisable three years after the grant date. For the remaining 190,000 stock options: 40% shall vest and become exercisable one year after the grant date and 60% shall vest and become exercisable two years after grant date.

On July 1, 2010, the Company granted a total of 80,000 stock options to two independent directors with contractual terms of 5 years. The exercise price of these stock options is $4.20 per share and the grant-date fair value of these stock options amounted to $91,349. A total of 40,000 of the options shall vest and become exercisable one year after the grant date and the remaining 40,000 of the stock options shall vest and become exercisable two years after the grant date, provided that the independent directors are re-elected for successive one year terms one year after the stock options issuance date.

On August 4, 2010, the Company granted 700,000 stock options to employees, with a contractual term of 5 years. The exercise price of these stock options was $4.50 per share and the grant-date fair value of these stock options amounted to $1,338,761. These stock options vest over three years as follows: 30% shall vest and become exercisable one year after the grant date, 40% shall vest and become exercisable two years after grant date and 30% shall vest and become exercisable three years after the grant date.

On December 29, 2010, 600,000 stock options granted to certain employees on August 4, 2010, were cancelled. As compensation for such cancellation, the Company committed to pay these employees incremental cash payments during the period through August 2013. The fair value of the committed cash payment on December 29, 2010 was approximately $400,000 and no incremental compensation costs resulted from the cancellation of these stock options. Included in accrued expenses and other payables is approximately $257,226 representing the liability related to the committed cash payment as of June 30, 2012.

No options were granted during the three and six months ended June 30, 2012.

For the three months ended June 30, 2012 and 2011, share-based compensation expense related to employee stock options charged to general and administrative expenses in the consolidated statements of operations were $406,098 and $155,188, respectively. For the six months ended June 30, 2012 and 2011, share-based compensation expenses related to employee stock options charged to general and administrative expenses in the consolidated statements of operations were $819,496 and $1,285,185, respectively.

As of June 30, 2012, there were unrecognized compensation costs related to employee stock options of approximately $1,146,910. These costs are expected to be recognized on a straight-line basis, over the remaining weighted average service period of 0.94 years.

17       INCOME TAXES

The Company and its subsidiaries file separate income tax returns.

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The United States of America

The Company is incorporated in the State of Nevada in the U.S., and is subject to the U.S. federal corporate income tax at progressive rates ranging from 15% to 35%. The state of Nevada does not impose any state corporate income tax.

British Virgin Islands

Keyuan International is incorporated in the British Virgin Islands (“BVI”). Under the current laws of British Virgin Islands, Keyuan International is not subject to tax on income or capital gains. In addition, upon payments of dividends by Keyuan International, no BVI withholding tax is imposed.

Hong Kong

Keyuan HK is incorporated in Hong Kong. Keyuan HK did not earn any income that was derived in Hong Kong for the six months ended June 30, 2012 and 2011 and therefore was not subject to Hong Kong Profits Tax. The payments of dividends by Hong Kong companies are not subject to any Hong Kong withholding tax.

PRC

Ningbo Keyuan , Ningbo Keyuan Petrochemicals, Ningbo Keyuan Synthetic Rubbers and Guangxi Keyuan are incorporated in the PRC and the applicable PRC statutory income tax rate is 25%.

Components of income (loss) before income tax expense (benefit) consist of the following jurisdictions:

	Three months ended June 30,
	2012			2011
	（Unaudited）			（Unaudited）
PRC	$	3,447,170		$	3,309,794
U.S.		(627,907	)		(3,765,742	)
Hong Kong and BVI		(886,638	)		(700,763	)
Income (loss) before income taxes	$	1,932,625		$	(1,156,711	)

	Six months ended June 30,
	2012			2011
	（Unaudited）			（Unaudited）
PRC	$	8,003,206		$	11,939,586
U.S.		(1,426,030	)		(4,704,077	)
Hong Kong and BVI		(1,660,367	)		(925,926	)
Income before income taxes	$	4,916,809		$	6,309,583

The Group’s income tax expense in the consolidated statements of operations consists of the following:

PRC:	Three months ended June 30,				Six months ended June 30,
	2012		2011		2012		2011
	（Unaudited）		（Unaudited）		（Unaudited）		(Unaudited）
Current income tax expense	$	870,277	$	665,828	$	2,009,469	$	2,917,979
Total income tax expense	$	870,277	$	665,828	$	2,009,469	$	2,917,979

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17       INCOME TAXES (CONTINUED)

Reconciliation between income tax expense (benefit) and the amounts computed by applying the PRC statutory income tax rate of 25% to income (loss) before income taxes is as follows:

	Three months ended June 30,
	2012				2011
	（Unaudited）				（Unaudited）
Income (loss) before income taxes	$	1,932,625			$	(1,156,711	)
Computed income tax expense (benefit)		483,156	25.0	%		(289.178	)	25.0	%
NOLs from overseas subsidiaries not recognized		378,636	19.6	%		1,433,636		(123.9	%)
Others		8,485	0.4	%		(478,630	)	41.4	%
Actual income tax expense	$	870,277	45.0	%	$	665,828		(57.6	%)

	Six months ended June 30,
	2011				2011
	（Unaudited）				（Unaudited）
Income before income taxes	$	4,916,809			$	6,309,583
Computed expected income tax expense		1,229,202	25.0	%		1,577,396		25.0	%
NOLs from overseas subsidiaries not recognized		771,599	15.7	%		1,799,204		28.5	%
Others		8,668	0.2	%		(458,621	)	(7.3	%)
Actual income tax expense	$	2,009,469	40.9	%	$	2,917,979		46.2	%

The PRC income tax rate has been used because the majority of the Group’s consolidated income (loss) before income taxes arises in the PRC.

According to the prevailing PRC income tax law and its relevant regulations, non-PRC-resident enterprises are levied withholding tax at 10%, unless reduced by tax treaties or similar arrangements, on dividends from their PRC-resident investees for earnings accumulated beginning on January 1, 2008, and undistributed earnings generated prior to January 1, 2008 are exempt from such withholding tax. Further, the Company’s distributions from its PRC subsidiaries are subject to U.S. federal income tax at 35%, less any applicable qualified foreign tax credits. Due to the Company’s policy of permanently reinvesting substantially all of its earnings in its PRC business, the Company has not provided for deferred income tax liabilities for U.S. federal income tax purposes on its PRC subsidiaries’ undistributed earnings of $37.8 million and $31 million as of June 30, 2012 and December 31, 2011, respectively.

The Group  files income tax returns in the United States and the PRC. The Company is subject to U.S. federal income tax examination by tax authorities for tax years beginning in 2008. According to the PRC Tax Administration and Collection Law, the statute of limitations is three years if the underpayment of taxes is due to computational errors made by the taxpayer or the withholding agent. The statute of limitations is extended to five years under special circumstances where the underpayment of taxes is more than RMB100,000 ($15,000). In the case of transfer pricing issues, the statute of limitation is ten years. There is no statute of limitation in the case of tax evasion. The PRC tax returns for the Company’s PRC subsidiaries are open to examination by the PRC state and local tax authorities for the tax years beginning in 2008.

18       CONTINGENCY

In the normal course of business, the Group is subject to loss contingencies, such as legal proceedings and claims arising out of its business. An accrual for a loss contingency is recognized when it is probable that a liability has been incurred and the amount of loss can be reasonably estimated.

In connection with the shipping of finished products, inaccurate product information has been provided to the PRC Port authority. In addition, through June 30, 2011, Ningbo Keyuan failed to withhold income tax of approximately $50,000 from payments to certain external service providers and employees. In consultation with PRC legal counsel, management has evaluated the contingencies associated with the provision of inaccurate information and expects that the penalty, if any, will not be significant and will not have a material impact on the consolidated financial statements. 

In addition, the Group had outstanding Letters of Credit as of June 30, 2012 of $177,135,878.

77

19       EARNINGS (LOSS) PER SHARE

The following table sets forth the computation of basic net income (loss) per share:

	For the three months ended					For the six months ended
	June 30		June 30			June 30		June 30
	2012		2011			2012		2011
	（Unaudited）		（Unaudited）			（Unaudited）		（Unaudited）
Net income (loss) attribute to Keyuan
Petrochemicals, Inc. stockholders	$	1,062,348	$	(1,822,539	)	$	2,907,340	$	3,391,604
Less: Dividend attributable to preferred
stockholders		-		306,247			-		602,507
Net income (loss) attributable to Keyuan Petrochemical Inc. common shareholders	$	1,062,348	$	(2,128,786	)	$	2,907,340	$	2,789,097
Weighted average common shares
(Denominator for basic income per share)		57,646,160		57,579,239			57,646,160		57,578,896
Effect of diluted securities:
- Series A convertible preferred stock		-		-			-		-
- Series B convertible preferred stock		5,333,340		-			5,333,340		5,400,010
- Series M convertible preferred stock		-		-			-		-
- Warrants		-		-			-		390,647
- Options		-		-			-		467,429
Weighted average common shares
(denominator for diluted income per share)		62,979,500		57,579,239			62,979,500		63,836,982
Basic net income (loss) per share	$	0.02	$	(0.04	)	$	0.05	$	0.05
Diluted net income (loss) per share	$	0.02	$	(0.04	)	$	0.05	$	0.05

20       FAIR VALUE MEASUREMENTS

The Company did not have any assets and liabilities that are measured at fair value on a recurring basis as of June 30, 2012.

The fair values of cash, pledged bank deposits, bills receivable, accounts receivable, consumption tax refund receivable, short-term bank borrowings, bills payable, current portion of long-term borrowings, and accounts payable approximate their respective carrying amounts due to their short-term nature. Amounts due from/to related parties are not practicable to estimate due to the related party nature of the underlying transactions. The Group’s long-term debt, secured by various assets, bears interest at rates commensurate with market rates, and therefore management believes carrying values approximate fair values.

21       SIGNIFICANT CONCENTRATIONS AND RISKS

As of June 30, 2012 and December 31, 2011, the Group held cash and pledged bank deposits in financial institutions of approximately $249,695,663 and $163,591,879, respectively. They were primarily held in major financial institutions located in mainland China and the Hong Kong Special Administrative Region. Management believes that these financial institutions have high credit ratings.

78

Sales to major customers, which individually exceeded 4% of the Group’s total net revenues, are as follows:

Three months ended June 30, 2012						Three months ended June 30, 2011
	（Unaudited）						（Unaudited）
Largest	Amount of		% Total			Largest	Amount of		% Total
Customers	Sales		Sales			Customers	Sales		Sales
Customer A	$	40,695,112		21	%	Customer A	$	35,607,254		24	%
Customer B		12,876,871		7	%	Customer D		14,540,619		10	%
Customer C		12,615,883		7	%	Customer  I		14,278,678		10	%
Customer D		11,234,274		6	%	Customer J		13,517,410		9	%
Customer E		9,820,712		5	%	Customer L		6,314,579		4	%
Total	$	87,242,852		47	%	Total	$	84,258,540		57	%

Six months ended June 30, 2012						Six months ended June 30, 2011
	（Unaudited）						（Unaudited）
Largest	Amount of		% Total			Largest	Amount of		% Total
Customers	Sales		Sales			Customers	Sales		Sales
Customer A	$	52,843,930		14	%	Customer A	$	58,150,912		20	%
Customer H		24,777,298		7	%	Customer J		42,284,552		14	%
Customer D		21,659,715		6	%	Customer D		28,430,114		10	%
Customer G		17,177,359		4	%	Customer I		14,278,678		5	%
Customer F		15,014,302		4	%	Customer K		13,176,798		4	%
Total	$	131,472,604		36	%	Total	$	156,321,054		53	%

The Group currently buys a majority of its heavy oil, an important component of its products, from three suppliers. Although there are a limited number of suppliers of the particular heavy oil, management believes that other suppliers could provide similar heavy oil on comparable terms. A change in suppliers, however, could cause a delay in manufacturing and a possible loss of sales, which would affect operating results adversely. Purchases (net of VAT) from the largest three suppliers for three months ended June 30, 2012 and 2011 were $155,361,871 and $153,035,430, respectively. These purchases represented 83% of all of the Company’s purchases for each of the three months ended June 30, 2012 and 2011. Purchases (net of VAT) from the largest three suppliers for the six months ended June 30, 2012 and 2011 were $275,123,617 and $231,995,919, respectively. These purchases represented 80% and 77%, respectively, of all of the Group’s purchases for the six months ended June 30, 2012 and 2011.

The Group’s operations are carried out in the PRC. Accordingly, the Group’s business, financial condition and results of operations may be influenced by the political, economic and legal environments in the PRC as well as by the general state of the PRC’s economy. The business may be influenced by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency conversion and remittance abroad, and rates and methods of taxation, among other things.

22       RELATED PARTY TRANSACTIONS AND RELATIONSHIPS AND TRANSACTIONS WITH CERTAIN OTHER PARTIES

(1)      Related Party Transactions

The Company considers all transactions with the following parties to be related party transactions.

Name of parties	Relationship
Mr. Chunfeng Tao	Majority stockholder
Mr. Jicun Wang	Principal stockholder
Mr. Peijun Chen	Principal stockholder
Ms. Sumei Chen	Member of the Company’s Board of Supervisors and spouse of Mr. Wang
Ms. Yushui Huang	Vice President of Administration, Ningbo Keyuan
Mr. Weifeng Xue	Vice President of Accounting, Ningbo Keyuan through  August 2011

79

Mr. Hengfeng Shou	Vice President of Sales, Ningbo Keyuan  Petrochemical
Ningbo Kewei Investment Co., Ltd.	A company controlled by Mr. Tao through September 2011
(Ningbo Kewei)
Ningbo Pacific Ocean Shipping Co., Ltd	100% ownership by Mr. Wang
(Ningbo Pacific)
Ningbo Hengfa Metal Product Co., Ltd	100% ownership by Mr. Chen
(Ningbo Hengfa, former name "Ningbo Tenglong")
Shandong Tengda Stainless Steel Co., Ltd	100% ownership by Mr. Chen
(Shandong Tengda)
Ningbo Xinhe Logistic Co., Ltd
(Ningbo Xinhe)	10% ownership by Ms. Huang
Ningbo Kunde Petrochemical Co, Ltd.     (Ningbo Kunde)	Mr. Tao’s mother was a 65% nominee shareholder for Mr. Hu, a third party through September 2011, and included in transactions with certain other parties beginning October 1, 2011.
Ningbo Jiangdong Jihe Construction Materials	Controlled by Mr. Xue’s Brother-in-law
Store (Jiangdong Jihe)
Ningbo Wanze Chemical Co., Ltd	Mr. Tao’s sister-in-law is the legal representative
(Ningbo Wanze)
Ningbo Zhenhai Jinchi Petroleum Chemical	Controlled by Mr. Shou
Co., Ltd (Zhenhai Jinchi)

Related party transactions and amounts outstanding with the related parties as of and for the three and six months ended June 30, 2012 and 2011 are summarized as follows:

	Three Months ended June 30,
	2012		2011
	（Unaudited）		（Unaudited）
Sales of products (a)	$	-	$	35,607,658
Purchase of raw material (b)	$	-	$	42,920
Purchase of transportation services (c)	$	1,104,716	$	316,506
Credit line of guarantee provision for bank borrowings (d)	$	-	$	-
Loan guarantee fees (d)	$	113,084	$	419,665
Short-term financing from related parties (e)	$	-	$	5,406,139
Short-term financing to related parties (e)	$	-	$	5,535,234

	Six Months ended June 30,
	2012		2011
	（Unaudited）		（Unaudited）
Sales of products (a)	$	-	$	58,217,477
Purchase of raw material (b)	$	-	$	7,066,055
Purchase of transportation services (c)	$	1,665,831	$	927,879
Credit line of guarantee provision for bank borrowings (d)	$	-	$	-
Loan guarantee fees (d)	$	203,984	$	756,919
Short-term financing from related parties (e)	$	-	$	13,144,234
Short-term financing to related parties (e)	$	-	$	13,144,234

	June 30,		December 31,
	2012		2011
	（Unaudited）
Amounts due from related parties (f)	$	39,625	$	39,350
Amounts due to related parties (g)	$	768,313	$	621,077

(a)       During the three months ended June 30, 2011, the Group sold finished products of $35,607,658 to Ningbo Kunde. During the six months ended June 30, 2011, the Group sold finished products of $58,150,912 to Ningbo Kunde. During the six months ended June 30, 2012 and 2011, the Group sold finished products of nil and $66,565 to Zhenhai Jinchi, respectively. Amounts received in the advance from Kunde were $3,077,199 as of June 30, 2011, and are included in the advances from customers on the consolidated balance sheet.

80

(b)       The Group purchased raw materials of $42,920 from Ningbo Kunde during the three months ended June 30, 2011. The Group purchased raw materials of $7,066,055 from Ningbo Kunde during the six months ended June 30, 2011.

(c)       The Group purchased transportation services of $1,104,716 and $316,506 from Ningbo Xinhe during the three months ended June 30, 2012 and 2011, respectively. The Group purchased transportation services of $1,665,831 and $927,879 from Ningbo Xinhe during the six months ended June 30, 2012 and 2011, respectively, and amounts owed to Ningbo Xinhe as of June 30, 2012 in respect of these purchase transactions were $768,313.

(d)       Guarantees for Bank Loans

There were no guarantees for Bank Loans provided during the three and six months ended June 30, 2012 and 2011.

Bank Loans guaranteed as of June 30, 2012 and December 31, 2011 as follows:

	Bank loan guaranteed as of
	June 30		December 31
	2012		2011
	（Unaudited）
Mr. Tao	$	15,850,000	$	34,628,000
Jincun Wang and Chen		1,902,000		1,983,523
Ningbo Kewei		-		-
Ningbo Pacific		18,318,901		27,918,200
Ningbo Hengfa		14,899,000		14,795,600
Shandong Tengda		951,000		944,400
Total	$	51,920,901	$	80,269,723

Beginning in 2011 loan guarantee fees of 0.3% the loan principal guaranteed are to be paid annually. During the three months ended June 30, 2012, loan guarantee fees were $32,255 and $80,829 for Ningbo Hengfa and Ningbo Pacific, respectively. In the three months ended June 30, 2011, loan guarantee fees were $73,644 and $178,367 for Ningbo Hengfa and Ningbo Pacific, respectively. During the six months ended June 30, 2012, loan guarantee fees were $65,022 and $138,961 for Ningbo Hengfa and Ningbo Pacific , respectively. In the six months ended June 30, 2011, loan guarantee fees were $150,116 and $301,247 for Ningbo Hengfa and Ningbo Pacific, respectively.

81

(e)       Short-term financing transactions with related parties

	Three Months Ended June 30
	（Unaudited）
	2012						2011
	From(i)		To(i)		Balance(ii)		From(i)		To(i)			Balance(ii)
Ningbo Kewei	$	-	$	-	$	-	$	5,358,850	$	(5,358,850	)	$	-
Ningbo Kunde		-		-		-		32,550		(32,550	)		-
Jiangdong Jihe		-		-		-		14,739		143,834			-
	$	-	$	-	$	-	$	5,406,139	$	(5,247,566	)	$	-

	Six Months Ended June 30
	（Unaudited）
	2012						2011
	From(i)		To(i)		Balance(ii)		From(i)		To(i)			Balance(ii)
Ningbo Kewei	$	-	$	-	$	-	$	5,358,850	$	(5,358,850	)	$	-
Ningbo Kunde		-		-		-		5,358,850		(5,358,850	)		-
Jiangdong Jihe		-		-		-		2,426,534		(2,426,534	)
	$	-	$	-	$	-	$	13,144,234	$	13,144,234	)	$	-

(i) Transactions during the year are translated at average exchange rates.

(ii) Balances at year end are translated at the balance sheet exchange rate.

(f)        Amount due from related parties consist of the following:

	June 30,		December 31,
	2012		2011
	（Unaudited）
Related Party
Mr. Tao	$	39,625	$	39,350

Amounts due from Mr. Tao represent advances made for business expenses which are unsecured, interest free and due on demand.

(g)       Amount due to related parties consists of the following:

	June 30,		December 31,
	2012		2011
	（Unaudited）
Related Party
Ninbo Xinhe	$	768,313	$	621,077

Amount due to related parties represent balances due for raw materials purchase and freight.

(2)       Relationships and transactions with certain other parties

The group has the following relationships and transactions with certain other parties:

Name of parties	Relationship
Ningbo Litong Petrochemical Co., Ltd	Former 12.75% nominee shareholder of Ningbo Keyuan
(Ningbo Litong)
Ningbo Jiangdong Haikai Construction	Controlled by cousin of Mr. Weifeng Xue, Vice
Materials Store (Jiangdong Haikai)	President of Accounting through August 2011

82

Ningbo Jiangdong Deze Chemical Co., Ltd (Jiangdong Deze)	Controlled by cousin of Mr. Weifeng Xue, Vice President of Accounting through August 2011
Ningbo Anqi Petrochemical Co., Ltd	Controlled by cousin of Mr. Weifeng Xue, Vice
(Ningbo Anqi)	President of Accounting through August 2011
Ningbo Kewei Investment Co., Ltd (Ningbo Kewei)	A related party through September 2011 when control transferred, and included in transactions with certain other parties beginning October 2011.
Ningbo Kunde Petrochemical Co., Ltd (Ningbo Kunde)	A related party through September 2011 when control transferred, and included in transactions with certain other parties beginning October 1, 2011.

Transactions and amounts outstanding with these parties for the three and six months ended June 30, 2012 and 2011, are summarized as follows:

	Three Months Ended June 30, （Unaudited）
	2012		2011
Sales of products (h)	$	47,734,203	$	-
Purchase of raw material (i)	$	21,912,149	$	9,536,282
Credit line of guarantee for bank borrowings (j)	$	141,062,000	$	-
Loan guarantee fees(j)	$	382,116	$	302,674
Short-term financing from theses parties (k)	$	-	$	12,862,621
Short-term financing to these parties (k)	$	-	$	(7,142,275	)
Amounts due from these parties	$	15,773,715	$	-
Amounts due to these parties	$	2,690,514	$	17,851

	Six Months Ended June 30, （Unaudited）
	2012		2011
Sales of products (h)	$	70,021,289	$	772,762
Purchase of raw material (i)	$	22,358,020	$	9,536,282
Credit line of guarantee for bank borrowings (j)	$	161,687,800	$	-
Loan guarantee fees(j)	$	742,303	$	505,626
Short-term financing from theses parties (k)	$	-	$	47,612,617
Short-term financing to these parties (k)	$	-	$	(45,374,149	)
Amounts due from these parties	$	15,773,715	$	-
Amounts due to these parties	$	2,690,514	$	17,851

(h)       During the three months ended June 30, 2012 and 2011, the Group sold finished products of $7,049,811 and nil to Ningbo Litong. During the three months ended June 30, 2012, the Group sold finished products of $40,684,392 to Ningbo Kunde. During the six months ended June 30, 2012 and 2011, the Group sold finished products of $17,177,359 and $772,762 to Ningbo Litong. During the six months ended June 30, 2012, the Group sold finished products of $52,843,930 to Ningbo Kunde. Amounts received in advance from Litong were $11,887,500 and $17,851, respectively as of June 30, 2012 and 2011. Amounts received in the advances from Kunde were $596,530 as of June 30, 2012. They are included in Advances from Customers on the consolidated balance sheet.

(i)        During the three months ended June 30, 2012 and 2011, the Group purchased raw materials of $8,778,079 and $9,536,282, respectively from Ningbo Litong. During the three months ended June 30, 2012, the Group purchased raw material of $13,134,070 from Ningbo Kunde. During the six months ended June 30, 2012 and 2011, the Group purchased raw materials of $9,223,950 and $9,536,282, respectively from Ningbo Litong. During the six months ended June 30, 2012, the Group purchased raw materials of $13,134,070 from Ningbo Kunde.

83

(j)        Guarantees for Bank Loans

	Guarantee provided during				Guarantee provided during
	the three months ended June 30				the six months ended June 30
	2012		2011		2012		2011
	（Unaudited）		（Unaudited）		（Unaudited）		（Unaudited）
Ningbo Litong	$	30,000,000	$	-	$	50,625,800	$	-
Ningbo Kewei		111,062,000		-		111,062,000		-
	$	141,062,000	$	-	$	161,687,800	$	-

	Bank loans guaranteed As of
	June 30		December 31
	2012		2011
	（Unaudited）
Ningbo Litong	$	55,586,521	$	61,632,077
Ningbo  Keiwei	$	43,524,897	$	29,700,067

Beginning in 2011 loan guarantee fees of 0.3% the loan principal guaranteed after January 1, 2011 are to be paid quarterly. In the three months ended June 30, 2012, loan guarantee fees were $179,698 and $202,419 for Ningbo Litong and Ningbo Kewei, respectively. In the three months ended June 30, 2011, loan guarantee fees were $302,674 and $167,654 for Ningbo Litong and Ningbo Kewei, respectively. In the six months ended June 30,2012, loan guarantee fees were $374,263 and $368,040 for Ningbo Litong and Ningbo Kewei, respectively. In the six months ended June 30, 2011, loan guarantee fees were $505,626 and $305,556 for Ningbo Litong and Ningbo Kewei, respectively.

(k)       Short-term financing transactions

Historically the Group and its theses parties have provided each other with short-term financing, typically, in the form of cash, bills receivable and bills payable.

	Three Months Ended June 30（Unaudited）
	2012						2011
	From(i)		To(i)		Balance(ii)		From(i)		To(i)			Balance(ii)
Ningbo Litong	$	-	$	-	$	-	$	12,862,621	$	(7,142,275	)	$	-
Jiangdong Deze		-		-		-		-		-			-
Ningbo Anqi		-		-		-		-		-			-
	$	-	$	-	$	-	$	12,862,621	$	(7,142,275	)	$	-

	Six Months Ended June 30（Unaudited）
	2012						2011
	From(i)		To(i)		Balance(ii)		From(i)		To(i)			Balance(ii)
Ningbo Litong	$	-	$	-	$	-	$	38,142,763	$	(35,904,295	)	$	-
Jiangdong Deze		-		-		-		2,602,870		(2,602,870	)		-
Ningbo Anqi		-		-		-		6,866,984		(6,866,984	)		-
	$	-	$	-	$	-	$	47,612,617	$	(45,374,149	)	$	-

(i) Transactions during the year are translated at average exchange rates.

(ii) Balances at year end are translated at the balance sheet exchange rate.

84

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Shareholders

Keyuan Petrochemicals, Inc.

We have audited the accompanying consolidated balance sheets of Keyuan Petrochemicals, Inc. and subsidiaries (the “Company”) as of December 31, 2011 and 2010, and the related consolidated statements of operations, stockholders’ equity and comprehensive income and cash flows for each of the two years in the period ended December 31, 2011.  These consolidated financial statements are the responsibility of the Company’s management.  Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.  An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.  We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Keyuan Petrochemicals, Inc. and subsidiaries as of December 31, 2011 and 2010, and the results of their operations and their cash flows for each of the two years in the period ended December 31, 2011, in conformity with accounting principles generally accepted in the United States of America.

Unusually important events occurred in 2011.  These events, management’s evaluation, and their potential effects are described in Note 1(b) to the consolidated financial statements.

The Company has significant transactions and relationships with related parties and certain other parties which are described in Note 24 to the consolidated financial statements.  It is possible that the terms of these transactions may not be the same as those that would result from transactions among unrelated parties.

/s/ GHP HORWATH, P.C.

Denver, Colorado

April 12, 2012

F-1

KEYUAN PETROCHEMICALS, INC. AND SUBSIDIAIRES

CONSOLIDATED BALANCE SHEETS

			As of December 31
	Note		2011		2010
ASSETS
Current assets:
Cash		2(d)	$	7,325,017	$	29,336,241
Pledged bank deposits		2(e)		156,318,066		98,053,146
Bills receivable		2(j)		1,574,000		9,194,513
Accounts receivable		12		2,226,288		-
Inventories		3		38,945,968		86,831,556
Prepayments to suppliers		4		15,781,294		14,071,219
Income tax receivable				-		-
Consumption tax refund receivable		5		55,809,560		39,144,688
Amounts due from related parties		24		39,350		5,332,193
Other current assets		6		45,978,428		28,608,833
Deferred income tax assets		20		37,348		469,914
Total current assets				324,035,319		311,042,303
Property, plant and equipment, net		7		190,867,621		129,781,304
Intangible assets, net		8		978,503		1,045,466
Land use rights		9		11,068,762		11,099,875
VAT recoverable		6		2,893,635		-
Total assets			$	529,843,840	$	452,968,948
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Short-term bank borrowings		10	$	225,969,421	$	135,768,634
Bills payable		2(j)		63,550,250		60,224,900
Current portion of long-term bank borrowings		11		15,740,000		17,445,500
Accounts payable				97,588,137		92,225,936
Advances from customers		12		7,821,623		10,479,217
Accrued expenses and other payables		13		30,287,946		18,205,110
Income taxes payable		21		186,326		10,699,778
Dividends payable				2,381,759		234,393
Amounts due to related parties		25		621,077		115,535
Total current liabilities				444,146,539		345,399,003
Long-term bank borrowings		11		-		15,170,000
Total liabilities				444,146,539		360,569,003

Series B convertible preferred stock:     Par value: $0.001; Authorized: 8,000,000 shares 6% cumulative dividend, Issued and outstanding: 5,333,340 shares in 2011 and 5,400,010 in 2010, Liquidation preference of $20,000,000 in 2011 and 20,250,000 in 2010.	14		16,451,552		16,701,565
Commitments and contingencies	19		-		-
Stockholders’ equity:
Common stock:
Par value:$0.001; Authorized: 100,000,000 shares; Issued and outstanding: 57,646,160 shares in 2011 and 57,577,840 shares in 2010	15		57,646		57,578
Additional paid-in capital			49,198,278		47,012,061
Statutory reserve	18		3,744,304		3,075,356
Accumulated other comprehensive income			6,545,811		3,310,416
Retained earnings			9,699,710		22,242,969
Total stockholders’ equity			69,245,749		75,698,380
Total liabilities and stockholders' equity		$	529,843,840	$	452,968,948

See accompanying notes to the consolidated financial statements.

F-2

KEYUAN PETROCHEMICALS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

			Year Ended
	Note		December 31, 2011			December 31, 2010
Sales
Third parties			$	533,913,328		$	446,891,336
Related parties		24		92,771,589			111,860,732
Total Sales				626,684,917			558,752,069
Cost of sales
Third parties				504,871,603			388,846,702
Related parties		24		99,797,931			102,076,731
Cost of sales				604,669,534			490,923,433
Gross profit				22,015,383			67,828,636
Selling expenses				1,240,709			623,652
General and administrative expenses				17,858,807			9,517,814
Total operating expenses				19,099,516			10,141,466
Income from operations				2,915,867			57,687,170
Other income (expense):
Interest income				4,320,393			556,159
Interest expense				(15,796,772	)		(9,945,389	)
Liquidated damages expense				(2,493,326	)		-
Foreign exchange gain, net				3,661,599			2,711,984
Other income (expense), net				3,102,661			(396,797	)
Total other expense, net				(7,205,445	)		(7,074,043	)
Loss(Income) before income taxes				(4,289,578	)		50,613,127
Income tax expense		20		2,851,718			13,492,704
Net (loss)income attributable to Keyuan
Petrochemicals Inc. stockholders				(7,141,296	)		37,120,423
Dividends to Series A convertible
Preferred stockholders		14		-			831,032
Dividends to Series B convertible
Preferred stockholders		14		1,205,014			306,247
Net (loss)income attributable to Keyuan
Petrochemicals Inc. common stockholders			$	(8,346,310	)	$	35,983,144
(Loss)earnings per share:
Attributable to common stock:
- Basic		21	$	(0.14	)	$	0.71
- Diluted		21	$	(0.14	)	$	0.66
Weighted average number of shares of common stock
used in calculation
Basic		21		57,585,040			50,929,526
Diluted		21		57,585,040			56,057,994

See accompanying notes to the consolidated financial statements.

F-3

KEYUAN PETROCHEMICALS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

AND COMPREHENSIVE INCOME (LOSS)

YEARS ENDED DECEMBER 31, 2011 AND 2010

	Series M convertible preferred stock						Common stock						Additional paid-in capital			Statutory reserve		Accumulated other comprehensive income		Retained earnings (deficit)			Total stockholders’ equity			Comprehensive income (loss)
	Number of shares			$			Number of shares			$			$			$		$		$			$			$
Balance as of January 1, 2010		47,658			48			-			-			20,229,949			-		1,062,781		(10,664,819	)		10,627,959
Effect of reverse recapitalization		-			-			5,696,800			5,697			(5,697	)		-		-		-			-
Repurchase and cancellation of
Common Stock		-			-			(3,264,000	)		(3,264	)		(396,736	)		-		-		-			(400,000	)
Fixed dividends for series A
Convertible preferred stockholders		-			-			-			-			-			-		-		(831,032	)		(831,032	)
Fixed dividends for series B
Convertible preferred stockholders																					(306,247	)		(306,247	)
Conversion of series A convertible
Preferred stock into common stock		-			-			6,738,336			6,738			21,011,405			-		-		-			21,018,143
Conversion of series M convertible
Preferred stock into common stock		(47,658	)		(48	)		47,658,000			47,658			(47,610	)		-		-		-			-
Issuance of common stock on April 22.2010 and May 18, 2010
Net of issuance costs of $221,661		-			-			748,704			749			1,598,390			-		-		-			1,599,139
Issuance of series A and series B
Warrants, net of issuance costs of $45,584		-			-			-			-			345,126			-		-		-			345,126
Issuance of series C and series D
Warrants, net of issuance of costs of $170,739		-			-			-			-			1,713,326			-		-		-			1,713,326
Issuance of warrants to placement
Agent In connection with series A Private placement		-			-			-			-			349,683			-		-		-			349,683
Issuance of warrants to placement
Agent in connection with series B Private placement		-			-			-			-			534,341			-		-		-			534,341
Share-based compensation		-			-			-			-			1,459,884			-		-		-			1,459,884
Capital contribution from stockholders		-			-			-			-			220,000			-		-		-			220,000
Net income		-			-			-			-			-			-		-		37,120,423			37,120,423			37,120,423
Statutory Reserve		-			-			-			-			-			3,075,356		-		(3,075,356	)		-

F-4

Other comprehensive income
Foreign currency translation gain	-	-	-	-	-	-	2,247,635	-		2,247,635		2,247,635
Balance as of December 31, 2010	-	-	57,577,840	57,578	47,012,061	3,075,356	3,310,416	22,242,969		75,698,380
Dividends declared for common Stockholders	-	-	-	-	-	-	-	(3,528,000	)	(3,528,000	)
Fixed dividends for series B
Convertible preferred stockholders	-	-	-	-	-	-	-	(1,205,014	)	(1,205,014	)
Exercise of series A warrants	-	-	1,150	1	4,863	-	-	-		4,863
Exercise of series B warrants	-	-	500	1	2,468	-	-	-		2.468
Series B conversion	-	-	66,670	66	249,947	-	-	-		250,013
Share-based compensation	-	-	-	-	1,928,939	-	-	-		1,928,940
Net loss	-	-	-	-	-	-	-	(7,141,296	)	(7,141,296	)		(7,141,296	)
Statutory Reserve	-	-	-	-	-	668,948	-	(668,948	)	-
Other comprehensive income -	-
Foreign currency translation gain	-	-	-	-	-	-	3,235,395	-		3,235,395			3,235,395
Balance as of December 31, 2011	-	-	57,646,160	57,646	49,198,278	3,744,304	6,545,811	(9,699,710	)	69,245,749			(3,905,901	)

See accompanying notes to the consolidated financial statements.

F-5

KEYUAN PETROCHEMICALS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

	Year Ended
	December 31, 2011			December 31, 2010
Cash flows from operating activities:
Net (loss)income	$	(7,141,296	)	$	37,120,423
Adjustments to reconcile net (loss)income to net cash
provided by (used in) operating activities:
Liquidated damages		2,493,326			-
Loss on disposal of property, plant and equipment		3,546			-
Depreciation		8,290,416			7,909,613
Amortization		104,598			99,859
Land use rights amortization		441,234			274,589
Deferred income tax expense		443,243			3,058,129
Share-based compensation expense		2,063,394			1,515,907
Changes in operating assets and liabilities:
Bills receivable		7,842,501			(8,562,744	)
Accounts receivable		(2,191,777	)		-
Inventories		50,355,316			(53,641,596	)
Prepayments to suppliers		1,431,638			(11,295,931	)
Consumption tax refund receivable		(14,958,506	)		(38,174,457	)
Other current assets		(18,500,179	)		2,086,940
Accounts payable		4,198,683			58,179,877
Advances from customers		(3,121,937	)		(6,357,494	)
Income taxes payable		(10,746,276	)		10,434,575
Accrued expenses and other payables		(19,276,573	)		(228,610	)
Net cash provided by operating activities		1,731,351			2,419,080
Cash flows from investing activities:
Purchase of land use rights		-			(5,789,302	)
Purchase of property, plant and equipment,		(42,323,976	)		(12,706,733	)
Proceeds from disposal of property, plant and equipment		10,639			-
Net cash used in investing activities		(42,313,337	)		(18,496,035	)
Cash flows from financing activities:
Pledged bank deposits used for bank borrowings		(53,734,552	)		(89,559,311	)
Proceeds from short-term bank borrowings		258,412,312			176,683,746
Repayment of short-term bank borrowings		(170,771,129	)		(127,866,341	)
Proceeds from bank notes		114,399,220			77,816,440
Repayment of bank notes		(113,353,240	)		(32,919,357	)
Repayments of long-term bank borrowings		(17,820,400	)		(13,610,480	)
Short-term financing from related parties		13,303,054			30,839,377
Short-term financing to related parties		(13,188,178	)		(30,949,048	)
Short-term financing to/from Litong (Note24)		2,265,533			(961,610	)
Proceeds from warrant exercises		7,332			220,000
Proceeds from Series A Private Placement, net		-			23,312,091
Proceeds from Series B Private Placement, net		-			18,949,232
Dividends paid		(2,585,647	)		(902,886	)
Net cash provided by financing activities		16,934,305			30,651,853
Effect of foreign currency exchange rate changes on cash		1,636,457			730,688
Net (decrease) increase in cash		(22,011,224	)		15,305,586
Cash at beginning of year		29,336,241			14,030,655
Cash at end of year	$	7,325,017		$	29,336,241
Supplemental disclosure of cash flow information:
Income taxes paid	$	13,154,751		$	-
Interest paid, net of capitalized interest		15,796,772			9,945,389
Non-cash investing and financing activities:		-			-
Payable for purchase of property, plant and equipment (net of VAT)		21,307,495			45,374,656
Reclassification of input VAT from property, plant and equipment to
other current assets		-			13,006,984

See accompanying notes to the consolidated financial statements.

F-6

1        ORGANIZATION,NATURE OF BUSINESS AND RECENT EVENTS

(a)      Organization and Nature of business

Keyuan Petrochemicals, Inc. (the “Company”) was incorporated in the State of Texas on May 4, 2004 in the former name of Silver Pearl Enterprises, Inc. The Company, through its wholly-owned subsidiary, Keyuan International Group Limited (“Keyuan International”) and its indirect subsidiaries, Keyuan Group Limited(“Keyuan HK”),Ningbo Keyuan Plastics Co., Ltd. (“Ningbo Keyuan”) and Ningbo Keyuan Petrochemicals Co., Ltd.(Ningbo Keyuan Petrochemicals), (the Company and its subsidiaries are collectively referred herein below as “the Group”) are engaged in the manufacture and sale of petrochemical products in the People’s Republic of China (“PRC”).

On April 22, 2010, Silver Pearl Enterprises, Inc., a U.S. public shell company (now known as the Company) entered into a share exchange agreement (the “Exchange Agreement”) with Keyuan International, a privately held investment holding company organized on June 11, 2009 under the laws of the British Virgin Islands, Delight Reward Limited (“Delight Reward”), the sole stockholder of Keyuan International and Denise D. Smith (“Smith”), the Company’s former principal stockholder. Pursuant to the terms of the Exchange Agreement, Delight Reward transferred to the Company all of its shares of Keyuan International in exchange for 47,658 shares of the Company’s Series M convertible preferred stock (the “Share Exchange”). On an “as-converted” basis, the Series M convertible preferred stock presented approximately 95% of the Company’s outstanding common stock. The Series M convertible preferred stock voted with the common stock on an “as converted basis” and was converted into 47,658,000 shares of the Company’s common stock on December 28, 2010. As a result of the Share Exchange, Keyuan International became a wholly-owned subsidiary of the Company and Delight Reward became the controlling stockholder of the Company. On April 22, 2010, the Company repurchased and cancelled 3,264,000 shares of common stock from Smith for cash consideration of $400,000. The consideration paid in excess of par value of the repurchased shares amounting to $396,736 was recorded as additional paid-in capital in the consolidated statement of stockholders’ equity and comprehensive income (loss). After giving effect to the repurchase and conversion of the Series M Preferred Stock, the former stockholders of Keyuan International currently held 95.2% of the Company’s common stock.

The Share Exchange has been accounted for as a reverse acquisition and recapitalization whereby Keyuan International is deemed to be the accounting acquirer (and the legal acquiree). Accordingly, Keyuan International’s historical financial statements for the periods prior to the reverse acquisition became those of the Company retroactively restated for, and giving effect to, the number of shares received in the Share Exchange. The assets and liabilities, and revenues and expenses of the Company are included in the accompanying financial statements effective from April 22, 2010. The total net liabilities assumed by Keyuan International as of the date of the Share Exchange were not significant. The Company is deemed to be a continuation of the business of Keyuan International.

On May 12, 2010, the Company formed a business combination-related shell company under the laws of the State of Nevada called Keyuan Petrochemicals, Inc. and on the same day, acquired 100% of the entity’s stock for cash. As such, the entity became the Company’s wholly-owned subsidiary (the “Merger Subsidiary”).

Effective as of May 17, 2010, the Merger Subsidiary was merged with and into the Company. As a result of the merger, the Company’s name was changed to “Keyuan Petrochemicals, Inc.”. Prior to the merger, the Merger Subsidiary had no liabilities and nominal assets and, as a result of the merger, the separate existence of the merger subsidiary ceased. The Company is the surviving corporation in the merger and, except for the name change, there was no change in the Company’s directors, officers, capital structure or business.

 Keyuan HK was established in Hong Kong in 2009, and is a holding company with no significant assets or operations. Ningbo Keyuan was established in April 2007 as a wholly foreign-owned enterprise in Ningbo, PRC.

F-7

On November 16, 2009 Keyuan HK acquired 100% of Ningbo Keyuan. At the time of the acquisition, Keyuan HK and Ningbo Keyuan were controlled by Mr. Tao Chunfeng, the Company’s Chief Executive Officer. Accordingly, the acquisition was accounted for as a common control transaction in a manner similar to a pooling of interests.

On August 8, 2010, Keyuan HK established Ningbo Keyuan Petrochemicals, a wholly-owned subsidiary in the PRC.

(b)      Other Events

In 2011, Company’s former auditor, KPMG, LLP (“KPMG”), brought certain issues to the Company’s Audit Committee’s attention through a March 28, 2011 memorandum and an April 18, 2011 letter (collectively, the “KPMG Memoranda”). KPMG requested that the Company’s Audit Committee conduct an independent investigation (the “Independent Investigation”) into those issues. On March31, 2011, the Audit Committee elected to commence such Independent Investigation and engaged the services of independent counsel, Pillsbury Winthrop Shaw Pittman LLP (“Pillsbury”), which in turn engaged the services of Deloitte Financial Advisory Services LLP (“Deloitte”), as independent forensic accountants, and King & Wood, as Audit Committee counsel in the PRC. Pillsbury, Deloitte and King & Wood are collectively referred to herein as the “Investigation Team”. On September 28, 2011, the Independent Investigation was completed. The Independent Investigation identified possible violations of PRC laws and U.S. Securities laws, including the maintenance of an off-balance sheet cash account that was used primarily to pay service providers and other Company-related expenses. Total activity in the off-balance sheet cash account amounted to approximately$800,000 through December 31, 2010, with a net income statement effect of approximately $12,000, and $400,000 for the period from January 1, 2011 to March 31, 2011, with a net income statement effect of approximately $192,000, at which time the Company ceased its use. The Independent Investigation identified certain other issues that could result in potential violations of PRC or U.S. laws. The Company continues to work with its legal counsel to evaluate the matters identified in the investigation and to determine the extent to which the Company may be exposed to fines and penalties. The Company has preliminarily concluded that the extent to which it may be exposed to fines and penalties in the PRC is limited, and to date, has not received any PRC governmental or regulatory communication or inquiry related to these matters. However, management is currently unable to determine the final outcome of these matters and their possible effects on the consolidated financial statements.

On October 7, 2011, trading of the Company’s common stock was delisted by NASDAQ, and is currently quoted on the Over-the-Counter Bulletin Board (symbol: KEYP).

The Company’s management believes that the Company’s cash, working capital, and access to cash through its bank loans provide adequate capital resources to fund its operations and working capital needs through at least the end of 2012.

F-8

2        SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a)      Principles of consolidation and basis of presentation

The accompanying consolidated financial statements of the Company have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) and include the financial statements of the Group.

All significant intercompany transactions and balances are eliminated on consolidation.

(b)      Use of estimates

The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities;  disclosures of contingent assets and liabilities at the date of the consolidated financial statements; and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant items subject to such estimates and assumptions include the useful lives of property, plant and equipment; the fair value determination of financial and equity instruments; the realizability of inventories; and the recoverability of property, plant and equipment. These estimates are often based on complex judgments and assumptions that management believes to be reasonable but are inherently uncertain and unpredictable.

(c)      Foreign currency transactions and translation

The functional currency of the Company, Keyuan International and Keyuan HK is the U.S. dollar. The functional currency of Ningbo Keyuan and Ningbo Keyuan Petrochemicals, the PRC operation subsidiaries, is the Renminbi (“RMB”). Transactions denominated in currencies other than the functional currency are translated into the functional currency at the exchange rates prevailing at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies are translated into the functional currency using the applicable exchange rates at each balance sheet date, and non-monetary items are translated at historical rates. The resulting exchange differences on these transactions are recorded in foreign exchange gain (loss), net in the consolidated statements of operations.

The Group’s reporting currency is the U.S. dollar. Assets and liabilities of the PRC operating subsidiaries are translated into the U.S. dollar using the exchange rates at each balance sheet date. Revenue and expenses of the PRC operating subsidiaries are translated at average rates prevailing during the reporting period. Shareholders’ equity is translated at historical rates. Adjustments resulting from translating the financial statements of the PRC operating subsidiaries into the U.S. dollar are recorded as a separate component of accumulated other comprehensive income in the consolidated statements of stockholders’ equity and comprehensive income (loss).

(d)      Cash

Cash consists of cash on hand and cash at banks. As of December 31, 2011 and 2010, cash of $7,101,505 and $26,857,729, respectively, was held in major financial institutions located in the PRC. Management performs periodic evaluations of the relative credit standings of those financial institutions, and believes that these major financial institutions have high credit ratings.

(e)      Pledged bank deposits

Pledged bank deposits represent amounts held by financial institutions, which are not available for the Group’s use, as security for issuances of bills payable to the Group’s suppliers, or as security for short-term bank borrowings. Upon maturity of the bills, which generally occurs within three to six months after the issuance of the bills, or upon the repayments of short-term bank borrowings, the deposits are released by the financial institutions and become available for use by the Group.  Pledged bank deposits related to the purchase of inventories are reported within cash flows from operating activities, and pledged bank deposits related to short-term bank borrowings are reported within cash flows from financing activities in the consolidated statements of cash flows.

F-9

2        SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(f)      Inventories

Inventory is stated at the lower of cost or market. Cost is determined using the weighted-average cost method. Provisions are made for excess, slow moving and obsolete inventory as well as inventory whose carrying value is in excess of net realizable value. Management continually evaluates the recoverability based on assumptions about customer demand and market conditions. If actual market conditions are less favorable than those projected by management, additional inventory reserves or write-downs may be required. The Group did not record any provision for slow-moving and obsolete inventory as of December 31, 2011 and 2010.

(g)      Property, plant and equipment

Property, plant and equipment are stated at cost. Depreciation is calculated using the straight-line method over the estimated useful lives of the assets, taking into consideration the assets’ estimated residual value. When items are retired or otherwise disposed of, income is charged or credited for the difference between the net book value and proceeds received thereon.  Ordinary maintenance and repairs are charged to expense as incurred.

The estimated useful lives of property, plant and equipment are as follows:

Buildings	45 years
Machinery and equipment	5 to 15 years
Vehicles	5 years
Office equipment and furniture	3 to 10 years

Construction-in-progress is stated at cost. Cost comprises nonrefundable prepayments and direct costs of construction as well as interest costs capitalized during the period of the construction of the plant or installation of equipment. Costs included in construction in progress are transferred to their respective categories of property, plant and equipment when the assets are ready for their intended use, at which time depreciation commences.

(h)      Long-Lived Assets

The Group reviews the recoverability of its long-lived assets on a periodic basis in order to identify business conditions, which may indicate a possible impairment. The assessment for potential impairment is based primarily on the Group’s ability to recover the carrying value of its long-lived assets from expected future discounted cash flows. If the total of the expected future discounted cash flows is less than the total carrying value of the assets, a loss is recognized for the difference between the fair value (computed based upon the expected future discounted cash flows) and the carrying value of the assets.

(i)      Land use rights

Land use rights represent the exclusive right to occupy and use a piece of land in the PRC for a specified contractual term. Land use rights are recorded at cost and amortized on a straight-line basis over the terms of the land use rights of 15 to 50 years.

(j)      Bills receivable and Bills payable

The Group utilizes banker’s acceptances in the form of bills receivable and bills payable.For certain major customers, the Group accepts their payment for the Group’s products by bills receivable. Bills receivable represent short-term notes receivable issued either by the customer or by the customer and an accepting bank that entitles the Group to receive the full face amount from the customer or the accepting bank at maturity, which is generally six months from the date of issuance. Bills receivable are typically sold at a discount prior to maturity, and the discount is included in interest expense. Historically, the Group has experienced no losses on bills receivable.

In connection with the Company’s financing transactions, the Group may also obtain bills receivable in exchange for cash or payables.  These bills, which are sold at a discount prior to maturity, include provisions whereby the Group agrees to reimburse the accepting bank in the event that the related party counterparty fails to honor its liability to the accepting bank.  At December 31, 2011 and 2010, discounted bills receivable subject to reimbursement amounted to approximately $1.6  million and $9.2 million, respectively.  Historically, the Group has not suffered any losses under these reimbursement agreements.

Bills payable represent bills issued by an accepting bank in favor of the Group’s suppliers. The Group’s suppliers receive payments from the accepting bank directly upon maturity of the bills, and the Group is obliged to repay the face value of the bills to the accepting bank. Bills that are not remitted directly by the Group to its suppliers may be sold by the Group to other accepting banks for cash prior to their maturity. Discounts paid are recorded as a component of interest expense.

F-10

2        SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(k)      Revenue recognition

The Group derives its revenue primarily from the sale of petrochemical products. In accordance with the provisions of the Securities and Exchange Commission (“SEC”) Staff Accounting Bulletin No. 104, codified in FASB ASC Topic 480, revenue is recognized only when it is realized or realizable and earned. Revenues are considered to have been earned when the entity has substantially accomplished what it must do to be entitled to the benefits represented by the revenues. The Group recognizes revenue when the products are delivered and the customer takes ownership and assumes risks of losses, collection of the relevant receivable is probable, persuasive evidence of an arrangement exists and the sales price is fixed or determinable. Written sales agreements, which specify price, product, and quantity, are generally used as evidence of an arrangement. Customer acceptance is generally evidenced by a carrier signed shipment notification form.

In the PRC, value added tax (“VAT”) of 17% on invoiced amounts is collected on behalf of tax authorities. Revenue is recorded net of VAT.  VAT paid for purchases, net of VAT collected from customers, is recorded in “other current assets” in the consolidated balance sheets as of December 31, 2011 and 2010.

(l)      Share-based compensation

The Group accounts for share-based payments under the provisions of FASB ASC Topic 718, “Compensation-Stock Compensation”, or ASC Topic 718. Under ASC Topic 718, the Group measures the costs of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award and recognizes the costs over the period the employee is required to provide service in exchange for the award, which generally is the vesting period.

The Group accounts for equity instruments issued to non-employee vendors in accordance with the provisions of FASB ASC Subtopic 505-50, “Equity-Based Payments to Non-Employees”. All transactions in which goods or services are received in exchange for equity instruments are accounted for based on the fair value of the equity instrument issued. The measurement date for the fair value of the equity instruments issued is the date on which the counterparty’s performance is completed.

(m)      Employee benefit plans

Pursuant to relevant PRC regulations, Ningbo Keyuan and Ningbo Keyuan Petrochemicals are required to make contributions to various defined contribution plans organized by municipal and provincial PRC governments. The contributions are made for each PRC employee at rates ranging from 18.6% to 26.1% on a standard salary base as determined by the local social security bureau.

Contributions to the defined contribution plans are charged to the consolidated statements of operations when the related service is provided. For the years ended December 31, 2011 and 2010, contributions to the defined contribution plans were $391,990 and $284,752, respectively.

The Group has no other obligation for the payment of employee benefits associated with these plans beyond the contributions described above.

(n)      Income taxes

Income taxes are accounted for under the asset and liability method. Deferred income tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, and operating loss carry forwards. Deferred income tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred income tax assets and liabilities of a change in tax rates is recognized in incomein the period that includes the enactment date. A valuation allowance is provided to reduce the carrying amount of deferred income tax assets if it is considered more likely than not that some portion, or all, of the deferred income tax assets will not

be realized.

F-11

2        SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

The Group recognizes the effect of income tax positions only if those positions are more likely than not of being sustained.  Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs. The Group has elected to classify interest and penalties related to unrecognized tax benefits as part of income tax expense in the consolidated statements of operations.

(o)      Fair value measurements

The Group utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible. The Group determines fair value based on assumptions that market participants would use in pricing an asset or liability in the principal or most advantageous market. When considering market participant assumptions in fair value measurements, the following fair value hierarchy distinguishes between observable and unobservable inputs, which are categorized in one of the following levels:

• Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the Group has the ability to access at the measurement date.

• Level 2 inputs are inputs other than quoted prices included in Level 1 inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the asset or liability.

• Level 3 inputs are unobservable inputs for the asset or liability used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at the measurement date.

The level in the fair value hierarchy within which a fair value measurement in its entirety falls is based on the lowest level input that is significant to the fair value measurement in its entirety.

(p)      Earnings (Loss) per share

Basic earnings(loss) per share is computed by dividing net income(loss) attributable to the Company’s common stockholders by the weighted average number of common stock outstanding during the year.

Diluted earnings(loss) per share is calculated by dividing net income(loss) attributable to the Company’s stockholders as adjusted for the effect of dilutive common stock equivalents, if any, by the weighted average number of common stock and dilutive common stock equivalents outstanding during the year. Common stock equivalents consist of the common stock issuable upon the conversion of the Group’s Series B convertible preferred stock (using the if–converted method) and common stock issuable upon the exercise of outstanding stock options and stock purchase warrants (using the treasury stock method). Potential dilutive securities are not included in the calculation of dilutive earnings (loss) per share if the effect is anti-dilutive. A total of 7,886,586 and 4,066,804warrants and options were excluded from diluted earnings per share for the years ended December 31, 2011 and 2010, respectively, as their effect was anti-dilutive.

F-12

2        SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

(q)      Segment reporting

The Group’s chief operating decision maker has been identified as its Chief Executive Officer (CEO).

The Group has one operating segment, which is the manufacture and sale of petrochemical products. Substantially all of the Company’s operations and customers are located in the PRC. Consequently, no geographic information is presented.

(r)      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. An accrual for a loss contingency is recognized when it is probable that a liability has been incurred and the amount of loss can be reasonably estimated.

(s)      Recent accounting pronouncements

In December 2011, the FASB issued ASU 2011-11, "Balance Sheet (Topic 210): Disclosures about Offsetting Assets and Liabilities," which requires entities to disclose both gross and net information about both instruments and transactions eligible for offset in the statement of financial position and instruments and transactions subject to an agreement similar to a master netting agreement. The objective of the disclosure is to facilitate comparison between those entities that prepare their financial statements on the basis of U.S. GAAP and those entities that prepare their financial statements on the basis of International Financial Reporting Standards ("IFRS"). This ASU is effective for fiscal years, and interim periods within those years, beginning on or after January 1, 2013. A retrospective presentation for all comparative periods presented is required. The Company is currently evaluating the impact of adopting this guidance.

In June 2011, the FASB issued ASU 2011-05, "Comprehensive Income (Topic 220): Presentation of Comprehensive Income," which improves the comparability, consistency and transparency of financial reporting and increases the prominence of items reported in other comprehensive income. This ASU is effective for fiscal years, and interim periods within those years, beginning on or after December 15, 2011 although early adoption is permitted. In December 2011, the FASB issued ASU 2011-12 "Comprehensive Income (Topic 220): Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05," which defers certain aspects of ASU 2011-05 related to the presentation of reclassification adjustments. The adoption of the revised guidance on January 1, 2012 is not expected to have a material impact on the Company’s  consolidated financial statements.

In May 2011, the FASB issued ASU 2011-04, "Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRS," which provides common requirements for measuring fair value and disclosing information about fair value measurements in accordance with U.S. GAAP and IFRS. This ASU is effective for fiscal years, and interim periods within those years, beginning on or after December 15, 2011. The adoption of this guidance on January 1, 2012 is not expected to have a material impact on the Company's consolidated financial statements.

3        INVENTORIES

Inventories consist of the following:

		As of December 31,
		2011		2010
Raw materials	$	26,226,388	$	53,160,604
Finished goods		10,891,825		30,024,896
Work-in-process		1,827,755		3,646,056
Total	$	38,945,968	$	86,831,556

4        PREPAYMENTS TO SUPPLIERS

As of December 31, 2011 and 2010, prepayments to suppliers are made in connection with the purchase of raw materials and the construction of the Group’s facilities. Prepayments to suppliers are reclassified to inventories or construction-in-progress when the Group applies the prepayments to related purchases of materials after the related invoices are received.

5       CONSUMPTION TAX REFUND RECEIVABLE

In August 2010, the PRC government enacted a regulation, as amended, that provides that, for the period from January 1, 2010 to September 30, 2012, domestically purchased heavy oil to be used for producing ethylene and aromatics products is exempted from a consumption tax. In addition, the consumption tax paid for imported heavy oil is to be refunded if it was used for producing ethylene and aromatics products. Given all the Group’s purchased heavy oils are, or are to be, used for  the production of ethylene and aromatics products, the Group recognizes a consumption tax refund receivable when the consumption tax has been paid and the relevant heavy oils have been used for production. As of  December 31, 2011 and 2010, the Group recorded an estimated consumption tax refund amounting to $55,809,560and $39,144,688, respectively.

Refunds of 2010 consumption tax receivable of $39,144,688 have been received in full. Claims for consumption tax of $55,809,560 for the year ended December 31, 2011 are in process and are expected to be approved and refunded in May 2012.

F-13

6    OTHER CURRRENT ASSETS

Other current assets consist of the following:

As of December 31,
2011	2010

VAT recoverable	$	9,991,877	$	21,953,590
Receivable from Ningbo Litong (Note 24)		2,740,970		2,217,854
Customs deposits for imported inventories		29,102,193		1,972,682
Other		4,143,388		2,464,707
	$	45,978,428	$	28,608,833

Prior to January 1,2009, VAT paid (input VAT) on the purchase of property, plant and equipment was not deductible and was included in the cost of the assets. In 2009, management estimated the deductible input VAT using vendor contracts, engineering and other estimates, as well as historical experience. In 2010, as more experience was gained, management revised their estimate of deductible input VAT and reclassified approximately $13 million from property, plant and equipment to VAT recoverable. These amounts were submitted on the Company’s VAT returns which have been approved by the PRC VAT authorities, approximately $2.9 million was included in non-current assets as of December 31, 2011.

Customs deposits for imported inventories represent amounts paid to the local customs office in connection with the import of raw materials inventories. Upon approval by the customs authorities, these amounts become refundable by the local tax authority and are reclassified as consumption tax refund receivable (Note 5).Through March 31, 2012, deposits of $29,102,193 have been approved for refund, which refund is expected to be received in May 2012.

7        PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment consist of the following:

As of December 31,
2011	2010

Buildings	$	3,888,234		$	3,733,116
Machinery and equipment		175,736,470			130,513,767
Vehicles		663,985			560,440
Office equipment and furniture		134,929			130,043
Construction-in-progress		27,449,846			3,117,935
		207,873,464			138,055,301
Less: Accumulated depreciation		(17,005,843	)		(8,273,997	)
	$	190,867,621		$	129,781,304

Depreciation expense on property, plant and equipment is allocated to the following items:

As of December 31,
2011	2010

Cost of sales	$	8,141,839	$	7,788,486
Selling, general and administrative expenses		165,229		121,127
	$	8,307,068	$	7,909,613

For the years ended December 31, 2011 and 2010, interest capitalized amounted to $1,246,179 and nil, respectively.

F-14

8        INTANGIBLE ASSETS

Intangible assets consist of the following:

Amortization	As of December 31,
Period	2011	2010

	Years
Licensing agreements	10-20	$	1,495,300		$	1,441,150
Less: Accumulated amortization			(516,797	)		(395,684	)
		$	978,503		$	1,045,466

Licensing agreements consist of technology utilization rights for petrochemical production. For the years ended December 31, 2011 and 2010, amortization expense for intangible assets amounted to $104,598and $99,859, respectively. Amortization expense for each of the next five years is estimated to be approximately $100,000.

9         LAND USE RIGHTS

Land use rights consist of the following:

As of December 31,
2011	2010

Land use rights	$	12,182,100		$	11,740,943
Less: Accumulated amortization		(1,113,338	)		(641,068	)
	$	11,068,762		$	11,099,875

For the years ended December 31, 2011 and 2010, amortization expense related to land use rights was $441,234 and $274,589, respectively.

10        SHORT-TERM BANK BORROWINGS

Short-term bank borrowings consist of the following:

As of December 31,
2011	2010

Bank borrowings-secured/guaranteed $ 225,969,421 $ 135,768,634

Short−term bank borrowings outstanding as of December 31, 2011 carry a weighted average interest rate of 5.45% (2010:5.15%) for bank loans in RMB; and a weighted average interest rate of 3.78% (2010: 3.44%) for bank loans in USD, and have maturity terms ranging from one to twelve months and interest rates ranging from 2.97% to 7.93% (2010: 2.97% to 5.56%).

Approximately $17,000,000 included in short term bank borrowings at December 31, 2011is payable to Shanghai Pudong Development Bank, and is secured by a one-year fixed term deposit with a carrying amount of $18,494,500.In addition, $45,577,366 payable to Bank of China is secured by Ningbo Keyuan’s one-year fixed term deposit and pledged deposits with carrying amounts of $46,533,893 as of December 31, 2011; $11,000,000 payable to China CITIC Bank is secured by Ningbo Keyuan's one-year fixed term deposit with a carrying amount of$11,411,500 as of December 31,2011.Among the rest of the Group's short-term borrowings, $152,392,055 is guaranteed by related party and third-party entities and individuals, including $18,888,000 which is guaranteed by the Group’s Chief Executive Officer, and $25,420,808 that is secured by the Group’s land, buildings and equipment with a carrying amount of $91,582,011 as of December 31, 2011.

F-15

11         LONG-TERM BANK BORROWINGS

Long-term bank borrowings consist of the following:

As of December 31,
2011	2010

Loan from China Construction Bank	$	15,740,000		$	15,170,000
Loan from Industrial and Commercial Bank of China		-			4,551,000
Loan from Bank of China		-			12,894,500
		15,740,000			32,615,500
Less: current portion		(15,740,000	)		(17,445,500	)
	$	-		$	15,170,000

As of December 31, 2011 and 2010, all of the Group’s long-term bank loans are guaranteed by related-party entities and Mr.Tao (Note 24), bear interest from 7.29% to 7.74% (2010:5.4% to 7.56%)and are due on various dates from December 2011 to December 2012. Bank loans of approximately RMB115,000,000 ($17,820,400)  and RMB 92,000,000($13,610,480) were repaid in 2011 and 2010, respectively.

12        ADVANCES FROM CUSTOMERS

Generally, the Group requires a prepayment of 100% of the sales contract price from its customers shortly before products are shipped. Such prepayment is recorded as “advances from customers” in the Group’s consolidated balance sheet, until the products are delivered and the customer takes ownership and assumes the risk of loss. With the approval of the Company’s general manager, the Company occasionally extends credit to its long-term customers with a good credit rating. As of December 31,2011,the balance of accounts receivable was  $2,226,288 which was received on January 6,2012.

13        ACCRUED EXPENSES AND OTHER PAYABLES

Accrued expenses and other payables consist of:

As of December 31,
2011	2010

Purchase of property, plant and equipment	$	24,590,217	$	17,217,958
Accrued payroll and welfare		1,061,508		690,831
Liquidated damages		2,493,326		-
Other accruals and payables		2,142,895		296,321
	$	30,287,946	$	18,205,110

14        STOCKHOLDERS’ EQUITY AND RELATED FINANCING AGREEMENTS

In April and May 2010, the Company completed a private placement offering (the “Series A Private Placement”), pursuant to a security purchase agreement with a group of unrelated investors (collectively, the “Series A Investors”). Under the Series A Private Placement, the Company sold 661,562 security units at $35 per unit on April 22, 2010 and 87,142 security units at $35per unit on May 18, 2010, respectively. Each security unit issued in the Series A Private Placement consisted of, (a) nine shares of Series A convertible preferred stock, with a par value of $0.001 per share (the “Series A convertible preferred stock”) which is convertible into the same number of shares of the Company’s common stock, (b) one share of the Company’s common stock, with a par value of $0.001 per share (c) a warrant to purchase one share of the Company’s Common Stock at an exercise price of $4.50 for a three-year period (the “Series A Warrant”), and (d) a warrant to purchase one share of the per share’s common stock at an exercise price of $5.25 per share for a three-year period (the “Series B Warrant”).

F-16

On September, 28, 2010, the Company completed a private placement offering (the “Series B Private Placement”), pursuant to a security purchase agreement with a group of unrelated investors (collectively, the “Series B Investors”) and sold 540,001 security units, at a price of $37.50 per unit. Each security unit issued in the Series B Private Placement consisted of (a) ten shares of Series B convertible preferred stock, with a par value of $0.001 per share (the “Series B convertible preferred stock”) which is convertible into the same number of shares of the Company’s common stock, (b) a warrant to purchase up to 1.5 shares of the Company’s common stock, at an exercise price of $4.50 per share for a three-year period (the “Series C Warrant”), and (c) a warrant to purchase up to 1.5 shares of the Company’s common stock at an exercise price of $5.25 per share for a three-year period(the “Series D Warrant”).

Because the convertible preferred stock and warrants are transferable separately and there are no terms requiring the surrender of convertible preferred stock when the warrants are exercised, the Series A, Series B, Series C and Series D Warrants are considered to be detachable from the Series A and Series B convertible preferred stock.

The Company received total gross proceeds of $26,204,639 and $20,250,000 from the Series A and Series B Private Placements, before issuance costs of $3,242,231 and $1,835,109, respectively. The net proceeds were allocated to the Series A and Series B convertible preferred stock, common stock issued in the Series A and Series B Private Placement, Series A, Series B, Series C and Series D Warrants on a relative fair value basis.

	Gross Proceeds		Issuance costs		Net proceeds
Series A Private Placement:
Series A convertible preferred stock	$	23,993,129	$	2,974,986	$	21,018,143
Issued Common Stock		1,820,800		221,661		1,599,139
Series A Warrant		233,210		27,279		205,931
Series B Warrant		157,500		18,305		139,195
	$	26,204,639	$	3,242,231	$	22,962,408
Series B Private Placement:
Series B convertible preferred stock	$	18,365,935	$	1,664,370	$	16,701,565
Series C Warrant		1,000,352		90,654		909,698
Series D Warrant		883,713		80,085		803,628
	$	20,250,000	$	1,835,109	$	18,414,891

The estimated fair values on April 22, 2010, May 18, 2010, and on September 28, 2010 were determined using a comprehensive model that evaluated each element of the security. This evaluation included consideration of conversion terms, analysis of other public companies with financial characteristics estimated to be similar to the Company’s, and the Black-Scholes option pricing model. A discount was applied in the valuation of each element reflecting the lack of marketability and other restrictions.

Key assumptions used are as follows:

		Series A Private Placement								Series B Private Placement:
		April 23,				May 18,				September 28,
		2010				2010				2010
Expected volatility			45.82	%			45.15	%			86.22	%
Expected dividends yield			0	%			0	%			0	%
Time to maturity		3 years				3 years				3 years
Weighted average risk-free interest rate		1.03		%		0.75		%		0.68		%
Fair value of the common stock	$	2.38			$	2.79			$	3.40

F-17

Concurrent with the Series A and Series B Private Placements, the Company issued to a placement agent warrants to purchase718,755 of shares of the Company’s Common Stock for the Series A Private Placement and warrants to purchase 561,601 of shares of the Company’s Common Stock for the Series B Private Placement. The warrants issued to the placement agent in the Series A Private Placement consisted of warrants to purchase 598,963, 59,986 and 59,896 shares of common stock at an exercise price of $3.50, $4.50 and $5.25 per share, respectively. The warrants issued to the placement agent in the Series B Private Placement consisted of warrants to purchase 432,001 and 64,800 shares of common stock at an exercise price of $3.75, $4.50 and $5.25 per share, respectively. The estimated fair values of these placement agent warrants on the completion dates of the respective private placements was $349,683 for Series A Private Placement and $534,341 for Series B Private Placement; and are included in the above issuance costs.

The significant terms of the Series A and Series B convertible preferred stocks are as follows:

Conversion

At any time on or after the issuance date, at the election of the holders, each share of the Series A and Series B convertible preferred stock may be converted into shares of the Company’s common stock, or a conversion price of $3.50 and $3.75 per share, respectively, subject to certain ownership limitations.

The conversion price is subject to certain anti-dilutive adjustments, including adjustments for stock splits, dividends and distributions, and reorganization, merger or consolidation. In addition, the conversion price may be adjusted down.

The Series A convertible preferred stock was to be automatically converted into common stock   at the earlier occurrence of 1) the 24 month anniversary of the issuance dates of the Series A convertible preferred stock; and 2) at such time that the volume weighted average price (“VWAP”) of the Company’s common stock is no less than $5.00 for a period of ten consecutive trading days with the daily volume of the Company’s common stock of at least 50,000 shares per day. All of the Series A convertible preferred stock was converted into common stock in October 2010.

The Series B convertible preferred stock shall be automatically converted into common stock (or the same conversion price as described above) upon the third year anniversary of the issuance date of the Series B convertible preferred stock (April and May 2013).

In the event the Company shall issue or sell any additional shares of common stock at a price per share less than the then-applicable conversion price or without consideration, then the conversion price upon each such issuance shall be reduced to that price (the “Round Down Provision”).

Management evaluated the terms and conditions of the embedded conversion features based on the guidance of ASC 815-15-25-1 (formerly SFAS 133, paragraph 12) to determine if there was an embedded derivative requiring bifurcation. An embedded derivative instrument (such as a conversion option embedded in the Convertible Preferred Stock) must be bifurcated from its host instruments and accounted for separately as a derivative instrument only if the “risks and rewards” of the embedded derivative instrument are not “clearly and closely related” to the risks and rewards of the host instrument in which it is embedded.  Management concluded that the embedded conversion feature of the preferred stock was not required to be bifurcated because the conversion feature is clearly and closely related to the host instrument, and because of the Company’s limited trading volume that indicates the feature is not readily convertible to cash in accordance with ASC 815-10, “Derivatives and Hedging”.

Therefore, in accordance with ASC 470-20, management compared the effective conversion prices of the Series A and Series B convertible preferred stocks and the estimated fair values of the Company’s common stock as of April 22, 2010, May 18, 2010 and September 28, 2010 as follows:

	Effective initial conversion price of				Fair value Intrinsic value per each share of the
	Series A  Convertible preferred stock		Series B of the convertible  preferred stock		Series A  common stock		or Series B preferred stocks
April 22, 2010	$	3.57	$	-	$	2.38	$	0
May 18, 2010	$	3.49	$	-	$	2.79	$	0
September 28,    2010	$	-	$	3.40	$	3.40	$	0

Management determined that there was no beneficial conversion features for the Series A and Series B convertible preferred stocks because the effective conversion price is equal to or higher than the fair value at the date of issuance.

Redemption

As a result of the Round Down Provision, and in accordance with ASR 268 “Presentation in Financial Statement of Redeemable Preferred Stock”, the Series A and Series B convertible preferred stocks have been classified as temporary equity as the Company does not control the events necessary to issue the maximum number of shares that could be required should the redemption feature be triggered.

In the event the Company has insufficient authorized registered shares of common stock to effect a conversion request from the Series A and Series B investors, the Company, at its sole discretion, may elect to satisfy such conversion request by either redeeming the preferred stock at their liquidation preference of $3.50 and $3.75 per share, respectively, or by issuing restricted shares of the Company’s common stock.

The Series A and Series B convertible preferred stocks are redeemable at the option of their holders simultaneously with the occurrence of the following events:

Merger or consolidation where the holders of the Company’s outstanding voting securities prior to such merger or consolidation do not own over 50% of the outstanding voting securities of the merged or consolidated entity immediately after such merger or consolidation; or the sale of all or substantially all of the Company’s properties or assets (collectively, an “Organic Change”).

Management considers the occurrence of the Organic Change is solely within the control of the Company.

F-18

Voting Rights

The Series A and Series B convertible preferred stocks shall have no voting rights with the common stock or other equity securities of the Company other than certain class voting rights, as outlined in the related agreement.

Fixed dividends are accrued and cumulative for one year from the date of the initial issuance of the Series A and Series B convertible preferred stocks, and are payable on a quarterly basis. Annual dividends are determined as 6% of $3.50 for each share of the Series A convertible preferred stock, and 6% of $3.75 for each share of the Series B convertible preferred stock. Total dividends for the Series A convertible stockholders for the year ended December 31, 2010 was $831,032.There were no dividends on the Series A convertible preferred stock in 2011. Total dividends for the Series B convertible preferred stockholders for the years ended December 31, 2011 and 2010 were $1,205,014 and $306,247, respectively.

Registration rights agreement

In connection with the Series A Private Placement, the Company entered into a registration rights agreement  with the Series A Investors, in which the Company agreed to file a registration statement  with the SEC to register for resale the common stock issued, the common stock issuable upon conversion of the Series A convertible preferred stock, and the common stock underlying the Series A and Series B Warrants and the placement agent warrants, within 30 calendar days of April 22, 2010 and to have this registration statement declared effective within 150 calendar days of April 22, 2010 or within 180 calendar days of April 22, 2010 in the event of a full review of the registration statement by the SEC. If the Company doesn’t comply with the foregoing obligations under the registration rights agreement, the Company will be required to pay liquidated damages in cash to each investor, at the rate of 1% of the applicable subscription amount for each 30 day period in which the Company is not in compliance; provided, that such liquidated damages will be capped at 10% of the subscription amount of each investor and will not apply to any registrable securities that may be sold pursuant to Rule 144 under the Securities Act if all of the conditions in Rule 144(i)(2) are satisfied at the time of the proposed sale, or are subject to an SEC comment with respect to Rule 415 promulgated under the Securities Act. At December 31, 2010, all of the Series A convertible preferred stock has been converted into the Company’s common stock. The Company did not incur any liquidated damages in connection with Series A Private Placement in 2010.

In connection with the Series B private placement, the Company entered into a registration rights agreement  with the Series B Investors, in which the Company agreed to file a registration statement with the SEC to register for resale the common stock issuable upon the conversion of the Series B convertible preferred stock, common stock underlying the Series C and Series D Warrants, and common stock underlying the placement agent warrants, within 30 calendar days following the later of (i) the closing date of the offering or (ii) the effective date of the prior registration statement for resale the common stock issued in the Series A Private Placement and common stock issuable upon the conversion of the Series A preferred stock, Series A and Series B Warrants, and placement agent warrants issued in the Series A Private Placement (the “Prior Registration Statement”), and to have the registration statement declared effective within 150 calendar days ( or 180 calendar days of the Closing Date in the event of a full review of the registration statement by the SEC)  following the later to occur of (i) the closing date of the Series B Private Placement or (ii) the effective date of the Prior Registration Statement.  If the Company does not comply with the foregoing obligations under the registration rights agreement, the Company will be required to pay cash liquidated damages to each Series B Investor, at the rate of 1% of the applicable subscription amount for each 30 day period in which the Company is not in compliance; provided, that such liquidated damages will be capped at 10% of the subscription amount of each investor and will not apply to any registrable securities that may be sold pursuant to Rule 144 under the Securities Act if all of the conditions in Rule 144(i)(2) are satisfied at the time of the proposed sale, or are subject to an SEC comment with respect to Rule 415 promulgated under the Securities Act. The Company did not incur any liquidated damages in connection with the Series B Private Placement in 2010.

Pursuant to the registration rights agreements in the Series A and Series B Private Placements, liquidated damages are also payable in the event that the registration statement is not maintained continuously effective for approximately 180 days, or if trading of the Company’s common stock is suspended or if the Company’s common stock is delisted from the principal exchange on which it is traded (NASDAQ)for more than three days.

As the required Registration Statements were declared effective in the specified time frame, management determined that a liability for liquidated damages had not been incurred as of December 31, 2010.  On April 1, 2011, trading of the Company’s common stock was suspended and on October 7, 2011 was delisted by NASDAQ. Management determined that the registration statements were no longer effective commencing on April 7, 2011 and registerable securities in connection with the Series A and B private placements were not able to be sold pursuant to Rule 144 under the Securities Act until November 1, 2011.   Accordingly, in the year ended December 31, 2011, an estimated contingent liability for $2,493,326 was accrued with a corresponding charge to earnings, as per the guidance in ASC 825-20, “Registration Payment Arrangements”.

Escrow shares agreement

In connection with the Series A and Series B Private Placements, the Company entered into two escrow share agreements with the representatives of the Series A Investors and the Series B Investors, Delight Reward, and Anslow&Jaclin, LLP (the “Escrow Agent) (the “Escrow Agreements”), pursuant to which 5,000 shares and 3,400 shares of the Company’s Series M convertible preferred stock held by Delight Reward (the “Escrow Shares”) were delivered to the Escrow Agent, respectively. On December 28, 2010, the Series M convertible preferred shares in the escrow share agreements converted into 5,000,000 shares and 3,400,000 shares of the Company’s common stock (the “Escrow Shares”).

The Escrow Shares were to be released back to Delight Reward upon the Company’s achievement of no less than 95% of a net income target, as defined, of $33 million for the year ended December 31, 2010 (the “Performance Threshold”). If the Company achieved less than 95% of the Performance Threshold, the Series A and Series B Investors were to receive in the aggregate, on a pro rata basis, 500,000 shares of the Company’s common stock for each full percentage point by which the Performance Threshold was not achieved, up to the total number of the Escrow Shares. Pursuant to the Escrow Agreements, for purposes of determining whether or not the net income was met, certain items, such as any accounting charges for issuing warrants, were not deemed to be an expense or charge, even though U.S. GAAP may require contrary treatment, and the annual report for the respective fiscal years filed with the SEC by the Company reported otherwise. No other exclusions were to be made for any non-recurring expenses of the Company, as defined in the Escrow Agreements, in determining whether the Performance Threshold has been achieved.

Management determined that entering into the Escrow Agreements was an inducement made to facilitate the Series A and Series B Private Placements, and is not part of a compensatory arrangement to management. The Escrow Shares were to be released or cancelled without regard to the continued employment of any management of the Group.

The Performance Threshold was achieved and the Escrow Shares are expected to be released from escrow in the second quarter of 2012.

F-19

15        COMMON STOCK AND CAPITAL CONTRIBUTION

On April 22, 2010 and May 18, 2010, the Company issued 661,562 shares of common stock and 87,142 shares of common stock, respectively, par value of $0.001 per share, upon the completion of the Series A Private Placement.

In April 2010 the registered capital of Keyuan International was increased as a result of a capital contribution of $220,000 by its shareholders.

In October2010, all of the Series A convertible preferred stock was converted into 6,738,336 shares of the Company’s common stock.

On December 28, 2010, all of the Series M convertible preferred stock was converted into 47,658,000 shares of the Company’s common stock upon the Company’s stockholders approval of an increase in the authorized common stock to100,000,000 shares.

On January 17, 2011, the Company’s Board of Directors approved the distribution of an annual cash dividend of $0.36 per share for 2010 to be paid quarterly to its common stock stockholders at the assigned dates of record. In January 2011, certain stockholders of the Company announced the waiver of their rights to receive such cash dividends. In addition, Dragon State International Limited, the primary Series B convertible stockholder agreed to waive their rights to receive cash dividend for 2010 should they choose to convert their preferred stock before the record date. The estimated dividends to be distributed and the dividends waived are approximately $3.5 million and $17.2 million, respectively. Approximately $ 1,205,014 was distributed to common stockholders as dividends during the year ended December 31, 2011. In October 2011, the Company’s Board of Directors suspended the payment of quarterly cash dividends on the Company’s common stock while it pursues strategic alternatives including, but not limited to, taking the Company private, a merger or other transaction.

During the year ended December 31, 2011, 66,670 shares of the Series B convertible preferred stock were converted into 66,670 shares of the Company’s common stock. In addition, 1,150Series A warrants and 500 Series B warrants were exercised, and the Company issued 1,150 shares and 500 shares of the Company’s common stock, receiving proceeds of $4,863 and $2,468,respectively.

16        COMMON STOCK PURCHASE WARRANTS

In connection with the Series A and Series B Private Placements, the Company issued the following warrants to purchase the Company’s common stock to the Series A and Series B investors and a placement agent:

	Issuance dates	Maximum number Of shares of  common stock		Exercise prices
Series A Warrants	April 22 and May 18, 2010		748,704		$4.50
Series B Warrants	April 22 and May 18, 2010		748,704		$5.25
Series C Warrants	September 28, 2010		810,001		$4.50
Series D Warrants	September 28, 2010		810,001		$5.25
Placement agent warrants
-Series A Private Placement	April 22 and May 18, 2010		718,755	$3.50~$5.25
-Series B Private Placement	September 28, 2010		561,601	$3.75~$5.25

Each of the above warrants entitles the holder to purchase shares of the Company’s common stock at any time after their respective issuance dates and shall expire after three years from their respective issuance dates. The Series A and Series B Warrants are callable at $0.01, at the Company’s election, if the Volume Weighted Average Price(“VWAP”) of the Company’s common stock equals or exceeds $9.00 and $10.50 for 15 consecutive trading days, with the average daily trading volume of no less than 75,000 shares. The Series C and Series D Warrants and the placement agent warrants are not callable.

The Series A, Series B, Series C and Series D Warrants and the placement agent warrants are classified within the Company’s stockholders’ equity since they are solely indexed to the Company’s common stock.

17        SHARE-BASED PAYMENTS

(a)   Employee stock option grants

Effective June 30, 2010, the Board of Directors approved the Company’s 2010 Equity Incentive Plan (the “Plan”). The maximum numbers of shares of common stock of the Company issuable pursuant to the Plan is 6,000,000 shares. The Plan shall be administered by the Board; provided however, that the Board may delegate such administration to a Plan Committee (the “Committee”).

F-20

Subject to the provisions of the Plan, the Board and/or the Committee shall have authority to determine the type or types of awards to be granted to each participant under the Plan. The exercise price of options to purchase shares of the Company’s common stock granted under the Plan shall be determined by the Board or the Committee, provided, however that the exercise price of any incentive stock option shall not be less than 100% of the fair market value of a share on the date of grant. The term of each option shall be fixed by the Board or the Committee, provided that no incentive stock option shall have a term greater than 10 years.

On June 30, 2010, the Company granted a total of 3,000,000 stock options to certain senior management employees with a contractual term of 5 years. The exercise price of these stock options is $4.20 per share and the grant-date fair value of these stock options amounted to $3,347,298. A total of 2,810,000 stocks options vest over three years as follows:30% shall vest and become exercisable one year after the grant date, 40% shall vest and become exercisable two years after the grant date, and 30% shall vest and become exercisable three years after the grant date. For the remaining 190,000 stock options: 40% shall vest and become exercisable one year after the grant date and 60% shall vest and become exercisable two years after the grant date.

On July 1, 2010, the Company granted a total of 80,000 stock options to two independent directors with contractual terms of 5 years. The exercise price of these stock options is $4.20 per share and the grant-date fair value of these stock options amounted to $91,349. A total of 40,000 options shall vest and become exercisable one year after the grant date and the remaining 40,000 options shall vest and become exercisable two years after the grant date, provided that the independent directors are re-elected for successive one year terms one year after the stock options issuance date.

On August 4, 2010, the Company granted 700,000 stock options to employees with a contractual term of 5 years. The exercise price of these stock options was $4.50 per share and the grant-date fair value of these stock options amounted to $1,338,761. These stock options vest over three years as follows: 30% shall vest and become exercisable one year after the grant date, 40% shall vest and become exercisable two years after the grant date and 30% shall vest and become exercisable three years after the grant date.

On December 29, 2010, 600,000 stock options granted to certain employees on August 4, 2010, were cancelled. As compensation for such cancellation, the Company committed to pay these employees incremental cash payments during the period through August 2013. The fair value of the committed cash payment on December 29, 2010 was approximately $400,000 and no incremental compensation cost resulted from the cancellation of these stock options. Included in accrued expenses and other payables is approximately $190,000and $56,000 representing the liability related to the committed cash payment as of December 31, 2011 and 2010, respectively.

There were no share options granted during the year ended December 31, 2011. A summary of the share options granted and the activity during the year ended December 31, 2010 is as follows:

	Number of options			Weighted average exercise price		Weighted average remaining contractual term	Aggregate intrinsic value
Balance as of
January 1,2010		-		$	-
Granted on June 30,2010		3,000,000			4.2
Granted on July 1,2010		80,000			4.2
Granted on August 4,2010		700,000			4.5
Cancelled		(600,000	)		4.5
Forfeited		(150,000	)		4.2
Balance as of
December 31, 2010		3,030,000		$	4.21	3.5 years	$	0
Exercisable as of December 31, 2010		-			-	-		-

F-21

The following table presents information relating to non-vested stock options as of December 31, 2011

	Options			Weighted average grant-date fair value			Weighted average  remaining contractual term
Nonvested at January 1, 2011		3,030,000		$	3,629,899
Granted		-			-
Vested		(989,000	)		(1,103,493	)
Forfeited		(586,000	)		(653,839	)
Nonvested at December 31, 2011		1,455,000		$	1,872,567		2.5 years

The total fair value of stock options that vested during the year ended December 31, 2011 was $1,103,493.  

The grant-date fair value of the stock options granted in 2010 was estimated using the Black-Scholes option pricing model, based on the assumptions in the following table.

		Options granted on June 30, 2010			Options granted on July 1, 2010			Options granted on August 4, 2010
Expected volatility		47	%		47	%		47	%
Expected dividend yield		0	%		0	%		0	%
Weighted average risk-free interest rate		1.79	%		1.80	%		1.62	%
Weighted average expected life (in years)		5.0			5.0			5.0
Estimated fair value of underlying
common stock	$	3.21		$	3.25		$	4.50

Because the Company’s common stock had limited trading history at the time the options were issued, the expected volatility was based on the historical volatilities of comparable publicly traded companies engaged in a similar industry. The risk free interest rate is based on the US Treasury Bill rate for the expected term of the options and the expected dividend yield is based on the Company’s current dividend yield. The Company uses historical data to estimate employee termination within the valuation model. The expected life of options granted represents the period of time that options granted are expected to be outstanding. For the year ended December 31, 2011 and 2010, share-based compensation expenses related to employee stock options charged to general and administrative expenses in the consolidated statements of operations were $1,627,802 and $777,102, respectively.

As of December 31, 2011, unrecognized compensation costs related to employee stock options was approximately $2,372,504. These costs are expected to be recognized on a straight-line basis, over the remaining weighted average service period of 1.44years.

(b)   Non-employee stock option grants

On April 19, 2010, the Group issued 88,000 shares of common stock to Hayden Communications International, for the investor related services they will provide for a 12 months period. All the shares vested immediately after the signature of the agreement.  The related expenses were $62,545 and $146,895 for the year ended December 31, 2011 and 2010, respectively.

On April 19, 2010,the Group issued 48,000 shares of common stock to Chesapeake Group, Inc, for the investor related services they will provide in a period of 12 months. The related expenses were $12,990 and $139,290 for the year ended December 31, 2011 and 2010, respectively.

On April 19, 2010,the Group issued 50,000 shares of common stock to Hampton Growth Resources, LLC, for the investor related services they will provide for a 12 months period. The related expenses were $54,500 and $144,875 for the year ended December 31, 2011 and 2010, respectively.

F-22

On July 1, 2010, the Group granted 40,000 stock options to an external HR consultant with a contractual term of 5 years in exchange for its services completed prior to the grant date. The exercise price of these stock options is $4.20 per share and the grant-date fair value was$45,675. These stock options vested and became exercisable at grant.

On July 27, 2010, the Group granted 420,000 stock options to a consultant. The options expire on April 21, 2013. The exercise price of these stock options is $4.20 per share. A total of 70,000 of the stock options vested and became exercisable at the grant date, 31,818 vested monthly from September 1, 2010 through April 1, 2011, and the remaining balance of 95,456 vested on May 1, 2011. Management considers that the vesting dates are concurrent with the respective service completion dates. The grant date fair value of the options was $520,441 and the related compensation expenses were $290,332 and $307,745 for the years ended December 31, 2011 and 2010, respectively.

A summary of the stock options granted to non-employees as of December 31, 2011 is as follows:

	Number of options		Weighted average exercise price		Weighted average remaining contractual term	Aggregate intrinsic value
Outstanding as of
December 31, 2011		460,000	$	4.20	1.5 years	$	-
Exercisable as of
December 31, 2011		460,000	$	4.20	1.68 years	$	-

The fair value of the stock options granted in 2010 was measured using the Black-Scholes option pricing model. The assumptions used in estimating the fair value are in the following table.

		Awards granted			Awards granted
		on July 1, 2010			on July 27, 2010
Expected volatility		47	%		47	%
Expected dividend yield		0	%		0	%
Weighted average risk-free interest rate		1.8	%		1.02	%
Weighted average expected life (in years)		5.0			3.0
Estimated fair value of underlying common stock	$	3.25		$	4.00-4.50

Because the Company’s common stock had limited trading history at the time the options were issued, the expected volatility was based on the historical volatilities of comparable publicly traded companies engaged in a similar industry. The risk free interest rate is based on the US Treasury Bill rate for the expected term of the options and the expected dividend yield is based on the Company’s current dividend yield. The Company uses historical data to estimate employee termination within the valuation model. The expected life of options granted represents the period of time that options granted are expected to be outstanding.

For the year ended December 31, 2011, share-based compensation expenses related to non-employee stock and stock options recorded in general and administrative expenses in the consolidated statements of operations were $130,035 and $290,332, respectively. For the year ended December 31, 2010, share-based compensation expenses related to non-employee stock and stock options recorded in general and administrative expenses in the consolidated statements of operations were $431,060 and $353,420, respectively.

As of December 31, 2011, the unrecognized compensation cost related to non-employee stock and stock options was $22,837. These costs are expected to be recognized over a remaining vesting period of 1.5 years.

18        STATUTORY RESERVES

Ningbo Keyuan and Ningbo Keyuan Petrochemicals are required to allocate at least 10% of their after tax profits as determined under generally accepted accounting principles in the PRC to a statutory surplus reserve until the reserve balances reach 50% of their respective registered capitals. For the year ended December 31, 2011and 2010, Ningbo Keyuan and Ningbo Keyuan Petrochemicals made appropriations to this statutory reserve of $3,744,304 and $3,075,356, respectively.

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19        COMMITMENTS AND CONTINGENCIES

(a)Operating lease commitments

The Group leases storage facilities under operating lease agreements. The terms of these leases range from 2 to 3 years, and future minimum lease payments, due in 2012, under those non-cancellable operating lease agreements as of December 31, 2011 are $710,478.

(b)Capital commitments

As of December 31, 2011, the Group had contractual capital commitments of $887,736 for purchases of equipment.

(c)  Litigation

The Company at times is involved in various legal actions arising in the ordinary course of business. Management does not currently believe that there are any pending legal actions where the outcome of such legal actions would have a material adverse effect on the Company’s consolidated financial statements.

(d)  Contingencies

In connection with the shipping of finished products, inaccurate product information has been provided to the PRC Port authority. In addition, through March 31, 2011, Ningbo Keyuan failed to withhold income tax of approximately $50,000 from payments to certain external service providers and employees. In consultation with PRC legal counsel, management has evaluated the contingencies associated with the provision of inaccurate information and expects that the penalty, if any, will not be significant and will not have a material impact on the consolidated financial statements. In addition, the Group had outstanding Letter’s of Credit as of December 31, 2011of RMB 65,017,503 (approximately $10,233,755).

20        INCOME TAXES

The Company and its subsidiaries file separate income tax returns.

The United States of America

The Company is incorporated in the State of Nevada in the U.S., and is subject to U.S. federal corporate income tax at progressive rates ranging from15% to 35%. The state of Nevada does not impose any state corporate income tax.

British Virgin Islands

Keyuan International is incorporated in the British Virgin Islands (“BVI”). Under the current laws of the BVI, Keyuan International is not subject to tax on income or capital gains. In addition, upon payments of dividends by Keyuan International, no BVI withholding tax is imposed.

Hong Kong

Keyuan HK is incorporated in Hong Kong. Keyuan HK did not earn any income that was derived in Hong Kong for the years ended December 31, 2011 and 2010 and therefore was not subject to Hong Kong Profits Tax. The payments of dividends by Hong Kong companies are not subject to any Hong Kong withholding tax.

F-24

PRC

Ningbo Keyuan and Ningbo Keyuan Petrochemicals are both incorporated in the PRC and the applicable PRC statutory income tax rate for both companies is 25%.

Components of income(loss) before income tax expense(benefit) consist of the following jurisdictions:

Year ended December 31,
2011	2010

PRC	$	8,930,752		$	53,158,384
U.S.		(9,761,824	)		(2,108,853	)
Hong Kong and BVI		(3,458,506	)		(436,404	)
(Loss)income before income taxes	$	(4,289,578	)	$	50,613,127

The Group’s income tax expense  in the consolidated statements of operations consists of the following:

Year ended December 31,
2011	2010

Current income tax expense	$	2,408,474	$	10,434,575
Deferred income tax expense		443,244		3,058,129
Total income tax expense	$	2,851,718	$	13,492,704

F-25

20        INCOME TAXES (CONTINUED)

Reconciliation between income tax expense (benefit) and the amounts computed by applying the PRC statutory income tax rate of 25% to income (loss) before income taxes is as follows:

		Year ended December 31,
		2011					2010
(Loss)income before income taxes	$	(4,289,578	)			$	50,613,127
Computed expected
Income tax (benefit) expense		(1,072,395	)	25.0	%		12,653,282	25.0	%
Tax loss not recognized		2,625,242		(61.2	%)		781,918	1.6	%
Effect of differential tax rate		679,840		(15.8	%)		57,504	0.1	%
Other		184,617		(4.3	%)		-	-
Permanent differences		434,414		(10.1	%)
Actual income tax expense	$	2,851,718		(66.4	%)	$	13,492,704	26.7	%

The PRC income tax rate has been used because the majority of the Group’s consolidated income (loss) before income taxes arises in the PRC.

The tax effects of the temporary differences that give rise to significant portions of deferred income tax assets are presented below:

		As of December 31,
		2011			2010
Net operating tax loss carried forwards	$	4,767,000		$	780,590
Depreciation		500,410			288,491
Interest on pledged bank deposits		(463,062	)		-
Accrued payroll expenses		-			181,423
Total gross deferred income tax assets		4,808,348			1,250,504
Valuation allowance		(4,767,000	)		(780,590	)
Net deferred tax assets	$	37,348		$	469,914

Deferred tax assets arising from net operating losses (“NOL’S”) from the Group’s operations outside of the PRC were $4,767,000 and $780,590 at December 31, 2011 and 2010, respectively. Management has determined that it is more likely than not that they will not generate sufficient taxable income in those jurisdictions to realize the deferred tax asset. Accordingly, a valuation allowance for the full amount was provided. At December 31, 2011, NOL’S and their expiration dates arose in the following jurisdictions:

				Expiration date
US	$	(11,870,677	)	December 31, 2031
Hong Kong		(3,709,718	)	Not applicable
BVI		(185,192	)	Not applicable
		(15,765,587	)

According to the prevailing PRC income tax law and its relevant regulations, non-PRC-resident enterprises are levied withholding tax at 10%, unless reduced by tax treaties or similar arrangements, on dividends from their PRC-resident investees for earnings accumulated beginning on January 1, 2008, and undistributed earnings generated prior to January 1, 2008 are exempt from such withholding tax. Further, the Group’s distributions from its PRC subsidiaries are subject to the U.S. federal income tax at 34%, less any applicable qualified foreign tax credits. Due to the Group’s policy of reinvesting permanently its earnings in its PRC business, the Group has not provided for deferred income tax liabilities for U.S. federal income tax purposes on its PRC subsidiaries’ undistributed earnings of $31million and $26 million as of December 31, 2011 and 2010, respectively.

As of January 1, 2010 and for each of the years ended December 31, 2010and 2011, the Group did not have unrecognized tax benefits, and therefore no interest or penalties related to unrecognized tax benefits were accrued. Management does not expect that the amount of unrecognized tax benefits will change significantly within the next twelve months.

The Group files income tax returns in the United States and the PRC. The Company is subject to U.S. federal income tax examination by tax authorities for tax years beginning in 2004.  According to the PRC Tax Administration and Collection Law, the statute of limitations is three years if the underpayment of taxes is due to computational errors made by the taxpayer or the withholding agent. The statute of limitations is extended to five years under special circumstances where the underpayment of taxes is more than RMB100,000 ($15,000). In the case of transfer pricing issues, the statute of limitation is ten years. There is no statute of limitation in the case of tax evasion. The PRC tax returns for the Company’s PRC subsidiary are open to examination by the PRC state and local tax authorities for the tax years beginning in 2008.

F-26

21       EARNINGS (LOSS) PER SHARE

Earnings per share for periods prior to the Share Exchange have been restated to reflect the recapitalization under the Share Exchange. The following table sets forth the computation of basic and diluted net income(loss) per share:

Year ended December 31,
2011	2010

Basic (loss)earnings per share:
Net (loss)income attributable to Keyuan
Petrochemicals, Inc. stockholders	$	(7,141,296	)	$	37,120,423
Fixed dividends to Series A convertible
Preferred stockholders		-			831,032
Fixed dividends to Series B convertible
Preferred stockholders		1,205,014			306,247
Net (loss)income attributable to Keyuan
Petrochemicals Inc. common stockholders	$	(8,346,310	)	$	35,983,144
Weighted average common shares
(Denominator for basic income per share)		57,585,040			50,929,526
Effect of dilutive securities:
- Series A convertible preferred stock		-			3,542,344
- Series B convertible preferred stock		-			1,390,688
- Warrants		-			103,985
- Options		-			91,451
Denominator for diluted income per share		57,585,040			56,057,994
Basic (loss)earnings per share:	$	(0.14	)	$	0.71
Diluted(loss)earnings per share:	$	(0.14	)	$	0.66

22        FAIR VALUE MEASUREMENTS

The Company did not have any assets and liabilities that are measured at fair value on a recurring basis as of December 31, 2011 and 2010.

The fair values of cash, pledged bank deposits, bills receivable, consumption tax refund receivable, short-term bank borrowings, bills payable, current portion of long-term borrowings, and accounts payable approximate their respective carrying amounts due to their short-term nature. Amounts due to related parties are not practicable to estimate due to the related party nature of the underlying transactions. The Group’s long-term debt, secured by various assets, bears interest at rates commensurate with market rates and therefore management believes carrying values approximate fair values.

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23        SIGNIFICANT CONCENTRATIONS AND RISKS

At December 31, 2011 and 2010, the Group held cash and pledged bank deposits in financial institutions of $163,591,879 and $127,260,081, respectively. They were primarily held in major financial institutions located in mainland China and the Hong Kong Special Administrative Region. Management believes that these financial institutions have high credit ratings.

Sales to major customers, which individually exceeded 4% of the Group’s total annual net revenue, are as follows:

Year ended December 31, 2011				Year ended December 31, 2010
Largest Customers	Amount of Sales	% Total Sales		Largest Customers	Amount of Sales	% Total Sales
Customer A	114,981,292	18	%	Customer A	101,680,459	18	%
Customer B	56,582,811	9	%	Customer B	32,193,696	6	%
Customer C	42,795,468	7	%	Customer F	31,745,184	6	%
Customer D	28,228,269	5	%	Customer G	29,625,766	5	%
Customer E	27,138,266	4	%	Customer H	26,545,302	5	%
Total	269,726,106	43	%	Total	221,790,407	40	%

The Group currently buys a majority of its heavy oil, an important component of its products, from three suppliers. Although there are a limited number of suppliers of the particular heavy oil used in production, management believes that other suppliers could provide similar heavy oil on comparable terms. A change in suppliers, however, could cause a delay in manufacturing and a possible loss of sales, which could affect operating results adversely. Purchases (net of VAT) from the largest three suppliers for the years ended December 31, 2011 and 2010 were $377,051,329 and $309,943,580, respectively. These purchases represented 83% and 61%, respectively, of all of the Group’s purchases for the years ended December 31, 2011 and 2010.The Company’s largest supplier accounted for approximately $305 million and $191 million, or 67% and 38% of total purchases for each of the years ended December 2011 and 2010, respectively.

The Group’s operations are carried out in the PRC. Accordingly, the Group’s business, financial condition and results of operations may be influenced by the political, economic and legal environments in the PRC, as well as by the general state of the PRC’s economy. The business may be influenced by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency conversion and remittances abroad, and rates and methods of taxation, among other things.

F-28

24        RELATED PARTY TRANSACTIONSAND RELATIONSHIPS AND TRANSACTIONS WITH CERTAIN OTHER PARTIES

(A) Related Party Transactions

The Company considers all transactions with the following parties to be related party transactions.

Name of parties	Relationship
Mr. Chunfeng Tao	Majority stockholder
Mr. Jicun Wang	Principal stockholder
Mr. Peijun Chen	Principal stockholder
Ms. Sumei Chen	Member of the Company’s Board of Supervisors and spouse of Mr. Wang
Ms. Yushui Huang	Vice President of Administration, Ningbo Keyuan
Mr. WeifengXue	Former Vice President of Accounting, Ningbo Keyuan through August 2011
Mr. HengfengShou	Former Vice President of Sales, Ningbo Keyuan Petrochemical through November 2011 General Manager/President
Mr.Shifa Wang	Vice President Guangxi Project
Mr.Ming Liang Liu	Vice President Production
Mr.Shegeng Ding	Vice President Equipment
Mr. Fan Zhang	CFO
Ningbo Kewei Investment Co., Ltd. (Ningbo Kewei)	A company controlled by Mr. Tao through September 2011
Ningbo Pacific Ocean Shipping Co., Ltd (Ningbo Pacific)	100% ownership by Mr. Wang
Ningbo Hengfa Metal Product Co., Ltd (Ningbo Hengfa, former name"Ningbo Tenglong")	100% ownership by Mr. Chen
Shandong Tengda Stainless Steel Co., Ltd (Shandong Tengda)	100% ownership by Mr. Chen
Ningbo Xinhe Logistic Co., Ltd (Ningbo Xinhe)	10% ownership by Ms. Huang
Ningbo Kunde Petrochemical Co, Ltd. (Ningbo Kunde)	Mr. Tao’s mother was a 65% nominee shareholder for Mr. Hu, a third party through September 2011
Ningbo JiangdongJihe Construction Materials Store (JiangdongJihe)	Controlled by Mr. Xue’s Brother-in-law
Ningbo Wanze Chemical Co., Ltd (Ningbo Wanze)	Mr. Tao’s sister-in-law is the legal representative
Ningbo Zhenhai Jinchi Petroleum Chemical Co., Ltd (Zhenhai Jinchi)	Controlled by Mr. Shou

Related party transactions and amounts outstanding with the related parties as of and for the years ended December 31, 2011 and 2010, are summarized as follows. Transactions with Ningbo Kunde and Ningbo Kewei are through the date the related party relationship ceased at which time transactions with these parties are included in details of transactions with certain other parties (Note 24(b)).

Year ended December 31,
2011	2010

Sales of products (a)	$	92,771,589	$	111,860,732
Purchase of raw material (b)	$	7,151,433	$	25,014,808
Purchase of transportation services (c)	$	3,059,216	$	3,659,000
Credit line of guarantee provision for bank borrowings (d)	$	142,563,200	$	161,994,300
Loan guarantee fees (d)	$	1,299,886	$	-
Short-term financing from related parties (e)	$	13,303,054	$	30,839,377
Short-term financing to related parties (e)	$	13,188,178	$	30,949,048

As of December 31,
2011	2010

Amount due from related parties (f)	$	39,350	$	5,332,193
Amount due to related parties (g)	$	621,077	$	115,535

F-29

(a)  The Group sold finished products of $92,704,220 and $101,680,459 to Ningbo Kunde in 2011 and 2010, respectively. Sales to Zhenhai Jinchi in 2011 and 2010 were $67,369 and $10,180,273, respectively.

(b)  The Group purchased raw materials of nil and $4,465,563 from Ningbo Kewei during 2011 and 2010, respectively, with no outstanding amount payable to Ningbo Kewei at December 31,2011 and 2010 in respect of these purchase transactions. The Group purchased raw materials of $7,151,433and $20,549,245from Ningbo Kunde during  2011 and 2010, respectively. The outstanding payment in advance to Ningbo Kunde as of December 31, 2010 and 2011 in respect of these purchase transactions was $5,181,809 and Nil respectively.

(c)  The Group purchased transportation services of $3,059,216 and $3,659,000 from Ningbo Xinhe during 2011 and 2010, respectively, and amounts owed to Ningbo Xinhe as of December 31, 2011 and 2010 in respect of these purchase transactions was $621,077 and $119, respectively

(d)   Guarantees for Bank Loans

	Guarantee provided during the year ended December 31				Bank loans guaranteed as of December 31
	2011		2010		2011		2010
Mr. Tao	$	12,396,800	$	79,887,600	$	34,628,000	$	36,408,000
Jicun Wang and Sumei Chen	$	30,992,000	$	-	$	1,983,523	$	12,136,000
Ningbo Kewei	$	34,091,200	$	82,106,700	$	29,700,067	$	11,377,500
Ningbo Pacific	$	65,083,200	$	-	$	27,918,200	$	16,687,000
Ningbo Hengfa	$	-	$	-	$	14,795,600	$	36,256,300
ShangdongTengda	$	-	$	-	$	944,400	$	910,200

Beginning in 2011 loan guarantee fees of 0.3% of the loan principal guaranteed are to be paid quarterly.In 2011, loan guarantee fees were $272,993, $636,427 and $390,466 for Ningbo Hengfa, Ningbo Pacific and Ningbo Kewei, respectively, and are included in $1,548,149 in the statements of operations.

(e)   Short-term financing transactions with related parties

	Year Ended December 31
	2011							2010
	From (i)		To(i)			Balance(ii)		From(i)		To(i)			Balance(ii)
Shandong Tengda	$	-	$	-		$	-	$	2,219,100	$	(2,219,100	)	$	-
Ningbo Kewei		5,423,600		(5,423,600	)		-		1,479,400		(1,479,400	)		-
Ningbo Kunde		5,423,600		(5,423,600	)		-		19,676,020		(19,676,020	)		-
JiangdongJihe		2,455,854		(2,340,978	)		-		7,464,857		(7,574,528	)		(112,459	)
	$	13,303,054	$	(13,188,178	)	$	-	$	30,839,377	$	(30,949,048	)	$	(112,459	)

(i) Transactions during the year are translated at average exchange rates.

(ii) Balances at year end are translated at the balance sheet exchange rate.

(f)   Amount due from related parties consist of the following:

	As of December 31,
		2011		2010
Related Party
Ningbo Kunde	$	-	$	5,181,809
JiangdongJihe		-		112,459
Mr. Tao		39,350		37,925
	$	39,350	$	5,332,193

Amounts due from Mr. Tao represents advances made for business expenses, are unsecured, interest free and due on demand.

F-30

(g)   Amounts due to related parties consist of the following:

	As of December 31,
	2011		2010
Related Party
Zhenhai Jinchi(prepayment)	$	-	$	115,416
NinboXinhe		621,077		119
	$	621,077	$	115,535

Amounts due to related parties primarily represent balances due for raw materials purchase and freight.

(B) Relationships and transactions with certain other parties

The Group has the following relationships and transactions with certain other parties:

Name of parties	Relationship
Ningbo Litong Petrochemical Co., Ltd	Former 12.75% nominee shareholder of Ningbo Keyuan
(Ningbo Litong)
Ningbo JiangdongHaikai Construction	Controlled by cousin of Mr. WeifengXue, former Vice President of Accounting
Materials Store (JiangdongHaikai)
Ningbo JiangdongDeze Chemical Co., Ltd	Controlled by cousin of Mr. WeifengXue, former (JiangdongDeze) Vice President of Accounting
Ningbo Anqi Petrochemical Co., Ltd	Controlled by cousin of Mr. WeifengXue, former (Ningbo Anqi) Vice President of Accounting
Ningbo Kewei Investment Co., Ltd.	A related party through September 2011
(Ningbo Kewei) when control transferred
Ningbo Kunde Petrochemical Co, Ltd.	A related party through September 2011 when control transferred
(Ningbo Kunde)

Transactions and amounts outstanding with these parties for the years ended December 31, 2011 and 2010 are summarized as follows. Transactions with Ningbo Litong are through September 2011.

	Year ended December 31,
	2011		2010
Sales of products (h)	$	29,637,868	$	29,625,766
Purchase of raw material (i)	$	20,253,780	$	18,994,104
Credit line of guarantee for bank borrowings (j)	$	81,136,800	$	-
Loan guarantee fees (j)	$	1,242,928	$	-
Short-term financing from these parties (k)	$	49,873,894	$	74,983,618
Short-term financing to these parties (k)	$	47,608,361	$	77,030,336
Amounts due from these parties	$	2,740,970	$	2,217,854
Advances from these parties for sales	$	130,458	$	110,134

(h)   The Group sold finished products of $7,360,796and $29,625,766 to Ningbo Litong in2011 and 2010, respectively. Amounts received in advance from Litong were nil and $110,134 as of December 31, 2011 and 2010, and are included in advances from customers on the consolidated balance sheet. The Group sold finished products of $22,277,072 to Ningbo Kunde  in 2011. There were outstanding amounts of $130,458 received in advance from Kunde as of December 31, 2011.

(i)   The Group purchased raw materials of $20,253,780from Ningbo Litong during 2011. During  2010, the Group purchased raw materials of $18,994,104from Ningbo Litong. Amounts prepayable to Litong were $2,740,970and nil as of December 31, 2011 and 2010, respectively.

F-31

(j)   Guarantees for Bank Loans

	Guarantee provided				Bank loans guaranteed
	During the year ended December 2011				as of December 2011
	2011		2010		2011		2010
Ningbo Litong	$	81,136,800	$	-	$	61,632,077	$	43,993,000

Through December 31, 2010, no compensation was paid in respect of these guarantees. Beginning in 2011, loan  guarantee fees of 0.3% of the loan principal guaranteed after January 1, 2011 are to be paid quarterly. Guarantee fees paid to Litong and Kewei  were $1,026,567 and $216,361 for the year ended December 31, 2011, respectively.

(k)  Short-term financing transactions

Historically the Group and these parties have provided each other with short-term financing, typically in the form of cash, bills receivable and bills payable.

Short-term financing with these parties is as follows:

	Year Ended December 31
			2011					2010
	From(i)		To(i)			Balance(ii)		From(i)		To(i)			Balance(ii)
Ningbo Litong	$	36,366,031	$	(34,100,498	)	$	-	$	57,180,289	$	(59,343,172	)	$	2,217,854
JiangdongHaikai		-		-			-		7,447,529		(7,331,364	)		-
JiangdongDeze		2,634,320		(2,634,320	)		-		4,438,200		(4,438,200	)		-
Ningbo Anqi		10,873,543		(10,873,543	)		-		5,917,600		(5,917,600	)		-
	$	49,873,894	$	(47,608,361	)	$	-	$	74,983,618	$	(77,030,336	)	$	2,217,854

(i) Transactions during the year are translated at average exchange rates.

(ii) Balances at year end are translated at the balance sheet exchange rate.

25        SUBSEQUENT EVENTS

In January 2012, the Company signed a cooperation agreement with Fang cheng gang City to build a new production facility in Guangxi Province. Preconstruction activities commenced in February 2012. Once the facility is fully operational, Guangxi Keyuan New Materials Industrial Park is expected to have an annual production capacity of 400,000 metric tons of ABS (Acrylonitrile Butadiene Styrene).

26        KEYUAN PETROCHEMICALS, INC. (PARENT COMPANY)

Relevant PRC statutory laws and regulation permit payments of dividends by the Company’s subsidiaries in the PRC only out of their retained earnings, if any, as determined in accordance with the PRC accounting standards and regulations.

Under the Law of the PRC on Enterprises with Wholly Owned Foreign Investment, the Company’s subsidiaries in the PRC are required to allocate at least 10% of their after tax profits, after making good of accumulated losses as reported in their PRC statutory financial statements, to the general reserve fund and have the right to discontinue allocations to the general reserve fund if the balance of such reserve has reached 50% of their registered capital. These statutory reserves are not available for distribution to the shareholders (except in liquidation) and may not be transferred in the form of loans, advances, or cash dividends.

As of December 31, 2011, $3,744,304(2010:$3,075,356) was appropriated from retained earnings and set aside for the statutory reserve by the Company’s subsidiaries in the PRC.

As a result of these PRC laws and regulations, the Company’s subsidiaries in the PRC are restricted in their ability to transfer a portion of their net assets to either in the form of dividends, loans or advances, which consisted of paid-up capital and statutory reserves, amounting to $57,144,304 as of December 31, 2011 (2010: $56,553,518).

F-32

The following presents condensed unconsolidated financial information of the Parent Company only:

Condensed Balance Sheets,

	As  of December 31, 2011		As  of December 31, 2010
Cash	$	5,089	$	392,741
Other current assets		392,770		570
Investment in subsidiaries		41,774,338		41,774,338
Total assets		42,172,197		42,167,649
Accounts payable		672,310		23,527
Accrued expenses and other payables		2,671,474		74,656
Inter-company liabilities		8,930,146		1,760,000
Dividends payable		2,381,760		234,393
Series B convertible preferred stock		16,451,553		16,701,565
Total stockholders’ equity		11,064,954		23,373,508
Total liabilities and stockholders’ equity	$	42,172,197	$	42,167,649

	Year ended		Year ended
	December 31,		December 31,
	2011		2010
General and administrative expenses	$	9,757,782	$	2,108,043
Interest expens		4,041		810
Loss before income taxes		9,761,823		108,853
Income tax expense		-		-
Net loss	$	9,761,823	$	2,108,853

F-33

26   Keyuan Petrochemicals, Inc. (Parent Company) (CONTINUED)

Condensed Statements of Cash Flows

	Year ended December 31, 2011			Year ended December 31, 2010
Cash flows from operating activities
Net loss	$	(9,761,823	)	$	(2,108,853	)
Adjustments to reconcile net loss to net cash used inoperating activities:
Share-based compensation		-			1,515,907
Stock option expense		2,063,394			-
Liquidated damages		2,493,326			-
Decrease in other assets		(392,200	)		(570	)
Decrease in trade payables		-			-
Increase in accounts payable, accrued expenses and other payables		617,821			42,158
Net cash used in operating activities		(4,979,482	)		(551,358	)
Cash flows from investing activities
Investment in subsidiaries		-			(41,774,338	)
Net cash used in investing activities		-			(41,774,338	)
Cash flows from financing activities
Advance from inter-group company		7,170,146			1,760,000
Dividend paid to stockholders		(2,585,647	)		(902,886	)
Repurchase of common stock		-			(400,000	)
Additional paid in capital		7,332			-
Proceeds from Series A Private Placement, net		-			23,312,091
Proceeds from Series B Private Placement, net		-			18,949,232
Net cash provided by financing activities		4,591,831			42,718,437
Net decrease in cash		(387,651	)		392,741
Cash at beginning of year		392,741			-
Cash at end of year	$	5,090		$	392,741

F-34

MANAGEMENT DISCUSSION AND ANALYSIS

The following discussion and analysis of the results of operations and financial condition of Keyuan Petrochemicals for the fiscal years ended December 31, 2011 and 2010 and for the three and six months ended June 30, 2012  should be read in conjunction with the Selected Consolidated Financial Data, and the financial statements, and the notes to those financial statements that are included elsewhere in this Registeration Statement. Our discussion includes forward-looking statements based upon current expectations that involve risks and uncertainties, such as our plans, objectives, expectations and intentions. Actual results and the timing of events could differ materially from those anticipated in these forward-looking statements as a result of a number of factors, including those set forth under the Risk Factors, Cautionary Notice Regarding Forward-Looking Statements and Business sections in this Memorandum. We use words such as “anticipate,” “estimate,” “plan,” “project,” “continuing,” “ongoing,” “expect,” “believe,” “intend,” “may,” “will,” “should,” “could,” and similar expressions to identify forward-looking statements.

Overview

Operating through our wholly-owned subsidiaries, Ningbo Keyuan and Ningbo Keyuan Petrochemicals, our operations include (i) a production facility with an annual petrochemical production capacity of 720,000 metric tons (MT) of a variety of petrochemical products , (ii) facilities for the storage and loading of raw materials and finished goods and (iii) a manufacturing technology that can support our manufacturing process with relatively low raw material costs and high utilization and yields, all of which are led by a management team consisting of petrochemical experts with proven track records from some of China’s largest state-owned enterprises in the petrochemical industry.

In order to facilitate the Company’s future growth, Ningbo Keyuan Petrochemicals, Ltd. was incorporated in Ningbo, China with a registered capital of $3 million as a wholly-owned subsidiary of Keyuan Group Limitd (the Hong Kong entity) on August 27, 2010. Ningbo Keyuan Petrochemicals is responsible for the sales and marketing, raw materials sourcing and market analysis for the Company. Dr. Jingtao Ma was appointed as the General Manager of the new entity. Dr. Ma was the head of the former sales and marketing division at Keyuan. This new entity will also serve as the “market thermometer” that can better monitor market conditions and obtain first hand market data through buying and selling activities. Management believes that the consolidation of the sales and marketing and raw material procurement function under one business unit will help efficiently manage the future expansion of the Company. In addition, on December 2, 2011, Mr. Jingtao Ma was appointed as the new General Manager of Ningbo Keyuan, replacing Mr. Chunfeng Tao so that Mr. Tao can focus on the development and stategy of the Company.

In order to optimize the Company’s expansion project, Guangxi Keyuan New Materials Co., Ktd was incorporated on April 4, 2012 in Guangxi province, China as the base for developing the Guangxi Project. Ningbo Keyuan Synthetic Rubbers Co., Ltd was incorporated on June 15, 2012 as a foreign owned enterprise to engage in the sales and marketing of various petrochemical products specifically synthetic rubbers.

In April 2011, we expanded our annual production capacity from 550,000 MT to 720,000 MT. We also completed the SBS production facility with an annual production capacity of 70,000 MT in September 2011. One SBS production line bagan commercial production in December 2011 and the second line began commercial production in August 2012.  In addition, we plan to complete an additional storage capacity, a raw material pre-treatment facility and an asphalt production facility by the end of 2012.

In January 2012, we signed a cooperation agreement with Fangchenggang City to build a new petrochemicals production facility, Guangxi Keyuan New Materials Industrial Park, in Guangxi Province. The total investment amount to construct this new production facility is RMB 12.8 billion (approximately USD $2.02 billion). We plan to commence construction in February 2012, finish the initial stage of construction and begin operation by the end of 2013. However, the timeline is subject to revision pending the status of project financing. This new production facility, as a part of our expansion plan, will improve our competitive position by extending and expanding our supply chain and manufacturing base. Once the facility is fully operational, it is expected to have annual production capacity of 400,000 metric tons of Acrylonitrile Butadiene Styrene (the “ABS”). We plan to fund the construction and operation of the new production facility through outside financings. If such financing is not available at terms acceptable to us, contruction of this facility will be delayed until appropriate financing is available. According to the cooperation agreement, the government of Fangchenggang City will be responsible to provide land use right for the facility.

In the first six months of 2012, the extreme fluctuation in international oil prices has caused substantial negative impact on the petrochemical industry, including us. To address this issue, we engaged with research institutes in Shanghai and Zhejiang province to study the possibility and feasilbility of diversifying our products, developing high value-added products and improving our production efficiency so that we can have a more stable long-term development plan, to optimize product structures, and to reduce the adverse effects of oil price fluctuations and the general economic environment.

On September 17, 2012, our Board of Directors authorized the repurchase of $2 million of its stock up to $1.50 per share. We are currently communicating with several candidate brokers to design and execute the stock repurchase program for us.

Our Facility and Equipment

Facility

85

As of December 31, 2011, we have invested a total of approximately $208 million in the construction and improvement of our production facility. As of June 30, 2012, we have invested a total of approximately $227 million in construction and improvement of our prodctuion facility. Our current production facility encompasses roughly 1.3 million square feet, including 594,000 square feet for production and 19,500 square feet for laboratories and offices. We also acquired 1.2 million square feet of additional land in August 2010 for our future expansion.

We have a total of 100,000 MT of storage capacity, consisting of 50,000 MT of storage capacity for raw materials and 50,000 MT for finished products. As part of our expansion plan, we intend to add 180,000 MT of new storage capacity in 2012, after which our total storage capacity will be 280,000MT.

We have an on-site ocean shipping dock with 5,000 MT of shipping capacity and a 10-truck loading facility. Approximately 90% of our feedstock and finished products use this shipping dock. We also have adjacent access to another shipping dock with an additional 50,000 MT of shipping capacity.

Equipment

Our major processing equipment includes the following:

l	Heavy oil catalytic pyrolysis processing equipment- risers/generators/precipitators, fuel gas boilers, fractionating tower, absorbing, re-absorbing ,and desorbing towers, heat exchangers, pumps, a stabilizing tower;
l	Gas fractionation processing equipment- de-propanizing tower, refining propylene tower, de-ethanizination tower, heat exchangers, pumps;
l	Ethylbenzene processing equipment- alkylation reactor, anti-alkylation reactor, dehydrogenation reactor, propylene absorbing tower, de-ethylene tower, ethylbenzene recovering tower, heating furnace for benzene, heating furnace for gas, steam overheating furnace, tail gas compressor, washing tower; and
l	Liquefied petroleum gas (LPG) and sulfur recovery process- LPG desulfurization extraction tower, dry gas desulfurization tower, regenerating tower, LPG de-mecaptan extraction tower.

Our Products

We manufacture and supply a variety of petrochemical products, including BTX aromatics, propylene, styrene, LPG, MTBE and other petrochemicals.

l	BTX Aromatics: Consisting of benzene, toluene, xylene and other chemical components for further processing into oil resin, gasoline and solvents materials widely used in paint, ink, construction coating and pesticide.
l	Propylene: A chemical intermediate as one of the building blocks for an array of chemical and plastic products that are commonly used to produce polypropylene, acrylonitrile, oxo chemicals, propylene oxide, cumene, isopropyl alcohol, acrylic acid and other chemicals for paints, household detergents, automotive brake fluids, indoor/outdoor carpeting, textile, insulating materials, auto parts and electrical appliances.
l	Styrene: A precursor to polystyrene and several copolymers widely used for packaging materials, construction materials, electronic parts, home appliances, household goods, home furnishings, toys, sporting goods and others.

86

l	LPG: A mixture of hydrocarbon gases used as fuel in heating appliances and vehicles. A replacement for chlorofluorocarbons as an aerosol propellant and a refrigerant which reduces damage to the ozone layer.
l	MTBE & Other Chemicals: MTBE, oil slurry, sulphur and others are used for a variety of applications including fuel components, refrigeration systems, fertilizers, insecticides and fungicides, etc.

Expansion Plan

Our annual designed manufacturing capacity was 550,000 metric tons of a variety of petrochemical products at the end of 2010. In order to meet the increasing market demands, we upgraded the catalytic pyrolysis processing equipment used in production facilities to expand the capacity from 550,000 MT to 720,000 MT. This capacity expansion project started in March 2011 and was completed in April 2011. We also substantially completed building an SBS production facility which is capable of producing up to70,000 MT in September 2011. We started commercial production in December 2011 for one SBS production line and entered into commercial production for second production line in early August 2012.

We are planning to expand our facility to include additional storage capacity, a raw material pre-treatment facility and an asphalt production facility by the end of 2012, and an ABS production facility.

SBS Facility

In September 2011, we substantially completed building a new facility designed for producing SBS, one of the Styreneic Block Copolymers.  SBS is a product with higher product margin with major application for footwear, adhesive, polymer modification and modified asphalt industries. The SBS facility was built on part of the 1.2 million square feet of land for which we obtained the use of right in August 2010 The construction started in September 2010 and was substantially completed (as planned) in September 2011. We started trial production in October and November, 2011. One SBS production line began commercial production in December 2011 and has produed about 13,100 tons as of June 30, 2012. The second line began commercial production in early August 2012.  The designed capacity of the SBS facility would allow for production of up to 70,000 metric tons per year.  We expect to generate net profit margins of 10% from our production of SBS once the facility reaches normal production levels. The SBS facility is anticipated to achieve an 80% utilization rate in 2012.

Other Expansion Projects

In addition to the SBS production facility, we plan to increase our current 100,000 MT storage capacity to 280,000 MT. Management believes that the increased storage capacity will allow the Company to take better advantage of sales price variations of raw materials and our products, as well supporting the storage needs resulting from our various expansion projects and our corresponding increased overall production capacity. We also plan to build a pretreatment facility and an asphalt facility on the land that was acquired in August 2010. The pretreatment facility will allow us to handle lower grade raw materials thereby allowing us to further decrease overall raw material costs. In addition, this facility will improve efficiency in current production process and provide the necessary feedstock for our planned asphalt production. The new asphalt facility will be capable of producing as much as 300,000 MT annually once it is completed. Once completed and fully operational, we estimate that the new asphalt facility will generate approximately $298 million in sales and approximately $30 million of additional profits a year. Currently, the management is evaluating the effectiveness and feasibility of above mentioned three expansion projects based upon the long-term development and the industry environment. We also entered into a cooperation agreement with Fanchengang City to build an ABS production facility with an estimated annual production of 40,000 MT ABS upon completion.

The actual and estimated schedule of our expansion plan is as follows:

l	Completed SBS facility in September 2011(achieved);
l	Completed trial production and began SBS production and sales in the fourth quarter of 2011(achieved) ;
l	Complete storage capacity expansion, pretreatment facility and asphalt by December 31, 2012, the management is evaluating the timeline now; and
l	Complete first phase construction of an ABS facility by the end of 2013.

87

On August 18, 2010, we acquired four parcels of land adjacent to the Company's current Ningbo facilities totaling approximately 1.2 million square feet. The total cost of the land was approximately $5.8 million. Aside from the cost of the land acquisition, the estimated cost of the storage expansion and construction of the  pretreatment facility, and asphalt facilities is approximately $70 million, including $20 million for facility construction, $40 million for new equipment and $10 million for working capital. We are currently estimating the cost of the ABS production facility.

We plan to fund this proposed expansion through debt financing, cash from operations, proceeds from prior financings, warrant exercises, and potential equity financing. However, we may not be able to obtain additional financing at acceptable terms, or at all, and, as a result, our ability to increase our production capacity and to expand our business could be adversely affected.

Currently, management is evaluating the effectiveness and feasibility of the whole manufacturing capacity expansion strategy based upon the long-term development and the industry environment. Therefore, the Company may make adjustments to one or more of the projects according to the evaluation results.

Manufacturing and Sales

Our total production of finished products for 2011 was 535,208 MT and revenue totaled $626.7 million, based on the sale of 588,976 MT of petrochemical products.  Our total production of finished products for 2010 was 635,782 MT and revenue totaled $558.8 million, based on the sale of 658,570 MT of petrochemical products in 2010. Therefore, we experienced a decrease in total production of finished products with an increase in revenue and sales. The decrease in overall production in 2011 was mainly due to the 44 days of production interruptions.

In the second quarter of 2011, we experienced production interruptions, mainly as a result of the expansion of our production capacity. In April 2011, we lost a combined 25 days of production, equating to approximately 54,000 tons of production, and approximately $45 million of revenues. In the third quarter of 2011, we incurred production interruptions, mainly as a result of the upgrade of the local power grid. We lost a combined 19 days of production, equating to approximately 41,000 tons of production, and approximately $40 million of revenues. 

As a result, in 2011 we experienced production interruptions totaling a combined 44 days.   These lost days of production equated to approximately 95,000 tons of production and approximately $85 million of revenues.

Our total production of finished products was 182,364 MT for the three months ended June 30, 2012 and we generated $184 million in revenue based on the sale of 169,107 MT of petrochemical products, including 350 MT of products produced by third parties. For the first six months of 2012, our total production was 342,978 MT and revenue generated from sales was $368 million, which represented an increase of 54%  from the same period of 2011.

Critical Accounting Policies and Estimates

Our consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America and include the financial statements of the Company and its subsidiaries (the “Group”). The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant items subject to such estimates and assumptions include the useful lives of fixed assets; the fair value determination of financial and equity instruments; the realizability of inventories; and the recoverability of property, plant and equipment. These estimates are often based on complex judgments and assumptions that management believes to be reasonable but are inherently uncertain and unpredictable.

88

We believe the following critical accounting policies, among others, affect our more significant judgments and estimates used in the preparation of our consolidated financial statements:

Inventories. Inventories are stated at the lower of cost or market. Cost is determined using the weighted-average cost method. Provisions are made for excess, slow moving and obsolete inventory as well as inventory whose carrying value is in excess of net realizable value. Management continually evaluates the recoverability based on assumptions about customer demand and market conditions. If actual market conditions are less favorable than those projected by management, additional inventory reserves or write-downs may be required. The Group did not record any provision for slow-moving and obsolete inventory as of December 31, 2011 and 2010.

Property, Plant and Equipment. Property, plant and equipment are stated at cost. Depreciation is calculated using the straight-line method over the estimated useful lives of the assets, taking into consideration the assets’ estimated residual value. When items are retired or otherwise disposed of, income is charged or credited for the difference between the net book value and proceeds received thereon. Ordinary maintenance and repairs are charged to expense as incurred.

The estimated useful lives of property, plant and equipment are as follows:

Buildings	45 years
Machinery and equipment	5 to 15 years
Vehicles	5 years
Office equipment and furniture	3 to 10 years

Construction-in-progress is stated at cost. Cost comprises nonrefundable prepayments and direct costs of construction as well as interest costs capitalized during the period of the construction of the plant or installation of equipment. Costs included in construction in progress are transferred to their respective categories of property, plant and equipment when the assets are ready for their intended use, at which time depreciation commences.

Long-Lived Assets. The Group reviews the recoverability of its long-lived assets on a periodic basis in order to identify business conditions, which may indicate a possible impairment. The assessment for potential impairment is based primarily on the Group’s ability to recover the carrying value of its long-lived assets from expected future discounted cash flows. If the total of the expected future discounted cash flows is less than the total carrying value of the assets, a loss is recognized for the difference between the fair value (computed based upon the expected future discounted cash flows) and the carrying value of the assets.

For certain major customers, the Group accepts their payment for the Group’s products by bills receivable. Bills receivable represent short-term notes receivable issued either by the customer or by the customer and an accepting bank that entitles the Group to receive the full face amount from the customer or the accepting bank at maturity, which is generally six months from the date of issuance. Bills receivable are typically sold at a discount prior to maturity, and the discount is included in interest expense. Historically, the Group has experienced no losses on bills receivable.

In connection with the Company’s financing transactions, the Group may also obtain bills receivable in exchange for cash or payables. These bills, which are sold at a discount prior to maturity, include provisions whereby the Group agrees to reimburse the accepting bank in the event that the related party counterparty fails to honor its liability to the accepting bank.

Bills payable represent bills issued by an accepting bank in favor of the Group’s suppliers. The Group’s suppliers receive payments from the accepting bank directly upon maturity of the bills, and the Group is obliged to repay the face value of the bills to the accepting bank. Bills that are not remitted directly by the Group to its suppliers may be sold by the Group to other accepting banks for cash prior to their maturity. Discounts paid are recorded as a component of interest expense.

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Revenue Recognition. The Group derives its revenue primarily from the sale of petrochemical products. In accordance with the provisions of the Securities and Exchange Commission (“SEC”) Staff Accounting Bulletin No. 104, codified in FASB ASC Topic 480, revenue should not be recognized until it is realized or realizable and earned. Revenues are considered to have been earned when the entity has substantially accomplished what it must do to be entitled to the benefits represented by the revenues. The Group recognizes revenue when the products are delivered and the customer takes ownership and assumes risks of losses, collection of the relevant receivable is probable, persuasive evidence of an arrangement exists and the sales price is fixed or determinable. Written sales agreements, which specify price, product, and quantity, are generally used as evidence of an arrangement. Customer acceptance is generally evidenced by a carrier signed shipment notification form.

In the PRC, value added tax (“VAT”) of 17% on invoiced amounts is collected on behalf of the tax authorities. Revenue is recorded net of VAT.  VAT paid for purchases, net of VAT collected from customers, is recorded in “other current assets” in the consolidated balance sheets.

Share-Based Compensation. The Group accounts for share-based payments under the provisions of FASB ASC Topic 718, “Compensation-Stock Compensation”, or ASC Topic 718. Under ASC Topic 718, the Group measures the costs of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award and recognizes the costs over the period the employee is required to provide service in exchange for the award, which generally is the vesting period.

The Group accounts for equity instruments issued to non-employee vendors in accordance with the provisions of FASB ASC Subtopic 505-50, “Equity-Based Payments to Non-Employees”. All transactions in which goods or services are received in exchange for equity instruments are accounted for based on the fair value of the equity instrument issued. The measurement date for the fair value of the equity instruments issued is the date on which the counterparty’s performance is completed.

Income Taxes. Income taxes are accounted for under the asset and liability method. Deferred income tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, and operating loss carryforwards. Deferred income tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred income tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is provided to reduce the carrying amount of deferred income tax assets if it is considered more likely than not that some portion, or all, of the deferred income tax assets will not be realized.

The Group recognizes the effect of income tax positions only if those positions are more likely than not of being sustained. Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs. The Group has elected to classify interest and penalties related to unrecognized tax benefits as part of income tax expense in the consolidated statements of operations.

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. An accrual for a loss contingency is recognized when it is probable that a liability has been incurred and the amount of loss can be reasonably estimated.

Results of Operations

The following table sets forth information from our statements of operations for the years ended December 31, 2011, and 2010:

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Comparison of years ended December 31, 2011 and 2010

	For the Year Ended December 31					Year to Year Comparison
	2011			2010		Increase/ (decrease)			Percentage Change
Sales
Third Parties	$	533,913,328		$	446,891,336	$	87,021,992			19	%
Related Parties		92,771,589			111,860,732		(19,089,143	)		(17	%)
Total Sales		626,684,917			558,752,069		67,932,848			12	%
Cost of Sale
Third Parties		504,871,603			388,846,702		116,024,901			30	%
Related Parties		99,797,931			102,076,731		(2,278,800	)		(2	%)
Cost of Sales		604,669,534			490,923,433		113,746,101			23	%
Gross Profit		22,015,383			67,828,636		(45,813,253	)		(68	%)
Operating Expenses
Selling Expenses		1,240,709			623,652		617,057			99	%
General and administrative Expenses		17,858,807			9,517,814		8,340,993			88	%
Total Operating Expenses		19,099,516			10,141,466		8,958,050			88	%
Income from Operations		2,915,867			57,687,170		(54,771,303	)		(95	%)
Other Income(Expense)
Interest Income		4,320,393			556,159		3,764,234			677	%
Interest Expense		(15,796,772	)		(9,945,389)		(5,851,383	)		59	%
Foreign Exchange gain , net		3,661,599			2,711,984		949,615			35	%
Liquidated damages expenses		(2,493,326	)		-		(2,493,326	)		100	%
Other income (expense),net		3,102,661			(396,797)		3,499,458			(882	%)
Total other Expenses:		(7,205,445	)		(7,074,043)		(131,402	)		2	%
(Loss) income  before provision for income taxes		(4,289,578	)		50,613,127		(54,902,705	)		(108	%)
Income tax expense		2,851,718			13,492,704		(10,640,986)			(79	%)
Net (Loss) Income		(7,141,296	)		37,120,423		(44,261,719)			(119	%)
Other comprehensive income
Foreign currency translation adjustment		3,235,395			2,247,635		987,760			44	%
Comprehensive (loss)  Income	$	(3,905,901	)	$	39,368,058		(43,273,959	)		(110	%)

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Comparison of the three and six months ended June 30, 2012 and 2011

	For the three months						Year to Year Comparison						For the six months						Year to Year Comparison
	Ended June 30,						Increase			Percentage			Ended June 30,						Increase			Percentage
	2012			2011			/(Decrease)			change			2012			2011			/(Decrease)			change
Sales
Third parties	$	184,425,717		$	115,281,945		$	69,143,772			60	%	$	367,750,405		$	239,436,744		$	128,313,661			54	%
Related Parties		-			35,607,658			(35,607,658	)		(100	%)		-			58,217,477			(58,217,477	)		(100	%)
Total sales	$	184,425,717		$	150,889,603		$	33,536,116			22	%	$	367,750,405		$	297,654,221		$	70,096,184			24	%
Cost of sales
Third parties		178,005,456			111,055,933			66,949,523			60	%		351,857,165			224,870,131			126,987,034			56	%
Related Parties		-			37,977,326			(37,977,326	)		(100	%)		-			58,276,685			(58,276,685	)		(100	%)
Total cost of sales		178,005,456			149,033,259			28,972,197			19	%		351,857,165			283,146,816			68,710,349			24	%
Gross profit		6,420,261			1,856,344			4,563,917			246	%		15,893,240			14,507,405			1,385,835			10	%
Operating expenses
Selling expenses		388,217			215,548			172,669			80	%		641,123			754,680			(113,557	)		(15	%)
General and administrative expenses		2,656,620			4,529,744			(1,873,124	)		(41	%)		5,266,815			7,764,824			(2,498,009	)		(32	%)
Total operating expenses		3,044,837			4,745,292			(1,700,655	)		(36	%)		5,907,938			8,519,504			(2,611,566	)		(31	%)
Income (Loss) from operations		3,375,424			(2,888,948	)		6,264,372			217	%		9,985,302			5,987,901			3,997,401			67	%
Other income (expenses):
Interest expense, net		(1,047,469	)		(1,856,793	)		809,324			(44	%)		(4,486,936	)		(4,146,479	)		(340,457	)		8	%
Foreign exchange gain (loss), net		(542,352	)		3,200,356			(3,742,708	)		(117	%)		(364,518	)		2,052,713			(2,417,231	)		(118	%)
Liquidated damage expenses		-			(1,300,730	)		1,300,730			(100	%)		-			(1,300,730	)		1,300,730			(100	%)
Non-operating income (expenses)		147,022			1,689,404			(1,542,383	)		(91	%)		(217,039	)		3,716,178			(3,933,217	)		(106	%)
Total other (expenses) Income		(1,442,799	)		1,732,237			(3,175,036	)		(183	%)		(5,068,493	)		321,682			(5,390,175	)		(1676	%)
Income (Loss) for income taxes		1,932,625			(1,156,711	)		3,089,336			267	%		4,916,809			6,309,583			(1,392,774	)		(22	%)
Income tax expense		870,277			665,828			204,449			31	%		2,009,469			2,917,979			(908,510	)		(31	%)
(Loss) Net Income		1,062,348			(1,822,539	)		2,884,887			158	%		2,907,340			3,391,604			(484,264	)		(14	%)
Other comprehensive income
Foreign currency translation adjustment		130,680			617,550			(486,870	)		(79	%)		708,091			1,174,874			(466,783	)		(40	%)
Comprehensive  income (loss)	$	1,193,028		$	(1,204,989	)	$	2,398,017			199	%	$	3,615,431		$	4,566,478		$	(951,047	)		(21	%)

Sales: Our sales for the year ended December 31, 2011 were approximately $626,684,917 compared to sales of $558,752,069 for the year ended December 31, 2010, an increase of $67,932,848 or 12%. The substantial increase in our sales was due to higher average sales price of our products.

In 2011, we sold 588,976 metric tons of chemical products at an average price of $1,064 per metric ton, as compared to sales of 658,570 metric tons of chemical products at an average price of $848 per metric ton in 2010. This represents an increase of approximately 25.4% in average sales price and a decrease of approximately 10.6% in overall products sold.  The decrease in overall products sold was mainly due to the 25 day production suspension caused by the capacity expansion in the second quarter of 2011and the 19 day production suspension caused by the upgrade of the local power grid in the third quarter of 2011.

Our overall sales for the year ended December 31, 2011 included $92,771,589 of sales to related parties as compared to $111,860,732 for the year ended December 31, 2010. Pricing for sales to related parties adopts the same principles as that to non-related parties. For additional information on related party sales, please refer to Footnote 24 of the financial statements for the years ended December 31, 2011 and 2010. 

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The breakdown of the 588,976 MT products produced is listed below.

Product	(Metric Tons)
BTX Light Aromatics		265,983
BTX Heavy Aromatics		97,923
LPG		49,842
MTBE and Others		72,719
Styrene		50,949
Propylene		51,560
Total Metric Tons Sold:		588,976

Our sales for the three months ended June 30, 2012 were approximately $184.4 million compared to sales of $150.9 million for the three months ended June 30, 2011, an increase of $33.5 million, or 22%. The substantial increase in our sales was due to the higher capacity utilization coupled with the higher average sales price of our products. In the three months ended June 30, 2012, we sold 169,107 metric tons of petrochemical products at an average price of $1,091 per metric ton, as compared to sales of 155,954 metric tons of petrochemical products at an average price of $968 per metric ton in the three months ended June 30, 2011. This represents an increase of approximately 12.7 % in the average sales price and an increase of approximately 8.4%   in overall products sold.

Our overall sales for the three months ended June 30, 2012 did not include any sales to related parties as compared to approximately $35.6 million of sales to related parties in the same period in 2011.  Pricing for sales to related parties was determined on the same basis as sales to non-related parties.  For additional informational on related party sales, please refer to Footnote 22 of the financial statements for the six months ended June 30, 2012 and 2011.

Sales for the six months ended June 30, 2012 were approximately $367.8 million compared to sales of $297.7 million for the six months ended June 30, 2011, an increase of $70 million, or 24%. The substantial increase in our sales was due to the higher capacity utilization coupled with the higher average sales price of our products. In the six months ended June 30, 2012 we sold 326,961 metric tons of petrochemical products at an average price of $1,125 per metric ton, as compared to sales of 284,595 metric tons of petrochemical products at an average price of $1,046 per metric ton in the six months ended June 30, 2011. This represents an increase of approximately 7.5 % in the average sales price and an increase of approximately 14.9% in overall petrochemical products sold.

Our overall sales for the first six months of 2012 did not include any sales to related parties as compared to approximately $58.2 million in same period in 2011.  Pricing for sales to related parties was determined on the same basis as that to non-related parties.  For additional informational on related party sales, please refer to Footnote 22 of the financial statements for the six months ended June 30, 2012 and 2011.

Cost of Sales: Our overall cost of sales was approximately $604,669,534 for the year ended December 31, 2011, or 96.5% of sales, compared to cost of sales of $490,923,433, or 87.9% of sales for the year ended December 31, 2010. Our cost of sales are primarily composed of the costs of direct raw materials (mainly heavy oil, benzene and carbinol), labor, depreciation and amortization of manufacturing equipment and facilities, and other overhead.  In 2011, our average cost of finished product was $1,027 per metric ton, as compared to an average cost of $745 per metric ton in 2010, an increase of 37.8%. In the second and third quarters of 2011, production was suspended for 44 days during which we still incurred estimated expenses of $2.2 million, including depreciation, labor and various other manufacturing overhead. Another reason for the higher percentage of cost of sales is the timing of our procurement of raw materials. In the third quarter of 2011, the price fluctuation of raw material was significant and we obtained a large portion of raw materials at a higher price. Our raw material price was $676 per metric ton, as compared to the average market price of $656 per metric ton. We estimate that the timing of our purchases in the third quarter of 2011 had an impact of approximately $2.5 million on the cost of sales for the year ended December 31, 2011.

Overall cost of sales was approximately $178.0 million for the three months ended June 30, 2012, or 96.5% of sales, as compared to cost of sales of approximately $149.0 million, or 98.8% of sales for the three months ended June 30, 2011.  Our cost of sales are primarily composed of the costs of direct raw materials (mainly heavy oil, benzene and carbinol), labor, depreciation and amortization of manufacturing equipment and facilities, and other overhead. In the three months ended June 30, 2012 our average cost of finished product was $1,053 per metric ton, as compared to an average cost of $956 per metric ton in the three months ended June 30, 2011, an increase of 10.1%. The increase was mainly caused by the increase in raw material prices.

Our overall cost of sales was approximately $351.9 million for the six months ended June 30, 2012, or 95.7% of sales, as compared to cost of sales of approximately $283.1 million, or 95.1% of sales for the six months ended June 30, 2011.  In the six months ended June 30, 2012 our average cost of finished product was $1,076 per metric ton, as compared to an average cost of $ 995 per metric ton in the six months ended June 30, 2011, an increase of 8.1%. The increase was mainly caused by the increase in raw material prices.

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Gross Profit /(Loss):Gross profit for the year ended December 31, 2011 was approximately $22,015,383 compared to $67,828,636 for 2010. Our gross margin has decreased from 12.1% for the year ended December 31, 2010 to 3.5% for the year ended December 31, 2011.  The main reason for the decrease in the gross margin is the increase in our raw material prices including the timing of procurement, and the manufacturing overhead incurred during the suspension of production. The Company uses fuel oil as raw material for production, which is a product of heavy crude oil. For crude oil, the average Brent oil price in the year ended December 31, 2011 was $107 per barrel, as compared to $94 in the same period of 2010, an increase of 14%. Additionally, the interruptions to production had a negative impact of approximately 0.4% on the gross margin for the year ended December 31, 2011.

Gross profit for the three months ended June 30, 2012 was approximately $6.4 million as compared to $1.9 million for the comparable period in 2011. Our gross margin increased from 1.23% for the three months ended June 30, 2011 to 3.48% for the three months ended June 30, 2012.  The main reason for the increase in the gross profit is the improvement of production efficiency and the suspension of production for approximately 25 days, which, when amortized over the period, resulted in increased per unit fixed costs and negatively impacted the gross profit by approximately 0.9% for the three months ended June 30, 2011.  This is due to the fact that even though during these periods when production was suspended, our total fixed costs remain unchanged and, as a result, the per unit fixed cost is higher and gross margins are lowered.

Gross profit for the six months ended June 30, 2012 was approximately $15.9 million as compared to $14.5 million for the comparable period in 2011. Our gross margin has decreased from 4.9% for the six months ended June 30, 2011 to 4.3% for the six months ended June 30, 2012.  The main reason for the decrease in the gross margin is due to delays in passing cost increases onto our customers.

Going forward, management believes that major fluctuations in prices of raw materials will continue to have a major impact on our gross margins, although management continues to improve efficiencies in our manufacturing processes.

Operating Expenses: Operating expenses, including selling expenses, and general and administrative expenses, were approximately $19,099,516, or 3% of sales for the year ended December 31, 2010 as compared to $10,141,466, or 1.8% of sales for the fiscal year 2012, an increase of $8,958,050. The increase was due to various public company expenses including share-based compensation, and various legal and consulting services. The share-based compensation for the year ended December 31, 2011 was $2.1 million, as compared to share-based compensation of $1.5 million for the year ended December 31, 2010. In the year ended December 31, 2011, we also incurred expenses of $5.8 million in connection with the Independent Investigation. Additionally, beginning in January 2011, certain individual loan guarantors, some of whom are related parties, were paid a monthly fee of approximately 0.1% of the outstanding loan balances as compensation for their guarantees, which resulted in expense of approximately $2.6million in 2011.  The remaining increase was mainly a result of various legal and consulting services associated with being a public company, as well as increased cost due to our growth and expansion.

Operating expenses, including selling expenses, and general and administrative expenses, were approximately $3.0 million, or 1.7% of sales for the three months ended June 30, 2012, as compared to $4.7 million, or 3.1% of sales, for the three months ended June 30, 2011, a decrease of approximately $1.7 million.  The decrease of the expenses was due to the decrease in general and administrative expenses, due to a substantial decrease in various legal, consulting and internal expenses related to the independent investigation that took place in 2011. General and administrative expenses for the three months ended June 30, 2012 were $2.7 million, as compared to general and administrative expenses of $4.5 million for the three months ended June 30, 2011.

Operating expenses, including selling expenses and general and administrative expenses, were approximately $5.9 million, or 1.6 % of sales for the six months ended June 30, 2012, as compared to $8.5 million, or 2.9% of sales for the comparable period in 2011, a decrease of approximately $2.6 million. The decrease in the expenses was due to the decreases in share-based compensation and various legal, consulting and internal expenses related to the  independent investigation. Selling expenses for the six months ended June 30, 2012 were $0.64 million, as compared to selling expenses of $0.75 million for the six months ended June 30, 2011. General and administrative expenses for the six months ended June 30, 2012 were $5.3 million, as compared to general and administrative expenses of $7.8 million for the six months ended June 30, 2011.

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Interest Expense:For the year ended December 31, 2011, interest expense was approximately $15,796,772 as compared to interest expense of approximately $9,945,389, or 58.8% for 2010. The increase in interest expense is mainly due to the increased interest cost associated with discounting of bank acceptance notes and higher interest rates, together with the increased bank borrowings.

For the three months ended June 30, 2012, interest expense (net) was approximately $1.0 million, as compared to interest expense (net) of approximately $1.9 million, for the comparable period in 2011. The decrease in interest expenses was mainly due to interest capitalization related to the SBS project.  For the six months ended June 30, 2012, interest expense was approximately $4.5 million, as compared to interest expense (net) of approximately $4.1 million for the six months ended June 30, 2011.

Liquidated damages expense: For the year ended December 31, 2011, we accrued liquidated damages expense of $2,493,326. On April 1, 2011, trading of the Company’s common stock was suspended. In addition, management determined that, our Registration Statements were no longer effective since April 15, 2011 and the registrable securities in connection with Series A and B Private Placements were not be able to be sold pursuant to Rule 144 under the Securities Act during the period between April 2011 and November 1, 2011. Accordingly, in the year ended December 31, 2011, it became probable that the Company will be required to remit liquidated damages to investors. Estimated contingent liabilities of $2.5 million were accrued with a corresponding charge to earnings in the year ended December 31, 2011.

Net Income/loss: Net income for the year ended December 31, 2010 was approximately $7,141,296, as compared to a net income of approximately $37,120,423 in 2010.  The loss was mainly due to the higher cost of sales and the increase in legal, consulting and Investigation expenses. We also believe that the Investigation contributed significantly to the loss in 2011, because it drew the attention of our management away from the daily operations. Nevertheless, it is difficult to quantify any impact beyond the direct costs incurred.

Net income was approximately $1.1 million for the three months ended June 30, 2012, as compared to a net loss of approximately $1.8 million in the same period in 2011, an increase of $2.9 million, or 158%. The increase was mainly due to a higher yield rate and decreased legal, consulting and investigation expenses.

Net income for the six months ended June 30, 2012 was approximately $2.9 million, as compared to a net income of approximately $3.4 million in the same period in 2011, a decrease of $0.5 million, or 14%.

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Foreign Currency Translation Adjustment:Our reporting currency is the U.S. dollar. Our local currency, Renminbi (RMB), is our functional currency. Results of operations and cash flow are translated at average exchange rates during the period, and assets and liabilities are translated at the unified exchange rate as quoted by the People’s Bank of China at the end of the period. Translation adjustments resulting from this process are included in accumulated other comprehensive income in the statement of shareholders’ equity. Transaction gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the functional currency are included in the results of operations as incurred.

Currency translation adjustments resulting from this process are included in accumulated other comprehensive income in the consolidated statement of shareholders' equity and amounted to $3,235,395 for the year ended December 31, 2011. The balance sheet amounts with the exception of equity at December 31, 2010 were translated at RMB6.35324 to 1.00 U.S. dollar. The equity accounts were stated at their historical rate. The average translation rates applied to income statement accounts for the year ended December 31, 2011 and 2010 were RMB6.45328 and RMB6.75950 to 1.00 U.S. dollar.

The balance sheet amounts, at June 30, 2012 and 2011, with the exception of equity, were translated at RMB 6.30915 and RMB 6.46412 to 1.00 U.S. dollar respectively. The equity accounts were translated at their historical rates. The average translation rates applied to income statement accounts for the three months ended June 30, 2012 and 2011 were RMB 6.30279 and RMB 6.53125, respectively, to 1.00 U.S. dollar.

Liquidity and Capital Resources

The following table sets forth a summary of our approximate cash flows for the periods indicated:

	For the Year Ended December 31 (in thousands),						For the Six Months Ended June 30 (in thousands),
	2011			2010			2012 (Unaudited)			2011 (Unaudited)
Net cash provided by (used in) operating activities		1,731			2,419			(106,934,901)			34,701,657
Net cash used in investing activities		(42,313	)		(18,496	)		(21,295,703	)		(11,563,733	)
Net cash provided by financing activities		16,934			30,652			131,548,092			(46,969,550)

Net cash provided by operating activities was $1,731,351 for the year ended December 31, 2011as compared to $2,419,080 for the same period in 2010.  The decrease in cash provided by operations was primarily due to the increased payment in  income tax , consumption tax and prepayment of tariff ,the amount is $10,746,276, $14,958,506 and $26,635,979,  respectively. For the year ended December 31, 2010, the net cash provided by operations was primarily caused by net income and the increase in accounts payable and increase in advances from customers.Net cash used in operating activities was approximately $106.9 mllion for the six months ended June 30, 2012, as compared to net cash provided by operations activities of approximately $34.7 million for the same period in 2011. The decrease was primarily caused by the increase in inventory, prepayments to suppliers and  consumption tax refund receivable.

Net cash used in investing activities was approximately $42,313,337 and $18,496,035 for the years ended December 31, 2011 and 2010, respectivley. Net cash used in investing activities was primarily focused on payments for the infrastructure construction and the expansion of our facility, including the SBS facility that was completed in September 2011.Net cash used in investing activities was approximately $21.3 milion and $11.6 million for the six months ended June 30, 2012 and 2011, respectively. Net cash used in investing activities was primarily focused on payments for the infrastructure construction and the expansion of our facility. As we move forward with our expansion, it is expected that net cash used in investing activities will be consistent throughout 2012. 

Net cash provided by financing activities amounted to $16,934,305 for 2011 and $30,651,853 for 2010. Cash provided by financing activities in 2011 was primarily due to the increase in short-term bank loans, offset by cash used in the settlement of bills payable, the repayment of bank loans and the increase in pledged deposits at banks. Cash provided by financing activities in 2010 was primarily the net proceeds received from the April-May and September 2010 private financings, offset by cash used for deposits for letters of credit for the purchase of imported raw materials.Net cash provided by financing activities amounted to approximately $131.5 million for the six months ended June 30, 2012. Net cash used in financing activities amounted to approximately $47.0 million for the same period in 2011. For the six months ended June 30, 2012, the net cash provided by financing activities was through an increase in bank borrowings and bills payable.

We have entered into loan agreements with our primary lenders, Bank of China, China Construction Bank, Agricultural Bank of China, etc. under which we have term loans. As of December 31, 2011, we had an aggregate principal amount of approximately $241.7 million outstanding under the loan agreements, with maturity dates from January 2012 to November 2012 and interest rates from 2.97% to 7.93% per annum. As of June 30, 2012, we had an aggregate principal amount of approximately $409.4 million in bank loans outstanding under the loan agreements, with maturity dates from July 2012 to June 2013 and interest rates from 1.57% to 7.93% per annum. Before we enter into  loan agreements with a lender, the lender will approve a comprehensive credit line which is the maximum amount of the loans we can obtain from the lender within a certain time period. The comprehensive credit line is usually secured by one or more third party guaranties or liens on our property and equipment, or a security deposit. Once the comprehensive credit line is approved, we will enter into an individual loan agreement with the lender each time we obtain a loan from the lender under the credit line. Therefore, we typically have multiple loan agreements under one comprehensive credit line with one lender as long as the credit limit has not been reached. Though different lenders have different forms for loan agreements,  loan agreements usually contain similar material terms such as the amount of a loan, the term of a loan, interest rate, etc. In addition, most loan agreements specify the purposes of loans, and   lenders are permitted to monitor the use of loans and our business. The loan agreements generally do not require us to maintain specific ratios or working capital requirements. In the event that lenders observe abnormal use of a loan or a substantial loss in our business or other event that could potentially have a substantial negative impact on our ability to repay the loans on time, they can either amend or terminate the loan agreements, or request additional financial convenatns to secure the loans. If we fail to repay loans in a timely manner, or fail to obtain  written consent from the lenders regarding extension/renewal applications, we may be subject to default interest or the loans may be canceled.   Historically, we have no record of default on any of our loans and, as a result, we do not anticipate that our loans will not be renewed when their terms expire.  However, we cannot guarantee that one or more of our loans will not be renewed or extended at the end of their terms, which could have a material negative impact upon our liquidity which could impact our ability to purchase raw materials, make upgrades and improvements to our infrastructure or otherwise negatively impact our business and operations.

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As of June 30, 2012, 9% of our bank loans (approximately USD $36,070,900) were guaranteed by our related parties. As of December 31, 2011, 41% of our bank loans (approximately USD $94,229,790) were guaranteed by related parties. Usually, a guaranty agreement is executed among a third party, a lender and us pursuant to a credit line approved by the lender. Though different lenders use different forms for loan guaranty agreements, loan guaranty agreements usually contain substantially similar terms. According to a loan guaranty agreement, the guarantor is jointly liable for all our debts to the lender under the corresponding loan agreements and the lender can bring  legal action against the guarantor for damages in the event there is a default or breach of any loan agreement under the credit line. The guaranty is independent of any loan agreement under the credit line and irrevocable. In addition, if the  credit line is extended or renewed, a written consent from the guarantor is required. Otherwise, the guarantor is only liable for loans under loan agreements that  were executed during the original term of the credit line. Beginning in January 2011, certain individual loan guarantors, some of whom are related parties, were paid a monthly fee of approximately 0.1% of the outstanding loan balances as compensation for their guarantees. Through December 31, 2010, no compensation was paid in respect of these guarantees. As of June 30, 2012,  approximately $2.7 million was accrued as compensation to these guarantors. Historically, all debts  have been repaid  by the Company in a timely manner. All short-term bank loans are revolving loans whose terms (at the due date of payment) are generally extended by the lender. As of December 31, 2011, we were in compliance with the terms of our loan agreements. As such, management expects most unpaid loan balances will be extended at their due dates. Depending on our capital needs, the Company evaluates whether to apply for additional long-term bank loans. The Company currently has sufficient lines of credit with its banks for both short-term and long-term borrowings.

Bank Loans guaranteed by related parties or certain parties as of December 31, 2011 and 2010 are as follows:

	Loan Guarantees provided during the year ended December 31				Bank loans guaranteed as of December 31
	2011		2010		2011		2010
Mr. Tao(1)	$	12,396,800	$	79,887,600	$	34,628,000	$	36,408,000
Jicun Wang and Sumei Chen(2)	$	30,992,000	$	-	$	1,983,523	$	12,136,000
Ningbo Kewei(3)	$	34,091,200	$	82,106,700	$	-	$	11,377,500
Ningbo Pacific(4)	$	65,083,200	$	-	$	29,700,067	$	16,687,000
Ningbo Hengfa(5)	$	-	$	-	$	14,795,600	$	36,256,300
ShangdongTengda(6)	$	-	$	-	$	944,400		-
Ningbo Litong(7)	$	81,136,800	$	-	$	61,632,077	$	43,993,000

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Bank Loans guaranteed by related parties as of June 30, 2012 and 2011 are as follows:

There were no guarantees for bank loans provided by related parties during the three and six months ended June 30, 2012 and 2011.

Bank Loans guaranteed by related parties  as of June 30, 2012 are as follows:

	Bank loan guaranteed as of
	June 30
	2012
	（Unaudited）
Mr. Tao(1)	$	15,850,000
Jincun Wang and Chen(2)		1,902,000
Ningbo Kewei(3)		-
Ningbo Pacific(4)		18,318,901
Ningbo Hengfa(5)		14,899,000
Shandong Tengda(6)		951,000
Total	$	51,920,901

Loan guarantees provided by certain other parties as of June 30, 2012 and 2011 are as follows:

	Loan Guarantees provided during				Loan Guarantees provided during
	the three months ended June 30				the six months ended June 30
	2012		2011		2012		2011
	（Unaudited）		（Unaudited）		（Unaudited）		（Unaudited）
Ningbo Litong(7)	$	30,000,000	$	-	$	50,625,800	$	-
Ningbo Kewei (3)		111,062,000		-		111,062,000		-
	$	141,062,000	$	-	$	161,687,800	$	-

Bank Loans guaranteed by certain other parties as of June 30, 2012 are as follows:

	Bank loans guaranteed As of
	June 30
	2012
	（Unaudited）
Ningbo Litong	$	55,586,521
Ningbo  Keiwei	$	43,524,897

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(1)   Mr. Tao is a principal  shareholder,  the CEO and President of the Company.

(2)   Mr. Wang is a principal stockholder of the Company and Ms. Chen is his spouse.

(3)   Ningbo Kewei is a company controlled by Mr. Tao through September 2011. After control was transferred, Ningbo Kewei is included in transaction with  certain other parties beginning October 2011. The Company purchased raw materials of nil and $4,465,563 from Ningbo Kewei during the years ended December 31, 2011 and 2010, respectively, with no outstanding amount payable to Ningbo Kewei at December 31,2011 and 2010 in respect of these purchase transactions. The Company had short-term financing transaction with Ningbo Kewei in 2011 and 2010 of approximately $5,423,600 and $1,479,400, respectively.

(4)   Ningbo Pacific is 100% owned by Mr. Wang, a principal stockholder of the Company. The Company has no other transactions with Ningbo Pactific.

(5)   Ningbo Hengfa is wholly owned by Mr. Peijun Chen, a principal stockholder of the Company. The Company has no other transactions with Ningbo Hengfa.

(6)   Shangdong Tengda is wholly-owned by Mr. Peijun Chen. The Company had short-term financing transactiosn with Shangdong Tengda during the years ended December 31,  2011 and 2010 of  nil and approximately $2,219,100, respectively. Other than the short-term financing transactions and the loan guaranty, the Company has no other transactions with Shangdong Tengda.

(7)   Through October 2011, Ningbo Litong was a 12.75% nominee shareholder of Ningbo Keyuan. The Company sold finished products of $7,360,796 and $29,625,766 to Ningbo Litong during the years ended December 31, 2011 and 2010, respectively. Amounts received in advance from Litong were nil and $110,134 as of December 31, 2011 and 2010. The Company  purchased raw materials of $20,253,780 from Ningbo Litong during the year ended December 31, 2011. During the year ended December 31, 2010, the Company purchased raw materials of $18,994,104 from Ningbo Litong. Amounts prepayable to Litong were $2,740,970 and nil as of December 31, 2011 and 2010, respectively. During the three months ended June 30, 2012 and 2011, the Company sold finished products of $7,049,811 and nil to Ningbo Litong. During the six months ended June 30, 2012 and 2011, the Company sold finished products of $17,177,359 and $772,762 to Ningbo Litong. Amounts received in advance from Litong were $11,887,500 and $17,851, respectively as of June 30, 2012 and December 31, 2011. During the three months ended June 30, 2012 and 2011, the Company purchased raw materials of $8,778,079 and $9,536,282, respectively from Ningbo Litong. During the six months ended June 30, 2012 and 2011, the Company purchased raw materials of $9,223,950 and $9,536,282, respectively from Ningbo Litong.

On August 15, 2012, the Company received a consumption tax refund of $95,124,967 as a result of new consumption tax policies issued in PRC in October 2011.  The Company anticipates that consumption tax claims procedures will be more efficient in the future.

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Changes in and Disagreements With Accountants on Accounting and Financial Disclosure

1. Effective on April 22, 2010, we dismissed The Hall Group, CPAs (“Hall”) as our independent auditors and engaged Patrizio & Zhao, LLC, an Independent Registered Public Accounting Firm (“P&Z”), to serve as our independent auditors.

 (a)  For the two fiscal years ended December 31, 2009 and 2008, Hall’s report on the financial statements did  not contain any adverse opinions or disclaimers of opinion, and were not qualified or modified as to uncertainty, audit scope, or accounting principles, other than for a “going concern” uncertainty.

(b)  The termination of Hall and engagement of P&Z was approved by our Board of Directors.

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(c)   Hall and the Company did not have any disagreements with regard to any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure for the audited financials for the fiscal years ended December 31, 2009 and 2008, and subsequent interim period ended March 31, 2010 and through the date of dismissal, which disagreements, if not resolved to the satisfaction of Hall, would have caused it to make reference to the subject matter of the disagreements in connection with its reports.

(d)  During the fiscal years ended December 31, 2009 and 2008, and subsequent interim period ended March 31, 2010 and through the date of dismissal, we did not experience any reportable events, except that in its letter to us in 2009 pursuant to “Statement on Auditing Standards (SAS) 112: Communicating Internal Control Related Matters,” Hall, our former auditor, identified the following material weakness of our internal controls, which constitute a reportable event under Item 304(a)(1)(v) of Regulation S-K:

n	Reliance on financial reporting consultants for review of critical accounting areas and disclosures and material non-standard transactions;
n	Lack of sufficient accounting staff which results in a lack of segregation of duties necessary for a good system of internal control.

2. Effective on January 17, 2011, we dismissed P&Z and engaged KPMG as our independent auditors. The decision to dismiss P&Z was approved by the Company’s Audit Committee of the Board of Directors.

During the two fiscal years ended December 31, 2009, and the subsequent period through January 17, 2011, there were no:

(a)   disagreements with P&Z on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure, which disagreements, if not resolved to their satisfaction, would have caused them to make reference in connection with their opinion to the subject matter of the disagreements, or

(b) reportable events.

The audit reports of P&Z on the consolidated financial statements of the Company as of and for the years ended December 31,2009 and 2008 did not contain any adverse opinion or disclaimer of opinion, nor were they qualified or modified as to uncertainty, audit scope, or accounting principles.

3. During the preparation of our Annual Report on Form 10-K for the year ending December 31, 2010, KPMG raised certain issues, primarily relating to unexplained issues regarding certain cash transactions and recorded sales. On or about March 24, 2011, KPMG brought these issues to the attention of our Audit Committee and requested that the Audit Committee conduct an independent investigation. On March 31, 2011, our Audit Committee elected to commence such an Investigation of the issues raised and engaged the services of the Investigation Team.

On May 20, 2011, KPMG orally advised the chairman of the Audit Committee that they were going to resign as the Company’s auditor and submitted a letter of resignation on May 24, 2011 while the Investigation was being carried out with the cooperation of the Company and before the results of such Investigation had been formulated or concluded.

From January 17, 2011 when KPMG was engaged, through KPMG's resignation on May 24, 2011, there were no disagreements between the Company and KPMG on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedures, which disagreements, if not resolved to the satisfaction of KPMG would have caused KPMG to make reference to the subject matter of the disagreements in connection with its reports.

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4. Effective July 5, 2011, we engaged GHP Horwath, P.C. (“GHP Horwath”) as our new independent registered public accounting firm. The decision to engage GHP Horwath was approved by the Company’s Audit Committee of the Board of Directors. During the two most recent fiscal years, and during any subsequent interim period prior to the date of GHP Horwath’s engagement, the Company did not consult the new auditor regarding either: (i) the application of accounting principles to a proposed or completed specified transaction, or the type of audit opinion that might be rendered, and neither a written report nor oral advice was provided that was an important factor considered by the Company in reaching a decision as to the accounting, auditing, or financial reporting issue; or (ii) any matter that was either the subject of a disagreement or reportable event within the meaning set forth in Regulation S-K, Item 304 a(1)(iv) or (a)(1)(v).

Controls and Procedures

(a)            Evaluation of disclosure controls and procedures

Our management maintains disclosure controls and procedures designed to provide reasonable assurance that material information required to be disclosed by us in the reports we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that the 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. We performed an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report. Based on this evaluation, our Chief Executive Officer and our Chief Financial Officer have concluded that our disclosure controls and procedures were ineffective in ensuring that information required to be disclosed in reports filed under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified by the Securities and Exchange Commission, and were ineffective in providing reasonable assurance that information required to be disclosed by the Company in such reports is accumulated and communicated to the Company’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

We do not expect that our disclosure controls and procedures will prevent all errors and all instances of fraud. Disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Further, the design of disclosure controls and procedures must reflect the fact that there are resource constraints, and the benefits must be considered relative to their costs. Because of the inherent limitations in all disclosure controls and procedures, no evaluation of disclosure controls and procedures can provide absolute assurance that we have detected all our control deficiencies and instances of fraud, if any. The design of disclosure controls and procedures also is based partly on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

(b)        Changes in internal control over financial reporting

In connection with the preparation of our Form 10-K for the period ended December 31, 2010, our former auditors, KPMG, raised certain issues, which were primarily related to issues regarding certain cash transactions and recorded sales.  As a result, our Audit Committee elected to commence an independent investigation and engaged the services of independent counsel, Pillsbury Winthrop Shaw Pittman LLP, which in turn engaged the services of Deloitte Financial Advisory Services LLP, as independent forensic accountants, and King & Wood, as Audit Committee counsel in China.  As a result of the investigation, the Audit Committee identified a number of issues that may have a material impact on our internal controls and procedures over financial reporting.

Since the commencement of investigation, the Company has been focused on improving its internal controls and procedures. Because of the material weaknesses described in Item 9A. “Controls and Procedures” in our annual report on Form 10-K for the year ended December 31, 2011, that the Company is still in the process of remediating its internal control,  management concluded that,  as of  June 30, 2012, our disclosure controls and procedures were not effective. Investors are directed to Item 9A of annual report on Form 10-K for the year ended December 31, 2011 for the description of these weaknesses.

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As of June 30, 2012, the Company has taken and has begun to take the following measures to remediate the material weaknesses:

1) A review of the responsibilities of senior management and a restructuring of our organization chart in order to provide for proper segregation of duties, including but not limited to:

          a) Restructuring of our previous accounting department into Planning Finance Department and Funds Department, and streamlining the department’s roles to ensure clear responsibilities, work efficiency and adequate oversight of the CFO; and

          b) Termination of Mr. Xue in August 2011, our former Vice President of Accounting/ PRC CFO and hiring of Mr. Fan Zhang as Vice President of Accounting/PRC CFO.

2) Continued and careful evaluation of control processes and systems by the Audit Committee, the Board of Directors and Management, including but not limited to:

          a) Engagement of a compliance officer to monitor the Company’s corporate governance and compliance, reporting directly to the Audit Committee;

          b) Evaluation of the duties and responsibilities of the CEO and his role in day-to-day operations of the Company and the control environment; and the appointment of Mr. Jiangtao Ma as General Manger of Ningbo Keyuan in December 2011 to replace Mr. Tao, so that Mr. Tao can focus on the Company’s overall development and strategy;

          c) Implementation of a comprehensive budget management procedure based upon the evaluation of the management and proposals from an outside consultant to assist with SOX 404 compliance; and

          d) The addition of one or one or more additional independent, bilingual Chinese-speaking directors to facilitate the Board oversight and assist and augment the efforts of the current independent directors.

3) Implementation of additional controls and procedures to ensure the preparation and review of complete and transparent US GAAP financial statements in a timely and efficient manner, including but not limited to:

          a) Additional training in U.S. GAAP for our accounting staff to ensure the accuracy of the Financial statement; and

          b) Hiring of additional qualified accounting personnel, including an experienced controller;

4) Cessation of the use of an off-balance sheet cash account and the adoption of policies and procedures to prevent the future use of off balance sheet accounts as well as development of new policies and procedures to strengthen effective management and day-to-day operation of funds;

5) Implementation of new procedures for the identification and approval of and appropriate disclosure of related party transactions;

6) Development and implementation of Customer Access System and Database Management System to review business licenses and other related documents, as well as conducting site visits to current and potential customers to ensure their good standing and improve the Company’s recording of transactions;

7) Implementation of new policies and procedures to ensure that all transactions are supported by sufficient documentation;

8) Development and implementation of policies and procedures that provide continuous risk assessment of legal and regulatory considerations related to business activities;

9) Development of policies to ensure that all identified contingencies are evaluated completely and in a timely manner;

10) Development and implementation of policies and procedures to ensure that revenues are properly recorded and all invoices are appropriately reviewed by accounting personnel;

11) Implementation of policies and procedures to ensure inventory purchases are properly recorded;

12) Implementation of policies and procedures to ensure that all liabilities are recorded on the proper period;

13) Development and implementation of policies and procedures to ensure that financial information is appropriately shared during inter-departmental meetings;

14) Development and implementation of procedures to set up an effective incentive system and commitment system to retain personnel and prevent talent losses; and

15) Planned adoption of a Corporate Best Practices Manual;

In addition, as a result of the resignation of Mr. Gerry Goldberg as the Chairman of the Audit Committee on June 29, 2012, we appointed Mr. Yuxing Xiang as a new independent director to serve as the Chairman of the Audit Committee who is bilingual with financial expertise and meets requirements for independence as set forth in Nasdaq Rule 4200(a) (14).

We believe that the remediation measures we are taking, if effectively implemented and maintained, will remediate the material weaknesses.

Except as described above, there have been no changes in our internal controls over financial reporting that have materially affected, or are reasonably likely to materially affect our internal controls over financial reporting.

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Directors And Executive Officers

The following table and text set forth the names and ages of all directors and executive officers as of September 19, 2012. The Board of Directors is comprised of only one class. All of the directors will serve until the next annual meeting of shareholders and until their successors are elected and qualified, or until their earlier death, retirement, resignation or removal. There are no family relationships among our directors and executive officers. Also provided herein are brief descriptions of the business experience of each director, executive officer and advisor during the past five years and an indication of directorships held by each director in other companies subject to the reporting requirements under the Federal securities laws.

As of the closing of the Share Exchange on April 22, 2010, Ms. Smith resigned as Chairman of the Board, Chief Executive Officer, Chief Financial Officer, President and Secretary, effective immediately. Our Board of Directors appointed Mr. Tao to serve as President, Chief Executive Officer, and Chief Financial Officer effective immediately at the closing of the Share Exchange.

Prior to the consummation of the Share Exchange, our Board of Directors was comprised of one director, Ms. Smith. Effective at the closing of the Share Exchange, Ms. Smith resigned from her position as Chairman and tendered her resignation as a member of our Board; prior to resigning as Chairman, Ms. Smith appointed Mr. Chunfeng Tao to serve as Chairman of our Board. This change in our Board was effective on May 10, 2010, which was 10 days after we mailed a schedule 14(f) to our shareholders regarding same.

Set forth below is information regarding our current directors and executive officers:

Name	Age	Position
Chunfeng Tao	44	Chairman, President, Chief Executive Officer and Secretary
Fan Zhang	34	Vice President of Accounting & Acting Chief Financial Officer
Dishen Shen	73	Independent Director
Xin Yue	47	Director
Xiang Yuxin	40	Independent Director

Mr. Chunfeng Tao, Chairman, President and Chief Executive Officer.Mr. Tao has been a member of our Board of Directors and the CFO of the Company since April 22, 2010. Mr. Tao has over 20 years’ extensive experience in the petrochemical industry. Between 2008 to 2010, he served as President of Ningbo Plastics. Between 2005 and 2008, he served as President of Ningbo Hebang Chemical Co., a company with annual revenue of RMB 10 billion which he managed and built to an annual production capacity of 250,000 MT for aromatic and heavy oil cracking products. Between 2002 and 2005, Mr. Tao served as Executive Vice President of Ningbo Daxie Liwan Petrochemicals Co., a company with annual revenue of RMB 6 billion. Under his management, the company’s annual production was increased to 500,000 MT of high grade asphalt. Between 1989 and 2002, Mr. Tao served in various senior management and technical positions at Sinopec Zhenhai Refining & Chemical Co., the largest base for crude oil processing and sour crude oil processing in China, and won over 30 technological innovations, management awards and distinction during his service period. Mr. Tao received his Bachelor of Science in Petroleum Processing from Guangdong Petrochemical College and Master of Science in Chemical Engineering from China University of Petrochemicals.

Mr. Fan Zhang, Vice President of Accounting & Acting Chief Financial Officer. On August 20, 2011, Mr. Fan Zhang was appointed as Vice President of Accounting by the Board of the Directors to replace Mr. Weifeng Xue, effective as of August 20, 2011. Before joining Keyuan, Mr. Zhang was a Finance Director in Ningbo LG Yongxing Chemical Co., Ltd., a Sino-Korean joint venture between Ningbo Yongxing Chemical Investment Co. Ltd., and LG Chemical Co. Ltd., the largest chemical company in Korea. Ningbo LG Yongxing Chemical Co. Ltd is the largest ABS producer in China. Mr. Zhang has more than twelve years experience in financial reporting and controls, tax planning, fund management, ERP operation system management, internal audit and property insurance planning. Mr. Zhang holds a Bachelor degree in Economics from Hangzhou Electronic Technical University.

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Mr. Dishen Shen, Director. Mr. Shen has been a member of our Board of Directors since July 1, 2010. Mr. Shen is a senior petrochemical engineer with nearly 40 years of oil refining and petrochemical industry expertise and management experience and has served in a variety of progressive leadership roles in planning and economic development in Zhejiang Province, focusing primarily on development of the petrochemical industry, and serves today as a member of the People’s Committee of Zhejiang Province. Since 2005, he has been serving as a senior counsel for Zhejiang Provincial Association Of Engineering Consultants, the institute providing consulting and administration service. He graduated from Beijing Petroleum Institute with a major in oil refining systems.

Mr. Xin Yue, Director. Mr. Yue has been a member of our Board of Directors since July 1, 2010. Mr. Yue currently is co-founder and chief executive officer of Cmark Capital Co., Ltd from 2005. Previously he also co-founded Golden Spider Co., Ltd., and New Shengtong Technology Co., Ltd. Mr. Yue serves as an advisor to Tianyin Pharmaceutical Co., Inc. and Jpak Group Inc. and president at a Shanghai subsidiary of Jiubai Group Co., Ltd. He received his Bachelor of Science in Economics and Management at Capital Economic and Trade University and his MBA in Finance from Baruch College at The City University of New York.

Mr.Yuxin Xiang, Director. Mr. Yuxin Xiang has been a member of our Board of Directors since September 6, 2012. Mr. Xiang serves as the President of CNX Consulting Inc. which provides financial reporting, asset management and capital transactions services to North American companies, as well as a director and Audit Committee member of five companies listed on the Toronto Stock Exchange (TSX) and TSX Venture Exchange (TSXV). Prior to joining CNX Consulting, Mr. Xiang served as the Chief Financial Officer of IND DairyTech Limited and GobiMin Inc, both listed on TSXV. Mr. Xiang also worked in corporate finance management for several TSX listed companies, including COM DEV International Ltd., ATS Automation Tooling Systems Inc. and CFM Corporation. He holdsa Bachelor of Arts Degree from Huazhong University of Science & Technology in China, and a Masters of Business Administration from York University in Canada. Mr. Xiang is a Certified Management Accountant (Ontario) and a Certified Public Accountant (Delaware).

Significant Employees

The following are employees who are not executive officers, but who are expected to make significant contributions to our business:

Dr. Jingtao Ma, Executive Vice President. Dr. Ma joined the Company in 2007 and he has over 20 years’ experience in corporate management, research & development, sales & marketing, and business development. Dr. Ma is responsible for the sales & marketing and raw material procurement of the Company. Between 1992 and 2007, he served in management and technical positions at Sinopec Zhenhai Refining & Chemical Co. in various functions including manufacturing and operations, and chemical and technical analysis. Dr. Ma received his Master of Science and is currently studying for a Doctorate in Physical Chemistry from Lanzhou Chemistry & Physics Research Institute of CSA.

Mr. Shifa Wang, Vice President & Chief Engineer. With 30 years’ management experience in petrochemical technology and manufacturing, and specialty in oil refining and catalytic cracking, Mr. Wang has been responsible for technology, and research and development of the Company since 2009. Between 2007 and 2009, Mr. Wang served as General Manager at Guangdong Yingchang Heavy Road Asphalt Co., Ltd, responsible for managing and overseeing the overall business operations of the company. Between 1981 and 2002, he served as the Chief Engineer at Sinopec Anqing Refinery Co., Ltd., responsible for technology development and research and development. Between 2003 and 2006, he was the Head of Operations for Phase II production line expansion, including construction of 500,000 MT heavy oil catalytic cracking facility, 150,000 MT gas fractionation facility, 10,000 MT sulphur recovery facility and 30,000 MT polypropylene facility, at Guangdong Tianyi Group Co., Ltd. Mr. Wang received his Bachelor of Science from Chemical Engineering Department of China Petroleum University and Master of Art in Enterprise Management from Qinghua University.

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Mr. Mingliang Liu, Vice President of Manufacturing. Mr. Liu has been responsible for overseeing the manufacturing by the Company since 2009. Mr. Liu has over 30 years of experience in petrochemical manufacturing and production management and specializes in oil refining, heavy oil cracking and crude oil processing. Between 1975 and 2009, he served in various supervisory and managerial positions at Sinopec Zhenhai Refining & Chemical Co. Mr. Liu majored in Economics & Management at Zhejiang CCP Institute.

Corporate Governance

Corporate governance is the system that allocates duties and authority among a company’s stockholders, Board of Directors and management. The stockholders elect the Board of Directors and vote on extraordinary matters; the Board of Directors is a company’s governing body, responsible for hiring, overseeing, and evaluating management, particularly the chief executive officer; and management runs a company’s day-to-day operations. Our Board of Directors currently consists of five seats.

Board Leadership Structure.

The Board of Directors maintains a structure with the Chief Executive Officer of the Company holding the position as Chairman of the Board of Directors.

The Board of Directors utilizes a leadership structure that has the Chief Executive Officer (who is the Corporation’s principal executive officer and a director) who also acts in the capacity as Board Chairman, without a designated independent lead director. This structure creates efficiency in the preparation of the meeting agendas and related Board materials as the Company’s Chief Executive Officer works more directly with those preparing the necessary Board materials and is more connected to the overall daily operations of the Company. Agendas are also prepared with the permitted input of the full Board of Directors allowing for any concerns or risks of any individual director to be discussed as deemed appropriate. Given the Company’s relatively small size (both in terms of number of employees and in scope of operational activities directly conducted by the Company), its corporate strategy and its focus on research and development, this structure is deemed to be appropriate and allows for efficient oversight. However, in order to improve corporate governance, the Board has authorized the establishment of a sub-committee composed of the independent directors, the Company’s SOX 404 compliance consultant and a U.S. securities counsel to the Company to examine the responsibilities and duties of the Chief Executive Officer and Chairman of the Board, and further evaluate this structure.

Compliance with Section 16(a) of the Exchange Act

Section 16(a) of the Exchange Act requires our officers, directors and persons who own more than 10% of any class of our securities registered under Section 12(g) of the Exchange Act to file reports of ownership and changes in ownership with the SEC. Officers, directors and greater than 10% stockholders are required by SEC regulation to furnish us with copies of all Section 16(a) forms they file.

Based on our review of copies of such reports, we believe that there was compliance with all filing requirements of Section 16(a) applicable to our officers, directors and 10% stockholders during fiscal 2011.

Code of ethics

The Company has always encouraged its employees, including officers and directors to conduct business in an honest and ethical manner. Additionally, it has always been our policy to comply with all applicable laws and provide accurate and timely disclosure.

We have always encouraged our employees, including officers and directors to conduct business in an honest and ethical manner. Additionally, it has always been our policy to comply with all applicable laws and provide accurate and timely disclosure. Due to our lack of operations and small employee base prior to the Share Exchange, we did not maintain a formal written code of ethics. However, as a result of the Share Exchange, we decided to adopt formal written codes of ethics for our executive officers, our directors and our employees.

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Our codes of ethics are designed to deter wrongdoing and promote honest and ethical conduct and compliance with applicable laws and regulations. These codes also incorporate our expectations of our executives that enable us to provide accurate and timely disclosure in our filings with the Securities and Exchange Commission and other public communications. Our codes of ethics are attached as exhibits to the Current Report on Form 8-K that we filed with the SEC on July 7, 2010 and are available on our website, http://ir.stockpr.com/keyuanpetrochemicals/governance-documents. Any future changes or amendments to our code of ethics, and any waiver of our codes of ethics will also be posted on our website when applicable.

Board Independence and Committees

Since our stock start started trading on Nasdaq in September 2010, we were required to comply with the director independence requirements of the Nasdaq rules. Since that time, in determining whether our directors are independent, we have complied and intend to continue to comply with the Nasdaq rules although our common stock is currently trading on OTCQB. The Board of Directors will also consult with counsel to ensure that the Boards of Director’s determinations are consistent with those rules and all relevant securities and other laws and regulations regarding the independence of directors, including those adopted under the Sarbanes-Oxley Act of 2002 with respect to the independence of Audit Committee members. The Nasdaq listing standards define an “independent director” generally as a person, other than an officer of a company, who does not have a relationship with the company that would interfere with the director’s exercise of independent judgment. Our board currently consists of four members and the board has determined that two of them are “independent” as defined by Nasdaq Rule 4200(a)(15).  We intend to appoint another independent director so that a majority of the board members will be independent. We are currently seeking for qualified candidate.

Audit Committee and Financial Expert

Our Audit Committee consists of Mr.Yuxin Xiang and Mr. Dishen Shen,. The Audit Committee assists the Board of Directors oversight of (i) the integrity of the our financial statements, (ii) our compliance with legal and regulatory requirements, (iii) the independent auditor’s qualifications and independence, and (iv) the performance of our internal audit function and independent auditor, and prepares the report that the Securities and Exchange Commission requires to be included in our annual proxy statement. The Audit Committee operates under a written charter. Mr. Yuxin Xiang is the Chairman of our Audit Committee.

The Board of Directors determined that Mr. Xiang possesses accounting or related financial management experience that qualifies him as financially sophisticated within the meaning of Rule 5605-3(2)(A) of the Marketplace Rules of The Nasdaq Stock Market LLC and that he is an “audit committee financial expert” as defined by the rules and regulations of the Securities and Exchange Commission.

Compensation Committee

The Compensation Committee is responsible for overseeing and, as appropriate, making recommendations to the Board of Directors regarding the annual salaries and other compensation of our executive officers and general employees and other policies, and for providing assistance and recommendations with respect to our compensation policies and practices. Mr. Dishen Shen and Mr. Yuxin Xiang  are the  member of the Compensation Committee. The Compensation Committee operates under a written charter.

Nominating Committee and Corporate Governance Committee

The purpose of the Nominating and Corporate Governance Committee is to assist the Board of Directors in identifying qualified individuals to become members of our Board of Directors, in determining the composition of the Board of Directors and in monitoring the process to assess Board effectiveness. Mr. Dishen Shen is the sole member of the Nominating and Corporate Governance Committee. The Nominating and Corporate Governance Committee operates under a written charter.

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Employee Agreements

We have entered into employment agreements with each of the PRC subsidiary’s employees, officers and directors.

On May 1, 2007, Ningbo Keyuan entered into a non-fixed term employment agreement with Mr. Chunfeng Tao, pursuant to which, Ningbo Keyuan hired Mr. Tao as its general manager effective May 1, 2007. The compensation in connection with this employment shall be commensurate with Mr. Tao’s duties and responsibility as the general manager and is subject to mutual agreement between Mr. Tao and Ningbo Keyuan.  On May 10, 2007, Keyaun Plastics entered into the similar employment agreement with Dr. Jingtao Ma to hire Dr. Ma as its vice executive general manager, effective May 10, 2007. On February 2, 2009, Keyaun Plastics entered into another similar agreement with Mr. Mingliang Liu to hire him as vice general manager. On October 21, 2009, Mr. Shifa Wang was hired by Ningbo Keyuan as a vice technical general manager and chief engineer and a similar employment agreement was signed between Ningbo Keyuan and Mr. Wang.

On May 1, 2007, Ningbo Keyuan also entered into a confidentiality and non-compete agreement with Mr. Tao, pursuant to which, Mr. Tao agreed, among other things, (i) that he will keep in confidence all Ningbo Keyuan confidential information obtained in connection with such employment; (ii) that Ningbo Keyuan has the sole ownership right to all Ningbo Keyuan intellectual properties, either developed by Mr. Tao individually or collectively with other parties during his employment term or within one (1) year following the termination of his employment; and (iii) that within two (2) years following the termination of his employment, he will not, directly or indirectly, engage in any business or other activities related to Ningbo Keyuan confidential information that he obtained during his last five (5) years of employment (or such less term) with Ningbo Keyuan.  On May 10, 2007, similar confidentiality and non-compete agreements were entered into between Ningbo Keyuan and Mr. Jingtao Ma and also between Ningbo Keyuan and Mr. Weifeng Xue. In addition, using the same form of the agreement, Ningbo Keyuan entered into confidentiality and non-compete agreements with Mr. Mingliang Liu and Mr. Shifa Wang respectively on February 2, 2009 and October 21, 2009.

On May 23, 2011, Ningbo Keyuan entered into a non-fixed term employment agreement with Mr. Fan Zhang, pursuant to which Ningbo Keyuan hired Mr. Zhang as its Chief Financial Officer effective May 23, 2011. Mr. Zhang assumed the responsibilities of our Acting Chief Financial Officer after Ms. Li’s resignation as our Chief Financial Officer.

 

On December 2, 2011, Ningbo Keyuan appointed Dr. Jingtao Ma as the new General Manager of Ningbo Keyuan, effective immediately, replacing Mr. Chungfeng Tao.

Executive Compensation

Summary Compensation Table of Named Executive Officers

The following table sets forth all cash compensation paid by us, as well as certain other compensation paid or accrued, in 2011, 2010 and 2009 to each of the following named executive officers.

Name and Principal Position	Fiscal Year	Salary ($)		Bonus ($)		Option Awards ($)		Non-Equity Incentive Plan Compensation ($)	Change in Pension Value and Nonqualified Deferred Compensation Earnings ($)	All Other Compensation ($)	Total ($)
	2011		28,116		90,772							118,888
Chunfeng Tao	2010		27,836		53,174		55,788					136,825
(President, Chief Executive)	2009		25,337		47,810							73,148
Aichun Li(2)	2011		125,000									125,000
(Chief Financial Officer)	2010		97,581				42,771					140,352
Fan Zhang (3) (Acting Chief Financial Officer)	2011		14,079		13,822							27,902
	2011		25,435		48,555							73,990
Jingtao Ma (1)	2010		23,602		27,982		42,771					97,335
(Vice President)	2009		21,423		22,466							43,889
	2011		15,739									15,739
Weifeng Xue(1)	2010		23,843		27,711		39,052					90,606
(Vice President of Accounting)	2009		19,986		23,903							43,889

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(1) Although they are not executive officers, based on upon the compensation received, Mr. Ma and Mr. Xue qualify as named executive officers for purposes of this table. Mr. Xue no longer has any further responsibility or authority with regard to the accounting or finance of the Company since August 20, 2011. Mr. Xue remained available to assist the Company with the transition for a period of up to two months.

(2) On October 12, 2011, Ms. Li resigned her position as Chief Financial Officer of the Company. Ms. Li currently was a consultant retained by the Company until December 12, 2011.

(3) Mr. Zhang was appointed as Acting Chief Financial Officer after Ms. Li resigned her postion as the CFO of the Company in October 2011.

Pension Benefits

We do not sponsor any qualified or non-qualified defined benefit plans.

Nonqualified Deferred Compensation

We do not maintain any non-qualified defined contribution or deferred compensation plans.

Retirement/Resignation Plans

We do not have any plans or arrangements in place regarding the payment to any of our executive officers following such person’s retirement, resignation, constructive termination or change in control transaction.

Compensation of Directors

Our directors are reimbursed for expenses incurred by them in connection with attending Board of Directors’ meetings. Pursuant to an independent director agreement we entered into with Gerry Goldberg on August 1, 2011, Mr. Goldberg receives a fee in cash of $10,000 per month during the two-year term of the agreement. On July 1, 2010, we granted to Mr. Goldberg a five-year option to purchase 40,000 shares of our common stock, at an exercise price of $4.20 per share. Pursuant to an independent director agreement we entered into with Michael Rosenberg on August 1, 2011, Mr. Rosenberg receives a fee in cash of $8,000 per month during the two-year term of the agreement. On July 1, 2010, we granted to Mr. Rosenberg a five-year option to purchase 40,000 shares of our common stock, at an exercise price of $4.20 per share. Mr. Dishen Shen received a fee in cash of RMB 11,000 (approximately USD$ 1,705) per month pursuant to an independent director agreement we entered into with him, as amended on September 30, 2011. Other than the compensation disclosed above, our directors do not receive any other compensation for serving on the Board of Directors.

The following table sets forth all cash compensation paid by us, as well as certain other compensation paid in fiscal year 2011 to each of the following named directors.

Name	Fees earned or paid in cash ($)		Stock Awards ($)		Option Awards ($)		Non-equity incentive plan compensation ($)			Nonqualified deferred compensation earnings ($)		All other compensation ($)		Total ($)
Chunfeng Tao		-		-		-		-			-		-		-
Gerry Goldberg		78,000		-		-		-	(1)		-		-		169,349
Michael Rosenberg		64,000		-		-		-	(2)		-		-		155,349
Xin Yue		-		-		-		-			-		-		-
Dishen Shen		20,460		-		-		-			-		-		20,460

(1)

Pursuant to his agreement to serve as our independent director on July 1, 2010, Mr. Goldberg was granted a five-year option to purchase 40,000 shares of our common stock, at an exercise price of $4.20 per share, which represents the fair market value of our common stock on July 1, 2010. 50% of the option vested after one year of issuance and the remaining 50% shall vest after two years of issuance. The option will expire on June 30, 2015.

(2)

Pursuant to his agreement to serve as our independent director on July 1, 2010, Mr. Rosenberg was granted a five-year option to purchase 40,000 shares of our common stock, at an exercise price of $4.20 per share, which represents the fair market value of our common stock on July 1, 2010. 50% of the option vested after one year of issuance and the remaining 50% shall vest after two years of issuance. The option will expire on June 30, 2015.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth certain information regarding beneficial ownership of our Common Stock as of February 17, 2012 by (i) each person (or group of affiliated persons) who is known by us to own more than five percent (5%) of the outstanding shares of our Common Stock, (ii) each director, executive officer and director nominee, and (iii) all of our directors, executive officers and director nominees as a group. As of  September 19, 2012, we had 57,646,160  shares of Common Stock issued and outstanding, and 5,333,340 shares of Series B Preferred Stock issued and outstanding.

Beneficial ownership is determined in accordance with SEC rules and generally includes voting or investment power with respect to securities. For purposes of this table, a person or group of persons is deemed to have “beneficial ownership” of any shares of common stock that such person has the right to acquire within 60 days of September 19, 2012. For purposes of computing the percentage of outstanding shares of our common stock held by each person or group of persons named above, any shares that such person or persons has the right to acquire within 60 days of September 19, 2012 is deemed to be outstanding for such person, but is not deemed to be outstanding for the purpose of computing the percentage ownership of any other person. The inclusion herein of any shares listed as beneficially owned does not constitute an admission of beneficial ownership.

Notwithstanding the foregoing, because the Series M Preferred Stock votes on as converted basis with the Common Stock, we have included the owners of such stock in this table. Accordingly, we calculate beneficial ownership for purposes of this table as follows:

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A + B

X + B

Where:

A = individual’s current holders of common stock

B = number of shares of common stock individual may own within 60 days

X= number of common stock currently outstanding, including the shares of common stock underlying the Series M Preferred Stock since such class votes on as converted basis with the common.

Unless otherwise noted, the principal address of each of the stockholders, directors and officers listed below is Qingshi Industrial Park, Ningbo Economic & Technological Development Zone, Ningbo, Zhejiang Province, P. R. China 31580.

Name of Beneficial Owner	Amount (Number of Shares)			Percentage of Outstanding Shares of Common Stock(5)(6)
Delight Reward Limited(1)		47,658,000	(2)		82.67	%
Chunfeng Tao(3)		21,738,338			37.71	%
Dragon State International Limited		5,085,185	(4)		8.47	%
Jicun Wang		11,081,581	(7)		19.22	%
Peijun Chen		9,802,965	(8)		17.01	%

(1) Delight Reward Limited is owned by Apex Smart Limited (45.6132%), Best Castle Investments Limited (23.2523%), Chance Brilliant Holdings Limited (20.5694%), Harvest Point Limited (5.3896%) and Strategic Synergy Limited (5.1755%). Mr. Brian Pak-Lun Mok is the controlling person of Apex Smart Limited, Harvest Point Limited and Strategic Synergy Limited (subject to the share transfer agreement described in Footnote 2 and the discussion below). Mr. O. Wing Po is the controlling person of Best Castle Investments Limited (subject to the share transfer agreement described in more detail below). Mr. Lo Kan Kwan is the controllingperson of Chance Brilliant Holdings Limited (subject to the share transfer agreement described in more detail below).

(2) In connection with the Share Exchange, Delight Reward received 47,658 shares of Series M Preferred Stock that converted into 47,658,000 shares of Common Stock on December 28, 2010.

(3) Pursuant to a share transfer agreement, Mr. Chunfeng Tao, our Chairman, Chief Executive Officer and President has an option, subject to certain performance targets, to purchase from Mr. Brian Pak-Lun Mok, the current sole shareholder of Apex Smart Limited (the current owner of 45.6132% of the share capital of Delight Reward Limited), up to 100% of Apex Smart Limited’s equity, which, upon exercise, would entitle Mr. Tao to own 45.6132% of the equity of Delight Reward Limited. Accordingly, upon exercise of such option, Mr. Tao will indirectly (through his 45.6132% ownership of Delight Reward Limited) own and control 21,738,338 shares of our Common Stock. On November 15, 2010, Mr. Tao exercised the option and acquired 16,677 shares of Apex Smart Limited. Therefore, Mr. Tao indirectly owns and controls 7,246,113 shares of our common stock. Based upon the terms of the share transfer agreement, the earliest Mr. Tao may exercise the remaining option is March 2011. However, as of February 17, 2012, Mr. Tao has not yet exercised the remaining options.

(4) In connection with the September 2010 Private Placement, Dragon State International Limited owns 5,333,340 shares of Series B Preferred Stock. However, pursuant to the relative rights and preferences of the Series B preferred stock, the numbers of common stock to be issued upon conversion of the Series B preferred stock cannot exceed 9.99% of the then issued and outstanding shares of common stock outstanding at such time. Given as of September 19, 2012, there are 57,646,160  shares of common stock outstanding giving effect that 47,658 of Series M preferred stock has converted into 47,658,000 shares of common stock.

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(5) On November 4, 2010, the Company exercised its mandatory conversion rights under the terms of the Series A Preferred Stock to convert all of outstanding shares of its Series A 6% Cumulative Convertible Preferred Stock into a total of 6,132,032 shares of Common Stock, $0.001 par value per share. As a result, following the conversion, all 6,132,032 shares of Series A Preferred Stock that had been outstanding will be cancelled and will be automatically converted, without any delivery of conversion notice required on the part of the holders of Series A Preferred Stock. As of the date hereof, the Company has 57,646,160 shares of Common Stock outstanding. Dividends on the Series A Preferred Stock accrued through November 3, 2010 and amounted to approximately $143,000 and will be paid to the holders of Series A Preferred Stock on the regularly scheduled payment date of January 31, 2011. As a result of foregoing, as of November 4, 2010, the Company will no longer incur the Series A Dividend that was payable quarterly, at the rate of 6% per annum for each outstanding share, payable in cash or common stock dividends, as applicable.

(6) On December 28, 2010, Keyuan Petrochemicals, Inc (the “Company”) exercised its mandatory conversion rights under the terms of the Series M Preferred Stock to convert all of outstanding shares of its Series M Preferred Stock into a total of 47,658,000 shares of Common Stock, $0.001 par value per share. As a result, following the conversion, all 47,658 shares of Series M preferred stock that had been outstanding will be cancelled and will be automatically converted, without any delivery of conversion notice required on the part of the holders of Series M Preferred Stock. As of the date hereof, the Company has 57,646,160 shares of Common Stock outstanding.

(7) Pursuant to a share transfer agreement, Mr. Jicun Wang exercised his Slow Walk Options, after  certain performance targets were met, to purchase from Mr. O. Wing Po, 100% of Best Castle Investments Limited’s equity, which entitled Mr. Wang to own 23.2523% of the equity of Delight Reward Limited. Accordingly, upon exercise of such option, Mr. Wang indirectly (through his 23.2523% ownership of Delight Reward Limited) owns and controls 11,081,581 shares of our Common Stock.

(8) Pursuant to a share transfer agreement, Mr. Peijun Chen exercised his Slow Walk Options, after  certain performance targets were met, to purchase from Mr. Lo Kan Kwan, 100% of Chance Brilliant Holdings Limited’s equity, which entitled Mr. Wang to own 20.5694% of the equity of Delight Reward Limited. Accordingly, upon exercise of such option, Mr. Wang indirectly (through his 20.5694% ownership of Delight Reward Limited) owns and controls 9,802,965 shares of our Common Stock.

Changes in Control

Lock Up Agreements

Pursuant to the lock up agreement the Company entered into in April-May Private Placement, all of the shares of common stock to be owned by Delight Reward will be restricted from public or private sale for a period of six (6) months following October 19, 2010 (the effective date of the registration statement registering the registrable shares issued in the April-May Private 2010 Placement ); following such six (6) month period, Delight Reward shall be allowed to sell up to 1/12 of its holdings each month for the next twelve months. Notwithstanding the foregoing, Delight Reward shall be permitted to engage in a transfer in a private sale of the lock-up shares, provided that such transferee agrees in writing to be bound by and subject to the terms of the lock-up agreement.

Pursuant to the lock up agreement the Company entered into in September Private Placement, all of the shares of common stock to be owned by Mr. Chunfeng Tao, Mr. Jicun Wang, Mr. Peijun Chen and Mr. Xin Yue will be restricted from public or private sale until January 19, 2011 ( the effective date of the registration statement registering all registrable shares in September Private Placement); during the twenty four (24) months immediately following January 19, 2011, such shareholders shall not transfer more than twenty percent (20%) of the their lock-up shares in the aggregate, provided, that they may transfer not more than 0.83333% of the lock-up shares during each calendar month in such 24 month period. Notwithstanding the foregoing, such shareholders are permitted to engage in a transfer in a private sale of their lock-up shares, provided that such transferee agrees in writing to be bound by and subject to the terms of the lock-up agreement. .

Share Escrow Agreement

We also entered into an escrow agreement with the Investors of the April-May 2010 Private Placement and the September 2010 Private Placement, pursuant to which we placed 5,000 shares of Series M Preferred Stock in an escrow account. The 5,000 shares of Series M Preferred Stock automatically converted into 5,000,000 shares of Common Stock (the “Escrow Shares”) after we amended our Articles of Incorporation to increase our authorized Common Stock to one hundred million (100,000,000) shares on December 28, 2010.

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If we achieve less than 95% of the 2010 performance threshold (net income equal to or greater than $33.0 million), then the Escrow Shares for such year will be delivered to the Investors in the amount of 500,000 shares of Common Stock for each full percentage point by which such threshold was not achieved up to a maximum of 5,000,000 shares of Common Stock.

The net income for the year ended December 31, 2010 was approximately $37,100,000, therefore, we achieved the 2010 performance threshold and the Escrow Shares are in the process of being released to the shareholders.

Slow Walk Agreements

The controlling persons of each of the five shareholders entities of Delight Reward Limited have entered into certain Slow Walk Agreements whereby the controlling persons have each agreed to transfer their shareholdings to another beneficiary, subject to certain performance targets being met. The performance targets are: at least $39 million of gross revenue for the three months commencing from July 2010 to September 2010; at least $40 million of gross revenue for the three months commencing from October 2010 to December 2010; and, at least $41 million of gross revenue for the three months commencing from January 2011 to March 2011.

Pursuant to these agreements, (i) Mr. Brian Pak-Lun Mok, the sole shareholder of Apex Smart Limited, granted to Mr. Tao an option to acquire the 50,000 ordinary shares of Apex Smart Limited if the performance targets are met; (ii) Mr. O. Wing Po, the sole shareholder of Best Castle Investments Limited, granted to Mr. Jicun Wang an option to acquire the 50,000 ordinary shares of Best Castle Investments Limited if the performance targets are met; (iii) Mr. Lo Kan Kwan, the sole shareholder of Chance Brilliant Holdings Limited, Mr. Peijun Chen an option to acquire the 50,000 ordinary shares of Chance Brilliant Holdings Limited if the performance targets are met; (iv) Mr. Brian Pak-Lun Mok, the sole shareholder of Harvest Point Limited, granted to Mr. Xin Yue an option to acquire the 50,000 ordinary shares of Harvest Point Limited if the performance targets are met; and, (v) Mr. Brian Pak-Lun Mok, the sole shareholder of Strategic Synergy Limited, granted to Mr. Yue an option to acquire the 50,000 ordinary shares of Strategic Synergy Limited if the performance targets are met. Pursuant to each of these agreements, the option to acquire theses shares shall vest at a rate of one-third (1/3) for each performance target that is met (the “Slow Walk Options”).

On November 5, 2010, one-third of the Slow Walk Options were exercised after the first performance target was met.

On April 29, 2011, Harvest Point Limited transferred 1,028 shares of Delight Reward Limited’s stock to Strategic Synergy Limited, changing their ownership of Delight Reward Limited’s stock to 3.334% and 7.232% respectively. On the same day, Mr. Brian Pak-Lun Mok and Mr. Xin Yue transferred 33,333 shares and 16,667 shares of Harvest Point Limited, respectively, to Ms. Muxia Duan thus transferring 100% of the ownership of Harvest Point Limited to Ms. Muxia Duan.

After the relative performance targets of the Slow Walk Agreements were met, Mr. Chen and Mr. Wang exercised their remaining two-thirds of the Slow Walk Options on February 15, 2012 and Mr. Tao exercised his remaining two-thirds of the Slow Walk Options on March 30, 2012. As the date of hereof, Mr. Yue has not yet exercised his remaining two-thirds of the Slow Walk Options.

Review, Approval and Ratification of Related Party Transactions

Given our small size and limited financial resources, we had not adopted, prior to the Share Exchange, formal policies and procedures for the review, approval or ratification of related party or third party transactions with our executive officers, directors and significant shareholders. However, in September 2011, we adopted new procedures for the identification and approval of and appropriate disclosure of potential related party transactions. Our Board of Directors will consider and may pre-approve specific pre-determined related party transactions, and may authorize us to proceed with certain related party transactions subject to proper accounting and disclosure.

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Certain Relationships and Related Transactions.

We have not entered into any transaction during the last two fiscal years with any director, executive officer, director nominee, 5% or more shareholder, nor have we entered into transaction with any member of the immediate families of the foregoing person (including spouse, parents, children, siblings, and in-laws) or is any such transaction proposed, except as follows:

(A)   Related Party Transactions

The Company considers all transactions with the following parties to be related party transactions.

Name of parties	Relationship
Mr. Chunfeng Tao	Majority stockholder
Mr. Jicun Wang	Principal stockholder
Mr. Peijun Chen	Principal stockholder
Ms. Sumei Chen	Member of the Company’s Board of Supervisors and spouse of Mr. Wang
Ms. Yushui Huang	Vice President of Administration, Ningbo Keyuan
Mr. WeifengXue	Former Vice President of Accounting, Ningbo Keyuan through August 2011
Mr. HengfengShou	Former Vice President of Sales, Ningbo Keyuan Petrochemical though November 2011
Mr. Jingtao Ma	General Manager/President
Mr.Shifa Wang	Vice President Guangxi Project
Mr.Ming Liang Liu	Vice President Production
Mr.Shegeng Ding	Vice President Equipment
Mr. Fan Zhang	CFO
Ningbo Kewei Investment Co., Ltd.	A company controlled by Mr. Tao through September 2011
(Ningbo Kewei)
Ningbo Pacific Ocean Shipping Co., Ltd	100% ownership by Mr. Wang
(Ningbo Pacific)
Ningbo Hengfa Metal Product Co., Ltd	100% ownership by Mr. Chen
(Ningbo Hengfa, former name"Ningbo Tenglong")
Shandong Tengda Stainless Steel Co., Ltd	100% ownership by Mr. Chen
(Shandong Tengda)
Ningbo Xinhe Logistic Co., Ltd	10% ownership by Ms. Huang
(Ningbo Xinhe)
Ningbo Kunde Petrochemical Co, Ltd.	Mr. Tao’s mother was a 65% nominee shareholder for Mr. Hu, a third party through September 2011
(Ningbo Kunde)
Ningbo JiangdongJihe Construction Materials	Controlled by Mr. Xue’s Brother-in-law
Store (JiangdongJihe)
Ningbo Wanze Chemical Co., Ltd	Mr. Tao’s sister-in-law is the legal representative
(Ningbo Wanze)
Ningbo Zhenhai Jinchi Petroleum Chemical	Controlled by Mr. Shou
Co., Ltd (Zhenhai Jinchi)

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Related party transactions and amounts outstanding with the related parties as of and for the years ended December 31, 2011 and 2010, are summarized as follows. Transactions with Ningbo Kunde and Ningbo Kewei are through the date the related party relationship ceased at which time transactions with these parties are included in details of transactions with certain other parties (Note 24(b)).

	Year ended December 31,
	2011		2010
Sales of products (a)	$	92,771,589	$	111,860,732
Purchase of raw material (b)	$	7,151,433	$	25,014,808
Purchase of transportation services (c)	$	3,059,216	$	3,659,000
Credit line of guarantee provision for bank borrowings (d)	$	142,563,200	$	161,994,300
Loan guarantee fees (d)	$	1,299,886	$	-
Short-term financing from related parties (e)	$	13,303,054	$	30,839,377
Short-term financing to related parties (e)	$	13,188,178	$	30,949,048
	As of December 31,
		2011		2010
Amount due from related parties (f)	$	39,350	$	5,332,193
Amount due to related parties (g)	$	621,077	$	115,535

(a)   The Group sold finished products of $92,704,220 and $101,680,459 to Ningbo Kunde in 2011 and 2010, respectively. Sales to Zhenhai Jinchi in 2011 and 2010 were $67,369 and $10,180,273, respectively.

(b)   The Group purchased raw materials of nil and $4,465,563 from Ningbo Kewei during 2011 and 2010, respectively, with no outstanding amount payable to Ningbo Kewei at December 31,2011 and 2010 in respect of these purchase transactions. The Group purchased raw materials of $7,151,433and $20,549,245from Ningbo Kunde during  2011 and 2010, respectively. The outstanding payment in advance to Ningbo Kunde as of December 31, 2010 and 2011 in respect of these purchase transactions was $5,181,809 and Nil respectively.

(c)   The Group purchased transportation services of $3,059,216 and $3,659,000 from Ningbo Xinhe during 2011 and 2010, respectively, and amounts owed to Ningbo Xinhe as of December 31, 2011 and 2010 in respect of these purchase transactions was $621,077 and $119, respectively

(d)   Guarantees for Bank Loans

	Guarantee provided during the year ended December 31				Bank loans guaranteed as of December 31
	2011		2010		2011		2010
Mr. Tao	$	12,396,800	$	79,887,600	$	34,628,000	$	36,408,000
Jicun Wang and Sumei Chen	$	30,992,000	$	-	$	1,983,523	$	12,136,000
Ningbo Kewei	$	34,091,200	$	82,106,700	$	29,700,067	$	11,377,500
Ningbo Pacific	$	65,083,200	$	-	$	27,918,200	$	16,687,000
Ningbo Hengfa	$	-	$	-	$	14,795,600	$	36,256,300
ShangdongTengda	$	-	$	-	$	944,400	$	910,200

Beginning in 2011 loan guarantee fees of 0.3% of the loan principal guaranteed are to be paid quarterly.In 2011, loan guarantee fees were $272,993, $636,427 and $390,466 for Ningbo Hengfa, Ningbo Pacific and Ningbo Kewei, respectively, and are included in $1,548,149 in the statements of operations.

(e)   Short-term financing transactions with related parties

	Year Ended December 31
	2011							2010
	From (i)		To(i)			Balance(ii)		From(i)		To(i)			Balance(ii)
Shandong Tengda	$	-	$	-		$	-	$	2,219,100	$	(2,219,100	)	$	-
Ningbo Kewei		5,423,600		(5,423,600	)		-		1,479,400		(1,479,400	)		-
Ningbo Kunde		5,423,600		(5,423,600	)		-		19,676,020		(19,676,020	)		-
JiangdongJihe		2,455,854		(2,340,978	)		-		7,464,857		(7,574,528	)		(112,459	)
	$	13,303,054	$	(13,188,178	)	$	-	$	30,839,377	$	(30,949,048	)	$	(112,459	)

(i) Transactions during the year are translated at average exchange rates.

(ii) Balances at year end are translated at the balance sheet exchange rate.

114

(f)   Amount due from related parties consist of the following:

	As of December 31,
	2011		2010
Related Party
Ningbo Kunde	$	-	$	5,181,809
JiangdongJihe		-		112,459
Mr. Tao		39,350		37,925
	$	39,350	$	5,332,193

Amounts due from Mr. Tao represents advances made for business expenses, are unsecured, interest free and due on demand.

(g)   Amounts due to related parties consist of the following:

	As of December 31,
	2011		2010
Related Party
Zhenhai Jinchi(prepayment)	$	-	$	115,416
NinboXinhe		621,077		119
	$	621,077	$	115,535

Amounts due to related parties primarily represent balances due for raw materials purchase and freight.

Related party transactions and amounts outstanding with the related parties as of and for the three and six months ended June 30, 2012 and 2011 are summarized as follows:

	Three Months ended June 30,
	2012		2011
	（Unaudited）		（Unaudited）
Sales of products (a)	$	-	$	35,607,658
Purchase of raw material (b)	$	-	$	42,920
Purchase of transportation services (c)	$	1,104,716	$	316,506
Credit line of guarantee provision for bank borrowings (d)	$	-	$	-
Loan guarantee fees (d)	$	113,084	$	419,665
Short-term financing from related parties (e)	$	-	$	5,406,139
Short-term financing to related parties (e)	$	-	$	5,535,234

	Six Months ended June 30,
	2012		2011
	（Unaudited）		（Unaudited）
Sales of products (a)	$	-	$	58,217,477
Purchase of raw material (b)	$	-	$	7,066,055
Purchase of transportation services (c)	$	1,665,831	$	927,879
Credit line of guarantee provision for bank borrowings (d)	$	-	$	-
Loan guarantee fees (d)	$	203,984	$	756,919
Short-term financing from related parties (e)	$	-	$	13,144,234
Short-term financing to related parties (e)	$	-	$	13,144,234

115

	June 30,		December 31,
	2012		2011
	（Unaudited）
Amounts due from related parties (f)	$	39,625	$	39,350
Amounts due to related parties (g)	$	768,313	$	621,077

(a)      During the three months ended June 30, 2011, the Group sold finished products of $35,607,658 to Ningbo Kunde. During the six months ended June 30, 2011, the Group sold finished products of $58,150,912 to Ningbo Kunde. During the six months ended June 30, 2012 and 2011, the Group sold finished products of nil and $66,565 to Zhenhai Jinchi, respectively. Amounts received in the advance from Kunde were $3,077,199 as of June 30, 2011, and are included in the advances from customers on the consolidated balance sheet.

(b)      The Group purchased raw materials of $42,920 from Ningbo Kunde during the three months ended June 30, 2011. The Group purchased raw materials of $7,066,055 from Ningbo Kunde during the six months ended June 30, 2011.

(c)      The Group purchased transportation services of $1,104,716 and $316,506 from Ningbo Xinhe during the three months ended June 30, 2012 and 2011, respectively. The Group purchased transportation services of $1,665,831 and $927,879 from Ningbo Xinhe during the six months ended June 30, 2012 and 2011, respectively, and amounts owed to Ningbo Xinhe as of June 30, 2012 in respect of these purchase transactions were $768,313.

(d)      Guarantees for Bank Loans

There were no guarantees for Bank Loans provided during the three and six months ended June 30, 2012 and 2011.

Bank Loans guaranteed as of June 30, 2012 and December 31, 2011 as follows:

	Bank loan guaranteed as of
	June 30		December 31
	2012		2011
	（Unaudited）
Mr. Tao	$	15,850,000	$	34,628,000
Jincun Wang and Chen		1,902,000		1,983,523
Ningbo Kewei		-		-
Ningbo Pacific		18,318,901		27,918,200
Ningbo Hengfa		14,899,000		14,795,600
Shandong Tengda		951,000		944,400
Total	$	51,920,901	$	80,269,723

Beginning in 2011 loan guarantee fees of 0.3% the loan principal guaranteed are to be paid annually. During the three months ended June 30, 2012, loan guarantee fees were $32,255 and $80,829 for Ningbo Hengfa and Ningbo Pacific, respectively. In the three months ended June 30, 2011, loan guarantee fees were $73,644 and $178,367 for Ningbo Hengfa and Ningbo Pacific, respectively. During the six months ended June 30, 2012, loan guarantee fees were $65,022 and $138,961 for Ningbo Hengfa and Ningbo Pacific , respectively. In the six months ended June 30, 2011, loan guarantee fees were $150,116 and $301,247 for Ningbo Hengfa and Ningbo Pacific, respectively.

116

(e)      Short-term financing transactions with related parties

	Three Months Ended June 30
	（Unaudited）
	2012						2011
	From(i)		To(i)		Balance(ii)		From(i)		To(i)			Balance(ii)
Ningbo Kewei	$	-	$	-	$	-	$	5,358,850	$	(5,358,850	)	$	-
Ningbo Kunde		-		-		-		32,550		(32,550	)		-
Jiangdong Jihe		-		-		-		14,739		143,834			-
	$	-	$	-	$	-	$	5,406,139	$	(5,247,566	)	$	-

	Six Months Ended June 30
	（Unaudited）
	2012						2011
	From(i)		To(i)		Balance(ii)		From(i)		To(i)			Balance(ii)
Ningbo Kewei	$	-	$	-	$	-	$	5,358,850	$	(5,358,850	)	$	-
Ningbo Kunde		-		-		-		5,358,850		(5,358,850	)		-
Jiangdong Jihe		-		-		-		2,426,534		(2,426,534	)
	$	-	$	-	$	-	$	13,144,234	$	13,144,234	)	$	-

(i) Transactions during the year are translated at average exchange rates.

(ii) Balances at year end are translated at the balance sheet exchange rate.

(f)       Amount due from related parties consist of the following:

	June 30,		December 31,
	2012		2011
	（Unaudited）
Related Party
Mr. Tao	$	39,625	$	39,350

Amounts due from Mr. Tao represent advances made for business expenses which are unsecured, interest free and due on demand.

(g)      Amount due to related parties consists of the following:

	June 30,		December 31,
	2012		2011
	（Unaudited）
Related Party
Ninbo Xinhe	$	768,313	$	621,077

Amount due to related parties represent balances due for raw materials purchase and freight.

117

(B) Relationships and transactions with certain other parties

The Group has the following relationships and transactions with certain other parties:

Name of parties	Relationship
Ningbo Litong Petrochemical Co., Ltd	Former 12.75% nominee shareholder of Ningbo Keyuan
(Ningbo Litong)
Ningbo JiangdongHaikai Construction	Controlled by cousin of Mr. WeifengXue, former Vice President of Accounting
Materials Store (JiangdongHaikai)
Ningbo JiangdongDeze Chemical Co., Ltd	Controlled by cousin of Mr. WeifengXue, former (JiangdongDeze) Vice President of Accounting
Ningbo Anqi Petrochemical Co., Ltd	Controlled by cousin of Mr. WeifengXue, former (Ningbo Anqi) Vice President of Accounting
Ningbo Kewei Investment Co., Ltd.	A related party through September 2011
(Ningbo Kewei) when control transferred
Ningbo Kunde Petrochemical Co, Ltd.	A related party through September 2011 when control transferred
(Ningbo Kunde)

Transactions and amounts outstanding with these parties for the years ended December 31, 2011 and 2010 are summarized as follows. Transactions with Ningbo Litong are through September 2011.

	Year ended December 31,
	2011		2010
Sales of products (h)	$	29,637,868	$	29,625,766
Purchase of raw material (i)	$	20,253,780	$	18,994,104
Credit line of guarantee for bank borrowings (j)	$	81,136,800	$	-
Loan guarantee fees (j)	$	1,242,928	$	-
Short-term financing from these parties (k)	$	49,873,894	$	74,983,618
Short-term financing to these parties (k)	$	47,608,361	$	77,030,336
Amounts due from these parties	$	2,740,970	$	2,217,854
Advances from these parties for sales	$	130,458	$	110,134

(h)   The Group sold finished products of $7,360,796and $29,625,766 to Ningbo Litong in2011 and 2010, respectively. Amounts received in advance from Litong were nil and $110,134 as of December 31, 2011 and 2010, and are included in advances from customers on the consolidated balance sheet. The Group sold finished products of $22,277,072 to Ningbo Kunde  in 2011. There were outstanding amounts of $130,458 received in advance from Kunde as of December 31, 2011.

(i)    The Group purchased raw materials of $20,253,780from Ningbo Litong during 2011. During  2010, the Group purchased raw materials of $18,994,104from Ningbo Litong. Amounts prepayable to Litong were $2,740,970and nil as of December 31, 2011 and 2010, respectively.

(j)   Guarantees for Bank Loans

118

	Guarantee provided				Bank loans guaranteed
	During the year ended December 2011				as of December 2011
	2011		2010		2011		2010
Ningbo Litong	$	81,136,800	$	-	$	61,632,077	$	43,993,000

Through December 31, 2010, no compensation was paid in respect of these guarantees. Beginning in 2011, loan  guarantee fees of 0.3% of the loan principal guaranteed after January 1, 2011 are to be paid quarterly. Guarantee fees paid to Litong and Kewei  were $1,026,567 and $216,361 for the year ended December 31, 2011, respectively.

(l)    Short-term financing transactions

Historically the Group and these parties have provided each other with short-term financing, typically in the form of cash, bills receivable and bills payable.

Short-term financing with these parties is as follows:

	Year Ended December 31
	2011							2010
	From(i)		To(i)			Balance(ii)		From(i)		To(i)			Balance(ii)
Ningbo Litong	$	36,366,031	$	(34,100,498	)	$	-	$	57,180,289	$	(59,343,172	)	$	2,217,854
JiangdongHaikai		-		-			-		7,447,529		(7,331,364	)		-
JiangdongDeze		2,634,320		(2,634,320	)		-		4,438,200		(4,438,200	)		-
Ningbo Anqi		10,873,543		(10,873,543	)		-		5,917,600		(5,917,600	)		-
	$	49,873,894	$	(47,608,36	)	$	-	$	74,983,618	$	(77,030,336	)	$	2,217,854

(i) Transactions during the year are translated at average exchange rates.

(ii) Balances at year end are translated at the balance sheet exchange rate.

Transactions and amounts outstanding with these parties for the three and six months ended June 30, 2012 and 2011, are summarized as follows:

	Three Months Ended June 30, （Unaudited）
	2012		2011
Sales of products (h)	$	47,734,203	$	-
Purchase of raw material (i)	$	21,912,149	$	9,536,282
Credit line of guarantee for bank borrowings (j)	$	141,062,000	$	-
Loan guarantee fees(j)	$	382,116	$	302,674
Short-term financing from theses parties (k)	$	-	$	12,862,621
Short-term financing to these parties (k)	$	-	$	(7,142,275	)
Amounts due from these parties	$	15,773,715	$	-
Amounts due to these parties	$	2,690,514	$	17,851

119

	Six Months Ended June 30, （Unaudited）
	2012		2011
Sales of products (h)	$	70,021,289	$	772,762
Purchase of raw material (i)	$	22,358,020	$	9,536,282
Credit line of guarantee for bank borrowings (j)	$	161,687,800	$	-
Loan guarantee fees(j)	$	742,303	$	505,626
Short-term financing from theses parties (k)	$	-	$	47,612,617
Short-term financing to these parties (k)	$	-	$	(45,374,149	)
Amounts due from these parties	$	15,773,715	$	-
Amounts due to these parties	$	2,690,514	$	17,851

(h)        During the three months ended June 30, 2012 and 2011, the Group sold finished products of $7,049,811 and nil to Ningbo Litong. During the three months ended June 30, 2012, the Group sold finished products of $40,684,392 to Ningbo Kunde. During the six months ended June 30, 2012 and 2011, the Group sold finished products of $17,177,359 and $772,762 to Ningbo Litong. During the six months ended June 30, 2012, the Group sold finished products of $52,843,930 to Ningbo Kunde. Amounts received in advance from Litong were $11,887,500 and $17,851, respectively as of June 30, 2012 and 2011. Amounts received in the advances from Kunde were $596,530 as of June 30, 2012. They are included in Advances from Customers on the consolidated balance sheet.

(i)       During the three months ended June 30, 2012 and 2011, the Group purchased raw materials of $8,778,079 and $9,536,282, respectively from Ningbo Litong. During the three months ended June 30, 2012, the Group purchased raw material of $13,134,070 from Ningbo Kunde. During the six months ended June 30, 2012 and 2011, the Group purchased raw materials of $9,223,950 and $9,536,282, respectively from Ningbo Litong. During the six months ended June 30, 2012, the Group purchased raw materials of $13,134,070 from Ningbo Kunde.

(j)       Guarantees for Bank Loans

	Guarantee provided during				Guarantee provided during
	the three months ended June 30				the six months ended June 30
	2012		2011		2012		2011
	（Unaudited）		（Unaudited）		（Unaudited）		（Unaudited）
Ningbo Litong	$	30,000,000	$	-	$	50,625,800	$	-
Ningbo Kewei		111,062,000		-		111,062,000		-
	$	141,062,000	$	-	$	161,687,800	$	-

	Bank loans guaranteed As of
	June 30		December 31
	2012		2011
	（Unaudited）
Ningbo Litong	$	55,586,521	$	61,632,077
Ningbo  Keiwei	$	43,524,897	$	29,700,067

Beginning in 2011 loan guarantee fees of 0.3% the loan principal guaranteed after January 1, 2011 are to be paid quarterly. In the three months ended June 30, 2012, loan guarantee fees were $179,698 and $202,419 for Ningbo Litong and Ningbo Kewei, respectively. In the three months ended June 30, 2011, loan guarantee fees were $302,674 and $167,654 for Ningbo Litong and Ningbo Kewei, respectively. In the six months ended June 30,2012, loan guarantee fees were $374,263 and $368,040 for Ningbo Litong and Ningbo Kewei, respectively. In the six months ended June 30, 2011, loan guarantee fees were $505,626 and $305,556 for Ningbo Litong and Ningbo Kewei, respectively.

120

(k)      Short-term financing transactions

Historically the Group and its theses parties have provided each other with short-term financing, typically, in the form of cash, bills receivable and bills payable.

	Three Months Ended June 30（Unaudited）
	2012						2011
	From(i)		To(i)		Balance(ii)		From(i)		To(i)			Balance(ii)
Ningbo Litong	$	-	$	-	$	-	$	12,862,621	$	(7,142,275	)	$	-
Jiangdong Deze		-		-		-		-		-			-
Ningbo Anqi		-		-		-		-		-			-
	$	-	$	-	$	-	$	12,862,621	$	(7,142,275	)	$	-

	Six Months Ended June 30（Unaudited）
	2012						2011
	From(i)		To(i)		Balance(ii)		From(i)		To(i)			Balance(ii)
Ningbo Litong	$	-	$	-	$	-	$	38,142,763	$	(35,904,295	)	$	-
Jiangdong Deze		-		-		-		2,602,870		(2,602,870	)		-
Ningbo Anqi		-		-		-		6,866,984		(6,866,984	)		-
	$	-	$	-	$	-	$	47,612,617	$	(45,374,149	)	$	-

(i) Transactions during the year are translated at average exchange rates.

(ii) Balances at year end are translated at the balance sheet exchange rate.

121

Promoters and Certain Control Persons

None of our management or other control persons were “promoters” (within the meaning of Rule 405 under the Securities Act), and none of such persons took the initiative in the formation of our business or received any of our debt or equity securities or any of the proceeds from the sale of such securities in exchange for the contribution of property or services, during the last five years.

Director Independence

Presently, we are not required to comply with the director independence requirements of any securities exchange since we are listed on OTCQB, which does not have any such listing standards. In determining whether our directors are independent, however, we intend to comply with the rules of the Nasdaq . The Board of Directors also will consult with counsel to ensure that the Board of Directors’ determinations are consistent with those rules and all relevant securities and other laws and regulations regarding the independence of directors, including those adopted under the Sarbanes-Oxley Act of 2002 with respect to the independence of audit committee members. The Nasdaq listing standards define an “independent director” generally as a person, other than an officer of a company, who does not have a relationship with the company that would interfere with the director’s exercise of independent judgment.

Currently we have two independent directors serving on the board and we intend to hire another independent director so that we can satisfy the “independent director” requirements of Nasaq listing rules, which requires that a majority of a company’s directors be independent. 

ITEM 11A.  MATERIAL CHANGES

None.

ITEM 12.  INCORPORATION OF CERTAIN INFORMATION BY REFERENCE

None.

Item 12A.  DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION FOR SECURITIES ACT LIABILITIES

Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to our directors, officers and controlling persons pursuant to the foregoing provisions, or otherwise, we have been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by us of expenses incurred or paid by one of our directors, officers or controlling persons in the successful defense of any action, suit or proceeding) is asserted by that director, officer or controlling person in connection with the securities being registered, we will, unless in the opinion of our counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether that indemnification by us is against public policy as expressed in the Securities Act and will be governed by the final adjudication of that issue.

122

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13.  OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The following table sets forth estimated expenses we expect to incur in connection with the sale of the shares being registered. All such expenses are estimated except for the SEC and FINRA registration fees.

SEC registration fee	$	4,900
Fees and expenses of counsel for the Company	$	15,000
Fees and expenses of accountants for Company	$	10,000
Miscellaneous	$	5,000
Total	$	34,900

ITEM 14.  INDEMNIFICATION OF DIRECTORS AND OFFICERS

Our officers and directors are indemnified as provided by the Nevada Revised Statutes (‘NRS”) and our bylaws.

Under the NRS, director immunity from liability to a company or its shareholders for monetary liabilities applies automatically unless it is specifically limited by a company’s articles of incorporation that is not the case with our articles of incorporation. Excepted from that immunity are: 

(1)  a willful failure to deal fairly with the company or its shareholders in connection with a matter in which the director has a material conflict of interest;

(2)  a violation of criminal law (unless the director had reasonable cause to believe that his or her conduct was lawful or no reasonable cause to believe that his or her conduct was unlawful);

(3)  a transaction from which the director derived an improper personal profit; and

(4)  willful misconduct.

 Our Articles of Incorporation permits us to indemnify our officers and directors to the fullest extent authorized or permitted by law in connection with any proceeding arising by reason of the fact any person is or was our officer or director. Notwithstanding this indemnity, a director shall be liable to the extent provided by law for any liability incurred by him by his own fraud or willful default.

Our bylaws provide that we will indemnify our directors and officers to the fullest extent not prohibited by Nevada law. Our bylaws provide that we will advance all expenses incurred to any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that he is or was our director or officer, or is or was serving at our request as a director or executive officer of another company, partnership, joint venture, trust or other enterprise, prior to the final disposition of the proceeding, promptly following request. This advance of expenses is to be made upon receipt of an undertaking by or on behalf of such person to repay said amounts should it be ultimately determined that the person was not entitled to be indemnified under our bylaws or otherwise.

ITEM 15.  RECENT SALES OF UNREGISTERED SECURITIES

During the past three years, we effected the following transactions in reliance upon exemptions from registration under the Securities Act as amended. Unless stated otherwise: (i) each of the persons who received these unregistered securities had knowledge and experience in financial and business matters which allowed them to evaluate the merits and risk of the receipt of these securities, and they were knowledgeable about our operations and financial condition; (ii) no underwriter participated in, nor did we pay any commissions or fees to any underwriter in connection with the transactions; (iii) the transactions did not involve a public offerings; and (iv) each certificate issued for these unregistered securities contained a legend stating that the securities have not been registered under the Act and setting forth the restrictions on the transferability and the sale of the securities.

123

In connection with the Exchange Agreement, on April 22, 2010, we issued an aggregate of 47,568 shares of our Series M Preferred Stock to the Keyuan International Shareholder. We received in exchange from the Keyuan International Shareholder 50,000 shares of Keyuan International, representing 100% of the issued and outstanding shares of Keyuan International, which exchange resulted in Keyuan International becoming our wholly-owned subsidiary. The issuance of such securities was exempt from registration pursuant to Section 4(2) of, and Regulation D and/or Regulation S promulgated under the Securities Act of 1933, as amended (the “Securities Act”).

As more fully described in Item 3 above, on April 22, 2010, immediately following the Share Exchange, we consummated the Private Placement for the issuance and sale of Units, consisting of an aggregate of (a) 5,954,058 shares of Series A Preferred Stock, (b) 661,562 Shares of common stock, (c) three-year Series A Warrants to purchase up to 661,562 Series A Warrant Shares, and (d) three-year Series B Warrants to purchase up to 661,562 Series B Warrant Shares, for aggregate gross proceeds of approximately $23.2 million.  In connection with the final closing on May 17, 2010, we issued 784,278 shares of Series A Preferred Stock, 87,142 shares of Common Stock, 87,142 Series A Warrants and 87,142 Series B Warrants to the Investors.   The issuance of the Units, the Series A Preferred Stock, the Shares, the Series A Warrants, the Series B Warrants and the placement agent warrants pursuant to the Private Placement were exempt from registration pursuant to Section 4(2) of, and Regulation D and/or Regulation S promulgated under the Securities Act.

On April 19, 2010, we issued 88,000 shares of common stock to Hayden Communications International, for the investor related services they will provide to us from April 19, 2010 to April 18, 2011. The shares were issued in accordance with the exemption from the registration provisions of the Securities Act of 1933, as amended, provided by Section 4(2) of such Act for issuances not involving any public offering and Rule 506 of Regulation D promulgated thereunder.

On April 19, 2010, we issued 48,000 shares of common stock to Chesapeake Group, Inc, for the investor related services they will provide to us in a period of 12 months. The shares were issued in accordance with the exemption from the registration provisions of the Securities Act of 1933, as amended, provided by Section 4(2) of such Act for issuances not involving any public offering and Rule 506 of Regulation D promulgated thereunder.

On April 19, 2010, we issued 50,000 shares of common stock to Hampton Growth Resources, LLC, for the investor related services they will provide to us for a 12 months period. The shares were issued in accordance with the exemption from the registration provisions of the Securities Act of 1933, as amended, provided by Section 4(2) of such Act for issuances not involving any public offering and Rule 506 of Regulation D promulgated thereunder.

On July 1, 2010, we granted 80,000 five-year options to two outside directors to purchase up to 80,000 shares of the Company’s common stock at an exercise price of US$4.20 per share, in consideration of their services to the Company. Of these options, 40,000 of the options shall vest after one year of the issuance and the remaining 40,000 of the options shall vest after two years of the issuance, provided that the optionee is re-elected for successive one year terms at the end of 12 months of the issuance. The shares were issued in accordance with the exemption from the registration provisions of the Securities Act of 1933, as amended, provided by Section 4(2) of such Act for issuances not involving any public offering.

On July 1, 2010, we granted 40,000 five-year options to a consultant to purchase an aggregate of 40,000 shares of the Company’s common stock at an exercise price of US$4.20 per share, in consideration of their services to the Company. Of these options, all 40,000 of the options shall vest immediately. The shares were issued in accordance with the exemption from the registration provisions of the Securities Act of 1933, as amended, provided by Section 4(2) of such Act for issuances not involving any public offering.

On July 27, 2010, we granted 420,000 three-year options to a consultant to purchase an aggregate of 420,000 shares of the Company’s common stock at an exercise price of US$4.20 per share, in consideration of their services to the Company. Of these options, 70,000 of the options vested immediately, 31,818 vest monthly beginning on September 1, 2010 and the remaining balance of 95,456 vested on May 1, 2011. The shares were issued in accordance with the exemption from the registration provisions of the Securities Act of 1933, as amended, provided by Section 4(2) of such Act for issuances not involving any public offering and Rule 506 of Regulation D promulgated thereunder.

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On August 4, 2010, we granted five-year options to 79 managers and employees to purchase in the aggregate 700,000 shares of the Company’s common stock at an exercise price of US$4.50 per share, in consideration of their services to the Company. Of these options, 30% of the Options shall vest immediately one year after the issuance, 40% of the options shall vest two years after the issuance and 30% of the options shall vest three years after the issuance.  The shares were issued in accordance with the exemption from the registration provisions of the Securities Act of 1933, as amended, provided by Section 4(2) of such Act for issuances not involving any public offering and Regulation S promulgated under the Securities Act of 1933, as amended. We made this determination based upon the representations of the respective Optionees that none of them were “U.S. person[s]” as that term is defined in Rule 902(k) of Regulation S under the Securities Act. Based on feedback received from the employees after the option award which indicated that most of those employees would prefer tangible cash rewards, management proposed canceling 600,000 of these stock options that had been granted to 77 of the 79 employees. On December 29 2010, the Board of Directors approved this proposal to cancel such options.

On September 28, 2010 , we closed a private placement  of $20,250,000 from offering a total of 540,001 units  at a purchase price of $37.5 per unit, consisting of an aggregate of  (a) 5,400,010 shares of Series B convertible preferred stock of the Company, (b) three year Series C warrants to purchase up to 810,002 share of Common Stock, at an exercise price of $4.50 per share, and (c) three year Series D warrants to purchase up to 810,002  share of Common Stock, at an exercise price of $5.25 per share.  In addition, we issued placement agent warrants to purchase up to 561,601 shares of Common Stock to Tripoint Global Equities, Inc.  The issuance of the Units, the Series B Preferred Stock, the Series C Warrants, the Series D Warrants and the Placement Agent Warrants pursuant to the private placement were issued pursuant to the exemption from the registration provisions of the Securities Act of 1933, as amended, provided by Section 4(2) of such Act for issuances not involving any public offering and Regulation S promulgated under the Securities Act of 1933, as amended. We made this determination based upon the representations of the respective Investors that they were not a “U.S. person[s]” as that term is defined in Rule 902(k) of Regulation S under the Securities Act.

On February 24, 2011, two investors in the April-May 2010 Private Placement exercised Series A warrants and  purchased 650 shares of common stock and 500 shares of common stock respectively at an exercise price of $4.50 per share. As a result, 650 shares of common stock were issued on March 1, 2011 and 500 shares of common stock were issued on April 1, 2011.

On April 1, 2011, one investor in the April-May 2010 Private Placement exercised Series B warrants and purchased 500 shares of common stock at an exercise price of $5.25 per share. As a result, 500 shares of common stock were issued on April 4, 2011.

On November 29, 2011, one investor in the September 2010 Private Placement chose to convert 66,670 shares of Series B preferred stock into common stock. As a result, 66,670 shares of common stock were issued on December 7, 2011.

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ITEM 16.  EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

EXHIBITS

The following exhibits are filed as part of this registration statement:

2.1	Share Exchange Agreement dated April 22, 2010 (incorporated by reference to Exhibit 2.1 of the Registrant’s Form 8-K filed on April 28, 2010)
2.2	Agreement and Plan of Merger (incorporated by reference to Exhibit 2.1 of the Registrant’s Form 8-K filed on May 19, 2010)
3.1	Amended Articles of Incorporation of Keyuan Petrochemicals, Inc. (f/k/a Silver Pearls, Inc.), filed with the Secretary of State of Nevada (incorporated by reference to Exhibit 3.1 of the Registrant’s Form S-1 filed on December 29, 2010).
3.2	Articles of Merger (incorporated by reference to Exhibit 3.1 of the Registrant’s Form 8-K filed on May 19, 2010)
3.3	Amended Bylaws of Keyuan Petrochemicals, Inc. dated June 29, 2010 (incorporated by reference to Exhibit 3.1 of the Registrant’s Form 8-K filed on July 7, 2010)
4.1	Certificate of Designation of Rights and Preferences of Series A Preferred Stock (incorporated by reference to Exhibit 4.1 of the Registrant’s Form 8-K filed on April 28, 2010)
4.2	Certificate of Designation of Rights and Preferences of Series M Preferred Stock (incorporated by reference to Exhibit 4.2 of the Registrant’s Form 8-K filed on April 28, 2010)
4.3	Certificate of Designation of Rights and Preference of Series B Preferred Stock (incorporated by reference to Exhibit 3.1 of the Registrant’s Form 8-K filed on September 30, 2010)
5.1	Consent of Hunter Taubman Weiss LLP (filed herewith)
10.1	Form of Securities Purchase Agreement (incorporated by reference to Exhibit 10.1 of the Registrant’s Form 8-K filed on April 28, 2010)
10.2	Registration Rights Agreement (incorporated by reference to Exhibit 10.2 of the Registrant’s Form 8-K filed on April 28, 2010)
10.3	Form of Securities Escrow Agreement (incorporated by reference to Exhibit 10.3 of the Registrant’s Form 8-K filed on April 28, 2010)
10.4	Lock-up Agreement with Delight Reward Limited dated April 22, 2010 (incorporated by reference to Exhibit 10.4 of the Registrant’s Form 8-K filed on April 28, 2010)
10.5	Form of Series A Warrant (incorporated by reference to Exhibit 10.5 of the Registrant’s Form 8-K filed on April 28, 2010)
10.6	Form of Series B Warrant (incorporated by reference to Exhibit 10.6 of the Registrant’s Form 8-K filed on April 28, 2010)
10.7	Share Transfer Agreement between Brian Pak-Lun Mok and Chunfeng Tao, dated April 2, 2010 (incorporated by reference to Exhibit 10.7 of the Registrant’s Form 8-K filed on April 28, 2010)
10.8	Share Transfer Agreement between O. Wing Po and Jicun Wang, dated April 2, 2010 (incorporated by reference to Exhibit 10.8 of the Registrant’s Form 8-K filed on April 28, 2010)
10.9	Share Transfer Agreement between Lo Kan Kwan and Peijun Chen, dated April 2, 2010 (incorporated by reference to Exhibit 10.9 of the Registrant’s Form 8-K filed on April 28, 2010)
10.10	Share Transfer Agreement between Brian Pak-Lun Mok and Xin Yue, dated April 2, 2010 (incorporated by reference to Exhibit 10.10 of the Registrant’s Form 8-K filed on April 28, 2010)
10.11	Share Transfer Agreement between Brian Pak-Lun Mok and Xin Yue, dated April 2, 2010. (incorporated by reference to Exhibit 10.10 of the Registrant’s Form 8-K filed on April 28, 2010)
10.12	Employment Agreement by and between Chunfeng Tao and Keyuan Plastics Co., Ltd., dated May 1, 2007 (English translation) (incorporated by reference to Exhibit 10.12 of the Registrant’s Form 8-K filed on April 28, 2010)
10.13	Confidentiality and Non-Compete Agreement by and between Chunfeng Tao and Keyuan Plastics Co., Ltd., dated May 1, 2007 (English translation) (incorporated by reference to Exhibit 10.13 of the Registrant’s Form 8-K filed on April 28, 2010)
10.14	Employment Agreement by and between Jingtao Ma and Keyuan Plastics Co., Ltd.,, dated May 10,2007(English translation) (incorporated by reference to Exhibit 10.14 of the Registrant’s Form S-1 filed on November 3, 2010).

126

10.15	Employment Agreement by and between Weifeng Xue and Keyuan Plastics Co., Ltd., dated May 10, 2007(English translation) (incorporated by reference to Exhibit 10.15 of the Registrant’s Form S-1 filed on November 3, 2010).
10.16	Employment Agreement by and between Mingliang Liu and Keyuan Plastics Co., Ltd., dated February 2, 2009(English translation) (incorporated by reference to Exhibit 10.16 of the Registrant’s Form S-1 filed on November 3, 2010).
10.17	Employment Agreement by and between Shifa Wang and Keyuan Plastics Co., Ltd., dated October 21,2009(English translation) (incorporated by reference to Exhibit 10.17 of the Registrant’s Form S-1 filed on November 3, 2010).
10.18	Confidentiality and Non-Compete Agreement by and between Shifa Wang and Keyuan Plastics Co., Ltd., dated October 21, 2009(English translation) (incorporated by reference to Exhibit 10.18 of the Registrant’s Form S-1 filed on November 3, 2010).
10.19	Employment Agreement by and between Aichun Li and Silver Pearl Enterprises, Inc, dated May 7, 2010 (incorporated by reference to Exhibit 10.19 of the Registrant’s Form S-1 filed on November 3, 2010)..

10.20	Placement Agent Agreement by and between Tripoint Global Equities, LLC., and Keyuan Plastics Co., Ltd., dated March 18, 2009(incorporated by reference to Exhibit 10.20 of the Registrant’s Form S-1 filed on November 3, 2010).
10.21	Independent Director Agreement of Gerry Goldberg, dated August 1, 2011 (incorporated by reference to Exhibit 10.1 of the Registrant’s Form 10-Q filed on November 21, 2011).
10.22	Independent Director Agreement of Michael Rosenberg, dated August 1, 2010(incorporated by reference to Exhibit 10.2 of the Registrant’s Form 10-Q filed on November 21, 2011).
10.23	Independent Director Agreement of Dishen Shen, dated July 1, 2010(incorporated by reference to Exhibit 10.23 of the Registrant’s Form S-1 filed on November 3, 2010).
10.24	Amendment to Independent Director Agreement of Dishen Shen, dated September 30, 2011 (incorporated by reference to Exhibit 10.24 of the Registrant’s Form 10-K filed on October 20, 2011).
10.25	Director Agreement of Yin Xue, dated July 1, 2010(incorporated by reference to Exhibit 10.24 of the Registrant’s Form S-1 filed on November 3, 2010).
10.26	Land use right transfer agreement by and between Keyuan Petrochemicals, Inc and Ningbo Municipal Bureau of National Land and Resources, dated August 18, 2010 (incorporated by reference to Exhibit 10.25 of the Registrant’s Form S-1 filed on November 3, 2010).
10.27	Land use right transfer agreement by and between Keyuan Petrochemicals, Inc and Ningbo Municipal Bureau of National Land and Resources, dated August 18, 2010(incorporated by reference to Exhibit 10.26 of the Registrant’s Form S-1 filed on November 3, 2010).
10.28	Land use right transfer agreement by and between Keyuan Petrochemicals, Inc and Ningbo Municipal Bureau of National Land and Resources, dated August 18, 2010(incorporated by reference to Exhibit 10.27 of the Registrant’s Form S-1 filed on November 3, 2010).
10.29	Land use right transfer agreement by and between Keyuan Petrochemicals, Inc and Ningbo Municipal Bureau of National Land and Resources, dated August 18, 2010(incorporated by reference to Exhibit 10.28 of the Registrant’s Form S-1 filed on November 3, 2010)
10.30	Confidentiality and Non-Compete Agreement by and between Jingtao Ma and Keyuan Plastics Co., Ltd., dated May 10, 2007(English translation) (incorporated by reference to Exhibit 10.34 of the Registrant’s Form S-1 filed on November 3, 2010).
10.31	Confidentiality and Non-Compete Agreement by and between Weifeng Xue and Keyuan Plastics Co., Ltd., dated May 10, 2007 (English translation) (incorporated by reference to Exhibit 10.35 of the Registrant’s Form S-1 filed on November 3, 2010).
10.32	Confidentiality and Non-Compete Agreement by and between Mingliang Liu and Keyuan Plastics Co., Ltd., dated February 2,2009(English translation) ( incorporated by reference to Exhibit 10.36 of the Registrant’s Form S-1 filed on November 3, 2010).
10.33	Form of Securities Purchase Agreement dated as of September 28, 2010 by and among the Company and the investors in September 2010 private placement ( incorporated by reference as to the Exhibit 10.1 of the Registrant’s Form 8-K filed on September 30, 2010)
10.34	Form of Registration Rights Agreement dated as of September 28, 2010 (incorporated by reference as to the Exhibit 10.2 of the Registrant’s Form 8-K filed on September 30, 2010)
10.35	Form of Securities Escrow Agreement dated as September 28, 2010 (incorporated by reference as to the Exhibit 10.3 of the Registrant’s Form 8-K filed on September 30, 2010)

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10.36	Form of Lock-up Agreement dated as of September 28, 2010 (incorporated by reference as to the Exhibit 10.4 of the Registrant’s Form 8-K filed on September 30, 2010)
10.37	Form of Voting Agreement dated as of September 28, 2010 (incorporated by reference as to the Exhibit 10.5 of the Registrant’s Form 8-K filed on September 30, 2010)
10.38	Form of Series C Warrant (incorporated by reference as to the Exhibit 10.6 of the Registrant’s Form 8-K filed on September 30, 2010)
10.39	Form of Series D Warrants (incorporated by reference as to the Exhibit 10.7 of the Registrant’s Form 8-K filed on September 30, 2010)
10.40	Employment Agreement by and between Fan Zhang and Keyuan Plastics Co., Ltd., dated May 23, 2011 (English translation) (Filed herewith)
10.41	Confidentiality and Non-Compete Agreement by and between Fan Zhang and Keyuan Plastics Co., Ltd., dated May 23, 2011 (English translation) (Filed herewith)
10.42	Cooperation Agreement by and between Fangchenggang City and Keyuan Plastics Co., Ltd for Construction of New Material Industrial Park in Guangxi Province (English translation) (Filed herewith)
10.43	Employment Agreement dated as of May 23, 2011 by and among Ningbo Keyuan Plastics Co., Ltd and Fan Zhang (English Translation, incorporated by reference as to the Exhibit 10.39 of the Registrant’s Form 10-K filed on April 13, 2012)
10.44	Loan Agreement by and between Ningbo Keyuan Plastic Co., Ltd and Huaxia Bank Co., Ltd. Ningbo Branch, dated September 13, 2011 (English Translation)
10.45	Import Hui Li Da Contract by and between Ningbo Keyuan Plastics Co., Ltd and Bank of China Inc, Beilun Branch dated August 8, 2011 (English Translation)
10.46	Current Fund Loan Agreement by and between Ningbo Keyuan Plastics Co., Ltd. and China Construction Bank Inc, Ningbo Beilun Branch dated March 31, 2011 (English Translation)
10.47	Inward Bills Contract by and between Ningbo Keyuan Plastics Co., Ltd and Bank of China, Beilun Branch dated January 24, 2011 (English Translation)
10.48	Agreement on Import Payment by and between Ningbo Keyuan Plastics Co., Ltd and Ningbo Brach of China CITIC Bank Corporation Limited dated August 4, 2011 (English Translation).
10.49	Agreement on Import Payment by and between Ningbo Keyuan Plastics Co., Ltd and Ningbo Brach of China CITIC Bank Corporation Limited dated August 4, 2011 (English Translation).
10.50	Agreement on Import Payment by and between Ningbo Keyuan Plastics Co., Ltd and Ningbo Ximen Branch/Sub-branch of Shanghai Pudong Development Bank dated July 19, 2011 (English Translation)
10.51	Contract of Agreed Payment Processing by and between Ningbo Keyuan Plastics Co, Ltd and the Bank of China Co., Ltd. Ningbo Branch dated June 29, 2011 (English Translation)
10.52	Contract of Credit by and between Ningbo Keyuan Plastics Co, Ltd and China Merchants Bank Ningbo Branch dated October 24, 2011
10.53	Contract of Credit by and between Ningbo Keyuan Plastics Co, Ltd and China Merchants Bank Ningbo Branch dated November 11, 2011
10.54	CCB Cooperation Agreement on Inter-Bank Refinance by and between Ningbo Keyuan Plastics Co, Ltd and China Construction Bank Ningbo Beilun Branch dated February 21, 2012 (English Translation)
10.55	Trust Receipt Loan Agreement by and between Ningbo Keyuan Plastics Co, Ltd and China Construction Bank Ningbo Beilun Branch dated March 8, 2012 (English Translation)
10.56	CCB Cooperation Agreement on Inter-Bank Refinance by and between Ningbo Keyuan Plastics Co, Ltd and China Construction Bank Ningbo Beilun Branch dated March 30, 2012 (English Translation)
10.57	Agreement on Opening L/C by and between Ningbo Keyuan Plastics Co, Ltd and Bank of Ningbo Baizhang Branch dated February 21, 2012 (English Translation)
10.58	Loan Contract of Current Fund by and between Ningbo Keyuan Plastics Co, Ltd and Bank of China Beilun Branch dated February 7, 2012 (English Translation)
10.59	Inward Bills Contract by and between Ningbo Keyuan Plastics Co, Ltd and Bank of China Beilun Branch (English Translation)
10.60	“Daifuda” Business Contract by and between Ningbo Keyuan Plastics Co, Ltd and Bank of China Beilun Branch dated March 23, 2012 (English Translation)
10.61	Agreement of Inward Bills by and between Ningbo Keyuan Plastics Co, Ltd and Ningbo Ximen Branch/Sub-branch of Shanghai Pudong Development Bank dated January 31, 2012 (English Translation)
10.62	Maximum Guarantee Contract by and among Agricultural Bank of China, Ningbo Keyuan Plastics Co., Ltd, Ningbo Pacific Shipping Co., Ltd, Jicun Wang and Sumei Chen for RMB 200 million, dated November 23, 2011.
10.63	Maximum Guarantee Contract by and among Agricultural Bank of China, Ningbo Keyuan Plastics Co., Ltd, Ningbo Pacific Shipping Co., Ltd, Jicun Wang and Sumei Chen for RMB 200 million, dated November 23, 2011.
10.64	Maximum Loan Guarantee Contract by and between Ningbo Litong Petrochemicals Co., Ltd and Beilun Branch of China Construction Bank, dated March 23, 2012.
10.65	Loan Guarantee Contract by and between Ningbo Pacific Ocean Shipping Co., Ltd and Beilun Branch of China Construction Bank, dated October 26, 2011.
10.66	Maximum Guarantee Contract by and between Ningbo Litong Petrochemicals Co., Ltd and China Citic Bank Ningbo Branch, dated April 15, 2011.
10.67	Maximum Irrevocable Guarantee Contract by and between Ningbo Litong Petrochemicals Co., Ltd and  China Merchants Bank Inc. Ningbo Beilun Branch, dated March 31, 2011.
10.68	Maximum Guarantee Contract by and between Ningbo Litong Petrochemicals Co., Ltd and Huaxia Bank Co., Ltd Ningbo Branch, dated September 13, 2012.
10.69	Maximum Guarantee Contract by and between Ningbo Litong Petrochemicals Co., Ltd and Shenzhen Development Bank Ningbo Haishu Branch, dated February 18, 2012.
10.70	Maximum Guarantee Contract by and Between Ningbo Litong Petrochemicals Co., Ltd and Bank of Shanghai Ningbo Branch, dated November 29, 2011.
10.71	Form of Material Purchase Agreement used by Ningbo Keyuan Plastics Co, to purchase raw materials from  Ningbo Kunde and Ningbo Litong  (English Translation)
10.72	Form of Sale Contract universally used by Ningbo Keyuan Plastics Co, Ltd to sale its finished goods to customers (English Translation)
10.73	Form of Transportation Contract used by Ningbo Keyuan Plastics Co, Lted to purchase transportation services from Ningbo Xinghe for its domestic raw material purchases (English Translation)
16.1	Letter from the Hall Group, CPAS (incorporated by reference as to the Exhibit 16.1 of the Registrant’s Form 8-K filed on April 28, 2010)
16.2	Letter from Patrizio & Zhao, LLC (incorporated by reference as to the Exhibit 16.1 of the Registrant’s Form 8-K filed on January 18, 2011)
16.3	Letter from KPMG (incorporated by reference as to the Exhibit 16.1 of the Registrant’s Form 8-K filed on May 31, 2011)
23.1	Consent of Hunter Taubman Weiss LLP (included in Exhibit 5.1 hereto)
23.2	Consent of Patrizio & Zhou, LLC (incorporated by reference as to the Exhibit 23.2 of the Registrant’s Form S-1 filed on February 21, 2012)
23.3	Consent of GHP Horwath, P.C. (filed herewith)

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ITEM 17.  UNDERTAKINGS

The undersigned registrant hereby undertakes to:

(1) File, during any period in which offers or sales are being made, a post-effective amendment to this registration statement to:

(i) Include any prospectus required by Section 10(a)(3) of the Securities Act of 1933, as amended (the "Securities Act");

(ii) Reflect in the prospectus any facts or events which, individually or together, represent a fundamental change in the information in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of the securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of a prospectus filed with the Commission pursuant to Rule 424(b) under the Securities Act if, in the aggregate, the changes in volume and price represent no more than a 20% change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective registration statement, and

(iii) Include any additional or changed material information on the plan of distribution.

(2) For determining liability under the Securities Act, treat each post-effective amendment as a new registration statement of the securities offered, and the offering of the securities at that time to be the initial bona fide offering.

(3) File a post-effective amendment to remove from registration any of the securities that remain unsold at the end of the offering.

(4) Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable.

In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of  appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.

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SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Registrant certifies that it has and authorized Amendment No. 3 to this Registration Statement on Form S-1 to be signed on its behalf by the undersigned, thereunto duly authorized, in Qingdao, China on September 25, 2012.

By:	/s/ Chunfeng Tao
	Chunfeng Tao Chief Executive Officer, Chairman and Director

By:	/s/ Fan Zhang
	Fan Zhang Acting Chief Finanical Officer & Vice President of Accounting

In accordance with the requirements of the Securities Act of 1933, this Registration Statement on Form S-1 was signed by the following persons in the capacities and on the dates stated.

Signature	Title	Date
/s/ Chunfeng Tao	Chairman, President, Chief Executive Officer and Director	September 25, 2012
Chunfeng Tao
/s/ Fan Zhang	Acting Chief Financial Officer & Vice President of Accounting	September 25, 2012
Fan Zhang
/s/ Yuxin Xiang	Director, Audit Committee Chairman and	September 25, 2012
Yuxin Xiang	Compensation Committee Chairman
/s/ Dishen Shen	Director	September 25, 2012
Dishen Shen

130

EX-5.1

Exhibit 5.1

Hunter Taubman Weiss LLP

17 State Street, Suite 2000

New York, New York 10004

(212) 732-7184   Fax: (212) 202-6380

E-mail: ltaubman@htwlaw.com

September 24, 2012

KEYUAN PETROCHEMICALSKEYUAN PETROCHEMICALS, INC.

15 Xinghua Road

Qingdao, Shandong Province

P.R. China 266401

Ladies and Gentlemen:

We have acted as counsel to KEYUAN PETROCHEMICALS, INC. a Nevada company (the “Company”), in connection with the preparation and filing with the Securities and Exchange Commission under the Securities Act of 1933, as amended (the “Act”), of this amended Registration Statement on Form S-1 (the “Registration Statement”), relating to the proposed sale by the selling shareholders listed therein (the “Selling shareholders”) of 14,449,640 shares of the Company’s common stock (the “Common Stock”).  

In so acting, we have examined and relied upon the originals or copies, certified or otherwise identified to our satisfaction, of such Company records, documents, certificates and other instruments as in our judgment are necessary or appropriate to enable us to render the opinions expressed below. Based upon the foregoing and such examination of law as we have deemed necessary, we are of the opinion that the Common Stock to be offered by the Selling shareholders, when sold under the circumstances contemplated in the Registration Statement, will be legally issued, fully paid and non-assessable.

The opinions we express herein are limited to matters involving the Nevada corporate law and the federal laws of the United States and are further expressly limited to the matters set forth above and we render no opinion, whether by implication or otherwise as to any other matters relating to the Company or the Common Stock.

We consent to the use of this letter as an Exhibit to the Registration Statement and to the use of our name under the heading “Legal Matters” included in the Prospectus forming a part of the Registration Statement.

Sincerely,

Hunter Taubman Weiss LLP

By: /s/ Louis E. Taubman

Louis E. Taubman, Partner

EX-10.44

Exhibit 10.44

Working Capital Loan Agreement

Huaxia Bank Inc

Working Capital Loan Agreement

No. NB071011110144/145

Borrower (Party A): Ningbo Keyuan Plastic Co., Ltd

Address: Ningbo Beilun Qingzhi Industrial Zone

Postal code: 315800                   Legal representative:

Te;: 86232717                         Fax: 86234706

Opening bank: Bank of China, Beilun Branch Account number: 810735036108091001

Lender (Party B): Huaxia Bank Co., Ltd. Ningbo Branch

Address: No. 787, Baizhang East Road

Postal code: 315040

Legal Representative (Principal):

Phone: 87972545                               Fax: 87972608

Based on the principles of fairness, Party A and Party B enter into this Contract after negotiation in accordance with the Contract Law, General Rules of Loan and relevant laws and regulations.

Article 1 Type of Loan

1.1   The loan under this contract is working capital loan.

Article 2 Currency and Amount

2.1   The currency under this contract is √RMB □ USD □Others / .

2.2   The amount of the loan under this Contract is (Spell-Out): RMB Eighty Million.

Article 3 Purpose of Loan

The loan under this contract should be only used under the articles of Working Capital Loan Withdrawal Application; Party A shall not change the purpose of the loan hereunder without the written consent of Party B.

2

Article 4 Term of Loan

4.1   The term of the loan hereunder is one year (Day/month/year), from Sept. 13th, 2011 to Sept. 13th, 2012.

4.2   Party A shall withdraw the loan under this contract according to the types as follows:

√Party A shall withdraw the loan in on the day of Sept. 13th, 2011 . Party A shall in advance file an application with Party B ahead of three working days, and the loan shall is available only after the application is approved by Party B.

□Party A shall withdraw the loan on the period as below:

Party A shall withdraw the loan during the period from the date when the contract is signed to ______/___. Party A shall in advance file an application with Party B ahead of / working days each time, and the loan shall is available only after the application is approved by Party B.

Once Party A wants to withdraw the loan, all the terms and conditions in Article Six should be satisfied firstly, or else, Party B is under no obligation to provide any kind of loans.

4.3   Party A can repay principal following the types as below:

□ Repay the principal in one time on the day of _____ ______________.

√ Adopt Installment repayment following the sequence, time and amount.

August 13, 2012 , Amount (Spell-Out)     Forty Million

September 13, 2012 , Amount (Spell-Out)     Forty Million

____/___Year___/____month____/___Day, Amount (Spell-Out) ___________/_____________

____/___Year___/____month____/___Day, Amount (Spell-Out) ___________/_____________

____/___Year__/_____month____/___Day, Amount (Spell-Out) ___________/_____________

____/___Year____/___month___/____Day, Amount (Spell-Out) ___________/_____________

□ Repay the loan according to the maturity date written by Party B in Working Capital Loan Withdrawal Application, and all the maturity dates of withdrawing should not be later than the date of ___________/_____________.

4.4   If the withdrawal and maturity date written in the loan collection certificate is inconsistent with the in the appointed date or the date stated on the Application, the date on the loan collection certificate under this contract shall prevail. The accessories including the Application, loan collection certificate and other files already identified by both sides consists of an inseparable part of the contract, and have the same validity with this contract.

3

Article 5 Interest Rate

5.1   The interest of loan in calculated in according with such the agreement as below:

√The interest rate of the Contract is calculated at 6.56 % (annual rate). After the contract is signed and before the loan is given out, if the People's Bank of China adjusts the benchmark lending rates, the interest rate shall be conducted subject to the floating proportion written in Article 5.5.

□ The interest rate will be adjusted every ___/___months, and the interest rate from the date of withdrawing loan to the first date of interest rate settlement is / % (annual rate).

□ The floating interest rate is composed of _/_____months’ ___/___(LIBOR/HIBOR) plus ___/___% rep-resents, and floating every ___/___months. (LiBOR, an acronym for the London Interbank Offered Rate, is the interest rate at which large international banks are willing to lend each other money on a short-term basis. It's calculated every business day in 10 currencies and 15 terms, ranging from overnight to one year. HIBOR, an interest rate stated in Hong Kong dollars on the lending and borrowing between banks in the Hong Kong interbank market. The terms of the deposits vary from overnight to one year. The HIBOR is a reference rate for lenders and borrowers that participate directly or indirectly in the Asian economy. )

□ Others

________________/_____________________________________________________________

_____________________________________________________________________________

5.2   The interest date shall be executed with the start of withdrawal date, and the calculation formula is: Interest rate = the loan balance × the days of interest date × annual rate/360(day).

5.3   One kind of the interest settlement types shall be chosen as below:

□ Interest settlement monthly, the interest payment date is 20th every month, and the last interest payment date is the maturity rate the contract.

√ Interest settlement quarterly, the interest payment date is 20th every quarter, and the last interest payment date is the maturity rate the contract.

□ Interest settlement follows the settlement of principal, and interest will be paid off at the same

date as the principal in one time.

□___________/_______________________________________________________________

5.4   After the loan is given out, in case the People’s Bank of China adjusts the interest rate and calculation method, the interest rate shall be conducted according to the types as below:

□ The interest rate is unchangeable.

□ The interest rate shall be conducted subject to the adjustment of the benchmark interest rate of the corresponding grade of the People’s Bank of China.

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□ For the monthly interest settlement, the interest rate shall be conducted monthly, and the adjusted interest rate will be effective from the second day of the first interest settlement date.

√For the quarterly interest settlement, the interest rate shall be conducted seasonally, and the adjusted interest rate will be effective from the second day of the first interest settlement date.

□ The interest rate is adjusted annually.

□

_______/____________________________________________________________________

5.5    Following the articles of 5.1 and 5.4, the adjusted interest rate will float upwards___/_____/downwards___10％_______, according to the benchmark interest rate of the corresponding grade of the People’s Bank of China.

5.6    If there is a change in the interest rate under this contract, the penalty for interest rate will be changed to some extent and will be effective at the same time, and by virtue of sectional method.

5.7    Based on the above principles, Party B can adjust the interest rate without the necessary agreement of Party A.

Article 6 Items and conditions of withdrawal

6.1    When party A withdraws the loan, these items should be in advance satisfied as below:

6.1.1  Complying with the current laws and regulations, Party A should finish the related procedures, including the administrative permission, approval, registration and so on.

6.1.2  Part y A has submitted the related files that have already met the requirements.

6.1.3  The Certificate of guarantee should be finished in advance and all the relevant procedures are already in effect, and also the mortgage right and the pledge.

6.1.4  Party A doesn’t break the any agreement under this contract.

6.1.5  On the moment of withdrawing, the claims and guarantee of Party A are to be real, punctual and effective.

6.1.6  On the moment of withdrawing, Party A should guarantee the inconsistence between the real running, financing conditions and the written contents in the contract.

6.2    After Party A has fulfilled the above items and conditions, Party B will deal with the withdrawal procedures and sign the loan certificate. The loan certificate has the same legal effect with the contract and is an indispensable party of the contract

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6.3   When Party A can’t satisfy the items and conditions of withdrawal, Party B has a privilege of

partly fulfilling the contract.

Article 7 grants and payments of loan

7.1   The grants and payments of loan are conducted as below:

□ Party A pays independently

√ Party B pays as fiduciary party

□ The payment amounts is less than __/_____RMB (or the equal foreign currency) , the payment will be handled by Party A; while the payment amounts exceed ___/____RMB (or the equal foreign currency), the payment will be handled by Party B; if the payment object is specified but the amounts is indefinite, the payment will be handled by Party A directly.

7.2   Payment handled by Party A independently, the officially sealed Working Capital Loan Withdrawal Application Party A should be certified firstly, and then, the loan will be transferred to account of Party A who will finally handle the independent payment, where the transact object has an appointed use.

7.3   Payment handled by Party B, based on the appointed use of the loan, Party B will verify whether the listed object and the paid amounts provided by Party A are consistent with the commercial contract. After being approved, in accordance with the officially sealed Working Capital Loan Withdrawal Application, Party B will offer loans to Party A and pay the appointed use outwardly for part y A’s transaction object.

7.4   Payment handled by Party A independently; Party A should sum up the payment records every_/___months, and party B has the right to investigate and analyze the account, certificate and the spot.

7.5   Payment handled by Party B as fiduciary party, Party A should provide the related information and usage of transaction counterpart, and Party B will bear little responsibility due to lack of truth, punctuality, integrity of the transaction counterpart provided by Party A.

7.6   The loan shouldn’t be offered to the agency company of Party A in the capital market or the associated company of Party A but without the accordant use of loan.

Article 8 Capital Supervision after Granting Loan

8.1   Party A should open a single capital withdrawal account in Party B (Account: _______________/___________), or provides a capital withdrawal account opened in other banks (Account: 810735036108091001), and deposit the withdrawal capital to the account by not lower the proportion of _____5___%. If the capital withdrawal account is opened in other banks, Party A should provide the invoice to Party B every__3__months.

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Article 9 Repayment

9.1   Party A repays the principal and interest of the loan hereunder with the capital from the sources, including but not limited to Operation Revenue. In case of any provision on the capital source of Party A’s repayment as specified in any other contracts in which Party A is one party, the provision shall not affect the fulfillment of repayment obligation under the contract. Party A, in any case, shall not invoke the appointed items to refuse the fulfillment of repayment obligation.

9.2   Party A shall deposit sufficient funds for repayment of the principal and interest due in the account opened with Party B prior to the interest settlement date or principal repayment date, and authorize Party B to deduct money from the account on such date. If confronting with the in legal holiday, the repayment date can be postponed to next working day.

9.3   Party B has the rights to deduct money from the account on such date if Party A doesn’t repay the loan timely. If the currency is not consistent with the required one, the currency will be converted according to the exchange price quotation.

9.4   The payment contents are listed in order hereunder: the cost used to realize the claim and guarantee title, the bill for the damage, the breaches and compound interest, overdue interests, and penalty interest, interest and principal etc.., and Party B has a right to change the order.

9.5    If Party A wants to repay the loan, he should present an application in written form, after Party B approves it, the repayment will be conducted as below:

√ Party B charges for the interest according to the loan interest rate appointed in the contract and

the real days

□ Except for the interest according to the loan interest rate appointed in the contract and the real days, Party B charges for the compensation money according to a proportion of ___/___% and with a top limit that is calculated by the amounts of repayment in advance × loan interest rate in the contract /360×days in advance.

Article 10 Loan Guarantee

10.1  One item or several items of the loan guarantee can be adopted as below:

□ The guarantor___________/____________signs the Guarantee Contract with Party B.

□ The mortgagor_______________/________signs the Mortgage Contract with Party B.

□ The pledgor _______________/________signs the Pledge Contract with Party B.

□ ________________________/________________________________________________

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10.2  If the claim in this contract belongs to the claims of the maximize guarantee, one item or several items of the pledges can be adopted as below:

√ the guarantor_ Ningbo Litong Petrochemical Co., Ltd _signs the Guarantee Contract of the maximize guarantee with Party B.

□ the mortgagor_________/______________signs the Guarantee Contract of the Top Amount

with Party B.

□ the pledger______________/_________signs the Pledge Contract of the Cop Amount with

Party B.

√The guarantor Tao Chunfeng signs the Personal Guarantee Contract of the maximize guarantee with Party B.

Article 11 Rights and Obligations of Party A

11.1  Party A shall guarantee the legality of his company and the validity of survival, and has the right to deal with the assets, the related business with the loan, the sign and fulfillment of this contract.

11.2  Party A shall obtain the approval and authorization from its superior departments or the board of directors.

11.3  Party A shall guarantee the sign and fulfillment of the contract without violating other asset regulations and appointments, the pledge agreement signed with other companies and other documents that are binding upon both parties.

11.4  Party A shall be responsible for the truth, accuracy and integrity of the materials provided during the examination of the loan.

11.5  During the survival of the loan agreement, the asset-liability ratio of Party A shall not exceed 95% .

11.6  Party A shall withdraw and use the loan in accordance with the term and purpose as specified in the contract.

11.7  Party A shall open the bank settlement account assigned by Party B, and accept voluntarily Party B’s investigation and supervision.

11.8  Party A shall use the loan in accordance with the term and purpose as specified in the contract, but not be used for purposes of illegal production and running.

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11.9    Party A shall not embezzle the working capital for other usage, and actively cooperate with Party B in supervision and investigation over its production, operation and management and so on, and provide the information but not limited to the documents as below:

11.9.1 Business license, annual proof, legal person code certificate, necessary proofs of identity and personal information of the legal person, the board members, the responsible persons in charge of finance, business license, tax authorities annual examination of the tax registration certificate, annual tax certificate proofs, a copy of related loan certificate (card) required by Party

11.9.2 All opening Banks and account, and the deposits and loans

11.9.3 Annual audited balance sheet, income statement, equity changes of shareholders, sales, the cash flow sheet, the financial statements and notes.

11.9.4 Production and operation plans, statistical reports.

11.9.5 All external (including any institution of Party B) security situation.

11.9.6 All associated companies and related information, and the related transactions that have taken place or is about to occur exceed more than ten percent of its net assets as well as the internal mutual guarantees Group.

11.9.7 In case of litigation, arbitration, administrative penalties, and other disputes such as the debts and personal criminal prosecution.

11.9.8 Using records and information about loans under this contract.

11.10  Repay the loan according to appointed items in this contract

11.11  Party A shall notify Party B in writing ahead of thirty days before the related aspects changes, including but not limited to the office investment, substantial increase in debt financing, contracting, leasing, trust, asset restructuring, debt restructuring, equity restructuring, equity transfer, joint venture, merger (the merger), division, joint venture (cooperative), reducing registered capital or application business for rectification, application for dissolution (or revocation), the application re-engineering, reconciliation and bankruptcy and other operations, its own institutions and legal status, written notice to Party B, and implement responsibility for debt repayment under this contract, or provide a new guarantee in writing, or else, Party A shall not carry out any activities before paying off all the loan.

11.12  Party A shall notify Party B in writing ahead of thirty days before the related aspects changes, including but not limited to suspend business for rectification, and is declared closed, is dissolved (withdrawal), is asked to reorganize, bankruptcy, and changes in legal status and to take adequate and effective steps to preserve Party B’s claims.

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11.13  Party A shall notify Party B in writing within three days after the running or the claims security turn into serious situations, as well as adopt take adequate and effective steps to preserve Party B’s claims.

11.14  Party A shall notify Party B in writing within seven days after such changes happen, including residence, name, legal representative or other senior management members.

11.15  Party B shall not sell certain assets, pay off other debts in advance, and be guarantor for third-party debt without Party B agrees before paying off the loan principal and interest.

11.16  Party A shall not sign contract with any third party that may damage Party B under this contract rights.

11.17  In the case of guarantee, if the guarantor violates any kind of the warranty service or commitment, or lose guarantee capabilities, Party A should provide Party B immediately with new guarantor or prepay the loan in advance.

Article 12 Rights and Obligations of Party B

12.1    Has the right to require Party A to provide all the relevant materials.

12.2    Has the right to supervise, examine the using of loan, know more about the running activities, financing, guarantee and deputes and so on.

12.3    Has the right to ask Party A to open a bank account in an assigned bank, and supervise the account according to the articles under this contract.

12.4    Has the right to participate the large party financing, asset sales and mergers, division, joint-stock reform, bankruptcy and liquidation activities, maintaining the party claims without violating the laws, regulations and regulatory requirements.

12.5    During the process of loan payment, if there is a declined credit, a low business profitability, not in accordance with the agreed purpose or use of loan funds, or borrow funds to pay as agreed, Party B has the right to adjust the loan payment terms and payment methods, or to suspend the issuance and payment of loan funds, meanwhile claim that it will call in the all the released principal and interest and other measures immediately.

12.6    If Party A withdraws all loan funds ahead of the maturity date, Party B has the right to call in the loan ahead of time.

12.7    Party B shall grant loans to the full schedule, if Party A fulfills its obligations completely and meet the withdrawal conditions under this contract.

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12.8    Keep confidential the materials provided by Party A concerned information of liabilities, finance, production, operation, etc., unless otherwise required by the Contract and laws and regulations.

12.9    Notify Party A timely when Party B changes his residency and promulgate an announcement publicly.

Article 13 Liabilities of Breach

13.1    Both Parties hereto shall fulfill the obligations as specified in the Contract after the Contract takes into effect. Any party who fails to fulfill the obligations hereunder shall bear the liabilities of breach of contract.

13.2    Should Party A fail to provide the guarantor or the guaranteed documents or go through the withdrawal documents within thirty days (including legal holidays and weekends), Party B has the right to remove the contract or call in the released loan.

13.3    Should Party A fail to repay the principal under the Contract on time, Party B has the right to request for repayment within a specified time. Party B has the right to collect an additional 50% penalty interest to overdue loan. Should Party A fail to repay the interest under the Contract on time, Party B has the right to collect the compound interest, in case of the maturity date, Party B shall collect the compound interest according to penalty interest stated on this contract.

13.4    Should Party A fail to use the loan for the purpose as stipulated in the Contract, Party B is entitled to collect the principal and interest according to penalty interest at a rate 100%.

13.5    Should Party A fail to repay the loan under the Contract on time or use the loan for the purpose as stipulated in the Contract, Party B shall collect the overdue interest, penalty interest and compound interest.

13.6    Due to breach of Party A that results in litigation, Party A should bear the costs for this payment, arbitration fees, security fees, advertising fees, assessment fees, appraisal fees, auction fees, travel expenses, legal fees and the cost of achieving the other claims.

13.7    In case Party A is involved in one of the following situations, Party B shall have the right to reclaim part of or all loan in advance and cease to grant loan, and adopt the relevant measures.

13.7.1 Should Party A fail to use the loan for the purpose as stipulated in the Contract, or fail to pay for the principal, interest and other payables on time.

13.7.2 Should Party A fail to pay for the loan according to the agreed types.

13.7.3 Party A exceeds agreed financial index.

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13.7.4   Party A fails to use the loan funds for the purpose as stipulated in the Contract.

13.7.5   Party A breaks up the whole into parts in order to avoid the payment by Party B.

13.7.6   Party A provides Party B with false reports or conceals important facts in the financial statements and other business information.

13.7.7   Party A refuses to accept the monitoring and inspection in the aspects of the loan funds and the relevant production, management, financial activities.

13.7.8   Party A use the loans for equity investment

13.7.9   Party A uses the loans for the purpose of speculation in securities, futures, real estate, etc., or engages in other illegal business, illegal transactions.

13.7.10 Party A takes advantages of the loans for lending in order to obtain illegal revenues

13.7.11 Party A defraud the Party A for loans by means of fraud.

13.7.12 Party A cheats the capital by means of providing false contract with the associated parties without the actual trade notes receivable, accounts receivable and other claims.

13.7.13 Through related party transactions, Party A avoids the claims of bank debts.

13.7.14 As a party in violation of other contracts (including this contract, Party B) or agreement, Party A constitutes a serious breach.

13.7.15 If the Party A changes the mode of operation, its own system, insolvency or legal status, without the written consent and the implementation of the repayment of debt of Party B, or the new guarantor provided by Party A, including but not limited to foreign investment, substantial increase in debt financing, contract, trust, asset restructuring, debt restructuring, equity transfer, joint-stock reform, joint venture, merger (the merger), acquisition, division, paid transfer of property rights, joint venture (cooperative), to reduce the registered capital or application business for rectification, application for dissolution (or revocation), the application re-engineering, reconciliation and bankruptcy.

13.7.16 The change of the guarantee under the contract is not conducive to Party B’s claims, including but not limited to collateral, collateral damage, loss, reduction in the value or that Party A fail to provide the new guarantor timely when the old guarantor breaches its obligations established by the contract.

13.7.17 The guarantee contract is not in effect, or the guarantor loses the ability or fail to perform guarantee duties by way of violating promise and or refuse to bear responsibilities, thus Party A fails to provide the new guarantor.

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13.7.18 The statements, representations and warranties made by Party A is not real, inaccurate or concealed material.

13.7.19 Party A does not fulfill the contract obligations specifically.

13.7.20 During the period of loans, the debt ratio of Party A exceeds 95% .

13.7.21 Party violates any other contract obligations and commitments which affect the achievement of Party B’s claim.

13.7.22 Party A’s description of the statements or materials in the application or attached accessories are untrue or violates the commitments in the withdrawal application.

13.8       If it has been seven working days from the date after Party A has reached all the conditions for withdrawal but can’t obtain loans, Party A is entitled to receive a penalty, according to the actual number of days overdue under penalty interest articles 13.3.

Article 14 Effectiveness

14.1       The contract shall come into effect after the execution of both parties hereto.

Article 15 Transfer, change and Termination

15.1       A contract takes effect, Party B under this contract in whole or in part of the debt to a third party, without the consent of Party A agrees.

15.2       The contract takes effect, Party A under this contract all or part of the debt to a third party, shall be submitted in advance to the B button to take the Guarantor agree to transfer obligations bear any written documents or provide new guarantees, and by B written consent.

15.3       This contract takes effect, A, B shall not alter any of the parties. For a change, A, B and both parties have reached an agreement in writing to change.

15.4       If Party A requires the loan extension of the contract hereunder, with Party B’s investigation and agreement, extension agreement can be signed. If Party B do not agree with loan extension Party A should still fulfill its repayment obligations in accordance with the contract.

15.5       During the contract performance period, when one of the following cases occurs, Party B is entitled to terminate the contract, withdraw the granted loan and interests in advance and stop the continual lending:

15.5.1    Party A’s operation and financial position deteriorates and unable to pay due debts, or involves in major economic litigation or arbitration and other legal correction, which severely affects and threats Party B’s fulfillment of obligatory right;

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15.5.2   The overall customer credit status, operation situation and financial condition of the Group Party A belongs to arise severe crisis, which raises serious imperil to Party B’s loan safety;

15.5.3   Party A is closed, dismissed, stopped, with the business license being revoked, cancelled and so forth;

15.5.4   Any other situations that will treat or severely affect Party B’s fulfillment of obligatory right under this contract.

Article 16 Settlements of disputes

16.1       If there is a dispute between the parties took place due to all disputes should be resolved through consultation; consultation fails, the parties choose the following ways:

√Sue to the people's court.

□ Ask for ____/______ from arbitration committee for arbitration.

Article 17 Supplementary Provisions

17.1       If both parties have signed _________/________according to the Maximum Amount of Financing Contract, this contract shall be the maximum amount of financing under the contract the specific business contract.

17.2       The Contract, Party A corporate name, magic representative, shelter and other changes without written notice to Party B, Party B according to the information contained in the contract sent to Party all instruments, beginning with the service.

17.3       Party A shall assume the contract and its registration under the contract of guarantee, insurance, notary, appraisal, assessment, transportation and all other related costs. Payment by Party B, Party B has the right to deduct from the party account directly.

17.4       contract changes to meet after the main laws and regulations, judicial interpretations of the regulations made changes to the contract, the other should be with. Otherwise, do not stop issuing loans.

17.5       The two sides agreed to other matters.

_______________________/_______________________________________________________

_______________________________________________________________________________

_______________________________________________________________________________

17.6       This contract adopt □option, denotes the agreed article, while ×denotes unfitness here.

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17.7       Copies of the contract: Party A of one copy, Party B of two copies and / Party of /

copy, shares the same legal effect.

17.8       The accessories under the contract have the same legal effect with the contract

17.9       Party B has taken reasonable means to draw attention to the West under the contract exclusion or limitation of liability provisions Party, according to owner required a full explanation of the conditions, both parties all the terms of this contract, understanding does not exist objection.

Attachment: Application for withdrawing working capital loans.

Sign in this page (without the text)

Party A： Ningbo Keyuan Plastic Co., Ltd. (Seal)

Legal representative (or agency): Signed name:

Sept. 13 2011

Party B Huaxia Bank Inc. Ningbo Branch (Seal)

Legal representative (or agency): Signed name:

Sept. 13 2011

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EX-10.45

Exhibit 10.45

Import Hui Li Da Contract

No.:026, Beilun E5-01-01, 2011

Party A(applicant): Ningbo Keyuan Plastics Co., Ltd

Business license No.:330200400023187

Legal representative/person in charge: Chunfeng Tao

Address: Qingshi Industrial Zone, Ningbo Postcode: 315803

Financial institution account and account No.:

Tel: 86232932                        Fax:

Party B: Bank of China Inc, Beilun Branch

Legal representative/ person in charge: Xiaoping Ying

Address: No.245, Huashan Road, Beilun District  Postcode: 315800

Tel: 86880639                   Fax:

According to the regulations of the related law, both parties sign this contract under the negotiation.

This contract belongs to the single arrangement under the itemof The Arrangement of Credit Line or The General Arrangement of Credit Business signed by both sides.

Article1 Preconditions of the import financing

Under the articles of import financing of this contract, it must meet the demands of the following conditions:

1, the contract has already been effective;

2, party A obligates and signs the related company documents, receipts, signatures, related person’s names and samples of signatures for party B, and also fulfills the related certificates;

3, party A opens the account needed by this contract;

4, party A arranges the needed approval process of the law and the administration of the business properly, and submits the transcripts of the approval documents and the copies of the original documents according to party B’s requirement;

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5, the arranged guarantee of this contract has already been set up;

6, party B considers other conditions that party B should provides.

Article 2, related contents of import business

√Letter of Credit

Letter of Credit No.:

Name of Bank Issuing Document:

No. of Issued Document:

Receipt amount:

Collection

Invoice No.: /           Entrusted bank’s name: /

Issuing documents No.: /  Receipt amount: /

Remittance

TT:/      Receiver:/

Amount:/

Article 3, Financing currency and amount

Financing currency: USD

Financing amount: (Spell-Out) Sixteen Million Forty-four Thousand Nine Hundred and

Forty-Five Point Ninety-nine.

(Numeric)USD 16,044,945.99

Article 4, Financing duration

The financing duration is twelve months/ / days, starting from the day that party B pays for the foreign payments.

Article 5, Interest rate and interest settlement (Notes: complete with factual information.)

1, Interest rate

(1) Annual interest rate of %: fixed interest rate

(2) √ LIBOR/HIBOR for latest 12 months + 370 base point before 1 working day of Financing day .

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2, Calculation of interest

Interest is calculated according to the actual payment amount and days since the date of Party B made payment.

Calculation formula: Interest=Principal*Days*Daily interest rate.

Basis for calculating daily interest rate is of 360 days, the reduction formula is: daily interest rate=annual interest rate/360.

3, Method of interest settlement

Interest settlement is according to the following _third_ way:

(1)   Settlement with quarter, 20th of each last month per quarter as the interest settlement day, and the 21st as the payment day.

(2)   Settlement with month, 20th of each month as the interest settlement day, and the 21st as the interest payment day.

(3)   Same as expiration date of principal.

(4)   Receive the interest in advance and settle when expiration date.

On the condition that the final payment day of the financing principal is not the same date of interest payment day, then the final payment day is considered as interest payment day and Party A shall pay off the entire interest.

4, Default interest

(1)   If Party A fails to return the principal amount of financing within the agreed term, as for the overdue payment, the default interest shall begin accruing according to the default interest rate starting from the date of late payment until both the principal and interest are paid off.

(2)   If Party A fails to pay the interest and default interest in time, it can be penalized with compound interest per month/per quarter according to agreed default interest in this contract.

(3)   Default interest rate

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A. Default interest rate is a floating rate, the floating period is  / month/ /year. In every floating period, the default interest shall be re-priced on the default date. The re-pricing date is the corresponding date in the month of the default date. If there is no corresponding date in the same month, then the last date of the month is the re-pricing date.

B. Default interest rate equals to the benchmark interest rate in the item C below plus 20%.

C. In the first floating period, the benchmark interest rate is the financing interest rate item 1 of this Article. After each full floating period, the benchmark interest rate shall be calculated as below:

Re-pricing according to benchmark interest rate issued by the People’s Bank of China in the re-pricing day.

√Re-pricing according to LIBOR/HIBOR for latest 12 months + 370 base point before 1 working day of Financing day .

Article 6, Financing fees

Party A shall pay the related fees produced under the business of this contract to party B in time. The calculating and paying basis, standard and method of these fees shall be carried out according to the regulations of party B.

Party A pays the above fees through the __second__ method:

A.   Party A pays Party B the expense of financing under the contract: _. Party A authorizes Party B to withdraw directly from Party A’s account: Account No. 361058330713.

B.   Other methods:____________________/_______________.

Article 7, Guarantee

1, Margin Pledge

According to the related covenants in < General Agreement of Margin Pledge>_signed by both parties. Party A provides the Margin Pledge for the financial right of party B under this contract, and fulfills the responsibilities according to the arrangements of this contract and the above < General Agreement of Margin Pledge>.

2, the guaranteed claim scope

The guaranteed claim scope contains financing principal, interest (including legal interest, arranged interest, compound interest and default interest), liquidated damages, compensation money, fees to realize claim right (including but not limiting in fees of litigation, lawyer, notarization and performance), fees produced from party A’s fault and any other payable ones.

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3,Amounts and payment

(1)   Margin: (currency)__RMB__; (Spell-Out)__RMB One Hundred and Five Million_; (Numeric) _￥105,000,000.00__

Pledge effectiveness bases on the interest produced from Margin, and the pledgee has the right to use the interest produced from Margin to pay for the principal claims.

(2)   the pledgee pays the above margin through the following methods:

Since the __first __ banking day of signing this contract, deduct/deposit the Margin to the Margin account opened in party B (account No.:35036108091001);

To authorize party B to have the right to delimit Margin directly from party A’s RMB account (account No.: ______/____) opened in party B to party A’s insurance account (account No.:______/______)opened in party B.

The guaranteed responsibilities of Margin deposited under the business whose number is __ __ managed in party B’s side has been assured to discharge, and authorize party B to delimit Margin directly from account opened in party B.

(Other methods)__________/_______________.

4, Occurrence of the guaranteed responsibilities

If party B doesn’t pay the arranged amount during any normal repayment day or repayment day in advance to party B under this contract, party B has the right, according to the arrangement of this contract, to change the pledge into cash to enjoy the priority repayment.

The normal repayment day in above is the regulated day to repay the principal, pay the interest or pay any payments to party B according to the regulations of this contract. And the repayment day in advance in above is the day put forward by party A and agreed by party B, or the day when party B demands party A to withdraw the principal and interest of the financing amount or any other payments.

5, Realization of the pledge

After the guaranteed responsibilities happening, if agreed by party B to release Margin, party A agrees party B to use the released Margin (including the principal and the interest) to the delivery of the long-term sales business under the Application of the Long-term Sales whose number is RMBFWDmanaged by party B, and use the foreign amount of delivery to repay the principal and the interest of import financing under this contract.

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If the foreign amount obtained from the due delivery can’t repay the financing principal and interest, party A authorizes party B to actively delimit any amount in the settlement account opened in party B’ side to complement, and the antedated money in the account is regarded as the expire in advance. As for the situation that the currency account is different from the currency of price of party B’s business, then convert according to the settlement price applicable in deducting to party B.

Article 9, Party A’s statements and promise

1, Party A registers and exists according to the law, and possess the complete capacity of civil rights needed to fulfill this contract;

2, That sign and fulfill this contract depending on party A’s true thought indicates that obtain the legal and effective authority according to the requirements of the regulations and its inner management documents while not go against any treaty, contract and other law documents having restraint to party A; party A has gained or will gain all the related approvals, permits, files or registers needed to sign and fulfill this contract;

3, All the documents and certificates provided by party A to party B is true, complete, accuracy and effective under this contract;

4,The trading background described by party A to party B is true and legal, and does not have the illegal purpose such as money laundering. Party A provides any documents to party B according to party B’s requirements, which can’t be explained that party B has the obligations and responsibilities of inspection towards the authenticity and legality of party A’s trade;

5, Party A will not hide any truths that may influence both parties’ financial situation and contract-fulfill capacity.

Party A’s promise is as following:

1, Provide the instructions of goods sales situation related to the import items in time to party B.

2, If party A has already signed or will sign counter-guarantee agreement or other similar agreements about the guaranteed obligations with the guarantor of this contract, then this agreement will not damage any rights owned by party B under this contract;

3,If the goods sales of the import items occur to serious difficulties, or situations that may influence both parties’ financial conditions and capacity to fulfill this contract, including but not limiting in the change of any business pattern of dismantlement, merger, affiliation, joint venture with foreign merchants, cooperation, contractual operation, reorganization, reformation and listing program, reduction of registered capital, assignment of significant property or stock right, commitment of significant liabilities, or installation of new significant liabilities on the pledge, or involvement to significant litigation or arbitration cases, party A shall inform party B in time;

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4, As for the unarranged items in this contract, party A agrees to manage with party B according to the international conventions.

Article10, Disclosure of the related party and the related transactions of party .

Both parties are applicable to the __first _ item:

1, party A does not belong to the group guests of party B according to the Management Guidance of Credit Extension Business Risk of Commercial Bank Group (short for Guidance).

2, party A belongs to the group guests of party B according to Guidance. Party A shall report the situation of related trade whose pure assets is over 10 percentages to party B in time, including the related relationship, trading projects, trading properties, trading amount, relevant proportion and price policy among the trading aspects (including the trade with no capital but only proportion capital).

Article 10, Default events

Party A will be regarded as breaking this contract once one event of the following ones happens:

1, party A does not fulfill his obligations to pay and repay to the party B according to this contract;

2, the statements made in this contract by party A is untrue or go against the promise that have been made in this contract by party A.

3, party A stop the business or something serious happens;

4, party A goes against other arrangements related to the party’s obligations and rights;

5, party A breaks the arrangements under other contracts with party B, Bank of China or any other institutes.

When one item of the above situation happens, party B has the right to take action relatively or in the meantime according to the actual situation:

1, request party A to correct his nonperformance during the duration;

2, all terminate, partly terminate or just terminate the business application with party B in this contract or other contract: as for the not-issued loan and not-managed trade financing, all terminate, partly terminate or just terminate the management;

3, the unpaid loan/financing capital under this contract or other contract between party A and party B is declared to become due both or partly;

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4. stop this contract, and all terminate, partly terminate or stop other contracts between party A and party B;

5. demand party A to pay for the damages of party B because of party A’s fault;

6. it just need announcement before or after the situation happening, delimit the amount in the account in party B’s side opened by party A to pay off all or part debt to party B. The undue capital in this account will be regarded as the acceleration of maturity. As for the situation that the account currency is different from the business invoicing currency of party B, convert according to the price applicable to party B.

7. perform the right to guarantee the goods;

8, other arrangement needed by party B.

Article 11, Retain of right

If one party fails to fulfill entire or part rights under this contract or request the other party to fulfill, undertake entire or part obligations, responsibilities, it shall not be considered to waive the obligations or responsibilities.

Any party’s tolerance or extension or delay execution of the rights under this contract towards another party shall not affect the rights under this contact and laws and regulations, also not considered to waive the rights.

Article 12, Amendment, Modification and Termination

This contract can be amended or modified in writing  mutual agreement. Any amendments or modifications are inseparable parts of this contract.

Unless otherwise specified by laws or regulations or covenants, this contract is not allowed to terminate till the rights and obligations are completely executed.

Unless otherwise specified by laws or regulations or covenants, invalidation of any items under this contract will never affect the other items’ legal effectiveness.

Article 13, Applicable Laws and Settlement

This contract shall be governed by the laws of PRC.

After this contract becomes effective, all disputes concerning this contract should be settled through friendly negotiation. When negotiation fails, any party can settle with following second method;

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1.   Submit to ___________________Arbitration Committee to arbitrate.

2.   Submit to the People’s court located in the domicile of Party B or other corresponding institutions of Bank of China, Inc.

3.   Prosecute the People's Courts with jurisdiction.

During the settlement period, if this dispute does not affect the performance of this other items, the other items shall continue to performance,

Article 14, Attachment

The following attachments and other attachments ensured by both parties makes up the inseparable parts of this contract, and possess the equal legal validity.

1,__________/_______;

2,__________/_______;

Article 15.  Other Covenants

1.   Without Party B’s written consent, Party A is not allowed to transfer rights or obligations to the third parties.

2.   If Party B entrusts any other institutes of Bank of China to execute the rights and obligations under this contract, Party A shall agree. Party B or its designees are entitled to exercise all the rights under this agreement and to file a lawsuit in the People's Courts or submit to the Arbitration Committee to arbitrate.

3.   In case of not affecting the other covenants of this contract, this contract has the legal binding to the heirs and transferees.

4.   Apart from the other covenants, the address specified in this contract by both parties is regarded as the contract address, and also promise that when the contract address changes, then information will sent to the party in written form in time.

5.   The titles and business names in this contract are just used for the purpose of convenience, and can’t be used for the purpose to explain the clause content, and obligations and rights of the party.

6.   Per the changes of laws and regulations or regulatory process or the requirements of regulatory authority, Party B is unable to execute this agreement or execute according to covenants, Party B has the right to terminate or amend this agreement or single agreement according to the changes of laws and regulations or regulatory process or the requirements of regulatory authority and exemption from liability.

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Article 16.  Conditions for effectiveness

This contract becomes effective upon the signature and seal of the legal representatives of both parties, principals or the authorized persons.

This contract is made in duplicates, each party has one copy, both having the same legal effects.

Party A: Ningbo Keyuan Plastics Co., Ltd Party  B: Bank of China Beilun Branch Ltd

The authorized person:                 The authorized person: _unable to identify_________

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EX-10.46

Exhibit 10.46

Current Fund Loan Contract

China Construction Bank

Ningbo Branch

1

Contract Number: G1230-2011-079

Loanee (Party A ): Ningbo Keyuan Plastics Co., Ltd.

Address: Qingzhi Industrial Zone, Xiaogang, Beilun

Zip code: 315803

Legal representative (Principal): Chunfeng Tao

Fax: 86232618   Tel: 86232939

Lender (Party B): China Construction Bank Inc, Ningbo Beilun Branch

Address: No.251, Xinda Road, Beilun, Ningbo   Zip code: 315800

Principal : Jiangen Han

Fax: 86882154     Tel：86884361

WHEREAS, Party B agrees Party A’s loan application for normal business operation. Both parties agree to enter into this agreement according to applicable laws and regulations.

Article 1. Amount of loan

Amount: RMB (Spell-Out) Seventy-five Million .

Article 2. Purpose and repayment

Party A shall use this loan into normal business operation,

Article 3. Term of loan

The term under this contract is 12 months, from March 31, 2011 to March 30, 2012.

If the beginning date of the term under this contract is different from the loan voucher (a certificate of indebtedness, the same below), it shall be applied for factual loan date recorded in voucher for first time, and the expiration date in item 1 shall be adjusted.

The loan voucher is a part of this contract and has the same legal validity as this contract.

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Article 4. Interest rate of loan, default interest rate and calculation, settlement

1.   Interest rate of loan

The interest rate of loan under this contract is annual interest rate, which is the following third one:

A.   Fixed rate, which is %. This rate will not change during the term of loan.

B.    Fixed rate, that is the benchmark rate of value date (“floating upward” or “floating downward”) %. This rate will not change during the term of loan.

C.   Floating rate, that is the benchmark rate of value date ___(“floating upward” or “floating downward”) __%, which shall be adjusted per three months according to benchmark rate on the adjustment day and the ratio of mentioned floating upward/ floating downward from the value date to paid off date. The adjustment date is the corresponding date in the month of the value date. If there is no corresponding date in the same month, then the last date of the month is the adjustment date.

2.   Default interest rate

A.   If Party A failed to se the loan as the contract stated, the default interest rate is the rate which loan’s interest rate + 100%. If the loan’s interest rate revised according to the third point of the first article, the default interest rate should be revised corresponding.

B.   Default interest rate under this contract is the loan interest rate + 50%, the loan interest rate shall be adjusted according to Item 3 in Article 1.

C.   If Party A diverts the loan as well as cannot repay on time, the default interest rate shall be calculated according the greater one.

3.   The value date under this contract is the date which the loan firstly issued to the specified account of Party A.

The benchmark rate of the first issued loan is the rate which issued by People’s Bank of China on the value date. After that, when the loan’s rate is revised according to the above articles, the benchmark rate is the rate which issued by People’s Bank of China on that day. If People’s Bank of China does not distribute the interest rate of loan, the benchmark rate is the rate which is recognized in bank industry or the common rate. It will not be chosen if the two parties have other arrangement.

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4.   The loan interest will be calculated since the loan has been transferred to the specified account of Party A. The loan interest will be calculated per day. Daily interest rate =annual interest rate /360. If Party A failed to pay the interest on time, the compound interest will be calculated since the second day.

5.   Interest settlement

A.   With fix rate, it will be settled with this agreed rate. With floating rate, it will be settled with the rate of that period. If there are more than one interest floating, firstly calculate the interest of each period, and then add them together on the final settlement date.

B.   The loan interest under this contract shall be settlement with following first way:

1). Monthly Settlement, the settlement date is the twentieth day of every month.

2). Quarterly Settlement, the c settlement date is the twentieth day of last month of each quarter.

3). Others

Article 5. Issuance of loans and disbursement

1.   Precondition

Party B has the responsibility to issue the loan only when the below conditions are continuously satisfied ,with exception of Party B giving up it entirely or partly.

A.   Party A has completed the approval, registration, payment, insurance and other regulated procedures.

B.   There is a qualified and effective guaranty corresponding to this contract.

C.   Party A has opened an account for withdraw and repayment based on Party B’s requirements.

D.    Party A has not occurred any violated matter agreed by this contract.

E.   Any conditions may endanger Party B’s claims have not been occurred.

F.   The regulation and law, rules or some powerful departments do not prohibit and restrict the issuance of loan.

G.   Party A’s financial index has met related clause’s requirement.

H.   Party A has submitted related documents before issuance of loan.

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I.   The documents provided by Party A are legal, authentic, accurate, effective and qualified.

J.   Others.

2.   The plan of using the loan

The plan of using the loan as followed the first way:

I.  

A.   The plan of using the loan is as following:

1)   March 31, 2011 Amount: Seventy-five Million

2)   .

3)  

B.                      /

3.   Party A shall use the loan according to Item 2 and shall not advance, postpone or cancel the draw of money without Party B’s written consent.

4.   If Party A uses the money separately, the repayment date should still based on the Article 3 under this contract.

5.   Documents shall be provided by Party A

Both parties agreed to use the first item regarding Party A’s documents.

A.   If only satisfied with the first condition:

(1)   Amount for single loan withdraw is over RMB 10 million and any external payment under this plan is over RMB 10 million.

(2)  

Party A shall provide following documents no later 1 work day after single loan withdraw:

a.   Loan archived documents and payment settlement documents sealed by Party A.

b.   Transaction documents.

c.   Other documents requested by Party B.

With exception of Item A, Party A shall provide following documents no later 1 work day after single loan withdraw:

a.   The plan of using loan.

b.   Loan archived documents sealed by Party A

c.   Other documents requested by Party B.

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II.  

Party A shall provide following documents no later 1 work day after single loan withdraw:

a.   Loan archived documents and payment settlement documents sealed by Party A.

b.   Transaction documents.

c.   Other documents requested by Party B.

When amount for single loan withdraw is over RMB 10 million and any external payment under this plan is over RMB 10 million, and Party B agreed to it accord with payment objection after review corresponding documents provided by Party A, which can be applied for entrusted payment by Party B. Otherwise, it shall be paid by Party A directly.

Article 6. Account Usage and Supervision

1.   Loans account

Loans account under this contract shall be defined with the second way:

A.   Party A shall open a specific loan account since working day from signing this contract to issuance of first loan, which shall be only used to issue and pay loans under this contract.

B.   Party A shall open other account (Account:).

2.   Principal recovery account

A.   Party A shall open a principal recovery account within 1 working day after signing this contract or use existed account (Account:)in Party B as the principal recovery account.

B.   Party A shall report the status of principal recovery to Party B per month. Party B report the status of principal recovery of last cycle to Party A no later than the third working day of current cycle.

C.   Party B has the right to supervise the status of principal recovery.

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Article7. Repayment

1.   The principle of repayment

Party A shall repay the loan as following the principles:

Party B has the right to apply the repayment to the costs which should be undertaken by Party B and paid by Party A in advance. The left money should be repaid follows the principle of repaying the interest first and repaying the principal second. However, for the loan which its principal cannot be repaid over ninety days or the interest cannot be paid over ninety days, or there is other stipulations of the loan according to the law, regulation, and rules, the repayments of Party A can be used to repay the principal first and repay the interest second.

2.   Interest payment

Party A shall pay the interest to Party B at the expiration date for interest. The first interest payment date is the first expiration date for interest after the issuance of loan. The interest will be paid off as well as the principal is wholly repaid.

3.   The plan of principal repayment

The plan of principal repayment shall be according the first way:

A.   The plan of principal repayment as following:

1. March 30, 2012   Amount: Seventy-five Million

2_______________________________________

3________________________________________

4________________________________________

5__________________________________________

6__________________________________________

4.    Repayment Method

Party A shall deposit the enough money on the account opened in Party B before the repayment date. The money will be used to pay for the loan and will be transferred to pay automatically. (Party B also has the right to take off the money to pay for the loan). Or Party A can transfer the money from other account to pay for the loan.

5.   Repayment in advance

If the loan intends to be repaid in advance, Party A must provide written application to Party B no later 30 wording days. Only when Party B has approved, Party A can repay the part or whole principal in advance.

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If Party A repays the principal in advance, the interest should be calculated based on the real days and the loan’s interest rate signed in the contract.

If Party B agrees Party A to repay the principal in advance, he has the right to ask Party A to pay for compensation. The compensation shall be defined as following 1 way:

A.   Compensation = Principal repaid in advance × the months in advance × one ‰. It will be calculated as one month whether it has been one month or not.

B.    _______________________________________________________

On condition of that Party A repay the loan separately, if he repay part of the principal in advance, the order of repayments should be opposite. The remaining loan shall still execute according to the loan’s interest rate signed in the contract.

Article8. The rights and obligations of Party A

1.   The rights of Party A

A.   Having the right to ask Party B to issue the loan according to this contract;

B.   Having the right to use the loan according to this contract;

C.   Having the right to extend the time of borrowing the money on the condition that meets Party B’s requirements.

D.   Having the right to ask Party B keep Party A ’s financial documents and things about its production secret, except the stipulations of law, regulation and rules, or the demand of powerful departments, or the two parties has other agreements.

E.    Having the right to reject the request of bribery by Party A and to report Party B’s activity which against the national laws and regulations about loan’s interest rate, charge of service etc.

2.   The obligations of Party A

A.   Drawing the money according to the stipulations of this contract, repaying the principal and the interest, and undertaking the charge which stipulated in this contract;

B.   Providing the relative financial documents and production and management information to Party A, including but not restricted to providing balance sheet, income statement (income payment table for public institutes) of the last quarter on 10 work days ago and current flow statement at the end of the year. Party A should be responsible for the information’s reality, integrity and effectiveness and do not provide false information and hide important financial facts;

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C.   If Party A changes its business registration, such as name, legal representative, address, business range, registered principal, articles of association etc., he shall inform Party B on paper within 30 work days after changing. The relative documents should be delivered to Party B at the same time;

D.   Party A shall use the loan according to the stipulation of the contract and cannot squeeze, misappropriate or use the loan to do some illegal things. Party A should cooperate and accept Party A’s inspection and supervision of its production, management, financial activities and the usage of the loan. Party A cannot surreptitiously withdraw the funds, transfer the assets or make use of other transactions to escape its obligations;

E.   If Party A makes use of the loan to do production, construction of project, it shall comply with the national regulations about environmental protection;

F.   Before repaying the whole principal and interest, Party A cannot provide guarantee by using the assets which come from the loan unless on the agreements of Party A;

G.   If Party A is group client, it shall timely inform Party B of the situation of associated transaction of over 10% of Party A’s net assets, which include 1) the association of each transaction party; 2)transaction project and transaction nature; 3) the transaction amount or corresponding proportion; 4) price fixing policy (including the transaction without amount or only with symbolizing amount);

H.   Party A shall inform and obtain written consent of Party B before merger, spin-off, option transfer, and investment, increase of debt financing and so. And the written consent shall not affect Party B’s right to apply for remedy measure under this contract when endangered by aforementioned behaviors;

I.   When Party A repaid directly, he shall report the status of loans to Party B per month. Party B reports the status of loans of last month to Party A no later than the third working day of current month.

J.  

Article 9. The rights and obligations of Party B

1.   Party B has the right to ask Party A to repay the principal, interest and costs, to complement the rights signed in this contract, and to ask Party A to perform the obligations signed in this contract.

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2.   Party B has the right to take part in wholesale funding of Party A, asset sales and merger, spin-off, shareholding reform, bankrupt and so on. The specific methods as following:

A.   Party A shall obtain Party B’s written consent while taking aforementioned behaviors;

B.   Party B arrange the wholesale funding for Party A;

C.   The price and receiver of Party’s asset shall meet following agreement:

D.   Other methods agreed by Party B.

3.    Issuing the loan according to the stipulations of the contract; expect the delay which caused by Party A or other caused which are not Party B’s faults.

4.   Keep secrets on the information which Party A provided, except the stipulation of law and regulation, relative powerful departments’ requirements or the other agreements of the two parties.

5.   Party B cannot provide or ask for bribery from Party A.

6.   Party B cannot be dishonest and harms the Party A’s rights.

Article 10. Responsibility of breaching a contract and remedy for the conditions of harming Party B’s claims

1.   The conditions and responsibility for Party B when it breaches the contract

A.    If Party B does not issue the loan without any reasonable reasons, Party A can ask Party B to issue the loan according to the contract.

B.   If Party B against the law, regulation and rules to ask Party A to pay for the interest and cost more than it should, Party A has the right to ask Party B to return the money.

2.   The conditions for Party A to breach a contract

A.   Party A against any agreements of this contract or against any legal obligations.

B.   Party A clearly indicates that it will not fulfill the obligations which signed in the contract or its action indicates that.

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3.   The conditions that may harm Party B’s claims

A.   Any of the following conditions can be considered as may harm the safety of Party B’ rights: Party A happens to contract, mandate, lease, shareholding reform, decrease registered principal, invest, join operation, merge, restrict, separate, joint venture, apply for suspending business for rectification, apply for dismissing, be revoked, apply for going bankrupt, the controlling shareholder or the real controller changed, large assets been transferred, stop production, close a business, be imposed a large quantity fine or be cancelled registration by powerful government departments, be revoked license, be involved in big legal dispute, have serious difficulties in production and management, the financial condition worsened, the legal representative or main responsible person cannot fulfill its duties.

B.   Any of the following conditions can be considered as may harm the safety of Party B’ rights: Party A does not fulfill its other debts, including the branch of China Construction Bank and other third side’s due debts. Party A transfers its assets in very low price or with no charge, cancels or decreased the third party’s debt, do not want to exercise its rights, or offer security for the third party.

C.   Party A’s shareholders abuse the independent state of company’s legal representative or shareholders’ limited responsibilities. Party A’s shareholders evade the debts which Party B thinks can harm the safety of its rights under this contract.

D.   The pre-conditions of issuing the loan signed in this contract are not be continuously satisfied.

E.   If the guarantor has the following conditions, Party B can think the safety of its claims may be hurt:

①  Violation of any conventions of the contract or the statements and the things its assuring are mendacious, wrong and incomplete;

② Occurrence of contract, mandate, lease, shareholding reform, decrease registered principal, invest, join operation, merge, restrict, separate, joint venture, apply for suspending business for rectification, apply for dismissing, be revoked, apply for going bankrupt, the controlling shareholder or the real controller changed, large assets been transferred, stop production, close a business, be imposed a large quantity fine or be cancelled registration by powerful government departments, be revoked license, be involved in big legal dispute, have serious difficulties in production and management, the financial condition worsened, the legal representative or main responsible person cannot fulfill its duties and may influence the assuring ability of the guarantor;

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③ other conditions that will lose or may lose guaranty ability:

F.    If one of the following situations happens to pledge and collateral, Party B thinks it may harm the safety of its rights under this contract:

①  Because of the third person’s action, country’s levy, confiscation, taking over for use, taking back without compensation and removing, changes of the market, or any other reasons that leads the pledge and collateral be destroyed, lose or value decreased.

② Pledge and collateral be sealed up, detained, frozen, remained, auctioned, supervised by executive authority or disputes occurs to the prosperity.

③ The mortgagor against the contract. Any convention of the contract or the statements and the issuing things are mendacious, false and incomplete.

④ Other situations that may harm Party B’s hypothec or pledge rights’ fulfillments.

G.   The guarantee is false, unenforced, invalid, being revoked, being relieved. The guarantor against the contract or clearly indicates that it will not fulfill the guarantee responsibility or its action indicates that. Other situations like the guarantee lose part or whole guaranteed ability or the value of the thing pledged decreased, Party B thinks may harm the safety of its rights under this contract.

H.   Other situations that may harm Party B’s claims safety.

4.   Party B’s remedy measures

If the second clause or third clause of this article has happened, Party B has the rights to exercise one or some of the following rights:

1.   Cease of loans issuance;

2.   Supplement conditions for loans issuance and payment;

3.   Change of payment method comply with this contract;

4.   Declare that the loan is due and ask Party A to return the principal and interests immediately.

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5.   If Party A do not use the loan as the contract required, Party B has the right to ask Party A pay the penalty which equals to the 9.09 % of the money that misused by Party B. Also, Party A has the right to refuse Party B use the money do not withdraw;

6.   If Party A do not use the loan as the contract required, the calculation of interest from that time on should be based on the default interest rate and the calculation ways signed in this contract;

7.   If Party A cannot repay the loan on time, the calculation of interest from that time on should be based on the default interest rate and the calculation ways signed in this contract.

8.   Other remedy measures including but not limited as :

A.   Party B can deduct RMB or other currency from Party A ’s account in China Construction Bank without informing in advance;

B.   Execution of the guarantee rights;

C.   Request Party A to offer new guarantee of all debts according to Party B’s requirements;

D.   Rejection of Party A to handle corresponding deposit from the account opened in China Construction Bank

E.   Termination of this contract.

Article 11. Other covenants

1.   The undertaking of costs

The cost regarding counsel, insurance, evaluation, registration, keeping, identification, and notarization should be undertaken by Party A except the two parties have other conventions.

All the costs for Party A to fulfill its obligatory rights, including but not limited of legal cost, arbitration fee, property preservation cost, travel expense, fulfillment cost, evaluation cost, auctioneers fee, notarization cost, lawyer’s fee etc., should be undertaken by Party A .

2.   The usage of Party A’s information

Party A agrees Party B to provide its information to the People’s Bank of China to set the credit data base. Party A agrees Party B to use its information for the need of business.

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3.   Announcement

If Party A does not repay the principal and interests on time, Party B has the right to notify the relative departments and publish getting advisements through media.

4.   The force of the evidence recorded by Party B

Unless having reliable and certain opposite evidence, Party A cannot raise an objection on the Party A ’s record of principal, interest, costs and repayment records, the documents, proof and getting records of Party A ’s action of drawing, repaying and pay the interests.

5.   Reservation of right

The rights Party A have in this contract do not influence its other rights according to the law, regulation and rules. Any tolerance, concessions or postpone the rights under the contract cannot be regarded as giving up the rights or the confirmation of the active. It will not limit, prevent, block the continuously exercise the rights.

6.   If Party A has other due debts to Party B despite the debts under this contract, Party B has the right to get the money from the account which Party B opened in China Construction Bank to pay for the due debts first. Party A should agree with it.

7.   If Party A’s address or contract information changed, it should notice Party B in written form immediately. The losses caused by late advice should be undertaken by Party B.

8.   Deduct of the account payable

For the money that Party A should pay under this contract, Party B has the right to get the money from the account which Party B opened in China Construction Bank without advance advisements. If it is need to deal with money exchange or forward exchange transaction, Party A has the obligation to help Party A, the risk of exchange rate should be taken by Party A.

9.   Settlement of disputes

If the disputes occur during the performance of the contract, it can be solved through negotiation. If it is failed, than should be solved according to the first method below:

A.   Proceed to the People's Court of the domicile of Party B

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B.   Submit to arbitration commission (address________ ________), it should base on the arbitration rules. The last results have the constraining force to two parties.

During the arbitration, the parties shall continue to perform the terms which is not covered by dispute.

10.   Execution of contract

The contract shall come into force when the legal representative (principal) of Party A and Party B have signed and stamped.

11.   This contract is in four copies.

12.   Others

1____________________

2______________________

3_______________________

4______________________

Article 12. Statements

1.   Party A clearly understands Party B’s scope of business and rights.

2.   Party A has read all the articles of the contract. Party B has explained the articles which Party A do not clearly understand. Party A has fully known and understood the meaning of each articles and its legal consequence.

3.   The obligations of Party A are meet the stipulation of law, regulation and rules as well as of Party A’s inner regulations and files. It has obtained the approval of Party A’s company.

4.   Business operation of Party A is legal compliance.

5.   Party B has capability to remain operation and repay legally.

6.   Party A promise to loan basing on real requirement, rather exceeding factual requirement.

7.   Party A and control shareholders are in good credit status.

8.   Party B has the right to entrust other institutions of CCB to execute, fulfill Party B’s rights and obligations under this contract.

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9.   Party A states that at the time of executing the contract there is no violation of any laws and regulations related to environmental protection, energy conservation and emission reduction; and promises to comply with those laws and regulations throughout the term of this contract. If Party A’s above statement is false or it fails to perform, or there is potential risk of waste of energy and pollution from the part of Party A, Party B has the right to stop issuing loan to Party A, or announce the claims is acceleration of maturity, or using other reliefs allowed by this contract or laws.

Party A (stamp): Ningbo Keyuan Plastics Co., Ltd.

Legal representative (principal) authorized agent (sign):___________

Date: March 31, 2011

Party B (stamp):

Legal representative (principal) authorized agent (sign):___________

Date: March 31, 2011

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EX-10.47

Exhibit 10.47

C1-02: Inward Bills Contract (applicable for single business)

Inward Bills Contract

No.:

Party A (Applicant): Ningbo Keyuan Plastics Co., Ltd

Business license No.:330200400023187

Legal representative/Principal: Chunfeng Tao

Address: Qingshi Industrial Park, Ningbo Postcode: 315803

Financial institution account and account No.: 35036108091001

Tel: 0574-86232932 Fax: 0574-86232618

Party B: Bank of China Inc, Beilun Branch

Legal representative/ Principal: Xiaoping Ying

Address: No.245, Huashan Road, Beilun Zone   Postcode: 315800

Tel: 0574-86880294 Fax: 0574-86890975

WHEREBY, the undersigned parties agreed to sign this contract in comply with applicable laws.

Article 1. Preconditions

Inward Bills under this contract shall meet the following requirements:

1.   This contract has already been effective;

2.    Party A obligates and signs the related documents, receipts, seal, related

person’s name lists and samples of signatures for party B, and also fills in relevant certificates;

3.   Party A opens the required account to fulfill this contract;

4.   Party A arranges the required legal and administrative approval process to facilitate the business properly, and submits the duplicate copy of the approval documents and the copies of the original documents as requested by Party B;

5.   The guarantee on the provision of this contract has been effectively established;

6.   Other conditions requested by Party B.

Article 2. Related to Import Trade (Notes: complete with factual information.)

√Letter of Credit

Letter of Credit No.:

Name of Bank Issuing Documents:

No. of Issued Document:

Receipt amount:

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Collection

Invoice No.: /           Entrusted bank’s name: /

Issuing documents No.: /  Receipt amount: /

Article 3.  Currency of Inward Bills and amount

Currency of Inward Bills: USD

Amount: (Spell-Out) 10 Million；

(Numeric)USD 10,000,000.00

Article 4.  The Term of Inward Bills

The term of Inward Bills is 12 months/ /   days, beginning to calculate since the date of Party B made foreign payment.

If sale price of the imported products has been collected before the closing of the financing, Party B has the right to consider the final collection date as the closing date of the financing. Party A agrees to use the payment for sale of imported products it receives to repay Party A of the financing amount.

Article 5.  Interest Rate and Interest Settlement (Notes: complete with factual information.)

1.   Interest rate (annual interest rate)

(1)   Inward Bills in RMB: fixed interest rate, and annual interest rate is / ％;

(2)   Inward Bills in foreign currency:

A.   Fixed interest rate, and annual interest rate is / ％;

B.   Loan interest rate in the floating period within  / months / years since the Inward Bills date published by the Bank of China, Inc.

C.   Benchmark of LIBOR/HIBOR + 300 for the latest 12 months published by Reuters till the prior working day of the Inward Bills date.

2.   Calculation of interest

Interest is calculated according to the actual payment amount and days since the date of Party B made payment.

Calculation formula: Interest=Principal*Days*Daily interest rate.

Base for calculating daily interest rate is of 360 days, the reduction formula is: daily interest rate=annual interest rate/360.

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3.   Method of interest settlement

Interest settlement is according to the following _third_ way:

(1)   Settlement with quarter, 20th of each last month per quarter as the interest settlement day, and the 21st as the payment day.

(2)   Settlement with month, 20th of each month as the interest settlement day, and the 21st as the interest payment day.

(3)   Same as expiration date of principal.

(4)   Receive the interest in advance and settle when expiration date.

On the condition that the final payment day of the financing principal is not the same date of interest payment day, then the final payment day is considered as interest payment day and Party A shall pay off the entire interest.

4.   Default interest

(1)   If Party A fails to return the payment of Inward Bills within the agreed time, as for the overdue payment, the default interest shall begin accruing according to the default interest rate starting from the date of late payment until both the principal and interest are paid off.

       Default interest rate equals to the benchmark interest rate in the item 1 of this section plus 20%

(2)   If Party A fails to pay the interest and default interest in time, it can be penalized with compound interest per month/per quarter according to agreed default interest in this contract.

(3)    Default interest rate: Interest = principal ×factual days ×daily interest rate.

Article 6.  Fees

Party A shall pay the related fees related to the business under this contract in time and the Party B decides the calculation basis, standard and method, etc.

Party A pays the above fees through the __second__ method:

1.   In __/__ banking day since this contract became effective, pay with __/___.

2.   Party B is authorized to deduct from the Party A’s account (Account No.:10735036108491001)

3.   Other methods:____________________/_______________.

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Article 7. Other Rights and Obligations of the Parties

Party B has the right to handle the full set of documents/goods under the inward bills business or other guarantee right/ property right pursuant to applicable laws and regulations. According to applicable laws and regulations or the verdict of the courts and arbitral authorities, the right to handle the full set of documents/goods under the Inward Bills business belongs to Party A, then Party A agrees to transfer this right to party B unconditionally to the maximum extent allowed by applicable law and regulations and accept performance and non- performance of Party B to handle the documents/goods. If according to applicable laws and regulations or the verdict of the courts and arbitral authorities, the right to handle the full set of documents/goods under the Inward Bills business belongs to Party B, then Party B retains this right till Party A completely pays off the financing.

 When Party A requests to hold receipts/goods, and repays the financing with sales income, Party A is only acting as Party B’s consignee, including but not limited to safekeeping relevant receipts, handling storage, transportation and other related matters under those receipts, and maintain sales fund or deposit it to specific account of Party B. Party A shall disclose this role when selling the goods to a third party.

Party A shall be responsible for all the fees (including but not limited to insurance, storage, transport and wharf) during period when Party A retains the goods. Party A promises to insure the goods according to the market price of the goods, indicate Party B as the insured and provide the insurance documents to Party B. Party B has the right to clam directly when insured cargo endures loss.

Without the permission of Party B, party A is not allowed to delay payment or handle the goods through any non-currency method or at the price lower than the market price. Party A is not allowed to mortgage or pledge, or make the goods to be bound by any other liens. Once requested by Party B, Party A shall submit the details of the goods’ accounts, any sales revenue or relevant sales contracts to party B; Party B has the right to enter into the warehouse to review the actual situations of the goods, or repossess these goods.

Article 8.  Guarantee (Notes: complete with factual information.)

The guarantee methods of liability under this contract:

 /          provide joint liability guarantee, … , and sign corresponding guarantee contract.

√ Ningbo Keyuan Plastics Co., Ltd provides margin pledge:

In case the pledgor is a third party, Party B and the pledgor shall enter into additional margin pledge contract.

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√ This contract is the main contract of < General Agreement of Margin Pledge>, and the agreement provides margin pledge and submit corresponding <Certification of Margin Pledge> or handle directly as following ways rather submit <Certification of Margin Pledge>:

1)   Margin Amount: (Currency) RMB ; (Spell-Out) Sixty-six Million Five hundred thousand ;

(Numeric) 66,500,000.

2)   Party A pay for above margin with following method:

√ Within   1   banking days since the effective date of this contract, Party A will deposit or load margin to the margin account opened in Party B with 10735036108091001    .

Entrusted Party B to load the margin to the margin account opened in Party B from the RMB account in Party B.

Party A ‘s guarantee liability of margin under  business has been removed, and Party A authorized Party B to load the margin to margin account opened in Party B directly from account.

Others:   _______________

3)   In case above guarantee liability of margin has been removed by Party B, Party B shall return according to following methods:

√ Return to the Party A’s account.

Return according to the deposit route.

Return according to the written instruction of Party A.

Others:                               .

 If Party B believes that Party A or guarantee occurred matters potentially affect the contractual capacity, or guarantee contract becomes invalid, terminated or cancelled, or financial conditions of Party A or guarantor gets worse or they enter into major litigation or arbitration, or any other factors that may affect their ability to perform their contractual obligations, or the value of guaranty gets worse or lost due to devaluation, destruction, losses, or being closed down, Party B has the right to demand and Party A has the obligation to provide new guarantee, replace the guarantor to bear the liability under this contract.

Article 9.  Party A’s Statements and Commitment

Statements as follows:

1.   Party A registers and survives by law, and possess the complete capacity of civil rights needed to fulfill this contract;

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2.   Party A signs and fulfills this contract based on true intention, has obtained the legal and effective authority according to the requirements of the Articles of Incorporation or other internal management documents, and is not allowed to violate any binding agreement, contract and other legal documents; Party A has gained or will gain all the relevant approvals, permits, files or registers.

3.   All the documents and certificates provided by party A to Party B is authentic, complete, accurate and effective under this contract;

4.   The trading background described by party A to party B is authentic and legal, and does not have the illegal purpose such as money laundering. Party A providing any documents according to party B’s requirements does not mean that party B has the obligations and responsibilities of inspection towards the authenticity and legality of party A’s trade;

5.   Party A will not hide any truths that may influence both parties’ financial situation and contractual capacity.

Commitments as follows:

1.   Provide the statement of products sales regarding the import items in timely manner according to Party B’s requirement.

2.   If  Party A has already signed or will sign counter-guarantee agreement or other similar agreements about the guaranteed obligations with the guarantor of this contract, then the agreement will not damage any rights owned by party B under this contract;

3.   If the products sales of the import items have serious difficulties, or situations that may influence both parties’ financial conditions and capacity to fulfill this contract, including but not limited to the change of any business pattern of dismantlement, merger, affiliation, joint venture with foreign merchants, cooperation, contractual operation, reorganization, reformation and listing program, reduction of registered capital, assignment of significant property or stock right, commitment of significant liabilities, or installation of new significant liabilities on the pledge, or involvement to grave litigation or arbitration cases, party A shall inform party B in time;

4.   As for pending matters, Party A agrees to handle according to the international conventions and agreement with Party B.

Article10. Disclosure of Related Parties of Party A and Related Transactions

The __/_ item below is applicable to both parties:

1.   Party A does not belong to the group client of party B according to the Management Guidance of Credit Extension Business Risk of Commercial Bank Group (short for Guidance).

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2.   Party A belongs to the group client of party B according to Guidance. Party A shall report the situation of related transactions over 10% net assets in time, including the related relationship, trading projects, trading properties, trading amount, corresponding proportion and pricing policy and so on (including the trade with no capital but only proportion capital).

Article 11. Default Events

Party A will be considered in violation of this contract if one of the following events happens:

1.   Party A fails to fulfill its obligations to pay and repay to the party B according to this contract;

2.   The statements made by party A is untrue or default the commitments under this contract;

3.    The matters mentioned in No.3 of Item 2 in Article 9 happen; Party B considered those may affect the financial conditions and contractual capability of Party A or guarantor, and Party A has not provided new guarantee, replaced guarantor in accordance with the provisions of this contract.

4.   Party A closes down or is subject to disincorporation, revocation or bankrupt.

5.   Party A defaults other covenants in this contract;

6.   Party A default the other contracts signed with Party B or other institutions of Bank of China, Inc.

7.   Guarantor defaults the covenants of guarantee contract, or other contracts signed with Party B or other institutions of Bank of China, Inc.

When any of the above mentioned events occur, Party B has the right to take one or some following actions:

1.   Request Party A and/or guarantor to amend the default behaviors within limited time;

2.   Entirely or partly suspend or terminate Party A’s business applications under this contract or the other contracts, entirely or partly suspend or terminated to grant and handle the un-granted loans, holding trading financing;

3.   Announce the unpaid loans/financing principals and interests and the other account payables to entirely or partly expire.

4.   Terminate or revoke this contract, entirely or partly terminate or revoke the other contracts between Party A and Party B;

5.    Request Party B to compensate the liquidated damages;

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6.   Deduct funds from Party A’s account to repay entirely or partly liability under this contract. The undue funds in this account will be considered due in advance. If the account currency is different from the business currency of Party B, convert according to the applicable rate of Party B.

7.   Execute real guarantee;

8.   Request guarantor to bear guarantee liability;

9.   Other measures considered necessary by Party B.

Article 12. Reservation of the Rights

If one party fails to fulfill entire or part rights under this contract or request the other party to fulfill, undertake entire or part obligations, responsibilities, it shall not be considered to waive the obligations or responsibilities.

 Any party’s tolerance or extension or delay execution of the rights under this contract towards another party shall not affect the rights under this contact and laws and regulations, also not considered to waive the rights.

Article 13. Amendment, Modification and Termination

This contract can be amended or modified in writing  mutual agreement. Any amendments or modifications are inseparable parts of this contract.

Unless otherwise specified by laws or regulations or covenants, this contract is not allowed to terminate till the rights and obligations are completely executed.

Unless otherwise specified by laws or regulations or covenants, invalidation of any items under this contract will never affect the other items’ legal effectiveness.

Article 14. Applicable Laws and Settlement

This contract shall be governed by the laws of PRC.

After this contract becomes effective, all disputes concerning this contract should be settled through friendly negotiation. When negotiation fails, any party can settle with following second method;

1.   Submit to ___________________Arbitration Committee to arbitrate.

2.   Submit to the People’s court located in the domicile of Party B or other corresponding institutions of Bank of China, Inc.

3.   Prosecute the People's Courts with jurisdiction.

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During the settlement period, if this dispute does not affect the performance of this other items, the other items shall continue to performance.

Article 15. Fees

Otherwise confirmation by law or other covenants, Party A undertakes all regarding fees.

Article 16. Attachment

The following attachments and other attachments ensured by both parties makes up the inseparable parts of this contract, and possess the equal legal validity.

1,__________/_______;

2,__________/_______;

……

Article 17.  Other Covenants

1.   Without Party B’s written consent, Party A is not allowed to transfer rights or obligations to the third parties.

2.   If Party B entrusts any other institutes of Bank of China to execute the rights and obligations under this contract, Party A shall agree. Party B or its designees are entitled to exercise all the rights under this agreement and to file a lawsuit in the People's Courts or submit to the Arbitration Committee to arbitrate.

3.   In case of not affecting the other covenants of this contract, this contract has the legal binding to the heirs and transferees.

4.   Apart from the other covenants, the address specified in this contract by both parties is regarded as the contract address, and also promise that when the contract address changes, then information will sent to the party in written form in time.

5.   The titles and business names in this contract are just used for the purpose of convenience, and can’t be used for the purpose to explain the clause content, and obligations and rights of the party.

6.   Per the changes of laws and regulations or regulatory process or the requirements of regulatory authority, Party B is unable to execute this agreement or execute according to covenants, Party B has the right to terminate or amend this agreement or single agreement according to the changes of  laws and regulations or regulatory process or the requirements of regulatory authority and exemption from liability.

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Article 18.  Conditions for effectiveness

This contract becomes effective upon the signature and seal of the legal representatives of both parties, principals or the authorized persons.

This contract made in duplicate, each party has one copy, both having the same legal effects.

Party A: Ningbo Keyuan Plastic Co., Ltd         Party B: Bank of China, Inc Beilun Branch

The authorized person:                   The authorized person:

January 24, 2011                               January 24, 2011

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EX-10.48

Exhibit 10.48

Appendix III

Agreement on Import Payment

Agreement No: 2011 Xinyong Zhongshan Daifu DF001

Party A (Applicant for import payment): Ningbo Keyuan Plastics Co., Ltd.

Address: Qingzhi Village, Beilun District, Ningbo City

Postal code: 315803

Tel: 86232932

Fax: 86232932

Legal Representative: Tao Chunfeng

Opening Bank and Bank Account:

Party B: Ningbo Brach of China CITIC Bank Corporation Limited

Address: No.36, Zhenming Road, Ningbo City

Postal Code: 315010

Tel:

Fax:

Legal Representative: Xia Nianlu

Opening Bank and Bank Account:

Place of contract signing: No. 36, Zhenming Road

Date of contract signing: August 4, 2011

For the purpose of performing Party A’s (i.e. the importer and applicant for import payment) responsibility of foreign payment under the import contract, Party A applies to Party B for import refinancing amount, and the Agreement is made by and entered into through equal negotiation between parties to clarify respective responsibilities.

Import payment mentioned herein refers to the business that Party A commissions Party B to guarantee that Party A will duly and fully reimburse the third bank (hereinafter referred to as “paying bank agent”), who pays the payable import funds for Party A, for the same, during the process of Party A’s performance of its obligation of foreign payment under the import contract by going through such settlement means as import L/C, import collection and T/T payment with Party B. Party A shall, within the agreed period, through Party B reimburse the paying bank agent for all the funds paid thereby for Party A and the corresponding expenses or reimburse Party B for all the funds paid thereby for the purpose of fulfilling its guaranty obligation and the relevant expenses.

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Article 1 Granted credit amount for import payment

(1)Party A’s maximum amount of import payment determined by Party B in accordance with China Citic Bank’s credit-granting requirements and systems is as follows:

Currency: USD

Amount (Capitalized): ELEVEN MILLION US DOLLARS

Amount (Arabic numbers): USD 11,000,000.00

Such credit amount may be valid from August 4, 2011 to September 4, 2012, and only the application for import payment put forward by Party A hereunder within such period will be accepted by Party B.

(2) Party A may re-use such granted credit amount within the valid period under the Agreement, on the condition that Party A shall separately apply to Party B for each import payment, and Party B may, after examination and approval of each application, instruct the paying bank agent to pay for Party A and provide corresponding guarantees. Party B is not obliged to allow Party A to use such granted credit amount.

Article 2 Guarantees for credit-granting of import payment

Party A agrees to provide one or several of the following guarantees (optional) as the counter-guarantees for Party A’s obtaining of the granted credit of import payment:

o Security;

o Suretyship    No. _________ Suretyship Contract is signed and entered into between and by the surety_____ and Party B;

o Pledge    No. _________ Pledge Contract is signed and entered into between and by the pledgor _____ and Party B;

o Mortgage   No. _________ Mortgage Contract is made by and entered into between and by the mortgager_____ and Party B;

þ Maximum suretyship   No. 2011 Xinyong Zhongshanyin Zuibao Zixu 113004 Maximum Suretyship Contract is made by and entered into between and by the surety Ningbo Litong Petroleum & Chemical Corporation and Party B;

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o Maximum mortgage  No. Maximum Mortgage Contract is made by and entered into between and by the mortgagor and Party B;

o ______________________________________________________________________.

Article 3 Prerequisites for import payment

(1) Before concluding the Agreement, Party A shall, in accordance with Party B’s rules and systems, open a settlement account with Party B for settlement of import payment hereunder.

(2) Party A has provided, as requested by Party B, the signature card, copy of business license or other materials which is consistent with original thereof, and the signatory’s valid letter of authorization.

(3) The said security at the agreed amount herein has been paid or the said guarantee contract has been signed and relevant formalities have been completed.

(4) Party A truthfully fills out and submits the Application for Import Payment according to the actual circumstances where Party A applies to Party B for import payment, and provides the transaction agreement under the Application and other documents and materials specified by Party B.

(5) All the promises and guarantees made by Party A herein are authentic, accurate and complete.

After fulfillment of the said prerequisites, Party B will, according to laws and regulations and China Citic Bank’s rules and systems, examine carefully Party A’s qualification, asset credit, transaction agreement and application for import payment, and based on such examination, Party B is entitled to determine whether to accept Party A's application.

Detailed information on the import payment hereunder shall be based on each Application for Import payment separately submitted by Party A and confirmed by Party B through affixing a seal. The Application will serve as the necessary supplement hereto and an integral part hereof, and liabilities under the Application are also the liabilities hereunder; Party A and the guarantor shall separately assume the responsibility of discharging the said liabilities and guaranteeing the payment of such liabilities in accordance with the Agreement and relevant regulations. Any of Party A’s import payment provided by Party B shall be performed under the Application corresponding to such business and the Agreement, and in case of any discrepancy, the said Application shall prevail in the performance of such business. Except as otherwise explicitly agreed in the Application, regulations of the Application inconsistent herewith will only apply to such business corresponding to that application, and will not be deemed as revision hereto or apply to other businesses hereunder.

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Article 4 Party A’s representations and warranties

(1) Party A warrants that the materials provided by Party A to Party B are authentic, lawful and effective, that the applied import payment is based on authentic transaction, and that relevant transaction agreements are all authentic, truthful, accurate and complete.

(2) Party A shall deposit all the refinancing funds and other expenses with Party B before the expiration of import payment. Any dispute between Party A and relevant parties of import contract has nothing to do with Party B, and Party A may not refuse to perform any of its obligations hereunder on the strength of such dispute.

(3) Before the expiration of import payment, if Party A is under any of such circumstances or if Party B has reasons to think that Party A is under any of such circumstances as its business conditions are seriously deteriorating, it loses its commercial credibility; or other circumstances indicating that it loses or is possible to lose the capacity of full payment of import refinancing funds, Party B is entitled to require Party A to add security to full amount or to provide other full guarantees, and Party A shall, within seven days as of Party B's request, satisfy Party B’s requirement. Otherwise, Party B has the right to take other legal measures as procedural preservation.

Article 5 Party A’s rights and obligations

(1) Party A is entitled to apply to Party B for import payment within the period and under the regulations as agreed herein.

(2) Party A shall, in accordance with relevant regulations of the Agreement and the Application for Import payment, through Party B, reimburse the paying bank agent for the import refinancing funds and the relevant expenses, or reimburse Party B for the funds disbursed by Party B for the purpose of performing its guarantee obligation and the relevant expenses.

(3) Party A shall, at Party B’s request, regularly or from time to time provide Party B with the reports and other documents which can truthfully reflect its operational and financial status.

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(4) During the period of expiration of import payment, Party A shall notify Party B in writing of its change of legal person’s name, legal representative, project leader, address, telephone and fax (if any) within seven calendar days of such change.

(5) During the period of expiration of import payment, Party A shall notify Party B in writing at least thirty calendar days in advance and obtain Party B’s prior written consent of any significant change (if any) in its operational policies including but not limited to such decisions as share transference, reorganization, merger, division, shareholding reform, joint venture, cooperation, joint operation, lease, and change of operational scope and registered capital which may influence Party B’s rights and interests, and shall pay off the import refinancing funds or provide the guarantees approved by Party B.

(6) Party A shall actively aid Party B in its investigation and supervision of Party A’s operational status and use of import refinancing funds, and all the expenses incurred to Party A from Party B’s non-cooperation shall be assumed by Party B.

(7) Without Party B’s prior written consent, in no case may Party A transfer (or transfer in a disguised way) its liabilities hereunder in whatsoever manner.

(8) Party A shall notify Party B in writing at least thirty calendar days in advance and obtain Party B’s prior written consent of disposition (if any) of its significant assets or all or major part of its business or business income by means of transference, lease or establishment of guarantee for the liabilities other than those hereunder.

(9) Party A shall immediately notify Party B of the events (if any) which may have significantly adverse influence on the discharge of liabilities hereunder including but not limited to major economic dispute, termination of business, suspense of business, being declared as bankruptcy, winding-up, business license being revoked, being cancelled or financial situation being deteriorating.

(10) If Party A’s surety herein partly or totally losses its capacity of surety for the import refinancing funds hereunder or if the value in the mortgage, pledge or pledge right hereunder decreases, Party A shall provide new guarantees approved by Party B.

Article 6 Party B’s rights and obligations

(1) Party B has the right to examine and supervise Party A's operational status and use of import refinancing funds.

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(2) Party B shall keep confidential Party A’s materials, documents and information provided by Party A, except as otherwise specified by laws and regulations and supervision authorities.

(3) Before expiration of the Agreement, in case of noncompliance of the Agreement because of newly revised policies and laws and regulations, or if Party A is under any of such circumstances or if Party B has reasons to think that Party A is under any of such circumstances as its business conditions are seriously deteriorating, it loses its commercial credibility; or other circumstances indicating that it loses or is possible to lose the capacity of full payment of import refinancing funds, Party B is entitled to terminate Party A’s use of the amount hereunder, and ask Party A to immediately pay off all the paid refinancing funds, payable interest, default interest and other expenses. Party B is entitled to directly deduct money from any of Party A’s accounts opened in China Citic Bank to offset Party A’s paid refinancing funds hereunder and other expenses.

Article 7 Liabilities for breach of contract

(1) After the Agreement has come into effect, parties shall separately perform their obligations as agreed herein, and either party who fails to (fully) fulfill the said obligations shall assume liabilities for breach of contract.

(2) After expiration of any import payment hereunder, if Party A fails to reimburse the paying bank agent through Party B for the import refinancing funds and relevant expenses, Party B’s disbursement thereby for the purpose of fulfilling its guarantee obligation will be converted as Party B’s overdue loans to Party A, the default interest of which shall be calculated according to the overdue days and overdue amount, with default interest rate as the loan default interest rate.

(3) After Party B’s disbursement on the expiration of import payment, if Party A fails to pay off such disbursement, Party B may simultaneously take the following remedy measures:

1. Deducting refinancing funds and relevant expenses from Party A’s margin account opened in Party B;

2. Deducting refinancing funds, payable interest and default interest from any of Party A’s accounts opened in any banking establishment of China Citic Bank;

3. Other lawful measures.

(4) Various expenses incurred to Party B from its realization of creditor’s rights (including but not limited to court fee, traveling expense, attorney fee, and disposal fee) shall be assumed by Party A.

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Article 8 Enforceable notarization

It is agreed by Party A that Party B may, on the strength of the Agreement, apply to notary public for enforceable notarization. If the funds arising from Party B's service of import payment hereunder and relevant expenses fail to be fully paid on the expiration of import payment, Party B may, on the strength of such notarization, apply to competent people’s court for enforcement. Party A unconditionally and irrevocably accepts people’s court’s lawful enforcement, and waives all of its counter-argument rights.

Article 9 Applicable law

The Agreement shall apply to laws of People’s Republic of China.

Article 10 Settlement of disputes

All the disputes arising from or relating to the Agreement shall be settled through negotiation between parties; if an agreement cannot be reached through negotiation, parties agree to take the first / second measure:

(1)   resorting to _____Arbitration Committee for arbitration; or

(2)   bringing a lawsuit before local people’s court at Party B’s location.

Article 11 Miscellaneous

(1) The Agreement will come into effect upon signature (or seal) of parties’ legal representative/ person-in-charge or their authorized agent and separate official seals.

(2) Any revision and supplement to the Agreement shall be decided in writing through negotiation. Any revision and supplement hereto, appendix hereto, the Application for Import payment and other relevant documents all constitute as a part of the Agreement.

(3) If some provision of this Agreement or part of some provision hereof becomes ineffective at present or in the future, the validity of the other provisions or other parts of the ineffective provision shall remain unaffected.

(4) All the notices, requests and other correspondence sent by Party B to Party A under the Agreement, including but not limited to such official letters as telex, telegram and fax, shall be deemed to have been delivered to Party A upon delivery; official letters sent by registered mail shall be deemed to have been delivered to Party A three days from the time of posting.

(5) This Agreement shall be executed in TWO original copies and is hold respectively by each party for compliance.

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(6) Party B has reasonably called Party A’s attention to the provisions of exemption or restriction of its obligations hereunder, and has explained sufficiently relevant provisions as requested by Party A; there is no discrepancy between parties’ understanding of the whole Agreement.

(7) Other matters agreed by parties:

Party A (the Company) agrees to deposit the RMB equivalent of USD11, 000,000 into the Bank (Party B) before the date of September 4, 2011 for one year, and agrees that the Bank (Party B) may block such security until September 4, 2012. It is Party A’s special promise.

Party A (official seal): Ningbo Keyuan Plastics Co., Ltd.

Legal representative (seal): Tao Chunfeng

(or authorized agent)

Party B (official seal): Ningbo Brach of China CITIC Bank Corporation Limited

Legal representative (seal): Xia Nianlu

(or authorized agent)

Date: ___(MM)___(DD)____(YY)           Date: ___(MM)___(DD)____(YY)

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Appendix IV

Application for Import Payment (use under the granted amount)

                                         No:

Ningbo Branch of China CITIC Bank Corporation Limited:

In accordance with regulations of No. 2011 Xinyong Zhongshan Daifu DF001 Agreement of Import payment Amount, the Company hereby applies to the Bank for import payment for the purpose of performing its obligation of foreign payment under the import contract.

Detailed Information on the applied import payment is as follows:

Name of exporter: MERCURIA ENERGY TRADING PTE LTD                                                                                        

Name of importer:Ningbo Keyuan Plastics Co., Ltd.                                                                                                        

Amount of import payment: USD 11,000,000.00                                                                                                                

Agreed refinancing price: 1 year LIBOR + 415 BPS    (or :_____________)

Duration: From the date of August 4, 2011to the date of September 4, 2012, totally: 396 days.

The total amount of import refinancing funds and relevant expenses: 

Name of payee: ____________________________________________________

Bank account of payee and opening bank: ________________________________

Account No.:                  

The Company promises and warranties that:

1. It has chosen one of the following guarantee measures for the application:

þ it will deposit ___ Yuan, which is 100% of the said applied refinancing funds, into its pledge margin account of the Bank (account No.:___________________).

oit has signed relevant guarantee contract with the Bank (No.: ____________________).

2. It will fully deposit all the agreed import refinancing funds and relevant expenses into Party A’s designated account opened with Party B at least 3 business days before expiration of bank import payment

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Applicant’s seal:

                                        (Below is the bank’s examination and approval)                                                                  

After examination, the Bank agrees to provide import refinancing service with the applicant, and specific information is as follows:

Import paying amount: USD 11,000,000 Currency: US dollar Expiration of refinance: September 4, 2012 Interest rate: 4.91611% plus the electronic remittance of paying bank: USD 4.00

Bank seal:

(This Application shall be executed in 2 original copies and is hold respectively by each party for compliance.)

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EX-10.49

Exhibit 10.49

Contract No. (2011Xin)Yin (YongYa) No. 107

Contract on Import Bill Advance

China CITIC Bank

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Contract on Import Bill Advance

This Contract on Import Bill Advance (“Contract”) is made and entered into by and between the applicant for import bill advance, Ningbo Keyuan Plastics Co., Ltd.having its registered office at Qingshi, Beilun District, Ningbo 315803, telephone number of 86232932, fax number of 86232618, legally represented by Tao Chun Feng and having a bank account opened with the Zhongshan Road Sub-branch of the China CITIC Bank (“the Client”) and the processing bank, Ningbo Branch of the China CITIC Bank Co., Ltd having its registered office at No.36, Zhenming Road 315000 and legally represented by Xia Nianlu (“the Bank”).

This Contract is executed at No.36, Zhenming Road as of the fourth day of August, 2011.

WHEREAS, the Client has applied with the Bank for import bill advance for payments to be made under the letter of credit (No. 31500LC1100563)and the Bank has accepted such application.

NOW THEREFORE, in order to clarify the rights and obligations of both parties, in accordance with applicable laws and regulations, in consideration of mutual covenants and on an equal basis, the parties hereto hereby agree as follows:

Article 1 Details of Letter of Credit/Collection

1.1 If the import bill advance is based on a letter of credit (L/C), details of such letter of credit will be as follows:

L/C No.: 31500LC1100563

Invoice No.: V201457

Amounts specified in the documents: (in words) Sixteen Million Three Hundred and Two Thousand One Hundred and Eighty Eight Dollars Seventy Nine Cents

                                 (in numbers) USD 16,302,188.79

1.2 If the import bill advance is on a collection basis, the details of such collection will be as follows:

Collection No.:   Name of the Remitting Bank:

Invoice No.:

Amounts specified in the documents: (in words)

                              (in numbers)

Article 2 Details of the Import Bill Advance

2.1 Currency: United States Dollar .

2.2 Amounts of advance: (in words) Five Million Three Hundred and Two Thousand One Hundred and Eighty Eight Dollars Seventy Nine Cents.

                    (in numbers) USD 5,302,188.79;

2.3 Term of this Import Bill Advance: 30 days commencing on August 5, 2011 and ending on September 5, 2011. If an event specified herein occurs and as a result repayment becomes due and payable prior to the date of repayment, the repayment will be due on the date when such event occurs.

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2.4 The amounts of advance under this Contract shall be applied exclusively towards payments under the foregoing letter of credit (letter of credit/import contract) and the Client shall not use the same for any other purposes.

2.5 The amounts of advance, date of advance and the date of repayment will be determined as per the bank certificate to be issued by the Bank.

Article 3 Interest Rate, Calculation and Payment of Interest

3.1 Interest rate applied to the amounts of advance under this Contract will be an annual rate and the Article 3.1(1) hereunder will apply:

(1) The interest rate to be applied to the amounts of advance under this Contract will be a fixed rate of 4.20506% and the interest rate will remained unchanged during the term of this import bill advance.

(2) The interest rate to be applied to the amounts of advance under this Contract will be a fixed rate which will beBPs above the base rate which is the Libor/Hibor interest rate formonths’ loan in the same currencybusiness days prior to the date of advance. Such interest rate will be specified in the bank certificate to be issued by the Bank and will remain unchanged during the term of this import bill advance.

(3) The interest rate to be applied to the amounts of advance under this Contract will be a floating rate which will beBPs above the base rate which is the Libor/Hibor interest rate for   months’ loan in the same currencybusiness days prior to the date of advance. Meanwhile, the interest rate will be adjusted during each interest rate adjustment period (i.e. the selected Libor/Hibor period). The date of interest rate adjustment will be the same day of the month of adjustment as the date of advance, or the last day of the month of adjustment if there is no corresponding date in that month of adjustment. The adjusted interest rate will be the Libor/Hibor interest rate ofbusiness days prior to the date of interest rate adjustment plus any increase determined pursuant to the foregoing. The interest rate will be specified in the bank certificate to be issued by the Bank.

(4) Others:

3.2 Calculation and Payment of Interest

(1) normal interest = interest rate agreed upon herein × amounts of advance × the number of days for possession of the advance/360.

(2) Penalty interest rate will be   50 % above the interest rate specified in Article 3.1 of this Contract. penalty interest = penalty interest rate × the overdue amounts × the number of overdue days/360. The interest will be calculated based on the overdue amounts and the actual number of overdue days from the day when the repayment becomes overdue and will be paid quarterly. In the event that the Client fails to pay the interest on time, compound interest will be charged at the penalty rate specified herein.

3.3 Interest hereunder will be paid in pursuance to Article 3.3(2) below.

(1) Interest will be prepaid and will be settled on the due date.

(2) Interest will be paid on the due date together with the principal amounts from which such interest accrues.

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Article 4 Release of the Amounts of Advance

4.1 The Bank will release the amounts of this import bill advance on the condition that all of the following requirements are met to the satisfaction of the Bank (unless the Bank waives all or any of them):

(1) The Client has completed all formalities as may be required by the Bank and such formalities continue in force;

(2) The guaranty contract (if any) under this Contract has become effective and continues in force;

(3) There has been no material change of the business operation and financial condition of the Client;

(4) The Client breaches none of the terms or conditions of this Contract.

4.2 The Bank is authorized by the Client to pay to a third party the amounts of advance under this Contract.

Article 5 Repayment of Debts under the Import Bill Advance

The Client warrants that it will, on or before the prescribed due date of repayment of the advance, pay back all principal amounts, interest and charges connected with the amounts of advance under this Contract. The Client shall transfer the foregoing principal amounts, interest and charges into a bank account designated by the Bank. In the event that the Client fails to pay back any amount on its due date, the Bank shall be entitled to the following rights:

1.debiting and collecting from any account opened by the Client with the China CITIC Bank an amount covering all the due principal amounts, interest, penalty interest, liquidated damages and compensatory damages (if any), and costs and expenses incurred by the Bank to collect such amount (collectively “the Debts”),

2.deducting an amount equivalent to the full amount of the Debts from all kinds of the Client’s receivables including payments for export of goods and/or services,

3. charging penalty interest to be determined in pursuance to the penalty interest rate set forth in Article 3.2 of this Contract provided that the Client fails to pay back the principal amounts, interest and charges under this Contract on their respective due dates,

4 disposing of collaterals or demanding that the Guarantor repay the Debts,

5.effecting any other measures which are adequate to protect the Bank’s rights and interests under this Contract.

Article 6 Guaranty and Safeguard Measures under the Import Bill Advance

6.1 The Client, upon entering into the import bill advance, transfers all titles, rights and interests in and to the documents and the goods represented by such documents to the Bank as guaranty or safeguard measures for repayment of the Debts so as to ensure that the Bank will collect in full amount the amounts of advance paid under the letter of credit/import contract, interest and charges.

The Bank shall be entitled to the ownership of the full set of documents/goods under this import bill advance as a result of the foregoing transfer. The Bank will, upon request of the Client, entrust the title documents and the goods represented by such documents to the Client in trust, in which case The Client is the trustee and the Bank is the grantor and sole beneficiary. The Client as the trustee shall act in good faith to the extent possible, prudently hold and dispose of the documents and goods represented by such documents for the best interest of the Bank, including taking delivery of, transporting, storing, processing, effecting insurance for and sell the foregoing goods, and undertake to sell the documents and the goods represented by such documents at reasonable prices, and shall apply in a timely manner the proceeds from such sale to repayment of the principal amounts, interest and charges under the import bill advance, or transfer the same to the account of the Bank (Account No. 7337610182400000111) as may be instructed by the Bank. To this end, the Client has issued to the Bank a trust receipt (No. YongYa 11243), which is attached hereto.

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6.2 In order to pay back the Debts, The Client, upon request of the Bank, provides the guaranty specified in Article 6.2(1) below:

(1)Ningbo Litong Plastics Co., Ltd. undertakes to be a surety (who is primarily and jointly and severally liable to repayment of the Debts) and has issued the Irrevocable Guarantee；

(2)Mortgagor  attaches security interest to its property and a separate Mortgage Contract (contract No.) is executed;

(3) Pledgor  pledges properties and a separate Pledge Contract (contract No. ) is executed;

(4) Other guaranty: _________

Article 7 The Client’s Representations and Warranties

7.1 The Client is a duly organized and validly existing legal person, has the full right, power and authority to enter into this Contract and to perform all of its obligations hereunder, and is able to be held independently accountable for civil liability.

7.2 It is the Client’s real intention to execute and perform this Contract and the Client has obtained all approvals required either by applicable laws or by its corporate bylaws for its execution and performance of this Contract, and all necessary approvals and authorizations by the regulatory authority (if any) and/or its corporate authority (board of directors, shareholders’ meeting) and there exist no flaws at law.

7.3 All documents, statements, materials and information provided by the Client to the Bank during execution and/or performance of this Contract are true, accurate, complete and valid; the Client did not hold back any information that might have an effect on its financial condition and/or ability to pay back the Debts.

7.4 The Client has the right of import and export. There are real and lawful transactions from which the letter of credit /collection arises and the imported goods specified therein are within the approved scope of business of the Client.

7.5 The Client warrants that neither its execution nor its performance of the Contract will result in a default or violation of any regulation applying to or covenant or undertaking binding to the Client or any of its assets or any agreement to which the Client is a party.

7.6 The Client hereby confirms that the documents and title to the goods under the foregoing letter of credit/collection and the rights and interests under the insurance policy are the properties of the Bank, and the Client warrants that it will go through all necessary formalities in order for the Bank to be entitled to the foregoing rights and will cause the Bank to be listed as the first beneficiary in the insurance policy. The Client shall not, without authorization by the Bank, dispose of any of the said documents and/or goods in any manner. None of the foregoing acts will result in deduction or release of or set-off against the debts owned by the Client to the Bank.

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Article 8 The Client’s Obligations

8.1 The Client shall repay the Debts under this Contract at such time, in such currency and amount and at such interest rate as is specified in this Contract.

8.2 The Client shall bear all costs, expenses and charges arising out of or in relation to this Contract, including without limitation to notary fees, valuation and survey fees, appraisal fees and registration charges. The Client will take care of the goods (i.e. the bailed property) and assume all costs and expenses related thereto, including without limitation to insurance expenses, storage expenses, transportation costs and wharfage charges.

8.3 The Client undertakes to deposit all payments for the goods under this import bill advance into the account opened by the Client with the Bank (Account No. 7337610182400000111) to repay the Debts.

8.4 Title to the goods under this import bill advance will remain with the Bank unless and until the Client pays off the Debts. The Client shall not mortgage or pledge the aforementioned goods to any entity or individual, or cause a lien or any other security interest to be attached to the goods.

8.5 Upon request of the Bank, the Client shall hand over to the Bank all such materials as sales contracts, sales statements and sales records with respect to the goods.

8.6 The Client undertakes to act prudently as the trustee for the best interest of the Bank, sell the entrusted goods at reasonable prices, and to repay the Bank as soon as possible with the proceeds from the sale of the goods. The Client will, as is instructed by the Bank, transfer the money into the account designated by the Bank. The Client promises not to use the money for any other purpose.

8.7 The Client voluntarily waives any and all possible defenses against the Bank under this Contract and/or the letter of credit and/or import collection and/or trust receipt that may result in reduction or release in whole or in part of the Client’s liability.

8.8 The Client shall not cause the Bank’s entitlement and rights to be jeopardized as a result of any dispute arising from the trade contract on which this Contract is based. The legal dispute(s) between the Client and a third party shall have no effect on the Bank’s rights and interests under this Contract.

8.9 After the Bank releases the documents to the Client, the Client shall not assert any such defenses against the bank as a discrepancy or discrepancies contained in any of the documents.

8.10 The Client shall, on a monthly basis, submit to the Bank financial statements and related plans and Statistics statements and shall provide convenience for the Bank in its management of this advance.

8.11 The Client shall not, without the Bank’s consent, decide to return the goods to the Bank based on such excuses as impossibility of selling the goods, price decrease, financial inability to pay back the Debts and/or others. The Bank shall have the right to first demand repayment of the Debts in cash from the Client.

8.12 In case that any of the following events occurs to the Client, the Client shall give the Bank at least thirty days’ notice, and shall, as may be requested by the Bank, pay off all the principal amounts and interest under the Contract regardless of whether they are due and payable, or as an alternative furnish the Bank with repayment schedules and guaranty. The Client shall not, without first obtaining written consent of the Bank, conduct any of the following acts:

(1) selling, giving away as gifts, leasing, lending, transferring, mortgaging, pledging or otherwise disposing of its major assets or all or any substantial part of its business income;

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(2) causing its business system, business decisions or forms of business ownership to be or possibly to be changed, including without limitation to decisions that might have an effect on the right and/or interest of the Bank, on transfer of shares, reorganization, merger, division, transformation into a joint-stock company limited by shares, establishment of joint ventures or cooperatives, affiliation, independent contracts, lease, change of scope of business or registered capital;

(3) intending to file for bankruptcy, discontinue or suspension of business, and etc.;

(4) intending to enter into a contract that has materially adverse effects on its business and financial condition.

8.13 In case that any of the following events occurs to the Client, the Client shall, within seven days from the date of occurrence of the event, give notice to the Bank thereof and shall, as may be requested by the Bank, pay off all the principal amounts and interest under the Contract regardless of whether they are due and payable, or as an alternative furnish the Bank with repayment schedules and guaranty:

(1) The Client is ordered to be shut down or dissolved or the registration of the Client is cancelled or its business license is revoked or a bankruptcy petition is filed against it, and etc.;

(2) The Client is involved in any material economic disputes, lawsuit or arbitration, or a preservation order is issued against any of its major assets;

(3) Any act of the Client or of its legal representative violates any law;

(4) The Client encounters serious difficulties in business operations or the Client’s financial condition worsens or any other event occurs, which has materially adverse effect on its financial condition or its ability to perform its obligations under this Contract.

(5) The Client provides guaranty for a third party, which has materially adverse effect on its financial condition or its ability to perform its obligations under this Contract.

8.14 In case of any change of the guaranty under this Contract which adversely affects rights and/or interest of the Bank, the Client shall, upon request by the Bank, provide such other guaranty as is agreed to by the Bank.

8.15 During the term of this Contract, in the event of any amendment to the Client’s corporate bylaws, any change of the name of the Client or replacement of its legal representative or personnel in charge of the project, change of its registered address, telephone number, fax number or scope of business, the Client shall notify the Bank of the same within seven days thereafter.

Article 9 Rights and Obligations of the Bank

9.1 The Bank shall have the right to, in pursuance to provisions of this Contract, collect the principal amounts of the advance together with interest (including penalty interest and compound interest) and charges payable by the Client, and to exercise all other rights conferred by applicable laws or granted by this Contract.

9.2 The Bank shall have the right to inspect on and supervise over the sale of the goods and collection of payments for the goods under the letter of credit, conduct inspection on the Client’s business operations, financial activities and inventory of materials and, in case of necessity, to dispose of the goods.

9.3 After the Client sells the entrusted documents or goods and collects the payments, such payments shall be the property of the Bank and the Bank shall be entitled to demand immediate handover of the same by the Client to the Bank. During the period of time when the Client keeps such payments as a trustee, even if the Client becomes bankrupt, such payments will not be the bankruptcy estate of the Client and shall be returned to the Bank. The Bank shall have the trustor’s rights to such payments.

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9.4 No matter where the proceeds from the sale of the entrusted goods obtained by the Client may be transferred and no matter whose account such proceeds are paid into (including that of a third party), the Bank shall nevertheless be entitled to a right of recourse in accordance with the Trust Law of the People’s Republic of China and may demand from the third party in possession of the proceeds return to the Bank the trust interest that the Bank is entitled to in respect of such proceeds.

9.5 If any third party acquires the entrusted goods without paying reasonable consideration for them, the Bank shall have the right to demand from such third party the trust interest that the Bank is entitled to in respect of the goods.

Article 10 Liability for Breach of the Contract

10.1 Upon occurrence of any one of the following (“Event of Default”), the Bank shall have the right to cease to make any advance under the Contract or to declare that the amounts already released to the Client be due and payable in whole or in part prior to the date of repayment and demand that the Client immediately pay back all amounts due and payable together with interest:

(1) The Client breaches any provision of this Contract or any Event of Default described herein occurs;

(2) The representations and/or warranties made by the Client in Article 7 are false or the Client fails to live up to such representations and/or warranties;

(3) In the opinion of the Bank, the credibility of the Client or that of the guarantor goes through such a change or changes that their performance of obligations under this Contract will be adversely affected;

(4) The Client is or is likely to be dissolved, reorganized or become bankrupt;

(5) The Client fails to pay any amount due and payable under this Contract;

(6) The Client breaches any other contract entered by and between the Client and the Bank (e.g. delay in performing any of its obligations under that contract) and fails to cure the default after being reminded thereof by the Bank.

10.2 In the even that the Client breaches this Contract and as a result thereof the Bank resorts to lawsuit, arbitration or any other means to get the repayment, the Client shall indemnify and hold the Bank harmless from and against all costs and expenses (including but not limited to reminder fees, court costs (or arbitration costs), preservation costs, public notice costs, enforcement costs, attorneys’ fees and travelling expenses) incurred by the Bank.

Article 11 Agreement on Debiting

11.1 The Client authorizes the Bank to debit directly from any one of the bank accounts opened by the Client with any of the branches or sub-branches of the China CITIC Bank an amount equivalent to the total amount of the due principal amounts, interest, penalty interest, compound interest and other charges. When the Bank debits an amount from the Client’s account, any pre-mature amount of deposit in the account will be deemed to be broken.

11.2 If the debited amount is in a currency different from the currency of the amount due and payable, the debited amount will be converted into the latter at the exchange rate published by the China CITIC Bank on the date of debiting.

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Article 12 Effectiveness of the Contract

This Contract shall become effective after the parties hereto cause their respective legal representatives/the person in charge of a party or duly authorized agent(s) to put their respective signatures (or name seals) on this Contract and affix their respective corporate seals (or contract seals) to the Contract.

Article 13 Applicable Law and Dispute Resolution

13.1 This Contract shall be governed by the laws and regulations of the People’s Republic of China.

13.2 Any dispute arising out of or in relation to this Contract shall be settled by the parties through amicable consultation. Absent such settlement, the parties agree to cause the dispute to be settled in accordance with Article 13.2(1) below:

(1) to be litigated in the competent court in the venue of the Bank’s location;

(2) to be referred to and determined by the Arbitration Commission in accordance with the then current arbitration rules of that arbitration commission. The arbitral award is final and binding to both parties.

Article 14 Miscellaneous

14.1 Other covenants: (In case of any conflict between this Article and other articles of this Contract, this Article will prevail.)

 finance arrangement fees of 0.15% will be charged.

14.2 The Application for the Import Bill Advance, Trust Receipt and bank certificates as well as related documents and materials confirmed by both parties hereto shall be integral parts of this Contract and provisions contained therein shall have the same legal effect as provisions of this Contract. In case of any dispute between the parties over any provision of this Contract (including but not limited to unclear expression or ambiguity in meaning, or anything not stipulated herein), the parties hereto agree to have the same construed in accordance with rules on import bill advance and rules on trust receipt established by the Bank.

14.3 IN WITNESS WHEREOF, this Contract is executed in two duplicates with each party hereto receiving and holding one executed copy.

The Bank has taken all measures to direct the Client’s attention to the provisions of this Contract that release or limit liability of the Bank and has made adequate explanations to such provisions upon request of the Client; the parties hereto agree with each other on the meaning(s) of each provision of this Contract.

The Client (seal):   Ningbo Keyuan Plastics Co., Ltd

Legal Representative:    name seal of Tao Chunfeng

(or duly authorized agent)

The Bank (seal): Ningbo Branch of China CITIC Bank Co., Ltd

Legal Representative:  name seal of Xia Nianlu

(or duly authorized agent)

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EX-10.50

Exhibit 10.50

Attachment 2:

Agreement on Import Payment

To: Ningbo Ximen Branch/Sub-branch of Shanghai Pudong Development Bank

                                                                                                          NO.: 940J2011280214

Name of Client		Ningbo Keyuan Plastics Co., Ltd.	Date of Application
Address		Bei Lun	Liaison for Client	Chen Xiaoying
Tel.		86232932	SPD Bank Liaison(filled up by bank)
Fax:
This company hereby irrevocably applies to SPD bank for import pay on other’s behalf service in accordance with following provisions of This Agreement due to in need of financing.
I.   Prime Articles
o This Agreement is entered into as affiliated financing documents of Financing Limit Agreement with ref. No. of ( ) (hereinafter “Financing Limit Agreement”). After This Agreement comes into effect, all articles of it will merge to Financing Limit Agreement and be regarded as an integral part of it (The client should check this item and indicate ref. No. of Financing Limit Agreement if the client has signed Financing Limit Agreement with SPD bank. ); o This Agreement is an independent credit document entered into by and between applicant and SPD Bank  (the client should check this item if the client has not signed Financing Limit Agreement with SPD bank );
II.  Document Description and Condition of Payment on Other’s Behalf
(If there is discrepancy between Financing Limit Agreement signed by the client and This Agreement on interest rate of financing and penalty interest rate, provisions of This Agreement shall prevail.)
Type of Pay on Other’s Behalf	þ Import Pay on Other’s Behalf under L/C   o Import Pay on Other’s Behalf under Import Collection   o Import Pay on Other’s Behalf under TT Pay on Delivery

No. of L/C	LC940511C00001	Amount of L/C Draft/ Invoice Amount (Currency)	RMB143,691,658.36Yuan
Record of Document Examination	oInconsistent oConsistent	No. of Import Trading Contract	KAO-20101230-045
No. of Import Collection (Name of the Collection Bank)	N/A	Amount of Import Collection Draft/ Invoice Amount(Currency)	N/A

TT Pay on Delivery Invoice No.	N/A	Deposit Amount(Currency)	RMB seven thousand two hundred Yuan only
Proportion of Deposit	50%	Document Treatment	oMortgage oRelease Bill of Lading oRelease Bill of Lading upon Signing Trust Receipt
Amount of Pay on Other’s Behalf (Currency)	RMB143,691,658.36Yuan	Term of Pay on Other’s Behalf	Six months
Interest Rate	4.2%	Penalty Interest Rate	5 out of ten thousand per day

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Note: 1. Interest rate of pay on other’s behalf shall be fixed annual interest rate. Under This Agreement, pay on other’s behalf service shall apply coterminous rate of London Interbank Offer Rate on the date of payment plus ______ (that is LIBOR+___). “LIBOR” refers to arithmetic average of interest rate reported displayed on pages of Reuters screen (if any) (rounded to five decimal places). Coterminous rate means LIBOR price in months matching the term of pay on other’s behalf and currency as well. If term of import pay on other’s behalf is less than one month, it will be calculated as LIBOR price of one month; if term of import pay on other’s behalf is more than one month and less than two months, it will be calculated as LIBOR price of two months, and so on. The limit is LIBOR price of twelve months. 2. This interest rate remains the same in term of pay on other’s behalf unless both parties agree otherwise. 3. Amount of pay on other’s behalf shall not exceed that of the draft. If no draft is available, it should not exceed the amount of the invoice. 4. Term of pay on other’s behalf refers to the period starting from the value date when SPD bank gives instruction to the bank to pay on other’s behalf, to the date when the client repays the amount.
III.   Confirmation of Guarantor
About the (                ) agreement with ref. No. of (        ) where This Company be the guarantor and SPD bank be the secured creditor. This Company, as the guarantor between the client and SPD bank to skip opening deposit L/C, has already signed abovementioned guarantee documents along with SPD bank. This Company hereby agrees that: once SPD bank releases aforesaid amount for import pay on other’s behalf, This Company shall keep taking joint and several liability for the principal and interest of the amount released by SPD bank to pay on other’s behalf; and creditor’s rights enjoyed by SPD bank against the client belong to the range of creditor’s rights secured by guarantee agreement. This Confirmation shall be irrevocable. Guarantor (Seal) Legal Representative or Authorized Agent (Signature or Seal)
IV.    Newly-Added  Guarantee
Guarantor:	Form of Security :  □ mortgage; □ impawn; □ guarantee
V    General   Provisions
The client hereby confirms that the client has read and agrees with general provisions of  following import pay on other’s behalf agreement: 1.Import pay on other’s behalf referred in This Agreement means a short-term financing act, that is, under import trading settlement business, upon client’s application, SPD bank selects the bank to pay on other’s behalf according to the credit status and repayment ability of the client, to pay import payment for goods for the client to the trading partner (the exporter)   under settlement methods such as L/C, import collection, TT payment, etc. on behalf of SPD bank. 2.Import pay on other’s behalf referred in This Agreement limits only to external payments under import trading contract provided by the second part of This Agreement (except for advance money under trading). International settlement services referred to as import pay on other’s behalf include: sight L/C, usance L/C, usance L/ C Payable at sight under L/C settlement; D/P under import collection settlement; D/A; Payment upon delivery under TT settlement.

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3.After signing This Agreement, SPD bank can at any time revoke the commitment to pay on other’s behalf made by the selected bank in This Agreement, and SPD bank takes no responsibility for the revocation, unless SPD bank has contacted this bank and this bank has actually carried out import pay on other’s behalf to the exporter as well.

4.The client hereby confirms that SPD bank shall have the right to independently select or change the bank to pay on other’s behalf. In case that the bank to pay on other’s behalf fails to keep performing the responsibility to pay on other’s behalf, or after changing the bank to pay on other’s behalf, the pay on other’s behalf service is still not provided, the client will not be entitled to demand SPD bank or the bank to pay on other’s behalf to take any liability.

5.The financing value date under This Agreement shall be the actual date when the bank to pay on other’s behalf makes the external payment (that is, actual date to pay on other’s behalf). In principle, actual date to pay on other’s behalf shall be no later than the latest L/C payment day.

6.Payment of interest. Except indicated otherwise, payment of interest under This Agreement shall always be calculated in days, and both principal and interest shall be settled once-off. If HK Dollar or Pound is chosen to be the currency to pay on other’s behalf, one year shall be calculated to include 365 days; for currencies other than HK Dollar and Pound, one year shall be calculated to include 360 days.

7.Document submission and conditions for pay on other’s behalf

Client promises to submit following documents to SPD bank 2 working days before the date of pay on other’s behalf or meet relevant conditions, yet SPD bank shall take no responsibility to verify authenticity of these documents.

(1)Copy of the latest Articles of Association and business license of the client;

(2)Resolution made by board of directors which authorizes the client to sign This Agreement and relevant affiliated financing documents (if there is restrictions on the mandate of the legal representative to enter into agreement in Articles of Association of the client);

(3)The authorization letter made by the client to the authorized agent and signature sample of the authorized agent;

(4) This Agreement which has been legally signed by the client;

(5)The client is qualified for the requirement from SPD bank to conduct import pay on other’s behalf business and is from authentic trading background;

(6)The date to pay on other’s behalf designated by the client shall be a working day of SPD bank;

(7)If the pay on other’s behalf business under This Agreement is secured, then this security document shall have been signed prior to pay on other’s behalf and this guarantee shall have come into effect;

(8)The client’s basic trading contract, original ocean bill of lading, original import payment of foreign exchange sheet (if needed),  original import goods customs declarations and invoices etc.;

(9)The client has properly handled all necessary approval, registration, delivery and other legal procedure related to pay on other’s behalf under This Agreement in accordance with laws, regulations and regulatory rules.

(10)The client doesn’t violate any of the agreed in This Agreement;

(11)Other documents and/or conditions SPD bank might ask at any time.

8.Skip the inconsistence

The client hereby confirms that SPD bank handles the pay on other’s behalf and the use of it just based on client’s application. Therefore, once the client submits This Agreement which has been effectively signed, an irrevocable application for pay on other’s behalf has then been established, and the client has irrevocably agreed to waive counter-argument right of refusing payment on the grounds of documents inconsistence under relevant L/C.

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9.If the expiry date of period to pay on other’s behalf designated shall not be a working day of SPD bank, then the expiry date of financing period designated shall be put off to next working day of SPD bank, and interest shall be collected for this put-off period;

10.Reporting balance of international payments

After make import pay on other’s behalf, the client shall carry out relevant procedure according to requirement from foreign exchange control policies as soon as possible.

11.Prepayment and expiration ahead of time

Client can conduct a prepayment on condition that SPD bank agrees in writing and the client fully compensates SPD bank in terms of any costs and losses arising from prepayment, and this kind of prepayment shall be immediately regarded as expiration ahead of time. SPD bank shall have the right to inform the client at any time of expiration ahead of time of import pay on other’s behalf under This Agreement, without having to give any explanation. And the client shall immediately repay any amount related to pay on other’s behalf.

12.The client hereby confirms that:

(12)In case that the client presents trust receipt to SPD bank, and before the debt under This Agreement gets fully paid, SPD bank shall have the ownership of the goods under import pay on other’s behalf.

(13)When the client has any payment due against SPD bank, SPD bank shall have the right to dispose the goods under import pay on other’s behalf, and the processed, mixed and composite of the goods as well. Any amount acquired from these disposals shall first of all be used to repay the debt under This Agreement. And SPD bank shall still have the right to further claim against the client on the part of debt which can not be repaid due to inadequate amount. The client though, doesn’t raise objection about this.

(14)The client confirms that the deposit paid at application to SPD bank for import pay on other’s behalf and its interest shall be the mortgage to guarantee the performance of This Agreement, and authorizes SPD bank to directly deduct from this deposit and its interest when SPD bank needs to make external payment due to This Agreement.

13.Tax

The client shall repay full amount under This Agreement and shall not make deduction in any form from it, unless client shall, according to law, deduct relevant taxes at repayment of amount of pay on other’s behalf. In this case, the client shall pay SPD bank extra amount which shall be equal to the amount deducted.

14.Declaration and Guarantee

15.The client hereby makes following declaration and guarantee which will be viewed as repeatedly made each time SPD bank provides pay on other’s behalf service to the client according to provisions of This Agreement:

(15)The client shall be companies etc. which is established according to Chinese law (HK, Macau and Taiwan excluded, similarly hereinafter),  which have the right to sign This Agreement and any documents related to This Agreement, and have adopted any necessary corporation action to make This Agreement and any documents related to This Agreement legal, effective and enforceable;

(16)The client doesn’t and will not violate any other contracts or documents already signed by it, nor articles of association, any applicable laws, regulations or ordinance, relevant documents, rules and arbitration rules made by competent department, nor conflict with any other obligations or agreement borne by the client by signing This Agreement and implementing obligations under This Agreement;

(17)The client and its any shareholders, affiliates don’t be involved in any liquidation, bankruptcy, reconstruction, merger, consolidation, division,  reorganization, dissolve, close down, discontinuation  or similar legal procedure, nor is there any situation happening which could result in these legal proceedings;

(18)The client isn’t involved in any economic, civil, criminal, administrative procedure or similar arbitration proceedings which could have major adverse impact on it, nor is there any situation happening which could result in the client being involved in these legal proceedings or similar arbitration proceedings;

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(19)Legal representative, director, supervisor or other senior management of the client and any vital assets of the client isn’t involved in any enforcement, close down, seizure, freeze, lien and supervisory measures, nor is there any situation happening which could result in the client being involved in these measures;

(20)The client guarantees that all financial statements (if any ) presented by it are in line with provisions of Chinese laws, and are a true, complete and fair reflection of its financial status; and all data, documents and information etc. about the client itself and the guarantor etc. provided by the client to SPD bank during the process of signing and implementing This Agreement is true, effective, accurate, complete and no any hidden facts or omission;

(21)The client strictly abides by provisions of laws and regulations during its operational activities, carries out businesses exactly according to business scope approved by its business license or verified by laws, and handles annual inspection of registration procedure in a timely manner;

(22)The client guarantees that there shall not be any other situations or events which have or could have major adverse impact on contractual capacity of the client;

(23) For the financing under this import pay on other’s behalf agreement provided by SPD bank, the client guarantees that repay all principal refinanced, interest (including compound interest and penalty interest ),  commission charge, postage/cable charge and all relevant charges once and for all before expiration of import pay on other’s behalf according to requirement from SPD bank.

15. Items Promised

The client hereby makes promises as follow:

(1)The client shall strictly abide by and implement each item of obligations under This Agreement;

(2)The client shall, according to provisions of This Agreement, repay the principal and interest of pay on other’s behalf and related charges in a timely manner; the client shall carry out, acquire and conform to all approval, authorization, registration and licensing procedure required by applicable laws and keep its effectiveness, to make it able to legally sign and perform obligations under This Agreement and any documents related to  This Agreement; the client shall be able to present prove accordingly at SPD bank’s request.;

(3)If the client shall be informed of its involvement of any economic, civil, criminal, administrative procedure or similar arbitration proceedings, or any enforcement, close down, seizure, freeze, lien and supervisory measures which could have a major adverse impact on it, the client shall, within 5 working days, inform SPD bank in writing and give a detailed explanation about the impact and what remedial measures it has taken or plans to take;

(4)The client shall in no case repay any third party other than SPD bank any debt of a large amount or perform any guarantee obligation without written approval from SPD bank;

(5)The client shall not incur any other liability or contingent liability with large amount, nor shall it set up or provide guarantee in any form with a nature of priority for itself or any third party without written approval from SPD bank. The client shall, since the signing of This Agreement, and before paid-up of pay on other’s behalf under This Agreement, without written approval from SPD bank, not

A.   carry out any liquidation, bankruptcy, reconstruction, merger, consolidation, division,  reorganization, dissolve, close down, discontinuation  or similar legal procedure;

B.   sell, lease, bestow, transfer or dispose any of its vital assets in any other ways except for daily operation purposes;

C.   incur any alternation of its stockholders’ rights structure;

D. sign any contract/agreement which could have major adverse impact on contractual capacity of the client under This Agreement, or take on obligations which could do the same impact.

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(1)As for the guarantee under This Agreement, if it incurs certain change under certain circumstances, the client shall, according to SPD bank’s requirement, provide other guarantees in time that SPD bank permits. These certain circumstances or certain changes include but not limited to guarantor suspension of production, close down, dissolve, suspension and correction, revocation or cancellation of business license, apply or be applied for reorganization, bankruptcy, substantive change in its operation or financial status, be involved in major litigation or arbitration cases, its legal representative, director, supervisor or senior management be involved in law suit, reduction or would-be reduction of value of collateral, or property preservation measures such as closing down be adopted on collaterals, breach of guarantee contract and demand to cancel guarantee contract etc.;

(2)The client shall also carry out enforceable public notary in public notary office designated by SPD bank at SPD bank’s request, and the client shall bear the cost and willingly accept the enforcement;

(3)If there shall be any events happening which could have an impact on client’s capability of performing obligations under This Agreement or any documents related to This Agreement, the client shall at any time keep SPD bank informed;

(4)The client guarantees that there shall be no restriction articles on the client’s acquiring the ownership of the goods in the basic trading contract about financing under This Agreement, including but not limited to the articles speculating the seller keeps ownership of the goods etc.;

(5)If the client imports to sell to domestic markets, the client shall provide domestic trading (sales) contract, and designates in this contract a certain bank account opened in SPD bank as the only bank account for collection of the payment of the goods. And the client further confirms that after payment of the goods is credited to this bank account, SPD bank shall have the right to proactively deduct amount from it to repay the financing amount under This Agreement.

16.Costs and expenses

The client shall pay any stamp duties and other taxes and charges on This Agreement and any documents related to This Agreement, except for those as law stipulates shall be paid by SPD bank.

17.Penalty interests

If the client shall have any payment due of pay on other’s behalf, the client shall pay SPD bank penalty interests for the period starting from expiration date of this payment to the actual payment date with the due amount (including due penalty interests) as the base. The penalty interests shall be settled monthly and compound interest shall be collected also monthly.

18.Authorization of repayment and its offset

The client hereby gives authorization to SPD bank, shall the client have any payment due in SPD bank, whether this payment due is under This Agreement or not, SPD bank shall have the right to, on the client’s behalf, directly deduct this amount from any bank account (whatever currency) opened in any branch administered by Head Office of SPD bank to pay up this payment due. This authorization shall be irrevocable. As for foreign exchange conversion, SPD bank shall do it according to its own foreign exchange rate, and the risk of foreign exchange rate shall be taken by the client.

19.Liability prove

SPD bank will, according to its consistent business operation principle, keep one set of account books and vouchers on its account for business activities This Agreement involves. The client admits that this record of account books and vouchers shall be the effective evidence of its liability except for obvious mistakes.

20.Transfer

The client shall not transfer any rights or obligations under This Agreement. SPD bank can at any time, transfer its rights or obligations under This Agreement to any third party, and disclose any information related to This Agreement, including those provided by the client and its guarantor to SPD bank for This Agreement.

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21.Disclosure of information

The client agrees that besides the disclosure permitted by Article 20, SPD bank can also disclose any information related to This Agreement to its HQ, branches, affiliates and the employees of these institutes. Still, disclosure is further permitted for SPD bank according to requirements from any laws, regulations, and supervisory bodies, governmental departments or judicial organs.

22.Breach of the contract

Any statements and guarantee from the client which violates  This Agreement, or these statements and guarantee is proved to be incorrect, untrue, incomplete, misleading or has been violated,  and/or the client violates or doesn’t fulfill any items promised in This Agreement, or the client violates any provision of  This Agreement,  and/or there is any situation happening on the client which could affect the security of the loan of SPD bank, and/or guarantor violates provisions of any guarantee documents etc, shall constitute breach of This Agreement by each of them. SPD bank shall have the right to declare expiration ahead of time, and demand the client to immediately repay the principal and interest (including penalty interest) of pay on other’s behalf, and compensate all losses incurred by SPD bank including legal costs, and take measures agreed on This Agreement to further claim against the client and the guarantor.

23.Special agreement for group client

If the client under This Agreement shall be group client, it agrees as follow:

(1)The client shall in time report the situation of affiliate transaction of 10% and above the net assets of actual fiduciary, including a.) affiliate relation between parties involved in the transaction; b.) transaction project and nature of the transaction; c.) amount of transaction or proportion; d.) pricing policy (including transactions where there isn’t an amount or there is only a symbolic amount)

(2)actual fiduciary having following situations will be regarded as breach under This Agreement by the client, and SPD bank shall have the right to unilaterally cancel the credit line the client has not used, and withdraw the credit line which has partly or wholly been used, or give the client a margin call up to 100%: a.) provide false material or hide substantive operational or financial facts; b.) unilaterally change the designated usage of credit line,  misappropriate credit line or engage in illegal transaction using credit line without permission from SPD bank; c.) using unreal contract with affiliate, to discount the creditor’s rights such as notes receivable and amounts receivable or mortgage to extract bank capital or credit line; d.) reject supervision and examination by SPD bank on usage of its credit and relevant operation and financial situation; e.) SPD bank thinks security of credit line could be affected due to substantive merger, acquisition and reorganization etc. emerging; f.) intentionally evade creditor’s rights of the bank by affiliate transaction.

24. Other agreements__________

25. Applicable laws and jurisdiction

This Agreement shall be governed by law of the People’s Republic of China (HK, Macau and Taiwan is not included here for the purpose of This Agreement), and interpreted by law of the People’s Republic of China. Any disputes related to This Agreement, shall be submitted to the People’s Court where SPD bank locates.

26. Place to serve litigation bills

The client confirms that if any law suits happen under This Agreement, legal papers such as summons, notice etc. issued against it during the process of litigation can be regarded as served only by delivering to the address listed at the head of This Agreement. Alternation of this address will not have legal effect until SPD bank is informed in advance.

27. Severability of articles

Any articles going void, illegal or unenforceable under This Agreement shall not affect effectiveness, validity and enforceability of other articles herein.

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28. During the period of validity of This Agreement, if SPD bank grants extension or defers to take action against any breaching or other activities of the client, it shall not damage, impact or restrict all rights or benefits that SPD bank enjoys as the creditor according to laws or This Agreement, nor shall it be regarded as permission for activities of breaching This Agreement of the client given by SPD bank, nor even be regarded as SPD bank waiving its rights to take action against existing or future breaching activities of the client.

29. Consistency of financing limit agreement

If there is discrepancy between financing limit agreement (if any, and including effective alternation made at any time) and This Agreement, the latter shall prevail.

30. This Agreement comes in 6 copies of the same content with equal legal effect, with the client holding one copy, the guarantor holding one copy, and SPD bank holding four copies. and it shall not be established until both parties affix stamp, or their legal representative/person in charge or authorized agent sign or affix stamp. This Agreement shall come into force since the bank to pay on other’s behalf completes import pay on other’s behalf.

Signature column Both parties confirm that by the time of signing This Agreement, both parties have carefully read and discussed about all articles, and don’t raise any objections on any articles of This Agreement, and have correct understanding of rights and obligations of the involved parties and the legal definition of liability restrictions or exemption clause as well.
Client: (Seal: Ningbo Keyuan Plastics Co., Ltd.) Legal representative or authorized agent (signature or seal) : Tao Chunfeng	SPD bank (Seal : Special stamp for business contract of Ningbo Ximen Branch of Shanghai Pudong Development  Bank ) person in charge or authorized agent( signature or seal):
Signing date: Jul.19, 2011

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EX-10.51

Exhibit 10.51

Contract of Agreed Payment Processing

No.: Beilun Documentation No. 026 of Year 2011

This Agreed Payment processing Contract (hereinafter referred to as the Contract) is made by and between Ningbo Keyuan Plastics Co., Ltd. (hereinafter referred to as Party A) (address: Qingzhi Industrial Park of Beilun, Ningbo, Zhejiang Province 315800. Tel: 86232932  Fax: _______________________Account-opening financial institution: Bank of China, Beilun Sub-branch ) with its registered business license number of 330200400023187 and authorized legal representative named Tao Chunfeng, and The Bank of China Co., Ltd. Ningbo Branch (hereinafter referred to as Party B)(address: No. 139 Yaohang Street, Haishu District, Ningbo, Zhejiang Province 315000 Tel: 0574-87196666-0330 Fax: 0574-87196666-0394) with authorized legal representative named Qian Jianzhong.

In accordance with the terms and conditions stipulated in the Cooperative Agreement regarding the Agreed Payment processing made by and between Party B and its financed payment agent bank, Bank of China Co., Ltd. Milan, Party A and Party B herby agree to sign the contract with the terms and conditions listed as follows:

Article I Definitions concerning the Agreement Payment Transactions

1.  The agreed payment processing under this Contract refers to that in line with the arrangements with the financed payment Agent bank, Party B and Party A sign the contract so that the financing payment Agent bank can provide short-term financing (hereinafter referred to as financing) to Party A for settling the payment of the imported goods by Party A via Party B, on the condition of which the financing payment Agent bank can make the foreign payment (hereinafter referred to as foreign payment) due from Party A to the parties under the directives of Party B.

2.  The payment settlement for the imports made by Party A mentioned in the first item of Article I include but not limited to: the import L/C, inward collection, outward remittance (including the advance payment, cash on delivery and payment under the service trade). All the foregoing import payment settlement shall be done in adherence to the international conventions and the agreements and contracts signed by and between Party A and B regarding the import payment transactions contained in this Article.

Article II   Claims and Debts under this Contract

1. Party A applies to Party B that Party B arranges the agreed payment transactions with the financed payment Agent bank.

2. Upon the request of Party A, Party B arranges for the agreed payment transactions with the financed payment Agent bank, which will provide financing to Party A according to the terms and conditions of the Contract and make the foreign payment under the directives of Party B. Party A acknowledges that the foregoing foreign payment constitutes the claims of the financing payment Agent bank over Party A under the Contract.

3. Party B exerts the rights of creditor under the contract in response to the instructions of the financed payment Agent bank.

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4. In case that Party A fails to pay off the debts under the contract upon expiry, the financing payment Agent bank will transfer its claims to Party B and Party B will notify Party of such transfer of creditor’s rights, upon which Party B obtains the legal claims over the financing debt due from Party A.

Article III Preconditions of the Agreed Payment Financing

The agreed payment processing under financing initiatives as mentioned in this Contract should meet the following conditions:

1. The Contract has taken effect;

2. Party A keeps and signs the corporate documents, bills and notes, seals and signatures, the name list of people concerned and copies of their signatures for Party B with the relevant certificates filled out properly.

3. Party A opens the account that is necessary to accomplish the transactions under this Contract as required by Party B.

4. Party A arranges for all the required legal and administrative review and approval procedures for the business and submits the required duplicates or copies in line with the originals needed for the application and approval formalities.

5. Party A and Party B have signed the Credit-Granting Degree Agreement or General Agreement of Credit Granting concerning how much credit can be granted from Party B to Party A or the guarantee contract delivered by Party A has taken effect.

6. Other conditions that should be met by Party A as considered necessary by Party B.

Article IV Business Application and Acceptance

1. When Party A applies for the detailed agreed payment processing under financing initiatives to Party A, it shall deliver Application for the Agreed Payment processing trade by trade to Party B. The Application files shall be filled out by both parties upon consultation and discussion. After Party B seal them with official seal or transaction exclusive seal, the files can constitutes a separate agreement, constituting an integral part of the Contract.

2. Party B shall arrange for the agreed payment transaction under the financing initiatives of the due payment for Party A upon the application of Party A. In case that Party B cannot make the foregoing arrangement, and therefore cannot accept the application of Party A, Party B shall notify Party A of the situation before the end of the following working date upon receiving Party A’s application.

Article V Other Rights and Obligations of the Contracted Parties

In line with the stipulations of the Cooperative Agreement of Financed Payment between Party B and the financing payment Agent bank or upon the transfer of claims over Party A by the financing payment Agent bank to Party B, Party B, as the creditor, enjoys the rights of disposing the full set of documents/goods related to the agreed payment processing under financing initiatives or other guaranteed rights and interests and property rights and interests stipulated in the applicable laws and regulations. Where the disposing rights of the full set of documents and documents related to the agreed payment processing under financing initiatives belong to Party A in line with the applicable laws or the opinions of the people’s court or arbitration organization with jurisdiction, Party A agrees to transfer such rights to Party B unconditionally to the maximum degree within the scope of the applicable laws and accepts Party B’s actions or inactions regarding the full set of documents/goods. Where the disposing rights of the full set of documents and documents related to the agreed payment processing under financing initiatives belong to Party B or the financing payment Agent bank in line with the applicable laws or the opinions of the people’s court or arbitration organization with jurisdiction, Party B or the financing payment Agent bank will act as the creditor or direct the creditor to reserve such rights till Party A pay off the principal and interests of the financing payment provided by the financing payment Agent bank and the relevant fees due to the Agent bank.

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The financing payment application submitted by Party A to Party B related to the documents/ goods owned by Party A which shall be paid off with the sales income and the relevant arrangements are done upon the request of the commissioner of Party B, including but not limited to the preservation of relevant documents, the storage of goods under the foregoing documents arranged on behalf of Party A, other matters regarding the preservation, transportation, processing, sales and insurance, keeping the sales payment or depositing them to the account designated by Party B. When Party A sells the goods to any third party, it shall declare its identification as clarified in this Paragraph.

All the fees and expenses arising from preserving the goods by Party A (including but not limited to the insurance premium, storage, transportation and dock fees) shall be borne by Party A. Party A acknowledges to cover all the potential risks according to the marketable prices of the goods and list the insured as Party B in the original of policy before submitting the policy original to Party B for preservation. In case the covered goods suffer from losses, Party B is endowed with the rights of lodging losses directly against the insurance company.

Without the previous consent of Party B, Party A shall not postpone the payment or dispose the goods by means of non-currency or at a price lower the marketable prices. Party A shall not take the goods as the mortgage or pledge them with others. Nor shall it leave the goods bounded by any constraints of lien. Upon the request of Party B, Party A shall brief the details regarding the bookkeeping records, the sales income or the stipulations of sales contract for the goods to Party B. Party B has the rights to access the actual status of the goods in the warehouse or repossess such goods at any time.

Article VI   Withholding Tax or Operational Tax of the Financed Payment Agent bank in China

With regard to the withholding tax or operational tax of the financed payment agent bank in China arising from the Contract, Party B shall declare and pay them on behalf of the financed payment agent bank to the Tax Authorities of China.

Article VII    Representations and commitment of Party A

(1) Party A hereby represents as follows:

1. Party A was established through legal procedures with registration and exists legally, having the complete capacity for civil rights and abilities as required to sign and honor the Contract.

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2. Signing and honoring the contract is out of the true will of Party A, which has obtained the legal and effective corporate authorization according to the stipulations of the Articles of Association or other internal control documents without violating any agreements, contracts or other legal documents having binding force of Party A. Party A have obtained and accomplished or will obtain and accomplish all the approval, permission, documentation and registration as required for the signing and implementation of the Contract.

3. All the documents, certificates and vouchers provided by Party A to Party B under the Contract are valid, intact, accurate and effective.

4. All the transaction background provided by Party A to Party B is valid and legal without being used for illegal purposes such as money laundry. All the documents provided by Party A to Party A upon the request of Party B shall not be interpreted as that Party A is obliged to shoulder the obligations and responsibilities of reviewing the validity and authenticity of the foregoing documents.

5.  Party A does not hide any events that might influence or compromise the financial situation and abilities of honoring contract of Party A and its guarantor.

(2) Party A hereby makes the commitment as follows:

1.  Providing the sales of goods under the import contract in a timely manner as requested by Party B.

2. Where Party A has signed or plans to sign the counter-guarantee agreement or similar agreement regarding the guarantee obligations with the guarantor of the Contract, such agreement shall not jeopardize any rights of Party B under the Contract.

3. In the event that the goods under the import contract suffer from severe sales difficulties, or situations that might influence or compromise the financial situation and abilities of honoring contract of Party A arise, including but not limited to the division, merger, joint operation, the joint venture, cooperation with foreign companies, subcontracted operation, reshuffle, institutional reform, and the planned public listing among other forms of alteration, the reduction of registered capital, the major asset of share transfer, the assumption of great debt, or the set-up of new guarantee over the guaranteed items, the appropriation of the guarantee items, the dissolution, cancelation and forced or voluntary application for bankruptcy, involvement in major litigation or arbitration cases, Party A shall notify Party B of the details in time.

4. As for other matters that are not agreed in the Contract, Party A agrees to observe the international conventions and the relevant agreements with Party B.

Article VIII Internal Interrelated Parties in the Group Where Party A is and the Disclosure of Interrelated Party’s Transactions

The agreements between the captioned parties in this Article apply to the first item of the Article.

1. Party A does not fall into the range of the Group’s clients as determined by Party B according to the Credit-granting Business Risk Administration Guidance (hereinafter referred to as the Guidance) for the Commercial Bank Group.

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2. Party A belongs to the category of the group client as determined by Party B according to the Guidance. Party A shall report to Party B according to the stipulations of Article 17 in the Guidance regarding the interrelated transactions covering over 10 percent of the net asset (including the symbolic financial transactions without detailed amounts), including but not limited to the interrelated parties’ relations, transaction projects, transaction nature, transaction amount or the corresponding proportion, the pricing policies and so on.

Article IX  Events of Default

Under one of the following circumstances, the infringement of the Contract by Party A is constituted against Party B.

1. Party A fails to honor the obligations of paying off the payment or debt to the financed payment agent Bank according to the stipulations of the Contract.

2. Party A makes invalid representations in the Contract or breaks the commitment made under the Contract.

3. The circumstances described in the third sub-item of Item 2 in Article VII in the Contract arise, which Party B believes might influence or compromise the financial situation and abilities of honoring contract of Party A and its guarantor, and Party A does not provide new or replace the guarantor according to the stipulations of the Contract.

4. Party A terminates business or is subject to the events of dissolution, cancelation or bankruptcy.

5. Violates other agreements concerning the rights and obligations of the contracted parties.

6. Other events of default occur under other contracts made by and between Party A and Party B.

7. Guarantor breaks the stipulations of the guarantee contract or has other events of default under other contracts made by and between Party A and Party B.

Where the foregoing events of default occur, Party B shall act upon the directions of the financed payment agent bank or act as the creditor after the financed payment agent bank transfer its claims over Party A to Party B, and shall be endowed to take (one of) the following measures:

1. Requesting Party A and/or the guarantor to remedy the behaviors of infringement within the deadlines.

2. Reducing, even terminating or canceling, completely or partially, the credit granted to Party A.

3. Terminating or canceling, completely or partially, the transaction of business under the contract and other contracts made and between Party A and Party B. For the loans not granted or other financing for trade purposes to be handled, the granting or the corresponding transactions shall be terminated or cancelled, completely or partially.

4. Declaring that the unpaid loans or the financing items for trade purposes (principals and interests) are due, totally or partially under the Contract or other contracts made by and between Party A and Party B.

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5. Terminating or canceling the Contract, terminating or canceling other contracts made by and between Party A and Party B, totally or partially.

6. Requesting that Party A make compensation for the losses to Party B arising from the default.

7. Deducting the deposits of Party A at the Party B to pay off all or partial debt of Party B owed to Party A under the Contract. The outstanding payment in the account can be deemed as overdue prematurely. Where the currency of the account is different from that of the business transaction, the applicable foreign exchange rate to Party B can be used to calculate the actual amount.

8. Exerting the security rights.

9. Requesting the guarantor to shoulder the responsibility of guarantee.

10. Other measures as deemed necessary or possible by Party B.

Article X Reservation of Rights

In case that one party fails to implement the rights and shoulder the obligations under the Contract, partially or totally, or fails to request the other party to honor the rights and shoulder the obligations under the contract, partially or totally, it does not constitute the waiver of the party concerned regarding such rights or the immunity of obligations.

The tolerance, extension or the postponement of one party concerning the other party’s rights under the Contract, do not compromise any rights as stipulated in the Contract or any applicable laws, rules and regulations. It shall not deem it a waiver of rights, either.

Article XI Alteration, Modification and Cancelation

Upon discussion and negotiation between the two parties, they can make the alteration or modification in written form. Any forms of alteration or modification of the contract constitutes an integral part of the Contract.

Unless otherwise stipulated in the applicable laws, regulations or agreements made between the contracted parties, all the rights and obligations of the contracted parties under the Contract are terminated upon their completion of implementation.

Unless otherwise stipulated in the applicable laws, regulations or agreements made between the contracted parties, the ineffectiveness of some or one of the terms and conditions does not influence the legal validity of other terms and conditions.

Article XII Governance and Dispute Resolutions

The Contract is governed by the applicable laws of the People’s Republic of China.

Upon the effectuation of the Contract, all the disputes arising from the entrance and implementation of the Contract can be resolved through mutual consultation and negotiation. In case that consultation and negotiation fails, either Party can adopt the second way listed as follows to resolve the disputes.

1.  File a lawsuit to the people’s Court of where Party B is located or other branches of Bank of China Co., Ltd. which implements the rights and honors the obligations of the Contract according to the applicable laws.

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2. File a law suit to the People’s Court which has the jurisdiction.

3. Submit to theArbitration Committee for disputes resolution.

During the period of resolving the disputes, in case the disputes do not influence the implementation of other terms and conditions of the Contract, those other terms and conditions should be implemented as scheduled.

Article XIII Miscellaneous

1. Without the previous written consent of Party B, Party A shall not transfer any rights or obligations under the Contract to any third party.

2. In case that Party B shall arrange the other branch of Bank of China Co., Ltd. to honor obligations and enjoy the rights of the financed payment agent bank as requested by the transactions and Party A agrees to and recognizes such arrangements by Party B, the foregoing branches of Bank of China Co., Ltd. shall assume the transaction of agreed payment according to the Contract and thus be endowed to implement all the rights under the Contract or Party B can act on its behalf to implement al the rights under the Contract. The branch of Bank of China or Party B (as the circumstances might be) is eligible to file law suit to the people’s court or submit the case to the arbitration when disputes arise. Where Party A fails to pay off the due debt, Party A shall transfer the claim of debt to Party B and notify the latter of the transfer, upon which Party B obtains the legal claims of debt over Party A’s under the Contract.

3. Under the condition that no other terms and conditions are influenced under the Contract, the Contract has binding force over the heirs or heiresses arising naturally or other transferees.

4. Unless stipulated otherwise, both Parties designate the address as listed in the beginning of the Contract as the correspondence address and acknowledge that it will notify the other party in written form of the changing address in time, as the case might be.

5. All the headlines and name of business are just to provide convenience of designation and shall not be used as the interpretation of the rights and obligations of the contracted parties.

6. In case that Party B fails to honor the Contract or the agreed terms of the contract due to the changing applicable laws, regulations, the requirements of the governing authorities, Party B is eligible to terminate the changed agreements or the single terms under the Contract as requested by the changing applicable laws, regulations, the requirements of the governing authorities. With regard to the termination or alteration of the agreement due to the foregoing reasons, which cause Party B’s failure of honoring the Contract, Party B shall not assume the responsibility of infringement as stipulated in Article IX of the Contract.

Article XIV Terms of Entry into Force Conditions

The Contract takes effect since the signing date by the authorized legal representatives of Party A and Party B with the official seals. The later date of signing and official seal stamping shall prevail in case they are not the same.

This Contract is made in three original copies with both parties holding to one duplicate, each of which has the same legal validity.

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Party A: Ningbo Keyuan Plastics Co., Ltd. (Official Seal)

Signature of the legal representative: Tao Chunfeng

Date:     (Month)    (Date),   (Year)

Party B: Bank of China Co., Ltd., Ningbo Branch (Official Seal)

Signature of the legal representative: Qian Jianzhong

Date:     (Month)    (Date),   (Year)

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Application for Agreed Payment Transaction

No.: Documentation 0630 (Zi) 031 of Year 2011

To Whom It May Concern in Bank of China Co., Ltd., Ningbo Branch

As requested by the business, according to the Contract of Agreed Payment Processing (hereinafter referred to as the Contract) with a No. of Beilun Documentation No. 026 of Year 2011, we apply for the agreed payment processing with the Bank. With regard to the rights and obligations arising from the agreed payment processing, the foregoing Contract and its stipulations and the agreement made in the Application shall be observed. When the application is accepted by the Bank, it will become an integral part of the foregoing Contract.

The Application and the abovementioned contract are the separate agreements made by our Company and the Bank under［］the Credit-Granting Degree Agreement or ［］General Agreement of Credit Granting with a number of _____________(This is an optional article. If it is not ticked at all, it shall be deemed as not applicable).

Article 1  Contents of Transactions

[ ] Under the L/C business item:

No. of L/C: LC 92A 1DEKJ003    Issuing Bank: DBS Bank LTD Singapore

Order Number: 553-15-17250609  Amount of the Order: RMB 124, 094, 157.42

[ ] Under the Collection Business:

Collection Number:  _____________________       Issuing Bank: _____________________

Amount of bills: _____________________

[ ] Under the Outward Remittance (Cash on Delivery) item:

TT Number: ___________________________ Payee: _______________

Amount: _______________________

Article 2 Financed Payment Agent Bank and the Payment Date

Under the business as described in Article 1, the Company applies for the financing business for trading purposes with Bank of China Co., Ltd. Milan Branch (hereinafter referred to as the financed payment agent bank) which shall pay off the financed payment to our foreign client directly on the date of June 30, 2011.

9

Article 3  Currency and Amount of Payment under Financing Initiatives

Financed Payment Currency: RMB

Financed amount: (In words): say RMB one hundred and twenty-four million and ninety-four thousand and one hundred and fifty-seven point forty-two Yuan only

(in figures): RMB 124, 094, 157.42Yuan.

Article 4 Financing Period

The financing period is 369 days.

þ  with no grace period

[ ]  with a grace period of ___day(s), commencing from the date of payment made by the financed payment agent bank and calculated on a consecutive basis.

In case the sales payment are collected before the expiry of financing period, the Bank is endowed to take the collection completing date as the expiry date of the financing period in line with the directives of the financed payment agent bank. Our company acknowledges that all the collectables received of the goods under the import contract will be used on a preferable basis to pay off the financing item provided by the financed payment agent bank to our company.

Article 5  Financing interest and calculation and settlement of interests (Comment: select and fill in the blanks according to the actual situation. Delete or draw a single line in the middle at the blocks preceding the inapplicable articles.)

1. Interest Rate:

(1) financing in RMB: fixed interest rate: annual interest rate of 3.1 percent.

(2) financing in foreign currency.

A. fixed interest rate: annual interest rate of ______ percent.

B. counted according to the loan interest for the ________ (currency) of _____years with a floating period of ________months implemented by Bank of China Co., Ltd. on the financing date.

C. annual interest rate (%) obtained on the preceding date of financing from the Routers at 9:00 a.m. (Beijing Time) and calculated according to the LIBOR/HIBOR of the latest____ months plus __ basic points.

2. Calculation of interests

Interests are calculated from the date of foreign payment in line with the actually paid amount and the days.

Formula for calculating interests: interests=principle ×actual days× daily interest rate.

The daily interest rate has a calculation basis of 360 days with a conversion formula:

Daily interest rate= annual interest rate/360

10

3. Interest settlement means:

The third means of the following is taken as the means of interest settlement.

(1) settled on a quarterly basis with the 20th day of the ending month selected as the settlement day and the 21rd day as the payment date.

(2)settled on a monthly basis with the 20th day as the settlement date and the 21rd day as the payment date.

(3) principal and interest paid off on the expiry date.

(4) interest collected in advance and settled upon expiry.

In case that the settlement date of the last-period principal for the financed payment is not the same as payment date, then the settlement date of the last-period principal for the financed payment is the payment date, on which our Company shall pay off all the interests.

4. Penalty Interest

(1) Where our Company fails to pay off the due payment, the overdue part shall charge interests according to the interest rate of the penalty interest rate until the settlement date of the overdue principal and interest.

(2) In case that our Company fails to pay off the interest and the penalty interest, according to the penalty interest rate stipulated in the Article the compound interest shall be charged according to [ ]monthly rate or [ ]quarterly rate.

A. The penalty interest adopts the floating interest with a floating period of __month(s)or _year(s). Since the overdue date, the floating interest will be repositioned. The repositioning date shall be the corresponding date of the overdue date in the current month. In case there is no corresponding date, the last day of the current month shall be the repositioning date.

B. The penalty interest rate for the overdue payment should be the fundamental interest level as designated in Item C of this Article plus 20 percent.

C. During the initial floating period, the fundamental interest rate is the financing interest rate agreed in the first time of the Article. Upon the expiry of the first floating period, the following floating period has a fundamental interest rate decided upon in the following means.

[ ] Financing in RMB, the fundamental interest rate shall be the benchmark interest rate of the same range implemented by the People’s Bank of China on the repositioning date with a [ ]upper floating/[ ]lower floating rate of ________percent(ticking one option).

[ ] Financing in foreign currency

[ ] the fundamental interest rate should be that of the loan of ___-year period with the same floating period implemented by the People’s Bank of China on the repositioning date.

[ ]the fundamental interest rate should be obtained on the preceding date of financing from the Routers at 9:00 a.m. (Beijing Time) and calculated according to the LIBOR/HIBOR of the latest __months plus __ basic points.

Article 6 Guarantee (Remarks: select and fill in the blanks according to the actual situation. Delete the blocks preceding the inapplicable articles)

11

1. The guarantee means for the debt under the Application are:

[ ] The Application belongs to the major contract under [ ] the Highest Amount Guarantee Contract/[ ] the Highest Amount Mortgage Contract/[ ] the Highest Amount Pledge Contract signed by our Company and your Company with a number of _________.

[ ] The Application belongs to the major contract under [ ] the Highest Amount Guarantee Contract/[ ] the Highest Amount Mortgage Contract/[ ] the Highest Amount Pledge Contract signed by our Company and your Company with a number of _________. In addition, _________ is to provide _______guarantee. … and sign the corresponding guarantee contract. Where the security deposit is provided for the pledge, then the second item of the Article shall be observed. Among them, the guarantee contract of ___________________ has the corresponding debt amount fall out of the major debt range as stipulated in the foregoing Highest Amount Guarantee Contract, and the rest debt all within the range of the major debt.

[ ] _______guarantee is provided by ___________ with the corresponding guarantee contract signed. Where the security deposit is provided for the pledge, then the second item of the Article shall be observed.

[ ] Other means of guarantee means with details listed here: _for returning the funds under the _Application for Agreed Payment Transaction with No.: Documentation 0630 (Zi) 031 of Year 2011;

2.  Security deposit pledge is provided according to the foregoing item, the following stipulations shall be observed:

[ ] When the pledger is a third party, the Bank and the pledger shall sign a separate security deposit pledge contract;

[ ] The application belongs to the major contract under the General Agreement of Security deposit Pledge signed by the Company and the Bank with a number of Documentation Lun G2-05-01 (Zi) No. 014 of Year 2010. According to the Agreement, the corresponding Security deposit Pledge Confirmation Letter shall be submitted, otherwise, the following agreement can be adopted.

1) the security deposit amount is (currency): RMB with an amount (in words) say _one hundred and twenty-four million and _one hundred and forty-one thousand only, in figures RMB 124, 141, 000.00;

2) The Company pays the foregoing security deposit by one of the following means:

[ ] Within one working day from the effectuation date of the Application, the security deposit should be transferred to the security deposit account of our Company opened at the Bank. (Account number: 35036118417001).

[ ] Authorize the Bank to transfer the security deposit from the RMB account of our Company opened at the Bank (with the account number of ____________)/foreign currency account (with the account number of ____________) to the security deposit account of our Company opened at the Bank ( with the account number of ____________).

12

[ ] The guarantee obligations for our Company’s security deposit with the transaction number of LC92A10Ekj003 in the Bank has been confirmed as dissolved by your Company. We hereby authorize the Bank to transfer the security deposit from the account with the number of _________ to our security deposit account opened at the Bank (with the account number of 31-036118417001).

[ ] Other means________________

3) In case that the guarantee obligations above security deposit have been dissolved, the Bank can return the security deposit in one of the following means:

[ ] return it to our Company’s account in __________ (with the account number of _________________).

[ ] return the security deposit according to the deposit route.

[ ] return the security deposit under the written directive of the Company.

[ ] Other means ____________________________

3. In case that our Company or guarantor cause the events that might compromise the abilities of honoring the Contract or that the Guarantee Contract turns invalid, is canceled or dissolved, or that the financial situation of our Company or the guarantor becomes severe or that the Company or the guarantor gets involved in major litigation or arbitration case or has the ability of honoring contracts compromised due to other reasons, or the guarantee infringes the guarantee contract of other contracts between the Bank and the guarantor, or that the guaranteed items are depreciated, destroyed, demolished or sealed up, the Bank reserves the rights to ask and our company is obliged to providing new guarantee, replace the guarantor or taking other means to guarantee the debt under the Application.

Article7 Fees

1. The fees for the financed payment under the captioned transaction are calculated according to the annual rate of _____percent and our Company assumes them.

2. The telegraph fees under the transaction for the financed payment are borne

[ ]By our company.

[ ]By the payees.

3. Please deduct the interest and fees from the RMB account of the Company at the Bank (with the account number of 810735036108091001) (or the foreign currency account with the account number of _________________).

Applicant: Ningbo Keyuan Plastics Co., Ltd.(Official Seal of Ningbo Keyuan Plastics Co., Ltd.)

Authorized representative: Tao Chunfeng  (Signature)

Date: (Date, month), 2011

13

Bank’s Opinions: agreed

Authorized representative: _QianJianzhong_ (with the official Seal of Bank of China Co., Ltd.)

Date:  (Date, month), 2011                         

14

Security deposit Pledge Confirmation Letter

Number:

To Whom It May Concern at the Beilun Sub-branch, Bank of China Co., Ltd.

According to the General Agreement of Security deposit Pledge with the number of Documentation Lun G2-05-01(Zi) 014 of Year 2010, the Company hereby confirms the following items:

I. The major contract and principal debt corresponding to the security deposit under the confirmation letter

The security deposit under the confirmation letter is corresponded to the debt occurring under the Application for the Agreed Payment Transaction with the number of Documentation No. 0630(Zi) 031 of Year 2011.

The guaranteed debt amount is

RMB (currency)

_______________________________(in Chinese capital characters)

RMB 124, 094, 157.42 (in figure)

If L/C is opened, the debt covered by the security deposit confirmed in the Letter shall also include the allowed premium, i.e.

____________________(currency)

____________________(in capital Chinese characters)

____________________(in figure)

II. The Guaranteed Specific Transaction and Its Scope

Transaction No. LC 92A 10EKJ003/AB92A11EKJ003

Specific business and scope: Agreed Payment Transaction (in RMB)

III. Security deposit Amount

RMB (currency)

_______________________________(in Chinese capital characters)

RMB 124, 141, 000.00 (in figure)

IV Payment of Security Deposit (Comment: select and fill in the blanks according to the actual situation. Delete the blocks preceding the inapplicable articles)

Our Company pays the security deposit according to one of the following means:

[ ] Within one working day from the effectuation date of the Contract, the security deposit can be transferred to the security deposit account of our Company opened at the Bank (with the account number of 35036118417001).

15

[ ] Authorize the Bank to transfer the security deposit from the RMB account of our Company opened at the Bank (with the account number of ____________)/foreign currency account (with the account number of ____________) to the security deposit account of our Company opened at the Bank ( with the account number of ____________).

[ ] The guarantee obligations for our Company’s security deposit with the transaction number of LC92A10Ekj003 in the Bank has been confirmed as dissolved by your Company. We hereby authorize the Bank to transfer the security deposit from the account with the number of 35036108402001 to our security deposit account opened at the Bank (with the account number of 35036118417001).

[ ] Other means of payment __________________________.

V. Return of Security Deposit (Comment: select and fill in the blanks according to the actual situation. Delete the blocks preceding the inapplicable articles)

Since the guarantee obligations above security deposit have been dissolved, the Bank can return the security deposit in one of the following means:

[ ] return it to our Company’s account in __________ (with the account number of _________________).

[ ] return the security deposit according to the deposit route.

[ ] return the security deposit under the written directive of the Company.

[ ] Other means _to return the _ under the Application for Agreed Payment Transaction with the number of Documentation No. 0630 (Zi) 031 of Year 2011.

VI Relations with the General Agreement of Security Deposit Pledge

The Confirmation letter constitutes one of the integral parts of the General Agreement of Security Deposit Pledge. Other matters not covered should be bounded by the stipulations of the Agreement.

Applicant: _Ningbo Keyuan Plastic Co., Ltd. (official Seal of Ningbo Keyuan Plastic Co., Ltd.)_

Authorized representative: Tao Chunfeng (signature)

Date: June 29, 2011

Bank’s Opinions

Authorized representative: Qian Jianzhong(with the official Seal of Bank of China Co., Ltd.)

Date: June 29, 2011

16

EX-10.52

Exhibit 10.52

******Print Style******

CHINA MERCHANTS BANK SWIFT MESSAGE CONTENT 2011-10-14 13:32:05

Message Type: 700    Issue of a Documentary Credit

FIN/Session/ISN: F01  .SS.  SEQ..

Priority/obsol. Period: Normal/100 Minutes

Sender: CMBCCNBSA286

CHINA MERCHANTS BANK

NINGBO

(NINGBO BRANCH)

Receiver: BOTKSGSXXXXX

BANK OF TOKYO-MITSUBISHI UFJ, LTD.,

THE

SINGAPORE

(SINGAPORE BRANCH)

MUR: IS57411092300070

--------------------------------------------------------------------------------------------

27/Sequence of Total

1/1

40A/Form of Documentary Credit

IRREVOCABLE

20/Documentary Credit Number

574LC1100896

31C/Date of Issue

111014

40E/Applicable Rules

UCP LATEST VERSION

31D/Date and Place of Expiry

111230SINGAPORE

50/Applicant

NINGBO KEYUAN PLSTICS CO., LTD.

QINGZHI BEILUE DISTRICT NINGBO

ZHEJIANG PROVINCE CHINA

59/Beneficiary

MERCURIA ENERGY TRADING PTE LTD.

9 RAFFLES PLACE 59TH FLOOR.

REPUBLIC PLAZA SINGAPORE 048619

32B/Currency Code, Amount

USD14792760,

39A/Percentage Credit Amount Tolerance

10/10

41D/Available With...By...

ANY BANK

BY NEGOTIATION

1

42C/Drafts at...

SIGHT FOR 100PCT OF INVOICE VALUE

QUOTING DATE AND NO.OF THIS CREDIT

42A/Drawee

CMBCCNBS286

CHINA MERCHANTS BANK

NINGBO

(NINGBO BRANCH)

43P/Partial Shipments

NOT ALLOWED

43T/Transshipment

NOT ALLOWED

2

44E/Port of Loading/Airport of Departure

TALLINN, ESTONIA

44F/Port of Discharge/Airport of Destination

ONE SAFE PORT/BERTH, ZHOUSHAN, CHINA

44C/Latest Date of Shipment

111010

45A/Description of Goods and/or Services

COMMODITY: STRAIGHT RUN LOW SULFUR FUEL OIL

QUANTITY: 2000.00MTS

UNIT PRICE: USD739.638/MT

TOTAL AMOUNT: USD14792760.00

PRICE TERMS: DES ONE SAFE PORT/BERTH, ZHOUSHAN, CHINA

46A/Documents Required

1. SIGNED COMMERCIAL INVOICE IN 1 ORIGINAL AND 2 COPIES INDICATING THIS L/C NO. AND CONTRACT NO.1141875-5 SHOWING SHORE TANK QUANTITY AT ZHOUSHAN

2. FULL SET OF ORIGINAL CLEAN ON BOARD MARINE BILL OF LADING MARKED FREIGHT PAYABLE AS PER CHARTER PARTY NOTIFYING THE APPLICANT WITH FULL NAME AND ADDRESS.

3. CERTIFICATE OF QUALITY IN 1 ORIGINAL AND2 COPIES ISSUED BY INDEPENDENT INSPECTOR AT LOADING PORT.

4. CERTIFICATE OF QUANTITY IN 1 ORIGINAL AND 2 COPIES ISSUED BY CHINA INSPECTION AND QUARANTINE AT ZHOUSHAN.

5. SIGNED CARGO RELEASE NOTICE INDICATING CARGO RELEASE DATE.

IN CASE THAT ORIGINAL BILL OF LADING ARE NOT AVAILABLE AT PRESENTATION, PAYMENT WILL BE EFFECTED AGAINST PRESENTATION OF THE FOLLOWING DOCUMENTS:

A. SIGNED COMMERCIAL INVOICE ISSUED BY BENEFICIARY,

B. SIGNED CARGO RELEASE NOTICE ONDICATING CARGO RELEASE DATE.

C. LETTER OF INDEMNITY ISSUED BY BENEFICIARY IN THE FOLLOWING

FORMAT:

QUOTE

LETTER OF INDEMNITY

DATE:

TO:

RE:...MTS OF...

SHIPPED PER MT...

BILL OF LADING DATED...

L/C NO...ISSUED BY...DATED...

3

IN CONSIDERATION OF YOUR PAYING US THE SUM OF....USD BEING THE PURCHASE PRICE OF THE ABOVE MENTIONED GOODS WITHOUT HAVING IN HAND THE ORIGINAL BILLS OF LADING, WE HEREBY GUARANTEE PURCHASE PRICE OF THE ABOVE MENTIONED GOODS WITHOUT HAVING IN HAND THE ORIGINAL.BILLS OF LADING, WE HEREBY GUARANTEE UNCONDITIONALLY AND IRREVOCABLY TO INDEMNIFY YOU AGAINST ANY AND ALL DAMAGES, LOSSES, LIABILTIES, COSTS, COUNSEL FEES AND ANY OTHER EXPENSES INCLUDING BUT NOT LIMITED TO ANY CLAIMS OR DEMANDS WHICH MAY BE MADE BY THE CARRIER, CONSINGEE, CONSIGOR, CONSIGNEE, CONSIGNOR OR ANY HOLDER OR TRANSFEREE OF THE ORIGINAL BILLS OF LADING OR BY ANY WHICH MAY BE MADE BY THE CARRIER, CONSIGNEE, CONSIGNOR OR ANY HOLDER OR TRANSFEREE OF THE ORIGINAL BILLS OF LADING OR BY ANY THIRD PARTY CLAIMING AN INTEREST OR LIEN IN THE CARGO OR PROCEEDS WHICH MAY ARISE OUT OF OUR FAILURE TO PROVIDE THE ABOVE MENTIONED ORIGINAL DOCUMENTS.

WE MERCURIA ENERGY TRADING PTE LTD, HEREWITH UNDERTAKE IRREVOCABLY TO DELIVER ONLY TO... (APPLICANT) THE FULL SET OF NEGOTIABLE BILLS OF LADING REFERRED TO ABOVE DULY SIGNED AND ENDORSED COVERING THE CARGO OF...METRIC TONS OF... (PRODUCTNAME) WE MERCURIA ENERGY TRADING PTE LTD.HEREBY EXPRESSLY

4

WARRANT, THAT WE HAVE THE PULL RIGHT AND UNENCUMBERED AUTHORITY TO TRANSFER SUCH TITLE AND TO EFFECT DELIVERY OF THE STRAIGHT RUN LOW SULFUR FUEL OIL TO... (APPLICNT) OUR OBLIGATION TO INDEMNITY YOU IS OF COURSE SUBJECT TO THE CONDITION THAT YOU SHALL GIVE US PROMPT NOTICE OF THE ASSERTION OF ANY CLAIM(S) AND FULL OPPORTUNITY TO CONDUCT THE DEFENCE THEREOF AND THAT YOU SHALL NOT SETTLE ANY SUCH CLAIM(S) WITHOUT OUR WRITTEN APPROVAL, UNLESS IN CASE OF ALLEGED NEGLIGENCE ON OUR SIDE WHICH COULD RESULT IN A DETRIMENT TO YOUR INTERESTS. THIS LETTER OF INDEMNITY SHALL BE GOVERNED BY THE SAME LAWS AND JURISDICTION AS THAT CONTAINED IN THE SALES CONTRACT BETWEEN... (APPLICANT) AND MERCURIA ENERGY TRADING PTE LTD POR THE AFOREMENTIONED CARGO.

THIS LETTER OF INDEMNITY SHALL EXPIRE UPON OUR TENDERING THE AFOREMENTIONED CARGO. THIS LETTER OF INDEMNITY SHALL EXPIRE UPON OUR TENDERING THE AFOREMENTIONED CARGO. THIS LETTER OF INDEMNITY SHALL EXPIRE UPON OUR TENDERING THE FULL SET OF ORIGINAL BILLS OF LADING TO... (APPLICANT)

YOURS FAITHFULLY,

MERCURIA ENERGY TRADING PTE LTD.

UNQUOTETD.

47A/Additional Conditions

+BENEFICIARY'S CERTIFICATE ADDRESSED TO ISSUING BANK CONFIRMING THEIR ACCEPTANCE OR NON-ACCEPTANCE OF ALL AMENDMENTS MADE UNDER THIS CREDIT QUOTING RELEVANT AMENDMENT NO.IF THE CREDIT HAS NOT BEEN AMENDED, SUCH CERTIFICATE IS NOT REQUIRED.

+ONE EXTRA PHOTOCOPY OF INYOICE AND TRANSPORT DOCUMENTS ARE REQUIRED FOR ISSUING BANK'S REFERENCE.IF SUCH COPIES NOT PRESENTED, A FEE FOR USD10.00 OR ITS EQUIVALENCE WILL BE DEDUCTED UPON PAYMENT.

+WITHOUT A PRIOR NOTICE, A FEE OF USD75.00 OR ITS EQUIVALENCE, AND RELATIVE TELEX CHARGES ARE FOR ACCOUNT OF BENEFICIARY AND WILL BE DEDUCTED FROM THE PROCEEDS OF EACH PRESENTATION OF DISCREPANT DOCUMENTS PROVIDED THE DISCREPANT DOCUMENTS HAVE BEEN ACCEPTED.HOWEVER, THIS MUST NOT BE CONSTRUED TO MEAN THAT THE SAME DISCREPANCIES APPEARING IN DOCUMENTS OF SUBSEQUENT PRESENTATION ARE AUTOMATICALLY ACCEPTABLE TO US.

+DOCUMENTS MUST BE ISSUED IN ENGLISH.

+5 PERCENT MORE OR LESS ARE ALLOWED ON BOTH CERDIT AMOUNT AND QUANTITY.

+THE CARGO RELEASE DATE SHOWN ON CARGO RELEASE NOTICE WILL BE

CONSTRUED AS SHIPMENT DATE.

+UNLESS OTHERWISE STIPULATED UNDER THIS LC, THIRD PARTY

IN CONSIDERATION OF YOUR PAYING US THE SUM OF....USD BEING THE PURCHASE PRICE OF THE ABOVE MENTIONED GOODS WITHOUT HAVING INHAND THE ORIGINAL BILLS OF LADING, WE HEREBY GUARANTEE  DOCUMENTS EXCEPT INVOICE, DRAFT AND LETTER OF INDEMNITY ARE ACCEPTABLE.

5

+COPY OF B/L IS ACCEPTABLE.

+PHOTOCOPIES IN LIEU OF COPY DOCUMENTS ARE ACCEPTABLE.

+SPELLING AND TYPOGRAPHICAL ERRORS EXCLUDING VALUE, DATE AND QUANTITY SHALL NOT BE CONSIDERED AS DISCREPANCIES.

+NAME OR TITLE OF DOCUMENTS THAT ARE DIFFERENT FROM LC BUT SERVE THE SAME PURPOSE ARE ACCEPTABLE.

+EXCEPT AS OTHERWISE STATED OR MODIFIED, THIS CREDIT IS SUBJECT

TO THE UCP 600.

71B/Charges

ALL BANKING CHARGES OUTSIDE ISSUING

BANK (INCLUDING FINANCING INTEREST)

AND ALL RELATIVE

REIMBURSEMENT/PAYMENT CHARGES ARE

FOR BENEFICIARY'S ACCOUNT.

48/Period for Presentation

LATER THAN 5 DAYS AFTER

B/L DATE BUT ANYWAY

WITHIN THE VALIDITY OF THE CREDIT

49/Conformation Instructions

WITHOUT

78/Instructions to the Paying/Accepting/Negotiating Bank

+EACH DRAWING SHOULD BE ENDORSED ON THE REVERSE OF THIS L/C AND THE PRESENTING BANK MUST EVIDENCE THIS EFFECT ON THEIR COVERING SCHEDULE.

+DOCUMENTS SHOULD BE SENT BY COURIER SERVICE IN ONE LOT TO

CHINA MERCHANTS BANK, NINGBO BRANCH, 9/F., CHINA MERCHANTS

BANK BUILDING, NO.342 MIN'AN EAST ROAD, JIANGDONG DISTRICT.

NINGBO, CHINA 31542, TEL: 86-574-87950065/87015594.

+UPON RECEIPT OF DOCUMENTS AND DRAFTS BY ISSUING BANK AT THE

COUNTER OF INTL DEPT IN COMPLIANCE WITH TERMS AND CONDITIONS OF

THIS CREDIT, WE WILL UNDERTAKE TO REIMBURSE YOU AS PER YOUR

INSTRUCTIONS.

72/Sender to Receiver Information

/TELEBEN/

REC/PLS COLLECT YOUR ADVISING

//CHARGES FROM BENE BEFORE YOU

//RELEASE THE ORIGINAL CREDIT

 6

EX-10.53

Exhibit 10.53

******Print Style******

CHINA MERCHANTS BANK SWIFT MESSAGE CONTENT 2011-10-14 13:32:05

Message Type: 700    Issue of a Documentary Credit

FIN/Session/ISN: F01  .SS.  SEQ..

Priority/obsol. Period: Normal/100 Minutes

Sender: CMBCCNBSA286

CHINA MERCHANTS BANK

NINGBO

(NINGBO BRANCH)

Receiver: BOTKSGSXXXXX

BANK OF TOKYO-MITSUBISHI UFJ, LTD.,

THE

SINGAPORE

(SINGAPORE BRANCH)

MUR: IS57411101400016

--------------------------------------------------------------------------------------------

27/Sequence of Total

1/1

40A/Form of Documentary Credit

IRREVOCABLE

20/Documentary Credit Number

574LC1100896

31C/Date of Issue

111014

40E/Applicable Rules

UCP LATEST VERSION

31D/Date and Place of Expiry

111230SINGAPORE

50/Applicant

NINGBO KEYUAN PLSTICS CO., LTD.

QINGZHI BEILUE DISTRICT NINGBO

ZHEJIANG PROVINCE CHINA

59/Beneficiary

MERCURIA ENERGY TRADING PTE LTD.

9 RAFFLES PLACE 59TH FLOOR.

REPUBLIC PLAZA SINGAPORE 048619

32B/Currency Code, Amount

USD3731250,

39A/Percentage Credit Amount Tolerance

05/05

41D/Available With...By...

ANY BANK

BY NEGOTIATION

1

42C/Drafts at...

SIGHT FOR 100PCT OF INVOICE VALUE

QUOTING DATE AND NO.OF THIS CREDIT

42A/Drawee

CMBCCNBS286

CHINA MERCHANTS BANK

NINGBO

(NINGBO BRANCH)

43P/Partial Shipments

NOT ALLOWED

43T/Transshipment

NOT ALLOWED

2

44E/Port of Loading/Airport of Departure

TALLINN, ESTONIA

44F/Port of Discharge/Airport of Destination

ONE SAFE PORT/BERTH, ZHOUSHAN, CHINA

44C/Latest Date of Shipment

111025

45A/Description of Goods and/or Services

COMMODITY: STRAIGHT RUN LOW SULFUR FUEL OIL

QUANTITY: 5000.00MTS

UNIT PRICE: USD746.250/MT

TOTAL AMOUNT: USD3731250.00

PRICE TERMS: DES ONE SAFE PORT/BERTH, ZHOUSHAN, CHINA

46A/Documents Required

1. SIGNED COMMERCIAL INVOICE IN 1 ORIGINAL AND 2 COPIES INDICATING THIS L/C NO. AND CONTRACT NO.1141875-5 SHOWING SHORE TANK QUANTITY AT ZHOUSHAN

2. FULL SET OF ORIGINAL CLEAN ON BOARD MARINE BILL OF LADING MARKED FREIGHT PAYABLE AS PER CHARTER PARTY NOTIFYING THE APPLICANT WITH FULL NAME AND ADDRESS.

3. CERTIFICATE OF QUALITY IN 1 ORIGINAL AND2 COPIES ISSUED BY INDEPENDENT INSPECTOR AT LOADING PORT.

4. CERTIFICATE OF QUANTITY IN 1 ORIGINAL AND 2 COPIES ISSUED BY CHINA INSPECTION AND QUARANTINE AT ZHOUSHAN.

5. SIGNED CARGO RELEASE NOTICE INDICATING CARGO RELEASE DATE.

IN CASE THAT ORIGINAL BILL OF LADING ARE NOT AVAILABLE AT PRESENTATION, PAYMENT WILL BE EFFECTED AGAINST PRESENTATION OF THE FOLLOWING DOCUMENTS:

A. SIGNED COMMERCIAL INVOICE ISSUED BY BENEFICIARY,

B. SIGNED CARGO RELEASE NOTICE ONDICATING CARGO RELEASE DATE.

C. LETTER OF INDEMNITY ISSUED BY BENEFICIARY IN THE FOLLOWING

FORMAT:

QUOTE

LETTER OF INDEMNITY

DATE:

TO:

RE:...MTS OF...

SHIPPED PER MT...

BILL OF LADING DATED...

L/C NO...ISSUED BY...DATED...

3

IN CONSIDERATION OF YOUR PAYING US THE SUM OF....USD BEING THE PURCHASE PRICE OF THE ABOVE MENTIONED GOODS WITHOUT HAVING IN HAND THE ORIGINAL BILLS OF LADING, WE HEREBY GUARANTEE PURCHASE PRICE OF THE ABOVE MENTIONED GOODS WITHOUT HAVING IN HAND THE ORIGINAL.BILLS OF LADING, WE HEREBY GUARANTEE UNCONDITIONALLY AND IRREVOCABLY TO INDEMNIFY YOU AGAINST ANY AND ALL DAMAGES, LOSSES, LIABILTIES, COSTS, COUNSEL FEES AND ANY OTHER EXPENSES INCLUDING BUT NOT LIMITED TO ANY CLAIMS OR DEMANDS WHICH MAY BE MADE BY THE CARRIER, CONSINGEE, CONSIGOR, CONSIGNEE, CONSIGNOR OR ANY HOLDER OR TRANSFEREE OF THE ORIGINAL BILLS OF LADING OR BY ANY WHICH MAY BE MADE BY THE CARRIER, CONSIGNEE, CONSIGNOR OR ANY HOLDER OR TRANSFEREE OF THE ORIGINAL BILLS OF LADING OR BY ANY THIRD PARTY CLAIMING AN INTEREST OR LIEN IN THE CARGO OR PROCEEDS WHICH MAY ARISE OUT OF OUR FAILURE TO PROVIDE THE ABOVE MENTIONED ORIGINAL DOCUMENTS.

WE MERCURIA ENERGY TRADING PTE LTD, HEREWITH UNDERTAKE IRREVOCABLY TO DELIVER ONLY TO... (APPLICANT) THE FULL SET OF NEGOTIABLE BILLS OF LADING REFERRED TO ABOVE DULY SIGNED AND ENDORSED COVERING THE CARGO OF...METRIC TONS OF... (PRODUCTNAME) WE MERCURIA ENERGY TRADING PTE LTD.HEREBY EXPRESSLY

4

WARRANT, THAT WE HAVE THE PULL RIGHT AND UNENCUMBERED AUTHORITY TO TRANSFER SUCH TITLE AND TO EFFECT DELIVERY OF THE STRAIGHT RUN LOW SULFUR FUEL OIL TO... (APPLICNT) OUR OBLIGATION TO INDEMNITY YOU IS OF COURSE SUBJECT TO THE CONDITION THAT YOU SHALL GIVE US PROMPT NOTICE OF THE ASSERTION OF ANY CLAIM(S) AND FULL OPPORTUNITY TO CONDUCT THE DEFENCE THEREOF AND THAT YOU SHALL NOT SETTLE ANY SUCH CLAIM(S) WITHOUT OUR WRITTEN APPROVAL, UNLESS IN CASE OF ALLEGED NEGLIGENCE ON OUR SIDE WHICH COULD RESULT IN A DETRIMENT TO YOUR INTERESTS. THIS LETTER OF INDEMNITY SHALL BE GOVERNED BY THE SAME LAWS AND JURISDICTION AS THAT CONTAINED IN THE SALES CONTRACT BETWEEN... (APPLICANT) AND MERCURIA ENERGY TRADING PTE LTD POR THE AFOREMENTIONED CARGO.

THIS LETTER OF INDEMNITY SHALL EXPIRE UPON OUR TENDERING THE AFOREMENTIONED CARGO. THIS LETTER OF INDEMNITY SHALL EXPIRE UPON OUR TENDERING THE AFOREMENTIONED CARGO. THIS LETTER OF INDEMNITY SHALL EXPIRE UPON OUR TENDERING THE FULL SET OF ORIGINAL BILLS OF LADING TO... (APPLICANT)

YOURS FAITHFULLY,

MERCURIA ENERGY TRADING PTE LTD.

UNQUOTETD.

47A/Additional Conditions

+BENEFICIARY'S CERTIFICATE ADDRESSED TO ISSUING BANK CONFIRMING THEIR ACCEPTANCE OR NON-ACCEPTANCE OF ALL AMENDMENTS MADE UNDER THIS CREDIT QUOTING RELEVANT AMENDMENT NO.IF THE CREDIT HAS NOT BEEN AMENDED, SUCH CERTIFICATE IS NOT REQUIRED.

+ONE EXTRA PHOTOCOPY OF INYOICE AND TRANSPORT DOCUMENTS ARE REQUIRED FOR ISSUING BANK'S REFERENCE.IF SUCH COPIES NOT PRESENTED, A FEE FOR USD10.00 OR ITS EQUIVALENCE WILL BE DEDUCTED UPON PAYMENT.

+WITHOUT A PRIOR NOTICE, A FEE OF USD75.00 OR ITS EQUIVALENCE, AND RELATIVE TELEX CHARGES ARE FOR ACCOUNT OF BENEFICIARY AND WILL BE DEDUCTED FROM THE PROCEEDS OF EACH PRESENTATION OF DISCREPANT DOCUMENTS PROVIDED THE DISCREPANT DOCUMENTS HAVE BEEN ACCEPTED.HOWEVER, THIS MUST NOT BE CONSTRUED TO MEAN THAT THE SAME DISCREPANCIES APPEARING IN DOCUMENTS OF SUBSEQUENT PRESENTATION ARE AUTOMATICALLY ACCEPTABLE TO US.

+DOCUMENTS MUST BE ISSUED IN ENGLISH.

+5 PERCENT MORE OR LESS ARE ALLOWED ON BOTH CERDIT AMOUNT AND QUANTITY.

+THE CARGO RELEASE DATE SHOWN ON CARGO RELEASE NOTICE WILL BE

CONSTRUED AS SHIPMENT DATE.

+UNLESS OTHERWISE STIPULATED UNDER THIS LC, THIRD PARTY

IN CONSIDERATION OF YOUR PAYING US THE SUM OF....USD BEING THE PURCHASE PRICE OF THE ABOVE MENTIONED GOODS WITHOUT HAVING INHAND THE ORIGINAL BILLS OF LADING, WE HEREBY GUARANTEE  DOCUMENTS EXCEPT INVOICE, DRAFT AND LETTER OF INDEMNITY ARE ACCEPTABLE.

5

+COPY OF B/L IS ACCEPTABLE.

+PHOTOCOPIES IN LIEU OF COPY DOCUMENTS ARE ACCEPTABLE.

+SPELLING AND TYPOGRAPHICAL ERRORS EXCLUDING VALUE, DATE AND QUANTITY SHALL NOT BE CONSIDERED AS DISCREPANCIES.

+NAME OR TITLE OF DOCUMENTS THAT ARE DIFFERENT FROM LC BUT SERVE THE SAME PURPOSE ARE ACCEPTABLE.

+EXCEPT AS OTHERWISE STATED OR MODIFIED, THIS CREDIT IS SUBJECT

TO THE UCP 600.

71B/Charges

ALL BANKING CHARGES OUTSIDE ISSUING

BANK (INCLUDING FINANCING INTEREST)

AND ALL RELATIVE

REIMBURSEMENT/PAYMENT CHARGES ARE

FOR BENEFICIARY'S ACCOUNT.

48/Period for Presentation

LATER THAN 5 DAYS AFTER

B/L DATE BUT ANYWAY

WITHIN THE VALIDITY OF THE CREDIT

49/Conformation Instructions

WITHOUT

78/Instructions to the Paying/Accepting/Negotiating Bank

+EACH DRAWING SHOULD BE ENDORSED ON THE REVERSE OF THIS L/C AND THE PRESENTING BANK MUST EVIDENCE THIS EFFECT ON THEIR COVERING SCHEDULE.

+DOCUMENTS SHOULD BE SENT BY COURIER SERVICE IN ONE LOT TO

CHINA MERCHANTS BANK, NINGBO BRANCH, 9/F., CHINA MERCHANTS

BANK BUILDING, NO.342 MIN'AN EAST ROAD, JIANGDONG DISTRICT.

NINGBO, CHINA 31542, TEL: 86-574-87950065/87015594.

+UPON RECEIPT OF DOCUMENTS AND DRAFTS BY ISSUING BANK AT THE

COUNTER OF INTL DEPT IN COMPLIANCE WITH TERMS AND CONDITIONS OF

THIS CREDIT, WE WILL UNDERTAKE TO REIMBURSE YOU AS PER YOUR

INSTRUCTIONS.

72/Sender to Receiver Information

/TELEBEN/

REC/PLS COLLECT YOUR ADVISING

//CHARGES FROM BENE BEFORE YOU

//RELEASE THE ORIGINAL CREDIT

 6

EX-10.54

Exhibit 10.54

Attachment 1

CCB Cooperation Agreement on Inter-Bank Refinance

Agreement No. :   G9112-2012-014

Party A (full name):  Ningbo Keyuan Plastic Co.,Ltd.(seal)

Add.: Qingshanshi, Beilun District, Ningbo    Postal Code: 315803

Legal Representative (Person in Charge):  Tao Chunfeng

Fax: 0574-86232618 Tel:0574-86232932

Bank to open basic deposit account:

Bank account number:

Bank account opened at Party B:

Party B: China Construction Bank) Ningbo Beilun Branch (seal)

Add: No.251 Xinda Road, Beilun District, Ningbo Postal Code: 325800

Person in Charge:

Fax: 86882154  Tel: 86884361

This Agreement is entered into by and between Party A and Party B to identify rights and obligations for both parties in Overseas Payment businesses in accordance with relevant laws, regulations and regulatory rules through negotiation for mutual compliance.

Article 1    Inter-bank refinance

1. Inter-bank refinance herein means Party A entrusts Party B with applying to overseas branches of CCB or other banks acknowledged by CCB (hereinafter ‘overseas branches/ other banks’) that under the condition of Party A taking payment responsibility and Party B taking responsibility of guarantee of payment, overseas branches/ other banks shall pay for import goods (including advances) under L/C, import collection and T/T payment settlement and refinancing services under non-trade item.

2. Inter-bank refinance herein is limited to payment under import trade contract or non-trade item. Types of international settlement that can conduct Overseas Payment include: sight L/C, usance L/C, usance L/ C payable at sight under L/C settlement; D/P under import collection settlement; D/A; Pay on delivery under TT settlement.

3. Considering Party A’s application, Party B agrees to provide maximum (currency, Spell- Out)US Dollar: Nine Million Two Hundred and Twenty Six Thousand Five Hundred and Nine Point Thirty-Six_ of trust receipt facility for Party A to handle Overseas Payment businesses.

Validity of this facility is from M___D___Y ___ to M___D___Y ___.

During the effective period of the agreed facility, only if Party B accepts Party A’s entrust and applies to overseas branches/ other banks for inter-bank refinance, and the balance of principal of it doesn’t exceed aforementioned facility. Party A can continuously apply to Party B for Overseas Payment according to This Agreement and not be limited by numbers of application. Nonetheless, the sum of the amount that Party A applies for Party B for Overseas Payment and the balance of principal of Overseas Payment that Party A has taken up or keeps outstanding shall not exceed the agreed facility.

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Trust receipt facility under This Agreement belongs to trade refinancing facility, which means import refinancing facility that Party B, under the condition that Party A presents trust receipt, provides to Party A. Party A can apply to Party B to use this facility for Overseas Payment businesses.

4. Unless both parties agree otherwise, the concrete amount of each Overseas Payment shall be determined by Party B based on amount due under import contract, with the maximum amount not exceeding that of the draft. If no draft, the maximum shall not exceed amount due for the goods.

5. Term for each Overseas Payment shall be calculated as of the actual payment date by refinancing bank, and will end on expiration date determined by refinancing bank.

Article 2   Procedure for Overseas Payment businesses under This Agreement

1. If Party A wants to apply for using trust receipt facility in Overseas Payment businesses under This Agreement, it shall submit Application for Overseas Payment within the period of validity of the facility to Party B. Party A shall guarantee that Overseas Payment businesses facilities submitted not exceed the limit agreed herein.

2. If Party B agrees to accept Party A’s entrust after examination to apply to overseas branches/ other banks for Overseas Payment businesses, Party B shall, according to issues entrusted by Party A, submit refinancing application as the trustee to its overseas branches/ other banks, and take guarantee of payment responsibility accordingly, meanwhile it should present Notice on Using Trade Refinancing Facility to Party A.

3. Before expiration of single Overseas Payment business, Party B shall send Notice on Expiration of Overseas Payment Business to Party A. Both parties agree that actual amount, interest, expense and term etc. of single Overseas Payment business shall be subject to the information listed on Notice on Expiration of Overseas Payment Business.

Article 3    Interest, expense of overseas payment

Party A agrees to take relevant interest and expense under Overseas Payment (including refinancing interest charged by overseas branches/ other banks, commission charged on Party B for Overseas Payment and other related charges), and all interests and charges payable shall be paid by Party B.

1. Interest and expense

Party A selects the ___second__ way among the following to determine interest and expense of inter-bank refinance:

(1) When Party A applies to Party B for single Overseas Payment business, Party B  should enquire from overseas branches/ other banks to determine refinancing interest rate. Meanwhile, Party A should bear interests of overseas branches/ other banks and commission charged on Party B for inter-bank refinance. Details of refinancing interest rate and commission rate shall be subject to Notice on Using Trade Refinancing Facility presented to Party A by Party B.

(2) Both parties agree that under This Agreement, each Overseas Payment business shall calculate by applying general rate of LIBOR of the same period plus price difference (including refinancing interest charged by overseas branches/ other banks and commission charged on Party B for inter-bank refinance), and Party A agrees that Party B shall have the right to deduct commission charged by Party B for Overseas Payment from the sum of accrued interest. Details of general rate for Overseas Payment shall be subject to agreement of Notice on Using Trade Refinancing Facility.

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Refinancing interest rate/ general rate for Overseas Payment shall be annual rate and calculated by the day ( Currencies for Overseas Payment shall be HK Dollar and Pound, and it will be calculated by 365 days in one year; for currencies other than HK Dollar and Pound, it will be calculated by 360 days in one year).

LIBOR referred in this Article means the very same day of each Overseas Payment business day, or one or two bank trading day before each Overseas Payment business day, or the very same day of interest rate adjustment day, or one or two bank trading day before interest rate adjustment day, the inter-bank offered rate for the same period and same currency published by BBA provided by financial telecommunication terminals such as TELERATE etc. LIBOR applies to each Overseas Payment business shall be subject to determination by overseas branches/ other banks.

LIBOR for the same period means the LIBOR price in months matching the term and currency of inter-bank refinance. LIBOR price for each day can be divided into different levels from one month to twelve months. Shall term of Overseas Payment be less than one month, it shall be calculated in LIBOR price for one month; Shall term of Overseas Payment be more than one month but less than two months, it shall be calculated in LIBOR price for two months; so on and so forth, maximum can apply LIBOR price for twelve months.

2. Other charges

Unless otherwise agreed, Party A agrees to bear other charges incurred in the process of transaction of Overseas Payment businesses, including but not limited to postage, commission charged by foreign banks etc. Party A agrees to pay other charges listed on Notice on Expiration of Overseas Payment Business sent by Party B to overseas branches/ other banks once and for all before expiration date of Overseas Payment via Party B.

3. Payment for interest

Party A agrees to pay for t principal, interests and charges listed on Notice on Expiration of Overseas Payment Business as interests of Overseas Payment businesses under This Agreement sent by Party B to overseas branches/ other banks once and for all before expiration date of Overseas Payment via Party B.

4. In case of extension, Party A shall still pay for interest for extended period and all expenses happened after extended period to overseas branches/ other banks via Party B.

Article 4   Preconditions for Party B to accept Party A’s entrust to apply to overseas branches/ other banks for Overseas Payment businesses and provide guarantee for Party A’s payment obligation

Unless Party B waives all or part of its rights, Party B shall not be obliged to accept Party A’s entrust to apply to overseas branches/ other banks for Overseas Payment businesses and provide guarantee for Party A’s payment obligation until following preconditions are all met:

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1. Party A has properly handled approval, registration, delivery and other legal procedure related to Overseas Payment under This Agreement in line with relevant laws, regulations and regulatory rules.

2. Party A has carried out foreign exchange payment procedure in accordance with requirements from State Administration of Foreign Exchange and this has been confirmed by State Administration of Foreign Exchange.

3. Party A has submitted relevant documents that meet Party B’s requirement.

4. Guarantee agreement that meets Party B’s requirement or other guarantee methods have come into effect.

5. Party A hasn’t involved in any breaching activities listed in This Agreement.

6. Party A has submitted Trust Receipt to Party B except Party B agrees not to do so.

7. Party B has approved Party A’s application.

Article 5   Repayment

1. Ways of repayment

(1) Payment for goods obtained from disposing the goods represented by trust receipt by Party A  shall be used to repay Overseas Payment amount, and the insufficient shall be repaid by Party A using other funds.

(2) Principal, interests, charges and other payment due listed on Notice on Expiration of Overseas Payment Business sent by Party B to Party A shall be payable for inter-bank refinance. Unless otherwise agreed by both parties, Party A shall pay above amount due to overseas branches/ other banks once and for all before expiration date of Overseas Payment via Party B.

(3) Party A shall, before the repayment date listed on Notice on Expiration of Overseas Payment Business, deposit sufficient amount payable for Overseas Payment in the bank account opened by Party B, and transfer the amount to pay off debt by itself, or transfer amount from other bank account on repayment date to bank account designated by Party B to pay off debt; shall Party A not make repayment on schedule, Party B will have the right to appropriate it  from Party A’s bank account opened in CCB.

2. Prepayment

Unless it’s agreed by overseas branches/ other banks and Party B, Party A shall not repay principal, interests, charges for Overseas Payment ahead of schedule. Nonetheless, in cases that Party B and/or overseas branches/ other banks consider that Party A is already suffering from operational crisis or other factors which has already impaired Party A’s capability of making repayment for Overseas Payment upon expiration or this kind of situation would happen, or due to change of national policies, or internal managerial issues of Party B and/or requirements from overseas branches/ other banks, Party A shall be obliged to repay Overseas Payment amount ahead of schedule according to Party B’s requirement.

Shall Party A need to repay all or part of Overseas Payment amount ahead of schedule, Party A shall submit application to overseas branches/ other banks by tested cable via Party B at least 15 days in advance, and if overseas branches/ other banks agree, Party A shall pay default punishment to overseas branches/ other banks via Party B. Default punishment shall be subject to the amount on the tested cable, which is the reply of overseas branches/ other banks. Meanwhile Party B shall have the right to charge Party A for losses resulted from prepayment according to actual situation.

3. If Party A requires for extension for inter-bank refinance, it should apply to overseas branches/ other banks by tested cable via Party B at least 15 days in advance.

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Article 6   Rights and obligations of both parties

1. Party A shall have the right to request Party B , according to agreement herein, to apply to overseas branches/ other banks for Overseas Payment businesses for Party A, and provide guarantee for Party A’s payment obligation when conditions are met.

2. Party B shall keep Party A’s commercial secret confidential in accordance with law.

3. Party A’s settlement in RMB or foreign currencies under This Agreement shall all be handled via the bank account opened by Party B.

4. When overseas branches/ other banks make payment and occupy the vouchers which represent the ownership of goods and relevant documents, Party B shall promptly acquire the ownership of vouchers and ownership of goods represented by vouchers.

5. After Party A represents trust receipt to Party B, Party B shall pass the vouchers to Party A.

6. Party B, as the trustor of trust receipt, shall enjoy the beneficial right from Party A’s disposing trusted properties.

7. Party A, as the trustee of trust receipt, holds documents under settlement methods such as import L/C, import collection or T/T settlement involved in Overseas Payment and the goods represented by these documents, and can decide on unloading, storage, manufacture, processing and sales matters.

Payment for goods obtained by Party A from sales shall be used to repay Overseas Payment amount applied from overseas branches/ other banks via Party B, and the insufficient shall be repaid by Party A using other funds.

8. All costs arising from disposal of goods or goods shall be borne by Party A.

9. After the goods represented by documents under settlement methods such as import L/C, import collection or T/T settlement involved in each Overseas Payment under This Agreement has been sold out, Party B shall have the right to collect payments for goods from the buyer and issue effective receipt without the obligation to inform Party A in advance.

10. In case that Party B expresses special requirements, Party A shall dispose the goods according to Party B’ requirement.

11. The documents involved in each Overseas Payment under This Agreement and the goods represented by these documents shall, as Party B’s trusted properties, be independent of Party A. In situations like dissolution, cancellation or bankruptcy happened to Party A, trusted properties shall not be included in assets to be liquidated. Creditor’ rights that Party A obtained from managing and disposing documents and the goods represented by documents shall not offset the debts arising from its own properties.

12. Before paying off principal, interests and charges of inter-bank refinance, Party A shall not mortgage (pawn) documents and the goods represented by documents to other people.

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13. In case that Party B expresses special requirements, Party A shall, before selling the goods involved in single Overseas Payment under This Agreement, guarantee that relevant documents about the goods delivered to Party B be stored according to Party B’s instruction, and make a warehouse receipt with a letter head of Party B.

14. In case that Party B expresses special requirements, Party A shall purchase fire insurance and other common insurance types from insurance with good reputation according to full value of the goods involved in single Overseas Payment under This Agreement, and hold it for Party B as trustee of trust receipt, and submit, at any time when Party B requests, the insurance policy or insurance contracts with Party B being the party to enjoy priority claim right or the benefits under this policy being transferred to Party B. Premium shall be borne by Party A. In case of compensation claimed for goods under this policy, Party A shall immediately inform Party B, and after collection of compensation, Party A shall promptly pass it on to Party B.

15. Party B shall have the right to decide and examine transportation methods, storage place, storage method and different coverage of goods involved in single Overseas Payment under This Agreement. Party A guarantees to provide convenience for Party B, including allowing Party B’ s staff to enter into warehouse and place owned, occupied or managed by Party A. If Party B requires, Party A shall sign all documents necessary for facilitating Party B to take delivery of goods and claim compensation.

16. Party B shall have the right to supervise Party A’s operational status and Party A shall provide assistance. Party B shall have the right to examine and supervise the collection of payment for goods involved in single Overseas Payment under This Agreement, and Party A shall, at any time when Party B requests, provide relevant information in writing to Party B.

17. In case that Party A shall change legal representative (person in charge), domicile or business place, or reduce registered capital during agreement period, Party A shall inform Party B in writing in advance.

18. In case that Party A shall change operational type or ownership organizational form due to contracting, leasing, associate company, shareholding reform, division, merger, consolidation and other reasons, Party A shall inform Party B in advance and carry out debt clearance measures.

19. Shall situations happen to Party A which constitute crisis to its normal operation or have substantial adverse impact on Party A’s capability of making repayment for Overseas Payment under This Agreement, including but not limited to production suspension, close down, having cancellation registration, business license revocation, legal representative or major person in charge being involved in illegal activities, major litigation, or serious difficulties in operation, financial status degradation, Party A and its investors withdraw capital, transfer assets or shares on its own etc., Party B shall have the right to demand Party A to immediately deposit the capital and interests for Overseas Payment into the bank account designated by Party B as the earnest money guarantee or take other measures acknowledged by Party B.

20. Party A guarantees not to sign agreement with any third party to damage Party B’s benefits under This Agreement.

21. Party B can at any time revoke trust. Once Party B request, Party A shall promptly return whole set of property ownership documents, vouchers and other instruments or the goods under these documents to Party B.

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22. Shall Party A not dispose trusted properties according to Party B’s requirements, Party B shall have the right to cancel trust relation and retrieve trusted properties for its own disposal.

23. In case of security established, if the guarantor breaches security agreement or lost its capability of guarantee, Party A shall promptly provide new security acknowledged  by Party B, or Party B shall have the right to retrieve ahead of schedule the principal, interests and relevant charges of Overseas Payment in the name of overseas branches/ other banks, and Party B shall have the right to appropriate this amount from Party A’s bank account opened in CCB, and shall have the right to exercise security rights.

24. Party A agrees that: Party B shall have the right to exercise whatever rights overseas branches/ other banks enjoy against Party A.

25. Both parties agree that international conventions such as UCP 600 etc. shall be applied on issues not finalized in This Agreement or ambiguous expressions.

Article 7   Guarantee

Guarantee methods under This Agreement shall be _the first and the fourth____ among following choices:

(1) Guarantee

(2) Mortgage

(3) Pawn

(4) Earnest money

(5) Spare L/C

(6) Credit insurance

(7) Others:_________

Article 8    Liability for breach of contract

1. Upon expiration of inter-bank refinance, shall Party A not make full payment via Party B on time or the balance in Party A’s bank account opened in Party B be insufficient, Party B shall have the right to issue a collection notice to Party A, and Party A shall, according to Party B’s requirement, raise funds in time and make full payment via Party B. Under any circumstances, if Party B performs obligation of payment guarantee, Party A shall pay following amount to Party B within 3 working days after Party B makes payment:

(1) The full amount that Party B paid to overseas branches/ other banks or third party designated by overseas branches/ other banks;

(2) For outstanding amount (including principal, interests, postage/cable charge, commission etc. for inter-bank refinance) of Part A in the period from the date that Party B makes payment to the date that Party B collects full payment from Party A, it should calculate the rate of monies advanced  by a daily interest rate of 0.05%;

(3) Costs for Party B to deliver notice and other relevant expenses.

2. Shall Party A not repay full amount of principal and relevant charges on schedule, Party B shall have the right to adopt one or several methods of following choices:

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(1) Appropriate it from Party A’s bank account opened in CCB, or appropriate it from other receivables of Party A;

(2) Dispose documents under import L/C, import collection or T/T settlement involved in single Overseas Payment under This Agreement and the goods represented by these documents;

(3) Dispose collaterals, properties in pawn or pursue recovery from the guarantor.

3. If Party A have any violation of the situations provided herein, Party B shall have the right to demand Party A correct it by a set time, and demand Party A provide guarantee in line with Party B’s requirement, and appropriate any amount payable from Party A’s bank account opened in CCB and other remedial measures permitted by law.

Article 9 Modification, supplementation and interpretation of This Agreement

1. Any modification or supplementation of This Agreement shall be agreed by both parties and made in writing, and constitute effective components of This Agreement.

2. Shall there be discrepancy in interpretation of any articles herein, the true meaning of it shall be determined by purpose of This Agreement, words and expressions used, relevant clauses, trading conventions and honesty and credibility principle.

Article 10   Attachment of This Agreement

Application for Overseas Payment submitted by Party A, Notice on Using Trade Refinancing Facility, Notice on Expiration of Overseas Payment Business issued by Party B to Party A, and import goods list and other vouchers and documents, etc. under import L/C, import collection or T/T settlement involved in single Overseas Payment under This Agreement shall all be attachment of This Agreement and constitute effective components of This Agreement.

Article 11 Settlement of disputes

Shall any disputes happen during the process of implementing This Agreement, it can be solved via negotiation. If negotiation fails, the __first____ way of following choices shall be chosen for settlement:

(1) File a lawsuit to the People’s Court where Party B locates;

(2) Submit the case to __________ arbitration committee (arbitration place shall be _______) for arbitration in accordance with presently existing and effective arbitration rules of this committee. The award of arbitration shall be final and legally binding upon parties hereto.

During litigation or arbitration period, the part of This Agreement which is not involved in disputes shall still be enforced upon.

Article 12   Operation of This Agreement

This Agreement comes into effect after legal representative (person in charge) or authorized agent from Party A sign and affix official stamp and legal representative (person in charge) or authorized agent from Party B sign and affix official stamp.

Article 13 Miscellaneous agreement

1. Shall Party A pay earnest money in full amount or relevant financial pawn in full value to Party B, if Party B examines and agrees, Party B can carry out Overseas Payment businesses for Party A and will be legally bound by relevant rights and obligations herein;

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2. ____________;

3. __________.

Article 14   This Agreement comes in ___two___ copies with same content.

Article 15   Statement

1. Party A clearly acknowledges business scope and authorization of Party B.

2. Party A has read all clauses herein. At Party A’s request, Party B has given interpretation to articles herein accordingly. Party A has sufficient knowledge and understanding of meanings of the articles herein and their corresponding legal effect.

3. Party A has the right to sign This Agreement.

Party A (seal): Ningbo Keyuan Plastic Co., Ltd.

Legal Representative (person in charge) or Authorized Agent (signature):Chunfeng Tao

Feb. 21, 2012

Party B (seal): CCB Ningbo Beilun Branch

Legal Representative (person in charge) or Authorized Agent (signature):

Feb. 21, 2012

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EX-10.55

Exhibit 10.55

Trading financing 008

Trust Receipt Loan Contract

Contract No: G1225-2012-006

Party A: Ningbo Keyuan Plastics Co., Ltd

Address: Qingzhi Postal code: 315801

Legal representative: Chunfeng Tao

Tel: 86232932

Party B (Lender ): China Construction Bank, Beilun Branch

Address: No 251 Xinda road Postal code: 315800

Principals: Jiangen Han

Fax: 86882154             Tel: 86884361

Since the Letter of Credit (“L/C” or “LC”) / Telegraphic Transfer (“T/T” or “TT”) / documents under import collection will arrive (has arrived), Party A applied for trust receipt loan and Party B has already accepted the application.

WHEREAS:

The undersigned parties agreed to sign this contract after mutual agreement.

Article 1. Trust Receipt Loan

1. Trust Receipt Loan under this contract means the short term financing provide by Party B per Party A’s request when the expiration date of LC/TT/ documents under import collection to be used for payment.

Information of L/C

L/C No.:8300901000635901

Amount of L/C (Spell-Out):USD Thirteen Million Two hundred and Fifty-Four Thousand Four Hundred and Sixty-Eight point Ninety-Six

Invoice/Bills (Spell-Out):USD Thirteen Million Two hundred and Fifty-Four Thousand Four Hundred and Sixty-Eight point Ninety-Six

Information of Inward Collection

Inward Collection No.:/

Invoice/Bills (Spell-Out):/

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Information of Import COD

Import Contract No.:/

Invoice/Bills(Spell-Out):/

Invoice No:/

2. Trust Receipt Loan Amount(Currency, Spell-Out): EURO Ten Million Sixty-Eight Thousand Two Hundred and Sixty-Three Point Fifty-Five.

3. Term: 92 days, from March 8, 2012 to June 8, 2012.

Article 2.  Interest Rate and Interest Calculation and Interest Settlement

1. Interest rate under this contract is annual interest rate, being the following Item 1:

1) The loan interest under this contract is fixed interest rate, which is 2.7384%, the interest rate remains unchanged within loan term

2) The loan interest under this contract is floating interest rate, which is LIBOR +interest margin /, floating once per month.

2. The loan interest is started to be calculated from the date of payment by Party B, which date is also value date. The loan interest is accounted by date. Daily interest of the loan calculates with 365 days if the currency is HK dollar and UK pound, while the other currencies shall be calculated by 360. The first day of the term is included in the interest period but exclude the last day.

3. Interest settlement

1) With fixed interest, the interest rate shall be calculated according to agreed fixed rate. With floating interest, the interest rate shall be calculated according to the interest rate in the floating term. If the floating interest rate term is shorter than settlement term, the floating interest will be calculated first, settlement date plus interest in each period to calculate the loan interest.

2) Settlement method applies for the following second one :

a. Settlement by/(month/quarter/half year), settlement date shall be the corresponding date of value date, if there is no corresponding date, the last shall be done.

b. Loan is cleared with payment of both principal and interests on the due date of the loan.

c.

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Article 3.  Preconditions for Party B to Grant Loan

Unless Party B waives all or any of the following, Party B will be obligated to grant loan when all of the following preconditions are met.

1. Party A has already complete related legal procedures like approval, registration, insurance and so on required by law;

2. Party A has already submitted all the files required by Party B;

3. Party A has already submitted the trust receipt required by Party B;

4. All requested guarantee becomes and remains effective;

5. Party A does not breach any covenants under this contract;

6. Others

Article 4. Repayment

1. Repayment principle

Payments Party A receives for products relating to L/C/inward collection/import COD under this contract shall be used for repaying Party B’s trust receipt, and shall repay the outstanding amount with other capital.

2. Interest payment

Patty A shall pay the due interest to Party B in settlement date. The first interest payment date is the first settlement date and the loan shall be cleared with the payment of both interests and principal.

3. Repayment method

1) Party A shall pay off the loan principal and interest at the same time when the loan is due.

2) Party A shall prepare sufficient capital in the account opened with Party B before payment due day (Party B is also entitled to deduct the money from Party A’s account for payment), or transfer the capital from other account on the payment due day.

4. Repayment in advance

Party A has the right to repay in advance.

When repay in advance, Party A shall calculate the interest according to the actual number of days the loan and interest rate stipulated in this contract. After the prepayment, the unpaid balance shall be still subject to the terms and conditions under this contract.

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Article 5.  The Rights and Obligations

1. Party A has the right to request Party B to grant loan according to the provisions of this contract.

2. Party B should keep Party A’s the commercial secret confidential, unless otherwise required by laws and regulations, demanded by the authority, or according to other agreements between the parties.

3. All settlement of RMB and foreign currency under this contract shall be conducted in Party A’s account opened with Party B.

4. Party B takes the ownership of the documents and products when Party A issued loan receipt or Party B paid (whichever happens first).

5. After Party A issued the trust receipt to Party B, Party B shall hand over all the documents to Party A.

6. Being the trustor and beneficiary, Party B has the beneficial right to Party A’s entrusted property.

7. Being the trustee, Party A shall unload, store, produce, process, transport and sell under the documents and products involving L/C/inward collection/import COD for the interest of Party B.

The sales price received by Party A shall be used to repay the loan. The remaining balance of the loan shall be paid with other capital.

8. Party A shall undertake all fees incurred by products or handling products.

9. Party B has the right to collect the payment from buyers regarding sales products involving L/C/inward collection/import COD and does not need to inform Party A in advance.

10. If Party B has special requirements, Party A will handle the products according to the requirements.

11. All relevant documents, products and rights (including but not limited to the unsold products, and the claims to buyers due to products sales, the payment due to products sales and insurance compensation) under this contract are Party B’s trust property, and independent from Party A. When Party A entered into dissolution, revocation and bankruptcy, or the creditors of Party A claim rights to the trust assets, it is the obligation for Party A to declare to the court or third Party that the trust assets does not belong to Party A’s liquidation assets or owned assets, or Party A’ s bankrupt assets. Claims Party A obtains due to managing and handling the documents and products is not allowed to offset the liability under the owned assets.

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12. Before paying off the trust receipt loan principal, interest and expense, Party A can not pledge the documents or the products to other third parties, or make the goods must subject to any restriction of lien.

13. If Party B so requests, Party A shall provide any requested documents or store goods as instructed, and use Party B letterhead to create warehouse receipt.

14. If Party B so requests, Party A shall take related insurance from good credit insurance company with equal value to L/C/inward collection/import COD, and hold as the trustee of Party B and provide Party B with the insurance policy or insurance agreement which Party B is beneficiary or endorsing Party B as beneficiary per Party B’s request. Party A will be responsible for all the expenses related to insurance. If any claims occur, Party A shall inform Party B immediately and hand over the insurance compensation to Party B upon receipt.

15. Party B is entitled to decide and inspect the transportation methods, storage location and method and insurance. Party A shall provide all the convenient access to allow Party B to get into Party A’s location or warehouse, and sign all the documents for Party B’s collection and claims.

16. Party B is entitled to inspect the payment collection of the products under L/C/inward collection/import COD and Party A shall inform Party B in writing when required by Party B.

17. If Party A changed its legal representative, address, or business location, registered capital and article of incorporation, it shall inform Party B within …..working days after occurrence.

18. Party A shall not sign any contracts with third parties that may be detrimental to Party B’s rights under this contract.

19. Party B can revoke the trust any time. Upon request by Party B, Party A shall return to all the property certificate, documents and the products o Party B.

20. If Party A fails to handle the trust property per Party B’s request, Party B is entitled to terminate the trust relationship, take back the trust property and handle as it sees fit.

21. If there are any disputes or frauds under the main contract concerning L/C/inward collection/import COD, whatever settled or not, Party A shall pay loan principal and interest and related expenses under this contract to Party B.

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22. Party A cannot use the related party transaction to avoid the liability to Party B; cannot use the false contract with related parties, bill receivable without practical business background, account receivable to discount or pledge in bank for cash or credit granting.

23. If the Party A is a group client, it shall give Party B a timely notice for related transaction involving over 10% net assets, including: 1) the relationship with each party in the transaction, 2) project and transaction nature; 3) the money amount and related proportion; 4) the pricing policy (including symbolic transaction without monetary amount).

Article 6.  Liability of Default

1. Party A’s defaults and the conditions may adversely affect Party B’s claims:

1) Party A breaches any covenants under this contract or explicitly expresses not to perform one of the covenants;

2) If any following conditions occur that make Party B believe may affect its claims:  Party A takes contract, trusteeship, lease, shareholding reforming, investment, joint operation, M & A, purchase and reorganization, separation, joint venture, apply for closing down, apply for dismissing, being revoked, being applied for bankruptcy, shareholder change or major assets transfer, stop production, closing down, and charged by local authority, cancelling it registration, suspend its license, involved in great legal dispute, great difficulties in production or finance, legal representative can not perform its duty, Party A does not perform its obligation for due debt (including the debt of Party A to Party B, or to other departments in Chinese Construction Bank), transfer its capital for free or in low price, reduce third Party’s liability or provide guarantee for third Party, neglect to perform its claims  or other rights, Party A’s shareholder to use its independent position to avoid liability, or Party A fails to provide certification to prove its property separate with shareholder’s property, the guarantee under the contract is false, ineffective, invalid, being revoked, or being dismissed, the guarantor default the contract or express he will not continue the guarantee by his actions, or the guarantor lose its guarantee capacity partially or wholly, and the value of warranty is being reduced, or the other conditions may endanger Party B’s claims.

3) If any one of above mentioned situation arises, Party B has the right to take one or any actions below:

A. Announce that the loan is due immediately, and request Party A to repay entire due and undue principal, interest and expense.

B. If Party A fails to pay the interest in time within the term, it shall pay compound interest pursuant to relevant terms under this agreement.

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When the loan is overdue, from the overdue date to the date of paying off all principal and interest, the unpaid principal and interest (including the principal and interest which Party B to declare acceleration of maturity) shall be calculated based on agreed settlement with default loan interest; if the agreed principal and interest shall be paid off simultaneously when due, the unpaid principal and interest (including the principal and interest which Party B to declare acceleration of maturity) shall be calculated based on agreed settlement with default loan interest. The default loan interest 4.7384%.

The overdue loan means Party A fails to pay off the loans on time.

C. Dispose the documents and products regarding L/C/inward collection/import COD.

D. Request Party A to provide guarantee

E. Exercise the guarantee right.

F. Other remedies allowed by law.

Article 7.  Others

1. Fees

Unless otherwise agreed, Party A shall be responsible for all fees related to legal counsel, insurance, evaluation, registration, appraisal and notarization under this contract.

Party A shall be responsible for all fees (including but not limited legal cost, arbitration fee, property protection fee, travel expense, execution fee, evaluation fee, auction fee, delivery fee, announcement fee, lawyer fee and etc) that Party B incurs in order to pursue its claims.

2. Collection of account receivable

For all the account receivable under this contract, Party B is entitled to deduct the money or foreign currency directly from Party A’s account in Chinese Construction Bank without informing Party A in advance. If the settlement of exchange and purchasing foreign currency is required, it is Party A’s obligation to assist Party B and take care exchange rate risk.

3. The usage of Party A’s information

Party A agrees that Party B may check Party A’s credit status form People’s Bank of China or the credit data base approve by Credit Department or other departments, and also agrees that Party B may provide information to People’s Bank of China or the credit data base approve by Credit Department. Party A also agrees that Party B may use and disclose Party A’s information if it is necessary to carry out business.

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4. Announcement collection

Party B has the right to inform related department for the default of Party A, and do announcement collection through press.

5. The effectiveness of Party B’s record

Unless there are reasonable, definite contrary evidences, all the Party B’s internal records for principal, interest and expense and repayment records, the documents and evidences related to Party A to withdrawal money, repayment, and interest payment, and record for Party B’s announcement of collection, are all regarded as the efficient evidences to prove the relationship between Party A and Party B.  Party A can not object due to the fact that the records and documents are prepared by Party B.

6. Reservation of power

Party B’s right under this contract will never affect and exclude his rights under the law and other contracts. Any tolerant, grace, privilege or delay to execute any rights for the default behavior and delay behavior shall not be considered as waive of rights and interests or accept the default behavior, and also does not bind or prevent Party B from continuing to execute the rights, and also will not result in Party B undertaking obligation and responsibility to Party A.

7. If Party A owes other due liability to Party B apart from the liabilities under this contract, Party B is entitled to deduct money from Party A’s account in Chinese Construction Bank system for RMB and foreign currency to pay off the liabilities, and Party A shall not object.

8. Party A shall make an immediate notice to Party B for any changes of address in writing. If failure to provide notice results in any losses, Party A be responsible for the losses.

9. The construction of this contract shall be subject to the purpose of this contract, sentences used, relevant clauses, trading custom, international practice, and the principle of good faith and honesty.

10. Trust receipt loan applications and other documents are parts of this contract.

11. Settlement

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All disputes concerning this contract should be settled through friendly negotiation; when the negotiation fails, shall settle with following method:

1) Proceed to the local People's Court

2) Submit to arbitration committee.

During the dispute, the parties shall continue to perform the terms which are not affected by the dispute.

12. Effect of this contract

This contract becomes effective upon the signature and seal of the legal representatives of both parties, principals or the authorized persons.

13. This contract is made in two duplicates.

14. Other covenants

                       /                           

Article 8. Statements

1. Party A is aware of Party B’s operation scope and authority limit.

2. Party A has read all the clauses of this contract. At Party A’s request, Party B has made sufficient explanation for this contact. Party A fully understands the contract and is aware of the legal consequence.

3. Party A’s signing and execution of this contract complies with all the national laws and regulations, as well as Party A’s internal constitution and internal organization files. Party A has already obtained approval authority within the company or from national organization to enter into this contract.

4. Party A states that at the time of executing the contract there is no violation of any laws and regulations related to environmental protection, energy conservation and emission reduction; and promises to comply with those laws and regulations throughout the term of this contract. If Party A’s above statement is false or it fails to perform, or there is potential risk of waste of energy and pollution from the part of Party A, Party B has the right to stop granting credit to Party A (include but not limited to refuse loaning, financing, issuing L/G, LC), or announce the claims (principal and interest) is acceleration of maturity (include but not limited to loan, financing, money paid in advance or to be paid actually) , or using other reliefs allowed by this contract or laws.

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Party A(Stamp)

Legal Representative/ Authorized person

2012-3-8

Party B (Stamp)

Legal Representative/ Authorized person

2012-3-8

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EX-10.56

Exhibit 10.56

CCB Cooperation Agreement on Inter-Bank Refinance

Agreement No. :   G9112-2012-025

Party A (full name):  Ningbo Keyuan Plastics Co.,Ltd.(seal)

Add.: Qingshanshi, Beilun District, Ningbo    Postal Code: 315803

Legal Representative (Person in Charge):  Tao Chunfeng

Fax: 0574-86232618 Tel: 0574-86232932

Bank to open basic deposit account:

Bank account number:

Bank account opened at Party B:

Party B: China Construction Bank Inc, Ningbo Beilun Branch (seal)

Add: No.251 Xinda Road, Beilun District, Ningbo Postal Code: 325800

Person in Charge:

Fax: 86882154  Tel: 86884361

This Agreement is entered into by and between Party A and Party B to identify rights and obligations for both parties in Overseas Payment businesses in accordance with relevant laws, regulations and regulatory rules through negotiation for mutual compliance.

Article 1    Inter-bank refinance

1. Inter-bank refinance herein means Party A entrusts Party B with applying to overseas branches of CCB or other banks acknowledged by CCB (hereinafter ‘overseas branches/ other banks’) that under the condition of Party A taking payment responsibility and Party B taking responsibility of guarantee of payment, overseas branches/ other banks shall pay for import goods (including advances) under L/C, import collection and T/T payment settlement and refinancing services under non-trade item.

2. Inter-bank refinance herein is limited to payment under import trade contract or non-trade item. Types of international settlement that can conduct Overseas Payment include: sight L/C, usance L/C, usance L/ C payable at sight under L/C settlement; D/P under import collection settlement; D/A; Pay on delivery under TT settlement.

3. Considering Party A’s application, Party B agrees to provide maximum (currency, Spell-Out)US Dollar: Fourteen Million Seven Hundred and Forty-Nine Thousand Two Hundred and Eighty- One Point Six of trust receipt facility for Party A to handle Overseas Payment businesses.

Validity of this facility is from March 30, 2012 to June 28, 2012.

During the effective period of the agreed facility, only if Party B accepts Party A’s entrust and applies to overseas branches/ other banks for inter-bank refinance, and the balance of principal of it doesn’t exceed aforementioned facility. Party A can continuously apply to Party B for Overseas Payment according to This Agreement and not be limited by numbers of application. Nonetheless, the sum of the amount that Party A applies for Party B for Overseas Payment and the balance of principal of Overseas Payment that Party A has taken up or keeps outstanding shall not exceed the agreed facility.

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Trust receipt facility under This Agreement belongs to trade refinancing facility, which means import refinancing facility that Party B, under the condition that Party A presents trust receipt, provides to Party A. Party A can apply to Party B to use this facility for Overseas Payment businesses.

4. Unless both parties agree otherwise, the concrete amount of each Overseas Payment shall be determined by Party B based on amount due under import contract, with the maximum amount not exceeding that of the draft. If no draft, the maximum shall not exceed amount due for the goods.

5. Term for each Overseas Payment shall be calculated as of the actual payment date by refinancing bank, and will end on expiration date determined by refinancing bank.

Article 2   Procedure for Overseas Payment businesses under This Agreement

1. If Party A wants to apply for using trust receipt facility in Overseas Payment businesses under This Agreement, it shall submit Application for Overseas Payment within the period of validity of the facility to Party B. Party A shall guarantee that Overseas Payment businesses facilities submitted not exceed the limit agreed herein.

2. If Party B agrees to accept Party A’s entrust after examination to apply to overseas branches/ other banks for Overseas Payment businesses, Party B shall, according to issues entrusted by Party A, submit refinancing application as the trustee to its overseas branches/ other banks, and take guarantee of payment responsibility accordingly, meanwhile it should present Notice on Using Trade Refinancing Facility to Party A.

3. Before expiration of single Overseas Payment business, Party B shall send Notice on Expiration of Overseas Payment Business to Party A. Both parties agree that actual amount, interest, expense and term etc. of single Overseas Payment business shall be subject to the information listed on Notice on Expiration of Overseas Payment Business.

Article 3    Interest, expense of overseas payment

Party A agrees to take relevant interest and expense under Overseas Payment (including refinancing interest charged by overseas branches/ other banks, commission charged on Party B for Overseas Payment and other related charges), and all interests and charges payable shall be paid by Party B.

1. Interest and expense

Party A selects the ___second__ way among the following to determine interest and expense of inter-bank refinance:

(1) When Party A applies to Party B for single Overseas Payment business, Party B  should enquire from overseas branches/ other banks to determine refinancing interest rate. Meanwhile, Party A should bear interests of overseas branches/ other banks and commission charged on Party B for inter-bank refinance. Details of refinancing interest rate and commission rate shall be subject to Notice on Using Trade Refinancing Facility presented to Party A by Party B.

(2) Both parties agree that under This Agreement, each Overseas Payment business shall calculate by applying general rate of LIBOR of the same period plus price difference (including refinancing interest charged by overseas branches/ other banks and commission charged on Party B for inter-bank refinance), and Party A agrees that Party B shall have the right to deduct commission charged by Party B for Overseas Payment from the sum of accrued interest. Details of general rate for Overseas Payment shall be subject to agreement of Notice on Using Trade Refinancing Facility.

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Refinancing interest rate/ general rate for Overseas Payment shall be annual rate and calculated by the day ( Currencies for Overseas Payment shall be HK Dollar and Pound, and it will be calculated by 365 days in one year; for currencies other than HK Dollar and Pound, it will be calculated by 360 days in one year).

LIBOR referred in this Article means the very same day of each Overseas Payment business day, or one or two bank trading day before each Overseas Payment business day, or the very same day of interest rate adjustment day, or one or two bank trading day before interest rate adjustment day, the inter-bank offered rate for the same period and same currency published by BBA provided by financial telecommunication terminals such as TELERATE etc. LIBOR applies to each Overseas Payment business shall be subject to determination by overseas branches/ other banks.

LIBOR for the same period means the LIBOR price in months matching the term and currency of inter-bank refinance. LIBOR price for each day can be divided into different levels from one month to twelve months. Shall term of Overseas Payment be less than one month, it shall be calculated in LIBOR price for one month; Shall term of Overseas Payment be more than one month but less than two months, it shall be calculated in LIBOR price for two months; so on and so forth, maximum can apply LIBOR price for twelve months.

2. Other charges

Unless otherwise agreed, Party A agrees to bear other charges incurred in the process of transaction of Overseas Payment businesses, including but not limited to postage, commission charged by foreign banks etc. Party A agrees to pay other charges listed on Notice on Expiration of Overseas Payment Business sent by Party B to overseas branches/ other banks once and for all before expiration date of Overseas Payment via Party B.

3. Payment for interest

Party A agrees to pay for t principal, interests and charges listed on Notice on Expiration of Overseas Payment Business as interests of Overseas Payment businesses under This Agreement sent by Party B to overseas branches/ other banks once and for all before expiration date of Overseas Payment via Party B.

4. In case of extension, Party A shall still pay for interest for extended period and all expenses happened after extended period to overseas branches/ other banks via Party B.

Article 4   Preconditions for Party B to accept Party A’s entrust to apply to overseas branches/ other banks for Overseas Payment businesses and provide guarantee for Party A’s payment obligation

Unless Party B waives all or part of its rights, Party B shall not be obliged to accept Party A’s entrust to apply to overseas branches/ other banks for Overseas Payment businesses and provide guarantee for Party A’s payment obligation until following preconditions are all met:

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1. Party A has properly handled approval, registration, delivery and other legal procedure related to Overseas Payment under This Agreement in line with relevant laws, regulations and regulatory rules.

2. Party A has carried out foreign exchange payment procedure in accordance with requirements from State Administration of Foreign Exchange and this has been confirmed by State Administration of Foreign Exchange.

3. Party A has submitted relevant documents that meet Party B’s requirement.

4. Guarantee agreement that meets Party B’s requirement or other guarantee methods have come into effect.

5. Party A hasn’t involved in any breaching activities listed in This Agreement.

6. Party A has submitted Trust Receipt to Party B except Party B agrees not to do so.

7. Party B has approved Party A’s application.

Article 5   Repayment

1. Ways of repayment

(1) Payment for goods obtained from disposing the goods represented by trust receipt by Party A  shall be used to repay Overseas Payment amount, and the insufficient shall be repaid by Party A using other funds.

(2) Principal, interests, charges and other payment due listed on Notice on Expiration of Overseas Payment Business sent by Party B to Party A shall be payable for inter-bank refinance. Unless otherwise agreed by both parties, Party A shall pay above amount due to overseas branches/ other banks once and for all before expiration date of Overseas Payment via Party B.

(3) Party A shall, before the repayment date listed on Notice on Expiration of Overseas Payment Business, deposit sufficient amount payable for Overseas Payment in the bank account opened by Party B, and transfer the amount to pay off debt by itself, or transfer amount from other bank account on repayment date to bank account designated by Party B to pay off debt; shall Party A not make repayment on schedule, Party B will have the right to appropriate it  from Party A’s bank account opened in CCB.

2. Prepayment

Unless it’s agreed by overseas branches/ other banks and Party B, Party A shall not repay principal, interests, charges for Overseas Payment ahead of schedule. Nonetheless, in cases that Party B and/or overseas branches/ other banks consider that Party A is already suffering from operational crisis or other factors which has already impaired Party A’s capability of making repayment for Overseas Payment upon expiration or this kind of situation would happen, or due to change of national policies, or internal managerial issues of Party B and/or requirements from overseas branches/ other banks, Party A shall be obliged to repay Overseas Payment amount ahead of schedule according to Party B’s requirement.

Shall Party A need to repay all or part of Overseas Payment amount ahead of schedule, Party A shall submit application to overseas branches/ other banks by tested cable via Party B at least 15 days in advance, and if overseas branches/ other banks agree, Party A shall pay default punishment to overseas branches/ other banks via Party B. Default punishment shall be subject to the amount on the tested cable, which is the reply of overseas branches/ other banks. Meanwhile Party B shall have the right to charge Party A for losses resulted from prepayment according to actual situation.

3. If Party A requires for extension for inter-bank refinance, it should apply to overseas branches/ other banks by tested cable via Party B at least 15 days in advance.

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Article 6   Rights and obligations of both parties

1. Party A shall have the right to request Party B , according to agreement herein, to apply to overseas branches/ other banks for Overseas Payment businesses for Party A, and provide guarantee for Party A’s payment obligation when conditions are met.

2. Party B shall keep Party A’s commercial secret confidential in accordance with law.

3. Party A’s settlement in RMB or foreign currencies under This Agreement shall all be handled via the bank account opened by Party B.

4. When overseas branches/ other banks make payment and occupy the vouchers which represent the ownership of goods and relevant documents, Party B shall promptly acquire the ownership of vouchers and ownership of goods represented by vouchers.

5. After Party A represents trust receipt to Party B, Party B shall pass the vouchers to Party A.

6. Party B, as the trustor of trust receipt, shall enjoy the beneficial right from Party A’s disposing trusted properties.

7. Party A, as the trustee of trust receipt, holds documents under settlement methods such as import L/C, import collection or T/T settlement involved in Overseas Payment and the goods represented by these documents, and can decide on unloading, storage, manufacture, processing and sales matters.

Payment for goods obtained by Party A from sales shall be used to repay Overseas Payment amount applied from overseas branches/ other banks via Party B, and the insufficient shall be repaid by Party A using other funds.

8. All costs arising from disposal of goods or goods shall be borne by Party A.

9. After the goods represented by documents under settlement methods such as import L/C, import collection or T/T settlement involved in each Overseas Payment under This Agreement has been sold out, Party B shall have the right to collect payments for goods from the buyer and issue effective receipt without the obligation to inform Party A in advance.

10. In case that Party B expresses special requirements, Party A shall dispose the goods according to Party B’ requirement.

11. The documents involved in each Overseas Payment under This Agreement and the goods represented by these documents shall, as Party B’s trusted properties, be independent of Party A. In situations like dissolution, cancellation or bankruptcy happened to Party A, trusted properties shall not be included in assets to be liquidated. Creditor’ rights that Party A obtained from managing and disposing documents and the goods represented by documents shall not offset the debts arising from its own properties.

12. Before paying off principal, interests and charges of inter-bank refinance, Party A shall not mortgage (pawn) documents and the goods represented by documents to other people.

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13. In case that Party B expresses special requirements, Party A shall, before selling the goods involved in single Overseas Payment under This Agreement, guarantee that relevant documents about the goods delivered to Party B be stored according to Party B’s instruction, and make a warehouse receipt with a letter head of Party B.

14. In case that Party B expresses special requirements, Party A shall purchase fire insurance and other common insurance types from insurance with good reputation according to full value of the goods involved in single Overseas Payment under This Agreement, and hold it for Party B as trustee of trust receipt, and submit, at any time when Party B requests, the insurance policy or insurance contracts with Party B being the party to enjoy priority claim right or the benefits under this policy being transferred to Party B. Premium shall be borne by Party A. In case of compensation claimed for goods under this policy, Party A shall immediately inform Party B, and after collection of compensation, Party A shall promptly pass it on to Party B.

15. Party B shall have the right to decide and examine transportation methods, storage place, storage method and different coverage of goods involved in single Overseas Payment under This Agreement. Party A guarantees to provide convenience for Party B, including allowing Party B’ s staff to enter into warehouse and place owned, occupied or managed by Party A. If Party B requires, Party A shall sign all documents necessary for facilitating Party B to take delivery of goods and claim compensation.

16. Party B shall have the right to supervise Party A’s operational status and Party A shall provide assistance. Party B shall have the right to examine and supervise the collection of payment for goods involved in single Overseas Payment under This Agreement, and Party A shall, at any time when Party B requests, provide relevant information in writing to Party B.

17. In case that Party A shall change legal representative (person in charge), domicile or business place, or reduce registered capital during agreement period, Party A shall inform Party B in writing in advance.

18. In case that Party A shall change operational type or ownership organizational form due to contracting, leasing, associate company, shareholding reform, division, merger, consolidation and other reasons, Party A shall inform Party B in advance and carry out debt clearance measures.

19. Shall situations happen to Party A which constitute crisis to its normal operation or have substantial adverse impact on Party A’s capability of making repayment for Overseas Payment under This Agreement, including but not limited to production suspension, close down, having cancellation registration, business license revocation, legal representative or major person in charge being involved in illegal activities, major litigation, or serious difficulties in operation, financial status degradation, Party A and its investors withdraw capital, transfer assets or shares on its own etc., Party B shall have the right to demand Party A to immediately deposit the capital and interests for Overseas Payment into the bank account designated by Party B as the earnest money guarantee or take other measures acknowledged by Party B.

20. Party A guarantees not to sign agreement with any third party to damage Party B’s benefits under This Agreement.

21. Party B can at any time revoke trust. Once Party B request, Party A shall promptly return whole set of property ownership documents, vouchers and other instruments or the goods under these documents to Party B.

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22. Shall Party A not dispose trusted properties according to Party B’s requirements, Party B shall have the right to cancel trust relation and retrieve trusted properties for its own disposal.

23. In case of security established, if the guarantor breaches security agreement or lost its capability of guarantee, Party A shall promptly provide new security acknowledged  by Party B, or Party B shall have the right to retrieve ahead of schedule the principal, interests and relevant charges of Overseas Payment in the name of overseas branches/ other banks, and Party B shall have the right to appropriate this amount from Party A’s bank account opened in CCB, and shall have the right to exercise security rights.

24. Party A agrees that: Party B shall have the right to exercise whatever rights overseas branches/ other banks enjoy against Party A.

25. Both parties agree that international conventions such as UCP 600 etc. shall be applied on issues not finalized in This Agreement or ambiguous expressions.

Article 7   Guarantee

Guarantee methods under This Agreement shall be _the first and the fourth____ among following choices:

(1) Guarantee

(2) Mortgage

(3) Pawn

(4) Earnest money

(5) Spare L/C

(6) Credit insurance

(7) Others:_________

Article 8    Liability for breach of contract

1. Upon expiration of inter-bank refinance, shall Party A not make full payment via Party B on time or the balance in Party A’s bank account opened in Party B be insufficient, Party B shall have the right to issue a collection notice to Party A, and Party A shall, according to Party B’s requirement, raise funds in time and make full payment via Party B. Under any circumstances, if Party B performs obligation of payment guarantee, Party A shall pay following amount to Party B within 3 working days after Party B makes payment:

(1) The full amount that Party B paid to overseas branches/ other banks or third party designated by overseas branches/ other banks;

(2) For outstanding amount (including principal, interests, postage/cable charge, commission etc. for inter-bank refinance) of Part A in the period from the date that Party B makes payment to the date that Party B collects full payment from Party A, it should calculate the rate of monies advanced  by a daily interest rate of 0.05%

(3) Costs for Party B to deliver notice and other relevant expenses.

2. Shall Party A not repay full amount of principal and relevant charges on schedule, Party B shall have the right to adopt one or several methods of following choices:

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(1) Appropriate it from Party A’s bank account opened in CCB, or appropriate it from other receivables of Party A;

(2) Dispose documents under import L/C, import collection or T/T settlement involved in single Overseas Payment under This Agreement and the goods represented by these documents;

(3) Dispose collaterals, properties in pawn or pursue recovery from the guarantor.

3. If Party A have any violation of the situations provided herein, Party B shall have the right to demand Party A correct it by a set time, and demand Party A provide guarantee in line with Party B’s requirement, and appropriate any amount payable from Party A’s bank account opened in CCB and other remedial measures permitted by law.

Article 9 Modification, supplementation and interpretation of This Agreement

1. Any modification or supplementation of This Agreement shall be agreed by both parties and made in writing, and constitute effective components of This Agreement.

2. Shall there be discrepancy in interpretation of any articles herein, the true meaning of it shall be determined by purpose of This Agreement, words and expressions used, relevant clauses, trading conventions and honesty and credibility principle.

Article 10   Attachment of This Agreement

Application for Overseas Payment submitted by Party A, Notice on Using Trade Refinancing Facility, Notice on Expiration of Overseas Payment Business issued by Party B to Party A, and import goods list and other vouchers and documents, etc. under import L/C, import collection or T/T settlement involved in single Overseas Payment under This Agreement shall all be attachment of This Agreement and constitute effective components of This Agreement.

Article 11 Settlement of disputes

Shall any disputes happen during the process of implementing This Agreement, it can be solved via negotiation. If negotiation fails, the __first____ way of following choices shall be chosen for settlement:

(1) File a lawsuit to the People’s Court where Party B locates;

(2) Submit the case to __________ arbitration committee (arbitration place shall be _______) for arbitration in accordance with presently existing and effective arbitration rules of this committee. The award of arbitration shall be final and legally binding upon parties hereto.

During litigation or arbitration period, the part of This Agreement which is not involved in disputes shall still be enforced upon.

Article 12   Operation of This Agreement

This Agreement comes into effect after legal representative (person in charge) or authorized agent from Party A sign and affix official stamp and legal representative (person in charge) or authorized agent from Party B sign and affix official stamp.

Article 13 Miscellaneous agreement

1. Shall Party A pay earnest money in full amount or relevant financial pawn in full value to Party B, if Party B examines and agrees, Party B can carry out Overseas Payment businesses for Party A and will be legally bound by relevant rights and obligations herein;

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2. ____________;

3. __________.

Article 14   This Agreement comes in ___two___ copies with same content.

Article 15   Statement

1. Party A clearly acknowledges business scope and authorization of Party B.

2. Party A has read all clauses herein. At Party A’s request, Party B has given interpretation to articles herein accordingly. Party A has sufficient knowledge and understanding of meanings of the articles herein and their corresponding legal effect.

3. Party A has the right to sign This Agreement.

Party A (seal): Ningbo Keyuan Plastic Co., Ltd.

Legal Representative (person in charge) or Authorized Agent (signature):Chunfeng Tao

March 30, 2012

Party B (seal): CCB Ningbo Beilun Branch

Legal Representative (person in charge) or Authorized Agent (signature):

March 30, 2012

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EX-10.57

Exhibit 10.57

2010 Edition No.35

Agreement on Opening L/C

Ref. No.053022C20120057

Applicant: Ningbo Keyuan Plastics Co., Ltd. (seal)

Correspondent Bank: Bank of Ningbo Baizhang Branch (seal)

The Applicant applies to the Correspondent Bank for opening L/C due to its import businesses development. The following agreement has been reached via negotiation by both parties according to provisions of national laws, regulations and regulatory rules.

Article 1   Reference number and amount of L/C

1. Reference number of L/C shall be the one on the officially opened L/C to which the applicant has no objection.

2. Currency and amount (Spell- Out): US$ Nine Million Three Hundred and Sixty Two Thousand Seven Hundred and Five, (Numeric) 1,509,362,705.00 amount of more/less goods _5__%/__5__%.

3. The applicant irrevocably authorizes the Correspondent Bank to open L/C under This Agreement in the name of Bank of Ningbo or other banks. Nonetheless, whether the opening bank of L/C is Bank of Ningbo or not, all payment obligations under L/C shall be carried out by the applicant to the Correspondent Bank, and all rights shall be enjoyed by the Correspondent Bank. Shall the applicant not repay principal, interest of the debt and all payment due according to agreement herein or not perform other obligations, the Correspondent Bank, as the creditor, shall have the right to directly claim creditor’s rights against the applicant and/or the guarantor in accordance with law.

4. Both parties agree that business application,  applicant letter of commitment for opening L/C , notice on arrival of imports/acceptance/payment under L/C, L/C related bank telex etc. for certain business under This Agreement shall constitute integral part of This Agreement. Shall there be discrepancy between these documents and articles herein, the latter shall prevail. Nonetheless, if there is discrepancy between the L/C finally opened and expression of this Article, and issues not finalized in this Article, the former shall prevail.

Article 2   Conditions for opening L/C

Unless the Correspondent Bank waives all or part of its rights, the applicant shall first meet all following conditions and the Correspondent Bank can open L/C under This Agreement for the applicant:

1. This Agreement comes into effect;

2. The guarantee described in Article 4 under This Agreement has come into effect and will be effective continuously;

3. In case that L/C business is required to report to competent national authority for approval, this L/C business has been approved in accordance with relevant provisions;

4. Any activities of breaching the contract  listed on This Agreement don’t happen;

5. The applicant has submitted other documents, vouchers, receipts and commitment etc.  considered necessary  by  the Correspondent Bank;

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6. Meet other conditions that the Correspondent Bank considers necessary.

7. ________________.

Article 3    Margin

1. The applicant shall, according to requirement from the Correspondent Bank, deposit performance security for opening L/C of (Spell- Out) _RMB Twelve Million Six Hundred Thousand _ to the bank account __5302099000334833-5, a special bank account for earnest money, that it opened at the Correspondent Bank, and this earnest money shall be special payment fund under L/C herein. The applicant guarantees that from the date of depositing, it will not appropriate, draw, dispose this corresponding amount whatever without approval from the Correspondent Bank, and the Correspondent Bank shall have the right to refuse the applicant drawing from this security account to pay other party irrelevant to the L/C referred herein.

2. In case of insufficient Marign due to foreign exchange fluctuation, the Correspondent Bank shall have the right to require the applicant to refill, or the Correspondent Bank and its designated bank shall have the right to refuse to open L/C or take every measure agreed in Clause 2, Article 7 herein, and every right that should have been enjoyed by the Correspondent Bank according to This Agreement shall not be affected. Meanwhile, the losses and liabilities resulted from foreign exchange fluctuation shall also be borne by the applicant and/or the guarantor.

Article 4   Guarantee

Shall the applicant not deposit earnest money corresponding to L/C  in abovementioned bank account in full amount, depending on requirements of the Correspondent Bank, for the difference between the amount of L/C and earnest money, the applicant can provide collateral for the Correspondent Bank separately, and sign contract and its supplementary agreement separately. The reference numbers are 05302BY20121051/05302BY20121052.

Article 5   Charges

1. The commission charges for opening L/C will be calculated and collected according to the percentage and methods published by the Correspondent Bank or separate agreement reached by both parties. The applicant shall, before apply to the Correspondent Bank for opening L/C, pay the agreed amount to the Correspondent Bank once and for all.

2. Other charges include but not limited to modification of L/C, when the applicant shall pay interests and relevant commission charges for pay on other’s behalf at agreed interest rate to the Correspondent Bank.

3. To open usance L/C payable at sight, the applicant shall pay interests and relevant commission charges for pay on other’s behalf at agreed interest rate to the Correspondent Bank.

Article 6   Rights and obligations for both parties

1. Each party admits and complies with L/C international conventions, and both parties guarantee to handle all issues of opening L/C under This Agreement in line with The Uniform Customs and Practice for Documentary Credits (ICC Publication No. 600) and revised editions thereafter, its supplementary documents and international conventions and operational rules of the Correspondent Bank, and each party agrees to take its own responsibility arising from it.

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2. L/C under This Agreement shall be independent of any trading contract relationship. The applicant guarantees liability for authenticity, validity of basic trading contract, instrument, document involved in L/C and their content. If any disputes, fraudulent or other illegal activities happen to the trading contract involved in L/C, the applicant hereby promises to solve the problem on its own, and will never ever affect performance of rights and obligations of each party under L/C whatever, and protects the Correspondent Bank from any loss.

3. The applicant promises before expiration date provided in the notice on arrival of imports issued by the Correspondent Bank, to go to business place of the Correspondent Bank to carry out corresponding payment or acceptance of L/C, otherwise the applicant will be regarded as having accepted the documents under this L/C and agreed to pay or pay by acceptance.

4. For the L/C businesses under This Agreement, the applicant guarantees to carry out relevant payment or payment by acceptance procedure under the condition that the Correspondent Bank judges and determines that the documents comply with credit terms. Shall the documents not comply with credit terms, the applicant shall, before expiration date provided in the notice on arrival of imports issued by the Correspondent Bank, return whole set of documents to the Correspondent Bank with written explanations for refusing payment, and the Correspondent Bank shall determine if there is justification for refusing payment in accordance with international conventions. The applicant admits that the Correspondent Bank shall have discretion on justification for refusing payment, and have the right to identify bound applicant, guarantor based on its discretion. Shall the Correspondent Bank consider the reasons for the applicant to refuse payment unjustified, or the applicant not return whole set of documents, or the applicant refuse payment or return whole set of documents just exceed the time limit provided by the notice on arrival of imports, the Correspondent Bank shall have the right to independently decide to carry out payment or payment by acceptance, and in this circumstance, the applicant shall still be obliged to pay L/C amount and corresponding interest and charges to the Correspondent Bank. Still, shall the reasons for the applicant to refuse payment presented by the Correspondent Bank be considered unjustified by remitting bank, negotiating bank, the applicant shall bear all responsibilities and relevant payment, interests and other charges payable including but not limited to court costs, legal expense etc.

5. Whether L/C under This Agreement will be justified for refusing payment or not, the applicant shall, no latter than payment date, appropriate amount payable under L/C to the settlement account opened by the applicant at the Correspondent Bank to be used to repay the debt of the applicant under This Agreement. Or the Correspondent Bank will have the right to appropriate corresponding amount from any bank account of the applicant to be used to pay any debt and charges under L/C. shall there be insufficient balance in the applicant’s account which lead to the Correspondent Bank making advanced payment, the Correspondent Bank shall have the right, since the very day of making advanced payment, to charge daily interests at the rate of 0.5‰ against the applicant.

6. Any losses and results from the third party’s reason e.g. business correspondence and instruments, etc. go missing, delayed, mistake and omission etc. during Telecommunication transmission or postal process and other force majeure events shall be borne by the applicant and  the Correspondent Bank shall not be involved in it.

7. The applicant agrees to bear relevant charges under This Agreement and its L/C, and unconditionally repay advanced payment for L/C under This Agreement made by the Correspondent Bank and any other payments and expense, and take up all losses suffered by the Correspondent Bank, including but not limited to principal and interest, default punishment, compensation for damages and other relevant expenses advanced.

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8. The applicant shall not withdraw the contributed capital, transfer, dispose at low price or donate assets, or transfer stocks irrespectively, to evade repayment to the Correspondent Bank or weaken its repayment capability.

9. Shall the applicant intentionally hides substantial facts relevant to establishment of This Agreement, or provide false document or data, the Correspondent Bank shall have the right to collect 10% of the balance of the creditor’s rights already produced under This Agreement as default punishment from the applicant.

10. Shall the Correspondent Bank have to resort to litigation to materialize the creditor’s rights because the applicant or its guarantor breaches contract, the applicant shall bear court costs, security expense, compliance costs, legal expense, travel expense and other costs to materialize the creditor’s rights paid by the Correspondent Bank.

11. The applicant shall provide true financial statement and name, bank account, deposit balance etc. of all banks it opens account at to the Correspondent Bank, and provide implementation situation of L/C trading contract.

12. The applicant shall not, before paying off of the debts under This Agreement, provide guarantee for other liabilities, or establish mortgage, pawn on its main properties for third party, unless it has got written approval from the Correspondent Bank in advance.

13. When the Correspondent Bank, according to agreement herein, recovers or recovers ahead of schedule the principal, interests, compound interests, penalty interest or other expenses payable by the applicant under This Agreement, the Correspondent Bank can directly appropriate the amount from any bank account of the applicant opened at the Correspondent Bank.

14. Shall the applicant be in arrears of principal and interest of the debts, evade supervision, intentionally hide substantial facts relevant to establishment of This Agreement, or provide false document or data or other illegal activities, the Correspondent Bank shall have the right to circulate a notice to competent department or unit, collect the amount by making statement in news media, and pursue liabilities for breaching contract against the applicant in accordance with laws, regulations and agreement herein.

15. Shall the applicant, before paying off of the debts under This Agreement, take contracting, leasing, shareholding reform, associate company, consolidation, merger, division, joint venture, capital reduction, assets transfer, apply for closing down and correction, apply for dissolution, apply for bankruptcy and other activities which can absolutely incur alternation of debtor-creditor relationship or affect materialization of creditor’s rights of the Correspondent Bank, the applicant shall, 30 days before carrying out abovementioned activities, inform the Correspondent Bank in writing, and materialize debt payment liability or pay off in advance, and ask written approval from the Correspondent Bank, otherwise above activities shall not be taken whatsoever.

16. Shall the applicant, before paying off of the debts under This Agreement, experiences alternation of name, legal representative, address, business scope, closed down and corrected, business license revoked, cancelled or involved in litigation, arbitration etc, the applicant shall, within 3 days after alternation of relevant item, inform the Correspondent Bank in writing, and carry out relevant alternation procedure (if necessary).

17. Shall there be mortgage (pawn) established for the debts under This Agreement, the applicant and mortgagor (pledge provider) shall, according to requirement from  the Correspondent Bank, properly handle legal proceedings such as registration and/or insurance in accordance with law, and this guarantee, insurance shall be continuously effective.

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18. The applicant shall bear legal fees, premium, transportation costs, assessment fee, registration fee, custodian fee, appraisal fee and public notary costs etc. related to This Agreement and the security under This Agreement.

19. When the Correspondent Bank directly serves collection notice or collection letter or serves it by mail, the applicant shall immediately sign for it and deliver the return to the Correspondent Bank, or mail it back within 3 days after receiving.

20. Shall any events happen to the guarantor which constitute threats to its normal operation or have adverse impact on its capability of performing the obligation corresponding to the debts under This Agreement (whether or not these events have happened to the guarantor shall be judged by  the Correspondent Bank independently),  including but not limited to production suspension, close down, having cancellation registration, business license revocation, bankruptcy, having serious difficulties in operation, financial status degradation, legal representative or major person in charge being involved in illegal activities, or in major litigation or economic disputes, assets preservation measures such as property seizure or appropriation etc, or the collateral, pledge as the guarantee under This Agreement being taken assets preservation measures such as property seizure or appropriation etc, or reduction in value of pawn rights, the Correspondent Bank shall have the right to demand the applicant to separately provide security acknowledged by the Correspondent Bank or take each measure agreed in Clause 2, Article 7 herein.

Article 7   Remedies for breaching the contract

1. During period of validity of This Agreement, breaching the contract will be constituted upon one or multiple events happening among following situations, and the Correspondent Bank shall have the right to judge independently whether these situations have happened to the applicant.

(1) The applicant is experiencing production suspension, close down, dissolution, operation suspension and correction, having cancellation registration, business license revocation, or revocation;

(2) The applicant hides, forges substantial facts relevant to establishment of This Agreement or opening L/C, or provide false document or data or false information is included in the data provided by the applicant;

(3) The applicant doesn’t repay any other due debt (including being declared due ahead of schedule), or doesn’t perform other agreement or legal obligation, which have affected performance of obligation under This Agreement by the applicant or could do so.

(4) The applicant, before paying off creditor’s rights of the Correspondent Bank, disposes (including but not limited to donates, relocates, transfers, sells at low price ) any of its assets which affects its capability of repayment;

(5) The Correspondent Bank considers that there exist any events which constitute threats to normal operation of the applicant or have adverse impact on its capability of performing repayment obligation under This Agreement, including but not limited to production suspension, close down, dissolution, having cancellation registration, business license revocation, bankruptcy, capital reduction, acquisition or equity transfer with the applicant being the target company, in arrears of principal or interests payable of any debts,  legal representative or major person in charge being involved in illegal activities, or in major litigation or economic disputes, assets preservation measures such as property seizure or appropriation etc, having serious difficulties in operation, financial status degradation etc,;

(6) The applicant is experiencing other changes disadvantageous to materialization of creditor’s rights besides Clause (1), (2), (3), (4), (5) of this Article, and the applicant fails to separately provide guarantee acknowledged by the Correspondent Bank according to requirements from the Correspondent Bank;

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(7) The applicant doesn’t perform obligations herein or its performance is not in line with agreement, or the applicant has other activities of breaching the contract, or under reasonable deduction of the Correspondent Bank, the applicant has activities which could threaten repayment of the debts under This Agreement.

2. Shall the applicant breach the contract, the Correspondent Bank shall have the right to take any one or multiple measures from the following:

(1) the Correspondent Bank shall have the right to determine all credit lines of the applicant at the Correspondent Bank expire ahead of schedule, including but not limited to loan, discount, bank draft of acceptance, international trade financing, bank letter of guarantee etc., and demand the applicant to repay principal and interests of abovementioned debts and other charges ahead of schedule, and can deduct principal , interests, penalty interests, default punishment and other relevant charges from any bank account of the applicant at the Correspondent Bank and other branches which belong to the same corporate and pay on other’s behalf;

(2) Freeze all kinds of credit facility of the applicant at the Correspondent Bank;

(3) Cancel relevant contract or agreement between the Correspondent Bank and the applicant ahead of time,  including but not limited to This Agreement;

(4) Demand the applicant to supplement earnest money of L/C under This Agreement, or supplement other guarantee measures acknowledged by the Correspondent Bank;

(5) Seize and dispose documents on arrival of imports under L/C;

(6) Take measures such as legal action, seizure, appropriation etc., and demand the applicant to bear court costs, preservation fee, compliance cost, legal fee, travel expense paid by the Correspondent Bank and other charges for materialization of creditor’s rights;

(7) Other measures considered necessary by the Correspondent Bank.

Meanwhile, all branches of Bank of Ningbo shall enjoy abovementioned rights against the applicant. The applicant promises not to raise any objection to it, and shall, according to requirement from the Correspondent Bank, take relevant remedial measures to protect the Correspondent Bank from any losses and damages, and shall make compensation to the Correspondent Bank and its designated bank in case these losses and damages shall happen.

Article 8   Other agreements

1. Shall the applicant authorize the Correspondent Bank to open L/C at other banks other than Bank of Ningbo, the rate provided by the Correspondent Bank shall only be a reference and that of the bank opening L/C shall prevail. Charges produced from opening L/C or back-to-back L/C , including but not limited to commission charges for opening L/C, modification fee, cable fee, bill of lading endorsement fee etc. and relevant charges, shall be borne by the applicant.

2. The foreign exchange rate mentioned herein shall be subject to the rate determined by the Correspondent Bank.

3. Either party herein requests public notary, both parties shall submit application to public notary office and unambiguously establish enforceability to this contract. The costs of public notary shall be borne by the applicant.

4. _______.

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Article 9   Shall any disputes arise during performance of This Agreement, both parties can settle it via negotiation; shall the dispute be submitted to the court, it shall be settled in the first way of the following:

1. Shall the case be brought to the court, it shall be governed by the People’s Court at the location of  the Correspondent Bank;

2. Shall the case be brought to the court, it shall be governed by the People’s Court at the location of signing the contract;

3. Both parties agree to submit the case to _________arbitration committee and be governed by presently effective arbitration rules of this committee.

During negotiation and litigation or arbitration period, the part of This Agreement not involved in disputes shall still be carried out by both parties. The applicant shall not refuse to perform any obligation under This Agreement using ongoing proceedings as an excuse.

If This Agreement can not be performed due to change of regulations, regulatory rules and policies, or coming into being of emergency measures, the Correspondent Bank shall not take any liabilities. Issues which have not been finalized herein shall be handled according to laws, regulations and relevant provisions of the People’s Bank of China.

Article 10

This Agreement comes into force as of the date when both parties sign or affix official stamp, and it will terminate after paying off L/C principal and interests, interest on overdue payments, compound interests, penalty interests, bank commission charges, postage, default punishment, compensation for damages and court costs, preservation fee, compliance fee, legal fee, assessment fee, auction fee, travel expense and other costs for materialization of creditor’s rights.

This Agreement comes in three copies of the same content with equal legal effect, with the applicant holding one copy and the Correspondent Bank holding two copies.

Article 11   Prompt and statement

The Correspondent Bank has had attention from the applicant to make complete and accurate understanding of meanings of the articles herein, and has given interpretation to articles accordingly at the applicant’s request. Signing parties have had complete knowledge and sufficient understanding of meanings of the articles herein and their corresponding legal effect.

Meanwhile, the applicant specifically makes statement hereby, that it has paid special attention on articles about its obligations and disadvantageous to it, especially the articles in bold letters and confirms acceptance.

Applicant: Ningbo Keyuan Plastics Co., Ltd. (seal)

Legal representative or authorized agent: Chunfeng Tao (seal)

Correspondent Bank: Bank of Ningbo Baizhang Branch (seal or contract seal)

Legal representative or authorized agent (person in charge): Gangjun  Dong (seal)

Date: Feb. 21, 2012

Signing place: Jiangdong District, Ningbo

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EX-10.58

Exhibit 10.58

Loan Contract of Current Fund

No.

Borrower: Ningbo Keyuan Plastic Co., Ltd.

Business License No. 330200400023187

Legal Representative/Person in Charge: Chunfeng Tao

Address： Qinzhi Industrial Zone, Beilun District, Ningbo City Post Code: 315803

Financial Institution of Deposit and Account: Beilun Sub-branch, Bank of China,

810735036108091001

Tel.: 86232939 Fax: 86232618

Lender: Bank of China, Beilun Branch

Legal Representative/ Person in Charge: Shuguang Sun

Address: No. 245, Huashan Road, Beilun District Post Code: 315800

Tel: 86880639 Fax: 86880294

The Lender and the Borrower hereby conclude this Contract upon agreement of a short-term

RMB loan reached through friendly and fair negotiation.

This contract is an individual agreement under□<Credit Line Agreement>/□<General Agreement of Credit Business> with a number of / signed between / and / (as an optional article, it shall be deleted if not applicable).

Article 1.Amount of Loan

Loan currency: USD

Amount of loan (Spell-Out)Eleven Million (Numeric) USD11,000,000

If, on the date of actual drawing by the Borrower hereunder, the credit balance already drawn by the Lender under the <Credit Line Agreement>, after converted into / (currency) based on the currency rate / on the said date of actual drawing hereunder, exceeds the credit line agreed in the Credit Line Agreement due to fluctuation of exchange rate, the Lender shall have the right to terminate this Contract or refuse the Borrower’s application for drawing; if the credit line available under the Credit Line Agreement is less than the loan amount hereunder, the Lender shall have the right to reduce the loan amount hereunder and determine the loan amount hereunder based on the said credit line available(As an optional clause, it shall be deleted if not applicable).

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Article 2. Loan Term

The loan term shall be 12 months / days, commencing from the date of actual drawing, or, in case of drawing by installments, from the first date of actual drawing.

The Borrower shall draw the loan hereunder within the agreed time limit. If the date of actual drawing is later than the agreed time limit, the Borrower shall still repay the loan pursuant to the time limit for repayment as agreed in this Contract.

Article 3. Purpose of Loan

The loan shall be for purpose of:  purchasing raw materials.

Without written consent of the Lender, the Borrower shall not change the loan purpose, including but not limited to, that the Borrower shall not invest the loan into stocks or other securities, nor use the loan for any project banned by any laws, regulations, provisions or policies of the State or not approved legally or for any project and purpose into which any bank loan is prohibited from being invested.

Article 4. Interest Rate and Settlement of Interests (Notes: complete with factual information.)

1.      Interest rate

Interest rate as following first method:

(1). Fixed interest rate. The annual interest rate shall be 6.384% that shall remain unchanged within the term of this Contract.

(2). Floating interest rate. The floating period shall be ____/__ months: The interest rate shall be readjusted for every ____/__ months from the date of actual drawing (in case of drawing by installments, from the first date of actual drawing). The readjustment date shall be that in the readjustment month corresponding to the date of actual drawing. If there is no date in the readjustment month corresponding to the date of actual drawing, the readjustment date shall be the last date in the readjustment month.

Per each withdrawal:

RMB loan floating interest rate

A. Initial interest rate shall be the benchmark interest rate of loan issued by The People’s Bank of China on actual withdrawal date.  floating upward/ floating downward(pick one) / %.

B. Re-pricing Date, re-pricing according to corresponding loan benchmark rate issued by The People’s Bank of China that day, floating upward/ floating downward(pick one) / % as the appropriate interest of the floating period.

Foreign currency loan floating interest:

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A. Initial interest rate shall be the benchmark interest rate of loan issued by The People’s Bank of China on actual withdrawal date.  floating upward/ floating downward(pick one) / %.

B. Re-pricing Date, re-pricing according to corresponding loan benchmark rate issued by The People’s Bank of China that day, floating upward/ floating downward(pick one) / % as the appropriate interest of the floating period.

Foreign currency loan floating interest:

A. Initial interest rate shall be the latest ____/__ month obtained from Reuters one the last working day before actual withdrawal date at (Beijing time ) 9:00 am plus ____/__  base point.

B. Re-pricing Date, re-pricing according to the latest floating period obtained from Reuters one the last working day before actual withdrawal date at (Beijing time ) 9:00 am plus ____/__  base point as the appropriate interest of the floating period.

2. Calculations of interests

Interest is calculated according to the actual payment amount and days since the date of Party B made payment.

Calculation formula: Interest=Principal*Days*Daily interest rate.

Basis for calculating daily interest rate is of 360 days, the reduction formula is: daily interest rate=annual interest rate/360.

3. Method of interest settlement

Interest settlement is according to the following _first_ way:

(1) Settlement with quarter, 20th of each last month per quarter as the interest settlement day, and the 21st as the payment day.

(2) Settlement with month, 20th of each month as the interest settlement day, and the 21st as the interest payment day.

On the condition that the final payment day of the financing principal is not the same date of interest payment day, then the final payment day is considered as interest payment day and Party A shall pay off the entire interest.

4. Default interest

(1) If Party A fails to return the payment of Inward Bills within the agreed time, as for the overdue payment, the default interest shall begin accruing according to the default interest rate starting from the date of late payment until both the principal and interest are paid off.

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(2) If Party A fails to pay the interest and default interest in time, it can be penalized with compound interest per month/per quarter according to agreed default interest in this contract.

(3) Default interest rate   Fixed interest rate

A. Default interest rate is a floating rate, the floating period is  12 month/ /year. In every floating period, the default interest shall be re-priced on the default date. The re-pricing date is the corresponding date in the month of the default date. If there is no corresponding date in the same month, then the last date of the month is the re-pricing date.

B. Default interest rate equals to the benchmark interest rate in the item C below plus 20%.

C. In the initial floating period, the benchmark interest rate is the financing interest rate item 1 of this Article. After each full floating period, the benchmark interest rate shall be calculated as below:

Financing in RMB, it floats upward/ floats downward according to the same level loan benchmark interest rate issued by the People’s Bank of China in the re-pricing day.

Financing with foreign currency,

It is the loan interest rate within the same floating period of / years of the re-pricing day implemented by Bank of China, Inc.

√It equals to Libor of the latest 12 months floating period obtained from Reuters of the prior day of re-pricing day before 9:00 (Beijing time) pluses 530.

Article 5. Preconditions of Withdrawal

The Borrower shall meet the following conditions before drawing the loan hereunder:

1. This Contract and its Attachments have become effective;

2. The borrower has provided guarantee required by the lender. The guarantee contract has come into effect and passed relevant procedures such as approval, registering or filing.

3. The Borrower has retained with the Lender the Borrower’s documents, bills, specimen seal impression, list of relevant personnel and signature sample relating to execution and performance of this Contract and properly fill in the relevant certificates;

4. The Borrower has opened the account for performance of this Contract as required by the Lender;

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5. The Borrower shall, __three__ banking days prior to drawing, submit to the Lender a written application for drawing and the certificate of the loan purpose, and handle the relevant procedures for withdrawal;

6. √ The Borrower has provided to the Lender the resolution and authorization approving execution and performance of this Contract issued by the board of director or other authorities of the Borrower (as an optional clause, ,it should be ascertained that the borrower has been approved and authorized before establishment of the contract); and

7. Other conditions for drawing as stipulated by law or agreed by both Parties_/_

The Lenders may refuse the Borrower’s application for drawing if the above conditions for drawing are not satisfied, except the Lender agrees to extend the loan.

Article 6.Time Limit and Method of Withdrawal

1. The Borrower shall draw the loan pursuant to the following second items:

(1) Draw the loan in a lump sum on __/_.

(2) Draw the loan in full within 5 days since February 7, 2012.

(3) Draw the loan by installments pursuant to the following provisions.

Time Amount

2. If the Borrower delays to draw any amount of the loan within the time limit as stipulated above, the Lender has the right to refuse the Borrower’s application for drawing the delayed amount thereafter.

If the Lender agrees to extend the said delayed amount, it shall have the right to charge the obligation fees at __/__ for the delayed amount; if the Lender refuses to extend the delayed amount, it shall have the right to charge the obligation fees at __/__ for the delayed amount.

Article 7. Payment for Loan

1. Loan release account

The borrower should open an account in the lender ‘s bank as loan release accounts to use for issuing and. This account is special accounts which is only using as delivery and payment should not use for other usage) (Please note the sentence is optional, please delete if not appropriate)

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Account Name: Ningbo Keyuan Plastic Co., ltd

Account No: 383159759542

2. Loan Payment

(1) The payment for loan should under law and regulation, inspection and this contract. Every single withdrawal should be confirmed at the application. If the lender considers the payment for the loan is not applicable, the lender has the right to change and stop delivering loan and payment.

(2) If the borrower be commissioned to pay, which means, lender is commissioned under the contract. According to the CBRC and borrower’s internal management, the lender meets one of the following terms should use the commissioned payment：

A. The lender and the borrower should build new credit business relationship and the borrower’s credit lever doesn’t meet the lender’s internal requirement.

B. There is clearly payee for the withdraw application (specific account name and number) and the every single draw exceeds 10 million. (The foreign currency should convert according the exchange of the actual day __/_.

C. Other term and situation between lender and borrower __/_.

(3) The lender pays the fund independently, which means that the lender grants the loan fund to the borrower’s account with the borrower’s withdraw application. Excluding the preceding terms above, other payment of the fund should be independent payment.

(4) Payment change. If there are changes for the outside payment and credit lever, independent loan payment and changeable loan fund payment which meets term 2 after submitting application. When there are changes of payment amount, counter-party, and fund usage under the changes of payment and commissioned payment.

3. After granting the loan fund, shall provide fund usage record and information which is required by the lender, shall provide the preceding material including but not limited: payment voucher.  

4. After releasing loan, the borrower shall provide using record, documents and so on as requested by the lender.

5. The lender has the right to cease the granting loan fund and payment if there is any possibility as below:

(1) The borrower breaches the contract by paying the commissioned payment with breaking up the whole into parts.

(2) The borrower’s credit lever and ability of profiting in main business is slumping

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(3) The abnormal usage of the loan fund

(4) The borrower fails to provide the usage records and material as the leader required

(5) The borrower breaches the contract with paying leading fund.

Article 8. Repayments

1. The lender appoints the following bank accounts as the fund collecting accounts, it should be only the accounts collects the money. The lender should provides the transfer in and out situation in time. The borrower have the rights to ask the lender to explain huge amount or unusual amount flowing and do the inspection on the accounts.

Account name: Ningbo Keyuan Plastics Co., Ltd

Account No: 383159759542

2. Unless otherwise agreed by both Parties, the Borrower shall repay the loan hereunder pursuant to the following item:

(1) The whole loan hereunder shall be repaid on the date of expiration of the term of the loan.

(2) The loan hereunder shall be repaid pursuant to the following repayment schedule:

Repayment Time Repayment Amounts

(3) Other repayment plan: /

To change the above repayment schedule, the Borrower shall, three banking days prior to expiration of the relevant loan amount, apply to the Lender in writing, and change to such repayment schedule shall be subject to the written confirmation of both Parties.

3. Unless otherwise agreed by both Parties, on condition that the Borrower defaults in payment of both the principal and interests, the Lender shall have the right to decide the sequence of payment of principal and interests; if there are several mature loans and overdue loans hereunder in case of repayment by installments, the Lender shall have the right to decide the sequence of repayment of certain loan by the Borrower; if there are several mature loan contracts between both Parties, the Lender shall have the right to decide the sequence of performance of each contract by the Borrower.

4. Unless otherwise agreed by both Parties, the Borrower may repay the loan in advance, provided that it shall give a written notice of __5___ banking days to the Lender. The amount repaid in advance shall be firstly used to repay the loan to be mature lastly, i.e. repayment by the reverse sequence.

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The Lender shall have the right to charge the compensatory fees for the loan repaid in advance at _/_.

5. The Borrower shall repay the loan hereunder by _(1)_ of the following:

(1) The Borrower shall, no later than three__ banking days prior to maturity of each sum of principal and interests, deposit adequate funds into the following account for repayment of the loan, and the Lender shall have the right to actively collect the sum from such account on the mature date of each sum of principal and interest.

Repayment account: Ningbo Keyuan Plastics Co., Ltd

Account No.: __383159759542____.

(2) Other repayment method as agreed by both Parties: _ / .

Article 9. Guarantee

1. The guarantee method under this contract is:

No guaranty.

This contract is the major contract of Maximum Guarantee Contract, Maximum Mortgage Contract, Maximum Pledge Contract with a code of Beilun 2009 loan 003and individual signed between the Guarantor Ningbo Keyuan Petrochemicals Co., Ltd and Ningbo Keyuan Plastics Co., Ltd and the Lender, which provides the maximum assurance. This contract is the major contract of X Maximum Guarantee Contract, X Maximum Mortgage Contract, X Maximum Pledge Contract with a code of / signed between / and the Lender. In addition, / provides / guarantee,…and the guarantee contract is signed.

Among them: the liability sum corresponded in this guarantee contract is not included in the maximum guarantee contract, while other liability sum is included. / provides / guarantee… and sign the guarantee contract.

(Other guarantee methods) /

2. The Lender is entitled to, and the Borrower is liable to provide new guarantee, or change guarantor, etc, in the case that the Borrower notices that the implementation of the contract may be in peril, or the guarantee contracts becomes invalid, is withdrawn or canceled, or the economic status of the Lender and Guarantor deteriorates or gets involved in legal issues, or their ability of payment is imperiled by other factors, or the Guarantor violates the contract with the Lender or the Borrower, or the guaranty is depreciated, damaged, lost, or confiscated and becomes less valuable or valueless.

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Article 10. Statements and Warranty

1. The Borrower’s statements as following:

(1) It is duly incorporated and validly existing, and has the full ability of civil rights and acts required for execution and performance of this Contract;

(2) Its execution and performance of this Contract is its true declaration of intent, has obtained legal and valid authorization according to its articles of association or other internal constitutional document, and will not violate any agreement, contract and other legal documents binding upon the Borrower; it has or will obtain all approvals, permits, filings or registrations required for its execution and performance of this Contract;

(3) All documents, financial Statements, certificates and materials provided by it to the Lender hereunder are true, complete, accurate and valid;

(4) The transaction background under which it applies to the Lender for handling the business hereunder is true and legal, and is not for the purpose of money laundering

(5) It does not conceal with the Lender any event that may affect its financial standing or ability of performance; and

(6) It does not conceal with the Lender any event that may failed to obey PRC environmental standard and regulations or other pollution risk and

(7) Other matters represented by it: __/__.

2. The Borrower’s warranty as following:

(1) It will provide regularly or timely to the Lender its financial Statements (including but not limited to annual reports, quarterly reports and monthly reports) and other relevant materials; the borrower shall make sure that it can always confirm to the following requirement: __/__.

(2) If the lender has signer or is about to sign a counter-guarantee contract or the like with the guarantor, that contract shall not alter or affect any terms under this contract.

(3) It will be subject to the inspection and supervision of the Lender upon the credit loan, and provide adequate assistance and cooperation, reporting time :_1 month ___

(4) It will timely notify the Lender in case of occurrence of any event that may affect its financial standing or ability of performance, including but not limited to the change of its operation such as division, merger, association, joint venture with foreign investors, contractual operation, reorganization, reform or plan for listing in any way, reduction of registered capital, transfer of major assets or equity, assumption of major debts, creation of new major debts over the mortgaged object, freezing up of the guaranteed object, dissolution, cancellation, application for bankruptcy by or against it, being subject to major litigation or arbitration, difficulty in its operation or deterioration of its financial standing, or its defaults under other contracts; if it will take any action of the forgoing that may affect its ability of repayment, it must obtain the consent of the Lender;

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(5) The sequence of its repayment of the Lender’s loan hereunder has precedence over the loan extended by its shareholders to it, and is not subordinate to the debts of the same kind owed to its other creditors;

(6) √It will not distribute any dividend and bonus to its shareholders in any way from its pre-tax profits in the relevant fiscal year unless and until the principal, interests and expenses payable to the Lender during such fiscal year are paid off;

(7) It will not dispose of its own assets in a manner impairing its ability of repayment; the total amount of guarantees provided by it will not be higher than ___1___ time(s) of its net assets, and the total amount of guarantees and the amount of single guarantee will not exceed the limit as stipulated in its articles of association;

(8) The borrower is not allowed to transfer loan under this contract to the account with same name and related account exception of agreed by the Lender.

(9) The terms under this contract, should not lower than any other financial organizations between the borrower and the lender of the guarantee terms, loan fund rate, payback sequent.

(10) X should register currency transaction loan at FECB in time and pay the loan and interest and other procedure.

(11) The borrower has the right to get back fund in advance which is according to the situation.

(12) The borrower promise other items: _/_

Article11. Disclosure of Related Transaction in the Borrower’s Group.

The borrower and lender has the agreement as following first item:

1. If the Borrower is a group client as determined by the Lender in accordance with the Guidelines on the Management of Risks of Credits Granted by Commercial Banks to Group Clients (referred to as “Guidelines” hereinafter).

2. It shall timely report to the Lender any of its related-party transaction regarding more than 10% of its net assets, including the relationship between the related parties under the transaction, the project, nature and amount of the transaction or the relevant policies on ratio and pricing (including the transaction without consideration or with nominal consideration).

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The Lender shall have the right to decide, at its own discretion, to stop to extend the loan not drawn by the Borrower and take back part or whole of the principal and interests of the loan in advance, if the Borrower is under any of the following circumstances: where based on false contracts with related parties, it uses such creditor’s right as any bill receivable or account receivable without true trade background to handle discount or pledge with the bank so as to illegally obtain the loan or credit of the bank; where it is subject to such events as major merger, acquisition or reorganization, which may affect the safety of the loan as deemed by the Lender; where it intentionally escapes the creditor’s right of the bank through related-party transaction; other circumstances as described in Article 18 of the Guidelines.

Article12. Default Events and Consequences

If the Borrower is under any of the following conditions, it shall constitute or be deemed as an default event hereunder:

1. The Borrower fails to perform its obligations of payment and repayment pursuant to the provisions contained herein;

2. The Borrower uses the loan hereunder for any purpose other than that as agreed in this Contract;

3. Any representation made by the Borrower herein is untrue or violates any undertaking made by the Borrower herein;

4. In case of occurrence of the circumstances as described in item (3) of ⅸ 2 hereof, the Lender deems it will affect the financial standing and ability of performance of the Borrower, but the Borrower fails to provide new guarantee and replace the surety pursuant to the provisions of this Contract;

5. The Borrower’s credit standing decrease, or its indexes of profitability, ability of repayment, performance, or cash flow deteriorate, which exceeds the requirements of this contract or other financial contracts.

6. X the Borrower violates provisions of the contract with the Leander or sub-branches of Bank of China

√The Borrower violates provisions of the contract with the Leander or sub-branches of Bank of China: The borrower violates provision of the contract with other financial organization (please chose the applicable one, and delete the inapplicable one.)

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7. The Guarantor violates provisions of the contract with the Leander or sub-braches of Bank of China;

8. The Borrower stops its business operation or is dissolved, cancelled or bankrupt.

9. The Lender spots conditions that may affect the Borrower’s and the Guarantor’s financial status and fulfillment of the contract during its annual review on them(every full year after the effective date).

10. The Borrower violates other provisions hereof regarding the rights and obligations of both Parties; In case of occurrence of any of the above event of breach, the Lender shall have the right to take one or more of the following measures based on the specific circumstances:

1. Require the Borrower to rectify its breach within a stipulated time limit;

2. Reduce, suspend or terminate the credit line granted to the Borrower in part or in whole;

3. Suspend or terminate acceptance of the Borrower’s application for drawing under this Contract and other contracts between the Lender and the Borrower in part or in whole; suspend or terminate in part or in whole extending and handling any loan and trade financing not extended and handled;

4. Accelerate in part or in whole the principal, interests and other payables of the loan/trade financing outstanding under this Contract and other contracts between the Lender and Borrower;

5. Terminate this Contract, and terminate other contracts between the Lender and Borrower in part or in whole;

6. Require the Borrower to indemnify the losses caused to the Lender by the breach of the Borrower;

7. Only by giving a prior or subsequent notice, transfer the amounts in the accounts opened by the Borrower with the Lender and other branches of XX Bank to satisfy all or part of the debts owed to the Lender under this Contract. The unmatured amount in such accounts shall be deemed mature in advance. If the currency in such accounts is not the same as that used by the Lender for settlement, the amounts in such accounts shall be converted at the quoted exchange rate for settlement and sales of foreign exchange applicable to the Lender at the time of transfer;

8. Exert the real rights granted by way of security;

9. Require the Guarantor to assume the responsibility of guarantee;

10. Other measures necessary and practicable as deemed by the Lender.

Article 13. Reservation of the Rights

If one party fails to fulfill entire or part rights under this contract or request the other party to fulfill, undertake entire or part obligations, responsibilities, it shall not be considered to waive the obligations or responsibilities.

Any party’s tolerance or extension or delay execution of the rights under this contract towards another party shall not affect the rights under this contact and laws and regulations, also not considered to waive the rights.

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Article 14. Amendment, Modification and Termination

This contract can be amended or modified in writing  mutual agreement. Any amendments or modifications are inseparable parts of this contract.

Unless otherwise specified by laws or regulations or covenants, this contract is not allowed to terminate till the rights and obligations are completely executed.

Unless otherwise specified by laws or regulations or covenants, invalidation of any items under this contract will never affect the other items’ legal effectiveness.

Article 15. Applicable Laws and Settlement

This contract shall be governed by the laws of PRC.

After this contract becomes effective, all disputes concerning this contract should be settled through friendly negotiation. When negotiation fails, any party can settle with following second method;

1. Submit to ___________________Arbitration Committee to arbitrate.

2. Submit to the People’s court located in the domicile of Party B or other corresponding institutions of Bank of China, Inc.

3. Prosecute the People's Courts with jurisdiction.

During the settlement period, if this dispute does not affect the performance of this other items, the other items shall continue to performance,

Article 16. Attachment

The following attachments and other attachments ensured by both parties makes up the inseparable parts of this contract, and possess the equal legal validity.

1,__________/_______;

2,__________/_______;

……

Article 17.  Other Covenants

1. Without Party B’s written consent, Party A is not allowed to transfer rights or obligations to the third parties.

2. If Party B entrusts any other institutes of Bank of China to execute the rights and obligations under this contract, Party A shall agree. Party B or its designees are entitled to exercise all the rights under this agreement and to file a lawsuit in the People's Courts or submit to the Arbitration Committee to arbitrate.

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3. In case of not affecting the other covenants of this contract, this contract has the legal binding to the heirs and transferees.

4. Apart from the other covenants, the address specified in this contract by both parties is regarded as the contract address, and also promise that when the contract address changes, then information will sent to the party in written form in time.

5. The transactions under this contract is handled basing on independent interest.

6. The titles and business names in this contract are just used for the purpose of convenience, and can’t be used for the purpose to explain the clause content, and obligations and rights of the party.

7. The borrower has the right to submit related information and the lender’s other information to the credit system of the People’s Bank of China and other credit data to be searched and used by qualified institution or individual. The borrower also has the right to search the lender’s information through above credit system before entering into this contract.

8. If withdrawal date, repayment date is the same day of legal holidays, it shall be postponed to the following working day.

9. Per the changes of laws and regulations or regulatory process or the requirements of regulatory authority, Party B is unable to execute this agreement or execute according to covenants, Party B has the right to terminate or amend this agreement or single agreement according to the changes of laws and regulations or regulatory process or the requirements of regulatory authority and exemption from liability.

Article 19.  Conditions for effectiveness

This contract becomes effective upon the signature and seal of the legal representatives of both parties, principals or the authorized persons.

This contract made in three copies, each party has one copy, all having the same legal effects.

Party A: Ningbo Keyuan Plastic Co., Ltd	Party B: Bank of China, Inc Beilun Branch
The authorized person:	The authorized person:
Feburary 07, 2012	Feburary 07, 2012

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EX-10.59

Exhibit 10.59

C1-02: Inward Bills Contract (applicable for single business)

Inward Bills Contract

No.:

Party A (Applicant): Ningbo Keyuan Plastic Co., Ltd

Business license No.:330200400023187

Legal representative/Principal: Chunfeng Tao

Address: Qingshi Industrial Park, Ningbo Postcode: 315803

Financial institution account and account No.: Bank of China Inc, Beilun Branch 810735036108091001

Tel: 0574-86232932 Fax: 0574-86232618

Party B: Bank of China Inc, Beilun Branch

Legal representative/ Principal: Shuguang Sun

Address: No.588, Huashan Road, Beilun Zone   Postcode: 315800

Tel: 0574-86869916 Fax: 0574-86880294

WHEREBY, the undersigned parties agreed to sign this contract in comply with applicable laws.

Article 1. Preconditions

Inward Bills under this contract shall meet the following requirements:

1. This contract has already been effective;

2. Party A obligates and signs the related documents, receipts, seal, related

person’s name lists and samples of signatures for party B, and also fills in relevant certificates;

3. Party A opens the required account to fulfill this contract;

4. Party A arranges the required legal and administrative approval process to facilitate the business properly, and submits the duplicate copy of the approval documents and the copies of the original documents as requested by Party B;

5. The guarantee on the provision of this contract has been effectively established;

6. Other conditions requested by Party B.

Article 2. Related to Import Trade (Notes: complete with factual information.)

√Letter of Credit

Letter of Credit No.:LC1901311000334

Name of Bank Issuing Documents: RABOBANK

No. of Issued Document: OB11/03479u72T

Receipt amount: USD 12,485,045.79

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Collection

Invoice No.: /           Entrusted bank’s name: /

Issuing documents No.: /  Receipt amount: /

Article 3.  Currency of Inward Bills and amount

Currency of Inward Bills: USD

Amount: (Spell-Out) Twelve Million Four Hundred and Eighty-Five Thousand Forty-Five Point Seventy-Nine

(Numeric)USD 12,485,045.79

Article 4.  The Term of Inward Bills

The term of Inward Bills is / months/  days, beginning to calculate since the date of Party B made foreign payment.

If sale price of the imported products has been collected before the closing of the financing, Party B has the right to consider the final collection date as the closing date of the financing. Party A agrees to use the payment for sale of imported products it receives to repay Party A of the financing amount.

Article 5.  Interest Rate and Interest Settlement (Notes: complete with factual information.)

1. Interest rate (annual interest rate)

(1) Inward Bills in RMB: fixed interest rate, and annual interest rate is / ％;

(2) Inward Bills in foreign currency:

A. Fixed interest rate, and annual interest rate is / ％;

B. Loan interest rate in the floating period within  / months / years since the Inward Bills date published by the Bank of China, Inc.

C. Benchmark of LIBOR/HIBOR + 520 for the latest 3 month published by Reuters till the prior working day of the Inward Bills date.

2. Calculation of interest

Interest is calculated according to the actual payment amount and days since the date of Party B made payment.

Calculation formula: Interest=Principal*Days*Daily interest rate.

Base for calculating daily interest rate is of 360 days, the reduction formula is: daily interest rate=annual interest rate/360.

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3. Method of interest settlement

Interest settlement is according to the following _first_ way:

(1) Settlement with quarter, 20th of each last month per quarter as the interest settlement day, and the 21st as the payment day.

(2) Settlement with month, 20th of each month as the interest settlement day, and the 21st as the interest payment day.

(3) Same as expiration date of principal.

(4) Receive the interest in advance and settle when expiration date.

On the condition that the final payment day of the financing principal is not the same date of interest payment day, then the final payment day is considered as interest payment day and Party A shall pay off the entire interest.

4. Default interest

(1) If Party A fails to return the payment of Inward Bills within the agreed time, as for the overdue payment, the default interest shall begin accruing according to the default interest rate starting from the date of late payment until both the principal and interest are paid off.

(2) If Party A fails to pay the interest and default interest in time, it can be penalized with compound interest per month/per quarter according to agreed default interest in this contract.

(3) Default interest rate

A. Default interest rate is a floating rate, the floating period is  / month/ /year. In every floating period, the default interest shall be re-priced on the default date. The re-pricing date is the corresponding date in the month of the default date. If there is no corresponding date in the same month, then the last date of the month is the re-pricing date.

B. Default interest rate equals to the benchmark interest rate in the item C below plus 20%.

C. In the first floating period, the benchmark interest rate is the financing interest rate item 1 of this Article. After each full floating period, the benchmark interest rate shall be calculated as below:

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Financing in RMB, it floats upward/ floats downward according to the same level loan benchmark interest rate issued by the People’s Bank of China in the re-pricing day.

Financing with foreign currency,

It is the loan interest rate within the same floating period of / years of the re-pricing day implemented by Bank of China, Inc.

√It equals to the latest floating period obtained from Reuters of the prior day of re-pricing day before 9:00 (Beijing time) pluses 520.

Article 6.  Fees

Party A shall pay the related fees related to the business under this contract in time and the Party B decides the calculation basis, standard and method, etc.

Party A pays the above fees through the __second__ method:

1. In __/__ banking day since this contract became effective, pay with __/___.

2. Party B is authorized to deduct from the Party A’s account (Account No.:361058330713)

3. Other methods:____________________/_______________.

Article 7. Other Rights and Obligations of the Parties

Party B has the right to handle the full set of documents/goods under the inward bills business or other guarantee right/ property right pursuant to applicable laws and regulations. According to applicable laws and regulations or the verdict of the courts and arbitral authorities, the right to handle the full set of documents/goods under the Inward Bills business belongs to Party A, then Party A agrees to transfer this right to party B unconditionally to the maximum extent allowed by applicable law and regulations and accept performance and non- performance of Party B to handle the documents/goods. If according to applicable laws and regulations or the verdict of the courts and arbitral authorities, the right to handle the full set of documents/goods under the Inward Bills business belongs to Party B, then Party B retains this right till Party A completely pays off the financing.

When Party A requests to hold receipts/goods, and repays the financing with sales income, Party A is only acting as Party B’s consignee, including but not limited to safekeeping relevant receipts, handling storage, transportation and other related matters under those receipts, and maintain sales fund or deposit it to specific account of Party B. Party A shall disclose this role when selling the goods to a third party.

Party A shall be responsible for all the fees (including but not limited to insurance, storage, transport and wharf) during period when Party A retains the goods. Party A promises to insure the goods according to the market price of the goods, indicate Party B as the insured and provide the insurance documents to Party B. Party B has the right to clam directly when insured cargo endures loss.

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Without the permission of Party B, party A is not allowed to delay payment or handle the goods through any non-currency method or at the price lower than the market price. Party A is not allowed to mortgage or pledge, or make the goods to be bound by any other liens. Once requested by Party B, Party A shall submit the details of the goods’ accounts, any sales revenue or relevant sales contracts to party B; Party B has the right to enter into the warehouse to review the actual situations of the goods, or repossess these goods.

Article 8.  Guarantee (Notes: complete with factual information.)

The guarantee methods of liability under this contract:

√ Ningbo Kewei Fuels Co., Ltd and Ningbo Keyuan Petrochemicals Co., Ltd provide joint liability guarantee, … , and sign corresponding guarantee contract.

√ Ningbo Keyuan Plastics Co., Ltd provides margin pledge:

In case the pledgor is a third party, Party B and the pledgor shall enter into additional margin pledge contract.

√ This contract is the main contract of < General Agreement of Margin Pledge>, and the agreement provides margin pledge and submit corresponding <Certification of Margin Pledge> or handle directly as following ways rather submit <Certification of Margin Pledge>:

1) Margin Amount: (Currency) RMB ; (Spell-Out) Eighty Million Fifty Thousand;

(Numeric) 8,050,000.00.

2) Party A pay for above margin with following method:

Within   /   banking days since the effective date of this contract, Party A will deposit or load margin to the margin account opened in Party B with     .

√ Entrusted Party B to load the margin to the margin account opened in Party B from the RMB account in Party B.

Party A ‘s guarantee liability of margin under business has been removed, and Party A authorized Party B to load the margin to margin account opened in Party B directly from account.

Others:

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3) In case above guarantee liability of margin has been removed by Party B, Party B shall return according to following methods:

Return to the Party A’s account.

Return according to the deposit route.

Return according to the written instruction of Party A.

Others:                               .

 If Party B believes that Party A or guarantee occurred matters potentially affect the contractual capacity, or guarantee contract becomes invalid, terminated or cancelled, or financial conditions of Party A or guarantor gets worse or they enter into major litigation or arbitration, or any other factors that may affect their ability to perform their contractual obligations, or the value of guaranty gets worse or lost due to devaluation, destruction, losses, or being closed down, Party B has the right to demand and Party A has the obligation to provide new guarantee, replace the guarantor to bear the liability under this contract.

Article 9.  Party A’s Statements and Commitment

Statements as follows:

1. Party A registers and survives by law, and possess the complete capacity of civil rights needed to fulfill this contract;

2. Party A signs and fulfills this contract based on true intention, has obtained the legal and effective authority according to the requirements of the Articles of Incorporation or other internal management documents, and is not allowed to violate any binding agreement, contract and other legal documents; Party A has gained or will gain all the relevant approvals, permits, files or registers.

3. All the documents and certificates provided by party A to Party B is authentic, complete, accurate and effective under this contract;

4. The trading background described by party A to party B is authentic and legal, and does not have the illegal purpose such as money laundering. Party A providing any documents according to party B’s requirements does not mean that party B has the obligations and responsibilities of inspection towards the authenticity and legality of party A’s trade;

5. Party A will not hide any truths that may influence both parties’ financial situation and contractual capacity.

Commitments as follows:

1. Provide the statement of products sales regarding the import items in timely manner according to Party B’s requirement.

2. If  Party A has already signed or will sign counter-guarantee agreement or other similar agreements about the guaranteed obligations with the guarantor of this contract, then the agreement will not damage any rights owned by party B under this contract;

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3. If the products sales of the import items have serious difficulties, or situations that may influence both parties’ financial conditions and capacity to fulfill this contract, including but not limited to the change of any business pattern of dismantlement, merger, affiliation, joint venture with foreign merchants, cooperation, contractual operation, reorganization, reformation and listing program, reduction of registered capital, assignment of significant property or stock right, commitment of significant liabilities, or installation of new significant liabilities on the pledge, or involvement to grave litigation or arbitration cases, party A shall inform party B in time;

4. As for pending matters, Party A agrees to handle according to the international conventions and agreement with Party B.

Article10. Disclosure of Related Parties of Party A and Related Transactions

The __/_ item below is applicable to both parties:

1. Party A does not belong to the group client of party B according to the Management Guidance of Credit Extension Business Risk of Commercial Bank Group (short for Guidance).

2. Party A belongs to the group client of party B according to Guidance. Party A shall report the situation of related transactions over 10% net assets in time, including the related relationship, trading projects, trading properties, trading amount, corresponding proportion and pricing policy and so on (including the trade with no capital but only proportion capital).

Article 11. Default Events

Party A will be considered in violation of this contract if one of the following events happens:

1. Party A fails to fulfill its obligations to pay and repay to the party B according to this contract;

2. The statements made by party A is untrue or default the commitments under this contract;

3. The matters mentioned in No.3 of Item 2 in Article 9 happen; Party B considered those may affect the financial conditions and contractual capability of Party A or guarantor, and Party A has not provided new guarantee, replaced guarantor in accordance with the provisions of this contract.

4. Party A closes down or is subject to disincorporation, revocation or bankrupt.

5. Party A defaults other covenants in this contract;

6. Party A default the other contracts signed with Party B or other institutions of Bank of China, Inc.

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7. Guarantor defaults the covenants of guarantee contract, or other contracts signed with Party B or other institutions of Bank of China, Inc.

When any of the above mentioned events occur, Party B has the right to take one or some following actions:

1. Request Party A and/or guarantor to amend the default behaviors within limited time;

2. Entirely or partly suspend or terminate Party A’s business applications under this contract or the other contracts, entirely or partly suspend or terminated to grant and handle the un-granted loans, holding trading financing;

3. Announce the unpaid loans/financing principals and interests and the other account payables to entirely or partly expire.

4. Terminate or revoke this contract, entirely or partly terminate or revoke the other contracts between Party A and Party B;

5. Request Party B to compensate the liquidated damages;

6. Deduct funds from Party A’s account to repay entirely or partly liability under this contract.

The undue funds in this account will be considered due in advance. If the account currency is different from the business currency of Party B, convert according to the applicable rate of Party B.

7. Execute real guarantee;

8. Request guarantor to bear guarantee liability;

9. Other measures considered necessary by Party B.

Article 12. Reservation of the Rights

If one party fails to fulfill entire or part rights under this contract or request the other party to fulfill, undertake entire or part obligations, responsibilities, it shall not be considered to waive the obligations or responsibilities.

 Any party’s tolerance or extension or delay execution of the rights under this contract towards another party shall not affect the rights under this contact and laws and regulations, also not considered to waive the rights.

Article 13. Amendment, Modification and Termination

This contract can be amended or modified in writing  mutual agreement. Any amendments or modifications are inseparable parts of this contract.

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Unless otherwise specified by laws or regulations or covenants, this contract is not allowed to terminate till the rights and obligations are completely executed.

Unless otherwise specified by laws or regulations or covenants, invalidation of any items under this contract will never affect the other items’ legal effectiveness.

Article 14. Applicable Laws and Settlement

This contract shall be governed by the laws of PRC.

After this contract becomes effective, all disputes concerning this contract should be settled through friendly negotiation. When negotiation fails, any party can settle with following second method;

1. Submit to ___________________Arbitration Committee to arbitrate.

2. Submit to the People’s court located in the domicile of Party B or other corresponding institutions of Bank of China, Inc.

3. Prosecute the People's Courts with jurisdiction.

During the settlement period, if this dispute does not affect the performance of this other items, the other items shall continue to performance,

Article 15. Attachment

The following attachments and other attachments ensured by both parties makes up the inseparable parts of this contract, and possess the equal legal validity.

1,__________/_______;

2,__________/_______;

……

Article 16.  Other Covenants

1. Without Party B’s written consent, Party A is not allowed to transfer rights or obligations to the third parties.

2. If Party B entrusts any other institutes of Bank of China to execute the rights and obligations under this contract, Party A shall agree. Party B or its designees are entitled to exercise all the rights under this agreement and to file a lawsuit in the People's Courts or submit to the Arbitration Committee to arbitrate.

3. In case of not affecting the other covenants of this contract, this contract has the legal binding to the heirs and transferees.

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4. Apart from the other covenants, the address specified in this contract by both parties is regarded as the contract address, and also promise that when the contract address changes, then information will sent to the party in written form in time.

5. The titles and business names in this contract are just used for the purpose of convenience, and can’t be used for the purpose to explain the clause content, and obligations and rights of the party.

6. Per the changes of laws and regulations or regulatory process or the requirements of regulatory authority, Party B is unable to execute this agreement or execute according to covenants, Party B has the right to terminate or amend this agreement or single agreement according to the changes of  laws and regulations or regulatory process or the requirements of regulatory authority and exemption from liability.

Article 18.  Conditions for effectiveness

This contract becomes effective upon the signature and seal of the legal representatives of both parties, principals or the authorized persons.

This contract made in duplicate, each party has one copy, both having the same legal effects.

Party A: Ningbo Keyuan Plastic Co., Ltd	Party B: Bank of China, Inc Beilun Branch
The authorized person:	The authorized person:

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EX-10.60

Exhibit 10.60

“Daifuda” Business Contract

No: 2012 Beilun Branch “Daifuda” 038

Party A (Applicant): Ningbo Keyuan Plastics Co., Ltd

Business License No: 330200400023187

Legal Representative; Chunfeng Tao

Address: Qingchi Beilun Ningbo      Postal Code: 315803

Opening Financial Institution and Account No:

Tel: 0574-86232932     Fax: 0574-86232618

Party B: Bank of China, Inc Beilun Branch

Legal Representative: Shuguang Sun

Address: No 588, Hua Shan Road, Beilun District, Ningbo  Postal code: 315800

TEL: 0574-86869916          Fax: 0574-86895311

The two parties entered into this contract in accordance with the laws and regulations. This contract is a single agreement under < General Agreement on Credit Business>.

Article1. Definition of “Daifuda”

1.   “Daifuda” means: Based on Party A’s application, Party B provides the short-term financing with its overseas branch or through inter-bank borrowing in domestic and international markets (hereinafter refer to as “Paying Bank”) for Party A’s account payable under the imported products or trade service. Party A shall pay off all the above mentioned financing including interests, commissions, fees and default interests within the time limits.

2.   The scope for import settlement account includes: Letter of Credit, collection, remittance (including prepayment, cash on delivery and trade service etc), all above mentioned settlements should be conducted in accordance with international practice and all signed contacts and agreements between Party A and Party B.

Article 2.  Preconditions

“Daifuda” business shall meet following conditions:

1.   This contract has already been effective;

2.    Party A obligates and signs the related documents, receipts, seal, related person’s name lists and samples of signatures for party B, and also fills in relevant certificates;

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3.   Party A opens the required account to fulfill this contract;

4.   Party A arranges the required legal and administrative approval process to facilitate the business properly, and submits the duplicate copy of the approval documents or the copies of the original documents as requested by Party B;

5.   The guarantee on the provision of this contract has been effectively established;

6.   Other conditions requested by Party B.

Article 3. Related to Import Trade (Notes: complete with factual information.)

√Letter of Credit

Letter of Credit No.: LC1901312000004/AB190131200160

Name of Bank Issuing Document: BANK OF TOKYO – MITSUBISHI UFJ, SINGAPORE

No. of Issued Document: 3655-XPR-8496806

Receipt amount: USD9,689,112.50

Collection

Invoice No.: /                             Entrusted bank’s name: /

Issuing documents No.: /        Receipt amount: /

Remittance

TT:/      Receiver:/

Amount:/

Article 4. Financing Currency and Amount

Financing Currency: US dollar

Financing Amount (Spell-Out): Nine Million Six hundred and Eighty-Nine Thousand One Hundred and Twelve point Five.

(Numeric): USD9,689,112,50

Article 5. Financing Term

The term is / months/91 days.

√No grace period.

Plus ……days of grace period, since the date of starting financing foreign payment

If sale price of the imported products has been collected before the closing of the financing, Party B has the right to consider the final collection date as the closing date of the financing. Party A agrees to use the payment for sale of imported products it receives to repay Party A of the financing amount.

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Article 6.  Interest Rate and Interest Settlement (Notes: complete with factual information.)

1.   Interest rate (annual interest rate)

(1)     Financing in RMB: fixed interest rate, and annual interest rate is / ％;

(2)     Financing in foreign currency:

A.     Fixed interest rate, and annual interest rate is / ％;

B.     Loan interest rate in the floating period within  / months / years since the financing date published by the Bank of China, Inc.

C.     Benchmark of LIBOR/HIBOR + 220 for the 3 months fixed by paying bank on financing date.

2.   Calculation of interest

Interest is calculated according to the actual payment amount and days since the date of Party B made payment.

Calculation formula: Interest=Principal*Days*Daily interest rate.

Basis for calculating daily interest rate is of 360 days, the reduction formula is: daily interest rate=annual interest rate/360.

3.   Method of interest settlement

Interest settlement is according to the following _third_ way:

(1)   Settlement with quarter, 20th of each last month per quarter as the interest settlement day, and the 21st as the payment day.

(2)   Settlement with month, 20th of each month as the interest settlement day, and the 21st as the interest payment day.

(3)   Same as expiration date of principal.

(4)   Receive the interest in advance and settle when expiration date.

On the condition that the final payment day of the financing principal is not the same date of interest payment day, then the final payment day is considered as interest payment day and Party A shall pay off the entire interest.

4.   Default interest

(1)      If Party A fails to return the principal amount of financing within the agreed term, as for the overdue payment, the default interest shall begin accruing according to the default interest rate starting from the date of late payment until both the principal and interest are paid off.

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(2)     If Party A fails to pay the interest and default interest in time, it can be penalized with compound interest per month/per quarter according to agreed default interest in this contract.

(3)     Default interest rate

A. Default interest rate is a floating rate, the floating period is  / month/ /year. In every floating period, the default interest shall be re-priced on the default date. The re-pricing date is the corresponding date in the month of the default date. If there is no corresponding date in the same month, then the last date of the month is the re-pricing date.

B. Default interest rate equals to the benchmark interest rate in the item C below plus 20%.

C. In the first floating period, the benchmark interest rate is the financing interest rate item 1 of this Article. After each full floating period, the benchmark interest rate shall be calculated as below:

Financing in RMB, it floats upward/ floats downward according to the same level loan benchmark interest rate issued by the People’s Bank of China in the re-pricing day.

Financing with foreign currency,

It is the loan interest rate within the same floating period of / years of the re-pricing day implemented by Bank of China, Inc.

Based on the re-pricing day of paying bank’s LIBOR plus 220 base point .

Article 7.  Fees

Party B provides the following services to Party A under this contract:

1.   Arrangement of paying for another financing Party A pays Party B the expense of financing under the contract:   /. Party A authorizes Party B to withdraw directly from Party A’s account: Account No. 361058330713

Article 8. Other Rights and Obligations of the Parties

Party B has the right to handle the full set of documents/goods under the “Daifuda” business or other guarantee right/ property right pursuant to applicable laws and regulations. If according to applicable laws and regulations or the verdict of the courts and arbitral authorities, the right to handle the full set of documents/goods under the “Daifuda” business belongs to Party A, then Party A agrees to transfer this right to party B unconditionally to the maximum extent allowed by applicable law and regulations and accept performance and non-performance of Party B to handle the documents/goods. If according to applicable laws and regulations or the verdict of the courts and arbitral authorities, the right to handle the full set of documents/goods under the “Daifuda” business belongs to Party B, then Party B retains this right till Party A completely pays off the financing.

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When Party A requests to hold receipts/goods, and repays the financing with sales income, Party A is only acting as Party B’s consignee, including but not limited to safekeeping relevant receipts, handling storage, transportation and other related matters under those receipts, and maintain sales fund or deposit it to specific account of Party B. Party A shall disclose this role when selling the goods to a third party.

Party A shall be responsible for all the fees (including but not limited to insurance, storage, transport and wharf) during period when Party A retains the goods. Party A promises to insure the goods according to the market price of the goods, indicate Party B as the insured and provide the insurance documents to Party B. Party B has the right to clam directly when insured cargo endures loss.

Without the permission of Party B, party A is not allowed to delay payment or handle the goods through any non-currency method or at a price lower than the market price. Party A is not allowed to mortgage or pledge, or make the goods to be bound by any other liens. Once requested by Party B, Party A shall submit the details of the goods’ accounts, any sales revenue or relevant sales contracts to party B; Party B has the right to enter into the warehouse to review the actual situations of the goods, or repossess these goods.

Article 9. Guarantee (Notes: complete with factual information.)

The guarantee methods of liability under this contract:

Ningbo / provides joint liability guarantee, … , and sign corresponding guarantee contract.

√ Ningbo Keyuan Plastics Co., Ltd provides margin pledge:

In case the pledgor is a third party, Party B and the pledgor shall enter into additional margin pledge contract.

√ This contract is the main contract of < General Agreement of Margin Pledge>, and the agreement provides margin pledge and submit corresponding <Certification of Margin Pledge> or handle directly as following ways rather submit <Certification of Margin Pledge>:

1)   Margin Amount: (Currency) RMB ; (Spell-Out) Sixty-Two Million ; (Numeric) 62,000,000

2)   Party A pay for above margin with following method:

Within   /   banking days since the effective date of this contract, Party A will deposit or load margin to the margin account opened in Party B with     .

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√ Entrusted Party B to load the margin to the margin account opened in Party B from the RMB account in Party B.

Party A’s guarantee liability of margin under business has been removed, and Party A authorized Party B to load the margin to margin account opened in Party B directly from account.

Others:  

3)   In case above guarantee liability of margin has been removed by Party B, Party B shall return according to following methods:

Return to the Party A’s account.

Return according to the deposit route.

Return according to the written instruction of Party A.

Others:                               .

If Party B believes that Party A or guarantee occurred matters potentially affect the contractual capacity, or guarantee contract becomes invalid, terminated or cancelled, or financial conditions of Party A or guarantor gets worse or they enter into major litigation or arbitration, or any other factors that may affect their ability to perform their contractual obligations, or the value of guaranty gets worse or lost due to devaluation, destruction, losses, or being closed down, Party B has the right to demand and Party A has the obligation to provide new guarantee, replace the guarantor to bear the liability under this contract.

Article 10.  Party A’s Statements and Commitment

Statements as follows:

1.   Party A registers and survives by law, and possess the complete capacity of civil rights needed to fulfill this contract;

2.   Party A signs and fulfills this contract based on true intention, has obtained the legal and effective authority according to the requirements of the Articles of Incorporation or other internal management documents, and is not allowed to violate any binding agreement, contract and other legal documents; Party A has gained or will gain all the relevant approvals, permits, files or registers.

3.   All the documents and certificates provided by party A to Party B is authentic, complete, accurate and effective under this contract;

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4.   The trading background described by party A to party B is authentic and legal, and does not have the illegal purpose such as money laundering. Party A providing any documents according to party B’s requirements does not mean that party B has the obligations and responsibilities of inspection towards the authenticity and legality of party A’s trade;

5.   Party A will not hide any truths that may influence both parties’ financial situation and contractual capacity.

Commitments as follows:

1.      Provide the statement of products sales regarding the import items in timely manner according to Party B’s requirement.

2.      If Party A has already signed or will sign counter-guarantee agreement or other similar agreements about the guaranteed obligations with the guarantor of this contract, then the agreement will not damage any rights owned by party B under this contract;

3.      If the products sales of the import items have serious difficulties, or situations that may influence both parties’ financial conditions and capacity to fulfill this contract, including but not limited to the change of any business pattern of dismantlement, merger, affiliation, joint venture with foreign merchants, cooperation, contractual operation, reorganization, reformation and listing program, reduction of registered capital, assignment of significant property or stock right, commitment of significant liabilities, or installation of new significant liabilities on the pledge, or involvement to grave litigation or arbitration cases, party A shall inform party B in time;

4.      Party A agrees that Party B has the right to provide related business documents to paying bank in order to continues to do business.

5.      As for pending matters, Party A agrees to handle according to the international conventions and agreement with Party B.

Article11. Disclosure of Related Parties of Party A and Related Transactions

The __first _ item below is applicable to both parties:

1.   Party A does not belong to the group client of party B according to the Management Guidance of Credit Extension Business Risk of Commercial Bank Group (“Guidance”).

2.   Party A belongs to the group client of party B according to Guidance. Party A shall report the situation of related transactions over 10% net assets in time, including the related relationship, trading projects, trading properties, trading amount, corresponding proportion and pricing policy and so on (including the trade with no capital but only proportion capital).

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Article 12. Default Events

Party A will be considered in violation of this contract if one of the following events happens:

1.   Party A fails to fulfill its obligations to pay and repay to the party B according to this contract;

2.   The statements made by party A is untrue or default the commitments under this contract;

3.    The matters mentioned in No.3 of Item 2 in Article 9 happen; Party B considered those may affect the financial conditions and contractual capability of Party A or guarantor, and Party A has not provided new guarantee, replaced guarantor in accordance with the provisions of this contract.

4.   Party A closes down or is subject to disincorporation, revocation or bankrupt.

5.   Party A defaults other covenants in this contract;

6.   Party A default the other contracts signed with Party B or other institutions of Bank of China, Inc.

7.   Guarantor defaults the covenants of guarantee contract, or other contracts signed with Party B or other institutions of Bank of China, Inc.

When any of the above mentioned events occur, Party B has the right to take one or some following actions:

1.   Request Party A and/or guarantor to amend the default behaviors within limited time;  

2.   Entirely or partly suspend or terminate Party A’s business applications under this contract or the other contracts, entirely or partly suspend or terminated to grant and handle the un-granted loans, holding trading financing;

3.   Announce the unpaid loans/financing principals and interests and the other account payables to entirely or partly expire.

4.   Terminate or revoke this contract, entirely or partly terminate or revoke the other contracts between Party A and Party B;

5.    Request Party B to compensate the liquidated damages;

6.   Deduct funds from Party A’s account to repay entirely or partly liability under this contract.

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The undue funds in this account will be considered due in advance. If the account currency is different from the business currency of Party B, convert according to the applicable rate of Party B.

7.   Execute real guarantee;

8.   Request guarantor to bear guarantee liability;

9.   Other measures considered necessary by Party B.

Article 13. Reservation of the Rights

If one party fails to fulfill entire or part rights under this contract or request the other party to fulfill, undertake entire or part obligations, responsibilities, it shall not be considered to waive the obligations or responsibilities.

Any party’s tolerance or extension or delay execution of the rights under this contract towards another party shall not affect the rights under this contact and laws and regulations, also not considered to waive the rights.

Article 14. Amendment, Modification and Termination

This contract can be amended or modified in writing  mutual agreement. Any amendments or modifications are inseparable parts of this contract.

Unless otherwise specified by laws or regulations or covenants, this contract is not allowed to terminate till the rights and obligations are completely executed.

Unless otherwise specified by laws or regulations or covenants, invalidation of any items under this contract will never affect the other items’ legal effectiveness.

Article 15. Applicable Laws and Settlement

This contract shall be governed by the laws of PRC.

After this contract becomes effective, all disputes concerning this contract should be settled through friendly negotiation. When negotiation fails, any party can settle with following second method;

1.   Submit to ___________________Arbitration Committee to arbitrate.

2.   Submit to the People’s court located in the domicile of Party B or other corresponding institutions of Bank of China, Inc.

3.   Prosecute the People's Courts with jurisdiction.

During the settlement period, if this dispute does not affect the performance of this other items, the other items shall continue to performance,

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Article 16. Attachment

The following attachments and other attachments ensured by both parties makes up the inseparable parts of this contract, and possess the equal legal validity.

1,__________/_______;

2,__________/_______;

……

Article 17.  Other Covenants

1.   Without Party B’s written consent, Party A is not allowed to transfer rights or obligations to the third parties.

2.   If Party B entrusts any other institutes of Bank of China to execute the rights and obligations under this contract, Party A shall agree. Party B or its designees are entitled to exercise all the rights under this agreement and to file a lawsuit in the People's Courts or submit to the Arbitration Committee to arbitrate.

3.   In case of not affecting the other covenants of this contract, this contract has the legal binding to the heirs and transferees.

4.   Apart from the other covenants, the address specified in this contract by both parties is regarded as the contract address, and also promise that when the contract address changes, then information will sent to the party in written form in time.

5.   The titles and business names in this contract are just used for the purpose of convenience, and can’t be used for the purpose to explain the clause content, and obligations and rights of the party.

6.   Per the changes of laws and regulations or regulatory process or the requirements of regulatory authority, Party B is unable to execute this agreement or execute according to covenants, Party B has the right to terminate or amend this agreement or single agreement according to the changes of laws and regulations or regulatory process or the requirements of regulatory authority and exemption from liability.

Article 18.  Conditions for effectiveness

This contract becomes effective upon the signature and seal of the legal representatives of both parties, principals or the authorized persons.

This contract is made in duplicates, each party has one copy, both having the same legal effects.

Party A: Ningbo Keyuan Plastic Co., Ltd	Party B: Bank of China, Inc Beilun Branch
The authorized person:	The authorized person:
March 23, 2012	March 23, 2012

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EX-10.61

Exhibit 10.61

Agreement on Inward Bills

To: Ningbo Ximen Branch/Sub-branch of Shanghai Pudong Development Bank

                                                                                                          NO.: 94052012280029

Name of Client		Ningbo Keyuan Plastics Co., Ltd.		Date of Application		January 31, 2012
Address		Bei Lun		Liaison for Client		Dongyi Liang
Tel.		0574-86232932		SPD Bank Liaison(filled up by bank)
Fax:		0574-86232618
This company hereby irrevocably applies to SPD bank for import pay on other’s behalf service in accordance with following provisions of This Agreement due to in need of financing.
I.   Prime Articles
o This Agreement is entered into as affiliated financing documents of Financing Limit Agreement with ref. No. of ( ) (hereinafter “Financing Limit Agreement”). After This Agreement comes into effect, all articles of it will merge to Financing Limit Agreement and be regarded as an integral part of it (The client should check this item and indicate ref. No. of Financing Limit Agreement if the client has signed Financing Limit Agreement with SPD bank. ); þ This Agreement is an independent credit document entered into by and between applicant and SPD Bank  (the client should check this item if the client has not signed Financing Limit Agreement with SPD bank );
II.  Document Description and Condition of Payment on Other’s Behalf
(If there is discrepancy between Financing Limit Agreement signed by the client and This Agreement on interest rate of financing and penalty interest rate, provisions of This Agreement shall prevail.)
No. of L/C	LC940511000049A1		Amount of L/C Draft/ Invoice Amount(Currency)		USD 15,537,836.60
Record of Document Examination	o Inconsistent o Consistent		No. of Import Trading Contract		KAO-20101230-045
Percent of Margin	10%		Documentation		Release
Inward Bills Amounts	USD 15,537,836,60		Terms		90 Days
Interest Rate	7.04685%		Default Interest Rate
Notes: RMB interest rate is annual interest rate, floating interest rate shall indicate floating term.
III.   Confirmation of Guarantor
About the (                ) agreement with ref. No. of (        ) where This Company be the guarantor and SPD bank be the secured creditor. This Company, as the guarantor between the client and SPD bank to skip opening deposit L/C, has already signed abovementioned guarantee documents along with SPD bank. This Company hereby agrees that: once SPD bank releases aforesaid amount for import pay on other’s behalf, This Company shall keep taking joint and several liability for the principal and interest of the amount released by SPD bank to pay on other’s behalf; and creditor’s rights enjoyed by SPD bank against the client belong to the range of creditor’s rights secured by guarantee agreement. This Confirmation shall be irrevocable.
Guarantor (Seal) Legal Representative or Authorized Agent (Signature or Seal)

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IV.    Newly-Added  Guarantee
Guarantor:	Form of Security : o mortgage; o impawn; o guarantee
V    General   Provisions
The client hereby confirms that the client has read and agrees with general provisions of  following Inward Bills agreement: 1.     SPD bank shall release bills after signing the agreement, otherwise, can revoke the financial promise basing on this agreement. 2.     Bills under this agreement only used for making up Margin gap under related L/C. Value date is the real issuance date, which shall not later the last repayment date of L/C. 3.     Interest Payment method  Unless otherwise noted, interest shall be settled per day, profits with this clear. 4.     Document submission

Client promises to submit following documents to SPD bank or meet corresponding conditions, yet SPD bank shall take no responsibility to verify authenticity of these documents.

      (1) Copy of the latest Articles of Association and business license of the client;

     (2) Resolution made by board of directors which authorizes the client to sign This Agreement and relevant affiliated financing documents (if there is restrictions on the mandate of the legal representative to enter into agreement in Articles of Association of the client);

     (3) The authorization letter made by the client to the authorized agent and signature sample of the authorized agent;

     (4) This Agreement which has been legally signed by the client;

     (5) The client refers business day of SPD bank as the withdrawal day.

     (6) If the pay on other’s behalf business under This Agreement is secured, then this security document shall have been signed prior to pay on other’s behalf and this guarantee shall have come into effect;

      (7) Other documents and/or conditions SPD bank might ask at any time.

5.     Skip the inconsistence

The client hereby confirms that SPD bank handles the pay on other’s behalf and the use of it just based on client’s application. Therefore, once the client submits This Agreement which has been effectively signed, an irrevocable application for pay on other’s behalf has then been established, and the client has irrevocably agreed to waive counter-argument right of refusing payment on the grounds of documents inconsistence under relevant L/C.

6. If the expiry date of period to pay on other’s behalf designated shall not be a working day of SPD bank, then the expiry date of financing period designated shall be put off to next working day of SPD bank, and interest shall be collected for this put-off period;

7.    Reporting balance of international payments

After make import pay on other’s behalf, the client shall carry out relevant procedure according to requirement from foreign exchange control policies as soon as possible.

8.     Prepayment and expiration ahead of time

Client can conduct a prepayment on condition that SPD bank agrees in writing and the client fully compensates SPD bank in terms of any costs and losses arising from prepayment, and this kind of prepayment shall be immediately regarded as expiration ahead of time. SPD bank shall have the right to inform the client at any time of expiration ahead of time of import pay on other’s behalf under This Agreement, without having to give any explanation. And the client shall immediately repay any amount related to pay on other’s behalf.

9.     The client hereby confirms that:

(8)In case that the client presents trust receipt to SPD bank, and before the debt under This Agreement gets fully paid, SPD bank shall have the ownership of the goods under import pay on other’s behalf.

(9)When the client has any payment due against SPD bank, SPD bank shall have the right to dispose the goods under import pay on other’s behalf, and the processed, mixed and composite of the goods as well. Any amount acquired from these disposals shall first of all be used to repay the debt under This Agreement. And SPD bank shall still have the right to further claim against the client on the part of debt which can not be repaid due to inadequate amount. The client though, doesn’t raise objection about this.

(10)  The client confirms that the deposit paid at application to SPD bank for import pay on other’s behalf and its interest shall be the mortgage to guarantee the performance of This Agreement, and authorizes SPD bank to directly deduct from this deposit and its interest when SPD bank needs to make external payment due to This Agreement.

10.  Tax

The client shall repay full amount under This Agreement and shall not make deduction in any form from it, unless client shall, according to law, deduct relevant taxes at repayment of amount of pay on other’s behalf. In this case, the client shall pay SPD bank extra amount which shall be equal to the amount deducted.

11.  Declaration and Guarantee

The client hereby makes following declaration and guarantee which will be viewed as repeatedly made each time SPD bank provides pay on other’s behalf service to the client according to provisions of This Agreement:

(11)   The client shall be companies etc. which is established according to Chinese law (HK, Macau and Taiwan excluded, similarly hereinafter),  which have the right to sign This Agreement and any documents related to This Agreement, and have adopted any necessary corporation action to make This Agreement and any documents related to This Agreement legal, effective and enforceable;

(12)  The client doesn’t and will not violate any other contracts or documents already signed by it, nor articles of association, any applicable laws, regulations or ordinance, relevant documents, rules and arbitration rules made by competent department, nor conflict with any other obligations or agreement borne by the client by signing This Agreement and implementing obligations under This Agreement;

(13)  The client and its any shareholders, affiliates don’t be involved in any liquidation, bankruptcy, reconstruction, merger, consolidation, division,  reorganization, dissolve, close down, discontinuation  or similar legal procedure, nor is there any situation happening which could result in these legal proceedings;

(14)  The client isn’t involved in any economic, civil, criminal, administrative procedure or similar arbitration proceedings which could have major adverse impact on it, nor is there any situation happening which could result in the client being involved in these legal proceedings or similar arbitration proceedings;

(15)  Legal representative, director, supervisor or other senior management of the client and any vital assets of the client isn’t involved in any enforcement, close down, seizure, freeze, lien and supervisory measures, nor is there any situation happening which could result in the client being involved in these measures;

(16)  The client guarantees that all financial statements (if any ) presented by it are in line with provisions of Chinese laws, and are a true, complete and fair reflection of its financial status; and all data, documents and information etc. about the client itself and the guarantor etc. provided by the client to SPD bank during the process of signing and implementing This Agreement is true, effective, accurate, complete and no any hidden facts or omission;

(17)  The client strictly abides by provisions of laws and regulations during its operational activities, carries out businesses exactly according to business scope approved by its business license or verified by laws, and handles annual inspection of registration procedure in a timely manner;

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(18)  The client guarantees that there shall not be any other situations or events which have or could have major adverse impact on contractual capacity of the client;

(19)  For the financing under this import pay on other’s behalf agreement provided by SPD bank, the client guarantees that repay all principal refinanced, interest (including compound interest and penalty interest ),  commission charge, postage/cable charge and all relevant charges once and for all before expiration of import pay on other’s behalf according to requirement from SPD bank.

12.  Items Promised

The client hereby makes promises as follow:

(1)     The client shall strictly abide by and implement each item of obligations under This Agreement;

(2)    The client shall, according to provisions of This Agreement, repay the principal and interest of pay on other’s behalf and related charges in a timely manner; the client shall carry out, acquire and conform to all approval, authorization, registration and licensing procedure required by applicable laws and keep its effectiveness, to make it able to legally sign and perform obligations under This Agreement and any documents related to  This Agreement; the client shall be able to present prove accordingly at SPD bank’s request.;

(3)      If the client shall be informed of its involvement of any economic, civil, criminal, administrative procedure or similar arbitration proceedings, or any enforcement, close down, seizure, freeze, lien and supervisory measures which could have a major adverse impact on it, the client shall, within 5 working days, inform SPD bank in writing and give a detailed explanation about the impact and what remedial measures it has taken or plans to take;

(4)    The client shall in no case repay any third party other than SPD bank any debt of a large amount or perform any guarantee obligation without written approval from SPD bank;

(5)    The client shall not incur any other liability or contingent liability with large amount, nor shall it set up or provide guarantee in any form with a nature of priority for itself or any third party without written approval from SPD bank. The client shall, since the signing of This Agreement, and before paid-up of pay on other’s behalf under This Agreement, without written approval from SPD bank, not

A.   carry out any liquidation, bankruptcy, reconstruction, merger, consolidation, division,  reorganization, dissolve, close down, discontinuation  or similar legal procedure;

B.    sell, lease, bestow, transfer or dispose any of its vital assets in any other ways except for daily operation purposes;

C.    incur any alternation of its stockholders’ rights structure;

D.   sign any contract/agreement which could have major adverse impact on contractual capacity of the client under This Agreement, or take on obligations which could do the same impact.

(1)   As for the guarantee under This Agreement, if it incurs certain change under certain circumstances, the client shall, according to SPD bank’s requirement, provide other guarantees in time that SPD bank permits. These certain circumstances or certain changes include but not limited to guarantor suspension of production, close down, dissolve, suspension and correction, revocation or cancellation of business license, apply or be applied for reorganization, bankruptcy, substantive change in its operation or financial status, be involved in major litigation or arbitration cases, its legal representative, director, supervisor or senior management be involved in law suit, reduction or would-be reduction of value of collateral, or property preservation measures such as closing down be adopted on collaterals, breach of guarantee contract and demand to cancel guarantee contract etc.;

(2)    The client shall also carry out enforceable public notary in public notary office designated by SPD bank at SPD bank’s request, and the client shall bear the cost and willingly accept the enforcement;

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(3)     If there shall be any events happening which could have an impact on client’s capability of performing obligations under This Agreement or any documents related to This Agreement, the client shall at any time keep SPD bank informed;

(4)    The client guarantees that there shall be no restriction articles on the client’s acquiring the ownership of the goods in the basic trading contract about financing under This Agreement, including but not limited to the articles speculating the seller keeps ownership of the goods etc.;

(5)     If the client imports to sell to domestic markets, the client shall provide domestic trading (sales) contract, and designates in this contract a certain bank account opened in SPD bank as the only bank account for collection of the payment of the goods. And the client further confirms that after payment of the goods is credited to this bank account, SPD bank shall have the right to proactively deduct amount from it to repay the financing amount under This Agreement.

13.  Costs and expenses

The client shall pay any stamp duties and other taxes and charges on This Agreement and any documents related to This Agreement, except for those as law stipulates shall be paid by SPD bank.

14.  Penalty interests

If the client shall have any payment due of pay on other’s behalf, the client shall pay SPD bank penalty interests for the period starting from expiration date of this payment to the actual payment date with the due amount (including due penalty interests) as the base. The penalty interests shall be settled monthly and compound interest shall be collected also monthly.

15.  Authorization of repayment and its offset

The client hereby gives authorization to SPD bank, shall the client have any payment due in SPD bank, whether this payment due is under This Agreement or not, SPD bank shall have the right to, on the client’s behalf, directly deduct this amount from any bank account (whatever currency) opened in any branch administered by Head Office of SPD bank to pay up this payment due. This authorization shall be irrevocable. As for foreign exchange conversion, SPD bank shall do it according to its own foreign exchange rate, and the risk of foreign exchange rate shall be taken by the client.

16.  Liability prove

SPD bank will, according to its consistent business operation principle, keep one set of account books and vouchers on its account for business activities This Agreement involves. The client admits that this record of account books and vouchers shall be the effective evidence of its liability except for obvious mistakes.

17.  Transfer

The client shall not transfer any rights or obligations under This Agreement. SPD bank can at any time, transfer its rights or obligations under This Agreement to any third party, and disclose any information related to This Agreement, including those provided by the client and its guarantor to SPD bank for This Agreement.

18.  Breach of the contract

Any statements and guarantee from the client which violates  This Agreement, or these statements and guarantee is proved to be incorrect, untrue, incomplete, misleading or has been violated,  and/or the client violates or doesn’t fulfill any items promised in This Agreement, or the client violates any provision of  This Agreement,  and/or there is any situation happening on the client which could affect the security of the loan of SPD bank, and/or guarantor violates provisions of any guarantee documents etc, shall constitute breach of This Agreement by each of them. SPD bank shall have the right to declare expiration ahead of time, and demand the client to immediately repay the principal and interest (including penalty interest) of pay on other’s behalf, and compensate all losses incurred by SPD bank including legal costs, and take measures agreed on This Agreement to further claim against the client and the guarantor.

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19.  Special agreement for group client

If the client under This Agreement shall be group client, it agrees as follow:

    (1) The client shall in time report the situation of affiliate transaction of 10% and above the net assets of actual fiduciary, including a.) affiliate relation between parties involved in the transaction; b.) transaction project and nature of the transaction; c.) amount of transaction or proportion; d.) pricing policy (including transactions where there isn’t an amount or there is only a symbolic amount)

    (2) actual fiduciary having following situations will be regarded as breach under This Agreement by the client, and SPD bank shall have the right to unilaterally cancel the credit line the client has not used, and withdraw the credit line which has partly or wholly been used, or give the client a margin call up to 100%: a.) provide false material or hide substantive operational or financial facts; b.) unilaterally change the designated usage of credit line,  misappropriate credit line or engage in illegal transaction using credit line without permission from SPD bank; c.) using unreal contract with affiliate, to discount the creditor’s rights such as notes receivable and amounts receivable or mortgage to extract bank capital or credit line; d.) reject supervision and examination by SPD bank on usage of its credit and relevant operation and financial situation; e.) SPD bank thinks security of credit line could be affected due to substantive merger, acquisition and reorganization etc. emerging; f.) intentionally evade creditor’s rights of the bank by affiliate transaction.

20.  Other agreements__________

21.  Applicable laws and jurisdiction

This Agreement shall be governed by law of the People’s Republic of China (HK, Macau and Taiwan is not included here for the purpose of This Agreement), and interpreted by law of the People’s Republic of China. Any disputes related to This Agreement, shall be submitted to the People’s Court where SPD bank locates.

22.  Place to serve litigation bills

The client confirms that if any law suits happen under This Agreement, legal papers such as summons, notice etc. issued against it during the process of litigation can be regarded as served only by delivering to the address listed at the head of This Agreement. Alternation of this address will not have legal effect until SPD bank is informed in advance.

23.  Severability of articles

Any articles going void, illegal or unenforceable under This Agreement shall not affect effectiveness, validity and enforceability of other articles herein.

24.  During the period of validity of This Agreement, if SPD bank grants extension or defers to take action against any breaching or other activities of the client, it shall not damage, impact or restrict all rights or benefits that SPD bank enjoys as the creditor according to laws or This Agreement, nor shall it be regarded as permission for activities of breaching This Agreement of the client given by SPD bank, nor even be regarded as SPD bank waiving its rights to take action against existing or future breaching activities of the client.

25.  Consistency of financing limit agreement

If there is discrepancy between financing limit agreement (if any, and including effective alternation made at any time) and This Agreement, the latter shall prevail.

26. This Agreement comes in 6 copies of the same content with equal legal effect, with the client holding one copy, the guarantor holding one copy, and SPD bank holding four copies. and it shall not be established until both parties affix stamp, or their legal representative/person in charge or authorized agent sign or affix stamp. This Agreement shall come into force since the bank to pay on other’s behalf completes import pay on other’s behalf.

Signature column Both parties confirm that by the time of signing This Agreement, both parties have carefully read and discussed about all articles, and don’t raise any objections on any articles of This Agreement, and have correct understanding of rights and obligations of the involved parties and the legal definition of liability restrictions or exemption clause as well.
Client: (Seal: Ningbo Keyuan Plastics Co., Ltd.) Legal representative or authorized agent (signature or seal) : Tao Chunfeng	SPD bank (Seal : Special stamp for business contract of Ningbo Ximen Branch of Shanghai Pudong Development  Bank ) person in charge or authorized agent( signature or seal):
Signing date:

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EX-10.62

Exhibit 10.62

AGRICULTURAL BANK OF CHINA

Series No. ABC(2010)2005

The Maximum Guarantee Contract of

Agricultural Bank of China Inc .

Contract No.:82100520110005399

Date: November 23, 2011

ABC(2010)2005

The Maximum Guarantee Contract

Contract No.:82100520110005399

Clients: In order to protect your legal right, please read carefully the Articles in the contract (especially the articles with blank),confirm your right and obligation before signing .Please consult handling bank if you have any questions.

Loaner (full name): Economic and Technical Development Zone Branch, Agriculture Bank of China

Guarantor (full name): 1) Ningbo Pacific Shipping Co., Ltd  2) Jicun Wang, Sumei Chen

                                 
In view that the guarantor is willing to provide the maximum guarantee for claim formed according to a series of business contract (“main contract”) signed in Article 1 of the contract signed by loaner and Ningbo Keyuan Plastic Co., Ltd.(Loaner). The parties enter into this contract through negotiation according to relevant laws and regulations.

Article 1 The guaranteed creditor’s rights and the maximum amount

1. Guarantor is willing to offer guarantee of the following creditor’s rights formed by the loaner and loanee. The maximum balance of guaranteed creditor’s rights is equal to RMB200,000,000. Foreign currency business shall be calculated according to the selling price of business stipulated in the (1).

(1) From November 23, 2011 to November 23, 2012, is the period of determination of the secured claims. Claims are formed by agreed businesses between the loaner and the loanee. Businesses including: (√ is included)

√ RMB/foreign currency loans √ Discounted commercial bills √ Commercial acceptance bill	√ Margin relief for issuing √ Import bill    Export bill	Export packing loan Bank guarantee
√ Other businesses    Domestic letter of credit and debt

(2) The loan principal, interest, default interest, compound interest and cost which are not be paid in master contract signed by loaner and loanee should be counted from agreed date to real pay date:

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Contract Name Contract Number Unpaid Debt Principal Currency

(Another table may be attached if the columns are not enough, and it is a part of the contract.)

2. The guaranteed business types, amount, interest rate, term etc. in this contract shall be based on related legal instruments or certificates.

3. The loaner doesn’t need to handle security procedures individually when making loans or provide other bank credit within the agreed time limit and maximum balance.

4. The businesses which happen in the period stipulated in the contract and within the maximum balance, the guarantor will assume guarantee responsibility on a voluntary basis.

Article 2 Guaranty of Scope

The guaranty scope includes loan principal, interest rate, default interest, compound interest, liquidated damages, damages, arbitration fee, counsel fee etc. which can realize loaner’s right.

The guarantor will assume guarantee responsibility on a voluntary basis for the part beyond beyond maximum balance due to the exchange rate change.

Article 3 Guarantee method

The guarantee method is joint liability. If there are many guarantors under the contract, each guarantor shall assume joint responsibility to the loaner.

Article 4 Guarantee period

1. The guarantor’s guarantee period is 2 years since the termination of the loan execution specified in the main contract;

2. The guarantee period under the commercial bills acceptance, waiving and issuing bond certificate and bond letter is 2 years since the payment is paid by the loaner;

3. The guarantee period of the commercial bills discounting is 2 years since the expiration of discounted bills;

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4. If the loaner and loanee reach agreement with regard to the time period of loan execution of the main contract, the guarantor continues to assume guarantee responsibility.

5. If the loaner declares the financial claim acceleration of maturity due to laws and regulations happened and items of main contract ,guarantee period is 2 years since the date of acceleration of maturity .

Article 5 Guarantor Commitment

1. Having got the authorization required by the contract guarantee according to relevant rules and procedure;

2. Providing the loaner with authentic, complete, effective financial statement, articles of association and other relevant materials or information. The guarantor should also accepting loaner’s supervision and inspection of guarantor’s product operation and financial condition.

3. When the loanee fails to fulfill contractual obligations, the guarantor promises to fulfill the responsibility voluntarily.

4. When guarantor fails to perform the contract responsibility, the loaner is entitled to directly withdraw the related payments from guarantor’s account opened at loaner.

5. The guarantor immediately notifies the loaners in written form in any one of the following circumstances:

(1) Guarantor changes the name, domicile, legal representative, contact information and other matters;

(2) Affiliation changes, high-level personnel changes, corporate charter changes, and organizational restructuring happen to the guarantor;

(3) Guarantor’s financial conditions deteriorates, serious difficulties arise in production and operation, or other significant litigation and arbitration emerge;

(4) Guarantor is discontinued, has its business suspended or are filed for bankruptcy, reorganization, restructuring and so on;

(5) Guarantor’ business license is revoked or suspended or other dissolution event;

(6) Other matters unbeneficial to the realization of loaner’s debt happen to guarantor.

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6. When guarantors implement any one the following actions, they shall inform the loaner within 15 days and obtain written consent from the loaner;

(1) Guarantor change operating system, capital structure, including but not limited to

contracting, leasing, joint-stock business, merger, division, joint ventures, capital reduction, asset transfer, application re-engineering, application reconciliation, application to bankruptcy.

(2) Guarantor provide the third person’s debt with assurance guarantee or set pledge or pledge guarantee, with their own assets, for their own or the third person’s debts and this may affect the guarantee responsibility under the contract;

Article 6 Determination of guaranteed creditor’s rights

The maximum amount under the contract to ensure the security of claims should be determined if any one of the following circumstances happened.

1. The determination period of creditor’s right expires. This expiration includes that the determination period of the creditor’s right stipulated in Article 1 of the contract expires as well as the situations that the loaner declares the creditor’s rights’ determination period expires in advance according to national laws, regulations or the main contract.

2. The new claim can not happen.

3. The loanee or the guarantor is declared bankrupt or has been revoked.

4. Other circumstances confirmed by creditor’s right according to the law.

Article 7 Guarantee Responsibility Assuming

1. If one of the following circumstances occurs, the loaner has the right to request the guarantor to performance guarantee liability. When guarantor’s payment is not sufficient to pay off the secured claim settled in the contract, the loaner can choose to repay the principal, interest, penalty interest, compound interest or fees, etc with this sum;

(1) The loan execution period expires under any main contract and the loaner fails to pay off. “Period expiration” includes the loan execution period expiration specified in the main contract as well as the conditions that the loaner declares the creditor’s rights under the main contract expire in advance according to national laws, stipulations and matters stipulated in the main contract;

(2) The loanee and guarantor are ordered to apply for bankruptcy by people’s court or arbitrated for reconciliation.

(3) The loanee and guarantor’ business license is revoked , ordered to close down or have other dissolution event.

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(4) The loanee and guarantor have died or proclaimed to go missing or have died;

(5) Guarantor breaches the obligations under this contract.

(6) Other serious situations which affect the realization of financing claim;

2. Debt assumed by the contract exists in the loaner to provide security and ensure the property. The loaner may request the guarantor before the guarantee responsibility of guarantee property. If guarantee or assurance guarantee happen to the creditor’s rights guaranteed in the contract, the loaner is entitled to require to the guarantor to assume the assurance responsibility of the object.

3. If the loaner offers object guarantee, the loaner shall abandon this guaranteed object right, guaranteed object’s position or change the guarantee object rights, the guarantor agree to assume joint liability assurance for the creditor’s right under the main contract. This guaranteed object right refers to the right that the loaner forms due to the guarantee of the object provided for the creditor’s right under the main contract.

4. Guarantors provide guarantee for the entire several debts , included but limited several under the contract between loaner and loanee ,and the guarantor’s payment is unsufficient to pay the whole due debt ,the loaner could decide the paid debt and filing order.

5. According to related laws and regulations or the contract ,loaner executes counteracting right and decides the paid debt and filing order ;loaner executes subrogation right and decide paid debt form sub-loanees and filing order.

Article 8 Breach of Contract

1. If loaners do not fulfill a contractual obligation and result in loss of guarantor after the contract takes effect, they shall bear the corresponding liability.

2. Guarantor should pay% of the maximum amount of liquidated damages to loaners according to the contract with any one of the following actions; if the guarantor cause losses to the loaners, a full compensation shall be given;

(1) Fails to obtain lawful and effective authorization required by the contract guarantee;

(2) Fails to provide authentic, complete and effective financial statements, articles of association or other related data, information

(3) Fails to immediately notify the loaner when the matter in item 5 of Article 5 happened.

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(4) Fails to obtain consent of loaner in advance when executed the action in item 6 of Article 5;

(5) Other actions which breach the contract or effect the claim realization of loaner.

Article 9 Objection Period of Counteracting Right and the Rescission Right

Loaner executes the counteracting right and rescission right based on related laws and regulations or the contract, the objection period is 7 business days since the loaner inform the guarantors with written, oral and other forms.

Article 10 Dispute Resolution

Dispute in the contract can be resolved through consultation by the parties or in the first way as following:

1. Litigation. Ruled by local People’s Court.

2. Arbitration. Submit ____ to / (Full name of arbitration) for arbitration according to rules.

During the litigation or arbitration, the articles and the items not involved in dispute should be performed.

Article 11 Other Items

1.   Guarantor should understand the loanee's business condition or the various of business and operation under the contract .The main contract, related law documents or voucher of various businesses under the contract shall not be delivered to the guarantor;

Article 12 Effectiveness of the contract

This contract becomes effective when each party signs or stamps.

Article 13 This contract is triplicate, one for loaner, one for guarantor, one for loanee, Each is equal validity.

Claim: Loaner has asked guarantor to have a comprehensive and accurate understanding of the contract. The loaner has made corresponding explanation to the above clauses upon the guarantor’s requirements. Contracting parties have the same understanding of the meaning of the contract.

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Loaner (stamp):        Loaner (stamp):

Principal or authorized agent: Legal representative or authorized agent:

Guarantor (stamp):

Principal or authorized agent: Principal or authorized agent:

Guarantor (stamp):

Principal or authorized agent: Principal or authorized agent:

Guarantor (stamp):

Principal or authorized agent: Principal or authorized agent:

Signed time: November 23, 2011

Signed site: Economic and Technical Development Zone Branch, Agriculture Bank of China

Loanee’s claim: Having obtained the above The Maximum Guarantee Contract, without any dissents to all clauses.

Loanee (stamp):  Ningbo Keyuan Plastic Co., Ltd

Principal or authorized agent:

Receipted time: November 23, 2011

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EX-10.63

Exhibit 10.63

Individual Maximum Amount Guarantee Contract

HuaXia Bank Inc,

Individual Maximum Amount Guarantee Contract

Serial no: NB07Maxium guarantee 720110144-2

PARTY A: (Guarantor): Chunfeng Tao

Certificate type and no: ID card, 440902670616043

Address: Room no 902,97 building, phase 2 ,Donghu Garden

Telephone: 88278655

Post code: 315000

The Company:  Ningbo Keyuan Plastics Co., Ltd.

Company telephone: 86232600

Cell phone: 13806033688

PARTY B (Creditor) Huaxia bank co.ltd Ningbo branch

Address: no 787 Baizhang east road

Post code: 315000

Legal representative/Principal: Kaiwen Wei

Telephone: 87972545                 FAX:87972608

Based on the provisions of the Guaranty Law of the Peoples Republic of China and other related applicable law and regulations. Party B will have several creditor’ right with debtor--- Ningbo Keyuan Plastics Co., Ltd. (hereinafter referred to as “main contract debtor) continuously during the contract period in terms of main contract. Party A is willing to provide guarantee to Party B for the above mentioned creditor’s right (hereinafter referred to as “main creditor right”) within the maximum credit right amounts, both parties signed the contract after mutual agreements.

Part One

Section 1 The type of guaranteed Main creditor’s right, maximum claims amount and period of occurred claims

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1. The form of Main contract under the contract as following:

x Party B signed contract______No.____with Main contract debtor, the contract, with its detailed operations ,formed main contract of this contract.

The several ( circulating capital loan contracts) signed continuously between Party B and main contract debtor in the main creditor’s right period pursuant to clause 3 of the contract, all considered to be the main contract of the contract.

2. The guaranteed maximum credit amount under the contract is: currency: RMB, Amount: 80,000,000, ( the foreign currency is calculated per party B’s listing of foreign exchange rate)

3. The guaranteed main credit’s duration under this contract is from 13th, SEP,2011---13TH, SEP, 2012.

Section 2 Settlement of disputes

4. All the disputes between Party A and B for proceed this contract, should be settled with negotiation, the followings can be used if the negotiation is failed,

ü  A to sue to the court of Party B’s place of domicile

x B to apply for the arbitration to committee.

5. If there is a conflict between the settlements chosen by both parties and the settlement stated in the main contract, the settlement in the contract shall prevail.

Section 3 Miscellaneous clause

6. The other issues both parties agreed_____________________________________

7. The contract has 3 copies, party A takes one, and Party B takes two copies,   Party ___takes ____, all has the same legal power.

Part Two

Section 1 The type of guaranteed Main creditor’s right, maximum creditor’s right amount and period of occurred creditor’s right

8. The main credit’s business range which party A guaranteed is the same as which stipulated in the contract.

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9. Per the section 2 of the contract, the maximum credit amount is ref to maximum main loan amount balance, it has the several following meanings:

9.1 Main contract debtor’s all outstanding loan amount at anytime( if the business under the main contract are credit card, banker’s acceptance bill, guarantee letter, delivery guarantee, the amount is the business balance which actually happened but did not paid yet) can not be exceed the above limitation, but the main contract debtor can use the credit amount which has been paid off circularly within the limit.

9.2 The maximum credit amount is only the maximum limitation of main credit loan, when the loan amount is not exceed the above limitation, Party A agrees to take the guarantee responsibility for all interests, punitive interest, fee and all other due payment in the range stipulated in section 11.

10. The stipulation of section 3 has following definitions:

10.1 If the business stipulated in the main contract is loan, the issue date of each loan can not be later than the date of expiry within the period.

10.2 If the businesses stipulated in the main contract are acceptance of bill/ letter of credit/open letter of guarantee (Or letter of delivery) , the date of party B to accept the bill, open letter of credit or open the guarantee or letter of delivery can not later than the date of expiry within the period.

10.3 The expiry date for each creditor’s right should be based on the expiry date stipulated in each exact business contract, no matter if it has been expired or not in the period.

Section two: The scope of guaranty

11. Under the main contract, the guarantee’s range for Party A is debt capital, interest, overdue interest, punitive interest, compound interest, liquidated damages, compensation for damages, the fees for party B to achieve the creditor’s right ( including but not limited to litigation fee, arbitration fee, maintenance fee, the announcement fee, appraisal fee, assessment fee, auction fee, trip fee, telegraph fee, lawyer fee etc) and all the other main contract debtor’s due fee.

12. All the fees except the principal in the above mentioned range, should be calculated into Party A’s guaranteed scope, but shall not be calculated into guaranteed amount of claims under the contract.

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Section 3.  The assurance of guaranteed creditor’s right and guaranteed method

13. The guaranteed creditor’s right will be confirmed under the contract when anyone of the following situations happen:

13.1 The main creditor’s right stipulated in clause 3’s period is expired

13.2 Based on the legal regulation or main contract’s stipulation , the main contract creditor announce all the debt under the contract are expired ahead of time.

13.3 The other circumstances confirmed by guaranteed creditor’s right by law.

14. The followings take effect when the guaranteed creditor’s right is confirmed under the contract.

14.1 When the guaranteed creditor’s right fixed, the outstanding creditor’s right under the main contract, no matter if the deadline for performance is expired or additional condition existed, all belong to guaranteed creditor’s right scope.

14.2 When the guaranteed creditor’s right fixed, all the payment except principal stipulated in clause 11 of the contract, no matter if it is happened when fixed, all belong to guaranteed creditor’s right scope.

15. The guarantee method for party A is joint liability, starting from the fixed date of guaranteed creditor’s right and not finished until all the guaranteed creditor’s right have been paid off, if the main contract debtor did not perform the payment liability, the Party B has the right to file a claim for recovery to Party A directly, and Party A should immediately pay off the concerning debt to Party B.

16. If there are other guarantees (include but not limited to main contract debtor provide Party B the material guarantee) except the guarantee method stipulated in the contract, the party B has the priority to choose performing the right under the contract, and also request party A to take jointly liability, the guarantee responsibility from party A to party B will not be affected by other guarantees, party B to claim right or proceed sue /arbitration/ enforcement will not be taken as a premise to undertake its guaranteed responsibilities. If party B waive, alter the material guarantee from main contract debtor, or change the sequence of guarantee, caused its prior compensation right under the above mention material guarantee get lost or reduced, Party A agrees its guarantee responsibility under the contract will not be waived or reduced.

17. If party A to provide the guarantee for some creditor’s right under the contract, the creditor’s right under the main contract get some paid off will not reduce or relief the guarantee liability of party A, and party A still need to take the guarantee responsibility for unpaid balance within the scope under the contract.

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18. If the debtor make the early payment under the contract or discuss with the party B to change the interest, party A will carry on the guarantee responsibility for party B ‘s creditor right after changed.

Part 4  Guarantee Period

19. The guarantee period for party A to take guarantee responsibility is two years, the date will be calculated as follows:

19.1 The deadline for the performance of any debt is earlier or the same as the fixed date of guaranteed creditor’s right, the starting date of guaranteed period for party A to take the guarantee responsibility is counted as the fixed date of guaranteed creditor’s right.

19.2 The deadline for the performance of any debt is later than the fixed date of guaranteed creditor’s right, the starting date of guaranteed period for party A to take the guarantee responsibility is counted as the deadline date of performance for this debt.

20. The deadline date of performance for the debt include if the main contract debtor take the installment payment, the expiry date for each debt, also include based on the stipulation of main contract, the creditor to announce the date of debt which is expired ahead of time.

21. If the business for main contract is letter of credit, acceptance bill, guarantee letter, delivery guarantee, the date of advance payment is deemed as the deadline date of performance for the debt.

Section 5 Party A ‘s Right and Obligation

22. Party A understand and agree all the clauses of contract, and willingly to provide guarantee for main contract debtor and pay off on debtor’s behalf based on the contract.

23. During the contract period , party A should provide actual information such as personal information , incoming, expense, debt, guarantee and other circumstance about economy conflict with others.

24. All the files party A provide to party B should be real, accurate, legal and valid.

25. During the contract period, party A should inform party B in writing about the change of personal or family income, personal identification and legal address or other issues may effect party A’s guarantee ability such as sue, arbitration or other issue within 3 days.

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26. During the contract period, party A should inform B about the change of name, living location and contact information in writing in 7 days after changing.

27. Party A will promise not to provide to third party other kinds of guarantee which exceed its own guarantee capacity.

28. When the Party A’s payment under the contract is due, party B has the right to charge from any accounts which A owns in B’s operation place directly at anytime, if still has balance, Party A still need to pay off.

29. Party B signed the detailed contract with main contact debtor, no need to inform party A.

30. When borrow new capital for previous debt under the contract, party A still take the guarantee responsibility willingly.

Section 6 The Right and Obligation for Party B

31. Party B has the right to ask party A to provide all data to reflect party A ‘s qualification.

32. If party failed to perform the obligation under the contract, party B should charge it directly from any accounts party A own in Huaxia bank, when do so, if the currency in the account is different with main debt currency, should convert it based on party B’s up to date exchange rate.

Section 7 Liability for Breach of Contract

33. When the contract takes effect, both party A and B should perform its obligation, fail to do so or take only partial obligation should take the liability for breach the contract accordingly, and compensate to other party.

Section 8 Effectiveness of Contract

34. The contract will take its effect when both parties sign it.

35. The effectiveness of the contract is independent with main contract, will not be invalid with main contract’s invalid, if the main contract is confirmed to be invalid, thus party A will take the joint liability for main contract debtor’s debt while returning the property or compensate the loss.

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Section 9 The assignment of Contract, Change and Termination

36. While the contract become effective, both party A and B can not change or termination this contract without authorization.

37. During the contract period, while party B transfer the creditor’s right to third party, no need to get the approval form party A, but should inform party A, party A should still carry on its joint liability in the same scope.

38. If the type of main creditor’s right under the contact is credit card advance, after party A confirm, to modify the letter of credit with the consent of applicant and party B, if the modified amount in the credit card( the amount exclude interest, Liquidated damages,compensation and other related fees)will not exceed the guaranteed maximum creditor’s right under the contract, no matter how to change the amount or other clauses, the above amends will all be deemed as having party A’s prior’s consent. The guarantee contract will still be effective, and party A still carry on joint liability.

Section 10 Supplementary Provision

39. During the contract period, if party A change its name, address and contact information without informing party B, all the information required by contract sent to previous mail information from Party B will be deemed as delivered successfully,

40. While have □ option in contract, have √ inside means this clause is applicable, × means not applicable.

41. Section all the appendixes under the contract is taken as supplementary provisions for contract, having the same legal right with main contract.

42. Party A has read and fully understand all the clauses in contract, and party B has taken reasonable method to remind party A all the responsibility waiving and restricting  clauses, and fully explaining the related clauses per party A’s request, there is no conflicts in both parties’ understanding in this contract.

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Signature Page
Party A (Entrusted Agent)	(Signature)
September 13, 2011

Party B Huaxia bank co.ltd Ningbo branch (Stamp)

Legal Representative/ Principals: Kaiwen Wei

(Entrusted Agent)

September 13, 2011

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EX-10.64

Exhibit 10.64

Guarantee Contract

(Maximum)

China Construction Bank

Ningbo Branch

Contract No.: G1230-2012-0J9

Guarantor (Party A): Ningbo Litong Petrochemical Co.,Ltd

Domicile: Room 425 No.4 Hengyang Community ,Beilun Zone, Ningbo

Postal Code:315800

Legal Representative (Principal):Hongjiao Chen

FAX:                Telephone No.:86152818

Loaner (Party B): China Construction Bank Inc，Beilun Branch

Domicile: No.251, Xinda Road, Beilun   Postal Code: 315800

Principal: Jiangen Han

FAX: 86882154              Telephone No.:86884361

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In view of Party B handled Ningbo Keyuan Plastics Co., Ltd. as (called “loanee”) the following FIRST ,SECOND,THIRD ,FOURTH credit business continually and it will or it has signed the RMB Fund Loan Contract, the Foreign Exchange Fund Loan Contract, the Bank Accepts Agreement, the Credit Card Contract, the Issue Guarantee Agreement and/or other legal documents (the above-mentioned signed contracts, agreements and/or other legal documents in debt to determine period are called “main contract”) with the loanee from 23/03/2012 to 22/03/2014(called “loaner’s rights determined period”):

(1)   Issuing RMB/Foreign Currency Loan

(2)   Honoring Commercial Bill

(3)   Opening the Letter of Credit

(4)   Issuing Guarantee

(5)   Other Credit Business (blank)

Party A is willing to provide the maximum guarantee for a series of loanee’s debts under the contract. According to the related laws, regulations and rules, both

sides conclude this contract by consensus in order to abide with law enforcement.

Article 1 Guaranty of Scope

1.   The guaranty of scope as following :

(1)  Under the main contract, loan principal is not greater (Currency) RMB(Amount in Words) 50 million; and

(2)  Interests (including compound interests and default interests), liquidated damages, compensations, other funds (including but not limiting the related poundage, telecommunication charges, incidentals, letter of credit under that the related bank charges which the beneficiary refuses to bear and the like) the loanee pays for party B, the expenses of party B realizing loaner’s rights and guaranteeing rights (including but not limiting costs, arbitration fees, property preservation fees, travel expenses, execution fees, valuation fees, auctioneers fees, notarial fees, service fees, advertising fees, counsel fees and the like).

2.   If the Party A takes the guaranty responsibility according to the contract ,Party B will make some discount for the maximum based on its paid loan principal.

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3.   Under the main contract, credits, advances, interests, expenses or the real formation time of any other debts of party B’s even if it is out of debt determined period are still belong to the scope of guaranty of the maximum amount. The expiration of the time limit for paying debts under the main contract is not confined to the last day of the period debts determined.

Article 2 Guarantee Way

Guarantee provided by Party A under the contract is guarantee of joint responsibility.

Article 3 Guarantee Period

(1)   The guarantee periods under the contract are respectively calculated according to the single active business handled by Party B as the loanee, namely two years, starting from the date of signing of the main contract of single active business, after the expiration date of deadline for performance of debt of the loanee under the main contract.

(2)   If Party B and loanee conclude the agreement period extending on the deadline for performance of debt under the main contract, the guarantee period will be effective for two years after the expiration date of deadline for performance of debt agreed by the contract of period extending once again. The extending of period needs no approval of the guarantor, however, the guarantor has to assume the joint guarantee responsibility.

(3)   If there arise laws and regulations or arranged items in the main contract, party B declares the contract terminates after two years from maturity of debts in advance in the guarantee period to the day of maturity of debts in advance.

Article 4 of the Independence of the Guaranty Contract

The validity of the contract is separated from the main contract. It will not affect the validity of this contract when the main contract is inexistent, ineffective, invalid, part invalid or canceled, terminated. If the main contract is notarized inexistent, ineffective, invalid, part invalid or canceled, terminated, party A will also bear joint responsibility for the debts formed by the loanee because of restitution of property or compensation of loss.

Article 5 Modification of the Main Contract

1.   Party A agrees that party B signs the main contract with the loanee or modifies any items in the main contract (including but not limiting extension of time for fulfilling obligation or increased capital of loaner’s rights) without noticing party A, but party A still bear Guaranty liability within the maximum amount of this contract and the agreed scope of guaranty.

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2.    Party A’s guarantee liability will not be abated when it emerges any situations following:

(1) The situation that party B or the loanee make restructuring of enterprise, merge, acquisition, separation, capital changes, joint venture, joint operation, name changes and so on.

(2) Party B entrusts the third party to fulfill the obligations under the main contract.

3 When the obligatory rights under the main contract are transferred, the Guaranty of this contract shall be transferred concurrently.

4 If the transference of the obligatory rights or the debts under the main contract is not going into effect, or is invalid, or is revoked or terminated, party A still bear joint guarantee liability in accordance with this contract.

Article 6 Guarantee Liability

1 If debts under the main contract fall due or party B declares that debts expires in advance according to agreements of the main contract or laws and regulations and the loanee is late with full payment or violates other agreements of the main contract, party A shall bear the guarantee liability within the scope of the guarantee.

2 No matter whether party B has other guarantees (including but not limiting the way of guarantee: pledge, mortgage, hypothecation, letter of guarantee, standby letter of credit, etc.) of the loaner’s rights under the main contract, and no matter when the above mentioned other guarantees establish, whether they are effective, whether party B presents assertion of rights to other guarantors, and no matter whether there is the third party who agrees to take responsibility for the whole or part debts under the main contract; and no matter the loanee provides other guarantees by self, all of party A’s guarantee liability of this contract will not be abated for these reasons and party B has the right to require party A to bear the guarantee liability within the agreed scope of guarantee according to this contract but party A will not raise an objection.

3.   If after party A bearing the guarantee liability but it has not paid off debts under the main contract yet, party A will promise to offer other loanees or guarantors (including exercise in advance) subrogation or indemnity in order to guarantee party B’s benefits, and agree that liquidation of debts of the main contract is prior to the subrogation or indemnity of party A.

Specifically, before all debts of party B being paid off,

(1) Party A agrees that he will not ask the loanees or other guarantors for subrogation or indemnity: if party A enforces these rights, he should take the gained money to clear off the debts which party B has not obtained indemnity;

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(2)  If debts under the main contract have security for thing, party A agrees that will not propose the assertion of rights for the guaranty or its cost after sanction for the reason of subrogation or any other reasons and this guaranty and its cost should give priority to clear off the debts which party B has not obtained indemnity;

(4)   If the loanees or other guarantors provide the counter guarantee to party A, party A gets the money from the counter guarantee should give priority to clear off the debts which party B has not obtained indemnity.

4.   Party A has fully realized the interest rate risk. If party B adjusts interest rates, interest accruals or clearing forms according to agreements of the main contract or changes of national interest rate policy and leads interests, default interests and compound interests which loanees should repay to increase, party A also should bear joint guarantee liability for the increased part.

5.   If the loanee has any other due debt owing to Party B, except the debt under the main contract, Party B has the right to use the RMB or other currency in the account opened by the loanee in the system of Construction Bank of China to pay off the first due debt, and the guarantee responsibility of Party A has no remission because of it.

Article 7 Other Obligations of Party A

1 Party A shall monitor the use condition (including usage) of loan of the loanee, and receive the monitoring of Party A’s funds, assets and operation condition by Party B, provide the related information, document and data of the financial statement according to the requirement of Party B, and ensure its accuracy, truthfulness, completeness and effectiveness. Without the written approval of Party B, Party A shall not provide the guarantee that is beyond its own affordability to a third party.

2 If there occurs contract, trusteeship (receivership), lease, shareholding reformation, decreasing of registered capital, investment, joint operation, mergence, consolidation, acquisition and reconstruction, separation, joint venture, application of suspending business to bring up to standard, application of dissolution, being revoked, application of bankruptcy, alteration of controlling shareholders/real controllers or transference of asset, cessation of production, closing a business, heavy fines by entitled institutions, cancellation of registration, revocation of the license, involving major legal disputes, exceptional hardship of operation or deterioration of financial position, incapable fulfillment of duties normally by legal representatives or principals, or full or partial incapacitation of guarantee liability for any reasons, party A should notice party B in written immediately and practice the commitment, transference or adoption of this contract’s guarantee liability according to party B’s requirement, or provide a new guarantee accepted by party B for the fulfillment of the main contract.

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3 If party A alters business registrations like name, legal representatives (principals), domicile, scope of business, registered capital or firm’s (enterprise’s) regulations, he should notice party B in written within 5 workdays and enclose the related materials after alteration.

Article 8 Other Clauses

1 Gathering Accrued Expenses

For all of party A’s accrued expenses of this contract, party B has the right to get relevant money of RMB or other currencies from the account in China Construction Bank from party A, and does not need to notice party A in advance. When party B needs to handle the foreign exchange, party A is in duty bound to assist party B and also bear the interest rate risks.

2 Making Use of Party A’s Information

Party A agrees that party B can query party A’s trustworthiness from PCR or units concerned or department concerned and party B provides party A’s information to PCRS, and party B can properly use and disclose party A’s information for business requirement.

3 Announcement Collection

For party A’s nonperformance, party B has the right to inform party A through units concerned or department concerned and announce collection through the news media.

4 The Efficacy of Evidence Recorded by Party B

Only when there are reliable and doubtless contrary evidences, party B’s recording interior accounts about capitals, interests, expenses and repayments, and the documents, made or reserved by party B during the loanee making transactions like drawing money, repaying, paying for interests and the records, vouchers during party B collecting credits, all efficiently prove the doubtless evidences of credit under the main contract. Party A cannot raise an objection only for these records, documents and vouchers are made or reserved by party B.

5 Reservation of Rights

Party B’s rights of this contract will not affect and exclude any rights shared by other contracts according laws and regulations. Any tolerance, grace and privilege is used for any nonperformance or delay, or delay to execute any rights of this contract, all of these will not regard as abandonment of rights and benefits or permission of any violation, and they also will not affect, deter and hinder the continual execution of this right or the execution of any other right. Moreover, they will not cause party B to bear obligation and responsibility for party A.

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If party B does not execute or delay to execute any rights of the main contract, or he does not use up any remedies of the main contract, party A’s guarantee liability of this contract will not be abated, but if party B abate debts of the main contract, party A’s guarantee liability of this contract will be abated accordingly.

6.   Disbandment or Bankruptcy of Loanees

When party A know the loanees turn into disbandment or bankruptcy, he should notice party B to apply for loaner’s rights immediately and join the procedure of disbandment or bankruptcy concurrently and execute the right of indemnity in advance. If party A has knew or should know the loanees turn into disbandment or bankruptcy but he has not executed the right of indemnity in advance immediately, losses are suffered by party A himself.

The second agreement of article 5 writes, during the procedure of bankruptcy of loanees, if party B comes to a settlement agreement with loanees or consents to a reforming plan, and party B’s rights are not damaged because of them, party A’s guarantee liability will not abated. What’s more, party A cannot withstand party B’s assertion of rights with a settlement agreement and a reforming plan as qualifications. During the settlement agreement and the reforming plan, part of debts which has not paid off when party B makes a concession to loanees, party B still has the right to require party A to pay off debts continually.

7.   Disbandment or Bankruptcy of Party A

In case of disbandment or bankruptcy of Party A, though Party B’s obligatory right under the main contract is unmatured, Party B also has the right to participate in the liquidation or bankruptcy program of Party A and the right of declaration.

8 If the correspondence address or the contact method of Party A change, written notice shall be given to Party B immediately, and all the loss resulted from the delay of notice shall be assumed by Party A.

9 The Way of Settling Disputes

Disputes occur during the fulfillment of this contract can be settled by consulting, if consultation fails, solving the disputes in accordance with the first method:

(1)   Sue in People’s Court of party B’s domicile.

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(2) Submitto Arbitration Committee (place of arbitration is), according to the application of arbitration, the committee will arbitrate by actual and effective rules. The arbitration award is the final award and binding upon both.

During the lawsuit or arbitration, other parts excluding disputes of this contract still perform.

10 Conditions for Effect-Taking

This contract will take effect after the two parties sign or seal it.

11 The Contract is in Four Originals.

12 Other Agreed Items

Article 9 The Statement and Guaranty of Party A

1 Party A knows the scope of party B’s business and authorization exactly.

2 Party A has read all clauses of this contract and the main contract. At the request of party A, party B has done relevant explanations for this contract and the main contract. In addition, party A has thoroughly understood and fully comprehended the implications and relevant legal consequences of this contract and the main contract.

3 Party A is legally qualified to be a guarantor. And party A’s guarantee behavior of this contract is in conformity with laws, administrative regulations, rules and party A’s regulations or interior prescriptive documents, and he has obtained approval from the internal competent institutions of the company and/or national competent authorities. If party A has no right to sign this contract, all responsibilities, including but not limiting full payment for losses suffered by party B, should be undertaken by

party A.

4 Party A confirms that he has an adequate acquaintance with the loanee’s asset, debts, operation, credit, reputation and so on, and whether he has the main qualification and power of awarding the main contract, and he fully knows all contents of the main contract.

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Party A (common seal): Ningbo Litong Petrochemical
Legal Representative (principal) or Authorized Agent (sign):
March 23th, 2012
Party B (common seal): China Construction Bank Inc，Beilun Branch
Legal Representative (principal) or Authorized Agent (sign):

March 23th, 2012

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EX-10.65

Exhibit 10.65

Contract No.: G9110-2012-004

Guarantor (Party A): Ningbo Pacific Ocean Shipping Co., Ltd

Domicile: No.388 Pinghai Road Zhenhai, Ningbo

Postal Code:315200

Legal Representative (Principal):Jichun Wang

FAX: 86290099                     Telephone No.:86292777

Loaner (Party B): China Construction Bank Inc, Beilun Branch

Domicile: No.251, Xinda Road, Beilun   Postal Code: 315800

Principal: Jiangen Han

FAX: 86882154                    Telephone No.:86884361

In view of Party B handled Ningbo Keyuan Plastics Co., Ltd. as (called “loanee”) the following FIRST , THIRD ,Fifth credit business continually and it will or it has signed the RMB Fund Loan Contract, the Foreign Exchange Fund Loan Contract, the Bank Accepts Agreement, the Credit Card Contract, the Issue Guarantee Agreement and/or other legal documents (the above-mentioned signed contracts, agreements and/or other legal documents in debt to determine period are called “main contract”) with the loanee from 26/10/2011 to 25/10/2013(called “loaner’s rights determined period”):

(1)   Issuing RMB/Foreign Currency Loan

(2)   Honoring Commercial Bill

(3)   Opening the Letter of Credit

(4)   Issuing Guarantee

(5)   Other Credit Business (blank)Trade Financing like Refinancing .

Party A is willing to provide the maximum guarantee for a series of loanee’s debts under the contract. According to the related laws, regulations and rules, both sides conclude this contract by consensus in order to abide with law enforcement.

Article 1 Guaranty of Scope

1.   The guaranty of scope as following :

(1) Under the main contract, loan principal is not greater (Currency) RMB (Amount in Words) 220 million; and

(2) Interests (including compound interests and default interests), liquidated damages, compensations, other funds (including but not limiting the related poundage, telecommunication charges, incidentals, letter of credit under that the related bank charges which the beneficiary refuses to bear and the like) the loanee pays for party B, the expenses of party B realizing loaner’s rights and guaranteeing rights (including but not limiting costs, arbitration fees, property preservation fees, travel expenses, execution fees, valuation fees, auctioneers fees, notarial fees, service fees, advertising fees, counsel fees and the like).

2.   If the Party A takes the guaranty responsibility according to the contract , Party B will make some discount for the maximum based on the paid loan principal.

3.   Under the main contract, credits, advances, interests, expenses or the real formation time of any other debts of party B’s even if it is out of debt determined period are still belong to the scope of guaranty of the maximum amount. The expiration of the time limit for paying debts under the main contract is not confined to the last day of the period debts determined.

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Article 2 Guarantee Way

Guarantee provided by Party A under the contract is guarantee of joint responsibility.

Article 3 Guarantee Period

(1)   The guarantee periods under the contract are respectively calculated according to the single active business handled by Party B as the loanee, namely two years, starting from the date of signing of the main contract of single active business, after the expiration date of deadline for performance of debt of the loanee under the main contract.

(2)   If Party B and loanee conclude the agreement period extending on the deadline for performance of debt under the main contract, the guarantee period will be effective for two years after the expiration date of deadline for performance of debt agreed by the contract of period extending once again. The extending of period needs no approval of the guarantor, however, the guarantor has to assume the joint guarantee responsibility.

(3)   If there arise laws and regulations or arranged items in the main contract, party B declares the contract terminates after two years from maturity of debts in advance in the guarantee period to the day of maturity of debts in advance.

Article 4  The Independence of the Guaranty Contract

The validity of the contract is separated from the main contract. It will not affect the validity of this contract when the main contract is inexistent, ineffective, invalid, part invalid or canceled, terminated. If the main contract is notarized inexistent, ineffective, invalid, part invalid or canceled, terminated, party A will also bear joint responsibility for the debts formed by the loanee because of restitution of property or compensation of loss.

Article 5 Modification of the Main Contract

1.   Party A agrees that party B signs the main contract with the loanee or modifies any items in the main contract (including but not limiting extension of time for fulfilling obligation or increased capital of loaner’s rights) without noticing party A, but party A still bear Guaranty liability within the maximum amount of this contract and the agreed scope of guaranty.

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2.    Party A’s guarantee liability will not be abated when it emerges any situations following:

(1) The situation that party B or the loanee make restructuring of enterprise, merge, acquisition, separation, capital changes, joint venture, joint operation, name changes and so on.

(2) Party B entrusts the third party to fulfill the obligations under the main contract.

3 When the obligatory rights under the main contract are transferred, the Guaranty of this contract shall be transferred concurrently.

4 If the transference of the obligatory rights or the debts under the main contract is not going into effect, or is invalid, or is revoked or terminated, party A still bear joint guarantee liability in accordance with this contract.

Article 6 Guarantee Liability

1 If debts under the main contract fall due or party B declares that debts expires in advance according to agreements of the main contract or laws and regulations and the loanee is late with full payment or violates other agreements of the main contract, party A shall bear the guarantee liability within the scope of the guarantee.

2 No matter whether party B has other guarantees (including but not limiting the way of guarantee: pledge, mortgage, hypothecation, letter of guarantee, standby letter of credit, etc.) of the loaner’s rights under the main contract, and no matter when the above mentioned other guarantees establish, whether they are effective, whether party B presents assertion of rights to other guarantors, and no matter whether there is the third party who agrees to take responsibility for the whole or part debts under the main contract; and no matter the loanee provides other guarantees by self, all of party A’s guarantee liability of this contract will not be abated for these reasons and party B has the right to require party A to bear the guarantee liability within the agreed scope of guarantee according to this contract but party A will not raise an objection.

3.If after party A bearing the guarantee liability but it has not paid off debts under the main contract yet, party A will promise to offer other loanees or guarantors (including exercise in advance) subrogation or indemnity in order to guarantee party B’s benefits, and agree that liquidation of debts of the main contract is prior to the subrogation or indemnity of party A.

Specifically, before all debts of party B being paid off,

(1) Party A agrees that he will not ask the loanees or other guarantors for subrogation or indemnity: if party A enforces these rights, he should take the gained money to clear off the debts which party B has not obtained indemnity;

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(2) If debts under the main contract have security for thing, party A agrees that will not propose the assertion of rights for the guaranty or its cost after sanction for the reason of subrogation or any other reasons and this guaranty and its cost should give priority to clear off the debts which party B has not obtained indemnity;

(4)   If the loanees or other guarantors provide the counter guarantee to party A, party A gets the money from the counter guarantee should give priority to clear off the debts which party B has not obtained indemnity.

3.   Party A has fully realized the interest rate risk. If party B adjusts interest rates, interest accruals or clearing forms according to agreements of the main contract or changes of national interest rate policy and leads interests, default interests and compound interests which loanees should repay to increase, party A also should bear joint guarantee liability for the increased part.

4.   If the loanee has any other due debt owing to Party B, except the debt under the main contract, Party B has the right to use the RMB or other currency in the account opened by the loanee in the system of Construction Bank of China to pay off the first due debt, and the guarantee responsibility of Party A has no remission because of it.

Article 7 Other Obligations of Party A

1 Party A shall monitor the use condition (including usage) of loan of the loanee, and receive the monitoring of Party A’s funds, assets and operation condition by Party B, provide the related information, document and data of the financial statement according to the requirement of Party B, and ensure its accuracy, truthfulness, completeness and effectiveness. Without the written approval of Party B, Party A shall not provide the guarantee that is beyond its own affordability to a third party.

2 If there occurs contract, trusteeship (receivership), lease, shareholding reformation, decreasing of registered capital, investment, joint operation, mergence, consolidation, acquisition and reconstruction, separation, joint venture, application of suspending business to bring up to standard, application of dissolution, being revoked, application of bankruptcy, alteration of controlling shareholders/real controllers or transference of asset, cessation of production, closing a business, heavy fines by entitled institutions, cancellation of registration, revocation of the license, involving major legal disputes, exceptional hardship of operation or deterioration of financial position, incapable fulfillment of duties normally by legal representatives or principals, or full or partial incapacitation of guarantee liability for any reasons, party A should notice party B in written immediately and practice the commitment, transference or adoption of this contract’s guarantee liability according to party B’s requirement, or provide a new guarantee accepted by party B for the fulfillment of the main contract.

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3 If party A alters business registrations like name, legal representatives (principals), domicile, scope of business, registered capital or firm’s (enterprise’s) regulations, he should notice party B in written within 5 workdays and enclose the related materials after alteration.

Article 8 Other Clauses

1     Gathering Accrued Expenses

For all of party A’s accrued expenses of this contract, party B has the right to get relevant money of RMB or other currencies from the account in China Construction Bank from party A, and does not need to notice party A in advance. When party B needs to handle the foreign exchange, party A is in duty bound to assist party B and also bear the interest rate risks.

2     Making Use of Party A’s Information

Party A agrees that party B can query party A’s trustworthiness from PCR or units concerned or department concerned and party B provides party A’s information to PCRS, and party B can properly use and disclose party A’s information for business requirement.

3     Announcement Collection

For party A’s nonperformance, party B has the right to inform party A through units concerned or department concerned and announce collection through the news media.

4     The Efficacy of Evidence Recorded by Party B

Only when there are reliable and doubtless contrary evidences, party B’s recording interior accounts about capitals, interests, expenses and repayments, and the documents, made or reserved by party B during the loanee making transactions like drawing money, repaying, paying for interests and the records, vouchers during party B collecting credits, all efficiently prove the doubtless evidences of credit under the main contract. Party A cannot raise an objection only for these records, documents and vouchers are made or reserved by party B.

5     Reservation of Rights

Party B’s rights of this contract will not affect and exclude any rights shared by other contracts according laws and regulations. Any tolerance, grace and privilege is used for any nonperformance or delay, or delay to execute any rights of this contract, all of these will not regard as abandonment of rights and benefits or permission of any violation, and they also will not affect, deter and hinder the continual execution of this right or the execution of any other right. Moreover, they will not cause party B to bear obligation and responsibility for party A.

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If party B does not execute or delay to execute any rights of the main contract, or he does not use up any remedies of the main contract, party A’s guarantee liability of this contract will not be abated, but if party B abate debts of the main contract, party A’s guarantee liability of this contract will be abated accordingly.

6.     Disbandment or Bankruptcy of Loanees

When party A know the loanees turn into disbandment or bankruptcy, he should notice party B to apply for loaner’s rights immediately and join the procedure of disbandment or bankruptcy concurrently and execute the right of indemnity in advance. If party A has knew or should know the loanees turn into disbandment or bankruptcy but he has not executed the right of indemnity in advance immediately, losses are suffered by party A himself.

The second agreement of article 5 writes, during the procedure of bankruptcy of loanees, if party B comes to a settlement agreement with loanees or consents to a reforming plan, and party B’s rights are not damaged because of them, party A’s guarantee liability will not abated. What’s more, party A cannot withstand party B’s assertion of rights with a settlement agreement and a reforming plan as qualifications. During the settlement agreement and the reforming plan, part of debts which has not paid off when party B makes a concession to loanees, party B still has the right to require party A to pay off debts continually.

7.     Disbandment or Bankruptcy of Party A

In case of disbandment or bankruptcy of Party A, though Party B’s obligatory right under the main contract is unmatured, Party B also has the right to participate in the liquidation or bankruptcy program of Party A and the right of declaration.

8 If the correspondence address or the contact method of Party A change, written notice shall be given to Party B immediately, and all the loss resulted from the delay of notice shall be assumed by Party A.

9 The Way of Settling Disputes

Disputes occur during the fulfillment of this contract can be settled by consulting, if consultation fails, solving the disputes in accordance with the first method:

(1) Sue in People’s Court of party B’s domicile.

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(2) Submitto Arbitration Committee (place of arbitration is), according to the application of arbitration, the committee will arbitrate by actual and effective rules. The arbitration award is the final award and binding upon both.

During the lawsuit or arbitration, other parts excluding disputes of this contract still perform.

10 Conditions for Effect-Taking

This contract will take effect after the two parties sign or seal it.

11 The Contract is in Four Originals.

12 Other Agreed Items

The guarantee contract ( Maximum) signed on October 26, 2011 with reference No.G9110-2011-012 is waived ,the guarantee contract (Maximum) include financial claim under Refinancing item issued on December 9, 2011 and financial claim under sight letter of credit item issued on December 16, 2011.

Article 9 The Statement and Guaranty of Party A

1 Party A knows the scope of party B’s business and authorization exactly.

2 Party A has read all clauses of this contract and the main contract. At the request of party A, party B has done relevant explanations for this contract and the main contract. In addition, party A has thoroughly understood and fully comprehended the implications and relevant legal consequences of this contract and the main contract.

3 Party A is legally qualified to be a guarantor. And party A’s guarantee behavior of this contract is in conformity with laws, administrative regulations, rules and party A’s regulations or interior prescriptive documents, and he has obtained approval from the internal competent institutions of the company and/or national competent authorities. If party A has no right to sign this contract, all responsibilities, including but not limiting full payment for losses suffered by party B, should be undertaken by

party A.

4 Party A confirms that he has an adequate acquaintance with the loanee’s asset, debts, operation, credit, reputation and so on, and whether he has the main qualification and power of awarding the main contract, and he fully knows all contents of the main contract.

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Party A (common seal): Ningbo Pacific Ocean Shipping Co., Ltd

Legal Representative (principal) or Authorized Agent (sign): 

October 26, 2011

Party B (common seal): China Construction Bank Inc, Beilun Branch

Legal Representative (principal) or Authorized Agent (sign): 

October 26, 2011

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EX-10.66

Exhibit 10.66

Maximum Guarantee Contract

China Citic Bank Inc,

Maximum Guarantee Contract

Guarantor: Ningbo Litong Petrochemical Co., Ltd (hereinafter refereed to as the Party A)

Address: Room no 312, 12 building, Xifang area , Dagang, xonhuajiang road, Xinqi sub district, Beilun district, Ningbo city, Zhejiang province,

Post code: 315000

Tel: 86232616

Fax: 86232616

Legal representative: Liangcai Zhu

Opening bank and account no: Ningbo economical and development zone branch, agriculture bank, 39202001040007670

Creditor: China Citic Bank Ningbo branch, (hereinafter refereed to as the party B)

Address: no 36, zhengming road, Haishu district, Ningbo city, Zhejiang province

Post code: 315010

Tele: 0574-87731188

Fax:

Legal representative/ Principal : Nianlu Xia

The contract signing location: Beilun Ningbo

Signing date: 15th Apr, 2011

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Based on the provisions of the Guaranty Law , contract law of the Peoples Republic of China and other related applicable law and regulations. To make sure Party B will have several creditor’ right (hereinafter referred to as main creditor right)  with debtor--- Ningbo Keyuan Plastics Co., Ltd (hereinafter referred to as “contract debtor) continuously during the contract period in terms. Party A is willing to provide guarantee to Party B  the maximum guarantee amount, both parties signed the contract after mutual agreements as follows:

Article 1 Definition

1.1 The maximum guarantee: means party A and B to fix a maximum amount for the debtor ‘s many debts in a certain period, and party A will guarantee the Party B the debtor will perform the debt within maximum amount. The maximum is the total sum for all the debts( and potential debts) for debtor to take care.

Article 2 The guaranteed main creditor’s right

2.1 The guaranteed main creditor’s right is a serial of creditor’s right happen after party B to credit to debtor since 15th of Apr of 2011 to 15th of Apr of 2014, including but not limited to all kinds of loans, bills, guarantee letter, credit care and other kinds of bank business.

2.2 The guaranteed main creditor’s right maximum amount is 220,000,000 RMB, if party A to perform the guarantee obligation based on this contract, the maximum amount will be deducted according to the performed amount.

2.3 Within the confirmed period and maximum amount, the contract, agreement and other legal documents between party B and debtor to form a debt and creditor’s right relationship will be the main contracts.

Article 3 Guarantee method

3.1 The guarantee method for party A is joint liability, if a single debt under the main contract is expired , but debtor did not perform the payment liability or partial liability, the Party B has the right to file a claim for recovery to Party A directly.

3.2 When the debtor does not perform the debt based on the main contract, no matter if the party B has other guarantee for the creditor’s right under the main contract( including but not limited to promise, mortgage, pledge, guarantee letter, the standby letter of credit etc), party B shall have the right to ask party A to take guarantee responsibility within the scope.

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Article 4 Guarantee period

4.1 The party A ‘s guarantee period is 2 years, means the two years after the expiry date of debtor’s debt period stipulated in the contract. Each detailed debt’s guarantee period will be calculated separately.

4.2 If the debt expired in advance based on the requirement of law, regulation or main contract or the stipulation of both party’s agreement, the date for expiry date in advance is the expiry date for debt period.

4.3 If the business under the contract is LC or acceptance bill or guarantee letter, the period is starting from two years since the advance payment, it is advance payment in several times, the period is starting from each date of advance payment.

Article 5 Scope for guarantee

5.1 Under the main contract, the guarantee’s scope for Party A is debt capital, interest, overdue interest, punitive interest, compound interest, liquidated damages, compensation for damages, the fees for party B to achieve the creditor’s right ( including but not limited to litigation fee, arbitration fee, attorney fee(within 10% of main creditor’s right amount) ,trip fee, , appraisal fee, assessment fee, auction fee, transfer fee, preservation fee, announcement fee, executive fee etc) and all due fee.

Article 6 Party A’s statement and guarantee

6.1 Party A is a legal person or other organization established according to the law of people republic of China, and have the capacity for civil rights and behavior ability to sign and perform contract, can solely take civil responsibility, and party A has obtained all approval and authorized to sign the contract.

6.2 Party A fully understand and agree all the clauses in the main contract, and willingly to  provide the guarantee for creditor, and all the expressed meaning under the contract is true.

6.3 The establishment of the guarantee will not get any restrict and cause any illegal situation.

6.4 All the documents, report and statement provided by party A shall be legal, true and accurate and complete, except the information expose to party B, party A does not hold other material debt( potential debt), breach, litigation, arbitration which may affect the contract or other big issue to influence the capital to party B.

Article 7 Party A’s right and obligation

7.1 Party A should provide party B with legal documents which can prove its legal identity.

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7.2 During the contract period, if party A changed its legal person name, legal representative, project manager, address, telephone, fax etc, should inform Party B in writing in 7 days after changing.

7.3 When the expiry of debt’s deadline or expiry in advance , if debtor did not pay the capital and interest under the contract provision, the party B has right to ask party A to pay off directly, party A will not have any reason to reject any claim from party B, and waive the right of defense in the article 22 of (law of warranty).

7.4 It is party A’s obligation to provide balance sheet and all report for external guarantee, and provide the party B with which really reflect the financial progress report and other documents in regular basis or any time per party B’s request.

7.5 During the contract period, the following things happened including but not limited to share transfer, reorganization, merger, separation, stock system reform, joint venture, cooperation, association, contracting, lease,  operation scope change and registered capital change, material capital transfer and other issues may cause or effect its ability to guarantee for party A, should inform the party B in writhing 30 days ahead.

7.6 During the contract period, if the following circumstance happen to party A (including but not limited to): closure, suspension, application or announce bankrupt, dissolve, the license was suspended , revoked, the financial situation deteriorate, or any issues about sue, arbitration, criminal and executive penalty, or other issue may effect party’s ability to guarantee, should inform Party B within 3 days if the above mentioned situation happened.

7.7 During the contract period, if party A intend to provide the guarantee to third party, can not damage party B’s interest.

7.8 During the contract period, if party A has the issues which stipulated in article 7.5 and 7.6, party A will promise to properly fulfill all the guarantee obligation under the contract and provide the detailed plan to perform the obligation,

7.9 If the debtor does not pay off the debt or partial debt under the contract( including the debt expired in advance based on the requirement of law, regulation or main contract or the stipulation of both party’s agreement),  and party B require party A to take the guarantee responsibility , once party A receiving the informing letter from party B, party A will make the payment based on party B’s requested amount and method to pay off the debt in the contract.

7.10 If the party A  fails to pay off the debt based on article 7.9, party A authorize party B to withdraw capital from the guarantor’s account at party B’s bank or party b can dispose the party’s property and property right which party B legally own and manage, to pay off the debt under the contract. While party B is withdraw the capital from party A’s account, if the currency is different with main contract’s creditor’s right currency, will be calculated based on party B’s listing foreign currency exchange rate.

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7.11 If there is third party to take the guarantee for debt under the contract, party A still need to take the guarantee responsibility based on article 3 in the contract.

Article 8 Party B’s right and obligation

8.1 If party B to transfer all the creditor’s right under the contract to third party , should inform party A in writing when transfer contract is signed.

8.2 If party B sign a detailed business contract for detailed credit under the main contract with debtor, no need to inform party A.

8.3 If the debtor does not pay off the debt or partial debt under the contract( including the debt expired in advance based on the requirement of law, regulation or main contract or the stipulation of both party’s agreement),it is party B’s right to ask party A to take the guarantee responsibility under the contract.

8.4 Party B should keep confidential for all party A’s data, file and information, but except those are required by law to expose.

Article 9 Liability for breach of contract

9.1 When the contract is valid, both party A and B should perform the obligation in the contract, if any one does not perform or only perform partial obligation in the contract, should take related liability for breach the contract, and make compensation for other party’s loss.

9.2 If the state and guarantee made by party A in article 6 of the contract is not real not accurate and incomplete, or make other party misunderstanding, thus cause party B’s loss, should make compensation for party B.

9.3 If the contract is invalid due to party A’s fault, party A should make the compensation for all party B’s loss within the guarantee scope.

9.4 During the contract period, if the one of the following happen, party B has the right to ask party A to take guarantee responsibility or take according legal measures to party A’s property or property’s right based on article 7.9 and 7.10:

9.4.1 Any one of main contracts expired but party B does not get paid off.

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9.4.2 Any debt expired in advance based on the requirement of law, regulation or main contract or the stipulation of both party’s agreement, but party B does not get paid off.

9.4.3 If party B has material finance loss, capital loss or capital loss due to guarantee, or other finance crisis, would not be able to provide guarantee or the guarantee provided can not satisfy party B.

9.4.4 There is crisis in operation and finance in the controlling share holder from party A’s side or other related companies, or there is material transaction between party A and controlling share holder and other related companies, therefore effect party A’s normal business, would not be able to provide guarantee or the guarantee provided can not satisfy party B.

9.4.5 There is harmful change in the party A’s industry, would not be able to provide guarantee or the guarantee provided can not satisfy party B.

9.4.6 The managing staff from party A are suspected corruption, bribe, fraud or illegally running business, would not be able to provide guarantee or the guarantee provided can not satisfy party B.

9.4.7 Party A did breach the contract with other creditors, would not be able to provide guarantee or the guarantee provided can not satisfy party B.

9.4.8 Party A has business closure, suspension, application or announce bankrupt, dissolve, the license was suspended , revoked.

9.4.9 Party A to breach the article 7.8 of the contract, fail to take all guarantee responsibility, or the plan to take the obligation can not satisfy party B;

9.4.10  Other issues from party A to harm, damage or potentially harm and damage party B’s interest.

Article 10 The right’s accumulation

10.1 The right for party B under the contract is accumulative, will not affect and exclude party B’s other right to party A based on law and other contract. Unless party B’s written confirmation, party B does not exercise, or exercise partially or delay to exercise, does not mean to give up or partially give up the right, and will not effect and stop party B to carry on exercising and to exercise other rights.

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Article 11 The continuity of the obligation

11.1 Under the contract, party A’s all obligation and joint responsibility is continuous, will have the same constrain for it successor, receiver, assignee, and the organization after merger, reorganization and title changed, will be free from the impact of any dispute, claim, and order from authority and any contract or files signed between main creditor and any natural person or legal person, and will not be changed due to debtor’s bankruptcy, insolvent, disqualification, constitution reforming and any other material changes.

Article 12 Miscellaneous clauses

If any conflict, will be subject to this clause

Article 13 Applicable law

13.1 The contract is governed by law of people republic of china.

Section fourteen, the settlement of dispute

14.1 If any dispute for the contract or regarding to contract, both party should try to settle by negotiation, if failed, both parties agree to use the 2nd way to revolve.

1. Apply arbitration to committee

2. Sue to the court at party B’s domicile.

Article 15 Effectiveness of the contract

15.1 The effectiveness of the contract is independent with main contract, will not be invalid while main contract become invalid, party A’s joint responsibility will still remain if the main contract is confirmed to be invalid, (including but not limited to return and compensate the loss).

15.2 If some article of contract or some content of article is or will be invalid, the invalid article or the invalid part will not affect the effectiveness of the contract and other article or other content of article.

Article 16 The contract’s effectiveness, change and termination

16.1 The contract will take effect after the legal representative of  party A or agent with party B’s legal representative or person in charge or legal agent to stamp(sign or stamp name seal) and stamp the official seal /contract special seal.

16.2 When the contract is valid, except as otherwise noted, both parties can not change or terminate the contract without authorization, if do need to change or terminate, the mutual consent and written agreement is needed.

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Article17  Others

17.1 Party A and B can have a written proposal separately for all unaccomplished matters as the attachment of contract, all the attachment, revision and supplement will be regarded as a part of contract, sharing the same legal right with contract.

17.2 For all the notice, request and other communication sent from party B to party A concerning the contract, including but not limited to telex, telegraph and fax, once sent will be regarded as to be delivered to party A, third day of mailing the registered letter will be deemed as delivered to party A, if it is sent by a specific man, the date of signing by receiver will be deemed as delivered.

17.3 4 Copies for contract, party A takes one copy, and party B takes three copies.

17.4 party B has taken reasonable method to remind party A all the responsibility waiving and restricting clauses, and fully explaining the related clauses per party A’s request, there is no conflicts in both parties’ understanding in this contract.

Party A：Ningbo Litong Petrochemical Co., Ltd  ( Common Seal or Special Seal)

Legal Representative ( seal ) Liangcai Zhu

(or Entrusted Agent)

Party B：China Citic Bank Ningbo branch ( Common Seal or Special Seal)

Legal Representative (seal) Nianlu Xia

(or Entrusted Agent)

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EX-10.67

Exhibit 10.67

China Merchants Bank

Maximum Irrevocable Guarantee Contract

Maximum Irrevocable Guarantee Contract

no：

Atten： China Merchants bank Inc Ningbo Beilun Branch

Since：

Your Bank and Ningbo Keyuan Plastics Co., Ltd (hereinafter referred to as “ credit applicant”) signed a No.6299110303 “credit agreement” at ____March 21. 2011 based on “Credit agreement”. During the credit period from March 21, 2011 to March 20, 2012 (hereinafter referred to as “Credit period”), your bank will provide the credit applicant with US dollars 30 million as the line of credit (hereinafter referred to as “line of credit”)

Per the credit applicant’s request, the guarantor agreed to issue this guarantee contract, voluntarily take jointly responsibility for credit applicant’ all debts in the credit agreement. Specifically guarantee the following matters:

Article 1 This guaranty is maximum guarantee contract

1.1 In the credit period, you may do according to the credit agreement and/or the specific contracts under the agreement to make loans or other credits by several times. Circulation line of credit can be recycled, one-time line of credit shall not be recycling for applicant. Every time the loan or other credit amount, time limit, and the specific use, shall be prescribed by the detailed contract.

The specific business maturity date can be later than the expiry date specified in the credit agreement.

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1.2 When the credit period expired, if there is still remaining for the loan , advance payments or other credits from your bank to applicant, namely the guarantor shall bear joint liability based on article 2 within the scope of certain guarantee; If the expiration of the period ahead of time, if your bank need to get the loan back from applicant in advance according to the credit agreement and/or the specific provisions of the contract, the guarantor also promise to bear joint guarantee responsibility based on article 2 within the scope.

1.3 During the credit period, your bank to open the l/c, commercial bills acceptance (including entrust turn to open the l/c, similarly hereinafter), open a guarantee, delivery guarantee business and other credit business to applicant, even if the advance payment has not occurred when the credit period expired , but after the expiration of the period, your bank actually did make advance payment on this business, the guarantor will take joint responsibility for all the debt by credit applicants based article 2 of this guaranty scope.

1.4 During the process of performing any business under the credit agreement , between your bank and credit applicant for all the dead line of business,  interest rates, amount to achieve an extension proposal or alteration relevant terms agreement, or in guarantee period  your bank according to the credit agreement and/or the specific contract to change  interest rates, do not need to get the consent of guarantor or inform the guarantor, the guarantor will all agree, , do not affect the guarantor  to take responsibility under the agreement.

1.5 If your bank received bank documents under credit agreement is not conformed after your bank’s inspection,  but the applicant accept discrepancies, but credit applicant accept discrepancies, the guarantor will still take the joint responsibility under the guarantee contract for the debt principal and interest from foreign acceptance or payment of principal and interest, will not put forward any defense for bank accept discrepancies without getting consent or informing the guarantor.

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1.6 The revisions of l/c, guarantee (or standby contract of credit) under  credit , the acceptance of usance l/c or promised payment after due or the extension for payment time limit, do not need to get the consent of the guarantor or inform the guarantor,

Article 2 Scope of Guaranty

2.1 The scope of guaranty for the guarantor is: your bank according to the credit agreement and in the limit of credit to provide applicants with the sum of loans and other credit principal balance (maximum sum US dollars 30 million), and interest, penalty, compound interest, liquidated, factoring expenses and other relevant expenses to realize creditor's rights. Including but not limited to:

2.1.1 The specific loans principal balance and the corresponding interest, penalty, compound interest, and other related expenses for liquidated damages issued by your bank according to the credit agreement under the contract.

2.1.2 Your bank for its obligations to make the advance payment for the applicants for principal balance and interest, penalty, compound interest ,penalty and other related expenses, to perform commercial draft, contract of credit, guarantee, delivery and payment obligation under the <credit agreement>.

2.1.3 Under the factoring business item, your bank transferee for the applicant for the accounts receivable claim and the corresponding late penalty (fine for delaying payment), and/or your bank to credit the applicant to pay the acquisition of basic (basic acquisition fee) and related factoring cost;

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2.1.4 Under the credit agreement, your bank make advance payment and principal balance and interest, penalty, compound interest, penalty and other related expenses, which was committed in the trading fiancé business.

2.1.5 After Your bank to open the l/c per request of the applicant, and entrust the other branch of CMBC to turn to open the LC to the beneficiary, under the LC, your bank make advance payment and import documentary credit for establish LC and guarantee debt principal balance, penalty, compound interest, penalty and other related expenses to perform the issuing bank obligation.

2.1.6 the previously signed credit agreement no_____ between you bank and applicant, since the agreement takes effect, the outstanding balance in the detailed business of previous agreement (if this clause is applicable, pls tick “√” in □).

2.1.7 Your bank to claim the debt for applicants with the costs (including but not limited to legal fees, attorney fees, announcement fee, delivery fee, travel fee, etc).

2.2 If the credit is circulate, when the loan or other credit from bank to applicant is more then credit amount, the guarantor will not take responsibility for the balance, and only take the joint guarantee responsibility for which is not more than the sum of the line of credit loans or other credit principal balance of interest and penalties and interest, the complex, liquidated and relevant fees.

Despite the previously agreed, the guarantor confirmed: even at a certain time point during the credit period, the loan or other credit amount provided by your bank is more than credit line amount, but once the guarantor is required to take guarantee responsibility at that time the sum of all credit did not exceed credit line, guarantor can not raise a plea for the previous agreements, and should take joint responsibility for all credit principal balance and its interest, penalty, compound interest, penalty and liquidated damages related expenses, etc, (specific to article 2.1 of the scope).

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Article 3 The guaranty method

Based on the provisions of article 2, the guarantor to confirm within the scope of guarantee, will take the economic and legal joint liability for applicant's debts. If the applicant fails to abide the “credit agreement” and or the specific contract to pay off the principal and interest of loans, advance payment and other credit debt and related fee, or any events happen to breach the “credit agreement” or other specific contract, your bank has the right to directly claim the loss to guarantor and do not need to claim or sue the applicant first, and even guarantee applicant ‘s all the debt under the agreement can be paid off in time, and have pledge or mortgage or other assurance separately, you also have the right to choose claim directly to guarantor without first dealing with the mortgaged property, the pledged property or cargo under trade financing, documents, do not need to claim other guarantor first.

The claim notice issued from your bank is summative, no objections to the guarantor. The guarantor agree to pay all the applicant’s debt under the agreement after receive your written claim in five days, do no need other documents from your bank. Unless there are obvious and great mistake, we accept your bank claims of money for the amount as accurate data.
 

Your bank has the right to take the appropriate method, including but not limited to fax, mail and special service, in the public media and public announcement for collection to our guarantor.

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Article 4 The Period of Guarantee liability

The duration of guarantee period is form the starting date of this guarantee contract to the expiry date of each loan and other financing or accounts receivable creditor’ rights, or the date for advance payment plus 2 years. Any detailed credit granting ‘s extension happen, the guarantee period will extend to the expiry of extension and plus another 2 years.

Article 5 The independence of Guarantee Contract

This guaranty is independent, remain effective, irrevocable and unconditional, will not be affected by the credit agreement and the influence of the specific contract, and are not effected by the applicant and any other company/personal’s any agreement, documents, nor changed for the influences of the applicant for the fraud, reorganization, closure, dissolution, bankruptcy, liquidation, merger, division, (merger) restructuring, and other changes, if your bank to give grace or time delay to applicant or bank postpones to perform the right under the agreement to claim the owe debts, will not influent the this  guarantee contract.

Even there is another pledge, mortgage or other guarantor at the same time, and your bank to waive, change or terminate the pledge, mortgage, or modification, termination of other guarantor guaranteed liability, the guarantor will still take the guarantee responsibility based on this guarantee contract.

Article 6 Special Statement and Guarantee from Guarantor

6.1 The guarantor is established according to law, has the legal person qualification, or other organization have guarantor qualification, or guarantor is natural person having a complete civil capacity (id number is­­_____), and is willing to use his own property or have the right to dispose of the assets in accordance with law to guarantee to perform the obligations specified in this guaranty;

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6.2 The guarantee contract issued by guarantor has obtained the full authorization or approval by the superior departments/the board of directors

6.3 The issuing of the guarantee contract is of the real intention of guarantor,, does not exist any fraud or intimidation factor;

6.4 Before the guarantee contract get invalid, all the guarantee sum (including foreign currency)will be not more than the total amount of the guarantor’s own equity;

6.5 Per your bank’s request, to provide your bank financial statements timely, and promptly report to your bank the material changes and decisions in production, operation and management;

6.6 All financial statements and all other files provided from guarantor to your bank are real and legal, the guarantor’s legal representative or other director responsible should have inescapable responsibility over these;

6.7 Based on your bank’s request, to issue the certification;

6.8 If there is any change for the guarantor’s industry and commerce registration, organization structure, equity structure, operating style or financial status , or the occurrence of any material change in debt restructuring, and the related party transaction, and so no, shall not affect the legal binding force for guarantor under the guarantee contract, if the above mentioned changes may affect the guarantor  to perform its ability of this guaranty, it is the guarantor’s  obligation to immediately notify your bank;

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6.9 The heir or transferee of the guarantor shall be subject to the clauses of the agreement, unless the written permission of your bank, the guarantor will not transfer the above mentioned obligations.

6.10 If the guarantor fails to pay off the debt based on the agreement, your bank  has the right to withdraw capital from the guarantor’s account at your bank or entrust other financial institutions to do so, until all the debts will be paid off under the agreement.

Article 7 Not be considered to be a waiver

During the effective period of guarantee, your bank to impose any tolerance, grace for any breach or delay of applicant and guarantor, or postpone performing of (credit agreement) and the right or interest your bank should have under the guarantee contract, will not damage, influence, or restricted your bank’s all right and interest as creditor based on law regulation and the guarantee contract, also cannot be regarded as your bank to give up the right for the existing or future default actions.

Article 8 Dispute and Settlement

The law of the People's Republic is the governing law for this guarantee contract, for all controversy and disputes arising from this guarantee contract, the guarantor agrees to take dispute resolution in the credit agreement to resolve.

Article 9 Terms

All the terms used in the guarantee contract, unless otherwise specified, all have the same explanation with the provisions in agreement.

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Article 10 Notification

The guarantee contract’s notification between your bank and guarantor must be sent in written form, and be delivered by specific man, the receiver’s sign for will be regarded as delivered,( if the receiver reject, the day of rejection is regarded as delivered), if the notification is delivered in postal mail, the 7 days after sent will be regarded as delivered, if in fax, the fax system in receiver received will be regarded as delivered.

If your banks claim the payment in public media, the date of announcement will be regarded as delivered.

The guarantor’s address:
 

The change of guarantor’s address should be informed to your banks in time, otherwise the guarantor should take the potential risk.

Article 11 The Effectiveness of the Guarantee Contract.

11.1 If the guarantor is the legal person or other organizations, this guarantee contract will take effect when starting date of the legal representative of legal person /main person in charge or the authorized agent signing/ stamp name seal and stamp the official seal /contract special seal.

11.2 If the guarantor is natural person, the guarantee contract will take effect when the date of he/she to sign.

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Article 12 The Transfer of the Creditor’s right and Secondary right

12.1 No matter if the creditor’s right for maximum amount guarantee is confirmed, your bank transfer the creditor’s right under the credit agreement to third party, the secondary right will be transferred accordingly to assignee.

12.2 When the creditor's rights of this guaranty contract is confirmed, if your bank transfer some parts of creditor’s right, the guarantor’s guarantee from the right will be also transferred , bank’s untransfer part of creditor's rights and assignee’s some transferred right will share the guarantee of guarantor based on amount, before the creditor’s right of the guarantee is fixed,  your bank transfer part of creditor's rights, the security interest will also transfer accordingly, and the maximum amount of your main creditor’s right guaranteed by original maximum amount will be reduced accordingly, ( means maximum amount of your bank’s creditor’s right guaranteed by original maximum guarantee amount deduct the transferred some creditor’s right), when the main creditor’s right for un transferred creditor’s right is fixed,  your bank will share guarantor’s right and interests based on creditor's rights debt amount on the un transferred some creditor’s right and with some transferred right assignee.

Article 13 Attachment

The guarantee contract has ___3___copies, your bank, applicant and guarantor and _____ has each one copies, all share the equal legal effect.

Notes:

All of the guaranty clauses have been explained to the guarantor by your bank, and guaranty to confirm the understanding of terms is the same with your banks. At the same time, your bank has been remind the guarantor to pay attention to the exclusion or limitation of your bank responsibility, your bank unilaterally has some rights, and has some clauses to increase the security responsibility or limit the guarantor’ right,  your bank has remind the guarantor has a comprehensive and accurate understanding for those clauses.

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Guarantor is legal person or other organization: Ningbo Litong Petrochemicals Co., Ltd (Stamp)

Guarantor:

Legal Representative/ Principal or Authorized Agent ( Signatures or Seal):

Liangcai Zhu

Address:

Guarantor is a nature person:

Guarantor （Signature）:

Address:

Guarantor’s Opening Bank:	Guarantor’s Balance Account:
Tel:	Fax:

Date : March 31, 2011

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EX-10.68

Exhibit 10.68

Maximum Guarantee Contract

HUA XIA BANK CO., LTD

The Maximum Guarantee Contract

Contract No.: NB07 (Maximum Guarantee) 20090117-1

Party A (Guarantee): Ningbo Litong Petrochemicals Co., Ltd.

Address: Room 312, Building 12, Dagang Sifang Region, Xingan Songhua River Road, Development Zone

Zip code: 315000                        Legal representative: Liangcai Zhu

Tel: 86152818                                Fax: 86152818

Opening Bank: Economic and Technical Development Zone Branch of Agricultural Bank

Account：39202001040007670

Party B (Creditor): HUA XIA BANK CO., LTD Ningbo Branch

Address: No.787, Baizhang East Road

Zip code: 315000

Legal representative/People in Charge: Kaiwen Wei

Tel: 87972545 Fax: 87972608

According to the provisions of Guaranty Law of the People's Republic of China and other related laws and regulations, a series of debts will occur between Party Band loanee Ningbo Keyuan Plastics Co., Ltd. (“the loanee of the main contract”) in the period of this contract regulated. Party A is willing tooffer the guarantee for Party B in the extent of the maximum amount of debts of theabove debts (the principal debts for short in the following). Through the consensus ofParty A and Party B, they sign the contract.

Article 1 The categories and maximum amount of the secured principal financial claims and the Occurrence period of the claims

1.1 The categories of the main contract under this contract

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□× The number of this contract signed between Party B and the loanee of the main contract is / of “ / ”, this contract and the specific business contract under the contract form the main contract together.

√The agreed loan contracts signed continuously in the happened period of the debts between Party B and the loanee of the main contract under article 1.4 of this contract all belong to the main contracts.

1.2 The business sorts of principal claims Party A guaranteed are in accordance with the agreements of the main contracts.

1.3 The maximum amount of claims under this contract is: currency RMB, amount: RMB 80 million ( in which the different currency business can be exchanged on that day by the listed exchanged rate of Party B).

The maximum amount of claims refers to the remaining balance of the maximum principal claims. The meanings are as following:

1.3.1 The loanee of the main contract can not exceed the limits of all principal amounts (for example: the business under the main contract: L/C, Bank Acceptance Drafts, Guarantee, Lading Guarantee, that is to say the amount of it is the remaining balance of undischarged business) which is not discharged when using in any time, but in the above limitation, the loaner of the main contract can apply for cycle using to those discharged principal amounts.

1.3.2 The maximum amount of claims is the maximum limit amount of principal. In the premise that the principal cannot exceed the above limited amount, the interest, default interest, fees and other all payables happened under the article II of the contract, Party A is will to undertake the guarantee obligation.

1.4 The happened period of the secured principal claims under the contract is from September 13, 2011to September 13, 2012. The specific meaning as following:

1.4.1 If the business sorts agreed in the main contract are loan business, then disbursement date of every loan can not exceed the due date of this period;

1.4.2 If the business sorts agreed in the main contract are acceptance of bills/issuing credit / issuing guarantee (or letter of guarantee for production of bill of lading), then Party B will make an acceptance for the drafts/ issuing credit / issuing guarantee (or letter of guarantee for production of bill of lading), but should not exceed the due date of this period.

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1.4.3 The due date of every debt is based on the agreed date of the specific business contract and cannot be limited whether it is expired during this period.

Article 2 Scope of Guaranty

2.1 Party A guarantees that the scope of guaranty is the claims principal, interest, overdue interest, default interest, compound interest, penal sum, damage awards, the fees that Party B in order to achieve the claims(including but not limited in the litigation cost, arbitration fee, security expense, charge for announcement, survey fee, commission of survey, auction charge, travel charge, telecommunications fee, a retaining fee and so on) and other all payables in the main contract the loanee should pay.

2.2 All above fees excluding the principal are reckoned in the scope of guarantee responsibilities that Party A should undertake, but are not reckoned in the secured maximum amount claims under this contract.

Article 3 Confirmation of Secured Claims and Ways of Guaranty

3.1 In any one of following conditions, confirmation of secured claims under the contract:

3.1.1 The expiration of the happened period of the agreed claims of item1.4.

3.1.2 The loanee of the main contract announces that all the loans expired in advance according to the laws and regulations or the agreements of main contract.

3.1.3 Other conditions confirmed by the guarantee claims according to related laws and regulations.

3.2 The secured claims confirmation under the contract with following efficacy:

3.2.1 When the secured claims confirmed, whether the dead line for performance of the undischarged debts under the main contract is expired or whether it has additional conditions, they all belong to the scope of guaranty;

3.2.2 When the secured claims confirmed, all other clauses excluding the principal agreed in Article II of this contract belong to the extent of secured debts, whether the debts happened when confirmation.

3.3 The way of guaranty of Party A is surety ship of joint and several liabilities. Since the confirmation of the secured claims to the end of dischargement of all the secured claims, if the loanee of the main contract fails to fulfill the discharge of obligation in certain condition, Party B has the right to recourse to Party A directly, Party A has to pay the corresponding debts to Party B immediately.

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3.4 Excluding the way of guaranty under the contract, the main contract has other guarantees (including but is not limited the guarantee that loanee offered to Party B), Party B has the right to execute priority of performing the contract, to ask Party A to undertake the joint and several liability, and the liability for guarantee that Party A undertakes for Party B cannot be influenced by other guarantee, and the undertaking of liability for guarantee is not based on the claims or lawsuit, arbitration , enforcement that Party B put forward to other guarantor. If Party B gives up for any causes, change the guarantee that the loanee of the main contract offer to him, change the position of guarantee, it causes the lose or reduction of the priority of compensation of the above guaranteed items, Party A agrees that the liability for guarantee will not waive or reduce under the contract.

3.5 If Party A offers the guarantee for part claims under the main contract, any part dischargement for the principal claims can not waive or reduce Party A’s liability for guarantee, Party A still should undertake the liability for guarantee for the remaining balance which is not discharged of the main contract in the extent of the amount that he gives faith to undertake.

Article 4 Guaranty Period

4.1 Guaranty Period of the liability for guarantee Party A undertaking is 2 years, the initial day can be confirmed as the following ways:

4.1.1 When the due date of execution of any debts is earlier than or the same as approval date of the secured claims, the initial day of guaranty period that the liability for guarantee Party A undertakes for this debt is the approval day of the secured claims.

4.1.2 When the due date of execution of any debts is later than approval date of the secured claims, the initial day of guaranty period that the liability for guarantee Party A undertakes for this debt is the due date of performance of the debts.

4.2 “The due date of execution of the debts” in item 4.1 includes the condition that the principal loanee of the main contract amortize debts refers to the due date of every debts and according to the agreements of the main contract, it refers to the acceleration of maturity the loanee announces.

4.3 If the business under the main contract is L/C, Bank Acceptance Drafts, guarantee, Lading Guarantee, the day of advance is the due date of execution of the debts.

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Article 5 Party A’s Rights and Obligations

5.1 Party A guarantees that is a statutorily registered enterprise, having the guarantor qualification and capacity of assuring debts that is legally required, and voluntarily to undertake and to perform the guarantee liability of assets that he has the right to owned and to deal with.

5.2 Party A guarantees that he obeyed to the laws and regulations and the articles of association to sign this contract, and he is approved and authorized by his superior department or the board of directors, shareholders’ meetings and some other authorities.

5.3 Party A guarantees that he will sign and perform this contract and will not violate the regulations or agreements that will restrict Party A and its assets, will not violate any guarantee agreements and other agreements and any other documents, promise, commitment that will restrict Party A that he signed with other parties.

5.4 All the documents, information Party A offered to Party B are authentic, accurate, legal, and valid.

5.5 Party A knows and agrees all the clauses of the main contract, and is willing to offer guarantee for the loanee of the main contract, and guaranteed that he will perform assuming debts according to the promise of the main contract.

5.6 If the main contract under the contract is the “Bank Acceptance Agreement”, Party A guarantees that any disputes of bills or non-bills between the loanee of the main contract and the owner of the acceptance draft, endorser, or other bearer will not influence the liability for guarantee that Party A undertakes for Party B according to this contract.

5.7 Party A guarantees that he will not offer any other guarantee that exceeds his own ability to the third party in the period of validity.

5.8 Party A guarantees in the period of validity of this contract he will offer the balance sheet, income statement, cash flow chart and other finance statements according to Party B’s requirements, and accepts the inspection and supervision of its production and operating activities and financial status.

5.9 In the period of validity of this contract, Party A should notice Party B in written form and to carry out all the liability for guarantee under this contract thirty days before the changing that includes but not limits the way of contract in, leasing, trusteeship, recapitalization, debt restructuring, demutualization, consortium, merger( or acquisition), spin-offs, remunerative transfer of the property right, joint venture( or cooperation), reducing the registration capital, or applying for the suspending business for consolidation, applying for the dissolution( or repeal), applying for the restructure, reconciliation and bankruptcy and other mode of business, own system and legal status.

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5.10 In the period of validity of this contract, Party A should notice Party B in written form within three days after the occurrence of the announcement of suspending business for consolidation, closing, the dissolution (or repeal), applying for the restructure, reconciliation and bankruptcy and other changing of own system and legal status or any other situations that threat its own normal operation and cause him losing guarantee ability.

5.11 If Party A changes the address, name, legal representative, he should notice Party B in written form within seven days.

5.12 Party A is still willing to undertake liability for guarantee when the loan is used for refunding under the main contract.

Article 6 Party B’s Rights and Obligations

6.1 Party B has the right to ask Party A to offer the financial statements, financial sheet, and other information that can reflect its operating status and statement standing.

6.2 If Party A disobeyed the agreements under the contract, Party B has the right to deduct the funds that Party B should pay to Party A which in the account that Party A opens in any operating agency of the HUA XIA BANK CO., LTD directly. When Party B collects the funds from Party A’s account, it should based on the exchanging rate that Party B declared that day if the currency in the account is different from the currency of the principal claims.

6.3 Party B needn’t to notice Party A when he signs the specific business contract (or agreements) with the loanee of main contract.

Article 7 Default Responsibility

7.1 When the contract comes into force, both parties should execute the agreed responsibility of this contract. Either side doesn’t execute or incompletely execute the agreed responsibility of this contract; he will undertake the corresponding responsibilities and compensate the loss that he caused to the other party.

Article 8 Validation of Contract

8.1 The contract comes into force from the date both parties signed the contract.

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8.2 The validity of this contract is separate from the main contract, and it will not go in vain because of the invalidity of the main contract. If the main contract is determined to be invalid, Party A will undertake the joint and several liability for the debts that the loaner of the main contract’s restoration of property or compensation for the loss.

Article 9 Alteration and Dissolution of Contract

9.1 When the contract comes into force, both parties should not change or relieve this contract without permission.

9.2 If the principal claims sorts is L/C advance under this contract, Party A confirmed that when the certification applicant and Party B agreed to amend L/C, and the amount under the items of L/C ( not including interest, penal sum, compensation, and other related fees) after amendment will not exceed the maximum amount of secured claims under this contract, no matter how changeable of the amount of L/C and other clauses, the above amendment will be seen accepted by Party A in advance, and this contract will be guaranteed valid continually, and Party A will keep on undertaking the joint and several liability.

Article 10 Resolution of Disputes

10.1 The disputes occurred between Party A and Party B when they execute the contract should be settled with negotiation, if not, both of them should choose the following ways.

√To sue the local People’s Court of Party B

□To submit arbitration to the / Arbitration Commission.

10.2 If there has differences between above disputes settlement and the main contract, it should be based on the main contract.

Article 11 Supplement

11.1 During the period of validity, Party A hasn’t noticed Party B in written form when his legal person ,legal representative and address changed ,it seemed received if Party B send to all documents according to the contract.

11.2 Other agreed items

/____________________________

11.3 When using □ to make a choice, the √in the □means this clause is appropriately , the ×in the □means this clause is inappropriately.

11.4 Copies of the contract: one copy for Party A, two copies for Party B and / Party of / copy, each has equal validity.

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11.5 The attachment of this contract is the part of this contract, and it has the equal legal effect of this contract.

11.6 Party B has adopted rational method submit the clauses that exempt or limit Party B to Party A of this contract, and has explained the related clauses adequately according to Party A’s requirements. Both Party A and Party B have no dissidence to the understanding of the content of the clauses.

(No formal text in the following)

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Page of Signatures (No formal text in this page)

Party A

Legal representative( entrusted agent ):

September 13， 2011

Seal: Ningbo Litong Petrochemical Co.,Ltd.

Party B

Legal representative/ Principal ( entrusted agent ):

September 13， 2011

Seal: HUA XIA BANK CO., LTD,Ningbo Branch

Signature:

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EX-10.69

Exhibit 10.69

Preface

In order to maintain you/your company’s legal right, please read carefully following content and confirm related issues before signing:

1.   All application materials you/your company providing shall be authentic, complete, legal and validity, neither including fault record false records, misunderstand statements and material omission.

2.   You/your company have read all clauses in the contract carefully, especially the font bold part and completely understood the meaning and legal effect.

3.   Before signing, you /your company have the right to put forward amendment of the contract. You/your company must execute rights and fulfill obligation according to the contract.

4.   In order to protect you/your company’s interest, please inform the Bank within 10 days with written form when you/your company’s domicile, mailing address, contact telephone and business scope, legal representative changed.

5.   Please consult to the Bank when you/your company have questions on the contract and related issues.

Maximum Guarantee Contract

Contract No. SDBNB Maximum Guarantee No.2621202022

Party A (Loaner of the main contract ):ShenZhen Development Bank NingBo Haishu Branch

Address: No.188 Jiefang South Road ,Haishu Zone, Ningbo

Tel: 83863269	Fax: 83863267
Principal: Zhixiong Huang	Title: President of the Bank

Part B( Guarantor): Ningbo Litong Petrochemical Co., Ltd

Certificate Type : Certificate No.

Address: No. 239 Daqi Shiqiu village ,Beilun Zone

Tel: 86232717	Fax: 86152818
Legal representative: Hongjiao Chen	Title: Director

In order to guarantee execution of the contract (“Main Contract”) between Party A and Ningbo Keyuan Plastics Co., Ltd.(“Loanee”), Party B is willing to be the guarantor of the loanee of the main contract to provide suretyship of joint and several liability to Party B. Through the consensus ofParty A and Party B, they sign the contract.

Article1 Scope of Guaranty

Scope of guaranty in the contract is (Chosen with “ √ ”):

x SDB ___No. ___of ___ the contract ,the loanee shall bear the entire debt (include contingent liabilities ) principal, interest, compound interest and default interest and the fees for realization of claims. The Maximum amounts (balance) of the debt principal are ___currency (Capitalization) ___.

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√ Under SDB NB No. 2621202022   of General Credit limit contract, the loanee shall undertake the entire debt (include contingent liabilities) principal RMB currency (Capitalization) 50Million among RMB currency (Capitalization)  200Million , and corresponding, interest, compound interest and default interest and the fees for realization of claims. Party A has the right to request should joint and several liability in the scope of guaranty for the debt balance if the debt wasn’t paid completely under the main contract.

x Loanee fulfill the debt under the whole main contract which signed from year  monthdate to yearmonthdate with Party A. Signing Date should be within above period while Execution Date is not limited in above period. Scope of guaranty of Party B includes loanee’s the entire debt (include contingent liabilities ) principal, interest, compound interest and defaut interest and the fees for realization of claims under the main contract .The maximum balance of above debt principal is ___ Currency(Capitalization)

x Under SDB ____ No. ___ of ____contract, the entire unpaid debt principal of loanee is ___Currency(Capitalization) ___ and related interest, compound interest and defaut interest and the fees for realization of claims .

Interest, compound interest and default interest can be calculated according to the agreement of the main contract, through the date the debt is paid off. The fees of realization of claims include but not limited to announcement fees, delivery fees, appraisal fees, counsel fees, court fees, travel fees, valuation fees, auction fees, property preservation fees, enforcement fees ,etc.

Exchange rate of currency excluding RMB to convert based on Party A’ s outstanding exchange rate quotation when happening the specific business.

Article2 Guaranty Period

Guaranty Period in the contract is (Chosen with “ √ ”):

√ Additional 2 years since effective date of the contract to expiry date of execution of any debts in main contract .Guaranty period shall be calculated separately of each specific credit line and if occurs any specific credit extension, guaranty period should extent to additional 2 years since credit extension.

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Party A has the right to transfer the claims to the third party by the laws during guaranty period, Party B hereby agreed to continued to bear guaranty liability within the original scope.

Article 3 Loanee transferred the credit line Party A granted to the third party, Party B hereby agreed to shoulder guaranty liability in accordance of the contract for the transferred credit line ,the transferee of credit line and amounts are :

Article 5 The contract is in triplicate, one for Party A, one for Party B, loanee respectively, each one has equal legal effect.

Article 5 Enforcement Notarization

x Both parties agree to make enforcement notarization for the contract .

The contract, after both parties handling enforcement notarization, on the condition of Party B doesn’t fulfill or incompletely fulfill obligation according to the contract ,Party A has the right to apply execution certificate from original notary organs and submit to the jurisdictional people’s court(the people’s court which located in the domicile of person subject to enforcement or the place of his property) based on original notarial deed and execution certificate to apply for execution.

√ The contract would never be made enforcement notarization.

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Article 7 Guarantee Liability

Party B shall undertake the joint liability for the entire debt ((include contingent liabilities) principal, interest, compound interest and default interest and the fees for realization of claims. When loanee failed to fulfill payment obligation on the due date (including contract expiration and expiration in advance) or other breach matters under the main contract, Party A could request payment both from loanee and Party B. Party B hereby agrees irrevocably granted Party A that Party A could deduct the due claims amount from the Party B’s bank account when loanee failed to fulfill payment obligation on the due date (including contract expiration and expiration in advance).

Whether loanee or the third party offers property security (pledge/mortgage), Party A has the right to request Party B to undertake liability, and needless to handle collateral in advance.

Article 8   Guaranty hereby is independent and won’t affect by guarantee which other guarantors offered.

Article 9 Guaranty hereby is irrecoverable, won’t affect by any agreement or file signed between loanee and any entities, won’t change due to various conditions of the loanee, including bankrupt, unable to pay off, losing business qualification ,rearrangement of article of association and so on.

Article 10 Events and Liability of Default

1.   Events of Default

If had occurred any one of following events, it deemed to be events of Default:

1)   Party B default any obligation under the contract ,or Party B explicitly states or shows with his behaviors that he won’t fulfill any obligation under the contract;

2)   Party B offers related certification and documents or any statement, guaranty and promise to Party A which are unauthentic ,inaccurate , incomplete or refer to false records, misunderstanding statements or material omission;

3)   Party B conceals the real important condition, doesn’t cooperate to investigation, review and examination;

4)   Party B lazily manages and searches the due claims, or transfers his property or other evading debts actions ,such as handling his principal property for free, unreasonable low price and other inappropriate methods;

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5)   Party B defaults the other similar contracts (including not limiting credit contract, loan contract, guarantee contract) with Party A or other third parties, or issues debt securities, or enters into suit or arbitration due to argument of the kinds of contracts or securities.

6)   Guaranty is invalid or waived.

7)   Main contract debt is due or acceleration of maturity, debt of Party A is completely or partly being unpaid.

8)   Party A is intent to evade and reject bank claims via related transactions or other methods;

9)   If Party B is an entity:

a)   Party B has material weakness on operation condition, worsens seriously on financial situation ,occurs material lose on finance, reduces assets (includes but not limits losing assets incurred by guaranty), or other financial risks;

b)   Party B suffers administrative penalty, penal sanction or investigations or has potential to suffer administrative penalty and penal sanction due to illegal behaviors in operation;

c)   Party B occurs following conditions: division, merger, acquisition and rearrangement, major assets disposal, assets reduction, liquidation, reconstruction, waiver, bankrupt, close-down, etc.

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d)   Party B’s controlling shareholders or actual controllers changed and Party A considered it has endangered or may endanger the claims realization under the main contract or/and the contract; or Party B’s controlling shareholders, actual controllers, legal representative, officers changed, includes but not limited suffering administrative penalty and penal sanction or being investigated and have potential to suffer suffering administrative penalty and penal sanction, proceeding or arbitration, weakness of financial condition, bankrupt or waiver and so on due to illegal behaviors in operation.

e)   The industry of Party B changed adversely and Party A considered it has endangered or may endanger the claims realization under the main contract or/and the contract.

10)   If Party B is an individual:

a)   Party B dropped into any one following changes: disability, unemployment, relocation, job changes ,business changes, etc. , and Party A considered it has affected or may affected his guaranty liability fulfillment .

b)   By the laws, Party B was investigated for criminal responsibility or other enforcement measures or was limited certain right by appropriate body, and Party A considered it has affected or may affected his guaranty liability fulfillment .

c)   Party B 's heirs or legatee waives inheritance, legacy or accepts inheritance, legacy but refuses to continue to bear guaranty liability.

11)   Other related conditions which make Party A to consider has affected or may affected Party B guaranty liability fulfillment.

2.   Liability of Default

When happened events listing above item 1, Party A has the right to take any one or some below measures:

1)   Request Party B to bear guaranty liability and has the right to deduct from Party B’s bank account the entire debts under the main contract (include contingent liabilities ) principal, interest, compound interest and default interest and the fees, including but not limited fees related to credit information, test and notarization and so on ,and fees for realization of claims including legal fees, costs, arbitration fees, travel fees, notice fees, delivery fees, execution fees and so on .

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2)   Request Party B to offer new guaranty under the main contract according to Party A’s requirement, including but not limited offering mortgage and pledge.

3)   Request Party B to pay all lose of Party A.

4)   Request Party B’s loanee to bear subrogation by the laws, Party B needs to provide all necessary cooperation and support according to Party A’s requirement, and pays related fees.

5)   Request the People’s court to revoke Party B’s behaviors regarding waives due claims or transfer property for free or with unreasonable low price, Party B needs to provide all necessary cooperation and support according to Party A’s requirement, and pays related fees.

6)   Party A has the right to propose the other remedy measures by the laws and regulations.

Article 11 If the main contract or the special business under the main contract becomes complete invalid or part invalid by the laws due to any reasons, Party B still has the right to request loanee to pay back agreed credit principals and interest and other related costs submitting to appropriate laws. In above condition, the contract’s effective wasn’t being affected, and Party B still burdens guaranty liability for the main contract loanee’s payment liability according to the contract.

Article 12 Party B’s Representations, Warranties, and Covenants

1.   Party B has legal power, right and authorized signature, delivery and fulfillment of the contract. The contract forms effective and binding force agreement to Party B, and impose Party B to execute according to the contract.

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2.   When Party B is a corporate, it must be a corporate which established legally in jurisdictions, adapted effectively, had good reputation and had the entire corporate right and the government permission and approval for his current business.

3.   Party B promises that the various application documents are authentic, legal, valid without any false records, misunderstanding statements or material omission.

4.   Party B hereby promises that he will completely fulfill the entire obligation with friendly method under the contract and will never take any actions (including he should performance but not do , or should nonperformance but do) to endanger the claims realization under the contract without obtaining Party A’s written consent in advance.

5.   Party B hereby promises that he will inform Party A within 10 days with written consent if domicile, mailing address, contract telephone and employment status ( or business scope, legal representative) ,etc. changed. On the condition that Party B failed to fulfill above notice obligation, it seemed as being delivery to Party B if Party A mailed related notice, documents with original mailing address.

6.   Party B hereby confirms that he has read, completely learned and understood the whole clauses in the contract, signs the contract to show the real representation.

Article 13 Amendment

1.   With two parties consensus, the contract can be amended or removed with written forms.

2.   When the main contract amended, Party A shall inform Party B timely, Party B agrees and continues to bear guaranty liability jointly and severally. However, when the amendment reduced loanee’s debts status ( including but not limited reduction of debt amounts , shortening of debt priod under the main contracts), Party B shall be considered to agree, therefore, there needles to inform Party B again, and Party B  continues to bear guaranty liability jointly and severally to the amendment.

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Article 14 When in the period of continued existing, Party A fulfills the right with tolerant, grace or postponing attitude under the contract for any default or postponing of Party B, and would never reduce, affect or limit Party A’s all right according to the contract and appropriate laws and regulations , which couldn’t be considered permission or approval for any break behaviors , nor the Party A waives the right to take actions for Party B’s current or future nonperformance.

Article 15 Appropriate Laws and Settlement of Dispute

1.   The contract is constructed and interpreted by the laws of the People’s Republic of China.

2.   The dispute of the contract is settled by the agreement of the main contracts.

Article 16 The contract becomes effective after two parties’ signatures ( If the party is nature person ,the contract shall be signed by the party , if the party is corporate or other organization , the contract shall be signed by authorized person or sealed and common seal).

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Party A: ShenZhen Development Bank NingBo Haishu Branch (Stamp)

Principal or Entrusted Agent:  

February 18, 2012

Party B(Corporate) common seal: Ningbo Litong Petrochemical Co., Ltd(Stamp)

Legal Representative or Entrusted Agents:

February 18, 2012

Party B ( Individual ) in person

Entrusted Agents

       Year       Month       Date

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EX-10.70

Exhibit 10.70

MAXIMUM GUARANTEE CONTRACT

(Applicable for Companies’ Guarantee)

Bank of Shanghai

MAXIMUM GUARANTEE CONTRACT

(Applicable to Guarantee Provided by Units)

Contract No.: ZDB 301100528

Guarantor: Ningbo.Litong Petrochemicals Co., Ltd.

Registration Location:                   Postcode:

Principal business place:              Postcode:

Tel: 86152818                                                Fax:

Opening bank for basic bank accounts:       Account No.:

Legal representative (responsible person):

Agent:                                                                   Tel:

Person for contact:                                              Tel

Email:                                                                 Website:

Loaner: Bank of Shanghai Ningbo Branch

Principal business place: No.1, Zhaohui Road, Jiangdong District, Ningbo

Postcode: 315040

Tel: 87979876                                                Fax: 87979875

Legal representative (responsible person):

Agent:                                                                    Tel:

Person for contact:                                               Tel:

Email:                                                                 Website:

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In order to clarify the rights and obligations of both parties, according to the Property Law of the People’s Republic of China, the Guarantee Law of the People’s Republic of China and other laws, regulations and financial regulations, the loaner and the guarantor make this contract for common abidance.

(Caption: The in the contract indicate choice, the chosen one is indicated by √, the without chosen one is indicated by × .)

Article 1. The Principal Claims

The principal claims guaranteed in the contract is the debt principal (including loan principal, discount and money in advance) which happen due to a series of activities (one or the combination of many) listed during the claims period agreed in Item 2 in the contract made between the loaner and the loanee Ningbo Keyuan Plastics Co. Ltd., including comprehensive credit, loans, project financing, trade financing, discounting, overdrafts, factoring, v. letter and repurchase, loan commitments, guarantees, letters of credit, bill acceptance, and other services under the specific contract (hereinafter called "the main contract").

Article 2. Claims Period

The claims period is from November 29, 2011 to November 29, 2012.

Article 3. Limit of Maximum Principal Claims Guaranteed

The maximum principal claims guaranteed in the contract are limited to:

√(Currency ) RMB (Amount written in capitalization) 30million

×(Currency) ____ (Amount written in capitalization) ____

×(Currency) (Amount written in capitalization) ____

Principal claims balance = Accumulated principal claims amount happened-

Accumulated principal claims amount paid

Article 4. Period for The Loanee to Pay the Debt

Period for The Loanee to Pay the Debt is the repayment limit agreed by the main contract under Term 1 of the contract.

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Article 5. Guarantee Method

The guarantor guarantees the guaranteed claims to the loaner by shouldering joint liability.

Article 6. Scope of Guaranty

6.1 Scope of guaranty includes: debt principal, interest, default interest, penalty, compensation; all the bank fees concerning principal claims (including not limited to issuing fees, fees charged for amending letters of credit, fees for lading endorsement, acceptance fees, risk fees, registration fees, notary fees and insurance fees); claims realization fees (including not limited to collection fees, court costs, security fees, implementation fees, attorney fees, collateral disposal fees, advertising fees, auction fees, transfer fees, travel expenses) and other damage on the loaner caused by the loanee (the above claims are collectively referred to as “secured claims”).

6.2 If the scope of guaranty goes beyond the limit of maximum principal claims specified in Item 3 in the contract, the guarantor should also shoulder the guarantee obligation.

6.3 If it has been agreed in the main contract that the loanee should pay deposit, but the loanee does not pay or pay in less amount, the guarantor is obliged to pay instead.

Article 7. Guarantee Period

7.1 The guarantor’s obligation period is 2 years from the fulfillment expiry date of each debt in the main contract. If the debt in the main contract is divided into several parts (such as installment), and each part’s fulfillment period is different, the guarantee period is 2 years from the fulfillment expiry date of the last principal debt. If the loaner withdraw claims in advance because of the loanee’s default, the guarantor should shoulder the guarantee obligation in advance.

7.1.1 The principal debt’s fulfillment expiry date for loans, project financing, discounting, over draft and lending is the payment due date agreed in the main contract.

7.1.2 The principal debt’s fulfillment expiry date for letter of credit and bank guarantee is the payment date regulated in the payment note offered by the loaner.

7.1.3 The principal debt’s fulfillment expiry date for import and export letters of credit, export collection financing, export invoice discounting and packing loan is the financing due date agreed in the main contract.

7.1.4 If the loaner and the loanee consult to extend the debt, the principal debt’s fulfillment expiry date is the extended due date; if the loaner declares early due date, the fulfillment expiry date is the declared early due date.

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7.2 The period for the guarantor to pay the margin and pay the added margin to shoulder the guarantee obligation to the loanee is 2 years since the date the loaner requires the loanee to pay; if the loaner requires the payment separately, the period is 2 year from each date of the separate payment and added payment required.

7.3 If the loaner does not get the pay off when the fulfillment period for part or all the claims has been due, the loaner has the right to require the guarantor to shoulder the guarantee obligation.

Article 8. Debt Settlement Order

Unless otherwise agreed, the below orders are abided when the guarantor’s any payment for fulfilling the guarantee obligation to the loaner happens: (1) pay the payable fees and taxes of the loanee under the main contract; (2) damages; (3) liquidated damages; (4) overdue interest and penalty interest under the main contract; (5) interest under the main contract; (6) the principal and other payment under the main contract.

Article 9. Declaration and Commitment

9.1 Guarantor’s declaration:

9.1.1 Guarantor is a legally established and validly existing independent civil subject, has all the essential civil rights and civil capacity required, and is able to sign the contract in its own name and perform the civil liability of the contract.

9.1.2 The guarantor’s signing the contract and fulfilling the obligation of the contract is totally out of true intention, and in accordance with company’s regulation; the signature personal representative of the guarantor has got all the essential legal authorization and violates no regulation and laws.

9.1.3 The fulfillment and enforcement of the contract will not conflict any laws and regulations that the guarantor must abide, neither will it violate any paper that the guarantor has signed.

9.1.4 The guarantor does not hide any events involved that may endanger the loaner’s interests such as regulation, arbitration, litigation, enforcement, claims event and others. Any of the guarantor’s property is under the situation of attachment, seizure, freezing, and other enforcement measures.

9.1.5 All the data and certificating papers provided by the guarantor to the loaner are authentic, legal and effective.

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9.2 Guarantor’s commitment

9.2.1 The guarantor will accept and coordinate the loaner’s checking about security qualifications, privileges, credit status and the truth nature of the consent to provide writing papers for guarantee.

9.2.2 The guarantor has known that the scope of guarantee obligation may exceed the maximum of the claims.

9.2.3 If there is any other property security under the claims, the loaner has the right to choose to exercise other property security or require the guarantor to shoulder guarantee obligation, and the guarantor gives up the defense right on other property security, security sequence, changes of guarantee objects and the fulfillment order of the guarantee obligation.

9.2.4 The guarantor will timely provide according to the loaners requirement financial accounting reports and financial statements, and all the financial accounting reports should be signed and sealed by the legal representative or person authorized.

9.2.5 Names and Account of all banks should be provided.

9.2.6 Within period of validity, if the following significant situations on the guarantor’s side happen such as changes in management mechanism, changes in registered capital, changes in ownership, bankruptcy, dissolution, liquidation, revocation of business licenses and etc., the guarantor must notify the loaner 30days in advance. If the guarantor changes address, name, legal representative and etc., the guarantor should notify the loaner within 3 days.

9.2.7 If any of the events listed below happens, the guarantor must immediately notify the loaner with written form:

9.2.7.1 The guarantor has been or will be involved in significantly negative events, such as litigation, arbitration, administrative or other judicial proceedings.

9.2.7.2 The guarantor receives any notice, order or instruction from any government agencies that have great negative influence on the fulfillment of the obligation of the contract.

9.2.7.3 The guarantor has learned other events that may have significantly negative influence on the fulfillment of the obligation of the contract.

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Article 10. The Realization of Guarantee Rights

10.1 If any of the situation below listed happens, the loaner has the right to send the guarantor written notices and require the guarantor to liquidate the guaranteed claims within 10 days after receiving the notices. The contents of the notices should include the total amount of the guaranteed claims and the details of each claim in the scope of the guaranteed claims (including amount, period and types etc.). The notices should have the same binding force to both parties unless there are obvious errors between the loaner’s corresponding calculation and the contents of the notices.

10.1.1 The loanee does not fulfill any debt in the main contract stated in Item 1 of this contract when the time is due.

10.1.2 The loaner requires the guarantor shoulder the guarantee obligation in advance when it happens that the loanee under the main contract defaults or the guarantor default in terms of this contract.

10.1.3 It happens that the loanee or the guarantor has the following situations that may influence the loaner’s claims realization: bankruptcy, dissolution, liquidation, revocation of business licenses, encounters of serious illness, accident, involvement in significant civil and criminal litigations, arbitration and etc.

10.1.4 The margin should be submitted (or submitted later) according to the contract, but the loanee does not fulfill the corresponding obligation, and the guarantor refuses to submit instead.

10.1.5 The guarantor violates the declaration and commitment or does not fulfill the other obligations of the contract.

10.1.6 Other situations that influencing the loaner to fulfill the claims realization.

Article 11. Rights and Obligations of Both Parties

11.1. Guarantor’s rights and obligations

11.1.1 The guarantor is obliged to pay to the loaner the guaranteed claims defined by the contract and clearly recorded in the written notices within 10 days after receiving as specified in Item 10.1.

11.1.2 The guarantee offered by the guarantor is independent, if there is a third party also providing guarantee for the loanee to fulfill the contract, the guarantor still should shoulder the whole guarantee obligation unless the loaner has agreed.

11.1.3 The guarantor’s rights and obligations in the contract are not able to be removed or influenced for the following situations:

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11.1.3.1 The loaner offers grace for loanee’s repayment or negotiates debt reconciliation with the loanee.

11.1.3.2 The loaner sets up, changes or remove any rights in loanee’s respect.

11.1.3.3 Other guarantees under the guaranteed claims have been changed, delayed in fulfillment, removed, and lose partially or wholly.

11.1.3.4 The loanee’s obligations in the contract are affected because of the loanee’s bankruptcy, liquidation, dissolution or other events due to any law, regulation or administrative order.

11.1.4 In case that the loaner and the loanee change the principal contact, if the guarantor’s obligations are not increased, the guarantor’s agreement about the change needs not to be drawn, and the joint guarantee obligations are not able to be relieved because of this.

11.1.5 Within the period of validity, the guarantor is not allowed to guarantee for the third party without the loaner’s permission.

11.2 Loaner’s rights and obligations

11.2.1 The loaner has the rights to require at any time the loanee to provide financial reports and financial statements or other data that reflect the guarantor’s business condition.

11.2.2 If the guarantor does not fulfill the guarantee obligations as agreed in the contract, the loaner has the rights to directly deduct the guarantor’s money in the accounts opened at the Bank of Shanghai, Inc (including any level of branches) in order to liquidate the claims guaranteed by the guarantor.

11.2.3 The guarantee in the contract is independent of any guarantee rights that the loaner obtains now or will obtain in future. The loaner is allowed to directly carry out the guarantee rights in the contract without carrying out other guarantee rights firstly.

11.2.4 Unless the loaner expresses to give up the rights in the contract in writing, the loaner’s not carrying out and delaying to carry out the whole or partial right, and the loaner’s agreement for the loanee to repay later are not able to be taken as giving up the rights.

Article 12. The Contract’s Effectiveness, Amendment and Termination

12.1 The contract takes effect after the signature or seal of the legal representatives (responsible person) and agents of both parties.

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12.2 After the contract has taken effect, any party can not amend or terminate the contract unauthorized. If amend or termination needed, the two parties shall negotiate an agreement and make a written contract.

Article 13. The Independency of The contract

13.1 The contract is independent of the main contract, the invalidation or the ceasing of the invalidation of the main contract does not affect the effectiveness of the contract. The guarantor shall shoulder the guarantee obligation of the civil obligation caused of the loanee to the loaner because of the invalidation of the whole contract or part of the contract.

13.2 The invalidation of part of the items in the contract does not affect the validation of other items; neither does it affect the loaner’s rights.

Article 14. Breach of the Contract

After the contract has taken effect, both parties should fulfill the obligations agreed in the contract, any party that does not fulfill or does not full fulfill should shoulder corresponding breach of the contract, and compensates the loss so caused to the other party.

Article 15. Applicable Law and Dispute Resolution

15.1 The contract is applicable to laws in China and is explainable accordingly.

15.2 If disputes appear in the fulfillment of the contract between the two parties, they can negotiate, as well as directly submit litigation to the people’s court in the loaner’s location.

15.3 If the contract has been enforced arbitration, when the debt fulfillment term ends, the loanee does not fulfill or does not fully fulfill the debt or the loaner realizes the claim in advance because the loanee has violates the contract, enforced implementation can be directly applied according to law.

Article 16. Force Majeure

If one party is not able to fulfill the obligation of the contract because of the force majeure, the party should notify the other party with written form within 10 days after the occurring date, and provides the written data issued by related agencies to certify the occurring of the force majeure.

9

Article 17. Notice Form and Delivery

17.1 Notice about related subjects of the two parties should be in written form and delivered to the corresponding party according to the principal business addresses listed in the contract.

17.2 When notices are delivered according to the address above, delivery date is: for delivery on a special trip, the date the recipient signed; for telegram and fax, the time fax and telegram arrived at the corresponding party; for post, postmark date for registered letter.

Article 18. Pending Issues

The pending issues of the contract are implemented according to the related laws, regulations and financial regulations of the nation.

Article 19. Indication and Specification

19.1 When the contract is signed, the loaner has stated and explained the item in the contract in detail to the guarantor, there is no disagreement about the contract items between both parties, and both parties have a correct understanding on the legal significance of related rights, obligations, limits on responsibilities and the disclaimer.

19.2 The loaner’s rights and obligations in the contract are able to be enjoyed and fulfilled by the loaner of the contract, or by the upper agencies the loaner belongs to.

Article 20. Consultation Supplementary

Article 21. Contract Copies

The contract has 3 duplicates, the loaner holds one, the guarantor holds one, and the arbitration agency holds one. The number of the duplicates is decided by needs and has the same legal force with the original one.

Loaner:	Guarantor:
(Seal)	(Seal)
Legal representative (Principal)	Legal representative (Principal)
GuiShen (Seal)	Liangcai Zhu (Seal)
	Time: November 29, 2011
	Place: No.1 Zhouhui Road Ningbo

10

EX-10.71

Exhibit 10.71

PURCHASE CONTRACT

No.:  

Date :  

The Buyer ( Party A):

The Seller (Party B):

WHEREBY, the undersigned Seller and Buyer have agreed to close the following transactions according to the terms and conditions set forth as below：

1.   PRODUCTS

Product Name	Product Grade	Contract Quantity （TON）	Time and quantity of delivery
备   注 Notes:

2.   QUALITY GUARANTEE: Refer to attached quality specification.

3.   PRICING:

4.   SETTLEMENT AND PAYMENT: Using COD. In principle, Party A shall pay within 5 days after receiving invoice.

5.   DELIVERY:

6.   TRANSPORT AND COSTS: Paid by Party B.

7.   MEASUREMENT OF QUANTITY AND STANDARD:

1)      The settlement of goods’ quantities is applied for Party A’s shore tanks and refers to Party B’s bills of loading. If the loss lower than 3‰, Party A shall undertake, if it over 3‰, Party B shall undertake the excess loss.

2)     QUALITY: The Seller shall provide qualify evidence before the goods out of the factory and the both parties keep the copies. Party A shall accept according to Item 2 under this contract. If Party A has objection on the quality, written objection shall be send to Party B within 15 days receipt of goods and the final result shall be apply for the test report of SGS.

8.   OWNERSHIP AND RISK   Loading into the tank is the cut-off point of risk liability and ownership, which shall transfer from Party B to Party A when passes this point.

9.   CONFIDENTIAL TERM   Both parties have the duty of confidentiality for the other party’s commercial confidentiality (including but not limited related contracts, documents, information and data, or other information is beneficial for completion for the receiving party). Any party is not allowed to disclose the other party’s commercial confidentiality to the third party or misuse, with exception of written consent or basis of laws and regulations. This term shall stain respond regardless of amendment, termination or cease of this contract.

10.   WARRANTY

1. Party B:

1)      The quality shall meet the specifications under the attachment of this contract.

2)      Party B shall confirm all goods are authentic and effective, if not, Party B shall undertake all loss of Party A.

3)      Party B has authorized his representative to sign his contract and the terms under this contract has the same binding force to him since effective date.

2. Party A

1)      Party A shall be establishment according to law, existence and completion of regarding procedures.

2)      Party A execute related liability under this contract and ensure not to violate the Business License, Articles of Incorporation and any similar regulations, ensure not to violate the authorization and approval of applicable laws and regulations or government departments.

3)      Party B shall take responsibility for transportation and term.

4)      Party A has authorized his representative to sign his contract and the terms under this contract has the same binding force to him since effective date.

11.   HEALTH, SAFETY AND ENVIRONMENTAL PROTECTION Both parties must subject to the requirement of safety, environment and health under applicable laws and regulations during the period of sales, transportation, storage, process and usage and undertake the liability of safety, environment and health.

12.   AMENDMENT AND TERMINATION   1. On both parties’ consensus, this contract can be amended or terminated with written forms. 2. If this contract partly or entirely can not be performed due to one party’s fault, the other party has the right to partly or entirely terminate this contract and the fault party shall undertake corresponding consequence. The party provide to terminate this contract shall inform the other party when termination.

13.   EXCEPTIONS   1. One party or two parties shall not be held responsible for failure of performing obligations entirely or partly under this contract in consequence of any Force Majeure incidents which might occur, but shall take measures to minimize the loss. Force Majeure as referred to in this contract means unforeseeable, unavoidable and insurmountable objective conditions.

14.   LIABILITY FOR BREACH OF CONTRACT   1. Party B shall inform Party A in timely manner if he may failed to perform this contract in time in consequence of Force Majeure or other special reasons. Otherwise, Party B shall undertake the costs incurred by preventing further loss of Party A.   2. If the quality fails to reach the specifications under this contract, Party A has the right to request to reduce price or make an compensation, but Party A shall undertake the liability due to misuse.   3. Occurrence of the others, default party shall compensate the other party’s loss. If both parties have fault, the liability shall be undertaken respectively.

15.   SETTLEMENT OF DISPUTE   All disputes arising from the performance of contract, should through friendly negotiation by both parties if no settlement can be reached, the case should be submitted to local court for arbitration.

16.   EFFECTIVE AND OTHERS   1. The contract will be effective after signed, the valid period is from - to -   2. The pending matter shall be handled on the provision of applicable laws and regulations. The contract is done in duplicate, party A and party B hold each copy, the fax of contract is regard as the same effect with original contract.

The Buyer： The Seller :

2

EX-10.72

Exhibit 10.72

SALES CONTRACT

No.:  

Date :  
 

The Seller:

The Buyer:

WHEREBY, the undersigned Seller and Buyer have agreed to close the following transactions according to the terms and conditions set forth as below：

1. PRODUCTS

Product Name	Product Grade	Executive Standard	Packing	Quantity （TON）	Unit Price	Net(US Dollar)
备   注 Notes:

2.   TIME OF SHIPMENT:

3.   PLACE OF DELIVERY:

4.   TRANSPORT AND COSTS:

5.   QUALITY GUARANTEE: The Seller shall guarantee that the product must be in conformity with the quatity, specifications and quantity specified in this Contract and qualified index of the company (attached quality specification).

6.   PAYMENT: The buyer shall pay off 100% of goods value to the seller before delivery and the Seller shall issue the invoice to the Buyer within 5 days after the Buyer receipt of goods

7.   MEASUREMENT OF QUANTITY: The settlement of goods’ quantities is applied for the Seller’s supporting document, which required to be signed by principals or authorized persons of both parties. If any party disputes on goods’ quantities during the period of delivery, it still use the Seller’s measurement of quantity if the difference within 3‰ between the Buyer’s measurement and the Seller’s. If the difference over 3‰, both parties shall rework respectively, and when the difference still over 3‰, the third party shall be engaged to check and its result as the basis of settlement. The costs for the third party’s check shall be paid by fault party.

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8.   OBJECTION PERIOD OF QUALITY: During the period of dispute regarding quality, the Buyer shall reflect to the Seller with written form within 3 days after receipt of goods and keep the goods in original state, accepting to investigation and settled with negotiation. If the Buyer does not raise objection during above period, it seemed as the goods are accepted.

9.   LIABILITY FOR BREACH OF CONTRACT: If the buyer failed to pay the 100% of goods value or take delivery of goods on time as stipulated in the Contract, the seller has the right to terminate this contract unilaterally, and the buyer shall refund 5% of the goods value as compensation to the seller. If the buyer failed to take the entire goods within the time of shipment under this contract, he agree to pay 5‰ of the remaining postponed goods value for every day as penalty and bear other Indemnifiable Expenses including but not limited Escrow fees and storage fees.

10.   METHOD OF PAYING PENALTY: If defaulted the contract, the seller shall pay the penalty to the buyer directly; If the buyer defaulted the contract, the seller has the right to deduct penalty from performance bond or payment for goods.

11.   The Buyer has the obligation to provide proper and safety transportation, otherwise, the Seller has the right to reject loading according to regulations and the Buyer shall undertake default liability.

12.   OTHER COVENANT: Both parties shall not be held responsible for failure of delay of the contract under this contract in consequence of any Force Majeure.

13.   The contract is done in duplicate, party A and party B hold each copy, the fax of contract is regard as the same effect with original contract.

14.   All disputes arising from the performance of contract, should through friendly negotiation by both parties if no settlement can be reached, the case should be submitted to local court for arbitration.

15.   Both parties have the duty of confidence and shall not disclose the information to the third party without both agreement, or it seems as breach of the contract and the default party shall pay 50% of total amounts as compensations.

The Seller ： The Buyer：

2

EX-10.73

Exhibit 10.73

Transport Contract

Party A ( Client): Ningbo Keyuan Plastics Co., Ltd                    Contract no

Party B (Carrier): Ningbo Xinhe Logistics Co., Ltd                     Sign at:

Now the party B is entrusted by party A to transport the ethyl benzene and therefore signed the contract based on the principle of equality and mutual benefit for both parties to strictly execute it.

1 The transported products’ name, origin place, packing, transportation and quantity

Product name	Origin place	Packing	Transportation	Quantity
--	--	--	--	--

2 Start shipment time :  

3 Loading address:  

Point of Delivery: Ningbo Keyuan Plastics Co., Ltd

4 Quality: Based on the coast tank quality in the loading port, to ensure the quality of ethyl benzene, the carrier should use the special tank lorry for transportation, after loaded, the carrier should apply one time lead sealing on the entry opening and discharge opening, when the tank lorry arrived the appointed location by client, the client should inspect the sealing’s completeness, and check thoroughly if any abnormal situation before discharge.

5 Transportation method: The carrier uses the chemical special vehicle which complies with the national standard, in order to achieve the carrying quantities on the provision of the contract, and the carrier should inform the client two days ahead in case of any changes. The vehicle should be kept in neat condition and be available any time per client’s request.

6 Transport fees: RMB / ton , settlement upon delivery

7 Products quantity: Based on Ningbo Keyuan’s weighing sheet, the reasonable tolerance is ≤ 2‰,if exceeded the 2‰,the party B should compensate for those which exceed 2‰ on the ex factory price on the condition that the lost incurred by the party B after both confirmation. Both parties shall keep the sample if quality dispute happens, and submit the sample to quality supervise department for inspection, and the inspection result is final for both parties to proceed, the fault party should take the responsibility if the inspection result is below the standard. If the party B doubt the weighbridge, the both parties can do weighing in third party’s weighingbridge which both parties all confirm, the result should be final.

1

8 The party B ‘s driver and supercargo should submit to the client’s regulation in the client’s factory area and the arrangement related to route and loading matters;and the client’s staff is not allowed to cause problem to party B’s driver without reasons and make any unreasonable delay.

9 Settle method: After completing the whole transportation, the carrier shall issue formal transportation invoice after both confirmation, and the client shall make payment according to the payment standard agreed in this contract within 10 days.

10 Liability for breach: The carrier should do the delivery based on client’s specified location and time, the client should make payment according to contract.

11 Miscellaneous clause: If both parties delay or fail to perform the contract due to disaster(typhoon, frog, earthquake etc), fire, war and violation, law, government regulation , code, limitation, both parties are all exempt from the liability, but need to inform each other on a timely manner.

12 The carrier will take the safety responsibility during the transportation, and compensate for lose due to traffic damages during the transportation,

13 For all pending matters, both parties shall settle with friendly negotiation on the condition of < Contract law of the People Republic of China >.

14 The contract is done in duplicate, the client and the carrier hold each copy. The contract will be effective since date of both signed and sealed, and be expired automatically after complete execution.

15 The fax version of contract is regard as the same effect with original contract.

16 The period of validity : From   to    .

The client: Ningbo Keyuan Plastics Co., Ltd	The carrier: Ningbo Xinhe Logistics Co., Ltd
Legal representative/Entrusted Agent:	Legal representative/Entrusted Agent
Bank of Deposit:	Bank of Deposit:
Account:	Account:
Address:	Address:
Corporate Tax:	Corporate Tax:
Tel:	Tel:

2

Raw Material Transport Contract (Waterway)

                                                      Contract No:  

                                           Signing date:  

 Signed at:  

Party A ( The client):    Ningbo Keyuan Plastics Co., Ltd

Party B (The carrier):    Ningbo Xinhe Logistics Co., Ltd

According to < Contract law of the People Republic of China> and the applicable law and regulations related to the transportation industry, upon the equality, voluntary basis, and mutual benefit principle, party A and B hereby signed a contract regarding the  in water transportation after discussion.

1.   Products

Products：. Quantity:

2.   Receiving and Delivery System

1.   Loading port shall subject to shore tanks actual transported oil quantity, the quality shall subject to the actual transported quality of depot listings.

2.   Discharging port shall be subject to shore tanks quantity, and the quality shall be same with the loading port’s index.

3.   Both ports shall take samples and sealing: shall subject to SGS if it is involved.

3.   Carrying Date and Time Limit

The carrying date for the products is   /    (before/later one day), the party B shall make related arrangements before this date, and choose the reasonable route to ensure the timely delivery, if any carriage delay or failure due to party A’s fault, the party A shall compensate for corresponding lose; if it incurred by party B, it shall take the compensation, except for force majeure factors including but not limited the ship fault and weather.

4.   Time Limit, Origin Point, Arrival Point and Recipient

1.   Party B shall delivery to destination place immediately after completing loading and shall not stop in midway.

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2.   Loading port:

3.   Discharging port:

5.   Shipping and Transportation Requirement

1.   Shipping: Shipping  as requested by part A and the actual loading shall within the range of loading capacity.

2.   Party B shall promise that shipping accord with the safety requirement to transport         .

3.   It is party B’s responsibility to have all the required licenses which is true, valid and complete for ships to transport the , and take care all the insurances for the ships( including civil liability insurance) during the contract period, and ensure the ships equipped with effective volume and gauge.

4.   If was polluted and caused other lose due to party B’s fault , party B shall take the responsibility .

5.   Party B is not allowed to wash the cabin in the own port of Ningbo Keyuan Plastics Co., Ltd.

6.   Discharge and Period of Responsibility

1.   Party B’s period of responsibility begins from the  across over the board to the completion of discharge at arrival port, party B shall take all the damage responsibility during this period,

2.   After loading, the departure port or inspection authority will arrange the inspection measurement and submit written report to party B, which will be taken as basis for party B to discharge, the recipient must begin to discharge after no comments for the written report.

3.   When party A entrust third party(SGS) to do tank sampling, ship sampling and ship measuring, shore measuring, party B shall send staff to attend and confirm, which will be taken as basis for later inspection. If party B failed, it can be deemed as approval for the results.

4.   If party A’s products showed moisture content over standard and qualification change and leads damage due to the party B’s fault , party B shall compensate completely. The ship provided by party B shall be empty cabin both before loading and after discharging. And the sealing sample on the ship at loading port shall keep the same index as at the discharging ship.

5.   Party B shall inform the recipient before the arrive at the destination and delivery completely, the delivery quantity shall be subject to party A’s inspection quantity of shore tank.

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6.   When the both parties have disputes on the unloading quantity, on the provision of item 6 clause5, it shall deduct the transportation consumption (less than), party B shall make compensation for the shortage based on market price, and party A also is entitled to deduct from delivery fee.

7.   Party A shall cover the insurance for under the contract and party B shall cover the vessel insurance.

7.   Incidental Expenses and Settlement

1.   Transport fees: RMB / ton ( including RMB /ton for port lump sum and RMB/ton for price adjustment allowance, and RMB / ton for port construction ),and the price can only be changed with both parties consent,

2.   Settlement quantity shall subject to the actual shipping quantity.

3.   The shipping fees shall be settled in the beginning of the next month , party B shall provide detailed lists and issue formal transportation invoice after confirmation of party A, and party A shall make payment within 10days after receiving invoice.

8.   Settlement for Dispute

All disputes arising from the performance of contract, should through friendly negotiation by both parties if no settlement can be reached, the case should be submitted to local court for arbitration.

9.   Contract Effectiveness and Other Matters

1.   The contract will be effective after signing, the valid period is from  to            .

2.   The pending matter shall be handled on the provision of applicable laws and regulations.

3.   The contract is done in duplicate, party A and party B hold each copy.

4.   Any handwriting and correction in contract will be deem invalid, the fax of contract is regard as the same effect with original contract.

The client ( Party A):	The carrier( Party B):
Ningbo Keyuan Plastics Co., Ltd	Ningbo Xinhe Logistics Co., Ltd
Legal Representative (or authorized signer)	Legal Representative (or authorized signer)

 5

EX-23.3

Exhibit 23.3

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the use in this amended Registration Statement on Form S-1 of our report dated April 12, 2012, relating to the December 31, 2011 consolidated financial statements of Keyuan Petrochemicals, Inc. and subsidiaries, which expresses an unqualified opinion and includes explanatory paragraphs that relate to unusually important events that occurred in 2011, and significant transactions and relationships with related parties and certain other parties,  and to the reference to our firm under the caption “Experts” in the Prospectus.

/s/ GHP HORWATH, P.C.

Denver, Colorado

September 25, 2012

XML

Inventories (Tables)

6 Months Ended

12 Months Ended

Jun. 30, 2012

Dec. 31, 2011

Inventory Disclosure [Abstract]

Schedule of Inventory

	June 30,		December 31,
	2012		2011
	(Unaudited)
Raw materials	$	48,865,084	$	26,226,388
Finished goods		20,219,210		10,891,825
Work-in-process		3,963,955		1,827,755
Total	$	73,048,249	$	38,945,968

		As of December 31,
		2011		2010
Raw materials	$	26,226,388	$	53,160,604
Finished goods		10,891,825		30,024,896
Work-in-process		1,827,755		3,646,056
Total	$	38,945,968	$	86,831,556

XML

Keyuan Petrochemicals, Inc. (Parent Company) (Details) (USD $)	Jun. 30, 2012		Dec. 31, 2011		Dec. 31, 2010		Dec. 31, 2009
Condensed Balance Sheets
Cash	$ 9,879,169	[1]	$ 7,325,017	[1]	$ 29,336,241	[2]
Other current assets	60,646,615	[3]	45,978,428	[3]	28,608,833	[4]
Total assets	766,485,188		529,843,840		452,968,948
Accounts payable	79,936,476		97,588,137		92,225,936
Accrued expenses and other payables	30,254,525	[5]	30,287,946	[5]	18,205,110	[6]
Dividends payable	2,381,759		2,381,759		234,393
Series B convertible preferred stock	16,451,552		16,451,552		16,701,565	[5]
Total stockholders’ equity	73,614,251		69,245,749		75,698,380		10,627,959
Total liabilities and stockholders' equity	766,485,188		529,843,840		452,968,948
Parent Company [Member]
Condensed Balance Sheets
Cash			5,089		392,741
Other current assets			392,770		570
Investment in subsidiaries			41,774,338		41,774,338
Total assets			42,172,197		42,167,649
Accounts payable			672,310		23,527
Accrued expenses and other payables			2,671,474		74,656
Inter-company liabilities			8,930,146		1,760,000
Dividends payable			2,381,760		234,393
Series B convertible preferred stock			16,451,553		16,701,565
Total stockholders’ equity			11,064,954		23,373,508
Total liabilities and stockholders' equity			$ 42,172,197		$ 42,167,649

[1] Note 3

[2] Note 2(d)

[3] Note 8

[4] Note 6

[5] Note 14

[6] Note 13

XML

Keyuan Petrochemicals Inc Parent Company (Tables)

12 Months Ended

Dec. 31, 2011

Condensed Financial Information Of Parent Company Only Disclosure [Abstract]

Condensed Balance Sheets

	As  of December 31, 2011		As  of December 31, 2010
Cash	$	5,089	$	392,741
Other current assets		392,770		570
Investment in subsidiaries		41,774,338		41,774,338
Total assets		42,172,197		42,167,649
Accounts payable		672,310		23,527
Accrued expenses and other payables		2,671,474		74,656
Inter-company liabilities		8,930,146		1,760,000
Dividends payable		2,381,760		234,393
Series B convertible preferred stock		16,451,553		16,701,565
Total stockholders’ equity		11,064,954		23,373,508
Total liabilities and stockholders’ equity	$	42,172,197	$	42,167,649

Condensed Statements of Operations

	Year ended		Year ended
	December 31,		December 31,
	2011		2010
General and administrative expenses	$	9,757,782	$	2,108,043
Interest expens		4,041		810
Loss before income taxes		9,761,823		108,853
Income tax expense		-		-
Net loss	$	9,761,823	$	2,108,853

Condensed Statements of Cash Flows

	Year ended December 31, 2011			Year ended December 31, 2010
Cash flows from operating activities
Net loss	$	(9,761,823	)	$	(2,108,853	)
Adjustments to reconcile net loss to net cash used inoperating activities:
Share-based compensation		-			1,515,907
Stock option expense		2,063,394			-
Liquidated damages		2,493,326			-
Decrease in other assets		(392,200	)		(570	)
Decrease in trade payables		-			-
Increase in accounts payable, accrued expenses and other payables		617,821			42,158
Net cash used in operating activities		(4,979,482	)		(551,358	)
Cash flows from investing activities
Investment in subsidiaries		-			(41,774,338	)
Net cash used in investing activities		-			(41,774,338	)
Cash flows from financing activities
Advance from inter-group company		7,170,146			1,760,000
Dividend paid to stockholders		(2,585,647	)		(902,886	)
Repurchase of common stock		-			(400,000	)
Additional paid in capital		7,332			-
Proceeds from Series A Private Placement, net		-			23,312,091
Proceeds from Series B Private Placement, net		-			18,949,232
Net cash provided by financing activities		4,591,831			42,718,437
Net decrease in cash		(387,651	)		392,741
Cash at beginning of year		392,741			-
Cash at end of year	$	5,090		$	392,741

XML

Common Stock Purchase Warrants (Tables)

12 Months Ended

Dec. 31, 2011

Common Stock Purchase Warrants [Abstract]

Schedule of warrants issued to purchase the Company's common stock

	Issuance dates	Maximum number Of shares of  common stock		Exercise prices
Series A Warrants	April 22 and May 18, 2010		748,704		$4.50
Series B Warrants	April 22 and May 18, 2010		748,704		$5.25
Series C Warrants	September 28, 2010		810,001		$4.50
Series D Warrants	September 28, 2010		810,001		$5.25
Placement agent warrants
-Series A Private Placement	April 22 and May 18, 2010		718,755	$3.50~$5.25
-Series B Private Placement	September 28, 2010		561,601	$3.75~$5.25

XML

Land Use Rights (Details Textual) (USD $)	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011	Dec. 31, 2011	Dec. 31, 2010
Land use rights (Textual)
Amortization expense related to land use rights	$ 112,934	$ 109,677	$ 225,868	$ 217,999	$ 441,234	$ 274,589

XML

Organization and Description of Business (Details) (USD $)	1 Months Ended		3 Months Ended	6 Months Ended	12 Months Ended
	Dec. 31, 2010	Apr. 30, 2010	Mar. 31, 2011	Jun. 30, 2012	Dec. 31, 2011	Dec. 31, 2010	Sep. 28, 2011	Apr. 22, 2010	May 12, 2010 Keyuan International Group Limited [Member]	Nov. 16, 2009 Ningbo Keyuan Plastics Co. [Member]
Organization and description of business (Textual)
Exchange of common stock for company'S series M convertible preferred stock		47,658
Percentage of preferred stock representing number of common stock		95.00%
Conversion of series M convertible preferred stock into common stock (Shares)	47,658,000
Common stock, shares repurchased		3,264,000
Common stock, shares repurchased, value		$ 400,000
Consideration paid in excess of par value of repurchased shares, recorded as additional paid in capital								396,736
Ownership percentage of former stockholders after shares repurchase and conversion of series M preferred stock in the company		95.20%
Amount of off-balance sheet cash							800,000
Net income statement effect of off-balance sheet cash			$ 400,000	$ 192,000	$ 192,000	$ 12,000
Minimum period for that bank loans provide adequate capital resources to fund its operations and working capital				12 years	12 years
Organization and Description of Business (Additional Textual)
Equity ownership percentage in the company									100.00%	100.00%

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Stockholders' Equity and Related Financing Agreements (Details 1) (USD $)	1 Months Ended
	May 31, 2010 Series A Private Placement [Member]	Apr. 30, 2010 Series A Private Placement [Member]	Sep. 30, 2010 Series B Private Placement [Member]
Fair Value Assumptions
Expected volatility	45.15%	45.82%	86.22%
Expected dividends yield	0.00%	0.00%	0.00%
Time to maturity	3 years	3 years	3 years
Weighted average risk-free interest rate	0.75%	1.03%	0.68%
Fair value of the common stock	$ 2.79	$ 2.38	$ 3.40

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Related Party Transactions and Relationships and Transactions With Certain Other Parties (Details 3) (USD $)	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011	Dec. 31, 2011	Dec. 31, 2010
Short-term financing transactions with related parties
Short-term financing from related parties		$ 5,406,139		$ 13,144,234	$ 13,303,054	$ 30,839,377
Short-term financing to these parties		5,535,234		(13,144,234)	13,188,178	30,949,048
Short-term financing transactions with related parties, Balance						(112,459)
Shandong Tengda [Member]
Short-term financing transactions with related parties
Short-term financing from related parties						2,219,100
Short-term financing to these parties						(2,219,100)
Short-term financing transactions with related parties, Balance
Ningbo Kewei [Member]
Short-term financing transactions with related parties
Short-term financing from related parties		5,358,850		5,358,850	5,423,600	1,479,400
Short-term financing to these parties		(5,358,850)		(5,358,850)	(5,423,600)	(1,479,400)
Short-term financing transactions with related parties, Balance
Ningbo Kunde [Member]
Short-term financing transactions with related parties
Short-term financing from related parties		32,550		5,358,850	5,423,600	19,676,020
Short-term financing to these parties		(32,550)		(5,358,850)	(5,423,600)	(19,676,020)
Short-term financing transactions with related parties, Balance
Jiangdong Jihe [Member]
Short-term financing transactions with related parties
Short-term financing from related parties		14,739		2,426,534	2,455,854	7,464,857
Short-term financing to these parties		143,834		(2,426,534)	(2,340,978)	(7,574,528)
Short-term financing transactions with related parties, Balance						$ (112,459)

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Accrued Expenses and Other Payables (Tables)

6 Months Ended

12 Months Ended

Jun. 30, 2012

Dec. 31, 2011

Accounts Payable and Accrued Liabilities [Abstract]

Accrued expenses and other payables

	June 30,		December 31,
	2012		2011
	(Unaudited)
Payables for the purchase of property, plant and equipment	$	24,419,569	$	24,590,217
Accrued payroll and welfare		341,775		1,061,508
Liquidated damages		2,493,326		2,493,326
Other accruals and payables		2,999,855		2,142,895
	$	30,254,525	$	30,287,946

As of December 31,
2011	2010

Purchase of property, plant and equipment	$	24,590,217	$	17,217,958
Accrued payroll and welfare		1,061,508		690,831
Liquidated damages		2,493,326		-
Other accruals and payables		2,142,895		296,321
	$	30,287,946	$	18,205,110

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Significant Concentrations and Risks

6 Months Ended

12 Months Ended

Jun. 30, 2012

Dec. 31, 2011

Significant Concentrations and Risks [Abstract]

SIGNIFICANT CONCENTRATIONS AND RISKS

21         SIGNIFICANT CONCENTRATIONS AND RISKS

As of June 30, 2012 and December 31, 2011, the Group held cash and pledged bank deposits in financial institutions of approximately $249,695,663 and $163,591,879, respectively. They were primarily held in major financial institutions located in mainland China and the Hong Kong Special Administrative Region. Management believes that these financial institutions have high credit ratings.

Sales to major customers, which individually exceeded 4% of the Group’s total net revenues, are as follows:

Three months ended June 30, 2012						Three months ended June 30, 2011
	¼ Unaudited ¼‰						¼ Unaudited ¼‰
Largest	Amount of		% Total			Largest	Amount of		% Total
Customers	Sales		Sales			Customers	Sales		Sales
Customer A	$	40,695,112		21	%	Customer A	$	35,607,254		24	%
Customer B		12,876,871		7	%	Customer D		14,540,619		10	%
Customer C		12,615,883		7	%	Customer  I		14,278,678		10	%
Customer D		11,234,274		6	%	Customer J		13,517,410		9	%
Customer E		9,820,712		5	%	Customer L		6,314,579		4	%
Total	$	87,242,852		47	%	Total	$	84,258,540		57	%

Six months ended June 30, 2012						Six months ended June 30, 2011
	¼ Unaudited ¼‰						¼ Unaudited ¼‰
Largest	Amount of		% Total			Largest	Amount of		% Total
Customers	Sales		Sales			Customers	Sales		Sales
Customer A	$	52,843,930		14	%	Customer A	$	58,150,912		20	%
Customer H		24,777,298		7	%	Customer J		42,284,552		14	%
Customer D		21,659,715		6	%	Customer D		28,430,114		10	%
Customer G		17,177,359		4	%	Customer I		14,278,678		5	%
Customer F		15,014,302		4	%	Customer K		13,176,798		4	%
Total	$	131,472,604		36	%	Total	$	156,321,054		53	%

The Group currently buys a majority of its heavy oil, an important component of its products, from three suppliers. Although there are a limited number of suppliers of the particular heavy oil, management believes that other suppliers could provide similar heavy oil on comparable terms. A change in suppliers, however, could cause a delay in manufacturing and a possible loss of sales, which would affect operating results adversely. Purchases (net of VAT) from the largest three suppliers for three months ended June 30, 2012 and 2011 were $155,361,871 and $153,035,430, respectively. These purchases represented 83% of all of the Company’s purchases for each of the three months ended June 30, 2012 and 2011. Purchases (net of VAT) from the largest three suppliers for the six months ended June 30, 2012 and 2011 were $275,123,617 and $231,995,919, respectively. These purchases represented 80% and 77%, respectively, of all of the Group’s purchases for the six months ended June 30, 2012 and 2011.

The Group’s operations are carried out in the PRC. Accordingly, the Group’s business, financial condition and results of operations may be influenced by the political, economic and legal environments in the PRC as well as by the general state of the PRC’s economy. The business may be influenced by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency conversion and remittance abroad, and rates and methods of taxation, among other things.

23        SIGNIFICANT CONCENTRATIONS AND RISKS

At December 31, 2011 and 2010, the Group held cash and pledged bank deposits in financial institutions of $163,591,879 and $127,260,081, respectively. They were primarily held in major financial institutions located in mainland China and the Hong Kong Special Administrative Region. Management believes that these financial institutions have high credit ratings.

Sales to major customers, which individually exceeded 4% of the Group’s total annual net revenue, are as follows:

Year ended December 31, 2011				Year ended December 31, 2010
Largest Customers	Amount of Sales	% Total Sales		Largest Customers	Amount of Sales	% Total Sales
Customer A	114,981,292	18	%	Customer A	101,680,459	18	%
Customer B	56,582,811	9	%	Customer B	32,193,696	6	%
Customer C	42,795,468	7	%	Customer F	31,745,184	6	%
Customer D	28,228,269	5	%	Customer G	29,625,766	5	%
Customer E	27,138,266	4	%	Customer H	26,545,302	5	%
Total	269,726,106	43	%	Total	221,790,407	40	%

The Group currently buys a majority of its heavy oil, an important component of its products, from three suppliers. Although there are a limited number of suppliers of the particular heavy oil used in production, management believes that other suppliers could provide similar heavy oil on comparable terms. A change in suppliers, however, could cause a delay in manufacturing and a possible loss of sales, which could affect operating results adversely. Purchases (net of VAT) from the largest three suppliers for the years ended December 31, 2011 and 2010 were $377,051,329 and $309,943,580, respectively. These purchases represented 83% and 61%, respectively, of all of the Group’s purchases for the years ended December 31, 2011 and 2010.The Company’s largest supplier accounted for approximately $305 million and $191 million, or 67% and 38% of total purchases for each of the years ended December 2011 and 2010, respectively.

The Group’s operations are carried out in the PRC. Accordingly, the Group’s business, financial condition and results of operations may be influenced by the political, economic and legal environments in the PRC, as well as by the general state of the PRC’s economy. The business may be influenced by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency conversion and remittances abroad, and rates and methods of taxation, among other things.

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Stockholders' Equity and Related Financing Agreements (Details 2) (USD $)	Sep. 28, 2010	May 18, 2010	Apr. 22, 2010
Series A convertible preferred stock [Member]
Summary of effective conversion prices and estimated fair values
Effective initial conversion price of stock issued		$ 3.49	$ 3.57
Series B convertible preferred stock [Member]
Summary of effective conversion prices and estimated fair values
Effective initial conversion price of stock issued	$ 3.40
Fair value Intrinsic value of stock issued	$ 0	$ 0	$ 0
Series A Common Stock [Member]
Summary of effective conversion prices and estimated fair values
Fair value Intrinsic value of stock issued	$ 3.40	$ 2.79	$ 2.38

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Long-Term Bank Borrowings (Details) (USD $)	Jun. 30, 2012		Dec. 31, 2011		Dec. 31, 2010
Summary of long-term bank borrowings
Loan from Bank	$ 15,850,000		$ 15,740,000		$ 32,615,500
Less: current portion	(15,850,000)	[1]	(15,740,000)	[1]	(17,445,500)	[2]
Loans payable to bank, non-current					15,170,000	[2]
China Construction bank [Member]
Summary of long-term bank borrowings
Loan from Bank			15,740,000		15,170,000
Industrial and Commercial Bank of China [Member]
Summary of long-term bank borrowings
Loan from Bank					4,551,000
Bank of China [Member]
Summary of long-term bank borrowings
Loan from Bank					$ 12,894,500

[1] Note 13

[2] Note 11

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Share-Based Payments (Details Textual) (USD $)	1 Months Ended		3 Months Ended		6 Months Ended		12 Months Ended			1 Months Ended	12 Months Ended		1 Months Ended	12 Months Ended		1 Months Ended	12 Months Ended		1 Months Ended			12 Months Ended		1 Months Ended	12 Months Ended				1 Months Ended		12 Months Ended			1 Months Ended
	Dec. 31, 2010	Jun. 30, 2010	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011	Dec. 31, 2011	Dec. 31, 2010	Dec. 29, 2010	Apr. 30, 2010 Hayden Communications International [Member]	Dec. 31, 2011 Hayden Communications International [Member]	Dec. 31, 2010 Hayden Communications International [Member]	Apr. 30, 2010 Chesapeake Group Inc [Member]	Dec. 31, 2011 Chesapeake Group Inc [Member]	Dec. 31, 2010 Chesapeake Group Inc [Member]	Apr. 30, 2010 Hampton Growth Resources LLC [Member]	Dec. 31, 2011 Hampton Growth Resources LLC [Member]	Dec. 31, 2010 Hampton Growth Resources LLC [Member]	Jun. 30, 2010 Senior Management Employees [Member]	Aug. 04, 2010 Two Independent Directors [Member]	Jul. 01, 2010 Two Independent Directors [Member]	Dec. 31, 2011 Employees [Member]	Dec. 31, 2010 Employees [Member]	Jul. 27, 2010 Consultant [Member]	Dec. 31, 2011 Consultant [Member]	Dec. 31, 2010 Consultant [Member]	May 01, 2011 Consultant [Member]	Mar. 31, 2011 Consultant [Member]	Jul. 27, 2010 External Hr Consultant [Member]	Jul. 01, 2010 External Hr Consultant [Member]	Dec. 31, 2011 Non Employee [Member]	Dec. 31, 2010 Non Employee [Member]	Jun. 30, 2010 2010 Equity Incentive Plan [Member]	Jun. 30, 2010 Vest and Exercisable Condition 1 [Member] Senior Management Employees [Member]	Jun. 30, 2010 Vest and Exercisable Condition 2 [Member] Senior Management Employees [Member]
Share-based payments (Textual)
Number of Shares issuable pursuant to Equity Incentive Plan																																	6,000,000
Number of stock options granted																			3,000,000	700,000	80,000			420,000					40,000
Conractual term of stock option																			5 years	5 years	5 years								5 years
Stock option expiration date																								Apr. 21, 2013
Exercise price of stock option																			$ 4.20	$ 4.50	$ 4.20			$ 4.20						$ 4.20
Condition for stock option to vest and become exercisable																					Independent directors are re-elected for successive one year terms one year after the stock options issuance date.
Grant date fair value of stock options																			$ 3,347,298	$ 1,338,761	$ 91,349			$ 520,441						$ 45,675
Number of stock options vested																					40,000			70,000			95,456							2,810,000	190,000
Number of stock options vested monthly from September 1, 2010 through April 1, 2011																												31,818
Remaining stock option subject to vest and exercisable																					40,000
Vesting period of stok options																			3 years	3 years
Percentage of stock option vest and exercisable in year one																				30.00%														30.00%	40.00%
Percentage of stock option vest and exercisable in year two																				40.00%														40.00%	60.00%
Percentage of stock option vest and exercisable in year three																				30.00%														30.00%
Stock Issued During Period, Shares, Issued for Services										88,000			48,000			50,000
Period of services										12 months			12 months			12 months
Share-based compensation expenses related to employee stock options charged to general and administrative expenses and services			406,098	155,188	819,496	1,285,185	1,627,802	777,102			62,545	146,895		12,990	139,290		54,500	144,875				290,332	353,420		290,332	307,745					130,035	431,060
Unrecognized compensation costs related to employee stock options			1,146,910		1,146,910		2,372,504																								22,837
Remaining weighted average service period					11 months 3 days		1 year 5 months 8 days																								1 year 6 months
Exercise price of incentive stock option		Shall not be less than 100% of the fair market value of a share on the date of grant.					Shall not be less than 100% of the fair market value of a share on the date of grant
Term of incentive stock option							Not greater than 10 years
Cancellation of stock option granted to certain employees	600,000
Fair value of committed cash payment									400,000
Liability related to committed cash payment	56,000		257,226		257,226		190,000	56,000
Fair value of the stock options vested							$ 1,103,493

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Summary of Significant Accounting Policies (Details Textual) (USD $)	12 Months Ended
	Dec. 31, 2011		Dec. 31, 2010		Jun. 30, 2012
Summary of significant accounting policies (Textual)
Cash	$ 7,325,017	[1]	$ 29,336,241	[2]	$ 9,879,169	[1]
Maturity period of short term bank borrowings	Three to six months
Contractual term of land use rights	15 to 50 years
Reimbursement on discounted bill receivable	1,600,000		9,200,000
Percentage of invoiced amount collected on behalf of tax authorities	17.00%
Minimum percentage of contribution in PRC on employee salary	18.60%
Maximum percentage of contribution in PRC on employee salary	26.10%
Employer contribution amount	$ 391,990		$ 284,752
Largest amount of recognized income tax positions	(Greater than 50%)
Stock Options [Member]
Summary of significant accounting policies (Textual)
Antidilutive Securities Excluded from Computation of Earnings Per Share	4,066,804		4,066,804
Warrant [Member]
Summary of significant accounting policies (Textual)
Antidilutive Securities Excluded from Computation of Earnings Per Share	7,886,586		7,886,586

[1] Note 3

[2] Note 2(d)

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Related Party Transactions and Relationships and Transactions With Certain Other Parties (Details 8) (USD $)	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011	Dec. 31, 2011	Dec. 31, 2010
Short-term financing transactions from other related parties
Short-term financing from these parties		$ 12,862,621		$ 47,612,617	$ 49,873,894	$ 74,983,618
Short-term financing to these parties (k)		(7,142,275)		(45,374,149)	47,608,361	77,030,336
Balance amount from other related parties	15,773,715		15,773,715		2,740,970	2,217,854
Ningbo Litong [Member]
Short-term financing transactions from other related parties
Short-term financing from these parties		12,862,621		38,142,763	36,366,031	57,180,289
Short-term financing to these parties (k)		(7,142,275)		(35,904,295)	(34,100,498)	(59,343,172)
Balance amount from other related parties						2,217,854
Jiangdong Haikai [Member]
Short-term financing transactions from other related parties
Short-term financing from these parties						7,447,529
Short-term financing to these parties (k)						(7,331,364)
Balance amount from other related parties
Jiangdong Deze [Member]
Short-term financing transactions from other related parties
Short-term financing from these parties				2,602,870	2,634,320	4,438,200
Short-term financing to these parties (k)				(2,602,870)	(2,634,320)	(4,438,200)
Balance amount from other related parties
Ningbo Anqi [Member]
Short-term financing transactions from other related parties
Short-term financing from these parties				6,866,984	10,873,543	5,917,600
Short-term financing to these parties (k)				(6,866,984)	(10,873,543)	(5,917,600)
Balance amount from other related parties

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Accrued Expenses and Other Payables (Details) (USD $)	Jun. 30, 2012		Dec. 31, 2011		Dec. 31, 2010
Accrued expenses and other payables
Payables for the purchase of property, plant and equipment	$ 24,419,569		$ 24,590,217		$ 17,217,958
Accrued payroll and welfare	341,775		1,061,508		690,831
Liquidated damages			2,493,326
Other accruals and payables	2,999,855		2,142,895		296,321
Accrued expenses and other payables	$ 30,254,525	[1]	$ 30,287,946	[1]	$ 18,205,110	[2]

[1] Note 14

[2] Note 13

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Share-Based Payments (Details 2) (Employee Stock Option [Member], USD $)	1 Months Ended
	Aug. 04, 2010	Jul. 01, 2010	Jun. 30, 2010
Employee Stock Option [Member]
Summary of grant-date fair value of the stock options granted based on the assumptions
Options granted, Expected volatility	47.00%	47.00%	47.00%
Options granted, Expected dividend yield	0.00%	0.00%	0.00%
Options granted, Weighted average risk-free interest rate	1.62%	1.80%	1.79%
Options granted, Weighted average expected life (in years)	5 years	5 years	5 years
Options granted, Estimated fair value of underlying common stock	$ 4.50	$ 3.25	$ 3.21

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Common Stock and Capital Contribution (Details) (USD $)	1 Months Ended			6 Months Ended		12 Months Ended						1 Months Ended	12 Months Ended	1 Months Ended
	Dec. 31, 2010	Oct. 31, 2010	Apr. 30, 2010	Jun. 30, 2012	Jun. 30, 2011	Dec. 31, 2011	Dec. 31, 2010	Jan. 17, 2011	Dec. 28, 2010	May 18, 2010	Apr. 22, 2010	Jan. 31, 2011 Series B Preferred Stock [Member]	Dec. 31, 2011 Series B Preferred Stock [Member]	Jan. 31, 2011 Series A warrants [Member]	Jan. 31, 2011 Series B warrants [Member]
Common Stock and Capital Contributions (Textual)
Estimated dividend to be distributed												$ 3,500,000
Dividend waived												17,200,000
Amount distributed to common stockholders as dividends													1,205,014
Shares converted into common stock						500,000							66,670
Company’s common stock issued												66,670
Number of warrants exercised														1,150	500
Number of common stock issued in exercise of warrants														1,150	500
Proceeds from warrant exercises					7,332	7,332	220,000							4,863	2,468
Common stock share issued by the company upon the completion of the Series A Private Placement	57,577,840			57,646,160		57,646,160	57,577,840			87,142	661,562
Capital contribution by the stockholders			$ 220,000				$ 220,000
Par value of issued common stock	$ 0.001			$ 0.001		$ 0.001	$ 0.001			$ 0.001	$ 0.001
Conversion of series A convertible preferred stock into common stock		6,738,336
Conversion of series M convertible preferred stock into common stock	47,658,000
Authorized common stock	100,000,000			100,000,000		100,000,000	100,000,000		100,000,000
Annual cash dividend per share for 2010 to be paid quarterly to its common stock								$ 0.36

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Share-Based Payments (Details 3) (Non employee stock option grants [Member], USD $)	12 Months Ended
	Dec. 31, 2011
Non employee stock option grants [Member]
Summary of stock options granted to non-employees
Number of options, Balance	460,000
Weighted average exercise price, Balance	$ 4.20
Weighted average remaining contractual term	1 year 6 months
Aggregate intrinsic value, Balance
Number of options, Exercisable	460,000
Weighted average exercise price, Exercisable	$ 4.20
Weighted average remaining contractual term, Exercisable	1 year 8 months 5 days
Aggregate intrinsic value, Exercisable

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Stockholders' Equity and Related Financing Agreements (Details) (USD $)	6 Months Ended	12 Months Ended
	Jun. 30, 2012	Dec. 31, 2011	Dec. 31, 2010
Proceeds from issuance of private placements
Proceeds from Series A Private Placement, net			$ 23,312,091
Series A Private Placement [Member]
Proceeds from issuance of private placements
Gross Proceeds			26,204,639
Issuance cost			3,242,231
Proceeds from Series A Private Placement, net			22,962,408
Series B Private Placement [Member]
Proceeds from issuance of private placements
Gross Proceeds			20,250,000
Issuance cost			1,835,109
Proceeds from Series A Private Placement, net			18,414,891
Series A convertible preferred stock [Member] | Series A Private Placement [Member]
Proceeds from issuance of private placements
Gross Proceeds			23,993,129
Issuance cost			2,974,986
Proceeds from Series A Private Placement, net			21,018,143
Common Stock [Member] | Series A Private Placement [Member]
Proceeds from issuance of private placements
Gross Proceeds			1,820,800
Issuance cost			221,661
Proceeds from Series A Private Placement, net			1,599,139
Series A warrants [Member] | Series A Private Placement [Member]
Proceeds from issuance of private placements
Gross Proceeds			233,210
Issuance cost			27,279
Proceeds from Series A Private Placement, net			205,931
Series B warrants [Member] | Series A Private Placement [Member]
Proceeds from issuance of private placements
Gross Proceeds			157,500
Issuance cost			18,305
Proceeds from Series A Private Placement, net			139,195
Series B convertible preferred stock [Member] | Series B Private Placement [Member]
Proceeds from issuance of private placements
Gross Proceeds			18,365,935
Issuance cost			1,664,370
Proceeds from Series A Private Placement, net			16,701,565
Series C Warrant [Member] | Series B Private Placement [Member]
Proceeds from issuance of private placements
Gross Proceeds			1,000,352
Issuance cost			90,654
Proceeds from Series A Private Placement, net			909,698
Series D Warrant [Member] | Series B Private Placement [Member]
Proceeds from issuance of private placements
Gross Proceeds			883,713
Issuance cost			80,085
Proceeds from Series A Private Placement, net			$ 803,628

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Short-Term Bank Borrowings (Details) (USD $)	Jun. 30, 2012		Dec. 31, 2011		Dec. 31, 2010
Short-Term Bank Borrowings
Bank borrowings-secured/guaranteed	$ 393,534,612	[1]	$ 225,969,421	[1]	$ 135,768,634	[2]

[1] Note 12

[2] Note 10

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Common Stock and Capital Contribution

12 Months Ended

Dec. 31, 2011

Common Stock and Capital Contributions [Abstract]

COMMON STOCK AND CAPITAL CONTRIBUTION

15        COMMON STOCK AND CAPITAL CONTRIBUTION

On April 22, 2010 and May 18, 2010, the Company issued 661,562 shares of common stock and 87,142 shares of common stock, respectively, par value of $0.001 per share, upon the completion of the Series A Private Placement.

In April 2010 the registered capital of Keyuan International was increased as a result of a capital contribution of $220,000 by its shareholders.

In October2010, all of the Series A convertible preferred stock was converted into 6,738,336 shares of the Company’s common stock.

On December 28, 2010, all of the Series M convertible preferred stock was converted into 47,658,000 shares of the Company’s common stock upon the Company’s stockholders approval of an increase in the authorized common stock to100,000,000 shares.

On January 17, 2011, the Company’s Board of Directors approved the distribution of an annual cash dividend of $0.36 per share for 2010 to be paid quarterly to its common stock stockholders at the assigned dates of record. In January 2011, certain stockholders of the Company announced the waiver of their rights to receive such cash dividends. In addition, Dragon State International Limited, the primary Series B convertible stockholder agreed to waive their rights to receive cash dividend for 2010 should they choose to convert their preferred stock before the record date. The estimated dividends to be distributed and the dividends waived are approximately $3.5 million and $17.2 million, respectively. Approximately $ 1,205,014 was distributed to common stockholders as dividends during the year ended December 31, 2011. In October 2011, the Company’s Board of Directors suspended the payment of quarterly cash dividends on the Company’s common stock while it pursues strategic alternatives including, but not limited to, taking the Company private, a merger or other transaction.

During the year ended December 31, 2011, 66,670 shares of the Series B convertible preferred stock were converted into 66,670 shares of the Company’s common stock. In addition, 1,150Series A warrants and 500 Series B warrants were exercised, and the Company issued 1,150 shares and 500 shares of the Company’s common stock, receiving proceeds of $4,863 and $2,468,respectively.

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Income Taxes (Tables)

6 Months Ended

12 Months Ended

Jun. 30, 2012

Dec. 31, 2011

Income Tax Disclosure [Abstract]

Components of income (loss) before income tax expense (benfit) by jurisdiction

	Three months ended June 30,
	2012			2011
	(Unaudited)			(Unaudited)
PRC	$	3,447,170		$	3,309,794
U.S.		(627,907	)		(3,765,742	)
Hong Kong and BVI		(886,638	)		(700,763	)
Income (loss) before income taxes	$	1,932,625		$	(1,156,711	)

	Six months ended June 30,
	2012			2011
	(Unaudited)			(Unaudited)
PRC	$	8,003,206		$	11,939,586
U.S.		(1,426,030	)		(4,704,077	)
Hong Kong and BVI		(1,660,367	)		(925,926	)
Income before income taxes	$	4,916,809		$	6,309,583

Year ended December 31,
2011	2010

PRC	$	8,930,752		$	53,158,384
U.S.		(9,761,824	)		(2,108,853	)
Hong Kong and BVI		(3,458,506	)		(436,404	)
(Loss)income before income taxes	$	(4,289,578	)	$	50,613,127

Group’s income tax expense

PRC:	Three months ended June 30,				Six months ended June 30,
	2012		2011		2012		2011
	¼ Unaudited ¼‰		¼ Unaudited ¼‰		¼ Unaudited ¼‰		(Unaudited ¼‰
Current income tax expense	$	870,277	$	665,828	$	2,009,469	$	2,917,979
Total income tax expense	$	870,277	$	665,828	$	2,009,469	$	2,917,979

Year ended December 31,
2011	2010

Current income tax expense	$	2,408,474	$	10,434,575
Deferred income tax expense		443,244		3,058,129
Total income tax expense	$	2,851,718	$	13,492,704

Reconciliation between income tax expense (benefit) and the amounts computed by applying the PRC statutory income tax rate

	Three months ended June 30,
	2012				2011
	¼ Unaudited ¼‰				¼ Unaudited ¼‰
Income (loss) before income taxes	$	1,932,625			$	(1,156,711	)
Computed income tax expense (benefit)		483,156	25.0	%		(289.178	)	25.0	%
NOLs from overseas subsidiaries not recognized		378,636	19.6	%		1,433,636		(123.9	%)
Others		8,485	0.4	%		(478,630	)	41.4	%
Actual income tax expense	$	870,277	45.0	%	$	665,828		(57.6	%)

	Six months ended June 30,
	2011				2011
	¼ Unaudited ¼‰				¼ Unaudited ¼‰
Income before income taxes	$	4,916,809			$	6,309,583
Computed expected income tax expense		1,229,202	25.0	%		1,577,396		25.0	%
NOLs from overseas subsidiaries not recognized		771,599	15.7	%		1,799,204		28.5	%
Others		8,668	0.2	%		(458,621	)	(7.3	%)
Actual income tax expense	$	2,009,469	40.9	%	$	2,917,979		46.2	%

		Year ended December 31,
		2011					2010
(Loss)income before income taxes	$	(4,289,578	)			$	50,613,127
Computed expected
Income tax (benefit) expense		(1,072,395	)	25.0	%		12,653,282	25.0	%
Tax loss not recognized		2,625,242		(61.2	%)		781,918	1.6	%
Effect of differential tax rate		679,840		(15.8	%)		57,504	0.1	%
Other		184,617		(4.3	%)		-	-
Permanent differences		434,414		(10.1	%)
Actual income tax expense	$	2,851,718		(66.4	%)	$	13,492,704	26.7	%

Income tax effects of temporary differences

		As of December 31,
		2011			2010
Net operating tax loss carried forwards	$	4,767,000		$	780,590
Depreciation		500,410			288,491
Interest on pledged bank deposits		(463,062	)		-
Accrued payroll expenses		-			181,423
Total gross deferred income tax assets		4,808,348			1,250,504
Valuation allowance		(4,767,000	)		(780,590	)
Net deferred tax assets	$	37,348		$	469,914

Net operating loss deffered tax assets

				Expiration date
US	$	(11,870,677	)	December 31, 2031
Hong Kong		(3,709,718	)	Not applicable
BVI		(185,192	)	Not applicable
		(15,765,587	)

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Intangible Assets (Tables)

6 Months Ended

12 Months Ended

Jun. 30, 2012

Dec. 31, 2011

Goodwill and Intangible Assets Disclosure [Abstract]

Summary of intangible assets

	Amortization		June 30,			December 31,
	Period		2012			2011
	Years		(Unaudited)
Licensing agreements		10-20	$	1,505,750		$	1,495,300
Less: Accumulated amortization				(573,902	)		(516,797	)
			$	931,848		$	978,503

Amortization	As of December 31,
Period	2011	2010

	Years
Licensing agreements	10-20	$	1,495,300		$	1,441,150
Less: Accumulated amortization			(516,797	)		(395,684	)
		$	978,503		$	1,045,466

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Advances from Customers (Details) (USD $)	Jun. 30, 2012		Dec. 31, 2011		Dec. 31, 2010
Advances from Customers (Textual)
Percentage of sales contract price prepayments required from customers			100.00%
Accounts receivable	$ 4,014,076	[1]	$ 2,226,288	[1]		[2]

[1] Note 4

[2] Note 12

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Contingency (Details)	3 Months Ended	6 Months Ended	12 Months Ended
	Mar. 31, 2011 USD ($)	Jun. 30, 2012 USD ($)	Dec. 31, 2011 USD ($)	Dec. 31, 2011 CNY
Contingency (Textual)
Terms of leases range minimum			2 years	2 years
Terms of leases range maximum			3 years	3 years
Future minimum lease payments, due in 2012, under non-cancellable operating lease agreements			$ 710,478
Contractual capital commitments for purchases of equipment			887,736
Failure of Ningbo Keyuan to withhold income taxes payment	50,000	50,000
Outstanding letter’s of Credit		$ 177,135,878	$ 10,233,755	65,017,503

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Summary of Significant Accounting Policies (Policies)

12 Months Ended

Dec. 31, 2011

Accounting Policies [Abstract]

Principles of consolidation and basis of presentation

(a)      Principles of consolidation and basis of presentation

The accompanying consolidated financial statements of the Company have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) and include the financial statements of the Group.

All significant intercompany transactions and balances are eliminated on consolidation.

Use of estimates

(b)      Use of estimates

The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities;  disclosures of contingent assets and liabilities at the date of the consolidated financial statements; and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant items subject to such estimates and assumptions include the useful lives of property, plant and equipment; the fair value determination of financial and equity instruments; the realizability of inventories; and the recoverability of property, plant and equipment. These estimates are often based on complex judgments and assumptions that management believes to be reasonable but are inherently uncertain and unpredictable.

Foreign currency transactions and translation

(c)      Foreign currency transactions and translation

The functional currency of the Company, Keyuan International and Keyuan HK is the U.S. dollar. The functional currency of Ningbo Keyuan and Ningbo Keyuan Petrochemicals, the PRC operation subsidiaries, is the Renminbi (“RMB”). Transactions denominated in currencies other than the functional currency are translated into the functional currency at the exchange rates prevailing at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies are translated into the functional currency using the applicable exchange rates at each balance sheet date, and non-monetary items are translated at historical rates. The resulting exchange differences on these transactions are recorded in foreign exchange gain (loss), net in the consolidated statements of operations.

The Group’s reporting currency is the U.S. dollar. Assets and liabilities of the PRC operating subsidiaries are translated into the U.S. dollar using the exchange rates at each balance sheet date. Revenue and expenses of the PRC operating subsidiaries are translated at average rates prevailing during the reporting period. Shareholders’ equity is translated at historical rates. Adjustments resulting from translating the financial statements of the PRC operating subsidiaries into the U.S. dollar are recorded as a separate component of accumulated other comprehensive income in the consolidated statements of stockholders’ equity and comprehensive income (loss).

Cash

(d)      Cash

Cash consists of cash on hand and cash at banks. As of December 31, 2011 and 2010, cash of $7,101,505 and $26,857,729, respectively, was held in major financial institutions located in the PRC. Management performs periodic evaluations of the relative credit standings of those financial institutions, and believes that these major financial institutions have high credit ratings.

Pledged bank deposits

(e)      Pledged bank deposits

Pledged bank deposits represent amounts held by financial institutions, which are not available for the Group’s use, as security for issuances of bills payable to the Group’s suppliers, or as security for short-term bank borrowings. Upon maturity of the bills, which generally occurs within three to six months after the issuance of the bills, or upon the repayments of short-term bank borrowings, the deposits are released by the financial institutions and become available for use by the Group.  Pledged bank deposits related to the purchase of inventories are reported within cash flows from operating activities, and pledged bank deposits related to short-term bank borrowings are reported within cash flows from financing activities in the consolidated statements of cash flows.

Inventories

(f)      Inventories

Inventory is stated at the lower of cost or market. Cost is determined using the weighted-average cost method. Provisions are made for excess, slow moving and obsolete inventory as well as inventory whose carrying value is in excess of net realizable value. Management continually evaluates the recoverability based on assumptions about customer demand and market conditions. If actual market conditions are less favorable than those projected by management, additional inventory reserves or write-downs may be required. The Group did not record any provision for slow-moving and obsolete inventory as of December 31, 2011 and 2010.

Property, plant and equipment

(g)      Property, plant and equipment

Property, plant and equipment are stated at cost. Depreciation is calculated using the straight-line method over the estimated useful lives of the assets, taking into consideration the assets’ estimated residual value. When items are retired or otherwise disposed of, income is charged or credited for the difference between the net book value and proceeds received thereon.  Ordinary maintenance and repairs are charged to expense as incurred.

The estimated useful lives of property, plant and equipment are as follows:

Buildings	45 years
Machinery and equipment	5 to 15 years
Vehicles	5 years
Office equipment and furniture	3 to 10 years

Construction-in-progress is stated at cost. Cost comprises nonrefundable prepayments and direct costs of construction as well as interest costs capitalized during the period of the construction of the plant or installation of equipment. Costs included in construction in progress are transferred to their respective categories of property, plant and equipment when the assets are ready for their intended use, at which time depreciation commences.

Long-Lived Assets

(h)      Long-Lived Assets

The Group reviews the recoverability of its long-lived assets on a periodic basis in order to identify business conditions, which may indicate a possible impairment. The assessment for potential impairment is based primarily on the Group’s ability to recover the carrying value of its long-lived assets from expected future discounted cash flows. If the total of the expected future discounted cash flows is less than the total carrying value of the assets, a loss is recognized for the difference between the fair value (computed based upon the expected future discounted cash flows) and the carrying value of the assets.

Land use rights

(i)      Land use rights

Land use rights represent the exclusive right to occupy and use a piece of land in the PRC for a specified contractual term. Land use rights are recorded at cost and amortized on a straight-line basis over the terms of the land use rights of 15 to 50 years.

Bills receivable and Bills payable

(j)      Bills receivable and Bills payable

The Group utilizes banker’s acceptances in the form of bills receivable and bills payable.For certain major customers, the Group accepts their payment for the Group’s products by bills receivable. Bills receivable represent short-term notes receivable issued either by the customer or by the customer and an accepting bank that entitles the Group to receive the full face amount from the customer or the accepting bank at maturity, which is generally six months from the date of issuance. Bills receivable are typically sold at a discount prior to maturity, and the discount is included in interest expense. Historically, the Group has experienced no losses on bills receivable.

In connection with the Company’s financing transactions, the Group may also obtain bills receivable in exchange for cash or payables.  These bills, which are sold at a discount prior to maturity, include provisions whereby the Group agrees to reimburse the accepting bank in the event that the related party counterparty fails to honor its liability to the accepting bank.  At December 31, 2011 and 2010, discounted bills receivable subject to reimbursement amounted to approximately $1.6  million and $9.2 million, respectively.  Historically, the Group has not suffered any losses under these reimbursement agreements.

Bills payable represent bills issued by an accepting bank in favor of the Group’s suppliers. The Group’s suppliers receive payments from the accepting bank directly upon maturity of the bills, and the Group is obliged to repay the face value of the bills to the accepting bank. Bills that are not remitted directly by the Group to its suppliers may be sold by the Group to other accepting banks for cash prior to their maturity. Discounts paid are recorded as a component of interest expense.

Revenue recognition

(k)      Revenue recognition

The Group derives its revenue primarily from the sale of petrochemical products. In accordance with the provisions of the Securities and Exchange Commission (“SEC”) Staff Accounting Bulletin No. 104, codified in FASB ASC Topic 480, revenue is recognized only when it is realized or realizable and earned. Revenues are considered to have been earned when the entity has substantially accomplished what it must do to be entitled to the benefits represented by the revenues. The Group recognizes revenue when the products are delivered and the customer takes ownership and assumes risks of losses, collection of the relevant receivable is probable, persuasive evidence of an arrangement exists and the sales price is fixed or determinable. Written sales agreements, which specify price, product, and quantity, are generally used as evidence of an arrangement. Customer acceptance is generally evidenced by a carrier signed shipment notification form.

In the PRC, value added tax (“VAT”) of 17% on invoiced amounts is collected on behalf of tax authorities. Revenue is recorded net of VAT.  VAT paid for purchases, net of VAT collected from customers, is recorded in “other current assets” in the consolidated balance sheets as of December 31, 2011 and 2010.

Share-based compensation

(l)      Share-based compensation

The Group accounts for share-based payments under the provisions of FASB ASC Topic 718, “Compensation-Stock Compensation”, or ASC Topic 718. Under ASC Topic 718, the Group measures the costs of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award and recognizes the costs over the period the employee is required to provide service in exchange for the award, which generally is the vesting period.

The Group accounts for equity instruments issued to non-employee vendors in accordance with the provisions of FASB ASC Subtopic 505-50, “Equity-Based Payments to Non-Employees”. All transactions in which goods or services are received in exchange for equity instruments are accounted for based on the fair value of the equity instrument issued. The measurement date for the fair value of the equity instruments issued is the date on which the counterparty’s performance is completed.

Employee benefit plans

(m)      Employee benefit plans

Pursuant to relevant PRC regulations, Ningbo Keyuan and Ningbo Keyuan Petrochemicals are required to make contributions to various defined contribution plans organized by municipal and provincial PRC governments. The contributions are made for each PRC employee at rates ranging from 18.6% to 26.1% on a standard salary base as determined by the local social security bureau.

Contributions to the defined contribution plans are charged to the consolidated statements of operations when the related service is provided. For the years ended December 31, 2011 and 2010, contributions to the defined contribution plans were $391,990 and $284,752, respectively.

The Group has no other obligation for the payment of employee benefits associated with these plans beyond the contributions described above.

Income taxes

(n)      Income taxes

Income taxes are accounted for under the asset and liability method. Deferred income tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, and operating loss carry forwards. Deferred income tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred income tax assets and liabilities of a change in tax rates is recognized in incomein the period that includes the enactment date. A valuation allowance is provided to reduce the carrying amount of deferred income tax assets if it is considered more likely than not that some portion, or all, of the deferred income tax assets will not

be realized.

The Group recognizes the effect of income tax positions only if those positions are more likely than not of being sustained.  Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs. The Group has elected to classify interest and penalties related to unrecognized tax benefits as part of income tax expense in the consolidated statements of operations.

Fair value measurements

(o)      Fair value measurements

The Group utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible. The Group determines fair value based on assumptions that market participants would use in pricing an asset or liability in the principal or most advantageous market. When considering market participant assumptions in fair value measurements, the following fair value hierarchy distinguishes between observable and unobservable inputs, which are categorized in one of the following levels:

•  Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the Group has the ability to access at the measurement date.

•  Level 2 inputs are inputs other than quoted prices included in Level 1 inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the asset or liability.

•  Level 3 inputs are unobservable inputs for the asset or liability used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at the measurement date.

The level in the fair value hierarchy within which a fair value measurement in its entirety falls is based on the lowest level input that is significant to the fair value measurement in its entirety.

Earnings (Loss) per share

(p)      Earnings (Loss) per share

Basic earnings(loss) per share is computed by dividing net income(loss) attributable to the Company’s common stockholders by the weighted average number of common stock outstanding during the year.

Diluted earnings(loss) per share is calculated by dividing net income(loss) attributable to the Company’s stockholders as adjusted for the effect of dilutive common stock equivalents, if any, by the weighted average number of common stock and dilutive common stock equivalents outstanding during the year. Common stock equivalents consist of the common stock issuable upon the conversion of the Group’s Series B convertible preferred stock (using the if–converted method) and common stock issuable upon the exercise of outstanding stock options and stock purchase warrants (using the treasury stock method). Potential dilutive securities are not included in the calculation of dilutive earnings (loss) per share if the effect is anti-dilutive. A total of 7,886,586 and 4,066,804warrants and options were excluded from diluted earnings per share for the years ended December 31, 2011 and 2010, respectively, as their effect was anti-dilutive.

Segment reporting

(q)      Segment reporting

The Group’s chief operating decision maker has been identified as its Chief Executive Officer (CEO).

The Group has one operating segment, which is the manufacture and sale of petrochemical products. Substantially all of the Company’s operations and customers are located in the PRC. Consequently, no geographic information is presented.

Contingencies

(r)      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. An accrual for a loss contingency is recognized when it is probable that a liability has been incurred and the amount of loss can be reasonably estimated.

Recent accounting pronouncements

(s)      Recent accounting pronouncements

In December 2011, the FASB issued ASU 2011-11, "Balance Sheet (Topic 210): Disclosures about Offsetting Assets and Liabilities," which requires entities to disclose both gross and net information about both instruments and transactions eligible for offset in the statement of financial position and instruments and transactions subject to an agreement similar to a master netting agreement. The objective of the disclosure is to facilitate comparison between those entities that prepare their financial statements on the basis of U.S. GAAP and those entities that prepare their financial statements on the basis of International Financial Reporting Standards ("IFRS"). This ASU is effective for fiscal years, and interim periods within those years, beginning on or after January 1, 2013. A retrospective presentation for all comparative periods presented is required. The Company is currently evaluating the impact of adopting this guidance.

In June 2011, the FASB issued ASU 2011-05, "Comprehensive Income (Topic 220): Presentation of Comprehensive Income," which improves the comparability, consistency and transparency of financial reporting and increases the prominence of items reported in other comprehensive income. This ASU is effective for fiscal years, and interim periods within those years, beginning on or after December 15, 2011 although early adoption is permitted. In December 2011, the FASB issued ASU 2011-12 "Comprehensive Income (Topic 220): Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05," which defers certain aspects of ASU 2011-05 related to the presentation of reclassification adjustments. The adoption of the revised guidance on January 1, 2012 is not expected to have a material impact on the Company’s  consolidated financial statements.

In May 2011, the FASB issued ASU 2011-04, "Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRS," which provides common requirements for measuring fair value and disclosing information about fair value measurements in accordance with U.S. GAAP and IFRS. This ASU is effective for fiscal years, and interim periods within those years, beginning on or after December 15, 2011. The adoption of this guidance on January 1, 2012 is not expected to have a material impact on the Company's consolidated financial statements.

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Significant Concentrations and Risks (Tables)

6 Months Ended

12 Months Ended

Jun. 30, 2012

Dec. 31, 2011

Significant Concentrations and Risks [Abstract]

Sales to the major customers as cotributed to Group’s total annual net revenue

Three months ended June 30, 2012						Three months ended June 30, 2011
	(Unaudited)						(Unaudited)
Largest	Amount of		% Total			Largest	Amount of		% Total
Customers	Sales		Sales			Customers	Sales		Sales
Customer A	$	40,695,112		21	%	Customer A	$	35,607,254		24	%
Customer B		12,876,871		7	%	Customer D		14,540,619		10	%
Customer C		12,615,883		7	%	Customer  I		14,278,678		10	%
Customer D		11,234,274		6	%	Customer J		13,517,410		9	%
Customer E		9,820,712		5	%	Customer L		6,314,579		4	%
Total	$	87,242,852		47	%	Total	$	84,258,540		57	%

Six months ended June 30, 2012						Six months ended June 30, 2011
	(Unaudited)						(Unaudited)
Largest	Amount of		% Total			Largest	Amount of		% Total
Customers	Sales		Sales			Customers	Sales		Sales
Customer A	$	52,843,930		14	%	Customer A	$	58,150,912		20	%
Customer H		24,777,298		7	%	Customer J		42,284,552		14	%
Customer D		21,659,715		6	%	Customer D		28,430,114		10	%
Customer G		17,177,359		4	%	Customer I		14,278,678		5	%
Customer F		15,014,302		4	%	Customer K		13,176,798		4	%
Total	$	131,472,604		36	%	Total	$	156,321,054		53	%

Year ended December 31, 2011				Year ended December 31, 2010
Largest Customers	Amount of Sales	% Total Sales		Largest Customers	Amount of Sales	% Total Sales
Customer A	114,981,292	18	%	Customer A	101,680,459	18	%
Customer B	56,582,811	9	%	Customer B	32,193,696	6	%
Customer C	42,795,468	7	%	Customer F	31,745,184	6	%
Customer D	28,228,269	5	%	Customer G	29,625,766	5	%
Customer E	27,138,266	4	%	Customer H	26,545,302	5	%
Total	269,726,106	43	%	Total	221,790,407	40	%

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Intangible Assets (Details) (USD $)							6 Months Ended	12 Months Ended	6 Months Ended	12 Months Ended
	Jun. 30, 2012		Dec. 31, 2011		Dec. 31, 2010		Jun. 30, 2012 Licensing agreements [Member] Minimum [Member]	Dec. 31, 2011 Licensing agreements [Member] Minimum [Member]	Jun. 30, 2012 Licensing agreements [Member] Maximum [Member]	Dec. 31, 2011 Licensing agreements [Member] Maximum [Member]
Intangible assets
Licensing agreements, Amortization Period							10 years	10 years	20 years	20 years
Licensing agreements	$ 1,505,750		$ 1,495,300		$ 1,441,150
Finite-Lived Intangible Assets, Accumulated Amortization	(573,902)		(516,797)		(395,684)
Intangibles assets, net	$ 931,848	[1]	$ 978,503	[1]	$ 1,045,466	[2]

[1] Note 10

[2] Note 8

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Subsequent Events (Details)	12 Months Ended
	Dec. 31, 2011
Subsequent Events (Textual)
New cooperation agreement to build a new production facility by company	January 2012
Expected annual production capacity of new Materials Industrial Park (metric tons)	400,000

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Consumption Tax Refund Receivable (Details) (USD $)	6 Months Ended		12 Months Ended
	Jun. 30, 2012		Dec. 31, 2011		Aug. 15, 2012	Dec. 31, 2010
Consumption Tax Refund Receivable (Textual)
Consumption tax refund receivable	$ 107,023,606	[1]	$ 55,809,560	[1]	$ 95,124,967	$ 39,144,688	[2]
Claims for consumption tax	$ 11,898,639		$ 55,809,560

[1] Note 7

[2] Note 5

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Stockholders' Equity and Related Financing Agreements (Tables)

12 Months Ended

Dec. 31, 2011

Equity [Abstract]

Proceeds from issuance of private placements

	Gross Proceeds		Issuance costs		Net proceeds
Series A Private Placement:
Series A convertible preferred stock	$	23,993,129	$	2,974,986	$	21,018,143
Issued Common Stock		1,820,800		221,661		1,599,139
Series A Warrant		233,210		27,279		205,931
Series B Warrant		157,500		18,305		139,195
	$	26,204,639	$	3,242,231	$	22,962,408
Series B Private Placement:
Series B convertible preferred stock	$	18,365,935	$	1,664,370	$	16,701,565
Series C Warrant		1,000,352		90,654		909,698
Series D Warrant		883,713		80,085		803,628
	$	20,250,000	$	1,835,109	$	18,414,891

Fair Value Assumptions

		Series A Private Placement								Series B Private Placement:
		April 23,				May 18,				September 28,
		2010				2010				2010
Expected volatility			45.82	%			45.15	%			86.22	%
Expected dividends yield			0	%			0	%			0	%
Time to maturity		3 years				3 years				3 years
Weighted average risk-free interest rate		1.03		%		0.75		%		0.68		%
Fair value of the common stock	$	2.38			$	2.79			$	3.40

Summary of effective conversion prices and estimated fair values

	Effective initial conversion price of				Fair value Intrinsic value per each share of the
	Series A  Convertible preferred stock		Series B of the convertible  preferred stock		Series A  common stock		or Series B preferred stocks
April 22, 2010	$	3.57	$	-	$	2.38	$	0
May 18, 2010	$	3.49	$	-	$	2.79	$	0
September 28,    2010	$	-	$	3.40	$	3.40	$	0

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Basis of Presentation

6 Months Ended

Jun. 30, 2012

Organization, Consolidation and Presentation Of Financial Statements [Abstract]

BASIS OF PRESENTATION

2           BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (U.S. GAAP) and include the financial statements of the Company and its subsidiaries. All intercompany balances and transactions are eliminated in consolidation. The financial statements have been prepared in accordance with U.S. GAAP applicable to interim financial information and the requirements of Form 10-Q and Article 10 of Regulation S-X of the Securities and Exchange Commission. Accordingly, they do not include all of the information and disclosures required by accounting principles generally accepted in the United States of America for complete financial statements. These interim financial statements should be read in conjunction with the audited financial statements for the years ended December 31, 2011 and 2010, as not all disclosures required by generally accepted accounting principles for annual financial statements are presented. The interim financial statements follow the same accounting policies and methods of computation as the audited financial statements for the years ended December 31, 2011 and 2010. Interim results are not necessarily indicative of results for a full year. In the opinion of management, all adjustments, consisting of normal recurring adjustments, considered necessary for a fair presentation of the financial position and the results of operations and cash flows for the interim periods have been included.

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Other Current Assets (Details) (USD $)	Jun. 30, 2012		Dec. 31, 2011		Dec. 31, 2010
Components of other current assets
VAT recoverable	$ 23,360,510		$ 9,991,877		$ 21,953,590
Receivable from Ningbo Litong (Note 22)			2,740,970		2,217,854
Customs deposits for imported inventories	27,398,747		29,102,193		1,972,682
Others	9,887,358		4,143,388		2,464,707
Other current assets	$ 60,646,615	[1]	$ 45,978,428	[1]	$ 28,608,833	[2]

[1] Note 8

[2] Note 6

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Land Use Rights (Tables)

6 Months Ended

12 Months Ended

Jun. 30, 2012

Dec. 31, 2011

Land Use Rights [Abstract]

Land Use Rights

	June 30,			December 31,
	2012			2011
	(Unaudited)
Land use rights	$	12,267,235		$	12,182,100
Less: Accumulated amortization		(1,346,759	)		(1,113,338	)
	$	10,920,476		$	11,068,762

As of December 31,
2011	2010

Land use rights	$	12,182,100		$	11,740,943
Less: Accumulated amortization		(1,113,338	)		(641,068	)
	$	11,068,762		$	11,099,875

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Statutory Reserves

12 Months Ended

Dec. 31, 2011

Statutory Reserves [Abstract]

STATUTORY RESERVES

18        STATUTORY RESERVES

Ningbo Keyuan and Ningbo Keyuan Petrochemicals are required to allocate at least 10% of their after tax profits as determined under generally accepted accounting principles in the PRC to a statutory surplus reserve until the reserve balances reach 50% of their respective registered capitals. For the year ended December 31, 2011and 2010, Ningbo Keyuan and Ningbo Keyuan Petrochemicals made appropriations to this statutory reserve of $3,744,304 and $3,075,356, respectively.

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Income Taxes

6 Months Ended

12 Months Ended

Jun. 30, 2012

Dec. 31, 2011

Income Tax Disclosure [Abstract]

INCOME TAXES

17       INCOME TAXES

The Company and its subsidiaries file separate income tax returns.

The United States of America

The Company is incorporated in the State of Nevada in the U.S., and is subject to the U.S. federal corporate income tax at progressive rates ranging from 15% to 35%. The state of Nevada does not impose any state corporate income tax.

British Virgin Islands

Keyuan International is incorporated in the British Virgin Islands (“BVI”). Under the current laws of British Virgin Islands, Keyuan International is not subject to tax on income or capital gains. In addition, upon payments of dividends by Keyuan International, no BVI withholding tax is imposed.

Hong Kong

Keyuan HK is incorporated in Hong Kong. Keyuan HK did not earn any income that was derived in Hong Kong for the six months ended June 30, 2012 and 2011 and therefore was not subject to Hong Kong Profits Tax. The payments of dividends by Hong Kong companies are not subject to any Hong Kong withholding tax.

PRC

Ningbo Keyuan , Ningbo Keyuan Petrochemicals, Ningbo Keyuan Synthetic Rubbers and Guangxi Keyuan are incorporated in the PRC and the applicable PRC statutory income tax rate is 25%.

Components of income (loss) before income tax expense (benefit) consist of the following jurisdictions:

	Three months ended June 30,
	2012			2011
	¼ Unaudited ¼‰			¼ Unaudited ¼‰
PRC	$	3,447,170		$	3,309,794
U.S.		(627,907	)		(3,765,742	)
Hong Kong and BVI		(886,638	)		(700,763	)
Income (loss) before income taxes	$	1,932,625		$	(1,156,711	)

	Six months ended June 30,
	2012			2011
	¼ Unaudited ¼‰			¼ Unaudited ¼‰
PRC	$	8,003,206		$	11,939,586
U.S.		(1,426,030	)		(4,704,077	)
Hong Kong and BVI		(1,660,367	)		(925,926	)
Income before income taxes	$	4,916,809		$	6,309,583

The Group’s income tax expense in the consolidated statements of operations consists of the following:

PRC:	Three months ended June 30,				Six months ended June 30,
	2012		2011		2012		2011
	¼ Unaudited ¼‰		¼ Unaudited ¼‰		¼ Unaudited ¼‰		(Unaudited ¼‰
Current income tax expense	$	870,277	$	665,828	$	2,009,469	$	2,917,979
Total income tax expense	$	870,277	$	665,828	$	2,009,469	$	2,917,979

Reconciliation between income tax expense (benefit) and the amounts computed by applying the PRC statutory income tax rate of 25% to income (loss) before income taxes is as follows:

	Three months ended June 30,
	2012				2011
	¼ Unaudited ¼‰				¼ Unaudited ¼‰
Income (loss) before income taxes	$	1,932,625			$	(1,156,711	)
Computed income tax expense (benefit)		483,156	25.0	%		(289.178	)	25.0	%
NOLs from overseas subsidiaries not recognized		378,636	19.6	%		1,433,636		(123.9	%)
Others		8,485	0.4	%		(478,630	)	41.4	%
Actual income tax expense	$	870,277	45.0	%	$	665,828		(57.6	%)

	Six months ended June 30,
	2011				2011
	¼ Unaudited ¼‰				¼ Unaudited ¼‰
Income before income taxes	$	4,916,809			$	6,309,583
Computed expected income tax expense		1,229,202	25.0	%		1,577,396		25.0	%
NOLs from overseas subsidiaries not recognized		771,599	15.7	%		1,799,204		28.5	%
Others		8,668	0.2	%		(458,621	)	(7.3	%)
Actual income tax expense	$	2,009,469	40.9	%	$	2,917,979		46.2	%

The PRC income tax rate has been used because the majority of the Group’s consolidated income (loss) before income taxes arises in the PRC.

According to the prevailing PRC income tax law and its relevant regulations, non-PRC-resident enterprises are levied withholding tax at 10%, unless reduced by tax treaties or similar arrangements, on dividends from their PRC-resident investees for earnings accumulated beginning on January 1, 2008, and undistributed earnings generated prior to January 1, 2008 are exempt from such withholding tax. Further, the Company’s distributions from its PRC subsidiaries are subject to U.S. federal income tax at 35%, less any applicable qualified foreign tax credits. Due to the Company’s policy of permanently reinvesting substantially all of its earnings in its PRC business, the Company has not provided for deferred income tax liabilities for U.S. federal income tax purposes on its PRC subsidiaries’ undistributed earnings of $37.8 million and $31 million as of June 30, 2012 and December 31, 2011, respectively.

The Group  files income tax returns in the United States and the PRC. The Company is subject to U.S. federal income tax examination by tax authorities for tax years beginning in 2008. According to the PRC Tax Administration and Collection Law, the statute of limitations is three years if the underpayment of taxes is due to computational errors made by the taxpayer or the withholding agent. The statute of limitations is extended to five years under special circumstances where the underpayment of taxes is more than RMB100,000 ($15,000). In the case of transfer pricing issues, the statute of limitation is ten years. There is no statute of limitation in the case of tax evasion. The PRC tax returns for the Company’s PRC subsidiaries are open to examination by the PRC state and local tax authorities for the tax years beginning in 2008.

20        INCOME TAXES

The Company and its subsidiaries file separate income tax returns.

The United States of America

The Company is incorporated in the State of Nevada in the U.S., and is subject to U.S. federal corporate income tax at progressive rates ranging from15% to 35%. The state of Nevada does not impose any state corporate income tax.

British Virgin Islands

Keyuan International is incorporated in the British Virgin Islands (“BVI”). Under the current laws of the BVI, Keyuan International is not subject to tax on income or capital gains. In addition, upon payments of dividends by Keyuan International, no BVI withholding tax is imposed.

Hong Kong

Keyuan HK is incorporated in Hong Kong. Keyuan HK did not earn any income that was derived in Hong Kong for the years ended December 31, 2011 and 2010 and therefore was not subject to Hong Kong Profits Tax. The payments of dividends by Hong Kong companies are not subject to any Hong Kong withholding tax.

PRC

Ningbo Keyuan and Ningbo Keyuan Petrochemicals are both incorporated in the PRC and the applicable PRC statutory income tax rate for both companies is 25%.

Components of income(loss) before income tax expense(benefit) consist of the following jurisdictions:

Year ended December 31,
2011	2010

PRC	$	8,930,752		$	53,158,384
U.S.		(9,761,824	)		(2,108,853	)
Hong Kong and BVI		(3,458,506	)		(436,404	)
(Loss)income before income taxes	$	(4,289,578	)	$	50,613,127

The Group’s income tax expense  in the consolidated statements of operations consists of the following:

Year ended December 31,
2011	2010

Current income tax expense	$	2,408,474	$	10,434,575
Deferred income tax expense		443,244		3,058,129
Total income tax expense	$	2,851,718	$	13,492,704

Reconciliation between income tax expense (benefit) and the amounts computed by applying the PRC statutory income tax rate of 25% to income (loss) before income taxes is as follows:

		Year ended December 31,
		2011					2010
(Loss)income before income taxes	$	(4,289,578	)			$	50,613,127
Computed expected
Income tax (benefit) expense		(1,072,395	)	25.0	%		12,653,282	25.0	%
Tax loss not recognized		2,625,242		(61.2	%)		781,918	1.6	%
Effect of differential tax rate		679,840		(15.8	%)		57,504	0.1	%
Other		184,617		(4.3	%)		-	-
Permanent differences		434,414		(10.1	%)
Actual income tax expense	$	2,851,718		(66.4	%)	$	13,492,704	26.7	%

The PRC income tax rate has been used because the majority of the Group’s consolidated income (loss) before income taxes arises in the PRC.

The tax effects of the temporary differences that give rise to significant portions of deferred income tax assets are presented below:

		As of December 31,
		2011			2010
Net operating tax loss carried forwards	$	4,767,000		$	780,590
Depreciation		500,410			288,491
Interest on pledged bank deposits		(463,062	)		-
Accrued payroll expenses		-			181,423
Total gross deferred income tax assets		4,808,348			1,250,504
Valuation allowance		(4,767,000	)		(780,590	)
Net deferred tax assets	$	37,348		$	469,914

Deferred tax assets arising from net operating losses (“NOL’S”) from the Group’s operations outside of the PRC were $4,767,000 and $780,590 at December 31, 2011 and 2010, respectively. Management has determined that it is more likely than not that they will not generate sufficient taxable income in those jurisdictions to realize the deferred tax asset. Accordingly, a valuation allowance for the full amount was provided. At December 31, 2011, NOL’S and their expiration dates arose in the following jurisdictions:

				Expiration date
US	$	(11,870,677	)	December 31, 2031
Hong Kong		(3,709,718	)	Not applicable
BVI		(185,192	)	Not applicable
		(15,765,587	)

According to the prevailing PRC income tax law and its relevant regulations, non-PRC-resident enterprises are levied withholding tax at 10%, unless reduced by tax treaties or similar arrangements, on dividends from their PRC-resident investees for earnings accumulated beginning on January 1, 2008, and undistributed earnings generated prior to January 1, 2008 are exempt from such withholding tax. Further, the Group’s distributions from its PRC subsidiaries are subject to the U.S. federal income tax at 34%, less any applicable qualified foreign tax credits. Due to the Group’s policy of reinvesting permanently its earnings in its PRC business, the Group has not provided for deferred income tax liabilities for U.S. federal income tax purposes on its PRC subsidiaries’ undistributed earnings of $31million and $26 million as of December 31, 2011 and 2010, respectively.

As of January 1, 2010 and for each of the years ended December 31, 2010and 2011, the Group did not have unrecognized tax benefits, and therefore no interest or penalties related to unrecognized tax benefits were accrued. Management does not expect that the amount of unrecognized tax benefits will change significantly within the next twelve months.

The Group files income tax returns in the United States and the PRC. The Company is subject to U.S. federal income tax examination by tax authorities for tax years beginning in 2004.  According to the PRC Tax Administration and Collection Law, the statute of limitations is three years if the underpayment of taxes is due to computational errors made by the taxpayer or the withholding agent. The statute of limitations is extended to five years under special circumstances where the underpayment of taxes is more than RMB100,000 ($15,000). In the case of transfer pricing issues, the statute of limitation is ten years. There is no statute of limitation in the case of tax evasion. The PRC tax returns for the Company’s PRC subsidiary are open to examination by the PRC state and local tax authorities for the tax years beginning in 2008.

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Significant Concentrations and Risks (Details Textual) (USD $)	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011	Dec. 31, 2011	Dec. 31, 2010
Significant concentrations and risks (Textual)
Cash and pledged bank deposits in financial institutions	$ 249,695,663		$ 249,695,663		$ 163,591,879	$ 127,260,081
Percentage of revenue over that customer treated as major customer			4.00%		4.00%
Number of major supplier			3		3
Purchase (net of VAT) from major supplier	155,361,871	153,035,430			377,051,329	309,943,580
Purchase from major supplier percentage	83.00%	83.00%			83.00%	61.00%
Purchase from largest supplier, Amount			$ 275,123,617	$ 231,995,919	$ 305,000,000	$ 191,000,000
Purchase from largest supplier, Percentage			80.00%	77.00%	67.00%	38.00%

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Summary of Significant Accounting Policies (Details)	12 Months Ended
	Dec. 31, 2011
Summary of estimated useful lives of property, plant and equipment
Property, Plant and Equipment, Estimated Useful Lives	15 to 50 years
Building [Member]
Summary of estimated useful lives of property, plant and equipment
Property, Plant and Equipment, Estimated Useful Lives	45 years
Machinery and Equipment [Member]
Summary of estimated useful lives of property, plant and equipment
Property, Plant and Equipment, Estimated Useful Lives	5 to 15 years
Vehicles [Member]
Summary of estimated useful lives of property, plant and equipment
Property, Plant and Equipment, Estimated Useful Lives	5 years
Office Equipment and Furniture [Member]
Summary of estimated useful lives of property, plant and equipment
Property, Plant and Equipment, Estimated Useful Lives	3 to 10 years

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Short-Term Bank Borrowings (Tables)

6 Months Ended

12 Months Ended

Jun. 30, 2012

Dec. 31, 2011

Short-Term Debt [Abstract]

Summary of short-term bank borrowings

	June 30,		December 31,
	2012		2011
	(Unaudited)
Bank borrowings-secured/guaranteed	$	393,534,612	$	225,969,421

As of December 31,
2011	2010

Bank borrowings-secured/guaranteed $ 225,969,421 $ 135,768,634

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Contingency

6 Months Ended

12 Months Ended

Jun. 30, 2012

Dec. 31, 2011

Commitments and Contingencies Disclosure [Abstract]

CONTINGENCY

18         CONTINGENCY

In the normal course of business, the Group is subject to loss contingencies, such as legal proceedings and claims arising out of its business. An accrual for a loss contingency is recognized when it is probable that a liability has been incurred and the amount of loss can be reasonably estimated.

In connection with the shipping of finished products, inaccurate product information has been provided to the PRC Port authority. In addition, through June 30, 2011, Ningbo Keyuan failed to withhold income tax of approximately $50,000 from payments to certain external service providers and employees. In consultation with PRC legal counsel, management has evaluated the contingencies associated with the provision of inaccurate information and expects that the penalty, if any, will not be significant and will not have a material impact on the consolidated financial statements. 

In addition, the Group had outstanding Letters of Credit as of June 30, 2012 of $177,135,878.

19        COMMITMENTS AND CONTINGENCIES

(a)Operating lease commitments

The Group leases storage facilities under operating lease agreements. The terms of these leases range from 2 to 3 years, and future minimum lease payments, due in 2012, under those non-cancellable operating lease agreements as of December 31, 2011 are $710,478.

(b)Capital commitments

As of December 31, 2011, the Group had contractual capital commitments of $887,736 for purchases of equipment.

(c)  Litigation

The Company at times is involved in various legal actions arising in the ordinary course of business. Management does not currently believe that there are any pending legal actions where the outcome of such legal actions would have a material adverse effect on the Company’s consolidated financial statements.

(d)  Contingencies

In connection with the shipping of finished products, inaccurate product information has been provided to the PRC Port authority. In addition, through March 31, 2011, Ningbo Keyuan failed to withhold income tax of approximately $50,000 from payments to certain external service providers and employees. In consultation with PRC legal counsel, management has evaluated the contingencies associated with the provision of inaccurate information and expects that the penalty, if any, will not be significant and will not have a material impact on the consolidated financial statements. In addition, the Group had outstanding Letter’s of Credit as of December 31, 2011of RMB 65,017,503 (approximately $10,233,755).

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Earnings (Loss) Per Share

6 Months Ended

12 Months Ended

Jun. 30, 2012

Dec. 31, 2011

Earnings Per Share [Abstract]

EARNINGS (LOSS) PER SHARE

19         EARNINGS (LOSS) PER SHARE

 The following table sets forth the computation of basic net income (loss) per share:

	For the three months ended					For the six months ended
	June 30		June 30			June 30		June 30
	2012		2011			2012		2011
	¼ Unaudited ¼‰		¼ Unaudited ¼‰			¼ Unaudited ¼‰		¼ Unaudited ¼‰
Net income (loss) attribute to Keyuan
Petrochemicals, Inc. stockholders	$	1,062,348	$	(1,822,539	)	$	2,907,340	$	3,391,604
Less: Dividend attributable to preferred
stockholders		-		306,247			-		602,507
Net income (loss) attributable to Keyuan Petrochemical Inc. common shareholders	$	1,062,348	$	(2,128,786	)	$	2,907,340	$	2,789,097
Weighted average common shares
(Denominator for basic income per share)		57,646,160		57,579,239			57,646,160		57,578,896
Effect of diluted securities:
- Series A convertible preferred stock		-		-			-		-
- Series B convertible preferred stock		5,333,340		-			5,333,340		5,400,010
- Series M convertible preferred stock		-		-			-		-
- Warrants		-		-			-		390,647
- Options		-		-			-		467,429
Weighted average common shares
(denominator for diluted income per share)		62,979,500		57,579,239			62,979,500		63,836,982
Basic net income (loss) per share	$	0.02	$	(0.04	)	$	0.05	$	0.05
Diluted net income (loss) per share	$	0.02	$	(0.04	)	$	0.05	$	0.05

21       EARNINGS (LOSS) PER SHARE

Earnings per share for periods prior to the Share Exchange have been restated to reflect the recapitalization under the Share Exchange. The following table sets forth the computation of basic and diluted net income(loss) per share:

Year ended December 31,
2011	2010

Basic (loss)earnings per share:
Net (loss)income attributable to Keyuan
Petrochemicals, Inc. stockholders	$	(7,141,296	)	$	37,120,423
Fixed dividends to Series A convertible
Preferred stockholders		-			831,032
Fixed dividends to Series B convertible
Preferred stockholders		1,205,014			306,247
Net (loss)income attributable to Keyuan
Petrochemicals Inc. common stockholders	$	(8,346,310	)	$	35,983,144
Weighted average common shares
(Denominator for basic income per share)		57,585,040			50,929,526
Effect of dilutive securities:
- Series A convertible preferred stock		-			3,542,344
- Series B convertible preferred stock		-			1,390,688
- Warrants		-			103,985
- Options		-			91,451
Denominator for diluted income per share		57,585,040			56,057,994
Basic (loss)earnings per share:	$	(0.14	)	$	0.71
Diluted(loss)earnings per share:	$	(0.14	)	$	0.66

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Organization and Description of Business

6 Months Ended

12 Months Ended

Jun. 30, 2012

Dec. 31, 2011

Organization, Consolidation and Presentation Of Financial Statements [Abstract]

ORGANIZATION AND DESCRIPTION OF BUSINESS

1            ORGANIZATION AND DESCRIPTION OF BUSINESS

(a)          Organization

Keyuan Petrochemicals, Inc. (the “Company”) was incorporated in the State of Texas on May 4, 2004 in the former name of “Silver Pearl Enterprises, Inc”.  The Company, through its wholly-owned subsidiary, Keyuan International Group Limited (“Keyuan International”) and its indirect subsidiaries, Keyuan Group Limited (“Keyuan HK”),  Ningbo Keyuan Plastics Co., Ltd. (“Ningbo Keyuan”), Ningbo Keyuan Petrochemicals Co., Ltd.(Ningbo Keyuan Petrochemicals), Ningbo Keyuan Synthetic Rubbers Co., Ltd. (“Ningbo Keyuan Synthetic Rubbers”), and Guangxi Keyuan New Materials Co., Ltd. (“Guanxi Keyuan”), are collectively referred herein below as “the Group” and are engaged in the manufacture and sale of petrochemical products in the People’s Republic of China (“PRC”).

(b)         Other Events

In 2011, the Company’s former auditor, KPMG, LLP (“KPMG”), brought certain issues to the Company’s Audit Committee’s attention through a March 28, 2011 memorandum and an April 18, 2011 letter (collectively, the “KPMG Memoranda”). KPMG requested that the Company’s Audit Committee conduct an independent investigation (the “Independent Investigation”) into those issues. On March 31, 2011, the Audit Committee elected to commence such Independent Investigation and engaged the services of independent counsel, Pillsbury Winthrop Shaw Pittman LLP (“Pillsbury”), which in turn engaged the services of Deloitte Financial Advisory Services LLP (“Deloitte”), as independent forensic accountants, and King & Wood, as Audit Committee counsel in the PRC. Pillsbury, Deloitte and King & Wood are collectively referred to herein as the “Investigation Team”. On September 28, 2011, the Independent Investigation was completed. The Independent Investigation identified possible violations of PRC laws and U.S. Securities laws, including the maintenance of an off-balance sheet cash account that was used primarily to pay service providers and other Company-related expenses. Total activity in the off-balance sheet cash account amounted to approximately $800,000 through December 31, 2010, with a net income statement effect of approximately $12,000, and $400,000 for the period from January 1, 2011 to March 31, 2011, with a net income statement effect of approximately $192,000, at which time the Company ceased its use. The Independent Investigation identified certain other issues that could result in potential violations of PRC or U.S. laws. The Company continues to work with its legal counsel to evaluate the matters identified in the investigation and to determine the extent to which the Company may be exposed to fines and penalties. The Company has preliminarily concluded that the extent to which it may be exposed to fines and penalties in the PRC is limited, and to date, has not received any PRC governmental or regulatory communication or inquiry related to these matters. However, management is currently unable to determine the final outcome of these matters and their possible effects on the consolidated financial statements.

On October 7, 2011, trading of the Company’s common stock was delisted by NASDAQ, and is currently quoted on the Over-the-Counter Bulletin Board (symbol: KEYP).

The Company’s management believes that the Company’s cash, working capital, and access to cash through its bank loans provide adequate capital resources to fund its operations and working capital needs for at least the next twelve months.

1        ORGANIZATION,NATURE OF BUSINESS AND RECENT EVENTS

(a)      Organization and Nature of business

Keyuan Petrochemicals, Inc. (the “Company”) was incorporated in the State of Texas on May 4, 2004 in the former name of Silver Pearl Enterprises, Inc. The Company, through its wholly-owned subsidiary, Keyuan International Group Limited (“Keyuan International”) and its indirect subsidiaries, Keyuan Group Limited(“Keyuan HK”),Ningbo Keyuan Plastics Co., Ltd. (“Ningbo Keyuan”) and Ningbo Keyuan Petrochemicals Co., Ltd.(Ningbo Keyuan Petrochemicals), (the Company and its subsidiaries are collectively referred herein below as “the Group”) are engaged in the manufacture and sale of petrochemical products in the People’s Republic of China (“PRC”).

On April 22, 2010, Silver Pearl Enterprises, Inc., a U.S. public shell company (now known as the Company) entered into a share exchange agreement (the “Exchange Agreement”) with Keyuan International, a privately held investment holding company organized on June 11, 2009 under the laws of the British Virgin Islands, Delight Reward Limited (“Delight Reward”), the sole stockholder of Keyuan International and Denise D. Smith (“Smith”), the Company’s former principal stockholder. Pursuant to the terms of the Exchange Agreement, Delight Reward transferred to the Company all of its shares of Keyuan International in exchange for 47,658 shares of the Company’s Series M convertible preferred stock (the “Share Exchange”). On an “as-converted” basis, the Series M convertible preferred stock presented approximately 95% of the Company’s outstanding common stock. The Series M convertible preferred stock voted with the common stock on an “as converted basis” and was converted into 47,658,000 shares of the Company’s common stock on December 28, 2010. As a result of the Share Exchange, Keyuan International became a wholly-owned subsidiary of the Company and Delight Reward became the controlling stockholder of the Company. On April 22, 2010, the Company repurchased and cancelled 3,264,000 shares of common stock from Smith for cash consideration of $400,000. The consideration paid in excess of par value of the repurchased shares amounting to $396,736 was recorded as additional paid-in capital in the consolidated statement of stockholders’ equity and comprehensive income (loss). After giving effect to the repurchase and conversion of the Series M Preferred Stock, the former stockholders of Keyuan International currently held 95.2% of the Company’s common stock.

The Share Exchange has been accounted for as a reverse acquisition and recapitalization whereby Keyuan International is deemed to be the accounting acquirer (and the legal acquiree). Accordingly, Keyuan International’s historical financial statements for the periods prior to the reverse acquisition became those of the Company retroactively restated for, and giving effect to, the number of shares received in the Share Exchange. The assets and liabilities, and revenues and expenses of the Company are included in the accompanying financial statements effective from April 22, 2010. The total net liabilities assumed by Keyuan International as of the date of the Share Exchange were not significant. The Company is deemed to be a continuation of the business of Keyuan International.

On May 12, 2010, the Company formed a business combination-related shell company under the laws of the State of Nevada called Keyuan Petrochemicals, Inc. and on the same day, acquired 100% of the entity’s stock for cash. As such, the entity became the Company’s wholly-owned subsidiary (the “Merger Subsidiary”).

Effective as of May 17, 2010, the Merger Subsidiary was merged with and into the Company. As a result of the merger, the Company’s name was changed to “Keyuan Petrochemicals, Inc.”. Prior to the merger, the Merger Subsidiary had no liabilities and nominal assets and, as a result of the merger, the separate existence of the merger subsidiary ceased. The Company is the surviving corporation in the merger and, except for the name change, there was no change in the Company’s directors, officers, capital structure or business.

 Keyuan HK was established in Hong Kong in 2009, and is a holding company with no significant assets or operations. Ningbo Keyuan was established in April 2007 as a wholly foreign-owned enterprise in Ningbo, PRC.

On November 16, 2009 Keyuan HK acquired 100% of Ningbo Keyuan. At the time of the acquisition, Keyuan HK and Ningbo Keyuan were controlled by Mr. Tao Chunfeng, the Company’s Chief Executive Officer. Accordingly, the acquisition was accounted for as a common control transaction in a manner similar to a pooling of interests.

On August 8, 2010, Keyuan HK established Ningbo Keyuan Petrochemicals, a wholly-owned subsidiary in the PRC.

(b)      Other Events

In 2011, Company’s former auditor, KPMG, LLP (“KPMG”), brought certain issues to the Company’s Audit Committee’s attention through a March 28, 2011 memorandum and an April 18, 2011 letter (collectively, the “KPMG Memoranda”). KPMG requested that the Company’s Audit Committee conduct an independent investigation (the “Independent Investigation”) into those issues. On March31, 2011, the Audit Committee elected to commence such Independent Investigation and engaged the services of independent counsel, Pillsbury Winthrop Shaw Pittman LLP (“Pillsbury”), which in turn engaged the services of Deloitte Financial Advisory Services LLP (“Deloitte”), as independent forensic accountants, and King & Wood, as Audit Committee counsel in the PRC. Pillsbury, Deloitte and King & Wood are collectively referred to herein as the “Investigation Team”. On September 28, 2011, the Independent Investigation was completed. The Independent Investigation identified possible violations of PRC laws and U.S. Securities laws, including the maintenance of an off-balance sheet cash account that was used primarily to pay service providers and other Company-related expenses. Total activity in the off-balance sheet cash account amounted to approximately$800,000 through December 31, 2010, with a net income statement effect of approximately $12,000, and $400,000 for the period from January 1, 2011 to March 31, 2011, with a net income statement effect of approximately $192,000, at which time the Company ceased its use. The Independent Investigation identified certain other issues that could result in potential violations of PRC or U.S. laws. The Company continues to work with its legal counsel to evaluate the matters identified in the investigation and to determine the extent to which the Company may be exposed to fines and penalties. The Company has preliminarily concluded that the extent to which it may be exposed to fines and penalties in the PRC is limited, and to date, has not received any PRC governmental or regulatory communication or inquiry related to these matters. However, management is currently unable to determine the final outcome of these matters and their possible effects on the consolidated financial statements.

On October 7, 2011, trading of the Company’s common stock was delisted by NASDAQ, and is currently quoted on the Over-the-Counter Bulletin Board (symbol: KEYP).

The Company’s management believes that the Company’s cash, working capital, and access to cash through its bank loans provide adequate capital resources to fund its operations and working capital needs through at least the end of 2012.

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Fair Value Measurements

6 Months Ended

12 Months Ended

Jun. 30, 2012

Dec. 31, 2011

Fair Value Disclosures [Abstract]

FAIR VALUE MEASUREMENTS

20         FAIR VALUE MEASUREMENTS

The Company did not have any assets and liabilities that are measured at fair value on a recurring basis as of June 30, 2012.

The fair values of cash, pledged bank deposits, bills receivable, accounts receivable, consumption tax refund receivable, short-term bank borrowings, bills payable, current portion of long-term borrowings, and accounts payable approximate their respective carrying amounts due to their short-term nature. Amounts due from/to related parties are not practicable to estimate due to the related party nature of the underlying transactions. The Group’s long-term debt, secured by various assets, bears interest at rates commensurate with market rates, and therefore management believes carrying values approximate fair values.

22        FAIR VALUE MEASUREMENTS

The Company did not have any assets and liabilities that are measured at fair value on a recurring basis as of December 31, 2011 and 2010.

The fair values of cash, pledged bank deposits, bills receivable, consumption tax refund receivable, short-term bank borrowings, bills payable, current portion of long-term borrowings, and accounts payable approximate their respective carrying amounts due to their short-term nature. Amounts due to related parties are not practicable to estimate due to the related party nature of the underlying transactions. The Group’s long-term debt, secured by various assets, bears interest at rates commensurate with market rates and therefore management believes carrying values approximate fair values.

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Common Stock Purchase Warrants (Details Textual)	12 Months Ended
	Dec. 31, 2011
Common Stock Purchase Warrants (Textual)
Description for callable series A and Series B warrants	The Series A and Series B Warrants are callable at $0.01, at the Company's election, if the Volume Weighted Average Price("VWAP") of the Company's common stock equals or exceeds $9.00 and $10.50 for 15 consecutive trading days, with the average daily trading volume of no less than 75,000 shares.
Series A Warrants [Member]
Common Stock Purchase Warrants (Textual)
Warrants expiration period from issuance dates	3 years
Series B Warrants [Member]
Common Stock Purchase Warrants (Textual)
Warrants expiration period from issuance dates	3 years
Series C Warrants [Member]
Common Stock Purchase Warrants (Textual)
Warrants expiration period from issuance dates	3 years
Series D Warrants [Member]
Common Stock Purchase Warrants (Textual)
Warrants expiration period from issuance dates	3 years
Series A Private Placement [Member]
Common Stock Purchase Warrants (Textual)
Warrants expiration period from issuance dates	3 years
Series B Private Placement [Member]
Common Stock Purchase Warrants (Textual)
Warrants expiration period from issuance dates	3 years

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Keyuan Petrochemicals, Inc. (Parent Company) (Details 2) (USD $)	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011	Dec. 31, 2011	Dec. 31, 2010
Cash flows from operating activities:
Net income	$ 1,062,348	$ (1,822,539)	$ 2,907,340	$ 3,391,604	$ (7,141,296)	$ 37,120,423
Adjustments to reconcile net income to net cash (Used in) provided by operating activities:
Share-based compensation expense			819,496	1,285,185	2,063,394	1,515,907
Liquidated damages					2,493,326
Other current assets			(16,565,560)	(23,036,081)	(18,500,179)	2,086,940
Decrease in trade payables			(18,462,125)	44,000,832	4,198,683	58,179,877
Net cash (used in) provided by operating activities			(106,934,901)	34,701,657	1,731,351	2,419,080
Cash flows from investing activities:
Net cash used in investing activities			(21,295,703)	(11,563,733)	(42,313,337)	(18,496,035)
Cash flows from financing activities:
Dividend paid				(1,396,964)	(2,585,647)	(902,886)
Repurchase of common stock						(400,000)
Additional paid in capital				7,332	7,332	220,000
Proceeds from Series A Private Placement, net						23,312,091
Proceeds from Series B Private Placement, net						18,949,232
Net cash provided by financing activities			131,548,092	(46,969,550)	16,934,305	30,651,853
Net increase (decrease) in cash			2,554,152	(23,553,231)	(22,011,224)	15,305,586
Cash at beginning of year			7,325,017	29,336,241	29,336,241	14,030,655
Cash at end of year	9,879,169	5,783,010	9,879,169	5,783,010	7,325,017	29,336,241
Parent Company [Member]
Cash flows from operating activities:
Net income					(9,761,823,000)	(2,108,853,000)
Adjustments to reconcile net income to net cash (Used in) provided by operating activities:
Share-based compensation expense						1,515,907,000
Stock option expense					2,063,394,000
Liquidated damages					2,493,326,000
Other current assets					(392,200,000)	(570,000)
Decrease in trade payables
Increase in accounts payable, accrued expenses and other payables					617,821,000	42,158,000
Net cash (used in) provided by operating activities					(4,979,482,000)	(551,358,000)
Cash flows from investing activities:
Investment in subsidiaries						(41,774,338,000)
Net cash used in investing activities						(41,774,338,000)
Cash flows from financing activities:
Advance from inter-group company					7,170,146,000	1,760,000,000
Dividend paid					(2,585,647,000)	(902,886,000)
Repurchase of common stock						(400,000,000)
Additional paid in capital					7,332,000
Proceeds from Series A Private Placement, net						23,312,091,000
Proceeds from Series B Private Placement, net						18,949,232,000
Net cash provided by financing activities					4,591,831,000	42,718,437,000
Net increase (decrease) in cash					(387,651,000)	392,741,000
Cash at beginning of year				392,741,000	392,741,000
Cash at end of year					$ 5,090,000	$ 392,741,000

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Other Current Assets (Tables)

6 Months Ended

12 Months Ended

Jun. 30, 2012

Dec. 31, 2011

Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]

Other current assets

	June 30,		December 31,
	2012		2011
	¼ Unaudited ¼‰
VAT recoverable	$	23,360,510	$	9,991,877
Receivable from Ningbo Litong (Note 22)		-		2,740,970
Customs deposits for imported inventories		27,398,747		29,102,193
Others		9,887,358		4,143,388
	$	60,646,615	$	45,978,428

As of December 31,
2011	2010

VAT recoverable	$	9,991,877	$	21,953,590
Receivable from Ningbo Litong (Note 24)		2,740,970		2,217,854
Customs deposits for imported inventories		29,102,193		1,972,682
Other		4,143,388		2,464,707
	$	45,978,428	$	28,608,833

XML

Related Party Transactions and Relationships and Transactions With Certain Other Parties (Tables)

6 Months Ended

12 Months Ended

Jun. 30, 2012

Dec. 31, 2011

Related Party Transactions [Abstract]

Related Party Transactions, Relationships

Name of parties	Relationship
Mr. Chunfeng Tao	Majority stockholder
Mr. Jicun Wang	Principal stockholder
Mr. Peijun Chen	Principal stockholder
Ms. Sumei Chen	Member of the Company’s Board of Supervisors and spouse of Mr. Wang
Ms. Yushui Huang	Vice President of Administration, Ningbo Keyuan
Mr. Weifeng Xue	Vice President of Accounting, Ningbo Keyuan through  August 2011

Mr. Hengfeng Shou	Vice President of Sales, Ningbo Keyuan  Petrochemical
Ningbo Kewei Investment Co., Ltd.	A company controlled by Mr. Tao through September 2011
(Ningbo Kewei)
Ningbo Pacific Ocean Shipping Co., Ltd	100% ownership by Mr. Wang
(Ningbo Pacific)
Ningbo Hengfa Metal Product Co., Ltd	100% ownership by Mr. Chen
(Ningbo Hengfa, former name "Ningbo Tenglong")
Shandong Tengda Stainless Steel Co., Ltd	100% ownership by Mr. Chen
(Shandong Tengda)
Ningbo Xinhe Logistic Co., Ltd
(Ningbo Xinhe)	10% ownership by Ms. Huang
Ningbo Kunde Petrochemical Co, Ltd.     (Ningbo Kunde)	Mr. Tao’s mother was a 65% nominee shareholder for Mr. Hu, a third party through September 2011, and included in transactions with certain other parties beginning October 1, 2011.
Ningbo Jiangdong Jihe Construction Materials	Controlled by Mr. Xue’s Brother-in-law
Store (Jiangdong Jihe)
Ningbo Wanze Chemical Co., Ltd	Mr. Tao’s sister-in-law is the legal representative
(Ningbo Wanze)
Ningbo Zhenhai Jinchi Petroleum Chemical	Controlled by Mr. Shou
Co., Ltd (Zhenhai Jinchi)

Name of parties	Relationship
Mr. Chunfeng Tao	Majority stockholder
Mr. Jicun Wang	Principal stockholder
Mr. Peijun Chen	Principal stockholder
Ms. Sumei Chen	Member of the Company’s Board of Supervisors and spouse of Mr. Wang
Ms. Yushui Huang	Vice President of Administration, Ningbo Keyuan
Mr. WeifengXue	Former Vice President of Accounting, Ningbo Keyuan through August 2011
Mr. HengfengShou	Former Vice President of Sales, Ningbo Keyuan Petrochemical through November 2011 General Manager/President
Mr.Shifa Wang	Vice President Guangxi Project
Mr.Ming Liang Liu	Vice President Production
Mr.Shegeng Ding	Vice President Equipment
Mr. Fan Zhang	CFO
Ningbo Kewei Investment Co., Ltd. (Ningbo Kewei)	A company controlled by Mr. Tao through September 2011
Ningbo Pacific Ocean Shipping Co., Ltd (Ningbo Pacific)	100% ownership by Mr. Wang
Ningbo Hengfa Metal Product Co., Ltd (Ningbo Hengfa, former name"Ningbo Tenglong")	100% ownership by Mr. Chen
Shandong Tengda Stainless Steel Co., Ltd (Shandong Tengda)	100% ownership by Mr. Chen
Ningbo Xinhe Logistic Co., Ltd (Ningbo Xinhe)	10% ownership by Ms. Huang
Ningbo Kunde Petrochemical Co, Ltd. (Ningbo Kunde)	Mr. Tao’s mother was a 65% nominee shareholder for Mr. Hu, a third party through September 2011
Ningbo JiangdongJihe Construction Materials Store (JiangdongJihe)	Controlled by Mr. Xue’s Brother-in-law
Ningbo Wanze Chemical Co., Ltd (Ningbo Wanze)	Mr. Tao’s sister-in-law is the legal representative
Ningbo Zhenhai Jinchi Petroleum Chemical Co., Ltd (Zhenhai Jinchi)	Controlled by Mr. Shou

Related party transactions and amounts outstanding with the related parties

	Three Months ended June 30,
	2012		2011
	(Unaudited)		(Unaudited)
Sales of products (a)	$	-	$	35,607,658
Purchase of raw material (b)	$	-	$	42,920
Purchase of transportation services (c)	$	1,104,716	$	316,506
Credit line of guarantee provision for bank borrowings (d)	$	-	$	-
Loan guarantee fees (d)	$	113,084	$	419,665
Short-term financing from related parties (e)	$	-	$	5,406,139
Short-term financing to related parties (e)	$	-	$	5,535,234

	Six Months ended June 30,
	2012		2011
	(Unaudited)		(Unaudited)
Sales of products (a)	$	-	$	58,217,477
Purchase of raw material (b)	$	-	$	7,066,055
Purchase of transportation services (c)	$	1,665,831	$	927,879
Credit line of guarantee provision for bank borrowings (d)	$	-	$	-
Loan guarantee fees (d)	$	203,984	$	756,919
Short-term financing from related parties (e)	$	-	$	13,144,234
Short-term financing to related parties (e)	$	-	$	13,144,234

	June 30,		December 31,
	2012		2011
	(Unaudited)
Amounts due from related parties (f)	$	39,625	$	39,350
Amounts due to related parties (g)	$	768,313	$	621,077

(a)         During the three months ended June 30, 2011, the Group sold finished products of $35,607,658 to Ningbo Kunde. During the six months ended June 30, 2011, the Group sold finished products of $58,150,912 to Ningbo Kunde. During the six months ended June 30, 2012 and 2011, the Group sold finished products of nil and $66,565 to Zhenhai Jinchi, respectively. Amounts received in the advance from Kunde were $3,077,199 as of June 30, 2011, and are included in the advances from customers on the consolidated balance sheet.

(b)   The Group purchased raw materials of $42,920 from Ningbo Kunde during the three months ended June 30, 2011. The Group purchased raw materials of $7,066,055 from Ningbo Kunde during the six months ended June 30, 2011.

(c)   The Group purchased transportation services of $1,104,716 and $316,506 from Ningbo Xinhe during the three months ended June 30, 2012 and 2011, respectively. The Group purchased transportation services of $1,665,831 and $927,879 from Ningbo Xinhe during the six months ended June 30, 2012 and 2011, respectively, and amounts owed to Ningbo Xinhe as of June 30, 2012 in respect of these purchase transactions were $768,313.

(d)   Guarantees for Bank Loans

There were no guarantees for Bank Loans provided during the three and six months ended June 30, 2012 and 2011.

Bank Loans guaranteed as of June 30, 2012 and December 31, 2011 as follows:

	Bank loan guaranteed as of
	June 30		December 31
	2012		2011
	(Unaudited)
Mr. Tao	$	15,850,000	$	34,628,000
Jincun Wang and Chen		1,902,000		1,983,523
Ningbo Kewei		-		-
Ningbo Pacific		18,318,901		27,918,200
Ningbo Hengfa		14,899,000		14,795,600
Shandong Tengda		951,000		944,400
Total	$	51,920,901	$	80,269,723

Beginning in 2011 loan guarantee fees of 0.3% the loan principal guaranteed are to be paid annually. During the three months ended June 30, 2012, loan guarantee fees were $32,255 and $80,829 for Ningbo Hengfa and Ningbo Pacific, respectively.In the three months ended June 30, 2011, loan guarantee fees were $73,644 and $178,367 for Ningbo Hengfa and Ningbo Pacific, respectively. During the six months ended June 30, 2012, loan guarantee fees were $65,022 and $138,961 for Ningbo Hengfa and Ningbo Pacific , respectively.In the six months ended June 30, 2011, loan guarantee fees were $150,116 and $301,247 for Ningbo Hengfa and Ningbo Pacific, respectively.

(e)   Short-term financing transactions with related parties

	Three Months Ended June 30
	(Unaudited)
	2012						2011
	From(i)		To(i)		Balance(ii)		From(i)		To(i)			Balance(ii)
Ningbo Kewei	$	-	$	-	$	-	$	5,358,850	$	(5,358,850	)	$	-
Ningbo Kunde		-		-		-		32,550		(32,550	)		-
Jiangdong Jihe		-		-		-		14,739		143,834			-
	$	-	$	-	$	-	$	5,406,139	$	(5,247,566	)	$	-

	Six Months Ended June 30
	(Unaudited)
	2012						2011
	From(i)		To(i)		Balance(ii)		From(i)		To(i)			Balance(ii)
Ningbo Kewei	$	-	$	-	$	-	$	5,358,850	$	(5,358,850	)	$	-
Ningbo Kunde		-		-		-		5,358,850		(5,358,850	)		-
Jiangdong Jihe		-		-		-		2,426,534		(2,426,534	)
	$	-	$	-	$	-	$	13,144,234	$	13,144,234	)	$	-

(i) Transactions during the year are translated at average exchange rates.

(ii) Balances at year end are translated at the balance sheet exchange rate.

(f)    Amount due from related parties consist of the following:

	June 30,		December 31,
	2012		2011
	(Unaudited)
Related Party
Mr. Tao	$	39,625	$	39,350

Amounts due from Mr. Tao represent advances made for business expenses which are unsecured, interest free and due on demand.

(g)   Amount due to related parties consists of the following:

	June 30,		December 31,
	2012		2011
	(Unaudited)
Related Party
Ninbo Xinhe	$	768,313	$	621,077

Amount due to related parties represent balances due for raw materials purchase and freight.

Year ended December 31,
2011	2010

Sales of products (a)	$	92,771,589	$	111,860,732
Purchase of raw material (b)	$	7,151,433	$	25,014,808
Purchase of transportation services (c)	$	3,059,216	$	3,659,000
Credit line of guarantee provision for bank borrowings (d)	$	142,563,200	$	161,994,300
Loan guarantee fees (d)	$	1,299,886	$	-
Short-term financing from related parties (e)	$	13,303,054	$	30,839,377
Short-term financing to related parties (e)	$	13,188,178	$	30,949,048

As of December 31,
2011	2010

Amount due from related parties (f)	$	39,350	$	5,332,193
Amount due to related parties (g)	$	621,077	$	115,535

(a)  The Group sold finished products of $92,704,220 and $101,680,459 to Ningbo Kunde in 2011 and 2010, respectively. Sales to Zhenhai Jinchi in 2011 and 2010 were $67,369 and $10,180,273, respectively.

(b)  The Group purchased raw materials of nil and $4,465,563 from Ningbo Kewei during 2011 and 2010, respectively, with no outstanding amount payable to Ningbo Kewei at December 31,2011 and 2010 in respect of these purchase transactions. The Group purchased raw materials of $7,151,433and $20,549,245from Ningbo Kunde during  2011 and 2010, respectively. The outstanding payment in advance to Ningbo Kunde as of December 31, 2010 and 2011 in respect of these purchase transactions was $5,181,809 and Nil respectively.

(c)  The Group purchased transportation services of $3,059,216 and $3,659,000 from Ningbo Xinhe during 2011 and 2010, respectively, and amounts owed to Ningbo Xinhe as of December 31, 2011 and 2010 in respect of these purchase transactions was $621,077 and $119, respectively

(d)   Guarantees for Bank Loans

	Guarantee provided during the year ended December 31				Bank loans guaranteed as of December 31
	2011		2010		2011		2010
Mr. Tao	$	12,396,800	$	79,887,600	$	34,628,000	$	36,408,000
Jicun Wang and Sumei Chen	$	30,992,000	$	-	$	1,983,523	$	12,136,000
Ningbo Kewei	$	34,091,200	$	82,106,700	$	29,700,067	$	11,377,500
Ningbo Pacific	$	65,083,200	$	-	$	27,918,200	$	16,687,000
Ningbo Hengfa	$	-	$	-	$	14,795,600	$	36,256,300
ShangdongTengda	$	-	$	-	$	944,400	$	910,200

Beginning in 2011 loan guarantee fees of 0.3% of the loan principal guaranteed are to be paid quarterly.In 2011, loan guarantee fees were $272,993, $636,427 and $390,466 for Ningbo Hengfa, Ningbo Pacific and Ningbo Kewei, respectively, and are included in $1,548,149 in the statements of operations.

(e)   Short-term financing transactions with related parties

	Year Ended December 31
	2011							2010
	From (i)		To(i)			Balance(ii)		From(i)		To(i)			Balance(ii)
Shandong Tengda	$	-	$	-		$	-	$	2,219,100	$	(2,219,100	)	$	-
Ningbo Kewei		5,423,600		(5,423,600	)		-		1,479,400		(1,479,400	)		-
Ningbo Kunde		5,423,600		(5,423,600	)		-		19,676,020		(19,676,020	)		-
JiangdongJihe		2,455,854		(2,340,978	)		-		7,464,857		(7,574,528	)		(112,459	)
	$	13,303,054	$	(13,188,178	)	$	-	$	30,839,377	$	(30,949,048	)	$	(112,459	)

(i) Transactions during the year are translated at average exchange rates.

(ii) Balances at year end are translated at the balance sheet exchange rate.

(f)   Amount due from related parties consist of the following:

	As of December 31,
		2011		2010
Related Party
Ningbo Kunde	$	-	$	5,181,809
JiangdongJihe		-		112,459
Mr. Tao		39,350		37,925
	$	39,350	$	5,332,193

Amounts due from Mr. Tao represents advances made for business expenses, are unsecured, interest free and due on demand.

(g)   Amounts due to related parties consist of the following:

	As of December 31,
	2011		2010
Related Party
Zhenhai Jinchi(prepayment)	$	-	$	115,416
NinboXinhe		621,077		119
	$	621,077	$	115,535

Amounts due to related parties primarily represent balances due for raw materials purchase and freight.

Guarantees for Bank Loans

	Bank loan guaranteed as of
	June 30		December 31
	2012		2011
	(Unaudited)
Mr. Tao	$	15,850,000	$	34,628,000
Jincun Wang and Chen		1,902,000		1,983,523
Ningbo Kewei		-		-
Ningbo Pacific		18,318,901		27,918,200
Ningbo Hengfa		14,899,000		14,795,600
Shandong Tengda		951,000		944,400
Total	$	51,920,901	$	80,269,723

	Guarantee provided during the year ended December 31				Bank loans guaranteed as of December 31
	2011		2010		2011		2010
Mr. Tao	$	12,396,800	$	79,887,600	$	34,628,000	$	36,408,000
Jicun Wang and Sumei Chen	$	30,992,000	$	-	$	1,983,523	$	12,136,000
Ningbo Kewei	$	34,091,200	$	82,106,700	$	29,700,067	$	11,377,500
Ningbo Pacific	$	65,083,200	$	-	$	27,918,200	$	16,687,000
Ningbo Hengfa	$	-	$	-	$	14,795,600	$	36,256,300
ShangdongTengda	$	-	$	-	$	944,400	$	910,200

Short-term financing transactions with related parties

	Three Months Ended June 30
	(Unaudited)
	2012						2011
	From(i)		To(i)		Balance(ii)		From(i)		To(i)			Balance(ii)
Ningbo Kewei	$	-	$	-	$	-	$	5,358,850	$	(5,358,850	)	$	-
Ningbo Kunde		-		-		-		32,550		(32,550	)		-
Jiangdong Jihe		-		-		-		14,739		143,834			-
	$	-	$	-	$	-	$	5,406,139	$	(5,247,566	)	$	-

	Six Months Ended June 30
	(Unaudited)
	2012						2011
	From(i)		To(i)		Balance(ii)		From(i)		To(i)			Balance(ii)
Ningbo Kewei	$	-	$	-	$	-	$	5,358,850	$	(5,358,850	)	$	-
Ningbo Kunde		-		-		-		5,358,850		(5,358,850	)		-
Jiangdong Jihe		-		-		-		2,426,534		(2,426,534	)
	$	-	$	-	$	-	$	13,144,234	$	13,144,234	)	$	-

(i) Transactions during the year are translated at average exchange rates.

(ii) Balances at year end are translated at the balance sheet exchange rate.

	Year Ended December 31
	2011							2010
	From (i)		To(i)			Balance(ii)		From(i)		To(i)			Balance(ii)
Shandong Tengda	$	-	$	-		$	-	$	2,219,100	$	(2,219,100	)	$	-
Ningbo Kewei		5,423,600		(5,423,600	)		-		1,479,400		(1,479,400	)		-
Ningbo Kunde		5,423,600		(5,423,600	)		-		19,676,020		(19,676,020	)		-
JiangdongJihe		2,455,854		(2,340,978	)		-		7,464,857		(7,574,528	)		(112,459	)
	$	13,303,054	$	(13,188,178	)	$	-	$	30,839,377	$	(30,949,048	)	$	(112,459	)

(i) Transactions during the year are translated at average exchange rates.

(ii) Balances at year end are translated at the balance sheet exchange rate.

Amount due to related parties

	June 30,		December 31,
	2012		2011
	(Unaudited)
Related Party
Mr. Tao	$	39,625	$	39,350

	June 30,		December 31,
	2012		2011
	(Unaudited)
Related Party
Ninbo Xinhe	$	768,313	$	621,077

	As of December 31,
		2011		2010
Related Party
Ningbo Kunde	$	-	$	5,181,809
JiangdongJihe		-		112,459
Mr. Tao		39,350		37,925
	$	39,350	$	5,332,193

	As of December 31,
	2011		2010
Related Party
Zhenhai Jinchi(prepayment)	$	-	$	115,416
NinboXinhe		621,077		119
	$	621,077	$	115,535

Relationships and transactions with certain other parties

Name of parties	Relationship
Ningbo Litong Petrochemical Co., Ltd	Former 12.75% nominee shareholder of Ningbo Keyuan
(Ningbo Litong)
Ningbo Jiangdong Haikai Construction	Controlled by cousin of Mr. Weifeng Xue, Vice
Materials Store (Jiangdong Haikai)	President of Accounting through August 2011

Ningbo Jiangdong Deze Chemical Co., Ltd (Jiangdong Deze)	Controlled by cousin of Mr. Weifeng Xue, Vice President of Accounting through August 2011
Ningbo Anqi Petrochemical Co., Ltd	Controlled by cousin of Mr. Weifeng Xue, Vice
(Ningbo Anqi)	President of Accounting through August 2011

Ningbo Kewei Investment Co., Ltd (Ningbo Kewei)	A related party through September 2011 when control transferred, and included in transactions with certain other parties beginning October, 2011.
Ningbo Kunde Petrochemical Co., Ltd (Ningbo Kunde)	A related party through September 2011 when control transferred, and included in transactions with certain other parties beginning October 1, 2011.

Name of parties	Relationship
Ningbo Litong Petrochemical Co., Ltd	Former 12.75% nominee shareholder of Ningbo Keyuan
(Ningbo Litong)
Ningbo JiangdongHaikai Construction	Controlled by cousin of Mr. WeifengXue, former Vice President of Accounting
Materials Store (JiangdongHaikai)
Ningbo JiangdongDeze Chemical Co., Ltd	Controlled by cousin of Mr. WeifengXue, former (JiangdongDeze) Vice President of Accounting
Ningbo Anqi Petrochemical Co., Ltd	Controlled by cousin of Mr. WeifengXue, former (Ningbo Anqi) Vice President of Accounting
Ningbo Kewei Investment Co., Ltd.	A related party through September 2011
(Ningbo Kewei) when control transferred
Ningbo Kunde Petrochemical Co, Ltd.	A related party through September 2011 when control transferred
(Ningbo Kunde)

Transactions and amounts outstanding with certain other parties

	Three Months Ended June 30, (Unaudited)
	2012		2011
Sales of products (h)	$	47,734,203	$	-
Purchase of raw material (i)	$	21,912,149	$	9,536,282
Credit line of guarantee for bank borrowings (j)	$	141,062,000	$	-
Loan guarantee fees(j)	$	382,116	$	302,674
Short-term financing from theses parties (k)	$	-	$	12,862,621
Short-term financing to these parties (k)	$	-	$	(7,142,275	)
Amounts due from these parties	$	15,773,715	$	-
Amounts due to these parties	$	2,690,514	$	17,851

	Six Months Ended June 30, (Unaudited)
	2012		2011
Sales of products (h)	$	70,021,289	$	772,762
Purchase of raw material (i)	$	22,358,020	$	9,536,282
Credit line of guarantee for bank borrowings (j)	$	161,687,800	$	-
Loan guarantee fees(j)	$	742,303	$	505,626
Short-term financing from theses parties (k)	$	-	$	47,612,617
Short-term financing to these parties (k)	$	-	$	(45,374,149	)
Amounts due from these parties	$	15,773,715	$	-
Amounts due to these parties	$	2,690,514	$	17,851

(h)  During the three months ended June 30, 2012 and 2011, the Group sold finished products of $7,049,811 and nil to Ningbo Litong. During the three months ended June 30, 2012, the Group sold finished products of $40,684,392 to Ningbo Kunde. During the six months ended June 30, 2012 and 2011, the Group sold finished products of $17,177,359 and $772,762 to Ningbo Litong. During the six months ended June 30, 2012, the Group sold finished products of $52,843,930 to Ningbo Kunde. Amounts received in advance from Litong and Kunde were $11,887,500 and $596,530, respectively as of June 30, 2012 and $17,851 and $3,077,199, respectively as of June 30, 2011, and are included in the Advances from Customers on the consolidated balance sheet.

(i)    During the three months ended June 30, 2012 and 2011, the Group purchased raw materials of $8,778,079 and $9,536,282, respectively from Ningbo Litong. During the three months ended June 30, 2012, the Group purchased raw material of $13,134,070 from Ningbo Kunde. During the six months ended June 30, 2012 and 2011, the Group purchased raw materials of $9,223,950 and $9,536,282, respectively from Ningbo Litong. During the six months ended June 30, 2012, the Group purchased raw materials of $13,134,070 from Ningbo Kunde.

(j)    Guarantees for Bank Loans

	Guarantee provided during				Guarantee provided during
	the three months ended June 30				the six months ended June 30
	2012		2011		2012		2011
	(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)
Ningbo Litong	$	30,000,000	$	-	$	50,625,800	$	-
Ningbo Kewei		111,062,000		-		111,062,000		-
	$	141,062,000	$	-	$	161,687,800	$	-

	Bank loans guaranteed As of
	June 30		December 31
	2012		2011
	(Unaudited)
Ningbo Litong	$	55,586,521	$	61,632,077
Ningbo  Keiwei	$	43,524,897	$	29,100,067

Beginning in 2011 loan guarantee fees of 0.3% the loan principal guaranteed after January 1, 2011 are to be paid quarterly. In the three months ended June 30, 2012, loan guarantee fees were $179,698 and $202,419 for Ningbo Litong and Ningbo Kewei, respectively. In the three months ended June 30, 2011, loan guarantee fees were $302,674 and $167,654 for Ningbo Litong and Ningbo Kewei, respectively. In the six months ended June 30,2012, loan guarantee fees were $374,263 and $368,040 for Ningbo Litong and Ningbo Kewei, respectively. In the six months ended June 30, 2011, loan guarantee fees were $505,626 and $305,556 for Ningbo Litong and Ningbo Kewei, respectively.

(k)   Short-term financing transactions

Historically the Group and its theses parties have provided each other with short-term financing, typically, in the form of cash, bills receivable and bills payable.

	Three Months Ended June 30 (Unaudited)
	2012						2011
	From(i)		To(i)		Balance(ii)		From(i)		To(i)			Balance(ii)
Ningbo Litong	$	-	$	-	$	-	$	12,862,621	$	(7,142,275	)	$	-
Jiangdong Deze		-		-		-		-		-			-
Ningbo Anqi		-		-		-		-		-			-
	$	-	$	-	$	-	$	12,862,621	$	(7,142,275	)	$	-

	Six Months Ended June 30 (Unaudited)
	2012						2011
	From(i)		To(i)		Balance(ii)		From(i)		To(i)			Balance(ii)
Ningbo Litong	$	-	$	-	$	-	$	38,142,763	$	(35,904,295	)	$	-
Jiangdong Deze		-		-		-		2,602,870		(2,602,870	)		-
Ningbo Anqi		-		-		-		6,866,984		(6,866,984	)		-
	$	-	$	-	$	-	$	47,612,617	$	(45,374,149	)	$	-

(i) Transactions during the year are translated at average exchange rates.

(ii) Balances at year end are translated at the balance sheet exchange rate.

	Year ended December 31,
	2011		2010
Sales of products (h)	$	29,637,868	$	29,625,766
Purchase of raw material (i)	$	20,253,780	$	18,994,104
Credit line of guarantee for bank borrowings (j)	$	81,136,800	$	-
Loan guarantee fees (j)	$	1,242,928	$	-
Short-term financing from these parties (k)	$	49,873,894	$	74,983,618
Short-term financing to these parties (k)	$	47,608,361	$	77,030,336
Amounts due from these parties	$	2,740,970	$	2,217,854
Advances from these parties for sales	$	130,458	$	110,134

(h)   The Group sold finished products of $7,360,796and $29,625,766 to Ningbo Litong in2011 and 2010, respectively. Amounts received in advance from Litong were nil and $110,134 as of December 31, 2011 and 2010, and are included in advances from customers on the consolidated balance sheet. The Group sold finished products of $22,277,072 to Ningbo Kunde  in 2011. There were outstanding amounts of $130,458 received in advance from Kunde as of December 31, 2011.

(i)   The Group purchased raw materials of $20,253,780from Ningbo Litong during 2011. During  2010, the Group purchased raw materials of $18,994,104from Ningbo Litong. Amounts prepayable to Litong were $2,740,970and nil as of December 31, 2011 and 2010, respectively.

(j)   Guarantees for Bank Loans

	Guarantee provided				Bank loans guaranteed
	During the year ended December 2011				as of December 2011
	2011		2010		2011		2010
Ningbo Litong	$	81,136,800	$	-	$	61,632,077	$	43,993,000

Through December 31, 2010, no compensation was paid in respect of these guarantees. Beginning in 2011, loan  guarantee fees of 0.3% of the loan principal guaranteed after January 1, 2011 are to be paid quarterly. Guarantee fees paid to Litong and Kewei  were $1,026,567 and $216,361 for the year ended December 31, 2011, respectively.

(k)  Short-term financing transactions

Historically the Group and these parties have provided each other with short-term financing, typically in the form of cash, bills receivable and bills payable.

Short-term financing with these parties is as follows:

	Year Ended December 31
			2011					2010
	From(i)		To(i)			Balance(ii)		From(i)		To(i)			Balance(ii)
Ningbo Litong	$	36,366,031	$	(34,100,498	)	$	-	$	57,180,289	$	(59,343,172	)	$	2,217,854
JiangdongHaikai		-		-			-		7,447,529		(7,331,364	)		-
JiangdongDeze		2,634,320		(2,634,320	)		-		4,438,200		(4,438,200	)		-
Ningbo Anqi		10,873,543		(10,873,543	)		-		5,917,600		(5,917,600	)		-
	$	49,873,894	$	(47,608,36	)	$	-	$	74,983,618	$	(77,030,336	)	$	2,217,854

(i) Transactions during the year are translated at average exchange rates.

(ii) Balances at year end are translated at the balance sheet exchange rate.

Guarantees for bank loans with certain other parties

	Guarantee provided during				Guarantee provided during
	the three months ended June 30				the six months ended June 30
	2012		2011		2012		2011
	(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)
Ningbo Litong	$	30,000,000	$	-	$	50,625,800	$	-
Ningbo Kewei		111,062,000		-		111,062,000		-
	$	141,062,000	$	-	$	161,687,800	$	-

	Bank loans guaranteed As of
	June 30		December 31
	2012		2011
	(Unaudited)
Ningbo Litong	$	55,586,521	$	61,632,077
Ningbo  Keiwei	$	43,524,897	$	29,700,067

	Guarantee provided				Bank loans guaranteed
	During the year ended December 2011				as of December 2011
	2011		2010		2011		2010
Ningbo Litong	$	81,136,800	$	-	$	61,632,077	$	43,993,000

Short-term financing transactions with certain other parties

	Three Months Ended June 30 (Unaudited)
	2012						2011
	From(i)		To(i)		Balance(ii)		From(i)		To(i)			Balance(ii)
Ningbo Litong	$	-	$	-	$	-	$	12,862,621	$	(7,142,275	)	$	-
Jiangdong Deze		-		-		-		-		-			-
Ningbo Anqi		-		-		-		-		-			-
	$	-	$	-	$	-	$	12,862,621	$	(7,142,275	)	$	-

	Six Months Ended June 30 (Unaudited)
	2012						2011
	From(i)		To(i)		Balance(ii)		From(i)		To(i)			Balance(ii)
Ningbo Litong	$	-	$	-	$	-	$	38,142,763	$	(35,904,295	)	$	-
Jiangdong Deze		-		-		-		2,602,870		(2,602,870	)		-
Ningbo Anqi		-		-		-		6,866,984		(6,866,984	)		-
	$	-	$	-	$	-	$	47,612,617	$	(45,374,149	)	$	-

(i) Transactions during the year are translated at average exchange rates.

(ii) Balances at year end are translated at the balance sheet exchange rate.

	Year Ended December 31
			2011					2010
	From(i)		To(i)			Balance(ii)		From(i)		To(i)			Balance(ii)
Ningbo Litong	$	36,366,031	$	(34,100,498	)	$	-	$	57,180,289	$	(59,343,172	)	$	2,217,854
JiangdongHaikai		-		-			-		7,447,529		(7,331,364	)		-
JiangdongDeze		2,634,320		(2,634,320	)		-		4,438,200		(4,438,200	)		-
Ningbo Anqi		10,873,543		(10,873,543	)		-		5,917,600		(5,917,600	)		-
	$	49,873,894	$	(47,608,361	)	$	-	$	74,983,618	$	(77,030,336	)	$	2,217,854

(i) Transactions during the year are translated at average exchange rates.

(ii) Balances at year end are translated at the balance sheet exchange rate.

XML

Short-Term Bank Borrowings (Details Textual) (USD $)	6 Months Ended
	Jun. 30, 2012		Dec. 31, 2011		Dec. 31, 2010
Short-term bank borrowings (Textual)
Short-term bank borrowings	$ 393,534,612	[1]	$ 225,969,421	[1]	$ 135,768,634	[2]
Additional short-term bank borrowings (Textual)
Range of maturity term	One to twelve months
Interest range minimum	1.57%		2.97%		2.97%
Interest range maximum	7.93%		7.93%		5.56%
Amount guaranteed by related party and third party entities and individuals	248,714,638		152,392,055
Amount guaranteed by Chief Executive Officer	15,850,000		18,888,000
Land buildings and equipment carrying amount	90,798,902		91,582,011
Amount secured by land, buildings and equipment	11,000,000		25,420,808
Shanghai Pudong Development Bank [Member]
Short-term bank borrowings (Textual)
Short term loan payable secured carrying amount	48,835,000		17,000,000
Shanghai Pudong Development Bank [Member] | Ningbo Keyuan's one year fixed term deposit [Member]
Short-term bank borrowings (Textual)
Short term loan payable secured carrying amount	50,403,000		18,494,500
Bank of China [Member]
Short-term bank borrowings (Textual)
Short term loan payable secured carrying amount	62,393,870		45,577,366
Bank of China [Member] | Ningbo Keyuan's one year fixed term deposit [Member]
Short-term bank borrowings (Textual)
Short term loan payable secured carrying amount	63,835,423		46,533,893
China CITIC Bank [Member]
Short-term bank borrowings (Textual)
Short term loan payable secured carrying amount	11,000,000		11,000,000
China CITIC Bank [Member] | Ningbo Keyuan's one year fixed term deposit [Member]
Short-term bank borrowings (Textual)
Short term loan payable secured carrying amount	11,246,860		11,411,500
China Construction bank [Member]
Short-term bank borrowings (Textual)
Short term loan payable secured carrying amount	22,591,104
China Construction bank [Member] | Pledged deposit [Member]
Short-term bank borrowings (Textual)
Short term loan payable secured carrying amount	$ 22,825,797
Bank loans in RMB [Member]
Short-term bank borrowings (Textual)
Short-term Debt, Weighted Average Interest Rate	5.91%		5.45%		5.15%
Bank Loans In USD [Member]
Short-term bank borrowings (Textual)
Short-term Debt, Weighted Average Interest Rate	4.48%		3.78%		3.44%

[1] Note 12

[2] Note 10

XML

Condensed Consolidated Balance Sheets (USD $)	Jun. 30, 2012		Dec. 31, 2011		Dec. 31, 2010
Current assets:
Cash	$ 9,879,169	[1]	$ 7,325,017	[1]	$ 29,336,241	[2]
Pledged bank deposits	239,816,494		156,318,066		98,053,146	[3]
Bills receivable	3,309,663		1,574,000		9,194,513	[4]
Accounts receivable	4,014,076	[5]	2,226,288	[5]		[6]
Inventories	73,048,249	[7]	38,945,968	[7]	86,831,556	[1]
Prepayments to suppliers	44,507,626	[8]	15,781,294	[8]	14,071,219	[5]
Income tax receivable
Consumption tax refund receivable	107,023,606	[9]	55,809,560	[9]	39,144,688	[7]
Amounts due from related parties	39,625	[10]	39,350	[10]	5,332,193	[11]
Other current assets	60,646,615	[12]	45,978,428	[12]	28,608,833	[8]
Deferred income tax assets	37,609	[13]	37,348	[13]	469,914	[14]
Total current assets	542,322,732		324,035,319		311,042,303
Property, plant and equipment, net	209,768,917	[15]	190,867,621	[15]	129,781,304	[9]
Intangible assets, net	931,848	[16]	978,503	[16]	1,045,466	[12]
Land use rights	10,920,476	[17]	11,068,762	[17]	11,099,875	[15]
VAT recoverable	2,541,215		2,893,635			[8]
Total assets	766,485,188		529,843,840		452,968,948
Current liabilities:
Short-term bank borrowings	393,534,612	[6]	225,969,421	[6]	135,768,634	[16]
Bills payable	111,267,000		63,550,250		60,224,900	[4]
Current portion of long-term bank borrowings	15,850,000	[18]	15,740,000	[18]	17,445,500	[17]
Accounts payable	79,936,476		97,588,137		92,225,936
Advances from customers	41,202,535	[5]	7,821,623	[5]	10,479,217	[6]
Accrued expenses and other payables	30,254,525	[19]	30,287,946	[19]	18,205,110	[18]
Income taxes payable	1,224,165	[13]	186,326	[13]	10,699,778	[20]
Dividends payable	2,381,759		2,381,759		234,393
Amounts due to related parties	768,313	[10]	621,077	[10]	115,535	[21]
Total current liabilities	676,419,385		444,146,539		345,399,003
Loans payable to bank, non-current					15,170,000	[17]
Total liabilities			444,146,539		360,569,003
Series B convertible preferred stock: Par value: $0.001; Authorized: 8,000,000 shares6% cumulative dividend for one year from insurance, with liquidation preference over common stock, Issued and outstanding:5,333,340 shares in June 30, 2012, in 2011 and 5,400,010 in 2010,Liquidation preference of $20,000,000 in June 30, 2012, in 31 Dec. 2011 and 20,250,000 in 2010.	16,451,552		16,451,552		16,701,565	[19]
Commitments and contingencies		[22]		[22]		[23]
Stockholders’ equity:
Common stock par value:$0.001; Authorized: 100,000,000 shares; Issued and outstanding: 57,646,160 shares as at June 30, 2012 and December 31, 2011 and 57,577,840 shares in 2010	57,646		57,646		57,578	[24]
Additional paid-in capital	49,951,346		49,198,278		47,012,061
Statutory reserve	3,744,304		3,744,304		3,075,356	[22]
Accumulated other comprehensive income	7,253,902		6,545,811		3,310,416
Retained earnings	12,607,053		9,699,710		22,242,969
Total stockholders’ equity	73,614,251		69,245,749		75,698,380
Total liabilities and stockholders' equity	$ 766,485,188		$ 529,843,840		$ 452,968,948

[1] Note 3

[2] Note 2(d)

[3] Note 2(e)

[4] Note 2(j)

[5] Note 4

[6] Note 12

[7] Note 5

[8] Note 6

[9] Note 7

[10] Note 22

[11] Note 24

[12] Note 8

[13] Note 17

[14] Note 20

[15] Note 9

[16] Note 10

[17] Note 11

[18] Note 13

[19] Note 14

[20] Note 21

[21] Note 25

[22] Note 18

[23] Note 19

[24] Note 15

XML

Long-Term Bank Borrowings (Tables)

6 Months Ended

12 Months Ended

Jun. 30, 2012

Dec. 31, 2011

Long-Term Debt and Capital Lease Obligations [Abstract]

Long-term Debt

	June 30,			December 31,
	2012			2011
	(Unaudited)
Loan from China Construction Bank	$	15,850,000		$	15,740,000
Less: current portion		(15,850,000	)		(15,740,000	)
	$	-		$	-

As of December 31,
2011	2010

Loan from China Construction Bank	$	15,740,000		$	15,170,000
Loan from Industrial and Commercial Bank of China		-			4,551,000
Loan from Bank of China		-			12,894,500
		15,740,000			32,615,500
Less: current portion		(15,740,000	)		(17,445,500	)
	$	-		$	15,170,000

XML

Statutory Reserves (Details) (USD $)	12 Months Ended
	Dec. 31, 2011	Jun. 30, 2012	Dec. 31, 2010
Statutory Reserves (Textual)
Minimum percentage allocation of after tax profit	10.00%
Percentage of statutory reserve balance of registered capital	50.00%
Statutory reserve	$ 3,744,304	$ 3,744,304	$ 3,075,356	[1]

[1] Note 18

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Keyuan Petrochemicals, Inc. (Parent Company) (Details 1) (USD $)	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011	Dec. 31, 2011		Dec. 31, 2010
Condensed statements of operations
General and administrative expenses	$ 2,656,620	$ 4,529,744	$ 5,266,815	$ 7,764,824	$ 17,858,807		$ 9,517,814
Interest expense	2,930,281	2,638,734	7,308,982	5,835,364	15,796,772		9,945,389
Loss before income taxes	(1,932,625)	1,156,711	(4,916,809)	(6,309,583)	4,289,578		(50,613,127)
Income tax expense	870,277	665,828	2,009,649	2,917,979	2,851,718	[1]	13,492,704	[1]
Net income (loss) attributable to Keyuan Petrochemicals Inc. stockholders	(1,062,348)	1,822,539	(2,907,340)	(3,391,604)	7,141,296		(37,120,423)
Parent Company [Member]
Condensed statements of operations
General and administrative expenses					9,757,782		2,108,043
Interest expense					4,041		810
Loss before income taxes					9,761,823		2,108,853
Income tax expense
Net income (loss) attributable to Keyuan Petrochemicals Inc. stockholders					$ 9,761,823,000		$ 2,108,853,000

[1] Note 20

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Condensed Consolidated of Stockholders Equity and Comprehensive Income (Loss) (Parenthetical) (USD $)	12 Months Ended
	Dec. 31, 2010
Statement Of Stockholders' Equity [Abstract]
Issuance costs of issued common stock	$ 221,661
Issuance costs of warrants issued of Series A and Series B	45,584
Issuance costs of warrants issued of Series C and Series D	$ 170,739

XML

Income Taxes (Details 4) (USD $)	12 Months Ended
	Dec. 31, 2011
Deferred tax assets, net operating loss
Net operating loss	$ (15,765,587)
U.S. [Member]
Deferred tax assets, net operating loss
Net operating loss	(11,870,677)
Expiration Date	Dec. 31, 2031
Hong kong [Member]
Deferred tax assets, net operating loss
Net operating loss	(3,709,718)
BVI [Member]
Deferred tax assets, net operating loss
Net operating loss	$ (185,192)

XML

Accounts Receivable (Details) (USD $)	6 Months Ended
	Jun. 30, 2012		Dec. 31, 2011		Dec. 31, 2010
Accounts Receivable (Textual)
Percentage of prepayment of sales contract price from customers	100.00%
Balance of accounts receivable	$ 4,014,076	[1]	$ 2,226,288	[1]		[2]

[1] Note 4

[2] Note 12

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Significant Concentrations and Risks (Details) (USD $)	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011	Dec. 31, 2011	Dec. 31, 2010
Sales to major customers
Sales to major customer, Amount	$ 87,242,852	$ 84,258,540	$ 131,472,604	$ 156,321,054	$ 269,726,106	$ 221,790,407
Sales to major customer, Percentage	47.00%	57.00%	36.00%	53.00%	43.00%	40.00%
Customer A [Member]
Sales to major customers
Sales to major customer, Amount	40,695,112	35,607,254	52,843,930	58,150,912	114,981,292	101,680,459
Sales to major customer, Percentage	21.00%	24.00%	14.00%	20.00%	18.00%	18.00%
Customer B [Member]
Sales to major customers
Sales to major customer, Amount	12,876,871				56,582,811	32,193,696
Sales to major customer, Percentage	7.00%				9.00%	6.00%
Customer C [Member]
Sales to major customers
Sales to major customer, Amount	12,615,883				42,795,468
Sales to major customer, Percentage	7.00%				7.00%
Customer D [Member]
Sales to major customers
Sales to major customer, Amount	11,234,274	14,540,619	21,659,715	28,430,114	28,228,269
Sales to major customer, Percentage	6.00%	10.00%	6.00%	10.00%	5.00%
Customer E [Member]
Sales to major customers
Sales to major customer, Amount	9,820,712				27,138,266
Sales to major customer, Percentage	5.00%				4.00%
Customer F [Member]
Sales to major customers
Sales to major customer, Amount			15,014,302			31,745,184
Sales to major customer, Percentage			4.00%			6.00%
Customer G [Member]
Sales to major customers
Sales to major customer, Amount			17,177,359			29,625,766
Sales to major customer, Percentage			4.00%			5.00%
Customer H [Member]
Sales to major customers
Sales to major customer, Amount			24,777,298			26,545,302
Sales to major customer, Percentage			7.00%			5.00%
Customer I [Member]
Sales to major customers
Sales to major customer, Amount		14,278,678		14,278,678
Sales to major customer, Percentage		10.00%		5.00%
Customer J [Member]
Sales to major customers
Sales to major customer, Amount		13,517,410		42,284,552
Sales to major customer, Percentage		9.00%		14.00%
Customer K [Member]
Sales to major customers
Sales to major customer, Amount				13,176,798
Sales to major customer, Percentage				4.00%
Customer L [Member]
Sales to major customers
Sales to major customer, Amount		$ 6,314,579
Sales to major customer, Percentage		4.00%

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Subsequent Events

12 Months Ended

Dec. 31, 2011

Subsequent Events [Abstract]

SUBSEQUENT EVENTS

25        SUBSEQUENT EVENTS

In January 2012, the Company signed a cooperation agreement with Fang cheng gang City to build a new production facility in Guangxi Province. Preconstruction activities commenced in February 2012. Once the facility is fully operational, Guangxi Keyuan New Materials Industrial Park is expected to have an annual production capacity of 400,000 metric tons of ABS (Acrylonitrile Butadiene Styrene).

XML

Property, Plant and Equipment (Details 1) (USD $)	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011	Dec. 31, 2011	Dec. 31, 2010
Depreciation expense on property, plant and equipment
Cost of sales	$ 2,580,156	$ 2,246,111	$ 5,347,643	$ 4,589,859	$ 8,141,839	$ 7,788,486
Selling, general and administrative expenses	55,355	40,473	104,491	81,707	165,229	121,127
Depreciation	$ 2,635,511	$ 2,286,584	$ 5,452,134	$ 4,671,566	$ 8,290,416	$ 7,909,613

XML

Advances from Customers

12 Months Ended

Dec. 31, 2011

Customer Advances and Deposits, Current [Abstract]

ADVANCES FROM CUSTOMERS

12        ADVANCES FROM CUSTOMERS

Generally, the Group requires a prepayment of 100% of the sales contract price from its customers shortly before products are shipped. Such prepayment is recorded as “advances from customers” in the Group’s consolidated balance sheet, until the products are delivered and the customer takes ownership and assumes the risk of loss. With the approval of the Company’s general manager, the Company occasionally extends credit to its long-term customers with a good credit rating. As of December 31,2011,the balance of accounts receivable was  $2,226,288 which was received on January 6,2012.

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Keyuan Petrochemicals, Inc. (Parent Company)

12 Months Ended

Dec. 31, 2011

Condensed Financial Information Of Parent Company Only Disclosure [Abstract]

KEYUAN PETROCHEMICALS, INC. (PARENT COMPANY)

26        KEYUAN PETROCHEMICALS, INC. (PARENT COMPANY)

Relevant PRC statutory laws and regulation permit payments of dividends by the Company’s subsidiaries in the PRC only out of their retained earnings, if any, as determined in accordance with the PRC accounting standards and regulations.

Under the Law of the PRC on Enterprises with Wholly Owned Foreign Investment, the Company’s subsidiaries in the PRC are required to allocate at least 10% of their after tax profits, after making good of accumulated losses as reported in their PRC statutory financial statements, to the general reserve fund and have the right to discontinue allocations to the general reserve fund if the balance of such reserve has reached 50% of their registered capital. These statutory reserves are not available for distribution to the shareholders (except in liquidation) and may not be transferred in the form of loans, advances, or cash dividends.

As of December 31, 2011, $3,744,304(2010:$3,075,356) was appropriated from retained earnings and set aside for the statutory reserve by the Company’s subsidiaries in the PRC.

As a result of these PRC laws and regulations, the Company’s subsidiaries in the PRC are restricted in their ability to transfer a portion of their net assets to either in the form of dividends, loans or advances, which consisted of paid-up capital and statutory reserves, amounting to $57,144,304 as of December 31, 2011 (2010: $56,553,518).

The following presents condensed unconsolidated financial information of the Parent Company only:

Condensed Balance Sheets,

	As  of December 31, 2011		As  of December 31, 2010
Cash	$	5,089	$	392,741
Other current assets		392,770		570
Investment in subsidiaries		41,774,338		41,774,338
Total assets		42,172,197		42,167,649
Accounts payable		672,310		23,527
Accrued expenses and other payables		2,671,474		74,656
Inter-company liabilities		8,930,146		1,760,000
Dividends payable		2,381,760		234,393
Series B convertible preferred stock		16,451,553		16,701,565
Total stockholders’ equity		11,064,954		23,373,508
Total liabilities and stockholders’ equity	$	42,172,197	$	42,167,649

	Year ended		Year ended
	December 31,		December 31,
	2011		2010
General and administrative expenses	$	9,757,782	$	2,108,043
Interest expens		4,041		810
Loss before income taxes		9,761,823		108,853
Income tax expense		-		-
Net loss	$	9,761,823	$	2,108,853

Condensed Statements of Cash Flows

	Year ended December 31, 2011			Year ended December 31, 2010
Cash flows from operating activities
Net loss	$	(9,761,823	)	$	(2,108,853	)
Adjustments to reconcile net loss to net cash used inoperating activities:
Share-based compensation		-			1,515,907
Stock option expense		2,063,394			-
Liquidated damages		2,493,326			-
Decrease in other assets		(392,200	)		(570	)
Decrease in trade payables		-			-
Increase in accounts payable, accrued expenses and other payables		617,821			42,158
Net cash used in operating activities		(4,979,482	)		(551,358	)
Cash flows from investing activities
Investment in subsidiaries		-			(41,774,338	)
Net cash used in investing activities		-			(41,774,338	)
Cash flows from financing activities
Advance from inter-group company		7,170,146			1,760,000
Dividend paid to stockholders		(2,585,647	)		(902,886	)
Repurchase of common stock		-			(400,000	)
Additional paid in capital		7,332			-
Proceeds from Series A Private Placement, net		-			23,312,091
Proceeds from Series B Private Placement, net		-			18,949,232
Net cash provided by financing activities		4,591,831			42,718,437
Net decrease in cash		(387,651	)		392,741
Cash at beginning of year		392,741			-
Cash at end of year	$	5,090		$	392,741

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Earnings (Loss) Per Share (Details) (USD $)	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011	Dec. 31, 2011		Dec. 31, 2010
Basic earnings per share:
Net income (loss) attributable to Keyuan Petrochemicals, Inc. stockholders	$ 1,062,348	$ (1,822,539)	$ 2,907,340	$ 3,391,604	$ (7,141,296)		$ 37,120,423
Dividends to Series A convertible Preferred stockholders						[1]	831,032	[1]
Dividends to Series B convertible preferred stockholders		306,247		602,507	1,205,014	[1]	306,247	[1]
Net income (loss) attributable to Keyuan Petrochemicals Inc. common stockholders	$ 1,062,348	$ (2,128,786)	$ 2,907,340	$ 2,789,097	$ (8,346,310)		$ 35,983,144
Weighted average common shares (Denominator for basic income per share)	57,646,160	57,579,239	57,646,160	57,578,896	57,585,040	[2]	50,929,526	[2]
Effect of diluted securities:
Diluted	62,979,500	57,579,239	62,979,500	63,836,892	57,585,040	[2]	56,057,994	[2]
Basic net income (loss) per share	$ 0.02	$ (0.04)	$ 0.05	$ 0.05	$ (0.14)	[2]	$ 0.71	[2]
Diluted net income (loss) per share	$ 0.02	$ (0.04)	$ 0.05	$ 0.05	$ (0.14)	[2]	$ 0.66	[2]
Series A convertible preferred stock [Member]
Effect of diluted securities:
Diluted				5,400,010			3,542,344
Series B convertible preferred stock [Member]
Effect of diluted securities:
Diluted	5,333,340		5,333,340				1,390,688
Series M convertible preferred stock [Member]
Effect of diluted securities:
Diluted
Warrant [Member]
Effect of diluted securities:
Diluted				390,647			103,985
Options [Member]
Effect of diluted securities:
Diluted				467,429			91,451

[1] Note 14

[2] Note 21

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Stockholders' Equity and Related Financing Agreements

6 Months Ended

12 Months Ended

Jun. 30, 2012

Dec. 31, 2011

Equity [Abstract]

STOCKHOLDERS’ EQUITY AND RELATED FINANCING AGREEMENTS

15         STOCKHOLDERS’ EQUITY AND RELATED FINANCING AGREEMENTS

Dividends

Fixed dividends are accrued and cumulative one year from the date of the initial issuance of the Series B convertible preferred stock, are payable on a quarterly basis, and are determined as 6% of $3.75 for each share of the Series B convertible preferred stock.

On January 17, 2011, the Company’s Board of Directors approved the distribution of annual cash dividend of $0.36 per share for 2010 to be paid quarterly to its common stock stockholders at the assigned dates of record. In January 2011, certain stockholders of the Company announced the waiver of their rights to receive such cash dividends. In addition, Dragon State International Limited, the primary Series B convertible stockholder agreed to waive their rights to receive cash dividend for 2010 should they choose to convert their preferred stock before the record date. The estimated dividends to be distributed and the dividends waived are approximately $3.5 million and $17.2 million, respectively. In October 2011, the Company’s Board of Directors suspended the payment of quarterly cash dividends on the Company’s common stock while it pursues strategic alternatives including, but not limited to, taking the Company private, a merger or other transaction.

During the year ended December 31, 2011, 66,670 shares of the Series B convertible preferred stock were converted into 66,670 shares of the Company’s common stock. In addition,1,150 Series A warrants and  500 Series B warrants were exercised, and the Company issued 1,150 shares and 500 shares of the Company’s common stock, receiving proceeds of $4,863 and $2,468, respectively. There were no dividends to be paid and accrued for the three and six months ended June 30, 2012.

Registration rights agreement

In connection with the Series A Private Placement, the Company entered into a registration rights agreement  with the Series A Investors, in which the Company agreed to file a registration statement  with the Securities and Exchange Commission (“SEC”) to register for resale of the issued common stock,  the common stock issuable upon conversion of the Series A convertible preferred stock, and the common stock underlying the Series A and Series B Warrants and the Placement agent warrants, within 30 calendar days of April 22, 2010 and to have this registration statement declared effective within 150 calendar days of April 22, 2010 or within 180 calendar days of April 22, 2010 in the event of a full review of the registration statement by the SEC. If the Company doesn’t comply with the foregoing obligations under the registration rights agreement, the Company will be required to pay liquidated damages in cash to each investor, at the rate of 1% of the applicable subscription amount for each 30 day period in which the Company is not in compliance; provided, that such liquidated damages will be capped at 10% of the subscription amount of each investor and will not apply to any registrable securities that may be sold pursuant to Rule 144 under the Securities Act if all of the conditions in Rule 144(i)(2) are satisfied at the time of the proposed sale, or are subject to an SEC comment with respect to Rule 415 promulgated under the Securities Act.

In connection with the Series B private placement, the Company entered into a registration rights agreement  with the Series B Investors, in which the Company agreed to file a registration statement with the SEC to register for resale of the common stock issuable upon the conversion of the Series B convertible preferred stock, common stock underlying the Series C and Series D Warrants, and common stock underlying the placement agent warrants, within 30 calendar days following the later of (i) the closing date of the offering or (ii) the effective date of the prior registration statement for resale of the Issued Common Stock and common stock issuable upon the conversion of the Series A Preferred Stock, Series A and Series B Warrants, and placement agent warrants issued in the Series A Private Placement (the “Prior Registration Statement”), and to have the registration statement declared effective within 150 calendar days ( or 180 calendar days of the Closing Date in the event of a full review of the registration statement by the SEC)  following the later to occur of (i) the closing date of the Series B Private Placement or (ii) the effective date of the Prior Registration Statement.  If the Group does not comply with the foregoing obligations under the registration rights agreement, the Group will be required to pay cash liquidated damages to each Series B Investor, at the rate of 1% of the applicable subscription amount for each 30 day period in which the Group are not in compliance; provided, that such liquidated damages will be capped at 10% of the subscription amount of each investor and will not apply to any registrable securities that may be sold pursuant to Rule 144 under the Securities Act if all of the conditions in Rule 144(i)(2) are satisfied at the time of the proposed sale, or are subject to an SEC comment with respect to Rule 415 promulgated under the Securities Act.

Liquidated damages are also payable in the event that the Registration Statement is not maintained continuously effective for approximately 180 days, or if trading of the Company’s common stock is suspended or if the Company’s common stock is delisted from the principal exchange on which it is traded (NASDAQ) for more than three days.

On April 1, 2011, trading of the Company’s common stock was suspended and on October 7,2011, was delisted by NASDAQ. Management determined that the registration statements were no longer effective commencing on April 7, 2011 and registerable securities in connection with the Series A and B private placements were not able to be sold pursuant to Rule 144 under the Securities Act until November 1, 2011. Accordingly, in the year ended December 31, 2011, an estimated contingent liability for $2,493,326 was accrued with a corresponding charge to earnings. There were no liquidated damages during the three and six months ended June 30, 2012.

14        STOCKHOLDERS’ EQUITY AND RELATED FINANCING AGREEMENTS

In April and May 2010, the Company completed a private placement offering (the “Series A Private Placement”), pursuant to a security purchase agreement with a group of unrelated investors (collectively, the “Series A Investors”). Under the Series A Private Placement, the Company sold 661,562 security units at $35 per unit on April 22, 2010 and 87,142 security units at $35per unit on May 18, 2010, respectively. Each security unit issued in the Series A Private Placement consisted of, (a) nine shares of Series A convertible preferred stock, with a par value of $0.001 per share (the “Series A convertible preferred stock”) which is convertible into the same number of shares of the Company’s common stock, (b) one share of the Company’s common stock, with a par value of $0.001 per share (c) a warrant to purchase one share of the Company’s Common Stock at an exercise price of $4.50 for a three-year period (the “Series A Warrant”), and (d) a warrant to purchase one share of the per share’s common stock at an exercise price of $5.25 per share for a three-year period (the “Series B Warrant”).

On September, 28, 2010, the Company completed a private placement offering (the “Series B Private Placement”), pursuant to a security purchase agreement with a group of unrelated investors (collectively, the “Series B Investors”) and sold 540,001 security units, at a price of $37.50 per unit. Each security unit issued in the Series B Private Placement consisted of (a) ten shares of Series B convertible preferred stock, with a par value of $0.001 per share (the “Series B convertible preferred stock”) which is convertible into the same number of shares of the Company’s common stock, (b) a warrant to purchase up to 1.5 shares of the Company’s common stock, at an exercise price of $4.50 per share for a three-year period (the “Series C Warrant”), and (c) a warrant to purchase up to 1.5 shares of the Company’s common stock at an exercise price of $5.25 per share for a three-year period(the “Series D Warrant”).

Because the convertible preferred stock and warrants are transferable separately and there are no terms requiring the surrender of convertible preferred stock when the warrants are exercised, the Series A, Series B, Series C and Series D Warrants are considered to be detachable from the Series A and Series B convertible preferred stock.

The Company received total gross proceeds of $26,204,639 and $20,250,000 from the Series A and Series B Private Placements, before issuance costs of $3,242,231 and $1,835,109, respectively. The net proceeds were allocated to the Series A and Series B convertible preferred stock, common stock issued in the Series A and Series B Private Placement, Series A, Series B, Series C and Series D Warrants on a relative fair value basis.

	Gross Proceeds		Issuance costs		Net proceeds
Series A Private Placement:
Series A convertible preferred stock	$	23,993,129	$	2,974,986	$	21,018,143
Issued Common Stock		1,820,800		221,661		1,599,139
Series A Warrant		233,210		27,279		205,931
Series B Warrant		157,500		18,305		139,195
	$	26,204,639	$	3,242,231	$	22,962,408
Series B Private Placement:
Series B convertible preferred stock	$	18,365,935	$	1,664,370	$	16,701,565
Series C Warrant		1,000,352		90,654		909,698
Series D Warrant		883,713		80,085		803,628
	$	20,250,000	$	1,835,109	$	18,414,891

The estimated fair values on April 22, 2010, May 18, 2010, and on September 28, 2010 were determined using a comprehensive model that evaluated each element of the security. This evaluation included consideration of conversion terms, analysis of other public companies with financial characteristics estimated to be similar to the Company’s, and the Black-Scholes option pricing model. A discount was applied in the valuation of each element reflecting the lack of marketability and other restrictions.

Key assumptions used are as follows:

		Series A Private Placement								Series B Private Placement:
		April 23,				May 18,				September 28,
		2010				2010				2010
Expected volatility			45.82	%			45.15	%			86.22	%
Expected dividends yield			0	%			0	%			0	%
Time to maturity		3 years				3 years				3 years
Weighted average risk-free interest rate		1.03		%		0.75		%		0.68		%
Fair value of the common stock	$	2.38			$	2.79			$	3.40

Concurrent with the Series A and Series B Private Placements, the Company issued to a placement agent warrants to purchase718,755 of shares of the Company’s Common Stock for the Series A Private Placement and warrants to purchase 561,601 of shares of the Company’s Common Stock for the Series B Private Placement. The warrants issued to the placement agent in the Series A Private Placement consisted of warrants to purchase 598,963, 59,986 and 59,896 shares of common stock at an exercise price of $3.50, $4.50 and $5.25 per share, respectively. The warrants issued to the placement agent in the Series B Private Placement consisted of warrants to purchase 432,001 and 64,800 shares of common stock at an exercise price of $3.75, $4.50 and $5.25 per share, respectively. The estimated fair values of these placement agent warrants on the completion dates of the respective private placements was $349,683 for Series A Private Placement and $534,341 for Series B Private Placement; and are included in the above issuance costs.

The significant terms of the Series A and Series B convertible preferred stocks are as follows:

Conversion

At any time on or after the issuance date, at the election of the holders, each share of the Series A and Series B convertible preferred stock may be converted into shares of the Company’s common stock, or a conversion price of $3.50 and $3.75 per share, respectively, subject to certain ownership limitations.

The conversion price is subject to certain anti-dilutive adjustments, including adjustments for stock splits, dividends and distributions, and reorganization, merger or consolidation. In addition, the conversion price may be adjusted down.

The Series A convertible preferred stock was to be automatically converted into common stock   at the earlier occurrence of 1) the 24 month anniversary of the issuance dates of the Series A convertible preferred stock; and 2) at such time that the volume weighted average price (“VWAP”) of the Company’s common stock is no less than $5.00 for a period of ten consecutive trading days with the daily volume of the Company’s common stock of at least 50,000 shares per day. All of the Series A convertible preferred stock was converted into common stock in October 2010.

The Series B convertible preferred stock shall be automatically converted into common stock (or the same conversion price as described above) upon the third year anniversary of the issuance date of the Series B convertible preferred stock (April and May 2013).

In the event the Company shall issue or sell any additional shares of common stock at a price per share less than the then-applicable conversion price or without consideration, then the conversion price upon each such issuance shall be reduced to that price (the “Round Down Provision”).

Management evaluated the terms and conditions of the embedded conversion features based on the guidance of ASC 815-15-25-1 (formerly SFAS 133, paragraph 12) to determine if there was an embedded derivative requiring bifurcation. An embedded derivative instrument (such as a conversion option embedded in the Convertible Preferred Stock) must be bifurcated from its host instruments and accounted for separately as a derivative instrument only if the “risks and rewards” of the embedded derivative instrument are not “clearly and closely related” to the risks and rewards of the host instrument in which it is embedded.  Management concluded that the embedded conversion feature of the preferred stock was not required to be bifurcated because the conversion feature is clearly and closely related to the host instrument, and because of the Company’s limited trading volume that indicates the feature is not readily convertible to cash in accordance with ASC 815-10, “Derivatives and Hedging”.

Therefore, in accordance with ASC 470-20, management compared the effective conversion prices of the Series A and Series B convertible preferred stocks and the estimated fair values of the Company’s common stock as of April 22, 2010, May 18, 2010 and September 28, 2010 as follows:

	Effective initial conversion price of				Fair value Intrinsic value per each share of the
	Series A  Convertible preferred stock		Series B of the convertible  preferred stock		Series A  common stock		or Series B preferred stocks
April 22, 2010	$	3.57	$	-	$	2.38	$	0
May 18, 2010	$	3.49	$	-	$	2.79	$	0
September 28,    2010	$	-	$	3.40	$	3.40	$	0

Management determined that there was no beneficial conversion features for the Series A and Series B convertible preferred stocks because the effective conversion price is equal to or higher than the fair value at the date of issuance.

Redemption

As a result of the Round Down Provision, and in accordance with ASR 268 “Presentation in Financial Statement of Redeemable Preferred Stock”, the Series A and Series B convertible preferred stocks have been classified as temporary equity as the Company does not control the events necessary to issue the maximum number of shares that could be required should the redemption feature be triggered.

In the event the Company has insufficient authorized registered shares of common stock to effect a conversion request from the Series A and Series B investors, the Company, at its sole discretion, may elect to satisfy such conversion request by either redeeming the preferred stock at their liquidation preference of $3.50 and $3.75 per share, respectively, or by issuing restricted shares of the Company’s common stock.

The Series A and Series B convertible preferred stocks are redeemable at the option of their holders simultaneously with the occurrence of the following events:

Merger or consolidation where the holders of the Company’s outstanding voting securities prior to such merger or consolidation do not own over 50% of the outstanding voting securities of the merged or consolidated entity immediately after such merger or consolidation; or the sale of all or substantially all of the Company’s properties or assets (collectively, an “Organic Change”).

Management considers the occurrence of the Organic Change is solely within the control of the Company.

Voting Rights

The Series A and Series B convertible preferred stocks shall have no voting rights with the common stock or other equity securities of the Company other than certain class voting rights, as outlined in the related agreement.

Fixed dividends are accrued and cumulative for one year from the date of the initial issuance of the Series A and Series B convertible preferred stocks, and are payable on a quarterly basis. Annual dividends are determined as 6% of $3.50 for each share of the Series A convertible preferred stock, and 6% of $3.75 for each share of the Series B convertible preferred stock. Total dividends for the Series A convertible stockholders for the year ended December 31, 2010 was $831,032.There were no dividends on the Series A convertible preferred stock in 2011. Total dividends for the Series B convertible preferred stockholders for the years ended December 31, 2011 and 2010 were $1,205,014 and $306,247, respectively.

Registration rights agreement

In connection with the Series A Private Placement, the Company entered into a registration rights agreement  with the Series A Investors, in which the Company agreed to file a registration statement  with the SEC to register for resale the common stock issued, the common stock issuable upon conversion of the Series A convertible preferred stock, and the common stock underlying the Series A and Series B Warrants and the placement agent warrants, within 30 calendar days of April 22, 2010 and to have this registration statement declared effective within 150 calendar days of April 22, 2010 or within 180 calendar days of April 22, 2010 in the event of a full review of the registration statement by the SEC. If the Company doesn’t comply with the foregoing obligations under the registration rights agreement, the Company will be required to pay liquidated damages in cash to each investor, at the rate of 1% of the applicable subscription amount for each 30 day period in which the Company is not in compliance; provided, that such liquidated damages will be capped at 10% of the subscription amount of each investor and will not apply to any registrable securities that may be sold pursuant to Rule 144 under the Securities Act if all of the conditions in Rule 144(i)(2) are satisfied at the time of the proposed sale, or are subject to an SEC comment with respect to Rule 415 promulgated under the Securities Act. At December 31, 2010, all of the Series A convertible preferred stock has been converted into the Company’s common stock. The Company did not incur any liquidated damages in connection with Series A Private Placement in 2010.

In connection with the Series B private placement, the Company entered into a registration rights agreement  with the Series B Investors, in which the Company agreed to file a registration statement with the SEC to register for resale the common stock issuable upon the conversion of the Series B convertible preferred stock, common stock underlying the Series C and Series D Warrants, and common stock underlying the placement agent warrants, within 30 calendar days following the later of (i) the closing date of the offering or (ii) the effective date of the prior registration statement for resale the common stock issued in the Series A Private Placement and common stock issuable upon the conversion of the Series A preferred stock, Series A and Series B Warrants, and placement agent warrants issued in the Series A Private Placement (the “Prior Registration Statement”), and to have the registration statement declared effective within 150 calendar days ( or 180 calendar days of the Closing Date in the event of a full review of the registration statement by the SEC)  following the later to occur of (i) the closing date of the Series B Private Placement or (ii) the effective date of the Prior Registration Statement.  If the Company does not comply with the foregoing obligations under the registration rights agreement, the Company will be required to pay cash liquidated damages to each Series B Investor, at the rate of 1% of the applicable subscription amount for each 30 day period in which the Company is not in compliance; provided, that such liquidated damages will be capped at 10% of the subscription amount of each investor and will not apply to any registrable securities that may be sold pursuant to Rule 144 under the Securities Act if all of the conditions in Rule 144(i)(2) are satisfied at the time of the proposed sale, or are subject to an SEC comment with respect to Rule 415 promulgated under the Securities Act. The Company did not incur any liquidated damages in connection with the Series B Private Placement in 2010.

Pursuant to the registration rights agreements in the Series A and Series B Private Placements, liquidated damages are also payable in the event that the registration statement is not maintained continuously effective for approximately 180 days, or if trading of the Company’s common stock is suspended or if the Company’s common stock is delisted from the principal exchange on which it is traded (NASDAQ)for more than three days.

As the required Registration Statements were declared effective in the specified time frame, management determined that a liability for liquidated damages had not been incurred as of December 31, 2010.  On April 1, 2011, trading of the Company’s common stock was suspended and on October 7, 2011 was delisted by NASDAQ. Management determined that the registration statements were no longer effective commencing on April 7, 2011 and registerable securities in connection with the Series A and B private placements were not able to be sold pursuant to Rule 144 under the Securities Act until November 1, 2011.   Accordingly, in the year ended December 31, 2011, an estimated contingent liability for $2,493,326 was accrued with a corresponding charge to earnings, as per the guidance in ASC 825-20, “Registration Payment Arrangements”.

Escrow shares agreement

In connection with the Series A and Series B Private Placements, the Company entered into two escrow share agreements with the representatives of the Series A Investors and the Series B Investors, Delight Reward, and Anslow&Jaclin, LLP (the “Escrow Agent) (the “Escrow Agreements”), pursuant to which 5,000 shares and 3,400 shares of the Company’s Series M convertible preferred stock held by Delight Reward (the “Escrow Shares”) were delivered to the Escrow Agent, respectively. On December 28, 2010, the Series M convertible preferred shares in the escrow share agreements converted into 5,000,000 shares and 3,400,000 shares of the Company’s common stock (the “Escrow Shares”).

The Escrow Shares were to be released back to Delight Reward upon the Company’s achievement of no less than 95% of a net income target, as defined, of $33 million for the year ended December 31, 2010 (the “Performance Threshold”). If the Company achieved less than 95% of the Performance Threshold, the Series A and Series B Investors were to receive in the aggregate, on a pro rata basis, 500,000 shares of the Company’s common stock for each full percentage point by which the Performance Threshold was not achieved, up to the total number of the Escrow Shares. Pursuant to the Escrow Agreements, for purposes of determining whether or not the net income was met, certain items, such as any accounting charges for issuing warrants, were not deemed to be an expense or charge, even though U.S. GAAP may require contrary treatment, and the annual report for the respective fiscal years filed with the SEC by the Company reported otherwise. No other exclusions were to be made for any non-recurring expenses of the Company, as defined in the Escrow Agreements, in determining whether the Performance Threshold has been achieved.

Management determined that entering into the Escrow Agreements was an inducement made to facilitate the Series A and Series B Private Placements, and is not part of a compensatory arrangement to management. The Escrow Shares were to be released or cancelled without regard to the continued employment of any management of the Group.

The Performance Threshold was achieved and the Escrow Shares are expected to be released from escrow in the second quarter of 2012.

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Intangible Assets (Details Textual) (USD $)	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2012	Mar. 31, 2011	Jun. 30, 2012	Jun. 30, 2011	Dec. 31, 2011	Dec. 31, 2010
Intangible Assets (Textual)
Amortization of Intangible Assets	$ 26,774	$ 25,995	$ 53,548	$ 51,675	$ 104,598	$ 99,859
Estimated amortization expense for each of the next five years			$ 100,000		$ 100,000

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Related Party Transactions and Relationships and Transactions With Certain Other Parties (Details 7) (USD $)	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011	Dec. 31, 2011	Dec. 31, 2010
Guarantees for bank loans from other certain parties
Guarantee provided during the period	$ 141,062,000		$ 161,687,800
Ningbo Litong [Member]
Guarantees for bank loans from other certain parties
Guarantee provided during the period	30,000,000		50,625,800		81,136,800
Bank loans guaranteed	55,586,521		55,586,521		61,632,077	43,993,000
Ningbo Kewei [Member]
Guarantees for bank loans from other certain parties
Guarantee provided during the period	111,062,000		111,062,000
Bank loans guaranteed	$ 43,524,897		$ 43,524,897		$ 29,700,067

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Condensed Consolidated Statements of Cash Flows (Unaudited)(USD ($))	6 Months Ended		12 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Dec. 31, 2011	Dec. 31, 2010
Cash flows from operating activities:
Net income	$ 2,907,340	$ 3,391,604	$ (7,141,296)	$ 37,120,423
Adjustments to reconcile net income to net cash (Used in) provided by operating activities:
Liquidated damages			2,493,326
Loss on disposal of property, plant and equipment		3,504	3,546
Depreciation	5,452,134	4,671,566	8,290,416	7,909,613
Amortization	53,548	51,675	104,598	99,859
Land use rights amortization	225,868	217,999	441,234	274,589
Deferred income tax expense			443,243	3,058,129
Share-based compensation expense	819,496	1,285,185	2,063,394	1,515,907
Changes in operating assets and liabilities:
Bills receivable	(1,726,404)	5,665,046	7,842,501	(8,562,744)
Accounts receivable	2,244,109		(2,191,777)
Inventories	(33,864,254)	(14,517,420)	50,355,316	(53,641,596)
Prepayments to suppliers	(25,882,018)	11,118,823	1,431,638	(11,295,931)
Consumption tax refund receivable	(50,875,322)	5,455,515	(14,958,506)	(38,174,457)
Other current assets	(16,565,560)	(23,036,081)	(18,500,179)	2,086,940
Accounts payable	(18,462,125)	44,000,832	4,198,683	58,179,877
Advances from customers	29,341,763	4,320,196	(3,121,937)	(6,357,494)
Income taxes payable	879,675	(9,427,659)	(10,746,276)	10,434,575
Accrued expenses and other payables	(1,483,151)	1,500,872	(19,276,573)	(228,610)
Net cash (used in) provided by operating activities	(106,934,901)	34,701,657	1,731,351	2,419,080
Cash flows from investing activities:
Purchase of land use rights				(5,789,302)
Proceeds from disposal of property, plant and equipment		10,512	10,639
Purchase of property, plant and equipment,	(21,295,703)	(11,574,245)	(42,323,976)	(12,706,733)
Net cash used in investing activities	(21,295,703)	(11,563,733)	(42,313,337)	(18,496,035)
Cash flows from financing activities:
Pledged bank deposits used for bank borrowings	(82,489,175)	(52,211,458)	(53,734,552)	(89,559,311)
Proceeds from short-term bank borrowings	457,866,240	74,477,809	258,412,312	176,683,746
Repayment of short-term bank borrowings	(291,149,318)	(45,167,450)	(170,771,129)	(127,866,341)
Proceeds from bills payable	111,379,320	51,215,295
Repayment of bills payable	(64,058,975)	(60,784,670)
Proceeds from bank notes			114,399,220	77,816,440
Repayment of bank notes			(113,353,240)	(32,919,357)
Repayments of long-term bank borrowings		(13,014,350)	(17,820,400)	(13,610,480)
Short-term financing from related parties		13,144,234	13,303,054	30,839,377
Short-term financing to related parties		(13,144,234)	(13,188,178)	(30,949,048)
Repayments of Related Party Debt		(95,094)
Short-term financing to/from Litong (Note24)			2,265,533	(961,610)
Proceeds from warrant exercises		7,332	7,332	220,000
Proceeds from Series A Private Placement, net				23,312,091
Proceeds from Series B Private Placement, net				18,949,232
Dividend paid		(1,396,964)	(2,585,647)	(902,886)
Net cash provided by financing activities	131,548,092	(46,969,550)	16,934,305	30,651,853
Effect of foreign currency exchange rate changes on cash	(763,336)	278,395	1,636,457	730,688
Net increase (decrease) in cash	2,554,152	(23,553,231)	(22,011,224)	15,305,586
Cash at beginning of year	7,325,017	29,336,241	29,336,241	14,030,655
Cash at end of year	9,879,169	5,783,010	7,325,017	29,336,241
Supplemental disclosure of cash flow information:
Income taxes paid	1,028,792	12,345,638	13,154,751
Interest paid, net of capitalized interest	588,578	5,835,363	15,796,772	9,945,389
Non-cash investing and financing activities:
Payable for purchase of property, plant and equipment (net of VAT)	4,433,893	24,433,051	21,307,495	45,374,656
Reclassification of input VAT from property, plant and equipment to other current assets				$ 13,006,984

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Condensed Consolidated Balance Sheets (Parenthetical) (USD $)	Jun. 30, 2012	Dec. 31, 2011	Dec. 31, 2010
Statement Of Financial Position [Abstract]
Series B convertible preferred stock, par value	$ 0.001	$ 0.001	$ 0.001
Series B convertible preferred stock, shares authorized	8,000,000	8,000,000	8,000,000
Series B convertible preferred stock, cumulative dividend	6.00%	6.00%	6.00%
Series B convertible preferred stock, share issued	5,333,340	5,333,340	5,400,010
Series B convertible preferred stock, shares oustanding	5,333,340	5,333,340	5,400,010
Series B convertible preferred stock, shares liquidation preference	$ 20,000,000	$ 20,000,000	$ 20,250,000
Common stock, par value	$ 0.001	$ 0.001	$ 0.001
Common stock, shares authorized	100,000,000	100,000,000	100,000,000
Common stock, shares issued	57,646,160	57,646,160	57,577,840
Common stock, shares outstanding	57,646,160	57,646,160	57,577,840

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Property, Plant and Equipment

6 Months Ended

12 Months Ended

Jun. 30, 2012

Dec. 31, 2011

Property, Plant and Equipment [Abstract]

PROPERTY, PLANT AND EQUIPMENT

9           PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment consist of the following:

	June 30,			December 31,
	2012			2011
	¼ Unaudited ¼‰
Buildings	$	3,915,407		$	3,888,234
Machinery and equipment		177,358,013			175,736,470
Vehicles		786,083			663,985
Office equipment and furniture		139,728			134,929
Construction-in-progress		50,141,011			27,449,846
		232,340,242			207,873,464
Less: Accumulated depreciation		(22,571,325	)		(17,005,843	)
	$	209,768,917		$	190,867,621

Depreciation expense on property, plant and equipment is allocated to the following items:

	Three months ended June 30,				Six months ended June 30,
	2012		2011		2012		2011
	¼ Unaudited ¼‰		¼ Unaudited ¼‰		¼ Unaudited ¼‰		¼ Unaudited ¼‰
Cost of sales	$	2,580,156	$	2,246,111	$	5,347,643	$	4,589,859
Selling, general and administrative expenses		55,355		40,473		104,491		81,707
	$	2,635,511	$	2,286,584	$	5,452,134	$	4,671,566

For the six months ended June 30, 2012 and the year ended December 31,2011, interest capitalized amounted to $587,984 and $1,246,179 respectively.

7        PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment consist of the following:

As of December 31,
2011	2010

Buildings	$	3,888,234		$	3,733,116
Machinery and equipment		175,736,470			130,513,767
Vehicles		663,985			560,440
Office equipment and furniture		134,929			130,043
Construction-in-progress		27,449,846			3,117,935
		207,873,464			138,055,301
Less: Accumulated depreciation		(17,005,843	)		(8,273,997	)
	$	190,867,621		$	129,781,304

Depreciation expense on property, plant and equipment is allocated to the following items:

As of December 31,
2011	2010

Cost of sales	$	8,141,839	$	7,788,486
Selling, general and administrative expenses		165,229		121,127
	$	8,307,068	$	7,909,613

For the years ended December 31, 2011 and 2010, interest capitalized amounted to $1,246,179 and nil, respectively.

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Related Party Transactions and Relationships and Transactions With Certain Other Parties (Details 2) (USD $)	Jun. 30, 2012	Dec. 31, 2011	Dec. 31, 2010
Guarantees for Bank Loans
Bank Loans guaranteed	$ 51,920,901	$ 80,269,723
Mr. Tao [Member]
Guarantees for Bank Loans
Guarantee provided during the year		12,396,800	79,887,600
Bank Loans guaranteed	15,850,000	34,628,000	36,408,000
Jicun Wang and Chen [Member]
Guarantees for Bank Loans
Guarantee provided during the year		30,992,000
Bank Loans guaranteed	1,902,000	1,983,523	12,136,000
Ningbo Kewei [Member]
Guarantees for Bank Loans
Guarantee provided during the year		34,091,200	82,106,700
Bank Loans guaranteed			11,377,500
Ningbo Pacific [Member]
Guarantees for Bank Loans
Guarantee provided during the year		65,083,200
Bank Loans guaranteed	18,318,901	27,918,200	16,687,000
Ningbo Hengfa [Member]
Guarantees for Bank Loans
Guarantee provided during the year
Bank Loans guaranteed	14,899,000	14,795,600	36,256,300
Shandong Tengda [Member]
Guarantees for Bank Loans
Guarantee provided during the year
Bank Loans guaranteed	$ 951,000	$ 944,400	$ 910,200

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Income Taxes (Details 3) (USD $)	Dec. 31, 2011	Dec. 31, 2010
Summory of deferred income tax assets
Net operating tax loss carried forwards	$ 4,767,000	$ 780,590
Depreciation	500,410	288,491
Interest on pledged bank deposits	(463,062)
Accrued payroll expenses		181,423
Total gross deferred income tax assets	4,808,348	1,250,504
Valuation allowance	(4,767,000)	(780,590)
Net deferred tax assets	$ 37,348	$ 469,914

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Income Taxes (Details 1) (USD $)	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011	Dec. 31, 2011		Dec. 31, 2010
Group’s income tax expense
Current income tax expense	$ 870,277	$ 665,828	$ 2,009,649	$ 2,917,979	$ 2,408,474		$ 10,434,575
Deferred income tax expense					443,243		3,058,129
Actual (Total) income tax expense	$ 870,277	$ 665,828	$ 2,009,649	$ 2,917,979	$ 2,851,718	[1]	$ 13,492,704	[1]

[1] Note 20

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Document and Entity Information	6 Months Ended
	Jun. 30, 2012	Aug. 15, 2012
Document and Entity Information [Abstract]
Entity Registrant Name	Keyuan Petrochemicals, Inc.
Entity Central Index Key	0001326396
Amendment Flag	true
Amendment Description	We need to file this prospectus to conform the disclosure contained herein to our Annual Report on Form 10-K for the fiscal year ended December 31, 2011, filed on April 13, 2012. This Registration Statement contains a combined prospectus pursuant to Rule 429 under the Securities Act that relates to, among other things, the exercise of warrants that have previously been registered with the Securities and Exchange Commission pursuant to the Company's Registration Statements on Form S-1 (File No's. 3333-167029 and 333-170324). Accordingly, upon effectiveness, this Registration Statement shall act as a post-effective amendment to such previously filed Registration Statements. The information in this Registration Statement updates the information contained in Registration Statement No's. 3333-167029 and 333-170324.
Current Fiscal Year End Date	--12-31
Document Type	S-1
Document Period End Date	Jun. 30, 2012
Document Fiscal Period Focus	Q2
Document Fiscal Year Focus	2012
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		57,646,160

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Intangible Assets

6 Months Ended

12 Months Ended

Jun. 30, 2012

Dec. 31, 2011

Goodwill and Intangible Assets Disclosure [Abstract]

INTANGIBLE ASSETS

10         INTANGIBLE ASSETS

Intangible assets consist of the following:

	Amortization		June 30,			December 31,
	Period		2012			2011
	Years		¼ Unaudited ¼‰
Licensing agreements		10-20	$	1,505,750		$	1,495,300
Less: Accumulated amortization				(573,902	)		(516,797	)
			$	931,848		$	978,503

For the six months ended June 30, 2012 and 2011, amortization expense for intangible assets amounted to $53,548 and $51,675, respectively. For the three months ended June 30, 2012 and 2011, amortization expense for intangible assets amounted to $26,774 and $25,995, respectively. Estimated amortization expense for each of the next five years is estimated to be approximately $100,000.

8        INTANGIBLE ASSETS

Intangible assets consist of the following:

Amortization	As of December 31,
Period	2011	2010

	Years
Licensing agreements	10-20	$	1,495,300		$	1,441,150
Less: Accumulated amortization			(516,797	)		(395,684	)
		$	978,503		$	1,045,466

Licensing agreements consist of technology utilization rights for petrochemical production. For the years ended December 31, 2011 and 2010, amortization expense for intangible assets amounted to $104,598and $99,859, respectively. Amortization expense for each of the next five years is estimated to be approximately $100,000.

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Stockholders' Equity and Related Financing Agreements (Details Textual) (USD $)	3 Months Ended		6 Months Ended		12 Months Ended									12 Months Ended		12 Months Ended		1 Months Ended	3 Months Ended	6 Months Ended	12 Months Ended				12 Months Ended		1 Months Ended	6 Months Ended	12 Months Ended		1 Months Ended	6 Months Ended	12 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011	Dec. 31, 2011		Dec. 31, 2010		Dec. 31, 2011 Series A Investors [Member]	Dec. 31, 2011 Series B Investors [Member]	Dec. 31, 2010 Series A Private Placement [Member]	May 18, 2010 Series A Private Placement [Member]	Apr. 22, 2010 Series A Private Placement [Member]	Dec. 31, 2010 Series B Private Placement [Member]	Sep. 28, 2010 Series B Private Placement [Member]	Dec. 31, 2011 Series A Convertible Prefered Stock [Member]	Dec. 31, 2010 Series A Convertible Prefered Stock [Member]	Jan. 31, 2011 Series B convertible preferred stock [Member]	Jun. 30, 2012 Series B convertible preferred stock [Member]	Jun. 30, 2012 Series B convertible preferred stock [Member]	Dec. 31, 2011 Series B convertible preferred stock [Member]	Dec. 31, 2010 Series B convertible preferred stock [Member]	Dec. 31, 2011 Series M Convertible Preferred Stock [Member] Series A Investors [Member]	Dec. 28, 2010 Series M Convertible Preferred Stock [Member] Series A Investors [Member]	Dec. 31, 2011 Series M Convertible Preferred Stock [Member] Series B Investors [Member]	Dec. 28, 2010 Series M Convertible Preferred Stock [Member] Series B Investors [Member]	Jan. 31, 2011 Series A warrants [Member]	Jun. 30, 2012 Series A warrants [Member]	Dec. 31, 2011 Series A warrants [Member]	Dec. 31, 2010 Series A warrants [Member] Series A Private Placement [Member]	Jan. 31, 2011 Series B warrants [Member]	Jun. 30, 2012 Series B warrants [Member]	Dec. 31, 2011 Series B warrants [Member]	Dec. 31, 2010 Series B warrants [Member] Series A Private Placement [Member]
Stockholders Equity and Related Financing Agreements (Textual)
Securities issued under private placement offering												87,142	661,562		540,001
Securities issued under private placement offering price per unit												$ 35	$ 35		$ 37.50
Description of Securities issued under private placement offering											Each security unit issued in the Series A Private Placement consisted of, (a) nine shares of Series A convertible preferred stock, with a par value of $0.001 per share (the "Series A convertible preferred stock") which is convertible into the same number of shares of the Company's common stock, (b) one share of the Company's common stock, with a par value of $0.001 per share (c) a warrant to purchase one share of the Company's Common Stock at an exercise price of $4.50 for a three-year period (the "Series A Warrant"), and (d) a warrant to purchase one share of the per share's common stock at an exercise price of $5.25 per share for a three-year period (the "Series B Warrant").			Each security unit issued in the Series B Private Placement consisted of (a) ten shares of Series B convertible preferred stock, with a par value of $0.001 per share (the "Series B convertible preferred stock") which is convertible into the same number of shares of the Company's common stock, (b) a warrant to purchase up to 1.5 shares of the Company's common stock, at an exercise price of $4.50 per share for a three-year period (the "Series C Warrant"), and (c) a warrant to purchase up to 1.5 shares of the Company's common stock at an exercise price of $5.25 per share for a three-year period(the "Series D Warrant").
Gross Proceeds											$ 26,204,639			$ 20,250,000																$ 233,210				$ 157,500
Issuance cost											3,242,231			1,835,109																27,279				18,305
Maximum Number Of Shares Of Common Stock Issuable On Conversion Of Warrants											718,755			561,601
Exercise price											$ 3.50			$ 3.75
Shares of common stock issuable on conversion of warrant one											598,963			432,001
Shares of common stock issuable on conversion of warrant two											59,986			64,800
Shares of common stock issuable on conversion of warrant three											59,896
Warranr exercise price one											$ 3.50			$ 3.75
Warranr exercise price two											$ 4.50			$ 4.50
Warranr exercise price three											$ 5.25			$ 5.25
Estimated fair value of placement agent warrant											349,683			534,341
Convertible preferred stock, conversion terms											The Series A convertible preferred stock was to be automatically converted into common stock at the earlier occurrence of 1) the 24 month anniversary of the issuance dates of the Series A convertible preferred stock; and 2) at such time that the volume weighted average price ("VWAP") of the Company's common stock is no less than $5.00 for a period of ten consecutive trading days with the daily volume of the Company's common stock of at least 50,000 shares per day			The Series B convertible preferred stock shall be automatically converted into common stock (or the same conversion price as described above) upon the third year anniversary of the issuance date of the Series B convertible preferred stock (April and May 2013).
Convertible preferred stock redemption condition							(50,000)
Price per share of reedemable preferred stock									$ 3.50	$ 3.75
Annual dividend rate																6.00%				6.00%	6.00%
Per share amount of annual dividend																$ 3.50				$ 3.75	$ 3.75
Distribution of annual cash dividend																		360
Estimated dividend to be distributed																		3,500,000
Dividend waived																		17,200,000
Company’s common stock issued																		66,670					5,000		3,400
Number of warrants exercised																											1,150				500
Number of common stock issued in exercise of warrants																											1,150				500
Proceeds from warrant exercises				7,332	7,332		220,000																				4,863				2,468
Declaration of registration statement																												Within 30 calendar days of April 22, 2010	Within 30 calendar days of April 22, 2010			Within 30 calendar days following the later of (i) the closing date of the offering or (ii) the effective date of the prior registration statement for resale of the Issued Common Stock	Within 30 calendar days following the later of (i) the closing date of the offering or (ii) the effective date of the prior registration statement for resale of the Issued Common Stock
Filing of registration statement																												Within 150 calendar days of April 22, 2010 or within 180 calendar days of April 22, 2010	Within 150 calendar days of April 22, 2010 or within 180 calendar days of April 22, 2010			Within 150 calendar days ( or 180 calendar days of the Closing Date in the event of a full review of the registration statement by the SEC) following the later to occur of (i) the closing date of the Series B Private Placement or (ii) the effective date of the Prior Registration Statement.	Within 150 calendar days ( or 180 calendar days of the Closing Date in the event of a full review of the registration statement by the SEC) following the later to occur of (i) the closing date of the Series B Private Placement or (ii) the effective date of the Prior Registration Statement.
Payment of liquidated damages					The registration statement is not maintained continuously effective for approximately 180 days, or if trading of the Company's common stock is suspended or if the Company's common stock is delisted from the principal exchange on which it is traded (NASDAQ)for more than three days.																							1% of the applicable subscription amount for each 30 day period	1% of the applicable subscription amount for each 30 day period			1% of the applicable subscription amount for each 30 day period	1% of the applicable subscription amount for each 30 day period
Cap of liquidated damages																												10% of the subscription amount of each investor	10% of the subscription amount of each investor			10% of the subscription amount of each investor	10% of the subscription amount of each investor
Period for issuance of accrued dividend																1 year					1 year
Dividends to Series A convertible Preferred stockholders						[1]	831,032	[1]									831,032
Dividends to Series B convertible preferred stockholders		306,247		602,507	1,205,014	[1]	306,247	[1]													1,205,014	306,247
Estimated derivative contingent liability					2,493,326
Convertible Preferred Stock, Shares Issued upon Conversion					500,000																			5,000,000		3,400,000
Shares received on pro rata basis if performance threshhold is not achieved									500,000	500,000
Maximum outstanding voting securities of merged entities					50.00%
Number of Escrow shares agreement					2
Minimum percentage of Escrow shares released back					95.00%
Limit of performance threshhold defined as net income target							$ 33,000,000
Description of Escrow shares released back					To Delight Reward upon the Company's achievement of no less than 95% of a net income target, as defined, of $33 million for the year ended December 31, 2010 (the Performance Threshold). If the Company achieved less than 95% of the Performance Threshold, the Series A and Series B Investors were to receive in the aggregate, on a pro rata basis, 500,000 shares of the Company's common stock for each full percentage point by which the Performance Threshold was not achieved, up to the total number of the Escrow Shares.

[1] Note 14

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Income Taxes (Details) (USD $)	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011	Dec. 31, 2011	Dec. 31, 2010
Components of income before income tax expens by jurisdictions:
(Loss) income before income taxes	$ 1,932,625	$ (1,156,711)	$ 4,916,809	$ 6,309,583	$ (4,289,578)	$ 50,613,127
PRC [Member]
Components of income before income tax expens by jurisdictions:
(Loss) income before income taxes	3,447,170	3,309,794	8,003,206	11,939,586	8,930,752	53,158,384
U.S. [Member]
Components of income before income tax expens by jurisdictions:
(Loss) income before income taxes	(627,907)	(3,765,742)	(1,426,030)	(4,704,077)	(9,761,824)	(2,108,853)
Hong Kong and Bvi [Member]
Components of income before income tax expens by jurisdictions:
(Loss) income before income taxes	$ (886,638)	$ (700,763)	$ (1,660,367)	$ (925,926)	$ (3,458,506)	$ (436,404)

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Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited) (USD $)	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011	Dec. 31, 2011		Dec. 31, 2010
Sales
Third parties/External parties	$ 184,425,717	$ 115,281,945	$ 367,750,405	$ 239,436,744	$ 533,913,328		$ 446,891,336
Related parties		35,607,658		58,217,477	92,771,589	[1]	111,860,732	[1]
Total Sales	184,425,717	150,889,603	367,750,405	297,654,221	626,684,917		558,752,069
Cost of sales
Third parties/External Parties	178,005,456	111,055,933	351,857,165	224,870,131	504,871,603		388,846,702
Related parties		37,977,326		58,276,685	99,797,931	[1]	102,076,731	[1]
Total Cost of sales	178,005,456	149,033,259	351,857,165	283,146,816	604,669,534		490,923,433
Gross profit	6,420,261	1,856,344	15,893,240	14,507,405	22,015,383		67,828,636
Operating expenses
Selling expenses	388,217	215,548	641,123	754,680	1,240,709		623,652
General and administrative expenses	2,656,620	4,529,744	5,266,815	7,764,824	17,858,807		9,517,814
Total operating expenses	3,044,837	4,745,292	5,907,938	8,519,504	19,099,516		10,141,466
Income (loss) from operations	3,375,424	(2,888,948)	9,985,302	5,987,901	2,915,867		57,687,170
Other income (expense):
Interest income	1,882,812	781,941	2,822,046	1,688,885	4,320,393		556,159
Interest expense	(2,930,281)	(2,638,734)	(7,308,982)	(5,835,364)	(15,796,772)		(9,945,389)
Foreign exchange (loss) gain, net	(542,352)	3,200,356	(364,518)	2,052,713	3,661,599		2,711,984
Liquidated damages expense		(1,300,730)		(1,300,730)	(2,493,326)
Other income (expense), net	147,022	1,689,404	(217,039)	3,716,178	3,102,661		(396,797)
Total other expense (income), net	(1,442,799)	1,732,237	(5,068,493)	321,682	(7,205,445)		(7,074,043)
Income (loss) before income taxes	1,932,625	(1,156,711)	4,916,809	6,309,583	(4,289,578)		50,613,127
Income tax expense	870,277	665,828	2,009,649	2,917,979	2,851,718	[2]	13,492,704	[2]
Net income (loss) attributable to Keyuan Petrochemicals Inc. stockholders	1,062,348	(1,822,539)	2,907,340	3,391,604	(7,141,296)		37,120,423
Dividends to Series A convertible Preferred stockholders						[3]	831,032	[3]
Dividends to Series B convertible preferred stockholders		306,247		602,507	1,205,014	[3]	306,247	[3]
Net income (loss) attributable to Keyuan Petrochemicals Inc. common stockholders	1,062,348	(2,128,786)	2,907,340	2,789,097	(8,346,310)		35,983,144
Net income (loss) attributable to Keyuan Petrochemicals, Inc. stockholders	1,062,348	(1,822,539)	2,907,340	3,391,604	(7,141,296)		37,120,423
Other comprehensive income
Foreign currency translation adjustment	130,680	617,550	708,091	1,174,874	3,235,395		2,247,635
Comprehensive Income (loss)	$ 1,193,028	$ (1,204,989)	$ 3,615,431	$ 4,566,478
Earnings (loss) per share:
- Basic	$ 0.02	$ (0.04)	$ 0.05	$ 0.05	$ (0.14)	[4]	$ 0.71	[4]
- Diluted	$ 0.02	$ (0.04)	$ 0.05	$ 0.05	$ (0.14)	[4]	$ 0.66	[4]
Weighted average number of shares of common stock used in calculation
Basic	57,646,160	57,579,239	57,646,160	57,578,896	57,585,040	[4]	50,929,526	[4]
Diluted	62,979,500	57,579,239	62,979,500	63,836,892	57,585,040	[4]	56,057,994	[4]

[1] Note 24

[2] Note 20

[3] Note 14

[4] Note 21

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Accounts Receivable

6 Months Ended

Jun. 30, 2012

Receivables [Abstract]

ACCOUNTS RECEIVABLE

4           ACCOUNTS RECEIVABLE

The Group generally requires a prepayment of 100% of the sales contract price from its customers shortly before products are delivered. Such prepayment is recorded as “advances from customers” in the Group’s consolidated balance sheet, until the products are delivered and the customer takes ownership and assumes the risk of loss. With the approval of the Company’s general manager, the Company occasionally extends credit to its long-term customers with a good credit rating. As of June 30, 2012 and December 31, 2011, the balance of accounts receivable was $4,014,076 and $2,226,288 respectively. The $4,014,076 of accounts receivable as of June 30, 2012 was received in July 2012.

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Cash

6 Months Ended

Jun. 30, 2012

Cash and Cash Equivalents [Abstract]

CASH

3           CASH

Cash consists of cash on hand and cash at banks. As of June 30, 2012 and December 31, 2011, cash of $9,029,095 and $7,101,505, respectively, was held in major financial institutions located in the PRC;and cash of $736,386 and $124,355, respectively was held in the Hong Kong Special Administrative Region. Management performs periodic evaluations of the relative credit standings of these major financial institutions, and believes that these major financial institutions have high credit ratings.

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Accrued Expenses and Other Payables

6 Months Ended

12 Months Ended

Jun. 30, 2012

Dec. 31, 2011

Accounts Payable and Accrued Liabilities [Abstract]

ACCRUED EXPENSES AND OTHER PAYABLES

14         ACCRUED EXPENSES AND OTHER PAYABLES

Accrued expenses and other payables as of June 30, 2012 and December 31, 2011 consist of:

	June 30,		December 31,
	2012		2011
	(Unaudited)
Payables for the purchase of property, plant and equipment	$	24,419,569	$	24,590,217
Accrued payroll and welfare		341,775		1,061,508
Liquidated damages		2,493,326		2,493,326
Other accruals and payables		2,999,855		2,142,895
	$	30,254,525	$	30,287,946

13        ACCRUED EXPENSES AND OTHER PAYABLES

Accrued expenses and other payables consist of:

As of December 31,
2011	2010

Purchase of property, plant and equipment	$	24,590,217	$	17,217,958
Accrued payroll and welfare		1,061,508		690,831
Liquidated damages		2,493,326		-
Other accruals and payables		2,142,895		296,321
	$	30,287,946	$	18,205,110

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Land Use Rights

6 Months Ended

12 Months Ended

Jun. 30, 2012

Dec. 31, 2011

Land Use Rights [Abstract]

LAND USE RIGHTS

11         LAND USE RIGHTS

	June 30,			December 31,
	2012			2011
	¼ Unaudited ¼‰
Land use rights	$	12,267,235		$	12,182,100
Less: Accumulated amortization		(1,346,759	)		(1,113,338	)
	$	10,920,476		$	11,068,762

For the six months ended June 30, 2012 and 2011, amortization expense related to land use rights was $225,868 and $217,999, respectively. For the three months ended June 30, 2012 and 2011, amortization expense related to land use rights was $112,934 and $109,677, respectively.

9         LAND USE RIGHTS

Land use rights consist of the following:

As of December 31,
2011	2010

Land use rights	$	12,182,100		$	11,740,943
Less: Accumulated amortization		(1,113,338	)		(641,068	)
	$	11,068,762		$	11,099,875

For the years ended December 31, 2011 and 2010, amortization expense related to land use rights was $441,234 and $274,589, respectively.

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Share-Based Payments (Details) (USD $) In Thousands, except Share data, unless otherwise specified	1 Months Ended	12 Months Ended
	Dec. 31, 2010	Dec. 31, 2010 Employee Stock Option [Member]
Summary of the share options granted and the activity
Number of options, Balance as of January 1,2010
Number of options, Granted on June 30,2010		3,000,000
Number of options, Granted on July 1,2010		80,000
Number of options, Granted on August 4,2010		700,000
Number of options, Cancelled		(600,000)
Number of options, Forfeited	600,000	(150,000)
Number of options, Balance		3,030,000
Number of options, Exercisable
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Exercise Price
Weighted average exercise price, Granted on June 30,2010		$ 4.2
Weighted average exercise price, Granted on July 1,2010		$ 4.2
Weighted average exercise price, Granted on August 4,2010		$ 4.5
Weighted average exercise price, Cancelled		$ 4.5
Weighted average exercise price, Forfeited		$ 4.2
Weighted average exercise price, Balance		$ 4.21
Weighted average exercise price, Exercisable
Weighted average remaining contractual term		3 years 6 months
Weighted average remaining contractual term, Exercisable		0 years
Aggregate intrinsic value, Balance		$ 0
Aggregate intrinsic value, Exercisable

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Consumption Tax Refund Receivable

6 Months Ended

12 Months Ended

Jun. 30, 2012

Dec. 31, 2011

Consumption Tax Refund Receivable [Abstract]

CONSUMPTION TAX REFUND RECEIVABLE

7           CONSUMPTION TAX REFUND RECEIVABLE

The PRC government has enacted a regulation that provides that domestically purchased heavy oil to be used for producing ethylene and aromatics products is to be exempted from a consumption tax. In addition, the consumption tax paid for imported heavy oil is to be refunded if it is used for producing ethylene and aromatics products. Given all the Group’s purchased heavy oils are, or are to be used for the production of ethylene and aromatics products, the Group recognizes a consumption tax refund receivable when the consumption tax has been paid and the relevant heavy oils have been used for production. As of June 30, 2012 and December 31, 2011, the Group recorded an estimated consumption tax refund receivable amounting to $107,023,606 and $55,809,560, respectively.

On August 15, 2012, the Group received a consumption tax refund of $95,124,967 and consumption tax claims of $11,898,639 are in process and are expected to be approved and refunded by the end of September 2012.

5       CONSUMPTION TAX REFUND RECEIVABLE

In August 2010, the PRC government enacted a regulation, as amended, that provides that, for the period from January 1, 2010 to September 30, 2012, domestically purchased heavy oil to be used for producing ethylene and aromatics products is exempted from a consumption tax. In addition, the consumption tax paid for imported heavy oil is to be refunded if it was used for producing ethylene and aromatics products. Given all the Group’s purchased heavy oils are, or are to be, used for  the production of ethylene and aromatics products, the Group recognizes a consumption tax refund receivable when the consumption tax has been paid and the relevant heavy oils have been used for production. As of  December 31, 2011 and 2010, the Group recorded an estimated consumption tax refund amounting to $55,809,560and $39,144,688, respectively.

Refunds of 2010 consumption tax receivable of $39,144,688 have been received in full. Claims for consumption tax of $55,809,560 for the year ended December 31, 2011 are in process and are expected to be approved and refunded in May 2012.

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Inventories (Details) (USD $)	Jun. 30, 2012		Dec. 31, 2011		Dec. 31, 2010
Components of inventories
Raw materials	$ 48,865,084		$ 26,226,388		$ 53,160,604
Finished goods	20,219,210		10,891,825		30,024,896
Work-in-process	3,963,955		1,827,755		3,646,056
Total	$ 73,048,249	[1]	$ 38,945,968	[1]	$ 86,831,556	[2]

[1] Note 5

[2] Note 3

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Related Party Transactions and Relationships and Transactions With Certain Other Parties (Details Textual) (USD $)	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011	Dec. 31, 2011		Dec. 31, 2010
Related Party Transactions and Relationships and Transactions With Certain Other Parties (Textual)
Sales of products		$ 35,607,658		$ 58,217,477	$ 92,771,589	[1]	$ 111,860,732	[1]
Purchase of raw material		42,920		7,066,055	7,151,433		25,014,808
Purchase of transportation services	1,104,716	316,506	1,665,831	927,879	3,059,216		3,659,000
Guarantee fee as a percentage of loan principal			0.30%		0.30%		0.30%
Loan guarantee fees	113,084	419,665	203,984	756,919	1,299,886
Amount due from related parties	39,625		39,625		39,350		5,332,193
Loan guarantee fees included in statement of operation for Ningbo Hengfa, Ningbo Pacific and Ningbo Kewei					1,548,149
Ningbo Kunde [Member]
Related Party Transactions and Relationships and Transactions With Certain Other Parties (Textual)
Sales of products	40,684,392	35,607,658	52,843,930	58,150,912	92,704,220		101,680,459
Outstanding advances from related parties	596,530	3,077,199	596,530	3,077,199	130,458		130,458
Purchase of raw material	13,134,070	42,920	13,134,070	7,066,055	7,151,433		20,549,245
Outstanding advance payment in advance respect to raw material purchase transaction							5,181,809
Ningbo Kunde Other Parties [Member]
Related Party Transactions and Relationships and Transactions With Certain Other Parties (Textual)
Sales of products					22,277,072
Zhenhai Jinchi [Member]
Related Party Transactions and Relationships and Transactions With Certain Other Parties (Textual)
Sales of products				66,565	67,369		10,180,273
Ningbo Xinhe [Member]
Related Party Transactions and Relationships and Transactions With Certain Other Parties (Textual)
Purchase of transportation services	1,104,716	316,506	1,665,831	927,879	3,059,216		3,659,000
Amount owed in respect of transport services	768,313		768,313		621,077		119
Ningbo Hengfa [Member]
Related Party Transactions and Relationships and Transactions With Certain Other Parties (Textual)
Loan guarantee fees	32,255	73,644	65,022	150,116	272,993
Ningbo Pacific [Member]
Related Party Transactions and Relationships and Transactions With Certain Other Parties (Textual)
Loan guarantee fees	80,829	178,367	138,961	301,247	636,427
Ningbo Kewei [Member]
Related Party Transactions and Relationships and Transactions With Certain Other Parties (Textual)
Purchase of raw material							4,465,563
Outstanding advance payment in advance respect to raw material purchase transaction
Loan guarantee fees	202,419	167,654	368,040	305,556	390,466
Ningbo Kewei Other Parties [Member]
Related Party Transactions and Relationships and Transactions With Certain Other Parties (Textual)
Loan guarantee fees					216,361
Ningbo Litong [Member]
Related Party Transactions and Relationships and Transactions With Certain Other Parties (Textual)
Sales of products	7,049,811		17,177,359	772,762	7,360,796		29,625,766
Outstanding advances from related parties	11,887,500	17,851	11,887,500	17,851			110,134
Purchase of raw material	8,778,079	9,536,282	9,223,950	9,536,282	20,253,780		18,994,104
Outstanding advance payment in advance respect to raw material purchase transaction					2,740,970
Loan guarantee fees	$ 179,698	$ 302,674	$ 374,263	$ 505,626	$ 1,026,567

[1] Note 24

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Inventories

6 Months Ended

12 Months Ended

Jun. 30, 2012

Dec. 31, 2011

Inventory Disclosure [Abstract]

INVENTORIES

5           INVENTORIES

Inventories consist of the following:

	June 30,		December 31,
	2012		2011
	¼ Unaudited ¼‰
Raw materials	$	48,865,084	$	26,226,388
Finished goods		20,219,210		10,891,825
Work-in-process		3,963,955		1,827,755
Total	$	73,048,249	$	38,945,968

3        INVENTORIES

Inventories consist of the following:

		As of December 31,
		2011		2010
Raw materials	$	26,226,388	$	53,160,604
Finished goods		10,891,825		30,024,896
Work-in-process		1,827,755		3,646,056
Total	$	38,945,968	$	86,831,556

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Prepayments to Suppliers

6 Months Ended

12 Months Ended

Jun. 30, 2012

Dec. 31, 2011

Advance Payments [Abstract]

PREPAYMENTS TO SUPPLIERS

6           PREPAYMENTS TO SUPPLIERS

As of June 30, 2012 and December 31, 2011, prepayments to suppliers are made in connection with the purchase of raw materials and the construction of the Group’s facilities. Prepayments to suppliers are reclassified to inventories or construction-in-progress, when the Group applies the prepayments to related purchases of materials after the related invoices are received.

4        PREPAYMENTS TO SUPPLIERS

As of December 31, 2011 and 2010, prepayments to suppliers are made in connection with the purchase of raw materials and the construction of the Group’s facilities. Prepayments to suppliers are reclassified to inventories or construction-in-progress when the Group applies the prepayments to related purchases of materials after the related invoices are received.

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Other Current Assets

6 Months Ended

12 Months Ended

Jun. 30, 2012

Dec. 31, 2011

Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]

OTHER CURRRENT ASSETS

8           OTHER CURRRENT ASSETS

Other current assets consist of the following:

	June 30,		December 31,
	2012		2011
	¼ Unaudited ¼‰
VAT recoverable	$	23,360,510	$	9,991,877
Receivable from Ningbo Litong (Note 22)		-		2,740,970
Customs deposits for imported inventories		27,398,747		29,102,193
Others		9,887,358		4,143,388
	$	60,646,615	$	45,978,428

The estimate of deductible input VAT on the purchase of property, plant and equipment is determined using vendor contracts, engineering and other estimates, as well as historical experience, and is included in VAT recoverable. Approximately $2.5 million and $2.9 million is included in non-current assets as of June 30, 2012 and December 31, 2011, respectively.

Customs deposits for imported inventories represent amounts paid to the local customs office in connection with the importing of raw materials inventories. Upon approval by the customs authorities, these amounts become refundable by the local tax authority and are reclassified as consumption tax refund receivable (Note 7).

6    OTHER CURRRENT ASSETS

Other current assets consist of the following:

As of December 31,
2011	2010

VAT recoverable	$	9,991,877	$	21,953,590
Receivable from Ningbo Litong (Note 24)		2,740,970		2,217,854
Customs deposits for imported inventories		29,102,193		1,972,682
Other		4,143,388		2,464,707
	$	45,978,428	$	28,608,833

Prior to January 1,2009, VAT paid (input VAT) on the purchase of property, plant and equipment was not deductible and was included in the cost of the assets. In 2009, management estimated the deductible input VAT using vendor contracts, engineering and other estimates, as well as historical experience. In 2010, as more experience was gained, management revised their estimate of deductible input VAT and reclassified approximately $13 million from property, plant and equipment to VAT recoverable. These amounts were submitted on the Company’s VAT returns which have been approved by the PRC VAT authorities, approximately $2.9 million was included in non-current assets as of December 31, 2011.

Customs deposits for imported inventories represent amounts paid to the local customs office in connection with the import of raw materials inventories. Upon approval by the customs authorities, these amounts become refundable by the local tax authority and are reclassified as consumption tax refund receivable (Note 5).Through March 31, 2012, deposits of $29,102,193 have been approved for refund, which refund is expected to be received in May 2012.

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Property, Plant and Equipment (Details) (USD $)	Jun. 30, 2012		Dec. 31, 2011		Dec. 31, 2010
Property, plant and equipment
Property, plant and equipment, Gross	$ 232,340,242		$ 207,873,464		$ 138,055,301
Accumulated Depreciation, Depletion and Amortization, Property, Plant, and Equipment	22,571,325		(17,005,843)		(8,273,997)
Property, plant and equipment, Net	209,768,917	[1]	190,867,621	[1]	129,781,304	[2]
Building [Member]
Property, plant and equipment
Property, plant and equipment, Gross	3,915,407		3,888,234		3,733,116
Machinery and equipment [Member]
Property, plant and equipment
Property, plant and equipment, Gross	177,358,013		175,736,470		130,513,767
Vehicles [Member]
Property, plant and equipment
Property, plant and equipment, Gross	786,083		663,985		560,440
Office equipment and furniture [Member]
Property, plant and equipment
Property, plant and equipment, Gross	139,728		134,929		130,043
Construction-in-progress [Member]
Property, plant and equipment
Property, plant and equipment, Gross	$ 50,141,011		$ 27,449,846		$ 3,117,935

[1] Note 9

[2] Note 7

XML

Share-Based Payments (Details 1) (Employee Stock Option [Member], USD $)	12 Months Ended
	Dec. 31, 2010	Dec. 31, 2011 Non-vested stock options [Member]
Information relating to non-vested stock options
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Number		3,030,000
Options, Granted
Options, Vested		(989,000)
Options, Forfeited		(586,000)
Options, Nonvested at December 31, 2011		1,455,000
Weighted average grant-date fair value, Nonvested at January 1, 2011		$ 3,629,899
Weighted average grant-date fair value, Granted
Weighted average grant-date fair value, Vested		(1,103,493)
Weighted average grant-date fair value, Forfeited		(653,839)
Weighted average grant-date fair value, Nonvested at December 31, 2011		$ 1,872,567
Weighted average remaining contractual term, Nonvested at December 31, 2011	3 years 6 months	2 years 6 months

XML

Property, Plant and Equipment (Details Textual) (USD $)	6 Months Ended	12 Months Ended
	Jun. 30, 2012	Dec. 31, 2011	Dec. 31, 2010
Property, Plant and Equipment (Textual)
Interest capitalized	$ 587,984	$ 1,246,179

XML

Related Party Transactions and Relationships and Transactions With Certain Other Parties (Details 1) (USD $)	3 Months Ended			6 Months Ended			12 Months Ended
	Jun. 30, 2012		Jun. 30, 2011	Jun. 30, 2012		Jun. 30, 2011	Dec. 31, 2011		Dec. 31, 2010
Amounts outstanding with the related parties
Sales of products			$ 35,607,658			$ 58,217,477	$ 92,771,589	[1]	$ 111,860,732	[1]
Purchase of raw material			42,920			7,066,055	7,151,433		25,014,808
Purchase of transportation services	1,104,716		316,506	1,665,831		927,879	3,059,216		3,659,000
Credit line of guarantee provision for bank borrowings							142,563,200		161,994,300
Loan guarantee fees	113,084		419,665	203,984		756,919	1,299,886
Short-term financing from related parties (e)			5,406,139			13,144,234	13,303,054		30,839,377
Short-term financing to related parties (e)			5,535,234			(13,144,234)	13,188,178		30,949,048
Amount due from related parties	39,625			39,625			39,350		5,332,193
Amounts due to related parties	$ 768,313	[2]		$ 768,313	[2]		$ 621,077	[2]	$ 115,535	[3]

[1] Note 24

[2] Note 22

[3] Note 25

XML

Other Current Assets (Details Textual) (USD $)	Jun. 30, 2012	Dec. 31, 2011	Dec. 31, 2010
Other Current Assets (Textual)
VAT recoverable included in non-current assets	$ 2,541,215	$ 2,893,635		[1]
Estimate of deductible input VAT			13,000,000
Customs deposits for imported inventories	$ 27,398,747	$ 29,102,193	$ 1,972,682

[1] Note 6

XML

Income Taxes (Details 2) (USD $)	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011	Dec. 31, 2011		Dec. 31, 2010
Income tax expense reconciliation
(Loss) income before income taxes	$ 1,932,625	$ (1,156,711)	$ 4,916,809	$ 6,309,583	$ (4,289,578)		$ 50,613,127
Computed expected Income tax (benefit) expense	483,156	(289,178)	1,229,202	1,577,396	(1,072,395)		12,653,282
Computed expected Income tax (benefit) expense, Percentage	25.00%	25.00%	25.00%	25.00%	25.00%		25.00%
Tax loss not recognized					2,625,242		781,918
Tax loss not recognized, percentage					(61.20%)		1.60%
Effect of differential tax rate					679,840		57,504
Effect of differential tax rate, percentage					(15.80%)		0.10%
NOLs from overseas subsidiaries not recognized	378,636	1,433,636	771,599	1,799,204
NOLs from overseas subsidiaries not recognized, Percentage	19.60%	(123.90%)	15.70%	28.50%
Others	8,485	(478,630)	8,668	(458,621)	184,617
Others, Percentage	0.40%	41.40%	0.20%	(7.30%)	(4.30%)
Permanent differences					434,414
Permanent differences, percentage					(10.10%)
Actual (Total) income tax expense	$ 870,277	$ 665,828	$ 2,009,649	$ 2,917,979	$ 2,851,718	[1]	$ 13,492,704	[1]
Actual income tax expense, Percentage	45.00%	(57.60%)	40.90%	46.20%	(66.40%)		26.70%

[1] Note 20

XML

Related Party Transactions and Relationships and Transactions With Certain Other Parties

6 Months Ended

12 Months Ended

Jun. 30, 2012

Dec. 31, 2011

Related Party Transactions [Abstract]

RELATED PARTY TRANSACTIONS AND RELATIONSHIPS AND TRANSACTIONS WITH CERTAIN OTHER PARTIES

22         RELATED PARTY TRANSACTIONS AND RELATIONSHIPS AND TRANSACTIONS WITH CERTAIN OTHER PARTIES

(1)   Related Party Transactions

The Company considers all transactions with the following parties to be related party transactions.

Name of parties	Relationship
Mr. Chunfeng Tao	Majority stockholder
Mr. Jicun Wang	Principal stockholder
Mr. Peijun Chen	Principal stockholder
Ms. Sumei Chen	Member of the Company’s Board of Supervisors and spouse of Mr. Wang
Ms. Yushui Huang	Vice President of Administration, Ningbo Keyuan
Mr. Weifeng Xue	Vice President of Accounting, Ningbo Keyuan through  August 2011

Mr. Hengfeng Shou	Vice President of Sales, Ningbo Keyuan  Petrochemical
Ningbo Kewei Investment Co., Ltd.	A company controlled by Mr. Tao through September 2011
(Ningbo Kewei)
Ningbo Pacific Ocean Shipping Co., Ltd	100% ownership by Mr. Wang
(Ningbo Pacific)
Ningbo Hengfa Metal Product Co., Ltd	100% ownership by Mr. Chen
(Ningbo Hengfa, former name "Ningbo Tenglong")
Shandong Tengda Stainless Steel Co., Ltd	100% ownership by Mr. Chen
(Shandong Tengda)
Ningbo Xinhe Logistic Co., Ltd
(Ningbo Xinhe)	10% ownership by Ms. Huang
Ningbo Kunde Petrochemical Co, Ltd.     (Ningbo Kunde)	Mr. Tao’s mother was a 65% nominee shareholder for Mr. Hu, a third party through September 2011, and included in transactions with certain other parties beginning October 1, 2011.
Ningbo Jiangdong Jihe Construction Materials	Controlled by Mr. Xue’s Brother-in-law
Store (Jiangdong Jihe)
Ningbo Wanze Chemical Co., Ltd	Mr. Tao’s sister-in-law is the legal representative
(Ningbo Wanze)
Ningbo Zhenhai Jinchi Petroleum Chemical	Controlled by Mr. Shou
Co., Ltd (Zhenhai Jinchi)

Related party transactions and amounts outstanding with the related parties as of and for the three and six months ended June 30, 2012 and 2011 are summarized as follows:

	Three Months ended June 30,
	2012		2011
	(Unaudited)		(Unaudited)
Sales of products (a)	$	-	$	35,607,658
Purchase of raw material (b)	$	-	$	42,920
Purchase of transportation services (c)	$	1,104,716	$	316,506
Credit line of guarantee provision for bank borrowings (d)	$	-	$	-
Loan guarantee fees (d)	$	113,084	$	419,665
Short-term financing from related parties (e)	$	-	$	5,406,139
Short-term financing to related parties (e)	$	-	$	5,535,234

	Six Months ended June 30,
	2012		2011
	(Unaudited)		(Unaudited)
Sales of products (a)	$	-	$	58,217,477
Purchase of raw material (b)	$	-	$	7,066,055
Purchase of transportation services (c)	$	1,665,831	$	927,879
Credit line of guarantee provision for bank borrowings (d)	$	-	$	-
Loan guarantee fees (d)	$	203,984	$	756,919
Short-term financing from related parties (e)	$	-	$	13,144,234
Short-term financing to related parties (e)	$	-	$	13,144,234

	June 30,		December 31,
	2012		2011
	(Unaudited)
Amounts due from related parties (f)	$	39,625	$	39,350
Amounts due to related parties (g)	$	768,313	$	621,077

(a)         During the three months ended June 30, 2011, the Group sold finished products of $35,607,658 to Ningbo Kunde. During the six months ended June 30, 2011, the Group sold finished products of $58,150,912 to Ningbo Kunde. During the six months ended June 30, 2012 and 2011, the Group sold finished products of nil and $66,565 to Zhenhai Jinchi, respectively. Amounts received in the advance from Kunde were $3,077,199 as of June 30, 2011, and are included in the advances from customers on the consolidated balance sheet.

(b)   The Group purchased raw materials of $42,920 from Ningbo Kunde during the three months ended June 30, 2011. The Group purchased raw materials of $7,066,055 from Ningbo Kunde during the six months ended June 30, 2011.

(c)   The Group purchased transportation services of $1,104,716 and $316,506 from Ningbo Xinhe during the three months ended June 30, 2012 and 2011, respectively. The Group purchased transportation services of $1,665,831 and $927,879 from Ningbo Xinhe during the six months ended June 30, 2012 and 2011, respectively, and amounts owed to Ningbo Xinhe as of June 30, 2012 in respect of these purchase transactions were $768,313.

(d)   Guarantees for Bank Loans

There were no guarantees for Bank Loans provided during the three and six months ended June 30, 2012 and 2011.

Bank Loans guaranteed as of June 30, 2012 and December 31, 2011 as follows:

	Bank loan guaranteed as of
	June 30		December 31
	2012		2011
	(Unaudited)
Mr. Tao	$	15,850,000	$	34,628,000
Jincun Wang and Chen		1,902,000		1,983,523
Ningbo Kewei		-		-
Ningbo Pacific		18,318,901		27,918,200
Ningbo Hengfa		14,899,000		14,795,600
Shandong Tengda		951,000		944,400
Total	$	51,920,901	$	80,269,723

Beginning in 2011 loan guarantee fees of 0.3% the loan principal guaranteed are to be paid annually. During the three months ended June 30, 2012, loan guarantee fees were $32,255 and $80,829 for Ningbo Hengfa and Ningbo Pacific, respectively.In the three months ended June 30, 2011, loan guarantee fees were $73,644 and $178,367 for Ningbo Hengfa and Ningbo Pacific, respectively. During the six months ended June 30, 2012, loan guarantee fees were $65,022 and $138,961 for Ningbo Hengfa and Ningbo Pacific , respectively.In the six months ended June 30, 2011, loan guarantee fees were $150,116 and $301,247 for Ningbo Hengfa and Ningbo Pacific, respectively.

(e)   Short-term financing transactions with related parties

	Three Months Ended June 30
	(Unaudited)
	2012						2011
	From(i)		To(i)		Balance(ii)		From(i)		To(i)			Balance(ii)
Ningbo Kewei	$	-	$	-	$	-	$	5,358,850	$	(5,358,850	)	$	-
Ningbo Kunde		-		-		-		32,550		(32,550	)		-
Jiangdong Jihe		-		-		-		14,739		143,834			-
	$	-	$	-	$	-	$	5,406,139	$	(5,247,566	)	$	-

	Six Months Ended June 30
	(Unaudited)
	2012						2011
	From(i)		To(i)		Balance(ii)		From(i)		To(i)			Balance(ii)
Ningbo Kewei	$	-	$	-	$	-	$	5,358,850	$	(5,358,850	)	$	-
Ningbo Kunde		-		-		-		5,358,850		(5,358,850	)		-
Jiangdong Jihe		-		-		-		2,426,534		(2,426,534	)
	$	-	$	-	$	-	$	13,144,234	$	13,144,234	)	$	-

(i) Transactions during the year are translated at average exchange rates.

(ii) Balances at year end are translated at the balance sheet exchange rate.

(f)    Amount due from related parties consist of the following:

	June 30,		December 31,
	2012		2011
	(Unaudited)
Related Party
Mr. Tao	$	39,625	$	39,350

Amounts due from Mr. Tao represent advances made for business expenses which are unsecured, interest free and due on demand.

(g)   Amount due to related parties consists of the following:

	June 30,		December 31,
	2012		2011
	(Unaudited)
Related Party
Ninbo Xinhe	$	768,313	$	621,077

Amount due to related parties represent balances due for raw materials purchase and freight.

(2)   Relationships and transactions with certain other parties

The group has the following relationships and transactions with certain other parties:

Name of parties	Relationship
Ningbo Litong Petrochemical Co., Ltd	Former 12.75% nominee shareholder of Ningbo Keyuan
(Ningbo Litong)
Ningbo Jiangdong Haikai Construction	Controlled by cousin of Mr. Weifeng Xue, Vice
Materials Store (Jiangdong Haikai)	President of Accounting through August 2011

Ningbo Jiangdong Deze Chemical Co., Ltd (Jiangdong Deze)	Controlled by cousin of Mr. Weifeng Xue, Vice President of Accounting through August 2011
Ningbo Anqi Petrochemical Co., Ltd	Controlled by cousin of Mr. Weifeng Xue, Vice
(Ningbo Anqi)	President of Accounting through August 2011

Ningbo Kewei Investment Co., Ltd (Ningbo Kewei)	A related party through September 2011 when control transferred, and included in transactions with certain other parties beginning October 2011.
Ningbo Kunde Petrochemical Co., Ltd (Ningbo Kunde)	A related party through September 2011 when control transferred, and included in transactions with certain other parties beginning October 1, 2011.

Transactions and amounts outstanding with these parties for the three and six months ended June 30, 2012 and 2011, are summarized as follows:

	Three Months Ended June 30,(Unaudited)
	2012		2011
Sales of products (h)	$	47,734,203	$	-
Purchase of raw material (i)	$	21,912,149	$	9,536,282
Credit line of guarantee for bank borrowings (j)	$	141,062,000	$	-
Loan guarantee fees(j)	$	382,116	$	302,674
Short-term financing from theses parties (k)	$	-	$	12,862,621
Short-term financing to these parties (k)	$	-	$	(7,142,275	)
Amounts due from these parties	$	15,773,715	$	-
Amounts due to these parties	$	2,690,514	$	17,851

	Six Months Ended June 30, (Unaudited)
	2012		2011
Sales of products (h)	$	70,021,289	$	772,762
Purchase of raw material (i)	$	22,358,020	$	9,536,282
Credit line of guarantee for bank borrowings (j)	$	161,687,800	$	-
Loan guarantee fees(j)	$	742,303	$	505,626
Short-term financing from theses parties (k)	$	-	$	47,612,617
Short-term financing to these parties (k)	$	-	$	(45,374,149	)
Amounts due from these parties	$	15,773,715	$	-
Amounts due to these parties	$	2,690,514	$	17,851

(h)        During the three months ended June 30, 2012 and 2011, the Group sold finished products of $7,049,811 and nil to Ningbo Litong. During the three months ended June 30, 2012, the Group sold finished products of $40,684,392 to Ningbo Kunde. During the six months ended June 30, 2012 and 2011, the Group sold finished products of $17,177,359 and $772,762 to Ningbo Litong. During the six months ended June 30, 2012, the Group sold finished products of $52,843,930 to Ningbo Kunde. Amounts received in advance from Litong were $11,887,500 and $17,851, respectively as of June 30, 2012 and 2011. Amounts received in the advances from Kunde were $596,530 as of June 30, 2012. They are included in Advances from Customers on the consolidated balance sheet.

(i)    During the three months ended June 30, 2012 and 2011, the Group purchased raw materials of $8,778,079 and $9,536,282, respectively from Ningbo Litong. During the three months ended June 30, 2012, the Group purchased raw material of $13,134,070 from Ningbo Kunde. During the six months ended June 30, 2012 and 2011, the Group purchased raw materials of $9,223,950 and $9,536,282, respectively from Ningbo Litong. During the six months ended June 30, 2012, the Group purchased raw materials of $13,134,070 from Ningbo Kunde.

(j)    Guarantees for Bank Loans

	Guarantee provided during				Guarantee provided during
	the three months ended June 30				the six months ended June 30
	2012		2011		2012		2011
	(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)
Ningbo Litong	$	30,000,000	$	-	$	50,625,800	$	-
Ningbo Kewei		111,062,000		-		111,062,000		-
	$	141,062,000	$	-	$	161,687,800	$	-

	Bank loans guaranteed As of
	June 30		December 31
	2012		2011
	(Unaudited)
Ningbo Litong	$	55,586,521	$	61,632,077
Ningbo  Keiwei	$	43,524,897	$	29,700,067

Beginning in 2011 loan guarantee fees of 0.3% the loan principal guaranteed after January 1, 2011 are to be paid quarterly. In the three months ended June 30, 2012, loan guarantee fees were $179,698 and $202,419 for Ningbo Litong and Ningbo Kewei, respectively. In the three months ended June 30, 2011, loan guarantee fees were $302,674 and $167,654 for Ningbo Litong and Ningbo Kewei, respectively. In the six months ended June 30,2012, loan guarantee fees were $374,263 and $368,040 for Ningbo Litong and Ningbo Kewei, respectively. In the six months ended June 30, 2011, loan guarantee fees were $505,626 and $305,556 for Ningbo Litong and Ningbo Kewei, respectively.

(k)   Short-term financing transactions

Historically the Group and its theses parties have provided each other with short-term financing, typically, in the form of cash, bills receivable and bills payable.

	Three Months Ended June 30 (Unaudited)
	2012						2011
	From(i)		To(i)		Balance(ii)		From(i)		To(i)			Balance(ii)
Ningbo Litong	$	-	$	-	$	-	$	12,862,621	$	(7,142,275	)	$	-
Jiangdong Deze		-		-		-		-		-			-
Ningbo Anqi		-		-		-		-		-			-
	$	-	$	-	$	-	$	12,862,621	$	(7,142,275	)	$	-

	Six Months Ended June 30 (Unaudited)
	2012						2011
	From(i)		To(i)		Balance(ii)		From(i)		To(i)			Balance(ii)
Ningbo Litong	$	-	$	-	$	-	$	38,142,763	$	(35,904,295	)	$	-
Jiangdong Deze		-		-		-		2,602,870		(2,602,870	)		-
Ningbo Anqi		-		-		-		6,866,984		(6,866,984	)		-
	$	-	$	-	$	-	$	47,612,617	$	(45,374,149	)	$	-

(i) Transactions during the year are translated at average exchange rates.

(ii) Balances at year end are translated at the balance sheet exchange rate.

24        RELATED PARTY TRANSACTIONSAND RELATIONSHIPS AND TRANSACTIONS WITH CERTAIN OTHER PARTIES

(A) Related Party Transactions

The Company considers all transactions with the following parties to be related party transactions.

Name of parties	Relationship
Mr. Chunfeng Tao	Majority stockholder
Mr. Jicun Wang	Principal stockholder
Mr. Peijun Chen	Principal stockholder
Ms. Sumei Chen	Member of the Company’s Board of Supervisors and spouse of Mr. Wang
Ms. Yushui Huang	Vice President of Administration, Ningbo Keyuan
Mr. WeifengXue	Former Vice President of Accounting, Ningbo Keyuan through August 2011
Mr. HengfengShou	Former Vice President of Sales, Ningbo Keyuan Petrochemical through November 2011 General Manager/President
Mr.Shifa Wang	Vice President Guangxi Project
Mr.Ming Liang Liu	Vice President Production
Mr.Shegeng Ding	Vice President Equipment
Mr. Fan Zhang	CFO
Ningbo Kewei Investment Co., Ltd. (Ningbo Kewei)	A company controlled by Mr. Tao through September 2011
Ningbo Pacific Ocean Shipping Co., Ltd (Ningbo Pacific)	100% ownership by Mr. Wang
Ningbo Hengfa Metal Product Co., Ltd (Ningbo Hengfa, former name"Ningbo Tenglong")	100% ownership by Mr. Chen
Shandong Tengda Stainless Steel Co., Ltd (Shandong Tengda)	100% ownership by Mr. Chen
Ningbo Xinhe Logistic Co., Ltd (Ningbo Xinhe)	10% ownership by Ms. Huang
Ningbo Kunde Petrochemical Co, Ltd. (Ningbo Kunde)	Mr. Tao’s mother was a 65% nominee shareholder for Mr. Hu, a third party through September 2011
Ningbo JiangdongJihe Construction Materials Store (JiangdongJihe)	Controlled by Mr. Xue’s Brother-in-law
Ningbo Wanze Chemical Co., Ltd (Ningbo Wanze)	Mr. Tao’s sister-in-law is the legal representative
Ningbo Zhenhai Jinchi Petroleum Chemical Co., Ltd (Zhenhai Jinchi)	Controlled by Mr. Shou

Related party transactions and amounts outstanding with the related parties as of and for the years ended December 31, 2011 and 2010, are summarized as follows. Transactions with Ningbo Kunde and Ningbo Kewei are through the date the related party relationship ceased at which time transactions with these parties are included in details of transactions with certain other parties (Note 24(b)).

Year ended December 31,
2011	2010

Sales of products (a)	$	92,771,589	$	111,860,732
Purchase of raw material (b)	$	7,151,433	$	25,014,808
Purchase of transportation services (c)	$	3,059,216	$	3,659,000
Credit line of guarantee provision for bank borrowings (d)	$	142,563,200	$	161,994,300
Loan guarantee fees (d)	$	1,299,886	$	-
Short-term financing from related parties (e)	$	13,303,054	$	30,839,377
Short-term financing to related parties (e)	$	13,188,178	$	30,949,048

As of December 31,
2011	2010

Amount due from related parties (f)	$	39,350	$	5,332,193
Amount due to related parties (g)	$	621,077	$	115,535

(a)  The Group sold finished products of $92,704,220 and $101,680,459 to Ningbo Kunde in 2011 and 2010, respectively. Sales to Zhenhai Jinchi in 2011 and 2010 were $67,369 and $10,180,273, respectively.

(b)  The Group purchased raw materials of nil and $4,465,563 from Ningbo Kewei during 2011 and 2010, respectively, with no outstanding amount payable to Ningbo Kewei at December 31,2011 and 2010 in respect of these purchase transactions. The Group purchased raw materials of $7,151,433and $20,549,245from Ningbo Kunde during  2011 and 2010, respectively. The outstanding payment in advance to Ningbo Kunde as of December 31, 2010 and 2011 in respect of these purchase transactions was $5,181,809 and Nil respectively.

(c)  The Group purchased transportation services of $3,059,216 and $3,659,000 from Ningbo Xinhe during 2011 and 2010, respectively, and amounts owed to Ningbo Xinhe as of December 31, 2011 and 2010 in respect of these purchase transactions was $621,077 and $119, respectively

(d)   Guarantees for Bank Loans

	Guarantee provided during the year ended December 31				Bank loans guaranteed as of December 31
	2011		2010		2011		2010
Mr. Tao	$	12,396,800	$	79,887,600	$	34,628,000	$	36,408,000
Jicun Wang and Sumei Chen	$	30,992,000	$	-	$	1,983,523	$	12,136,000
Ningbo Kewei	$	34,091,200	$	82,106,700	$	29,700,067	$	11,377,500
Ningbo Pacific	$	65,083,200	$	-	$	27,918,200	$	16,687,000
Ningbo Hengfa	$	-	$	-	$	14,795,600	$	36,256,300
ShangdongTengda	$	-	$	-	$	944,400	$	910,200

Beginning in 2011 loan guarantee fees of 0.3% of the loan principal guaranteed are to be paid quarterly.In 2011, loan guarantee fees were $272,993, $636,427 and $390,466 for Ningbo Hengfa, Ningbo Pacific and Ningbo Kewei, respectively, and are included in $1,548,149 in the statements of operations.

(e)   Short-term financing transactions with related parties

	Year Ended December 31
	2011							2010
	From (i)		To(i)			Balance(ii)		From(i)		To(i)			Balance(ii)
Shandong Tengda	$	-	$	-		$	-	$	2,219,100	$	(2,219,100	)	$	-
Ningbo Kewei		5,423,600		(5,423,600	)		-		1,479,400		(1,479,400	)		-
Ningbo Kunde		5,423,600		(5,423,600	)		-		19,676,020		(19,676,020	)		-
JiangdongJihe		2,455,854		(2,340,978	)		-		7,464,857		(7,574,528	)		(112,459	)
	$	13,303,054	$	(13,188,178	)	$	-	$	30,839,377	$	(30,949,048	)	$	(112,459	)

(i) Transactions during the year are translated at average exchange rates.

(ii) Balances at year end are translated at the balance sheet exchange rate.

(f)   Amount due from related parties consist of the following:

	As of December 31,
		2011		2010
Related Party
Ningbo Kunde	$	-	$	5,181,809
JiangdongJihe		-		112,459
Mr. Tao		39,350		37,925
	$	39,350	$	5,332,193

Amounts due from Mr. Tao represents advances made for business expenses, are unsecured, interest free and due on demand.

(g)   Amounts due to related parties consist of the following:

	As of December 31,
	2011		2010
Related Party
Zhenhai Jinchi(prepayment)	$	-	$	115,416
NinboXinhe		621,077		119
	$	621,077	$	115,535

Amounts due to related parties primarily represent balances due for raw materials purchase and freight.

(B) Relationships and transactions with certain other parties

The Group has the following relationships and transactions with certain other parties:

Name of parties	Relationship
Ningbo Litong Petrochemical Co., Ltd	Former 12.75% nominee shareholder of Ningbo Keyuan
(Ningbo Litong)
Ningbo JiangdongHaikai Construction	Controlled by cousin of Mr. WeifengXue, former Vice President of Accounting
Materials Store (JiangdongHaikai)
Ningbo JiangdongDeze Chemical Co., Ltd	Controlled by cousin of Mr. WeifengXue, former (JiangdongDeze) Vice President of Accounting
Ningbo Anqi Petrochemical Co., Ltd	Controlled by cousin of Mr. WeifengXue, former (Ningbo Anqi) Vice President of Accounting
Ningbo Kewei Investment Co., Ltd.	A related party through September 2011
(Ningbo Kewei) when control transferred
Ningbo Kunde Petrochemical Co, Ltd.	A related party through September 2011 when control transferred
(Ningbo Kunde)

Transactions and amounts outstanding with these parties for the years ended December 31, 2011 and 2010 are summarized as follows. Transactions with Ningbo Litong are through September 2011.

	Year ended December 31,
	2011		2010
Sales of products (h)	$	29,637,868	$	29,625,766
Purchase of raw material (i)	$	20,253,780	$	18,994,104
Credit line of guarantee for bank borrowings (j)	$	81,136,800	$	-
Loan guarantee fees (j)	$	1,242,928	$	-
Short-term financing from these parties (k)	$	49,873,894	$	74,983,618
Short-term financing to these parties (k)	$	47,608,361	$	77,030,336
Amounts due from these parties	$	2,740,970	$	2,217,854
Advances from these parties for sales	$	130,458	$	110,134

(h)   The Group sold finished products of $7,360,796and $29,625,766 to Ningbo Litong in2011 and 2010, respectively. Amounts received in advance from Litong were nil and $110,134 as of December 31, 2011 and 2010, and are included in advances from customers on the consolidated balance sheet. The Group sold finished products of $22,277,072 to Ningbo Kunde  in 2011. There were outstanding amounts of $130,458 received in advance from Kunde as of December 31, 2011.

(i)   The Group purchased raw materials of $20,253,780from Ningbo Litong during 2011. During  2010, the Group purchased raw materials of $18,994,104from Ningbo Litong. Amounts prepayable to Litong were $2,740,970and nil as of December 31, 2011 and 2010, respectively.

(j)   Guarantees for Bank Loans

	Guarantee provided				Bank loans guaranteed
	During the year ended December 2011				as of December 2011
	2011		2010		2011		2010
Ningbo Litong	$	81,136,800	$	-	$	61,632,077	$	43,993,000

Through December 31, 2010, no compensation was paid in respect of these guarantees. Beginning in 2011, loan  guarantee fees of 0.3% of the loan principal guaranteed after January 1, 2011 are to be paid quarterly. Guarantee fees paid to Litong and Kewei  were $1,026,567 and $216,361 for the year ended December 31, 2011, respectively.

(k)  Short-term financing transactions

Historically the Group and these parties have provided each other with short-term financing, typically in the form of cash, bills receivable and bills payable.

Short-term financing with these parties is as follows:

	Year Ended December 31
			2011					2010
	From(i)		To(i)			Balance(ii)		From(i)		To(i)			Balance(ii)
Ningbo Litong	$	36,366,031	$	(34,100,498	)	$	-	$	57,180,289	$	(59,343,172	)	$	2,217,854
JiangdongHaikai		-		-			-		7,447,529		(7,331,364	)		-
JiangdongDeze		2,634,320		(2,634,320	)		-		4,438,200		(4,438,200	)		-
Ningbo Anqi		10,873,543		(10,873,543	)		-		5,917,600		(5,917,600	)		-
	$	49,873,894	$	(47,608,361	)	$	-	$	74,983,618	$	(77,030,336	)	$	2,217,854

(i) Transactions during the year are translated at average exchange rates.

(ii) Balances at year end are translated at the balance sheet exchange rate.

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Earnings (Loss) Per Share (Tables)

6 Months Ended

12 Months Ended

Jun. 30, 2012

Dec. 31, 2011

Earnings Per Share [Abstract]

Computation of basic net income per share:

	For the three months ended					For the six months ended
	June 30		June 30			June 30		June 30
	2012		2011			2012		2011
	¼ Unaudited ¼‰		¼ Unaudited ¼‰			¼ Unaudited ¼‰		¼ Unaudited ¼‰
Net income (loss) attribute to Keyuan
Petrochemicals, Inc. stockholders	$	1,062,348	$	(1,822,539	)	$	2,907,340	$	3,391,604
Less: Dividend attributable to preferred
stockholders		-		306,247			-		602,507
Net income (loss) attributable to Keyuan Petrochemical Inc. common shareholders	$	1,062,348	$	(2,128,786	)	$	2,907,340	$	2,789,097
Weighted average common shares
(Denominator for basic income per share)		57,646,160		57,579,239			57,646,160		57,578,896
Effect of diluted securities:
- Series A convertible preferred stock		-		-			-		-
- Series B convertible preferred stock		5,333,340		-			5,333,340		5,400,010
- Series M convertible preferred stock		-		-			-		-
- Warrants		-		-			-		390,647
- Options		-		-			-		467,429
Weighted average common shares
(denominator for diluted income per share)		62,979,500		57,579,239			62,979,500		63,836,982
Basic net income (loss) per share	$	0.02	$	(0.04	)	$	0.05	$	0.05
Diluted net income (loss) per share	$	0.02	$	(0.04	)	$	0.05	$	0.05

Year ended December 31,
2011	2010

Basic (loss)earnings per share:
Net (loss)income attributable to Keyuan
Petrochemicals, Inc. stockholders	$	(7,141,296	)	$	37,120,423
Fixed dividends to Series A convertible
Preferred stockholders		-			831,032
Fixed dividends to Series B convertible
Preferred stockholders		1,205,014			306,247
Net (loss)income attributable to Keyuan
Petrochemicals Inc. common stockholders	$	(8,346,310	)	$	35,983,144
Weighted average common shares
(Denominator for basic income per share)		57,585,040			50,929,526
Effect of dilutive securities:
- Series A convertible preferred stock		-			3,542,344
- Series B convertible preferred stock		-			1,390,688
- Warrants		-			103,985
- Options		-			91,451
Denominator for diluted income per share		57,585,040			56,057,994
Basic (loss)earnings per share:	$	(0.14	)	$	0.71
Diluted(loss)earnings per share:	$	(0.14	)	$	0.66

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Long-Term Bank Borrowings

6 Months Ended

12 Months Ended

Jun. 30, 2012

Dec. 31, 2011

Long-Term Debt and Capital Lease Obligations [Abstract]

LONG-TERM BANK BORROWINGS

13         LONG-TERM BANK BORROWINGS

	June 30,			December 31,
	2012			2011
	(Unaudited)
Loan from China Construction Bank	$	15,850,000		$	15,740,000
Less: current portion		(15,850,000	)		(15,740,000	)
	$	-		$	-

As of June 30, 2012  and December 31, 2011,  the Group's long-term bank loans are secured/ guaranteed by related-party entities and Mr. Tao (Note 22), bearing interest from 7.29% to 7.74% (2011:5.76% to 6.98%) and are due on various dates through October 2012.There were no additional long-term bank borrowings in the six months ended June 30, 2012.

11         LONG-TERM BANK BORROWINGS

Long-term bank borrowings consist of the following:

As of December 31,
2011	2010

Loan from China Construction Bank	$	15,740,000		$	15,170,000
Loan from Industrial and Commercial Bank of China		-			4,551,000
Loan from Bank of China		-			12,894,500
		15,740,000			32,615,500
Less: current portion		(15,740,000	)		(17,445,500	)
	$	-		$	15,170,000

As of December 31, 2011 and 2010, all of the Group’s long-term bank loans are guaranteed by related-party entities and Mr.Tao (Note 24), bear interest from 7.29% to 7.74% (2010:5.4% to 7.56%)and are due on various dates from December 2011 to December 2012. Bank loans of approximately RMB115,000,000 ($17,820,400)  and RMB 92,000,000($13,610,480) were repaid in 2011 and 2010, respectively.

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Keyuan Petrochemicals, Inc. (Parent Company) (Details Textual) (USD $)	12 Months Ended
	Dec. 31, 2011	Jun. 30, 2012	Dec. 31, 2010
Keyuan Petrochemicals, Inc. (Parent Company) (Textual)
Minimum percentage of profit after tax to be allocated to General Reserve under PRC	10.00%
Mandatory percentage of allocations of PAT to General Reserve to discontinue allocations under PRC	50.00%
Statutory reserve	$ 3,744,304	$ 3,744,304	$ 3,075,356	[1]
Restricted in the ability to transfer a portion of their net assets to either in the form of dividends, loans or advances under PRC	$ 57,144,304		$ 56,553,518

[1] Note 18

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Common Stock Purchase Warrants

12 Months Ended

Dec. 31, 2011

Common Stock Purchase Warrants [Abstract]

COMMON STOCK PURCHASE WARRANTS

16        COMMON STOCK PURCHASE WARRANTS

In connection with the Series A and Series B Private Placements, the Company issued the following warrants to purchase the Company’s common stock to the Series A and Series B investors and a placement agent:

	Issuance dates	Maximum number Of shares of  common stock		Exercise prices
Series A Warrants	April 22 and May 18, 2010		748,704		$4.50
Series B Warrants	April 22 and May 18, 2010		748,704		$5.25
Series C Warrants	September 28, 2010		810,001		$4.50
Series D Warrants	September 28, 2010		810,001		$5.25
Placement agent warrants
-Series A Private Placement	April 22 and May 18, 2010		718,755	$3.50~$5.25
-Series B Private Placement	September 28, 2010		561,601	$3.75~$5.25

Each of the above warrants entitles the holder to purchase shares of the Company’s common stock at any time after their respective issuance dates and shall expire after three years from their respective issuance dates. The Series A and Series B Warrants are callable at $0.01, at the Company’s election, if the Volume Weighted Average Price(“VWAP”) of the Company’s common stock equals or exceeds $9.00 and $10.50 for 15 consecutive trading days, with the average daily trading volume of no less than 75,000 shares. The Series C and Series D Warrants and the placement agent warrants are not callable.

The Series A, Series B, Series C and Series D Warrants and the placement agent warrants are classified within the Company’s stockholders’ equity since they are solely indexed to the Company’s common stock.

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Income Taxes (Details Textual)	6 Months Ended		12 Months Ended
	Jun. 30, 2012 USD ($)	Jun. 30, 2012 CNY	Dec. 31, 2011 USD ($)	Dec. 31, 2011 CNY	Dec. 31, 2010 USD ($)
Income taxes (Textual)
Federal statutory income tax rate, Minimum	15.00%	15.00%	15.00%	15.00%
Federal statutory income tax rate, Maximum	35.00%	35.00%	35.00%	35.00%
People republic of China statutory income tax rate	25.00%	25.00%	25.00%	25.00%
Net operating tax loss carried forwards			$ 4,767,000		$ 780,590
Tax rate levied on non Prc resident enterprises	10.00%	10.00%	10.00%	10.00%
Undistributed earnings	37,800,000		31,000,000		26,000,000
Statute of limitations for underpayment of taxes	3 years	3 years	3 years	3 years
Statute of limitations for underpayment of taxes more than specified limit	5 years	5 years	5 years	5 years
Underpayment of taxe	$ 15,000	100,000	$ 15,000	100,000
Statute of limitations in case of transfer pricing	10 years	10 years	10 years	10 years
Federal statutory income tax rate			34.00%	34.00%

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Share-Based Payments (Tables)

12 Months Ended

Dec. 31, 2011

Share-based Compensation Arrangement by Share-based Payment Award [Line Items]

Summary of the share options granted and the activity

	Number of options			Weighted average exercise price		Weighted average remaining contractual term	Aggregate intrinsic value
Balance as of
January 1,2010		-		$	-
Granted on June 30,2010		3,000,000			4.2
Granted on July 1,2010		80,000			4.2
Granted on August 4,2010		700,000			4.5
Cancelled		(600,000	)		4.5
Forfeited		(150,000	)		4.2
Balance as of
December 31, 2010		3,030,000		$	4.21	3.5 years	$	0
Exercisable as of December 31, 2010		-			-	-		-

Information relating to non-vested stock options

	Options			Weighted average grant-date fair value			Weighted average  remaining contractual term
Nonvested at January 1, 2011		3,030,000		$	3,629,899
Granted		-			-
Vested		(989,000	)		(1,103,493	)
Forfeited		(586,000	)		(653,839	)
Nonvested at December 31, 2011		1,455,000		$	1,872,567		2.5 years

Summary of grant-date fair value of the stock options granted based on the assumptions

		Options granted on June 30, 2010			Options granted on July 1, 2010			Options granted on August 4, 2010
Expected volatility		47	%		47	%		47	%
Expected dividend yield		0	%		0	%		0	%
Weighted average risk-free interest rate		1.79	%		1.80	%		1.62	%
Weighted average expected life (in years)		5.0			5.0			5.0
Estimated fair value of underlying
common stock	$	3.21		$	3.25		$	4.50

Non employee stock option grants [Member]

Share-based Compensation Arrangement by Share-based Payment Award [Line Items]

Summary of the share options granted and the activity

	Number of options		Weighted average exercise price		Weighted average remaining contractual term	Aggregate intrinsic value
Outstanding as of
December 31, 2011		460,000	$	4.20	1.5 years	$	-
Exercisable as of
December 31, 2011		460,000	$	4.20	1.68 years	$	-

Summary of grant-date fair value of the stock options granted based on the assumptions

		Awards granted			Awards granted
		on July 1, 2010			on July 27, 2010
Expected volatility		47	%		47	%
Expected dividend yield		0	%		0	%
Weighted average risk-free interest rate		1.8	%		1.02	%
Weighted average expected life (in years)		5.0			3.0
Estimated fair value of underlying common stock	$	3.25		$	4.00-4.50

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Related Party Transactions and Relationships and Transactions With Certain Other Parties (Details 4) (USD $)	Jun. 30, 2012		Dec. 31, 2011		Dec. 31, 2010
Summary of amount due from related parties
Amounts due from related parties	$ 39,625	[1]	$ 39,350	[1]	$ 5,332,193	[2]
Summary of amount due to related parties
Amounts due to related parties	768,313	[1]	621,077	[1]	115,535	[3]
Ningbo Kunde [Member]
Summary of amount due from related parties
Amounts due from related parties					5,181,809
Jiangdong Jihe [Member]
Summary of amount due from related parties
Amounts due from related parties					112,459
Mr. Tao [Member]
Summary of amount due from related parties
Amounts due from related parties	39,625		39,350		37,925
Zhenhai Jinchi [Member]
Summary of amount due to related parties
Amounts due to related parties					115,416
Ningbo Xinhe [Member]
Summary of amount due from related parties
Amounts due from related parties
Summary of amount due to related parties
Amounts due to related parties	$ 768,313		$ 621,077		$ 119

[1] Note 22

[2] Note 24

[3] Note 25

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Property, Plant and Equipment (Tables)

6 Months Ended

12 Months Ended

Jun. 30, 2012

Dec. 31, 2011

Property, Plant and Equipment [Abstract]

Summary of property, plant and equipment

	June 30,			December 31,
	2012			2011
	(Unaudited)
Buildings	$	3,915,407		$	3,888,234
Machinery and equipment		177,358,013			175,736,470
Vehicles		786,083			663,985
Office equipment and furniture		139,728			134,929
Construction-in-progress		50,141,011			27,449,846
		232,340,242			207,873,464
Less: Accumulated depreciation		(22,571,325	)		(17,005,843	)
	$	209,768,917		$	190,867,621

As of December 31,
2011	2010

Buildings	$	3,888,234		$	3,733,116
Machinery and equipment		175,736,470			130,513,767
Vehicles		663,985			560,440
Office equipment and furniture		134,929			130,043
Construction-in-progress		27,449,846			3,117,935
		207,873,464			138,055,301
Less: Accumulated depreciation		(17,005,843	)		(8,273,997	)
	$	190,867,621		$	129,781,304

Depreciation expense on property, plant and equipment

	Three months ended June 30,				Six months ended June 30,
	2012		2011		2012		2011
	(Unaudited)		(Unaudited)		(Unaudited)		(Unaudited)
Cost of sales	$	2,580,156	$	2,246,111	$	5,347,643	$	4,589,859
Selling, general and administrative expenses		55,355		40,473		104,491		81,707
	$	2,635,511	$	2,286,584	$	5,452,134	$	4,671,566

As of December 31,
2011	2010

Cost of sales	$	8,141,839	$	7,788,486
Selling, general and administrative expenses		165,229		121,127
	$	8,307,068	$	7,909,613

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Related Party Transactions and Relationships and Transactions With Certain Other Parties (Details 6) (USD $)	3 Months Ended		6 Months Ended		12 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011	Dec. 31, 2011	Dec. 31, 2010
Transactions and amounts outstanding with certain other parties
Sales of products (a)	$ 47,734,203		$ 70,021,289	$ 772,762	$ 29,637,868	$ 29,625,766
Purchase of raw material (b)	21,912,149	9,536,282	22,358,020	9,536,282	20,253,780	18,994,104
Credit line of guarantee for bank borrowings (j)	141,062,000		161,687,800		81,136,800
Loan guarantee fees (d)	382,116	302,674	742,303	505,626	1,242,928
Short-term financing from these parties		12,862,621		47,612,617	49,873,894	74,983,618
Short-term financing to these parties (k)		(7,142,275)		(45,374,149)	47,608,361	77,030,336
Amounts due from these parties	15,773,715		15,773,715		2,740,970	2,217,854
Amounts due to these parties	2,690,514	17,851	2,690,514	17,851	130,458	110,134
Ningbo Litong [Member]
Transactions and amounts outstanding with certain other parties
Short-term financing from these parties		12,862,621		38,142,763	36,366,031	57,180,289
Short-term financing to these parties (k)		(7,142,275)		(35,904,295)	(34,100,498)	(59,343,172)
Amounts due from these parties						$ 2,217,854

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Condensed Consolidated of Stockholders Equity and Comprehensive Income (Loss) (USD $)	Total	Series M Convertible Preferred Stock	Common Stock	Additional Paid-In Capital	Statutory Reserve	Accumulated Other Comprehensive Income	Retained Earnings (Deficit)	Comprehensive Income (Loss)
Balance at Dec. 31, 2009	$ 10,627,959	$ 48		$ 20,229,949		$ 1,062,781	$ (10,664,819)
Balance, (Shares) at Dec. 31, 2009		47,658
Effect of reverse recapitalization			5,697	(5,697)
Effect of reverse recapitalization (Shares)			5,696,800
Repurchase and cancellation of Common Stock	(400,000)		(3,264)	(396,736)
Repurchase and cancellation of Common Stock (Shares)			(3,264,000)
Fixed dividend for series A Convertible preferred stockholders	(831,032)						(831,032)
Fixed dividend for series B Convertible preferred stockholders	(306,247)						(306,247)
Conversion of series A convertible preferred stock into common stock	21,018,143		6,738	21,011,405
Conversion of series A convertible preferred stock into common stock (Shares)			6,738,336
Conversion of series M convertible preferred stock into common stock		(48)	47,658	(47,610)
Conversion of series M convertible preferred stock into common stock (Shares)		(47,658)	47,658,000
Issuance of common stock on April 22, 2010 and May 18, 2010 Net of issuance costs of $221,661	1,599,139		749	1,598,390
Issuance of common stock on April 22, 2010 and May 18, 2010 Net of issuance costs of $221,661 (Shares)			748,704
Issuance of series A and series B Warrants, net of issuance costs of $45,584	345,126			345,126
Issuance of series C and series D Warrants, net of issuance costs of $170,739	1,713,326			1,713,326
Issuance of warrants to placement agent in connection with series A Private placement	349,683			349,683
Issuance of warrants to placement agent in connection with series B Private placement	534,341			534,341
Share based compensation	1,459,884			1,459,884
Capital contribution from stockholders	220,000			220,000
Net income	37,120,423						37,120,423	37,120,423
Statutory Reserves					3,075,356		(3,075,356)
Other comprehensive income - Foreign currency translation gain	2,247,635					2,247,635		2,247,635
Ending Balance at Dec. 31, 2010	75,698,380		57,578	47,012,061	3,075,356	3,310,416	22,242,969
Ending Balance (Shares) at Dec. 31, 2010			57,577,840
Fixed dividend for series B Convertible preferred stockholders	(1,205,014)						(1,205,014)
Dividend declared for common stock	(3,528,000)						(3,528,000)
Exercise of series A warrants	4,863		1	4,863
Exercise of series A warrants (Shares)			1,150
Exercise of series B warrants	2,468		1	2,468
Exercise of series B warrants (Shares)			500
Series B conversion	250,013		66	249,947
Series B conversion (Shares)			66,670
Share based compensation	1,928,940			1,928,939
Net income	(7,141,296)						(7,141,296)	(7,141,296)
Statutory Reserves					668,948		(668,948)
Other comprehensive income - Foreign currency translation gain	3,235,395					3,235,395		3,235,395
Ending Balance at Dec. 31, 2011	$ 69,245,749		$ 57,646	$ 49,198,278	$ 3,744,304	$ 6,545,811	$ (9,699,710)	$ (3,905,901)
Ending Balance (Shares) at Dec. 31, 2011			57,646,160

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Share-Based Payments (Details 4) (Non employee stock option grants [Member], USD $)	1 Months Ended
	Jul. 27, 2010	Jul. 01, 2010
Non employee stock option grants [Member]
Summary of grant-date fair value of the stock options granted based on the assumptions
Awards granted, Expected volatility	47.00%	47.00%
Awards granted, Expected dividend yield	0.00%	0.00%
Awards granted, Weighted average risk-free interest rate	1.02%	1.80%
Awards granted, Weighted average expected life (in years)	3 years	5 years
Awards granted, Estimated fair value of underlying common stock		$ 3.25
Awards granted, Estimated fair value of underlying common stock, Minimum	$ 4.00
Awards granted, Estimated fair value of underlying common stock, Maximum	$ 4.50

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Summary of Significant Accounting Policies

12 Months Ended

Dec. 31, 2011

Accounting Policies [Abstract]

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

2        SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a)      Principles of consolidation and basis of presentation

The accompanying consolidated financial statements of the Company have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) and include the financial statements of the Group.

All significant intercompany transactions and balances are eliminated on consolidation.

(b)      Use of estimates

The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities;  disclosures of contingent assets and liabilities at the date of the consolidated financial statements; and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant items subject to such estimates and assumptions include the useful lives of property, plant and equipment; the fair value determination of financial and equity instruments; the realizability of inventories; and the recoverability of property, plant and equipment. These estimates are often based on complex judgments and assumptions that management believes to be reasonable but are inherently uncertain and unpredictable.

(c)      Foreign currency transactions and translation

The functional currency of the Company, Keyuan International and Keyuan HK is the U.S. dollar. The functional currency of Ningbo Keyuan and Ningbo Keyuan Petrochemicals, the PRC operation subsidiaries, is the Renminbi (“RMB”). Transactions denominated in currencies other than the functional currency are translated into the functional currency at the exchange rates prevailing at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies are translated into the functional currency using the applicable exchange rates at each balance sheet date, and non-monetary items are translated at historical rates. The resulting exchange differences on these transactions are recorded in foreign exchange gain (loss), net in the consolidated statements of operations.

The Group’s reporting currency is the U.S. dollar. Assets and liabilities of the PRC operating subsidiaries are translated into the U.S. dollar using the exchange rates at each balance sheet date. Revenue and expenses of the PRC operating subsidiaries are translated at average rates prevailing during the reporting period. Shareholders’ equity is translated at historical rates. Adjustments resulting from translating the financial statements of the PRC operating subsidiaries into the U.S. dollar are recorded as a separate component of accumulated other comprehensive income in the consolidated statements of stockholders’ equity and comprehensive income (loss).

(d)      Cash

Cash consists of cash on hand and cash at banks. As of December 31, 2011 and 2010, cash of $7,101,505 and $26,857,729, respectively, was held in major financial institutions located in the PRC. Management performs periodic evaluations of the relative credit standings of those financial institutions, and believes that these major financial institutions have high credit ratings.

(e)      Pledged bank deposits

Pledged bank deposits represent amounts held by financial institutions, which are not available for the Group’s use, as security for issuances of bills payable to the Group’s suppliers, or as security for short-term bank borrowings. Upon maturity of the bills, which generally occurs within three to six months after the issuance of the bills, or upon the repayments of short-term bank borrowings, the deposits are released by the financial institutions and become available for use by the Group.  Pledged bank deposits related to the purchase of inventories are reported within cash flows from operating activities, and pledged bank deposits related to short-term bank borrowings are reported within cash flows from financing activities in the consolidated statements of cash flows.

(f)      Inventories

Inventory is stated at the lower of cost or market. Cost is determined using the weighted-average cost method. Provisions are made for excess, slow moving and obsolete inventory as well as inventory whose carrying value is in excess of net realizable value. Management continually evaluates the recoverability based on assumptions about customer demand and market conditions. If actual market conditions are less favorable than those projected by management, additional inventory reserves or write-downs may be required. The Group did not record any provision for slow-moving and obsolete inventory as of December 31, 2011 and 2010.

(g)      Property, plant and equipment

Property, plant and equipment are stated at cost. Depreciation is calculated using the straight-line method over the estimated useful lives of the assets, taking into consideration the assets’ estimated residual value. When items are retired or otherwise disposed of, income is charged or credited for the difference between the net book value and proceeds received thereon.  Ordinary maintenance and repairs are charged to expense as incurred.

The estimated useful lives of property, plant and equipment are as follows:

Buildings	45 years
Machinery and equipment	5 to 15 years
Vehicles	5 years
Office equipment and furniture	3 to 10 years

Construction-in-progress is stated at cost. Cost comprises nonrefundable prepayments and direct costs of construction as well as interest costs capitalized during the period of the construction of the plant or installation of equipment. Costs included in construction in progress are transferred to their respective categories of property, plant and equipment when the assets are ready for their intended use, at which time depreciation commences.

(h)      Long-Lived Assets

The Group reviews the recoverability of its long-lived assets on a periodic basis in order to identify business conditions, which may indicate a possible impairment. The assessment for potential impairment is based primarily on the Group’s ability to recover the carrying value of its long-lived assets from expected future discounted cash flows. If the total of the expected future discounted cash flows is less than the total carrying value of the assets, a loss is recognized for the difference between the fair value (computed based upon the expected future discounted cash flows) and the carrying value of the assets.

(i)      Land use rights

Land use rights represent the exclusive right to occupy and use a piece of land in the PRC for a specified contractual term. Land use rights are recorded at cost and amortized on a straight-line basis over the terms of the land use rights of 15 to 50 years.

(j)      Bills receivable and Bills payable

The Group utilizes banker’s acceptances in the form of bills receivable and bills payable.For certain major customers, the Group accepts their payment for the Group’s products by bills receivable. Bills receivable represent short-term notes receivable issued either by the customer or by the customer and an accepting bank that entitles the Group to receive the full face amount from the customer or the accepting bank at maturity, which is generally six months from the date of issuance. Bills receivable are typically sold at a discount prior to maturity, and the discount is included in interest expense. Historically, the Group has experienced no losses on bills receivable.

In connection with the Company’s financing transactions, the Group may also obtain bills receivable in exchange for cash or payables.  These bills, which are sold at a discount prior to maturity, include provisions whereby the Group agrees to reimburse the accepting bank in the event that the related party counterparty fails to honor its liability to the accepting bank.  At December 31, 2011 and 2010, discounted bills receivable subject to reimbursement amounted to approximately $1.6  million and $9.2 million, respectively.  Historically, the Group has not suffered any losses under these reimbursement agreements.

Bills payable represent bills issued by an accepting bank in favor of the Group’s suppliers. The Group’s suppliers receive payments from the accepting bank directly upon maturity of the bills, and the Group is obliged to repay the face value of the bills to the accepting bank. Bills that are not remitted directly by the Group to its suppliers may be sold by the Group to other accepting banks for cash prior to their maturity. Discounts paid are recorded as a component of interest expense.

(k)      Revenue recognition

The Group derives its revenue primarily from the sale of petrochemical products. In accordance with the provisions of the Securities and Exchange Commission (“SEC”) Staff Accounting Bulletin No. 104, codified in FASB ASC Topic 480, revenue is recognized only when it is realized or realizable and earned. Revenues are considered to have been earned when the entity has substantially accomplished what it must do to be entitled to the benefits represented by the revenues. The Group recognizes revenue when the products are delivered and the customer takes ownership and assumes risks of losses, collection of the relevant receivable is probable, persuasive evidence of an arrangement exists and the sales price is fixed or determinable. Written sales agreements, which specify price, product, and quantity, are generally used as evidence of an arrangement. Customer acceptance is generally evidenced by a carrier signed shipment notification form.

In the PRC, value added tax (“VAT”) of 17% on invoiced amounts is collected on behalf of tax authorities. Revenue is recorded net of VAT.  VAT paid for purchases, net of VAT collected from customers, is recorded in “other current assets” in the consolidated balance sheets as of December 31, 2011 and 2010.

(l)      Share-based compensation

The Group accounts for share-based payments under the provisions of FASB ASC Topic 718, “Compensation-Stock Compensation”, or ASC Topic 718. Under ASC Topic 718, the Group measures the costs of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award and recognizes the costs over the period the employee is required to provide service in exchange for the award, which generally is the vesting period.

The Group accounts for equity instruments issued to non-employee vendors in accordance with the provisions of FASB ASC Subtopic 505-50, “Equity-Based Payments to Non-Employees”. All transactions in which goods or services are received in exchange for equity instruments are accounted for based on the fair value of the equity instrument issued. The measurement date for the fair value of the equity instruments issued is the date on which the counterparty’s performance is completed.

(m)      Employee benefit plans

Pursuant to relevant PRC regulations, Ningbo Keyuan and Ningbo Keyuan Petrochemicals are required to make contributions to various defined contribution plans organized by municipal and provincial PRC governments. The contributions are made for each PRC employee at rates ranging from 18.6% to 26.1% on a standard salary base as determined by the local social security bureau.

Contributions to the defined contribution plans are charged to the consolidated statements of operations when the related service is provided. For the years ended December 31, 2011 and 2010, contributions to the defined contribution plans were $391,990 and $284,752, respectively.

The Group has no other obligation for the payment of employee benefits associated with these plans beyond the contributions described above.

(n)      Income taxes

Income taxes are accounted for under the asset and liability method. Deferred income tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, and operating loss carry forwards. Deferred income tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred income tax assets and liabilities of a change in tax rates is recognized in incomein the period that includes the enactment date. A valuation allowance is provided to reduce the carrying amount of deferred income tax assets if it is considered more likely than not that some portion, or all, of the deferred income tax assets will not

be realized.

The Group recognizes the effect of income tax positions only if those positions are more likely than not of being sustained.  Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs. The Group has elected to classify interest and penalties related to unrecognized tax benefits as part of income tax expense in the consolidated statements of operations.

(o)      Fair value measurements

The Group utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible. The Group determines fair value based on assumptions that market participants would use in pricing an asset or liability in the principal or most advantageous market. When considering market participant assumptions in fair value measurements, the following fair value hierarchy distinguishes between observable and unobservable inputs, which are categorized in one of the following levels:

• Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the Group has the ability to access at the measurement date.

• Level 2 inputs are inputs other than quoted prices included in Level 1 inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the asset or liability.

• Level 3 inputs are unobservable inputs for the asset or liability used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at the measurement date.

The level in the fair value hierarchy within which a fair value measurement in its entirety falls is based on the lowest level input that is significant to the fair value measurement in its entirety.

(p)      Earnings (Loss) per share

Basic earnings(loss) per share is computed by dividing net income(loss) attributable to the Company’s common stockholders by the weighted average number of common stock outstanding during the year.

Diluted earnings(loss) per share is calculated by dividing net income(loss) attributable to the Company’s stockholders as adjusted for the effect of dilutive common stock equivalents, if any, by the weighted average number of common stock and dilutive common stock equivalents outstanding during the year. Common stock equivalents consist of the common stock issuable upon the conversion of the Group’s Series B convertible preferred stock (using the if–converted method) and common stock issuable upon the exercise of outstanding stock options and stock purchase warrants (using the treasury stock method). Potential dilutive securities are not included in the calculation of dilutive earnings (loss) per share if the effect is anti-dilutive. A total of 7,886,586 and 4,066,804warrants and options were excluded from diluted earnings per share for the years ended December 31, 2011 and 2010, respectively, as their effect was anti-dilutive.

(q)      Segment reporting

The Group’s chief operating decision maker has been identified as its Chief Executive Officer (CEO).

The Group has one operating segment, which is the manufacture and sale of petrochemical products. Substantially all of the Company’s operations and customers are located in the PRC. Consequently, no geographic information is presented.

(r)      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. An accrual for a loss contingency is recognized when it is probable that a liability has been incurred and the amount of loss can be reasonably estimated.

(s)      Recent accounting pronouncements

In December 2011, the FASB issued ASU 2011-11, "Balance Sheet (Topic 210): Disclosures about Offsetting Assets and Liabilities," which requires entities to disclose both gross and net information about both instruments and transactions eligible for offset in the statement of financial position and instruments and transactions subject to an agreement similar to a master netting agreement. The objective of the disclosure is to facilitate comparison between those entities that prepare their financial statements on the basis of U.S. GAAP and those entities that prepare their financial statements on the basis of International Financial Reporting Standards ("IFRS"). This ASU is effective for fiscal years, and interim periods within those years, beginning on or after January 1, 2013. A retrospective presentation for all comparative periods presented is required. The Company is currently evaluating the impact of adopting this guidance.

In June 2011, the FASB issued ASU 2011-05, "Comprehensive Income (Topic 220): Presentation of Comprehensive Income," which improves the comparability, consistency and transparency of financial reporting and increases the prominence of items reported in other comprehensive income. This ASU is effective for fiscal years, and interim periods within those years, beginning on or after December 15, 2011 although early adoption is permitted. In December 2011, the FASB issued ASU 2011-12 "Comprehensive Income (Topic 220): Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05," which defers certain aspects of ASU 2011-05 related to the presentation of reclassification adjustments. The adoption of the revised guidance on January 1, 2012 is not expected to have a material impact on the Company’s  consolidated financial statements.

In May 2011, the FASB issued ASU 2011-04, "Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRS," which provides common requirements for measuring fair value and disclosing information about fair value measurements in accordance with U.S. GAAP and IFRS. This ASU is effective for fiscal years, and interim periods within those years, beginning on or after December 15, 2011. The adoption of this guidance on January 1, 2012 is not expected to have a material impact on the Company's consolidated financial statements.

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Cash (Details) (USD $)	Jun. 30, 2012		Dec. 31, 2011		Dec. 31, 2010
Cash (Textual)
Cash	$ 9,879,169	[1]	$ 7,325,017	[1]	$ 29,336,241	[2]
PRC [Member]
Cash (Textual)
Cash	9,029,095		7,101,505
Hong Kong Special Administrative Region [Member]
Cash (Textual)
Cash	$ 736,386		$ 124,355

[1] Note 3

[2] Note 2(d)

XML

Common Stock Purchase Warrants (Details) (USD $)	12 Months Ended
	Dec. 31, 2011
Series A Warrants [Member]
Schedule of issued warrants to purchase the Company’s common stock
Issuance dates	April 22 and May 18, 2010
Maximum number of shares of common stock	748,704
Exercise price	$ 4.50
Series B Warrants [Member]
Schedule of issued warrants to purchase the Company’s common stock
Issuance dates	April 22 and May 18, 2010
Maximum number of shares of common stock	748,704
Exercise price	$ 5.25
Series C Warrants [Member]
Schedule of issued warrants to purchase the Company’s common stock
Issuance dates	September 28, 2010
Maximum number of shares of common stock	810,001
Exercise price	$ 4.50
Series D Warrants [Member]
Schedule of issued warrants to purchase the Company’s common stock
Issuance dates	September 28, 2010
Maximum number of shares of common stock	810,001
Exercise price	$ 5.25
Series A Private Placement [Member]
Schedule of issued warrants to purchase the Company’s common stock
Issuance dates	April 22 and May 18, 2010
Maximum number of shares of common stock	718,755
Series A Private Placement [Member] | Maximum [Member]
Schedule of issued warrants to purchase the Company’s common stock
Exercise price	$ 5.25
Series A Private Placement [Member] | Minimum [Member]
Schedule of issued warrants to purchase the Company’s common stock
Exercise price	$ 3.50
Series B Private Placement [Member]
Schedule of issued warrants to purchase the Company’s common stock
Issuance dates	September 28, 2010
Maximum number of shares of common stock	561,601
Series B Private Placement [Member] | Maximum [Member]
Schedule of issued warrants to purchase the Company’s common stock
Exercise price	$ 5.25
Series B Private Placement [Member] | Minimum [Member]
Schedule of issued warrants to purchase the Company’s common stock
Exercise price	$ 3.75

XML

Related Party Transactions and Relationships and Transactions With Certain Other Parties (Details 5) (Certain Other Parties [Member])	6 Months Ended	12 Months Ended
	Jun. 30, 2012	Dec. 31, 2011
Ningbo Litong Petrochemical Co., Ltd (Ningbo Litong) [Member]
Relationships and transactions with certain other parties
Relationship	Former 12.75% nominee shareholder of Ningbo Keyuan	Former 12.75% nominee shareholder of Ningbo Keyuan
Ningbo Jiangdong Haikai Construction Materials Store (Jiangdong Haikai) [Member]
Relationships and transactions with certain other parties
Relationship	Controlled by cousin of Mr. Weifeng Xue, Vice President of Accounting through August 2011	Controlled by cousin of Mr. WeifengXue, former Vice President of Accounting
Ningbo JiangdongDeze Chemical Co., Ltd (Jiangdong Deze) [Member]
Relationships and transactions with certain other parties
Relationship	Controlled by cousin of Mr. Weifeng Xue, Vice President of Accounting through August 2011	Controlled by cousin of Mr. WeifengXue, former (JiangdongDeze) Vice President of Accounting
Ningbo Anqi Petrochemical Co., Ltd (Ningbo Anqi) [Member]
Relationships and transactions with certain other parties
Relationship	Controlled by cousin of Mr. Weifeng Xue, Vice President of Accounting through August 2011	Controlled by cousin of Mr. WeifengXue, former (Ningbo Anqi) Vice President of Accounting
Ningbo Kewei Investment Co., Ltd (Ningbo Kewei) [Member]
Relationships and transactions with certain other parties
Relationship	A related party through September 2011 when control transferred, and included in transactions with certain other parties beginning September, 2011.	A related party through September 2011
Ningbo Kunde Petrochemical Co., Ltd (Ningbo Kunde) [Member]
Relationships and transactions with certain other parties
Relationship	A related party through September 2011 when control transferred, and included in transactions with certain other parties beginning October 1, 2011.	A related party through September 2011 when control transferred

XML

Land Use Rights (Details) (USD $)	Jun. 30, 2012		Dec. 31, 2011		Dec. 31, 2010
Land Use Rights
Land use rights	$ 12,267,235		$ 12,182,100		$ 11,740,943
Accumulated Amortization On Land Use Rights	1,346,759		(1,113,338)		(641,068)
Land use rights, Total	$ 10,920,476	[1]	$ 11,068,762	[1]	$ 11,099,875	[2]

[1] Note 11

[2] Note 9

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Share-Based Payments

6 Months Ended

12 Months Ended

Jun. 30, 2012

Dec. 31, 2011

Disclosure Of Compensation Related Costs, Share-Based Payments [Abstract]

SHARE-BASED PAYMENTS

16         SHARE-BASED PAYMENTS

Effective June 30, 2010, the Board of Directors approved the Company’s 2010 Equity Incentive Plan ( the “Plan”). The maximum numbers of shares of common stock of the Company issuable pursuant to the Plan is 6,000,000 shares.  The Plan shall be administered by the Board; provided however, that the Board may delegate such administration to a plan Committee.

On June 30, 2010, the Company granted a total of 3,000,000 stock options to certain senior management employees with a contractual term of 5 years. The exercise price of these stock options is $4.20 per share and the grant-date fair value of these stock options amounted to $3,347,298. A total of 2,810,000 stocks options vest over three years as follow: 30% shall vest and become exercisable one year after a grant date, 40% shall vest and become exercisable two years after the grant date, and 30% shall vest and become exercisable three years after the grant date. For the remaining 190,000 stock options: 40% shall vest and become exercisable one year after the grant date and 60% shall vest and become exercisable two years after grant date.

On July 1, 2010, the Company granted a total of 80,000 stock options to two independent directors with contractual terms of 5 years. The exercise price of these stock options is $4.20 per share and the grant-date fair value of these stock options amounted to $91,349. A total of 40,000 of the options shall vest and become exercisable one year after the grant date and the remaining 40,000 of the stock options shall vest and become exercisable two years after the grant date, provided that the independent directors are re-elected for successive one year terms one year after the stock options issuance date.

On August 4, 2010, the Company granted 700,000 stock options to employees, with a contractual term of 5 years. The exercise price of these stock options was $4.50 per share and the grant-date fair value of these stock options amounted to $1,338,761. These stock options vest over three years as follows: 30% shall vest and become exercisable one year after the grant date, 40% shall vest and become exercisable two years after grant date and 30% shall vest and become exercisable three years after the grant date.

On December 29, 2010, 600,000 stock options granted to certain employees on August 4, 2010, were cancelled. As compensation for such cancellation, the Company committed to pay these employees incremental cash payments during the period through August 2013. The fair value of the committed cash payment on December 29, 2010 was approximately $400,000 and no incremental compensation costs resulted from the cancellation of these stock options. Included in accrued expenses and other payables is approximately $257,226 representing the liability related to the committed cash payment as of June 30, 2012.

No options were granted during the three and six months ended June 30, 2012.

For the three months ended June 30, 2012 and 2011, share-based compensation expense related to employee stock options charged to general and administrative expenses in the consolidated statements of operations were $406,098 and $155,188, respectively. For the six months ended June 30, 2012 and 2011, share-based compensation expenses related to employee stock options charged to general and administrative expenses in the consolidated statements of operations were $819,496 and $1,285,185, respectively.

As of June 30, 2012, there were unrecognized compensation costs related to employee stock options of approximately $1,146,910. These costs are expected to be recognized on a straight-line basis, over the remaining weighted average service period of 0.94 years.

17        SHARE-BASED PAYMENTS

(a)   Employee stock option grants

Effective June 30, 2010, the Board of Directors approved the Company’s 2010 Equity Incentive Plan (the “Plan”). The maximum numbers of shares of common stock of the Company issuable pursuant to the Plan is 6,000,000 shares. The Plan shall be administered by the Board; provided however, that the Board may delegate such administration to a Plan Committee (the “Committee”).

Subject to the provisions of the Plan, the Board and/or the Committee shall have authority to determine the type or types of awards to be granted to each participant under the Plan. The exercise price of options to purchase shares of the Company’s common stock granted under the Plan shall be determined by the Board or the Committee, provided, however that the exercise price of any incentive stock option shall not be less than 100% of the fair market value of a share on the date of grant. The term of each option shall be fixed by the Board or the Committee, provided that no incentive stock option shall have a term greater than 10 years.

On June 30, 2010, the Company granted a total of 3,000,000 stock options to certain senior management employees with a contractual term of 5 years. The exercise price of these stock options is $4.20 per share and the grant-date fair value of these stock options amounted to $3,347,298. A total of 2,810,000 stocks options vest over three years as follows:30% shall vest and become exercisable one year after the grant date, 40% shall vest and become exercisable two years after the grant date, and 30% shall vest and become exercisable three years after the grant date. For the remaining 190,000 stock options: 40% shall vest and become exercisable one year after the grant date and 60% shall vest and become exercisable two years after the grant date.

On July 1, 2010, the Company granted a total of 80,000 stock options to two independent directors with contractual terms of 5 years. The exercise price of these stock options is $4.20 per share and the grant-date fair value of these stock options amounted to $91,349. A total of 40,000 options shall vest and become exercisable one year after the grant date and the remaining 40,000 options shall vest and become exercisable two years after the grant date, provided that the independent directors are re-elected for successive one year terms one year after the stock options issuance date.

On August 4, 2010, the Company granted 700,000 stock options to employees with a contractual term of 5 years. The exercise price of these stock options was $4.50 per share and the grant-date fair value of these stock options amounted to $1,338,761. These stock options vest over three years as follows: 30% shall vest and become exercisable one year after the grant date, 40% shall vest and become exercisable two years after the grant date and 30% shall vest and become exercisable three years after the grant date.

On December 29, 2010, 600,000 stock options granted to certain employees on August 4, 2010, were cancelled. As compensation for such cancellation, the Company committed to pay these employees incremental cash payments during the period through August 2013. The fair value of the committed cash payment on December 29, 2010 was approximately $400,000 and no incremental compensation cost resulted from the cancellation of these stock options. Included in accrued expenses and other payables is approximately $190,000and $56,000 representing the liability related to the committed cash payment as of December 31, 2011 and 2010, respectively.

There were no share options granted during the year ended December 31, 2011. A summary of the share options granted and the activity during the year ended December 31, 2010 is as follows:

	Number of options			Weighted average exercise price		Weighted average remaining contractual term	Aggregate intrinsic value
Balance as of
January 1,2010		-		$	-
Granted on June 30,2010		3,000,000			4.2
Granted on July 1,2010		80,000			4.2
Granted on August 4,2010		700,000			4.5
Cancelled		(600,000	)		4.5
Forfeited		(150,000	)		4.2
Balance as of
December 31, 2010		3,030,000		$	4.21	3.5 years	$	0
Exercisable as of December 31, 2010		-			-	-		-

The following table presents information relating to non-vested stock options as of December 31, 2011

	Options			Weighted average grant-date fair value			Weighted average  remaining contractual term
Nonvested at January 1, 2011		3,030,000		$	3,629,899
Granted		-			-
Vested		(989,000	)		(1,103,493	)
Forfeited		(586,000	)		(653,839	)
Nonvested at December 31, 2011		1,455,000		$	1,872,567		2.5 years

The total fair value of stock options that vested during the year ended December 31, 2011 was $1,103,493.  

The grant-date fair value of the stock options granted in 2010 was estimated using the Black-Scholes option pricing model, based on the assumptions in the following table.

		Options granted on June 30, 2010			Options granted on July 1, 2010			Options granted on August 4, 2010
Expected volatility		47	%		47	%		47	%
Expected dividend yield		0	%		0	%		0	%
Weighted average risk-free interest rate		1.79	%		1.80	%		1.62	%
Weighted average expected life (in years)		5.0			5.0			5.0
Estimated fair value of underlying
common stock	$	3.21		$	3.25		$	4.50

Because the Company’s common stock had limited trading history at the time the options were issued, the expected volatility was based on the historical volatilities of comparable publicly traded companies engaged in a similar industry. The risk free interest rate is based on the US Treasury Bill rate for the expected term of the options and the expected dividend yield is based on the Company’s current dividend yield. The Company uses historical data to estimate employee termination within the valuation model. The expected life of options granted represents the period of time that options granted are expected to be outstanding. For the year ended December 31, 2011 and 2010, share-based compensation expenses related to employee stock options charged to general and administrative expenses in the consolidated statements of operations were $1,627,802 and $777,102, respectively.

As of December 31, 2011, unrecognized compensation costs related to employee stock options was approximately $2,372,504. These costs are expected to be recognized on a straight-line basis, over the remaining weighted average service period of 1.44years.

(b)   Non-employee stock option grants

On April 19, 2010, the Group issued 88,000 shares of common stock to Hayden Communications International, for the investor related services they will provide for a 12 months period. All the shares vested immediately after the signature of the agreement.  The related expenses were $62,545 and $146,895 for the year ended December 31, 2011 and 2010, respectively.

On April 19, 2010,the Group issued 48,000 shares of common stock to Chesapeake Group, Inc, for the investor related services they will provide in a period of 12 months. The related expenses were $12,990 and $139,290 for the year ended December 31, 2011 and 2010, respectively.

On April 19, 2010,the Group issued 50,000 shares of common stock to Hampton Growth Resources, LLC, for the investor related services they will provide for a 12 months period. The related expenses were $54,500 and $144,875 for the year ended December 31, 2011 and 2010, respectively.

On July 1, 2010, the Group granted 40,000 stock options to an external HR consultant with a contractual term of 5 years in exchange for its services completed prior to the grant date. The exercise price of these stock options is $4.20 per share and the grant-date fair value was$45,675. These stock options vested and became exercisable at grant.

On July 27, 2010, the Group granted 420,000 stock options to a consultant. The options expire on April 21, 2013. The exercise price of these stock options is $4.20 per share. A total of 70,000 of the stock options vested and became exercisable at the grant date, 31,818 vested monthly from September 1, 2010 through April 1, 2011, and the remaining balance of 95,456 vested on May 1, 2011. Management considers that the vesting dates are concurrent with the respective service completion dates. The grant date fair value of the options was $520,441 and the related compensation expenses were $290,332 and $307,745 for the years ended December 31, 2011 and 2010, respectively.

A summary of the stock options granted to non-employees as of December 31, 2011 is as follows:

	Number of options		Weighted average exercise price		Weighted average remaining contractual term	Aggregate intrinsic value
Outstanding as of
December 31, 2011		460,000	$	4.20	1.5 years	$	-
Exercisable as of
December 31, 2011		460,000	$	4.20	1.68 years	$	-

The fair value of the stock options granted in 2010 was measured using the Black-Scholes option pricing model. The assumptions used in estimating the fair value are in the following table.

		Awards granted			Awards granted
		on July 1, 2010			on July 27, 2010
Expected volatility		47	%		47	%
Expected dividend yield		0	%		0	%
Weighted average risk-free interest rate		1.8	%		1.02	%
Weighted average expected life (in years)		5.0			3.0
Estimated fair value of underlying common stock	$	3.25		$	4.00-4.50

Because the Company’s common stock had limited trading history at the time the options were issued, the expected volatility was based on the historical volatilities of comparable publicly traded companies engaged in a similar industry. The risk free interest rate is based on the US Treasury Bill rate for the expected term of the options and the expected dividend yield is based on the Company’s current dividend yield. The Company uses historical data to estimate employee termination within the valuation model. The expected life of options granted represents the period of time that options granted are expected to be outstanding.

For the year ended December 31, 2011, share-based compensation expenses related to non-employee stock and stock options recorded in general and administrative expenses in the consolidated statements of operations were $130,035 and $290,332, respectively. For the year ended December 31, 2010, share-based compensation expenses related to non-employee stock and stock options recorded in general and administrative expenses in the consolidated statements of operations were $431,060 and $353,420, respectively.

As of December 31, 2011, the unrecognized compensation cost related to non-employee stock and stock options was $22,837. These costs are expected to be recognized over a remaining vesting period of 1.5 years.

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Long-Term Bank Borrowings (Details Textual)	6 Months Ended		12 Months Ended
	Jun. 30, 2012 USD ($)	Jun. 30, 2011 USD ($)	Dec. 31, 2011 USD ($)	Dec. 31, 2011 CNY	Dec. 31, 2010 USD ($)	Dec. 31, 2010 CNY
Long term debt (Textual)
Long term debt interest rate range minimum	7.29%		5.76%	5.76%	5.40%	5.40%
Long term debt interest rate range maximum	7.74%		6.98%	6.98%	7.56%	7.56%
Repayments of long-term bank borrowings		$ 13,014,350	$ 17,820,400	115,000,000	$ 13,610,480	92,000,000

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Summary of Significant Accounting Policies (Tables)

12 Months Ended

Dec. 31, 2011

Accounting Policies [Abstract]

Summary of estimated useful lives of property, plant and equipment

Buildings	45 years
Machinery and equipment	5 to 15 years
Vehicles	5 years
Office equipment and furniture	3 to 10 years

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Short-Term Bank Borrowings

6 Months Ended

12 Months Ended

Jun. 30, 2012

Dec. 31, 2011

Short-Term Debt [Abstract]

SHORT-TERM BANK BORROWINGS

12         SHORT-TERM BANK BORROWINGS

	June 30,		December 31,
	2012		2011
	¼ Unaudited ¼‰
Bank borrowings-secured/guaranteed	$	393,534,612	$	225,969,421

Short−term bank borrowings outstanding as of June 30, 2012 carry a weighted average interest rate of 5.91% (2011: 5.32%) for bank loans in RMB; a weighted average interest rate of 4.48% (2011: 3.42%) for bank loans in USD, and have maturity terms ranging from one to twelve months and interest rates ranging from 1.57% to 7.93% (2011: 2.97% to 4.3%).

At June 30, 2012, approximately $48,835,000 included in short-term bank borrowings is payable to Shanghai Pudong Development Bank, which is secured by a one-year fixed term deposit with a carrying amount of $50,403,000. In addition, $62,393,870 payable to Bank of China is secured by Ningbo Keyuan's one year fixed term deposit and pledged deposits with a carrying amount of $63,835,423 as of June 30, 2012; $11,000,000 payable to China CITIC Bank is secured by Ningbo Keyuan’s one-year fixed term deposit with a carrying amount of $11,246,860 as of June 30, 2012; and $22,591,104 payable to China Construction Bank is secured by pledged deposits with a carrying amount of $22,825,797 as of June 30, 2012. Among the rest of the Group's short-term borrowings, $248,714,638 is guaranteed by related party and third-party entities and individuals, including $15,850,000 which is guaranteed by the Group’s Chief Executive Officer and $11,000,000 that is secured by the Group’s land, buildings and equipment with a carrying amount of $90,798,902 as of June 30, 2012.

10        SHORT-TERM BANK BORROWINGS

Short-term bank borrowings consist of the following:

As of December 31,
2011	2010

Bank borrowings-secured/guaranteed $ 225,969,421 $ 135,768,634

Short−term bank borrowings outstanding as of December 31, 2011 carry a weighted average interest rate of 5.45% (2010:5.15%) for bank loans in RMB; and a weighted average interest rate of 3.78% (2010: 3.44%) for bank loans in USD, and have maturity terms ranging from one to twelve months and interest rates ranging from 2.97% to 7.93% (2010: 2.97% to 5.56%).

Approximately $17,000,000 included in short term bank borrowings at December 31, 2011is payable to Shanghai Pudong Development Bank, and is secured by a one-year fixed term deposit with a carrying amount of $18,494,500.In addition, $45,577,366 payable to Bank of China is secured by Ningbo Keyuan’s one-year fixed term deposit and pledged deposits with carrying amounts of $46,533,893 as of December 31, 2011; $11,000,000 payable to China CITIC Bank is secured by Ningbo Keyuan's one-year fixed term deposit with a carrying amount of$11,411,500 as of December 31,2011.Among the rest of the Group's short-term borrowings, $152,392,055 is guaranteed by related party and third-party entities and individuals, including $18,888,000 which is guaranteed by the Group’s Chief Executive Officer, and $25,420,808 that is secured by the Group’s land, buildings and equipment with a carrying amount of $91,582,011 as of December 31, 2011.

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Related Party Transactions and Relationships and Transactions With Certain Other Parties (Details)	6 Months Ended	12 Months Ended
	Jun. 30, 2012	Dec. 31, 2011
Mr. Chunfeng Tao [Member]
Parties to the related party transactions
Relationship	Majority stockholder	Majority stockholder
Mr. Jicun Wang [Member]
Parties to the related party transactions
Relationship	Principal stockholder	Principal stockholder
Mr. Peijun Chen [Member]
Parties to the related party transactions
Relationship	Principal stockholder	Principal stockholder
Ms. Sumei Chen [Member]
Parties to the related party transactions
Relationship	Member of the Company's Board of Supervisors and spouse of Mr. Wang	Member of the Company's Board of Supervisors and spouse of Mr. Wang
Ms. Yushui Huang [Member]
Parties to the related party transactions
Relationship	Vice President of Administration, Ningbo Keyuan	Vice President of Administration, Ningbo Keyuan
Mr. Weifeng Xue [Member]
Parties to the related party transactions
Relationship	Vice President of Accounting, Ningbo Keyuan through August 2011	Former Vice President of Accounting, Ningbo Keyuan through August 2011
Mr. Hengfeng Shou [Member]
Parties to the related party transactions
Relationship	Vice President of Sales, Ningbo Keyuan Petrochemical	Former Vice President of Sales, Ningbo Keyuan Petrochemical through November 2011 General Manager/President
Mr. Shifa Wang [Member]
Parties to the related party transactions
Relationship		Vice President Guangxi Project
Mr. Ming Liang Liu [Member]
Parties to the related party transactions
Relationship		Vice President Production
Mr. Shegeng Ding [Member]
Parties to the related party transactions
Relationship		Vice President Equipment
Mr. Fan Zhang [Member]
Parties to the related party transactions
Relationship		CFO
Ningbo Kewei Investment Co., Ltd. (Ningbo Kewei) [Member]
Parties to the related party transactions
Relationship	A company controlled by Mr. Tao through September 2011	A company controlled by Mr. Tao through September 2011
Ningbo Pacific Ocean Shipping Co., Ltd (Ningbo Pacific) [Member]
Parties to the related party transactions
Relationship	100% ownership by Mr. Wang	100% ownership by Mr. Wang
Ningbo Hengfa Metal Product Co., Ltd (Ningbo Hengfa, former name "Ningbo Tenglong") [Member]
Parties to the related party transactions
Relationship	100% ownership by Mr. Chen	100% ownership by Mr. Chen
Shandong Tengda Stainless Steel Co., Ltd (Shandong Tengda) [Member]
Parties to the related party transactions
Relationship	100% ownership by Mr. Chen	100% ownership by Mr. Chen
Ningbo Xinhe Logistic Co., Ltd (Ningbo Xinhe) [Member]
Parties to the related party transactions
Relationship	10% ownership by Ms. Huang	10% ownership by Ms. Huang
Ningbo Kunde Petrochemical Co, Ltd. (Ningbo Kunde) [Member]
Parties to the related party transactions
Relationship	Mr. Tao's mother was a 65% nominee shareholder for Mr. Hu, a third party through September 2011, and included in transactions with certain other parties beginning October 1, 2011.	Mr. Tao's mother was a 65% nominee shareholder for Mr. Hu, a third party through September 2011
Ningbo Jiangdong Jihe Construction Materials Store (Jiangdong Jihe) [Member]
Parties to the related party transactions
Relationship	Controlled by Mr. Xue's Brother-in-law	Controlled by Mr. Xue's Brother-in-law
Ningbo Wanze Chemical Co., Ltd (Ningbo Wanze) [Member]
Parties to the related party transactions
Relationship	Mr. Tao's sister-in-law is the legal representative	Mr. Tao's sister-in-law is the legal representative
Ningbo Zhenhai Jinchi Petroleum Chemical Co., Ltd (Zhenhai Jinchi) [Member]
Parties to the related party transactions
Relationship	Controlled by Mr. Shou	Controlled by Mr. Shou