10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2013

or

¨ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _____________ to ________________

Commission file number: 001-34445

LIHUA INTERNATIONAL, INC.

(Exact name of registrant as specified in its charter)

Delaware	14-1961536
(State or other jurisdiction of	(I.R.S. Employer Identification No.)
incorporation or organization)
c/o Lihua Holdings Limited
Houxiang Five-Star Industry District, Danyang City, Jiangsu Province, PRC	212312
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: (86) 511 86317399

Securities registered pursuant to Section 12(b) of the Act: Common Stock, par value $0.0001 per share

Name of each exchange on which registered: NASDAQ Capital Market

Securities registered pursuant to Section 12(g) of the Act:  None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes  ¨   No  x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act.  Yes  ¨  No  x

Indicate by check mark whether the registrant (1) has filed all reports required by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes  x  No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§229.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes  x  No  ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  ¨

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.

Large accelerated filer  ¨	Accelerated filer    x
Non-accelerated filer  ¨	Smaller reporting company  ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes  ¨   No  x

The aggregate market value of the voting and non-voting stock held by non-affiliates of the Registrant as of June 30, 2013 was approximately $79,222,316.

The number of shares outstanding of the Registrant’s common stock as of March 13, 2014 was 30,032,116.

DOCUMENTS INCORPORATED BY REFERENCE

None.

LIHUA INTERNATIONAL, INC.

Annual Report on Form 10-K for the Year Ended December 31, 2013

FORWARD LOOKING STATEMENTS			1
PART I
	ITEM 1.	BUSINESS	2
		ITEM 1A.     RISK FACTORS	23
		ITEM 1B.     UNRESOLVED STAFF COMMENTS	38
	ITEM 2.	PROPERTIES	38
	ITEM 3.	LEGAL PROCEEDINGS	38
	ITEM 4.	MINE SAFETY DISCLOSURES	39
PART II			39
	ITEM 5.	MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED SHAREHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES	40
	ITEM 6.	SELECTED FINANCIAL DATA	41
	ITEM 7.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	42
		ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	55
	ITEM 8.	FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA	56
	ITEM 9.	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE	56
		ITEM 9A. CONTROLS AND PROCEDURES	56
		ITEM 9B. OTHER INFORMATION	57
PART III			58
	ITEM 10.	DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE	58
	ITEM 11.	EXECUTIVE COMPENSATION	65
	ITEM 12.	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED SHAREHOLDER MATTERS	72
	ITEM 13.	CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE	74
	ITEM 14.	PRINCIPAL ACCOUNTANT FEES AND SERVICES	75
PART IV			76
	ITEM 15.	EXHIBITS AND FINANCIAL STATEMENT SCHEDULES	76

i

FORWARD LOOKING STATEMENTS

This Annual Report on Form 10-K contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, and Section 21E of the Securities Exchange Act of 1934. These statements relate to future events or our future financial performance. We have attempted to identify forward-looking statements by terminology including “anticipates”, “believes”, “expects”, “can”, “continue”, “could”, “estimates”, “expects”, “intends”, “may”, “plans”, “potential”, “predict”, “should” or “will” or the negative of these terms or other comparable terminology. These statements are only predictions. Uncertainties and other factors, including the risks outlined under Risk Factors contained in Item 1.A. of this Form 10-K, may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements.

A variety of factors, some of which are outside our control, may cause our operating results to fluctuate significantly. They include:

· changes in end-user demand for the products manufactured and sold by our customers;

· general and cyclical economic and business conditions, domestic or foreign, and, in particular, those in China’s copper industries;

· the rate of introduction of new products by our competitors and customers;

· the rate of introduction of enabling technologies by our suppliers;

· changes in our pricing policies or the pricing policies of our competitors or suppliers;

· changes in the market price of copper;

· our ability to compete effectively with our current and future competitors;

· our ability to manage our growth effectively, including possible growth through acquisitions;

· our ability to enter into and renew key corporate and strategic relationships with our customers and suppliers;

· foreign currency exchange rate fluctuations;

· adverse changes in the securities markets; and

· legislative or regulatory changes in China.

Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Our expectations are as of the date this Form 10-K is filed, and we do not intend to update any of the forward-looking statements after the filing date to conform these statements to actual results, unless required by law.

We file annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and proxy and information statements and amendments to reports filed or furnished pursuant to Sections 13(a) and 15(d) of the Securities Exchange Act of 1934, as amended. You may read and copy these materials at the SEC’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. You may obtain information on the operation of the public reference room by calling the SEC at 1-800-SEC-0330. The SEC also maintains a website (http://www.sec.gov) that contains reports, proxy and information statements and other information regarding us and other companies that file materials with the SEC electronically. You may also obtain copies of reports filed with the SEC, free of charge, via a link included on our website at http://www.lihuaintl.com.

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PART I

ITEM 1. BUSINESS

Company Overview

Business Overview

We are a vertically integrated company in China which develops, designs, manufactures, markets and distributes low cost, high quality refined copper products including copper anode, copper rod, pure superfine copper wire, and copper-clad aluminum superfine wire (“CCA”), which is an alternative to pure superfine copper wire. We also use recycled scrap copper as a raw material to produce refined copper products including copper anode and copper rod.  Copper anode is the raw material for copper cathode, which is the fundamental building block for pure copper products. We use the copper rod we produce as raw material for the production of pure copper wire. Primarily because of its high electrical conductivity, pure copper wire is used in many components in a wide variety of motorized and electrical appliances such as dishwashers, microwaves and automobiles. In most instances, our CCA wire and refined copper rod and wire products are an excellent, less costly substitute for pure copper cable and wire products.

We sell copper anode primarily to a few large copper cathode producers in China. We sell our rod and wire products to down stream manufacturers including fine and superfine wire processors and small and micro electronic motor manufacturers who in turn sell to the consumer electronics, white goods, automotive, utility, telecommunications and specialty cable industries. Our track record and reputation for producing high quality products in large quantities has paved the way for expansion of our customer base. In the PRC, the market for copper products is large and growing. As a result, there is solid demand for all of our products. Essentially all of our product sales are made to domestic customers in the PRC.

Prior to 2009, our business focused primarily on CCA. Our CCA business consisted of acquiring CCA with a line diameter of 2.60 mm from our suppliers as a raw material, and then reducing the diameter of the CCA by drawing it and then annealing and coating it. Our final CCA product typically has diameters from 0.03 mm to 0.18 mm, depending on customer specifications.

Over the past several years we have worked to develop and produce a new form of CCA wire using our own proprietary binding technology which has better performance characteristics than the CCA wire that is currently available to us from third party suppliers. In 2013, we completed product and industry standard testing of this new CCA product. In the second half of 2013 we added five copper and aluminum binding machines in order to supply this new CCA product as the raw material for new superfine CCA products, which share the improved performance characteristics of the new CCA raw material, including better conductivity. Due to these improved performance characteristics, the new CCA superfine wire can be used in more sophisticated applications such as audio and visual equipment.

In the first quarter of 2009, we began production of copper rod from recycled scrap copper. The copper rod we produce meets the national purity standard for pure copper cable and wire. In August 2010, we began production and sales of copper anode, another refined copper product produced from recycled scrap copper, and increased our refined copper smelting capacity to 50,000 tons per annum.  In October 2011, we completed capacity efficiency improvements to our two smelters and thereby increased annual production capacity of copper anode and copper rod to 35,000 tons and 50,000 tons, respectively. In mid 2012, we focused on copper anode production capacity expansion and completed construction of two new copper anode smelters on the 30-acre plant site, giving us a total of 3 anode smelters. In December 2012, we dismantled the oldest copper anode smelter as a result of consolidating and upgrading our production site. In the first quarter of 2013, we completed construction of a third copper anode smelter. The new copper anode smelters constructed in 2012 and 2013 each have an annual production capacity of 25,000 – 30,000 tons, giving us total copper anode refinery capacity of 75,000 – 90,000 tons per annum. We started construction of a fourth copper anode smelter in early 2013, however we have delayed the further construction due to reconfiguration of the dust collection system. The construction will resume upon completion of the dust collection system and a better near term economic outlook. To the extent our down stream wire-drawing capacity allows, we process our copper rod into copper wire.  Until the first half of 2010, because our output of copper rod exceeded our capacity to process it into copper wire, we sold our excess copper rod to other wire manufacturers for further processing.  In the third quarter of 2010, we completed an expansion of our wire drawing capacity expansion and reached 20,000 – 25,000 tons of annual drawing capacity for wires with diameters ranging from 0.03mm – 1.60mm, we started using our copper rod output exclusively for internal copper wire drawing. With the October 2011 copper rod capacity expansion to 50,000 tons per annum, in the fourth quarter of 2011, we again began selling excess copper rod to the open market.

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Because copper anode is the raw material for copper cathode, which is the fundamental building block for pure copper products, copper anode is an upstream product, and the end market for copper anode covers most of the copper consumption market in the PRC.  Our markets for our other three main products overlap to a degree, and are characterized by their breadth and depth, with a number of current and potential customers for each product category. Our refined copper products, copper anode and copper rod, which are manufactured from recycled scrap copper, compete directly with the same products made from “virgin” (e.g. newly mined) copper. Since we produce our copper products with bulk scrap copper, we believe it provides us with a cost advantage in the market. Our copper anode customers are large domestic copper cathode manufacturers.  Most of our copper rod customers are producers of smaller diameter copper wire used in power cables ranging in size from high voltage power transmission cables to white good applications such as internal wiring in household appliances and consumer electronics. Our copper wire, which is sold in a variety of diameters and may undergo further in-line processing such as coating with plastic, is sold to many of the same types of end-use customers who purchase copper wire from our copper rod customers. These include manufacturers of a wide range of power cables and products that incorporate wiring, such as household appliances, automobiles, consumer electronics and telecommunications equipment. Our CCA wire is sold to many of these manufacturers as well. CCA wire sells at a lower cost per unit of weight than pure copper wire, due to the relatively lower density of the aluminum core which makes up most of the volume of CCA wire. Our new CCA wire product offers conductivity performance characteristics that are comparable to those of pure copper wire, which means they are attractive in a wide variety of product applications such as audio and video equipment, most household appliance, automotive, consumer electronics and telecommunications applications. Demand for each of our product lines is solid, due both to consistent demand in the PRC for overall copper consumption and all types of basic wire raw materials and the relative cost advantages our product lines carry over “virgin” copper competitive products.

We believe that we are well positioned to continue capturing further market share in the larger copper consumption market and the copper wire industry.  We generated sales of $900.7 million, $853.8 million, and $637.1 million for the years ended December 31, 2013, 2012 and 2011, respectively. We achieved net income of $56.2 million, $57.9 million and $53.1 million for the years ended December 31, 2013, 2012 and 2011, respectively. In 2013, we had a $8,369 non-cash loss on extinguishment of warrant liabilities and non-cash charge of $106,536, which resulted from the change in the fair value of the warrants issued to investors in conjunction with the Company’s issuance of convertible Preferred Stock in October 2008. Excluding the warrant related non-cash charges, net income for 2013 was $56.3 million, down 3.0% from the same period last year of $58.0 million, which excluded aggregate non-cash charges of $50,709 related to gains on extinguishment of warrant liabilities and changes in the fair value of warrants.

Currently, our ability to increase production and sales of our copper anode, copper rod, copper wire (drawn from copper rod) and CCA wire products is limited by the capacity of the equipment we have installed to produce these products. Our refined copper products are made from bulk scrap copper, which is cleaned, purified and smelted in large capacity smelter units. At the present time we have four smelting facilities with total annual scrap copper refining capacity of 125,000 – 140,000 tons. Three of the smelters are copper anode smelters which are capable of producing a total of approximately 75,000 – 90,000 tons per year. In October 2011, we completed efficiency improvements to the copper rod smelter and increased the copper rod production capacity to 50,000 tons per annum, after adding a vertical smelter on top of the original horizontal one. As of December 31, 2013, we operated approximately 80 high speed wire drawing machines, which draw larger diameter copper rod or CCA rod into much finer diameter wire, with a total capacity of 6,000 – 8,000 tons per annum of superfine CCA wire and 20,000 - 25,000 tons per annum of superfine copper wire, with a diameter range of 0.03mm to 1.60mm. We also have four fine wire drawing machines with aggregate annual drawing capacity of 50,000 – 100,000 tons of fine wire products with a diameter range of 1.65mm – 2.60mm. Certain of these drawing machines incorporate additional production steps such as coating, annealing or magnetizing the fine wire produced. These drawing machines are manufactured to our design and specifications by custom equipment manufacturers located in the PRC.  We are not dependent on any single custom equipment manufacturer for the fabrication of our drawing lines.  In 2012, we completed construction of a new production and warehousing facility adjacent to the current plant, which houses our three copper anode smelters. We began construction of the fourth copper anode smelter in early 2013 but delayed construction completion due to the reconfiguration of the dust collection system for the smelters. The decision to complete construction of the fourth anode smelter is dependent on better near term economic outlook and the completion of the dust collection system. We have completed construction of all the production and warehouse facilities on site to house production equipment for our new CCA cable and wire product, as well as warehousing of materials.

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We continuously pursue technological innovations and improvements in our manufacturing processes. We have obtained two patents in the PRC. In 2013 we submitted 16 patent applications relating to the production technology of the new CCA product we have developed. We have formed research and development (“R&D”) partnerships with Shanghai Electric Cable Research Institute and Beijing Modern Recycle Economy Research Institute. We believe that our emphasis on technological innovations and production efficiency has contributed significantly to our leading industry position in the PRC and will continue to do so for the foreseeable future. Further, significant capital requirements make it difficult for newcomers to successfully compete with our scrap copper refinery and superfine wire businesses. With respect to our scrap copper refinery business, our proprietary smelting process enhances scrap copper purity, and enables us to produce high purity refined copper products, which meet the industry standard for pure copper product.  With respect to CCA, during the process of drawing, annealing and coating CCA, it is challenging to maintain the integrity of copper and aluminum weight and volume distribution without breakage, especially for finer diameter wires. Our knowledge and experience in successfully generating high quality CCA fine and super fine wires put us at a significant advantage over would-be competitors. With respect to pure copper wire, our proprietary recycling technology offers us a unique ability to produce high quality pure copper wire from scrap copper. This enables us to have a lower raw material cost base compared to pure copper wire produced from “virgin” copper sourced from copper mines. Our experience and technology allow us to offer products that are, in most instances, more cost-effective to those that our potential competitors can produce. Because we are already an approved vendor for many of our customers and qualifying new vendors can be time-consuming, we believe we are further advantaged vis-à-vis potential competitors.

To minimize exposure to copper commodity risk, we seek to minimize our raw material inventory. In addition, we charge a fixed dollar processing fee for most of our products thus enabling us to pass most of the underlying raw material price exposure to our customers, and minimize our exposure to copper price fluctuation. The processing fee is adjusted periodically based on market condition, which includes supply demand dynamics, competitive landscape changes, and copper price fluctuation. We further confirm raw material purchase orders for scrap copper or CCA with suppliers only when the applicable sales order has been received. On the other hand, our principal CCA and scrap copper suppliers usually dedicate portions of their inventories as reserves to meet our manufacturing requirements. We have built a network of reliable suppliers that deliver high quality raw materials, and accordingly, are not dependent upon any one supplier.

We believe that our experienced management team will continue to leverage our leading technologies and increase capacity to manufacture, produce, market and distribute cost-effective, high quality refined copper and superfine copper and CCA wire products. If worldwide demand for alternatives to pure copper grows as we anticipate, and we continue to innovate and improve our processes, we believe we will be well positioned to compete in the copper consumption and copper wire market on a global scale.

Our Strengths

We believe that the following strengths have contributed to our competitive position in China:

Leading market position and early-mover advantage.   We are one of the few scrap copper refineries in China that can produce high purity refined copper products with a purity level as high as 99.96%, which meets the national pure copper cable and wire standard.  We believe we were one of the first companies in China to produce CCA superfine wire on a commercial scale, and currently we are one of the leading CCA superfine wire producers in China, as measured by our current annual CCA superfine wire production capacity of 6,000 – 8,000 tons.

The early-mover advantage coupled with our reputation for high quality products enabled us to establish a wide array of customer and supplier relationships and to expand our relationships with our existing customers. We believe we are well positioned to leverage our increasing production scale and to expand our customer base and product portfolio, to meet China’s demand for copper products.

Proprietary automated and efficient production facility that can be scaled to meet increased demand.   To cope with increased demand, we continue to expand our production facility organically: our CCA wire production capacity increased from 2,200 tons per annum in 2006 to 6,000 – 8,000 tons per annum as of December 31, 2013. In March 2009 we launched scrap copper refinery production and have since built refined copper production capacity to 125,000 – 140,000 tons per annum. In 2010, we increased pure copper superfine wire drawing capacity (for diameter range 0.03mm – 1.60mm) to 20,000 – 25,000 tons per annum.

4

Efficient proprietary production technology.   We continually pursue technological improvements to our manufacturing processes via our strategic partnerships with leading research institutes. We have obtained two patents related to our production technology and production processes. In 2013 we submitted 16 patent applications relating to the production process of the new CCA product we have developed. In addition, we have entered into technology cooperation agreements with research institutes to develop new products as well as new techniques and processes. Our research and development (“R&D”) efforts have generated technological improvements that have been instrumental in controlling our production costs and increasing our operational efficiency. The combination of our trade secrets and our proprietary production technology enables us to use lower-cost recycled copper feedstock and to produce high quality copper alternative products.

Rigorous quality control standards.   Consistent with our continuing commitment to quality, we impose rigorous quality control standards at each stage of our production process. Since January 2007, our plant has maintained ISO9001:2000, a certification of quality management systems maintained by the International Organization of Standardization and administered by certification and accreditation bodies, which is subject to annual review. In addition, our plant has obtained ISO14001 environmental management standard certification.

For copper magnet wire, we obtained a National Industrial Production License in January 2009 and satisfied the UL standard in October 2008. According to a test report dated April 17, 2008 by China’s Machinery Industry Quality Supervision and Test Center For Electrical Material and Special Wire and Cable, a government inspection and testing agency, recycled copper rod produced by us satisfied the national standard for electrical copper wire, GB/T3952-1998. We believe these testing results demonstrate our commitment to producing high-quality products as well as provide us with a competitive advantage over certain domestic competitors in the event China implements stricter quality standards in the future.

Strong technology improvement and R&D capabilities.   Our technology improvement and R&D infrastructure includes a team of more than 30 professionals focusing on quality assurance, equipment maintenance, process maintenance and improvement, and new product and process R&D. We have formed R&D partnerships with Shanghai Electric Cable Research Institute and Beijing Modern Recycle Economy Research Institute. We absorb most of the technology related expenses in our production costs, and thus have only incurred R&D costs at very low levels in past years. We were granted two patents relating to our production process. We believe our knowledge and experience in R&D are the key reasons why we were able to become one of the earliest and leading manufacturers in China in both the CCA and high purity refined copper products. Our scrap copper refinery operation utilizes a proprietary smelting process, which enables us to smelt scrap copper into high purity copper rod product, which meets the national industry standard for pure copper. As a result, we have been able to take advantage of this emerging market opportunity given the growth in China’s copper consumption.

Experienced management and operations teams with local market knowledge.   Our senior management team and key operating personnel have extensive management skills, relevant operating experience and industry knowledge. Mr. Zhu and Ms. Wang, our co-founders, Chairman & CEO and COO, have extensive experience managing and operating companies in the copper manufacturing industry. We believe our management team’s in-depth knowledge of the Chinese copper market will enable us to formulate sound expansion strategies and to take advantage of market opportunities.

Our Strategies

We will continue to strive to be a leading supplier of copper replacement products in the PRC, while maximizing shareholder value and pursuing a growth strategy that includes:

Developing market driven new products and processes.   We consistently pursue technological improvements to our manufacturing processes and new product development through our strong in-house technology development team. Our R&D efforts have generated technological improvements that have been instrumental in controlling our production costs and increasing our operational efficiency. Our combination of trade secrets and proprietary production technology enables us to use lower-cost feedstock and to attain higher product quality. We have formed R&D partnerships with Shanghai Electric Cable Research Institute and Beijing Modern Recycle Economy Research Institute. Through innovation and further production efficiencies, we believe our emphasis on R&D will enable us to maintain our position as a leading copper alternative and replacement product supplier in the PRC.

5

Reliable supplier network for low cost raw materials.   We maintain long-term supply relationships with several key suppliers. We believe many of our suppliers prefer to sell raw materials to us due to our track record for prompt payment as well as our ability to accept large quantities of raw materials. Our long-standing supplier relationships provide us with a competitive advantage in China, and we intend to broaden these relationships to parallel our efforts to increase the scale of our production facilities, thereby maintaining a diverse supplier network while leveraging our purchasing power to obtain favorable price and delivery terms.

Production capacity expansion.   In order to accommodate the rapidly increasing demand for our products, we have expanded, and plan to continue to expand, our manufacturing capacity. An increase in capacity has a significant effect on our results of operations, both in allowing us to produce and sell more products and achieve higher revenues, and in lowering our manufacturing costs resulting from economies of scale. We have expanded rapidly since we launched our CCA wire production in 2006. The following table sets forth information on the historical development of our production facilities:

	Plant 1	Plant 2	Plant 3
Location	Danyang, Jiangsu	Danyang, Jiangsu	Danyang, Jiangsu
Began construction	March 1999	March 2008	November 2010
Began production	January 2006	March 2009	2 new copper anode smelters – June 2012; 3rd copper anode smelter – January 2013; 4th copper anode smelter – construction started in early 2013; Completed construction of production factories and warehouses
Capacity as of December 31, 2013 (metric tons per year)	None.  For new product test run only.	Copper rod – 50,000 Fine Copper wire – 50,000-100,000	Copper anode – 75,000-90,000
			*Superfine copper wire – 20,000–25,000 *CCA superfine wire – 6,000-8,000
Site area (square meters)	11,000	66,000	119,988

* Production equipment moved from Plant 2 to Plant 3 in the third quarter of 2013.

We believe our expansion strategy will enable us to increase market share in the copper market in the PRC.

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Selectively pursue acquisition opportunities.  Although we have not identified a potential acquisition target(s), we may in the future look to acquire businesses or assets that may enhance our market position.

Strengthening our relationships with key customers and diversifying our customer base.  We intend to strengthen our existing relationships with key customers while further expanding our customer base. We plan to continue providing high-quality and cost-competitive products to our existing customers and use our existing customer network and strong industry reputation to expand geographically to strategic locations across China. We plan to increase our sales service personnel to further expand our supplier and customer base and to provide increased coverage of the market. To assist our efforts, we intend to continue to use customer feedback to improve our service quality and strengthen our long-term customer base.

Competition

The PRC is the world’s largest country for copper products consumption and is also the largest producer and market for cable and wire. Our sales are predominantly in the PRC, and as a result, our primary competitors are PRC domestic companies. To a lesser degree we face competition from international companies.

We believe we are the leading CCA superfine wire manufacturer in China in terms of market share, and we are one of the leading scrap copper recyclers in the nation, based on our current scrap copper refinery capacity.

We believe being located in the PRC provides us with a number of competitive advantages within our industry, such as:

· Pricing.   Low cost of shipping from being geographically close to our customers and low cost of labor provide us with cost and pricing advantage;

· Technology.   Developed proprietary technologies from being in the PRC copper industry and knowledge of the supply and demand trend in the local market; and

· Barriers to entry.   Strong customer relationships and superior product quality benefiting from our proprietary technology, as well as access to capital from being a public company.

Competition in the bimetallic and scrap copper recycling and refinery industry, particularly in the PRC, can be characterized by growth and a concentration of manufacturers. We believe we differentiate ourselves by being an early mover in the industry, and by offering superior product quality, timely delivery and better value. We believe we have the following advantages over our competitors:

· the performance and cost effectiveness of our products;

· our ability to manufacture and deliver products in required volumes, on a timely basis, and at competitive prices;

· superior quality and reliability of our products;

· our after-sale support capabilities, from both an engineering and an operational perspective;

· excellence and flexibility in operations;

· effectiveness of customer service and a seasoned sales force to assist our customers; and

· overall management capability.

Corporate Structure

The following diagram illustrates our corporate structure as of December 31, 2013.  All of our subsidiaries are owned directly by us.

 

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Manufacturing Process

Copper recycling

Our copper recycling pre-treatment process involves manually or mechanically sorting, stripping, shredding and magnetically separating the scrap copper. The scrap copper is then compacted and then smelted and fire refined in a furnace. The furnace refining process commences with loading the furnace with the pre-treated metal, smelting it, and then refining and reducing it. Thereafter, the molten copper is continually belt cast and further treated, and the refined copper product is ultimately molded or shaped for further processing or sale.

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Wire processing

Our fine and superfine wire drawing process utilizes either our recycled copper rod or CCA and involves drawing the wire to the desired final diameter. Whether using recycled copper rod or CCA, the drawing process entails multiple steps, including heat treating, annealing, baking, cooling, quenching and spooling, as may be necessary to achieve the desired wire diameter and other customer specifications. The CCA drawing process, however, is more complex than the process for using recycled copper rod, and utilizes our proprietary trade secrets to ensure that the wire maintains the original bimetallic bond from the raw material. The fine or superfine wire is either sold to customers or is coated and further processed to become magnet wire.

The following illustration is a simplified outline of our process:

Products

We were one of the first vertically integrated companies in the PRC to develop, design, manufacture, market and distribute low cost, high quality refined copper products.  Our products consist of high purity copper products refined from scrap and bi-metallic copper products.

Copper Anode

An anode is an electrode through which electric current flows into a polarized electrical device.   Copper anode is the raw material for the production of copper cathode, which is the fundamental building block of pure copper products.  The copper anode we produce is in a very heavy, dull looking copper pallet form.

In July of 2010, we completed the construction of a scrap copper smelter dedicated to the production of copper anode.  We started manufacturing and selling copper anode in August of 2010, mainly to larger copper entities, which produce and sell copper cathode to copper products manufacturers.

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Copper Rod and Copper Wire

In March 2009, we launched the manufacturing of copper rod for fire refining, melting and rod casting. We use scrap copper as the raw material for the refined pure copper rod. We use copper rod produced internally as raw material for pure copper wire.

Cable and magnet wire are copper rod based products that have the following end uses: 

Cable

· Used for:

· telephone drop wire and conductors;

· electric utilities; transmission lines, grid wire, fence and structured grounds;

· industrial drop wire, magnet wire, battery cables, automotive wiring harnesses; and

· electronics: radio frequency shielding.

Magnet wire

· Used in electronic motors, transformers, water pumps, automobile meters, energy, industrial, commercial, and residential industries.

The superfine pure copper wire we manufacturer is stretched from the copper rod we produce from the scrap copper refinery.  We produce and distribute pure copper superfine wire in the following forms:

· Fine wire.   Fine wire is sold to smaller wire manufacturers for further processing;

· Magnet wire.   Magnet wire can be fine or super fine and is the basic building block of a wide range of motorized appliances and is mainly used for its electrical conductivity; and

· Tin plated wire.   Tin plated wire is mainly used for the transmission of audio and visual signals.

We produce in accordance with customer orders and we customize our products based on customer specifications.

Copper Clad Aluminum (CCA) Superfine Wire

CCA is an electrical conductor consisting of an outer sleeve of copper that is metallurgically bonded to a solid aluminum core. This structure is set out in the following CCA illustration:

 

Note: The illustration is not drawn to scale.

Since approximately 2005, CCA in China has become a viable and popular alternative to pure copper wire. In comparison with solid copper wire, CCA raw material costs are generally 35% to 40% lower per ton. CCA and pure copper raw materials are purchased based on weight. Our CCA products are a cost effective substitute for pure copper wire in a wide variety of applications such as wire and cable, consumer electronic products, audio and visual equipment, white goods, automotive parts, utility applications, telecommunications, and specialty cables.

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We produce CCA wire with the line diameter in the range of 0.03 mm to 0.18 mm. We produce and distribute wire in the following forms:

· Fine wire.   Fine wire is sold to smaller wire manufacturers for further processing;

· Magnet wire.   Magnet wire can be fine or super fine and is the basic building block of a wide range of motorized appliances and is mainly used for its electrical conductivity;

· Tin plated wire.   Tin plated wire is mainly used for the transmission of audio and visual signals.

We produce our wire products in accordance with customer orders and we customize our products based on customer specifications. Customer specifications vary depending on the end use of the CCA wire, but are primarily determined based upon two measurements, the thickness of the copper layer on the aluminum core and the diameter of the CCA wire.

Quality Control

We apply rigorous quality control standards and have implemented safety procedures at all phases of our production process. Since January 2007, our plant has maintained ISO9001:2000, a certification of quality management systems maintained by the International Organization of Standardization and administered by certification and accreditation bodies. In addition, our plant has obtained ISO14001 environment management standard certification.

Quality assurance efforts have been made on various lines of products in the following ways:

· Copper magnet wire.   We strictly follow the mandatory national product standard in China, and obtained National Industrial Production License for copper magnet wire in January 2009 and satisfied UL standards in October 2008.

· Scrap copper refinery.   According to a test report dated April 17, 2008 of China’s Machinery Industry Quality Supervision and Test Center For Electrical Material and Special Wire and Cable, a government inspection and testing agency, our copper rod satisfied the national standard for electrical copper wire, GB/T3952-1998.

· CCA wire.   We strictly follow the industry recommended standards.

We believe the testing results we have obtained demonstrate our commitment to producing high-quality products and provide us with a competitive advantage over certain domestic competitors in the event China implements stricter quality standards in the future.

Raw Materials and Suppliers

For the superfine CCA wire product, we primarily use CCA wire with a line diameter of 2.60 mm, produced in house and to the extent needed, supplemented with CCA raw wire from our bimetallic wire suppliers, to manufacture superfine CCA wire. Our raw material procurement policy is to use only long-term suppliers who have demonstrated quality control, reliability and maintain multiple supply sources so that supply problems with any one supplier will not materially disrupt our operations. In order to avoid copper price volatility exposure, we do not maintain raw material inventory of CCA. We confirm raw material purchase orders with suppliers only when the relevant sales orders are received from our customers. On the other hand, because of the long-term relationship that we have maintained with our suppliers, our principal suppliers usually dedicate portions of their inventories as reserves to meet our manufacturing requirements. Suppliers are generally paid with a credit term of 30 days. We use pure copper rod produced internally as raw material for the pure copper wire product.

For our scrap copper refinery, we primarily use No. 1 and No. 2 scrap copper in our production of two types of recycled copper products: copper anode and copper rod, which is the raw material for our pure copper wire product. We purchase the materials through dealers and the scrap metal market. We have a scrap copper raw material warehouse in one of China’s largest scrap metal markets. Scrap copper is generally purchased with cash on delivery terms. In addition, we periodically purchase scrap copper from one or two venders which require partial prepayments. We believe that we will have access to an adequate supply of scrap copper on satisfactory commercial terms due to the numerous scrap dealers located throughout Guangdong Province in the PRC.

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For each of the fiscal years ended December 31, 2011, 2012 and 2013, our five largest suppliers accounted for 73%, 49% and 50% of our total purchases, respectively, and our single largest supplier accounted for 38%, 24% and 16% of our total purchases, respectively.  We believe that we will have access to an adequate supply of raw material on satisfactory commercial terms for the foreseeable future.

Sales, Marketing and Distribution

Chinese domestic market sales account for a majority of our revenue. We target our sales efforts primarily in the coastal provinces of Guangdong, Fujian, Zhejiang, Anhui and Jiangsu, as well as the Shanghai region, where the majority of our customers are located. We have a sales staff of approximately 42 employees. We maintain ten sales offices in the PRC, including five in Guangdong, two in Zhejiang, one in Fujian, one in Shandong and one in Anhui. We participate in industry exhibitions in which we showcase our products and services and from which we obtain new customers.

We have a small fleet of trucks that deliver merchandise to customers located within three hours of our production facilities. In addition, we contract with independent third-party trucking companies to deliver our products when necessary.

Customers

We sell our products in China either directly to manufacturers or through distributors in the wire and cable industries and manufacturers in the consumer electronics, audio and visual equipment, white goods, automotive, utility, telecommunications and specialty cable industries. Our customer base in the wire category has been very diversified with 170 customers in total as of December 31, 2013.  Since we started offering copper anode in August 2010, we have experienced customer concentration. We have five anode customers as of December 31, 2013. Copper anode customers are typically large domestic copper cathode producers.

For the years ended December 31, 2013, 2012 and 2011 our five largest customers accounted for 52.4%, 50.8% and 49.0% of our total sales, respectively, and the single largest customer accounted for 25.5%, 31.7% and 25.3% of our total sales, respectively. We generally extend unsecured credit for 30 days to large or established CCA wire customers with good credit history. In terms of the refined copper products, we typically do not extend credit terms for more than 15 days. Historically, the Company has not experienced customer payment delays or delinquencies, however management reviews its accounts receivable on a regular basis to determine if adequate allowance for doubtful accounts should be created.

Research and Development

Our scrap copper recycling and superfine wire manufacturing technology were developed and refined via strategic partnerships with leading research institutes and in-house by our technology improvement and R&D team. Our in house professionals focus on quality assurance, equipment maintenance, process maintenance and improvement, and new product and process R&D.

We absorb most of the development technology related expenses in our production costs, and thus have only reported R&D costs at very low levels in the past years. For each of the fiscal years ended December 31, 2013, 2012 and 2011, we reported R&D costs of $1,305,379, $1,779,018 and $954,299. The reduction in 2013 R&D costs from the prior year is mainly the result of the completion in R&D for our new CCA cable and wire product we developed in partnership with Shanghai Electric Cable Research Institute.

We believe our commitment to, and knowledge and experience in, R&D are the key reasons why we are able to remain an early mover advantage in the copper alternative and replacement manufacturing industry in China. This expertise has enabled us to expedite the launch and expansion of our superfine copper wire production as well as scrap copper refinery production.

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We plan to continue our R&D efforts, to maintain and strengthen our leading position in China, and to expand into new products and markets.

In 2011, Lihua Electron entered into several research and development agreements with Shanghai Electric Cable Research Institute for the research and development of new CCA products. In late 2013, we successfully completed this project and passed industry standard tests. We are currently in batch production mode and expect the gradual ramp up in production and sales of this new product in 2014. Lihua Copper has also cooperated with Beijing Modern Recycling Economy Research Institute in the development and planning of new copper recycling technology.

Financial Information About Segments

For financial information regarding our segments, please refer to Note 22 to our financial statements included in this Annual Report, which is incorporated herein by reference.

Intellectual Property

Our manufacturing processes are based on technology substantially developed via partnership with leading research institutes and in-house by our R&D and engineering personnel. We rely on a combination of patent, trademark, domain names and confidentiality agreements to protect our intellectual property. We require all members of our senior management and our key R&D personnel to sign agreements with us which stipulate, among other things, confidentiality obligations and restrictions on the assignment of intellectual property.

We were granted a utility model patent (patent no.: 1182192) by the State Intellectual Property Office of the PRC for our “Oxygen-free copper rod pressure cut off device,” patent issued on March 4, 2009. The term of this patent is 10 years from the effective date. We were also granted a patent (patent no.: 707494) by the State Intellectual Property Office of the PRC for our “CCA magnet wire paint and related production process,” patent issued on December 8, 2010. The term of this patent is 10 years from the effective date. We have no foreign patents. We are currently using the trademark “Mei Lihua” for all our products.  We have applied to register the trademark “Mei Lihua” in the PRC. We are not aware of any material infringement of our intellectual property rights. In 2013, we submitted 16 patent applications relating to the production process of our new CCA product.

Employees

As of December 31, 2013, we had 402 full time employees.

Insurance

We maintain various insurance policies to safeguard against risks and unexpected events. In protecting against work-related casualties and injuries, we purchase accidental injury insurance policies for our employees. In addition, we provide social security insurance including pension insurance, unemployment insurance, work related injury insurance and medical insurance for our employees. We also maintain insurance for our plants, machinery, equipment, inventories and motor vehicles. We do not have product liability insurance for our products. All of our products have met the relevant regulatory requirements under PRC laws and we have not been subject to any material fines or legal action involving product non-compliance.

Financial Information About Geographic Areas

We produce and sell all our products to PRC based customers.

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Industry and Market Overview

Copper

Copper ranks third in world consumption of metals after iron and aluminum, and is broadly used in a variety of industries and applications. According to preliminary data from the International Copper Study Group (ICSG), global mines produced over 16.7 million tons of copper in 2012; copper smelter production reached approximately 16.7 million tons and refinery production rose to over 20.1 million tons in 2012. The global demand for copper continues to grow due to expanding industries such as electrical and electronic products, building construction, industrial machinery and equipment, transportation equipment, and consumer and general products.

A malleable and ductile metal, copper is an excellent conductor of heat and electricity that is corrosion resistant and antimicrobial while maintaining exceptional strength. Copper’s chemical, physical and aesthetic properties make it an attractive choice for a wide range of applications including electronics and communications, construction, transportation, and industrial equipment.

The chief commercial use of copper is based on its electrical conductivity, which is second only to that of silver among all metals. Electrical uses account for the majority of copper consumption, including power transmission and generation, building wiring, telecommunication, and electrical and electronic products. Copper is an essential component of energy efficient generators, motors, transformers and renewable energy production. Renewable energy sources such as solar, wind, geothermal, fuel cells and other technologies are all heavily reliant on copper due to its excellent conductivity. Copper is also heavily relied upon as a raw material in construction, transportation, industrial machinery and equipment and consumer products and white goods.

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The following chart shows the global consumption of refined copper, for the years 1960, 1980 & 2012, by geographic region.

According to Platts, a leading global energy, petrochemicals and metals information provider, in 2012, the PRC consumed nearly 7.68 million tons of refined copper, accounting for nearly 40% of worldwide copper consumption. Even with its relatively low per capita consumption, China consumes significantly more copper than any other country. In 2012, China accounted for nearly 43% of the 20.5 million tons of refined copper used worldwide. Accordingly, China is, by a large margin, the world's largest importer of copper. However, the copper China imports is used for both its domestic needs and a rapidly expanding manufacturing industry. Thus, China has also become the world's second-largest exporter of semi-fabricated copper products, after Germany.

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The PRC’s consumption of copper continues to outpace its production of copper, making it among the largest importers of the non-precious metal. In 2012, the PRC was the world’s leading importer of refined copper, copper ore and copper concentrates. The shortfall in production was satisfied through recycling of scrap copper as well as copper imports, which are more expensive due to freight costs. We believe that the PRC’s continued urbanization should continue to drive strong copper consumption within the PRC. In addition, under China’s 12th Five-Year Plan, the central government has expedited large infrastructure projects and invested significantly in continued infrastructure development. In September 2012, the government announced a policy of accelerating $156 billion in infrastructure spending. Three large users estimate that China’s refined copper consumption might rise 5 to 6 percent in 2014. This would take consumption to around 8.6 million tons, based on 8.1 million tons estimated for 2013 by State-backed research firm Beijing Antaike Information and Development Co.

The following chart shows the global consumption of copper in 2012, by geographic region.

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2012 World Copper Consumption

Basis: Copper content, thousand metric tons

Source: International Copper Association

Source: ICSG, World Copper Factbook 2013

Refined Copper

The dynamics of constrained supply and growing demand in the PRC have contributed to the continued search for cost effective alternatives to pure copper. Manufacturers in the cable and wire industry have begun pursuing and adopting alternative technologies, including the use of scrap copper. According to ICSG, refined copper usage (usage by semi plants or the first users of copper) accounted for 19.5 million tons in 2013 (through November). China was also the largest consumer of refined copper in 2012 with apparent usage of over 8.8 million tons.

Copper is also one of the most recycled of all metals. Recycled copper (also known as secondary copper) represents scrap copper that has been fire-refined, or that has been converted to anode at the smelter level and then electrolytically refined. The recovery process for recycling and refining scrap copper is divided into four separate operations:

· Scrap pre-treatment: the pre-treatment process includes the cleaning and consolidation of scrap in preparation for smelting.

· Smelting: Smelting consists of heating and treating the scrap for separation and purification of specific metals.

· Alloying: Alloying involves the addition of other metals to copper to obtain desirable qualities characteristic of the combination of metals.

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· Casting: In the casting process, the molten metal is poured into molds for being turned into different shapes.

We use recycled scrap copper as raw material to produce our refined copper products including copper anode and copper rod.  To produce pure copper superfine wire products, we primarily use copper rod. These products provide a cost effective alternative to newly mined copper products and lower raw material costs, while meeting the requirements of pure copper products based on the employment of our proprietary recycling technology.

Source: ICSG, World Copper Factbook 2013

A price spread between refined copper and scrap copper, reflecting the profit for the recycling process, fluctuates in relation to the movement of copper prices, as well as scrap consumption. To minimize our exposure to copper commodity risk, we maintain minimal raw material inventory and charge a fixed-dollar processing fee for most of our products. In doing so, we are able to pass through most of the underlying copper price exposure to our customers.

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Source: ICSG, World Copper Factbook 2013

The PRC is a net importer of copper and has deficient copper reserves. In recent years, the PRC has significantly grown its refining capacity. To meet increased demand, the PRC has been importing raw materials including scrap copper to fill the gap.

In 2013, the PRC’s scrap copper imports was 4.37 million tons, a 10.1% decrease compared with 2012. The PRC government has established industrial policies to encourage the use of scrap copper. In 2007 the import duty on scrap copper in the PRC, historically 1.5%, was removed. China’s 11th Five-Year (2006 – 2010) Plan encouraged the greater use of scrap metals to help alleviate a shortfall in supplies and set the target consumption of secondary copper at 35% of total national copper consumption. China’s 12th Five Year Plan (2011-2015) places an emphasis on internal markets and domestic demand including industrial structures that emphasize added value, including a focus on energy, environmental and next generation telecom equipment industries, all of which bode well for higher copper demand and consumption.

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Source: smc®, November 2013

Copper Clad Aluminum (“CCA”) Wire

CCA bimetallic materials are an ideal substitute for pure copper, a major raw material component of magnet wire, and a prime alternative to satisfy China’s demand. Bimetallic materials have been in existence for decades, but until recently they have only been selectively adopted due to higher production costs and historically low copper prices. However, as the price of copper increased in recent years, companies have started to use CCA bimetallic materials as an alternative.

CCA wire is composed of an inner aluminum core and outer copper cladding. CCA wire has a significant cost advantage over copper because its main constituent, aluminum is a cheaper metal. In addition to the cost advantages, the properties of CCA wire include:

· Lighter than pure copper wire;

· Higher conductivity and strength than pure aluminum wire; and

· Better solder ability than aluminum, due to the lack of an oxide layer, which prevents solder adhesion when soldering bare aluminum.

However, CCA wire has a high fabrication cost, as the cladding process is more complex than conventional wiredrawing. As a result, developed economies have not widely used CCA since the higher fabrication costs offsets the lower cost of raw material.

As a result of the changes in the market conditions in recent years, PRC-based companies perceived a potential market opportunity and added capacity for production of CCA wire. This has in turn resulted in improvements in the production process and made increased production volumes of CCA wire available from the PRC. As a result of the increased production capacity, the PRC has become leading global supplier in the CCA market.

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Our Corporate History and Background

From the date of our incorporation until October 31, 2008, we were a “blank check” company with nominal assets. We were originally incorporated in the State of Delaware on January 24, 2006 under the name of Plastron Acquisition Corp. for the purpose of raising capital to be used to merge, acquire, or enter into a business combination with an operating business.

Ally Profit was incorporated in the British Virgin Islands on March 12, 2008 under the Business Companies Act of 2004. In June 2008, Ally Profit became the parent holding company of a group of companies comprised of Lihua Holdings, a company organized under the laws of Hong Kong and incorporated on April 17, 2008, which is the 100% shareholder of each of Lihua Electron and Lihua Copper, each a limited liability company organized under the existing laws of the PRC. Lihua Electron and Lihua Copper were incorporated on December 30, 1999 and August 31, 2007, respectively. We changed our name from Plastron Acquisition Corp. to Lihua International, Inc. on September 22, 2008.

On September 4, 2009, the Company’s common stock began trading on the NASDAQ Capital Market under the symbol LIWA.

As of December 31, 2013, details of our subsidiaries are as follows:

Subsidiaries’ names	Domicile and date of incorporation	Paid-up capital		Effective ownership			Principal activities
Ally Profit Investments Limited (“Ally Profit”)	British Virgin Islands March 12, 2008	$	100		100	%	Holding company of other subsidiaries
Lihua Holdings Limited (“Lihua Holdings”)	Hong Kong April 17, 2008	HK$	100		100	%	Holding company of other subsidiaries
Danyang Lihua Electron Co., Ltd. (“Lihua Electron”)	People’s Republic of China (“PRC”) December 30, 1999	$	10,500,000		100	%	Manufacturing and sales of pure copper wire and bimetallic composite conductor wire such as copper clad aluminum (CCA) wire and enameled CCA wire
Jiangsu Lihua Copper Industry Co., Ltd. (“Lihua Copper”)	PRC August 31, 2007	$	46,000,000		100	%	Manufacturing and sales of refined copper products

Government Regulation

Overview

Manufacturing

Our manufacturing operations are subject to numerous laws, regulations, rules and specifications relating to human health and safety and the environment. These laws and regulations address and regulate, among other matters, waste water discharge, air quality and the generation, handling, storage, treatment, disposal and transportation of solid and hazardous wastes and releases of hazardous substances into the environment. We are in compliance with all material aspects of such laws, regulations, rules, specifications and have obtained all material permits, approvals and registrations relating to human health and safety and the environment. Third parties and governmental agencies in some cases have the power under such laws and regulations to require remediation of environmental conditions and, in the case of governmental agencies, to impose fines and penalties. We make capital expenditures from time to time to stay in compliance with applicable laws and regulations.

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Environmental Matters

Given the nature of our business, we generate waste water, exhaust fumes and noise during our production process. We have implemented a comprehensive set of environmental protection measures to treat emissions generated during our production process to minimize the impact of our production process on the environment. These measures include the following:

· Waste water.   Waste water processed by our facilities meets the Chinese standard for discharge. To conserve water resources, we also recycle and reuse waste water generated during our production process, which decreases our consumption of water and reduces the discharge of waste water into the environment;

· Exhaust fumes.   We generate exhaust fumes during our production process. Exhaust fumes generated during our production process are filtered to reduce dust, sulfur dioxide, total suspended particulate, nitrogen oxide and organic elements. In each case, exhaust fumes are treated to comply with national air quality standards; and

· Noise.   We generate noise through the operation of our heating, ventilation and pumping systems. We typically reduce the noise generated by these activities to a range of 60 decibels to 80 decibels by employing various noise reduction measures that comply with applicable law.

Foreign Investment in PRC Operating Companies

The Foreign Investment Industrial Catalogue jointly issued by MOFCOM and the National Development and Reform Commission (“NDRC”) in 2007 classified various industries/business 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/business permitted to have foreign investment. Except for those expressly provided restrictions, encouraged and permitted industries/business are usually 100% open to foreign investment and ownership. With regard to those industries/business restricted to or prohibited from foreign investment, there is always a limitation on foreign investment and ownership. The reason that our business is not subject to limitation on foreign investment and ownership is as follows:

(i)        our business falls under the class of “manufacturing of materials for processing beryllium copper straps, lines, pipes and rods”, which is open to 100% foreign investment and ownership;

(ii)       our business does not fall under the industry categories that are restricted to, or prohibited from foreign investment; and

(iii)      whether a business is subject to foreign investment restriction is subject to interpretation by MOFCOM and/or the NDRC, restructuring of each of our operating entities into a wholly foreign owned enterprise, each of which has been approved by the local MOFCOM, can also directly evidence no limitation on foreign investment and ownership to our business.

Share Exchange

Restructuring

In June 2008, Magnify Wealth, a British Virgin Islands holding company, which was 100% owned by Mr. Chu, developed a restructuring plan (the “Restructuring”). At that time, Magnify Wealth was the parent company and sole shareholder of Ally Profit, which was the parent company and sole shareholder of Lihua Holdings. The Restructuring was accomplished in two steps. The first step was the PRC Subsidiary Acquisition. After the PRC Subsidiary Acquisition, the second step was for Magnify Wealth to enter into and complete a share exchange transaction with a US public reporting company, whereby the US company would acquire Ally Profit, Lihua Holdings and the PRC Operating Companies.

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PRC Subsidiary Acquisition

The PRC Subsidiary Acquisition was structured to comply with PRC M&A Laws. Under PRC M&A laws, the acquisition of PRC Operating Companies by foreign companies that are controlled by PRC citizens who are affiliated with the PRC Operating Companies, is strictly regulated and requires approval from MOFCOM. However, such restrictions do not apply to foreign entities controlled by foreign persons. These restrictions apply only at the time that PRC Operating Companies are acquired by a foreign entity. In our case, this was July 10, 2008 when the PRC Operating Companies were acquired by Lihua Holdings, which was ultimately beneficially owned by Mr. Chu, a Hong Kong citizen, as the sole shareholder of Magnify Wealth.

Lihua Holdings acquired 100% of the equity interests in the PRC Operating Companies from companies owned by our current CEO, Mr. Zhu, and the Minority Shareholders of the PRC Operating Companies. In addition to being the sole shareholder of Magnify Wealth, Mr. Chu was also a 45.5% owner of Lihua Electron, prior to the consummation of the PRC Subsidiary Acquisition. The aggregate consideration payable by Lihua Holdings to the shareholders of Lihua Electron was $2,200,000, and the aggregate consideration payable by Lihua Holdings to the shareholders of Lihua Copper was $4,371,351.

The Share Transfer Agreement enabled Mr. Zhu to receive consideration for selling his interest in the PRC Operating Companies to Lihua Holdings by allowing him to earn back an indirect interest in the PRC Operating Companies without violating PRC laws. At the time of the PRC Subsidiary Acquisition, Mr. Zhu did not have any equity interest in Lihua Holdings. As a PRC citizen, Mr. Zhu would not have been permitted to immediately receive shares in Lihua Holdings or in Magnify Wealth in exchange for his interests in the PRC Operating Companies. Subject to registering with SAFE prior to the exercise and issuance of the Option Shares under the Share Transfer Agreement, which is an administrative task, there is no prohibition under PRC laws for Mr. Zhu to earn an interest in Magnify Wealth after the PRC Subsidiary Acquisition was consummated, in compliance with PRC laws. Pursuant to the original terms of the Share Transfer Agreement, Mr. Chu granted to Mr. Zhu the option to purchase all of the 3,000 ordinary shares of Magnify Wealth then held by Mr. Chu at the nominal price of $1.00 per share, subject to the achievement of certain net income targets. Since our consolidated net income targets were reached, as of February 14, 2011 all of the Options Shares were vested and are fully exercisable.

Also on October 22, 2008, Mr. Chu and Europe EDC entered into subscription agreements to purchase shares in Magnify Wealth at a nominal price of $1.00 per share. Pursuant to these subscription agreements, Mr. Chu and Europe EDC will be issued the shares of Magnify Wealth for which they subscribed in tranches on February 14, 2009, 2010 and 2011 of 25%, 25% and 50%, respectively, which are the same dates the Option Shares are exercisable. The number of subscription shares issuable to Mr. Chu and Europe EDC in the aggregate, are 632 shares and 32 shares, respectively, and was determined based on the proportion of capital contributed by each of them in the PRC Operating Companies. As of February 14, 2010, Mr. Chu was issued 316 shares of Magnify Wealth and Europe EDC was issued 16 shares of Magnify Wealth, which equals 50% of the shares of Magnify Wealth which have been issued as per the subscription agreements. The subscription agreements enable Mr. Chu, a Hong Kong citizen, and Europe EDC, a Dutch company, to receive an interest in Magnify Wealth in consideration for the sale of their respective interests in the PRC Operating Companies to Lihua Holdings. Because Mr. Chu is a Hong Kong Citizen and Europe EDC is a Dutch company, there is no prohibition or restriction under PRC laws against non-PRC residents or citizens acquiring shares in Magnify Wealth in consideration for the sale of their respective interests in the PRC Operating Companies to Lihua Holdings.

ITEM 1A. RISK FACTORS

Investing in our securities involves a great deal of risk. Careful consideration should be made of the following factors as well as other information included in this annual report before deciding to purchase our common stock. You should pay particular attention to the fact that we conduct all of our operations in the PRC and are governed by a legal and regulatory environment that in some respects differs significantly from the environment that may prevail in other countries. Our business, financial condition or results of operations could be affected materially and adversely by any or all of these risks.

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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

We have a limited operating history.

Our limited operating history and the early stage of development in the CCA industry and the scrap copper recycling industry in which we operate makes it difficult to evaluate our business and future prospects. Although our revenues have grown rapidly, we cannot assure you that we will maintain our profitability or that we will not incur net losses in the future. We expect that our operating expenses will increase as we expand. Any significant failure to realize anticipated revenue growth could result in operating losses.

We will continue to encounter risks and difficulties in implementing our business model.

We believe that our business model will allow us to become a leader in the CCA and the scrap copper recycling industries in which we operate. However, we cannot assure you that our business model will be effective. We are susceptible to risks, including the failure to create awareness of our products, protect our reputation and develop customer loyalty, the inability to manage our expanding operations, the failure to maintain adequate control of our expenses, and the inability to anticipate and adapt to changing conditions in the markets in which we operate as well as the impact of any changes in government regulation, mergers and acquisitions involving our competitors, technological developments, and other significant competitive and market dynamics. If we are not successful in addressing any or all of these risks, our business may be materially and adversely affected.

Our quarterly operating results may fluctuate.

Our quarterly results of operations may fluctuate as a result of a number of factors, including fluctuation in the demand for and shipments of our products and changes in the prices of copper which directly affect the price of our products and may influence the demand for our products. Therefore, quarter-to-quarter comparisons of results of operations have been and will be impacted by the volume of such orders and shipments. In addition, our operating results could be adversely affected by the following factors, among others, such as variations in the mix of product sales, price changes in response to competitive factors, increases in raw material costs and other significant costs, increases in utility costs (particularly electricity) and interruptions in plant operations resulting from the interruption of raw material supplies, narrowing of the price spread between our raw material price and average sales price of our products, and other factors. Our operating results are also impacted during the summer months and first few months of each year, when production at our factory declines due to the hot weather in Southern China, and Chinese New Year vacation, respectively.

Fluctuating copper prices and the price spread between pure copper and scrap copper impact our business and operating results.

Copper prices declined sharply from 2008 to early 2009 before seeing a rapid upturn until early 2011, and have experienced a downturn from 2011 to 2013. Such prices may continue to fluctuate significantly in the future because the copper industry is highly volatile and cyclical in nature. This affects our business both positively and negatively. For example, since our products are a substitute for pure copper wire, higher copper prices usually increase demand for our CCA products, while lower copper prices can decrease demand for CCA products. Numerous factors, most of which are beyond our control, influence copper prices. These factors include general economic conditions, industry capacity, utilization, import duties and other trade restrictions. We cannot predict copper prices in the future or the effect of fluctuations in the costs of copper on our future operating results. Consequently, fluctuations in copper prices and the narrowing of price spread between pure copper and scrap copper can significantly affect our business and operating results.

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We may encounter substantial competition in our business and our failure to compete effectively may adversely affect our ability to generate revenue.

The CCA and scrap copper recycling industries are becoming increasingly competitive. Our competitors may have greater market recognition and substantially greater financial, technical, marketing, distribution, purchasing, manufacturing, personnel and other resources than we do. Furthermore, some of our competitors have manufacturing and sales forces that are geographically diversified, allowing them to reduce transportation expenses, tariff costs and currency fluctuations for certain customers in markets where their facilities are located. The principal elements of competition in the refined copper and bimetallic industry are, in our opinion, pricing, product availability and quality. In order to succeed in the bimetallic industry, we must be competitive in our pricing, product availability and quality. If we fail to do so, we will not be able to compete effectively and will lose market share. In such case we may be forced to reduce our margins to retain or acquire that business, which could decrease our revenues or slow our future revenue growth and lead to a decline in profitability. Further, to the extent that, whether as a result of the relative cost of copper, the relative strength of the Chinese currency, shipping costs or other factors, we are not able to price our products competitively, our ability to sell our products in both the Chinese domestic and the international markets will suffer.

We may not be able to effectively control and manage our growth.

If our business and markets grow and develop it may be necessary for us to finance and manage expansion in an orderly fashion. In addition, we may face challenges in managing expanding product offerings. Such circumstances will increase demands on our existing management and facilities. Failure to manage this growth and expansion could interrupt or harm our operations and cause production backlogs, longer product development time frames and administrative inefficiencies.

Shortages or disruptions in the availability of raw materials could harm our business.

We expect that raw materials of CCA and recycled copper will continue to account for a significant portion of our cost of goods sold in the future. The prices of raw materials fluctuate because of general economic conditions, global supply and demand and other factors causing monthly variations in the costs of our raw materials purchases. The macro-economic factors, together with labor and other business interruptions experienced by certain suppliers, have contributed to periodic shortages in the supply of raw materials, and such shortages may increase in the future. If we are unable to procure adequate supplies of raw material to meet our future production needs and customer demand, shortages could result in a material loss of customers and revenues and adversely impact our results of operations. In addition, supply shortages or disruptions or the loss of suppliers may cause us to procure our raw materials from less cost effective sources and may harm our business, revenues and results of operations.

We depend on a few suppliers for a significant portion of our principal raw materials and we do not have any long-term supply contracts in excess of one year. Interruptions of production at our key suppliers may harm our results of operations and financial performance.

We rely on a limited number of suppliers for most of the raw materials we use. Interruptions or shortages of supplies from our key suppliers of raw materials could disrupt production or impact our ability to increase production and sales. We do not have long-term or volume purchase agreements in excess of one year with most of our suppliers. Identifying and accessing alternative sources may increase our costs. Interruptions at our key suppliers could negatively impact our results of operations, financial performance and the price of our common stock.

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Material prepayment for raw material purchases may increase risk of loss resulting from non-delivery of goods by our suppliers

We periodically make prepayments to a few scrap copper suppliers. Material prepayment we make for raw materials increases our exposure to loss resulting from potential non-delivery of goods by suppliers.

Any increases in raw materials prices will increase our need for working capital.

As the prices of raw materials increase, our working capital requirements increase. Increases in our working capital requirements can materially adversely impact our results of operations, our cash flow and our available liquidity to fund other business needs. Furthermore, there is no assurance we would be able to finance additional working capital requirements or finance such working capital requirements on favorable terms. If we were unable to obtain financing on favorable terms, our business and results of operations may be adversely affected. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations —Liquidity and Capital Resources”.

Any increases in raw materials prices may increase credit and default risk with respect to our customers.

Any increases in the price of our products, as raw material prices may rise, may place additional demands on the working capital and liquidity needs of our customers. Accordingly, our customers’ cash flow may be negatively impacted which may have an adverse effect on the timing and amount of payment on our accounts receivable, which would in turn, harm our results of operations.

If the scrap copper recycling or CCA industry does not grow or grows at a slower speed than we project, our sales and profitability may be negatively impacted.

We derive most of our profits from sales of our products in China. The continued development of our business depends, in large part, on continued growth in the copper consumption market in China. Although China’s copper consumption market has grown in the past, it may not continue to grow or grow at a lower rate in the future. Any reduced demand for our products, any downturn or other adverse changes in China’s copper consumption market or related industries could severely harm the profitability of our business.

Potential environmental liability could harm our operations and financial condition.

As a manufacturer, we are subject to various Chinese environmental laws and regulations on air emission, waste water discharge, solid wastes and noise. Although we believe that our operations are in compliance with current environmental laws and regulations, and our plant has ISO14001 environmental management system certification, we may not be able to comply with these regulations at all times as the Chinese environmental legal regime is evolving and becoming more stringent. Therefore, if the Chinese government imposes more stringent regulations in the future, we may have to incur additional and potentially substantial costs and expenses in order to comply with new regulations, which may negatively affect our results of operations. Further, no assurance can be given that all potential environmental liabilities have been identified or properly quantified or that any prior owner, operator, or tenant has not created an environmental condition unknown to us. If we fail to comply with any of the present or future environmental regulations in any material aspects, we may suffer from negative publicity and be subject to claims for damages that may require us to pay substantial fines or have our operations suspended or even be forced to cease operations.

We may be unable to retain key employees who are essential to growing our business.

Mr. Jianhua Zhu, Ms. Yaying Wang and Ms. Daphne Huang, along with Ms. Junying Zhu, and Mr. Yingchun Han, are essential to our ability to continue to grow our business. Each of these key employees has established relationships within the industries in which we operate. Each of these employees has agreed to non-solicitation and non-compete restrictions during the course of their employment with us, however, these restrictions only extend for a one year period from termination. Further, we do not maintain, or intend to maintain, key person life insurance for any of our officers or key employees. If any of them were to leave us, our growth strategy might be hindered, which could limit our ability to increase revenue. In addition, we face competition 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.

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We have derived a material portion of our revenues from a small group of customers. If we were to become dependent again upon a few customers, such dependency could negatively impact our business, operating results and financial condition.

As a result of our copper anode product offering in 2010, our customer base has become more concentrated since we currently produce and sell to a few large copper anode customers. For the year ended December 31, 2013 and each of the fiscal year ended December 31, 2012, 2011, 2010 and 2009, our five largest customers accounted for 52.4%, 50.8%, 49.0%, 36.5% and 6.9% of our total sales, respectively, and the single largest customer accounted for 25.5%, 31.7%, 25.3%, 12.7%, and 1.6% of our total sales, respectively. As our customer base may change from year-to-year, during such years that the customer base is highly concentrated, the loss of, or reduction of our sales to, any of such major customers could harm our business, operating results and financial condition.

We may need additional financing, which may not be available on satisfactory terms or at all.

Our capital requirements may be accelerated as a result of many factors, including timing of development activities, underestimates of budget items, unanticipated expenses or capital expenditures, future product opportunities with collaborators, future licensing opportunities and future business combinations. Consequently, we may need to seek additional debt or equity financing, which may not be available on favorable terms, if at all, and which may be dilutive to our stockholders.

We may seek to raise additional capital through public or private equity offerings, debt financings or additional corporate collaboration and licensing arrangements. To the extent we raise additional capital by issuing equity securities, our stockholders may experience dilution. To the extent that we raise additional capital by issuing debt securities, we may incur substantial interest obligations, may be required to pledge assets as security for the debt and may be constrained by restrictive financial and/or operational covenants. Debt financing would also be superior to our stockholders’ interest in bankruptcy or liquidation. To the extent we raise additional funds through collaboration and licensing arrangements, it may be necessary to relinquish some rights to our technologies or product candidates, or grant licenses on unfavorable terms.

If we fail to adequately protect or enforce our intellectual property rights, or to secure rights to patents of others, the value of our intellectual property rights could diminish.

Our success, competitive position and future revenues will depend in part on our ability to obtain and maintain patent protection for our products, methods, processes and other technologies, to preserve our trade secrets, to prevent third parties from infringing on our proprietary rights and to operate without infringing the proprietary rights of third parties.

To date, we have two approved patents filed with the State Intellectual Property Office of the PRC. However, we cannot predict the degree and range of protection patents will afford us against competitors. Third parties may find ways to invalidate or otherwise circumvent our proprietary technology. Third parties may attempt to obtain patents claiming aspects similar to our patent applications. If we need to initiate litigation or administrative proceedings, such actions may be costly whether we win or lose.

Our success also depends on the skills, knowledge and experience of our scientific and technical personnel, consultants, advisors, licensors and contractors. To help protect our proprietary know-how and inventions for which patents may be unobtainable or difficult to obtain, we rely on trade secret protection and confidentiality agreements. If any of our intellectual property is disclosed, our value would be significantly impaired, and our business and competitive position would suffer.

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If we infringe the rights of third parties, we could be prevented from selling products, forced to pay damages and compelled to defend against litigation.

If our products, methods, processes and other technologies infringe proprietary rights of other parties, we could incur substantial costs, and may have to obtain licenses (which may not be available on commercially reasonable terms, if at all), redesign our products or processes, stop using the subject matter claimed in the asserted patents, pay damages, or defend litigation or administrative proceedings, which may be costly whether we win or lose. All of the above could result in a substantial diversion of valuable management resources.

We believe we have taken reasonable steps, including comprehensive internal and external prior patent searches, to ensure we have freedom to operate and that our development and commercialization efforts can be carried out as planned without infringing others’ proprietary rights. However, we cannot guarantee that no third party patent has been filed or will be filed that may contain subject matter of relevance to our development, causing a third party patent holder to claim infringement. Resolving such issues has traditionally resulted, and could in our case result, in lengthy and costly legal proceedings, the outcome of which cannot be predicted accurately.

One shareholder owns a large percentage of our outstanding stock and could significantly influence the outcome of our corporate matters.

Currently, Magnify Wealth beneficially owns approximately 44% of our outstanding common stock. Mr. Zhu, our Chairman and CEO, is the sole director of Magnify Wealth. As the sole director of Magnify Wealth, Mr. Zhu has the sole power to vote the shares of our common stock owned by Magnify Wealth, and as a result, is able to exercise significant influence over all matters that require us to obtain shareholder approval, including the election of directors to our board and approval of significant corporate transactions that we may consider, such as a merger or other sale of our company or its assets. Additionally, pursuant to the Share Transfer Agreement, Mr. Zhu has a fully vested option to purchase up to 3,000 shares of Magnify Wealth from Mr. Chu (the “Option Shares”). At such time as Mr. Zhu exercises and acquires all of the Option Shares, he will own shares representing 81.9% of Magnify Wealth’s issued and outstanding shares. Once the Option Shares are exercised, Mr. Zhu will then also have a controlling equity interest in Magnify Wealth. This concentration of ownership in our shares by Magnify Wealth will limit the other shareholders’ ability to influence corporate matters and may have the effect of delaying or preventing a third party from acquiring control over us.

If we are unable to maintain appropriate internal financial reporting controls and procedures, it could cause us to fail to meet our reporting obligations, result in the restatement of our financial statements, harm our operating results, subject us to regulatory scrutiny and sanction, and cause investors to lose confidence in our reported financial information.

Effective internal controls are necessary for us to provide reliable financial reports and effectively prevent fraud.  As a public company, we have significant additional requirements for enhanced financial reporting and internal controls. We are required to document and test our internal control procedures in order to satisfy the requirements of Section 404 of the Sarbanes-Oxley Act of 2002, which requires annual management assessments of the effectiveness of our internal controls over financial reporting and a report by our independent registered public accounting firm addressing these assessments. The process of designing and implementing effective internal controls is a continuous effort that requires us to anticipate and react to changes in our business and the economic and regulatory environments and to expend significant resources to maintain a system of internal controls that is adequate to satisfy our reporting obligations as a public company.

We cannot assure you that we will not, in the future, identify areas requiring improvement in our internal control over financial reporting. We cannot assure you that the measures we will take to remediate any areas in need of improvement will be successful or that we will implement and maintain adequate controls over our financial processes and reporting in the future as we continue our growth. If we are unable to establish appropriate internal financial reporting controls and procedures, it could cause us to fail to comply with Sarbanes-Oxley and meet our reporting obligations, result in the restatement of our financial statements, harm our operating results, subject us to regulatory scrutiny and sanction, and cause investors to lose confidence in our reported financial information.

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Due to lower profit margins associated with the sale of refined copper products, we expect our overall gross profit margin to decline as we continue the capacity expansion in the scrap copper refinery segment. However, the ramp up in production and sales of our new CCA product may result in an increase in our average gross profit margin since we expect this product to have a higher profit margin than our refined copper products.

Our gross margin is affected by our product mix. As a result of significant costs associated with production in our scrap recycling business, copper anode and rod contribute a lower gross profit margin compared to our finished wire products. As we continue to expand the capacity of our scrap copper refineries, we expect that as the sales of the refined copper products increase over time, there will be a decline in our gross margin, unless we are able to add additional processing capacity of higher margin products such as CCA and increase its sales percentage in the product mix.

Risks Associated With Doing Business In China

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 our 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.

We derive a substantial portion of our sales from China and a slowdown or other adverse developments in the PRC economy may materially and adversely affect our customers, demand for our services and our business.

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. Although the PRC economy has grown in recent years, we cannot assure you that such growth will continue. The industry which we are involved in the PRC is relatively new and growing, but we do not know how sensitive we are to a slowdown in economic growth or other adverse changes in the PRC economy which may affect demand for our products. A slowdown in overall economic growth, an economic downturn or recession or other adverse economic developments in the PRC may materially reduce the demand for our products and materially and adversely affect our business.

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. 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.

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The income 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 currencies denominated transactions results 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 results 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.

The application of PRC regulations relating to the overseas listing of PRC domestic companies is uncertain, and we may be subject to penalties for failing to request approval of the PRC authorities prior to listing our shares in the U.S.

On August 8, 2006, six PRC government agencies, namely, MOFCOM, SAIC, CSRC, SAFE, the State Assets Supervision and Administration Commission, and the State Administration for Taxation, jointly issued the Regulations on Mergers and Acquisitions of Domestic Enterprises by Foreign Investors (the “New M&A Rules”), which became effective on September 8, 2006. The New M&A Rules purport, among other things, to require offshore “special purpose vehicles”, that are (1) formed for the purpose of overseas listing of the equity interests of PRC companies via acquisition and (2) are controlled directly or indirectly by PRC companies and/or PRC individuals, to obtain the approval of the CSRC prior to the listing and trading of their securities on overseas stock exchanges. On September 21, 2006, pursuant to the New M&A Rules and other PRC Laws, the CSRC published on its official website relevant guidance with respect to the listing and trading of PRC domestic enterprises’ securities on overseas stock exchanges (the “Related Clarifications”), including a list of application materials regarding the listing on overseas stock exchange by special purpose vehicles. Based on our understanding of current PRC Laws and as advised by our PRC counsel, because (i) the CSRC currently has not issued any definitive rule or official interpretation concerning whether our offering is subject to the New M&A Rules and Related Clarifications; (ii) we were and are not a special purpose vehicle formed or controlled by PRC individuals; and (iii) conversion of Lihua Electron and Lihua Copper from a joint venture to a wholly foreign owned enterprise was and is not subject to the New M&A Rules in accordance with Rule 55 of the New M&A Rules and Guidance Manual on Administration of Entry of Foreign Investment issued by the Department of Foreign Investment Administration of the MOFCOM in December 2008, we were and are not required to obtain the approval of CSRC under the New M&A Rules in connection with this offering.

However, there are substantial uncertainties regarding the interpretation, application and enforcement of these rules, and CSRC has yet to promulgate any written provisions or formally to declare or state whether the overseas listing of a PRC-related company structured similar to ours is subject to the approval of CSRC. Any violation of these rules could result in fines and other penalties on our operations in China, restrictions or limitations on remitting dividends outside of China, and other forms of sanctions that may cause a material and adverse effect to our business, operations and financial conditions.

The new mergers and acquisitions regulations also established additional procedures and requirements that are expected to make merger and acquisition activities by foreign investors more time-consuming and complex, including requirements in some instances that the Ministry of Commerce be notified in advance of any change-of-control transaction in which a foreign investor takes control of a PRC domestic enterprise that owns well-known trademarks or China’s traditional brands. In addition, PRC national security review rules which became effective on September 1, 2011 require acquisitions by foreign investors of PRC companies engaged in military related or certain other industries that are crucial to national security be subject to security review before consummation of any such acquisition. We may grow our business in part by acquiring other businesses. Complying with the requirements of the new mergers and acquisitions regulations in completing this type of transactions could be time-consuming, and any required approval processes, including CSRC approval, may delay or inhibit our ability to complete such transactions, which could affect our ability to expand our business or maintain our market share.

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We have granted stock options to three of our past and current PRC employees and our CEO, Mr. Zhu, who has options to purchase shares in our majority shareholder, Magnify Wealth, which may require registration with SAFE. We may also face regulatory uncertainties that could restrict our ability to issue equity compensation to our directors and employees and other parties who are PRC citizens or residents under PRC law.

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 February 2012, SAFE promulgated the Notices on Issues Concerning the Foreign Exchange Administration for Domestic Individuals Participating in Stock Incentive Plans of Overseas Publicly-Listed Companies, or the Stock Option Rules, which replaced the Application Procedures of Foreign Exchange Administration for Domestic Individuals Participating in Employee Stock Ownership Plans or Stock Option Plans of Overseas Publicly-Listed Companies issued by SAFE in March 2007. Under these rules, PRC residents who participate in the stock incentive plan of an overseas publicly-listed company are required to register with SAFE or its local branches and complete certain other procedures. Participants of a stock incentive plan who are PRC residents must retain a qualified PRC agent, which could be a PRC subsidiary of such overseas publicly-listed company or another qualified institution selected by such PRC subsidiary, to conduct the SAFE registration and other procedures with respect to the stock incentive plan on behalf of its participants. Such participants must also retain an overseas entrusted institution to handle matters in connection with their exercise of stock options, the purchase and sale of corresponding stocks or interests and fund transfers. In addition, the PRC agent is required to amend the SAFE registration with respect to the stock incentive plan if there is any material change to the stock incentive plan, the PRC agent or the overseas entrusted institution or other material changes. We have adopted an equity compensation plan and have begun to make option grants to some of our key employees, three of whom are PRC citizens. If we or our PRC recipients of such options fail to comply with these regulations, we or our PRC option grantees may be subject to fines and other legal or administrative sanctions. In that case, our ability to compensate our employees and directors through equity compensation would be hindered and our business operations may be adversely affected.

PRC SAFE Regulations regarding offshore financing activities by PRC residents have undertaken continuous changes which may increase the administrative burden we face and create regulatory uncertainties that could adversely affect our business.

Recent regulations promulgated by SAFE regarding offshore financing activities by PRC residents have undergone a number of changes which may increase the administrative burden we face.  The failure by our stockholders and affiliates who are PRC residents, including Mr. Zhu, who has sole voting power with respect to shares held by our majority shareholder, Magnify Wealth, to make any required applications and filings pursuant to such regulations may prevent us from being able to distribute profits and could expose us and our PRC resident stockholders to liability under PRC law.

In 2005, SAFE promulgated regulations in the form of public notices, which require registrations with, and approval from, SAFE on direct or indirect offshore investment activities by PRC resident individuals.  The SAFE regulations require that if an offshore company directly or indirectly formed by or controlled by PRC resident individuals, known as “SPC,” intends to acquire a PRC company, such acquisition will be subject to strict examination by the SAFE. Without registration, the PRC entity cannot remit any of its profits out of the PRC as dividends or otherwise.  This could have a material adverse effect on us given that we are a publicly listed company in the U.S.

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Because our principal assets are located outside of the United States and with the exception of one director and one officer, the rest of our directors and officers reside outside of the United States, it may be difficult for you to enforce your rights based on the United States Federal securities laws against us and our officers and directors in the United States or to enforce judgments of United States courts against us or them in the PRC.

With the exception of one director and one officer, the rest of our officers and directors reside outside of the United States. In addition, our operating subsidiaries are located in the PRC and all of their assets are located outside of the United States. China does not have a treaty with United States providing for the reciprocal recognition and enforcement of judgments of courts. It may therefore be difficult for investors in the United States to enforce their legal rights based on the civil liability provisions of the United States Federal securities laws against us in the courts of either the United States or the PRC and, even if civil judgments are obtained in courts of the United States, to enforce such judgments in PRC courts. Further, it is unclear if extradition treaties now in effect between the United States and the PRC would permit effective enforcement against us or our officers and directors of criminal penalties, under the United States Federal securities laws or otherwise.

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

The Chinese government has enacted some 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. Although legislation in China over the past 30 years has significantly improved the protection afforded to various forms of foreign investment and contractual arrangements in China, these laws, regulations and legal requirements are relatively new and their interpretation and enforcement 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 operations.

We must comply with the Foreign Corrupt Practices Act.

We are required to comply with the United States Foreign Corrupt Practices Act, which prohibits U.S. companies from engaging in bribery or other prohibited payments to foreign officials for the purpose of obtaining or retaining business and requires that we maintain adequate financial records and internal controls to prevent such prohibited payments. Foreign companies, including some of our competitors, are not subject to these prohibitions. Corruption, extortion, bribery, pay-offs, theft and other fraudulent practices occur from time-to-time in mainland China. If our competitors engage in these practices, they may receive preferential treatment from personnel of some companies, giving our competitors an advantage in securing business or from government officials who might give them priority in obtaining new licenses, which would put us at a disadvantage. Although we inform our personnel that such practices are illegal, we cannot assure you that our employees or other agents will not engage in such conduct for which we might be held responsible. If our employees or other agents are found to have engaged in such practices, we could suffer severe penalties.

Due to various restrictions under PRC laws on the distribution of dividends by our PRC operating companies, we may not be able to pay dividends to our stockholders.

The Wholly-Foreign Owned Enterprise Law (1986), as amended and The Wholly-Foreign Owned Enterprise Law Implementing Rules (1990), as amended and the Company Law of the PRC (2006) contain the principal regulations governing dividend distributions by wholly foreign owned enterprises. Under these regulations, wholly foreign owned enterprises, such as Lihua Electron and Lihua Copper, may pay dividends only out of their accumulated profits, if any, determined in accordance with PRC accounting standards and regulations. Additionally, Lihua Electron and Lihua Copper are required to set aside a certain amount of their accumulated profits each year, if any, to fund certain reserve funds. These reserves are not distributable as cash dividends except in the event of liquidation and cannot be used for working capital purposes. The PRC government also imposes controls on the conversion of RMB into foreign currencies and the remittance of currencies out of the PRC.  We may experience difficulties in completing the administrative procedures necessary to obtain and remit foreign currency for the payment of dividends from the profits of Lihua Electron and Lihua Copper.

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Furthermore, if our subsidiaries in China incur debt on their own in the future, the instruments governing the debt may restrict its ability to pay dividends or make other payments. If we or our subsidiaries are unable to receive all of the revenues from our operations due to the above mentioned government controls, we may be unable to pay dividends on our common stock.

We have no current plans to pay any dividends and we plan to retain earnings, if any, for use in the development of the business. Payment of future dividends, if any, will be at the discretion of the Board of Directors after taking into account of various factors, including dividend issuance criteria of the state of the Delaware, where our parent holding company is registered in, current financial condition, operating results, current and anticipated cash needs and regulations governing dividend distributions by wholly foreign owned enterprises in the PRC.

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

We receive substantially all of our revenues in Renminbi, the Chinese currency, which is currently not a freely convertible currency.  The restrictions on currency exchanges may limit our ability to use revenues generated in RMB to make dividends or other payments in United States dollars.  The PRC government strictly regulates conversion of RMB 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 RMB 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. In addition, failure to obtain approval from SAFE for currency conversion on the capital account may adversely impact our capital expenditure plans and our ability to expand in accordance with our desired objectives.

The PRC government also may at its discretion restrict access in the future to foreign currencies for current account transactions.  If the foreign exchange control system prevents us from obtaining foreign currency, we may be unable to pay dividends or meet obligations that may be incurred in the future that require payment in foreign currency.

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

We are dependent on our relationship with the local government in the province in which we operate our business.  The 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.

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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.  Rapid economic growth can lead to growth in the money supply and rising inflation.  If prices for our products rise at a rate that is insufficient to compensate for the rise in the costs of supplies, it may have an adverse effect on profitability.  These factors have led to the adoption by 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 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.

The PRC historically has been deficient in Western style management and financial reporting concepts and practices, as well as in modern banking, and other control systems.  We may have difficulty in hiring and retaining a sufficient number of qualified employees to work in the PRC.  As a result of these factors, 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.  Therefore, we may, in turn, experience difficulties in implementing and maintaining adequate internal controls as required under Section 404 of the Sarbanes-Oxley Act of 2002 and other applicable laws, rules and regulations.  This may result in significant deficiencies or material weaknesses in our internal controls which could impact the reliability of our financial statements and prevent us from complying with SEC rules and regulations and the requirements of the Sarbanes-Oxley Act of 2002.  Any such deficiencies, weaknesses or lack of compliance could have a materially adverse effect on our business and the public announcement of such deficiencies could adversely impact our stock price.

It may be difficult to protect and enforce our intellectual property rights under PRC law.

Intellectual property rights in China are still developing, and there are uncertainties involved in the protection and the enforcement of such rights. We will need to pay special attention to protecting our intellectual property and trade secrets.  Failure to do so could lead to the loss of a competitive advantage that could not be compensated by a damages award.

Under PRC law, we are required to obtain permits and business licenses, and our failure to do so would adversely impact our ability to conduct business in China.

We hold various permits, business licenses, and approvals authorizing our operations and activities, which are subject to periodic review and reassessment by the Chinese authorities.  Standards of compliance necessary to pass such reviews change from time to time and differ from jurisdiction to jurisdiction, leading to a degree of uncertainty.  If renewals, or new permits, business licenses or approvals required in connection with existing or new facilities or activities, are not granted or are delayed, or if existing permits, business licenses or approvals are revoked or substantially modified, we will suffer a material adverse effect. If new standards are applied to renewals or new applications, it could prove costly to us to meet any new level of compliance.

If our land use rights are revoked, we would have no operational capabilities.

Under Chinese law land is owned by the state or rural collective economic organizations. The state issues to tenants the rights to use property. Use rights can be revoked and the tenants forced to vacate at any time when redevelopment of the land is in the public interest. The public interest rationale is interpreted quite broadly and the process of land appropriation may be less than transparent. Each of our two operating subsidiaries rely on these land use rights as the cornerstone of their operations, and the loss of such rights would have a material adverse effect on our company.

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Because we may not be able to obtain business insurance in the PRC, we may not be protected from risks that are customarily covered by insurance in the United States.

Business insurance is not readily available in the PRC. To the extent that we suffer a loss of a type which would normally be covered by insurance in the United States, such as product liability and general liability insurance, we would incur significant expenses in both defending any action and in paying any claims that result from a settlement or judgment.

We are subject to the environmental protection law of China.

Our manufacturing process may produce by-products such as effluent, gases and noise, which are harmful to the environment.  We are subject to multiple laws governing environmental protection, such as “The Law on Environmental Protection in the PRC (1989)”, as amended, and “The Law on Prevention of Effluent Pollution  in the PRC (1984),” as amended, as well as standards set by the relevant governmental authorities determining the classification of different wastes and proper disposal.  We have properly attained a waste disposal permit for our manufacturing facility, which details the types and concentration of effluents and gases allowed for disposal.

China is experiencing substantial problems with environmental pollution.  Accordingly, it is likely that the national, provincial and local governmental agencies will adopt stricter pollution controls.  There can be no assurance that future changes in environmental laws and regulations will not impose costly compliance requirements on us or otherwise subject us to future liabilities.  Our profitability may be adversely affected if additional or modified environmental control regulations are imposed upon us.

Any recurrence of severe acute respiratory syndrome, or SARS, or another widespread public health problem, could adversely affect our operations.

A renewed outbreak of SARS or another widespread public health problem in the PRC, where all of our revenue is derived, could have an adverse effect on our operations. Our operations may be impacted by a number of health-related factors, including quarantines or closures of some of our offices that could leave us without many employees to conduct our business, which would materially and adversely affect our operations and financial condition.

The audit report included in this annual report are prepared by auditors who are not inspected by the Public Company Accounting Oversight Board and, as such, you are deprived of the benefits of such inspection.

Our independent registered public accounting firm that issues the audit reports included in our annual reports filed with the U.S. Securities and Exchange Commission, as auditors of companies that are traded publicly in the United States and a firm registered with the U.S. Public Company Accounting Oversight Board (United States) (“the “PCAOB”), is required by the laws of the United States to undergo regular inspections by the PCAOB to assess its compliance with the laws of the United States and professional standards.

Because we have substantial operations within the Peoples' Republic of China and the PCAOB is currently unable to conduct inspections of the work of our auditors as it relates to those operations without the approval of the Chinese authorities, our auditors are not currently inspected fully by the PCAOB. In May 2013, PCAOB announced that it had entered into a Memorandum of Understanding on Enforcement Cooperation with the CSRC and the PRC Ministry of Finance, which establishes a cooperative framework between the parties for the production and exchange of audit documents relevant to investigations undertaken by PCAOB, the CSRC or the PRC Ministry of Finance in the United States and the PRC, respectively. PCAOB continues to be in discussions with the CSRC and the PRC Ministry of Finance to permit joint inspections in the PRC of audit firms that are registered with PCAOB and audit Chinese companies that trade on U.S. exchanges.

Inspections of other firms that the PCAOB has conducted outside China have identified deficiencies in those firms’ audit procedures and quality control procedures, which may be addressed as part of the inspection process to improve future audit quality.  This lack of PCAOB inspections in China prevents the PCAOB from regularly evaluating our auditor's audits and its quality control procedures.   As a result, investors may be deprived of the benefits of PCAOB inspections.

The inability of the PCAOB to conduct full inspections of auditors in China makes it more difficult to evaluate the effectiveness of our auditor’s audit procedures or quality control procedures as compared to auditors outside of China that are subject to PCAOB inspections. Investors may lose confidence in our reported financial information and procedures and the quality of our financial statements.

Risks Related to the Common Stock

Techniques employed by manipulative short sellers in Chinese small cap stocks may drive down the market price of our common stock

Short selling is the practice of selling securities that the seller does not own but rather has, supposedly, borrowed from a third party with the intention of buying identical securities back at a later date to return to the lender. The short seller hopes to profit from a decline in the value of the securities between the sale of the borrowed securities and the purchase of the replacement shares, as the short seller expects to pay less in that purchase than it received in the sale.   As it is therefore in the short seller’s best interests for the price of the stock to decline, many short sellers (sometime known as “disclosed shorts”) publish, or arrange for the publication of, negative opinions regarding the relevant issuer and its business prospects in order to create negative market momentum and generate profits for themselves after selling a stock short.  While traditionally these disclosed shorts were limited in their ability to access mainstream business media or to otherwise create negative market rumors, the rise of the Internet and technological advancements regarding document creation, videotaping and publication by weblog (“blogging”) have allowed many disclosed shorts to publicly attack a company’s credibility, strategy and veracity by means of so-called research reports that mimic the type of investment analysis performed by large Wall Street firm and independent research analysts.  These short attacks have, in the past, led to selling of shares in the market, on occasion in large scale and broad base.  Issuers with business operations based in the PRC and who have limited trading volumes and are susceptible to higher volatility levels than U.S. domestic large-cap stocks, can be particularly vulnerable to such short attacks.

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These short seller publications are not regulated by any governmental, self-regulatory organization or other official authority in the U.S., are not subject to the certification requirements imposed by the Securities and Exchange Commission in Regulation AC (Regulation Analyst Certification) and, accordingly, the opinions they express may be based on distortions of actual facts or, in some cases, fabrications of facts.  In light of the limited risks involved in publishing such information, and the enormous profit that can be made from running just one successful short attack, unless the short sellers become subject to significant penalties, it is more likely than not that disclosed shorts will continue to issue such reports.

While we intend to strongly defend our public filings against any such short seller attacks, often times we are constrained, either by principles of freedom of speech, applicable state law (often called “Anti-SLAPP statutes”), or issues of commercial confidentiality, in the manner in which we can proceed against the relevant short seller.  You should be aware that in light of the relative freedom to operate that such persons enjoy – oftentimes blogging from outside the U.S. with little or no assets or identity requirements – should we be targeted for such an attack, our stock will likely suffer from a temporary, or possibly long term, decline in market price should the rumors created not be dismissed by market participants.

The market price for our securities may be subject to wide fluctuations.

The securities of a number of Chinese companies and companies with substantial operations in China have experienced wide fluctuations in their stock price. Among the factors that could affect the price of our common stock are risk factors described in this section and other factors, including:

· announcements of competitive developments, by our competitors;

· regulatory developments of our industry affecting us, our customers or our competitors;

· actual or anticipated fluctuations in our quarterly operating results;

· failure of our quarterly financial and operating results to meet market expectations or failure to meet our previously announced guidance, if any;

· changes in financial estimates by securities research analysts;

· changes in the economic performance or market valuations of our competitors;

· additions or departures of our executive officers and other key personnel;

· announcements regarding intellectual property litigation (or potential litigation) involving us or any of our directors and officers;

· fluctuations in the exchange rates between the U.S. dollar and the Renminbi; and

· release or expiration of the underwriters’ post-offering lock-up or other transfer restrictions on our outstanding common stock.

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In addition, the securities markets have from time to time experienced significant price and volume fluctuations that are not related to the operating performance of particular industries or companies. For example, in September 2008, the volatility and disruption of the capital and credit markets reached extreme levels, developing into a global crisis. As a result, stock prices of a broad range of companies worldwide, whether or not they are related to financial services, have declined significantly. These market fluctuations may also have a material adverse effect on the market price of our securities.

We may need additional capital and may sell additional securities or other equity securities or incur indebtedness, which could result in additional dilution to our shareholders or increase our debt service obligations.

We may require additional cash resources due to changed business conditions or other future developments, including any investments or acquisitions we may decide to pursue. If our cash resources are insufficient to satisfy our cash requirements, we may seek to sell additional equity or debt securities or obtain a credit facility. The sale of additional equity securities or equity-linked debt securities could result in additional dilution to our shareholders. The incurrence of indebtedness would result in increased debt service obligations and could result in operating and financing covenants that would restrict our operations. We cannot assure you that financing will be available in amounts or on terms acceptable to us, if at all.

Substantial future sales of our securities in the public market, or the perception that these sales could occur, could cause the price of our securities to decline.

Additional sales of our securities in the public market or the perception that these sales could occur, could cause the market price of our securities to decline. As of March 13, 2014 there were 30,032,116 shares of our common stock outstanding.  Of that amount, 15,604,421 shares of common stock are freely transferable without restriction upon resale. None of our shares are subject to any lock-up restrictions, although 14,427,695 of them are subject to volume and other restrictions as applicable under Rule 144 under the Securities Act. In addition, we may grant or sell additional options, restricted shares or other share-based awards in the future under our share incentive plan to our management, employees and other persons, the settlement and sale of which may further dilute our shares and drive down the price of our securities.

As of March 13, 2014 we had options outstanding to purchase an aggregate of 665,000 shares of our common stock, of which 515,000 are currently exercisable and warrants to purchase 28,456 shares of common stock. To the extent that the options and warrants are exercised, they may be exercised at prices below the price of our shares of common stock on the public market, resulting in a significant number of shares entering the public market and the dilution of our securities.

If NASDAQ were to delist our securities from trading on its exchange, such action could limit investors’ ability to make transactions in our securities and subject us to additional trading restrictions.

Our common stock is currently listed on the NASDAQ Capital Market. We cannot assure you that our securities will meet the continued listing requirements be listed on NASDAQ in the future.

If NASDAQ delists our common stock from trading on its exchange, we could face significant material adverse consequences including:

· a limited availability of market quotations for our securities;

· a determination that our common stock is a “penny stock” which will require brokers trading in our common stock to adhere to more stringent rules and possibly resulting in a reduced level of trading activity in the secondary trading market for our common stock;

· a limited amount of news and analyst coverage for our company; and

· a decreased ability to issue additional securities or obtain additional financing in the future.

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If our shares of common stock become subject to the SEC’s penny stock rules, broker-dealers may experience difficulty in completing customer transactions and trading activity in our securities may be adversely affected.

If our common stock were removed from listing with the Nasdaq Capital Market, it may be subject to the so-called “penny stock” rules. The SEC has adopted regulations that define a “penny stock” to be any equity security that has a market price per share of less than $5.00, subject to certain exceptions, such as any securities listed on a national securities exchange. For any transaction involving a “penny stock,” unless exempt, the rules impose additional sales practice requirements on broker-dealers, subject to certain exceptions. If our common stock were delisted and determined to be a “penny stock,” a broker-dealer may find it more difficult to trade our common stock and an investor may find it more difficult to acquire or dispose of our common stock on the secondary market. Investors in penny stocks should be prepared for the possibility that they may lose their whole investment.

ITEM 1B. UNRESOLVED STAFF COMMENTS

Not applicable.

ITEM 2. PROPERTIES

Under the current PRC law, land is owned by the state, and parcels of land in rural areas which is known as collective land is owned by the rural collective economic organization “Land use rights” are granted to an individual or entity after payment of a land use right fee is made to the applicable state or rural collective economic organization. Land use rights allow the holder the right to use the land for a specified long-term period.

We occupy our properties located in Danyang City, Jiangsu Province, PRC under land use rights for purposes of production, R&D and employee living quarters. We have land use rights, all expiring in 2058, for a total of approximately 77,000 square meters of land for all of our existing plants and plants under construction.

On April 12, 2009, Lihua Copper entered into a lease agreement for a cargo yard located at Liangdong Industrial Development Area, LiangQingTang, Dali, Guangdong Province, Nanhai District in China. The lease is for a five year term, which began on May 2, 2009 and terminates on May 1, 2014. From May 2, 2009 to May 1, 2012, the monthly rent is RMB 28,000 ($4,455), from May 2, 2012 to May 1, 2013, the monthly rent is RMB 31,000 ($4,932), and from May 2, 2013 to May 1, 2014, the monthly rent is RMB 33,000 ($5,250). The Company will not renew the lease agreement for the cargo yard upon expiration since it does not need to maintain a warehouse for scrap copper purchased.

On November 5, 2010, Lihua Copper entered into a Land Expropriation Contract with Houxiang Township People’s Government, Danyang City, Jiangsu Province, relating to the transfer to Lihua Copper of a 50-year right to use a parcel of land located in Wuxing Village and Jide Village, Houxiang Township, for consideration of $5,154,578 (RMB 32,399,100).  The size of the land being transferred is 119,988 square meters, or 180 mu, and the land will be used for the extension of Lihua Copper’s existing factory buildings. Lihua Copper paid $4,772,890 (RMB30,000,000) as a deposit for the above land use right. Not all the relevant formalities were completed prior to December 31, 2013, and therefore as of year-end Lihua Copper had not yet obtained the legal title to the land use rights of 80 mu of the total 180 mu land leased. For more information on the Prepaid Land Use Rights, please refer to Note 9 to the Financial Statements contained on page F-19 of this report.

We believe that our existing facilities and equipment are well maintained and in good operating condition, and are sufficient to meet our needs for the foreseeable future.

ITEM 3. LEGAL PROCEEDINGS

We may be subject to legal proceedings, investigations and claims incidental to the conduct of our business from time to time. We are not currently a party to any material litigation or other legal proceedings brought against us. We are also not aware of any legal proceeding, investigation or claim, or other legal exposure that has a more than remote possibility of having a material adverse effect on our business, financial condition or results of operations.

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ITEM 4. MINE SAFETY DISCLOSURES

Not Applicable.

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PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED SHAREHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Our common stock has been quoted on the Nasdaq Capital Market (“Nasdaq”) under the trading symbol “LIWA” since September 4, 2009. The closing price for our common stock on Nasdaq on March 13, 2014 was $5.05 per share.

The following table shows by each fiscal quarter and partial period, where applicable, the range of high and low sales prices reported by Nasdaq for each full quarterly period within the two most recent fiscal years, through March 13, 2014.

	High		Low
2014
First Quarter (through March 13)	$	5.85	$	5.05
2013
Fourth Quarter	$	6.03	$	4.98
Third Quarter	$	5.34	$	4.84
Second Quarter	$	6.02	$	4.69
First Quarter	$	5.34	$	4.23
2012
Fourth Quarter	$	4.45	$	3.50
Third Quarter	$	5.47	$	3.42
Second Quarter	$	5.85	$	4.24
First Quarter	$	6.63	$	5.20

Holders of Record

At March 13, 2014, there were 30,032,116 shares of our common stock outstanding. Our shares of common stock are held by approximately 34 stockholders of record. The number of record holders was determined from the records of our transfer agent and does not include beneficial owners of common stock whose shares are held in the names of various security brokers, dealers, and registered clearing agencies.

Dividends

We have no current plans to pay dividends and we plan to retain earnings, if any, for use in the development of the business. Payment of future dividends, if any, will be at the discretion of the Board of Directors after taking into account various factors, including dividend issuance criteria of the state of the Delaware, where our parent holding company is registered in, current financial condition, operating results, current and anticipated cash needs and regulations governing dividend distributions by wholly foreign owned enterprises in the PRC.

Performance Graph

The graph below charts the cumulative total return of our common stock listed on Nasdaq, the Nasdaq Composite index and the Copper index, for the fiscal year ended December 31, 2013.  Our stock began trading on Nasdaq on September 4, 2009.

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Recent Sales of Unregistered Securities

None.

Purchases of Equity Securities by the Company

There were no purchases of equity securities made by the Company in the 4^th quarter of 2013.

ITEM 6. SELECTED FINANCIAL DATA

The following table sets forth selected consolidated statement of financial data as of and for the years ended December 31, 2013, 2012, 2011, 2010, and 2009, which are derived from our audited consolidated financial statements. Our consolidated financial statements are prepared in accordance with U.S. GAAP. Our historical results for any period are not necessarily indicative of results to be expected for any future period. You should read the following selected financial information in conjunction with the consolidated financial statements and related notes and the information under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere in this annual report.

	Year Ended December 31,
	2013						2012						2011						2010						2009
	US$			% of Sales			US$			% of Sales			US$			% of Sales			US$			% of Sales			US$			% of Sales
	(in thousands, except for percentages, per share and operating data) (all periods are audited)
Consolidated Statement of Income Data:
Sales
CCA and copper wire		359,517			39.9	%		393,782			46.1	%		335,574			52.7	%		243,133			65.6	%		109,398			67.7	%
Copper anode		472,042			52.4	%		381,114			44.6	%		287,269			45.1	%		97,614			26.3	%		—			—
Refined copper rod		69,168			7.7	%		78,870			9.3	%		14,250			2.2	%		29,785			8.0	%		52,146			32.3	%
Total sales		900,727			100.00	%		853,766			100.00	%		637,093			100	%		370,532			100	%		161,544			100	%
Cost of sales
CCA and copper wire		(317,961	)		-35.3	%		(345,897	)		-40.5	%		(285,851	)		-44.9	%		(192,199	)		-51.9	%		(78,081	)		-48.3	%
Copper anode		(430,348	)		-47.8	%		(343,446	)		-40.2	%		(262,045	)		-41.1	%		(89,107	)		-24.0	%		—			—
Refined copper rod		(66,019	)		-7.3	%		(74,875	)		-8.8	%		(13,483	)		-2.1	%		(27,124	)		-7.3	%		(47,230	)		-29.2	%
Total cost of sales		(814,328	)		-90.4	%		(764,218	)		-89.5	%		(561,379	)		-88.1	%		(308,430	)		-83.2	%		(125,311	)		-77.6	%
Gross profit		86,399			9.6	%		89,548			10.5	%		75,714			11.9	%		62,102			16.8	%		36,233			22.4	%
Selling expenses		(3,021	)		-0.3	%		(2,954	)		-0.4	%		(2,486	)		-0.4	%		(2,058	)		-0.6	%		(1,722	)		-1.1	%
Administrative expenses		(8,073	)		-0.9	%		(8,622	)		-1.0	%		(6,650	)		-1.0	%		(5,747	)		-1.6	%		(3,992	)		-2.5	%
Income from operations		75,305			8.4	%		77,972			9.1	%		66,578			10.5	%		54,297			14.7	%		30,519			18.9	%
Interest income		660			0.1	%		548			0.1	%		523			0.1	%		254			0.07	%		174			0.1	%
Interest expenses		—			—			—			—			(144	)		-0.02	%		(131	)		-0.04	%		(335	)		-0.2	%
Foreign exchange differences		(1	)		0.00	%		110			0.01	%		235			0.04	%		(112	)		-0.03	%		—			—
Gain/(loss) on extinguishment of warrant liabilities		(8	)		0.00	%		73			0.01	%		88			0.01	%		187			0.05	%		(1	)		0.001	%
Change in fair value of warrants		(107	)		-0.01	%		(124	)		-0.01	%		3,062			0.5	%		(1,449	)		-0.4	%		(11,877	)		-7.4	%
Other income (expenses)		35			0.00	%		94			0.01	%		115			0.02	%		(80	)		-0.02	%		501			0.3	%
Income before tax		75,884			8.4	%		78,673			9.2	%		70,457			11.1	%		52,966			14.3	%		18,981			11.7	%
Income tax		(19,725	)		-2.2	%		(20,731	)		-2.4	%		(17,324	)		-2.7	%		(14,500	)		-3.9	%		(5,248	)		-3.2	%
Net income		56,159			6.2	%		57,942			6.8	%		53,133			8.4	%		38,466			10.4	%		13,733			8.5	%

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	Year Ended December 31,
	2013			2012			2011			2010			2009
	US$			US$			US$			US$			US$
	(in thousands, except for percentages, per share and operating data)
Earnings per share
—Basic		1.88			1.94			1.78			1.38			0.77
—Diluted		1.87			1.93			1.77			1.34			0.72
Other Consolidated Financial Data:
Gross profit margin		9.6	%		10.5	%		11.9	%		16.8	%		22.4	%
Operating profit margin		8.4	%		9.1	%		10.5	%		14.7	%		18.9	%
Net profit margin		6.2	%		6.8	%		8.3	%		10.4	%		8.5	%
Consolidated Operating Data:
Shipment volume (ton)
CCA and copper wire		44,331			46,273			34,743			28,388			15,353
Copper anode		63,600			48,689			31,943			12,330			—
Refined copper rod		9,199			9,994			1,876			3,994			9,630
Average selling price ($ per ton)
CCA and copper wire		8,110			8,510			9,659			8,565			7,126
Copper anode		7,422			7,828			8,993			7,917			—
Refined copper rod		7,519			7,892			7,596			7,457			5,414
Consolidated Balance Sheet Data:
Cash and cash equivalents		203,406			144,300			105,638			90,609			34,615
Accounts receivable		60,498			45,285			31,082			32,974			10,996
Inventories		12,141			17,844			15,502			16,156			17,534
Property, plant and equipment		47,139			47,197			20,566			18,189			18,424
Total assets		365,533			293,912			238,289			178,285			91,167
Secured short-term bank loans		—			—			—			2,265			2,197
Total liabilities		19,533			14,980			18,652			25,127			23,661
Total stockholders’ equity		346,000			278,932			219,637			153,158			67,506
Total liabilities and stockholders’ equity		365,533			293,912			238,289			178,285			91,167

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

OVERVIEW

We are principally engaged in the production of copper replacement products, which include refined copper products, copper wire produced from refined scrap copper and CCA wire.

We manufacture and sell four major types of refined copper products and copper alternative products: copper anode, pure copper rod, pure copper wire and CCA wire.  Copper anode, pure copper rod and pure copper wire products are produced from refined scrap copper utilizing our proprietary scrap copper recycling technology and process.

In the first quarter of 2009, with the completion of a 25,000 ton per annum capacity smelter, we introduced a new production process and product line which enables us to produce pure copper products from scrap copper.  The new production process involves the fire refining of bulk recycled copper into high purity, low oxygen content copper rods (also known as fire-refined high-conductivity rods).  We then either sell these large diameter (8mm) copper rods into a range of markets, or further process these rods into much smaller diameter (e.g., 0.03 mm) copper wire (also known as “superfine” copper wire). We believe this recycled superfine copper wire is generally a more cost effective product for our customers, compared with pure copper wire manufactured from newly mined copper.   We launched production of copper anode in July 2010, in conjunction with the completion of our second scrap copper smelter, with an initial annual capacity of 25,000 tons. In October 2011, we completed an efficiency upgrade of the smelters and increased the copper anode smelting capacity to 35,000 tons per annum, and the copper rod smelting capacity to 50,000 tons per annum. In mid 2012, we focused on copper anode production capacity expansion and completed construction of two new copper anode smelters on the 30-acre plant site, giving us a total of 3 anode smelters. In December 2012, we dismantled the oldest copper anode smelter as a result of consolidating and upgrading our production site. In the first quarter of 2013, we completed construction of a third copper anode smelter. The new copper anode smelters constructed in 2012 and 2013 each has an annual production capacity of 25,000 – 30,000 tons, giving us total copper anode refinery capacity of 75,000 – 90,000 tons per annum. We started construction of a fourth copper anode smelter in early 2013. However, we have delayed further construction due to reconfiguration of the dust collection system. The construction will resume upon completion of the dust collection system and a better near term economic outlook. Copper anode is the fundamental building block for almost all pure copper products, and holds a wide range of potential end market uses.  We believe that our pricing advantage on our refined copper products can be maintained regardless of fluctuations in the commodity price of copper.

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We believe we were among the first manufacturers to commercialize CCA superfine wire production in China. Currently we have three different CCA products: CCA fine wire, CCA magnet wire and CCA tin plated wire. CCA fine wire is the raw material for CCA magnet wire and CCA tin plated wire.  In the case of CCA magnet wire, we coat the CCA fine wire with a special magnetic coating, while in the case of CCA tin plated wire, we plate the CCA fine wire with a very thin layer of tin.  The value added nature of our CCA superfine wire products lies in our ability and technology to draw down from much larger diameter CCA raw wire, and further process it to produce super fine CCA magnet wire and CCA tin plated wire. As a result, CCA magnet wire and CCA tin plated wire command higher market prices and higher gross margins than plain CCA fine wire.  In late 2013, we started batch production and sales of a new CCA wire product which was developed in partnership with Shanghai Cable and Wire Research Institute. Compared to the existing CCA wire we produced, the new CCA wire has higher electric transmission and conductivity quality and can be used in more diverse end markets such as audio and visual equipment, computers and mobile phones. We draw pure copper wire from the refined pure copper rod we produce.  The pure copper wire we produce has three main sub categories of products: fine wire, magnet wire and tin plated wire. These three copper wire products have the similar characteristics as the three CCA wire products mentioned above.

We have expanded our business from the CCA superfine wire segment into the scrap copper refinery business because we believe that the scrap copper refinery business allows us to sell into the much bigger pure copper products market and offers us the ability to grow more rapidly while utilizing the proprietary equipment and technology that we possess relating to both the scrap copper cleaning as well as superfine wire drawing. We believe that the ability to sell into the large and growing copper and copper replacement products market in China offers us substantial opportunity to increase our sales in the future. We anticipate that we will continue to expand production capacity in both refined copper products and CCA wire, but that the majority of our investment and resulting planned growth in sales volume will occur in the refined copper products business, which caters to a much bigger pure copper products market, compared with the CCA wire market.

We sell our products primarily in China, either through distributors or directly to users, including distributors in the wire and cable industries and copper conglomerates as well as manufacturers in the consumer electronics, white goods, automotive, utility, telecommunications and specialty cable industries.

Our market for copper anode is very large and diverse as copper anode is the raw material for copper cathode, which in turn is the foundation for most pure copper products.  For our other three main product categories (copper rod, copper wire and CCA wire), our markets overlap to a degree, and are characterized by their breadth and depth, with a very large number of current and potential customers for each product category. Copper rod is a raw material used in wire and cable production.  Our refined copper products (copper anode, copper rod and copper wire), which are manufactured from recycled scrap copper, compete directly with copper products made from “virgin” (e.g. newly mined) copper. Since we produce our copper products with bulk scrap copper, we believe it provides us with a cost advantage in the market. During 2013, we sold copper anode to a few large copper cathode manufacturers, which use our product to produce copper cathode.  We sold copper rod to customers which are mostly producers of smaller diameter copper wire used in power cables ranging in size from high voltage power transmission cables to white good applications such as internal wiring in household appliances and consumer electronics.  Our copper wire, which is sold in a variety of diameters and may have undergone further in-line processing such as coating with plastic, is sold to many of the same types of end-use customers who purchase copper wire from our copper rod customers.  These include manufacturers of a wide range of power cables and products that incorporate wiring, such as household appliances, automobiles, consumer electronics and telecommunications equipment.  Our CCA wire is sold to many of these manufacturers also. Our new CCA wire product can be used in more diverse applications such as audio and visual equipment, computers and mobile phones.  CCA wire sells at a lower cost per unit of weight than pure copper wire, due to the relatively lower density of the aluminum core, which makes up most of the volume of CCA wire.  Our new CCA wire offers conductivity performance characteristics that are equal to or only marginally below those of pure copper wire, which means they are attractive in a wide variety of product applications. The demand for each of our product lines is solid, due both to steady demand in China for copper products including all types of basic wire raw materials and the relative cost advantages our product lines carry over “virgin” pure copper competitor products.

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We believe that we are well positioned to continue to capture further market share in the copper and replacement product industry. Our refined copper products produced from recycled copper and CCA wire are increasingly being accepted as cheaper alternatives to pure copper products. As a result, we have experienced sales growth in the last three years. We generated sales of $900.7 million, $853.8 million and $637.1 million for the years ended December 31, 2013, 2012 and 2011, respectively.

Our capacity to sell our copper anode, copper rod, recycled copper wire products (drawn from copper rod) and CCA wire products (drawn from larger diameter CCA wire) is limited by the number and capacity of the equipment we have installed to produce these products.  Our copper anode and copper rod are made from bulk scrap copper, which is cleaned, purified and smelted in large capacity smelter units.  At the present time we have four smelting facilities allocated to copper rod and copper anode production. The three copper anode smelters are capable of producing 75,000 – 90,000 tons per year and the copper rod smelter is capable of producing 50,000 tons per year.  In 2013, we sold 63,600 tons of copper anode and 47,111 tons of copper rod and wire.  The fine copper wire products we produce have diameters ranging between 1.65mm – 2.6mm (the “fine wire”) and the superfine wire products have diameters ranging between 0.03mm – 1.6mm (the “superfine wire”). In fiscal year 2013, the sales of fine wire and superfine wire were 55.8% and 44.2%, respectively, of total sales of our copper wire products, and 60% and 40%, respectively, of the volume of our copper wire products sold. As of December 31, 2013, we operated approximately 80 high-speed wire drawing machines which draw CCA rod or larger diameter fine copper wire into much finer diameter wires, with a total capacity of approximately 6,000 – 8,000 tons per annum of CCA wire and approximately 20,000 – 25,000 tons per annum of superfine wire. We also have four fine wire drawing machines with aggregate annual drawing capacity of 50,000 – 100,000 tons of fine wire products. We produce wire products with different diameters depending on customer requirements and thus our actual production of wire products in a particular period fluctuates depending on the orders that we received during that period. In 2013, we sold 6,419 tons of CCA wire and a total of 37,912 tons of fine wire and superfine copper wire products. Certain of these drawing machines incorporate additional production steps such as coating, annealing or magnetizing the fine wire produced.  These drawing machines are manufactured to our design and specifications by custom equipment manufacturers located in China.  We are not dependent on any single custom equipment manufacturer for the fabrication of our drawing lines.  In the first half of 2010, we added six high-capacity copper wire drawing production lines, all of which are used to draw copper wire from our copper rod, and increased our annual capacity to 20,000 – 25,000 tons of 0.03mm – 1.60mm diameter range copper wire.  In the third quarter of 2010, we built our first copper anode smelter with 25,000 tons of annual capacity and started copper anode production.  In October 2011 we increased the production efficiency and capacity of the copper rod smelter and increased the smelting capacity to 50,000 tons. As a result, the copper rod production capacity is more than that for superfine copper wire and we sell the excess copper rod produced to external customers. On the new plant construction site, we have added three copper anode smelters with 25,000 - 30,000 tons of annual capacity each.  We have also began construction of a fourth anode smelter but the construction is currently halted pending completion of the dust collection system reconfiguration and a better near term economic outlook. An original cooper anode smelter with a smelting capacity of 35,000 tons was dismantled in December 2012. In the second half of 2013, upon completion of new CCA cable and wire product testing, we have added CCA binding machines and magnet and tin plate machines utilizing new technology and processes we developed.

Historically, we have taken a conservative approach in estimating the annual capacity of each main product category. Specifically, in the wire product categories (CCA and copper wire), our historical total annual capacity estimate was based upon the capacity assumption on drawing the thinnest superfine wire, even though we often produced and sold larger millimeters of wire. Since drawing the thinnest diameter of superfine wire (i.e. 0.03 mm) takes the longest time, the estimated annual capacity that we have disclosed assumes only the smallest possible wire production capacity that we could attain.

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We produce and sell a wide variety of superfine CCA and copper wire products according to customer order specifications. In 2013, the average CCA and copper wire diameters we produced and sold were in the range of 0.03 mm to 2.6 mm. As a result, the actual sales volume of these two products exceeded our estimated production capacity, since such estimate is based upon the thinnest wire diameter production. We are capable of producing annual production capacities for CCA and superfine copper wire in the range of 6,000 – 8,000 tons and 20,000 – 25,000 tons (in the thickness range of 0.03mm – 1.60mm), respectively. We also have four fine wire drawing machines with aggregate annual drawing capacity of 50,000 – 100,000 tons of fine wire products (in the thickness range of 1.65mm – 2.6mm).

Given the production capacity estimates are conservative based upon the assumptions that are used, as described above, management does not expect the current CCA and copper wire capacity to limit potential sales. However, such analysis and determination will be performed by us regularly in future years and any changes will be timely disclosed. In 2012 and 2013, we have completed the construction of three new smelters with 25,000 – 30,000 tons of capacity each. In 2013, we have completed the research and development of new products in the CCA cable and wire category, and have passed sample product quality testing. We are in the process of adding production capacity for this new product while actively seeking potential customers. Currently we are planning to ramp up the production and sales gradually throughout 2014. The degree of the ramp up in production and sales is dependent on various factors, including but not limited to: receipt of new customer product qualification and orders, our capital investment plan, as well as working capital needs.

Significant Factors Affecting Our Results of Operations

The most significant factors that affect our financial condition and results of operations are:

· product mix and implications on gross margins;

· supply and costs of principal raw materials;

· copper prices and supply and demand of copper;

· production capacity; and

· economic conditions in China;

Product mix and effect on gross margins

Our gross margin is affected by our product mix. We produce and sell products according to customer orders.  In our wire products (pure copper wire and CCA wire), magnet wire and tin plated wire are final products from which we will derive the highest production markup, or gross profit.  We also generate a significant portion of revenue from selling semi-finished products such as fine wire at a lower production cost markup, or gross profit.

Generally, copper anode and copper rod products contribute a lower gross profit margin compared to the wire products.  However, given the quick turnover and large volume production of the refined copper products, as well as primarily cash on delivery payment terms with our customers, the return on invested capital for the refined copper products and working capital turnover are much better than that of the wire products.

Supply and costs of principal raw materials

Our ability to manage our operating costs depends significantly on our ability to secure affordable and reliable supplies of raw materials. We have been able to secure a sufficient supply of raw materials, which consist primarily of scrap copper and CCA raw material wire.

The price of our primary raw materials varies with reference to copper prices, and changes in copper price affect our cost of sales.  However, we are able to price our copper and CCA products based on our material procurement costs plus a fixed dollar mark-up, which is essentially our gross profit.  The mark up is adjusted periodically based on market condition, which includes supply demand dynamics, competitive landscape changes, and copper price fluctuation.

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Copper prices and supply and demand of copper

Generally the price of our products is set at a certain discount to local retail copper prices, and we believe our products replace or supplement copper. For these reasons, our products are affected by the market price, demand and supply of copper.

We price our refined copper and CCA wire products based on the market price for materials plus a fixed dollar mark-up, which is essentially our gross profit. As copper prices rise, our fixed dollar mark-up per ton processed represents a relatively lower percentage of our gross sales (which is generally based on tons processed) and therefore our gross profit margin as a percentage of sales is relatively lower; as copper prices decline, the inverse is true and we report relatively higher gross profit margins on a percentage basis.  Despite the implications of copper price volatility on our gross and net profit margins in percentage terms, during the past three years the markup, or our gross and net profit in absolute dollar terms, has not been materially affected by the change of copper prices. Shanghai Changjiang Commodity Market, one of the major metal trading markets in the PRC, publishes the copper trading prices twice daily. These prices typically set the range for the prices of our materials as well as finished products, and are generally followed by all industry participants.

For the year ended December 31, 2013, the average copper price published by the Shanghai Changjiang Commodity Market was $7,363 per ton. During the year, the highest monthly average price was $8,010 per ton (in the month of February 2013), and the lowest monthly average price was $6,973 per ton (in the month of July 2013).

For the year ended December 31, 2012, the average copper price published by the Shanghai Changjiang Commodity Market was $7,750 per ton. During the year, the highest monthly average price was $8,072 per ton (in the month of March 2012), and the lowest monthly average price was $7,456 per ton (in the month of June 2012).

Production capacity

In order to capture the market opportunity for our products, we have expanded, and plan to continue to expand, our production capacity, should the copper product demand in China continue to grow. Increased capacity has had, and could continue to have, a significant effect on our results of operations, by allowing us to produce and sell more products to generate higher revenues and net income.

Economic conditions in the PRC

We operate our manufacturing facilities in the PRC and derive the majority of our revenues from sales to customers in the PRC. As such, economic conditions in the PRC will affect virtually all aspects of our operations, including the demand for our products, the availability and prices of our raw materials and our other expenses. From 1999 to 2013, the PRC has experienced significant economic growth, achieving a CAGR of 15.3% in gross domestic product, according to National Bureau of Statistics of China. Domestic demand for and consumption of copper and CCA products has increased substantially during the time span as a result of this growth. We believe that economic conditions in the PRC will continue to affect our business and results of operations.

PRINCIPAL INCOME STATEMENT COMPONENTS

Sales

Our sales are derived from sales of our products net of value-added taxes.

The most significant factors that affect our sales are shipment volume and average selling prices.

Our collection practices generally consist of cash payment on delivery. However, we also extend credit for 30 days to 60 days to certain of our established customers in the CCA wire category.

Cost of sales

Our cost of sales primarily consists of direct material costs, and, to a lesser extent, direct labor costs and manufacturing overhead costs. Direct material costs generally accounted for the majority of our cost of sales.

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Gross Profit

Our gross profit is affected primarily by the cost of raw materials, which is defined with reference to the cost of copper.  We are also able to price our products based on the market price for materials plus a fixed dollar mark-up, which is essentially our gross profit. The mark up is adjusted periodically based on market condition, which includes supply demand dynamics, competitive landscape changes, and copper price fluctuation.

Operating expenses

Our operating expenses consist of selling, general and administrative expenses, and research and development expenses.

Selling, general and administrative expenses

Our selling expenses include shipping expenses, salaries and traveling expenses for our sales personnel.  Our general and administrative expenses include administrative staff costs and other benefits, depreciation of office equipment, professional service fees and other miscellaneous expenses related to our administrative corporate activities.

Our sales activities are conducted through direct selling by our internal sales staff.  Because of the steady demand for our products, we have not had to start to aggressively market and distribute our products, and our selling expenses have been relatively small as a percentage of our revenues.

We anticipate that our selling, general and administrative expenses will increase with the anticipated growth of our business and continued upgrades to our information technology infrastructure. We expect that our selling, general and administrative expenses will also increase as a result of compliance, investor-relations and other expenses associated with being a publicly listed company.

Other income and expense

Other income and expense includes interest income, interest expense, and other income.

Our interest expense consists of expenses related to our short term bank borrowings.  We expense all interest as it is incurred.

Change in fair value of warrants

The Company’s issued and outstanding Series B warrants expired on October 31, 2013. The Company recognized an $8,369 loss as a result of the extinguishment of warrant liabilities. The fair value of the Company’s issued and outstanding warrants issued to placement agents in conjunction with the Company’s initial public offering in September 2009, decreased to $33,262 as of December 31, 2013 and the Company recognized a $106,536 loss, which is a non-cash loss from the change in fair value of these warrants for the year ended December 31, 2013. In future periods, we may experience gains or losses, as the value of these warrants fluctuates in response to changes in our stock price.

Income taxes

Under the current laws of the Cayman Islands and British Virgin Islands, we are not subject to any income or capital gains tax, and dividend payments we make are not subject to any withholding tax in the Cayman Islands or British Virgin Islands. Under the current laws of Hong Kong, we are not subject to any income or capital gains tax and dividend payments we make are not subject to any withholding tax in Hong Kong.

The PRC New Tax Law imposes a 10% withholding income tax for dividends distributed by a foreign invested enterprise to its immediate holding company outside the PRC for distribution of earnings generated after January 1, 2008. Under the New Tax Law, the distribution of earnings generated prior to January 1, 2008 is exempt from the withholding tax. As our subsidiaries in the PRC will not be distributing their earnings to the Company for the years ended December 31, 2013, 2012 and 2011, no deferred tax liability has been recognized for the undistributed earnings of these PRC subsidiaries through December 31, 2013. Total undistributed earnings of these PRC subsidiaries at December 31, 2013 were RMB1,638,688,844 ($268,774,105).

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Our two operating subsidiaries are governed by the PRC income tax laws and are subject to the PRC enterprise income tax (“EIT”).  Each of the two entities files its own separate tax return.  According to the relevant laws and regulations in the PRC, foreign invested enterprises established prior to January 1, 2008 were entitled to full exemption from income tax for two years beginning from the first year when enterprises become profitable and have accumulative profits and a 50% income tax reduction for the subsequent three years.  Being converted into a Sino-foreign joint equity enterprise in 2005, Lihua Electron was thus entitled to the EIT exemption in 2005 and 2006, and has been subject to the 50% income tax reduction for the period from 2007 to 2009.  Set out in the following table are the EIT rates for our two PRC Operating Companies from 2007 to 2013:

	2007			2008			2009			2010			2011			2012			2013
Lihua Electron		12	%		12.5	%		12.5	%		25	%		25	%		25	%		25	%
Lihua Copper		25	%		25	%		25	%		25	%		25	%		25	%		25	%

RESULTS OF OPERATIONS

YEAR ENDED DECEMBER 31, 2013 COMPARED TO YEAR ENDED DECEMBER 31, 2012

Sales

2013 is a transition year for us to lay the foundation for future growth. In 2013, net sales increased by 5.5% to $900.7 million from $853.8 million in 2012. This growth was primarily driven by increased sales of our copper anode products and negatively impacted by the decrease in sales of our wire products and copper rod product. Please see the table below for more details regarding the product sales breakdown by specific category.

	Year ended December 31,
	2013						2012
In thousands, except for percentage and average price	Sales		Volume (m.t.)		Average price		Sales		Volume (m.t.)		Average price
Fine Copper wire	$	170,903		22,739	$	7,516	$	188,810		23,761	$	7,946
Superfine copper wire		135,329		15,173		8,919		144,338		15,574		9,268
CCA wire		53,284		6,419		8,301		60,634		6,938		8,739
Copper anode		472,042		63,600		7,422		381,114		48,689		7,828
Copper rod		69,168		9,199		7,519		78,870		9,994		7,892
Total	$	900,727		117,130	$	7,690	$	853,766		104,956	$	8,135

The overall sales volume increase of 11.6% in 2013 over 2012 is primarily the result of additional copper anode production as a result of the third copper anode smelter added in January 2013. Sales volume of CCA and copper wire in 2013 has decreased by 4.2% from fiscal year 2012 mainly as a result of the production stoppage when we moved the wire drawing equipment from the old plant to the new 30 acre plant site. Sales volume of copper rod has decreased by 795 tons to 9,199 tons in 2013, an 8.0% reduction from the sales volume of 2012, as a result of the suspension of production of a smelter for vertical copper melting furnace reconstruction in December 2013.

The average sales price decreased by 5.5% in 2013, primarily as a result of the decrease in copper prices. For the year ended December 31, 2013, the average copper price published by the Shanghai Changjiang Commodity Market was $7,363 per ton, compared to the 2012 average of $7,750 per ton, representing a drop of 5%.

We sell our products based on the prevailing market price at the time of the sale. Factors impacting average selling prices of our products are copper price fluctuation, and in the case of the wire products, the average diameter of the wire products we sold during the period - the thicker the wire diameter the lower the sale price, and vice versa.

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Cost of Sales and Gross Margin

The following table sets forth our cost of sales and gross profit, both in amounts and as a percentage of total sales for the years ended December 31, 2013 and 2012:

	Year ended December 31,
	2013					2012
In thousands, except for percentage	Cost of Sales		% of Sales*			Cost of Sales		% of Sales*
Fine copper wire	$	161,176		17.9	%	$	177,348		20.8	%
Superfine copper wire		119,860		13.3	%		127,517		14.9	%
CCA wire		36,925		4.1	%		41,032		4.8	%
Copper anode		430,348		91.2	%		343,446		90.1	%
Copper rod		66,019		95.4	%		74,875		94.9	%
Total	$	814,328		90.4	%	$	764,218		89.5	%

	Year ended December 31,
	2013					2012
In thousands, except for percentage	Gross Profit		% of Sales*			Gross Profit		% of Sales*
Fine copper wire	$	9,727		5.7	%	$	11,462		6.1	%
Superfine copper wire		15,470		11.4	%		16,821		11.7	%
CCA wire		16,359		30.7	%		19,602		32.3	%
Copper anode		41,694		8.8	%		37,668		9.9	%
Copper rod		3,149		4.6	%		3,995		5.1	%
Total	$	86,399		9.6	%	$	89,548		10.5	%

* Percentage of sales of respective product category

Average gross profit margin decreased to 9.6% in 2013 as compared to 10.5% in 2012, primarily as a result of increased copper anode sales in the product mix. Our refined copper products typically are the lower profitable products when compared with the wire products. Additionally, gross profit decreased across all product lines as the spread between the Company's scrap copper cost and the market copper price became narrower in 2013.

Selling, General and Administrative Expenses

The following table sets forth operating expenses and income from operations both in amounts and as a percentage of total sales for Selling, General and Administrative Expenses for the years ended December 31, 2013 and 2012:

	Year ended December 31,												Change in  year ended  December 31,  2013 compared to  year ended  December 31,
	2013						2012						2012
In thousands, except for percentage	US$			% of Sales			US$			% of Sales			%
Gross profit	$	86,399			9.6	%	$	89,548			10.5	%		(3.5	)%
Operating Expenses:
Selling expenses		(3,021	)		(0.3	)%		(2,954	)		(0.4	)%		2.2	%
General & administrative expenses		(8,073	)		(0.9	)%		(8,622	)		(1.0	)%		(6.4	)%
Total operating expense		(11,094	)		(1.2	)%		(11,576	)		(1.4	)%		(4.2	)%
Income from operations	$	75,305			8.4	%	$	77,972			9.1	%		(3.4	)%

Total selling, general and administrative expenses were $11.1 million for the year ended December 31, 2013, compared to $11.6 million for the same period last year, a decrease of 4.2%.

Selling expenses were $3.0 million for the year ended December 31, 2013, an increase of 2.2% compared to the same period last year. 

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Included in selling expenses were shipping and handling costs of $2.4 million and $2.3 million in 2013 and 2012, respectively, representing an increase of 3.5%, while tons of products sold by us increased 11.6% compared to 2012. The slower growth in shipping and handling costs compared to the sales volume growth of our products is due to: i) The increase in total sales volume was due to an increase in copper anode sales, which is concentrated with a few large customers located in cities that are within close proximity to our production location. ii) Depending on our negotiation with customers on a case-by-case basis, shipping and handling costs for our products may either be borne by us or by our customers; and iii) We own a small fleet of trucks to handle part of the shipping and handling of our products which provides further cost savings compared to outsourcing.

General and administrative expenses were $8.1 million for the year ended December 31, 2013, a decrease of 6.4% compared to the same period last year. The main factors which caused this increase was lower research and development costs as we have completed R&D for new CCA products.

Income Tax

For the year ended December 31, 2013, income tax expense was $19.7 million, reflecting an effective tax rate of 26.0%.  The effective tax rate for the same period in 2012 was 26.4%. Excluding the non-taxable fair value change on warrants and the operating loss of the US entity, the effective tax rate was 25.0% and 25.3% for 2013 and 2012, respectively.

Commencing in 2010, both Lihua Electron and Lihua Copper have been subject to an EIT rate of 25%.

Net Income

Net income for the year ended December 31, 2013 was $56.2 million, or 6.2% of net revenue, compared to $57.9 million, or 6.8% of net revenue, in the same period in 2012. The net income for the year ended December 31, 2013 and 2012 was impacted by a total $0.1 million non-cash charge and $0.05 million non-cash charge, respectively, as a result of the gain/loss on extinguishment of warrant liabilities and change of the fair value of the warrants. Excluding the impact of these non-cash items, net income for the year ended December 31, 2013 was $56.3 million, down 3.0% from the prior year.

Foreign Currency Translation Gains

During the year ended December 31, 2013, the RMB rose against the US dollar, and we recognized a foreign currency translation gain of $9.6 million.

YEAR ENDED DECEMBER 31, 2012 COMPARED TO YEAR ENDED DECEMBER 31, 2011

Sales

Our business for the year ended December 31, 2012 continued to demonstrate solid growth.  Net sales increased by 34.0% from $637.1 million in 2011 to $853.8 million in 2012. This growth was primarily driven by increased sales of all of our products as a result of capacity addition. The sales growth was partially offset by the decrease in average sales price in 2012 compared to 2011. Please see the table below for more details regarding the product sales breakdown by specific category.

	Year ended December 31,
	2012						2011
In thousands, except for percentage and average price	Sales		Volume (m.t.)		Average price		Sales		Volume (m.t.)		Average price
Fine copper wire	$	188,810		23,761	$	6,946	$	124,062		14,060	$	8,824
Superfine copper wire		144,338		15,574		9,268		149,809		14,347		10,442
CCA wire		60,634		6,938		8,739		61,703		6,336		9,739
Copper anode		381,114		48,689		7,828		287,269		31,943		8,993
Copper rod		78,870		9,994		7,892		14,250		1,876		7,596
Total	$	853,766		104,956	$	8,135	$	637,093		68,562	$	9,292

The overall sales volume increase of 53.1% in 2012 over 2011 is the result of additional production from two new smelters added in June 2012. Sales volume of CCA and copper wire in 2012 has grown 33.2% from fiscal year 2011 as a result of the copper rod smelter annual capacity increase to 50,000 tons in October 2011.

Sales volume of copper anode in 2012 has grown 52.4% from 2011 primarily as a result of the additional production from two new copper anode smelters which were completed and started production in June 2012. The 432.7% year over year copper rod sales volume increase was the result of full year production from the increased copper rod capacity in 2012 after the October 2011 rod smelter capacity expansion.

The average sales price decreased by 12.5% in 2012, primarily as a result of the decrease in copper prices. For the year ended December 31, 2012, the average copper price published by the Shanghai Changjiang Commodity Market was $7,750 per ton, compared to the 2011 average of $8,767 per ton, representing a drop of 11.6%. In 2011, the Company sold copper rod only in the last quarter, which copper market price was lower than the yearly average of 2012. As a result, the Company recorded an increase in the average price of copper rod in 2012.

We sell our products based on the prevailing market price at the time of the sale. Factors impacting average selling prices of our products are copper price fluctuation, and in the case of the wire products, the average diameter of the wire products we sold during the period - the thicker the wire diameter the lower the sale price, and vice versa.

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Cost of Sales and Gross Margin

The following table sets forth our cost of sales and gross profit, both in amounts and as a percentage of total sales for the years ended December 31, 2012 and 2011:

	Year ended December 31,
	2012					2011
In thousands, except for percentage	Cost of Sales		% of Sales*			Cost of Sales		% of Sales*
Fine copper wire	$	41,032		4.8	%	$	40,328		6.3	%
Superfine copper wire		177,348		20.8	%		115,662		18.2	%
CCA wire		127,517		14.9	%		129,861		20.4	%
Copper anode		343,446		90.1	%		262,045		91.2	%
Copper rod		74,875		94.9	%		13,483		94.6	%
Total	$	764,218		89.5	%	$	561,379		88.1	%

	Year ended December 31,
	2012					2011
In thousands, except for percentage	Gross Profit		% of Sales*			Gross Profit		% of Sales*
Fine copper wire	$	11,462		6.1	%	$	8,400		6.8	%
Superfine copper wire		16,821		11.7	%		19,947		13.3	%
CCA wire		19,602		32.3	%		21,376		34.6	%
Copper anode		37,668		9.9	%		25,224		8.8	%
Copper rod		3,995		5.1	%		767		5.4	%
Total	$	89,548		10.5	%	$	75,714		11.9	%

* Percentage of sales of respective product category

Average gross profit margin decreased to 10.5% in 2012 as compared to 11.9% in 2011, primarily as a result of increased copper anode and copper rod sales in the product mix. Our refined copper products typically are the lower profitable products when compared with the wire products. Since copper wire is a lower gross margin product than CCA wire, the increase in copper wire sales also contributed to the decrease in average CCA and copper wire gross margin as well as overall gross margin.

Selling, General and Administrative Expenses

The following table sets forth operating expenses and income from operations both in amounts and as a percentage of total sales for Selling, General and Administrative Expenses for the years ended December 31, 2012 and 2011:

	Year ended December 31,												Change in  year ended  December 31,  2012 compared to  year ended  December 31,
	2012						2011						2011
In thousands, except for percentage	US$			% of Sales			US$			% of Sales			%
Gross profit	$	89,548			10.5	%	$	75,714			11.9	%		18.3	%
Operating Expenses:
Selling expenses		(2,954	)		(0.4	)%		(2,486	)		(0.4	)%		18.8	%
General & administrative expenses		(8,622	)		(1.0	)%		(6,650	)		(1.0	)%		29.7	%
Total operating expense		(11,576	)		(1.4	)%		(9,136	)		(1.4	)%		26.7	%
Income from operations	$	77,972			9.1	%	$	66,578			10.5	%		17.1	%

Total selling, general and administrative expenses were $11.6 million for the year ended December 31, 2012, compared to $9.1 million for the same period last year, an increase of 26.7%.

Selling expenses were $3.0 million for the year ended December 31, 2012, an increase of 18.8% compared to the same period last year. The increase was attributable to:

· Increased costs related to product distribution and insurance as a result of expanded business volume; and

· Increased staffing costs as we continued to expand the sales force during the period.

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Included in selling expenses were shipping and handling costs of $2.3 million and $2.1 million in 2012 and 2011, respectively, representing an increase of 14.3%, while tons of products sold by us increased 53.1% compared to 2011. Tons of CCA and copper wire and rod products sold increased 53.7% in 2012. The slower growth in shipping and handling costs compared to the sales volume growth of our products is due to: i) Copper anode sales have only been made to two customers, both of whom are located in cities that are within close proximity to our production location. Our wire and rod products are mostly sold to customers located geographically close to us as well; ii) Depending on our negotiation with customers on a case-by-case basis, shipping and handling costs for our products may either be borne by us or by our customers; iii) we own a small fleet of trucks to handle part of the shipping and handling of our products which provides further cost savings compared to outsourcing.

General and administrative expenses were $8.6 million for the year ended December 31, 2012, an increase of 29.7% compared to the same period last year. The main factors which caused this increase were (i) higher staff costs associated with our expanded scale of operations; and (ii) higher research and development costs as we have completed R&D for new CCA products and developed R&D partnerships with Shanghai Electric Cable Research Institute and Beijing Modern Recycling Economy Research Institute in 2011.

Interest Expense

Interest expense was none for the year ended December 31, 2012, compared to $143,779 for the same period last year. The decrease was mainly due to the fact that the Company has sufficient cash and did not borrow any money from banks in 2012.

Income Tax

For the year ended December 31, 2012, income tax expense was $20.7 million, reflecting an effective tax rate of 26.4%.  The effective tax rate for the same period in 2011 was 24.6%. Excluding the non-taxable fair value change on warrants and the operating loss of the US entity, the effective tax rate was 25.3% and 24.9% for 2012 and 2011, respectively.

Commencing in 2010, both Lihua Electron and Lihua Copper have been subject to an EIT rate of 25%.

Net Income

Net income for the year ended December 31, 2012 was $57.9 million, or 6.8% of net revenue, compared to $53.1 million, or 8.3% of net revenue, in the same period in 2011. The net income for the year ended December 31, 2012 and 2011 was impacted by a $0.05 million non-cash charge and $3.1 million non-cash gain, respectively, as a result of the change of the fair value of the warrants. Excluding the impact of these non-cash items, net income for the year ended December 31, 2012 was $58.1 million, up16.0% from the prior year.

Foreign Currency Translation Gains

During the year ended December 31, 2012, the RMB rose against the US dollar, and we recognized a foreign currency translation gain of $0.7 million.

LIQUIDITY AND CAPITAL RESOURCES

We have historically financed our operations and capital expenditures through cash flows from operations, bank loans and fund raising through issuing new shares in the capital markets.

As of December 31, 2013, total cash held in Renminbi and U.S. dollars was RMB 1.2 billion (or $203.4 million based on the conversion rate of US$1 = RMB 6.0969 on the same date). We maintain cash in U.S. dollars in offshore accounts in Hong Kong and in the U.S. to pay for U.S. related expenses such as legal fees and external investor relation firm fees for being a public company in the U.S.

As of December 31, 2013, we had approximately $203.4 million in cash, up $59.1 million from $144.3 million at December 31, 2012. The Company has added new production facilities for its new CCA cable and wire product on the new plant site. Total capex in 2013 was $7.8 million. In December 2013, the Company started a facility upgrade of the copper rod smelter, and completed the upgrade at the end of February 2014. Total cost for the copper rod facility upgrade was approximately $3.8 million. The Company expects to incur additional capex for equipment additions for the new CCA product as we intend to ramp up its sales throughout 2014.

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The following table summarizes our cash flows for each of the periods indicated:

	Year Ended December 31
	2013			2012			2011
(US$)
Net cash provided by operating activities	$	61,046,939		$	48,729,569		$	33,377,997
Net cash used in investing activities		(7,796,777	)		(9,365,100	)		(20,309,900	)
Net cash (used in) provided by financing activities		590,441			(992,846	)		(2,550,960	)
Effect of exchange rate on cash and cash equivalents		5,265,327			291,040			4,511,150
Cash and cash equivalents at beginning of year		144,300,290			105,637,627			90,609,340
Cash and cash equivalents at end of year	$	203,406,220		$	144,300,290		$	105,637,627

Operating activities

For the year ended December 31, 2013, cash provided by operating activities totaled $61.1 million compared to $48.7 million and $33.4 million in the same period of 2012 and 2011, respectively. This was primarily attributable to: i) $56.2 million in net earnings; ii) a decrease of $3.0 million in prepayments for raw material purchases, which was primarily caused by the decrease in scrap copper prices; iii) a $6.2 million inventory decrease, as a result of quicker inventory turnover compared with the prior year; iv) a $3.4 million accounts payable increase; v) a $2.0 million increase in other payables and accruals; offset by: vi) a $13.6 million accounts receivable increase, as a result of increase in copper anode sales; and vii) a $1.0 million decrease in income taxes payable.

Investing activities

For the year ended December 31, 2013, cash used in investing activities totaled $7.8 million compared to $9.4 million and $20.3 million in the same period of 2012 and 2011, respectively. This was primarily attributable to a total net cash outflow of $7.8 million for the purchase of and deposits paid for property, plant and equipment and construction in progress, primarily as a result of the facility upgrade of the copper rod smelter, all being part of our planned expansion.

Financing activities

For the year ended December 31, 2013, cash provided by financing activities totaled $0.6 million compared to cash outflow of $1.0 million and cash outflow of $2.6 million in the same period of 2012 and 2011, respectively. The $0.6 million cash provided by financing activities in 2013 was from the exercise of share options and Series B Warrants.

In October 2011, the Board of Directors approved two special dividends. The amount of each special dividend was $0.03 per outstanding share of Lihua common stock on the respective record dates. The first dividend of $0.5 million was paid on January 13, 2012 to Lihua shareholders of record on December 31, 2011 and the second dividend of $0.5 million was paid on April 13, 2012 to Lihua shareholders of record on March 31, 2012. The per share amount of each special dividend was calculated on an annualized method based on 5% of the Company’s full-year GAAP net income of $38.5 million for the twelve months ended December 31, 2010. Magnify Wealth Enterprise Ltd. (“Magnify Wealth”), the Company’s largest shareholder and an affiliate of Mr. Jianhua Zhu, the Company’s founder, Chairman and CEO, had agreed to waive payment of the two special dividends. Accordingly, the two special dividends were distributed among approximately 16.8 million shares.

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In January 2011, the Board of Directors authorized management to repurchase stock over a 12-month period with a total value of up to $15 million (the “Repurchase Program”). The Company purchased 264,047 shares in the open market at an aggregate cost of $2.1 million. The initial repurchases were funded with US dollars the Company had in its Hong Kong bank account, and the subsequent repurchases were funded by an aggregate of $1.3 million in loans, denominated in U.S. dollars, from Magnify Wealth, under an up to $4 million demand promissory note entered between Magnify Wealth and the Company on May 19, 2011 (the “Note”). The Company repaid Magnify Wealth in full, in RMB. While the Company’s operating subsidiaries in the PRC have substantial cash reserves available, the laws of the PRC restrict the conversion of RMB to U.S. dollars, such that the Company had encountered difficulty funding the Repurchase Program with U.S. dollars from cash held by its PRC subsidiaries. The Company explored possible alternative arrangements for funding the Repurchase Program in U.S. dollars with financial institutions, but Company management determined that such alternatives would have been costly or otherwise not appropriate for the Company. The Repurchase Program expired in January 2012.

On January 9 and March 15, 2012, in order to partially fund the 2011 special dividend payment and operating expenses, Magnify Wealth loaned $1 million and $0.6 million respectively under the Note, of which RMB6.3 million and RMB3.8 million were repaid on January 9 and March 31, 2012, respectively, in RMB, at the average rate of 6.3126 RMB per US dollar, which was based upon the exchange rate between US dollars and RMB as set forth by Standard Chartered Bank in Hong Kong. The loans under the Note were unsecured, payable on demand and bore interest at 2% per annum.

On April 6 and April 26, 2012, in order to partially fund the 2011 special dividend payment and U.S. dollar operating expenses, upon Board approval, Magnify Wealth loaned $0.5 million and $0.9 million, respectively, under the Note, of which RMB 3.15 million and RMB 5.65 million were repaid, respectively, in RMB, at the average rate of 6.2916 RMB per US dollar, based upon the exchange rate between US dollars and RMB as set forth by Standard Chartered Bank in Hong Kong. The loans under the Note were unsecured, payable on demand and bore interest at 2% per annum.

As of December 31, 2012, there were no outstanding loans under the Note.

Capital expenditures

Our capital expenditures are principally directed for expansion of production facilities, including construction and purchases of property, plant and equipment. In 2013, 2012 and 2011, we funded our capital expenditures primarily through cash flows from operating activities and the proceeds of bank borrowings, and equity issuance.

In 2014, as we accelerate our expansion, we expect to continue capital expenditures for maintaining existing machines and adding manufacturing equipment in our 180 mu new plant site, which is adjacent to our existing plant. We currently have four smelting facilities which can produce a total of 125,000 – 140,000 tons of refined copper products per year.  Since 2012, we have added 75,000-90,000 tons of new anode smelting capacity, while dismantling an older anode smelter with 35,000 tons of annual capacity. With our current capacity of production lines, we can produce 6,000 – 8,000 tons of CCA wire and 20,000 - 25,000 tons of copper wire with the diameter range of 0.03mm – 1.60mm.  We have completed the research and development of a new CCA cable and wire product and have passed the industry standard testing. We began batch production and sales at end of 2013 and plan to ramp up the production and sales of this new CCA product as we continue our efforts to add new customers. We believe that our existing cash, cash equivalents and cash flows from operations will be sufficient to meet our presently anticipated future cash needs to bring all of our facilities into full production. We may, however, require additional cash resources due to changing business conditions or other future developments, including any investments or acquisitions we may decide to pursue.

Accounts receivable

In 2013, we sold 44,331 tons of CCA and copper wire, 63,600 tons of copper anode and 9,199 tons of copper rod.  In 2012, we sold 46,273 tons of CCA and copper wire, 48,689 tons of copper anode and 9,994 tons of copper rod. As CCA is an emerging product in the PRC, Lihua extends credit terms to some of its larger customers. However, pure copper products, such as our copper anode, copper rod and copper wire, are in higher demand that we don’t have to extend credit terms. Our customers often purchase more than one type of product from us (for example, one customer may purchase both CCA wire and copper wire).  CCA wire purchases are generally accorded 30 to 60 day payment terms, depending upon the creditworthiness of the customer, while the copper wire (and copper rod and anode) purchases are payable upon delivery to the customer, which may occur two to seven days after we ship the product and recognize our revenue. This decision to extend terms or to collect payment upon receipt (essentially a “cash sale”, although due to the shipping time this effectively becomes a very short receivable), is based primarily upon the product type. We may extend terms for CCA purchases to a credit-worthy customer, but for that same customer require payment upon delivery for purchases of copper anode, rod and/or copper wire.

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The table below shows the breakdown of accounts receivable by products:

	As of December 31,
	2013		2012
CCA wire and copper wire	$	17,352,415	$	13,119,436
Copper anode		34,793,532		28,586,258
Copper rod		8,351,833		3,579,229
Total	$	60,497,780	$	45,284,923

Off-balance sheet arrangements

As of December 31, 2013, we have no off-balance sheet arrangements.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Foreign Exchange Risk

Substantially all of our revenues and expenditures are denominated in Renminbi. As a result, fluctuations in the exchange rate between the U.S. dollars and Renminbi will affect our financial results in U.S. dollars terms without giving effect to any underlying change in our business or results of operations. The Renminbi’s exchange rate with the U.S. dollar and other currencies is affected by, among other things, changes in the PRC’s political and economic conditions. The exchange rate for conversion of Renminbi into foreign currencies is heavily influenced by intervention in the foreign exchange market by the People’s Bank of China. From 1995 to July 2005, the People’s Bank of China intervened in the foreign exchange market to maintain an exchange rate of approximately 8.3 Renminbi per U.S. dollar. On July 21, 2005, the PRC government changed this policy and began allowing modest appreciation of the Renminbi versus the U.S. dollar. However, the Renminbi is restricted to a rise or fall of no more than 0.5% per day versus the U.S. dollar, and the People’s Bank of China continues to intervene in the foreign exchange market to prevent significant short-term fluctuations in the Renminbi exchange rate. Nevertheless, under China’s current exchange rate regime, the Renminbi may appreciate or depreciate significantly in value against the U.S. dollar in the medium to long term. There remains significant international pressure on the PRC government to adopt a substantial liberalization of its currency policy, which could result in a further and more significant appreciation in the value of the Renminbi against the U.S. dollar.

Any devaluation of the Renminbi against the U.S. dollar would consequently have an adverse effect on our financial performance and asset values when measured in terms of U.S. dollars. On the other hand, the appreciation of the Renminbi could make our customers’ products more expensive to purchase because many of our customers are involved in the export of goods, which may have an adverse impact on their sales. A decrease in sales by our customers could have an adverse effect on our operating results. In addition, as of December 31, 2013 and 2012, we had cash denominated in Renminbi and U.S. dollar amounting to RMB1.2 billion ($203.4 million) and RMB907.0 million ($144.3 million), respectively.

We recognized a foreign currency translation adjustment of approximately RMB 59.7 million ($9.6 million) for the year ended December 31, 2013.

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Very limited hedging transactions are available in the PRC to reduce our exposure to exchange rate fluctuations. To date, we have not entered into any hedging transactions in an effort to reduce our exposure to foreign currency exchange risk. While we may decide to enter into hedging transactions in the future, the availability and effectiveness of these hedging transactions may be limited and we may not be able to successfully hedge our exposure at all. In addition, our currency exchange losses may be magnified by PRC exchange control regulations that restrict our ability to convert Renminbi into foreign currency.

Interest Rate Risk

Should we incur short term bank borrowings, we may be exposed to interest rate risk arising from short-term variable rate borrowings from time to time. Our future interest expense will fluctuate in line with any change in our borrowing rates. We believe our exposure to interest rate risk and other relevant market risks is not material. We did not have short term bank borrowing outstanding as of December 31, 2013. However, we may incur short-term bank borrowings under our working capital revolving line of credit from time to time.

Inflation

In recent years, the PRC has experienced more material inflation, however inflation has not had a material impact on our results of operations. According to the National Bureau of Statistics of China, the change in Consumer Price Index in China was -0.7%, 3.3%, 5.4%, 2.6% and 2.6% in 2009, 2010, 2011, 2012 and 2013, respectively.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Our consolidated financial statements and the notes thereto begin on page F-1 of this Annual Report.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

Under the supervision and with the participation of management, including our chief executive officer, who is our principal executive officer, and the chief financial officer, who is our principal financial officer, we conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, as of December 31, 2013. Based on this evaluation, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures were effective, as of December 31, 2013, to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is accumulated and communicated to our management, including our chief executive officer and chief financial officer, to allow timely decisions regarding required disclosures.

Management’s Annual Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting for the Company.  Using the Integrated Framework adopted by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”), our management assessed the effectiveness of the Company’s internal control over financial reporting, as of December 31, 2013, and determined it to be effective.

Attestation Report of Independent Registered Public Accounting Firm

Our independent registered public accounting firm, Crowe Horwath (HK) CPA Limited, has audited the effectiveness of our internal controls over financial reporting as of December 31, 2013, as stated in their report which appears on pages F-1 of this annual report on Form 10-K.

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Changes in Internal Controls

In addition, no change in our internal control over financial reporting (as defined in Rules 13a-15 or 15d-15 under the 1934 Act) occurred during the fourth quarter of the year ended December 31, 2013, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

ITEM 9B. OTHER INFORMATION

None.

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PART III

ITEM 10.     DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Directors and Executive Officers

The following table sets forth information about our directors and executive officers as of March 13, 2014.

Name	Age	Position
Jianhua Zhu	52	Chief Executive Officer, President and Director
Daphne Huang	43	Chief Financial Officer and Treasurer
Yaying Wang	51	Chief Operating Officer, Secretary and Director
Robert C. Bruce*	51	Independent Director
Jonathan P. Serbin*	44	Independent Director
Kelvin Lau*	51	Independent Director

* Indicates member of Audit, Nominating and Corporate Governance Committee and Compensation Committee.

Our directors are appointed for a one-year term to hold office until the next annual meeting of our stockholders or until they resign or are removed from office in accordance with our bylaws. Our officers serve at the discretion of our Board of Directors.

Set forth below is information regarding certain significant employees.

Name	Age	Position
Yingchun Han	44	General Manager of Lihua Electron
Junying Zhu	35	VP of Sales and Marketing

Set forth below are the respective principal occupations or brief employment histories of each of our directors and the periods during which each has served as a director of the Company, as well as for our named executive officers and certain significant employees.

Jianhua Zhu, President and Chief Executive Officer of the Company and the Chairman of the Board of Directors. Mr. Zhu has served as a director of the Company since October 31, 2008. Mr. Zhu has over 20 years of experience in the PRC’s copper industry. From Lihua Electron’s inception in October 1999 and from Lihua Copper’s inception in September 2007 until June 6, 2008, Mr. Zhu served as the sole member of the board of directors. Mr. Zhu currently serves as the Executive Director of Lihua Electron and Lihua Copper. In addition to overall management of the Company, Mr. Zhu is responsible for corporate and product development and governmental regulations. As our founder and CEO, we believe that Mr. Zhu’s extensive experience in the copper industry provides him with significant insights into our business, which make him qualified to be the Chairman of our Board of Directors.

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Daphne Huang, Chief Financial Officer and Treasurer. Ms. Huang has served as Chief Financial Officer and Treasurer since October 23, 2011 and as Executive Vice President of Finance and Director of Investor Relations since October 2009. From April 2003 through February 2009, Ms. Huang worked at GE Capital Markets, Inc., a broker dealer, where she served as Assistant Vice President and then Vice President of the Debt Capital Markets group and was responsible for debt product structuring and syndication in the U.S. capital markets. From 2000 to 2002, Ms. Huang was an Associate and then a Senior Associate at Fleet Securities, Inc., an investment bank that was acquired by Bank of America. Ms. Huang also served as a Senior Auditor in the Capital Markets Group of PriceWaterhouseCoopers from 1997 to 2000, an Equity Research Analyst at SG Cowen & Company from 1996 to 1997 and a Financial Analyst at Morgan Stanley Dean Witter from 1995 to 1996. Ms. Huang earned an MBA in Finance and Management from the Leonard N. Stern School of Business at New York University, a BBA in Accounting from Baruch College, and holds an inactive CPA license in the State of New York. She is also fluent in Mandarin.

Yaying Wang, Chief Operating Officer and a member of the Board of Directors. Ms. Wang has served as a director of the Company, Secretary and COO since October 31, 2008. Ms. Wang has over 20 years of experience in the PRC’s copper industry. Ms. Wang has strong technical knowledge of copper and extensive industry relationships. In addition to her responsibilities as COO, Ms. Wang is responsible for the Sales and Production Departments. We believe that Ms. Wang’s extensive experience in the copper industry provides her with significant insights into our business, which are needed by our Board of Directors.

Robert C. Bruce, Independent Director. Mr. Bruce has served as a director of the Company since April 14, 2009. Mr. Bruce is Founder and CEO of Zylo Media, LLC, an early stage digital advertising and marketing company headquartered in Portland, Maine. Mr. Bruce also serves as President of Oakmont Advisory Group, LLC, a financial and operational management consulting firm located in Portland, Maine. Prior to founding Oakmont Advisory Group, from 1999 through 2004, Mr. Bruce served as Chief Operating Officer, Treasurer and Director for Enterix Inc., a privately-held, venture-funded medical device and laboratory services company that was purchased by Quest Diagnostics. He also previously served as Chief Financial Officer for Advantage Business Services (1997 to 1998), a privately-held national payroll processing and tax filing business that was subsequently acquired by PayChex. Mr. Bruce previously served as a member of the board of directors of ImmuCell Corporation (NASDAQ: ICCC) and China North East Petroleum Holdings Ltd. (NYSE Amex: NEP). Mr. Bruce received his MBA from the Yale School of Management, and a Bachelor of Arts degree in East Asian Studies from Princeton University. Mr. Bruce is proficient in written and spoken Mandarin. We believe that Mr. Bruce’s experience as a former director of two other public companies and his extensive finance experience provides him with a unique and valuable perspective from which he helps advise the Board of Directors.

Jonathan P. Serbin, Independent Director. Mr. Serbin has served as a director of the Company since April 14, 2009. Mr. Serbin has been the head of Asia Investment Banking of Mesa Global since 2012. Prior to that he was the head of Media and Telecom Investment Banking Asia division for Oppenheimer & Co. from October 2010 until October 2012. From January 2007 until October 2010, he was the Chief Executive Officer of D Mobile, Inc., a seller of mobile content in the PRC. Mr. Serbin holds a B.A. from Washington University, St. Louis, a J.D. from Boston University and an MBA from Columbia University. Mr. Serbin is proficient in spoken Mandarin. We believe that Mr. Serbin’s significant experience in senior management, extensive finance experience and familiarity with working in the PRC provides him with a unique and valuable perspective from which he helps advise the Board of Directors.

Siu Ki “Kelvin” Lau, Independent Director.  Mr. Lau has served as a director of the Company since October 20, 2009. Mr. Lau has substantial experience in capital markets, corporate finance, investments and mergers & acquisitions, particularly in the Asia Pacific region. He has worked for a few international and regional investment banks since 1990 and has been providing advisory service to listed and private companies with regard to public listing, corporate takeover, equity fund raising and other corporate activities. From January 1990 to May 1993, Mr. Lau worked for a leading local investment bank in Hong Kong. During May 1993 and May 1997, he worked as a director for a European investment bank, and since May 1997, he has been working for Asian investment banks with global network. Mr. Lau was Managing Director of DBS Asia Capital Limited during April 2002 and December 2008. Since December 2008, he has been working in the Equity Capital Markets and Corporate Finance department of Mizuho Securities Asia Limited, which is a major Japanese investment banking and securities company with global distribution network.  Mr. Lau is a fellow member of the Chartered Association of Certified Accountants of the United Kingdom and a member of the Hong Kong Institute of Certified Public Accountants. He majored in economies. Mr. Lau has language skills in English and Chinese, including Mandarin and Cantonese, and is currently based in Hong Kong and principally covers fund raising and corporate activities of listed and private companies in the Greater China region. We believe that Mr. Lau’s strong exposure in investment banking, corporate finance and corporate governance and his substantial experience of working with PRC corporates provides him with a unique and valuable perspective as an important member of the Board of Directors.

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Significant Employees

Yingchun Han, Vice President. Mr. Han has served as the Vice President of Lihua Electron since July 2013. Mr. Han has over 20 years’ experience working in the cable and wire metals industry in China. He has held executive management positions with a number of cable and wire manufacturers prior to joining our company. Prior to joining Lihua Electron, Mr. Han was the Chief Operating Officer of Jiangsu Huijingyuan Metal Material Ltd. from January 2013 to June 2013. From 2010 to 2012, Mr. Han was the Chief Operating Officer of Changzhou Minhao New Metal Materials Ltd. From 2006 to 2010, Mr. Han was Vice President of Changzhou Suyun Electric Ltd. Earlier in his career, Mr. Han held vice president positions in three companies in the materials and metals manufacturing industry. Mr. Han graduated from Jiangsu Teacher’s University in 1992.

Junying Zhu, VP of Sales and Marketing. Ms. Zhu has served as the VP of sales of Lihua Electron since its inception in 1999. Ms. Zhu has more than 10 years working experience in Copper Clad Aluminum magnet wire industry. She had held various executive management positions since Lihua Electron was established, including VP of operations, from 2001 to 2005. During her career, Ms. Zhu has focused on the business development, strategic market planning, key account management, contract negotiation and loss prevention. Ms. Zhu graduated from Changzhou Accounting College with a degree in marketing.

Family Relationships

Mr. Jianhua Zhu, our Chief Executive Officer, President and Chairman, and Ms. Yaying Wang, our Chief Operating Officer and a director, are married. There are no other family relationships among our executive officers, directors and significant employees.

Involvement in Certain Legal Proceedings

To the best of our knowledge, there have been no events under any bankruptcy act, no criminal proceedings and no judgments, injunctions, orders or decrees material to the evaluation of the ability and integrity of any director, executive officer, promoter or control person of our Company during the past ten years.

Corporate Governance

Board Leadership Structure

The Board of Directors believes that Mr. Zhu’s service as both Chairman of the Board and Chief Executive Officer is in the best interest of the Company and its stockholders. Mr. Zhu possesses detailed and in-depth knowledge of the issues, opportunities and challenges facing the Company and its business and is thus best positioned to develop agendas that ensure that the Board’s time and attention are focused on the most critical matters. His combined role enables decisive leadership, ensures clear accountability, and enhances the Company’s ability to communicate its message and strategy clearly and consistently to the Company’s stockholders, employees, customers and suppliers.

The board has not designated a lead director. Given the limited number of directors comprising the board, the independent directors call and plan their executive sessions collaboratively and, between board meetings, communicate with management and one another directly. In the circumstances, the directors believe that formalizing in a lead director functions in which they all participate might detract from rather than enhance performance of their responsibilities as directors.

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Risk Oversight

The Board of Directors is responsible for the oversight of risk management related to the company and its business and accomplishes this oversight through regular reporting by the Audit Committee. The Audit Committee assists the Board of Directors by periodically reviewing the accounting, reporting and financial practices of the company, including the integrity of our financial statements, the surveillance of administrative and financial controls and the Company’s compliance with legal and regulatory requirements. Through its regular meetings with management, including the finance and internal audit functions, the Audit Committee reviews and discusses all significant areas of our business, including credit policies, inventory management practices, internal controls, accounting policies and procedures and summarizes for the Board of Directors areas of risk and the appropriate mitigating factors.

Board Practices

Our business and affairs are managed under the direction of our board of directors. The primary responsibilities of our board of directors are to provide oversight, strategic guidance, counseling and direction to our management.

Board Committees and Independence

The Board of Directors has an Audit Committee, Nominating and Corporate Governance Committee and a Compensation Committee, each of which was formed on April 14, 2009. Our board of directors has determined that Robert C. Bruce, Jonathan P. Serbin, and Kelvin Lau, the members of these committees, are “independent” under the current independence standards of Rule 5605(a)(2) of the Marketplace Rules of The NASDAQ Stock Market, LLC and meet the criteria for independence set forth in Rule 10A(m)(3) under the U.S. Securities Exchange Act of 1934, as amended (the “Exchange Act”). Our board of directors has also determined that these persons have no material relationships with us — either directly or as a partner, stockholder or officer of any entity — which could be inconsistent with a finding of their independence as members of our board of directors.

Audit Committee

Our audit committee was established in accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934, as amended. The audit committee members consist of Robert C. Bruce, Jonathan P. Serbin and Kelvin Lau. Each of these members would be considered “independent” as defined by Rule 5605 of NASDAQ’s Marketplace Rules, as determined by our board of directors. During the fiscal year ended December 31, 2013, the Audit Committee met 4 times.

The audit committee oversees our financial reporting process on behalf of the board of directors. The committee’s responsibilities include the following functions:

· approve and retain the independent auditors to conduct the annual audit of our books and records;

· review the proposed scope and results of the audit;

· review and pre-approve the independent auditors’ audit and non-audited services rendered;

· approve the audit fees to be paid;

· review accounting and financial controls with the independent auditors and our internal auditors and financial and accounting staff;

· review and approve transactions between us and our directors, officers and affiliates;

· recognize and prevent prohibited non-audit services; and

· meet separately and periodically with management and our internal auditor and independent auditors.

The Audit Committee operates under a written charter, which is available at our website at http://www.lihuaintl.com. Robert C. Bruce serves as the Chairman of our Audit Committee.

Our board of directors has determined that we have at least one audit committee financial expert, as defined by the rules and regulations of the SEC and NASDAQ, serving on our audit committee, and that Robert C. Bruce is the “audit committee financial expert”. We have also determined that Robert C. Bruce is “independent” under the current independence standards of Rule 5606(a)(2) of the Marketplace Rules of The NASDAQ Stock Market, LLC and meets the independence criteria set forth in Rule 10A(m)(3) of the U.S. Securities Exchange Act of 1934, as amended.

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Audit Committee Report

The role of the Audit Committee is to assist the Board of Directors in its oversight of the Company’s financial reporting process. As set forth in the Charter, management of the Company is responsible for the preparation, presentation and integrity of the Company’s financial statements, accounting and financial reporting principles and internal controls and procedures designed to assure compliance with accounting standards and applicable laws and regulations. The independent auditors are responsible for auditing the Company’s financial statements and expressing an opinion as to their conformity with generally accepted accounting principles.

In the performance of this oversight function, the Audit Committee has reviewed and discussed the audited financial statements for the fiscal year ended December 31, 2013 with management, and has discussed with the independent auditors the matters required to be discussed by Statement of Auditing Standards No. 61, Communication with Audit Committee, as currently in effect. The Audit Committee has received the written disclosures and the letter from the independent auditors required by Independence Standards Board Standard No. 1, Independence Discussions with Audit Committees, as currently in effect, and has discussed with the independent auditors the independent auditors’ independence; and based on the review and discussions referred above, the Audit Committee recommended to the Board of Directors that the audited financial statements be included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2013 for filing with the SEC.

The members of the Audit Committee are not professionally engaged in the practice of auditing or accounting, are not experts in the fields of accounting or auditing, including in respect of auditor independence. Members of the Committee rely without independent verification on the information provided to them and on the representations made by management and the independent accountants. Accordingly, the Audit Committee’s oversight does not provide an independent basis to determine that management has maintained appropriate accounting and financial reporting principles or appropriate internal control and procedures designed to assure compliance with accounting standards and applicable laws and regulations. Furthermore, the Audit Committee’s consideration and discussions referred to above do not assure that the audit of the Company’s financial statements has been carried out in accordance with generally accepted accounting principles or that the Company’s auditors are in fact “independent”.

Based upon the reports, review and discussions described in this report, and subject to the limitations on the role and responsibilities of the Committee referred to above and in the Charter, the Committee recommended to the Board that the audited financial statements be included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013, be filed with the Securities and Exchange Commission.

The members of the Audit Committee are:

Robert. C. Bruce

Jonathan P. Serbin

Kelvin Lau

Nominating and Corporate Governance Committee

The Nominating and Governance Committee is responsible for identifying potential candidates to serve on our board and its committees. The committee’s responsibilities include the following functions:

· making recommendations to the board regarding the size and composition of the board;

· identifying and recommending to the board nominees for election or re-election to the board, or for appointment to fill any vacancy;

· establishing procedures for the nomination process;

· advising the board periodically with respect to corporate governance matters and practices, including periodically reviewing corporate governance guidelines to be adapted by the board; and

· establishing and administering a periodic assessment procedure relating to the performance of the board as a whole and its individual members.

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Each of Messrs. Bruce, Serbin and Lau are the members of the Nominating and Corporate Governance Committee. The Nominating and Corporate Governance Committee operate under a written charter, which is available on our website at http://www.lihuaintl.com. Mr. Lau is the Chairman of the Nominating and Corporate Governance Committee. During the fiscal year ended December 31, 2013, the Nominating and Corporate Governance Committee met 4 times and acted by written consent one time.

The Nominating and Corporate Governance Committee will consider director candidates recommended by security holders. Potential nominees to the Board of Directors are required to have such experience in business or financial matters as would make such nominee an asset to the Board of Directors and may, under certain circumstances, be required to be “independent”, as such term is defined under Rule 5605 of the listing standards of NASDAQ and applicable SEC regulations. Security holders wishing to submit the name of a person as a potential nominee to the Board of Directors must send the name, address, and a brief (no more than 500 words) biographical description of such potential nominee to the Nominating and Corporate Governance Committee at the following address: Kelvin Lau, Chairman, Nominating and Corporate Governance Committee, Lihua International, Inc., GPO Box 5247, Hong Kong. Potential director nominees will be evaluated by personal interview, such interview to be conducted by one or more members of the Nominating and Corporate Governance Committee, and/or any other method the Nominating and Corporate Governance Committee deems appropriate, which may, but need not, include a questionnaire. The Nominating and Corporate Governance Committee may solicit or receive information concerning potential nominees from any source it deems appropriate. The Nominating and Corporate Governance Committee need not engage in an evaluation process unless (i) there is a vacancy on the Board of Directors, (ii) a director is not standing for re-election, or (iii) the Nominating and Corporate Governance Committee does not intend to recommend the nomination of a sitting director for re-election. A potential director nominee recommended by a security holder will not be evaluated differently from any other potential nominee. Although it has not done so in the past, the Nominating and Corporate Governance Committee may retain search firms to assist in identifying suitable director candidates.

The Board does not have a formal policy on Board candidate qualifications. The Board may consider those factors it deems appropriate in evaluating director nominees made either by the Board or stockholders, including judgment, skill, strength of character, experience with businesses and organizations comparable in size or scope to the Company, experience and skill relative to other Board members, and specialized knowledge or experience. Depending upon the current needs of the Board, certain factors may be weighed more or less heavily. In considering candidates for the Board, the directors evaluate the entirety of each candidate’s credentials and do not have any specific minimum qualifications that must be met. “Diversity,” as such, is not a criterion that the Committee considers. The directors will consider candidates from any reasonable source, including current Board members, stockholders, professional search firms or other persons. The directors will not evaluate candidates differently based on who has made the recommendation.

Compensation Committee

The Compensation Committee is responsible for making recommendations to the board concerning salaries and incentive compensation for our officers and employees and administers our stock option plans. Its responsibilities include the following functions:

· reviewing and recommending policy relating to the compensation and benefits of our officers and employees, including reviewing and approving corporate goals and objectives relevant to the compensation of our chief executive officer and other senior officers; evaluating the performance of these officers in light of those goals and objectives; and setting compensation of these officers based on such evaluations;

· administering our benefit plans and the issuance of stock options and other awards under our stock plans; and reviewing and establishing appropriate insurance coverage for our directors and executive officers;

· recommending the type and amount of compensation to be paid or awarded to members of our board of directors, including consulting, retainer, meeting, committee and committee chair fees and stock option grants or awards; and

· reviewing and approving the terms of any employment agreements, severance arrangements, change-of-control protections and any other compensatory arrangements for our executive officers.

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Each of Messrs. Bruce, Serbin and Lau are the members of the Compensation Committee. The Compensation Committee operates under a written charter, which is available on our website at http://www.lihuaintl.com. Mr. Serbin is Chairman of Compensation Committee. Our executive officers have no formal role in suggesting their salaries. During the fiscal year ended December 31, 2013, the Compensation Committee met one time and acted by written consent one time.

Compensation Committee Report

The goal of the Company’s executive compensation policy is to ensure that an appropriate relationship exists between executive compensation and the creation of stockholder value, while at the same time attracting, motivating and retaining experienced executive officers.

The Compensation Committee has reviewed and discussed the discussion and analysis of the Company’s compensation which appears in Item 11 below with management, and, based on such review and discussion, the Compensation Committee recommended to the Company’s Board of Directors that the above disclosure be included in this Annual Report on Form 10-K for the year ended December 31, 2013.

Compensation Committee Interlocks and Insider Participation

No member of our Compensation Committee has at any time been an officer or employee of ours or our subsidiaries. No interlocking relationship exists between our Board of Directors or Compensation Committee and the Board of Directors or Compensation Committee of any other company, nor has any interlocking relationship existed in the past.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Securities Exchange Act of 1934, as amended, or the Exchange Act, requires our executive officers, directors and persons who beneficially own more than 10% of a registered class of our equity securities to file with the Securities and Exchange Commission initial reports of ownership and reports of changes in ownership of our common stock and other equity securities. These executive officers, directors, and greater than 10% beneficial owners are required by SEC regulation to furnish us with copies of all Section 16(a) forms filed by such reporting persons.

Based solely on our review of such forms furnished to us and written representations from certain reporting persons, we believe that all filing requirements applicable to our executive officers, directors and greater than 10% beneficial owners were complied with during 2013; except that the following Section 16 reports were filed late in 2013:

a) Mr. Robert Bruce filed a late Form 4 to reflect the issuance of options to purchase up to 20,000 shares issued on May 30, 2013;

b) Mr. Jonathan Serbin filed a late Form 4 to reflect the issuance of options to purchase up to 20,000 shares issued on May 30, 2013; and

c) Mr. Kelvin Lau filed a late Form 4 to reflect the issuance of options to purchase up to 20,000 shares issued on May 30, 2013.

Code of Ethics

We adopted a Corporate Code of Ethics and Conduct on December 31, 2007. The Code of Ethics is designed to deter wrongdoing and to promote ethical conduct and full, fair, accurate, timely and understandable reports that the Company files or submits to the Securities and Exchange Commission and others. A copy of the Code of Ethics is included as Exhibit 14.1 to our Annual Report on Form 10-KSB, filed with the SEC on February 26, 2008. A copy of the Code of Ethics is available on our website at www.lihuaintl.com. A printed copy of the Code of Ethics may also be obtained free of charge by writing to us at our headquarters located at Houxiang Minying Industrial Park, Danyang City, Jiangsu Province, PRC 212312.

Meetings of the Board and Committees

During the fiscal year ended December 31, 2013, the Board of Directors met 4 times and took action by written consent on two occasions. All of the directors participated in the board meetings. Each director is expected to participate, either in person or via teleconference, in meetings of our Board of Directors and meetings of committees of our Board of Directors in which each director is a member, and to spend the time necessary to properly discharge such director’s respective duties and responsibilities. We do not have a written policy with regard to directors’ attendance at annual meetings of stockholders; however, all directors are encouraged to attend the annual meeting and all directors attended our 2013 Annual Meeting of Stockholders.

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Communications with the Board of Directors

Stockholders can mail communications to the Board of Directors, c/o Hao Du, VP and Board Secretary, Lihua International, Inc., Houxiang Minying Industrial Park, Danyang City, Jiangsu Province, PRC 212312, who will forward the correspondence to each addressee.

ITEM 11.     EXECUTIVE COMPENSATION

Compensation Discussion and Analysis

We strive to provide our named executive officers with a competitive base salary that is in line with their roles and responsibilities.

We believe that other peer companies in the PRC which are listed on U.S. stock markets would be the most appropriate to use for salary comparison purposes. However, none of our direct competitors are public companies in the U.S. We have looked at Fushi International (Dalian) Bimetallic Cable Co., Ltd., one of our past suppliers, which, until December 2012, was listed on the Nasdaq Stock Market. The salaries of Fushi’s CEO and CFO were $225,000 and $180,000 per year, respectively. Fushi’s CEO and CFO were each entitled to 100% cash bonuses, according to their compensation plan. In addition, Fushi’s CFO was awarded 30,000 shares of stock and 150,000 stock options. Fushi had lower revenues than we did and therefore, taking this into consideration, we believe that the compensation of our executive officers is appropriate.

It is not uncommon for companies with operations primarily in the PRC to have base salaries and bonuses as the sole and only form of compensation. The base salary level is established and reviewed based on the level of responsibilities, the experience and tenure of the individual and the current and potential contributions of the individual. The base salary is compared to similar positions within comparable peer companies and with consideration of the executive’s relative experience in his or her position. Based on an evaluation of available information with respect to the base salaries of executives of our competitors, the base salary and bonus paid to our named executive officers is in line with our competitors. Base salaries are reviewed periodically and at the time of promotion or other changes in responsibilities.

On April 14, 2009, the Company adopted the Lihua International, Inc. 2009 Omnibus Securities and Incentive Plan (the “2009 Plan”). The 2009 Plan includes: Distribution Equivalent Rights, Options, Performance Share Awards, Performance Unit Awards, Restricted Stock Awards, Restricted Stock Unit Awards, Stock Appreciation Rights, Tandem Stock Appreciation Rights, Unrestricted Stock Awards or any combination of the foregoing. We will consider other elements of compensation, including without limitation, short and long term compensation, cash and non-cash, and other equity-based compensation. We believe our current compensation package is comparative to our peers in the industry and aimed to retain and attract talented individuals.

Summary Compensation Table

The following table sets forth the compensation paid or accrued by us for each of the Company’s last three completed fiscal years to our Chief Executive Officer and each of our three other officers whose compensation exceeded $100,000.

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Name and Principal Position (1)	Fiscal Year		Salary ($)(1)		Bonus ($)		Stock Awards ($)		Option Awards (4) ($)		Non-equity Incentive Plan Compensation ($)		Change in Pension Value and Nonqualified Deferred Compensation Earnings ($)		All Other Compensation ($)		Total ($)
Mr. Jianhua Zhu,		2013		250,000		-0-		-0-		-0-		-0-		-0-		-0-		250,000
CEO and President (2)		2012		250,000		-0-		-0-		-0-		-0-		-0-		-0-		250,000
		2011		191,667		-0-		-0-		-0-		-0-		-0-		-0-		191,667
Ms. Daphne Huang,		2013		200,000		-0-		-0-		-0-		-0-		-0-		-0-		200,000
Chief Financial Officer (3)		2012		200,000		-0-		-0-		-0-		-0-		-0-		-0-		200,000
		2011		116,667		15,000		-0-		334,286		-0-		-0-		-0-		465,953
Ms. Yaying Wang,		2013		200,000		-0-		-0-		-0-		-0-		-0-		-0-		200,000
Chief Operating Officer (2)		2012		200,000		-0-		-0-		-0-		-0-		-0-		-0-		200,000
		2011		158,333		-0-		-0-		-0-		-0-		-0-		-0-		158,333

(1)	Some of our named executive officers reside in the PRC and therefore may receive their annual compensation in RMB.
(2)	Mr. Zhu and Ms. Wang entered into new employment agreements with the Company on October 23, 2011. Therefore, their salaries for the fiscal year ended December 31, 2011 are pro-rated in U.S. dollars from based on their salaries received before and after October 23, 2011.
(3)	Ms. Huang was named as Chief Financial Officer on October 23, 2011. Therefore, Ms. Huang’s salary as Chief Financial Officer and Treasurer is pro-rated in U.S. dollars from October 23, 2011 through December 31, 2011. Ms. Huang’s compensation also includes those amounts received in her capacity as Executive Vice President of Finance and Director of Investor Relations from October 31, 2009 through October 22, 2011.
(4)	Reflects the aggregate grant date fair value of stock awards determined in accordance with ASC Topic 718.

Employment Contracts and Termination of Employment, and Change-In-Control 

The following employment agreements were entered into by the Company’s PRC subsidiaries and the following executive officers:

Jianhua Zhu

The Company’s PRC subsidiaries entered into an employment agreement with Jianhua Zhu on June 24, 2008 to serve as Chief Executive Officer and a member of the board of directors for a term of three (3) years. Pursuant to the agreement, Mr. Zhu was to receive annual compensation equal to $180,000. In addition, Mr. Zhu was entitled to participate in any and all benefit plans, from time to time, in effect for employees, along with vacation, sick and holiday pay in accordance with policies established and in effect from time to time. In the event that either of the PRC Subsidiaries terminate the employment agreement without cause (as defined therein), Mr. Zhu was entitled to a severance payment of one year’s salary from the date of termination plus all medical and dental benefits for that time period as well. In addition, if he is no longer employed by the Company, Mr. Zhu had agreed that neither he, nor any of his affiliates shall directly or indirectly employ, solicit, or induce any individual, consultant, customer or supplier who is, or was at any time during the one year period prior to his termination date, an employee or consultant of the Company, a customer of the Company or a supplier of the Company, cause such employee, consultant, customer or supplier to refrain from continuing their relationship with the Company. Mr. Zhu had also agreed to a non-compete clause whereby he shall not engage or assist others to engage in related businesses within Beijing and Danyang, PRC, the prescribed territory, however, he might own up to 5% of the outstanding shares of a company engaged in a similar business if such shares are listed on a national securities exchange. On September 26, 2008, Mr. Zhu entered in an amendment to the Employment Agreement with the PRC Subsidiaries whereby certain clerical errors were corrected.

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On October 23, 2011, Mr. Zhu entered into a 3 year employment agreement with the Lihua Electron. All of the material terms of this agreement are identical to the prior agreement, except that Mr. Zhu shall receive annual cash compensation of $250,000.

Daphne Huang

The Company entered into an employment agreement with Daphne Huang on October 23, 2011, to serve as Chief Financial Officer. The agreement is for a one-year term, renewable annually at the Company’s option up to an additional two years. Ms. Huang will receive annual cash compensation of $200,000 and will be awarded a stock option to purchase up to 225,000 shares of common stock at $4.50 per share, which shall vest in equal installments on October 22, 2012, 2013 and 2014, so long as Ms. Huang is serving as CFO at each such time. Additionally, Ms. Huang received a one-time signing bonus of $15,000. Pursuant to the agreement, Ms. Huang must devote all of her time during business hours to the Company and is subject to non-compete, non-interference and non-solicitation covenants during the term of her employment with the Company and for one year subsequent to the termination of her employment with the Company. In the event that Ms. Huang’s employment was terminated by the Company without cause, by Ms. Huang for good reason, or by her death or disability, Ms. Huang would be entitled to continue to receive severance pay equal to her base salary for a period of six months after the termination date, subject to her entry into a separation agreement and general release with the Company.

Yaying Wang

The Company’s PRC subsidiaries entered into an employment agreement with Yaying Wang on June 24, 2008 to serve as Chief Operating Officer and a member of the board of directors for a term of three (3) years. Pursuant to the agreement, Ms. Wang was to receive annual compensation equal to $150,000. In addition, Ms. Wang was entitled to participate in any and all benefit plans, from time to time, in effect for employees, along with vacation, sick and holiday pay in accordance with policies established and in effect from time to time. In the event that either of the PRC Subsidiaries terminate the employment agreement without cause (as defined therein), Ms. Wang would be entitled to a severance payment of one year’s salary from the date of termination plus all medical and dental benefits for that time period as well. In addition, if she is no longer employed by the Company, Ms. Wang had agreed that neither she, nor any of her affiliates shall directly or indirectly employ, solicit, or induce any individual, consultant, customer or supplier who is, or was at any time during the one year period prior to her termination date, an employee or consultant of the Company, a customer of the Company or a supplier of the Company, cause such employee, consultant, customer or supplier to refrain from continuing their relationship with the Company. Ms. Wang had also agreed to a non-compete clause whereby she shall not engage or assist others to engage in related businesses within Beijing and Danyang, PRC, the prescribed territory, however, she may own up to 5% of the outstanding shares of a company engaged in a similar business if such shares are listed on a national securities exchange. On September 26, 2008, Ms. Wang entered in an amendment to the Employment Agreement with the PRC Subsidiaries whereby certain clerical errors were corrected.

On October 23, 2011, Ms. Wang entered into a 3 year employment agreement with the Company’s PRC subsidiaries. All of the material terms of this agreement are identical to the prior agreement, except that Ms. Wang shall receive annual cash compensation of $200,000.

Potential Payments upon Termination or Change in Control

Assuming the employment of our named executive officers were to be terminated without cause or for good reason, as of December 31, 2013, the following individuals would have been entitled to payments in the amounts set forth opposite to their name in the below table through December 31, 2013:

Cash Payments
Mr. Jianhua Zhu	$	250,000	(1)
Daphne Huang	$	100,000	(1)
Ms. Yaying Wang	$	200,000	(1)

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(1) Subject compliance with non-solicitation, non-compete, non-disclosure and non-use provisions of the executive’s employment agreement, as well as a general release.

Grants of Plan-Based Awards

The following table sets forth information regarding each award made to the named executive officers, under the Company’s 2009 Omnibus Securities and Incentive Plan during 2012.

2013 GRANTS OF PLAN-BASED AWARDS

There were no grants of plan-based awards in 2013.

Equity Compensation Plan Information

The following table summarizes our plan-based awards as of December 31, 2013.

Plan Category	Number of Securities To Be Issued Upon Exercise of Outstanding Options, Warrants and Rights (a)		Weighted- Average Exercise Price of Outstanding Options, Warrants and Rights (b)		Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column (a)) (c)
Equity compensation plans approved by security holders		-0-		-0-		-0-
Equity compensation plans not approved by security holders:
Options to purchase common stock		665,000	$	5.41		2,338,191	(1)
Warrants to purchase common stock		28,456	$	4.80		-0-
Total		693,456	$	5.38		2,338,191

(1) Based on 10% of the aggregate number of shares of the Common Stock outstanding as of December 31, 2013, less aggregate options issued and outstanding as of December 31 2013, pursuant to Section 5.1 of the 2009 Omnibus securities and Incentive Plan.

Equity Compensation Plans not approved by Security Holders

The Company’s Board of Directors adopted the 2009 Plan on April 14, 2009. The 2009 Plan is described in detail under “The Lihua International, Inc. 2009 Omnibus Securities and Incentive Plan” below.

The Lihua International, Inc. 2009 Omnibus Securities and Incentive Plan

Administration. The 2009 Plan is administered by the compensation committee of the board of directors, which consists of three members of the board of directors, each of whom is a “non-employee director” within the meaning of Rule 16b-3 promulgated under the Exchange Act, an “outside director” within the meaning of Code Section 162(m) and “independent” for purposes of any applicable listing requirements. Among other things, the compensation committee has discretion, subject to the express limits of the 2009 Plan, to determine which directors, employees and independent contractors are to be granted an award under the 2009 Plan, the type of award to be granted, the terms and conditions of each award, the number of shares of common stock subject to each award, the exercise price of each award which is a stock option and base price of each award which is a stock appreciation right (“SAR”), the term of each award, the vesting schedule for an award, whether to accelerate vesting, the value of the common stock, and to determine any required tax withholdings. The compensation committee may amend or modify any outstanding award, provided that the U.S. Participant’s consent to such action is required if the action would materially and adversely impair the rights or entitlements of the U.S. Participant. The compensation committee is also authorized to construe the award agreements, and may prescribe rules relating to the 2009 Plan.

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Grant of Awards; Shares Available for Awards. The 2009 Plan provides for the grant of stock options, SARs, performance share awards, performance unit awards, distribution equivalent right awards, restricted stock awards, restricted stock unit awards and unrestricted stock awards in an amount not to exceed 10% of the aggregate number of shares of common stock issued and outstanding. If any award expires, is cancelled, or terminates unexercised or is forfeited, the shares subject thereto are again available for grant under the 2009 Plan. The number of shares of common stock for which awards may be granted under the 2009 Plan to a participant cannot exceed 100,000 shares in any calendar year.

Currently, there are 8 employees and directors who would be entitled to receive stock options and/or restricted shares under the 2009 Plan.  Future new hires and consultants would be eligible to participate in the 2009 Plan as well. The number of stock options and/or restricted shares to be granted to executives and directors cannot be determined at this time as the grant of stock options and/or restricted shares is dependent upon various factors such as hiring requirements and job performance.

Stock Options. Stock options granted under the 2009 Plan are “nonqualified stock options” (“NQSOs”). NQSOs may be granted on such terms and conditions as the Committee may determine; provided, however, that the per share exercise price of an NQSO may not be less than the fair market value of a share of the underlying common stock on the date of grant of the NQSO and the term of an NQSO may not exceed 10 years.

Stock Appreciation Rights. A SAR entitles the participant, upon exercise, to receive an amount, in cash or common stock or a combination thereof, equal to the increase in the fair market value of the underlying common stock between the date of grant and the date of exercise. SARs may be granted in tandem with, or independently of, NQSOs granted under the 2009 Plan. A SAR granted in tandem with an NQSO (i) is exercisable only at such times, and to the extent, that the related NQSO is exercisable in accordance with the procedure for exercise of the related NQSO; (ii) terminates upon termination or exercise of the related option (likewise, the option granted in tandem with a SAR terminates upon exercise of the SAR); and (iii) is transferable only upon surrender of the participant’s right to exercise the equivalent portion of the related NQSO. A SAR that is not granted in tandem with an NQSO is exercisable at such times as the compensation committee may specify.

Performance Shares or Performance Unit Awards. Performance share or performance unit awards awarded under the 2009 Plan entitle the participant to receive cash or shares of common stock upon the attainment of specified performance goals. In the case of performance units, the right to acquire the units is denominated in cash values.

Restricted Stock Awards or Restricted Stock Unit Award. A restricted stock award under the 2009 Plan is a grant or sale of common stock to the participant, subject to the Company’s right to repurchase all or part of the shares at their purchase price (or to require forfeiture of such shares if purchased at no cost) in the event that conditions specified by the compensation committee in the award are not satisfied prior to the end of the time period during which the shares subject to the award may be repurchased by or forfeited to the Company. A restricted stock unit entitles the participant to receive a cash payment equal to the fair market value of a share of common stock, or award under the 2009 Plan one share of common stock for each restricted stock unit subject to such restricted stock unit award, if the participant satisfies the applicable vesting requirement.

Unrestricted Stock Awards. An unrestricted stock award under the 2009 Plan is a grant or sale of common stock to the participant that is not subject to transfer, forfeiture or other restrictions.

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Distribution Equivalent Right Awards. A distribution equivalent right award under the 2009 Plan entitles the participant to receive bookkeeping credits, cash payments and/or common stock distributions equal in amount to the distributions that would have been made to the participant had the participant held a specified number of shares of the common stock during the period the participant held the distribution equivalent right. A distribution equivalent right may be awarded under the 2009 Plan as a component of another award, where, if so awarded, such distribution equivalent right will expire or be forfeited by the participant under the same conditions as under such other award.

Change-of-Control Provisions. In connection with the grant of an award under the 2009 Plan, the compensation committee may provide that, in the event of a “change in control” (as defined in the 2009 Plan), any outstanding awards that are unexercisable or otherwise unvested will become fully vested and immediately exercisable.

Amendment and Termination. The Board of Directors may amend, suspend or terminate the 2009 Plan, but no amendment will be made that adversely affects any rights of a participant with respect to a previously granted award without the participant’s consent, other than amendments that are necessary to permit the granting of awards in compliance with applicable laws. We have attempted to structure the 2009 Plan so that remuneration attributable to stock options and other awards will not be subject to the deduction limitation contained in Section 162(m) of the Code.

Certain Federal Income Tax Consequences of the 2009 Plan.

The following is a general summary of the federal income tax consequences under current tax law to the Company and to participants in the 2009 Plan who are individual citizens or residents of the United States for federal income tax purposes (“U.S. Participants”) of stock options which are NQSOs, restricted stock, SARs, dividend equivalent rights, restricted stock units, performance shares, performance units and unrestricted stock awards. It does not purport to cover all of the special rules that may apply, including special rules relating to limitations on the ability of the Company to deduct certain compensation, special rules relating to deferred compensation, golden parachutes, participants subject to Section 16(b) of the Exchange Act or the exercise of a stock option with previously – acquired shares of common stock.  This summary assumes that U.S. Participants will hold their shares of common stock as capital assets within the meaning of Section 1221 of the Code.  In addition, this summary does not address the foreign, state or local income or other tax consequences, or any U.S. federal non-income tax consequences, inherent in the acquisition, ownership, vesting, exercise, termination or disposition of an award under the 2009 Plan, or shares of common stock issued pursuant thereto.  Participants are urged to consult with their own tax advisors concerning the tax consequences to them of an award under the 2009 Plan or shares of common stock issued thereto pursuant to the 2009 Plan.

A U.S. Participant generally does not recognize taxable income upon the grant of an NQSO. Upon the exercise of an NQSO, the U.S. Participant generally recognizes ordinary income in an amount equal to the excess, if any, of the fair market value of the shares acquired on the date of exercise over the exercise price thereof, and the Company will generally be entitled to a deduction for such amount at that time. If the U.S. Participant later sells shares acquired pursuant to the exercise of an NQSO, the U.S. Participant recognizes a long-term or short-term capital gain or loss, depending on the period for which the shares were held thereby. A long-term capital gain is generally subject to more favorable tax treatment than ordinary income or a short-term capital gain.  The deductibility of capital losses is subject to certain limitations.

A U.S. Participant generally does not recognize income upon the grant of a SAR. The U.S. Participant recognizes ordinary compensation income upon exercise of the SAR equal to the increase in the value of the underlying shares, and the Company will generally be entitled to a deduction for such amount.

A U.S. Participant generally does not recognize income on the receipt of a performance shares award, performance units award, restricted stock units award, unrestricted stock award or dividend equivalent rights award until a cash payment or a distribution of shares is received thereby. At such time, the U.S. Participant recognizes ordinary compensation income equal to the excess, if any, of the fair market value of the shares received over any amount paid for the shares thereby, and the Company is generally entitled to deduct such amount at such time.

A U.S. Participant who receives a restricted stock award generally recognizes ordinary compensation income equal to the excess, if any, of fair market value of such shares of stock at the time the restriction lapses over any amount paid thereby for the shares. Alternatively, the U.S. Participant may elect to be taxed on the fair market value of such shares at the time of this grant. The Company is generally entitled to a deduction at the same time and in the same amount as the income is required to be included by the U.S. Participant.

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Outstanding Equity Awards at Fiscal Year-End

The following table summarizes the number of securities underlying outstanding plan awards for each named executive officer as of December 31, 2013.

	Option Awards										Stock Awards
	Number of Securities Underlying Unexercised Options (#)		Number of Securities Underlying Unexercised Options (#)		Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#)		Option Exercise Price ($)		Option Expiration Date		Number of Shares or Units of Stock That Have Not Vested (#)		Market Value of Shares or Units of Stock That Have Not Vested ($)		Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#)		Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)
Name	Exercisable		Unexercisable
Jianhua Zhu		-0-		-0-		-0-		-0-		-0-		-0-		-0-		-0-		-0-
Daphne Huang		75,000				-0-	$	4.50		10/23/2021		-0-		-0-		-0-		-0-
		75,000				-0-	$	4.50		10/23/2021		-0-		-0-		-0-		-0-
				75,000		-0-	$	4.50		10/23/2021		-0-		-0-		-0-		-0-
Yaying Wang		-0-		-0-		-0-		-0-		-0-		-0-		-0-		-0-		-0-

Option Exercises and Stock Vested

The following table summarizes stock option exercises by our named executive officers in 2013 and shares of restricted stock that vested in 2013.

	Option Awards				Stock Awards
Name	Number of Shares Acquired on Exercise (#)		Value Realized on Exercise ($)		Number of Shares Acquired on Vesting (#)		Value Realized on Vesting ($))
Jianhua Zhu		-0-		-0-		-0-		-0-
Daphne Huang		-0-		-0-		-0-		-0-
Yaying Wang		-0-		-0-		-0-		-0-

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.

Director Compensation

The following table summarizes compensation that our non-employee directors earned during 2013 for services as members of our board of directors.

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Name	Fees Earned or Paid in Cash ($)		Stock Awards ($)		Option Awards(1) ($)		Non-Equity Incentive Plan Compensation ($)		Change in Pension Value and Nonqualified Deferred Compensation Earnings ($)		All Other Compensation ($)		Total ($)
Robert C. Bruce(2)		63,000		-		41,467		-		-		-		104,467
Jonathan P. Serbin(2)		51,000		-		41,467		-		-		-		92,467
Kelvin Lau (2)(3)		51,000		-		41,467		-		-		-		92,467

(1)

Reflects the aggregate grant date fair value to option awards granted to the directors, determined in accordance with ASC Topic 718.

(2)

Pursuant to one-year agreements effective as of April 14, 2013, between the Company and each of Robert Bruce, Kelvin Lau and Jonathan Serbin, each of Messrs. Bruce, Lau and Serbin received an option to purchase up to 20,000 shares of common stock of the Company and an annual cash fee of $60,000 paid quarterly, beginning July 1, 2013 (prior to July 1, 2013, the annual rate has been $48,000 paid quarterly). Additionally, Mr. Bruce received quarterly, cash payments of $12,000 per year for serving as Chair of the Audit Committee.  The Company will also reimburse each of Messrs. Bruce, Lau and Serbin for (i) expenses related to his attending meetings of the Board of Directors, meetings of committees of the Board of Directors, executive sessions, stockholder meetings, and other Company-related travel, and (ii) up to $3,000 in expenses related to attending bona fide director education seminars that each director, in his discretion, may select.  The stock options granted to each of Messrs. Bruce, Lau and Serbin in 2013 have an exercise price of $5.60 per share, such options vesting in equal installments on July 14, 2013, October 14, 2013, January 14, 2014 and April 14, 2014, so long as each director is, respectively, serving as a member of the Board of Directors at each such time.

ITEM 12.     SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED SHAREHOLDER MATTERS

The following table sets forth as of March 13, 2014 the number of shares of our common stock beneficially owned by (i) each person who is known by us to be the beneficial owner of more than five percent of the Company’s common stock; (ii) each director; (iii) each of the named executive officers in the Summary Compensation Table; and (iv) all directors and executive officers as a group. As of March 13, 2014, we had 30,032,116 shares of common stock issued and outstanding.

Beneficial ownership is determined in accordance with SEC rules and generally includes voting or investment power with respect to securities. Unless otherwise indicated, the stockholders listed in the table have sole voting and investment power with respect to the shares indicated. Unless otherwise noted, the principal address of each of the stockholders, directors and officers listed below is c/o Lihua Holdings Limited, Houxiang Minying Industrial Park, Danyang City, Jiangsu Province, PRC 212312, China.

All share ownership figures include shares of our common stock issuable upon securities convertible or exchangeable into shares of our common stock within sixty (60) days of March 13, 2014 which are deemed outstanding and beneficially owned by such person for purposes of computing his or her percentage ownership, but not for purposes of computing the percentage ownership of any other person.

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Name and Address of Beneficial Owner	Number of Shares of Common Stock Beneficially Owned (1)		Percentage of Outstanding Shares of Common Stock (2) (3)
Magnify Wealth Enterprises Limited (4)(5)		13,350,000		44.45	%
Jianhua Zhu (5)		13,350,000		44.45	%
Yaying Wang (6)		13,350,000		44.45	%
Robert C. Bruce (7)		101,000		*
Jonathan P. Serbin (8)		100,000		*
Siu Ki “Kelvin” Lau (9)		95,000		*
Daphne Huang (10)		165,000		*
All Directors and Executive Officers, as a group (6 persons)		13,811,000		45.99	%

* Less than one percent

(1)	Beneficial ownership is determined in accordance with the rules of the SEC and generally includes voting or investment power with respect to securities. Shares of Common Stock subject to securities anticipated to be exercisable or convertible at or within 60 days of the date hereof, are deemed outstanding for computing the percentage of the person holding such option or warrant but are not deemed outstanding for computing the percentage of any other person. The indication herein that shares are anticipated to be beneficially owned is not an admission on the part of the listed stockholder that he, she or it is or will be a direct or indirect beneficial owner of those shares.
(2)	Based upon 30,032,116 shares of Common Stock outstanding as of March 13, 2014
(3)	In determining the percent of Common Stock beneficially owned on March 13, 2014, (a) the numerator is the number of shares of Common Stock beneficially owned (including shares that the stockholder has the right to acquire within 60 days of March 13, 2014), and (b) the denominator is the sum of (i) the 30,032,116 shares outstanding on March 13, 2014, and (ii) the number of shares of Common Stock which such stockholder has the right to acquire within 60 days of March 13, 2014.
(4)	The address of Magnify Wealth is Quastisky Building, P.O. Box 4389, Road Town, Tortola, British Virgin Islands. As the sole director of Magnify Wealth, Mr. Zhu, our CEO and President has sole voting and investment power over the shares.
(5)	Includes 13,350,000 shares owned by Magnify Wealth, of which Mr. Zhu, as the sole director of Magnify Wealth, has sole voting and investment power over the shares. Mr. Zhu is deemed to beneficially own all of the 13,350,000 shares of common stock owned by Magnify Wealth as a result of the vesting in full of Mr. Zhu’s option to purchase all 3,000 shares of Magnify Wealth (the “Option Shares”) at $1.00 per share. While the option to purchase the Option Shares has vested in full, Mr. Zhu has not yet exercised the option.
(6)	As Mr. Zhu’s wife, Ms. Wang is deemed to be the beneficial owner of all shares of common stock beneficially owned by Mr. Zhu as a result of the vesting of 100% of Mr. Zhu’s Option Shares. Ms. Wang disclaims beneficial ownership over the remaining 2,569,115 shares owned by Magnify Wealth over which Mr. Zhu has sole voting and investment power.

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(7)	Consists of 2,000 shares of common stock held by Mr. Bruce’s wife, 9,000 shares of common stock held directly by Mr. Bruce and 90,000 shares of common stock underlying options held by Mr. Bruce, which are exercisable in the next 60 days
(8)	Consists of 100,000 shares of common stock underlying options, which are exercisable in the next 60 days.
(9)	Consists of 95,000 shares of common stock underlying options, which are exercisable in the next 60 days.
(10)	Consists of 165,000 shares of stock underlying options, which are exercisable in the next 60 days.

ITEM 13.     CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

(1) Sales

For the years ended December 31, 2013, 2012 and 2011, sales included nil, nil, and $620,295, respectively that were made from Tianyi Telecom.  The controlling stockholders of Tianyi Telecom are related to Ms. Yaying Wang, our COO and one of our directors.

(2) Loans

On May 19, 2011, Magnify Wealth, an entity affiliated with Mr. Jianhua Zhu, the Chief Executive Officer and Chairman of the Company, agreed to loan the Company up to $4 million pursuant to the terms of a demand promissory note (the “Note”) to partially fund the Company’s previously announced $15 million stock repurchase program to make open market purchases of the Company’s common stock (the “Repurchase Program”). While the Company’s operating subsidiaries in the PRC have substantial cash reserves available, the laws of the PRC restrict the conversion of RMB to US dollars, such that the Company has encountered difficulty funding the Repurchase Program with US dollars from cash held by its PRC subsidiaries. The Company explored possible alternative arrangements for funding the Repurchase Program in US dollars with financial institutions, but Company management determined that such alternatives would have been costly or otherwise not appropriate for the Company.

On May 23, 2011, Magnify Wealth loaned $1 million under the Note, which amount the Company repaid in full on May 25, 2011 in RMB. On June 14, 2011, Magnify Wealth loaned $300,000 under the Note, which amount the Company repaid in full on June 14, 2011 in RMB. The total amount repaid was RMB8,434,660, which was repaid at the average rate of 6.4822 RMB per US dollar, which was based upon the exchange rate between US dollars and RMB as set forth by Standard Chartered Bank in Hong Kong. The loans under the Note were unsecured, payable on demand and bore interest at 2% per annum.

On January 9 and March 15, 2012, in order to partially fund the 2011 special dividend payment and U.S. dollar operating expenses, upon approval by our board of directors, Magnify Wealth loaned US$1 million and $0.6 million, respectively, under the Note, of which RMB6.3 million and RMB3.8 million were repaid on January 9 and March 31, 2012, respectively, in RMB, at the average rate of 6.3126 RMB per US dollars, based upon the exchange rate between US dollars and RMB as set forth by Standard Chartered Bank in Hong Kong. The loans under the Note were unsecured, payable on demand and bore interest at 2% per annum.

On April 6 and April 26, 2012, in order to partially fund the 2011 special dividend payment and U.S. dollar operating expenses, upon approval by our board of directors, Magnify Wealth loaned US$0.5 million and $0.9 million, respectively, under the Note, of which RMB3.15 million and RMB5.65 million were repaid, respectively, in RMB, at the average rate of 6.2916 RMB per US dollars, based upon the exchange rate between US dollars and RMB as set forth by Standard Chartered Bank in Hong Kong. The loans under the Note were unsecured, payable on demand and bore interest at 2% per annum. 

As of December 31, 2013, there was no outstanding loan under the Note.

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(3)    Amount due to a related party

In June 2011, Mr. Jianhua Zhu loaned the Company $140,000. The loan was unsecured and non-interest bearing. The loan was repaid in August 2011.

It is Company’s policy to not enter any transaction (other than compensation arrangements in the ordinary course) with any director, executive officer, employee, or principal stockholder or party related to them, unless authorized by a majority of the directors having no interest in the transaction, upon a favorable recommendation by the Audit Committee (or a majority of its disinterested members).

Director Independence

Our board of directors has determined that Robert C. Bruce, Jonathan P. Serbin, and Kelvin Lau, the members of the Company’s audit, compensation and nominating and corporate governance committees, are “independent” under the current independence standards of Rule 5605(a)(2) of the Marketplace Rules of The NASDAQ Stock Market, LLC and meet the criteria for independence set forth in Rule 10A(m)(3) under the U.S. Securities Exchange Act of 1934, as amended (the “Exchange Act”). Our board of directors has also determined that these persons have no material relationships with us — either directly or as a partner, stockholder or officer of any entity — which could be inconsistent with a finding of their independence as members of our board of directors.

ITEM 14.     PRINCIPAL ACCOUNTANT FEES AND SERVICES

Public Accounting Fees

The following chart sets forth public accounting fees paid and payable to Crowe Horwath (HK) CPA Limited (“Crowe”) during the years ended December 31, 2013 and 2012:

	2013		2012
Audit Fees	$	453,000	$	453,000
Audit Related Fees	$	—	$	—
Tax Fees	$	—	$	—
All Other Fees	$	—	$	—

Audit fees were for professional services rendered by Crowe for the audit of our annual financial statements and the review of the financial statements included in our quarterly reports on Forms 10-Q, and services that are normally provided by Crowe in connection with statutory and regulatory filings or engagements for that fiscal year.

Audit related fees consist of services provided by Crowe that are reasonably related to the performance of the audit or review of our financial statements and are not reported above under Audit Fees.

Pre-Approval of Services

The Audit Committee appoints the independent accountant each year and pre-approves the audit services. The Audit Committee chair is authorized to pre-approve specified non-audit services for fees not exceeding specified amounts, if he promptly advises the other Audit Committee members of such approval. All of the services described under the caption “Audit Fees” were pre-approved. 

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PART IV

ITEM 15.     EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a)	The following are filed with this report:
	(1) The financial statements listed on the Financial Statements’ Table of Contents
	(2) Not applicable

(b)   Exhibits

EXHIBIT NUMBER		DESCRIPTION
3.1		Certificate of Incorporation, as filed with the Delaware Secretary of State on January 24, 2006 (1)
3.2		By-Laws (1)
3.3		Certificate of Ownership and Merger, dated September 19, 2008 (2)
3.4		Certificate of Designations, Preferences, Rights and Limitations of Series A Preferred Stock (2)
10.1		Share Transfer Agreement, dated October 22, 2008 (3)
10.2		Amendment to the Share Transfer Agreement, dated March 7, 2009 (3)
10.3		Land Expropriation Contract dated November 5, 2010 (4)
10.4		Lihua International, Inc. 2009 Omnibus Securities and Incentive Plan (5)
10.5	+	2013 Independent Director Agreement, Robert Bruce
10.6	+	2013 Independent Director Agreement, Jonathan Serbin
10.7	+	2013 Independent Director Agreement, Kelvin Lau
10.8		Jianhua Zhu Employment Agreement, dated October 23, 2011(6)
10.9		Daphne Huang Employment Agreement, dated October 23, 2011 (6)
10.11		Yaying Wang Employment Agreement, dated October 23, 2011 (6)
14		Code of Business Conduct and Ethics (7)
21		List of Subsidiaries (8)
23.1	+	Consent of Crowe Horwath (HK) CPA Limited
31.1	+	Certification of Chief Executive Officer pursuant to Rule 13A-14(A)/15D-14(A) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	+	Certification of the Principal Financial Officer pursuant to Rule 13A-14(A)/15D-14(A) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	+	Certification of Chief Executive Officer Pursuant to 18 U.S.C. 1350 (Section 906 of the Sarbanes-Oxley Act of 2002).
32.2	+	Certification of the Principal Financial Officer Pursuant to 18 U.S.C. 1350 (Section 906 of the Sarbanes-Oxley Act of 2002).

+ Filed herewith.

(1)	Incorporated by reference to the Company’s Form 10-SB, filed with the SEC on May 15, 2007
(2)	Incorporated by reference to the Company’s Current Report on Form 8-K, filed with the SEC on November 6, 2008
(3)	Incorporated by reference to the Company’s Annual Report on Form 10-K filed with the SEC April 2, 2009
(4)	Incorporated by reference to the Company’s Current Report on Form 8-K, filed with the SEC on November 12, 2010.
(5)	Incorporated by reference to the Company’s Annual Report on 10-K, filed with the SEC on March 14, 2011.
(6)	Incorporated by reference to the Company’s Current Report on Form 8-K, filed with the SEC on October 27, 2011.
(7)	Incorporated by reference to our Annual Report on Form 10-KSB, filed with the SEC on February 26, 2008
(8)	Incorporated by reference to the Company’s Annual Report on 10-K, filed with the SEC on March 31, 2010.

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SIGNATURES

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

	LIHUA INTERNATIONAL, INC.
Dated: March 17, 2014	By:	/s/ Jianhua Zhu
	Name:	Jianhua Zhu
	Title:	Chairman and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Dated: March 17, 2014	By:	/s/ Jianhua Zhu
	Name:	Jianhua Zhu
	Title:	Chairman and Chief Executive Officer (Principal Executive Officer)
Dated: March 17, 2014	By:	/s/ Daphne Huang
	Name:	Daphne Huang
	Title:	Chief Financial Officer (Principal Accounting Officer)
Dated: March 17, 2014	By:	/s/Yaying Wang
	Name:	Yaying Wang
	Title:	Director
Dated: March 17, 2014	By:	/s/ Jonathan Serbin
	Name:	Jonathan Serbin
	Title:	Director
Dated: March 17, 2014	By:	/s/ Robert Bruce
	Name:	Robert Bruce
	Title:	Director
Dated: March 17, 2014	By:	/s/ Kelvin Lau
	Name:	Kelvin Lau
	Title:	Director

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EXHIBIT INDEX

EXHIBIT NUMBER		DESCRIPTION
3.1		Certificate of Incorporation, as filed with the Delaware Secretary of State on January 24, 2006 (1)
3.2		By-Laws (1)
3.3		Certificate of Ownership and Merger, dated September 19, 2008 (2)
3.4		Certificate of Designations, Preferences, Rights and Limitations of Series A Preferred Stock (2)
10.1		Share Transfer Agreement, dated October 22, 2008 (3)
10.2		Amendment to the Share Transfer Agreement, dated March 7, 2009 (3)
10.3		Land Expropriation Contract dated November 5, 2010 (4)
10.4		Lihua International, Inc. 2009 Omnibus Securities and Incentive Plan (5)
10.5	+	2013 Independent Director Agreement, Robert Bruce
10.6	+	2013 Independent Director Agreement, Jonathan Serbin
10.7	+	2013 Independent Director Agreement, Kelvin Lau
10.8		Jianhua Zhu Employment Agreement, dated October 23, 2011(6)
10.9		Daphne Huang Employment Agreement, dated October 23, 2011 (6)
10.11		Yaying Wang Employment Agreement, dated October 23, 2011 (6)
14		Code of Business Conduct and Ethics (7)
21		List of Subsidiaries (8)
23.1	+	Consent of Crowe Horwath (HK) CPA Limited
31.1	+	Certification of Chief Executive Officer pursuant to Rule 13A-14(A)/15D-14(A) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	+	Certification of the Principal Financial Officer pursuant to Rule 13A-14(A)/15D-14(A) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	+	Certification of Chief Executive Officer Pursuant to 18 U.S.C. 1350 (Section 906 of the Sarbanes-Oxley Act of 2002).
32.2	+	Certification of the Principal Financial Officer Pursuant to 18 U.S.C. 1350 (Section 906 of the Sarbanes-Oxley Act of 2002).

+ Filed herewith.

(1)	Incorporated by reference to the Company’s Form 10-SB, filed with the SEC on May 15, 2007
(2)	Incorporated by reference to the Company’s Current Report on Form 8-K, filed with the SEC on November 6, 2008
(3)	Incorporated by reference to the Company’s Annual Report on Form 10-K filed with the SEC April 2, 2009
(4)	Incorporated by reference to the Company’s Current Report on Form 8-K, filed with the SEC on November 12, 2010.
(5)	Incorporated by reference to the Company’s Annual Report on 10-K, filed with the SEC on March 14, 2011.
(6)	Incorporated by reference to the Company’s Current Report on Form 8-K, filed with the SEC on October 27, 2011.
(7)	Incorporated by reference to our Annual Report on Form 10-KSB, filed with the SEC on February 26, 2008
(8)	Incorporated by reference to the Company’s Annual Report on 10-K, filed with the SEC on March 31, 2010.

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LIHUA INTERNATIONAL, INC. AND SUBSIDIARIES

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

	Page
Report of Independent Registered Public Accounting Firm – Crowe Horwath (HK) CPA Limited	F – 1
Consolidated Balance Sheets	F – 2
Consolidated Statements of Income and Comprehensive Income	F – 3
Consolidated Statements of Stockholders’ Equity	F – 4
Consolidated Statements of Cash Flows	F – 5
Notes to Consolidated Financial Statements	F-6 – F-36

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of

Lihua International, Inc.

We have audited the accompanying consolidated balance sheets of Lihua International, Inc. and Subsidiaries (the “Company”) as of December 31, 2013 and 2012, and the related consolidated statements of income and comprehensive income, stockholders' equity and cash flows for each of the years in the three-year period ended December 31, 2013. We also have audited Lihua International, Inc. and Subsidiaries’ internal control over financial reporting as of December 31, 2013, based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in 1992. Lihua International, Inc. and Subsidiaries’ management is responsible for these financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on these financial statements and an opinion on the Company's internal control over financial reporting 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 audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinion.

A company's internal control over financial reporting is a process designed 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. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness of the internal control over financial reporting to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Lihua International, Inc. and Subsidiaries as of December 31, 2013 and 2012, and the consolidated results of their operations and cash flows for each of the years in the three-year period ended December 31, 2013 in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, Lihua International, Inc. and Subsidiaries maintained, in all material respects, effective internal control over financial reporting as of December 31, 2013, based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in 1992.

/s/ Crowe Horwath (HK) CPA Limited

Hong Kong, China

March 17, 2014

F-1

 LIHUA INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(AMOUNTS EXPRESSED IN US DOLLARS)

	As of December 31,
	2013			2012
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	203,406,220		$	144,300,290
Accounts receivable, net		60,497,780			45,284,923
Prepayments for raw material purchases		17,143,138			19,569,239
Other receivables, deposits and prepayments		337,189			559,955
Prepaid land use right – current portion		418,502			406,026
Deferred income tax assets		146,418			24,948
Inventories		12,140,696			17,844,405
Total current assets		294,089,943			227,989,786
OTHER ASSETS
Property, plant and equipment, net		47,139,458			47,197,115
Construction in progress		5,559,901			175,006
Prepaid land use right – long-term portion		18,701,959			18,546,658
Intangible assets		42,195			3,332
Total non-current assets		71,443,513			65,922,111
Total assets	$	365,533,456		$	293,911,897
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable		7,415,370			3,891,110
Other payables and accruals		7,143,964			4,937,404
Income taxes payable		4,941,050			5,797,188
Warrant liabilities		33,262			354,000
Total current liabilities		19,533,646			14,979,702
Total liabilities		19,533,646			14,979,702
STOCKHOLDERS' EQUITY
Preferred stock: $0.0001 par value, 10,000,000 shares authorized, none issued and outstanding		-			-
Common stock, $0.0001 par value: 75,000,000 shares authorized, 30,295,955 shares issued and 30,031,908 shares outstanding as of December 31, 2013 (2012: 30,084,883 shares issued and 29,820,836 shares outstanding), respectively		3,029			3,008
Additional paid-in capital		80,627,496			79,257,921
Treasury stock, at cost, 264,047 shares as of December 31, 2013 and 2012, respectively		(2,126,597	)		(2,126,597	)
Statutory reserves		18,723,836			14,566,846
Retained earnings		222,165,580			170,163,120
Accumulated other comprehensive income		26,606,466			17,067,897
Total stockholders' equity		345,999,810			278,932,195
Total liabilities and stockholders' equity	$	365,533,456		$	293,911,897

See accompanying notes to consolidated financial statements

F-2

LIHUA INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

(AMOUNTS EXPRESSED IN US DOLLARS)

	Year Ended December 31,
	2013			2012			2011
NET REVENUE	$	900,726,958		$	853,766,541		$	637,093,439
Cost of sales		(814,327,740	)		(764,218,167	)		(561,379,767	)
GROSS PROFIT		86,399,218			89,548,374			75,713,672
Selling expenses		(3,020,600	)		(2,954,460	)		(2,485,978	)
General and administrative expenses		(8,073,172	)		(8,621,494	)		(6,650,142	)
Income from operations		75,305,446			77,972,420			66,577,552
Other income (expenses):
Interest income		660,326			547,679			522,722
Interest expenses		-			-			(143,779	)
Foreign exchange differences		(1,636	)		109,638			234,763
Gain (Loss) on extinguishment of warrant liabilities		(8,369	)		73,291			88,777
Change in fair value of warrants		(106,536	)		(124,000	)		3,062,575
Other income (expenses)		35,136			93,819			114,623
Total other income (expenses)		578,921			700,427			3,879,681
Income before income taxes		75,884,367			78,672,847			70,457,233
Provision for income taxes		(19,724,917	)		(20,730,844	)		(17,323,700	)
NET INCOME	$	56,159,450		$	57,942,003		$	53,133,533
OTHER COMPREHENSIVE INCOME:
Foreign currency translation adjustments		9,538,569			659,754			9,152,577
COMPREHENSIVE INCOME	$	65,698,019		$	58,601,757		$	62,286,110
Net income per share
Basic	$	1.88		$	1.94		$	1.78
Diluted	$	1.87		$	1.93		$	1.77
Weighted average number of shares outstanding
Basic		29,858,880			29,815,943			29,816,871
Diluted		29,996,833			29,965,811			30,076,130

See accompanying notes to consolidated financial statements.

F-3

LIHUA INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(AMOUNTS EXPRESSED IN US DOLLARS)

																Accumulated
	Common Stock					Additional										Other
	Number of					Paid-in		Statutory		Treasury			Retained			Comprehensive
	Shares			Amount		Capital		Reserves		Stock			Earnings			Income		Total
At January 1, 2011		29,385,326		$	2,938	$	71,251,843	$	7,556,187	$	-		$	67,091,089		$	7,255,566	$	153,157,623
Net income		-			-		-		-		-			53,133,533			-		53,133,533
Foreign currency translation adjustment		-			-		-		-		-			-			9,152,577		9,152,577
Exercise of warrants		651,155			65		6,814,073		-		-			-			-		6,814,138
Repurchase of common stock		(264,047	)		-		-		-		(2,126,597	)		-			-		(2,126,597	)
Common stock dividend		-			-		-		-		-			(992,846	)		-		(992,846	)
Share-based payments to employees and directors		-			-		498,212		-		-			-			-		498,212
Appropriation of statutory reserves		-			-		-		2,862,289		-			(2,862,289	)		-		-
At December 31, 2011		29,772,434		$	3,003	$	78,564,128	$	10,418,476	$	(2,126,597	)	$	116,369,487		$	16,408,143	$	219,636,640
Net income		-			-		-		-		-			57,942,003			-		57,942,003
Foreign currency translation adjustment		-			-		-		-		-			-			659,754		659,754
Exercise of warrants		48,402			5		311,704		-		-			-			-		311,709
Share-based payments to employees and directors		-			-		382,089		-		-			-			-		382,089
Appropriation of statutory reserves		-			-		-		4,148,370		-			(4,148,370	)		-		-
At December 31, 2012		29,820,836		$	3,008	$	79,257,921	$	14,566,846	$	(2,126,597	)	$	170,163,120		$	17,067,897	$	278,932,195
Net income		-			-		-		-		-			56,159,450			-		56,159,450
Foreign currency translation adjustment		-			-		-		-		-			-			9,538,569		9,538,569
Exercise of share options		110,000			11		494,989		-		-			-			-		495,000
Exercise of warrants		101,072			10		531,073		-		-			-			-		531,083
Share-based payments to employees and directors		-			-		343,513		-		-			-			-		343,513
Appropriation of statutory reserves		-			-		-		4,156,990		-			(4,156,990	)		-		-
At December 31, 2013		30,031,908			3,029		80,627,496		18,723,836		(2,126,597	)		222,165,580			26,606,466		345,999,810

See accompanying notes to consolidated financial statements.

F-4

 LIHUA INTERNATIONAL, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(AMOUNTS EXPRESSED IN US DOLLARS)

	Year Ended December 31,
	2013			2012			2011
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	56,159,450		$	57,942,003		$	53,133,533
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization		4,361,117			3,669,077			2,294,159
Loss on disposal of property, plant and equipment		86,330			-			-
Share-based compensation		343,513			382,089			498,212
(Gain) loss on extinguishment of warrant liabilities		8,369			(73,291	)		(88,777	)
Change in fair value of warrants		106,536			124,000			(3,062,575	)
Deferred income tax benefits		(118,821	)		175,379			(65,136	)
(Increase) decrease in assets:
Accounts receivable		(13,597,256	)		(14,065,887	)		3,487,873
Bills receivable		-			-			541,989
Prepayments for raw material purchases		2,984,314			2,357,227			(21,347,998	)
Other receivables, deposits and prepayments		236,354			1,321,844			(1,814,309	)
Inventories		6,158,432			(2,294,323	)		1,442,579
Increase (decrease) in liabilities:
Accounts payable		3,350,965			(2,180,647	)		(246,640	)
Other payables and accruals		1,987,001			198,772			(782,013	)
Income taxes payable		(1,019,365	)		1,173,326			(612,900	)
Net cash provided by operating activities		61,046,939			48,729,569			33,377,997
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property, plant and equipment and construction in progress		(7,796,777	)		(9,365,100	)		(16,965,626	)
Deposits for plant and equipment		-			-			(3,344,274	)
Net cash used in investing activities		(7,796,777	)		(9,365,100	)		(20,309,900	)
CASH FLOWS FROM FINANCING ACTIVITIES
Payment of common stock dividend		-			(992,846	)		-
Repayments of short-term bank loans		-			-			(2,322,413	)
Repurchase of common stock		-			-			(2,126,597	)
Proceeds from exercise of share options		495,000			-			-
Proceeds from exercise of warrants		95,441			-			1,898,050
Net cash (used in) provided by financing activities		590,441			(992,846	)		(2,550,960	)
Foreign currency translation adjustment		5,265,327			291,040			4,511,150
INCREASE IN CASH AND CASH EQUIVALENTS		59,105,930			38,662,663			15,028,287
CASH AND CASH EQUIVALENTS, at the beginning of the year		144,300,290			105,637,627			90,609,340
CASH AND CASH EQUIVALENTS, at the end of the year	$	203,406,220		$	144,300,290		$	105,637,627
MAJOR NON-CASH TRANSACTION:
Share-based compensation to employees and directors	$	343,513		$	382,089		$	498,212
Issuance of common stock to settle warrant liabilities		435,642			311,709			4,916,088
SUPPLEMENTAL DISCLOSURE INFORMATION
Cash paid for interest	$	-		$	-		$	143,779
Cash paid for income taxes	$	20,743,750		$	19,569,241		$	18,056,035

See accompanying notes to consolidated financial statements.

F-5

LIHUA INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011

NOTE 1 DESCRIPTION OF BUSINESS AND ORGANIZATION

(A) BUSINESS AND ORGANIZATION

Lihua International, Inc. (“Lihua” or the “Company”) was incorporated in the State of Delaware on January 24, 2006 under the name Plastron Acquisition Corp.  On September 22, 2008, the Company changed its name from Plastron Acquisition Corp. to Lihua International, Inc. The Company conducts its business through two operating subsidiaries, Danyang Lihua Electron Co., Ltd. and Jiangsu Lihua Copper Industry Co., Ltd.

On September 4, 2009, the Company’s common stock began trading on the NASDAQ Capital Market under the symbol “LIWA”.

As of December 31, 2013, details of the subsidiaries of the Company are as follows:

Subsidiaries’ names	Domicile and date of Incorporation	Paid-up capital		Effective Ownership			Principal activities
Ally Profit Investments Limited (“Ally Profit”)	British Virgin Islands March 12, 2008	$	100		100	%	Holding company of other subsidiaries
Lihua Holdings Limited (“Lihua Holdings”)	Hong Kong April 17, 2008	HK$	100		100	%	Holding company of other subsidiaries
Danyang Lihua Electron Co., Ltd. (“Lihua Electron”)	People’s Republic of China (“PRC”) December 30, 1999	$	10,500,000		100	%	Manufacturing and sales of pure copper wire and bimetallic composite conductor wire such as copper clad aluminum (CCA) wire and enameled CCA wire
Jiangsu Lihua Copper Industry Co., Ltd. (“ Lihua Copper ”)	PRC August 31, 2007	$	46,000,000		100	%	Manufacturing and sales of refined copper

(B) REVERSE ACQUISITION

On October 31, 2008, the Company entered into a share exchange agreement (“Share Exchange Agreement”) under which the Company issued 14,025,000 shares of its Common Stock, par value $0.0001, to Magnify Wealth Enterprise Limited, the sole shareholder of Ally Profit (the “Ally Profit Shareholder” or “Magnify Wealth”) in exchange for all the issued and outstanding shares of Ally Profit (the “Share Exchange”). As a result of the Share Exchange, Ally Profit has become the Company’s wholly-owned subsidiary and Ally Profit Shareholder acquired a majority of the Company’s issued and outstanding stock. Concurrent with the Share Exchange, Mr. Jianhua Zhu (the managing director of Ally Profit and all of its operating subsidiaries, “Mr. Zhu”) has been appointed the Chief Executive Officer of the Company.

As a result, the Share Exchange has been accounted for as a reverse acquisition using the purchase method of accounting, whereby Ally Profit is deemed to be the accounting acquirer (legal acquiree) and the Company to be the accounting acquiree (legal acquirer). The financial statements before the date of the Share Exchange are those of Ally Profit with the results of the Company being consolidated from the date of the Share Exchange. The equity section and earnings per share have been retroactively restated to reflect the reverse acquisition and no goodwill has been recorded.

F-6

LIHUA INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011

NOTE 1 DESCRIPTION OF BUSINESS AND ORGANIZATION- CONTINUED

(B) REVERSE ACQUISITION- CONTINUED

Ally Profit was incorporated in the British Virgin Islands on March 12, 2008. In June 2008, pursuant to a restructuring plan set out below, Ally Profit has become the holding company of a group of companies comprising Lihua Holdings, a company incorporated in Hong Kong, which holds 100% equity interests in each of Lihua Electron and Lihua Copper, each a limited liability company organized under the existing laws of the PRC.

(C) RESTRUCTURING

In June 2008, pursuant to a restructuring plan (“Restructuring”) intended to ensure compliance with the PRC rules and regulations, Ally Profit through its directly wholly-owned subsidiary Lihua Holdings, acquired 100% of the equity interests in Lihua Electron and Lihua Copper from companies controlled by Mr. Zhu and other minority shareholders.

The table below sets forth the proportion of equity interests in all entities involved before and after the Restructuring based on subscribed registered capital:

	Magnify Wealth				Ally Profit				Lihua Holdings				Lihua Electron				Lihua Copper
	Before		After		Before		After		Before		After		Before		After		Before		After
	%		%		%		%		%		%		%		%		%		%
Shareholder
Mr. Fo-Ho Chu (“ Mr. Chu ”)		100		100		—		—		—		—		45.46		—		—		—
Magnify Wealth		—		—		100		100				—		—		—		—		—
Ally Profit		—		—		—		—		100		100		—		—		—		—
Lihua Holdings		—		—		—		—		—		—		—		100		—		100
Danyang Special Electronics Co., Ltd. (a)		—		—		—		—		—		—		52.27		—		25		—
Invest Unicorn Holdings Limited (b)		—		—		—		—		—		—		—		—		75		—
Imbis Europe B.V. h/o Asia Trading (EDC) (“ Europe EDC ”)		—		—		—		—		—		—		2.27		—		—		—
		100		100		100		100		100		100		100		100		100		100

(a) Equity interests in Danyang Special Electronics Co., Ltd., a PRC domestic company, are held as to 60% by Mr. Zhu and 40% by his wife. Mr. Zhu and his wife are acting in concert and considered parties to the same control group.

(b) Invest Unicorn Holdings Limited, incorporated in the British Virgin Islands, is 100% beneficially owned by Mr. Zhu.

As part of the Restructuring, Mr. Zhu and Mr. Chu entered into a Share Transfer Agreement dated October 22, 2008, pursuant to which Mr. Chu granted to Mr. Zhu the option to purchase all of the 3,000 ordinary shares of Magnify Wealth held by Mr. Chu at the nominal price of $1.00 per share (the “Option Shares”). Pursuant to the Share Transfer Agreement, the Option Shares vested and became exercisable upon Lihua Electron and Lihua Copper attaining consolidated net income performance targets for fiscal 2008, 2009, and 2010 of $8 million (“2008 Target”), $11 million and $14 million, respectively. If each performance target was met, the Option Shares would have vested 25%, 25% and 50%, respectively, 45 days after December 31 of each respective year.

On March 7, 2009, Mr. Zhu and Mr. Chu entered into an amendment to the Share Transfer Agreement whereby alternate conditions for the achievement of the performance targets were agreed. Under the amended agreement, as long as the audited consolidated net income of Lihua Electron and Lihua Copper for fiscal 2008 was 10% or more higher than the 2008 Target (“Alternate Performance Target”) regardless of whether the performance targets for 2009 and 2010 were met or not, the Option Shares would vest and become exercisable. Mr. Zhu would then be able to exercise the Option Shares in the same percentages and on the same dates as per the original agreement. Since our consolidated net income for 2008 was $11,701,879, which met the Alternate Performance Target, 100% of the Option Shares were exercisable as of February 14, 2011.

F-7

LIHUA INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011

NOTE 1 DESCRIPTION OF BUSINESS AND ORGANIZATION– CONTINUED

(C) RESTRUCTURING – CONTINUED

Also on October 22, 2008, the minority shareholders, namely Mr. Chu and Europe EDC, respectively, entered into a subscription agreement (“Subscription Agreement”) to purchase additional shares in Magnify Wealth at a nominal price of US$1.00 per share. Pursuant to these subscription agreements, Mr. Chu and Europe EDC will only be entitled to exercise their subscription rights at the same time Mr. Zhu exercises his Option Shares under the Share Transfer Agreement. The number of subscription shares exercisable by Mr. Chu and Europe EDC was determined based on the proportion of capital contributed by each of Mr. Zhu, Mr. Chu and Europe EDC in Lihua Electron and Lihua Copper. The purpose of the subscription agreements, together with the Share Transfer Agreement, is to enable Mr. Zhu, Mr. Chu and Europe EDC to re-acquire their proportionate ultimate legal ownership of Lihua Electron and Lihua Copper in compliance with the PRC rules and regulations. As a result, there has been no ownership change of the minority interests of each of the two PRC Operating Companies.

As part of the Restructuring, Lihua Holdings’ capital was established by way of contributions from Mr. Zhu and other minority shareholders, which aggregate amount equaled the total transfer price they were entitled to receive for the transfer of their equity interests in Lihua Electron and Lihua Copper to Lihua Holdings. Therefore, Mr. Zhu and the other minority shareholders, as the former stockholders of Lihua Electron and Lihua Copper who gave up legal ownership thereof, have not received any net cash amount. Nor has there been any cash flow out of the combined entity during the whole period from the date of transfer of legal ownership of Lihua Electron and Lihua Copper through the expiry of the Share Transfer Agreement and the Subscription Agreements. It is fully expected that Mr. Zhu and the other minority shareholders will re-acquire their proportionate legal ownership of Lihua Electron and Lihua Copper. As a result, Mr. Zhu and other minority shareholders have continued to bear the residual risks of the combined entity.

Mr. Zhu has retained a financial controlling interest in the combined entity through the above-discussed residual risks and rewards. Furthermore, during and after the Restructuring, there has been no change to the composition of the board of directors of either Lihua Electron or Lihua Copper and Mr. Zhu continues to act as the managing director of these companies as well as the sole director of Magnify Wealth, Ally Profit and Lihua Holdings. Lihua Electron and Lihua Copper have remained under common operating, management and financial control. As a result, the Restructuring has been accounted for as a combination of entities under common control and recapitalization of Lihua Electron and Lihua Copper using the “as if” pooling method of accounting, with no adjustment to the historical basis of the assets and liabilities of Lihua Electron and Lihua Copper, and the operations were consolidated as if the Restructuring occurred as of the beginning of the first accounting period presented in these financial statements.

NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principle of consolidation

These consolidated financial statements include the financial statements of Lihua International, Inc. and its subsidiaries.  All significant inter-company balances or transactions have been eliminated on consolidation.

Basis of preparation

These consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America.

F-8

LIHUA INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011

NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – CONTINUED

Use of estimates

The preparation of these consolidated financial statements in conformity with generally accepted accounting principles requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities and the related disclosure of contingent assets and liabilities at the date of these consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. Accordingly, actual results may differ from these estimates under different assumptions or conditions. Significant estimates for the years ended December 31, 2013, 2012 and 2011 include the allowance for doubtful accounts, the useful life of property, plant and equipment and intangible assets, recoverability of the carrying values of property, plant and equipment and the fair values of share-based payments and warrants granted in connection with the private placement of preferred stock in 2008 and the public offering of common stock in 2009.

Cash and cash equivalents

Cash and cash equivalents consist of all cash balances and highly liquid investments with an original maturity of three months or less.  Because of the short maturity of these investments, the carrying amounts approximate their fair value.  Restricted cash is excluded from cash and cash equivalents.

Accounts receivable

Accounts and bills receivable are stated at cost, net of an allowance for doubtful accounts. The Company maintains allowances for doubtful accounts for estimated losses, if any, resulting from the failure of customers to make required payments. The Company reviews the accounts and bills receivable on a periodic basis and makes allowances where there is doubt as to the collectibility of individual balances. In evaluating the collectibility of individual receivable balances, the Company considers many factors, including the age of the balance, the customer’s payment history, its current credit-worthiness and current economic trends.

Inventories

Inventories are stated at the lower of cost, determined on a weighted average basis, or market. Costs of inventories include purchase and related costs incurred in bringing the products to their present location and condition. Market value is determined by reference to selling prices after the balance sheet date or to management’s estimates based on prevailing market conditions. Management will write down the inventories to market value if it is below cost. Management also regularly evaluates the composition of its inventories to identify slow-moving and obsolete inventories to determine if a valuation allowance is required.

Property, plant and equipment

Property, plant and equipment are stated at cost less accumulated depreciation and accumulated impairment losses, if any. Gains or losses on disposals are reflected as gain or loss in the year of disposal. The cost of improvements that extend the life of buildings, machinery and equipment are capitalized. These capitalized costs may include structural improvements, equipment and fixtures. All ordinary repair and maintenance costs are expensed as incurred.

Depreciation for financial reporting purposes is provided using the straight-line method over the estimated useful lives of the assets as follows:

	Useful Life
	(In years)
Buildings	20
Machinery	5-10
Office equipment & motor vehicles	5

F-9

LIHUA INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011

NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – CONTINUED

Construction in progress

Construction in progress includes direct costs of construction of buildings and equipment and interest incurred during the period of construction, if material, is also capitalized. Construction in progress is not depreciated until such time as the assets are completed and put into service.

Prepaid land use right

Prepaid land use right represents lump sum payments for land use rights in the PRC.  The amount is expensed over the period of the land use rights of 50 years.

Intangible assets

The Company’s intangible assets include computer software.  The Company’s amortization policy on intangible assets is as follows:

	Useful Life
	(In years)
Computer software	5

The Company accounts for its intangible assets pursuant to FASB ASC Subtopic 350-30, “General Intangibles Other Than Goodwill”. Under ASC 350-30, intangibles with definite lives continue to be amortized on a straight-line basis over the lesser of their estimated useful lives or contractual terms. Intangibles with indefinite lives are evaluated at least annually for impairment if events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. Based on the existence of one or more indicators of impairment, the Company measures any impairment of long-lived assets by comparing the asset's estimated fair value with its carrying value, based on cash flow methodology.

Impairment of long-lived assets

The Company reviews and evaluates its long-lived assets for impairment when events or changes in circumstances indicate that the related carrying amounts may not be recoverable. Impairment is considered to exist if the total estimated future cash flows on an undiscounted basis are less than the carrying amount of the assets. An impairment loss is measured and recorded based on discounted estimated future cash flows. In estimating future cash flows, assets are grouped at the lowest level for which there is identifiable cash flows that are largely independent of future cash flows from other asset groups.

Derivative financial instruments

The Company evaluates all its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the consolidated statements of income.

The Company’s warrants have been classified as derivatives in accordance with the guidance provided in FASB ASC 815-40-15-7I, because they are denominated in U.S. dollars, which is different from the Company’s functional currency (Renminbi).The Company accounted for the exercise of these warrants as extinguishment of debts in accordance with ASC 815-10-40-1, “Derivatives and Hedges – Derecognition” and ASC 470-50-40, “Debt – Modification and Extinguishments – Derecognition”.

Revenue recognition

Revenue is recognized when the following four revenue criteria are met: persuasive evidence of an arrangement exists, delivery has occurred, the selling price is fixed or determinable, and collectibility is reasonably assured.

Sales revenue is recognized net of value added tax, sales discounts and returns at the time when the merchandise is sold and delivered to the customer. Based on historical experience, management estimates that sales returns are immaterial and has not made an allowance for estimated sales returns.

F-10

LIHUA INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011

NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – CONTINUED

Research and development costs

Research and development costs are expensed as incurred, and charged to general and administrative expense. For the years ended December 31, 2013, 2012 and 2011, research and development costs were $1,305,379, $1,779,018 and $954,299, respectively.

Advertising costs

The Company expenses all advertising costs as incurred. The total amount of advertising costs charged to general and administrative expense were $13,247, $856 and $17,138 for the years ended December 31, 2013, 2012 and 2011, respectively.

Shipping and handling costs

Substantially all costs of shipping and handling of products to customers are included in selling expenses. Shipping and handling costs for the years ended December 31, 2013, 2012 and 2011 were $2,424,613, $2,343,646 and $2,051,193, respectively.

Income taxes

The Company is subject to income taxes in the United States and other foreign jurisdictions where it operates. The Company accounts for income taxes in accordance with FASB ASC Topic 740, “Income Taxes”.  FASB ASC Topic 740 requires an asset and liability approach for financial accounting and reporting for income taxes and allows recognition and measurement of deferred tax assets based upon the likelihood of realization of tax benefits in future years.  Under the asset and liability approach, deferred taxes are provided for the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.  A valuation allowance is provided for deferred tax assets if it is more likely than not these items will either expire before the Company is able to realize their benefits, or that future deductibility is uncertain.

The Company’s income tax returns are subject to examination by the Internal Revenue Service (“IRS”) and other tax authorities in the locations where it operates. The Company assesses potentially unfavorable outcomes of such examinations based on the criteria of FASB ASC 740-10-25-5 through 740-10-25-7 and 740-10-25-13 which the Company adopted on January 1, 2007. The interpretation prescribes a more-likely-than-not threshold for financial statement recognition and measurement of a tax position taken (or expected to be taken) in a tax return. This interpretation also provides guidance on de-recognition of income tax assets and liabilities, classification of current and deferred income tax assets and liabilities, accounting for interest and penalties associated with tax positions, accounting for income taxes in interim periods and income tax disclosures.

Comprehensive income

FASB ASC Topic 220, “Comprehensive Income”, establishes standards for reporting and displaying comprehensive income and its components in the consolidated financial statements. Accumulated other comprehensive income includes foreign currency translation adjustments.

Stock based compensation

The Company accounts for share-based compensation awards to employees in accordance with FASB ASC Topic 718, “Compensation – Stock Compensation”, which requires that share-based payment transactions with employees be measured based on the grant-date fair value of the equity instrument issued and recognized as compensation expense over the requisite service period.

The Company accounts for share-based compensation awards to non-employees in accordance with FASB ASC Topic 718 and FASB ASC Subtopic 505-50, “Equity-Based Payments to Non-employees”. Under FASB ASC Topic 718 and FASB ASC Subtopic 505-50, stock compensation granted to non-employees has been determined as the fair value of the consideration received or the fair value of equity instrument issued, whichever is more reliably measured and is recognized as an expense as the goods or services are received.

F-11

LIHUA INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011

NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  – CONTINUED

Foreign currency

The Company has its local currency, Renminbi, (“RMB”), as its functional currency. The Company’s subsidiaries maintain their books and records in their functional currency, RMB. The consolidated financial statements of the Company are translated from RMB into United States dollars (U.S. Dollars or “US$” or “$”). Accordingly, assets and liabilities of the PRC subsidiaries are translated from RMB to U.S. Dollars using the applicable exchange rates prevailing at the balance sheet date. Items on the statement of comprehensive income and cash flows are translated at average exchange rates during the reporting period. Equity accounts are translated at historical rates. Adjustments resulting from the translation of the Company’s financial statements are recorded as accumulated other comprehensive income.

The exchange rates used to translate amounts in RMB into U.S. Dollars for the purposes of preparing the consolidated financial statements are based on the rates as published on the website of People’s Bank of China and are as follows:

	2013	2012	2011
Balance sheet items, except for equity accounts	US$1=RMB6.0969	US$1=RMB6.2855	US$1=RMB6.3009
Items in the statements of income and cash flows	US$1=RMB6.1932	US$1=RMB6.3125	US$1=RMB6.4588

No representation is made that the RMB amounts could have been, or could be, converted into U.S. dollars at the above rates. The value of RMB against U.S. dollars and other currencies may fluctuate and is affected by, among other things, changes in China’s political and economic conditions. Any significant revaluation of RMB may materially affect the Company’s financial condition in terms of U.S. dollar reporting.

Segment reporting

The Company follows FASB ASC Topic 280, “Segment Reporting”, which requires that companies disclose segment data based on how management makes decision about allocating resources to segments and evaluating their performance.

The Company believes that during the years ended December 31, 2013, 2012 and 2011, it operated mainly in one business segment – Manufacturing and sales of refined copper rod and copper anode, as well as copper clad aluminum (CCA) wire and copper wire produced from refined copper rod.  Throughout the years ended December 31, 2013, 2012 and 2011 all of the Company’s operations were carried out mainly in one geographical segment - China.

The Company’s major product categories are (1) wire manufacturing, consisting of (a) CCA wire, which is an electrical conductor consisting of an outer sleeve of copper that is metallurgically bonded to a solid aluminum core, and (b) copper fine and superfine wire, manufactured from recycled copper rod; (2) refined copper rod; and (3) refined copper anode, the latter two of which are fire refined from scrap copper. The manufacturing of refined copper was launched in the first quarter of 2009.

Dividends

Dividends are recognized when declared.

PRC regulations currently permit payment of dividends only out of accumulated profits as determined in accordance with PRC accounting standards and regulations. The Company’s PRC subsidiaries can only distribute dividends after they have met the PRC requirements for appropriation to statutory reserves. The PRC government imposes control over its foreign currency reserves in part through direct regulation of the conversion of the RMB into foreign exchange and through restrictions on foreign trade. As the majority of the Company’s revenues are in RMB, any restrictions on currency exchange may limit the Company’s ability to use revenue generated in RMB to fund its business activities outside China or to make dividend payments in U.S. dollars.

F-12

LIHUA INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011

NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  – CONTINUED

Earnings per common share

The Company reports earnings per share in accordance with the provisions of FASB ASC Topic 260, “Earnings per Share”. FASB ASC Topic 260 requires presentation of basic and diluted earnings per share in conjunction with the disclosure of the methodology used in computing such earnings per share. Basic earnings per share excludes dilution and is computed by dividing income available to common stockholders by the weighted average common shares outstanding during the period. Diluted earnings per share takes into account the potential dilution (using the treasury stock method) that could occur if securities or other contracts to issue common stock were exercised and converted into common stock.

Commitments and contingencies

The Company follows FASB ASC Subtopic 450-20, “Loss Contingencies” in determining its accruals and disclosures with respect to loss contingencies. Accordingly, estimated losses from loss contingencies are accrued by a charge to income when information available prior to issuance of the financial statements indicates that it is probable that a liability could have been incurred and the amount of the loss can be reasonably estimated. Legal expenses associated with the contingency are expensed as incurred. If a loss contingency is not probable or reasonably estimable, disclosure of the loss contingency is made in the financial statements when it is at least reasonably possible that a material loss could be incurred.

Recent accounting pronouncements

In February 2013, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2013-2, Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income (ASU 2013-02), that requires an organization to present the effects on the line items of net income of significant amounts reclassified out of Accumulated OCI, but only if the item reclassified is required under U.S. GAAP to be reclassified to net income in its entirety in the same reporting period. ASU 2013-02 is effective for fiscal years beginning after December 15, 2012. The Company adopted ASU 2013-02 effective January 1, 2013 and it did not have a significant impact on its consolidated results of operations and financial condition.

In March 2013, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2013-05, Foreign Currency Matters, (Topic 830): Parent's Accounting for the Cumulative Translation Adjustment upon Derecognition of Certain Subsidiaries or Groups of Assets within a Foreign Entity or of an Investment in a Foreign Entity (ASU 2013-05), to resolve a diversity in accounting for the cumulative translation adjustment of foreign currency upon derecognition of a foreign subsidiary or group of assets. ASU 2013-05 requires the parent to apply the guidance in Subtopic 830-30 to release any related cumulative translation adjustment into net income when a reporting entity (parent) ceases to have a controlling financial interest in a subsidiary or group of assets within a foreign entity. Accordingly, the cumulative translation adjustment should be released into net income only if the sale or transfer results in the complete or substantially complete liquidation of the foreign entity in which the subsidiary or group of assets had resided. Further, ASU 2013-05 clarified that the parent should apply the guidance in subtopic 810-10 if there is a sale of an investment in a foreign entity, including both (1) events that result in the loss of a controlling financial interest in a foreign entity and (2) events that result in an acquirer obtaining control of an acquiree in which it held an equity interest immediately before the acquisition date. Accordingly, the cumulative translation adjustment should be released into net income upon the occurrence of those events. ASU 2013-05 is effective prospectively for the Company in its first quarter of fiscal 2014, with early adoption permitted. The Company does not expect ASU 2013-05 to have a significant impact on its consolidated results of operations and financial condition.

In July 2013, the FASB issued Accounting Standards Update No. 2013-11, Income Taxes (Topic 740)(ASU 2013-11). The amendments in this update provide guidance on the financial statement presentation of an unrecognized tax benefit when a net operating loss carryforward, similar tax loss, or tax credit carryforward exists. These amendments provide that an unrecognized tax benefit, or a portion thereof, should be presented in the financial statements as a reduction of a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward, except to the extent that a net operating loss carryforward, a similar tax loss, or a tax credit carryforward is not available at the reporting date to settle any additional income taxes that would result from disallowance of a tax position, or the tax law does not require the entity to use, and the entity does not intend to use, the deferred tax asset for such purpose, then the unrecognized tax benefit should be presented as a liability. The amendments in this update are effective for fiscal years, and interim periods within those years, beginning after December 15, 2013. Early adoption is permitted. The Company does not expect ASU 2013-11 to have a significant impact on its consolidated results of operations and financial condition.

F-13

LIHUA INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011

NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  – CONTINUED

Recent accounting pronouncements- Continued

Other accounting standards that have been issued or proposed by the FASB or other standards-setting bodies that do not require adoption until a future date are not expected to have a material impact on the Company’s consolidated financial statements upon adoption.

NOTE 3 FAIR VALUE MEASUREMENTS AND FINANCIAL INSTRUMENTS

ASC Topic 820, Fair Value Measurement and Disclosures, defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. This topic also establishes a fair value hierarchy which requires classification based on observable and unobservable inputs when measuring fair value. The fair value hierarchy distinguishes between assumptions based on market data (observable inputs) and an entity’s own assumptions (unobservable inputs). The hierarchy consists of three levels:

¨ Level one — Quoted market prices in active markets for identical assets or liabilities;

¨ Level two — Inputs other than level one inputs that are either directly or indirectly observable; and

¨ Level three — Unobservable inputs developed using estimates and assumptions, which are developed by the reporting entity and reflect those assumptions that a market participant would use.

Determining which category an asset or liability falls within the hierarchy requires significant judgment. The Company evaluates its hierarchy disclosures each quarter.

The Company’s financial instruments include cash equivalents, trade receivables and payables, prepayments and other current assets, other payables and accruals. The carrying value of the Company’s short-term financial instruments approximates their fair value because of their short maturities.

The following table sets forth the financial instruments, measured at fair value, by level within the fair value hierarchy as of December 31, 2013:

	Fair value measurements at reporting date using
Items	As of December 31, 2013		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Warrant liability	$	33,262	$	-	$	33,262	$	-

The following table sets forth the financial instruments, measured at fair value, by level within the fair value hierarchy as of December 31, 2012:

	Fair value measurements at reporting date using
Items	As of December 31, 2012		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Warrant liability	$	354,000	$	-	$	354,000	$	-

F-14

LIHUA INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011

NOTE 3 FAIR VALUE MEASUREMENTS AND FINANCIAL INSTRUMENTS - CONTINUED

Assets and liabilities measured at fair value on a recurring basis using significant observable inputs (Level 2) from January 1, 2011 to December 31, 2013 are summarized as follows:

	Warrant liability (Level 2)
Balance at January 1, 2011	$	8,682,441
Change in fair value included in earnings		(3,062,575	)
Exercise of warrants		(5,004,866	)
Balance at December 31, 2011		615,000
Change in fair value included in earnings		124,000
Exercise of warrants		(385,000	)
Balance at December 31, 2012		354,000
Change in fair value included in earnings		106,536
Exercise of warrants		(427,274	)
Balance at December 31, 2013	$	33,262

There were no assets or liabilities measured at fair value on a non-recurring basis as of December 31, 2013 and 2012.

Derivative Instruments – Warrants

The Company’s warrants have been classified as derivatives in accordance with the guidance provided in FASB ASC 815-40-15-7I, because they are denominated in U.S. dollars, which is different from the Company’s functional currency (Renminbi).

For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the consolidated statements of income.

The Company accounted for the exercise of these warrants as extinguishment of debts in accordance with ASC 815-10-40-1, “Derivatives and Hedges – Derecognition” and ASC 470-50-40, “Debt – Modification and Extinguishments – Derecognition”.

For stock-based derivative financial instruments, the Company uses the Black-Scholes option pricing model using the following assumptions to value the derivative instruments at inception and on subsequent valuation dates:

F-15

LIHUA INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011

NOTE 3 FAIR VALUE MEASUREMENTS AND FINANCIAL INSTRUMENTS- CONTINUED

	December 31, 2013			December 31, 2012
Series B Warrants
Market price of common stock:	$	-		$	4.390
Exercise price:		-			3.50
Remaining contractual life (years):		-			0.83
Dividend yield:		-			-
Expected volatility:		-			51.41	%
Risk-free interest rate:		-			0.13	%
Fair value – Series A and B Warrants	$	-		$	319,000
Underwriter Warrants
Market price of common stock:	$	5.720		$	4.390
Exercise price:		4.80			4.80
Remaining contractual life (years):		0.68			1.68
Dividend yield:		-			-
Expected volatility:		34.87	%		61.26	%
Risk-free interest rate:		0.10	%		0.21	%
Fair value – Underwriter Warrants	$	33,262		$	35,000
Fair value – Total	$	33,262		$	354,000

In 2011, 542,300 warrants were exercised at $3.50 each in cash and 187,164 warrants were exercised on a cashless basis to purchase 108,855 shares of common stock. In accordance with ASC 470-50-40, “Debt – Modification and Extinguishments – Derecognition”, an aggregate gain of $88,777 was recognized. For details, please refer to the following table.

Exercise date:	January 14,			March 3,			March 14,			March 17,			April7,			December 21,
Market price of common stock:	$	10.64		$	10.98		$	10.19		$	9.79		$	8.39		$	5.00
Exercise warrants:		549,300			20,000			28,814			74,000			44,850			12,500
Exercise price:	$	3.50		$	3.50		$	4.80		$	3.50		$	4.80		$	3.50
Remaining contractual life (years):		2.79			2.66			3.47			2.62			3.41			1.86
Dividend yield:		–			–			–			–			–			1.19	%
Expected volatility:		46.34	%		48.00	%		44.05	%		48.54	%		44.05	%		39.58	%
Risk-free interest rate:		0.90	%		1.09	%		1.27	%		0.86	%		1.46	%		0.22	%
Fair values:	$	7.2301		$	7.7083		$	6.0599		$	6.5324		$	4.4485		$	1.7342
Gain (loss) on extinguishment of warrant liabilities	$	48,210		$	8,153		$	5,722		$	(1,361	)	$	26,531		$	1,522

In 2012, 125,000 warrants were exercised on a cashless basis to purchase 48,402 shares of common stock. In accordance with ASC 470-50-40, “Debt – Modification and Extinguishments – Derecognition”, an aggregate gain of $73,291 was recognized.  For details, please refer to the following table.

Exercise date:	February 7,
Market price of common stock:	$	6.44
Exercise warrants:		125,000
Exercise price:	$	3.50
Remaining contractual life (years):		1.73
Dividend yield:		-%
Expected volatility:		39.43%
Risk-free interest rate:		0.21%
Fair values:	$	3.08
Gain on extinguishment of warrant liabilities	$	73,291

F-16

LIHUA INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011

NOTE 3 FAIR VALUE MEASUREMENTS AND FINANCIAL INSTRUMENTS- CONTINUED

In 2013, 27,585 warrants were exercised at $3.50 each in cash and 227,915 warrants were exercised on a cashless basis to purchase 73,696 shares of common stock. In accordance with ASC 470-50-40, “Debt – Modification and Extinguishments – Derecognition”, an aggregate loss of $8,369 was recognized. As of December, 2013, 209 shares were not yet issued. For details, please refer to the following table.

Exercise date:	May 22,			September 27,			October 3,			October 11,			October 15,			October 29,			October 30,
Market price of common stock:	$	5.76		$	4.96		$	5.05		$	5.00		$	4.99		$	5.98		$	5.92
Exercise warrants:		28,348			58,000			35,000			96,652			12,500			15,000			10,000
Exercise price:	$	3.5		$	3.5		$	3.5		$	3.5		$	3.5		$	3.5		$	3.5
Remaining contractual life (years):		0.44			0.09			0.08			0.05			0.04			0.00			0.00
Dividend yield:		-	%		-	%		-	%		-	%		-	%		-	%		-	%
Expected volatility:		35.48	%		22.68	%		24.76	%		17.20	%		18.55	%		5.71	%		-	%
Risk-free interest rate:		0.07	%		0.02	%		0.13	%		0.2 5	%		0.34	%		0.03	%		-	%
Fair values:	$	2.2653		$	1.4572		$	1.5485		$	1.4956		$	1.4899		$	2.4788		$	2.4200
Gain (loss) on extinguishment of warrant liabilities	$	3,520		$	(7,124	)	$	(2,135	)	$	(4,432	)	$	(217	)	$	(378	)	$	2,397

NOTE 4 ACCOUNTS RECEIVABLE, NET

Accounts receivable consisted of the following:

	As of December 31,
	2013		2012
Accounts receivable	$	60,497,780	$	45,284,923
Less: Allowance for doubtful debts		-		-
Accounts receivable, net	$	60,497,780	$	45,284,923

As of December 31, 2013 and 2012, there were no accounts receivable aged greater than 90 days, and management has determined that no allowance for doubtful debts was necessary.

NOTE 5 PREPAYMENTS FOR RAW MATERIAL PURCHASES

Starting from the second quarter of 2011, the Company initiated purchases of scrap copper from overseas via a third-party import-export company. Pursuant to the terms of the Company’s purchase agreements with that third-party, the Company was required to make prepayments in advance of delivery of the purchased scrap copper to the Company’s production facilities. As of December 31, 2013 and 2012, such prepayments were $17,143,138 and $19,569,239, respectively.

F-17

LIHUA INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011

NOTE 6 OTHER RECEIVABLES, DEPOSITS AND PREPAYMENTS

Other receivables, deposits and prepayments consisted of the following:

	As of December 31,
	2013		2012
Prepaid insurance	$	136,500	$	162,000
Other receivables		118,680		118,031
Utility deposits		82,009		79,548
Prepaid research and development costs		-		200,376
Less: Allowance for valuation and doubtful debts		-		-
	$	337,189	$	559,955

In 2011, the Company signed various research and development contracts with Shanghai Electric Cable Research Institute. The service periods of the contracts vary from approximately 1.5 years to 3 years, with installment payment terms. Prepaid research and development costs as of December 31, 2012 represented aggregate installment payments made upon execution of the contracts, net of amortization in 2013 and 2012, pursuant to the terms of these contracts. No such prepayments remained outstanding as of December 31, 2013.

NOTE 7 INVENTORIES

Inventories by major categories are summarized as follows:

	As of December 31,
	2013		2012
Raw materials	$	8,775,850	$	12,906,713
Work in progress		183,699		419,695
CCA and copper wire		2,863,021		2,947,584
Copper rod and anode		318,126		1,570,413
	$	12,140,696	$	17,844,405

NOTE 8 INTANGIBLE ASSETS

	As of December 31,
	2013			2012
Computer software, cost	$	60,429		$	15,524
Less: Accumulated amortization		(18,234	)		(12,192	)
	$	42,195		$	3,332

Amortization expense for the years ended December 31, 2013, 2012 and 2011 was $5,577, $644 and $3,595, respectively.

F-18

LIHUA INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011

NOTE 9 PREPAID LAND USE RIGHTS

The Company has recorded as prepaid land use rights the lump sum payments made to acquire long-term interests to utilize the land underlying the building and production facility. This type of arrangement is common for the use of land in the PRC. The prepaid land use rights are expensed on the straight-line basis over the term of the land use rights of 50 years.

The amounts expensed on prepaid land use rights for the years ended December 31, 2013, 2012 and 2011 were $411,994, $404,207 and $395,052, respectively. The estimated expense of the prepaid land use rights over each of the next five years and thereafter will be $418,501 per annum.

As of December 31, 2013, prepaid land use rights included RMB32,399,100 ($5,314,029) representing payments made by Lihua Copper to a local authority to acquire a 50-year right to use a parcel of land which has been used for expansion of its manufacturing facilities. As of December 31, 2013, RMB2,399,100 ($393,495) remained unpaid and is included as other payables and accruals. Apart from the payment of $5,314,028 to the local authority, the Company also paid $5,950,703 to various local authorities primarily as compensation to the local communities in connection with the Company’s acquisition of these land use rights.

The Company has completed all the formalities in relation to the acquisition of the land use rights, except for paying the last payment of RMB2,399,100 ($393,495). Based on the Company’s understanding of the process, each year the local government allocates certain area (mu) of land to selected local manufacturers. However, the physical land use right certificates are not issued to those manufacturers until the local government receives the formal annual land quota from the state government. The Company received a land use rights certificate in November 2011 for 100 mu out of a total of 180 mu of land allocated to the Company, and management believes they can receive the land use rights certificate for the remaining 80 mu. However, the timing of receiving the certificate is highly dependent on the local government. Upon receipt of the land use right certificates for the remaining 80 mu of land, the Company will pay the remaining land use payments.

Based upon the local government practice, as well as the Company’s prior experience obtaining land use rights after going through the same process, management believes that the risk of losing the already allocated land use right is extremely low. In the unlikely event that the local government is unable to issue the physical land use right certificate for the remaining 80 mu of land, the Company believes it would have the right to receive a refund of the payment we made to the local government with respect to the land use right and, request to receive additional monies from the local government for construction costs incurred to date on the land.

NOTE 10 PROPERTY, PLANT AND EQUIPMENT, NET

Property, plant and equipment, net consisted of the following:

	As of December 31,
	2013			2012
Cost:
Buildings	$	35,481,843		$	34,264,012
Office equipment		431,648			415,007
Motor vehicles		774,693			696,015
Machinery		23,775,665			21,545,892
Total cost		60,463,849			56,920,926
Less: Accumulated depreciation		(13,324,391	)		(9,723,811	)
Net book value	$	47,139,458		$	47,197,115

Depreciation expense for the years ended December 31, 2013, 2012 and 2011 was $3,943,546, $3,264,226 and $1,895,512, respectively.

F-19

LIHUA INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011

NOTE 11 CONSTRUCTION IN PROGRESS

Construction in progress was related to the construction of the new production plant and consisted of the following:

	As of December 31,
	2013		2012
Construction of equipment	$	5,323,387	$	175,006
Construction of buildings		236,514		-
	$	5,559,901	$	175,006

NOTE 12 OTHER PAYABLES AND ACCRUALS

Other payables and accruals consisted of the following:

	As of December 31,
	2013		2012
Accrued staff costs	$	600,440	$	763,430
Research and development costs payable		484,960		-
Other taxes payable		3,386,518		1,768,702
Construction cost payable		2,054,220		1,958,204
Other payables		617,826		447,068
	$	7,143,964	$	4,937,404

NOTE 13 COMMON STOCK, TREASURY STOCK, PREFERRED STOCK AND COMMON STOCK PURCHASE WARRANTS

Common Stock and Treasury Stock

On April 14, 2010, the Company closed an offering of 4,285,715 shares of its common stock at a public offering price of $8.05 per share, which included the sale of 559,006 shares of its common stock as a result of the exercise of the over-allotment option by the underwriters. The Company received net proceeds of approximately $32.1 million from the offering, after deducting underwriting discounts and estimated offering expenses.

The offering was underwritten by Rodman& Renshaw, LLC, Chardan Capital Markets, LLC and Brean Murray, Carret & Co., LLC, pursuant to an underwriting agreement with the Company dated April 8, 2010. The offering was made pursuant to the Company’s effective registration statement on Form S-3, as amended (Registration Statement No. 333-164269), filed with the United States Securities and Exchange Commission and, as disclosed in a prospectus supplement dated April 8, 2010 filed with the Securities and Exchange Commission.

On January 24, 2011, the Board of Directors approved a one-year share repurchase program of up to $15 million of the Company’s common stock, pursuant to which the Company was authorized to repurchase its outstanding common stock from time to time, depending on market conditions, share price and other factors, on the open market or in privately negotiated transactions. Repurchased shares may be retired immediately and will resume the status of authorized but unissued shares or they may be held by the Company as treasury stock. The repurchase authorization may be modified, suspended, or discontinued by the Board of Directors at any time. In 2011, the Company repurchased 264,047 shares of its common stock under the share repurchase authorization at a weighted-average price of $8.05 per share for an aggregate purchase cost of $2,126,597. The share repurchase program expired on January 23, 2012.

F-20

LIHUA INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011

NOTE 13 COMMON STOCK AND COMMON STOCK PURCHASE WARRANTS – CONTINUED

On November 9, 2011, the Company announced that the Board of Directors had adopted a resolution to approve the Company’s proposed distribution of a special dividend to the shareholders of the Company of record as of December 31, 2011 and March 31, 2012. The Company accrued a dividend payable of $992,846 as of December 31, 2011. On January 13, 2012 and April 13, 2012, the Company distributed and paid dividends amounting to $498,757 and $494,089 to its shareholders of record as of December 31, 2011 and March 31, 2012 (except for Magnify Wealth (note 1(B) which agreed to waive its entitlements).

Series A Redeemable Convertible Preferred Stock

The Company’s Certificate of Incorporation grants the Board of Directors the authority, without any further vote or action by stockholders, to issue preferred stock in one or more series, fix the number of shares constituting the series and establish the preferences, limitations and relative rights, including dividend rights, dividend rate, voting rights, terms of redemption, redemption price or prices, redemption rights and liquidation preferences of the shares of the series.

On October 31, 2008, the Company entered into and completed a securities purchase agreement (“Private Placement”) with certain accredited investors (the “Investors”) for the issuance and sale by the Company in a private placement of 6,818,182 shares of Series A Convertible Preferred Stock (“Preferred Shares”) and Series A warrants to purchase 1,500,000 shares of Common Stock. The Company received $13,656,538 in proceeds from this Private Placement after paying fees and expenses.

On September 9, 2009, pursuant to the completion of the Public Offering, as discussed below, and in accordance with the terms of the Preferred Shares, all outstanding shares of the Preferred Stock were automatically converted into 6,818,182 shares of Common Stock.

Series A Warrants

In conjunction with the issuance of the Preferred Shares, the Company issued Series A Warrants to purchase up to 1,500,000 shares of Common Stock at an exercise price of $3.50 per share. The Series A Warrants have a term of exercise expiring 5 years from October 31, 2008. The Series A Warrants at the option of the holder, may be exercised by cash payment of the exercise price or, commencing 18 months following the closing of the Private Placement, if the per share market value of one share of Common Stock is greater than the exercise price and a registration statement under the Securities Act of 1933, as amended, covering the shares of Common Stock underlying the Series A Warrants is not then declared ineffective by the SEC, in lieu of exercising the Series A Warrants by payment of cash, a holder may exercise the Series A Warrant by a cashless exercise by surrender of the Series A Warrant, in which event the Company will issue to the holder a number of shares of our Common Stock computed using the following formula:

	X = Y - (A)(Y) B
Where	X =	the number of shares of Common Stock to be issued to the holder.
	Y =	the number of shares of Common Stock issuable upon exercise of the Series A Warrant in accordance with the terms of the Series A Warrant by means of a cash exercise rather than a cashless exercise.
	A =	the Exercise Price.
	B =	the per share market value of one share of Common Stock on the trading day immediately preceding the date of such election.

The Company will not receive any additional proceeds to the extent that the Series A Warrants are exercised by cashless exercise.

The exercise price and number of shares of the Company’s Common Stock issuable upon exercise of the Series A Warrants may be adjusted in certain circumstances, including in the event of a stock dividend, or recapitalization, reorganization, merger or consolidation and the issuance of rights to purchase additional shares of our Common Stock or to receive other securities convertible into additional shares of Common Stock.

F-21

LIHUA INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011

NOTE 13 COMMON STOCK AND COMMON STOCK PURCHASE WARRANTS – CONTINUED

Series A Warrants - continued

The Series A Warrants were originally issued with an anti-dilution protection provision whereby, for a period of two years following the original issue date of the Series A Warrants (the “Full Ratchet Period”), in the event the Company issued any additional shares of Common Stock or securities exercisable, convertible or exchangeable for Common Stock at a price per share less than the exercise price then in effect or without consideration, then the exercise price upon each such issuance would be adjusted to a price equal to the consideration per share paid for such additional shares of Common Stock.

On December 22, 2009, the Company and the holders of the Series A Warrants entered into agreements to amend certain provisions of the Warrants. The amendment to the Series A Warrant removes the anti-dilution protection rights that were applicable if the Company were to issue new shares of common stock or common stock equivalents at a price per share less than the exercise price of the Series A Warrant.  In addition, the amendment to the Series A Warrant added a provision to grant the holders of a majority of the Series A Warrants an approval right until October 31, 2010, over any new issuance of shares of common stock or common stock equivalents at a price per share less than the exercise price of the Series A Warrant.

No fractional shares will be issued upon exercise of the Series A Warrants. If, upon exercise of a Series A Warrant, a holder would be entitled to receive a fractional interest in a share, the Company will pay to the holder cash equal to such fraction multiplied by the then fair market value of one full share.

Pursuant to the terms of the Series A Warrants, the Company will not effect the exercise of any Series A Warrant, and no person who is a holder of any Series A Warrant has the right to exercise the Series A Warrant, to the extent that after giving effect to such exercise, such person would beneficially own in excess of 9.9% of the then outstanding shares of the Company’s Common Stock. However, the holder is entitled to waive this cap upon 61 days notice to the Company.

The Company has the right to redeem up to 9.9% of the Series A Warrants at a price equal to $0.01 per share of Common Stock underlying such warrants if (i) our Common Stock is traded on a national securities exchange, (ii) the daily volume weighted average price of our Common Stock is above $8.87 for 30 consecutive trading days ending on the date of the notice of redemption, and (iii) the average daily trading volume for the trading period is greater than 300,000 shares per day ; provided, that all shares underlying such Series A Warrants are registered pursuant to an effective registration statement and the Company simultaneously calls all of the Series A Warrants on the same terms. The Company will have the right, but not the obligation, to redeem the Series A Warrants at any time, and from time to time, provided that at such time, the foregoing conditions have been met, but in no event can the Company redeem the Series A Warrants more than once in any thirty (30) trading day period.

Series B Warrants

In connection with the Private Placement, Broadband Capital Management, LLC (“Broadband”) acted as the Company’s financial advisor and placement agent. Broadband received Series B warrants to purchase 250,000 shares of the Company’s Common Stock at an exercise price per share of $3.50.

On October 31, 2008, the Company issued Series B Warrants to purchase 250,000 shares of the Registrant’s Common Stock at an exercise price of $3.50 to Penumbra Worldwide Ltd. (“Penumbra”). Penumbra is not a broker dealer and the Series B Warrants were not issued as compensation for underwriting activities, but as compensation for business and investor relations consulting services performed by Penumbra.

The Series B Warrants have a term of exercise expiring 5 years from October 31, 2008. The Series B Warrants, at the option of the holder, may be exercised by cash payment of the exercise price or by “cashless exercise”. The Company will not receive any additional proceeds to the extent that warrants are exercised by cashless exercise.

F-22

LIHUA INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011

NOTE 13 COMMON STOCK AND COMMON STOCK PURCHASE WARRANTS – CONTINUED

Series B Warrants - continued

If the per share market value of one share of Common Stock is greater than the exercise price and at the time of election, the average trading volume of Common Stock exceeds 100,000 shares for the immediately preceding 30 trading days, in lieu of exercising the Series B Warrant by payment of cash, the holder may exercise the Series B Warrant by cashless exercise by surrendering the Series B Warrant, in which event the Company will issue to the holder a number of shares of our Common Stock computed using the following formula:

	X = Y - (A)(Y) B
Where:	X =	the number of shares of Common Stock to be issued to the Holder.
	Y =	the number of shares of Common Stock issuable upon exercise of the Series B Warrant in accordance with the terms of the Series B Warrant by means of a cash exercise rather than a cashless exercise.
	A =	the exercise price.
	B =	the volume weighted average price of the Common Stock for the 30 trading day period immediately preceding the date of such election.

The exercise price and number of shares of Common Stock issuable upon exercise of the warrants may be adjusted in certain circumstances, including in the event of a stock dividend, or our recapitalization, reorganization, merger or consolidation and the issuance of rights to purchase additional shares of Common Stock or to receive other securities convertible into additional shares of Common Stock.

The Series B Warrants were originally issued with an anti-dilution protection provision whereby for a period of two years following the original issue date of the Series B Warrant (the “Weighted Average Period”), in the event the Company issued any additional shares of Common Stock or securities exercisable, convertible or exchangeable for Common Stock at a price per share less than the exercise price then in effect or without consideration, then the exercise price then in effect would be multiplied by a fraction (i) the numerator of which shall be equal to the sum of (x) the number of shares of outstanding Common Stock immediately prior to the issuance of such additional shares of Common Stock plus (y) the number of shares of Common Stock (rounded to the nearest whole share) which the aggregate consideration price per share paid for the total number of such additional shares of Common Stock so issued would purchase at a price per share equal to the exercise price then in effect and (ii) the denominator of which shall be equal to the number of shares of outstanding Common Stock immediately after the issuance of such additional shares of Common Stock.  

On December 22, 2009, the Company and the holders of the Series B Warrants entered into agreements to amend certain provisions of the Warrants. The amendment to the Series B Warrant removed the anti-dilution protection rights that were applicable if the Company were to issue new shares of common stock or common stock equivalents at a price per share less than the exercise price of the Series B Warrant.

No fractional shares will be issued upon exercise of the warrants. If, upon exercise of a warrant, a holder would be entitled to receive a fractional interest in a share, the Company will pay to the holder cash equal to such fraction multiplied by the then fair market value of one full share.

F-23

LIHUA INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011

NOTE 13 COMMON STOCK AND COMMON STOCK PURCHASE WARRANTS – CONTINUED

Allocation of Proceeds from Private Placement

In accordance with ASC Topic 470-20, Debt with Conversion and Other Options, (formerly EITF 00-27, “Application of Issue No. 98-5 to Certain Convertible Instruments”), the proceeds from the Private Placement were first allocated between the Preferred Shares and the warrants issued in connection with the Private Placement based upon their estimated fair values as of the closing date, resulting in an aggregate amount of $539,910 being allocated to the Series A Warrants and the 250,000 Series B Warrants issued to Broadband.

Then, the fair value of the embedded conversion feature of the Preferred Shares of $1,002,115 was calculated using the intrinsic value model in accordance with the guidance provided in ASC Topic 470-20-30-6 (formerly EITF 00-27, “Application of Issue No. 98-5 to Certain Convertible Instruments”), limited to the amount of the proceeds allocated to the convertible instrument. The intrinsic value of the beneficial conversion feature was calculated by comparing the effective conversion price, which was determined based on the proceeds from the Private Placement allocated to the convertible Preferred Shares, and the fair value of the Company’s common stock of $2.26 at the commitment date, which was determined based on retrospective valuations prepared consistent with the methods outlined in the American Institute of Certified Public Accountants Practice Aids, “ Valuation of Privately-Held Company Equity Securities Issued as Compensation ” and based on a discounted future cash flow approach that used the Company’s estimates of revenue, driven by assumed market growth rates, and estimated costs as well as appropriate discount rates. The fair value of $1,002,115 of the beneficial conversion feature has been recognized as a reduction to the carrying amount of the convertible Preferred Shares and an addition to paid-in capital.

Public Offering of Common Stock and Issuance of Warrants

On September 9, 2009, the Company completed a public offering (“Public Offering”) of 2,000,000 shares of Common Stock and an additional 300,000 shares exercised by the underwriters as part of the over-allotment option, at an offering price of $4.00 per share and raised proceeds of $7,864,000, net of legal fees, commission and other expenses directly related to this public offering.

In conjunction with the Public Offering, the Company issued warrants to the underwriters to purchase up to 138,000 shares of the Company’s Common Stock at a strike price of $4.80 per share (“Underwriter Warrants”). These warrants are exercisable at any time during a 5-year term commencing on the date that is six months from September 4, 2009. The shares underlying these warrants will have registration rights upon the Company proposing to register any of its securities (other than in connection with a registration on Form S-4 or S-8 or any successor forms). These warrants contain standard anti-dilution provisions for stock dividends, stock splits, stock combination, recapitalization and a change of control transaction.  

Warrants issued and outstanding at December 31, 2013, and changes during the three years then ended, are as follows:

	Warrants Outstanding							Warrants Exercisable
	Number of underlying shares			Weighted Average Exercise Price		Average Remaining Contractual Life (years)		Number of underlying shares		Weighted Average Exercise Price		Average Remaining Contractual Life (years)
Balance, January 1, 2011		1,138,420		$	3.62		2.91		1,138,420	$	3.62		2.91
Granted / Vested		-
Forfeited		-
Exercised		(729,464	)		3.63
Balance, December 31, 2011		408,956		$	3.59		1.89		408,956	$	3.59		1.89
Granted / Vested		-
Forfeited		-
Exercised		(125,000	)		3.50
Balance, December 31, 2012		283,956		$	3.63		0.91		283,956	$	3.63		0.91
Granted / Vested		-
Forfeited		-
Exercised		(255,500	)		3.50
Balance, December 31, 2013		28,456		$	4.80		0.68		28,456	$	4.80		0.68

F-24

 LIHUA INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011

NOTE 13 COMMON STOCK AND COMMON STOCK PURCHASE WARRANTS – CONTINUED

Accounting for Series A Warrants, Series B Warrants and Underwriter Warrants

The Company has performed a thorough assessment of the terms of all its warrants with reference to the guidance provided in ASC 815-40, “Derivatives and Hedging – Contracts in Entity’s Own Equity”, which has been effective from January 1, 2009. In particular, the Company has considered the guidance in ASC 815-40-15-7I regarding the Company’s exposure to changes in currency exchange rates. This assessment has led to management’s conclusion that the Company’s warrants should not be considered indexed to the Company’s own stock because the warrants are denominated in U.S. Dollars, which is different from the Company’s functional currency, Renminbi (the Chinese lawful currency). Therefore, the Company has classified Series A Warrants, Series B Warrants and Underwriter Warrants as derivative liabilities and reported any changes in their fair value up to the earlier of the date of exercise or the reporting date in earnings.

NOTE 14 SHARE-BASED COMPENSATION

Common Stock awarded to Employees by a Majority Shareholder

Pursuant to a contractual arrangement between Magnify Wealth and Mr. Yang “Roy” Yu, the Company’s then Chief Financial Officer, Mr. Yu was entitled to receive up to 450,000 shares of the Company’s common stock issued to Magnify Wealth in the Share Exchange. 112,500 of such shares were transferred to Mr. Yu immediately upon consummation of the Share Exchange. 112,500 of such shares were released to Mr. Yu on each of the first, second and third anniversary of the consummation of the Share Exchange. In 2011, all the 450,000 shares have been released to Mr. Yu. In connection with these share-based payments to Mr. Yu, the Company recognized compensation expense of $nil, $nil and $211,875 based on the grant-date fair value of the Company’s common stock of $2.26 per share, for the years ended December 31, 2013, 2012, and 2011, respectively.

Options granted to Independent Directors and Employees

The Company grants share-based awards, primarily stock options, to their independent directors and employees.

On January 14, 2011, the Company granted options to one of its independent directors, Mr. Kelvin Lau to purchase 15,000 shares of the Company’s common stock at a strike price of $10.64 per share, in consideration of his services to the Company. The options vest and become exercisable in equal installments on December 3, 2010, January 16, 2011, March 1, 2011 and April 14, 2011 and will expire 10 years from the date of grant.

On June 3, 2011, the Company granted options to each of its independent directors, Mr. Robert Bruce, Mr. Jonathan Serbin and Mr. Kelvin Lau to purchase 20,000 shares of the Company’s common stock at a strike price of $6.49 per share, in consideration of their services to the Company. The options vest and become exercisable in equal installments on July 14, 2011, October 14, 2011, January 14, 2012 and April 14, 2012 and will expire 10 years from the date of grant.

On October 23, 2011, the Company granted options to two of its employees, Mr. Peng Zhu and Mr. Chunming Chu, to purchase 100,000 shares each of the Company’s common stock at a strike price of $4.50 per share, in consideration for their services to the Company. These options vest in installments of 40,000, 30,000 and 30,000 shares on October 23, 2012, 2013 and 2014, respectively, and will expire 10 years from the date of grant. 

On October 23, 2011, Ms. Daphne Huang entered into an employment agreement with the Company to serve as Chief Financial Officer. The agreement is for a one-year term, renewable annually at the Company’s option up to an additional two years. Ms. Huang will receive annual cash compensation of $200,000 and will be awarded a stock option to purchase up to 225,000 shares of common stock at $4.50 per share, which shall vest in equal installments on October 23, 2012, 2013 and 2014, so long as Ms. Huang is serving as CFO at each such time, and will expire 10 years from the date of grant.

F-25

LIHUA INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011

NOTE 14 SHARE-BASED COMPENSATION – CONTINUED

On October 23, 2011, Mr. Yu entered into a new employment agreement with Lihua Electron to serve as Executive Vice President of Finance of Lihua Electron and of the Company. The agreement is for a one-year term, renewable annually at the Company’s option up to an additional two years. Mr. Yu will receive annual cash compensation of $150,000 and will be awarded a stock option to purchase up to 100,000 shares of common stock at $4.50 per share, which shall vest in installments of 40,000, 30,000 and 30,000 shares on October 23, 2012, 2013 and 2014, respectively, so long as Mr. Yu is serving as Executive Vice President of Finance, or as an officer of the Company at each such time, and will expire 10 years from the date of grant. Mr. Yu resigned on November 7, 2012.

On April 26, 2012, the Company granted options to each of its independent directors, Mr. Robert Bruce, Mr. Jonathan Serbin and Mr. Kelvin Lau to purchase 20,000 shares of the Company’s common stock at a strike price of $5.63 per share, in consideration of their services to the Company. The options vest and become exercisable in equal installments on July 14, 2012, October 14, 2012, January 14, 2013 and April 14, 2013 and will expire 10 years from the date of grant.

On May 30, 2013, the Company granted options to each of its independent directors, Mr. Robert Bruce, Mr. Jonathan Serbin and Mr. Kelvin Lau to purchase 20,000 shares of the Company’s common stock at a strike price of $5.60 per share, in consideration of their services to the Company. The options vest and become exercisable in equal installments on July 14, 2013, October 14, 2013, January 14, 2014 and April 14, 2014 and will expire 10 years from the date of grant.

In accordance with the guidance provided in ASC Topic 718, Stock Compensation, the compensation costs associated with these options are recognized, based on the grant-date fair values of these options, over the requisite service period, or vesting period. Accordingly, the Company recognized a compensation expense of $343,513, $382,089 and $286,337 for the years ended December 31, 2013, 2012 and 2011, respectively.

Options issued and outstanding at December 31, 2013, 2012, and 2011 and their movements during the three years are as follows:

	Number of Underlying Shares			Weighted-Average Exercise Price Per Share		Aggregate Intrinsic Value(1)		Weighted-Average Contractual Life Remaining in Years
Outstanding at January 1, 2011		115,000		$	6.74	$	517,450		9.00
Granted		600,000			4.85		-		10.00
Exercised		-			-		-		-
Expired		-			-		-		-
Forfeited		-			-		-		-
Outstanding at December 31, 2011		715,000		$	5.16	$	213,300		9.43
Granted		60,000			5.63		-		10.00
Exercised		-			-		-		-
Expired		-			-		-		-
Forfeited		(60,000	)		4.50		-		-
Outstanding at December 31, 2012		715,000		$	5.25	$	65,700		8.47
Granted		60,000			5.60		-		10.00
Exercised		(110,000	)		4.50		-		-
Expired		-			-		-		-
Forfeited		-			-		-		-
Outstanding at December 31, 2013		665,000		$	5.41	$	551,300		7.64
Exercisable at December 31, 2013		515,000		$	5.64	$	384,800		7.54

(1) The intrinsic value of the stock options at December 31, 2013, 2012 and 2011 is the amount by which the market value of the Company’s common stock of $5.72, $4.39 and $4.76 as of December 31, 2013, 2012 and 2011 exceeds the exercise price of the option.

F-26

LIHUA INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011

NOTE 15 STATUTORY RESERVES

The Company is required to make appropriations to reserve funds, comprising the statutory surplus reserve, statutory public welfare fund and discretionary surplus reserve, based on after-tax net income determined in accordance with generally accepted accounting principles of the PRC (the “PRC GAAP”). Appropriation to the statutory surplus reserve should be at least 10% of the after tax net income determined in accordance with the PRC GAAP until the reserve is equal to 50% of the entities’ registered capital or members’ equity. In accordance with the Chinese Company Law, the Company allocated 10% of income after taxes to the statutory surplus reserve for the years ended December 31, 2013, 2012 and 2011. For the years ended December 31, 2013, 2012 and 2011, statutory reserve activity is as follows:

Balance – January 1, 2011	$	7,556,187
Addition to statutory reserves		2,862,289
Balance – December 31, 2011		10,418,476
Addition to statutory reserves		4,148,370
Balance – December 31, 2012		14,566,846
Addition to statutory reserves		4,156,990
Balance – December 31, 2013	$	18,723,836

NOTE 16 OTHER INCOME (EXPENSES)

	Year ended December 31,
	2013			2012			2011
Government subsidies	$	80,734		$	95,128		$	-
Gain on sale of scraps		-			-			13,520
Other		(45,598	)		(1,309	)		101,103
	$	35,136		$	93,819		$	114,623

NOTE 17 INCOME TAXES

The Company is subject to income tax on an entity basis on income arising from the tax jurisdiction in which they operate.

Lihua is subject to taxes in the U.S.

Ally Profit being incorporated in the British Virgin Islands (“BVI”) is not subject to any income tax in the BVI.

Lihua Holdings is generally subject to Hong Kong income tax on its taxable income derived from trade or businesses carried out in Hong Kong at 16.5% for the three years ended December 31, 2013. However, as Lihua Holdings has not generated any revenue or income, no provision for Hong Kong income tax has been made.

The Company’s two operating subsidiaries, Lihua Electron and Lihua Copper, are generally subject to PRC enterprise income tax (“EIT”). Both Lihua Electron and Lihua Copper are subject to an EIT rate of 25% for the three years ended December 31, 2013 under China’s Unified Enterprise Income Tax Law (“New Tax Law”).

F-27

LIHUA INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011

NOTE 17 INCOME TAXES – CONTINUED

The new Tax Law also imposes a 10% withholding income tax for dividends distributed by a foreign invested enterprise to its immediate holding company outside China for distribution of earnings generated after January 1, 2008. Under the New Tax Law, the distribution of earnings generated prior to January 1, 2008 is exempt from the withholding tax. As our subsidiaries in the PRC will not be distributing earnings to the Company for the years ended December 31, 2013, 2012 and 2011, no deferred tax liability has been recognized for the undistributed earnings of these PRC subsidiaries at December 31, 2013 and 2012. Total undistributed earnings of these PRC subsidiaries at December 31, 2013 were RMB 1,638,688,844 ($268,174,105).

No provision for other overseas taxes is made as neither Lihua, Ally Profit or Lihua Holdings has any taxable income in the U.S., British Virgin Islands or Hong Kong, respectively.

The Company’s provision for income taxes consisted of:

	Year ended December 31,
	2013			2012		2011
PRC income tax:
Current	$	19,843,738		$	20,555,465	$	17,388,836
Deferred		(118,821	)		175,379		(65,136	)
	$	19,724,917		$	20,730,844	$	17,323,700

A reconciliation of the provision for income taxes determined at the local income tax rate to the Company’s effective income tax rate is as follows:

	Year ended December 31,
	2013			2012			2011
Pre-tax income	$	75,884,367		$	78,672,847		$	70,457,233
United States federal corporate income tax rate		34	%		34	%		34	%
Income tax computed at United States statutory corporate income tax rate		25,800,685			26,748,768			23,955,459
Reconciling items:
Loss not recognized as deferred tax assets		962,173			1,155,378			771,079
Non-deductible expenses		14,492			197,375			175,696
Change in fair value of warrants		39,068			17,241			(1,071,460	)
Rate differential for PRC earnings		(7,091,501	)		(7,399,559	)		(6,260,780	)
Other		-			11,641			(246,294	)
Effective tax expense	$	19,724,917		$	20,730,844		$	17,323,700

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of deferred income tax assets are as follows:

	As of December 31,
	2013			2012
Deferred income tax assets:
Net operating loss carryforward	$	5,744,674		$	4,786,510
Unrealized intercompany profit in inventory		25,178			24,948
Accrued R&D expenses		121,240			-
Less: Valuation allowance		(5,744,674	)		(4,786,510	)
	$	146,418		$	24,948

F-28

LIHUA INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011

NOTE 17 INCOME TAXES – CONTINUED

As of December 31, 2013 and 2012, the Company’s U.S. entity, Lihua International, Inc., had net operating loss carryforwards of $16,896,101 and $14,077,971, respectively, available to reduce future taxable income which will expire in various years through 2033. Management believes it is more likely than not that the Company will not realize these potential tax benefits as the Company’s U.S. operations will not generate any operating profits in the foreseeable future. As a result, the full amount of the valuation allowance was provided against the potential tax benefits.

As of December 31, 2013 and 2012, the Company has no material unrecognized tax benefits which would favorably affect the effective income tax rate in future periods and does not believe that there will be any significant increases or decreases of unrecognized tax benefits within the next twelve months. No interest or penalties relating to income tax matters have been imposed on the Company during the years ended December 31, 2013, 2012 and 2011, and no provision for interest and penalties is deemed necessary as of December 31, 2013 and 2012.

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 its withholding agent. The statute of limitations extends to five years under special circumstances, which are not clearly defined. In the case of a related party transaction, the statute of limitations is ten years. There is no statute of limitations in the case of tax evasion.

NOTE 18 EARNINGS PER SHARE

Basic earnings per common share is computed by dividing income available to common shareholders by the weighted average number of common shares outstanding for the period. Diluted income per common share is computed similarly to basic income per common share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potentially dilutive common shares had been issued.

The following table is a reconciliation of the net income and the weighted average shares used in the computation of basic and diluted earnings per share for the periods presented:

	Year ended December 31,
	2013		2012		2011
Income available to common stockholders:
- Basic and diluted	$	56,159,450	$	57,942,003	$	53,133,533
Weighted average number of shares:
- Basic		29,858,880		29,815,943		29,816,871
- Effect of dilutive securities - warrants and options		137,953		149,868		259,259
- Diluted		29,996,833		29,965,811		30,076,130
Net income per share
- Basic	$	1.88	$	1.94	$	1.78
- Diluted	$	1.87	$	1.93	$	1.77

NOTE 19 RELATED PARTY TRANSACTIONS

(1) Sales

For the years ended December 31, 2013, 2012 and 2011, sales included nil, nil, and $620,295, respectively, that were made from Tianyi Telecom.  The controlling stockholders of Tianyi Telecom are related to Ms. Yaying Wang, our COO and one of our directors.

(2) Loans 

On May 19, 2011, Magnify Wealth Enterprise Limited (“Magnify Wealth”), a British Virgin Islands corporation and an entity affiliated with Mr. Jianhua Zhu, the Chief Executive Officer and Chairman of the Company, agreed to loan the Company up to $4 million pursuant to the terms of a demand promissory note (the “Note”) to partially fund the Company’s previously announced $15 million stock repurchase program to make open market purchases of the Company’s common stock (the “Repurchase Program”) (See Note 13 above). While the Company’s operating subsidiaries in the PRC have substantial cash reserves available, the laws of the PRC restrict the conversion of RMB to US dollars, such that the Company has encountered difficulty funding the Repurchase Program with US dollars from cash held by its PRC subsidiaries. The Company explored possible alternative arrangements for funding the Repurchase Program in US dollars with financial institutions, but Company management determined that such alternatives would have been costly or otherwise not appropriate for the Company.

F-29

On May 23, 2011, Magnify Wealth loaned $1 million under the Note, which amount the Company repaid in full on May 25, 2011 in RMB. On June 14, 2011, Magnify Wealth loaned $300,000 under the Note, which amount the Company repaid in full on June 14, 2011 in RMB. The total amount repaid was RMB8,434,660, which was repaid at the average rate of 6.4822 RMB per US dollar, which was based upon the exchange rate between US dollars and RMB as set forth by Standard Chartered Bank in Hong Kong. The loans under the Note were unsecured, payable on demand and bore interest at 2% per annum.

On January 9 and March 15, 2012, in order to partially fund the 2011 special dividend payment and U.S. dollar operating expenses, upon Board approval, Magnify Wealth loaned $1 million and $0.6 million, respectively, under the Note, of which RMB 6.3 million and RMB 3.8 million were repaid on January 9 and March 31, 2012, respectively, in RMB, at the average rate of 6.3126 RMB per US dollars, based upon the exchange rate between US dollars and RMB as set forth by Standard Chartered Bank in Hong Kong. The loans under the Note were unsecured, payable on demand and bore interest at 2% per annum.

On April 6 and April 26, 2012, in order to partially fund the 2011 special dividend payment and U.S. dollar operating expenses, upon Board approval, Magnify Wealth loaned $0.5 million and $0.9 million, respectively, under the Note, of which RMB3.15 million and RMB5.65 million were repaid, respectively, at the average rate of 6.2916 RMB per US dollars, based upon the exchange rate between US dollars and RMB as set forth by Standard Chartered Bank in Hong Kong. The loans under the Note were unsecured, payable on demand and bore interest at 2% per annum.

As of December 31, 2013, there was no outstanding loan under the Note.

(3) Amount due to a related party

In June 2011, Mr. Jianhua Zhu loaned the Company $140,000. The loan was unsecured and non-interest bearing. The loan was repaid in August 2011.

F-30

LIHUA INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011

NOTE 20 CERTAIN RISKS AND CONCENTRATION

Credit risk and major customers

As of December 31, 2013 and 2012, substantially all of the Company’s cash including cash on hand and deposits in accounts were maintained within the PRC where there is currently no rule or regulation in place for obligatory insurance to cover bank deposits in the event of a bank’s failure. However, the Company has not experienced any such losses and believes it is not exposed to any significant risks on its cash in bank accounts.

For the years ended December 31, 2013, 2012, and 2011, all of the Company’s sales arose in the PRC. In addition, all accounts receivable as of December 31, 2013 and 2012 were due from customers located in the PRC.

Two customers accounted for 25.5% and 12.3% of the Company’s revenue for the year ended December 31, 2013, respectively. Two customers accounted for 31.7% and 12.9% of the Company’s revenue for the year ended December 31, 2012, respectively, and two customers accounted for 25.3% and 10.6% of the Company’s revenue for the year ended December 31, 2011, respectively. There was no other single customer who accounted for more than 10% of the Company’s revenue for the years ended December 31, 2013, 2012 or 2011.

One customer accounted for 37.8% of total accounts receivable of the Company as of December 31, 2013. Two customers accounted for 48.5% and 14.6% of total accounts receivable of the Company as of December 31, 2012. There was no other customer who accounted for 10% or more of the Company’s accounts receivable as of December 31, 2013 or 2012.

Risk arising from operations in foreign countries

Substantially all of the Company’s operations are conducted in China. The Company’s operations are subject to various political, economic, and other risks and uncertainties inherent in China. Among other risks, the Company’s operations are subject to the risks of restrictions on transfer of funds; export duties, quotas, and embargoes; domestic and international customs and tariffs; changing taxation policies; foreign exchange restrictions; and political conditions and governmental regulations.

NOTE 21 COMMITMENTS AND CONTINGENCIES

Lease commitments

The Company has entered into tenancy agreements for the lease of its factory premises and warehouse with independent parties. The Company’s commitments for minimum lease payments under these operating leases for the next five years and thereafter as of December 31, 2013 are as follows:

Payable within:
- fiscal year ending December 31, 2014	$	21,650
- fiscal year ending December 31, 2015 and thereafter		-
Total	$	21,650

Capital commitments  – contracted but not provided for 

	As of December 31,
	2013		2012
Acquisition or construction of buildings - within one year	$	552.412	$	-
Purchase of machinery - within one year		309,994		365,922
	$	862,406	$	365,922

F-31

LIHUA INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011

NOTE 21 COMMITMENTS AND CONTINGENCIES - CONTINUED

Other commitments

During 2011, the Company signed various research and development contracts with Shanghai Electric Cable Research Institute with a total contract amount of $3.02 million. As of December 31, 2013, the Company has paid $2.26 million. The Company expects to pay the remaining $0.85 million within one year.

NOTE 22 SEGMENT DATA AND RELATED INFORMATION

The Company operates in one business segment, the manufacturing and sale of refined copper rod and copper anode, as well as copper clad aluminum (CCA) wire and copper wire produced from refined copper rod. The Company also operates in only one geographical segment – China, as all of the Company’s products are sold to customers located in China and the Company’s manufacturing operations are located in China.

The Company’s major product categories are (1) wire manufacturing, consisting of (a) CCA fine and superfine wire, which is an electrical conductor consisting of an outer sleeve of copper that is metallurgically bonded to a solid aluminum core, and (b) copper fine and superfine wire, manufactured from recycled copper rod; (2) refined copper rod; and (3) refined copper anode, the latter two of which are fire refined from scrap copper.

Management evaluates performance based on several factors, of which net revenue and gross profit by product are the primary financial measures:

	Year ended December 31,
	2013		2012		2011
Net revenue from unaffiliated customers:
Fine copper wire	$	170,903,382	$	188,810,251	$	124,062,182
Superfine copper wire		135,328,792		144,337,762		149,808,595
CCA wire		53,284,353		60,634,148		61,703,257
Copper anode		472,042,033		381,114,304		287,269,353
Refined copper rod		69,168,398		78,870,076		14,250,052
	$	900,726,958	$	853,766,541	$	637,093,439
Gross profit:
Fine copper wire	$	9,727,112	$	11,462,253	$	8,399,703
Superfine copper wire		15,469,518		16,820,626		19,947,147
CCA wire		16,359,209		19,602,531		21,375,471
Copper anode		41,693,682		37,667,562		25,224,807
Refined copper rod		3,149,697		3,995,402		766,544
	$	86,399,218	$	89,548,374	$	75,713,672

F-32

LIHUA INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011

NOTE 23 RESTRICTED NET ASSETS

The Company’s operations are substantially conducted through Lihua Electron and Lihua Copper. Lihua Electron and Lihua Copper may only pay dividends out of its retained earnings determined in accordance with the accounting standards and regulations in the PRC and after it has met the PRC requirements for appropriation to statutory reserves (see Note 15).

In addition, Lihua Electron and Lihua Copper’s business transactions and assets are primarily denominated in RMB, which is not freely convertible into foreign currencies. All foreign exchange transactions take place either through the People’s Bank of China or other banks authorized to buy and sell foreign currencies at the exchange rates quoted by the People’s Bank of China. Approval of foreign currency payments by the People’s Bank of China or other regulatory institutions requires submitting a payment application form together with suppliers’ invoices, shipping documents and signed contracts. These currency exchange control measures imposed by the PRC government may restrict the ability of Lihua Electron and Lihua Copper to transfer their net assets to the Company through loans, advances or cash dividends. The net assets of Lihua Electron and Lihua Copper in aggregate exceeded 25% of the Company’s consolidated net assets. Accordingly, condensed parent company financial statements have been prepared in accordance with Rule 5.04 and Rule 12-04 of SEC Regulation S-X.

The Company records its investment in subsidiaries under the equity method of accounting. Such investment and long-term loans to subsidiaries are presented on the balance sheet as “Investments in subsidiaries” and the income of the subsidiaries is presented as “Equity in income of subsidiaries” on the statement of income.

These supplemental condensed parent company financial statements should be read in conjunction with the notes to the Company’s Consolidated Financial Statements. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted.

As of December 31, 2013 and 2012, there were no material contingencies, significant provisions for long-term obligations, or guarantees of the Company, except as separately disclosed in the Consolidated Financial Statements, if any.

F-33

LIHUA INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011

NOTE 23 RESTRICTED NET ASSETS – CONTINUED

Supplemental Parent Company Financial Information – Lihua International, Inc.

Condensed Balance Sheets

	As of December 31,
	2013			2012
ASSETS
Current assets:
Cash and cash equivalents	$	43,010		$	64,015
Other receivables		16,333			15,843
Prepayments		136,500			162,000
Total current assets		195,843			241,858
Investments in subsidiaries		345,837,229			279,044,337
Total assets	$	346,033,072		$	279,286,195
LIABILITIES
Current liabilities:
Warrant liabilities	$	33,262		$	354,000
Total liabilities		33,262			354,000
Stockholders’ equity
Preferred stock: $0.0001 par value, 10,000,000 shares authorized, none issued and outstanding		-			-
Common stock, $0.0001 par value: 75,000,000 shares authorized, 30,295,955 shares issued and 30,031,908 shares outstanding as of December 31, 2013 (2012: 30,084,883 shares issued and 29,820,836 shares outstanding), respectively		3,029			3,008
Additional paid-in capital		80,627,496			79,257,921
Treasury stock, at cost, 264,047 shares and 264,047 as of December 31, 2013 and 2012, respectively		(2,126,597	)		(2,126,597	)
Retained earnings		240,889,416			184,729,966
Accumulated other comprehensive income		26,606,466			17,067,897
Total stockholders' equity		345,999,810			278,932,195
Total liabilities and stockholders' equity	$	346,033,072		$	279,286,195

Condensed Statements of Income

	Year ended December 31,
	2013			2012			2011
Administrative expenses	$	(2,818,130	)	$	(3,397,929	)	$	(2,267,880	)
Other expenses:
Change in fair value of warrant		(106,536	)		(124,000	)		3,062,575
Gain (Loss) on extinguishment of warrant liabilities		(8,369	)		73,291			88,777
Equity in income of subsidiaries		59,092,485			61,390,641			52,250,061
Net income	$	56,159,450		$	57,942,003		$	53,133,533

F-34

LIHUA INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011

NOTE 23 RESTRICTED NET ASSETS – CONTINUED

Condensed Statements of Cash Flows 

	Year ended December 31,
	2013			2012			2011
Net cash used in operating activities	$	(2,818,130	)	$	(3,333,914	)	$	(2,267,880	)
Net cash provided by (used in) investing activities		2,206,684			4,390,775			2,496,427
Net cash (used in) provided by financing activities		590,461			(992,846	)		(228,547	)
Cash, beginning of year		64,015			-			-
Cash, end of year	$	43,010		$	64,015		$	-

NOTE 24 SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)

Selected quarterly financial data for the years ended December 31, 2013, 2012 and 2011 are presented in the following table:

	Three Months Ended,
Year ended December 31, 2013	December 31,			September 30,			June 30,			March 31,
Revenue	$	217,333,427		$	219,359,379		$	245,804,613		$	218,229,539
Cost of goods sold		(196,857,791	)		(198,261,030	)		(222,034,732	)		(197,174,187	)
Gross profit		20,475,636			21,098,349			23,769,881			21,055,352
Selling expenses		(741,114	)		(796,945	)		(801,861	)		(680,680	)
General and administrative expenses		(1,853,646	)		(1,807,615	)		(2,006,127	)		(2,405,784	)
Income from operations		17,880,876			18,493,789			20,961,893			17,968,888
Net income	$	13,233,558		$	13,938,895		$	15,675,810		$	13,311,187
Earnings per share
Basic	$	0.44		$	0.47		$	0.53		$	0.45
Diluted	$	0.44		$	0.46		$	0.52		$	0.44

	Three Months Ended,
Year ended December 31, 2012	December 31,			September 30,			June 30,			March 31,
Revenue	$	254,879,358		$	238,793,030		$	191,007,886		$	169,086,267
Cost of goods sold		(229,933,412	)		(213,536,628	)		(170,296,852	)		(150,451,275	)
Gross profit		24,945,946			25,256,402			20,711,034			18,634,992
Selling expenses		(786,331	)		(741,135	)		(740,988	)		(686,006	)
General and administrative expenses		(2,630,168	)		(2,059,027	)		(1,834,465	)		(2,097,834	)
Income from operations		21,529,447			22,456,240			18,135,581			15,851,152
Net income	$	15,793,687		$	17,226,638		$	13,446,666		$	11,475,012
Earnings per share
Basic	$	0.52		$	0.58		$	0.45		$	0.39
Diluted	$	0.52		$	0.58		$	0.45		$	0.38

F-35

LIHUA INTERNATIONAL, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2013, 2012 AND 2011

NOTE 24 SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED) – CONTINUED

	Three Months Ended
Year ended December 31, 2011	December 31,			September 30,			June 30,			March 31,
Revenue	$	177,579,159		$	155,570,657		$	167,012,527		$	136,931,096
Cost of goods sold		(157,877,953	)		(136,113,727	)		(147,365,064	)		(120,023,023	)
Gross profit		19,701,206			19,456,930			19,647,463			16,908,073
Selling expenses		(660,992	)		(633,584	)		(668,366	)		(523,036	)
General and administrative expenses		(2,239,462	)		(1,498,306	)		(1,339,062	)		(1,573,312	)
Income from operations		16,800,752			17,325,040			17,640,035			14,811,725
Net income	$	12,727,388		$	13,528,083		$	14,366,076		$	12,511,986
Earnings per share
Basic	$	0.43		$	0.45		$	0.48		$	0.42
Diluted	$	0.43		$	0.45		$	0.48		$	0.41

F-36

EX-10.5

EXHIBIT 10.5

LIHUA INTERNATIONAL, INC.

INDEPENDENT DIRECTOR AGREEMENT

This INDEPENDENT DIRECTOR AGREEMENT (the “Agreement”) is made and entered into as of this 30^th day of May, 2013, effective as of April 14, 2013 (the “Effective Date”), by and between Lihua International, Inc., a Delaware corporation whose shares are publicly traded (the “Company”), and Robert Bruce, a citizen of the United States, with the following address:                                           (the “Independent Director”).

WHEREAS, the Company desires to re-engage the Independent Director, and the Independent Director desires to serve, as a non-employee director of the Company, subject to the terms and conditions contained in this Agreement.

NOW, THEREFORE, in consideration of the mutual promises and covenants contained herein, the receipt of which is hereby acknowledged, the Company and the Independent Director, intending to be legally bound, hereby agree as follows:

1. DEFINITIONS.

(a) “Corporate Status” describes the capacity of the Independent Director with respect to the Company and the services performed by the Independent Director in that capacity.

(b) “Entity” shall mean any corporation, partnership, limited liability company, joint venture, trust, foundation, association, organization or other legal entity.

(c) “Proceeding” shall mean any threatened, pending or completed claim, action, suit, arbitration, alternate dispute resolution process, investigation, administrative hearing, appeal, or any other proceeding, whether civil, criminal, administrative or investigative, whether formal or informal, including a proceeding initiated by the Independent Director pursuant to Section 12 of this Agreement to enforce the Independent Director’s rights hereunder.

(d) “Expenses” shall mean all reasonable fees, costs and expenses, reasonably incurred in connection with any Proceeding, including, without limitation, attorneys’ fees, disbursements and retainers, fees and disbursements of expert witnesses, private investigators, professional advisors (including, without limitation, accountants and investment bankers), court costs, transcript costs, fees of experts, travel expenses, duplicating, printing and binding costs, telephone and fax transmission charges, postage, delivery services, secretarial services, and other disbursements and expenses.

(e) “Liabilities” shall mean judgments, damages, liabilities, losses, penalties, excise taxes, fines and amounts paid in settlement.

(f) “Parent” shall mean any corporation or other entity (other than the Company) in any unbroken chain of corporations or other entities ending with the Company, if each of the corporations or entities, other than the Company, owns stock or other interests possessing 50% or more of the economic interest or the total combined voting power of all classes of stock or other interests in one of the other corporations or entities in the chain.

(g) “Subsidiary” shall mean any corporation or other entity (other than the Company) in any unbroken chain of corporations or other entities beginning with the Company, if each of the corporations or entities, other than the last corporation or entity in the unbroken chain, owns stock or other interests possessing 50% or more of the economic interest or the total combined voting power of all classes of stock or other interests in one of the other corporations or entities in the chain.

2. SERVICES OF INDEPENDENT DIRECTOR. While this Agreement is in effect, the Independent Director shall perform duties as an independent director and/or a member of the committees of the Board, be compensated for such and be reimbursed expenses in accordance with the Schedule A attached to this Agreement, subject to the following.

(a) The Independent Director will perform services as is consistent with Independent Director’s position with the Company, as required and authorized by the By-Laws and Certificate of Incorporation of the Company, and in accordance with high professional and ethical standards and all applicable laws and rules and regulations pertaining to the Independent Director’s performance hereunder, including without limitation, laws, rules and regulations relating to a public company.

(b) The Independent Director is solely responsible for taxes arising out of any compensation paid by the Company to the Independent Director under this Agreement, and the Independent Director understands that he/she will be issued a U.S. Treasury form 1099 for any compensation paid to him/her by the Company. The Independent Director acknowledges and agrees that because he is not an employee of the Company the Company will not withhold any amounts for taxes from any of his payments under the Agreement.

(c) The Company may offset any and all monies payable to the Independent Director to the extent of any monies owing to the Company from the Independent Director.

(d) The rules and regulations of the Company notified to the Independent Director, from time to time, apply to the Independent Director. Such rules and regulations are subject to change by the Board in its sole discretion. Notwithstanding the foregoing, in the event of any conflict or inconsistency between the terms and conditions of this Agreement and rules and regulations of the Company, the terms of this Agreement control.

3. REQUIREMENTS OF INDEPENDENT DIRECTOR. During the term of the Independent Director’s services to the Company hereunder, Independent Director shall observe all applicable laws and regulations relating to independent directors of a public company as promulgated from to time, and shall not: (1) be an employee of the Company or any Parent or Subsidiary; (2) accept, directly or indirectly, any consulting, advisory, or other compensatory fee from the Company other than as a director and/or a member of a committee of the Board; (3) be an affiliated person of the Company or any Parent or Subsidiary, as the term “affiliate” is defined in 17 CFR 240.10A-3(e)(1), other than in his capacity as a director and/or a member of a committee of the Board; (4) possess an interest in any transaction with the Company or any Parent or Subsidiary, for which disclosure would be required pursuant to 17 CFR 229.404(a), other than in his capacity as a director and/or a member of a committee of the Board committees; (5) be engaged in a business relationship with the Company or any Parent or Subsidiary, for which disclosure would be required pursuant to 17 CFR 229.404(b), except that the required beneficial interest therein shall be modified to be 5% hereby.

4. REPORT OBLIGATION. While this Agreement is in effect, the Independent Director shall immediately report to the Company in the event: (1) the Independent Director knows or has reason to know or should have known that any of the requirements specified in Section 3 hereof is not satisfied or is not going to be satisfied; and (2) the Independent Director simultaneously serves on an audit committee of any other public company.

5. TERM AND TERMINATION. The term of this Agreement shall be for one (1) year from the Effective Date, unless terminated as provided for in this Section 5 (the “Term”). This Agreement and the Independent Director’s services hereunder shall terminate upon the earlier of the following:

(a) Removal of the Independent Director as a director of the Company, upon proper Board or stockholder action in accordance with the By-Laws and Certificate of Incorporation of the Company and applicable law;

(b) Resignation of the Independent Director as a director of the Company upon written notice to the Board of Directors of the Company; or

(c) Termination of this Agreement by the Company, in the event any of the requirements specified in Section 3 hereof is not satisfied, as determined by the Company in its sole discretion.

6. LIMITATION OF LIABILITY. In no event shall the Independent Director be individually liable to the Company or its shareholders for any damages for breach of fiduciary duty as an independent director of the Company, unless the Independent Director’s act or failure to act involves intentional misconduct, fraud or a knowing violation of law.

7. AGREEMENT OF INDEMNITY. The Company agrees to indemnify the Independent Director as follows:

(a) Subject to the exceptions contained in Section 8(a) below, if the Independent Director was or is a party or is threatened to be made a party to any Proceeding (other than an action by or in the right of the Company) by reason of the Independent Director’s Corporate Status, the Independent Director shall be indemnified by the Company against all Expenses and Liabilities incurred or paid by the Independent Director in connection with such Proceeding (referred to herein as “Indemnifiable Expenses” and “Indemnifiable Liabilities,” respectively, and collectively as “Indemnifiable Amounts”).

(b) Subject to the exceptions contained in Section 8(b) below, if the Independent Director was or is a party or is threatened to be made a party to any Proceeding by or in the right of the Company, to procure a judgment in its favor by reason of the Independent Director’s Corporate Status, the Independent Director shall be indemnified by the Company against all Indemnifiable Amounts.

(c) For purposes of this Agreement, the Independent Director shall be deemed to have acted in good faith in conducting the Company’s affairs as an independent director of the Company and/or a member of a committee of the Board of the Company, if the Independent Director: (i) exercised or used the same degree of diligence, care, and skill as an ordinarily prudent man would have exercised or used under the circumstances in the conduct of his own affairs; or (ii) took, or omitted to take, an action in reliance upon advise of counsels or other professional advisors for the Company, or upon statements made or information furnished by other directors, officers or employees of the Company, or upon a financial statement of the Company provided by a person in charge of its accounts or certified by a public accountant or a firm of public accountants, which the Independent Director had reasonable grounds to believe to be true.

(d) In the event the Independent Director intends to engage separate legal counsel, the Independent Director shall provide at least three business days’ prior written notice to the Company identifying therein: (i) the name, address, telephone number, and hourly rate(s) of the attorney(s) the Independent Director intends to engage; (ii) the Proceeding in which the Independent Director has been named as a party or is threatened to be named as a party; and (iii) the basis for the Independent Director’s reasonable belief that he has been named or is threatened to be named as a party to a Proceeding, including any supporting documentation. The Company may, in its discretion, decline to pay any Indemnifiable Amounts incurred where the Independent Director has failed to comply with the notice requirements set forth in this subparagraph (d).

8. EXCEPTIONS TO INDEMNIFICATION. Director shall be entitled to indemnification under Sections 7(a) and 7(b) above in all circumstances other than the following:

(a) If indemnification is requested under Section 7(a) and it has been adjudicated finally by a court or arbitral body of competent jurisdiction that, in connection with the subject of the Proceeding out of which the claim for indemnification has arisen, (i) the Independent Director failed to act in good faith and in a manner the Independent Director reasonably believed to be in or not opposed to the best interests of the Company, (ii) the Independent Director had reasonable cause to believe that the Independent Director’s conduct was unlawful, or (iii) the Independent Director’s conduct constituted willful misconduct, fraud or knowing violation of law, then the Independent Director shall not be entitled to payment of Indemnifiable Amounts hereunder.

(b) If indemnification is requested under Section 7(b) and

(i) it has been adjudicated finally by a court or arbitral body of competent jurisdiction that, in connection with the subject of the Proceeding out of which the claim for indemnification has arisen, the Independent Director failed to act in good faith and in a manner the Independent Director reasonably believed to be in or not opposed to the best interests of the Company, including without limitation, the breach of Section 4 hereof by the Independent Director, the Independent Director shall not be entitled to payment of Indemnifiable Amounts hereunder; or

(ii) it has been adjudicated finally by a court or arbitral body of competent jurisdiction that the Independent Director is liable to the Company with respect to any claim, issue or matter involved in the Proceeding out of which the claim for indemnification has arisen, including, without limitation, a claim that the Independent Director received an improper benefit or improperly took advantage of a corporate opportunity, the Independent Director shall not be entitled to payment of Indemnifiable Amounts hereunder with respect to such claim, issue or matter.

9. WHOLLY OR PARTLY SUCCESSFUL. Notwithstanding any other provision of this Agreement, and without limiting any such provision, to the extent that the Independent Director is, by reason of the Independent Director’s Corporate Status, a party to and is successful, on the merits or otherwise, in any Proceeding, the Independent Director shall be indemnified in connection therewith. If the Independent Director is not wholly successful in such Proceeding but is successful, on the merits or otherwise, as to one or more but less than all claims, issues or matters in such Proceeding, the Company shall indemnify the Independent Director against those Expenses reasonably incurred by the Independent Director or on the Independent Director’s behalf in connection with each successfully resolved claim, issue or matter. For purposes of this section, the termination of any claim, issue or matter in such a Proceeding by dismissal, with or without prejudice, shall be deemed to be a successful result as to such claim, issue or matter.

10. ADVANCES AND INTERIM EXPENSES. Within ten (10) business days of the Independent Director’s written request for indemnification, the Company shall pay to the Independent Director all Indemnifiable Expenses incurred by the Independent Director in connection with any Proceeding, including a Proceeding by or in the right of the Company, in advance of the final disposition of such Proceeding, if the Independent Director furnishes the Company with a written undertaking, to the satisfaction of the Company, to repay the amount of such Indemnifiable Expenses advanced to the Independent Director in the event it is finally determined by a court or arbitral body of competent jurisdiction that the Independent Director is not entitled under this Agreement to indemnification with respect to such Indemnifiable Expenses.

11. PROCEDURE FOR PAYMENT OF INDEMNIFIABLE AMOUNTS. The Independent Director shall submit to the Company a written request specifying the Indemnifiable Amounts, for which the Independent Director seeks payment under Section 7 hereof, and the Proceeding of which the Independent Director has previously notified the Company. At the request of the Company, the Independent Director shall furnish such documentation and information as are reasonably available to the Independent Director and necessary to establish that the Independent Director is entitled to indemnification hereunder. The Company shall pay such Indemnifiable Amounts within ten (10) days of receipt of all required documents.

12. REMEDIES OF INDEPENDENT DIRECTOR.

(a) RIGHT TO PETITION COURT. In the event that the Independent Director makes a request for payment of Indemnifiable Amounts under Sections 7, 9-11 above, or seeks payment of insurance under Section 14 below, and such payment or advancement is not made in a timely manner: (i) by the Company pursuant to the terms of this Agreement, or (ii) by any insurer pursuant to the terms of its insurance policy, then the Independent Director may petition the appropriate judicial authority to enforce the Company’s or any insurer’s obligations.

(b) BURDEN OF PROOF. In any judicial proceeding brought under Section 12 (a) above, the Company shall have the burden of proving that the Independent Director is not entitled to payment of Indemnifiable Amounts hereunder.

(c) EXPENSES. The Company agrees to reimburse the Independent Director in full for any Expenses incurred by the Independent Director in connection with investigating, preparing for, litigating, defending or settling any action brought by the Independent Director under Section 12 (a) above, or in connection with any claim or counterclaim brought by the Company in connection therewith.

(d) VALIDITY OF AGREEMENT. The Company shall be precluded from asserting in any Proceeding, including, without limitation, an action under Section 12(a) above, that the provisions of this Agreement are not valid, binding and enforceable or that there is insufficient consideration for this Agreement and shall stipulate in court that the Company is bound by all the provisions of this Agreement.

(e) FAILURE TO ACT NOT A DEFENSE. The failure of the Company (including its Board of Directors or any committee thereof, independent legal counsel, or stockholders) to make a determination concerning the permissibility of the payment of Indemnifiable Amounts or the advancement of Indemnifiable Expenses under this Agreement shall not be a defense in any action brought under Section 12(a) above.

13. PROCEEDINGS AGAINST COMPANY. Except as otherwise provided in this Agreement, the Independent Director shall not be entitled to payment of Indemnifiable Amounts or advancement of Indemnifiable Expenses with respect to any Proceeding brought by the Independent Director against the Company, any Entity which the Company controls, any director or officer thereof, or any third party, unless the Company has consented to the initiation of such Proceeding. This section shall not apply to counterclaims or affirmative defenses asserted by the Independent Director in an action brought against the Independent Director.

14. INSURANCE. The Company shall obtain and maintain a policy or policies of director and officer liability insurance, with an aggregate limit of liability of not less than $5,000,000, providing the Independent Director with coverage for claims against the Independent Director by reason of his Corporate Status, in accordance with the terms of said insurance policy or policies (“D&O Insurance”); provided that the Company shall not be liable under this Agreement to make any payment in connection with any claim made against the Independent Director to the extent that the Independent Director has otherwise received payment under any insurance policy of the amounts otherwise indemnifiable hereunder. The Company shall take any actions it deems reasonably necessary or desirable to cause the D&O insurer(s) to pay, on behalf of the Independent Director, all amounts payable in accordance with the terms of the D&O Insurance.

15. SUBROGATION. In the event of any payment of Indemnifiable Amounts under this Agreement or the D&O Insurance, the Company or its Insurance Carrier, as the case may be, shall be subrogated to the extent of such payment to all of the rights of contribution or recovery of the Independent Director against other persons, and the Independent Director shall take, at the request of the Company, all reasonable action necessary to secure such rights, including the execution of such documents as are necessary to enable the Company to bring suit to enforce such rights.

16. AUTHORITY. Each party has all necessary power and authority to enter into, and be bound by the terms of, this Agreement, and the execution, delivery and performance of the undertakings contemplated by this Agreement have been duly authorized by each party hereto:

17. SUCCESSORS AND ASSIGNMENT. This Agreement shall (a) be binding upon and inure to the benefit of all successors and assigns of the Company (including any transferee of all or a substantial portion of the business, stock and/or assets of the Company and any direct or indirect successor by merger or consolidation or otherwise by operation of law), and (b) be binding on and shall inure to the benefit of the heirs, personal representatives, executors and administrators of the Independent Director. The Independent Director has no power to assign this Agreement or any rights and obligations hereunder.

18. CHANGE IN LAW. To the extent that a change in applicable law (whether by statute or judicial decision) shall mandate broader or narrower indemnification than is provided hereunder, the Independent Director shall be subject to such broader or narrower indemnification and this Agreement shall be deemed to be amended to such extent.

19. SEVERABILITY. Whenever possible, each provision of this Agreement shall be interpreted in such a manner as to be effective and valid under applicable law, but if any provision of this Agreement, or any clause thereof, shall be determined by a court of competent jurisdiction to be illegal, invalid or unenforceable, in whole or in part, such provision or clause shall be limited or modified in its application to the minimum extent necessary to make such provision or clause valid, legal and enforceable, and the remaining provisions and clauses of this Agreement shall remain fully enforceable and binding on the parties.

20. MODIFICATIONS AND WAIVER. Except as provided in Section 18 hereof with respect to changes in applicable law which broaden or narrow the right of the Independent Director to be indemnified by the Company, no supplement, modification or amendment of this Agreement shall be binding unless executed in writing by each of the parties hereto. No delay in exercise or non-exercise by the Company of any right under this Agreement shall operate as a current or future waiver by it as to its same or different rights under this Agreement or otherwise.

21. NOTICES. All notices, requests, demands and other communications hereunder shall be in writing and shall be deemed to have been duly given (a) when delivered by hand, (b) when transmitted by facsimile and receipt is acknowledged, or (c) if mailed by certified or registered mail with postage prepaid, on the third business day after the date en which it is so mailed:

If to Independent Director, to: Robert Bruce. Address: c/o Oakmont Advisory Group, LLC, P.O. Box 8181, Portland, ME 04104, U.S.A.

If to the Company, to: Jinhua Zhu, CEO, Lihua International, Houxiang Five Star Industry District, Danyang City, Jiangsu Province, PR China 212312, or to such other address as may have been furnished in the same manner by any party to the others.

22. GOVERNING LAW. This Agreement shall be governed by and construed and enforced under the laws of the State of Delaware.

23. CONSENT TO JURISDICTION. The parties hereby consent to the jurisdiction of the courts having jurisdiction over matters arising in Delaware for any proceeding arising out of or relating to this Agreement. The parties agree that in any such proceeding, each party shall waive, if applicable, inconvenience of forum and right to a jury.

24. AGREEMENT GOVERNS. This Agreement is to be deemed consistent wherever possible with relevant provisions of the By-Laws and Certificate of Incorporation of the Company; however, in the event of a conflict between this Agreement and such provisions, the provisions of this Agreement shall control.

25. INDEPENDENT CONTRACTOR. The parties understand, acknowledge and agree that the Independent Director’s relationship with the Company is that of an independent contractor and nothing in this Agreement is intended to or should be construed to create a relationship other than that of independent contractor. Nothing in this Agreement shall be construed as a contract of employment/engagement between the Independent Director and the Company or as a commitment on the part of the Company to retain the Independent Director in any capacity, for any period of time or under any specific terms or conditions, or to continue the Independent Director’s service to the Company beyond any period.

26. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement between the Company and the Independent Director with respect to the subject matter hereof, and supersedes all prior understandings and agreements with respect to such subject matter.

IN WITNESS WHEREOF, the parties hereto have executed this Independent Director Agreement as of the day and year first above written.

AGREED	AGREED
LIHUA INTERNATIONAL, INC.	INDEPENDENT DIRECTOR
/s/ Jianhua Zhu	/s/ Robert C. Bruce
Name:  Jianhua Zhu	Name: Robert C. Bruce
Title:   Chairman and CEO

SCHEDULE A

I. COMPENSATION:

A. Fees. For all services rendered by the Independent Director pursuant to this Agreement, both during and outside of normal working hours, including but not limited to, attending all required meetings of the Board or applicable committees thereof, executive sessions of the independent directors, reviewing filing reports and other corporate documents as requested by the Company, providing comments and opinions as to business matters as requested by the Company, the Company agrees to pay to the Independent Director a fee in cash of Four Thousand Dollars ($4,000) per month during the Term (the “Base Fee”), so long as the Independent Director is serving on the Board of Directors. In addition to the Base Fee, the Company agrees to pay the Independent Director a fee in cash of One Thousand Dollars ($1,000) per month (the “Audit Committee Chair Fee”), as long the Independent Director is serving as Chair of the Audit Committee of the Board of Directors. The Base Fee and the Audit Committee Chair Fee shall be paid in cash to the Independent Director on a quarterly basis in equal installments on the last day of each calendar quarter.

B. Stock Option. Upon execution of this Agreement the Independent Director shall be granted a 10-year option to purchase Twenty Thousand (20,000) shares of common stock of the Company, with an exercise price equal to the fair market value of a share of the Company’s common stock on the date of the grant of the option. Such option shall vest in equal installments on July 14, 2013, October 14, 2013, January 14, 2014 and April 14, 2014, as long as the Independent Director is serving as a member of the Board of Directors at each such time. Such award shall be made pursuant to the Company’s 2009 Omnibus Securities and Incentive Plan. The Independent Director’s rights in respect to any grant shall be determined solely by the Compensation Committee of the Company and are subject to execution by Independent Director of any applicable agreements as established and requested by the Company pursuant to the 2009 Omnibus Securities and Incentive Plan.

C. Expenses. During the Term the Company shall promptly reimburse the Independent Director for all expenses incurred by him/her in connection with attending (a) all meetings of the Board or applicable committees thereof, (b) executive sessions of the independent directors, (c) stockholder meetings, as a director or a member of any committee of the Board, which are approved by the Company in advance and (d) subject to prior Company approval, other Company-related travel. The Company will promptly reimburse the Independent Director for hotel accommodation expenses actually incurred in connection with any such meetings the Independent Director attends, up to $350 per night for stays of up to five nights per meeting. The Company will only reimburse the Independent Director for economy class airplane tickets purchased for Company business, provided, however, that if the total flight time exceeds six hours, the Company will reimburse the Independent Director for business class tickets. The amount of such expenses eligible for reimbursement by the Company during a calendar year shall not affect such expenses eligible for reimbursement by the Company in any other calendar year, and the reimbursement of any such eligible expenses shall be made on or before the last day of the calendar year next following the calendar year in which the expense was incurred. Additionally, the Company will reimburse the Independent Director up to $3,000 during the Term, for the actual costs incurred to travel to and attend bona fide director education seminars that the Independent Director may, in his discretion, select.

D. No Other Benefits Or Compensation. The Independent Director acknowledges and agrees that he is not granted and is not entitled to any other benefits or compensation from the Company for the services provided under this Agreement except expressly provided for in this Schedule A.

AGREED	AGREED
LIHUA INTERNATIONAL, INC.	INDEPENDENT DIRECTOR
/s/ Jianhua Zhu	/s/ Robert C. Bruce
Name:  Jianhua Zhu	Name: Robert C. Bruce
Title:   Chairman and CEO

EX-10.6

EXHIBIT 10.6

LIHUA INTERNATIONAL, INC.

INDEPENDENT DIRECTOR AGREEMENT

This INDEPENDENT DIRECTOR AGREEMENT (the “Agreement”) is made and entered into as of this 30^th day of May, 2013, effective as of April 14, 2013 (the “Effective Date”), by and between Lihua International, Inc., a Delaware corporation whose shares are publicly traded (the “Company”), and Jonathan P. Serbin, a citizen of the United States, with the following address:                                           (the “Independent Director”).

WHEREAS, the Company desires to re-engage the Independent Director, and the Independent Director desires to serve, as a non-employee director of the Company, subject to the terms and conditions contained in this Agreement.

NOW, THEREFORE, in consideration of the mutual promises and covenants contained herein, the receipt of which is hereby acknowledged, the Company and the Independent Director, intending to be legally bound, hereby agree as follows:

1. DEFINITIONS.

(a) “Corporate Status” describes the capacity of the Independent Director with respect to the Company and the services performed by the Independent Director in that capacity.

(b) “Entity” shall mean any corporation, partnership, limited liability company, joint venture, trust, foundation, association, organization or other legal entity.

(c) “Proceeding” shall mean any threatened, pending or completed claim, action, suit, arbitration, alternate dispute resolution process, investigation, administrative hearing, appeal, or any other proceeding, whether civil, criminal, administrative or investigative, whether formal or informal, including a proceeding initiated by the Independent Director pursuant to Section 12 of this Agreement to enforce the Independent Director’s rights hereunder.

(d) “Expenses” shall mean all reasonable fees, costs and expenses, reasonably incurred in connection with any Proceeding, including, without limitation, attorneys’ fees, disbursements and retainers, fees and disbursements of expert witnesses, private investigators, professional advisors (including, without limitation, accountants and investment bankers), court costs, transcript costs, fees of experts, travel expenses, duplicating, printing and binding costs, telephone and fax transmission charges, postage, delivery services, secretarial services, and other disbursements and expenses.

(e) “Liabilities” shall mean judgments, damages, liabilities, losses, penalties, excise taxes, fines and amounts paid in settlement.

(f) “Parent” shall mean any corporation or other entity (other than the Company) in any unbroken chain of corporations or other entities ending with the Company, if each of the corporations or entities, other than the Company, owns stock or other interests possessing 50% or more of the economic interest or the total combined voting power of all classes of stock or other interests in one of the other corporations or entities in the chain.

(g) “Subsidiary” shall mean any corporation or other entity (other than the Company) in any unbroken chain of corporations or other entities beginning with the Company, if each of the corporations or entities, other than the last corporation or entity in the unbroken chain, owns stock or other interests possessing 50% or more of the economic interest or the total combined voting power of all classes of stock or other interests in one of the other corporations or entities in the chain.

2. SERVICES OF INDEPENDENT DIRECTOR. While this Agreement is in effect, the Independent Director shall perform duties as an independent director and/or a member of the committees of the Board, be compensated for such and be reimbursed expenses in accordance with the Schedule A attached to this Agreement, subject to the following.

(a) The Independent Director will perform services as is consistent with Independent Director’s position with the Company, as required and authorized by the By-Laws and Certificate of Incorporation of the Company, and in accordance with high professional and ethical standards and all applicable laws and rules and regulations pertaining to the Independent Director’s performance hereunder, including without limitation, laws, rules and regulations relating to a public company.

(b) The Independent Director is solely responsible for taxes arising out of any compensation paid by the Company to the Independent Director under this Agreement, and the Independent Director understands that he/she will be issued a U.S. Treasury form 1099 for any compensation paid to him/her by the Company. The Independent Director acknowledges and agrees that because he is not an employee of the Company the Company will not withhold any amounts for taxes from any of his payments under the Agreement.

(c) The Company may offset any and all monies payable to the Independent Director to the extent of any monies owing to the Company from the Independent Director.

(d) The rules and regulations of the Company notified to the Independent Director, from time to time, apply to the Independent Director. Such rules and regulations are subject to change by the Board in its sole discretion. Notwithstanding the foregoing, in the event of any conflict or inconsistency between the terms and conditions of this Agreement and rules and regulations of the Company, the terms of this Agreement control.

3. REQUIREMENTS OF INDEPENDENT DIRECTOR. During the term of the Independent Director’s services to the Company hereunder, Independent Director shall observe all applicable laws and regulations relating to independent directors of a public company as promulgated from to time, and shall not: (1) be an employee of the Company or any Parent or Subsidiary; (2) accept, directly or indirectly, any consulting, advisory, or other compensatory fee from the Company other than as a director and/or a member of a committee of the Board; (3) be an affiliated person of the Company or any Parent or Subsidiary, as the term “affiliate” is defined in 17 CFR 240.10A-3(e)(1), other than in his capacity as a director and/or a member of a committee of the Board; (4) possess an interest in any transaction with the Company or any Parent or Subsidiary, for which disclosure would be required pursuant to 17 CFR 229.404(a), other than in his capacity as a director and/or a member of a committee of the Board committees; (5) be engaged in a business relationship with the Company or any Parent or Subsidiary, for which disclosure would be required pursuant to 17 CFR 229.404(b), except that the required beneficial interest therein shall be modified to be 5% hereby.

4. REPORT OBLIGATION. While this Agreement is in effect, the Independent Director shall immediately report to the Company in the event: (1) the Independent Director knows or has reason to know or should have known that any of the requirements specified in Section 3 hereof is not satisfied or is not going to be satisfied; and (2) the Independent Director simultaneously serves on an audit committee of any other public company.

5. TERM AND TERMINATION. The term of this Agreement shall be for one (1) year from the Effective Date, unless terminated as provided for in this Section 5 (the “Term”). This Agreement and the Independent Director’s services hereunder shall terminate upon the earlier of the following:

(a) Removal of the Independent Director as a director of the Company, upon proper Board or stockholder action in accordance with the By-Laws and Certificate of Incorporation of the Company and applicable law;

(b) Resignation of the Independent Director as a director of the Company upon written notice to the Board of Directors of the Company; or

(c) Termination of this Agreement by the Company, in the event any of the requirements specified in Section 3 hereof is not satisfied, as determined by the Company in its sole discretion.

6. LIMITATION OF LIABILITY. In no event shall the Independent Director be individually liable to the Company or its shareholders for any damages for breach of fiduciary duty as an independent director of the Company, unless the Independent Director’s act or failure to act involves intentional misconduct, fraud or a knowing violation of law.

7. AGREEMENT OF INDEMNITY. The Company agrees to indemnify the Independent Director as follows:

(a) Subject to the exceptions contained in Section 8(a) below, if the Independent Director was or is a party or is threatened to be made a party to any Proceeding (other than an action by or in the right of the Company) by reason of the Independent Director’s Corporate Status, the Independent Director shall be indemnified by the Company against all Expenses and Liabilities incurred or paid by the Independent Director in connection with such Proceeding (referred to herein as “Indemnifiable Expenses” and “Indemnifiable Liabilities,” respectively, and collectively as “Indemnifiable Amounts”).

(b) Subject to the exceptions contained in Section 8(b) below, if the Independent Director was or is a party or is threatened to be made a party to any Proceeding by or in the right of the Company, to procure a judgment in its favor by reason of the Independent Director’s Corporate Status, the Independent Director shall be indemnified by the Company against all Indemnifiable Amounts.

(c) For purposes of this Agreement, the Independent Director shall be deemed to have acted in good faith in conducting the Company’s affairs as an independent director of the Company and/or a member of a committee of the Board of the Company, if the Independent Director: (i) exercised or used the same degree of diligence, care, and skill as an ordinarily prudent man would have exercised or used under the circumstances in the conduct of his own affairs; or (ii) took, or omitted to take, an action in reliance upon advise of counsels or other professional advisors for the Company, or upon statements made or information furnished by other directors, officers or employees of the Company, or upon a financial statement of the Company provided by a person in charge of its accounts or certified by a public accountant or a firm of public accountants, which the Independent Director had reasonable grounds to believe to be true.

(d) In the event the Independent Director intends to engage separate legal counsel, the Independent Director shall provide at least three business days’ prior written notice to the Company identifying therein: (i) the name, address, telephone number, and hourly rate(s) of the attorney(s) the Independent Director intends to engage; (ii) the Proceeding in which the Independent Director has been named as a party or is threatened to be named as a party; and (iii) the basis for the Independent Director’s reasonable belief that he has been named or is threatened to be named as a party to a Proceeding, including any supporting documentation. The Company may, in its discretion, decline to pay any Indemnifiable Amounts incurred where the Independent Director has failed to comply with the notice requirements set forth in this subparagraph (d).

8. EXCEPTIONS TO INDEMNIFICATION. Director shall be entitled to indemnification under Sections 7(a) and 7(b) above in all circumstances other than the following:

(a) If indemnification is requested under Section 7(a) and it has been adjudicated finally by a court or arbitral body of competent jurisdiction that, in connection with the subject of the Proceeding out of which the claim for indemnification has arisen, (i) the Independent Director failed to act in good faith and in a manner the Independent Director reasonably believed to be in or not opposed to the best interests of the Company, (ii) the Independent Director had reasonable cause to believe that the Independent Director’s conduct was unlawful, or (iii) the Independent Director’s conduct constituted willful misconduct, fraud or knowing violation of law, then the Independent Director shall not be entitled to payment of Indemnifiable Amounts hereunder.

(b) If indemnification is requested under Section 7(b) and

(i) it has been adjudicated finally by a court or arbitral body of competent jurisdiction that, in connection with the subject of the Proceeding out of which the claim for indemnification has arisen, the Independent Director failed to act in good faith and in a manner the Independent Director reasonably believed to be in or not opposed to the best interests of the Company, including without limitation, the breach of Section 4 hereof by the Independent Director, the Independent Director shall not be entitled to payment of Indemnifiable Amounts hereunder; or

(ii) it has been adjudicated finally by a court or arbitral body of competent jurisdiction that the Independent Director is liable to the Company with respect to any claim, issue or matter involved in the Proceeding out of which the claim for indemnification has arisen, including, without limitation, a claim that the Independent Director received an improper benefit or improperly took advantage of a corporate opportunity, the Independent Director shall not be entitled to payment of Indemnifiable Amounts hereunder with respect to such claim, issue or matter.

9. WHOLLY OR PARTLY SUCCESSFUL. Notwithstanding any other provision of this Agreement, and without limiting any such provision, to the extent that the Independent Director is, by reason of the Independent Director’s Corporate Status, a party to and is successful, on the merits or otherwise, in any Proceeding, the Independent Director shall be indemnified in connection therewith. If the Independent Director is not wholly successful in such Proceeding but is successful, on the merits or otherwise, as to one or more but less than all claims, issues or matters in such Proceeding, the Company shall indemnify the Independent Director against those Expenses reasonably incurred by the Independent Director or on the Independent Director’s behalf in connection with each successfully resolved claim, issue or matter. For purposes of this section, the termination of any claim, issue or matter in such a Proceeding by dismissal, with or without prejudice, shall be deemed to be a successful result as to such claim, issue or matter.

10. ADVANCES AND INTERIM EXPENSES. Within ten (10) business days of the Independent Director’s written request for indemnification, the Company shall pay to the Independent Director all Indemnifiable Expenses incurred by the Independent Director in connection with any Proceeding, including a Proceeding by or in the right of the Company, in advance of the final disposition of such Proceeding, if the Independent Director furnishes the Company with a written undertaking, to the satisfaction of the Company, to repay the amount of such Indemnifiable Expenses advanced to the Independent Director in the event it is finally determined by a court or arbitral body of competent jurisdiction that the Independent Director is not entitled under this Agreement to indemnification with respect to such Indemnifiable Expenses.

11. PROCEDURE FOR PAYMENT OF INDEMNIFIABLE AMOUNTS. The Independent Director shall submit to the Company a written request specifying the Indemnifiable Amounts, for which the Independent Director seeks payment under Section 7 hereof, and the Proceeding of which the Independent Director has previously notified the Company. At the request of the Company, the Independent Director shall furnish such documentation and information as are reasonably available to the Independent Director and necessary to establish that the Independent Director is entitled to indemnification hereunder. The Company shall pay such Indemnifiable Amounts within ten (10) days of receipt of all required documents.

12. REMEDIES OF INDEPENDENT DIRECTOR.

(a) RIGHT TO PETITION COURT. In the event that the Independent Director makes a request for payment of Indemnifiable Amounts under Sections 7, 9-11 above, or seeks payment of insurance under Section 14 below, and such payment or advancement is not made in a timely manner: (i) by the Company pursuant to the terms of this Agreement, or (ii) by any insurer pursuant to the terms of its insurance policy, then the Independent Director may petition the appropriate judicial authority to enforce the Company’s or any insurer’s obligations.

(b) BURDEN OF PROOF. In any judicial proceeding brought under Section 12 (a) above, the Company shall have the burden of proving that the Independent Director is not entitled to payment of Indemnifiable Amounts hereunder.

(c) EXPENSES. The Company agrees to reimburse the Independent Director in full for any Expenses incurred by the Independent Director in connection with investigating, preparing for, litigating, defending or settling any action brought by the Independent Director under Section 12 (a) above, or in connection with any claim or counterclaim brought by the Company in connection therewith.

(d) VALIDITY OF AGREEMENT. The Company shall be precluded from asserting in any Proceeding, including, without limitation, an action under Section 12(a) above, that the provisions of this Agreement are not valid, binding and enforceable or that there is insufficient consideration for this Agreement and shall stipulate in court that the Company is bound by all the provisions of this Agreement.

(e) FAILURE TO ACT NOT A DEFENSE. The failure of the Company (including its Board of Directors or any committee thereof, independent legal counsel, or stockholders) to make a determination concerning the permissibility of the payment of Indemnifiable Amounts or the advancement of Indemnifiable Expenses under this Agreement shall not be a defense in any action brought under Section 12(a) above.

13. PROCEEDINGS AGAINST COMPANY. Except as otherwise provided in this Agreement, the Independent Director shall not be entitled to payment of Indemnifiable Amounts or advancement of Indemnifiable Expenses with respect to any Proceeding brought by the Independent Director against the Company, any Entity which the Company controls, any director or officer thereof, or any third party, unless the Company has consented to the initiation of such Proceeding. This section shall not apply to counterclaims or affirmative defenses asserted by the Independent Director in an action brought against the Independent Director.

14. INSURANCE. The Company shall obtain and maintain a policy or policies of director and officer liability insurance, with an aggregate limit of liability of not less than $5,000,000, providing the Independent Director with coverage for claims against the Independent Director by reason of his Corporate Status, in accordance with the terms of said insurance policy or policies (“D&O Insurance”); provided that the Company shall not be liable under this Agreement to make any payment in connection with any claim made against the Independent Director to the extent that the Independent Director has otherwise received payment under any insurance policy of the amounts otherwise indemnifiable hereunder. The Company shall take any actions it deems reasonably necessary or desirable to cause the D&O insurer(s) to pay, on behalf of the Independent Director, all amounts payable in accordance with the terms of the D&O Insurance.

15. SUBROGATION. In the event of any payment of Indemnifiable Amounts under this Agreement or the D&O Insurance, the Company or its Insurance Carrier, as the case may be, shall be subrogated to the extent of such payment to all of the rights of contribution or recovery of the Independent Director against other persons, and the Independent Director shall take, at the request of the Company, all reasonable action necessary to secure such rights, including the execution of such documents as are necessary to enable the Company to bring suit to enforce such rights.

16. AUTHORITY. Each party has all necessary power and authority to enter into, and be bound by the terms of, this Agreement, and the execution, delivery and performance of the undertakings contemplated by this Agreement have been duly authorized by each party hereto:

17. SUCCESSORS AND ASSIGNMENT. This Agreement shall (a) be binding upon and inure to the benefit of all successors and assigns of the Company (including any transferee of all or a substantial portion of the business, stock and/or assets of the Company and any direct or indirect successor by merger or consolidation or otherwise by operation of law), and (b) be binding on and shall inure to the benefit of the heirs, personal representatives, executors and administrators of the Independent Director. The Independent Director has no power to assign this Agreement or any rights and obligations hereunder.

18. CHANGE IN LAW. To the extent that a change in applicable law (whether by statute or judicial decision) shall mandate broader or narrower indemnification than is provided hereunder, the Independent Director shall be subject to such broader or narrower indemnification and this Agreement shall be deemed to be amended to such extent.

19. SEVERABILITY. Whenever possible, each provision of this Agreement shall be interpreted in such a manner as to be effective and valid under applicable law, but if any provision of this Agreement, or any clause thereof, shall be determined by a court of competent jurisdiction to be illegal, invalid or unenforceable, in whole or in part, such provision or clause shall be limited or modified in its application to the minimum extent necessary to make such provision or clause valid, legal and enforceable, and the remaining provisions and clauses of this Agreement shall remain fully enforceable and binding on the parties.

20. MODIFICATIONS AND WAIVER. Except as provided in Section 18 hereof with respect to changes in applicable law which broaden or narrow the right of the Independent Director to be indemnified by the Company, no supplement, modification or amendment of this Agreement shall be binding unless executed in writing by each of the parties hereto. No delay in exercise or non-exercise by the Company of any right under this Agreement shall operate as a current or future waiver by it as to its same or different rights under this Agreement or otherwise.

21. NOTICES. All notices, requests, demands and other communications hereunder shall be in writing and shall be deemed to have been duly given (a) when delivered by hand, (b) when transmitted by facsimile and receipt is acknowledged, or (c) if mailed by certified or registered mail with postage prepaid, on the third business day after the date on which it is so mailed:

If to Independent Director, to: Jonathan P. Serbin Address: c/o Duo Guo 819 Nanjing Lu, Room 1508 Shanghai, PR China 200041.

If to the Company, to: Jinhua Zhu, CEO, Lihua International, Houxiang Five Star Industry District, Danyang City, Jiangsu Province, PR China 212312, or to such other address as may have been furnished in the same manner by any party to the others.

22. GOVERNING LAW. This Agreement shall be governed by and construed and enforced under the laws of the State of Delaware.

23. CONSENT TO JURISDICTION. The parties hereby consent to the jurisdiction of the courts having jurisdiction over matters arising in Delaware for any proceeding arising out of or relating to this Agreement. The parties agree that in any such proceeding, each party shall waive, if applicable, inconvenience of forum and right to a jury.

24. AGREEMENT GOVERNS. This Agreement is to be deemed consistent wherever possible with relevant provisions of the By-Laws and Certificate of Incorporation of the Company; however, in the event of a conflict between this Agreement and such provisions, the provisions of this Agreement shall control.

25. INDEPENDENT CONTRACTOR. The parties understand, acknowledge and agree that the Independent Director’s relationship with the Company is that of an independent contractor and nothing in this Agreement is intended to or should be construed to create a relationship other than that of independent contractor. Nothing in this Agreement shall be construed as a contract of employment/engagement between the Independent Director and the Company or as a commitment on the part of the Company to retain the Independent Director in any capacity, for any period of time or under any specific terms or conditions, or to continue the Independent Director’s service to the Company beyond any period.

26. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement between the Company and the Independent Director with respect to the subject matter hereof, and supersedes all prior understandings and agreements with respect to such subject matter.

IN WITNESS WHEREOF, the parties hereto have executed this Independent Director Agreement as of the day and year first above written.

AGREED	AGREED
LIHUA INTERNATIONAL, INC.	INDEPENDENT DIRECTOR
/s/ Jianhua Zhu	/s/ Jonathan P. Serbin
Name:  Jianhua Zhu	Name: Jonathan P. Serbin
Title:   Chairman and CEO

SCHEDULE A

I. COMPENSATION:

A. Fees. For all services rendered by the Independent Director pursuant to this Agreement, both during and outside of normal working hours, including but not limited to, attending all required meetings of the Board or applicable committees thereof, executive sessions of the independent directors, reviewing filing reports and other corporate documents as requested by the Company, providing comments and opinions as to business matters as requested by the Company, the Company agrees to pay to the Independent Director a fee in cash of Four Thousand Dollars ($4,000) per month during the Term (the “Base Fee”), so long as the Independent Director is serving on the Board of Directors. The Base Fee shall be paid in cash to the Independent Director on a quarterly basis in equal installments on the last day of each calendar quarter.

B. Stock Option. Upon execution of this Agreement the Independent Director shall be granted a 10-year option to purchase Twenty Thousand (20,000) shares of common stock of the Company, with an exercise price equal to the fair market value of a share of the Company’s common stock on the date of the grant of the option. Such option shall vest in equal installments on July 14, 2013, October 14, 2013, January 14, 2014 and April 14, 2014, as long as the Independent Director is serving as a member of the Board of Directors at each such time. Such award shall be made pursuant to the Company’s 2009 Omnibus Securities and Incentive Plan. The Independent Director’s rights in respect to any grant shall be determined solely by the Compensation Committee of the Company and are subject to execution by Independent Director of any applicable agreements as established and requested by the Company pursuant to the 2009 Omnibus Securities and Incentive Plan.

C. Expenses. During the Term the Company shall promptly reimburse the Independent Director for all expenses incurred by him/her in connection with attending (a) all meetings of the Board or applicable committees thereof, (b) executive sessions of the independent directors, (c) stockholder meetings, as a director or a member of any committee of the Board, which are approved by the Company in advance and (d) subject to prior Company approval, other Company-related travel. The Company will promptly reimburse the Independent Director for hotel accommodation expenses actually incurred in connection with any such meetings the Independent Director attends, up to $350 per night for stays of up to five nights per meeting. The Company will only reimburse the Independent Director for economy class airplane tickets purchased for Company business, provided, however, that if the total flight time exceeds six hours, the Company will reimburse the Independent Director for business class tickets. The amount of such expenses eligible for reimbursement by the Company during a calendar year shall not affect such expenses eligible for reimbursement by the Company in any other calendar year, and the reimbursement of any such eligible expenses shall be made on or before the last day of the calendar year next following the calendar year in which the expense was incurred. Additionally, the Company will reimburse the Independent Director up to $3,000 during the Term, for the actual costs incurred to travel to and attend bona fide director education seminars that the Independent Director may, in his discretion, select.

D. No Other Benefits Or Compensation. The Independent Director acknowledges and agrees that he is not granted and is not entitled to any other benefits or compensation from the Company for the services provided under this Agreement except expressly provided for in this Schedule A.

AGREED	AGREED
LIHUA INTERNATIONAL, INC.	INDEPENDENT DIRECTOR
/s/ Jianhua Zhu	/s/ Jonathan P. Serbin
Name:  Jianhua Zhu	Name: Jonathan P. Serbin
Title:   Chairman and CEO

EX-10.7

EXHIBIT 10.7

LIHUA INTERNATIONAL, INC.

INDEPENDENT DIRECTOR AGREEMENT

This INDEPENDENT DIRECTOR AGREEMENT (the “Agreement”) is made and entered into as of this 30^th day of May, 2013, effective as of April 14, 2013 (the “Effective Date”), by and between Lihua International, Inc., a Delaware corporation whose shares are publicly traded (the “Company”), and Siu Ki Lau, a citizen of the United Kingdom, with a permanent residence at                                            (the “Independent Director”).

WHEREAS, the Company desires to re-engage the Independent Director, and the Independent Director desires to serve, as a non-employee director of the Company, subject to the terms and conditions contained in this Agreement.

NOW, THEREFORE, in consideration of the mutual promises and covenants contained herein, the receipt of which is hereby acknowledged, the Company and the Independent Director, intending to be legally bound, hereby agree as follows:

1. DEFINITIONS.

(a) “Corporate Status” describes the capacity of the Independent Director with respect to the Company and the services performed by the Independent Director in that capacity.

(b) “Entity” shall mean any corporation, partnership, limited liability company, joint venture, trust, foundation, association, organization or other legal entity.

(c) “Proceeding” shall mean any threatened, pending or completed claim, action, suit, arbitration, alternate dispute resolution process, investigation, administrative hearing, appeal, or any other proceeding, whether civil, criminal, administrative or investigative, whether formal or informal, including a proceeding initiated by the Independent Director pursuant to Section 12 of this Agreement to enforce the Independent Director’s rights hereunder.

(d) “Expenses” shall mean all reasonable fees, costs and expenses, reasonably incurred in connection with any Proceeding, including, without limitation, attorneys’ fees, disbursements and retainers, fees and disbursements of expert witnesses, private investigators, professional advisors (including, without limitation, accountants and investment bankers), court costs, transcript costs, fees of experts, travel expenses, duplicating, printing and binding costs, telephone and fax transmission charges, postage, delivery services, secretarial services, and other disbursements and expenses.

(e) “Liabilities” shall mean judgments, damages, liabilities, losses, penalties, excise taxes, fines and amounts paid in settlement.

(f) “Parent” shall mean any corporation or other entity (other than the Company) in any unbroken chain of corporations or other entities ending with the Company, if each of the corporations or entities, other than the Company, owns stock or other interests possessing 50% or more of the economic interest or the total combined voting power of all classes of stock or other interests in one of the other corporations or entities in the chain.

(g) “Subsidiary” shall mean any corporation or other entity (other than the Company) in any unbroken chain of corporations or other entities beginning with the Company, if each of the corporations or entities, other than the last corporation or entity in the unbroken chain, owns stock or other interests possessing 50% or more of the economic interest or the total combined voting power of all classes of stock or other interests in one of the other corporations or entities in the chain.

2. SERVICES OF INDEPENDENT DIRECTOR. While this Agreement is in effect, the Independent Director shall perform duties as an independent director and/or a member of the committees of the Board, be compensated for such and be reimbursed expenses in accordance with the Schedule A attached to this Agreement, subject to the following.

(a) The Independent Director will perform services as is consistent with Independent Director’s position with the Company, as required and authorized by the By-Laws and Certificate of Incorporation of the Company, and in accordance with high professional and ethical standards and all applicable laws and rules and regulations pertaining to the Independent Director’s performance hereunder, including without limitation, laws, rules and regulations relating to a public company.

(b) The Independent Director is solely responsible for taxes arising out of any compensation paid by the Company to the Independent Director under this Agreement, and the Independent Director understands that he/she will be issued a U.S. Treasury form 1099 for any compensation paid to him/her by the Company. The Independent Director acknowledges and agrees that because he is not an employee of the Company the Company will not withhold any amounts for taxes from any of his payments under the Agreement.

(c) The Company may offset any and all monies payable to the Independent Director to the extent of any monies owing to the Company from the Independent Director.

(d) The rules and regulations of the Company notified to the Independent Director, from time to time, apply to the Independent Director. Such rules and regulations are subject to change by the Board in its sole discretion. Notwithstanding the foregoing, in the event of any conflict or inconsistency between the terms and conditions of this Agreement and rules and regulations of the Company, the terms of this Agreement control.

3. REQUIREMENTS OF INDEPENDENT DIRECTOR. During the term of the Independent Director’s services to the Company hereunder, Independent Director shall observe all applicable laws and regulations relating to independent directors of a public company as promulgated from to time, and shall not: (1) be an employee of the Company or any Parent or Subsidiary; (2) accept, directly or indirectly, any consulting, advisory, or other compensatory fee from the Company other than as a director and/or a member of a committee of the Board; (3) be an affiliated person of the Company or any Parent or Subsidiary, as the term “affiliate” is defined in 17 CFR 240.10A-3(e)(1), other than in his capacity as a director and/or a member of a committee of the Board; (4) possess an interest in any transaction with the Company or any Parent or Subsidiary, for which disclosure would be required pursuant to 17 CFR 229.404(a), other than in his capacity as a director and/or a member of a committee of the Board committees; (5) be engaged in a business relationship with the Company or any Parent or Subsidiary, for which disclosure would be required pursuant to 17 CFR 229.404(b), except that the required beneficial interest therein shall be modified to be 5% hereby.

4. REPORT OBLIGATION. While this Agreement is in effect, the Independent Director shall immediately report to the Company in the event: (1) the Independent Director knows or has reason to know or should have known that any of the requirements specified in Section 3 hereof is not satisfied or is not going to be satisfied; and (2) the Independent Director simultaneously serves on an audit committee of any other public company.

5. TERM AND TERMINATION. The term of this Agreement shall be for one (1) year from the Effective Date, unless terminated as provided for in this Section 5 (the “Term”). This Agreement and the Independent Director’s services hereunder shall terminate upon the earlier of the following:

(a) Removal of the Independent Director as a director of the Company, upon proper Board or stockholder action in accordance with the By-Laws and Certificate of Incorporation of the Company and applicable law;

(b) Resignation of the Independent Director as a director of the Company upon written notice to the Board of Directors of the Company; or

(c) Termination of this Agreement by the Company, in the event any of the requirements specified in Section 3 hereof is not satisfied, as determined by the Company in its sole discretion.

6. LIMITATION OF LIABILITY. In no event shall the Independent Director be individually liable to the Company or its shareholders for any damages for breach of fiduciary duty as an independent director of the Company, unless the Independent Director’s act or failure to act involves intentional misconduct, fraud or a knowing violation of law.

7. AGREEMENT OF INDEMNITY. The Company agrees to indemnify the Independent Director as follows:

(a) Subject to the exceptions contained in Section 8(a) below, if the Independent Director was or is a party or is threatened to be made a party to any Proceeding (other than an action by or in the right of the Company) by reason of the Independent Director’s Corporate Status, the Independent Director shall be indemnified by the Company against all Expenses and Liabilities incurred or paid by the Independent Director in connection with such Proceeding (referred to herein as “Indemnifiable Expenses” and “Indemnifiable Liabilities,” respectively, and collectively as “Indemnifiable Amounts”).

(b) Subject to the exceptions contained in Section 8(b) below, if the Independent Director was or is a party or is threatened to be made a party to any Proceeding by or in the right of the Company, to procure a judgment in its favor by reason of the Independent Director’s Corporate Status, the Independent Director shall be indemnified by the Company against all Indemnifiable Amounts.

(c) For purposes of this Agreement, the Independent Director shall be deemed to have acted in good faith in conducting the Company’s affairs as an independent director of the Company and/or a member of a committee of the Board of the Company, if the Independent Director: (i) exercised or used the same degree of diligence, care, and skill as an ordinarily prudent man would have exercised or used under the circumstances in the conduct of his own affairs; or (ii) took, or omitted to take, an action in reliance upon advise of counsels or other professional advisors for the Company, or upon statements made or information furnished by other directors, officers or employees of the Company, or upon a financial statement of the Company provided by a person in charge of its accounts or certified by a public accountant or a firm of public accountants, which the Independent Director had reasonable grounds to believe to be true.

(d) In the event the Independent Director intends to engage separate legal counsel, the Independent Director shall provide at least three business days’ prior written notice to the Company identifying therein: (i) the name, address, telephone number, and hourly rate(s) of the attorney(s) the Independent Director intends to engage; (ii) the Proceeding in which the Independent Director has been named as a party or is threatened to be named as a party; and (iii) the basis for the Independent Director’s reasonable belief that he has been named or is threatened to be named as a party to a Proceeding, including any supporting documentation. The Company may, in its discretion, decline to pay any Indemnifiable Amounts incurred where the Independent Director has failed to comply with the notice requirements set forth in this subparagraph (d).

8. EXCEPTIONS TO INDEMNIFICATION. Director shall be entitled to indemnification under Sections 7(a) and 7(b) above in all circumstances other than the following:

(a) If indemnification is requested under Section 7(a) and it has been adjudicated finally by a court or arbitral body of competent jurisdiction that, in connection with the subject of the Proceeding out of which the claim for indemnification has arisen, (i) the Independent Director failed to act in good faith and in a manner the Independent Director reasonably believed to be in or not opposed to the best interests of the Company, (ii) the Independent Director had reasonable cause to believe that the Independent Director’s conduct was unlawful, or (iii) the Independent Director’s conduct constituted willful misconduct, fraud or knowing violation of law, then the Independent Director shall not be entitled to payment of Indemnifiable Amounts hereunder.

(b) If indemnification is requested under Section 7(b) and

(i) it has been adjudicated finally by a court or arbitral body of competent jurisdiction that, in connection with the subject of the Proceeding out of which the claim for indemnification has arisen, the Independent Director failed to act in good faith and in a manner the Independent Director reasonably believed to be in or not opposed to the best interests of the Company, including without limitation, the breach of Section 4 hereof by the Independent Director, the Independent Director shall not be entitled to payment of Indemnifiable Amounts hereunder; or

(ii) it has been adjudicated finally by a court or arbitral body of competent jurisdiction that the Independent Director is liable to the Company with respect to any claim, issue or matter involved in the Proceeding out of which the claim for indemnification has arisen, including, without limitation, a claim that the Independent Director received an improper benefit or improperly took advantage of a corporate opportunity, the Independent Director shall not be entitled to payment of Indemnifiable Amounts hereunder with respect to such claim, issue or matter.

9. WHOLLY OR PARTLY SUCCESSFUL. Notwithstanding any other provision of this Agreement, and without limiting any such provision, to the extent that the Independent Director is, by reason of the Independent Director’s Corporate Status, a party to and is successful, on the merits or otherwise, in any Proceeding, the Independent Director shall be indemnified in connection therewith. If the Independent Director is not wholly successful in such Proceeding but is successful, on the merits or otherwise, as to one or more but less than all claims, issues or matters in such Proceeding, the Company shall indemnify the Independent Director against those Expenses reasonably incurred by the Independent Director or on the Independent Director’s behalf in connection with each successfully resolved claim, issue or matter. For purposes of this section, the termination of any claim, issue or matter in such a Proceeding by dismissal, with or without prejudice, shall be deemed to be a successful result as to such claim, issue or matter.

10. ADVANCES AND INTERIM EXPENSES. Within ten (10) business days of the Independent Director’s written request for indemnification, the Company shall pay to the Independent Director all Indemnifiable Expenses incurred by the Independent Director in connection with any Proceeding, including a Proceeding by or in the right of the Company, in advance of the final disposition of such Proceeding, if the Independent Director furnishes the Company with a written undertaking, to the satisfaction of the Company, to repay the amount of such Indemnifiable Expenses advanced to the Independent Director in the event it is finally determined by a court or arbitral body of competent jurisdiction that the Independent Director is not entitled under this Agreement to indemnification with respect to such Indemnifiable Expenses.

11. PROCEDURE FOR PAYMENT OF INDEMNIFIABLE AMOUNTS. The Independent Director shall submit to the Company a written request specifying the Indemnifiable Amounts, for which the Independent Director seeks payment under Section 7 hereof, and the Proceeding of which the Independent Director has previously notified the Company. At the request of the Company, the Independent Director shall furnish such documentation and information as are reasonably available to the Independent Director and necessary to establish that the Independent Director is entitled to indemnification hereunder. The Company shall pay such Indemnifiable Amounts within ten (10) days of receipt of all required documents.

12. REMEDIES OF INDEPENDENT DIRECTOR.

(a) RIGHT TO PETITION COURT. In the event that the Independent Director makes a request for payment of Indemnifiable Amounts under Sections 7, 9-11 above, or seeks payment of insurance under Section 14 below, and such payment or advancement is not made in a timely manner: (i) by the Company pursuant to the terms of this Agreement, or (ii) by any insurer pursuant to the terms of its insurance policy, then the Independent Director may petition the appropriate judicial authority to enforce the Company’s or any insurer’s obligations.

(b) BURDEN OF PROOF. In any judicial proceeding brought under Section 12 (a) above, the Company shall have the burden of proving that the Independent Director is not entitled to payment of Indemnifiable Amounts hereunder.

(c) EXPENSES. The Company agrees to reimburse the Independent Director in full for any Expenses incurred by the Independent Director in connection with investigating, preparing for, litigating, defending or settling any action brought by the Independent Director under Section 12 (a) above, or in connection with any claim or counterclaim brought by the Company in connection therewith.

(d) VALIDITY OF AGREEMENT. The Company shall be precluded from asserting in any Proceeding, including, without limitation, an action under Section 12(a) above, that the provisions of this Agreement are not valid, binding and enforceable or that there is insufficient consideration for this Agreement and shall stipulate in court that the Company is bound by all the provisions of this Agreement.

(e) FAILURE TO ACT NOT A DEFENSE. The failure of the Company (including its Board of Directors or any committee thereof, independent legal counsel, or stockholders) to make a determination concerning the permissibility of the payment of Indemnifiable Amounts or the advancement of Indemnifiable Expenses under this Agreement shall not be a defense in any action brought under Section 12(a) above.

13. PROCEEDINGS AGAINST COMPANY. Except as otherwise provided in this Agreement, the Independent Director shall not be entitled to payment of Indemnifiable Amounts or advancement of Indemnifiable Expenses with respect to any Proceeding brought by the Independent Director against the Company, any Entity which the Company controls, any director or officer thereof, or any third party, unless the Company has consented to the initiation of such Proceeding. This section shall not apply to counterclaims or affirmative defenses asserted by the Independent Director in an action brought against the Independent Director.

14. INSURANCE. The Company shall obtain and maintain a policy or policies of director and officer liability insurance, with an aggregate limit of liability of not less than $5,000,000, providing the Independent Director with coverage for claims against the Independent Director by reason of his Corporate Status, in accordance with the terms of said insurance policy or policies (“D&O Insurance”); provided that the Company shall not be liable under this Agreement to make any payment in connection with any claim made against the Independent Director to the extent that the Independent Director has otherwise received payment under any insurance policy of the amounts otherwise indemnifiable hereunder. The Company shall take any actions it deems reasonably necessary or desirable to cause the D&O insurer(s) to pay, on behalf of the Independent Director, all amounts payable in accordance with the terms of the D&O Insurance.

15. SUBROGATION. In the event of any payment of Indemnifiable Amounts under this Agreement or the D&O Insurance, the Company or its Insurance Carrier, as the case may be, shall be subrogated to the extent of such payment to all of the rights of contribution or recovery of the Independent Director against other persons, and the Independent Director shall take, at the request of the Company, all reasonable action necessary to secure such rights, including the execution of such documents as are necessary to enable the Company to bring suit to enforce such rights.

16. AUTHORITY. Each party has all necessary power and authority to enter into, and be bound by the terms of, this Agreement, and the execution, delivery and performance of the undertakings contemplated by this Agreement have been duly authorized by each party hereto:

17. SUCCESSORS AND ASSIGNMENT. This Agreement shall (a) be binding upon and inure to the benefit of all successors and assigns of the Company (including any transferee of all or a substantial portion of the business, stock and/or assets of the Company and any direct or indirect successor by merger or consolidation or otherwise by operation of law), and (b) be binding on and shall inure to the benefit of the heirs, personal representatives, executors and administrators of the Independent Director. The Independent Director has no power to assign this Agreement or any rights and obligations hereunder.

18. CHANGE IN LAW. To the extent that a change in applicable law (whether by statute or judicial decision) shall mandate broader or narrower indemnification than is provided hereunder, the Independent Director shall be subject to such broader or narrower indemnification and this Agreement shall be deemed to be amended to such extent.

19. SEVERABILITY. Whenever possible, each provision of this Agreement shall be interpreted in such a manner as to be effective and valid under applicable law, but if any provision of this Agreement, or any clause thereof, shall be determined by a court of competent jurisdiction to be illegal, invalid or unenforceable, in whole or in part, such provision or clause shall be limited or modified in its application to the minimum extent necessary to make such provision or clause valid, legal and enforceable, and the remaining provisions and clauses of this Agreement shall remain fully enforceable and binding on the parties.

20. MODIFICATIONS AND WAIVER. Except as provided in Section 18 hereof with respect to changes in applicable law which broaden or narrow the right of the Independent Director to be indemnified by the Company, no supplement, modification or amendment of this Agreement shall be binding unless executed in writing by each of the parties hereto. No delay in exercise or non-exercise by the Company of any right under this Agreement shall operate as a current or future waiver by it as to its same or different rights under this Agreement or otherwise.

21. NOTICES. All notices, requests, demands and other communications hereunder shall be in writing and shall be deemed to have been duly given (a) when delivered by hand, (b) when transmitted by facsimile and receipt is acknowledged, or (c) if mailed by certified or registered mail with postage prepaid, on the third business day after the date in which it is so mailed:

If to Independent Director, to: GPO Box 5247, Hong Kong.

If to the Company, to: Jinhua Zhu, CEO, Lihua International, Houxiang Five Star Industry District, Danyang City, Jiangsu Province, PR China 212312, or to such other address as may have been furnished in the same manner by any party to the others.

22. GOVERNING LAW. This Agreement shall be governed by and construed and enforced under the laws of the State of Delaware.

23. CONSENT TO JURISDICTION. The parties hereby consent to the jurisdiction of the courts having jurisdiction over matters arising in Delaware for any proceeding arising out of or relating to this Agreement. The parties agree that in any such proceeding, each party shall waive, if applicable, inconvenience of forum and right to a jury.

24. AGREEMENT GOVERNS. This Agreement is to be deemed consistent wherever possible with relevant provisions of the By-Laws and Certificate of Incorporation of the Company; however, in the event of a conflict between this Agreement and such provisions, the provisions of this Agreement shall control.

25. INDEPENDENT CONTRACTOR. The parties understand, acknowledge and agree that the Independent Director’s relationship with the Company is that of an independent contractor and nothing in this Agreement is intended to or should be construed to create a relationship other than that of independent contractor. Nothing in this Agreement shall be construed as a contract of employment/engagement between the Independent Director and the Company or as a commitment on the part of the Company to retain the Independent Director in any capacity, for any period of time or under any specific terms or conditions, or to continue the Independent Director’s service to the Company beyond any period.

26. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement between the Company and the Independent Director with respect to the subject matter hereof, and supersedes all prior understandings and agreements with respect to such subject matter.

IN WITNESS WHEREOF, the parties hereto have executed this Independent Director Agreement as of the day and year first above written.

AGREED	AGREED
LIHUA INTERNATIONAL, INC.	INDEPENDENT DIRECTOR
/s/ Jianhua Zhu	/s/ Siu Ki Lau
Name:  Jianhua Zhu	Name: Siu Ki Lau
Title:   Chairman and CEO

SCHEDULE A

I. COMPENSATION:

A. Fees. For all services rendered by the Independent Director pursuant to this Agreement, both during and outside of normal working hours, including but not limited to, attending all required meetings of the Board or applicable committees thereof, executive sessions of the independent directors, reviewing filing reports and other corporate documents as requested by the Company, providing comments and opinions as to business matters as requested by the Company, the Company agrees to pay to the Independent Director a fee in cash of Four Thousand Dollars ($4,000) per month during the Term (the “Base Fee”), so long as the Independent Director is serving on the Board of Directors. The Base Fee shall be paid in cash to the Independent Director on a quarterly basis in equal installments on the last day of each calendar quarter.

B. Stock Option. Upon execution of this Agreement the Independent Director shall be granted a 10-year option to purchase Twenty Thousand (20,000) shares of common stock of the Company, with an exercise price equal to the fair market value of a share of the Company’s common stock on the date of the grant of the option. Such option shall vest in equal installments on July 14, 2013, October 14, 2013, January 14, 2014 and April 14, 2014, as long as the Independent Director is serving as a member of the Board of Directors at each such time. Such award shall be made pursuant to the Company’s 2009 Omnibus Securities and Incentive Plan. The Independent Director’s rights in respect to any grant shall be determined solely by the Compensation Committee of the Company and are subject to execution by Independent Director of any applicable agreements as established and requested by the Company pursuant to the 2009 Omnibus Securities and Incentive Plan.

C. Expenses. During the Term the Company shall promptly reimburse the Independent Director for all expenses incurred by him/her in connection with attending (a) all meetings of the Board or applicable committees thereof, (b) executive sessions of the independent directors, (c) stockholder meetings, as a director or a member of any committee of the Board, which are approved by the Company in advance and (d) subject to prior Company approval, other Company-related travel. The Company will promptly reimburse the Independent Director for hotel accommodation expenses actually incurred in connection with any such meetings the Independent Director attends, up to $350 per night for stays of up to five nights per meeting. The Company will only reimburse the Independent Director for economy class airplane tickets purchased for Company business, provided, however, that if the total flight time exceeds six hours, the Company will reimburse the Independent Director for business class tickets. The amount of such expenses eligible for reimbursement by the Company during a calendar year shall not affect such expenses eligible for reimbursement by the Company in any other calendar year, and the reimbursement of any such eligible expenses shall be made on or before the last day of the calendar year next following the calendar year in which the expense was incurred. Additionally, the Company will reimburse the Independent Director up to $3,000 during the Term, for the actual costs incurred to travel to and attend bona fide director education seminars that the Independent Director may, in his discretion, select.

D. No Other Benefits Or Compensation. The Independent Director acknowledges and agrees that he is not granted and is not entitled to any other benefits or compensation from the Company for the services provided under this Agreement except expressly provided for in this Schedule A.

AGREED	AGREED
LIHUA INTERNATIONAL, INC.	INDEPENDENT DIRECTOR
/s/ Jianhua Zhu	/s/ Siu Ki Lau
Name:  Jianhua Zhu	Name: Siu Ki Lau
Title:   Chairman and CEO

EX-23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We hereby consent to the incorporation by reference in the Registration Statement (No. 333-164269) on Form S-3 and Post Effective Amendment No. 2 to Form S-1 on Form S-3 (Registration No. 333-156120) of our report dated March 17, 2014, relating to the consolidated financial statements of Lihua International, Inc. and its subsidiaries (collectively the “Company”) and the effectiveness of the Company’s internal control over financial reporting, which appears in this Annual Report on Form 10-K of the Company for the year ended December 31, 2013.

/s/ Crowe Horwath (HK) CPA Limited

Hong Kong, China

March 17, 2014

EX-31.1

EXHIBIT 31.1

CERTIFICATIONS PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

CERTIFICATION

I, Jianhua Zhu, certify that:

1.           I have reviewed this annual report on Form 10-K of Lihua International, Inc.

2.           Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.           Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.           The registrant’s other certifying officer(s) and I are responsible establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15 (e) and 15d-15 (e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we have:

(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;

(b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this annual report based on such evaluation; and

(d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s fourth fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.           The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

/s/ Jianhua Zhu

Jianhua Zhu

Chief Executive Officer

Date: March 17, 2014

EX-31.2

EXHIBIT 31.2

CERTIFICATIONS PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

CERTIFICATION

I, Daphne Huang, certify that:

1.           I have reviewed this annual report on Form 10-K of Lihua International, Inc.

2.           Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.           Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.           The registrant’s other certifying officer(s) and I are responsible establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15 (e) and 15d-15 (e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we have:

(a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;

(b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this annual report based on such evaluation; and

(d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s fourth fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.           The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

/s/ Daphne Huang

Daphne Huang

Chief Financial Officer

Date: March 17, 2014

EX-32.1

EXHIBIT 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Lihua International, Inc. (the “Company”) on Form 10-K for the period ending December 31, 2013, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Jianhua Zhu, Principal Executive Officer of the Company, certify, pursuant to 18 U.S.C. 1350, as adopted pursuant to 906 of the Sarbanes-Oxley Act of 2002, to my knowledge that:

1.	The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2.	The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

/s/ Jianhua Zhu

Jianhua Zhu

Chief Executive Officer

Date: March 17, 2014

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

EX-32.2

EXHIBIT 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Lihua International, Inc. (the “Company”) on Form 10-K for the period ending December 31, 2013, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Daphne Huang, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. 1350, as adopted pursuant to 906 of the Sarbanes-Oxley Act of 2002, to my knowledge that:

1.	The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
2.	The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

/s/ Daphne Huang

Daphne Huang

Chief Financial Officer

Date: March 17, 2014

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

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PROPERTY, PLANT AND EQUIPMENT, NET (Tables)

12 Months Ended

Dec. 31, 2013

Property, Plant and Equipment, Net [Abstract]

Property, Plant and Equipment Net

Property, plant and equipment, net consisted of the following:

	As of December 31,
	2013		2012
Cost:
Buildings	$	35,481,843	$	34,264,012
Office equipment		431,648		415,007
Motor vehicles		774,693		696,015
Machinery		23,775,665		21,545,892
Total cost		60,463,849		56,920,926
Less: Accumulated depreciation		(13,324,391)		(9,723,811)
Net book value	$	47,139,458	$	47,197,115

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Proportion of Equity Interests (Detail)	Dec. 31, 2013
Magnify Wealth
Schedule of Equity Method Investments [Line Items]
Equity Method Investment Ownership Percentage Before Restructuring	100.00%
Equity Method Investment Ownership Percentage After Restructuring	100.00%
Ally Profit
Schedule of Equity Method Investments [Line Items]
Equity Method Investment Ownership Percentage Before Restructuring	100.00%
Equity Method Investment Ownership Percentage After Restructuring	100.00%
Lihua Holdings
Schedule of Equity Method Investments [Line Items]
Equity Method Investment Ownership Percentage Before Restructuring	100.00%
Equity Method Investment Ownership Percentage After Restructuring	100.00%
Lihua Electron
Schedule of Equity Method Investments [Line Items]
Equity Method Investment Ownership Percentage Before Restructuring	100.00%
Equity Method Investment Ownership Percentage After Restructuring	100.00%
Lihua Copper
Schedule of Equity Method Investments [Line Items]
Equity Method Investment Ownership Percentage Before Restructuring	100.00%
Equity Method Investment Ownership Percentage After Restructuring	100.00%
Mr Fo Ho Chu Shareholder | Magnify Wealth
Schedule of Equity Method Investments [Line Items]
Equity Method Investment Ownership Percentage Before Restructuring	100.00%
Equity Method Investment Ownership Percentage After Restructuring	100.00%
Mr Fo Ho Chu Shareholder | Ally Profit
Schedule of Equity Method Investments [Line Items]
Equity Method Investment Ownership Percentage Before Restructuring	0.00%
Equity Method Investment Ownership Percentage After Restructuring	0.00%
Mr Fo Ho Chu Shareholder | Lihua Holdings
Schedule of Equity Method Investments [Line Items]
Equity Method Investment Ownership Percentage Before Restructuring	0.00%
Equity Method Investment Ownership Percentage After Restructuring	0.00%
Mr Fo Ho Chu Shareholder | Lihua Electron
Schedule of Equity Method Investments [Line Items]
Equity Method Investment Ownership Percentage Before Restructuring	45.46%
Equity Method Investment Ownership Percentage After Restructuring	0.00%
Mr Fo Ho Chu Shareholder | Lihua Copper
Schedule of Equity Method Investments [Line Items]
Equity Method Investment Ownership Percentage Before Restructuring	0.00%
Equity Method Investment Ownership Percentage After Restructuring	0.00%
Magnify Wealth Shareholder | Magnify Wealth
Schedule of Equity Method Investments [Line Items]
Equity Method Investment Ownership Percentage Before Restructuring	0.00%
Equity Method Investment Ownership Percentage After Restructuring	0.00%
Magnify Wealth Shareholder | Ally Profit
Schedule of Equity Method Investments [Line Items]
Equity Method Investment Ownership Percentage Before Restructuring	100.00%
Equity Method Investment Ownership Percentage After Restructuring	100.00%
Magnify Wealth Shareholder | Lihua Holdings
Schedule of Equity Method Investments [Line Items]
Equity Method Investment Ownership Percentage Before Restructuring
Equity Method Investment Ownership Percentage After Restructuring	0.00%
Magnify Wealth Shareholder | Lihua Electron
Schedule of Equity Method Investments [Line Items]
Equity Method Investment Ownership Percentage Before Restructuring	0.00%
Equity Method Investment Ownership Percentage After Restructuring	0.00%
Magnify Wealth Shareholder | Lihua Copper
Schedule of Equity Method Investments [Line Items]
Equity Method Investment Ownership Percentage Before Restructuring	0.00%
Equity Method Investment Ownership Percentage After Restructuring	0.00%
Ally Profit Shareholder | Magnify Wealth
Schedule of Equity Method Investments [Line Items]
Equity Method Investment Ownership Percentage Before Restructuring	0.00%
Equity Method Investment Ownership Percentage After Restructuring	0.00%
Ally Profit Shareholder | Ally Profit
Schedule of Equity Method Investments [Line Items]
Equity Method Investment Ownership Percentage Before Restructuring	0.00%
Equity Method Investment Ownership Percentage After Restructuring	0.00%
Ally Profit Shareholder | Lihua Holdings
Schedule of Equity Method Investments [Line Items]
Equity Method Investment Ownership Percentage Before Restructuring	100.00%
Equity Method Investment Ownership Percentage After Restructuring	100.00%
Ally Profit Shareholder | Lihua Electron
Schedule of Equity Method Investments [Line Items]
Equity Method Investment Ownership Percentage Before Restructuring	0.00%
Equity Method Investment Ownership Percentage After Restructuring	0.00%
Ally Profit Shareholder | Lihua Copper
Schedule of Equity Method Investments [Line Items]
Equity Method Investment Ownership Percentage Before Restructuring	0.00%
Equity Method Investment Ownership Percentage After Restructuring	0.00%
Lihua Holdings Shareholder | Magnify Wealth
Schedule of Equity Method Investments [Line Items]
Equity Method Investment Ownership Percentage Before Restructuring	0.00%
Equity Method Investment Ownership Percentage After Restructuring	0.00%
Lihua Holdings Shareholder | Ally Profit
Schedule of Equity Method Investments [Line Items]
Equity Method Investment Ownership Percentage Before Restructuring	0.00%
Equity Method Investment Ownership Percentage After Restructuring	0.00%
Lihua Holdings Shareholder | Lihua Holdings
Schedule of Equity Method Investments [Line Items]
Equity Method Investment Ownership Percentage Before Restructuring	0.00%
Equity Method Investment Ownership Percentage After Restructuring	0.00%
Lihua Holdings Shareholder | Lihua Electron
Schedule of Equity Method Investments [Line Items]
Equity Method Investment Ownership Percentage Before Restructuring	0.00%
Equity Method Investment Ownership Percentage After Restructuring	100.00%
Lihua Holdings Shareholder | Lihua Copper
Schedule of Equity Method Investments [Line Items]
Equity Method Investment Ownership Percentage Before Restructuring	0.00%
Equity Method Investment Ownership Percentage After Restructuring	100.00%
Danyang Special Electronics Co Ltd Shareholder | Magnify Wealth
Schedule of Equity Method Investments [Line Items]
Equity Method Investment Ownership Percentage Before Restructuring	0.00%	[1]
Equity Method Investment Ownership Percentage After Restructuring	0.00%	[1]
Danyang Special Electronics Co Ltd Shareholder | Ally Profit
Schedule of Equity Method Investments [Line Items]
Equity Method Investment Ownership Percentage Before Restructuring	0.00%	[1]
Equity Method Investment Ownership Percentage After Restructuring	0.00%	[1]
Danyang Special Electronics Co Ltd Shareholder | Lihua Holdings
Schedule of Equity Method Investments [Line Items]
Equity Method Investment Ownership Percentage Before Restructuring	0.00%	[1]
Equity Method Investment Ownership Percentage After Restructuring	0.00%	[1]
Danyang Special Electronics Co Ltd Shareholder | Lihua Electron
Schedule of Equity Method Investments [Line Items]
Equity Method Investment Ownership Percentage Before Restructuring	52.27%	[1]
Equity Method Investment Ownership Percentage After Restructuring	0.00%	[1]
Danyang Special Electronics Co Ltd Shareholder | Lihua Copper
Schedule of Equity Method Investments [Line Items]
Equity Method Investment Ownership Percentage Before Restructuring	25.00%	[1]
Equity Method Investment Ownership Percentage After Restructuring	0.00%	[1]
Invest Unicorn Holdings Limited Shareholder | Magnify Wealth
Schedule of Equity Method Investments [Line Items]
Equity Method Investment Ownership Percentage Before Restructuring	0.00%	[2]
Equity Method Investment Ownership Percentage After Restructuring	0.00%	[2]
Invest Unicorn Holdings Limited Shareholder | Ally Profit
Schedule of Equity Method Investments [Line Items]
Equity Method Investment Ownership Percentage Before Restructuring	0.00%	[2]
Equity Method Investment Ownership Percentage After Restructuring	0.00%	[2]
Invest Unicorn Holdings Limited Shareholder | Lihua Holdings
Schedule of Equity Method Investments [Line Items]
Equity Method Investment Ownership Percentage Before Restructuring	0.00%	[2]
Equity Method Investment Ownership Percentage After Restructuring	0.00%	[2]
Invest Unicorn Holdings Limited Shareholder | Lihua Electron
Schedule of Equity Method Investments [Line Items]
Equity Method Investment Ownership Percentage Before Restructuring	0.00%	[2]
Equity Method Investment Ownership Percentage After Restructuring	0.00%	[2]
Invest Unicorn Holdings Limited Shareholder | Lihua Copper
Schedule of Equity Method Investments [Line Items]
Equity Method Investment Ownership Percentage Before Restructuring	75.00%	[2]
Equity Method Investment Ownership Percentage After Restructuring	0.00%	[2]
Imbis Europe Bv Ho Asia Trading Edc Shareholder | Magnify Wealth
Schedule of Equity Method Investments [Line Items]
Equity Method Investment Ownership Percentage Before Restructuring	0.00%
Equity Method Investment Ownership Percentage After Restructuring	0.00%
Imbis Europe Bv Ho Asia Trading Edc Shareholder | Ally Profit
Schedule of Equity Method Investments [Line Items]
Equity Method Investment Ownership Percentage Before Restructuring	0.00%
Equity Method Investment Ownership Percentage After Restructuring	0.00%
Imbis Europe Bv Ho Asia Trading Edc Shareholder | Lihua Holdings
Schedule of Equity Method Investments [Line Items]
Equity Method Investment Ownership Percentage Before Restructuring	0.00%
Equity Method Investment Ownership Percentage After Restructuring	0.00%
Imbis Europe Bv Ho Asia Trading Edc Shareholder | Lihua Electron
Schedule of Equity Method Investments [Line Items]
Equity Method Investment Ownership Percentage Before Restructuring	2.27%
Equity Method Investment Ownership Percentage After Restructuring	0.00%
Imbis Europe Bv Ho Asia Trading Edc Shareholder | Lihua Copper
Schedule of Equity Method Investments [Line Items]
Equity Method Investment Ownership Percentage Before Restructuring	0.00%
Equity Method Investment Ownership Percentage After Restructuring	0.00%

[1] Equity interests in Danyang Special Electronics Co., Ltd., a PRC domestic company, are held as to 60% by Mr. Zhu and 40% by his wife. Mr. Zhu and his wife are acting in concert and considered parties to the same control group.

[2] Invest Unicorn Holdings Limited, incorporated in the British Virgin Islands, is 100% beneficially owned by Mr. Zhu.

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COMMITMENTS AND CONTINGENCIES (Tables)

12 Months Ended

Dec. 31, 2013

Commitments and Contingencies Disclosure [Abstract]

Commitments for Minimum Lease Payments Under Operating Leases

The Company’s commitments for minimum lease payments under these operating leases for the next five years and thereafter as of December 31, 2013 are as follows:

Payable within:
- fiscal year ending December 31, 2014	$	21,650
- fiscal year ending December 31, 2015 and thereafter		-
Total	$	21,650

Unrecorded Unconditional Purchase Obligations Disclosure

Capital commitments  – contracted but not provided for 

	As of December 31,
	2013		2012
Acquisition or construction of buildings - within one year	$	552.412	$	-
Purchase of machinery - within one year		309,994		365,922
	$	862,406	$	365,922

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Intangible Assets (Detail) (USD $)	Dec. 31, 2013	Dec. 31, 2012
Finite-Lived Intangible Assets [Line Items]
Computer software, cost	$ 60,429	$ 15,524
Less: Accumulated amortization	(18,234)	(12,192)
Intangible assets	$ 42,195	$ 3,332

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Additional Information (Detail) (USD $)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Significant Accounting Policies [Line Items]
Land use rights, useful life	5 years
Research and development costs	$ 1,305,379	$ 1,779,018	$ 954,299
Advertising costs	13,247	856	17,138
Shipping and handling costs	$ 2,424,613	$ 2,343,646	$ 2,051,193
Land use rights
Significant Accounting Policies [Line Items]
Land use rights, useful life	50 years

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SHARE BASED COMPENSATION - Additional Information (Detail) (USD $)	12 Months Ended			1 Months Ended	12 Months Ended			0 Months Ended				1 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011	Oct. 23, 2011 Chief Financial Officer	Dec. 31, 2013 Chief Financial Officer	Dec. 31, 2012 Chief Financial Officer	Dec. 31, 2011 Chief Financial Officer	May 30, 2013 Independent Directors	Apr. 26, 2012 Independent Directors	Jun. 03, 2011 Independent Directors	Jan. 14, 2011 Independent Directors	Oct. 23, 2011 Employee	Oct. 23, 2011 Executive Vice President Of Finance Danyang Lihua Electron Co., Ltd.
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based compensation arrangement by share-based payment award, Vesting Rights				vest in equal installments on October 23, 2012, 2013 and 2014	112,500 of such shares were released to Mr. Yu on each of the first, second and third anniversary of the consummation of the Share Exchange.			The options vest and become exercisable in equal installments on July 14, 2013, October 14, 2013, January 14, 2014 and April 14, 2014	The options vest and become exercisable in equal installments on July 14, 2012, October 14, 2012, January 14, 2013 and April 14, 2013	The options vest and become exercisable in equal installments on July 14, 2011, October 14, 2011, January 14, 2012 and April 14, 2012	The options vest and become exercisable in equal installments on December 3, 2010, January 16, 2011, March 1, 2011 and April 14, 2011	These options vest in installments of 40,000, 30,000 and 30,000 shares on October 23, 2012, 2013 and 2014, respectively	vest in installments of 40,000, 30,000 and 30,000 shares on October 23, 2012, 2013 and 2014, respectively
Options strike price	$ 5.60	$ 5.63	$ 4.85	$ 4.50
Stock or unit option plan expense	$ 343,513	$ 382,089	$ 286,337
Shares held in employee stock option plan, allocated					450,000
Stock issued during period, shares, employee stock ownership plan					112,500
Allocated share-based compensation expense							211,875
Share-based compensation arrangement by share-based payment award, options, grants in period, weighted average grant date fair value					$ 2.26	$ 2.26	$ 2.26
Granted	60,000	60,000	600,000	225,000				20,000	20,000	20,000	15,000	100,000	100,000
Option indexed to issuers equity, strike price								5.60	5.63	6.49	10.64	4.50	4.50
Share based compensation arrangement by share based payment award options granted in period contractual term				10 years				10 years	10 years	10 years	10 years	10 years	10 years
Deferred compensation arrangement with individual, cash award granted, amount				$ 200,000									$ 150,000

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INCOME TAXES (Tables)

12 Months Ended

Dec. 31, 2013

Income Tax Disclosure [Abstract]

Provision for Income Tax

The Company’s provision for income taxes consisted of:

	Year ended December 31,
	2013		2012		2011
PRC income tax:
Current	$	19,843,738	$	20,555,465	$	17,388,836
Deferred		(118,821)		175,379		(65,136)
	$	19,724,917	$	20,730,844	$	17,323,700

Reconciliation of Provision For Income Taxes Determined at Local Income Tax Rate to Effective Income Tax Rate

A reconciliation of the provision for income taxes determined at the local income tax rate to the Company’s effective income tax rate is as follows:

	Year ended December 31,
	2013			2012			2011
Pre-tax income	$	75,884,367		$	78,672,847		$	70,457,233
United States federal corporate income tax rate		34	%		34	%		34	%
Income tax computed at United States statutory corporate income tax rate		25,800,685			26,748,768			23,955,459
Reconciling items:
Loss not recognized as deferred tax assets		962,173			1,155,378			771,079
Non-deductible expenses		14,492			197,375			175,696
Change in fair value of warrants		39,068			17,241			(1,071,460)
Rate differential for PRC earnings		(7,091,501)			(7,399,559)			(6,260,780)
Other		-			11,641			(246,294)
Effective tax expense	$	19,724,917		$	20,730,844		$	17,323,700

Significant Components of Deferred Income Tax Assets

Significant components of deferred income tax assets are as follows:

	As of December 31,
	2013		2012
Deferred income tax assets:
Net operating loss carryforward	$	5,744,674	$	4,786,510
Unrealized intercompany profit in inventory		25,178		24,948
Accrued R&D expenses		121,240		-
Less: Valuation allowance		(5,744,674)		(4,786,510)
	$	146,418	$	24,948

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables)

12 Months Ended

Dec. 31, 2013

Accounting Policies [Abstract]

Estimated Useful Lives of Assets

Depreciation for financial reporting purposes is provided using the straight-line method over the estimated useful lives of the assets as follows:

	Useful Life
	(In years)
Buildings	20
Machinery	5-10
Office equipment & motor vehicles	5

Schedule of Amortization Policy on Intangible Assets

The Company’s intangible assets include computer software.  The Company’s amortization policy on intangible assets is as follows:

	Useful Life
	(In years)
Computer software	5

Exchange Rates Used to Translate Amounts in RMB to U.S. Dollars

The exchange rates used to translate amounts in RMB into U.S. Dollars for the purposes of preparing the consolidated financial statements are based on the rates as published on the website of People’s Bank of China and are as follows:

	2013	2012	2011
Balance sheet items, except for equity accounts	US$1=RMB6.0969	US$1=RMB6.2855	US$1=RMB6.3009
Items in the statements of income and cash flows	US$1=RMB6.1932	US$1=RMB6.3125	US$1=RMB6.4588

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Movements of Options Issued and Outstanding (Detail) (USD $)	12 Months Ended
	Dec. 31, 2013		Dec. 31, 2012		Dec. 31, 2011		Dec. 31, 2010
Number of Underlying Shares
Number of underlying shares, Outstanding at beginning of the period	715,000		715,000		115,000
Granted	60,000		60,000		600,000
Exercised	(110,000)		0		0
Expired	0		0		0
Forfeited	0		(60,000)		0
Number of underlying shares, Outstanding at end of the period	665,000		715,000		715,000		115,000
Number of underlying shares, Exercisable at December 31, 2013	515,000
Weighted Average Exercise Price Per Share
Weighted-Average Exercise Price Per Share, Outstanding at beginning of the period	$ 5.25		$ 5.16		$ 6.74
Granted	$ 5.60		$ 5.63		$ 4.85
Exercised	$ 4.50		$ 0		$ 0
Expired	$ 0		$ 0		$ 0
Forfeited	$ 0		$ 4.50		$ 0
Weighted-Average Exercise Price Per Share, Outstanding at end of the period	$ 5.41		$ 5.25		$ 5.16		$ 6.74
Weighted-Average Exercise Price Per Share, Exercisable at December 31, 2013	$ 5.64
Aggregate Intrinsic Value
Aggregate Intrinsic Value, Outstanding at beginning of the period	$ 65,700	[1]	$ 213,300	[1]	$ 517,450	[1]
Granted	0	[1]	0	[1]	0	[1]
Exercised	0	[1]	0	[1]	0	[1]
Expired	0	[1]	0	[1]	0	[1]
Forfeited	0	[1]	0	[1]	0	[1]
Aggregate Intrinsic Value, Outstanding at end of the period	551,300	[1]	65,700	[1]	213,300	[1]	517,450	[1]
Aggregate Intrinsic Value, Exercisable at December 31, 2013	$ 384,800	[1]
Weighted Average Contractual Life Remaining in Years
Weighted-Average Contractual Life Remaining in Years, Outstanding	7 years 7 months 20 days		8 years 5 months 19 days		9 years 5 months 5 days		9 years
Granted	10 years		10 years		10 years
Weighted-Average Contractual Life Remaining in Years, Exercisable at December 31, 2013	7 years 6 months 14 days

[1] The intrinsic value of the stock options at December 31, 2013, 2012 and 2011 is the amount by which the market value of the Company’s common stock of $5.72, $4.39 and $4.76 as of December 31, 2013, 2012 and 2011 exceeds the exercise price of the option.

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Property, Plant and Equipment Net (Detail) (USD $)	Dec. 31, 2013	Dec. 31, 2012
Cost:
Total cost	$ 60,463,849	$ 56,920,926
Less: Accumulated depreciation	(13,324,391)	(9,723,811)
Net book value	47,139,458	47,197,115
Buildings
Cost:
Total cost	35,481,843	34,264,012
Office equipment
Cost:
Total cost	431,648	415,007
Motor vehicles
Cost:
Total cost	774,693	696,015
Machinery
Cost:
Total cost	$ 23,775,665	$ 21,545,892

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RELATED PARTY TRANSACTIONS - Additional Information (Detail)	0 Months Ended	1 Months Ended	12 Months Ended			1 Months Ended	12 Months Ended			0 Months Ended		1 Months Ended	0 Months Ended		1 Months Ended								1 Months Ended
	Jun. 14, 2011 CNY	Jan. 24, 2011 USD ($)	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011	Jun. 30, 2011 Mr. Jianhua Zhu USD ($)	Dec. 31, 2013 Tianyi Telecom USD ($)	Dec. 31, 2012 Tianyi Telecom USD ($)	Dec. 31, 2011 Tianyi Telecom USD ($)	Apr. 06, 2012 Magnify Wealth Enterprise Limited CNY	Jan. 09, 2012 Magnify Wealth Enterprise Limited CNY	Apr. 26, 2012 Magnify Wealth Enterprise Limited CNY	Jun. 14, 2011 Magnify Wealth Enterprise Limited USD ($)	Jun. 14, 2011 Magnify Wealth Enterprise Limited CNY	Mar. 31, 2012 Magnify Wealth Enterprise Limited CNY	May 23, 2011 Magnify Wealth Enterprise Limited USD ($)	May 25, 2011 Magnify Wealth Enterprise Limited CNY	Apr. 26, 2012 Magnify Wealth Enterprise Limited USD ($)	Apr. 06, 2012 Magnify Wealth Enterprise Limited USD ($)	Mar. 15, 2012 Magnify Wealth Enterprise Limited USD ($)	Jan. 09, 2012 Magnify Wealth Enterprise Limited USD ($)	May 19, 2011 Magnify Wealth Enterprise Limited USD ($)	May 19, 2011 Magnify Wealth Enterprise Limited Maximum USD ($)
Related Party Transaction [Line Items]
Sales made to related party							$ 0	$ 0	$ 620,295
Debt instrument maximum borrowing capacity amount																						4,000,000
Share repurchase program authorized amount		15,000,000																					15,000,000
Unsecured debt																		900,000	500,000	600,000	1,000,000
Repayment of unsecured notes payable	8,434,660									3,150,000	6,300,000	5,650,000	300,000	300,000	3,800,000	1,000,000	1,000,000
Average exchange rate	6.4822		6.1932	6.3125	6.4588					6.2916	6.3126	6.2916			6.3126
Interest rate				2.00%	2.00%
Proceeds from a related party						$ 140,000
Loan agreement dated						Aug. 31, 2011

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Amortization Policy On Intangible Assets (Computer software) (Detail)	12 Months Ended
	Dec. 31, 2013
Acquired Finite-Lived Intangible Assets [Line Items]
Finite-Lived Intangible Asset, Useful Life	5 years

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COMMON STOCK, TREASURY STIOCK, PREFERRED STOCK AND COMMON STOCK PURCHASE WARRANTS - Additional Information (Detail) (USD $)	0 Months Ended		1 Months Ended	12 Months Ended				12 Months Ended	0 Months Ended				1 Months Ended		12 Months Ended	1 Months Ended				1 Months Ended
	Apr. 13, 2012	Jan. 13, 2012	Jan. 24, 2011	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011	Sep. 09, 2009	Dec. 31, 2011 Common Stock	Apr. 14, 2010 IPO	Sep. 09, 2009 IPO	Apr. 14, 2010 Underwriters	Sep. 09, 2009 Underwriters	Oct. 31, 2008 Private Placement	Oct. 31, 2008 Series B Warrants	Dec. 31, 2013 Series B Warrants Private Placement	Oct. 31, 2008 Series A Preferred Stock Private Placement	Oct. 31, 2008 Series A Warrants	Oct. 31, 2008 Series A Warrants Maximum	Oct. 31, 2008 Broadband Capital Management, Llc Series B Warrants	Oct. 31, 2008 Penumbra Worldwide Ltd Series B Warrants
Class Of Warrant Or Right [Line Items]
Warrants exercise price				3.50		3.50											3.50		3.50	3.50
Stock issued during period, shares, new issues									4,285,715		559,006
Equity issuance, per share amount									$ 8.05
Proceeds from issuance of common stock									$ 32,100,000
Share repurchase program authorized amount			15,000,000
Repurchase of common stock (in shares)								264,047
Repurchase of common stock						2,126,597		0
Temporary equity, redemption price per share						$ 8.05											$ 0.01
Dividends Payable, Current						992,846
Dividends	494,089	498,757
Proceeds of the private placement (net of fees and expenses)													13,656,538
Number of shares issued on cashless exercise of warrants				73,696		108,855				138,000							1,500,000		250,000	250,000
Stock and warrants issued during period, value, preferred stock and warrants													1,500,000			6,818,182
Convertible preferred stock, shares issued upon conversion							6,818,182
Class of warrant or rights period from which warrants or rights exercisable																	5 years			5 years
Conversion restriction, number of shares owned percntage than issued and outstanding																		9.90%
Warrants redemption percentage																		9.90%
Description on weighted average price of our common stock																	The daily volume weighted average price of our Common Stock is above $8.87 for 30 consecutive trading days ending on the date of the notice of redemption.
Description on average trading volume in shares														The average trading volume of Common Stock exceeds 100,000 shares for the immediately preceding 30 trading days.			300,000 shares per day.
Proceeds from exercise of warrants				95,441	0	1,898,050									539,910
Allocation of proceeds to beneficial conversion feature				1,002,115
Fair value of common stock on commitment date				$ 2.26
Sale of stock number of additional shares exercised										300,000
Offering price										$ 4.00
Proceeds from issuance initial public offering										$ 7,864,000
Common stock strike price per share										$ 4.80
Sale of stock, number of shares issued in transaction												2,000,000

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Reconciliation of Provision For Income Taxes Determined at Local Income Tax Rate to Effective Income Tax Rate (Detail) (USD $)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Reconciliation of Effective Income Tax Rate [Line Items]
Pre-tax income	$ 75,884,367	$ 78,672,847	$ 70,457,233
United States federal corporate income tax rate	34.00%	34.00%	34.00%
Income tax computed at United States statutory corporate income tax rate	25,800,685	26,748,768	23,955,459
Reconciling items:
Loss not recognized as deferred tax assets	962,173	1,155,378	771,079
Non-deductible expenses	14,492	197,375	175,696
Change in fair value of warrants	39,068	17,241	(1,071,460)
Rate differential for PRC earnings	(7,091,501)	(7,399,559)	(6,260,780)
Other	0	11,641	(246,294)
Income Tax Expense (Benefit)	$ 19,724,917	$ 20,730,844	$ 17,323,700

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STATUTORY RESERVES - Additional Information (Detail)	12 Months Ended
	Dec. 31, 2013
Minimum
Retained Earnings Adjustments [Line Items]
Appropriation to the statutory surplus reserve	10.00%
Maximum
Retained Earnings Adjustments [Line Items]
Appropriation to the statutory surplus reserve	50.00%

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Significant Components of Deferred Income Tax Assets (Detail) (USD $)	Dec. 31, 2013	Dec. 31, 2012
Deferred income tax assets:
Net operating loss carryforward	$ 5,744,674	$ 4,786,510
Unrealized intercompany profit in inventory	25,178	24,948
Accrued R&D expenses	121,240	0
Less: Valuation allowance	(5,744,674)	(4,786,510)
Deferred Tax Assets, Net of Valuation Allowance, Current, Total	$ 146,418	$ 24,948

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Warrants Issued and Outstanding (Detail) (Warrants, USD $)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Warrants
Warrants Outstanding Number of underlying shares
Beginning Balance	283,956	408,956	1,138,420
Granted / Vested	0	0	0
Forfeited	0	0	0
Exercised	(255,500)	(125,000)	(729,464)
Ending Balance	28,456	283,956	408,956
Warrants Outstanding Weighted Average Exercise Price
Beginning Balance	$ 3.63	$ 3.59	$ 3.62
Exercised	$ 3.50	$ 3.50	$ 3.63
Ending Balance	$ 4.80	$ 3.63	$ 3.59
Warrants Outstanding Average Remaining Contractual Life (yrs)
Beginning Balances			2 years 10 months 28 days
Ending Balance	8 months 5 days	10 months 28 days	1 year 10 months 20 days
Warrants Exercisable Number of underlying shares
Beginning Balance	283,956	408,956	1,138,420
Ending Balance	28,456	283,956	408,956
Warrants Exercisable Weighted Average Exercise Price
Beginning Balance	$ 3.63	$ 3.59	$ 3.62
Ending Balance	$ 4.80	$ 3.63	$ 3.59
Warrants Exercisable Average Remaining Contractual Life (yrs)
Beginning Balance			2 years 10 months 28 days
Ending Balance	8 months 5 days	10 months 28 days	1 year 10 months 20 days

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PREPAID LAND USE RIGHTS - Additional Information (Detail)	12 Months Ended				12 Months Ended
	Dec. 31, 2013 USD ($)	Dec. 31, 2012 USD ($)	Dec. 31, 2011 USD ($)	Dec. 31, 2013 CNY	Dec. 31, 2013 Land use rights USD ($)	Dec. 31, 2012 Land use rights USD ($)	Dec. 31, 2011 Land use rights USD ($)	Dec. 31, 2013 Land use rights Jiangsu Lihua Copper Industry Co., Ltd. USD ($)	Dec. 31, 2013 Land use rights Jiangsu Lihua Copper Industry Co., Ltd. CNY
Finite-Lived Intangible Assets [Line Items]
Land use rights, useful life	5 years				50 years
Amortization expense	$ 5,577	$ 644	$ 3,595		$ 411,994	$ 404,207	$ 395,052
Estimated expense of the prepaid land use rights , year one					418,501
Estimated expense of the prepaid land use rights , year two					418,501
Estimated expense of the prepaid land use rights , year three					418,501
Estimated expense of the prepaid land use rights , year four					418,501
Estimated expense of the prepaid land use rights , year five					418,501
Estimated expense of the prepaid land use rights , thereafter					418,501
Payments made to acquire land use rights	5,314,028							5,314,029	32,399,100
Unpaid amount of land use right	393,495			2,399,100
Land use right compensation paid to local communities	$ 5,950,703
Land allocated to the Company, certified	100
Land allocated to company	180
Land allocated to the company, not certified	80

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RELATED PARTY TRANSACTIONS

12 Months Ended

Dec. 31, 2013

Related Party Transactions [Abstract]

RELATED PARTY TRANSACTIONS

NOTE 19 RELATED PARTY TRANSACTIONS  

(1) Sales

For the years ended December 31, 2013, 2012 and 2011, sales included nil, nil, and $620,295, respectively, that were made from Tianyi Telecom.  The controlling stockholders of Tianyi Telecom are related to Ms. Yaying Wang, our COO and one of our directors.

(2) Loans 

On May 19, 2011, Magnify Wealth Enterprise Limited (“Magnify Wealth”), a British Virgin Islands corporation and an entity affiliated with Mr. Jianhua Zhu, the Chief Executive Officer and Chairman of the Company, agreed to loan the Company up to $4 million pursuant to the terms of a demand promissory note (the “Note”) to partially fund the Company’s previously announced $15 million stock repurchase program to make open market purchases of the Company’s common stock (the “Repurchase Program”) (See Note 13 above). While the Company’s operating subsidiaries in the PRC have substantial cash reserves available, the laws of the PRC restrict the conversion of RMB to US dollars, such that the Company has encountered difficulty funding the Repurchase Program with US dollars from cash held by its PRC subsidiaries. The Company explored possible alternative arrangements for funding the Repurchase Program in US dollars with financial institutions, but Company management determined that such alternatives would have been costly or otherwise not appropriate for the Company.

On May 23, 2011, Magnify Wealth loaned $1 million under the Note, which amount the Company repaid in full on May 25, 2011 in RMB. On June 14, 2011, Magnify Wealth loaned $300,000 under the Note, which amount the Company repaid in full on June 14, 2011 in RMB. The total amount repaid was RMB8,434,660, which was repaid at the average rate of 6.4822 RMB per US dollar, which was based upon the exchange rate between US dollars and RMB as set forth by Standard Chartered Bank in Hong Kong. The loans under the Note were unsecured, payable on demand and bore interest at 2% per annum.

On January 9 and March 15, 2012, in order to partially fund the 2011 special dividend payment and U.S. dollar operating expenses, upon Board approval, Magnify Wealth loaned $1 million and $0.6 million, respectively, under the Note, of which RMB 6.3 million and RMB 3.8 million were repaid on January 9 and March 31, 2012, respectively, in RMB, at the average rate of 6.3126 RMB per US dollars, based upon the exchange rate between US dollars and RMB as set forth by Standard Chartered Bank in Hong Kong. The loans under the Note were unsecured, payable on demand and bore interest at 2% per annum.

On April 6 and April 26, 2012, in order to partially fund the 2011 special dividend payment and U.S. dollar operating expenses, upon Board approval, Magnify Wealth loaned $0.5 million and $0.9 million, respectively, under the Note, of which RMB3.15 million and RMB5.65 million were repaid, respectively, at the average rate of 6.2916 RMB per US dollars, based upon the exchange rate between US dollars and RMB as set forth by Standard Chartered Bank in Hong Kong. The loans under the Note were unsecured, payable on demand and bore interest at 2% per annum.

As of December 31, 2013, there was no outstanding loan under the Note.

(3) Amount due to a related party

  

In June 2011, Mr. Jianhua Zhu loaned the Company $140,000. The loan was unsecured and non-interest bearing. The loan was repaid in August 2011.

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RESTRICTED NET ASSETS (Tables)

12 Months Ended

Dec. 31, 2013

Restricted Cash and Investments [Abstract]

Condensed Balance Sheets

Condensed Balance Sheets

	As of December 31,
	2013		2012
ASSETS
Current assets:
Cash and cash equivalents	$	43,010	$	64,015
Other receivables		16,333		15,843
Prepayments		136,500		162,000
Total current assets		195,843		241,858
Investments in subsidiaries		345,837,229		279,044,337
Total assets	$	346,033,072	$	279,286,195
LIABILITIES
Current liabilities:
Warrant liabilities	$	33,262	$	354,000
Total liabilities		33,262		354,000
Stockholders’ equity
Preferred stock: $0.0001 par value, 10,000,000 shares authorized, none issued and outstanding		-		-
Common stock, $0.0001 par value: 75,000,000 shares authorized, 30,295,955 shares issued and 30,031,908 shares outstanding as of December 31, 2013 (2012: 30,084,883 shares issued and 29,820,836 shares outstanding), respectively		3,029		3,008
Additional paid-in capital		80,627,496		79,257,921
Treasury stock, at cost, 264,047 shares and 264,047 as of December 31, 2013 and 2012, respectively		(2,126,597)		(2,126,597)
Retained earnings		240,889,416		184,729,966
Accumulated other comprehensive income		26,606,466		17,067,897
Total stockholders' equity		345,999,810		278,932,195
Total liabilities and stockholders' equity	$	346,033,072	$	279,286,195

Condensed Statements of Income

Condensed Statements of Income

	Year ended December 31,
	2013		2012		2011
Administrative expenses	$	(2,818,130)	$	(3,397,929)	$	(2,267,880)
Other expenses:
Change in fair value of warrant		(106,536)		(124,000)		3,062,575
Gain (Loss) on extinguishment of warrant liabilities		(8,369)		73,291		88,777
Equity in income of subsidiaries		59,092,485		61,390,641		52,250,061
Net income	$	56,159,450	$	57,942,003	$	53,133,533

Condensed Statements of Cash Flows

Condensed Statements of Cash Flows 

	Year ended December 31,
	2013		2012		2011
Net cash used in operating activities	$	(2,818,130)	$	(3,333,914)	$	(2,267,880)
Net cash provided by (used in) investing activities		2,206,684		4,390,775		2,496,427
Net cash (used in) provided by financing activities		590,461		(992,846)		(228,547)
Cash, beginning of year		64,015		-		-
Cash, end of year	$	43,010	$	64,015	$	-

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COMMON STOCK AND COMMON STOCK PURCHASE WARRANTS (Tables)

12 Months Ended

Dec. 31, 2013

Common Stock and Common Stock Purchase Warrants [Abstract]

Warrants Issued and Outstanding

Warrants issued and outstanding at December 31, 2013, and changes during the three years then ended, are as follows:

			Warrants Outstanding					Warrants Exercisable
	Number of  underlying  shares	Weighted Average Exercise Price		Average Remaining Contractual Life (years)		Number of  underlying  shares	Weighted Average Exercise Price		Average Remaining Contractual Life (years)
Balance, January 1, 2011	1,138,420	$	3.62		2.91	1,138,420	$	3.62		2.91
Granted / Vested	-
Forfeited	-
Exercised	(729,464)		3.63
Balance, December 31, 2011	408,956	$	3.59		1.89	408,956	$	3.59		1.89
Granted / Vested	-
Forfeited	-
Exercised	(125,000)		3.50
Balance, December 31, 2012	283,956	$	3.63		0.91	283,956	$	3.63		0.91
Granted / Vested	-
Forfeited	-
Exercised	(255,500)		3.50
Balance, December 31, 2013	28,456	$	4.80		0.68	28,456	$	4.80		0.68

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Other Payables and Accruals (Detail) (USD $)	Dec. 31, 2013	Dec. 31, 2012
Accounts Payable and Accrued Liabilities [Line Items]
Accrued staff costs	$ 600,440	$ 763,430
Research and development costs payable	484,960	0
Other taxes payable	3,386,518	1,768,702
Construction cost payable	2,054,220	1,958,204
Other payables	617,826	447,068
Other payables and accruals	$ 7,143,964	$ 4,937,404

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Condensed Balance Sheets (Parenthetical) (Detail) (USD $)	Dec. 31, 2013	Dec. 31, 2012	Oct. 31, 2008
Preferred stock, par value	$ 0.0001	$ 0.0001
Preferred stock, shares authorized	10,000,000	10,000,000
Preferred stock, issued	0	0
Preferred stock, outstanding	0	0
Par value of common stock issued	$ 0.0001	$ 0.0001	$ 0.0001
Common stock, shares authorized	75,000,000	75,000,000
Common stock, shares issued	30,295,955	30,084,883
Common stock, shares outstanding	30,031,908	29,820,836
Treasury stock, shares	264,047	264,047
Parent
Preferred stock, par value	$ 0.0001	$ 0.0001
Preferred stock, shares authorized	10,000,000	10,000,000
Preferred stock, issued	0	0
Preferred stock, outstanding	0	0
Par value of common stock issued	$ 0.0001	$ 0.0001
Common stock, shares authorized	75,000,000	75,000,000
Common stock, shares issued	30,295,955	30,084,883
Common stock, shares outstanding	30,031,908	29,820,836
Treasury stock, shares	264,047	264,047

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INVENTORIES (Tables)

12 Months Ended

Dec. 31, 2013

Inventory Disclosure [Abstract]

Inventories by Major Categories

Inventories by major categories are summarized as follows:

	As of December 31,
	2013		2012
Raw materials	$	8,775,850	$	12,906,713
Work in progress		183,699		419,695
CCA and copper wire		2,863,021		2,947,584
Copper rod and anode		318,126		1,570,413
	$	12,140,696	$	17,844,405

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DESCRIPTION OF BUSINESS AND ORGANIZATION - Additional Information (Detail) (USD $)	0 Months Ended	1 Months Ended		3 Months Ended												12 Months Ended
	Mar. 07, 2009	Oct. 22, 2008	Oct. 31, 2008	Dec. 31, 2013	Sep. 30, 2013	Jun. 30, 2013	Mar. 31, 2013	Dec. 31, 2012	Sep. 30, 2012	Jun. 30, 2012	Mar. 31, 2012	Dec. 31, 2011	Sep. 30, 2011	Jun. 30, 2011	Mar. 31, 2011	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010	Dec. 31, 2009	Dec. 31, 2008	Feb. 14, 2011	Jun. 30, 2008
Organization and Principal Activities [Line Items]
Number Of Operating Subsidiaries																2
Stock issued during period shares, share exchange agreement			14,025,000
Common Stock, Par or Stated Value Per Share			$ 0.0001	$ 0.0001				$ 0.0001								$ 0.0001	$ 0.0001
Equity Method Investment, Ownership Percentage																							100.00%
Option to purchase ordinary shares under share transfer agreement		3,000
Nominal price per share under share transfer agreement		$ 1.00
Percentage of option shares vest on attainment of performance targets																			50.00%	25.00%	25.00%
Amended share transfer agreement description	Under the amended agreement, as long as the audited consolidated net income of Lihua Electron and Lihua Copper for fiscal 2008 was 10% or more higher than the 2008 Target (Alternate Performance Target) regardless of whether the performance targets for 2009 and 2010 were met or not, the Option Shares would vest and become exercisable.
Net Income (Loss) Attributable to Parent, Total				$ 13,233,558	$ 13,938,895	$ 15,675,810	$ 13,311,187	$ 15,793,687	$ 17,226,638	$ 13,446,666	$ 11,475,012	$ 12,727,388	$ 13,528,083	$ 14,366,076	$ 12,511,986	$ 56,159,450	$ 57,942,003	$ 53,133,533			$ 11,701,879
Percentage of option shares exercisable																						100.00%
Mr. Zhu
Organization and Principal Activities [Line Items]
Net icome performance targets																			$ 14,000,000	$ 11,000,000	$ 8,000,000
Mr. Zhu | Danyang special electronics co ltd
Organization and Principal Activities [Line Items]
Equity Method Investment, Ownership Percentage				60.00%												60.00%
Mr. Zhu | Invest Unicorn Holdings Limited
Organization and Principal Activities [Line Items]
Equity Method Investment, Ownership Percentage				100.00%												100.00%
Mr. Zhu Wife | Danyang special electronics co ltd
Organization and Principal Activities [Line Items]
Equity Method Investment, Ownership Percentage				40.00%												40.00%

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Other Receivables and Prepayments (Detail) (USD $)	Dec. 31, 2013	Dec. 31, 2012
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Line Items]
Prepaid insurance	$ 136,500	$ 162,000
Other receivables	118,680	118,031
Utility deposits	82,009	79,548
Other receivables, deposits and prepayments	337,189	559,955
Prepaid research and development costs
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Line Items]
Prepayments	0	200,376
Other prepayments
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Line Items]
Prepayments	$ 0	$ 0

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Assets and Liabilities Measured at Fair Value on Recurring Basis Using Significant Observable Inputs (Level 2) (Detail) (USD $)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Change in fair value included in earnings	$ (106,536)	$ (124,000)	$ 3,062,575
Fair Value, Measurements, Recurring | Warrants | Fair Value, Inputs, Level 2
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Balance	354,000	615,000	8,682,441
Change in fair value included in earnings	106,536	124,000	(3,062,575)
Exercise of warrants	(427,274)	(385,000)	(5,004,866)
Balance	$ 33,262	$ 354,000	$ 615,000

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EARNINGS PER SHARE (Tables)

12 Months Ended

Dec. 31, 2013

Earnings Per Share [Abstract]

Reconciliation of Net Income and Weighted Average Shares Used in Computation of Basic and Diluted Earnings Per Share

The following table is a reconciliation of the net income and the weighted average shares used in the computation of basic and diluted earnings per share for the periods presented:

	Year ended December 31,
	2013		2012		2011
Income available to common stockholders:
- Basic and diluted	$	56,159,450	$	57,942,003	$	53,133,533
Weighted average number of shares:
- Basic		29,858,880		29,815,943		29,816,871
- Effect of dilutive securities - warrants and options		137,953		149,868		259,259
- Diluted		29,996,833		29,965,811		30,076,130
Net income per share
- Basic	$	1.88	$	1.94	$	1.78
- Diluted	$	1.87	$	1.93	$	1.77

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FAIR VALUE MEASUREMENTS AND FINANCIAL INSTRUMENTS

12 Months Ended

Dec. 31, 2013

Fair Value Measurements and Financial Instruments [Abstract]

FAIR VALUE MEASUREMENTS AND FINANCIAL INSTRUMENTS

NOTE 3 FAIR VALUE MEASUREMENTS AND FINANCIAL INSTRUMENTS

ASC Topic 820, Fair Value Measurement and Disclosures, defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. This topic also establishes a fair value hierarchy which requires classification based on observable and unobservable inputs when measuring fair value. The fair value hierarchy distinguishes between assumptions based on market data (observable inputs) and an entity’s own assumptions (unobservable inputs). The hierarchy consists of three levels:

· Level one — Quoted market prices in active markets for identical assets or liabilities;  

· Level two — Inputs other than level one inputs that are either directly or indirectly observable; and  

· Level three — Unobservable inputs developed using estimates and assumptions, which are developed by the reporting entity and reflect those assumptions that a market participant would use.

Determining which category an asset or liability falls within the hierarchy requires significant judgment. The Company evaluates its hierarchy disclosures each quarter.

The Company’s financial instruments include cash equivalents, trade receivables and payables, prepayments and other current assets, other payables and accruals. The carrying value of the Company’s short-term financial instruments approximates their fair value because of their short maturities.

The following table sets forth the financial instruments, measured at fair value, by level within the fair value hierarchy as of December 31, 2013:

	Fair value measurements at reporting date using
Items	As of December 31, 2013		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Warrant liability	$	33,262	$	-	$	33,262	$	-

The following table sets forth the financial instruments, measured at fair value, by level within the fair value hierarchy as of December 31, 2012:

	Fair value measurements at reporting date using
Items	As of December 31, 2012		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Warrant liability	$	354,000	$	-	$	354,000	$	-

Assets and liabilities measured at fair value on a recurring basis using significant observable inputs (Level 2) from January 1, 2011 to December 31, 2013 are summarized as follows:

	Warrant liability (Level 2)
Balance at January 1, 2011	$	8,682,441
Change in fair value included in earnings		(3,062,575)
Exercise of warrants		(5,004,866)
Balance at December 31, 2011		615,000
Change in fair value included in earnings		124,000
Exercise of warrants		(385,000)
Balance at December 31, 2012		354,000
Change in fair value included in earnings		106,536
Exercise of warrants		(427,274)
Balance at December 31, 2013	$	33,262

There were no assets or liabilities measured at fair value on a non-recurring basis as of December 31, 2013 and 2012.

Derivative Instruments – Warrants

The Company’s warrants have been classified as derivatives in accordance with the guidance provided in FASB ASC 815-40-15-7I, because they are denominated in U.S. dollars, which is different from the Company’s functional currency (Renminbi).

For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the consolidated statements of income.

The Company accounted for the exercise of these warrants as extinguishment of debts in accordance with ASC 815-10-40-1, “Derivatives and Hedges – Derecognition” and ASC 470-50-40, “Debt – Modification and Extinguishments – Derecognition”.

For stock-based derivative financial instruments, the Company uses the Black-Scholes option pricing model using the following assumptions to value the derivative instruments at inception and on subsequent valuation dates:

	December 31, 2013			December 31, 2012
Series B Warrants
Market price of common stock:	$	-		$	4.390
Exercise price:		-			3.50
Remaining contractual life (years):		-			0.83
Dividend yield:		-			-
Expected volatility:		-			51.41	%
Risk-free interest rate:		-			0.13	%
Fair value – Series A and B Warrants	$	-		$	319,000
Underwriter Warrants
Market price of common stock:	$	5.720		$	4.390
Exercise price:		4.80			4.80
Remaining contractual life (years):		0.68			1.68
Dividend yield:		-			-
Expected volatility:		34.87	%		61.26	%
Risk-free interest rate:		0.10	%		0.21	%
Fair value – Underwriter Warrants	$	33,262		$	35,000
Fair value – Total	$	33,262		$	354,000

In 2011, 542,300 warrants were exercised at $3.50 each in cash and 187,164 warrants were exercised on a cashless basis to purchase 108,855 shares of common stock. In accordance with ASC 470-50-40, “Debt – Modification and Extinguishments – Derecognition”, an aggregate gain of $88,777 was recognized. For details, please refer to the following table.

Exercise date:	January 14,				March 3,		March 14,			March 17,				April 7,		December 21,
Market price of common stock:	$	10.64		$	10.98		$	10.19		$	9.79		$	8.39		$	5.00
Exercise warrants:		549,300			20,000			28,814			74,000			44,850			12,500
Exercise price:	$	3.50		$	3.50		$	4.80		$	3.50		$	4.80		$	3.50
Remaining contractual life (years):		2.79			2.66			3.47			2.62			3.41			1.86
Dividend yield:		–			–			–			–			–			1.19	%
Expected volatility:		46.34	%		48.00	%		44.05	%		48.54	%		44.05	%		39.58	%
Risk-free interest rate:		0.90	%		1.09	%		1.27	%		0.86	%		1.46	%		0.22	%
Fair values:	$	7.2301		$	7.7083		$	6.0599		$	6.5324		$	4.4485		$	1.7342
Gain (loss) on extinguishment of warrant liabilities	$	48,210		$	8,153		$	5,722		$	(1,361)		$	26,531		$	1,522

In 2012, 125,000 warrants were exercised on a cashless basis to purchase 48,402 shares of common stock. In accordance with ASC 470-50-40, “Debt – Modification and Extinguishments – Derecognition”, an aggregate gain of $73,291 was recognized.  For details, please refer to the following table.

Exercise date:	February 7,
Market price of common stock:	$	6.44
Exercise warrants:		125,000
Exercise price:	$	3.50
Remaining contractual life (years):		1.73
Dividend yield:		-	%
Expected volatility:		39.43	%
Risk-free interest rate:		0.21	%
Fair values:	$	3.08
Gain on extinguishment of warrant liabilities	$	73,291

In 2013, 27,585 warrants were exercised at $3.50 each in cash and 227,915 warrants were exercised on a cashless basis to purchase 73,696 shares of common stock. In accordance with ASC 470-50-40, “Debt – Modification and Extinguishments – Derecognition”, an aggregate loss of $8,369 was recognized. As of December, 2013, 209 shares were not yet issued. For details, please refer to the following table.

Exercise date:	May 22,			September 27,			October 3,			October 11,			October 15,			October 29,			October 30,
Market price of common stock:	$	5.76		$	4.96		$	5.05		$	5.00		$	4.99		$	5.98		$	5.92
Exercise warrants:		28,348			58,000			35,000			96,652			12,500			15,000			10,000
Exercise price:	$	3.5		$	3.5		$	3.5		$	3.5		$	3.5		$	3.5		$	3.5
Remaining contractual life (years):		0.44			0.09			0.08			0.05			0.04			0.00			0.00
Dividend yield:		-	%		-	%		-	%		-	%		-	%		-	%		-	%
Expected volatility:		35.48	%		22.68	%		24.76	%		17.20	%		18.55	%		5.71	%		-	%
Risk-free interest rate:		0.07	%		0.02	%		0.13	%		0.25	%		0.34	%		0.03	%		-	%
Fair values:	$	2.2653		$	1.4572		$	1.5485		$	1.4956		$	1.4899		$	2.4788		$	2.4200
Gain (loss) on extinguishment of warrant liabilities	$	3,520		$	(7,124)		$	(2,135)		$	(4,432)		$	(217)		$	(378)		$	2,397

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Fair Value of Warrants Using Black-Scholes Option Pricing Model (Detail) (USD $)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012
Fair Value Inputs, Liabilities, Quantitative Information [Line Items]
Fair Value	$ 33,262	$ 354,000
Series B Warrants
Fair Value Inputs, Liabilities, Quantitative Information [Line Items]
Market price of common stock:	$ 0	$ 4.390
Exercise price:	$ 0	$ 3.50
Remaining contractual life (years):	0 years	9 months 29 days
Dividend yield:	0.00%	0.00%
Expected volatility:	0.00%	51.41%
Risk-free interest rate:	0.00%	0.13%
Fair Value	0	319,000
Underwriter Warrants
Fair Value Inputs, Liabilities, Quantitative Information [Line Items]
Market price of common stock:	$ 5.720	$ 4.390
Exercise price:	$ 4.80	$ 4.80
Remaining contractual life (years):	8 months 5 days	1 year 8 months 5 days
Dividend yield:	0.00%	0.00%
Expected volatility:	34.87%	61.26%
Risk-free interest rate:	0.10%	0.21%
Fair Value	$ 33,262	$ 35,000

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SHARE-BASED COMPENSATION (Tables)

12 Months Ended

Dec. 31, 2013

Share-Based Compensation [Abstract]

Movements of Options Issued and Outstanding

Options issued and outstanding at December 31, 2013, 2012, and 2011 and their movements during the three years are as follows:

	Number of Underlying Shares	Weighted-Average Exercise Price Per Share		Aggregate Intrinsic Value(1)		Weighted-Average Contractual Life Remaining in Years
Outstanding at January 1, 2011	115,000		6.74	$	517,450	9.00
Granted	600,000		4.85		-	10.00
Exercised	-		-		-	-
Expired	-		-		-	-
Forfeited	-		-		-	-
Outstanding at December 31, 2011	715,000		5.16	$	213,300	9.43
Granted	60,000		5.63		-	10.00
Exercised	-		-		-	-
Expired	-		-		-	-
Forfeited	(60,000)		4.50		-	-
Outstanding at December 31, 2012	715,000		5.25	$	65,700	8.47
Granted	60,000		5.60		-	10.00
Exercised	(110,000)		4.50		-	-
Expired	-		-		-	-
Forfeited	-		-		-	-
Outstanding at December 31, 2013	665,000		5.41	$	551,300	7.64
Exercisable at December 31, 2013	515,000	$	5.64	$	384,800	7.54

(1) The intrinsic value of the stock options at December 31, 2013, 2012 and 2011 is the amount by which the market value of the Company’s common stock of $5.72, $4.39 and $4.76 as of December 31, 2013, 2012 and 2011 exceeds the exercise price of the option.

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RESTRICTED NET ASSETS

12 Months Ended

Dec. 31, 2013

Restricted Cash and Investments [Abstract]

RESTRICTED NET ASSETS

NOTE 23 RESTRICTED NET ASSETS

The Company’s operations are substantially conducted through Lihua Electron and Lihua Copper. Lihua Electron and Lihua Copper may only pay dividends out of its retained earnings determined in accordance with the accounting standards and regulations in the PRC and after it has met the PRC requirements for appropriation to statutory reserves (see Note 15).

In addition, Lihua Electron and Lihua Copper’s business transactions and assets are primarily denominated in RMB, which is not freely convertible into foreign currencies. All foreign exchange transactions take place either through the People’s Bank of China or other banks authorized to buy and sell foreign currencies at the exchange rates quoted by the People’s Bank of China. Approval of foreign currency payments by the People’s Bank of China or other regulatory institutions requires submitting a payment application form together with suppliers’ invoices, shipping documents and signed contracts. These currency exchange control measures imposed by the PRC government may restrict the ability of Lihua Electron and Lihua Copper to transfer their net assets to the Company through loans, advances or cash dividends. The net assets of Lihua Electron and Lihua Copper in aggregate exceeded 25% of the Company’s consolidated net assets. Accordingly, condensed parent company financial statements have been prepared in accordance with Rule 5.04 and Rule 12-04 of SEC Regulation S-X.

The Company records its investment in subsidiaries under the equity method of accounting. Such investment and long-term loans to subsidiaries are presented on the balance sheet as “Investments in subsidiaries” and the income of the subsidiaries is presented as “Equity in income of subsidiaries” on the statement of income.

These supplemental condensed parent company financial statements should be read in conjunction with the notes to the Company’s Consolidated Financial Statements. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted.

As of December 31, 2013 and 2012, there were no material contingencies, significant provisions for long-term obligations, or guarantees of the Company, except as separately disclosed in the Consolidated Financial Statements, if any.

Supplemental Parent Company Financial Information – Lihua International, Inc.

Condensed Balance Sheets

	As of December 31,
	2013		2012
ASSETS
Current assets:
Cash and cash equivalents	$	43,010	$	64,015
Other receivables		16,333		15,843
Prepayments		136,500		162,000
Total current assets		195,843		241,858
Investments in subsidiaries		345,837,229		279,044,337
Total assets	$	346,033,072	$	279,286,195
LIABILITIES
Current liabilities:
Warrant liabilities	$	33,262	$	354,000
Total liabilities		33,262		354,000
Stockholders’ equity
Preferred stock: $0.0001 par value, 10,000,000 shares authorized, none issued and outstanding		-		-
Common stock, $0.0001 par value: 75,000,000 shares authorized, 30,295,955 shares issued and 30,031,908 shares outstanding as of December 31, 2013 (2012: 30,084,883 shares issued and 29,820,836 shares outstanding), respectively		3,029		3,008
Additional paid-in capital		80,627,496		79,257,921
Treasury stock, at cost, 264,047 shares and 264,047 as of December 31, 2013 and 2012, respectively		(2,126,597)		(2,126,597)
Retained earnings		240,889,416		184,729,966
Accumulated other comprehensive income		26,606,466		17,067,897
Total stockholders' equity		345,999,810		278,932,195
Total liabilities and stockholders' equity	$	346,033,072	$	279,286,195

Condensed Statements of Income

	Year ended December 31,
	2013		2012		2011
Administrative expenses	$	(2,818,130)	$	(3,397,929)	$	(2,267,880)
Other expenses:
Change in fair value of warrant		(106,536)		(124,000)		3,062,575
Gain (Loss) on extinguishment of warrant liabilities		(8,369)		73,291		88,777
Equity in income of subsidiaries		59,092,485		61,390,641		52,250,061
Net income	$	56,159,450	$	57,942,003	$	53,133,533

Condensed Statements of Cash Flows 

	Year ended December 31,
	2013		2012		2011
Net cash used in operating activities	$	(2,818,130)	$	(3,333,914)	$	(2,267,880)
Net cash provided by (used in) investing activities		2,206,684		4,390,775		2,496,427
Net cash (used in) provided by financing activities		590,461		(992,846)		(228,547)
Cash, beginning of year		64,015		-		-
Cash, end of year	$	43,010	$	64,015	$	-

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SEGMENT DATA AND RELATED INFORMATION

12 Months Ended

Dec. 31, 2013

Segment Reporting [Abstract]

SEGMENT DATA AND RELATED INFORMATION

NOTE 22 SEGMENT DATA AND RELATED INFORMATION

The Company operates in one business segment, the manufacturing and sale of refined copper rod and copper anode, as well as copper clad aluminum (CCA) wire and copper wire produced from refined copper rod. The Company also operates in only one geographical segment – China, as all of the Company’s products are sold to customers located in China and the Company’s manufacturing operations are located in China.

The Company’s major product categories are (1) wire manufacturing, consisting of (a) CCA fine and superfine wire, which is an electrical conductor consisting of an outer sleeve of copper that is metallurgically bonded to a solid aluminum core, and (b) copper fine and superfine wire, manufactured from recycled copper rod; (2) refined copper rod; and (3) refined copper anode, the latter two of which are fire refined from scrap copper.

Management evaluates performance based on several factors, of which net revenue and gross profit by product are the primary financial measures:

	Year ended December 31,
	2013		2012		2011
Net revenue from unaffiliated customers:
Copper wire	$	170,903,382	$	188,810,251	$	124,062,182
Superfine copper wire		135,328,792		144,337,762		149,808,595
CCA wire		53,284,353		60,634,148		61,703,257
Copper anode		472,042,033		381,114,304		287,269,353
Refined copper rod		69,168,398		78,870,076		14,250,052
	$	900,726,958	$	853,766,541	$	637,093,439
Gross profit:
Copper wire	$	9,727,112	$	11,462,253	$	8,399,703
Superfine copper wire		15,469,518		16,820,626		19,947,147
CCA wire		16,359,209		19,602,531		21,375,471
Copper anode		41,693,682		37,667,562		25,224,807
Refined copper rod		3,149,697		3,995,402		766,544
	$	86,399,218	$	89,548,374	$	75,713,672

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SELECTED QUARTERLY FINANCIAL DATA (Detail) (USD $)	3 Months Ended												12 Months Ended
	Dec. 31, 2013	Sep. 30, 2013	Jun. 30, 2013	Mar. 31, 2013	Dec. 31, 2012	Sep. 30, 2012	Jun. 30, 2012	Mar. 31, 2012	Dec. 31, 2011	Sep. 30, 2011	Jun. 30, 2011	Mar. 31, 2011	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2008
Selected Quarterly Financial Information [Line Items]
Revenue	$ 217,333,427	$ 219,359,379	$ 245,804,613	$ 218,229,539	$ 254,879,358	$ 238,793,030	$ 191,007,886	$ 169,086,267	$ 177,579,159	$ 155,570,657	$ 167,012,527	$ 136,931,096	$ 900,726,958	$ 853,766,541	$ 637,093,439
Cost of goods sold	(196,857,791)	(198,261,030)	(222,034,732)	(197,174,187)	(229,933,412)	(213,536,628)	(170,296,852)	(150,451,275)	(157,877,953)	(136,113,727)	(147,365,064)	(120,023,023)	(814,327,740)	(764,218,167)	(561,379,767)
Gross profit	20,475,636	21,098,349	23,769,881	21,055,352	24,945,946	25,256,402	20,711,034	18,634,992	19,701,206	19,456,930	19,647,463	16,908,073	86,399,218	89,548,374	75,713,672
Selling expenses	(741,114)	(796,945)	(801,861)	(680,680)	(786,331)	(741,135)	(740,988)	(686,006)	(660,992)	(633,584)	(668,366)	(523,036)	(3,020,600)	(2,954,460)	(2,485,978)
General and administrative expenses	(1,853,646)	(1,807,615)	(2,006,127)	(2,405,784)	(2,630,168)	(2,059,027)	(1,834,465)	(2,097,834)	(2,239,462)	(1,498,306)	(1,339,062)	(1,573,312)	(8,073,172)	(8,621,494)	(6,650,142)
Income from operations	17,880,876	18,493,789	20,961,893	17,968,888	21,529,447	22,456,240	18,135,581	15,851,152	16,800,752	17,325,040	17,640,035	14,811,725	75,305,446	77,972,420	66,577,552
Net income	$ 13,233,558	$ 13,938,895	$ 15,675,810	$ 13,311,187	$ 15,793,687	$ 17,226,638	$ 13,446,666	$ 11,475,012	$ 12,727,388	$ 13,528,083	$ 14,366,076	$ 12,511,986	$ 56,159,450	$ 57,942,003	$ 53,133,533	$ 11,701,879
Earnings per share
Basic	$ 0.44	$ 0.47	$ 0.53	$ 0.45	$ 0.52	$ 0.58	$ 0.45	$ 0.39	$ 0.43	$ 0.45	$ 0.48	$ 0.42	$ 1.88	$ 1.94	$ 1.78
Diluted	$ 0.44	$ 0.46	$ 0.52	$ 0.44	$ 0.52	$ 0.58	$ 0.45	$ 0.38	$ 0.43	$ 0.45	$ 0.48	$ 0.41	$ 1.87	$ 1.93	$ 1.77

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Estimated Useful Lives of Assets (Detail)	12 Months Ended
	Dec. 31, 2013
Buildings
Property, Plant and Equipment [Line Items]
Property plant and equipment, estimated useful lives	20 years
Machinery | Minimum
Property, Plant and Equipment [Line Items]
Property plant and equipment, estimated useful lives	5 years
Machinery | Maximum
Property, Plant and Equipment [Line Items]
Property plant and equipment, estimated useful lives	10 years
Office equipment & motor vehicles
Property, Plant and Equipment [Line Items]
Property plant and equipment, estimated useful lives	5 years

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STATUTORY RESERVES (Tables)

12 Months Ended

Dec. 31, 2013

Statutory Reserves [Abstract]

Statutory Reserve Activity

For the years ended December 31, 2013, 2012 and 2011, statutory reserve activity is as follows:

Balance – January 1, 2011	$	7,556,187
Addition to statutory reserves		2,862,289
Balance – December 31, 2011		10,418,476
Addition to statutory reserves		4,148,370
Balance – December 31, 2012		14,566,846
Addition to statutory reserves		4,156,990
Balance – December 31, 2013	$	18,723,836

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SELECTED QUARTERLY FINANCIAL DATA

12 Months Ended

Dec. 31, 2013

Selected Quarterly Financial Information [Abstract]

SELECTED QUARTERLY FINANCIAL DATA

NOTE 24       SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)

Selected quarterly financial data for the years ended December 31, 2013, 2012 and 2011 are presented in the following table:

	Three Months Ended,
Year ended December 31, 2013	December 31,		September 30,		June 30,		March 31,
Revenue	$	217,333,427	$	219,359,379	$	245,804,613	$	218,229,539
Cost of goods sold		(196,857,791)		(198,261,030)		(222,034,732)		(197,174,187)
Gross profit		20,475,636		21,098,349		23,769,881		21,055,352
Selling expenses		(741,114)		(796,945)		(801,861)		(680,680)
General and administrative expenses		(1,853,646)		(1,807,615)		(2,006,127)		(2,405,784)
Income from operations		17,880,876		18,493,789		20,961,893		17,968,888
Net income	$	13,233,558	$	13,938,895	$	15,675,810	$	13,311,187
Earnings per share
Basic	$	0.44	$	0.47	$	0.53	$	0.45
Diluted	$	0.44	$	0.46	$	0.52	$	0.44

	Three Months Ended,
Year ended December 31, 2012	December 31,		September 30,		June 30,		March 31,
Revenue	$	254,879,358	$	238,793,030	$	191,007,886	$	169,086,267
Cost of goods sold		(229,933,412)		(213,536,628)		(170,296,852)		(150,451,275)
Gross profit		24,945,946		25,256,402		20,711,034		18,634,992
Selling expenses		(786,331)		(741,135)		(740,988)		(686,006)
General and administrative expenses		(2,630,168)		(2,059,027)		(1,834,465)		(2,097,834)
Income from operations		21,529,447		22,456,240		18,135,581		15,851,152
Net income	$	15,793,687	$	17,226,638	$	13,446,666	$	11,475,012
Earnings per share
Basic	$	0.52	$	0.58	$	0.45	$	0.39
Diluted	$	0.52	$	0.58	$	0.45	$	0.38

	Three Months Ended
Year ended December 31, 2011	December 31,		September 30,		June 30,		March 31,
Revenue	$	177,579,159	$	155,570,657	$	167,012,527	$	136,931,096
Cost of goods sold		(157,877,953)		(136,113,727)		(147,365,064)		(120,023,023)
Gross profit		19,701,206		19,456,930		19,647,463		16,908,073
Selling expenses		(660,992)		(633,584)		(668,366)		(523,036)
General and administrative expenses		(2,239,462)		(1,498,306)		(1,339,062)		(1,573,312)
Income from operations		16,800,752		17,325,040		17,640,035		14,811,725
Net income	$	12,727,388	$	13,528,083	$	14,366,076	$	12,511,986
Earnings per share
Basic	$	0.43	$	0.45	$	0.48	$	0.42
Diluted	$	0.43	$	0.45	$	0.48	$	0.41

XML

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)

12 Months Ended

Dec. 31, 2013

Accounting Policies [Abstract]

Principle of consolidation

Principle of consolidation

These consolidated financial statements include the financial statements of Lihua International, Inc. and its subsidiaries.  All significant inter-company balances or transactions have been eliminated on consolidation.

Basis of preparation

Basis of preparation

These consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America.

Use of estimates

Use of estimates

The preparation of these consolidated financial statements in conformity with generally accepted accounting principles requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities and the related disclosure of contingent assets and liabilities at the date of these consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. Accordingly, actual results may differ from these estimates under different assumptions or conditions. Significant estimates for the years ended December 31, 2013, 2012 and 2011 include the allowance for doubtful accounts, the useful life of property, plant and equipment and intangible assets, recoverability of the carrying values of property, plant and equipment and the fair values of share-based payments and warrants granted in connection with the private placement of preferred stock in 2008 and the public offering of common stock in 2009.

Cash and cash equivalents

Cash and cash equivalents

Cash and cash equivalents consist of all cash balances and highly liquid investments with an original maturity of three months or less.  Because of the short maturity of these investments, the carrying amounts approximate their fair value.  Restricted cash is excluded from cash and cash equivalents.

Accounts receivable

Accounts receivable

Accounts and bills receivable are stated at cost, net of an allowance for doubtful accounts. The Company maintains allowances for doubtful accounts for estimated losses, if any, resulting from the failure of customers to make required payments. The Company reviews the accounts and bills receivable on a periodic basis and makes allowances where there is doubt as to the collectibility of individual balances. In evaluating the collectibility of individual receivable balances, the Company considers many factors, including the age of the balance, the customer’s payment history, its current credit-worthiness and current economic trends.

Inventories

Inventories

Inventories are stated at the lower of cost, determined on a weighted average basis, or market. Costs of inventories include purchase and related costs incurred in bringing the products to their present location and condition. Market value is determined by reference to selling prices after the balance sheet date or to management’s estimates based on prevailing market conditions. Management will write down the inventories to market value if it is below cost. Management also regularly evaluates the composition of its inventories to identify slow-moving and obsolete inventories to determine if a valuation allowance is required.

Property, plant and equipment

Property, plant and equipment

Property, plant and equipment are stated at cost less accumulated depreciation and accumulated impairment losses, if any. Gains or losses on disposals are reflected as gain or loss in the year of disposal. The cost of improvements that extend the life of buildings, machinery and equipment are capitalized. These capitalized costs may include structural improvements, equipment and fixtures. All ordinary repair and maintenance costs are expensed as incurred.

Depreciation for financial reporting purposes is provided using the straight-line method over the estimated useful lives of the assets as follows:

	Useful Life
	(In years)
Buildings	20
Machinery	5-10
Office equipment & motor vehicles	5

Construction in progress

Construction in progress

Construction in progress includes direct costs of construction of buildings and equipment and interest incurred during the period of construction, if material, is also capitalized. Construction in progress is not depreciated until such time as the assets are completed and put into service.

Prepaid land use right

Prepaid land use right

Prepaid land use right represents lump sum payments for land use rights in the PRC.  The amount is expensed over the period of the land use rights of 50 years.

Intangible assets

Intangible assets

The Company’s intangible assets include computer software.  The Company’s amortization policy on intangible assets is as follows:

	Useful Life
	(In years)
Computer software	5

The Company accounts for its intangible assets pursuant to FASB ASC Subtopic 350-30, “General Intangibles Other Than Goodwill”. Under ASC 350-30, intangibles with definite lives continue to be amortized on a straight-line basis over the lesser of their estimated useful lives or contractual terms. Intangibles with indefinite lives are evaluated at least annually for impairment if events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. Based on the existence of one or more indicators of impairment, the Company measures any impairment of long-lived assets by comparing the asset's estimated fair value with its carrying value, based on cash flow methodology.

Impairment of long-lived assets

Impairment of long-lived assets

The Company reviews and evaluates its long-lived assets for impairment when events or changes in circumstances indicate that the related carrying amounts may not be recoverable. Impairment is considered to exist if the total estimated future cash flows on an undiscounted basis are less than the carrying amount of the assets. An impairment loss is measured and recorded based on discounted estimated future cash flows. In estimating future cash flows, assets are grouped at the lowest level for which there is identifiable cash flows that are largely independent of future cash flows from other asset groups.

Derivative financial instruments

Derivative financial instruments

The Company evaluates all its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the consolidated statements of income.

The Company’s warrants have been classified as derivatives in accordance with the guidance provided in FASB ASC 815-40-15-7I, because they are denominated in U.S. dollars, which is different from the Company’s functional currency (Renminbi).The Company accounted for the exercise of these warrants as extinguishment of debts in accordance with ASC 815-10-40-1, “Derivatives and Hedges – Derecognition” and ASC 470-50-40, “Debt – Modification and Extinguishments – Derecognition”.

Revenue recognition

Revenue recognition

Revenue is recognized when the following four revenue criteria are met: persuasive evidence of an arrangement exists, delivery has occurred, the selling price is fixed or determinable, and collectibility is reasonably assured.

Sales revenue is recognized net of value added tax, sales discounts and returns at the time when the merchandise is sold and delivered to the customer. Based on historical experience, management estimates that sales returns are immaterial and has not made an allowance for estimated sales returns.

Research and development costs

Research and development costs

Research and development costs are expensed as incurred, and charged to general and administrative expense. For the years ended December 31, 2013, 2012 and 2011, research and development costs were $1,305,379, $1,779,018 and $954,299, respectively.

Advertising costs

Advertising costs

The Company expenses all advertising costs as incurred. The total amount of advertising costs charged to general and administrative expense were $13,247, $856 and $17,138 for the years ended December 31, 2013, 2012 and 2011, respectively.

Shipping and handling costs

Shipping and handling costs

Substantially all costs of shipping and handling of products to customers are included in selling expenses. Shipping and handling costs for the years ended December 31, 2013, 2012 and 2011 were $2,424,613, $2,343,646 and $2,051,193, respectively.

Income taxes

Income taxes

The Company is subject to income taxes in the United States and other foreign jurisdictions where it operates. The Company accounts for income taxes in accordance with FASB ASC Topic 740, “Income Taxes”.  FASB ASC Topic 740 requires an asset and liability approach for financial accounting and reporting for income taxes and allows recognition and measurement of deferred tax assets based upon the likelihood of realization of tax benefits in future years.  Under the asset and liability approach, deferred taxes are provided for the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.  A valuation allowance is provided for deferred tax assets if it is more likely than not these items will either expire before the Company is able to realize their benefits, or that future deductibility is uncertain.

The Company’s income tax returns are subject to examination by the Internal Revenue Service (“IRS”) and other tax authorities in the locations where it operates. The Company assesses potentially unfavorable outcomes of such examinations based on the criteria of FASB ASC 740-10-25-5 through 740-10-25-7 and 740-10-25-13 which the Company adopted on January 1, 2007. The interpretation prescribes a more-likely-than-not threshold for financial statement recognition and measurement of a tax position taken (or expected to be taken) in a tax return. This interpretation also provides guidance on de-recognition of income tax assets and liabilities, classification of current and deferred income tax assets and liabilities, accounting for interest and penalties associated with tax positions, accounting for income taxes in interim periods and income tax disclosures.

Comprehensive income

Comprehensive income

FASB ASC Topic 220, “Comprehensive Income”, establishes standards for reporting and displaying comprehensive income and its components in the consolidated financial statements. Accumulated other comprehensive income includes foreign currency translation adjustments.

Stock based compensation

Stock based compensation

The Company accounts for share-based compensation awards to employees in accordance with FASB ASC Topic 718, “Compensation – Stock Compensation”, which requires that share-based payment transactions with employees be measured based on the grant-date fair value of the equity instrument issued and recognized as compensation expense over the requisite service period.

The Company accounts for share-based compensation awards to non-employees in accordance with FASB ASC Topic 718 and FASB ASC Subtopic 505-50, “Equity-Based Payments to Non-employees”. Under FASB ASC Topic 718 and FASB ASC Subtopic 505-50, stock compensation granted to non-employees has been determined as the fair value of the consideration received or the fair value of equity instrument issued, whichever is more reliably measured and is recognized as an expense as the goods or services are received.

Foreign currency

Foreign currency

The Company has its local currency, Renminbi, (“RMB”), as its functional currency. The Company’s subsidiaries maintain their books and records in their functional currency, RMB. The consolidated financial statements of the Company are translated from RMB into United States dollars (U.S. Dollars or “US$” or “$”). Accordingly, assets and liabilities of the PRC subsidiaries are translated from RMB to U.S. Dollars using the applicable exchange rates prevailing at the balance sheet date. Items on the statement of comprehensive income and cash flows are translated at average exchange rates during the reporting period. Equity accounts are translated at historical rates. Adjustments resulting from the translation of the Company’s financial statements are recorded as accumulated other comprehensive income.

The exchange rates used to translate amounts in RMB into U.S. Dollars for the purposes of preparing the consolidated financial statements are based on the rates as published on the website of People’s Bank of China and are as follows:

	2013	2012	2011
Balance sheet items, except for equity accounts	US$1=RMB6.0969	US$1=RMB6.2855	US$1=RMB6.3009
Items in the statements of income and cash flows	US$1=RMB6.1932	US$1=RMB6.3125	US$1=RMB6.4588

No representation is made that the RMB amounts could have been, or could be, converted into U.S. dollars at the above rates. The value of RMB against U.S. dollars and other currencies may fluctuate and is affected by, among other things, changes in China’s political and economic conditions. Any significant revaluation of RMB may materially affect the Company’s financial condition in terms of U.S. dollar reporting.

Segment reporting

Segment reporting

The Company follows FASB ASC Topic 280, “Segment Reporting”, which requires that companies disclose segment data based on how management makes decision about allocating resources to segments and evaluating their performance.

The Company believes that during the years ended December 31, 2013, 2012 and 2011, it operated mainly in one business segment – Manufacturing and sales of refined copper rod and copper anode, as well as copper clad aluminum (CCA) wire and copper wire produced from refined copper rod.  Throughout the years ended December 31, 2013, 2012 and 2011 all of the Company’s operations were carried out mainly in one geographical segment - China.

The Company’s major product categories are (1) wire manufacturing, consisting of (a) CCA wire, which is an electrical conductor consisting of an outer sleeve of copper that is metallurgically bonded to a solid aluminum core, and (b) copper fine and superfine wire, manufactured from recycled copper rod; (2) refined copper rod; and (3) refined copper anode, the latter two of which are fire refined from scrap copper. The manufacturing of refined copper was launched in the first quarter of 2009.

Dividends

Dividends

Dividends are recognized when declared.

PRC regulations currently permit payment of dividends only out of accumulated profits as determined in accordance with PRC accounting standards and regulations. The Company’s PRC subsidiaries can only distribute dividends after they have met the PRC requirements for appropriation to statutory reserves. The PRC government imposes control over its foreign currency reserves in part through direct regulation of the conversion of the RMB into foreign exchange and through restrictions on foreign trade. As the majority of the Company’s revenues are in RMB, any restrictions on currency exchange may limit the Company’s ability to use revenue generated in RMB to fund its business activities outside China or to make dividend payments in U.S. dollars.

Earnings per common share

Earnings per common share

The Company reports earnings per share in accordance with the provisions of FASB ASC Topic 260, “Earnings per Share”. FASB ASC Topic 260 requires presentation of basic and diluted earnings per share in conjunction with the disclosure of the methodology used in computing such earnings per share. Basic earnings per share excludes dilution and is computed by dividing income available to common stockholders by the weighted average common shares outstanding during the period. Diluted earnings per share takes into account the potential dilution (using the treasury stock method) that could occur if securities or other contracts to issue common stock were exercised and converted into common stock.

Commitments and contingencies

Commitments and contingencies

The Company follows FASB ASC Subtopic 450-20, “Loss Contingencies” in determining its accruals and disclosures with respect to loss contingencies. Accordingly, estimated losses from loss contingencies are accrued by a charge to income when information available prior to issuance of the financial statements indicates that it is probable that a liability could have been incurred and the amount of the loss can be reasonably estimated. Legal expenses associated with the contingency are expensed as incurred. If a loss contingency is not probable or reasonably estimable, disclosure of the loss contingency is made in the financial statements when it is at least reasonably possible that a material loss could be incurred.

Recent accounting pronouncements

Recent accounting pronouncements

In February 2013, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2013-2, Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income (ASU 2013-02), that requires an organization to present the effects on the line items of net income of significant amounts reclassified out of Accumulated OCI, but only if the item reclassified is required under U.S. GAAP to be reclassified to net income in its entirety in the same reporting period. ASU 2013-02 is effective for fiscal years beginning after December 15, 2012. The Company adopted ASU 2013-02 effective January 1, 2013 and it did not have a significant impact on its consolidated results of operations and financial condition.

In March 2013, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2013-05, Foreign Currency Matters, (Topic 830): Parent's Accounting for the Cumulative Translation Adjustment upon Derecognition of Certain Subsidiaries or Groups of Assets within a Foreign Entity or of an Investment in a Foreign Entity (ASU 2013-05), to resolve a diversity in accounting for the cumulative translation adjustment of foreign currency upon derecognition of a foreign subsidiary or group of assets. ASU 2013-05 requires the parent to apply the guidance in Subtopic 830-30 to release any related cumulative translation adjustment into net income when a reporting entity (parent) ceases to have a controlling financial interest in a subsidiary or group of assets within a foreign entity. Accordingly, the cumulative translation adjustment should be released into net income only if the sale or transfer results in the complete or substantially complete liquidation of the foreign entity in which the subsidiary or group of assets had resided. Further, ASU 2013-05 clarified that the parent should apply the guidance in subtopic 810-10 if there is a sale of an investment in a foreign entity, including both (1) events that result in the loss of a controlling financial interest in a foreign entity and (2) events that result in an acquirer obtaining control of an acquiree in which it held an equity interest immediately before the acquisition date. Accordingly, the cumulative translation adjustment should be released into net income upon the occurrence of those events. ASU 2013-05 is effective prospectively for the Company in its first quarter of fiscal 2014, with early adoption permitted. The Company does not expect ASU 2013-05 to have a significant impact on its consolidated results of operations and financial condition.

In July 2013, the FASB issued Accounting Standards Update No. 2013-11, Income Taxes (Topic 740)(ASU 2013-11). The amendments in this update provide guidance on the financial statement presentation of an unrecognized tax benefit when a net operating loss carryforward, similar tax loss, or tax credit carryforward exists. These amendments provide that an unrecognized tax benefit, or a portion thereof, should be presented in the financial statements as a reduction of a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward, except to the extent that a net operating loss carryforward, a similar tax loss, or a tax credit carryforward is not available at the reporting date to settle any additional income taxes that would result from disallowance of a tax position, or the tax law does not require the entity to use, and the entity does not intend to use, the deferred tax asset for such purpose, then the unrecognized tax benefit should be presented as a liability. The amendments in this update are effective for fiscal years, and interim periods within those years, beginning after December 15, 2013. Early adoption is permitted. The Company does not expect ASU 2013-11 to have a significant impact on its consolidated results of operations and financial condition.

Other accounting standards that have been issued or proposed by the FASB or other standards-setting bodies that do not require adoption until a future date are not expected to have a material impact on the Company’s consolidated financial statements upon adoption.

XML

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

12 Months Ended

Dec. 31, 2013

Accounting Policies [Abstract]

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principle of consolidation

These consolidated financial statements include the financial statements of Lihua International, Inc. and its subsidiaries.  All significant inter-company balances or transactions have been eliminated on consolidation.

Basis of preparation

These consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America.

Use of estimates

The preparation of these consolidated financial statements in conformity with generally accepted accounting principles requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities and the related disclosure of contingent assets and liabilities at the date of these consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. Accordingly, actual results may differ from these estimates under different assumptions or conditions. Significant estimates for the years ended December 31, 2013, 2012 and 2011 include the allowance for doubtful accounts, the useful life of property, plant and equipment and intangible assets, recoverability of the carrying values of property, plant and equipment and the fair values of share-based payments and warrants granted in connection with the private placement of preferred stock in 2008 and the public offering of common stock in 2009.

Cash and cash equivalents

Cash and cash equivalents consist of all cash balances and highly liquid investments with an original maturity of three months or less.  Because of the short maturity of these investments, the carrying amounts approximate their fair value.  Restricted cash is excluded from cash and cash equivalents.

Accounts receivable

Accounts and bills receivable are stated at cost, net of an allowance for doubtful accounts. The Company maintains allowances for doubtful accounts for estimated losses, if any, resulting from the failure of customers to make required payments. The Company reviews the accounts and bills receivable on a periodic basis and makes allowances where there is doubt as to the collectibility of individual balances. In evaluating the collectibility of individual receivable balances, the Company considers many factors, including the age of the balance, the customer’s payment history, its current credit-worthiness and current economic trends.

Inventories

Inventories are stated at the lower of cost, determined on a weighted average basis, or market. Costs of inventories include purchase and related costs incurred in bringing the products to their present location and condition. Market value is determined by reference to selling prices after the balance sheet date or to management’s estimates based on prevailing market conditions. Management will write down the inventories to market value if it is below cost. Management also regularly evaluates the composition of its inventories to identify slow-moving and obsolete inventories to determine if a valuation allowance is required.

Property, plant and equipment

Property, plant and equipment are stated at cost less accumulated depreciation and accumulated impairment losses, if any. Gains or losses on disposals are reflected as gain or loss in the year of disposal. The cost of improvements that extend the life of buildings, machinery and equipment are capitalized. These capitalized costs may include structural improvements, equipment and fixtures. All ordinary repair and maintenance costs are expensed as incurred.

Depreciation for financial reporting purposes is provided using the straight-line method over the estimated useful lives of the assets as follows:

	Useful Life
	(In years)
Buildings	20
Machinery	5-10
Office equipment & motor vehicles	5

Construction in progress

Construction in progress includes direct costs of construction of buildings and equipment and interest incurred during the period of construction, if material, is also capitalized. Construction in progress is not depreciated until such time as the assets are completed and put into service.

Prepaid land use right

Prepaid land use right represents lump sum payments for land use rights in the PRC.  The amount is expensed over the period of the land use rights of 50 years.

Intangible assets

The Company’s intangible assets include computer software.  The Company’s amortization policy on intangible assets is as follows:

	Useful Life
	(In years)
Computer software	5

The Company accounts for its intangible assets pursuant to FASB ASC Subtopic 350-30, “General Intangibles Other Than Goodwill”. Under ASC 350-30, intangibles with definite lives continue to be amortized on a straight-line basis over the lesser of their estimated useful lives or contractual terms. Intangibles with indefinite lives are evaluated at least annually for impairment if events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. Based on the existence of one or more indicators of impairment, the Company measures any impairment of long-lived assets by comparing the asset's estimated fair value with its carrying value, based on cash flow methodology.

 

Impairment of long-lived assets

The Company reviews and evaluates its long-lived assets for impairment when events or changes in circumstances indicate that the related carrying amounts may not be recoverable. Impairment is considered to exist if the total estimated future cash flows on an undiscounted basis are less than the carrying amount of the assets. An impairment loss is measured and recorded based on discounted estimated future cash flows. In estimating future cash flows, assets are grouped at the lowest level for which there is identifiable cash flows that are largely independent of future cash flows from other asset groups.

Derivative financial instruments

The Company evaluates all its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in the fair value reported in the consolidated statements of income.

The Company’s warrants have been classified as derivatives in accordance with the guidance provided in FASB ASC 815-40-15-7I, because they are denominated in U.S. dollars, which is different from the Company’s functional currency (Renminbi).The Company accounted for the exercise of these warrants as extinguishment of debts in accordance with ASC 815-10-40-1, “Derivatives and Hedges – Derecognition” and ASC 470-50-40, “Debt – Modification and Extinguishments – Derecognition”.

Revenue recognition

Revenue is recognized when the following four revenue criteria are met: persuasive evidence of an arrangement exists, delivery has occurred, the selling price is fixed or determinable, and collectibility is reasonably assured.

Sales revenue is recognized net of value added tax, sales discounts and returns at the time when the merchandise is sold and delivered to the customer. Based on historical experience, management estimates that sales returns are immaterial and has not made an allowance for estimated sales returns.

Research and development costs

Research and development costs are expensed as incurred, and charged to general and administrative expense. For the years ended December 31, 2013, 2012 and 2011, research and development costs were $1,305,379, $1,779,018 and $954,299, respectively.

Advertising costs

The Company expenses all advertising costs as incurred. The total amount of advertising costs charged to general and administrative expense were $13,247, $856 and $17,138 for the years ended December 31, 2013, 2012 and 2011, respectively.

Shipping and handling costs

Substantially all costs of shipping and handling of products to customers are included in selling expenses. Shipping and handling costs for the years ended December 31, 2013, 2012 and 2011 were $2,424,613, $2,343,646 and $2,051,193, respectively.

Income taxes

The Company is subject to income taxes in the United States and other foreign jurisdictions where it operates. The Company accounts for income taxes in accordance with FASB ASC Topic 740, “Income Taxes”.  FASB ASC Topic 740 requires an asset and liability approach for financial accounting and reporting for income taxes and allows recognition and measurement of deferred tax assets based upon the likelihood of realization of tax benefits in future years.  Under the asset and liability approach, deferred taxes are provided for the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.  A valuation allowance is provided for deferred tax assets if it is more likely than not these items will either expire before the Company is able to realize their benefits, or that future deductibility is uncertain.

The Company’s income tax returns are subject to examination by the Internal Revenue Service (“IRS”) and other tax authorities in the locations where it operates. The Company assesses potentially unfavorable outcomes of such examinations based on the criteria of FASB ASC 740-10-25-5 through 740-10-25-7 and 740-10-25-13 which the Company adopted on January 1, 2007. The interpretation prescribes a more-likely-than-not threshold for financial statement recognition and measurement of a tax position taken (or expected to be taken) in a tax return. This interpretation also provides guidance on de-recognition of income tax assets and liabilities, classification of current and deferred income tax assets and liabilities, accounting for interest and penalties associated with tax positions, accounting for income taxes in interim periods and income tax disclosures.

Comprehensive income

FASB ASC Topic 220, “Comprehensive Income”, establishes standards for reporting and displaying comprehensive income and its components in the consolidated financial statements. Accumulated other comprehensive income includes foreign currency translation adjustments.

Stock based compensation

The Company accounts for share-based compensation awards to employees in accordance with FASB ASC Topic 718, “Compensation – Stock Compensation”, which requires that share-based payment transactions with employees be measured based on the grant-date fair value of the equity instrument issued and recognized as compensation expense over the requisite service period.

The Company accounts for share-based compensation awards to non-employees in accordance with FASB ASC Topic 718 and FASB ASC Subtopic 505-50, “Equity-Based Payments to Non-employees”. Under FASB ASC Topic 718 and FASB ASC Subtopic 505-50, stock compensation granted to non-employees has been determined as the fair value of the consideration received or the fair value of equity instrument issued, whichever is more reliably measured and is recognized as an expense as the goods or services are received.

Foreign currency

The Company has its local currency, Renminbi, (“RMB”), as its functional currency. The Company’s subsidiaries maintain their books and records in their functional currency, RMB. The consolidated financial statements of the Company are translated from RMB into United States dollars (U.S. Dollars or “US$” or “$”). Accordingly, assets and liabilities of the PRC subsidiaries are translated from RMB to U.S. Dollars using the applicable exchange rates prevailing at the balance sheet date. Items on the statement of comprehensive income and cash flows are translated at average exchange rates during the reporting period. Equity accounts are translated at historical rates. Adjustments resulting from the translation of the Company’s financial statements are recorded as accumulated other comprehensive income.

The exchange rates used to translate amounts in RMB into U.S. Dollars for the purposes of preparing the consolidated financial statements are based on the rates as published on the website of People’s Bank of China and are as follows:

	2013	2012	2011
Balance sheet items, except for equity accounts	US$1=RMB6.0969	US$1=RMB6.2855	US$1=RMB6.3009
Items in the statements of income and cash flows	US$1=RMB6.1932	US$1=RMB6.3125	US$1=RMB6.4588

No representation is made that the RMB amounts could have been, or could be, converted into U.S. dollars at the above rates. The value of RMB against U.S. dollars and other currencies may fluctuate and is affected by, among other things, changes in China’s political and economic conditions. Any significant revaluation of RMB may materially affect the Company’s financial condition in terms of U.S. dollar reporting.

Segment reporting

The Company follows FASB ASC Topic 280, “Segment Reporting”, which requires that companies disclose segment data based on how management makes decision about allocating resources to segments and evaluating their performance.

The Company believes that during the years ended December 31, 2013, 2012 and 2011, it operated mainly in one business segment – Manufacturing and sales of refined copper rod and copper anode, as well as copper clad aluminum (CCA) wire and copper wire produced from refined copper rod.  Throughout the years ended December 31, 2013, 2012 and 2011 all of the Company’s operations were carried out mainly in one geographical segment - China.

The Company’s major product categories are (1) wire manufacturing, consisting of (a) CCA wire, which is an electrical conductor consisting of an outer sleeve of copper that is metallurgically bonded to a solid aluminum core, and (b) copper fine and superfine wire, manufactured from recycled copper rod; (2) refined copper rod; and (3) refined copper anode, the latter two of which are fire refined from scrap copper. The manufacturing of refined copper was launched in the first quarter of 2009. 

Dividends

Dividends are recognized when declared.

PRC regulations currently permit payment of dividends only out of accumulated profits as determined in accordance with PRC accounting standards and regulations. The Company’s PRC subsidiaries can only distribute dividends after they have met the PRC requirements for appropriation to statutory reserves. The PRC government imposes control over its foreign currency reserves in part through direct regulation of the conversion of the RMB into foreign exchange and through restrictions on foreign trade. As the majority of the Company’s revenues are in RMB, any restrictions on currency exchange may limit the Company’s ability to use revenue generated in RMB to fund its business activities outside China or to make dividend payments in U.S. dollars.

Earnings per common share

The Company reports earnings per share in accordance with the provisions of FASB ASC Topic 260, “Earnings per Share”. FASB ASC Topic 260 requires presentation of basic and diluted earnings per share in conjunction with the disclosure of the methodology used in computing such earnings per share. Basic earnings per share excludes dilution and is computed by dividing income available to common stockholders by the weighted average common shares outstanding during the period. Diluted earnings per share takes into account the potential dilution (using the treasury stock method) that could occur if securities or other contracts to issue common stock were exercised and converted into common stock.

Commitments and contingencies

The Company follows FASB ASC Subtopic 450-20, “Loss Contingencies” in determining its accruals and disclosures with respect to loss contingencies. Accordingly, estimated losses from loss contingencies are accrued by a charge to income when information available prior to issuance of the financial statements indicates that it is probable that a liability could have been incurred and the amount of the loss can be reasonably estimated. Legal expenses associated with the contingency are expensed as incurred. If a loss contingency is not probable or reasonably estimable, disclosure of the loss contingency is made in the financial statements when it is at least reasonably possible that a material loss could be incurred.

Recent accounting pronouncements

In February 2013, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2013-2, Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income (ASU 2013-02), that requires an organization to present the effects on the line items of net income of significant amounts reclassified out of Accumulated OCI, but only if the item reclassified is required under U.S. GAAP to be reclassified to net income in its entirety in the same reporting period. ASU 2013-02 is effective for fiscal years beginning after December 15, 2012. The Company adopted ASU 2013-02 effective January 1, 2013 and it did not have a significant impact on its consolidated results of operations and financial condition.

In March 2013, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2013-05, Foreign Currency Matters, (Topic 830): Parent's Accounting for the Cumulative Translation Adjustment upon Derecognition of Certain Subsidiaries or Groups of Assets within a Foreign Entity or of an Investment in a Foreign Entity (ASU 2013-05), to resolve a diversity in accounting for the cumulative translation adjustment of foreign currency upon derecognition of a foreign subsidiary or group of assets. ASU 2013-05 requires the parent to apply the guidance in Subtopic 830-30 to release any related cumulative translation adjustment into net income when a reporting entity (parent) ceases to have a controlling financial interest in a subsidiary or group of assets within a foreign entity. Accordingly, the cumulative translation adjustment should be released into net income only if the sale or transfer results in the complete or substantially complete liquidation of the foreign entity in which the subsidiary or group of assets had resided. Further, ASU 2013-05 clarified that the parent should apply the guidance in subtopic 810-10 if there is a sale of an investment in a foreign entity, including both (1) events that result in the loss of a controlling financial interest in a foreign entity and (2) events that result in an acquirer obtaining control of an acquiree in which it held an equity interest immediately before the acquisition date. Accordingly, the cumulative translation adjustment should be released into net income upon the occurrence of those events. ASU 2013-05 is effective prospectively for the Company in its first quarter of fiscal 2014, with early adoption permitted. The Company does not expect ASU 2013-05 to have a significant impact on its consolidated results of operations and financial condition.

In July 2013, the FASB issued Accounting Standards Update No. 2013-11, Income Taxes (Topic 740)(ASU 2013-11). The amendments in this update provide guidance on the financial statement presentation of an unrecognized tax benefit when a net operating loss carryforward, similar tax loss, or tax credit carryforward exists. These amendments provide that an unrecognized tax benefit, or a portion thereof, should be presented in the financial statements as a reduction of a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward, except to the extent that a net operating loss carryforward, a similar tax loss, or a tax credit carryforward is not available at the reporting date to settle any additional income taxes that would result from disallowance of a tax position, or the tax law does not require the entity to use, and the entity does not intend to use, the deferred tax asset for such purpose, then the unrecognized tax benefit should be presented as a liability. The amendments in this update are effective for fiscal years, and interim periods within those years, beginning after December 15, 2013. Early adoption is permitted. The Company does not expect ASU 2013-11 to have a significant impact on its consolidated results of operations and financial condition.

Other accounting standards that have been issued or proposed by the FASB or other standards-setting bodies that do not require adoption until a future date are not expected to have a material impact on the Company’s consolidated financial statements upon adoption.

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DESCRIPTION OF BUSINESS AND ORGANIZATION (Tables)

12 Months Ended

Dec. 31, 2013

Description Of Business and Organization [Abstract]

Details of Subsidiaries

As of December 31, 2013, details of the subsidiaries of the Company are as follows:

Subsidiaries’ names	Domicile and date of Incorporation	Paid-up capital		Effective Ownership		Principal activities
Ally Profit Investments Limited (“Ally Profit”)	British Virgin Islands March 12, 2008	$	100	100	%	Holding company of other subsidiaries
Lihua Holdings Limited (“Lihua Holdings”)	Hong Kong April 17, 2008	HK$	100	100	%	Holding company of other subsidiaries
Danyang Lihua Electron Co., Ltd. (“Lihua Electron”)	People’s Republic of China (“PRC”) December 30, 1999	$	10,500,000	100	%	Manufacturing and sales of pure copper wire and bimetallic composite conductor wire such as copper clad aluminum (CCA) wire and enameled CCA wire
Jiangsu Lihua Copper Industry Co., Ltd. (“ Lihua Copper ”)	PRC August 31, 2007	$	46,000,000	100	%	Manufacturing and sales of refined copper

Proportion of equity interests

The table below sets forth the proportion of equity interests in all entities involved before and after the Restructuring based on subscribed registered capital:

	Magnify Wealth		Ally Profit		Lihua Holdings		Lihua Electron		Lihua Copper
	Before	After	Before	After	Before	After	Before	After	Before	After
	%	%	%	%	%	%	%	%	%	%
Shareholder
Mr. Fo-Ho Chu (“ Mr. Chu ”)	100	100	—	—	—	—	45.46	—	—	—
Magnify Wealth	—	—	100	100		—	—	—	—	—
Ally Profit	—	—	—	—	100	100	—	—	—	—
Lihua Holdings	—	—	—	—	—	—	—	100	—	100
Danyang Special Electronics Co., Ltd. (a)	—	—	—	—	—	—	52.27	—	25	—
Invest Unicorn Holdings Limited (b)	—	—	—	—	—	—	—	—	75	—
Imbis Europe B.V. h/o Asia Trading (EDC) (“ Europe EDC ”)	—	—	—	—	—	—	2.27	—	—	—
	100	100	100	100	100	100	100	100	100	100

(a) Equity interests in Danyang Special Electronics Co., Ltd., a PRC domestic company, are held as to 60% by Mr. Zhu and 40% by his wife. Mr. Zhu and his wife are acting in concert and considered parties to the same control group.

(b) Invest Unicorn Holdings Limited, incorporated in the British Virgin Islands, is 100% beneficially owned by Mr. Zhu.

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Other Income (Expenses) (Detail) (USD $)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Other Income Net [Line Items]
Other	$ 35,136	$ 93,819	$ 114,623
Government subsidies
Other Income Net [Line Items]
Other	80,734	95,128	0
Gain on sale of scraps
Other Income Net [Line Items]
Other	0	0	13,520
Other
Other Income Net [Line Items]
Other	$ (45,598)	$ (1,309)	$ 101,103

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CONSTRUCTION IN PROGRESS (Tables)

12 Months Ended

Dec. 31, 2013

Construction In Progress [Abstract]

Construction in Progress

Construction in progress was related to the construction of the new production plant and consisted of the following:

	As of December 31,
	2013		2012
Construction of equipment	$	5,323,387	$	175,006
Construction of buildings		236,514		-
	$	5,559,901	$	175,006

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Details of Subsidiaries (Detail)	12 Months Ended
	Dec. 31, 2013 Ally Profit Investments Limited USD ($)	Dec. 31, 2013 Lihua Holdings Limited HKD	Dec. 31, 2013 Danyang Lihua Electron Co., Ltd. USD ($)	Dec. 31, 2013 Jiangsu Lihua Copper Industry Co., Ltd. USD ($)
Organization and Principal Activities [Line Items]
Entity Incorporation, State Country Name	British Virgin Islands	Hong Kong	People’s Republic of China (“PRC”)	PRC
Entity Incorporation, Date Of Incorporation	Mar. 12, 2008	Apr. 17, 2008	Dec. 30, 1999	Aug. 31, 2007
Paid-up capital	$ 100	100	$ 10,500,000	$ 46,000,000
Effective ownership	100.00%	100.00%	100.00%	100.00%
Principal activities	Holding company of other subsidiaries	Holding company of other subsidiaries	Manufacturing and sales of pure copper wire and bimetallic composite conductor wire such as copper clad aluminum (CCA) wire and enameled CCA wire	Manufacturing and sales of refined copper

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PROPERTY, PLANT AND EQUIPMENT, NET - Additional Information (Detail) (USD $)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Property, Plant and Equipment [Line Items]
Depreciation expense	$ 3,943,546	$ 3,264,226	$ 1,895,512

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CONSOLIDATED BALANCE SHEETS (USD $)	Dec. 31, 2013	Dec. 31, 2012
CURRENT ASSETS
Cash and cash equivalents	$ 203,406,220	$ 144,300,290
Accounts receivable, net	60,497,780	45,284,923
Prepayments for raw material purchases	17,143,138	19,569,239
Other receivables, deposits and prepayments	337,189	559,955
Prepaid land use right - current portion	418,502	406,026
Deferred income tax assets	146,418	24,948
Inventories	12,140,696	17,844,405
Total current assets	294,089,943	227,989,786
OTHER ASSETS
Property, plant and equipment, net	47,139,458	47,197,115
Construction in progress	5,559,901	175,006
Prepaid land use right - long-term portion	18,701,959	18,546,658
Intangible assets	42,195	3,332
Total non-current assets	71,443,513	65,922,111
Total assets	365,533,456	293,911,897
CURRENT LIABILITIES
Accounts payable	7,415,370	3,891,110
Other payables and accruals	7,143,964	4,937,404
Income taxes payable	4,941,050	5,797,188
Warrant liabilities	33,262	354,000
Total current liabilities	19,533,646	14,979,702
Total liabilities	19,533,646	14,979,702
STOCKHOLDERS' EQUITY
Preferred stock: $0.0001 par value, 10,000,000 shares authorized, none issued and outstanding	0	0
Common stock, $0.0001 par value: 75,000,000 shares authorized, 30,295,955 shares issued and 30,031,908 shares outstanding as of December 31, 2013 (2012: 30,084,883 shares issued and 29,820,836 shares outstanding), respectively	3,029	3,008
Additional paid-in capital	80,627,496	79,257,921
Treasury stock, at cost, 264,047 shares as of December 31, 2013 and 2012, respectively	(2,126,597)	(2,126,597)
Statutory reserves	18,723,836	14,566,846
Retained earnings	222,165,580	170,163,120
Accumulated other comprehensive income	26,606,466	17,067,897
Total stockholders' equity	345,999,810	278,932,195
Total liabilities and stockholders' equity	$ 365,533,456	$ 293,911,897

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OTHER INCOME (EXPENSES) (Tables)

12 Months Ended

Dec. 31, 2013

Component of Operating Income [Abstract]

OTHER INCOME

	Year ended December 31,
	2013		2012		2011
Government subsidies	$	80,734	$	95,128	$	-
Gain on sale of scraps		-		-		13,520
Other		(45,598)		(1,309)		101,103
	$	35,136	$	93,819	$	114,623

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Condensed Balance Sheets (Detail) (USD $)	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2010
Current assets:
Cash and cash equivalents	$ 203,406,220	$ 144,300,290	$ 105,637,627	$ 90,609,340
Other receivables	337,189	559,955
Prepayments	418,502	406,026
Total current assets	294,089,943	227,989,786
Total assets	365,533,456	293,911,897
Current liabilities:
Warrant liabilities	33,262	354,000
Total current liabilities	19,533,646	14,979,702
Stockholders’ equity
Preferred stock: $0.0001 par value, 10,000,000 shares authorized, none issued and outstanding	0	0
Common stock, $0.0001 par value: 75,000,000 shares authorized, 30,295,955 shares issued and 30,031,908 shares outstanding as of December 31, 2013 (2012: 30,084,883 shares issued and 29,820,836 shares outstanding), respectively	3,029	3,008
Additional paid-in capital	80,627,496	79,257,921
Treasury stock, at cost, 264,047 shares and 264,047 as of December 31, 2013 and 2012, respectively	(2,126,597)	(2,126,597)
Retained earnings	222,165,580	170,163,120
Accumulated other comprehensive income	26,606,466	17,067,897
Total stockholders' equity	345,999,810	278,932,195	219,636,640	153,157,623
Total liabilities and stockholders' equity	365,533,456	293,911,897
Parent
Current assets:
Cash and cash equivalents	43,010	64,015	0	0
Other receivables	16,333	15,843
Prepayments	136,500	162,000
Total current assets	195,843	241,858
Investments in subsidiaries	345,837,229	279,044,337
Total assets	346,033,072	279,286,195
Current liabilities:
Warrant liabilities	33,262	354,000
Total current liabilities	33,262	354,000
Stockholders’ equity
Preferred stock: $0.0001 par value, 10,000,000 shares authorized, none issued and outstanding	0	0
Common stock, $0.0001 par value: 75,000,000 shares authorized, 30,295,955 shares issued and 30,031,908 shares outstanding as of December 31, 2013 (2012: 30,084,883 shares issued and 29,820,836 shares outstanding), respectively	3,029	3,008
Additional paid-in capital	80,627,496	79,257,921
Treasury stock, at cost, 264,047 shares and 264,047 as of December 31, 2013 and 2012, respectively	(2,126,597)	(2,126,597)
Retained earnings	240,889,416	184,729,966
Accumulated other comprehensive income	26,606,466	17,067,897
Total stockholders' equity	345,999,810	278,932,195
Total liabilities and stockholders' equity	$ 346,033,072	$ 279,286,195

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CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$ 56,159,450	$ 57,942,003	$ 53,133,533
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization	4,361,117	3,669,077	2,294,159
Loss on disposal of property, plant and equipment	86,330	0	0
Share-based compensation	343,513	382,089	498,212
(Gain) loss on extinguishment of warrant liabilities	8,369	(73,291)	(88,777)
Change in fair value of warrants	106,536	124,000	(3,062,575)
Deferred income tax benefits	(118,821)	175,379	(65,136)
(Increase) decrease in assets:
Accounts receivable	(13,597,256)	(14,065,887)	3,487,873
Bills receivable	0	0	541,989
Prepayments for raw material purchases	2,984,314	2,357,227	(21,347,998)
Other receivables, deposits and prepayments	236,354	1,321,844	(1,814,309)
Inventories	6,158,432	(2,294,323)	1,442,579
Increase (decrease) in liabilities:
Accounts payable	3,350,965	(2,180,647)	(246,640)
Other payables and accruals	1,987,001	198,772	(782,013)
Income taxes payable	(1,019,365)	1,173,326	(612,900)
Net cash provided by operating activities	61,046,939	48,729,569	33,377,997
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property, plant and equipment and construction in progress	(7,796,777)	(9,365,100)	(16,965,626)
Deposits for plant and equipment	0	0	(3,344,274)
Net cash used in investing activities	(7,796,777)	(9,365,100)	(20,309,900)
CASH FLOWS FROM FINANCING ACTIVITIES
Payment of common stock dividend	0	(992,846)	0
Repayments of short-term bank loans	0	0	(2,322,413)
Repurchase of common stock	0	0	(2,126,597)
Proceeds from exercise of share options	495,000	0	0
Proceeds from exercise of warrants	95,441	0	1,898,050
Net cash (used in) provided by financing activities	590,441	(992,846)	(2,550,960)
Foreign currency translation adjustment	5,265,327	291,040	4,511,150
INCREASE IN CASH AND CASH EQUIVALENTS	59,105,930	38,662,663	15,028,287
CASH AND CASH EQUIVALENTS, at the beginning of the year	144,300,290	105,637,627	90,609,340
CASH AND CASH EQUIVALENTS, at the end of the year	203,406,220	144,300,290	105,637,627
MAJOR NON-CASH TRANSACTION:
Share-based compensation to employees and directors	343,513	382,089	498,212
Issuance of common stock to settle warrant liabilities	435,642	311,709	4,916,088
SUPPLEMENTAL DISCLOSURE INFORMATION
Cash paid for interest	0	0	143,779
Cash paid for income taxes	$ 20,743,750	$ 19,569,241	$ 18,056,035

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Net Revenue and Gross Profit By Product (Detail) (USD $)	3 Months Ended												12 Months Ended
	Dec. 31, 2013	Sep. 30, 2013	Jun. 30, 2013	Mar. 31, 2013	Dec. 31, 2012	Sep. 30, 2012	Jun. 30, 2012	Mar. 31, 2012	Dec. 31, 2011	Sep. 30, 2011	Jun. 30, 2011	Mar. 31, 2011	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Schedule Of Entity Wide Revenue And Gross Profit By Major Products [Line Items]
Net revenue from unaffiliated customers	$ 217,333,427	$ 219,359,379	$ 245,804,613	$ 218,229,539	$ 254,879,358	$ 238,793,030	$ 191,007,886	$ 169,086,267	$ 177,579,159	$ 155,570,657	$ 167,012,527	$ 136,931,096	$ 900,726,958	$ 853,766,541	$ 637,093,439
Gross profit	20,475,636	21,098,349	23,769,881	21,055,352	24,945,946	25,256,402	20,711,034	18,634,992	19,701,206	19,456,930	19,647,463	16,908,073	86,399,218	89,548,374	75,713,672
Fine copper wire
Schedule Of Entity Wide Revenue And Gross Profit By Major Products [Line Items]
Net revenue from unaffiliated customers													170,903,382	188,810,251	124,062,182
Gross profit													9,727,112	11,462,253	8,399,703
Superfine copper wire
Schedule Of Entity Wide Revenue And Gross Profit By Major Products [Line Items]
Net revenue from unaffiliated customers													135,328,792	144,337,762	149,808,595
Gross profit													15,469,518	16,820,626	19,947,147
CCA wire
Schedule Of Entity Wide Revenue And Gross Profit By Major Products [Line Items]
Net revenue from unaffiliated customers													53,284,353	60,634,148	61,703,257
Gross profit													16,359,209	19,602,531	21,375,471
Copper anode
Schedule Of Entity Wide Revenue And Gross Profit By Major Products [Line Items]
Net revenue from unaffiliated customers													472,042,033	381,114,304	287,269,353
Gross profit													41,693,682	37,667,562	25,224,807
Refined copper rod
Schedule Of Entity Wide Revenue And Gross Profit By Major Products [Line Items]
Net revenue from unaffiliated customers													69,168,398	78,870,076	14,250,052
Gross profit													$ 3,149,697	$ 3,995,402	$ 766,544

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FAIR VALUE MEASUREMENTS AND FINANCIAL INSTRUMENTS - Additional Information (Detail) (USD $)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Fair Value Measurements [Line Items]
Number of warrant exercised in cash	27,585	125,000	542,300
Warrants exercise price	3.50		3.50
Number of warrant exercised in cashless basis	227,915	48,402	187,164
Number of shares issued on cashless exercise of warrants	73,696		108,855
Gain on extinguishment of warrant liabilities	$ (8,369)	$ 73,291	$ 88,777
Common stock, shares subscribed but unissued	209

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Condensed Statements of Cash Flows (Detail) (USD $)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Net cash used in operating activities	$ 61,046,939	$ 48,729,569	$ 33,377,997
Net cash provided by (used in) investing activities	(7,796,777)	(9,365,100)	(20,309,900)
Net cash (used in) provided by financing activities	590,441	(992,846)	(2,550,960)
CASH AND CASH EQUIVALENTS, at the beginning of the year	144,300,290	105,637,627	90,609,340
CASH AND CASH EQUIVALENTS, at the end of the year	203,406,220	144,300,290	105,637,627
Parent
Net cash used in operating activities	(2,818,130)	(3,333,914)	(2,267,880)
Net cash provided by (used in) investing activities	2,206,684	4,390,775	2,496,427
Net cash (used in) provided by financing activities	590,461	(992,846)	(228,547)
CASH AND CASH EQUIVALENTS, at the beginning of the year	64,015	0	0
CASH AND CASH EQUIVALENTS, at the end of the year	$ 43,010	$ 64,015	$ 0

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ACCOUNTS RECEIVABLE, NET (Tables)

12 Months Ended

Dec. 31, 2013

Accounts Receivable, Net [Abstract]

Accounts Receivable

Accounts receivable consisted of the following:

	As of December 31,
	2013		2012
Accounts receivable	$	60,497,780	$	45,284,923
Less: Allowance for doubtful debts		-		-
Accounts receivable, net	$	60,497,780	$	45,284,923

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PREPAYMENTS FOR RAW MATERIAL PURCHASES - Additional Information (Detail) (USD $)	Dec. 31, 2013	Dec. 31, 2012
Schedule of Inventory [Line Items]
Prepayments for raw material purchases	$ 17,143,138	$ 19,569,239

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OTHER INCOME (EXPENSES)

12 Months Ended

Dec. 31, 2013

Component of Operating Income [Abstract]

OTHER INCOME (EXPENSES)

NOTE 16 OTHER INCOME (EXPENSES)

	Year ended December 31,
	2013		2012		2011
Government subsidies	$	80,734	$	95,128	$	-
Gain on sale of scraps		-		-		13,520
Other		(45,598)		(1,309)		101,103
	$	35,136	$	93,819	$	114,623

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OTHER RECEIVABLES, DEPOSITS AND PREPAYMENTS (Tables)

12 Months Ended

Dec. 31, 2013

Other Receivables Deposits and Prepayments [Abstract]

Other Receivables and Prepayments

Other receivables, deposits and prepayments consisted of the following:

	As of December 31,
	2013		2012
Prepaid insurance	$	136,500	$	162,000
Other receivables		118,680		118,031
Utility deposits		82,009		79,548
Prepaid research and development costs		-		200,376
Less: Allowance for valuation and doubtful debts		-		-
	$	337,189	$	559,955

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Condensed Statements of Income (Detail) (USD $)	3 Months Ended												12 Months Ended
	Dec. 31, 2013	Sep. 30, 2013	Jun. 30, 2013	Mar. 31, 2013	Dec. 31, 2012	Sep. 30, 2012	Jun. 30, 2012	Mar. 31, 2012	Dec. 31, 2011	Sep. 30, 2011	Jun. 30, 2011	Mar. 31, 2011	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2008
Administrative expenses	$ (1,853,646)	$ (1,807,615)	$ (2,006,127)	$ (2,405,784)	$ (2,630,168)	$ (2,059,027)	$ (1,834,465)	$ (2,097,834)	$ (2,239,462)	$ (1,498,306)	$ (1,339,062)	$ (1,573,312)	$ (8,073,172)	$ (8,621,494)	$ (6,650,142)
Other expenses:
Change in fair value of warrant													(106,536)	(124,000)	3,062,575
Gain (Loss) on extinguishment of warrant liabilities													(8,369)	73,291	88,777
NET INCOME	13,233,558	13,938,895	15,675,810	13,311,187	15,793,687	17,226,638	13,446,666	11,475,012	12,727,388	13,528,083	14,366,076	12,511,986	56,159,450	57,942,003	53,133,533	11,701,879
Parent
Administrative expenses													(2,818,130)	(3,397,929)	(2,267,880)
Other expenses:
Change in fair value of warrant													(106,536)	(124,000)	3,062,575
Gain (Loss) on extinguishment of warrant liabilities													(8,369)	73,291	88,777
Equity in income of subsidiaries													59,092,485	61,390,641	52,250,061
NET INCOME													$ 56,159,450	$ 57,942,003	$ 53,133,533

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EARNINGS PER SHARE

12 Months Ended

Dec. 31, 2013

Earnings Per Share [Abstract]

EARNINGS PER SHARE

NOTE 18 EARNINGS PER SHARE

Basic earnings per common share is computed by dividing income available to common shareholders by the weighted average number of common shares outstanding for the period. Diluted income per common share is computed similarly to basic income per common share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potentially dilutive common shares had been issued.

The following table is a reconciliation of the net income and the weighted average shares used in the computation of basic and diluted earnings per share for the periods presented:

	Year ended December 31,
	2013		2012		2011
Income available to common stockholders:
- Basic and diluted	$	56,159,450	$	57,942,003	$	53,133,533
Weighted average number of shares:
- Basic		29,858,880		29,815,943		29,816,871
- Effect of dilutive securities - warrants and options		137,953		149,868		259,259
- Diluted		29,996,833		29,965,811		30,076,130
Net income per share
- Basic	$	1.88	$	1.94	$	1.78
- Diluted	$	1.87	$	1.93	$	1.77

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Inventories by Major Categories (Detail) (USD $)	Dec. 31, 2013	Dec. 31, 2012
Schedule of Inventory [Line Items]
Raw materials	$ 8,775,850	$ 12,906,713
Work in progress	183,699	419,695
Inventories	12,140,696	17,844,405
CCA and copper wire
Schedule of Inventory [Line Items]
Other inventory	2,863,021	2,947,584
Copper rod and anode
Schedule of Inventory [Line Items]
Other inventory	$ 318,126	$ 1,570,413

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DESCRIPTION OF BUSINESS AND ORGANIZATION

12 Months Ended

Dec. 31, 2013

Description Of Business and Organization [Abstract]

DESCRIPTION OF BUSINESS AND ORGANIZATION

NOTE 1 DESCRIPTION OF BUSINESS AND ORGANIZATION

(A) BUSINESS AND ORGANIZATION

Lihua International, Inc. (“Lihua” or the “Company”) was incorporated in the State of Delaware on January 24, 2006 under the name Plastron Acquisition Corp.  On September 22, 2008, the Company changed its name from Plastron Acquisition Corp. to Lihua International, Inc. The Company conducts its business through two operating subsidiaries, Danyang Lihua Electron Co., Ltd. and Jiangsu Lihua Copper Industry Co., Ltd.

On September 4, 2009, the Company’s common stock began trading on the NASDAQ Capital Market under the symbol “LIWA”.

As of December 31, 2013, details of the subsidiaries of the Company are as follows:

Subsidiaries’ names	Domicile and date of Incorporation	Paid-up capital		Effective Ownership		Principal activities
Ally Profit Investments Limited (“Ally Profit”)	British Virgin Islands March 12, 2008	$	100	100	%	Holding company of other subsidiaries
Lihua Holdings Limited (“Lihua Holdings”)	Hong Kong April 17, 2008	HK$	100	100	%	Holding company of other subsidiaries
Danyang Lihua Electron Co., Ltd. (“Lihua Electron”)	People’s Republic of China (“PRC”) December 30, 1999	$	10,500,000	100	%	Manufacturing and sales of pure copper wire and bimetallic composite conductor wire such as copper clad aluminum (CCA) wire and enameled CCA wire
Jiangsu Lihua Copper Industry Co., Ltd. (“ Lihua Copper ”)	PRC August 31, 2007	$	46,000,000	100	%	Manufacturing and sales of refined copper

(B) REVERSE ACQUISITION

On October 31, 2008, the Company entered into a share exchange agreement (“Share Exchange Agreement”) under which the Company issued 14,025,000 shares of its Common Stock, par value $0.0001, to Magnify Wealth Enterprise Limited, the sole shareholder of Ally Profit (the “Ally Profit Shareholder” or “Magnify Wealth”) in exchange for all the issued and outstanding shares of Ally Profit (the “Share Exchange”). As a result of the Share Exchange, Ally Profit has become the Company’s wholly-owned subsidiary and Ally Profit Shareholder acquired a majority of the Company’s issued and outstanding stock. Concurrent with the Share Exchange, Mr. Jianhua Zhu (the managing director of Ally Profit and all of its operating subsidiaries, “Mr. Zhu”) has been appointed the Chief Executive Officer of the Company.

As a result, the Share Exchange has been accounted for as a reverse acquisition using the purchase method of accounting, whereby Ally Profit is deemed to be the accounting acquirer (legal acquiree) and the Company to be the accounting acquiree (legal acquirer). The financial statements before the date of the Share Exchange are those of Ally Profit with the results of the Company being consolidated from the date of the Share Exchange. The equity section and earnings per share have been retroactively restated to reflect the reverse acquisition and no goodwill has been recorded.

Ally Profit was incorporated in the British Virgin Islands on March 12, 2008. In June 2008, pursuant to a restructuring plan set out below, Ally Profit has become the holding company of a group of companies comprising Lihua Holdings, a company incorporated in Hong Kong, which holds 100% equity interests in each of Lihua Electron and Lihua Copper, each a limited liability company organized under the existing laws of the PRC.

(C) RESTRUCTURING

In June 2008, pursuant to a restructuring plan (“Restructuring”) intended to ensure compliance with the PRC rules and regulations, Ally Profit through its directly wholly-owned subsidiary Lihua Holdings, acquired 100% of the equity interests in Lihua Electron and Lihua Copper from companies controlled by Mr. Zhu and other minority shareholders.

The table below sets forth the proportion of equity interests in all entities involved before and after the Restructuring based on subscribed registered capital:

	Magnify Wealth		Ally Profit		Lihua Holdings		Lihua Electron		Lihua Copper
	Before	After	Before	After	Before	After	Before	After	Before	After
	%	%	%	%	%	%	%	%	%	%
Shareholder
Mr. Fo-Ho Chu (“ Mr. Chu ”)	100	100	—	—	—	—	45.46	—	—	—
Magnify Wealth	—	—	100	100		—	—	—	—	—
Ally Profit	—	—	—	—	100	100	—	—	—	—
Lihua Holdings	—	—	—	—	—	—	—	100	—	100
Danyang Special Electronics Co., Ltd. (a)	—	—	—	—	—	—	52.27	—	25	—
Invest Unicorn Holdings Limited (b)	—	—	—	—	—	—	—	—	75	—
Imbis Europe B.V. h/o Asia Trading (EDC) (“ Europe EDC ”)	—	—	—	—	—	—	2.27	—	—	—
	100	100	100	100	100	100	100	100	100	100

(a) Equity interests in Danyang Special Electronics Co., Ltd., a PRC domestic company, are held as to 60% by Mr. Zhu and 40% by his wife. Mr. Zhu and his wife are acting in concert and considered parties to the same control group.

(b) Invest Unicorn Holdings Limited, incorporated in the British Virgin Islands, is 100% beneficially owned by Mr. Zhu.

As part of the Restructuring, Mr. Zhu and Mr. Chu entered into a Share Transfer Agreement dated October 22, 2008, pursuant to which Mr. Chu granted to Mr. Zhu the option to purchase all of the 3,000 ordinary shares of Magnify Wealth held by Mr. Chu at the nominal price of $1.00 per share (the “Option Shares”). Pursuant to the Share Transfer Agreement, the Option Shares vested and became exercisable upon Lihua Electron and Lihua Copper attaining consolidated net income performance targets for fiscal 2008, 2009, and 2010 of $8 million (“2008 Target”), $11 million and $14 million, respectively. If each performance target was met, the Option Shares would have vested 25%, 25% and 50%, respectively, 45 days after December 31 of each respective year.

On March 7, 2009, Mr. Zhu and Mr. Chu entered into an amendment to the Share Transfer Agreement whereby alternate conditions for the achievement of the performance targets were agreed. Under the amended agreement, as long as the audited consolidated net income of Lihua Electron and Lihua Copper for fiscal 2008 was 10% or more higher than the 2008 Target (“Alternate Performance Target”) regardless of whether the performance targets for 2009 and 2010 were met or not, the Option Shares would vest and become exercisable. Mr. Zhu would then be able to exercise the Option Shares in the same percentages and on the same dates as per the original agreement. Since our consolidated net income for 2008 was $11,701,879, which met the Alternate Performance Target, 100% of the Option Shares were exercisable as of February 14, 2011.

Also on October 22, 2008, the minority shareholders, namely Mr. Chu and Europe EDC, respectively, entered into a subscription agreement (“Subscription Agreement”) to purchase additional shares in Magnify Wealth at a nominal price of US$1.00 per share. Pursuant to these subscription agreements, Mr. Chu and Europe EDC will only be entitled to exercise their subscription rights at the same time Mr. Zhu exercises his Option Shares under the Share Transfer Agreement. The number of subscription shares exercisable by Mr. Chu and Europe EDC was determined based on the proportion of capital contributed by each of Mr. Zhu, Mr. Chu and Europe EDC in Lihua Electron and Lihua Copper. The purpose of the subscription agreements, together with the Share Transfer Agreement, is to enable Mr. Zhu, Mr. Chu and Europe EDC to re-acquire their proportionate ultimate legal ownership of Lihua Electron and Lihua Copper in compliance with the PRC rules and regulations. As a result, there has been no ownership change of the minority interests of each of the two PRC Operating Companies.

As part of the Restructuring, Lihua Holdings’ capital was established by way of contributions from Mr. Zhu and other minority shareholders, which aggregate amount equaled the total transfer price they were entitled to receive for the transfer of their equity interests in Lihua Electron and Lihua Copper to Lihua Holdings. Therefore, Mr. Zhu and the other minority shareholders, as the former stockholders of Lihua Electron and Lihua Copper who gave up legal ownership thereof, have not received any net cash amount. Nor has there been any cash flow out of the combined entity during the whole period from the date of transfer of legal ownership of Lihua Electron and Lihua Copper through the expiry of the Share Transfer Agreement and the Subscription Agreements. It is fully expected that Mr. Zhu and the other minority shareholders will re-acquire their proportionate legal ownership of Lihua Electron and Lihua Copper. As a result, Mr. Zhu and other minority shareholders have continued to bear the residual risks of the combined entity.

Mr. Zhu has retained a financial controlling interest in the combined entity through the above-discussed residual risks and rewards. Furthermore, during and after the Restructuring, there has been no change to the composition of the board of directors of either Lihua Electron or Lihua Copper and Mr. Zhu continues to act as the managing director of these companies as well as the sole director of Magnify Wealth, Ally Profit and Lihua Holdings. Lihua Electron and Lihua Copper have remained under common operating, management and financial control. As a result, the Restructuring has been accounted for as a combination of entities under common control and recapitalization of Lihua Electron and Lihua Copper using the “as if” pooling method of accounting, with no adjustment to the historical basis of the assets and liabilities of Lihua Electron and Lihua Copper, and the operations were consolidated as if the Restructuring occurred as of the beginning of the first accounting period presented in these financial statements.

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CONSOLIDATED BALANCE SHEETS (Parenthetical) (USD $)	Dec. 31, 2013	Dec. 31, 2012	Oct. 31, 2008
Preferred stock, par value	$ 0.0001	$ 0.0001
Preferred stock, shares authorized	10,000,000	10,000,000
Preferred stock, issued	0	0
Preferred stock, outstanding	0	0
Common stock, par value	$ 0.0001	$ 0.0001	$ 0.0001
Common stock, shares authorized	75,000,000	75,000,000
Common stock, shares issued	30,295,955	30,084,883
Common stock, shares outstanding	30,031,908	29,820,836
Treasury stock, shares	264,047	264,047

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CONSTRUCTION IN PROGRESS

12 Months Ended

Dec. 31, 2013

Construction In Progress [Abstract]

CONSTRUCTION IN PROGRESS

NOTE 11 CONSTRUCTION IN PROGRESS

Construction in progress was related to the construction of the new production plant and consisted of the following:

	As of December 31,
	2013		2012
Construction of equipment	$	5,323,387	$	175,006
Construction of buildings		236,514		-
	$	5,559,901	$	175,006

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Capital Commitments Contracted But Not Provided For (Detail) (USD $)	Dec. 31, 2013	Dec. 31, 2012
Unrecorded Unconditional Purchase Obligation [Line Items]
Acquisition or construction of buildings - within one year	$ 552.412	$ 0
Purchase of machinery - within one year	309,994	365,922
Unrecorded Unconditional Purchase Obligation, Total	$ 862,406	$ 365,922

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COMMITMENTS AND CONTINGENCIES - Additional Information (Detail) (USD $) In Millions, unless otherwise specified	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2011
Statement [Line Items]
Research and development contract		$ 3.02
Payment to research and development contract	2.26
Research and development contract obligation, remaining within one year	$ 0.85

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Document And Entity Information (USD $)	12 Months Ended
	Dec. 31, 2013	Mar. 13, 2014	Jun. 30, 2013
Document Information [Line Items]
Document Type	10-K
Amendment Flag	false
Document Period End Date	Dec. 31, 2013
Document Fiscal Year Focus	2013
Document Fiscal Period Focus	FY
Trading Symbol	LIWA
Entity Common Stock, Shares Outstanding		30,032,116
Entity Registrant Name	LIHUA INTERNATIONAL INC.
Entity Central Index Key	0001399521
Current Fiscal Year End Date	--12-31
Entity Well-known Seasoned Issuer	No
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Filer Category	Accelerated Filer
Entity Public Float			$ 79,222,316

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OTHER PAYABLES AND ACCRUALS

12 Months Ended

Dec. 31, 2013

Payables and Accruals [Abstract]

OTHER PAYABLES AND ACCRUALS

NOTE 12 OTHER PAYABLES AND ACCRUALS

Other payables and accruals consisted of the following:

	As of December 31,
	2013		2012
Accrued staff costs	$	600,440	$	763,430
Research and development costs payable		484,960		-
Other taxes payable		3,386,518		1,768,702
Construction cost payable		2,054,220		1,958,204
Other payables		617,826		447,068
	$	7,143,964	$	4,937,404

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Movements of Options Issued and Outstanding (Parenthetical) (Detail) (Stock Options, USD $)	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Stock Options
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Market price of common stock:	$ 5.72	$ 4.39	$ 4.76

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CERTAIN RISKS AND CONCENTRATION - Additional Information (Detail)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Concentration Risk [Line Items]
Number of customers with greater than ten percent revenue	2	2	2
Percentage of total accounts receivables	37.80%
Customer 1
Concentration Risk [Line Items]
Concentration Risk, Percentage	25.50%	31.70%	25.30%
Number of customers with greater than ten percent of total accounts receivable		1
Percentage of total accounts receivables		48.50%
Customer 2
Concentration Risk [Line Items]
Concentration Risk, Percentage	12.30%	12.90%	10.60%
Number of customers with greater than ten percent of total accounts receivable		2
Percentage of total accounts receivables		14.60%

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CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (USD $)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
NET REVENUE	$ 900,726,958	$ 853,766,541	$ 637,093,439
Cost of sales	(814,327,740)	(764,218,167)	(561,379,767)
GROSS PROFIT	86,399,218	89,548,374	75,713,672
Selling expenses	(3,020,600)	(2,954,460)	(2,485,978)
General and administrative expenses	(8,073,172)	(8,621,494)	(6,650,142)
Income from operations	75,305,446	77,972,420	66,577,552
Other income (expenses):
Interest income	660,326	547,679	522,722
Interest expenses	0	0	(143,779)
Foreign exchange differences	(1,636)	109,638	234,763
Gain (Loss) on extinguishment of warrant liabilities	(8,369)	73,291	88,777
Change in fair value of warrants	(106,536)	(124,000)	3,062,575
Other income (expenses)	35,136	93,819	114,623
Total other income (expenses)	578,921	700,427	3,879,681
Income before income taxes	75,884,367	78,672,847	70,457,233
Provision for income taxes	(19,724,917)	(20,730,844)	(17,323,700)
NET INCOME	56,159,450	57,942,003	53,133,533
OTHER COMPREHENSIVE INCOME:
Foreign currency translation adjustments	9,538,569	659,754	9,152,577
COMPREHENSIVE INCOME	$ 65,698,019	$ 58,601,757	$ 62,286,110
Net income per share
Basic	$ 1.88	$ 1.94	$ 1.78
Diluted	$ 1.87	$ 1.93	$ 1.77
Weighted average number of shares outstanding
Basic	29,858,880	29,815,943	29,816,871
Diluted	29,996,833	29,965,811	30,076,130

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OTHER RECEIVABLES, DEPOSITS AND PREPAYMENTS

12 Months Ended

Dec. 31, 2013

Other Receivables Deposits and Prepayments [Abstract]

OTHER RECEIVABLES, DEPOSITS AND PREPAYMENTS

NOTE 6 OTHER RECEIVABLES, DEPOSITS AND PREPAYMENTS

Other receivables, deposits and prepayments consisted of the following:

	As of December 31,
	2013		2012
Prepaid insurance	$	136,500	$	162,000
Other receivables		118,680		118,031
Utility deposits		82,009		79,548
Prepaid research and development costs		-		200,376
Less: Allowance for valuation and doubtful debts		-		-
	$	337,189	$	559,955

In 2011, the Company signed various research and development contracts with Shanghai Electric Cable Research Institute. The service periods of the contracts vary from approximately 1.5 years to 3 years, with installment payment terms. Prepaid research and development costs as of December 31, 2012 represented aggregate installment payments made upon execution of the contracts, net of amortization in 2013 and 2012, pursuant to the terms of these contracts. No such prepayments remained outstanding as of December 31, 2013.

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PREPAYMENTS FOR RAW MATERIAL PURCHASES

12 Months Ended

Dec. 31, 2013

Prepayments For Raw Material Purchases [Abstract]

PREPAYMENTS FOR RAW MATERIAL PURCHASES

NOTE 5 PREPAYMENTS FOR RAW MATERIAL PURCHASES

Starting from the second quarter of 2011, the Company initiated purchases of scrap copper from overseas via a third-party import-export company. Pursuant to the terms of the Company’s purchase agreements with that third-party, the Company was required to make prepayments in advance of delivery of the purchased scrap copper to the Company’s production facilities. As of December 31, 2013 and 2012, such prepayments were $17,143,138 and $19,569,239, respectively.

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INCOME TAXES

12 Months Ended

Dec. 31, 2013

Income Tax Disclosure [Abstract]

INCOME TAXES

NOTE 17 INCOME TAXES

The Company is subject to income tax on an entity basis on income arising from the tax jurisdiction in which they operate.

Lihua is subject to taxes in the U.S.

Ally Profit being incorporated in the British Virgin Islands (“BVI”) is not subject to any income tax in the BVI.

Lihua Holdings is generally subject to Hong Kong income tax on its taxable income derived from trade or businesses carried out in Hong Kong at 16.5% for the three years ended December 31, 2013. However, as Lihua Holdings has not generated any revenue or income, no provision for Hong Kong income tax has been made.

The Company’s two operating subsidiaries, Lihua Electron and Lihua Copper, are generally subject to PRC enterprise income tax (“EIT”). Both Lihua Electron and Lihua Copper are subject to an EIT rate of 25% for the three years ended December 31, 2013 under China’s Unified Enterprise Income Tax Law (“New Tax Law”).

The new Tax Law also imposes a 10% withholding income tax for dividends distributed by a foreign invested enterprise to its immediate holding company outside China for distribution of earnings generated after January 1, 2008. Under the New Tax Law, the distribution of earnings generated prior to January 1, 2008 is exempt from the withholding tax. As our subsidiaries in the PRC will not be distributing earnings to the Company for the years ended December 31, 2013, 2012 and 2011, no deferred tax liability has been recognized for the undistributed earnings of these PRC subsidiaries at December 31, 2013 and 2012. Total undistributed earnings of these PRC subsidiaries at December 31, 2013 were RMB 1,638,688,844 ($268,174,105).

No provision for other overseas taxes is made as neither Lihua, Ally Profit or Lihua Holdings has any taxable income in the U.S., British Virgin Islands or Hong Kong, respectively.

The Company’s provision for income taxes consisted of:

	Year ended December 31,
	2013		2012		2011
PRC income tax:
Current	$	19,843,738	$	20,555,465	$	17,388,836
Deferred		(118,821)		175,379		(65,136)
	$	19,724,917	$	20,730,844	$	17,323,700

A reconciliation of the provision for income taxes determined at the local income tax rate to the Company’s effective income tax rate is as follows:

	Year ended December 31,
	2013			2012			2011
Pre-tax income	$	75,884,367		$	78,672,847		$	70,457,233
United States federal corporate income tax rate		34	%		34	%		34	%
Income tax computed at United States statutory corporate income tax rate		25,800,685			26,748,768			23,955,459
Reconciling items:
Loss not recognized as deferred tax assets		962,173			1,155,378			771,079
Non-deductible expenses		14,492			197,375			175,696
Change in fair value of warrants		39,068			17,241			(1,071,460)
Rate differential for PRC earnings		(7,091,501)			(7,399,559)			(6,260,780)
Other		-			11,641			(246,294)
Effective tax expense	$	19,724,917		$	20,730,844		$	17,323,700

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of deferred income tax assets are as follows:

	As of December 31,
	2013		2012
Deferred income tax assets:
Net operating loss carryforward	$	5,744,674	$	4,786,510
Unrealized intercompany profit in inventory		25,178		24,948
Accrued R&D expenses		121,240		-
Less: Valuation allowance		(5,744,674)		(4,786,510)
	$	146,418	$	24,948

 As of December 31, 2013 and 2012, the Company’s U.S. entity, Lihua International, Inc., had net operating loss carryforwards of $16,896,101 and $14,077,971, respectively, available to reduce future taxable income which will expire in various years through 2033. Management believes it is more likely than not that the Company will not realize these potential tax benefits as the Company’s U.S. operations will not generate any operating profits in the foreseeable future. As a result, the full amount of the valuation allowance was provided against the potential tax benefits.

As of December 31, 2013 and 2012, the Company has no material unrecognized tax benefits which would favorably affect the effective income tax rate in future periods and does not believe that there will be any significant increases or decreases of unrecognized tax benefits within the next twelve months. No interest or penalties relating to income tax matters have been imposed on the Company during the years ended December 31, 2013, 2012 and 2011, and no provision for interest and penalties is deemed necessary as of December 31, 2013 and 2012.

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 its withholding agent. The statute of limitations extends to five years under special circumstances, which are not clearly defined. In the case of a related party transaction, the statute of limitations is ten years. There is no statute of limitations in the case of tax evasion.

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COMMON STOCK, TREASURY STOCK, PREFERRED STOCK AND COMMON STOCK PURCHASE WARRANTS

12 Months Ended

Dec. 31, 2013

Common Stock and Common Stock Purchase Warrants [Abstract]

COMMON STOCK, TREASURY STOCK, PREFERRED STOCK AND COMMON STOCK PURCHASE WARRANTS

NOTE 13 COMMON STOCK, TREASURY STOCK, PREFERRED STOCK AND COMMON STOCK PURCHASE WARRANTS

Common Stock and Treasury Stock

On April 14, 2010, the Company closed an offering of 4,285,715 shares of its common stock at a public offering price of $8.05 per share, which included the sale of 559,006 shares of its common stock as a result of the exercise of the over-allotment option by the underwriters. The Company received net proceeds of approximately $32.1 million from the offering, after deducting underwriting discounts and estimated offering expenses.

The offering was underwritten by Rodman& Renshaw, LLC, Chardan Capital Markets, LLC and Brean Murray, Carret & Co., LLC, pursuant to an underwriting agreement with the Company dated April 8, 2010. The offering was made pursuant to the Company’s effective registration statement on Form S-3, as amended (Registration Statement No. 333-164269), filed with the United States Securities and Exchange Commission and, as disclosed in a prospectus supplement dated April 8, 2010 filed with the Securities and Exchange Commission.

On January 24, 2011, the Board of Directors approved a one-year share repurchase program of up to $15 million of the Company’s common stock, pursuant to which the Company was authorized to repurchase its outstanding common stock from time to time, depending on market conditions, share price and other factors, on the open market or in privately negotiated transactions. Repurchased shares may be retired immediately and will resume the status of authorized but unissued shares or they may be held by the Company as treasury stock. The repurchase authorization may be modified, suspended, or discontinued by the Board of Directors at any time. In 2011, the Company repurchased 264,047 shares of its common stock under the share repurchase authorization at a weighted-average price of $8.05 per share for an aggregate purchase cost of $2,126,597. The share repurchase program expired on January 23, 2012.

On November 9, 2011, the Company announced that the Board of Directors had adopted a resolution to approve the Company’s proposed distribution of a special dividend to the shareholders of the Company of record as of December 31, 2011 and March 31, 2012. The Company accrued a dividend payable of $992,846 as of December 31, 2011. On January 13, 2012 and April 13, 2012, the Company distributed and paid dividends amounting to $498,757 and $494,089 to its shareholders of record as of December 31, 2011 and March 31, 2012 (except for Magnify Wealth (note 1(B) which agreed to waive its entitlements).

Series A Redeemable Convertible Preferred Stock

The Company’s Certificate of Incorporation grants the Board of Directors the authority, without any further vote or action by stockholders, to issue preferred stock in one or more series, fix the number of shares constituting the series and establish the preferences, limitations and relative rights, including dividend rights, dividend rate, voting rights, terms of redemption, redemption price or prices, redemption rights and liquidation preferences of the shares of the series.

On October 31, 2008, the Company entered into and completed a securities purchase agreement (“Private Placement”) with certain accredited investors (the “Investors”) for the issuance and sale by the Company in a private placement of 6,818,182 shares of Series A Convertible Preferred Stock (“Preferred Shares”) and Series A warrants to purchase 1,500,000 shares of Common Stock. The Company received $13,656,538 in proceeds from this Private Placement after paying fees and expenses.

On September 9, 2009, pursuant to the completion of the Public Offering, as discussed below, and in accordance with the terms of the Preferred Shares, all outstanding shares of the Preferred Stock were automatically converted into 6,818,182 shares of Common Stock.

Series A Warrants

In conjunction with the issuance of the Preferred Shares, the Company issued Series A Warrants to purchase up to 1,500,000 shares of Common Stock at an exercise price of $3.50 per share. The Series A Warrants have a term of exercise expiring 5 years from October 31, 2008. The Series A Warrants at the option of the holder, may be exercised by cash payment of the exercise price or, commencing 18 months following the closing of the Private Placement, if the per share market value of one share of Common Stock is greater than the exercise price and a registration statement under the Securities Act of 1933, as amended, covering the shares of Common Stock underlying the Series A Warrants is not then declared ineffective by the SEC, in lieu of exercising the Series A Warrants by payment of cash, a holder may exercise the Series A Warrant by a cashless exercise by surrender of the Series A Warrant, in which event the Company will issue to the holder a number of shares of our Common Stock computed using the following formula:

	X = Y - (A)(Y) B
Where	X =	the number of shares of Common Stock to be issued to the holder.
	Y =	the number of shares of Common Stock issuable upon exercise of the Series A Warrant in accordance with the terms of the Series A Warrant by means of a cash exercise rather than a cashless exercise.
	A =	the Exercise Price.
	B =	the per share market value of one share of Common Stock on the trading day immediately preceding the date of such election.

The Company will not receive any additional proceeds to the extent that the Series A Warrants are exercised by cashless exercise.

The exercise price and number of shares of the Company’s Common Stock issuable upon exercise of the Series A Warrants may be adjusted in certain circumstances, including in the event of a stock dividend, or recapitalization, reorganization, merger or consolidation and the issuance of rights to purchase additional shares of our Common Stock or to receive other securities convertible into additional shares of Common Stock.

The Series A Warrants were originally issued with an anti-dilution protection provision whereby, for a period of two years following the original issue date of the Series A Warrants (the “Full Ratchet Period”), in the event the Company issued any additional shares of Common Stock or securities exercisable, convertible or exchangeable for Common Stock at a price per share less than the exercise price then in effect or without consideration, then the exercise price upon each such issuance would be adjusted to a price equal to the consideration per share paid for such additional shares of Common Stock.

On December 22, 2009, the Company and the holders of the Series A Warrants entered into agreements to amend certain provisions of the Warrants. The amendment to the Series A Warrant removes the anti-dilution protection rights that were applicable if the Company were to issue new shares of common stock or common stock equivalents at a price per share less than the exercise price of the Series A Warrant.  In addition, the amendment to the Series A Warrant added a provision to grant the holders of a majority of the Series A Warrants an approval right until October 31, 2010, over any new issuance of shares of common stock or common stock equivalents at a price per share less than the exercise price of the Series A Warrant.

No fractional shares will be issued upon exercise of the Series A Warrants. If, upon exercise of a Series A Warrant, a holder would be entitled to receive a fractional interest in a share, the Company will pay to the holder cash equal to such fraction multiplied by the then fair market value of one full share.

Pursuant to the terms of the Series A Warrants, the Company will not effect the exercise of any Series A Warrant, and no person who is a holder of any Series A Warrant has the right to exercise the Series A Warrant, to the extent that after giving effect to such exercise, such person would beneficially own in excess of 9.9% of the then outstanding shares of the Company’s Common Stock. However, the holder is entitled to waive this cap upon 61 days notice to the Company.

The Company has the right to redeem up to 9.9% of the Series A Warrants at a price equal to $0.01 per share of Common Stock underlying such warrants if (i) our Common Stock is traded on a national securities exchange, (ii) the daily volume weighted average price of our Common Stock is above $8.87 for 30 consecutive trading days ending on the date of the notice of redemption, and (iii) the average daily trading volume for the trading period is greater than 300,000 shares per day ; provided, that all shares underlying such Series A Warrants are registered pursuant to an effective registration statement and the Company simultaneously calls all of the Series A Warrants on the same terms. The Company will have the right, but not the obligation, to redeem the Series A Warrants at any time, and from time to time, provided that at such time, the foregoing conditions have been met, but in no event can the Company redeem the Series A Warrants more than once in any thirty (30) trading day period.

Series B Warrants

In connection with the Private Placement, Broadband Capital Management, LLC (“Broadband”) acted as the Company’s financial advisor and placement agent. Broadband received Series B warrants to purchase 250,000 shares of the Company’s Common Stock at an exercise price per share of $3.50.

On October 31, 2008, the Company issued Series B Warrants to purchase 250,000 shares of the Registrant’s Common Stock at an exercise price of $3.50 to Penumbra Worldwide Ltd. (“Penumbra”). Penumbra is not a broker dealer and the Series B Warrants were not issued as compensation for underwriting activities, but as compensation for business and investor relations consulting services performed by Penumbra.

The Series B Warrants have a term of exercise expiring 5 years from October 31, 2008. The Series B Warrants, at the option of the holder, may be exercised by cash payment of the exercise price or by “cashless exercise”. The Company will not receive any additional proceeds to the extent that warrants are exercised by cashless exercise.

If the per share market value of one share of Common Stock is greater than the exercise price and at the time of election, the average trading volume of Common Stock exceeds 100,000 shares for the immediately preceding 30 trading days, in lieu of exercising the Series B Warrant by payment of cash, the holder may exercise the Series B Warrant by cashless exercise by surrendering the Series B Warrant, in which event the Company will issue to the holder a number of shares of our Common Stock computed using the following formula:

	X = Y - (A)(Y) B
Where:	X =	the number of shares of Common Stock to be issued to the Holder.
	Y =	the number of shares of Common Stock issuable upon exercise of the Series B Warrant in accordance with the terms of the Series B Warrant by means of a cash exercise rather than a cashless exercise.
	A =	the exercise price.
	B =	the volume weighted average price of the Common Stock for the 30 trading day period immediately preceding the date of such election.

The exercise price and number of shares of Common Stock issuable upon exercise of the warrants may be adjusted in certain circumstances, including in the event of a stock dividend, or our recapitalization, reorganization, merger or consolidation and the issuance of rights to purchase additional shares of Common Stock or to receive other securities convertible into additional shares of Common Stock.

The Series B Warrants were originally issued with an anti-dilution protection provision whereby for a period of two years following the original issue date of the Series B Warrant (the “Weighted Average Period”), in the event the Company issued any additional shares of Common Stock or securities exercisable, convertible or exchangeable for Common Stock at a price per share less than the exercise price then in effect or without consideration, then the exercise price then in effect would be multiplied by a fraction (i) the numerator of which shall be equal to the sum of (x) the number of shares of outstanding Common Stock immediately prior to the issuance of such additional shares of Common Stock plus (y) the number of shares of Common Stock (rounded to the nearest whole share) which the aggregate consideration price per share paid for the total number of such additional shares of Common Stock so issued would purchase at a price per share equal to the exercise price then in effect and (ii) the denominator of which shall be equal to the number of shares of outstanding Common Stock immediately after the issuance of such additional shares of Common Stock.  

On December 22, 2009, the Company and the holders of the Series B Warrants entered into agreements to amend certain provisions of the Warrants. The amendment to the Series B Warrant removed the anti-dilution protection rights that were applicable if the Company were to issue new shares of common stock or common stock equivalents at a price per share less than the exercise price of the Series B Warrant.

No fractional shares will be issued upon exercise of the warrants. If, upon exercise of a warrant, a holder would be entitled to receive a fractional interest in a share, the Company will pay to the holder cash equal to such fraction multiplied by the then fair market value of one full share.

Allocation of Proceeds from Private Placement

In accordance with ASC Topic 470-20, Debt with Conversion and Other Options, (formerly EITF 00-27, “Application of Issue No. 98-5 to Certain Convertible Instruments”), the proceeds from the Private Placement were first allocated between the Preferred Shares and the warrants issued in connection with the Private Placement based upon their estimated fair values as of the closing date, resulting in an aggregate amount of $539,910 being allocated to the Series A Warrants and the 250,000 Series B Warrants issued to Broadband.

Then, the fair value of the embedded conversion feature of the Preferred Shares of $1,002,115 was calculated using the intrinsic value model in accordance with the guidance provided in ASC Topic 470-20-30-6 (formerly EITF 00-27, “Application of Issue No. 98-5 to Certain Convertible Instruments”), limited to the amount of the proceeds allocated to the convertible instrument. The intrinsic value of the beneficial conversion feature was calculated by comparing the effective conversion price, which was determined based on the proceeds from the Private Placement allocated to the convertible Preferred Shares, and the fair value of the Company’s common stock of $2.26 at the commitment date, which was determined based on retrospective valuations prepared consistent with the methods outlined in the American Institute of Certified Public Accountants Practice Aids, “ Valuation of Privately-Held Company Equity Securities Issued as Compensation ” and based on a discounted future cash flow approach that used the Company’s estimates of revenue, driven by assumed market growth rates, and estimated costs as well as appropriate discount rates. The fair value of $1,002,115 of the beneficial conversion feature has been recognized as a reduction to the carrying amount of the convertible Preferred Shares and an addition to paid-in capital.

Public Offering of Common Stock and Issuance of Warrants

On September 9, 2009, the Company completed a public offering (“Public Offering”) of 2,000,000 shares of Common Stock and an additional 300,000 shares exercised by the underwriters as part of the over-allotment option, at an offering price of $4.00 per share and raised proceeds of $7,864,000, net of legal fees, commission and other expenses directly related to this public offering.

In conjunction with the Public Offering, the Company issued warrants to the underwriters to purchase up to 138,000 shares of the Company’s Common Stock at a strike price of $4.80 per share (“Underwriter Warrants”). These warrants are exercisable at any time during a 5-year term commencing on the date that is six months from September 4, 2009. The shares underlying these warrants will have registration rights upon the Company proposing to register any of its securities (other than in connection with a registration on Form S-4 or S-8 or any successor forms). These warrants contain standard anti-dilution provisions for stock dividends, stock splits, stock combination, recapitalization and a change of control transaction.  

Warrants issued and outstanding at December 31, 2013, and changes during the three years then ended, are as follows:

			Warrants Outstanding					Warrants Exercisable
	Number of  underlying  shares	Weighted Average Exercise Price		Average Remaining Contractual Life (years)		Number of  underlying  shares	Weighted Average Exercise Price		Average Remaining Contractual Life (years)
Balance, January 1, 2011	1,138,420	$	3.62		2.91	1,138,420	$	3.62		2.91
Granted / Vested	-
Forfeited	-
Exercised	(729,464)		3.63
Balance, December 31, 2011	408,956	$	3.59		1.89	408,956	$	3.59		1.89
Granted / Vested	-
Forfeited	-
Exercised	(125,000)		3.50
Balance, December 31, 2012	283,956	$	3.63		0.91	283,956	$	3.63		0.91
Granted / Vested	-
Forfeited	-
Exercised	(255,500)		3.50
Balance, December 31, 2013	28,456	$	4.80		0.68	28,456	$	4.80		0.68

Accounting for Series A Warrants, Series B Warrants and Underwriter Warrants

The Company has performed a thorough assessment of the terms of all its warrants with reference to the guidance provided in ASC 815-40, “Derivatives and Hedging – Contracts in Entity’s Own Equity”, which has been effective from January 1, 2009. In particular, the Company has considered the guidance in ASC 815-40-15-7I regarding the Company’s exposure to changes in currency exchange rates. This assessment has led to management’s conclusion that the Company’s warrants should not be considered indexed to the Company’s own stock because the warrants are denominated in U.S. Dollars, which is different from the Company’s functional currency, Renminbi (the Chinese lawful currency). Therefore, the Company has classified Series A Warrants, Series B Warrants and Underwriter Warrants as derivative liabilities and reported any changes in their fair value up to the earlier of the date of exercise or the reporting date in earnings.

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INCOME TAXES - Additional Information (Detail)	12 Months Ended			12 Months Ended		36 Months Ended	12 Months Ended
	Dec. 31, 2013 USD ($)	Dec. 31, 2013 CNY	Dec. 31, 2012 USD ($)	Dec. 31, 2013 Danyang Lihua Electron Co., Ltd.	Dec. 31, 2013 Jiangsu Lihua Copper Industry Co., Ltd.	Dec. 31, 2013 Subsidiaries	Dec. 31, 2013 CHINA	Dec. 31, 2012 CHINA	Dec. 31, 2011 CHINA
Income Taxes [Line Items]
Enterprise income tax rate				25.00%	25.00%		10.00%	10.00%	10.00%
Undistributed earnings of PRC subsidiaries	$ 268,174,105	1,638,688,844
Operating loss carryforwards expiration year	2033	2033
Statute of limitations period if the underpayment of taxes is due to computational errors	3 years	3 years
Statute of limitations period if the underpayment of taxes is due to computational errors, special circumstance	5 years	5 years
Statute of limitations period in case of related party transactions	10 years	10 years
Effective income tax rate foreign income						16.50%
Operating loss carryforwards	$ 16,896,101		$ 14,077,971

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PREPAID LAND USE RIGHTS

12 Months Ended

Dec. 31, 2013

Prepaid Land Use Rights [Abstract]

PREPAID LAND USE RIGHTS

NOTE 9 PREPAID LAND USE RIGHTS

The Company has recorded as prepaid land use rights the lump sum payments made to acquire long-term interests to utilize the land underlying the building and production facility. This type of arrangement is common for the use of land in the PRC. The prepaid land use rights are expensed on the straight-line basis over the term of the land use rights of 50 years.

The amounts expensed on prepaid land use rights for the years ended December 31, 2013, 2012 and 2011 were $411,994, $404,207 and $395,052, respectively. The estimated expense of the prepaid land use rights over each of the next five years and thereafter will be $418,501 per annum.

As of December 31, 2013, prepaid land use rights included RMB32,399,100 ($5,314,029) representing payments made by Lihua Copper to a local authority to acquire a 50-year right to use a parcel of land which has been used for expansion of its manufacturing facilities. As of December 31, 2013, RMB2,399,100 ($393,495) remained unpaid and is included as other payables and accruals. Apart from the payment of $5,314,028 to the local authority, the Company also paid $5,950,703 to various local authorities primarily as compensation to the local communities in connection with the Company’s acquisition of these land use rights.

The Company has completed all the formalities in relation to the acquisition of the land use rights, except for paying the last payment of RMB2,399,100 ($393,495). Based on the Company’s understanding of the process, each year the local government allocates certain area (mu) of land to selected local manufacturers. However, the physical land use right certificates are not issued to those manufacturers until the local government receives the formal annual land quota from the state government. The Company received a land use rights certificate in November 2011 for 100 mu out of a total of 180 mu of land allocated to the Company, and management believes they can receive the land use rights certificate for the remaining 80 mu. However, the timing of receiving the certificate is highly dependent on the local government. Upon receipt of the land use right certificates for the remaining 80 mu of land, the Company will pay the remaining land use payments.

Based upon the local government practice, as well as the Company’s prior experience obtaining land use rights after going through the same process, management believes that the risk of losing the already allocated land use right is extremely low. In the unlikely event that the local government is unable to issue the physical land use right certificate for the remaining 80 mu of land, the Company believes it would have the right to receive a refund of the payment we made to the local government with respect to the land use right and, request to receive additional monies from the local government for construction costs incurred to date on the land.

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Financial Instruments, Measured at Fair Value, by Level within Fair Value Hierarchy (Detail) (USD $)	Dec. 31, 2013	Dec. 31, 2012
Fair Value Assets and Liabilities Measured On Recurring and Nonrecurring Basis [Line Items]
Warrant liability	$ 33,262	$ 354,000
Fair Value, Inputs, Level 1
Fair Value Assets and Liabilities Measured On Recurring and Nonrecurring Basis [Line Items]
Warrant liability	0	0
Fair Value, Inputs, Level 2
Fair Value Assets and Liabilities Measured On Recurring and Nonrecurring Basis [Line Items]
Warrant liability	33,262	354,000
Fair Value, Inputs, Level 3
Fair Value Assets and Liabilities Measured On Recurring and Nonrecurring Basis [Line Items]
Warrant liability	$ 0	$ 0

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INVENTORIES

12 Months Ended

Dec. 31, 2013

Inventory Disclosure [Abstract]

INVENTORIES

NOTE 7 INVENTORIES

Inventories by major categories are summarized as follows:

	As of December 31,
	2013		2012
Raw materials	$	8,775,850	$	12,906,713
Work in progress		183,699		419,695
CCA and copper wire		2,863,021		2,947,584
Copper rod and anode		318,126		1,570,413
	$	12,140,696	$	17,844,405

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INTANGIBLE ASSETS

12 Months Ended

Dec. 31, 2013

Goodwill and Intangible Assets Disclosure [Abstract]

INTANGIBLE ASSETS

NOTE 8 INTANGIBLE ASSETS

	As of December 31,
	2013		2012
Computer software, cost	$	60,429	$	15,524
Less: Accumulated amortization		(18,234)		(12,192)
	$	42,195	$	3,332

Amortization expense for the years ended December 31, 2013, 2012 and 2011 was $5,577, $644 and $3,595, respectively.

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PROPERTY, PLANT AND EQUIPMENT, NET

12 Months Ended

Dec. 31, 2013

Property, Plant and Equipment, Net [Abstract]

PROPERTY, PLANT AND EQUIPMENT, NET

NOTE 10 PROPERTY, PLANT AND EQUIPMENT, NET

Property, plant and equipment, net consisted of the following:

	As of December 31,
	2013		2012
Cost:
Buildings	$	35,481,843	$	34,264,012
Office equipment		431,648		415,007
Motor vehicles		774,693		696,015
Machinery		23,775,665		21,545,892
Total cost		60,463,849		56,920,926
Less: Accumulated depreciation		(13,324,391)		(9,723,811)
Net book value	$	47,139,458	$	47,197,115

Depreciation expense for the years ended December 31, 2013, 2012 and 2011 was $3,943,546, $3,264,226 and $1,895,512, respectively.

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Accounts Receivable (Detail) (USD $)	Dec. 31, 2013	Dec. 31, 2012
Accounts, Notes, Loans and Financing Receivable [Line Items]
Accounts receivable	$ 60,497,780	$ 45,284,923
Less: Allowance for doubtful debts	0	0
Accounts receivable, net	$ 60,497,780	$ 45,284,923

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Provision for Income Tax (Detail) (USD $)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
PRC income tax:
Current	$ 19,843,738	$ 20,555,465	$ 17,388,836
Deferred	(118,821)	175,379	(65,136)
Income Tax Expense (Benefit)	$ 19,724,917	$ 20,730,844	$ 17,323,700

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OTHER RECEIVABLES, DEPOSITS AND PREPAYMENTS - Additional Information (Detail)	12 Months Ended
	Dec. 31, 2013
Minimum
Research and Development Arrangement, Contract to Perform for Others [Line Items]
Research and development service period	1 year 6 months
Maximum
Research and Development Arrangement, Contract to Perform for Others [Line Items]
Research and development service period	3 years

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Warrant Exercises (Detail) (USD $)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Fair Value Inputs Liabilities Quantitative Information [Line Items]
Gain (loss) on extinguishment of warrant liabilities	$ (8,369)	$ 73,291	$ 88,777
Warrants Exercised On May 22, 2013
Fair Value Inputs Liabilities Quantitative Information [Line Items]
Exercise date:	May 22, 2013
Market price of common stock:	$ 5.76
Exercise warrants:	28,348
Exercise price:	$ 3.5
Remaining contractual life (years):	5 months 8 days
Dividend yield:	0.00%
Expected volatility:	35.48%
Risk-free interest rate:	0.07%
Fair values:	$ 2.2653
Gain (loss) on extinguishment of warrant liabilities	3,520
Warrants Exercised On February 7, 2012
Fair Value Inputs Liabilities Quantitative Information [Line Items]
Exercise date:		Feb. 07, 2012
Market price of common stock:		$ 6.44
Exercise warrants:		125,000
Exercise price:		$ 3.50
Remaining contractual life (years):		1 year 8 months 23 days
Dividend yield:		0.00%
Expected volatility:		39.43%
Risk-free interest rate:		0.21%
Fair values:		$ 3.08
Gain (loss) on extinguishment of warrant liabilities		73,291
Warrants Exercised on January 14, 2011
Fair Value Inputs Liabilities Quantitative Information [Line Items]
Exercise date:			Jan. 14, 2011
Market price of common stock:			$ 10.64
Exercise warrants:			549,300
Exercise price:			$ 3.50
Remaining contractual life (years):			2 years 9 months 14 days
Dividend yield:			0.00%
Expected volatility:			46.34%
Risk-free interest rate:			0.90%
Fair values:			$ 7.2301
Gain (loss) on extinguishment of warrant liabilities			48,210
Warrants Exercised on March 3, 2011
Fair Value Inputs Liabilities Quantitative Information [Line Items]
Exercise date:			Mar. 03, 2011
Market price of common stock:			$ 10.98
Exercise warrants:			20,000
Exercise price:			$ 3.50
Remaining contractual life (years):			2 years 7 months 28 days
Dividend yield:			0.00%
Expected volatility:			48.00%
Risk-free interest rate:			1.09%
Fair values:			$ 7.7083
Gain (loss) on extinguishment of warrant liabilities			8,153
Warrants Exercised on March 14, 2011
Fair Value Inputs Liabilities Quantitative Information [Line Items]
Exercise date:			Mar. 14, 2011
Market price of common stock:			$ 10.19
Exercise warrants:			28,814
Exercise price:			$ 4.80
Remaining contractual life (years):			3 years 5 months 19 days
Dividend yield:			0.00%
Expected volatility:			44.05%
Risk-free interest rate:			1.27%
Fair values:			$ 6.0599
Gain (loss) on extinguishment of warrant liabilities			5,722
Warrants Exercised on March 17, 2011
Fair Value Inputs Liabilities Quantitative Information [Line Items]
Exercise date:			Mar. 17, 2011
Market price of common stock:			$ 9.79
Exercise warrants:			74,000
Exercise price:			$ 3.50
Remaining contractual life (years):			2 years 7 months 13 days
Dividend yield:			0.00%
Expected volatility:			48.54%
Risk-free interest rate:			0.86%
Fair values:			$ 6.5324
Gain (loss) on extinguishment of warrant liabilities			(1,361)
Warrants Exercised on April 7, 2011
Fair Value Inputs Liabilities Quantitative Information [Line Items]
Exercise date:			Apr. 07, 2011
Market price of common stock:			$ 8.39
Exercise warrants:			44,850
Exercise price:			$ 4.80
Remaining contractual life (years):			3 years 4 months 28 days
Dividend yield:			0.00%
Expected volatility:			44.05%
Risk-free interest rate:			1.46%
Fair values:			$ 4.4485
Gain (loss) on extinguishment of warrant liabilities			26,531
Warrants Exercised on December 21, 2011
Fair Value Inputs Liabilities Quantitative Information [Line Items]
Exercise date:			Dec. 21, 2011
Market price of common stock:			$ 5.00
Exercise warrants:			12,500
Exercise price:			$ 3.50
Remaining contractual life (years):			1 year 10 months 10 days
Dividend yield:			1.19%
Expected volatility:			39.58%
Risk-free interest rate:			0.22%
Fair values:			$ 1.7342
Gain (loss) on extinguishment of warrant liabilities			1,522
Warrants Exercised on September 27, 2013
Fair Value Inputs Liabilities Quantitative Information [Line Items]
Exercise date:	Sep. 27, 2013
Market price of common stock:	$ 4.96
Exercise warrants:	58,000
Exercise price:	$ 3.5
Remaining contractual life (years):	1 month 2 days
Dividend yield:	0.00%
Expected volatility:	22.68%
Risk-free interest rate:	0.02%
Fair values:	$ 1.4572
Gain (loss) on extinguishment of warrant liabilities	(7,124)
Warrants Exercised on October 3, 2013
Fair Value Inputs Liabilities Quantitative Information [Line Items]
Exercise date:	Oct. 03, 2013
Market price of common stock:	$ 5.05
Exercise warrants:	35,000
Exercise price:	$ 3.5
Remaining contractual life (years):	29 days
Dividend yield:	0.00%
Expected volatility:	24.76%
Risk-free interest rate:	0.13%
Fair values:	$ 1.5485
Gain (loss) on extinguishment of warrant liabilities	(2,135)
Warrants Exercised on October 11, 2013
Fair Value Inputs Liabilities Quantitative Information [Line Items]
Exercise date:	Oct. 11, 2013
Market price of common stock:	$ 5.00
Exercise warrants:	96,652
Exercise price:	$ 3.5
Remaining contractual life (years):	18 days
Dividend yield:	0.00%
Expected volatility:	17.20%
Risk-free interest rate:	0.25%
Fair values:	$ 1.4956
Gain (loss) on extinguishment of warrant liabilities	(4,432)
Warrants Exercised on October 15, 2013
Fair Value Inputs Liabilities Quantitative Information [Line Items]
Exercise date:	Oct. 15, 2013
Market price of common stock:	$ 4.99
Exercise warrants:	12,500
Exercise price:	$ 3.5
Remaining contractual life (years):	14 days
Dividend yield:	0.00%
Expected volatility:	18.55%
Risk-free interest rate:	0.34%
Fair values:	$ 1.4899
Gain (loss) on extinguishment of warrant liabilities	(217)
Warrants Exercised on October 29, 2013
Fair Value Inputs Liabilities Quantitative Information [Line Items]
Exercise date:	Oct. 29, 2013
Market price of common stock:	$ 5.98
Exercise warrants:	15,000
Exercise price:	$ 3.5
Remaining contractual life (years):	0 years
Dividend yield:	0.00%
Expected volatility:	5.71%
Risk-free interest rate:	0.03%
Fair values:	$ 2.4788
Gain (loss) on extinguishment of warrant liabilities	(378)
Warrants Exercised on October 30, 2013
Fair Value Inputs Liabilities Quantitative Information [Line Items]
Exercise date:	Oct. 30, 2013
Market price of common stock:	$ 5.92
Exercise warrants:	10,000
Exercise price:	$ 3.5
Remaining contractual life (years):	0 years
Dividend yield:	0.00%
Expected volatility:	0.00%
Risk-free interest rate:	0.00%
Fair values:	$ 2.4200
Gain (loss) on extinguishment of warrant liabilities	$ 2,397

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Commitments for Minimum Lease Payments Under Operating Leases (Detail) (USD $)	Dec. 31, 2013
Payable within:
- fiscal year ending December 31, 2014	$ 21,650
- fiscal year ending December 31, 2015 and thereafter	0
Total	$ 21,650

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FAIR VALUE MEASUREMENTS AND FINANCIAL INSTRUMENTS (Tables)

12 Months Ended

Dec. 31, 2013

Fair Value Measurements and Financial Instruments [Abstract]

Fair Value Measurements, Recurring and Nonrecurring

The following table sets forth the financial instruments, measured at fair value, by level within the fair value hierarchy as of December 31, 2013:

	Fair value measurements at reporting date using
Items	As of December 31, 2013		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Warrant liability	$	33,262	$	-	$	33,262	$	-

The following table sets forth the financial instruments, measured at fair value, by level within the fair value hierarchy as of December 31, 2012:

	Fair value measurements at reporting date using
Items	As of December 31, 2012		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Warrant liability	$	354,000	$	-	$	354,000	$	-

Assets and Liabilities Measured at Fair Value on Recurring Basis Using Significant Observable Inputs (Level 2)

Assets and liabilities measured at fair value on a recurring basis using significant observable inputs (Level 2) from January 1, 2011 to December 31, 2013 are summarized as follows:

	Warrant liability (Level 2)
Balance at January 1, 2011	$	8,682,441
Change in fair value included in earnings		(3,062,575)
Exercise of warrants		(5,004,866)
Balance at December 31, 2011		615,000
Change in fair value included in earnings		124,000
Exercise of warrants		(385,000)
Balance at December 31, 2012		354,000
Change in fair value included in earnings		106,536
Exercise of warrants		(427,274)
Balance at December 31, 2013	$	33,262

Fair Value of Warrants Using Black-Scholes Option Pricing Model

For stock-based derivative financial instruments, the Company uses the Black-Scholes option pricing model using the following assumptions to value the derivative instruments at inception and on subsequent valuation dates:

	December 31, 2013			December 31, 2012
Series B Warrants
Market price of common stock:	$	-		$	4.390
Exercise price:		-			3.50
Remaining contractual life (years):		-			0.83
Dividend yield:		-			-
Expected volatility:		-			51.41	%
Risk-free interest rate:		-			0.13	%
Fair value – Series A and B Warrants	$	-		$	319,000
Underwriter Warrants
Market price of common stock:	$	5.720		$	4.390
Exercise price:		4.80			4.80
Remaining contractual life (years):		0.68			1.68
Dividend yield:		-			-
Expected volatility:		34.87	%		61.26	%
Risk-free interest rate:		0.10	%		0.21	%
Fair value – Underwriter Warrants	$	33,262		$	35,000
Fair value – Total	$	33,262		$	354,000

Warrant Exercises

In 2011, 542,300 warrants were exercised at $3.50 each in cash and 187,164 warrants were exercised on a cashless basis to purchase 108,855 shares of common stock. In accordance with ASC 470-50-40, “Debt – Modification and Extinguishments – Derecognition”, an aggregate gain of $88,777 was recognized. For details, please refer to the following table.

Exercise date:	January 14,				March 3,		March 14,			March 17,				April 7,		December 21,
Market price of common stock:	$	10.64		$	10.98		$	10.19		$	9.79		$	8.39		$	5.00
Exercise warrants:		549,300			20,000			28,814			74,000			44,850			12,500
Exercise price:	$	3.50		$	3.50		$	4.80		$	3.50		$	4.80		$	3.50
Remaining contractual life (years):		2.79			2.66			3.47			2.62			3.41			1.86
Dividend yield:		–			–			–			–			–			1.19	%
Expected volatility:		46.34	%		48.00	%		44.05	%		48.54	%		44.05	%		39.58	%
Risk-free interest rate:		0.90	%		1.09	%		1.27	%		0.86	%		1.46	%		0.22	%
Fair values:	$	7.2301		$	7.7083		$	6.0599		$	6.5324		$	4.4485		$	1.7342
Gain (loss) on extinguishment of warrant liabilities	$	48,210		$	8,153		$	5,722		$	(1,361)		$	26,531		$	1,522

In 2012, 125,000 warrants were exercised on a cashless basis to purchase 48,402 shares of common stock. In accordance with ASC 470-50-40, “Debt – Modification and Extinguishments – Derecognition”, an aggregate gain of $73,291 was recognized.  For details, please refer to the following table.

Exercise date:	February 7,
Market price of common stock:	$	6.44
Exercise warrants:		125,000
Exercise price:	$	3.50
Remaining contractual life (years):		1.73
Dividend yield:		-	%
Expected volatility:		39.43	%
Risk-free interest rate:		0.21	%
Fair values:	$	3.08
Gain on extinguishment of warrant liabilities	$	73,291

In 2013, 27,585 warrants were exercised at $3.50 each in cash and 227,915 warrants were exercised on a cashless basis to purchase 73,696 shares of common stock. In accordance with ASC 470-50-40, “Debt – Modification and Extinguishments – Derecognition”, an aggregate loss of $8,369 was recognized. As of December, 2013, 209 shares were not yet issued. For details, please refer to the following table.

Exercise date:	May 22,			September 27,			October 3,			October 11,			October 15,			October 29,			October 30,
Market price of common stock:	$	5.76		$	4.96		$	5.05		$	5.00		$	4.99		$	5.98		$	5.92
Exercise warrants:		28,348			58,000			35,000			96,652			12,500			15,000			10,000
Exercise price:	$	3.5		$	3.5		$	3.5		$	3.5		$	3.5		$	3.5		$	3.5
Remaining contractual life (years):		0.44			0.09			0.08			0.05			0.04			0.00			0.00
Dividend yield:		-	%		-	%		-	%		-	%		-	%		-	%		-	%
Expected volatility:		35.48	%		22.68	%		24.76	%		17.20	%		18.55	%		5.71	%		-	%
Risk-free interest rate:		0.07	%		0.02	%		0.13	%		0.25	%		0.34	%		0.03	%		-	%
Fair values:	$	2.2653		$	1.4572		$	1.5485		$	1.4956		$	1.4899		$	2.4788		$	2.4200
Gain (loss) on extinguishment of warrant liabilities	$	3,520		$	(7,124)		$	(2,135)		$	(4,432)		$	(217)		$	(378)		$	2,397

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SELECTED QUARTERLY FINANCIAL DATA (Tables)

12 Months Ended

Dec. 31, 2013

Selected Quarterly Financial Information [Abstract]

Schedule of Quarterly Financial Information

Selected quarterly financial data for the years ended December 31, 2013, 2012 and 2011 are presented in the following table:

	Three Months Ended,
Year ended December 31, 2013	December 31,		September 30,		June 30,		March 31,
Revenue	$	217,333,427	$	219,359,379	$	245,804,613	$	218,229,539
Cost of goods sold		(196,857,791)		(198,261,030)		(222,034,732)		(197,174,187)
Gross profit		20,475,636		21,098,349		23,769,881		21,055,352
Selling expenses		(741,114)		(796,945)		(801,861)		(680,680)
General and administrative expenses		(1,853,646)		(1,807,615)		(2,006,127)		(2,405,784)
Income from operations		17,880,876		18,493,789		20,961,893		17,968,888
Net income	$	13,233,558	$	13,938,895	$	15,675,810	$	13,311,187
Earnings per share
Basic	$	0.44	$	0.47	$	0.53	$	0.45
Diluted	$	0.44	$	0.46	$	0.52	$	0.44

	Three Months Ended,
Year ended December 31, 2012	December 31,		September 30,		June 30,		March 31,
Revenue	$	254,879,358	$	238,793,030	$	191,007,886	$	169,086,267
Cost of goods sold		(229,933,412)		(213,536,628)		(170,296,852)		(150,451,275)
Gross profit		24,945,946		25,256,402		20,711,034		18,634,992
Selling expenses		(786,331)		(741,135)		(740,988)		(686,006)
General and administrative expenses		(2,630,168)		(2,059,027)		(1,834,465)		(2,097,834)
Income from operations		21,529,447		22,456,240		18,135,581		15,851,152
Net income	$	15,793,687	$	17,226,638	$	13,446,666	$	11,475,012
Earnings per share
Basic	$	0.52	$	0.58	$	0.45	$	0.39
Diluted	$	0.52	$	0.58	$	0.45	$	0.38

	Three Months Ended
Year ended December 31, 2011	December 31,		September 30,		June 30,		March 31,
Revenue	$	177,579,159	$	155,570,657	$	167,012,527	$	136,931,096
Cost of goods sold		(157,877,953)		(136,113,727)		(147,365,064)		(120,023,023)
Gross profit		19,701,206		19,456,930		19,647,463		16,908,073
Selling expenses		(660,992)		(633,584)		(668,366)		(523,036)
General and administrative expenses		(2,239,462)		(1,498,306)		(1,339,062)		(1,573,312)
Income from operations		16,800,752		17,325,040		17,640,035		14,811,725
Net income	$	12,727,388	$	13,528,083	$	14,366,076	$	12,511,986
Earnings per share
Basic	$	0.43	$	0.45	$	0.48	$	0.42
Diluted	$	0.43	$	0.45	$	0.48	$	0.41

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STATUTORY RESERVES

12 Months Ended

Dec. 31, 2013

Statutory Reserves [Abstract]

STATUTORY RESERVES

NOTE 15 STATUTORY RESERVES

The Company is required to make appropriations to reserve funds, comprising the statutory surplus reserve, statutory public welfare fund and discretionary surplus reserve, based on after-tax net income determined in accordance with generally accepted accounting principles of the PRC (the “PRC GAAP”). Appropriation to the statutory surplus reserve should be at least 10% of the after tax net income determined in accordance with the PRC GAAP until the reserve is equal to 50% of the entities’ registered capital or members’ equity. In accordance with the Chinese Company Law, the Company allocated 10% of income after taxes to the statutory surplus reserve for the years ended December 31, 2013, 2012 and 2011. For the years ended December 31, 2013, 2012 and 2011, statutory reserve activity is as follows:

Balance – January 1, 2011	$	7,556,187
Addition to statutory reserves		2,862,289
Balance – December 31, 2011		10,418,476
Addition to statutory reserves		4,148,370
Balance – December 31, 2012		14,566,846
Addition to statutory reserves		4,156,990
Balance – December 31, 2013	$	18,723,836

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CERTAIN RISKS AND CONCENTRATION

12 Months Ended

Dec. 31, 2013

Certain Risks and Concentration [Abstract]

CERTAIN RISKS AND CONCENTRATION

NOTE 20 CERTAIN RISKS AND CONCENTRATION

Credit risk and major customers

As of December 31, 2013 and 2012, substantially all of the Company’s cash including cash on hand and deposits in accounts were maintained within the PRC where there is currently no rule or regulation in place for obligatory insurance to cover bank deposits in the event of a bank’s failure. However, the Company has not experienced any such losses and believes it is not exposed to any significant risks on its cash in bank accounts.

For the years ended December 31, 2013, 2012, and 2011, all of the Company’s sales arose in the PRC. In addition, all accounts receivable as of December 31, 2013 and 2012 were due from customers located in the PRC.

Two customers accounted for 25.5% and 12.3% of the Company’s revenue for the year ended December 31, 2013, respectively. Two customers accounted for 31.7% and 12.9% of the Company’s revenue for the year ended December 31, 2012, respectively, and two customers accounted for 25.3% and 10.6% of the Company’s revenue for the year ended December 31, 2011, respectively. There was no other single customer who accounted for more than 10% of the Company’s revenue for the years ended December 31, 2013, 2012 or 2011.

One customer accounted for 37.8% of total accounts receivable of the Company as of December 31, 2013. Two customers accounted for 48.5% and 14.6% of total accounts receivable of the Company as of December 31, 2012. There was no other customer who accounted for 10% or more of the Company’s accounts receivable as of December 31, 2013 or 2012.

Risk arising from operations in foreign countries

Substantially all of the Company’s operations are conducted in China. The Company’s operations are subject to various political, economic, and other risks and uncertainties inherent in China. Among other risks, the Company’s operations are subject to the risks of restrictions on transfer of funds; export duties, quotas, and embargoes; domestic and international customs and tariffs; changing taxation policies; foreign exchange restrictions; and political conditions and governmental regulations.

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RESTRICTED NET ASSETS - Additional Information (Detail)	12 Months Ended
	Dec. 31, 2013
Restricted Net Assets [Line Items]
Percentage Of Net Assets Of Subsidiary To Parent	25.00%

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SEGMENT DATA AND RELATED INFORMATION (Tables)

12 Months Ended

Dec. 31, 2013

Segment Reporting [Abstract]

Schedule of Segment Reporting Information, by Segment

Management evaluates performance based on several factors, of which net revenue and gross profit by product are the primary financial measures:

	Year ended December 31,
	2013		2012		2011
Net revenue from unaffiliated customers:
Copper wire	$	170,903,382	$	188,810,251	$	124,062,182
Superfine copper wire		135,328,792		144,337,762		149,808,595
CCA wire		53,284,353		60,634,148		61,703,257
Copper anode		472,042,033		381,114,304		287,269,353
Refined copper rod		69,168,398		78,870,076		14,250,052
	$	900,726,958	$	853,766,541	$	637,093,439
Gross profit:
Copper wire	$	9,727,112	$	11,462,253	$	8,399,703
Superfine copper wire		15,469,518		16,820,626		19,947,147
CCA wire		16,359,209		19,602,531		21,375,471
Copper anode		41,693,682		37,667,562		25,224,807
Refined copper rod		3,149,697		3,995,402		766,544
	$	86,399,218	$	89,548,374	$	75,713,672

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OTHER PAYABLES AND ACCRUALS (Tables)

12 Months Ended

Dec. 31, 2013

Payables and Accruals [Abstract]

Other Payables and Accruals

Other payables and accruals consisted of the following:

	As of December 31,
	2013		2012
Accrued staff costs	$	600,440	$	763,430
Research and development costs payable		484,960		-
Other taxes payable		3,386,518		1,768,702
Construction cost payable		2,054,220		1,958,204
Other payables		617,826		447,068
	$	7,143,964	$	4,937,404

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CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (USD $)	Total	Common Stock	Additional Paid-in Capital	Statutory Reserves	Treasury Stock	Retained Earnings	Accumulated Other Comprehensive Income
Beginning Balance at Dec. 31, 2010	$ 153,157,623	$ 2,938	$ 71,251,843	$ 7,556,187	$ 0	$ 67,091,089	$ 7,255,566
Beginning Balance (in shares) at Dec. 31, 2010		29,385,326
Net income	53,133,533	0	0	0	0	53,133,533	0
Foreign currency translation adjustment	9,152,577	0	0	0	0	0	9,152,577
Exercise of warrants (in shares)		651,155
Exercise of warrants	6,814,138	65	6,814,073	0	0	0	0
Repurchase of common stock (in shares)		(264,047)
Repurchase of common stock	(2,126,597)	0	0	0	(2,126,597)	0	0
Common stock dividend	(992,846)	0	0	0	0	(992,846)	0
Exercise of share options (in shares)	0
Share-based payments to employees and directors	498,212	0	498,212	0	0	0	0
Appropriation of statutory reserves	0	0	0	2,862,289	0	(2,862,289)	0
Ending Balance at Dec. 31, 2011	219,636,640	3,003	78,564,128	10,418,476	(2,126,597)	116,369,487	16,408,143
Ending Balance (in shares) at Dec. 31, 2011		29,772,434
Net income	57,942,003	0	0	0	0	57,942,003	0
Foreign currency translation adjustment	659,754	0	0	0	0	0	659,754
Exercise of warrants (in shares)		48,402
Exercise of warrants	311,709	5	311,704	0	0	0	0
Exercise of share options (in shares)	0
Share-based payments to employees and directors	382,089	0	382,089	0	0	0	0
Appropriation of statutory reserves	0	0	0	4,148,370	0	(4,148,370)	0
Ending Balance at Dec. 31, 2012	278,932,195	3,008	79,257,921	14,566,846	(2,126,597)	170,163,120	17,067,897
Ending Balance (in shares) at Dec. 31, 2012		29,820,836
Net income	56,159,450	0	0	0	0	56,159,450	0
Foreign currency translation adjustment	9,538,569	0	0	0	0	0	9,538,569
Exercise of warrants (in shares)		101,072
Exercise of warrants	531,083	10	531,073	0	0	0	0
Exercise of share options (in shares)	110,000	110,000
Exercise of share options	495,000	11	494,989	0	0	0	0
Share-based payments to employees and directors	343,513	0	343,513	0	0	0	0
Appropriation of statutory reserves	0	0	0	4,156,990	0	(4,156,990)	0
Ending Balance at Dec. 31, 2013	$ 345,999,810	$ 3,029	$ 80,627,496	$ 18,723,836	$ (2,126,597)	$ 222,165,580	$ 26,606,466
Ending Balance (in shares) at Dec. 31, 2013		30,031,908

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Reconciliation of Net Income and Weighted Average Shares Used in Computation of Basic and Diluted Earnings Per Share (Detail) (USD $)	3 Months Ended												12 Months Ended
	Dec. 31, 2013	Sep. 30, 2013	Jun. 30, 2013	Mar. 31, 2013	Dec. 31, 2012	Sep. 30, 2012	Jun. 30, 2012	Mar. 31, 2012	Dec. 31, 2011	Sep. 30, 2011	Jun. 30, 2011	Mar. 31, 2011	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011	Dec. 31, 2008
Income available to common stockholders:
- Basic and diluted	$ 13,233,558	$ 13,938,895	$ 15,675,810	$ 13,311,187	$ 15,793,687	$ 17,226,638	$ 13,446,666	$ 11,475,012	$ 12,727,388	$ 13,528,083	$ 14,366,076	$ 12,511,986	$ 56,159,450	$ 57,942,003	$ 53,133,533	$ 11,701,879
Weighted average number of shares:
- Basic													29,858,880	29,815,943	29,816,871
- Effect of dilutive securities - warrants and options													137,953	149,868	259,259
- Diluted													29,996,833	29,965,811	30,076,130
Net income per share
- Basic	$ 0.44	$ 0.47	$ 0.53	$ 0.45	$ 0.52	$ 0.58	$ 0.45	$ 0.39	$ 0.43	$ 0.45	$ 0.48	$ 0.42	$ 1.88	$ 1.94	$ 1.78
- Diluted	$ 0.44	$ 0.46	$ 0.52	$ 0.44	$ 0.52	$ 0.58	$ 0.45	$ 0.38	$ 0.43	$ 0.45	$ 0.48	$ 0.41	$ 1.87	$ 1.93	$ 1.77

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ACCOUNTS RECEIVABLE, NET

12 Months Ended

Dec. 31, 2013

Accounts Receivable, Net [Abstract]

ACCOUNTS RECEIVABLE, NET

NOTE 4 ACCOUNTS RECEIVABLE, NET

Accounts receivable consisted of the following:

	As of December 31,
	2013		2012
Accounts receivable	$	60,497,780	$	45,284,923
Less: Allowance for doubtful debts		-		-
Accounts receivable, net	$	60,497,780	$	45,284,923

As of December 31, 2013 and 2012, there were no accounts receivable aged greater than 90 days, and management has determined that no allowance for doubtful debts was necessary.

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Exchange Rates Used to Translate Amounts in RMB to U.S. Dollars (Detail)	0 Months Ended	12 Months Ended
	Jun. 14, 2011	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Balance sheet items, except for equity accounts		6.0969	6.2855	6.3009
Items in the statements of comprehensive income and cash flows	6.4822	6.1932	6.3125	6.4588

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Statutory Reserve Activity (Detail) (USD $)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Retained Earnings Adjustments [Line Items]
Beginning Balance	$ 14,566,846	$ 10,418,476	$ 7,556,187
Addition to statutory reserves	4,156,990	4,148,370	2,862,289
Ending Balance	$ 18,723,836	$ 14,566,846	$ 10,418,476

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INTANGIBLE ASSETS - Additional Information (Detail) (USD $)	12 Months Ended
	Dec. 31, 2013	Dec. 31, 2012	Dec. 31, 2011
Finite-Lived Intangible Assets [Line Items]
Amortization expense	$ 5,577	$ 644	$ 3,595

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COMMITMENTS AND CONTINGENCIES

12 Months Ended

Dec. 31, 2013

Commitments and Contingencies Disclosure [Abstract]

COMMITMENTS AND CONTINGENCIES

NOTE 21 COMMITMENTS AND CONTINGENCIES

Lease commitments

The Company has entered into tenancy agreements for the lease of its factory premises and warehouse with independent parties. The Company’s commitments for minimum lease payments under these operating leases for the next five years and thereafter as of December 31, 2013 are as follows:

Payable within:
- fiscal year ending December 31, 2014	$	21,650
- fiscal year ending December 31, 2015 and thereafter		-
Total	$	21,650

Capital commitments  – contracted but not provided for 

	As of December 31,
	2013		2012
Acquisition or construction of buildings - within one year	$	552.412	$	-
Purchase of machinery - within one year		309,994		365,922
	$	862,406	$	365,922

Other commitments

During 2011, the Company signed various research and development contracts with Shanghai Electric Cable Research Institute with a total contract amount of $3.02 million. As of December 31, 2013, the Company has paid $2.26 million. The Company expects to pay the remaining $0.85 million within one year.

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Construction in Progress (Detail) (USD $)	Dec. 31, 2013	Dec. 31, 2012
Property, Plant and Equipment [Line Items]
Construction in progress	$ 5,559,901	$ 175,006
Construction of equipment
Property, Plant and Equipment [Line Items]
Construction in progress	5,323,387	175,006
Construction of buildings
Property, Plant and Equipment [Line Items]
Construction in progress	$ 236,514	$ 0

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INTANGIBLE ASSETS (Tables)

12 Months Ended

Dec. 31, 2013

Goodwill and Intangible Assets Disclosure [Abstract]

Intangible Assets

	As of December 31,
	2013		2012
Computer software, cost	$	60,429	$	15,524
Less: Accumulated amortization		(18,234)		(12,192)
	$	42,195	$	3,332

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SHARE-BASED COMPENSATION

12 Months Ended

Dec. 31, 2013

Share-Based Compensation [Abstract]

SHARE-BASED COMPENSATION

NOTE 14 SHARE-BASED COMPENSATION

Common Stock awarded to Employees by a Majority Shareholder

Pursuant to a contractual arrangement between Magnify Wealth and Mr. Yang “Roy” Yu, the Company’s then Chief Financial Officer, Mr. Yu was entitled to receive up to 450,000 shares of the Company’s common stock issued to Magnify Wealth in the Share Exchange. 112,500 of such shares were transferred to Mr. Yu immediately upon consummation of the Share Exchange. 112,500 of such shares were released to Mr. Yu on each of the first, second and third anniversary of the consummation of the Share Exchange. In 2011, all the 450,000 shares have been released to Mr. Yu. In connection with these share-based payments to Mr. Yu, the Company recognized compensation expense of $nil, $nil and $211,875 based on the grant-date fair value of the Company’s common stock of $2.26 per share, for the years ended December 31, 2013, 2012, and 2011, respectively.

Options granted to Independent Directors and Employees

The Company grants share-based awards, primarily stock options, to their independent directors and employees.

On January 14, 2011, the Company granted options to one of its independent directors, Mr. Kelvin Lau to purchase 15,000 shares of the Company’s common stock at a strike price of $10.64 per share, in consideration of his services to the Company. The options vest and become exercisable in equal installments on December 3, 2010, January 16, 2011, March 1, 2011 and April 14, 2011 and will expire 10 years from the date of grant.

On June 3, 2011, the Company granted options to each of its independent directors, Mr. Robert Bruce, Mr. Jonathan Serbin and Mr. Kelvin Lau to purchase 20,000 shares of the Company’s common stock at a strike price of $6.49 per share, in consideration of their services to the Company. The options vest and become exercisable in equal installments on July 14, 2011, October 14, 2011, January 14, 2012 and April 14, 2012 and will expire 10 years from the date of grant.

On October 23, 2011, the Company granted options to two of its employees, Mr. Peng Zhu and Mr. Chunming Chu, to purchase 100,000 shares each of the Company’s common stock at a strike price of $4.50 per share, in consideration for their services to the Company. These options vest in installments of 40,000, 30,000 and 30,000 shares on October 23, 2012, 2013 and 2014, respectively, and will expire 10 years from the date of grant. 

On October 23, 2011, Ms. Daphne Huang entered into an employment agreement with the Company to serve as Chief Financial Officer. The agreement is for a one-year term, renewable annually at the Company’s option up to an additional two years. Ms. Huang will receive annual cash compensation of $200,000 and will be awarded a stock option to purchase up to 225,000 shares of common stock at $4.50 per share, which shall vest in equal installments on October 23, 2012, 2013 and 2014, so long as Ms. Huang is serving as CFO at each such time, and will expire 10 years from the date of grant.

On October 23, 2011, Mr. Yu entered into a new employment agreement with Lihua Electron to serve as Executive Vice President of Finance of Lihua Electron and of the Company. The agreement is for a one-year term, renewable annually at the Company’s option up to an additional two years. Mr. Yu will receive annual cash compensation of $150,000 and will be awarded a stock option to purchase up to 100,000 shares of common stock at $4.50 per share, which shall vest in installments of 40,000, 30,000 and 30,000 shares on October 23, 2012, 2013 and 2014, respectively, so long as Mr. Yu is serving as Executive Vice President of Finance, or as an officer of the Company at each such time, and will expire 10 years from the date of grant. Mr. Yu resigned on November 7, 2012.

On April 26, 2012, the Company granted options to each of its independent directors, Mr. Robert Bruce, Mr. Jonathan Serbin and Mr. Kelvin Lau to purchase 20,000 shares of the Company’s common stock at a strike price of $5.63 per share, in consideration of their services to the Company. The options vest and become exercisable in equal installments on July 14, 2012, October 14, 2012, January 14, 2013 and April 14, 2013 and will expire 10 years from the date of grant.

On May 30, 2013, the Company granted options to each of its independent directors, Mr. Robert Bruce, Mr. Jonathan Serbin and Mr. Kelvin Lau to purchase 20,000 shares of the Company’s common stock at a strike price of $5.60 per share, in consideration of their services to the Company. The options vest and become exercisable in equal installments on July 14, 2013, October 14, 2013, January 14, 2014 and April 14, 2014 and will expire 10 years from the date of grant.

In accordance with the guidance provided in ASC Topic 718, Stock Compensation, the compensation costs associated with these options are recognized, based on the grant-date fair values of these options, over the requisite service period, or vesting period. Accordingly, the Company recognized a compensation expense of $343,513, $382,089 and $286,337 for the years ended December 31, 2013, 2012 and 2011, respectively.

Options issued and outstanding at December 31, 2013, 2012, and 2011 and their movements during the three years are as follows:

	Number of Underlying Shares	Weighted-Average Exercise Price Per Share		Aggregate Intrinsic Value(1)		Weighted-Average Contractual Life Remaining in Years
Outstanding at January 1, 2011	115,000		6.74	$	517,450	9.00
Granted	600,000		4.85		-	10.00
Exercised	-		-		-	-
Expired	-		-		-	-
Forfeited	-		-		-	-
Outstanding at December 31, 2011	715,000		5.16	$	213,300	9.43
Granted	60,000		5.63		-	10.00
Exercised	-		-		-	-
Expired	-		-		-	-
Forfeited	(60,000)		4.50		-	-
Outstanding at December 31, 2012	715,000		5.25	$	65,700	8.47
Granted	60,000		5.60		-	10.00
Exercised	(110,000)		4.50		-	-
Expired	-		-		-	-
Forfeited	-		-		-	-
Outstanding at December 31, 2013	665,000		5.41	$	551,300	7.64
Exercisable at December 31, 2013	515,000	$	5.64	$	384,800	7.54

(1) The intrinsic value of the stock options at December 31, 2013, 2012 and 2011 is the amount by which the market value of the Company’s common stock of $5.72, $4.39 and $4.76 as of December 31, 2013, 2012 and 2011 exceeds the exercise price of the option.